94993 ANNUAL 2014 REVIEW FIAS the Facility for Investment Climate Advisory Services With support from: ©2015 The World Bank Group 1818 H Street NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org All rights reserved. This volume is a product of the staff of the World Bank Group. The World Bank Group refers to the member institutions of the World Bank Group: The World Bank (International Bank for Reconstruction and Development); International Finance Corporation (IFC); and Multilateral Investment Guarantee Agency (MIGA), which are separate and distinct legal entities each organized under its respective Articles of Agreement. We encourage use for educational and non-commercial purposes. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Directors or Executive Directors of the respective institutions of the World Bank Group or the governments they represent. 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About the Facility for Investment Climate Advisory Services (FIAS) Through the FIAS program, the World Bank Group and donor partners facilitate investment climate reforms in developing countries to foster open, productive, and competitive markets and to unlock sustainable private investments in sectors that contribute to growth and poverty reduction. The FIAS program is managed by the Trade and Competitiveness Global Practice of the World Bank Group. For more information, visit www.wbginvestmentclimate.org. Cover and interior photo credits, p. 75. Contents Message from the Senior Director . . . . . . . . . 2 $750m Main Achievements and Milestones . . . . . . . . . 4 Special Topic: Trade Logistics for Growth . . . . . . 12 generated in new investment through Operational Highlights . . . . . . . . . . . . . . . . .18 FAIS-supported projects that created thousands of jobs in Core Thematic Areas in Investment Climate underdeveloped regions. Interventions . . . . . . . . . . . . . . . . . . . . . . .36 Collaboration, Knowledge and Learning . . . . . .44 76 reforms Financial Results and Resource Use . . . . . . . .52 Annexes . . . . . . . . . . . . . . . . . . . . . . . . . 60 Annex 1: Reforms and Other Results Supported by FIAS in FY14. . . . . . . . . . . . . . . . . . . . . .62 FIAS-supported work by the Annex 2: Portfolio of FIAS-Funded Projects in FY14 . . . 70 World Bank Group contributed to Annex 3: Abbreviations . . . . . . . . . . . . . . . . . 74 76 reforms in 39 client countries. 1 MESSAGE FROM THE SENIOR DIRECTOR It gives me great pleasure as head of international trade, and stimulating investment the World Bank Group’s new Trade and in key sectors. Competitiveness Global Practice (T&C) to present the FIAS 2014 Annual Review, It was during the period covered by this outlining our achievements in some of the review that the World Bank Group built the most challenging economic environments in Global Practices concept and assembled the world. The Facility for Investment Climate the T&C team. FIAS plays a vitally important Advisory Services (FIAS) once again achieved role in this new structure, articulated in the strong results in fiscal 2014, providing crucial T&C Prospectus. T&C enhances the FIAS support for delivering policy advice and agenda by allowing for more systematic and technical assistance to client governments. strategic embedding of FIAS projects into FIAS-funded activities generated 76 reforms an expanded portfolio that includes work in benefiting the business environment and global value chains, green competitiveness, private sector activity in 39 client countries productivity-led growth, and connectivity. and four regions, making it easier to start Linkages across the global practices lead to a a business, opening pathways to greater collaborative focus on results in a broad range 2 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES “ Linkages across the global practices lead to a collaborative focus on results in a broad range of client countries, from low- to middle-income and conflict-affected states and, notably, the West African countries whose economies are ” suffering major shocks due to the Ebola crisis. of client countries, from low- to middle-income projects in his new role as the senior director and conflict-affected states and, notably, the of the Transport and ICT Global Practice. We West African countries whose economies are greatly value our partnership with donors suffering major shocks due to the Ebola crisis. and our strong collaboration across the Bank Group, with client countries, and with other We are profoundly grateful to our FIAS donors key stakeholders, and we look forward to and partners for providing a record level of working together to help countries develop support in FY14. Their active engagement dynamic and resilient economies, expand will continue to generate substantial benefits market opportunities, and encourage private in developing countries that are seeking to initiative. break through economic obstacles and realize their extraordinary potential. I would also like to personally thank my colleague Pierre Guislain, who for many years led the World Anabel Gonzalez Bank Group’s Investment Climate Department Senior Director Trade and Competitiveness Global Practice and who continues to collaborate with us on World Bank Group 3 FISCAL YEAR 2014 MAIN ACHIEVEMENTS AND MILESTONES In fiscal year 2014, the pace of FIAS- supported investment and reform accelerated, yielding tangible results and increased client satisfaction. $750 million 83% forms 76 reforms of re in new investment in IDA countries in 39 client countries generated, more than double the FY13 total 4 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 1 Main Achievements and Milestones At a time of significant change in the global economy, FIAS-funded work in FY14 maintained strong momentum across a broad range of activities, from promoting trade and competitive markets to streamlining business regulation to encouraging major new investment in specific industries. FIAS-supported teams launched a new Trade Facilitation Support Program that will serve as a centerpiece of an increasing focus on trade as an engine of sustainable growth in developing countries. The portfolio has achieved results in the world’s poorest countries, nations in fragile and conflict-affected situations (FCS), and Sub-Saharan Africa. FIAS support helped achieve a substantial jump in investment generated for industry-specific sectors, continuing a strong trend of growth in this field. These achievements took place amid a major Bank Group reorganization that resulted in the creation of a new Trade and Competitiveness (T&C) Global Practice, which is expanding the reach of the FIAS program in FY15 and beyond. Impact and Reform • The FIAS-supported work by the World Bank Group • The 197 reforms achieved in the FY12–14 period contributed to 76 reforms in 39 client countries averages 66 reforms per year, putting FIAS on track (75 reforms in 41 countries in FY13). to exceed its target goal of 250 investment climate reforms for the five-year FY12–16 strategy cycle. • The World Bank Group’s Doing Business 2015 report records 56 of these reforms, or 74 percent (in FY13: Regional Distribution of Reforms 75 percent; see FIAS-supported reforms table on p. 10). 100% = 76 Reforms • FIAS helped generate $750 million in new investments by specific industries in Haiti and Brazil, creating an n Sub-Saharan Africa, 62 (82%) estimated 5,839 jobs in specific projects in FY14, up n Europe and Central Asia, sharply from the $329 million in new investments in 8 (11%) FY13 and $108 million in FY12. Regional distribution of reforms showed the emphasis the FIAS-supported n Latin America and the program has placed on Sub-Saharan Africa. Caribbean, 4 (5%) n East Asia and Pacific, 2 (3%) FIAS-Supported Reforms by Region and Strategic Priority, FY14 5 • FIAS is well ahead of its target of achieving 60 • Expertise and knowledge from FIAS-supported percent of FIAS reforms in International teams contributed to 26 additional reforms achieved Development Association (IDA) countries. For FY14, by IFC’s Investment Climate Business Line (ICBL) 63 reforms, or 83 percent, were in IDA countries but not directly funded by FIAS.1 (57 reforms or 76 percent in FY13). For the strategy • The World Bank Group’s Doing Business 2015 report cycle to date, 75 percent of reforms have been in lists 10 countries as showing the most improvement IDA countries and 73 percent have been recorded across three or more areas measured in the report. in Doing Business. Of these, seven countries— Azerbaijan, Benin, Côte • In FY14, FIAS raised over $50 million, putting the d’Ivoire, the Democratic Republic of Congo, Facility on track to reach or exceed the funding Senegal, Tajikistan, and Togo—benefited from FIAS- target for the FY12-16 cycle of $155 million. funded projects in FY14, and all but Azerbaijan implemented FIAS-supported reforms. FIAS Strategy Cycle Metrics, FY11–14 With three years of the strategy cycle completed, the numbers indicate that steady-state expenditures are yielding more projects and reforms. FIAS-supported teams are now working in more than half the FCS states and generating more reforms in more countries. (Figures for FY11 are shown to provide a pre-strategy cycle baseline.) TOTAL FIAS-SUPPORTED REFORMS SHARE OF REFORMS RECORDED IN DOING BUSINESS 100 n Reforms 100% n Countries 75 76 80% 76% 75% 74% 80 *Strategy 69% *Strategy Cycle Goal: Cycle 60 50 reforms 60% Goal: 50% 46 42 41 39 40 40% 27 30 20 20% 0 0% FY11 FY12 FY13 FY14 FY11 FY12 FY13 FY14 SHARE OF REFORMS IN IDA COUNTRIES SHARE OF REFORMS IN SUB-SAHARAN AFRICA 100% 100% 83% *Strategy 82% 80% 76% 80% Cycle 61% Goal: 60% 65% 60% 55% 60% 45% 41% 40% 40% 20% 20% 0% 0% FY11 FY12 FY13 FY14 FY11 FY12 FY13 FY14 SHARE OF REFORMS IN FRAGILE AND CONFLICT-AFFECTED FIAS-SUPPORTED REFORMS IN FRAGILE AND CONFLICT- SITUATIONS AFFECTED SITUATIONS 100% 40 35 36 33 33 80% 30 24 23 60% 19 18 17 20 14 40% 33% 11 32% 30% 24% 10 7 20% 0 FY11 FY12 FY13 FY14 0% FY11 FY12 FY13 FY14 n Total FCS Countries n FCS Countries with Active FIAS Projects *Note: Goal indicates goal per year for the FY12-16 Strategy Cycle. n Number of Reforms 1 As of FY15, ICBL has been reorganized and its functions taken over by the T&C Global Practice. 6 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES Growth in Industry-Specific Portfolio FIAS and Investment Climate Evaluations • The FIAS-supported portfolio of agriculture projects in FY14 marked the midpoint of the five-year FIAS strategy industry-specific work jumped significantly, with 30 cycle and provided an opportunity for stepping back and projects in FY14 (up from 21 projects in FY13), helping reviewing results to date. Several independent evaluations client countries realize more of the value of their were completed in FY14, and more are in the pipeline. agricultural output. The number of tourism projects also Four key evaluations either completed or under review increased, from 8 in FY13 to 12 in FY14, leading to greater have confirmed the soundness of the FIAS approach to privatization and consumer choice. addressing investment climate issues in client countries and the quality of results on the ground. The evaluations Focus on Priority Client Groups: Fragile and Conflict-Affected are providing valuable input that helps FIAS-supported Situations, Low-Income Countries, Sub-Saharan Africa teams continuously refine their approaches and strive to • As the figure below indicates, target spending, actual improve. The T&C Global Practice is incorporating findings spending, and distribution of reforms by priority area are and recommendations into the work to be done through in rough alignment in FY14.2 the remainder of the strategy cycle and in the design of the strategy for the next cycle (see p. 21). The complete reports will be available online; among the key evaluations: RESULTS BY PRIORITY CLIENT GROUP , FY14 Share of Client-Facing Project Expenditures and Total Reforms • The Midterm Independent Evaluation of FIAS 2012–2016 FISCAL YEAR 2014 MAIN ACHIEVEMENTS AND MILESTONES Strategy and Program, conducted by the consulting firm 100% Ecorys, commended FIAS for strong results that are likely to exceed strategy cycle targets and for a high 80% efficiency rate compared with other technical assistance 60% and advisory programs. T&C committed to fulfilling the evaluation’s recommendation for increased focus on the 40% role of gender in supporting economic growth. • The World Bank Group’s Independent Evaluation Group 20% assessed investment climate work dating back to FY07, 0 including FIAS-supported work, concluding that the IDA-eligible countries Sub-Saharan Africa Fragile and conflict- Bank Group has been successful in improving the affected situations investment climate in client countries. n Share of Client-Facing Project Expenditures, Target • Dalberg Global Development Advisors found that the n Share of Client-Facing Indicator-Based Reform Advisory product (IBRA) Project Expenditures, Actual effectively supports the enactment of Doing Business n Share of Total Reforms reforms and represents a model for collaboration across the Bank Group. • An evaluation of the Business Taxation product by the FIAS DEVELOPMENT EFFECTIVENESS RATINGS, FY08-FY14 consulting firm Economisti Associati found that the (Share of completed projects with positive ratings) program performs well, delivering important results across a range of relevant themes with both analytical 100% rigor and practical feasibility that is appreciated by 86% 88% 83% clients. 80% 60% Development Effectiveness and Client Satisfaction • The Development Effectiveness rating for FIAS-funded 40% projects increased 5 percentage points to 88 percent in FY14, up significantly from the rating for FY08–11 of 20% 61 percent. 0 • Nine client-facing FIAS-funded projects closed in FY14. FY12 FY13 FY14* • Client satisfaction with advisory services provided by *7 out of 8 Investment Climate projects validated as of ICBL in FY14, through which a majority of FIAS-funded Sept. 2014 were rated positively. An additional project which received a negative rating was excluded because programs are implemented, was 91 percent (94 percent it was managed by PPP and included only a minority in FY13). investment Climate component. • FIAS-supported projects received a client satisfaction rating of 88 percent (92 percent in FY13), in line with FY08-FY11 overall ICBL client satisfaction ratings. average (61%) 2 The larger percentage of reforms from Sub-Saharan Africa relative to expenditures stems from the 17 West African countries of OHADA (the Organisation pour l’Harmonisation en Afrique du Droit des Affaires) each achieving a reform based on the revised business law. 7 • For the ICBL survey, of 103 clients surveyed, only 2 counterpart donors which constrained expenditure of responded negatively; for the client satisfaction survey FIAS funds for a number of pipeline projects. of FIAS-supported projects, only 1 negative response Expenditures in FY13 were unusually high due to was received from the 42 clients surveyed. The additional FIAS funds added to regional projects in slight decline in overall satisfaction in these two order to fill funding gaps. Overall, however, planned surveys stemmed from a slight increase in responses and actual spending for the strategy cycle are aligned. that were neither positive nor negative. • The share of expenditures on industry-specific activities supported by FIAS totaled $1.45 million in Investment Climate Business Line FY14, 13.4 percent of client-facing FIAS expenditures. Client Satisfaction, FY08-FY14 This compares with 19 percent in FY13 and 13 (Share of clients satisfied) percent in FY12.4 As was the case for overall client- 100% 94% 91% facing spending, some industry-specific pipeline 92% 91% 88% 89% projects that were to have started in FY14 were held 85% 80% up by delays in flows of funding from counterpart donors. 60% • FIAS funding was used to co-finance 57 projects 40% directly managed by the Investment Climate Department (including 26 non-client-facing projects 20% focused on knowledge management and product development), and 38 projects managed by regional 0% IFC Advisory Services units.5 FY08 FY09 FY10* FY11* FY12 FY13 FY14 • FIAS-funded project spending for non-client-facing activities related to knowledge management and Strong Results in FY14 across the FIAS Portfolio product development projects remained steady at • Of the 69 client-facing projects, 31 were implemented by $7.2 million. the World Bank Group’s Investment Climate Department; the remaining 38 were managed by regional IFC units.3 • Funding administered through FIAS made up 18.3 percent of total ICBL spending in FY14, and FIAS • Total project expenditures reached $18 million ($22.9 funding was involved in projects that supported the million in FY13), $10.8 million to client-facing projects implementation of 76 of 102 ICBL reforms, or 75 ($15.7 million in FY13), and $7 .2 million to knowledge percent (74 percent in FY13). management and product development projects ($7.2 million in FY13). • The decline in client-facing spending FY13–14 stemmed in part from delays in flows of funding from 3 As of FY15, the Investment Climate Department has been reorganized and its functions taken over by the T&C Global Practice. 4 For comparison purposes, the FY14 industry-specific figure includes funding for special economic zone projects. Excluding those projects, the share of expenditures on industry-specific activities in FY14 was 11 percent. 5 FIAS funding supported an additional 14 projects managed by regional IFC Advisory Services units that had less than $10,000 in expenditures for the fiscal year. 8 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES FISCAL YEAR 2014 MAIN ACHIEVEMENTS AND MILESTONES 9 FIAS-Supported Reforms by Region and Country, FY14  Licenses and Permits Resolving Insolvency Construction Permits Investor Protections Enforcing Contracts Starting a Business Property Transfers Getting Electricity Tax Transparency Tax Simplification and Compliance Trade Logistics Getting Credit Management Competition Grand Total Industry Region Country EAST ASIA AND THE PACIFICPhilippines ü 1 Vietnam 1 ü 1 EAST ASIA AND PACIFIC TOTAL 2 2 EUROPE AND CENTRAL ASIA Albania ü ü* 2 Georgia ü ü 2 Russian Federation ü** ü** ü** 3 Tajikistan 1 ü 1 EUROPE AND CENTRAL ASIA TOTAL 3 1 1 1 2 8 LATIN AMERICA Colombia ü 1 AND CARIBBEAN Honduras 1 ü ü* 2 Jamaica ü 1 LATIN AMERICA AND CARIBBEAN TOTAL 1 2 1 4 SUB-SAHARAN AFRICA Benin 1 ü ü ü ü 4 Burkina Faso 1 ü ü 2 Cameroon 1 ü ü ü* 3 Central African Republic 1, 2 ü 1 Chad 1, 2 ü 1 Comoros 1, 2 ü 1 Congo, Dem. Rep. 1, 2 ü ü ü ü ü 5 Congo, Rep. 1, 2 ü 1 Côte d'Ivoire 1, 2 ü ü ü ü* ü 5 Djibouti 1 ü 1 Equatorial Guinea ü 1 Gabon ü 1 Ghana 1 ü 1 Guinea 1 ü ü ü** 3 Guinea-Bissau 1, 2 ü 1 Kenya 1 ü ü 2 Liberia 1, 2 ü* 1 Malawi 1, 2 ü 1 Mali 1, 2 ü 1 Mauritania 1 ü ü 2 Niger 1 ü 1 Rwanda 1 ü ü ü ü* 4 São Tomé and Príncipe 1 ü ü 2 Senegal 1 ü ü ü ü ü 5 Sierra Leone 1, 2 ü* 1 Swaziland ü 1 Tanzania 1 ü** ü* 2 Togo 1, 2 ü** ü ü ü 4 Uganda 1 ü ü 2 Zambia 1 ü ü 2 SUB-SAHARAN AFRICA TOTAL 1 3 2 5 2 1 17 1 3 2 10 7 2 5 62 GRAND TOTAL 1 6 2 5 2 2 17 1 6 2 11 7 7 8 76 Reforms captured by Doing Business 56 Percentage validated by DB 74% FIAS Total of which in IDA 63 Percentage in IDA 83% FIAS Total of which in FCS 23 Percentage in FCS 30% FIAS TOTAL of which in AFR 62 Percentage in AFR 82% ü Reforms from FIAS-cofinanced projects mapped to regional IFC Advisory Services units. International Development Association 1 * Of the 64 reforms under Doing Business topics, 50 were validated by Doing Business 2015 and 6 by Doing Business 2014. (IDA) country. Eight reforms reported under Doing Business topics do not fall under the standardized Doing Business case study. 2 Fragile or conflict-affected situation. ** These reforms are recognized retroactively; they were validated by Doing Business 2014, but were not reported in FY13. 10 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES FY12–14 Funding and Expenditures FY12 FY13 FY14 In US$, In US$, In US$, Contributions (Sources of Funds) Thousands Share of Total Thousands Share of Total Thousands Share of Total WORLD BANK GROUP CONTRIBUTIONS 12,089 36%  11,754   42% 9,917 19% Core 8,188 24% 8,000 28% 7,600 14% IFC 1 4,088 12% 4,000 14% 4,500 9% MIGA 2,500 8% 2,400 8% 1,500 3% World Bank 1,600 5% 1,600 6% 1,600 3% Project Specific/Other Contributions (IFC) 2 3,901 11% 3,754 13% 2,317 4% Donor Contributions 21,390 63% 16,435 58% 42,584 81% Core 5,730 17% 5,532 20% 21,241 40% Programmatic 6,678 20% 5,447 19% 15,410 29% Project Specific 8,982 26% 5,456 19% 5,933 11% Client Contributions 484 1% 90 0.3% 75 0.1% Total Contributions 3 33,9633 100% 28,279 100% 52,577 100% Less Trust Fund Administration Fees 1,122 1,021 2,507 Total Net Contributions 32,841 27,258 50,070 In US$, In US$, In US$, Expenditures (Uses of Funds) 1 Thousands Share of Total Thousands Share of Total Thousands Share of Total Staff Costs (including consultants) 19,740 70% 21,855 69% 22,439 81% Operational Travel Costs 5,847 21% 6,099 19% 3,643 13% Indirect Costs (including office and operating costs) 2,455 9% 3,603 11% 1,792 6% Total Expenditures 28,042 100% 31,557 100% 27,875 100% Includes FY12 and FY13 Advisory Services adminstrative budget and expenditures of approximately $1.2 million and FY14 Advisory Services administrative budget and 1 expenditures of approximately $2.3 million provided by IFC to cover a number of Investment Climate Business Line positions and their related staff and travel costs. 2 Includes IFC project-specific contributions ($2,968,000 in FY12, $3,084,000 in FY13, $1,759,475 in FY14) to support a range of global knowledge management and product design initiatives and other IFC contributions ($934,000 in FY12, $670,000 in FY13, $558,144 in FY14) to support activities indirectly related to projects, including initial project designs, portfolio management, monitoring and evaluation, and knowledge sharing associated with the global portfolio. 3 FY12 donor contributions amended to correct a typographic error in the FY12 Expenditures table on page 6 of the FIAS 2012 Annual Review. TOTAL EXPENDITURE BY THEMATIC PRIORITY PROJECT EXPENDITURES BY PRODUCT, FY14 OF CLIENT-FACING PROJECTS, FY14 100% = $10.8 Million 100% = $10.8 Million n Business Regulation for n Business Regulation (21%) Enterprise Creation and n Indicator-based Reform Advisory (16%) Growth (45%) n Business Taxation (15%) n International Trade and n Industry-specific IC: Real Sectors, Investment (36%) and related (13%) n Investment Climate for n Trade Logistics (13%) Industry (13%) n Debt Resolution & Business Exit (8%) n Other (6%) n Investment Policy (7%) n Other (6%) TOTAL PROJECT IMPLEMENTATION EXPENDITURES, FY14 100% = $18 Million TOTAL EXPENDITURE BY TYPE CLIENT-FACING EXPENDITURE BY REGION n Sub-Saharan Africa (58%) n Client Facing $10.8M (60%) n Europe and Central Asia (12%) n Non-Client Facing $7.2M (40%) n World (7%) n Latin America and Caribbean (7%) n East Asia and Pacific (6%) n Middle East and North Africa (6%) n South Asia (4%) 11 SPECIAL TOPIC TRADE LOGISTICS FOR GROWTH The FIAS-funded Global Trade Logistics Advisory Program helps developing countries build efficient trade logistics systems and services that enhance competitiveness and stimulate job creation. $2.6 trillion 44 projects 40 IDA & FCS countries estimated global GDP increase for trade logistics in 68 participating in trade through modest improvement developing countries logistics program in trade best practices 12 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 2 TRADE LOGISTICS FOR GROWTH Facilitating international trade in developing countries is key to fostering sustainable economic growth. The underlying idea is that to grow their economies and create jobs, developing countries must engage in trade; to do that, they must have robust business sectors able to compete in the international arena. Trade logistics is an important pillar of the FIAS strategy and includes both the physical transit and port facilities used to move goods as well as the administrative laws and regulations that govern trade. The technical assistance program has evolved over the years since its launch in 2007 and was scaled up substantially during the FY12–16 strategy cycle. Evolution of the Global Trade Logistics Advisory Program Phase 4: Global Value Regional Integration Chains Moving from a focus on doing the Agribusiness simple things right—streamlining and simplifying...to improving firm competitiveness to integrate more fully into global value chains Phase 3: Systemic reforms: Improve Single Windows, Border Agency Coordination, Sector Focus Phase 2: Implementing risk management and automation for all border agencies Phase 1: Steamlining and simplification agenda for border clearance agencies 2008 2009/10 2010/11 2012-2014 T&C GP Addressing Binding Constraints: Pilot Years offerings but also enabled a coordinated and focused dialogue to provide targeted assistance to countries. The program has benefited from partnerships with a multitude of developing countries and international To compete and survive in the global economy, traders in institutions. Support has been provided by the Canadian developing countries require lean, rapid, and responsive Department of Foreign Affairs, Trade and Development supply chains. However, due to inefficient trade facilitation (DFATD); the Netherlands Ministry of Foreign Affairs; systems and trade logistics practices, firms in the developing the Norwegian Agency for Development Cooperation; world face greater barriers to trade, making it difficult to the Swedish International Development Agency (SIDA), get their goods to market. Research shows that in many the Swiss State Secretariat for Economic Development countries, administrative barriers such as the processing (SECO), the United Kingdom Department for International of trade-related documents and fulfilling of clearance Development (DFID), and the U.S. Agency for International requirements by customs and other technical control Development (USAID), among others. International agencies account for 50 to 60 percent of the total time institutions supporting the program include the European to export and import. Firms in developing countries incur Union, the Organisation for Economic Cooperation higher trading costs due to long clearance-processing times, and Development, the UN Conference on Trade and excessive controls from technical agencies, and corruption. Development (UNCTAD), the World Customs Organization, For traders dealing in perishables, such as Honduran tomato and the World Trade Organization (WTO). Leveraging these exporter Ricardo Melgar, delays in clearance times can result partnerships has not only strengthened the FIAS product in spoilage and damage of their goods (see box, p.14). 13 The World Economic Forum estimated that if every investments, increased trade, and job creation. The program country improved just two key trade functions—border was launched in 2007 with the goal of developing and rolling administration and transport, and communications out a scalable advisory service across all regions, beginning infrastructure and related services—halfway toward the with pilot projects in Rwanda, Colombia, and Liberia. world’s best practices, global GDP could increase by Key components included simplifying and harmonizing $2.6 trillion (4.7 percent) and exports by $1.6 trillion trade procedures and documentation, integrating risk (14.5 percent). management systems in border clearance and inspections, and supporting the implementation of trade-related Recognizing the importance of addressing these binding automation and single window systems. Notable results constraints, the FIAS-funded Global Trade Logistics were achieved in these pilot projects (see box at the bottom). Advisory Program was established to help developing countries build efficient trade logistics systems and Leveraging an implementation-focused, rapid response- services that enhance private sector competitiveness. based approach to delivering technical assistance, the These improvements, in turn, open the door to potential program was able to quickly scale up and deploy the Rotting Tomatoes at the Border Stuck on the border between Honduras and El Salvador in sweltering heat, all Ricardo Melgar could think about was his slowly rotting tomatoes. One of his trucks, carrying eight tons of tomatoes from Comayagua to markets in San Salvador, could not proceed. The holdup stemmed from a simple mistake in the handwritten export documents, and it was costing Mr. Melgar time and money. He, and his tomatoes, would have to spend the night at the border, waiting for the customs office to reopen in the morning to straighten out the problem. “One single mistake would cost us eight to ten hours. This meant having to pay the driver an extra night and would often make the whole shipment go to waste, ” says Mr. Melgar, who coordinates paperwork for 17 Honduran small exporters and has spent countless sleepless nights camped out on the border due to bureaucratic delays. FIAS support helped Honduras link three government agencies to streamline export and import procedures for agribusiness products. More than 700 Honduran companies selling abroad can now obtain export permits in one day, compared with the three days it took previously, and the chances of problems like the one that held up Mr. Melgar’s tomatoes have been reduced. Phytosanitary permits—which cover plant products—have been automated. By helping government agencies connect more efficiently, the new system is reducing bottlenecks and excessive delays that limit trade flows. Improving trade logistics and facilitating economic integration means a great deal in Honduras, where 39 percent of the labor force works in agriculture and more than 59 percent of the population lives below the poverty line.6 Notable Results from Trade Logistics Pilot Projects • Rwanda: Reduced the time to import and export by 55 percent and 25 percent, respectively, and enhanced the risk-based inspections process to allow 60 percent of cargo shipments to be routed through low- or medium-risk channels. These reforms are expected to save the private sector $1.4 million annually. • Colombia: Generated an estimated $200 million in private sector savings by designing a national cargo risk-management policy for Colombian ports and improving the single window for foreign trade (VUCE). • Liberia: Supported the implementation of a customs automated system, which reduced customs clearance from three weeks to three to four days. The resulting elimination or reduction of fees saves the private sector $4.6 million per year. 6 http://www.ifc.org/wps/wcm/connect/region__ext_content/regions/latin+america+and+the+caribbean/news/honduras+it+takes+a+computer+to+export+fresh+tomatoes. 14 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES resources needed to meet increasing client demands The strategy included concrete options to develop logistics and tight delivery schedules. Eight years after launching and distribution facilities strategically aligned with existing operations, the program manages 44 projects in all six production centers to yield the competitive advantages World Bank Group regions and 68 countries, including 40 necessary for exports to succeed. Should the strategy IDA countries, 17 Sub-Saharan Africa countries, and 10 be implemented by the private sector and government, states in fragile and conflict-affected situations. Rwanda could transform itself from a net importer of logistics services to an exporter of those services to Evolving Program and Expanding Portfolio neighboring countries. The FIAS-supported Global Trade Logistics Advisory Promoting regional integration through cross-border Program has adopted a flexible strategy, able to respond product certification and standards, and greater to emerging trends, global shifts, and client demands. In harmonization of cross-border clearance processes and the first few years, reform projects focused on reducing inspections also became an integral part of the Global barriers for firms, rationalizing and simplifying trade Trade Logistics Advisory Program’s offering. Currently, the logistics systems and services, improving the performance trade logistics team is working on several projects aimed of customs and technical control agencies, reducing time at enhancing regional integration in the Caribbean, Central and cost for border clearance processes, and fostering SPECIAL TOPIC: TRADE LOGISTICS FOR GROWTH transparency and predictability. These improvements were aimed at making cross-border trade faster and more cost-effective, thus helping attract private investment in export industries and infrastructure, as well as logistics and ancillary services. To respond effectively to growing client needs and demands, the program further evolved to help developing countries remove barriers to trade for key sectors, such as agribusiness and logistics services, and to boost trade within regions. In many client countries, this new set of priorities focused on reducing the time and cost to import and export agricultural products, and improving the efficiency of agribusiness supply chains, with the overarching objectives of ensuring food security and enhancing food safety. The trade logistics team ramped up work in the agribusiness sector in alignment with strategic corporate priorities and increasing client demand. Already the trade logistics portfolio of agribusiness projects in Armenia, Honduras, the Philippines, Rwanda, Zambia, Central America, and South East Europe is generating positive results for traders. Building on the success of reform results in Rwanda, the government requested FIAS support in transforming the country’s trade logistics system. Rwanda’s goal was to become a trading logistics hub for itself and its neighbors. The starting point was a supply route serving a landlocked country heavily dependent on imports and offering limited value-adding logistics. A number of challenges stood in the way of this ambition. Rwanda has limited capacity to attract imports or generate exports. Inefficient sea-land supply chains and a nascent air cargo service hampered the country’s connectivity. The FIAS-supported team provided Rwanda with a strategy to turn these challenges into a new opportunity to achieve the country’s goal. The strategy and action plan incorporated logistics services with value added activities that would support the export of high-value products destined for regional and international markets. 15 America, South Asia, South East Europe, West Africa, and By focusing technical assistance on implementation and the Pacific Islands. These regional integration projects have rapid response, as in South Asia, the Global Trade Logistics the potential to generate significant economies of scale, Advisory Program has been able to quickly scale up and and notable results are already being achieved. deploy the resources needed to meet increasing client demands and tight delivery schedules. In South Asia, for example, a FIAS-funded project harmonized the customs working hours of Nepal with Launch of the Trade Facilitation Support Program those of India and China, which prompted banks in the major customs offices to follow suit. This resulted in a 14 in Alignment with WTO percent increase in the number of active trading days. The During FY14, as negotiations on a new global trade South Asia project was an example of true coordination and agreement proceeded, the FIAS-funded Trade Logistics sequencing between IFC and the World Bank’s transport Program focused on supporting countries in their efforts to team, with each bringing their strengths to solve complex implement global best practices and global agreements. In problems faced by Nepal. While the World Bank team parallel with this effort, and in partnership with Australia, focused doing the heavy lifting on the infrastructure side, Canada, the European Union, Norway, Switzerland, and IFC improved the soft infrastructure. The Bank has been the United States, the Bank Group developed the Trade helping to rehabilitate the critical road infrastructure linking Facilitation Support Program, a multidonor platform and Nepal with India. IFC is complementing this initiative rapid-response mechanism. The aim of this FIAS-supported by focusing on trade facilitation reform measures at the effort is to help countries reform their trade facilitation border that will reap the benefits gained from the new practices in alignment with the main components of the infrastructure. Such collaboration is continuing in an even new Trade Facilitation Agreement (TFA) reached at the more seamless fashion under the T&C Global Practice, 9th WTO Ministerial Conference in Bali, Indonesia, in which places World Bank and IFC experts under a single December 2013. organizational umbrella. 16 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES “ Canada’s support will help a large number of developing countries undertake targeted reforms to help more businesses get off the ground and ultimately thrive in a competitive marketplace. This includes providing early support to implement the World Trade Organization’s new Trade Facilitation Agreement, which could add $1 ” trillion to the global economy through lowered costs for doing business and expanded private sector activity. Christian Paradis Canada’s Minister of International Development Conference of Montreal, June 11, 2014 SPECIAL TOPIC: TRADE LOGISTICS FOR GROWTH As part of the Bank Group response to the Bali agreement, The Trade Facilitation Support Program also complements the Trade Facilitation Support Program was formally and underpins project interventions with the development launched in July 2014 at the G-20 Trade Ministerial Meeting of knowledge, learning, and measurement toolkits and in Sydney by Anabel Gonzalez, senior director of the T&C initiatives, in collaboration with the Bank Group’s Trade Global Practice. The program responds to developing and International Integration Team of the Development country demands for technical assistance to fulfill Economics Research Group. Such activities may include commitments under the TFA. Under the Trade Facilitation benchmarking of progress in TFA implementation, Support Program, the Bank Group is helping developing impact assessments and evaluations, piloting of best countries reform their trade facilitation laws, procedures, practices in trade facilitation and border management, processes, and systems in a manner consistent with the and development of project-level monitoring and result WTO TFA. More specifically, the program will provide measurement indicators. Peer-to-peer learning and support in the design and implementation of policy, experience-sharing events within and across regions are regulatory, legal, and institutional aspects, taking into also being organized to help encourage dissemination of account countries’ schedules of commitments, identified best practices between developing countries. gaps in procedures and systems related to trade, and implementation capacity. The program will help countries The Trade Facilitation Support Program builds on the global create a reform map for prioritizing reform activities and practice structure to provide a continuum of support to support enhancement of their national trade facilitation developing countries to suit their development needs and committees. The Bank Group is working closely with priorities. The T&C Global Practice will be able to offer a stakeholders to implement reform actions and support variety of assistance, from learning to rapid response and deeper systemic reforms through delivery models tailored additional long-term institutional projects. to country needs. Since its launch, more than 30 countries have requested support through the program. 17 OPERATIONAL HIGHLIGHTS To achieve the Twin Goals of eliminating extreme poverty and boosting shared prosperity, the World Bank Group helps low-income and conflict-affected countries improve trade, business regulation, and industry sectors. 83% of FIAS reforms in IDA countries 82% of reforms in Sub-Saharan Africa 30% of reforms in FCS 18 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 3 OPERATIONAL HIGHLIGHTS With FIAS support, the World Bank Group is working with highly motivated government and private sector representatives on a broad portfolio of projects and programs to improve the climate for investment, entrepreneurship, trade, and economic growth. At the end of FY14, FIAS funding had delivered on a portfolio that totaled 57 projects mapped to the World Bank Group’s Investment Climate Department (49 in FY13). In addition, there were 38 projects mapped to regional IFC Advisory Services units (40 in FY13, 19 in FY12), for a total of 95 projects (69 of them client-facing).7 Two industry-specific projects generated $750 million in new investment in FY14, a 128 percent increase from the $329 million generated in FY13 and a nearly sevenfold increase over the $108 million investment generated in FY12. The Investment Climate and IFC Advisory projects reflect the continuing emphasis on collaboration across the Bank Group, a trend solidified by the launch in FY15 of the global practices, including T&C, which inherited the Investment Climate portfolio. This chapter surveys FIAS-funded work across three FIAS Focus on FCS States major thematic areas—business regulation and reform, programs to promote investment and trade, and Achieving the World Bank Group’s Twin Goals of industry-specific work. But we begin with a look at eliminating extreme poverty and promoting shared the FIAS portfolio through a geographic lens, at Sub- prosperity requires taking on development challenges Saharan Africa, the locus of so much of the work that in economies beset by protracted conflict and political FIAS supports, particularly in IDA and FCS states such instability. Sub-Saharan Africa, a region rich in human as Côte d’Ivoire (see box below). and natural capital, lies at the center of this effort. More The Côte d’Ivoire Turnaround These days, the banging Nagolo Soro hears from his cement factory in Abidjan is likely to be construction work on the long-awaited Third Bridge, a six-lane, 1.9-kilometer roadway spanning Ebrie Lagoon in Côte d’Ivoire’s fast-growing capital city. A few years ago, the banging noises were more likely to be gunfire. “We heard bullets outside the building but kept working until the last hour, ” said Soro, director of Ciment Cuirasse, as he recalled daily life during the protracted period of instability and violence that followed the military coup in 1999. With the easing of political tensions, Côte d’Ivoire is one of a number of countries that have been able to turn their focus from war and survival to growth and prosperity. Collaborative efforts in Côte d’Ivoire exemplify the way FIAS support, World Bank Group expertise, and focused strategies by client countries can bring about dramatic economic change. Côte d’Ivoire’s ambitious reform agenda has reversed an economic slide that had reached negative 4.7 percent GDP growth annually in 2011. Within two years, growth had rebounded to an annual rate of 8.7 percent. The government has now set its sights on moving off the list of countries in FCS and joining the ranks of emerging market economies by 2020. As orders for his cement pour in, Mr. Soro has opened a new plant to meet demand driven by housing construction and infrastructure improvements such as the Third Bridge, a project going forward with the help of a risk guarantee from the Bank Group’s Multilateral Investment Guarantee Agency (MIGA). Key to the turnaround has been the implementation of a new set of policies and procedures designed to promote rather than hinder private sector investment and growth. From making it easier to start a business to empowering women entrepreneurs to streamlining the construction permitting process, Côte d’Ivoire, with FIAS support, has spurred domestic business growth and attracted substantial new foreign investment. 7 FIAS funding supported an additional 14 projects managed by regional IFC Advisory Services units that had less than $10,000 in expenditures for the fiscal year. 19 than half of the 36 countries on the World Bank Group’s of Congo; 4 in Togo; and one each in the Central African list of FCS states are in Sub-Saharan Africa and eligible Republic, Chad, the Comoros, Guinea-Bissau, the for IDA loans. FIAS support is at work in most of these Republic of Congo, Liberia, Malawi, Mali, and Sierra countries, helping in their effort to match the robust Leone. Project expenditures in FCS countries totaled economic growth achieved by other countries in Africa. $3.3 million, or 31 percent of total client-facing project The development challenges are greater and the path spending ($4.4 million, or 28 percent of client-facing to progress more arduous in IDA and FCS states. But project spending in FY13). the results show a clear correlation between embracing business reform and attracting domestic and foreign investment. In this chapter we tell the stories of some of OHADA Regional Initiative to Attract and Retain Investment these efforts. Conflict has been a major drag on sustainable development in several countries in West and Central Africa. But In FY14, FIAS funded active investment climate reform this is not the only source of economic stagnation. projects in 198 of the 36 countries or territories on Disjointed trade, customs, and investment laws have the FY14 Harmonized List of Fragile Situations in the thwarted opportunities for countries in the region to following regions and countries: work together for growth. In FY14, with FIAS support, the World Bank Group helped 17 African countries enact • East Asia and Pacific: Myanmar, Timor-Leste. groundbreaking reforms that streamline the structuring of equity investments and the process of establishing limited • Europe and Central Asia: Kosovo. liability firms. In January 2014, the Organization for the Harmonization of Business Law in Africa, known by its • Latin America and Caribbean: Haiti. French acronym OHADA, adopted a new Company Law, or Acte Uniforme, applicable in the organization’s 17 member • Middle East and North Africa: Afghanistan. states stretching from West Africa to the Indian Ocean.9 • Sub-Saharan Africa: Burundi, Central African It includes measures that are applicable on a voluntary Republic, Chad, the Comoros, the Democratic basis but consists mainly of mandatory provisions which Republic of Congo, the Republic of Congo, became law in all 17 countries immediately upon passage Côte d’Ivoire, Guinea-Bissau, Liberia, Madagascar, by OHADA in January. As a result, all 17 member states Malawi, Mali, Togo, and Zimbabwe. have been credited with a Doing Business reform. FIAS support helped bring about 23 reforms in 12 The OHADA countries aim to harmonize the business countries (compared with 24 reforms in 12 countries laws and implementing institutions encompassing a in FY13), representing 30 percent of all FIAS-funded market of about 230 million consumers. The Company reforms: 5 in Côte d’Ivoire and the Democratic Republic Law authorizes each member state to adopt national legislation making it optional rather than mandatory to Working to Avert “Catastrophic” Economic Impact of Ebola Crisis As this report was going to press, the Ebola epidemic in West Africa was not yet contained. FIAS supports investment climate reform projects in all three of the West African countries most directly impacted by the Ebola crisis, Guinea, Liberia, and Sierra Leone. The economic progress made over the past several years in this region is at risk of being overwhelmed by the economic repercussions of a health crisis with profound implications for commerce and international trade. A World Bank Group analysis released in September 2014 found that the already serious economic impact of the epidemic could grow eightfold, inflicting a potentially catastrophic blow to already fragile economies. In one of her early initiatives as senior director of the T&C Global Practice, Anabel Gonzalez convened key staff to discuss ways that T&C can collaborate in a Bank Group-wide effort to respond to the crisis. Small and medium enterprises in the affected countries will be particularly vulnerable, as the Ebola epidemic erodes labor force participation, closes places of employment, and disrupts transportation and trade patterns. The potential closure of one large mining concern in Sierra Leone, for example, could impact some 60 small and medium enterprises. As part of the coordinated Bank Group response, T&C is reconfiguring existing activities in the affected countries to (i) support firms’ resilience throughout the crisis, (ii) encourage demand, and (iii) work on issues relating to the cost of doing business. T&C will explore the possibility of utilizing a proposed multidonor trust fund for activities that cannot be directly funded as a result of the reconfiguration. 8 Country total includes regional projects. 9 OHADA member states are Benin, Burkina Faso, Cameroon, the Central African Republic, Chad, Comoros, the Democratic Republic of the Congo, the Republic of Congo, Côte d’Ivoire, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Mali, Niger, Senegal, and Togo. 20 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES use a public notary when establishing a limited liability The Midterm Independent Evaluation of FIAS company (LLC) and to reduce the minimum capital 2012–2016 Strategy and Program, conducted by the requirement for creating an LLC. The mandatory investor consulting firm Ecorys, found that FIAS is fulfilling its provisions protect the interests of minority shareholders mission of facilitating reforms in developing countries and improve corporate governance. Specific positive and that the focus on private sector development ties impacts expected to flow from the Company Law include directly to the World Bank Group’s twin goals of boosting the following: shared prosperity and eliminating extreme poverty. On the basis of reforms achieved to date, the evaluation found • A potential increase in the number of that FIAS-supported programs will likely meet or exceed companies created, particularly small and reform targets. medium enterprises. “Ecorys sees integration of CIC (Investment Climate • A reduction in the informal economic sector. Department) and the FIAS program into the Trade and This is important because unregistered or Competitiveness Global Practice from a position of unlicensed businesses avoid taxes, and their strength, with a well-honed product range—impressive growth is stunted for lack of access to finance results pipeline—strong brand equity—deep-rooted M&E and large-scale trade. impact oriented culture,” the evaluation found. A vast majority of FIAS-supported programs are “optimally placed • Strengthening of the capital base of businesses to make a direct and significant contribution to the WBG to finance their growth. twin goals.”11 • Diversifying the source of funding through The FIAS evaluation recommended greater focus on OPERATIONAL HIGHLIGHTS private equity and hedge funds, opening measuring impact at higher aggregate levels to help donor opportunities for the development of financial and client countries understand the impact of FIAS- markets with new financial instruments. supported programs on income, jobs, and wealth creation, among other metrics. The evaluation found that among Shearman & Sterling, a leading U.S. corporate law firm, cross-cutting issues, gender has not reached the level of commented that the Company Law “adds tailwind to a prominence envisioned in the FIAS strategy, and public- fast-developing market and further incentivizes investors, private dialogue should receive more focused attention. including private equity investors, to enter the dynamic T&C has indicated that both these areas will feature African markets. ”10 prominently in the second half of the strategy cycle. The World Bank Group’s Independent Evaluation Group FIAS-Supported Work Endorsed by Independent Evaluations (IEG) reported on Investment Climate Reforms, covering At the midpoint of the FIAS FY12–16 strategy cycle, work dating back to FY07 , including FIAS-supported work, several detailed evaluations of FIAS-supported work concluding that the Bank Group has been successful have confirmed the soundness of the FIAS approach to in improving the investment climate in client countries. addressing investment climate issues in client countries “These reforms were generally supported in the right and the quality of results on the ground. The T&C Global countries and generally addressed the right areas of Practice is incorporating the findings of the evaluations the regulatory environment, ” the IEG found.12 The completed during FY14 of FIAS-supported work. Four assessment covered 819 projects with investment climate evaluations cover work relating to the FIAS FY12-16 interventions in 119 countries for a total estimated value of strategy cycle; the World Bank Group’s investment climate $3.7 billion. services; the Indicator-Based Reform Advisory product; and the Business Taxation program. All the evaluations The IEG evaluation concluded that the Bank Group: found these activities to be relevant and effective in • Has supported a comprehensive menu of delivering important benefits to client countries. T&C is investment climate reforms focused on reducing committed to applying lessons learned and proposals costs to businesses that has improved the for further improving quality to the work done through investment climate in client countries. the remainder of the strategy cycle and the design for the next cycle. In particular, this commitment includes • In the design and assessment of reforms, should working to identify and implement the most effective include an examination of their effect on ways to measure the positive economic impact of T&C’s investment, jobs, business formation, and growth. technical assistance and advisory services in such areas • Contends with political instability and lack of as job creation, income, exports, and wealth. Following are political commitment in some client countries as summaries of four of the evaluations completed as of factors limiting the effectiveness of reforms. fall 2014. 10 Shearman & Sterling LLP ” Project Development & Finance newsletter, , Client Publication, “A Revised Uniform Companies Code for the 17 African Countries of Ohada, February 9, 2014. 11 Quoted from Midterm Independent Evaluation of FIAS 2012–2016 Strategy and Program, October 2014, Ecorys, not yet published when the Annual Review went to print. World Bank Group, Independent Evaluation Group, Investment Climate Reforms: An Independent Evaluation of World Bank Group Support to Reforms of Business 12 Regulations, 2014, p. ix. Available at: https://ieg.worldbankgroup.org/evaluations/investment-climate-reforms. 21 The Evaluation of Indicator-Based Reform Advisory improve their regulatory environment for business to Product (IBRA), conducted by Dalberg Global encourage investment, spur economic growth, and create Development Advisors, found that IBRA not only is jobs. The product serves as an entry point for investment responsible for a significant share of Doing Business climate programs by responding to client demand reforms achieved but plays an important catalytic role. generated by the World Bank Group’s Doing Business Nearly half the client countries engaged on IBRA issues report and other datasets. IBRA provides rapid-response went on to expand their investment climate portfolios. In technical assistance in at least nine key areas: business several ways, IBRA serves as a model for collaboration start-up, construction permitting, property registration, across the Bank Group.13 The success of the IBRA model access to credit, investor protections, tax administration, appears to be due to several unique elements: the team’s trade logistics, contract enforcement, and resolution of ability to build off of significant client country interest insolvency. generated by the Doing Business rankings; the rapid- response nature of the IBRA Reform Memo; and the Over the past year, IBRA has received eight new requests collaboration that allows IBRA to tap into expertise from for technical assistance and four countries renewed across a wide range of relevant topics. Taken together, their agreements. Responding to demand generated by these elements have contributed to IBRA’s ability to the Women, Business, and the Law Project to improve support a substantial portion—nearly 20 percent—of the women’s economic opportunities, IBRA has organized two Doing Business reforms since 2008. The impact is also high-level peer-to-peer events on the topic in Belgrade and sustainable. More than 95 percent of reforms take hold in Togo. As noted above, the independent evaluation by and are not reversed. About 45 percent of client countries the consulting firm Dalberg Global Development Advisors have seen their investment climate portfolio increase found that IBRA effectively supports the enactment of following their initial IBRA engagements. Doing Business reforms and represents a model for collaboration across the Bank Group. The Business Taxation Product Evaluation, conducted by the consulting firm Economisti Associati, found that The government of Tajikistan identified investment the program performs well, delivering important results climate improvements as a priority but lacked a clear plan across a range of relevant themes with both analytical for reform. At the request of the Tajikistan Investment rigor and practical feasibility that is appreciated by clients. Council, a FIAS-supported World Bank Group team helped The program, begun in FY07 and greatly expanded in develop an Investment Climate Action Plan covering a recent years, exhibits a broad diversity of client countries broad range of business environment reforms. Approved ranging from highly dysfunctional to business friendly by the Tajik cabinet at the end of FY14, the plan will shape but with weaknesses. In a common theme among the the reform agenda for the next two years. “I am grateful evaluations, the Business Taxation evaluation found that to the team for helping us define the reform agenda, a comprehensive assessment of impacts was difficult to prioritize based on global good practice, and identify the compile because of a scarcity of solid evidence. More than key ingredients we need to make the implementation two-thirds of Business Taxation projects were joint IFC– possible, ” said Manuchehra Madjonova, economic World Bank operations and were well coordinated with consultant at the Tajikistan Investment Council. other donor-supported projects in the tax field. “It is quite remarkable that, over a relatively short period of time, the The effort, part of the FIAS-funded IBRA Project in East BT Program has become an important player in the area of Europe and Central Asia also helped Tajikistan address taxation reform, covering a range of very relevant themes a long-standing concern about obstacles to obtaining and achieving some important results, ” the evaluation construction permits. Working jointly with the Bank found.14 The assistance effectively balances analytical Group’s Project on Private Sector Competitiveness, the rigor and practical feasibility that is appreciated by client FIAS-supported team delivered a plan to streamline countries and institutions. construction permitting and shorten the overall time required for obtaining construction permits by 20 percent. The project supports the Tajik Construction Agency in Starting Businesses and Fostering their Growth modernizing its services and improving capacity. In FY14, FIAS support under the strategic theme of For three years, the Tirana Municipality in Albania had fostering enterprise creation and growth continued to stopped issuing construction permits. During that time, drive economy-wide reforms across client countries. FIAS many buildings in Tirana were built illegally, earning supported a range of activities focused on unlocking firms’ Albania a last-place ranking worldwide on the Doing productivity, fostering competition, and reducing barriers Business indicator dealing with construction permits. to entry, expansion, and exit, thus generating broad Through the IBRA project, FIAS helped Albania carry out productivity gains for client countries. a detailed assessment of the construction permitting process in Tirana that led to a package of legislative and Targeted Advice on Key Investment Climate Indicators administrative changes. The World Bank team provided The FIAS-supported IBRA helps client governments feedback on a draft law on territorial planning and ensured 13 The report (Evaluation of Indicator Based Reform Advisory Product (IBRA) Summary of Findings, June 13, 2014, Dalberg Global Development Advisors) was not yet published when the Annual Review went to print. 14 Quoted from Business Taxation Product Evaluation Final Report, 2014, Economisti Associati, not yet published when the Annual Review went to print. 22 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES OPERATIONAL HIGHLIGHTS it was in compliance with global good practice. Enacted Support to Subnational Doing Business Reports in April 2013 and implemented in February 2014, the law has enabled the Municipality of Tirana to resume issuing FIAS-supported subnational Doing Business reports construction permits. The law increases transparency capture differences in business regulations and their and streamlines procedures, combining the development enforcement across locations in a single country or across and construction permits into a single permit, reducing various small countries in a region with a shared legal and the number of procedures, and eliminating the fee for regulatory framework. The reports recommend reforms obtaining an extract of the master plan. to improve performance in each of the indicator areas. In FY14, the subnational Doing Business project continued to The Comoros, listed among countries in fragile and expand its geographic coverage with studies in the Middle conflict-affected situations, is an island nation off the east East and North Africa (Egypt), Latin America (Colombia coast of Africa with a history of political and institutional and Mexico and a regional Central America project), Sub- instability. Until a few years ago, the country had little Saharan Africa (Nigeria, South Africa), Eastern Europe interaction with international financial institutions and even (Poland), and Southern Europe (Spain). less with major investors. In Central America and the Caribbean, the project In 2011, the government of the Comoros asked the World benchmarked 22 cities and 10 ports in Costa Rica, Bank Group for help in addressing the weaknesses of its the Dominican Republic, El Salvador, Guatemala, legal and regulatory framework in two areas: investment Honduras, Nicaragua, and Panama. The project is piloting climate and access to finance. With support from FIAS, a new set of research questions to provide insights into the Bank Group has been providing technical assistance the region’s trading across borders indicator (a measure for three years, resulting in passage of new leasing, of the time, cost, and number of documents associated urban development, and tax codes, and creation of a with exporting and importing, and one of the 11 indicators new Chamber of Arbitration and Meditation. The country measured by Doing Business). The report will provide also became a member of the MIGA in 2013 and is now original information on good practices to facilitate trade discussing accession to the Convention on the Recognition and regional integration, including single windows, and Enforcement of Foreign Arbitral Awards, also known as customs practices (risk-based and information exchange the New York Convention. FIAS support helped bring about systems), and port operations. improvements in the country’s business environment, particularly in relation to starting a business. The number Drawing upon funding from multiple donors, including of new companies created has increased three-fold since FIAS, USAID, and DFATD, this project is a component of a 2012. As a result of its ambitious reform agenda, the joint World Bank–IFC programmatic approach to strengthen Comoros has become more visible to investors and to the the investment climate in Latin America and the Caribbean. international donor community. Quality is ensured by rigorous review mechanisms and 23 regular progress reports. The strong monitoring and The ongoing reform process will be bolstered by evaluation framework was designed jointly with DFATD. parliamentary action, including passage of legislative reforms to ensure the sustainability of the permitting Another highlight supported by funding from FIAS is reforms. At the same time, the government has been the Doing Business in Egypt 2014 report. The report engaged in a fundamental reform of its supervision and marks a first-of-its-kind effort to benchmark the business inspections system. and regulatory environment at the subnational level in post-revolutionary Egypt. Overcoming a number of data With the government and parliament taking the overall collection challenges posed by social unrest during and lead, the World Bank Group was instrumental in after the Arab Spring, the project successfully collected supporting the initial steps by providing detailed training new micro-level data across 15 cities and 5 strategic ports. to government technocrats, state secretaries, business The report also includes a pilot study on the availability representatives, and members of parliament, earning the of information in the construction permitting system. FIAS-supported team a long-term role as trusted adviser to The project has been recognized with an award by the the client. The success of the project to date stems from Development Economics Vice-Presidency of the World the collaborative nature of the engagement, involving the Bank Group. participation of government leaders, Mongolian and Bank Group technical experts, and a broad coalition of political Regulations Enabling the Ease of Business Entry and Operations parties and business representatives. The FIAS-supported Business Regulation Program works To promote sustainable private sector investments in with client governments to improve and streamline the the state of Rajasthan, India, the World Bank Group regulatory environment for doing business, with the partnered with the Rajasthan government on a three- ultimate aim of fostering enterprise creation and sustaining year cooperation agreement, signed in September 2010, growth. The program supports legal, institutional, and with the client covering half the cost. FIAS funded a regulatory reforms aimed at reducing the burden of streamlining business regulations (SBR) component of the starting and operating a business and improving the project, which aimed to reduce and simplify the regulatory overall quality and effectiveness of regulations affecting requirements for businesses in the region. Working businesses. While the focus is on government reform, groups and consultations with government officials and the program involves extensive engagement with a wide with private sector organizations and associations led to variety of private sector interests (see box below). more than 100 recommendations affecting three-quarters of administrative procedures. A significant result of this Mongolia engaged with technical experts of the World effort was the adoption of the “Rajasthan Factory Rules Bank Group seeking to cut in half the number of permits— 2013,” providing for self-certification for annual inspections, more than 900—imposed on businesses. A “guillotine extending the expiration of business licenses from five to team” was established, headed by the cabinet secretary ten years, eliminating mandatory annual license renewals, and composed of members of parliament and senior and specifying times for approvals. It now takes less time officials from various ministries. The team was tasked to to set up industrial electrical connections and to apply for assess whether existing permits were legal, necessary, new solar, wind, and biomass projects, and applications and supportive of business activity. Those that did not can be accepted online. meet the criteria were removed or modified. A Comprehensive Business Reform Effort in Bosnia and Herzegovina Severe floods, civil unrest, and political instability are among the forces dragging on the economy of Bosnia and Herzegovina over the past year. Working in close collaboration with the World Bank Group, the government nevertheless managed to implement critical business reforms benefiting more than 17,000 companies, entrepreneurs, and sole traders. The effort has generated an estimated $9.2 million in new investments and resulted in verified direct savings of over $6 million. The FIAS-funded project team collaborated with five ministries and multiple agencies at the national and subnational levels as well as several municipalities, achieving a number of reforms in agribusiness, construction law, business registration, and regulatory reform. For example, some 112 agribusiness- related procedures were streamlined, with a particular focus on export and import of agriculture-related products. The team also supported the Ministry of Foreign Trade and Economic Relations in establishing the country’s first online electronic register of licenses and permits. Simplified documentation and information requirements led to significant cost and time savings, and increased transparency. Assisting with the drafting of a strategy for regulatory reform, the team in FY14 conducted rigorous capacity assessments and training sessions with government agencies as well as extensive stakeholder engagement with donors and private sector parties. 24 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES Efficient Debt Resolution and Business Exit Procedures assistance was delivered as part of a collaborative effort of Bank Group teams. In June 2014, the National Assembly The FIAS-supported Debt Resolution and Business Exit passed the new bankruptcy law that brings Vietnam’s code Program provides technical assistance to countries around into line with international practice. The law introduces a the world in achieving reforms of their legal, regulatory, and number of modernizing elements to Vietnam’s insolvency institutional frameworks for commercial dispute resolution, system. FIAS is supporting continued collaboration, nonperforming loans, business exit and reorganization, and ensuring that the law can be put in practice effectively. the collection of debts. This work is crucial because the orderly restructuring or liquidation of troubled businesses Many Sub-Saharan African countries lack a mindset of encourages entrepreneurs, investors, and lenders to rescuing troubled businesses, a circumstance both caused take risks in new ventures. Growing appreciation of the by and reflected in weak legal, regulatory, and institutional importance of debt resolution and business exit procedures frameworks. To improve insolvency regimes in the region explains the increase in the number of insolvency reforms and foster public-private dialogue on this topic, FIAS worldwide.15 funding supported the fourth Africa Round Table in Lusaka, Zambia, in October 2013. The event, organized by the In Samoa, FIAS funding supported the drafting of new Debt Resolution and Business Exit team, in partnership mediation rules, finalized in August 2013, that establish a with INSOL International, attracted over 90 participants, framework for implementing court-referred mediation. They including delegations from Burundi, the Democratic include provisions mandating mediation, confidentiality, Republic of the Congo, Ghana, Kenya, Lesotho, Liberia, admissibility of mediation evidence in court, and Malawi, Mauritius, Nigeria, Rwanda, Senegal, Seychelles, enforceability of mediated settlements. They also establish South Africa, Uganda, and Zambia. The Africa Round Table a mediator accreditation system, which includes an has seen the number of participating countries increase OPERATIONAL HIGHLIGHTS accreditation board and a complaints handling mechanism, from 6 in 2010 to 15 in 2013. So far, the gathering has in accordance with international best practices. Rules contributed directly to the implementation of five distinct and fee guidelines for mediators implemented at the insolvency reforms, all of which have helped improve same time address stakeholder concerns about fees countries’ credit environments. The fifth round table event and the administrative processes related to mediation. took place in Kampala, Uganda, in October 2014. Implemented in December 2013, the rules make mediation the default procedure, thus making it effectively mandatory before any litigation can take place. Boosting Trade and Investment in Access to credit for businesses in Trinidad and Tobago Developing Countries has been a particular challenge. Domestic credit represents In FY14, FIAS funding continued to help provide support only 30.7 percent of GDP , as compared with the regional to client countries to catalyze investment and trade for average of 46.8 percent and the global average of 131 advancing the overall competitiveness agenda, creating percent.16 Concern that banks and other investors may not jobs, and increased growth. This work in facilitating be able to recoup loans to struggling or failing businesses international trade and investment ties directly to the has led to a reluctance to lend, particularly to smaller FIAS FY12–16 strategy cycle. The key goals of the effort enterprises. FIAS support enabled the World Bank Group to are to: assist in drafting a new insolvency law passed in May 2014. The law includes a full set of implementing regulations • Remove impediments to stimulating and retaining and establishes the Office of the Supervisor of Insolvency. investment. The new law is expected to affect over $536 million in nonperforming loans and to result in higher creditor • Streamline and harmonize trade logistics systems and recoveries. Access to credit for businesses in Trinidad and services. Tobago is expected to expand significantly over the next • Support more effective and transparent business few years. taxation. In Vietnam, only 250 cases had been filed under the country’s bankruptcy law in the nearly 10 years since it Effective and Transparent Business Taxation Mechanisms took effect in 2004, with only about a third of those cases FIAS is supporting efforts to help developing countries proceeding to completion. Vietnam lacked a systemic introduce reforms that expand the tax base, improve the release valve for the country’s rising nonperforming loan efficacy and transparency of tax administrations, and ratio.17 Increasing numbers of foreign businesses fled the reduce the private sector tax burden. In FY14, the FIAS- country as the implications of this systemic flaw became supported business taxation product provided expertise clear. With the help of FIAS support, the World Bank Group to World Bank Group tax simplification projects in 36 partnered with Vietnam’s National Assembly and Supreme countries across the globe, including 7 considered fragile or Court in drafting new insolvency legislation. This technical affected by conflict. 15 World Bank Group, Doing Business (2013). 16 World Bank Development Indicators, http://data.worldbank.org/data-catalog/world-development-indicators. 17 Moody’s. 25 In Uganda, the investment climate team advised the Transfer Pricing Program government on improving transparency in the awarding of tax incentives. Uganda’s Ministry of Finance began listing Since 2011, in partnership with the Organisation for these tax expenditures on its website. This transparency Economic Cooperation and Development and the European had the beneficial effect of reducing the granting of Union, FIAS has supported World Bank Group assistance to discretionary incentives and resulted in the repeal of some Colombia, Ghana, Kenya, and Vietnam in strengthening that had been previously granted. Training in tax policy and their legislative and regulatory frameworks and their administration provided by the project team emphasized capacity for enforcement and implementation in the the importance of maintaining transparency by the transfer pricing area. continuous publication of tax expenditures. In Colombia, FIAS has supported the delivery of In the East African Community (EAC) Common Market, significant input on the drafting of legislation on primary FIAS support for reducing tax compliance costs led to a and secondary transfer pricing. Following transfer pricing directive harmonizing tax procedures. The FIAS-supported adjustments made as a result of audits of multinational tax team completed a tax incentives study to ensure enterprises, the Colombian tax administration has that fiscal policies supporting a common market exist in increased its revenues by 76 percent, from $3.3 million in EAC. These initiatives helped identify specific incentives 2011 to $5.83 million in 2012. for harmonization and led to the adoption of a regional In Ghana, FIAS support has helped the revenue authority incentives policy. In Kenya, legislation removed the build an effective transfer pricing regime with significant discretionary power of the minister to grant value added input on the drafting of the new transfer pricing legislation, tax (VAT) remissions, improving transparency, leveling the supporting guidance, and return schedule. The team has playing field for investors, and aligning the country’s policy also undertaken a comprehensive skills-building program with proposed regional incentives guidelines. with the newly established group of specialist auditors. Through continued FIAS support in FY14, the Rwanda The FIAS-supported tax team has helped Kenya develop Revenue Authority successfully implemented a number and deliver an intensive training program on advanced of tax-filing innovations that enable taxpayers to make transfer pricing issues for government auditors. The self-declarations and pay tax liabilities. Regulatory changes program has resulted in more efficient work by the tax now allow small and medium enterprises to file and pay administration and contributed to an increase in the VAT returns on a quarterly basis, submit declarations and number of audit cases completed and the number of pay taxes by mobile phone, and electronically file and cases going to dispute resolution. Revenue collections submit returns. The effort combined technical advice on have increased by 63 percent, from $52 million in FY12 to the tax program with communications support for a public $85 million for FY13. In two recent cases, Kenya’s revenue awareness campaign to boost participation and raise authority has successfully negotiated transfer pricing sensitivity to the importance of paying taxes. More than adjustments, resulting in additional tax revenues of $12.9 10,000 entrepreneurs have registered for and used the million and $8 million. free application. A further enhancement—the capability to submit payments online using a traditional bank account Technical and policy support to the tax administration or mobile money network—is being implemented. Launch of Vietnam has aided reform of transfer pricing of the M-Declaration platform in Rwanda is providing a procedures. Bank Group collaboration has also resulted learning ground for refining the mobile application model as in a series of skills-building workshops for specialist a channel for government-to-business service delivery and auditors, significantly improving their capacity to enforce sharing lessons learned with other tax authorities in Africa. transfer pricing rules. The number of transfer pricing audits conducted by the tax administration has grown In Burundi, a FIAS-supported program has helped greatly from a single case in 2012 to 40 cases in 2013, and the increase the tax base by enacting two new tax laws in adjustments from transfer pricing amounted to $110 million early FY14, affecting the VAT and tax procedures. Burundi by the end of 2013. Voluntary compliance has significantly now recognizes various forms for making the date of a improved, with fewer taxpayers reporting losses. communication official, beyond the use of post office stamps or notifications which caused delays for taxpayers. Taxpayers now have better access to information as Global Tax Transparency Program a result of the new tax procedure law, which makes Under the FIAS-funded Global Tax Transparency Program, mandatory the publication of various legal and regulatory the World Bank Group assisted Botswana, Ghana, texts as well as documentation with information on Jamaica, Kenya, the Philippines, and Uruguay in taxpayer rights and obligations. meeting international tax transparency standards. These efforts included providing information countries can use to The FIAS-supported tax work in Burundi is part of a improve tax enforcement, as verified by externally prepared broader investment climate program in that country reports published by the Global Forum on Transparency and recognized in October 2014 with an IFC Corporate Award. Exchange of Information for Tax Purposes. Meeting the The program, launched in the aftermath of a 13-year civil standards has helped these countries improve rules related war, has helped make Burundi one of the world’s most to corporate transparency, accounting requirements, full improved economies in terms of enhancing its business disclosure of ownership of entities, and greater access to environment. 26 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES information by the tax authority. Enhancing the quality and request procedures, approvals, authorizations, and other effectiveness of the tax audit process, in turn, increases certifications needed to import and export goods. In two revenue potential. of Colombia’s major ports of entry, the project successfully established a risk management program comprising the Efficient Trade Logistics Systems use of risk profiles and risk management committee meetings. Following the technical guidance of the trade FIAS-supported activities demonstrated a strong track team, the Ministry of Finance passed a decree mandating record in helping client countries enhance their trade the introduction of health clearances at the first port of logistics systems and services, leading to significant arrival, thereby eliminating the need for additional checks decreases in the time and cost to import and export for at subsequent domestic ports. This reduced berth time for traders and putting these countries in a more competitive ships by 50 percent on average. position in international trade markets. During FY14, the trade logistics program consolidated its border In São Tomé and Príncipe, a FIAS-funded trade logistics management interventions and aligned the work with the project has helped implement sustained reforms aimed articles of the new WTO Trade Facilitation Agreement (TFA). at simplifying and reducing the time and cost to complete These adjustments placed the work in a more coherent, import and export transactions. The country’s customs broader context. In FY14, trade logistics work spanned 54 administration implemented ASYCUDA World—the countries, including 40 IDA countries, of which 17 were in Automated Systems for Customs Data established by the Sub-Saharan Africa and 10 on the list of states in FCS. The United Nations Conference on Trade and Development. trade logistics work included a comprehensive effort in the Efficiency and transparency in customs operations has Western Balkans (see box below). been enhanced by setting up a link that enables the real- time verification of tax identification numbers for traders OPERATIONAL HIGHLIGHTS With FIAS help, Colombia has achieved significant reforms involved in import and export. Shippers can electronically in streamlining trade-related procedures and automation log manifests through ASYCUDA World, eliminating the development of the single window system for foreign need for paper-based manifests and release orders. During trade. The single window connects the 17 public agencies FY14, technical assistance has also enabled São Tomé and involved in foreign trade—primarily the ministries and Príncipe’s customs administration to tackle transparency health and safety entities—and two private companies, issues. With customs officers now automatically assigned namely a provider of e-signature certificates and a provider to a specific customs declaration, traders benefit from of legal information on registered traders. The single increased transparency and automation of international window seamlessly links traders, customs agents, and trade procedures. brokers through an online platform that allows users to Easing Trade Flows in the Western Balkans Region A FIAS-funded regional trade logistics project helped implement key initiatives in a number of countries in the Western Balkans, including Albania, Bosnia and Herzegovina, Kosovo, the Former Yugoslav Republic of Macedonia, and Montenegro. The project team organized joint technical meetings between Customs and Food Safety Agencies, which culminated in the prime ministers of Albania and Kosovo signing a bilateral agreement on transit facilitation in January 2014. The agreement aims to ease the transport of goods destined for Kosovo that enter through the port of Durres in Albania by simplifying transit procedures and streamlining the exchange of data and information between the countries’ border agencies. In FYR Macedonia, the FIAS-supported team helped the food and veterinary agency and the state sanitary and health inspectorate introduce a risk-based approach to import control by developing an inspections methodology consisting of risk scores and rankings. This systematic, risk-based approach is expected to reduce inspection rates at border and inland terminals by as much as 40 percent. Traders benefit, as goods can be released to market faster, reducing handling, warehousing, and transport costs. Following the success of the FYR Macedonia effort, the project team agreed to assist the Veterinary Office of Bosnia and Herzegovina along the same lines. Additional reforms in Bosnia included extending the working hours of the federal border inspectorates and aligning them with those of Croatia’s customs agency at the three most frequented border-crossing posts, responsible for more than 70 percent of Bosnia’s trade volume. This reform shortened the lead time for clearing goods by the agencies responsible for the safety of agricultural imports and exports by 13 percent. In Montenegro, incoming import declarations had been assigned to a customs officer by the shift manager. Applicants had to either wait in the customs office or make repeated visits to obtain updated information about their declaration. This inefficient process has been replaced with an automated system that quickly assigns cases to customs officers and provides traders with online updates on the progress of their declarations. Implementation of this system has led to a 45 percent reduction in the time needed for clearances without physical inspections. 27 A New Policy Approach to Attract and Retain Investments During FY14, a refocused investment policy product was developed and introduced in more than 30 countries, with planning under way to apply the program in more than 10 countries in every region. The new product promotes reforms to help developing economies better integrate their private sectors with local and global value chains. These reforms address the legal, regulatory, and administrative impediments to attracting, establishing, retaining, and linking the different types of foreign direct investment (FDI) and non-equity modes of investment (NEMs) with the domestic private sector.18 Reforms also promote steps toward maximizing the potential benefits of FDI and NEMs through regional integration and collaboration. Increasingly, more goods and services reach consumers through sales by foreign affiliates than by trade alone. A global network of over 80,000 multinational enterprises and their 800,000 foreign affiliates generates a quarter of the world’s GDP , selling more than $25 trillion worth of goods and services with an added value of more than $6 trillion. Within this context, most countries seek investments, both foreign and domestic, to help advance their socioeconomic objectives. However, paradoxically, a wide array of legal, regulatory, and administrative barriers commonly prevents countries from maximizing the potential of investments. These barriers tend to affect different dimensions of the investment life cycle, such as strategy formulation, investment attraction, investment entry, investment protection and retention, investment linkages, and regional integration and investment. To respond to these new realities and to enhance the effectiveness of FIAS-supported interventions, the team prepared online toolkits to serve as reference guides for implementing investment policy reforms. Each toolkit provides access to a range of practical tools, relevant case studies on reforms, and best practices, with links to further reading materials and resources. The toolkits address the following areas: Investment Reform Map (IRM)—IRM provides client governments with a logical framework for (i) visualizing the types of investment flowing into their economies and the policy mixes required to maximize the potential benefits of each type; (ii) designing coherent and concrete reform agendas that can be implemented in the short term and lead to results that can be measured on an objective basis; and (iii) enabling a reform champion within a government to coordinate the implementation of the reform agenda with other government agencies. Investment Entry­ —Protectionism has regained momentum in the recent years. One of four new investment policy changes that countries make every year tends to obstruct, rather than, liberalize FDI flows. The intervention on investment entry enables client countries 18 The NEMs are contractual relationships between foreign and local enterprises to coordinate international production of goods and services. Through NEMs, foreign firms tend to participate by providing intangible assets (such as branding, knowhow, and technology) while local firms provide the capital needed to undertake the productive activity. Services outsourcing, franchising, licensing, and contract management are examples of NEMs. 28 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES to enhance investment entry regimes by (i) reducing or The EAC Common Market Scorecard eliminating discriminatory barriers to the establishment of FDI, in particular in services sectors; and (ii) streamlining In 2010, the EAC partner states signed the EAC Common and improving the transparency of procedures affecting the Market Protocol, an ambitious agreement that aims to establishment of investment. allow the free movement of goods, services, and capital between Burundi, Kenya, Rwanda, Tanzania, and Investment Incentives—While many policy makers believe Uganda. So far, results among the five signatories have that investment incentives play a key role in attracting varied in terms of eliminating trade restrictions. Many and retaining all types of FDI, evidence suggests that in non-tariff barriers have remained in place and in some many cases they can be redundant or may not meet the cases new restrictions have been introduced. At the EAC intended or targeted public objectives. In many countries, Secretariat’s request, IFC developed a set of interventions nearly four of five companies state that incentives did not to address barriers to full implementation of the protocol. play a significant role in their decision to invest. FIAS- One of the key initiatives to emerge from this effort was supported work on investment incentives assists clients the FIAS-supported EAC Common Market Scorecard, a in rationalizing the use of investment incentives by (i) transparent, rigorous, and easily understandable monitoring taking stock of existing investment incentives; (ii) mapping mechanism to guide the trade liberalization process. In and improving procedures for allocation of investment putting together the first scorecard, the team reviewed incentives; (iii) conducting cost-benefit analysis to assess more than 680 laws, regulations, and procedures to the effectiveness of incentives; and (iv) reducing the identify nonconforming measures and other restrictions degree of potential distortion of incentives by increasing that impede the common market. Using a simple scoring their compatibility with applicable international rules and mechanism, the team ranked partner states based on their disciplines on subsidies and performance requirements. performance, creating healthy peer pressure to accelerate OPERATIONAL HIGHLIGHTS reform. The first scorecard was published in February 2014 Investor Protection and Confidence —One in four using data from the previous year. It identified more than investors in developing countries either withdraws from an 60 nonconforming measures related to trade in services existing investment or cancels planned investment projects and about 50 non-tariff barriers affecting trade in goods. because of concerns related to government actions such The scorecard showed that with regard to capital, only 2 as expropriations, arbitrary regulatory changes, transfer of the 20 operations covered by the protocol are free of restrictions, or breaches of contracts. The investment restrictions in all five EAC partner states. protection toolkit enables governments to improve investor confidence and retain greater levels of investment by (i) National implementation committees, which bring together eliminating gaps between international and domestic legal different government agencies, have already started using frameworks on key investment protection guarantees the scorecard findings to target key implementation areas, (such as transfers, expropriation, and fair and equitable while the private sector is using the information to urge treatment); (ii) streamlined implementation of investment governments to speed up reforms. Donor partners in the protection guarantees; and (iii) establishing investment region are targeting their development resources toward retention and confidence mechanisms to improve effective implementing the scorecard’s recommendations, and implementation of key investment protection guarantees, some countries have already started recording scorecard thereby increasing the retention of investment, preventing reforms. For instance, Tanzania has relaxed discriminatory investor-government disputes, and boosting investors’ fees levied on trucks from Burundi and Rwanda that use confidence in the host state. After undergoing the peer the Tanzanian central corridor route, from $500 to $152. review process, the toolkits will be publicly available online Tanzania has also relaxed rules that restricted its residents in FY15. and citizens from investing in the securities markets of Mongolia Reverses FDI Slide Investor concerns in Mongolia reached a critical level with the adoption of the Law on the Regulation of Foreign Investment in Strategic Sectors, which allowed for discretionary approval and takeover of any existing foreign investment in mining, the financial sector, and the media. FDI inflows began to decline at an average rate of $32 million per month. A new law enacted during FY14 with the help of FIAS-supported teams halted the sharp decline in Mongolia’s FDI. During the first three months after enactment of the new law, FDI inflows started to show a positive balance (with a positive average of $67 million per month). With continued funding from FIAS and advisory support from the investment policy team, the government started to design a mechanism to manage investor grievances before they become legal disputes. This mechanism, which is expected to be concluded in FY15, will alert a responsible agency at the early stages of a potential dispute and help the government assess the situation and identify solutions. In addition to avoiding the direct costs of arbitration claims, the mechanism will address the long-term costs of investor-state conflicts in terms of lost foreign investment. 29 other EAC partner states and widened opportunities for Group teams increased significantly in FY14, totaling foreign participation in its securities market. $750 million in new investments by specific industries, more than double the total for FY13.19 These investments Sustainable Investment in Key Industries created an estimated 5,839 jobs in specific projects in FY14: Some of the most immediate and tangible results from the World Bank Group’s FIAS-supported work • $6.7 million in garment sector investment in Haiti, in investment climate stem from efforts to unlock producing 2,789 jobs sustainable and climate-friendly investments in key industries, particularly agribusiness, tourism, and light • $743 million in light and heavy manufacturing, manufacturing. Again in FY14, FIAS support helped the renewable energy, agribusiness, and services in Bank Group work proactively to bring together private Brazil, creating 3,050 jobs, with the vast majority sector firms and client countries on projects that generate of investment and job creation occurring in the significant investment and job creation. frontier states of Para and Pernambuco, in the north and northeast of the country Investment Generated: A Key Goal of Industry-Specific Work As these numbers indicate, the ratio of capital to jobs Investment generated by FIAS-supported World Bank varies widely from sector to sector. For example, Haiti’s World Bank Group’s Strong Value Proposition in Generating Investment Much of the investment climate work supported by FIAS and undertaken by the World Bank Group’s T&C Global Practice entails advisory services geared toward helping client countries modernize and streamline their business regulatory structures. The results can be hugely important in helping generate sustainable growth, but the impact is necessarily indirect and longer term because of the time lag between an improved business climate in a country and an uptick in business activity. T&C’s investment promotion work, coordinated closely with its policy and regulatory reform teams, aims to help win investment in the shorter term by directly supporting client governments in reaching out to firms and attracting new investments in targeted sectors of the economy. Direct investment promotion support by the Bank Group has led to hundreds of millions of dollars in investment generated in industry-specific projects in recent years. FIAS-supported investment promotion projects employ specialist market and sector expertise in the specific context of client country needs. The aim is to identify viable opportunities for investment that the private sector and governments by themselves may not be aware of or may have overlooked. Key to this work is an understanding of sectors with the most promise for new investment based on a range of factors, including markets, value chains, production processes, cost drivers, industry players, relevant public policy, innovations, and trends. The Bank Group helps clients assess whether the business environment would be conducive to promoting investment in key sectors and helps structure effective investor outreach activities to attract the attention of potential investors, for example, in the tea and horticulture sectors in Rwanda. The search for prospective investors and the exact outreach mechanisms used will often depend on the prevalent modes of investment in the targeted sectors. These are usually chosen by the investor, but they are also influenced by the legislative and policy framework in a country. A decisive factor in attracting new investment is a business case that links investors’ needs with what the country has to offer as a competitive location. A highly targeted investment promotion strategy concentrates efforts on sectors where countries have a clear competitive advantage and a strong value proposition. Experience has shown that Bank Group investment promotion efforts that are tailored to the needs of investors operating in a particular sector are far more effective than broad attempts to target all potential investors. The sweet spot for this work is in investments that would not have taken place without the assistance and involvement offered by T&C teams and that show a strong promise for sustained success. FIAS-supported teams are conservative in how they calculate investment generated, using a rigorous methodology which both articulates the specific role played by our assistance and calculates impact based only on those private sector investment projects where actual funds have been committed, as opposed to being merely pledged or announced. The global team carefully assesses each project’s claim of investment generated against these criteria and examines evidence presented before confirming a dollar figure for investment generated. 19 The dramatic increase in investment generated reflects the considerable forward momentum of individual projects as well as the increasing focus on this kind of work by the team working in industry- specific fields. Year-to-year fluctuations are to be expected due to a variety of factors, such as incomplete reporting from client countries, wide variations in project size, the closing down of mature and completed investment-generated programs, and the variable timing of new investment decisions. 30 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES garment sector is labor intensive and jobs rich, whereas investment and helped create more than 5,000 jobs, the bulk of the investment generated in Brazil in FY14 was particularly in light manufacturing. Of these cumulative in much more capital-intensive industries. The dramatic numbers, $6.7 million and 2,789 jobs were reported increase reflects particularly strong momentum in the during FY14. Brazil Frontier States effort and a growing realization on the part of investors—thanks in part to the work of the Much of the FIAS-supported industry-specific work in Haiti FIAS-supported team—of the growth potential in these has focused on the garment industry—a mainstay of the underdeveloped regions. It also reflects more thorough country’s economy and a significant employer of women. tracking of investments generated in client countries with This sector has high job-growth potential, leveraging its the help of FIAS-supported interventions. T&C plans to comparative advantages. Like other investors, however, expand the investment-generated portfolio, capitalizing on garment companies face a complex, overlapping deep knowledge of client country priorities and industry- regulatory framework and limited suitable places to specific opportunities for investors. establish operations. In response, the Bank Group brought the IEZ concept to the forefront of Haiti’s sustainable Teams are working closely with investors and countries reconstruction agenda. A study by IFC showed that the to attract new private sector investments into client zones have the potential to create more than 380,000 countries—investments which would not have happened jobs in Haiti over 20 years through the implementation of without the Bank Group’s involvement. The resulting further significant regulatory reform. investment and job figures are calculated conservatively and certified by the investors themselves in accordance To ensure that investment promotion is sustained, the with the approved Results Measurement methodology FIAS-supported team delivered training and coaching in (see box, p. 30). investment promotion to staff at the Centre for Facilitation OPERATIONAL HIGHLIGHTS of Investments, Haiti’s national investment promotion agency. The goal was to raise the Centre’s capacity, An Investment Path to Recovery in Post-Quake Haiti equip it to meet the growing needs and demands of More than four years after the devastating earthquake international investors, and help it become the preferred in Haiti, the nation is moving from post-disaster point of entry in Haiti for investors. The program benefited reconstruction to economic development. Haiti has from the Bank Group’s collaboration with the Inter- embraced investment climate reform as a path to job American Development Bank, which is executing a $17 growth, focusing particular attention on integrated million project that will strengthen the Centre and Haiti’s economic zones (IEZs) and investment generation as capability to attract more investment. part of its work on economic growth and employment— one of Haiti’s five strategic pillars for reconstruction, The Bank Group effort unfolded as part of the Haiti growth, and development. FIAS funding has helped the Investment Generation project, which closed successfully World Bank Group maintain its support for Haiti’s efforts in December 2013. This four-year program won recognition to spur investment and job creation through sector- in 2014 with the annual IFC Corporate Award for its focused investment promotion and economic zones. significant contribution to sustainable job creation and These initiatives have attracted some $65 million in new investment in Haiti. 31 Investment Promotion in Brazil’s Frontier as FDI has historically favored the country’s south and southeastern regions which, as recently as 2008, held 95 Working in frontier states of non-IDA countries is a high percent of the country’s FDI stock. priority of IFC and of FIAS support in the industry-specific field. Though they lie within the borders of wealthier Pernambuco has been able to attract major investment in developing countries, these regions can have rates of the renewable energy sector, an industry that the southern poverty that match those of the world’s poorest countries. regions of the country have historically dominated. The In the northern and northeastern frontier states of Brazil, program supported exploration of renewable energy the FIAS-supported effort is generating substantial results. possibilities along the value chain and uncovered A significant influx of investment has been achieved as a Pernambuco’s great potential for solar energy generation result of a FIAS-supported Bank Group program that has and wind energy equipment manufacturing. helped Brazil’s federal investment promotion (IP) agency, ApexBrasil, and state investment promotion agencies in In Para, the program worked closely with the Brazilian Para and Pernambuco, attract and retain investment. Amazon Basin Initiative to determine areas of collaboration for sustainable development and investment promotion. In FY14 the Bank Group effort in Brazil took a quantum The Dutch company Var established a $10 million biomass leap, recording $743 million in new investment, exceeding brick plant, employing 60 direct workers and recycling the already considerable half-billion dollars in investment sawdust and acai seeds. It will soon begin exporting to generated over the previous four years and creating 3,050 Europe. Brazilian manufacturer Natura recently inaugurated jobs nationwide. Of the total invested in FY14, the vast a 295-worker soap plant, while developing production majority went to projects in Para and Pernambuco in light chains that protect socio-biodiversity. By engaging the and heavy industry, renewable energy, agribusiness, and community and encouraging entrepreneurship, Natura services. This achievement has translated into about 2,600 now has over 1,200 families in the Amazon sourcing exotic new jobs in Para and Pernambuco, regions beset by chronic ingredients such as acai and generating higher shared value unemployment (see box, p. 33). in the process. Since project inception in 2009, $1.33 billion in investment Other Brazilian states have since requested similar has been generated and more than 7 ,000 jobs created investment promotion support. And the investment throughout Brazil, with about 70 percent of that occurring promotion framework, training materials, tools, and delivery in those two frontier states. Some $924 million in foreign methods are being used by Bank Group teams working investment and about 5,300 jobs have been generated in on similar projects in Bosnia and Herzegovina, Haiti, India, Pernambuco and nearby Para. This is an important shift, Indonesia, Kenya, and the Russian Federation. In FY14 the Bank Group effort in Brazil took a quantum leap, recording $743 million in new investment... ...and creating 3,050 jobs nationwide. 32 2014 Annual Review • FIAS - the Facility for Investment Climate Advisory Services Investment Generation Opening Paths to Opportunity in Brazil Raquel Maria Da Silva’s first job in her hometown of Gloria do Goita, a small city in Brazil’s northeastern frontier state of Pernambuco, was as a stock and register clerk at the local supermarket. The position provided limited growth opportunity for the 28-year-old, but employment was scarce and Ms. Da Silva had to support herself and her mother. Larger, nearby cities like Recife offered the promise of better jobs, and many had already left Gloria do Goita, leaving high rates of unemployment in their wake. Things changed in October 2012 when Ms. Da Silva was hired by Nissin, a Japanese food maker that had recently invested $46 million in Pernambuco. She had never worked for a foreign company before, but she quickly moved from cleaning to working on the production line. After 10 months, she was offered a position as a quality control assistant. She is now able to fully support her mother and even study logistics at nearby university, thanks to a corporate program that covers 40 percent of the cost. Edna Aldermia de Silva Amorim, a 31-year-old woman also from Gloria do Goita, has been able to improve her standard of living through Nissin as well. Before joining the company, Ms. Amorim worked as a housekeeper and supermarket clerk. After being chosen as one of only six women to join Nissin São Paolo, she went on to become a production line leader and now manages 40 staff members. She has since been able to fulfill many aspirations, from building a house to buying her first car, and she is taking a management course in Vitoria de Santo Antão. All six women are in leadership positions at Nissin today. OPERATIONAL HIGHLIGHTS Investment Climate Reforms in Agribusiness the combined expertise of different parts of the Bank Group and leverage public investments and policies to FIAS funding was used in FY14 to implement 30 engage the private sector for agribusiness growth. For agribusiness projects across all regions. Thirteen of the example, in Uganda, FIAS funding is helping develop the projects—43 percent of the total—are in Sub-Saharan regulatory frameworks for agri-leasing. This is a necessary Africa. The agribusiness work continues growing at double- precursor for lending institutions and farmers to benefit digit rates, with the jump from 21 projects in FY13 to 30 in from the government’s planned policy and investment FY14 representing a 43 percent increase in the portfolio. An in an agricultural mechanization strategy. Similar work is additional 10 projects were in the pipeline for development under way in a quarter of the portfolio and pipeline projects globally at the close of FY14. as a result of the consistent application of this approach over the last two fiscal years. In addition, a focus on a In responding to client needs in agribusiness, the portfolio few core themes is yielding results in warehouse receipts continues to identify project interventions that maximize Helping Restore Ukraine as an Agricultural Powerhouse As a result of FIAS-supported efforts in FY14, Ukraine has moved a step closer to regaining its place as a global agriculture powerhouse. As of April 2014, Ukrainian agribusinesses no longer needed to obtain quality or storage compliance certificates for grain and grain products. With the help of the World Bank Group’s IFC advisory team in agribusiness, certificates for producers of Ukraine’s more than 60 million tons of annual grain output can be obtained from private sector providers rather than the State Agriculture Inspectorate. This conforms to procedures used in most developed countries. ” “Abolishing certificates on grain and grain products is a watershed moment for Ukraine’s agriculture sector, said Mykola Stryzhak, first vice-president of the Association of Farmers and Private Land Owners of Ukraine. “Getting those certificates was a hurdle that delayed and overburdened grain logistics. More importantly, the procedure was an artificially created burden, the necessity and value of which was hugely questionable; ” quality certification enabled corruption. The new regulation has been welcomed by agribusinesses whose annual compliance cost savings amount to $37.7 million from grain silo certification and $25.6 million from grain quality certification, according to IFC. Mandatory certification was often accompanied by artificially created delays and a range of transportation and logistical roadblocks, resulting in poor conditions for grain storage and processing. This increased costs for agribusinesses and weakened their competitiveness in international markets. 33 and in regulations on primary production and postharvest percent of the crop undergoes processing that adds any activities. FIAS-supported work on warehouse receipt meaningful value. The rest is processed in other countries. systems is helping the governments of Senegal and Côte Through a FIAS-supported program, the World Bank Group d’Ivoire introduce and scale up those systems through is helping Côte d’Ivoire change that equation. appropriate legislation and regulation. The development objective is to unlock inclusive, In Ukraine, food safety reform work led to the passage of sustainable investment and value addition along the entire a law aligning Ukrainian regulations with European Union cashew supply chain. Post-implementation goals include requirements, a move expected to help attract greater the following: $5 million in credit released to the cashew foreign investment in Ukrainian agribusiness (see box sector, benefiting at least 10,000 users; investment p. 33, bottom). “This law is a real breakthrough for Ukraine, generation of $20 million; and 5,000 jobs created in the effectively opening up EU markets for Ukrainian producers, ” cashew processing sector. A five-year IDA loan supports said Vitaliy Bashynskyi, deputy head of the State Veterinary efforts to raise the on-farm competitiveness of farmers in and Phytosanitary Inspection. “We worked hand-in-hand multiple value chains. (For more, see p. 43.) with IFC on this and are really looking forward for the Ukrainian goods to appear on many new markets. ” Post-conflict Burundi has a predominantly agricultural economy, with coffee as the biggest source of foreign Measurement of these results and thought leadership exchange and jobs. More than half of the population on these themes saw considerable development during depends on coffee for a significant part of its income. FY14. A survey for an impact evaluation of the Rwanda tea The constraints to realizing this potential are rooted in a sector conducted in FY14 confirmed the increase in farmer lack of investment on all levels and, importantly, in the income that resulted from the FIAS-supported reform of misalignment of incentives to make those investments. the green leaf price regulation by the government that was reported in FY13. A joint literature review on food safety In FY14 FIAS support helped the Bank Group coordinate and the launch and adoption of the food safety toolkit by a joint effort to aid Burundi in meeting challenges in the global food safety fora has helped inform best practices coffee sector. A multiphase privatization initiative is under for increased competitiveness and market access in way focused on Burundi’s coffee washing stations. These agri-food supply chains. Such partnerships are critical to facilities, which are critical to producing higher-quality knowledge generation, and they have been developed with coffee that will fetch a better price in international markets, international research bodies such as the International Food use water to sort the best beans from those that are unripe Policy Research Institute, Michigan State University, and and to remove the skin and pulp covering the beans before the University of Sussex, along with operational partners. they are dried. The complex effort involves highly delicate negotiations among government officials, farmers, and Côte d’Ivoire is the world’s second largest cashew private washing station operators. It also entails working producer after India and the top exporter of cashews directly with farmers with a goal of improving productivity. worldwide. Some 1.5 million people earn their living in the The project seeks to support increased private investment cashew sector, including 250,000 producers. Côte d’Ivoire along the coffee value chain through enhanced public- is closer to final markets in Europe and North America than private dialogue and privatization support, leading to more other cashew-producing countries. Still, the country misses sustainable income opportunities for the country’s 750,000 out on substantial income because, prior to export, only 5 coffee farmers. Enhancing the Tourist Experience Along the Silk Road The ancient Silk Road trade route, a popular niche “destination” for adventure tourists, passes through landlocked Uzbekistan. With its rich natural, cultural, and historical assets, the country has a well-established tourist trade, but one that is underperforming due to a number of barriers to growth. Among these are the government’s dual role as tourism regulator and tourism operator, costly administrative processes for tourism businesses, poor internal transport and utility infrastructure, a lack of diversity in product and services offerings, a restrictive visa regime, and a challenging international image. After conducting a detailed scoping report to identify barriers and opportunities, the Bank Group in FY14 held a high-level workshop to present the findings to Uzbek officials. The Ministry of Economy strongly endorsed the findings and ordered various line ministries to take immediate action to implement reforms. With strong leadership and cross-ministerial recognition of this new strategic road map, a fast-paced process was launched that, within a few months, produced and implemented four reforms in tourism procedures. An online tourist registration system was created; the cost of accommodation licenses and the minimum capital requirements for family-run tourist enterprises were reduced; the amount of charter capital required to open a tour agency was reduced; and privatization and the leasing of cultural heritage sites were allowed. Hotels had been required to report tourist registrations to the police daily; reform reduced that reporting requirement to weekly. 34 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES Enabling Investment Opportunities in Tourism competitive concession terms covering such issues as fees and the duration of the contract. The FIAS-supported portfolio of industry-specific projects in tourism expanded in FY14 from 8 active projects to 12 Acting on Climate Change through Climate-Efficient Industries with the addition of projects in Uganda, Odisha State in India, São Tomé and Príncipe, and Sri Lanka. Projects in Under a FIAS-funded project, the World Bank Group has the pipeline at the close of FY14 include Ethiopia (now helped Bangladesh become the first low-income country active as of mid-FY15), Kenya, Senegal, Tanzania, and to adopt a road map for reducing carbon emissions from Zambia. The FIAS-supported team continued to deliver export processing zones (EPZs). The FIAS-supported effort cross-support to other World Bank Group units in Armenia, focused on one such zone, in Chittagong, and is now Azerbaijan, Bolivia, Georgia, Haiti, India, Iraq, the Kyrgyz poised to be replicated throughout all of the country’s Republic, Morocco, Russia, Sri Lanka, Tajikistan, Uganda, export zones. At the beginning of FY14, Bangladesh began Pacific Island states, and the nine member countries of the implementing the low-carbon zone guidelines contained in Organization of Eastern Caribbean States. the road map, helping companies in Chittagong improve energy efficiency while remaining competitive. Short-term Collaboration and coordination are key themes of steps have already generated savings of $844,000 and investment climate and industry-specific work in the have reduced carbon emissions by 9,000 metric tons per tourism sector. FIAS-supported teams collaborate to year, the equivalent of the annual emissions that would be ensure that reforms yield investment outcomes, and they produced by fuel in 119 gasoline tanker trucks. continue to build strong links to IFC Investment Services teams working on tourism, for example by sharing market “By promoting a low-carbon green EPZ, we can reduce our intelligence, participating in joint missions, and undertaking ” said Mahbubur Rahman, the Bangladesh operation cost, EPZ Authority’s Member of Finance. “The introduction of OPERATIONAL HIGHLIGHTS impact evaluations on a joint basis. new technology will not only help face climate change but During FY14, the FIAS-supported tourism team initiated a also promote business growth. ” process of developing an integrated approach to tourism across the entire World Bank Group in preparation for the The guidelines implemented in Chittagong are now poised introduction of the global practices on July 1, 2014, the to be replicated across the country’s EPZs. To date, the beginning of FY15. The team convened a “Tourism Meeting project, with support from FIAS, IFC, Korea, the European of the Minds” event, bringing together senior technical Union, and the United Kingdom, has generated more than experts in tourism from across the Bank Group to design a $170 million in private investments in energy efficiency. more structured approach to serving the rapidly increasing demand from clients in this sector. Under the T&C Global Welcoming the green drive, Nasir Uddin, chairman of Practice and in coordination with other units, this approach Pacific Jeans, an exporter of blue jeans and denim from is enabling the Bank Group to approach tourism in a more Bangladesh, said: “At Pacific, we have already started coordinated way and to mobilize the full range of services environment-friendly production procedures. Once to help clients manage tourism to deliver on development the green production idea is adopted by all, we hope goals. Bangladesh can stand as an example. ” In early 2013 the FIAS-supported tourism team responded Recognition of Industry Achievements through World Bank to a direct request from the Uganda tourism ministry Group Awards to address the issue of investment generation in one of Uganda’s core tourism assets: its protected areas. The FIAS-supported team working in the tourism sector A longstanding contractual agreement between the was recognized twice this year with awards. In the Europe country’s wildlife authority and one investor made it almost and Central Asia Region, the team was included in a Vice- impossible for any other investor to enter the market or Presidential Team Award for the “Regional Development operate accommodation facilities within the parks. The Bank Program in Georgia Improving Infrastructure” project. Group worked with Uganda to gather extensive data and This project applies an integrated approach to municipal evidence to build a powerful case for change. Particularly infrastructure, cultural heritage, and tourism to promote persuasive was a clear delineation of the cost of this local economic development in lagging regions. The exclusivity agreement to the Uganda Wildlife Authority tourism team was recognized for its work in designing and and the Ugandan tourism economy as a whole. The lack of implementing the private sector development dimensions competition for game park tourism was severely impeding of the tourism components. In the Latin America and the growth of one of Uganda’s core tourism assets. The Caribbean Region, the team received a National Tourism Bank Group delivered the findings to the government Award from the Peru National Chamber of Tourism. IFC in May 2013 in a presentation that outlined a series of was recognized as the “lead institution supporting tourism options for renegotiation of the contracts and provided in Peru in 2013” for its work in Cuzco to help design and various positions and counter-positions for the negotiating implement investment climate reforms in the tourism team. In FY14, Ugandan officials reported the successful sector that are lowering regulatory barriers and improving renegotiation of the contracts—significantly reducing the the prospects of investments. Both of these awards reflect exclusion zones and thereby allowing for competition from the scale-up in tourism activities in the past year. This other tourism firms. The new agreement imposed more work recognizes tourism as a key sector driving economic growth, job creation, and inclusion. 35 CORE THEMATIC AREAS IN INVESTMENT CLIMATE INTERVENTIONS FIAS funding and the work of Investment Climate teams (now the T&C Global Practice) operate through a variety of thematic channels on issues that are priorities for many developing countries. COMPETITION INFORMATION TRANSPARENCY GENDER GREEN PUBLIC- COMMUNICATIONS REFORMS PRIVATE TECHNOLOGIES DIALOGUE 36 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 4 CORE THEMATIC AREAS IN INVESTMENT CLIMATE INTERVENTIONS As outlined in the previous chapter, much of FIAS-supported work flows to projects in the core service areas relating to business regulation, trade and investment, and industry- specific sectors. There is also a strong geographic theme running through the work supported by FIAS, with a substantial portion of FIAS funding applied in Sub-Saharan Africa, a region heavily represented by IDA member countries and states in FCS. This chapter covers another major organizing theme of FIAS-supported work, having to do with the six core thematic areas that cut across the full spectrum of investment climate projects. FIAS supports innovation-driven projects in competition policy, information and communication technologies, green growth, gender inclusion, transparency, and public-private dialogue. Two other cross-cutting programs, in impact measurement and monitoring and evaluation, play an important role in consistently and accurately measuring results, creating data and knowledge that lead to better project design. These programs are critical to the deep commitment to quality in the T&C Global Practice. Fostering Competition and Well-Functioning Markets new regulations have reduced unnecessary regulatory burdens on businesses that decide to engage in T&C’s agenda is closely tied to the work being done corporate restructuring, mergers, or acquisitions to in the competition policy field. Firms typically buy improve their performance in Honduran markets. The their inputs, such as transportation, energy, financial new approach allows the competition agency to focus services, telecommunications, and construction services, on those mergers that are more likely to have an effect from domestic suppliers. When a country’s upstream on competition and free up resources to deal with markets lack competition and are dominated by one anticompetitive practices that are particularly harmful or two favored firms, the cost of supplies goes up, for consumers. As a result of the reform, the duration the competitiveness of the firms in the international of the review process declined considerably, from an marketplace declines, and GDP growth in the country average of 170 days in 2011 to 15 days in 2013. In Kenya, suffers. Firms facing vigorous competition have FIAS-funded work focused on increasing deterrence of strong incentives to reduce their costs, innovate, and anticompetitive practices through a more transparent fine become more efficient and productive than their rivals. and settlement system. The government applied the new Competitive domestic markets enable more productive policy to punish a price-fixing cartel among supermarkets, and efficient exporters which, in turn, boost trade and generating consumer savings estimated at $1.2 million international competitiveness. This positive impact per year. The lack of competition in Mexico has been is the aim of the FIAS-supported Competition Policy estimated to cost 1 percentage point of GDP growth Thematic Group within T&C, working with teams from each year. FIAS-supported work in Mexico focused on regions and departments in more than 20 countries. FIAS tackling anticompetitive regulations at the subnational supports the delivery of technical advice, assistance level. The team developed an innovative methodology to client countries in reforming their competition laws that enabled the government to identify, prioritize, and and policies, and analytical reports on identifying and eventually remove state and municipal regulations that removing anticompetitive regulations and practices. unduly restrict competition in key economic sectors. The first pilot project took place in Oaxaca, the third poorest Major operational achievements during FY14 include the state in Mexico, and as a result, reforms in the retail removal of competition restrictions that affect inter- sector will be implemented. island shipping transport in the Philippines. The reform eliminated the possibility that incumbent operators might The FIAS-supported team is also contributing to the prevent new companies from serving certain routes, generation of frontier knowledge to shape nascent thus cutting dramatically the time needed to register new markets pro-competitively. For instance, in Peru, the vessels. Increased competition in shipping transport may team responded to a request by the Central Bank to translate into a 5 percent savings in transport-logistics provide clear policy recommendations that are expected costs and is expected to yield an additional investment in to improve competition in electronic payment systems. the shipping industry of $18 million over four years. The average Peruvian makes 15 electronic payments per year, compared with 27 in Mexico and 110 in Brazil. By In Honduras, the team helped the country’s competition curbing anticompetitive self-regulation and increasing agency prepare and adopt a new regulatory approach transparency for consumers, the cost for use of to increase the effectiveness of merger control. These electronic payments is expected to decline from as much 37 as 5 percent of total sales in some cases, promoting is collected in an online database equipped with a economic activity and efficiency across all sectors of the management dashboard that summarizes information and economy. tailors reports for each agency’s management. Evaluation of these pilots will lead to guidance notes and software In an initiative that came to fruition in FY14, the documentation that will facilitate the deployment of such FIAS-supported team announced winners of a global ICT tools in other settings. Competition Policy Advocacy Contest, recognizing notable efforts by countries in advancing successful Enhancing Governance and Transparency in Client Countries competition advocacy initiatives. The contest showcased the positive results for consumers, businesses, and A FIAS-supported initiative is developing approaches overall economic growth generated by forward-leaning and knowledge products to help introduce transparency policies aimed at thwarting anticompetitive behaviors. principles in the investment climate work of client In particular, the contest focused on advocacy-based governments. Transparency builds confidence in efforts, as opposed to the more typical but also time- economic, legal, and regulatory regimes and helps consuming and cumbersome antitrust enforcement instill a sense of fairness and a level playing field among method. In early 2014, the World Bank Group announced private sector participants in economic activity. Innovative the winners of the first contest. They were chosen approaches are being piloted in a number of investment from among a strong—and highly competitive—field of climate projects. The experience with the pilot projects contenders. Efforts by competition promotion agencies will help refine the approaches and tools prior to in Egypt, Chile, Colombia, and Pakistan were selected mainstreaming in the practice. as winners in categories emphasizing various aspects Predictability and transparency in the way regulations are of competition policy. Honorable mentions went to applied is important for businesses when dealing with competition agencies in El Salvador, Mexico, Moldova, governments. To address this issue, the FIAS-supported South Africa, and Turkey. Public Service Delivery Quality project in Morocco has been piloting an innovative approach to measure the Harnessing Modern Information and Communication predictability of public services rendered to businesses. Technologies Morocco’s public-private dialogue mechanism, the World Bank Group reform programs supported by FIAS- National Committee for Business Climate, has been a key funded expertise in ICT in FY14 included 50 active and partner in this work, beginning with the identification of pipeline project components in 32 countries and two the first areas to be addressed and the definition of the regional projects, roughly the same as in FY13, although indicators, and extending to the organization of public- the list of client countries changes continually. FIAS private workshops to develop solutions. funding continues to support successful deployment Three problem areas were identified as drags on of ICT solutions in client countries to improve the business, particularly small and medium enterprises, transparency, accessibility, and accountability of due to a lack of predictability and unnecessarily complex government-to-business service delivery. These ICT procedures: public procurement payment delays, VAT solutions reduce compliance costs and opportunities for reimbursement delays, and the time and cost to obtain corruption by enabling the replacement of face-to-face construction permits. Not only was there significant visits to government offices with online interactions. variation in the application of regulations among cities (for The use of mobile technologies continues to be an example, construction permitting could require anywhere increasing area of focus for information and service from 6 to 11 procedures depending on location), but even delivery, as mobile phone penetration in most developing within the same city. Some builders were obtaining all countries has now far outstripped the level of traditional approvals in three weeks while others in the same city Internet access through personal computers. FIAS- could spend three months getting the same permits. supported work includes pilot projects as well as the For a business to get paid by a municipality after finishing development of knowledge products aimed at enabling contract work, it could take as few as 10 days or as many clients and staff to effectively adapt these technologies to as three years, according to data gathered in the four their local situations. pilot cities. Due to the number of actors involved and the The Rwanda M-Tax project, launched at the end of FY13 lack of systematic case management systems, officials and deployed in FY14, is a prime example of the power themselves were surprised by these results. Following of leveraging modern ICT as part of reform strategies discussion of the findings and reform options at several (see box, p. 46). Deployment of the mobile application thematic workshops, the indicators will now be used in Rwanda, which allows micro and small enterprises to support and track implementation on the ground of a to declare and pay their taxes by mobile phone, is one new construction law, and a new extended integrated example of applying ICT to solve investment climate expenditure management system, among others. problems. Another pilot project in Jordan, funded by In Jordan, ICT is aiding the establishment of feedback USAID, involves the deployment of a mobile application mechanisms. A new mobile-based application called which allows businesses to provide direct feedback on Tawasol (Arabic for “reach” or “communicate”) gives the quality of business inspections to the management Jordanian businesses an opportunity to provide feedback of the four participating inspectorates. This feedback 38 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES about their experiences with the inspection functions. Addressing Gender Disparities in the Business Environment This is an attempt to increase the transparency, efficiency, and effectiveness of the inspection functions Despite gains in women’s employment and labor force and encourage regulators to identify and prioritize key participation in most developing countries, numerous areas for reform and act upon them. gender disparities remain—a situation that deprives countries of significant potential economic benefits and The application is flexible and can easily be customized opportunities for transformational growth. According to to develop other types of feedback for other government estimates by the World Bank Group, emerging markets authorities. The reporting engine of the tool can miss out on roughly $1 trillion in GDP as a result of the aggregate data by inspectorate, question, group of gap in male and female labor participation rates. Many questions, and time interval. The app was officially of the barriers, including access to credit and other launched in an event in Amman in April 2014 and can be productive inputs such as land titles and machinery, as downloaded from Google Play, the Apple Store, SMS, and well as restrictive business and property regulations, the website www.tawasol.gov.jo. The project team has present impediments in the business enabling finalized a communications plan to encourage the private environment to women’s economic participation. The sector to use it. A measurement framework has been elimination of labor market segregation and gender developed to ensure the effectiveness and usefulness discrimination could increase worker productivity by of the tool. Next steps will include analyzing responses 25 to 40 percent, depending on the type and degree of based on the measurement framework and hiring a local exclusion. marketing consultant to oversee the implementation of Tawasol, assist in marketing the tool to the private FIAS funding has been instrumental in supporting sector, and support the inspectorates in implementing it reforms to address gender disparities in the business CORE THEMATIC AREAS IN INVESTMENT CLIMATE INTERVENTIONS effectively. environment. In Côte d’Ivoire, implementation in FY14 of the recent amendment of the family law has marked Feedback pilots are now being considered in the a victory for working women. Previously, women context of investment climate projects in Bangladesh, were subject to a higher income tax rates than men. Mongolia, Myanmar, Nepal, Rwanda, and Uganda. Today, men and women pay the same level of taxes, Another transparency-related initiative involving the freeing up money for families and children’s education establishment of an investor grievance mechanism and eliminating a disincentive for women to enter the is being developed for Mongolia in the context of an formalized work force. An initial estimate shows the investment policy project. reform has resulted in a 3 percent increase in revenue to women-led businesses. Bank Group teams, with As part of the knowledge product work, transparency FIAS support, helped set up a series of consultation checklists are being prepared to help assess the and training events in Côte d’Ivoire in June 2014 to degree of transparency in specific regulatory regimes. disseminate and promote adaptation of the family law Two checklists prepared in FY14 cover construction amendment. The training, which convened about 100 regulations and investment policy. Work has been participants, including representatives from civil society, initiated on transparency checklists for three other areas: religious leaders, and journalists, was critical to clarifying investment incentives, business entry, and business the law, addressing concerns, and getting buy-in from inspections. These checklists are being piloted in a stakeholders. number of countries in FY15. 39 FIAS supported a regional conference in Belgrade, T&C is committed to scaling up solutions for greater Serbia, in May 2014 to share knowledge and best impact by leveraging existing FIAS-funded projects aimed practices on women’s employment with a focus on the at improving the business climate and clearly identifying findings of the most recent Women, Business, and the the gender component within them. Integrating or Law 2014 report. The conference, part of the FIAS-funded retrofitting a gender focus into existing investment IBRA project in Europe and Central Asia (ECA), brought climate products will reduce duplicative efforts, help together more than 70 participants from the seven identify barriers to women’s economic participation Western Balkan countries. (For more on this IBRA project and to overall growth and competitiveness, and thus (see p. 27). maximize the impact of proposed reforms. A high-level regional workshop on the World Bank Finally, funding allocated to gender projects must be Group’s Women, Business, and the Law project revised. Twenty percent of investment climate projects convened in Lomé, Togo, in February 2014. in FY14 were flagged as having a gender focus. But the Representatives of 11 African economies—Benin, budget allocated for this work amounts to less than 3 Burkina Faso, Burundi, the Republic of Congo, the percent. Additional funding is needed to establish the Democratic Republic of Congo, Côte d’Ivoire, Guinea, integrated gender program outlined above in order to Mali, Niger, Senegal, and Togo—discussed the relevant target issues that directly or disproportionately affect role of women by sharing their experiences and reporting women’s economic participation. This will help create on the challenges in their efforts to promote gender a level playing field for both men and women, which equality. The discussions revealed important similarities will increase private investment and generate inclusive in the challenges facing economies on the ground which growth. The T&C Prospectus document under preparation may pave the way for future collaboration. in FY15 will commit the Global Practice to mainstreaming gender issues across its knowledge and country work. To FIAS-supported work in generating private sector this end, T&C plans to deepen its collaboration with the investment in Haiti (see p. 31) included the Bank Group’s newly established Gender Cross Cutting implementation of high international environmental and Solutions Area. social standards in Haitian IEZs, with a particular focus on the working conditions of the employees and the Green Reforms: The FIAS Link to the Climate Change Agenda maintenance of gender-balanced employment policies. As a result of this work, new zones in Haiti are adopting T&C’s work in climate change includes extensive measures such as gender-sensitive training, health, and engagement with the push to expand construction of family support programs. The garment sector and the green buildings. The built environment accounts for 19 IEZs, in particular, provide an entry point for women into percent of global greenhouse gas emissions. Projected formal sector employment. Improving working conditions population growth combined with continuing energy and creating sustainable economic opportunities for inefficiencies in homes and buildings will increase the women in the economic zones present a unique way to built environment’s share of global emissions to 30 empower women in Haiti. percent by 2030. Building stocks are projected to double in the next 15 to 20 years, and 80 percent of that growth The work FIAS is supporting to help entrepreneurs in will occur in developing countries, particularly India, client countries, while gender neutral on paper, can China, and Indonesia. prove particularly beneficial to women because they have been disproportionately disadvantaged in terms FIAS contributes expertise and advisory inputs in the of economic participation. A clear understanding of the regulatory and legal fields to IFC’s EDGE program. progress these programs have achieved in reducing EDGE seeks to reduce energy and water consumption gender disparities has been limited by the lack of gender- in buildings and CO2 emissions from buildings by at disaggregated data. Better measurement and evaluation least one-fifth from current practices in large cities in of reforms aimed at reducing gender discrimination, use emerging countries. The global EDGE team has been of diagnostic tools to identify gender-biased institutions, engaged for the past four years in India and China, and assessment of the impact of laws and regulations on encouraging leaders to establish a mix of regulatory tools women’s economic activities are necessary to monitor and green building codes, and a certification system for results and identify best practices. Stronger quality buildings. Energy efficiency in buildings is the cheapest control of project components pertaining to gender, way to reduce greenhouse gases; it reduces the need as well as capacity building and knowledge sharing to develop costly additional power infrastructure; and it of clients and project leads will help strengthen the increases the disposable incomes of households. sustainability of reforms. EDGE is creating a common understanding of what a FIAS funding has made possible a regional analysis of green building is, long a poorly defined category. IFC the role of gender, specifically a study of restrictions and applies tools to define the concept, including the EDGE incentives in the law and in practice that either constrain rating system, which provides precise and simple criteria or encourage women’s participation in labor markets and that widely varied markets can understand. The emphasis entrepreneurial activities across Central America and the on simplicity contrasts with the current complex and Dominican Republic. costly instruments in use in high-income countries, providing builders in developing economies with 40 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES simpler and cheaper ways to apply green methods and t o enable all other cities in the Philippines to adopt technologies. One basic tenet used by EDGE holds that robust green building standards. if a certain green approach cannot pay for itself in fewer than two to three years, simpler alternative approaches • Strong synergies with the EDGE certification will be used to deliver more immediate savings. The team program have been established in these client measures success primarily by the rate of compliance countries. The program is on track to meet its with green codes of new building construction. goal of affecting 20 percent of the new construction after seven years of engagement in Among the highlights of the FIAS-supported green a client country. building work in FY14: • FIAS-supported teams contributed to the launch • A new green building code was developed and of a $7 million green buildings program in India formally adopted in Vietnam in September 2013. in partnership with key states in that country. The program now focuses on educating building enforcement agencies and implementation In FY14, FIAS support has contributed to the guidelines. For regulations, there are six client development of knowledge and information tools to help countries: Bangladesh, Colombia, Indonesia, Iraq clients enforce green building codes. The FIAS-supported (Kurdistan region), the Philippines, and Vietnam. team engaged in partnership and dialogue discussion More are being signed on in FY15. with think tank experts in energy efficiency, climate change, and green building technology, and with the • A new green building ordinance was approved for International Code Council, an organization that works to the district of Mandalayung in Manila, the develop a uniform set of construction codes applicable Philippines, in February 2014. The code establishes across multiple jurisdictions. FIAS support has also been CORE THEMATIC AREAS IN INVESTMENT CLIMATE INTERVENTIONS requirements for construction in line with green instrumental in developing a consistent framework for building standards for water and energy efficiency. impact measurement across all regions. A green building referral code is under development For more information, see https://www.wbginvestmentclimate.org/advisory-services/cross-cutting-issues/public-private-dialogue/resources.cfm. 41 Fostering Public-Private Dialogue to Catalyze Reform in fragile and conflict-affected situations (FCS), up from 11 such projects in FY13. This trend confirms the In FY14, FIAS contributed to taking stakeholder importance of PPD in fragile countries in filling the gap engagement through public-private dialogue (PPD) to resulting from the lack of stable, legitimate institutions. another level. FIAS-supported teams have optimized In countries beset by conflict and instability, PPD integrated solutions to client countries by refining and is a challenging undertaking, but it can help create tailoring PPD offerings to governments and the private transparency and trust among stakeholders and can point sector with the aim of improving the investment climate. the way to reforms and interventions that will improve The volume of work has increased markedly, with 63 the business environment and attract investment PPD projects in the portfolio, up from 35 in FY13. An (see box below). In FY14, FIAS funding supported the additional eight projects were completed and closed production of a quick guide and a report on PPD in fragile during FY14. Total portfolio value as of the end of FY14 states. Similarly, knowledge pieces on PPD for specific was approximately $17 million. sectors on extractives and agribusiness have been written and distributed widely. The innovative and flexible PPD mechanisms resulting from this work better fit the needs of particular sectors Guinea is a post-conflict country looking for sources of and regions. Sector-specific PPDs have increased inclusive growth. The country is rich in mineral resources dramatically over the last year, with a focus on extractive but struggles to put in place a policy framework that industries and agribusiness. Indeed, industry-centered could maximize the benefit of mining investment, PPDs have been shown to improve competitiveness by diversify the economy, and create sustainable economic providing structured platforms for collaboration along the opportunities for the broader population. The political value chain for governments, firms, and communities. economy of the country and deep societal rifts hamper constructive policy dialogue within the private sector and Likewise, the number of projects integrating PPD between the private sector and the government. FIAS approaches in fragile states has grown by more than has helped in the development of the Guinea Business a third. Of 63 projects from the PPD portfolio in 45 Forum, a PPD platform that has been recently designed countries, 18 projects, or 29 percent, are now in states Keys to PPD Success in Fragile and Conflict-Affected Situations The World Bank Group conducted a survey and interviews that captured the knowledge of 27 professionals with experience implementing PPD projects in more than 30 FCS countries. The main conclusions from the study were as follows: • Project design should be conflict-sensitive and based on stakeholder mapping and political economy analysis. • Communicating commitments publicly, including in the media, is effective in creating transparency and accountability. • Inclusiveness, although elusive in FCS, can be achieved over the long term and is crucial for success. • Finding people available to serve as champions of the PPD process can be difficult, and those who can be found may lack sufficient capacity to implement PPD initiatives. PPD projects need strategies to work effectively with the champions who are available, while mitigating the risk of depending too heavily on a few individuals. • Engaging stakeholders in PPD requires an understanding of the values and culture of the client country. A viable PPD platform requires a politically savvy staff with a deep understanding of political and social networks and how those networks relate to drivers of conflict or tensions. • PPD in FCS may achieve better results by focusing on a key sector, such as extractives or agribusiness. • Successful PPD platforms take into account the particular risks of working in FCS and develop mitigation plans to address them. • The timeline for successful implementation and transition to local ownership in FCS is often much slower than in other countries. It needs to be extended to ensure a sustainable outcome of the project supported by the PPD. • The results of PPD are embodied in the reforms it initiates and also the process it implements. In FCS, the peacebuilding and conflict-mitigating results are difficult to capture. However, the stakeholders who benefit from the results value them highly. For more information, see https://www.wbginvestmentclimate.org/advisory-services/cross-cutting-issues/public-private-dialogue/resources.cfm. 42 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES to advance structured dialogue in the private sector and of reform, not the quantity of new laws or regulations. with the government of Guinea. It will help define and One of the ways this impact is measured is through the advocate for policy and regulatory-related reform for direct compliance cost savings indicator. Compliance local content in extractive industries. cost savings measures the impact of reforms on the cost of doing business for investors, entrepreneurs, In Côte d’Ivoire, another FCS state, agriculture and private sector firms in developing countries. drives economic development, accounting for 24.3 The indicator focuses on the savings derived from percent of GDP . A major market failure underlying reforms and revised regulations aimed at improving the underperformance in the cashew industry is the administrative and institutional procedures so as lack of coordination among stakeholders in the value to reduce the time and costs associated with the chain. Despite its importance to the economy, cashew procedures required of private businesses. Estimated production is the only supply chain in the country not to private sector savings are arrived at by calculating the have an industry association to encourage coordination difference in the annual costs before and after reforms among private sector stakeholders and structured (adjusted for taxes and discounted to the baseline year). policy dialogue with government. To fill this gap, FIAS- The tally is based on a rigorous formula that measures supported teams helped develop a sector-specific PPD both direct costs—the fee for licensing a new business, mechanism, a technical committee for the cashew nut for example—and the indirect cost involved when supply chain. Designed with the help of stakeholders, cumbersome regulations impose lengthy delays before a the PPD aims to create an industry association and new business is licensed to operate. put in place thematic working groups that will focus on regulatory constraints affecting pricing, access to For FY14, FIAS support yielded $22 million in validated finance, tax, and product traceability systems. This compliance cost savings in four countries in the East CORE THEMATIC AREAS IN INVESTMENT CLIMATE INTERVENTIONS agribusiness-specific PPD approach, embedded in the Europe and Central Asia region—Armenia, Bosnia and overall Bank Group project, aligns with the government’s Herzegovina, Kosovo, and Moldova—and two Sub- vision to increase the percentage of raw cashew Saharan Africa countries—Burundi and Côte d’Ivoire. processing in the country and ultimately unlock inclusive Additional compliance cost savings for FY14 has been sustainable investment and value addition along the reported but not yet validated. Through three years of cashew supply chain. (For more, see p. 34.) the FIAS FY12–16 strategy cycle, a total of $172 million in compliance cost savings have been validated. These Impact of Compliance Cost Savings savings usually occur late in a project cycle or at the end, after the benefit from all the legal and regulatory reform The goal of the work supported by FIAS is not simply work done in a client country can be assessed for its to rack up a long list of reforms, but to help client impact on new and existing businesses. For that reason, governments foster more vibrant and sustainable FIAS support is expected to generate significantly more economies by removing or streamlining obstacles to compliance cost savings in the two years remaining in doing business. Thus what matters most is the impact the strategy cycle. In FY14, FIAS support yielded $22 million in validated compliance cost savings in four countries in the East Europe and Central Asia region. 43 COLLABORATION, KNOWLEDGE AND LEARNING FIAS pulls togther examples of best practices from the public and private sectors to stimulate discussion, peer-to- peer learning, and investment climate innovation in client countries. 260k 78k Facebook followers of FIAS-supported activities unique visitors to investment climate website 2,705 participants in 56 investment climate-related events in 13 countries 44 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 5 COLLABORATION, KNOWLEDGE AND LEARNING Knowledge management and strategic communications are not adjuncts but an essential element of the work supported by FIAS and implemented by the World Bank Group’s Trade and Competitiveness (T&C) Global Practice. Throughout the preceding project descriptions in fields ranging from business regulation to trade and investment strategy to industry- specific work, and in the challenging realm of conflict-affected states, the importance of knowledge dissemination and effective communications emerges as a recurring theme. Improving the investment climate of client countries happens on the basis of the expertise and knowledge gained in past projects, through long experience in a wide array of countries, cultures, and regions, and through the deep subject-area expertise the World Bank Group brings to bear. The willingness of a developing country to commit to a program of reform, meanwhile, often hinges on effective communication of the benefits that will result or of the negative consequences that will ensue if outdated systems remain in place. Communications help the Bank Group engage donor cross borders and demonstrating the losses created by partners, client country governments, policy makers, barriers to competition that stem from trade, agriculture, private sector stakeholders, and the general public and industrial policies. The forum also supported the in the agenda for sustainable growth. All of these Competition Policy Advocacy Contest, which recognizes elements were present in the work done in knowledge exemplary efforts by the competition authorities in management and communications in FY14, along with developing countries to go beyond enforcement actions the added challenges of preparing for the T&C Global against cartels and monopolies and develop advocacy Practice structure now up and running. efforts to broaden support for vibrant competition across in market sectors (see p. 38). Shaping and Sharing Knowledge FIAS funding continued to support the production Identifying and Disseminating Solutions and dissemination of knowledge in key areas of client Several publications and knowledge events in FY14 demand. This strategic priority was addressed through introduced widely applicable solutions relevant for a a robust program to capture knowledge and channel range of investment climate interventions. For instance, technical expertise, experiences, and lessons into FIAS funding supported the development of an integrated published resources and events. More than 30 external package of knowledge resources, including a toolkit and knowledge resources were published in FY14 (see two sector-specific technical notes, to help practitioners box, p. 48), offering technical guidance, best practices, engage stakeholders by embedding mechanisms for and empirical evidence to support the design and PPD in their private sector development projects. A implementation of investment climate reforms. complementary seminar helped participants understand how to employ PPD in FCS, based on a survey of the In FY14, knowledge sharing and learning events engaged experiences of Bank Group program leaders working in practitioners, government and private sector clients, these situations. This seminar, along with one on trade donor partners, and other stakeholders. FIAS funding was logistics in FCS, was presented at the FCS Knowledge used to support 56 investment climate-related events in Forum, a Bank Group-wide learning event. 13 countries that attracted 2,705 clients, private sector representatives, staff members, and other participants. The capture and organization of knowledge is an These seminars and conferences, including “deep dive” important driver in the World Bank Group’s new model and other learning events, earned an average quality for improved client service delivery. With the Bank Group rating of 4.5 of 5 in participant evaluations. reorganization and the creation of the global practices, the Investment Climate Department in FY14 migrated Through a full roster of peer-to-peer events, FIAS thousands of documents to centralize knowledge and supported the World Bank Group in providing tools in a new T&C Global Practice portal. Similar one- opportunities for governments to exchange knowledge, stop-shop intranet portals have been created for all share experiences, and collectively develop best 19 of the new global practices in the new integrated practices (see FY14 highlights, p. 50). For example, the Bank Group-wide platform. As part of the Bank Group’s Pre-ICN Forum, which preceded the annual conference commitment to more effective collaboration across the of the International Competition Network, has become organization, work has begun on the portal’s system for an important vehicle for sharing replicable success organizing project knowledge, a system that enables stories. As a platform for knowledge exchange, the in-house practitioners to post and search for simple, forum is useful in addressing competition issues that practical solutions to specific development challenges 45 their clients often face. A portal function to help match A diverse set of communications products highlighted staff skills to projects, also launched in FY14, is designed the impact of FIAS-supported investment climate reforms to help teams deploy staff fluidly and better leverage on local beneficiaries, including small businesses and expertise within the T&C Global Practice. women entrepreneurs. Results stories from the ground were featured on the investment climate thematic Communicating Results Effectively website, www.wbginvestmentclimate.org. The website recorded 78,016 unique visitors in FY14.20 FIAS- Strong communications on FIAS-supported projects supported activities reached and were shared by nearly and knowledge solutions help expand the reach and 11,700 Twitter and 260,000 Facebook followers across a strengthen the impact of investment climate work in wide range of corporate and regional World Bank Group client countries. Communications initiatives also helped channels. Monthly e-newsletters delivered the latest raise the profile of FIAS-supported activities among staff, news on FIAS-supported activities to internal and external development, and donor partners amid the World Bank audiences. More than 36 project briefs presented the Group reorganization in FY14. achievements of FIAS-supported work in client countries A key goal of this communications effort is to ensure in a concise and easy-to-digest format. donor country policy makers and their constituents Multimedia projects in client countries captured the understand the economic development goals of our sights and sounds of private sector activity boosted by joint work. In client countries, effective communications investment climate reforms. FIAS-supported staff shared ensure that reform achievements do not exist their perspectives from the field for the World Bank merely as laws or regulations but also as priorities Group’s Private Sector Development blog and the Trade well understood by government, the private sector, Post blog. FIAS-supported activities were showcased in consumers, and other key stakeholders. Ensuring other corporate products, such as newsletters, marketing public buy-in to FIAS-supported reform work is critical products, and flagship publications such as the IFC to effective implementation of reforms. Increasingly, Annual Report. the wider availability of mobile Internet access means that communications can be an integral part of FIAS- These targeted and results-driven communications efforts supported reform programs, as was the case in Rwanda promoted the key role of FIAS-supported investment in FY14 through a program enabling businesses to pay climate work in fostering growth and job creation as the taxes online (see box below). Investment Climate Department transitioned into the T&C Global Practice. Moving ahead, FIAS-supported projects Communications, Tax Teams Collaborate on Rwanda Tax Reform Some Rwanda business owners did not fail to pay taxes for lack of trying. An overly complicated tax system was partly responsible for the low proportion—only 11.2 percent—of Rwanda’s 123,256 business establishments that were registered with the Rwanda Revenue Authority. The World Bank Group response was an example of collaboration across teams to deliver an effective solution. FIAS-supported investment climate tax experts helped Rwanda simplify the tax code and deploy a new mobile platform called M-Declaration that makes it easier for businesses to declare their taxes. With M-Declaration, taxpayers simply dial an access number and follow basic steps to declare their taxes by reporting the previous year’s turnover, calculating the profit tax, and submitting the information electronically to the Rwanda Revenue Authority. Helping Rwanda improve the tax system was the tax team’s specialty. Getting the word out was where the Africa communications team came in. With a modest budget, the team helped Rwanda launch a public awareness campaign targeting small and medium enterprises and firms that had not registered with the Authority. Under the marketing banner “SME development for better taxation, ” the communications effort alerted businesses to the tools available to help them declare their taxes and, more broadly, sensitized citizens to the importance of paying taxes. The campaign consisted of training events, brochures in English and Kinyarwanda, community radio programming, newspaper and radio ads, and the engagement of local artists. The mobile tax tool has attracted considerable use by SMEs, with more than 10,000 entrepreneurs having registered and used the application. A further enhancement—the capability to submit payments online using a traditional bank account or mobile money network—is being implemented. David Nduwimana, a motorcycle taxi driver in the Rwandan capital, Kigali, is already seeing the value of M-Declaration. “The system is a great relief to my colleagues and me. Too much paperwork really made it ” he said. difficult for us to comply, 20 FY13 data for unique visitors is not available, making a year-to-year comparison impossible. 46 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES COLLABORATION, KNOWLEDGE AND LEARNING will receive even stronger coverage as communications media channels, and formats to extend the reach of T&C’s units across the organization merge to collaborate on the work to donors, client countries, and potential new clients World Bank Group’s wide array of results stories. Along alike. with the creation of the global practices, the Bank Group reorganization also restructured communications through The communications and knowledge management teams a revamped External and Corporate Relations department. strive to provide visibility to FIAS donor partners in the Just as the global practice structure is designed to full range of print and online publications, blogs, video promote collaboration across Bank Group units, so will materials, and other products at every opportunity so that the new communications structure better serve FIAS- client countries and other key stakeholders are aware of supported programs by seamlessly bringing together the this critical support. full range of communications products, functions, social 47 Key Publications Released in FY13 FIAS funding supported the development of a wide range of published resources to help government policy makers and practitioners (within client governments and inside the World Bank Group) design and implement reforms to improve the investment climate and build competitiveness in client countries. In FY14 these resources were produced primarily to disseminate research and benchmarking data for application in the field, provide practical guidance and hands-on diagnostic tools, and examine the literature to determine reform impact and gaps in analysis. All publications are available at www.wbginvestmentclimate.org unless otherwise indicated. Toolkits Food Safety Toolkit, also available in Russian, offers reformers a set of tools and helps them assess the market potential, build capacity, and assist in mitigating barriers to development in food safety. Low-Carbon Zones: A Practitioner’s Handbook, draws heavily on lessons learned from an innovative Bangladesh project that inspired an approach for transforming EPZs into more environmentally friendly low-carbon zones. Quick Guides to Integrating Public-Private Dialogue, a set of four modules on scoping, stakeholder mapping, communications, and PPD in FCS, provide an overview and necessary tools to integrate PPD into private sector development projects. Reports Arbitrating and Mediating Disputes assesses the legal and institutional framework for commercial arbitration, mediation, and conciliation regimes in 100 economies, identifying several opportunities for improvement, such as greater flexibility for domestic arbitration regimes, faster arbitration proceedings, and better domestic court capabilities. Converting and Transferring Currency benchmarks foreign exchange restrictions to FDI across 98 economies and notes areas for regulatory reform that could be considered across economies, depending on country-specific conditions and the macroeconomic context of potential foreign exchange reforms. East African Community Common Market Scorecard 2014 assesses progress toward the development of a common market in capital, services, and goods across the partner states of the EAC—Burundi, Kenya, Rwanda, Tanzania, and Uganda. Employing Skilled Expatriates analyzes the skilled immigration regime relevant for FDI across 93 economies to provide comparable information about this regulatory space. Global Investment Promotion Best Practices: Winning Tourism Investment provides guidance on how investment promotion agencies can improve their investment facilitation services to tourism investors with a focus on attracting long-term growth businesses in the sector. Little Data Book on Private Sector Development 2014 provides data for key indicators on business environment and private sector development in a single page for each of the World Bank member countries and other economies with populations of more than 30,000. The Potential for Alternative Private Supply of Power in Developing Countries assesses the value and financial viability of the most common forms of alternative private supply in developing countries through a series of case studies in South and East Asia and in Africa, and it examines whether such models have potential for scaling and replication similar to that of the mobile phone industry. Public-Private Dialogue in Fragile and Conflict-Affected Situations: Experiences and Lessons Learned discusses the findings of a survey and interviews of World Bank Group project leaders with experience implementing PPD projects in more than 30 countries. Starting a Foreign Investment across Sectors analyzes 103 economies to identify which countries pose the greatest barriers to foreign companies trying to enter their markets, such as equity ownership restrictions on foreign investors and procedural barriers to establishing foreign-owned subsidiaries. 48 > FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 2014 ANNUAL REVIEW • Technical Papers and Notes World Bank Policy Research Working Paper Can e-filing reduce tax compliance costs for small businesses in developing countries? investigates the association between electronic filing and the total tax compliance costs incurred by small and medium-size businesses in developing countries, based on survey data from Nepal, South Africa and Ukraine. Viewpoint Series Debt Resolution and Business Exit: Insolvency Reform for Credit, Entrepreneurship, and Growth examines literature that quantifies the impact of effective insolvency regimes and reforms and identifies associated benefits: lower cost of credit, increased availability of credit, increased returns to creditors, job preservation, entrepreneurship, and other benefits for small firms. Distributed Private Energy Projects: Supporting Electrification Goals in Low-Income Countries rdiscusses models for the alternative private supply of power, the conditions when each is appropriate, and the financial and regulatory support that can attract investment for these projects. COLLABORATION, KNOWLEDGE AND LEARNING Food Safety Standards: Economic and Market Impacts in Developing Countries discusses evidence of the economic impacts of private firms and public agencies complying with food safety standards and also of the impact of technical assistance in achieving compliance. Investment Climate In Practice series Does e-filing reduce tax compliance costs for small businesses in developing countries? offers a cautiously positive assessment of e-filing reforms in developing countries but recommends that countries not rush to push e-filing on all taxpayers until the revenue authorities, infrastructure, and taxpayers are ready. Promoting Foreign Investment in Fragile and Conflict-Affected Situations provides guidance for policy makers and promoters in recovering economies on how to bring investment opportunities to fruition and highlights recent sector data on foreign investment in these situations. Nuts & Bolts: Technical Guidance for Reform Implementation series Does Specialized Software Reduce Tax Compliance Costs in Developing Countries? examines the association between the use of specialized tax software and total tax compliance costs for businesses based on data from surveys of businesses in developing countries. Enabling Private Sector Feedback on Public Services through Mobile Devices outlines considerations for governments in implementing mobile data collection as a means for citizens to provide immediate feedback on public services, thus allowing public agencies to quickly identify and respond to issues, obtain suggestions, and communicate their reform progress. Public-Private Dialogue for Specific Sectors: Agribusiness focuses on PPD as an engagement mechanism to support agribusiness and help ensure that issues such as governance, transparency, inclusiveness, and supply chain linkages are addressed to benefit investors, governments, and local communities. Public-Private Dialogue for Specific Sectors: Extractive Industries focuses on PPD to support the extractive industries and help ensure that natural resources can contribute positively to economic development by engaging stakeholders along the industries’ value chain. SmartLessons From Monologue to Dialogue: How IFC Worked with the Private Sector to Encourage Reform through Advocacy http://smartlessons.ifc.org/smartlessons/lesson.html?id=1777 It’s No Illusion: You Can Pay Taxes with a Smile: The Rwanda Case http://smartlessons.ifc.org/smartlessons/lesson.html?id=1809 49 More than Just Words: How the Africa Round Table Is Enabling Meaningful Reforms across Africa http://smartlessons.ifc.org/smartlessons/lesson.html?id=1745 Winning the Peace and Building Confidence in Burundi: IFC’s Efforts to Strengthen Burundi’s Private Sector http://www.wbginvestmentclimate.org/advisory-services/regulatory-simplification/business-taxation/upload/Winning- the-Peace-and-Building-Confidence-in-Burundi.pdf. Journal articles Competition Policy International (September 2013) “Cartel Exemptions in Developing Countries” Competition Policy International (September 2013) “Combating Cartels in Developing Countries” fDi Intelligence (February/March 2014) “Empty Promises?” Handshake (IFC quarterly journal, July 2013) “Have PPP Will Travel: The tourism industry’s not-so-secret weapon” “Forecast Bright: Tourism’s Investment Climate” International Transfer Pricing Journal (May 2014) “Georgia: Comprehensive Decree on Transfer Pricing Signed” http://www.ibfd.org/IBFD-Products/Journal-Articles/International-Transfer-Pricing-Journal/collections/itpj/html/ itpj_2014_03_ge_1.html Peer-to Peer Learning: Transforming Knowledge into Best- representatives, and policy makers discussing trends and priority areas in trade logistics. Practice Results Also in Seoul, Korea, the Ministry of Trade, Industry, In FY14, FIAS funding continued to support World and Energy of Korea; Korea Energy Management Bank Group staff in organizing numerous peer-to-peer Corporation (KEMCO); and the Investment Climate events, such as those highlighted here, that brought Department co-hosted a conference to discuss together government practitioners to share lessons public and private sector experiences in promoting and solutions drawn from their reform experiences. climate-efficient industries. The program included a presentation of the findings of three country studies A number of peer-to-peer learning events focused conducted by the World Bank Group and KEMCO to on regional integration and building competitiveness identify opportunities and improve competitiveness and trade. The 2014 Pre-ICN Forum in Marrakech, through resource efficiency. Morocco, ahead of the International Competition Network’s annual conference, was co-sponsored Several regional events addressed the unique by the Morocco Competition Council, the African challenges of Sub-Saharan Africa. The fourth Africa Competition Forum, and the Regional Center of Round Table convened in Lusaka, Zambia, under Competition for Latin America. Pre-ICN emphasized the theme, “Building Africa’s Credit Environment the role of competition in achieving regional for Growth. ” This annual event, jointly organized by integration and developing trade. The forum was the World Bank Group and INSOL International, the attended by 150 participants from 50 competition largest global association for national insolvency agencies, several international organizations, donor associations and professionals, brought together institutions, and the private sector; an additional 200 delegates from 15 countries across the region, people followed the conference panels online. including policy makers, judges, bankers, and private practitioners. Discussions focused on the importance In Seoul, Korea, the World Bank Group, in partnership of developing effective insolvency regimes to mitigate with the Korean Ministry of Strategy and Finance; bank exposure and strengthen counties’ credit the Ministry of Trade, Industry and Energy; the Korea environments (see also, SmartLessons, p. 49). Customs Service; and the Korea International Trade Association, hosted a regional event on enhancing In Lomé, Togo, 11 representatives of 11 African trade logistics connectivity with over 40 experts from economies participated in a high-level workshop on regional and multilateral organizations, private sector 50 2014 ANNUAL REVIEW > 2013 • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES the World Bank Group’s Women, Business, and the Law countries (including 100 from the host country). Project. The discussions, centering on the role of women and challenges in promoting gender equality, explored In Amman, Jordan, a workshop organized in cooperation important common issues facing economies on the with USAID brought together delegations of Yemeni ground and opportunities for collaboration. and Jordanian tax officials in support of the relaunched tax simplification project in Yemen, which had been At the fifth session of the Network of Reformers for on hold since 2011. The event was designed to help East and Southern Africa, held in Lusaka, Zambia, 80 familiarize Yemeni tax officials with regional experiences to 100 regional officials, policy makers, and private and to foster regular interaction and knowledge sharing sector stakeholders convened to share best practices in between the two tax authorities. reforming countries’ business environments. The network relies on peer-to-peer learning as a catalyst for improved As part of the FIAS-funded Western Balkans Trade regulatory quality and effectiveness among participating Logistics project, customs officials from Albania, FYR countries. On a related theme, the fifth annual Ease Macedonia, Montenegro, and Serbia met in Belgrade, of Doing Business conference attracted 150 delegates Serbia, for a week-long regional training session on from 17 African countries to Maputo, Mozambique, best international practices in organizing, managing, and in July 2014 to share their reform experiences on the performing post-clearance audits in customs. Supported Doing Business topics of registering property, dealing by the World Customs Organization and led by a former with construction permits, getting credit, and conducting deputy director of that organization and a trainer from cross-border trade. The event featured presentations Japan Customs, the program emphasized the benefits of from the region’s best performers as reported in Doing moving from border-focused controls to post-clearance Business (such as Mauritius), and recent reformers audits as the prime basis for customs controls. As part of COLLABORATION, KNOWLEDGE AND LEARNING (Burundi, Côte d’Ivoire, and Madagascar), as well as the same project, two workshops on the WTO TFA were global best practices presented by representatives from held in Serbia (co-organized with SECO and UNCTAD) Colombia, Portugal, and the United Kingdom. and Montenegro (with USAID). Government and private sector participants reviewed the gaps in the national Investment climate teams continued to support their legislation and implementation compared with the advisory work with client governments through peer-to- requirements of the agreement and identified steps to peer events offering practical approaches to designing achieve compliance. and implementing reforms. For example, a conference in Bishkek, the Kyrgyz Republic, facilitated peer-to-peer Workshops in Lima, Peru, and Bucharest, Romania, learning on the design and use of fiscal and non-fiscal tackled specific legal and practical issues related to incentives to encourage investments in Central Asia the employment of dawn-raid tactics by competition in such sectors as agriculture, energy, and mining. The agencies as a key instrument in sanctioning and deterring event brought together policy makers from Tajikistan, cartels that are particularly harmful to consumers. In Uzbekistan, and the Kyrgyz Republic, academics, and Lima, four experts from top enforcement agencies a range of multi- and bilateral providers of technical shared best practices with 20 staff of the Peruvian assistance. Competition Authority, which led to 13 surprise investigations conducted by the authority, as reported in The biannual International Tax Dialogue global conference, the Peruvian media, and five new sanctioning processes. in Marrakech, Morocco, focused on tax decentralization At the workshop in Bucharest, a team from the United and how to design intergovernmental tax and fiscal States Department of Justice, including both an expert frameworks. World Bank Group tax experts discussed litigator and an FBI agent, carried out a series of practical trends in tax and intergovernmental relations, regional exercises on how to conduct dawn raids with 32 staff of integration, subnational taxation, and tax administration the Romanian Competition Council. challenges in subnational governments. The program attracted over 350 participants from more than 90 51 FINANCIAL RESULTS AND RESOURCE USE The financial results reported in this section cover only the funds managed by the Investment Climate Department under the FIAS trust fund structure as well as supplemental funds earmarked for the implementation of the FIAS strategy. 95% $50.3 of expenditures are project related million $21.2 million in total contributions from FIAS received from donors in donors, clients, World Bank Group, core contributions, up well above $33.1 million target from $5.5 million in FY13 52 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 6 FINANCIAL RESULTS AND RESOURCE USE FIAS-supported activities covered in the FIAS 2014 Annual Review were cofinanced through a set of FIAS trust funds managed by the World Bank Group’s Investment Climate Department. Beginning July 1, 2014, the start of FY15, FIAS has been fully embedded in the T&C Global Practice. Through the end of FY14, the Investment Climate Department managed, in addition to FIAS trust funds, additional funds received from the World Bank and IFC for operational and administrative tasks related to FIAS as well as the department’s anchor, or backbone, function in the investment climate space supporting both IFC and World Bank advisory services. The Investment Climate Department administered donor funds for activities managed outside the scope of the FIAS program (not covered in this report), such as the following: n The policy and advisory component of IFC’s ● France Health in Africa initiative and work related to policies ● International Bank for Reconstruction and and regulations affecting private participation in Development (C) infrastructure. ● International Finance Corporation (C) n The Water Resources Group, funded by IFC and other public and private partners to help governments set ● Ireland (C) up multi-stakeholder platforms to address water ● Luxembourg (C) resource issues. ● Multilateral Investment Guarantee Agency (C) n IFC’s coordination team for FCS. ● Sweden (C) These initiatives were remapped either to a Bank Group ● Switzerland (C) global practice or cross-cutting solutions area, or to IFC’s Cross-Cutting Advisory Solutions Department. ● Trademark East Africa The financial results reported in this section cover ● United Kingdom (C) only the funds managed by the Investment Climate ● United States Department under the FIAS trust fund structure as well as supplemental funds earmarked for the implementation Most donors who supported FIAS during the FY08–11 of the FIAS strategy. cycle also provided consent to roll over the unused portions (fund balances) of their FY08–11 contributions to The Investment Climate Department followed IFC’s the FY12–16 strategy cycle. In addition to the core donors standard accounting policies and procedures, as noted listed above, rollover consents were provided by Australia below.21 FIAS financial reports use cash-based reporting and France. in alignment with the quarterly financial reports on IFC’s donor-funded operations. n Contributions for FIAS projects made available through IFC’s Technical Assistance Trust Funds Funding program: New FIAS-related contributions received in FY14 from the ● Korea following donors, World Bank Group partners, and clients n Client contributions: are gratefully acknowledged: ● Costa Rica n Direct contributions to FIAS trust funds:22 Additional client contributions were received by IFC ● Austria (C) regions for IFC region-managed projects receiving ● Canada (C) cofinancing from FIAS trust funds. Such client contributions are accounted for at the regional program ● European Union level. 21 Annual contributions from IFC, the MIGA, and the World Bank are treated in the same manner as core donor funds and are comingled with other donor funds in the FIAS Parent Trust Fund account, as terms and conditions allow. Contributions from the IFC ICBL are treated as an additional source of project-specific funding. Contributions received from IFC in the form of regular administrative budget and as part of the mainstreaming of contributions from the Funding Mechanism for Technical Assistance and Advisory Services (FMTAAS) are treated as off-balance contributions. The total of IFC’s contribution to the FIAS Core Trust Fund and its contribution to FIAS in the form of regular administrative budget reflect IFC’s core contribution in line with the funding targets in the FIAS FY12–16 strategy. 22 Donors contributing some or all of their funding in the form of core contributions are marked with a “C.” 53 Core and Programmatic Funding activities in IDA as well as FCS countries. Also, for FIAS- cofinanced projects managed by IFC regional units, client In FY14, FIAS donors, clients, and the World Bank Group contributions typically are accounted for under the regional contributed a total of $50.3 million (before trust fund programs. Efforts to increase client contributions are administration fees of $2.5 million) to the various FIAS ongoing. trust funds, supporting the implementation of a broad- based investment climate reform program under the FIAS Project-specific contributions from IFC, received in the umbrella (see details in Tables 1 and 2, pp. 56–58). An form of project-specific FMTAAS allocations, amounted additional $2.3 million was made available by IFC in the to $1.8 million in FY14. These allocations primarily form of regular administrative budget to cover salaries and supported a range of global knowledge management related costs of a small number of staff working mostly and product design and development initiatives on FIAS-related projects. Total FY14 contributions were implemented under the FIAS umbrella (see Table 2, well above the FY14 funding target of $33.1 million. Core Project-Specific Donor and Client Contributions, p. 58). funding raised in FY14 increased significantly to $26.5 Other contributions from IFC, amounting to $0.6 million million (FY13: $12.3 million), as did program- and project- in FY14, supported activities indirectly related to projects, specific donor contributions to $21.3 million (FY13: $10.9 including initial product design and development, portfolio million). management, monitoring and evaluation, and knowledge sharing associated with the global portfolio implemented World Bank Group core contributions totaled $5.3 under the FIAS umbrella. million in FY14, including $2.2 million from IFC, $1.6 million from the World Bank, and $1.5 million from the MIGA. Contributions outside FIAS’ Regular Financial Structure It should be noted that IFC’s total contribution to FIAS in FY14 was approximately $4.5 million; $2.2 million as Indirect contributions for FIAS-related advisory direct contributions to the FIAS core trust fund and $2.3 activities were made available to the Investment million as administrative budget to cover sustaining costs Climate Department through non-FIAS specific funding associated with the management of FIAS and IFC’s ICBL. mechanisms (see Table 3, Other Funding, p. 59). Including the $2.3 million of administrative budget from Administrative budget ($2.3 million) was provided by IFC, the World Bank Group’s core contribution to FIAS was IFC to cover the staff costs of certain “mainstreamed” $7 .6 million. ICBL positions associated with the management of FIAS and ICBL. As noted above, IFC’s total FY14 contribution Core contributions received from donors amounted to to FIAS is $4.5 million, including $2.2 million as direct $21.2 million in FY14, a dramatic increase over the FY13 contributions to the FIAS core trust fund and $2.3 million core contributions of $5.5 million, thanks largely to a as administrative budget. significant donation from Canada of $16.4 million. Overall, the total amount of core funding received from the World In-Kind Support Via Staff Exchanges and Secondments Bank Group and donors amounted to $28.8 million, The FIAS program continues to benefit from in-kind consisting of the $26.5 million in contributions from resources that several donors make available in the donors and $2.3 million from IFC’s regular administrative form of secondees and staff exchanges. Throughout budget. FY14, the FIAS program benefited from secondments Programmatic contributions from donors, made available to the Investment Climate Department under the World through thematic and regional FIAS Trust Funds, totaled Bank Group’s Donor-Funded Staffing Program: one staff $15.4 million in FY14 versus $5.4 million in FY13. member funded by the government of Spain, a second staff member by the government of Denmark, and a third by the government of the United States. In addition, a Project-Specific Funding direct secondment was supported by the Korean Ministry In FY14, project-specific contributions from donor of Trade, Investment, and Energy. Such staff exchanges partners, clients, and IFC amounted to $7 .8 million, and secondments offer an attractive way for FIAS partners including $5.9 million from donor partners, $0.1 million to be directly involved in the program and establish direct from clients, and $1.8 million from ICBL. Project-specific connections between their private sector development contributions decreased slightly in FY14 from the $8.6 programs and FIAS. million recorded in FY13. Use of Funds Project-specific contributions from donors totaled $5.9 In FY14, FIAS trust fund expenditures for investment million in FY14, up from $5.5 million the previous year. climate reform activities reached $25.6 million (see Table 1, Sources and Uses of Funds, p. 56), a decrease in Client contributions received in FY14 totaled $0.1 million, FIAS expenditures from FY13 ($30.4 million). In addition, similar to the previous year and below the funding target $2.3 million of expenditures were incurred against the set forth in the FIAS FY12–16 strategy. The potential administrative budget provided by IFC, bringing the total to generate significant cash contributions from clients expenditures to $27 .9 million. remains modest due to the high concentration of FIAS 54 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES Administration fees are collected by IFC to cover trust In FY14, project-related expenditures (both direct fund administration costs and are deducted from donor and indirect) accounted for 95 percent of total FIAS contributions at the time of receipt. In FY14, IFC collected expenditures, with the remaining 5 percent for general trust fund administration fees of $2.5 million from FIAS and administration (rent, communications, equipment, donor contributions.23 and other non-overhead costs such as administrative and back-office support staff; see Table 4, Expenditures by At the end of FY14, fund balances in the various FIAS trust Advisory Services Activity). Direct project implementation funds totaled $40.2 million,24 including $23.9 million of expenditures fell 22 percent in FY14. This decrease is due core funds and about $16.3 million of program and project- in large part to a substitution effect, as costs have been specific funds received under multiyear donor agreements. redirected to the IFC administrative budget, as well as to This reflects about 140 percent of the average annual lower project spending. In comparison, average project- budget for FIAS (up significantly from 63 percent in FY13). related expenditures for the FY08–11 cycle accounted for Fund balances are expected to fall throughout the rest of 83 percent of total FIAS expenditures with the remaining the FY12–16 FIAS cycle. 17 percent for general and administration.25 FINANCIAL RESULTS AND RESOURCE USE 23 FIAS trust funds established after July 1, 2009, are subject to the standard IFC trust fund administration fee of 5 percent. Trust fund administration fees collected by IFC are included in Table 1, Sources of Funds. 24 FIAS trust fund cash balances less outstanding consultant commitments. 25 In July 2010, IFC implemented a new cost allocation methodology for Advisory Services which resulted in a redistribution between direct and indirect project costs. As a result of this change, some figures in table 4 are not consistent with figures reported in FIAS Annual Reports/Reviews, FY08–10. General and administration expenditures, however, are not affected by this change in methodology (see Table 4). 55 Table 1: Sources and Uses of Fundsa – In US$ Thousands FY08 FY09 FY10 FY11 FY12 FY13 FY14 SOURCES OF FUNDS WORLD BANK GROUP CORE CONTRIBUTIONS IFCb 8,000 2,000 2,000 4,000 2,863 2,800 2,200 IBRD 2,000 1,600 1,600 1,600 1,600 1,600 1,600 MIGA 4,000 3,500 3,000 2,700 2,500 2,400 1,500 Subtotal World Bank Group Core Contributions 14,000 7,100 6,600 8,300 6,963 6,800 5,300 WORLD BANK GROUP PROJECT-SPECIFIC AND OTHER CONTRIBUTIONS IFC IC Business Line - Project Specific 3,800 2,672 1,862 1,915 2,968 3,084 1,759 IFC IC Business Line - Administration - - - 1,687 934 670 558 IFC AS Contingency - - - 880 - - IFC Global Fund - 150 400 - - - Total World Bank Group Contributions 17,800 9,922 8,862 12,782 10,865 10,554 7,617 CORE DONOR CONTRIBUTIONS Australiac 800 676 1,502 - - - - Austria 368 373 355 331 708 621 660 Canada - - - - 985 16,392 Francec - 1,281 1,403 - - - - Iceland 45 - - - - - - Ireland 735 - - - 205 186 428 Italy - 1,414 - - - - - Luxembourgc 273 539 - 829 - 1,033 548 Netherlands (Global Program)d 559 2,350 1,950 1,550 1,870 750 - New Zealand 399 276 384 - - - - Norway 475 475 475 1,138 - - - Spain - - - - - - Sweden 406 285 345 396 1,448 1,494 1,528 Switzerland 250 240 - - 400 300 300 United Kingdom - 494 332 309 1,099 163 1,385 Subtotal Core Donor Contributions 4,310 8,401 6,746 4,552 5,730 5,532 21,241 PROGRAMMATIC DONOR CONTRIBUTIONS - Austria (Investment Climate Cooperation Program) - - - - 2,010 1,841 2,036 Austria (Investment Generation) 2,571 2,608 2,489 2,287 - - - Austria (Crisis Response) - 280 307 - - - - Canada (Trade Facilitation) - - - - - - 1,821 EU (ECOWAS Trade Logistics) - - - - - - 2,423 EU (ECOWAS Investment Policy) - - - - - - 5,330 Ireland (Africa) 735 - 724 531 615 559 601 Italy (Africa) 508 - - - - - - Korea (Trade Logistics) - - - - - 200 350 Luxembourg (Crisis Response) - 750 - 263 - - - Luxembourg (Tax Transparency) - - - - - 646 343 Netherlands (Investing Across Borders) - - - - 200 - - Netherlands (Tax Transparency) - - - - 300 - - Netherlands (Trade Logistics) 503 400 400 - - - - Netherlands (Secured Lending) - 450 - 600 - - 400 Norway (Business Entry) - - 154 428 - - - Norway (Trade Logistics) 300 340 150 500 500 500 - Sweden (Africa) 628 630 1,122 - - - - Switzerland (Industry) - - - - 600 400 400 Switzerland (Secured Lending) - 500 400 400 - - - Switzerland (Tax) - 500 300 200 700 500 - Switzerland (Tax Transparency) - - - - 300 300 - Switzerland (Western Balkans) 820 600 600 500 - - - United Kingdom (Western Balkans) 497 440 - - - - - United Kingdom (Tax) 1,426 183 96 - - - - United Kingdom (Tax Transparency) - - - - - - 1,150 United States (Doing Business) 632 1,150 724 1,704 978 501 456 Subtotal Programmatic Donor Contributions 8,620 8,830 7,466 7,413 6,203 5,447 15,410 DONOR CONTRIBUTIONS (PROJECT SPECIFIC)e 5,525 4,436 8,868 8,267 9,457 5,456 5,933 Total Donor Contributions 18,455 21,667 23,080 20,231 21,390 16,435 42,584 TOTAL WORLD BANK GROUP AND DONOR CONTRIBUTIONS 36,255 31,589 31,942 33,013 32,255 26,989 50,202 CLIENT CONTRIBUTIONS 129 1,093 1,830 283 484 90 75 TOTAL RECEIPTS 36,384 32,682 33,772 33,296 32,739 27,079 50,277 Trust Fund Administrative Fees f 1,099 973 1,140 1,212 1,122 1,021 2,507 TOTAL (NET) RECEIPTS 35,285 31,709 32,632 32,084 31,617 26,058 47,770 Continued on next page 56 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES Table 1: Sources and Uses of Fundsa – In US$ Thousands (continued) FY08 FY09 FY10 FY11 FY12 FY13 FY14 USES OF FUNDSg STAFF COSTS Staff 9,961 11,636 11,181 13,128 12,036 14,934 13,512 Consultants and Temporaries 9,322 10,268 7,634 8,101 6,570 5,939 6,807 Total Staff Costs 19,283 21,905 18,815 21,229 18,606 20,873 20,319 TRAVEL Total Travel 6,217 6,488 5,229 5,678 5,618 5,893 3,477 INDIRECT COSTS Office Occupancy 683 1,071 1,018 1,073 102 274 119 Office Equipment 116 53 57 47 84 114 321 Other Operating Costs 214 863 242 528 635 711 817 Other Costs 108 1,693 2,256 1,718 1,634 2,491 530 Total Indirect Costs 1,122 3,681 3,573 3,366 2,455 3,590 1,786 TOTAL USES OF FUNDS 26,622 32,073 27,616 30,273 26,679 30,356 25,583 a. The FIAS Annual Review is prepared as a reporting tool for FIAS donors and management, utilizing management accounting principles. b. IFC contributions during the FY08–11 strategy cycle amounted to $4.0 milllion per anum ($16 million over the duration of the cycle), with disbursements frontloaded in FY08 (by $4.0 million) and FY09 (by $2.0 million). IFC contributions during the FY12–16 strategy cycle include direct contributions to the FIAS core trust fund ($2.9 million in FY12, $2.8 million in FY13, and $2.2 million in FY14), and IFC Advisory Services administrative budget ($1.2 million each in FY12 and FY13 and $2.3 million in FY14) to cover staff costs of a number of mainstreamed Investment Climate Business Line positions related to FIAS. As a result, total IFC core contributions to FIAS amounted to $4.1 million in FY12, $4.0 million in FY13, and $4.5 million in FY14. c. While Australia and France did not make fresh core contributions to FIAS in FY12 and FY13, they provided consent to roll over their remaining shares in core funding from the FY08-11 cycle to the new FIAS cycle that started in FY12. Luxembourg signed a new Agreement with IFC in September 2012 to contribute core and other funding; Luxembourg contribution for FY12 and FY13 were received andrecorded in FY13. d. Netherlands core contributions are earmarked for activities in IDA countries. e. For details of FY14 project specific contributions, see Table 2. FINANCIAL RESULTS AND RESOURCE USE f. Administration fees collected by IFC to cover cost of trust fund administration. g. The Uses of Funds table does not include the use of $2.3 million of regular administrative budget received from IFC in FY14 or the $1.2 million received in each of FY13 and FY12 under the FMTAAS mainstreaming (see note b). 57 Table 2: Project-specific Donor and Client Contributions – In US$ Thousands PROJECT DONOR 2014 AMOUNT WORLD BANK GROUP CONTRIBUTIONS [IFC INVESTMENT CLIMATE BUSINESS LINE (IC BL)] Business Regulation IFC IC BL 145 Debt Resolution and Business Exit IFC IC BL 96 Investment Policy - Product Development IFC IC BL 148 Impact Measurement IFC IC BL 193 Trade Logistics IFC IC BL 149 Business Taxation IFC IC BL 95 Agribusiness IFC IC BL 180 Tourism IFC IC BL 7 Public-Private Dialogue IFC IC BL 185 Competition Policy IFC IC BL 200 ICT Theme IFC IC BL 75 Green Building IFC IC BL 50 Social Sectors IFC IC BL 50 Industrial Efficiency IFC IC BL 100 IC Transparency IFC IC BL 88 Subtotal World Bank Group Contributions 1,759 DONOR CONTRIBUTIONS OHADA Business Law Reform France 1,318 Investment Climate Reform in East Africa Trademark East Africa 2,310 Impact and Knowledge Management USAID 689 LAC: Doing Business Reform USAID 309 Competition Policy USAID 119 Trade Facilitation USAID 950 Morocco: Doing Business Reform USAID 238 Subtotal Donor Contributions 5,933 CLIENT CONTRIBUTIONS LAC: Doing Business Reform Costa Rica 75 Subtotal Client Contributions 75 TOTAL FY14 PROJECT-SPECIFIC DONOR AND CLIENT CONTRIBUTIONS 7,768 58 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES Table 3: Other Funding – Indirect Support to FIAS Program – In US$ Thousands OTHER FUNDING – INDIRECT SUPPORT TO FIAS PROGRAM DONOR AMOUNT IFC ADVISORY SERVICES ADMINISTRATIVE BUDGET ALLOCATION AS administrative budget - staff-related costsa IFC 2,300 TOTAL FY14 OTHER FUNDING 2,300 a. Advisory Services administrative budget is provided by IFC for certain mainstreamed Investment Climate Business Line positions associated with the management of FIAS and the ICBL. IFC’s FY14 total contribution to FIAS: $4.5 million, consisting of $2.2 million as direct contribution to the FIAS core trust fund and $2.3 million as administrative budget. IFC’s direct contribution to FIAS ($2.2 million) is included in Table 1: Sources of Funds. Table 4: Expenditures by Advisory Services Activity STANDARD ADVISORY SERVICES FY10 % FY10 FY11 % FY11 FY12 % FY12 FY13 % FY13 FY14 % FY14 ACTIVITY EXPENDITURESd ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL PROJECT-RELATED EXPENDITURES Direct Project Expendituresa 18,988,606 69% 19,057,472 63% 19,116,172 72% 22,943,307 76% 17,930,234 70% Indirect Project Expendituresb 3,322,980 12% 7,679,623 25% 5,252,790 20% 5,282,040 17% 6,383,990 25% TOTAL PROJECT-RELATED 22,311,586 81% 26,737,095 88% 24,368,962 91% 28,225,347 93% 24,314,224 95% EXPENDITURES GENERAL & 5,304,256 19% 3,535,986 12% 2,310,393 9% 2,130,521 7% 1,268,306 5% ADMINISTRATION COSTSc TOTAL STANDARD ADVISORY 27,615,842 100% 30,273,081 100% 26,679,355 100% 30,355,868 100% 25,582,530 100% SERVICES ACTIVITY EXPENDITURES FINANCIAL RESULTS AND RESOURCE USE a. Direct Project Expenditures include project preparation, implementation, and supervision costs. b. Indirect Project Expenditures include program management and operational support costs (product development, monitoring and evaluation, knowledge sharing and staff development, donor relations, and public relations) previously reported separately and consolidated under the new IFC cost allocation methodology introduced in July 2010. c. General & Administration includes overheads (rent, communications, equipment, and so on) and other non-overhead costs such administrative and back-office support staff. d. Due to the change in IFC’s cost allocation methodology, some figures in table 4 are not consistent with figures reported in FIAS Annual Reports/Reviews, FY08–10. The new cost allocation methodology redistributes expenditures between direct and indirect project costs. Although General & Administration expenditures are not affected by the change in the cost allocation methodology, FY08–FY10 G&A expenditures restated to exclude trust fund administration fees previously reported as expenditures. FY08–FY12 trust fund administration fees are reported in table 1 (Sources and Uses of Funds) as a reduction to receipts. Total FIAS FY14 Expenditures PERCENT OF FIAS FY14 PERCENT OF FIAS FY14 DIRECT PROJECT EXPENDITURES TOTAL EXPENDITURES (Client-Facing and Non-Client-Facing) 100% = $25,582,500 100% = $17,930,234 n Client-Facing IDA (47%) n Client-Facing (42%) Direct Project Expenditures n Client-Facing Non-IDA (13%) n Non-Client-Facing (28%) Direct Project Expenditures n Non-Client-Facing KM/PD (40%) n Non-Client-Facing (25%) Indirect Project Expenditures n General and Administrative (5%) General and Administrative Total FIAS FY14 Donor Contributions Percent of FY14 Source of Funding (Gross) Receipts* 100% = $52,577,000 n Core Donor Contributions (40%) n Programmatic Donor Contributions (29%) n World Bank Group Core Contributions (19%) n Project Specific Donor Contributions (11%) n Client Contributions (0%) *Includes administrative fees of $2.5 million and $2.3 million IFC Advisory Services administrative budget to cover staff costs of certain “mainstreamed” Investment Climate Business Line positions. 59 7 ANNEXES Annex 1: Reforms and other results supported by FIAS in FY 1.1: FIAS-Supported Reforms by Region and Country, FY 1.2: Reforms and Results from FIAS-Funded Projects Ma 1.3: Reforms and Results from FIAS-Cofinanced Project n Reforms and Other Results Supported by FIAS in FY14 Annex 2: Portfolio of FIAS-Supported Projects in FY14, p. 7 2.1: FIAS-Funded Client-Facing Projects Mapped to the n Portfolio of FIAS-Funded 2.2: FIAS-Cofinanced Client-Facing Projects Mapped to Projects in FY14 2.3: FIAS-Funded Knowledge Management and Product n Abbreviations Annex 3: Abbreviations, p. 74 Reforms funded by FIAS REFORM REFORMS REFORM COUNT BY REGION DESCRIPTION 60 2014 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES Y14, p. 62 Y14, p. 62 apped to the World Bank Group Investment Climate Department, p. 63 ts Mapped to Regional IFC Advisory Services Unit, p. 68 70 World Bank Group Investment Climate Department, p. 70 Regional IFC Advisory Services Units, p. 71 t Development Projects Mapped to the World Bank Group Investment Climate Department, p. 73 Portfolio of FIAS funded Projects PROJECTS IN FUNDING SPENDING PORTFOLIO RECEIVED PER PROJECT PER PROJECT 61 ANNEX 1: REFORMS AND OTHER RESULTS SUPPORTED BY FIAS IN FY14 1.1 FIAS-Supported Reforms by Region and Country, FY14 Tax Transpar- Management Licenses and Construction Competition fication and Compliance Protections Grand Total Tax Simpli- Insolvency Electricity Contracts Resolving Starting a Enforcing Transfers Business Logistics Property Industry Investor Permits Permits Getting Getting Credit Trade ency Region Country EAST ASIA AND THE PACIFIC Philippines                       ü   1 Vietnam 1 ü 1 EAST ASIA AND PACIFIC TOTAL                         2   2 EUROPE AND CENTRAL ASIA Albania   ü                 ü* 2 Georgia                       ü ü 2 Russian Federation   ü**             ü**   ü**     3 Tajikistan 1   ü                     1 EUROPE AND CENTRAL ASIA TOTAL   3             1   1   1 2 8 LATIN AMERICA Colombia                     ü   1 AND CARIBBEAN Honduras 1         ü             ü* 2 Jamaica                         ü 1 LATIN AMERICA AND CARIBBEAN TOTAL           1             2 1 4 SUB-SAHARAN AFRICA Benin 1 ü ü ü ü 4 Burkina Faso 1 ü ü 2 Cameroon 1 ü ü ü* 3 Central African Republic 1, 2 ü 1 Chad 1, 2 ü 1 Comoros 1, 2 ü 1 Congo, Dem. Rep. 1, 2 ü ü ü ü ü 5 Congo, Rep. 1, 2 ü 1 Côte d'Ivoire 1, 2 ü ü ü ü* ü 5 Djibouti 1 ü 1 Equatorial Guinea ü 1 Gabon ü 1 Ghana 1 ü 1 Guinea 1 ü ü ü** 3 Guinea-Bissau 1, 2 ü 1 Kenya 1 ü ü 2 Liberia 1, 2 ü* 1 Malawi 1, 2 ü 1 Mali 1, 2 ü 1 Mauritania 1 ü ü 2 Niger 1 ü 1 Rwanda 1 ü ü ü ü* 4 São Tomé and ü ü 2 Príncipe 1 Senegal 1 ü ü ü ü ü 5 Sierra Leone 1, 2 ü* 1 Swaziland ü 1 Tanzania 1 ü** ü* 2 Togo 1, 2 ü** ü ü ü 4 Uganda 1 ü ü 2 Zambia 1 ü ü 2 SUB-SAHARAN AFRICA TOTAL 1 3 2 5 2 1 17 1 3 2 10 7 2 5 62 GRAND TOTAL 1 6 2 5 2 2 17 1 6 2 11 7 7 8 76 Reforms captured by Doing Business 56 Percentage validated by DB 74% FIAS Total of which in IDA 63 Percentage in IDA 83% FIAS Total of which in FCS 23 Percentage in FCS 30% FIAS TOTAL of which in AFR 62 Percentage in AFR 82% ü Reforms from FIAS-cofinanced projects mapped to regional IFC Advisory Services units. 1 International Development Association (IDA) country. * Of the 64 reforms under Doing Business topics, 50 were validated by Doing Business 2015 and 6 by Doing Business 2014. 2 Fragile or conflict-affected situation. Eight reforms reported under Doing Business topics do not fall under the standardized Doing Business case study. ** These reforms are recognized retroactively; they were validated by Doing Business 2014, but were not reported in FY13. 62 2013 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES ANNEX 1: REFORMS AND OTHER RESULTS SUPPORTED BY FIAS IN FY14  eforms and Results from FIAS-Funded Projects Mapped to the World Bank Group Investment Climate Department 1.2 R Doing Number of Business Country Reform Topic Reform Description Reforms Validated EAST ASIA AND THE PACIFIC Philippines Tax Transparency The team provided assistance to the Philippines to meet the Global Forum on Tax Transparency and Exchange of 1 Information standards. In November 2013, the country successfully passed Phase 2, confirming its readiness to exchange information under existing legal and regulatory frameworks. The team provided in-country assistance to help the tax admininistration develop exchange of information procedures and followed up with remote consultations. It also provided tax authorities with training on how to independently request information from other tax jurisdictions to improve the effectiveness of auditing and enforcement activities. Vietnam Tax Transparency Since 2011, the team has been providing technical assistance to Vietnam’s General Department of Taxation 1 (GDT) on transfer pricing legislation, organizational issues, and skills training for auditors to improve the efficiency and effectiveness of multinational enterprise (MNE) audits. The team assisted Vietnam in the introduction of the Advance Pricing Agreement (APA) program. Since the program’s inception, the GDT has reported significant improvement in voluntary compliance among taxpayers and fewer losses reported by MNEs. The assistance has resulted in a more efficient tax administration, which has translated into an increase in revenue collected. For the GDT and Provincial Tax Offices combined, the number of audit cases has increased from 1in 2012 to 40 in 2013. EUROPE AND CENTRAL ASIA ANNEXES Albania Construction Permits Following in-depth advisory assistance, Albania resumed issuance of construction permits in February 2014 1 1 and implemented the Regulatory Plan of Tirana Municipality. A law adopted in April 2013 by parliament and implemented in FY14 has eliminated the concept of two separate development and construction permits in favor of a single construction development permit for simple projects. The law provides for a range of permits, from construction to infrastructure to complex projects. The fee for obtaining a master plan extract from the Plot from the Urban Planning Department was abolished. Russia Construction Permits In 2011, the mayor of Moscow repealed the city’s construction regulations and declared that the Urban 1 1 Planning Code of the Russian Federation of 1997 now applies to the construction process. Prior to this decision, Moscow’s construction process was regulated by Moscow City government resolutions and various mayoral decisions. The 1997 Urban Planning Code does not require multiple project approvals from government agencies. However, this change has not always been implemented in practice. In March 2013, the Moscow City government further clarified construction regulations, with the result that several project approvals are now no longer required. The number of procedures has decreased by four, wait time by 16 days, and permitting costs by 22 percent. Russia Property Transfers Russia has made it easier to transfer property by streamlining procedures and implementing effective time 1 1 limits for processing transfer applications. New provisions in federal law introduce time limits for the state to register a property. Through an improved website, private businesses and individuals can perform multiple procedures online, such as obtaining information on ownership rights and encumbrances, conducting title searches for a property, and applying for the state registration of title transfer. As a result, one procedure was eliminated, which led to a reduction in total time of 10 days and total cost of 3.1 percent. Russia Starting a Business In March 2013, a Russian government decree simplified the state registration process for limited liability 1 1 companies. As a result, banks no longer require the notarization of a bank signature card in order to open a company bank account. Two procedures were merged into one, the wait time decreased by three days, and cost fell by 25 percent. Tajikistan Construction Permits The Town Planning Code of the Republic of Tajikistan and a resolution on licensing were approved by the 1 1 government in March 2014 and have been fully implemented. They eliminated three procedures and cut the overall registration time by 45 days. A requirement to request and obtain approval of project design drawings from the state construction approval agency was eliminated. Requests to obtain a project design permit can now be completed in 15 days, the time to request and obtain project clearance has been reduced from 45 days to 20 days, and time to establish connections with engineering systems and utilities has been reduced from 30 to 10 days. LATIN AMERICA AND THE CARIBBEAN Colombia Tax Transparency The team helped the government establish a comprehensive transfer pricing legislative framework, providing 1 inputs and advice on the legislation, which took effect in January 2014. The team undertook a comprehensive skills building program with the tax administration’s transfer pricing team. The capacity-building training resulted in more efficient and effective work and an increase in revenue collected, from $3.3 million to $5.83 million from 2011 to 2012, as a result of transfer pricing adjustments following audits of multinational enterprises. Honduras Agribusiness The Investment Climate team helped the government improve the transparency of the pesticide registration 1 process, level the playing field, and eliminate the discriminatory treatment of applicants. On the basis of the team’s advice, the government optimized registration procedures and enforced new process manuals to ensure consistency and equal treatment across applications. Approximately 40,000 farmers benefitted from a reform aimed at increasing competition in the pesticides and fertilizers markets. Product availability increased, with 400 products registered in one year. Prices of some pesticides dropped by as much as 9 percent, and firms now benefit from a more expedited and standardized process for registering their products. In select cases, processes that took three years now take fewer than 90 days. Continued on next page 63  eforms and Results from FIAS-Funded Projects Mapped to the World Bank Group Investment Climate 1.2 R Department (continued) Doing Number of Business Country Reform Topic Reform Description Reforms Validated Jamaica Tax Transparency The team assisted Jamaica’s tax administration in implementing administrative procedures to operationalize 1 the exchange of information to meet the Global Forum on Tax Transparency and Exchange of Information standards. In November 2013, the country successfully passed Phase 2, confirming its readiness to exchange information under the existing legal and regulatory framework. SUB-SAHARAN AFRICA Benin Enforcing Contracts Benin made enforcing contracts easier by creating a commercial section within the Court of First Instance. 1 1 The newly established commercial section has four judges that hear only commercial cases and six additional judges that hear such cases whenever a decision by a judicial panel is required. The court has jurisdiction over all cases involving companies, as well as cases involving competition, securities, initial public offerings, and intellectual property rights. The project team recommended the reform and supported the Cotonou court in establishing the commercial section. Benin Investor Protections The OHADA Company Law, approved by the 17 West African member nations of the Organisation for the 1 1 Harmonization of Business Law in Africa (known by its French acronym), strengthened minority investor protections by introducing greater requirements for disclosure of related-party transactions to the board of directors and by making it possible for shareholders to inspect the documents pertaining to related party transactions and to appoint auditors to conduct an inspection of such transactions. Benin Starting a Business Benin made starting a business easier by abolishing the minimum capital requirement of $2,000. A new decree 1 1 allows shareholders to freely set the amount of capital needed to incorporate limited liability companies. The project supported the presidential investment council by recruiting a legal expert to review the draft decree. The team shared examples of good practice in the region and supported the dissemination of the decree. Benin Trade Logistics Benin made trading across borders easier by reducing the import document list. In February 2014, importers 1 1 were notified that the health certificate was no longer required for imports other than food items. Customs can directly collect information electronically from the National Shippers Council of Benin. The amount of paperwork for traders wishing to import has decreased, as has as the associated document preparation time. The project team undertook a follow-up mission and recommended the elimination of the cargo tracking note, the phytosanitary certificate, and the pay slip. The team also provided support in disseminating the reform. Burkina Faso Investor Protections The OHADA Company Law strengthened minority investor protections by introducing greater requirements for 1 1 disclosure of related-party transactions to the board of directors and by making it possible for shareholders to inspect the documents pertaining to related party transactions and to appoint auditors to conduct an inspection of such transactions. Cameroon Investor Protections The OHADA Company Law strengthened minority investor protections by introducing greater requirements for 1 1 disclosure of related-party transactions to the board of directors and by making it possible for shareholders to inspect documents pertaining to related-party transactions and to appoint auditors to conduct an inspection of such transactions. Central Investor Protections The OHADA Company Law strengthened minority investor protections by introducing greater requirements for 1 1 African disclosure of related-party transactions to the board of directors and by making it possible for shareholders to Republic inspect the documents pertaining to related-party transactions and to appoint auditors to conduct an inspection of such transactions. Chad Investor Protections The OHADA Company Law strengthened minority investor protections by introducing greater requirements for 1 1 disclosure of related-party transactions to the board of directors and by making it possible for shareholders to inspect the documents pertaining to related-party transactions and to appoint auditors to conduct an inspection of such transactions. Comoros Investor Protections The OHADA Company Law strengthened minority investor protections by introducing greater requirements for 1 1 disclosure of related-party transactions to the board of directors and by making it possible for shareholders to inspect the documents pertaining to related-party transactions and to appoint auditors to conduct an inspection of such transactions. Congo, Dem. Getting Credit The team helped the government establish a credit registry, improving access to credit information. 1 1 Rep. Congo, Dem. Getting Electricity The cost to get electricity fell by about 30 percent following a reduction in the number of approvals required for 1 1 Rep. new connections and a reduction in the required security deposit. Congo, Dem. Investor Protections The OHADA Company Law strengthened minority investor protections by introducing greater requirements for 1 1 Rep. disclosure of related-party transactions to the board of directors and by making it possible for shareholders to inspect the documents pertaining to related-party transactions and to appoint auditors to conduct an inspection of such transactions. Congo, Dem. Starting a Business The creation of a one-stop shop reduced the steps required to start a business from 11 to 7, the time needed 1 1 Rep. from 31 to 16 days, and the cost from 200 percent to 30 percent of income per capita. Continued on next page 64 2013 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES  eforms and Results from FIAS-Funded Projects Mapped to the World Bank Group Investment Climate 1.2 R Department (continued) Doing Number of Business Country Reform Topic Reform Description Reforms Validated Congo, Dem. Tax Simplification The simplification of coporate income tax returns reduced the time required to file and pay taxes from 348 1 1 Rep. and Compliance hours to 316 hours. Depending on the company’s size, elimination of the minimum tax payable reduced the total Management tax rate by more than half. Congo, Rep. Investor Protections The OHADA Company Law strengthened minority investor protections by introducing greater requirements for 1 1 disclosure of related-party transactions to the board of directors and by making it possible for shareholders to inspect the documents pertaining to related-party transactions and to appoint auditors to conduct an inspection of such transactions. Côte d’Ivoire Investor Protections The OHADA Company Law strengthened minority investor protections by introducing greater requirements for 1 1 disclosure of related-party transactions to the board of directors and by making it possible for shareholders to inspect the documents pertaining to related-party transactions and to appoint auditors to conduct an inspection of such transactions. Djibouti Construction Permits Djibouti made dealing with construction permits less time-consuming by streamlining the review process for 1 1 building permits. The time to issue a permit was reduced from 167 to 117 days. Equatorial Investor Protections The OHADA Company Law strengthened minority investor protections by introducing greater requirements for 1 1 Guinea disclosure of related-party transactions to the board of directors and by making it possible for shareholders to inspect the documents pertaining to related-party transactions and to appoint auditors to conduct an inspection of such transactions. 1 1 ANNEXES Gabon Investor Protections The OHADA Company Law strengthened minority investor protections by introducing greater requirements for disclosure of related-party transactions to the board of directors and by making it possible for shareholders to inspect the documents pertaining to related-party transactions and to appoint auditors to conduct an inspection of such transactions. Ghana Tax Transparency Since 2011, the project team has helped the Ghana Revenue Authority (GRA) build a comprehensive transfer 1 pricing regime. Prior to the intervention, Ghana had no legislative or administrative framework for transfer pricing enforcement. The team advised on a comprehensive legislative package, the development of practical guidelines for taxpayers, and the creation of a “disclosure schedule.” It also helped strengthen the GRA’s administrative capacity and undertook a comprehensive skills-building program with a newly established team of specialist auditors. In FY14, the GRA conducted a preliminary analysis of the large taxpayer base, identifying 209 companies for audit. It sent detailed questionnaires to these companies and received responses that have allowed for in-depth audits of 35 to 40 companies. Guinea Investor Protections The OHADA Company Law strengthened minority investor protections by introducing greater requirements for 1 1 disclosure of related-party transactions to the board of directors and by making it possible for shareholders to inspect the documents pertaining to related-party transactions and to appoint auditors to conduct an inspection of such transactions. Guinea Property Transfers Responding to advice from the project team, land property rights and property transfer statistics have been 1 1 digitized. Scanning ownership titles has made eliminated time-consuming searches through paper archives. The reform has helped reduce the time needed to confirm the identity of a landowner and a clear title at the land registry from 14 days to 1 day. It has reduced the time to transfer the final ownership with the land registry from 15 days to 3 days. Guinea Starting a Business Thanks to the launch of a one-stop shop, the time needed to register a business was reduced from 40 to 12 1 1 days. Approximately 750 businesses registered between July and December 2013. Since the launch of the investment promotion agency’s website, legal notices have been published daily. A representative of the country’s labor agency was posted to the investment promotion agency offices, a move which will reduce the time required to start a business by five days. With online registration, the time to register a business was reduced from 35 days to 12 days. Guinea- Investor Protections The OHADA Company Law strengthened minority investor protections by introducing greater requirements for 1 1 Bissau disclosure of related-party transactions to the board of directors and by making it possible for shareholders to inspect the documents pertaining to related-party transactions and to appoint auditors to conduct an inspection of such transactions. Kenya Competition A transparent fining and settlement system has helped deter anticompetitive practices. The team assisted the 1 Competition Authority of Kenya in the preparation, adoption, and implementation of a fining and settlement policy that is in line with international best practices. The policy increases and clarifies the penalties for infringements to the Competition Act of 2010. It also gives guidance on when settlements can be used as an alternative to pursuing an investigation. Settlements allow firms to recognize that they committed an infringement while enabling competition agencies to resolve cases quickly. Kenya Tax Transparency Over the past 18 months, the team has made recommendations and provided implementation assistance to 1 help Kenya meet the Global Forum on Tax Transparency and Exchange of Information standards. In November 2013, the country successfully passed Phase 1, confirming that its legal and regulatory framework for tax information exchange meets international standards. Continued on next page 65  eforms and Results from FIAS-Funded Projects Mapped to the World Bank Group Investment Climate 1.2 R Department (continued) Doing Number of Business Country Reform Topic Reform Description Reforms Validated Liberia Trade Logistics As a direct result of risk management workshops and recent on-the-job training, the Liberian Customs 1 Administration adopted and began utilizing the ASYCUDA World risk management module. This reform resulted in an extensive reduction in the level of physical inspections required, from 97 percent in February 2014 to 57 percent in June 2014. A risk management committee meets twice a month to review compliance and enforcement, further facilitate trade, and ensure proper revenue collection. During the last committee meeting, a decision was passed to add 36 companies to the list of compliant traders, representing a third of Liberia’s total trade. Malawi Starting a Business Malawi made starting a business easier by streamlining the company name search and registration process. It 1 1 also eliminated mandatory inspections of company premises before issuance of a business license. Accordingly, the number of procedures required to start a business was reduced from ten to eight, and the time needed was reduced by two hours. Mali Investor Protections The OHADA Company Law strengthened minority investor protections by introducing greater requirements for 1 1 disclosure of related-party transactions to the board of directors and by making it possible for shareholders to inspect the documents pertaining to related-party transactions and to appoint auditors to conduct an inspection of such transactions. Mauritania Getting Credit Mauritania improved the depth of credit information provided by lowering the minimum threshold for loans to 1 1 be included in the credit registry’s database. Mauritania Starting a Business Mauritania’s one-stop shop has made starting a business easier by eliminating two procedures and shortening 1 1 the time need by nine days. The government eliminated the publication requirement and the fee to obtain a tax identification number. The cost was reduced by 19 percent. Niger Investor Protections The OHADA Company Law strengthened minority investor protections by introducing greater requirements for 1 1 disclosure of related-party transactions to the board of directors and by making it possible for shareholders to inspect the documents pertaining to related-party transactions and to appoint auditors to conduct an inspection of such transactions. Rwanda Construction Permits Rwanda made dealing with construction permits easier by eliminating three steps and reducing the time 1 1 needed from 104 to 77 days. It simplified the process for obtaining an occupancy title. The fee to obtain a freehold title has been eliminated. Rwanda Getting Credit Rwanda established clear priority rules outside bankruptcy for secured creditors and clear grounds for relief 1 1 from stay-of-enforcement actions by secured creditors during reorganization procedures. Rwanda Getting Electricity As a result of several fee reductions, Rwanda reduced the cost to get an electrical connection by about 25 1 1 percent. Rwanda Tax Simplification A small and medium entreprise (SME) tax simplification bill was adopted, making it easier for SMEs to comply. 1 and Compliance The project team supported the development of the first mobile solution in Africa that allows people to file and Management pay their taxes using their mobile phones. This solution has eased compliance for small and micro enterprises in the three lowest tax brackets, as the mobile system eliminates the need to visit a tax office or have a fixed Internet connection. As of May 14, 2014, more than 10,000 firms filed and payed taxes using their phones. Senegal Construction Permits Senegal reduced the time involved in processing building permit applications. One step was eliminated, and 1 1 the time to issue a permit was reduced from 245 to 200 days by shortening the processing time for building permit applications. Senegal Investor Protections The OHADA Company Law strengthened minority investor protections by introducing greater requirements for 1 1 disclosure of related-party transactions to the board of directors and by making it possible for shareholders to inspect the documents pertaining to related-party transactions and to appoint auditors to conduct an inspection of such transactions. Senegal Property Transfers Senegal made transferring property easier by replacing the authorization requirement from the tax authority 1 1 with a notification requirement. It also created a single step for property transfers at the land registry. One step was eliminated and the total time required to transfer property was reduced from 122 to 71 days. Senegal Starting a Business Senegal made starting a business easier by reducing the minimum capital requirement. The minimum capital 1 1 requirement was reduced from 192 percent to 19 percent of income per capita. Senegal Tax Simplification Senegal eliminated one payment and reduced the total tax rate from 48.5 percent to 45.1 percent of profit 1 1 and Compliance by abolishing the vehicle tax. It also reduced the time required to file and pay taxes from 644 to 620 hours by Management making it possible to download the declaration forms for value added taxes online. Sierra Leone Tax Simplification The Finance Act of 2013 improved the tax system for small and medium enterprises (SMEs) by giving 1 and Compliance businesses the option of replacing the regressive and arbitrary fixed tax system with a new turnover tax Management system. The fixed tax system imposed fixed amounts set across 50 business activities and two regional categories. The Finance Law introduced an optional turnover tax system for businesses earning between $2,000 and $80,000 per year. The turnover tax system is more progressive and simpler in terms of its structure as it can be applied equally to all businesses within the turnover band. It also encourages businesses to keep a simple record of accounts. Continued on next page 66 2013 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES  eforms and Results from FIAS-Funded Projects Mapped to the World Bank Group Investment Climate 1.2 R Department (continued) Doing Number of Business Country Reform Topic Reform Description Reforms Validated Swaziland Starting a Business Swaziland reduced the total time required to start a business from 38 to 30 days by shortening the notice and 1 1 objection period for obtaining a new trade license. Togo Investor Protections The OHADA Company Law strengthened minority investor protections by introducing greater requirements for 1 1 disclosure of related-party transactions to the board of directors and by making it possible for shareholders to inspect the documents pertaining to related-party transactions and to appoint auditors to conduct an inspection of such transactions. Uganda Resolving Insolvency Uganda improved the recovery rate on the dollar from 36 percent to 37.9 percent by consolidating all provisions 1 1 related to corporate insolvency into one law, establishing provisions for the administration of companies that are or are about to become insolvent, clarifying professional qualification standards for insolvency practitioners, and introducing provisions that prevent undervalued transactions. Uganda Trade Logistics Uganda reduced the total time required to export from 30 to 28 days and the total time required to import from 1 1 33 to 31 days by implementing the ASYCUDA World electronic system for the submission of export and import documents. Zambia Getting Credit A reform implemented with the help of the project team has enhanced the depth of credit information available 1 1 by enabling the credit reference bureau to exchange credit information with retailers and utilities. ANNEXES Grand Total 57 46 67 ANNEX 1: REFORMS AND OTHER RESULTS SUPPORTED BY FIAS IN FY14 Reforms and Results from FIAS-Cofinanced Projects Mapped to Regional IFC Advisory Services Unit 1.3  Doing Number of Business Country Reform Topic Reform Description Reforms Validated EUROPE AND CENTRAL ASIA Albania Trade Logistics Customs clearance in Albania required traders to pay customs duties at a bank and wait 24 hours for payment 1 confirmation from Albanian Customs. The project initiated round-table discussions between the Albanian Customs Agency, commercial banks, and Albania’s Association of Banks. As a result, Albania Customs commissioned the United Nations Conference on Trade and Development (UNCTAD) to build a real-time link between banks, the Treasury, and Customs. This new system was inaugurated on May 30, 2013, in a formal ceremony presided over by the prime minister of Albania. The new e-payment system, rolled out in June 2013, electronically transmits information from commercial banks to Customs. Customs immediately releases the goods upon receipt of payment, a time savings of up to one business day. The time and cost savings constitute a significant efficiency gain for Albania’s commercial payment system and for the country’s traders. The general director of Customs, Mr. Flamur Gjymishka, stated, “Online electronic payment of customs duties reduces business costs, reduces the time of goods staying at Customs, enhances safety and consumer protection, and minimizes corruption.” Georgia Tax Transparency With IFC support, Georgia’s Ministry of Finance issued a transfer pricing decree that introduces an advance 1 pricing arrangement framework that affords the private sector with near certainty on transfer pricing matters. The frameworreduces transfer pricing compliance obligations for small and medium enterprises. It is consistent with the international best practice of the Organization for Economic Cooperation and Development (OECD) and provides unprecedented guidance on specific issues of concern to developing countries. This results in a high level of certainty for investors regarding transfer pricing obligations in Georgia. The framework also allows greater transparency for foreign investors and submission of documentation in several languages other than Georgian, helping to reduce compliance costs for multinational enterprises in fulfilling their transfer pricing documentation obligations. Georgia Trade Logistics The implementation of an upgraded version of the Automated System for Customs Data (ASYCUDA) World 1 has enabled the Georgian Revenue Service (GRS) to improve the functionality and performance of the system. Selected modules have been enhanced, allowing the GRS more online functionality, such as electronic cargo control manifests and periodic declarations. The improved system will benefit the private sector by speeding customers procedures. Authorized economic operators can now lodge simplified customs declarations with 50 percent less data required. Importers and exporters benefit from the integration of e-payments and e-certification. Freight forwarders benefit from enhanced Customs transit procedures. LATIN AMERICA AND THE CARIBBEAN Honduras Trade Logistics Procedures to obtain certificates for export and imports were streamlined, automated, and made available 1 online. Before the reform, processes to obtain agriculture export permits were performed manually and exporters from all parts of the country had to visit the Center of Exports office at least three times to obtain a certificate of export, requiring at least three days to complete the process. The team helped Honduras interconnect the export system with the systems of both the Agriculture and the Customs agencies. The interconnection has improved the procedures for all products entered into the export system, not just for agriculture. Import certificates can now be obtained online and the cargo released with an online certificate. Clients reported a reduction of time to obtain the export certificates from three days to just minutes. SUB-SAHARAN AFRICA Burkina Faso Licenses and Permits The requirements for obtaining technical permits for housing construction, public works, and other government 1 contracting work resulted in a time-consuming and costly process, particularly for small and medium enterprises and led to complaints from private sector firms. The project team helped the Ministry of Housing reduce the time needed to obtain a license from six to three months and simplified the required documentation. For 63 types of licenses, the government adopted a ”silence agreement principle,” meaning that once a certain maximum time has passed (varying with the type of license) with no government action, the license is deemed to have been granted. Cameroon Getting Credit Cameroon improved its credit information system by passing regulations that provide for the establishment and 1 1 operation of a credit registry database. The team helped Cameroon put in place the Fibane Platform Database of positive and negative credit information. Cameroon Tax Simplification The procedures for paying taxes have been reduced by more than 10 percent as a result of project efforts. 1 and Compliance Taxpayers had been required to file separate tax forms declaring for each tax: VAT, corporation taxes, salaries, Management capital income, and special taxes (petroleum) at different times during each month of the year. Through the introduction of the new unified tax declaration, each taxpayer now fills out one form only once a month, amounting to 13 tax payments annually, including the payment of income tax. Côte d’Ivoire Property Transfers Based on a recommendation from the project team, the government adopted a regulation combining 1 1 registration of a sale agreement with the local authority and registration at the land authority. This reform has reduced the time required to register property by 10 days, from 42 to 32 days. Côte d’Ivoire Starting a Business Côte d’Ivoire made starting a business easier by reducing the minimum capital requirement, lowering 1 1 registration fees, and enabling the one-stop shop to publish notices of incorporation. Continued on next page 68 2013 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES Reforms and Results from FIAS-Cofinanced Projects Mapped to Regional IFC Advisory Services Unit (continued) 1.3  Doing Number of Business Country Reform Topic Reform Description Reforms Validated Côte d’Ivoire Tax Simplification In Côte d’Ivoire, women lacked some of the legal rights available to men, a factor that limited the economic 1 and Compliance development of women in the country. With the help of the project team, the government enacted regulations Management addressing the problem. The new fiscal law allows women to pay the same level of tax as men. An amendment to the family code gives married men and women the same rights in terms of the selection of residence and job. A married woman can now accept any job without the approval of her husband, has the same right to choose the family residence as the husband, and has equal status under the law in terms of being in charge of the household. This latter provision replaced a law that gave husbands responsibility for children, thereby allowing husbands, but not wives, to reduce their taxes. Results of an impact assessment survey found that the reform is increasing family revenue by between 3 and 10 percent. Côte d’Ivoire Trade Logistics Côte d’Ivoire made trading across borders easier by simplifying the processes for producing inspection reports 1 1 and by reducing port and terminal handling charges at the port of Abidjan. Among other improvements, two required import documents were merged into one. São Tomé Starting a Business São Tomé and Príncipe made starting a business easier by eliminating the minimum capital requirement for 1 1 and Príncipe business entities to obtain a commercial license. São Tomé Tourism The government successfully introduced an online visa system enabling a much faster, simpler, and cheaper 1 and Príncipe access into the country for foreigh tourists requiring visas. The system is in the pilot phase, and it receives over ANNEXES 400 applications per month on average. In the testing phase, 50 percent are receiving automated approval; the rest require additional verification. IFC is advising the government on the application of the system and its ongoing improvements. The online system itself is fully funded and implemented by the government. Prior to the reform, applicants had to send their passport to one of five embassies of São Tomé and Príncipe worldwide, with handling times varying depending on where the applications came from. Under the automated system, visa applications are handled in a maximum of seven days. The visa fee at the embassies was €80, whereas the online fee is €20, plus shipping costs. Prior to the reform, no online visas were issued in São Tomé and Príncipe. Tanzania Resolving Insolvency Tanzania made resolving insolvency easier by clearly defining the professional qualifications required of 1 1 individuals or firms appointed to handle insolvency cases, as well as their remuneration. The new insolvency rules supplement the Companies Act of 2002, establishing key features for corporate insolvency proceedings. Among other provisions, the rules (i) establish a process for implementing voluntary insolvency arrangements either for debt resolution or reorganization, (ii) outline the duties of appointed administrative receivers charged with ensuring that a financially troubled but viable company survives as a going concern, and (iii) streamline insolvency proceedings by establishing time limits on various procedural steps. Tanzania Trade Logistics Tanzania was imposing nontariff barriers on the transport sector, affecting partner states of the East African 1 Community (EAC). For example, a discriminatory road toll charges Burundian trucks $500 instead of the $152 toll paid by Tanzanian trucks. The differential was contrary to Tanzania’s commitments on the implementation of the EAC Common Market Protocol and was negatively affecting trade, particularly the cost of goods in Burundi, as well as the profitability of transporter businesses registered in Burundi. On the basis of the team’s advice, Tanzania reduced the toll fees charged to Burundian trucks by 70 percent, to a level equal to the toll charged to trucks registered in EAC partner states. The reform has lowered the cost of imported consumer goods trucked to Burundi through Tanzania and reduced the cost of doing business for Burundian-registered transporters by $696 per round trip. Togo Enforcing Contracts Togo made enforcing contracts easier by creating specialized commercial divisions within the court of first 1 1 instance. The project team supported the government in creating three specialized commercial chambers within the Lomé Tribunal. Judges and clerks in these chambers deal exclusively with commercial cases. Previously, civil and commercial cases were judged by the same magistrates, with no procedural distinction between civil, commercial, or family matters. The IFC team initiated discussions among various stakeholders in the judicial system, resulting in several recommendations. The team assisted in drafting the regulation establishing the commercial chambers. The number of hearings of commercial cases has increased from one a week to four per week. Reform work has continued with the adoption in 2014 of a commercial procedure agreement between the court and the bar association, setting clear steps for commercial cases and assigning time limits to each step. Togo Property Transfers The IFC team helped bring about the adoption of the 2013 finance law reducing the property registration tax 1 1 rate from 8 percent to 6 percent of the property value and reducing the land conservation tax rate from 1.2 percent to 1 percent. Togo Starting a Business Togo made starting a business easier by enabling the one-stop shop to publish notices of incorporation and 1 1 eliminating the requirement to obtain an economic operator card. The reform also reduced the minimum capital requirement from $2,000 to $200. Zambia Tax Simplification The team helped the Zambia Revenue Authority introduce a new system called “Tax Online” in July 2013. It is 1 1 and Compliance designed to ease the cost of tax compliance and administration and consequently the cost of doing business. Management Grand Total 19 10 69 ANNEX 2: PORTFOLIO OF FIAS-SUPPORTED PROJECTS IN FY14 2.1 FIAS-Funded Client-Facing Projects Mapped to the World Bank Group Investment Climate Department FYTD FY14 FIAS Region Country Project Name Total Funding Expenditures Expenditures Stage EUROPE AND Eastern Europe Indicator Based Reform Advisoty in ECA $778,500 $179,758 $146,729 PORTFOLIO CENTRAL ASIA Region LATIN AMERICA Colombia Trade Logistics Advisory Program in Colombia $1,912,030 $483,794 $397,720 PORTFOLIO AND CARIBBEAN MENA Region DB Reform MENA $1,276,247 $65,480 $65,247 PORTFOLIO MIDDLE EAST AND Morocco Morocco quality of public service delivery and transparency $525,000 $238,372 $238,372 PORTFOLIO NORTH AFRICA to improve the investment climate Africa Region Indicator-Based Reform in Sub-Saharan Africa $1,275,470 $400,718 $400,718 PORTFOLIO Benin Benin Investment Climate Reform Program $1,177,825 $131,379 $114,393 PORTFOLIO Burkina Faso Trade Logistics Burkina Faso $923,592 $112,710 $53 PORTFOLIO Burundi Burundi Investment Climate Reform Program $2,413,207 $420,248 $326,144 PORTFOLIO Comoros Comoros Investment Climate and Leasing Reform Program $1,200,000 $131,074 $44,592 PORTFOLIO Eastern Africa East African Community IC Phase 2 $8,080,035 $1,615,778 $1,545,804 PORTFOLIO Region Guinea Guinea Business Regulation $1,840,000 $468,322 $127,449 PORTFOLIO SUB-SAHARAN Kenya Kenya Investment Generation Program $1,493,350 $244,141 $171,850 PORTFOLIO AFRICA Kenya Trade Logistics Kenya $2,532,939 $497,143 $2,800 PORTFOLIO Liberia Liberia Trade 2 $945,000 $169,152 $34,399 PORTFOLIO Uganda Uganda Investment Climate Program $1,981,600 $453,860 $453,860 PORTFOLIO Western Africa West Africa Trade Logistics $436,000 $273,332 $273,332 PORTFOLIO Region Western Africa OHADA Uniform Acts Reform phase 2 $3,660,118 $956,520 $767,417 PORTFOLIO Region Western Africa Investment Policy Reform for West Africa Regional $10,350,000 $504,099 $504,099 PORTFOLIO Region Organizations World Region Tax Transparency Technical Assistance Program $2,286,129 $271,199 $271,199 PORTFOLIO WORLD World Region Competition Policy for Investment Climate $1,542,951 $434,907 $434,907 PORTFOLIO World Region Tax Transparency Exchange of Information - Client Facing $1,500,000 $- $- PORTFOLIO LATIN AMERICA Latin America Doing Business Reform Latin America and the Caribbean $1,336,235 $424 $256 COMPLETED AND CARIBBEAN Region SOUTH ASIA Bangladesh Low-Carbon Industry Initiative in Bangladesh $834,744 $186,718 $107,276 COMPLETED Africa Region OHADA: Building the Capacity to Improve the Quality of the $4,690,056 $1,047 $1,047 COMPLETED Legislation Africa Region DB Reform Sub-Saharan Africa $1,632,614 $- $- COMPLETED SUB-SAHARAN Eastern Africa EAC Investment Climate Reform Program $1,977,312 $(5) $(5) COMPLETED AFRICA Region Kenya Kenya: Improving Regulatory Performance and Capacities $4,925,000 $- $- COMPLETED Rwanda Rwanda Investment Climate Reform Program $4,564,730 $430,532 $112,355 COMPLETED WORLD World Region Global Investment Promotion Benchmarking 2012 $1,993,835 $74,109 $74,109 COMPLETED MIDDLE EAST AND MENA Region IBRA Project in the MENA Region $1,632,614 $159,913 $159,913 PIPELINE NORTH AFRICA SUB-SAHARAN Mali Mali Investment Climate Program - Phase 3 $1,890,000 $- $- PIPELINE AFRICA Grand Total $6,776,055 70 2013 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES ANNEX 2: PORTFOLIO OF FIAS-SUPPORTED PROJECTS IN FY14 2.2 FIAS-Cofinanced Client-Facing Projects Mapped to Regional IFC Advisory Services Units FYTD Total FY14 FIAS Region Country Project Name Total Funding Expenditures Expenditures Stage Mongolia Mongolia Business Inspection Reform $2,624,993 $446,407 $90,655 PORTFOLIO Philippines Philippines Agribusiness Trade Competitiveness $3,594,817 $519,222 $91,056 PORTFOLIO EAST ASIA AND Timor-Leste Timor-Leste Business Registration and Licensing Reform $1,954,679 $357,858 $227,693 PORTFOLIO PACIFIC Project Vietnam Viet Nam Debt Resolution $2,380,168 $247,224 $75,701 PORTFOLIO Albania ECA DR Al $237,500 $112,013 $112,013 PORTFOLIO Armenia Armenia Investment Climate Reform Project $1,605,567 $436,515 $143,272 PORTFOLIO Armenia Armenia Investment Climate II $1,500,000 $22,443 $22,443 PORTFOLIO Georgia Georgia IC Project $1,784,000 $475,370 $306,564 PORTFOLIO EUROPE AND Kyrgyz Republic Central Asia Tax Project $3,377,931 $1,050,872 $120,225 PORTFOLIO CENTRAL ASIA Macedonia, Renewable Energy Macedonia Small Hydro Power $1,522,580 $352,346 $63,258 PORTFOLIO Former Yugoslav Republic of Moldova Investment Climate Reform Moldova $3,341,641 $1,026,161 $17,142 PORTFOLIO Serbia Trade Logistics South East Europe $2,577,457 $862,493 $299,088 PORTFOLIO ANNEXES Caribbean Region Trade Logistics in the Caribbean $1,814,447 $843,897 $55,000 PORTFOLIO Latin America Taxation Knowledge Management in LAC $500,000 $57,186 $27,302 PORTFOLIO LATIN AMERICA Region AND CARIBBEAN Latin America Indicator Based Reform Advisory in LAC $2,607,245 $424,850 $40,434 PORTFOLIO Region Egypt, Arab Egypt SubNational Doing Business 2013 $1,307,474 $175,512 $121,258 PORTFOLIO MIDDLE EAST AND Republic of NORTH AFRICA Pakistan Pakistan Punjab GSTS Reform Project $2,236,265 $187,990 $25,636 PORTFOLIO India Odisha Inclusive Growth Partnership $2,698,000 $572,053 $134,652 PORTFOLIO SOUTH ASIA India India Rajasthan Investment Climate Reform $3,369,600 $537,479 $153,702 PORTFOLIO Africa Region IC Rapid Response III $1,801,700 $401,402 $86,741 PORTFOLIO Burkina Faso Burkina Faso Investment Climate Reform Program $2,194,587 $529,257 $66,905 PORTFOLIO Cameroon Cameroon Investment Climate Reform Program $1,400,000 $242,632 $50,000 PORTFOLIO Côte d’Ivoire Côte d’Ivoire Investment Climate Reform Program - Business $2,307,725 $544,554 $351,726 PORTFOLIO Regulation Guinea Investment Climate Reform in Guinea Investment Policy and $1,600,000 $522,689 $105,044 PORTFOLIO SUB-SAHARAN Taxation AFRICA Liberia Liberia Investment Climate AS Phase 3 $3,784,175 $686,142 $40,964 PORTFOLIO São Tomé and São Tomé and Príncipe Investment Climate Project $1,206,786 $246,581 $115,686 PORTFOLIO Príncipe Tanzania Tanzania IC Program $920,000 $140,003 $130,521 PORTFOLIO Togo Togo Investment Climate Reform Program $772,071 $145,179 $100,906 PORTFOLIO Uganda Uganda IC Industry Program $1,140,000 $52,517 $52,517 PORTFOLIO Zambia Zambia Investment Climate Program II $3,040,000 $397,970 $52,134 PORTFOLIO LATIN AMERICA Haiti Haiti Investment Generation Strategy $3,209,366 $439,637 $196,177 COMPLETED AND CARIBBEAN Honduras Honduras Agribussines Trade Logistics $774,156 $72,663 $35,359 COMPLETED SUB-SAHARAN Lesotho Lesotho Tourism PPPs $1,304,174 $330,661 $46,427 COMPLETED AFRICA Mongolia Mongolia Investment policy and investor protection $1,855,008 $46,316 $46,316 PIPELINE confidence EAST ASIA AND Myanmar Myanmar Investment Climate Project $5,522,500 $482,710 $102,085 PIPELINE PACIFIC Southern Europe ECA Debt Resolution and Business Exit #UMB $250,284 $97,875 $65,595 PIPELINE Region SUB-SAHARAN Burkina Faso Burkina Faso IC for Agribusiness $950,000 $108,079 $108,079 PIPELINE AFRICA Côte d’Ivoire Côte d’Ivoire - Agribusiness Program $2,015,000 $124,089 $84,354 PIPELINE SUBTOTAL $3,964,627 71 2.2 FIAS-Cofinanced Client-Facing Projects Mapped to Regional IFC Advisory Services Units (continued) FYTD Total FY14 FIAS Region Country Project Name Total Funding Expenditures Expenditures Stage Non-CIC Client Facing projects < $10k spending (Expenditures to be captured but projects not included in project listing) FYTD Total FY14 FIAS Region Country Project Name Total Funding Expenditures Expenditures Stage Azerbaijan Azerbaijan Investment Climate - Phase II $1,490,000 $811,787 $3,861 PORTFOLIO Belarus Belarus: Regulatory Simplification and Investment $3,037,454 $588,236 $665 PORTFOLIO Generation 2010 - 2013 EUROPE AND Bosnia and Bosnia and Herzegovina Investment Climate Project (ISCRA) $2,960,360 $899,472 $0 PORTFOLIO CENTRAL ASIA Herzegovina Georgia Georgia Tax Simplification Project $1,081,003 $- $- PORTFOLIO Kosovo Kosovo Investment Climate $2,511,479 $730,993 $- PORTFOLIO LATIN AMERICA Latin America Central America Regional Agribusiness Trade Logistics $2,433,000 $355,507 $3,205 PORTFOLIO AND CARIBBEAN Region Project MIDDLE EAST AND Pakistan Pakistan/Punjab Energy $494,475 $180,056 $840 PORTFOLIO NORTH AFRICA India Bihar IC Tax Simplification Program $783,075 $2,788 $- PORTFOLIO Nepal Nepal Investment Climate for Industry $2,053,881 $617,929 $8,659 PORTFOLIO SOUTH ASIA Southern Asia SA Regional Trade $4,178,000 $1,368,938 $- PORTFOLIO Region Ethiopia Ethiopia Business Forum $1,144,800 $358,991 $(110) PORTFOLIO SUB-SAHARAN Mozambique Mozambique Investment Climate Program $1,018,000 $124,571 $85 PORTFOLIO AFRICA Zambia Investment Climate Rapid Response $2,285,000 $215,123 $5,940 COMPLETED Rwanda Rwanda Tea PPP $70,000 $753 $- PIPELINE Subtotal $23,146 Grand total $3,987,773 72 2013 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES ANNEX 2: PORTFOLIO OF FIAS-SUPPORTED PROJECTS IN FY14  IAS-Funded Knowledge Management and Product Development Projects Mapped to the World Bank Group 2.3 F Investment Climate Department Total FY Total FY FIAS Expenditure Expenditure % FIAS Region Name Project Name Total Funding US$ Share Expenditures Project Stage Gender in Investment Climate $500,000 $193,660 $131,527 68% PORTFOLIO Cross Business Line PDP Initiative on Green Buildings $4,307,000 $405,986 $162,344 40% PORTFOLIO Investment Climate Agribusiness Global Product Development $1,712,500 $40,790 $40,790 100% PORTFOLIO Project Global Trade Logistics Advisory Program $1,855,008 $61,460 $61,460 100% PORTFOLIO Investment Services and Advisory Services Knowledge $783,075 $102,660 $102,660 100% PORTFOLIO Management Phase 2 Debt Resolution $468,885 $415,058 $414,167 100% PORTFOLIO Business Regulation Product Development and Knowledge $704,500 $177,857 $177,857 100% PORTFOLIO Management Tourism Global Phase 2 $473,776 $1,147 $1,147 0% PORTFOLIO Investment Climate Indicator Based Reform Advisory Global $1,029,204 $8,088 $1,423 18% PORTFOLIO Public Private Dialogue Global Product Development and $436,000 $- $- 0% PORTFOLIO ANNEXES Knowledge Management Investment Climate for Private Participation in Power $1,450,000 $345,363 $- 0% PORTFOLIO ICT-enabled Investment Climate Reform Theme Project $1,276,247 $103,439 $103,439 100% PORTFOLIO WORLD Transparency and Access to Information in Investment Climate $1,336,235 $94,958 $94,958 100% PORTFOLIO Operations Climate Efficient Industries Product Development Project $1,500,000 $214,480 $214,480 100% PORTFOLIO Public Private Dialogue Global Knowledge Management $700,000 $382,691 $382,691 100% PORTFOLIO Promoting Competition $1,000,000 $445,906 $445,906 100% PORTFOLIO Investment Climate Indicator Based Reform Advisory Global $1,033,091 $324,511 $324,511 100% PORTFOLIO Investment Climate Agribusiness Supply Chain PDP $2,575,000 $662,758 $662,758 100% PORTFOLIO Trade Logistics PDP (FY13-FY17) $1,950,000 $628,656 $628,656 100% PORTFOLIO Business Taxation Product Design $2,722,000 $904,434 $889,134 98% PORTFOLIO Joint Donor/World Bank Group Program on Impact and Value for $4,453,649 $1,258,554 $1,102,931 88% PORTFOLIO Money Investment Policy Product Development and Roll Out $1,780,000 $547,949 $500,166 91% PORTFOLIO Investment Climate-Business Taxation (Tax Transparency) $600,000 $161,423 $161,423 100% PORTFOLIO Investment Climate for Tourism - Global $2,030,000 $399,700 $399,700 100% PORTFOLIO Special Economic Zones Product Development Knowledge $474,132 $(128) $(128) 100% COMPLETED Management Phase 2 Investing Across Borders Indicators $3,389,209 $57,026 $57,026 100% COMPLETED Subtotal $7,061,025 Projects Closed and continued in Follow-On project (Expenses to be captured but projects not included in project listing) Total FY Total FY FIAS Expenditure Expenditure % FIAS Region Name Project Name Total Funding US$ Share Expenditures Project Stage Debt Resolution and Business Exit $1,712,500 $891 $891 100% UNKNOWN Tax Product Program Design $1,029,204 $15,300 $15,300 100% UNKNOWN WORLD Investment Policy Product Development and Roll Out $1,977,312 $46,970 $46,970 100% UNKNOWN Investment Climate-Business Line Impact Estimations & Evaluations $4,925,000 $77,812 $77,812 100% UNKNOWN Subtotal $140,972 Grand Total $7,201,997 73 ANNEX 3: ABBREVIATIONS ASYCUDA Automated Systems for Customs Data DB World Bank Group’s Doing Business report DFATD Canadian Department of Foreign Affairs, Trade and Development DFID United Kingdom Department for International Development EAC East African Community FCS states in fragile and conflict-affected situations FDI Foreign Direct Investment FIAS Facility for Investment Climate Advisory Services FMTAAS Funding Mechanism for Technical Assistance and Advisory Services IBRA Indicator-Based Reform Advisory IBRD International Bank for Reconstruction and Development ICBL Investment Climate Business Line ICT information and communication technologies IDA International Development Association M&E monitoring and evaluation MIGA Multilateral Investment Guarantee Agency NORAD Norwegian Agency for Development Cooperation OECD Organization for Economic Cooperation and Development OHADA Organization for the Harmonization of Business Law in Africa PPD public-private dialogue SECO Swiss State Secretariat for Economic Development SIDA Swedish International Development Agency T&C Trade and Competitiveness Global Practice USAID U.S. Agency for International Development WTO World Trade Organization 74 2013 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES PHOTO CREDITS Cover: Construction of Power Station, Limpopo, South Africa, by Robin Hammond, Panos Pictures Chapter introduction photos: Chapter 1, Ukraine, Vimal Metal production, Chernihiv, by Dmitry Kolosov Chapter 2, Côte d’Ivoire, Port of Abidjan, World Bank Group photo Chapter 3, Côte d’Ivoire, restaurant worker, World Bank Group photo Chapter 4, Brazil, wind turbine, World Bank Group photo Chapter 5, Côte d’Ivoire, construction site, World Bank Group photo Chapter 6, Côte d’Ivoire, bridge construction in port of Abidjan, World Bank Group photo Chapter 7, Ukraine, Fresh-market, Kiev, by Dmitry Kolosov Other key photos: p. 47, Côte d’Ivoire, entrepreneurship forum, World Bank Group photo pgs. 9, 16-17, 28, 31, 39, 41, 43, BigStock Images pgs. 15, 23, Flickr, World Bank Group photo Acknowledgments: Printer: District Creative Printing, Inc. Design Partner: Corporate Visions, Inc. 75 iii Through the FIAS program, the World Bank Group and donor partners facilitate investment climate reforms in developing countries to foster open, productive, and competitive markets and to unlock sustainable private investments in sectors that contribute to growth and poverty reduction. The FIAS program is managed by the Investment Climate Department under the joint oversight of the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the World Bank (IBRD). For more information, visit www.wbginvestmentclimate.org.