1 IDA14 Strengtheningthe PrivateSector inIDA Countries: WorldBank Group's Collaborationwith ExternalPartners InternationalDevelopment Association November 2004 Table of Contents I Introduction............................................................................................................................ . 1 I1. Partnerships inInvestment Climate Work ............................................................................. 1 I1A. Co-financedTechnical Assistance andAdvisory Activities ........................................ 1 I1B. Collaboration on Investment ClimateDiagnosticWork............................................... 4 I1C. Mechanisms for Dialogue with the Private Sector inClient Countries........................ 5 I11 GlobalPartnerships to Improve Infrastructure Services ........................................................ . 6 IV. Sustainable Private Sector Development ............................................................................... 8 IVA. EnvironmentalandSocialFacilities............................................................................ 8 IVB. CorporateGovernance............................................................................................... 10 V. Partnerships with the Private Sector..................................................................................... 11 VI. AidEffectiveness ................................................................................................................. 11 VI1. Prospects and Challenges for the PeriodAhead................................................................... 12 Tables: Table A.1: IFC Project DevelopmentFacilities............................................................................ 13 Table A.2: Norwegian Trust Fundfor Private Sector and Infrastructure...................................... 14 Table A.3: Knowledge for Change Program................................................................................. 15 Table A.4: Portfolio of the Global Partnership on Output-Based Aid .......................................... 16 Table AS: Global Programs and Trust-FundPartnerships to Improve InfrastructureServices ... 17 Table A.6: IFC Against AIDS Program........................................................................................ 19 Table A.7: World Bank Group and Partnerships with a Selection of Private Foundations .......... 21 Acronyms AFD Agence FranGaisede Dkveloppement AfDB African DevelopmentBank AFUR African Forum for Utility Regulation APDF African Project DevelopmentFacility AsDB Asian Development Bank AUSAID Australian Agency for InternationalDevelopment BEEPS Business Environment and Enterprise Performance Survey BIDFacility Balkans Infrastructure DevelopmentFacility BNPP World Bank-Netherlands Partnership Program BNWP World Bank-Netherlands Water Partnership CGAP Consultative Group to Assist the Poorest CIDA Canadian InternationalDevelopmentAgency DAC Development Assistance Committee DANIDA Danish InternationalDevelopment Agency DEC Development Economics Group DFID Department for InternationalDevelopment EAPIRF East Asia and Pacific InfrastructureRegulatory Forum EBRD European Bank for Reconstruction and Development EC European Commission EFG Environmental Finance Group ESMAP Energy Sector Management Assistance Program FIAS Foreign Investment Advisory Services FMTAAS FundingMechanismfor TechnicalAssistance and Advisory Services FSAP Financial Sector Assessment Program GBO Grassroots Business Organizations GBSN Global Business School Network GEF Global Environment Facility GFPTT Global FacilitationPartnership for Transportation and Trade GGFR Global Gas Flaring Reduction GPOBA Global Partnership for Output-Based Aid GTZ Gesellschaft fur Technische Zusammenarbeit GVEP Global Village Energy Partnership HDM-4 Highway Development and Management Tools HIPC Heavily Indebted Poor Countries IBRD InternationalBank for Reconstruction and Development ICA Investment Climate Assessment IDA InternationalDevelopmentAssociation IFAD InternationalFundfor Agricultural Development IFC InternationalFinance Corporation FUR InternationalForumfor Utility Regulation L O InternationalLabour Organization IMF InternationalMonetary Fund INCaF IFC-Netherlands Carbon Facility KCP Knowledge for Change Program KfW Kreditanstalt fur Wiederaufbau NEPAD New Partnership for Africa's Development NORAD The Norwegian Agency for Development Cooperation NTF-PSI NorwegianTrust Fundfor Private Sector and Infrastructure OBA Output-Based Aid OECD Organization for Economic Cooperation and Development PIDG Private InfrastructureDevelopment Group PPIAF Public-PrivateInfrastructure Advisory Facility PPP Public-PrivatePartnerships PRSC Poverty Reduction Support Credit PRSP Poverty Reduction Strategy Papers ROSC Reports of the Observance of Standards and Codes S A F I R South Asian Forum for Infrastructure Regulation SBAP Sustainable Business Assistance Program SDC Swiss Agency for Development and Cooperation SGBI Strengthening Grassroots Business Organizations Initiations Sida Swedish InternationalDevelopment Corporation SME Small and Medium Enterprises SSATP Sub-Saharan Africa Transport Policy Program TATF Technical Assistance Trust Fund UNCDF United Nations Capital Development Fund UNDP United Nations Development Program USAID United States Agency for International Development WBG World Bank Group WDR World Development Report WSP Water and Sanitation Program Private Sector Development inIDA Countries: World Bank Group's Collaboration with External Partners I. Introduction 1. At the IDA14 meeting inWashington D.C. inOctober 4-6,2004, Deputies welcomed the increased attention being paid to the private sector development in IDA countries. They requested an update on the World Bank Group's efforts to strengthen outreach to andjoint work with external partners.' This paper responds to that request. 2. The WorldBank Group's client country governments are its primary partners in development. However, in recent years, the Group has also involved a wide range of other public and private stakeholders in all aspects of its work. The World Bank Group has built and continues to strengthen partnerships with other multilateral development banks, United Nations agencies, bilateral donors, the private sector, as well as with non-governmental organizations. 3. This note is a supplement to an IDA14 paper entitled "Strengthening the Private Sector in IDA Countries (September 2004)." This paper describes, in greater detail, the ongoing collaborative efforts between the World Bank Group and its external development partners in promoting private sector development in client countries. Section I1outlines joint efforts between the World Bank Group and its external partners ininvestment climate work. Partnerships with other donors and internationalinstitutions inprograms for improvingprovision of infrastructure and for promotion of sustainable private sector development are discussed in sections I11and IV. Access to financing from the Group's private sector partners i s discussed in section V. Section VI i s a brief description of a partnership initiative in the area of donor effectiveness. Finally, section VI1offers some concluding remarks on the prospects and challenges in the period aheadfor collaboration with external partners. 11. Partnerships inInvestment Climate Work 4. The WorldBank Group's external partnerships ininvestment climate work can be divided into three categories: (a) partnerships with other donors in financing technical assistance and advisory activities; (b) partnerships with other international institutions as well as private agencies on investment climate diagnostic work; and (c) partnerships that facilitate policy dialogue between all development stakeholders, in particular the private sector. I1A. Co-financed Technical Assistance andAdvisory Activities 5. IFCDonor-Funded Technical Assistance Programs. Improvingthe investment climate of client countries i s one of IFC's main activities as described inits articles of 'association. Investment climate-related technical assistance at IFC has become a vital instrument for delivering IFC's mission of identifying and removing constraints to private investment. A companion paper "Strengthening thePrivate Sector in IDA Countries: Status of World Bank Group Collaboration (November 2004)," discusses the ongoing efforts to strengthenand improve collaboration among the institutionsof the World Bank Group. - 2 - 6. IFC's Technical Assistance Trust Funds (TATF)programwas initiatedby IFC in 1988 and i s funded by bilateral and multilateraldonors. It currently receives funding from 25 donors, including the IFC itself. TATF provides funding to many one-time technical assistance projects. At the same time, TATF also allows IFCto use donor fundingto initiate activities and do more work infrontier-market countries. Of the technical assistanceprograms approved inFY04,97 percent were in low-income and lower middle-incomecountries. Sixty-one percent of these programs were incountries with very high-risk ratings. These technical assistance projects often allow IFC to invest in these countries at a later date.2 7. Other donor-fundedprograms, such as small and mediumenterprise (SME) fa~ilities,~ address broader issues such as improving investment climate in certain sectors, regions, and countries, while usingthe knowledge and experience IFC has acquired through its investment operations. Donors have continuedto show strong support for SME facilities, and about 75 percent of new commitments inFY04 from the donors went to these facilities (Table A.1). The facilities operate predominantly inIDA-eligible countries, covering 70 of the 81IDA borrowers. 8. Fundsprovidedby donors also assist work carried out by thejoint IFC-WorldBank Foreign Investment Advisory Services (FIAS).4 Of the 60 projects completed by FIAS inFY04, half were inIDA-eligible countries. 9. To allow IFC to fulfill its financial commitments to its donor partnership programs in a reliable and stable manner, IFC's Board has approved the creation of the FundingMechanismfor Technical Assistance and Advisory Services (FMTAAS). Each year that IFC's net operating income exceeds an agreed level, a portion of the retained earnings will be designated for FMTAAS. The approved amount designated for FY05 i s US$225 million, which will be partially used with matchingdonor funding, to sustain project development facilities and other IFC activities focusing on SMEs, environmental and social programs, and corporate governance initiatives, as well as technical assistance that complements project development costs in frontier markets. 10. Norwegian Trust Fundfor Private Sector and Infrastructure (NTF-PSI). In2002 the NorwegianMinistry of ForeignAffairs established a trust fundto support the WorldBank Group's Private Sector Development (PSD) strategy. Three thematic windows are targeted for support: (a) Investment Climate and Governance; (b) InfrastructureService Delivery to the Poor; and (c) Existing Global Programs. Withinthe first window, Norway has indicated a preference for activities that address: See "IFC Donor-Supported TechnicalAssistance Programs: 2004 Report to the Donor Community'' for more details. During FY04, one new facility to promote SMEs was launched (Private Enterprise Partnership for the Middle East), and another was approved (Iraq Small Business Financing Facility), thus increasing the total number of SME facilities to 12. Over the past four years, FIAS has received contributions from Canada, Ireland, Italy, Luxembourg, Netherlands, Norway, Spain, Sweden, Switzerland, and the United Kingdom, as well as contributions from the World Bank Group. FIAS has also received contributions for regional activities from Australia, New Zealand, and Switzerland. - 3 - 0 Corporate governance, the role of public sector in sustainable systems, institutional development and capacity building- including legal and regulatory frameworks, and the enabling environment; Private sector development inrural areas; Assistance efforts emphasizing strategic partnership and promoting cooperation with UN agencies and other external institutions. 11. The legal agreement with Norway requires that 50 percent of the funds go to work on Sub-Saharan Africa. The Trust Fundis limitedto financing activities in countries included inthe lowest three categories of Part 1of the DevelopmentAssistance Committee (DAC) list of aid recipients: (a) Least DevelopedCountries, (b) Other Low Income Countries, and (c) Lower Middle Income Countries and Territories. Preference i s given to projects inIDA countries. Table A.2 provides a list of recent investment climate and governance activities funded by NTF- PSI. 12. Norway has also channeled funding for investment climate work of the World Bank Group through the ExistingGlobal Programs window of NTF-PSI. Inparticular, the IFC African Project Development Facility (APDF) and FIAS have been beneficiaries of this fund. 13. WorldBank-NetherlandsPartnershipProgram(BNPP). The Netherlands is providing important support for the World Bank Group's private sector development agenda through the BNPP. In2004, BNPPapproved a US$251,000 project aimed at expanding and strengthening the treatment of investment climate issues inPoverty Reduction Strategy Papers (PRSPs). The proposed program is designed to: (a) facilitate sharing of knowledge, expertise and experience among key people and institutions, who are involved inthe PRSPprocess, in order to improve the understanding of reformprocesses, business environment policies, and their linkto poverty reductionstrategies; (b) through dialogue, help gather knowledge andbuild capacity particularly inWorld Bank country teams and inclient countries to analyze investment climate issues that matter most to the poor, and help client country constituents on investment climate issues engageinthe PRSP process; (c) enable stakeholders to help develop a global repository of knowledge: an analytical framework and knowledge base on investment climate issues and poverty reduction that will lead to appropriate interventions; (d) help build broad- based awareness of linkages between investment climate and poverty reduction; and (e) secure coordination with rural investment climate programs under the BNPP. Expected outputs and results include: Development of an investment climate-poverty toolkit; 0 Web site on investment climate-povertyissues; An annual conference andtraining course on investment climate-povertylinkages; Development of six distance-learning seminars and training to be delivered from Washington, D.C.; 0 Organization of institutions inclient countries that represent the private sector, such as business associations; Pilot mainstreaming of investment climate issues inPRSPs; A global investment climate-poverty network consisting primarily of people involvedin the PRSP process across the globe. - 4 - 14. For 2005, BNPP has created a specific window for private sector development, allocating US$550 millionto efforts that support global and regional activities in IDA-eligible countries, with particular attention to Africa. A similar level of support i s expected for 2006. 15. Knowledge for Change Program (KCP). The World Bank's Development Economics (DEC) Vice Presidency and donor countries (including Canada, Finland, Norway, Switzerland and the UnitedKingdom) created the KCP in2002 as a way of scaling up, leveraging and broadening dissemination of the Bank's research and analysis to member governments and the development community worldwide. There are two trust funds under the program. One i s for investment climate and trade and the other is for poverty dynamics and basic service delivery, KCP funds are targeted towards activities concerning IDA countries and the poorest groups in IBRDcountries, with priority for Africa and South Asia (Table A.3). I1B. CollaborationonInvestmentClimateDiagnostic Work 16. The World Bank Group has been pursuingcollaboration with partners ina number of areas involving the development and use of diagnostic tools for the assessment of investment climates inclient countries. 17. The DoingBusiness Report project produces data, comparable across countries and updated annually, about specific businessregulations and their enforcement. The dataset currently covers 145 countries, including 56 IDA countries. About 3,300 local experts, including judges, lawyers, accountants, credit registry representatives, business consultants, and government officials from around the world have participated inthe DoingBusiness survey^.^ They have participated on their own time without charging any fees, makingthe preparation of the report a truly collaborativeeffort. 18. Investment Climate Assessments (ICAs) involve consultation and collaboration with both private and public sectors, as well as other donors. They feed into the Country Assistance Strategies of the Bank and the development strategies of client countries. Thus far, collaborative efforts with other development agencies includejoint World Bank and Asian Development Bank (AsDB) ICAs intwo IDAcountries, Indonesia and Sri Lanka. Joint World Bank-AsDB ICAs are planned for FY05 in Laos and Vietnam. 19. Investment Climate Surveys are business establishment surveys aimed at generating the statistical information required for ICAs. They provide information that helps quantify investment climate obstacles and their impact on firm productivity, employment and investment. In 1999, and again in2002, one such set of surveys was developedjointly by the WorldBank and the European Bank for Reconstruction and Development (EBRD) and conducted inthe transition economies of Eastern Europe and Central Asia. The Business Environment and Enterprise Performance Survey (BEEPS) comprises the results of interviews with firm managers and owners in26 transition countries on a wide range of issues relatingto their businesses, includingthe business environment, corruption, lobbying, financial system, legal system, regulation, public services, and firm performance. The names of the Doing BusinessReport's external partners are listedinthe Contributor's section of the report, as well as on the Doing Business web site at http://rru.worldbank.org/DoingBusiness/. - 5 - I1C. Mechanismsfor Dialoguewith the Private Sector inClient Countries 20. Public-Private BusinessFora. The World Bank Group and the IMF, as a way to encourage investment climate reforms in developing countries, are supporting government- business consultation mechanisms. InSpringof 2001, inresponse to a request by senior government officials in Africa for assistanceinimproving the investment climates intheir respective countries, the World Bank Group and the IMFproposed the formation of small, high- level investor councils. Investor councils are comprised of business leaders and key ministers, under the chairmanship of the country president, who prioritize and take action on issues to remove obstacles to investment. Pilot investor councils were launched in Ghana, Senegal and Tanzania (2001), Mali and Uganda (2004). 21. Similar initiatives have been taken inEast Asia. IFC and Canada have been involved with the Vietnam Business Forum since 1999. The Forum has succeeded, among other reforms, in amending the Law on Business Companies to streamline licenses and approvals. The Cambodia Private Sector Forum, set up in2002 and supportedjointly by IFC and AUSAID, has led a nation-wide survey on agro-business and agro-processing with small farmers. Other achievements of the Foruminclude high-level consultation on investment and tax law, the introduction of private sector monitors within the Customs Department, improvedlabor standards, and negotiations on cost reductions for a major road concession. These partnerships are key to the policy makingprocess. They ensure a voice to the stakeholders by facilitating a dialogue between the government, development agencies, and the private sector to better understand the business environment constraints. 22. Poverty ReductionStrategy. At the Annual Meetings of the World Bank Group and the IMFinSeptember 1999, it was agreedthat nationally owned and participatorypoverty reduction strategies should provide the basis for all World Bank and IMFlending and for debt relief under the enhanced Heavily IndebtedPoor Countries (HIPC) Initiative. This approach, buildingon the principles of the Comprehensive Development Framework, would be reflectedinthe development of Poverty ReductionStrategy Papers (PRSPs) by country authorities. PRSPs outline a country's macroeconomic, structural and social policies and programs to promote growth and reduce poverty, as well as associatedexternal financing needs. Five core principles underlie the development and implementationof poverty reduction strategies. The strategies should be: (a) country-driven, involving broad-based participation by civil society and the private sector in all operational steps; (b) results-oriented, focusing on outcomes that would benefit the poor; (c) comprehensive inrecognizingthe multidimensionalnature of poverty; (d) partnership-oriented, involving coordinated participation of development partners (bilateral, multilateral, and non-governmental); and (e) based on a long-term perspective for poverty reduction. 23. PRSPs are a key mechanism by which private sector development issues can be addressedincountry development strategies. The I C A findings for Cambodia are extensively incorporated into the CambodiaPRSP. On the operations side, the ICA findings are used in Ethiopia and Nepal Poverty Reduction Support Credits (PRSC). ICAs are a significant part of pipeline PRSCs for Honduras, Mozambique, Nicaragua, Senegal, and Tanzania. The World - 6 - Bank Group has submitted a proposal to the World Bank-Netherlands Partnership Program (BNPP) for a programdesignedto strengthenthe treatment of private sector development issues inthe PRSPprocess (Section II.A). The program is expectedto be launchedinFY05. 111. GlobalPartnershipsto ImproveInfrastructureServices 24. The World Bank Group i s home to a number of global technical assistance facilities that involve partnerships working towards improving provision of infrastructure services in developing countries. Inparticular, a large variety of public-private partnerships (PPP) have been established to facilitate this. 25. The Public-PrivateInfrastructureAdvisory Facility(PPIAF)is a multi-donor6 technical assistance facility aimed at helpingdeveloping countries improve the quality of their infrastructurethrough private sector participation inthe financing, ownership, operation, rehabilitation, maintenance, or management of eligible infrastructure services. Eligible infrastructureservices comprise roads, ports, airports, railways, electricity, telecommunications, solid waste, water and sewerage, and gas transmission and distribution. Currently there are 93 approved or ongoing PPIAFprojects in IDA countries, representing 63 percent of PPIAF's active portfolio in value terms. 26. The GlobalPartnershipfor Output-BasedAid (GPOBA) i s a multi-donor trust fund set up by the United Kingdom's Department for InternationalDevelopment (DFID) and the World Bank. The goal of GPOBA i s to provide increased access to reliable basic infrastructure and social services to the poor in developing countries through the wider use of output-based aid (OBA) approaches. The primary outputs of GPOBA are pilot projects and related activities to identify and disseminate lessons of experience in the design and implementation of OBA schemes, including the targeting of eligible beneficiaries, definition of performance requirements, the determination of payment structures, and the design of monitoring arrangements. About 68 percent of GPOBA's portfolio in value terms i s inprojects in IDA countries (Table A.4). 27. DevCois a multi-donor facility that supports IFC's privatizationadvisory work in infrastructure. It was established inJune 2003 through a Memorandumof Understandingsigned between IFC and DFID. DFIDhas agreed to contribute US$10 million over three years (FY04- FY06), and the Netherlands Ministry of ForeignAffairs has agreed inprinciple to make a US$1 million contribution to DevCo inFY05. Inaddition, IFC has also agreed to contribute US$0.75 million to DevCo over three years (FY04-FY06). The facility has been established under the umbrella of a broader portfolio of work being developed in association with the Private Infrastructure Development Group (PIDG), a group of donors seeking to increase private sector investment ininfrastructure of developing countries. Other non-PIDG donors are also expected to contribute. DevCo supports the development and implementation of infrastructure projects in water, electricity, sanitation, telecommunications-ICT, and transport at both the municipal and national level in developingcountries, as well as other services such as housing, solid waste handling, and other physical infrastructure services. Eligible countries are those inthe lowest PPIAF'sdonors includethe AsDB, Canada, France, Germany, Italy, Japan, the Netherlands, Norway, Sweden, Switzerland, UNDP,the UnitedKingdom, the UnitedStates, andthe World BankGroup, - 7 - three categories of Part 1of the D A C list of aid recipients: 1) Least Developed Countries, 2) Other Low Income Countries, and 3) Lower Middle Income Countries and Territories. 28. The Balkans Infrastructure DevelopmentFacility (BIDFacility) i s a technical assistanceinitiative that i s being set up by IFC inthe Balkans together with the USAID and European and Nordic donors. The BIDFacility will help public sector entities in South Eastern Europeto attract private sector participation and investments in infrastructure, primarily in energy, transport, and water and sanitation sectors. The Facility covers, among others, IDA eligible countries such as Albania, Bosnia and Herzegovina, and Serbia and Montenegro. 29. Other collaborative as well as trust-fund programs for improving access to infrastructure services with components that support public-private partnerships include the World Bank-Netherlands Water Partnership (BNWP), the Cities Alliance, the Energy Sector Management Assistance Program (ESMAP), the Global Facilitation Partnership for Transportation and Trade (GFPTT),the Global Village Energy Partnership (GVEP), Highway Development and Management Tools (HDM-4), Information for Development (InfoDev), the Infrastructurewindow and the Existing Global Programs window of the NorwegianTrust Fund for Private Sector Development and Infrastructure (NTF-PSI),7 Sub-Saharan Africa Transport Policy Program (SSATP), and the Water and Sanitation Program (WSP). See Table AS for more details. 30. Provision of support to infrastructure regulators in developing countries i s also an important area where the World Bank Group and its partners are contributing to the enhancement of infrastructure services. The following are some of the specific programs and partnerships in this area. 31. International Training Programon Utility Regulationand Strategy i s an innovative mechanism for promoting improvedutility regulationthrough training and knowledge sharing. The program was first launched in 1997 as the first major initiative of the InternationalForum for Utility Regulation (FUR). The two-week training program-developedjointly by the World Bank and the University of Florida- i s offered twice per year, and has so far been attended by more than 1,300 regulators from over 120countries. Ongoing learning and networking i s also supported by the publication of a Directory of Utility Regulatory Agencies that i s updated regularly. 32. The South Asian Forumfor Infrastructure Regulation (SAFIR) was launched in 1999 with support from the World Bank to provide more focused learning and networking opportunities for regulators inthat region. Supported by a local administrativepartner and guidedby a steering committee of experienced regulators from the region, SAFIR has a regular newsletter, web-based resources, and holds regional training programs. Four two-week courses and several workshops have been held to date, involving some 400 participants. SAFIR participants recently formalizedtheir network through the creation of a membership-based association. ' The existing globalprograms window of NTF-PSIprovides funding for The Energy Sector Management Assistance Program(ESMAP), the Public-Private Infrastructure Advisory Facility (PPIAF), and the Water and Sanitation Program (WSP). - 8 - 33. The African Forumfor Utility Regulation(AFUR) was launched in2000 as a framework for supporting regulators across the region. It has held four major meetings to date, with each including a workshop aimed at sharing knowledge and experience on a particular theme. AFUR has also developed a newsletter, a web site, and measuresto support particular training activities. Meetings have involvedrepresentatives from 40 regulatory agencies from around 30 countries. AFUR has been incorporated into the New Partnership for Africa's Development (NEPAD) regional initiative and participants recently agreed to further institutionalize the network through the creation of a membership-based association. 34. The East Asia and PacificInfrastructure RegulatoryForum(EAPIRF) was launched in2003 with support from the WorldBank, the AsDB andPPIAF. The objective of the Forumis to promote good regulatory practices ininfrastructure inthe regionby creating a cross-sectoral and cross-country platform in which regulators can learn from each other's experiences and knowledge. InApril 2004, more than 70 officials representing infrastructure regulators from 20 East Asia and Pacific countries met inManila as part of the second EAPIRFmeeting. Regulators came from all infrastructure sectors. The role of infrastructure regulators in protecting consumer rights and involving consumers inthe regulatory decision-making process was discussed and debated inManila. Participants acknowledged that sustained efforts are requiredto execute the Forum's activities in the near future and, with assistance from the Bank, are now inthe process of establishing a small Secretariat to assist in implementation of the Forum's activities. IV. SustainablePrivate Sector Development 35. The World Bank Group i s committed to sustainable development in all aspects of its activities, The following are some of the partnerships that the World Bank Group i s involved in to address sustainable private sector development. I V A. Environmentaland SocialFacilities 36. SustainableBusiness AssistanceProgram (SBAP). InJuly 2002, IFC created three donor-funded8 facilities to help the private sector in emerging markets manage the social and environmentalrequirements of a sustainable development. Together, these facilities are called the Sustainable Business Assistance Program (SBAP). They enable IFC to promote corporate social responsibility inIFC client companies (Corporate Citizenship Facility); enhance the environmental and social impact of financial intermediaries (Sustainable FinancialMarkets Facility); and finance innovativeprojects that promote local environmentalbenefits (Environmental Opportunities Facility). Nearly half of the SBAP's completed, ongoing, and pipeline projects as of the end of FY04 are in IDA-eligible countries. 37. Global EnvironmentFacility (GEF). IFC's EnvironmentalFinance Group (EFG) acts as a private sector window for the GEF. Established in 1991, GEF helps developing countries fundprojects and programs that protect the global environment. GEFgrants help support * SBAP is funded by IFC as well as donors, including Austria, Italy, the Netherlands, New Zealand (FY05), Norway, and Switzerland. - 9 - projects related to biodiversity, international waters, land degradation, the ozone layer, and persistent organic pollutants. The activities of the GEF, which are funded by US$7 billion in commitments from the member countries, are implementedby the World Bank, the United Nations DevelopmentProgramand the UnitedNations Environment Program. Other executing agencies include the regional development banks and a number of UNSpecialized agencies. IFC acts as a primary private sector interface for the GEF, operating through the World Bank. The EnvironmentalFinance Group (EFG) within the Environment and Social Development Department i s responsible for IFC's GEF activities. To date the EFGhas developed US$125 million of GEF-eligible projects. 38. IFC-NetherlandCarbonFacility(INCaF). This is an innovative partnership under which IFC will purchase greenhousegas emission reductions on behalf of the Government of Netherlands usingthe "Clean DevelopmentMechanism" of the Kyoto Protocol. The Netherlands will use these emission reductions to help meet its commitments under the Kyoto Protocol. The Netherlands has allocated about US$47 million for this Facility that will provide additional revenues to eligible projects that generate emission reductions in developing countries. 39. GlobalGas FlaringReduction(GGFR) Partnership. This is apartnership initially set upby the World Bank Group incollaborationwith the Government of Norway. It supports national governments and the petroleum industry intheir efforts to reduce the flaring and venting of gas associated with the extraction of crude oil by improving the framework for private sector investments. Apart from the World Bank, GGFR currently comprises the GovernmenWNational Oil Companies of Algeria (Sonatrach), Angola, Cameroon (SNH),Chad, Ecuador, Nigeria, Norway and the USA as well as the international oil companies BP, Chevron Texaco, Exxon Mobil, Norsk Hydro, Shell, Statoil and TOTAL. 40. The ExtractiveIndustriesReview. In2004 the World Bank Group concludeda comprehensive assessment of its activities inthe extractive industriessector through an independent stakeholder consultation process. The World Bank Group has considered the recommendations of the Extractive Industries Review and consulted with many stakeholders, including shareholder governments, civil society, and industry. The World Bank Group i s already inthe process of implementingmany of the recommendations and continues to be a leading provider of resources to developing countries for environmental protection and other sectors that are related to the extractive industries. 41. IFCAgainstAIDS Program. Since its inceptionin2000, IFCAgainst AIDS has worked with many clients, providing guidance toward the successful implementation of HIV/AIDS workplace programs. So far the program has been implementedmainly inIDA- eligible countries inAfrica, the Caribbean, and South Asia. One notable example of the program i s inAngola where Odebrecht, the Brazilian constructioncompany, earmarked US$1 million of the US$280 million IFC corporate loan extended to them in 2002 to support efforts relatedto the fight against AIDS. Together, IFC and Odebrecht launched an education, prevention and care programtargeted at 30,000 people in the communities of Odebrecht's Angolan operations (Table A.6). - 10- 42. The GlobalBusinessSchoolNetwork (GBSN). This is an IFC initiative designed to strengthen the institutionalcapacity of business schools indeveloping and transition countries. The Network bringstogether top global business schools with business schools inthe emerging markets . 43. Strengthening Grassroots Business OrganizationsInitiative (SGBI). The goal of "grassroots business organizations" i s to help the poor and disadvantaged participate in sustainable business opportunities. However, most grassroots business organizations (GBOs) are too small, have a highcost structure, and have limitedbusiness capabilities. GBOs also often lack access to private financing, markets, and outside technical assistance. Therefore, most GBOs tend to remain small, inefficient, donor-dependent, and far too limited inreachingthe poor and disadvantaged. The SGBIwould initially provide a group of six GBOs with well- designed and carefully deliveredprograms of technical assistance to support business improvement and scaling up. The group includes companies inBolivia, Cambodia, India, Kenya, Tanzania and Nigeria. The SGBIwould be initially funded equally by IFC and the World Bank (via the Development Grant Facility). DGFfunds would be channeled directly to GBOs as grants, to be managed by the GBOs themselves. Additional donor funds will be mobilized for the future phases. Several technical and strategic partners are already working with IFC and the Bank on this initiative, including consulting firms, specialized firms that promote or invest inGBOs, web-based retailers, NGOs from developed countries, and local organizations. I V B. Corporate Governance 44. Good corporate governance i s important for long-termprivate sector growth in developingcountries. The joint IFC-WorldBank Corporate Governance Group collaborates with external partners in several areas to help companies and countries improve standards of governance for corporations, focusing on shareholder and stakeholder rights, board member duties, disclosure, and effective enforcement. 45. Reports of the Observance of Standards and Codes (ROSC) are summary assessmentsof the observance of selected standards relevant to private and financial sector development and stability. ROSCs arejoint products of the IMFand the World Bank Group. The IMFhas taken a lead in 9 out of 12 areas, including data dissemination and fiscal transparency. The financial sector assessments (monetary and financial policy transparency, banking supervision, securities market regulation, payment systems, and deposit insurance) are mostly derived as by-products from a parallel Bank-IMF Financial Sector Assessment Program (FSAP). The WorldBank Group has taken the leadinthree areas covered by ROSCs: (a) corporate governance, (b) accounting and auditing, and (c) insolvency regimes and creditor rights. ROSC modules for about 30 IDA countries have beenprepared to date, of which five have been corporate governance assessment^.^ 9 ROSCs have beencompleted by the IFC-WorldCorporate Governance Group for Georgia, India, Indonesia, Moldova, and Zimbabwe. - 11- 46. The Global Corporate Governance Forum i s a multidonor trust fund" founded by the World Bank Group and the Organization for Economic Co-operation and Development (OECD) to promote global, regional, and local initiatives that aim at improving the institutional framework and practices of corporate governance. V. Partnershipswith the Private Sector 47. Syndication and Resource Mobilization. IFC provides a range of products and services for clients, including loans, equity, quasi-equity, structured finance, and risk management products that are funded through IFC's own financial resources. IFC also syndicates participationsin its loans to international financial institutions. Through its B-loan program, the Corporation maintains an active business relationship with leadingcommercial banks around the world, enabling it to mobilize additional resources for its clients. IFC's committed syndicated loan portfolio as of June 30,2004 was US$5.5 billionin204 projects, of which 49 projects worth close to US$1 billionwere in IDA-eligible countries. 48. Partnershipswith Private Foundations. In 1996, World Bank President, James D. Wolfensohn, called on Bank staff to "strengthen the development impact of assistance in member countries by working with foundations to identify new forms of operational partnerships, strengthen the Bank's own process of learning, mobilize external technical and financial resources, identify business process innovations, and builda broader constituency for global interdependence." As of September 2004, there are about 66 corporations and 45 foundations that have collaborated with the World Bank in a variety of areas. Table A.7 provides details on 18 such programs where over 20 private foundations are collaborating with the World Bank insectors rangingfrom agricultural research to education and social development, environment and natural resources management, and health and other social services. VI. Aid Effectiveness 49. Donor Peer Reviews. Early in2002, the Consultative Group to Assist the Poorest (CGAP) joined with DFIDand other ministries and agencies to launch a unique aid effectiveness initiative: Microfinance Donor Peer Reviews. A total of 17 bilateral and multilateral agencies have signed on to the review exercise." The Donor Peer Reviews have focused on what donor agencies could most directly influence: their own procedures, practices, processes and systems. lo Donors include India, Luxembourg, the Netherlands, Norway, the Organization for Economic Co-operation and Development (OECD), Switzerland, Sweden, the United Kingdom, the United States, and the World Bank Group. 11 African Development Bank (AfDB), Agence Franqaise de Dtveloppement (AFD), AsDB, Canadian International Development Agency (CIDA), Danish International Development Agency (DANIDA), Department for International Development (DFID), European Commission (EC), Gesellschaft fur Technische Zusammenarbeit (GTZ),International Labour Organization (ILO), International Fundfor Agricultural Development (IFAD),Kreditanstalt fur Wiederaufbau (KfW),Netherlands DevelopmentCorporation System, Norwegian Agency for Development Cooperation (NORAD), Swedish International Development Corporation (Sida), Swiss Agency for Development and Cooperation (SDC), United States Agency for International Development (USAID), United Nations Development Program (UNDP) and UnitedNations Capital Development Fund(UNCDF). - 12- The reviews have identified success factors and constraints to goodpractices in microfinance and provided concrete recommendations for each agency. CGAP has facilitated and documented the reviews on behalf of donors, and providedfollow-on technical upp port.'^ VII. Prospects and Challenges for the Period Ahead 50. Recent years have witnessed a major intensification of the World Bank Group's collaboration and a multiplicationof its partnerships with external development partners. These relationships have been instrumental in mobilizing financial and technical assistance for the promotion of private sector development in IDA countries. This collaboration has allowed the World Bank Group to reinforce its own efforts for the benefit of client countries. Notwithstandingthis progress, major challenges still lie ahead in strengthening the business environment and promoting private sector development in IDA countries. These challenges provide an opportunity to continue strengthening the partnerships that have already been forged, as well as buildingnew partnerships inorder to move forward the implementation of the investment climate agenda. l2 The full-text of letters by eachparticipating agency to their managementare available on the "Donor Effectiveness - Donor Peer Reviews" section of the CGAP website (www.cgap.org) along with several papers on the peer reviews and an update on actions agencies are taking to improve their effectiveness. - 13- Table A.l: IFC Project Development Facilities Donor Commitments for the Current PDF Cycle (US$ millions) as of SeDtember 30.2004 * IFC is currently working with PEP-MEandNAEDto merge thesetwo facilities into PEP-MENA. PEP-MENA may receive commitments from other donors at a later date. APDF -African Project Development Facility; CPDF -ChinaProject DevelopmentFacility; LACP-LatinAmerican & the CaribbeanSME Facility; MPDF-Mekong Project Development Facility; PEP-MENA Private EnterprisePartnershipfor the MiddleEast and NorthAfrica; - NAED-NorthAfrica EnterpriseDevelopment; PEDF-Pacific EnterpriseDevelopmentFacility; PENSA Programfor EasternIndonesiaSME - Assistance; PEP-Private EnterprisePartnership;SEDF- SouthAsia EnterpriseDevelopment Facility; SEED- South East Europe Enterprise Development Facility. a/ FMO - The NetherlandsDevelopment FinanceCompany Source: IFC staff - 14- Table A.2: Norwegian Trust Fundfor Private Sector and Infrastructure: Portfolio of Investment Climate and Governance projects (InUS$ thousands) Products, Markets and Investment Climate: the Costs of Logistics Source: See http://wbln0018.worldbank.org/infrastructure/ntfpsi.nsf - 15- Table A.3: Knowledgefor Change Program: Allocations for Investment Climate, as of July 31,2004 (InUS$) Regional Project Geographic Focus Distribution IDA Allocations Surveys and Assessments in Low-incomeCountries and Bangladesh,Brazil,Ethiopia, Regions India,Mozambique Global X 295,000 InvestmentClimate Surveys Eastem& CentralEurope & Central Asia, Honduras, Africa, East Asia, India,Nicaragua,Tanzania, Europe and Central Uganda,Vietnam Asia, Latin X 620,000 America and Caribbean, South EmergingTrends in Industrial Competitiveness inEast Asia Indonesia EastAsia X 38,000 Micro Indicatorsof Financial Development Global Global 120,000 RampingUp Investment Global (Bulk to Africa, Climate Surveys CameroodSenegal) Africa, Other X 320,000 World Development Report 2005: Investment Climate, Growth andPoverty Global Global 712,000 InvestmentClimate Extension Guyana,Vietnam EastAsia, Latin X 150,000 America and Caribbean Access to Finance and PovertyAlleviation Global Global 90,000 Source: See http://research.worldbank,org/kcp/ - 16- Table A.4: Portfolioof the Global Partnershipon Output-BasedAid Democratic Republic of Contractual 3/25/2004 47,790 Congo Approaches for Iimproving health services delivery Mozambique I I I I I IOBA for Rural 6/4/2003 160,000 Electrification Expansion Uganda OBA for Health 5/5/2003 25,000 services Madagascar/Chad/Tanzania/ OBA in Road Network 3/5/2004 599,800 Cape Verde Management and Maintenance Uganda Uganda UEDC 3/30/2004 400,000 Transition Tariff support EastAsia Cambodia Water Access with 611112003 430,000 Small-scale providers . LatinAmerica Bolivia Bolivia Rural Access 6/9/2003 200,000 with small-scale providers Bolivia Supplemental funding 3/30/2004 103,000 for Bolivia Rural Access with small scale providers Nicaragua Off-grid Rural 11/19/2003 400,000 Electrification SouthAsia Bangladesh Multi-sector Project for 611112003 170,000 basic services in Rural Areas Global Fiscal Support for OBA Multi-sector 1111112003 25,000 projects Designing OBA where there Multi-sector 5/12/2003 23,750 is an Incumbent supplier Source: See http:Noba.worldbank.ore a 3 I Q\ 3 I 8 I I -21 - Table A.7: World Bank Group and Partnerships with a Selection of Private Foundations Name of Foundations Sector Region Year Closing Description ProjecWrogram Involved .~ ..- Begun Date Community FordFoundation,The Social Global 0ngoing To build the Bank's Foundation Initiative JohnD. and Development intemationalcapacity for Catherine T. working with community MacArthur foundations and to consider the Foundation, Charles feasibility of initiating Stewart Mott community foundation Foundation demonstrationprojects. Market-Based The John D. and Environment Global Ongoing With the financial support of the Incentives to CatherineT. and Natural MacArthur Foundation, the Strengthen MacArthur Resources Development Marketplace has Biodiversity Foundation Management established a separateaward Conservation fund for Market-Based Incentives to Strengthen Biodiversity Conservation. Development Marketplace (DM)is aWorld Bankprogram that promotesinnovative developmentideas through early-stage seed funding. DM links social entrepreneurs with poverty fighting ideas to partners with resources to help implement their vision. Early Child Brazil ECD Education Africa, East 2004 2007 The building of capacity Development MillenniumFund, Asia and regionally and locally will Capacity-Building Bernardvan Leer, Pacific, support effective expansionof hitiative(ECDCI) Johnson & Johnson Latin quality ECD programs inthe Foundation,Mauricio America developing world. Sirotsky Sobrinho and Caribbean, Middle East and North Africa Sender Researchand RockdaleFoundation Multisectoral Middle East 2010 To advancethe policy agenda rrainingNetwork for and North on gender inthe MENA Region 4rab and Farsi Africa Speaking Countries 3lobal Fundto Fight UnitedNations Healthand Global 2002 Ongoing To Fight AIDS, Tuberculosis 4IDS, Tuberculosis Foundation, Non- Other Social and Malaria ind Malaria profits and other Services GFATM) Foundations 3lobal Partnershipfor Kennedy Foundation, Multisectoral Global 2005 2007 Global Partnershipfor lisability and other Foundations Disability and Development levelopment jlobal Programto Bill and Melinda Healthand Global Ongoing IDA will work with the Ladicate Gates Foundation, 3ther Social following countries that have 'oliomyelitis United Nations Services beenidentifiedby IDA in Foundation, Rotary collaboration with the World Foundation HealthOrganization ("WHO"): Afghanistan, Angola, Bangladesh, Democratic Republic of Congo, Ethiopia, India, Nigeria, Pakistanas well as any other country that may be identified by IDA in collaboration with WHO and the Foundationsto determine the country's interest in receivingan IDA Credit with specialterms to supportpolio eradication activities, focusing on the use of oral polio vaccine - 22 - Name of Foundations Sector Region Year Closing Description ProjectRrogram Involved Begun Date Grassroots Trading CamegieEndowment Multisectoral Global 2004 0ngoing The project will aid poor Network for International producers reachmarkets around Peace: Trade, Equity, the world in order to generate and Development secure incomes and livelihoods Project MillenniumScience The David and Lucile Multisectoral Global 2005 2005 This global partnershipseeks to Initiative PackardFoundation, sustainand expand the Rockefeller MillenniumScienceInitiative, Foundation, Vietnam which demonstratesthat Education building capacity in modern Foundation,Andrew science and technology can W. Mellon contribute to a country's Foundation, Kellogg sustainable development Foundation,Bill and Melinda Gates Foundation Partnershipfor Child National Science Education Africa, 2007 Support countriesin attaining Development: Foundation (United Europeand their "Education for All" goals SupportingEFNFTI States), Wellcome Central which is central to the Bank's with more effective Trust, MacArthur Asia, South poverty reduction strategy ECD, SchoolHealth ResearchNetworks, Asia and Nutrition, and United Nations HIV/AIDS awareness Foundation,Verelst, programs William Hewlett Foundation Partnership on Rockefeller Education Middle East 1999 2003 Careful analysisof the critical SustainableStrategies Foundation,Nike and North issues involved in effective for Girls' Education Africa, implementation of girls' Latin educationstrategies. Central America task is to better understandthe and process of effectivepolicy Caribbean, implementation ingirls' South Asia educationso that it canbe applied in support of policies and strategiesbeneficialto girls' education. (MNW Egypt; LAC/ Peru, Bolivia, Ecuador, Bolivia SAP/ India) Researchand Bill&MelindaGates Health and Global Supportandevaluate Developmentin Foundation, Other Social international researchand HumanReproduction Rockefeller Services developmentrelated to human Foundation,David reproduction and Lucille Packard Foundation RomaEducation Fund Open Society Education ECA 2005 Ongoing Improveeducation completion InstituteKOROS andperformancefor Romain 8 FoundationNetwork Central andEasternEuropean Countries ---..-... SpecialProgramfor Bill& Melinda Gates Healthand Global 2003 Ongoing SpecialProgramfor Research Researchand Foundation,Open Other Social and Training in Tropical rraining in Tropical Society Services Diseases(TDR) 3iseases (TDR) tnstitute/SOROS FoundationNetwork, Wellcome Trust Stop Tuberculosis Bill & Melinda Gates Healthand Global 1999 Ongoing Aims to improve coordinated nitiative Foundation, Open Other Social andeffective action againstthe Society Services globaltuberculosisepidemic Institute/SOROS that is worsening with nearly 2 FoundationNetwork, million death and 8 million new Rockefeller cases each year, with most of Foundation the affectedpersonsintheir mostreproductive years. rargetedResearch gational Science Agriculture, ~ Africa, East 2004 2009 Establishmentof a global Y mdCapacity Building Foundation(United Fishing, Asia and network of coral reefscientists brCoralReef States) Forestry Pacific, working togetherincoral reef aanagement Latin ecosystemdynamics - 23 - Closing Description Date Ongoing The African Programfor OnchocerciasisControl (APOC) 2006 The Global Exchange for Social for Social Investme Investment (GEXSI) 2007 Improve capacities for leadershipand change management within the higher education institutions of Southem Africa Development Community (SADC) Source: World Bank staf