1_e ==* jy AY~~~~~~Voum 1A Volume , /X-? x 'eie =~~~~~~~~~~~~~~~~~~~~ = 25225 Volume 1 Volume 1 Year in Review Fiscal 2001 Highlights IBRD and IDA lending com- set out in the Country Sixteen countries qualified A clear consensus emerged mitments increased to $17.3 Assistance Strategy. The for debt relief under the from extensive consultations billion, reflecting higher Bank recognized the need enhanced Heavily Indebted that the Bank can play a lending by IDA (the Bank's to strengthen its economic Poor Countries (HIPC) crucial role in middle- concessional lending arm) and sector work, particularly Initiative in fiscal 2001, income countries, home to Fiscal 2001 was the first in public expenditure, pro- more than double the num- nearly 80 percent of the time in 10 years that IDA curement and financial ber in fiscal 2000. As of world's poor living on less lending to Africa reached 50 management, and structural June 30, 2001, a total of 23 than $2 a day. A Bank percent of total IDA lend- constraints to poverty countries were receiving Group task force called for ing, a target set by IDA reduction debt relief totaling $34 bil- analytical and advisory sup- donors lion in nominal terms, from port as well as financial sup- This new model has been all creditors port that crowds in private Intense efforts to sustain put into practice first in low- capital, with private sector gains in project quality con- income countries. Thirty-two With country and global engagement through the tinued into fiscal 2001. At of these countries articulat- partners, the Bank intensi- IFC and MIGA. year-end, only 12 percent of ed their vision in Full and fied its fight against Bank-financed projects Interim Poverty Reduction HIV/AIDS. Seven countries A new Strategic Framework under implementation were Strategy Papers (PRSPs), have begun to benefit for fiscal 2001-03 set out at risk of not achieving their accompanied by Bank-IMF from the Multi-Country the twin pillars of Bank sup- development objectives, Joint Staff Assessments The HIV/AIDS Program for port to countries strength- compared with 29 percent Bank introduced Poverty Africa, under which the ening the investment cli- five years earlier. Reduction Support Credits Bank earmarked an initial mate and investing in the (PRSCs) to help low-income $500 million on IDA terms poor. The past year's The Bank formalized its countries implement policy to support countries' pro- momentum achieved by results-focused country and institutional reforms grams In addition, the global and national actors business model, which is drawn from their PRSPs The Bank approved the first in agreeing on development grounded in the country's first two PRSCs were two operations of a $1S5 goals, and on the respective own vision of develop- approved for Uganda and million HIV/AIDS initiative responsibilities of rich and ment and in diagnostic Vietnam for Caribbean countries. developing countries, will work on the priorities and provide a key driving force constraints for change, and for Bank assistance IBRD and IDA Lending: New Approvals in Fiscal 2001 § Share of Total Lending of $17.3 billion Urban Otherb Africa Development 7% 2%O Human 20% Development Public Sector / 25% Latin America and Mngmn the Caribbea.n Maaemn2 30% 12% East Asia - and Pacific 12% Middle East and Infrastructurea' Finance and Private North Africa 21% Sector Development 3% 16% South' Aia Europe and 19% Economic Policy Central Asia Agriculture and 4% 16% Environment 13% By Region By Sector Note See table 1 1, page 26 a Includes transportation, telecommunications, and water supply and sanitation b Includes multisector, electric power and other energy, oil and gas, and mining i I7A3 oothigh HIV/AIDS ribbon marks World AIDS hl;g!i $¢ >! ] >: > , Day in December2000 at i > 2' g i iWorld Bank Headquarters. Poverty remains a global problem of huge proportions. Nearly half of the world's 6 billion Contents people live on less than $2 a day; Message from the President 2 Meeting the Poverty Challenge 4 about a fifth live on less than $1 Map of Country Offices and Borrower Eligibility 12 I The World Bank Group 14 -- a day. Poor people lack opportunity.ThWolBakGup4 Financial and Operational Results i6 Cofinancing and Trust Fund Highlights 20 They lack voice. And they are I Active Portfolio and Operational Quality Highlights 22 extremely vulnerable to sickness, Overview 25 v The Board of Executive Directors 37 violence) and natural disasters. I Thematic Perspectives 41 D Regional Perspectives 63 Developed and cleveloping countries, Development Effectiveness 95 Partnerships for Development tot i the World Bank, and its partners in I Project Summaries 107 About the World Bank 127 the development community are firmly I Index 157 List of Boxes, Tables, and Figures 161 committed to making a difference, Selected World Bank Publications 163 List of Part I and Part II 164 with the full conviction that progress IDA Member Countries World Bank Web Sites 165 is possible-with concerted action. Acronyms 167 Note This is the first of two volumes that will be dis- tributed as a set. The complete Management's Discussion and Analysis, audited financial statements of the International Bank for Reconstruction and Development, audited About the cover: The World Bank has for several years financial statements of the International been the world's largest external financier of human Development Association, and appendixes are development programs. In fiscal 2001 the Bank published in a separate volume as The World markedly Intensified its fight against communicable Bank Annual Report 2001: Volume 2, Financial diseases-to prolong life, improve its quality, and Statements and Appendixes. This Annual protect development prospects in the world's poorest Report is also available on the Internet at countries. www.worldbank.org. j) All dollar amounts used in this Annual Report are current U.S. dollars unless otherwise specified. Message from the President of the World Bank and Chairman of the Board of Executive Directors The poverty reduction agenda has advanced signifi- cantly over the past year, with development partners i coming together as never before. We must now build I on that momentum. Progress in reducing poverty \ remains slow too many girls still do not go to _ school, too many children die before the age of five, ' , , O . and too many poor people lack opportunity e\ A . ' The urgency for action is pressing. Nearly half ,.' of the world's people live on less than $2 a day, and ' 1F - __ 1 ! 2although the number of poor people still increased . '- )aj lb < z 1 It -Wi ^^ ,st zA g - t - . x in South Asia because of population growth. On average, poverty declined in fast-growing countries <_tk g *. s s - '~ t ' ;11i and increased in countries experiencing stagnation l , AkXX^vs> ff - _ .. or contraction. _ w w ,,, ,^=_ " tte- PROSPECTS FOR 2015 "' ~~~~~~~Projections indicate that, if developing countries' i ' 2 ;average per capita gross domestic product (GDP) were to grow at a sustained rate of 3.7 percent . j.("base case" in the graphs)-higher than the 1990s' average of 1.8 percent and the 2.3 percent average of the low case used for the graphs-the global inci- 1L~~~~ \fJ[fr ~~~~~~dence of absolute poverty could decline from 23 percent in 1998 to 13 percent in 2015. The number of poor could drop from 1.2 billion to less than 800 'k l$' '*,Y X j; %%t IRJ7 rmillion. But many countries, especially in Africa, would still not reach the goal of halving poverty by 2015. - ~l7 .&i!. ,,, - , '.s''~~~~_j! a _ r_hWrdaAnu e&26 The International Development Goals: A Particular Challenge for Africa Life expectancy decreased, on average, from 50 years in 1987 to 47 years in 1999, largely under the devastating impact of Progress in Some Regions, Setbacks in Others HIV/AIDS; in hardest-hit countries such as Proportion of people living on less than $1 a day (percent) Botswana, Lesotho, South Africa, and Zimbabwe, life expectancy fell by more than Sub-Saharan Africa Europe and Central Asia 10 years. Child mortality increased from 155 per 50 so,, _ 1,000 in 1990 to 161 per 1,000 in 1999; it 40 40 declined in all other regions. Health-care systems, weakened by conflict, 30 30 poor management, and the impact of 20 20 HIV/AIDS, are finding themselves unable to cope with traditional illnesses, and malaria 10 10 and tuberculosis continue to kill millions o____________________________ 0 _, * _ Gross primary school enrollment rates 1990 1998 2015 1990 1998 2015 declined between 1980 and the mid-1990s; nine countries still reported net primary enrollment rates of less than 50 percent in East Asia and Pacific Latin America and the Caribbean the 1990s, with even lower rates for girls. so so 40 40 But breaking the cycle of impoverishment Is possible: in countries such as Ethiopia, Ghana, 30 30 Mauritania, and Uganda, sustained economic recovery and stability have helped reduce 20 ** < 20 ( poverty and improve living conditions. 10 10 0 0 1990 1998 2015 1990 1998 2015 South Asia Middle East and North Africa so so 40 40 30 30 20 > 20 10 10 0 0~~~~~m 1990 1998 2015 1990 1998 2015 * m Actual poverty reduction Source World Bank 2001 Global Economic Prospects and the Developing Countries 2001 Washington, D C Reduction needed to halve poverty by 201 5 Poverty reduction with low-case growth Poverty reduction with base-case growth Meeting the Poverty Challenge: An Agenda for Action WThe -r1d0Bin a ... demand that all partners accept responsibility... ti liiW&ld aink and ia ,n al ZI.velopmnt Goals g- TWak Smweaving the - ,oa .iliit.ir' operations -.kr4_ - - The international development goals reflect an 2 The debt relief agenda must go forward c* 5 wiy~'dg gol e n unprecedented consensus of the international com- Following the substantial advances made in fiscal j (glyllgue munity. Shared goals support the effort to increase 2001, the next challenge is to move forward with -_ SuEghXiFYe aid effectiveness through stronger partnership and implementation of the Heavily Indebted Poor country leadership Countries Initiative, in particular in those coun- >'',Frameewk, Poverly tries affected by conflict. Securing sustainable h ;e&,d in Strategy A NEW DEVELOPMENT COMPACT financing on appropriately concessional terms will F- - Rers. .cOunlrv also be important. (See middle figure below) '-- Sane Strategies. The agenda facing developing countries is formi- ..;a. Siraiegy dable. Many developing countries already reflect the 3 Now is the time to increase aid Pbrs .. ana Seeking a goals m their strategies, others have identified spe- Developing countries' efforts to improve their pol- tie gInrerli cific intermediate measures linked to longer-term icy environments are allowing them to make more , thr2z:'a nd poverty reduction outcomes. Pursuing sound domes- effective use of aid. Support from most members SLzWiortin~6.utcome tic policies wmll be critical to attracting greater of the OECD Development Assistance ,n cor e resources. Sound macroeconomic policies, strong Committee (DAC) falls well short of the pledged - progra nsnC. financial systems, and well-functioning regulatory, 0 7 percent share of gross national income, so far ,dna dna. legal, and judicial frameworks will enhance the only Denmark, the Netherlands, Norway, iCapbllles in effectiveness of aid and attract more productive Sweden-and most recently Luxembourg-have Ijta apabilites in of atat poutve ' -~many clnI, cbsancres private investment. met this target While average DAC contributions ,-- sEndndmg research declined in 2000, however, aid levels from 15 of ; o lnrease The responsibility of developed countries stands 22 DAC members increased over the prior year. ipublic secvo' effecl,e out even more clearly as developing countries take (See right figure below.) ! n ess a acCelerate full responsibility for their own choices. Key areas pro-gress for action are summarized below. 4 Simplifying and harmonizing aid procedures will 'l*kng hilh part X 1.iking I~th part lower the burden on developing countries l, ,rlIgo nalZfnfee 1 Dismantling trade barriers is fundamental Multilateral and bilateral donors, working 40 0.uppori at thre ii idoir c~ty,urIel ndt Ie ' Trade barriers in high-income countries cost together, can do much to reduce the costs to , tutvlevel and croolD ifr*atin ,ieh other developing countries over $100 billion a year developing countries of managing aid programs in ___sr in a piogram of Trade restrictions set by the high-income members areas ranging from strategy and medium-term g~al monitoring ana of the Organisation for Economic Co-operation financing to procurement and evaluation Recent - .!epao,ing and Development (OECD) offset the benefit of progress in untying aid and procurement will pro- , ' N5 ' 2 their aid contributions (See left figure below.) mote efficiency. The Welfare Costs of Tariffs in 1995 Trends in Social Spending before and Net Official Development Assistance as after Assistance under the Heavily Percent of Gross National Income Indebted Poor Countries Initiative 08 Tariffs on Trade 7,000 7 0% 7 0 Social 0 7 Goal= 0 7% spending, percent 0.6 58% $6,000 of GDP. From high-.ncome From a.noingto right axis 0.5 to hrgh--ncome high1incomecounn 0.5 co.ntrla S49 6 billion $96 6 blillion.. $4,278 rlSca 0 4 3,500 3 5 spending, France in millions 03Japan of dollars, 3 left axis ~ ~O~ Germany 0 2 Average all DAC membe 6- ~~~~~~~~~~~~~~~~~~~~~0 1 United States 0 - _ _ _ _ _ _ - 00 0.C Before HIPC After HIPC OSt 1991 1992 193 1994 inns *9s 1997 I9 1999 2000 (1999) (2001-02) Source World Bank 2001 World Development Source World Bank 2001 World Development Indicators, Indicators, 2001 Washington, D C 2001 Washington, D C 8 The World Bank Annual Report 2001 Meeting the Poverty Challenge: The World Bank's Strategy ...and that the World Bank sharpen its strategy... WORLD BANK MISSION Poverty reduction is the World Bank's mission, guided by the international development goals. In pursuit of poverty reduction, the World Bank will rely on its business approach and institutional strengths. Business approach: Institutional strengths: A long-term, comprehensive, country-led Financial strength approach to development Global reach Participatory development and partnership Broad diagnostic capabilities A focus on operational quality, development Operational knowledge effectiveness, and outcomes Strong partnerships with clients, other donors, Knowledge sharing and capacity building and civil society Increasing selectivity within countries, across countries, and at the global level BANK ASSISTANCE WILL BE DELIVERED PRIMARILY AT THE COUNTRY LEVEL, FOCUSED ON: Building the climate for investment, Empowering poor people to participate in jobs, and growth development, and investing in them Private investment climate Empowerment, security, and social inclusion Public sector governance Education Health For low-income countries, priority areas of For middle-income countries, priority themes assistance will be. of assistance will be: Where poverty is concentrated - Policy and institutional reform for reducing Where the policy environment is favorable for poverty poverty reduction Well-targeted, high-impact investments Where post-conflict challenges are urgent Promoting competitiveness in the global knowl- edge economy BANK SUPPORT FOR INTERNATIONAL EFFORTS TO PROVIDE CRITICAL GLOBAL PUBLIC GOODS WILL FOCUS ON: Communicable diseases Information and knowledge Environmental commons International financial architecture Trade and integration The World Bank Annual Report 2001 9 Meeting the Poverty Challenge: The Role of IBRD ... re&ying on the unique strengths of WIBRO... IBRD provides important support for The Treasury 4 ' ' " poverty reduction. How? By providing i [thene e i- ', its middle-income client countries center of the access to capital in larger volumes, on Bank's innova- . good terms, with longer maturities, and trvenanctioal in a more sustainable manner than the such as the b ;ir market provides. IBRD: iJbond issued in E Supports long-term human and social in Januaryth 2 .E development needs that private Bank's liquid creditors largely find unappealing. assets, manag- O Preserves borrowers' financial sheetn sks, and What Is IBRD? strength by providing support in meeting bond IBRD is a AAA-rated financial institution-with some unusual charac- crisis periods, when poor people inavestor needst teristics. Its shareholders are sovereign governments. Its member t X rr 1 ~~~~~~are crucial to are most adversely affected. the Bank's abil- borrowers have a voice in setting its policies. They also usually accord C Uses the leverage of finance to ity to respond preferred creditor status to IBRD, helping it stay financialty strong. promote key policy and to clients' institutional reforms (such financing needs. IBRD loans are typically accompanied by nonlending services to ensure as y etorms more effective use of funds. Also, unlike commercial banks, it is driven ra !sa y by a development impact, rather than profit maximization, objective. reforms) . El Catalyzes private capital by helping Who Are IBRD's Clients? create a favorable investment climate. Seventy-five percent of people who live on less than $1 per day live C] Provides financial support (in the in countries that receive IBRD lending, which are typically middle- form of grants made available from income and enjoy some access to private capital markets but include IBRD net income) for global public countries that also borrow from IDA. Even excluding countries that goods that are critical for the well- also borrow from IDA, such as India, Indonesia, Nigeria, and Pakistan, being of poor people in all countries. j a full 25 percent of the world's $1-a-day poor live in countries that are IBRD borrowers. Elements of IBRD's Financial Strategy Preserving AAA-rated financial strength Achieving efficient Intermediation Adapting to borrower needs To maintain income-generating capacity, To ensure cost-effective funding for To ensure flexibility and innovation in help manage risk, and support IBRD's development uses meeting diverse and changing client development objectives needs O Capital commitments of 183 0 Wide access to markets 0 Product innovations to help clients sovereign shareholders 0 50 years of capital market innovation manage their financial, debt, and O Strong record of repayment by 0 Leadership in new products, crisis strategies borrowers, reflecting priority given structured finance, emerging market 0 Wide borrower choice in loan types to IBRD debt issuance 0 Increasing currency and interest rate O Conservative financial management 0 Wide underwriter partnerships choice O Substantial liquidity 0 Diversified global investor base 0 Flexible guarantees, both to help O Conservative capital structure 0 Ample Treasury liquidity private sector financing and to O Risk-minimizing lending policies 0 Strong derivatives capacity support reforms 0 Active asset-liability management 0 Increased choice of lending terms 10 The World Bank Annual Report 2001 Meeting the Poverty Challenge: The Role of IDA ...and on IDA as an agent for progress in the poorest countries IDA helps the world's poorest countries reduce IDA'S EVOLVING ROLE: GREATER EMPHASIS ON poverty by providing "credits," which are loans at PARTICIPATION AND PARTNERSHIPS zero interest with a 10-year grace period and maturi- ties of 35 to 40 years These countries face complex Responding to recent changes I the internatlonal challenges in striving for progress toward the inter- development environment, IDA works more closely national development goals They must, for example, with borrowers and other development partners The respond to the competitive pressures as well as Poverty Reduction Strategy Papers, prepared in a opportunities of globalization, arrest the spread of participatory manner by IDA countries, offer an HIV/AIDS, and prevent conflict or deal with its opportunty to align donor strategies more closely aftermath To help these countries improve their with country strategies. prospects, the policy framework emphasizes The Bank took important steps i the spring of . Accelerating broad-based growth through sound 2001 to increase transparency and broaden partici- macroeconomic and sectoral policies, especially pation in the formulation of IDA's operational for rural and private sector development. approaches Documents for the donor meetings on Investing in people through strong support for the 13th Replenishment of IDA (IDA- 13)-which the social sectors (see figure), including gender will fund lending in fiscal 2003-05-are publicly mainstreaming and efforts to counter the chal- available at www.worldbank.org/ida t And in lenge and social impact of communicable dis- June 2001, for the first time in IDA's 41-year history, eases, especially HIV/AIDS. representatives of borrowing countries joined donors Building capacity for improving governance- in discussions about IDA's future directions. including in public expenditure management- and combating corruption. Protecting the environment for sustainable IDA's Stepped-up Effort in the Social Sectors development 285 Projects ongoing (compared with 184 a decade ago) - Fostering recovery in post-conflict countries Promoting trade and regional integration. 300 Water supply l E and sanitation X ('1 : 63 Social protection E 200 52 IRlb ( gSl 1|3 (iES 3 1) e e 81 6 Health, nutrition, 81 and population wxai0Jsroi l IDdfbaaaald Ii-i1btiioIs 0 100 50 3f80 85 88 Education [ I G [ ( @ °~1 c -1991 1996 _ 2001 556603 xo}4i.~. ~ As of June 30 - ~~~~~~~~~~~~1 -IDA commitmht-valueof ongoing social sector projects 1991. $7.7 billion 1996. $13 1 billion 2001 $13 9 billion The World Bank Annual Report 2001 The World Bank in Fiscal Year 2001 El C,~~~~~~~~~~~~~~ I-"-- A~~~~~~~~~~~~~ .,~~~~~~~~~~~~~~~~~~~~~~~~~~~6 ° \S o . X~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~oo a F F arigi Th. d-hn(.m ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ CA |urt . mq~E n u e Countries Eligible for IDA Funds Only~~~~~~~~~~~~~~~~~~~~~~~~~~~~o.hFV~II A 1h 2 Th Worl BakAnulRpot20 d~~~~~~~~~~~~~~~~~~~~~~~~~~ bo Mo ountries Agoibl for.WoI IBDFndony* fieno h ord. _l ,pd Inoctiv I I Dn A -Eiil Countnos Conre1lgbe2a BDFnsOny*Ofcso The World Bank Ana eot20 IBRD 31362 AUGUST 2DOtffi uX 0 Vd- CW 'oAova k/;(3Xao. okho[Bimndo nd~~~~~~~~~~~~~~~~~~~~~~~~n of fica 2001[7 Bolvi beam liibefo R ~ k.b bi10/0Rw Chlo N in adito toIAfns;FRM cdni rdae Thf rap refleccs e th following dekiant a theF Republ of fisal200goidvia became eligible for IBD indo G Tanomn~~S ,Cinnadtonto IDAhnds;YRMaeonia 0rad0te Maddition to IBRD funds. s P~lease see the Office Locations and Country ofX ®xt( sigibility for Borrowing from The World Bank tables on pages 135 and 139, respectively. Please ~~ ~i se te ffc Lcaiosan Cunr The World Bank Group The World Bank, with a The International Bank for The International Development Reconstruction and Development Association mission to fight poverty Established 1945 ' 183 Members Established 1960 :X 162 Members Cumulative lending: $360 billion Cumulative lending: $127 billion and improve living Fiscal 2001 lending: $10.5 billion for Fiscal 2001 lending: $6.8 billion for 91 new operations in 36 countries 134 new operations in 57 countries standards for people in the developing world, --I is among the world's leading development institutions. It provides 7 loans, policy advice, i J J I technical assistance, j _ n - _ - .J and knowledge-sharing Ambulances, fumished by Bulgaria's Health Newly literate Bangladeshi women leam to Sector Restructuring Project, stand ready to utilize their new skills toward better employ- services. I BRD and IDA- provide emergency service in Sofia, The project, ment and income-generating opportunities which has also trained physicians and emer- under the Post-Literacy and Continuing together the "World gency personnel, has dramatically reduced the Education for Human Development Project, to geth e r th e "World mortality rate in emergency service cases, which targets 1.6 million of the country's resulting in more than 2,300 lives saved a year poorest, half of them women. Bank"-are owned by IBRD aims to reduce poverty in Contributions to IDA enable the member countries that middle-income and creditworthy World Bank to provide $6-7 bil- poorer countries by promoting sus- lion per year in interest-free cred- carry ultimate decision- tainable development, through its to the world's 78 poorest loans, guarantees, and nonlend- countries, home to 2.4 billion peo- making power. The ing-including analytical and advi- ple. This support is vital because sory-services. IBRD does not these countries have little or no World Bank Group today maximize profit but has earned a capacity to borrow on market net income each year since 1948. terms. In most of these countries consists of five closely Its profits fund several develop- incomes average under just $500 a mental activities and ensure finan- year per person, and many people associated institutions. cial strength, which enables survive on much less. IDA helps low-cost borrowings in capital provide access to better basic serv- markets, and good terms for bor- ices (such as education, health rowing clients. Owned by member care, and clean water and sanita- countries, IBRD links voting tion) and supports reforms and power to members' capital sub- investments aimed at productivity scriptions-in turn based on a growth and employment creation. country's relative economic strength. 14 The World Bank Annual Report 2001 Pg, ,IC The International Finance The Multilateral Investment The International Centre for Corporation Guarantee Agency Settlement of Investment Disputes Established 1956 F] 175 Members Established 1988 D:1 154 Members Committed portfolio $21 8 billion* Cumulative guarantees issued Established 1966 [ 134 Members Fiscal 2001 commitments $9 1 billion Total cases registered 87 $3 9 billiont in 205 companies for Fiscal 2001 guarantees issued Fiscal 2001 cases registered 12 74 countries $2 billion a -1., Women at the Liki River Farm in Kenya pack Children in San Marcos, Peru, attend a com- A port terminal concession in Argentina was vegetables for export Pnvate sector businesses puter leaming session at a training center cre- among the matters settled in ICSID dunng like this one provide jobs that help improve ated and operated by a project benefiting from fiscal 2001 lives and contribute to economic strength and MIGA guarantees stability IFC's mandate is to further eco- MIGA helps encourage foreign ICSID helps to encourage foreign nomic development through the investment in developing countries investment by providing interna- private sector. Working with busi- by providing guarantees to foreign tional facilities for conciliation and ness partners, it invests in sustain- investors against losses caused by arbitration of investment disputes, able private enterprises in noncommercial nsks, such as in this way helping to foster an developing countries and provides expropriation, currency inconvert- atmosphere of mutual confidence long-term loans, guarantees, and ibility and transfer restrictions, between states and foreign risk management and advisory and war and civil disturbances investors. Many international services to its clients IFC invests Furthermore, MICA provides agreements concerning investment in projects in regions and sectors technical assistance to help coun- refer to ICSID's arbitration facili- underserved by private investment tries disseminate information on ties ICSID also has research and and finds new ways to develop investment opportunities. The publishing activities in the areas of promising opportunities in markets agency also offers investment dis- arbitration law and foreign invest- deemed too risky by commercial pute mediation on request. ment law investors in the absence of IFC participation Includes syndications, $14 3 billion for own account t Includes svndications, $2 7 billion for own account The World Bank Annual Report 2001 15 IBRD Financial Results Net Return on Assets Equity-to-Loans Ratio as of June 30, 2001 Borrowings and Investments (percent) (percent) as of June 30, 2001 (billions of dollars) 1 5 1.34 24 118 6 14 0 111st ~~~~~~~~~~~~~~~~~~~~~~~~~~0 :< 2 9 12 ~21 .5 1n4 973d 207H 1.0 1.05 0.87 Bor ow ngs 0 96 outUUndingt 0.78 *Cash and (quid 18 3 248 30 1 24 3 24.4 0.01 ________________I_____I__ __I_____I_____I_____I_ FY97 FY98 FY99 FY00 FY0I' FY97 FY98 FY99 FY00 FY01 FY97 FY98 FY99 FY00 FY01 MANAGING RETURNS TO MAINTAIN MANAGING RISK ACHIEVING EFFICIENT STRENGTH INTERMEDIATION As a cooperative institution, IBRD Consistent with its development IBRD's high credit rating (AAA) does not seek to maximize profit mandate, IBRD's main risk is the allows the Bank to borrow for long but to earn a return on assets suffi- credit risk of its loan portfolio. This maturities at favorable terms. The cdent to ensure its financial risk is closely managed. Bank borrows globally in multiple strength and sustain its develop- IBRD keeps its exposure to market markets and currencies. ment activities on an ongoing basis. risk quite limited. Market risk Outstanding debt after swaps IBRD achieves a net return on assets arises due to movements in market reached 76 percent of average total of about 1 percent per annum. In fis- variables, such as interest rates and earning assets, as of June 30, 2001. cal 2001, an increase in loan loss exchange rates. As of June 30, 2001, the liquid provision reduced net return on IBRD's equity-to-loans ratio is a asset portfolio was $24.2 billion, assets, to under 1 percent. summary measure of its risk- composed of liquid investments. beanng capacity. The ratio Is con- *In fiscal 2001 IBRD adopted Statement of Financial beran te managet. d rin ig of t Outstanding borrowings, net of swaps Accounting Standard No 133 and International servatively managed In light of Accounting Standard No 39, which required that IBRD's financial and risk outlook. derivative instruments be reported at fair value Without adoption of these standards, the ratio would have been 0 78 Selected IBRD Financial Data (millions of dollars) F.scl20i Fiscal 2000 For the fiscal year a Income from loans 8,153 Income from investments 1,589 Borrowing expenses (7,128) Administrative expenses (935) Other 312 Net income . 1,991 Loan commitments ItV 10,919 Loan disbursements 13,332 At fiscal year-enda Cash and liquid investments _ 24,331 Loans outstanding 120,104 Borrowings outstanding (1 14,012)b Equity l (29,289) a Excerpted from the audited financial statements presented in volume 2 of this Annua/ Report b Outstanding borrowings, net of swaps 16 The World Bank Annual Report 2001 Where the World Bank Got Its Money in Fiscal 2001 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Where Do IBRDs Proffts Go? In fiscal 2001 IBRD raised $17 billion, before IBRD's net income serves several purposes related to Its mission: swaps, at medium- to long-term maturities, in inter- A portion of net Income is retained annually to ensure IBRD's national debt capital markets. Borrowings and financial Integrity. The General Reserve allows IBRD to assume shareholder equity fund IBRD's loans and invest- credit risk in lending to countries at the lowest funding costs- ments. Then yea's. fund ng v lume was abov tha of is-which In turn benefits borrowers. Income retention has enabled cal 2000, after peaking in fiscal 1998 due to IBRD to maintain financial soundness through periods of deterio- cabov-av era demakn for fincan cin rating loan quality as well as surging ioan demand. abRD'sefa nial sem ng isa n te uo. Support to IDA has consistently been a priority. Over the last five it receives from its shareholders and on its array years, $1.6 billion (or about 22 percent of IBRD net income) has of financial policies and practices. been transferred to IDA. IBRD issued debt in nine currencies and in a SupportfortheHeavilyIndebtedPoorCountrIes(HiC)iniative wide range of maturities and structures in fiscal has atso been Important. Over the last five years transfers to the 2001. Diversification helps lower borrowers' HIPC Trust Fund have amounted to a total of $900 million, aver- funding costs and expands IBRD's investor base. aging about 12 percent of annual IBRD net income. IBRD's net Income helps meet other developmentat needs from time to time. it enables IBRD to respond to unforeseen humani- INTERNATIONAL DEVELOPMENT ASSOCIATION tarian crises and provide grants or other support for worthy IDA donors come together every three years to causes. IBRD also regularly shares Income with its borrowing decide on the amount of new resources required members through partial waivers of the interest and commitment to fund IDAs future lending program and to dis- fees it contractually charges on its loans. cuss lending policies and priorities. Financial strength and standing In the markets allow IBRD to Fiscal 2001 was the second year of the 12th leverage its equity by five times in the international bond Replenishment of IDA. IDA- 12 is designed to pro- markets. This leverage increases IBRD's ability to lend for vide IDA with resources to fund credits committed developmental activities. during the period July 1, 1999, to June 30, 2002. Nearly 40 countries are IDA donors. Donor nations include not only industrial countries but also devel- Allocation of Fiscal 2001 Net Operating Income oping and transition countries-some of them IBRD of S1.1 billion borrowers and former IDA borrowers-such as (millions of dollars) Argentina, Brazil, Hungary, the Republic of Korea, the Russian Federation, and Turkey (see page 35). 69 IDAs financial strength is based on the strong and continued support of its donors as well as reflows. Sources of IDA funding (billions of dollars) Reserve IDA 150 618 81 0 1 reouc6 110 fl.<*IDA own 7 s . 6 o 11 ~~~~resources' ns o U fiOR Reserve t net income 155 4.1 contribution O 9 _ 12 O 9 . 3 ~~~New funding 0.9 1 1 2 0.9 'An additional amount of 531 million was allocated to the HIPC Trust Fund out of the surplus account consisting of a portion of prior years net operating IDA-10 IDA-li IDA-12 income FY94-96 FY97-99 FYOO-02 tPension Reserve is used exclusively for the income derived from the difference between actual funding of the Staff Retirement Plan and the accounting 'IDA Own Resources includes pnncipal repayments, service charges, and investment income expense atsociated with it, required by GAAP These funds are not 'allocable The World Bank Annual Report 2001 17 IBRD Operational Results LENDING: QUALITY UP, VOLUME STABLE Human development was a high priority in fiscal 2001, the share of education, health/nutrition/ Therqui f onoD operts contrinue tO population, and social protection lending in total Improve fewer ongoing projects were at risk of IBRD lending increased to 21 percent ($2.2 bil- not achievig their development objectves com- lion) from 16 percent ($1 7 billion) in fiscal pared wlth last year. 2000 Most of the increase was concentrated in The portfolio of ongoing projects (713) was the LAC Region smaller than last year's (764), reflecting a IBRD lendig also helped borrowers to decline in approvals of new operations (91 strengthen their flnancial sector ($1 7 billion) approved in fiscal 2001 compared with an imre pubic sector ($1 4 bil- annual average of 130 in the last five years) and lion), meet infrastructure needs ($2.7 billon, efforts to ensure the timely completion of proj- including $2.4 billion in the transport sector), ects under implementation. and support the envilronment and rural develop- As access to international capital markets contin- ment ($1.3 billion) ued to improve for many countries, IBRD lend- ing stabilized at slightly below last year's $10 9 billion. ECONOMIC AND SECTOR WORK (ESW) The share of adjustment lending continued to decline (38 percent in fiscal 2001, down from 41 In fiscal 2001, 230 ESW products were deliv- percent in fiscal 2000 and 63 percent in fiscal ered for IBRD-eligible countries-including 38 1999), approaching pre-East Asia crisis levels. core diagnostic reports underpinning Country Assistance Strategies and adjustment lending (poverty assessments, country economic memo- randa, public expenditure reviews, country finan- New IBRD lending commitments in fiscal 2001 cial accountability assessments, and country were highest for the Latin America and the procurement assessments)-compared with 259 Caribbean (LAC) Region ($4.8 billion), followed products in fiscal 2000. by the Europe and Central Asia (ECA) Region In addition, reports on the financial sector, rural ($2 2 billion) development, social protection, and other sectors Latin American countries also accounted for enhanced the design of projects and supported close to 69 percent of IBRD's adjustment lend- the dialogue on policy and institutional priorities ing, half of it in phased, programmatic support Twenty-seven ESW products were delivered for for medium-term policy reform and institution- India, the year's largest IBRD borrower. The building efforts (for example, fiscal and financial ECA Region accounted for nearly 40 percent of reform in Brazil, social sector reform in Peru, ESW deliveries, with 44 country studies supple- and bank restructuring in Jamaica). mented by 30 regional reports focusing on topics such as education, enterprise restructuring, and accession to the European Union. IBRD Lending Commitments and IBRD Lending by Region, Fiscal 2001 IBRD Lending by Sector, Fiscal 2001 Disbursements, Fiscal 1997-2001 Share of total lending of $10.5 billion Share of total lending of $10.5 billion (billions of dollars) 24 22 2 East Asia Urban Otherb 21 1 and Pacific Development 8% commitments ~~~~~~~~11% 2% Human Public Sector -evelopment 145 192 182 Latin America Manage ment 21 Disbursements Q 118 and theCaribbean SouthAsia 13%t 14 0 46% 19% Finance and 109 5 Private Sector Afric ~~~~~~~~~~~~~~~~~~~Development Africa <^ jurope and Infrastructure' 17% 0% ~~~~~Europe and 26%comi O Central Asia Economic Middle East and 21% Agriculture and 10% FY97 FY98 FY99 FYOO FY01 North AfrPca Environment 3% 12% Note See table 1 1, page 26 a Includes transportation, telecommunications, and water supply and sanitation b Includes multisector, electric power and other energy, oil and gas, and mining 18 The World Bank Annual Report 2001 IDA Operational Results LENDING: QUALITY UP, VOLUME UP Ethiopia was the largest IDA borrower in fiscal F7 The quality of ongoing IDA operations continued 2001 ($667 million), followed by Vietnam ($629 to improve, with fewer projects at risk than last million) and India ($520 million). year. a IDA support for human development-educa- Ye ar tion, health/nutrition/population (including li The size of IDA's active project portfolio HI/IS,adsca rtcinrahd$. increased to 735 from 729 in fiscal 2000 as a HIV/AIDS), and social protechon-reached $2.2 result of a significantly larger number of new billion (representing a $600 million increase approvals (134 operations in fiscal 2001 com- c Other prioritdes were economic reform and pub- pared with an annual average of 127 in the last i sectorimanagement1 il r nfrastruc- fiv yer) lIC sector management ($1.3 billilon), infrastruc- nIve years). ture development ($0.9 billion), finance and compared with $4 4 bmllion In frscal 2000 private sector development ($1 billion, represent- Compareduting withisri$4 was 4 billion in fiscale0 ing an almost $600 million increase over last Contributing to this rise was $1 4 billion in newyer,adualevop ntndhenio- commitments to three countries (Ethiopia, year), and rural development and the envron- Kenya, and Pakistan) that had received no new IDA financing in fiscal 2000. The share of adjustment lending increased to 27 ECONOMIC AND SECTOR WORK (ESW) percent from 16 percent in fiscal 2000 as a One hundred and five ESW products were deliv- result of a number of large adjustment loans, ered for IDA-eligible countries in fiscal 2001, including the first two PRSCs approved for slightly less than the previous year's total of 119 Uganda and Vietnam K Core diagnostic reports, numbering 24, covered poverty, social and structural analysis, public LENDING BY REGION AND SECTOR expenditure management, financial accountability assessments, and procurement assessments, help- r, IDA lending increased in all Regions, except in ing countries to improve governance, financial dis- the Middle East and North Africa Region, which cipline, and the targeting of public expenditures maintained last year's lending levels IDA lend- on poverty reduction. ing to the Africa Region ($3.4 billion) reached 50 ' Other diagnostic and advisory reports centered on percent of total new IDA commitments, and education and rural, social, and private sector included several Africa-wide programs-a con- development. certed response to the HIV/AIDS crisis, help to L J The Afnca Region accounted for 36 percent of adjust to oil price shocks, promotion of regional total ESW deliveries, followed by South Asia (23 trade, and post-conflict reconstruction support. percent) and ECA (14 percent). IDA Lending Commitments and IDA Lending by Region, Fiscal 2001 IDA Lending by Sector, Fiscal 2001 Disbursements, Fiscal 1997-2001 Share of total lending of $6.8 billion Share of total lending of $6.8 billion (billions of dollars) Latin America and UbnOhr 8 7 5 Commitments Middle East and the Caribbean Urban b 6 8 6 8 North Africa 7% Development Oh 21/, ~ ~ ~ ~ ~ ~~~~~2%Hman 60 ~~~~~~5 2 Europe adPublic Sector UDvlopment 60 central Asia Management 32% 5 6 8% ~~~~~~~~~~~~~~~~~~~~11% 4 6 Disbursements 4 4 A r n 's.t\ SuhAsia 3 Al soCa InfrastruCturea South Asa5%14% 18% O 18%_v__ _ __ _ _ _ _ _inance and Agriculture' adPivate Sector FY97 FY98 FY99 FYOO FY01 East Asia and PaEnvironmen Development 15% ~~~~~~~~~~~141' Economic Delomn 15% ~~~~~~~~~~~~~~~~~~Policy 14%Y Note See table 1 1, page 26 a Includes transportation, telecommunications, and water supply and sanitation b Includes multisector, electric power and other energy, oil and gas, and mining W orld Bank Cofinancing Examples of Coflnancing In Fiscal 2001 Total projects cofinanced by the Bank and its partners numbered 131 in fiscal 2001. Examples of projects with significant cofinancing include: The Bolivia Programmatic Structural Adjustment Credit for Decentralization leveraged $20 million In funds from three part- ners: Department for International Development, United Cofinancing * describes funds committed by official Kingdom; Sweden; and the Netherlands. Parallel cofinancing of bilateral partners, multilateral partners, export credit $127 million came from KfW, the German Technical Assistance agenctes, or private sources to specific Bank-funded Corporation, Denmark, the U.S. Agency for International projects. Partners include regional development banks, Development, the Andean Development Corporation, and the multilateral partners such as those associated with IADB. environmental agreements, and special program mech- The Mali Education Sector Expenditure Project leveraged $154 anisms, as well as private sector actors that provide million from 15 donors: the African Development Bank, the project financing The Bank's cofinancing figures Agence Fransaise de Developpement, the Canadian International reflect the combining of Bank resources with those of Development Agency, Sweden, the United States, the Islamic other donors in specific regions and sectors to support Development Bank, KfW, France, Belgium, the Netherlands, client country activities. The wider the participation in the cofnancin effor, the reaterthe cosensuson theNorwvay, the Organization of Petroleum Exporting Countries Fund, the cofinancing effort, the greater the consensus on the teUie ain hlrnsFn,teUle ain aciite an poice supprted the United Nations Children's Fund, the United Nations Development Programme, and the World Food Program. Cofinancing in fiscal 2001 amounted to $5.47 billion. The India PowerGrid 11 Project received $175 million of cofinanc- Multilateral and bilateral partners contributed 85 ing from KfW. percent of this amount. Major partners included the The West Bank and Gaza lending program is financed through Inter-American Development Bank (IADB-$1.9 the Bank-established Trust Fund for Gaza and the West Bank. billion); the Japan Bank for International Cooperation The fund has been allocated $380 million from the Bank's net ($0.53 billion); and Kreditanstalt fur Wiederaufbau income and since September 1994 hasfinanced 20 projectsfora (KfW-$0.3 billion). This year's cofinancing was total of $307 million. Over $540 million has been provided in below the previous year's level ($9 3 billion), reflecting joint and parallel cofinancing by numerous donor governments. unusually large volumes of cofinancing in fiscal 2000 for the Chad-Cameroon Pipeline Project ($3.4 bil- lion) and in China ($0.4 billion). The Latin America and the Caribbean Region accounted for the largest share of cofinancing in fiscal 2001 ($3.4 billion), followed by Africa ($1.12 billion) and Europe and Central Asia ($0.46 billion). The major sectors attracting cofinancing were Coflnancing Ratio public sector management ($1.2 billion), finance Ratio of total cofinancing to World Bank lending ($1 billion), and oil and gas ($0.9 billion). (percent) In addition to cofinancing of $5.47 billion, 60 $2 billion was committed in fiscal 2001 under the Strategic Partnership with Africa framework. The commitment, which reflected close donor coordina- tion on policies in the context of Poverty Reduction 38 Strategy Papers (in Benin and Uganda, for example), 34 was above the amount committed in fiscal 2000 29 ($0.51 billion). FY98 FY99 FYOO FY01 *Data in this section represent project cofinancing estimates at the time of project presentation to the Board and could be revised as financing plans evolve 20 The World Bank Annual Report 2001 Trust Fund Highlights TrustJFunded Initlatives for Cllmate Change and Post-Conflict The Prototype Carbon Fund (PCF), established with the objective of mitigating climate change, alms to promote sustainable development, demonstrate the possi- bilities of public-private partnerships, and offer a learning-by-doing' opportunity to stakeholders. PCF emphasizes renewable energy and energy efficiency projects that have potential for replication and for reducing climate change at a reasonable cost. PCF investments wilt be made in transition economies and developing countries fol- Trust funds are financial and administrative arrange- lowing the emerging framework of the Kyoto Protocol for its joint Implementation ments * that facilitate grant funding of high-priority development needs, including technical assistance and and Clean Development Mechanisms, respectively. By October 2000, the PCF had advisory services, debt relief, post-conflict transition, subsc?ibed capital of $145 million from 17 corporate and 6 public sector partici- and cofinancing. Trust funds help leverage poverty pants. See www.PrototypeCarbonFund.org. 6) reduction programs by funding key due diligence activ- ities for development operations, promoting innovative Trust funds increasingly support reconstruction and transition In post-conflict coun- approaches, forging partnerships, and expanding the tries and regions. Bank-financed trust funds provide credits (on IDA terms) and scope of development collaboration. grants to nonmember countries to support demobilization, help rebuild economies, and develop key institutions. The Bank has catalyzed additional external donor assistance to increase development Impact In post-conflict situations. Special Bank In fiscal 2001:t credits and grants for the West Bank and Gaza, East Timor, Kosovo, and the Federal Total contributions expanded significantly, with Republic of Yugoslavia totaled nearly $500 million in recent years, leveraged by an increased donor support for the Heavily Indebted additional S1 billion in grants from the larger donor community. Poor Countries (HIPC) Initiative, a new Japan Social Development Fund (JSDF) to help poor and vulnerable groups hurt by crisis, a trust fund for the Federal Republic of Yugoslavia, and major technical assistance and cofinancing projects. Contributions to Bank-Administered Trust Funds, Contributions totaled $2,719 million, comprising Fiscal 1997-2001 $1,450 million from bilateral donors, $1,225 mil- (millions of dollars) lion from multilateral donors, and $44 million from private sector and nongovernmental organi- 3,000 zations. 2,719 Major contributions were provided by the 2,500 Bank Group European Community ($757 million), the World 2 000 1,927 Bank Group ($422 million), Japan ($277 mil- 1,769 lion), and the Netherlands ($235 million). 1,500 1,544 1,568 Contributions to ongoing, global programs External donors financed by Japan and the Netherlands included 1,268 1,153 1368 1,359 2,297 $93 million for the JSDF, $59 million for the 500 s Japan Policy and Human Resources Development l (PHRD) Fund, and $60 million for the Bank- 0 _ _ Netherlands Partnership Program. 1997 1998 1999 2000 2001 Disbursements totaled $1.85 billion with $988 million attributable to three large programs: HIPC, the Global Environment Facility and the PHRD Fund. * Trust funds are accounted for separately from the Bank's own resources and are defined through formal agreements between the Bank, external donors, and the recipients who receive grant funding. t The financial information presented for the trust fund portfolio reflects reporting on an accrual basis for contributions to the Heavily Indebted Poor Countries (HIPC) Trust Fund, and reporting on a cash basis for contributions to all other trust funds. The differential between contributions reported on an accrual and cash basis totaled $536 million in fiscal 2001,(S16) million in fiscal 2000, $233 million in fiscal 1999, and $80 million in fiscal 1998. Disbursements for all trust funds, including the HIPC Trust Fund, are reported on a cash basis. The World Bank Annual Report 2001 21 The World Bank's Active Portfolio of Projects under Implementation at June 30, 2001 EVOLVING PRIORITIES TURNING THE PORTFOLIO AROUND: TWO EXAMPLES Th.e World Bank's project portfolio of $105 bllion The World Bank's project portfolio of billion Water and Sanitation Sector. Five years ago, about half at the end of fiscal 2001 comprised 1,553 ongoing the Water and Sanitation portfolio was at risk, and prob- projects, nearly a quarter of them in Africa. lem projects accounted for nearly a quarter of the portfo- Measured in dollars as well as number of projects, the lo. At the end of fiscal 2001, only 15 percent of projects distribution of the portfolio highlights the Bank's sus- Th tained emphasis on investments in people, rural were at risk e radical Improvement has resulted from development with an environmental focus, and A shft lendmg away from publc sector utilities that infrastructure and institution building needed to rome reor and toad uli tht h ave help countries attract private investment and reduce reformed io to Bak runing and sector talent into their operations, and The share of the portfolo i the energy as well as the The Bank's adoption of a proactive approach toward The har ofthe ortoli in he nery aswel asthe problem projects, including quantitative performance oil and gas sectors has fallen sharply over the past five proem proects ri g qantitativ o years, reflecting countries' success in attracting pri- g g g vate and other lenders into those sectors and the Africa Region. Operations in the Afnca Region have histor- Bank's focus on policy and institutional reform -averageors methe ofnc onfhavelated Countnes with od policy and institutional envi- ically faced above-average nsk because of conflict-related ronments account for a markedly higher share of the cnses, political instability, and weak govemance Despite poretfoli todayurelti tora fcardly 1996er shareofthe these risks, the quality of the region's portfolio has improved portfolio today relative to fiscal 1996 makdyXs euto Support for countries' efforts to combat corruption as a resultof and HIV/AIDS has been mainstreamed and is today Lnoking new lending to resolutiton of outstandng problems, more than double what It was in fiscal 1996 Providing staff wilth real-time data on portfolio quality, more tan doble wat it as infisca 1996Tackling cross-cutting problems in risky projects The Bank continues to be a leader in providing recon- taclig couttin reminrsk struction assistance following natural disasters, with through country- oreiews, growing attention to disaster prevention In the last five Usig local staff In country offices to strengthen over- years, lending for reconstruction totaled nearly $5 billion, silght, and and while difficult to quantify precisely, disaster preven- Filitatingpl invole a tion lending is approaching similar levels sight of the Bank's portfolio Portfolio management by decentralized country office staff has increased significantly, strengthening the Bank's responsiveness to client needs and improv- ing portfolio health. Project Portfolio by Region, Project Portfolio by Sector, Projects at Risk of Not Achieving Development June 30, 2001 June 30, 2001 Objectives, Africa Region Share of total $105.4 billion Share of total $105.4 billion (percent) 35% Urban Agriculture and South Asia 17% - -Africa14% Development 6% Environment Middle East and infrastructure' Economic North Africa 23% Policy 15% 6% 3% and Pacific Public Sector Latin America and 26% Management 4% DevlHuman the Caribbean P Finance and Development 22% Europe and Private Sector Otherb 23% Central Asia 15% Development 14% FY96 FYO1 6% a Includes transportation, telecommunications, and water supply and sanitation b Includes multisector, electric power and other energy, oil and gas, and mining Source Quality Assurance Group 22 The World Bank Annual Report 2001 The Quality of the World Bank's Operations: Sustained Improvement Following five years of solid improvement, the develop- Findings of the Bank's Annual Report on Portfolio ment nskiness of the Banks portfolio has been cut in Performance include improved relevance of Bank half and is now the lowest it has been in many years. assistance, consulting of stakeholders, attention to As a result, some $16 billion of loans and credits are likely social and environmental impacts, oversight of now better positioned to deliver results Improvements fiduciary aspects, collaboration with partners, and over the five-year penod have been broad based, cover- focus on results and problem solving. Building on ing virtually all regions and sectors. progress and sustaining efforts will be crucial The quality of projects under implementation has improved substantiallya... Satisfactory Quality at Entry Satisfactory Quality of Supervision Projects at Risk of Not Achieving (percent of total projects) (percent of total projects) Development Objectives (percent of total projects) 92 92 82 L' 29 CY97 CYOO FY97 FY00 FY96 FY01 The quality of economic and sector analytical work is also improvinga... Economic and Sector Work (percent) 86 72 FY98 FY00 These gains are beginning to show up In independent evaluations of projects that have closedb Satisfactory Outcomes Projects with Substantial Institutional Projects Whose Sustainability Is Likely (percent of total) Development Impact (percent of total) 78 78 78 (percent of total) 71 5653 5 43 U III I ' Iii L Disbursements FY96 FY00 FY96 FY00 FY96 FY00 a Data refer to the evaluation assessments by the Quality Assurance Group of a sample of recently approved and ongoing protects each year Historical year shown represents the first year for which data are available Calendar year figures are preliminary b Data refer to ndependent evaluation assessments by the Operations Evaluation Department (OED) of projects that have completed their loan disbursement phase and have exited the Bank's active lending portfolio Results for fiscal 2000 exits are preliminary, based on all currently available independent assessments, covering roughly 45 percent, as reported in the Annual Report for Development Effectiveness 2000 The World Bank Annual Report 2001 23 Chapter i Overview of World Bank Activities in Fiscal 2001 In fiscal 2001 the World Bank intensified its efforts cent, with China leading the decline. In at least 25 to help countries fight poverty It accelerated sup- developing countries, infant mortality rates have been port-jointly with the IMF-to help the world's declining, putting them within likely reach of the poorest countries prepare poverty reduction strate- 2015 infant mortality goal. The gaps between girls' gies, thus advancing their eligibility for significant and boys' enrollments have narrowed. But other data debt relief. It heightened collaboration with global are sobering: estimates show that more than 113 mil- partners around the international development goals lion children remain out of school, 150 million chil- to enhance prospects for their achievement and, in dren remain underweight, and maternal deaths particular, to strengthen the fight against HIV/AIDS. average 440 per 100,000 in developing countries And it articulated a new Strategic Framework that (compared with 21 in high-income countries) clarifies the key strategic directions of the Bank and HIV/AIDS continues to present a formidable ob- emphasizes the need to consolidate and build on the stacle to reaching the goals, although a few countries significant progress of recent years. are beginning to reap successes from prevention pro- grams. And many countries, on present trends, are not GLOBAL CONTEXT: SLOWING RECOVERY, SLOW on track to halving their poverty incidence by 2015. PROGRESS ON POVERTY REDUCTION During 2000, the world economy continued its FISCAL 2001 ASSISTANCE: FOCUS ON POVERTY, remarkable recovery from the 1997-98 financial cri- QUALITY sis, but momentum faded as the year progressed. Higher lending volumes and special financing. At GDP growth of developing countries averaged 5.4 $17.3 billion, new lending in fiscal 2001 was mod- percent in 2000, a shade above the previous year. estly above the previous year's level for IBRD and The fastest-growing region was East Asia and IDA combined (table 1.1). The increase resulted Pacific, at 7.5 percent, Sub-Saharan Africa trailed from higher IDA lending to Africa, consistent with with 2.7 percent growth. South Asia continued on a IDA-12 goals and in particular to respond to the steady growth path despite a major earthquake in HIV/AIDS crisis, post-conflict situations, and oil India Accelerated reform also helped growth in price shocks A multicountry, fast-track program for Europe and Central Asia's developing countries, Africa to intensify the fight against HIV/AIDS boosted by the rise of Russian oil revenues to a deserves special mention for its innovativeness as record level, resolving setbacks to financial stability well as scope for scaling up development impact and attracting private investment remain challenges (box 1.1). Overall, new IDA lending focused on for the region Latin America, on the whole, also investments aimed at reducing poverty, including recovered well, benefiting from a return to stability investments in the social sectors and rural and of global financial markets. Growth in the Middle community-driven development. Demand from East and North Africa continued, but serious chal- IBRD borrowers, particularly in Europe and Central lenges include the continued political uncertainty Asia and Latin America, was centered on strength- and high unemployment in the region. For the world ening financial sectors, investing in people, improv- as a whole, slower growth is expected for 2001. ing public sector management, and addressing needs Progress on poverty reduction has been slow, in the transport sector. Institution building remained and the challenge of the international development a strong priority. With respect to the number of goals remains immense (see page 4) Prospects for projects, the year's total of 225 was about the same success, in some areas, are improving, however as last year, with IDA operations reaching a first- Between 1990 and 1998 the proportion of people liv- time-ever 60 percent of the total. The average size ing in extreme poverty fell from 29 percent to 23 per- of operations increased to $77 million in fiscal 2001 Overview 25 Table i.i World Bank Lending by Sector, Fiscal 1992-2001 (millions of dollars) Classified on a Classified on a loan-by-loan basisa,d loan component basisb Sector FY92-97 FY98-99C FY00 FY01 FY00 FY01 Annual Annual Average Average Agriculture 2,9133 2,700 0 1,336.7 1,4568 1,150 0 1,448 4 Economic policy 2,339.6 5,812 7 1,286 7 1,323 8 1,301 0 652 0 Education 1,724 6 2,231 9 6840 794 1 762.3 1,143 4 Electric power and other energy 2,547.2 1,253.6 994 2 824 4 990 5 944 9 Environment 738.3 711 5 514 1 515 9 918 8 791 2 Finance 1,632 5 4,247 6 1,676 5 2,231 3 1,774 0 2,231 7 Mining 218 1 845 8 54 5 36.0 20 0 36.0 Multisector 140 0 504.6 654 5 50 1 513 5 5 0 Oil and gas 550 9 78 8 167 0 81 6 166 7 155 1 Health, nutrition, and population 1,263 9 1,549 0 987 0 1,047 8e 1,044.3 1,343 3e Private sector development 774 7 723 5 163 9 507 3 207.3 556 6 Public sector management 600 6 1,280 1 2,442 5 2,570.6 1,868.3 2,115 0 Social protection 757 2 2,190.4 990 0 1,672 5 1,517 9 1,882 7 Telecommunications 261 1 90 7 109 3 65 0 1094 64 2 Transportation 3,060.2 3,183 1 1,690 0 2,969.9 1,612.3 3,024 6 Urban development 1,112 9 9104 621 7 549.5 699.5 317.3 Water supply and sanitation 908 0 481 3 903 6 554 0 620 5 539 2 Total 21,543.1 28,795.0c 15,276.2 17,250.69 15,276.3 17,250.69 Of which IBRD 15,368 4 21,634 3 10,918 7 10,487 1 IDA 6,174 7 7,160.7f 4,357.6 6,763 5f Note Numbers may not add to totals because of rounding Please see appendix 10 in volume 2 for detailed IBRD and IDA lending by sector a To better capture the evolving nature of Bank operations, the Bank's sector classification system is reviewed and changed as appropriate In fiscal 2000, two new sector categories were created (Economic Policy and Private Sector Development) and one sector category was dropped (Industry) Economic Policy comprises oper- ations that support macroeconomic poiicy, trade, and other economic and institutional reforms It includes structural adjustment operations previously assigned to Multisector and some operations previousiy assigned to Finance Private Sector Development comprises operations dealing with the business environment, private infrastructure, small scale enterprise, and privatization issues As such, it includes some operations previously assigned to Industry and to Public Sector Management Other operations previously included under Industry have been assigned to the Public Sector Management sector In addition, a few individual operations approved in fiscal 1998-99 were reassigned, including a fiscal 1999 project from Agriculture to Water Supply and Sanitation b This column shows lending by sector, based on a classification by major loan component The example of a $100 million public sector loan,with components aimed at addressing environmental, financial, and social protection needs, serves as an illustration In the case of loan-by-loan classification, the full amount of the loan appears in the Public Sector Management sector, in the component classification, the full amount is split among the four sectors-Public Sector Management, Environment, Finance, and Social Protection As a result, total lending of $1,882 7 million for Social Protection in the component classification is the sum of all social protection components within loans approved in fiscal 2001 c Bank lending in fiscal 1998 and 1999 are presented together, the two being exceptional years due to the East Asia financial crisis d The data in last year's Annual Report were slightly revised in fiscal 2001 e Includes $287 2 million in IDA credits to seven countries under the Multi-country HIV/AIDS Program for Africa, and $40 1 million in IBRD loans to two countries under the Caribbean HIV/AIDS Initiative, for which the Bank earmarked funding of $500 million and $155 million, respectively, in fiscal 2001 f Excludes IDA HIPC grants of $75 million to Uganda in fiscal 1998, $154 million to Mozambique in fiscal 1999, and $37 million and $64 million to Honduras and Cameroon, respectively, in fiscal 200t g Does not include special financing of $104 8 million provided by the Trust Funds for East Timor, Gaza and the West Bank, Kosovo, and the Federal Republic of Yugoslavia from $69 million the previous year, reflecting several 12 operations and $96.5 million in fiscal 2000. The large investment operations. The share of adjust- beneficiaries were East Timor, Gaza and the West ment lending continued to stabilize at about one- Bank, Kosovo, and the Federal Republic of Yugoslavia. third of total lending, significantly down from the fiscal 1999 peak of above 50 percent and approach- Accelerated debt relief. Significant progress was ing the typical adjustment lending shares in the early made in fiscal 2001 to provide deeper, broader, and 1990s (before the financial crisis). In addition, 17 faster debt relief to some of the world's poorest coun- special financing operations were approved for a tries, many of them in Africa, under the enhanced total commitment of $104.8 million, compared with Heavily Indebted Poor Countries (HIPC) Initiative 26 The World Bank Annual Report 2001 Box m.i The Multi-Country HIV/AIDS Program (MAP) for Africa The HIV/AIDS epidemic now poses the paramount threat to development in Sub-Saharan Africa. About 25 million adults and \Pi children are living with HIV/AIDS, as estimated by the joint , a United Nations Programme on HIV/AIDS (December 2000). '\ \ Some 17 million have already died from the disease, which may -;| " be costing the region 0.5 percent to 1.2 percent of per capita . growth each year, with losses likely to grow. In collaboration with partners (see page 103), the Bank K : launched in September 2000 the Multi-Country HIV/AIDS Program (MAP) for Africa-the first of its kind. Under MAP, - flexible and rapid funding will be committed, on IDA terms, to individual HIV/AIDS projects developed by countries > + The MAP seeks to dramatically increase access-especially \X by vulnerable groups-to HIV/AIDS prevention, care, and - treatment programs. Communities and associations of people affected by HIV/AIDS will help design and implement activities and will l J control resources. D - Countries benefiting from the MAP in fiscal 2001 include Cameroon, Eritrea, Ethiopia, The Gambia, Ghana, Kenya, and Uganda. This young boy is one of 8 1 million beneficiarnes of Mexico's Second An initial amount of $500 million covers the first of three Basic Health Care Project, which is bnnging modem basic health serv- phases. Phase 1 (expected to be fully committed by the end ices to previously excluded rural poor people, especially women and of calendar 2001) aims to help as many countries as possible children A Third Basic Health Care Project was approved in fiscal 2001, intensify action against HIV/AIDS and cope with the unprece- focusmg on mcreasmg equit dented burdens of the epidemic. Phases 2 and 3, respec- . Increase (based on early indications) social tively, will stress mainstreaming and prevention. The MAP aims ultimately to avert millions of HIV infections, °expedures by1an av recof aout 17bllio alleviate suffering for tens of millions, and protect the devel- a year during 2001-02, directed toward health, opment prospects of entire nations, education, HIV/AIDS programs, basic infrastruc- ture, and governance reform, and Reduce spending on debt service to about 2 per- cent of GDP-well below the average for devel- framework As of June 30, 2001, 23 countries- oping countries, social expenditures, in compared with 7 a year ago-were receiving debt comparison, are estimated at about 7 percent relief under this framework, amounting to more than $34 billion over time from all creditors. Importantly, Evolving economic and sector work (ESW). debt relief has begun to be delivered within a trans- ESW products numbered about 335 in fiscal 2001, parent and comprehensive Poverty Reduction including about 234 analytical reports and some 100 Strategy Paper (PRSP) framework. PRSPs (dis- cussed on page 30 under "Support to low-income countries") are developed by countries after national Figure t.i Reduced Debt Stock and Improving Debt consultations and aim to ensure a nationally "owned" Service Ratios before and after Assistance poverty reduction framework for spending resources under the HIPC Initiative freed by debt relief. In addition, debt relief is deliv- Percent Billions of doiiars ered only to countries that have demonstrated the 30 28% 6 Debt service as commitment and capacity to use the resources effec- 25 $53 2 percent of exports tively After HIPC (and combined with traditional) 20 19% debt relief, the 23 countries will' _=v Debt service as 1 5 _ \ 13%30 percent of revenue 15 ~~~~~~~~~~~13% (left axis) Witness a two-thirds reduction in total debt, 10 $202 Debtstock with debt service payments reduced by about bilions of dollars billion year ir ~~~~~~~~~~,, 5net present value $1 l bilion a year (figure 1 1), (right axis) 00 Before HIPC (1999) After HIPC (2001-02) Overview 27 policy notes and other products. In fiscal 2001 for- these projects benefited from IDA financing. mal reports included 62 core diagnostic reports Also to benefit the vulnerable, the Bank is not only (such as poverty and gender assessments, public steadily expanding its social protection portfolio- expenditure reviews, financial accountability, and whose quality is also improving-but also working procurement assessments), 75 other diagnostic at the global level, for example with the Intemational reports (such as institutional and governance Labour Organisation and the United Nations reviews, financial sector assessments, social protec- Children's Fund, to fight child labor. tion reviews, and city development strategies); and Working toward a cleaner, healthier environment 97 regional and country advisory reports. The Africa has entailed extensive global consultations to and Europe and Central Asia regions accounted for inform a forthcoming environmental strategy, col- the highest share of the year's ESW ESW provides laborative efforts to better manage Nile water the basis for the Bank's policy dialogue with clients. resources, and more environmentally focused sup- When undertaken in partnership with local institu- port for the energy, oil and gas, and mining sectors. tions, it is also an effective vehicle for building insti- Other progress to empower people is reflected in tutional capacity It underpins the country's own collaborative work on the Global Development vision and the Bank's diagnosis of the country's Gateway-an initiative to make worldwide devel- development situation; it provides the analytical opment knowledge more widely and interactively basis for HIPC and PRSP work in IDA countries; accessible-as well as using Bank lending to help and it plays an important role in middle-income build countries' information systems (75 percent countries-underscored by the Development of Bank projects have such components) Committee's call for stronger analysis of structural, A wide range of Bank Group services supports pri- social, and sectoral issues and priorities. ESW helps vate sector development, ranging from investment the Bank develop its Country Assistance Strategies climate surveys (of places as diverse as East Timor (CASs) and formulate and implement effective lend- and the Russian Federation) and support for pn- ing programs. In fiscal 2001 the Bank continued a vate provision of infrastructure to catalytic lending reform effort to strengthen ESW and fill gaps in the and innovative finance, including guarantees availability of diagnostic reports, particularly in key A fast-growing area of support is law and justice, areas such as public expenditure, procurement and where Bank focus has evolved from specific law financial management, and structural constraints to reform to encompass legal education for the pub- growth and poverty reduction. lic, anticorruption programs in the judiciary, indigenous dispute resolution mechanisms, and Multidimensional support for poverty reduction. legal aid for poor women. Released in September 2000, the Bank's World A new operational policy to guide conflict-related Development Report 2000/2001 emphasized opportu- work allows for a more systematic approach, nity, empowerment, and security as key to reducing including, in the area of conflict prevention, multidimensional poverty. Examples of the Bank's studies to identify root causes, support for trans- efforts to reflect in its work the report's conclusions, parent public expenditure management, and var- through lending and nonlending services, include ied operational support (for demobilization and the following reintegration, for example). Lending to fight communicable diseases amounted to over $610 million-twice the average for the Improved development effectiveness. The number past four years, and including over $418 million of projects considered "at risk" in the Bank's portfolio from IDA; support to combat HIV/AIDS and has been cut in half over the past five years and is malaria has intensified, while the Bank is already now the lowest it has been in many years. As a the largest single source of external support for result, some $16 billion of loans and credits are bet- tuberculosis control in developing countries. ter positioned to deliver results to clients. The Support for education is emphasizing access, quality of project appraisal and supervision has also quality, and equity, as of June 30, 2001, the improved substantially; a similar trend is emerging Bank has supported 64 active projects world- with respect to nonlending services. These results are wide with girls' education components; 55 of beginning to be reflected steadily in improved project 28 The World Bank Annual Report 2001 outcomes: the independent Operations Evaluation Department (OED) estimates that 78 percent of r closed projects had satisfactory outcomes in fiscal 2000, compared with 73 percent in fiscal 1999 Institutional development and sustainability of results are also improving, slowly but steadily. Particularly noteworthy are quality improvements in the Africa region, which reflect in part IDA's growing effort to focus new lending on countries with good policy performance The quality of adjustment lend- ing has also improved markedly. Also notable toward ensuring more effective use of aid is the greater attention, Bank-wide, to safeguard and fiduciary policies. Highlights include an improved tracking system, recognizing the potentially high social and envi- - ronmental costs of noncompliance; efforts to harmo- nize safeguard requirements across donors, and a steady strengthening of project financial management resulting from systematic efforts to improve govemance and cost effectiveness. A growing prionty of OED is to and cost effectiveness. A growing prionty of OED is to More and more people are taking advantage of child health services strengthen borrowers' capacity for evaluation. in Ugandan villages covered by the country's Nutrition and Early Childhood Development Project, whose communications component is making a dramatic difference to community participation Here, a child PRESERVING FINANCIAL STRENGTH TO SUPPORT is weighed DEVELOPMENT NEEDS pared for the Annual Meetings in September 2000- IBRD net income in fiscal 2001 was $1.5 million, described the changing paradigm for development lower than the previous year primarily because of assistance and outlined the way the Bank is adapting higher provisioning expenses. IBRD retained $618 its approach to better reflect the lessons of experi- million out of fiscal 2001 operating income in its ence and respond to new needs for development General Reserve-lower than in the previous year, services. In particular, the paper noted the increasing when $1 1 billion was retained in keeping with focus on policies and institutions, the role of the pri- IBRD's strategy to preserve long-term financial vate sector, and country ownership and partnership strength and support other development needs. As as articulated in the Comprehensive Development part of its regular financing operations, IBRD raised Framework (CDF). The paper also formalized the $17 billion in international debt markets in fiscal Bank's results-focused country business model, 2001. It continued to borrow at favorable costs, in which is grounded in the country's own vision of turn enabling low borrowing costs for client coun- development and diagnostic work on the priorities tries Funding volume was above the previous year's and constraints for change, and set out in the CAS level, reflecting financing for loan disbursements and refinancing of debt retirements. IBRD maintained Evolving Country Assistance Strategies. In fiscal adequate liquidity in fiscal 2001 to ensure uninter- 2001 the Board discussed 37 CASs, including 8 rupted cash flow to meet its obligations. As of June Transitional or Interim Support Strategies for post- 30, 2001, the liquid asset portfolio was $24.2 billion. conflict economies such as East Timor, Ethiopia, Kosovo, and Sierra Leone. More than ever, CASs are FORMALIZING THE COUNTRY BUSINESS MODEL being prepared in consultation with countries and AND GLOBAL PRIORITIES with attention to transparency Emphasis on disclo- sure continued, with disclosure of 100 percent of Country business model. "Supporting Country IDA (including "blend") and 71 percent of IBRD Development World Bank Role and Instruments in country assistance documents, for an overall disclo- Low- and Middle-Income Countries"-a paper pre- sure ratio of 87 percent Bank-wide. It is expected Overview 29 Box 1.2 Scaling Up Results, Targeting the Vulnerable, Building on Success, Supporting Private Enterprise: Illustrations of Projects Approved in Fiscal 2001 that, after July 1, 2002, each IDA CAS presented to Health. The Second National Leprosy Eliminotion Project (IDA, $30 million) the Bank's Board would normally be based on a supports national programs in India to improve diagnosis, treatment, and PRSP, which would provide the context for all IDA monitoring at the state level, building on its predecessor, under which reg- lending and nonlending activities The Board has istered cases nationwide were cut in half between 1993 and 2000. already considered a number of CASs based on PRSPs, Including Burkina Faso and Uganda. A total Rural development. Brazil's Land-Based Poverty Alleviation Project (I BRD, of 17 of the year's CASs were prepared jointly with $202 million) will scale up the results of two successful Bank-financed the IFC underscoring the Importance of private pilots that tested a community-based approach to provide faster access to land by the rural poor, thereby helping raise the incomes of about 50,000 investment to these countries' strategies While the families. poverty focus of CASs has been improving, the Bank has been steadily raising the standard for its assis- Regional Integration. The Regional Trade Facilitation Project (IDA, $110 tance. Key priorities include good poverty diagnosis, million)-the first of its kind-will support poverty reduction through pri- integration of economic and sector work, selectivity vate sector-led growth in seven African countries, helping increase credit in assistance, appropriate sequencing of instruments, availability for productive activities and providing startup funds for the and capacity building to monitor PRSP outcome Africa Trade Insurance Agency. indicators-currently a major challenge Projects Social protection. The Emergency Demobilization and Reintegrotion Project approved over the past year attest to the strong and the Emergency Recovery Project (IDA, $400 million) will have a signifi- poverty focus of Bank assistance (box 1.2) cant impact on reducing poverty in war-torn Ethiopia by helping veterans restart their lives and lump-starting the economy, while also addressing Support to low-income countries. The Boards of basic needs and scaling up HIV/AIDS-related interventions. the Bank and the IMF considered Full and Interim PRSPs prepared by 32 countries in fiscal 2001, Finance. The Second Poverty Alleviation Microfinance Project (IDA, $151 prepard by 32 cou s in sl 2001r million) expands rural microcredit in Bangladesh to reach those who have pr y introduction in Dlecember 1999, PRSPs have to date been left out or underserved, while also ensuring that microlending will be sustainable into the future; 1 2 million new borrowers and 19,500 become the principal vehicle for implementing the microentrepreneurs are expected to benefit. principles of the CDF in low-income countries. The accelerated preparation of PRSPs (including 29 Education. The Mali Education Sector Expenditure Program (IDA, $45 mil- Interim ones to enable countries' preliminary quali- lion) is a 10-year program aimed at increasing gross primary enrollment fication for debt relief under the enhanced HIPC from about 56 percent in 2000 to 95 percent in 2010, helping Mali's future framework) signals progress, but the strong partici- ability to respond to competitive market conditions. patory process, still to come in the Full PRSPs, will Transport. The Third Inland Waterways Project (IBRD, $100 million) will be crucial. The approach is still in its early stages, improve market access of, and power supply to, remote inland areas of linking public actions to priority poverty reduction China's Hunan province and provide more economic inland waterway trans- outcomes will be critical as the process evolves port, reducing transport bottlenecks, strengthening institutional capacity, Progress of a different kind-donor coordination- and benefiting nearly six million poor residents. is reflected in the European Union's decision to base its assistance to the Africa, Caribbean, and Natural disasters. The Natural DisasterManagement Project (IBRD, $404 Pacific regions on the PRSP framework. Growing million) will help reduce human, economic, and flnancial costs of natural dis- adopt ion of the PRSP framests towing asters in Mexico by focusing on recovery and prevention of loss of life and adoption of the PRSP approach attests to the infrastructure damage. expanding acceptance of CDF principles, which emphasize country ownership based on national Public sector reform. The Budget Systems Modemization Project (IBRD, consensus and strong participatory processes, long- $24 million) will modernize and expand Algeria's capacity for growth by term vision, results focus, and partnership. The promoting efficient, transparent, and effective governance. Bank's Poverty Reduction Support Credit (PRSC) will help Implement these strategies On May 31, Environment. Russia's Coal and ForestrySector Guarantee Facility (IBRD, 2001 he Boardmof the WorldeBank Ov a $200 million) will help foster a better business environment in the coal and forestry sectors and support commercially viable enterprises. $150 million PRSC for Uganda, the first IDA credit to support the implementation of a country's Watersupply. The Rural WaterSupply and Sanitation Project (IDA, $20 mil- poverty reduction strategy as set out in its PRSP lion) will expand sustainable water supply and improve sanitation service coverage to over 400,000 of the Republic of Yemen's mostly poor rural pop- ulation, improving health and freeing girls from water-fetching chores to attend school. (see page 43) A PRSC for Vietnam was also ing with global partners on major initiatives, and approved in fiscal 2001. integrating efforts into country-level work An urgent task at the international level is to develop solid esti- Support to middle-income countries. With the mates of financing requirements for each priority support of Ministers at the Joint Bank-Fund Annual area That pending, the Bank is relying on innovative Meetings in September 2000, the Bank Group cre- IBRD and IDA program and project lending to sup- ated a task force to consider how best to respond to port strong national programs (such as the Multi- the needs of middle-income countries (those eligible Country HIV/AIDS Program) as a basis for latcr to borrow from IBRD). A clear consensus emerged global approaches, while also exploring a limited from extensive consultations with client countries, expansion of IDA's grant capability and a restructur- shareholders, and other partners the Bank Group ing of the Bank's Development Grant Facility The has a crucial role to play in middle-income coun- Bank's approach toward global public goods is based tries With nearly 80 percent of people who live on on careful selectivity in priorities and partnerships, under $2 a day residing in middle-income countries, and measured deployment of resources. any plan for successful global poverty reduction will require the Bank's continued active engagement in Sector Strategy Papers (SSPs). SSPs help organize these countries The Bank's global reach, broad sec- the Bank's work on global priorities such as disease toral knowledge, and specific private sector engage- eradication or the environment. They are a launching ment through the IFC and MIGA enable it to point for promoting public action at the global level, provide strong support for sound policies and insti- pulling together global programs and partnerships, tutions, its financial support "crowds in" private cap- and providing incentives for client countries to take ital and reduces vulnerability to market volatility, action. More generally, SSPs help shape the Bank's and, through its work in middle-income countries, approach and activities in a given sector or thematic the Bank gains valuable experience, informing its area to enhance impact on poverty reduction and work in low-income countries The task force high- growth SSPs also lay out strategic options for sector lights, however, the need for a catalytic and selective and thematic areas identifying aspects of relatively role, with the Bank focusing on assistance that weak country performance for priority attention They others cannot or will not provide. At the Joint Bank- are developed with broad stakeholder consultation, Fund Spring Meetings in April 2001, Ministers wel- and their implementation is regularly monitored. In comed the task force-based proposals put forward fiscal 2001 the Board reviewed three SSPs, including by the Bank noting that they would support more "Strategy for the Financial Sector," "Reforming Public structured and streamlined Bank-Fund cooperation. Institutions and Strengthening Governance A World Proposals included the strengthening of the Bank's Bank Strategy," and "Social Protection Sector analysis of the country situation, including expand- Strategy. From Safety Net to Spring Board" ing, in concert with its partners, support for local capacity building, a deferred drawdown option A CHANGING WORLD BANK for adjustment loans to reforming countries, and a more systematic and developmental role for Compact Assessment. In fiscal 2001 the Bank con- adjustment lending. ducted an assessment of the Strategic Compact, launched in April 1997 between the Bank and its Support for global public goods. The 2000 Annual shareholders to renew itself to become more effective, Meetings also set near-term priorities for Bank with $250 million in additional administrative engagement in global collective action communica- resources over a three-year period. The Compact was ble diseases, environmental commons, economic ambitious in its time frame and scope, the challenge governance and financial stability, trade and integra- was heightened by unanticipated external develop- tion; and the information and knowledge revolution. ments-financial crises, post-conflict situations, and The Bank has since moved forward in each of these natural disasters-as well as the nsing demands of areas, whose links to poverty reduction are strong partnership linked to the CDF-PRSP-HIPC work in Progress has consisted of sharpening strategy, work- many countnes Overview 31 Table 1.2 The Changing World Bank Bank Group in 1996 Bank Group Today Increased poverty focus Understanding of poverty Economic focus Multidimensional focus Country-owned poverty reduction strategies 4 Full PRSPs, 32 Interim PRSPs Broader development agenda Comprehensive Development Framework Pilots in 12 countries Anticorruption, good governance programs - Programs in 95+ countries Lending commitments to combat HIV/AIDS $35 million over $393 million Response to war-torn and indebted poor countries Post-conflict lending and advice 15 countries 35 countries Debt relief operations - 23 countries Total committed debt relief (nominal) - $34 billion over time (from all creditors) Greater operational impact Satisfactory project outcomes (% of total projects) 69% 78% Share of projects at risk 29% 12% Quality of economic and sector work (% satisfactory) 72% (FY98) 86% Improved client service Country directors in the field 0 out of 24 29 out of 53 Share of Bank staff in the field 38% 45% Time for project preparation 24 months 15 months More effective private sector promotion Private provision component in infrastructure projects 21% 39% IFC investment commitments $2.1 billion $2.4 biliion MIGA guarantee coverage $0 8 billion S1 6 billion Joint Bank-IFC departments - 6 Increased knowledge sharing Number of distance learning centers 16 Number of "communities of practice" supported by the Bank's thematic networks less than 30 about 110 Greater openness and participation Published country assistance strategies (% of total) None 87% Share of projects with civil society involvement less than 50% more than 70% Community-driven development components in projects S0 7 billion $1 4 billion (estimated approximate value) Broader product base Lending product innovations Examples include learning and Financial product innovations innovation loans, adaptable program Advisory product innovations loans, and IDA guarantees; single currency loans, and e-bonds, and institutional and governance reviews, and financial sector assessments Significant progress has been made, in a rela- presence in the field. The Bank has also delivered tively short time. Under the Compact, the Bank was on its commitment to return in fiscal 2001 to the to refuel business activity, refocus the development fiscal 1997 net administrative budget in real terms. agenda, retool its knowledge base, and revamp insti- The efficiency gains foreseen under the tutional capabilities. Important gains have been Compact have proved more difficult to realize. A made in Improving operational quality and expand- number of new priorities and processes have ing the Bank's portfolio of products and services increased the complexity and-in the short term- (table 1.2) A changed Bank has meant making the cost of doing business. Supervision costs are "Spring Meetings" documents publicly available for higher because of the greater emphasis on quality as the first time, well-coordinated support from the well as compliance with safeguard and fiduciary Bank Group, including the IFC, for small and policies; the costs of preparing CASs have risen in medium enterprises; and speeding up response to step with growing attention to stakeholder consulta- clients during periods of crisis through a greater tions and disclosure; and the introduction of services 32 The World Bank Annual Report 2001 Table 1.3 Aligning Resources with Corporate Priorities: Selected Items in the Bank's Budget (millions of dollars) Fiscal 2001 Fiscal 2002 Comments Project Supervision 130 149 Higher fiduciary and safeguard standards Lending 94 101 Increased emphasis on poverty reduction in Africa and South Asia Country ESW 50 78 Increased funding for poverty assessments, public expenditure reviews, financial accountability as well as procurement assessments, and other key diagnostic work Country Program Support 55 61 Continued support for PRSP preparation in low-income countries and policy dialogue in middle-income countries Quality Assurance 19 23 Strong focus to maintain quality standards, attention to monitoring and evaluation Selected Operational 54 42 Finance, administrative, and corporate services Support Services expected to decline as cost efficiency achieved such as PRSP support and Financial Sector L' A year-long antlcorruption program in Paraguav Assessments has entailed significant added cost (see (cosponsored by the U S. Agency for International figure 1 2) The Bank has also faced higher costs in Development) culminated in an action plan terms of the stress levels of staff, who played a cru- approved by the country's president, to be imple- cial role in the progress made under the Compact. mented by the government and civil society Lessons from the Compact experience are reflected LA An independent evaluation has shown that stu- in the Strategic Directions Paper (SDP) as well as in dents of the World Links Program, which links the Bank's administrative budget for fiscal 2002, 100,000 students across 27 countries, have approved at the end of fiscal 2001 (see table 1 3). acquired nexv skills, knowledge, and attitudes- which explains growing demand from such coun- World Bank Institute (WBI). A major emphasis of tries as Peru, Senegal, Sri Lanka, and Turkey for the "new" Bank is empowerment of people through scaled-up assistance. knowledge and capacity building. Renewed during 1- As an outcome of a PRSP forum in C6te the Compact period, WBI is an important d'lvoire, elected officials and civil society repre- contributor to this objective (others being the Bank's sentatives of eight participating country delega- research and advisory services, its thematic networks' tions created regional networks to facilitate "communities of practice," and information technol- consultations on their poverty reduction ef'forts ogy-based efforts) WBI facilitates learning on I H, In an early example of WBI's "Nvholesaling" policy, development issues for staff as well as Bank the Administrative Staff College of India regularly clients-including policymakers, ministry staff, offers-now on its own-a course on resettle- academics, and increasingly, parliamentarians, jour- ment policy originally designed jointly with WBI nalists, the private sector, nongovernmental organizations, and other segments of civil society. At Figure 1.2 Unit Cost of Operational Processes the end of fiscal 2001, WBI was reaching 48,000 (thousands of dollars) participants annually in client programs in about 150 344 countries through nearly 600 learning activities. 308 307 Programs continue to be scaled up through distance learning, global knowledge networks, and extended partnerships, and by harnessing the newest learning technologies Over the past year WBI developed an 135 Attacking Poverty Program aimed at building national * FY97 capacity to prepare and implement the PRSP *67 74 FY01 process WBI programs are having an impact, as seen in these examples 0 Lending Supervision PRSPs CASs Overview 33 Development impact. The Strategic Compact's ulti- ment The SDP emphasizes a catalytic role coupled mate aim was to improve development outcomes. with the need for selectivity along three dimen- Clear gains are emerging In the areas of human sions-within countries, across countries, and for development, institutional strengthening, and post- global programs The Bank will articulate in the CAS conflict assistance, for example, the Bank has its selectivity within a country, use income, poverty, helped and performance as the key criteria for selectivity In Ethiopia, to improve access by four million across countries, and be guided by corporate and people to health and sanitation facilities, and global public goods priorities at the global level In access by 600,000 children-half of them girls- addition, the papers center assistance to low-income to school, countries on CDF-based poverty reduction strategies In Senegal, to advance prospects for more than as well as debt relief and post-conflict needs, while halving the female illiteracy rate to 30 percent by clarifying the Bank's role in middle-income countries 2005, and at the global level In Brazil, to achieve a 38 percent drop in the number of AIDS-related deaths since 1993; Role of partners. The strategy papers emphasize the l In Mexico, to reduce the number of people with central role of collaboration with partners at the coun- no health coverage from 10 million to 1 5 mil- try, as well as global, level. Closely involving client lion, governments, civil society, the private sector, and mul- In some Caribbean countries, to reduce tele- tilateral and bilateral partners at all stages and levels phone and Internet charges by up to 50 percent; of country assistance-policy dialogue, formulation of In Guatemala, to streamline the country's finan- Bank GASs, and design and implementation of lend- cial management system and make its budget ing and nonlending services-has become the norm. available online, Collaboration with major institutional partners, such In Poland, to make corruption a high-profile as the IMF and the United Nations (U N.), has issue, intensified. Operational cooperation and coordination In Tunisia, to cut the public share of hospital with multilateral development banks (MDBs) has financing from 69 percent to 35 percent, advanced significantly, and several technical working In Rwanda, to return to normal social and eco- groups are launching efforts to promote coherence in nomic life some 1.3 million refugees of the civil approaches and harmonization of policies and proce- war and to strengthen the country's economic dures (on matters ranging from environmental assess- recovery, ments and financial management to corruption and In Bosnia and Herzegovina, to create 100,000 gender). For global public goods, strategic partner- jobs through support for microcredit, following ships with national governments, civil society, interna- the brutal war of the early 1990s, tional organizations, bilateral donors, and the 1 In East Timor, to set up 400 village development corporate sector have become fundamental to the councils under a project that is already funding Bank's engagement. In many arenas, joint work with over 500 subprojects selected by the communi- U N agencies, the IMF, and MDBs is crucial ties themselves Important examples are the Global Alliance for Vaccines and Immunization focusing on prevention of STRATEGIC FRAMEWORK AND communicable diseases, the Financial Stability Forum FUTURE DIRECTIONS helping to prevent and manage financial crises, the Prototype Carbon Fund that addresses climate Strategic Framework. Aimed at building on the change issues, the Global Development Gateway progress made under the Compact, a Strategic aimed at increasing access worldwide to development Framework Paper and an SDP were presented to the knowledge, and work with the World Trade Board in fiscal 2001 (see page 9) The papers reiter- Organization and other partners on integrating least ate the Bank's mission of fighting poverty, with the developed countries into the multilateral trade system. international development goals representing a prime commitment They set out the two inter-related pil- Future Directions. For all the collective progress lars that will underpin Bank assistance to countries noted in this report, the world has far to go to win and at the global level building the climate for the fight against poverty. The Bank Group has an investment, jobs, and sustainable growth, and important role to play Core assets are its financial empowering poor people to participate in develop- strength, experience and knowledge, global reach, 34 The World Bank Annual Report 2001 Table 1.4 Cumulative IDA Subscriptions and Contributions, as of June 30, 2001 Member n I Percent of total United States 25,841.8 23.8 Japan 24,078.1 22.1 Germany 12,309.0 11.3 United Kingdom 8,013.1 7.4 France 7,468.5 6.9 Canada 4,767.5 4.4 Italy 4,410.0 4.0 Netherlands 4,026.4 3.7 Sweden 2,770.6 2.5 Saudi Arabia 2,158.2 2.0 Australia 1,810.0 1.7 Belgium 1,759.0 1.6 Denmark 1,457.3 1.3 Switzerland 1,398.6 1.3 Norway 1.371.3 1.3 Top 15 donors 103,639.4 95.3 Other members* 5,084.7 4.7 Total 108,724.1 100.0 *For a complete list of other subscribers and donors, see IDA:s Special Purpose Financial Statements, page 75 of the World Bank Annual Report 2001: Volume 2, Financial Statements and Appendixes. independence that enables objectivity, ability to regional, and global levels. There is now unprece- integrate the major elements of sustainable develop- dented consensus worldwide on what is needed for ment, and capacity to deliver services and resources poverty reduction. The Bank has called for a "com- to countries. Going forward, the 13ank will maintain pact" between rich and poor countries, with each its global diagnostic capacity across the whole range doing its part. Rich countries need to increase of developmental sectors, while being much more market access to developing countries' exports, and selective in its areas of implementation capacity. provide debt relief and new concessional finance Increasing effectiveness will continue to be a prior- for the poorest countries; developing countries, for ity, built around a strong quality culture. Country their part, need to ensure sound policy and institu- focus will dominate Bank assistance, complemented tional environments to promote growth as well as by carefully selected cross-border and global issues. the effective use of aid, making sure also that the Measuring the Bank's performance-particularly benefits of growth reach poor people. The CAS difficult in areas such as policy support and capac- will continue to spell out the Bank's focused busi- ity building-will also be important, as will be the ness strategy in support of a country's program, transparent reporting of results. working in partnership with governments and As laid out in the Strategy Framework Paper, together with the IMF, MDBs, the U.N., bilateral Bank assistance will emphasize governance as well agencies, the private sector, and civil society. The as institutional and policy structures, including the IDA- 13 Replenishment, which is expected to be regulatory framework for infrastructure, to create a decided by the end of calendar 2001, will crucially positive investment climate-key to expanding jobs guide the Bank's efforts going forward; IDA donors and achieving sustainable growth. It will equally (table 1.4) have been considering ways to increase emphasize the need to invest in people and aid effectiveness. Collaboration with the IMF will empower them to participate in development, in continue to be paramount. The agenda with part through community-driven development. MDBs includes harmonizing operational policies Building poor people's assets, promoting gender and division of labor on countries' social and struc- equality, and protecting the most vulnerable will all tural issues. Division of labor on global public be central to the poverty reduction effort. Investment goods will be the shared challenge in work with and adjustment lending will both be set in the con- the U.N. The Bank will be flexible, explicitly step- text of a sound program of policy and institutional ping back where another partner's comparative development, capacity building, and strong govern- advantage is clear. ment commitment. Partnership, based on institutional comparative advantages will be key to progress at the country, Overview 3! Chapter 2 The Board of Executive Directors s,A , ,. K~~~~~~~~~~~~~ i' I,. 1/ 1/_ The Executive Dlirectors are responsible for the From left to right Andrei Bugrov Girmai Abraham (seated), Finn Jonck, Balmik, Prasad conduct of the \iAorld Bank's general operations; Singh, Neil F Hyden, Jean-Claude Milleron (seated), Matthias Meyer Rosemary Stevenson* (seated), Terrie O'Leary Philippe M Peeters, Bassary Toure, Moises Pineda (seated), Pieter they perform their duties under powers delegated by Stek, Jan Piercy, Helmut Schaffer Jalme Ruiz (seated), Mano Soto-Platero, Mohamd Kamel the Board of Governors As provided in the Articles Amr*, Ahmed Sadoudi (seated), Franco Passacantando, Yahya Abdulla M Alyahya, Yuzo Harada (seated), Zhu Guangyao, Abdul Azlz Mohd Yaacob of Agreement, 5 of the 24 Executive Directors are *AeraeEcuieDeto *Altemnate Executive Director appointed by the member countries having the largest number of shares, the rest are elected by the other member countries, which form constituencies Department (OED), which is accountable directly to in an election process conducted every two years. the Board to perform professional evaluations as set ExecLutive Directors consider and decide on out in OED's Board-approved polices, strategies, ancl I BRD loan and guarantee proposals and IDA credit work program. OED provides independent advice to and guarantee proposals made by the President, and the Board on the relevance, sustainability, efficiency, they decide on policies that guide the 13ank's general and effectiveness of operations. During fiscal 2001 operations. They are also responsible for presenting to Executive Directors regularly met at Bank headquar- the Board of Governors, at the Annual Meetings, an ters to carry out their responsibilities. Directors also audit of accounts, an administrative budget, and an serve on one or more of five standing committees Annual Report (this report) on the Bank's operations Audit, Development Effectiveness, Budget, Personnel, and policies as well as other matters Their oversight and Executive Directors'Administrative Matters The responsibility covers all Bank policies and activities, committees help the Board discharge its oversight including approval of all lending and guarantee opera- responsibilities through in-depth examinations of poli- tions and the annual budget In shaping Bank policy, cies and practices the Board of Executive Directors (the Board) takes Executive Directors and Alternate Executive into account the evolving perspectives of member Directors also periodically visit borrowing countries countries on the role of the Bank Group as well as to review Bank assistance in progress. They meet a the Bank's operational experience In this regard, an wide range of people, including project managers, important role is played by the Operations Evaluation beneficiaries, government officials, nongovernmental The Board of Executive Directors 37 organizations (NGOs), the business community, HIPC documents (covering 23 countries) under the other development partners, financial institutions, enhanced framework (comprising 10 Preliminary, 16 and resident Bank staff. In fiscal 2001 Directors vis- Decision Point, and 2 Completion Point docu- ited Bhutan, Djibouti, Eritrea, Ethiopia, Latvia, ments), and stressed the importance of full burden Pakistan, Tajikistan, Turkey, and Uganda Directors sharing by all creditors.' They also reviewed 3 also play an active role in preparing the agenda and PRSPs and 29 I-PRSPs, and expressed appreciation issues papers for the semiannual meetings of the for the tangible progress made in implementation of Joint Bank-Fund Development Committee. In fiscal the PRSP process They suggested several areas for 2001 the Development Committee addressed the improvement, including better alignment of Bank World Bank's strategy in middle-income countries, assistance with countries' own strategies and their poverty reduction and global public goods, assis- implementation capacities. The Board also approved tance to post-conflict countries, and a number of the the first two Poverty Reduction Support Credits to issues discussed below. (For more detail, see appen- Uganda and Vietnam In addition, the Board dLx 12 in volume 2 of this Annual Report.) reviewed papers on tracking poverty-related spending in HIPCs, and discussed the impact of STRATEGIC ISSUES debt reduction on long-term debt sustainability The Board also discussed a number of sector Major areas of Board emphasis during fiscal 2001 strategy papers designed to help define the Bank's are highlighted below. role in poverty reduction at the sector level, includ- ing strategies for reforming public institutions and Strategic Framework. During fiscal 2001 manage- strengthening governance, social protection, and the ment presented the Executive Directors with several financial sector papers on the strategic directions for the Bank Group for the fiscal 2002-04 period, including the Country programs. Country Assistance Strategies Strategic Framework Paper, the Strategic Compact (CASs) and the principles underlying the Compre- Assessment, and the Strategic Directions Papers for hensive Development Framework and PRSPs the Bank and the IFC The Board reviewed the pro- continued to guide the Bank Group's work at the posals, expressing strong support for increased selec- country level. During the fiscal year the Board con- tivity in Bank activities to help member countries sidered 37 CASs and related CAS products achieve the international development goals as a Directors commended the greater focus on poverty means to address more efficiently the central goal of reduction as the overarching goal, as well as the poverty reduction. They also discussed several increasing use of consultative processes in preparing important policy papers-for example the Bank's CASs. They also stressed the importance of the middle-income country strategy Bank's increasing use of partnerships and selectivity at the country level. Bank Group's role in poverty reduction. The Board continued to closely monitor implementation Global programs and partnerships. Participation of the Bank Group's poverty reduction mandate. by the Bank in global initiatives and partnerships has Executive Directors reviewed a number of poverty- increased significantly in recent years In fiscal 2001 related reports, including a paper on the operational the Board discussed a framework for managing implications of the World Development Report global programs and partnerships to reinforce country- 2000/2001 on attacking poverty, and the annual level poverty reduction efforts. It reviewed several Poverty Progress Report The Board also focused considerable attention on implementation of the 1 Decision potnt The point at which the international community agrees-for countries with unsustainable debt levels and a solid record enhanced Heavily Indebted Poor Countries (HIPC) on economic reform and poverty reduction programs-on the amount Initiative for debt relief to low-income countries, as of relief needed to reduce outstanding debt to a sustainable level Multilateral creditors, including IDA, begin providing significant "inter- well as the related Poverty Reduction Strategy im assistance" beginning immediately at the decision point Papers (PRSPs) and Interim PRSPs (I-PRSPs) Completion point The point at which all creditors provide, uncondi- tionally, the remainder of their share of debt relief agreed to at the designed to ensure stronger links between debt relief decision point The completion point is tied to implementation of key and poverty reduction Directors considered 28 reforms and policies outlined in a country's PRSP 38 The World Bank Annual Report 2001 reports on global public goods Executive Directors level agreed on at the outset of the Strategic confirmed five priority areas for Bank engagement Compact despite increased demands on the 13ank communicable diseases, environmental commons, that had not been anticipated at the time of the economic governance and financial stability, trade Compact In June 2001 the Executive Directors integration, and information and knowledge. They approved a total administrative budget, net of rcim- also discussed several initiatives within these priority bursements, of $1,589 7 million for fiscal 2002 areas, such as the Bank's work with the IMF to strengthen the international financial architecture, INSPECTION PANEL with particular emphasis on the integrity of financial markets and the implementation of standards and The Board created an independent Inspection Panel codes. The Board discussed the Development Grant in 1993 to address morc closely the concerns of pco- Facility, which provides grant financing for several ple affected by Bank projects by ensuring that the of these initiatives, including activities rclating to Bank adheres to its operational policies and proce- HIV/AIDS The Board has also been involved in dures in the design, preparation, and implemcnta- preparations for the United Nations High-Level tion of projects Any group of indivicluals believing Event on Financing for Development In addition, that they may be harmed by a Bank-supported proj- the Board remained focused on the Bank's engage- ect may ask the panel to investigate complaints that ment with civil society and NGOs, whose role in such harm stems from the Bank's railure to abidc by the discussion of development issues has become its policies and procedures. The Executive Directors more pronounced decide, on the recommendation of the Panel, whether an investigation will take place OVERSIGHT AND FIDUCIARY RESPONSIBILITY In fiscal 2001 the Board considered the Panel Investigation Report and the 13ank Management rec- The Board exercises oversight and fiduciary respon- ommendations on the Qinghai component of the sibility on behalf of its shareholders, in part through China Western Poverty Reduction Project No fur- its Audit Committee. The Committee reviewed its ther Board action was taken after the Chinese gov- terms of reference to reflect the cvolving duties and ernment announced that it would undertake and responsibilities of audit committees in an ever more finance the Qinghai component entirely with its complex and risky environment The Committee own resources and on its own terms, as it could not advises the Board on financial risk management and accept additional conditionality The Board approved other governance issues to facilitate Board decisions and the Panel conducted two other investigations of on policy issues. projects in Kenya and Ecuador that looked at appli- cation of the Bank's policies on environmental assessmcnt, consultation with or participation by local people, and Bank supervision In both cases, Following review by the Budget Committee, the Board approved managemcnt's recommended Executive Directors approved an administrative actions in response to the Panel's investigation budget, net of reimbursements, for fiscal 2001 of reports The Panel received two new requests for $1,442.2 million This total budget included an allo- inspection concerning the Chad-Cameroon Pipeline cation of $146 9 million for the Development Grant Project and the Coal India Environmental and Facility The administrative budget xvas below the Social Mitigation Project The Board of Executive Directors 39 12 r~~~~~~~~~ E. CMAN 3 Thematic Perspectilves Addressing the Social, Institutional, and Economic Dimensions of Poverty 42 Investing in People 46 Promoting Environmentally and Socially Sustainable Development 49 Supporting Private Sector Development and Infrastructure 52 Building Strong Financial Systems, Addressing Vulnerabilities 5 Building Effective Legal and Judicial Systems 59 Addressing the Social, Institutional, and Economic Dimensions of Poverty I~~~~~~~~~~~~~~~L In fiscal 2001 the World Bank intensified efforts Poverty has many faces It is hunger or homelessness It is being sick to address many of the social, institutional, and and not being able to see a doctor It is fear for the future, living one economic iseunrynpoday at a time And it is not having power representation, or freedom economic Issues underlying poverty. In close part- nership with the IMF, it accelerated implementation Program to accelerate poverty reduction in low- of a country-owned approach to development that income countries PRSPs provide the basis for debt firmly links poverty reduction to debt relief and con- relief under the enhanced Heavily Indebted Poor cessional lending It also promoted good governance Countries (HIPC) Initiative and for concessional and effective public institutions-both critical for Bank and Fund lending They identify key obstacles sustained poverty reduction In addition, the Bank is to poverty reduction and lay out a plan to overcome helping developing countries pursue gender equality those obstacles, with mechanisms to monitor progress and integrate into the global economy, while working The country-driven nature of PRSPs is the program's at the global level to strengthen the international most notable feature the strategies are produced by financial architecture the countries themselves in broad consultation with Much Bank lending to support improved eco- civil society and poor people-markmng an important nomic management, policies, and institutions falls shift in culture for the Bank and the Fund. (See under the umbrella of adjustment lending Adjustment box 3 1 ) lending promotes sustained growth and poverty The PRSP Program gained considerable reduction by supporting countries' efforts to under- momentum in fiscal 2001 A total of 29 countries take structural and social reforms (see table 3 1, and presented Interim PRSPs (I-PRSPs), in many cases table 8 14 in About the World Bank). to qualify for preliminary HIPC debt relief. In addi- tion, 3 countries presented their first Full PRSPs in ACCELERATING SUPPORT FOR POVERTY fiscal 2001 Over the past year, the Bank has sought REDUCTION STRATEGIES to better align its country assistance with countries' visions and priorities as laid out in PRSPs The In December 1999 the Bank and the IMF launched Poverty Reduction Support Credit (PRSC) was the Poverty Reduction Strategy Paper (PRSP) introduced in fiscal 2001 to support an IDA-eligible 42 The World Bank Annual Report 2001 Box 3.1 Poverty-Reducing Spending in Full and Interim PRSPs All PRSPs and I-PRSPs seek to shift public spending toward poverty-reducing country's policy and institutional reform program to programs. help implement its poverty reduction strategy (box 3.2). The PRSC is grounded in the principles of the Most countrystrategies proposeto: Comprehensive Development Framework and the * Enhance access of the poor to primary education and health-care services, and international development goals It is derived from * Emphasize infrastructure programs in water, roads, electricity, and the PRSP, based on the Country Assistance Strategy, telecommunications. and underpinned by suitable analysis-environmen- tal, social, structural, and fiduciary. Over time, it is Some also propose to: expected to become an important vehicle of IDA * Provide housingto the poor, and financial support to low-income countries with * Strengthen social safety nets to include food subsidies or other food security programs, social assistance programs, and labor-intensive public works. strong programs, anchoring the Bank's overall sup- port for their poverty reduction strategies To monitor progress, some countries explicitly target yearly reductions in the The PRSP approach is still at an early stage. incidence of poverty. Intermediate targets often measure progress in enrollment, The process was conceived as a broad framework for infant mortality rates, incidence of communicable diseases, and, in some coun- engaging domestic stakeholders and external devel- tries, gender disparities. opment partners, while providing a vehicle for improved aid coordination Regional development banks, United Nations development agencies, most________ ___ banks, United Nations development agencies, most Box 3.2 The Uganda Poverty Reduction Support Credit bilateral donors, the European Union, and many nongovernmental organizations have indicated sup- porfor th appro a land a tions todwork wit On May 31. 2001, the Board of the World Bank approved a $150 million PRSC pountneso m the apPRoach process an inthentin s e w k wfor Uganda to support the implementation of the country's poverty reduction the process entails steadfast endeavor over the long strategy set out in Uganda's PRSP. The PRSC is the first of a planned series of three World Bank operations to support Uganda's medium-term development term Only when countries reduce poverty-an iermpact y that n bcobnteserveduy poverta-nuMber o and reform program. The President's Report for the Uganda PRSC has been impact that can be observed only over a number of disclosed and made publicly available at the World Bank's InfoShop. years-can PRSPs cliam success. The Uganda PRSC, the first IDA credit supporting the implementation of a PRSP, supports policy and institutional measures in the government's strate- FULFILLING PROMISES OF ENHANCED gy, with a focus on improving public service delivery through (1) efficient and DEBT RELIEF equitable use of public resources, (2) improved governance through cross- Fiscal 2001 was an important year for the HIPC cutting public sector reforms, and (3) improved access to and quality of educa- Initiative. Building on enhancements in September tion, health care, and water and sanitation services. The PRSC builds on a ni999 emphasiling deeper, broader, and faster debt broad range of economic and sector work carried out in Uganda- including relief and stronger links to poverty reduction, debt household surveys, an enterprise survey, surveys to assess public service relief was committed for an additional 16 countries delivery and corruption, and diagnostic reports such as the Country Financial Benin, Cameroon, Chad, The Gambia, Guinea, Accountability Assessment and Country Procurement Assessment. It supports Guinea-Bissau, Guyana, Honduras, Madagascar, the government's anticorruption action plan and helps to create an effective Malawi, Mali, Nicaragua, Niger, Rwanda, Sao Tome incentive system to improve service delivery. and Principc, and Zambia As a result of the HIPC The participatory process used to develop the government's poverty Initiative, the 23 countries that have reached their reduction strategythat underpinsthe PRSP Program broadened the country's decision points' under the enhanced framework will ownership of the reforms, and a large number of partners are ready to support receive more than $34 billion in debt service relief their implementation. The multisector, programmatic approach promotes over time from all creditors. This amount is equiva- Uganda's ownership of its poverty reduction and public expenditure program lent in net present value (NPV) terms to nearly half and collaboration among local and external partners-with Bank support of their total stock of external debt In combination through the PRSC focused on policy and institutional reform measures with the highest poverty impact in those areas where the Bank has a comparative 1 Decision point The point at which the international community advantage. In addition, the approach helps reduce transaction costs in delivery agrees-for countries with unsustainable debt levels and a solid record of external assistance, strengthen budgetary institutions, and align external on economic reform and poverty reduction programs-on the amount of relief needed to reduce outstanding debt to a sustainable level support for service delivery reforms with Uganda's budget cycle, which Is an Multilateral creditors, including IDA, begin providing significant "inter- essential ingredient for sustained institutional reform and poverty reduction. im assistance" beginning immediately at the decision point Thematic Perspectives 43 with other sources of debt relief, their total out- Among governance issues, public expenditure standing debt is projected to fall by more than management has emerged as a high-priority area. two-thirds. Effective public spending is crucial for poverty The year's considerable progress was enabled reduction, and strong public expenditure manage- by the intense efforts and dynamic cooperation of ment systems are essential to ensure that develop- HIPC governments, official creditors, and civil so- ment assistance is utilized as intended The Bank, ciety from around the world The relief packages for with partners, is working on an integrated approach the 23 countries were developed with country author- to improving the quality of expenditure management ities and approved by the Bank and IMF Boards of in poor countries Executive Directors in less than 16 months. Since 1997 anticorruption activities have been As a result of the enhanced HIPC Initiative increasingly integral and important components of assistance, the annual public debt service burdens of the Bank's public sector management portfolio, the 23 countries over the next three years will be cut which represented 12 percent of the Bank's commit- by roughly $1.1 billion, equal to 1 2 percent of GDP. ments in fiscal 2001 Increasingly, efforts are aimed As a share of government revenues, debt service will at not only assessing the quality of governance but fall from 28 percent before HIPC relief to about 13 also offering deeper insights into government per- percent in 2001-02, freeing up resources for identi- formance and institutional arrangements. fied poverty reduction priorities, including social sector expenditures. Debt service payments will be PROMOTING GENDER EQUALITY reduced to about 2 percent of GDP, in comparison with 7 percent of GDP that these countries will be In fiscal 2001 the Bank published a major policy spending on social investments, research report, Engendertng Development-Through Notwithstanding this progress, much work Gender Equality in Rights, Resources, and Vloice The remains to be done to ensure the long-term sustain- main findings of the report-which benefited from ability of HIPCs By delivering debt relief sufficient extensive consultations with civil society, academia, to reduce a country's level of debt in NPV terms to and donors-place gender at the center of the either 150 percent of exports or 250 percent of gov- Bank's work on poverty reduction. The report shows ernment revenues at the decision point, the HIPC that gender equality helps lower infant and child Initiative provides a robust basis for long-term debt mortality, improve nutrition, and lower fertility rates, sustainability. However, a permanent exit from debt it is also associated with lower HIVI/AIDS preva- rescheduling can only be achieved if the underlying lence rates, less corruption in government, higher causes that contributed to the debt problem are economic productivity, and faster growth-outcomes addressed. Hence, debt sustainability depends not not traditionally linked to gender equality. only upon the absolute level of debt, but also upon With strong empirical evidence that gender a comprehensive set of policies that lead to povcrty inequalities tend to slow development, the Bank has reduction and economic growth begun drafting a revised strategy for better integrating gender into its assistance. Several regional consulta- REFORMING PUBLIC INSTITUTIONS AND tions, including with client governments, internation- STRE I INT BICG GOVERNANCE al agencies, and civil society, are helping to inform this process Priorities are converging on diagnosing Good governance and strong public institutions gender-related barriers, creating gender-inclusive are increasingly seen as critical for development consultations, and working with country and external effectiveness. More and more, the focus of Bank partners to identify and support appropriate action. assistance is on helping countries to design and implement good policies themselves A new strategy, HELPING COUNTRIES USE TRADE FOR "Reforming Public Institutions and Strengthening DEVELOPMENT Governance," was published in November 2000, key new directions include emphasis on "bottom-up" Trade plays an important role in growth-and there- empowerment and longer-term Bank lending to fore poverty reduction The Bank's three-pronged allow time for institutional reform approach comprises analysis ol impediments to 44 The World Bank Annual Report 2001 trade, advocacy of better trade policies that support economic and financial system, and diagnosing the development, and advice to policymakers. In fiscal social and structural obstacles to successful develop- 2001 the Bank engaged in research and dissemina- ment as a basis for Bank assistance tion of studies demonstrating the crucial importance The Bank has been working closely with the of opening developed-country markets to goods from IMIF on initiatives that will help developing countries developing countries. The Bank is also helping benefit from the global economy The Financial developing countries use the multilateral trading Sector Assessment Program identifies financial sys- system more effectively through policy analysis, tem strengths and vulnerabilities (page 57). Under trainin1g, and a handbook for trade negotiators A the Reports on the Observance of Standards and new sourcebook of information on trade aims to Codes (ROSC) Program, the Bank prepares assess- help client countries prepare PRSPs. In addition, ments in its traditional areas of expertise, ROSCs two ongoing research programs, on general trade summarize the extent to Nvhich countries observe cer- policies and agriculture, provide assistance to coun- tain Internationally recognized standards that can tries in identifying priorities for reforms at both the help improve economic policymaking and strengthen national and multilateral levels the international financial system In fiscal 2001 146 ROSC assessments were completed, 94 of which STRENGTHENING THE INTERNATIONAL FINANCIAL were published. The Bank has also collaborated with ARCHITECTURE the IMF and other partner organizations to develop a set of principles and guidelines for effective insol- The tern "international financial architecture" refers vency and creditor rights systems In fiscal 2001 the to the financial and institutional arrangements that Board and the Development Committee agreecd that are critical to help countries avoid and mitigate the Bank would, with partners, carry out a series of crises, integrate into the global economy, and de- experimental country insolvency assessments under velop successfully The Bank's role in this area has the ROSC Program A third area of collaboration three dimensions ensuring that developing country relates to preparation of studies on external debt perspectives are brought to bear on discussions on management that will help construct a set of core international norms and governance, helping devel- principles for sovereign debt management oping countries integrate into the international Table 3.1 World Bank Adjustment Commitments, Fiscal 1999-2001 Fiscal 1999 Fiscal 2000 Fiscal 2001 Adjustment Commitments by Region S Million Percent $ Million Percent $ Million Percent Africa 769 5 495 10 909 16 East Asia and Pacific 5,712 37 552 11 250 4 Europe and Central Asia 3,372 22 950 18 1,132 20 Latin America and the Caribbean 4,445 29 2,860 56 2,788 48 Middle East and North Africa 680 5 - - 185 3 South Asia 350 2 251 5 500 9 IBRD and IDA Adjustment Commitments IBRD 13,937 91 4,426 87 3,937 68 IDA 1,391 9 682 13 1,826 32 Total Adjustment Loans and Credits 15,328 100 5,108 100 5,763 100 Total World Bank Lending Commitments IBRD 22,182 10,919 10,487 IDA 6,813 4,358 6,764 Total IBRD plus IDA 28,996 15,276 17,251 Share of Adjustment Loans and Credits 53 33 33 Note Numbers may not add to totals because of rounding Thematic Perspectives 45 Investing in People Two million children die every year from vaccine- preventable diseases. About three million people lost their lives in the year 2000 from HIV/AIDS Many people living in poverty lack basic health and educa- tion, are vulnerable to crises, and have little personal income or savings The world's human development >._ . needs are staggering. The World Bank remains the largest external fin- _ ancier of human development programs It recog- nizes that healthy and educated people are the back- Children's attendance at underperforming rural publc schools in bone of sustainable economic growth and central to Bangladesh has improved dramatically after government efforts to any strategy for achieving the international develop- involve nongovemmental organizations in the schools' day-to-day operation and maintenance The government is especially emphasizing ment goals. Through lending and nonlending servic- girls' education, with support from the Bank es, it helps countries invest in and provide social safety nets for their people-efforts that help allevy- tation services, combined with broad public sector ate some of the worst consequences of poverty while reform (see page 43). In addition, education projects increasing people's chances to improve their own addressing health, nutrition, and child labor issues well-being In fiscal 2001 new Icnding commitments demonstrate efforts to take advantage of synergies for education, health, and social protection amount- across social sectors (box 3 3). ed to $4 4 billion (figure 3 1) Nonlending services ranged from analytical work and sharing of best prac- THE EDUCATION AGENDA: FOCUSING ON ACCESS, tice to support for preparation of people-focused QUALITY,ANDGENDERCONCERNS poverty reduction strategies and considerable work at the global level, with multiple partners, to intensify Education empowers people, enhances opportunities the fight against communicable diseases in particular. for greater participation in the labor market, and The Bank also helped clients better integrate promotes security. The Bank's education strategy human development concerns into overall poverty focuses on efforts proven to make a difference in reduction efforts in fiscal 2001. The first Poverty increasing access to schooling and improving the Reduction Support Credit provided Uganda interest- quality of education. The Bank has also committed free, medium-term multisector support for delivery to building human capacity for the knowledge of basic education, health care, and water and sani- economy A key thrust is to help countries eliminate gender disparities in primary and secondary educa- tion by 2005 Figure 3.1 Lending for Human Development, Fiscal 2001 At $ 11 billion, Bank lending for education in Total of $4.4 billion fiscal 2001 was 1.5 times its fiscal 2000 level. The (millions of dollars) 1,882 7 increase reflects the Bank's commitment-together with the United Nations Educational, Scientific and 1,343 3 913.0 Cultural Organization, United Nations Development 1,1434 Programme, United Nations Children's Fund 6607 DIDA (UNICEF), and United Nations Population Fund- 584 8 IBRD to scale up its support to countries' education sys- 969.7 tems, following the April 2000 World Conference 558.6 682.6 on Education for All (EFA). New projects supported improved access, quality, efficiency, and equlty at Education Health, Nutrition, Social Protection and Population 46 The World Bank Annual Report 2001 Box 3.3 Focusing Resources on Effective School Health (FRESH) Education for All.(EFA) is about getting all children into school help countries address digital divide and information and keeping them there. Poor and disadvantaged children are communications technology issues. Collaboration the ones whose participation is most compromised, by ill health with the private sector will further benefit from the and mainutrition. FRESH is a multicountry, multipartner program IFC's new education strategy, which sees these play- launched at the April 2000 World Conference on EFA, aimed at ers as partners in helping alleviate financial con- forging cross-sectorai linkages between education and health straints, enhance social mobility, improve equity, sectors. There are now 22 projects in the Africa region that encourage innovation, and promote effectiveness. include a school health and nutrition component using the FRESH framework. Conceived as an effective program to respond EXPANDING EFFORTS TOWARD A HEALTHY to a need, it is beginning to increase the efficacy of other invest- GLOBAL POPULATION ments in child development, promote better educational out- comes, and achieve greater social equity, while also being cost In fiscal 2001 Bank lending to help countries effective. Highlights of FRESH follow: improve health outcomes and health systems per- * It helps countries develop the school health components of formance, and to promote sustainable financing of social sector projects, emphasizing health-related school poli- health care, amounted to $1.3 billion. Significant cies, provision of safe water and sanitation, skills-based health support was directed toward combating the education, and school-based health and nutrition services. HIV/AIDS epidemic and other communicable dis- * It allows an international exchange of information on school eases, the former evolving rapidly from a health issue health and aims at a common vision of school health among into a formidable development challenge for many development agencies. countries, especially in Africa (see also pages 27, 67, * It serves to accelerate implementation of HIV/AIDS- and and 103). The Multi-Country HIV/AIDS Program for malaria-prevention activities in the education sector. Africa and a similar multicountry program for the Caribbean earmarked $500 million and $155 million, respectively, for HIV/AIDS projects that support the the primary, secondary, and vocational levels; an area scaling up of national prevention and care programs. of focus was distance learning. As of June 30, 2001, Total Bank support for HIV/AIDS prevention, treat- the Bank had 64 active education projects that ment, and care in stand-alone projects, as well as address girls' education. For example, innovative components in other projects, amounted to $393.6 and effective programs are being implemented in million in fiscal 2001, and to $851.5 million over the Bangladesh to benefit secondary school girls, and in last five years (see footnote e to table 1. I on page 26). India to benefit primary school children. Results are The Bank has also accelerated its efforts to combat improving: under a project in Guinea, for example, malaria and tuberculosis, diseases that are pre- girls' enrollment increased moderately to 49 percent ventable but which are leading killers of poor people. in 2000-01 from 44 percent a year earlier. The Bank The Bank also continued to help countries is also helping improve adult-especially female- improve nutrition and reproductive health outcomes. literacy in several countries. Efforts to support nutrition focused on its links to The Bank also provides varied nonlending sup- poverty, its impact on learning and productivity, and port for education. In fiscal 2001 such efforts includ- women's nutrition. The Bank's work in reproductive ed analytical work, synthesis of good practice, and health emphasized the impoverishing effects of capacity building, as well as technical support to help unplanned pregnancy, maternal mortality and morbid- countries prepare Poverty Reduction Strategy Papers. ity, and sexually transmitted diseases. Operational Major policy issues identified to be in early need of tools, such as practice guides on condom procure- attention were education finance, teacher training ment and contracting for delivery of reproductive and pay, and coverage (to widen access). Strategic health services, are helping to improve outcomes. And alliances constitute another important form of sup- to arrest the growing health burden posed by non- port. In fiscal 2001 the Bank worked with donor, communicable diseases, the Bank's work on the eco- nongovernmental organization (NGO), and private nomics of tobacco control is helping to demonstrate sector partners to support the Focusing Resources on that taxation, together with nonprice measures (for Effective School Health (FRESH) program in Africa instance, advertising bans), can reduce smoking and (box 3.3), and with the private sector in particular to save lives without negatively affecting the economy Thematic Perspectives 47 Box 3.4 Multidimensional Support for Social Protection Lending for social protection has grown over the past several years, espe- . cially in fiscal 1999 in response to the Asian crisis. Bank support for this , l aspect of human development encompasses a wide range of activities: Providing training, with the World Bank Institute and to participants m- worldwide, on how labor market policies and social safety nets can be ,t 4* designed and implemented to reduce poverty and mitigate the risks L7* facing the poor. _ Working with the International Labour Organisation and UNICEF to S- improve child labor data and assess the impact of anti-child labor efforts, and with IFC in its assistance to private sector clients in help- ing end child labor. Bringing pension reform tools to Argentina to broaden support of the elderly, to India to devise coverage for the informal sector, and to Senegal to reduce fiscal costs and free up resources for other urgent needs. ,__ o Building on the experience of social funds to give communities greater ov " control over the decisions and resources that affect their lives, includ- -;= ing emergency responses to natural disasters in Madagascar and Cambodia this year. -. Through a pilot social risk and vulnerability assessment in the Latin --i America and Caribbean region, identifying two extremeiy vulnerable groups generally unprotected by existing programs: children 0 to 5 years old facing serious health and developmental risks, and youth i aged 15 to 24 years old, who are susceptible to dropping out of school, unemployment, violence, and crime. PROTECTING THE MOST VULNERABLE A Bolivian child is immunized Through policy dialogue, lending operations, and partnerships such as the Global Alliance for Vaccines Natural or manmade shocks can devastate poor faml- and Immunization, the World Bank is intensifying its role in commu- nicable disease prevention and control lies, robbing them of security, income, and productiv- ity Social protection-risk reduction and mitigation, and coping-measures are essential to making the poor less vulnerable. Such measures seek to help individuals, households, and communities better The Bank adopted a new Social Protection manage risks, and to provide support to the critically Strategy in September 2000, prepared following poor In fiscal 2001 these measures helped countries extensive consultations with governments, donors, build viable pension systems, develop equitable and United Nations agencies, NGOs, and civil society. inclusive labor markets, eliminate child labor, and The strategy benefits from an analysis of vulnera- rely on social safety nets and social funds to reach bility and proposes reliance on pilot social risk and vulnerable groups (box 3 4). Lending for social pro- vulnerability assessments as well as a methodology tection continued to grow in fiscal 2001, amounting for social expenditure reviews that would enhancc the to $1 9 billion, compared with $1 5 billion last year. coverage and impact of social protection programs. 48 The World Bank Annual Report 2001 Promoting Environmentally and Socially Sustainable Development For the World Bank, promoting sustainable develop- - - -ji >.- ment means improving the linkages between poverty I _ alleviation and the environment It means enhancing food security, the overall well-being of rural people, and the sustainable use of natural resources. And it means ensuring greater civic engagement, particu- larly by the most vulnerable groups in society POVERTY AND THE ENVIRONMENT- IMPROVING THE LINKAGE Environmental degradation poses great harm to _ developing countries, which suffer annual losses of a=_ _ productivity and natural capital as high as 4 to 8 percent of CDP Over the past year, the Bank's environmental work has been informed by global consultations with institutions, governments, non- - __ governmental organizations (NGOs), civil society, W and the private sector, through in-country workshops as well as electronic and Web-based discussions. With country and external partners, the Bank seeks to help improve the Quality of life-by reducing environmental health risks and vulnerability to environmental hazards Quality of growth-by promoting sustainable management of resources, such as forests, land, and water, as an essential condition for long-term More than 430 million people live in countres with water stress or scarcity, which threatens to increase fivefold by 2050, constraining and lasting improvements in people's well-being economic growth and posing a risk to livelihoods and secunty Li Quality of the global environmental commons- by pursuing efforts targeted to benefit developing countries and local communities Progress was made on the Nile Basin Initiative-a regional partnership that brings together 10 African The Bank is exploring how environmental work countries for the sustainable development of Nile can be better designed to improve health outcomes. waters (see page 93). Analysis in fiscal 2001 with India's Andhra Pradesh The Bank is also working actively at the global state, in collaboration with the World Health level, with multiple partners, recognizing that a large Organisation and donors, examined the effects of number of environmental concerns cannot be poor household environments and lack of basic infra- addressed purely at the country level (see page 103 structure on public health The analysis influenced for examples of partnerships in the environment area, the state's priorities in sector planning At a regional and page 21 for a description of the Prototype level, "Cleaner Transport Fuels for Central Asia and Carbon Fund) As an implementing agency of the the Caucasus,' a two-year study, resulted in a com- Global Environment Facility (GEF) and the mitmcnt by authorities to improve fuel quality, moni- Multilateral Fund of the Montreal Protocol, the tor vehicle emissions, and establish new regulations Bank continues to work with the United Nations Thematic Perspectives 49 Development Programme, United Nations approved a grant to be used through the Global Environment Programme, and United Nations Mechanism of the Convention to Combat Industrial Development Organization to help coun- Desertification, which will help member countries tries address global environmental challenges and combat desertification and mitigate the effects of meet their international environmental obligations. drought by engaging civil society and the private sec- tor. Through the GEF, the Bank is also coordinating SUSTAINING LIFE the Africa Land and Water Initiative Action Program to reverse the rapid trends of land and water degra- About 1.2 billion people live on less than $1 a day, dation in Africa through comprehensive approaches and 800 million people go to bed hungry every The Bank is also contributing to efforts to double night, most of them live in rural areas. Slowing and global food production to feed an additional 2 9 bil- reversing the decline in the natural resource base lion people by 2050 With the growing scarcity of and improving the productivity of agriculture are land and water, future increases in food supplies have imperatives for Bank assistance to come from increased productivity (rather than The Bank is basing its rural work over the past expanded cultivation and irrigation). Supported by 58 year on three pillars-enhancing the social and eco- public and private sector members, including the nomic well-being of rural people, improving food Bank, the 16 international research centers that make security, and ensuring the sustainable use of natural up the Consultative Group on International Agricul- resources Supplementing the rural work is the tural Research (CGIAR) are at the forefront of mobi- Bank's attention to the forestry sector, aiming to har- hzing modern agricultural science on behalf of the ness the potential of forests to reduce poverty, inte- world's poor and hungry (see page 103) CGIAR tech- grate forests in sustainable economic development, nologies support the Banks rural lending programs to and protect global forest values. The Bank is alleviate hunger and poverty, improve rural produc- involved in partnerships and special initiatives, such tivity and raise agricultural incomes, manage natural as the World Bank-World Wide Fund for Nature resources sustainably, and build partnerships with Alliance for Forest Conservation and Sustainable national agricultural research programs. In fiscal 2001 Use, in which the Bank has invested close to the CGIAR launched a fast-track, participatory $2 million. The Alliance aims at three targets by 2005 reform process toward a revitalized, world-class 50 million hectares of new forest protected areas, a knowledge network-an agile South-North partner- comparable area of existing but highly threatened ship that works at the frontier of science for the poor forest protected areas secured under effective and provides public goods research management, and a global target of 200 million hectares of production forest under independently DEALING WITH THE SOCIAL DIMENSIONS certified sustainable management The Chief OF WITY Executive Officer Forum on Forest Industry and OF POVERTY Conservation-chaired by Mr. Wolfensohn-is a Sustainable development also requires addressing private sector-civil society dialogue process with the social dimensions of poverty-that poor people ambitious objectives for improved forest manage- must have more say and participate as equal part- ment and forest conservation ners The Bank is working to improve the quality of In fiscal 2001 the Bank actively supported efforts such operations and is developing a methodology for to sustain life in rural areas A financial systems sup- including social dimensions in programmatic lend- port project will increase access to microcredit in ing A review in fiscal 2001 found that good social poor rural areas in Romania, for example, while sup- assessments are helping promote social Inclusion, port for farmed marshlands, commercial and export participation, and ownership in 13ank operations. agriculture, and agricultural services delivery will help Helping countries affected by conflict- Rwanda on its road to recovery Total lending for frequently in partnership with other agencies-is a rural development rose to $2 2 billion in fiscal 2001, fast-growing priority for the Bank. People affected by compared with $2 1 billion in fiscal 2000 conflict are among the most vulnerable to poverty Efforts at a global level are aimed at scaling up and ill health, including HIV/AIDS. Conflict and development impact. In fiscal 2001 the Bank violence remain among the most pressing social and 50 The World Bank Annual Report 2001 Box 3.5 Community-Driven Development (CDD): Making Progress Last economic problems in several parts of the world Among the many dimensions of poverty are vulnerability, pow- 1 6 of the world's 20 poorest countries are in-or are erlessness, and exclusion. The World Bank has increased its just emerging from-conflict, and some 35 others support for CDD, an approach explicitly identifying a role for may currently be considered affected by conflict communities, society groups, and local people in development Reconstructing societies after conflict is as much, if efforts. Support for CDD is significant and growing: new com- not more, about helping people rebuild their lives mitments amounted to roughly $1 4 billion in fiscal 2001. and meet their social and political security needs as The Bank intensified support to all regions for CDD in fis- it is about repairing physical infrastructure Given its cal 2001. It has undertaken a major effort in 17 African coun- overall mandate, the Bank hopes to contribute to tries to increase funding of community groups and elected conflict prevention in two ways. by providing assis- local governments to enable their greater participation in poli- tance that may help countries become more resilient cy and institutional reform. Similar efforts are ongoing in East to eruption of violent conflict, for instance through Asia (Cambodia, East Timor, Indonesia, Vietnam), Eastern strengthened capacity to address root causes and Europe (Albania, Armenia, Romania), and Central Asia. In South trigger issues, and by strengthening its own and Asia and Latin America, the CDD portfolio continues to expand. partners' sensitivities to the potential positive and negative impacts of conflicts on development poli- cies and programs. The Bank provides substantial lending and nonlending support to countries emerg- ing from conflict, particularly in Africa, ranging from comprehensive reconstruction packages to small ity and reflect important lessons learned, appointed grants from the Post-Conflict Fund Examples regional safeguard coordinators, established a safe- include a program to help Eritrean excombatants guards "helpdesk" for staff, and upgraded the safe- demobilize and re-integrate into normal life, and guards training program. another to promote the transition from conflict to peace in Mindanao, in the Philippines Participation and civic engagement. The Bank The Bank's new operational policy, "Development increasingly recognizes that inclusive, participatory Cooperation and Confict," guides its work in coun- development is key to more equitable and sustain- tries affected by conflict The Post-Conflict Fund able development Over the past year, it sponsored has, since 1997, provided financing for early phases events on civic engagement and participatory of Bank work in post-conflict situations, with $29 approaches, with participants representing govern- million in grants allocated to more than 30 coun- ments and NGOs in about 40 countries Civic tries. Over the past year, and with increased bilateral engagement is a vital underpinning of the Poverty donor finanicing, this fund has supported projects in Reduction Strategy Paper Program and also central East Timor, Eritrea, and Georgia to the Community-Driven Development (CDD) Cultural identity is another essential part of approach, which is about transferring funds to com- empowering communities to take charge of their munity groups so that they can invest in their own own destinies. The Bank continues to promote, cur- development priorities, as well as ensuring poor peo- rently through over 80 stand-alone or component ple's access to information to enable them to make operations, efforts that recognize the role of culture informed investment decisions and engage in entre- in poverty reduction Examples include a cultural preneurial activities (box 3.5) heritage management project in Eritrea, and a proj- ect in China to upgrade urban infrastructure Science and technology (S&T). Dealing effectively with urgent global issues-communicable diseases, SHARPENING THE TOOLS FOR SUCCESS environmental degradation, or food security- requires increased scientific and technological Strengthening the safeguard system. The Bank's capacity The Bank is looking to S&T to help provide environmental and social safeguard policies are solutions to the most pressing needs of poor people designed to prevent and mitigate undue harm, to Looking farther out, the Bank aims to improve people and their environments, that may potentially reliance on knowledge to inform development poli- result from Bank operations. In fiscal 2001 the Bank cies and to build capacity in client countries to restated its operational policies to ensure greater clar- generate and use knowledge on their own Thematic Perspectives 51 Supporting Private Sector Development and Infrastructure J . . . _ N*%E \ . ''-s ~ Private markets are crucial for economic growth But Opportunity forjobs and entrepreneunal activity in the pnvate sector is well-functioning private markets do not alwavs devel- cntical for the poor Hence the pervasive Importance of small Informal activity microfinance services, and small and medium enterprises, such op spontaneously, they depend on sound institutional as this one in Azerbaijan and policy environments. Growth, while the best way out of poverty, is not always enough for all to escape it Efforts are needed to ensure effective social safety faster (box 3 6) Moreover, foreign direct investment nets. Responding to these dual considerations, the flows to developing countries continue to substan- World Bank's private sector development effort aims tially exceed official aid flows (figure 3 4), although, to help countries strengthen their investment cli- particularly since the Asian crisis, these flows have mates and improve the delivery of infrastructure scrv- been concentrated in a few middle-income and ices to poor people New lending to support private large countries To help more countries attract pri- sector development and infrastructure amounted to vate investment, the Bank is developing systematic $5.6 billion, with the active portfolio at $47 3 billion methodologies to identify investment barriers and as of June 30, 2001 (figures 3 2 and 3 3). monitor progress on corrective efforts In fiscal 2001 the Joint Bank-IFC Foreign STRENGTHENING THE INVESTMENT CLIMATE Investment Advisory Service continued its foreign direct investment surveys in places as diverse as Economies open to trade and foreign investment East Timor, Nigeria, and the Russian Federation. flows and bound by the rule of law tend to grow Such surveys-showing, for example, that the 52 The World Bank Annual Report 2001 absence of land markets, an intrusive tax regime, Figure 3.2 Lending for Private Sector Development and and excessive foreign currency and customs regula- Infrastructure, Fiscal 2001 tions are impeding foreign investment in the Russian Share of total new commitments of $5.6 billion Federation-are helping authorities develop correc- Private Sector tive strategies. Development Telecommunications 10% 1% The Bank is also strengthening its support for Mining small and medium enterprise (SME) development Urban A joint Bank-IFC SME department formed in fiscal 6% 2000 is blending the Bank's business-climate policy Water Supply Traniportation and Sanitation Tasotto expertise with the IFC's transaction and company- 10% level experience. In Bosnia and Herzegovina, for example, IFC's links with local business have fos- tered policy dialogue between firms and government and Othr Energy Joint Bank-IFC work is promoting the investment Oil and Gas climate for mining in low-income countries while encouraging environmental and social initiatives. A Note Total includes a multisector share of less than 1 percent fiscal 2001 project in Mozambique, for example, will not only catalyze private investment but also promote private provision of infrastructure, HIV education, Figure 3.3 Portfolio of Active Projects in Private Sector and SME support services to local communities. The Development and Infrastructure as of June 30, 2001 Bank is also helping build Mozambique's mining insti- Share of total of $47.3 billion tutions, while improving the efficiency, capacity, employment, and environmental impact of the mining Water Supply sectors of Poland and Ukrainc 11% Electric Power and Energy, Oil and Gas Urban Development SUPPORT FOR INFRASTRUCTURE: 13% 'Mining STRENGTHENING PRIVATE PARTICIPATION, 2% SERVICES FOR THE POOR - Multisector 3% Infrastructure has multiple links to poverty reduc- Transportation , Development tion Improved infrastructure can help create jobs Telecommunications and raise worker productivity It can save time and 1% 11-Iman effort in transporting water, crops, wood, and other commodities It can also improve health (by reducing indoor air pollution and emissions in urban areas and making clean water available) and educa- tions(by eaning aCess to schols, cm utes Figure 3.4 Net Long-Term Resource Flows to Developing tion (d y expandg g access to schools, computers, Countries, 1991-2000 and lighting) (billions of dollars) The Bank provides advice, finance, risk mitiga- tion, and knowledge and information services to 178 help countries improve their infrastructure A major Foreign direct investment objective relates to the design of sound legal and regulatory frameworks to promote private participa- tion. While lending support (typically to middle- 60 Official flows income countries) tapers off as they gain increased access to private finance, it will continue to be 3 7 38 6 important-together with technical assistance for 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 sector reform-in countries where such access remains limited. Subsector highlights for the year Source World Bank 2001 Global Development Finance 2001, p36 Washington D C are noted below. Note 2000 data are preliminary Net long-term resource flows are defined as net liability transactions or origional maturity of greater than one year Thematic Perspectives 53 Box 3.6 Open Economies Grow Faster example of Bank support for innovation and private sector involvement, the project is being replicated in Research shows that the top developing country performers in Brazil, Chad, Guatemala, and Uruguay terms of expanded foreign trade and investment (a group includ- ing India, China, and Mexico) enjoyed good growth in the 1990s, Urban support. Demand for lending and nonlend- while the rest of the developing world, as a whole, did poorly. ing services has been growing, spurred by a fiscal The result was partly an outcome of trade liberalization, but also 2000 sector strategy and the Cities Alliance partner- depended on factors such as the rule of law and corruption, infra- ship (see page 104) Many urban projects help regu- structure investment, and streamliningof government regulations. larize land tenure in slums and provide basic infra- structure services Reflecting a new generation of GDP per Capita Growth Rates projects aimed at scaling up efforts, a fiscal 2001 (percent) 5.2 project in Mauritania has established a national slum-upgrading program, launched it in five cities, and created a national land-development program for low-income residents. 1.9 Telecommunications. The Bank's support for telecommunications reform continues to lead to dra- -0.2 matic increases in private investment in telecommu- nications and public access to telephones In Peru, Less open Rich More open over the course of Bank-supported reforms invest- policies countries policies o ment increased from $28 million of public invest- Sources Dollar, David 2001 'Improving the Investment climate ment in 1993 to over $2 billion in private investment in India World Bank "Concept Note" Mimeo Washington, D C in 1998, while the share of poor households in Lima with a telephone increased from I to 21 percent In Mauritania, the sale of the first mobile license and privatization of the state-owned operator, both with Bank assistance, have set records for telecommuni- Water. Key priorities were to maximize the develop- cations privatization proceeds in Africa and opened mental impact of ongoing projects and ensure the the way to full competition The Bank is also sup- quality of projects under preparation. For urban water porting private provision of rural telephone services and sanitation projects, this strategy has meant a in Bolivia, Nepal, and Uganda, and community shift toward competitive private management and Internet access in Thailand-through efforts pat- financing of such services to improve utility perform- terned after a Chilean model that expanded access ance and leverage the Bank's financial products from 85 to 99 percent of the population at modest Rural projects are emphasizing greater user involve- cost to the public ment, not only in designing and implementing but also in contributing resources to the project. Energy. A new energy business renewal strategy emphasizes market-based efforts to improve access to Transport. Support to the sector in fiscal 2001 cleaner energy for poor people, energy tax reform to reflected the Bank's dual emphasis on private partic- promote fiscal stability and cleaner fuels, and support ipation and service provision for the poor Assistance for good governance and private sector development to Brazil helped extend rail concessions to urban in the energy sector Important nonlending work over railways while ensuring that the benefits of urban the year included a review of Nigeria's petroleum sec- mass transit investments reach poor people. In tor and support to India and Bangladesh for use of India, the Bank supported the development of the cleaner fuels for indoor cooking to improve women's Delhi-Noida Bridge, the country's first major public- health A new global study on petroleum product tax- private toll bridge concession A successful road ation will help advise governments on how best to maintenance project using multiyear output-based avoid adverse effects on the poor in structuring taxes contracts, just closed in Argentina, offers another and subsidies. Joint Bank-IFC support to Pakistan, 54 The World Bank Annual Report 2001 meanwhile, for sector reforms, and private participa- Box 3.7 Output-Based Aid tion to develop local gas resources, should save the country large sums on imported oil Ensuring maximum impact from aid projects and government spending is a common concern of donor agencies and develop- PROVIDING GUARANTEES TO INCREASE CLIENTS' mg-country governments. Output-based aid advances this objec- ACCESS TO PRIVATE CAPITAL tive by focusing on more efficient, and better-targeted, service delivery rather than on the construction of facilities (as in tradi- In fiscal 2001 the Board approved a partial credit tional aid-funded projects). guarantee for the Bolivia-Brazil gas pipeline, which A number of developing countries already rely on output- has opened up Bolivia's huge gas potential and based aid approaches: expanded energy markets in Brazil Also this year, Subsidies for water services to Chile's low-income households the Bank issued a $158 8 million IBRD policy- flow to service providers only when a qualifying household based guarantee for Colombia to help raise $1 bil- has received and paid for the service. lion at a time when U S capital markets were vir- Bangladeshi field-workers who educate mothers on oral rehy- tually closed to comparably rated borrowers. In dration techniques to reduce infant mortality are paid wages April 2001 financing closed for the Haripur power that depend on how well the mothers can remember how to project in Bangladesh, with backing from an IDA make and administer rehydration solutions. partial risk guarantee that played a catalytic role in Peruvian telecommunications companies compete to expand mobilizing first-time, long-term funding from lead- and sustain services in rural areas, on the basis of the small- ing international banks In addition, the Bank est level of subsidy required to serve rural consumers. introduced guarantee facilities to facilitate export credits to private sector exporters in Africa, and similar support is under preparation to help the Russian Federation rehabilitate its forestry and coal sectors Bank Group's total portfolio The content of such work is changing (figure 3.3) It is shifting away UPDATING THE BANK'S PRODUCTS AND STRATEGy from traditional investment lending to a new mix of advisory services (some of it fee-based), phased In fiscal 2001 the Bank Group engaged in substan- medium-term lending, and catalytic investment proj- tial analytical work and consultations toward de- ects increasingly financed by IFC and MIGA with velopment of a new private sector development policy support from the Bank. One such example strategy Areas analyzed include the respective roles relates to output-based aid (box 3 7) An emerging of the public and private sectors in development knowledge product is the Rapid Response Unit Web and the link between private sector development site (rru.worldbank.org bj)), which offers clients and poverty reduction online "selfhelp" and "helpdesk" services, together TIhe private sector development and infrastruc- with customized fee-based service for small advisory ture portfolio accounts for about 45 percent of the transactions. Thematic Perspectives 55 Building Strong Financial Systems, Addressing Vulnerabilities A strong financial system is an essential building block - for a sound investment climate, job creation, and sus- tainable growth. By improving poor people's access to financial resources, a well-functioning financial sys- tem directly supports their climb out of poverty It I' also spurs growth and reduces the lkelihood and cost - of financial crises, in this respect, its impact on pov- erty reduction is indirect-but significant n Financial sector development and reform take time, growth does not occur overnight and recovery Is not immediate Some financial systems in East -- Asia remain fragile Many emerging markets were newly set back after seeing some recovery in 2001, as slower growth in the United States and Japan - -I reduced capital flows to them. New "fragilities" -- linked to fiscal and exchange rate issues and sustain- ability of reform have emerged Turkey suffered a L banking crisis and Argentina grappled with the r 4 1 threat of a liquidity crisis after three years of reces- ' - sion As international financial systems integrate F ' . further, the international financial community has [ K : '' an even greater stake in working together to address '^ - vulnerabilities by promoting international standards and diverse financial systems REGIONAL AND COUNTRY-LEVEL ASSISTANCE The World Bank's regional and country-level activi- ties include a range of lending and nonlending serv- ices that respond to the specific needs of different financial systems (see boxes 3 8 and 3 9) Support to ! low-income countries has focused on strengthening . banking systems and increasing access to financial services, in middle-income countries, the Bank has \ ' concentrated on deepening capital markets and i ____ improving the stability of financial systems - d Lending services. Lending for financial sector reform A customer uses a newly installed Point of Sale terminal to pay for his grocenes at Kalu e Angela, which serves one of the poor neighbor- amounted to $2 2 billion in fiscal 2001, compared hoods of Praia, Cape Verde The store Is one of three thousand estab- with $1 8 billion last year Support to Turkey was lishments connected to the electronic interbank payment system under aimed at helping to restructure and privatize state- the Financial and Private Sector Development Project which was imple- owned banks and to empower the bank failure resolu- tion entity In Mexico the Bank continued assistance to strengthen financial system infrastrUcture It also 56 The World Bank Annual Report 2001 Box 3.8 The Central Bank of Sri Lanka: A Homegrown Re-engineering Redirecting the mission of a central bank, reconnecting it to eco- undertaken in fiscal 2001, bringing the total to 35 nomic goals, and refocusing core functions is an enormous assessments since program inception in May 1999. effort-one that requires the commitment and courage demon- Follow-up to these assessments, in terms of technical strated by the Central Bank of Sri Lanka (CBSL). Following exten- assistance, has already taken place in more than a sive discussions over the course of 2000, CBSL staff determined dozen countries. Another 24 to 30 countries are that the bank needed to realign its role within the Sri Lankan expected to participate in the program in fiscal 2002. economy and better position itself to support the nation's eco- nomic development. Technical assistance. Technical assistance has Taking its cue from several forward-thinking central banks, been an important tool for the Bank in helping gov- CBSL has decided to shed ancillary functions such as public debt ernments carry out financial system reform. Advice management, management of the Employees Provident Fund, continued to Indonesia to target pressure points for and development financing activities. CBSL staff have refocused revitalizing economic growth: corporate governance the bank's objectives on price stability and financial sector sta- of state banks, debt management, and corporate bility. Management is in the process of restructuring CBSL, debt restructuring. In Ukraine, the Bank helped the automating business activities, and implementing a Voluntary government clearly define the methods and proce- Retirement Scheme-which will result in a 50 percent reduction dures for the resolution of one of the largest banks in staff. CBSL is also committed to dramatic changes in human in the country, Banka Ukraina. Efforts to deepen resource policies, moving away from time-in-grade criteria for and scale up microfinance services in Bangladesh staff promotion to a merit-based system. will increase access to finance by up to 1.5 million In lune 2001, the World Bank approved a $30.3 million new microcredit borrowers and will help skilled credit to support this completely "homegrown" model of institu- microcredit entrepreneurs move to higher levels of tional reform. Success over the long term is very likely because activities through loans of up to $1,000. By directly the program was designed by the central bankers themselves. targeting women and the poorest segments of the population in rural and urban areas, this project will directly reduce poverty. helped the Central Bank of West African States to SUPPORT AT THE GLOBAL LEVEL put in place a set of regional payment mechanisms, and supported Brazil's efforts to accelerate and con- At the global level, the Bank has worked to strength- solidate financial sector reform-and thereby prevent en the international financial architecture by promot- financial crises, which hit the poor hardest. These ing international standards that respond to the loans are representative of the Bank's efforts to help requirements of developing countries, by developing governments reduce the risks to consumers of using tools to help governments maintain the stability of financial services; minimize the cost of resolving bad financial systems, and by offering training programs banks (thus enabling other government spending); to build the capacity of supervisory and regulatory and strengthen financial system infrastructLures, wvith- agencies. Besides the IMF, with whom coordination out wvhich grovtli could not take place. on financial sector work has increased significantly in the past few years, partners in these efforts include Nonlending services. A core diagnostic process the Financial Stability Forum, Basel Committee on underlying activities in many countries is the joint Banking Supervision, International Organization of World Bank-IMIF Financial SectorAssessment Securities Commissions, and International lProgram. Joint missions of financial sector specialists Association of Insurance Supervisors. The Bank help national authorities diagnose vulnerabilities and brings its unique perspective to global standard- priorities in their financial sectors and assess obser- setting bodies, based on its experience in the field vance of select international supervisory and regula- and understanding of the difficulties in implementing tory standards and codes. The IMF's focus on the financial standards in a developing-country context. linkages between the financial sector and macroeco- For example, the lessons learned from implementing nomic performance is complemented by the 13ank's payment system standards in Latin America's emphasis on economic development and capacity Western Hemisphere Clearance and Settlement building. Twenty-three country assessments were Initiative were valuable in guiding the assessment Thematic Perspectives 57 Box 3.9 Changing Cape Verde's Financial Landscape: Sustained Reform Pays Off In the early 1990s Cape Verde's financial sector was underde- and implementation of the Core Principles for veloped: banks were unprofitable and carried bad loans, the Systemically Important Payments Systems payments system was nonfunctional, and a weak legal and The Bank has changed the way it generates and regulatory environment stifled growth. The financial condition delivers knowledge on financial systems it has of the country's largest bank, the state-owned Banco worked more closely with partners, taken advantage Comercial do Atlantico (BCA), was deteriorating, and the gov- of the Internet and distance learning, built online ernment had to act. Given the bank's 90 percent market share databases, and addressed information gaps that the and high liquidation costs, the World Bank recommended that Bank is uniquely able to fill Specifically, the Bank is the government restructure BCA instead. helping countries understand the new challenges With support from the World Bank, the government of and choices offered by electroniic finance and the Cape Verde embarked on an ambitious economic reform pro- impact of technology on the integration of regional gram in 1996. A number of profound changes were introduced. financial markets in developing countries Together with the IMF, the Bank produced a handbook for Institutional changes ' developing government bond markets-essential for Changing BCA's management team and training staff to be governments to reduce the exposure to external bankers rather than civil servants shocks. The Bank has tripled the resources accessi- Upgrading and improving management information systems ble through the Fiancial Sector Web site, addng Introducing new financial products and services online databases that allow users to access banking Restructuring and privatizing BCA laws and compare information about how banks are Strengthening and regularizing bank supervision and improv- regulated and supervised around the world ing the legal environment Central to the dissemination effort is a new model for delivering training and knowledge to mem- Systemic changes ber countries Together with partners in the finan- Enhancing the role of the country's central bank as the mon- cial, academic, and official communities, the Bank etary authority and supervisor of the financial system has doubled Its course offerings. Over 33 programs Installing a modern and electronic-based payments system laddress policy issues im bankig, capital markets, (SWIFT, or Society for Worldwide Interbank Financial electronic finance, small financial systems, credit- Telecommunication) reporting systems and credit scoring, housing Opening up the financial sector to foreign banks, leading to finance, insurance supervision, disaster risk mitiga- better quality services tion, payments systems, and microfinance Over five years, BCA-and Cape Verde's financial system as a whole-have been transformed. The two state-owned banks (including BCA) have been privatized and, combined with the arrival of foreign banks, competition has intensified in the banking sector; bank governance has improved; the culture has changed, with a civil service mentality progressively replaced with banking skills; and modern and electronic-based banking has been introduced. In addition, banks have become more profitable, have better-quality balance sheets, and have improved their services to customers. 58 The World Bank Annual Report 2001 Building Effective Legal and Judicial Systems Fighting poverty for lasting results is the World Legal service centers for poor women under the Ecuador Judicial Bank's mission Effective and equitable legal systems Reform Project have assisted over 17, 000 women to exercise their constitutional and civil nghts Here, the World Bank's Vice President are vital to eradicating poverty-and sustaining and General Counsel Ko-Yung Tung visits with women at one of the gains. The Asian financial crisis of the late 1990s centers demonstrated not only that a sound financial archi- tecture is essential for growth but also that an effective legal and judicial system is paramount for need for legal and judicial reform. The rule of law growth to be equitable and sustainable The transi- requires the existence of an appropriate legislative tLion in Eastern Europe has shown that market forces framework and predictable and fair enforcement by alone, without transparent laws and fair enforce- independent judiciaries, and it calls for accountable ment, can lead to uneven economic growth and and legitimate governments to maintain order, pro- increased poverty Poor people often lack legal rights mote private sector growth, and fight inequality. that would empower them to take advantage of opportunities and protect them from arbitrary and BANK SUPPORT FOR LAW AND JUSTICE inequitable treatment. They, more than any other group in society, are adversely affected by laws per- In line with a more comprehensive approach to mitting discrimination, deficient laws and institu- development, the Bank's support for law and justice tions that fail to protect individual and property has evolved from specific law reform, aimed at eco- rights, and insufficient enforcement of these laws, as nomic development, to a broader spectrum of activi- well as other barriers to justice. ties Such activities have included legal education for These lessons have prompted an increasing the general public in the Rtissian Federation, anticor- number of countries to promote the rule of law as a ruption programs in Sri Lanka's judiciary, indigenous sine qua non of development and to recognize the dispute resolution mechanisms in Guatemala, and Thematic Perspectives 59 legal aid for poor women in Ecuador. While the BUILDING A SOLID KNOWLEDGE BASE THROUGH majority of legal and judicial reform projects have an NONLENDING SERVICES indirect impact on poor people, innovative compo- Sharing of global experience. As work on legal and nents are often included in projects to reach the judicial systems must be founded on solid knowl- most vulnerable members of society In poorer coun- edge, creating and disseminating global knowledge tries, the Bank supports efforts to bring justice close egal and dl remhas globa knor to the poor both physically and culturally by enhanc- on legal and judicial reform has become a major ing effective traditional informal mechanisms-while focus of Bank assistance in this area Following ing effective tradibuioaldg iformpatlehformal sys- strong participation by legal, judicial, and other at the same time building a compatible al minterested experts in the Global Conference on tem, and changing inherent traditional biases that Comprehensive Legal Reform held in June 2000, the may hurt the poor. In its work with middle-income Bank launched an electronic forum to broaden the countries, the Bank concentrates its efforts on mod- dialogue and build on the partnerships forged during ernizing the legal framework and strengthening the the conference Over 600 subscribers from around judicial system to promote economic development the wvorld participated in this virtual discussion Later The broad objectives of assistance are to help in the year the Bank launched the Development about legal and judicial reform, improve gover- Gateway for Law and Justice, initially focusing on bring ai and judctref, improeae nsolvency law, judicial and legal reform, child labor nance and physical infrastructure, and increasela,aditrtonlevomnalawAnweec access to justice Key elements of reform include law, and international environmental law. A new elec- access to jutm icel Keyelementsof threfough incde tronic forum initiated in May 2001 sought to develop promoting judicial independence through improved momentum for the July 2001 Conference, appointment systems, planning, and financing, as 'Empowerment, Security and Opportunity through well as disciplinary procedures, modernizing judicial Law and justice," in St. Petersburg, the Russian administration and case management, and training Federation It also served the purpose of benefiting judges and court personnel Governance improve- those unable to attend the conference ments encompass strengtheniing anticorruption pro- grams, building capacity in public agencies and civil Building capacity among legal practitioners. society organizations, and supporting bar associa- Knowledge sharing took other forms in fiscal 2001 tions and legal education Bank assistance may The Bank designed and launched a distance learning include improvements in physical infrastructure, pilot course for Bangladesh, Indonesia, the such as providing public information areas in court- pilippines, Sr Lanka, andoThala, tle houses and setting design standards for court build- Phlipl Rnes, Sri Lanka, and Thailand, entitled ings to improve physical access for the public, as "Judicial Reform Improvng Performance and well as to increase efficiency Access to justice can Accountablity" Ths course focused on judicial inde- be enhanced by providing legal counseling and advo- pendence and accountability, case management, cacy, particularly for the vulnerable, and by develop- empirical research, and corruption control. Another ing alternative dispute resolution mechanisms and modernizing court administration Working closely with governments, bar associa- Figure 3.5 Legal and Judiciat Reform Activities tions, judges, and civil society, the Bank is embark- Share of 481 selected Bank projects ing on a number of activities in support of law and (percent) justice (figure 3 5). These diverse activities include the sharing of global and regional knowledge on 23 26 31 topical issues, assessments of countries' legal and H A 38 - 39 49 judicial systems, and financing of countries' legal 25 27 1 23 Law reform and judicial efforts Together, these activities are 13 _ E Knwledge helping to promote legal knowledge, as well as * capacity capacity and institution building, prerequisites for * building legal reform and for effective use of financial assis- tance AFR EAP ECA LAC MNA SAR 60 The World Bank Annual Report 2001 innovation is the World Bank's Legal Yearbook, a include banking, corporate governance, environ- publication to be launched jointly with the IFC and ment, insolvency, infrastructure, water and forests, MIClGA, offering seminal articles, case studies, and and land titling, as well as gender equity and indige- legal materials covering various subject arcas of devel- nous peoples In addition, an insolvency initiative- opment la\w in partnership with the IMF, regional development banks. IFC, the United Nations Commission on Sharing global best practice. While laws are International Trade Law, the Organisation for country specific, they benefit from regional harmo- Economic Co-operation and Development, the nizationi and Incorporation of global best-practice International Federation of Insolvency Practitioncrs, principles to foster empowerment, security, and and the International Bar Association-was opportunity Advisory services to borro-wing countries launched to develop best practices and guidelines helped tailor global comparative expertise to coun- for effective insolvency and creditor rights' systems try-specific culture and traditions in a growing Also, the 13ank established an International Advisory number of areas T hese areas have expanded to Council on Law and Justice, made LIp of leading I~~~~DGt R mS aOC MMM :~ftwv& ftwM= a-I -,Uowd -Moup* BW ¶~ak ~l~~-- l\'A~ &Da o - s~~~~~ ~~~~ - -\- . -o 0 aS' ~~~ ~~~M g ri1igmW m P w - ,ft& ISH IHAT A 09 _ blk ?ee OX S &AN&M = pgft a nom W , Ns md $5 W_ &O waMDMf ~ oftflMdw lb 00IJM ~W§g N~ Df 0 0lb 0bv 0 *~ ~bd m§p OR nbwo gDf M"w~* gopma fe fij MmO3 o- -o bFA 0~W6f m~-T @ b(G WlW gtiDeSSdX0~~~~~~~~ThmaicPespetivs6  XboxEm g ^ X %@ hs hQ @w S S 3 SU g d ° uk~gnm ~§mw&hm dftmw ,k t a *>&Ow{ GSffgw hB A9hXm*adtd ~PMbM Mo~ b M ~b M WNM aX M M609 So5r DN f *g~I bO MM 9 WMI D 6~1 WW ~M ,@bM Nk06A &V UPOAnmdqo~ a} U 2h3 ~MV06WftmfXSWf ar & W wtSkt Mg@ 9 )bonm qa om ao ,MOADuo oma tknVDN Wd S &w~A9P~d~W*f~ DAOf wp r X < 03 @ m bn= Xftmb ato b00 m) aRagm 0XOMVh @ P0 Thematic Perspectives 61 Box 3.10 Support for Bangladesh's Business Climate, LENDING FOR REFORM Women, and Poor People To date there are 31 stand-alone projects in legal Approved in fiscal 2001, the Bangladesh Legal and Judicial Capacity and judmbial reform, there are more than ce t rmes Building Project is aimed at (1) improving the business environment ects that deal with some aspect of legal and judicial by making the civil justice system more supportive of economic ecorm New in fore a l and udicial activity, and (2) improving access to justice for women and poor peo- reform New lending for legal and judicial reform ple. The project combines traditional elements of judicial reform with amounted to $47 millon for fpscal 2001-wa th innovative measures to increase access to lustice and fight corrup- another $51 5 mdllion in preparation-and concen- tion. It also promotes women's representation on the bench, gender- poorest countries. Activities included, a comprehen- sensitivity training for judges and court personnel, legal aid for poor women, and informal dispute resolution mechanisms to bring lustice sive program for legal and judicial reform in to the underprivileged. Bangladesh (see box 3.10) as well as similar pro- grams in preparation for Benin, Guinea, the The project's capacity-building component will help improve iippesa ra Le eT f irstnfull-scale court administration and case management systems, upgrade court evaluatineof a jicia reorm p ro t wasc le infrastructure, strengthen small claims courts, provide training, and evaluation of a judlcial reform project was complet- upgrade training facilities Legal literacy and public awareness cam- ed for Boltvha, alloweng the Bank to draw the fLrst paigns would be carried out in cooperation with local nongovern- Aerica. the evaluan undec ore th in mental organizations. ~~America. The evaluation underscored the long-term menial organizations. nature of legal and judicial reform and the need for The project-which was built on extensive consultations with civil society, legal professionals, and government officials-was not only realsti c c xpectatmons and goals but also funded by an IDA credit ($30 6 million, total project cost $43 7 mil- allitkh o mders. lion), with cofinancing by the Danish International Development A survey of recent Bank activities in knowledge, Administration and the Canadian International Development Agency. capacity building, and law reform in 84 countries shows that the Africa Region had the highest percent- age (52 percent) of capacity-building activities in legal and judicial reform (figure 3 5) Capacity- and institu- jurists and legal scholars, to provide guidance to the tion-building aspects of the legal and judicial reform Bank on its law- and justice-related activities activities supported by the Bank aim at strengthening the judiciary, strengthening legal institutions, and Assessing countries' legal and judicial systems. increasing access to justice Included in these activi- Through intensive, comprehensive diagnostic assess- ties was a series of workshops held to support the har- ments, the Bank has been building its knowledge of monization of commercial codes in 16 (francophone the significant elements of countrnes' legal systems. and lusophone) African countries under the Legal and judicial sector assessments are the basis for Organisation pour l'Harmonisation en Afrique du dialogue with governments and for the design and Droit des Affaires Treaty, as well as the strengthening implementation of programs, in concert with other of the women lawyers' association in Niger to increase development partners In fiscal 2001 the Bank under- its capacity to deliver legal services to the rural and took assessments for Argentina, Romania, the Russian urban poor Forty-nine percent of the activities in the Federation, the Slovak Republic, and the Federal South Asia Region were law reform activities, the Republic of Yugoslavia Such assessments review Europe and Central Asia Region was close behind appointment and disciplinary procedures of judges and with 38 percent. These activities included reviewing provide baseline information on each system's effi- land titling in Sri Lanka, as well as providing techni- ciency and effectiveness Results from some of the cal assistance on insolvency, enterprise restructuring, assessments show that key areas in need of further in- and institutional and regulatory reforms in the Czech depth analysis are access to justice, alternative dispute Republic The East Asia Region had the largest num- resolution mechanisms, gender protection, the cost of ber of knowledge activities, including a legal needs inefficient systems, and corruption. assessment in Mongolia 62 The World Bank Annual Report 2001 Regional Perspectives Africa 65 East Asia and Pacific 70 South Asia 75 Europe and Central Asia 80 Latin America and the Caribbean 85 Middle East and North Africa go Gross Domestic Product-per Capita Index 1990-2000 Africa East Asia and Pacific South Asia 200 200 200 178 150 150 150 139 100 100 100 100 95____________________ 100 100 50 50 0 1990 2000 1990 2000 1990 2000 Europe and Central Asia Latin America and the Caribbean Middle East and North Africa 200 200 200 150 150 150 118 111 100 100 100 100 ~ ~ ~ ~ ~~~~~~4100 _______________________ 50 50 50 0 0 -0 1990 2000 1990 2000 1990 2000 Source World Development Indicators database HIV/AIDS: Prevention Is Vital Today 36 million people are infected with HIV; more than 21 million have died of AI DS since the 1980s; and over 13 million children have been orphaned by the disease. As a cosponsor of the Joint United Nations Programme on HIV/AIDS (UNAIDS), the World Bank has commit- ted more resources to HIV/AIDS in fiscal 2001 than in any previous year. Other sections of this Annual Report discuss the Bank's support to Africa (page 27) and work with partners (page 103). In this chapter, the "Fast Facts" box in each section shows the number of per- gD H -,,,, U1- ' DL , sons living with HIV/AIDS.* While the epidemic's impact on Sub-Saharan Africa has been by far the gravest, data for c w( ly a $@ltA°&nCTO Oa..South Asia-a region with relatively low HlIV prevalence rates but extensive vul- it O Onerability to the infection -underscore llJ1llV/Affl)D9s gm a gll()Ll: $ W that both rates and absolute numbers matter. South Asia's large population, for example, means that a rise of a mere 0.1 ,guffez$ bwhX knYcdop meng a8 o t/ d~7 percent in the overall adult prevalence rate would increase the region's total of $flg( 21U9o adults living with HIV by about half a million persons. Prevention is vital. And it is esti- mated that, while a national prevention m gFt U.N. S@ g fo ow§fios program in Sub-Saharan Africa would cost less than $3 per capita with preva- lence rates below 5 percent, costs would quadruple to $12 per capita at preva- lence rates of 15 percent. UNAIDS esti- mates that a basic HIV/AIDS program in all developing countries would cost at least $9.2 billion per year, six times the current level of investment. * Figures presented in the "Fast Facts" boxes in this chapter represent UNAIDS estimates as of December 2000 and are based on UNAIDS regional definitions, which differ somewhat from those used by the World Bank For more details, visit www.unaids.org e' "Today in Africa, we are aware that it's not the Bank or the Fund that is going to develop our countries orfight against poverty. It's up to us. We shall do it. We need to be accompanied by these institutions because they have the know- .1 how that helps us to amplify, multiply, and accelerate what we are going to do." Ali Badjo Gamatie, Minister of Finance of Niger, at the Spring 2001 Meetings of the World Bank and IMF. incomes depended on a strong human resource base Countries Africa in Africa-calling for better access to health and Wlogd Bank education services and an exceptional, concerted Borrowing: REGIONAL CONTEXT: URGENT NEED FOR FASTER, fight against HIV/AIDS. Angola REGIONWIDE DEVELOPMENT Regional cooperation and integration is also nec- Benin essary to increase Africa's competitiveness and posi- Botswana Economic growth in Africa in 2000 was mixed. While tion it to maximize the benefits of globalization Burundi it averaged 7 percent in Mozambique and Uganda Enhancing African access to global markets- Cameroon Cape Verde and 5 percent in 14 other countries, Sub-Saharan especially the markets of industrialized countries Central African Africa's economic performance has, on average, weak- and for agricultural products-is an essential factor, Republic Chad ened over the last two years, largely due to resurgent alongside debt relief and renewed official aid, for Comoros conflicts and political upheavals in a few countries. In sustaining growth. Congo, addition, sharply higher oil prices in 2000 created Democratic adverse external shocks for some countries, while WORLD BANK ASSISTANCE: Congo, markets for other primary exports were depressed. Republic of ACCELERATING AFRICA'S DEVELOPMENT Cote d'lvoire For much of the region, inequality is still high Equatorial and growth remains below the 5 percent rate needed Bank lending to Africa rose from $2.2 billion in fis- Guinea Eritrea to prevent an increase in the number of poor Many cal 2000 to $3.4 billion in fiscal 2001 A strategy Ethiopia still have no access to basic services and cannot was submitted to the Board in December 2000 to Gabon Gambia, The effectively participate in the modern economy increase IDA lending to Africa-to reach 50 percent Ghana HIV/AIDS remains one of the largest challenges to of total IDA resources-while strengthening mecha- Guinea human development in Africa, having already nisms to better reflect country performance in the Kenya reversed hard-won gains in life expectancy in several allocations. The strategy was based on discussions Lesotho countries. Africa has also experienced falling levels held with IDA Deputies around the IDA-10-IDA-12 Liberia Madagascar of overseas development assistance, down to $19 per review, in preparation of the 13th Replenishment of Malawi capita by 1998 from $32 in 1990. IDA. Lending included new responses to the Mali Mauritania These factors have sharpened the urgency for HIV/AIDS crisis and oil price shocks, as well as re- Mauritius accelerated development in Africa. At the 2000 engagement in several post-conflict countries. The Mozambique Namibia World Bank-IMF Annual Meetings in Prague, Bank increased aid flows also reflect the dramatically Niger President James D. Wolfensohn and IMF Managing improved development effectiveness of the region's Nigeria Director Horst Kohler committed to making Africa a Bank-financed projects following intense efforts to Rwanda priority In February 2001 they met with 22 African raise the quality of project preparation and supervi- Principe heads of state in Bamako, Mali, and Dar Es Salaam, sion. Priority areas for Bank assistance were consis- Senegal Seychelles Tanzania, to listen to their visions of how Africa can tent with those articulated in the 2000 landmark Sierra Leone accelerate growth rates, drastically reduce poverty, study, Can Africa Claim the 21st Century?, which pro- Somalia South Africa and position itself to benefit from globalization. The posed ways for international donors to better support Sudan leaders recognized that poverty reduction had to Africa's development efforts with a focus on improv- Swaziland Tanzania begin with peace, democracy, and good governance. ing governance and resolving conflicts, investing in Togo And they acknowledged that prospects for higher people, increasing competitiveness and diversifying Uganda Zambia Zimbabwe Regional Perspectives 65 Africa Fast Facts Total population: 0.7 billion Population growth: 2.4% Life expectancy at birth: 47 years economies, reducing aid dependence, and strengthen- Infant mortality per 1,000 births: 92 ing partnerships. Key priorities in fiscal 2001 included Female youth illiteracy: 26% providing debt relief to the poorest countries, 2000 GNI per capita: $480 tackling the HIV/AIDS epidemic, spurring private Number of persons living with HIV/AIDS: 25 million sector development, and helping countries Note: Life expectancy at birth and infant mortality rate per 1, 000 births are for 1999, other empower communities as well as prevent and Indicators are for 2000, from the World Development Indicators database. The term gross recover from conflict national Income (GNI) is now used instead of gross national product (GNP). The Bank works closely with multiple develop- I .. ment partners in Africa, including multilateral organ- Total FY01 New Commitments Total Y m e~tS - J izations such as the African Development Bank, key IBRD $0 million 11,43 i4o, bilaterals, the private sector, and nongovernmental IDA $3,369.6 million _ I, organizations (NGOs). For example, it works with the Food and Agriculture Organization on rural 'a aa@111- a a a s a- a - a * a S development, with the Forum of African Women * iR.RIm Educationalists on girls' education, and with the International Partnership Against AIDS in Africa, in whose support it contributed $4 million to the Joint United Nations Programme on HIV/AIDS r - (UNAIDS) Secretariat. In addition, the Strategic Partnership with Africa symbolizes the Bank's role in bringing together aid agencies and African institu- tions, providing a forum for coherently addressing .A- -. Africa's development issues The Bank is also work- pL , ming closely with other partners to support the Nile Basin Initiative, and in June 2001 hosted the .rp. {'3International Consortium for Cooperation on the _ --e /' Nile, a Consultative Group-style meeting aimed at t 4 | i. mobilizing funding for sustainable development of the 10 countries of the Nile Basin. Table 4. 1 shows the value and sectoral distribu- tion of total Bank lending to the Sub-Saharan Africa region in the fiscal 1992-2001 period. Table 8.2 (see About the World Bank) compares commit- ments, disbursements, and net transfers to the region for fiscal 1996-2001, and table 8.8 (see About the World Bank) shows operations approved in fiscal 2001, by country. Figure 4.1 shows IBRD and IDA lending by sector. Supporting poverty reduction through debt relief A total of 13 African countries qualified in fiscal 2001 to receive debt relief under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative For these Kenyan students regulate the flow of liquid into a flask dunng a chemistry class at Kisumu Girls' High School Girls' educatbon is an countries, debt service will be reduced over tme, important pnonty for many African countries from all creditors, by about two-thirds, or over $25 billion. Particularly in Africa such debt relief reflects the coming together of a global and diverse group of partners The Bank helped achieve consensus on debt reduction without jeopardizing positive aid transfers. 66 The World Bank Annual Report 2001 1. 2~~~~~~~~~~~~~~~~~~~~/ IDA-eligible African countries became eligible for debt relief by preparing Poverty Reduction L Strategy Papers (PRSPs), which bring aid agencies and countries together around common goals defined by the country. Through the PRSP process, 17 African countries began to pursue a country- driven development agenda, underpinned by a process of domestic consensus building and with support from development partners. Such support is provided by the IMF's Poverty Reduction and Growth Facility and the Bank's Poverty Reduction Support Credit, the first of which was approved for - Uganda in fiscal 2001 (see page 43) - Tackling the HIV/AIDS epidemic and other communicable diseases Investing in people-and addressing HIV/AIDS in particular-has been a key priority for the Bank, worklng closely with UNAIDS and other partners (see page 103). In September 2000, through a Multi- Country HIV/AIDS Program for Africa, the Bank made a regionwide commitment to put all the neces- sary resources at the disposal of African countries struck by the pandemic (see page 27). The Bank ear- A young Peul Beroro girl and her father near the southem town of marked an initial $500 million in flexible and rapid Zinder are among Niger's population of some 105 million whose living for indiv a Hconditions the Bank seeks to Improve A key focus of Bank assistance IDA funding for idividual HIV/AIDS projects devel- to Nlger is combating desertification oped by Sub-Saharan African countries, of which $287 million was committed in fiscal 2001 for proj- ects in Cameroon, Eritrea, Ethiopia, The Gambia, Ghana, Kenya, and Uganda. A second phase is being Figure 4.1 Africa: IBRl and IDA Lending by Sector, prepared In fiscal 2001 the Bank also stepped up its Share of total of $3.4 billion support for the fight against malaria, a serious killer, particularly among Africa's children (box 4 1) Urban Development Infrastructurea 1% Agriculture and Spurring private sector development 12% Environment Public Sector 2% A buoyant private sector-both domestic and Management foreign-is critical for sustained growth and genera- 11% Eccrticaigrothognera 1E4oomic Policy tion of jobs and domestic income The Bank contin- ued supporting reforms aimed at improving the Finance and -- environment for business and investment It also Private Sector Development - developed new tools to support the development of i5% trade, such as the seven-country Regional Trade 3% aevelopmentb Facilitation Project (box 4 2). In response to African 32% leaders' requests, the Bank increased its lending for infrastructure operations (transport, energy, wvater)- Note Sector classification is on a loan component basis See table 1 1, page 26 a Includes transportation, telecommunications, and water supply and sanitation both to facilitate the development of the private sec- b Includes $287 2 million in IDA credits to seven countries under the Multi- tor and to improve liNing standards The Bank Country HIV/AIDS Program for Africa, for which the Bank earmarked $500 million committed to further increase its lending in the in September 2000 c Includes electric power and other energy, oil and gas, and mining infrastructure sectors in the coming years. Regional Perspectives 67 Helping empower communities Box 4.1 Rolling Back Malaria To ensure that development benefits do reach the Malaria is on the rise again, killing over a million people a year poorest communities, the Bank developed Community worldwide, including an estimated 700,000 children. And the Action Programs, which reflect the Community- rising numbers of people affected by malaria are overwhelming Driven Development (CDD) approach that empowers national health services and weakening societies, particularly in communities by making resources available to them in Sub-Saharan Africa, where 90 percent of the cases occur. support of effective local development programs The In April 2001 the Bank hosted the Fourth Global Bank has placed growing emphasis on decentralized Partnership Meeting to Roll Back Malaria (RBM). Participants CDD mechanisms to help channel resources to rural shared experiences on expanding country-level partnerships to areas, such as the social funds in Malawi and nutrition implement national programs to reach the RBM goal of halving programs in Senegal and Madagascar. This effort was the burden of malaria by 2010. They examined the roles of gov- complemented by a focus on strengthening capacities, ernment, the private sector, and NGOs in working together to in both the public and private sectors. The Bank has extend malaria programs beyond the public health sector. They committed up to $150 million to the Partnership for also discussed the challenges faced in mobilizing and effectively Capacity Building in Africa (PACT) over five years, employing external resources, and the opportunities provided together with the Harare-based African Capacity through the PRSP and HIPC Initiatives to scale up successful Building Foundation. In 2000 PACT funded projects malaria programs. in 29 countries to help develop skills, knowledge, and management capacity. Helping countries affected by conflict Conflict is increasingly becoming a development issue in Africa. The Bank has strengthened its capacity to cooperate with specialized partners, Box 4.2 Stimulating Africa's Productivity by Facilitating including United Nations agencies, bilaterals, and Regional Trade NGOs, in preventing conflict and supporting post- conflict recovery. With regard to prevention, the Financing for productive activities in Africa is severely con Bank has worked with others to try to address some strained by a perception that the region is highly risky. In many of the root causes that may generate political insta- countries, however, this perception is not justiried by circum- bility and, eventually, conflict, and in particular stances. The IDA-supported Regional Trade racilitation Project poverty and inequalities. With regard to recovery, the (RTFP, $110 million) tackles this problem by bringing together Bank was active in several countries, both through countries that are willing to address the market's perception by project financing and technical advice. In November settirg up a credible insurance mechanism against losses 2000 the Bank approved a $90 million credit to sup- caused by political risks. T hese ccurtries governments would port Eritrea's long-term reconstruction and economic be the ultimate risk takers in the Insurance mechanism, creating recovery, through complementary actions in agricul- a strong disincentive to cause claims. Private insuiers, while not ture, private sector reconstruction, and social protec- currently able to assume the high political risk in cross-border tion. The Bank also approved two credits totaling transactions involving African countries, would --with the public $400.6 million to assist the Ethiopian government sector's assumption of risk-be able to extend artivities in the with its post-war recovery program. Support region. included the emergency demobilization and reinte- The RTFP will benefit commerci.l firms Involved In trade, by gration of 150,000 veterans of the conflict with extending the maturities at which credit is available and creat- Eritrea, emergency humanitarian needs, and rehabil- ing a more stable business environment. Seven countries will itation and reconstruction of infrastructure, as well initially benefit (Burundi, Kenya, Mia awl, Rwanda, Tanzania, as stabilization of the economy and restarting the Uganda, and Zambia); the project could later be extended to all reform agenda. Other countries in which the Bank African countries. has been active in post-conflict reconstruction oper- ations include Burundi, Guinea-Bissau, Rwanda, and Sierra Leone. 68 The World Bank Annual Report 2001 Table 4.1 World Bank Lending to Borrowers in Africa, by Sector, Fiscal 1992-2001 (millions of dollars) Sector Classified on a Loan-by-Loan Basis | [ Classified on a Loan Component Basis FY92-97 FY98-99 FY00 FY01 FY00 FY01 Annual Annual average average Agriculture 315.2 182.5 173.6 362.3 181.4 384.7 Economic policy 527.0 503.2 426.2 540.3 360.1 458.3 Education 233.5 283.2 159.7 74.9 203.7 146.7 Electric power 181.4 190.2 42.9 - 60.3 0.5 and other energy Environment 53.9 35.9 16.4 22.0 22.6 26.1 Finance 217.3 17.2 60.4 204.4 60.4 198.6 Mining 10.7 10.0 - 18.0 - 18.0 Multisector 38.9 - 93.5 - 43.2 Oil and gas 31.4 8.8 116.6 72.0 116.7 89.0 Health, nutrition, 136.9 199.6 110.0 384.2a 154.0 466.2a and population Private sector 193.8 61.3 143.2 462.2 186.6 298.1 development Public sector 101.8 150.9 312.2 382.2 194.9 365.6 management Social protection 117.6 113.4 139.4 453.7 143.4 490.5 Telecommunications 14.9 5.4 10.2 - 10.2 11.8 Transportation 294.4 503.2 256.2 99.0 256.2 112.1 Urban development 132.3 105.5 10.8 40.0 91.7 20.0 Water supply 124.6 92.9 87.7 254.4 73.7 283.4 and sanitation Total 2,725.7 2,463.2b 2,159.1 3,369.6 2,159.1 3,369.6 Of which IBRD 175.0 31.2 97.6 - IDA 2,550.6 2,432.0b 2,061.5 3,369.6a,b Note See table 1 1, page 26 Numbers may not add to totals because of rounding a Includes $287 2 million in IDA credits to seven countries under the Multi-Country HIV/AIDS Program for Africa, for which the Bank earmarked funding of $500 million in September 2000 b Excludes IDA HIPC grants of $75 million to Uganda in fiscal 1998, $154 million to Mozambique in fiscal 1999, and $64 million to Cameroon in fiscal 2001 Regional Perspectives 69 L L "When the orchardists saw their piled fruit turn --1 _ 4 into cash and their life standard was thus :1 improved, they were very excited and filled with . happiness. These kind and honest people did no; forget the organizations that helped them." Letter from Mr. Song Yongxiang, a recipient of a small busi- ness loan funded by the Shanxi Poverty Alleviation Project, which is improving lives in some of China's poorest areas. Countries E + A Pacific that build on strategic alliances and partnerships Eligible for LatL l and a ll World Bank to encompass global good practices. In fiscal Borrowing: 2001, $2.1 billion in new lending, covering 30 Cambodia REGIONAL CONTEXT: RECOVERY CONTINUES BUT projects (excluding 3 with special trust fund China RISKS PERSIST financing), supplemented the Bank's policy Fiji advice and technical support The strategic thrust Indonesia Kiribati East Asia's recovery from financial crisis has been of Bank assistance includes revitalizing the busi- Korea, remarkable Growth in the region's developing coun- ness sector, supporting public sector perform- Republic of Lao People's tries exceeded 7 percent in 2000, and extreme ance, addressing social risks, and preventing Democratic poverty is down to about 13 in 100 people living on countries from retreating into environmental Republic less than $1 a day, compared with nearly 30 percent neglect. Malaysia Marshall Islands at the start of the decade Much of the progress was Delivering global and regional experience to Micronesia, driven by China, a pillar of growth during the crisis. countries and applying resources to local needs Federated States of Steady recovery in other parts of East Asia has are the driving principles behind the Bank's strat- Mongolia renewed progress in poverty reduction, which was egy in East Asia Nearly half the Bank's staff in Myanmar Palau interrupted during the crisis. 2000 marks the second the region and all its Country Directors are Papua New consecutive year of growth for East Asia's major located in the field to ensure more effective Guinea Philippines economies. Countries are financially stronger than assistance. Indonesia's fiscal 2001 CAS, devel- Samoa they were four years ago, which will help them man- oped in a highly consultative manner, links Solomon Islands age the impact of the global contraction this year increased concessional lending to improved gov- Thailandagth Tonga Revitalizing the business sector is essential to ernance; and a new transition strategy is guiding Vanuatu enhance resistance to shocks. Some smaller econo- the Bank's program in East Timor (box 4.3). mies are lagging, and disparities within larger In Cambodia, the Lao People's Democratic This section economies are high. Social vulnerability remains wor- Republic, Mongolia, and Vietnam, the Bank is also reports on East Timor. risome nearly half the population lives on less than supporting comprehensive, long-term programs- $2 a day Progress on other social development developed by the countries through the Poverty goals-which require effective institutions and service Reduction Strategy Paper process-that promote delivery-has been slower The need for increased broad public participation and are pro-poor responsiveness of public institutions has thus grown, and pro-growth. A new CAS has been initiated in step with the emergence of an active civil society, a for China growmng policy debate, and changes in government. Table 4.2 shows the value and sectoral distri- Finally, the environment needs renewed attention bution of total Bank lending to the East Asia and Pacific region in the fiscal 1992-2001 period WORLD BANK ASSISTANCE: COMPETITIVE Table 8.3 (see About the World Bank) compares BUSINESSES, EMPOWERED COMMUNITIES, commitments, disbursements, and net transfers to CLEANER AIR the region for fiscal 1996-2001, and table 8.9 (see About the World Bank) shows operations approved The Bank's primary objective is to reduce poverty in fiscal 2001, by country. Figure 4.2 shows IBRD through Country Assistance Strategies (CASs) and IDA lending by sector. 70 The World Bank Annual Report 2001 East Asia and Pacific Fast Facts Total population: 1.9 billion Population growth: 0.9% Revitalizing East Asian business and restoring Life expectancy at birth: 69 years investor confidence Infant mortality per 1,000 births: 35 Female youth illiteracy: 4% The Bank is helping to improve the institutional and 2000 GNI per capita: $1 060 policy environment for private investment through Number of persons living with HIV/AIDS: 0.6 million support for corporate restructuring, governance, and competitiveness. In Indonesia, it has worked closely Note: Life expectancy at birth and infont mortality rate per 1,000 births are for 1999, other indicators are for 2000, from the World Development Indicators database. The term gross with the IMF and the Asian Development Bank nationalincome (GNI) is now used instead ofgross national product (GNP). (ADB) in bank and corporate restructuring, and led support to state banks. In Thailand, the Country Total FY01 New Commitments Total FY01 Disbursements Development Partnership for Competitiveness IBRD $1,136.1 million IBRD $2,683.3 million (CDPC)-nonlending support to take forward coun- IDA $997.7 million IDA $646.8 million try dialogue in the absence of adjustment lending-is helping implement policies and financial and corpo- No S @3 . . 9Am s rate reforms. In Vietnam, a new Poverty Reduction Support Credit is supporting a comprehensive set of structural reforms to promote increased private investment and to strengthen transparency and i accountability in state enterprises, banks, and public finance-essential for broadly shared growth. To promote regional competitiveness, the Bank is investing in information infrastructure, technology innovation, and skills development. Thailand's CDPC is addressing key constraints in these areas, comple- ,c mented by technical assistance from partners. The - _ .' Bank-managed Vietnam Development Information L Center is a multidonor-funded cutting-edge facility that offers distance learning and public access to global knowledge; the operation is one of four Global Development Learning Network centers established by the Bank in Asia. Through knowledge and country developnment partnerships established with countries such as the Republic of Korea and Thailand, the _ Bank is facilitating access to global development _ knowledge to reduce vulnerability and strengthen ^ competitiveness (box 4.4). Work has also advanced with the Organisation for Economic Co-operation and -, . , ;- t,,_ Development (OECD) to assess China's knowledge l' economy and requirements for technological innova- | . - tion. The Third Asia Development Forum for regional . policymakers and others, organized jointly with ADB, - _ the Economic and Social Commission for Asia and - the Pacific, and other partners, also aimed at prepar- ing for the future economy. ;-'- Improving public services and governance In China, lending for projects with a strong environmental focus has With rising public debt squeezing public spending, been the fastest growing part of the Bank's portfolio. civil society in many East Asian countries is demanding more efficient and accountable govern- Regional Perspectives 71 Box 4.3 East Timor: Where Is It Now? ment, improved social and infrastructure services, and better environmental safeguarding. Bank assis- In September 1999, East Timor was devastated by violence after tance thus continues to emphasize public sector the East Timorese voted overwhelmingly to break from Indonesia. transparency and accountability, and greater stake- Leading the coordination of the international community's holder participation in project design and implemen- reconstruction efforts, the Bank has, over the last i8 months, tation. Initiatives in Indonesia include anticorruption administered the Trust Fund for East Timor. The fund received and civil service reforms. The Indonesian-led Partner- pledges of up to $166 million for basic reconstruction and ship for Governance Reform-a joint initiative with development works in nearly all sectors. the United Nations Development Programme- Progress has been remarkable. Within six months, grant facilitates a national dialogue on governance and is agreements for projects and programs in all sectors were funding innovative reform proposals from civil soci- signed. By December 2000 economic activity was recovering; ety and government agencies projects supporting agriculture, community recovery, health, Bank operations are adopting demand-oriented education, sanitation, and infrastructure were under way; a and private sector approaches to service delivery, United Nations (U.N.) agency had set up power-sharing particularly in infrastructure activities and with arrangements with the East Timorese; and a schedule for elec- emphasis on cost recovery. Decentralized public tions was agreed on. The Bank has developed a Transition sector decisionmaking and accountability are also Support Strategy to help East Timor as it moves toward post- priorities. Indonesia's Provincial Health Project is U.N. independence. The challenges ahead are enormous- delivering services to the poor in the provinces of but within reach, if the success of the last two years provides Banten, North Sumatera, and West Java in an any indication. increasingly decentralized environment The Philippines' Local Government Finance and Development Project is making cities more livable by expanding and upgrading basic infrastructure, services, and facilities, as well as the capacity of Box 4.4 Innovating with Knowledge and Country participating local governments In China, the Development Partnerships: The Republic of Korea and Economic Law Reform Project is financing technical Thaltand assistance for preparing economic laws, while the Accounting Reform Project is helping government Through partnerships established with countries such as Korea auditors curb waste and other misuse of resources, and Thailand, the Bank is facilitating access to global develop- and strengthen public sector financial management. ment knowledge to reduce vulnerability and strengthen compet- In Thailand, Bank-funded surveys to gauge house- itiveness. These have emerged as the central development hold, private sector, and public sector perceptions of concerns in middle-income countries following the crisis. corruption have raised national awareness of, and The knowledge partnership with the Korean government is debate on, the problem. contributing to Korea's efforts to become a more competitive, knowledge-based economy and to transfer Korean development Reducing vulnerability and ensuring that poor experience to other countries. In June 2001 the Bank, jointly R e bene r owth with the Korean Development Institute, organized a workshop on business innovation systems, providing insights that can be Bank strategy has evolved from supporting safety nets applied to other developing countries. and crisis assessment to strengthening policies and In Thailand, the Bank is assisting the government via coun- institutions that help households manage social risks, try development partnerships centered on technical assistance build social policy frameworks, and enable the poor and capacity-building needs, private sector and civil society to participate in the benefits of growth. Social pro- involvement, and grant resource mobilization. The partnership grams in low- as well as middle-income countries on competitiveness focuses on completing the reform agenda have increasingly emphasized community empower- and implementing the forward-looking agenda-deepening ment and demand-driven approaches. In Cambodia skills, strengthening innovation capabilities, and improving the Social Fund II Project is financing community- logistics. based subprojects for infrastructure, creating employ- ment opportunities, and strengthening communities and local governments. Indonesia's Kecamatan 72 The World Bank Annual Report 2001 NN '-I~~~~~~A 4A -. It --I- 1. - - World Bank officials visit a school in Jakarta whose students received work with the Bangkok authorities to tackle motor- scholarships from the National Scholarships and Grants Program, a e cycle polto;a multidonor report on China's envi- donor-supported program that helped poor families and schools facepluin the impact of the 1997-98 financial crisis ronment and a report analyzing options for natural resource management in Indonesia; and support for projects in China with a strong environmental focus, Development Project is helping 10,000 subdistricts which have been the fastest-growing part of the nationwide fund small-scale infrastructure projects or Bank's loan portfolio for that country ($1 2 billion income-generating activities; the project is strength- approved in fiscal 2000-01). For example, the ening local capacity, empowering village councils, Sichuan Urban Environment Project is bringing and improving community participation, cleaner water and a healthier environment to six mil- The Bank has also been supporting areas of lion low-income people in Sichuan while helping extreme poverty Mongolia's rural transport project is protect and restore the Grand Buddha of Leshan, a improving poor communities' access to health and World Cultural Heritage site. education services and facilitating private enterprise and trade. In Vietnam, small-scale infrastructure and Figure 4.2 East Asia and Paciflc: IBRD and IDA Lending livelihood projects are being planned to tackle by Sector, Fiscal 2001 poverty in some of the country's poorest areas Share of total of $2.1 billion through participatory, decentralized, and targeted Urban Agriculture and approaches. China's Tri-Provincial Highway Project Development Environment X~~~~ ~ ~ ~~~~~~~ ,,X 16% is helping develop transport in three western 9% 1n% Economic provinces while improving road access to poor coun- Polioy ties to reduce income inequalities. 3% Infrastructure" Improving the environment 35t - With urbanization now embracing half the popula- Human Development ion in the region's major countries, urban air and Public Sector brn27% water pollution is an extremely serious problem. Management Finance and Otherb Together with he Fo Motor Company, ADB, and 1 % Private Sector 1 % with the Ford ~~~~~~~~~~~Development the governments of Japan and the Netherlands, the 8% Bank has launched the Clean Air Initiative for Cities Note Sector classification is on a loan component basis See table I 1, page 26 of East Asia as a platform for knowledge sharing a Includes transporation, telecommunications, and water supply and sanitation among Asian cities. Assistance to countries includes b Includes electric power and other energy Regional Perspectives 73 Table 4.2 World Bank Lending to Borrowers In East Asia and Pacific, by Sector, Fiscal 1992-2001 (millions of dollars) Sector Classified on a Loan-by-Loan Basis Classified on a Loan Component Basis FY92-97 FY98-99 FY00 FY01 FY00 FY01 Annual Annual average average Agriculture 958.4 1,035.3 353.8 193.5 412.8 154.9 Economic policy 97.8 1,831.0 30.0 250.0 40.0 57.5 Education 495.7 330.4 5.0 7.6 7.0 16.6 Electric power 1,292.0 473.4 470.0 30.0 470.0 30.0 and other energy Environment 279.1 259.7 382.7 4.8 590.3 197.0 Finance 94.9 3,105.2 32.0 8.0 32.0 88.0 Mining 5.8 - 10.0 - 10.0 - Multisector 10.5 - - 35.0 - Oil and gas 139.3 - 7.0 - 7.0 Health, nutrition, 206.2 125.6 119.4 108.2 82.7 108.2 and population Private sector 22.5 99.3 - - - 85.0 development Public sector 74.6 367.5 490.0 - 470.0 12.5 management Social protection 52.9 650.0 100.0 378.4 105.0 443.4 Telecommunications 180.7 67.3 - - - - Transportation 1,147.8 1,105.6 629.2 729.0 577.3 746.1 Urban development 320.1 116.7 - 389.3 - 194.6 Water supply 126.8 127.2 350.0 - 175.0 and sanitation Total 5,505.1 9,694.2 2,979.1 2,133.8a 2,979.1 2,133.8a Of which IBRD 4,389.1 8,800.9 2,495.3 1,136.1 IDA 1,116.0 893.3 483.8 997.7 Note See table 1 1, page 26 Numbers may not add to totals because of rounding a Does not include special financing of $21 6 million provided by the Trust Fund for East Timor 74 The World Bank Annual Report 2001 "We are happy that the World Bank has come to talk directly to us. We know what we need and we know how to solve our problems better than any- one else. Come back again and keep talking to us." Local farmer speaking during Country Assistance Strategy consultations in Kohat district, Pakistan I South Asia's poverty continues to present a Countries South Asia profound development challenge Half a billion Eligible for World Bank people live on less than $1 a day, accounting for 44 Borrowing: REGIONAL CONTEXT: GROWING STEADILY, percent of the world's poor. The illiteracy rate is the Afghanistan BUT BELOW POTENTIAL world's highest, and women have only about half as Bangladesh many years of education as men. Lack of access to Bhutan India At 5 8 percent, growth in South Asia in 2000 contin- health care, the continuing acceleration of HIV Maldives ued to be robust and sustained compared to the infection, and environmental degradation are only a Nepal I ~~~Pakistan rest of the world. Long-term growth continues to be few of the problems that threaten the region's pros- Sri Lanka well below potential, however, and the 2000 out- perity and undermine the quality of life for all, espe- come was also affected by drought that undermined cially poor people agricultural output in some parts of the region. India's GDP growth led the region at 6 percent, WORLD BANK ASSISTANCE: STRENGTHENING while Bangladesh's remained steady, at 5.2 percent PROSPECTS FOR LASTING DEVELOPMENT Strength in manufacturing and exports raised Paklstan's growth slightly, to 3.8 percent. The Bank's central goal in South Asia is reduction The stability of South Asia's growth is impres- of poverty and vulnerability, which it pursues by sive, given recurrent natural disasters and continuing promoting country and community ownership of political instability in some areas Drought struck development efforts; responding quickly to crises; northern India, Afghanistan, and Pakistan, a massive supporting increased investment in human devel- earthquake killed thousands in India. Other more opment, especially for marginalized groups; and chronic obstacles to growth were poor governance, encouraging private sector-led and equitably civil conflict, and insufficient economic reforms. shared economic growth. The pace of India's economic reforms has been Table 4.3 shows the value and sectoral distribu- slowed by political challenges at the state level. tion of total Bank lending to the South Asia region in Pakistan continues to face pervasive, inherited gover- the fiscal 1992-2001 period Table 8.4 (see About the nance problems and economic distortions, con- World Bank) compares commitments, disbursements, fronting them effectively will be crucial to the and net transfers to the region for fiscal 1996-2001, success of its Economic Revival Program introduced and table 8 10 (see About the World Bank) shows in 2000 In Bangladesh, a sharply polarized political operations approved in fiscal 2001, by country. Figure environment prior to 2001 elections slowed imple- 4.3 shows IBRD and IDA lending by sector. mentation of second-generation reforms necessary to accelerate growth and reduce poverty. Over the year, Promoting ownership and empowering communities political instability continued in Nepal, and in June 2001 the country suffered the tragedy of the royal In fiscal 2001 the Bank consulted extensively with assassinations, Sri Lanka saw a combination of a local communities, civil society, and government offi- deepening of its 18-year conflict, a fragile ceasefire, cials in preparing its Country Assistance Strategies and political volatility, and intense fighting contin- (CASs) for India, Bangladesh, Sri Lanka, and ued in Afghanistan. Pakistan (box 4.5). It also engaged in civil society Regional Perspectives 75 South Asia Fast Facts Total population: 1.4 billion Population growth: 1.9% Life expectancy at birth: 63 years BOx 4.5 Deepening the Devetopment Dialogue In Pakistan Infant mortality per 1,000 births: 74 Female youth illiteracy: 40% In preparing a new CAS, the Bank's Pakistan team conducted con- 2000 GNI per capita: $460 sultations from the village to the national level, talking to farmers, Number of persons living with HIV/AIDS: 5.8 million women's groups, NGOs, trade unions, academia, media, govern- Note- Life expectancy at birth and Infant mortality rate per 1,000 births are for 1999, other ment officials, and politicians. The team heard voices of deep con- indiators ore for2000 from the World Development Indicators databose The term gross cern about widespread corruption, and despair about the lack of national income (GNI) Is now used instead of gross notional product (GNP). economic opportunities, fair access to justice, education, and health services. But it also heard creative ideas from people with a Total FY01 New Commitments Total FY01 Disbursements great desire to make a difference in their own lives. IBRD $2,035.0 million IBRO $756.0 million The CAS consultations helped the Bank identify local develop- IDA $1,211.5 million IDA $1,935.3 million ment needs and priorities as determined by the citizens them- selves. It is hoped that the opening of this dialogue will lead to a Portfolio of projects under implementation as of June 30, 2001: more inclusive development process in Pakistan. consultations and interactive workshops that allowed A8 the Bank to bring its global development experience to client countries while seeking local perspectives on development priorities. ' ', r i vbt < In India, over 300 politicians, civil servants, and I, + s- r nongovernmental organizations (NGOs) met at a r -. _ X F workshop on state-level reforms in December X ; ^ r t ;-- 2000-sponsored by the Bank, other donors, and 6-' kt[ o ; E . - -- -- f . the Ministry of Finance-to exchange ideas with ¢- t- t s f ~~~~~~~~ =; _ ~~~global fiscal and governance experts, while a glba fc an g e whilnumber of large workshops at the federal level also helped to examine fiscal, privatization, and business-climate issues Support for sector-level dialogue included a work- shop in Pakistan on the sustainable provision of xwater and sewerage services in Karachi, and a series of consultations to help national and provin- cial authonties and other stakeholders better 1 19- X . i v]-~ '- understand the needs and concerns of road users. Two journalism workshops aimed at strengthening r i I tS h S\ - i ,. . q the media were sponsored by the World Bank - IX * Institute- one on economic reporting and one, offered with support from the Commonwealth 1~1EIIIIELL _________ Press Union, on corruption and journalism ethics. The Bank is helping increase local ownership of development efforts by empowering communities to Girls raise their hands to indicate that they are in school, during World design and implement projects. For example, India's 8ank consultations in rural Pakistan The consultations were among District Poverty Initiatives projects (in Andhra several held with numerous stakeholders to inform the Bank's Country Assistance Strategy for Pakistan Pradesh, Madhya Pradesh, and Rajasthan) and Rural Water Supply and Environmental Sanitation Project closely involve rural communities in efforts to increase their access to resources and improved serv- 76 The World Bank Annual Report 2001 ices. Sri Lanka's pilot Village Self-Help Learning access to global development knowledge. In Initiative, meanwhile, includes a Village Community Pakistan, Bank participation in policy dialogue has Telecenter that relies on information technology helped the government prepare a national educa- and communications to help reduce poverty in tion sector strategy. remote villages. The project is funded by a Japanese In fiscal 2001 the Bank continued its strong Social Development Fund Grant administered by support for the region's health programs-which are the Bank. showing results A second project to deepen HIV/AIDS prevention efforts is under way in India, Working together to respond to crises the first helped to launch a national control pro- gram, increase blood safety from 30 percent to Bank assistance in fiscal 2001 helped address nearly 100 percent, significantly reduce risky behav- needs arising from natural disaster- and conflict- ior, and raise condom use in high-risk groups. related crises, recognizing their devastating Another follow-up project in India, this one impact on poor people. Response to India's earth- approved in fiscal 2001 to fight leprosy, will help quake was quick, collaborative, and multidimen- move India toward elimination of this disease; under sional (box 4.6). In drought- and conflict-ridden the first project, 4.4 million patients received treat- Afghanistan, the Bank is helping the efforts of the ment, and registered leprosy cases fell from over I United Nations and other agencies to alleviate million in 1993 to 500,000 in 2000. In fiscal 2001 famine and malnutrition among an estimated 12 the Bank also approved an HIV/AIDS Prevention million Afghanis (including those in refugee cen- Project in Bangladesh, targeting high-risk groups ters in neighboring Pakistan). In addition, the Bank is helping combat tuber- In Sri Lanka, the Bank-financed North-East culosis (TB) in South Asia, which has 3 of the 10 Irrigated Agricultural Lands Project continues to countries with the world's highest TB incidence In make progress amid the challenges of conflict. The India the Bank supports a revised national TB con- project aims to re-establish at least a subsistence trol program, which treated 1.1 million patients in level of production and basic community services 1999 and rising in 2000 under DOTS (Directly through agricultural and small-scale reconstruction Observed Treatment, Short-course-a cost-effective activities. Partners include the government of Sri strategy that reduces illness, deaths, and transmis- Lanka, the focal communities, local NGOs, the United Nations High Commission for Refugees, and the International Committee of the Red Cross. Figure 4.3 South Asia: IBRD and IDA Lending by Both parties to the conflict have been appreciative Sector, Fiscal 2001 of this work to assist some half a million people n Share of total of $3.2 billion the conflict zone. Agriculture and Environment 9% Economic Policy _ 1% Investing in people Human The Bank's support to South Asia recognizes the Infrastructurea" Development centrality of education and health in poverty reduc- 41% 11% tion. A new project in Bangladesh will strengthen literacy programs and help the newly literate utilize . Otherb their skills, benefiting some 1 6 million of the 23% country's poorest people, half of them women. Also in Bangladesh, a new Legal and Judicial Capacity Public Sector Management Finance and Building Project will help improve access to jus- 8% Private Sector tice, especially for the poor and women (see page Development 7% 62). A distance-learning project-the first of its kind in South Asia-offers videoconference and Note Sector classification is on a loan component basis See table 1 1, page 26 a Includes transportation, telecommunications, and water supply and sanitation Internet-based training opportunities to political b Includes electric power and other energy and business leaders in Sri Lanka, expanding their Regional Perspectives 77 7 ~ - t. - N -lb^ L .. ' t ./7 $4 A woman shares the story of her loss with World Bank team mem- bers following the devastating earthquake In Gujarat sion). The Bank is also supporting efforts to expand DOTS in Pakistan and Bangladesh. Box 4.6 Disaster Response: Multidimensional Assistance, Partnership, and Participation Promoting private sector growth A dynamic private sector is crucial for growth-and On January 26, 2001, a severe earthquake hit India's Gujarat thus central to the Bank's country programs. India's state, leaving over 20,000 people dead, nearly a million Rajasthan Power Sector Restructuring Project, families homeless, social infrastructure destroyed, and a approved in fiscal 2001, continues the Banks government suddenly faced with an immense challenge. support for private provision of infrastructure in the The Bank quickly made $400 million available for emergency region It will help advance the privatization of dis- rehabilitation and partnered with counterparts from the Asian tribution firms and promote small-scale power gen- Development Bank to prepare a comprehensive damage eration as well as renewable energy production for assessment (http://www.worldbank.org/gujarat e ) remote locales The Pakistan Trade and Transport crucial to shaping a recovery plan and guiding cooperation Facilitation Project, also approved in fiscal 2001, among all parties. will help the country modernize and reform its trans- Reconstruction needs are estimated at a staggering $2.3 port sector. Lower transport costs will help billion. The Bank's emergency assistance of $400 million pro- Pakistan's industries become more competitive in vides short-term financing for temporary shelter, rubble international markets. removal, health and education services, rehabilitation of In fiscal 2001 the IFC, the Bank Group's pri- basic infrastructure, community capacity building, and estab- vate investment-promotion arm, continued to com- lishment of disaster management capabilities. A longer-term plement Bank assistance for the region's private reconstruction credit is under preparation. In close consulta- sector development IFC is helping South Asia tion with Indian authorities, the Bank is urging the active par- accelerate private participation in the provision of ticipation of affected communities in all reconstruction infrastructure, tourism, health, and education serv- efforts. ices, and is providing support for countries' financial sectors and capital markets 78 The World Bank Annual Report 2001 Table 4.3 World Bank Lending to Borrowers in South Asia, by Sector, Fiscal 1992-2001 (millions of dollars) Sector Classified on a Loan-by-Loan Basis Classified on a Loan Component Basis FY92-97 FY98-99 FY00 FY01 FY00 FY01 Annual Annual original average average Agriculture 405.1 610.9 271.5 231.8 61.0 297.3 Economic policy 138.4 275.0 45.0 350.0 45.0 15.0 Education 271.4 408.2 200.0 192.6 200.0 269.6 Electric power 507.1 252.5 280.0 630.0 280.0 745.5 and other energy Environment 94.9 91.8 - 5.0 7.8 7.4 Finance 185.9 184.5 65.1 181.3 65.1 163.3 Mining 12.5 266.0 - - - - Multisector 41.7 271.6 Oil and gas 50.1 - - - - Health, nutrition, 357.8 475.7 344.6 70.0 344.6 70.0 and population Private sector 107.9 16.0 - - - 51.0 development Public sector 79.8 - 251.3 182.6 251.3 259.1 management Social protection 86.6 - - - 231.5 33.0 Telecommunications 15.0 - 62.0 - 62.0 Transportation 244.8 292.4 582.1 1,333.0 556.3 1,332.9 Urban development 51.1 52.5 10.8 4.7 7.8 2.4 Water supply 139.0 16.2 - 65.5 - and sanitation Total 2,789.1 3,213.3 2,112.4 3,246.5 2,112.4 3,246.5 Of which IBRD 1,056.7 1,034.0 934.3 2,035.0 IDA 1,732.4 2,179.3 1,178.1 1,211.5 Note See table 1 1, page 26 Numbers may not add to totals because of rounding Regional Perspectives 79 "In Poland I turned to the World Bank with which we had already established a good working relationship through the transition years. Because it is independent, the Bank can help give a credible start to anticorruption initiatives. It helped us with the analytical work and advised us on the polcy and technical reforms that can help to minimize corruption." Leszek Balcerowicz, op-ed in Segodnya (Russian Federation newspaper). September 2000. Countries r Eur d Central Asia In Turkey, the macroeconomic stabilization program Eligible for Ope an suffered a major setback in February 2001, and out- World Bank Borrowing: put is expected to decline this year The currency Albania REGIONAL CONTEXT: GROWING ECONOMIES depreciated sharply and major losses occurred in the Armenia NEED FOR STRONGER BUSINESS CLIMATE banking sector. A comprehensive structural reform Azerbaijan of the pubhc and financial sectors accelerated in the Belarus The year 2000 marks the first year in the past spring, alongside implementation of agricultural Herzegovina decade when all transition countries experienced reform. Bulgaria Croatia positive growth Growth in Central Europe and the Czech Republic Baltics averaged 4 percent, the highest during the Estonia last five years. The Baltic countries, Croatia, the WORLD BANK ASSISTANCE: CREATING JOBS, Georgia PROTECTING THE VULNERABLE, FIGHTING Hungary Czech Republic, and Romania started to grow again CORRUPTION Kazakhstan after having stabilized their economies in the previ- Kyrgyz Republic Latvia ous year. Overall, growth in the Commonwealth of Poverty has increased substantially in the Europe Lithuania Independent States (CIS) countries reached a and Central Asia (ECA) region over the last decade, Macedonia, record high of 7.4 percent, led by the Russian resulting from the deep economic recessions initi- former Yugoslav Federation's strong economic recovery fueled by ated by the transition process Helping countries Republic of higher energy prices and the post-1998 currency to move to a sustainable growth path-and to Poland depreciation. ensure that growth translates into jobs and improved Romania Barring a sharp decline in growth in Western living standards-continues to be a major compo- Russian Federation Europe, economic growth is expected to remain nent of the Bank's poverty reduction strategv, with Slovak Republic strong in most of the region into 2001. Many of the efforts to help improve the business climate A Slovenia Tajikistan new administrations in Central Europe and the second component is support for realigning public Turkey Baltics are accelerating reforms, and the European expenditures to protect extensive achievements in Turkmenistan Union (EU) accession process has become an education and health, and improving the targeting of Ukraine Uzbekistan important catalyst. Continued growth in the Russian social protection programs toward the most vulnera- Yugoslavia, Federation and Ukraine will depend crucially on ble. Improving governance and institutional Federal Republic improving the environment for business and private structures to serve the broader public interest, with of investment. Such improvement could not only raise a strong focus on anticorruption and community- This section also the present low levels of domestic and foreign direct driven development, marks a third component of the reports on investment but also spur growth of new small- and Bank's strategy. This strategy incorporates lessons Kosovo. medium-size firms-a major factor in the growth of learned from the past decade of transition experi- the Baltics and Central Europe ence (see http://wwwworldbank.org/eca/ Major developments have occurred in Turkey publications e') and the Federal Republic of Yugoslavia In late 2000, The Bank continues to play a key role in sup- the new administration of the Federal Republic of porting peace and economic recovery in South East Yugoslavia embarked upon a reform program to facil- Europe. With other partners, it has helped the new itate the transition to a market economy, and re- government of the Federal Republic of Yugoslavia established links with the international community prepare an Economic Recovery and Transition 80 The World Bank Annual Report 2001 Europe and Central Asia Fast Facts Total population: 0.5 billion Population growth: 0.1% Program, and cosponsored a donor conference to Life expectancy at birth: 69 years raise funds for this Program. The Federal Republic Infant mortality per 1,000 births: 21 of Yugoslavia became a member of the World Bank Female youth illiteracy: 2% in May, after agreement was reached on a plan to 2000 GNI per capita: $2,010 resolve its arrears to the IBRD The Bank prepared Number of persons living with HIV/AIDS: 0.7 million a Transitional Support Strategy, and start-up activi- Note: Life expectancy at birth and Infant mortatityrate per 1,000 births are for 1999, atherindl- ties are being financed by a $30 million trust fund cotOrsarefor2000,fromtheWorldDevelopmentIndicatorsdatabase Thetermgrossnational The Bank is also helping Kosovo rebuild its econ- Income (GNI)isnowusedinsteadafgrossnationalproduct(GNP). omy and is continuing its support for regional initia- tives in South East Europe, including the Trade and Total FY01 New Commitments T F b ts - Transport Facilitation Program. Under this program, IBRD $2,154.1 million E@= $'2l3i.n-+ Bank-financed projects in six South East European IDA $539.0 million IiA $342.01;iltio w countries will help reduce nontariff transport costs and reduce smuggling and corruption at border Portfolio of projects under implementation as.of June 30, 2001: crossings by supporting reforms and financing criti- $15.8 billion cal infrastructure and equipment needs. The Bank moved rapidly to support the new economic program of Turkey by preparing a series of adjustment loans to accelerate structural reform and mitigate social risks. A loan supporting the ini- tial phase of financial sector reforms was approved ..41 in December 2000. Table 4 4 shows the value and sectoral distri- bution of total Bank lending to the Europe and Central Asia region in the fiscal 1992-2001 period. Table 8.5 (see About the World Bank) compares commitments, disbursements, and net transfers to the region for fiscal 1996-200 1, and table 8 11 (see About the World Bank) shows operations -4 approved in fiscal 2001, by country. Figure 4.4 shows IBRD and IDA lending by sector. S Launching the Poverty Reduction Strategy process Water user associations are one of many civil society groups In Armenia helping the World Bank to formulate its Country The Poverty Reduction Strategy process was Assistance Strategy launched in all nine IDA countries in the ECA region during fiscal 2000. Albania presented its Interim Poverty Reduction Strategy Paper (I-PRSP) to the Bank and the IMF Boards in fiscal 2000; Armenia, Georgia, the former Yugoslav Republic of NGOs from Europe and Central Asia-is providing Macedonia, Moldova, and Tajilkstan presented their feedback on the process. I-PRSPs in fiscal 2001; and Azerbaijan, Bosnia and The external debt situation of some of the Herzegovina, and the Kyrgyz Republic are expected region's poorest countries is of growing concern In to present theirs in early fiscal 2002. Extensive con- fiscal 2001 the Bank and the IMF produced a joint sultations are under way in Albania and the Kyrgyz paper analyzing the magnitude and severity of the Republic and will take place in other countries as problem across IDA-only CIS countries. Additional they prepare full-fledged PRSPs The newly estab- work is under way to identify country-specific lished ECA Nongovernmental Organization (NGO) options for ensuring that debt servicing does not Working Group-an external advisory group of crowd out poverty-oriented public spending Regional Perspectives 81 Box 4.7 Promoting Community-Based Services for Vulnerable Children Improving the business climate Today nearly a million children live "lives of quiet desperation" in Growth and job creation have been much stronger institutions across the region, according to a report of the loint in countries experiencing rapid growth of new small United Nations Children's Fund-World Bank project "Changing and medium enterprises (SMEs). Improving the Minds, Policies and Lives." The project aims to promote systemic business climate, especially for SMEs, has become a change in the region from reliance on state institutions to strength- key focus of adjustment operations. The Armenia ened family and community-based services for vulnerable children. Fourth Structural Adjustment Credit, for example, Over the past three years the Bank has supported efforts in aims to improve the business climate by rationalizing Armenia, Bulgaria, Lithuania, Moldova, and Romania to establish the system of business inspections, streamlining viable alternatives to institutionalization. business registration and licensing procedures, and Romania has pioneered community-based alternatives to insti- reforming the tax and customs administration as tutionalization with the help of a $5 million Learning and Innovation well as the public procurement system, to create a Loan as part of a larger $29 miilion program supported also by the level playing field, especially for new businesses. EU, U.S. Agency for International Development, Council of Europe Armenia, the Russian Federation, and Ukraine are Development Bank, and some international NGOs. This support has initiating a series of regular business surveys to mon- enabled the government to close down large institutions, prevent itor progress on efforts to reduce public interference abandonment, and move children to family-friendly environments. in business activity Bulgaria's Child Welfare Reform Project follows a similar approach, benefiting 40,000 institutionalized children. Partnering with police, who are usually the first to come into contact with problematic Ensuring essential social services family situations, marks an innovative feature of the project. The Bank continues to help countries reform their Preventive actions include working with disadvantaged ethnic safety nets to ensure greater financial sustainability communities (such as the Roma who account for the malority of and better targeting For example, a new IDA credit institutionalized children) to improve basic preschool education to Bosnia and Herzegovina supports pension reform, and day care. while an IBRD loan will help Turkey finance sever- ance payments and labor redeployment services as the economy restructures. Loans to Azerbaijan, Bulgaria, Georgia, and Moldova are helping govern- ments undertake major restructuring in their health and education sectors, to improve service and reduce cial reform, and building public oversight, trans- informal payments that households are forced to parency, and accountability in the use of public make The Moldova project will help the government resources. In the past year the Bank has assisted develop tuberculosis (TB) and HIV/AIDS strategies Bosnia and Herzegovina, Kazakhstan, the Kyrgyz The Bank is also preparing operations to help Republic, Romania, and the Russian Federation in Belarus, the Russian Federation, and Ukraine fight carrying out corruption surveys, which provide the these diseases In FYR Macedonia, a Learning and basis for devising country-specific anticorruption Innovation Credit will test community-based strategies. Support to Ukraine has helped the govern- approaches to support youth at risk, while in Bulgaria ment take steps to eliminate nontransparent netting a Bank-financed project addresses the problems of operations between government entities, streamline children at risk (see box 4.7) licensing procedures, and reduce the number of inspections, while promoting the adoption of improved accounting standards and disclosure proce- imnrolvieng gvracan inesn com it dures, as well as civil society involvement, in the involvement'X budget process. Projects under development in FYR The Bank is supporting a multipronged strategy for Macedonia and Latvia aim to improve the credibility combating corruption, combining economic policy of public expenditure policies and accountability to reform, public administration reform; legal and judi- citizens, while support for institutional reform in 82 The World Bank Annual Report 2001 N ~~~~~~~J r* N ; ' -; .- ;- t wS t- <- * wfi Fund, with support from the Bank Croatia attacks corruption by introducing transparent Figure 4.4 Europe and Central Asia:113RDand ID working procedures in commercial courts and increas- Lending by Sector, Fiscat 2001 ing the accountability of judges and other officials Share of total of $2.7 billion Also to reduce poverty, the Bank is scaling up Urban efforts to help develop effective community organi- Development Agriculture and zations and provide them wvith resources to address 3% Environment lnifrastructurea 13% their own development priorities. Project experi- 16% Economic Policy ence-for example, with the Moldova and Romania 2% Social Investment Fund Projects-shows that com- PubliceSeto munity organizations are often in the best position to 2% Human Development manage local public initiatives Projects approved 22% this fiscal year with Community-Driven Development components will help Albania, Finance and Bulgaria, FYR Macedonia, and Turkey. Private Sector Other6 Development 8% 34% Note Sector classification is on a loan component basis See table 1 1, page 26 a includes transportation, telecommunications, and water supply and sanitation b includes multisector, electric power and other energy, and oil and gas Regional Perspectives 83 Table 4.4 World Bank Lending to Borrowers in Europe and Central Asia, by Sector, Fiscal 1992-2001 (millions of dollars) Sector Classified on a Loan-by-Loan Basis Classified on a Loan Component Basis FY92-97 FY98-99 FY00 FY01 FY00 FY01 Annual Annual average average Agriculture 393.1 183.5 160.6 234.5 130.6 243.3 Economic policy 1,002.2 1,452.3 764.6 183.5 635.0 57.9 Education 40.4 316.8 22.6 90.3 22.6 94.8 Electric power 299.3 295.5 196.5 164.4 177.4 165.9 and other energy Environment 27.2 60.4 62.4 32.2 151.8 93.5 Finance 281.7 372.0 359.0 853.5 309.0 817.3 Mining 140 1 550.0 44.5 - 10.0 - Multisector 4.0 25.0 252.5 5.0 222.5 5.0 Oil and gas 278.9 5.0 - 9.6 - 54.0 Health, nutrition, 172.9 60.8 168.4 30.0 168.4 34.5 and population Private sector 232.8 326.3 - 19.8 - 84.1 development Public sector 109.7 329.0 87.9 66.4 47.5 61.0 management Social protection 203.8 308.6 35.0 439.0 295.0 468.1 Telecommunications 30.5 15.0 - - - 7.5 Transportation 416.5 495.7 207.5 303.8 207.5 306.3 Urban development 162.4 373.8 507.0 85.0 507.0 85.0 Water supply 120.2 85.5 173.6 176.1 157.8 114.9 and sanitation Total 3,915.7 5,255.2 3,042.1 2,693.1a 3,042.1 2,693.1a Of which IBRD 3,606.7 4,406.3 2,733.0 2,154.1 IDA 309.0 848.9 309.1 539.0 Note See table 1 1, page 26 Numbers may not add to totals because of rounding a Does not include special financing of $35.1 million provided by the Trust Fund for Kosovo, and $12 million provided by the Trust Fund for the Federal Republic of Yugoslavia. 84 The World Bank Annual Report 2001 "Perhaps one of the most important A_ aspects of our partnership with the project cofinanced by the government and the World Bank is the integration of drug users into public health interventions. The financing shows the Bank's recognm- tion of the importance of the work we do with drug users, and not just for them." Domiciano Siquiera of ABORDA, an NGO working with HIV-infected drug users in Sao Paulo, Brazil. investment dropped from a historic high of $90 bil- Countries lion in 1999 to a still significant $76 billion in 2000 World Bank the Caribbean Despite economic growth, about a third of the Borrowing: region's population still lives on less than $2 a day, Antigua and and deep inequalities persist in most countries Barbuda REGIONAL CONTEXT: IMPROVING Expanding poor people's access to health, educa- Belize MACROECONOMIC INDICATORS, BUT tion, and water services remains a priority, particu- Bolivia larly for countries hit by severe natural disasters Brazil INEQUALITIES PERSIST Chile In addition, a continentwide trend toward decen- Colombia In 2000 most Latin American and Caribbean (LAC) tralization of powers and responsibilities is creating Costa Rica economies were on the path of recovery after the an urgent need for the region's state, provincial, Dominican shocks triggered by the 1998-99 crises in Asia and and municipal governments to build their capacity Republic the Russian Federation. The region's GDP grew by to deliver quality public services, especially to Ecuador El Salvador 3 8 percent over the year, responding to stabilized poor people. Grenada global financial markets and 13 percent growth in Guatemala Guyana world trade. Most macroeconomic indicators Haiti improved Inflation fell or remained stable in most Honduras 11 itrtretc u . PEOPLE, MANAGING DISASTER RECOVERY, Jamaica countries, allowing mterest rates to contmue falhng. SUPPORTING DECENTRALIZATION Mexico Unemployment dropped in Brazil, Chile, and Nicaragua Panama Mexico, it remained high, however, in Argentina, In fiscal 2001 the Bank helped LAC countries Paraguay Colombia, and Peru, where political problems con- reduce poverty by supporting human development Peru tributed to slowing growth Slower growth in the and disaster reconstruction programs and, in the St. Kitts and Nevis United States could affect prospects for the region's poorest countries, providing debt relief In the St. Lucia sustained recovery. region's larger countries, it helped strengthen the St. Vincent and the Strong trade-at 51.5 percent of LAC's GDP, public sector and reform governance systems, often Grenadines nearly double the proportion of a decade ago-and to accommodate the shifting of responsibilities from Suriname Trinidad and high oil prices eased balance of payments pressures central to decentralized authorities. The Bank also Tobago in the region High oil prices helped Colombia, participated in a major multilateral effort to help Uruguay Ecuador, Mexico, and the Republica Bolivariana Argentina address its recession by indicating readi- Venezuela, RepLiblica de Venezuela but increased the burden on oil ness to commit up to $2.4 billion over 2001 and Bolivariana de importers, particularly in Central American and 2002 as part of a $39.7 billion IMF-backed package. Caribbean countries, which already faced price Throughout the region, wide consultations with declines for their commodity exports. Oil exporters' stakeholders are a priority to ensure ownership-and higher surpluses narrowed the region's current therefore greater sustainability-of development account deficit from $55 billion in 1999 to $47 bil- efforts (box 4.8). lion in 2000-about 2.5 percent of GDP. The oil Table 4.5 shows the value and sectoral distribu- price boom prompted a temporary dip in the need tion of total Bank lending to the Latin America and for foreign savings and, accordingly, a drop in net the Caribbean region in the fiscal 1992-2001 resource flows to the region. Net foreign direct period. Table 8.6 (see About the World Bank) com- Regional Perspectives 85 Latin America and the Caribbean Fast Facts J Total population: 0.5 billion Population growth: 1.5% Life expectancy at birth: 70 years pares commitments, disbursements, and net trans- Infant mortality per 1,000 births: 30 fers to the region for fiscal 1996-2001, and table Female youth illiteracy: 6% 8.12 (see About the World Bank) shows operations 2000 GNI per capita: $3,680 approved in fiscal 2001, by country. Figure 4.5 shows Number of persons living with HIV/AIDS: 1.8 million IBRD and IDA lending by sector. Note: Life expectancy at birth and Infant mortality rate per 1,000 births are for 1999, other indicators are for2000, from the Woad Development Indicators database. The termg ross nat/onal income (GNI) Is now used Instead af gross national product (GNP). Investing in people Support for investing in people is a priority in IBRD- Total FY01 New Commitments Total FY01 Disbursements as well as IDA-eligible countries. New Bank assis- IBRD $4,806.7 million IBRD $5,268.0 million tance was approved in fiscal 2001 for vulnerable IDA $493.4 million IDA $198.0 million children's education and health in Colombia, basic education in Brazil and Panama, water and sanita- _f !seoe . ,.. * * ~tion in Ecuador, and social protection in Argentina and Colombia-raising the Bank's regional portfolio of ongoing projects in health, education, and social protection to $7.2 billion. The portfolio includes Box 4.8 Wider Consultations: The Bank's New Approach to efforts to address inequalities. As part of an overall Developing Strategy strategy to focus efforts in Brazil's poorest region, for example, the Bank is supporting a government initia- With globalization, and civil society deeply engaged in public tive to provide land and capital to about 50,000 policy debates, the Bank is consulting with stakeholders more farmers in the northeast. than ever in developing assistance strategies for LAC countries. The Bank's $2.6 billion health care portfolio in In Argentina, a new Country Assistance Strategy drew perspec- LAC includes Mexico's five-year-old program to tives from over 4,000 representatives from nongovernmental expand health-care coverage; 8.1 million poor peo- organizations (NGOs), unions, companies, religious groups, and I ple, mostly in small communities with no previous academic institutions who attended Bank-organized meetings i coverage, now have access. In the Caribbean, the across the country. Participants discussed studies on topics I Bank is helping attack the world's highest HIV ranging from education and judicial reform to transportation and prevalence rate outside Sub-Saharan Africa, with a the financial sector. Similar processes have been completed, or $155 million program to support HIV/AIDS preven- are under way or planned, in several other countries. tion and treatment programs in several countries, In Mexico, the July 2000 election that resulted In a change of starting with Barbados and the Dominican Republic. government was followed in October by a Bank-sponsored policy Support for Brazil's efforts to curb the spread of seminar attended by decisionmakers from the outgoing and HIV/AIDS has yielded good results, with a halving incoming teams. The seminar focused on analyses and recom- in the number of such deaths since 1993 (box 4.9). mendations prepared by Bank staff in 36 areas ranging from The Bank has provided over $2 billion since macroeconomic policy to human development. 1998 to improve education for poor people, with projects ranging from primary education in rural areas of Brazil, El Salvador, and Nicaragua, to post- secondary student loan programs in Mexico. In El Salvador, three loans totaling $148 million have sup- ported a community-managed schools program (EDUCO) to strengthen preschool and primary edu- cation, as well as a program for secondary education. EDUCO, which brought schools and teachers to many poor rural areas for the first time, has raised the country's primary enrollment to almost 85 per- i cent, up from 78 percent in 1996. The EDUCO l model has been used to develop similar projects in Guatemala and Honduras, also with Bank support. 86 The World Bank Annual Report 2001 In some of LAC's poorest countries, debt _i. relief and effective / poverty reduction / strategy go together. In Bolivia, ., 1 -a Guyana, Honduras, .- J and Nicaragua, 'ii governments-in \. , consultation with civil society-are 0 ' - developing strate- gies to halve ---. K poverty by 2015 The Poverty Reduction Strategy Papers coincide with debt reduc- tion provided under the Youths from the Terena Indigenous Tribe In Mato Grosso do Sul, enhanced Heavilv Indebted Poor Countries Brazil, leam about the use of condoms as a way to protect themselves enhanced Heavily Indebted Poor Countries against HIV/AIDS Initiative, supported by the Bank and the IMF In fiscal 2001 Guyana, Honduras, and Nicaragua joined Bolivia in obtaining required Bank agreement to start receiving reductions in their external debt Box 4.9 Helping Brazil Save Lives, Prevent the Spread of The agreements will reduce, over time and from all HIV/AIDS creditors, Nicaragua's debt service by $4.5 billion, Honduras's by $900 million, and Guyana's by $590 Two Bank loans totaling $325 million-approved in fiscal 1994 million, in addition to the $1.3 billion debt service and fiscal 1999-have helped Brazil reduce the spread of reduction for Bolivia approved in fiscal 2000. HIV/AIDS, and enabled Brazilians with AIDS to live longer. The first $160 million loan supported over 400 grassroots projects run by 175 NGOs in cooperation with state and municipal gov- uprportingss natra dsaserreovey ndernments. They distributed over 180 million condoms, raised preparednes vHIV/AIDS awareness among over half a million people at risk, Recovery from natural disasters remained a high and trained 3,800 teachers and 32,500 students in promoting priority in Central America. The Bank helped HIV/AIDS and drug abuse prevention. Belize, Honduras, and Nicaragua continue to The project, now in a second phase and supported by a rebuild after the devastation of Hurricane Miltch in $165 million loan, has helped reduce the number of deaths 1998. In El Salvador, $33 million in education loans due toAIDS by5O percentsince 1993. Personslivingwith were reprogrammed to finance reconstruction of HIV/AIDS also receive care through the project, because it sup- schools damaged in the two earthquakes of January ports AIDS care units and home-care teams throughout the and February 2001 The Bank is also supporting country. But prevention remains the project's focus. It has prevention efforts in Dominica, Grenada, Mexico, helped finance a nationwide network of 170 HIV/AIDS testing St. Kitts and Nevis, St. Lucia, and St. Vincent and and counseling centers and 800 diagnostic and treatment cen- the Grenadines to reduce loss of life and material ters, and in partnership with the National Business AIDS damage caused by natural disasters A $60 million Council, it enabled 3,000 companies to offer HIV/AIDS- credit to Honduras will support a fifth phase of the awareness training to three to five million workers. Social Investment Fund, which has provided grants for reconstruction, as well as drinking water and Regional Perspectives 87 N_ t t ^G re. v _ ;. ;1r Figure 4.5 Latin America and the Caribbean: IBRD and Benefiting poor people in Pompoa, Honduras, this subproject is one of over 15,000 small-scale, community-driven public investments financed IDA Lending by Sector, Fiscal 2001 since 1990 by the Honduras Social Investment Fund. A fifth IDA credit Share of total of $5.3 billion of $60 million was approved in fiscal 2001, bringing the total value of the programs to $300 million. Agriculture and Environment Infrastructurea 14% 11% Economic Policy Strengthening the public sector 1% Public Sector\Lending to subnational governments emerged as a Management / major new Bank activity in LAC in 2001. The Bank 23% , is helping Argentina's Catamarca and C6rdoba \ .~ --' \Human provinces, for example, to reform public finance and Developmentb administration to ensure that decentralized health 3* /care, education, and public safety services are of Finance and high quality and accessible to the poor. Private Sector Other' Development 1% In Mexico, the Bank has supported the federal 19% government's efforts to facilitate structural reforms in the country's states, including a $505 million fast- Note: Sector classification is on a loan component basis. See table 1.1, page 26. disbursing loan to the Estado de Mexico (the coun- a. Includes transportation, telecommunications, and water supply and sanitation. b. Includes S40.1 millon in IBRD loans to two countries undera multi-country trys largest state) in fiscal 2001. Support to Mexico program to support HIV/AIDS prevention and treatment, for which the Bank has included a study of the challenges inherent in earmarked funding of S155 million in fiscal 2001. c. Includes electric power and other energy, and oil and gas. devolving responsibilities to state and municipal gov- ernments, including analysis of taxation, transfer payments, and dispute settlement mechanisms. sanitation systems, roads, schools, and health Two projects are helping Brazil's state govern- centers for the poor. In Colombia the Bank is help- ments in Bahia and Cearg improve basic education ing to alleviate the impact of economic crisis by systems. Also in Brazil, the Bank is supporting the supporting a workfare program and conditional government's fiscal stability program with a $758 cash transfers to help poor families keep children million loan focused on fiscal discipline by states in school and maintain access to health and nutri- and municipalities, federal debt management, and tion services. public expenditure management. 88 The World Bank Annual Report 2001 Table 4.5 World Bank Lendingto Borrowers in Latin America and the Caribbean, by Sector, Fiscal 1992-2001 (millions of dollars) Sector Classified on a Loan-by-Loan Basis __j_Classified on a Loan Component Basis FY92-97 FY98-99 FY00 FY01 FY00 FY01 Annual Annual average average Agriculture 534.1 403.7 224.2 359.5 211.2 293.0 Economic policy 378.4 1,566.2 20.9 - 220.9 63.3 Education 588.5 796.8 77.5 362.7 95.5 545.7 Electric power 179.1 15.0 4.8 - 2.8 3.0 and other energy Environment 255.4 246.2 52.6 451.9 73.8 458.7 Finance 761.9 449.2 1,160.0 984.1 1,307.5 964.5 Mining 49.0 19.8 - - - - Multisector 38.2 208.0 225.0 10.1 185.0 Oil and gas 18.7 65.0 43.4 - 43.0 12.1 Health, nutrition, 334.1 566.8 157.6 45504a 175.6 660.4a and population Private sector 197.1 152.6 4.8 25.3 4.8 38.4 development Public sector 225.5 405.7 1,265.8 1,795.7 869.3 1,253.0 management Social protection 250.4 1,029.6 640.6 381.4 693.6 435.7 Telecommunications - 3.0 28.2 - 28.2 Transportation 897.8 757.3 - 422.5 - 444.6 Urban development 258.7 88.9 10.8 13.5 10.8 6.8 Water supply 306.0 114.5 147.3 38.0 141.5 120.9 and sanitation Total 5,272.9 6,888.3 4,063.5 5,300.1 4,063.5 5,300.1 Of which IBRD 4,957.1 6,406.4 3,898.2 4,806.7 IDA 315.8 481.9 165.3 493.4a,b Note See table 1 1, page 26. Numbers may not add to totals because of rounding. a Includes $40 1 million in IBRD loans to two countries under a multicountry program to support HIV/AIDS prevention and treatment, for which the Bank earmarked funding of $155 million in fiscal 2001 b. Excludes IDA HIPC grants of $37 million to Honduras in fiscal 2001. Regional Perspectives 89 "I am now 95 years old. This was the first time that someone asked us what projects we needed. and then it was realized." A man from the small town of Um Dar by Jenin (West Bank and Gaza), commenting on the Bank's consultations with villagers for the Community Development Program Road Project. Countries r Ea t WORLD BANK ASSISTANCE: SUPPORTING THE Eligible for as and PRIVATE SECTOR, PUBLIC INSTITUTIONS, AND World Bank Borrowing: North Africa HUMAN RESOURCES Algeria The diversity of the MNA region's challenges calls Djibouti for customized Bank assistance. Fiscal 2001 was Egypt, Arab Republic of REGIONAL CONTEXT: IMPROVING marked by continued support for client-driven serv- Iran, Islamic PERFORMANCE, STILL FACING SERIOUS ices to alleviate povertv, rapid response to severe Republic of CHALLENGES economic shocks in the West Bank and Gaza Jordan Starting i the late 1 980s many of the economies (through grant and concessional financing provided Morocco of the Middle East and North Africa (MNA) by the Bank's Trust Fund for Gaza and the West Syrian Arab Bank) and reimbursable technical assistance to the Republic region committed to far-reaching economic Bank), Tunisia reforms to restore macroeconomic balances and Gulf Cooperation Council countres as well as Yemen, Malta and Libya-whose mcomes make them ieli- Republic of promote development led by the private, rather Malta a lbya-whose winc makef thm invi- than the public, sector Economic performance gible for IBRD lending but which benefit from adva- also reports improved annual GDP growth increased from sory sevces in a wide range of areas on the West 2 4 percent in 1981-90 to 3.1 percent in the The Bank's assistance strategy to MNA countres Bank and Gaza. 1991-2000 period, as well as over the past year focused on three priority areas in fiscal 2001. The first was helping strengthen the overall climate for Despite the improved performance, the investment and private sector-led growth-critical region faces serious economic and social challenges. The break in the peace process, resulting in border economic stabilty and pursuing efficiency-enhancm g closures, has posed severe problems in the West policy reform A second prority was support for Bank and Gaza. Unemployment rates, averaging strngtenigo pbli sector management and over 15 percent regionally, are of mounting concern stitutin blin thr moree ent ueo Much of the region is still characterized by large budgetary resources and enhanced mechanisms for pubic sectors, with centralized governments, over- participation. Bank assistance also focused on social staffed civil services, and weak systems of accounta- protection and human resource development by bility Several countries continue to be extremely helping countries improve the quality and coverage of vulnerable to weather and commodity price shocks education and health-care services, reduce disparities due to their limited economic resource base. Basic in incomes and access to services through targeted infrastructure and services vital for private sector community-based development, and protect the vul- growth remain weak. Integration with the rest of nerable with effective social policies In addition, the world still lags behind other developing support for knowledge sharing through the Global economies in Asia and Latin America Poverty, Development Learning Network (GDLN) strength- though relatively low by some income measures, ens prospects for empowerment of people and persists in large pockets throughout the region. increases the region's productivity (box 4.10). 90 The World Bank Annual Report 2001 Middle East and North Africa Fast Facts Total population: 0.3 billion Population growth: 1.9% The Bank increasingly depends upon partner- Life expectancy at birth: 68 years ships in the development process. Broad consulta- Infant mortality per 1,000 births: 44 tion with civil society and the poor is essential to Female youth illiteracy: 23% better understanding their needs and helping them 2000 GNI per capita: $2,040 plan and implement their own development strate- Number of Persons living with HIV/AIDS: 0.4 million gies. In Morocco, for example, the Bank organized Note: Life expectancy at birth and infant mortality rate per 1,000 births are for 1999, other consultations with over 55 civil society representa- indicators are for 2000, from the World Development Indicators database. The term gross tives to inform the preparation of its Country notionol income (GNI) is now used instead of gross national product (GNP). Assistance Strategy (CAS). Partnership with other devlopentorgniatins s eualy ita, t shre Total FY01 New Commitments Total FY01 Disbursements development organizations is equally vital, to share BD352miloIRD662mlin knowledge and avoid gaps and overlaps in activities. IBD $355.2 million IDA $666.2 million For example, the Bank-sponsored Palestinian non- governmental organization (NGO) project (Phase II approved in fiscal 2001), designed to strengthen Portfolio of projects under implementation as of June 30, 2001: NGOs' capacity to deliver improved services to the $5.9 billion poor, has drawn international attention to the approach of relying on NGOs' comparative advan- Box 4.10 MNA Joins the Global Development Learning tages in addressing the needs of poor people. Network (GDLN) Partnership has also helped Egyptian women obtain identification cards (see box 4.1 1). With some 25 countries around the world connected to the Table 4.6 shows the value and sectoral distribu- GDLN, this year saw the opening of the first two GDLN centers in tion of total Bank lending to the Middle East and the MNA region, in Jordan and Egypt (with Egypt's GDLN soon to North Africa region in the fiscal 1992-2001 period. become fully operational). Plans are under way for a center in Table 8.7 (see About the World Bank) compares com- Saudi Arabia. Algeria. Morocco, Tunisia, and the Republic of mitments, disbursements, and net transfers to the Yemen have also expressed interest in being connected. region for fiscal 1996-2001, and table 8.13 (see The GDLN provides a platform for developing countries to About the World Bank) shows operations approved in exchange information. As other MNA economies link to the fiscal 2001, by country. Figure 4.6 shows IBRD and GDLN, the network offers great potential to become a powerful IDA lending by sector. facility for collaborative information-sharing on issues common to the region, with substantial benefit for effective policymaking. Strengthening the climate for investment and pri- At the country level, sharing of information among the govern- vate sector-led growth ment, civil society, and interested parties also promotes partici- pation in the development process. By enabling the exchange of Sustained growth that raises incomes and extends experience among countries, the GDLN offers a potentially benefits to the poor is critical for poverty reduction important vehicle for finding common solutions to problems fac- and job creation. Helping countries pursue faster, ing the MNA region. sustainable growth is a defining theme of Bank sup- port to the MNA region, both through CASs (Djibouti and Morocco, and an interim assistance strategy for the Islamic Republic of Iran) and sources of growth studies (Jordan and Lebanon). To promote private sector development, the Bank importance of enhancing the region's integration helped Tunisia strengthen urban transport capacity with the global economy. Extensive work toward a while supporting Morocco in privatization and fur- private sector development strategy for Kuwait offers ther liberalization of its telecommunications sector. an example of the Bank's growing emphasis on pri- Trade and competitiveness studies for Egypt, the vate sector development and competitiveness issues Islamic Republic of Iran, Tunisia, and the West in the region. Bank and Gaza, as well as support for information Gender and cultural issues also affect growth. infrastructure in Morocco and an information tech- Empirical evidence increasingly demonstrates that nology strategy for Algeria, also underscore the gender inequality contributes significantly to Regional Perspectives 91 dialogue series was iijli*i~' a launched in fiscal 2001 to help MNA Region staff m ~~~~~~~~~~~~implement the Bank's ~~~* ~~~~~s ~~~gender policies. The Bank also recognizes that pre- serving cultural heritage is _ t t - + ~ 4 - ' \; _;_- @ - integral to MNA's devel- opment strategy Efforts in fiscal 2001 included a t ' v, 4cultural heritage preserva- ______________ ~~~~~~tion project in Tunisia and a comprehensive report ' <:W -tL +k4' ' on cultural heritage In fiscal 2001, the World Bank responded rapidly to the unemployment preservation in the region crisis in the West Bank and Gaza through the Emergency Response Program, which supported infrastructure improvements through labor- intensive activities, and has already, in its first five months of imple- Public sector management and institution building mentation, created about 180,000 man-days of work Institution building, to improve public sector accountability and efficiency, is a key theme of Bank Figure 4.6 MIddle East and North Africa: IBRD and IDA assistance to the MNA region. In fiscal 2001 the Lending by Sector, Fiscal 2001 Bank helped strengthen the public administration's Share of total of $0.5 billion ability to provide basic social and infrastructure serv- Urban ices through, for example, support for long-term Development education strategies in Djibouti, Morocco, and the 2% Agriculture and Republic of Yemen, and for pension system improve- Environment ments in Djibouti and the West Bank and Gaza. Infrastructure' 16% 29% Other new operations reinforced local public institu- tional capacity (Morocco and the Republic of Human Development Yemen), making public expenditure more efficient. 17% They also pave the way for greater decentralization as well as reliance on civil society and the private Otherb sector in planning and delivering public services. 4% The Bank also supported budgetary systems in Public Sector Algeria, Jordan, and the Republic of Yemen, for an Management 32% innovative and comprehensive public sector reform credit Important capacity-building activities were Note Sector classification Is on a loan component basis See table 1 1, page 26 initiated in Egypt in the area of project appraisal, a Includes transportaion, telecommunications, and water supply and sanitation b Includes mining monitoring, and evaluation. Social protection and human resource poverty Bank assistance to the region has sought to development close the gender gap and mainstream gender con- Although MNA's poverty rates are relatively low, cerns in policy dialogue, projects, and economic other social indicators signal a more serious poverty and sector work. In 2000 over 55 percent of lending problem In fiscal 2001 the Bank continued to build operations in MNA addressed gender issues- knowledge on poverty, through reviews and assess- higher than any other Region and more than double ments (Egypt, Morocco, and the West Bank and the rate of 10 years ago At the suggestion of the Gaza). Helping countries address the survival needs MNA Consultative Council on Gender, a gender of those in society who are unable adequately to 92 The World Bank Annual Report 2001