International Bank for Reconstruction and Development
                  International Development Association           87308
                     International Finance Corporation
                Multilateral Investment Guarantee Agency
                        FOR OFFICIAL USE ONLY
                        CONFIDENTIAL
                                                                     EDS98-303
                                                                   June 16, 1998


Board Meeting of June 16, 1998
Statement by Frode Neergaard
                Bolivia - Country Assistance Strategy
     I welcome the Country Assistance Strategy for Bolivia, which is
presented in a very clear and informative document.
     However, I regret that the time between the discussion of the
Bolivia Country Assistance Review and Strategy has been less than a
week. In my view there should be more time to digest the review before
discussion the strategy. Also, I think that the Bank could benefit
from this because it will give it more time to take into account the
conclusions of the CAR in the preparation of the CAS. In this case,
the CAS was even distributed to Board members before the CAR was
distributed.

With regard to the substance in the CAS, I especially appreciate and
support the emphasis put on poverty alleviation. In this respect, I
endorse the proposed set of core benchmarks for monitoring and
evaluating the implementation of the CAS within the area of poverty
alleviation.
I have a few general comments and a number of more specific comments
on the CAS:
     Overall, I welcome that Bolivia will remain eligible for IDA
loans throughout the CAS period. Although I question whether it
already now is possible to decide on the graduation of Bolivia from
IDA, I can endorse the CAS’s graduation strategy. In this respect, I
think that the CAS document lacks an analysis of how the future mix of
IDA and IBRD loans will be and how it will influence the country’s
economy. Considering this, it should also be taken into account that
the Inter-American Development Bank in coming years will have limited
possibilities for providing concessional loans to Bolivia.
     There is no doubt that the chosen areas of priority are indeed
important and that work within these areas needs to be done. However,
it might be worth considering whether the Bank should focus its
lending in areas with relatively high rates of return such as
infrastructure. It also includes the social sectors, but here the Bank
must accommodate its lending to complement grant funding available
from bilateral donors. This should, of course, all be part of a co-
ordinated effort taking into consideration each donor’s comparative
advantages.
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Generally, I can support a strengthened effort within the following
areas:

-   Infrastructure within transport, health and education.
-   Investments in rural areas to promote higher productivity leading to
    increased production.
-   A strengthening of the private sector’s ability to contribute to
    growth, equity and income generation.
-   A strengthening of the private Civil Service reform.
-   Reform of the legal system.
-   Decentralization of local government.
Now, my more specific comments:
     I urge the Bank to channel all activities through official
Bolivian institutions so as to avoid the creation of parallel
structures.

     I believe that the Bank could also play an essential role in
developing the agricultural sector. Especially, I think that the Bank
should play an active role in supporting the formulation of a national
strategy for agricultural development.

     Generally, there is a clear need to take gender and environmental
dimensions much more systematically into account. Investments in sound
environmental management would have a high rate of return, and should
therefore be attractive for the Government of Bolivia.
     I welcome the joint CAS’s strategy for the private sector, and I
am especially pleased with the strategy for IFC´s work in Bolivia.

     I would like to have seen a more in-depth analysis in the CAS of
how the Bolivia-Brazil Gas Pipeline will affect the country’s economy.

     Finally, I can associate myself with Mr. Stek in his written
statement when pointing out that little discussion of the CAS has
taken place in La Paz. Also, it is the impression of the countries in
my constituency that the possibility for donors to influence the
chosen strategy was – in reality – rather limited. Stronger
coordination between the Bank and donors in La Paz should be pursued.