47045 September-October 2008 March - April 2008 Issue no 6 Issue no 8 Ian Porter: Seven Wonderful Years World Bank Country Director for South East Asia Retires S even years ago as the during his final visit as Director for region was emerging from Southeast Asia. H.E. Mr. Bouasone the Asian financial crisis, Bouphavanh, the Prime Minister of Ian Porter became the World Laos thanked Ian for his Bank Director for South East Asia. contribution to the development of Being optimistic by nature, he was Laos, and on behalf of the confident that the region would Government of Laos, Minister of see solid economic growth, Planning and Investment, H.E. Mr. especially in Laos. Ian strongly Soulivong Daravong awarded a believed that the Government's Friendship Medal, which Ian policies to attract investment and accepted on behalf of the World stabilize the economy would lead Bank Group, in recognition of his the country in the right direction. contribution to the country. Seven years later as Ian retires During this final round of meetings from the World Bank, he explains with the government, Ian that the results have been even highlighted three areas that better than he expected. (for require continued focus and more see the interview with Ian emphasis to take advantage of the on page 2-3). ongoing reform agenda: At a recent farewell party, hosted by the World Bank, Country Farewell meeting with the Prime Minister of Lao PDR, 1) Natural Resources Manager for Laos, Patchamuthu H.E. Mr. Bouasone Bouphavanh Management The country's Illangovan, highlighted some of growth will continue to be fulfilled the major achievements that occurred under Poverty Reduction Support Operation through exploitation of natural resources. Ian's leadership. Perhaps the most important (PRSO). Four years later the PRSO has This needs to be done in a sustainable way. has been the success of the Nam Theun 2 become an effective means of supporting the Both the NT2 Hydropower Project and Lane (NT2) process. In the early years of this Government's reform effort and now includes Xang Minerals mining project in Sepon have decade, there were many skeptics who Australia, the European Union, and Japan as shown that Laos can be a world leader in this thought concerns related to environment, partners. According to Illangovan, "Ian respect. Future projects should continue to social, governance/transparency, and public fought hard to win the approval of PRSO take advantage of such lessons, and ensure financial management were too big a from Bank senior management at a time that quality investments are attracted, challenge to be overcome. Some believed when not everyone was convinced that the benefits are equally shared among all Lao that the NT2 project was too large for a Government was ready for such a program people including future generations, and small country like Laos. In short, there were driven approach to reform. The rest is resources and social and cultural practices many doubts about whether the project history, and we are now in the fifth year of are protected. >> would go ahead. Under Ian's leadership, PRSO and a long list of reforms have been however, the World Bank was able to accomplished." design interventions to ensure that all In addition to these, Ian's vision for IN THIS ISSUE stakeholders' concerns were addressed. getting the World Bank more involved Now, we are just over a year away from in the Greater Mekong Sub-region has seeing NT2 begin its operations and start led to major activities, such as a Ian Porter: Seven Wonderful Years generating power and revenues for the regional power transmission project Interview with Karin Finkelston, country, while benefiting the impacted and initiatives in water, trade, labor Director of East Asia Pacific, people. migration, environment and climate International Finance Corporation Another major achievement has been change. James Bond Advises Mekong to engage the Government in a major The Lao government recognized Ian's Countries to Develop Hydropower reform effort through the use of the contribution to the development of Laos Sustainably Page 2 http: //www.worldbank.org/lao September-October 2008 · recognizing that IDA resources are lim- Q: Did you expect this rapid growth? ited, the World Bank should consider providing other instruments such as A: Whenever I met the Minister of Finance IBRD (International Bank for Reconstruc- throughout the years, I told him I was very tion and Development) credits to Laos; optimistic about the Lao economy. However, like most of us in the World Bank, as much · the World Bank should look into increas- as we were confident of the potential of the ing its involvement in financial ser- country, we have all been pleasantly sur- vices to encourage private sector prised with the level and consistency of the development, including providing growth. financing to small and medium en- Q: Other than NT2, what have been the terprises; major achievements of the World Bank At his meeting with the Minister of Planning during the last 7 years? and Investment, major issues discussed included developing a sound legal framework A: Other than NT2, important challenges we through the preparation of a good practice have taken on include supporting the gov- Investment Law; government revenue gen- ernment to strengthen its overall financial On behalf of the World Bank Group, Ian eration through effective taxation, royalties management and public expenditure man- receives Friendship Medal from Minister of and fees; benefit sharing (community, pro- agement, supporting the government in the Planning and Investment, H.E. Mr. vincial, national); managing major infrastruc- area of trade facilitation and with accession Soulivong Daravong. ture projects (especially for hydropower); to WTO. At the sector level, we have worked managing environmental and social concerns with the government to develop its first sec- "Ian has put significant effort building on the experience of NT2 and the tor-wide transport operation. In social sec- into aid coordination between Sepon mining project; and governance and tors, we have programs to improve the qual- the World Bank and the Lao Gov- contract management. ity of education and health services and to ernment to mobilize soft loans ensure that people have access to those and funding grants for the imple- Interview with Ian C. Porter services. And, at the moment, we are carry- mentation of 28 projects in vari- ing out important analytical work on the ous sectors worth more than Before his farewell party, Ian shared some of issues affecting the development of upland US$350 million. On behalf of the his impressions and experience working in villages - to increase income and livelihood in remote areas, and conserve the environment Lao Government, we express our Laos. for future generations. sincere gratitude to Ian for this Q: Can you share with us your perspec- great contribution to Lao socio- economic development and the tives on Laos seven years ago and fight against poverty in his 7 now? years in charge of the World A: In the last 7 years there have been major Bank's South East Asia section." changes in Laos, even bigger than I could H.E. Mr. Soulivong Daravong, have anticipated. A major thing that comes Minister of Planning and Invest- to mind is the rapid economic growth reach- ment. ing a consistent level of 6-7% per year over 2) Financial Sector - The need for the last 7 years. This growth has had a sig- nificant impact on reducing poverty and access to finance is huge, especially in rural improving social indicators. It's not just the areas. As Laos contemplates more reforms in numbers either. I can see the changes with this sector, emphasis should be placed on my own eyes when visiting Vientiane and developing a more modern and well regu- rural areas where we can see improvements lated sector that offers a range of products in infrastructure, significant new housing and and services that can contribute to the ex- Minister of Finance, H.E. Mr. Somdy construction and a general improvement in Douangdy speaks at Ian's farewell pansion of domestic and foreign private the lives of the Lao people. reception sector, and help rural households. 3) Public Administration/Civil Q: What have been the most significant Q: How about the challenges of work- Service - Over the past four years, sev- changes in Laos since 2001? ing in Laos in general? eral partners have contributed to capacity A: The strong economic growth has been A: In the last few years, the World Bank development among institutions, organiza- stimulated by very important economic re- and the Government have developed a tions and individuals. Laos needs to move to forms. The government introduced processes stronger partnership ­ a lot more trust, con- the next stage of building a more modern such as the Lao Business Forum to reach out fidence and respect on both sides. Because and efficient public administration, through to the private sector, and has developed a of this strong partnership the government is more targeted reforms. better business enabling environment more direct with us and at the same time we The Prime Minister indicated his sup- through reforms such as the Enterprise Law are also more frank with the government port for the World Bank's continuing and the Law on Commercial Banks. Also through our interaction and because of the efforts in these areas and agreed with recognizing that Laos is in the middle of a good dialogue developed over the last few all three points raised while supporting very rapidly growing and dynamic region, the years through PRSO. The big challenge on further cooperation with concerned government has made an extra effort to the government side is the need for greater ministries. The Prime Minister also made attract private investment, which is benefit- capacity to effectively implement reforms.>> some suggestions to the World Bank: ing the country. September-October 2008 http: //www.worldbank.org/lao Page 3 "We at the World Bank have been both lucky and privileged to have had Ian serve as our Director for this long. He brought leadership, passion, commitment, and dedication to the job. My colleagues in the Vientiane Office join me in applauding your leadership. We wish you the very best as you retire from the World Bank at the end of the month after 32 years of outstanding contribution to development." Patchamuthu Illangovan, World Bank Country The World Bank Group staff has grown from 13 (2001) to 60 (2008) Manager for Laos Association) has, together with that of the also need to continue to help the govern- IFC and MIGA (Multilateral Investment Guar- ment in implementing important programs Significant changes are taking place in the antee Agency) to help the government both that we have been supporting such as public government with a new generation of lead- in policy and at the operational level. One financial management, infrastructure, rural ers accelerating the pace of reform. In the area we have in mind already for strengthen- development, and social services. last 7 years the significant growth of the ing this collaboration is the financial sector. Q: Can you share with us your most World Bank country office in Vientiane has IFC has already done some important work memorable personal achievement made the dialogue with the government recently to develop the legal and regulatory working in Laos in the last 7 years? much easier. We are working on very com- framework and strengthen banking supervi- plex issues, and it can be difficult from time sion. IDA will strengthen its work in this area A: In terms of my role as Director in Laos, to time. However, the strong partnership and by further engaging the government on its the day I look back at with the most satisfac- increased capacity of the World Bank and the financial sector strategy and by finding op- tion is when the Board of Directors approved government are making our relationship and portunities to support the development of the Lao Country Assistance Strategy (CAS) in our work in the country more effective. the financial sector infrastructure perhaps in the areas of secured transactions and pay- 2005, which included the PRSO operations Q: To support the Government of Laos ment and clearing systems. and support for NT2. In particular, NT2 is something that we had been working on in achieving its 2020 goal of graduating In the hydropower sector, we will see what wholeheartedly for a number of years. Once from least developed country status, we can support in terms of operations. The it was approved as part of the CAS there was what should the World Bank be doing World Bank is planning a large capacity no turning back. This was the result of the more of and do differently? building project to support the development hard work the government and we had been A: Also discussed with Minister of Finance, and sustainability of the hydropower sector. putting in for a long time. To be honest, I H.E. Mr. Somdy Douangdy in my last meet- Such support combined with financing from was not sure the day would ever come that ing with him, an important strategy for us is IDA, IFC and MIGA could lead to significant the NT2 project would be approved. I look to strengthen our collaboration within the developments in this sector. forward to the next memorable day at the World Bank Group. We need to combine the We need to continue to support the govern- end of 2009, when I come back for the experience, capacity, resources and instru- ment in the area of capacity building, par- launching of NT2. ments that IDA (International Development ticularly in public administration reform. We James Bond Advises Mekong Countries to Develop Hydropower Sustainably T he Mekong River Basin is nearly the size while the basin has crucial aquatic resources We need to have information and of France and Germany combined. It that can offer tremendous benefits to people facts to base any judgments on a solid ana- flows through six countries and its water and in Laos, Thailand, Vietnam and Cambodia, lytical foundation. Unless careful studies and biodiversity resources are second only to the changes to its flow and system can impact assessments are conducted, the full extent of Amazon River Basin. The region is so large, many of the people living along it. the benefits and detriments of development that the Lower Mekong River Basin ­ Thai- In order for any developments in the in the basin cannot be properly evaluated. land, Vietnam, Cambodia and Laos ­ is home Lower Mekong River Basin to be done sus- My second proposition focuses on to about 60 million people, almost a third of tainably, there are five considerations that I the importance of keeping a regional per- the countries' combined populations. would suggest. spective on the basin's development and the But who are these 60 million people The first focuses on weighing bene- political and economic issues at stake in all living along the basin? Unfortunately up to fits and impacts. For any management of the the Mekong countries. The studies that need one third of them are very poor, living on river basin to take place, careful considera- to take place must take into consideration less than US$1 a day. Mainly rural farmers tions need to be taken. It is essential to es- the effects any development will have in the and fishermen, these people rely heavily on tablish what the impacts are, how extensive whole lower river basin. Moreover, they also the resources that the river offers them ­ they are, who they impact, and what the need to take into consideration the regional both fish and water. Any changes to this ultimate benefits are. We cannot `jump the effects that the development can have with aquatic system can have an impact on their gun' and say that any developments in the an aim of ensuring that the benefits of the lives ­ whether floods, loss of fishery, im- region would have a negative or a positive developments can be widely shared. pacts to their diet, income, and more. So impact. CONTINUED ON PAGE 4 Page 4 http: //www.worldbank.org/lao September-October 2008 Karin Finkelston Director of East Asia Pacific, International Finance Corporation Q&A sector, rural electrification, and other areas projects. I think NT2 is a good example of where we can put IDA and IFC products how a project can strive for very high O together to better serve Laos and the Lao standards of environment and social n August 18, 2008 Karin Finkelston people. sustainability while at the same time earning took over as Director of East Asia and revenue for the country. We also need to Pacific (EAP) for the World Bank's In addition to collaborating in the power look at ways for IFC and IDA to work International Finance Corporation (IFC). Prior sector, IFC and IDA have been discussing together to help the government to do these to this position, Karin was the Deputy ways to collaborate more to support financial projects more efficiently so we can speed up Director of EAP focusing on IFC's investment sector development. As the World Bank the process without losing focus on program in the region and IFC Country Group, we would like to support the environmental and social concerns. I believe Manager in China. Her first job in IFC 12 Government in increasing access to finance the combined strengths of IDA and IFC can years ago was as Country Officer for Laos. for Lao people and businesses. IFC is help the government to achieve these goals. Being familiar with Laos, Karin shared with working with the government to develop the us her mission and priorities as the new legal framework for commercial banking, and What opportunities are there for IFC to Director. we invested in the ANZ Vientiane Commercial strengthen it operations in Laos? Bank. I think this is a good first step and What are your first priorities for the In Laos we have focused on providing now we would like to do more around Small region and for Laos in your new role of advisory services to the government through and Medium Enterprise Finance, micro- IFC EAP Director? legal reforms such as the Enterprise Law, finance, and potentially support the Law on Commercial Banks and currently the First, let me speak about IFC priorities across government with the privatization of the Investment Law. We also serve as the the EAP region. We have two top priorities. state-owned bank BCEL (Banque Pour Le secretariat for the Lao Business Forum. We The first is that IFC in EAP is trying to do Commerce Exterieur Lao). are working closely with the rest of the much more in IDA countries versus the What would you like to see Laos World Bank team to support the middle income countries. For EAP, this achieve in the next 10 years? improvement of the business enabling means Mongolia, Laos, Cambodia, Vietnam environment. We are now planning to and the Pacific. So, in short Laos is a big I think Laos has a huge competitive strengthen our team in Laos by hiring two priority for IFC. The second priority in the advantage in hydropower and natural investment officers who will be tasked with region is climate change and the resources. This is something that the Lao developing our investment portfolio in Laos. I development of renewable energy. In Laos I government, on behalf of the Lao people, see a lot of investment potential in Laos not think we have an opportunity to promote need to manage well. There are about 70 only in the natural resources sector but also climate change work through support of the hydropower projects of various sizes being in supporting SMEs through bank hydropower sector. looked at, so I would really like to see the government prioritize these projects and set investments and by making smaller I am here in Laos to find ways to work with a high standard for managing the investments to meet the demand of Lao the World Bank to support the hydropower environmental and social impact of these businesses. CONTINUED FROM PAGE 3 ments, providing policy advise to the The third consideration is prop- various countries, disseminating informa- erly mitigating the impacts on the envi- tion, engaging stakeholders, ensuring ronment and the people affected. While transparency of processes and more. The stakeholder participation and engage- MRC clearly needs to exercise its role of ment is important throughout all the helping countries cooperate and promote processes that I have mentioned, it is sustainable development of its water as it especially important when social and takes forth its Hydropower Program. environmental impacts are being man- I believe that these five consid- aged. Communities need to have a say in erations can help Thailand, Cambodia, this process, as well as civil society or- Vietnam and Laos think about develop- ganizations and partners. Best practice ments in the Lower Mekong Basin in a programs need to be implemented. more sustainable fashion. We must all For example, Laos can draw on James Bond visited NT2 while in Laos ensure that any developments are truly the lessons that are emerging from the for the benefit of these countries' popula- Nam Theun 2 project. The preparation of may be foremost in developers mind, the tions. NT2, with the numerous studies conducted importance of developing socially and envi- James Bond is Chief Operating Officer of the World and the at-length consultation processes, ronmentally sustainable and responsible Bank Group's Multilateral Investment Guarantee paved the way for more participatory, trans- hydropower projects must also be at the top Agency. This piece is based on his speech at the parent and improved hydropower develop- of the priority list. Mekong River Commission consultation on hydro- ment in Laos. These lessons can be evalu- In order to bring all these elements power on September 25, 2008. The piece was featured in the Bangkok Post. ated and replicated in future projects so the together, my last consideration is the impor- best social and environmental programs are tance of the MRC. Sustainable hydropower For more information about put in place in order to effectively manage development in the Mekong basin will not be the World Bank in Lao PDR, impacts. possible unless there is an institution that please contact: Fourth, a key player in all of these can liaise and coordinate between the vary- Nanda M. Gasparini developments is the private sector. There is ing interests of all the countries. The MRC Email: mgasparini@worldbank.org a need to attract responsible partners that can add great value to the whole process of Viengsamay Srithirath can help the Government to appropriately hydropower development, from enhancing Email: vsrithirath@worldbank.org implement social and environmental pro- the impact assessments that are done, lead- Website: http://www.worldbank.org/lao grams. While the lure of the construction ing the way on cumulative impact assess- Editor: Anita Dean