SECOND QUARTER 2006 37138 ·Editorial: Modernizing Lebanon's Public Procurement ........................................... 3 · Oil Boom Marked by Expenditure Restraint ................................................................................................ 4 ·Recent Economic Developments ............................................................................................................................................. 7 ·Bank Group Operations ...................................................................................................................................................................................11 ·Lebanon Improves Business Registration......................................................................................................................... 14 · News, Recent and Upcoming Activities ............................................................................................................................ 16 ·Recent World Bank Publications ........................................................................................................................................................... 19 Joseph Saba, Country Director Tel. (202) 473-2992 - Fax (202) 477-1482 World BankAddress: E-mail: jsaba@worldbank.org 1818 H Street, NW Washington, DC 20433 Sophie Warlop, OperationsAnalyst Tel. (202) 473-7255 - Fax. (202) 477-1482 www.worldbank.org E-mail:swarlop@worldbank.org To Order World Bank Publications: Sabah Moussa, ExecutiveAssistant http://publications.worldbank.org/ecommerce Tel. (202) 473-9019 - Fax (202) 477-1482 E-mail: smoussa@worldbank.org For Information on World Bank Programs in Lebanon: www.worldbank.org/mna/lebanon Omar Razzaz, Country Manager Jad Chaaban, Economist E-mail: orazzaz@worldbank.org, Tel. Ext. 228 Email: jchaaban@worldbank.org Haneen Sayed, Lead Operations Officer Mouna Couzi, Senior ProgramAssistant E-mail: hsayed@worldbank.org, Tel. Ext. 229 Email: mcouzi@worlbank.org, Tel. Ext 231 Radwan Shaban, Lead Country Economist E-mail: rshaban@worldbank.org, Tel. Ext. 246 May Ibrahim, ProgramAssistant Email: mibrahim@worldbank.org, Tel. Ext. 245 Robert Maurer, Lead Urban Sector Specialist E-mail: rmaurer@worldbank.org, Tel. Ext. 224 Sophie Urnechlian, ProgramAssistant Email: surnechlian@worldbank.org Sebastien Dessus, Senior Economist E-mail: sdessus@worldbank.org, Tel. Ext. 225 Robert Bou Jaoude, Senior Financial Management The World Bank Office in Beirut Specialist United Nations House, Sixth Floor E-mail: rboujaoude@worldbank.org, Tel. Ext. 230 Riad El Solh 1107-2270 P. O. Box: 11-8577 Hadia Samaha Karam, Operations Officer Beirut - Lebanon E-mail: hsamaha@worldbank.org, Tel. Ext. 241 Tel. (961-1) 987-800 Lina Fares, Procurement Specialist Fax (961-1) 986-800 E-mail: lfares@worldbank.org, Tel. Ext. 244 www.worldbank.org/lb Mona Ziade, Communications Officer Email: mziade@worldbank.org, Tel. Ext. 239 Editorial Team: Mona El-Chami, Financial Management Specialist Chadi Bou Habib E-mail: melchami@worldbank.org, Tel. Ext. 223 Julia Brickell Sebastien Dessus Diana Masri, Financial Management Specialist Zeina El Khalil E-mail: dmasri@worldbank.org, Tel. Ext. 238 Georges Nicolas Omar Razzaz Zeina El Khalil, Public InformationAssociate Joseph Saba E-mail: zelkhalil@worldbank.org, Tel. Ext. 234 Andrew Stone Chadi Bou Habib, Economist Mona Ziade Email: cbouhabib@worldbank.org, Tel. Ext: 233 With special thanks to Mary Saba 2 Second Quarter 2006 EDITORIAL Modernizing Lebanon's Public Procurement The Government of Lebanon has made improving offer. There is no provision for announcing bid prices governance and fighting corruption a central part of publicly at the bid opening. its reform program. It has launched budget, tax, and administrative procedure reforms. But perhaps one · Besides open competitive bidding through so-called of the most significant challenges that remains to be «Public Tender», other procurement methods, including addressed is the reform of public procurement. Pre- noncompetitive methods, are permitted at the discretion liminary results of a World Bank Investment Climate of the procuring entity. Assessment (ICA) of over 450 private enterprises' data and other analysis clearly suggests two realities: · Prequalification is not covered in the legal frame- Lebanese firms are disadvantaged by the extraordi- work, and the criteria for post-qualification are relegated narily high costs associated with doing business, and to the special conditions of contract. market-led growth is impeded by a variety of chal- lenges to fair competition. Consequently, the two · Bids offering goods made in Lebanon are accorded priorities for a growth agenda would have to address a preferential treatment equal to 10 percent, which is a these high costs and level the playing field for market common practice. However, the conditions for deter- competition. mining the origin of goods are not specified. The survey revealed that enterprises perceive public pro- · There is no specific protest mechanism for unsuc- curement as a leading process through which corruption cessful bidders in the country's framework for pro- takes place. Overpricing of certain infrastructure proj- curement. ects, either in the original bid or in subsequent variation orders, is widely acknowledged by many contractors. A radical approach is necessary to achieve procure- mentreform. Themodernizationneededisnotlikelyto Fortunately, the Government is now in the process of be achieved by an incremental approach or by a gradual revising its public procurement laws to remove oppor- phasing-in of a new procurement system. A piecemeal tunities for corruption, to introduce fair competition and approach to fixing the current fragmented and confus- reduce costs.The problems in the existing system reflect ing legal framework, with its myriad of exceptions, a need for modernization: may cause even greater problems. Procurement reform in Lebanon should take a holistic view of public sec- · The country's existing regulatory framework for pro- tor management. Its chances of being successful depend curement is 40 years old and contains ambiguities and very much on corresponding reforms in financial, man- is generally inconsistent with international procurement agement and public administration, and on creating a standards. Public Procurement Reform Task Force with executive leadership to achieve the desired results. · There is a lack of publicly disseminated procurement information on the outcome of procurement processes. · There is no requirement in the legal framework to conductpublicbidopenings.Bidsarecommonlyopened at least a day after the deadline for submission of bids. · The generally accepted procurement method requires the submission of bids as two separate enve- lopes. The first envelope contains the technical offer; the second envelope the financial offer. Since the tech- nical offers are opened and evaluated first, bids can be rejected without opening the corresponding financial Second Quarter 2006 3 OilBoomMarkedbyExpenditureRestraint The Middle East is experiencing an oil boom reminis- short-term adjustments to oil prices, but the concerns of cent of the 1970s and 1980s. But this time, instead of potential poverty impacts have held back more ambi- spending the profits, oil-producing countries are man- tious reforms. aging the windfall with restraint. According to a new World Bank report on the Middle East and NorthAfrica The Good News (MENA) region, oil producers are increasingly turning finite oil wealth into longer-term revenue streams. Petroleum exports of oil-rich, labor-importing nations, namely SaudiArabia, the UnitedArab Emirates (UAE), MENA Economic Developments and Prospects 2006: Kuwait, Qatar, Libya, Oman and Bahrain, have more Financial Markets in a New Age of Oil* finds that than doubled in the past three years, rising from US$186 resource-richcountriesareshowingfiscalrestraint.They billion in 2002 to US$440 billion by 2005. are building up savings, paying down debt and setting up oil stabilization funds. However, the document, the At the same time, these economies grew by an average second in a new series of annual reports on economic seven percent in 2005, boosting the region's growth rate developments in MENA, notes that the growth upturn in to six percent, up from 5.6 percent in 2004, and 3.5 per- the resource-rich countries is not shared by poorer coun- cent in the late 1990s. The economies of oil-rich, labor tries. In sharp contrast, resource-poor countries (Leba- abundant countries - Algeria, Iran, Syria and Yemen - non, Jordan, Egypt, the Palestinian territories etc...) are also had healthy growth rates of between five and six feeling the pinch of surging oil prices. percent. Insufficient Behavioral Change The report notes the increasingly close ties between the price of oil and the growth outcomes in oil-rich, labor- Behavior of oil producers this time around differs from importing countries - a fact that was not always the case that of the previous oil booms in the 1970s and 1980s, in prior oil booms. Because these countries are adopt- when these countries built up debt and banked on con- ing largely similar development strategies, they are now tinued high oil prices to fuel their expansion. When the experiencing a "common growth effect." oil price declined, many were caught with large debts. This time, "there's a realization that they can't do things Oil-rich countries of the Middle East are building up as before," says Jennifer Keller, Senior Economist in the liquidity through external reserves, oil stabilization Office of the Chief Economist for the Middle East and funds and payment of debts.They are pursuing common NorthAfrica Region and principal author of the report. strategies for diversification of the oil wealth into for- eign assets to secure long-term revenue streams. SaudiArabia,forinstance,hasreduceddomesticdebtfrom 97 percent of Gross Domestic Product (GDP) in 2002 to Moreover, these countries are working almost in uni- 41 percent by the end of 2005. Over the same period, it son to develop trade ties and encourage greater foreign turnedafiscaldeficitofalmostsixpercentofGDPtoafis- participation in their economies. With increased pru- cal surplus of 8.4 percent of GDP, according to the report. dence, the volatile growth outcomes among oil produc- ers, which characterized the l970s and l980s, have been On the fiscal front, the sharp rise in oil prices has high- increasingly supplanted by a common growth effect. lighted the heavy dependence on oil price subsidies in the local markets in MENA countries.While oil-import- The Bad News ing economies are particularly affected, the reliance on energy subsidies pervades, with large fiscal implica- tions.Severalresource-poorcountrieshaveimplemented Unfortunately, the resource-poor economies are not enjoying as many spillover effects from the high price of oil, when compared with oil booms. In fact, the report * Report Published by theWorld Bank, MENA region, Office finds that the relationship between economic growth in of the Chief Economist in June 2006. these countries and the price of oil has weakened sub- 4 Second Quarter 2006 stantially. Lebanon, Egypt, Djibouti, Jordan, Morocco Bahrain, Oman and Qatar, in particular, have taken steps and Tunisia averaged collectively a four percent growth. to allow greater participation in public policy. Progress Morocco's growth rate fell from 6.3 percent in 2004, to on the governance front is important, says Keller. "It has 1.5 percent in 2005, and Lebanon's economic growth implications for the overall reform effort." collapsed to one percent from six percent in 2004. "Reforms that are implemented through top-down man- In earlier periods, MENA's non-oil economies benefited agement may work initially, but it is difficult to enact from rising oil prices through a range of transmission reforms at a deep level, unless you have the compliance mechanisms from the oil producers, namely labor remit- and participation of those groups whose well-being is tances and aid. Many transmission channels remain and affected by reforms." have even thrived during the current oil boom. But the overall magnitude of these channels has significantly Worldwide, successful reform efforts have depended diminished in comparison with prior booms. critically on the support and participation of those in society whom reforms will impact. Governance Reasons cited for the slowdown include less aid from improvements in MENA, in terms of enhancing the oil-rich countries, fewer job opportunities for Arab accountability of governments and granting greater laborers in the Gulf and less money flowing from oil voice in development to the people, are important rich countries to resource-poor countries. In addition, not only to take into account the needs and values of the resource-poor countries are using more energy than those who are affected by reforms, but also to ensure they did 20 or 30 years ago, and must import greater that in the transition to a new development model, the amounts of more costly oil.And like all countries in the economic outcomes are socially acceptable to those region, they maintain oil subsidies that keep the price of who have benefited from the old systems. The MENA gas and diesel well below market prices. The cost of oil region continues to have the greatest gap with the rest subsidies in Jordan, for example, doubled between 2004 of the world in terms of accountable and inclusive and 2005 - from 3.1 percent of GDP, and 11.3 percent of governance structures, ranking in the bottom quintile total expenditures, to 5.8 percent of GDP and 19 percent worldwide. of current expenditures, according to the report. Looking Ahead "Oil subsidies are a drain on all the economies of the Middle East region, but are often politically difficult General conditions for maintaining a solid pace for to abandon," says Mustapha Nabli, Chief Economist growth appear promising. Global oil prices are now for the Middle East and NorthAfrica Region. "And ris- anticipated to hold above US$50 per barrel through ing oil revenues seem to be delaying plans to reform 2008, which will provide a substantial flow of oil rev- subsidy systems in several countries," he notes. This enues to MENA exporters. Should prudent budgetary includes Saudi Arabia, which recently cut the price policies prevail, prospects for the oil dominant econo- of gas and diesel by 30 percent to offset the effect of mies are upbeat, with growth easing from 6.7 percent in equity market declines. 2005, to five percent by 2008. Oil Wealth and Reform For the diversified economies, the anticipated recovery in European demand will be a key external factor for The region's recent strong liquidity creates a window growth over 2006-2008, as will the easing of oil prices. for MENA governments to either accelerate or postpone This should allow some of the costs of subsidies to be the complicated process of reform, within the financial recaptured. Growth among resource-poor economies is sector and in the economy in general. With the windfall expected to pick up to reach 5.5 percent, according to revenues accumulating since 2002, a natural question the report. emerges as to what impact oil is having on the reform process in oil-producing states. To date, the large bud- Overall, continued moderate progress in domestic get surpluses appear to have slowed down the drive for reforms, the MENA region's growth is viewed to ease reforming the oil subsidy system in resource-rich econo- modestly in 2006, to 5.6 percent, and to establish a 5.2 mies. Oil producers have also exhibited weaker reform percent pace over 2007-2008, reflecting an acceleration progress than the region's resource-poor economies on for the diversified economies, in contrast with some two fronts: improving the business climate and liberal- slowing for oil exporters. izing trade. Second Quarter 2006 5 Structural Reform Progress in MENA, 2000-2005 Trade Policy Business Climate Governance: Quality of Governance: Public public administration sector accountability Country / Region Current Reform Current Reform Current Reform Current Reform status progress status progress status progress status progress Algeria 44 71 13 38 38 91 29 91 Bahrain ­ 62 ­ ­ 77 26 23 91 Djibouti ­ 51 ­ 74 ­ ­ ­ ­ Egypt 43 100 11 36 43 92 25 84 Iran 22 74 57 44 16 19 21 4 Iraq ­ ­ 66 ­ ­ ­ ­ ­ Jordan 47 86 58 89 66 67 34 60 Kuwait 53 65 59 7 58 24 31 65 Lebanon 61 80 37 31 ­ ­ ­ ­ Libya ­ 27 ­ ­ 11 64 0 42 Morocco 38 52 61 54 73 83 33 81 Oman 71 11 78 15 61 75 16 81 Qatar ­ ­ ­ ­ 60 89 13 74 Saudi Arabia 39 77 80 26 57 77 5 69 Syria 18 43 30 5 15 67 7 74 Tunisia 51 57 83 93 74 87 22 22 UAE ­ ­ 43 14 59 6 17 41 Yemen 62 82 35 57 28 71 20 89 MENA 46 63 51 42 49 63 20 64 Resource Poor 48 71 50 63 64 82 28 62 Resource rich 44 57 51 23 44 55 17 65 RRLA 36 67 40 36 24 62 19 64 RRLI 54 48 65 15 55 62 15 66 East Asia Pacific 56 37 61 47 43 45 41 48 Europe Central Asia 51 69 48 64 47 46 52 51 Latin America / Carib 57 50 40 51 46 50 57 43 High Income OECD 70 64 84 50 89 47 91 49 South Asia 41 48 48 41 48 53 39 31 Sub-Saharan 34 27 27 43 34 53 37 55 WORLD 50 50 50 50 50 50 50 50 Note: Regional averages reflect the simple average of the data for the countries included. Source: World Bank Staff estimates from country data Full report available on the World Bank website www.worldbank.org 6 Second Quarter 2006 EconomicDevelopmentsinTheFirstQuarterof2006 In the First Quarter of 2006, Lebanon continued to At this juncture, Lebanon does not have the luxury benefit from an exceptionally benign environment. to delay the structural reforms needed to tackle these Ever-high oil prices and ample levels of liquidities in problems at their roots.Accordingly, the Government's the region encouraged capital inflows and transfers to five-yearplanforeseesadministrative,social,financialand Lebanon, tourism, real estate activity and exports to economicreformstorationalizepublicspending,improve the Gulf countries. All these factors helped sustain the governance, strengthen safety nets and raise Lebanon's demand for Lebanon's products and services, despite long term growth and job creation performances. As a a higher oil-import bill and related weak demand in major instrument of any policy reform, the 2006 budget Europe. In turn, following a poor performance in 2005, should incorporate some of these elements. GDP growth could well rebound as of 2006. Security conditions permitting, a progressive return of the Leba- The other sections of this note summarize recent nese economy to normal operating levels could entail an developments in the real and financial sectors, public average annual growth rate in real GDP in the range of 4 accounts and the balance of payments in the First Quar- to 6 percent in 2006. ter of 2006. Figure 1. Cumulated Change in Net Foreign Real Sector Developments Assets Since December 2004 The regrettable absence of updated economic sta- tistics impedes rigorous monitoring of economic activity. National and external accounts are still miss- ing. Also, there is no up-to-date information on house- hold living conditions, wages or unemployment. Recent effortsexertedbytheGovernmentofLebanontodevelop quantitative information, notably national accounts (for the period 1997-2002), household living conditions (for 2004), consumer price indexes (on a quarterly basis) are welcome, but remain insufficient2. Government efforts should be sustained to make permanent the production and dissemination of reliable statistics in these fields, among others, as a critical element for good gover- nance. Source: World Bank staff calculations based on BDL. The coincidence indicator from the Central Bank At the same time, structural problems remain colos- in the First Quarter of 2006 was 8 percent higher sal, and cloud Lebanon's future: unsustainable debt than in the First Quarter of 20053. This surge clearly dynamics and related financial vulnerabilities, large reflects an increase in economic activity compared with fiscal and current account deficits, weak and volatile growth performance, strong emigration flows of young and skilled workers and ageing population, poor pub- 2 In 2005, Lebanon ranked 103rd out of the 143 countries lic services and corruption, and a deteriorating envi- listed by the World Bank in terms of statistical capacity (statistical practice, data collection and data availability). ronment. In the face of such daunting challenges, the 3 The coincident indicator is a linear combination of indirect external environment will not always be as favorable indicators of economic activity: imports of petroleum, as today1. electricity production, value of compensated banks' checks deflated by the consumer price index, cement deliveries, number of foreign passengers, sum of imports and exports 1 World Bank, Global Development Finance, May 2006, deflated by the consumer price index, and money supply (M3) Washington D.C. deflated by the consumer price index. Second Quarter 2006 7 the First Quarter of 20054. Indirect indicators notably was estimated at 5-6 percent, and Lebanon could well suggest a strong acceleration in construction and tour- progressively return in 2006 to a similar growth path, ism activities in the First Quarter of 2006. Construction inspired by booming exports of goods and services and permits and cement deliveries grew respectively by 95 real estate investments. Nevertheless, in the absence of percent and 68 percent compared with the First Quarter massive investments in other sectors, it is unlikely that of 2005. Also, the number of tourists was 37 percent Lebanon will be able to maintain such type of perfor- higher in the First Quarter of 2006 than in the First mance in the medium term. Per World Bank calcula- Quarter of2005, which, beyond the negative impact of tions, the long-term growth potential of Lebanon cur- political and security events, nevertheless, confirms the rently does not exceed 3 percent per year, as the econ- structural increase in tourism activity witnessed since omy continues to face a poor investment climate. the late 1990s. Merchandise exports also grew, and were 28 percent higher in the First Quarter of 2006 than Balance of Payments in the First Quarter of 2005. Since April 2005, mer- chandise exports have been growing at the annual rate MerchandiseTradedeficitwidenedintheFirstQuar- of 23 percent, a pace similar to that observed in 2003 ter of 2006 compared with the First Quarter of 2005. and 2004. At the other extreme, government expendi- Export growth, although more rapid than import growth ture (excluding transfers and debt payments) continued between the First Quarter of 2005 and the First Quar- to barely contribute to growth in aggregate demand ter of 2006, was insufficient to contain the merchandise in the absence of a new budget law, which restricts trade deficit, given the much larger size of imports. As expenditures to essentials and freezes most investment a result, the merchandise trade deficit grew by US$76 projects. Private consumption, as indirectly proxied by million, from US$1,757 million in the First Quarter of merchandise imports, was 11 percent higher in the First 2005 to US$1,833 million in the First Quarter of 2006. Quarter of 2006 than in the First Quarter of 2005, but For the full year 2005, the merchandise trade deficit a significant part of the growth in the value of imports stood at approximately 34 percent of GDP. can be explained by higher import prices. The widening merchandise trade deficit was, never- Figure 2. Number of Tourists, theless, more than offset by growing net exports of First Quarter 2000-2006 services, remittances, transfers and capital inflows. The sum of these three components is calculated by the sum of merchandise trade deficit and changes in the net foreign assets of banks. This composite grew by US$1,688 million between the First Quarter of 2005 and the First Quarter of 2006, financed the trade deficit and allowed banks to improve their net foreign assets posi- tion (see Figure 1). Excluding the peaks of early 2003, (following Paris II) and dips of February-April 2005, (following the assas- sination of former Prime Minister Rafic Hariri), these inflows have shown relative stability and a significant increase, mirroring the oil boom in the region. In 2005, Source: Ministry of Tourism. the sum of exports of services (minus imports of ser- vices), remittances, transfers and capital inflows repre- SinceApril 2005, the coincident indicator from the Cen- sented approximately 37 percent of GDP. tral Bank is growing at an annual pace of 7.5 percent, which is similar to the 7.4 percent observed in the years Fiscal Developments 2003 and 2004. Annual real GDP growth in these years Fiscal deficit increased in the First Quarter of 2006, 4 Although significant, these increases should be somewhat with the rise in debt service and oil prices. The deficit discounted by the fact that the period of comparison, the First Quarter of 2005, was one of utmost prudence for investors increased to LBP608 billion from LBP475 billion a year and tourists, in the face of the political turmoil following the earlier (+LBP133 billion). Primary surplus improved assassination of former Prime Minister Rafic Hariri. to LBP339 billion from LBP220 billion a year earlier 8 Second Quarter 2006 (+LBP119 billion). The debt service, which makes the taxes, tax revenue rose by 7.5 percent and represented difference between the overall deficit and the primary 30 percent of the total increase in revenues. The high- surplus, indeed rose by 36 percent between the First est increases occurred in the taxes on property, taxes on Quarterof2005andtheFirstQuarterof2006(+LBP252 capital gain and taxes on interest rates, which respec- billion). In turn, most of the increase in the debt ser- tively rose by 46, 42 and 20 percent. These increases vice resulted from higher interest rates paid on the debt reflect the impact of growing capital inflows on bank labeled in Lebanese Pounds, the consequence of longer deposits and on the demand for real estate and equities. average maturities and a higher share of subscriptions at market conditions. Indirect taxes on consumption (VAT, tariffs and excise taxes,excludingpetroleumexcisetaxes)roseby5percent Figure 3. Fiscal Accounts, betweentheFirstQuarterof2005andtheFirstQuarterof First Quarter 2004-2006 2006 (and declined by 4 percent once petroleum excise taxes, which dropped by 43 percent, were included). LBP billion 2004 2005 2006 Total Receipts 1,141 1,094 1,281 Thegrosspublicdebtincreasedby7percentbetween Budget Receipts 1,084 1,051 1,210 March 2005 and March 2006. The debt denominated Tax Revenues 771 750 807 in LBP increased by 8.9 percent, while the debt denomi- VAT 252 272 281 nated in foreign currency rose by 5.3 percent. In terms Customs 258 221 155 of maturities, the average life of LBP-denominated debt o/w Petroleum Tax 188 130 73 increasedto1.7yearsinMarch2006,upfrom1.6yearsin Other Tax Revenues 261 258 371 March 2005, while the average life of foreign currency- denominated debt stood at 5.4 years against 6.1 years in Other 313 301, 403 2005. In terms of interest rates, the average interest rate Treasury Receipts 57 43 71 on LBP debt reached 8.07 percent in 2006 against 6.44 Total Payments 1,525 1,409 1,684 percent in 2005, while the rate on foreign currency debt Primary Spending 498 492 504 rose from 7.2 percent to 7.5 percent.The composition of Debt Service 530 461 628 the debt by currency did not change dramatically over in LBP 310 211 355 the year, with the share of the LBP-denominated debt in FX 221 250 273 remaining at 48 to 49 percent. However, the composi- tion by type of holder was substantially modified, as the Treasury Payments 496 456 552 Central Bank was able to sell a large number of bonds it Surplus / Deficit -384 315 -403 had acquired in the First Quarter of 2005.As a result, 19 Primary Surplus 147 146 225 percent of the debt was detained by the Central Bank by Source: Ministry of Finance. end-March 2006, against 28 percent a year earlier. The lowerresorttoCentralBankfinancingalsoisreflectedin Rising oil prices continue to exert a heavy toll on fiscal the decrease in public sector deposits, which decreased accounts, in terms of higher expenditures and lower rev- by LBP336 billion between March 2005 and March enue. Higher diesel oil subsidies and transfers to EDL 2006, the equivalent of 1 percent of GDP. coupled with lower excise taxes, a consequence of the cap imposed on retail gas prices to fend off rising world Financial Markets Developments oil prices, cost the Treasury LBP110 billion more in the First Quarter of 2006 than in the First Quarter of 2005. Money Supply grew rapidly in the First Quarter of 2006. Monetary aggregates rose by 9 percent compared Revenues increased by 17 percent over the First to March 2005, and by 2 percent since end-2005. The Quarter of 2006, driven by substantial increases growth of the Money Supply in LBP reached 41 percent in both non-tax and tax revenues, partially driven between the First Quarter of 2005 and the First Quarter by the indirect effects of the increase in oil prices. of 2006, while the Money Supply in foreign currencies Non-tax revenues rose by 34 percent and contributed increased by only 1 percent. Accordingly, the dollari- by 55 percent to the total increase in revenues. Trans- sation rate of banks' deposits decreased from 79 to 72 fers from the Telecom companies rose by 53 percent, percent between March 2005 and March 2006. Look- while administrative fees rose by 52 percent, the result ing at the counterpart of Money Supply, it appears that of increases introduced in the Budget Law for 2005, and the bulk of the increase in Money Supply comes from implemented in 2006. In spite of lower petroleum excise incoming capital inflows. Second Quarter 2006 9 Domestic interest rates only partially absorbed the The exposure of commercial banks to the public sec- rise in global interest rates. While the three-month tor continued to grow. Total lending to the Govern- LIBOR (US Dollar) gained 190 basis points (bps) ment and the Central Bank increased from 52.5 percent betweenMarch2005andMarch2006,theaverageremu- of banks' total assets in March 2005, to 53.5 percent in neration of US Dollar-denominated deposits increased March 2006. The share of banks' assets invested at the only by 74 bps. Meanwhile, the average remuneration of Central Bank went down from 31 to 27 percent, while LBP-denominated deposits dropped by 33 basis points. the share of banks'assets invested in public bonds grew These evolutions should, obviously, be discounted by from 21 to 26 percent. the fact that the period of comparison, the First Quarter of 2005, was one of high perceived exchange rate risk The Central Bank was able to reconstitute its gross and growing dollarization rates in the midst of political stock of foreign currency reserves to levels reached turmoil. This also reflects, to some extent, the impact of prior to the political turmoil of early 2005. The Cen- the large supply of foreign capital inflows and transfers tral Bank's foreign reserves increased from US$7.6 to Lebanon since March 2005. In turn, in the face of billion in March 2005 to US$9.9 billion, fueled by stagnant private demand for credit, lending interest rates inflows of foreign capital and by the de-dollarisation are on the decline (at least with respect to those served of deposits. on deposits), minus 80 bps for LBP-denominated loans and advances and +17 bps for US Dollar-denominated The growth in the Beirut Stock Exchange (BSE) cap- loans and advances. italization also reflects the influence of foreign capital inflows. After more than doubling in 2005, the capital- Figure 4. Interest Rates ization of the BSE increased by 50 percent during the Served on Deposit First Quarter of 2006. Most of the increase stems from the rise in the stocks of the real estate Solidere Company (from US$8 by end-2004 to US$18 by-end 2005 and US$22 by end-March 2005), fueled by growing demand from Gulf investors. 10 Second Quarter 2006 BankGroupOperations IBRD Ongoing Projects Ba'albeckWater andWastewater Project. (US$43.5 mil- lion). The major development objectives of the Project The current World Bank portfolio in Lebanon consists include:(a)improvingtheaccessofsatisfactorywatersup- of seven projects for a total commitment amount of ply and wastewater services to the region's residents; (b) US$321.82 million, of which US$122.78 million has introducing appropriate sector reforms­ particularly the been disbursed through May 31, 2006. developmentandstrengtheningofthecapacityoftheexist- ing Ba'albeck HermelWater and IrrigationAuthority and, Revenue Enhancement and Fiscal Management Tech- onceitisestablished,theBekaaRegionalWaterAuthority; nical Assistance Project (REFMTAP). (US$25.25 mil- and (c) involving the private sector in the operation and lion). The Project seeks to support Government efforts maintenance of water and wastewater facilities by prepar- to enhance revenue and strengthen fiscal management. ing for a Management Contractor (MC) through a lease or concession contract that would secure the long term finan- Education Development Project (EDP). (US$56.6 mil- cial needs for sector investments. The World Bank Board lion). This Project is designed to support the Govern- of Directors approved the Project in June 2002. ment's efforts to enhance the capacity of the Ministry of Education to function as an effective manager of the Urban Transport Development Project (UTDP). education sector and to restore the credibility of the (US$65.0 million). The Project's objectives are to pro- Public Education System. vide the city of Beirut and the Greater Beirut Area with thebasicinstitutionalframeworkthatiscurrentlylacking, First Municipal Infrastructure Project (FMIP-I). and to support critical investments needed to maximize (US$80.0 million). This Project aims at addressing the efficiency of existing urban transport infrastructure. urgent municipal works while setting the stage for the TheWorld Bank Board of Directors approved the Project gradual assumption of responsibility for municipal ser- in June 2002. vices at the local level. Cultural Heritage and Urban Development Project Community Development Project (CDP). (US$20.0 (CHUD). (US$31.5 million). The Project will finance million). This Project is designed to raise living stan- site conservation, enhancement investments, associated dards in targeted poorer communities, and to raise eco- urban infrastructure improvements in selected sites and nomic activity levels in such communities by investing provide technical assistance to strengthen the capacity in grass-roots social and small infrastructure activities, of the Directorate General of Antiquities, Ministry of and in employment creation. Tourism and targeted municipalities in cultural heritage preservation and tourism development. A signing for implementation of the Project was held in July 2003. Commitments and Disbursements as of May 31, 2006 Approval Loan Amount Closing Project Name Year Amount Disbursed US$ Million Date Revenue Enhancement and Fiscal Management TechnicalAssistance 1994 25.25 24.70 Dec. 2005 Education Development 2000 56.57 16.75 Dec. 2007 First Municipal Infrastructure 2000 80.00 61.20 June 2007 Community Development 2001 20.00 2.30 Dec. 2006 Ba'albeck Water and Wastewater 2002 43.50 6.13 Dec. 2007 Urban Transport Development 2002 65.00 8.40 June 2009 Cultural Heritage and Urban Development 2003 31.50 3.30 Dec. 2009 Total 321.82 122.78 Second Quarter 2006 11 IFC Projects in Lebanon rying out a survey of administrative barriers in Lebanon to identify reforms necessary to improve the business IFC currently holds a total of US$31.5 million in seven environment in Lebanon. companies in its investment portfolio. Many of these are in the financial sector and are for on-lending, primarily Business Enabling Environment ­ As a follow on to for mortgages and the SME sector. In the past year, IFC the November 2005 Doing Business Conference, IFC has signed four new transactions in Lebanon, all in new signed a technical assistance agreement in January activities or sectors. 2006 with the Ministry of Economy and Trade to assist in the reform and streamlining of the business regis- ThefirstisaUS$8milliontransactiontopartiallyfinance tration process. This program will take approximately the SABIS International School ofAdma ­ a world class one year to complete and will tackle one of the issues K-12 educational facility located north of Beirut. The that Lebanon performed most poorly on in the Doing SABIS International School ­Adma opened its doors in Business Survey. September of 2005. The investment represents the first for IFC with the SABIS school system, and the first in Corporate Governance ­ In partnership with the Asso- Lebanon in the education sector. ciation of Lebanese Bankers, IFC is undertaking a com- prehensive review of Corporate Governance practices in In October 2005, Banque-Libano Francaise became the the banking sector in Lebanon. The survey will inves- first bank in Lebanon to join IFC's global trade finance tigate how Lebanese commercial banks incorporate program with a U$20 million line, followed by Fran- corporate governance principles into their operations, sabank, who signed an additional US$20 million with particularly in terms of arrangements for supervisory IFC in December 2005, and Bank of Beirut in May and management boards, disclosure and transparency 2006. This program, a new initiative for IFC, supports policies, protection of shareholders' rights and internal trade with emerging markets worldwide and promotes controls. The survey will also review the current regu- the flow of goods and services between developing latory framework for corporate governance in Lebanon countries. IFC provides guarantee coverage of bank and identify areas for improvement. risk in emerging markets, allowing recipients to expand their trade finance transactions within an extensive net- Privatization ­ In August 2005, IFC completed a val- work of countries and banks and to enhance their trade uation of BLC Bank, a bank currently owned by the finance coverage. Banque du Liban (BdL). The valuation was undertaken at the request of the Banque du Liban and was used In addition to its traditional lending activities, in 2004, to guide BdL in the successful sale of BLC Bank in IFC launched the Private Enterprise Partnership for December 2005. the Middle East and North Africa (PEP-MENA), a US$100 million, donor-financed technical assistance IFCisindiscussionswiththeGovernmentandinterested facility focused at providing technical assistance in a stakeholders on five additional potential areas of techni- number of areas. Current technical assistance activities cal assistance: privatization assistance; administrative in Lebanon are: reform; establishment of a credit bureau; Alternative Dispute Resolution; and assistance to small and medium AdministrativeBarriersSurvey­ThejointWorldBank/ enterprises in the Information Technology sector. IFC Foreign InvestmentAdvisory Services group is car- 12 Second Quarter 2006 MIGA in Lebanon have submitted preliminary applications in the finance, infrastructureandmanufacturingsectorsforinvestments Lebanon has been a member of the Multilateral Invest- in Cote d'Ivoire, Ghana, Sierra Leone, Gambia, Guinea ment Guarantee Agency (MIGA) since 1994. Over the and Syria. Eligible investors include those from MIGA- past decade, MIGA has received more than 20 prelimi- member countries investing in Lebanon, Lebanese nary applications from investors in Austria, Canada, nationals repatriating funds for investments in Lebanon, France, Luxembourg, SaudiArabia and Spain for invest- as well as Lebanese investors investing in developing mentsinLebanoninthefinance,infrastructure,telecom- countries, including the Middle East region. munications and tourism sectors. The Investment Development Authority of Lebanon In addition, the Lebanese investor community has (IDAL), Lebanon's Investment Promotion Agency, has become increasingly interested in MIGA's ability to submitted to MIGA a NeedsAssessment request. MIGA provide non-commercial risk coverage for their invest- performed the Needs Assessment in March 2006. The ments in other developing countries. In fiscal year 2002, Needs Assessment will benchmark IDAL's investment MIGA issued US$8.1 million in Guarantees to Invest- promotion capacity relative to international best prac- com, a Lebanese-owned company, for a telecommuni- tices and recommend steps to improve IDAL's ability to cations project in Benin involving the installation of a attract FDI into Lebanon. new GSM mobile telephone network. Lebanon is one of the lowest teledensity countries in the world. In fiscal MIGA's online investment promotion services (www. year 2003, MIGA issued US$56 million in Guarantees fdixchange.com and www.ipanet.net) feature 130 docu- to Investcom's investment in Spacetel, Syria's second ments on investment opportunities and the related legal mobile telephone network. Also, Lebanese investors and regulatory environments in Lebanon. Second Quarter 2006 13 LebanonImrovesBusinessRegistration The Government of Lebanon, in its new campaign to released this summer. Based on this information, the reduce the cost of doing business and improve competi- project team will work with the relevant authorities tiveness, has teamed up with the International Finance and the private sector to re-design these procedures and Corporation (IFC), the private sector arm of the World provide assistance to the partner institutions and their Bank Group, to engage in the re-engineering and simpli- personnel to implement simple and business-friendly fication of the Business Registration process. procedures. The longer term objective is to create an automated business registration process in Lebanon. This joint initiative was formally launched January 26, 2006, when Minister of Economy and Trade Sami The project team will work closely with the private sec- Haddad signed an agreement to this effect with the tor and all institutions involved in business registration IFC. But, the effort to address bureaucratic obstacles ranging from the Ministry of Finance, the Ministry of to doing business in Lebanon had been afoot since Economy and Trade, the Commercial Registrar, the October 2005, when the World Bank and IFC's annual MinistryofJustice,theOfficialGazetteandthe National Doing Business Report, investigating government reg- Social Security Fund. The project team will guide the ulations which promote or constrain business activity, Lebanese partners to always compare this effort with was unveiled in Beirut. best international practice and experience in reform- ing business regulations. This approach will encourage On the issue of «Ease of Doing Business» the Report new solutions for a long-lasting impact on the Lebanese showed that Lebanon ranked 95 among the 155 coun- business community. tries examined. On the ease of «Starting a Business,» Lebanon ranked 99, well behind countries such as India, To demonstrate the practical benefits of reform in this Sudan, Morocco and Tunisia. The findings pointed out field,theprojectteamcreatedaTaskForceinMarch2006, that to register a new company in Lebanon; it takes on- with representatives from the Ministry of Economy and average 46 days, six procedures and costs 110 percent of Trade, the Ministry of Justice, the Ministry of Finance income per capita. This is compared to an average cost and Lebanese legal experts. The Task Force was assigned of 6.8 percent of income per capita in countries of the the objective of realizing a quick re-design of the for- Organization for Economic Cooperation and Develop- eign branch registration process in Lebanon, primarily to ment (OECD). reduce the number of procedures and the time involved in theprocess.Adetailedmappingoftheregistrationprocess The Report concluded that the process of starting a busi- revealed the complexity of the process to potential inves- ness should be an immediate area of reform, not just in tors: indeed, an investor today has to go through 31 steps Lebanon, but also in the Middle East and North Africa and make 21 visits to nine different Government offices in (MENA) region at-large, as it constitutes an important order to complete the registration of a foreign branch. obstacle to both local and foreign investors. Without requesting any changes in the current laws, the Joint Government/IFC Initiative Task Force developed a streamlined solution whereby Begins to Bear Fruit an investor would only go through seven steps and inter- act with three different Government offices. The time delays in this new process would be reduced by 75 per- To support the Government's reform process, IFC, with cent. The simplification of this procedure is expected to itsregionaltechnicalassistancefacility,thePrivateEnter- be endorsed soon by the Government. prisePartnership(PEP-MENA),hassetupaprojectteam dedicated to reducing the regulatory burden on the pri- WhilethejointGovernment/IFCinitiativewillfocusini- vate sector through a restructuring of business registra- tiallyonreformingbusinessregistration,itwillalsoseek tion and a reduction in the cost and time of procedures. additional political commitment to tackle new reforms, involving licensing and permit requirements. This will A review of administrative procedures is now underway complement the ongoingWorld Bank activities in Leba- and a detailed «process mapping» will be non aimed at improving the investment climate. 14 Second Quarter 2006 To achieve this, the joint World Bank and IFC's For- be an important tool to improve investment conditions eign InvestmentAdvisory Service (FIAS) is now pool- in Lebanon, while unleashing the potential and talent ing its expertise and resources with those of the PEP- of its entrepreneurs. MENA project. FIAS is currently reviewing a large number of administrative procedures which investors Red Tape Obstacles Endemic in MENA must go through in areas ranging from land regis- tration, business licensing to operating procedures, In most MENA countries, entrepreneurs and investors such as tax requirements and inspections, import and find it difficult to start and formalize their businesses export procedures, and visas and labor inspections, with multiple authorities demanding various docu- to just name a few. PEP- MENA and FIAS will use ments and fees. Cumbersome and time-consuming the resulting recommendations later in 2006 to fur- procedures create barriers to growth and cause inef- ther engage the Government in reforming the business ficiencies, while excessive discretionary power opens environment and help turn Lebanon into a better place opportunities for corruption. for investment. On-average, a new company takes 45 days to be regis- The Time is Just Right for Lebanon to tered in the MENA region compared to only 19 days in Initiate This Reform OECD countries. First, recent studies from theWorld Bank Group points These processes tend to be expensive: High initial capi- to the significant size of Lebanon's informal sector tal requirements are the norms in the Middle East at 17 estimated at 34 percent of the current Gross National times the average per capita income inYemen, 16 times Product. Entrepreneurs are not encouraged to formal- in SaudiArabia and 24 times in Jordan. ize when business regulations, inspections and admin- istrative requirements are too complex and not trans- Today, reform-oriented governments across the world parent. This, in turn, affects roughly 200,000 Leba- recognize the benefits of reducing red tape to attract nese informal entrepreneurs who are unable to obtain investment and draw people into the formal economy. bank credit, use courts to resolve disputes and access Regulators in reforming countries such as Denmark, technologies and Government contracts. Informal- Norway, Vietnam and Turkey have successfully sim- ity has important social consequences, with women plified their business registration processes in order to being hurt disproportionately and thousands of work- attract more investment, increase job opportunities and ers lacking both health insurance and pension benefits. facilitate income generation. In this context, it is only more urgent to address inad- equate and costly market entry regulations, complex The benefits of entry regulation reforms are always tan- reporting regulatory and administrative requirements gible and quick to materialize. InAustria, only one year which continue to push Lebanese entrepreneurs into after the adoption of its Young Enterprise Law in 1999, the informal economy. which removed bureaucratic burdens and eliminated all registration costs for business start-ups, the number Second, stimulating growth is at the heart of Lebanon's of registrations shot up from 19,000 to 26,000 in just new Reform Agenda. Research shows that reforming one year. Similarly, within one year of completing the business start-ups can add between a quarter to one reform process, the number of registrations increased by and a half percentage points to the growth rate on 26 percent in Bosnia-Herzegovina. In Vietnam, the new average in developing the economy. Reducing the cost Enterprise Law rapidly encouraged 50,000 informal entrepreneurs to register. of doing business is, therefore, a top priority in Leba- non's program of reform as was articulated by Prime Minister Fouad Siniora in a recent speech in London. Tackling this challenge now will send a very positive For additional information on the Business Reg- signal to international investors and the business com- istration Simplification Project, please contact Mr. munity at-large. Georges Nicolas, Project Manager, gnicolas@ifc.org Lebanon is, by tradition, an open economy and has For general information about IFC's activities in Lebanon, please contact Ms. Julia Brickell, Coun- long realized the advantages of attracting investment. try Officer, jbrickell@ifc.org The ongoing simplification of business procedures will Second Quarter 2006 15 NEWS,RECENT AND PCOMING CTIVITIES U A World Bank Unveils Country Financial Accountability Assessment Report The World Bank convened two workshops in Beirut have been tested in countries where financial and eco- in May to unveil the Country Financial Accountability nomic environments were similar to those in Lebanon. Assessment (CFAA) Report and reflect on international experiences that could be replicated by the Government World Bank officials noted that the Government of Leb- of Lebanon in its drive to reform its financial manage- anon, especially the Ministry of Finance, has exerted ment system. substantial efforts to improve its fiscal budget process. These adjustments point to a determination to maintain The first workshop on May 25, 2006 attracted nearly the momentum. However, reforming the budget process 100 participants from both the public and private sectors is a long, often arduous, journey in any country, and and other stakeholders, including Non-Governmental also is an effort that requires the cooperation and active Organizations and financial institutions. The workshop involvement of all stakeholders: Parliament, the private was held under the patronage, and in the presence of, sector and the population at-large. the Minister of Finance Jihad Azour and was chaired by World Bank Country Manager for Lebanon, Omar Addressing the workshop on May 25, 2006, Mr. Razzaz Razzaz and the World Bank Regional Finance Manager, said the growing challenges of budgetary deficit and fis- Samia Msadek. Experts from Canada, France and the cal management required an enhanced budget process United Kingdom shared with the participants their expe- and innovative financial management techniques. These riences in financial reform, enlivening the debate. changes are at the core of any economic reform program. The second workshop on May 29, 2006 engaged the But, the fact that the Government of Lebanon insisted Parliament of Lebanon's Budget and Finance Commit- on making this CFAA a public document also is a strong tee in issues related to public reform as recommended indicator of dedication to the principles of accountabil- by the CFAA. ity and transparency. The CFAA offers a pragmatic new approach to old prob- lems, based on best practices in economic transition that For more information, please contact Mr. Robert Bou Jaoude, Sr. Financial Management Special- ist, rboujaoude@worldbank.org Lebanon Development Marketplace Selects 13 Winners to Share US$240,000 The World Bank and its international competitors displayed proposals to promote the rights development partners have awarded and duties of the youth in Lebanon, curb the brain drain US$240,000 to 13 local Non-Govern- and foster links between the Lebanese at home and in mental Organizations (NGOs) and aca- the Diaspora. demic institutions which applied for seed funding for projects in the competition entitled The competition, launched November 18, 2005, was Youth in Governance: Shaping the Future. organized by the World Bank, in partnership with the British Foreign Office's Global Opportunities Fund WinnersoftheLebanonDevelopmentMarketplace2006 (GOF), the United Nations Development Programme (LDM 2006) were announced on Innovation Day,April (UNDP),theUnitedNationsChildren'sFund(UNICEF) 6, 2006, at Al-Madina Theater in Beirut. Twenty-three and the Lebanese Transparency International (LTA). 16 Second Quarter 2006 Youth in Governance: Shaping the Future is a com- World Bank Lebanon Country Manager Omar Razzaz petition that attracted 67 project proposals. Twenty- told the audience that the competition underscored the four were selected for the second and final stage of the resourcefulness of young Lebanese, and challenged competition, but one withdrew before the final round. the youth with questions: «Are today's youth more able than the war generation to prevent civil strife? Innovation Day featured a mix of light entertainment Are today's youth more tolerant than their ancestors and passionate debate. The North Lebanon Fayhaa and more able to listen to and accept an opposing Choir, a winner of the 2005 music contest in Warsaw, view? Are today's youth more immune to corruption Poland, teamed up with local university bands to attract and favoritism? If so, the youth have no time to waste a large audience of mixed ages from all walks of life, as in assuming an effective role in governance», Mr. Raz- well as diplomats and officials. zaz concluded. In opening remarks, Lebanon's Minister of Culture, UNDPResidentRepresentativeMonaHammampraised Tarek Mitri stressed the all-important role of Lebanese LDM 2006 as the second consecutive successful part- youth in shaping «good governance.» He said young nership with the World Bank in Beirut. Lebanesearetornbetween«despairandfear,»andurged the Government to initiate dialogue with the youth on BritishAmbassador James Watt said the challenges fac- administrative reform and corruption. ing the youth are not unique to Lebanon, but prevalen even in developedcountries. The 13 winners are: ORGNIZATION / Project Title MASAR: The Age Basket The National Association for Vocational Training and Social Services: Strengthening the Involvement of the Youth in Community Matters in the Refugee Camps in Lebanon by Conflict Resolution Workshops for Youth Com- munity Workers DevelopmentAction without Boarders NABA'A: Youth Festival and Human Rights 05AMAM: MockYouth Municipal Council in JabalAkroum,Akkar Lebanese Physical Handicapped Union: Unlocking Potential forYouth with Disabilities Universite Saint Joseph - Faculte des Sciences Economiques: Lebanon'sYouth Internship Databank (Lebanon's Youth ID) EnoughViolence and Exploitation (KAFA): Youth Clubs for Gender Equality and NonViolence Nahwa Al-Muwatiniya (Na-am):Youth inAction: Public ServiceAccountability Campaign Association for Forest Development and Conversation AFDC:A Common Political Declaration Environment Lebanese Association forYouth Centers: Introducing theYouth to their Rights and Duties Nahar Ash-Shabab: Youth Shadow Government The Group of the UN First Summer School on Conflict Prevention and Transformation: What We Can Do Basil Fuleihan Foundation: Basil Fuleihan Innovative Good GovernanceAward Paper Competition World Bank Awards US$34,000 in Small Grants to Four NGOs TheWorldBankLebanonOfficeawarded Implemented for the sixth consecutive year in Lebanon, US$34,000 in small grants to four non- the Small Grants Program supports activities that pro- governmental organizations in May mote dialogue, dissemination and linkages among orga- 2006. The four proposals were selected nizations to foster civic engagement. Civic engagement against a list of pre-established eligibility is defined as: citizen, either individually or as organized criteria from a long list of 36 project proposals. groups, interacting with the public sector to strengthen Second Quarter 2006 17 mechanisms for inclusion, accountability and participa- The project aims at decreasing the risk of the marginal- tion in order to influence development outcomes. ization of children and youth with special needs by help- ing them acquire knowledge and skills that enable them Below is a brief description of the four winning projects. to take part in claiming and protecting their rights and in bringing about positive changes to try to deal with 1- «Women Empowerment» by the Lebanese Associa- their special needs in a more independent and produc- tion for Development ­ Al Majmoua ­ US$5,000 tive way. The organization plans to implement a women's The project will target 30 children and young persons empowerment project aiming at raising the awareness with special needs in Beirut and the suburbs to be identi- of some 400+ disadvantaged women in various parts fied through active NGOs, as well as through direct con- of Lebanon on civic issues, rights and engagement tact. Sessions will cover: self-awareness, self esteem, possibilities. The sessions will be held in focus groups assertiveness, autonomy and self control, problem solv- and general assembly format and will cover the fol- ing, critical thinking, interpersonal skills and decision lowing areas: making, awareness on rights, needs and capacities, etc. Guidelines to handle basic administrative formalities; Indirect beneficiaries consisting of the families of the Guidelines to handle basic juridical formalities; target group will also be engaged in a number of the Guidelines to handle basic banking formalities; sessions. Potential employers will also be approached Reading of the International Convention on the and attempts at job placement made for a number of the Rights of the Child; beneficiaries. Reading of Women's Rights. The project will be implemented in partnership with The dissemination of the sessions' content will also be Shams Cooperative Association for Culture and youth: made available to a wider audience and to a network of anorganizationwithextensiveexperienceintheapplica- active organizations through brochures, handouts, web- tion of interactive teaching techniques including drama, site publishing, etc. role playing, etc. 2- «KIDSWAP ­ School Curricula on Socio-Economic 4- «Clubs in School ­ Smoke Free Healthy Schools» Inequalities and Poverty» by Bassma ­ US$9,000 by Tobacco Free Initiative ­ US$10,000 Implemented in a number of schools in Lebanon, the The project aims at engaging the youth in 15 schools project would introduce students to the socio-economic to lead small campaigns in tobacco prevention and to inequalities in Lebanon and to real life poverty examples. promote the enforcement of smoke-free environments in public areas, namely academic institutions. Under the supervision of teachers and social scientists, groups of students will undertake mini social surveys Students will be coached throughout the project on the in various poor, middle class and rich neighborhoods planning,preparation,implementationandevaluationofa to assess and compare the socio-economic situations of campaignofactivitiestobedeliveredthroughyouthclubs different groups using simple questions on nutrition, lei- withintheirschools.Studentswillattendtrainingsessions sure time, consumption, spending habits, etc. Students covering various areas such as medical, public health, will then present the results of their surveys and conclu- industry, psychological aspects, as well as capacity build- sions to a wider student audience and hold debates to ing sessions. Activities implemented by the students will exchange opinions, perceptions and concerns. A tracer include:sharinginformation,raisingawareness,engaging survey will be conducted to assess changes in percep- different target groups and promoting the enforcement of tions and approach of the group of students before and the application of a legislation banning smoking in public after the survey exercise. The whole process will be areas. A closing event will be organized towards the end documented audio-visually and on paper to ensure dis- of the next academic year to present and disseminate the semination to a wider public in more schools and for various activities conducted by all youth clubs. possible replication. 3- «Life SkillActivities for Children andYouth» by the FormoreinformationontheSmallGrantsProgram, LebaneseAutism Society ­ US$10,000 please contact Ms. Zeina el Khalil, Public Informa- tion Associate, zelkhalil@worldbank.org 18 Second Quarter 2006 RecentWorldBankPublications Global Monitoring Report 2006: Strengthening World Wide Web emerged, and five years since the tele- MutualAccountability -Aid,Trade, and Governance communications bubble burst. How have the ICT sec- (ISBN 0-8213-6477-4). This third edition of the Global tor and its role in development evolved? What have we Monitoring Report examines the commitments and learned? How can we move forward? actions of donors, international financial institutions, and developing countries to implement the Millennium Information and Communications for Development Declaration, signed by 189 countries in 2000. Many 2006: Global Trends and Policies contains lessons from countries are off track to meet the Millennium Develop- both developed and developing countries. It examines ment Goals, particularly in Africa and South Asia, but the roles of the public and private sectors, identifying new evidence is emerging that higher-quality aid and a the challenges and the benefits of adopting and expand- better policy environment are accelerating progress in ing ICT use. The Report assesses topics essential to some countries, and that the benefits of this progress are building an information society, including: investment, reaching poor families. access, diffusion, and country policies and strategies. This Report takes a closer look at the donors' 2005 Assessing what has worked, what hasn't, and why, this commitments to aid and debt relief, and argues that Report is an invaluable guide for understanding how to rigorous, sustained monitoring is needed to ensure capture the benefits of ICT around the world. that they are met and deliver results, and to prevent the cycle of accumulating unsustainable debt from repeat- Budget Support as More Effective Aid?: Recent ing itself. International financial institutions need to Experiences and Emerging Lessons (ISBN 0-8213- focus on development outcomes rather than inputs, 6463-4). Budget support has become an increasingly and strengthen their capacity to manage for results in important instrument in the context of a partnership- developing countries. based approach to development assistance. Compared to traditional modes of aid delivery, it promises greater World Development Indicators 2006 (ISBN 0-8213- country ownership, reduced transaction costs, better 6470-7). Looking for accurate, up-to-date data on devel- donor coordination, scaling up of poverty reduction and opment issues? This indispensable statistical reference potentially greater development effectiveness. allows you to consult over 800 indicators for some 150 economies and 14 country groups in more than 80 This book presents a timely and valuable review of key tables. It provides a current overview of the most recent concepts, issues, experiences and emerging lessons rel- data available, as well as important regional data and evant to budget support. It provides an overview of prin- income group analysis in six thematic chapters: World cipal characteristics, expectations and concerns related to View, People, Environment, Economy, States and Mar- budget support, key design and implementation issues, kets, and Global Links. The CD-ROM editions, avail- as well as some practical experiences. The contributors able soon, contain 43 years of time series data, cover- include: government representatives from developing ing 1960 to 2004, and offers mapping, charting and data countries, leading academic scholars, bilateral develop- export formats. ment agencies and development practitioners from inter- national financial institutions, including the World Bank Information and Communications for Development and the International Monetary Fund. 2006: GlobalTrends and Policies (ISBN 0-8213-6346- 8). Information and Communication Technology (ICT) The authors present a wide range of views on key issues is rapidly evolving, changing rich and poor societies such as the choice of instruments, alignment of budget alike. It has become a powerful tool for participating in support with country programs, predictability, and coor- the global economy and for offering new opportunities dination and conditionality. for development efforts. ICT can and should advance economic growth and reduce poverty in developing The authors also draw on their insightful analysis on countries. It has been 20 years since the first telephone the contemporary research and evaluation work, as well operator was privatized, a little over 10 years since the as the broad practical experience with budget support. Second Quarter 2006 19 This book will be of great interest to practitioners in aid- Unlocking the Employment Potential in the recipient countries and international financial institu- Middle East and North Africa: Toward a New tions, bilateral agencies and civil organizations involved Social Contract (ISBN: 0-8213-5678-X SKU: in budget support. 15678). Sustaining Gains in Poverty Reduction and Human Better Governance for Development in the Development in the Middle East and North Africa Middle East and North Africa (ISBN: 0-8213- (ISBN No. 0-8213-6527-4 SKU: 16527). The Report 5635-6 SKU: 15635). provides an overview of trends in income poverty and human development indicators over the last 40 years, Trade, Investment, and Development in the and notes that since the mid-1980s, there has been little Middle East and North Africa: Engaging with progress in the poverty situation in the MENA region, theWorld (ISBN: 0-8213-5574-0SKU: 15574). although human development indicators have continued to improve. Accelerating poverty reduction and sustain- ing human development improvements are important Ordering World Bank Publications challenges for the region in the future. Phone: (001) 1-800-645-7247 or (001) 703-661-1580 The future challenge for the MENA region will be Fax: (001) 703-661-1501 obtaining faster growth in a sustainable manner, since growth remains the best guarantee of rapid income On-Line: http://publications.worldbank.org/ecommerce poverty reduction. At the same time, the region has to E-Mail: books@worldbank.org build on its experiences to-date with education, health Research and working papers are also available in elec- and social safety net reforms. In particular, the region tronic format free of charge at: needs to shift the focus of education policy from quan- http://econ.worldbank.org/ tity to quality, and the focus of health policy towards better serving the poor. More attention must be paid to the consequences of the ongoing demographic transi- tion. Finally, it is important to develop new and more Data and Statistics efficient social insurance mechanisms to improve the ability of the poor to cope with adverse shocks that The World Bank offers multiple databases online, some may occur as MENA countries move toward more freeofcharge,andsomeonanannualsubscriptionbasis. open economies. Almost all the data reported in the site mentioned below are derived, either directly or indirectly, from official Health Financing Revisited: A Practitioner's Guide statistical systems organized and financed by national (ISBN 0-8213-6585-1).This overview of health financ- governments. ing tools, policies and trends--with a particular focus on challenges facing developing countries--provides the basis for effective policy-making. Analyzing the To access the on-line databases, visit: current global environment, the book discusses health http://www.worldbank.org/data/ financing goals in the context of both the underlying health, demographic, social, economic, political and demographic analytics, as well as the institutional realities faced by developing countries, and assesses policy options in the context of global evidence, the international aid architecture, cross-sectoral interac- tions and countries' macroeconomic frameworks and overall development plans. Also available: Gender and Development in the Middle East and North Africa: Women in the Public Sphere (ISBN: 0-8213-5676-3 SKU: 15676). 20 Second Quarter 2006