World Bank & Its Impact on International Trade

8/9/2019 World Bank & Its Impact on International Trade

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Impact Assessment on decision

taking by world bank: observation

from the trade point of view

Submitted toMd. Thoufiqul Islam

Assistant Professor

Department of Management Studies

University of Dhaka

Submitted by

2

Name ID

Sharmin Aktar 116

Mazharul Islam 126Bappy Sharker 142

Mintu Kumar Debnath 155

Tahmina Binte Rahman 165


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Department of Management StudiesUniversity of Dhaka

Date of Submission:26th April , 2010

All praises are due to the Almighty Allah without whose kind blessings, it

would not be possible to complete the Term paper. In the process of

preparing the Term paper, I received valuable inputs, guidance, assistance

and instructions from a number of respected persons. I would like to express

my gratitude and sincere thanks to those persons for their immense help and

enormous cooperation.

First of all, I would like to convey my gratitude to my honorable courseteacher Md. Thoufiqul Islam, who has given us the opportunity of

preparing such kind of term paper on Impact Assessment on

decision taking by world bank: observation from the trade point

of view

We also express our sincere thanks to MD. Sajedul Karim MBA-11 Batch, who

has given us valuable inputs and guidance during preparing the Term paper.

3

Acknowledg


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LETTER OF TRANSMITTAL

26th April 2010

ToMohammad Thoufiqul IslamAssistant ProfessorDepartment of Management StudiesUniversity of Dhaka.

Subject: Submission of Term paper

Dear Sir,

In the enclosed, we have prepared a Term paper on Impact assessment

on decision taking by World Bank: observation from the trade point

of view, which you have authorized us to prepare and submit by 26th April

2010 as MGT-310 course requirement.

We enjoyed preparing this Term paper though it was challenging to finish

within the given time. In preparing this Term paper, we have tried our level

best to include all the relevant information related to World Bank.

So, we therefore hope that, the Term paper covers the entire requirementyou needed and you will find it in proper order.

Sincerely,

Bappy Sharker

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(On behalf of my group members)

Table of Contents

5

Contents Page

AbstractIntroduction

Objectives

Methodology

FindingsThe World Bank

World Bank Group Institutions

Member Countries Decision Making

Some Recent World Bank Projects

World Bank Fiscal Year Highlights 2009

World Bank Group Assistance

COLLABORATING TO RESPOND TO THE GLOBAL

The World Bank Group Institutions Summary

Millennium Development Goals

SPURRING TRADE AND DEVELOPING THE

Financial and Private Sector Development

World Bank: Action in the field

DiscussionThe Bank in the 21st Century

Programs of the World BankWhy World Bank Programs Fail

Development without World Bank

CONCLUSIONReferences


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Abstract

This paper analyses the impact of World Bank on the international trade. The

World Bank is a vital source of financial and technical assistance to

developing countries around the world. The World Bank was originally

established to support reconstruction in Europe after World War II, but has

since reframed its mission and expanded its operations both geographically

and substantively. Today, the Bank's mission is to reduce poverty. It has185 member countries and provides over $24 billion annually for activities

ranging from agriculture to trade policy, from health and education to energy

and mining. The World Bank provides funding for bricks-and-mortar projects,

as well to promote economic and policy prescriptions it believes will promote

economic growth.

Since inception in 1944, the World Bank has expanded from a single

institution to a closely associated group of five development institutions. At

any given moment in locations around the globe, people are engaged in

development projects designed to improve living standards and reduce

poverty. Last year, the World Bank provided $46.9 billion for 303 projects in

developing countries worldwide, with our financial and/or technical expertise

aimed at helping those countries reduce poverty. The Bank is currently

involved in more than 1,800 projects in virtually every sector and developing

country. The projects are as diverse as providing microcredit in Bosnia and

Herzegovina, raising AIDS-prevention awareness in Guinea, supporting

education of girls in Bangladesh, improving health care delivery in Mexico,

and helping East Timor rebuild upon independence and India rebuild Gujarat

after a devastating earthquake.The Bank has been actively supporting Trade Facilitation. The Bank has

considerably stepped up its analytical and lending activities to promote trade

integration. Given its development focus, the World Bank has developed a

cross-cutting approach to Trade Facilitation in order to effectively address

the bottlenecks and inefficiencies of developing countries supply chains. The

Bank supports its constituencies efforts of Trade Facilitation reforms through

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worldwide initiatives, and by helping to mainstream Trade Facilitation at the

country or regional levels. In order to build constituencies for Trade

Facilitation, the Bank is working closely with other organizations such as the

IMF, WTO, UNCTAD, WCO, and UNECE to disseminate knowledge and help

policy makers and stakeholders from developing countries to better

understand the stakes and the roadmap to trade facilitating reforms. The

World Bank is also responding to an increasing demand for more analytical

work and project lending related to Trade Facilitation.

With respect to the Bank, we find that the number of projects has a positive

impact on overall economic freedom, while the effect of the amount of World

Bank credits appears to be negative.

Keywords

1. Incorporation of World Bank2. Total loan disbursement in 2009

3. World bank in poverty alleviation

4. World Bank in structural development

5. Trade facilitation by world Bank

Introduction

In the past time, trades between two countries were not possible. But now-a-

days, its possible for the blessings of globalization. Trade, now conducted

not within a country but with a great diversification, large periphery. It is not

confined in a country or a group of countries. Various types of organization in

the world working for smooth flow of international trade. World Bankis one

of them. In international trade, these organizations have immense

contribution. Various decisions or steps these organizations take which have

great impact on international trade or international finance. One effectivedecision or steps can change the future of a country.

World Bank is an important decision maker for international trade regarding

developing and under-developed countries. Its main objectives are economic

and social development and to reduce the poverty to lend the money to

developing or poor countries. World Bank is a development institution whose

goal is to reduce poverty by promoting sustainable economic growth in its

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client countries. Development is a long-term process which ultimately

involves the transformation of whole societies. It is about getting economic

and financial policies right. But it is also about empowering the people,

building the roads, writing the laws, recognizing the women, educating the

girls, eliminating the corruption, protecting the environment, inoculating the

children - and much, more. The main reason to prepare this paper is to

analyze the impact of decision making of World Bank in international

business.

Literature Review

Axel Dreher (2002). The Development and Implementation of IMF and World

Bank Conditionality. HWWA. ISSN 1616-4814.

William Easterly (2001). The Elusive Quest for Growth. MIT Press. ISBN0-262-

55042-3.

Catherine Caufield (1997). Masters of Illusion. Henry Holt & Company, New York.

ISBN0-8050-2875-7 (hardcover) ISBN 0-330-35321-7 (paperback, 1998).

Bruce Rich (1994). Mortgaging the Earth. Beacon Press. ISBN0-8070-4704-X(hardcover), ISBN 0-8070-4707-4 (paperback).

Walden Bello, et al. (1999). Dark Victory. Pluto Press. ISBN0-7453-1466-X

(hardcover) ISBN 0-935028-61-7 (paperback).

Paul McClure (editor) (2003).A Guide to the World Bank. World Bank

Publications. ISBN0-8213-5344-6.

Elizabeth P. McLellan (editor) (2003). The World Bank: Overview and Current

Issues. Nova Science Publishers. ISBN1-59033-550-3.

Phillipe Le Prestre (1989). The World Bank and the Environmental Challenge.

Susquehanna University Press. ISBN0-941664-98-8.

Ansel Webb (1994). The World Bank Is Closed. NCSU Term Paper. ISBN none.

8
http://econwpa.wustl.edu/eps/if/papers/0207/0207003.pdfhttp://econwpa.wustl.edu/eps/if/papers/0207/0207003.pdfhttp://en.wikipedia.org/wiki/William_Easterlyhttp://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-262-55042-3http://en.wikipedia.org/wiki/Special:BookSources/0-262-55042-3http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-8050-2875-7_(hardcover)_ISBN_0-330-35321-7_(paperback,_1998)http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-8070-4704-X_(hardcover),_ISBN_0-8070-4707-4_(paperback)http://en.wikipedia.org/wiki/Special:BookSources/0-8070-4704-X_(hardcover),_ISBN_0-8070-4707-4_(paperback)http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-7453-1466-X_(hardcover)_ISBN_0-935028-61-7_(paperback)http://en.wikipedia.org/wiki/Special:BookSources/0-7453-1466-X_(hardcover)_ISBN_0-935028-61-7_(paperback)http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-8213-5344-6http://en.wikipedia.org/wiki/Nova_Science_Publishershttp://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/1-59033-550-3http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-941664-98-8http://econwpa.wustl.edu/eps/if/papers/0207/0207003.pdfhttp://econwpa.wustl.edu/eps/if/papers/0207/0207003.pdfhttp://en.wikipedia.org/wiki/William_Easterlyhttp://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-262-55042-3http://en.wikipedia.org/wiki/Special:BookSources/0-262-55042-3http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-8050-2875-7_(hardcover)_ISBN_0-330-35321-7_(paperback,_1998)http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-8070-4704-X_(hardcover),_ISBN_0-8070-4707-4_(paperback)http://en.wikipedia.org/wiki/Special:BookSources/0-8070-4704-X_(hardcover),_ISBN_0-8070-4707-4_(paperback)http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-7453-1466-X_(hardcover)_ISBN_0-935028-61-7_(paperback)http://en.wikipedia.org/wiki/Special:BookSources/0-7453-1466-X_(hardcover)_ISBN_0-935028-61-7_(paperback)http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-8213-5344-6http://en.wikipedia.org/wiki/Nova_Science_Publishershttp://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/1-59033-550-3http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-941664-98-8


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Sebastian Mallaby (2004). The World's Banker: a story of failed states, financial

crises, and the wealth and poverty of nations. Penguin Press HC. ISBN1-59420-023-

8.

Zoe Young (2002).A New Green Order? The World Bank and the Politics of the

Global Environment Facility. Pluto Press. ISBN0-7453-1553-4.

John Perkins (2004). Confessions of an Economic Hit Man. Ebury Press. ISBN0-

452-28708-1.

ObjectivesThe main objective of the paper is to comprehensive study on World Bank

and to find out the impact of its decision taking. We also tried to find out to

what extent it is successful to achieve its goals. The prime objectives of this

report are as follows:

1. To assess the impact of World Banks decision on international trade

2. To examine the contribution of world bank in poverty reduction

3. To examine the eradication of corruption by world bank in

underdeveloped countries

4. The after effect of its Structural Adjustment Programme(SAP)

Methodology

This report is totally based on secondary data. World Bank has a resourcefulwebsite. On the other hand every year World Bank published different kinds

of report like the World Bank report, world human development report etc.

We took helps from different books. As our required information from

secondary data were available so we did not sought for any primary data.

First of all we tried to analyze the different programmes taken by World Bank

for poverty reduction and economic development. Then we tried to find out

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http://en.wikipedia.org/w/index.php?title=Sebastian_Mallaby&action=edit&redlink=1http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/1-59420-023-8http://en.wikipedia.org/wiki/Special:BookSources/1-59420-023-8http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-7453-1553-4http://en.wikipedia.org/wiki/John_Perkins_(author)http://en.wikipedia.org/wiki/Confessions_of_an_Economic_Hit_Manhttp://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-452-28708-1http://en.wikipedia.org/wiki/Special:BookSources/0-452-28708-1http://en.wikipedia.org/w/index.php?title=Sebastian_Mallaby&action=edit&redlink=1http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/1-59420-023-8http://en.wikipedia.org/wiki/Special:BookSources/1-59420-023-8http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-7453-1553-4http://en.wikipedia.org/wiki/John_Perkins_(author)http://en.wikipedia.org/wiki/Confessions_of_an_Economic_Hit_Manhttp://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-452-28708-1http://en.wikipedia.org/wiki/Special:BookSources/0-452-28708-1


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the out comes of such kind of programmes. The pie chart are used for data

analysis.

Data collection:

The secondary sources of data we used to prepare this report are given

below:

1. World bank website

2. Different publications about world bank

3. Book: The world bank since Bretton woods by Edward S. Mason &

Robert E. Asher

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The World Bank

Created at the Bretton Woods

Conference in 1944, The World

Bank Group is comprised of five

agencies that make loans or

guarantee credit to its 177 member countries. In addition to financingprojects such as roads, power plants and schools, the Bank also makes loans

to restructure a country's economic system by funding structural adjustment

programs (SAPs). The Bank manages a loan portfolio totaling US$200 billion

and last year loaned a record US$28.9 billion to over 80 countries.

The founding principles

The Bank and its officers shall not interfere in the political affairs of any

member nor shall they be influenced in their decisions by the political

character of the member or members concerned. Only economicconsiderations shall be relevant to their decisions...

The Bank quickly established various impartial principles that continue to

govern its work and which have helped to ensure that, to this day, its

borrowers has always repaid in full:

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Interest rates must be related to borrowing costs; the same rate applies

to all borrowers for all loans granted at any given time, regardless of

creditworthiness.

Supervision is required by the Articles and thus the Bank ensures that

the loans are used only for the purposes for which they were intended.

Each borrower must provide a negative pledge, undertaking not to

secure international debt in a way that gives any lender preference over

another.

Expansion 1950s

During the 1950s, the Bank expanded considerably and its lending began tosupport the foundation of institutions within countries for development

purposes. It was during this decade that the Banks present focus on

development first became apparent, as further development agencies were

set up under the Banks umbrella as affiliates. These include the

International Financial Corporation (IFC), the International Development

Association (IDA) and the Economic Development Institute (EDI). The IBRD

remains the largest agency within the World Bank Group and its earnings

now help to fund the others.

This decade of expansion can also be marked in monetary as well asinstitutional terms: in 1959 the IBRD increased its capital for the first time, to

$21 billion.

Maturity and focus on development (1960s

1990s)

The Banks activities and investments continued to diversify and by the early

1970s, it had made loans in a number of politically-charged sectors, such as

nuclear power, pollution control and family planning. By this stage, its single

largest area of investment was agriculture, marking a policy shift from its

focus on infrastructure projects that had dominated its earlier programme

and arguably reflecting its greater focus on poorer countries development.

In 1978, the Bank published its first World Development Report. This has

since emerged as an annual flagship publication; its major themes are

accelerating growth and alleviating poverty.

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Despite this policy shift, the Bank does not see itself as a charity. Its

response to the deteriorating outlook for developing countries arising out of

the global financial crises of the 1970s was to innovate a new lending

approach known as Structural Adjustment Programmes. In exchange for

funding, governments agreed to stabilize their nations economies by

adopting the prescriptive policies laid down by the Bank such as reducing

government spending, lowering inflated exchange rates and encouraging

free trade by reducing tariff barriers and subsidies. Such policies also

promoted privatization and market rather than command economies.

There were claims that this contravened the Banks overarching ban on

political considerations (as mentioned above), but the Bank contended that

these were valid factors that have to be taken into account when making a

decision about investment or wider involvement.

Today, the IBRD is funded mainly by the issuance of World Bank bonds in the

international markets. Because of its borrower AAA rating, the Bank can

raise funds cheaply and, as a not-for-profit organization, it passes these

savings onto its borrowers, as well as to the IDA. In the fiscal year 2009,

World Bank lending amounted to over $30 billion.

Membership of the World Bank Group

A country must join the International Monetary Fund (IMF) in order to

become a member of the IBRD, and membership of the other institutions of

the World Bank Group is conditional upon membership of the IBRD.

World Bank Group Institutions

The International Development Association (IDA)

The IDA is the part of the World Bank that helps the worldspoorest

countries. Established in 1960, the IDA aims to reduce poverty by providing

interest-free credits and grants for programs that boost economic growth,

reduce inequalities and improve peoples living conditions.

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The IDA has 166 members, 82 of whom are the worlds poorest countries,

and as the world's largest source of interest-free loans and grant assistance

to such countries, helps countries to achieve the Millennium Development

Goals. The loans are typically repayable within 30-40 years, with a 10-year

initial grace period before any payment is due at all. The IDA loans money on

concessional terms (known as credits) to countries that are unable to borrow

from the IBRD or commercial markets. IDA also spends around 20 per cent of

its funds on grants to countries at risk of debt distress. Since its inception,

IDA credits and grants have totaled US$182 billion, averaging US$10 billion a

year in recent years and directing the largest share, about 50%, to Africa.

The IDA accounts for nearly 40% of the Banks total lending.

The International Bank for Reconstruction andDevelopment (IBRD)

The IBRD is a market based non-profit organization which provides loans and

development assistance to middle-income and credit-worthy lower income

countries. The IBRD is structured like a cooperative, owned and operated for

the benefit of its member countries with the aim of reducing poverty in

middle income (i.e. a per capita income of c. US$1,000 to US$10,000) and

credit worthy poorer countries (whereas low-income countries are

eligible to receive low or no interest loans and grants from the IDA).

Countries that borrow from the IBRD have more time to repay the money

than if they borrowed from a commercial bank. Unlike commercial banks, theIBRD is driven by development impact rather than profit maximization. The

IBRD has also supported middle-income countries in times of crisis when

their access to capital has dried up.

The IBRD provides its members with financial products, knowledge and

technical services and strategic advice, while using its capacity to call

members together to discuss ways to further their specific development

objectives. It works closely with the IFC, MIGA, the IMF and other multilateral

development banks; and collaborates with foundations, civil society partners

and donors.

The International Finance Corporation (IFC)

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The IFC was set up in 1956 and has 179 member countries. It is the private

sector arm of the World Bank Group and is legally and financially

independent of the rest of the Group. The IFC promotes growth in the

developing world by financing private sector investment and providing

technical support and advice to government and business. In partnership

with private sector investors, the IFC provides loans and equity finance for

business ventures in developing countries, advisory assistance, (primarily to

governments) on private sector participation in infrastructure and other

public services, and the restructuring of state-owned enterprises.

The IFC may provide finance for a company with some government

ownership, provided there is private sector participation and the venture is

run on a commercial basis. The IFC does not lend directly to micro, small,

and medium enterprises or individual entrepreneurs and does not accept

government guarantees for its financing, (although its work often requires

close cooperation with government agencies in developing countries). The

IFC seeks partners for joint ventures and raises additional financing by

encouraging other institutions to invest in IFC projects.

Multilateral Investment Guarantee Agency (MIGA)

Set up in 1988, MIGAs mission is to promote foreign direct investment

into developing countries to help support economic growth and reduce

poverty. It encourages foreign investment in developing countries byproviding guarantees against losses caused by non-commercial risk. MIGA

issues guarantees for periods of up to 15 to 20 years. The minimum length of

a guarantee is three years. In guarantees that cover loans, MIGA usually

issues coverage to match the length of such loans. MIGA now has 172

member countries and has issued nearly 900 guarantees worth more than

$17.4 billion for projects in 96 developing countries.

MIGA specializes in facilitating investments in high-risk, low-income

countries, such as Africa or conflict-affected areas. By partnering with the

World Bank and others within the World Bank Group, MIGA is able to

leverage finance for guarantee trust funds. MIGA also focuses on supporting

complex infrastructure projects and promoting investments between

developing countries. In addition, it provides technical support to help

developing countries promote investment opportunities and provides legal

expertise to reduce barriers to investment.

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International Centre for the Settlement ofInvestment Disputes (ICSID)

ICSID is an autonomous international institution established under the

Convention on the Settlement of Investment Disputes between States and

Nationals of Other States (the ICSID Convention or the Washington

Convention), with the primary purpose of providing facilities for conciliation

and arbitration of international investment disputes. ICSID is an impartial

forum assisting the resolution of legal disputes between eligible parties,

through conciliation or arbitration procedures. Recourse to ICSID conciliation

and arbitration is entirely voluntary. However, once the parties have

consented to arbitration under the ICSID Convention, neither can unilaterally

withdraw its consent. Moreover, all ICSID contracting states, whether or notparties to the dispute, are required by the Convention to recognize and

enforce ICSID arbitral awards.

Member Countries Decision Making

Member countries govern the World Bank through a Board of Governors and

Executive Directors.

Voting

The World Bank and the IMF have adopted a weighted system of voting. Aquota is assigned by the IMF on the basis of the size of its economy(equivalent to the country's subscription to the Fund) and this determines itsvoting power and the number of shares allotted to each new membercountry of the Bank. Each new member country of the World Bank is allotted250 votes plus one additional vote for each share it holds in the World Bank'scapital stock.

Board of Governors

The governments of the shareholding countries are represented by a Boardof Governors who meet at an annual meeting and have ultimateresponsibility for making all decisions. The World Bank Group has four boards(there is a board for each of the IBRD, the IDA, the IFC and MIGA), who meetseparately or jointly as business requires.

Operational control - Executive Directors

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The Executive Directors representing the 185 member countries areresponsible for the day-to-day conduct of the general operations of the Bankand exercise all the powers delegated to them by the Board of Governors.The Executive Directors consider and decide on IBRD loans, IDA credits andgrants, IFC investments, MIGA guarantees, and they determine policy issues

that guide the general operations of the Bank. In addition, the ExecutiveDirectors are alsoresponsible for annually presenting the audited accounts/administrative budget and the annual reports on the Bank's operations andpolicies to the Board of Governors.

Of 24 Executive Directors, 5 are appointed by the US, Japan, Germany,

France and the UK (being the biggest shareholders in the Bank); the

remaining 19 Executive Directors represent the other member countries and

are elected every 2 years.

The Executive Directors select a Presidentwho serves as Chairman of theBoards. The President is, by tradition, an American (whereas by traditionEurope chooses the head of the IMF) and is elected for a five year term.Currently, this position is held by Robert Zoellick.

Some Recent World Bank Projects

Summaries of Operations Approved during Fiscal 2009,

South Asia

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Africa

18

Country/Project name Total Cost

BangladeshFood Crisis Development Support Development Policy

Credit$130 million.

Siddhirganj Peaking Power Specific Investment Credit $470 million.

Dhaka Water Supply and Sanitation Specific

Investment Credit$165.7

million.

India

Orissa Rural Livelihoods Specific Investment Credit $90.5

million.

Coal Fired Generation Rehabilitation Specific

Investment Loan$303.4

million.

Third Uttar Pradesh Sodic Lands Reclamation Specific

Investment Credit$272 million.

PakistanPoverty Reduction and Economic Support

Development Policy Credit$500 million.

Punjab Education Sector Specific Investment Credit $3.3 billion.

Social Safety Net Technical Assistance Project

Technical Assistance Credit$60 million.


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East Asia and Pacific

Country/project name Total Cost

China

19


AfricaCentral Africa 3A CEMAC Regional Institutions

Support Specific Investment Credit/Grant$81.6

million.

West and Central Africa Air Transport Phase II B

Adaptable Program Credit/Grant$18 million.

Second Lake Victoria Environmental Management

Adaptable Program Credit$114.8

million.

Kenya

Northern Corridor Transport Improvement Additional

Financing of Specific Investment Credit$355.3

million

Energy Sector Recovery Project Additional Financing

of Specific Investment Credit$80 million.

Agricultural Productivity and Agribusiness Adaptable

Program Credit$98.5

million.

Nigeria

Community and Social Development Specific


Electricity and Gas Improvement Specific Investment

Credit$600 million.

Second HIV/AIDS Program Development Specific



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Eco-Farming Specific Investment Loan $439.7

million.

Wenchuan Earthquake Emergency Recovery Loan $740

million.

Yunnan Urban Environmental Second Specific

Investment Loan

$191.2

million.

Indonesia

Second Infrastructure Development Policy Loan $200

million.

Tax Administration Reform Specific Investment Loan $146.1

million.

Public Expenditure Support Facility Development

Policy Loan

$2 billion.

Vietnam

Agriculture Competitiveness Specific Investment

Credit

$75 million

Financial Sector Modernization and Information

Management System Specific Investment Credit

$71.8

million.

Eighth Poverty Reduction Support Operation

Development Policy Credit

$350

million.

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Europe and Central Asia


Croatia

Development of Emergency Medical Services and

Investment Planning (DEMSIP) Specific Investment

Loan

$132.7

million.

Second Coastal Cities Pollution Control Project

Adaptable Program Loan

$181.4

million.

Rijeka Gateway II Specific Investment Loan 88 million.

Armenia

Lifeline Roads Improvement (LRIP) Emergency

Recovery Credit

$30.4

million.

Access to Finance for Small and Medium Enterprises

Financial Intermediary Loan

$50 million.

Rural Enterprise and Small-Scale Commercial

Agriculture Development Emergency Recovery Credit

Additional Financing

$2.1 million.

Bulgaria

Social Inclusion (SIP) Specific Investment Loan 136.7

million.

Second Social Sector Institutional Reform

Development Policy Loan

$150

million.

Third Social Sector Institutional Reform Development

Policy Loan

$200

million.


Latin America and the Caribbean


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Argentina

Mining Environmental Restoration Specific Investment

Loan

$34.2

million.

Second Provincial Agricultural Development Specific

Investment Loan

$423.8

million.

Unleashing Productive Innovation Specific Investment

Loan

$224

million.

Brazil

Second Provincial Agricultural Development Specific

Investment Loan

$59.4

million.

Brazil Health Formation and Quality Improvement

Adaptable Program Loan

$676.8

million.

Ceara Inclusive Growth (SWAP II) Adaptable Program

Loan

$2.4 billion.

Mexico

Mexico Information Technology (IT) Industry

Development Specific Investment Loan

$80 million.

Savings and Rural Finance Second Phase Specific

Investment Loan

$105.6

million.

Private Housing Finance Markets Strengthening

Specific Investment Loan

$1.01

billion.


Middle East and North Africa


Jordan

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Amman Solid Waste Management Specific Investment

Loan

$40.5

million.

Higher Education Reform for the Knowledge Economy


$65 million.

Second Education Reform for the Knowledge Economy


$408

million.

Egypt

Ain Sokhna Power Specific Investment Loan $2.1 billion.

National Railways Restructuring Specific Investment

Loan

$305

million.

TunisiaIntegration and Competitiveness Development Policy

Loan

$250

million.

Second Water Sector Investment Specific Investment

Loan

$162.9

million.

Scaling Up Energy Efficiency and Renewable

Investment Specific Investment Loan

$55 million.

World Bank Fiscal Year Highlights 2009

The World Bank Group, among the worlds largest development institutions,

is a major source of financial and technical assistance to developing

countries around the world. Its member institutionsthe International Bank

for Reconstruction and Development (IBRD), the International Development

Association (IDA), the International Finance Corporation (IFC), the Multilateral

Investment Guarantee Agency (MIGA), and the International Centre for

Settlement of Investment Disputes (ICSID)work together and complementeach others activities to achieve their shared goals of reducing poverty and

improving lives. The Bank Groups purpose is to advance ideas about

international projects on trade, finance, health, poverty, education,

infrastructure, governance, climate change, and more to benefit all people in

developing countries, especially the poor seeking new opportunities.

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The passing of the Millennium Development Goals midpoint is a strong

reminder that the international community must remain focused on meeting

the basic needs of the worlds impoverished peoples. For the Bank Group,

this means providing funding and technical assistance as well as redoubling

efforts to improve service delivery and help countries strengthen

investments in recovery and development projects.

The global economic crisis heightens the need for action. To prevent it from

wiping out decades of developmental progress, the Bank Group has

increased efforts to protect the most vulnerable in the poorest countries,

maintain long-term infrastructure investment programs, and sustain private

sectorled economic growth and employment creation. It is also ramping up

work to help governments strengthen their health systems, promoting

innovative community based practices to deal with global challenges such as

HIV/AIDS and malaria.

World Bank Group AssistanceIn fiscal 2009, the World Bank Group sponsored 767 projects with a total

commitment of $58.8 billion, distributed in credits, loans, grants, and

guarantees. This fiscal years funding marks a 54 percent increase over the

previous fiscal year and a record high for the Bank Group. Commitments

from IDA totaled a record $14 billion for operations in 63 low-income

countries, a 25 percent increase from $11.2 billion in fiscal 2008. IBRD

committed $32.9 billion for 126 projects in middle-income and creditworthy

low-income countries, a 144 percent increase over the $13.5 billioncommitted in fiscal 2008. IBRD is able to commit about $100 billion through

fiscal 2011 to raise the living standard of the poor, support countries facing

large budget shortfalls, and help sustain long-term investment projects. As

the largest provider of multilateral financing for the private sector in the

developing world, IFC committed $10.5 billion for its own account and

mobilized an additional $4 billion in fiscal 2009, funding 447 projects that

support sustainable private enterprises in developing and transition

economies. MIGA issued guarantees totaling $1.4 billion for 26 projects in

developing countries.

COLLABORATING TO RESPOND TO THE GLOBALFINANCIAL CRISIS

Joint projects and programs by the Bank Groups institutions focus on

promoting sustainable development by expanding financial markets, issuing

guarantees to investors and commercial lenders, and providing advisory24


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services to create better investment conditions in developing countries. The

shared priorities of the Bank and IFC led to 104 active advisory projects in

IDA countries in fiscal 2009, up from 78 in fiscal 2008. This collaboration also

resulted in commitments for 14 investment projects (with 33 others in the

pipeline) in IDA countries in fiscal 2009. These initiatives reinforce strong

public-private partnerships, which are particularly important during the

current global economic crisis. More than half of the 447 investment projects

IFC initiated in fiscal 2009 were in IDA countriesa portfolio distribution that

will help move IFC toward meeting its mandate to implement half of its

projects in IDA countries by fiscal 2011. In addition, IFC is working on a series

of initiatives to support projects in the banking, trade, small- and medium-

size enterprise, and infrastructure sectors in IDA countries. These initiatives

are expected to total about $30 billion over the next three years.

IFCs $450 million additional contribution to the 15th Replenishment of IDA

(IDA15) in fiscal 2009, as part of IFCs IDA15 commitment totaling $1.75billion, improved collaborative efforts to create better living conditions in

developing countries, especially in Africa. In support of the human

development targets of the Millennium Development Goals, IDA15 will make

$42 billion available to 78 of the worlds poorest countries over fiscal 2009

11.

The Bank Groups investment projects are aimed largely at improving

infrastructure services associated with poverty reduction and enhanced

growth. In fiscal 2009, the Bank Group committed $20.7 billion to

infrastructure, a critical sector to provide the foundation for rapid recovery

from the crisis and to support job creation. The Sustainable Infrastructure

Action Plan, launched in July 2008, will leverage up to $72 billion to provide

additional financing of up to $149 billion in public and private investments

over fiscal 200911.

The largest multilateral investors and lenders in Eastern Europethe

European Bank for Reconstruction and Development, the EIB Group (the

European Investment Bank and the European Investment Fund), and the

World Bank Grouphave pledged to provide up to 24.5 billion to support

banking sectors in the region and to provide credit to businesses hit by the

global economic crisis. Under a two-year plan for 200910, the Bank Groupwill provide a collective 7.5 billion. IFC is expected to contribute up to 2

billion, channeled through its crisis response initiatives in banking,

infrastructure, trade, and other sectors and through its traditional investment

and advisory services. IBRD will increase its lending to European and Central

Asian countries in fiscal 200910 to 16 billion, of which as much as 3.5

billion is envisaged for addressing banking sector issues in emerging Europe.

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The World Bank Group Institutions Summary 2005-

2009

The International Bank for Reconstruction and Development (IBRD)lends to governments of middle-income and creditworthy low-income

countries. This affiliate promotes sustainable development through loans,

guarantees, risk management products, and non-lending analytical and

advisory services. IBRDs financial strength enables it to borrow in capital

markets at low cost and to offer clients favorable borrowing terms.

Established 1944

Members 186

Cumulative lending $ 479 billion

Fiscal 2009 lending $ 32.9 billion for 126 new operations

in 42 countries

IBRD key financial indicatorsMillions of Dollars

2005 2006 2007 2008 2009

Operating

income*

1,320 1,740 1,659 2,271 572

Loans

outstanding

104,401 103,004 97,805 99,050 105,698

Total assets 222,008 212,326 208,030 233,311 275,420

Total equity 38,588 36,474 39,926 41,548 40,037

*Reported in IBRDs financial statements as income before fair value adjustment on non-trading portfolios, net and Board of Governorsapproved transfers.

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The International Development Association (IDA) provides interest-free, long-term loanscalled creditsand grants to governments of theworlds 82 poorest countries, which have little or no capacity to borrow onmarket terms. IDAs lending is financed by contributions to IDA from donor

countries, IBRDs net income transfers, grants from IFC, and IDAs creditreflows.

Established 1960

Members 169

Cumulative commitments $ 207 billion

Fiscal 2009 commitments $14 billion for 176 new operations in

63 countries

IDA KEY FINANCIAL INDICATORSMillions of Dollars

2005 2006 2007 2008 2009

Development

credits

outstanding

120,907 127,028 102,457 113,542 112,894

Total sources

of

development

resources/Tot

al equity*

130,378 102,871 110,212 123,619 127,950

*Up to the fiscal year ended June 30, 2007, IDA prepared special-purpose financial statements. Effective July 1, 2007, IDAs financialstatements are prepared in conformity with accounting principles generally accepted in the United States (U.S. GAAP).

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The International Finance Corporation (IFC) provides long-term loans,equity, structured and securitized products, and advisory and risk mitigationservices to private enterprises in developing and transition countries, helping

reduce poverty and improve peoples lives. IFC seeks to reach businesses inregions and countries with limited access to capital and markets that areconsidered too risky by commercial investors in the absence of IFCparticipation. IFC provides services without accepting governmentguarantees.

Established 1956

Members 182

Committed portfolio $ 34.4 billion plus $ 8 billion

syndicated loans

Fiscal 2009 commitments $10.5 billion committed and $ 4

billion mobilized for 447 projects in

103 countries

IFC KEY FINANCIAL INDICATORS

Millions of Dollars

2005 2006 2007 2008 2009

Operating

income

(loss)*

1,953 1,409 2,739 1,938 (153)

Liquid 13,325 12,730 13,269 14,622 17,864

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assets net

of

associated

derivatives

Loans,

equityinvestment

s, and debt

securities,

net

11,489 12,787 15,796 23,319 22,214

Total

capital

9,821 11,141 14,017 18,261 16,122

*Reported in IFCs financial statements as (loss) income before net gains (losses) on other nontrading financial

instruments accounted for at fair value and grants to IDA.

The Multilateral Investment Guarantee Agency (MIGA) providespolitical risk insurance or guarantees to promote foreign direct investmentinto developing countries. MIGA also works to resolve disputes betweeninvestors and host governments to keep guaranteed investments, and theirbenefits, on track. The agencys knowledge sharing and technical assistanceactivities help countries define and implement strategies to promoteinvestment, and provide information on business opportunities, investmentclimate conditions, and political risk insurance.

Established 1988

Members 174

Cumulative guarantees issued $ 20.9 billion

Fiscal 2009 guarantees issued $1.4 billion for 26 projects

MIGA KEY FINANCIAL INDICATORS

Millions of Dollars

2005 2006 2007 2008 2009

Operating 24 17 49 55 51

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The millennium Development Goals are a challenge the global community

has set for itself. They are a challenge to poor countries to demonstrate good

governance and a commitment to poverty reduction. And they are a

challenge to wealthy countries to make good on their promise to support

economic and social development. The Millennium Development Goals have

captured the worlds attention, in part because they can be measured.

1. Eradicating poverty and hunger

The first of the eight Millennium Development Goals aims to eradicate

extreme poverty and hunger and achieve full and productive employment

and decent work for all. Two of the three targets are illustrated here.

One is to reduce the proportion of people living in extreme poverty to half

the 1990 level by 2015. If this target is achieved by 2015, poverty would not

be eradicated, but it would bring us much closer to the day when we can saythat the entire worlds people have at least the bare minimum to meet their

daily needs. The international poverty line has been recalculated at $1.25 a

day. Using new data on purchasing power parities, compiled by the

international comparison program, and an expanded set of household

surveys, measured at the $1.25 a day line, extreme poverty has been

decreasing since the 1980s. The greatest reduction occurred in East Asia and

the Pacific, where poverty rates declined from 55 percent in 1990 to 17

percent in 2005. Only this region is consistently on track to meet the MDG

target of reducing 1990 poverty rates by half by 2015. But a slight

acceleration over historical growth rates could lift Latin America and the

Caribbean and south Asia to the target. Whether poverty rates will continue

to fall in all regions may depend on the length and depth of the recent

recession that was triggered by the global financial crisis.

2. Achieving universal primary education

Education prepares children to participate in their society and in the global

economy. It is the basis for reducing poverty and inequality, improving

health, enabling the use of new technologies, and creating and spreading

knowledge.

Since 1990 the countries of the world have called for all children to be able

to complete primary school, but more than 75 million children of primary

school age remain out of school, most of them in South Asia and Sub-

Saharan Africa, and the majority of them are girls. To reach the Millennium

Development Goals by 2015, school systems with low completion rates will

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need to start now to train teachers, build classrooms, and improve the

quality of education. They will also have to remove barriers to attendance,

such as fees and lack of transportation, and address parents concern for the

safety of their children.

3. Promoting gender equality

Gender inequality starts early and keeps women at a disadvantage

throughout their lives. In some countries, infant girls are less likely to survive

than infant boys because of parental discrimination and neglect. Girls are

more likely to drop out of school and to receive less education than boys

because the economic value of their work at home exceeds the perceived

value of schooling, but when a country educates both its boys and its girls,

economic productivity tends to rise, maternal and infant mortality ratesusually fall, fertility rates decline and the health and education prospects of

the next generation improve.

Three regions lag behind in providing girls full access to primary and

secondary school: South Asia, Sub-Saharan Africa, and the Middle East and

North Africa. But countries with the widest gender gaps have made progress

and renewed efforts to get all children into school will create more

opportunities for girls. That is not all that is needed. Empowering women

means having an equal voice in all decisions which affect their lives: in the

family, in the marketplace, and in government.

4. Reducing child mortality

Every year almost 11 million children in developing countries die before the

age of five, most from causes that are readily preventable in rich countries:

acute respiratory infections, diarrhea, measles, and malaria. Rapid

improvements before 1990 gave hope that mortality rates for infants and

children under five could be cut by two-thirds in the following 25 years.

Progress slowed almost everywhere in the 1990s. Only two regions-LatinAmerica and Caribbean, and Eastern Europe and Central Asia may be on

track to achieve the target, progress has been particularly slow in Sub-

Saharan Africa, where civil disturbances and the HIV epidemic have driven

up rates of infant and child deaths.

5. Improving maternal health

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Complications from pregnancy and childbirth are a leading cause of death

and disability among women of reproductive age in developing countries.

Every year more than 500,000 women die during pregnancy or childbirth,

and at least 10 million women suffer injuries, infection, and disabilities.

Death in childbirth is a rate rare event in rich countries, where there aretypically fewer than 15 maternal deaths or every 100,000 live births. But in

the poorest countries of Africa and Asia the rate may be 100 times higher.

And because women in poor countries have more children, their lifetime risk

of maternal death may by more than 200 times greater than that for women

in rich countries, there is some evidence of progress. More women have

access to reproductive health services, and in many places births are more

likely to be attended by trained health staff.

6. Combating disease

Epidemic diseases exact a huge toll in human suffering and lost

opportunities for development. Poverty, armed conflict, and natural disasters

contribute to the spread of disease and are made worse by it. HIV,

tuberculosis, and malaria are among the worlds biggest killers. Effective

prevention and treatment programs will save lives. Reduce poverty and help

economies develop.

In Africa the spread of HIV has reversed decades of improvements in life

expectancy and left millions of children orphaned. It is draining the supply of

teachers and eroding the quality of education.

There are 300-500 million cases of malaria each year, leading to more than 1

million deaths. Most cases occur in Sub-Saharan Africa and most deaths from

malaria are among children younger than five years old.

Tuberculosis kills some 2 million people a year, most of them 15-45 years

old. The disease is spreading more rapidly because of the emergence of

drug-resistant strains of tuberculosis; the spread of HIV, which reduces

resistance; and the growing number of refugees and displaced people.

7. Ensuring environmental sustainability

Sustainable development can be ensured only by protecting the environment

and using its resources wisely. Poor people, often dependent on natural

resources for their livelihood, are the most affected by environmental

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degradation and natural disasters, the effects of which are worsened by

environmental mismanagement.

Although many countries have adopted principles of sustainable

development and agreed to international accords on protecting the

environment, land is still being degraded. Forests are being lost and fisheriesoverused, plant and animal species are becoming extinct, and carbon

emissions are leading to climate change.

8. Developing a global partnership

Goal 8 calls for an open, rule-based trading and financial system, more

generous aid to countries committed to poverty reduction, and relief for the

debt problems of developing countries. It draws attention to the problems of

the least developed countries and of landlocked countries and small-island

developing states, which have greater difficulty competing in the globaleconomy. It also calls for cooperation with the private sector to address

youth unemployment, ensure access to affordable, essential drugs, and

make available the benefits of new information and communication

technologies.

Economies need to grow to provide jobs and incomes for poor people. Health

and education systems must deliver services to everyone: men and women,

rich and poor. Infrastructure has to work and be accessible to all. And

policies need to empower people to participate in the development process.

While success depends on the actions of developing countries, which mustdirect their own development, there is also much that rich countries must do

to help. This is what Goal 8 is for it complements the first seven. Official

development assistance to developing countries reached $ 105.1 billion in

2007.

SPURRING TRADE AND DEVELOPING THE FINANCIALAND PRIVATE SECTORS

Trade

The Bank launched the Trade Facilitation Facility, a rapid-response fund

aimed at helping developing countries reduce trade costs and enhance their

ability to move goods and services across borders rapidly, cheaply, and

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predictably. The facility is designed to finance activities that will make

immediate and direct improvements in trade facilitation systems by

modernizing infrastructure, institutions, policies, and regulations. Reducing

trade costs represents a significant opportunity for countries to realize their

economic development and poverty-reduction goals during this time of

economic crisis. Surveys of exporters, importers, and local banks involved

with trade finance in 14 developing countries reveal that the cost of trade

finance has increased markedly and the supply of export finance has

contracted. The World Bank has put in place operational programs with a

trade finance component in the amount of $4 billion through the IFC Global

Trade Finance Program (GTFP) and the Global Trade Liquidity Program

(GTLP). Together with its official and private partners, the GTLP is expected

to contribute up to $50 billion in short-term trade finance over a three-year

period.

Financial and Private Sector Development

The Banks fiscal 2009 work on financial and private sector development

focused on assisting governments in managing their responses to the

financial crisis; maintaining financial stability; ensuring access to finance,

especially by micro-, small-, and medium-size enterprises and the poor; and

creating conditions for economic recovery and growth. It did so through

three main mechanisms: crisis preparedness, financial sector reforms, and

investment climate reforms.

Crisis Preparedness and Tracking The Bank supported nationalauthorities in undertaking simulation exercises in fiscal 2009 to replicate the

key characteristics and behaviors of a financial system in crisis. The process

was designed to prepare authorities to better manage potential crises and

increase the speed of their responses. In addition, CGAP (Consultative Group

to Assist the Poor) offered a suite of analytical products that tracked what

was happening to microfinance performance globally. And as part of a

campaign for responsible finance, CGAP helped investors implement the

Client Protection Principles.

Financial Sector Reforms The Bank advised a number ofgovernments on the design of regulatory reforms during fiscal 2009. The

Financial Sector Assessment Programs (FSAPs), carried out with the IMF in

low and middle-income countries, will continue to play a critical role as a key

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diagnostic in understanding the vulnerabilities and developmental challenges

of financial systems. The Bank has engaged in FSAPs and FSAP updates in

more than 120 countries over the past 10 years, contributing to the

analytical underpinnings of financial sector reforms and some of the recent

crisis-related loans to governments. In more than 50 countries, the Bank is

helping to enhance the stability of and promote access to basic payment

services. Jointly with IFC, the Bank is promoting credit bureau development

in more than 50 countries, and has helped establish or improve 13 bureaus

supporting approximately $19 billion in financing and working on secured

transaction and collateral registry projects in nine countries. Such a project

in China, completed in June 2009, supported more than $350 billion in

receivables financing. The Banks Remittance Prices worldwide Database

contains detailed information on the cost of sending remittances in 134

bilateral corridors. These data are intended to increase transparency in the

market for remittances, which combined with adequate consumer protection,help foster a competitive and safe market for remittances, and are an

important factor in the reduction of costs.

Investment Climate ReformsThe Bank supports governments indeveloping countries in reforms to improve the environment for business,

with the objective of promoting a robust and competitive private sector. One

focus of this work is improving the efficiency of business regulation, leading

to more opportunities for entrepreneurship and formal sector employment.

The annual BankIFC publication Doing Business has tracked close to 1,000

such reforms in 158 countries over the past five years. Business startup

reforms in Mexico, for example, boosted formal sector employment by close

to 3 percent. A new initiative launched this year, the online Gender Law

Library, tracks laws and regulations that affect the economic status of

women in 181 economies. The database facilitates comparative analysis of

legislation, contributing to reforms that can enhance womens full economic

participation. The multi-donor Foreign Investment Advisory Service (FIAS),

focused on supporting measurable reforms to improve the investment

climate in about 40 countries in fiscal 2009, expanding activities in strategic

priority areas such as Africa, IDA countries, and conflict-affected states. Inresponse to the global financial crisis, it scaled up its work in business

reform, secured lending and collateral frameworks, business tax

simplification, and trade logistics. FIAS also began developing a new

insolvency product to assist countries in improving their legal and

institutional frameworks for insolvency and corporate restructuring.

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World Bank: Action in the field

AFRICA

New Commitments Disbursements

IBRD $362 million IBRD $120 million

IDA $7,887 million IDA $4,317 million

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EAST ASIA AND PACIFIC


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IBRD $6,905 million IBRD $3,275 million


EAST ASIA AND PACIFIC

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South Asia




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EUROPE AND CENTRAL ASIA



IDA $384 million IDA $493 million

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LATIN AMERICA AND THE CARIBBEAN




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MIDDLE EAST AND NORTH AFRICA45


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The World Bank is a development institution whose goal is to reduce poverty

by promoting sustainable economic growth in its client countries.

Development is a long-term process which ultimately involves the48


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transformation of whole societies. It is about getting economic and financial

policies right. But it is also about empowering the people, building the roads,

writing the laws, recognizing the women, educating the girls, eliminating the

corruption, protecting the environment, inoculating the children - and much,

much more. Development is about putting all the component parts in place -

balanced economic andsocial programs.

The challenge is immense, and this means that everyone involved in the

development process - governments, institutions such as the Bank, civil

society, and the private sector - must work in close partnership to define the

needs and implement the programs.

The global fight against poverty is aimed at ensuring that people everywhere

in this world have a chance for a better life for themselves and for their

children. Over the past generation, more progress has been made in

reducing poverty and raising living standards than during any other period inhistory. In developing countries:

Life expectancy has increased from 55 to 65years

Incomes per person have doubled

The proportion of children attending school has risen from less

than half to more than three quarters

Infant mortality has been reduced by 50 percent

Despite these successes, massive development challenges remain. Of the

4.7 billion people who live in the 100 countries that are World Bank clients:

3 billion live on less than $2 a day and 1.3 billion on less than $1

a day

40,000 die of preventable diseases every day

130 million never have an opportunity to go to school

1.3 billion do not have clean water to drink

All countries have a stake in meeting these challenges. Raising living

standards and promoting growth and development in the world's poorer

countries also expands trade, jobs, and incomes in the wealthier countries.

Equally, an increase in poverty in developing countries can adversely affectwealthier nations as markets and investment opportunities shrink, the

environment is damaged, and people migrate in search of work and income.

We live in one world - a world linked by communications and trade, by global

finance and a shared environment, and most of all by common aspirations

for a better life. The fight against global poverty is - without question - a

global responsibility.

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The World Bank is the world's largest source of development assistance,

providing nearly $30 billion in loans annually to its client countries. The Bank

uses its financial resources, its highly trained staff, and its extensive

knowledge base to individually help each developing country onto a path ofstable, sustainable, and equitable growth. The main focus is on helping the

poorest people and the poorest countries, but for all its clients the Bank

emphasizes the need for:

*0 Investing in people, particularly through basic health and education

*1 Protecting the environment

*2 Supporting and encouraging private business development

*3 Strengthening the ability of the governments to deliver quality

services, efficiently and transparently

*4 Promoting reforms to create a stable macroeconomic environment,conducive to investment and long-term planning

*5 Focusing on social development, inclusion, governance, and institution-

building as key elements of poverty reduction

The Bank in the 21st Century

As the world enters the 21st century, there is room for neither gloom nor

complacency. For the countries emerging from financial crisis, the worst

appears over; prospects are brighter, to different degrees. Success for thedeveloping world will depend in part on economic developments in the

United States, Europe and Japan. Equally important is whether developing

countries are able to put in place the policies and structural reforms which

can provide the basis for strong growth. Worldwide, those countries will

prosper which are best able to capitalize on the opportunities of globalization

while effectively managing its risks. Those which do not adapt will fall farther

and farther behind - creating wider gaps, globally, between the haves and

have-nots.

Mindful of the challenges ahead, the Bank is working with developing

countries to pilot a more inclusive and more integrated approach to its

development mission - the Comprehensive Development Framework (CDF).

As the Bank has moved beyond simply financing projects - and even beyond

supporting only discrete policy reforms, such as trade liberalization - to

addressing broader issues such as human and social development,

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governance, and institutions, the need for an integrating framework of this

kind became apparent. The CDF approach calls for a development plan

"owned" by the country itself, focused on a long-term vision of the results to

be achieved, and supported by strong partnerships among governments,

donors, civil society, the private sector and other development actors.

In launching the CDF, the Bank has focused attention on what it sees as the

essential building blocks for effective development:

*0 Structural: good governance and clean government, an effective legal

and judicial system, a well-organized and supervised financial system,

and social safety net and social programs.

*1 Physical: water and sewerage, energy, roads, transport and

telecommunications, and environmental and cultural issues.

*2 Specific strategies: for rural, urban, and private sector development

Additionally, each country has its own unique priorities. Attention tomacroeconomic and fiscal issues, trade and regulatory issues, the labor

market and employment conditions, and the role of the private sector, for

example, depends on the characteristics of the country and the results of the

national dialogue about priorities and programs needed to address them.

The CDF is essentially a process. It is a new way of doing business, a tool to

achieve greater development effectiveness in a world challenged by poverty.

In the short run, the CDF establishes mechanisms to bring people together

and build consensus; it forges stronger partnerships that allow for strategic

selectivity, and emphasizes the achievement of concrete results. In the long

run, the expectation is that the CDF will enhance development effectiveness

and contribute towards the central goal of poverty reduction.

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Programs of the World Bank

Through its loans, policy advice and technical assistance, the World Bank

supports a broad range of programs aimed at reducing poverty and

improving living standards in the developing world. Effective povertyreduction strategies and poverty-focused lending are central to achieving

these objectives. Bank programs give high priority to sustainable, social and

human development and strengthened economic management, with a

growing emphasis on inclusion, governance and institution-building.

Investing in People

No country will grow economically and reduce poverty while its people

cannot read or write, or while its people struggle with malnourishment and

sickness. As we enter the new millennium, hundreds of millions of peoplelack the minimally acceptable levels of education, health, and nutrition that

so many in the industrialized world take for granted. This is not just a moral

issue, it is a global economic travesty and a major impediment to the

reduction of poverty.

Accordingly, the Bank targets much of its assistance where the impact is

greatest - on basic social services such as reproductive and maternal health

care, nutrition, early childhood development programs, primary education,

and programs that target the rural poor and women. As the single largest

investor in social sectors, the Bank has provided loans totaling over $40billion for more than 500 projects for human development in 100 countries.

Protecting the Environment

Poverty reduction is intrinsically linked to environmental and social

sustainability. Sustainability means a number of things, but first and

foremost it means that resources, including human resources, are enhanced

or protected rather than damaged or depleted as part of the development

process. Developing countries are, in most instances, much more vulnerable

to environmental degradation than industrial countries. Problems such as airand water pollution, climate change, loss of biological diversity,

desertification, and deforestation are threatening their ability to meet the

basic human needs of their people: adequate food, clean water, safe shelter,

and a healthy environment.

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The Bank goes to great lengths to ensure that its projects do not harm the

natural environment. All projects are screened to determine whether they

pose environmental risks. Environmental assessments are undertaken on

projects that may be harmful and the Bank includes special measures in

such projects to avoid environmental damage. Environmental concerns have

been mainstreamed into all Bank activities, because experience has shown

that it is more cost effective to prevent environmental damage than to clean

it up later.

Stimulating Private Sector Growth

The private sector is the engine of long-term growth. A stable and open

business climate with access to credit and sound financial systems is

essential for private entrepreneurs to emerge, for business to flourish, and

for local people and investors from abroad to find the confidence to invest,

and create wealth, income, and jobs. The World Bank is helping client

governments throughout the developing world create the necessary

conditions for the revival and expansion of private sector investment. These

include:

Putting in place the basic laws, regulations, and local institutionsthat private investors need to ensure clear enforcement of contractualobligations

Building the physical infrastructure (such as transportation,water, energy, telecommunications, etc.) and developing the critical

technological and information base necessary for countries to competein the global marketplace

Developing local capital markets and banking systems.In addition to its loans and technical assistance, the World Bank also offers

guarantees to encourage private investment; these guarantees are designed

to mitigate investment risks, especially for long-term debt financing. They

are particularly important for encouraging private financing of infrastructure

- where more than $250 billion a year in investment is needed to meet World

Bank client country needs for the next decade. These guarantees are

intended to supplement reform programs and complement the risk

mitigation benefits offered to the private sector by IFC and MIGA.

Since its inception, the Bank's private sector affiliate, the International

Finance Corporation (IFC), has supported some 2,000 companies in 129

countries through more than $21 billion in financing from its own account

and $15 billion arranged through syndications and underwriting. The IFC also

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helps countries establish capital markets and provides advisory services for

privatization of state-owned enterprises.

Promoting Economic Reform

As economic distortions exacerbate poverty, the Bank helps its clientgovernments improve their economic and social policies so as to increase

efficiency and transparency, promote stability, and bring about equitable

economic growth. The Bank provides funding, policy advice and technical

assistance in support of reform efforts to cut budget deficits, reduce

inflation, liberalize trade and investment, privatize state-owned enterprises,

establish sound financial systems, strengthen judicial systems, and ensure

property rights. These reforms help attract foreign private capital, generate

domestic savings and investment, and enable governments to provide

effective social services.

However, because reform measures can lead to unemployment as

unproductive enterprises are closed, and to increased prices when inefficient

government subsidies are cut, reforms can adversely affect poor and

vulnerable people in the short term. To address these concerns, Bank

support for reform often includes funding for safety net programs to help

protect the poor or to keep vulnerable people from slipping into poverty.

Fighting Corruption

For governments to be effective, they must have the trust and confidence ofthe people they serve. Corruption has a devastating economic and social

impact. It undermines trust in government and diminishes the effectiveness

of public policy. It impedes investor confidence and has a negative impact on

foreign investment. Corruption also reduces the effectiveness of aid and

threatens both political and grassroots support for donor assistance.

While citizens and governments must themselves lead the fight against

corruption, the Bank has been assisting a number of countries with their anti-

corruption efforts. The Bank has conducted surveys to diagnose the extent

and character of corruption in a given country. It has also organizedworkshops, courses and training for government officials and members of

civil society. But most far-reaching, perhaps, are the efforts the Bank is

making to help countries identify and implement the policy and institutional

reforms which can minimize opportunities for corruption; these reforms

include better financial regulation, supervision and disclosure; greater

transparency in public sector decision-making; and greater accountability in

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the private sector through the confirmation of shareholder and creditor

rights.

Assisting Countries Affected by Conflict

Conflict and violence are among the world's most pressing developmentproblems, affecting many of the world's poorest countries. The Bank's

comparative advantage in this area lies in facilitating the transition from

dependence on relief to sustainable economic growth, and improving the

coordination of post-conflict reconstruction and recovery assistance. The

Bank's post-conflict assistance has focused not only on rebuilding

infrastructure, but also on programs to promote economic adjustment and

recovery, address social sector needs, and build institutional capacity.

Projects are also being designed to assist in demining, demobilization and

reintegration of ex-soldiers, and reintegration of displaced populations. The

Bank is working around the globe - in places as diverse as the Balkans,

Burundi, Cambodia, Sierra Leone, and Haiti - and with a wide range of

partners to held rebuild economies and bring stability and a better future to

the people whose lives have been affected by conflict.

Leveraging Investment

The World Bank's unique partnership with its client governments, and its role

in helping them shape their plans and priorities, equip it to play a strongcoordinating role in leveraging funds for development.

IBRD and IDA loans and credits typically cover less than half of the total

investment costs of a project. The remainder is provided by client

governments themselves or by co-financiers. In this fashion, the resources

that the Bank raises from bondholders and shareholders are multiplied in

both scope and effectiveness.

The World Bank provides over $24 billion in assistance to developing and

transition countries every year. The Bank's projects and policies affect thelives and livelihoods of billions of people worldwide - sometimes for the

better, but very often in controversial and problematic ways.

Why World Bank Programs Fail

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The main reason for a lack of economic growth in these countries is a

corresponding lack of economic freedom. A lack of economic freedom

prevents countries from creating wealth and prosperity, and a recent

worldwide survey of economic freedom finds that many World Bank

recipients have economies that are mostly not free or repressed. The 1996

Index of Economic Freedom, published by The Heritage Foundation, analyzes

the level of economic freedom in 142 countries.18 The study considers ten

economic factors -- trade, taxation, government consumption, monetary

policy, banking, foreign investment, wage and price controls, private

property rights, regulation, and black markets -- and categorizes each

country as having a "free," "mostly free," "mostly not free," or "repressed"

economy. The findings of the study demonstrate that a majority of World

Bank loan and grant recipients do not have significant levels of economic

freedom:

Of the 60 long-term recipients of World Bank aid that were graded in

The 1996 Index of Economic Freedom, 37 have economies that are

"mostly not free" or "repressed"

Only 23 long-term recipients of World Bank aid have economies that

are "mostly free," and none have economies that are "free"

Thus, most long-term recipients of World Bank loans and grants still do not

have significant levels of economic freedom. Moreover, those recipients that

have performed particularly poorly are the least economically free:

The 18 countries whose economies have shrunk since they have been

World Bank recipients, 16 have either "mostly not free" or "repressed"

economies.

Economic prosperity is not forthcoming in these countries because they do

not have economic freedom. Rather, most have high taxes, barriers to trade,

restrictions on foreign investment, banking systems in disarray, onerous

government regulations, bad monetary policies, extensive wage and price

controls, and large black markets. To be sure, 23 long-term recipients of

World Bank aid do have mostly free economies, but most of these are in

Latin America, an area which has benefited from several years of economic

reform. Thus, their categorization as having mostly free economies is a

recent phenomenon.19 It is good that they are making progress, but given

the evidence elsewhere in the world, it would be difficult to attribute this

progress to help from the World Bank.

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Development without World Bank

Hong Kong and Singapore: Models of Growth

without World Bank Aid

The poor record of the World Bank in delivering on its promise of economic

development can be demonstrated not only by listing its many failures, but

also by examining some development successes that occurred without the

Bank's help. Hong Kong and Singapore are the most successful of the so-

called Asian Tigers, running up phenomenal economic growth rates that are

the envy of the developed world. They did this largely without loans from the

World Bank. Even though they were as poor 30 years ago as other countries

that took World Bank aid, they eschewed World Bank loans and embarked

instead on successful programs of economic liberalization. The evidenceshows that there is a direct correlation between the economic freedom these

countries enjoy and their tremendous economic growth over the past 30

years. Of one thing there can be absolutely no doubt: World Bank assistance

was in no way responsible for creating the best development success stories

the world has seen during this 30-year period.

Hong Kong

In the 1960s, the U.S. foreign aid community and international lending

institutions like the World Bank decided that the East Asian region was

barren of economic promise and that they should focus their aid on Africa

instead. Hong Kong received no aid from the World Bank and only a small

amount in U.S. foreign aid -- $43 million, most of which was cut off after

1965. The World Bank admitted that many economists misjudged the

economic prospect in Asia. In the commemorative volume marking the

Bank's 50th anniversary, the authors state: "In the 1960s, many economists

were more optimistic about sub-Saharan Africa than East Asia. Yet, East Asia

proved to be the 'miracle' of the developing world -- and sub-Saharan Africa

its most daunting challenge.

While eschewing foreign aid after 1965, Hong Kong at the same time began

a massive economic liberalization program. This included reforms in many57


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sectors, including banking and financial services, government regulation of

business, and foreign investment laws. Among the most important of these

reforms was lowering barriers to international trade and making Hong Kong's

trade laws consistent with international standards. The government

eliminated virt

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World Bank & Its Impact on International Trade

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