30488.pdf - World Bank Document

THE WORLD BANK

The World BankAnnual Report

2004

Volume 1Year in Review

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Administrator

30488 vol 1

THE WORLD BANK


2004


Operational Summary, Fiscal 2004

IBRD(millions of dollars)

FY04 FY03 FY02 FY01 FY00

Commitments 11,045 11,231 11,452 10,487 10,919Of which adjustment lending 4,453 4,187 7,384 3,937 4,426

Number of projects 87 99 96 91 97Of which adjustment lending 18 21 21 15 14

Gross disbursements 10,109 11,921 11,256 11,784 13,332Of which adjustment lending 4,348 5,484 4,673 4,393 4,924

Principal repayments(including prepayments) 18,479 19,877 12,025 9,635 10,398

Net disbursements (8,370) (7,956) (769) 2,149 2,934

Loans outstanding 109,610 116,240 121,589 118,866 120,104

Undisbursed loans 32,128 33,031 36,353 37,934 44,754

Allocable net income 1,675 3,050 1,831 989 1,582

Usable capital and reserves 31,332 30,027 26,901 24,909 25,067

Equity-to-loans ratio 29.4% 26.6% 22.9% 21.5% 21.3%

IDA(millions of dollars)

FY04 FY03 FY02 FY01 FY00

Commitments 9,035 7,282 8,068 6,764 4,358Of which adjustment lending 1,698 1,831 2,443 1,826 682

Number of projects 158 141 133 134 126 Of which adjustment lending 23 24 23 15 9

Gross disbursements 6,936 7,019 6,612 5,492 5,177Of which adjustment lending 1,685 2,795 2,172 1,280 860

Principal repayments 1,398 1,369 1,063 997 920

Net disbursements 5,538 5,651 5,549 4,495 4,257

Credits outstanding 115,743 106,877 96,372 86,572 86,643

Undisbursed credits 23,998 22,429 22,510 20,442 20,833

Undisbursed grants 2,358 1,316 148 — —

Development grant expenses 1,697 1,016 154 — —

Letter ofTransmittal

This Annual Report, which

covers the period from July 1,

2003, to June 30, 2004, has

been prepared by the

Executive Directors of both

the International Bank for

Reconstruction and

Development (IBRD) and the

International Development

Association (IDA) in accor-

dance with the respective

bylaws of the two institutions.

James D. Wolfensohn,

President of the IBRD and

IDA and Chairman of the

Board of Executive Directors,

has submitted this report,

together with the accompany-

ing administrative budgets

and audited financial state-

ments, to the Board of

Governors.

Annual reports for the

International Finance

Corporation (IFC), the

Multilateral Investment

Guarantee Agency (MIGA),

and the International Centre

for Settlement of Investment

Disputes (ICSID) are pub-

lished separately.

About this photo: This bronze sculpture inthe atrium of the World Bank headquarters inWashington, D.C., represents a once typical scenein many African nations: the adult has been blindedby a parasitic disease called onchocerciasis, orriverblindness, which is borne by blackflies thatbreed in flowing rivers.

While millions of people are still infected withriverblindness in a swath of Africa from Senegal toEthiopia and from Angola to Mozambique, the num-ber is half what it was in the early 1970s because ofclose collaboration among the partners in the WestAfrican Onchocerciasis Control Programme and theAfrican Programme for Onchocerciasis Control, andthe use of a drug that relieves symptoms and helpsstop transmission of the disease.

The sculpture commemorates efforts that arehelping to make the once commonplace image ofblind adults being led from place to place bychildren a thing of the past.

About the cover: An estimated $60 billion is invested in water for developing countries each year.About 90 percent of investment comes from domes-tic sources. The World Bank accounts for about halfof all external financing, or $3 billion a year, equal toabout 15 percent of all World Bank lending.

The challenge of achieving the Millennium Devel-opment Goal of halving the proportion of peoplewithout sustainable access to safe drinking water by2015 is daunting. In February 2003, the Bank en-dorsed a new Water Resources Strategy aimed atproviding more effective assistance to countries inorder to help meet the goal.

NoteThis Annual Report is also available atwww.worldbank.org. All dollar amounts arecurrent U.S. dollars unless otherwise specified.


2004


ContentsMessage from the President of the World Bank and

Chairman of the Board of Directors 2The Board of Executive Directors 5The World Bank Group 8

Chapter 1 The Development Agenda 10

Chapter 2 Regional Perspectives 24Africa 28East Asia and Pacific 32South Asia 37Europe and Central Asia 41Latin America and the Caribbean 46Middle East and North Africa 51

Chapter 3 Thematic Perspectives 56Reducing Poverty and Improving Economic Management 58Investing in People 61Addressing the Challenges of Sustainable Development 65Revitalizing Infrastructure 69Supporting Private Sector Development 72Building Strong Financial Systems 76Promoting the Modernization of Legal and Judicial Systems 79

Chapter 4 Improving Development Effectiveness 82

Chapter 5 Summary of Fiscal 2004 Activities 96

List of Boxes, Figures, and Tables 118Abbreviations 119Index 120

About the World BankOrganizational InformationFiscal 2004 Summaries of Operations ApprovedTables previously included in chapter 6 and

as appendixes in volume 2

The World Bank Annual Report 20042

Message from the President of the World Bank andChairman of the Board of Directors

The past year has brought with it signs of hope andprogress, but it has also brought signs of concern in thefight against global poverty.

On a positive note, new data this year show that thenumber of poor people continues to fall. The propor-tion of people living on less than $1 a day decreasedfrom 40 to 21 percent of the global population between1981 and 2001. Development indicators are clearly im-proving in countries that have laid good foundations forgrowth. In Europe, for example, we saw Slovenia gradu-ate from Bank borrower status and join the EuropeanUnion along with nine other Bank member countries.

The progress, though, is uneven across the globe.Growth in East Asia has meant that there were 500 mil-lion fewer people living below $1 a day in 2001 than in1981. The number of poor people has also fallen inSouth Asia and in the Middle East and North Africa,though less dramatically than in East Asia. However,the absolute number of poor people has risen in Africa,Latin America and the Caribbean, and Europe andCentral Asia.

This year the Annual Meetings of the World Bankand the International Monetary Fund (IMF) were heldin the Middle East for the first time. In Dubai, wherewe met in the shadow of conflict and loss, I stressedthat the world I see today is a world out of balance. Ofthe 6 billion people in the world today, 1 billion peoplein the wealthy countries account for 80 percent of theworld’s gross domestic product while the other 5 bil-lion have 20 percent. While rich countries spend$700 billion a year for defense and transfer $325 billionto their agriculture, they devote just $68 billion todevelopment assistance.

These global imbalances are reflected in the dailylives of poor people around the world. Two billionpeople have no access to clean water, 115 millionchildren never get the chance to go to school, andsome 38 million people, more than 95 percent ofthem in developing countries, are HIV-positive, withlittle hope of receiving treatment.

It was only four years ago, in 2000, that world lead-ers gathered at the Millennium Summit in New York

President Wolfensohn meets with students at San Jose High Academy in California, United States.

The World Bank Annual Report 2004 3

and committed themselves to cut poverty in half by2015. They agreed on Millennium Development Goalsfor health, education, women, and the environment.At our Spring Meetings this year, the Bank launchedthe first Global Monitoring Report, which highlights thepolicies and actions we all need to reach those goals.The report, a joint effort with the IMF, sounded analarm bell: most of the goals will not be met in mostcountries by the 2015 deadline.

So the world is at a tipping point: either we in theinternational community recommit to delivering onthe goals, or the targets we set in a fanfare of publicitywill be missed, the world’s poor will be left evenfurther behind, and our children will be left to face theconsequences.

During the next 25 years, about 2 billion morepeople will be added to the global population, but only50 million of them will be in the richer countries. Thevast majority will be born with the prospect of growingup in poverty and becoming disillusioned with a worldthey will inevitably view as inequitable and unjust.Terrorism is often bred in places where a fast-growingyouth population has no hope.

We cannot ignore the rise of this more youthfulworld. In the past year, I met with youth from all overthe world at places as varied as Tsinghua University inBeijing and Brandeis University in Massachusetts.

These young people are not only the future—theyare the now. Almost half the people of the worldtoday are under 24 years old. Nine out of 10 of theseyoung people live in developing countries. A billionof them will need jobs in the next decade. An ever-increasing number will leave their home countriesto find work.

We need to face these realities, and we need to acton three issues in particular.

First, world trade talks—which can reduce agricul-tural protectionism and thus poverty in developingnations—must be pushed forward. Developing coun-tries would gain nearly $325 billion by 2015 as a result,enough to lift 140 million people out of poverty.

Second, aid flows need to rise well above currentcommitments, and they need to be used more effec-tively. Although some increases have been made in re-cent years, almost a doubling of current developmentassistance levels will be required to meet the Millen-nium Development Goals. It is essential that donorcountries fully replenish the International Develop-ment Association (IDA)—the fund that delivers provenresults for the world’s poorest nations.

Third, we must push forward in relieving the debtburdens of the poorest countries by providing a largerproportion of additional aid in the form of grantsrather than loans.

President Wolfensohn among World Youth representatives at the Youth, Development, and Peace Conference 2003 inParis, France.

For these actions to be successful, the bargain be-tween rich and poor nations struck at the MonterreyConference in 2002 must be more effectively imple-mented. The developing countries must do more to re-form their economies and cut out corruption, and thedeveloped countries must back those reforms withincreased support.

In the global fight against poverty, the World Bankis—and should be—playing a central role. The Bank’sstrategy continues to focus on the two pillars for pov-erty reduction: empowering people and improving theinvestment climate. These pillars support the Bank’sCountry Assistance Strategies and are reflected in thePoverty Reduction Strategy Papers of poorer countriesand the development strategies of wealthier ones. TheBank continued its client-oriented approach this year,supporting development of Poverty Reduction StrategyPapers in low-income countries that receive IDA cred-its, and doing more to tailor its lending instruments formiddle-income countries that borrow from the Inter-national Bank for Reconstruction and Development(IBRD). We are also continuing to work with countriesexperiencing weak policies, institutions, and ofteninternal conflict through a special initiative known asLow-Income Countries under Stress. Donor partner-ships are critical to success.

The Heavily Indebted Poor Countries Initiativegained momentum this year, with progress toward itsgoal of cutting poor countries’ debt to manageablelevels. Twenty-seven countries—two-thirds of thoseeligible—are now participating and are receiving debtrelief that will total more than $52 billion from allcreditors over time. With our partners, we are workingto move beyond debt relief to debt sustainability.

On the AIDS front, the Bank joined with the UnitedNations Children’s Fund; the Global Fund to FightAIDS, Tuberculosis and Malaria; and the ClintonFoundation to provide generic drugs at a fraction ofthe current cost. We are also working with partners todevelop HIV/AIDS prevention programs in countrieswith high risk.

One highlight of the year was the development con-ference we cohosted with the Chinese government inShanghai, the culmination of nine months of studyingdevelopment experiences. Leaders from developingcountries shared their successes and failures with otherleaders. We learned that feeling good about individualprojects is not enough. We learned that we must “scaleup” our development efforts. It is not 10 schools weare trying to help build. It is 10,000 schools. It is not5 bridges we are trying to help construct. It is5,000 bridges. It is not thousands of people we aretrying to support. It is billions of people.

We at the World Bank believe that the disadvan-taged of the world should be seen not as objects ofcharity but as assets in the fight against poverty. We be-lieve overcoming poverty is a moral, social, economic,and security imperative. We will continue to state thisview loud and clear as we work tirelessly to support allwho seek to achieve the Millennium DevelopmentGoals.

James D. Wolfensohn



The Board of Executive Directors

The Executive Directors are responsible for the con-duct of the World Bank’s general operations, perform-ing their duties under powers delegated by the Boardof Governors. As provided in the Articles of Agree-ment, the member countries having the largest numberof shares appoint 5 of the 24 Executive Directors; therest are elected by the other member countries, whichform constituencies in an election process conductedevery two years.

Executive Directors consider and decide on IBRDloan and guarantee proposals and IDA credit, grant,and guarantee proposals made by the President, andthey decide on policies that guide the Bank’s generaloperations. They are also responsible for presenting tothe Board of Governors, at the Annual Meetings, anaudit of accounts, an administrative budget, and an an-nual report (this report) on the Bank’s operations andpolicies as well as other matters that require submis-sion to the Board of Governors. The Board of Execu-tive Directors (the Board) also exercises an importantrole in shaping Bank policy and its evolution. It is inthis role that the Board takes into account the evolving

perspectives of member countries on the strategy andoperations of the Bank Group. In this regard, the Oper-ations Evaluation Department provides independentadvice to the Board on the relevance, sustainability,efficiency, and effectiveness of operations. The depart-ment is directly accountable to the Board for perform-ing evaluations as set out in its Board-approved poli-cies, strategies, and work program.

The Executive Directors regularly meet at Bankheadquarters to carry out their responsibilities, in for-mal Board meetings as the Committee of the Wholeas well as in informal meetings. Directors also serve onone or more standing committees: Audit, Budget, De-velopment Effectiveness (CODE), Governance and Ex-ecutive Directors’ Administrative Matters (COGAM),and Personnel. With the committees’ help, the Boarddischarges its oversight responsibilities through in-depth examinations of policies and practices. Commit-tees are not empowered to make decisions for theentire Board.

In fiscal 2004 the Audit Committee revised its termsof reference, taking into consideration emerging best

From left to right: (standing) Per Kurowski, Terrence O’Brien, Otaviano Canuto, Paolo Fernando Gomes, Nuno Mota Pinto, Pierre Duquesne, ThorsteinnIngolfsson, Tanwir Ali Agha, Tom Scholar, Kurt Richard Bayer, Eckhard Karl Deutscher, Alexey G. Kvasov, Toshio Oya, Louis A. Kasekende, Yahya A.Alyahya, Rapee Asumpinpong; (seated) Guangyao Zhu, Pietro Veglio, Carole Brookins, Mahdy Ismail Aljazzaf, Gobind Ganga, Tamara Solyanyk, andAlieto A. Guadagni.


practices in the areas of governance and oversight aswell as the special status of the World Bank Group asa multilateral organization. The revised terms of refer-ence are now the foundation for continued enhance-ments in the governance and control framework withinthe World Bank Group. The Budget Committee se-cured management’s commitment to the Board’s earlyengagement in the Bank budget process and plans towork with management toward developing an integrat-ed multiyear framework. CODE, as part of the Bank’ssimplification and harmonization efforts, discussed theeligibility of expenditures in World Bank lending.COGAM approved a new code of conduct for Boardmembers and continued its discussion of Board effec-tiveness and the issue of voice and participation of de-veloping and transition countries in the Bretton Woodsinstitutions. The Personnel Committee recommended,and the Board approved, an employment policy for amore flexible work force.

Executive Directors and Alternate Executive Direc-tors periodically visit borrowing countries to reviewBank assistance in progress. They meet a wide varietyof people, including project managers, beneficiaries,and government officials, as well as representatives ofcivil society organizations, the business community,other development partners, financial institutions, andresident Bank staff. During fiscal 2004 Directors visitedBosnia and Herzegovina, Serbia and Montenegro,Kosovo, Vietnam, Lao People’s Democratic Republic,and Samoa.

Directors also play an active role in preparing theagenda and issues papers for the semiannual meetingsof the joint World Bank and International MonetaryFund (Bank-Fund) Development Committee. In fiscal2004 the Development Committee continued to ad-dress the Bank’s strategy for monitoring progress infighting poverty and achieving the internationallyagreed-upon goals of the Millennium Declaration. To-ward that end the Development Committee reviewedthe first progress report, known as the Global Monitor-ing Report, on achieving the Millennium DevelopmentGoals (MDGs). (See chapter 4 of this volume and theDevelopment Committee Communiqués on theenclosed CD-ROM.)

STRATEGIC ISSUES

The Board emphasized the following areas during thefiscal year.

Strategic FrameworkThe Board’s work during fiscal 2004 focused on thecontinued implementation of its Strategic Framework,last reviewed and updated in fiscal 2002. Managementpresented the Executive Directors with several paperson the strategic directions for the Bank Group for thefiscal 2004–06 period, including a medium-term strat-egy and finance paper. The Board reviewed these papersand expressed strong support for the continued focuson implementation and results toward attaining theMDGs, and on greater selectivity, trade-offs, redeploy-ment, and efficiency gains.

The Bank’s Role in Poverty ReductionThe Board’s agenda continued to emphasize the Bank’srole and contributions toward meeting the MDGs. Thisyear, in addition to the first Global Monitoring Report,Directors also reviewed other papers including the“Progress Report on Financing Modalities toward theMDGs” and “Supporting Sound Country Policies withAdequate and Appropriate Financing: Implementingthe Monterrey Consensus at the Country Level.” TheBoard reviewed a report on poverty reduction entitled“Poverty Reduction Strategy Papers: Progress in Imple-mentation and Detailed Analysis of Progress in Imple-mentation.” It also considered 12 Poverty ReductionStrategy Papers (PRSPs) and 20 PRSP ProgressReports.

On the related issue of debt reduction, the Boardfocused on the enhanced Heavily Indebted Poor Coun-tries (HIPC) Initiative. In fiscal 2004 it considered 6HIPC completion point documents. (The completionpoint is the point at which all creditors provide, uncon-ditionally, the remainder of their share of debt reliefagreed on at the decision point, the point at which theinternational community agrees on the amount of debtrelief a country needs and begins providing it. Thecompletion point is tied to implementation of keyreforms and policies outlined in a country’s PRSP.) TheBoard also considered a number of joint Bank-Fundpapers on the HIPC Initiative, including the annualHIPC progress report and papers on the HIPC sunsetclause—the deadline for these countries to adopt pro-grams of adjustment and reforms, supported by IDAand the International Monetary Fund and leading tothe decision point—and the topping-up framework,within which additional debt relief is provided at thecompletion point in exceptional cases where exogenousfactors have led to a fundamental change in a country’s

economic situation. In addition, the Board consideredthe new joint Bank-Fund work on long-term debtsustainability in low-income countries.

Country ProgramsCountry Assistance Strategies (CASs) and the princi-ples underlying the Comprehensive DevelopmentFramework and PRSPs remained the cornerstone ofBank Group work at the country level. Directorscontinued their call for a closer link between the CASand the PRSP process and for grounding CASs in arealistic, measurable, results-based framework that canbe monitored. The Board reviewed 38 CASs, 6 of whichare results-based, and CAS products during the fiscalyear. It emphasized the need for these strategiesto be more focused and selective by building onpartnerships. The Board also stressed the need topay greater attention to implementation, capacitybuilding, and risks.

Global Programs and PartnershipsThe Bank has continued to respond to demands for itsinvolvement in and support of global partnerships andinternational initiatives with the International Mone-tary Fund, other multilateral institutions, the UnitedNations system, bilateral aid agencies, and civil society.The managements of both the Bank and the Fund de-cided to strengthen the Joint Implementation Commit-tee, giving it a renewed mandate to address issues thataffect both middle- and low-income countries. Areasof collaboration include scaling up activities in supportof middle-income countries and increasing debt

sustainability in low-income countries. Other areasof collaboration included supporting anti-money-laundering activities and combating the financing ofterrorism, improving the international financial archi-tecture, providing implementation updates on the PRSPand HIPC processes, and strengthening Bank-Fundcountry programs and conditionality. The Board alsoreviewed the progress of global programs and partner-ships and the development of a framework for moni-toring cooperation among multilateral institutions.

OVERSIGHT AND FIDUCIARY RESPONSIBILITY

The Board exercises oversight and fiduciary responsi-bility on behalf of its shareholders, in part through itsAudit Committee. The committee advises the Board ona broad range of financial management and other gov-ernance issues with the goal of strengthening the over-all control environment and Board decision makingon the Bank’s financial policy and direction.

ADMINISTRATIVE BUDGET

The total administrative budget for fiscal 2004 was$1,865.2 million, net of reimbursements, and included$178.2 million for the Development Grant Facility. Thenet administrative budget of $1,438.3 million repre-sented a 2.5 percent real increase over the fiscal 2003budget (a 6 percent nominal increase). In June 2004the Executive Directors approved a total administrativebudget, net of reimbursements, of $2,000.3 million forfiscal 2005.


8

The World Bank Group

A comprehensive program to support the re-construction of Timor-Leste won the President’sAward for Excellence in 2002.

A villager harvests rice on the high plains ofMadagascar. Because of widespread deforesta-tion and consequent soil erosion, the countrymust now supplement its rice production withAsian imports.

The International Bank forReconstruction and Development

Established 1945 ■ 184 MembersCumulative lending: $394 billionFiscal 2004 lending: $11 billion for87 new operations in 33 countries

IBRD aims to reduce poverty inmiddle-income and creditworthypoorer countries by promotingsustainable development throughloans, guarantees, and (nonlend-ing) analytical and advisory ser-vices. The income that IBRDhas generated over the years hasallowed it to fund several develop-mental activities and to ensure itsfinancial strength, which enables itto borrow in capital markets at lowcost and offer clients good borrow-ing terms. IBRD’s 24-memberBoard is made up of 5 appointedand 19 elected Executive Directors,who represent its 184 membercountries.

The International DevelopmentAssociation

Established 1960 ■ 165 MembersCumulative commitments: $151 billionFiscal 2004 commitments: $9 billion for158 new operations in 62 countries

Contributions to IDA enable theWorld Bank to provide approxi-mately $6 billion to $9 billion a yearin highly concessional financing tothe world’s 81 poorest countries(home to 2.5 billion people). IDA’sinterest-free credits and grants arevital because these countries havelittle or no capacity to borrow onmarket terms. In most of thesecountries, the great majority ofpeople live on less than $2 a day.IDA’s resources help supportcountry-led poverty reductionstrategies in key policy areas, in-cluding raising productivity, pro-viding accountable governance,improving the private investmentclimate, and improving access toeducation and health care for poorpeople.

The World Bank Group,

with a mission to fight

poverty and improve

living standards for

people in the develop-

ing world, is among the

world’s leading devel-

opment institutions. It

provides loans, policy

advice, technical assis-

tance, and knowledge-

sharing services. IBRD

and IDA—together, the

“World Bank”—are

owned by member

countries that carry

ultimate decision-

making power. The

World Bank Group

today consists of five

closely associated

institutions.



IFC invested in Asaka Bank in Uzbekistan tomake more term financing available to theprivate sector, including small and mediumenterprises.

MIGA guaranteed a coffee processing facility inUganda, which introduced cost-effective pro-cessing techniques and buys the bulk of itscoffee from small-scale farmers.

A third of ICSID’s current cases involve projectsin the energy sector.

The International FinanceCorporation

Established 1956 ■ 176 MembersCommitted portfolio: $23.5 billion (in-cludes $5.5 billion in syndicated loans)Fiscal 2004 commitments: $4.8 billionfor 217 projects in 65 countries

IFC promotes economic develop-ment through the private sector.Working with business partners, itinvests in sustainable private enter-prises in developing countries with-out accepting government guaran-tees. It provides equity, long-termloans, structured finance and riskmanagement products, and adviso-ry services to its clients. IFC seeksto reach businesses in regions andcountries that have limited access tocapital. It provides finance in mar-kets deemed too risky by commer-cial investors in the absence of IFCparticipation and adds value to theprojects it finances through its cor-porate governance, environmental,and social expertise.

The Multilateral InvestmentGuarantee Agency

Established 1988 ■ 164 MembersCumulative Guarantees1 Issued:$13.5 billionFiscal 2004 guarantees issued:$1.1 billion

MIGA helps promote foreign directinvestment in developing countriesby providing guarantees to investorsagainst noncommercial risks, suchas expropriation, currency incon-vertibility and transfer restrictions,war and civil disturbance, andbreach of contract. MIGA’s capacityto serve as an objective intermedi-ary and to influence the resolutionof potential disputes enhances in-vestors’ confidence that they will beprotected against these risks. In ad-dition, MIGA provides technical as-sistance and advisory services tohelp countries attract and retainforeign investment and to dissemi-nate information on investment op-portunities to the internationalbusiness community.

The International Centre forSettlement of Investment Disputes

Established 1966 ■ 140 MembersTotal cases registered: 159Fiscal 2004 cases registered: 30

ICSID helps encourage foreign in-vestment by providing internation-al facilities for conciliation and ar-bitration of investment disputes,thereby helping foster an atmo-sphere of mutual confidence be-tween states and foreign investors.Many international agreementsconcerning investment refer toICSID’s arbitration facilities. ICSIDalso issues publications on disputesettlement and foreign investmentlaw.

1. Amounts include funds leveraged throughthe Cooperative Underwriting Program.

United NationsMonetary andFinancial Conferencedraws up BankArticles of Agreementat Bretton Woods; 44countries represented.

194

4

194

2 Twenty-ninegovernments signArticles ofAgreement inWashington, D.C.

194

5 Inaugural meetingof the Boards ofGovernors of theWorld Bank andthe InternationalMonetary Fund heldin March.

194

6

194

0s

Eugene Meyer (1946)

Mr. John J. McCloy, center,World Bank President,

1947–1949.

Mr. Eugene Meyer, firstWorld Bank President,

1946.

First Annual Meeting of the Board of Governors ofthe IBRD and the IMF, September 27, 1946. President

Eugene Meyer is pictured third from right.

1

First loan made—$250million to France.

194

7 The Bank’s technicalassistance programbegins.19

49First development

loan made—$13.5million to Chile.

194

8

The Development Agenda

Eugene R. Black (1949–1963)John J. McCloy (1947–1949)

Mr. John J. McCloy, Chairman, at an IBRD Meetingof Executive Directors, Washington D.C., May 1949

The World Bank loan toFrance financed post-warreconstruction.

Post-war industrial investment in France.

FISCAL 2004 HIGHLIGHTS

■ The Global Conference on Poverty Reduction

held in Shanghai, China, in May 2004 brought the

development community together to consider

concrete actions to accelerate progress on the

development agenda. One hundred case studies,

undertaken for the conference, helped to identify

poverty solutions that work and that can be

applied around the world. (See chapter 1, box 1.1,

and chapter 5.)

■ IBRD approved 87 projects for $11 billion in fiscal

2004 in 33 countries. IDA made commitments

of $9 billion for 158 operations in 62 countries.

(See chapter 5.)

■ The 16th Annual Bank Conference on

Development Economics (ABCDE) was held in

Washington, D.C., and Europe in May 2004. The

Washington, D.C., conference, on May 3 and 4,

featured keynote addresses by Nobel Laureate

Vernon Smith and Bank Senior Vice President and

Chief Economist François Bourguignon. The theme

of the conference was “Lessons of Experience.”

The Bank will publish the conference proceedings

in fiscal 2005. At the ABCDE Europe conference, on

May 10 and 11, some 350 policy makers, academics,

journalists, and representatives of youth

organizations and civil society organizations

discussed the theme “Doha, Monterrey, and

Johannesburg: Are We on Track?”

■ In April 2004 World Bank President James D.

Wolfensohn appeared before the United Nations

Security Council in New York and called for a War

on AIDS. He cited the devastation that AIDS has

caused in developing countries, most notably in

Africa, and warned that AIDS is turning the clock

back on development and undermining economic

and social hope. AIDS in Africa has already claimed

13 million African lives and orphaned 10 million

children.

■ In April 2004 the Bank joined in partnership with

the Global Fund to Fight AIDS, Tuberculosis and

Malaria; the United Nations Children’s Fund; and

the Clinton Foundation to make generic drugs

available to people infected with HIV/AIDS in more

than 100 poor countries. The program will reduce

the cost of drugs to about one-third to one-half

the cost of the cheapest drugs available commer-

cially; diagnostic tests will cost about one-fifth

of the market price. The drugs have been

endorsed by the World Health Organization.

(See chapter 3.)

■ Slovenia “graduated” on March 17, 2004, from

being a recipient of Bank financial and technical

assistance and expressed its intention to become

an IDA donor in the 14th Replenishment. Slovenia:

From Yugoslavia to the European Union was pub-

lished by the Bank in April 2004. Slovenia and

nine other World Bank member countries—Cyprus,

the Czech Republic, Estonia, Hungary, Latvia,

Lithuania, Malta, Poland, and the Slovak

Republic—joined the European Union in May 2004.

The Bank has loaned a total of $10.6 billion

to these countries since 1990. (See chapter 2.)

■ The first Global Monitoring Report was published

in June 2004, produced jointly by Bank and IMF

staff in close collaboration with partner agencies.

It assesses progress on the policies and actions by

developing countries, developed countries, and

development agencies to achieve the Millennium

Development Goals. (See chapter 4.)

■ As part of its results action plan, the Bank devel-

oped and began to implement the Statistical

Capacity Building Program to help developing

countries strengthen statistical systems,

institutional capacity, and planning.

■ In fiscal 2004 the Bank conducted a review of

its activities with middle-income countries and

approved an action plan for enhancing services to

those countries. Almost 70 percent of the world’s

poor people live in middle-income countries,

hence the need for a strong Bank role. Action on

the plan began in fiscal 2004. (See chapter 1.)

■ The Bank worked to simplify and modernize its

lending policies and procedures to make it easier

for clients to borrow. It also worked with develop-

ment partners to harmonize processes for the

benefit of borrowing countries. (See chapter 4.)

■ In cooperation with the United Nations, the Bank

produced a Joint Iraq Needs Assessment, which

identified Iraq’s reconstruction and development

requirements and estimated the financing needed

for reconstruction. The two organizations made

provisions for trust funds to help donors channel

their resources and coordinate support.

(See chapter 5.)

■ The Bank’s Post-Conflict Fund is now benefiting

36 countries. It provided three grants to Iraq this


year for knowledge sharing in the areas of human

development, water, and power. Other countries

receiving support include Côte d’Ivoire, Haiti,

Liberia, and Somalia. The Fund has approved a

total of more than $61 million for grants for the

period 1998–2005. The Africa region is the largest

beneficiary of the funds. (See chapter 3.)

■ The Bank created a new $25 million trust fund for

low-income countries under stress, which will tar-

get governance reforms and social services. (See

chapter 1.)

■ In February 2004 negotiations for the 14th Replen-

ishment of IDA were launched when donor and

borrower representatives met in Paris. Commit-

ments to IDA14 will be especially important to

developing countries as they strive to reach the

Millennium Development Goals by 2015.

(See chapter 5.)

■ At the global Development Marketplace held

in December 2003, 183 finalists from 65 coun-

tries presented innovative proposals for solving

development problems. Winning projects—

groundbreaking ideas in the fight against

poverty—ranged from expanding health care

outreach and medical supplies in Mozambique

to improving landfill management and conserving

an endangered plant species in Brazil by recycling

coconut husks. Since 1998 the Development

Marketplace has awarded more than $24 million

in grants to some 370 projects

(www.developmentmarketplace.org).

■ On the eve of the Cancún trade talks in

September 2003, the Bank launched Global

Economic Prospects 2004: Realizing the

Development Promise of the Doha Agenda. It pre-

sents a detailed overview of the world economy

and an analysis of global trade issues, particularly

those on the agenda for the Doha round of trade

negotiations.

■ At the Youth, Development, and Peace Conference

in Paris in September 2003, President James D.

Wolfensohn and Managing Director Mamphela

Ramphele met with participants from youth orga-

nizations worldwide, many of whom are active

in development programs in their countries.

Mr. Wolfensohn assured them that the Bank is

ready to engage them more substantially in its

work. The conference was jointly organized by

the Bank, the European Youth Forum, and the

World Organization of the Scout Movement.

(See chapter 3.)

■ World Bank President James D. Wolfensohn’s

speech at the Annual Meetings in Dubai in

September 2003 pointed to the inequity and

imbalance between rich and poor, which he said

was both unsustainable and a source of global

instability. The speech challenged governments

and organizations to scale up their efforts toward

meeting the Millennium Development Goals.

■ In July 2003 the Bank launched its Infrastructure

Action Plan. The plan sets the stage for increased

support for infrastructure service delivery through

a balanced public sector–private sector approach

and the mobilization of financing from multiple

sources. (See chapter 3.)


The Development Marketplace Global Competition was held December 3–4, 2003, in Washington, D.C.

Developing countries have made much progress inrecent decades. Globally, life expectancy at birth hasrisen by 20 years over the past 40 years, and adultilliteracy has been cut in half over the past 30 years.Poverty rates have fallen: the proportion of people


Chapter 1

THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (IBRD) AND THE INTERNATIONAL

DEVELOPMENT ASSOCIATION (IDA) TOGETHER MAKE UP THE WORLD BANK, AN INTERNATIONAL FINANCIAL

ORGANIZATION WHOSE MISSION IS TO FIGHT WORLD POVERTY. THE BANK HELPS CLIENT COUNTRIES

ACHIEVE SUSTAINABLE DEVELOPMENT BY HARNESSING RESOURCES AND FORMING PARTNERSHIPS WITH

OTHERS, INCLUDING DEVELOPMENT INSTITUTIONS AND CIVIL SOCIETY ORGANIZATIONS.

The Development Agenda

living in extreme poverty fell from just under 40 per-cent in 1981 to 21 percent in 2001. In countries thathave laid good foundations for growth, indicators ofsocial development are improving. Strong health pro-grams in Brazil, Thailand, and Uganda are controllingthe spread of HIV/AIDS (human immunodeficiencyvirus/acquired immune deficiency syndrome), andThailand has reduced the number of new infectionsfrom 140,000 a year in the early 1990s to 30,000in 2001.

The success stories of many developing countries provethat progress is possible when countries have good policiesand the support of partners. But progress has been un-even. Slow growth, low educational achievement, civildisturbances, and poor health remain obstacles formany countries. At the end of 2003, some 38 millionadults and children were living with HIV/AIDS—morethan 95 percent of them in developing countries and70 percent of them in Africa. Almost a million newcases emerged in South and East Asia, where morethan 7 million people now live with the disease.

To accelerate the development agenda, the globalcommunity embraced the Millennium DevelopmentGoals (MDGs), eight common goals that identify cleartargets for eradicating poverty and other sources ofhuman deprivation and for promoting sustainabledevelopment by 2015. In September 2000, 189 coun-tries signed the Millennium Declaration.

The agenda is unfinished, and the challenge isimmense. Some 2.8 billion people—more than half ofthe population in developing countries—still live onless than $2 a day, and 1.1 billion of these people liveon less than $1 a day. The task of helping these people

ERADICATE EXTREME POVERTY AND HUNGER

23

456

7

8

The Millennium Development Goals

Eradicate extreme poverty and hungerHalve the number of people in extremepoverty, and the number of people whosuffer from hunger, by 2015

Achieve universal primary educationEnsure by 2015 that all children will be able tocomplete a full course of primary schooling

Promote gender equality and empower womenEliminate gender disparity in primary andsecondary education by 2005, and in all levelsof education by 2015

Reduce child mortalityReduce by two-thirds the under-five mortalityrate by 2015

Improve maternal healthReduce by three-quarters the maternalmortality rate by 2015

Combat HIV/AIDS, malaria, and other diseasesHalt the spread of HIV/AIDS, malaria, and othermajor diseases, and begin to reverse thespread, by 2015

Ensure environmental sustainabilityHalve the proportion of people withoutsustainable access to safe drinking waterby 2015

Develop a global partnership for developmentFurther develop an open, rule-based,predictable, nondiscriminatory trading andfinancial system

1

move from poverty to prosperity while the world’spopulation continues to grow is enormous. (Figure 1.1shows poverty rates by region since 1990.)

MONITORING PROGRESS

With broad agreement on the goals, the internationalcommunity forged a shared development strategyat meetings in Doha, Monterrey, and Johannesburg,where trade, financing for development, and sus-tainable development were discussed. In Monterreyworld leaders formed a consensus on mutualresponsibilities: developing countries are called uponto improve policies and governance, and developedcountries are called upon to step up support byproviding more and better aid and more open accessto their markets.

The first Global Monitoring Report, published inJune 2004, looks at the progress made toward theMDGs, the constraints blocking action, and how allparties are doing in delivering on their commitments.The report, produced jointly by the staffs of the WorldBank and the International Monetary Fund (IMF) inclose collaboration with partner agencies, assesses thepolicies and actions needed to attain the MDGs andrelated outcomes. Its findings present the sobering as-sessment that, while the first goal of halving povertywill likely be met globally, given current trends, mostcountries will not meet most of the goals. A significantand immediate increase in resources and concentratedeffort by all parties is needed to avoid falling far shortof the goals. (See “Global Monitoring of Policies andActions toward the MDGs” in chapter 4.)


ACHIEVE UNIVERSAL PRIMARY EDUCATION


No country truly committed to poverty reductionand to meeting the MDGs should be denied the chanceof achieving these goals because of lack of resources.Yet that is what is happening. Development assistancehas risen since the meeting in Monterrey, where donorspledged additional support, but the increase largelyreflects debt relief and technical cooperation grants.By all estimates, there is a gap between the amountspledged and the amount necessary to achieve theMDGs. It is critical—and urgent—to increase

the quantity and quality of development assistanceto countries with sound policies to help themaccelerate their progress toward the MDGs. (Seefigure 1.2.)

It is clear that the goals remain a great challenge andthat hard work lies ahead for the entire internationalcommunity. The Bank is deeply committed to respond-ing to the challenge and playing the important roleexpected of it in the new global architecture fordevelopment.

0

50

25

1990 2001 2015

44.6

46.542.3

22.3

Africa East Asia and Pacific

29.6

15.6

14.8

2.3

South Asia Europe and Central Asia

41.3

31.1

20.6

16.412.3

0.5

19.7

3.7

10.3

1.30.3

Latin America and the Caribbean

0

50

25

1990 2001 2015

0

50

25

1990 2001 20150

50

25

1990 2001 2015

0

50

25

1990 2001 2015

0

50

25

1990 2001 2015

Middle East and North Africa

28.4

11.3

24.5

9.5

20.5

7.6

5.6

21.4 23.2

10.2

2.3 2.4 1.21.2

Note: The graphs for Africa, East Asia and Pacific, and South Asia do not include figures for $2 a day.

Source: World Bank. 2004. World Development Indicators 2004. Washington, D.C.

Actual $1-a-day poverty rateActual $2-a-day poverty rate

Projected path ($1 a day)Projected path ($2 a day)

Path to $1-a-day goal

Figure 1.1 Population Living below $1 and $2 a Day | percent

1990 1992 1994 1996 1998 2000 2002 2004 200640

50

60

70

80

90

100

110

120

Note: GNI � gross national income.

Source: Organisation for Economic Co-operation and Development. 2004.Development Cooperation Report 2003. Paris. Development Committee. 2003.“Supporting Sound Policies with Adequate and Appropriate Financing.”DC 2003–0016. Washington, D.C.

Additional $50 billion � 0.35 percent of donors‘ projectedGNI in the latter half of the 2000s, roughly the same asin the early 1990s.

Sept. 2003 DevelopmentCommittee Paper

� $30 billion

$18.6 billionMonterrey

commitments

REDUCING POVERTY

The most effective development strategy is one that iscountry owned and country led, promotes economicgrowth, and ensures that poor people participate inand benefit from their country’s development. Reduc-ing poverty effectively depends on many factors.Foremost among these are a conducive developmentclimate and the participation of all people in theircountry’s development. (See box 1.1.) These two pillarsform the basis of the Bank’s strategy, set forth in theStrategic Framework in 2001.

Building the Climate for Investment, Jobs,and Sustainable GrowthEntrepreneurship, investment, and innovation by theprivate sector drive economic growth, but they willnot occur without the right environment. A goodeconomic climate spurs domestic economic activityand attracts domestic and foreign investment. Such aclimate can be identified by its positive characteristics:sound macroeconomic policies, openness to trade,good governance and institutions, strong financialmarkets that channel savings to productive uses andbroaden access to finance, and the availability of keyphysical infrastructure (transportation, power, andtelecommunications). Since 1999 many countries haveimproved their private business environments, accord-ing to evidence from Country Policy and InstitutionalAssessments conducted by the Bank using a number ofindicators rated on a scale of one to six. (See figure 1.3.)Average ratings for business environment are rising butare still relatively low, showing continued weakness.


Figure 1.2 Aid Is Rising but Is Well Short of What IsNeeded | billions of dollars

BOX 1.1 SHARING DEVELOPMENT EXPERIENCES

More than 1,000 people from the international

community met in China in May 2004 for a unique

forum on poverty reduction. The Shanghai Confer-

ence on Poverty Reduction, and the nine-month

learning process that preceded it, provided an op-

portunity for participants to identify development

successes and failures and to jointly explore ways to

build on success.

Participants from developing and developed

countries, including heads of state and representa-

tives from civil society and the private sector, dis-

cussed some 100 case studies of poverty reduction

projects. They identified development solutions

that work, that endure, and that can be applied

around the world to meet the Millennium Develop-

ment Goals. The conference made it clear that the

global community has the knowledge and re-

sources to meet the goals, but that redoubled

action is needed to deliver better lives for the

world’s poor.

As the review of the Millennium Summit in

2005 approaches, and with only a decade left until

the target date of 2015, moving forward with the

lessons learned in Shanghai is essential. (See also

“Capacity Enhancement” in chapter 5.)

1999 2000 20022001 20032.3

2.5

2.7

2.9

3.1

3.3

3.5

3.7

Factor and productmarkets (low income)

Factor and productmarkets (all)

Property rights andgovernance (low income)

Property rights andgovernance (all)

Competitive environment(all)

Competitive environment(low income)

Source: World Bank Country Policy and Institutional Assessment ratings, 2003.

Figure 1.3 Countries Are Improving Their Private BusinessEnvironment | scale of 1 to 6

The Bank has also launched more than 50 investmentclimate surveys. (See “Supporting Private SectorDevelopment” in chapter 3.)

Investing in Poor People and Empowering Themto Participate in DevelopmentThe capabilities of poor people can be increased bywidening their access to key services and by fosteringsocial inclusion. Better access to quality education andhealth care expands opportunities for poor people toimprove their own well-being. Access to social protec-tion is also important—well-targeted safety nets pro-tect poor and vulnerable people from the unforeseenshocks and dislocations that accompany necessary re-forms. To be effective, the strategy must also includemechanisms that foster poor people’s participation indecisions that affect them. Cutting across this agenda isthe empowerment of women, achieved by removingbarriers to their fuller participation in the developmentprocess. Data gathered since 1993 show that citizensare increasingly participating in processes that caninfluence policy making and hold their leadersaccountable. (See figure 1.4.)

ACTING ON COUNTRY PRIORITIES

The Country Assistance Strategy (CAS) is the businessplan that guides Bank activities in a client country. TheBank tailors its strategy to the country’s needs. Various

approaches are developed for low-income countries,low-income countries under stress (LICUS), andmiddle-income countries.

Country Assistance StrategiesThe CAS is based on a country’s own vision for devel-opment. It contains a diagnosis of proposed policiesand outlines the Bank’s program to support the vision.Oriented toward results, the strategy is prepared inconsultation with country authorities, developmentpartners, civil society organizations, and other stake-holders. It is the central tool used by the Bank’s man-agement and Board of Executive Directors to review


1993 1994 1995 1996 1997 1998 1999 200010

20

30

40

50

60

70

80

Middle-income countries Low-income countriesunder stressLow-income countries

Note: Values denote percentage of country chief executives elected inmultiparty elections with less than 75 percent of the vote.

Source: Beck and others. 2000. “New Tools and New Tests in ComparativePolitical Economy. ” Policy Research Working Paper 2283. World Bank,Washington, D.C.

Figure 1.4 Participatory Processes Are Improving inDeveloping Countries | percent

PROMOTE GENDER EQUALITY AND EMPOWERWOMEN

REDUCE CHILD MORTALITY

and guide the Bank’s country programs, and it is avehicle for gauging the impact of the Bank’s work.

During fiscal 2004 the Bank aligned CountryAssistance Strategies and Progress Reports for IDA-borrowing members with country-owned povertyreduction strategies in Armenia, Benin, Bolivia,Cameroon, Chad, Ghana, Kenya, Madagascar, Mali,Mongolia, Mozambique, Pakistan, Vietnam, andZambia. It also prepared Country Assistance Strategiesand Progress Reports for several IBRD- and blend-borrowing countries, including Argentina, Brazil, CostaRica, the Dominican Republic, Indonesia, the formerYugoslav Republic of Macedonia, Mexico, Nigeria,Paraguay, the Slovak Republic, Tunisia, Turkey, andUkraine.

In fiscal 2004 the Board discussed six TransitionalSupport Strategies (TSS) for postconflict settings, in-cluding the Democratic Republic of Congo, the Repub-lic of Congo, Kosovo, Serbia and Montenegro, and theWest Bank and Gaza, and a TSS update for Comoros.It also prepared an Interim Strategy Note for Iraq. Aspart of its work to engage low-income countries understress, the Bank prepared Country Re-engagementNotes for Liberia and Sudan. In fiscal 2004, 15 CountryAssistance Strategies and CAS Progress Reports wereprepared jointly with IFC. All of the 38 fiscal 2004 CASdocuments have been or are in the process of beingdisclosed to the public.

The Bank is paying particular attention to improv-ing the results orientation of Country AssistanceStrategies. Following the first pilot CAS based on aresults framework—for Sri Lanka, in fiscal 2003—theBoard discussed six additional pilot strategies—for

Armenia, Brazil, Cameroon, Mozambique, Ukraine,and Zambia—in fiscal 2004. Each pilot drew lessonsfrom the completion report for the previous CAS,which evaluated the extent to which results hadbeen achieved. (The Bank’s Operations EvaluationDepartment reviews these completion reports.See chapter 4.)

Low-Income CountriesReducing poverty is particularly difficult in low-income countries, where the incidence of poverty ishigh, the institutional constraints are severe, theinvestment climate may not be conducive to sustain-able growth, and access to resources is limited.

A key tool in the Bank’s support for low-incomecountries is the Poverty Reduction Strategy Paper(PRSP), introduced at the end of calendar 1999. PRSPsare country-authored, results-oriented, comprehensiveplans based on broad consultation with internal andexternal partners and stakeholders. Intended to serve asthe framework for domestic policies and cross-sectoral


IMPROVE MATERNAL HEALTH

COMBAT HIV/AIDS, MALARIA, AND OTHERDISEASES

programs that reduce poverty, they are the basis fordevelopment aid, including IDA financing. During theprocess of developing the strategy papers, countriesidentify their special circumstances and needs. TheBank plays an active role in helping clients strengthenthe role of stakeholders in this process. (See “ReducingPoverty and Improving Economic Management” inchapter 3.) The Bank also encourages countries to inte-grate the Millennium Development Goals into theirstrategy papers, considering the cross-sectoral actionsneeded to achieve the goals. This approach will helpensure that country strategies address the trade-offsinherent in achieving the MDGs.

The PRSP process can be complex and time con-suming. To ensure that it does not prevent IDA conces-sional lending or Heavily Indebted Poor Countries(HIPC) debt relief from reaching low-income coun-tries, the Bank introduced interim Poverty ReductionStrategy Papers. These PRSPs use a simpler format, andcan thus be prepared more quickly, than full PRSPs.

PRSP-based IDA assistance to low-income countriesincludes Poverty Reduction Support Credits, whichsupport country-owned poverty-reduction priorities.These credits focus on building government capacityand institutions, particularly capacity and institutionsthat serve poor people. This fiscal year the Bank’sBoard of Executive Directors approved nine suchcredits for eight countries.

A new PRSP-linked results measurement system hasbeen proposed for use during the 14th Replenishmentof IDA (IDA14, fiscal years 2006–08). It will measureresults in terms of both aggregate country outcomesand IDA’s contribution to country outcomes. The newmeasurement system is designed to reflect the prioritiesof national poverty reduction strategies, to be linked tothe MDGs, to show aggregated results in IDA coun-tries, and to assess IDA’s contribution to developmentresults.

The IDA14 replenishment will be a key instrumentin helping low-income countries meet the MDGs.Since IDA funds typically disburse over a period ofabout 8 years, the IDA14 funds will be an importantfactor as the year 2015 approaches. (See also “IDAResources” in chapter 5.)

Low-Income Countries under StressLow-income countries under stress are the world’smost fragile states, characterized by weak policies, in-stitutions, and governance and often by internal con-flict. Child mortality in these countries is twice as highas in other low-income countries, and the death ratefrom malaria is three times as high. Some 500 millionof the world’s poorest people live in these countries,


ENSURE ENVIRONMENTAL SUSTAINABILITY

DEVELOP A GLOBAL PARTNERSHIP FORDEVELOPMENT

which often lack the capacity to use finance effectivelyto reduce poverty.

The LICUS Initiative is a new approach to engage-ment in these countries. It anchors its strategies instrong political and economic analysis, promoting do-mestic demand and capacity for change, supportingsimple entry-level reforms, and strengthening socialservice delivery mechanisms.

Since the initiative was launched in 2002, the Bank’sBoard has discussed 7 LICUS country strategies, and13 LICUS teams have started to develop innovativecountry approaches. These approaches include activi-ties that improve transparency in the management ofoil revenue in Angola, support the provision of basicpublic goods in Somalia, and build leadership capacityin Sudan. Analytical services to these countries in-creased, with in-country missions undertaken in all thecountries currently in arrears on their outstandingloans. The Bank is also improving its ability to measurecountry performance at the bottom of the perfor-mance spectrum by revising its Country Policy and

Institutional Assessment and the Post-Conflict ProgressIndicators.

In fiscal 2004 the Bank increased staffing resourcesfor work on these countries and created a $25 milliontrust fund. The fund, which will focus on countriesthat lack access to regular IDA financing, is helpingthese countries implement early reforms.

Donor partnerships are critical to success in low-income countries under stress. The Bank has developeda new tool—the transitional results framework—tofoster an integrated approach that includes peacebuilding and support for economic, social, and institu-tional recovery in postconflict situations. Joint effortsare under way with the United Nations and bilateraldonors to use this approach in the Central AfricanRepublic, Haiti, Liberia, and Timor-Leste.

The Bank and other donors have also supported theestablishment of a learning and advisory group withinthe Organisation for Economic Co-operation andDevelopment (OECD) Development AssistanceCommittee. The new group is undertaking a strongprogram of policy research on aid allocation, deliverymechanisms, and donor coordination issues in thesecountries.

Middle-Income CountriesDespite numerous advances, poverty and social chal-lenges still exist in many middle-income countries,where hundreds of millions of poor people live. Thesecountries face many development hurdles: promoting


high and sustained growth in order to provide produc-tive employment, reducing poverty while reducinginequality, reducing the volatility of access to privatefinancial markets while developing safety nets to cush-ion the impact of volatility, and strengthening the insti-tutional and governance structures that underpinviable market-based economies. Supporting progressin these areas enables the Bank to significantly increaseits contribution to the global development agenda,particularly the MDGs.

The Bank helps middle-income countries througha combination of knowledge, lending, and financialservices tailored to each country’s specific needs andcircumstances. The Bank is attempting to increase thevalue of services to middle-income countries by ensur-ing that its Country Assistance Strategies better re-spond to their diverse needs and that countries cantake advantage of the increased flexibility of the Bank’sfinancial offerings. By supporting policy and institu-tional reforms, the Bank also plays a catalytic role inattracting private sector investment as well as supportfrom other development partners.

In fiscal 2004 the Bank conducted a review of itswork with middle-income countries, recognizing thatit may have missed significant opportunities to supporttheir growth and poverty reduction efforts. (See“Innovations in Lending” in chapter 5.) It approvedand began to implement an action plan for enhancingservices to middle-income countries. The goals of the

plan are to reestablish the Bank as the partner of choicein development knowledge and finance for middle-income countries, and to play a more proactive role inworking with other partners to support developmentand reduce poverty. Implementation will continue infiscal 2005.

Activities include strengthening partnerships withbilateral donors, improving the quality and timelinessof the Bank’s knowledge services and response toclients by removing a number of internal Bankobstacles, building increased flexibility into CountryAssistance Strategies that will enable staff to respond tonew lending opportunities, developing and promotingnew financial products such as local currency lending,and working with IFC and MIGA to better exploit po-tential synergies, particularly in supporting investmentin infrastructure and other sectors through public-private partnerships.

WORKING WITH PARTNERS

The Bank’s policy is to operate jointly with partnerswhen addressing major development issues in bothglobal and country program activities. It works closelywith the IMF, other multilateral development banks,governments, the United Nations and its agencies,OECD’s Development Assistance Committee, bilateraldonors, the World Trade Organization, and civil societyorganizations.


As a global development institution with broadcoverage of countries and issues, the Bank oftenplays a global strategic role in providing what morespecialized agencies cannot because of their smallersize or narrower mandate. In carrying out its partner-ship activities, the Bank plays different roles—leader,follower, adviser, helper, and so on—depending onthe need.

At the global level, the Bank is working closely withits development partners to improve aid coordinationby integrating poverty reduction efforts. (See “Simpli-fying and Harmonizing Policies and Procedures” inchapter 4.)

In countries, the Bank is committed to strengthen-ing its emphasis on effective development results. Anew poverty report and booklet—both entitled Part-nerships in Development: Progress in the Fight againstPoverty, 2004—highlight this focus. The report aims toprovide a more comprehensive assessment of how theBank works with other organizations to help countriesachieve the vision of poverty reduction embodied inthe MDGs and the Monterrey Consensus. Usingcountry examples, the publications highlight the broadrange of activities the Bank pursues to promote growthand reduce poverty in its multiple dimensions.

Partnerships in Development shows how the Bankis helping clients develop broadly supported povertyreduction strategies in Egypt, Ethiopia, and SierraLeone. It describes how the Bank is addressing specificproblems related to the lack of opportunity, voice, and


security in Bolivia, Columbia, India, Latvia, Uganda,and Vietnam. A spotlight on Niger shows one wayin which the Bank is working more closely with itspartners to achieve better development results. Thebooklet is available on the Bank’s Web site, atwww.worldbank.org/progress; the report isavailable at www.worldbank.org/poverty.

SHARING INFORMATION

The Bank’s Public Information Centers disseminatedevelopment-related information and documentationon World Bank operations and research to the public.The goal is to encourage dialogue, to enable people tomake informed decisions on matters that affect theirlivelihood, and to encourage them to participate intheir country’s development. These centers facilitatethe production of documents in local languages, andthey develop and maintain Web sites in local languages.Through public lectures, seminars, workshops, andWeb casts, the Bank and partner institutions worldwidemake information on economic and social develop-ment widely available. Public Information Centersoperate in about 70 capital cities, with more than60 satellite centers in some 80 countries. By 2005centers will be located in every country in which theWorld Bank operates.

First loan made to anational developmentbank—$2 million tothe EthiopianDevelopment Bank.

Bank lending reachesthe one billion dollar mark.

195

0 First loan with jointplacement by aprivate lender—$50 million in Bankloans to SouthAfrica plus $30million from eightU.S. commercialbanks.

First loans completelyrepaid—$5 million by Finland andYugoslavia.

Sweden signs IBRDArticles of Agreementas 50th member ofthe Bank.

195

1

195

2 First loan to Japan,totaling $40.2million, approved.19

53

Eugene R. Black (1949–1963)

195

0s

Annual Meetings, 1959.Pictured from left:

World Bank PresidentEugene R. Black, IFCPresident Robert L.

Garner, U.S. PresidentDwight D. Eisenhower.

Mr. Eugene R. Black,World Bank President

1949–1963.

World BankPresident Eugene

R. Black with HaileSelassie, Emperor

of Ethiopia.

In 1952 the Bank madea loan to KLM Royal

Dutch Airlines to replacepart of its air fleet.

2

Bank lendingreaches the twobillion dollar mark.

195

4

195

5 International FinanceCorporation (IFC) isestablished as affili-ate of Bank, withauthorized capital of$100 million and 31member countries.

First Country Officeopens, in Karachi,Pakistan.

Economic Develop-ment Institute(future World BankInstitute) opens.

195

6

195

7

195

9

Regional Perspectives

World Bank PresidentEugene R. Black withIndian Prime MinisterJawaharlal Nehru.

The Yanhee Dam across the PingRiver, part of a 1957 hydroelectricpower project in Thailand.

A railway station at Tambo, in the HighSierras of the Andes, part of a 1957railway construction project in Peru.

A steam locomotive being serviced at EbuteMette workshops in Lagos, part of a 1958 railway construction project in Nigeria.

World BankRegions, CountryOffices, andBorrowerEligibility

The World Bank

today operates out of

more than 100 offices

worldwide. Increased

presence in client

countries is helping

the Bank to better

understand, work

more closely with,

and provide faster

service to clients.

Three-fourths of

outstanding loans are

managed by country

directors located

away from the Bank’s

Washington, D.C.,

headquarters. Over

thirty percent of staff

are now based in

country offices.

Chapter 2 Regional Perspectives 27

Claim the 21st Century? The Bank also chairs theStrategic Partnership for Africa. It participated as aco-organizer in the third Tokyo International Con-ference on African Development, held in September2003. The landmark session marked the 10th anni-versary of the conference and was aimed at ensuringthat regional priorities are fully addressed inharmony with the approach of NEPAD.

As of June 2004 the Bank was funding 334projects in Africa, with a net commitment of


AfricaSeveral African countries have made remarkableprogress in recent years. But the challenges the con-tinent must address to meet the Millennium Devel-opment Goals remain immense. Africa is home to32 of the 48 poorest countries in the world, and theproportion of poor people on the continent isgrowing.

In many respects Africa remains at the marginsof globalization. Its share of world exports droppedfrom more than 3.5 percent in 1970 to about1.4 percent by the end of 2002, a decline thatrepresents an income loss of $160 billion annually.Despite being home to 11 percent of the world’spopulation, Africa accounts for only about 1 percentof global gross domestic product (GDP), receives0.6 percent of the world’s total foreign direct invest-ment, and accounts for just 1 percent of the world’sInternet subscribers. With the African populationgrowing at an average rate of 3 percent a year, GDPgrowth of 5 percent is needed just to keep the num-ber of poor people from rising. But many factors,including the HIV/AIDS pandemic, stand in theway of achieving this level of economic growth.(See box 2.1.)

The World Bank is the largest provider of devel-opment assistance to Africa, where it supportsprojects that contribute to economic growth and tomeeting the Millennium Development Goals. Itsstrategic objectives in the region are in line with pri-orities identified by African governments throughthe Poverty Reduction Strategy Paper process. TheBank’s work in Africa is based on partnerships withAfrican countries and builds on the vision ofAfrican leaders as articulated in the New Partner-ship for Africa’s Development (NEPAD). It is an-chored in the Strategic Framework for Assistance toAfrica and the findings of the study Can Africa

BOX 2.1 FIGHTING THE HIV/AIDS PANDEMIC

IN AFRICA

Africa remains the region most affected by the

HIV/AIDS pandemic. In 2003 an estimated 25 mil-

lion people in the region were living with HIV,

including 3 million who became infected in

2003. AIDS killed approximately 2.2 million

Africans the same year.

Since late 2000 the Bank has provided more

than $1 billion to 28 countries and two subre-

gional projects through its Multi-Country

HIV/AIDS Program (MAP) for Africa. More than

27,000 subprojects from civil society organiza-

tions and communities have received grants for

HIV/AIDS. Over $80 million has been allocated

for various capacity enhancement activities, and

about $150 million has been committed to pub-

lic health agencies. In June 2004 the Bank ap-

proved a $60 million Treatment Acceleration

Program. Its pilot phase will, from September

2004, provide grants for innovative public,

private, and civil society partnerships in HIV/

AIDS treatment in Burkina Faso, Ghana, and

Mozambique.

CountriesEligible forWorld BankBorrowing:

AngolaBeninBotswanaBurkina FasoBurundiCameroonCape VerdeCentral African

RepublicChadComorosCongo,

DemocraticRepublic of

Congo,Republic of

Côte d’IvoireEquatorial

GuineaEritreaEthiopiaGabonThe GambiaGhanaGuineaGuinea-BissauKenyaLesothoLiberiaMadagascarMalawiMaliMauritaniaMauritiusMozambiqueNamibiaNigerNigeriaRwandaSão Tomé and

PrincipeSenegalSeychellesSierra LeoneSomaliaSouth AfricaSudanSwazilandTanzaniaTogoUgandaZambiaZimbabwe

28

$16.6 billion, or 41 percent of IDA commitmentsworldwide. The medium- to long-term objective isto direct 50 percent of all new IDA commitmentsto Africa. During fiscal 2004, 45 percent of newIDA commitments went to Africa.

BUILDING THE CLIMATE FOR INVESTMENT

To sustain growth and eventually achieve economiesof scale, African countries must reach regional andworld markets. But growth is held back by the tradebarriers and subsidies in the countries of the Organisa-tion for Economic Co-operation and Development(OECD). Africa’s greatest comparative advantage is inagriculture, but the $325 billion in annual subsidies toagriculture in OECD countries make it difficult forAfrica to compete. These subsidies—equivalent tothe combined GDP of all African countries—costWest African cotton producers about $250 milliona year.

The Bank is promoting several initiatives that seekto sustain growth and diversify the African economy. Itis supporting policy and institutional reforms to im-prove the investment climate and make Africa a goodbusiness destination. It has worked with regional insti-tutions to formulate regional integration strategies thatpromote the liberalization of intraregional trade, theharmonization of macroeconomic policies, capacitybuilding for regional institutions, the growth of capitalmarkets, and the building of regional infrastructure,including transportation corridors. The demands areenormous: Africa’s infrastructure needs alone areestimated at about $18 billion a year.

FOSTERING PARTICIPATION IN DEVELOPMENT

One key to reducing poverty is investing in people—by improving access to education and health servicesand providing other social interventions that benefitvulnerable groups.

The Bank is funding 37 education projects inAfrica, totaling $1.5 million. Many of these projectssupport countries’ efforts to attain universal primaryeducation, for girls as well as boys, by 2015. Some ofthe projects seek to improve access to secondary andtertiary education. More progress must be made toraise the level of secondary school enrollment inAfrica from barely 25 percent of the age group to the60 percent level achieved in developing countriesgenerally.


c. 1960. A World Bank loan to Kenya helped settlers create individuallyowned small holdings to replace tribal systems of cultivation.

The Bank also has increased its commitment toprotecting human capital by supporting the reformof pension programs and skills training for men andwomen in the African labor force.

IMPROVING GOVERNANCE ANDRESOLVING CONFLICT

Civil wars lower per capita GDP by 2.2 percent a year,on average, and divert scarce development resources

Africa Fast Facts

Total population | billion: 0.7Population growth | percent: 2.1Life expectancy at birth | years: 46Infant mortality per 1,000 births: 103Female youth literacy | percent: 772003 GNI per capita | dollars: 490Number of people living with HIV/AIDS | million: 25.2

Note: Life expectancy at birth and infant mortality rate per 1,000 live births arefor 2002; female youth literacy is for the most recent year available, 2002; otherindicators are for 2003; from the World Development Indicators Database.The term gross national income (GNI) is now used instead of gross nationalproduct (GNP).

Total FY04CommitmentsIBRD $0 millionIDA $4,115.9 million

Portfolio of projects under implementation as of June 30,2004: $16.6 billion

Total FY04DisbursementsIBRD $42.8 millionIDA $3,292.5 million

to defense and security spending. Reducing conflictis thus consistent with the Bank’s goal of increasinggrowth and alleviating poverty. During fiscal 2004 theBank increased support to African countries emergingor recovering from conflict, a group that includes 8 ofthe 10 poorest African countries.

The Bank is engaged in 44 projects in 7 postconflictcountries. These countries received $490 million ingrants from the Post-Conflict Fund. Bank-supportedprojects in this area address the profound politicaland economic development failures that trigger suchconflicts. They also aim to improve the managementof revenue from resources such as oil and diamonds,which often fund African conflicts. The Bank isaddressing conflict prevention while tackling thechallenges of postconflict reconstruction and peaceconsolidation.

PROVIDING DEBT RELIEF ANDDEVELOPMENT ASSISTANCE

The Bank increased debt relief in fiscal 2004 andencouraged policy makers to invest the freed-upfunds in poverty reduction programs, includingprograms to combat HIV/AIDS. One more Africancountry reached the decision point (the point at whichthe amount of debt relief is determined and interimdebt relief begins) in fiscal 2004, and three othersreached the completion point (the point at whichdonor countries provide all of the remaining debtrelief promised at the decision point). Through theHeavily Indebted Poor Countries Initiative, thesecountries will receive total debt relief with a netpresent value of almost $4 billion. This relief isexpected to reduce the ratio of debt service to GDP inthese countries from 3.4 percent in 1998 to 1.7 percentduring 2004.


Umm Bedda Water Supply, Omdurman, Sudan.


SocialDevelopment,Gender &Inclusion 9%

Financial &Private SectorDevelopment

19%

Environmental &Natural Resource

Management5%

HumanDevelopment

15%

Public SectorGovernance 20%Rule of Law 1%

RuralDevelopment 9%

Trade & Integration 9%

Urban Development 6% Economic Management 2%

Social Protection &Risk Management5%

Figure 2.1 Africa: IBRD and IDA Lending by Theme, Fiscal2004 | share of total of $4.1 billion

Energy &Mining 9%

Education 9%

Finance 4%

Health & OtherSocial Services 18%

Information &Communication 1%

Law & Justice &Public Administration24%

Water, Sanitation &Flood Protection 9%

Agriculture, Fishing &Forestry 7%

Transportation17%

Industry & Trade 2%

Figure 2.2 Africa: IBRD and IDA Lending by Sector, Fiscal2004 | share of total of $4.1 billion

Table 2.1 World Bank Lending to Borrowers in Africa, by Theme and Sector, Fiscal 1995–2004 | millions of dollars

1995–97 1998–99 (annual (annual

average) average) 2000 2001 2002 2003 2004

THEMEEconomic Management 134.4 165.0 78.2 138.5 138.7 37.8 67.8Environmental and Natural Resource

Management 272.9 156.0 172.4 110.0 159.9 227.0 195.3Financial and Private Sector Development 543.4 509.0 466.7 625.8 780.7 383.6 810.9Human Development 216.6 267.7 208.5 399.4 739.0 811.4 618.2Public Sector Governance 270.7 291.7 495.3 429.6 851.9 432.4 818.5Rule of Law 40.1 21.0 26.7 34.0 22.5 34.5 28.3Rural Development 189.2 393.6 151.8 296.3 329.2 384.1 360.7Social Development, Gender, and Inclusion 153.4 167.6 210.5 491.8 347.4 420.0 374.3Social Protection and Risk Management 77.8 117.2 140.5 376.4 98.3 543.7 209.2Trade and Integration 152.0 120.5 53.7 261.5 46.4 37.2 371.5Urban Development 201.1 253.8 154.9 206.1 279.6 425.5 261.2

Theme Total 2,251.5 2,463.2 2,159.1 3,369.6 3,793.5 3,737.2 4,115.9

SECTORAgriculture, Fishing, and Forestry 157.2 170.0 111.5 212.0 210.4 303.4 268.5Education 161.6 304.4 189.8 209.5 472.6 423.6 362.9Energy and Mining 209.5 244.0 176.3 198.0 490.3 324.4 365.8Finance 125.6 48.8 118.4 200.1 192.8 67.2 165.8Health and Other Social Services 263.7 273.6 183.1 889.9 616.6 775.9 723.1Industry and Trade 334.7 94.3 104.7 170.6 266.7 92.7 95.4Information and Communication 6.9 36.7 17.3 21.1 33.8 41.4 52.9Law and Justice and Public Administration 542.0 615.8 838.2 880.8 906.9 721.8 1,004.1Transportation 266.8 533.5 263.9 229.8 491.1 690.5 716.6Water, Sanitation, and Flood Protection 183.6 142.0 155.9 357.8 112.2 296.3 360.8

Sector Total 2,251.5 2,463.2 2,159.1 3,369.6 3,793.5 3,737.2 4,115.9

Of which IBRD 45.6 31.2 97.7 0.0 41.8 15.0 0.0Of which IDA 2,206.0 2,432.0 2,061.4 3,369.6 3,751.6 3,722.2 4,115.9

Note: Due to a recalculation of allocations by the system, lending by theme figures may differ from those in the 2003 Annual Report. For the Law and Justice and PublicAdministration sector, changes in figures reflect the retroactive remapping of projects to a new Compulsory Health Finance sector code under this category. For the Financesector, changes in figures reflect the retroactive remapping of projects to a new Compulsory Health Finance sector code under Law and Justice and Public Administration.Numbers may not add to totals because of rounding.

WORLD BANK ASSISTANCE

To assist this diverse region, the World Bank has tai-lored its approaches to country circumstances whileworking toward a set of five regional objectives:

■ Achieving high rates of growth■ Improving global and intraregional integration■ Enhancing social stability■ Reducing poverty, improving health, and

expanding education ■ Reducing corruption and improving governance

Lending to support these objectives reached$2.57 billion ($907 million in IDA and $1.67 billionin IBRD) during fiscal 2004. Establishing goodgovernance—reducing corruption, strengtheningfinancial management, creating effective legaland judicial systems, stopping the unsustainableexploitation of natural resources, and strengtheningcorporate governance—continues to be a challenge.The Bank is addressing this challenge through itsprojects, research, and advisory services. NewCountry Assistance Strategies were formulated forIndonesia and Mongolia. Mongolia’s was based onthe country’s own poverty reduction strategy. TheBank also updated its Country Assistance Strategyfor Vietnam.


Indonesia’s new Country Assistance Strategydemonstrates how the Bank is working to build theclimate for investment in East Asia while addressinggovernance challenges that hamper development.The Bank is supporting Indonesia in its effortsto maintain a stable economy and create strongerfinancial and private sectors, build infrastructure,

East Asia and PacificThe increasingly integrated economies of the EastAsia and Pacific region are growing at a solid pace,which is improving economic opportunities for theregion’s 1.9 billion people.

Fueled by growing exports, low interest rates,and high investment in China, Thailand, andVietnam, East Asia’s economy is expected to growby more than 7 percent in 2004—the strongestgrowth since the beginning of the global slowdownin early 2000. This strong recovery bodes well foran estimated 49 million of the region’s poor, whoseincomes are projected to rise above the $2-a-daypoverty line.

China has been the driver of regional growth;its imports surged 40 percent in 2003. Intraregionaltrade still accounts for about 70 percent of thegrowth in exports of East Asia’s developingeconomies, as it has since 2002. But this trend willlikely slow as current rapid growth rates in Chinalevel off.

The rest of the world is also paying more atten-tion to East Asia’s successful growth. Foreign directinvestment continues to grow, and net portfolioflows to the five postcrisis economies—Indonesia,the Republic of Korea, Malaysia, the Philippines,and Thailand—are also estimated to have risen toaround $33 billion in calendar 2003. Net foreign ex-change reserves of East Asian developing economiesnow stand at over $1 trillion.

The region’s rapid growth, structural shifts, anddemographic changes have increased demand fornatural resources. Sustainable management will be akey condition for improving the quality of people’slives and enhancing the opportunities of futuregenerations to share the benefits of economicdevelopment.


CambodiaChinaFijiIndonesiaKiribatiKorea,

Republic ofLao People’s

DemocraticRepublic

MalaysiaMarshall IslandsMicronesia,

FederatedStates of

MongoliaMyanmarPalauPapua New

GuineaPhilippinesSamoaSolomon IslandsThailandTimor-LesteTongaVanuatuVietnam


c. 1970. Loading rubber at the Port of Singapore, where a World Bankloan of $15 million assisted the construction of additional deep-waterberths, a new plant yard and workshop, and cargo handling equipment.

and create income opportunities for poor householdsand farmers. Because governance reforms are essentialto raising investment and improving the quality of ser-vices, the Bank’s program in Indonesia focuses on im-proving the quality, responsiveness, and accountabilityof public institutions, giving preference to local gov-ernments willing to adopt more transparent and moreefficient practices.

Infrastructure played a central role in East Asia’s de-velopment, as evidenced in Japan; Hong Kong; Korea;Singapore; Taiwan, China; and more recently, mainlandChina and Vietnam. Sound economic policies andinvestments in power, transportation, water supply,telecommunications, education, and health servicesaccounted for East Asia’s initial success in reducingpoverty. In fiscal 2004 the World Bank, the Asian De-velopment Bank, and the Japan Bank for InternationalCooperation launched a joint study to assess infra-structure needs in the region and examine ways torebuild the climate for infrastructure investment,particularly by harnessing the private sector.

To engage the corporate sector, the Bank is workingwith the Hills Program on Governance to promote bestcorporate practices in the region. The program hasestablished two Hills Centers—in Manila and Seoul—to foster good corporate governance through advocacy,research, and training. Improving the livability of citiesis a key issue for both investment and development.

In response to the devastation caused by the tropi-cal cyclone Heta, the Bank approved an emergencygrant operation for Samoa to help restore andstrengthen roads, bridges, and the coastline, and tohelp make both the natural and built environmentsmore resilient to storms.

EMPOWERING POOR PEOPLE

Programs such as Indonesia’s Kecamatan DevelopmentProject have been extremely effective in channelingfunds directly to communities to build roads, schools,health clinics, and drinking-water systems. Under theprogram, which now covers 28,000 villages and about35 million rural poor, communities determine theirneeds, design activities, seek technical help, and makeinformed choices about how to use limited resources.The third phase of the program, approved in fiscal 2004,aims to have local governments compete for programfunding as an incentive for better local governance. Inthe Philippines the $100 million KALAHI Project, whichadapts the Indonesian model, began as a pilot project in


East Asia and Pacific Fast Facts

Total population | billion: 1.9Population growth | percent: 0.8Life expectancy at birth | years: 69Infant mortality per 1,000 births: 32Female youth literacy | percent: 982003 GNI per capita | dollars: 1,080Number of people living with HIV/AIDS | million: 2.3


Total FY04CommitmentsIBRD $1,665.5 millionIDA $907.2 million


Total FY04DisbursementsIBRD $1,720.6 millionIDA $856.6 million

6 communities and has been replicated in more than1,300 communities across 67 municipalities. In additionto building capacity, these projects build confidence and


BOX 2.2 COUNTRY INNOVATION DAYS

To support community-level work by civil society

organizations, the Bank’s Development Market-

place organized two Innovation Days in fiscal 2004,

one in the Philippines and another in Vietnam. The

Philippines Innovation Marketplace, called Pani-

bagong Paraan (New Approaches), brought togeth-

er 117 finalist teams in the Philippines’ largest and

busiest shopping mall to present their ideas and

compete for more than $1.2 million in funding for

innovative ways to make services work for the poor.

Former President Corazon C. Aquino delivered the

keynote address for the competition, which was

funded by a dozen donor groups and companies.

One of the winners, Recycling War Trash for Peace,

aims to turn spent bullets and rocket casings into

craft items symbolizing peace, such as bells and

gongs. In addition to cleaning up the litter of con-

flict, the project will provide work for out-of-school

youth.

Visitors view a booth for a project on disability access at the CountryInnovation Day in the Philippines.

help people influence local governance. In Cambodiathe Rural Investment and Local Governance Project isworking through the Seila Program to improve localservices and community monitoring.

A key feature of the Bank’s strategy in low-incomecountries is assisting governments in developingpoverty reduction strategies. In fiscal 2004 the LaoPeople’s Democratic Republic and Mongolia complet-ed poverty reduction strategies. In Vietnam the Bank isfinancing its third Poverty Reduction Strategy Credit tosupport the government’s strategy.

Empowering and giving voice to people are criticalfor development. In Indonesia the Justice for the PoorInitiative is working to help people understand theirrights and strengthen village institutions that settledisputes. For its part, the Bank established Web sitesin Chinese, Khmer, and Vietnamese and increased itsofferings in Bahasa, Lao, Mongolian, Tetum, Thai, andother languages. In China the Bank is producing aChinese-language newsletter, and in Cambodia thelocal press routinely draws stories from the Bank’sKhmer-language newsletter. Public InformationCenters now operate in 11 of the region’s countryoffices. Sixteen provincial information centers in China,Indonesia, the Philippines, and Vietnam have beenestablished, with more planned, and local librarians arebeing trained on the Bank’s operations and policies.

In fiscal 2004 the Bank and the government ofJapan launched a new Tokyo Global DevelopmentLearning Network Center. The Japan–World Bank

Distance Learning Partnership Project (Tokyo Project),funded by the Japanese government, aims to make asubstantial intellectual contribution to the region’s de-velopment by making the Tokyo learning center a re-source for building capacity throughout the region. Bythe end of 2004, there will be 20 Global DevelopmentLearning Network centers in the East Asia and Pacificregion, including at least one in each of the Bank’s keycountries. These centers will be able to work on region-al integration and knowledge sharing with institutionssuch as the Association of South East Asian Nationsand the Organization for Asia-Pacific EconomicCooperation. (See also box 2.2.)

ADDRESSING GLOBAL PRIORITIES

The Bank’s East Asia and Pacific region is focusingactivities on the following global priorities.

Combating Communicable DiseasesThe Bank acted quickly to assist China and Vietnamafter the recent bouts of sudden acute respiratorysyndrome (SARS) and avian flu. The SARS and Infec-tious Disease Response Program supports the Chinesegovernment’s efforts to strengthen the capacity of thepublic health system to prevent infectious diseases andset up alert and response mechanisms to address publichealth crises. The Bank is also preparing an emergencyassistance program that will help Vietnam improve itspreparedness for dealing with avian flu. In China theBank and the United Kingdom’s Department for Inter-national Development are cosponsoring a second

tuberculosis control project. The Bank’s new HIV/AIDS strategy for the region provided input to theFifteenth International AIDS Conference in Bangkokin July 2004.

Fostering Trade and Regional IntegrationEast Asia Integrates, a flagship study completed in fiscal2004, urges policy makers to broaden their approachbeyond technical trade policies to emphasize develop-ment outcomes and links to social stability. At a jointconference, the Boao Forum for Asia and the Bankagreed on a three-year program of economic studiesand promotion of international networks of expertiseon Asian economic cooperation and integration.

In addition to its work with China on membershipin the World Trade Organization (WTO) and its impli-cations for the financial sector, the Bank is helpingCambodia and the Lao People’s Democratic Republicanalyze the impact of trade integration and implementtrade policies that promote growth and reduce poverty.It is advising Vietnam on WTO accession issues and isidentifying reforms needed for accession. Similar workis under way for the Lao People’s Democratic Republic.In Indonesia the Bank is working on a trade and inte-gration study.

Improving the Environment The Bank is working with city governments, compa-nies, donors, and civil society organizations throughthe Clean Air Initiative for Asian Cities to promoteinnovative ways to improve the air quality of Asiancities, which are among the world’s most polluted.



Table 2.2 World Bank Lending to Borrowers in East Asia and Pacific, by Theme and Sector, Fiscal 1995–2004 | millionsof dollars

1995–97 1998–99 (annual (annual

average) average) 2000 2001 2002 2003 2004


Management 1,009.7 932.4 880.4 399.3 102.3 232.3 432.2Financial and Private Sector Development 1,287.7 4,441.8 627.6 310.9 512.8 458.8 553.9Human Development 433.1 406.1 81.1 52.6 226.4 152.7 164.6Public Sector Governance 258.7 543.1 556.2 65.1 127.4 341.5 299.0Rule of Law 70.4 19.2 9.3 3.8 20.3 7.3 67.3Rural Development 991.7 855.6 430.3 341.6 360.9 411.7 400.9Social Development, Gender, and Inclusion 172.8 273.5 72.1 248.0 173.0 143.7 167.2Social Protection and Risk Management 169.6 708.4 55.2 239.4 138.7 161.5 5.5Trade and Integration 136.5 333.2 36.2 40.0 43.3 138.0 82.9Urban Development 757.0 900.8 230.6 433.1 63.6 233.6 399.2

Theme Total 5,326.6 9,694.2 2,979.1 2,133.8 1,773.6 2,310.8 2,572.7

SECTORAgriculture, Fishing, and Forestry 359.0 803.8 118.4 109.7 151.2 106.7 290.4Education 447.1 411.6 84.4 14.8 134.6 225.7 118.6Energy and Mining 1,659.2 517.0 640.5 142.2 314.5 254.3 67.2Finance 230.8 3,163.7 34.4 87.5 219.2 22.7 49.0Health and Other Social Services 261.1 581.6 118.4 217.3 243.8 184.1 84.3Industry and Trade 260.4 1,569.8 28.8 151.8 9.4 32.5 78.7Information and Communication 117.4 51.9 20.0 12.5 11.1 6.6 0.0Law and Justice and Public Administration 375.2 1,083.6 592.2 257.4 115.2 385.1 257.5Transportation 1,034.2 1,133.3 584.4 729.7 540.2 684.3 1,209.9Water, Sanitation, and Flood Protection 582.1 377.9 757.7 410.8 34.4 408.7 417.1

Sector Total 5,326.6 9,694.2 2,979.1 2,133.8 1,773.6 2,310.8 2,572.7

Of which IBRD 4,306.4 8,800.9 2,495.3 1,136.1 982.4 1,767.1 1,665.5Of which IDA 1,020.2 893.3 483.8 997.7 791.2 543.7 907.2



21%

HumanDevelopment 6%

RuralDevelopment 16%

Rule of Law 3%


Management17%

Public SectorGovernance 12%


Trade & Integration3%

Urban Development 16%

Social Protection &Risk Management�1%

Figure 2.3 East Asia and Pacific: IBRD and IDA Lending byTheme, Fiscal 2004 | share of total of $2.6 billion

Transportation47%


Education 5%

Energy & Mining3%

Finance 2%

Health & OtherSocial Services

3%

Industry & Trade3%

Law & Justice& Public

Administration10%

Water, Sanitation &Flood Protection16%

Figure 2.4 East Asia and Pacific: IBRD and IDA Lending bySector, Fiscal 2004 | share of total of $2.6 billion

South AsiaSouth Asia’s development is at a critical juncture.Economic growth in the region is relatively strong,but human development is uneven, both withinand across countries. South Asia has the world’shighest illiteracy rate (45 percent), and the regionaccounts for one-third of all maternal deaths inthe world. Given South Asia’s size, reducing povertyand achieving the Millennium Development Goalsin the region will be critical to achieving the goalsworldwide.

Along with East Asia, South Asia is playing anincreasingly important role in the global recovery.Gross domestic product (GDP) grew by morethan 6 percent during calendar year 2003, and theoutlook for continued growth remains positive.India, which accounts for 77 percent of GDP inthe region, grew by 6.8 percent in 2003, with agri-cultural output rising and productivity—propelledby the service industry—increasing. GDP roseabout 5.5 percent in Bangladesh, Pakistan, andSri Lanka.

The signing of a free trade agreement by SouthAsian countries in January 2004 is providing newopportunities for economic integration. But theneed to develop infrastructure within and betweencountries and to identify regulators and serviceproviders is constraining the ability of the privatesector to respond to the new trading environment.

The growing rapprochement between India andPakistan has renewed hopes in the region andshould positively affect economic performance.However, concerns about the possibility of violenceundermining the development process remain vividacross parts of the region: for example, the securitysituation in Afghanistan remains volatile; and the

unstable security and political situation in Nepal isstalling further development there.


The World Bank lent $3.4 billion to South Asiain fiscal 2004. To help improve the investmentclimate, the Bank is assisting countries with policyreforms, drawing on an extensive program ofanalytical work delivered in the form of studies,workshops, policy notes, and policy dialogue. TheBank is investing in infrastructure and leveragingprivate sector investments, as well as helpingcountries meet the Millennium Development Goalsby supporting efforts to improve service deliveryin health, education, energy, water supply, andsanitation.

The Bank discussed a new Country AssistanceStrategy for Nepal, which recognizes Nepal’s reformprogram, despite the country’s continued instability,and links the level of assistance to the pace of fur-ther reforms. It also approved a $70 million PovertyReduction Support Credit to help Nepal implementits poverty reduction strategy. The Bank’s Board ofDirectors discussed a progress report on the Coun-try Assistance Strategy for Pakistan, concluding thatthe country has remained on the ambitious path forfiscal consolidation envisioned in its initial PovertyReduction Strategy Paper (see box 2.3).

Assistance to the region is focusing onsectorwide policy interventions. One exampleis the $100 million credit to help the provinceof Punjab in Pakistan address its educationalneeds. Another is a $55 million public sectorcapacity-building project that will supportPakistan’s ongoing economic reformprogram.



AfghanistanBangladeshBhutanIndiaMaldivesNepalPakistanSri Lanka


Assessments in Bangladesh, Bhutan, India, Pakistan,and Sri Lanka suggest that inadequate infrastructureis hurting the investment climate. Bureaucracy andexcessive rules and regulations also represent bottle-necks, as do the rigid labor markets and lack of accessto long-term finance and credit for the private sector.

In Afghanistan two Bank loans are helping thegovernment rebuild the country’s infrastructure.A $22 million credit is revitalizing telephone linesand the postal service. A $31 million credit will helpincrease revenue from trade by streamlining customsand transit regulations.

Improving roads and other travel infrastructure is acritical component of the Bank’s work in South Asia.These efforts have had a major impact on reducingpoverty by cutting transportation costs and increasingpoor people’s access to markets, education, and healthcare. To increase trade competitiveness in Pakistan, theBank approved a $200 million loan and credit to revi-talize the national highway system. In India a $240 mil-lion loan will help reduce transportation constraints bybuilding a bypass to divert traffic from the historic cityof Allahabad in Uttar Pradesh.

In Nepal a $75.5 million financial sector reformproject is expected to help modernize the country’sfragile banking system. The Bank also approved the$220 million Second Andhra Pradesh EconomicReform Loan and Credit for India’s fifth-largest state.That loan will help the state achieve fiscal health andsustainability, strengthen public administration,enhance service delivery, promote private sectordevelopment, and create a platform for acceleratingreforms.


Central to the Bank’s strategy in the region is the no-tion that South Asia’s main resource is its people. Bankassistance is geared toward ensuring that the standardof living is improved across the entire spectrum of so-ciety and that obstacles that prevent people from par-ticipating in development and sharing its benefits areremoved. Innovative nonlending work involves anextensive dialogue with counterparts on better ways totarget welfare programs.

During fiscal 2004 the Bank expanded its support tomicrocredit, rural water and sanitation, irrigation, edu-cation, and health. In Pakistan it lent $238 million tothe Poverty Alleviation Fund, an autonomous institu-tion created by the government, to expand the fund’searlier efforts. A similar initiative in Nepal is expectedto bring much-needed credit to poor communities inrural areas. The Bank also approved a $181 millioncredit to bring sustainable drinking water and sanita-tion to poor people in the Indian state of Maharashtra,a $64.7 million credit to improve access to basic socialand economic infrastructure services to North East ar-eas of Sri Lanka, a $40 million credit to bring safe waterto rural communities in Afghanistan, and a $25.3 mil-lion credit to support rural water supply and sanitationin Nepal.

In education the Bank awarded a $500 millioncredit to help India attain its goals of universal


c. 1959. One of the world’s largest railroad modernization and expansionprograms was that of the Indian Railways, where new electric locomo-tives, bought with Bank loans, replaced older equipment.

South Asia Fast Facts

Total population | billion: 1.4Population growth | percent: 1.7Life expectancy at birth | years: 63Infant mortality per 1,000 births: 68Female youth literacy | percent: 622003 GNI per capita | dollars: 510Number of people living with HIV/AIDS | million: 5.2


Total FY04CommitmentsIBRD $439.5 millionIDA $2,982.1 million


Total FY04DisbursementsIBRD $891.8 millionIDA $1,835.0 million

elementary school enrollment and completion. Theloan represents the Bank’s first sectorwide program forIndia. The Bank also provided a $150 million creditto help Bangladesh develop primary education. Thisinnovative sectorwide project is supported jointly by$504 million from the Asian Development Bank, theWorld Bank, and eight other donors in an attempt bythe donor community to respond with one voice to anational development issue. The Bank also approveda $31 million credit to Bhutan to expand access toprimary and secondary education.

In Afghanistan a $95 million credit is helpingstrengthen the National Solidarity Program, whichsupports local governance and provides communitieswith resources for reconstruction and developmentactivities. In Sri Lanka a $51 million credit is helpingthe rural poor improve their livelihood and qualityof life.

The Bank is supporting a health system project inthe state of Rajasthan, in India, with an $89 millioncredit. In Sri Lanka a $60 million credit will help thegovernment implement its health sector strategy.


More than 5 million people in South Asia are currentlyliving with HIV/AIDS. Throughout the region theprevalence of HIV/AIDS among the general populationis believed to be low, but rates are much higher amongsubpopulations that engage in high-risk behaviors.And despite low overall prevalence rates, India has oneof the largest numbers of people with HIV/AIDS inthe world. The Bank has stepped up its assistance tonational programs working to prevent the spread ofHIV/AIDS among highly vulnerable subpopulations,young people, and the general population in SouthAsia. In addition, it is facilitating dialogue amongcountries to share lessons learned and good practicesof intervention.

Recognizing that development in the region can beachieved only through inclusion and participation, theBank is completing gender assessments in Afghanistan,Nepal, and Pakistan. Similar assessments are under wayin other countries. These assessments involve substan-tial analytical work and dialogue aimed at better un-derstanding what kinds of policies may lead to greatergender balance in the countries’ development.


BOX 2.3 IMPORTANT BENEFITS ARE BEGINNING

TO EMERGE FROM THE PRSP PROCESS

Countries in South Asia are making significant

progress in developing Poverty Reduction Strategy

Papers (PRSPs), where they are increasingly per-

ceived as useful vehicles for national planning and

decision making. Three countries—Nepal, Pakistan,

and Sri Lanka—have completed full PRSPs that have

been discussed with the Bank and the International

Monetary Fund. All three countries have received

Poverty Reduction Support Credits.

The shift to a programmatic approach to lend-

ing through Poverty Reduction Support Credits has

made it easier for IDA and other donors to align

their assistance with countries’ own priorities in

different sectors, as elaborated in the PRSPs. Assis-

tance through Poverty Reduction Support Credits—

which includes strengthening the capacity to

monitor public expenditure—promotes a

performance-based approach that benefits the

countries’ entire investment program. The PRSP

process is also helping harmonize donor lending.

In many parts of the developing world, access to water remains a luxuryfew can afford. In Sri Lanka, the World Bank’s work in water safety andsanitation is ensuring that communities in rural areas have access to cleanand safe water.


Urban Development 3% Economic Management �1%

Environmental &Natural ResourceManagement 3%


20%

HumanDevelopment

21%Public SectorGovernance 20%

RuralDevelopment 9%




Figure 2.5 South Asia: IBRD and IDA Lending by Theme,Fiscal 2004 | share of total of $3.4 billion



Transportation13%

Law & Justice& PublicAdministration28%

Education 19%

Energy &Mining 4%

Finance 10%


Industry & Trade 1%Information &Communication �1%

Figure 2.6 South Asia: IBRD and IDA Lending by Sector,Fiscal 2004 | share of total of $3.4 billion

Table 2.3 World Bank Lending to Borrowers in South Asia, by Theme and Sector, Fiscal 1995–2004 | millions of dollars

1995–97 1998–99 (annual (annual

average) average) 2000 2001 2002 2003 2004



Theme Total 2,649.9 3,213.2 2,112.4 3,246.6 3,508.4 2,918.7 3,421.6

SECTORAgriculture, Fishing, and Forestry 318.4 534.4 65.0 116.1 328.1 212.6 251.9Education 279.3 385.1 171.4 206.4 95.9 364.6 665.8Energy and Mining 411.8 545.9 277.8 746.2 504.8 150.6 130.8Finance 314.0 168.2 46.0 209.7 310.0 185.8 331.4Health and Other Social Services 447.7 589.3 393.3 188.1 278.7 369.0 334.6Industry and Trade 10.0 68.3 85.3 34.0 443.1 144.9 46.1Information and Communication 7.9 35.3 54.6 17.7 12.4 11.5 16.9Law and Justice and Public Administration 277.7 436.3 407.0 377.4 632.5 372.3 925.5Transportation 227.9 354.1 590.6 1,294.3 758.1 1,067.6 444.8Water, Sanitation, and Flood Protection 355.4 96.4 21.4 56.8 144.9 40.0 273.7

Sector Total 2,649.9 3,213.2 2,112.4 3,246.6 3,508.4 2,918.7 3,421.6

Of which IBRD 1,124.3 1,034.0 934.3 2,035.0 893.0 836.0 439.5Of which IDA 1,525.6 2,179.2 1,178.1 1,211.6 2,615.4 2,082.7 2,982.1


Europe and CentralAsia

The Europe and Central Asia region remains verydiverse in terms of poverty, human development,and individual country prospects for attaining theMillennium Development Goals. At one end ofthe spectrum, ten Bank member countries—theCzech Republic, Cyprus, Estonia, Hungary, Latvia,Lithuania, Malta, Poland, the Slovak Republic, andSlovenia—joined the European Union (EU) May 1,2004. Four of these EU accession countries aremembers of the Organisation for Economic Co-operation and Development, as is Turkey. Sloveniamoved from World Bank borrower to donor statuson March 17, 2004.

At the other end of the spectrum, more thanhalf the population in some of the countries ofthe Commonwealth of Independent States (CIS)lives in poverty, which stems in part from geo-graphic isolation and lack of integration into theglobal economy.

Growth in the region was strong in 2003, withoutput increasing at an average rate of 6.5 percent.Output rose 3.9 percent in the EU accession coun-tries, 4.3 percent in South Eastern Europe, and7.9 percent in the CIS. Twelve countries in theregion grew more than 5 percent, while no countryexperienced a decline in output.

Further integration into Europe is likely toprovide an impetus for reform in the EU accessioncountries and South Eastern Europe, which includescountries for which negotiations for EU accessionare under way (Bulgaria and Romania), those thatare candidates or whose candidacy is under consid-eration (Turkey and Croatia), and countries in theWestern Balkans, for which accession is a longer-term prospect. The CIS countries face an unfinished

agenda relating to building the institutions of amarket economy and diversifying their economies.The development of natural resources and theperformance of the Russian economy are likely tobe key drivers of growth for these countries.


Lending during fiscal year 2004 reached $3.6 billion,($3 billion in IBRD lending and $546 million inIDA credits). Analytical and advisory servicesincluded 186 reports and 58 technical assistanceactivities. Use of programmatic and cross-sectoral



AlbaniaArmeniaAzerbaijanBelarusBosnia and

HerzegovinaBulgariaCroatiaCzech RepublicEstoniaGeorgiaHungaryKazakhstanKyrgyz RepublicLatviaLithuaniaMacedonia,

formerYugoslavRepublic of

MoldovaPolandRomaniaRussian

FederationSerbia and

MontenegroSlovak RepublicTajikistanTurkeyTurkmenistanUkraineUzbekistan

Slovenia gradu-ated from bor-rower status infiscal 2004.

This sectionalso reportson Kosovo,Serbia andMontenegro.

BOX 2.4 THE BANK’S PROGRAMMATIC

APPROACH TO NONLENDING ACTIVITY

The Bank is increasingly taking a program-matic approach to nonlending activity inthe Europe and Central Asia region. In theRussian Federation it is engaged—with high-level Russian counterparts and in partnershipwith the United Kingdom’s Department forInternational Development—in a multiyearprogram of analytical and capacity-buildingwork on poverty. The program is designed tobe completed in two phases and to producea series of timely outputs to meet the needsof both the government and the Bank. Phaseone, completed in December 2003, signifi-cantly increased capacity in survey methodsand policy analysis. It opened up access tohousehold survey data sets and made con-crete recommendations on how to improvesurvey data. A collaborative Poverty Assess-ment Report is planned for 2004.(See www.worldbank.org/eca/knowledgefair.)

A 2003 conference supporting the integration of Roma people drewtop officials as well as Roma community leaders. Two initiatives werelaunched: the Roma Decade of Inclusion 2005–2015 and the RomaEducation Fund.

instruments—Programmatic Adjustment Loans inIBRD countries and Poverty Reduction SupportCredits in IDA countries—increased in an attempt tobetter support reforms.

This programmatic approach also carried overinto nonlending services. (See box 2.4 on page 41.) TheBank developed Country Assistance Strategies forArmenia, Lithuania, Macedonia, the Slovak Republic,Turkey, and Ukraine; and Transition Support Strategiesfor Kosovo and Serbia and Montenegro. The strategiesfor Armenia and Serbia and Montenegro were accom-panied by Poverty Reduction Strategy Papers (PRSPs).PRSP Progress Reports were submitted for Albania,Azerbaijan, the Kyrgyz Republic, and Tajikistan.

Individual Country Assistance Strategies also recog-nize the diversified needs of the subregions. In the poorcountries of the CIS, the emphasis is on supportingsound economic management and private sector–ledgrowth, promoting human development and equity,and improving governance. In the EU accession coun-tries, the focus is increasingly on investments to en-hance the benefits of accession and knowledge services.In South Eastern Europe and the larger countries ofthe CIS (Kazakhstan, the Russian Federation, andUkraine), the emphasis is on supporting growth withequity and improvements in governance—in the con-text of a wider EU agenda where relevant. Throughoutthe region, where issues go beyond the borders of a sin-gle country, as they do in the case of communicablediseases, water resources, trade and investmentregimes, energy markets, and regulatory frameworks,the Bank is taking a multicountry approach.


The region’s strong economic performance is a testa-ment to improvements in the business climate—improvements that are confirmed in part by firm-level survey data. The perception of corruption as anobstacle to business has declined significantly in somecountries since 1999. But in seven countries, investorscontinue to perceive corruption as a serious problem,and in two countries that perception has worsenedsignificantly.

Support for the investment climate depends oncountry needs. In Ukraine the Second ProgrammaticAdjustment Loan focuses on regulatory reform, creat-ing and protecting property rights, and improvingpublic sector accountability. In Turkey the SecondExport Finance Intermediation Loan aims to provideworking capital to facilitate export growth whileimproving quality, safety, and access to finance in theprivate financial sector. It follows a first loan, whichsuccessfully provided medium- and long-termfunding to banks and export companies, whoseexports grew 11–40 percent a year during the projectperiod.

The Bank is also supporting the investment climatethrough nonlending activities. It has completedInvestment Climate Assessments in the KyrgyzRepublic, Moldova, Poland, Uzbekistan, and Tajikistan.In conjunction with the International Monetary Fund,the Bank continued its Financial Sector AssessmentProgram in Azerbaijan, Macedonia, and Romania.


Europe and Central Asia Fast Facts

Total population | billion: 0.5 Population growth | percent: 0.1 Life expectancy at birth | years: 69 Infant mortality per 1,000 births: 31 Female youth literacy | percent: 99 2003 GNI per capita | dollars: 2,570 Number of people living with HIV/AIDS | million: 1.3


Total FY04CommitmentsIBRD $3,012.9 million IDA $546.2 million


Total FY04DisbursementsIBRD $2,005.0 million IDA $446.1 million

The Bank has also undertaken analytical work onthe knowledge economy in Latvia, Poland, andTurkey.


Human development indicators in Europe and CentralAsia are generally strong, but the quality of publicservices has deteriorated. As a result, many of theMillennium Development Goals will probably not bemet, particularly in the region’s poorer countries.

To address the problem, several Bank operationsfocus on improving public services. The secondPoverty Reduction Strategy Credit in Albania supportsimproved access to and quality of education and healthservices. It follows the first credit, which improved thepolicy on textbooks and reversed the sharp decline inoperations and maintenance expenditures that hadcontributed to a deterioration of facilities. The KyrgyzVillage Improvement Project and the Second Kosovo


Community Development Fund Project empower localcommunities to demand improvements in servicedelivery and to assist in implementing changes. TheBank has also helped raise awareness of poverty andhuman development outcomes for the Roma, thelargest and most vulnerable minority in Central andEastern Europe. (See www.worldbank.org/eca/ecshd.)


The Bank’s efforts in Europe and Central Asia focus onseveral global priorities.

Education for AllAlbania is the only country in the region eligible forthe Education for All Fast-Track Initiative. The Bankhas helped several other countries, including Moldovaand Tajikistan, to meet the requirements for eligibility,but the availability of funding remains in question. Asmany as eight other countries in the region may needhelp meeting the Education for All goal.

HIV/AIDSTogether with its partners, the Bank has been at theforefront of raising awareness of HIV/AIDS in theregion and helping countries address the problem.A regional support strategy and subregional studieswere completed for Poland and the Baltics, SouthEastern Europe, and Central Asia, and a policy notewas written on Georgia. In collaboration with theJoint United Nations Programme on HIV/AIDS,the Bank developed a Directory of Technical andManagerial Resources to improve access to technicaladvice for HIV/AIDS programs in the region(www.cee-trd.unaids.org). Work is under way ona study of HIV/AIDS in the Western Balkans, anda multicountry project on HIV/AIDS in CentralAsia, and Bank-supported projects are being imple-mented in Moldova, the Russian Federation, andUkraine.

Water Supply and SanitationAccess to water supply and sanitation in the Europeand Central Asia region is relatively good, but systemsare often poorly maintained, compromising qualityand reliability. The Bank program of assistance ad-dresses the sustainability of water supply and sanitationsystems. A new strategy for delivering infrastructureservices addresses the different policy challenges in thesubregions of Europe and Central Asia.

HIV/AIDS is spreading more quickly in Europe and Central Asia than in anyother region of the world. In 2003 it claimed some 30,000 lives, and anestimated 230,000 people became infected, bringing the total number ofpeople living with HIV/AIDS in the region to an estimated 1.5 million.


Environmental SustainabilityDuring fiscal 2004 the Bank undertook new analyticalwork to help define and measure the environmental

c. 1956. A drainage canal regulates water supplies in the Catania Plainas part of the Cassa Per II Mezzogiorno project in Southern Italy, whichincluded irrigation, roads, power and industry, and better housing.

targets contained in the Millennium DevelopmentGoals. It also began implementing new projects toenhance energy efficiency in Croatia, Moldova, andSerbia and Montenegro; develop renewable energysources in Turkey; and rehabilitate irrigation systemsin Romania.


Economic Management7%

Human Development 8%Public SectorGovernance 25%

Rule of Law4%

RuralDevelopment 3%

Social Development,Gender &Inclusion 1%

Social Protection &Risk Management 9%


Urban Development 3%


26%


Management9%

Figure 2.7 Europe and Central Asia: IBRD and IDA Lendingby Theme, Fiscal 2004 | share of total of$3.6 billion

Law & Justice &PublicAdministration32%

Transportation 9%


Information &Communication �1%

Industry & Trade 4%


Education 5%

Energy &Mining 10%

Finance 23%


Figure 2.8 Europe and Central Asia: IBRD and IDA Lendingby Sector, Fiscal 2004 | share of total of$3.6 billion

Table 2.4 World Bank Lending to Borrowers in Europe and Central Asia, by Theme and Sector, Fiscal 1995–2004 | mil-lions of dollars

1995–97 1998–99 (annual (annual

average) average) 2000 2001 2002 2003 2004


Management 344.1 404.3 301.7 161.3 157.5 122.7 309.4Financial and Private Sector Development 1,847.7 1,908.0 890.7 1,074.0 2,210.8 483.3 950.2Human Development 268.8 219.3 278.9 51.1 138.3 550.4 297.1Public Sector Governance 437.4 546.0 227.8 95.6 1,313.7 317.7 895.1Rule of Law 44.1 80.1 160.2 77.4 106.6 289.8 132.3Rural Development 239.2 331.5 213.4 137.6 309.9 194.9 117.4Social Development, Gender, and Inclusion 45.5 126.9 43.6 65.1 188.8 55.9 33.9Social Protection and Risk Management 288.6 575.6 530.1 381.2 363.9 288.5 305.3Trade and Integration 261.5 91.6 143.5 138.4 32.5 130.6 182.6Urban Development 352.0 248.9 153.6 383.9 65.4 216.7 93.6

Theme Total 4,593.5 5,255.1 3,042.2 2,693.1 5,523.6 2,670.0 3,559.1

SECTORAgriculture, Fishing, and Forestry 205.9 114.5 317.8 139.0 470.4 335.4 168.6Education 92.8 299.2 22.7 62.5 83.2 395.0 164.0Energy and Mining 915.6 849.2 398.6 336.6 218.0 262.9 352.2Finance 552.8 468.2 175.8 802.3 1,284.9 195.8 836.9Health and Other Social Services 390.6 359.3 277.8 281.9 524.7 415.3 244.3Industry and Trade 775.7 817.4 604.7 296.5 552.1 269.0 126.3Information and Communication 1.6 4.5 151.9 8.7 9.6 1.0 7.0Law and Justice and Public Administration 948.5 1,584.7 797.2 446.4 2,181.9 698.9 1,176.8Transportation 576.0 533.1 207.1 118.3 67.1 30.6 321.2Water, Sanitation, and Flood Protection 134.0 225.0 88.5 200.7 131.7 66.3 162.0

Sector Total 4,593.5 5,255.1 3,042.2 2,693.1 5,523.6 2,670.0 3,559.1

Of which IBRD 4,088.4 4,406.3 2,733.1 2,154.0 4,894.7 2,089.2 3,012.9Of which IDA 505.1 848.8 309.1 539.0 628.9 580.8 546.2


Latin America andthe Caribbean

The World Bank serves 30 countries in LatinAmerica and the Caribbean, a region of staggeringdiversity. The region is home to 525 million people,who speak Spanish, Portuguese, English, French,and some 400 indigenous languages. Three-quartersof the region’s people live in and around cities,making it the most urbanized region in the develop-ing world. Natural resources and agriculture arenevertheless important to the region’s economies.Despite immense resources and dynamic societies,deep poverty and gaping inequality persist in theregion.

Modest growth returned to Latin America andthe Caribbean in 2003, with regional gross domesticproduct (GDP) growing by an average of 1.3 per-cent, after contracting 0.8 percent in 2002. Argentinacontinued recovering rapidly from the acute crisisthat hit the country in 2001. Brazil, Mexico, andUruguay shared in the broadening of economic re-covery. Central America grew at an average rate of3.1 percent. The Andean countries also performedwell, with growth exceeding 3 percent in Chile,Colombia, and Peru. Elsewhere performance wasless encouraging. Ongoing political uncertaintiescaused the República Bolivariana de Venezuela’seconomy to deteriorate further in the first half ofcalendar 2003, and continued fiscal difficulties andexternal challenges caused the Caribbean to growless rapidly than the region as a whole.

The external environment for Latin America andthe Caribbean improved significantly in 2003. Withinvestor confidence returning and domestic condi-tions improving, gross private financial inflows in2003 increased by 40 percent over 2002. Net foreign

direct investment, however, continued its decline,falling from a peak of $88 billion in 1999 to anestimated $36 billion in 2003. Exports from theregion grew 9.2 percent—after rising just 2.2 per-cent in 2002—and the region’s current accountdeficit fell to 0.5 percent of GDP, down from4.5 percent in 1998. Tourism revenues and workers’remittances also improved, and commodity priceswere generally strong.

Growth and investment have improved in theregion, but poverty remains pervasive. Povertyrates have stagnated in the region as a whole andincreased markedly in Argentina, Uruguay, and theRepública Bolivariana de Venezuela. A Bank studyreleased in 2003—Inequality in Latin America:Breaking with History?—showed that income, assets,voice, and access to basic services, education, andopportunities are highly unequal in the region andthat this inequality reduces the positive impact ofgrowth on poverty reduction.


The World Bank addresses inequality in the regionby targeting the poorest areas and supporting mea-sures to empower excluded groups. Its support inthe region uses the full range of instruments, in-cluding innovative financial instruments such asthe deferred drawdown option in Chile and localcurrency options in Mexico. New Country Assis-tance Strategies for Argentina, Bolivia, Brazil, CostaRica, Mexico, and Paraguay are breaking newground for Bank support to the region throughcloser alignment with clients’ needs and priorities,more flexible lending instruments, and a strongerfocus on results.

Bank lending to Latin America and theCaribbean reached $5.3 billion in fiscal 2004



Antigua andBarbuda

ArgentinaBelizeBoliviaBrazilChileColombiaCosta RicaDominicaDominican

RepublicEcuadorEl SalvadorGrenadaGuatemalaGuyanaHaitiHondurasJamaicaMexicoNicaraguaPanamaParaguayPeruSt. Kitts and

NevisSt. LuciaSt. Vincent and

the GrenadinesSurinameTrinidad and

TobagoUruguayVenezuela,

RepúblicaBolivariana de

($5 billion in IBRD lending and $338 million in IDAcredits). Major loans included $1 billion to Brazilfor social protection and sustainable and equitablegrowth, $750 million to Argentina for maternal andchild health, and $303 million to Mexico for integratedirrigation modernization.

The Bank’s analytical and advisory support to theregion included studies of trade-related issues, researchon innovation (development of intellectual capital) inselected countries, and a range of technical assistanceefforts, such as urban management training for publicofficials in Colombia. The Bank proposed a new devel-opment strategy for Mexico’s southern states, pub-lished a report on Caribbean youth development, pro-vided policy advice for Jamaica on achieving sustainedgrowth, and developed a guide for Latin Americanmayors on how to implement urban crime and vio-lence prevention programs.

Nicaragua and Guyana both reached the comple-tion point (see page 6) under the enhanced HeavilyIndebted Poor Countries Initiative in fiscal 2004, allow-ing them to benefit from debt relief with a net presentvalue of about $3.3 billion in Nicaragua and $335 mil-lion in Guyana.


The Bank is assisting countries throughout the regionin their efforts to improve the investment climate andstrengthen growth and competitiveness. In Brazil theBank is supporting the new government’s economicreforms with a $505 million programmatic loan.The reforms aim to reduce logistical costs; enhancethe business environment; improve the efficiency,access, and soundness of the financial sector;and increase technological progress andinnovation.

The Bank provided a $150 million loan to Peruto support the government’s decentralization andcompetitiveness program. The loan will enable theauthorities to modernize ports, roads, and other infra-structure, thereby promoting foreign investment andeconomic growth.

The Bank is supporting Nicaragua’s poverty reduc-tion strategy with a $70 million IDA credit to promotehuman capital, build public institutions, andstrengthen growth and competitiveness.

Bank assistance is facilitating trade and enhancingproductivity in Peru and Honduras, helping to increase

access to water in Paraguay, and strengthening regula-tion in the transportation sector in Brazil. Other loansto the region are described in the Summaries of Opera-tions Approved on the enclosed CD-ROM.

As part of its analytical and diagnostic work, theBank is carrying out Investment Climate Assessmentsto help identify reform priorities in each country inthe region. It has completed, or nearly completed,assessments in Brazil, Chile, Ecuador, El Salvador,Guatemala, Honduras, and Nicaragua and has


One of 400 microenterprises created under a World Bank–Inter-AmericanDevelopment Bank rural road project, with the participation of men andwomen from poor rural communities, performs routine maintenance on arural road in the Peruvian Sierra.



Total FY04CommitmentsIBRD $4,981.6 million IDA $338.2 million


Total FY04DisbursementsIBRD $4,905.2 millionIDA $323.0 million

Latin America and the Caribbean Fast Facts

launched assessments in Grenada, Jamaica, Mexico,and Paraguay.


Across the region the Bank is supporting efforts toimprove poor people’s access to basic services andincrease the participation of excluded groups. InParaguay the Bank provided $24 million for aneducation reform project to increase secondaryenrollment among the rural poor. In Lima, Peru, a$45 million loan from the Bank is supporting efforts tomake the public transportation system more efficientand reliable as well as more accessible to people withdisabilities. In Peru and Honduras, Bank projects arehelping create microenterprises to provide road main-tenance. (See box 2.5).

In response to Argentina’s efforts toward economicrecovery and growth, the Bank provided $500 millionto help the government address financial and utilitiessector reform, government transparency, and privatesector competitiveness. In Colombia the Bank provideda $200 million loan for labor reform and social devel-opment. In Brazil and Chile the Bank is supporting thegovernments’ social protection programs including theBolsa Familia and the Chile Solidario Initiative, whichhelp the poorest households with a $572 million adapt-able program loan for Brazil, and a $200 million ad-justment loan with a deferred drawdown option andan accompanying $11 million technical assistance loanfor Chile.

The Bank also funds initiatives to reach the 30 mil-lion indigenous people in the region, about 80 percentof whom are poor. In fiscal 2004 the Bank made a$25 million land administration loan to Honduras thatwill benefit indigenous populations and people ofAfrican descent. In Mexico it provided $21.3 millionfor a project to help up to 200 indigenous communitiesand ejidos (communal landholding entities) improvethe management and conservation of their forestresources.


The Latin America and the Caribbean region has thepotential to achieve many of the Millennium Develop-ment Goals. The Bank is helping the region make fur-ther progress by investing in basic education in Brazil,Guatemala, Mexico, and Uruguay and in child andmaternal health in Argentina, Brazil, and Paraguay.


BOX 2.5 HELPING SMALL RURAL COMMUNITIES

IN HONDURAS THROUGH A ROAD PROJECT

A road project in Honduras is helping small rural

communities create productive employment and

maintain the country’s infrastructure. Under a

$66.5 million IDA credit, the project has created

50 microenterprises and trained their personnel to

repair potholes, clear landslides, and maintain road

shoulders, signals, and bridges. The 50 firms main-

tain 2,300 kilometers of roads—80 percent of

Honduras’ paved network. The government is

expected to institutionalize the program for the en-

tire road network once IDA funding expires in 2004.

Almost 700 small entrepreneurs own the micro-

enterprises, and some 4,160 men, women, and

children benefit directly from them. Eighty-two per-

cent of microenterprise members now own a house

or are building one and, thanks to an agreement

with the Ministry of Education, many of the adult

members have become literate after returning to

school alongside their children.

c. 1955. Workmen repair bridges, relay track, install new ties, and rebuildalong the Pacific railroad in Mexico. The Bank also financed the purchaseof railway stock.

In fiscal 2004 the Bank provided a $136 million loanto Argentina to help meet the health needs of poor,uninsured mothers and children.

HIV/AIDS poses a serious challenge in theCaribbean, which has the highest adult HIV prevalencerate outside of Africa. The Bank has provided morethan $550 million in funding for HIV/AIDS preventionand control programs in Latin America and theCaribbean. Under its AIDS initiative, the Bank


Three boys play on the river in Riberia Azul, Salvador do Bahia, wherethe Bank is supporting efforts to improve the living conditions of theurban poor.

approved grants to the Caribbean Communityand to Guyana in fiscal 2004 and helped prepareprojects in St. Lucia and in St. Vincent and theGrenadines.

Bank support for environmental sustainabilityin the region comprises 64 active projects totalingabout $3.4 billion. These include the Biodiversity Pro-tection Project in Bolivia, the Clean Air Initiative forLatin American Cities, the Mesoamerican BiologicalCorridor, and the Pilot Program to Conserve theBrazilian Rainforest. In fiscal 2004 the Bank provided$60 million to support sustainable regional develop-ment in the Brazilian state of Tocantins.


Table 2.5 World Bank Lending to Borrowers in Latin America and the Caribbean, by Theme and Sector, Fiscal 1995–2004 | millions of dollars

1995–97 1998–99 (annual (annual

average) average) 2000 2001 2002 2003 2004


Management 403.2 164.8 270.8 68.8 187.4 240.3 159.1Financial and Private Sector Development 1,229.3 1,626.9 1,056.1 985.4 965.4 819.8 912.4Human Development 569.8 786.9 157.7 471.2 560.4 1,171.7 1,046.7Public Sector Governance 531.4 825.2 519.9 1,099.7 1,182.8 798.6 672.0Rule of Law 63.6 94.1 111.7 202.2 15.5 138.8 270.9Rural Development 471.4 613.3 103.0 580.8 168.3 415.9 249.6Social Development, Gender, and Inclusion 244.8 359.1 141.5 371.7 248.9 123.1 268.9Social Protection and Risk Management 559.3 1,002.4 901.2 530.0 310.4 1,050.3 926.9Trade and Integration 91.9 144.6 160.7 218.3 83.9 59.6 364.6Urban Development 419.7 576.9 53.3 202.0 251.9 435.2 337.6

Theme Total 5,020.2 6,888.3 4,063.5 5,300.1 4,365.8 5,820.5 5,319.8

SECTORAgriculture, Fishing, and Forestry 228.4 326.4 104.1 72.3 85.0 58.4 379.6Education 536.2 659.8 62.8 529.1 560.4 785.5 218.3Energy and Mining 239.2 98.1 79.3 107.6 445.6 96.2 50.5Finance 666.6 1,004.7 1,191.8 946.7 593.5 973.0 405.1Health and Other Social Services 588.5 1,150.5 360.2 904.7 660.5 1,574.1 1,558.9Industry and Trade 93.6 204.2 165.3 38.3 51.4 183.4 428.0Information and Communication 16.9 17.2 28.7 97.8 16.5 52.4 14.0Law and Justice and Public Administration 1,246.0 2,293.8 1,791.0 1,726.7 1,440.0 1,564.9 1,521.3Transportation 927.5 875.6 11.6 650.3 463.1 146.4 675.7Water, Sanitation, and Flood Protection 477.3 258.0 268.7 226.6 49.8 386.2 68.4

Sector Total 5,020.2 6,888.3 4,063.5 5,300.1 4,365.8 5,820.5 5,319.8

Of which IBRD 4,733.3 6,406.4 3,898.1 4,806.7 4,188.1 5,667.8 4,981.6Of which IDA 286.9 481.9 165.4 493.4 177.8 152.7 338.2




Rural Development5%

Rule of Law 5%


Urban Development 6% Economic Management2%



17%

HumanDevelopment

20%

Public SectorGovernance 13%

Figure 2.9 Latin America and the Caribbean: IBRD and IDALending by Theme, Fiscal 2004 | share of totalof $5.3 billion


Information &Communication �1% Industry & Trade 8%

Transportation 13%

Water, Sanitation & FloodProtection 1%


Education 4%

Energy & Mining1%

Finance 8%


29%

Figure 2.10 Latin America and the Caribbean: IBRD andIDA Lending by Sector, Fiscal 2004 | share oftotal of $5.3 billion

Middle East andNorth Africa The Middle East and North Africa region is an eco-nomically diverse area whose economic fortunesover much of the past quarter century have beenheavily influenced by the price of oil and by eco-nomic policies and structures dominated by thestate. The region’s heavy dependence on a fewexport markets and commodities makes it highlyvulnerable to economic volatility. Sustainable andhigher growth requires fundamental transformationto more open, more diversified economies in whichthe private sector plays a larger role.

Unemployment in the region averages morethan 15 percent, and it disproportionately affects theyoung, the better educated, and women. Employingtoday’s jobless workers and new entrants into the la-bor market requires the creation of nearly 100 mil-lion new jobs over the next two decades—morethan double the current number of jobs availablein the region.


In response to the region’s daunting labor marketchallenge, the Bank has placed employment creationat the core of its strategy. In fiscal 2004 it publishedfour flagship reports—on governance, trade, gender,and employment in the region. The reports callfor a transition from public sector–dominated toprivate sector–led economies, from closed to moreopen economies, and from volatile, oil-dominatedeconomies to more stable and diversified econo-mies. The transition requires better governance,including greater inclusiveness and accountability,a larger role for women in the public sphere, andimprovements in the quality of education.

Bank lending in fiscal 2004 totaled $1.1 billion,which supported 15 projects in 8 countries. Theseprojects supported basic social services delivery tovulnerable groups, agricultural investments, publicworks enhancement, educational reform, large in-frastructure development, and natural resourcesmanagement.

In addition to lending, the Bank is delivering awide range of knowledge services that serve as a cat-alyst for change and policy reforms. Economic andsector reports highlighted the challenges and issuesin water management, education, public expendi-ture management, pensions, and poverty. Genderassessments are also under way in several countries.In response to increasing demand from the regionfor knowledge transfer, the Bank established aKnowledge Hub in Marseilles, France, to facilitatethe exchange of knowledge and learning activitiesto and from the Middle East and North Africa.

Gulf countries whose high income makes themineligible for Bank lending have been tapping intothe Bank’s knowledge services for three decadesthrough the Reimbursable Technical Assistance Pro-gram. In Saudi Arabia the Bank is providing policyadvice on public sector reforms, privatization, andsmall and medium-size enterprise development.Kuwait is drawing on the program for policy adviceon reforming education, generating employment,increasing transparency, and fighting corruption. InBahrain the program has expanded to include therestructuring of fiscal management to prepare thegovernment for the Gulf states’ monetary unionin 2010.

In areas affected by conflict, the Bank is address-ing emergency needs and helping establish the insti-tutional foundations for long-term development.In cooperation with the United Nations, the Bankproduced a Joint Iraq Needs Assessment, whichidentified Iraq’s reconstruction and development

Chapter 2 Regional Perspectives


AlgeriaDjiboutiEgypt, Arab

Republic of Iran, Islamic

Republic ofIraqJordanLebanonMoroccoSyrian Arab

RepublicTunisiaYemen,

Republic of

This section alsoreports on theWest Bank andGaza.

51

requirements in 14 sectors. To help donors channeltheir resources and coordinate their support for Iraq’sreconstruction, the Bank and the United Nations de-signed the International Reconstruction Fund Facility,with each organization managing a trust fund. Thetrust fund administered by the Bank is financing proj-ects on capacity building for Iraqi civil service, educa-tion, community-based rural infrastructure, and infra-structure reconstruction.

In the West Bank and Gaza, the Bank maintains abalance between emergency work and medium-termdevelopment projects. (See box 2.6.) Since September2000 approximately $329 million has been disbursedto the Palestinian Authority. Disbursement levels wereincreased significantly during fiscal 2004 to sustain thePalestinian Authority and slow the decline of economicand social indicators. The Bank’s portfolio in the WestBank and Gaza consists of 15 active projects, includingan emergency services support project to sustain edu-cation, health, and social services. The Bank also con-tributed $20 million to the Reform Fund, a generalbudget support facility established in 2004 at therequest of international donors.

The Bank supports countries that have been struckby natural disasters. In the aftermath of the Bam earth-quake in December 2003, and at the request of theIranian government, the Bank sent a team to assessthe economic damage and prepare a reconstructionprogram.


A World Bank Group Business Road Show in Kuwait,Saudi Arabia, and the United Arab Emirates broughttogether people from the private sector to discuss howto boost their investments in the region and developnew business activities. The Bank also sponsored theSecond Annual Knowledge for Development Confer-ence. Held in Marseilles, the conference aimed at help-ing countries develop knowledge-based economies thatwill enhance their competitiveness and increase trade.

In one of the largest projects in the region, the Banklent $335 million to the Arab Republic of Egypt tofinance the development of airport infrastructure. Theproject is expected to increase foreign exchange earn-ings from tourism. To enhance the competitiveness ofthe private sector, a separate loan is promoting market-driven skills for Egypt’s workers.

To improve public efficiency, the Bank is supportingan ambitious decentralization program adopted by

Access to better education expands opportunities for the poor in theregion.

Middle East and North Africa Fast Facts



Total FY04CommitmentsIBRD $946.0 million IDA $145.0 million


Total FY04DisbursementsIBRD $543.6 millionIDA $183.2 million



The Bank sponsors activities aimed at increasing private investment andcreating jobs in the region.

BOX 2.6 PARTNERING WITH CSOs TO CREATE JOBS

IN THE WEST BANK AND GAZA

In December 2000 the Bank allocated $23 million

from its Emergency Response Project to finance job

creation projects in the West Bank and Gaza

through civil society organizations (CSOs). By 2003

the CSO Employment Generation Program had cre-

ated 162,500 employment opportunities. The proj-

ects included creating embroidery production units;

rehabilitating youth centers, kindergartens, soccer

fields, water wells, and houses of poor families; and

hiring and training psychological counselors. By

2004 the Palestinian CSO Project, managed by the

Welfare Association Consortium, attracted consider-

able cofinancing and disbursed $5 million to proj-

ects aimed at creating jobs, especially in social

service delivery.

the government of the Republic of Yemen that giveslocal authorities greater responsibility in revenuemanagement. The project is expected to promoteproductive local investments and economic growth.

In Lebanon a Bank project is supporting goodgovernance by improving a land registration systemthat was disrupted by civil war.


In response to the socioeconomic realities in the re-gion, the Bank’s strategy focuses on expanding oppor-tunities for poor people through access to better educa-tion, health services, social protection, infrastructure,and other areas needed for development. As part of aregional strategy to enhance education, the secondphase of an education improvement project in Tunisiais ensuring that education corresponds to the needs ofthe job market. In the Republic of Yemen, where half ofthe population lives below the poverty line, the thirdphase of the Social Fund for Development project isdelivering basic services in education, water, health,and social protection to vulnerable groups, such aswomen and children.

in the Middle East and North Africa: The Costs of Inac-tion, if the current infection rate is left unchecked, by2025 it could cost the region one-third of today’s grossdomestic product. The report urges policy makers toincrease surveillance while prevalence is still low. Somecountries in the region have already taken action.Tunisia piloted a project for young people that provideseducation, counseling, and testing. The Islamic Repub-lic of Iran established a needle-exchange program. AndMorocco introduced a large-scale plan to upgrade ser-vices for treating sexually transmitted diseases.

More than half of the population in the region isunder the age of 25. Conflict, an economic downturn,and urban migration have left children and youngpeople vulnerable to dropping out of school and tousing drugs. To address these problems, the Bank isintegrating consideration of children and young peopleinto all its projects. The Second Basic Education Projectin the Republic of Yemen is providing learning oppor-tunities for working children that will not compromisetheir income opportunities. In Egypt a Child LaborPrevention Grant will help prevent child labor by iden-tifying children at risk and seeking ways to integratethem into schools while supporting their families.


Financed by the World Bank Trust Fund for theWest Bank and Gaza, an Emergency Water Project willprovide a clean, affordable, and consistent water supplyby rehabilitating the water supply and distributionsystem in the West Bank. In response to village surveysrevealing that water and access are top priorities forcommunities, a rural infrastructure project in Moroccois building on the success of a Bank-funded projectthat increased access to potable water from 18 percentto 40 percent among the rural population. The projectwill also link remote villages to a network of ruralroads.

In Djibouti, one of the poorest countries in the re-gion, the Bank helped the government develop its firstPoverty Reduction Strategy Paper, in close consultationwith civil society organizations.


During fiscal 2004 the Bank supported activities inthe region that addressed two key global priorities:HIV/AIDS, and children and youth.

The level of HIV infection remains low, at just0.3 percent. But according to a Bank report, HIV/AIDS



Management 10%


24%

Human Development18%

Social Development,Gender & Inclusion 6%

Rural Development 6%

Rule of Law �1% Public Sector Governance 2%

Urban Development16%

Trade &Integration 15%

SocialProtection &Risk Management3%

Figure 2.11 Middle East and North Africa: IBRD and IDALending by Theme, Fiscal 2004 | share of totalof $1.1 billion

Law & Justice& Public

Administration9%Transportation 38%


Education 14%

Finance 2%

Water, Sanitation &Flood Protection28%


5%Industry & Trade

2%

Figure 2.12 Middle East and North Africa: IBRD and IDALending by Sector, Fiscal 2004 | share of totalof $1.1 billion

Table 2.6 World Bank Lending to Borrowers in Middle East and North Africa, by Theme and Sector, Fiscal 1995–2004 | millions of dollars

1995–97 1998–99 (annual (annual

average) average) 2000 2001 2002 2003 2004



Theme Total 1,165.1 1,280.8 920.0 507.5 554.5 1,056.0 1,091.0

SECTORAgriculture, Fishing, and Forestry 126.0 147.9 120.6 46.5 2.9 196.7 27.2Education 116.2 94.2 197.1 72.3 38.0 154.3 154.9Energy and Mining 24.6 56.8 0.0 0.0 1.3 0.0 0.0Finance 179.7 176.4 5.3 0.0 110.5 1.9 20.8Health and Other Social Services 101.6 159.8 158.9 39.3 41.7 124.2 52.0Industry and Trade 187.0 168.6 47.9 27.0 71.7 74.3 23.4Information and Communication 1.3 33.8 1.3 59.2 69.9 2.3 0.0Law and Justice and Public Administration 153.9 250.5 108.9 161.5 74.7 213.6 93.6Transportation 153.7 81.7 59.6 82.8 70.9 107.9 409.6Water, Sanitation, and Flood Protection 121.2 110.9 220.5 19.0 73.1 180.9 309.5

Sector Total 1,165.1 1,280.8 920.0 507.5 554.5 1,056.0 1,091.0

Of which IBRD 990.6 955.5 760.2 355.2 451.8 855.6 946.0Of which IDA 174.5 325.3 159.8 152.3 102.7 200.4 145.0


InternationalDevelopmentAssociation (IDA)established asaffiliate of theBank, with initialsubscriptions of$1,390 million.

Indus WatersTreaty is signed by Pakistan, India,and the Bank.

196

0 First IDA credit is made, toHonduras forhighwaydevelopment.

First credit toChina, for a harbor dredgingproject.

196

1 First group arrivesfor the JuniorProfessional recruit-ment and trainingprogram (now theYoung Professionals program).

Guinea signs IBRDarticles of agreementas 100th member ofthe Bank.

196

3 First IDAreplenishment,providing$976 million.19

64The first

educationloan ismade, toTunisia.

196

2

Eugene R. Black (1949–1963)

196

0s

George D. Woods (1963–1968)

World Bank Presidents Eugene R.Black and George D. Woods sit below

portraits of World Bank PresidentsEugene Meyer and John J. McCloy.

IDA extends the firstdevelopment credit—a

$9 million loan toHonduras for highway

development—in 1961.

The first educationloan—$5 million from

IDA to Tunisia forschool construction—

was made in 1962.

In 1961 the Banklent $80 million

to Japan to helpfinance the

“bullet train.”

3Thematic Perspectives

Bank commitmentsexceed $1 billionfor the first time.19

65 International

Centre forSettlement ofInvestmentDisputes (ICSID)established.

196

6 France, Germany,Japan, the UnitedKingdom, and theUnited States formthe Group of 5 toconvene meetingsof finance ministersand governors ofcentral banks. Thegroup became theG7 in 1976, withthe addition of Italyand Canada. Withthe inclusion of theRussian Federation,the group is nowknown as the G8.

196

7

196

8

196

9

Robert S. McNamara (1968–1981)

A microwave relay station atop Mt. Chingal (elevation 9,000 feet) near Lae, Papua New Guinea,part of a 1968 telecommunications project.

Telephone operatorsat a PABX board inSingapore, part of a1967 telecommuni-cations project.

U.S. President John F. Kennedyaddresses theAnnual Meetings in autumn 1963.

The secondreplenishmentof IDA, providing$1.4 billion.

The Poverty Reduction and Economic ManagementNetwork seeks to expand the knowledge needed todesign policies that foster an enabling internationalenvironment for economic growth that benefits poorpeople.

POVERTY REDUCTION STRATEGY PAPERS ANDRELATED ACTIVITIES

About 1.1 billion people—one-fifth of the world’spopulation—live on less than $1 a day. The Bank’sstrategy for fighting poverty in low-income countries isbased on the Poverty Reduction Strategy Paper (PRSP)approach (www.worldbank.org/prsp). This approachhas resulted in broader country ownership of thepoverty reduction agenda as well as improved partici-pation. During fiscal 2004 the Executive Directors con-sidered 12 country-owned full PRSPs and 2 interimPRSPs (I-PRSPs), bringing the total to 42 PRSPs. Anadditional 14 countries have I-PRSPs. Twenty-threecountries have produced at least one Progress Report.(See www.povertynet.org.)

The PRSP process has led to dialogue and openness.It also appears to have spurred spending that aims tobenefit poor people. Challenges remain, however, inseveral areas, including establishing stable participatoryprocesses, developing focused strategies with clear pri-orities, and better aligning donor support with countrypriorities.

The Bank’s work on poverty reduction is guided byan emphasis on economic growth that benefits thepoor, poverty and social impact analysis, and empow-erment. Substantial progress was achieved in all threeareas in fiscal 2004.

Growth is essential for poverty reduction, but sus-tained, successful poverty reduction also requires thatpoor people participate in and benefit from growth. Infiscal 2004 the Bank did much to foster such growth.(See www.worldbank.org/poverty/inequal.) Bank staffprepared framework papers on defining and measuringpro-poor growth and on the extent to which pro-poorand pro-growth policies involve trade-offs.

The Bank also helped 50 countries evaluate thepotential impact of policy reforms on the welfare ofpoor and vulnerable people, initiating more than40 Poverty and Social Impact Analyses (PSIAs) in fiscal

2004. The Bank increased the number of trainingevents for staff and clients and developed new guide-lines on conducting PSIAs. It also strengthened its co-ordination with other donors to facilitate collaborationwith them on PSIAs, and it expanded the PSIA Website (www.worldbank.org/poverty/psia).

GOVERNANCE AND PUBLIC SECTOR REFORM

Bank lending for governance, public sector reform, andrule of law—all key to poverty reduction—totaled$3.9 billion in fiscal 2004. The Bank also increasedits learning and outreach programs on governanceissues, hosting nearly 50 seminars and trainingsessions on topics such as governance and accountabil-ity in a decentralized social sector, reinventing govern-ment, values and ethics, and judicial reform.

The Bank and the International Monetary Fund(IMF) continue to work closely on public financialmanagement through the Heavily Indebted PoorCountries expenditure-tracking initiative. Workingclosely with client countries, Bank and IMF staff arereassessing public finance systems, updating actionplan progress, and developing new action plans. TheBank has also increased its diagnostic and advisorywork in public financial management. It has


Reducing Poverty and ImprovingEconomic Management

c. 1966. A modern harvester shown reaping sorghum in an irrigated fieldreclaimed from desert land in Iran. The project raised living standards for12,000 villagers who formerly lived under primitive conditions.

collaborated with partners to develop a performancemeasurement framework for assessing public financesystems, as well as an analytical approach that supportsgovernment-led capacity building.

During fiscal 2004 the Bank supported implemen-tation of the Financing for Development Consensus,which reinforces the importance of domestic resourcemobilization and aims to enhance relations betweeninternational organizations and national authoritieson tax reform issues. The Bank, the IMF, and theOrganisation for Economic Co-operation and Devel-opment signed a memorandum of understandingon establishing an international tax dialogue. (Seewww.worldbank.org/publicsector.)

GENDER AND DEVELOPMENT

Gender equality issues are now integrated into mostCountry Assistance Strategies, and Poverty ReductionStrategy Papers are increasingly gender sensitive.Gender issues are also important in Bank-financedprojects, particularly in education, health, and socialprotection.

Numerous Bank-supported operations are promot-ing gender equality, including education projects inChad, Eritrea, Kenya, and Sierra Leone; an Early Child-hood Development Project in Brazil; an HIV/AIDS,Malaria, and Tuberculosis Control Project in Djibouti;a Rural Women’s Development and EmpowermentProject in India; and a Land Titling Project in the LaoPeople’s Democratic Republic.

The Trust Fund for Gender Mainstreaming inthe World Bank, financed by the governments ofthe Netherlands and Norway, is supporting capacitybuilding among women in indigenous communitiesin Honduras, entrepreneurial opportunities forwomen in Tajikistan, and gender- and HIV/AIDS-related activities in Africa. An economic policy initiativeis developing a body of analytical work on such areas astrade, competitiveness, and public sector downsizing.

The Bank also participates in partnerships to pro-mote gender equality and empower women at the mu-nicipal, regional, and country levels. Its November 2003workshop on Gender Equality and the MillenniumDevelopment Goals—organized jointly with UnitedNations agencies, multilateral development banks, andbilateral donors—conveyed the message that genderequality is critical to achieving all of the goals and iden-tified strategies for ensuring gender-sensitive actions.(See www.worldbank.org/gender.)

TRADE

Research shows that trade boosts productivity, whichin turn enhances growth. The Bank’s work on interna-tional trade promotes a world trading system that ismore conducive to economic development and helpsdeveloping countries capture the benefits of global op-portunities. (See box 3.1.) Established nearly two yearsago, the Bank’s International Trade Group supportsthe successful conclusion of the Doha DevelopmentRound and strengthens partnerships with internationalorganizations to enhance coherence and coordinationin support of trade reforms.

During fiscal 2004 Bank researchers investigatedthe impact of trade liberalization on poverty, the waysin which multilateral and regional trade agreementscan support the development process, the effect of in-ternational product standards on trade volumes andpatterns, and the impact of liberalizing trade in infra-structure services such as telecommunications, port

Chapter 3 Thematic Perspectives 59

The outcome of the Doha Development Round of Trade Negotiationsmatters a great deal to the world’s poor. An agreement that slashed tradebarriers, particularly in agriculture, would, in the long term, stimulatetrade and raise incomes around the world, leading to a substantialreduction in global poverty.

facilities, and international transportation. In fiscal2004 the Bank published several books on trade topics,including Agriculture and the WTO, Poor People’sKnowledge: Promoting Intellectual Property in Develop-ing Countries, and other titles that examine regionaland cross-cutting trade issues.

Capacity-building efforts through the World BankInstitute included new courses on standards, tradefacilitation, and services. The Bank also supportedVietnam’s accession to the World Trade Organization,the Doha negotiations, and national trade policies inAfrica, and it continued its regional program in sup-port of African researchers.

Bank lending operations reflect the growing impor-tance of trade in country development agendas.

Through the Trade Facilitation Initiative, the Bank isinvolved in more than 130 trade-related operationsin more than 60 countries. In September 2003, at theWorld Trade Organization Ministerial Conference inCancún, Mexico, the Bank announced a new programto help countries seize opportunities offered by thecurrent round of trade talks by reforming trade-related institutions and addressing barriers to tradestemming from inadequate ports, roads, and customsprocedures.

The Bank also works through the Global TradeFacilitation Partnership for Transportation andTrade—a collaboration of more than 150 internationalpartners—to create a worldwide constituency for thereform of trade logistics and trade facilitation.(See www.worldbank.org/research/trade.)

ECONOMIC POLICY

The Bank’s economic policy work focused on severalkey areas in fiscal 2004—all involving growth. Theseincluded economic growth and employmentstrategies; economic growth through technologicalchange; the role of fiscal policy in promoting growthand employment; debt and volatility issues affectingthe sustainability of growth; fiscal, growth, and em-ployment issues at the subnational level; and integra-tive policy analysis and tools for macroeconomicanalysis.

The Bank’s Economic Policy Group producedhandbooks on fiscal sustainability, tax expenditures,management of volatility and crises, and subnationalfiscal reform, as well as papers on government–privatesector interaction and technological change; wages,employment, and growth; export-promotion zonesand growth; competitiveness and growth; and fiscalpolicy and growth. (See www.worldbank.org/poverty.)

The Bank continues to support country develop-ment efforts through diagnostic reports, such as theDevelopment Policy Review and country economicmemoranda, which provide integrated views of acountry’s development priorities and cross-sectorallinks to poverty reduction. In fiscal 2004 it con-ducted development policy reviews of CapeVerde, Ecuador, Indonesia, Malaysia, Nepal, thePhilippines, the Seychelles, Sri Lanka, Tunisia,and Uganda.


BOX 3.1 TRADE: WORKING TOWARD RESULTS

AT THE COUNTRY LEVEL

The Bank’s regional trade work is being comple-

mented with country work. The Integrated Frame-

work (IF) Initiative to help the less-developed

countries integrate into the world economy is an

important part of this program. Trade diagnostic

studies have been completed for Burundi,

Cambodia, Djibouti, Ethiopia, Guinea, Lesotho,

Madagascar, Malawi, Mali (near completion),

Mauritania, Nepal, Senegal, and the Republic of

Yemen. Integrated Framework dissemination work-

shops have been organized in these countries.

Donor meetings have been held in Mauritania

(November 2002), Senegal (June 2003), Nepal

(November 2003), and Madagascar (January 2004).

Several major studies on the impacts of Russia’s

accession to the World Trade Organization have

also recently been completed.

The Bank’s CIS-7 trade initiative, which covers

the poorest countries in the Commonwealth of In-

dependent States, focuses on trade, integration,

and competitiveness, and provides technical assis-

tance for export and investment facilitation. Other

important diagnostic studies are under way for

Central America (in the context of the Central

America Free Trade Agreement), the Caribbean

region, the Dominican Republic, Kenya, Nigeria,

Pakistan, Tajikistan, and Ukraine, with many more

in advanced planning stages.


Investing in People

Investing in services that enable poor people to breakthe cycle of poverty has never been more important.Bank support to country clients to expand and deepenthe impact of their spending on health, education, andother key services is stronger than ever. The Bank alsoaims to strengthen the services that protect vulnerablepeople, including children and youth, people with dis-abilities, and people in crisis. From international part-nerships geared at scaling up the effort to meet theMillennium Development Goals (MDGs) to country-based programs at the local and household level,putting people first is at the heart of the Bank’scommitment.

EDUCATION

Helping countries build education systems that canrespond to the poverty and knowledge challengesof the 21st century is a fundamental objective of theWorld Bank. Restoring momentum toward the goalof universal primary school completion by 2015 hasbeen the objective of the Education for All Fast-Track

Initiative. In its first 20 months, the initiative promotedfaster policy reform, improved donor coordination,and mobilized additional resources, doubling fundsto the first seven participating countries. Most signifi-cantly, the initiative created a global framework for re-solving issues arising along the Education for All path.At a landmark meeting in Oslo in November 2003,attended by representatives of the Bank, donors, andclient countries, participants agreed to expand theFast-Track Initiative to all eligible low-income coun-tries and to launch a Bank-managed Catalytic Fundwith initial commitments of $250 million to providestart-up funding to countries implementing goodpolicies but lacking sufficient donor support.

In addition to accelerating progress toward univer-sal primary education—including support to help edu-cational systems respond to the impact of HIV/AIDS—the Bank is committed to helping countries build theadvanced skills they need to compete in global markets.

Education projects in Indonesia enable poor children in rural areas toattend school.

COMBATING HIV/AIDS

Since the HIV/AIDS epidemic began, more than 60 mil-

lion people have been infected with HIV and more

than 20 million people have died of AIDS. Around the

world, an estimated 5 million people became infected

with HIV in 2003 alone, bringing the total number of

adults and children living with HIV/AIDS to 38 million.

More than 95 percent of people living with HIV/AIDS

are in developing countries, and about half of all new

adult infections occur among young people ages 15

to 24.

AIDS threatens human welfare, socioeconomic ad-

vances, social cohesion, and even national security. In

many countries AIDS is erasing decades of progress in

development and is orphaning millions of children.

Given the impact of the epidemic on development,

the World Bank has placed HIV/AIDS at the center

of its development agenda.

The World Bank is one of the largest sources of

financial support for the prevention, care, treatment,

and mitigation of HIV/AIDS through national, regional,

and subregional programs. Since 1990 the Bank has

committed more than $2.4 billion for HIV/AIDS-related

programs in grants, loans, and credits in every region

to fight the disease. For the poorest countries, HIV/AIDS

projects supported by IDA can be financed wholly by

grants rather than loans. In fiscal 2004 12 stand-alone

HIV/AIDS projects or projects with HIV/AIDS and related

components were approved for nine countries, one

region, and two subregions for total commitments of

$381 million. Of these, 12 projects were IDA grants. In

Africa and the Caribbean, nearly $1.2 billion has been

made available since 2001 to support the implementa-

tion of national HIV/AIDS strategies and subregional

HIV/AIDS activities through the Multicountry HIV/AIDS

Programs (MAPs). Every eligible country in Africa is

now receiving MAP support or preparing for MAP

funding, and by the end of fiscal 2004, the Caribbean

MAP was supporting seven national projects and one

regional program.

In addition to financial assistance, the Bank is also

a major provider of project support, through direct

provision of expertise (especially in fiduciary matters),

the sharing of good practices and lessons learned, and

sponsorship of intercountry learning. As a founding

cosponsor of the Joint United Nations Programme on

HIV/AIDS (UNAIDS), the Bank works closely with other

U.N. agencies to strengthen HIV/AIDS work at country,

regional, and global levels. At the country level, the

Bank is actively engaged in policy dialogue and in help-

ing countries to use the Poverty Reduction Strategy

Paper process and the Heavily Indebted Poor Countries

Initiative to release funds from debt relief for fighting

HIV/AIDS.

The Bank’s Global HIV/AIDS Program supports the

World Bank’s efforts to address the HIV/AIDS pandemic

from a cross-sectoral perspective and leads the moni-

toring and evaluation efforts of UNAIDS partners

through the Global HIV/AIDS Monitoring and Evalua-

tion Support Team. This team works with countries and

diverse donors to strengthen monitoring and evalua-

tion capacity at the country level and coordinates with

donors to relieve countries from having multiple

reporting systems.

The World Bank is working with all major stake-

holders in scaling up antiretroviral therapy; its recently

completed technical guide, “Battling HIV/AIDS: A

Decision Maker’s Guide to the Procurement of

Medicines and Related Supplies,” has been endorsed by

U.N. agencies. The $60 million grant for the Treatment

Acceleration Project will pilot innovative public sector,

private sector, and civil society partnerships for scaling

up comprehensive treatment in Burkina Faso, Ghana,

and Mozambique.

The Bank has entered into a partnership with the

United Nations Children’s Fund; the Global Fund to

Fight AIDS, Tuberculosis and Malaria; and the Clinton

Foundation to make it possible for developing coun-

tries to purchase high-quality AIDS medications at low

prices. The drug agreements could save $150–$400 per

patient per year, allowing more people to be treated.

Agreements on diagnostic tests will result in savings of

up to 80 percent.

Today more than ever before, the Bank’s efforts on

HIV/AIDS are beginning to pay off. Within the Bank,

HIV/AIDS has been placed squarely on the development

agenda and AIDS work is reflected in health projects

as well as projects in many other sectors, including

education, infrastructure, transportation, and water

and sanitation. Internationally the Bank plays an im-

portant role as a major contributor to the fight against

HIV/AIDS and as a trendsetter in new ways of dealing

with the pandemic. (See www.worldbank.org/aids.)


This assistance is provided through analytical and advi-sory activities, which increased 25 percent in fiscal2004, and lending, which reached $1.68 billion in fiscal2004, including $515 million of education componentsin 50 noneducation projects. Steady growth in integrat-ed support reflects a strategy of nesting educationfirmly in national poverty reduction programs andother efforts that address vulnerability, health, privatesector development, and public sector governance.

The India Elementary Education Project offers agood example of Bank efforts to support a highly com-mitted government: accelerated project processing of a$500 million IDA credit in just nine months, and use ofa sectorwide approach permitting pooled funding,joint supervision, and common reporting and moni-toring with other donors. (See www.worldbank.org/education.)

HEALTH, NUTRITION, AND POPULATION

Protecting people from the impoverishing effects ofillness, malnutrition, and high fertility is at the core ofthe Bank’s focus on health, nutrition, and population.Good policies and effective health services are criticallinks in the chain of events that allow countries tobreak out of the vicious cycle of poverty, and they arecentral to the achievement of several MDGs. Betterhealth and nutrition lead to greater productivity,higher incomes, and economic growth.

Health systems performance remained a dominanttheme in fiscal 2004, representing $546 million in newlending. Support to child health, nutrition, and popu-lation programs and to reproductive health programstotaled more than $630 million, while support tothe fight against communicable diseases, includingHIV/AIDS, reached $379 million. The Bank’s commit-ment to addressing the health and economic impact ofinjury and noncommunicable disease was reflected in$315 million in new lending.

At a high level forum convened by the Bank andthe World Health Organization in Geneva in January2004, donor and country partners met to develop aconsensus on ways to accelerate progress toward thehealth MDGs, such as making Poverty ReductionStrategy Papers more responsive to these goals. Forexample, the Second Tanzania Health Sector Projecttracks the same indicators for health under bothnational and sector programs. The project also ad-dresses other critical constraints, such as the crisis ofhuman resources in health caused by both HIV/AIDSand emigration, and the challenge of deploying healthworkers to underserved areas.

To better understand what works in deliveringhealth services to poor people, the Bank assesseddozens of interventions in Africa, Eastern Europe, andLatin America. Although many initiatives undertakenwith the objective of benefiting poor people—such asimprovements in primary health care and efforts toensure attended births—are falling short of their goals,others are performing well. Measles immunizationcampaigns have had good results in Ghana and


c. 1974. An outdoor literacy class in a village near the Kita area in Maliwas part of an Integrated Rural Development Project.

poor are essential for reducing household vulnerability.Adequate and sustainable social protection policieshelp improve the investment climate, and they posi-tively affect economic growth, incomes, and poverty.Social safety nets reduce the severity of poverty andhelp promote health and education. Bank-supportedsocial funds and public works programs have improvedroads, schools, and health facilities. Interventions alsohave targeted vulnerable groups, such as the elderly, thedisabled, orphans, and children affected by harmfulchild labor. (See box 3.2.) In fiscal 2004, 77 percent ofthe $1.6 billion in new social protection lending wentto risk prevention and mitigation activities (pensions,unemployment insurance, and social funds), with theremaining 23 percent spent enhancing the ability ofhouseholds to cope with welfare downturns (socialsafety net operations).

More countries undertook assessments of risk, vul-nerability, and social safety nets, and more poverty as-sessments included a vulnerability focus in fiscal 2004.By comparing the main risks countries face with thepolicy instruments used to manage those risks, theseanalyses identified programs with insufficient coverageor inadequate emphasis on preventing or mitigatingrecurrent shocks, helping policy makers improve theeffectiveness of their interventions. For example, withassistance from development partners, including theBank, the Ethiopian government is shifting away froma system dominated by emergency humanitarian aidtoward a productive and protective safety net aimed atreducing vulnerability. (See www.worldbank.org/sp.)

ENGAGING WITH CHILDREN AND YOUTH

A priority for the Bank in fiscal 2004 was to bring chil-dren and youth into the policy dialogue on global de-velopment issues and have them inform national andlocal decision making. The objective is to give youngpeople a voice at the table where discussions on theCountry Assistance Strategy, Poverty Reduction Strate-gy Paper, and other projects take place. To do so, theBank launched the New Voices Initiative, an effort atthe country level to engage young adults directly indevelopment activities. At the Youth, Development,and Peace Conference that took place in Paris inSeptember 2003, the Bank and young leaders identifiedfive themes for future youth involvement: education,employment, risky behavior and HIV/AIDS, conflictand peace, and participation and empowerment.


BOX 3.2 DISABILITY AS A FUNDAMENTAL ISSUE

Roughly 400 million people with disabilities live in

developing countries. Poor nutrition, dangerous

working and living conditions, limited access to

adequate health care, poor hygiene, inadequate

information about the causes of impairments,

war, conflict, and natural disasters all help explain

why the number is so high. Disability exacerbates

poverty by reducing access to education and public

services and the opportunity to earn a living. This

vicious cycle affects not only the individual but

often the entire family and community.

A Bank-supported operation in India is training

disabled people in development work so that they

can help empower other disabled people and their

families. It strives to reduce stigma and raise the so-

cial and economic status of people with disabilities

by building institutions that support the provision

of accessible services and promote disability preven-

tion activities. The Bank has made it a priority to

ensure that all activities it finances, including

procurement and project design criteria, consider

the needs of people with disabilities. (See

www.worldbank.org/disability.)

Zambia, and government contracts with civil societyorganizations to operate district health systems haveproduced a patient mix in Cambodia that is morebeneficial to the poor.

The Argentina Maternal and Child Health Insur-ance Program responds to the urgent needs of poormothers and children. The loan uses an innovativematching grant mechanism from the federal budget totarget indigenous people in the nine poorest provinces.Other innovations include reducing the cost of bor-rowing for polio prevention in Nigeria and Pakistanand for tuberculosis prevention and treatment pro-grams in China, in partnership with foundations andbilateral donors. (See www.worldbank.org/hnp.)

PROTECTING VULNERABLE PEOPLE

Crises, natural or otherwise, have devastating effects onpoor households, robbing them of security, assets, andincomes. Social protection measures that help individ-uals, households, and communities better managerisks and that provide support for the chronically

Sustainable development is central to poverty reduc-tion. The Bank bases its policies on an environmentallyand socially integrated approach, including a focus onagriculture and rural areas, where 70 percent of thepoor now live.

Responsible Growth for the New Millennium:Integrating Society, Ecology, and the Economy describesthe Bank’s long-term strategy for addressing the futurechallenges of technology change, natural resourcemanagement, and social balance. To further this strate-gy the Bank is encouraging countries to address globalconcerns with appropriate solutions, customizingcountry approaches that can address challengesranging from water scarcity and climate changeto rural growth and social development. (Seewww.worldbank.org/sustainabledevelopment.)

AGRICULTURE AND RURAL DEVELOPMENT

Some 45 percent of rural development lending in fiscal2004 went to South Asia and Africa; the former is

home to some 490 million of the world’s poor. Lendingto agriculture rose in fiscal 2004, and is projected to in-crease significantly over the next two years, along withforest and rural water lending.

Implementation of the Bank’s rural developmentstrategy, Reaching the Rural Poor, has already had asignificant impact on many of the Bank’s activities inrural areas. The strategy has made rural developmenta multisector activity, enhancing cooperation amongthe many Bank units active in rural areas. (Seewww.worldbank.org/ruralstrategy.)

Rural poor people are increasingly involved inplanning national rural-development strategies.Eleven countries have used participatory processes todevelop people-centered national rural-developmentstrategies. With Bank support, another 10 countries—including Bangladesh, Ethiopia, India, Kenya, and thePhilippines—are preparing water resource assistancestrategies.

Lending for rural infrastructure now representsa third of all rural lending. Infrastructure is key to


Addressing the Challengesof Sustainable Development

A Sri Lankan village shop is lit by solar lamps.

revitalizing the agricultural sector, and increasingagricultural productivity is, in turn, critical topromoting economic growth in rural areas. TheBank has strengthened its partnership with theConsultative Group on International AgriculturalResearch to ensure the supply of new and adaptedtechnologies for enhancing agricultural productivity.(See www.cgiar.org.) It is continuing its efforts toconvince governments in industrial and developingcountries to allow a more open agricultural traderegime and to reduce trade-distorting agriculturalsubsidies. (See www.worldbank.org/rural.)

ENVIRONMENT

The Bank is in the third year of implementing itsenvironment strategy. It continues to make progresstoward achieving the key objectives of improving thequality of life, improving the quality of growth, andprotecting regional and global commons. At the same

time, it is committed to the Millennium DevelopmentGoal of ensuring environmental sustainability andendorses the global commitments made at the 2002World Summit on Sustainable Development.(See www.worldbank.org/environmentstrategy.)

Poverty and the EnvironmentNew programmatic lending instruments that provideloans for long-term change are helping the Bank sup-port policy and institutional reforms that address linksbetween poverty reduction and the environment. Oneexample is the Third Poverty Reduction SupportProject in Uganda, which improved the quality ofwater and sanitation services and increased access forthe poor. Poverty Reduction Strategy Papers andCountry Assistance Strategies are also incorporatingenvironmental objectives, recognizing and strengthen-ing the environmental impacts of development assis-tance and country actions.

Analytical and Cross-Sector WorkTo further enhance its environmental dialogue withclient governments, the Bank, during fiscal 2004,conducted Country Environmental Analyses (suchas in Bangladesh, Colombia, and Ethiopia); StrategicEnvironmental Assessments (such as the Assessmentof Macroeconomic Impact of Climate in Mali);Environment Monitors (in, for example, Cambodiaand Thailand); and Energy-Environment Reviews (in,for example, Rwanda and Turkey). Cross-sector work,increasingly owned by client countries, also strengthensthe links with the water and sanitation, transportation,urban, energy, and rural development sectors.

Environment LendingThe Bank approved 67 new projects with environmen-tal content in fiscal 2004, for a total of $1.3 billion innew lending for such projects. The loans representabout 6.5 percent of total new lending by the Bank,an increase from 4.7 percent in 2002 and 6 percent in2003. Examples of loans that support the environmentinclude the First Programmatic Reform Loan forEnvironmental Sustainability in Brazil and the WaterSupply and Sanitation Project in Iran.

Environmental BenefitsThe Bank is building synergies between local andglobal environmental benefits. In partnership with theGlobal Environment Facility (www.gefweb.org), the


c. 1965. Tea is picked in Ragati, in Kenya. Two Bank loans and three IDAcredits helped the development of agriculture and the improvement ofroads in the tea-growing areas.

Montreal Protocol, and the Bank’s carbon finance busi-ness (see box 3.3), the Bank is addressing global envi-ronmental issues. As an implementing agency of theGlobal Environment Facility, the Bank is preparingprojects in two new areas—land degradation andpersistent organic pollutants. Along with other partici-pants at the September 2003 World Parks Congress,and as one of the largest financiers of biodiversityprojects, the Bank highlighted the importance ofintegrating local livelihoods into protected areamanagement and of complying with the Conventionon Biological Diversity. (See www.worldbank.org/montrealprotocol.)

Greening the BankInternally, the Bank launched the Environmental andSocial Sustainability Initiative, its own approach tocorporate social responsibility. The initiative seeks toimprove the environmental impacts of its physicalfacilities as well as its corporate and operationalprocurement (See www.worldbank.org/ess;www.worldbank.org/environment.)

SOCIAL DEVELOPMENT

Social development is fundamental to the MillenniumDevelopment Goals. Evidence presented in the OEDReview of Social Development in Bank Operations showsthat projects that take social dimensions into accounthave better development outcomes, are more sustain-able, and are more likely to develop effective institu-tions. Incorporating recommendations from this re-view, the Bank drafted a strategic priorities paper,Social Development in World Bank Operations: Resultsand Way Forward. The paper, which is currently under-going global consultations, proposes ways in whichBank-financed projects and programs can better inte-grate the operational principles of social sustainability:inclusion, cohesion, and accountability.

A key area for Bank support in fiscal 2004 was thescaling up of community-driven development. Effortsto better integrate this approach into country pro-grams intensified, with analytical work on programdesign and implications in all regions. Efforts are in-creasingly moving toward strengthening local gover-nance, particularly the links between local governmentsand community-based organizations.

The Bank has developed a Conflict AnalysisFramework to enhance conflict sensitivity in Bank-

financed projects. It is also developing tools forengaging with civil society in conflict-affected areas,exploring the links between conflict and naturalresource management, adapting community-drivendevelopment approaches to conflict settings, develop-ing guidelines for assessing postconflict needs, andapplying conflict analysis to the poverty reductionstrategy process to ensure more effective povertyreduction in conflict-affected countries. (Seewww.worldbank.org/caf.)

During fiscal 2004 the Bank’s Post-ConflictFund approved more than $8.5 million in grantsto support conflict-affected countries. (Seewww.worldbank.org/conflict.)


BOX 3.3 CARBON FINANCE AS A POWERFUL

DEVELOPMENT TOOL

Carbon finance is proving to be a powerful tool for

improving the viability of clean technology invest-

ments that address climate change. Bank client

countries provide high-quality carbon emission

reductions in exchange for development dollars,

technological know-how, and clean technologies

for sustainable development. Through “learning

by doing” and targeted technical assistance, the

Bank is helping to build developing countries’

capacity to participate in this emerging market.

(See www.carbonfinance.org.)

The carbon finance business has substantial

private sector involvement. It catalyzes investment

in renewable energy and provides a source of rev-

enues after most Bank financing ceases, thus sus-

taining project activities long after a project is

completed.

With more than $420 million under manage-

ment and approximately $350 million in projects

approved or under preparation, funds supporting

carbon finance include the Prototype Carbon Fund,

a public-private partnership; the Community Devel-

opment Carbon Fund, which extends carbon fi-

nance to smaller poorer countries; the BioCarbon

Fund, which applies carbon finance to forestry and

land use projects; and industrial country funds such

as those of the Netherlands or Italy, which expand

carbon market development to involve the private

sector.

In collaboration with partners, the Bank providedoperational and cofinancing support for Poverty andSocial Impact Assessments. Country-level social indica-tors are being tracked through a new online database,and a framework for country-level social analysis isbeing tested.

Fiscal 2004 also saw the launching of the Commu-nity of Practice on Social Accountability, with a seriesof workshops and lectures aimed at enhancing knowl-edge sharing, networking, and the mainstreaming ofsocial accountability in Bank operations.

To integrate the safeguard review and clearanceprocess into the Bank’s work, the Bank’s QualityAssurance and Compliance Unit updated proceduresfor regional review of projects with moderate or low

environment and social impacts and risks. It conductedan extensive program of capacity-building activitieson safeguards for staff and clients and continued tosupport harmonization processes with the Bank’sdevelopment partners.

Fiscal 2004 also saw the approval of the GlobalFund for Indigenous Peoples (www.worldbank.org/indigenous), which finances a grant facility thatprovides small grants directly to indigenous peoples’organizations for development-related activities.The Bank also conducted a capacity-buildingprogram for leaders of indigenous peoples in theAndean region and worked to strengthen the UnitedNations Permanent Forum on Indigenous Issues.(See www.worldbank.org/socialdevelopment.)


Infrastructure is a key factor in reducing poverty,supporting growth, and reaching the MillenniumDevelopment Goals in developing countries. Butexisting infrastructure is often poor, access limited,and funds to improve it inadequate.

The World Bank supports a wide range of infra-structure services in transportation; water supply andsanitation; urban services; telecommunications; andenergy, including electricity and extractive industriessuch as oil, gas, and mining (see also “External Evalua-tion” in chapter 4). It supports infrastructure servicedelivery, reform, and institution building throughpolicy dialogue and physical investments. It also actsas a catalyst to leverage financial and other assistancefrom development partners and the private sector tosupport technical assistance. The Bank made a newcommitment in fiscal 2004 to infrastructure with thelaunch of the Infrastructure Action Plan.

POVERTY ALLEVIATION, THE MDGs,AND GROWTH

Estimates show that in the late 1990s infrastructure in-vestments reduced poverty by as much as 2.1 percentin low-income countries and 1.4 percent in middle-income countries. Improving infrastructure servicessuch as water supply and sanitation is an explicit targetin the Millennium Development Goals, and improvingservices such as housing and information and commu-nication technologies is at least implicit in the goals.Infrastructure services also have an impact on the goalsrelating to health, education, and gender. Increasingaccess to clean water, for example, has reduced theprobability of child mortality by 55 percent overall.Paved roads have significantly increased—and in onecase doubled—the attendance of girls at school.

Infrastructure also has important links to economicgrowth. Infrastructure investment is particularly im-portant to growth during the early stages of a country’sdevelopment, when infrastructure is scarce and basicnetworks have not been completed. One study foundthat if the stocks of telecommunications and power-generation infrastructure in Africa had been compara-ble to those in East Asia, the continent’s annual growthrate would have been about 1 percentage point higher

during the 1980s and 1990s. A recent study of LatinAmerica estimated that the lack of investment in infra-structure during the 1990s reduced long-term growthby 1 to 3 percentage points, depending on the country.At the project level, World Bank infrastructure projectshave had an average economic rate of return of 2 per-cent, and in recent years the return has averaged 3 per-cent. Infrastructure is also a critical element in buildingthe investment climate: the private sector consistently


Revitalizing Infrastructure

Solar energy lights a village shop in Sri Lanka.


ranks lack of infrastructure as one of the key impedi-ments to investment.

ACCESS, QUALITY, AND FINANCING NEEDS

The unmet access, quality, and financing needs for in-frastructure services in developing countries remainstaggering. In rural areas in low-income countries, only2 percent of the population has access to electricity,and less than 2 percent has access to a mainline tele-phone. Infrastructure needs are sizable in most middle-income countries and in urban areas as well.

Lack of access is compounded by the low quality ofinfrastructure services. Relative to OECD (Organisa-tion for Economic Co-operation and Development)countries adopting best practices, energy losses aretwice as large, water losses four times as high, andfaulty telephone lines ten times more common in low-income countries. Eighty percent of roads are paved inOECD countries, compared with just 29 percent inlow-income countries. A recent study of seven LatinAmerican countries suggests that the poor quality ofpublic infrastructure renders it only about 74 percentas effective as infrastructure in industrial countries.This translates into a long-run cost that is equivalentto about 40 percent of real per capita income.

Meeting the challenge of increasing access togood-quality infrastructure services will requiresizable investments over the medium term. Currentestimates point to financing needs of about 7 percentof gross domestic product (GDP) for all developingcountries—for both new investment and operationsand maintenance expenditures. Financing needs inlow-income countries could be as high as 9 percent ofGDP. These figures suggest that investment and opera-tions and maintenance allocations for infrastructure,which average about 3.5 percent of GDP in developingcountries, may have to double.

THE INFRASTRUCTURE ACTION PLAN

In July 2003 the Bank launched its Infrastructure Ac-tion Plan. The plan sets the stage for increased supportfor infrastructure service delivery through a balancedpublic sector–private sector approach and the mobi-lization of financing from multiple sources. It commitsthe Bank to responding to increased client demand forinfrastructure, to analyzing the effectiveness of andneed for infrastructure in developing countries, and to

strengthening its own instruments and approaches.(See box 3.4.)

The Bank has made significant progress in imple-menting the recommendations of the InfrastructureAction Plan and in reengaging in infrastructure devel-opment. It has signaled a more flexible approach tosupporting infrastructure service delivery and provid-ing guidance on the roles of the public and privatesectors. It is developing guidance notes on specifictypes of infrastructure services. A note on public andprivate sector roles in the supply of electricity servicesaddresses the range of options, from purely private topurely public, that most Bank client countries willface as they work with Bank staff to reform theirpower sectors and improve efficiency and growth.(See www.worldbank.org/infrastructure.)

The Bank also increased infrastructure lending,provided more policy advice, and strengthened donorcoordination in fiscal 2004. It began rebuilding itscountry knowledge base by introducing the RecentEconomic Developments in Infrastructure, a newstandardized infrastructure diagnostic. It invested ininfrastructure sector performance data to improveresults measurement and monitoring. Together withother multilateral development banks and bilateralorganizations, it built common analytical and policyplatforms. The Bank also strengthened its instruments

c. 1955. The Anchicaya dam and power station serve the fast-growingcity of Cali and were financed by loans from the World Bank totaling$8.03 million.


BOX 3.4 INNOVATIVE APPROACHES TO

INFRASTRUCTURE SERVICE DELIVERY

The Bank is taking an innovative approach to deliver-

ing infrastructure in several new operations launched

in fiscal 2004. The South Africa Regional Gas Project

(SASOL) will mobilize private sector investment to gen-

erate revenues by developing and exporting natural

gas from Mozambique to South Africa. A World Bank

Group project, SASOL involves an IBRD partial risk guar-

antee, MIGA guarantees (which help private sponsors

raise commercial debt on reasonable terms), and IFC

equity. It is also the first IBRD enclave guarantee—in

which IBRD resources are being used for an IDA-only

country—as well as the first IBRD local currency guaran-

tee, denominated in rand.

The Cambodia Provincial and Peri-Urban Water and

Sanitation Project uses an output-based aid approach

to finance water connections for poor households.

Under the project, the government (supported by IDA

grants) will make fixed subsidy payments for each con-

nection made by private sector operators to households

identified as being below the poverty line. Payments

will be made only after successful connection and proof

of reliable service.

The Trade and Transport Facilitation in South East

Europe Program is a regional initiative that fosters

trade and integration across eight countries by working

to reduce nontariff costs to trade and transportation,

reduce smuggling and corruption at border crossings,

and strengthen and modernize customs administrations

and other border control agencies.

and approaches by creating a cross-sectoral Infra-structure Economics and Finance Department. Thedepartment acts as a focal point for infrastructurefinance, strengthens risk mitigation instruments, andexplores engagement not just at the national level but

also at the state and municipal levels. As it revitalizesits infrastructure business, the Bank will continue toapply its social and environmental safeguards, whichare critical to ensuring high-quality infrastructureprojects.


Vendors sell a variety of produce at the Xai Xai Market.

Supporting Private Sector Development

The Private Sector Development Network identifies theregulatory reforms, policies, and institutional capacitiesneeded to create a vibrant investment climate. Buildingsuch a climate is crucial to promoting growth wherepoor people live. Research and practice show that suchgrowth is key to reducing poverty.

Growth has not taken hold in many countries,despite the important reforms of the 1980s and 1990s.Those reforms focused largely on macroeconomicstabilization, neglecting important microeconomicreforms, including streamlining the rules governingthe establishment and operation of a business. Suchreforms are crucial, as many microeconomic factors—including laws and regulations, public institutions,and civic habits that make it difficult for entrepre-neurs to start formal businesses, borrow money,and hire workers—limit the potential for economicgrowth.

The Bank’s strategy is to develop a second genera-tion of reforms focused on improving microeconomicconditions for private sector investment and growth.The network is providing better data through newsurvey tools that can be used to analyze the elementsof a good investment climate and to translate thatknowledge into Bank lending and advisory servicesthat support actual reforms in developing countries.The strategy includes promoting responsible businesspractices and corporate governance; targeting supportfor micro-, small, and medium-size enterprises, andadvancing privatization policies that work in suitable,competitive contexts so that the private sector cansuccessfully offer goods and services.

Private sector development work spans manyparts of the Bank. This cross-cutting theme, found inboth lending instruments and economic and sectorwork, is organizationally linked with the InternationalFinance Corporation, providing coordination for pri-vate sector programs throughout the World BankGroup. The Private Sector Development Network isimplementing the Bank Group’s private sector strategyby combining better research on business environmentconstraints with country programs that strengthenpolicies and institutions. It also facilitates importantdialogue between government and the private sectorabout reform.

RESEARCH AND ASSESSMENT

A Bank-IFC report, Doing Business in 2004: Understand-ing Regulation, released this year, provides microeco-nomic data from 133 countries on five key indicators:starting a company, hiring and firing workers, enforcinga contract, obtaining credit, and going bankrupt. (Seebox 3.5.) Doing Business generated global media

coverage and a new interest in reform in many coun-tries. Research showed that cumbersome regulation isassociated with lower productivity. (See figure 3.1.)

Doing Business complements investment climatesurveys launched in 52 countries in the past threeyears, with some 20 more planned in fiscal 2005. Tohelp identify priority areas for reform, these standard-ized firm surveys identify policy, regulatory, andinstitutional factors that constrain private investmentand link these constraints to firm-level performance.Together with other sources, the surveys underpinInvestment Climate Assessments, key country reportson the business environment. Some 26 InvestmentClimate Assessments have been completed. Theseassessments have influenced 11 Country AssistanceStrategies and helped shape some 30 new Bank lendingoperations in Africa, East Asia and Pacific, LatinAmerica and the Caribbean, and South Asia. Invest-ment Climate Assessment findings and Doing Businessindicators are also being incorporated into PovertyReduction Strategy Papers.

In several poor countries, Doing Business andInvestment Climate Assessments have helped spurgovernments to cut red tape. Many national and inter-national agencies, including the Dutch Departmentof Economic Development, the U.S. government’sMillennium Challenge Account, the Summit of theAmericas, and the European Bank for Reconstructionand Development, are using Doing Business indicatorsto help determine how to allocate aid or monitorcountry progress. IDA has adopted policy reformtargets that are based on Doing Business indicators.In response, a dozen countries have carried outpromising reforms. The spotlight on regulatoryreforms will intensify with the World DevelopmentReport 2005: A Better Investment Climate for Everyone.

The Foreign Investment Advisory Service (FIAS),a joint service of the Bank and IFC, provides govern-ments with analyses and recommendations for increas-ing foreign direct investment. (Figure 3.2 identifiesresource flows to developing countries.) The servicecompleted about 60 advisory projects on policy re-forms or capacity building in fiscal 2004. Almost70 percent of FIAS policy recommendations have beenfully or partially implemented within three years ofsubmission. An example is Albania, which beganimplementing recommendations to remove red tapeand root out corruption, such as streamlining its cus-toms procedures. (See www.fias.net.)


BOX 3.5 DOING BUSINESS IN 2004

Doing Business in 2004: Understanding Regulation

is an example of groundbreaking World Bank–IFC

research that makes a complex issue accessible to

the general public. The report, which includes data

on the business climate in 133 countries, has raised

important questions about the red tape affecting

business. Why, for instance, does it take 152 days in

Brazil, 168 in Indonesia, and 210 in Angola to start

a business and only 2 in Australia, 4 in Puerto Rico,

and 8 in Singapore? Why does this process cost five

times per capita income in Cambodia and less than

1 percent in Canada? Doing Business concludes that

poor countries regulate business in ways that are

associated with bad outcomes (greater government

inefficiency, more corruption, higher unemploy-

ment, and less investment). It also maintains that

best practices are transferable from one country to

another. What works in industrial countries can

work in developing countries, and innovations from

developing countries can be broadly replicated.

Planned as an annual report, Doing Business

will examine three new indicators (property titling,

corporate governance, and business licenses) in

2005 and another three (taxes, trade, and law and

order) in 2006. (See http://rru.worldbank.org/

doingbusiness.)

Figure 3.1 Cumbersome Regulation Is Associated withLower Productivity | labor productivity, $1,000per worker

0

10

20

30

40

1Fewer procedures More procedures

2 3 4

Countries ranked by procedures to start a business (quartiles)

Sources: World Bank Doing Business Database. Washington, D.C.World Bank. 2003. World Development Indicators 2003. Washington, D.C.

In fiscal 2004 the Bank’s Corporate GovernanceUnit completed 10 country assessments analyzinghow well securities laws, corporate laws, and businesspractices comply with principles of corporate gover-nance developed by the Organisation for EconomicCo-operation and Development. The 28 assessments


c. 1961. The World Bank has supported the development of many privateindustries. Cement stacks are shown being loaded onto a customer’struck at the Pacasmayo Cement Plant in Peru.

completed to date are serving as the basis for policydialogue, legal reforms, and new capacity-buildingprojects in many countries. The Arab Republic ofEgypt, for example, has adopted several corporategovernance recommendations, including establishinglisting rules for its stock exchange and creating aninstitute to train directors on corporate boards.

LENDING, TECHNICAL ASSISTANCE,AND ADVISORY SERVICES

The Bank made commitments for 95 new projects withprivate sector development components in fiscal 2004,which will amount to over $4 billion of its portfolio.These figures underscore the Bank’s commitment tonew and innovative lending for investment climatereforms. The Bank’s total portfolio now includes488 projects with private sector development compo-nents, amounting to more than $16 billion of lending.

IDA and IFC launched a pioneering $225 millionpilot project in several African countries to addressthe main roadblocks to the growth of small andmedium-size companies. In Brazil the Bank provided a$505 million adjustment loan, based partly on Invest-ment Climate Assessment findings, to help make firmsmore competitive by reducing logistics costs causedby bottlenecks in customs and transportation. DoingBusiness indicators will be used to assess progress.In Nigeria the Bank is helping design a small andmedium-size enterprise development project that uses

Figure 3.2 Net Long-Term Resource Flows to DevelopingCountries, 1993–2003 | billions of dollars

Official net resource flows Foreign direct investment

Capital market flows

a. Estimate. Net long-term resource flows are defined as net liabilitytransactions or original maturity of greater than one year.

Source: World Bank. 2004. Global Development Finance 2004.Washington, D.C.

�50

0

50

100

150

200

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003a


Doing Business indicators and Investment ClimateAssessments for monitoring performance.

Private sector research also influences advisory ser-vices and technical assistance. The network coordinatesclosely with many of the 10 IFC donor-supportedfunds, called Project Development Facilities. Thesefacilities provide technical assistance to small firmsand business organizations for work on improvingdifficult business environments. In Chengdu, China,to expand credit to small businesses, the DoingBusiness team provided the municipal governmentwith information on global best-practice creditbureaus. With the support of the Doing Business teamand the facility, FIAS is working with the People’s Bankof China on crafting recommendations for reformingthe country’s collateral laws and improving creditorrights protections.

The Private Sector Development Rapid ResponseUnit launched a new version of its highly ratedknowledge-management Web site, which allows Bankstaff, policy makers, and reformers to hold policydiscussions and access the leading research, databases,and privatization tool kits. The site is on target to reach1 million visits a year. (See http://rru.worldbank.org.)

PRIVATE SECTOR DIALOGUE

An important element of most successful investmentclimate reforms has been dialogue between business

and government. The Bank is actively facilitating suchdialogue around the world and working to create openenvironments that allow business and government toput difficult issues on the table for candid discussion.Business-government dialogues regularly accompanythe dissemination of Doing Business, InvestmentClimate Assessments, FIAS reports, and corporate gov-ernance reports. In Brazil the Doing Business forum ledto the formation of a private sector group to proposereforms to the government. As part of a new genderinitiative, consultations on the impact of regulation onwomen were held with women’s business associationsfrom 13 countries. In Nigeria the Investment ClimateAssessment provided the basis for launching the BetterBusiness Initiative, which has spurred a dialogue be-tween the private sector and the government on key in-vestment climate policies. In India the private sectorhas taken the lead in launching follow-up investmentclimate surveys to monitor progress in policy reforms.In Ghana, Senegal, Tanzania, and Uganda, investorcouncils composed of leading government and busi-ness officials have begun operating, and an investorcouncil was formed in Turkey in 2004 with FIAS assis-tance. The Global Corporate Governance Forum, amultidonor trust fund founded by the Organisation forEconomic Co-operation and Development and theBank, supports private-public roundtables at whichparticipants discuss policies and identify areas forurgent improvement.

The World Bank has long recognized that poverty re-duction and economic growth depend on effective andstrong national financial systems. Financial systemsthat develop unevenly and lack transparency and prop-er regulation are more vulnerable to financial shocks.Extensive Bank research shows that these shocks andcrises disproportionately affect poor people. Weakfinancial systems in developing countries contribute topoverty by providing inadequate access to financialservices to individuals and to the small and medium-size enterprises that are key to economic growth andempowerment. The Bank contributes to strengtheningthe financial sector in three ways: by generating anddisseminating knowledge, by providing country diag-nostic services, and through lending and technicalassistance.

KNOWLEDGE GENERATIONAND DISSEMINATION

In collaboration with outside groups, the Bank pro-duces cutting-edge contributions on financial sectortopics to help practitioners and governments make bet-ter policy decisions. The vast majority of this research,

both publications and data, can be downloaded fromthe Bank’s Web site (www.worldbank.org/finance).In fiscal 2004 the Bank was at the forefront of analysison several issues that are critical to mitigating risk anddeveloping sound financial markets, such as financialsector governance, risk management, corporate re-structuring, and electronic finance and security.(See box 3.6.)

In many countries, people lack access to financialservices. The Bank has developed analytic frameworksfor assessing poor people’s access to services and iden-tifying the impediments to expanding it. Simultaneousstudies in several Latin American countries, includingBrazil, Colombia, and Mexico, surveyed access tofinancial services by individuals and examined theactual and potential role of different types of financialinstitutions—private and public banks, microfinanceinstitutions, informal arrangements—in providingaccess. Results on individual countries have beenwidely disseminated, cross-country comparisons arenow under way, and studies are being conducted inother countries, including India and South Africa.These efforts should help policy makers understandwhat factors limit access to financial services.

The Financial Sector Learning Program comple-ments ongoing research by offering financial sectorpolicy makers, regulators, private sector practitioners,World Bank staff, and academics cutting-edge policyadvice and forums in which they can share multidisci-plinary perspectives. A number of programs wereconducted this year, including a collaboration withRiskWaters, a private firm specializing in providinginformation on financial services (including risk man-agement). It addressed the development of soundframeworks to implement the new Basel Accord, whichhighlights improved risk management, enhancedsupervisory authority, and disclosure and transparencyfor banking systems.

In addition, the World Bank stepped up efforts toassist countries at risk of crisis. A conference on dealingwith systemic financial distress brought together policymakers and academics to develop a handbook for au-thorities based on lessons learned. The Bank also tookthe lead in several regional seminars on bank insolven-cy, including events held in Malaysia, South Africa, andTunisia. The seminars were targeted to reach senior


c. 1976. A skilled worker in a Bangalore watch factory tends a modernmachine purchased with foreign exchange made available by theIndustrial Development Bank of India, which received a Bank loanand an IDA credit.

Building Strong Financial Systems

legal officials in central banks and drew on the findingsof the Global Seminar on Regulatory Aspects of Finan-cial Stability, held in Basel, Switzerland. Last, the Banklaunched a new Corporate Restructuring Initiative infiscal 2004, which was followed by a global seminar oninternational best practices in corporate restructuring.In the wake of the financial crises of the late 1990s,the link between corporate restructuring and bankrestructuring is widely recognized. For moreinformation about the Financial Sector LearningProgram, including the calendar of events, visitwww.financelearning.org.

This past year, the World Bank put increased focuson the role of global remittances, acknowledging thatthey are an important source of capital for developingeconomies. Inadequate financial infrastructure,however, and impediments to cross-border financialtransactions, hamper their flow through formal chan-nels. People who send money home often pay high feesor use informal financial channels. Transaction costsamount to billions of dollars each year and could bereduced substantially by promoting greater competi-tion and better outreach and payments infrastructurein the formal financial system. Besides lowering costs,these practices would also ensure greater transparencyby channeling remittance flows through appropriatelyregulated formal channels. Addressing these issues willalso help develop the financial sectors in recipientcountries, provide greater access to financial services,and support the Bank’s efforts to prevent money laun-dering and to block the financing of terrorism, bothincreasing global concerns.

The relative impact of natural disasters on develop-ing countries is greater and more disruptive than it ison developed ones, largely because the infrastructure indeveloping countries is less resilient, the building stan-dards are lower, and the coping resources and mecha-nisms are fewer. Yet because domestic insurance mar-kets are less developed in these countries, little of therisk is transferred to international reinsurance markets,leaving developing countries to retain most of the riskof natural disaster. In response to such a problem, theWorld Bank worked together with the Turkish govern-ment, domestic insurers, and international reinsurersto develop the Turkish Catastrophe Insurance Pool, astate-mandated pool that, by arranging sources of riskfinancing before a natural catastrophe occurs, can addto the availability of funds and access to liquidity in theevent of a disaster and thus can contribute to betterrisk management. The World Bank is working with


BOX 3.6 MEETING THE CHALLENGE

OF ELECTRONIC FINANCE

Electronic finance provides great opportunities to

reduce the costs of financial and commercial trans-

actions, but it also poses new security risks. The

Financial Sector publication Electronic Safety and

Soundness: Securing Finance in a New Age offers

practical information on how to mitigate risks so

that emerging economies can enjoy the benefits of

these new technologies. The paper was disseminat-

ed at events such as the Asia Pacific Regional Con-

ference on Electronic Safety and Soundness for

Financial Services, held in Singapore May 17–18,

2004. The conference provided policy makers with

advice on crafting safe and sound platforms for

electronic financial services and increasing cross-

border collaboration to help regulatory authorities

and policy makers improve their capacity for miti-

gating electronic security risk.

A money exchange market in Somalia, 2002.

other developing countries to develop similar schemesfor better managing the risks of natural disasters. InIndia the Bank delivered a comprehensive report ondisaster risk management to the government. The heartof the report consists of an estimate of the potentialloss from earthquakes, floods, and cyclones in fourstates that have suffered major disasters in the past twodecades. Key recommendations included establishing acentral disaster risk-management facility to further

the partnership has funded $15 million for 89 projectsglobally.

To help build secure investment climates, the Bankintensified its technical assistance to countries andregional organizations to strengthen anti-money-laundering efforts and combat the financing of terror-ism (AML/CFT). These efforts followed the comple-tion of a pilot program, undertaken jointly with theInternational Monetary Fund, of 33 country assess-ments measuring compliance with internationalAML/CFT standards. Assistance has involved providingadvice on drafting laws and regulations, implementingpreventive measures in the financial system, and train-ing evaluators. The Bank has also launched an externalAML/CFT Web site, which is available at the Bank’smain Web site at www.worldbank.org.

LENDING, POLICY ADVICE, ANDTECHNICAL ASSISTANCE

The Bank provides loans, advice, and technical assis-tance to client countries interested in reforming or re-structuring their financial sectors. Lending for financialsector reform amounted to $1.3 billion in fiscal 2004and covered topics ranging from payment systems andcapital markets to financial sector restructuring. Forexample, in West Africa the Bank financed a project tobuild institutional capacity in the regional financialmarket. With technical assistance and an IDA credit,the project helped to strengthen the regulatory frame-work and build the capacity of regional institutionsfor capital market operations. The credit providedmedium- and long-term financing for projects that willpromote regional integration among the West AfricaEconomic and Monetary Union countries. It also de-veloped political risk mitigation instruments that cancatalyze longer-term commercial financing in supportof small and medium-size infrastructure projects inWest African countries.


develop country and state disaster response and miti-gation capacity and linking such an initiative to the de-velopment of a formal contingency-funding capacity,including, where appropriate, contingent debt andmodern risk-transfer technologies. The Indian govern-ment recently established the core of a formal riskmanagement unit in the Ministry of Home Affairs,where senior staff are using the Bank report to furtherthe debate in India.

COUNTRY DIAGNOSTIC WORK

The World Bank joins the international communitythat has embarked on a range of initiatives to strengthenthe international financial architecture. Internationalfinancial architecture refers broadly to the frameworkand institutional context that can help manage crisesand even prevent them from occurring. The joint WorldBank–International Monetary Fund Financial SectorAssessment Program, established in 1999, helps identifyfinancial system strengths and vulnerabilities and helpsreduce the potential for crisis. As of June 2004, 86 coun-tries have had an initial assessment. Of these, 66 assess-ments have been completed. An additional 20 countrieshave formally requested an initial assessment.

Many systemically important countries—wherean internal financial crisis could spill over to othercountries—have been assessed, including, for instance,more than half of the G-20 group of developing coun-tries. The mix of countries now entering the programincludes an increasing share of poorer and smallerdeveloping and transition countries. Although theprogram will provide initial assessments to some17 countries, the number of reassessments and updatesis expected to increase in the future. A new multidonorpartnership, the Financial Sector Reform and Strength-ening Initiative, has been established as a mechanismto support technical assistance follow-up to the Finan-cial Sector Assessment Program and others. To date,

Effective legal frameworks and institutions are criticalto alleviating poverty. For this reason, strengtheningthe rule of law is a high-priority goal for the Bank,client countries, other international financial institu-tions, bilateral donors, and civil society organizations.

The Bank’s Legal Vice Presidency works closely withall other Bank units to increase assistance to borrowercountries in modernizing their legal systems. Tostrengthen these efforts, Bank plans call for a futureLegal Reform Trust Fund as a multidonor grant facility.This fund will promote knowledge sharing and devel-opment, research, capacity building, legal education,and civil society activities in the field of legal modern-ization. One of the priority areas for Institutional De-velopment Fund grants is legal and judicial reform thatsupports the rule of law.

As part of this process, the Bank is now elaboratingon a sector strategy for legal modernization in light ofexperience. The strategy aims to measurably improvethe development benefits delivered by legal systems.

ENHANCING THE INVESTMENT CLIMATEBY STRENGTHENING LAWS

As part of its effort to build the climate for investment,the Bank is helping strengthen the international finan-cial architecture. It recently finalized its Principles forEffective Insolvency and Creditor Rights Systems andhas assessed some 25 countries against these principlesunder a joint International Monetary Fund–WorldBank program to develop Reports on Observance ofStandards and Codes. These assessments have led toBank-provided technical assistance in 8 countries. Theonline Global Insolvency Law Database, which coversmore than 75 countries, has expanded knowledge out-reach. So, too, have regional conferences such as theForum on Insolvency in Latin America, organized incollaboration with the Organisation for EconomicCo-operation and Development and other partners,and the Third Forum on Asian Insolvency Reform inthe Republic of Korea. The Bank, the InternationalMonetary Fund, and the United Nations Commissionon International Trade Law are also exploring ways topromote unified standards on insolvency and creditorrights. (See www.worldbank.org/gild.)

The Bank continued to promote the improvementof investment climates and to strengthen the rule oflaw in a series of legal and judicial sector reformassessments and projects in numerous countries. (Seebox 3.7.) These assessments identify issues and offerrecommendations that encourage dialogue between theBank and borrowing countries and help coordinate thework of the donor community in this sector. Typically,they also lead the Bank and donors to support legaland judicial reform as necessary to promote sound in-vestment climates. A Bank-supported legal and judicialdevelopment project in Morocco, for example, has con-tributed to strengthening commercial courts and reg-istries, prompting wide interest from other countries inthe region. (See www.worldbank.org/ljr.)

POVERTY ALLEVIATION AND THE LAW

The Bank has also focused on how the justice sectorserves poor people. The Indonesian Justice for the PoorProgram, supported by the Bank, led to the develop-ment of a community-driven strategy for legal reform.The strategy is based on extensive case studies demon-strating that informal village institutions are widelyperceived as quicker, cheaper, and easier to deal withthan formal courts in resolving the most pressing dis-putes. Many disputes involve allegations of corruption.


Promoting the Modernization of Legaland Judicial Systems

By consulting the Internet in Mauritania's eastern village of Aioun AlAtrous, two residents learn of the right of the indigenous local populationto defend their remaining trees against tree-cutters from Nouakchott, thecapital.

While village institutions succeed in resolving somecases, most fail because of the large power imbalancebetween villagers and the perpetrators of corruption.Successful cases are those in which community leadersmobilize at the grassroots, have links to civil society,and have the backing of strong outside institutions.These lessons are now shaping Bank assistance to thesector in other countries, including Cambodia.

Cambodia’s Land Management and AdministrationProject (II)—funded by the Bank and the German So-ciety for Technical Cooperation—ensures that disad-vantaged parties in land disputes receive legal assistanceand that systematic titling of land occurs. The projectsupports a system of land mediation boards under theMinistry of Lands. The system, through which a na-tional committee renders final decisions on conflictingclaims, is proving to be a more user-friendly mecha-nism for land dispute resolution than local courts.

Many poor people in rural areas cannot obtain rele-vant legal information in a form they can understand.To address the problem, an Institutional DevelopmentFund grant is financing a pilot project in Mauritaniathat puts the official texts of statutes, such as the coun-try’s recently enacted Code Pastoral, on the Internet inArabic and French. The code devolves ownership ofnatural resources, such as grazing land and trees, backto the people living in outlying areas. Those able toaccess laws on the Internet in turn make the essence ofsuch laws available to illiterate people using poems andpictograms. Through these sorts of innovative presen-tations, access to relevant laws is empowering localvillagers.

ADDRESSING GENDER EQUALITY

In fiscal 2004 the Bank launched a program to provideadvisory and technical support to promote genderequality and justice. In Guatemala, Honduras, Peru,and República Bolivariana de Venezuela, the Bankexamined the extent to which international standards,as established under international conventions on gen-der equality, are applied. Through distance dialoguesvia videoconferences with Costa Rica, Guatemala,Honduras, Mexico, and República Bolivariana deVenezuela, the Bank proposed strategies for promotingequal access to justice by women, particularly in casesof gender-based violence, a priority issue voiced bylocal stakeholders. The Bank has also strengthenedongoing partnerships with other internationalorganizations—including the Office of the United


BOX 3.7 IMPROVING THE LEGAL ENVIRONMENT

IN IRAQ

Helping create positive climates for investment and

finance is particularly difficult in countries in the

midst or aftermath of a military conflict. In fiscal

2004 the Bank provided legal support on opera-

tional issues, international law, and institutional

issues in postconflict situations around the world.

In collaboration with the International Monetary

Fund and the United Nations, the Bank worked

within the framework of United Nations Security

Council resolutions, existing Iraqi law, and the mea-

sures adopted by the Coalition Provisional Authori-

ty to identify the possible contribution of the Bank

to the reconstruction and development of Iraq. As

part of this effort, the Bank is supporting a project

to build public and private capacity by training Iraqi

lawyers to draft and negotiate construction, com-

mercial, and financial contracts.

A tribal court near Ulundi, South Africa, deals with food shortage issues.

Nations High Commissioner for Human Rights, theUnited Nations Development Fund for Women, theInternational Labour Organization, the Organizationof American States, the Economic Commission forLatin America and the Caribbean, and the PanAmerican Health Organization—in the area ofwomen’s human rights, developing subregional initia-tives to improve the implementation and monitoringof relevant conventions. In addition, the Bank hasprovided Institutional Development Fund grants invarious countries, including Chile, Ghana, Kenya, andNigeria, to empower women to enforce their rightsthrough legal literacy and training.

COUNTERING FRAUD AND CORRUPTION

The Bank helps countries combat corruption, assessescorruption in its country analyses and lending deci-

sions, and contributes to international efforts to fightcorruption. Through its Department of InstitutionalIntegrity, it investigates allegations of fraud and cor-ruption in World Bank Group operations. Based onthese investigations, the Bank’s Sanctions Committeedetermines whether there is sufficient evidence that afirm has engaged in any fraudulent or corrupt practicein connection with a Bank-financed contract. Where itfinds evidence of fraud or corruption, the committeeidentifies an appropriate sanction, such as debarmentfor a specified period. The Bank is considering devel-oping a first-of-its-kind program for an internationalorganization that will encourage firms to comeforward voluntarily with information about fraudand corruption in Bank-financed projects. (Seewww.worldbank.org/integrity.)


Bank Groupcommitmentsexceed $2 billionfor the first time.19

70

Japan becomes oneof the Bank’s fivelargest shareholders.

The ConsultativeGroup on Interna-tional AgriculturalResearch (CGIAR) is founded.

197

1 Third replenishmentof IDA, providing$2.9 billion.

Bank commitmentsexceed $3 billion forthe first time.

World Bank StaffAssociation is established.

1972

President RobertS. McNamaradelivers theNairobi AnnualMeeting speech,in which, for thefirst time, povertyis placed at thetop of the Bank’sagenda.

197

3

Robert S. McNamara (1968–1981)

1970

sVisit to Zambia,

November 15–18,1972, by World Bank President

Robert S. McNamara.

Women who have given birthare given a family planning

lecture at the Victoria JubileeHospital in Kingston, Jamaica,before going home, as part of

the Bank’s first family planningproject, financed in 1970.

Robert S. McNamara,World Bank President

1968–1981.

World BankPresident Robert S.

McNamara on a visitto Tunisia in 1973.

4

IBRD and IDA commit nearly $1 billion in one fiscalyear for rural devel-opment projects.

First environmentloan is made, toFinland for water pollution control.

Fourth IDAreplenishment,providing $4.5 billion.

1975

First nutrition loan is made, for $19 million to Brazil. 19

76

Fifth IDAreplenishment,providing$7.7 billion.19

77 First World

DevelopmentReport: Reviewof DevelopmentExperience,1950–75 ispublished.

1978

Bank commitmentsexceed $10 billionfor the first time.

Bank begins lendingfor health projects.

197

9

Improving Development Effectiveness

Workers remove soil from thebanks of the Suez Canal as partof the 1974 Suez CanalRehabilitation Project to widenand deepen the canal.

The 1977 SanaaWater Supply andSewerage Project, inYemen, built wellsand a reservoir andprovided pumps andpipelines.

The 1974 Tarbela Dam Project in Pakistan,financed by a $500 million dollar interna-tional agreement signedby Canada, France, Italy, Pakistan, theUnited Kingdom, theUnited States, and theWorld Bank.

A doctor provides medical services inCalcutta, part of the 1973 CalcuttaUrban Development Project.


Chapter 4

Improving Development Effectiveness

Concern for global stability and prosperity requiresdevelopment efforts that achieve measurable results.Desirable outcomes can include raising greater num-bers of people out of poverty, achieving higher levelsof education for more people, and lowering infantmortality rates. Countries need to focus on suchresults so that they can make better policy decisionsand design better strategies for their own develop-ment. The new partnership for development calls forcountries to measure their achievement toward theMillennium Development Goals (MDGs). In fiscal2004 the Bank began to implement its own resultsagenda—an action plan to enhance its effectivenessas a development agency. With its developmentpartners, it also produced the first Global MonitoringReport, which provided an assessment of progresson the policies and actions needed to attain theMDGs.

MANAGING FOR DEVELOPMENT RESULTS

Managing for development results—using informationto improve decision making and to steer country-leddevelopment processes toward well-defined goals—isat the forefront of the global development agenda anda core element of the Bank’s strategic objectives. Itbuilds on the Bank’s efforts to increase aid effectivenessby improving the quality of lending and nonlendingactivities. A conceptual framework and Bank-wideaction plan on managing for results were developedin fiscal 2003. During fiscal 2004 the Bank began toimplement the action plan.

The framework recognizes that the Bank needsto focus on results throughout the project cycle:early on, for strategic planning and program design;during implementation, for day-to-day managementand corrections to program design; and toward theend, for evaluation and feedback that can inform

future work. The plan emphasizes action in threeareas:

■ In countries—where results are achieved, tostrengthen the planning, statistical, monitoring,and evaluation capacity needed to manage forresults, and to build public demand for greateraccountability for results.

■ In the Bank—to be a more relevant and effectivepartner by strengthening the focus on results instrategies, instruments, incentives, and reportingsystems.

■ Across development agencies—to foster a globalpartnership that manages for results by encourag-ing common approaches and better coordinatedsupport to strengthen country capacity.

Progress was made in all three areas in fiscal 2004.

Strengthening Capacity in CountriesThe motivation and capacity of developing countriesto manage for results are fundamental for success.Progress requires the political will to demand informa-tion on results as well as the institutions and expertiseto produce the information and use it to make in-formed policy and management decisions. But manycountries lack basic data on development outcomes,monitoring and evaluation systems, and institutionalmechanisms for providing information on results tomanagers and policy makers.

The Bank contributes to countries’ efforts to meetthese challenges by supporting a focus on results intheir national poverty reduction strategies, by assessingthe readiness of their institutions to manage for results,and by helping them employ results-based approachesin government institutions through sharpened ana-lytical work, public sector reform, and better fiscalmanagement. An important advance in fiscal 2004 was

the development and initial implementation of an um-brella lending program—the Statistical Capacity Build-ing Program—to strengthen statistical systems, institu-tional capacity, and planning in developing countries.The Bank’s knowledge-sharing activities—in which itdistills and disseminates experience on activities thatachieve results under various country circumstances—are another vehicle the Bank uses to help countriesachieve development results. (See also “KnowledgeSharing and Advisory Services” in chapter 5.)

Increasing the Bank’s Contribution toDevelopment ResultsThe Bank’s purpose has always been to achieve devel-opment results. Historically, however, it gauged itssuccess mainly by measuring the volume and, morerecently, the quality of its individual lending opera-tions. In recent years the widening array of Bankproducts and services—including analytical work,capacity-building initiatives, and global programs—and a shift in focus from individual operations to thecountry level created a need for a broader understand-ing of results.

The Bank is responding to this demand by increas-ing the focus on measurable results in its Country As-sistance Strategies and sector strategies, lending instru-ments, reporting systems, and internal incentives. Infiscal 2004 the Bank introduced a pilot for the results-based Country Assistance Strategy to better link the


BOX 4.1 RESULTS-BASED COUNTRY ASSISTANCE

STRATEGIES

Results-based Country Assistance Strategies help

Bank staff select the most relevant and effective

mix of Bank support for developing countries.

These strategies have the following key features:

■ Explicit statements of the results that Bank-

supported activities aim to achieve and of the

links between Bank support and those results

■ Better monitoring and evaluation to help the

Bank and countries steer toward agreed results

■ Greater emphasis on strengthening country

capacity to manage for results

■ Learning from experience through a systematic

assessment of the previous Country Assistance

Strategy to inform the strategy and Bank activ-

ities of the next one

Six pilot results-based Country Assistance Strategies

were approved in fiscal 2003 and fiscal 2004. Initial

feedback suggests that they lead to a better selec-

tion of Bank activities by encouraging discussions

across sectors. They also strengthen the dialogue

between countries and the Bank. The pilot phase

will be formally evaluated in fiscal 2005 as the next

step toward general adoption of results-based

Country Assistance Strategies.

Bank’s products and services with country-level results(see box 4.1 on page 85). The Bank’s Sector Boardshave strengthened the results frameworks and outcomemonitoring of their sector and thematic strategies.Basic documents and procedures have been revised tostrengthen the articulation of outcome-oriented objec-tives and the monitoring and evaluation of Bank oper-ations. The Bank is also developing a long-term learn-ing strategy to help staff and management meet thegrowing demand for skills in results-based approaches.These approaches are becoming an increasingly impor-tant and accepted part of the Bank’s culture.

The Bank also developed an enhanced results mea-surement system for the 14th Replenishment of IDA(IDA14, covering fiscal 2006–08). The system will re-flect the priorities of national poverty reduction strate-gies and will be linked with the Millennium Develop-ment Goals. It will provide aggregated informationon countries’ progress toward achieving developmentresults and on IDA’s contribution to their progress.

Development of a more comprehensive results-reporting system across the Bank—integrating country,sector, and global results information—is an importantgoal of the results agenda. Because such a system willbe based on information from results-based CountryAssistance Strategies and from operations and pro-grams with a stronger focus on results, it will achieveits full potential only after these approaches are adopt-ed throughout the Bank’s work.

Coordinating with OtherDevelopment AgenciesAchieving better results re-quires greater collaboration be-tween countries and develop-ment agencies and bettercoordination amongdevelopment agencies them-selves. Development agenciesneed to align their require-ments for results reporting withcountries’ national monitoringand evaluation systems. At thesame time, these agencies needto coordinate their support forcountries’ efforts to strengthencapacity to manage for results.

In fiscal 2004 the Bank pro-moted these aims by helpingestablish and actively partici-

pating in two formal partnerships on managing forresults—one among multilateral development agen-cies, the other between multilateral and bilateral devel-opment agencies. The Bank also cosponsored interna-tional events on managing for results, including theSecond International Roundtable on Managing for De-velopment Results, held in Morocco in February 2004.These partnerships and events enable agencies andcountries to raise the profile of managing for results,share good practices, and learn from one another.

The cosponsors of the Second Roundtable endorsedcore principles, a joint memorandum, and an actionplan on managing for development results, providing abasis for a broad consensus on what managing for re-sults means and how to go about achieving it. At thesame roundtable, the international statistical commu-nity reached agreement on a medium-term global ac-tion plan to strengthen international statistical systems,including collaborative mechanisms. Through theseinitiatives, the Bank and other development agenciesare building the foundations for harmonized results-based approaches and reporting.

SIMPLIFYING AND HARMONIZING POLICIESAND PROCEDURES

To modernize and simplify its assistance to borrowers,the Bank is streamlining and updating its policiesfor investment and adjustment lending. This effort


includes expanding the items eligible for financingunder investment lending; modernizing mechanismsfor disbursement, financial management, and procure-ment; streamlining procedures for fiduciary andsafeguard reviews of projects; and harmonizing theBank’s policies with those of other developmentorganizations.

The international community has recognized thatthe quantity and variety of donor requirements at-tached to development financing generate additionaltransaction costs for developing countries. As a result,multilateral and bilateral development institutions areworking to better coordinate their policies, procedures,and practices. Donor institutions are working to im-prove development effectiveness by eliminating du-plicative programs and aid requirements and by pro-viding assistance in line with their comparativeadvantage.

The Bank is working with the Organisation for Eco-nomic Co-operation and Development to develop aharmonization toolkit in areas such as financial man-agement, procurement, environmental and social safe-guards, and analytical work. It is also developing a Website that will bring together information about harmo-nization for practitioners and a country-level trackingtool for sharing experiences and best practices.

To ensure that laws adequately and consistentlyreflect Bank safeguard policies, the Bank is assistingMexico, Poland, Sri Lanka, and other client countriesby reviewing their national laws and helping themdesign adequate national environmental and socialmanagement frameworks.

GLOBAL MONITORING OF PROGRESSTOWARD THE MDGs

The first Global Monitoring Report, issued in April2004, reviewed global prospects for reaching theMDGs. It identified reasons for optimism, as well asreasons for grave concern. At the global level, the firstgoal—of halving income poverty between 1990 and2015—will most likely be met, because of stronger eco-nomic growth spurred by improvements in policies.

East Asia has already met the goal. Africa, however, isseriously off track, with just eight countries, represent-ing about 15 percent of Africa’s population, likely toachieve the goal. In other regions that will probablymeet the goal at the aggregate level, a number of coun-tries will not. Low-income countries under stress,about half of which are in Africa, are especially at riskof falling far short.

Progress on the human development goals, in par-ticular education and health, depends on the scale andeffectiveness of interventions directed toward them. Atthe same time, the multiple factors that determine suc-cess in meeting these goals cut across sectors. Prospectsfor achieving the goals are brighter in education thanin health. Given current trends, several regions willachieve or approach the goal of providing universalprimary education. But shortfalls are likely in Africaand are possible in South Asia and the Middle East andNorth Africa. Gender gaps are the most serious in thesethree regions as well. Although the MDG target date forgender equality in primary and secondary education is2005, it appears that, globally, about a third of develop-ing countries will not achieve this goal even by 2015.


The first Global Monitoring Report was the main agenda item for the spring 2004 meeting of the Development Committee, a forum of theWorld Bank and the International Monetary Fund (IMF) that works to build consensus on development issues. The report was prepared byBank and IMF staff, collaborating closely with partner agencies, including other multilateral development banks, the Organisation for Eco-nomic Co-operation and Development, the United Nations, and the World Trade Organization. The report will underpin the DevelopmentCommittee’s regular monitoring of progress on the policy agenda for achieving the Millennium Development Goals and related developmentsand reinforce the accountabilities of the key actors—developed and developing countries, as well as multilateral agencies.

In health, the prospects are grave. Just 15–20 per-cent of countries are currently on track to achieve thegoals of reducing child and maternal mortality. Ifcurrent trends continue, most regions will not attaineither goal. The incidence of HIV/AIDS, malaria, andtuberculosis is rising, making the goal of halting andreversing their spread daunting. The spread of thesediseases exacerbates conditions that increase child andmaternal mortality rates—and it has grim economicand social consequences. The risks of failure to haltHIV/AIDS are especially high in Africa but are sub-stantial in many countries in other regions as well.

Large gaps in access to safe drinking water and basicsanitation make achieving the health goals more diffi-cult. The gaps are largest in Africa for water and inSouth Asia for sanitation. To halve the proportion ofpeople without access to safe water and sanitation by2015, another 1.5 billion people will need safe water,and 2 billion will need sanitation. Since current rates ofprogress are about half what is needed, most regionswill fall far short: only about 20 percent of countrieswill achieve the target on access. Among low-incomecountries, just 1 in 10 is expected to do so.

Global and regional trends hide considerable varia-tion within regions—and often within countries. EastAsia provides a good example. The region’s middle-income countries have already met or will soon meetseveral of the MDGs. But its low-income countries areunlikely to meet them, as are many poor countries inAfrica. There is also diversity within countries, espe-cially large ones.

Middle-income countriesare much better positioned toachieve the MDGs than low-income countries, and manyof them have already met thegoals or are well on the way toachieving them. Yet, even inthose countries, hundreds ofmillions of people live inpoverty.

Urgent Action Is NeededThe implication is clear. Toachieve the MDGs, countriesmust substantially acceleratethe pace of development—anddo so swiftly. In line with theprinciples and partnershipestablished at Monterrey, in

March 2002, all parties—developing and developedcountries, as well as multilateral agencies—must scaleup their action. The policy agenda for achieving theMDGs has three essential elements:

■ Accelerate and deepen reforms to achieve strongereconomic growth, which directly reduces incomepoverty and expands resources for use toward theother goals.

■ Empower and invest in poor people, and improvethe delivery of human development and relatedkey services. Deliver better education and healthservices, as well as related infrastructure servicessuch as water and sanitation and rural roads.

■ Speed up action on the Monterrey partnership,matching stronger reform efforts by developingcountries with stronger support from developedcountries and international agencies. Developingcountries need expanded access to markets indeveloped countries to increase exports andspur growth, and they need more aid to financedevelopment programs.

The Global Monitoring Report provides an integratedassessment of the policies and actions of all develop-ment partners. It is an accountability framework formonitoring how the various parties are living up tothe commitments made at the Monterrey summitand for focusing attention on the priorities for action.

The framework for monitoring developing-countrypolicies classifies the policy agenda into four areas:economic and financial policies, public sector


governance, human develop-ment, and environmentalmanagement (figure 4.1).

The Monterrey Consensusenvisaged increased supportby developed countries in twokey areas that directly affectoutcomes in the developingworld: trade and aid. Policiesin developed countries alsogreatly affect the outcomes ofglobal collective action, suchas the preservation of theglobal environmental com-mons. The monitoringframework focuses on fourkey aspects of developed-country policies: macrofinan-cial policies, trade policies,aid, and global public goods(figure 4.2).

The international financial institutions have an im-portant role to play in helping countries achieve theMDGs. The monitoring framework for assessing theircontribution focuses on four key dimensions: countryprograms, global programs, partnership, and results(figure 4.3).

The Cost of Achieving the MDGsDeveloped countries and financial institutions arecalled upon to provide more and better aid, but thereis a concern that countries may not be able to absorbit effectively. However, aid increases pledged since the


Environmental management• Policies and institutions

Public sector governance• Public expenditure

and revenue management

• Publicadministration

• Transparency,accountability,control of corruption

Humandevelopment• Education and

health• Social protection• Voice/inclusion• Gender

Economic and financial policies• Macro• Trade

• Private sector regulatory andinstitutional environment

• Financial sector• Infrastructure

Source: World Bank. 2004. Global Monitoring Report 2004. Washington, D.C.

Figure 4.1 Monitoring: Dimensions of Developing-CountryPolicies

Trade policies• Agriculture and

manufactures• Services (including

temporary movementof workers)

• Trade-relatedassistance

Macrofinancial policies• Policies supportive of economic

growth and stable capital flows

Aid• Quantity and

quality of aid• Debt relief

Global public goods• Environment• Others


Figure 4.2 Monitoring: Dimensions of Developed-CountryPolicies

Monterrey summit, if realized, are still below the levelof the early 1990s relative to gross national income inrecipient countries. A recent Bank study found thatcountries with relatively good policies and institutionscould absorb a substantial increase in aid that could beused effectively to boost progress toward the MDGs. Asa conservative estimate, such countries could absorb atleast $30 billion annually. As countries improve theirpolicies and governance over time, the amount of aidthat can be used effectively would increase to $50 bil-lion or more per year, the amount that most estimatessuggest is necessary to support adequate progresstoward the MDGs.

The cost of achieving the MDGs is difficult to esti-mate for several reasons. One is that putting a pricetag on achieving these goals requires distinguishingbetween average and marginal cost. In education, themarginal cost of enrolling a child could be higher thanthe average cost, because children not in school mightbe harder to induce to attend school or may live inmore scattered populations. Another is that progresson one goal contributes to progress on other goals.For example, safe drinking water and good sanitationpromote better health. There are multiple determinants

for each goal, and they cut across many sectors. Theinterdependence of goals implies that costing eachgoal separately could result in double counting.The effectiveness of additional expenditure alsodepends on appropriate changes in policies andinstitutions.

Bank Lending for the MDGsIn fiscal 2004 the Bank analyzed the level of all newcommitments in relation to the individual MillenniumDevelopment Goals. Table 4.1 shows the breakdown oflending aimed at goals 2–8.

ASSESSING THE QUALITY OF BANK ACTIVITIES

The Bank’s Quality Assurance Group has a mandateto monitor the quality of the Bank’s projects andanalytical work. It reports directly to senior manage-ment but shares its reports with the Board. (The re-ports are posted at www.worldbank.org.) Its assess-ments are conducted by peer review panels that drawon several hundred senior staff as well as seasonedprofessionals from other development agencies, thinktanks, universities, and civil society organizations. Thisapproach lends credibility and allows the Bank toprovide timely feedback to frontline operations.

The Quality Assurance Group assesses the quality ofnew projects in “real time,” providing immediate feed-back to task teams and their managers when a projectis approved (quality at entry) and during implementa-tion (quality of supervision). It also assesses Bank


Table 4.1 Bank Lending to MDGs, Fiscal 2004

Number of projects Commitments (millions of dollars)

IBRD IDA IBRD/IDA IBRD IDA IBRD/IDA

All projects 87.0 158.0 245.0 11,045.4 9,034.6 20,080.1MDG-related projects 19.5 39.7 59.2 2,406.6 2,356.9 4,763.5

Achieve universal primary education 3.0 6.9 9.8 204.8 578.8 783.6Promote gender equality and

empower women 0.3 3.3 3.6 24.4 343.8 368.2Reduce child mortality 0.8 0.5 1.3 274.5 63.3 337.7Improve maternal health 0.5 2.2 2.7 212.6 79.7 292.3Combat HIV/AIDS, malaria, and

other diseases 0.3 8.7 9.0 25.0 354.2 379.2Ensure environmental sustainability 9.1 12.7 21.8 788.4 516.2 1,304.6Develop a global partnership for

development 5.6 5.4 11.0 876.9 420.9 1,297.8

Note: Data are not given for the first Millennium Development Goal: eradicate extreme poverty and hunger. The Bank’s overall mission is to reduce poverty. Therefore, all of itslending is linked to the first goal. The number of projects includes fractions because of the system employed for counting, which identifies projects that address more than onegoal and is designed to avoid double counting or overreporting of deliverables. Numbers have been rounded.

Global programs• Support to country

capacity building forRPGs/GPGs

• Anchor role ininternational systemfor key RPGs/GPGs

Country programs• Strategic alignment—with country-owned

priorities for poverty reduction and other MDGs• Relevance and selectivity in program design

Partnership• Harmonization

of policies andpractices

• Coordinationof supportprograms

Results• Focus on quality and results• Systems for monitoring,

reporting, and evaluation

Note: GPGs � global public goods; RPGs � regional public goods.


Figure 4.3 Monitoring: Dimensions of DevelopmentAgency Support

analytical and advisory services, known as economicand sector work, just after delivery to client countries.In fiscal 2004 the Quality Assurance Group initiated apilot program for assessing country lending portfolioson demand from country managers. Its flagship Annu-al Report on Portfolio Performance explores the scale,structure, performance, and quality of the activeportfolio. It also presents an analytical perspective onone or two key challenges to ongoing Bank operations.

Quality indicators derived from quality assurancereviews have documented broad improvement overthe past several years, although the trend for quality atentry has flattened somewhat over the past two years.During fiscal 2003, 85 percent of projects receivedsatisfactory ratings for quality at entry—down fromthe average of 90 percent for fiscal 2000–02. For fiscal2002, 90 percent of projects were rated satisfactoryin terms of quality of supervision, and 92 percent ofprojects received satisfactory ratings for their economicand sector work. The fiscal 2003 Annual Report onPortfolio Performance notes that the proportion of sat-isfactory development outcomes as evaluated by theOperations Evaluation Department (OED) in projectsexiting the portfolio fell. Project supervision ratings ofperformance had failed to give sufficient early warningof the decline in outcomes. Based on these findings,Bank management has initiated a comprehensive pro-gram to enhance development outcomes and increasethe reliability of project performance monitoring andreporting. Figures 4.4, 4.5, and 4.6 show the Bank’sActive Project Portfolio by region, theme, and sector.

INDEPENDENT EVALUATION

The Operations Evaluation Department is an indepen-dent unit within the World Bank that reports directlyto the Bank’s Board of Executive Directors. OED’s eval-uations seek to provide an objective basis for gaugingthe results of the Bank’s work, to ensure accountabilityin the achievement of the Bank’s objectives, and toallow Bank staff to learn from experience. OED helpsimprove Bank work by identifying and disseminatingthe lessons learned from experience and by framingrecommendations drawn from evaluation findings.

The overall objective of OED’s flagship AnnualReview of Development Effectiveness is to apprise theBank’s Board of Executive Directors of the Bank’sdevelopment effectiveness. The 2003 Annual Reviewof Development Effectiveness: The Effectiveness of BankSupport for Policy Reform found that the Bank’s current


Middle East &North Africa 5% East Asia &

Pacific 23%

Africa 17%

Europe & CentralAsia 15%

Latin America & the Caribbean 21%

South Asia 19%

Figure 4.4 Active Project Portfolio by Region as ofJune 30, 2004 | share of net commitmentsof $95.1 billion


17%


Management13%

HumanDevelopment

13%







Figure 4.5 Active Project Portfolio by Theme as ofJune 30, 2004 | share of net commitmentsof $95.1 billion

Transportation20% Energy &

Mining 9%

Education 9%

Finance 6%



Industry & Trade 4%

Law & Justice& PublicAdministration 16%



Figure 4.6 Active Project Portfolio by Sector as ofJune 30, 2004 | share of net commitmentsof $95.1 billion

strategy treats policy reform and institutional develop-ment as instruments for creating an environmentconducive to pro-poor growth and widespread,sustainable poverty reduction. The report examinedthe Bank’s effectiveness in helping client countriesput in place policies conducive to sustainablepoverty reduction and emerged with three keymessages:

■ Two-thirds of developing countries improved theireconomic and social policies over the past fouryears. Countries that did so grew at about twicethe rate of countries that did not. In many casesBank programs (including all forms of Banksupport, not just adjustment lending) contributedto policy improvements.

■ Bank country assistance had satisfactory outcomesin about 70 percent of the cases evaluated byOED. Where outcomes were not satisfactory,contributing factors included inadequate countryknowledge, poor alignment between programsand country policy-making styles, overoptimismabout debt sustainability, and attempts totransplant policies or institutions without

adequate consideration of country-specific factors.

■ During fiscal 2002, 79 percent of project outcomeswere satisfactory, exceeding the strategic compacttarget of 75 percent. About 84 percent of the fiscal2003 projects have been evaluated, and of these,74 percent are rated satisfactory (see figure 4.7).

Corporate EvaluationsCorporate evaluations are produced in response to aBoard request or to address particular concerns. Theyassess ongoing activities for overall effectiveness, effi-ciency, and consistency with stated objectives. Thecorporate evaluations completed in fiscal 2004included Comprehensive Development Frameworkand Sharing Knowledge: Innovations and RemainingChallenges.

The Comprehensive Development Framework evalua-tion concluded that to achieve the benefits of thisapproach, countries need to put disciplined budgetprocesses in place; donors need to support efforts tostrengthen budget processes and align their assistancewith national development strategies; and all donors,particularly the World Bank, need to show leadershipin developing better mechanisms for designing andimplementing cross-sectoral programs.

Sharing Knowledge: Innovations and RemainingChallenges found that more strategic direction andoversight of the Bank’s knowledge processes are re-quired and that network and regional units should linktheir knowledge-sharing activities more closely to coreoperational processes. The evaluation stated that theBank’s commitment to a comprehensive knowledge


FY74 FY82 FY86 FY90 FY94 FY98 FY02FY7840

60

80

100

Note: Data for fiscal 2003 are partial.

Source: World Bank, Operations Evaluation Department calculations.

Figure 4.7 Project Performance Trends, 1974–2004 |satisfactory project outcomes, percent

initiative was timely and appropriate and that Bankknowledge can now be accessed more quickly andeasily, but it concluded that improved oversight,monitoring, and incentives are needed.

Country Assistance Evaluations Country Assistance Evaluations examine Bank perfor-mance in a particular country, usually over theprevious four to five years. They assess how well per-formance conforms to the relevant Bank CountryAssistance Strategy, and they evaluate the overalleffectiveness of the strategy. The fiscal 2004 CountryAssistance Evaluation for Armenia concluded thatBank assistance should focus on improving the envi-ronment for private sector development and support-ing public sector reform. Together, progress in theseareas can generate the job creation and export expan-sion necessary to sustain progress. The Bosnia andHerzegovina evaluation found that the Bank needs towork closely with the International Monetary Fundand the European Union to present a commonapproach on critical reforms.

Since 1990 the Bank has played an important sup-portive role, through policy advice and institutionbuilding, in China’s enormous progress. In fiscal 2004OED recommended that the Bank continue to play arole in China. However, with a reduced lending pro-gram and without IDA resources, both the Bank andChina will need to adapt their policies and proceduresto make the best use of Bank assistance.

In Croatia the Bank should turn its attention tofostering growth, attacking unemployment, andstrengthening debt sustainability through private sectordevelopment, including working to create a better envi-ronment for new firms. In Rwanda OED recommend-ed that IDA assistance focus on reducing poverty andinequality, using the Millennium Development Goalsas an organizing framework. OED concluded that ana-lytical and advisory work and adaptation of projects tocountry conditions are crucial for Rwanda’s develop-ment. A joint evaluation on Tunisia undertaken withthe Islamic Development Bank recommended that theWorld Bank help the government improve the environ-ment for private investment, enhance the efficiency andquality of social spending, and strengthen institutionsand safety nets in the rural sector.

Sector and Thematic EvaluationsSector and thematic evaluations examine Bank perfor-mance and experience in a lending sector or a cross-cutting theme over 5 to 10 years and report on how

well they conform to Bank policy and good practiceand on how well Bank objectives have been met. TheReview of Social Development in Bank Activities helpeddefine the Bank’s work on social development, showedits importance to development effectiveness, and pro-vided messages on how social development work couldbe made more effective. OED recommended that theBank identify and promote the use of social-thematiccombinations that improve outcomes. It suggested thatstrategic planning needs to address current skills,monitoring, and evaluation. OED’s report PromotingImprovements in Ghana’s Basic Education concludedthat the delivery of hardware inputs to Ghana’s basiceducation system has had a substantial impact on high-er enrollments, as well as on better learning outcomes,but it recommended that more attention be paid toless privileged schools.

The Extractive Industries and Sustainable Develop-ment evaluation highlights the need to address gover-nance issues squarely, strengthen project implementa-tion, and use the Bank’s convening power to reach outto stakeholders more vigorously. The evaluation foundthat to enhance extractive industries’ contribution tosustainable development, the World Bank Group needsto formulate and implement integrated strategies at thesector and country levels. The Transition Economiesevaluation showed how the Bank supported the hugetransition that took place in the former socialistcountries of Eastern Europe and the Soviet Union.It pointed out that an earlier focus on governance,growing poverty, and the privatization process wouldhave helped the transition economies. OED con-cluded that Bank assistance was largely successful butrecommended that active programs of stakeholder in-clusion should be widely replicated and that CountryAssistance Strategies should be used to bolster reformcapacity.


OED Reviews of CAS Completion ReportsAn important change introduced in OED’s fiscal 2004work program was the OED review of piloted CAS(Country Assistance Strategy) Completion Reports.These completion reports are important new self-evaluation instruments that are validated by OEDreviews. OED reviews of the completion reports areexpected to be mainstreamed starting in fiscal 2005,with an eventual 20–25 reviews undertaken each year.In fiscal 2004 OED undertook reviews of the Brazil,Cameroon, Mozambique, Ukraine, and Zambia CASCompletion Reports.

INSPECTION PANEL

The Board created an independent Inspection Panelin 1993 to address more closely the concerns ofpeople affected by Bank projects and to ensure that theBank adheres to its operational policies and proceduresin designing, preparing, and implementing projects.Any group of two or more people that believes it is ormay be harmed by a Bank-supported project may askthe Panel to investigate its complaint that such harmstems from the Bank’s failure to abide by its policiesand procedures.

The Executive Directors decide, on the recommen-dation of the Panel, whether an investigation will takeplace. The Inspection Panel provides a vehicle for pri-vate citizens, and especially poor people, to directlyaccess the World Bank’s highest governing body, theBoard of Executive Directors. The process for address-ing claims has empowered and given voice to peoplewho may have been adversely affected by WorldBank–financed projects.

As one of the World Bank’s mechanisms for ad-dressing compliance, the existence of the Panel hasenabled the Bank to listen to complaints brought for-ward, consider the Panel’s assessments of those claims,and adopt better policies and operational proceduresto successfully implement the Bank’s poverty reductionmission.

In fiscal 2004 the Panel received six new requests forinspection involving Bank projects in the Philippines(Manila Second Sewerage Project), Cameroon(Petroleum Development and Pipeline Project),Mexico (Indigenous and Community BiodiversityProject), Colombia (Cartagena Water Supply, Sewerageand Environmental Management Project), and India(Mumbai Urban Transport Project, two requests). The


Panel also published its second book, Accountabilityat the World Bank: The Inspection Panel 10 Years On,which traces the evolution of the Panel and reviews itsexperiences over the years. It discusses eligibility issuesand the Panel’s effect on World Bank practices andpolicies. The book was translated and published inFrench, Spanish, and Portuguese.

Thirty-three requests for inspection have been filedsince the Panel was established: 10 from Africa, 11 fromLatin America and the Caribbean, 9 from South Asia,and 3 from East Asia and Pacific. Of the 33 formalrequests received, the Panel has recommended investi-gations in 14 cases, 6 under the rules that applied be-fore the April 1999 clarifications to the resolution thatestablished the Panel, and 8 since those clarificationswere adopted.

Requests for inspection, Panel recommendations,Panel investigation reports, and management recom-mendations for projects reviewed this fiscal year can befound at www.worldbank.org/inspectionpanel.

EXTERNAL EVALUATION

The World Bank Group began the Extractive IndustriesReview in 2000 to determine how effective its invest-ments in the oil, gas, and mining industries have beenin advancing sustainable development—and to helpdefine the future role of such investments, which repre-sent about 2 percent of annual lending commitments.Developing countries often find Bank Group involve-ment crucial to achieving positive outcomes, and proj-ects with Bank Group funding often set examples onenvironmental, social, and governance safeguards thatindustry subsequently follows.

The review consisted of two evaluations by groupsoperating independently of Bank Group management:one by the operations evaluation units of the WorldBank Group and the Compliance Advisor Ombudsmanfor IFC and MIGA (discussed above); and the otherthrough a stakeholder consultation process. The reviewsfound that Bank Group involvement in extractive pro-jects has resulted in positive contributions to sustain-able development, but not uniformly. The stakeholderreport, in particular, suggested reforms in a number ofareas, including a greater emphasis on renewable energysources, more transparent reporting of revenue figures,increased consultation with local stakeholders, andfuller disclosure of project information.

Bank Group management released a reform pro-posal for the Bank Group’s activities in the extractiveindustries on June 18, 2004. The proposal, released atthe request of the Board of Directors, was availablefor public comment for 30 days in order to have thebenefit of additional views before the Board authorizedan official Bank response. The full proposal, encom-passing a response to both internal and external re-views, can be found at www.worldbank.org/ogmc.Additional information about the various extractiveindustries reviews can be found at www.eireview.org,www.ifc.org/oeg, and www.caoombudsman.org/ev.php.

Among the Bank’s shareholder nations, broad sup-port remains for involvement in extractive industries.In addition to promoting and raising standards forindustry, the Bank assists with public sector reforms,provides technical advice and training, and offersexpertise and innovative financing for environmentalprotection and alternative energy.


First structural adjustment loan isapproved—$200million for Turkey.

People’s Republic ofChina assumes repre-sentation for Chinaand becomes one ofthe largest borrowers.

Timothy Thahaneappointed firstAfrican Vice President.

198

0

198

1 Sixth IDAReplenishment,providing$12 billion.

Anne Kruegeris appointedfirst femaleVice President(for Economicsand Research).

198

2 Bank establishes smallgrants program to pro-mote cooperation amongNGOs, governments, aca-demics, and the media.

198

3

Robert S. McNamara (1968–1981) A. W. Clausen (1981–1986)

198

0s

Alden W. Clausen,World Bank President,

1981–1986.

In 1980, the World Bankapproves a $200 million

loan to Turkey to supporteconomic recovery andstructural adjustment.

World Bank President A. W. Clausen on a visit to Mexico.

Barber B. Conable,World Bank President,

1986–1991.

The 1984 Industrial Credit Project inChina supported the development oflight industries like this metal shop.

NGO WorkingGroup is establishedto provide a world-wide forum fordialogue aboutdevelopment issueswith civil society.

198

4 Major reorganizationof the Bank. NewCountry Departmentsformed and the firstEnvironmentDepartment created.

198

7

198

6 Multilateral InvestmentGuarantee Agency(MIGA), the newestaffiliate of the WorldBank Group, establishedwith 29 signatories.

198

8 Bank’s ExecutiveBoard endorsesdirective on thedisclosure ofinformation.

198

9

Summary of Fiscal 2004 Activities

Barber B. Conable (1986–1991)

In 1985, Mr. Belisario Betancur (center) signs the documents for a $129 million loan to Colombia forexpansion of the water supply system in Bogota.World Bank President A. W. Clausen is pictured on the right.

Agricultural produceat the Mersin market in SouthernTurkey, part of the1981 Fruit andVegetable Project.

5


Chapter 5

Summary of Fiscal 2004 Activities

As a group, developing countries grew much fasterthan developed economies in calendar 2003, althoughthe accomplishments of individual economies variedwidely. Gross domestic product (GDP) per capita inthe low- and middle-income countries increased3.5 percent during the calendar year, more than twicethe 1.6 percent average growth rate experienced inhigh-income countries. Developing countries benefitedfrom the revival of global investment, with capitalspending among the group growing 10.8 percent in2003, more than twice the rate at which it grew in2002.

The economies of Europe and Central Asia grew5.5 percent in 2003, up from 4.6 percent the year be-fore. The outlook for 2004 and beyond is for continuedrobust growth in the region as a whole. GDP in SouthAsia rose 6.5 percent in 2003, up from 4.3 percent in2002, with domestic demand providing the impetusfor growth. Output in South Asia is expected to grow7.2 percent in calendar 2004, followed by a period ofmoderation. At the forefront of the global turnaroundin investment are the developing countries of East Asiaand the Pacific, which are expected to grow 7.4 percentin 2004, led by continued rapid growth in China.

In contrast with accelerating growth in other devel-oping regions, GDP growth in Africa slowed to 2.4 per-cent in 2003, down from 3.3 percent in 2002. Over thenext two years, the region should be able to accelerateGDP growth toward a range of 4 percent. Doing so willrequire significant structural reforms—in addition togood weather and greater political stability. Problemsof disease and poor infrastructure still represent chal-lenges in the region.

Despite severe disruption in the Middle East andNorth Africa—tied in large measure to the Iraqconflict—GDP growth jumped from 3.3 percent in2002 to 5.1 percent in 2003, the strongest economicperformance since 1991. Underpinning the growth wasa sharp upturn in growth in the region’s oil-exporting

economies, which grew 5.7 percent in 2003, up from3.6 percent in 2002.

Growth recovery in Latin America and theCaribbean has been slower, partly because of unevenperformance across countries. Regional GDP advanced1.3 percent in 2003, following a contraction of 0.6 per-cent during 2002. The region’s GDP is expected togrow 3.8 percent in 2004. (Figure 5.1 shows GDP percapita by region, 1993 to 2003.)

Growth in developing countries overall is expectedto grow 5.4 percent in 2004—the strongest growth intwo decades—before easing back toward 5 percent in2005–06. In this context, the Bank continues to adaptits activities to respond to country needs for lendingand advisory services.

KNOWLEDGE SHARING AND ANALYTICAND ADVISORY SERVICES

The Bank’s store of development knowledge has alwaysbeen an important element of its assistance to clientcountries. Analytic and advisory services include eco-nomic and sector work, technical assistance, andresearch services. Capacity enhancement includesinitiating outreach that enables client countries toaccess global knowledge.

ResearchCountry research—which forms the core of the Bank’sknowledge base—culminates in a number of knowl-edge products, including Policy Research WorkingPapers, development data, analyses of developmentprospects, and a wide range of development publica-tions. One flagship publication, the annual World De-velopment Report, incorporates research from acrossthe Bank. Its findings form the basis for Bank activitiesand are a catalyst for further research.

World Development Report 2004: Making ServicesWork for Poor People focused on one pillar of the Bank’s


San Juan del Sur, Nicaragua

Source: World Bank World Development Indicators Database.

Africa

108100

50

200

100

150

1993 2003

East Asia and Pacific

174

100

50

200

100

150

2003

South Asia

145

100

50

200

100

150

1993 2003

Europe and Central Asia

122100

50

200

100

150

1993 2003

Latin America and the Caribbean

107100

50

200

100

150

1993

1993 2003

Middle East and North Africa

122

100

50

200

100

150

1993 2003

Figure 5.1 Gross Domestic Product per Capita Index, 1993–2003

strategy—investing in and empowering poor people—and included evidence from multiple impact evalua-tions on how best to deliver health, education, andinfrastructure services. Such systematic evaluationshelp policy makers decide how best to allocate scarceresources—which programs and policies should bereplicated, which should be modified, and whichshould be eliminated.

The report cited the evaluation of the Progresa Pro-gram in Mexico, which offers monthly cash paymentsto poor families conditional on their children’s schoolattendance and participation in health programs. Therigorous independent evaluation convinced the Mexi-can authorities to expand the program to benefit20 percent of the Mexican people. The knowledge ac-quired through this evaluation was relevant not onlyfor Mexico but for other countries that are now carry-ing out similar programs.

The Bank’s research department conducted severalnew impact evaluations in fiscal 2004. These includedevaluations of targeted transfer programs similar to


Turkish farmer with food intended for export.

Progresa in Argentina, Brazil, Ecuador, and China;community-driven development interventions inGeorgia, Indonesia, Pakistan, and the Philippines;rural roads investments in Vietnam; sanitation pro-grams in Bangladesh and India; teacher and healthworker incentives in several countries in Africa andAsia; and the use of the press and information cam-paigns in Uganda.

World Development Report 2005: A Better InvestmentClimate for Everyone focuses on the other pillar of theBank’s strategy—building the climate for investment—and notes that investment climate conditions varytremendously across as well as within countries. Thereport draws on numerous data sources and countrycase studies to identify emerging lessons of experiencein designing and carrying out investment climate im-provements that will contribute to growth and povertyreduction. It focuses on the four interrelated ways thatgovernments influence the decisions of firms: throughthe cost of doing business, the risks associated withpursuing opportunities, the direct barriers toopportunities, and the competitive pressures thatfirms face.

The World Development Report 2006: Equity andDevelopment will assess the nature of inequality in thedeveloping world and the role it plays in economic de-velopment and poverty reduction. High levels of in-equality make it harder to reduce poverty in its variousdimensions and to meet the Millennium DevelopmentGoals. The report will describe levels of inequality andrecent trends within and across countries, examiningthe extent to which such inequalities matter and howthey can be reduced in ways that promote growth andeconomic efficiency.

Economic and Sector WorkEconomic and sector work (ESW) augments the Bank’slending activities, increasing the impact on develop-ment. Economic and sector work products include corediagnostic reports for Country Assistance Strategiesand overall policy dialogue, country advisory and re-gional reports that provide advice on special topics,and less formal products such as policy notes, work-shops, and conferences. ESW increasingly empha-sizes country ownership, participatory processes,partnerships, and capacity building.

The majority of advisory work in fiscal 2004 exam-ined financial and private sector development andpublic sector governance. Much work also examinedhuman development, social protection, and rural

development, which helped provide the basis forproject design and country programming. The Bank’sInvestment Climate Assessment for Poland sought toidentify features of the investment climate that mattermost for productivity, particularly for poor men andwomen, as well as priority areas for reform. A policynote for the Indian authorities was delivered on aquick-response basis to identify measures that couldbe adopted to improve India’s fiscal stance. CountryFinancial Accountability Assessments, undertaken forcountries such as Djibouti and Uganda, analyzed thestrengths and weaknesses of countries’ public sectorfinancial accountability arrangements and informedthe governments’ design of programs for buildingfinancial management capacity. Regional reportsexploring such issues as trade, health, and incomedistribution supplemented country reports.

During fiscal 2004 the Bank delivered 734 economicand sector work products to clients (table 5.1). Ofthese, 122 were core diagnostic reports that under-pinned Country Assistance Strategies, Poverty Reduc-tion Support Credits, and other adjustment lendingand that facilitated policy dialogue with clients. TheBank also produced a significant number of informalproducts, reflecting the increased emphasis on capacitybuilding and the provision of “just-in-time” analysisdesigned to help countries achieve quick results.

About 30 percent of the fiscal 2004 program wasdelivered by the Bank’s Africa region; another 21 per-cent was delivered by the Europe and Central Asia re-gion. The East Asia and Pacific region and the MiddleEast and North Africa region focused on increased useof programmatic economic and sector work, and theMiddle East and North Africa region continued its in-volvement in the reimbursable Technical CooperationProgram. (For more information on how the Bank iscollaborating with bilateral and multilateral donors,see www.countryanalyticwork.net.)

Capacity EnhancementIn fiscal 2004 the World Bank Institute (WBI) shiftedits strategy to supporting long-term institutionalcapacity building and customizing its programs tospecific country needs. At the same time, it continuesto reach broader audiences through distance learningon topics of global interest and to build informalgroups of decision makers who share knowledge oncommon development problems. These “communitiesof practice” contribute to a more informed dialogue,often leading to improved development outcomes.


They also help members solve problems and answerquestions that come up in their daily work.

WBI was instrumental in organizing the six-month-long global learning and knowledge-sharing processleading up to the Shanghai Scaling Up PovertyReduction Conference held in China in May 2004. Theconference brought together more than 1,200 partici-pants to discuss successful approaches to poverty re-duction based on some 100 case studies about howprograms, policies, and projects could be replicated ona wide scale. Key decision makers shared insights with

An important goal of the Bank's Environment Network is to ensure thatactions taken to promote development and reduce poverty do not resultin environmental degradation.

Table 5.1 Economic and Sector Work (ESW) ProductDeliveries by Type, Fiscal 2003–04

Number of ESWproducts delivered

Product type 2003 2004

Reports 443 487Core diagnostic reports 119 122

Other products 283 247

Total ESW products 726 734

Note: Includes deliveries by both regions and networks.

peers from other developing and developed countriesabout what worked, what did not, and why, within dif-ferent economic, social, and institutional contexts.

Some 20 multicountry, interactive videoconferencedialogues were held before the Shanghai conference togive authors early feedback on the case studies beingprepared for the conference. For example, a three-hourvideoconference on scaling up poverty reductionthrough community-driven development was held atGlobal Development Learning Network sites in Beijing,Colombo, Delhi, Hanoi, and Paris in February 2004.

WBI works more and more closely with the Bank’soperational country teams to ensure that the Bank’sCountry Assistance Strategies address capacity


enhancement. To date the institute has contributed to19 such strategies, including those for Brazil, India, andKenya. WBI has also responded to the Bank’s resultsagenda by emphasizing monitoring and evaluation,with a focus on intermediate outcomes. In fiscal 2004it completed 12 outcome and impact evaluations,and another 13 are being prepared.

As always, WBI provides traditional courses andseminars. Today it also identifies other means of ex-changing knowledge, such as networks and communi-ties of practice, dialogues among stakeholders, peerlearning, and mass communication. In addition, it hasdeveloped diagnostic and analytical tools that helpcountries assess their governance practices and theirpreparedness to compete in the global knowledgeeconomy.

Part of WBI’s new country focus has been to decen-tralize its programs gradually to take advantage of localexpertise and combine efforts with local donors andlearning organizations. Most recently, WBI and theMiddle East and North Africa region launched theMarseilles Knowledge Hub, which serves the MiddleEast and North Africa. This small office will draw onlocal and global experts to exchange knowledge andhelp design programs on topics such as urban manage-ment, governance, and education. WBI also maintainsa presence in Almaty, Beijing, Cairo, Moscow, Paris,and Tokyo. (See box 5.1.)

In partnership with local training centers andthrough the Global Development Learning Network’sdistance-learning facilities, the World Bank Institutedelivered 1,016 training activities to 78,500 participantsin some 124 countries in fiscal 2004. (See box 1.1 inchapter 1.)

BOX 5.1 RESPONDING TO COUNTRY NEEDS

As part of China’s lifelong learning project, the

World Bank Institute’s Knowledge for Development

Program organized a field visit by key Chinese

representatives from various ministries. The group

studied leading educational institutions and private

sector companies in Mexico and the United States

to assess models for quality and accreditation

systems, distance education, and large-scale

retraining.

At the request of Madagascar’s president, WBI

prepared and conducted a retreat for senior politi-

cal and administrative leaders of the new govern-

ment to help them formulate a national develop-

ment strategy. Enlisting a team of leaders and

policy makers from countries around the world,

WBI was able to foster an intensive South-South

exchange on how to improve the investment

climate and governance.

In developing a Capacity Enhancement Needs

Assessment for Nigeria, WBI worked closely with

key stakeholders to identify their capacity enhance-

ment needs, inviting them to determine the con-

tent as well as the methods to be used to build

capacity. It also encouraged them to develop a

shared vision of the future and a plan of action. In

addition to traditional courses and seminars, this

assessment identifies other means of knowledge

exchange through networks and communities of

practice, stakeholder dialogues, peer learning, and

mass communication.

The GDLN Studio in the World Bank headquarters in Washington, D.C.,where a dialogue with Afghan women is taking place.

WORLD BANK LENDING IN FISCAL 2004

The World Bank comprises cooperative institutionsthat mobilize financing from member shareholderequity by borrowing from international capital markets(for IBRD) and by means of outright contributionsfrom the richer member countries (for IDA). It chan-nels these resources to benefit poor people in borrow-ing countries.

Country lending reflects the Bank’s focus on achiev-ing the Millennium Development Goals. It is tailoredto individual country needs, with lending instrumentsthat are becoming increasingly flexible.

IBRD’s clients are generally middle-income coun-tries and, because of the limitation on IDA resources,some of the larger low-income countries that aredeemed creditworthy for borrowing. IBRD offers loansthat have long maturities and reflect its own favorablemarket costs. In fiscal 2004 IBRD provided $11 billionin loans in support of 87 projects in 33 countries.

IDA’s clients are the poorest countries, which usual-ly cannot afford to borrow on commercial terms. IDAoffers grants and concessional, no-interest loans (called“development credits”) to these countries, which arenormally repayable in 35–40 years including a 10-yeargrace period. In fiscal 2004 IDA provided $9 billion infinancing for 158 projects in 62 low-income countries.

Poverty reduction is at the core of lending by bothIBRD and IDA, through investments that supportgrowth as well as investments in basic public services.Through partnerships with other institutions, otherfunds are also made available for projects. Figures 5.2,5.3, and 5.4 show IBRD and IDA lending for fiscal 2004by region, theme, and sector. Table 5.2 shows WorldBank lending by theme and sector. A detailed explana-tion of the Bank’s financing is contained in volume 2of this Annual Report.

The Role of IBRDIn fiscal 2004 countries with per capita income of lessthan $5,115 that were not IDA-only borrowers wereeligible to borrow from IBRD. Countries with higherper capita incomes were able to borrow under specialcircumstances or as part of a graduation strategy. It isimportant to note, however, that the amount thatIBRD is prepared to lend to eligible countries at anygiven time depends on their creditworthiness as indi-vidual IBRD borrowers. Countries may be eligible toborrow but may not have access to IBRD resourcesbecause of poor creditworthiness. Net IBRD loans


Middle East &North Africa5% East Asia &

Pacific 13%

Africa 20%

Europe &Central Asia 18%

Latin America &the Caribbean 27%

South Asia 17%

Figure 5.2 Total IBRD-IDA Lending by Region, Fiscal 2004 |share of total lending of $20.1 billion



20%


HumanDevelopment

15%


Rural Development8%




Figure 5.3 Total IBRD-IDA Lending by Theme, Fiscal 2004 |share of total lending of $20.1 billion

Transportation19%

Energy &Mining 5%

Education 8%

Finance 9%



Industry & Trade 4%




Figure 5.4 Total IBRD-IDA Lending by Sector, Fiscal 2004 |share of total lending of $20.1 billion

outstanding to any individual borrowing country,irrespective of a borrower’s creditworthiness, may notexceed $13.5 billion.

Seventy-five percent of people who live on less than$1 a day live in countries that receive IBRD lending.The borrowers are typically middle-income countriesthat enjoy some access to private capital markets. Somecountries that are eligible for IDA lending as a resultof their low per capita incomes are also creditworthyfor some IBRD borrowing. These countries are knownas “blend borrowers.” Even excluding IBRD loans tothe blend countries, 25 percent of those who live onless than $1 a day live in countries that are IBRD

borrowers. IBRD provides important support forpoverty reduction by helping clients gain access tocapital in larger volumes, on better terms, at longermaturities, and in a more sustainable manner thanthe market provides.

IBRD is a AAA-rated financial institution—withsome unusual characteristics. Its shareholders are sov-ereign governments. Its member borrowers have avoice in setting its policies. IBRD loans (and IDA cred-its) are typically accompanied by advisory services toensure more effective use of funds. Unlike commercialbanks, IBRD is driven by development impact ratherthan profit maximization.


Table 5.2 World Bank Lending by Theme and Sector, Fiscal 1995–2004 | millions of dollars

1995–97 1998–99(annual (annual

average) average) 2000 2001 2002 2003 2004

THEMEEconomic Management 1,129.2 1,952.7 799.6 895.3 1,408.0 777.7 428.6Environmental and Natural Resource

Management 2,616.5 2,018.6 1,829.4 1,354.6 924.0 1,102.6 1,304.6Financial and Private Sector Development 5,876.9 9,486.0 3,368.4 3,940.9 5,055.4 2,882.9 4,176.6Human Development 1,888.7 2,486.5 1,190.3 1,134.7 1,756.1 3,374.0 3,079.5Public Sector Governance 1,646.0 2,550.7 2,142.5 2,053.7 4,247.2 2,464.1 3,374.0Rule of Law 274.4 362.9 373.6 410.0 273.2 530.9 503.4Rural Development 2,418.4 2,746.4 1,413.7 1,822.3 1,600.0 1,910.9 1,507.8Social Development, Gender, and Inclusion 1,102.7 1,320.5 800.8 1,469.7 1,385.7 1,003.1 1,557.8Social Protection and Risk Management 1,288.9 2,653.9 1,895.0 1,651.0 1,086.4 2,324.5 1,577.0Trade and Integration 674.7 813.2 426.4 1,059.9 300.9 566.3 1,212.7Urban Development 2,090.4 2,403.3 1,036.6 1,458.6 1,482.4 1,576.3 1,358.1

Theme Total 21,006.8 28,794.8 15,276.2 17,250.6 19,519.4 18,513.2 20,080.1

SECTORAgriculture, Fishing, and Forestry 1,395.0 2,097.1 837.5 695.5 1,247.9 1,213.2 1,386.1Education 1,633.2 2,154.3 728.1 1,094.7 1,384.6 2,348.7 1,684.5Energy and Mining 3,459.9 2,311.0 1,572.4 1,530.7 1,974.6 1,088.4 966.5Finance 2,069.6 5,029.9 1,571.6 2,246.3 2,710.8 1,446.3 1,808.9Health and Other Social Services 2,053.2 3,114.1 1,491.7 2,521.2 2,366.1 3,442.6 2,997.1Industry and Trade 1,661.3 2,922.7 1,036.7 718.3 1,394.5 796.7 797.9Information and Communication 152.0 179.4 273.8 216.9 153.2 115.3 90.9Law and Justice and Public Administration 3,543.2 6,264.7 4,534.6 3,850.2 5,351.2 3,956.5 4,978.7Transportation 3,186.0 3,511.3 1,717.2 3,105.2 2,390.5 2,727.3 3,777.8Water, Sanitation, and Flood Protection 1,853.5 1,210.2 1,512.6 1,271.7 546.0 1,378.3 1,591.6

Sector Total 21,006.8 28,794.8 15,276.2 17,250.6 19,519.4 18,513.2 20,080.1

Of which IBRD 15,288.5 21,634.3 10,918.6 10,487.0 11,451.8 11,230.7 11,045.4Of which IDA 5,718.3 7,160.5 4,357.6 6,763.6 8,067.6 7,282.5 9,034.6

Note: Due to a recalculation of allocations by the system, lending by theme figures may differ from those in the 2003 Annual Report. For the Law and Justice and Public Admin-istration sector, changes in figures reflect the retroactive remapping of projects to a new Compulsory Health Finance sector code under this category. For the Finance sector,changes in figures reflect the retroactive remapping of projects to a new Compulsory Health Finance sector code under Law and Justice and Public Administration. Numbersmay not add to totals because of rounding.

IBRD LendingAt $11 billion, new lending commitments by IBRD infiscal 2004 were close to the previous year’s level. Theshare of adjustment lending was slightly higher thanfiscal 2003.

Latin America and the Caribbean received the high-est level of IBRD lending, with $5.0 billion or 45 per-cent of total IBRD commitments, followed by Europeand Central Asia with $3.0 billion and East Asia andPacific with $1.7 billion. Lending was slightly moreconcentrated than it was in fiscal 2003. Whereas fivecountries received roughly 49 percent of total lendingin fiscal 2003, four countries—Argentina, Turkey,Brazil, and China—received a combined commitmentvolume equaling 51 percent of total IBRD lending infiscal 2004.

Among sectors, public administration, includinglaw and justice, received the highest volume of IBRDlending, with $2.7 billion, followed by transportationwith $2.5 billion and health and social services with$1.8 billion.

The thematic composition of lending in fiscal 2004was led by financial and private sector development,followed by public sector governance and human de-velopment. Figures 5.5, 5.6, and 5.7 show IBRD lendingby region, theme, and sector. Table 5.3 shows WorldBank adjustment commitments in fiscal 2001–04.

IBRD ResourcesAs part of its regular financing operations, IBRD raised$13 billion at medium- to long-term maturities in in-ternational capital markets in fiscal 2004. This fundingvolume was below the $19 billion raised in fiscal 2003.IBRD issued debt securities in 10 currencies with awide range of maturities and structures in fiscal 2004.Product diversification helps IBRD expand its investorbase and reduce lending rates on its loans. IBRD’sfinancial strength is based on the support it receivesfrom its shareholders and on its array of financialpolicies and practices designed to maintain a highcredit standing in international financial markets.

IBRD Financial Strength. IBRD’s operating incomein fiscal 2004 was $1,696 million, and allocable netincome (which can be allocated to reserves and devel-opment activities) was $1,675 million. IBRD retained$680 million out of allocable net income in its generalreserve in keeping with IBRD’s strategy to preservelong-term financial strength and support other devel-opment needs. IBRD also added $405 million of the


Middle East &North Africa 9%

Europe &Central Asia

27%

East Asia & Pacific15%


South Asia 4%

Figure 5.5 IBRD Lending by Region, Fiscal 2004 | share oftotal lending of $11 billion



22%


Management7%


HumanDevelopment

14%RuralDevelopment 6%




Figure 5.6 IBRD Lending by Theme, Fiscal 2004 | share oftotal lending of $11 billion

Transportation23%

Energy &Mining 3%

Finance 11%


Education 5%


16%

Industry & Trade 6%




Figure 5.7 IBRD Lending by Sector, Fiscal 2004 | share oftotal lending of $11 billion


FY00 FY01a

1.34

0.78

1.29

2.06

1.18

FY02a FY03a FY04a0

2.5

a. In fiscal 2001 IBRD adopted Statement of Financial Accounting StandardNo. 133 and International Accounting Standard No. 39, which require thatderivative instruments be reported at fair value. The returns shown abovefor fiscal 2001–04 are presented excluding the effects of these standards tofacilitate comparison with prior years. With the inclusion of the effects ofthese standards, the ratios would be 0.87, 1.87, 3.64, and �1.67 for fiscalyears 2001, 2002, 2003, and 2004, respectively.

Figure 5.8 Net Return on Average Earning Assets |percent

Table 5.3 World Bank Adjustment Commitments, Fiscal 2001–04

2001 2002 2003 2004

Millions Millions Millions Millionsof dollars Percent of dollars Percent of dollars Percent of dollars Percent

Adjustment commitmentsby region

Africa 908 16 1,437 15 789 13 925 15East Asia and Pacific 250 4 17 0 100 2 104 2Europe and Central Asia 1,132 20 4,743 48 710 12 1,620 26Latin America and the

Caribbean 2,788 48 2,517 26 3,639 60 3,022 49Middle East and North Africa 185 3 263 3 165 3 0 0South Asia 500 9 850 9 615 10 480 8

IBRD and IDA adjustmentcommitments

IBRD 3,937 68 7,383 75 4,187 70 4,453 72IDA 1,826 32 2,443 25 1,831 30 1,698 28Total adjustment loans 5,763 100 9,826 100 6,018 100 6,151 100

Total World Bank lendingcommitments

IBRD 10,487 11,452 11,231 11,045IDA 6,764 8,068 7,283 9,035Total IBRD + IDA 17,251 19,519 18,513 20,080Share of adjustment loans 33 50 33 31

Note: Numbers may not add to totals because of rounding.

fiscal 2004 income to the surplus account. IBRD trans-ferred $300 million to IDA, $240 million to the HeavilyIndebted Poor Countries (HIPC) Trust Fund, and$50 million to the Debt Reduction Facility for IDA-Only Countries in fiscal 2004. IBRD maintainedadequate liquidity in fiscal 2004 to ensure its abilityto meet its obligations. As of June 30, 2004, the liquidasset portfolio was about $31 billion.

Maintaining Financial Strength. As a cooperative insti-tution IBRD seeks not to maximize profit but to earna return on assets sufficient to ensure its financialstrength and sustain its development activities. IBRDachieves an annual net return on average earning assetsof about 1 percent a year. In fiscal 2004 the net returnon average earning assets returned to the 1 percentlevel after having risen above 2 percent in fiscal 2003due to a reduction in the provision for loan loss.Figure 5.8 shows the net return on average earningassets for fiscal 2000–04.

Managing Risk. Consistent with its development man-date, the principal risk taken by IBRD is the country

credit risk inherent in its portfolio of loans and guar-antees. Risks related to interest and exchange rates areminimized, and the Bank remains highly active inglobal credit markets to deliver financial instruments

(net of swaps), and its total disbursed and outstandingloans were approximately $110 billion. The size of bor-rowings was about three times the size of its equity.Figure 5.10 shows the Bank’s borrowings and invest-ments as of June 30, 2004. Table 5.4 shows select IBRDfinancial data for fiscal years 2003 and 2004.

Generation and Distribution of IBRD’s Net IncomeIBRD earns income from the interest margin on itsloans (returns on loans less cost of borrowings), theinterest margin on its investments, and contributionsfrom its equity. Barring unexpected credit events,IBRD generates net income after allowing for loanloss-provisioning expenses and administrative expens-es, including its contribution to staff retirementaccounts.

IBRD’s allocable net income serves several purposesrelated to the Bank’s mission. A portion of net incomeis retained each year to ensure IBRD’s financial integri-ty. The general reserve allows IBRD to assume creditrisk in lending to countries at the lowest funding costs,which in turn benefits borrowers. Income retention hasenabled IBRD to maintain financial soundness throughperiods of deteriorating loan quality and surging loandemand.

Support to IDA has consistently been a priority.Over the last five years, $1,522 million (or about


FY00 FY01

21.3 21.522.9

26.629.4

FY02 FY03 FY040

30

Figure 5.9 Equity-to-Loans Ratio as of June 30, 2004 |percent

Cash and liquid investmentsBorrowings outstanding after swaps

FY00

24.3 24.4 25.1 26.6 31.1

114.0 111.5 111.2103.0 103.3

FY01 FY02 FY04FY03

Figure 5.10 Borrowings and Investments as of June 30,2004 | billions of dollars

on the finest terms that are best suited to the needs ofborrowers. One summary measure of the Bank’s riskprofile is the ratio of balance sheet equity to outstand-ing loans, which is closely managed in line with theBank’s financial and risk outlook. Figure 5.9 showsthe equity-to-loans ratio as of June 30, 2004.

Achieving Efficient Intermediation. IBRD enjoys anexceptional franchise in capital markets, in large partreflecting the capital commitments of its sovereignshareholders and the preferred creditor status accor-ded by its borrowing members that support its highcredit rating (AAA) and allow it to borrow for longmaturities on favorable terms. This is reflected in therelatively low cost basis of its new borrowings, an aver-age spread of about 38 basis points (1 basis pointequals 0.01 percent) below the London InterBankOffered Rate in fiscal 2004, and the high volumes itcan intermediate at low cost.

At the end of fiscal 2004 the Bank’s outstandingborrowings from capital markets exceeded $103 billion

Table 5.4 Select IBRD Financial Data | millions of dollars

Fiscal Fiscal2004 2003

For the fiscal yeara

Income from loans 4,403 5,742Income from investments 304 418Borrowing expenses (2,789) (3,594)Administrative expenses (934) (882)Other 712 1,337

Operating incomeb 1,696 3,021Allocable net income 1,675 3,050

Loan commitments 11,045 11,231Loan disbursements 10,109 11,921

At fiscal year enda

Cash and liquid investments 31,126 26,620Loans outstanding 109,610 116,240Borrowings outstandingc 103,295 103,017Equity 35,463 37,918

a. Excerpted from the audited financial statements presented in volume 2 of thisAnnual Report.b. Excludes effects of Financial Accounting Standard 133 adjustments.c. Outstanding borrowings, net of swaps.

17 percent of IBRD’s allocable net income) has beentransferred to IDA.

Support for the Heavily Indebted Poor CountriesInitiative has also been important. Over the past fiveyears, transfers to the HIPC Trust Fund have amountedto a total of about $1,070 million, averaging about12 percent of annual IBRD allocable net income.

IBRD’s allocable net income helps meet otherdevelopment needs from time to time. It enables IBRDto respond to unforeseen humanitarian crises and toprovide grants or other support for worthy causes.IBRD also regularly shares income with its borrowingmembers through partial waivers of commitment feesand, for qualifying borrowers, waivers of contractualinterest charges on loans.

Financial strength and standing in the marketsallow IBRD to leverage its equity by four times in theinternational bond markets. This leverage increasesIBRD’s ability to lend for development activities.Figure 5.11 shows the proposed allocation of theBank’s net operating income.

The Role of IDAIDA is the largest single source of concessional finan-cial assistance for the world’s poorest countries. Itinvests in basic economic and human developmentprojects.

Eligibility for IDA resources is governed by a coun-try’s level of poverty (as measured by per capitaincome) and its lack of creditworthiness for IBRDresources. In fiscal 2004 countries with annual percapita gross national income of up to $865 were eligi-ble for IDA assistance. (In exceptional circumstances,IDA extends eligibility to countries, such as small


IDA 300

Debt ReductionFacility for

IDA-OnlyCountries 50

HIPC 240

Surplus 405

Note: Proposal to the Board of Governors.

General Reserve 680

Figure 5.11 Proposed Allocation of Fiscal 2004 AllocableNet Income of $1,675 Million | millions ofdollars

island economies, that are above the income cutoffbut are not creditworthy to borrow from IBRD.)The amount of IDA resources that countries receivedepends on the quality of their policies to promotegrowth and reduce poverty, which are assessedannually.

IDA recipient countries face complex challenges instriving to meet the Millennium Development Goals.Policy priorities include strengthening the fight againstthe spread of HIV/AIDS and other communicablediseases, building a healthy investment climate as aprerequisite for private sector investment, promotinggender equality, and improving the quality of basiceducation and poor people’s access to it.

Traditionally, IDA provided assistance in theform of highly concessional credits. In fiscal 2003 itintroduced the expanded use of grants, designed toaddress hardships faced by the poorest and most debt-vulnerable IDA countries. The grants are used tofinance HIV/AIDS programs, natural disaster recon-struction, and postconflict reconstruction.

IDA is financed by its own resources and by donorgovernments, which come together every three yearsto decide on the amount of new resources requiredto fund IDA’s future lending program and to discusslending policies and priorities. Since 2001 senior-levelrepresentatives from borrowing countries have alsoparticipated in these replenishment discussions.

Historically, donor contributions have been deter-mined on the basis of countries’ relative economicstrength and on their commitment to poor countries.The major industrial nations have thus been the largestcontributors to IDA. But donor nations also includedeveloping countries and transition economies—someof them IBRD borrowers and former IDA borrowers—including Argentina, Brazil, Hungary, the Republic ofKorea, the Russian Federation, and Turkey. IDA’s finan-cial strength is based on the strong and continued sup-port of its donors, as well as on repayments of pastcredits. (See IDA at www.worldbank.org.)

IDA CommitmentsIDA commitments in fiscal 2004 reached $9 billon for158 operations, consisting of $7.3 billion in credits and$1.7 billion in grants. IDA also provided a guaranteefor $70 million. The volume of IDA commitments infiscal 2004 represents a record in the history of IDA.

The largest share of IDA resources was committedto Africa, with $4.1 billion, constituting 45 percent oftotal IDA commitments. South Asia and East Asia and


Africa 45%

East Asia & Pacific 10%


Europe & CentralAsia 6%

South Asia 33%

Middle East &North Africa 2%

Figure 5.12 IDA Commitments by Region, Fiscal 2004 |share of total lending of $9 billion



18%


Management6%

HumanDevelopment

17%






Figure 5.13 IDA Commitments by Theme, Fiscal 2004 |share of total lending of $9 billion

Transportation14%

Energy &Mining 7%

Education 13%

Finance 6%



Industry & Trade 2%




Figure 5.14 IDA Commitments by Sector, Fiscal 2004 |share of total lending of $9 billion

Pacific followed with $3 billion and $0.9 billion,respectively. Among countries, Bangladesh, theDemocratic Republic of Congo, India, Pakistan,and Vietnam represent the largest single recipients.

In fiscal 2004, about 19 percent of total IDA financ-ing was provided in the form of grants to the followingclients and projects: the poorest countries, $264 mil-lion; debt-vulnerable countries, $529 million; postcon-flict countries, $536 million; HIV/AIDS projects andthose with HIV/AIDS-related components, $381 mil-lion; and natural disaster reconstruction projects,$2 million.

Public administration, including law and justice,was the leading sector receiving IDA support, with$2.3 billion, or 24 percent of the total. There was alsosignificant support provided to the health and socialservices and transportation sectors, each representing$1.2 billion, or 14 percent of the total.

The two most prominent themes were public sectorgovernance and financial and private sector develop-ment, each accounting for about 19 percent of IDAcommitments. Major attention was also paid to humandevelopment with 17 percent, social development andgender with 13 percent, and rural development with10 percent. Figures 5.12, 5.13, and 5.14 show IDAlending by region, theme, and sector.

IDA ResourcesThe 13th Replenishment of IDA (IDA13), which gov-erns IDA operations for fiscal 2003–05, will providea total of 18 billion in special drawing rights (SDRs)(about $23 billion) in concessional resources to eligiblecountries. This amount includes SDR 10 billion (about$13 billion) in new donor contributions; SDR 7.3 bil-lion (about $9 billion) in IDA internal resources, in-cluding repayments of principal from past credits andinvestment income; SDR 0.7 billion (about $0.9 bil-lion) in IBRD net income transfers (if available); anda small carryover of donor resources from the previousreplenishment. Figure 5.15 shows the sources of IDA’sfunding over the last three replenishments.

Under IDA13 a major initiative was launched tostrengthen IDA’s focus on results. This initiativeincluded development of a system to measure andmonitor the results of IDA assistance across countriesand to track the contribution made by IDA program-ming to country outcomes. Figure 5.16 shows IDA’sstepped-up commitments in the social sectors.

Negotiations for the 14th Replenishment of IDAwere launched in February 2004, when donor and

borrower representatives met in Paris. Main issuesdiscussed included debt sustainability, IDA’sperformance-based allocation system, how to financeIDA grants, and the findings of recent independentevaluations of IDA’s experience with country-leddevelopment.

Innovations in LendingAs part of the effort to enhance development impact,an increasing number of Bank loans support sector-wide approaches, known as SWAps. These efforts typi-cally focus on an entire sector within a country, such as

education, or on a large subsector, such as primaryeducation. Many low-income countries, particularlyin Africa, began pursuing SWAps in the mid-1990sin an effort to move away from fragmented projectsto a country-led approach based on a comprehensiveprogram.

Over the past decade, more than 30 Bank opera-tions have supported SWAps, mostly in social sectorsin Africa and South Asia. The Bank has collaboratedwith other development partners to organize externalfinancing based on a common policy framework anda comprehensive sector program or investment plan.Harmonization of planning, monitoring and evalua-tion, reporting, auditing, disbursement, and procure-ment systems has usually been a major part of thiseffort. Pooling of governments’ and partners’ resourcesis increasingly used. In low-income countries the useof SWAps has helped improve the coordination ofexternal resources. In middle-income countries theyare increasingly seen as a way to align the Bank’s sup-port with a country’s own strategy and systems andto reduce the transaction costs often associated withisolated projects.

Bank support for SWAps has grown over the pastfew years, as greater emphasis has been placed oncountry ownership, harmonization, results, and align-ment with country systems and procedures. Ongoingefforts to simplify and modernize the Bank’s internalpolicies and procedures enhance its ability to supportthe concept of sectorwide approaches more effectively,given the flexibility required for coordination withmultiple development partners. Changes in the Bank’saudit policies, expenditures eligible for Bank financing,and procurement guidelines, along with the movetoward streamlined report-based disbursement, are allintended to enhance country results and also facilitatethe sectorwide approach process.

Debt Relief and Debt SustainabilityThe Bank continued to provide debt relief to theworld’s poorest and most heavily indebted countriesin fiscal 2004. It also worked to improve debtsustainability—long-term debt management—inlow-income countries in an effort to help thesecountries meet the Millennium Development Goals.

As part of a comprehensive development strategy,the Heavily Indebted Poor Countries Initiative(http://www.worldbank.org/hipc) is well on its wayto achieving its primary goal of giving a fresh start tocountries by cutting their external debt to manageable


Education Health, Nutrition, and Population

Water, Sanitation, and Flood Protection

FY04

149

59

81

FY94

82

81

49

FY99

93

122

55

0

100

200

300

Number of projects underimplementation

Note: Number of projects under implementation includes projects in bothIDA-only and blend countries. IDA commitment value of ongoing socialsector projects: 1994, $11.7 billion; 1999, $14.4 billion; 2004, $15.4 billion.Numbers may not add to totals because of rounding.

Figure 5.16 IDA’s Stepped-up Efforts in the Social Sectors |290 projects ongoing (compared with 212 adecade ago)

IDA own resourcesa

Donor contributionsIBRD net income contribution

IDA11 FY97–99

a. IDA own resources include principal repayments, chargesless administrative expenses, and investment income.

IDA12 FY00–02

8.4

1.2

12.7

7.9

0.9

11.7

9.2

0.9

12.7

IDA13 FY03–05

Figure 5.15 Sources of IDA Funding | billions of dollars

levels. Twenty-seven countries—two-thirds of thoseeligible—are participating, receiving debt relief thatwill total more than $52 billion from creditors overtime. Fourteen of these countries have reached thecompletion point—the point at which creditors pro-vide all of the remaining debt relief promised at thedecision point. Ethiopia, Ghana, Guyana, Nicaragua,Niger, and Senegal reached the completion point infiscal 2004. Eight other countries—Benin, Bolivia,Burkina Faso, Mali, Mauritania, Mozambique,Tanzania, and Uganda—reached the completion pointbefore fiscal 2004. Thirteen countries have reached thedecision point and are receiving interim relief.

Key challenges remain for the HIPC Initiative.These include encouraging countries, many of whichare affected by conflict, to reach the decision point—the point at which the international community agreeson the amount of debt relief a country needs to reduceits debt to a sustainable level and interim reliefbegins—by the end of 2004, the deadline for potential-ly eligible countries; encouraging countries that havereached the decision point to proceed expeditiouslytoward meeting the requirements for reaching thecompletion point; improving participation by certainnon–Paris Club official bilateral, commercial, andsmall multilateral creditors; and continuing to supportHIPC’s pro-poor growth strategies.

The debt relief program has significantly reduceddebt stock in heavily indebted poor countries (figure 5.17) and has allowed social spending in thosecountries to rise (figure 5.18).

The Bank’s efforts to reduce poor countries’ debthave expanded beyond the HIPC Initiative to addresslonger-term issues of debt sustainability. For manylow-income countries, mobilizing sufficient financingto meet their development objectives, embodied in


14.5

%

21.8

%

14.6

%

9.8%

$28

0

30

60

90

Billionsof dollars

Before HIPC(1999)

After HIPC(2003)

0

30

Percent

15

Debt service aspercent of exports(left axis)

Debt service aspercent of revenue(left axis)

Debt stock, billionsof dollars netpresent value atthe decision point(right axis)

$69

Note: Weighted averages for the 27 countries that had reached the decisionpoint as of end-April 2004.

Source: World Bank. September 2002. Heavily Indebted Poor Countries(HIPC)—Status of Implementation. Washington, D.C. World Bank. April 2004.Heavily Indebted Poor Countries (HIPC) Initiative—Statistical Update.Washington, D.C.

Figure 5.17 HIPC Debt Relief: Reduced Debt Stock andImproving Debt Service Ratios

6.4%

$6,067 8%

$9,104

Before HIPC(1999)

After HIPC(2003)

0

10,000

5,000

Millionsof dollars

5

6

7

8

9

10

Percent

Note: Weighted averages for the 27 countries that had reached the decisionpoint as of end-April 2004.

Source: World Bank. April 2004. Heavily Indebted Poor Countries(HIPC) Initiative—Statistical Update. Washington, D.C.

Poverty-reducingexpenditures,millions of dollars(left axis)

Poverty-reducingexpenditures,percent of GDP(right axis)

Figure 5.18 Trends in Poverty-Reducing Expendituresbefore and after Assistance under the HIPCInitiative

Child health care in India.

the Millennium Development Goals, while avoiding apotentially unmanageable debt burden represents aserious challenge.

Staff from the Bank and the International MonetaryFund are developing a new approach to assessing debtsustainability in low-income countries outside theHIPC Initiative. This approach is designed to take intoaccount each country’s circumstances and to guidelending decisions that balance a country’s need forfunds with its ability to service debt. The approach re-flects extensive consultations with government officials,multilateral and bilateral donors, academics, and civilsociety organizations.

TRUST FUNDS

Trust funds are financial and administrative arrange-ments between external donors and the Bank that pro-vide grant funding to address diverse developmentneeds, including project preparation, technical assis-tance, advisory services, debt relief, postconflict transi-tion, and the cofinancing of investment projects. Trustfund financing contributes to the Bank’s poverty

reduction mission by supporting innovative approachesto projects and expanding the scope of developmentcollaboration. Donors include many industrial coun-tries, a few of the larger developing countries, theprivate sector, and foundations. Increasingly suchresources support multidonor programmatic instru-ments that underpin many of the Bank’s externalpartnerships. Single-donor programmatic trust funds(for example, Japan’s Policy and Human ResourceDevelopment Fund) also continue to be importantinstruments for supporting work with client countries.(See www.worldbank.org.)

ContributionsThe Bank’s trust fund portfolio was further expandedin fiscal 2004. Contributions received from donorstotaled $4.9 billion, an increase of $0.46 billion, or10 percent, over fiscal 2003. Funds held in trust rosefrom $6.89 billion to $8.6 billion, a 25 percent increase.These figures reflect contributions received on a cashbasis for all trust funds except HIPC, the Global Envi-ronment Facility (GEF), and the Global Fund to FightAIDS, Tuberculosis and Malaria (GFATM), for whichcontributions are recorded on an accrual basis. The top10 donors in fiscal 2004, shown in table 5.5, accountedfor 86 percent of all contributions.

DisbursementsDisbursements during the year totaled $3.28 billion, anincrease of $0.72 billion, or 28 percent, over fiscal 2003.The five programs with the largest disbursements wereHIPC ($941 million); GFATM ($429 million); GEF($398 million); the Afghanistan Reconstruction TrustFund ($218 million); and the West Bank and GazaTrust Fund ($170 million). Together these programsdisbursed $2.16 billion, or 66 percent of total disburse-ments. Disbursements for all trust funds are reportedon a cash basis. Contributions and disbursements areshown in figure 5.19.

Fund Balances and InvestmentsThe level of fund balances has increased steadily to$8.6 billion in fiscal 2004, which is more than doublethe level in fiscal 2000. Most of this increase resultedfrom the establishment of large programmatic multi-donor trust funds.

Major New Trust Fund ProgramsIn response to emerging development challenges, thedonor community agreed to establish several new


Woman spinning cotton thread in Bangladesh.

major trust funds and programs during fiscal 2004,with the Bank as administrator. These included amultidonor trust fund for Iraq, for which donorshad pledged approximately $400 million for recon-struction; a multidonor supported Education for AllFast-Track Initiative Catalytic Trust Fund, for which$250 million is earmarked for contributions betweenfiscal 2004 and 2007; and a multidonor commitmentin the amount of up to $185 million for a West Bankand Gaza Public Financial Management Reform TrustFund, which serves as a budget support facility, cofi-nancing the existing Bank-funded structural adjust-ment operation for the Palestinian Authority.

Update on Selected Trust FundsFiscal 2004 activities of three of the many trust fundsadministered by the Bank are described here.

Global Program to Eradicate Poliomyelitis. The Bankadministers a trust fund program launched in fiscal2003 in partnership with the Gates Foundation, RotaryInternational, and the United Nations Foundation, tohelp eradicate poliomyelitis worldwide by 2005. Toachieve this goal, the partnership uses an innovativefinancing mechanism in which trust fund resourcesare used to create financial incentives linked to eradica-tion results. Once the performance goals of eradicationefforts, funded by IDA credits, are achieved, trust fundresources are used to write off the debt, thus turning theIDA credit into a grant. As of the end of fiscal 2004,donor contributions to the trust fund totaled $39 mil-lion. The project was one of three selected to receivethe Bank’s Presidential Award for Excellence inDecember 2003.

The Least Developed Countries (LDC) Fund for ClimateChange. The LDC Fund was established in September2002 to address the needs of least developed countrieswhose specific economic and geophysical characteristicsmake them especially vulnerable to the impact of globalwarming and climate change. In its initial phase theLDC Fund supports the preparation of national adapta-tion programs of action. The Global Environment Facil-ity administers the fund and the Bank acts as its trustee.As of the end of fiscal 2004, $33 million had beenpledged by 12 donor countries, and $17 million hadbeen received; more than $9 million had already beenallocated for 43 national projects and 2 global supportprojects, and most of these projects had begun theirimplementation.

Iraq Trust Fund (ITF). At the Madrid Donor Confer-ence in October 2003, the international donor commu-nity ratified the International Reconstruction FundFacility for Iraq, comprising the World Bank Iraq TrustFund and the United Nations Development Group IraqTrust Fund, united through a common governancestructure that ensures close coordination. The Boardapproved the Bank’s role as Administrator of the ITFin January 2004. Donors had pledged approximately$400 million to the World Bank Trust Fund by the endof fiscal 2004. The ITF is focused on building institu-tional capacity and addressing urgent reconstruction


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

20042003200220012000

2,719

4,904

2,613

4,443

1,769

World Bank Group contributions

External donors’ contributions

Disbursements

Figure 5.19 Trust Fund Contributions and Disbursements,Fiscal 2000–04 | millions of dollars

Table 5.5 Top Ten Trust Fund Donors | millions of dollars

FY03 FY04

European Community 241 880United States 1,085 594United Kingdom 252 585Japan 500 508World Bank Group 329 466Netherlands 269 400Germany 194 226Canada 151 198Italy 132 187Norway 142 174Other donors 1,148 686

Total contributions 4,443 4,904

Note: Donor ranking shown above is based on fiscal 2004 contributions.

and economic transition needs. A $3.6 million capacity-building project has supported 14 different sectoral andproject management courses. A $40 million emergencyproject is financing primary and secondary school text-books for the 2004–05 school year. Other projects ad-dress school rehabilitation, private sector development,infrastructure, and public health.

CofinancingCofinanced funds are committed to complement spe-cific Bank-funded projects by official bilateral and mul-

tilateral partners, export credit agencies, and privatesources. These funds enable the Bank to leverage addi-tional financing, mostly at concessional terms, to bene-fit recipient countries. The Bank’s major cofinancingpartners in fiscal 2004 included the Inter-AmericanDevelopment Bank ($3.7 billion), the European Com-mission ($640 million), and the British Department forInternational Development ($612 million). Regionsbenefiting from cofinanced projects included LatinAmerica and the Caribbean ($4 billion), Africa($3 billion), and South Asia ($1.3 billion).


GlobalEnvironmentFacility is created.

IBRD approves$1.3 billion loan,its largest todate, to Mexico for debt reduction.

199

0 Chinareplaces Indiaas largest IDAborrower.China “grad-uates” fromIDA in1999/2000.

199

1 Russian Federationand 12 republics of the former SovietUnion join IBRD and IDA.

President Prestontells the EarthSummit in Rio deJaniero that promot-ing developmentand protecting theenvironment arecomplementary.

World DevelopmentReport focuses onthe environment.

199

2 IndependentInspectionPanel estab-lished to investigateexternalcomplaintsfrom groupsnegativelyaffected byBank-fundedprojects.

199

3 First PublicInformationCenter isopened, inWashington,D.C.

World Bankcelebrates50thanniversary.

199

4Barber B. Conable (1986–1991)

199

0s

Lewis T. Preston (1991–1995)

A doctor checks ababy’s weight andnutrition at ahealth center inKbong, Uganda,circa 1991.

Family planning clinic field workers visitpatients in Dacca, as part of the BangladeshPopulation Project (circa 1991).

Landscape in rural Bhutan, circa 1992.

A field worker maintains irrigated furrows, part of the Seyhan IrrigationProject, in Turkey, circa 1991.

Mr. Lewis T. Preston, World Bank President, 1991–1995.

Quality AssuranceGroup (QAG) is estab-lished to provideinformation on thequality of Bank work.

Trust Fund for Bosniaand Herzegovina is created.

IMF, World Bank, and donors launchthe Heavily IndebtedPoor Countries (HIPC)Initiative to alleviatedebt.

Jessica Einhornappointed firstfemale ManagingDirector.

199

6 The MillenniumDevelopment Goals are adopted by leadersof world’s nations and internationalorganizations.

Voices of the Pooris published. WorldDevelopment Reportfocuses on attackingpoverty.

Bank and partnerscreate GlobalDevelopment Gateway,an Internet portal ondevelopment.

20

00Bank approves

loans to theRepublic ofKorea andother economiesaffected by thefinancial crisis,to restoreinvestor confi-dence and mini-mize social costsof the crisis.

199

7 Bank approvesKosovo SpecialFund.

World Faith andDevelopmentConference held in London.

Bank holds firstDevelopmentMarketplace toencourageinnovation indevelopment.

Bank formulatesthe ComprehensiveDevelopmentFramework.

199

8 Bank beginsto activelyrecruit andretainworld-classstaff withdisabilities.

199

9

199

0s–

Pre

sen

t

James D. Wolfensohn (1995–present)

The Bank holds the first DevelopmentMarketplace in Washington, D.C., in 1998.

Mr. James D. Wolfensohn,World Bank President,

1995 to present.

President Wolfensohn with World Youthrepresentatives in Paris, 2003.

In Sri Lanka, solar powerprovides light for studying.

Development Marketplace,December 2003

HIPC delivers on its year2000 promise: 22 countriesreceive more than $34 billion in debt service relief.

Bank is named as one ofworld’s five best practicepartners in implementingknowledge management.

Completed projects withsatisfactory outcome ratingsreach 75 percent for firsttime in nearly 20 years (upfrom 60 percent in 1996).

Mamphela Ramphele isappointed first AfricanManaging Director.

International Conferenceon Financing forDevelopment, held inMonterrey, Mexico, inMarch, achieves a newglobal partnership fordevelopment.

World Summit onSustainableDevelopment, a 10-yearfollow-up to the RioEarth Summit, is held inJohannesburg, SouthAfrica, in August.

20

02 World Bank President

James D. Wolfensohn delivers Annual Meetingsspeech in Dubai, where he calls for a new globalbalance and partnershipamong nations.

Investment Partnershipfor Polio, an innovative financing program supporting the eradicationof poliomyelitis by 2005, is formed by the Bank and partners.

The Youth, Development,and Peace Conferencebrings young people intothe Bank’s dialogue ondevelopment.

20

03 The Bank joins partnership to

make generic drugs availableto people infected with AIDS inmore than 100 poor countries.

The Bank launches Youthink, a Web site where youth can share their ideas on development.

Global Conference on PovertyReduction held in Shanghai,China, brings developmentcommunity together to discussactions to accelerate progresson the development agenda.

20

04

In 2000 the WorldBank committed anadditional $500 millionto fight HIV/AIDS.

Girl writing onslate board at a nonformal primary educa-tion school inBangladesh, 1995.

World Bank President James D. Wolfensohn at the WorldBank Annual Meetings in Dubai in September 2003.

In Cambodia, a community worker teachessex workers about HIV/AIDS.

BOXES

Box 1.1 Sharing Development Experiences 17Box 2.1 Fighting the HIV/AIDS Pandemic in

Africa 28Box 2.2 Country Innovation Days 34Box 2.3 Important Benefits Are Beginning to

Emerge from the PRSP Process 39Box 2.4 The Bank’s Programmatic Approach to

Nonlending Activity 41Box 2.5 Helping Small Rural Communities in

Honduras through a Road Project 48Box 2.6 Partnering with CSOs to Create Jobs in the

West Bank and Gaza 53Box 3.1 Trade: Working Toward Results at the

Country Level 60Box 3.2 Disability as a Fundamental Issue 64Box 3.3 Carbon Finance as a Powerful Development

Tool 67Box 3.4 Innovative Approaches to Infrastructure

Service Delivery 71Box 3.5 Doing Business in 2004 73Box 3.6 Meeting the Challenge of Electronic

Finance 77Box 3.7 Improving the Legal Environment in

Iraq 80Box 4.1 Results-Based Country Assistance

Strategies 85Box 5.1 Responding to Country Needs 102

FIGURES

Figure 1.1 Population Living below $1 and $2 a Day 16

Figure 1.2 Aid Is Rising but Is Well Short of What IsNeeded 17

Figure 1.3 Countries Are Improving Their PrivateBusiness Environment 17

Figure 1.4 Participatory Processes Are Improving inDeveloping Countries 18

Figure 2.1 Africa: IBRD and IDA Lending by Theme,Fiscal 2004 31

Figure 2.2 Africa: IBRD and IDA Lending by Sector,Fiscal 2004 31

Figure 2.3 East Asia and Pacific: IBRD and IDALending by Theme, Fiscal 2004 36

Figure 2.4 East Asia and Pacific: IBRD and IDALending by Sector, Fiscal 2004 36

Figure 2.5 South Asia: IBRD and IDA Lending byTheme, Fiscal 2004 40

Figure 2.6 South Asia: IBRD and IDA Lending bySector, Fiscal 2004 40

Figure 2.7 Europe and Central Asia: IBRD and IDALending by Theme, Fiscal 2004 45

Figure 2.8 Europe and Central Asia: IBRD and IDALending by Sector, Fiscal 2004 45

Figure 2.9 Latin America and the Caribbean:IBRD and IDA Lending by Theme, Fiscal 2004 50

Figure 2.10 Latin America and the Caribbean:IBRD and IDA Lending by Sector, Fiscal 2004 50

Figure 2.11 Middle East and North Africa: IBRD andIDA Lending by Theme, Fiscal 2004 55

Figure 2.12 Middle East and North Africa: IBRD andIDA Lending by Sector, Fiscal 2004 55

Figure 3.1 Cumbersome Regulation Is Associatedwith Lower Productivity 73

Figure 3.2 Net Long-Term Resource Flows toDeveloping Countries, 1993–2003 74

Figure 4.1 Monitoring: Dimensions of Developing-Country Policies 89

Figure 4.2 Monitoring: Dimensions of Developed-Country Policies 89

Figure 4.3 Monitoring: Dimensions of DevelopmentAgency Support 90

Figure 4.4 Active Project Portfolio by Region as ofJune 30, 2004 91

Figure 4.5 Active Project Portfolio by Theme as ofJune 30, 2004 91

Figure 4.6 Active Project Portfolio by Sector as ofJune 30, 2004 91

Figure 4.7 Project Performance Trends,1974–2004 92

Figure 5.1 Gross Domestic Product per Capita Index,1993–2003 99

Figure 5.2 Total IBRD-IDA Lending by Region, Fiscal2004 103

Figure 5.3 Total IBRD-IDA Lending by Theme, Fiscal2004 103

Figure 5.4 Total IBRD-IDA Lending by Sector, Fiscal2004 103

Figure 5.5 IBRD Lending by Region, Fiscal2004 105

Figure 5.6 IBRD Lending by Theme, Fiscal 2004 105Figure 5.7 IBRD Lending by Sector, Fiscal 2004 105Figure 5.8 Net Return on Average Earning

Assets 106Figure 5.9 Equity-to-Loans Ratio as of June 30,

2004 107Figure 5.10 Borrowings and Investments as of June

30, 2004 107Figure 5.11 Proposed Allocation of Fiscal 2004

Allocable Net Income of$1,675 Million 108


List of Boxes, Figures, and Tables

Figure 5.12 IDA Commitments by Region, Fiscal2004 109

Figure 5.13 IDA Commitments by Theme, Fiscal2004 109

Figure 5.14 IDA Commitments by Sector, Fiscal2004 109

Figure 5.15 Sources of IDA Funding 110Figure 5.16 IDA’s Stepped-up Efforts in the Social

Sectors 110Figure 5.17 HIPC Debt Relief: Reduced Debt Stock

and Improving Debt Service Rations 111Figure 5.18 Trends in Poverty-Reducing Expenditures

before and after Assistance under theHIPC Initiative 111

Figure 5.19 Trust Fund Contributions andDisbursements, Fiscal 2000–04 113

TABLES

Table 2.1 World Bank Lending to Borrowers inAfrica, by Theme and Sector, Fiscal1995–2004 31

Table 2.2 World Bank Lending to Borrowers in EastAsia and Pacific, by Theme and Sector,Fiscal 1995–2004 36

Table 2.3 World Bank Lending to Borrowers inSouth Asia, by Theme and Sector,Fiscal 1995–2004 40

Table 2.4 World Bank Lending to Borrowers inEurope and Central Asia, by Theme andSector, Fiscal 1995–2004 45

Table 2.5 World Bank Lending to Borrowers inLatin America and the Caribbean, byTheme and Sector, Fiscal 1995–2004 50

Table 2.6 World Bank Lending to Borrowers inMiddle East and North Africa, by Themeand Sector, Fiscal 1995–2004 55

Table 4.1 Bank Lending to MDGs, Fiscal 2004 90Table 5.1 Economic and Sector Work (ESW) Product

Deliveries by Type, Fiscal 2003–04 101Table 5.2 World Bank Lending by Theme and

Sector, Fiscal 1995–2004 104Table 5.3 World Bank Adjustment Commitments,

Fiscal 2001–04 106Table 5.4 Select IBRD Financial Data 107Table 5.5 Top Ten Trust Fund Donors 113

Tables previously included in chapter 6 and as appendixes tovolume 2 can be found on the CD-ROM.

AML/CFT anti–money laundering and combatingthe financing of terrorism

CAS Country Assistance StrategyCIS Commonwealth of Independent StatesCODE Committee on Development

EffectivenessCOGAM Committee on Governance and

Executive Directors’ AdministrativeMatters

CSO civil society organizationESW economic and sector workFIAS Foreign Investment Advisory ServiceGDP gross domestic productGEF Global Environment FacilityGFATM Global Fund to Fight AIDS, Tuberculosis

and MalariaGNI gross national incomeHIPC heavily indebted poor countriesHIV/AIDS human immunodeficiency virus/acquired

immune deficiency syndromeIBRD International Bank for Reconstruction

and DevelopmentICSID International Centre for Settlement of

Investment DisputesIDA International Development AssociationIDA14 14th Replenishment of IDAIFC International Finance CorporationIMF International Monetary FundI-PRSP interim Poverty Reduction Strategy

PaperITF Iraq Trust FundLDC least developed countryLICUS low-income countries under stressMAP Multicountry HIV/AIDS ProgramMDGs Millennium Development GoalsMIGA Multilateral Investment Guarantee

AgencyNEPAD New Partnership for Africa’s

DevelopmentOECD Organisation for Economic Co-operation

and DevelopmentOED Operations Evaluation DepartmentPRSP Poverty Reduction Strategy PaperPSIA Poverty Social Impact AnalysisSARS sudden acute respiratory syndromeSDRs special drawing rightsSWAps sectorwide approachesTSS Transitional Support StrategyUNAIDS Joint United Nations Programme on

HIV/AIDSWBI World Bank InstituteWTO World Trade Organization


Abbreviations

Aadvisory services, 74–75, 78, 98–102Afghanistan, 37–39, 102, 112Africa, 16, 27, 28–31, 62, 63, 65, 73, 74, 87, 95, 98, 101,

110, 114agriculture, 65–67aid flows, levels of, 3, 16, 17, 73AIDS, see HIV/AIDSAlbania, 42, 43Angola, 21, 73Annual Bank Conference on Development Economics

(ABCDE), 12annual meetings, 2, 13annual report, preparation of, ii, 5anti-money laundering and combating financing of

terrorism (AML/CFT), 78Argentina, 19, 46, 47, 48, 64, 100Armenia, 19, 42, 93Articles of Agreement, 5Asian Development Bank, 33, 39Association of South East Asian Nations (ASEAN), 35Audit Committee, 5–6, 7Australia, 73Azerbaijan, 42

BBahrain, 51Bangladesh, 37, 38, 39, 65, 66, 109Basel Accord, 76, 77Benin, 19, 111Bhutan, 38, 39Boao Forum for Asia, 35Bolivia, 19, 23, 46, 49, 111Bosnia and Herzegovina, 6, 93Brazil, 13, 14, 19, 46–49, 59, 66, 73, 74, 75, 76, 83,

94, 100budget, ii, 7Budget Committee, 5, 6Bulgaria, 41Burkina Faso, 28, 62, 111Burundi, 60business, see economic and business climate

CCambodia, 34, 35, 60, 64, 66, 71, 73, 80Cameroon, 19, 93Canada, 73capacity for development, 84–85, 101–2Cape Verde, 60carbon finance business, 67Caribbean, see Latin America and CaribbeanCentral African Republic, 21Central America Free Trade Agreement, 60Chad, 19, 59children and youth, 2, 3, 13, 47, 54, 64Chile, 11, 46, 47, 48, 81China, 32–35, 56, 64, 75, 93, 96, 97, 98, 100, 102civil society organizations (CSOs), 6, 14, 22; ABCDE Europe

Conference, 12; CASs (country assistance strategies),18; regional reports, 28, 34, 35, 53, 54

Clinton Foundation, 4, 12, 62CODE (Development Effectiveness Committee), 5, 6cofinancing, 114COGAM (Governance and Executive Directors’

Administrative Matters Committee), 5, 6

Colombia, 23, 46, 47, 48, 66, 76, 94, 97committees, 5Commonwealth of Independent States (CIS), 41, 42Compliance Advisor Ombudsman, 95concessional lending, 20conflict reduction, see politics, governance and war,

and headings at post-conflictCongo, Democratic Republic of, 19, 109Congo, Republic of, 19corporate evaluations, 92corruption issues, 81Costa Rica, 19, 46, 80Côte d’Ivoire, 13countries eligible for World Bank funding, listed by

region, 28, 32, 37, 41, 46, 51Country Assistance Strategies (CASs), 4, 7, 18–19, 22;

evaluation of, 93; gender issues, 59; managingfor development results, 85; regional reports, 32, 37,42, 46

Country Policy and Institutional Assessment, 21Croatia, 41, 44, 93Cyprus, 12, 41Czech Republic, 12, 41

Ddebt relief, 4, 6–7, see also Heavily Indebted Poor

Countries (HIPC) initiative; Africa, 30; summaryof FY2004 activities, 110–12

debt sustainability, 110–12developed and developing countries, responsibilities of, 4development agenda, 14–23; Country Assistance

Strategies (CASs), 18–19; global partnerships and pro-grams, 22–23; information sharing and dissemination,23; low-income countries, agenda for, 19–21;Low-Income Countries under Stress (LICUS)initiative, 19, 20–21; middle-income countries,agenda for, 21–22; Millennium Development Goals(MDGs) embraced by, 14–16; monitoring progressof, 15–17; poverty reduction, 17–18; PRSPs, 19–20

Development Committee, 6development effectiveness, 84–95; CODE (Development

Effectiveness Committee), 5, 6; managing for devel-opment results, 84–86; Millennium DevelopmentGoals (MDGs), 84, 87–90; simplification and harmo-nization of policies and procedures, 86–97

Development Grant Facility, ii, 7Development Marketplace, 13disability, 64Djibouti, 54, 59, 60, 101Doha Agenda, 13, 15, 59Doing Business in 2004, 72–75Dominican Republic, 19, 60Dubai, annual meetings in, 2, 13

EEast Asia and Pacific, 16, 27, 32–36, 73, 87, 88, 95,

98, 101, 109economic and business climate, 17–18, 22, 60; infra-

structure and, 69–70; microeconomic factors, 38, 47,72; national financial system development, 76–78;private sector development, 17–18, 22, 72–75;public financial management reform, 58–59;regional reports, 29, 32–35, 37, 38, 41–43, 46–47,51–53

economic and sector work (ESW), 51, 72, 91, 98, 100–101


Index

Ecuador, 47, 60, 100education issues, 61–63; Education for All Fast-Track

initiative, 43, 61, 113; HIV/AIDS, 61; MDGs, 87, 90;regional reports, 29, 34–35, 37–39, 43, 48, 51–54;WBI activities, 102

Egypt, Arab Republic of, 23, 52, 83El Salvador, 47elderly as vulnerable population, 64electronic finance, 77energy, see environmental issues; infrastructureenvironmental issues: Environment Network, 101; GEF

(Global Environment Facility), 112; Least DevelopedCountries (LDC) Fund for Climate Change, 113;regional reports, 35, 44, 48, 49; sustainabledevelopment, 65, 66–67; water and sanitation,38–39, 43, 44, 47, 53–54, 66, 88

Eritrea, 59Estonia, 12, 41Ethiopia, 23, 24, 60, 64, 65, 66, 111Europe and Central Asia, 16, 27, 41–45, 63, 71, 98, 101European Bank for Reconstruction and Development, 73European Commission, 114European Union (EU), 12, 41, 42, 93European Youth Forum, 13Executive Directors, Board of, ii, 5–7Extractive Industries Review, 95

Ffiduciary responsibilities of Executive Directors, 7finance, see economic and business climateFinancial Sector Learning Program, 76–77Financing for Development Consensus, 59Finland, 24, 83Foreign Investment Advisory Service (FIAS), 73, 75France, 11, 57

GG-20 group of developing countries, 78gender issues, 39, 51, 59, 80–81, 87Georgia, 43, 100Germany, 57, 80Ghana, 19, 28, 62, 63, 75, 81, 93, 111Global Corporate Governance Forum, 75Global Development Learning Network Centers,

34–35, 102Global Environment Facility (GEF), 112Global Fund to Fight AIDS, Tuberculosis and Malaria

(GFATM), 4, 12, 62, 112Global Monitoring Report, 3, 6, 12, 15, 87–90global remittances, 77Global Trade Facilitation Partnership for Transportation

and Trade, 60governance, see politics, governance, and warGovernors, Board of, 5Grenada, 48gross domestic product (GDP), 28, 30, 37, 46, 70, 98, 99Guatemala, 47, 48, 80Guinea, 56, 60Guyana, 47, 111

HHaiti, 13, 21health issues, 63–64, see also HIV/AIDS; MDGs, 87–88;

regional reports, 35, 38, 48–49, 53, 54; World HealthOrganization (WHO), 12

Heavily Indebted Poor Countries (HIPC) initiative, 4, 6, 20,110–12; HIV/AIDS, 62; IBRD support, 108; regionalreports, 30, 47

Hills Program on Governance, 33historical background: FY2004 highlights, 12–13; time-

lines, 1940’s-1980’s, 10–11, 24–25, 56–57, 82–83, 96–97HIV/AIDS, 4, 12, 14, 62, 63; education issues, 61; gender

issues, 59; IDA, role of, 108, 109; regional reports,28–30, 35, 39, 43, 49, 54; youth developmentissues, 64

Honduras, 47, 48, 56, 59, 80Hong Kong, 33Hungary, 12, 41

IIndia, 23, 25, 37, 38, 39, 56, 59, 63, 64, 65, 76, 78,

94, 101, 109indigenous peoples, 48, 68Indonesia, 32–35, 60, 73, 100information sharing and dissemination, 23infrastructure, 69–71, see also water and sanitation;

Infrastructure Action Plan, 13, 69, 70; regionalreports, 29, 33, 37, 38, 48, 52–54; rural development,65–66, 70; vulnerable people, protections for, 64

Innovation Days, 34Inspection Panel, 94Integrated Framework (IF) initiative, 60Inter-American Development Bank, 47, 114International Bank for Reconstruction and Development

(IBRD), ii, 8, 103–8; Board of Executive Directors,responsibilities of, 5; Development Committee, 6;global partnerships and programs, 7; regionalcommitments, 31, 32, 36, 40, 41, 45, 50, 55

International Centre for Settlement of InvestmentDisputes (ICSID), ii, 9

International Development Association (IDA), ii, 8, 103,108–10; 14th replenishment, 13, 20, 85; aid flows,need for increase in, 3; Board of Executive Directors,responsibilities of, 5; concessional lending, 20; PovertyReduction Strategy Papers, 4; private developmentprograms, 74; PRSP-based assistance, 19–20; regionalcommitments, 28–29, 31, 32, 36, 45, 47, 48, 50,55, 109

International Finance Corporation (IFC), ii, 9, 19, 22,74–75, 95

International Labour Organization (ILO), 81International Monetary Fund (IMF): annual meeting, 2;

common approaches, coordinating, 93; FinancialSector Assessment Program in Europe and CentralAsia, 42; Global Monitoring Report, 3, 6, 12, 15;long-term debt sustainability in low-incomecountries, 7; modernization of legal and judicialsystems, 79, 80; national financial system develop-ment, 78; partnerships with, 22; public financialmanagement, 58–59

Iran, Islamic Republic of, 52, 54, 58, 66Iraq, 12–13, 19, 51–52, 80, 113–14Islamic Development Bank, 93Italy, 44, 67

JJamaica, 47, 82Japan, 24, 33, 34–35, 56, 57, 82, 112Japan Bank for International Cooperation, 33Johannesburg Conference, 12, 15Joint Iraq Needs Assessment, 12, 51–52


joint projects, 7, 22–23, 86, 114judicial systems, modernization of, 79–81, 87

KKazakhstan, 42Kenya, 19, 29, 59, 60, 65, 66, 81, 82knowledge services, 22, 42, 51, 52, 76–78, 98–102Korea, Republic of, 33Kosovo, 6, 19, 42, 43Kuwait, 52Kyrgyz Republic, 42, 43

LLao People’s Democratic Republic, 6, 34, 35, 59Latin America and Caribbean, 16, 26, 46–50, 60, 62, 63,

73, 76, 80–81, 95, 98, 114Latvia, 12, 23, 43Least Developed Countries (LDC) Fund for Climate

Change, 113Lebanon, 53legal systems, modernization of, 79–81, 87Lesotho, 60Liberia, 13, 19, 21Lithuania, 12, 41, 42loans, see also debt relief: concessional lending, 20;

environmental, 66; innovations in FY 2004, 110;MDG-related, 90; national financial systemdevelopment, 78; private sector development,74–75; regional reports, 31, 32, 36, 37–42, 45–48,50, 51, 52, 55; simplification and modernization oflending policies, 12; summary of FY2004 activities,103; theme and sector, 1995–2004, 31, 36, 40, 45, 50,55, 104

low-income countries, 19–21, 88Low-Income Countries under Stress (LICUS) Initiative, 4,

13, 19, 20–21

MMacedonia, former Yugoslav Republic of, 19, 42Madagascar, 19, 60, 102malaria, 4, 12, 59, 62Malawi, 60Malaysia, 32, 60, 76Mali, 19, 60, 63, 66, 111Malta, 12, 41Mauritania, 60, 79, 80, 111measles, 63Mexico, 19, 46, 47, 48, 76, 80, 87, 94, 100microeconomic factors, 38, 47, 72Middle East and North Africa, 16, 27, 51–55, 87,

98, 101, 102middle-income countries, 12, 88Millennium Development Goals (MDGs), 3, 4, 12–16, 61;

cost of achieving, 89–90; debt relief, 112; GlobalMonitoring Report, 6, 87–90; health issues centralto, 63; IDA, role of, 108; infrastructure, 69; list of,15; managing for development results, 84;middle-income countries, support for, 22;Partnerships in Development, 23; PRSPs and,20, 63; regional reports, 28, 37, 41, 43, 44, 48;social development, 67

Millennium Summit, New York, 2000, 2–3Millennium Summit Review, 2005, 17Moldova, 42, 43, 44money laundering, 78Mongolia, 19, 32, 34

Monterrey Consensus, 4, 15, 16, 23, 88, 89Morocco, 54, 79, 85Mozambique, 13, 19, 28, 62, 94, 111Multi-Country AIDS/HIV Programs (MAPs), 28, 62Multilateral Investment Guarantee Agency (MIGA), ii, 9,

22, 70, 95

Nnatural disaster relief and assistance, 33, 52, 77Nepal, 37–39, 60Netherlands, 24, 59, 67, 73New Partnership for Africa’s Development (NEPAD), 28Nicaragua, 47, 99, 111Niger, 111Nigeria, 25, 60, 64, 74, 75, 81, 102North Africa, see Middle East and North AfricaNorway, 59nutrition, 63

OOperations Evaluation Department (OED), 5, 19, 91–93Organization for Asia-Pacific Economic Cooperation, 35Organization for Economic Co-operation and

Development (OECD), 21, 22, 29, 41; infrastructure,70; politics and governance, 59; private sectordevelopment, 75; simplification andharmonization efforts, 87

Organization of American States (OAS), 81

PPacific, see East Asia and PacificPakistan, 19, 25, 37–39, 56, 60, 64, 83, 100, 109Palestinians, 19, 52, 53, 113Pan American Health Organization, 81Papua New Guinea, 57Paraguay, 19, 46, 48participation in development, 18, 29, 33–34, 38–39,

43, 48, 53–54, 61partnerships, 7, 22–23, 86, 114Personnel Committee, 5, 6Peru, 25, 46, 47, 48, 70, 74, 80Philippines, 33, 34, 60, 65, 94, 100Poland, 12, 41, 42, 43, 87, 101poliomyelitis, program to eradicate, 113politics, governance, and war, 58–59; corruption issues,

81; modernization of legal and judicial systems,79–81, 87; regional reports, 29–30, 37, 41, 42, 51–53;regulatory burdens, 73; social development, 67

population issues, 3, 63Post-Conflict Fund, 12–13, 30, 67Post-Conflict Progress Indicators, 21postconflict settings, Transitional Support Strategies

for, 19poverty and poverty reduction, 2–4, 6–7, 14, 16–18Poverty and Social Impact Analyses (PSIAs), 58Poverty Reduction Strategy Papers (PRSPs), 4, 6, 7, 19–20,

58; gender issues, 59; HIV/AIDS, 62; MDGs and, 63;regional reports, 28, 39, 42, 54

Poverty Reduction Support Credits, 20, 37, 39, 42, 43, 47prescription drugs, global access to, 4, 12private sector development, 17–18, 22, 72–75Public Information Centers, 23, 34Puerto Rico, 73

QQuality Assurance Group, 90–91


Rregulatory burdens, 73research activities, 72–74, 98–100results, measuring and monitoring: external evaluations,

95; Inspection Panel, 94; internal quality assuranceprocesses, 90–94; managing for development results,84–85; MDGs, progress towards, 87–90; OED(Operations Evaluation Department), 5, 19, 91–93

riverblindness (onchocerciasis), iRoma people, 42, 43Romania, 41, 42, 44rural development, 65–67, 70Russian Federation, 41, 42, 43, 60, 93Rwanda, 66, 93

SSt. Lucia, 49St. Vincent and the Grenadines, 49Samoa, 6, 33sanitation and water, 38–39, 43, 44, 47, 53–54, 66, 88SARS (sudden acute respiratory syndrome), 35Saudi Arabia, 51, 52Scout Movement, World Organization of, 13Seila Program, 34Senegal, 60, 75, 111Serbia and Montenegro, 6, 19, 42, 44Seychelles, 60Shanghai conference on poverty reduction, 4, 12, 17, 101Sierra Leone, 23, 59Singapore, 33, 57, 73Slovak Republic, 12, 19, 41, 42Slovenia, 2, 12, 41social development, 67–68Somalia, 13, 21South Africa, 24, 71, 76South America, see Latin America and CarribeanSouth Asia, 16, 27, 37–40, 65, 73, 87, 95, 98, 109, 110, 114Sri Lanka, 19, 37–39, 60, 87Statistical Capacity Building Program, 12, 85Strategic Framework, 6Strategic Partnership for Africa, 28Sudan, 19, 21Summit of the Americas, 73support sector-wide approaches (SWAps), 110sustainable development, 65–68Sweden, 24

TTaiwan, 33Tajikistan, 42, 43, 59, 60Tanzania, 63, 75, 111technical assistance programs, 47, 51, 74–75, 78, 101terrorism, 78Thailand, 14, 25, 66Timor-Leste, 21

Tokyo International Conferences on AfricanDevelopment, 28

Tokyo Project, 34–35Trade Facilitation Initiative, 60trade talks, 3, 13, 59–60transitional results framework, 21transportation, see infrastructuretrust funds, 112–14tuberculosis, 4, 12, 35, 59, 62Tunisia, 19, 53, 56, 60, 76, 82, 93Turkey, 19, 41, 42, 43, 44, 66, 75, 77, 96, 97

UUganda, 14, 23, 60, 66, 75, 101, 111Ukraine, 19, 42, 43, 60, 94unemployment issues in Middle East and

North Africa, 51, 53United Arab Emirates, 52United Kingdom, 35, 41, 57, 114United Nations: Children’s Fund, 4, 12, 62; gender issues,

59, 80–81; HIV/AIDS program (UNAIDS), 43, 62;indigenous peoples, 68; Joint Iraq Needs Assessment,12, 51–52; partnerships with, 22; poliomyelitis, pro-gram to eradicate, 113; Security Council, appearanceof James D. Wolfensohn before, 12; transitionalresults framework and donor partnerships, 21

United States, 57, 73Uruguay, 46Uzbekistan, 42

VVenezuela, República Bolivariana de, 46, 80Vietnam, 6, 19, 23, 32, 34, 35, 109vulnerable people, protections for, 64

Wwar, see politics, governance, and warwater and sanitation, 38–39, 43, 44, 47, 53–54, 66, 88West Africa Economic and Monetary Union, 78West Bank and Gaza, 19, 52, 53, 112, 113Wolfensohn, James D., ii, 2–4, 12, 13women, 51, 59, 80–81, 87World Bank Group, organization and institutions of, 8–9World Bank Institute (WBI), 101–2World Development Report, 98–100World Health Organization (WHO), 12World Trade Organization (WTO), 22, 35, 60world trade talks, 3, 13, 59–60

YYemen, Republic of, 53, 54, 60, 83youth development issues, 3, 13, 47, 54, 64Yugoslavia, 24

ZZambia, 19, 64, 82, 94


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