Regional Context

World Bank Assistance

East Asia &
Pacific Fast Facts

Regional Perspectives

Countries
Eligible for
World Bank Borrowing:

East Asia and Pacific

"When the orchardists saw their piled fruit turn into cash and their life standard was thus improved, they were very excited and filled with happiness. These kind and honest people did not forget the organizations that helped them."

Letter from Mr. Song Yongxiang, a recipient of a small business loan funded by the Shanxi Poverty Alleviation Project, which is improving lives in some of China’s poorest areas.

Regional Context: Recovery Continues but Risks Persist

East Asia’s recovery from financial crisis has been remarkable. Growth in the region’s developing countries exceeded 7 percent in 2000, and extreme poverty is down to about 13 in 100 people living on less than $1 a day, compared with nearly 30 percent at the start of the decade. Much of the progress was driven by China, a pillar of growth during the crisis. Steady recovery in other parts of East Asia has renewed progress in poverty reduction, which was interrupted during the crisis: 2000 marks the second consecutive year of growth for East Asia’s major economies. Countries are financially stronger than they were four years ago, which will help them manage the impact of the global contraction this year.

Revitalizing the business sector is essential to enhance resistance to shocks. Some smaller econo-mies are lagging, and disparities within larger economies are high. Social vulnerability remains worrisome: nearly half the population lives on less than $2 a day. Progress on other social development goals—which require effective institutions and service delivery—has been slower. The need for increased responsiveness of public institutions has thus grown, in step with the emergence of an active civil society, a growing policy debate, and changes in government. Finally, the environment needs renewed attention.

World Bank Assistance: Competitive Businesses, Empowered Communities, Cleaner Air

The Bank’s primary objective is to reduce poverty through Country Assistance Strategies (CASs) that build on strategic alliances and partnerships to encompass global good practices. In fiscal 2001, $2.1 billion in new lending, covering 30 projects (excluding 3 with special trust fund financing), supplemented the Bank’s policy advice and technical support. The strategic thrust of Bank assistance includes revitalizing the business sector, supporting public sector performance, addressing social risks, and preventing countries from retreating into environmental neglect.

Delivering global and regional experience to countries and applying resources to local needs are the driving principles behind the Bank’s strategy in East Asia. Nearly half the Bank’s staff in the region and all its Country Directors are located in the field to ensure more effective assistance. Indonesia’s fiscal 2001 CAS, developed in a highly consultative manner, links increased concessional lending to improved governance; and a new transition strategy is guiding the Bank’s program in East Timor (box 4.3). In Cambodia, the Lao People’s Democratic Republic, Mongolia, and Vietnam, the Bank is supporting comprehensive, long-term programs—developed by the countries through the Poverty Reduction Strategy Paper process—that promote broad public participation and are pro-poor and pro-growth. A new CAS has been initiated for China.

Table 4.2 shows the value and sectoral distribution of total Bank lending to the East Asia and Pacific region in the fiscal 1992–2001 period. Table 8.3 (see About the World Bank) compares commitments, disbursements, and net transfers to the region for fiscal 1996–2001, and table 8.9 (see About the World Bank) shows operations approved in fiscal 2001, by country. Figure 4.2 shows IBRD and IDA lending by sector.

Revitalizing East Asian business and restoring investor confidence

The Bank is helping to improve the institutional and policy environment for private investment through support for corporate restructuring, governance, and competitiveness. In Indonesia, it has worked closely with the IMF and the Asian Development Bank (ADB) in bank and corporate restructuring, and led support to state banks. In Thailand, the Country Development Partnership for Competitiveness (CDPC)—nonlending support to take forward country dialogue in the absence of adjustment lending—is helping implement policies and financial and corporate reforms. In Vietnam, a new Poverty Reduction Support Credit is supporting a comprehensive set of structural reforms to promote increased private investment and to strengthen transparency and accountability in state enterprises, banks, and public finance—essential for broadly shared growth.

To promote regional competitiveness, the Bank is investing in information infrastructure, technology innovation, and skills development. Thailand’s CDPC is addressing key constraints in these areas, complemented by technical assistance from partners. The Bank-managed Vietnam Development Information Center is a multidonor-funded cutting-edge facility that offers distance learning and public access to global knowledge; the operation is one of four Global Development Learning Network centers established by the Bank in Asia. Through knowledge and country development partnerships established with countries such as the Republic of Korea and Thailand, the Bank is facilitating access to global development knowledge to reduce vulnerability and strengthen competitiveness (box 4.4). Work has also advanced with the Organisation for Economic Co-operation and Development (OECD) to assess China’s knowledge economy and requirements for technological innovation. The Third Asia Development Forum for regional policymakers and others, organized jointly with ADB, the Economic and Social Commission for Asia and the Pacific, and other partners, also aimed at preparing for the future economy.

Improving public services and governance

With rising public debt squeezing public spending, civil society in many East Asian countries is demanding more efficient and accountable government, improved social and infrastructure services, and better environmental safeguarding. Bank assistance thus continues to emphasize public sector transparency and accountability, and greater stakeholder participation in project design and implementation. Initiatives in Indonesia include anticorruption and civil service reforms. The Indonesian-led Partner-ship for Governance Reform—a joint initiative with the United Nations Development Programme—facilitates a national dialogue on governance and is funding innovative reform proposals from civil society and government agencies.

Bank operations are adopting demand-oriented and private sector approaches to service delivery, particularly in infrastructure activities and with emphasis on cost recovery. Decentralized public sector decisionmaking and accountability are also priorities. Indonesia’s Provincial Health Project is delivering services to the poor in the provinces of Banten, North Sumatera, and West Java in an increasingly decentralized environment. The Philippines’ Local Government Finance and Development Project is making cities more livable by expanding and upgrading basic infrastructure, services, and facilities, as well as the capacity of participating local governments. In China, the Economic Law Reform Project is financing technical assistance for preparing economic laws, while the Accounting Reform Project is helping government auditors curb waste and other misuse of resources, and strengthen public sector financial management. In Thailand, Bank-funded surveys to gauge household, private sector, and public sector perceptions of corruption have raised national awareness of, and debate on, the problem.

Reducing vulnerability and ensuring that poor people benefit from growth

Bank strategy has evolved from supporting safety nets and crisis assessment to strengthening policies and institutions that help households manage social risks, build social policy frameworks, and enable the poor to participate in the benefits of growth. Social programs in low- as well as middle-income countries have increasingly emphasized community empowerment and demand-driven approaches. In Cambodia the Social Fund II Project is financing community-based subprojects for infrastructure, creating employment opportunities, and strengthening communities and local governments. Indonesia’s Kecamatan Development Project is helping 10,000 subdistricts nationwide fund small-scale infrastructure projects or income-generating activities; the project is strengthening local capacity, empowering village councils, and improving community participation.

The Bank has also been supporting areas of extreme poverty. Mongolia’s rural transport project is improving poor communities’ access to health and education services and facilitating private enterprise and trade. In Vietnam, small-scale infrastructure and livelihood projects are being planned to tackle poverty in some of the country’s poorest areas through participatory, decentralized, and targeted approaches. China’s Tri-Provincial Highway Project is helping develop transport in three western provinces while improving road access to poor counties to reduce income inequalities.

Improving the environment

With urbanization now embracing half the population in the region’s major countries, urban air and water pollution is an extremely serious problem. Together with the Ford Motor Company, ADB, and the governments of Japan and the Netherlands, the Bank has launched the Clean Air Initiative for Cities of East Asia as a platform for knowledge sharing among Asian cities. Assistance to countries includes work with the Bangkok authorities to tackle motorcycle pollution; a multidonor report on China’s environment and a report analyzing options for natural resource management in Indonesia; and support for projects in China with a strong environmental focus, which have been the fastest-growing part of the Bank’s loan portfolio for that country ($1.2 billion approved in fiscal 2000–01). For example, the Sichuan Urban Environment Project is bringing cleaner water and a healthier environment to six million low-income people in Sichuan while helping protect and restore the Grand Buddha of Leshan, a World Cultural Heritage site.