Overview of World Bank Activities in Fiscal 1996

 Poverty reduction and sustainable development remain the central objectives of the World Bank. In fiscal 1996, several initiatives were launched to strengthen the Bank's development effectiveness and to focus Bank efforts more on the needs of its clients and results on the ground (see accompanying box on the Bank's change process).

 The change agenda of the institution is focusing on two main areas: (a) immediate steps to raise the standards of all client services and (b) measures to improve the Bank's longer-term ability to meet client needs more effectively.

 In particular, the Bank's ability to respond quickly to the needs of its clients has been strengthened. For example:

CHANGING THE BANK

 Under new leadership, an integrated effort is under way for the Bank to better meet client needs, provide high-quality results on the ground, further improve efficiency and cost effectiveness, strengthen external partnerships, and increase Bankwide professional excellence. Examples of initiatives in each of these areas appear throughout the pages of this Annual Report.
 An institutional framework for facilitating the change process has been established. It has four main goals:
  • developing an institutional strategy that provides a clear sense of direction about how the Bank will serve borrowers, donors, other shareholders, beneficiaries, and partners;
  • enhancing institutional capacity by strengthening management capabilities and improving incentive mechanisms;
  • redesigning and putting into place improved and more efficient business processes with a view to improving the quality of the Bank's services; and
  • pursuing a communications strategy that builds institutional and external support for implementing the program of change.

 Although it is still in its early stages, the momentum for change is steadily building, and several initiatives are under way.
 Examples of the simplification of business processes and project documentation, steps to accelerate the project cycle and reduce elapsed time for processing, as well as efforts to improve the quality of the Bank portfolio of projects are documented in Section Two and the various regional sections of this Annual Report.
 Measures to strengthen the management of the Bank's human resources are reported on in the "Administrative Budget, Corporate Planning, and Resource Management" section of the Report.
 With a view to increasing the country focus of the Bank's work, country directors are being appointed in Africa and Latin America to lead country teams. Some--the country director for the new Mexico department and the country director for Kenya and Djibouti--are already located in the field. The intention is to increase, over time, the number of country directors in the field. In the Africa Region, fifteen country directors, reporting directly to the regional vice presidents, lead country teams. The teams, which include the resident representative as "co- pilot," contract technical staff to work on specific projects and programs. Country directors are responsible for allocating the operational budget across the work program and are accountable for delivering the services agreed on the country-assistance strategy (CAS), including portfolio management, disbursement performance, and the quality of services. Details of many change initiatives under way in the Latin America and the Caribbean Regional office may be found on page 115.
 Measures aimed at strengthening technical units in the Bank and the capacity to share knowledge across the institution are being pursued to facilitate professional excellence in the Bank's work.
 To sharpen focus on client needs, a new generation of CASs was designed in fiscal 1996 in closer consultation with borrowers and in collaboration with a much broader array of partners. Special efforts were made to solicit the views of government officials and donors throughout the CAS process for the Philippines, for example, with government officials participating in a series of workshops to clarify development strategies and the most productive areas for Bank focus.
 These and other efforts will be pursued further in fiscal 1997, targeted primarily at the four main goals of the change agenda.

 Changes in operational approaches are also taking place throughout the Bank. During fiscal 1996, for example, there has been considerable progress in upgrading country-assistance strategies (CASs) so that they (a) articulate the Bank's approach to country-specific development challenges by defining the appropriate mix of lending and advisory services and (b) set out monitorable indicators (both qualitative and quantitative) to assess the Bank's performance in addressing these challenges.

 Many examples of change at the regional level have also taken place.

 These initiatives that are taking place at the regional level are being supported by the recently established Quality Assurance Group. The group aims to strengthen accountability for quality and results by providing line managers with independent assessments of their work and by helping to address critical problem areas in the portfolio.

 A number of other institutional initiatives have been put into place, or are being proposed, to accelerate and sustain the Bank's change agenda (see accompanying box). They aim to improve substantially the Bank's level of performance and its ability to meet changing client needs. These initiatives include:

 The purpose of the Bank's agenda for change is to increase the development effectiveness of its services by improving the quality of work across the board--lending, advice, and state-of-the-art financial products. Change that improves the quality of the Bank's staff and multiplies the effectiveness of the Bank's programs can have a significant effect on the Bank's performance as a development institution.

 Improvements are being delivered in an increasingly cost-effective, responsive, and flexible manner. The need to enhance efficiency has been recognized explicitly through a reduction in the Bank's real net administrative budget by some 6 percent a year during fiscal years 1996 and 1997. In the process, the Bank has made hard choices that have led to well-balanced efficiency gains and selective programmatic reduction, while permitting significant new initiatives and expanding programs.

 Other immediate priorities were addressed throughout the past fiscal year, as well:

 The three-year package begins with a one-year interim fund of about $3 billion running from July 1, 1996, with decisionmaking and procurement limited to contributing donors and developing countries (see accompanying table). In each of the two subsequent years, starting July 1, 1997, all IDA donors will contribute about $4 billion to the Eleventh Replenishment of IDA.

Table 1

Table 2

 These donor contributions, when complemented by other sources of IDA funds, will be adequate to meet foreseen needs of some SDR 14.5 billion. They do not, however, leave room for contingencies--future operations that are not now foreseen--in countries currently inactive or borrowing below expected levels due to absorptive capacity constraints, for example. Bosnia is the most recent example of an unexpected demand for IDA funding. While the current program for Bosnia can now be funded, IDA would have great difficulty in financing new, unexpected demands within the available window.

 Donor representatives (IDA Deputies) reaffirmed IDA's special commitment to Africa within its overarching objective of poverty reduction, emphasized that private sector- led growth and social and environmental sustainability are the foundations of effective poverty reduction, and called upon recipient countries to improve governance and to broaden participation by the poor in development. The Deputies emphasized that access to primary education, clean water, health services, and basic infrastructure were vital to the emergence of families from poverty. They called on IDA management not only to continue strong support for such investments but also to help governments restructure public spending, wherever possible, toward these sectors and away from nonproductive purposes.

 On the basis of staff analysis, the executive boards of the institutions agreed that there was a number of HIPCs, most of which are in sub-Saharan Africa, for whom the burden of debt was likely to remain above sustainable levels over the medium term, even with strong policy performance and the full use of existing debt-relief mechanisms.

 Directors agreed that the following broad principles should guide further action:

 (a) The objective should be to target overall debt sustainability on a case-by-case basis, focusing on the totality of a country's debt.

 (b) Action should be envisaged only when the debtor has shown, through a track record of reform and sound policies, the ability to put to good use whatever exceptional support is provided to achieve a sustainable outcome.

 (c) New measures should build, as much as possible, on existing mechanisms.

 (d) Additional action for the problem cases should be coordinated among all creditors involved, with broad and equitable participation.

 (e) Any action to relieve the burden of debt owed to multilateral creditors should preserve the financial integrity of the institutions and their preferred creditor status, and be consistent with the constraints of their charters in order that the institutions can continue to provide financing to all member countries on appropriate terms.

 (f) New external finance for the countries concerned should be on appropriate concessional terms so as to support their efforts to pursue reform and establish a track record of good policy.

Figure

 At their April 1996 meetings, the Development and Interim Committees, after their study of the joint proposal, asked the Bank and the Fund, in close collaboration with all involved, to move swiftly to produce a program of action to implement this framework. Ministers urged that a decision be reached on this program and its financing as soon as possible, aiming to do so by the annual meetings of the two institutions in early October 1996. The Group of 7 (G-7) asked the president of the Bank to participate in its discussions on debt at its annual summit, held in June 1996 in Lyons. In their communiqué following the Lyons meeting, the seven heads of governments stated that the solution for some heavily indebted poor countries (HIPCs) should "provide an exit for unsustainable debt and be based on a case-by-case approach adapted to the specific needs of each country concerned, once it had shown its commitment to pursuing economic adjustment." The G-7 also endorsed an overall World Bank contribution of the order of $2 billion for a trust fund initiative aimed at assisting the HIPCs in dealing with their debt situation. The president of the Bank subsequently stated that the exact amounts allocated by the Bank would be determined by its shareholders and would depend on coordination of required action by all creditors involved and those countries that would make voluntary contributions to the trust fund.

 The Bank has stepped up its lending and advisory work in such areas, providing support for finance-sector reform and the private sector in Moldova; reform of the banking system in Vietnam; export development in Jordan; private infrastructure finance in India; and land titling in the Lao People's Democratic Republic. The Bank is also working with business organizations in many countries to provide business opportunities in developing countries (the annual meetings now feature investment seminars for private sector participants, for example). It has also launched infoDev, an initiative to bring new resources--from corporations, foundations, and governments--to promote reform and investment in the developing world through improved access to information technology (see accompanying box). More efforts are being undertaken on mainstreaming the guarantee facility to encourage investment and on other services that will catalyze private investment in developing countries.

INFORMATION FOR DEVELOPMENT (InfoDev) PROGRAM IS LAUNCHED

 InfoDev, a cooperative program managed in the World Bank's Industry and Energy Department, brings together finance and expertise from governments, mutilateral institutions, such as the World Bank and the European Union, and the private sector to promote reform and investment in the developing world through improved access to information technology. InfoDev receives project proposals from governments, private firms, and international and nongovernmental organizations wishing to foster such development in four main categories: creating a market-friendly environment to accelerate access to information; reducing poverty and exclusion; promoting education, improving health, and protecting the environment; and improving the efficiency and transparency of governments. InfoDev focuses on fostering partnerships among the World Bank, governments, the private sector, and civil society.
 InfoDev was launched in September 1995. Since then, it has received more than 144 project proposals from all over the world, ranging from distance education and sophisticated agricultural mapping to medical data bases. Of these, four have already been approved as part of infoDev's Initiating Work Program: the African Virtual University; Telematics for African Development; Jamaica: Partnership for Technology in Basic Education; and the Sixth International Telecommunications Union Regulatory Colloquium. The standard funding amount per project is around $250,000. Dozens more projects are in the process of being evaluated, of which infoDev hopes to fund ten to fifteen annually. Available funds for calendar year 1996 are expected to reach about $4.5 million from sources in the private sector, member governments, and multilateral institutions.

 Against this background, commitments by the Bank were $21,520 million--$14,656 million from the IBRD and $6,864 million from IDA (see accompanying table). A total of 256 projects were approved (129 by the IBRD and 127 from IDA). Two loans on IDA-like terms, totaling $60 million, from resources provided by the Trust Fund for Gaza, were approved for the West Bank and Gaza. Seven projects in Bosnia and Herzegovina, totaling $150 million from the Trust Fund for Bosnia and Herzegovina, were also approved. Partial guarantees, totaling $275 million, were approved for three countries--China, Jordan, and Pakistan. Gross disbursements amounted to $19,256 million--$13,372 million from the IBRD and $5,884 million from IDA.

Table 3

 Assistance to the poorest countries--those with a per capita gross national product of $765 or less (in terms of constant 1995 United States dollars) totaled $9,883 million--$3,556 million from the IBRD and $6,327 million from IDA (see figure on page 20).

 Some 32 percent of total Bank investment lending during the year was directly targeted to the poor, the same as in fiscal 1995 . These projects supported activities to increase the productivity of and economic opportunities for the poor, to develop their human resources, and to provide social safety nets (for a description of each such targeted project, turn to the project summaries, which begin on page 127).

 Grants during the year from the Debt-reduction Facility for IDA-only Countries totaled $77 million. They were advanced to four countries: Albania, Ethiopia, Mauritania, and Nicaragua. The Debt-reduction Facility provides low- income countries with grant funds to reduce their commercial debt that is public, external, noncollateralized, and unguaranteed. The facility is financed through contributions from the IBRD's net income and donors.

 On the financial side, the IBRD borrowed the equivalent of $10,883 million in the world's financial markets. Its net income was $1,187 million.

 And, at the end of the fiscal year, the executive board approved two initiatives that provide borrowers flexibility in determining the currency composition of their IBRD loans. One permits borrowers to select loans in a single currency for new loan commitments without volume restriction. The other allows borrowers to convert the terms of their existing currency-pool loans to the offered currency of their choice.

 During the fiscal year, Bosnia and Herzegovina fulfilled the required formalities to succeed to the membership of the former Socialist Federal Republic of Yugoslavia as a member of the IBRD. Brunei Darussalam became a member of the IBRD on October 10, 1995, increasing the IBRD's membership to 180.

 At the end of the fiscal year, action was pending on membership in the IBRD for the Federal Republic of Yugoslavia (Serbia/Montenegro).

 Bosnia and Herzegovina also fulfilled the required formalities to succeeed to the membership of the former Socialist Federal Republic of Yugoslavia as a member of IDA, bringing the total membership of IDA to 159.

 At the end of the fiscal year, action was pending on membership in IDA for Brunei Darussalam, Ukraine, and the Federal Republic of Yugoslavia (Serbia/Montenegro).

Footnotes

1 World Bank. 1996. World Bank Participation Sourcebook. Washington, D.C.

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