The executive directors consider and decide on the IBRD loan and ida credit proposals made by the president, and they decide policy issues that guide the general operations of the Bank. They are also responsible for presenting to the Board of Governors at the Annual Meetings an audit of accounts, an administrative budget, and an annual report on the operations and policies of the Bank, as well as any other matters that in their judgment require submission to the Board of Governors. During fiscal 1998 the Board of Executive Directors met ninety-two times in formal board meetings and as the Committee of the Whole another sixty-eight times in informal sessions. In addition, most of the executive directors serve on one or more of five standing committees: Audit Committee, Committee on Development Effectiveness, Budget Committee, Personnel Committee, and Committee on Executive Directors' Administrative Matters. The executive directors' Steering Committee, an informal advisory body, also meets regularly. Although a committee cannot make a decision for the entire Board of Executive Directors, the committees increasingly look in depth at Bank policies and practices and report their findings and recommendations to the executive directors.

In addition, workgroups of executive directors and alternate executive directors at times make special trips to borrowing countries to observe Bank-supported operations and the Bank's assistance strategy firsthand. They meet a wide range of people, including staff of the Bank's resident missions or field offices, government officials, project managers, nongovernmental organizations (NGOs), project beneficiaries, and the business community. In fiscal 1998, groups of executive directors visited the Middle East and North Africa (Jordan, Tunisia, West Bank and Gaza, and Yemen) and eastern and southern Africa (Eritrea, Lesotho, and South Africa).

Shaping policy

The Board of Executive Directors' oversight responsibility covers virtually all Bank policy, so its role cannot be clearly separated from most of the Bank's activities and initiatives as described in this Annual Report. This oversight responsibility is exercised in part by the executive directors' approval of Bank or ida lending operations and the annual budget process. The executive directors also exercise an important role in shaping Bank policy and its evolution. It is in this role that the directors represent the changing perspectives of their shareholder governments vis-à-vis the Bank's role. These policy initiatives normally reflect needs perceived by shareholders and involve a process of consensus building, both among executive directors and with Bank management. Many of the changes in Bank policy grow from initiatives by the executive directors and occur gradually over a period of years, such as the increasing emphasis on social development, gender, environment, and capacity-building issues.

In fiscal 1998, the executive directors approved the introduction of two adaptable lending instruments to add to the Bank's lending toolkit: the Learning and Innovation Loan (LIL) to support small, time-sensitive programs to build capacity and pilot promising development initiatives or to experiment and develop locally based models prior to large-scale interventions; and the Adaptable Program Loan (APL) to provide phased, but sustained, support for the implementation of long-term development programs (see box 4-1). On a pilot basis, the executive directors agreed in principle that ida be allowed to offer partial risk guarantees to private lenders in ida-only countries where IBRD enclave guarantees are not available (see box 3-2 ).

The executive directors have increasingly encouraged closer linking of the operations of the Bank, ifc, and MIGA. In fiscal 1998 the Board of Executive Directors considered eight country assistance strategies prepared jointly by the Bank and the IFC. (Brazil, Côte d'Ivoire, Egypt, India, Indonesia, Kazakhstan, Mexico, and Poland.)

The executive directors adopted strategies and guidelines in support of the Bank's commitment to strengthen its efforts to promote good governance and combat corruption. They acknowledged that corruption and weak governance undermined macroeconomic stability, private sector activity, and sustainable development. They agreed that the Bank should be actively involved in responding to member governments' requests to strengthen their institutions and performance in these areas. And they noted that member governments have the primary responsibility for combating corruption and strengthening governance, and underscored the importance of a consistent and even-handed approach to these issues.

Strategic Compact with shareholders

Last year the executive directors unanimously endorsed the Strategic Compact between the Bank and its shareholders--a plan for reform and renewal of the Bank to make it more effective in achieving its overriding goal of poverty reduction. The compact's objective is to transform the way the Bank conducts its business by improving its products, speeding up its processes, lowering its costs, making it more demand driven, and increasing its development impact. The executive directors' committees play a major role in helping directors to discharge their oversight responsibilities in monitoring the compact. The executive directors reviewed two semi-annual reports on the compact and noted that considerable progress has been made in meeting its ambitious objectives. They stressed the need to continue to improve the corporate scorecard, focusing on key performance indicators and strengthening the link to development results.

In early fiscal 1998 the executive directors considered a report on cost effectiveness focusing on aligning resource allocation with strategic priorities, developing clearer standards for policy compliance, simplifying business processes, and reducing overhead. The recommendations of the Cost Effectiveness Review are being implemented within the framework of the Strategic Compact. The executive directors approved far-reaching reforms to the Bank's human resources (HR) policies. The new hr policy framework is a major milestone in the Strategic Compact.

Response to the East Asian financial crisis

Under the executive directors' oversight, the Bank has been very active in responding to the East Asian crisis as part of the international effort to restore confidence and sustainable growth in the region and address the social impacts of the crisis. The Bank has pledged up to $16 billion to underpin programs of structural reform and technical assistance for countries in the region. In a swift response to the crisis, the executive directors approved a record $5,000 million in loans to the Republic of Korea. Together with its partners, the International Monetary Fund (IMF) and the Asian Development Bank (ADB), the Bank is helping several of its Asian client countries address structural issues relating to the current financial crisis.

Heavily indebted poor countries

Last year the executive directors of the Bank and the imf endorsed a program of action for reducing the debt burden of eligible heavily indebted poor countries (HIPCs) to a sustainable level and established the HIPC Debt Initiative Trust Fund. There has been extensive international cooperation among all partners--multilateral and bilateral--in implementing the initiative for the benefit of the poorest and most indebted countries. Further progress has been made in fiscal 1998 in implementing the initiative to support governments that show strong commitment to reform. Six countries have qualified for assistance--Bolivia, Burkina Faso, Côte d'Ivoire, Guyana, Mozambique, and Uganda. Uganda was the first country to reach the completion point under the initiative.

Country and sector strategies

The country assistance strategy (CAS) is the central tool for reviewing and guiding Bank country programs. It is a key Bank instrument for customizing its poverty reduction strategy, strengthening partnerships with clients, and allocating resources across competing demands. As a result of the executive directors' work, there has been a visible refocusing in the CAS on building on lessons from past performance, consulting civil society, evaluating the impact of Bank efforts and results on the ground, and strengthening the Bank's presence in the field.

In reviewing CASs in fiscal 1998, the executive directors continued their efforts to see poverty reduction--the Bank's overriding objective--more comprehensively integrated into strategies. Directors increasingly recognized considerable progress made in CAS quality. They emphasized the need for increasing country focus to enhance ownership and results on the ground. They agreed that the priorities for further advances in CAS quality are sharper strategic selectivity and enhanced treatment of self-evaluation and monitoring of CAS implementation.

In fiscal 1998 the executive directors approved a sector strategy for health, nutrition, and population--a prototype for a new Bank product intended to complement CASs with a sectoral perspective on the Bank's comparative advantage, effectiveness, and priorities.

Development effectiveness

The Board of Executive Directors' Committee on Development Effectiveness (CODE) oversees the development effectiveness aspects of Strategic Compact monitoring and implementation and tracks the results of Bank operations on the ground. code validates and guides the activities of the Operations Evaluation Department (OED) and attests to the adequacy of management responses to oed findings and recommendations. The committee assists the executive directors in assessing the corporate performance scorecard, portfolio management, and quality assurance and in refocusing the development priorities.

In fiscal 1998 the committee continued to montor implementation of strategies for strengthening self- and independent evaluation and developing a coherent evaluation framework. Significant progress has been made on all fronts in renewing and revamping the Bank's evaluation system.

The committee continued to ensure that evaluation results are routinely and rapidly fed back into the formulation of new directions, policies, and procedures. For example, it considered Country Assistance Reviews prepared by oed for Bangladesh, Côte d'Ivoire, Mozambique, and the Philippines and reported its findings to the Board of Executive Directors prior to the discussion of the CASs for those countries. Similarly, the committee reviews draft sector strategies ahead of executive directors' discussions; in fiscal 1998 these included health, nutrition, and population; and energy and the environment. Other areas of the committee's focus in fiscal 1998 included operational policy reform, performance of technical assistance projects, the Africa region's portfolio and capacity-building activities, and the Special Program of Assistance to Africa (SPA).

Selective capital increase

The IBRD 's executive directors recommended, and the Board of Governors approved, a selective capital increase (SCI) of 23,246 shares for five countries--Brazil, Denmark, the Republic of Korea, Spain, and Turkey. The sci will provide additional callable capital of $2,626 million, paid-in capital of $168.3 million, and additional contributions to ida of about $250 million. These countries are expected to maintain higher ida shares in ida-12 and thereafter.

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