World Bank/IMF Agenda

World Bank Doing a Better Job, But Criticisms Remain

According to a recent poll, opinion leaders in developing countries regard the World Bank’s influence on their respective countries as generally positive, and many say the Bank has become more useful, relevant, transparent, responsive, visible, and better at communicating. Opinions are particularly positive in Europe, Central Asia, and East Asia, where 8 in 10 opinion leaders say the Bank has a "very" or "somewhat" good influence. Many opinion leaders agree that the Bank’s manner and approach to borrowing countries have improved in recent years and that the Bank is more collaborative and willing to work in partnerships with civil society. Many, however, complain that the institution remains too bureaucratic and arrogant. The Bank also gets lower evaluations for its efforts to help developing countries reduce corruption. In addition, opinion leaders see the Bank as closely tied to the United States. On the issue of the benefits of economic reforms recommended by the Bank, opinion is mixed.

This new poll by Princeton Survey Research Associates was one of the largest and most comprehensive ever conducted on international development issues with opinion leaders. Between October 2002 and March 2003 researchers polled more than 2,600 individuals holding high-level positions in government, the media, civil society, academia, the private sector, and labor unions in 48 countries.

World Bank-IMF Annual Meetings 2003: Dubai, United Arab Emirates

The World Bank and IMF annual meetings will be held on September 23–24 in the Dubai World Trade Center in the United Arab Emirates. Topics of the preceding seminar event, scheduled for September 20–22, include

• What Future Role for the World Bank Group in Oil, Gas, and Mining? Findings of a Global Review.

• Roundtable Discussion: Middle East and North Africa’s Employment Challenge in the 21st Century.

• Foreign Direct Investment and Developing Country Economies: The Growing Impact of HIV/AIDS and Infectious Diseases.

• The Growing Dollarization of Banking Assets and Liabilities: A Problem or a Solution?

• Foreign Direct Investment to Emerging Markets: Where and Why?

• Water: From Scarcity to Security.

• Adopting a Global Standard? Developing Countries and the New Basel Accord.

• The Role of Effective Public Communications in the Success of Economic and Financial Policies and Reforms.

• Is There a Role for Business in Building Peace and Democracy?

Nick Stern Takes Senior Position at U.K. Treasury, David Dollar Appointed Director

The World Bank announced on June 12 that Nicholas Stern, the Bank’s chief economist and senior vice president for development economics since July 2000, is to take up the position of second permanent secretary and managing director, budget and public finances, at the U.K. Treasury. He will also be head of the U.K.’s Government Economic Service. His new appointment will take effect on September 29. A search for his successor will be initiated shortly.

As of June 16, David Dollar has been appointed director, development policy, in the Development Economics Vice Presidency. His most recent assignment was research manager in the Development Research Group of the vice presidency.

Cost of Preserving State-Owned Banks in Transition Countries: New World Bank Report

In May 2003 the World Bank released a new report, State-Owned Banks in the Transition: Origins, Evolution, and Policy Responses, by Khaled Sherif, Michael Borish, and Alexandra Gross, which recounts the time consuming, costly restructuring of state banks in European and Central Asian countries from the late 1980s through 2000. A key finding is that governments are better off moving swiftly to privatize or liquidate their remaining state banks rather than rehabilitating them. On average, state banks still hold nearly one-third of banking system assets in the region (46.2 percent in the CIS, 26.4 percent in CEE, and 7.7 percent in the Baltics), and do so at huge costs to the financial system and the economy as a whole. The report includes seven case studies of selected state-owned banks in Azerbaijan, the Czech Republic, Latvia, Romania, Russia, and Ukraine that have been reformed or privatized over the past decade (see http://lnweb18.worldbank.org/eca/eca.nsf/Attachments/State+Banks/$File/State+banks+Final-022803.pdf).

World Bank Supports Romania’s Electricity Market . . .

A €74.3 million ($82 million equivalent) loan approved on June 12 to Romania for the Electricity Market Project will support the development of a well-functioning wholesale electricity market and improvement of the transmission system. Transelectrica, Romania’s national power grid company, together with the national electricity regulator and the power market operator, will receive assistance to design and implement the regulatory framework for a new electricity trading platform. Since Romania joined the World Bank in 1991, Bank commitments to the country have totaled more than $3 billion for 30 operations.

Serbia’s Private and Financial Sector Reform…..

A $80 million IDA credit for Serbia and Montenegro approved on June 10 will support the country’s regulatory, institutional, and structural reforms in the private and financial sectors, targeting a better business registration system, a new enterprise law, and improved access to finance by enterprises and will facilitate the exit and redeployment of nonproductive assets.

A Revenue Collection System in Bulgaria…

A €31.9 million loan for the Revenue Administration Reform Project in Bulgaria approved on June 5 will help the country develop a modern and effective revenue collection system that is more transparent and efficient. It will save taxpayers both time and money. Improving and simplifying procedures will drastically reduce the private sector’s overhead time: current procedures require up to 30 percent of the time of an accountant in a small company The project will also minimize opportunities for corruption by introducing equal standards for contributors, and will set up clear rules and procedures for compliance with tax payment responsibilities. Since Bulgaria joined the World Bank in 1990, total commitments to the country have reached about $1.7 billion for 32 projects.

and Ukraine’s Tax Service Reform

A $40 million loan for the First State Tax Service Modernization Project in Ukraine approved on June 5 is the first of two proposed loans under an adaptable program lending instrument, with an estimated total $114 million in Bank lending out of $202 million in total costs. The program will support a decade-long, comprehensive modernization of tax administration, and will lay the foundation for a sustainable tax system in the country. Ukraine currently has a large shadow economy and a relatively low rate of taxpayer compliance with the tax legislation. As a result, tax authorities take an enforcement-oriented stance in relation to taxpayers, which creates opportunities for administrative abuses. Since Ukraine joined the World Bank in 1992, commitments to the country have totaled more than $3.4 billion for 27 operations.

Record $100 million IFC Loan to Moscow Narodny Bank

On June 9 the International Finance Corporation (IFC), the private sector financing arm of the World Bank Group, signed an agreement to provide a five-year, $100 million loan to Moscow Narodny Bank, majority owned by Russia’s central bank. This is IFC’s largest loan for Russia to date. The loan will help Russian companies access medium-term financing and will provide Moscow Narodny Bank with additional opportunities for doing business in Russia. The bank is already engaged in talks to pass on that money to companies in the oil and gas, metals, chemicals, and service sectors. Eventually the central bank will sell its 88.9 percent stake in Moscow Narodny Bank, whose total assets stood at $1.8 billion and equity at $440 million at the start of the year. Moscow Narodny Bank is headquartered in London and was established in 1919 to facilitate trade with Russia. Russia joined IFC in 1993. Since then IFC has invested more than $911 million of its own funds to finance about 70 projects in a variety of sectors.

In fiscal year 2003, which ended on June 30, IFC invested $500 million in Russia. In fiscal year 2004 IFC plans to focus on investments in the finance sector, but will also invest in the manufacturing sector, transportation, telecommunications, and technology, said IFC Executive Vice President Peter Woicke during a recent press conference in Moscow.

EBRD Sees New Opportunities in Transition Countries Even After EU Accession

The EEBRD sees opportunities for its business in Central and Eastern Europe after the countries become EU members, nevertheless, it does plan to downsize its operations in the region over time, announced EBRD First Vice President Noreen Doyle. The fields that EBRD is looking at in the region include leasing, mortgage loans, warehousing, and banking. With EU enlargement imminent, the EBRD also envisages working closely with central and local governments to help them obtain money from the EU’s structural and aid funds. The region continues to need equity investment funds.

Mixed Results in the War Against Poverty

The war against poverty has made definite progress, but has also encountered setbacks related to the Millennium Development Goals, which aim to halve the extent of severe poverty in the world by 2015. Australia’s Melbourne Age recently made the following observations:

• Global poverty is declining. The new update of the Bank’s World Development Indicators estimates that in the 1990s the number of people living in extreme poverty—an income of no more than $1 a day, indexed for inflation since 1990—fell from 1.3 billion to 1. 2 billion, despite rapid population growth. The Bank noted, however, that the fall was concentrated in China and India. Poverty rose—in some cases dramatically—in much of the world, above all in Africa and the former Soviet Union, where real incomes have been halved.

• More developing countries are enjoying real growth. Despite civil wars, AIDS, corruption, and misgovernment, since the mid-1990s average per capita incomes in Africa have risen by about 1 percent a year, reversing a 20-year slide.

• Economists and global institutions are finally grasping the economic importance of education; health care; good, corruption-free government; and a culture that is conducive to business development. The World Bank’s own priorities have changed radically to reflect this understanding. It funds infrastructure projects, but also wants to ensure that every child receives a good basic education, that safe water and health care are available to all, that childbirth is not fatal to mothers or children, and that gender equity becomes a reality. Experience shows that these rights not only flow from economic growth, but in a virtuous circle they also generate it.