World Bank/IMF Agenda

EBRD Lending Rising in Transition Economies

Despite the global economic downturn, last year the EBRD saw a 6 percent rise in its loans to and investments in Central and Eastern Europe to €3.89 billion ($4.3 billion). The EBRD is forecasting a further strong flow of its funds into the region in 2003, reports Stefan Wagstyl in the Financial Times. As the bank normally cofinances projects with private sector investors, the increase shows that the flow of private capital in the region was also strong, despite cuts in business investment elsewhere. EBRD President Jean Lemierre said he expected a similar total this year, with economic conditions in the EU accession states boosted by the EU’s decision at the Copenhagen summit to go ahead with enlargement. At the same time, high oil prices and reform were driving Russia’s economic growth, which in turn was generating growth in the former Soviet Union states. Last year the more advanced states’ share of EBRD financing fell from 44 to 31 percent, while Russia’s portion grew from 23 to 33 percent. Other states’ share rose from 33 to 36 percent. The shift reflects the EBRD’s policy of concentrating on countries where other forms of finance are hard to find and leaving more mature states to seek financing from commercial banks.

New International Financing Facility?

U.K. Chancellor of the Exchequer Gordon Brown revived his 2001 proposal to create a new funding base for development assistance. Donors would be asked to make legally binding commitments to provide annual contributions to the International Financing Facility (IFF), and the IFF would then use these funds to leverage additional resources from international markets by issuing bonds. Revenue generated through the IFF would be disbursed as grants and/or concessional loans through existing bilateral and multilateral mechanisms. Brown claims that the IFF could raise an additional $38 billion per year, bringing the annual total of development funds to $100 billion per year, identified by one report as sufficient to reach the Millennium Development Goals. Group of Seven reaction to the renewed IFF proposal has been mixed. The proposal competes with several mechanisms for raising concessional financing for development, including the World Bank’s International Development Association and the concessional lending windows of regional development banks.

EIB Lends Hungary €395 Million for Transport and Environmental Projects

During a recent visit to Budapest Wolfgang Roth, vice president of the European Investment Bank (EIB), signed five loans totaling €395 million for transport and environmental projects in Hungary that will include the rehabilitation of roads and railroads and the construction of several sewerage networks, water treatment facilities, and solid waste disposal facilities. The European Commission is cofinancing these projects with Instrument for Structural Policies for Pre-accession funds. Two other loans will finance the rehabilitation of Budapest’s major metro line and the purchase of 40 street cars. Since 1989 the EIB has provided a total of €2.64 billion to Hungary.

Last year the EIB lent a total of €39.6 billion for projects to further the EU’s political objectives. Financing in the EU member states reached €33.4 billion, while €6.2 billion was made available to non-EU countries. Lending to the accession countries of Central and Eastern Europe and to Cyprus and Malta ran to a record €3.6 billion. (For more information go to the EIB web site at http://www.eib.org/news/press/press.asp?Press=2584.)

IFC Loan to Romania’s Largest Commercial Bank

The International Finance Corporation (IFC), the private sector development arm of the World Bank Group, is providing a seven-year loan of $75 million to Romania’s Banca Comerciala Romana S.A., whose assets totalled leu 139,421 billion (about $42 million) as of June 30, 2002. IFC’s loan will strengthen the bank’s balance sheet. Banca Comerciala Romana was incorporated in 1990 as a spin-off of the National Bank of Romania, which carried out the majority of banking activities a Global Environment, written by Toke Aidt and Zafiris Tzannatos—says that union members and other workers covered by collective agreements average 15 percent higher earnings than nonunionized workers in developing countries and 5 to 10 percent higher earnings in industrial countries. While core labor standards are not conditional in World Bank lending, the Bank promotes such standards by holding training programs for staff and counterparts in client country governments, cooperating with the Global Child Labor Program, and working directly with trade unions.

World Bank Encourages Vietnam’s Innovators

In February Klaus Rohland, World Bank country director for Vietnam, announced a new initiative that will provide funding to innovators in communities throughout Vietnam. Focusing on the twin issues of safety and quality of life for people with disabilities, the new initiative will provide direct funding to implement innovative ideas that have the potential to reduce accidents or to improve the quality of life of disabled people. A total of at least $100,000 will be shared among 10 or more projects that will be chosen by an open competition culminating in Vietnam Innovation Day in May. The competition is open to Vietnamese NGOs, local governments, and public and private development agencies from across Vietnam. Anyone who has a good idea for a new product or service or a new way to reduce accidents or improve the quality of life for disabled people is eligible to apply for the funding to make the idea become reality. "Safety and disability is a very timely and country-specific topic: accidents are a major problem in Vietnam," said Rohland. According to UNICEF, about half of child mortality in Vietnam is due to accidents. Vietnam is estimated to have about 5 million people with disabilities.

Wolfensohn Interviewed by Radio France Internationale…

Parliamentarians are increasingly interested in poverty and development issues, and for the Bank to speak with them and also listen to their advice is important, said World Bank President Jim Wolfensohn in a recent interview with Radio France Internationale. Asked about World Bank conditionalities that governments and civil society often criticize, Wolfensohn said the Bank works closely with governments to establish their development plans, and that there is agreement on the need for good governance, sound fiscal systems, social polices, and poverty reduction programs. Today countries recognize that they need governance and legal systems to fight corruption, and these happen to be the same conditions the Bank offers. Asked about the privatization of water services, Wolfensohn noted that 1 billion people lack access to clean water and that good management of water services is critical, yet finding investment in water services is difficult because it is politically risky. Privatization is only one method for resolving water problems, but privatization is not the Bank’s religion, and in some situations privatization is not the required solution, Wolfensohn said.

…Then Holds Discussions with Top Russian Officials in Moscow

On March 11 World Bank President James Wolfensohn held talks with top Russian officials in Moscow on how to attract foreign investment to the country. Wolfensohn met Finance Minister Alexei Kudrin and Economic Development Minister German Gref during the one-day visit. Foreign direct investment in Russia stood at $4 billion in 2002, only 0.6 percent more than the previous year, according to the State Statistics Committee. Western investors are still shy about investing in Russia, despite a host of upbeat economic forecasts and signs that the corruption that marred business dealings following the fall of the Soviet Union in 1991 have begun to subside. Late last year the World Bank approved a new cooperation agreement with Russia in relation to loans totaling $1.8 billion through 2005.