2012 ANNUAL REVIEW 77090 FIAS the Facility for Investment Climate Advisory Services World Bank Group With support from: Through the FIAS program, the World Bank Group and donor partners facilitate investment climate reforms in developing countries to foster open, productive, and competitive markets and to unlock sustainable private investments in sectors that contribute to growth and poverty reduction. The FIAS program is managed by the Investment Climate Department under the joint oversight of the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the World Bank (IBRD). For more information, visit www.wbginvestmentclimate.org. ©2012 The World Bank Group 1818 H Street NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org All rights reserved. This volume is a product of the staff of the World Bank Group. 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Contents Fiscal Year 2012: FIAS Key Performance Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Message from the Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Fiscal Year 2012: Main Achievements and Milestones . . . . . . . . . . . . . . . . . . . . . . . . . 11 Improving the Investment Climate in Fragile States . . . . . . . . . . . . . . . . . . . . . . . . . .19 Fiscal Year 2012: Operational Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Cross-Cutting Themes, Collaboration, and Thought Leadership . . . . . . . . . . . . . . . . . . 41 Financial Results and Resource Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 Annexes Annex 1: Reforms and Results Supported by FIAS in FY12. . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Annex 2: Portfolio of FIAS-Funded Projects in FY12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .84 Annex 3: CIC/FIAS Organization Chart. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88 Annex 4: Abbreviations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .89 FISCAL YEAR 2012 FIAS KEY PERFORMANCE INDICATORS 4 In fiscal year 2012, FIAS contributed to 46 reforms, of which 36 were validated by Doing Business. (See Annex 1 for a detailed breakdown of reforms by country.) FIAS directly supported seven Doing Business reforms in 3 of the 10 countries recognized in Doing Business 2013 as the most improved economies across three or more areas of regulation (Burundi, Costa Rica, and Kazakhstan). Total project expenditures amounted to $19.1 million, with Sub-Saharan Africa accounting for 50 percent of total project expenditures and 69 percent of client-facing project expenditures. FIAS-Supported Reforms by Region Total Project Expenditures 100% = 46 Total Reforms Breakdown of FIAS FY12 Project Implementation Expenditures: $19.1 million CLIENT-FACING: 74% OF TOTAL  Europe and Central Asia, 13 Breakdown of the 74%: [28%]  East Asia and Pacific [1%]  Latin America and the  Europe and Central Asia [6%] Carribean, 11 [24%]  Latin America and the Caribbean [9%]  Middle East and North Africa, FISCAL YEAR 2012 FIAS KEY PERFORMANCE INDICATORS  Middle East and North Africa [2%] 2 [5%]  South Asia [3%]  South Asia, 1 [2%]  Sub-Saharan Africa [69%]  Sub-Saharan Africa, 19 [41%]  World [10%] NON-CLIENT-FACING: 26% OF TOTAL Breakdown of the 26%:  Knowledge Management / Product Development [100%] Focus on Priority Client Groups Share of Total Reforms Share of Client-Facing Project Priority Client Group (Total 46) Expenditures (Total $14 million) IDA 61% 77% SUB-SAHARAN AFRICA 41% 69% FRAGILE AND CONFLICT-AFFECTED STATES 24% 21% The development effectiveness rating for client-facing Client satisfaction for investment climate projects projects implemented by the Investment Climate remained very high, at 91 percent (Investment Climate Department and funded by FIAS was 86 percent for FY12, Business Line is used as proxy for FIAS). a significant increase over last year’s rating of 73 percent. FIAS Development Effectiveness, FY08–FY12 Investment Climate Business Line (Share of completed projects with positive rating) Client Satisfation, FY08–FY12 (Share of clients satisfied) 100% 100% 92% 91% 86% 88% 89% 85% 80% 73% 68% 80% 60% 57% 60% 47% 40% 40% 20% 20% 0% FY08 FY09 FY10 FY11 FY12 0% FY08 FY09 FY10 FY11 FY12 ¢ Investment Climate Business Line ¢ IFC Advisory Services Overall  Investment Climate Business Line  IFC Advisory Services Overall 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 5 FIAS-Supported Reforms By Region and Country, FY12 Business licensing and regulatory governance Resolving insolvency Construction permits Registering property Protecting investors Starting a business investment climate Business taxation Investment policy Industry-specific Getting credit…† Trade logistics TOTAL Region Country EUROPE AND CENTRAL ASIA Albania  1 Armenia 1  1 Belarus  1 Georgia 1, 2 * 1 Kazakhstan  1 Kosovo 1, 2   2 Moldova 1    3 Montenegro  1 Russian Federation  1 Tajikistan 1  1 FISCAL YEAR 2012 FIAS KEY PERFORMANCE INDICATORS Europe and Central Asia Total 13 LATIN AMERICA AND Colombia  1 THE CARIBBEAN Costa Rica    3 Guatemala  1 Mexico  1 Panama   2 Peru   2 Uruguay * 1 Latin America and the Caribbean Total 11 MIDDLE EAST AND Algeria  1 NORTH AFRICA Morocco  1 Middle East and North Africa Total 2 SOUTH ASIA Bangladesh 1 * 1 South Asia Total 1 SUB-SAHARAN AFRICA Burundi 1, 2    3 Congo, Rep. of 1, 2   2 Lesotho 1   2 Malawi 1  1 Mali 1    3 Rwanda 1 ** ** ** 3 Sierra Leone 1, 2  ** 2 Tanzania 1  1 Togo 1, 2  1 Uganda 1  1 Sub-Saharan Africa Total 19 GRAND TOTAL 3 6 7 5 3 1 5 1 1 11 3 46 Reforms captured by the Doing Business 2013 report NA 2 7 4 NA NA 5 1 1 10 2 32 1 International Development Association (IDA) country. 2 Fragile or conflict-affected situation. * Reforms on Doing Business topics that go beyond the standardized Doing Business case study. ** These reforms are recognized retroactively; they were validated by Doing Business 2012 but were not reported as reforms in FY11. † Reforms under the getting credit topic include four reforms on credit information in Algeria, Costa Rica, Rwanda, and Sierra Leone and one reform on secured transactions in Kazakhstan.  Reforms from FIAS-cofinanced projects mapped to regional IFC Advisory Services units. 6 FY12 Funding and Expenditures FY12 CONTRIBUTIONS (SOURCES OF FUNDS) IN US$ THOUSANDS SHARE OF TOTAL WORLD BANK GROUP CONTRIBUTIONS 12,089 36% Core 8,188 24% IFC 1 4,088 12% MIGA 2,500 8% World Bank 1,600 5% Project Specific/Other Contributions (IFC) 2 3,901 11% DONOR CONTRIBUTIONS 21,930 63% Core 5,730 17% Programmatic 6,678 20% Project Specific 8,982 26% CLIENT CONTRIBUTIONS 484 1% TOTAL CONTRIBUTIONS 33,963 100% Less Trust Fund Administration Fees 1,122 TOTAL NET CONTRIBUTIONS 32,841 FY12 EXPENDITURES (USES OF FUNDS) IN US$ THOUSANDS SHARE OF TOTAL FISCAL YEAR 2012 FIAS KEY PERFORMANCE INDICATORS Staff Costs (incl. consultants) 1 19,740 70% Operational Travel Costs 1 5,847 21% Indirect Costs (incl. office and other operating costs) 1 2,455 9% TOTAL EXPENDITURES 28,042 100% 1 Includes FY12 Advisory Service administrative budget ($1.2 million) provided by IFC to cover a number of Investment Climate Business Line positions and their related staff and travel costs. 2 Includes $2,968,000 of IFC project-specific contributions to support a range of global knowledge management and product design initiatives and $934,000 of other IFC contributions to support activities indirectly related to projects, including initial project design, portfolio management, monitoring and evaluation, and knowledge sharing associated with the global portfolio. 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES FISCAL YEAR 2012 FIAS KEY PERFORMANCE INDICATORS 7 MESSAGE from the DIRECTOR I am pleased to present the FIAS 2012 Annual Review, which reports on the results and progress achieved during the first year of FIAS’ FY12–16 strategy cycle. In a year marked by continued global economic stresses, the bright spots in the developing world remind us that private sector-led growth can transform some of the world’s most challenged economies. Robust demand for investment climate reform in this environment presents an opportunity for FIAS and its partners. I am especially grateful to FIAS donors and partners for their strong commitment in embracing our work as a vital path to growth and stability during uncertain times, often in the context of economic and budget challenges in their countries. This review highlights our progress in managing FIAS-funded activities to support investment climate reforms and deliver development impact in three strategic priority areas: fostering enterprise creation and growth, facilitating international trade and investment, and unlocking sustainable investments in key industries, particularly agribusiness and tourism. FIAS-funded activities in these three focus areas contributed to 46 reforms achieved by client governments in 30 countries in FY12, each reflecting multiple improvements in a client country’s business and investment environment. Most of this year’s total reforms took place in the three priority client groups outlined in the strategy: 28 reforms (61 percent of all reforms) in IDA countries, 11 reforms (24 percent) in fragile and conflict-affected states, and 19 reforms (41 percent) in Sub-Saharan Africa. With a rapidly increasing share of the world's poor now living in countries and territories classified as fragile or conflict-affected, our long-standing focus on this client segment has taken on increased meaning and urgency in the new strategy cycle. As highlighted in this review’s special section, “Improving the Investment Climate � FIAS-supported activities in countries such as Burundi, Guinea, Kosovo, and Togo, among in Fragile States, others, continue to produce tangible results in tough investment climates marred by strife or disaster. Building on the deep expertise developed by IFC’s Investment Climate Business Line with the help of FIAS funding, I was asked earlier this year to co-lead IFC’s work in this area, jointly with Georgina Baker, IFC’s director for Trade and Supply Chain in Investment Services. As a joint World Bank Group facility, FIAS has traditionally played an important connector and integrator role in the shared space that investment climate occupies across IFC, MIGA, and the World Bank. With the FY12 launch of the new Global Practices model under the World Bank’s Financial and Private Sector Development (FPD) Vice Presidency, Marialisa Motta, FPD director for Latin America and the Caribbean, and I have been asked to co-lead FPD’s investment climate practice. FIAS-funded global expert teams have become increasingly engaged in the design and implementation of Bank-led private sector development activities; this deeper integration with the Bank’s FPD Network—in places such as Haiti and Rwanda—with a focus on sharing replicable approaches and technical know-how will lead to improved service delivery and impact on the ground. With MIGA, we have embarked on an exciting new cooperation initiative that aims at strengthening the (political) risk dimension in our investment policy work. Moreover, our growing work on the removal of industry-specific barriers to investment is complementing seamlessly the more transaction-oriented instruments that MIGA and IFC offer. Collaboration is also a critical component in our work to increase market competition in client countries, a key principle ingrained in the FIAS FY12–16 strategy. In FY12, we ramped up our competition-related advisory offering and further integrated this work within relevant activities and expertise of the World Bank Group, exploiting synergies with IFC and Bank regional departments in 26 of the 32 pro-competition projects we supported in four regions around the world. In addition to our continued focus on client-facing activities that benefit client countries directly, we continue to use FIAS funding to build a world-class repository of global expertise and knowledge that can be shared with partners inside and outside the World Bank Group. As part of our extensive knowledge-sharing agenda, we organized 36 events in FY12 and implemented a client-focused peer-to-peer learning approach which was recognized with IFC’s “Knowbel� prize for excellence. Please visit our knowledge-sharing and communications portal—www.wbginvestmentclimate.org  —to explore the broad spectrum of our knowledge resources and operational activities. We also continue to improve the ways in which we assess the benefits and impact of investment climate work. We are rolling out an updated and enhanced result measurement and monitoring and evaluation framework in FY13. The improved framework, piloted and tested in all regions in FY12, incorporates a set of meaningful and precisely defined outcome, reach, and impact indicators. With strong support and active involvement from some FIAS donors, we are also expanding our work on impact evaluation, sustainability, and “value for money, � with a view to deepen our knowledge of the ultimate effects and benefits of our investment climate work. Moving ahead, we see points of leverage for FIAS on many fronts. With the World Bank Group’s new president, Jim Kim, stressing the importance of collaboration and synergies to provide quality support to our clients, FIAS is well positioned to deliver strong value for governments interested in investment climate reform. Drawing on the findings of the external evaluation of the FY08–11 strategy cycle, we have further strengthened our business model and addressed areas of weakness, in particular those related to client commitment and result measurement. And the continued strong support from our donors and World Bank Group internal partners enables us to keep exploring new and innovative approaches to investment climate reform that help us push the frontier of private sector development. With deep appreciation for the support of FIAS donors and partners, I look forward to continued productive and inspired collaboration in FY13. Pierre Guislain Director Investment Climate Department and FIAS World Bank Group FISCAL YEAR 2012 MAIN ACHIEVEMENTS and MILESTONES 12 Fiscal year 2012 marked the first year of the new FIAS FY12–16 strategy cycle. In line with the new strategy endorsed in 2011 by the World Bank Group board and donor partners, FIAS-funded activities were regrouped under three overarching strategic themes, reflecting the spectrum of economy-wide and industry- specific investment climate activities to be funded via FIAS: ¡¡ Fostering enterprise creation and growth ¡¡ Facilitating international trade and investment ¡¡ Unlocking sustainable investments in key industries, particularly agribusiness and tourism. Solid Reform Achievements with The FIAS reform count does not include investment Continued Focus on IDA,1 Africa, climate reforms from activities supported by other and Fragile States parts of the World Bank Group without a financial contribution from FIAS trust funds. Nevertheless, FIAS-funded activities in these strategic focus areas many of these activities benefit from the expertise MILESTONES supported the achievement of 46 investment climate of global investment climate technical or product reforms in 30 countries. The FIAS reform count teams that predominantly work on FIAS activities. covers reforms supported via 53 projects directly Global investment climate teams mapped to the managed by the World Bank Group’s Investment Investment Climate Department provide extensive and Climate Department (CIC)—which houses FIAS—and design and implementation support as well as FISCAL YEAR 2012 MAIN ACHIEVEMENTS via 19 projects managed by regional IFC Advisory quality control for investment climate reform Services units and receiving at least $10,000 of their activities implemented across the entire World Bank FY12 spending from FIAS trust funds. Summaries Group; such cross-support ensures that FIAS-related of each of the reforms achieved in FY12, grouped by expertise permeates the entire portfolio of World country, are presented in Annex 1. Bank Group investment climate activities. Several Investment climate reforms are defined as examples of projects supported by investment legislative, administrative, or institutional changes climate global technical teams but not directly that result in a reduction of 10 percent or more receiving FIAS funding are highlighted in the in time, cost, or procedures for businesses. main body of this review for illustrative purposes. These changes are captured as outcomes in the These projects are not included in the FIAS project investment climate monitoring and evaluation portfolio in Annex 2, and reforms related to these framework. For example, Kosovo made starting a projects are not included in the FIAS reform count. business easier by eliminating the minimum capital Among the total recorded FIAS reforms in FY12, 41 requirement, reducing business registration fees, percent occurred in Sub-Saharan Africa, followed and streamlining the business registration process. by 28 percent in Europe and Central Asia, 24 As a result, the number of procedures to start a percent in Latin America and the Caribbean, 5 business was reduced from 10 to 9, the time from percent in the Middle East and North Africa, and 58 to 52 days, and the cost from 28 to 23 percent 2 percent in South Asia. The concentration of of income per capita; moreover, the minimum reforms in Africa reflects FIAS’ continued focus capital requirement amounting to 105 percent of on supporting investment climate improvements income per capita was eliminated. in the Africa region. Lower reform counts in the 1 Members of the International Development Association (IDA). Middle East and North Africa region and in Asia IDA countries are those that had a per capita income in 2011 of reflect the fact that most client-facing activities less than $1,195 and lack the financial ability to borrow from the International Bank of Reconstruction and Development of the in these regions, and related funding, have World Bank Group. 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 13 been transferred to the respective regions. While regional integration and introduce regulatory reform for global investment climate teams continue to provide businesses across member states (see box, p. 14). extensive support to the portfolio of activities in these In FY12, reforms were concentrated in the following regions, FIAS funding is involved only in a limited areas: starting a business (24 percent or 11 reforms), number of projects. dealing with construction permits (15 percent or 7 Reforms from FIAS-funded activities continue to reflect reforms), business taxation (13 percent or 6 reforms) the targeted allocation of FIAS funding to activities in protecting investors (11 percent or 5 reforms), credit priority client groups. The large share of FIAS-supported information (9 percent or 4 reforms), trade logistics, reforms in IDA countries (61 percent of reforms) business licensing and regulatory governance, and reflects the fact that 77 percent of FIAS’ client-facing industry-specific reforms (each 7 percent or 3 reforms), expenditures in FY12 were allocated to project activities registering property, resolving insolvency, secured for that client group. The share of project expenditures transactions, and investment policy (each 2 percent related to activities in Africa rose to 69 percent in FY12 or 1 reform). FIAS funding and expertise supported (up from 51 percent in FY11) and yielded 41 percent of five of the ten countries recognized in Doing Business all FIAS-supported reforms (down from 45 percent in 2013 for the most improved ease of doing business FY11). This drop in share of reforms is due to a major across three or more areas of regulation (see boxes FISCAL YEAR 2012 MAIN ACHIEVEMENTS restructuring of the FIAS-funded portfolio in Africa, on Burundi, p. 22, and Costa Rica, p. 32). FIAS directly with a number of projects closing that contributed supported seven Doing Business reforms in three of the significantly to the FIAS reform count in previous years ten countries cited as most improved: Burundi, Costa and a number of new activities in the design phase in Rica, and Kazakhstan; two more countries (Ukraine and FY12 that have yet to generate reforms. Activities in Uzbekistan) benefited indirectly from FIAS via support fragile and conflict-affected countries were allocated from FIAS-funded global teams working on other 21 percent of FIAS project expenditures and yielded 24 investment climate areas. percent of total reforms. FIAS’ IDA and Africa spending in FY12 was in line with overall strategy cycle targets (70 and 50 percent, respectively), whereas FIAS’ project Increasing the Share of Industry-Specific spending in fragile and conflict-affected situations Activities stayed slightly below the envisaged 25–30 percent The FIAS FY12–16 strategy envisaged a significant target, as several projects in fragile states were on hold ramp-up of industry-specific activities, from a baseline of and (for instance, the Republic of Yemen project) or closed about 15 percent industry-specific activities on average MILESTONES (Liberia II, Sierra Leone) in FY12. during the FY08–11 strategy cycle to a share of around 30–40 percent by the end of the FY12–16 cycle. The Sub-Saharan Africa, IDA, and fragile and conflict baseline and target shares used in the FIAS strategy situations continue to be a focus of FIAS activities; included activities in the area of special economic zones examples of FIAS-supported country-specific and (SEZs), the majority of which have been transferred to regional activities can be found throughout this report. the FPD Competitive Industries Global Practice in FY12. As to FIAS’ sustained focus on Africa, in FY12, FIAS- Taking into account the FIAS project spending on SEZs, funded projects were operational in 30 countries in the share of industry-specific activities under FIAS has Africa, including member countries of the Organization increased to 18 percent in FY12. If SEZ activities are for the Harmonization of Business Law in Africa disregarded, the share of industry-specific work has (OHADA) and of the East African Community (EAC). increased from a baseline of around 7–8 percent in Programs with EAC2 and OHADA3 address improved FY08–11 to 13 percent in FY12. Both calculation methods indicate that the share of industry-specific activities is 2 EAC member countries are Burundi, Kenya, Rwanda, Tanzania, and increasing and that FIAS is moving in the right direction. Uganda. 3 OHADA member countries are Benin, Burkina Faso, Cameroon, the Nevertheless, additional efforts are required to ensure Central African Republic, Chad, the Comoros, the Democratic Republic that the cycle target of 30–40 percent industry-specific of Congo, the Republic of Congo, Côte d’Ivoire, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Mali, Niger, Senegal, and Togo. activities can be met. An additional dimension to this 14 growth will come from close cooperation with FPD’s as a result of the project intervention—to more clearly Competitive Industries Global Practice as both teams defined investment climate reforms and impact. work to maximize synergies and deliver comprehensive One of the measures of impact that has been tested industry-level solutions for clients. over the last two years is compliance cost savings. This measure calculates the savings to the private sector Strengthening Result and Impact in complying with new and improved processes and Measurement regulations that have led to a decrease in the time and In FY12, FIAS piloted an enhanced monitoring and cost to comply. The tested methodology has been rolled evaluation (M&E) framework to be rolled out in FY13. out for business regulation and taxation projects in all All product frameworks were revised to better capture regions and has generated results primarily in East Asia their objectives and incorporate the new investment and the Pacific and Europe and Central Asia, where data climate product offerings. The new result measurement collection is less challenging than in other regions. The framework will add, among other improvements, “reach total compliance costs savings in FY12 reached $118 indicators� that capture the number and range of firms million, $24 million more than in the previous fiscal year, that have benefited from FIAS-funded investment with savings of $42 million reported in IDA countries. climate interventions. The changes to the investment The methodology will continue to be tested in more MILESTONES climate M&E framework will also shift the emphasis challenging settings and will be expanded to other from somewhat loosely defined investment climate products where relevant. results—defined as changes spearheaded by clients FIAS, in collaboration with other partners, continues to support reforms that are likely to have an impact on and FISCAL YEAR 2012 MAIN ACHIEVEMENTS Improving Coherence of Business Regulations and Institutions through Regional Integration With FIAS funding, investment climate teams of the World Bank Group have been working to make legal, regulatory, administrative, and institutional reforms more consistent across both East and West Africa. In FY12, FIAS supported reforms within the context of the East African Community and worked with the Organization for the Harmonization of Business Law in Africa to reform a number of business laws common to its member states. Efforts supporting regional integration can play a key role in unlocking administrative and financing constraints faced by entrepreneurs in the regions. They also encourage cross-regional investment and trade, creating new opportunities for businesses. The EAC, a regional organization of five member countries, aims to create more attractive markets by providing a free- trade area between its member states and also common customs procedures. These efforts, supported by a number of development partners including the World Bank Group, widen and deepen cooperation between the EAC partner nations, strengthening their competitiveness. Funded in part through FIAS, investment climate work in the East African region has focused on harmonizing commercial laws, simplifying taxes, and creating an electronic business registry. As a result of these ongoing reform activities, each member state’s progress in harmonizing laws has been mapped, an inventory of current tax incentives completed, and a study, Business Entry Regulation and Cross-Border Exchange of Company Information in the East African Community, finalized. The EAC partner states have agreed to take steps to enable the exchange of registered business information by EAC company registrars, which will allow both the public and private sectors transparent and reliable access to legally binding business information. This will result in cheaper, less cumbersome instruments for trade finance among EAC member states. In addition, the registry will help companies set up more quickly and easily in other EAC countries. Also in FY12, as a result of FIAS-funded advisory support, significant reform progress was made in the 17 member countries of OHADA. The company and insolvency laws were revised and submitted to the OHADA Secretariat for official dissemination to its partner states; the company law is expected to be adopted in December 2012 and the insolvency law in mid-2013. This legislation will benefit the OHADA economies by simplifying the procedures for business creation, increasing investor protection, introducing best practices in corporate governance, and creating a better legal framework for access to finance. Also, the scope of insolvency will be broadened to include individuals exercising a commercial activity. The improved insolvency procedures are expected to be more favorable to smaller businesses, and cross-border insolvency will now be recognized. 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 15 the creation of new firms, investment, and jobs. For a joint donor-World Bank Group program was launched example, a secured transactions and collateral registries in FY12 to scale up work on the impact, sustainability, project in China supported by FIAS funds between FY06 and value for money of investment climate reform. and FY08 has achieved strong development impact, as Under this three-year work program, eight to ten major confirmed by an external post-completion evaluation in impact evaluations of investment climate projects will FY12 (see box, below). be conducted. These evaluations will complement two impact evaluations launched in FY12: an in-depth, rigorous Further efforts in FY12 focused on strengthening evaluation of the effects of a tax simplification project on approaches for measuring the impact of reforms: tax compliance and company formalization in Georgia  roducing literature reviews to gather evidence of the 1. P and an analysis of the effects of the introduction of new development impact of investment climate reforms insolvency procedures (allowing out-of-court workouts) on 2. B  uilding target-setting methodologies to estimate the loan repayments and new borrower requests in Romania. impact of investment climate reforms Both evaluations are being conducted in collaboration with 3. F  acilitating impact evaluations to fill in the knowledge the World Bank’s Development Research Group. gaps Together with the literature reviews that are ongoing, 4. P  romoting outreach and communications, to ensure these impact evaluations are expected to provide additional FISCAL YEAR 2012 MAIN ACHIEVEMENTS the dissemination and adoption of findings across the knowledge in areas with significant gaps about the impact World Bank Group and beyond. of certain types of investment climate activities. The evidence and knowledge created are expected to inform Under the FIAS umbrella and with support from the the design of new projects and support management in government of the United Kingdom and the United decision making and target setting. States Agency for International Development (USAID), Unlocking Over $3 Trillion in Accounts Receivable to Secure Safer Lending in China Investment climate work supported by donor partner Switzerland and funded by FIAS between FY06 and FY08 focused on developing a non-real estate-based financing market in China that facilitates lending to small and medium enterprises (SMEs). and Working with IFC Advisory Services in China, the project is currently supported with project-specific expertise rather than direct FIAS funding. MILESTONES In conjunction with the People's Bank of China, the country's central bank, the project helped the government create an online registry for security interests in receivables. The registry is the first of its kind in China. In 2007, a new property law became effective introducing a modern secured transaction system. This reform creates substantial growth of the Chinese financial sector and has increased lending to businesses. The program’s development impact spanned three levels, as confirmed by a FY12 independent evaluation: Sector level: The value of Chinese commercial loans involving movable assets grew by 24 percent per year from 2008 to 2010. Financial institution level: Bank lending to smaller businesses has increased substantially. Ninety percent of surveyed financial institutions have adopted movables financing, which now accounts for 22 percent of the number of loans outstanding for commercial banks and 33 percent for the five largest banks of China. Also, the introduction of movables financing triggered an overall improvement in the financial institutions’ risk management practices. SME level: As of June 30, 2011, 68,575 SMEs had obtained an estimated $1 trillion in financing secured by movable assets. Among the SMEs surveyed, 59 percent of respondents believe their business development would be severely impacted (or worse) if their current access to movables financing were removed; 88 percent said that account receivables financing resulted in business growth. The FIAS-supported program also led to the introduction of new financial product innovations and numerous publications. "We offer several product lines under movables financing, including inventory finance products, factoring, and other accounts receivable finance products, purchase order finance and agent services," says Qiu Wei of Guangdong Nanyue Bank. 16 subnational level, further developing and refining the Literature Reviews Provide Valuable Insights on M&E and impact measurement framework, and building the Impact of Investment Climate Reforms additional field-based delivery capacity. An important The benefits of literature reviews are in summarizing objective in service delivery is to ensure proximity to clients existing evidence on the impact of reforms, helping while drawing on the global technical and product expertise identify areas requiring more research, and informing available at headquarters and in global investment climate target setting. hubs such as Dakar, Istanbul, Nairobi, and Vienna. Many of In FY12, the literature review work was expanded, building on the reviews undertaken in the previous the recommendations made in the evaluator’s reports on year [on business entry, business taxation, alternative Phase 1 and 2 of the FIAS evaluation have been taken into dispute resolution (ADR), and insolvency reforms]. Three account in the FIAS FY12–16 strategy or are in the process additional Viewpoint notes were completed in FY12 that of being addressed. discuss the impact of trade logistics, competition policy, and power sector reforms on key economic variables such as productivity, exports, and employment. Reviews on agribusiness, investment policy, food inspections, Development Effectiveness, Client Satisfaction, and information and communication technologies (ICT) and Internal Recognition Remain High are planned for FY13. All published literature reviews are IFC measures development effectiveness of projects available at: https://openknowledge.worldbank.org/. by looking at five areas: strategic relevance, outputs, MILESTONES outcomes, impacts, and efficiency, giving greater weight to outcomes and impacts. External Evaluation Endorses FIAS’ Role as a Development effectiveness ratings for client-facing projects Leader in Investment Climate Reform co-financed via FIAS were at a very high 86 percent for and The second phase of the independent external FIAS FY12. This exceeds the rating for the overall Investment FISCAL YEAR 2012 MAIN ACHIEVEMENTS evaluation covering the FY08–11 strategy cycle was Climate Business Line of 71 percent and the IFC Advisory completed in May 2012. Reaffirming the positive findings Services score of 72 percent (see figure on p. 17).5 of Phase 1 (concluded in early 2011, and as reported in last year’s FIAS Annual Review), the Phase 2 Final Of the seven FIAS-funded projects included in the Report4 provided a positive assessment of the investment analysis, six were rated positively by IFC’s Development climate work supported by donors and the World Bank Impact Department; one project received a negative rating Group via FIAS during the FY08–11 strategy cycle (see as a result of the overestimation of tourism attractiveness box, p. 17). The evaluation found that most strategy in a post-conflict country. elements were implemented as planned; that projects Client satisfaction for investment climate projects was were generally well designed and managed (75 percent of also rated high, with 91 percent of clients reporting their active projects at the end of each fiscal year were “on or satisfaction with services delivered (see figure, p. 17).6 above target� to achieve development results; 91 percent were “on or under budget�), and client satisfaction was The work FIAS supports to implement improvements high (an average of 89 percent of clients said they were and reforms in the most difficult of environments “very satisfied� or “satisfied, � with Investment Climate continues to be recognized at the corporate level Business Line clients used as proxy for FIAS; see figure, within the World Bank Group. Several investment p. 17). Outcomes in terms of investment climate results climate programs and teams working on FIAS-funded supported by FIAS-funded projects exceeded the targets activities received awards in FY12. Investment Climate set at the beginning of the cycle by 50 percent. Department staff members were recognized through five FPD Vice Presidency Team Awards for their The evaluation also pointed out a few areas for further  tarting in FY12, IFC switched the period for which ratings are 5 S strengthening, including with regard to securing reported from a fiscal to a calendar year (CY). The FY11 and FY12 client commitment, replicating project activities at the ratings are based on CY10 and CY11 ratings, respectively. The ratings for the third and fourth quarters of FY12 will be included in the FY13 rating as part of the CY12 portfolio. 4 Nexus Associates. 2012. Independent Evaluation of CIC/FIAS Fiscal Year 2008–2011 Strategy and Program, Volume I – Main Report; 6 This figure relates to the overall IFC Investment Climate Business Volume ll – Case Studies (May 25, 2012). Line; a separate breakdown for FIAS projects is not available. 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 17 Key Findings of the FIAS FY08–11 Evaluation ¡¡ CIC/FIAS implemented most elements of the FIAS FY08–11 strategy. Projects were generally well managed, with development effectiveness ratings in line with overall IFC Investment Climate ¡¡  Business Line ratings. ¡¡ The vast majority of CIC/FIAS clients were satisfied with services. Implementation of the strategy has yielded results in line with its objectives, giving rise to over 400 results and more than ¡¡  200 significant investment climate reforms. According to IFC evaluations, literature shows that the types of reforms supported by CIC/FIAS have a positive impact on ¡¡  investment, employment, and economic growth. Studies of a sample of CIC/FIAS projects also suggest that reforms have had positive economic impact. ¡¡ In spite of progress and achievements, the M&E framework needs to be strengthened and impact measurement improved. Case studies of projects in Colombia (Subnational Doing Business and Trade Logistics), Kenya (Investment Climate), and ¡¡  Vietnam (Tax Policy and Access to Land) showed mixed results. • All of the projects are relevant, addressing a variety of issues considered important to private sector development.  ach of the projects has multiple components; some combine efforts to enact fundamental changes in laws with • E activities intended to streamline administrative procedures. For the most part, the latter have met with more success. FISCAL YEAR 2012 MAIN ACHIEVEMENTS • Client governments, at least those in middle-income countries, are willing to pay a significant share of project costs.  ertain aspects of project management were weak, in particular securing the upfront commitment of government • C clients to reforms, sequencing activities to ensure that prerequisites are in place, and establishing plans for replication. n general, M&E could be improved, particularly with respect to obtaining necessary data and defining the relationship • I between project activities and reported outcomes. Development Effectiveness Ratings, FY08–FY12 Client Satisfaction, FY08–FY12 (Share of completed projects with positive rating) (Share of clients satisfied) 100% 100 92% 89% 87% 91% 88% 86% 85% 88% 88% 87% 77% 77% 80% 73% 80 68% 71% 63% 57% and 60% 60 52% 47% 48% MILESTONES 40% 40 20% 20 0% 0 FY08 FY09 FY10 FY11 FY12 FY08 FY09 FY10 FY11 FY12 ¢ Investment Climate ¢ Investment Climate  Investment Climate Business Line  IFC Advisory Services Overall Department Business Line contributions to projects in Burundi, Haiti, Nepal, and strong FY11 performance (awards received in FY12).7 The Guinea, as well as a workshop on debt recovery and special economic zones project in Bangladesh, which business insolvency in Europe and Central Asia. In was supported by the industry-specific investment addition, several IFC regional and industry departments climate product team, earned a second-place runner recognized Investment Climate Department staff in up in the IFC CEO Gender Awards for successfully team awards for their contributions to projects with incorporating a strong gender dimension. 7 Financial Infrastructure Conference Rio Team, Bihar Tax Team, Microfinance Bosnia Team, Liberia Business Registry Team, Health in Africa Team, the Republic of Yemen Tax Reform Team, Investment Climate Caribbean Team, Georgia Tax Simplification Team, Kyrgyz Republic Magic Box Project Team. IMPROVING the INVESTMENT CLIMATE in FRAGILE STATES 20 Investment climate reform in fragile and conflict situations (FCS) remains a key priority for FIAS-funded activities. In FY12, 33 countries and territories were classified by the World Bank Group as fragile and conflict situations,8 including 17 in Sub-Saharan Africa. FIAS funding amounting to $2.9 million or 21 percent of total client-facing expenditures funded by FIAS was used to support activities in 18 fragile and conflict situations. These projects resulted in 11 reforms in six countries: Burundi, the Republic of Congo, Georgia, Kosovo, Sierra Leone, and Togo. The share of expenditure in fragile states is expected to further increase in FY13, when several new FIAS-supported activities in fragile and conflict situations will be launched, including new projects in the Eastern African Community and OHADA member countries, which include several fragile states, as well as new country-specific projects in Côte d’Ivoire, Guinea, and Kosovo. FIAS-Funded Activities in Fragile and Conflict For many fragile states, the Doing Business report Situations in FY12:a has proven a particularly powerful reform tool. It FRAGILE STATES Active projects in 18 of 33 countries on the Harmonized List of provides a comprehensive overview of business Fragile Situations: regulations and helps governments identify reform East Asia and the Pacific: Timor-Leste opportunities, some of which can be implemented Europe and Central Asia: Bosnia and Herzegovenia, Georgia, quickly. The report annually updates the data and Kosovo Middle East and North Africa: Afghanistan publicizes information about reforms, allowing fragile countries which undertake reforms to in Sub-Saharan Africa: Burundi, the Central African Republic, Chad, INVESTMENT CLIMATE the Comoros, the Democratic Republic of Congo, the Republic show the world they are re-opening for business. of Congo, Côte d’Ivoire, Guinea, Guinea-Bissau, Liberia, Sierra Leone, South Sudan, Togo In FY12, several fragile states supported by FIAS expertise—including Burundi (box, p. 22), the FIAS Client-Facing Project Expenditures in Fragile and Conflict Situations: Comoros (box, p. 50), Kosovo (box, p. 21), and $2.9 million (21% of total client-facing project spending) Togo—implemented reforms informed by the Doing Business indicators. In FY12, FIAS also FIAS-Supported Reforms in Fragile and Conflict Situations: supported reforms within the context of the East the 11 (3 in Burundi, 2 in the Republic of Congo, 2 in Kosovo, 2 in Sierra African Community and worked with OHADA to IMPROVING Leone, 1 in Georgia, 1 in Togo) reform a number of business laws common to a. Activities performed under project 565307 (Timor-Leste Business its member states, many of which are fragile and Registration and Licensing Reform Project) and project 574967 (South Sudan Investment Climate Reforms Program Phase 2) received less than conflict situations (see box, p. 14). With USAID $10,000 of FIAS funding in FY12 and are therefore are not listed in Annex 2 (FIAS project portfolio). However, they received FIAS funding in earlier years support, the Investment Climate Department and continue to be supported via FIAS-funded global teams. Project 571367 initiated work in Afghanistan, helping the (Doing Business Reform Middle East and North Africa) includes activities in Afghanistan. Project 569648 (Doing Business Reform Sub-Saharan Africa) includes activities in the Central African Republic, the Democratic Republic 8 The World Bank defines “fragile and conflict situations� of Congo, and Togo. Project 553006 (OHADA Business Law Reform) includes as having either: a harmonized average Country Policy and activities in the Central African Republic, Chad, the Comoros, the Republic of Congo, Côte d’Ivoire, Guinea, and Guinea-Bissau. Institutional Assessment (World Bank/Asian Development Bank/African Development Bank) rating of 3.2 or less; or the presence of a United Nations and/or regional peace-keeping or peace-building mission (for example, African Union, European Union, Organization of American States, North Atlantic Treaty Organization), with the exclusion of border monitoring operations, during the past three years. The harmonized list of fragile and conflict situations for FY12 includes: Afghanistan, Angola, Bosnia and Herzegovina, Burundi, the Central African Republic, Chad, the Comoros, the Republic of Congo, the Democratic Republic of Congo, Côte d’Ivoire, Eritrea, Georgia, Guinea, Guinea-Bissau, Haiti, Iraq, Kiribati, Kosovo, Liberia, the Marshall Islands, Micronesia, Myanmar, Nepal, Sierra Leone, the Solomon Islands, Somalia, Sudan, Timor-Leste, Togo, West Bank and Gaza, Western Sahara, the Republic of Yemen, Zimbabwe. 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 21 Kosovo Develops Foundation for Growth and Investment Thirteen years after the war and four years after Kosovo declared its independence, the Balkan nation is demonstrating its commitment to expanding its private sector. With support from FIAS, the government has enacted legislation to ease the procedures associated with starting and operating a business, protecting investors, and issuing construction permits. “These reforms are the cornerstone of our economic development vision, � said Deputy Prime Minister Mimoza Kusari-Lila, explaining that the Kosovar government’s plan sets the basic objective of promoting private sector-driven growth. “One of the � she major problems of our economy is the fact that it is driven by public spending and remittances from Kosovo’s diaspora, added.  Achievements include: ¡¡ Elimination of several cumbersome procedures including the minimum capital requirement to start a business, the fee to register a business, and the municipal work permit ¡¡ Establishment of a one-stop shop for business registration that links tax and business registration into one system, allowing business owners to obtain a registration number and a fiscal number in one step ¡¡ Reduction in the average time to start a business (from 58 to 52 days); 28 business municipal centers around the country can now register businesses, thus removing the need for business owners to travel to Pristina ¡¡ Reduction in the number of days (from 10 to 3) within which the Kosovo Business Registration Agency must process IMPROVING required documents, per new legislation ¡¡ Amendment of the Laws on Business Organizations, increasing minority investor protection ¡¡ Simplification of construction permitting, resulting in faster, more transparent, and safer processes. Moving forward, the government intends to introduce a full one-stop-shop-in-a-day process and online registration for the businesses. It aims to continue removing unnecessary licenses and permits that hinder private sector growth, targeting a INVESTMENT CLIMATE 50-percent cut in the inventory by 2014. On a regional level, with World Bank Group support, the government plans to increase trade in the Western Balkans by reducing regulatory and administrative bottlenecks to regional trade. government identify a first set of priority reform areas Increased Focus on Fragile and Conflict among those measured by Doing Business, including Situations business start-up, construction permits, access to The World Bank's World Development Report 2011: in finance (IFC project), and investor protection. Conflict, Security and Development (available at www. FRAGILE STATES According to Doing Business 2013, several fragile and worldbank.org) highlighted the challenges of countries conflict-affected states were among 50 economies affected by fragility or prolonged violence, and it that have most improved their business environments recognized the lack of economic opportunities and high since 2005, including Burundi, Bosnia and Herzegovina, unemployment as key drivers of further fragility. Since Georgia, Guinea-Bissau, Côte d’Ivoire, São Tomé the report was published, the World Bank Group has and Principe, Sierra Leone, Tajikistan, Timor-Leste, committed to operationalizing its findings by supporting the Solomon Islands, and Togo.9 In these countries, private sector development and creating employment FIAS-funded projects assisted the governments opportunities. More broadly, there is a growing in implementing reforms inspired by the Doing awareness that fragile and conflict states will remain the Business reports over the past years. Frequently, focus of international aid. By some estimates, a majority when a fragile state chooses to break with the past, of the poor (over 80 percent) will be living in fragile and reform momentum can be rapidly achieved alongside conflict situations, mostly in Africa. While the number a realization in society that the status quo is not of poor in today’s middle-income countries is expected acceptable and change is necessary. to decrease through high economic growth and falling population growth in most middle-income countries, income stagnation and high fertility rates in low-income 9 São Tomé and Principe was on the fragile and conflict situations and fragile countries will establish them as the main harmonized list in FY06 and FY09–11. Tajikistan was on the harmonized locations of global poverty. This is clearly the group list in FY06–11. 22 of countries that needs the help of the development In this effort the FCS Coordination Unit cooperates community now.10 across advisory and investment services, the regions globally, sectors, and with business lines to encourage In light of these developments, the Investment Climate and support greater levels of engagement in fragile Department was asked to host a special Fragile and states. The unit also works closely on the fragile Conflict Situations Coordination Unit for IFC (together states’ private sector development agenda with the with the Department of Trade and Supply Chain in World Bank and its newly-established Global Center on Investment Services). The FCS Coordination Unit is Conflict, Security and Development in Nairobi as well leading the development of IFC’s strategy for fragile as with the Multilateral Investment Guarantee Agency and conflict situations, with an integrated approach (MIGA; see the Comoros box, p. 50). This cooperation for both advisory and investment services to increase focuses on World Bank Group-wide efforts to address IFC’s engagement in this group of economies. For key constraints to private sector development advisory services, the goal will be to contribute to (for example, infrastructure), support for smaller market transformation in fragile and conflict situations businesses, and a jointly developed comprehensive by creating an enabling environment for investments, approach to risk mitigation. promoting transformative industries, and addressing key drivers of growth and employment creation. In Burundi, FIAS continues to support a well- FRAGILE STATES coordinated, collaborative World Bank Group program that has delivered strong results, including recognition 10 Kharas, Homi, and Andrew Rogerson. 2012. “Horizon 2025: Creative Destruction in the Aid Industry. � Overseas Development Institute. The in the Doing Business 2013 report (see box, below). authors use a broader definition of fragile and conflict situations than the current World Bank Group Harmonized List. in Once Again Burundi Earns Recognition as a Dedicated Reformer, with World Bank Group Support INVESTMENT CLIMATE For the second consecutive year, the Doing Business report has ranked Burundi among the top 10 most improved economies across three or more areas of regulation, accounting for 42 percent of reforms achieved in the East African Community over the two-year period. FIAS-supported World Bank and IFC regional teams continue to leverage their expertise and resources to develop a well- coordinated reform program that has already garnered internal awards and delivered results. The marked improvements detailed in the 2012 and 2013 Doing Business reports not only speak to the strong reform commitment of the Burundian government, but also to the success and effectiveness of World Bank Group collaboration. A key advantage of such collaboration the for governments is the development of a single coherent and comprehensive message along with a variety of means to help deliver on the reform agenda. In Burundi, the World Bank mobilized funding to build capacity, purchase equipment, and upgrade IMPROVING systems, while IFC deployed global expertise in very specific niches of investment climate reform to infuse best practices throughout the span of the reform. This approach ensured the complementary use of resources working toward the same objective to deliver strong results. Several of the many reforms enacted in Burundi directly address the particular needs of a postwar-context economy in which many businesses have suffered and collapsed. The cost and time businesses spend on the construction permitting process were reduced, which means the small business infrastructure can be built and rebuilt more efficiently. The regulatory framework for insolvency and restructuring was strengthened, helping to free up capital in insolvent companies for more productive uses. In addition, steps were taken to protect investors, boosting the confidence of Burundi’s entrepreneurs. Burundi also made it substantially faster to trade at borders, in particular with neighboring Tanzania, speeding up the movement of goods to and from the port of Dar Es Salaam, an essential step for the landlocked country. For Second Vice-President Gervais Rufyikiri, the reforms represent a key milestone for Burundi: “The government’s ambition is to continue the improvement of the business climate, simplifying and reinforcing transparency in the public administration, modernizing the business law, improving the settlement of trade disputes, and communicating reforms. � The government intends to deepen its reform agenda through a cooperation agreement with the World Bank Group that extends to mid-2014. Currently, the program is targeting improvements in the newly established one-stop shop for business registration and making it easier for firms—especially small businesses—to comply with the tax system. Reform efforts also focus on strengthening Burundi’s integration within the EAC to broaden market opportunities and limit harmful competition, in particular related to taxation (see box, p. 14). 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 23 In South Sudan, the government is moving fast to unreformed or have accumulated during the period of attract business investment. FIAS funding supported the conflict. Other areas requiring urgent reform usually enactment of six laws in FY12, facilitating investments include trade logistics and aspects of the investment and improving standards for consumer products. An climate for specific industries in order to facilitate private investment promotion agency was set up. More than investment. 2,000 businesses were registered between January FIAS-funded activities also complement activities and June 2012, a 44-percent increase over registrations undertaken under IFC’s Conflict Affected States in Africa in the same period last year; business registration was initiative, which now operates in seven Sub-Saharan also decentralized to the regions. In December 2011, the fragile and conflict situations. CASA programs seek government, supported by IFC and the United States to understand the causes of the conflicts and tailor Department of State, held an international investor advisory services programs that contribute to peace and conference in Washington, D.C. A number of investment stability through a private sector lens. FIAS-supported inquiries followed, including several in the agribusiness, involvement is essential at an early stage of engagement power, manufacturing, and oil production sectors; three in these countries, and it provides a foundation for investment leads are being pursued. further engagement by other IFC Advisory Services as FIAS is well-positioned to support the World Bank well as investments. In particular, FIAS-funded activities IMPROVING Group’s increased engagement in fragile states, helping in Sub-Saharan Africa seek to address the need for countries develop a foundation for a robust private access to finance through support to the financial sector sector and avoid the challenges that lead to future across the finance chain. For instance, effective and the fragility or recurring conflict. FIAS, through funding efficient business registration systems support the INVESTMENT CLIMATE and the expertise of the global product teams, is establishment of financial registries and encourage IFC uniquely positioned to support a “first response� in and others to make investments in financial institutions fragile and conflict situations. Typically, FIAS supports capable of lending to smaller businesses. In Liberia, the implementation of integrated programs that this approach has been particularly effective, improving focus on reform areas found to be particularly useful access to capital for entrepreneurs and yielding strong in these situations, such as fostering public-private results in terms of private sector savings, job creation, dialogue (PPD) and simplifying the morass of business and investment (see box, below). in entry regulations, outdated licensing requirements, FRAGILE STATES and excessive tax requirements that often remain Expanding Access to Finance for Liberian Small Businesses ¡¡ FIAS supported the Liberia Private Sector Development in Post Conflict Program starting in 2006, focusing on reducing barriers to formalization, Doing Business reforms, investment promotion, support for public-private dialogue, and assistance in creating special economic zones. ¡¡ According to an external evaluator,a the reforms implemented under the FIAS program have yielded private sector savings of $4.7 million, created over 20,000 new jobs, and attracted $13 million in private sector investment. ¡¡ IFC then invested nearly $2 million with the European Investment Bank and the African Development Bank to create Access Bank, the first microfinance bank in Liberia serving micro and small entrepreneurs. ¡¡ Following the investment climate reforms, IFC’s Access to Finance group supported the Central Bank of Liberia in developing microfinance regulation informed by industry best practices, and Access Bank staff assisted in capacity building, which reduced costs of market entry. ¡¡ Access Bank is now a market leader, with five branches, 235 employees, and a portfolio of $6.1 million in loans to 7,200 borrowers and $8.4 million in deposits. a Economisti Associati srl (Italy). 2011. Investment Climate in Africa Program, Four-Country Impact Assessment Comparative Report. https://www.wbginvestmentclimate.org/uploads/Comparative_Report_20110327 .pdf 24 Advancing Knowledge about Private Sector and analyzing how investment climate reforms can Development in Fragile States best address the needs of micro, small, and informal businesses, which constitute most of the private sector FIAS-funded projects often serve to “incubate� new in fragile states (see box, below). The second study approaches being tested in fragile and conflict situations. analyzes foreign direct investment (FDI) flows to fragile Successful approaches are replicated or expanded upon and conflict-affected states and the role FDI plays in in other projects developed by the World Bank Group. these economies. In Haiti, for example, the FIAS-funded Haiti Investment Generation project paved the way for job creation Investment Climate Department staff also contributed through the establishment of a framework for special to the design of a course, “Practicing Private Sector economic zones (see box, p. 37). � Development in Fragile and Conflict-affected Situations, which was developed under the auspices of the Other FIAS-funded projects in fragile and conflict Donor Committee for Enterprise Development in situations, such as the Private Sector Development cooperation with the International Labour Organization Growth in Post-Conflict Program in Liberia, the and GIZ (Deutsche Gesellschaft für Internationale Removing Administrative Barriers to Investment in Sierra Zusammenarbeit). Leone, and the Southern Sudan Investment Climate Reform program, have helped develop conflict-specific FRAGILE STATES expertise among World Bank Group staff working on these projects. These staff members have become well Preliminary Findings of the “Investment Climate Reform in Fragile and Conflict Situations� Study equipped to work closely with the other World Bank Group teams and donors to advance knowledge and ¡¡ Develop a “road map� at program outset to identify areas in which the investment climate team, the Bank share lessons learned on private sector development in Group, and donors can achieve the most impact. in fragile and conflict situations. INVESTMENT CLIMATE ¡¡ “Quick wins� (within one to two years) to show early results should be combined with sequential, multi- A series of five World Bank Group papers completed phased medium- to long-term programs. in FY12—The Effects of Fragility, Violence and ¡¡ “Boots on the ground� are necessary to build Conflict on the Private Sector and the Implications relationships with the client, identify problems in for Practitioners—look at private sector development program implementation, and monitor results. in fragile and conflict situations. The series includes ¡¡ A focus on regulatory reforms should be supplemented two studies being developed by Investment Climate with deals transacted by IFC, MIGA, and other the investors, in particular for critical infrastructure and Department fragile-state experts, “Investment Climate basic services. IMPROVING Reform in Fragile and Conflict Situations�11 and “Early ¡¡ A key success factor is programming flexibility in Foreign and Large-Scale Investments in FCS. � Study technical assistance interventions, given the instability findings will help guide World Bank Group staff and of the post-conflict environment. Programs need to be external practitioners working in these situations. The flexible in design, funding, staffing systems, time, and Investment Climate Reform in Fragile and Conflict client-engagement modalities. Situations study is based on interviews with more than 70 practitioners. It focuses on sequencing of interventions, identifying the right balance between investment climate reforms and investment generation, 11 Forthcoming. 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 25 IMPROVING the INVESTMENT CLIMATE in FRAGILE STATES FISCAL YEAR 2012 OPERATIONAL HIGHLIGHTS 28 FY12 Portfolio Snapshot. At the end of FY12, the portfolio of FIAS-funded activities included 53 projects mapped to the Investment Climate Department and 19 projects mapped to other World Bank Group units (projects managed by IFC regional Advisory Services units as well as subnational Doing Business projects implemented by the Global Indicators and Analysis department). About half of the CIC- mapped FIAS projects focused on product development and knowledge sharing that support regional teams through expertise and know-how in the delivery of regional projects. Among the client-facing FIAS projects, Effective Regulations for Business Entry and approximately 49 percent of activities in FY12 were Operation linked to the strategic theme of fostering enterprise This work aims to foster enterprise creation and creation and growth; 30 percent to the theme of sustain firm growth by improving the regulatory facilitating international trade and investment; and environment for doing business. In partnership 18 percent to the theme of unlocking sustainable with private sector and government agencies, investment opportunities in key sectors (as the product supports legal, institutional, and FISCAL YEAR 2012 OPERATIONAL HIGHLIGHTS measured by project expenditures in FY12). A regulatory reforms and builds the capacity of residual 3 percent of FIAS-funded activities related government agencies to develop and enforce to other activities not directly mapped to the three business friendly regulation. strategic priority areas under FIAS, mostly legacy projects carried over from the FY08–11 strategy In FY12, an independent evaluation of the cycle (see figure, below). business regulation product was conducted with the support of FIAS, under the leadership of the evaluation unit of IFC. It concluded that the Project Expenditures by Thematic Priority, FY12 product has been very effective in responding 100% = $19,116,172 to client needs and improving the regulatory environment in client countries and should remain  Business Regulation for a core product of the Investment Climate Business Enterprise Creation and Line. Recommendations included suggested Growth [49%] improvements to some features of the product’s  International Trade and Investment [30%] offerings. As a consequence, under a knowledge  Investment Climate for management project supported by FIAS and based Industry [18%] on broad internal and external consultations,  Other [3%] the team defined a new strategy for business regulation which will aim to: ¡¡Gradually shift the focus of business regulation reforms, from regulatory simplification (reducing Fostering Enterprise Creation and Growth cost, delays, and steps) to improving regulatory FIAS continues to support economy-wide reforms quality and the implementation of the rules by that foster enterprise creation, provide businesses regulatory agencies. In countries that have made with new growth opportunities, unlock firms’ progress in simplifying their key regulations, productivity, foster competition, and create a the second-generation reforms would shift level playing field by reducing barriers to entry, to ensuring better implementation and less expansion, and exit. FIAS-funded activities in FY12 discretion in how rules are applied. supported reforms in this area in particular via three ¡¡Introduce, in countries where capacity is available, standardized products (or services). integrated information and communication 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 29 technology platforms in regulatory agencies. For implemented include a 40-percent reduction in example, business entry reform projects will processing times and fees for property registration, the increasingly focus on providing ICT platforms that elimination of five tax payment procedures, and the integrate the registration process with different unification of two business registration procedures. agencies (for example, registrar’s office, tax authority, In FY12, the business regulation work program increased social security administration), with the view to its focus on fragile states (see, for example, the boxes enable ICT-based reforms and improve inter-agency on Kosovo, p. 21, Guinea, p. 30, and Nepal, p. 43). The information sharing. tools offered by the product are also increasingly used ¡¡Develop tools to improve the prioritization of in industry-specific reforms, in particular in agribusiness, regulatory reforms and support client countries in a and in the area of green regulations, such as the more systematic way to put in place regulatory reform issuance of green building codes and environmental processes to improve the quality of new regulations. licenses (see p. 42). Based on this work, FIAS-supported business regulation projects are likely to evolve in a number of ways in Debt Resolution and Business Exit the current FY12–16 strategy cycle. Examples include In response to the sustained negative effects of the helping clients with ICT solutions that integrate global financial crisis and as part of the new FIAS FISCAL YEAR 2012 OPERATIONAL HIGHLIGHTS various regulatory databases; introducing shared strategy to ensure a more harmonized approach to technology solutions across government in areas such reforms, a consolidated debt resolution and business as inspections reform; improving quality control and exit product was introduced in FY12. It integrates the external accountability when issuing new regulations; previous restructuring and insolvency and alternative rethinking the wholesale regulatory reform approach dispute resolution work streams and continues to with better prioritization in mind and a focus on support IFC’s Access to Finance advisory services in minimizing implementation gaps (between de jure and the secured transactions and collateral registries area by de facto implementation); reducing the variability of providing legal and regulatory inputs. The development outcomes across different categories of enterprises; and of this product is led by a global team that provides enhancing the sustainability of regulatory reforms. support to IFC and World Bank regional projects. The new business regulation strategy will also aim to This area of technical assistance focuses on legislative be more selective and to exit from regulatory areas and institutional reforms that closely engage key private after their processes have been sufficiently simplified, sector constituents, including commercial banks. which will allow focus on areas that are more binding The reforms aim to facilitate enterprise growth by to private sector development. This new approach, with improving access to credit, increasing firm dynamism its emphasis on institutional capacity, ICT solutions, through streamlined exit procedures, and ensuring and implementation issues, will require that the global the efficient redeployment of assets and capital from business entry and operations team work even more failed businesses to viable ones. The debt resolution closely with different parts of the World Bank Group to and business exit product is being deployed in both deliver frontier solutions for clients. IFC and IBRD projects in 31 countries,12 of which 61 Collaboration with the regional IFC and World Bank percent are IDA countries and 13 percent are fragile teams is already strong. For example, in Montenegro, states. While these projects are funded by regional IFC of 756 business administrative procedures proposed and World Bank teams, the knowledge activities and for improvement, 592 (78 percent) were simplified, the development of toolkits and other operational tools improved, or eliminated based on the product team’s needed by project teams are supported by FIAS under a recommendations. An additional 49 (18 percent) global knowledge management project. business-related laws and regulations were amended or abolished of the 272 proposed. Key examples of the legal and regulatory changes FIAS-funded teams 12 The OHADA project is counted as a single country. 30 Guinea Takes Steps toward a Simpler, More Business Friendly Regulatory Regime With the benefit of FIAS-supported reform expertise, Guinea’s new government is positioning the country—a fragile state with a long history of political turmoil—to become a preferred destination for investment in Africa. Guinea’s leaders recognize the importance of the private sector in creating the growth and jobs that will foster economic stability and prosperity. They are addressing four areas with World Bank Group support: starting a business, getting electricity, dealing with construction permits, and registering property. A presidential decree created the Agency for Promotion of Private Investments (APIP)—a one-stop shop that allows entrepreneurs to register their businesses at one location, cutting time and cost in the registration process. Oumar Yasané, CEO of a computer shop, found registration a quick and easy process. “I learned about APIP through the media, so I decided to use it to register my business. I was asked for two passport photos, a residence certificate, a photocopy of my ID card and 212,000 Guinean francs. I submitted these and in less than two weeks was called to pick up my documents. I was amazed at how quickly my business was registered. � In providing a platform for businesses to become formal, in particular smaller enterprises, the one-stop shop also creates an avenue for them to access opportunities created by large-scale investments in Guinea such as the $150 million Simandou iron ore mining project, an IFC investment. Achievements Starting a business: Combining interactions with different authorities through the one-stop shop has cut the number of ¡¡  FISCAL YEAR 2012 OPERATIONAL HIGHLIGHTS procedures by half (from 12 to 6) and total days to start a business from 40 to 35. Approximately 450 new businesses have been formed since early 2012. Dealing with construction permits: The government decreased the cost of warehouse registration, and through a more ¡¡  transparent fee structure, the cost to obtain a building permit. Getting electricity: Previously, requesting an electricity connection also required a separate request for excavation. Now this ¡¡  is a combined process, saving time and reducing the number of points of contact to access electricity. Also, instead of cash only, bank guarantees are now accepted as deposit. Registering property: A one-stop shop for construction and property registration has been created to enhance transparency ¡¡  and streamline construction and property controls. The government has also called upon the expertise of FIAS-supported investment policy and business taxation teams to create an attractive investment environment in the West African nation. The teams will help devise an investment policy, reform the tax incentive regime, and strengthen investment promotion institutions. For example, the debt resolution and business exit cross-team innovation helped establish an alternative product team and the IFC and Bank regional teams dispute resolution mechanism for tax disputes in supported the government of Ukraine in implementing Bangladesh (see box, p. 31). In Tunisia, the debt broad reforms to advance the country’s insolvency resolution and business exit team worked with IFC and system. New appointment requirements, qualification Bank units to offer a comprehensive World Bank Group criteria, and a professional development program reform solution (see p. 48). were put in place for insolvency practitioners. A new insolvency law was adopted in December 2011. The Indicator-Based Reform Advisory reforms are part of a broader World Bank Group advisory program which aims to mitigate the aftermath of the Indicator-based reform advisory assistance serves as an financial and economic crisis on the private sector in entry point for broader investment climate programs by Europe and Central Asia. The program is supported leveraging client demand created by the Doing Business by several multilateral organizations, including the report and other indicator sets13 to build momentum International Monetary Fund (IMF). for deeper reforms. In some countries, this work is integrated with other World Bank and IFC teams working A key feature of work in the area of debt resolution and 13 For example, the Women, Business and the Law report business exit is collaboration with other investment (wbl.worldbank.org), the World Bank Group Enterprise Surveys climate teams and World Bank Group units. In FY12, (www.enterprisesurveys.org) and the World Economic Forum report (www.weforum.org). 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 31 Innovative Cross-Product Collaboration Delivers “Bang for the Buck� in Bangladesh Expertise drawn from FIAS-supported products in the areas of debt resolution and business exit and business taxation is helping the National Board of Revenue (NBR) of Bangladesh introduce alternative dispute resolution tools for resolving income tax and value-added tax (VAT) disputes. The system for redressing tax disputes in many countries is dysfunctional. Taxpayers face long delays in resolving their disputes, tax appeal systems biased in favor of tax authorities, and high barriers in accessing the tax appeal process. In this environment, it is highly unlikely a decision taken by a tax authority will be contested for any given tax case. The lack of an adequate appeals process invites corruption and results in taxpayers, especially smaller businesses, incurring high compliance costs. The team, working closely with the local IFC investment climate facility, is implementing an ADR system for tax in Bangladesh—the first of its kind in a developing country—exemplifying FIAS’ role in supporting innovation and the incubation of new approaches. Achievements According to NBR statistics, around 16,000 revenue-related disputes currently pending in Bangladesh have locked up $1.4 ¡¡  billion of government revenue. The project is supporting the NBR in disposing of pending tax cases through mediation, which is expected to reduce the time and cost of dispute resolution by at least 50 percent. The NBR has incorporated ADR provisions in all tax laws (Income Tax Ordinance, Customs and VAT Acts) through the ¡¡  FISCAL YEAR 2012 OPERATIONAL HIGHLIGHTS Finance Bill 2011. The panel of facilitators was finalized through consensus with the Federation of Bangladesh Chambers of Commerce and ¡¡  Industry. Tax ADR was recently inaugurated on a pilot basis at four revenue collection centers in Dhaka and Chittagong, with a ¡¡  countrywide roll-out planned in FY13. IFC initiated a large-scale communications campaign to create awareness about the new system. The campaign has reached ¡¡  over 5 million taxpayers through print and electronic media. on the investment climate reform agenda. For example, countries and 60 percent in IDA countries. Project in Uganda, a joint indicator-based reform advisory, World examples include Sierra Leone, Costa Rica (see box, Bank, and IFC project is implementing short-term reform p. 32), Kosovo (see box, p. 21), Morocco, and Togo. proposals in business registration while incorporating In FY12, the scope of indicator-based reform advisory long-term recommendations into a new, broader World assistance expanded beyond the Doing Business Bank lending program. In Costa Rica, the indicator-based indicators to encompass information gathered through reform advisory project is linked to a World Bank project several World Bank Group and IMF datasets and promoting competitiveness and an IFC project focused diagnostics14 as well as other recognized international on developing a comprehensive framework for secured sources. The new, expanded reform memorandum—a transactions and collateral registries. World Bank and document that assesses a country’s performance on IFC teams supported the government in achieving three key investment climate indicators—serves as a tool for investment climate reforms and a strong showing in the governments in formulating investment climate reform Doing Business 2013 report (see box, p. 32). programs. Building on work initiated in FY12, new reform The indicator-based reform advisory work supported memoranda are being developed for the governments of by FIAS continues to provide “first-response� technical the Kyrgyz Republic, Togo, and Uzbekistan. assistance in helping clients implement reforms based To stimulate an exchange of country experiences in on analysis of countries’ performance on investment implementing investment climate reforms, the indicator- climate indicators. Of the 46 FIAS-supported reforms, based reform advisory product organized peer-to-peer 33 (72 percent) originated from indicator-based reform learning events in FY12 for Eastern and Southern Africa, advisory work with client governments. Of these reforms, 30 percent were in fragile and conflict-affected 14 Including indicator sets listed in previous footnote, plus IFC corporate governance studies and investment policy notes. 32 With World Bank and IFC Support, Costa Rica Is Region’s Most Improved Regulatory Reformer Costa Rica’s commitment to creating a business friendly environment was recognized by the Doing Business 2013 report, which cites the nation among the 10 most improved economies across three or more areas of regulation. Costa Rica is the only economy in Latin America and the Caribbean on the report’s list of most improved reformers. The Costa Rican government, which has achieved high marks on indicators that track human development, is now focused on encouraging continued private sector growth. As part of this agenda, and with support from the World Bank and IFC, President Laura Chinchilla created a council on competitiveness and innovation that prioritizes improving the investment climate through a series of business friendly reforms. During FY12, FIAS-funded teams assisted Costa Rica in improving access-to-credit information by guaranteeing the borrowers’ right to inspect their personal data. Through the creation of online approval systems, the teams helped simplify the process for businesses to obtain construction permits, which resulted in a 28-day reduction in time needed to complete the process. The government also devised an electronic payment system for municipal taxes and streamlined the process for obtaining a sanitary permit for low-risk activities. All improvements contributed to the nation’s solid performance as reported in Doing Business 2013. For President Chinchilla, the reforms represent a key milestone but are “only the starting point� of the government’s plans for continued improvement of the business climate, simplifying and reinforcing transparency in the public administration, modernizing the regulatory framework, and communicating reforms. FISCAL YEAR 2012 OPERATIONAL HIGHLIGHTS Through a cooperation agreement that extends to mid-2013 and with the expertise of FIAS-supported teams, the government intends to build on Costa’s Rica’s reform momentum. It plans to improve the operability of the “Crear Empresa� one-stop shop for business registration, revise insolvency and secured transactions laws, and launch a web-based electronic portal to process customs documentation. Latin America and the Caribbean, and the Western assistance using the gender indicators collected by the Balkans, which were attended by about 350 delegates Women, Business and the Law report. As a result, the from 33 countries (see box, p. 51). government has agreed to implement reforms to its family law in areas identified by the report, which will In Togo, indicator-based reform advisory assistance, allow women the same opportunities to navigate the part of a broader World Bank project, focused on business environment as men. Since reforming family business entry, registering property, tax, and public- law is a sensitive issue, the technical assistance will also private dialogue. An effort is currently underway to focus on helping the government engage with key civil produce a new, expanded reform memorandum with society organizations, academics, and women’s groups recommendations on improving Togo’s investment throughout the implementation process. Projects of this climate, based on indicators from several sources nature contribute to a concerted effort to incorporate a including the Doing Business report, the Women, stronger gender dimension in FIAS-funded operations Business and the Law report, and the Enterprise in the FY12–16 strategy cycle; additional details of other Surveys. Togo reduced the number of procedures to gender-focused activities are highlighted on page 46. start a business from 7 to 6, and the average time it takes for businesses to start up from 84 to 38 days (Doing Business 2013). Regulatory changes have Facilitating International Trade and Investment considerably reduced the cost to register a business The FY12–16 strategy strongly positions FIAS support through the one-stop shop. to client countries in catalyzing investment and trade In addition to supporting the government of Côte for the jobs, growth, and competitiveness agenda. FIAS d’Ivoire in establishing a World Bank-funded, one- funding in FY12 supported activities that: stop shop for business registration and streamlining ¡¡Removed impediments to stimulating and retaining procedures for obtaining construction permits and investment registering property, the indicator-based reform advisory ¡¡Streamlined and harmonized trade logistics systems team is helping pilot a new approach to technical and services 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 33 ¡¡Supported more effective and transparent business investors’ access to investment- and land-related taxation. information, and improving the process for obtaining work permits for foreign employees. The project A New Approach to Investment Policy to Help exceeded many projected results; notable outcomes Attract and Retain Investments include: Investment policy is a long-standing area of FIAS- ¡¡Elimination of obligatory double registration of foreign supported expertise, one that has generated many investment at the Ministry of Foreign Trade and reforms over the past two decades. To reflect Economic Relations; new challenges in investment policymaking, the ¡¡Creation of an interactive business map for land- investment policy product is currently undergoing a related transactions, which contains useful information strategic reorganization. In FY12, the first year of this for investors on starting a business, including reorganization, the product was more deeply focused economic and demographic data, infrastructure, on its core areas of competency and development of a natural resources, land use, investment procedures, set of new, innovative areas for future advisory work, and so on (http://www.fipa.gov.ba/); including: ¡¡Reduction by more than half in the number of required ¡¡Helping clients leverage FDI for wider impact on procedures to obtain expatriate work permits, as well FISCAL YEAR 2012 OPERATIONAL HIGHLIGHTS the economy, in particular by implementing policies as a cap on the time allowed for the government to conducive to facilitating linkages between foreign approve permit applications (15 days rather than the investments and local suppliers of goods and services; previous 30-day limit). ¡¡Assisting governments in reducing political risk The reforms implemented by the project are beginning and strengthening investor protection in terms of to translate into concrete results on the ground. Cost acquisition, operation, and disposition of their assets, savings for foreign businesses were nearly $1 million on including building investor confidence in the protection an annual basis; and statistics from the nation’s Central against unlawful acts by governments de jure and de Bank point to a significant increase in FDI flows from facto; $225 million in 2010 to $378 million in 2011.15 ¡¡Increasing regional trade and investment through reforms that reduce transaction costs and help Establishing thought leadership and facilitating peer- create more functional, predictable, and efficient to-peer learning was also a feature of FIAS-supported markets through streamlined investment-related laws, investment policy work in FY12. A global workshop regulations, and procedures, and including work on in Vienna brought together more than 100 public and investment and free-trade agreements at the regional private sector leaders, donors, development partners, level. and World Bank Group staff to explore emerging trends in international investment and discuss how investment The FY12 investment policy portfolio comprised 13 policies can be successfully applied to maximize the active projects under implementation and 14 new developmental impact of private investment. In addition pipeline projects spanning four regions and designed to the peer-to-peer learning workshop, customized to reflect the product’s strategic reorientation. Of the discussions were held with more than a dozen client investment policy engagements, 83 percent were in IDA delegations to agree on future priorities and develop countries and a third in fragile states. reform action plans. The conclusions of the workshop, including the panel discussions with global thought As part of a larger investment climate program, the leaders on investment policy topics such as regional investment policy team provided technical assistance integration and political risks, influenced and further to the government of Bosnia and Herzegovina with the goal of removing key regulatory and administrative 15 Total FDI inflows for Bosnia and Herzegovina prior to and after the reforms were compared. While it is not possible to determine the obstacles to FDI. In particular, advisory support focused exact attribution of impact to the reforms supported by the project, on streamlining FDI registration procedures, increasing there is nevertheless a positive correlation with increased FDI inflows during that time period. This approach is consistent with M&E practice at the time of project implementation. 34 inspired the development of innovative approaches for In the Eastern Caribbean region, for example, ocean the reorganized investment policy product. This event and terminal charges are as much as three times is one example of many peer-to-peer and staff learning those in Europe and the United States, which cripples events FIAS supported in FY12 (see box, p. 51). the competitiveness and growth of many firms that depend on foreign inputs to conduct business (on average, 70 percent of firms use foreign inputs, Efficient Trade Logistics Systems according to the World Bank Group Enterprise Surveys; FIAS-supported activities have a strong track record see www.enterprisesurveys.org. Projects benefiting in helping governments reduce non-tariff barriers and from FIAS-supported global team expertise have enhance trade logistics systems and services that helped improve border control agencies in Dominica, ultimately lead to significant decreases in the time and Grenada, St. Kitts and Nevis, and St. Lucia. In FY12, cost to import and export for traders in client countries. Eastern Caribbean projects achieved strong results, In FY12, trade logistics work spanned more than 33 most notably the re-establishment of task forces countries, including 15 classified as IDA countries, 10 in focused on trade facilitation; ongoing legal revision Sub-Saharan Africa, and several fragile states. of the Grenada Customs Act and the St. Kitts Port For example, in Mali, the team continued to support the Authority Act; preparation of a trade process map for government in simplifying regulations and streamlining improving procedures in Grenada and St. Kitts and FISCAL YEAR 2012 OPERATIONAL HIGHLIGHTS import and export documentation and procedures. As Nevis; establishment of a one-stop shop in Grenada; a result, traders can now process cargo shipments that and streamlined port operations in St. Kitts. These qualify for direct release from customs control within modernization efforts are expected to reduce the time an automated customs system. Further cargo clearance and costs businesses spend in conducting trade from delays were reduced through the introduction of a the Eastern Caribbean. preliminary risk-based inspection system and removal of post-control inspections conducted by technical Effective and Transparent Business Taxation control agencies. With FIAS support, the time to export Mechanisms goods from Mali has been reduced by 59 percent (from In the area of business taxation, FIAS supports 44 to 26 days) since 2008. Import times saw similar governments in introducing reforms that expand the improvements—a 47 percent reduction (from 65 to 31 tax base, improve the efficacy and transparency of days). Malian traders benefit from these improvements tax administrations, and reduce the private sector tax and now enjoy increased access to global markets. burden while easing governments’ aid dependency. In Similarly, in Kenya, advisory support led to improved FY12, the FIAS-supported tax product provided expertise procedures expediting the flow of cargo, which resulted to World Bank Group tax simplification projects in 26 in less congestion at the port of Malaba. Previously countries across the globe, including 6 considered fragile the queue of trucks waiting at the border spanned 5 or affected by conflict. kilometers, or more than 250 trucks; after streamlining The business taxation product has carved out a unique cargo flow procedures, border congestion was niche in providing technical assistance, working in significantly reduced to a 0.8 kilometer queue. strong partnership with World Bank Group and external FIAS increasingly supported regional trade logistics good practice institutions. It focuses on streamlining programs in FY12. In a concerted effort to integrate business-related tax instruments (VAT, corporate income developing countries into the global economy, trade tax, turnover taxes), reducing the cost of complying logistics projects strengthened systems and services with tax policies and procedures, and expanding the at and across borders, and they realized economies of tax net by removing barriers to inclusion, especially for scale through the implementation of reforms furthering small businesses. The tax work expanded in FY12 to regional integration in the Caribbean, South Asia, and include tax transparency as a focal set of work streams, South East Europe. Regional projects in Central America targeting the legal audit framework (transfer pricing), and West Africa are in the pipeline. accounting reform, and the exchange of information 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 35 procedures to enhance the transparency of tax systems through tax havens. By enabling the adjustment of by fostering better governance of the flow of funds prices for products and services bought and sold within through the economy via the tax regime. a multinational firm but across international jurisdictions, transfer pricing is considered a major cause of low tax During FY12, the tax program implemented a new, revenues collected from multinationals in developing simple SME tax system which minimizes the compliance countries. Multinationals are able to shift their tax burden of accounting for micro and small businesses liabilities from high- to low-tax jurisdictions, especially in and eases the administrative burden for the tax tax havens that charge little or no tax, by adjusting the authority. In Bangladesh, the government implemented prices charged or paid between related parties. the first online tax filing system for VAT and income tax in an effort to boost efficiency and transparency FIAS has supported the governments of Bangladesh in the filing process. The team also supported the (see box, p. 31), Kenya, Georgia, Ghana, and Liberia government’s drafting and implementation of a new in reforming their tax laws and regulations to address transfer pricing framework. In the Lao People’s transfer pricing issues. To further widen impact, the Democratic Republic, the tax team collaborated with FIAS-supported tax team, together with the Organisation World Bank and IMF partners to rewrite the tax code, for Economic Co-operation and Development (OECD), which was adopted and is being implemented. In the organized learning events on transfer pricing to train FISCAL YEAR 2012 OPERATIONAL HIGHLIGHTS East African Community, an ambitious program was regional tax practitioners in Europe and Central Asia, launched to harmonize tax treatment in the areas of with more training planned in Africa. The goal of these cross-border VAT and transfer pricing as well as promote training initiatives is to provide client countries with the harmonization of incentive regimes within the region to tools to greatly strengthen their tax systems and target prevent a “race to the bottom� in tax competition. transfer pricing. An important component of business taxation work is in knowledge sharing and fostering networks Unlocking Sustainable Investments in Key of practitioners through peer-to-peer learning. In Sectors FY12, several resources were produced: a guide for FIAS has a long record of supporting the implementation practitioners on implementing simple, risk-based of economy-wide reforms that level the playing field for selection for audit systems, basic guides on transfer businesses, helping to make markets more competitive. pricing issues, and a set of empirical (country-based) Delivering reforms through initiatives in key strategic analyses on the utility of tax incentives. These guides sectors of the economy can enable greater sustainable have been used as the underpinning documentation growth and investment. Assistance in the area of for the installation of a risk-based audit system in the investment climate for industry applies the full range Kyrgyz Republic, and the incentives work has been of FIAS-supported economy-wide approaches in the used to frame the operational design in the EAC and delivery of sector-specific advisory services to help Guinea. The team also held an event on transfer pricing increase development impact. The industry product hosted by the government of Albania for a regional is at the center of the FIAS strategy that calls for network of tax practitioners in the Europe and Central increased sector orientation, managing for impact, and Asia region. greater alignment with World Bank Group partners. The A key activity in the first year of the FY12–16 strategy work of the unit brings to bear established regulatory cycle was to expand international taxation support, reform and investment facilitation expertise to deepen both to improve tax transparency and meet growing FIAS-supported engagement in strategic sectors, demand from countries seeking help in creating the such as agribusiness and tourism, and to focus these legal framework to combat transfer pricing abuse (see interventions on corporate priorities such as food box, p. 36). Transfer pricing has become an increasingly security and job creation. important area for developing countries and is closely FY12 was a year of both consolidation and growth for related to the issue of international tax avoidance industry work, with the active portfolio of projects under 36 Joining Forces with Powerful Partners to Improve Tax Transparency in Client Countries The Investment Climate Department’s global tax team played a key role in designing the advisory dimension of the World Bank Group’s new policy governing the use of offshore financial centers in its private sector operations, reinforcing the institution's commitment to support countries in improving tax transparency through technical assistance. The new policy, introduced in FY12, promotes tax transparency using international standards established by the Global Forum on Transparency and the Exchange of Information for Tax Purposes. The Global Forum currently has more than 110 member countries that have committed to these standards and agreed to undergo substantive peer reviews by other member nations to identify areas for further improvement. FIAS will support advisory assistance to countries that request help in improving the transparency of their tax systems, including in areas highlighted in the peer review process. This assistance helps developing countries enact laws and implement procedures that make it possible to identify owners of all types of corporations, trusts, partnerships, and other entities, access accounting records, monitor bank accounts and bank transactions, and exchange information with other countries in an efficient and confidential manner. The enhanced transparency and a mechanism for information exchange enable developing countries to request information from other governments to better audit their own residents and combat tax abuse and evasion. The objective of the program is to assist governments in improving the transparency of their tax regimes, thereby potentially increasing revenue collection, accountability, and integration with the international community. Areas of focus include:  ¡¡ Reforming legal and regulatory frameworks of tax regimes ¡¡ Streamlining and establishing tax administration procedures FISCAL YEAR 2012 OPERATIONAL HIGHLIGHTS ¡¡ Establishing transfer pricing frameworks ¡¡ Strengthening accounting standards and reporting obligations ¡¡ Helping countries meet their exchange of information obligations as set out in international agreements; Plus, a strong learning component for tax practitioners executed through guidebooks on issues such as transfer pricing, ¡¡  peer-to-peer learning through regional practitioners, network workshops, and training. The tax transparency initiative is being implemented by the World Bank Group in partnership with the IMF, regional development banks, and other relevant stakeholders including the OECD, the International Bureau of Fiscal Documentation, and the European Commission. Donor partners include the governments of Switzerland, the Netherlands, Spain [via IFC’s Technical Assistance Trust Funds (TATF) system], and Luxembourg. A special trust fund has been established to support tax transparency technical assistance and advisory services under FIAS. implementation doubling and those in the pipeline productive relationships with colleagues working across tripling throughout the year. This expansion was fueled boundaries. This skill set includes not only sectoral primarily by growth in the agribusiness portfolio. knowledge, but also the ability to link with expertise in FIAS-supported efforts led to stronger results, with policy reform areas of particular relevance at an industry interventions generating over $120 million in investment. or firm level, such as competition policy, investment Particular attention was placed on building capacity by facilitation, and debt resolution. The industry-focused recruiting additional specialist expertise in Washington, work is a bridge to the broader investment climate D.C. and the regions, growing partnerships with other playing field, and cross-cutting themes such as inclusion, World Bank Group advisory units, and increasing gender, and “green growth� (see p. 42) are increasingly collaboration with colleagues in IFC Investment woven into the design of investment climate industry Services. These relationships were facilitated by the projects and approaches. Similarly, projects increasingly growth of the FIAS-supported Istanbul hub (see box, involve enhanced collaboration with partners in FPD, p. 49), where a growing cadre of investment climate the Bank’s Sustainable Development Network, and the industry staff is based. Bank’s Poverty Reduction and Economic Management (PREM) Network, with investment climate policy The work program for the investment climate for analysis imbedded in the design of lending operations industry area reflects this increasingly integrated and in the target sectors. These synergies are particularly unified approach. Individuals on the industry team apparent in agribusiness (for example, in projects in possess skills and experience conducive to fostering Armenia, Moldova, Rwanda) and growth pole projects 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 37 [for example, in the Democratic Republic of Congo have hindered profitability and investments to the sector. and Haiti (see box, below)], where investment climate FY12 achievements include: industry expertise supports World Bank operations. ¡¡Adoption, for the first time in Ukraine, of five checklists for inspecting the poultry business, Improving the Investment Climate in Agribusiness slaughtering, production and sales of veterinary medicines, construction, and management of The agribusiness portfolio doubled between FY11 agricultural markets; and FY12, with the FIAS-funded global product team supporting nine projects valued at $6 million. ¡¡Introduction of an integrated package of reforms for A concerted effort to manage regional growth in a the agribusiness sector in Moldova, including the sequential manner resulted in portfolio growth centered establishment of a single agency for food safety in on Africa (see box on Rwanda, p. 38) and Europe and line with international best practice to ensure science- Central Asia. Future regional growth will come from a based, non-duplicative, and business friendly food significant ramp-up in South and East Asia and Latin safety controls managed in a strategic, coordinated, America and the Caribbean. Overall, 20 projects are and risk-based fashion by a unified controlling agency; in development globally, of which 12 are expected to ¡¡Elimination of the Mandatory Conformity Assessment become operational in the first half of FY13. of Public Food Services and the abolition of mandatory FISCAL YEAR 2012 OPERATIONAL HIGHLIGHTS technical regulations on food service provision in In Europe and Central Asia, the team worked with Armenia. governments to address regulatory and policy constraints on input markets, food safety regulation, These measures are expected to improve post-harvest logistics, and import-export procedures that competitiveness and expand the opportunities of World Bank Group Teams Come Together to Help Generate Jobs and Investment in Haiti Two years after Haiti’s most devastating earthquake, the country’s needs extend far beyond reconstruction—the Haitian people need jobs. The FIAS-supported industry team partnered with the World Bank, IFC, and the Haitian government to focus on attracting investment as a path to creating jobs. The collaborative effort addresses Haiti’s lack of industrial space, low government capacity in investment promotion, and inadequate regulatory regimes for fostering special economic zones. Through the steadfast commitment of donor partners, the private sector, and the government, Haiti’s private sector is showing signs of recovery: ¡¡ Seven investors announced more than $30 million in investments with the potential to create over 7,500 jobs. The government adopted a 20-year SEZ strategy as the principal driver for job creation, announcing its plans to develop two ¡¡  to three zones. ¡¡ The garment sector ramped up an estimated $500 million in exports to the United States in fiscal years 2010–11.   It should be noted that some difficulties have arisen in the recent past in the implementation of the new SEZ strategy, in particular with respect to incentives and benefits provided to new zones and their potential impact on existing ones. The project team won an award from the joint Bank-IFC FPD Vice Presidency, which recognized the project’s value as an integrated World Bank Group approach to development assistance and a model of collaboration. � explains team leader Armando Heilbron. “Our “The client often cannot tell the difference between IFC and the World Bank, investment generation work in Haiti shows that having a single, coordinated and coherent approach not only facilitates project implementation and dialogue with the government, but also delivers stronger development impact results. � IFC, the World Bank, and the FIAS-supported industry team have jointly designed the upcoming Bank’s Job Creation and Growth project in support of Haiti’s private-sector development strategy, which incorporates recommendations (based on FIAS-supported team expertise) in the areas of business environment reforms, tourism development, sectoral investment promotion, and special economic zone development for greater impact on the ground. The team will continue collaborating across institutional boundaries to help the government implement the policies agreed upon in the project framework. 38 countries in the region to access export markets, countries. With over 400 million tourist arrivals especially in the European Union. projected for these countries in 2012, demand for tourism products and services is growing rapidly. In Africa, the investment climate industry team worked However, a key challenge is how to define the role of with colleagues in the region to assist API, the national developing countries in translating this demand into investment promotion agency of Mali, to strategically new investments, jobs, and inclusive economic growth. target and attract investment, as part of a multi-faceted While tourism needs to be a private sector-led industry investment climate support program. API’s efforts bore to thrive, it also needs sound sector planning, policies, fruit in FY12 with four new projects valued at $25 million regulations, and governance to guide sustainable growth starting operations, setting the stage for job growth and remain competitive. The FIAS-supported industry and a solid demonstration effect going forward, when work on tourism aims to do this by: stability returns. ¡¡Defining transformational reforms or investment The team’s agribusiness-related knowledge opportunities and the government’s role in facilitating management efforts in FY12 included developing a them, and aligning reforms and opportunities with toolkit on food safety and hosting a highly successful commercial, market-driven realities; agribusiness “deep dive� event attended by more than 100 staff from across all regions. Extensive work was ¡¡Enabling reforms that address regulatory barriers and FISCAL YEAR 2012 OPERATIONAL HIGHLIGHTS undertaken throughout the year to improve quality investment obstacles such as opaque and excessive at entry for agribusiness projects and to strengthen licensing practices, misplaced incentives, and the results measurement framework for the industry excessive end-user taxes. portfolio overall, in close collaboration with Investment During FY12 the first two tourism projects were Climate Department and other corporate colleagues. completed in Mozambique and Sierra Leone, with successful results (see FIAS 2011 Annual Review, p. 27, Enabling Investment Opportunities in Tourism on Mozambique). In Sierra Leone, the FIAS-supported Emerging markets account for 37 percent of global project and tourism product teams partnered with tourism activity, and tourism is the main foreign IFC’s Infrastructure Advisory unit to find a credible exchange earner in 47 of the world’s 50 poorest investor for the government-owned Cape Sierra Hotel, a Creating Jobs and Investments in Rwanda’s Tea and Horticulture Sectors FIAS-supported activities, in collaboration with the efforts of other World Bank and IFC units, are assisting the government of Rwanda in attracting investments in the horticulture and tea sectors to boost employment opportunities and exports in these key sectors. As part of the larger FIAS-funded Rwanda Investment Climate Program, this work aims to enhance transparency and streamline processes around agribusiness investments, with an emphasis on strengthening social and environmental safeguards as well as economic development impact. Tea: The project provided strategic advice about privatizing two remaining government-owned tea factories that also involved IFC transaction advisory support. In FY12, the program helped develop crucial reform proposals on a green leaf pricing mechanism expected to strengthen sustainability of the tea sector and help pave the way for a $200 million expansion plan which could result in doubling the area under production and export volume. The reform is also expected to significantly improve the income of 65,000 farmers and their families active in the sector. Horticulture: The team supported the government in setting up the Rwanda Horticulture Taskforce following a 2010 investor forum organized in collaboration with MIGA and other World Bank Group partners. The taskforce aims to proactively facilitate investor interest and remove regulatory barriers identified by potential investors in export logistics and access to land. In FY12 the taskforce attracted two international investors—an avocado producer- exporter and a fruit and vegetable sourcing and packing company to supply regional supermarkets—which are jointly expected to create more than 150 jobs. The taskforce also increased the pipeline of potential investors by 50 percent to 34 prospects and facilitated more than seven site visits by international investors in the past year. Additional investments by reputable international companies are expected to be announced in the next 12 months. 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 39 derelict, 100-room hotel in Freetown. In March 2009, the Building on this success, further FIAS-supported government awarded a 25-year lease to the government collaboration in tourism has been operationalized in pension fund. After initial unsuccessful discussions with new projects in Rajasthan, Bihar, and Uttar Pradesh in several investors, the pension fund reached out to IFC in India, and in Lebanon, Lesotho, and Nepal. Reflecting June 2010 for help in finding a strategic investor through rising demand from client countries, nine more advisory a competitive and transparent bidding process. The joint projects are in the pipeline for FY13 approval, including World Bank Group team worked with a network of high- one in South Asia’s revered “Buddhist Circuit� (see box, level government champions to respond, and in April below). 2012 the new investor broke ground. This investment is expected to generate 400 direct jobs. Partnering Across the World Bank Group to Boost Tourism in South Asia’s “Buddhist Circuit� In South Asia, the FIAS-supported tourism product team has designed and is piloting work with the regional investment climate team on programs that integrate collaboration with a range of World Bank Group actors—IFC’s Infrastructure Advisory and Sustainable Business Advisory, the World Bank’s FPD Network’s Competitive Industries and Sustainable Development Network teams, and IFC Investment Services. An example is the Buddhist Circuit program, planned for launch in early FY13, which aims to improve livelihoods through tourism development of the Buddhist Circuit in the Indian low-income states of FISCAL YEAR 2012 OPERATIONAL HIGHLIGHTS Bihar and Uttar Pradesh. The Buddhist Circuit features a number of destinations in India and Nepal of immense religious significance to Buddhists. Despite the spiritual and cultural importance of the circuit, tourism infrastructure in these destinations remains relatively undeveloped. The circuit has yet to become a key economic driver for the surrounding areas, which remain some of the poorest in India and Nepal. For example, it is estimated that at least 1,000 more rooms are needed to meet expected demand during the main pilgrimage season, including 300–400 in the four-star category or above. In FY12, the investment climate team collaborated with World Bank Group partners to draw up an integrated development strategy for circuit destinations in India and identify and bring to market transformative projects that could spur private investment in the circuit; a similar effort is being launched in Nepal. This innovative collaboration aims to facilitate public investments of $200 million that provide a platform for private sector investments of $100 million, which in turn support the creation of 15,000 jobs. The collaboration, which extends beyond the World Bank Group to the two state governments and the government of India’s Ministry of Tourism, is a first for India and is attracting the attention of other states. The government of the eastern state of Odisha has also requested FIAS-supported technical assistance in reviewing the state’s tourism policy, prioritizing tourism opportunities that can be taken forward as public-private partnerships, and improving Odisha’s investment climate for tourism. CROSS-CUTTING THEMES, COLLABORATION, and THOUGHT LEADERSHIP 42 The FY12 milestones highlighted in the previous section are underpinned by the FIAS operating principles in the new strategy cycle—the drive to innovate, to serve as a “connector� within the World Bank Group and join forces with strong international and local partners to bring the most value to clients, and to be a global leader in creating and sharing knowledge, ideas, and good practice on investment climate issues. An Incubator for New Approaches reform efforts also recommended eliminating or consolidating 283 of 517 business licenses. In the FY12–16 strategy cycle, FIAS funding is used to support an increased focus on innovative In Kenya, in the context of the Kenya Investment approaches to investment climate reforms and to Climate program, FIAS supported the City Council of position the FIAS-supported Investment Climate Nairobi in transforming a manual, paper-based process Department as an incubator for new ideas. for administering construction permits to a new Innovative, cross-cutting themes include ICT, green automated process. The new e-construction permit growth, competition, and inclusion. system, which was introduced in September 2011, is expected to increase the level of formalization in LEADERSHIP building construction and improve compliance. Harnessing Modern Information and Communication Technologies The reforms have: In FY12, FIAS support helped harness new ¡¡Established a one-stop center to streamline the technologies to improve the quality and issuance of construction permits, introducing and THOUGHT accessibility of information and increase better information and workflow systems and transparency of government services. Projects physically reorganizing the office floor to mirror supported the deployment of ICT solutions the steps of the process; and built government technology management CROSS-CUTTING THEMES, COLLABORATION, ¡¡Introduced a more robust system that has capacity, which reduced the time and cost of doing allowed the City Council to keep pace with the business and enabled online transactions that limit 300 percent increase in permits as a result of interactions between business and government Nairobi’s rapid growth; officials. The number of reform programs supported by ICT work has doubled over the past two years ¡¡Eliminated the need for private “expediters� to 48 active and pipeline components in 27 country to speed up the permitting process at a cost programs and three regional projects in FY12. This equivalent to 60 percent of the permit fee; work includes strong programs in IDA and fragile ¡¡Introduced a web- and short message service- countries such as Nepal (see box, p. 43). based tracking and notification system, which keeps business people informed at all times of In Zambia, FIAS supported a government-led effort the status of their applications. to reduce the regulatory burden on businesses and improve the delivery of information and services to the private sector. This included the development Fostering “Green Growth� Solutions and implementation of new delivery mechanisms FIAS-supported projects draw on a wealth of for government-to-business services, including regulatory and investment generation experience a one-stop shop for business entry as well as to help client countries develop “green� solutions the launch in March 2012 of a searchable online in setting standards and attracting investments in e-registry of all business licenses (http://www. resource-efficient economic activities. businesslicenses.gov.zm/), which provides full Globally, buildings and their operations use large details on the legal basis, requirements, costs, and amounts of resources and emit a variety of different steps for obtaining each type of license. Licensing types of polluting materials. Worldwide, 45 percent 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 43 Reforms in Business Creation and Operation Aim to Spur Nepal’s Fragile Economy IFC Advisory Services in South Asia called upon expertise from FIAS-funded product teams in business regulation and ICT to develop a comprehensive inventory of 125 licenses and establish Nepal’s first business licensing portal. The e-portal built on a system first piloted in Kenya and developed with FIAS funds. In the country’s fragile and fragmented political environment, the e-portal represents a cross-governmental initiative to reach out to the private sector. The e-portal was launched by Chhaya Sharma, president of the Federation of Woman Entrepreneurs Associations of Nepal, who felt it represented a good first step toward social inclusion. “The portal is expected to make the licensing system more � she efficient and licensing requirements will be more predictable, particularly for small businesses and disadvantaged groups, noted.  The e-portal is also a major step toward transparency. It consolidates information from 60 different websites and information from 41 license-issuing authorities. The project was based on similar FIAS-funded initiatives in Africa (for example in Kenya, see FIAS 2011 Annual Review, p. 22), and it provides an excellent example of FIAS-funded global product teams working with regional teams to replicate and scale up successful approaches. Additional results: As part of the “One Agency One Reform� agenda initiated by the License Reform Task Force, the Department of ¡¡  Commerce’s simplified firm registration process resulted in about $320,000 in compliance cost savings for businesses. Simplified FDI approval processes—reduced from 22 to 15 steps—saved businesses an estimated $55,000 in compliance costs. CROSS-CUTTING THEMES, COLLABORATION, The Ministry of Energy implemented two World Bank Group recommendations to streamline the hydro power license ¡¡  regime by introducing an application checklist and improved selection criteria for license issuance, both now part of the improved hydropower licensing guidelines. Enhanced connectivity and data sharing between the Office of the Company Registrar, the tax authority, and the ¡¡  government data center reduced the documentary requirements and number of steps. These improvements are expected to save businesses $120,000 in compliance costs. of energy generated is used to cool, light, and ventilate addressing sustainability issues in Bangladeshi industry. buildings with a further 5 percent used in the process of Together these projects provide a basis that will make construction. Buildings also generate around 17 percent Bangladesh’s industry more aware of, and committed of global greenhouse gas emissions, with the largest to, sustainability, which is vital for the future growth and share of building emissions expected to come from competitiveness of the country’s industrial sector. developing countries by 2030. New green building projects in the Philippines and and THOUGHT To address these concerns, FIAS support has proactively Vietnam were launched in FY12. These projects seek to: contributed to piloting a new global green building ¡¡Develop and implement new green building codes that program with projects in Bangladesh, Colombia, and set out mandatory minimum standards for resource Indonesia. Initial efforts in Indonesia have led to a formal efficiency in building design and construction; LEADERSHIP government decree announcing implementation of a ¡¡Improve skills of regulators and building practitioners new green building code for the province of Jakarta. to encourage a high level of compliance with new In Bangladesh, FIAS support helped identify and institute regulations; measures to lower the carbon footprint of export ¡¡Review opportunities for creating additional financial processing zones by establishing a legal and regulatory incentives, including leveraging IFC, financial framework and implementing solutions to reduce instruments directly targeting market players such as greenhouse gas emissions that will particularly impact property developers, energy service companies, and the textile sector. The Low Carbon Zone project, a pilot financial intermediaries. activity funded by the government of Korea, along with FIAS-supported activities have consistently emphasized the newly developed Bangladesh Water Partnership the value of green buildings to clients in creating for Clean Textiles and Green Building Code projects, net economic benefits at a low additional cost. represent a critical mass of FIAS-supported projects 44 Green buildings can cost 20–40 percent less than As part of the incubation process of this new approach, typical buildings to operate using a range of proven the green building team collaborated with IFC’s technologies aimed at demand reduction and energy Sustainable Business Advisory, which is leading the efficiency measures, such as better insulation, glazing, work to define a methodology to measure greenhouse water heating, air conditioning, and lighting. For gas emissions saved by green building standards and set example, in the case of Vietnam, current projections appropriate reduction targets. In pursuing this agenda, suggest the project will contribute to reducing 3.4 FIAS is now firmly contributing to the World Bank million metric tons of carbon dioxide and generate $364 Group’s strategic objective of mitigating climate change. million in cost savings by 2030. In addition to supporting green building regulations, FIAS-supported contributions in FY12 include initiating FIAS has supported the development of a base of first discussions with the Green Building Council, the technical knowledge and advisory capacity in the area of Consortium of European Building Controls, and the environmental regulations. The first project where this European network of building regulators with the view is being applied is in the frontier state of Acre in Brazil. of pooling resources to disseminate good practice in Investment promotion projects are also finding specific promoting modern regulatory frameworks and developing applications in green industries, such as wind energy a strong business case for investing in green building component manufacturing in Para, Brazil (see box, below). LEADERSHIP technologies. Supporting Brazil’s Frontier States with “Green� Regulations and Investments and THOUGHT Building on work with Apex-Brasil, the national investment promotion agency, and drawing on global expertise under FIAS, the investment climate industry team is helping attract investment to Brazil’s frontier states. Technical assistance has focused on building the capacity of the country’s national and state investment promotion agencies to provide a more coherent support framework for investors. Since project inception in 2009, Apex-Brasil has helped facilitate 55 announced investments. To date, $59.2 million and 3,171 jobs have been generated; additional announced investments valued at $22.1 million are expected to CROSS-CUTTING THEMES, COLLABORATION, create an additional 9,758 jobs over the next two years. The investment climate team has partnered with IFC’s Sustainable Business Advisory to support reforms in two key areas: renewable energy (wind component manufacturing) in the state of Pernambuco and agribusiness (fruticulture) in the state of Para. Market analysis and policy advocacy activities conducted for both sectors have encouraged state governments to explore better investment conditions, particularly through the removal of barriers that restrict market entry and suppress competition. As a result of the renewable energy project’s outreach campaign, 45 international wind power manufacturers were targeted, and 14 have confirmed site visits to the state. In the Amazon state of Acre, the Brazil Environmental Permits Project has also taken on the green growth agenda from a business regulation lens. The project, which draws heavily on the experience of FIAS-supported regulatory reform experience in licensing and permitting processes, closely collaborates with the Bank’s ProAcre project and IFC Sustainable Business Advisory. It aims to increase business formalization by redesigning environmental permitting procedures for forest management and construction. Current procedures in Acre are cumbersome, creating incentives for firms to operate illegally, particularly in the practice of deforestation. Regulatory improvements as a result of the project are expected to decrease processing time and the number of procedures for businesses to obtain environmental permits. Around 30,000 hectares of land are expected to fall under improved forest management each year, contributing to reduced annual greenhouse gas emissions of approximately 18,666 tons of carbon dioxide. To date, the improvements have allowed the government to license the activities of 26 large forest management communities and have helped more than 400 local smaller businesses legally produce wood products. Entrepreneurs in the region already notice improvements. According to Jandir Santin, who heads Triunfo Amazonia, a local wood product processing company, “Sustainable forest management is a powerful tool for preserving the Amazon and improving the lives of local communities. This concept is compelling to entrepreneurs. Yet they will only invest in Acre if environmental licenses are ready on time, ensuring production is not being delayed. The current improvements are benefitting local SMEs already. In fact, I am planning to expand my business as I am now able to produce more. � (See project video at http://www.youtube.com/watch?v=rF2BAle-re8.) 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 45 Strengthening Competition lengthy and discretional processes that distort market competition. The FIAS-supported team is advising the Promoting market competition is essential to ensure Honduran Secretary of Agriculture and Livestock in that private participation has positive effects on a optimizing administrative procedures with the objective country’s economy. In the FY12–16 strategy cycle, the of preventing discriminatory treatment and allowing FIAS-supported competition program has expanded to for more competition in agriculture input markets. cover more than 20 projects in FY12. Competition work Initial beneficial effects on pesticide prices have been enhances investment climate reforms economy-wide reported by the government. In the Philippines, the and in specific sectors by ensuring open markets to FIAS-supported team is designing interventions that competition, a level playing field that rewards efficient aim to eliminate several regulatory constraints affecting firms, and effective antitrust rules that discourage the shipping industry. Ex ante estimates indicate that anticompetitive behavior among market players. removing these constraints could generate an increase In FY12, FIAS supported the design and implementation in water transport industry output of at least $55 million of pro-competition reforms in regional groups, such as the over the next five years. East African Community, and seven additional countries Poor enforcement of antitrust rules can create undue globally (the Central African Republic, Honduras, Kenya, costs for businesses. FIAS is providing advisory services Moldova, Peru, the Philippines, and Tunisia). In addition, CROSS-CUTTING THEMES, COLLABORATION, in Kenya, Honduras, and Peru to ensure effective merger the competition policy team has provided technical control regulations while reducing the burden on investors. expertise across the World Bank Group in advising the Optimal thresholds for notification and improved merger governments of Armenia, Morocco, Romania, the Russian and acquisitions review policies reduce compliance Federation, Tunisia, and Turkey through projects led by the costs for firms and allow competition authorities to World Bank and IFC regional departments. focus resources on operations most likely to produce Competitiveness in key sectors is boosted by anticompetitive effects, freeing up resources to tackle other addressing competition issues along value chains. The pressing issues. In Kenya, the government set an optimal elimination of constraints to competition in markets threshold for notification, one of three pro-competition linked to agribusiness and tourism is one focus measures introduced in FY12 (see box, below). area for reform. In Honduras, the cost, quality, and The competition policy team has led the development variety of agriculture inputs are limited partly due to of knowledge and operational tools relevant for World and THOUGHT Preventing Collusion and Opening Markets to Competition in Kenya In FY12, the competition policy team worked with the Competition Authority of Kenya within the Ministry of Finance to develop new regulatory measures in two areas as part of the Kenya Investment Climate Program and, in collaboration with the investment climate industry team, amended legislation related to a key agricultural product. LEADERSHIP Introducing pro-competition regulation. Guidelines for anticompetitive agreements were published in February 2012 and new regulations drafted. When the regulations are en force, anticompetitive self-regulations of professional and trade associations will be prohibited per se and removed, generating private savings for firms and households. Ex ante estimates indicate potential savings of at least $18 million per year in the insurance sector alone. Setting effective merger control regulation. The previous process for mergers and acquisitions required that all transactions be approved by the Competition Authority—regardless of company size—and that all involved firms pay a filing fee. The team advised the government on setting an optimal threshold (in terms of the size of the parties) for notification to the government about the transaction. Under an optimal threshold, some smaller businesses will not be required to notify and pay fees. Administrative costs for firms to comply with merger regulations are expected to be reduced by around 70 percent. Removing constraints to competition in agribusiness. The team assisted stakeholders in drafting legal amendments that will allow for private commercialization of pyrethrum, a traditional agriculture product with significant export potential that is used as a natural source of insecticide. Removal of the statutory state monopoly will unlock investment opportunities for at least two local companies and three potential international investors. 46 Bank Group and FIAS projects. Collaboration with other The study comprises a comparative analysis of eight FIAS teams has been key in progressively integrating countries: Bangladesh, China, Costa Rica, the Arab competition principles into investment climate project Republic of Egypt, El Salvador, Jordan, Kenya, and the design and implementation. Monitoring and evaluation Philippines. It demonstrates the development impact indicators will help track the effect of reforms on market and business case for investing in women in the competition. Competition policy assessments, designed workforce inside zones and provides recommendations under the FIAS umbrella and applied in three regions, for governments, zone authorities, and businesses. The have triggered the inclusion of competition interventions research focused on women’s economic empowerment in World Bank projects. in the context of SEZs at three levels: employment and working conditions for female employees; professional In partnership with OECD, the team is working to assess advancement for female employees; and investment gaps in competition policies in client countries and opportunities for female entrepreneurs. The study identify areas for reform to increase market competition. found that: The OECD’s Product Market Regulations indicators have been used to identify regulations that restrict market ¡¡Fair employment and working conditions for women competition as a result of excessive state control of and equal access to opportunities for professional markets, legal barriers to entrepreneurship, and barriers advancement can lead to improved business performance. LEADERSHIP to trade and investment. In Latin America and the Caribbean, information gathered for Argentina, Colombia, ¡¡This dynamic, in turn, can deliver significant economic Honduras, Jamaica, and Peru is informing the upcoming returns, not only for firms but also at the national and report, Unleashing Latin America’s Entrepreneurial zone levels. and THOUGHT Potential, developed by the World Bank region. Four ¡¡Gender-inclusive employment policies in zones countries in Latin America and the Caribbean will be contribute to creating better income opportunities for added during FY13, and the collaboration is expected women. to be extended to other regions. The Product Market ¡¡Zone regulatory environments and infrastructure, by Regulations database serves as a powerful tool for CROSS-CUTTING THEMES, COLLABORATION, serving as “demonstration areas� or catalysts for benchmarking across countries and encouraging countrywide reforms, present unique opportunities competition policy reforms. to address the challenges faced by women in the workplace and female entrepreneurs. Gender and Investment Climate Reform The report identified and recommended gender- FIAS continues to support research and reforms that friendly policies and good practices, including laws, empower women and address inclusion to improve regulations, labor policies, gender-sensitive professional the economic participation of women and other groups development programs, family-support mechanisms that in many countries face specific constraints in and women’s health programs, and supplier diversity contributing to market activity. For example, many and capacity-building initiatives. Overall, the report women in developing countries make their first entry offers the necessary information and resources to help into formal-sector employment by working in special governments, zones, and individual businesses promote economic zones. The zones often offer a unique way women’s economic empowerment more effectively. to empower women with economic opportunity. FIAS It provides background, evidence of challenges, and and IFC’s Women in Business Program—in partnership success stories drawn from the countries where with the Canadian International Development Agency— research was conducted as well as comprehensive supported a study on women in SEZs, Fostering recommendations and a suite of tools and tips to help Women’s Economic Empowerment through Special implement the recommendations successfully. Economic Zones,16 which was launched in FY12. Improving the legal and regulatory framework to 16 World Bank and IFC. 2011. Fostering Women’s Economic Empowerment through Special Economic Zones: Comparative reduce explicit or implicit discrimination against Analysis of Eight Countries and Implications for Governments, Zone women workers and entrepreneurs is paramount Authorities and Businesses. 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 47 to the economic empowerment of women. During currently exist to quantify discretion in this area, FY12, indicator-based reform advisory reports began anecdotal evidence suggests there is a gap between to use data from the Women, Business and the Law how rules and regulations are written and how they are report to encourage governments to address legal implemented and experienced by entrepreneurs on the and regulatory impediments to women’s participation. ground. This gap is often reported to be larger for certain For instance, in Côte d’Ivoire, the investment climate disadvantaged groups, such as women entrepreneurs, team has recommended that the government reform particularly those involved in micro and small several key pieces of legislation. Yet often constraints businesses. Reform efforts of governments may thus to women’s economic participation are not explicit have results that are inadequate or even discriminatory. in laws and regulations, which on paper may appear To address these issues, the FIAS-supported team gender neutral. A number of country-level, regional, partnered with the Bank’s Europe and Central Asia and global consultations conducted during FY12 private sector development regional unit to win a have shown that discrimination and abuse against $600,000 grant through a World Bank Group-wide women and other excluded groups often prevail in the competitive selection process to commence work on arbitrary implementation of regulations. In FY12, as the initiative, “Measuring and Reducing Regulatory part of the economic governance and transparency Uncertainty and Discretion for Female Entrepreneurs in initiative described below, and with the support of CROSS-CUTTING THEMES, COLLABORATION, Central Asia. � The main objective of activities under this FIAS, investment climate work began piloting reforms initiative, which is being task-managed by an investment to address the issues of arbitrary implementation of climate staff member, is to: regulations which may affect women in particular. ¡¡Identify the areas in which gaps between laws and Women entrepreneurs are often disadvantaged in their implementation exist (including in particular gender- access to the courts and judicial system. Developing based gaps). alternative dispute resolution mechanisms has ¡¡Develop a methodology to measure gender-related proven to be useful in offering women entrepreneurs gaps between laws and implementation related to alternatives to lengthy, and potentially discriminatory, specific areas of investment climate reform in Central court procedures. For example, the FIAS-supported debt Asia. resolution and business exit product team has been working with IFC’s regional team in FY12 to assist an ¡¡Understand the main drivers of these gaps. ADR committee in Papua New Guinea in successfully ¡¡Design and implement policy recommendations to implementing court-annexed mediation in commercial address these gaps. and THOUGHT cases at the national court via an ADR center. In January The focus of the activities will be in the Kyrgyz Republic 2012, a successful mediation on Misima Island settled and Tajikistan, where demand for this work is greatest a 19-year dispute (including six open lawsuits) between and the World Bank Group has an active private sector landowner groups and the government’s mine benefits development program. In these countries, work is LEADERSHIP trustee company. Under this settlement, 15,000 people being initiated to support actions aimed at reducing the of Misima Island received $2 million in dividends implementation gap in general. Activities are planned and $28 million in mine closure benefits. Prior to the in Kazakhstan and Uzbekistan as well. Similar pilot mediation, women had no way to air their concerns. activities are ongoing in other parts of the world (for During the mediation process, women representatives example, in Bangladesh, Jordan, and Morocco), aimed at were active participants (in the mediator’s view, they improving the implementation of reforms by measuring drove the discussion to a settlement). discretion and abuse that may particularly affect women. In Central Asia, some countries have introduced a Looking forward to an increasing focus on investment number of de jure reforms in the regulatory area. climate reforms that specifically address constraints to Yet many entrepreneurs do not reap the benefits of economic empowerment of women or other groups these reforms because of unequal and discretionary who may suffer from discrimination, the FIAS-supported implementation of regulatory rules. While no tools investment climate team, jointly with IFC’s Women in 48 Business team, has launched a knowledge management projects were developed jointly with IFC’s Sustainable project that aims to: Business Advisory unit in Bangladesh (Water Partnership ¡¡Increase the collection of gender-disaggregated for Cleaner Textile) and with the Bank’s Competitive data to better inform policy recommendations in the Industries unit in Ethiopia (Private Sector Development). gender area. Gender-disaggregated data on firms reached by investment climate reforms are very rare. Partnerships and Collaboration Are Key for Measurements of discrimination in the way rules are Success applied are also rare. This project aims at reducing Institutionally, FIAS remains housed within the these gaps. Investment Climate Department —a joint IFC, World ¡¡Support innovative pilot projects in the gender arena, Bank, and MIGA department—and work undertaken in particular those that seek to measure and reduce under FIAS increasingly pulls together expertise and discriminatory implementation of the rules. teams from across the World Bank Group and partners with external good practice institutions to deliver Economic Governance and Transparency, and customized solutions for clients. Public-Private Dialogue FY12 also marked the launch of the Investment In the FIAS FY12–16 strategy, investment climate Climate Global Practice under the Bank-IFC Financial LEADERSHIP activities will increasingly incorporate principles of and Private Sector Development Network. Investment economic governance and transparency to help Climate is one of six FPD global practices that aim to ensure their broad-based and sustained impact on enable better deployment of knowledge resources and the ground. The inclusion of more explicit principles of global expertise, bring together anchor and regional and THOUGHT voice, participation, transparency, and accountability staff from IFC and the World Bank (especially FPD) into projects is intended to reduce the gap between around technical areas, focus on client delivery, and de jure and de facto implementation of reforms and strengthen collaboration. Like IFC’s Investment Climate discriminatory treatment of different enterprise groups. Business Line, the Investment Climate Global Practice is CROSS-CUTTING THEMES, COLLABORATION, An approach paper has been prepared and a pilot anchored by the World Bank Group Investment Climate intervention initiated in Morocco; three other pilot Department which ensures that strategies are aligned interventions are being designed for Jordan (involving and that Bank and IFC teams collaborate effectively. the application of ICT), the Kyrgyz Republic, and Tajikistan. The Morocco project addresses the variability This collaborative approach creates better conditions for of reform experience across firms and promotes bringing the public and private sectors together in areas disclosure of data on reform outcomes, focusing on such as policy reform and public-private investments; the areas of construction permits, VAT reimbursement, allows access to a larger pool of financial and human and procurement. The pilots in Central Asia will resources; exploits complementary knowledge, promote demand for good governance by incorporating expertise, instruments, and skills at the global, regional, beneficiary feedback mechanisms in the projects aimed and sector levels; offers a broad range of services from at reforming inspection regimes. policy lending, to investments and guarantees, advisory services, and analytical work; and leverages different FIAS has supported public-private dialogue mechanisms timeframes of units to allow for better sequenced as a long-standing tool in fostering investment climate interventions. reforms through stakeholder engagement. During FY12, FIAS supported the development of flexible PPD In FY12, the investment climate product teams mechanisms, providing World Bank Group staff with emphasized cross-institutional World Bank Group guidance on the most appropriate PPD approaches collaboration across all their operations. In Tunisia, for each particular situation, based on factors such as for example, the FIAS-supported business regulation, country characteristics (for example, IDA or fragile), competition policy, and investment policy teams are targeted sectors, and specific thematic issues. Pilot working with the FPD and IFC Advisory regional teams for the Middle East and North Africa in the context of a 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 49 World Bank PREM multi-sector development policy loan. new investment law and articulation of the country’s Under this arrangement, the government has committed investment policy in correlation with its national to revise the insolvency law in order to strengthen its development objectives. debt recovery frameworks. Additional measures are Field-based investment climate staff are primarily located being contemplated to improve financial stability and in hub offices in Dakar, Istanbul, Nairobi, and Vienna, address the large portfolio of non-performing loans in which has helped facilitate investment climate work in the tourism sector. The program is also supporting a pilot the regions and brought technical support proximate to project with the Ministry of Finance which reviewed 400 government clients (see box, below). formalities, and the preliminary data suggests that about 77 percent are marked for streamlining. As a result of FIAS’ industry-specific work program also supports this work, the government has decided to roll out the synergies with IFC’S Advisory and Investment business formalities project in nine ministries. Services with a view to unlock catalytic investments in key real sectors that generate measurable impacts. Under the same development policy loan in Tunisia, In FY12, the tourism team worked with IFC advisory the competition policy team is helping the government and investment colleagues on the development impact amend the competition regulatory framework and assessment of IFC’s $8.1 million investment in the minimize distortive government support to specific Kigali Serena Hotel in 2008 in Rwanda. The assessment CROSS-CUTTING THEMES, COLLABORATION, firms. Measures to open markets to competition showed that the 144-room hotel supports 1,100 local affecting the transport and tourism sectors are jobs and has, since 2007 , generated almost $64 million expected to increase efficiency along the tourism in Rwanda’s economic activity. value chain. Work to reform the investment regime is synchronized with development policy loan triggers on FIAS’ expanding role as a “connector� linking Bank, IFC, revision of the investment law and incentives regime. and MIGA teams is evident in the Comoros (see box, Assistance to date has included conducting investor p. 50), and as previously noted, in projects in Burundi motivation surveys and a cost-benefit analysis of the (see box, p. 22) and Haiti (see box, p. 37). existing incentives regime, as well as drafting of a FIAS-Supported Operational Hubs: Closer to Clients, Linking with Partners The industry-specific investment climate program is led by a CIC/FIAS manager based in the IFC offices in Istanbul, Turkey, which facilitates access to clients and partners and has fostered productive relationships with investment services colleagues and THOUGHT co-located in the regional operations center. The Istanbul hub has grown from one staff member in FY11 to a team of seven at the end of FY12, with an additional five staff slated to come on board in FY13. The reach of the office is global. On average 60 percent of the work performed by the team is cross support to the IFC regions and Bank departments, and ongoing collaboration with other IFC advisory teams is facilitated by the hub location. The hub location has led to increased alignment between the policy work of the FIAS-supported teams and economic and LEADERSHIP market analysis in support of investment services. For example, in a pilot effort in Central Asia conducted in FY12, investment officers identified specific policy issues blocking investment in the region that FIAS-supported teams were able to take up with the governments, leading to changes in the tax regime that will benefit the business community in the Kyrgyz Republic. This project is now being replicated in West and Central Africa and South Asia. As in Istanbul, the investment climate office in Vienna, Austria, improves the reach of FIAS-supported activities at the regional and global levels. It is an established partner of IFC and Bank units working in almost 20 countries across the Europe and Central Asia and Middle East and North Africa regions. It also has a role in global product development through the piloting of cross-product approaches, leveraging technical expertise in investment policy, tax, and trade logistics. Staffing of the Vienna office reached about 6 at the end of FY12, and it is expected to grow to about 10 in FY13 and up to 15 in FY14. Operational regional hubs in Dakar, Senegal and Nairobi, Kenya are staffed by CIC staff and IFC field staff who provide technical leadership and global experience to amplify the knowledge and expertise of regional teams. Significant FIAS-supported projects, including the large regional work programs supporting OHADA and EAC economic integration, and work on selected fragile and conflict situations are managed from these offices. 50 Collaboration Paves the Way for Investors in the Comoros Following decades of volatile politics, the government of the Comoros is showing signs of stability and a desire to attract and maintain investment in the island nation. The Comoros, a fragile and conflict-affected state, became eligible for World Bank Group assistance beginning in 2010. To deepen the impact of ongoing efforts, the World Bank Group has leveraged collaboration with a range of partners to pave the way for sustained reforms. Working closely with MIGA and international partners such as the IMF , the United Nations, the European Union, OHADA, and the African Union, FIAS-supported global product teams have helped the government improve the Comoros’ business environment by reducing red tape in areas particularly burdensome to business operations, such as starting a business, transferring property, accessing credit, and enforcing contracts. The project exemplifies how different parts of the World Bank Group can work together to bring value to client countries. The investment climate team directly advised the government on the ratification of the MIGA Convention, which had been signed two years before. Together with MIGA, the team provided technical information on various aspects of the membership process (for example, the implications of the membership fee payment on the public debt) as well as an explanation for the Assembly weighing the pros and cons of ratifying the Convention. In the step-by-step process to complete the ratification, the team functioned as an intermediary between the government and MIGA and supported MIGA colleagues during a joint IFC-MIGA mission to the Comoros. This allowed MIGA to move forward with its engagement in the Comoros, furthering the nation’s investment attractiveness by providing political risk insurance to investors and lenders against non-commercial risks. Interested new investors have been identified. Project milestones include: LEADERSHIP Reduced fees to register a company (from 3 percent of declared capital amount to a forfeit of $40 for limited liability ¡¡  companies and $280 for public limited companies); ¡¡ Lower fees to transfer property (from 15 to 9 percent of property value); ¡¡ Simplified procedures to obtain construction permits. and THOUGHT The FIAS-supported debt resolution and business exit team has also advised the government on how to effectively design and enact legislation related to enforcement of arbitration awards, greatly easing commercial dispute processes. An arbitration court was established and arbitrators will be trained in the coming months. A champion within the government—Plan Commissioner Alfeine Soifiat Tadjiddine—functioned as an incubator of programs, which has facilitated collaboration between agencies. The plan commissioner is the first point of contact for any donor CROSS-CUTTING THEMES, COLLABORATION, engagement in the country including current or planned interventions. Looking ahead, a permanent local World Bank Group staff presence is planned to oversee the interventions and identify reform needs, especially in priority sectors such as health, education, tourism, and investment. Further interventions in the areas of construction permitting, trading across borders, and alternative dispute resolution have already been identified as next steps for reform. Several FIAS-supported global product teams have products, and learning events sponsored by global been working closely with World Bank Group and product teams and at the project level. external good practice partners, as highlighted in other In FY12, FIAS continued tripartite collaboration with the examples in this report such as the collaborative effort Norwegian Agency for Development Cooperation and the in formulating the World Bank Group policy on offshore Brønnøysund Register Centre, the Norwegian government financial centers (see box, p. 36) and competition policy agency which develops and operates a number of national work with the OECD (see p. 46). registries. The partnership is focused on transferring the Strong engagement with donor partners, not only Norwegian business entry reform experience to countries related to funding but also through staff learning in development. This year, a global analysis of innovative and knowledge activities, continues to provide the solutions for business registration reform was finalized cornerstone for the success of FIAS activities. This and disseminated at various international forums and to a engagement occurs through platforms such as the number of government clients. In addition, experts from Donor Committee for Enterprise Development, donor the Brønnøysund Register Centre helped the government participation on advisory panels for various global 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 51 of Uganda with the design and implementation of business practice know-how to development partners outside the registration reforms. World Bank Group also remains an important aspect of the FIAS program. Knowledge and Learning Fueled by FIAS- In FY12, a multitude of knowledge management offerings Supported Investment Climate Expertise engaged practitioners, government and private sector The emphasis of FIAS activities has steadily shifted in clients, donor partners, and other stakeholders. More recent years from project implementation to product than 36 events attracting more than 1,500 staff and development and knowledge-sharing and learning external participants—including seminars, “deep dive� activities. While maintaining a solid portfolio of client- learning events, and client peer-to-peer workshops—were facing activities, in particular in innovative and newer supported by FIAS in FY12 (see box, below). areas of investment climate reform, FIAS funding has This innovative approach to strengthening institutional been used to develop in-house knowledge and expertise collaboration and engaging with clients was recognized on specific areas of reform and disseminate that know- with the World Bank Group’s “Knowbel� prize for how through support to projects, and increasingly, Excellence in Knowledge Sharing, which was awarded to research, publications, and learning events focused on the knowledge management and learning program in FY12. south-south exchanges between clients as well as staff CROSS-CUTTING THEMES, COLLABORATION, learning. Dissemination of investment climate good Client Peer-to-Peer Learning as a Tool for Encouraging Reforms In FY12, FIAS-supported global product teams brought together regional groups of clients to learn from their collective reform experiences and international good practice as a way to encourage bilateral cooperation and some healthy competition in improving their business environments. In Bogota, Colombia, the investment climate, Bank, and IFC regional teams organized a workshop attended by 155 government and private sector representatives from 14 countries to share best practices in business environment reforms, related to trade logistics, tax administration, collateral registries, and credit information systems. The event was rated as “excellent� by participating delegations and resulted in 10 bilateral advisory initiatives. “The conference is the first step in the new reform plan being implemented to advance the country’s competitiveness agenda. We are working very hard to create a better business environment for small and medium-sized enterprises, � said Sergio Diaz-Granados, Colombia’s Minister of Commerce, Industry and Tourism. World Bank Group teams are helping the government organize a second peer-to-peer learning event, planned for Panama City in 2013, which will provide an opportunity and THOUGHT for policymakers and practitioners to share their experiences in introducing Doing Business reforms. A similar event organized by the indicator-based reform advisory team for clients in Eastern and Southern Africa was held in Gaborone, Botswana, bringing together 143 participants from 13 countries. Clients from five countries in the Western Balkans also participated in a peer-to-peer learning forum in Sarajevo, Bosnia and Herzegovina, that highlighted the key ingredients of successful business regulation reforms, such as strong political commitment, institutional capacity, good coordination among LEADERSHIP institutions, and cooperation between central and local governments. Fostering peer-to-peer learning between client countries was a key feature of debt resolution and business exit work in FY12. The team was recognized at the World Bank Group corporate level for bringing together policymakers, experts, bankers, and regulators from 24 countries in Europe and Central Asia to address debt recovery and business insolvency in an effort to increase access to finance for businesses and encourage economic growth. The FIAS-funded workshop took place in Vienna, Austria, after the World Bank Group announcement in January 2012 of a two-year, $27 billion fund for emerging economies in the region affected by the European financial crisis. A two-day client and staff learning event in Tunis, Tunisia, in December 2011 addressed the area of debt resolution and business insolvency for representatives from 20 client countries as well as numerous external partner organizations and experts. The event has generated five requests for technical support to date and enhanced inter-client and client-staff collaboration in ongoing debt resolution reform initiatives in Egypt, Jordan, Lebanon, Liberia, Mauritius, Pakistan, and Tunisia. Other products, such as investment policy, also organized in-depth learning events (see p. 33) to help clients share their experiences and lessons learned. 52 To help increase staff capacity on investment climate worldbank.org/BESnapshots/) generated more than issues, intensive learning events were organized, 40,000 visits during the fiscal year. including “deep dive� events on trade logistics in Vienna, Austria, and New Delhi, India, and debt resolution “Telling the Story� Effectively—FY12 workshops in Cape Town, South Africa, and Tunis, Tunisia. Communications Efforts In FY12 several reports were published, including the The development impact of FIAS-supported investment flagship report, Global Investment Promotion Best climate activities across the globe and knowledge- Practices 2012. The publication assesses the ability of sharing efforts were highlighted through engaging national investment promotion intermediaries from feature stories and strong multimedia and social media 189 countries to react to investment opportunities by products. Communications were geared to present mirroring the location decision-making process of foreign results and research in a compelling and balanced way investors. The report launch in May 2012 was covered showcasing stakeholder testimonials—the “human face� widely by the international press, cited more than 100 of the reforms—as well as best practices to achieve times in traditional media, and reached more than 65,000 clients’ development objectives. Results and impact data followers on IFC and World Bank corporate, country- and underscored the stories highlighted. Communications region-specific Facebook and Twitter accounts. particularly emphasized the catalytic role of collaboration LEADERSHIP across the World Bank Group and with external partners A wide range of other publications was produced, to help achieve a more vibrant private sector in client including handbooks, guidebooks, technical papers, countries. the Investment Climate In Practice note series, three Viewpoint notes, and a number of SmartLessons (see The use of innovative tools to convey messages on and THOUGHT p. 54 for a listing of key FY12 publications). investment climate reforms and research resulted in substantial growth in the number of visits to FIAS continued to support the Business Environment the investment climate thematic website (www. Snapshots, a one-stop guide to business environment wbginvestmentclimate.org) rising from 136,000 views indicators, laws, and World Bank Group project CROSS-CUTTING THEMES, COLLABORATION, by June 2011 to 508,000 views in June 2012. The information for 183 countries. The website (http://rru. website is now among the top-10 search results for the 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 53 term “investment climate� on Google, representing Investment climate activities received wide coverage on an influential platform for sharing investment climate- traditional news media with over 582 citations in local, related knowledge and information. regional, and international outlets in FY12. Monthly investment climate newsletters served as a Communications within the World Bank Group on FIAS- tool to engage with donor partners, clients, and World supported activities was also robust in FY12 with more Bank Group staff and management. success stories being featured than in previous years on the IFC and Bank intranets, in a multitude of corporate Multimedia offerings produced in FY12 were well newsletters, and in external flagship publications such as received. Eight investment climate short films geared the IFC and MIGA annual reports. to an external audience garnered a total of 9,000 views on YouTube. Further multimedia products—interview In FY12, the FIAS-supported communications team clips and slideshows—were produced for internal staff also provided strategic guidance to client governments learning purposes (all external videos are available at in Bangladesh, Brazil, and Mexico on tools and https://www.wbginvestmentclimate.org/multimedia. methodologies to enhance their stakeholder outreach cfm). and awareness related to reforms supported by advisory assistance. In Mexico, for example, The thought leadership of FIAS-supported activities was guidance was provided to improve communications CROSS-CUTTING THEMES, COLLABORATION, further strengthened by cultivating direct conversations about an online business registration portal and and discussions about investment climate activities via a increase its usage among notaries and businesses. wide range of World Bank Group social media channels, Recommendations focused on developing stronger including IFC and World Bank corporate, country- and and more strategic communications campaigns around region-specific Facebook and Twitter accounts, reaching the registry (externally) and enhancing the image and about 450,000 followers. Contributions by investment communications capacity of registration staff (internally) climate staff members to the World Bank’s Private to help build champions for the reform within the Sector Development Blog yielded more than 30,000 relevant ministry. reads in FY12. and THOUGHT LEADERSHIP 54 Key Knowledge Products Published In FY12 All publications are available electronically on the investment climate website: www.wbginvestmentclimate.org/publications/. Flagship Reports The Global Investment Promotion Best Practices 2012 report, launched in May 2012, assesses the ability of national investment promotion intermediaries from 189 countries to react to investment opportunities by mirroring the location decision-making process of foreign investors. Investment Climate In Practice note series The flagship note series for clients and practitioners featured “hands-on� topics in political risk analysis, renewable energy investments, and competition policy. “Political Risk: The Missing Link in Understanding Investment Climate Reform?� (no. 20, March 2012) suggests reforms that can have immediate impacts: addressing ex ante and ex post issues in the legal and regulatory framework to protect investors, mitigating risks at the sector level, managing reputational and integrity risks at the project level, and issuing financial instruments to ease short-term impediments in the investment climate. “Providing Incentives for Investments in Renewable Energy: Advice for Policy Makers� (no. 19, November 2011) consolidates LEADERSHIP World Bank Group experiences with support mechanisms for renewable energy investments and identifies best practices for green policies, incentives, and administration. “The Power of Renewable Energy: Fostering Investment and Competition to Generate Electricity� (no.18, October 2011) discusses key steps for opening the power sector to renewable energy projects in developing countries while encouraging and THOUGHT efficient, competitive markets. It recommends policy approaches, measures to ease entry, and ways of reducing investor risks for on- and off-grid renewable energy projects. Viewpoint note series (published by the World Bank Group FPD Vice Presidency) CROSS-CUTTING THEMES, COLLABORATION, “Reforming Business Taxes – What is the Effect on Private Sector Development?� summarizes the findings of studies within and across countries suggesting that lowering corporate tax rates can increase investment, reduce tax evasion by formal firms, promote the creation of formal firms, and ultimately raise salaries and gross domestic product. “Settling Out of Court: How Effective is Alternative Dispute Resolution?� summarizes the empirical literature indicating that ADR can help a country’s justice system function more efficiently. “Saving Viable Businesses: The Effect of Insolvency Reform� summarizes the empirical literature on the effect of insolvency reforms on economic and financial activity. Handbooks, Technical Papers, and Reports Fostering Women’s Economic Empowerment Through Special Economic Zones examines the opportunity for SEZs to promote women’s economic empowerment and boost zone and enterprise competitiveness in developing countries. East African Community: Regulatory Capacity Review focuses on the capacities of the EAC institutional framework to develop, implement, and sustain the efficient, transparent, and market-based regulatory system that is needed to achieve the economic benefits of the EAC Common Market. Environmental Licensing: Global Mapping and Analysis of Environmental Regulations identifies and collects best practices on contents and procedures followed in environmental licensing globally. Risk-Based Tax Audits: Approaches and Country Experiences studies the critical revenue function of compliance management. It provides details on implementation matters, such as the requirement for data management tools, software, and hardware, for governments in the process of implementing risk management in revenue administration. Public-Private Dialogue for Sector Competitiveness and Local Economic Development: Lessons from the Mediterranean Region explores the influence of public-private dialogue on local development and sector competitiveness. Continued, next page 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 55 Avoiding the Fiscal Pitfalls of Subnational Regulation: How to Optimize Local Regulatory Fees to Encourage Growth covers country experiences with subnational reforms, basic principles of subnational revenue, and sound licensing practices for subnational governments. Global Analysis of General Trade and Operational Licensing provides criteria for identifying unnecessary licensing regulations, an overview of reform practices, and lessons learned from efforts to rationalize licensing. SmartLessons All SmartLessons are available on the IFC website (http://smartlessons.ifc.org/smartlessons/index.html). In FY12 staff authored and co-authored 16 SmartLessons, the IFC-sponsored note series that shares the learning experiences of World Bank Group staff authors. Four notes and one video SmartLesson were first-prize winners in World Bank Group competitions: Unleashing the Potential of South-South Knowledge Exchanges (video) ICing on the Cake: Using Surveys to Improve Investment-Advisory Collaboration Better Health in Africa: Can We Make a Difference by Working with the Private Sector? Putting Trade Logistics Reform “on the Map� in Armenia Kick-Starting Open Government in Developing Countries: Utilizing Technology to Improve Access to Information on Business CROSS-CUTTING THEMES, COLLABORATION, Licenses and Regulations and THOUGHT LEADERSHIP FINANCIAL RESULTS and RESOURCE USE 58 FIAS activities covered in the FIAS 2012 Annual Review are co-financed via a set of FIAS trust funds managed by the World Bank Group’s Investment Climate Department. In addition to FIAS trust funds, the Investment Climate Department manages additional funds received from the World Bank and IFC for operational and administrative tasks related to FIAS as well as the department’s “anchor� or backbone function in the investment climate space (for example, as backbone and anchor for IFC’s Investment Climate Business Line and the World Bank FPD Investment Climate Global Practice), and administers donor funds for activities managed outside the scope of FIAS (such as the policy and advisory component of IFC’s Health in Africa initiative and work related to policies and regulations affecting private participation in infrastructure). In FY12, the Investment Climate Department was also asked to host the Water Resources Group, funded by IFC and other public and private partners to help governments set up multi-stakeholder platforms to address water resource issues; this mandate is also outside the scope of the FIAS program and not covered in this report. The financial results reported in this section cover the funds RESOURCE USE managed by the Investment Climate Department under the FIAS trust fund structure as well as supplemental funds earmarked for the implementation of the FIAS strategy. The Investment Climate Department follows IFC’s ¡¡Multilateral Investment Guarantee Agency and standard accounting policies and procedures, as ¡¡the Netherlands noted below.17 FIAS financial reports use cash-based FINANCIAL RESULTS ¡¡Norway reporting in alignment with the quarterly financial ¡¡Sweden reports on IFC’s donor-funded operations. ¡¡Switzerland ¡¡Trademark East Africa Funding ¡¡the United Kingdom New FIAS-related contributions received in ¡¡the United States FY12 from the following donors, World Bank * Donors contributing some or all of their funding in the form of Group partners, and clients are gratefully core contributions are highlighted in green. acknowledged: Most donors who supported FIAS during the Direct contributions to FIAS trust funds:* FY08–11 cycle also provided consent to roll over the unused portions (fund balances) of their FY08–11 ¡¡Austria contributions to the FY12–16 strategy cycle. In ¡¡European Commission addition to the core donors listed above, roll-over ¡¡International Bank for Reconstruction and consents were provided by Australia, France, and Development Luxembourg. ¡¡International Finance Corporation ¡¡Contributions for FIAS projects made available ¡¡Ireland through IFC’s Technical Assistance Trust Funds ¡¡Kauffman Foundation program: ¡¡Korea • Japan • Spain 17 Annual contributions from IFC, MIGA, and the World Bank are treated in the same manner as core donor funds and are co- ¡¡ Client contributions: mingled with other donor funds in the FIAS Master Trust Fund account, as terms and conditions allow. Contributions from • Colombia • Mexico the IFC Investment Climate Business Line are treated as an additional source of project-specific funding. • Gabon • Panama 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 59 Core and Programmatic Funding Project-Specific Funding In FY12, FIAS donors, clients and the World Bank Group Slightly reduced levels of core and programmatic contributed a total of $32.7 million (including trust contributions were offset in FY12 by increased fund administration fees of $1.1 million) to the various project-specific contributions received from donors, FIAS trust funds, supporting the implementation of a clients, and the World Bank Group including the World broad-based investment climate reform program under Bank’s Trade Facilitation Facility (TFF). Project-specific the FIAS umbrella (see details in Tables 1 and 2). Total contributions from donor partners, clients, and IFC FY12 contributions were above the estimated FY12 amounted to $12.9 million in FY12, including $9.5 million funding target ($27 .7 million) and reflect the strong and from donors, $0.5 million from clients, and $2.9 million continued commitment by donors to support investment from IFC’s Investment Climate Business Line. climate reform at the global level, despite severe budget Project-specific contributions from donors totaled constraints experienced by many donor partners as a $9.5 million in FY12, reflecting strong donor interest in result of the global financial crisis. client-facing investment climate reform interventions and World Bank Group core contributions totaled $7 .0 an ongoing trend among some donors to decentralize million in FY12, including $2.9 million from IFC, $2.5 their aid budgets to country offices. Donor contributions million from the Multilateral Investment Guarantee were well above the $4.9 million target for FY12 and FINANCIAL RESULTS Agency, and $1.6 million from the World Bank. It about one-third of expected donor contributions ($28.4 should be noted that IFC’s total contribution to million) for the FY12–16 cycle. FIAS in FY12 was $4.1 million; $2.9 million as direct Client contributions received in FY12 totaled $0.5 contribution to the FIAS core trust fund and $1.2 million million, representing only 2 percent of FY12 total as administrative budget to cover sustaining costs contributions and well below the 5 percent funding associated with the management of FIAS and the target set forth in the FIAS FY12–16 strategy. The and Investment Climate Business Line. Including the $1.2 potential to generate significant cash contributions from million of administrative budget, the World Bank Group’s RESOURCE USE clients remains modest given the high concentration core contribution to FIAS was $8.2 million or 24 percent of FIAS activities in IDA as well as fragile and conflict- of total funds raised. affected countries. Core contributions received from donors amounted Project-specific contributions from IFC, received in to $5.7 million in FY12 including $1.9 million from the the form of project-specific FMTAAS allocations,18 Netherlands earmarked for activities in IDA countries. In amounted to $2.9 million in FY12. These allocations FY12, the Investment Climate Department raised a total primarily supported a range of global knowledge of $12.7 million in core contributions in the first year management and product design and development of the FIAS FY12–16 strategy cycle, approximately 89 initiatives implemented under the FIAS umbrella (see percent of its FY12 fund-raising target of $14.3 million. Table 2). Other contributions from IFC, amounting Programmatic contributions from donors, made to $0.9 million in FY12, supported activities indirectly available through thematic and regional FIAS Trust related to projects, including initial product design and Funds, totaled $6.2 million in FY12. While donor development, portfolio management, monitoring and contributions for regional programs continue to evaluation, and knowledge sharing associated with the decrease as more of these program funds are now global portfolio implemented under the FIAS umbrella. managed by IFC and World Bank regional units, the Investment Climate Department raised approximately 87 percent of the $7.1 million targeted for the first year of the FIAS strategy cycle. 18 FMTAAS is IFC’s Funding Mechanism for Technical Assistance and Advisory Services. 60 Contributions Outside FIAS’ Regular Financial new FIAS FY12–16 strategy cycle. With the exception Structure of travel, which remained relatively flat, overall costs A range of indirect contributions for FIAS-related including staff, consultant, and indirect costs significantly advisory activities were made available to the decreased in FY12. Investment Climate Department via non-FIAS specific Administration fees are collected by IFC to cover trust funding mechanisms and are listed in Table 3. These fund administration costs and are deducted from contributions include project-specific financial support donor contributions at the time of receipt. In FY12, IFC from Japan and Spain, made available through IFC’s collected trust fund administration fees of $1.1 million Technical Assistance Trust Funds program (a total of from FIAS donor contributions.19 $0.6 million) and administrative budget ($1.2 million) provided by IFC to cover the staff costs of certain At the end of FY12, fund balances in the various FIAS “mainstreamed� Investment Climate Business Line trust funds totaled $ 21.8 million,20 including $12.1 positions associated with the management of FIAS and million of core funds and about $9.7 million of program- the Investment Climate Business Line. As noted above, and project-specific funds received under multi-year IFC’s total FY12 contribution to FIAS is $4.1 million; $2.9 donor agreements. This reflects about 70 percent of the million as direct contribution to the FIAS core trust fund average annual budget for FIAS and is an appropriate and $1.2 million as administrative budget. level to maintain sufficient liquidity for FIAS. We expect RESOURCE USE that the level of end-of-year fund balances will drop to around 50 percent as FIAS activities are scaled up over In-Kind Support Via Staff Exchanges and the coming years. Secondments In FY12, project-related expenditures (both direct The FIAS program continues to benefit from in-kind and and indirect) accounted for 91 percent of total FIAS resources that several donors make available in the form FINANCIAL RESULTS expenditures with the remaining 9 percent for general of secondees and staff exchanges. Throughout FY12, and administration (rent, communications, equipment, senior staff members from the Italian Ministry of Foreign and other non-overhead costs such as administrative Affairs, the Korean Ministry of Knowledge Economy, and and back-office support staff; see Table 4, Expenditures the Norwegian Ministry of Foreign Affairs have been by Advisory Services Activity). The low general and seconded to the Investment Climate Department where administration burn rate in FY12 is a direct result of they have been working on FIAS-funded activities. Such budgeted office rent ($1 million) assumed by IFC. In staff exchanges and secondments offer an attractive way comparison, average project-related expenditures for the for FIAS partners to be directly involved in the program FY08–11 cycle accounted for 83 percent of total FIAS and establish direct connections between their respective expenditures with the remaining 17 percent for general private sector development programs and FIAS. and administration.21 Use of Funds In FY12, the first year of the FY12–16 strategy cycle, FIAS trust fund expenditures for investment climate reform activities reached $26.7 million (Table 1, Uses of Funds). While this is a significant (12 percent) decrease 19 FIAS trust funds established after July 1, 2009, are subject to the in FIAS expenditures from FY11, it is consistent with the standard IFC trust fund administration fee of 5 percent. Trust fund administration fees collected by IFC are included in Table 1, Sources of funding target for year one of the FIAS FY12–16 strategy Funds. cycle. The decrease in FY12 expenditures is due in part 20 FIAS trust fund cash balances less outstanding consultant commitments. to a change in delivery model resulting in increased 21 In July 2010, IFC implemented a new cost allocation methodology for cross-support to World Bank Group regions fueled Advisory Services which resulted in a redistribution between direct by greater demand for Investment Climate product and indirect project costs. As a result of this change, some figures in Table 4 are not consistent with figures reported in FIAS Annual expertise and delayed recruitment and start-up of the Reports/Reviews, FY08–10. General and administration expenditures, however, are not affected by this change in methodology (see Table 4). 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 61 Table 1: Sources And Uses Of Funds 1 – In US$ Thousands FY08 FY09 FY10 FY11 FY12 SOURCES OF FUNDS MANAGED VIA FIAS TRUST FUNDS WORLD BANK GROUP CORE CONTRIBUTIONS IFC2 8,000 2,000 2,000 4,000 2,863 IBRD 2,000 1,600 1,600 1,600 1,600 MIGA 4,000 3,500 3,000 2,700 2,500 Subtotal World Bank Group Core Contributions 14,000 7,100 6,600 8,300 6,963 WORLD BANK GROUP PROJECT-SPECIFIC AND OTHER CONTRIBUTIONS IFC IC Business Line - Project Specific 3,800 2,672 1,862 1,915 2,968 IFC IC Business Line - Administration – – – 1,687 934 IFC AS Contingency – – – 880 – IFC Global Fund – 150 400 – – Subtotal World Bank Group Contributions 17,800 9,922 8,862 12,782 10,865 CORE DONOR CONTRIBUTIONS Australia3 800 676 1,502 – – Austria 368 373 355 331 708 France3 – 1,281 1,403 – – Iceland 45 – – – – Ireland 735 – – – 205 FINANCIAL RESULTS Italy – 1,414 – – – Luxembourg3 273 539 – 829 – Netherlands (Global Program)4 559 2,350 1,950 1,550 1,870 New Zealand 399 276 384 – – Norway 475 475 475 1,138 – Sweden 406 285 345 396 1,448 Switzerland 250 240 – – 400 United Kingdom – 494 332 309 1,099 and Subtotal Core Donor Contributions 4,310 8,401 6,746 4,552 5,730 RESOURCE USE PROGRAMMATIC DONOR CONTRIBUTIONS Austria (IC Cooperation Program) – – – – 2,010 Austria (Investment Generation) 2,571 2,608 2,489 2,287 – Austria (Crisis Response) – 280 307 – – Ireland (Africa) 735 – 724 531 615 Italy (Africa) 508 – – – – Luxembourg (Crisis Response) – 750 – 263 – Netherlands (Investing Across Borders) – – – – 200 Netherlands (Tax Transparency) – – – – 300 Netherlands (Trade Logistics) 503 400 400 – – Netherlands (Secured Lending) – 450 – 600 – Norway (Business Entry) – – 154 428 – Norway (Trade Logistics) 300 340 150 500 500 Sweden (Africa) 628 630 1,122 – – Switzerland (Industry) – – – – 600 Switzerland (Secured Lending) – 500 400 400 – Switzerland (Tax) – 500 300 200 700 Switzerland (Tax Transparency) – – – – 300 Switzerland (Western Balkans) 820 600 600 500 – United Kingdom (Western Balkans) 497 440 – – – United Kingdom (Tax) 1,426 183 96 – – United States (Doing Business) 632 1,150 724 1,704 978 Subtotal Programmatic Donor Contributions 8,620 8,830 7,466 7,413 6,203 DONOR CONTRIBUTIONS (PROJECT SPECIFIC) 5 5,525 4,436 8,868 8,267 9,457 Total Donor Contributions 18,455 21,667 23,080 20,231 21,389 TOTAL WORLD BANK GROUP AND DONOR 36,255 31,589 31,942 33,013 32,254 CONTRIBUTIONS CLIENT CONTRIBUTIONS 129 1,093 1,830 283 484 Continued on next page 62 Table 1: Sources And Uses Of Funds1 – In US$ Thousands (Continued) FY08 FY09 FY10 FY11 FY12 TOTAL RECEIPTS 36,384 32,682 33,772 33,296 32,738 Trust Fund Administrative Fees 6 1,099 973 1,140 1,212 1,122 TOTAL (NET) RECEIPTS 35,285 31,709 32,632 32,084 31,616 USES OF FUNDS STAFF COSTS Staff 9,961 11,636 11,181 13,128 12,036 Consultants and Temporaries 9,322 10,268 7,634 8,101 6,570 Total Staff Costs 19,283 21,905 18,815 21,229 18,606 TRAVEL 6,217 6,488 5,229 5,678 5,618 INDIRECT COSTS Office Occupancy 683 1,071 1,018 1,073 102 Office Equipment 116 53 57 47 84 Other Operating Costs 214 863 242 528 635 Other Costs 108 1,693 2,256 1,718 1,634 RESOURCE USE Total Indirect Costs 1,122 3,681 3,573 3,366 2,455 TOTAL USES OF FUNDS 26,622 32,073 27,616 30,273 26,679 1 The FIAS Annual Review is prepared as a reporting tool for FIAS donors and management, utilizing management accounting principles. IFC contribution of $4.0 milllion per annum, front-loaded as follows: FY08: $4.0 million; FY09: $2.0 million. FY12: $4.1 million; $2.9 million direct contribution to FIAS core trust fund; 2  $1.2 million IFC Advisory Services administrative budget to cover the staff cost of certain "mainstreamed" Investment Climate Business Line positions. While Australia, France, and Luxembourg did not make fresh core contributions to FIAS in FY12, they provided consent to roll over their remaining shares in core funding from the 3  and FY08–11 cycle to the new FIAS cycle that started in FY12. Luxembourg signed a new agreement with IFC in September 2012 to contribute core (and other) funding that will be reported in FY13. FINANCIAL RESULTS 4 The Netherlands' core contributions are earmarked for activities in IDA countries. 5 For details of FY12 project-specific contributions, see Table 2. 6 Administration fees collected by IFC to cover cost of trust fund administration. 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 63 Table 2: Project-specific Donor and Client Contributions — In US$ Thousands PROJECT DONOR AMOUNT WORLD BANK GROUP CONTRIBUTIONS [IFC INVESTMENT CLIMATE BUSINESS LINE (IC BL)] Business Regulation IFC IC BL 418 Indicator-based Reform Advisory IFC IC BL 416 Tax Transparency IFC IC BL 391 Debt Resolution and Business Exit IFC IC BL 298 Investment Policy - Product Development IFC IC BL 230 Investing Across Borders IFC IC BL 199 Impact Measurement IFC IC BL 197 Trade Logistics IFC IC BL 196 Special Economic Zones IFC IC BL 174 Business Taxation IFC IC BL 146 Agribusiness IFC IC BL 95 Tourism IFC IC BL 94 Public - Private Dialogue IFC IC BL 76 FINANCIAL RESULTS Competition Policy IFC IC BL 38 Subtotal World Bank Group Contributions 2,968 DONOR CONTRIBUTIONS Kenya: Investment Climate Program European Commission 1,787 East Africa: Regulatory Reform European Commission 531 Entrepreneurship Project Kauffman Foundation 211 and Low Carbon Green Economic Zones Korea 200 RESOURCE USE Investment Climate Reform in East Africa Trademark East Africa 4,555 Afghanistan: Doing Business Reform USAID 475 Colombia: Trade and Investment USAID 855 Impact and Knowledge Management USAID 285 Mali Investment Climate Program USAID 333 Trade Facilitation Facility 225 Developing / Building Trade Logistics (multidonor Trust Fund) Subtotal Donor Contributions 9,457 CLIENT CONTRIBUTIONS Doing Business Reform Colombia 79 Doing Business Reform Gabon 210 Doing Business Reform Mexico 135 Investment Climate Reform Advisory Panama 60 Subtotal Client Contributions 484 TOTAL FY12 PROJECT-SPECIFIC DONOR AND CLIENT CONTRIBUTIONS 12,909 64 Table 3: Other Funding – Indirect Support to FIAS Program — In US$ Thousands OTHER FUNDING – INDIRECT SUPPORT TO FIAS PROGRAM DONOR AMOUNT PROJECT-SPECIFIC DONOR FUNDING APPROVED UNDER IFC'S TECHNICAL ASSISTANCE TRUST FUNDS Tax Product Design Program Japan 320 Tax Transparency Technical Assistance Program Spain 320 IFC ADVISORY SERVICES ADMINISTRATIVE BUDGET ALLOCATION AS administrative budget - staff-related costs1 IFC 1,225 TOTAL FY12 OTHER FUNDING 1,865 Advisory Services administrative budget provided by IFC for certain "mainstreamed" Investment Climate Business Line positions associated with the management of FIAS and the 1 Investment Climate Business Line. IFC's FY12 total contribution to FIAS: $4.1 million; $2.9 million as direct contribution to the FIAS core trust fund; $1.2 million as administrative budget (see Table 1: Sources of Funds). Table 4: Expenditures By Advisory Services Activity STANDARD ADVISORY SERVICES FY08 % FY08 FY09 % FY09 FY10 % FY10 FY11 % FY11 FY12 % FY12 ACTIVITY EXPENDITURES 1 ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL PROJECT-RELATED EXPENDITURES RESOURCE USE Direct Project Expenditures 2 17,620,579 66% 21,993,742 69% 18,988,606 69% 19,057,472 63% 19,116,172 72% Indirect Project Expenditures 3 4,117,228 15% 3,734,697 12% 3,322,980 12% 7,679,623 25% 5,252,790 20% TOTAL PROJECT-RELATED 21,737,807 82% 25,728,439 80% 22,311,586 81% 26,737,095 88% 24,368,962 91% EXPENDITURES GENERAL & ADMINISTRATION and 4,883,706 18% 6,344,667 20% 5,304,256 19% 3,535,986 12% 2,310,393 9% COSTS 4 FINANCIAL RESULTS TOTAL STANDARD ADVISORY SERVICES ACTIVITY 26,621,513 100% 32,073,106 100% 27,615,842 100% 30,273,081 100% 26,679,355 100% EXPENDITURES 1Due to the change in IFC's cost allocation methodology, some figures in Table 4 are not consistent with figures reported in FIAS Annual Reports/Reviews, FY08–10. The new cost allocation methodology redistributes expenditures between direct and indirect project costs. Although General & Adminstration expenditures are not affected by the change in the cost allocation methodology, FY08–10 G&A expenditures are restated to exclude trust fund administration fees previously reported as expenditures. FY08–12 trust fund administration fees are reported in Table 1: Sources and Uses of Funds as a reduction to receipts. 2 Direct Project Expenditures include project preparation, implementation, and supervision costs. 3Indirect Project Expenditures include program management and operational support costs, that is, product development, monitoring and evaluation, knowledge sharing and staff development, donor relations, and public relations previously reported separately and consolidated under the new IFC cost allocation methodology introduced in July 2010. 4 General & Administration includes overheads (rent, communications, equipment, etc.) and other non-overhead costs such as administrative and back-office support staff. 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 65 Total FIAS FY12 Expenditures Percent of FIAS FY12 Total Expenditures Percent of FIAS FY12 Direct Project Expenditures 100% = $26,679,355 (Client-Facing and Non-Client-Facing) 100% = $19,116,172 PROJECT RELATED EXPENDITURES [91%] Direct Project Expenditures [72%]  Client-Facing IDA [56%]  Direct Project Expenditures,  Client-Facing Non-IDA [17%] Client-Facing [52% of total]  Non-Client-Facing  Direct Project Expenditures, Knowledge Management/Product Non-Client-Facing [20% of total] Development [27%] Indirect Project Expenditures [19%]  Indirect Project Expenditures GENERAL & ADMINISTRATION EXPENDITURES [9%]  General & Administration Expenditures FINANCIAL RESULTS Total FIAS FY12 Donor Contributions Percentage of FY12 Source of Funding–(Gross) - Receipts 100% = $33,963,000 CORE CONTRIBUTIONS and  World Bank Group Core Contributions [21%]  Core Donor Contributions [18%] RESOURCE USE PROGRAMMATIC CONTRIBUTIONS  Programmatic Donor Contributions [19%] PROJECT-SPECIFIC CONTRIBUTIONS  Project Specific Donor Contributions [41%] CLIENT CONTRIBUTIONS  Client Contributions [1%] * Includes administration fees of $1,122,000 and $1,225,000 IFC Advisory Services administrative budget to cover staff costs of certain "mainstreamed" Investment Climate Business Line positions. ANNEXES 68 ANNEX 1: REFORMS AND OTHER RESULTS SUPPORTED BY FIAS IN FY12  eforms and Results from FIAS-Funded Projects Mapped to the World Bank Group Investment Climate 1.1 R Department Results Reform Reform Result Country Topic Reform Description Topic Result Description EUROPE AND CENTRAL ASIA ALBANIA 1 Starting a Albania adopted Law no. Starting a 3 Enactment of legislation related to business entry: The Business 9723/2007 on the National Business government adopted a Law on the National Registration Center that Registration Center, which made notarization of business incorporation documents optional. made starting a business easier Reduction in the number of days it takes to comply with by making the notarization of business regulation related to business entry: The number of the incorporation documents days businesses need to comply with business regulation related to optional. As a result, the number business entry was reduced from 5 to 4. of procedures decreased from 5 Reduction in the number of procedures to comply with to 4, the time from 5 to 4 days, business regulation related to business entry: The number of and the cost from 29% to 22% of procedures to comply with business regulation related to business Albania's income per capita. entry was reduced from 5 to 4. KAZAKHSTAN Enforcing 1 Reduction in number of days to enforce a contract: Kazakhstan Contracts introduced a new e-government platform that allows electronic filing of initial complaints, as well as other court documents, effective October 6, 2011. ANNEXES KAZAKHSTAN 1 Getting Kazakhstan strengthened the Access to 1 Enactment of legislation related to credit information: The Credit legal framework for accessing Finance government strengthened the legal framework for accessing credit credit by introducing new grounds by amending legislation regarding the recovery of competitive for relief from an automatic stay enterprises. during rehabilitation proceedings. Amended legislation regarding the recovery of competitive enterprises came into effect on March 12, 2012. KOSOVO 1 Starting a Amendments to the Law on Starting a 4 Enactment of legislation related to business entry: The Law Business Business Organization and the Business on Business Organization and the Law on Internal Trade were Law on Internal Trade in July amended in July 2011, eliminating the minimum capital requirement 2011 eliminated the minimum and removing the requirement of the municipal work permit and capital requirement (equal to associated fees. 105% of Kosovo's income per Reduction in the number of procedures to comply with capita) and business registration business regulation related to business entry: Amendments to fees. The business registration two laws eliminated two procedures (of 10 total) requiring owners to process was streamlined. As a (i) open a bank account and deposit the minimum chartered capita; result, the number of procedures and (ii) pay the business registration fee at a bank was cut from 10 to 9, the time Reduction in the number of days it takes to comply with from 58 to 52 days, and the cost business regulation related to business entry: Amendments to from 28% to 23% of Kosovo's the Law on Business Organization and Law on Internal Trade in July income per capita. 2011 reduced the time that businesses need to request and obtain the business certificate and the business information document at the Kosovo Business Registration Agency. The total number of days required to register a business decreased from 58 to 52 days. Enactment of legislation related to business entry: The government amended the Law on Business Organizations to require issuance of the certificate on business registration within 3 working days after the application is filed (a drop from the 10 days previously required). The amended law also eliminates the business registration fee and streamlines the registration process through introduction of an integrated registration system offered through one-stop shops set up in 28 municipalities. Continued on next page 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 69 Results Reform Reform Result Country Topic Reform Description Topic Result Description KOSOVO Dealing with 3 Enactment of legislation related to construction permits: The Construction government enacted a new Law on the Cadastre that lowers the Permits post-registration fee. Reduction in fees to comply with construction permitting: The Law on the Cadastre lowers the post registration fee to 0.70 euros per square meter for commercial buildings. For a 1,300.6 square meter warehouse, the survey and registration charge was cut from €5,203 to €910.42. Reduction in number of days to comply with construction permitting: The government made obtaining a construction permit faster by reducing administrative backlogs in several agencies. For three procedures, the time businesses must spend was reduced as follows: (i) to request and obtain approval of compliance with technical and urbanistic requirements (from 30 to 23 days); (ii) to request and obtain fire protection clearance (from 15 to 10 days); and (iii) to register property at the Geodesy and Cadastral Directorate of ANNEXES the Municipality (from 165 to 34 days). KOSOVO 1 Protecting The Law on Business Protecting 1 Enactment of legislation related to disclosure (outside Investors Organizations amended in Investors company law): The Laws on Business Organizations were amended July 2011 improved investor in July 2011 to improve investor protection by increasing disclosure protections by increasing and director liability requirements and ease of shareholder lawsuits. disclosure and director liability The amended legislation requires disclosure of all material facts requirements and ease of relating to the Director's interest in the buyer-seller transaction, shareholder suits. and disclosure to the public and shareholders related to both the transaction and conflict of interest. Voting requirements were improved; shareholders must vote and the investor is not permitted to vote. Directors' liability was improved: (i) the Director may be liable for damages caused by the transaction; (ii) the Director is liable for profits gained through the transaction; (iii) the Director may be held liable if the transaction is unfair or prejudicial to the other shareholders. Plaintiffs have full access to related documents. MOLDOVA 1 Protecting Moldova adopted Law on Protecting 1 Enactment of legislation related to disclosure (outside Investors Amending and Supplementing Investors company law): A new Law on Joint Stock Companies enacted Law no. 1134-XIII on joint stock July 3, 2011 amended several provisions concerning related-party companies that strengthened transactions. investor protections by allowing the rescission of prejudicial related-party transactions. Continued on next page 70  eforms and Results from FIAS-Funded Projects Mapped to the World Bank Group Investment Climate 1.1 R Department (continued) Results Reform Reform Result Country Topic Reform Description Topic Result Description MONTENEGRO Business 3 Improved institutional framework related to business Licensing operation: The Ministry of Finance institutionalized the Regulatory and Impact Assessment (RIA), which is important to a sustainable legal Regulatory and institutional framework. The Council for regulatory reform and Governance business-enabling environment, as a permanent body, continues to work as a private-public platform for consultations and endorsement of draft laws and regulations. These measures contribute to a uniform enforcement of reforms across all firms and the sustainability of enforcement over time. Improved regulatory framework related to business operation: The government institutionalized the Regulatory Impact Assessment by drafting modifications to the rules of procedures and instructions of applications; developing tools such as a RIA manual; and building the capacity of regulators and potential trainers. The RIA process was institutionalized in the Rules of the Government (Official Gazette ), which establishes the Ministry of Finance as an ANNEXES authority with ultimate power to evaluate the impact on the business environment. A full-fledged RIA started as of February 1, 2012. The new institutional set-up represents a pillar in the government's approach to economic governance, which is designed to adopt low- risk and low-cost regulations. Rationalization in the number of regulations related to business operation: Of a total 272 business-related laws and regulations proposed for modification or elimination, 49 (18%) were modified or eliminated. The project provided significant recommendations to the law on general administrative procedures and the law on improvement of the business environment. Through these laws, the project supported Montenegro in its efforts to join the European Union by establishing criteria, principles, and procedures for business start-up and operations. MONTENEGRO 1 Business The Ministry of Finance became Business 1 Reduction in the number of procedures to comply with Licensing an impact assessment institution Licensing business regulation related to business operation: Of a total and with ultimate veto power for and 756 business administrative procedures proposed for improvement, Regulatory proposed policies with a potential Regulatory 592 were simplified, improved, or eliminated. The exercise helped set Governance negative impact on the private Governance the complete legal and institutional framework and generated sound sector. Of a total 756 business results in general administrative procedures; construction permits; administrative procedures agriculture; environment; labor; zoning and urban planning; financial proposed for improvement, sector; company law; business start-up and operations; public and 592 (78%) were simplified, internal affairs; tourism; and sea- and port-related procedures. Project improved, or eliminated. Of activities resulted in annual direct and indirect savings for the private a total 272 business-related sector of about $32 million. laws and regulations proposed for modification or abrogation, 49 (18%) were modified or abrogated. Continued on next page 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 71 Results Reform Reform Result Country Topic Reform Description Topic Result Description RUSSIAN 1 Construction The Russian Federation made Dealing with 3 Enactment of legislation related to construction permits: FEDERATION Permits obtaining a construction Construction The government made it simpler to obtain a construction permit by permit simpler by eliminating Permits streamlining several pre-construction approvals. The Moscow City requirements for several Government Committee on Administrative Reform issued a resolution preconstruction approvals. As a effective in October 2011, eliminating the requirements that businesses result, the procedures were cut obtain: (i) Sketch No. 2 from Mosgorgeotrest and approval of it by the from 50 to 42, the time from 423 Moscow Architecture Committee; (ii) approval on transport routes from to 344 days and the cost from the Moscow City Transport Agency; and (iii) the construction passport 184% to 129% of the Russian from Mosgorgeotrest. Federation's income per capita. Reduction in fees to comply with construction permitting: As a result of streamlined procedures, the cost to comply with construction permitting was reduced. Reduction in number of days to comply with construction permitting: The time businesses must spend to comply with construction permitting was reduced by 79 days (from 423 to 344 days). ANNEXES TAJIKISTAN 1 Protecting Tajikistan adopted Law no. Protecting 1 Enactment of legislation related to disclosure (outside Investors 780 on amending the Joint Investors company law): A new law amending the Joint Stock Company Law Stock Company Law, which addresses the liability regime of company executives and directors for strengthened investor protections prejudicial transactions between interested parties. Under the new by making it easier to sue law, members of the board of directors can be held liable to pay for directors in cases of prejudicial damages caused by transactions between interested parties if the related-party transactions. board members did not vote against these transactions, provided that the terms were unfair and prejudicial to shareholders. UKRAINE Closing a 1 Improved regulatory framework related to restructuring and Business insolvency: A new law passed in December 2011 improves the regulatory framework for insolvency practitioners by: changing their status from licensee to the subject of independent professional practice; setting additional requirements for applicants to obtain a certificate of insolvency practitioner (including complete higher education, work experience and traineeship, exams); introducing a transparent system that automatically appoints asset managers by court; establishing incentives for the effectiveness of insolvency practitioners' work (a result-based approach to allocation of additional remuneration); unifying the procedure for insolvency practitioners' appointment for state and private entities; setting out the requirement for continuous education of insolvency practitioners; introducing insurance of their activity; introducing elements of self- regulation (their participation in the process of granting certificates and imposing disciplinary sanctions); setting requirements for their assistants. UZBEKISTAN Dealing with 1 Enactment of legislation related to construction permits: Construction A one-stop shop for dealing with construction permits was Permits established in October 2011. Two laws were passed in August 2011 enacting measures to cut red tape and further increase freedom of entrepreneurship. Continued on next page 72  eforms and Results from FIAS-Funded Projects Mapped to the World Bank Group Investment Climate 1.1 R Department (continued) Results Reform Reform Result Country Topic Reform Description Topic Result Description LATIN AMERICA AND THE CARIBBEAN BRAZIL Industry 11 Improvement in the conversion rates of investment leads Specific from relevant sectors: Apex-Brasil improved its lead-to-decision Investment conversion rate to 12% as of June 2011 (8 cumulative announced Climate investments of 67 leads) and to 15% as of December 2011 (13 cumulative announced investment of 86 leads). Invest in Pernambuco improved its lead-to-decision conversion rate to 13% as of June 2011 (10 cumulative announced investments of 77 leads) and to 20% as of December 2011 (18 cumulative announced investments of 87 leads) Improvement in the conversion rates from decisions (announcement) to actual: Apex-Brasil, Invest in Pernambuco, and Invest in Para each improved their conversion rates of announced investor decisions to actual investments as follows: Apex-Brasil (38% conversion—5 cumulative actual investments of 13 announcements); Invest in Pernambuco (11% conversion—2 cumulative actual investments of 18 announcements); Invest in Para (20% conversion—1 ANNEXES cumulative actual investment of 5 announcements). Increase in the number of leads from relevant sectors into investment generation pipeline: Apex-Brasil, Invest in Pernambuco, and Invest in Para each increased the number of leads from relevant sectors in their pipelines as follows: Apex-Brasil (from 27 to 86 active leads). Invest in Pernambuco (from 8 to 87). Invest in Para (from 3 to 35). Improvement in the conversion rates of investment leads from relevant sectors: Apex-Brasil reported a 17% conversion by June 2012 (19 cumulative announced investments of 107 leads). Invest in Pernambuco reported a 27% conversion (29 cumulative announced investments of 104 leads/inquiries). Invest in Para reported a 13% conversion (7 cumulative announced investments of 52 leads/ inquiries). Increase in the number of leads from relevant sectors into investment generation pipeline: Apex-Brasil, Invest in Pernambuco, and Invest in Para each increased its pipeline of leads from relevant sectors by more than 10%, resulting in 107 active leads (Apex-Brasil), 104 active leads (Pernambuco) and 52 active leads (Para). COLOMBIA 1 Starting a Colombia made starting a Starting a 3 Enactment of legislation related to business entry: Through a Business business easier by eliminating Business government decree of January 12, 2012, entrepreneurs are no longer the requirement to purchase required to purchase and register accounting and corporate books at and register accounting books at the time of business start-up. the time of incorporation. As a Reduction in the number of procedures to comply with result, the number of procedures business regulation related to business entry: A government decreased from 9 to 8, the time decree eliminated the requirement that entrepreneurs purchase and from 14 to 13 days, and the cost register accounting and corporate books at the time of business start- from 8% to 7.3% of Colombia's up, reducing required procedures to start a business from 9 to 8. income per capita. Reduction in the cost to comply with business regulation related to business entry: A government decree eliminated the requirement that entrepreneurs purchase and register accounting and corporate books at the time of business start-up, reducing the cost by 10% (Col$85,000). Continued on next page 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 73 Results Reform Reform Result Country Topic Reform Description Topic Result Description COSTA RICA 1 Construction Costa Rica streamlined the Dealing with 1 Reduction in number of procedures to comply with Permits process for obtaining construction Construction construction permitting: The government implemented online permits by implementing online Permits approval systems to obtain health and fire approvals for construction approval systems for obtaining projects. health and fire approvals. As a result, the number of procedures was reduced from 20 to 18, and the time from 188 to 160 days. COSTA RICA 1 Getting Costa Rica improved access Getting 1 Enactment of legislation related to credit information: A Credit to credit information by Credit new law improved access to credit information by guaranteeing guaranteeing borrowers’ right borrowers the right to inspect their personal data. to inspect their personal data through passage of Law No. 8968 on the Protection of Persons against the Treatment of Data, which came into force in ANNEXES September 2011. COSTA RICA 1 Starting a Costa Rica made starting a Starting a 2 Enactment of legislation related to business entry: The Business business easier by streamlining Business government issued a decree implementing the "Crear Empresa" the process of obtaining a website, launched in February 2012, for online company registration sanitary permit from the of companies. Legislation was enacted in December 2011 to authorities for low-risk activities. implement the 1961 Hague Apostille Convention, which will expedite In addition, Oficio DVMA-0399- the investment process for foreign investors. 2012 was issued in December 2011 to implement the 1961 Hague Apostille Convention, which will expedite the process for foreign investors. GUATEMALA 1 Construction Guatemala made dealing with Dealing with 1 Reduction in number of procedures to comply with Permits construction permits easier by Construction construction permitting: The municipality of Guatemala City introducing a risk-based approval Permits issued a new technical manual for construction permitting, which system. As a result, the number introduces a risk-based approach for inspections carried out during of procedures decreased from 18 the construction process. to 11, the time from 165 to 158 days, and the cost from 542% to 500% of Guatemala's income per capita. MEXICO 1 Starting a Mexico made starting a business Starting a 1 Enactment of legislation related to business entry: The Business easier by eliminating the Business government eliminated the minimum paid capital to start a business, minimum capital requirement which was equivalent to $783.72. for limited liability companies (equivalent to 8.4% of Mexico's income per capita) through amendments to Ley General de Sociedades on December 15, 2011. PANAMA 1 Business A new law that came into force Business 1 Implementation or improvement of payment options for Taxation on January 1, 2011 made paying Taxation taxpayers: A new law simplified reporting requirements for value- taxes easier by simplifying added tax and social security contributions, and the use of software reporting requirements for value- and online filing for these taxes made paying taxes easier. added tax and social security contributions. Also, the use of software and online filing for these taxes is more prevalent. As a result the time decreased from 482 to 431 hours. Continued on next page 74  eforms and Results from FIAS-Funded Projects Mapped to the World Bank Group Investment Climate 1.1 R Department (continued) Results Reform Reform Result Country Topic Reform Description Topic Result Description PANAMA 1 Construction Panama made dealing with Dealing with 1 Enactment of legislation related to construction permits: Permits construction permits easier by Construction A resolution enacted May 25, 2012 created a risk-based approval reducing the fees for a permit Permits system by which low-risk construction projects are approved faster. from the fire department’s safety The internal workflow of the municipal one-stop shop for construction office and by accelerating the permits in Panama City was reorganized in March 2012. process at the building registry for obtaining a certificate of good standing and for registering the new building. As a result, the time was cut from 113 to 101 days and the cost from 96% to 84% of Panama's income per capita. PERU 1 Construction Peru eliminated 2 of 16 Dealing with 1 Reduction in number of procedures to comply with Permits procedures (to obtain the land Construction construction permitting: The government eliminated two development and building Permits procedures: to obtain the land development and building parameter ANNEXES parameter certificate and to certificate and to obtain the project authorization certificate. obtain the project authorization certificate), which reduced the time to obtain a construction permit from 188 to 173 days and the cost from 76% to 63% of Peru's income per capita. PERU 1 Protecting The Companies Law was Protecting 1 Enactment of legislation related to credit information: The Investors amended in July 2010 to Investors Companies Law was amended to strengthen investor protections. strengthen investor protections through a new law regulating the approval of related-party transactions and making it easier to sue directors when such transactions are prejudicial. URUGUAY 1 Business The government enacted an Business 1 Enactment of new/revised legislation related to business Taxation amendment to its bearer share Taxation taxation: The government enacted an amendment to its bearer share law on June 15, 2012. The new law on June 15, 2012. The new law improves the transparency of law improves the transparency of ownership information required to be available to the government ownership information required so that the information can be accessed by authorities for tax to be available to the government enforcement purposes. so that the information can be accessed by authorities for tax enforcement purposes. Continued on next page 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 75 Results Reform Reform Result Country Topic Reform Description Topic Result Description MIDDLE EAST AND NORTH AFRICA ALGERIA 1 Getting Algeria improved access to credit Access to 1 Implementation or improvement of the coverage for credit Credit by eliminating the minimum Finance information sharing: The minimum loan threshold for loans loan threshold of DA 2,000,000 included in the database was eliminated. ($27,311) for loans included in the database. JORDAN Starting a 2 Reduction in the number of procedures to comply with Business business regulation related to business entry: The Municipality of Amman combined the procedures to register a business with execution of the company's Memorandum of Understanding. It has also combined the three steps to obtain a commercial license, obtain a municipal inspection, and register for social security. In total, the number of steps to start a business was reduced by 3. Reduction in the number of days it takes to comply with business regulation related to business entry: The Municipality of Amman reduced the time to start a business by combining some steps. ANNEXES The time was further reduced by a municipal decree to all municipal branches to drop the landlord requirements for the commercial license (such as copy of deeds, property tax, fees, and any other obligations by landlords). This has cut 6 days from the process. JORDAN Dealing with 1 Implementation of enacted legislation related to construction Construction permits: The government cut one step from the process of Permits obtaining a construction permit by eliminating the requirement for a location permit. Also, an order was issued requiring that the District Committee meet more frequently (twice weekly) to decide on construction and occupancy permits. Reduction in the number of procedures to comply with construction permitting: The government cut one step from the process by eliminating the requirement for a location permit. MOROCCO Trade 1 Reduction in the number of procedures at customs related Logistics to trade logistics: In December 2011, a new customs regulation improved current efforts to automate customs and reduced the time to import. It allows customs clearance to be issued when the goods are delivered at the premises of the importer, which can occur before the documents are physically submitted. MOROCCO 1 Starting a Morocco adopted Law No. 24-10 Starting a 1 Implementation of enacted legislation related to business Business in June 2011, which eliminated Business entry: The government modified the law on limited liability the minimum capital requirement companies to simplify the procedures for opening a business. for limited liability companies (equivalent to 10.7% of Morocco's income per capita). SUB-SAHARAN AFRICA BURUNDI 1 Starting a Burundi made starting a business Starting a 1 Enactment of legislation related to business entry: A one-stop Business easier by eliminating the Business shop became operational, enabling specialized staff from API, the requirements to have company Commercial Court, and the Burundi Revenue Authority to work documents notarized, to publish under one roof with simplified procedures and standard statutes information on new companies for registering a new company. Four required procedures were in a journal, and to register new eliminated. companies with the Ministry of Trade and Industry. As a result, the number of procedures was reduced from 8 to 4, the time from 13 to 8 days, and the cost from 117% to 18% of Burundi's income per capita. Continued on next page 76  eforms and Results from FIAS-Funded Projects Mapped to the World Bank Group Investment Climate 1.1 R Department (continued) Results Reform Reform Result Country Topic Reform Description Topic Result Description BURUNDI 1 Construction Burundi made obtaining a Dealing with 1 Reduction in number of procedures to comply with Permits construction permit easier by Construction construction permitting: Burundi made dealing with construction eliminating the requirement for Permits permits easier by amending the Land Act, reducing the number of a clearance from the Ministry of procedures and time to obtain a permit, and cutting costs. Health and reducing the cost of the geotechnical study. As a result, the number of procedures decreased from 24 to 21, the time from 137 to 99 days, and the cost from 3,136% to 1,912% of Burundi's income per capita. BURUNDI Resolving 1 Improved regulatory framework related to restructuring and Insolvency insolvency: Two regulations outlining implementation of the 2006 bankruptcy legal framework were enacted in May 2012. One details the process and agencies involved as a complement to the law organizing the bankruptcy process, and the other is the implementing ANNEXES regulation with respect to company restructuring. BURUNDI Business 1 Enactment of new/revised legislation related to business Taxation taxation: The government streamlined the document accompanying the annual tax return, thus reducing the time businesses must spend to comply from 274 to 74 hours. BURUNDI 1 Registering Burundi made property transfers Registering 2 Reduction in number of days to register property: Effective June Property faster by establishing a statutory Property 1, 2011, Burundi reduced the time required to process files at the time limit for processing property “property title." transfer requests at the land Reduction in fees to register property: Effective March 16, registry (from 0 to 30 days). As a 2012, Burundi reduced the cost required to process land transfer by result, the overall time to register removing the cost of BIF 250,000 related to signing of the contract property decreased from 94 to 64 between parties (now free of charge). days. BURUNDI Getting 1 Improvement of the regulatory framework for getting Electricity electricity: Burundi made getting electricity connection easier and cheaper by giving free will to sell or buy transformers and other equipment in the local or international market. CONGO, 1 Construction The Republic of Congo made Dealing with 1 Reduction in fees to comply with construction permitting: The REP. OF Permits dealing with construction permits Construction financial law of December 29, 2011 reduces the cost of registering less expensive by reducing the Permits a new building at the land registry from CFAF 26,020,000 to CFAF cost of registering a new building 12,516,300. at the land registry. As a result, the overall cost was reduced from 1,671% to 1,583% of the Republic of Congo's income per capita. CONGO, 1 Starting a The Republic of Congo made Starting a 1 Reduction in the cost to comply with business regulation REP. OF Business starting a business easier by Business related to business entry: The financial law of December 29, 2011 eliminating or reducing several reduces the cost of registering a business. A flat fee of CFAF 300,000 administrative costs associated replaces the 3% registration fee. with incorporation. As a result, the cost was reduced from 551% to 285% of Congo's income per capita. GABON Starting a 1 Reduction in the number of days it takes to comply with Business business regulation related to business entry: A sworn declaration for business registry was introduced by notice on February 20, 2012. This automatic procedure, which replaces the requirement that founders file a copy of the criminal record, previously required 1 to 10 days. Continued on next page 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 77 Results Reform Reform Result Country Topic Reform Description Topic Result Description KENYA Dealing with 1 Reduction in the number of procedures to comply with Construction business regulation related to business operation: The City Permits Council of Nairobi launched an automated construction permit application that simplifies the construction permitting process by aggregating five processes into one. KENYA Trade 1 Implementation or improvement of best practice cross border Logistics activities and regional integration: Processes and procedures were simplified at the port of Malaba in March 2012, which resulted in an improved flow of cargo. The new measures reduced congestion, and led to an increase in throughput of border clearance and shorter queues of trucks waiting at the border (from 5 to 0.8 kilometers). LESOTHO 1 Starting a Lesotho made starting a Starting a 2 Creation or improvement at the legal/regulatory level of Business business easier by creating Business institutions dealing with business entry: A one-stop shop for a one-stop shop for company business registration became operational in May 2012, following incorporation and by eliminating approval of the Companies Act on May 2, 2012. In addition to the requirements for paid- establishing simplified procedures, the act eliminates the trade and ANNEXES in minimum capital and for industry board for license approval. notarization of the articles of Enactment of company-related legislation: The Companies Act association. As a result, the time entered into force on May 2, 2012 eliminated the minimum capital to start a business was reduced requirement for business registration and notarization of the articles from 40 to 24 days and the cost of association. from 25% to 13% of Lesotho's income per capita. LESOTHO Resolving 1 Enactment of company-related legislation: The Companies Act Insolvency entered into force on May 2, 2012 clearly defines the application of a liquidation proceeding, specifies qualifications of liquidators, gives priority to secured creditors, and sets forth time limits for insolvency procedures. LESOTHO 1 Protecting The Companies Act entered Protecting 1 Enactment of company-related legislation: The Companies Act Investors into force on May 2, 2012 Investors strengthened investor protections. strengthened investor protections by increasing the disclosure requirements for related-party transactions and improving the liability regime for company directors in cases of abusive related-party transactions. MALAWI 1 Trade Trading across borders in Trade 1 Implementation or improvement of best practice cross border Logistics Malawi has become easier as Logistics activities and regional integration: The government improved a result of improved customs customs clearance procedures and transportation links between the clearance procedures and better port of Beira in Mozambique and Blantyre. transportation links between the port of Beira in Mozambique and Blantyre. As a result the time to export decreased from 41 to 34 days and the time to import from 51 to 43 days. Continued on next page 78  eforms and Results from FIAS-Funded Projects Mapped to the World Bank Group Investment Climate 1.1 R Department (continued) Results Reform Reform Result Country Topic Reform Description Topic Result Description MALI Trade 1 Implementation or improvement of best practice procedures Logistics related to the flow of cargo: The government incorporated the step of filing the customs declaration into the two steps of (i) payment of customs fees and (ii) issuance of bulletin of liquidation and delivery order. Thus, three steps in the clearing process are now combined into one, saving traders about one-half day. Customs now performs the declaration filling at the accounting desk for transmission to the differed control desk.  The presence of specialized agents is no longer required for the release of goods with a release order, which means importers will no longer incur the cost of ensuring the agents' presence. The steps in the "Brigade" clearance process for imports and exports arriving and leaving by road and rail were reduced. MALI Trade 1 Implementation or improvement of best practice risk Logistics management related to trade: The government improved two procedures, now performed simultaneously, related to the selectivity ANNEXES and status of goods on scanning. MALI Trade 1 Implementation or improvement of best practice information Logistics systems related to trade: The government implemented online customs clearance procedures, allowing importers and brokers to start the declaration process before the goods arrive. This measure expedites procedures and can save 2 of 6 days in the clearing process (34% reduction). MALI Trade 1 Reduction in the number of documents related to trade: The Logistics government eliminated the preferential certificate, reducing the list of mandatory documents from 7 to  6 (14% reduction). MALI Industry 1 Increase in the number of leads from relevant sectors into Specific investment generation pipeline: From project inception to Investment December 2011, the number of agro-business leads increased from 3 Climate to 11, with anticipated investments of $60 million. MALI 1 Investment A new investment code, Investment 1 Improved regulatory framework related to investment Policy promulgated by the President on Policy and generation: The government promulgated a new investment code. February 27, 2012, guarantees: Promotion equality of treatment between local and foreign investors; access to raw materials; access to land ownership for foreign investors; free transfer of capital payments, income, and compensation. MALI 1 Industry Mali simplified the processes Business 1 Implementation or improvement of payment options for Specific of paying taxes by introducing Taxation taxpayers: The tax agency introduced a single form to replace 13 Investment a single form for joint filing and forms. Climate payment of several taxes. MALI 1 Industry An investment survey conducted Industry 1 Improvement in the conversion rates of investment leads from Specific in May 2012 confirmed that Specific relevant sectors: API-Mali supported four projects that generated Investment four projects (of 14 leads) were Investment $25 million in investment. Climate supported by API-Mali, the Climate national investment promotion agency, and they have generated $25 million in investment. Continued on next page 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 79 Results Reform Reform Result Country Topic Reform Description Topic Result Description RWANDA Special 1 Improved regulatory framework related to investment Economic generation: Three new special economic zone regulations were Zones approved by Cabinet on December 14, 2011: (i) the prime minister's order determining the structure, powers and functioning on the Rwanda Special Economic Zone Authority; (ii) the ministerial order determining a license fee for SEZ developers and operator; (iii) the ministerial order determining a list of industries not allowed to operate in the SEZs. RWANDA Trade 1 Reduction in the number of days it takes to comply with Logistics business regulation related to trade logistics: Simplification of procedures and processes and technical assistance in risk management resulted in reducing the number of days businesses need to import and export. Export time was reduced from 38 to 29 days (24% reduction) and import time from 34 to 31 days (10% reduction). RWANDA Industry 1 Increase in the number of leads from relevant sectors into ANNEXES Specific investment generation pipeline: Twelve new horticulture leads Investment were recorded as a result of investor targeting and an outreach Climate mission to Kenya in March and April. The new leads add to the existing active pipeline of 22 investors. Horticulture-focused activities resulted in a draft access-to-land client charter and a draft concession agreement. RWANDA 1 Business Rwanda reduced the frequency Business 1 Reduction in the number of days it takes to file taxes: The Taxation of value-added tax filings by Taxation frequency of VAT payment was reduced from a monthly to a quarterly companies from monthly to basis. quarterly. As a result, the total number of payments was reduced from 25 to 17. RWANDA 1 Starting a The full implementation of an Starting a 1 Reduction in the cost to comply with business regulation Business online business registry reduced Business related to business entry: An online business registry reduced the the cost of registering a business cost of registering a business by $50 (now free of charge). from 9% to 5% of Rwanda's income per capita. RWANDA 1 Getting In Rwanda, the private credit Access to 1 Implementation or improvement of the coverage for credit Credit bureau started to collect and Finance information sharing: Rwanda implemented a new credit bureau distribute information from utility at the Central Bank and an online collateral registry at the Rwanda companies and also started to Development Board. distribute more than two years of historical information, improving the credit information system. SIERRA LEONE Starting a 1 Reduction in the number of days it takes to comply with Business business regulation related to business entry: A single form for business registration and payment of taxes was approved in May 2012 and is available online. The two procedures, now both done automatically, previously required 3 to 4 days. SIERRA LEONE 1 Trade Sierra Leone made trading across Trade 1 Reduction in the number of days to trade: The government Logistics borders faster by implementing Logistics implemented the Automated System for Customs Data (ASYCUDA++). the Automated System for Customs Data (ASYCUDA++). As a result, the time to import was reduced from 31 to 27 days, and the time to export from 26 to 24 days. Continued on next page 80  eforms and Results from FIAS-Funded Projects Mapped to the World Bank Group Investment Climate 1.1 R Department (continued) Results Reform Reform Result Country Topic Reform Description Topic Result Description SIERRA LEONE 1 Getting The Credit Reference Act Access to 2 Enactment of legislation related to credit information: The Credit was approved in March 2011, Finance Credit Reference Bureau, a public credit registry administered by providing a framework for credit the Bank of Sierra Leone, became fully operational April 20, 2011. information sharing in Sierra Between May 2011 and March 2012, the CRB issued 2,676 credit Leone. The Credit Reference reports. Bureau (CRB), a public credit Enactment of legislation related to credit information: The registry administered by the government passed the Credit Reference Act in March 2011. Bank of Sierra Leone, became fully operational April 20, 2011. Between May 2011 and March 2012, the CRB issued 2,676 credit reports. TANZANIA 1 Starting a Tanzania made starting a Starting a 1 Reduction in the number of days it takes to comply with Business business easier by eliminating Business business regulation related to business entry: Tanzania made the requirements to obtain starting a business easier by eliminating the requirements to obtain inspections from the health and inspections from the health and the town and land officers as a ANNEXES the town and land officers as a prerequisite to obtain a business license. prerequisite to obtain a business license, reducing the number of procedures from 10 to 9. TOGO 1 Starting a Togo made starting a business Starting a 1 Creation or improvement at the legal/regulatory level of Business easier and less costly by reducing Business institutions dealing with business entry: A government decree incorporation fees, improving the of March 7, 2012 created a one-stop shop for business registration. work flow at the one-stop shop Also, incorporation fees were reduced, and a sworn declaration at the for company registration, and time of registration replaced the requirement that founders provide replacing the requirement for a a copy of their criminal records. Both measures made it easier for copy of the founders’ criminal owners to register their businesses. records with one for a sworn declaration at the time of the company’s registration. As a result, the number of procedures was reduced from 7 to 6, the time from 84 to 38 days, and the cost from 177% to 119% of Togo's income per capita. UGANDA 1 Business The government eliminated Business 2 Rationalization in the number of regulations related to Licensing 27 business licenses, which Licensing business operation: The government eliminated 27 business and translates into private sector and licenses. Regulatory cost savings of UGX 55.4 billion Regulatory Reduction in the cost to comply with business regulation Governance shillings and a 7.7% reduction in Governance related to business operation: The government announced a 25% the total cost for businesses to reduction in the cost of trade license fees. comply with business regulations related to business operation. SOUTH ASIA BANGLADESH 1 Business Bangladesh adopted amendments Business 1 Enactment of new or revised legislation related to business Taxation to its transfer pricing legislation Taxation taxation: The government adopted amendments to its transfer and rules on June 30, 2012. The pricing legislation and rules. amendments govern the pricing of transactions for goods and services within a multinational group in order to provide clearer guidance on reporting of corporate profits for tax purposes and compliance requirements for taxpayers. The changes also aligned Bangladesh's transfer pricing framework with internationally-accepted transfer pricing norms. 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 81 Reforms and Results from FIAS-Cofinanced Projects Mapped to Regional IFC Advisory Services Units 1.2  Results Reform Reform Result Country Topic Reform Description Topic Result Description EUROPE AND CENTRAL ASIA ARMENIA Business 1 Implementation or improvement of best practice tax Taxation enforcement procedures or practices: The government adopted amendments to the Law on Taxes. Effective January 1, 2012, businesses will not maintain the revenue registration book to document the quantity and retail price of goods. New and simplified procedures were introduced for maintaining the shipment book, which is intended to register wholesale trade. The volume of necessary information to be filled in this book was cut by two times, and precise definitions of terms were given. The government adopted a decree on November 10, 2011 that determined the sequence of steps for assessing risk in conducting risk-based tax inspections, the formula for measuring the risk level, and the general description of risk criteria. For the first time, a list of taxpayers subject to inspection during 2012 has been prepared taking into account the risk level. The list has been published. ARMENIA 1 Industry The government adopted a Industry 2 Implementation or improvement of industry-specific ANNEXES Specific decision on Dec. 22, 2011 which Specific procedures, policies, and practices: The government eliminated Investment eliminated the mandatory Investment a mandatory certification and permission procedure in the provision Climate certification and permission Climate of food services. Licenses, permits, and certification in the area of procedure in the area of food food safety have been burdensome and ineffective. The changes will safety, resulting in a reduction reduce businesses' compliance costs and support business creation of cost and time spent by and competition. businesses. ARMENIA Business 1 Implementation or improvement of a risk-based approach Licensing to business regulation: The government adopted two decisions and approving the risk-based inspection methodology and risk criteria for Regulatory the Tax Authority (on November 10, 2011) and also for the Ministry of Governance Finance Licensing Requirements Control Inspectorate (on December 22, 2011). ARMENIA Business 1 Implementation or improvement of payment options for Taxation taxpayers: Amendments to the Law on Patent Fee established a one-month prepayment duty, which reduced the tax compliance burden for micro, small, and medium-sized businesses. Previously, the private sector had an obligation to prepay the patent fee for at least three months. BELARUS 1 Business On February 17, 2012, the Council Business 1 Improved regulatory framework related to business Licensing of Ministers adopted a list of Licensing operation: The government adopted a list of administrative and administrative procedures for and procedures for legal entities and individual entrepreneurs. Regulatory legal entities and individual Regulatory Governance entrepreneurs. The total number Governance of administrative procedures decreased by 19%, compliance for companes was simplified, and information about the procedures was made transparent and accessible to all. BELARUS Investment 1 Improvement in the ratio of benchmarked jurisdictions that Policy and reported a significant improvement as measured by GIPB: Promotion Belarus achieved a Global Investment Promotion Benchmarking score of 35, exceeding the target of 30 for the project. BOSNIA AND Business 9 Improved regulatory framework related to business HERZE- Licensing operation: On February 17, 2012, the Council of Ministers adopted GOVINA and a list of administrative procedures for legal entities and individual Regulatory entrepreneurs, affecting an estimated 220 business permits, licenses, Governance and approvals at the local level in the municipalities of Bosanska Krupa, Srebrenik and Tuzla yielding on average of 19% in time reduction per procedure. Continued on next page 82  eforms and Results from FIAS-Cofinanced Projects Mapped to Regional IFC Advisory Services Units 1.2 R (continued) Results Reform Reform Result Country Topic Reform Description Topic Result Description GEORGIA Business 3 Implementation or improvement of a taxpayer education Taxation system: The project conducted 12 training events in different regions for 671 micro and small businesses to help them comply with the new tax code. In addition, 3,746 copies of the tax brochures were distributed to micro and small companies through the events and local offices of the Revenue Service. Implementation or improvement of a best practice tax appeal process: The tax appeal process was improved to ensure better compliance. Mediation procedures adopted at the Revenue Service resulted in businesses winning about 47% of cases and partially winning up to 28%. Before mediation procedures were adopted, businesses won about 10% and partially won about 20%. Businesses that won their cases saved time in that they do not need to apply for the second stage. The new process increases the Revenue Service's credibility, and more companies will be willing to address their concerns to the Revenue Service. ANNEXES Implementation or improvement of a best practice tax audit system: Through a series of activities, the government is introducing transfer pricing procedures to make the business environment more competitive and protect the tax base. The project supported the Ministry of Finance in: (i) conducting a needs assessment and prioritizing sectors for transfer pricing activities; (ii) producing a report that includes recommendations on developing transfer pricing legislation and implementing regulations; (iii) conducting a two-day workshop for auditors and Revenue Service decision-makers on transfer pricing audit procedures; (iv) interviewing auditors and selecting two candidates to work on future transfer pricing audit procedures and participate in a one-month training session; and (v) establishing the institute of district officers, who will serve as consultants for micro and small businesses. GEORGIA 1 Business The tax code was amended Business 1 Enactment of new or revised legislation related to business Taxation on June 22, 2012 to include a Taxation taxation: As part of the drafting of secondary legislation, the tax transfer pricing-related clause on code was changed to include a transfer pricing-related clause on the the market price of transactions. market price of transactions. The change gives the Minister of Finance authority to determine how the "arm's length" price is established, enabling the concept to be incorporated into the transfer pricing regime, in line with international best practices. This amendment reduces uncertainty and the potential for economic double taxation or forgone revenues. Continued on next page 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 83 Results Reform Reform Result Country Topic Reform Description Topic Result Description INDIA Business 2 Implementation or improvement of payment options for Taxation taxpayers: The payment gateway was expanded for e-payments, enabling taxpayers to make payments through more than 40 banks (5 were previously available). Implementation or improvement of a taxpayer education system: A communications campaign was designed and is being rolled out in seven districts to support the small dealer taxpayer regime. The campaign includes mass advertisements, open houses, and hand bill distribution. A special communications plan for the border check posts program is being developed. MOLDOVA 1 Industry The Parliament adopted the Food Industry 1 Implementation or improvement of industry-specific Specific Safety Law on May 18, 2012. Specific procedures, policies, and practices: The Parliament adopted Investment It introduces a single-agency Investment the Food Safety Law. The project also produced an Inventory of Climate approach to inspections, thus Climate agribusiness procedures, which clarified key constraints and allowed reducing double-inspections; future activiities to be prioritized. The Parliament adopted and enacted and Hazard Analysis and Critical modifications to four laws (on seeds, plant protection, vineyards and ANNEXES Control Points to improve food wine, and orchards), which permit testing the EU Catalogue for Seeds safety. It also assigns more and Plant Varieties as a first step toward its full adoption. accountability and responsibility to food producers. MOLDOVA 1 Resolving Moldova strengthened its Resolving 1 Improved regulatory framework related to restructuring and Insolvency insolvency process by extending Insolvency insolvency: The Parliament adopted the Insolvency Law on June the duration of the reorganization 29, 2012, adopting an updated approach that shifts the focus from proceeding and refining the liquidation to reorganization and addressing aspects related to qualification requirements for insolvency practitioners. insolvency administrators. 84 ANNEX 2: PORTFOLIO OF FIAS-FUNDED PROJECTS IN FY12 The following tables summarize the portfolio of FIAS projects that received FIAS funding in FY12. FIAS-Funded Projects Mapped to the World Bank Group Investment Climate Department 2.1  Total FY Total FY FIAS Region Total Funding Expenditures Expenditures Project Name Country Name Project Name US$ US$ Share Stage1 EUROPE AND Eastern Europe Doing Business Reform East Europe and $1,154,602 $202,982 $72,077 PORTFOLIO CENTRAL EUROPE Region Central Asia Central Asia Tax Transparency and Industry- Region Specific Regulatory Reform Product $300,000 $145,717 $145,717 PORTFOLIO Development in Central Asia LATIN AMERICA Brazil Brazil Frontier States Investment $0 $693,925 $693,925 PORTFOLIO AND THE Generation (national-subnational) CARIBBEAN Latin America Doing Business Reform Latin America $1,424,235 $569,670 $523,469 PORTFOLIO Region and the Caribbean MIDDLE EAST AND Middle East and Doing Business Reform Middle East NORTH AFRICA North Africa and North Africa $1,527,748 $317,776 $317,776 PORTFOLIO Region SOUTH ASIA Bangladesh Low-Carbon Green Economic Zones $802,482 $227,727 $227,727 PORTFOLIO Program in Bangladesh SUB-SAHARAN Kenya Kenya: Improving Regulatory ANNEXES $4,925,000 $779,818 $779,818 PORTFOLIO AFRICA Performance and Capacities Africa Region OHADA: Building the Capacity to $4,690,056 $1,817,486 $1,800,169 PORTFOLIO Improve the Quality of the Legislation Kenya Kenya Investment Generation Program $1,500,000 $558,127 $558,127 PORTFOLIO Eastern Africa East African Community Investment $1,977,312 $456,776 $456,776 PORTFOLIO Region Climate Reform Program Burkina Faso Trade Logistics Burkina Faso $823,591 $229,316 $53,844 PORTFOLIO Africa Region Doing Business Reform Sub-Saharan $1,332,614 $574,369 $574,369 PORTFOLIO Africa Kenya Trade Logistics Kenya $1,082,939 $733,226 $733,226 PORTFOLIO Mali Investment Climate Reform Program in $2,951,000 $1,049,375 $610,447 PORTFOLIO3 Mali, Phase 2 Uganda Uganda Investment Climate Program $1,553,000 $544,761 $456,467 PORTFOLIO Burundi2 Burundi Investment Climate Reform $1,922,379 $867,820 $753,990 PORTFOLIO Program Rwanda Rwanda Investment Climate Reform $4,500,000 $1,640,309 $825,775 PORTFOLIO Program Continued on next page 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 85 FIAS-Funded Projects Mapped to the World Bank Group Investment Climate Department (continued) 2.1  Total FY Total FY FIAS Region Total Funding Expenditures Expenditures Project Name Country Name Project Name US$ US$ Share Stage1 WORLD World Region Subnational Doing Business - product $1,466,955 $166,264 $166,264 PORTFOLIO development and global roll-out support World Region Investment Policy and Promotion Core $540,000 $0 $0 PORTFOLIO Product 4 World Region Investing Across Borders Indicators 5 $3,279,209 $751,090 $341,752 PORTFOLIO World Region Tax Product Program Design $4,399,134 $507,252 $430,635 PORTFOLIO World Region Commercial Mediation Product Development and Knowledge $1,500,000 $231,199 $73,902 PORTFOLIO Management World Region Doing Business Reform Advisory -- $2,707,833 $0 $0 PORTFOLIO Global 6 World Region Tourism Investment and Development $447,144 $51,588 $51,588 PORTFOLIO Advisory Services Global World Region Land Market for Investment -- Global Knowledge Management and Product $583,149 $20,391 $20,390 PORTFOLIO ANNEXES Development 7 World Region Role of Incentives in Promoting $326,564 $493 $493 PORTFOLIO Investments 8 World Region Restructuring and Insolvency Advisory $1,998,785 $27,934 $27,934 PORTFOLIO Services Program Netherlands Knowledge Management: Ad-hoc Support to Regulatory Governance in $0 $28,896 $28,896 PORTFOLIO the Netherlands World Region Global Investment Promotion $1,872,125 $700,772 $721,629 PORTFOLIO Benchmarking 2012 World Region Special Economic Zones Product Development Knowledge Management $450,000 $174,132 $174,132 PORTFOLIO Phase 2 World Region Global Trade Logistics Advisory Program $1,851,989 $725,399 $562,345 PORTFOLIO World Region Investment Climate Agribusiness Global $1,462,500 $496,275 $496,275 PORTFOLIO Product Development Project World Region Business Regulation Product Management and Knowledge $1,063,600 $551,376 $551,376 PORTFOLIO Management World Region Investment Climate Business Line $1,670,699 $384,899 $384,899 PORTFOLIO Impact Estimations and Evaluations World Region Tax Transparency Technical Assistance $4,600,000 $601,911 $601,911 PORTFOLIO Program World Region Debt Resolution and Business Exit $1,500,000 $366,182 $366,182 PORTFOLIO World Region Investment Policy Product Development $850,000 $412,676 $412,676 PORTFOLIO and Roll-out EUROPE AND Montenegro Montenegro National Business $569,050 $143,965 $0 COMPLETED CENTRAL ASIA Enabling Environment Reform SUB-SAHARAN Nigeria Subnational Investment Climate $3,863,000 $43,070 $0 COMPLETED AFRICA Program Sierra Leone 2 Sierra Leone Tax Simplification Roll-out $2,050,000 $171,475 $0 COMPLETED Liberia2 Trade Logistics Project $850,000 $317 -$2,383 COMPLETED Sierra Leone2 Promoting Investment and Export for $1,682,050 $246,467 $0 COMPLETED Sierra Leone Sierra Leone2 Sierra Leone Tourism $1,999,500 $0 $0 COMPLETED Continued on next page 86 FIAS-Funded Projects Mapped to the World Bank Group Investment Climate Department (continued) 2.1  Total FY Total FY FIAS Region Total Funding Expenditures Expenditures Project Name Country Name Project Name US$ US$ Share Stage1 WORLD World Region Global Investment Law and Policy $224,544 $0 $0 COMPLETED Research and Advisory Project World Region Public-Private Dialogue Product Development and Knowledge $607,500 $196,087 -$473 COMPLETED Management World Region Knowledge Management: Best Practice in Investment Climate Reforms and $378,000 $419 $419 COMPLETED Incentives to Promote Low-carbon Growth SUB-SAHARAN Eastern Africa East African Community Investment $8,100,000 $875,235 $875,235 PIPELINE AFRICA Region Climate Phase 2 Guinea 2 Investment Climate Reform Program in $3,818,000 $450,656 $406,579 PIPELINE Guinea Conakry Western Africa OHADA Uniform Acts Reform Phase 2 $2,550,000 $523,219 $431,642 PIPELINE Region ANNEXES WORLD World Region Investment Climate Indicator-based $850,000 $416,116 $416,116 PIPELINE Reform Advisory Global World Region Tourism Global Phase 2 $850,000 $94,370 $94,370 PIPELINE World Region Public-Private Dialogue Global Product Development and Knowledge $800,000 $75,570 $75,570 PIPELINE Management World Region Competition Policy for Investment $1,155,000 $38,190 $38,190 PIPELINE Climate GRAND TOTAL $95,383,288 $20,883,063 $17,332,241 1 Portfolio includes active and on hold projects. 2 Fragile and conflict situations. 3 Project on hold. 4 The Investment Policy and Promotion product was phased out at the end of FY11 and the underlying product development project was closed. A new product development project underlying the new Investment Policy product was launched in FY12 (project 592287). 5 Project transferred to GIA (Global Indicator and Analysis Unit) during FY12. 6 The Doing Business Reform Advisory product was phased out at the end of FY11 and the underlying product development project was closed. A new product development project that will support the development and roll-out of the new Indicator-based Reform Advisory product is under development (pipeline project 583149). 7 Land product phased out during FY08-11 strategic cycle. FIAS funding was used in FY12 for the printing of final report. 8 Project to close in early FY13. Project supported work on incentives throughout the Investment Climate Business Line. Continued on next page 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 87 2.2 FIAS-Cofinanced Projects Mapped to Regional IFC Advisory Services Units Total FY Total FY FIAS Region Total Funding Expenditures Expenditures Project Name Country Name Project Name US$ US$ Share Stage1 EAST ASIA AND Lao PDR Lao Secured Transactions3 $842,969 $146,625 $14,399 PORTFOLIO THE PACIFIC Vietnam Vietnam Secured Transactions Phase 2 3 $956,338 $172,645 $24,243 PORTFOLIO EUROPE AND Albania Albania Subnational Regulatory CENTRAL ASIA Simplification and Investment $667,258 $184,748 $108,010 PORTFOLIO Generation Armenia Armenia Investment Climate Reform $1,656,707 $408,748 $61,895 PORTFOLIO Project Belarus Belarus: Regulatory Simplification and $2,897,117 $749,639 $231,008 PORTFOLIO Investment Generation 2010 - 2013 Bosnia and Bosnia Subnational Competitiveness $2,735,863 $221,888 $144,783 PORTFOLIO Herzegovina Bosnia and Bosnia and Herzegovina Investment $3,066,000 $465,840 $49,870 PORTFOLIO Herzegovina Climate Project (ISCRA) Georgia2 Georgia Tax Simplification Project $1,081,003 $561,692 $77,713 PORTFOLIO ANNEXES Moldova Investment Climate Reform Moldova $2,464,244 $381,448 $81,680 PORTFOLIO Tajikistan Tajikistan Business Enabling $4,917,051 $1,140,579 $69,872 PORTFOLIO Environment Phases III, IV SOUTH ASIA India Bihar Investment Climate Tax $535,000 $240,523 $124,433 PORTFOLIO Simplification Program WORLD World Region Global Secured Transactions and $2,380,000 $510,070 $288,303 PORTFOLIO Collateral Registries Program SUB-SAHARAN Mozambique Mozambique Tourism Anchor $1,905,149 $190,484 $160,164 COMPLETED AFRICA Investment Program EAST ASIA AND Philippines Philippines Secured Transactions3 $661,600 $134,949 $70,413 PIPELINE THE PACIFIC EUROPE AND Kosovo2 Kosovo Investment Climate $1,483,800 $34,873 $34,873 PIPELINE CENTRAL ASIA Uzbekistan Uzbekistan Tax Simplification Project $363,603 $29,132 $29,132 PIPELINE SOUTH ASIA India Odisha Inclusive Growth Partnership $1,050,000 $230,825 $45,872 PIPELINE SUB-SAHARAN São Tomé and São Tomé and Principe Investment $1,000,000 $95,166 $94,786 PIPELINE AFRICA Principe Climate Project Tanzania Tanzania Investment Climate Program $2,600,000 $73,854 $73,854 PIPELINE GRAND TOTAL $24,199,550 $5,184,445 $1,276,209 1 Portfolio includes active and on hold projects. 2 Fragile and conflict situations. 3 Legacy secured transactions projects receiving FIAS funding. 88 ANNEX 3: CIC/FIAS ORGANIZATION CHART FIAS IN THE WORLD BANK GROUP INSTITUTIONAL STRUCTURE IBRD MIGA IFC FIAS Supervisory Committee a World Bank Financial & Private IFC Advisory Services b Sector Development Networkb East Asia and Pacific FPD East Asia and Pacific IC Europe and Central Asia FPD Europe and Central Asia IC Latin America and Latin America and the Caribbean FPD the Caribbean IC World Bank Group Investment ANNEXES Middle East and Climate Department / FIAS Middle East and North Africa FPD North Africa IC South Asia FPD South Asia IC & BICF Sub-Saharan Africa FPD Sub-Saharan Africa IC Business Regulation International Trade Investment Climate Private Participation Fostering Enterprise and Investment for Industry in Infrastructure and Creation and Growth Facilitating International Unlocking Sustainable Social Sectors Trade and Investment Investments in Key Sectors (not FIAS-funded) a. The FIAS Supervisory Committee consists of: Executive Vice President, IFC (Chair), Executive Vice President MIGA, Vice President FPD (World Bank-IFC), Vice President Business Advisory Services (IFC), Vice President Africa Region (World Bank). b. FPD abbreviates Financial and Private Sector Development Vice Presidency; IC abbreviates Investment Climate; BICF abbreviates Bangladesh Investment Climate Facility. 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES 89 ANNEX 4: ABBREVIATIONS ADR alternative dispute resolution CASA Conflict Affected States in Africa (multi-donor program, IFC) CIC Investment Climate Department (IFC/World Bank/MIGA) EAC East African Community FCS fragile and conflict situations FDI foreign direct investment FIAS Facility for Investment Climate Advisory Services (formerly Foreign Investment Advisory Service) FPD Financial and Private Sector Development (Vice Presidency/Network) FY fiscal year IBRD International Bank for Reconstruction and Development ICT information and communication technologies IDA International Development Association IFC International Finance Corporation ANNEXES IMF International Monetary Fund M&E monitoring and evaluation MIGA Multilateral Investment Guarantee Agency OECD Organisation for Economic Co-operation and Development OHADA Organisation pour l’Harmonisation en Afrique du Droit des Affaires PPD public-private dialogue PREM Poverty Reduction and Economic Management (Network) SEZs special economic zones SMEs small and medium enterprises TATF Technical Assistance Trust Funds (system, IFC) USAID United States Agency for International Development VAT value-added tax All dollar amounts are in current U.S. dollars unless otherwise noted. 90 PHOTO CREDITS Cover: International Finance Corporation, Ethiopia; World Bank Group, Armenia; World Bank Group, Bangladesh; World Bank Group, Brazil; World Bank Group, Indonesia; World Bank Group, Rajasthan; World Bank Group, South Asia; World Bank Group, Vietnam. Inside Cover: World Bank Group, Brazil pp. 2–3: World Bank Group, Bangladesh pp. 10–11: World Bank Group, Vietnam p. 18: International Finance Corporation, Ethiopia pp. 26–27: World Bank Group, South Asia pp. 40–41: World Bank Group, Indonesia pp. 56–57: World Bank Group, Armenia pp. 66–67: World Bank Group, Rajasthan ANNEXES 2012 ANNUAL REVIEW • FIAS - the FACILITY for INVESTMENT CLIMATE ADVISORY SERVICES Through the FIAS program, the World Bank Group and donor partners facilitate investment climate reforms in developing countries to foster open, productive, and competitive markets and to unlock sustainable private investments in sectors that contribute to growth and poverty reduction. The FIAS program is managed by the Investment Climate Department under the joint oversight of the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the World Bank (IBRD). For more information, visit www.wbginvestmentclimate.org. World Bank Group