l1O13 I Itc. X I~~~~~~~~~~~~~~~~~~~I T HE WO 0R LD B AN K .W.es.~~~~~~~RE ,' ..R 1 99 7 -4 THE WORLD BANK ANNUAL REPORT 1997 i Cover photo montage copyright by The World Bank Group Photo credits Frontispiece, Jonathan Miller; pages viii and xii, Michele lannacci/World Bank; page 20, Curt Carnemark/World Bank; page 23, Jerri Dell; page 26, Edwin Huffman/World Bank; page 31, Jan Pakulski/World Bank; page 46, W. Graeme Donovan; page 55, Curt Carnemark/World Bank; page 62, Rebeca Robboy; page 72, Curt Carnemark/World Bank; page 82, Curt Carnemark/World Bank; page 87, World Bank; page 132, Edwin Huffman/World Bank; page 142, Richard A. Latoff and Co. Design Book and cover design: Joyce Petruzzelli, Graphic Design Unit, The World Bank Group Chart design: Jennifer Sterling, Graphic Design Unit, The World Bank Group Typography: Debra Malovany and Christopher Chapman, Graphic Design Unit, The World Bank Group Editorial Lesley Anne Simmons, Office of the Publisher, The World Bank Group Editorial assistance Marketa Jonasova and LaVerne Campbell, Office of the Publisher, The World Bank Group Production Stephanie Gerard, Office of the Publisher, The World Bank Group World Wide Web design Sherry Holmberg, Office of the Publisher, The World Bank Group ISSN: 0252-2942 ISBN: 0-8213-3760-2 iv THE WORLD BANK ANNUAL REPORT 1997 THE WORLD BANK ANNUAL REPORT 199 7 CONTENTS LETTER OF TRANSMITTAL VilI THE WORLD BANK GROUP: THE IBRD, IDA, IFC, ICSID AND MIGA X MESSAGE FROM THE CHAIRMAN OF THE EXECUTIVE BOARD XII OVERVIEW OF WORLD BANK ACTIVITIES IN FISCAL 1997 1 SECTION ONE THE EXECOTIVE BOARD 10 SECTION TWO MAJOR WORLD BANK PROGRAMS-FISCAL YEAR 1997 13 Poverty reduction activities 13 Human development 17 Gender 21 Social development 22 Environmentally sustainable development 24 Finance, private sector, and infrastructure development 29 Research 34 SECTION THREE 1997 REGIONAL PERSPECTIVES 37 Africa 37 East Asia and Pacific 48 South Asia 57 Europe and Central Asia 65 Latin America and the Caribbean 74 Middle East and North Africa 84 SUMMARIES OF OPERATIONS APPROVED FOR IBRD, IDA, IDA INTERIM TRUST FUND, AND TRUST FUND FOR GAZA AND THE WEST BANK ASSISTANCE IN FISCAL 1997 92 SECTION FOUR WORLD BANK OPERATIONS AND ADMINISTRATION 113 Institutional renewal 113 Development effectiveness 114 Operations evaluation 115 Commitments and guarantees 117 Disbursements 118 Cofinancing and trust fund programs 121 Technical assistance 126 Inspection Panel 127 Public Information Center 127 Administrative budget and corporate planning 128 SECTION FIVE WORLD BANK FINANCES 133 IBRD financial highlights 133 Financialpolicies 133 Loans 134 Liquid asset management 135 Borrowings and liability management 135 Capital 138 IDA finances 139 v iBRD/IDA APPENDIXES 143 FINANCIAL STATEMENTS OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 185 SPECIAL PURPOSE FINANCIAL STATEMENTS OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION 219 SPECIAL PURPOSE FINANCIAL STATEMENTS OF THE INTERIM TRUST FUND 240 INDEX 249 BOXES The Heavily Indebted Poor Countries (HIPc) Debt Initiative 2 Working at the Grassroots 22 Partnerships Improve Pearl Millet 28 Railway Concessioning 33 Capacity Building for Development 45 Initiatives to Promote Private Participation in Infrastructure in East Asia and the Pacific 54 Building Social Capital 63 Assisting Reforms in the Pension System 69 Supporting Peace in Guatemala 79 The West Bank and Gaza-Expanding and Diversifying Bank Group Support 90 Workshop on Large Dams 116 The Policy and Human Resources Development (PHRD) Fund 126 Requests for Inspection 128 The Interim Trust Fund 139 Review of IDA Activities in Fiscal Years 1994-96 140 TABLES Operational and Financial Overview, Fiscal Years 1993-97 8 Program of Targeted Interventions, Fiscal Years 1995-97 14 Patterns in World Bank-NGO Operational Collaboration, Fiscal Years 1986-97 16 World Bank PPI Operations, Fiscal Years 1988-97 32 Lending to Borrowers in Africa, by Sector, Fiscal Years 1988-97 40 World Bank Commitments, Disbursements, and Net Transfers in Africa, Fiscal Years 1992-97 41 Operations Approved During Fiscal Year 1997, Africa 42 Lending to Borrowers in East Asia and Pacific, by Sector, Fiscal Years 1988-9 7 49 World Bank Commitments, Disbursements, and Net Transfers in East Asia and Pacific, Fiscal Years 1992-97 51 Operations Approved during Fiscal Year 1997, East Asia and Pacific 52 Lending to Borrowers in South Asia, by Sector, Fiscal Years 1988-97 58 World Bank Commitments, Disbursements, and Net Transfers in South Asia, Fiscal Years 1992-97 60 Operations Approved during Fiscal Year 1997, South Asia 61 Lending to Borrowers in Europe and Central Asia, by Sector, Fiscal Years 1988-97 66 World Bank Commitments, Disbursements, and Net Transfers in Europe and Central Asia, Fiscal Years 1992-97 67 Operations Approved during Fiscal Year 1997, Europe and Central Asia 70 vi THE WORLD BANK ANNUAL REPORT 1997 Lending to Borrowers in Latin America and the Caribbean, by Sector, Fiscal Years 1988-97 77 World Bank Commitments, Disbursements, and Net Transfers in Latin America and the Caribbean, Fiscal Years 1992-97 78 Operations Approved during Fiscal Year 1997, Latin America and the Caribbean 80 Lending to Borrowers in Middle East and North Africa, by Sector, Fiscal Years 1988-97 85 World Bank Commitments, Disbursements, and Net Transfers in Middle East and North Africa, Fiscal Years 1992-97 88 Operations Approved during Fiscal Year 1997, Middle East and North Africa 89 Trends in IBRD and IDA Lending, Fiscal Years 1995-97 117 World Bank Adjustment Operations, Fiscal year 1997 119 IBRD and IDA Disbursements for Foreign and Local Expenditures 120 IBRD and IDA Disbursements for Foreign Expenditures, by Source of Supply 121 Total IBRD and IDA Lending and Cofinancing Operations, Fiscal Years 1994-97 122 World Bank Cofinancing Operations, by Region, Fiscal Years 1996-97 124 Trust Fund Disbursements 125 IBRD Medium- and Long-Term Borrowings, Fiscal Year 1997 136 IBRD Borrowings, after Swaps, Fiscal Year 1997 138 FIGURES IBRD and IDA Commitments and Disbursements, Fiscal Years 1993-97 5 IBRD and IDA Lending to the Poorest Countries, Fiscal Years 1988-97 9 Types of NGOs Involved in Bank-financed Projects, Fiscal Years 1992-97 15 1BRD and IDA Lendingfor the Social Sector, Fiscal Year 1997 17 World Bank Lendingfor Environment Projects, Fiscal Years 1986-97 24 IBRD and IDA Lending to Sectors with Potential for Private Sector Involvement, Fiscal Year 1997 30 Africa, Growth of GDP and Exports 38 Africa, Accounting for Growth 39 Africa: IBRD and IDA Commitments by Sector, Fiscal Year 1997 44 East Asia and Pacific: IBRD and IDA Commitments by Sector, Fiscal Year 1997 50 Poverty in East Asia: Percent of Population Below the Poverty Line 53 South Asia: IBRD and IDA Commitments by Sector, Fiscal Year 1997 59 Europe and Central Asia: IBRD and IDA Commitments by Sector, Fiscal Year 1997 68 Latin and America and Caribbean GDP Growth Rate and Inflation Rate, Fiscal 1991-96 75 Latin America and the Caribbean IBRD and IDA Commitments by Sector, Fiscal Year 1997 76 Middle East & North Africa IBRD and IDA Commitments by sector, Fiscal Year 1997 86 Projects Approved for Bank and IDA Assistance by Region, Fiscal Year 1997 118 IBRD and IDA Commitments, Fiscal Year 1997 118 Cofinancing by Region, Fiscal Years 1996-97 123 Trust Fund Contributions and Disbursements, Fiscal Years 1994-97 125 IBRD/IDA Income and Expenditure at a Glance, Fiscal Year 1997 129 vii LETTER OF TRANSMITTAL This Annual Report, which covers the period July 1, 1996, to June 30, 1997, has been prepared by the executive directors of both the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) in accor- dance with the respective by-laws of the two institutions. James D. Wolfensohn, president of the IBRD and IDA and chairman of the boards of executive directors, has submitted this The IBRD and IDA Executive Board and Senior Management, November 996 viii THEWORLD BANKANNUAL REPORT 1997 Report, together with accornpanying administrative budgets and audited financial statements, to the board of governors. Annual Reports for the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID) are published separately. Executive Directors Alternates G Khalid M. Al-Saad (vacant) Khalid H. Alyahya Ibrahim M.Al-Mofleh Juanita D. Amatong Murilo Portugal -. _ / .......... ll 2 l 2 Marc-Antoine Autheman Olivier Bourges Ali Bourhane Luc-AbdiAden Ka~im Brachemi AdlKarim Lodhi Andrei Bugrov Eugene Miagkov Juan Cariaga Julio Nogues Joaquim R. Carvalho Godfrey Gaoseb Enzo Del Bufalo Inigo Fernandez de Mesa -a , . _ l | l 2 Jean-Daniel Gerber Jan Sulmicki Leonard Good Winston Cox Luc Hubloue Namik Dagalp Jannes Hutagalung Sun Vithespongse ~ Ruth Jacoby Jorgen Varder Young-Hoi Lee Christopher Y. Legg _________________ ~~Li Yong Zhao Xiaoyu Atsuo Nishihara Akira Kamitomai Gus O'Donnell David Stanton Franco Passacantando Helena Cordeiro =-___. - Jan Piercy Michael Marek Helmut Schaffer Erika Wagenh6fer Surendra Singh Syed Ahmed Pieter Stek Mioara Ionescu -Q~ __ July 31, 1997 ix THE WORLD BANK GROUP THE IBRD, IDA, IFC, ICSID AND MIGA The World Bank, which these five institutions are Conservative lending policies, consists of the International known as the World Bank strong financial backing from Bank for Reconstruction and Group. members, and prudent finan- Development (IBRD) and the The IBRD, established in cial management give the IBRD International Development 1945, is now owned by the strong standing in the markets. Association (IDA), has one governments of 180 countries. As well as borrowings, the IBRD overarching goal: helping its To join the IBRD, countries is funded by the capital its borrowers reduce poverty. It must first be members of the members have paid in, its re- is a partner in strengthening International Monetary Fund tained earnings, and repay- economies and expanding (tMF). Upon joining the IBRD ments on its loans. markets to improve the qual- members subscribe to its capi- IDA was established in 1960 ity of life for people every- tal stock. The amount of to provide assistance to poorer where, especially the poorest. shares each member is allo- developing countries that can- The IBRD and IDA make cated reflects its quota in the not meet the IBRD's near-com- loans to borrower govern- IMF, which in turn reflects the mercial terms. IDA provides ments for projects and pro- country's relative economic credits to the poorest coun- grams that promote economic strength in the world tries-mainly those with an and social progress by helping economy. Members pay in a annual per capita gross na- raise productivity so that small portion of the value of tional product of $785 or less people may live better lives. their shares; the remainder is (in 1996 U.S. dollars). By this Along with these loans, the "callable capital" and would criterion, about seventy coun- World Bank provides advice only be paid should the IBRD tries are eligible (see appen- and technical assistance. The be unable to meet its obliga- dix 5). International Finance Corpo- tions-a situation that has All members of the IBRD are ration (IFC)-which works never arisen. eligible to join IDA, and 159 closely with private investors The IBRD lends only to credit have done so. Unlike the IBRD, and invests in commercial en- worthy borrowers and only for most of IDA'S funds are con- terprises in developing coun- projects that promise high real tributed by its richer mem- tries-and the Multilateral In- rates of economic return to bers, although some develop- vestment Guarantee Agency the country. As a matter of ing countries contribute to IDA (MIGA)-which encourages di- policy, the IBRD does not re- as well. In addition, IDA re- rect foreign investment in de- schedule payments, and it has ceives transfers from the net veloping countries by offering suffered no losses on the loans earnings of the IBRD and repay- insurance against noncommer- it has made. While it does not ments on its credits. cial risk-share the same over- aim to maximize profits, but IDA credits are made only to all goals. The International rather to intermediate devel- governments. The repayment Centre for Settlement of opment funds at the lowest period is thirty-five to forty Investment Disputes (ICSID) cost, the IBRD has earned a net years. Credits carry no inter- shares the World Bank's objec- income every year since 1948. est, but there is a commitment tive of promoting increased The IBRD borrows most of charge, which is set annually, flows of international invest- the money it lends through within a range of 0-0.5 per- ment by providing facilities medium- and long-term bor- cent of the undisbursed bal- for settling disputes between rowings in capital markets ance; the commitment charge foreign investors and their across the globe. It also bor- is currently set at zero per- host countries. Collectively, rows funds at market-based cent. Although IDA is legally rates from central banks and other government institutions. x THEWORLD BANKANNUAL REPORT 1997 and financially distinct from the IBRD, it shares are a common feature of international invest- the same staff, and the projects it supports have ment contracts, investment laws, and bilateral to meet the same criteria as do projects sup- and multilateral investment treaties. ICSID has ported by the IBRD. 127 members. In addition to its dispute-settle- Under its Articles of Agreement, the World ment activities, ICSID undertakes research, advi- Bank cannot allow itself to be influenced by the sory services and publishing in the fields of arbi- political character of a member country: Only tration and investment law. Its publications economic considerations are relevant. To ensure include multivolume collections of "Investment that its borrowers get the best value for the Laws of the World" and "Investment Treaties" money they borrow, Bank assistance is untied and the semi-annual "ICSID Review-Foreign In- and may be used to purchase goods and services vestment Law Journal." ICSID issues its own from any member country. annual report, which may be obtained from the The IFC, established in 1956, helps promote ICSID Secretariat'. private sector growth in developing countries MIGA was established in 1988 to promote the and helps mobilize domestic and foreign capital flow of foreign direct investment in member for this purpose. It has 172 members. Legally countries. It does this by providing guarantees and financially the IFC and the World Bank are to private investors against major political risks separate entities, and the IFC has its own operat- and offering investment marketing services to ing and legal staff It draws upon the World Bank host governments to help them attract foreign for administrative and other services, however. investment. The IFC provides loans and makes equity in- MIGA is an independent self-supporting agency vestments in support of projects. Unlike most of the World Bank Group. Like the IFC, it has its multilateral institutions, the IFC does not accept own capital base and country membership, but government guarantees for its financing. Like a it shares the World Bank's development man- private financial institution, the IFC seeks profit- date to promote the economic growth of its de- able returns and prices its finance and service, veloping member countries. to the extent possible, in line with the market MIGA has 141 members. MIGA issues its own while taking into account the cost of its funds. annual report, which may be obtained from its The IFC shares full project risks with its private- Office of Central Administration2. sector partners. The iFc issues its own annual report. ICSID was established in 1966 to help promote 1. International Centre for Settlement of Investment international investment. It does this by provid- Disputes, Secretariat, 1818 H Street N.W, Washington, ing facilities for the settlement, by conciliation D.C. 20433, USA. 2. The Multilateral Investment Guarantee Agency, Office and arbitration, of disputes between foreign in- of Central Administration, 1818 H Street N.W., Washing- vestors and their host countries. Provisions re- ton, D.C. 20433 USA. ferring to arbitration under the auspices of ICSID xi MESSAGE FROM THE CHAIRMAN OF THE EXECUTIVE BOARD This Annual Report, covering July 1, 1996 to June 30, 1997, chronicles a year of renewal at the World Bank. Strengthening partnerships and getting results in serving the poorest people in the world are two recurring themes run- ning through these pages. Nowhere have these two objec- tives been better illustrated than in the strengthened work- ing relationship that is being forged between management and staff of the World Bank and its shareholders represented by the Executive Board. Over the last ten years the environment for the Bank's clients has changed dramatically. While official development assistance has declined, private capital flows have surged. But they have been concentrated in a comparatively small number of countries. At the same time, the role of civil society and that of the private sector have become more pronounced, governments have become more accountable for their actions, and all the players rely on the new capacity to share knowledge rapidly as a result of dramatic changes in technology. As the Bank has recognized these developments, we have introduced new approaches to ensure that the lending and advice we provide is what our clients really need. One conse- quence of the reform process is of special note. Institutional change, encapsulated in the Strategic Compact, has been given momentum by a joint commitment by management and the board to enhance the latter's role in defining policy directions. The Executive Board's unanimous approval of the Strategic Compact last March, whereby investment in changes over the next two years will lead to a much stronger and xii THE WORLD BANK ANNUAL REPORT 1997 cost-effective institution in the future, was business plan, which is embodied in the an important step in further strengthening Strategic Compact. By the fiscal year 2001, the relationship between the Bank and its we have committed to returning our real shareholders. The executive board will have operating costs to this year's level while an integral role in monitoring the Strategic providing a higher level of service and Compact and ensuring its success as man- greater volume of products to our clients. agement reports regularly to the board on To ensure that our shareholders see a re- progress in implementing policy initiatives. turn on the investment that we are making We now have symmetry in the roles of to renew the Bank, we are building up our management and the board in approving capacity to evaluate our institutional perfor- projects and changes in the Bank's policies: mance against clearly defined objectives. projects are discussed as part of broader Fifty years after the Bank made its first country assistance strategies, while changes loan, we are poised to enter the new millen- in specific policies will increasingly be con- nium with fresh vigor and more attuned sidered within the overall policy framework to our clients needs than ever before. established by the Strategic Compact. Almost 5 billion people who live in our The changes the Bank is undertaking have client countries deserve the benefits that an the specific objective of making the Bank effective and competent World Bank, at the the most effective institution in the world heart of a global network of development in the fight against poverty. We aim to assistance, can provide. reach this goal through a clearly defined JAMES D. WOLFENSOHN xiii OVERVIEW OF WORLD BANK ACTIVITIES IN FISCAL 1997 Fiscal 1997 marked an * As the reforms of the North Africa region. Loans to escalation of the process of 1990s took root in South Jordan and Tunisia, for ex- renewal at the World Bank, Asian countries, the Bank sup- ample, are helping promote building on the vision of an ported its clients as they private sector participation in institution that delivers devel- shifted their focus to a second the wider world economy and opment results and reflecting generation of reform: In India facilitating important recent the Bank's guiding principles this involved responding to initiatives such as the pro- of greater selectivity in activi- several requests for assistance posed association of MENA ties, strengthened partnerships, at the state level to help countries with the European emphasis on client needs, in- evaluate fiscal situations and Union. creased results orientation, identify policy options to pro- One of the year's most sig- cost-effectiveness, and a strong mote fiscal sustainability. nificant achievements was the commitment to financial * Strengthening safety nets initiative to address the debt integrity, to protect the most vulnerable of the heavily indebted poor The Bank's regional assis- people from the adverse ef- countries (HIPcs), which com- tance strategies in fiscal 1997 fects of reform is a priority for bines powerful partnerships to addressed the specific needs of many of the Bank's clients, es- meet new needs, using its clients as they face the pecially in the Eastern Europe nonlending and lending ser- challenges of adjusting to a and Central Asia region. In fis- vices with funding drawn not rapidly changing global cal 1997 the Bank supported only from the Bank but from economy. Examples include: innovations to generate in- other partners (see box). An- - Following a request for come and create assets for the other was the Executive support by the Bank's African poor through social invest- Board's unanimous approval clients in fiscal 1996, capacity ment funds in a number of of the Strategic Compact in building remained high on the countries and through projects March 1997. agenda. Efforts to mainstream such as support to the Ukrain- The Strategic Compact is a capacity-building activities ian authorities to protect plan for fundamental reform into all Bank operations were people adversely affected by to make the Bank more effec- initiated, and development of coal sector restructuring. tive in delivering its regional a partnership framework . In Latin America, where program and in achieving its began. the legacy of recent years has basic mission of reducing pov- * In East Asia, where suc- made countries acutely aware erty. The compact is an ex- cessful economic development of the importance of sound fi- pression of the Bank's business has taken a heavy toll on the nancial markets, the Bank sup- strategy and focuses on the ex- environment, and "brown en- ported a number of programs ternal delivery of higher-qual- vironmental issues" such as air to restore confidence in finan- ity products and services to and water pollution are threat- cial systems, such as in Argen- the Bank's clients. The com- ening health and sustainable tina, Mexico, and Venezuela. pact was the outcome of ex- development, the Bank in- - Supporting reform pro- tensive consultation through- creased its support for the sec- grams to speed growth by pro- out the organization, reflects tor with loans and related ad- moting international competi- the input of clients and share- vice for water supply and tiveness and opening up to holders, and has the support sanitation, for example, which global markets was a focus for and partnership of all the increased more than two-and- clients in the Middle East and Bank's shareholders. one-half times over the fiscal Through the compact, the 1996 level. Bank's shareholders and man- agement are investing in and OVERVIEW OF WORLD BANK AcTIvIEs I THE HEAVILY INDEBTED POOR COUNTRIES (HIPC) DEBT INITIATIVE In September 1996 the Interim and Development cate about $260 million to $330 million to the HIPC committees endorsed the program of action proposed Trust Fund during the years 1997 to 2003. A num- by the Bank and the International Monetary Fund ber of bilateral donors have also made contributions (iMF) to ensure that heavily indebted poor countries or pledges to the World Bank's HIPC Trust Fund to (HiPcs) that have a sound track record of economic help other multilateral creditors provide their share adjustment can attain a sustainable debt situation of debt relief under the initiative. over the medium term. The committees requested the In April 1997 the executive boards of the IMF and Bank and Fund to proceed quickly with implementa- the World Bank approved, in principle, assistance tion and to report on progress at the spring 1997 under the HIPC Debt Initiative for Uganda, the first meetings. country to reach the "decision point." Under this de- Over the next six months the Bank and the Fund cision, which depends upon the participation of moved rapidly to implement the initiative and to Uganda's other creditors and the implementation of consider the assistance that could be provided for the agreed reforms, debt relief to Uganda, in net present first group of eligible countries. This marked an im- value terms, will total about $340 million. In view of portant development in the support that the Bank Uganda's exceptional record of sustained and strong and the Fund and the international community was adjustment and reform, and under the program of to provide to the poorest, most heavily indebted economic reforms and social development to be pur- countries. sued with the support of the IMF and the Bank, the The principal vehicles for Bank participation in boards agreed to shorten, on an exceptional basis, the initiative were created in fiscal 1997. The Bank the normal three-year interim period to one year The established the HIPc Trust Fund in November 1996 expected completion point, therefore, is April 1998. and subsequently allocated $500 million from its IDA will provide $160 million of the debt relief, which IBRD surplus to this trust fund as an initial contribu- will reduce nominal debt service to iDA by about tion. The IMF established the ESAF-HIPC Trust for fi- $430 million over time. nancing special Enhanced Structural Adjustment Fa- Bank and Fund staff have prepared debt- cility operations under the HIPC Debt Initiative. sustainability analyses for other countries that on The Bank chaired meetings of the multilateral the basis of their record of performance are ap- creditors of the HIPCs in November 1996 and March proaching the decision point. The boards have dis- 1997 to discuss the implementation of the initiative cussed preliminary analyses for Bolivia, Burkina as well as the status of their participation in it. At Faso, and Cote d'Ivoire, and consultations are the end of the fiscal year, most of theses creditors had underway that could progress to decision points for either obtained or were well advanced in obtaining these countries in the summer of 1997. In addition, the appropriate institutional approvals to enable Bank and Fund staff are preparing debt-sustainabi- them to participate. The African Development Bank lity analyses with the governments of several other and the Inter-American Development Bank, both countries. principal creditors of the HIPCS, have obtained the Total costs of the HIPC Debt Initiative, while tenta- necessary formal approvals in principle for them to tive, are in the range of $5.5 billion to $8.4 billion in participate. The African Development Bank will allo- net present value terms. implementing a series of changes over thirty progress will be measured and for which man- months to transform the way the institution agement will be held accountable. does business: improving its products, speeding The compact's vision is of a professionally ex- up its processes, lowering its costs, making it cellent institution that responds quickly to the more demand driven, and increasing its devel- evolving and varying needs of its clients and opment impact. The compact will also establish provides a wide range of high-quality services; clear performance criteria against which that operates through partnerships and acts as a catalyst for private-public collaboration; and 2 THE WORLD BANK ANNUAL REPORT 1997 that builds capacity and knowledge for the en- * Rebuild technical expertise in key areas of tire development community. development and expand the Bank's focus in The compact is rooted in the recognition of those areas-with the social sectors, institution the need for change if the Bank is to be effec- building, and the private sector being immedi- tive in the rapidly changing global economy ate priorities. where private capital flows are five times * Further decentralize activities to the field to greater than official assistance, where many dif- allow Bank staff to work more closely with cli- ferent actors (from multilateral banks to non- ents in order to better customize country assis- governmental organizations) now play a much tance strategies, design more appropriate condi- greater role in development, and where techno- tionality, and build local ownership of logical change has revolutionized the way busi- development programs. ness is done. The Bank has been slow to respond * Strengthen the Bank's information manage- to these changes in the past-with overly bu- ment system to collect, synthesize, and dissemi- reaucratic processes, weak capacity in key areas nate the best in development thinking. such as the social sectors, institution building, * Create new and stronger partnerships with and banking, and the acceptance of insufficient other organizations to enable the Bank to be development impact in the projects it supports. more selective and to specialize in those areas But as this Annual Report describes, change was where it has a comparative advantage. well under way to meet the Strategic Compact's * Reform the Bank's human resources system objectives by the end of the fiscal year. to create a more flexible, performance-based, The central objective of the compact is to and diverse institution. make the Bank more efficient and to increase * Eliminate cumbersome, inefficient pro- the development effectiveness of everything it cesses to make the Bank quicker, leaner, and does. In terms of lending effectiveness, for ex- more cost-effective. ample, it is expected that the proportion of Client benefits promise to be substantial: projects rated satisfactory will increase from 66 higher-quality and more relevant products percent to 75 percent, meaning that an extra $2 and services backed by an effective, modern billion a year of the Bank's lending will have knowledge-management system; and a staff that greater impact. combines state-of-the-art technical skills and The compact takes a comprehensive ap- global experience within the context of a flatter, proach to increasing the Bank's development ef- faster, more flexible, and more decentralized fectiveness in four priority and related areas: re- organization. fueling current business activities; refocusing The compact's overall costs will be met the development agenda; retooling the Bank's through a stringent program of savings and re- knowledge base; and revamping institutional deployment. Net additional investment under priorities. It will: the compact is $250 million. This funding will * Shift resources from overhead and adminis- be phased in to ensure that it is in line with the tration to frontline operations, with the goal of Bank's absorptive capacity: $100 million annu- frontline resources accounting for 60 percent of ally in fiscal 1998 and 1999 and $50 million in the budget and supporting activities accounting fiscal 2000; budgets will return to the fiscal for 40 percent. The Bank's management has 1997 level, in real terms, by fiscal 2001. Ap- committed to redeploying $170 million inter- proval of the compact's funding will be contin- nally to support frontline operations because gent on the Executive Board's annual review of the basic business of the Bank needs to be bet- the Bank's budget and work program. ter funded. The fundamental retooling of the Bank's op- * Develop new financial products and advi- erations must be judged by its impact on devel- sory services-with the emphasis on increasing opment effectiveness. Therefore, a broad range flexibility and timeliness for clients. of specific measures for gauging effectiveness OVERVIEW OF WORLD BANK ACTIVITIES 3 and accountability are being developed. These 6.6 months in fiscal 1996 to 6.1 months in include: fiscal 1997. * tracking development progress made by the By the end of the fiscal year, 96 percent of Bank's client countries (using the expanded the backlog of Implementation Completion Re- World Development Indicators'); ports (ICRS) was cleared. ICRs lay the foundation * setting targets for responding to clients. for a better future lending program based on Clearly defined business standards have been strategies that are well grounded in experience, set for managing the portfolio and for lending evaluation, and lessons learned. and nonlending services: for example, the Bank A more cost-effective, results-oriented Bank is aiming to get projects approved within five will lead to a stronger International Develop- months of appraisal and economic and sector ment Association (IDA). IDA borrowers will get a reports to clients within five months of onset; better-quality product, and IDA donors will have and greater confidence that their contributions are * monitoring the main determinants of what being used even more effectively. makes projects go well or badly, such as ensur- In fiscal 1997, disbursements from IDA contin- ing that projects are well prepared, well super- ued to increase (see figure 1), reflecting greater vised, and that implementation problems are emphasis on implementation. Disbursements recognized and dealt with quickly. reached a record $5,979 million, of which In line with the Bank's aim for increasing re- $4,815 million was for investment projects. sults, portfolio management programs to im- The temporary decline in new IDA commit- prove the current portfolio accelerated during ments in fiscal 1997 reflects both increased se- fiscal 1997 through the quality-at-entry and lectivity and the concentration of IDA resources portfolio improvement programs. A key innova- on improving implementation and the quality tion was the concept of projects at risk, which is of the existing portfolio. Selectivity is based on helping to identify the potential as well as ac- attaching increased importance to the policy tual problem projects. The concept continues to prerequisites for IDA lending of all types. Im- be refined but already is serving as an additional provements in policy performance in many tool for portfolio management as well as en- countries are expected to be reflected in future abling more accurate reporting on the status of increases in IDA commitments. While it is not the portfolio. yet possible to measure fully the transitional ef- Staff were encouraged to recognize problems fect of the reorganization of the Africa regional early and to address them proactively. The office, it is estimated to have been small. To the portfolio improvement program, for example, extent that this may have contributed to delays targeted poorly performing segments of the in new commitments during fiscal 1997, the portfolio for special attention. Coupled with now completed renewal program should result improvements in quality-at-entry for new op- in fiscal 1998 commitments returning to at least erations, these intensified portfolio management the level of fiscal 1996 (in SDR terms) as delays efforts should lead to higher rates of satisfactory are overcome and a quicker, more effective outcomes. regional program ensues. "Stretch targets" for client responsiveness are Promoting transparency, accountability, and providing a measure for improving results and institutional capacity is critical to successful, client focus. They included substantial cuts in sound, and equitable development and has been elapsed time for provision of services during the a key aspect of the Bank's development agenda fiscal year: The average time elapsed between in recent years. Building on these principles, the appraisal and board consideration was reduced Bank's president, in his 1996 Annual Meetings from 9.3 months in fiscal 1996 to 7.8 months in speech, emphasized the importance of eliminat- fiscal 1997, and projects are becoming effective ing corruption. The anticorruption measures more quickly. The average time between board approval and effectiveness is down from i. World Bank.1997. World Development Indicators. WashinTNon, D.C. 4 THE WORLD BANK ANNUAL REPORT 1997 Figure 1. IBRD and IDA Commitments and Disbursements, FiscalYears 1993-97 (US$ millions) 20,000 8,000 6,000 Disbursements Disbursements ¼. ~~5,000 / 10,000 1993 1994 1995 1996 1997 4,000 1993 1994 1995 1996 1997 IBRD IDA Note: Excludes guarantees and loans to the IFC. IBRD data for 1996 includes the refinanced/rescheduled overdue charges of $168 million for Bosnia and Herzegovina. contained in the Bank's procurement guidelines, tional financial institutions, United Nations its standard bidding documents, and its legal organizations, academia, foundations, business, technical assistance were strengthened in fiscal nongovernmental organizations (NGOS), and 1997. Many governments have strongly commit- others. Some of these partnerships are described ted themselves to fight corruption, and the Bank throughout this Annual Report. A framework for has worked with them to support their efforts to cooperation in financial sector activities was improve governance and public sector manage- agreed between the World Bank Group and the ment programs that aid efficient resource alloca- International Monetary Fund (IMF), and a coop- tion and reduce the possibilities for corruption, eration agreement was finalized with the World through lending and nonlending services. The Trade Organization. It will facilitate closer work- Economic Development Institute's (EDI)2 Gover- ing relations for promoting global trade and nance Program, initiated in fiscal 1994 to build helping developing countries adopt open policies national integrity systems to fight corruption, to support growth and eliminate poverty. is one example. EDI held more than thirty governance-related activities in more than a dozen countries across five regions in fiscal 1997. 2. The Economic Development Institute designs and Creating new and stronger partnerships with delivers training programs for Bank clients, providing policy other organizations is enabling the Bank to be lessons, skills building, and outreach to civil society. EDI issues its own annual report, which is available from: New more selective and specialize in those areas Products and Outreach, The Economic Development where it has a comparative advantage. In fiscal Institute, The World Bank, 1818 H Street, N.W, Washington, 1997, progress was made in developing joint D.C. 20433, USA. programs and information sharing with interna- OVERVIEW OF WORLD BANK ACTIVITIEs 5 The Business Partnership Center, launched Bank operations in countries emerging from early in the fiscal year to serve as a focal point conflict are an increasingly significant part of of contact for the business community and for the Bank's work, and the document "A Frame- developing strategic partnerships with business work for World Bank Involvement in Post Con- groups, handled over 1,000 inquiries from flict Reconstruction"3 provided a conceptual members of the business community, had over and operational framework for Bank staff work- 90,000 visitors to its World Wide Web site, and ing to help countries move from conflict to sus- featured in more than forty international con- tainable economic development. ferences. It is discussing potential partnership Much of the Bank's postconflict reconstruc- arrangements with more than fifteen groups tion work has been in rebuilding infrastructure, worldwide. but capacity is also needed to promote eco- The high level of NGO involvement in Bank- nomic adjustment and recovery, to address so- supported development activities was main- cial sector needs, and to build institutional ca- tained in fiscal 1997, with 47 percent of pacity. Some lending operations in fiscal 1997 projects involving NGO participation in some involve unique postconflict elements, including capacity and with NGO liaison staff now active clearing land mines in Bosnia and Herzegovina in seventy-two of the Bank's resident missions. and Croatia, demobilization and reintegration of The country assistance strategy (CAS) posi- ex-combatants in Bosnia, and reintegration of tions the country client at the center of the displaced people in Bosnia and Rwanda. Bank's operational work. It is the key tool for Two overall objectives for Bank intervention shaping and driving the Bank's country-level are set out in the framework: to facilitate the work. Management and the board worked transition to sustainable peace after hostilities closely together to improve the strategic focus cease and to support economic and social devel- of CASS in fiscal 1997. The CAS has evolved con- opment. The framework outlines a five-stage siderably in its seven-year history, mirroring process for Bank involvement corresponding to many concomitant changes in the Bank itself- various phases of postconflict reconstruction. for example, this year, social issues of develop- Sound financial systems are key to economic ment began to be integrated into CAS work. development, yet one in five developing coun- Greater efforts were also made to further build tries is at risk of facing banking problems. The the results of poverty assessments into cAss; and Bank has speeded up its response to clients fac- to strengthen the private sector focus, a number ing financial crisis and supported those vulner- of CASS were prepared jointly by the Bank and able to such risk. It prepared a series of loans to the International Finance Corporation (IFC) in help the Bulgarian government implement a fiscal 1997, including those for Brazil, Indone- stabilization and reform program to address its sia, Mexico, and Poland. As part of a larger strat- financial crisis, for example. The first loan, in egy to link lending and learning activities, EDI August 1996, helped to restructure enterprises helped prepare the CAS for Russia. and supported banking sector rehabilitation and The CAS starts with a diagnosis of country the acceleration of privatization. This was fol- challenges and client governments' concerns lowed by a loan in May 1997 to reduce short- and priorities. It takes into account what others ages of vital commodities and build public con- are doing and the lessons learned about what fidence in the reform program. has worked and what has not worked in the Bank's and others' programs in the country. CASS are discussed with the authorities of the bor- 3. World Bank. 1997. "A Framework for World Bank rowing country and increasingly with other Involvement in Post Conflict Reconstruction." Environment partners and stakeholders. and Social Policy Division, Environment Department, Washington, D.C. 6 THEWORLD BANKANNUAL REPORT 1997 To explore how the World Bank Group might seminate and apply lessons of experience among better help its clients promote and facilitate pri- staff and clients. Through this system, complex vate sector involvement in infrastructure, and in information is distilled into usable formats for response to the proposal made by the Governor delivery to those who need it: policymakers, for Japan during the 1996 Annual Meetings, an parliamentarians, NGOS, and journalists, in ways infrastructure working group was established in that build vital understandings in member fiscal 1997. It will report to the 1997 Annual countries. Meetings on how public-private partnerships Four networks established in fiscal 1997 are might be expanded to meet the growing invest- at the center of the new knowledge-based Bank. ment gap. They are: The Bank helped refocus the international * Human Development; community's attention on the needs of the 70 * Environmentally and Socially Sustainable percent of the poor in developing countries Development; who live in rural areas by calling for a renewed * Finance, Private Sector and Infrastructure; focus on agriculture and rural development in and fiscal 1997.The Executive Board endorsed the * Poverty Reduction and Economic Manage- paper, "Rural Development: From Vision to Ac- ment. tion,"4 which set out a strategy for supporting The networks link staff who work in related rural development by improving rural strategy sectors across the Bank so they interact more ef- formulation and consensus building; improving fectively across the organization and with part- project quality; increasing international aware- ners outside the Bank and play a major role in ness; and building staff capacity. strategic thinking. In fiscal 1997 the Human Nonlending activities are an increasingly im- Development network prepared the first of a portant service to clients. The Operations new World Bank product-sector strategy Evaluation Department (OED) conducted a re- papers-for the health, nutrition, and popula- view of the Bank's self-evaluation processes for tion sector. Sector strategy papers are cross- nonlending services as well as a review of the cutting studies that are the sector equivalent of EDI. Its recommendations for stronger evalua- CASs. They present the World Bank's corporate tions across all areas of the Bank's work have strategy for the sector. been incorporated into strengthened self- The regional renewal programs began in fiscal evaluation programs that will be carried out 1996 moved toward completion during fiscal by management over the coming years. 1997. They aim to de-layer and simplify Building a sound knowledge base to support decisionmaking and delegate increased responsi- nonlending (as well as lending) activities is at bility to the field-twenty-one country direc- the heart of the Strategic Compact. The Bank is tors have been or are being relocated to field made up of an unmatched repository of experi- offices. ence and understanding about development is- During fiscal 1997, the IBRD'S Executive sues, which too often has been underused. Too Board approved new policies governing the much knowledge has been locked up in reports concentration of its loan portfolio and the size that do not provide real-time and relevant ad- and management of its liquid assets. These vice to clients, colleagues, and partners. To meet changes were designed to enhance the IBRD'S client needs more effectively and better equip flexibility in managing its finances and thereby Bank staff, work began on developing a knowl- better meet the changing needs of its clients edge management system in fiscal 1997 to dis- 4. World Bank. 1997. "Rural Development: From Vision to Action." Agriculture and Natural Resources Department. Washington, D.C. OVERVIEW OF WORLD BANK ACTIVITIEs 7 TABLE 1. OPERATIONAL AND FINANCIAL OVERVIEW, FISCAL YEARS 1993-97 (millions of us dollars unless otherwise noted) Item FY93 FY94 FY95 FY96 FY97 IBRD Commitmentsa 16,945 14,244 16,853 14,656b 14,525 Disbursementsa 12,942 10,447 12,672 13,372b 13,998 Net disbursements to all borrowers' 2,331 (731) 897 1,213 2,094 Net disbursements to current borrowers,. 2,865 19 1,651 2,100 3,258 excluding prepayments, 3,319 983 2,238 2,882 4,301 Net income 1,130 1,051 1,354 1,187 1,285 Financial return on average investments 6.07% 3.53% 5.69% 4.43% 5.00% New MLT borrowings in Fy after swaps 12,676 8,908 9,026 10,883 15,139 Average cost of new MLT borrowings in Fr after swaps 5.97% 4.99% 6.31% 5.28% 5.01% Subscribed capital 165,589 170,003 176,438 180,630 182,426 Statutory lending limit 179,787 185,865 195,248 197,785 198,705 Loans and callable guarantees outstanding 104,606 109,468 123,676 110,369 105,954 as a % of statutory lending limit 58% 59% 63% 56% 53% Headroom 75,181 76,397 71,572 87,416 92,751 Interest coverage ratio 1.16% 1.16% 1.19% 1.18% 1.22% Reserves-to-loans ratio 11.7% 13.9% 14.3% 14.1% 14.0% IDA Commitments 6,752 6,592 5,669 6,861 4,622 Disbursements 4,947 5,532 5,703 5,884 5,979 Net disbursements 4,580 5,110 5,205 5,322 5,364 Development credits outstanding 56,158 62,810 72,032 72,821 76,124 Accumulated surplus 1,194 1,365 1,995 1,790 1,998 IRLDIDA Joint Activities Administrative expenses 1,254 1,389 1,540 1,376 1,188 a. Excludes guarantees and loans to the IFC. b. Includes the refinanced/rescheduled overdue charges of $168 million for Bosnia and Herzegovina. while preserving a strong, conservative financial and 100 by IDA. Seven loans on IDA-like terms, standing. totaling $83.5 million from resources provided by the Trust Fund for Gaza and the West Bank, Fiscal year in review were approved for the West Bank and Gaza. Against this background, commitments by Three partial guarantees, totaling $420 million, the Bank were $19,147 million-$14,525 were approved. Gross disbursements amounted million from the IBRD and $4,622 million from to $19,977 million-$13,998 million from the IDA; 36 percent of those, totaling $1,646 million, IBRD, and $5,979 million from IDA. Table 1 pre- were from the Interim Trust Fund. A total of sents a comparative overview of Bank opera- 241 projects were approved, 141 by the IBRD tions and finances for fiscal years 1993-97. 8 THE WORLD BANK ANNUAL REPORT 1997 Figure 2. IBRD and IDA Lending to the the poor, to develop their human resources, and Poorest Countries, Fiscal Years 1988-97 to provide social safety nets (for a description of (US$ millions) each such targeted project, turn to the project summaries after Section Three). Il,000 During fiscal 1997, fifty-five out of sixty-two borrowers (89 percent) took advantage of the new single-currency loans first made available in fiscal 1996. Measured in terms of volume, 10,000 IDA $12.9 billion out of $14.5 billion (89 percent) in new loan commitments were in single- currency loans. The IBRD has 180 members. At the end of the 8,000 - . . . fiscal year, action was pending on membership in the IBRD for Palau and the Federal Republic of Yugoslavia (Serbia/Montenegro). IDA has 159 members. At the end of the fiscal year, action 6,000 was pending on membership in IDA for Barba- 6:000 dos, Ukraine, Venezuela, and the Federal Repub- lic of Yugoslavia (Serbia/Montenegro). 4,000 2,000 0~i 1RJ.1) 1993 1994 1995 1996 1997 Note: The poorest countries are defined as those with a per capita income of $785 or less in 1996 U.S. dollars. Assistance to the poorest countries-those with a per capita gross national product of $785 or less (in terms of constant 1996 United States dollars)-totaled $7,442.9 million-$3,080.9 from the IBRD and $4,362.0 from IDA (see figure 2). Some 29 percent of total Bank investment lending during the year directly targeted the poor compared to 32 percent the year before. These projects supported activities to increase the productivity and economic opportunities of OVERVIEW OF WORLD BANK ACTIVITIES 9 SECTION ONE THE EXECUTIVE BOARD The Board of Executive ness, Budget Committee, important role in shaping Directors is responsible for Personnel Committee, and Bank policy and its evolution the conduct of the general Committee on Executive Di- as they work for changes in di- operations of the Bank and rectors' Administrative Matters. rection, emphasis, and/or im- performs its duties under The executive directors' Steer- provements in Bank results. It powers delegated to it by the ing Committee, an informal is in this role that the directors Board of Governors. As pro- advisory body, also meets represent the changing per- vided in the Articles of Agree- regularly. spectives of their shareholder ment, five of the twenty-four In addition to the meetings governments vis-a-vis the executive directors are ap- and committee work, groups Bank's role. These policy ini- pointed by the five member of executive directors and al- tiatives normally reflect needs governments having the larg- ternate executive directors at perceived by shareholders and est number of shares; the rest times make special trips to involve a process of consensus of the board is elected by the borrowing countries to ob- building, both among execu- other member governments, serve Bank-supported opera- tive directors and with Bank who form constituencies in tions and its assistance strategy management. Many of the the election process every firsthand. They meet with a changes in Bank policy grow two years. wide range of people, includ- from initiatives by the execu- The executive directors ing staff of the Bank's resident tive directors and occur gradu- consider and decide on the missions or field offices, gov- ally over a period of years, IBRD loan and IDA credit pro- ernment officials, project man- such as the increasing empha- posals made by the president, agers, NGOs and project benefi- sis on social development is- and they decide policy issues ciaries, and the business sues, capacity building in Af- that guide the general opera- community. In fiscal 1997, rica, anticorruption programs, tions of the Bank and its direc- groups of executive directors and postconflict assistance. tion. The executive directors visited East Asia (Cambodia The executive directors are also responsible for pre- and China), South Asia have increasingly encouraged senting to the Board of Gover- (Bangladesh and India), West- closer linking of the operations nors at the Annual Meetings ern Africa (Burkina Faso, of the Bank, IFC, and MIGA. In an audit of accounts, an ad- Guinea, Niger), and Europe fiscal 1997, for example, the ministrative budget, and an and Central Asia (Bosnia and board held a seminar on the annual report on the opera- Herzegovina and Russia). Bank Group's existing and tions and policies of the Bank, planned guarantee and risk- as well as any other matters Shaping policy mitigation products in the that in their judgment require The Board of Executive Di- context of its strategic goals. submission to the Board of rectors' oversight responsibil- The executive directors Governors. ity covers virtually all Bank broadly supported the out- During fiscal 1997 the ex- policy, so its role cannot be lined approach to expand and ecutive directors met eighty clearly separated from most of strengthen these catalytic ac- times in formal board meet- the Bank activities and initia- tivities and urged management ings and another eighty-one tives covered in this Report. to move forward with con- times in seminars, informal This oversight responsibility is crete proposals to the board. sessions, and as the Commit- exercised in part through the Similarly, at a board seminar tee of the Whole. In addition, process of board approval of on a Bank Group financial sec- most of the executive direc- each Bank or IDA lending op- tor framework, executive di- tors serve on one or more of eration and the annual budget rectors emphasized the need five standing committees: process. However, the execu- for a coordinated approach Audit Committee, Committee tive directors also exercise an with other agencies, including on Development Effective- the IMF. 10 THE WORLD BANK ANNUAL REPORT 1997 In a sense, the executive directors' oversight Country assistance strategies role seeks to ensure that Bank policies are inter- preted and implemented correctly. The executive The country assistance strategy (CAS) is the directors review major policy areas in order to central vehicle for change in the Bank. The keep them current. For example, in fiscal 1997 executive directors in fiscal 1997 continued the board endorsed a Bank policy to renew em- their efforts to see poverty reduction, the Bank's phasis on rural development as a vital element of overriding objective, more comprehensively the objective of reducing poverty and promoting integrated into CASs. Although recognizing economic growth, food security, and sustainable considerable progress in the past few years, the resource management. directors stressed that further work is needed to build the results of poverty assessments Strategic Compact with shareholders into CASS. In fiscal 1997 the executive directors unani- In their consideration of CASS, the directors in- mously endorsed the Strategic Compact between creasingly emphasized selectivity in setting the Bank and its shareholders--a plan for reform country priorities for Bank support through and renewal of the Bank to make it more effec- lending and nonlending services and on the tive in achieving its overriding objective of pov- tradeoffs implicit in the Bank program. They erty reduction. The Strategic Compact's objective emphasized that CASS should discuss the Bank's is to transform the way the Bank conducts its partnerships in a country, where appropriate, business by improving its products, speeding up with the IMF, other multilateral institutions, its processes, lowering its costs, making it more bilateral donors, and NGOS in a strategic context demand driven, and increasing its development to maximize the development impact and impact. Clear performance criteria will be set, increase cost-effectiveness. The treatment of against which progress will be measured. The country risk has also been receiving more atten- compact builds upon the strategic guiding prin- tion in CAS discussions. ciples laid out in the 1994 vision statement pre- As a result of the executive directors' work, pared in connection with the Bank's fiftieth anni- there has been a visible refocusing on evaluating versary. The board committees are expected to the impact of Bank efforts and results on the play a major role in assisting the board in dis- ground, building on lessons from past perfor- charging its oversight responsibilities in monitor- mance, consulting with civil society, and ing the compact. strengthening the Bank's presence in the field. Another direct outcome of the board's efforts is Heavily indebted poor countries the increasing focus on the vital importance of The process of finding a solution to the official client ownership of the country strategy and on debt problem of the heavily indebted poor coun- the need to reflect adequately the client's per- tries (HIPcs) continued in fiscal 1997. The boards spective in the CAS. of the Bank and the IMF endorsed a program of action for reducing the debt burden of eligible Development effectiveness HIPCs to a sustainable level and established the The Executive Board's Committee on Devel- HIPC Debt Initiative Trust Fund (see box in the opment Effectiveness deals with the issues Overview). Other donors are also expected to related to the effectiveness of on-the-ground contribute to the trust fund. Preliminary country results of Bank operations. The committee also documents have been prepared for a number of oversees the responses of Bank management to countries. They form the basis for consideration the Operations Evaluation Department's find- of eligibility for assistance under this initiative; ings and recommendations. Uganda was the first country to benefit from The committee continued to stress the need this initiative. to improve self evaluation by the Bank and to SECTION ONE THE EXECUTIVE BOARD I 1 ensure that evaluation results were routinely and rapidly fed back into the formulation of new directions, policies, and procedures. For ex- ample, the committee considered Country Assistance Reviews for Morocco, Poland, and Zambia and reported on its deliberations to the Executive Board prior to its consideration of the CASs for those countries. It followed up on the board discussion of the social development task group report' by reviewing recommendations and actions taken and a proposed work program on social development. The committee also re- viewed an update of the report on mainstreaming gender into Bank lending. The committee welcomed the creation of an evalua- tion learning group, co-chaired by the Opera- tions Evaluation Department and the Bank, and the new quality assurance program to strengthen the design of new projects and pro- grams and implementation of existing ones. Measurement and evaluation of the Bank's im- pact remain a major challenge. New auditors On the recommendation of the Audit Com- mittee, the board in fiscal 1995 decided to rotate external auditors periodically. In fiscal 1996, procedures for obtaining bids from five international firms were decided on. The bid- ding process and the selection of the new audi- tors took place in fiscal 1997. 1. World Bank. 1996. "Task Group Report: Social Develop- ment and Results on the Ground." October. Washington, D.C. 12 THE WORLD BANK ANNUAL REPORT 1997 SECTION Two MAJOR WORLD BANK PROGRAMS, FISCAL YEAR 1997 Poverty reduction activities Poverty reduction continues synthesize information on lished criteria in targeting the to be the World Bank's first poverty, identify key policy is- poor.3 During fiscal 1997, $4.09 priority, and the significant sues, and recommend a strat- billion, or about 29 percent of changes undertaken by the egy for reducing poverty. Since World Bank investment lending, Bank in fiscal 1997 have im- the Bank began preparing pov- was channeled directly for pov- portant implications for its fu- erty assessments in fiscal 1989, erty-targeted projects, com- ture poverty reduction ninety-three poverty assess- pared with 32 percent in fiscal agenda. These include the far- ments, covering approximately 1996. For iDA countries, lending reaching reforms in the orga- 90 percent of the world's poor, for projects in the Pvi amounted nization of regional opera- have been completed. The to 53 percent, compared with tions; introduction of a new findings of these assessments 63 percent in fiscal 1996. Of approach to knowledge man- constitute an important input twenty-nine adjustment opera- agement; and especially the into the design of country as- tions approved in fiscal 1997, establishment of the Poverty sistance strategies. cAss, which eighteen contained specific Reduction and Economic are developed in consultation poverty-reduction measures (see Management (PREM) network. with borrowing governments table 2-1). The newly constituted Poverty and are discussed by the Board While useful in planning the Sector Board within PREM iS of Executive Directors, reflect implementation of Bank strat- responsible for guiding the each country's unique circum- egy, these data on PTI lending implementation of the Bank's stances and priorities and and poverty-targeted adjust- poverty reduction strategy. It present the Bank's program of ment operations do not mea- is ensuring that poverty re- assistance in the context of sure the impact that Bank ac- mains at the heart of the the country's efforts to reduce tivities have on poor people's Bank's operational and re- poverty. With the first round lives. Since the Bank places search activities and that the of poverty assessments coming considerable emphasis on the maximum possible contribu- to completion, the Bank will need for better information tion is made to reducing pov- be placing more emphasis on on poverty in client countries, erty in the developing world. the cAs in monitoring the efforts are under way to assess In fiscal 1997 the Bank con- implementation of its poverty trends in poverty by encourag- tinued to make progress in reduction strategy. ing nationally representative implementing its poverty re- Bank operations support nu- household surveys. As a con- duction strategy, based on en- merous activities that help en- servative estimate, data on couraging broad-based hance the economic opportu- household incomes and growth, human capital devel- nities of the poor, develop opment, and the provision of their human capital (through 1. Thorough analysis of the Bank's safety nets.' Through its ana- health, education, and basic work in reducing poverty is presented lytical work, policy dialogue, social services), and provide in Poverry Reduction and the World and advice and its project and safety nets.2 While all of these Bank: Progress and Challenges in the adjustment lending, the Bank activities combine to reduce 1990s (World Bank 1996) and in Pov- erty Reduction and the World Bank: supports a wide range of ef- poverty, their impact is diffi- Progress in Fiscal 1996 (World Bank forts by client countries to re- cult to measure. The impact of forthcoming). duce poverty. Recent analysis poverty-targeted projects is 2. Safety nets are programs that protect has improved country-specific easier to measure, however. people or households against two kinds of adverse situations: chronic incapacity knowledge about poverty and The Bank tracks its lending for to work or earn a living; or temporary has provided the basis for a projects in the Program of Tar- decline in earnings capacity due to cy- more informed dialogue and geted Interventions (PTi) and clical dedines in the economy or other >- . ~~~~~~~~~~~~~~~~~~temporary situations. more effective policy inter- poverty-focused adjustment Sempag1 in s o 3. See page 112 in Surnmanes of Opera- ventions. Poverty assessments operations based on estab- tions for description of criteria for m. SECTION Two MAJOR WORLD BANK PROGRAMS 13 TABLE 2-1. PROGRAM OF TARGETED INTERVENTIONS, FISCAL YEARS 1995-97 (millions of us doUars) 1995 1996 1997 Total PTI lending 5,436.7 5,408.1 4,090.0 As share of investment lending (%) 32 32 29 As share of all Bank lending (%) 24 25 21 Total number of projects in the PrTi 75 79 77 Total number of investment projects 208 223 203 IDA PTi lending 2,423.2 3,246.0 1,873.5 As share of IDA investment lending (%) 54 63 53 As share of all IDA lending (%) 43 47 41 Number of IDA PTi projects 48 51 37 NoTE: Investment lending is defined as all lending except for adjustment, debt and debt-service reduction operations, and emergency reconstruction operations. expenditures now exist for seventy-three coun- used jointly to enhance understanding of pov- tries, more than double the number (thirty-one) erty and its reduction; and available in 1992. And since the fiscal 1995 * plans to link the agencies' poverty-related progress report (which drew on a total of 122 Internet Web sites. surveys in sixty-seven countries), new results Discussions on enlarging the group (to in- from at least sixteen surveys have become avail- clude the International Labour Organization, able. But there is also a need to build a better for example) have been held, and a proposal to database on how Bank lending (and especially link this collaboration with interagency efforts its PTI lending) benefits the poor. As such data to support the OECD/DAC initiative on "Shaping become increasingly available, the emphasis of the 21st Century," also under consideration, the Bank's monitoring efforts will shift away would further enlarge the membership. from input and process indicators and toward outcomes on the ground. This marked improve- NGO participation ment in information on poverty will form the The high level of nongovernmental organiza- basis of preparations for World Development Re- tions' (NGOS) participation in Bank-supported port in the year 2000, which is to be devoted to development activities was maintained, with poverty reduction.4 47 percent of operations approved in fiscal The Bank, the United Nations Children's 1997 involving NGO participation in some Fund (UNICEF), and the United Nations Devel- capacity (see Summaries of Operations and opment Programme (UNDP) have been working table 2-2). Figure 2-1 shows the NGO involve- in partnership to improve poverty monitoring ment in Bank projects by type of NGO. methods since May 1995. Activities include: To further NGO contributions to Bank- * an ongoing exchange of views and sharing supported development work at the field level, of approaches for monitoring social outcomes of NGO liaison staff have been appointed to sev- development aimed at developing a core moni- enty-two resident missions; more than half of toring instrument; * a joint Bank- and UNDP-Sponsored review of 4. Previously also the topic for World Development Report how quantitative and qualitative data can be 1990: Poverty. 1990. New York: Oxford University Press. 14 THE WORLD BANK ANNUAL REPORT 1997 these are full-time NGO specialists. They are public-private partnerships to foster social and strengthening communication and information human development. Pilot projects are being flows and ensuring more systematic in-country developed in Angola, Colombia, the Philippines, consultation and dialogue between the Bank and Poland, and Slovenia. indigenous NGOS. Collaboration between the Bank and NGOS Several initiatives to strengthen NGO partner- continues to be enhanced through the NGO- ship were undertaken in fiscal I 997. A donor- World Bank Committee. Several important new Bank-NGo workshop hosted by the Regional En- initiatives were launched in the fiscal year, in- vironmental Center in Budapest, for example, cluding an interagency working group on NGO included meetings between senior Bank manage- capacity building, which was proposed by ment and environmental NGOS to discuss opera- Southern NGO members; a joint NGo-Bank pro- tional experience and identify opportunities for gram to monitor stakeholder participation in additional partnership. And subregional work- eight Bank projects; and NGO participation in shops in Brazil, Ecuador, and El. Salvador the Global Conference on Social Funds, orga- brought together NGOS, governrnent, private sec- nized by the Economic Development Institute tor representatives, and senior Bank management (EDI), which examined lessons learned from for the first time to discuss and analyze partner- the past ten years. A discussion paper on NGO ship roles for the joint fight against poverty. involvement in World Bank-financed social The new Corporate Citizenship Program, funds, published in December 1996,5 reviews launched during the Annual Meetings in October 5. Malena, Carmen. 1996. "NGO Involvement in World 1996, is bringing together government leaders, Bank-Financed Social Funds: Lessons Learned." Psp Discus- business, and civil society to forge innovative sion Paper Series No. 100. World Bank, Washington, D.C. FIGURE 2-1 Types of NGOs Involved in Bank-financed Projects, Fiscal Years 1992-97 100% Grassroots 1 w International Indigenous - .-AUnclassifieda 80% 60% 40% 20% 0% 68 73 11i4 lOG 122 1 12 Total number of NGO-involved projects Note: Based on information provided in Staff Appraisal Reports (SARs). a. NGOs that are not clearly defined by type in the SARs. SECTION Two MAJOR WORLD BANK PROGRAMS 15 TABLE 2-2. PATTERNS IN WORLD BANK-NGO OPERATIONAL COLLABORATION, FISCAL YEARS 1986-97 Total 1986-94 1995 1996 1997 No. % No. % No. % No. % By regiona Africa 694 29 58 57 53 29 49 61 EastAsia and Pacific 364 19 42 29 46 20 37 32 South Asia 248 29 18 67 21 16 19 84 Europe and Central Asia 165 12 58 29 61 23 67 24 Latin America and the Caribbean 410 20 52 42 54 26 52 60 Middle East and North Africa 172 11 14 29 21 8 17 41 Total 2,053 23 242 42 256 48 241 47 By sector Agriculture 440 34 34 74 33 88 43 81 Education 190 24 26 54 29 52 18 56 Electric power and energy 167 13 16 25 19 21 17 18 Environment 47 70 16 50 13 69 12 100 Finance 104 12 16 6 17 12 14 29 Health, population and nutrition 125 64 24 75 23 57 15 60 Industry 88 15 2 0 4 25 5 40 Mining 15 7 2 50 8 63 2 50 Multisector 176 11 24 8 19 37 22 5 Oil and gas 51 6 7 14 3 33 4 - Public sector management 126 9 20 20 27 15 20 5 Social sector 37 68 8 88 17 82 16 69 Telecommunications 39 - 1 - 1 - - - Transportation 230 7 22 18 24 21 27 26 Urban development 117 21 13 38 10 70 13 54 Water supply and sanitation 101 16 11 55 9 67 13 69 Total 2,053 23 242 42 256 48 241 47 -Zero a. Refers to percentage of NGO-involved projects in all World Bank-approved projects in the region. NGO contributions and identifies key issues and remaining intact forest frontier areas of the Asia- lessons learned from experience to date. Pacific region, Central Africa, Latin America, and Initiated in 1994, the Forest Market Transfor- the Russian Federation-regions that are coming mation Initiative (FMTI) began a second phase of under increasing pressure from unsustainable operations in fiscal 1997 and exemplifies the in- and environmentally destructive forms of forest novative work partnerships can undertake. This exploitation. FMTI aims to develop and promote strategic coalition of conservation NGOS, private financial and other incentives-with support sector forest industry leaders, researchers, devel- from the Global Environment Facility (GEF), opment practitioners, and financiers, including the IFC, voluntary foundations, and other the World Bankj6 is working to develop innova- tive approaches to the adoption of more envi- ronmentally friendly forest management and 6. FMTI partners include the Institute for Sustainable Technol- marketing practices in the remaining forest og, the International Institute for Environment and Dev- elopment, the National Fish and Wildlife Foundation, the frontiers. The FMTI is particularly concerned to Rainforest Action Network, the Rocky Mountains Institute, accelerate a shift in private sector behavior in the the World Resources Institute, and the World Wildlife Fund. 16 THEWORLD BANKANNUAL REPORT 1997 sources-to help companies overcome barriers suffering that makes investments in human to the sustainable use of forests. Companies development a powerful weapon in the fight would be encouraged to begin transforming for- against poverty. est sector markets toward sustainable practices In fiscal 1997 the Bank's strategy for support- and to encourage the development of alterna- ing its clients' efforts to develop human capital tive fiber products. This would reduce the pres- and social systems focused on: (i) lending and, sures on natural forests from demands for tim- increasingly, nonlending services to support ber and other industrial products. population, health, nutrition, and education, with a special emphasis this year on support of Human development social programs that protect the most vulner- Investing in people-or human development able people who might otherwise be left out of (HD)-plays a crucial role in the Bank's overall the growth process; and (ii) efforts to improve strategy to reduce poverty. In conjunction with the quality of Bank services by working more policies that promote sustainable growth, in- closely with clients, collaborating with partners, vesting in people and the provision of social and establishing a human development network safety nets alleviate some of the most severe to strengthen the Bank's ability to provide qual- consequences of poverty, including ill health ity services. Figure 2-2 gives the breakdown of and malnutrition, while increasing people's Bank lending to the social sectors in fiscal 1997. chances to improve their own well-being. Evi- dence continues to mount that investments in Human development operations health, nutrition, and education contribute to By the end of fiscal 1997, cumulative Bank individual productivity and, in the aggregate, to lending for human development totaled $41.9 national economic growth. It is the combination billion, making the Bank the single largest of good economics and the reduction of human external financier of HD programs in low- to FIGURE 2-2 IBRD and IDA Lending for the Social Sector, FiscalYear 1997 (US$ millions) Total end ng-$l 9,146 Social sector lending-$4,357 Education-$1,017 Health, nutrition and population-$940 Social protecton $2,400a a. Includes social sector loans and finance, public sector management and multisector loans with a social protection focus. SECTION TWO MAJOR WORLD BANK PROGRAMS 17 middle-income countries, with active projects remains an important priority The Bank is in 107 countries and 516 completed projects. increasingly helping its clients to more closely In fiscal 1997, disbursements to the sector in- link population policies with reproductive creased to $3.89 billion, a 45 percent increase health policies, thus integrating them into pov- over fiscal 1996. erty reduction efforts and the overall develop- Health, nutrition, and population programs ment agenda. The Second Maternal and Child (HNP). The Bank's activities in the HNP sector Health and Nutrition Project in Argentina and have grown to a cumulative value of over the Reproductive and Child Health Project in $12 billion, making the Bank also the single India, both approved in fiscal 1997, illustrate largest external financier of health programs in this approach (see Summaries of Operations at low- to middle-income countries. the end of Section Three). The Bank's HIV/AIDS program has been an im- Supporting better nutrition is addressed in portant developmental priority in recent years. ongoing Bank projects in a number of ways. HIV/AIDS is not simply a health problem, and the Some of the more successful interventions in- Bank's strategy focuses on multisector programs clude projects at the community level that em- to accomplish the task of sustained prevention phasize behavioral change, such as in ongoing and care. These programs focus on HIV/AIDS pre- projects in Tanzania and Zimbabwe; those that vention, treatment, and care at both the country target food-marketing programs to enable the and regional levels. They include projects to poor greater access to food, such as in ongoing provide drugs for sexually transmitted diseases projects in Brazil, Colombia, and Honduras; and and AIDs-related infections, launch awareness micronutrient programs, such as in Indonesia's and condom distribution campaigns, and con- Intensified Iodine Deficiency Control project, duct analysis and research on the socioeconomic approved in fiscal 1997. impact of HIV/AIDS to find cost-effective preven- Education. In fiscal 1997 the Bank committed tion and care interventions. In fiscal 1997 the $1,017 million for eighteen education loans to Bank extended loans for HIV/AIDS to Argentina, fifteen countries. At the end of fiscal 1997, the Cambodia, and Sri Lanka. cumulative value of Bank loans for all levels of Designing effective policies to improve the education was $23.7 billion. Commitments for performance of both private and government- education loans temporarily declined from their run health systems has bedeviled both rich and fiscal 1995 and fiscal 1996 levels of $2,096.8 poor countries over the past decade. In recent million and $1,705.7 million, respectively, years, many countries have turned to sectorwide mainly because of the increased focus on im- reforms to improve performance of their health proving the quality and results of the existing systems and health, nutrition, and population portfolio; disbursement and supervision have in- policies. The Bank undertook a strategic shift in creased accordingly. In some cases, such as in its HNP lending in fiscal 1997 to support its cli- Brazil, new commitments were delayed as the ents as they undertook such comprehensive sec- education portfolio underwent a comprehensive tor reform, with loans totaling $940 million in eleven countries. These efforts were backed 7. The sector work includes: * Klugman, Jeni, and George Schieber. 1997. Health Care by extensive sector work that is providing les- Reform in Central Asia. World Bank Technical Paper No. sons of experience from many countries.7 344. Washington, D.C. Client focus has been strengthened through * Goldstein, Ellen, Alexander S. Preker, Olusoji Adeyi, and Bank participation in and cosponsorship of ma- Gnanaraj Chellaraj. 1996. Trends in Health Status, Services and Finance: The Transition in Central and Eastern Europe. jor international conferences. The Conference World Bank Technical Paper No. 341. Washington, D.C. on Innovations in Health Care Financing, orga- * World Bank. 1997. The Hasemite Kingdom of Jordan nized by the Bank's health group, drew 360 par- Health Sector Study. A World Bank Country Study. Wash- ticipants from over seventy countries, including ington, D.C. more than thirty ministers of health or finance. * World Bank. 1996. "China: Issues and Options in Health more ~~~~~~~~~~~Financing." Report No. 15278-Cha. Providing the poor with access to family planning and other reproductive health services 18 THEWORLD BANKANNUAL REPORT 1997 review. The greater focus on portfolio perfor- EDI is supporting the demand for knowledge, mance through the fiscal year is reflected in a analytical tools, and lessons from country expe- 23 percent increase in disbursements over fiscal rience for effective pension reform. The confer- 1996. ence on Pension Systems: From Crisis to Re- Attention to girls' education continues to form, held in Washington in November 1996, increase among Bank clients. Among other ben- brought together eighty policymakers from efits, better-educated women have been shown more than thirty countries to discuss pension to have fewer and healthier children and to be system design and implementation. Lessons in better health themselves and be more likely drawn from the conference will be published to educate their children and participate in and disseminated. EDI is also tailoring its activi- their communities, through parent-teacher asso- ties to meet the specialized needs of different ciations, for example. Thus, there is now wide regions; for example, it is working with the gov- recognition that investing in girls' education is ernment of Mexico to help implement the re- one of the best investments a society can make cently endorsed pension legislation. EDI and the in its own development. government of Mexico will launch a virtual net- Socialprotection (se). In fiscal 1.997 the Bank work of pension specialists in the Latin Ameri- formed a social protection group, which addresses can region later this year. two priorities: (i) to enhance human capital productivity by improving the operation of la- Improving the quality of HD operations bor markets, and (ii) to develop mechanisms In many countries, such as Botswana, Chile, and institutions to protect the most vulnerable and the Republic of Korea, where economic people, including the elderly, disabled, and growth has gone hand in hand with investment women. Social protection activities complement in people, significant reductions in poverty have other Bank efforts in the area of social develop- been achieved. In other countries, relatively low ment, and interventions help protect the poor economic growth and under investment in by addressing labor market reform, including people, combined with high population growth, unemployment insurance and vocational train- have led to an increase in the number of people ing, pension reform, and social assistance, who live on a dollar or less a day. When current including social funds. growth rates are insufficient, sound investment Lending for social protection has grown ex- in people is necessary both to reduce human plosively. In fiscal 1997, twenty-three social suffering and to lay the foundation for future protection loans were approved, totaling $2.4 improvement in living conditions. billion; twenty-three loans totaling $1.4 billion Two new instruments are helping to in fiscal 1996; and ten totaling $0.5 billion in strengthen the Bank's strategic focus and devel- fiscal 1995. By the end of fiscal 1997, cumula- opment effectiveness; they are sector strategy tive lending for social protection totaled $5.3 papers and knowledge management. billion. More than half of lending for social pro- Sector strategy papers. While the CAS papers tection programs in fiscal 1997 was for adjust- are used to elevate policy dialogue and increase ment loans to Mexico and Russia and a first- development effectiveness in general, they will time pension adjustment loan to Argentina. now be complemented by sector strategy papers Substantial new commitments supported labor (ssp), which provide a cross-cutting global per- market reforms, including support for reviewing spective on Bankwide and regional priorities in labor code revision, employment creation in pub- sector development. The first ssp, on the health, lic schemes, and retraining unemployed or poten- nutrition, and population subsectors, was pre- tially redundant workers, especially in transition sented to the Executive Board's Committee economies. Pension reform loans were extended on Development Effectiveness in fiscal 1997. to Argentina, Latvia, Mexico, Peru, and Russia, Others, on education and social protection, and social assistance loans to Argentina, Bulgaria, are planned for fiscal 1998 and fiscal 1999, Jamaica, Lithuania, Romania, and Ukraine. respectively. SECTION Two MAJOR WORLD BANK PROGRAMS 19 Knowledge management. Knowledge manage- ment systems (Kls) are of increasing impor- tance in retooling the Bank to better meet its clients' needs. In fiscal 1997 the Bank's educa- tion group developed a user-friendly KMs to pro- vide staff with ready access to a variety of infor- mation resources, including: (io "help desks"; (iip on-line databases of policy papers, best prac- tice papers, electronic forums, terms-of-refer- ence, profiles of staff and consultants, and links to external resources; (iii) a statistical database containing internal Bank data; (ivt a clearing- house function for data available from other agencies; and (v) a knowledge base on the eco- nomic aspects of human development, includ- ing good practice of economic analyses in project development. Parts of this system such Evidence continues to mount as the new Early Child Development Web site' that investments in health, are available to clients. nutrition, and education Within the Kms, the Education and Health contribute to individual neededmodelsof prjectiplemetationplans prodctiit and ntieponalt Advisory Services were launched in fiscal 1997 eprcicanc oroeth. n to provide operational staff with customized in- ectorow the formation, advice on consultants and partners, and direct access to best practices from inside committees trained in organizing, managing, and outside the Bank. TheKMS is only available and monitoring early childhood services, with externally on a limited basis at present but will NGOs helping to oversee the communities' man- eventually be expanded to provide more access agement of childcare centers. In Indonesia, two for external users. loans to support basic education were provided KMS is already filling a knowledge gap; for ex- directly to the provinces of Central Indonesia ample, when the Nepal Resident Mission and Sumatra to ensure local involvement in all needed models of project implementation plans phases of the project. to help its client in the Ministry of Education, Nonlending services. Greater emphasis has the Education Advisory Service provided best- been placed on the importance of economic and practice examples from similar projects in sector work (Esw) to raise the quality of the Burkina Faso, Croatia, Ghana, and Turkey. It also Bank's work in human development. Where made connections with officials in Turkey and possible, ESW iS carried out jointly with country with the Bank'S Hdoffice in Hungary to provide representatives. The Vietnam education sector the Nepalese government with expert advice financing study, for example, was prepared by a quickly on project implementation. team co-managed by the government of Viet- nam and the World Bank. The study, which Improving client focus places education and training needs within the Participation. A number of innovative pro- larger political and macroeconomic framework grams are focusing on greater client involve- and gives a comprehensive review of its effi- ment and participation in an effort to increase ciency, equity, and future direction, resulted in a effectiveness and ownership. The Kenya Early frank assessment of Vietnam's economy. The Childhood Development project, for example, government is considering the recommendations, approved in fiscal 1997, is training 15,000 pre- including those to raise teachers' salaries and in- school teachers and 5,000 community represen- crease school hours. tatives to run and monitor enriched child care programs. Centers will be managed by parent 8. http://wwwworldbank.org/children/ 20 THE WORLD BANK ANNUAL REPORT 1997 A review of China's pension system identified depend heavily on the ability of governments two problems: state-owned enterprises are bur- or agencies to communicate effectively with dening the system, and the population is rapidly target groups. Contraceptives, vaccines, and aging. The Bank and the government identified micronutrient supplements can only work if factors contributing to the problems and set out people choose to use them. Many other aspects recommendations for solutions. of behavior, including sexual activity, use of Sharing lessons of experience among coun- harmful drugs, hygiene practices, and views on tries is proving useful to policymakers in Cen- childrearing have important implications for tral Asia, the World Bank, donor organizations, overall health outcomes. The toolkit for com- and other international agencies as they develop munication for behavioral change9 was created cost-effective health reform policies. A survey in fiscal 1997 to provide state-of-the-art of health reform in Central Asia produced data advice on best practices in this complex and on levels and trends in health status, delivery of important process. services, and financing that were used to de- velop a health reform policy agenda based on Establishing the Human Development the experiences of various countries undergoing network similar economic transition. Established in fiscal 1997, the Huiman Partnerships. Partnerships are especially im- Development Network was the first network portant to increasing the efficiency and effec- in the Bank's new structure. It brings together tiveness of human development programs, and all staff working on health, nutrition, popula- increased efforts were made in fiscal 1997 to tion, education, training, and social protection. improve partnerships with other organizations Headed by the HD council and organized in and to share knowledge and experience. The three sector boards-health, nutrition, and Bank enjoys a close relationship with the Inter- population; education; and social protection- national Labour Organization (ILO), and the two the HD network is responsible for five major institutions benefit from mutual cooperation. activities: strategy; knowledge; staff develop- Two joint research projects were in progress in ment; client responsiveness and external part- fiscal 1997, and in addition to regular informal ners; and quality assurance. discussions between staff, a high-level team of The HD network's impact is already evident. ILO officials visited the Bank and reached initial Its HD Training Week, attended by nearly 100 agreement on cooperation in a number of new external organizations and about 600 HD staff, areas. These include increased collaboration and included presentations on state-of-the-art prac- consultations on harmful child labor practices tice in each of the three subsectors as well as and labor standards. Delegations from the Inter- high-level keynote speakers, exhibitions, hands- national Confederation of Free Trade Unions on demonstrations, videos, and advisory services. and the World Confederation of Labor also held Prior to this event, over sixty resident mission talks with senior Bank staff to discuss activities staff participated in a week-long pilot training for future cooperation. And the Bank continues program especially designed for them. to work closely with United Nations agencies such as UNESCO, UNDP, and UNICEF, as well as WHO, Gender on health and education programs. The Bank's commitment to promoting gender Communications. A vital, but often over- equality and implementing the recommenda- looked component in the complex web of hu- tions set out in the United Nations Conference man development is the role of communica- on Women, held in Beijing in September 1995, tions. Many of the most cost-effective public continued in fiscal 1997. Gender analysis and health interventions-for example, those aimed policy are strategically linked to economic and at promoting healthier lifestyles, safer reproduc- tive health, and preventing communicable dis- 9. Verzosa, Cecilia Cabanero. 1996. "Communications for eases-require behavioral changes that in turn Behavior Change: A Toolkit for Task Managers." Human Development Department. World Bank, Washington, D.C. SECTION Two MAJOR WORLD BANK PROGRAMS 21 policy activities through integration into coun- will also be members of water-user committees try assistance strategies-in fiscal 1997, for responsible for project design, planning, and example, the Ghana and Uganda CASs included management at the community level. gender analysis-economic and sector work, and Incorporating gender issues into Bank work is poverty assessments. Gender issues are system- being facilitated through research, preparation atically addressed in project design and prepara- of toolkits such as the toolkit on gender in agri- tion, especially in those that traditionally have culture'° and the toolkit on gender in water and addressed gender issues such as education, sanitation.11 Workshops, such as the Asia Gen- health, population, nutrition, and rural develop- der Symposium held in November 1996, are ment sectors. But more attention is also being also playing a role, as well as programs such as given to gender issues in sectors such as trans- EDI'S grassroots management training program port and energy. (see box 2-1). A gender "home page" on the Nepal's rural water supply and sanitation Bank's internal Web site is helping to integrate project is exemplary. It will deliver health and gender knowledge into the Bank's knowledge- hygiene benefits to rural people and improve management system; it will be made available women's incomes as they are able to spend on the external Web site in fiscal 1998. time-formerly spent carrying water-in more The Gender Consultative Group, comprising productive ways. The project is providing fourteen leading gender specialists from all re- nonformal education to increase women's lit- gions and representing a range of organizations eracy to help them better use that time. Women and professional backgrounds, held its second annual meeting with the Bank in May 1997. The group met with the president, senior man- BOX 2-1. WORKING AT THE agement, and regional staff to present the per- GRASS ROOTS spectives of different sectors of civil society on priority gender issues that the Bank should ad- The poor, and especially women, depend to dress and to provide feedback on the imple- an ever increasing extent on the infonnal sector mentation of the Bank's gender-related policies and microenterprises as a source of jobs and in- and programs. A second annual progress report come. Yet the constraints they face are tremen- on the implementation of the Bank's gender dous: illiteracy and lack of basic education; little policies was published in June 1997. or no access to infonnation, credit, markets, and other business support; inadequate management Social development skills; as well as hostile legal, policy, and institu- tional environments. While considerable progress was made over One program helping to overcome these ob- the past decade to incorporate the environmen- stacles, EDI'S program of grassroots management tal dimensions of development into Bank work, training (GMT), is providing very poor, often illiter- less was done to incorporate the social dimen- ate women in Sub-Saharan Afnca, South Asia, sions. This began to change in the early 1990s and North Africa with management skills rel- with the introduction of poverty assessments evant to their needs. Through EDI's program, sev- and with the development of methods and eral hundred trainers and enterprise support tools both to understand the needs of poor teams working with NGOs, local training institutes, people and to spread the benefits of develop- and government extension workers have been ment more broadly. The Bank has increasingly taught to deliver participatory management train- used beneficiary assessment and stakeholder ing In fiscal 1997, GMT was institutionalized and mainstreamed with awareness-raising seminars held in Morocco and Tunisia; seminars held in 10. Fong, Monica S., and Anjana Bhushan. 1996. "Toolkit on Burkina Faso for GMT trainers from West African Gender in Agriculture. Gender Toolkit No. I." Poverty and countries and in Morocco for those from the Social Policy Department. World Bank, Washington, D.C. Maghreb; training manuals were prepared and 1 . Fong, Monica S., Wendy Wakeman, and Anjana Bhushan. 1996. "Toolkit on Gender in Water and Sanitation. Gender distributed; and strategic workshops were held. Toolkit No. 2." Poverty and Social Policy Department. World Bank, Washington, D.C. 22 THE WORLD BANKANNUALREPORT1997 Young women in Burkina Faso learn bastc accounting skills. EDI's grassroots management training i sprepares women to select more viable projects, prepare business plans, increase savings and profits, and improve their creditworthiness. participation, for example to improve project * that in a world of increasing specialization design and to make project implementation more and interdependence, new kinds of relation- inclusive. And social and beneficiary assessments ships, organizations, and institutions will be were introduced to gather social data and help needed if people are to benefit and if growth countries set program priorities as well as to pro- and development are to be sustained; vide opportunities for the poor to voice concerns - that governments have a crucial role in and make proposals. Though not mandatory, shaping social policy and providing an enabling about seventy social assessments have been com- environment for poverty reduction and socially pleted by Bank staff and borrowers during the sustainable development; but past two years. Recognizing shortfalls, however, * that governments cannot act alone-pro- the Task Group on Social Development was cre- ductive partnerships between the state, the mar- ated in fiscal 1997 to examine how social con- ket, and society are needed to foster socially sus- cerns could be more effectively absorbed into the tainable development. development paradigm and be used for The task group recommended that social policymaking purposes. The task force recognized: policies and procedures be better integrated * that people are the reason for development and more comprehensive; that social analysis and that how they are affectecL is the measure by and participatory approaches be mainstreamed which development initiatives should be judged; into project and analytical work; and that * that people are the means of development- Bank procedures be used more flexibly to if they do not understand or are not committed accommodate client diversity and innovation. to development initiatives, development initia- The Social Learning Group was established tives will not succeed, no matter how well they and is following up on recommendations and are planned; monitoring implementation. * that fair and equitable development con- Considerable progress has been made since tributes to human welfare and to the social the task group reported: regional offices have cohesion and social stability that underpin prepared and submitted Social Action Plans that sustainable development; SECTION Two MAJOR WORLD BANK PROGRAMS 23 build upon, and in some cases incorporate, on- FIGURE 2-3 going work on poverty, participation, social as- World Bank Lending for Environment sessment and gender; proposals have been made Projects, Fiscal Years 1986-97 to identify key social issues by country and ad- (US$ billions) dress them through CAS and analytical work, and work programs include strategies to im- 1986 0.03 prove performance in areas such as NGO coordi- nation and in new areas such as postconflict reconstruction. 1988 61 An outgrowth of the report was the forma- tion of the Social Development Family, which 1989ta 85 includes staff working on participation and with NGOS, social policy staff, and social scien- tists from across the Bank. The Social Develop- 1991 a 2.84 ment Board has been established. Its work program includes measuring progress through 19921 4.39 monitorable benchmarks. Resources for social development initiatives have been made avail- 1993 able under the Strategic Compact, and a 1994a 8.93 postconflict unit was established on July 1, 1997. 1 995 Work on social development is at an early stage, about the same stage as work on environ- 1996 1 1 .44 mentally sustainable development was a decade 1997 1 1 .60 ago. But the high level of commitment is ex- pected to lead to rapid development. Note: Environmental projects approved since FY86 and that The Social Development Family is working are currently active. closely with other groups in the Bank to pro- mote community-based participation; to link people live on less than two dollars a day, often social and environmental assessments more without adequate water or sanitation, plagued closely; to mainstream activities; and to under- by pollution and lack of food. take joint research. And partnerships on social In 1992 the Bank's work in ESD was only a issues are being developed with other donors small part of its lending portfolio. Now, in rec- such as international agencies, including the ognition of continuing problems, the Bank has Inter-American Development Bank and the an extensive commitment to environmental Asian Development Bank, and groups such as sustainability with a portfolio that includes in- the Social Development Adviser Network.12 vestment programs to reduce pollution, protect ecosystems, and build capacity for environmen- Environmentally sustainable development tal management (see figure 2-3). Advancing sustainable development Strengthening the environmental agenda The 1992 United Nations Conference on the The Bank's fiscal 1997 environmental agenda Environment and Development (the "Earth focused on building a more strategic and inte- Summit") in Rio de Janeiro put environmen- grated approach to ensuring that environmental tally sustainable development (ESD) at the fore- front of global concerns. Today, five years be- 12. Formed in 1992, it is an informal group of sociologists and yond Rio, a great deal still needs to be done to sociocultural anthrnpmlto ministtrles The network's goal make economic development sustainable. The is to improve the capacity of development organizations loss of forests, wetlands, and other natural habi- (including multilateral and bilateral agencies and NGOS) to tats has not slowed enough. And some 3 billion reflect social and cultural dimensions in their programs. 24 THEWORLD BANKANNUAL REPORT 1997 sustainability is at the core of economic develop- lending underwent full EA, including public con- ment. The main prongs of the strategy included: sultations, and a further eighty-two projects to- * Building capacity for environmental manage- taling about $6.1 billion in Bank lending under- ment. At the end of fiscal 1997 the Bank was went some measure of EA appropriate to their helping seventy countries to strengthen their potential environmental impact. environmental management capacity. The fiscal The Bank has extended the process to include year witnessed support for innovative projects sectoral environmental assessments, such as an such as the regional Lake Victoria environment EA of the irrigation sector in Kazakhstan and of project in Kenya, Tanzania, and Uganda, the So- the power sectors in Nepal and Vietnam; and lar Home System project in Indonesia, and regional EAs, including one for the Aral Sea ba- India's Ecodevelopment project. The Bank sup- sin and one for flood protection in Argentina. ported natural resource management in forested Analysis of the environmental implications of areas in Argentina, Haiti, and Mexico and gen- policies, institutions, and development plans for eral environmental management in India, Mada- investments in agriculture, energy, and transport gascar, and Sri Lanka. It also helped these and provided an array of options to guide sustain- other developing countries move toward more able development. flexible and cost-effective environmental poli- The Bank's Economic Development Institute cies and to develop innovative market-based in- environment program helps to mainstream en- struments to promote environmental vironmental issues into all aspects of develop- sustainability. Market-based instruments such as ment by providing training for policymakers effluent charges, deposit-refund schemes, per- on biodiversity, climate change, coastal and ma- formance bonds, and tradable permits are all be- rine environment, urban and industrial pollu- ing utilized by Bank clients. Countries as diverse tion, resettlement and rehabilitation, and envi- as China, the Czech Republic, and Mexico are ronmental aspects of sustainable agricultural basing their policies and investment plans on development. EDI initiated a multistakeholder, careful cost-effectiveness analysis with Bank multiseminar approach in fiscal 1997 through support. And client countries are creating more its Mainstreaming Environmental Sustainability attractive business climates for private invest- program. This comprehensive approach facili- ment in environmental projects as well as re- tated awareness and policy dialogue among a ducing subsidies and pricing distortions to free wide audience-including ministers, policy- up resources for investment. With the IFC and makers, parliamentarians, journalists, and NGOs. the GEF, the Bank launched private sector ven- Programs on economic globalization and sus- ture capital funds for investments in biodiv- tainable development were implemented in ersity and renewable energy. southern Africa, Central America, and South * Mainstreaming environmental sustainability Asia in fiscal 1997. into development programs. Over and above its * Investing in partnerships that work. Recog- $11.6 billion portfolio of programs targeted at nizing that all groups in society have a role to protecting and improving the environment, the play in promoting sustainable development and Bank also requires that all Bank-financed pro- that its own work can only be effective in part- grams practice environmental sustainability. nership with other key stakeholders, the Bank One key means of achieving this is the environ- heightened its efforts to build and strengthen mental assessment (EA) process. partnerships in fiscal 1997. Its formal partners A fiscal 1997 review'3 shows that, although now include multilateral financial institutions; there are still weaknesses, the benefits of EA are United Nations agencies; bilateral donors; NGOS, considerable: promoting investment in activities such as the World Conservation Union (IUCN), that are more sensitive to ecological concerns than those financed a decade ago. In fiscal 1997, eighteen projects totaling $2.9 billion of Bank 13. World Bank. 1996. "The Impact of Environmental As- sessment: The World Bank's Experience." Land, Water and Natural Habitats Division, Environment Department. Washington, D.C. SECTION Two MAJOR WORLD BANK PROGRAMS 25 The Bank report on rural development sets out the critical challenges that must be met if 70 percent of the developing world's poor who live in rural areas are to rise above poverty rand achieve food security. the Earth Council, the World Resources Insti- planning and environmental assessment mitiga tute, and the World Wildlife Fund (WWFn; aca- tion of harmful effects of development projects, demic institutions and private organizations and new targets for biodiversity conservation in- such as the World Business Council for Sustain- vestments have resulted from this work. able Development. In partnership with the pri- - Building and sharng knowledge. Each year vate sector, the Bank is creating a series of mar- brings new understanding about what makes ket transformation initiatives that bring development sustainable. The Bank and its cli- together coalitions of private companies, NGOS, ents continue to learn from innovative pilot ac- and development financiers to fund private sec- tivities so that good practices can be replicated tor investments for sustainable development in and mistakes avoided. The Bank is filling knowl- a number of sectors, including forest, marine, edge gaps and creating a knowledge-manage- photovoltaics, and hydrocarbon refrigerants. ment system for development professionals us- The WWF and the World Bank have identified ing new information technologies and working priority areas and strategies for biodiversity with partners. The technical networks, estab- conservation throughout Latin America and the ished in fscal 1997, include a network of some Caribbean. This effort is complemented by an- 300 environmentally and socially sustainable other joint effort of the Bank, Agriconsulting, development professionals that is facilitating and the World Conservation Monitoring Center the generation and dissemination of knowledge. to pinpoint critical natural habitats in Argen- Environmental communication was strength- tina, Chile, Paraguay, and Uruguay. Improved ened through broader dissemination of the two- year-old journal for practitioners, Environment 26 THE WORLD BANK ANNUAL REPORT 1997 Matters;`4 while joint publication of best prac- nomic growth and reduce poverty in rural areas tice and research with partners resulted in the where 75 percent of the world's poor live. It "Wetlands in Asia" paper,5 along with three ma- will reduce urban poverty by bringing down the jor papers prepared for the fifth anniversary of price of food in cities. It will also contribute to the Rio Earth Summit: "Advancing Sustainable increasing national and global food supplies-an Development",16 "Expanding the Measure of essential goal in view of the expected increase Wealth,"'7 and "Five Years After Rio: Innovations in the world's population to over 8 billion by in Environmental Policy."'8 2025. The new strategy focuses on four areas of The Global Environment Facility and the action: Montreal Protocol * improving rural strategy formulation and The Bank shares responsibility for imple- consensus building; menting GEF activities with UNEP and UNDP. * improving project quality; The Bank is currently responsible for a GEF * increasing international awareness of the work program of about $1 billion, covering four importance of rural development; and focal areas: biodiversity, climate change, ozone- * building staff capacity. depleting substances phaseout, and interna- Actions were taken in all four areas in fiscal tional waters. At the end of fiscal 1997, World 1997, with rural strategies being incorporated Bank management had approved sixty-nine into country assistance strategies for Mexico projects in over fifty countries, totaling GEF and Morocco and the Country Economic grant commitments of $675 million and lever- Memorandum for India; reviews of the irriga- aging an additional $2,848 million. The Bank tion and forestry portfolios completed and oth- adopted important changes to streamline its GEF ers planned; Bank participation in several implementation processes and improve effec- high-profile activities for increasing awareness; tiveness. As a result, project processing time un- and a core staff training program developed. der the Bank's control is expected to halve. During fiscal 1997, two events spotlighted ru- As trustee of the GEF Trust Fund, the World ral issues. The first, the Bank's Environmentally Bank, at the request of the GEF Council and in Sustainable Development Conference-called cooperation with the cEo/chairman of the facil- Rural Well-Being: From Vision to Action, at- ity, initiated the second GEF replenishment pro- tended by delegates from NGOS, national govern- cess in May 1997. ments, academia, and foundations, as well as the The Bank recently completed its fifth year as heads of the African Development Bank, the an implementing agency of the Multilateral International Fund for Agricultural Develop- Fund of the Montreal Protocol. (MFMP). During ment, and the World Bank-resulted in a shared the past year, elimination of the use of ozone- th past year, elimination of the use of ozone- 14. World Bank. 1996-97. Environment Matters at the World depleting substances (ODS) amounted to over Bank. World Bank Environment Department, Washington, 9,000 tons, about 5 percent of total ODS usage D.C. (Produced three times a year, with an annual environ- by all developing countries eligible for assis- ment review each fall.) tance from the MFMP. This phaseout represents 15. Wetlands International-Asia Pacific and the World Bank. 1996. "Wetlands in Asia." Land, Water, and Natural 75 percent of the total phased out by all MFMP Habitats Division, Environment Department. World Bank, agencies and demonstrates the MFMP'S tangible Washington, D.C and measurable global environmental protec- 16. World Bank. 1997. "Advancing Sustainable Development: tion achievements. The World Bank and Agenda 21 Since the Rio Earth Sum- mit." Environment Department, Washington, D.C. Revitalizing rural development and 17. World Bank. 1997. "Expanding the Measure of Wealth: sustainable agriculture Indicators of Environmentally Sustainable Development." Environment Department, Washington, D.C. In fiscal 1997 the Executive Board endorsed 18. World Bank. 1997. "Five Years After Rio: Innovations the sector strategy paper, "Rural Development: in Environmental Policy." Environment Department, From Vision to Action."'II The renewed focus Washington, D.C. 19. World Bank. 1997. Rural Development: From Vision to Ac- on rural development is intended to foster eco- tion. ESD Studies and Monographs Series. Washington, D.C. SECTION TwO MAJOR WORLD BANK PROGRAMS 27 BOX 2-2. PARTNERSHIPS IMPROVE * Significant progress has been achieved in PEARL MILLET land reform. Pilot projects are ongoing in Brazil and Colombia. In Brazil the pilot was expanded The 1996 King Baudouin Award of CGIAR to five states, with approval of the first loan was awarded to the International Crops Research exclusively for land reform since the Bank's Institute for the Semi-Arid Tropics (IcRIsAT), a support to Kenya some thirty years ago. Addi- CGIAR center in India, for the development of tional loans are under preparation in Colombia disease-resistant, yield-increasing pearl millet in and Guatemala. collaboration with partners. * An innovative agricultural research opera- Pearl millet is farmed for grain and fodder in dryland areas of Asia and Africa by the very tion in Brazil is enhancing private sector in- poor. Its growth is constrained by diseases and by volvement and supporting a competitive grant drought, heat, and low soilfertility. system for allocating public research resources. ICRISAT's research has focused on developing hy- o The report "Rural Finance: Issues, Design, brids with high grain yield and resistance to Best Practices"20 was released. It sets out a new downy mildew, ergot, and smut diseases; breeding approach for providing credit to farmers and ru- attributes offarmers' varieties into improved ma- ral entrepreneurs, moving away from nurturing terials for drought tolerance; and searching for subsidized government institutions toward de- ways with partners to enrich poor soils with bio- veloping institutional capacity for a broader mass from crop residues and animal dung range of rural financial institutions, including Interdisciplinary efforts and partnerships have , characterized iciusAT's research. Farmer-managed those offerig microfinance. trials are being undertaken to understand farmers' Consultative Group for Inteational preferences better The annual returns to pearl millet Agricultural Research (CGIAR). farmers from the cultivated varieties that ICRISAT and its partners have developed are estimated at Central to agricultural development is agri- $54 million. cultural research. CGIAR is the leader in interna- tional research aimed at promoting sustainable agriculture for food security in developing vision for revitalizing rural development and countries. A global endeavor of cooperation and the actions needed to achieve it. Second was the goodwill, CGIAR celebrated twenty-five years of United Nations' Food and Agricultural Organ- effort and achievement this year. ization's World Food Summit in which the Bank Pakistan, South Africa, and Syria joined CGIAR, participated. The summit's broad plan of action bringing to fifty-three the number of develop- addresses issues fundamental to the Bank's assis- ing and developed countries, foundations, and tance strategy that go beyond agricultural and international and regional organizations, includ- rural development to stress the need for educa- ing the World Bank, that collectively support tion-especially for girls; measures to improve the work of sixteen international research environmental sustainability; and decentraliza- centers. tion and participation. The Global Forum on Agricultural Research Several other important activities were under- was convened during CGIAR's International taken during fiscal 1997: Centers Week in October 1996 to broaden part- * Implementation of the Focus Program Ini- nerships among national agricultural research tiative began in several countries. Through a systems, regional organizations, research institu- combination of political will and rigorous appli- tions, NGOS, universities, and the private sector. cation of best practices, the program will show The Declaration and Plan of Action for Global that it is possible to achieve significant regional Partnership in Agricultural Research, adopted and global impacts on food security and poverty by the Global Forum, was tabled at the World reduction through a variety of activities, includ- ing rural strategy formulation, increased lending, 20. Yaron, Jacob, McDonald Benjamin, and Gerda Piprek. and poralc 'ade. Forthcoming. Rural Finance: Issues, Design, Best Practices. and policy advice. ESD Studies and Monographs Series No. 14. Washington, D.C.: World Bank. 28 THEWORLD BANKANNUAL REPORT 1997 Food Summit. Global Forum participants com- * Bank partial risk and partial credit guarantees; mitted themselves to join in partnership to ad- * IFc equity financing in developing-country dress common concerns vigorously, thereby companies, and loans for, and equity and quasi- strengthening the capacity of the agricultural equity investments in, private ventures-these research community to help combat poverty, instruments are increasingly used in conjunction hunger, environmental degradation, and ineq- with Bank operations. IFC loans, lines of credit uity in developing countries. and equity investments totaled $8,118 million A comprehensive review of priorities and in fiscal 1997; strategies that defined the long-term directions * MIGA's guarantee program, which covers of CGIAR research was completed, and medium- new foreign private equity and debt invest- term planning for 1998-2000 was initiated in ments in developing countries against major fiscal 1997. Emphasis was placed on poverty al- political risks, and its investment marketing ser- leviation, environmental protection, and food vices, which provide information dissemination security, with particular focus on promoting op- and technical assistance to developing member portunities for the poor, especially rural women. governments on means to better attract foreign The research agenda for 1997 was approved, investment. In fiscal 1997, MIGA issued a record with a projected financing plan of $325 million, seventy guarantee contracts for $614 million in up from $300 million in 1996. Areas identified issued coverage, facilitating an estimated $4.7 for CGIAR engagement in Central and Eastern billion in foreign investment in twenty-five Europe and Central Asia were endorsed, adding developing countries. a new region to the CGIAR'S mandate. A review * The Foreign Investment Advisory Service's of the CGIAR system began in fiscal 1997. (FIAS) freestanding technical assistance activities. Greater efforts to coordinate the World Finance, private sector, and infrastructure Bank Group's support of private sector develop- development ment were made in fiscal 1997. The main em- Promoting private sector development, phasis was to enhance the group's catalytic sound financial systems, and infrastructure role in promoting private sector activities; development are important prongs in the Bank's encourage greater coordination at the policy, overall strategy to promote sustainable growth, country, sector, and project levels; and improve reduce poverty, and integrate countries into the outreach and partnerships with the interna- global economy. tional business community. Two projects in the West Bank and Gaza in- cluded activities that reached across the Bank Increasingly, private sector solutions can meet Group: (i) a technical assistance project for de- development problems in virtually every area- veloping the legal and regulatory environment from large-scale industry to small enterprises, conducive to private sector development-the environmental protection, and even the social Bank and IFC worked together to strengthen the sectors, which have traditionally been the pre- financial sector's ability to deliver credit, espe- serve of public sector investment. The public cially to small enterprises; and (ii) financing for sector has an important role in setting legal and a guarantee fund to provide political risk insur- institutional environments that allow the pri- ance for private investors in the West Bank and vate sector to flourish and encourage invest- Gaza. The fund is managed by MIGA. ment in sectors that improve the quality of life. In fiscal 1997 the World Bank approved loans The Bank Group supports private sector and credits for forty-three projects totaling $3.7 development with a number of products: billion in sectors with the most potential for * Bank assistance to create an enabling envi- private sector involvement-power, oil and gas, ronment for private investment through techni- industry and mining, and the financial sector. In cal assistance and capacity building in regula- addition, many of the fifty-four projects, total- tory work and policy reform and through ing $5.2 billion, for transport, urban develop- innovative financing arrangements; ment, and water supply and sanitation approved SECTION Two MAJOR WORLD BANK PROGRAMS 29 in fiscal 1997 have significant private sector de- outlined investment opportunities to more than velopment impact and are expected to leverage 500 representatives of international mining substantial private flows (see figure 2-4). Many companies. of these projects support policy changes that While the private sector has taken over most will facilitate the commercialization of state and of the direct investment in telephone compa- municipal functions such as water companies nies in Bank client countries, the Bank plays an and mines. important role in telecommunications policy The Bank supports energy development when and in promoting the use of information tech- countries are taking steps to involve the private nology for development purposes. An example sector more actively. In Africa, for example, of the increasing volume of nonlending services Bank assistance is helping countries to under- provided by the Bank is in telecommunications take comprehensive reform of the power sector, reform, where the Bank is providing support to including privatizing and bringing in private in- some forty countries as they prepare state vestors and decentralizing the provision of rural companies for commercialization, sell assets to energy. The Bank is also providing technical as- the private sector, and prepare distribution sistance to help southern African countries de- strategies. velop a power pool for regional interconnection. To help countries develop strategies to en- With Bank support, Ukraine is restructuring hance their economic competitiveness, the Bank its coal industry by closing unproductive mines, has mounted a program to share knowledge and improving management, and more vigorously technical assistance with client countries. In introducing the private sector into the industry. northeast Brazil, for example, nine states par- The Bank provided extensive financial, techni- ticipated in a Bank-supported workshop to cal, and legal assistance to Zambia in support of identify how to remove local constraints to the largest mining privatization in history. The firm-level competitiveness. The participants, process is almost complete; the state company from government and the private sector, fo- has been broken up into eight entities, and the cused on business prospects in tourism, fruit- bidding process is under way. To help the Mon- based agriculture and agroindustry, and grains. golian government privatize the mining sector, The resulting action program is changing policy the Bank and FIAS helped write a new mining to make the province more competitive. Similar code in a record six months. And to stimulate assistance is being provided to Malaysia on a interest in Africa's mining sector, MIGA organized fee-for-service basis. In partnership with inter- its fourth annual African Mining Investment national training institutions, EDI and the Bank and Business Opportunities Symposium. Repre- held a competition policy training course in sentatives from twenty-eight African countries New Delhi. Ministry officials, private sector FIGURE 2-4 IBRD and IDA Lending to Sectors with Potential for Private Sector Involvement, Fiscal Year 1997 (US$ millions) Oil and gas, coal, 4 projects, $ 136 ndustry and min ng, 7 projects, $51 7 Transportation, 28 projects, $3,691 *n- Urban deve opment, 13 prorects, $808 Electric power and other energy * Water supply and sanitation, 13 projecTs, $683 17 projects, $1,889 Financ al sector 15 projects, $ ,195 30 THEWORLD BANKANNUAL REPORT 1997 policy, law, regulation, and supervision; and cov- ering banking, micro- and rural finance, housing finance, contractual savings, and capital markets. The Bank also sponsored large-scale training pro- * grams for staff from central banks, other regula- tory and supervisory agencies, and financial inter- mediaries from over eighty countries. * I ! The Bank's Strategic Compact provides addi- tional funding to build and strengthen the Bank's own capacity. In fiscal 1997, renewed emphasis was placed on coordinating activities with the IFC, _ -. ..X./ _ ; the International Monetary Fund (IMF), the re- gional development banks, and the various inter- national organizations such as the Basle Commit- tee on Banking Supervision and the International Organization of Securities Commissions. Improving the financial sector's structure and operations has been a top priority in fiscal 1997. The Bank supported many countries facing a combination of weak macroeconomic conditions and a banking system plagued with bad debts and inadequate supervision, through lending and nonlending services. Some of these opera- - tions are described in Section Three of this The Bank is helping the Annual Report. In some cases these efforts were Ukrainian authorities mitigate undak partneship with the eff TeBa the social impact of coal undertaken in partnership with the iw. The Bank sector restructuring. also provided support to countries reforming their pension systems, insurance industries, and payment systems. leaders, academic and research institute leaders, and lawyers from ten Asian countries partici- Private provision of infrastructure pated in the program. The World Bank Group aims to help countries create the right mix of policy initiatives and in- Financial sector development vestment resources to enable their private sectors The importance of a sound financial sector to play a bigger role in investing in the enormous for economic development to be sustained is in- infrastructure needs that characterize Bank client creasingly evident as a growing number of coun- countries. Estimated at $200-250 billion over tries encounter financial instability. A report is- the next ten years, these requirements can only sued in the spring of 1997 by a committee of be met by private provision of infrastructure representatives from industrialized countries, (PPI), with domestic and foreign investors supply- emerging markets, and international institutions, ing the capital. Through its financial support the and endorsed by the G- 10 countries, empha- World Bank Group is an important catalyst in sized the Bank's key role in supporting develop- enabling PPi (see table 2-3), and its most active in- ing countries seeking to strengthen their finan- strument remains investment lending with strong cial systems. The Bank has provided technical policy content. Increased PPi operations in fiscal assistance to over seventy countries, focusing on 1997 were again concentrated in this type of financial institution and market infrastructure instrument. development and upgrading finiancial sector SECTION Two MAJOR WORLD BANK PROGRAMS 31 TABLE 2-3. WORLD BANK PPI OPERATIONS, FISCAL YEARS 1988-97 Latin America Middle East East Asia Europe and and the and Instrument Africa and Pacific South Asia Central Asia Caribbean North Africa Total Adjustment: single sector 4 0 0 1 1 1 7 Adjustment: multisector 1 0 0 1 7 1 10 Technical assistance 6 1 1 1 13 0 22 Investment lending 37 24 18 16 26 8 129 Guarantees 0 4 2 0 1 1 8 Total 48 29 21 19 48 11 176 of which: increase in FY97 (7) (6) (3) (3) (14) (5) (38) Among PPI projects approved in fiscal 1997 important tool for development finance. The were many innovative operations. In Poland the Bank's executive directors approved three guar- Port Access and Management Project is enhanc- antee operations totaling $420 million in fiscal ing private sector ownership of port operating 1997. They support two private sector opera- companies in three major ports. The Taiz Water tions and one public sector operation: Supply Pilot Project in Yemen, while mitigating * an innovative $120 million partial risk guar- water shortages through water supply invest- antee scheme in Ukraine to support a facility ments, is establishing community water associa- designed to enable private sector exporters to tions and preparing a management contract to access commercial financing. privatize the local water utility. And in Uruguay * a $200 million guarantee for the Sea the Forest Products Railway loan helped create Launch Project, a joint venture involving a special-purpose concession to haul wood American, Norwegian, Russian, and Ukrainian products from producers to port. This project is companies, to construct a facility to launch one of several high-impact railway commercial satellites from the Pacific Ocean. concessioning operations that the Bank has sup- The Bank guarantee covers the risks of govern- ported in eighteen countries over the last de- ment interference in Russia and Ukraine, where cade (see box 2-3). important components of the facility will be A worldwide shift toward greater private produced. participation in infrastructure in at least eighty * a partial credit guarantee to support a pub- countries has resulted in nearly 1,200 projects lic sector power restructuring project in Leba- in telecommunications, energy, water, and trans- non. The operation guarantees a bond issue of port. As governments retreat from their earlier $ 100 million to support the Electricite du role as owners and operators of infrastructure Liban, the national electric utility. facilities, they need to emphasize their new Bank coverage is provided when neither the role of establishing sustainable regulatory private market nor IFC or MIGA operations are frameworks. The Bank has established the sufficient to mobilize funds. Its guarantees are International Forum for Utility Regulation intended to bring broader benefits by facilitat- (IFUR), a worldwide learning forum, so that ing financing for projects that will provide utility regulators can exchange cross-country benchmarks for subsequent projects that might information on best practices and improve their otherwise attract limited or no coverage. The regulatory regimes. Bank continues to refine and accelerate imple- mentation of its guarantee program, building on Guarantee program the success of completed operations. The pipe- Because guarantees lower project risks and in- line of prospective guarantee operations, which duce private capital, they are an increasingly 32 THEWORLD BANKANNUAL REPORT 1997 is dominated by privately sponsored operations, government guarantee programs and structuring continues to expand. It includes more than fifty transactions. projects across all regions and covers all major In fiscal 1997, FIAS22 completed thirty-two infrastructure sectors. new advisory projects in twenty-eight countries. To more actively integrate the guarantee pro- These included advice on attracting foreign di- gram into the Bank's development assistance rect investment (FDI) in infrastructure for the package, guarantee processing has been speeded Philippines and Zimbabwe; on removing admin- up by streamlining documentation require- istrative barriers to investment for Mozambique ments and developing model agreements. Vari- and Swaziland; and establishing strategies and ous information materials21 have been issued to institutions for investment promotion in China, help Bank clients better understand both the Croatia, and El Salvador. FIAS also conducted or nature of guarantees and how they are pre- participated in a number of multicountry con- pared, appraised, and negotiated. ferences on investment issues, including a In parallel with its guarantee program, the roundtable for Asian countries on the role of Bank expanded its efforts to help governments attract project finance, with particular emphasis on private financing for infrastructure invest- 21. World Bank Guarantees Handbook;" "Revised World ments. These efforts include advice on develop- Bank Guarantee Brochure" (in English, French, and Spanish), issued by Cofinancing and Project Finance Department, Re- ing contractual arrangements and competitive source Mobilization and Cofinancing Vice Presidency. bidding packages for selecting private sponsors 22. FIAS is a joint IFc-Bank program that provides advisory to undertake projects. Substantial project fi- services to governments to help them improve the policy nance advisory services were extended to and institutional environment for foreign private direct in- vestment. The program is funded by the iFc, the Bank, other China, Colombia, Pakistan, and the Philippines donors, and paying customers among the developing coun- in fiscal 1997, including advice on setting up tries that receive advice. BOX 2- 3. RAILWAY CONCESSIONING The Bank's client countries have made large lendingfor labor redundancy and related "social investments in their railways, but many are ineffi- service" concessions. cient and are losing both market share and revenues. Bank support to railways in Argentina, C6te Through targeted advisory services and a mix offi- d'Ivoire, and Burkina Faso is exemplary. In Argen- nancial investments, the Bank has promoted various tina, Bank loans totaling $325 million and two IFc types of concessioning over the past seven years to operations led to concessioning of five of six freight promote private sector solutions to railway ineffi- railways, seven suburban passenger lines, and the ciency. Eighteen countries, most of them in Latin Buenos Aires metro. As a result, annual losses have America and Africa, have successfully adopted con- been reduced by about $1 billion, or nearly 1 percent cessions thus far, enhancing the private sector's role of GDP, and a long decline in freight and passenger even when full privatization was not possible. traffic has been reversed. The Bank's loans indirectly Successful railway concessioning depends on forg- financed the costs of redundancies. The laborforce ing partnerships among governments, railway and was reducedffrom 90,000 to fewer than 20,000, but union leaders, donors including the World Bank and output increased so that labor productivity the iFc, and the private sector Roundtables organized quadrupled. by the Bank and involving IFC have been an effective The Bank supported the first African and first bi- means of bringing the major parties together national rail concession, which now connects C6te Concessioning has improved productivity and d'Ivoire with Burkina Faso. In its first year this con- service quality, reduced costs to consumers, and re- cession reversed a sixteen-year decline in traffic and duced government deficits. Through its assistance for more than doubled labor and asset productivity. concessioning, the Bank has also pioneered SECTION Two MAJOR WORLD BANK PROGRAMS 33 government policies and programs in encourag- The privatization technical assistance pro- ing outflows of FDI from the newly industrialized gram, combining trust funds from the Japanese countries of Asia. Two occasional papers based government and the World Bank, supports free- on the proceedings of earlier roundtables for standing technical assistance for privatization promoting FDI in the infrastructure sector in that is not specifically linked to project prepara- Eastern Europe and in Africa were put out by tion-thus giving countries an opportunity to FIAS during the year. collaborate with the Bank on creative analytical and policy work. In fiscal 1997 the program Working with partners for greater supported two privatization networks of infor- effectiveness and impact mal groups of government officials, private sec- One of the Bank's guiding principles for in- tor managers, and academics in Asia and the creasing development effectiveness in the area of Pacific and in Latin America and the Caribbean. private sector development is working with part- InfoDev is a multidonor program set up un- ners. The Bank, bilateral donors, and private der the leadership of the World Bank to pro- companies have joined together in five global mote information technology applications in de- partnerships that disburse $35 million annually velopment. This year it concluded trust fund from trust funds contributed by official and pri- agreements with sixteen donors, set up a techni- vate donors and the World Bank. These partner- cal advisory panel, ran a worldwide colloquium ships facilitate the sharing of knowledge and best for over 100 government and private sector ex- practice as well as leveraging development assis- perts, and funded projects in twelve countries. tance resources for clients. The World Bank/UNDP Water and Sanitation Research Program provides urban and rural water supply Uniquely placed to analyze the issues critical services increasingly oriented toward commu- to effective development policy, the Bank's re- nity-based and private sector-led solutions. search mandate encompasses the range of fac- The Energy Sector Management Assistance tors that influence poverty reduction, social Program (ESMAP) provides technical assistance to welfare, and economic growth. The Bank has help countries privatize and restructure their unequaled access to information and data on power sectors; develop oil and gas trade; pro- circumstances and policies across countries mote private sector involvement in rural energy; and over time, and its staff are in constant develop renewables such as solar, wind, and bio- contact with officials who identify the crucial mass energy options; as well as support environ- current problems. mentally sustainable energy options. A fundamental improvement in knowledge The Consultative Group to Assist the Poorest management has been critical to the Bank's (CGAP) develops global best practice and pro- strategic agenda in fiscal 1997, and generating motes pilot programs in the field of microcredit. that knowledge is the goal of Bank research. Ef- Since its inception two years ago, CGAP has gener- forts to improve results and effectiveness are ated enormous interest in microcredit programs based on enhancing understanding of all aspects and has committed about $15 million (out of of development; making information generated the $30 million total approved by the Bank in by the Bank's activities accessible; and improv- fiscal 1994) for pilot projects, including women's ing staff capacity to adapt knowledge to meet banking in Latin America, a credit union for different country circumstances. poor entrepreneurs in Senegal, and a network or- In fiscal 1997, the research programs focused ganization servicing six microfinancing affiliates on: in the Philippines. CGAP serves as coordinator and * increasing flexibility to analyze urgent and clearinghouse for information on the more than newly arising issues; $300 million-worth of projects that are being * fostering partnerships with national and in- implemented by all donors. ternational research agencies; 34 THE WORLD BANK ANNUAL REPORT 1997 * making research reports understandable to market responses, including investor wariness to the wide membership in the development com- finance firms facing regulatory penalties, com- munity; and munity intervention in production, and related * opening new communication channels to consumer resistance. reach the range of audiences in that community. Working with partners. Bank researchers are These elements are also key to implementing establishing networks of partners with other de- the Strategic Compact and will be high on the velopment research agencies. The Development agenda in coming years. Research Group has created a program of inter- change with researchers in several agencies in Increasingflexibility Japan, for example. The Bank's Research Com- The Development Economics Vice-Presidency, mittee fostered increased research capacity and which is responsible for the Bank's research, was was instrumental in establishing a research pro- restructured in fiscal 1997 to facilitate fast real- gram in Russia and a center for economics train- location of resources to address critical policy ing in Ukraine. The Bank provided further sup- questions and problems as they emerge. Several port to the China Center for Economic studies focused on development issues needing Research, which was established in fiscal 1996. new approaches, such as work on the role of the And the African Economic Research Consor- state and environmental regulation. tium, which the Bank helped to found in 1988, World Development Report 199723 (WDR) ex- is receiving financial support from the Bank's amines how the institutional capability of the Special Grants program. state can be enhanced to implement much Partnerships in sector research programs and needed social and economic reforms. The report projects are drawing together analysts from recognizes the need for a more effective, al- both local and international agencies. A major though not a minimalist, state. It outlines a two- research program on the role of government in part strategy that requires governments to AIDS mitigation and prevention is illustrative. It (i) identify from the increasingly broad reform is a product of collaboration between the Euro- agenda those priority activities that are consis- pean Union and UNAIDS, which is itself a joint tent with the state's institutional capability; and program of the World Health Organization (ii) incorporate strategies to strengthen that ca- (WHO), United Nations Development pability by establishing incentives that encour- Programme (UNDP), United Nations Children's age officials to do their jobs better and proce- Fund (UNICEF), United Nations Educational, Sci- dures that constrain arbitrary and corrupt entific and Cultural Organization (UNESCO), the behavior. WDR 97 also analyzes issues such as United Nations Population Fund, and the World collapsed states and the need for greater inter- Bank. The institutional ties established in this national collective action in today's more inte- work will provide a basis for further coopera- grated nation-state system. tion in other research on public health issues. Another Bank research program elaborated A Bank research team working on industrial innovative incentive systems to compensate for emissions has developed a similarly wide range limited institutional capacity in environmental of collaborating institutions in client countries. regulation and enforcement. Public disclosure of Initiated in Indonesia in collaboration with the information on firms' industrial emissions is at Indonesian Environmental Impact Management the heart of the program. While the small group Agency, the project has been extended, with of serious polluters that should be targeted for work going on in cooperation with national formal regulatory action are identified, the re- and local agencies in Brazil, China, Colombia, search shows that public information on pollu- India, Mexico and the Philippines. The research tion damage mobilizes powerful community program, the implementation of disclosure pro- participation and facilitates negotiation about harmful emissions among a much wider range 23. World Bank. 1997. World Development Report 1997: The of local firms. Public disclosures also trigger State in a Changing World. New York: Oxford University Press. SECTION Two MAJOR WORLD BANK PROGRAMS 35 grams, and the channels of cooperation will all example, provides data drawn from related re- serve as precedents for further work on environ- search that is accessible through Internet sites, a mental issues. CD-ROM, and diskettes for personal computers. Global Knowledge 97. In June 1997 the World To make it more accessible, Bank research is Bank and the government of Canada hosted being provided in new ways: presenting models Global Knowledge 97, an international confer- and econometrics briefly and straightforwardly ence held in Toronto, Canada. The role of and communicating findings in a clear and con- knowledge and information technology in eco- cise manner to highlight the policy implications. nomic and social development was examined The Policy Research Reports series was created through seven themes: empowering the poor to make research accessible to a wide develop- with information and knowledge; the state's ment policy audience. The report on AIDS24 now role in developing regulatory frameworks for in- being produced, for example, is directed not formation; infrastructure and capacity building; only to analysts of public economics but also to fostering science and technology in developing the international public health community. It countries; promoting knowledge, civic dialogue, explains the economic effects of AIDS and the fi- and informed citizenship; utilizing distance edu- nancing of control and palliative care strategies cation and technology for learning; and partner- for a noneconomist audience and also covers ships. EDI served as secretariat for the confer- the analysis of political economy and social wel- ence, which brought together leaders from fare issues and outlines low-cost provision of government, the private sector, and NGOs and compassionate care and treatment. individuals from IDA-eligible countries. Improving communication. The Bank is im- 24. World Bank. 1997. Confronting AiDs: Public Priorities in a proving the way it presents and channels its Global Epidemic. New York: Oxford University Press. communication-through paper, electronic, and broadcast media-to more clearly present the importance of research findings for policymakers, analysts, and Bank operational staff. The EDI'S Global Links television series, for example, pro- duced and marketed for national broadcast, is now in nearly two dozen of the Bank's client countries. Global Links highlighted three docu- mentaries covering research on the economic impact of education reform in fiscal 1997. EDI drew on a wide range of Bank research on the implementation and implications of economic reform in its learning programs for non-econo- mist audiences, including parliamentarians, la- bor union members, and journalists. World Development Indicators 1997, which present the most comprehensive data series on developing countries, were produced in a CD-ROM format this year. The program allows easy access and review and straightforward comparisons of countries' relative positions on a wide range of indicators. The format also allows researchers to perform sophisticated economet- ric analysis. One-time studies are providing easier and more useful access to research data: the Industrial Pollution Projections System, for 36 THEWORLD BANKANNUAL REPORT 1997 SECTION THREE 1997 REGIONAL PERSPECTIVES AFRICA Improved policies continued GDP per capita of less than cent economic performance to fuel Africa's economic recov- $1,000 grew by 3.1 percent has energized both African ery, strengthening the reform on average per year, but coun- leaders and donors. Donors momentum and the resolve of tries that implemented poli- have responded positively by donors and African countries to cies conducive to social and launching the fourth phase work together. This gives cause macro-economic stability and (1997-99) of the Special Pro- for optimism as Africa's agenda efficiently allocated their re- gram of Assistance (SPA) for moves beyond recovery to focus sources among key parts of low-income, debt-burdened on development. The Bank's the economy bettered that countries in Africa, with indi- strategy-in addition to its pri- rate, growing by 4.6 percent cations of new support of mary goal of reducing poverty- annually (see Figure 3-2). Bet- about $5 billion of highly focuses on two interrelated ob- ter policies resulted in a more concessional, quick-disbursing jectives that are critical to broad-based recovery than in assistance for the period, to be Africa's development: building 1995. Budget deficits, though used in conjunction with institutional and human capac- still unsustainably high, de- World Bank and IMF programs. ity and enhancing knowledge clined as a percentage of GDP Today there is cautious opti- and its dissemination. nearly everywhere, helping to mism about Africa's future, bring inflation down for the with a new openness to taking Sub-Saharan Africa's eco- second year in a row in several risks, trying new ideas, setting nomic recovery both acceler- countries. Performance bene- bolder targets, and looking be- ated and spread to more coun- fited from the stronger owner- yond the near term. The entry tries in 1996. In sharp contrast ship of reform programs dis- of South Africa as an active to the early 1990s, the region's played by a new class of participant onto the African gross domestic product (GDP) committed leadership in many economic scene contributes grew faster than the popula- parts of the continent. to the recent optimism. All tion for the second year in a Yet improvements are frag- of this is refreshingly new row. Estimated GDP growth ile, and the threat of reversal is for Africa. was 4.9 percent in 1996 com- real in some cases. Several World Bank loans and Inter- pared to 3.6 percent in 1995 countries are mired in strife or national Development Asso- (see Figure 3-1). Growth was civil disorder. Social indicators ciation (IDA) credits approved widely shared, although rates remain below those of other by the executive directors in varied between countries: regions; fiscal deficits are high fiscal 1997 totaled $1,736.7 twenty-three countries accel- and domestic savings low; aid million-compared to erated their GDP growth, seven dependency remains high; pri- $2,740.1 in fiscal 1996. The reversed their GDP decline, and vate investment and foreign number of operations ap- thirty-four recorded an im- direct investment levels, proved fell to forty-nine com- provement in per capita in- though beginning to improve, pared with fifty-three in fiscal come, many of them signifi- are low; and there is a signifi- 1996. Table 3-1 shows the cantly and some for the first cant unfinished agenda in ar- sectoral distribution of lending time in years. In most coun- eas such as the financial sector, to the region for the 1988-97 tries, exports rebounded, too, public expenditure manage- period. Table 3-2 compares and evidence continues to ment, and privatization. But in commitments, disbursements confirm the link between good sharp contrast to the past- and net transfers to the region policies and good economic when the improved economic for fiscal years 1992-97, and performance, especially in the fortunes of individual coun- table 3-3 shows operations in poorer African countries. Be- tries tended to weaken rather the Africa region approved by tween 1994-96, the forty than strengthen the resolve to the Executive Board during countries in the region with continue reforms-Africa's re- fiscal 1997 by country. The SECTION THREE AFRICA 37 FIGURE 3-1 Africa, Growth of GDP and Exports (percent) I0 prts 8 6 4 Ave uation 2. 1./e4 2 _| ** ,I S .5 55 S._- dip in IDA commitments from $2,740.1 million Shifting agenda in fiscal 1996 to $1,680.7 million in fiscal 1997 Against this backdrop of improved perfor- reflects greater selectivity in lending, the accel- mance and better prospects for Africa, the fun- erated move by the Bank out of failed invest- damental priority of the Bank's strategy remains ment models, and the slow uptake of new strat- one of helping the region to accelerate and sus- egies focused on decentralized implementation. tain growth, to extend the reach of growth to While it is not yet possible to measure fully the more countries, and to make growth benefit transitional effect of the reorganization of the more people. Better results are reestablishing a Africa regional office, it is estimated to have stronger base for development and bolstering been small. effective interest in it. This, too, is refreshingly In addition to Bank and IDA operations, the new for Africa. While the center of the Bank's Bank's private sector affiliate, the International strategy continues to be reducing poverty and Finance Corporation (IFC), made seventy-three improving the quality of people's lives, two investments during the year for a total of $385 other areas are crucial to helping Africa shift its million, compared to the seventy-one invest- agenda from recovery to long-term, sustainable ments totaling $191 million in fiscal 1996. The development: (i) building human and institu- Multilateral Investment Guarantee Agency tional capacity (see box 3-1), and (ii) creating, (MIGA) issued its first guarantee in the region for managing, and disseminating knowledge-an an investment in Guinea totaling $8.3 million objective that is at the center of the Bank's in coverage. Strategic Compact. 38 THE WORLD BANK ANNUAL REPORT 1997 Building blocks: country assistance strategies The Bank has given priority to those coun- Preparing country assistance strategies (CAS) tries in the region that have demonstrated a in consultation with individual countries on the firm commitment to improved economic broadest possible basis is the foundation for management, with a strong focus on poverty implementing the Bank's strategy. In the Africa issues and the ability to use resources-both region, particular attention was paid in fiscal domestic and external-efficiently. In line 1997 to ensuring that nongovernmental organi- with the Bank's strategic goals for assistance zations (NGOs) and civil society were more to the region, another commitment has in- deeply involved in developing CASs. And consis- creasingly been added in fiscal 1997: the tent with the goals identified by the IDA depu- commitment to capacity building. ties, the analyses and action plans of poverty as- Two instruments epitomize selective and sessments and other relevant economic and flexible approaches to Bank assistance in fis- sector work were reflected in CASs. Indeed, pov- cal 1997. The first is policy-based lending in erty reduction is the central theme in CASS for support of high-impact economic reform Burkina Faso and Zambia this year, following programs. Here, each adjustment operation the examples set earlier by Mali, Malawi, and approved in fiscal 1997 contains an innova- Mozambique, among others. To better identify tion in the form of either a single tranche, ways to develop the private sector and to design disbursed on the basis of upfront action a joint strategy for addressing them, the prepa- when the operation is approved, or a floating ration of the C6te d'lvoire CAS was undertaken tranche, disbursed when pre-agreed specific collaboratively with IFC. Capacity-building goals conditions have been met. At the same time, are also being integrated into CASs. clear performance indicators, defined jointly with the client, are facilitating implementa- Selectivity and flexibility tion and follow-up. A second instrument is The diversity of Africa, documented in "A sector investment programs (SIPs). Introduced Continent in Transition,"' and the urgency of its two years ago, sIPs support the implementa- needs call for a combination of selectivity and tion of a set of policies for a sector (rather flexibility in Bank assistance. Selectivity in than a project) over time and bring together country and sector focus and in lending and 1. World Bank. 1995. "A Continent in Transition: Sub- nonlending activities is exercised through CASS. Saharan Africa in the Mid-I 990s." Office of the Chief Economist, Africa Region. Washington, D.C. FIGURE 3-2 Africa, Accounting for Growth 4.6 0 ~~~~~~~~~~~4. | -}3157,| l NUMBER OF COUNTRIES AVERAGE GDP GROWTH RATE 1994-96 Countries with GDP ... and with ... and with resource- below $1,000 per capita social stability allocation efficiency SECTION THREE AFRICA 39 all expenditures within the sector: recurrent and Nonlending services also were significantly capital, local and donor. In sips, the sector effec- enhanced to be more focused, timely, and bet- tively becomes the project. Such operations, ter disseminated. which are not appropriate in all sectors, circum- The Bank's intensified commitment to stances, or countries, still are evolving as experi- successful rural development is reflected in ence is gained. the designation of Guinea, Malawi, Mali, In fiscal 1997, assistance under the HIPC Debt Mauritania, and Uganda as focus countries for Initiative (to assist heavily indebted poor coun- monitoring the progress of rural development tries) was approved for the first time, with activities not only in agriculture and water sup- Uganda being the beneficiary (see box in Over- ply but in a number of related areas as well, view section). The preliminary HiPc documents, particularly poverty reduction and the provi- including debt sustainability analyses for sion of transport and financial services to rural Burkina Faso and C6te d'lvoire, were discussed populations. Support of private sector develop- by the Executive Boards of the Bank and IMF ment focused on strengthening microenter- during fiscal 1997. Decision points on these two prises, which play a vital role in rural develop- countries are expected to be reached in early ment. A model microenterprise intervention fiscal 1998. was achieved in the Republic of South Africa TABLE 3-1. LENDING TO BORROWERS IN AFRICA, BY SECTOR, FISCAL YEARS 1988-97 (millions of us dollars) Annual average, Sector FY88-92 FY93 FY94 FY95 FY96 FY97 Agriculture 657.6 300.2 152.6 287.1 301.3 193.7 Education 257.2 401.9 325.5 201.2 131.6 75.1 Electric power and other energy 163.1 356.0 90.0 255.3 73.3 163.7 Environment 36.9 18.1 2.6 8.0 38.5 95.4 Finance 222.0 279.6 400.1 7.2 116.9 65.9 Health, population and nutrition 181.6 99.5 161.6 271.7 158.7 54.9 Industry 310.9 20.9 16.8 120.0 23.7 23.8 Mining 15.1 - - 24.8 12.2 21.4 Multisector 641.0 451.2 724.1 470.9 387.8 707.5 Oil and gas 57.6 2.4 186.2 - - - Public sector management 125.7 155.3 61.0 117.3 592.2 110.1 Social sector 39.9 43.7 46.7 39.8 257.5 Telecommunications 68.2 89.1 - - - - Transportation 405.4 483.0 501.9 74.8 420.7 52.9 Urban development 234.3 49.2 64.7 158.0 190.0 147.3 Water supply and sanitation 214.4 67.2 74.1 248.2 35.7 25.0 Total 3,630.8 2,817.3 2,807.9 2,284.3 2,740.1 1,736.7 Of which: IBRD 966.8 47.0 127.7 80.7 - 56.0 IDA 2,664.0 2,770.3 2,680.2 2,203.6 2,740.1 1,680.7 NoTE: Details may not add to totals because of rounding. -Zero. 40 THEWORLD BANKANNUAL REPORT 1997 TABLE 3-2. WORLD BANK COMMITMENTS, DISBURSEMENTS, AND NET TRANSFERS IN AFRICA, FISCAL YEARS 1992-97 (millions of us dollars) C6te d'lvoire Kenya Zambia Total region start start start start Item 1997 1997 1992-97, 1997 1997 1992-97, 1997 1997 1992-979 1997 1997 1992-97, Undisbursed commitments 420 557 360 10,372 Commitments 96 1,727 232 1,129 156 1,163 1,737 16,360 Gross disbursements 180 1,312 84 864 118 965 2,479 16,554 Repayments 166 1,076 96 632 49 313 1,060 6,333 Net disbursements 15 236 -12 232 69 651 1,419 10,221 Interestandcharges 99 844 14 361 18 154 623 4,715 Net transfer -84 -608 -53 -129 51 497 796 15,506 NOTE: The countries shown in the table are those with the largest borrowings of Bank funds duing fiscal 1996-97. Details mnay not add to totals because of rounding. a. Disbursements from the IDA Special Fund are included through fiscal 1996. when the World Bank helped assemble a team providing a framework for dialogue and conflict of international microfinance experts to work resolution. The Uganda Private Sector Competi- with a team of South African bankers, NGOs, and tiveness Project, which follows prototypes devel- government officials to expand access to finan- oped in C6te d'Ivoire and Senegal, is an ex- cial services. The government adopted the ample: under this ongoing project, approved in group's proposal for an apex organization as the fiscal 1996, the government passed on an IDA centerpiece of its micro- and small-enterprise credit in the form of a grant to a private sector development program, which became opera- foundation, which administers an equity fund tional in fiscal 1997. and a matching grant voucher scheme for prod- Because of the important role private sector uct and market development. The private sector development has in enhancing growth, the foundation manages the scheme, with the gov- Bank, IFC, MIGA, and the Foreign Investment Ad- ernment cooperating by pursuing appropriate visory Service (FIAS) worked together to help policy and regulatory reforms. improve the region's business environment. An The Bank supported its clients undertaking re- example of close Bank-IFc collaboration was in form of their financial sectors through strength- the preparation of the Gabon Privatization and ening prudential supervision and restructuring Regulatory Capacity Building Project approved banking systems such as in Cameroon, Ghana, in fiscal 1997 and aimed at increasing the level Mozambique, and Uganda; liberalizing financial of private sector investment in the country. In systems such as in Cape Verde; and deepening Mozambique the Bank has been working with financial markets such as in Gabon. the authorities to improve the business environ- ment using a "roadmap" developed by FIAS. And Better development through to assist African countries in their efforts to at- increasing knowledge tract foreign investment, MIGA continued its Monitoring activities better, especially poverty support of the network of African Investment reduction effects, is embedded in all Bank activi- Promotion Agencies. A specific objective of ties. Knowledge-related activities themselves fo- Bank activities has been to encourage partner- cus on those sectors, issues, policies, and tech- ship between the public and private sectors by nologies that can help Africa "leapfrog" or SECTION THREE AFRICA 41 TABLE 3-3. OPERATIONS APPROVED DURING FISCAL YEAR 1997, AFRICA Principal amount (millions) Country/project name Date of Approval Maturities SDR US$ Benin Transport Sector Investment Program Oct 31, 1996 2007/2036 27.50 40.00 Burkina Faso Mining Sector Capacity Building and Environmental Management Project Jun 30, 1997 2007/2037 14.80 21.40 Post-Primary Education Project Dec 24, 1996 2007/2036 18.00 26.00 Cameroon Second Structural Adjustment Credit Nov 14, 1996 2006/2035 17.50 25.20 Chad Second Structural Adjustment Credit Jun 30, 1997 2007/2037 18.00 25.00 Comoros Third Education Project Jun 30, 1997 2007/2037 5.10 7.00 Pilot Agricultural Services Project Dec 23, 1996 2007/2036 1.10 1.60 C6te d'lvoire Rural Land Management and Community Infrastructure Development Project May 30, 1997 2007/2037 29.60 41.00 Private Sector Development Adjustment Credit Nov 14, 1996 2007/2036 37.90 54.60 Djibouti Economic Reform Technical Assistance Project Jan 23, 1997 2007/2036 4.60 6.50 Eritrea Road Sector Engineering Project Apr 10, 1997 2007/2037 4.40 6.32 Gabon Privatization and Regulatory Capacity Building Technical Assistance Project Jun 10, 1997 1997/2012 n.a. 10.00 Ghana Village Infrastructure Project May 30, 1997 2007/2036 20.80 30.00 Private Sector Adjustment Credit Nov 14, 1996 2005/2035 2.40 3.50 Public Financial Management Technical Assistance Project Nov 7, 1996 2007/2036 14.40 20.90 Guinea Third Water Supply and Sanitation Project Apr 17, 1997 2007/2037 18.00 25.00 Guinea-Bissau Basic Education Support Project Jun 10, 1997 2007/2037 10.50 14.30 Kenya Energy Sector Reform and Power Development Project Jun 19, 1997 2007/2037 86.60 125.00 Early Childhood Development Project Apr 8, 1997 2007/2037 19.30 27.80 National Agricultural Research Project-Phase II Jan 28, 1997 2007/2036 27.40 39.70 Structural Adjustment Credit Nov 14, 1996 2007/2036 18.50 26.60 Lake Victoria Environmental Management Project Jul 30, 1996 2007/2036 8.90 12.80 Madagascar Urban Infrastructure Project Jun 25, 1997 2007/2037 25.20 35.00 Private Sector Development and Capacity Building Project May 29, 1997 2007/2037 17.20 23.80 Structural Adjustment Credit Mar 14, 1997 2007/2037 48.60 70.00 Structural Adjustment Credit Mar 14, 1997 2007/2037 0.40 0.60 Second Environment Program Jan 9, 1997 2007/2036 20.60 30.00 Public Management Capacity Building Project Sep 3, 1996 2007/2036 9.60 13.83 Malawi Environmental Management Project Jun 20, 1997 2007/2037 8.70 12.40 Fiscal Restructuring and Deregulation Program Nov 14, 1996 2007/2036 2.40 3.40 42 THEWORLD BANKANNUAL REPORT 1997 Principal amount (millions) Country/project name Date of Approval Maturities SDR US$ Mali Regional Hydropower Development Project Jun 26, 1997 2007/2037 12.60 17.10 Pilot Private Irrigation Promotion Project May 30, 1997 2007/2037 3.00 4.20 Urban Development and Decentralization Project Dec 13, 1996 2007/2036 55.50 80.00 Mauritania Regional Hydropower Development Project Jun 26, 1997 2007/2037 8.10 11.10 Rainfed Natural Resource Management Project Jun 17, 1997 2007/2037 13.20 18.00 Public Resource Management Credit Nov 14,1996 2007/2036 0.40 0.60 Mozambique Third Economic Recovery Credit Feb 4, 1997 2007/2037 69.10 100.00 Niger Urban Infrastructure Rehabilitation Project May 29, 1997 2007/2037 14.50 20.00 Public Sector Adjustment Credit Mar 20, 1997 2007/2037 21.60 30.00 Health Sector Development Program Sep 5, 1996 2007/2036 27.90 40.00 Rwanda Emergency Reintegration and Recovery Project Jun 25, 1997 2007/2037 36.70 50.00 Senegal Regional Hydropower Development Project Jun 26, 1997 2007/2037 7.70 10.50 Urban Transport Reform and Capacity Building Technical Assistance Project Jun 13, 1997 2007/2036 4.90 6.60 Sustainable and Participatory Energy Management Project Jun 12, 1997 2007/2036 3.80 5.20 Endemic Disease Control Project May 8, 1997 2007/2036 10.80 14.90 Agricultural Sector Adjustment Credit Nov 14, 1996 2007/2035 1.30 1.80 Sierra Leone Structural Adjustment Credit Nov 14, 1996 2004/2033 0.10 0.15 South Africa Industrial Competitiveness and Job Creation Project May 29, 1997 2001/2012 n.a. 46.00 Tanzania Structural Adjustment Credit Jun 20, 1997 2007/2037 93.20 128.90 National Agricultural Extension Project - Phase ll Jul 11, 1996 2007/2036 21.50 31.10 River Basin Management and Smallholder Irrigation Improvement Project Jul11,1996 2007/2036 18.20 26.30 Lake Victoria Environmental Management Project Jul 30, 1996 2007/2036 7.00 10.10 Uganda Third Structural Adjustment Credit Jun 6,1997 2007/2037 90.40 125.00 Lake Victoria Environmental Management Project Jul30,1996 2007/2036 8.40 12.10 Zambia Environmental Support Program Jun 10, 1997 2007/2037 9.30 12.80 Enterprise Development Project May 27, 1997 2007/2037 32.60 45.00 Second Economic and Social Adjustment Credit Nov 14, 1996 2007/2036 5.40 7.80 Second Economic and Social Adjustment Credit Aug 1, 1996 2007/2036 62.40 90.00 Zimbabwe Rural District Council Pilot Capital Development Project May 29, 1997 2007/2037 8.90 12.25 Total 1,186.50 1,736.75 n.a. = not applicable (IBRD loan). SECTION THREE AFRICA 43 FIGURE 3-3 Africa: IBRD and IDA Commitments by Sector, FiscalYear 1997 Water supply and sanitation, 2% Industry, 1% Transportation, 3% thr1 Health, population and nutrition, 3% Mining and other extractive, % Finance, 4% Education, 4% Environment, 6% Multisecto 41% Pubic sector management, 6% U~rban development, 9% Electric power and other energy, 9% Agriculture, I 1% significantly accelerate its progress along the de- jointly developed a major work program on velopment path. African development. The program comprises a The Bank's country economic and sector series of collaborative studies on seven issues: work (Esw) program for the region continues to debt, rural poverty, privatization, financial mar- focus on public expenditure reviews (PERs), kets, trade and industrial policy, civil service re- which are essential for helping countries im- form, and country selectivity in foreign assis- prove the way they allocate their resources, es- tance. The program was developed in close pecially in favor of the social sectors. PERs are in- collaboration with African researchers, who also creasingly planned and carried out with the are expected to take part in it. participation of the countries concerned, are The Bank is helping African countries to take tied to the annual budget cycle, though within a advantage of the "information highway" in order medium-term macroeconomic framework, and to enhance knowledge, information exchange, are made available to policymakers as quickly as and communications among African countries possible. They aim to strengthen budget formu- and between Africa and the rest of the world. lation and implementation and to enhance gov- Communications links are being established in ernments' capacities to manage public expendi- about a dozen ongoing or new projects in ture efficiently. At the same time a program of Ghana, Malawi, Mozambique, and Senegal. regional studies is being carried out to address Many of these activities are being carried out problems and challenges that cut across coun- with the help of the Economic Development tries (such as poverty alleviation, institutional Institute (EDI) and in partnership with the development, AIDS, environment, and demobili- United Nations Economic Commission for Af- zation) and to draw out and operation-alize the rica (UNECA). The latter is leading the African findings of the Bank's ESW program. Information Society Initiative and the Harness- Two modern knowledge-management sys- ing Information and Technology for Develop- tems have been established to facilitate knowl- ment component of the UN Special Initiative for edge sharing and dissemination. The Live Data Africa. Utilizing information technology, Base constitutes the largest source of data on though quite advanced in other parts of the African economies, and the Best Practice Sys- world, could not find a place on Africa's over- tem aims to share lessons learned. Efforts are loaded agenda until recently. This is changing, as under way to make both systems available to evidenced by the recent launch of the African clients and partners through the Internet. In ad- Virtual University, a project sponsored by the dition, the Development Economics vice- Bank in partnership with other donors to pro- presidency and the Africa regional office have vide satellite technology-based distance educa- 44 THE WORLD BANK ANNUAL REPORT 1997 BOX 3-1. CAPACITY BUILDING FOR DEVELOPMENT Sub-Saharan Africa's severe lack of capacity in * Mainstreaming a capacity-building approach in economic management and related areas is well the World Bank by taking steps such as ensuring documented and may be the missing ingredient in CASs are explicitly aimed at building capacity; re- the region's development. In fiscal 1996 the Bank's viewing country portfolios and providing technical African governors undertook a series of consultations advice to task teams on strengthening capacity build- with wide segments of their societies. They set in mo- ing; expanding the skill base of staff to include com- tion several national capacity assessments and a petencies relevant to capacity development; and dis- study of the impact that World Bank operations had seminating lessons of experience. on building capacity. The resulting report, "Partner- * Fostering partnership by laying the groundwork ship for Capacity Building: Strategy and Program of for establishing a coordination mechanism and possi- Action," was presented to the Bank's president and bly a trust fund for capacity building. subsequently to donors. It called for a series of ac- * Supporting and facilitating national capacity ac- tions at the national and international levels and tivities by working closely with African authorities to from the Bank. The president agreed to join the gov- support their capacity-building initiatives, such as ernors in implementing the report's recommenda- carrying out national capacity assessments; establish- tions, and other partners indicated their support. ing national capacity-building secretariats, and for- The Bank took several steps toward becoming a mulating national capacity-development strategies. more effective partner in capacity building in fiscal * Building capacity in selected priority areas 1997. It has defined a strategic program of actions by working through the Bank's operational teams that will transform its policies and operating style to establish centers of excellence in Africa for skill and has established the Capacity Building Technical and leadership development, revitalize African Group within the Africa regional office to spearhead universities, promote capacity building in civil soci- activities. The Bank's response to the call from the ety, and strengthen the capacity of the public and African governors is proceeding on four fronts: private sectors. tion in science and engineering through public Bank's cooperation with UNDP, UNECA, the and private institutions. African Development Bank, and others working EDI continued its support of the use of new toward the shared objective of accelerated technologies in Africa, too. Noteworthy are growth of the UN Special Initiative for Africa. A (i) the World Links for Development program, cooperation arrangement with the European which aims to connect 1,000 schools in the Union was concluded in 1997; it will initially developed world with 1,000 schools in the de- focus on developing the private sector and veloping world through the Internet, with heavy human resources in C6te d'Ivoire, Ethiopia, concentration in Africa; and (ii) the World Wide and Mozambique. Web-based Master's-level course on policy analy- No activity better typifies the Bank's strive sis and economic management developed for the for results through partnership with others than Africa Economic Research Consortium (AERc) and the Road Maintenance Initiative (RMI). It owes targeted to students from African universities. its demonstrated success (for which it won a Partnership at its best 2. The Global Coalition for Africa was launched following In fiscal 1997 the Bank continued to build on the Maastricht Conference on Africa in 1990 as a forum for building consensus on development issues among African its commitment to work in partnership with oth- countries and their external partners. ers, first and foremost with its clients. It has con- 3. The Cross-Border Initiative, established in 1993, is tinued to support the Global Coalition for cosponsored by the World Bank, the IMIF, the European Africa2 in its consensus-building efforts and the Commission for the European Union, and the African Cross-Border Initiative' and other regional inte- Development Bank. The initiative is facilitating private investment, trade, and payments in eastern and southern gration efforts. Partnership also characterized the Africa and in the Indian Ocean countries. SECTION THREE AFRICA 45 With IDA'S support, Kenya,Tanzania, and Uganda are conserving Lake Victoria's biodiversity and genetic resources- generating food, ensuring safe water, reducing disease, and providing jobs. Bank Excellence Award) to bringing together the Economic Community of West African central and local government, big and small States (EcowAS) has decided to introduce a business, bilateral and multilateral donors, com- funding mechanism for road maintenance based munities, NGOs, and affected people. The RMI on user fees and stakeholder representation in helps countries to implement policy reforms each member country. that will ensure that road maintenance is fi- nanced on a sustainable basis. The initiative is a Improving program and key component of the Sub-Saharan Africa project implementation Transport Policy Program launched in 1987 by The Bank has redoubled efforts to improve the World Bank and UNECA. It covers seven the implementation and impact of its projects countries (Cameroon, Kenya, Madagascar, Tan- in Africa. A comprehensive reevaluation of zania, Uganda, Zambia, and Zimbabwe) and the portfolio in the region's forty-eight coun- benefits from the participation of bilateral and tries was carried out in fiscal 1997, focusing multilateral agencies. The RMI has (i) fostered on implementation progress, quality, and public-private partnerships through commer- project outcomes. The reevaluation pointed cializing roads-bringing them into the market- to a need for a more realistic assessment of place by assessing user fees without privatizing performance, and, to this end, a number of rat- the roads; and (ii) creating a system for govern- ings were revised downward. In response, de- ments to work with road users to manage and tailed portfolio management programs have sustain local road systems efficiently and effec- been prepared. These will be agreed on with tively and providing a forum for African coun- the beneficiaries, who will participate in imple- tries to form cross-national partnerships to menting them. The actions involved range from maintain roads. Significant road maintenance actively restructuring the portfolio and rede- policy reforms in line with the RMI have recently signing projects where needed, to introducing been undertaken in Ghana and Zambia, and the performance criteria and a system of continu- Authority of Heads of State and Government of ous monitoring. 46 THE WORLD BANK ANNUAL REPORT 1997 Implementation is being helped by actions enhanced by increased attention to capacity carried out with partners inside the Bank (such constraints and actions to alleviate them in CASS. as EDI) and outside the Bank (such as NGOS), Also, the innovations inherent in High Impact some of which are already yielding results. For Reform Programs and siPs, both of which example, NGOs are increasingly involved in were introduced in response to the implementa- project implementation by subcontracting or tion problems encountered by earlier instru- overseeing project implementation. Some NGOS ments with complex conditionality and uncoor- have assisted in the design of projects; for ex- dinated sector interventions, should help ample, NGOS were involved in the Sustainable improve outcomes. and Participatory Energy Management Project in The Africa regional office's renewal program, Senegal, approved in fiscal 1997. The Mali the first of the regional renewal programs, is al- Grassroots Initiative to Fight Hunger and Pov- ready having a positive impact through empha- erty Project, which is in an advanced stage of sizing country focus, client orientation, and preparation, takes a new approach by involving openness, all of which have been designed to NGOS in intermediating and implementing optimize results on the ground and reflect the village-level development. Communities will new culture of support to African leadership. participate in selecting, planning, and imple- The 1997 review of the region's entire portfolio, menting microprojects, including small irrigation unprecedented in its comprehensiveness, open- works, community schools, and rural roads. ness, and involvement of beneficiaries, is a first EDI has helped to demonstrate the value, direct result. in terms of higher rates of return, of communi- cating with beneficiaries during project develop- ment so that they are informed about the opera- tion-its purpose, design rationale, and how it will be implemented. The prospects of im- proved implementation and outcomes are being SECTION THREE AFRICA 47 EAST ASIA AND PACIFIC Despite the temporary cooling in the 1 990s. China's growth tries have a more robust exter- of overheated economies in 1996, has been astonishing, with per nal and fiscal position than most of the countries of the East capita income rising 270 per- countries that have faced Asia and Pacific (EAP) region cent in seventeen years. But banking crises elsewhere. The continued their unprecedented even the lesser-developed prospects for continued high rapid growth in fiscal 1997. Indochinese economies have growth in coming years re- Many began to confront the new shared the rapid growth dur- main sound, provided coun- round of policy reforms and insti- ing the past several years, with tries undertake the necessary tutional development necessary Vietnam growing at 8 percent important reforms. to sustain rapid and socially re- and Cambodia and Lao PDR East Asia enjoys enviable sponsible development in the fu- at 6 percent per year in the macroeconomic conditions ture and to lift the region's re- first half of the 1990s. and an unprecedented growth maining 350 million poor out of While the region continued momentum, but both the low- poverty. In fiscal 1997 the focus to be a major recipient of pri- and middle-income countries of World Bank support to the re- vate capital flows and a grow- face several structural con- gion shifted toward helping coun- ing world trade player, a slow- straints to maintaining future tries promote the commercializa- down of exports and growth at historic rates. A new tion and participation of the macroeconomic performance round of policy reforms and private sector in infrastructure fi- in 1996 raised questions about institutional development is nancing; increasing the protection whether the East Asian necessary to sustain rapid, so- of vulnerable groups who might "miracle" is over. After years of cially responsible, environ- otherwise be left out of the double-digit growth, export mentally sound, and quality region's growth experience; ensur- growth slowed, and some development into the next ing that environmental cleanup countries experienced large century. Addressing these and protection are more inte- current account deficits. Al- challenges underpinned the grated into the modernization though this highlighted some Bank's lending and advisory process; and strengthening the in- structural issues, it mostly re- services strategy for assisting stitutions necessary for efficient flected one-off, or cyclical its clients in the East Asia and competitive market econo- events, and the successful and Pacific region during mies. Although the East Asia and cooling of overheated econo- fiscal 1997. Pacific portfolio is strong, signifi- mies rather than an end to World Bank loans and Inter- cant additional efforts were made sustained economic growth. national Development Asso- to improve problem projects, Indeed, exports and overall ciation (IDA) credits approved work more closely with clients, economic growth recovered in by the executive directors in and enhance consultation with the first half 1997, albeit be- fiscal 1997 totaled $4,866 local groups and NGOS. low past levels. The large cur- million, compared to $5,420 rent account deficits, driven in fiscal 1996. Table 3-4 shows East Asia's capacity to sus- by high private inflows rather the sectoral distribution of tain rapid growth is without than low domestic savings, lending to the region for the precedent. The only significant reflect some short-run vulner- 1988-97 period. Table 3-5 group of countries to close the abilities. And although there compares commitments, dis- gap with the industrialized are some concerns about the bursements, and net transfers economies over the past few fragility of the region's bank- to the region for fiscal years decades, their growth has aver- ing systems, the risks of loss of 1992-97, and table 3-6 shows aged 7 percent per year in real confidence in banking systems operations in the EAP region terms since the mid-1970s, ac- would be easy to overstate, approved by the Executive celerating to 9 percent per year since most East Asian coun- Board during fiscal 1997 by 48 THEWORLD BANKANNUAL REPORT 1997 TABLE 3-4. LENDING TO BORROWERS IN EAST ASIA AND PACIFIC, BY SECTOR, FISCAL YEARS 1988-97 (millions of us dollars) Annual average, Sector FY88-92 FY93 FY94 FY95 FY96 FY97 Agriculture 892.7 889.3 1,570.4 373.0 1,284.9 1,265.0 Education 356.8 478.9 436.6 526.5 437.9 645.0 Electric power and other energy 822.3 760.0 1,048.5 1,383.0 1,243.0 1,131.4 Environment 34.9 500.0 381.5 308.1 170.7 - Finance 306.3 457.0 100.0 - 49.0 28.4 Health, population and nutrition 91.8 200.4 160.0 242.2 296.0 58.9 Industry -256.5 - - 175.0 217.0 60.0 Mining - - - - 35.0 - Multisector 277.0 200.0 82.7 167.0 130.0 - Oil and gas 49.8 225.0 266.0 245.0 - - Public sector management 83.5 173.0 - 88.0 - Social sector - - 9.7 267.5 40.0 - Telecommunications 155.9 134.0 250.0 325.0 - - Transportation 754.4 1,132.2 1,380.0 1,032.5 916.9 1,103.6 Urban development 191.5 110.0 349.0 486.0 542.7 405.1 Water supply and sanitation 135.4 310.0 - 75.0 57.0 168.6 Total 4,408.7 5,569.8 6,034.4 5,693.8 5,420.1 4,866.0 Of which: IBRD 3,588.4 4,404.8 4,623.8 4,592.6 4,252.2 4,074.4 IDA 820.3 1,165.0 1,410.6 1,101.2 1,167.9 791.6 NoTE: Details may not add to totals because of rounding. - Zero. country. Thirty-seven operations were approved, Infrastructure needs loom large compared to forty-six in fiscal 1996. The public sector's provision of infrastructure In addition to Bank and IDA operations, the has been a major contributor to East Asia's past Bank's private sector affiliate, the International success. But if rapid modernization is to be sus- Finance Corporation (IFC), invested in thirty- tained, international engagement deepened, and three operations during the year for a total of the challenges to rising urbanization met, large $1,359 million, compared to the thirty-nine infrastructure investments in power, transport, investments totaling $2,601 million in fiscal water, and telecommunications are needed. In 1996. The Multilateral Investment Guarantee an increasingly competitive global economic en- Agency (MIGA) issued 10 guarantee contracts vironment, efficient infrastructure services be- for more than $70 million in coverage during come a more important ingredient to success; the year, facilitating some $1 billion in foreign infrastructure bottlenecks not only stifle investment in the region. growth, raise costs, and hurt competitiveness but also reduce people's quality of life. East SECTION THREE EAST ASIA AND PACIFIC 49 Asia's infrastructure needs are vast-an esti- * support for countrywide policy and institu- mated $1.2 trillion to $1.5 trillion over the next tional frameworks; decade. These needs far exceed the financial and * support for sectoral reforms-legal, regula- managerial capacity of the public sector and can tory, and judicial; only be efficiently met if the private sector's * support for regional activities that promote role is increased significantly and infrastructure information sharing and exchange. provision is commercialized. Private sector in- Direct support for creating a policy and insti- vestment accounts for at most 10 percent of tutional framework conducive to private provi- today's infrastructure investment in East Asia, sion of infrastructure at the country level during yet there is growing recognition that private in- fiscal 1997 included design of reforms for the vestment should increase to some 30 percent power and transport sectors in China, Indonesia, over the medium term. The binding constraint and Vietnam; water supply policy improvements to reaching this goal is the lack of bankable in Indonesia and the Philippines; and road and projects. Creating a pool of bankable projects urban transport sector reforms in China and the requires a combination of political will and ag- Philippines. Support for reforms necessary to fa- gressive policy and institutional reforms that cilitate overall private investment in infrastruc- will develop competitive market structures, ture was provided jointly by the Bank, IFC, MIGA, sound regulatory regimes, price reforms, risk- and FIAS and included legal and judicial system mitigation measures, competitive and transpar- reforms in China and Indonesia; regulations for ent contracting procedures, and effective financ- transparent bidding and clearer laws in China, ing mechanisms. Indonesia, and the Philippines; and advice and Many countries are moving aggressively to- technical assistance to develop capital [bond) ward private provision of infrastructure on their markets in China and the Philippines. The Bank- own initiatives; nevertheless, infrastructure de- financed Shanghai Waigaoqiao power project in velopment remains a central element of World China includes innovative mechanisms to tap Bank support for the region, accounting for domestic share and bond markets, and an ongo- about half of annual commitments, or some $3 ing BOT (build, operate, transfer) bridge project billion a year. In addition to individual project in Wuhan involves some innovative work with loans, the Bank helps to create an environment IFC. These country-level efforts were comple- for more effective public-private partnership in mented by regionwide activities to help coun- nearly every East Asian country. This effort in- tries share their experiences, broaden and volves interventions from various parts of the deepen political support for reforms, and de- Bank at three levels: velop a regional momentum for developing a FIGURE 3-4 EastAsia and the Pacific: IBRD and IDA Commitments by Sector, FiscalYear 1997 Industry, i % Health, population and nutrition, 1% Water supply and sanitation, 4% Finance,% Urban development, 8% Agriculture, 26% Education, 313% -'< -- Elertric power and other energy, 23% TransporRtation, 231 50 THE WORLD BANK ANNUAL REPORT 1997 TABLE 3-5. WORLD BANK COMMITMENTS, DISBURSEMENTS, AND NET TRANSFERS IN EAST ASIA AND PACIFIC, FISCAL YEARS 1992-97 (millions of us dollars) China Indonesia Vietnam Total region start start start start Item 1997 1997 1992-97, 1997 1997 1992-97, 1997 1997 1992-97, 1997 1997 1992-97. Undisbursed commitments 10,294 4,882 1,027 19,734 Commitments 2,815 17,553 915 7,268 349 1,591 4,866 33,031 Gross disbursements 2,128 11,433 916 6,398 247 448 4,138 24,692 Repayments 366 1,747 1,501 6,225 1 4 3,073 16,123 Net disbursements 1,762 9,686 -585 173 246 444 1,065 8,568 Interest and charges 547 2,489 752 5,148 3 7 1,928 12,282 Net transfer 1,215 7,197 -1,337 -4,975 243 437 -863 -3,714 NOTE: The countries shown in the table are those with the largest borrowings of Bank funds duringfiscal 1996-97. Details may not add to totals because of rounding a. Disbursements from the IDA Special Fund are included through fiscal 1996. new public-private partnership (see box 3-2). A port them as they move into new jobs, and man- special unit was formed in the Elast Asia and Pa- age the decline of "sunset" industries. The Bank cific regional office of the Bank to focus on pro- is helping a number of countries build flexible moting the private sector's involvement in infra- vocational and science education and responsive structure provision in the region. secondary and higher education systems. The regional office, together with the Development Poverty and inequality persist, structural Economics staff, have begun collaborative change puts others at risk research on managing labor and upgrading The fast-growing East Asian economies have workers' skills. been exemplars of relatively equitable and rapid But as they tackle these emerging issues, poverty reduction (see figure 3-5). Nevertheless, countries must continue to give priority to rural the region is home to some 350 million poor development, provide broad-based social services, people. Concern about increasing income in- including education, and target help to those equalities in China and Thailand, and over inequi- at risk of being left out of rapid growth, espe- table distribution of the fruits of rapid growth cially in those countries with growing regional throughout the region, is growing. The region disparities. They will also require strongly com- faces rapid urbanization, formalization of labor petitive and transparent market structures to markets, and an aging population, all raising new ensure efficient allocation of resources and to challenges and posing new risks as people's earlier minimize corruption. informal ways of supporting the sick, disabled, Reducing poverty remained at the core of Bank unemployed, and elderly fall into decline and the assistance in fiscal 1997, especially in its support need for formal mechanisms increases. Rising of rural development, education, and health ser- integration, via international trade and capital vices and in targeted actions for those at risk of flows, and technological change are leading to being overlooked. The World Bank-financed, rapid shifts in patterns of production that necessi- multisectoral Qinba Poverty Reduction project, tate upgrading workers' skills. As unskilled jobs for example, will bring some 2.3 million of the get relocated abroad, countries must design edu- poorest rural Chinese above the poverty line. cation and training systems that provide workers Education and health are growing priorities in with flexible skills, provide mechanisms to sup- the Bank's East Asia portfolio, accounting for SECTION THREE EAST ASIA AND PACIFIc 51 TABLE 3-6. OPERATIONS APPROVED DURING FISCALYEAR 1997, EAST ASIA AND PACIFIC Principal amount (millions) Country/project name Date of Approval Maturities SDR US$ Cambodia Agriculture Productivity Improvement Project Feb 28, 1997 2007/2036 18.80 27.00 Disease Control and Health Development Project Dec 24, 1996 2007/2036 20.60 30.40 China Xiaolangdi Multipurpose Development Project: Stage II Jun 24,1997 2003/2017 n.a. 430.00 Waigaoqiao Thermal Power Project Jun 24, 1997 2003/2017 n.a. 400.00 National Rural Water Supply Project Jun 23, 1997 2007/2032 51.40 70.00 Qinba Mountains Poverty Reduction Project Jun 11, 1997 2007/2032 108.50 150.00 Qinba Mountains Poverty Reduction Project Jun 10, 1997 2003/2017 n.a. 30.00 Wanjiazhai Water Transfer Project Jun 3, 1997 2003/2017 n.a. 400.00 Inner Mongolia (Tuoketuo) Thermal Power Project May 27, 1997 2003/2017 n.a. 400.00 Fourth Basic Education Project May 27, 1997 2007/2032 61.50 85.00 Heilongjiang Agricultural Development Project May 13, 1997 2003/2017 n.a. 120.00 Second National Highway Project Dec 17, 1996 2003/2017 n.a. 400.00 Second Xinjiang Highway Project Oct 10, 1996 2002/2016 n.a. 300.00 Vocational Education Reform Project Jul 2, 1996 2001/2016 n.a. 10.00 Vocational Education Reform Project Jul 2, 1996 2006/2031 13.80 20.00 Indonesia Renewable Energy Small Power Project Jun 24, 1997 2001/2012 n.a. 66.40 Quality of Undergraduate Education Project Jun 17,1997 2001/2012 n.a. 71.20 BEPEKA Audit Modernization Project Jun 17,1997 2001/2012 n.a. 16.40 Bali Urban Infrastructure Project May 6, 1997 2000/2012 n.a. 110.00 Solar Home Systems Project Jan 28, 1997 2002/2017 n.a. 20.00 Intensified Iodine Deficiency Control Project Dec 17, 1996 2000/2012 n.a. 28.50 Second Sulawesi Urban Development Project Nov 21, 1996 2003/2017 n.a. 155.00 Railway Efficiency Project Nov 21, 1996 2002/2017 n.a. 105.00 Second Village Infrastructure Project Oct 10, 1996 2002/2016 n.a. 140.10 Sumatra Junior Secondary Education Project Sep 17, 1996 2002/2016 n.a. 98.00 Central Indonesia Junior Secondary Education Project Jul 2, 1996 2002/2016 n.a. 104.00 Lao People's Democratic Republic Third Highway Improvement Project Apr 8, 1997 2007/2037 34.60 48.00 Mongolia Banking and Enterprise Sector Adjustment Credit May 1, 1997 2007/2037 7.20 10.00 Banking, Enterprise and Legal Technical Assistance Project May 1, 1997 2007/2037 1.50 2.00 Philippines Third Elementary Education Project Nov 26, 1996 2003/2017 n.a. 113.40 Agrarian Reform Communities Development Project Nov 26, 1996 2003/2017 n.a. 50.00 Water Resources Development Project Nov 26, 1996 2003/2017 n.a. 58.00 Second Subic Bay Freeport Project Nov 26,1996 2003/2017 n.a. 60.00 Thailand Metropolitan Distribution Reinforcement Project Jun 24, 1997 2001/2013 n.a. 145.00 Universities Science and Engineering Education Project May 13, 1997 2001/2012 n.a. 143.40 Distribution Automation and Reliability Improvement Project Jul 16, 1996 2001/2012 n.a. 100.00 Vietnam Water Supply Project Jun 26, 1997 2007/2037 71.30 98.61 Second Highway Rehabilitation Project Mar 27, 1997 2007/2037 136.30 195.60 Rural Transport Project Dec 23, 1996 2007/2036 37.80 55.00 Total 563.30 4,866.01 n.a. = not applicable (IBRD loan). 52 THEWORLD BANKANNUAL REPORT 1997 13 percent of total lending to the region in fiscal Protecting the environment: a policy priority 1997. Education projects focused particularly on East Asia's successful economic development quality at the primary and lower secondary levels took a heavy toll on the environment, with and on targeting the poorest children. The Philip- rapid loss of forests and pollution of both sur- pines' Third Elementary Education Project, for face and groundwater. "Brown" environmental example, targeted 94 percent of project costs to- issues are increasingly important, as severe air ward reaching children in twenty poor provinces. and water pollution problems in Bangkok, And China's Basic Education Project, aimed Jakarta, and many of China's major cities attest. especially at improving girls' education, will ben- Unless environmental protection becomes a efit 4.7 million children. Its interventions include higher policy priority, the costs of ill health and providing student assistance and secure boarding declining well-being that result from pollution facilities for girls and providing female principals will inhibit economic growth. In fiscal 1997 as role models. Indonesia's Secondary Education the Bank addressed such problems with support Project is targeting rural areas and includes alter- to both China and Indonesia to reverse indus- native schooling models that allow more poor trial and urban pollution as well as to address children and girls to continue their education concerns of potential loss of biodiversity. And beyond the elementary level. Health projects in Indonesia, the Bali Urban Infrastructure also targeted the poorest. A project in Cambodia, Project includes an innovative component to for example, which will help the country de- protect Bali's unique cultural heritage through crease the prevalence of preventable diseases, strengthening conservation capacity and imple- also helps shift health systems so they reach the menting pilot conservation projects, establishing community level. FIGURE 3-5 Poverty in EastAsia: Percent of Population below the Poverty Line 100 v 99 80 85 60 40 20 0 8 East Asia East Asia China Indonesia Philippines Thailand Malaysia Vietnam Lao PDR Mongolia Papua (excl. China) New Guinea Note: Based on the international poverty line of $1 per person per day per capita at 1985 prices. Source: World Bank staff estimates. SECTION THREE EAST AStA AND PACIFIC 53 an inventory of historic places, and installing Policy advice and lending for water supply signage in Indonesian and other languages at and sanitation increased in fiscal 1997, with heritage sites. lending growing from $57 million in fiscal 1996 Shandong province, one of the engines of to $169 million in fiscal 1997; and "brown" en- China's economic growth, now also features vironmental and resettlement concerns are at some of the heaviest water and air pollution in the center of the Bank's involvement in infra- the country. But a Bank-supported multifaceted structure development. Regional and global intervention is helping clean up and promote environmental issues, including water pollution, policy changes that will address the problems. protecting the ozone layer, reducing acid rain, The project also will bring water from the Yel- and reducing carbon dioxide emissions, are low River to protect rapidly depleting and pol- being tackled through Global Environment luted groundwater resources and will demon- Facility (GEF) grants such as those to provide strate ways to improve district heating systems. fuel-efficient boilers in China and to provide BOX 3-2. INITIATIVES TO PROMOTE PRIVATE PARTICIPATION IN INFRASTRUCTURE IN EAST ASIA AND THE PACIFIC To help develop regionwide support and momen- the Bank/Fund Annual Meetings in October 1996. tum for enhanced private participation in infrastruc- This forum allowed the Jakarta seminar partici- ture, the Bank organized or supported three major pants to continue their discussion and for more pri- regionwide fora in fiscal 1997. All three facilitated vate sector executives to join in discussions with high-level dialogue between public sector officials and country officials. A summary report on the Jakarta business executives. They exemplify new nonlending seminar was distributed widely.' In light of the suc- products the Bank is developing to complement cess of these events, the Bank is planning a similar country-specific work and to respond to borrower forum at the 1997 Annual Meetings in Hong Kong. and private sector needs. Throughout fiscal 1997, Bank staff supported the In September 1996 the Bank and Indonesia orga- senior officials' working group charged with develop- nized a high-level summit in Jakarta where twenty- ing an action agenda for the Asia-Pacific Economic eight ministers from eighteen countries, other Cooperation (APEc). They prepared working papers policymakers, and over fifty senior business execu- for discussion at three meetings of officials from the tives, together with iFc, MIGA, Bank, and ADB staff, eighteen member economies as well as at a public- participated in three days of roundtable discussions. private dialogue held in Seattle, Washington. A Participants discussed both the successes and chal- framework developed by Bank staff provided the ba- lenges Indonesia faces-by inviting private invest- sis for an action agenda formulated by the working ment in infrastructure-and exchanged views on the group and endorsed by the economic ministers. In constraints the private sector faces. Broad consensus parallel, the Bank was asked to provide support to was reached on both the need and potential for in- the APEC Business Forum, a newly created group of creasing the share of private financing of infrastruc- some 450 chief executives from the APEC economies. ture in East Asia from today's roughly 10 percent of The associated APEC Business Advisory Council sup- total investment to about 30 percent toward the end ported the adoption of an action agenda during its of the century. The binding constraint is not in- meeting with the APEC leaders. The agenda was en- adequate financing but a lack of bankable projects. dorsed by the Subic Bay Communique, which called Participants discussed specific measures needed to in- on ministers to work with the private sector and in- crease the supply of bankable projects while meeting ternational institutions like the World Bank to for- societal concerns and asked the Bank to assist both mulate concrete follow-up steps. regionwide and country-specific efforts to develop ac- tion plans to achieve those measures. tion plans to achieve those measures. 1. World Bank. 1996. "Frontiers of the Public-Private Interface in The Jakarta seminar was followed by a roundtable East Asia's Infrastructure: Report on a High Level Conference held public-private dialogue in Washington, D.C., during in Jakarta, Indonesia, September 2-4, 1996.'Washington, D.C. 54 THE WORLD BANK ANNUAL REPORT 1997 photovoltaic devices to generate electricity in rural Indonesia. Developing the institutions of market economies Strengthening the institutional basis for mar- ket economies, an overriding issue for econo- mies in transition, is also a major question for the region's market economies. Sound market ___ economies need efficient financial systems, _ sound structures for corporate governance and industrial relations, and well-functioning gov- ernmental institutions. EDI offered training to support improvements in governance, including using client surveys to judge the quality of gov--__ ernment services and establishing deliberation councils to build consensus around policy _________ change. State enterprise reform and financial sector development are especially important in a China, Mongolia, and Vietnam. State-directed lending, political pressures, and poor lending practices are still common in the region, and- relative to their income level--many countries have institutionally poorly developed banking _5_-_______= systems. Solving these structural problems and building more robust banking systems are im- -777 portant throughout the region. The Bank is providing policy advice and technical assistance as well as lending services to many East Asia countries to help build and sustain efficient in- stitutions. An example is the new partnership initiated this year with the government of -- ---- Singapore. Under this partnership, managed by EDI, courses in strategic banking and environ-____ mental management are provided to clients _______________:_-- from East and South Asia, using Singaporean - __-:--- technical and financial resources. The banking Infrastructure remains a central aspect of World Bank course is designed specifically for China's most support to East Asian countries senior bank officials and is offered at the Singapore Institute of Banking and Finance. It will be followed by a round of training for other Enhancing the regional portfolio senior banking officials in China itself The envi- In fiscal 1997, significant management atten- ronmental management program will cover tion was devoted to further improve the region's urban-industrial issues and coastal-marine issues already strong portfolio. Key portfolio perfor- and will target senior and mid-level policy- mance indicators are reviewed twice a year, and makers from Asia. It is expected that the pro- action plans are prepared to improve problem gram will offer up to eight courses each year. projects within a six- to twelve-month period. A portfolio improvement plan (PIP) with specific, measurable targets was introduced in February 1996 to meet three aims: increase the focus on SECTIONTHREE EASTASIAAND PACIFIc 55 quality-at-entry; improve the quality of the ex- sure that the small Pacific island states are not isting portfolio, with targets set to reduce prob- left behind in an era of rapid change in trade lem projects and increase disbursements; and in- and technology. The project, the Global Knowl- crease the emphasis on learning from experience edge Revolution: Stakes and Opportunities for through more systematic review and better the Pacific Islands, will involve a regional over- design of implementation completion reports. view; country-level studies and workshops to assess opportunities and constraints to knowl- Emphasizing client orientation edge management; 'virtual" conferences via the Getting closer to clients has been key to improv- Internet; and follow-up support for pilot appli- ing effectiveness. Following a review of the Bank's cations in distance education, telemedicine, and experience with the region's smaller member commercial uses. In each country the Bank team countries, a new "country management unit" for is collaborating with governments, the business Papua New Guinea (PNG) and eight other Pacific community, academics, religious groups, and island countries was established to improve the fo- NGOS and at the regional level with agencies cus of support for these smaller island states and such as UNDP that are supporting information enhance the Bank's contribution to their develop- access and innovative applications. ment efforts. The unit has given a high priority to The Bank, MIGA, and IFC are working more establishing close and effective working relation- closely on many activities. The CAS for Indone- ships with regional agencies and other donors-in sia, for example, was prepared jointly with IFc, order to avoid duplication of effort while maximiz- and the Bank and IFc together provided advisory ing opportunities for synergy-and improving the assistance to the Philippines on promoting pri- effectiveness of aid flows to the countries. vate participation in the Manila Water Utility Experience in the region has shown that core and Sanitation Project. functions, such as accounting, disbursement, More Bank research in the region is being un- procurement, and environment/social services, are dertaken in partnership with local research in- particularly efficient when provided locally. There- stitutes and researchers. Work on private capital fore, responsibility and resources for these func- flows and increased financial integration, for tions and for supervision have increasingly been example, was undertaken with the Asian Devel- shifted to Bank resident missions throughout East opment Bank (ADB), and a seminar on pension Asia and the Pacific.4 This trend will continue. Also, reform was undertaken in collaboration with to better respond to clients needs, a business inno- the regional association of social securities agen- vation was introduced to set service standards, cies. Generating and sharing knowledge among which are monitored using a Web page. research and policy institutes outside is comple- mented by a broader program of partnerships Expanding collaboration and partnerships within the Bank Group-between the regional Collaboration with NGOs was expanded in office, the Development Economics vice presi- fiscal 1997, with NGOS participating in the dency, EDI, and other parts of the Bank. The aim preparation of the CAS for Cambodia and with is to reach out to governments, the private sec- more frequent and systematic consultation with tor, and civil society through workshops and NGOs in economic and sector work. NGOS in PNG, seminars. Such programs will be built on to for example, were involved in preparing the facilitate a more intense exchange of ideas be- country's poverty assessment, and in Lao PDR, NGOS tween the Bank Group and institutions in the collaborated on preparing the rural infrastructure region so that the policy and research agenda is report. Collaboration between the Bank and envi- jointly shaped and the results of research are ronmental NGOS was particularly notable on re- fully shared and discussed by all stakeholders. gional environmental strategies and community cleanup programs in large Asian cities. In partnership with the South Pacific Coin- arn with spo from Austr alia 4. The Bank has resident missions in China, Indonesia, the mission ant with support from Australia, the Philippines, Thailand, and Vietnam and liaison offices in Bank launched a new initiative designed to en- Cambodia, Lao PDR, and Papua New Guinea. 56 THEWORLD BANKANNUAL REPORT 1997 SOUTH ASIA Reflecting the region's recent re- double-digit inflation-and the growth of manufactured ex- fonns, South Asian economies widening current account ports and increased foreign in- fared well in 1996, with most deficit impeded growth and vestment flows are good news countries achieving healthy GDP poverty reduction. for South Asia, as is evidence and export growth rates, im- Despite faltering perfor- of cooperation among coun- proved creditworthiness indica- mance in Nepal and Pakistan, tries in the region. India and tors, and increased foreign in- the region's exports grew in Nepal, for example, recently vestment. Despite these 1996 by 7.5 percent. Yet even signed a treaty to integrate achievements, the region still after rapid growth throughout their development plans for contributes only 1 percent of the 1 990s, South Asia generates the Mahakali River, and India world trade, attracts less foreign only 1 percent of world trade, and Bangladesh have agreed investment than other regions, and its exports per capita are on arrangements to share the and is home to 40 percent of the six times lower than the aver- water from the Ganges River world's poor. In fiscal 1997 the age for developing countries. and to restore rail links that World Bank helped address The region's creditworthiness have been severed since 1965. these shortfalls by supporting the indicators continued to im- Under the auspices of the region's reform agenda-and in- prove, and the region maintains South Asian Association for vesting in its people while im- its impressive record of debt Regional Cooperation (SAARC), proving the effectiveness of Bank servicing, having kept arrears countries took steps to liberal- operations. This was accom- low and avoiding debt restruc- ize intraregional trade and plished by moving closer to cli- turing over the past decade. held discussions to facilitate ents, facilitating more participa- Newly liberalized investment further cooperation on trade, tion by local people in project regimes continued to attract infrastructure, communica- design and implementation, and foreign investors to the region, tions, and the use of natural introducing innovations to im- particularly India. In 1996, net resources, especially water, as prove new and ongoing projects. capital flows to South Asia a means to accelerate poverty reached $17 billion ($1 1 billion reduction. South Asia's output grew by from private sources), up from However, several factors over 6 percent in 1996, with $9 billion the previous year, as constrained the region's per- GDP growth expected to reach equity flows rebounded from formance. Some, such as 6.8 percent in India, 6 percent the effects of the 1994-95 the ongoing conflict in in Nepal, and 5.5 percent in Mexican crisis. The region at- Afghanistan and the civil strife Bangladesh. In Pakistan, poor tracted 6 percent of the total in Sri Lanka, are political in agricultural performance con- flows to developing countries nature, but in many cases the tributed to lowering growth to in 1996, up from 4 percent in incomplete reform agenda has 3.1 percent, while in Sri Lanka, 1995. Foreign direct invest- hampered growth, develop- civil strife and poor weather ment to South Asian countries ment, and poverty reduction. conditions lowered growth to rose, too, growing from $0.5 Reducing poverty, which re- 3.7 percent. Progress on the billion per year during 1990- quires high and sustained fiscal front was mixed; India, 92 to $2.6 billion in 1996. But growth, remains the Bank's for example, reduced its cen- at 0.5 percent of the region's major goal in South Asia. tral govemment fiscal deficit GDP, far lower than other re- While the incidence of pov- from 5.5 to 5 percent of GDP, gions, this underscores sizable erty has declined since the and its 1997 budget continues unexploited opportunities on 1980s, the number of poor to build on earlier reforms. In the part of investors. people has increased. More Pakistan, however, the inability Reforms initiated in the than 40 percent of the region's to cut the fiscal deficit sub- 1990s enjoy broad political people live below the dollar- stantially-and its resulting support, and the resulting rapid a-day poverty line; most live SECTION THREE SOUTH ASIA 57 in rural areas, are illiterate, and depend on sub- thus increase the region's growth rate in a sus- sistence agriculture or low-skill wages for their tainable manner. And because social indicators livelihood. remain weak, priority was given to comple- menting the reform effort with programs to de- World Bank assistance strategy velop the region's human capital. The Bank's fiscal 1997 assistance strategy for World Bank loans and International Develop- South Asia reflects the main goal of its clients in ment Association credits approved by the ex- the region: reducing poverty. To help achieve ecutive directors in fiscal 1997 totaled $2,011.6 this goal, the Bank aimed to provide better- million, compared to $2,929.1 million in fiscal quality services and innovative and efficient 1996. Nineteen operations were approved, programs by working with partners and involv- compared to twenty-one in fiscal 1996. Table ing broad community participation. The main 3-7 shows the sectoral distribution of lending to prongs of the Bank's strategy focused on helping the region for the 1988-97 period. Table 3-8 countries improve their fiscal situation and compares commitments, disbursements and net push ahead with reforms that will increase sav- transfers to the region for fiscal years 1992-97, ing and investment, attract foreign capital, and and table 3-9 shows operations in the South TABLE 3-7. LENDING TO BORROWERS IN SOUTH ASIA, BY SECTOR, FISCAL YEARS 1988-97 (millions of us dollars) Annual average, Sector FY88-92 FY93 FY94 FY95 FY96 FY97 Agriculture 684.0 334.9 387.8 551.3 420.6 409.0 Education 272.0 339.0 220.0 423.7 499.8 - Electric power and other energy 813.1 770.0 230.0 250.0 700.0 24.2 Environment 97.6 28.8 14.7 168.0 263.9 64.8 Finance 221.1 65.8 - 916.0 205.0 105.0 Health, population and nutrition 220.0 327.0 233.1 257.9 376.7 593.8 Industry 255.7 190.0 250.3 3.2 - - Mining - 12.0 - - 63.0 Multisector 168.8 503.5 - - Oil and gas 360.0 - - 120.8 - Public sector management 33.0 - 296.8 - 92.0 31.7 Social Sector 11.5 500.0 - - - Telecommunications 22.4 - - - 35.0 - Transportation 317.1 137.0 491.3 - - 684.5 Urban development 161.5 - 246.0 39.0 21.5 - Water supply and sanitation 104.3 208.2 - 275.8 251.6 98.6 Total 3,742.2 3,416.2 2,370.0 3,005.7 2,929.1 2,011.6 Of which: IBRD 2,006.1 1,145.0 474.0 1,584.8 1,161.6 626.5 IDA 1,736.1 2,271.2 1,896.0 1,420.9 1,767.5 1,385.1 Note: Details may not add to totals because of rounding. -Zero. 58 THEWORLD BANKANNUAL REPORT 1997 FIGURE 3-6 South Asia: IBRD and IDA Commitments by Sector, Fiscal Year 1997 Public saetr management, 2% Environment, 3% -____ _______ Water supply and sanitation, 5% -Fectr c power and other energy, 1% Finance, 5% ----------- Transportation, 34% Agriculture, 20% --* i---.--.-. Health, population and nutrition, 30% Asia (SAs) region approved by the Executive create large fiscal burdens. In fiscal 1997, at the Board during fiscal 1997 by country. In addition request of the state authorities, the Bank com- to Bank and IDA operations, the Bank's private pleted evaluations of the financial situations sector affiliate, the International Finance Corpo- of Andhra Pradesh, Orissa, Rajasthan, and ration (IFC), invested in twenty-nine operations Karnataka to identify policy options for imple- during the year for a total of $409 million, com- menting a sustainable fiscal strategy. pared to the twenty-nine investments totaling To better support its clients' reform efforts, $575.4 million in fiscal 1996. The Multilateral the Bank improved its nonlending services by Investment Guarantee Agency (MIGA) issued six speeding up response time, broadening the dis- guarantees contracts for $38 million during the semination of analysis, and strengthening col- year for projects in Pakistan and Bangladesh. laboration with other multilateral organizations to build partnerships and reduce overlap. The Improving the economic environment widely disseminated Bangladesh report' is an The Bank is supporting fiscal reform tailored to example of a timely intervention designed to country-specific circumstances. In Pakistan, for provide the newly elected government with a example, analytical support for the government's set of policy choices for reducing poverty new agricultural tax system was provided, and through rapid and sustainable growth. Far more in partnership with the British Overseas Devel- attention was paid this year to making the re- opment Administration, a public expenditure sults of economic and sector work known to a review was prepared to give the government a broad audience, including parliamentarians, the sound basis for setting its fiscal 1998 budget. In press, academia, and business groups. To collaboration with the Asian Development Bank complement this effort, the South Asia regional and Japan's Overseas Economic Cooperation office and EDI joined forces to disseminate inter- Fund (OECF), the Bank continues to evaluate national best practices in an ambitious program Pakistan's public investment program annually of activities ranging from a conference on to protect high-priority social Spending from competitive advantage in a global economy, budget cuts. to small workshops on resettlement policies, In India the Bank is assisting reform of state and establishing securities markets. A series of governments. About 50 percent of India's infra- EDI-supported workshops aimed at helping structure spending and about 90 percent of so- strengthen financial markets provided training cial sector spending are undertaken by the states. And state subsidies, for example, in states.Ariffstand watsidier, chargesample, in5. World Bank. 1996. "Bangladesh-An Agenda for Action." power tanffs and water charges for irrigation Washington, D.C. June. SECTION THREE SOUTH ASIA 59 in diversification of financial instruments, con- ing transparent procurement, and provincial tainment of market risk, management of trea- education and health projects are helping de- sury assets, and internationalization for stock ex- velop management information systems on change officials and treasury and fund managers. which rational choices for school and clinic As the first wave of reforms that started in locations and expenditure decisions are based. the early 1 990s gained roots, the Bank helped Private sector development. Fostering private countries shift the focus to a second generation sector growth is key to reducing poverty and of reforms. In India this involved addressing re- sustaining growth. To this end, the Bank is help- form at the state level, and in Bangladesh and ing Pakistan and Bangladesh prepare financial Pakistan it involved addressing governance is- sector reforms and India to broaden ongoing re- sues, which, though long present, have become forms to include regional rural banks. There are key constraints to reform. Governance issues roles for the Bank, IFC, and MIGA in promoting were addressed through nonlending services, private sector development, and often programs such as the Bangladesh report, "Government are undertaken collaboratively. In Pakistan, that Works,"6 prepared in close consultation where a joint Bank-IFc working group has been with civil society and the government. It sets established to coordinate private sector devel- out a phased approach to public sector reform opment, the Bank and IFc are collaborating on tailored to the country's political and economic power sector development through ongoing realities. The report was translated into Bangla loans and partial risk guarantees. Since its first and disseminated widely to parliamentarians, guarantees for investments in Pakistan were is- NGOs, and academia, and a healthy national de- sued in 1992, MIGA has issued 25 guarantee con- bate ensued. Improving governance was also tracts for investments worth more than $155 addressed within ongoing projects. Pakistan's million in coverage outstanding in the country's Financial Reporting and Auditing Project, for power, banking and manufacturing sectors. MIGA example, is helping the authorities strengthen has also issued coverage for agribusiness and their accounting and financial systems, enhance accountability, and improve capacity for eco- 6. World Bank. 1996. "Bangladesh: Government that nomic policymaking and management. Ongoing Works-Reforming the Public Sector." Report No. Bank-financed projects in Pakistan are promot- 15182 BD. Washington, D.C. March. TABLE 3-8. WORLD BANK COMMITMENTS, DISBURSEMENTS, AND NET TRANSFERS IN SOUTH ASIA, FISCAL YEARS 1992-97 (millions of us dollars) Bangladesh India Pakistan Total region start start start start Item 1997 1997 1992-97, 1997 1997 1992-97, 1997 1997 1992-97X 1997 1997 1992-97a Undisbursed commitments 1,402 9,506 2,774 14,441 Commitments 321 1,762 1,530 11,469 85 2,745 2,012 16,731 Gross disbursements 315 1,763 1,563 10,556 645 3,597 2,673 16,989 Repayments 57 230 1,070 5,781 260 1,257 1,411 7,393 Net disbursements 258 1,543 493 4,775 385 2,339 1,262 9,596 Interest and charges 45 248 790 5,024 222 1,289 1,079 6,691 Net transfer 213 1,286 -297 -249 163 1,050 183 2,905 NOTE: The countries shown in the table are those with the largest borrowings of Bank funds during fiscal 1996-97. Details may not add to totals because of rounding. a. Disbursements from the iDA Special Fund are included through fiscal 1996. 60 THEWORLD BANKANNUAL REPORT 1997 TABLE 3-9. OPERATIONS APPROVED DURING FISCAL YEAR 1997, SOUTH ASIA Principal amount (millions) Country/project name Date of Approval Maturities SDR US$ Bangladesh Fourth Dhaka Water Supply Project Dec 19, 1996 2007/2036 51.00 80.30 Second Rural Roads and Markets Improvement and Maintenance Project Dec 19, 1996 2007/2036 91.20 133.00 Jute Sector Adjustment Credit Nov 14, 1996 2004/2034 2.00 2.90 Poverty Alleviation Microfinance Project Sep 17, 1996 2006/2036 72.70 105.00 India Andhra Pradesh State Highway Project Jun 17, 1997 2003/2017 n.a. 350.00 Malaria Control Project Jun 12, 1997 2007/2032 119.20 164.80 Reproductive and Child Health Project May 28, 1997 2007/2032 179.50 248.30 Third Andhra Pradesh Irrigation Project May 20, 1997 2003/2017 n.a. 175.00 Third Andhra Pradesh Irrigation Project May 20, 1997 2007/2032 108.10 150.00 Andhra Pradesh Hazard Mitigation and Emergency Cyclone Recovery Project May 6, 1997 2003/2017 72.10 100.00 Andhra Pradesh Hazard Mitigation and Emergency Cyclone Recovery Project May 6, 1997 2007/2032 n.a. 50.00 Rural Women's Development and Empowerment Project Mar 27, 1997 2007/2032 13.50 19.50 Tuberculosis Control Project Jan 30, 1997 2007/2032 98.40 142.40 Environmental Management Capacity Building Technical Assistance Project Dec 23, 1996 2007/2031 34.70 50.00 States' Road Infrastructure Development Technical Assistance Project Dec 5, 1996 2002/2016 n.a. 51.50 Ecodevelopment Project Sep 5, 1996 2007/2031 19.50 28.00 Nepal Rural Water Supply and Sanitation Project Sep 3, 1996 2006/2036 12.80 18.28 Pakistan Improvement to Financial Reporting andAuditing Project Sep 17, 1996 2007/2031 20.10 28.80 Punjab Private Sector Groundwater Development Project Jul 11, 1996 2006/2031 38.50 56.00 Sri Lanka Environmental Action Project I Mar 27, 1997 2007/2037 10.70 14.80 Energy Services Delivery Project Mar 18, 1997 2007/2037 16.90 24.20 Health Services Project Dec 19, 1996 2007/2036 13.00 18.80 Total 973.90 2,011.58 n.a. = not applicable (IBRD loan). banking projects in Bangladesh. And in India, Roads and Markets Project is improving rural the Bank and IFC are working closely to promote transport and trading infrastructure by facilitat- private sector participation in power distribu- ing exploitation of the opportunities presented tion and manufacturing capacity for medical by the Jamuna Bridge, which will link the supplies and instruments. In line with a growing northwest region with the rest of the country. Bank trend, the next CAS for Inidia will be under- Local participation is emphasized in the project, taken jointly by the Bank and IFC. It will elaborate which is using labor-intensive technologies and a joint strategy for private sector development. employing the landless poor and disadvantaged Infrastructure development. Because good infra- women. The Bank has long supported efforts to structure not only provides the basis for private help South Asia meet its vast energy needs. The sector growth but helps attract foreign direct in- Nepal Power Development Fund, under prepa- vestment, particularly to export-oriented sectors, ration, will support the identification and evalu- the Bank is helping to improve the utilization ation of potential small and medium-size hydro- and maintenance of roads and to facilitate rural electric power projects suitable for private access to markets. Bangladesh's Second Rural sector funding. SECTION THREE SOUTH AsIA 61 more effectively, community participation is be- ing increased, and the private sector and NGOS are being encouraged to deliver services. In India's Malaria Control Project, for example, community organizations are delivering services to tribal people who are disproportionately af- fected by the disease. In Sri Lanka, a Health Sys- tems project supporting the fights against ma- _______ ~~~~~~~~~~~~~~~~laria and AIDS useS NGOS to identify and train = !i . i iInPakivolunteers to establish community centers. India's Tuberculosis Control Project was de- signed in partnership with the government, the World Health Organization, the Union Against Tuberculosis and Lung Disease, and other donors and supports a significant shift in strategy to __________ ~~~~~~~~~~~~~~~~fight the disease. In Pakistan, where social indicators, although Previously excluded from formal credit markets, the still poor, have improved since the launch of the poor-and particularly women-are increasinglygoen ntsScaAtinPgrmn192 borrowing small amounts of business start-up funds government's Social Action Program in 1992, through microcredit programs. the social sector continues to suffer from gover- nance problems, including political interference in recruitment and site selection, lack of trans- parent procurement, and weak accountability. Rural Development. Because of the importance The Bank is leading a multidonor effort to de- of promoting rural growth, the Bank is helping velop a second phase of the Social Action Pro- raise commitment for decentralized and partici- gram and is working closely with the authorities patory rural development programs that increase to improve project implementation, strengthen farm productivity. Pakistan's Private Sector governance, and encourage greater stakeholder Groundwater Development Project, for example, involvement and NGO and private sector partici- is mobilizing farmers to operate and maintain pation in service delivery. groundwater irrigation and new community Sharp gender disparities continue to constrain tubewells. To ensure sustainability, Nepal's Rural economic growth and poverty reduction. In fis- Water and Sanitation Project, which supports cal 1997 the Poverty Alleviation Microfinance water and sanitation schemes for 900 communi- Project in Bangladesh and the Rural Women De- ties, includes a community development subcom- velopment and Empowerment Project in India ponent to help local people organize water-user were specifically targeted to broaden poor groups to identify, design, construct, and main- women's access to credit and self-employment tain water schemes. The project was based on les- opportunities by supporting the institutional sons learned from a three-year pilot program that provision of microcredit. By strengthening com- verified that locally designed and managed munity links, these projects also contribute to projects met community needs in a cost-effective social capital building (see box 3-3). and sustainable manner. Improving development effectiveness Quality investment-the region's people To improve operational effectiveness, A key component of the Bank's poverty reduc- strengthen frontline operations, and respond to a tion strategy is to develop human capital by fo- broader development agenda, the South Asia re- cusing on delivering quality health and nutrition gional office further increased the role of field services to underserved areas and expanding and offices in implementing and managing country improving basic education, particularly for girls work programs. Guided by the need to work and disadvantaged groups. To reach these goals closer to clients and to understand the political, 62 THE WORLD BANK ANNUAL REPORT 1997 BOX 3-3. BUILDING SOCIAL CAPITAL The ability of microfinance programs to help the The Poverty Alleviation and Microfinance Project poor is well known. Perhaps the most visible is the in Bangladesh channels funds through a quasi- highly successful experiment based on mutually li- governmental organization, the Palli Kharma able, self-regulating borrower groups of the Grameen Sahayak Foundation (PKSF), to small and medium- Bank in Bangladesh. An equally important but less size NGOS SO they can expand their microcredit pro- well known development benefit of these programs is grams. The PKSF, with more than 120 affiliated orga- their contribution to building social capital-they nizations, has mobilized 1.2 million poor women into build relationships, networks, and formal and infor- small groups, but shortage of funds has limited its mal institutions that link individuals and help them reach. India's Rural Women Development and Em- achieve specific objectives Microfinance institutions also powerment Project is helping women gain access to influence how markets operate, and they shape the rela- credit and increasing their ability to generate income. tionships between civil society, the state, and markets. Through thrift and the credit-based Self Help The poor, and particularly women, tend to be ex- Groups (SHGS), a system of revolving credit for the cluded from formal credit markets because they have benefit of members and based on their own savings no credit history and lack collateral and because of has been developed. The project builds on the suc- the high costs of enforcing contracts and gathering in- cessful experience with SHGs, the positive response of formation about small borrowers. By building on banks to group lending, the increasing opportunities peer monitoring and trust to substitute for physical offered by the Panchayati Raj Act-which ensures collateral, microlending relaxes the constraints on representation of women in local government-and poor people's credit while avoiding the problems as- experience from previous operations. The project is sociated with indiscriminate credit subsidies and helping SHGS establish a track record of sound credit government loans. Because each member stands to management so they can access group loans from lose if another member does not comply, cosigning a lending institutions. The project has a strong capacity- loan with members of a group creates an incentive building emphasis and supports a comprehensive for the group to screen members and monitor their training program. NGOs have the major responsibil- actions. Repeated borrowing and repayment creates ity to form and sustain democratically managed a credit record, strengthens the links within the SHGs. The association of mature SHGs is also being group, and builds up social capital, thus contributing encouraged to support existing groups and further to broad-based growth. expand the SHG movement. social, and cultural dimensions of client coun- have been agreed on with borrowers and incor- tries better, country managers with full respon- porated into new lending operations. Ongoing sibility are now located in client countries. projects have been retrofitted with similar per- To provide Bank staff with a deeper perspec- formance indicators. By using these indicators tive and understanding of community develop- on supervision missions, and with greater man- ment, some operational staff spent two weeks agement attention to results, the disconnect be- living in villages in client countries. The first of tween evaluation of project performance by the these immersion programs, which took place in regional office and Operations Evaluation De- Pakistan, was formulated by the Aga Khan Rural partment (OED) staff has been virtually elimi- Support Program and the Balochistan Rural nated. To foster a stronger implementation cul- Support Program. Others followed in Sri Lanka ture, the Bank is insisting on closing projects on and Bangladesh. In addition to facilitating inter- schedule and is using midterm reviews to re- action with local people, the programs exposed structure slow-disbursing projects. The restruc- Bank staff to community initiatives such as turing of Pakistan's social sector has shifted microcredit and health programs. much of the responsibility for project supervi- Portfolio management has improved in recent sion, and upstream work has been shifted to the years as monitorable performance indicators resident mission where 40 percent of the port- SECTION THREE SOUTH ASIA 63 folio is now managed, compared to 30 percent at the beginning of fiscal 1996. The Bank is helping clients battle corrupt practices through project design and supervision and helping them improve the efficiency and transparency of procurement under Bank- financed projects. This effort has been comple- mented by greater attention to improving the audit and monitoring functions under Bank- fnanced projects. The procurement disburse- ment and audit team in the New Delhi office, for example, was strengthened to provide in- country expertise to assist implementing agen- cies in all aspects of procurement, disburse- ment, and audit. Similar steps are being taken in the Bangladesh and Pakistan field offices. 64 THE WORLD BANK ANNUAL REPORT 1997 EUROPE AND CENTRAL ASIA Progress in the transition to Fiscal deficits were generally growth for the first time. market-based economies varies kept under control, although Elsewhere, however, expecta- considerably across the countries at the price of high tax rates. tions that the recession would of Europe and Central Asia, as These positive results, together bottom out in 1996 proved do countries' policy priorities and with the prospect of member- premature. In Russia and resulting economic growth. The ship in the EU, continue to Ukraine, output shrank by objective of eventual membership encourage the CEE countries an estimated 6 percent and in the European Union (EU) uni- to keep up the reform 8.5 percent, respectively. fies the challenges of many of the momentum. Policy and legal reforms con- Central and Eastern Europe Progress in Albania, Bulgaria, tinued to be implemented (CEE) countries, and in fiscal and Romania has been much at a slow pace-particularly 1997 the Bank's assistance strat- more patchy. Continued in Ukraine-resulting in a egy for CEE countries focused on stalling on enterprise and bank- climate unfriendly to private supporting them in their prepara- ing reforms in Bulgaria contrib- investors and businesses. tion. Because these countries ben- uted to deterioration of the It is against this backdrop efit from large private financial economy in 1996, leading to and to meet the challenges flows, the Bank's attention is hyperinflation and macroeco- ahead that the Bank set its as- focusing on systemic economic nomic crisis. The caretaker gov- sistance strategy for the region issues, increasingly through ernment, which took office in fiscal 1997. nonlending services. For the coun- in April 1997, has begun to The ECA region serves tries of the Commonwealth of In- implement a program to stabi- twenty-seven active borrowing dependent States (cis) the chal- lize the situation and start countries, including Turkey lenges, and thus the assistance long-overdue structural re- and all European and Central strategy, are different. Here the forms. In Albania-after con- Asian transition economies emphasis is to help countries siderable success in implement- except the Federal Republic make their fiscal adjustment ing reform in the early years- of Yugoslavia (Serbia and more sustainable and efficient, lax fiscal policies and inatten- Montenegro). New operations strengthen law enforcement, basic tion to the danger of pyramid increased from sixty-one, social services, and safety nets, schemes caused a major politi- totaling $4,395 million, in fis- and accelerate implementation of cal and economic crisis that cal 1996 to sixty-seven, total- the numerous market-oriented re- has dominated 1997. And the ing $5,055 million, in fiscal forms that remain. Romanian situation was typi- 1997, led by a rapid expansion fied by some growth but of reconstruction projects in Progress toward creating mar- little structural reform until Bosnia and Herzegovina. Table ket economies varies widely a reform-minded government, 3-10 shows the sectoral distri- across countries in the Europe elected in November 1996, bution of lending to the region and Central Asia region (ECA). proceeded quickly to take for the 1988-97 period. In In 1996 the CEE countries, in- many previously neglected Ukraine, new lending commit- cluding the Baltics, experienced actions. ments in fiscal 1997 tripled to a third consecutive year of out- Economic performance also just under $1 billion, as the put growth and a fourth year of differed widely among the CIS7 government began implement- declining inflation. Strong ad- in 1996. Armenia experienced ing reforms across a wide vances in creditworthiness in its third consecutive year of front. Disbursements in- international capital markets recovery from a deep recession creased to $4,453 million in and a continued appeal to for- and Georgia and Kyrgyz Re- eign direct investors enabled public their second year. 7. Armenia, Azerbaijan, Belarus, the CEE countries to attract Kazakhstan and Uzbekistan re- Georgia, Kazakhstan, Kyrgyz Republic, Moldova, Russia, Tajikistan, external private financing. corded positive, albeit low Turkmenistan, Ukraine, Uzbekistan. SECTION THREE EUROPE AND CENTRAL AsIA 65 TABLE 3-10. LENDING TO BORROWERS IN EUROPE AND CENTRAL ASIA, BY SECTOR, FISCAL YEARS 1988-97 (millions of us dollars) Annual average, Sector FY88-92 FY93 FY94 FY95 FY96 FY97 Agriculture 221.6 448.4 502.9 202.0 185.8 771.7 Education 77.6 - 59.6 40.0 5.0 137.8 Electric power and other energy 297.2 93.0 164.8 191.7 325.4 504.9 Environment 3.6 77.0 80.0 123.0 30.1 - Finance 323.2 55.0 280.0 232.0 638.9 290.3 Health, population and nutrition 71.0 91.0 - 220.4 350.4 95.5 Industry 184.9 - 375.0 - - 111.8 Mining - - - - 540.8 300.0 Multisector 461.6 1,245.0 506.3 2000.0 656.8a 1227.0 Oil and gas 72.0 610.0 691.3 226.3 10.0 135.6 Public.sector management 109.8 335.0 270.0 70.9 505.6 109.1 Social sector 20.0 67.0 10.9 127.5 212.0 935.2 Telecommunications 54.0 30.0 153.0 - - Transportation 216.2 378.0 352.0 486.0 868.0 312.7 Urban development 40.0 285.0 171.0 418.0 44.3 56.0 Water supply and sanitation 101.6 129.5 109.6 161.0 21.5 67.3 Total 2,254.3 3,843.9 3,726.4 4,498.8 4,394.6 5,054.8 Of which: IBRD 2,246.1 3,739.5 3,533.3 3,953.8 3,918.2 4,560.9 IDA 8.2 104.4 193.1 545.0 476.4 493.9 NoTE: Details may not add to totals because of rounding. I - Zero. a. Includes the refinanced/rescheduled overdue charges of $168 million for Bosnia and Herzegovina. fiscal 1997, compared to $3,736 million in fis- million, including first guarantees to Azerbaijan, cal 1996. Table 3-11 compares commitments, Georgia, and Romania. MIGA also created the disbursements and net transfers to the region special Investment Guarantee Fund for Bosnia for fiscal years 1992-97. Table 3-12 shows op- and Herzegovina, sponsored by the EU, to fur- erations in the ECA region approved by the Ex- ther facilitate the flow of small and medium- ecutive Board during fiscal 1997 by country. In size investments into the country. The Eco- addition to Bank and IDA operations, the Bank's nomic Development Institute's (EDI) activities private sector affiliate, the International Finance in the region helped strengthen training and ca- Corporation (IFC), invested in fifty-seven opera- pacity building in many critical areas of reform. tions during the year for a total of $1,214 mil- lion, compared to the forty-two investments to- Challenges ahead taling $835 million in fiscal 1996. The Multi- EU membership now represents the major lateral Investment Guarantee Agency (MIGA) iS- challenge for many CEE countries. A strategy to sued ten guarantee contracts for almost $90 achieve the requirements rapidly for participat- 66 THE WORLD BANK ANNUAL REPORT 1997 TABLE 3-11. . WORLD BANK COMMITMENTS, DISBURSEMENTS, AND NET TRANSFERS IN EUROPE AND CENTRAL ASIA, FISCAL YEARS 1992-97 (millions of us dollars) Romania Russia Ukraine Total region start start start start Item 1997 1997 1992-97, 1997 1997 1992-97' 1997 1997 1992-97a 1997 1997 1992-97, Undisbursed commitments 958 4,723 512 12,045 Commitments 625 2,361 1,716 8,163 990 2,005 5,055 23,662 Gross disbursements 182 1,138 2,086 3,795 567 1,071 4,453 16,252 Repayments 14 14 - - - - 1,724 7,681 Net disbursements 168 1,123 2,086 3,795 567 1,071 2,729 8,571 Interest and charges 61 197 125 287 43 67 1,002 5,458 Net transfer 107 926 1,961 3,508 524 1,004 1,727 3,113 NOTE: The countries shown in the table are those uith the largest borrowings from the World Bank in fiscal 1996-97. Details may not add to totals because of rounding. -Zero. a. Disbursements from the IDA Special Fund are included through fiscal 1996. ing in the single-market and the monetary union, dation and resolving cross-border issues in infra- if combined with accelerated privatization, reduc- structure also remain major challenges. The need tion of excessive tax burdens, and social security to reduce pollution in industrial centers, improve reform, will help to sustain high growth. Financ- water and sewerage infrastructure, attract invest- ing necessary environmental investments, how- ment to integrated energy sectors and pipelines, ever, will be demanding. And while economic and manage shared water resources-particularly recovery has begun to reduce poverty, structural in Central Asia-are high on the agenda. shifts are expected to cause pockets of poverty In Bosnia and Herzegovina the phase of in regions with declining industries and in remote emergency reconstruction is coming to an end. rural areas. Policy reforms are needed to encour- Increasingly, attention is focusing on improving age mobility, promote efficient rural markets, policies and institutions to achieve sustainable and better target social assistance. recovery. Deep and widespread poverty due to the plum- meting output of the past several years poses a Supporting reform different challenge in most of the cis countries, In line with the CEE countries' objectives, a where more fundamental reforrn is needed to re- major emphasis in Bank assistance during fiscal verse negative growth trends, raise income levels, 1997, both in lending and nonlending services, and bring about reductions in poverty. Ensuring was to support preparation for EU membership. minimum benefits for vulnerable people, prevent- The Bank's Country Economic Memoranda for ing the collapse of basic health services, and miti- Poland and Slovakia, for example, focused on de- gating the social impact of restructuring, particu- fining policies helpful both to facilitating EU larly the potential disruption of social services, are membership and to increasing overall economic key. In some countries, obstacles to economic re- efficiency. Significant analytical work on pension covery remain; to overcome them, economic man- reform was carried out in Croatia, Hungary, agement must be strengthened, enterprise and Latvia, providing the basis for important reforms banking reform speeded up, and the energy and in the sector (see box 3-4). The Bank also advised agriculture sectors brought into the market the Czech Republic, Latvia, and Poland on least- economy. Stemming severe environmental degra- cost strategies for reaching EU environmental SECTION THREE EUROPE AND CENTRAL ASIA 67 standards, and in Slovenia, the EDI ing. The Welfare Reform Project in Latvia, for supported the establishment of the Center for example, provided assistance for the first reform International Competitiveness to help enter- of pension systems in the region. The loan prises better position themselves in the Euro- helped consolidate the public unfunded system pean market. and introduced a privately managed funded sys- In the CF.I countries the Bank has a compara- tem. In Hungary the cycle of state bank recapi- tive advantage in linking macro- and talizations caused by bad loans to loss-making microeconomic expertise and being able to state enterprises was broken by a comprehen- mobilize relatively large-scale resources quickly; sive program for bank and enterprise and in fiscal 1997, it helped several of these privatization, restructuring, or liquidation, sup- countries confront macroeconomic or sectoral ported by the Enterprise and Financial Sector crises. During the Bulgarian crisis, for example, Adjustment Loan. A similar operation in the Bank moved rapidly to provide the Reha- Croatia supports banking sector reform and hilitation Loan, which financedl the severance privatization of state-owned energy and infra- payments needed to close major loss-making structure enterprises. The Bank played a critical enterprises, and later a loan for critical imports role in setting the policy and institutional when that need developed. Also in Bulgaria, framework for the agriculture sector with preparation of the Enterprise Structural Adjust- the Agriculture Sector Adjustment Loan in ment Loan began. It will support a comprehen- Romania and major components of structural sive finance and enterprise sector reform pro- adjustment loans (SALS) to Lithuania and gram to be implemented by the newly elected Former Yugoslav Republic of Macedonia. government. The Bank helped identify one of The Bank's strategy for supporting reforms in the key underlying causes of the Latvia and the cis countries in fiscal 1997 focused on bol- Lithuania banking crises-the structural deficit stering and sustaining growth. This required of the wider public sector, including public strengthening the state's role in managing the utilities and social security institutions-and core functions of macroeconomic policy, law provided adjustment lending to support a com- enforcement, and basic social services and prehensive reform package. implementing the large number of market- Since many CEE countries benefit from high oriented reforms that still remain. Throughout and increasing private financial flows, the Bank the cis countries, and particularly in Russia, the shifted its attention to analyzing systemic prob- Bank worked in partnership with the Interna- lems in the economy while letting the private tional Monetary Fund (IMF), providing analytical sector provide much of the investment financ- support to bring about fiscal adjustment and FIGURE 3-7 Europe and Central Asia: IBRD and IDA Commitments by Sector, Fiscal Year 1997 Health. popul-itror anid nutrtonf. 2°o - *- Vvater supply and sarrnat on., Public sector management. 2r Ub *p - Industrv 2_ Urban 2%evelopment. 1 01 and gas 3. _ _ Multsect,:l: 24% Education' 3%i -M a_ 24 ;:iance. 6r, *. Mi,ing. 6%E _ rlansportation, o% - i^N TIraniportation. 6_ Social Sector. i 9% E:ectnc power and other energy. 0 - Agnculture. ! 5,% 68 THE WORI.D BANK ANNUAI. REPORT 1997 BOX 3-4. ASSISTING REFORMS IN THE PENSION SYSTEM Pension reform has moved into the mainstream of funded and mandatory component. Bank projects public sector reonn in the regon. Many pay-as-you- such as those in Hungary and Latuia finance both go (PAYG) ystems now account for 10-15 percent of technical assistance and some of the costs associated countries' GDP and are financed by high payroll con- with introdudng the new system. tributions These systems support an increasing num- Latvian pension remfonms have been supported by ber of pensioners while the number of contributors has exensive technical assistance during preparation of decined sharply; they drain public resources through the Latvia Wefare Reform Projea The reforns an increasing defict and fail to provide satisfactory aioided the incremental costs of transition to a new income security for the elderl. As a result, pensioners system by phasing in only thefuy funded "second have s-n their incomes drop dramaticaly during the pillar" as cost-saving measures in the reformed public transition. PAYG system were realized. The new pension law will Public opinion has shifted toward accepting higher lower the expenditure on the first PAYG pillar by one- retirement ages and tighter rldes for the PAYG schemes third over ten years. The privately managed pension and supporting a mixed system that wil combine system is expected to reach 20 percent of GDP by public and private sources forfinandngpensions. 2025 through a combination of mandatory second- Workers expect that -w private or privately and voluntary third-pillar conributions. managed schemes will provide hier rates of return Russia also began pension reform with support of on theirpension saving and wil restore the value the Bank. A Social Prtection Adjustment Loan was of pensions while governments and the private sector approed in fiscal 1997 and a related Impkementa- expect that the new schemes wil genrate more ongt tion loan was under preparation. These loans will term savings that ould help promote capital markets help the government shore up the PAYG system and and growth. In Croatia, Hungary, Latvia, and desin comprehensive reforms, including one or - Piland, legislative work to reform the psin system publy financd programs to protect vulnerable has proceeded to an advanced stag, and in groups; one or more fuliy or partly capitalized earn- Iazakhstan and Russia and the procs has started. ings-related programs; and a framevork for volun- The lank is helping countries design and launch tary schemes; new mied-pension systms that include a fiuly make it more sustainable. These were central to financial assistance through an adjustment loan. the Extended Fund Facility (EFF) and Enhanced World Bank assistance to the banking sector is Structural Adjustment Facility (ESAF) programs. exemplified by supporting the development Continued support for economywide reforms of rural finance systems in Georgia and Kyrgyz included the structural adjustment loan to Rus- Republic strengthened banking supervision in sia. Establishing budget processes as the key in- Armenia. The International Finance Corpora- strument of expenditure management was sup- tion (IFC) was instrumental in supporting ported through an adjustment loan to Kyrgyz Kazakhstan's financial sector with a broad- Republic and through public expenditure re- based program covering banking, leasing, and views in Armenia, Georgia, Moldova, and registry services. In addition, about 350 trainers Ukraine. And financial support was provided to from the cis received instruction under l:Dl'S set up a bureau of economic analysis in Russia banking and finance program; they in turn to strengthen the country's institutional capac- worked with trainer teams and have ultimately ity for economic policymaking. trained more than 2,500 banking and finance Several cis countries, previously hesitant to practitioners. privatize large enterprises, made significant With extensive technical advice and lending progress in fiscal 1997, including Ukraine, from the W'/orld Bank, Georgia and Ukraine which had support of World Bank technical and began to separate the entities responsible for SECIl1ON THREE EUROPE AND CENTRAI. ASIA 69 TABLE 3-12. OPERATIONS APPROVED DURING FISCAL YEAR 1997, EUROPE AND CENTRAL ASIA Principal amount (millions) Country/project name Date of Approval Maturities SDR US$ Armeniia Highway Project-Supplemental Financing Jun 25, 1997 2006/2030 11.00 15.00 Enterprise Developmenit Project Dec 24, 1996 2007/2031 11.60 16.75 Azerbaijan Farm Privatization Project Jan 16, 1997 2007/2031 10.20 14.70 Gas System Rehabilitation Project Sep 19, 1996 2007/2031 14.10 20.20 Bosnia and Herzegovina Emergency Industrial Re-Start Project Dec 13, 1996 2007/2031 7.00 10.00 Local Initiatives Project Dec 13, 1996 2007/2031 4.90 7.00 Essential Hospital Services Project Dec 13, 1996 2007/2031 10.40 15.00 Transition Assistance Credit Sep 5, 1996 2006/2031 62.40 90.00 Emergency Housing Repair Project Jul 30, 1996 2006/2031 10.50 15.00 Emergency Electric Power Reconstruction Project Jul 30, 1996 2006/2031 24.90 35.60 Emergency Public Works and Employment Project Jul 30, 1996 2006/2031 7.00 10.00 Emergency Landmines Clearance Project Jul 30, 1996 2006/2031 5.30 7.50 Emergency Demobilization and Reintegration Project Jul 30, 1996 2006/2031 5.30 7.50 Bulgaria Critical Imports Rehabilitation Loan May 8, 1997 2001/2016 n.a. 40.00 Social Insurance Administration Project Sep 3, 1996 2001/2016 n.a. 24.30 Rehabilitation Loan Aug 1, 1996 2001/2016 n.a. 30.00 Croatia Enterprise and Financial Sector Adjustment Loan May 13, 1997 2002/2012 n.a. 95.00 Coastal Forest Reconstruction and Protection Project Dec 11, 1996 2002/2013 n.a. 42.00 EmergencyTransport and Mine Clearing Project Nov 21, 1996 2002/2012 n.a. 102.00 Georgia Power Rehabilitation Project Jun 3, 1997 2007/2031 37.70 52.30 Oil Institution Building Project Apr 8, 1997 2007/2032 1.00 1.40 Agricultural Development Project Mar 25, 1997 2007/2032 10.40 15.00 Hungary Quick Start Gas Turbine Project Jun 25, 1997 2002/2012 n.a. 60.00 Enterprise and Financial Sector Adjustment Loan Mar 11, 1997 2000/2011 n.a. 225.00 Public Finance Management Project Dec 5, 1996 2000/2011 n.a. 7.75 Kazakhstan Real Estate Registration Pilot Project Apr 3, 1997 2003/2017 n.a. 10.00 Pilot Water Supply Project Dec 23, 1996 2002/2017 n.a. 7.00 Treasury Modernization Project Jul 30, 1996 2001/2016 n.a. 15.80 Uzen Oil Field Rehabilitation Project Jul 2,1996 2001/2013 n.a. 109.00 Kyrgyz Republic Rural Finance Project Jun 5, 1997 2007/2032 11.90 16.00 Public Sector Resource Management Adjustment Credit Apr 16, 1997 2007/2031 32.00 44.00 Latvia Welfare Reform Project May6, 1997 2001/2012 n.a. 18.10 Highway Project Mar 27, 1997 2002/2014 n.a. 20.00 Structural Adjustment Loan Dec 19, 1996 2000/2012 n.a. 60.00 Lithuaniia Social Policy and Community Social Services Development Project Feb 18, 1997 2002/2014 n.a. 3.70 Structural Adjustment Loan Oct 15, 1996 2000/2011 n.a. 80.00 Highway Project Sep 5, 1996 2002/2013 n.a. 19.(0 Energy Efficiency/Housing Pilot Project Jul 11,1996 2001/2016 n.a. 10.0)0 70 THE WORli) BANK ANNI Al. REPORt 1 997 Principal amount (millions) Country/project name Date of Approval Maturities SDR US$ Macedonia, former Yugoslav Republic of Structural Adjustment Loan May 6, 1997 2007/2032 n.a. 30.00 Structural Adjustment Credit May 6,1997 2002/2017 20.60 30.00 Moldova Second Private Sector Development Project Jun 10, 1997 2007/2032 6.60 9.00 General Education Project Apr 22, 1997 2003/2017 n.a. 16.80 Poland Port Access and Management Project Aug 1, 1996 2001/2013 n.a. 67.00 Romania Agricultural Sector Adjustment Loan Jun 3, 1997 2002/2017 n.a. 280.00 Agricultural Sector Adjustment Loan Jun 3, 1997 2002/2017 n.a. 70.00 Social Protection Adjustment Loan Jun 3, 1997 2002/2017 n.a. 50.00 Second Roads Project Jun 3, 1997 2002/2017 n.a. 150.00 Reform of Higher Education and Research Project Sep 19, 1996 2001/2016 n.a. 50.00 Bucharest Water Supply Project Aug 1, 1996 2001/2016 n.a. 25.00 Russia Social Protection Adjustment Loan Jun 25, 1997 2003/2014 n.a. 800.00 Structural Adjustment Loan Jun 5, 1997 2003/2014 n.a. 600.00 Electricity Sector Reform Support Project Jun 5, 1997 2003/2014 n.a. 40.00 Health Reform Pilot Project Jun 5, 1997 2003/2014 n.a. 66.00 Education Innovation Project Jun 5, 1997 2003/2014 n.a. 71.00 Enterprise Restructuring Services Project Jun 5, 1997 2003/2014 n.a. 85.00 Bureau of Economic Analysis Project Jun 5, 1997 2003/2012 n.a. 22.60 St. Petersburg Center City Rehabilitation Mar 27, 1997 2003/2014 n.a. 31.00 Slovenia Investment Recovery Project Jul 25, 1996 2001/2011 n.a. 49.30 Tajikistan Pilot PovertyAlleviation Project Apr 10, 1997 2007/2037 8.70 12.00 Agricultural Recovery and Social Protection Project Sep 12, 1996 2007/2036 34.80 50.00 Turkey Primary Health Care Services Project Jun 24, 1997 2001/2012 n.a. 14.50 Baku-Ceyhan Oil Export Pipeline Technical Assistance Project Sep 12, 1996 2000/2005 n.a. 5.00 Turkmenistan Urban Transport Project May 27, 1997 2002/2017 n.a. 34.20 Water Supply and Sanitation Project May 27, 1997 2002/2017 n.a. 30.30 Ukraine Coal Sector Adjustment Loan Dec 11, 1996 2002/2013 n.a. 300.00 Export Development Project Nov 21, 1996 2002/2013 n.a. 70.00 Agriculture Sector Adjustment Loan Oct 17, 1996 2002/2013 n.a. 300.00 Electricity Market Development Project Oct 10, 1996 2002/2013 n.a. 317.00 Social Protection Support Project Sep 19, 1996 2002/2013 n.a. 2.60 Uzbekistan Pilot Water Supply Engineering Project Sep 12, 1996 2002/2016 n.a. 5.00 Total 348.30 5,054.90 n.a. = not applicable (iBRD loan). SECTION THREE EUROPE AND CENTRAL ASIA 71 bilateral donors was particularly important in helping the Ukrainian authorities manage a large volume of technical assistance for energy reform. Parallel to institutional changes, govern- ments are restoring the financial viability of their power industries by cutting off delinquent customers, increasing payment discipline among budgetary entities, and discouraging barter ar- rangements. In Azerbaijan, the Bank supported more efficient use of gas by upgrading meters and rehabilitating pipelines. And it helped Kazakhstan to restructure and privatize old oil fields. Safety nets are key Strengthening social safety nets continues to be a high Bank priority, particularly in the cis countries. Sharp declines in recorded wage bills, and hence payroll taxes, resulted in a severe erosion of cash benefits, such as pensions, un- employment benefits, and child allowances. In Russia, a social sector adjustment operation sup- ports better targeting of social benefits and electricity generat, ttransferring federal funds to regional budgets on iluiiLI~ ¶ a matching grant basis. The Bank is supporting bution_________________________________________ _ ininnovations in generating income and creating _________________________________________________________ assets for the poor through loans for social in- vestment funds. Since NGOS can be an innova- tive and effective force in implementing social investment fund projects, the Bank is support- ing them and in some cases-notably in the ___ Tajikistan Pilot Poverty Alleviation Project-is contracting NGOs as implementing agencies. Providing support for those adversely affected ______________ ______ by enterprise restructuring is an important function of social safety nets. In fiscal 1997, the Bank helped the Ukrainian authorities mitigate the social impact of coal sector restructuring by _______________________supporting severance pay, worker redeployment, ___ _________ ~~~~~~~~and divestiture of enterprise social assets (such Pension reform has moved into the mainstream of public as housing, health facilities, and kindergartens) sector reform in Central and Eastern Europe. to municipalities. Robust and transparent intergovernmental finance systems are required to ensure that basic social services are delivered. Historically, electricity generation, transmission, and distri- revenue sharing in most cis countries has been bution in fiscal 1997, thus opening the way for based on annual budget negotiations, which privatizing their power industries. Partnership are nontransparent and create uncertainty about between the Bank and other multilateral and ultimate resource levels. But with the support 72 THE WORLD BANK ANNUAL REPoRT 1997 of an IDA adjustment credit, Kyrgyz Republic damaged infrastructure, clear land mines, repair has adopted a system that allocates resources- houses and hospitals, create jobs, reintegrate de- using a transparent revenue-sharing mobilized soldiers, and create government insti- arrangement-and dedicates resources for pro- tutions. In close coordination with other donors, viding minimum health and education services. the Bank is preparing a postcrisis recovery pro- Ensuring that local governments have the insti- gram for Albania that will serve as a basis for tutional and financial capacity to provide basic initiating a dialogue with a new government. social services is a key component of the health reform pilot project in Russia. Portfolio management The ECA portfolio has grown rapidly in recent Environmental cleanup and protection years, doubling between fiscal 1992 and fiscal high on the cis agenda 1997, with a total of 270 operations under su- Stemming environmental degradation in the pervision during fiscal 1997-almost half of cis remains a difficult task in view of limited which are in the new borrowing countries of domestic resources. The Bank bas supported ef- the cis. This rapid increase in lending to coun- forts to tackle this issue by helping governments tries with little or no previous experience in to develop national environmental action plans borrowing from the Bank resulted in unex- (NEAPS), which emphasize sustainable policy pected delays in project execution, particularly changes and further institution building. In fis- in formalizing legal agreements, completing cal 1997, the NEAP for Kazakhstan was com- procurement procedures, and processing dis- pleted, adding to twelve NEAPs delivered previ- bursements. To resolve these problems, Country ously: those for Armenia, Azerbaijan, Georgia, Portfolio Performance Reviews (CPPRS) were and Uzbekistan will be completed in fiscal initiated with new borrowers, starting with 1998. Progress was also made in addressing glo- Russia in mid-fiscal 1996 and during fiscal 1997 bal environmental issues. In Russia, the Bank with Armenia, Romania, and Russia, as well and the Global Environment Fund (GEF) are as a multicountry review held in Istanbul in establishing an ozone-depleting substance (oDS) which all Central Asia countries participated. phaseout trust fund that will be financed by bi- These reviews have had considerable impact, lateral donors. In Russia a greenhouse gas reduc- yielding clear improvements in the portfolio. tion project attracted donor cofinancing, and The Russian example, where visits by the the Biodiversity Conservation Project achieved Bank's top management have played a pivotal strong local ownership. Bank support of interna- role, is illustrative: the Russian portfolio is tional programs to clean up the Aral Sea, Baltic now the largest in ECA, disbursements to Russia Sea, Black Sea, Caspian Sea, and the Danube have tripled, and the percentage of unsatisfac- River continued. To enhance the role of NGOS in tory projects has been reduced. EDI'S Moscow the design and impact of environmental team also helped assess the role of training in projects, the Bank cosponsored an international Russia's portfolio improvement and prepared workshop of NGOS in May in Budapest. a training action plan for each project and for the overall portfolio. Reconstruction after conflict remains a These reviews have also highlighted the need major Bank activity for increased training in Bank procurement and Emergency reconstruction from the devastat- disbursement processes-subsequently pro- ing war in the Balkans remained a major objec- vided, in most cases, through resident mis- tive of Bank support to Bosnia and Herzegovina, sions-and the need to move more authority to although at the request of the international field offices (four of the eleven ECA directors community, the Bank and the EU took a lead co- will be moved to the field during fiscal 1998). ordinating role in beginning to move the focus toward sustainable recovery as the year pro- gressed. Bank operations helped rehabilitate SECTION THREE EUROPE AND CENTRAL AsIA 73 LATIN AMERICA AND THE CARIBBEAN Having successfully contained (see figure 3-8). Inflation Peru's tight fiscal policy re- the financial repercussions of the continued to decline while net sulted in a sharp slowdown in 1994-95 Mexican peso crisis, the long-term private capital flows growth from the previous year. Latin America and Caribbean gained ground, with an esti- With the exception of 1995, (LAc) region still faces continuing mated $74 billion of invest- GDP growth in the typical Latin development challenges, including ments, of which $26 billion American country this decade serious poverty, inequality, and was in the form of foreign di- has ranged between 3 percent unemployment. To help its clients rect investment. and 4 percent per year-insuffi- meet those challenges, the World In the Caribbean, 1996 saw cient to permit sustained Bank Group especially focused newly elected governments in progress on poverty reduction. on supporting national and re- the Dominican Republic, Haiti, About a quarter of the region's gional economic reform efforts, fi- and Suriname. The Dominican people live on less than a dollar nancial sector restructuring, and Republic and Guyana began to a day. To overcome this magni- human development through recover from recession and tude of poverty and achieve lending and nonlending instru- grew at more than 5 percent, sustainable development, ments and through stronger part- but in Haiti and Jamaica, which governments must consolidate nerships. To help improve the ef- still await the dividends from stabilization; achieve higher fectiveness of its own operations, politically difficult reform pro- and less volatile growth; ensure the regional office began a broad- grams, growth was close to zero. that growth is environmentally, ranging modernization effort Stronger links to the North economically, and socially geared to helping staff work more American Free Trade Agree- sustainable; and more effec- closely with clients, more quickly ment (NAFTA) and other regional tively involve the poor in the react to requests for assistance, trade groups, which will substi- growth process. and enhance technical skills. tute for preferential trade pro- Analysis undertaken within grams, have not yet material- the World Bank and elsewhere Stronger growth in Latin ized. Prices for Caribbean suggests that LAC countries America in 1996 reflected bananas, which are a major that have undertaken serious resumed positive growth in merchandise export for several reform have enjoyed an average Mexico and Argentina (at 5.1 countries, have eroded signifi- 2 percent higher per capita percent and 4.4 percent, re- cantly under evolving rules for income growth in the 1 990s spectively). Both countries preferential access to the Euro- than those that have not. It is managed to rebound from the pean Union (EU). encouraging, therefore, that 1994-95 crisis with restored With the exception of Bo- over the last year, a number of growth and access to interna- livia, economic growth in the countries, including Argentina, tional capital. Uruguay also en- Andean countries was sluggish. Brazil, El Salvador, Mexico, and joyed growth of 4.9 percent af- The poorest performer was Peru, have shown deep commit- ter a decline the previous year. Venezuela where, in response ment to reform. This reflected strong policy re- to a combined economic and fi- To achieve higher, less sponses as well as strengthened nancial crisis, GDP declined by volatile growth, governments economic fundamentals result- 1.6 percent and inflation must preserve the earlier gains ing from earlier reforms. In topped 100 percent; in early made on price stability, fiscal Chile, one of the earliest and 1997, however, stronger oil balance, and trade openness. most consistent reformers in prices contributed to an incipi- In addition, they need to the region, growth performance ent recovery in growth. pay attention to five critical remained strong at 7.1 percent, Bolivia's sound macroeconomic policy areas: but in many other countries, in- management and accelerated v improving human and cluding Brazil, the region's big- structural reforms led to real social development; gest economy, growth slowed GDP growth of about 4 percent. 74 THE WORLD BANK ANNUAL REPORT 1997 . strengthening public finances; FIGURE 3-8 * reforming and strengthening financial Latin America and Caribbean GDP Growth markets; Rate and Inflation Rate, Fiscal 1991-96 * improving legal and regulatory environ- (percent) ments to promote private sector activity * reforming the public sector and improving Growth Rate Inflation Rate governance. 6 1200 It is against this backdrop that the Bank's as- sistance strategy for fiscal 1997 was set. 5 1000 World Bank loans and Intemational Develop- ment Association (IDA) credits approved by the 4 800 executive directors in fiscal 1997 totaled $4,562 million-compared to $4,437 million in fiscal 3 600 1996. Table 3-13 shows the sectoral distribution of lending to the region for the 1988-97 period. 2 400 Table 3-14 compares commitments, disburse- ments and net transfers to the region for fiscal years 1992-97, and table 3-15 shows operations in the LAC region approved by the Executive 0 0 Board during fiscal 1997 by country. Fifty-two 1991 1992 1993 1994 1995 ¢'AI operations were approved, compared to fifty- four in fiscal 1996. In addition to Bank and IDA - Weighted mean inflation rate operations, the Bank's private sector affiliate, Real GDP growth rate the International Finance Corporation (IFC), invested in fifty-seven operations during the Source: World Bank and IMF. year for a total of $2,762 million, compared to the sixty-eight investments totaling $3,628 mil- lion in fiscal 1996. The Multilateral Investment Brazil, are confronting some of the same diffi- Guarantee Agency (MIGA) issued twenty-six cult issues facing the countries of the Organisa- guarantee contracts in nine countries in the re- tion for Economic Co-operation and Develop- gion for about $365 million in coverage. These ment (OECD), including managing the school- guarantees facilitated investments in the finan- to-work transition, keeping up with changing cial, manufacturing, mining, telecommunica- technology, and improving school management. tions and tourism sectors. The Bank is supporting improvements in the quality and accessibility of education. Improving human and social development About 100 million people in the region do Attention to the region's human and social not have regular access to a formal health care development has increased in recent years, system. The Bank is helping strengthen health partly because the dividends from an outward- care delivery systems so they can provide cost- oriented development strategy depend increas- effective, efficient, and quality preventive and ingly on the quality of human resources but also curative health services and is helping ensure because unequal access to education and health that health services are financially sustainable. services is a powerful determinant of inequality A new role for the Bank is helping governments and poverty. to redefine their role in the sector-that is, to Surveys indicate the quality of education in diminish the role of providing direct services LAC is low at all levels; there is also a high de- while creating a "friendly environment" for gree of inequality of educational opportunity in nongovernmental involvement and increased terms of both access and quality. In addition, competition among service providers. the region's middle-income countries, such as SECTION THREE LATIN AMERICA AND THE CARIBBEAN 75 FIGURE 3-9 Latin America and the Caribbean: IBRD and IDA Commitments by Sector, Fiscal Year 1997 Urban development, 2% Environment, 2% Mu tisector, 3 Education, i% Heath, popu abn o and nuitriion, 3% Water supply ane sanitacion, 4%. Social sector, 9/. Transportation, 33% Public sector management 13% X Finance, 14% Z EX ; | | g t Agriculture, 16% Strengthening public finances to manage revenue and expenditure better, Fiscal strength and stability are more impor- privatize public enterprises, reform the civil tant today than ever before because economies service, and reorganize debt obligations. are more open and are increasingly dependent To cushion the impact of cutbacks in the on market-driven, private capital flows. Well- public sector in the Argentine provinces of managed public finances also facilitate increased Cordoba and Tucuman, the Bank and IFC joined domestic savings and allow governments to forces to help create an environment conducive invest in those elements of infrastructure and to private sector development. Following up on human development in which the private sector a joint iFc-Bank study of the Tucuman Province, will not. IFC is providing a $30 million credit line to Colombia has recently established stabiliza- Banco Roberts for onlending to companies in tion arrangements to smooth the impact of oil- the northern provinces of Argentina. In addi- related financial flows on public finances and tion, IFC is providing a $10 million subordinated the domestic economy. The Bank has encour- convertible loan to Banco del Suquia to enable aged Ecuador and Venezuela to consider such this regional bank to further develop its busi- schemes and has discussed them with Suriname ness in Cordoba and surrounding provinces. and Trinidad and Tobago. In Guatemala the And in Mexico, following joint IDB, IFC, and Bank undertook a public investment review in World Bank analysis of the southern states, close collaboration with the government; the the IFC created the Fondo Chiapas to provide Bank is also playing a central role in supporting risk capital to support small and medium-size implementation of the country's peace accords enterprises. (see box 3-5). Reforming social security systems helps coun- Fiscal imbalances at the provincial or state tries maintain long-term fiscal sustainability. levels can quickly spread to the national level. Increased reliance on private funding of social This often occurs through loans made by public security reduces governments' long-term liabili- banks to insolvent local entities or through ties, while a strong fiscal position facilitates the bonds issued by these entities, which the na- transition to private management. In fiscal 1997 tional treasury is later forced to redeem. Where the Bank supported Mexican social security re- subnational governments have been interested form; aided Peru in undertaking initial reforms in reform, such as in some Brazilian states and of its system; and helped the Argentine authori- Argentine provinces, the World Bank (often in ties transfer provincial social security obliga- collaboration with the Inter-American Develop- tions to a national system. ment Bank-IDB) has helped to design programs 76 THEWORLD BANKANNUAL REPORT 1997 Reforming financial markets Argentina, Mexico, and Venezuela were among countries facing such difficulties in 1995 The legacy of recent years has made Latin and 1996. The Bank, together with the IDB, American countries only too aware of the im- helped the Argentine and Mexican governments portance of sound financial markets-not only address weaknesses and restore confidence in for maintaining economic stability and efficient their financial systems. In Argentina, the on- resource allocation but also for attracting and going Provincial Bank Privatization Loan and managing cross-border capital flows. Macroeco- the Banking Sector Reform Loan helped con- nomic instability weakens financial systems, par- solidate the banking system, with fourteen pro- ticularly banking systems, especially where su- vincial bank privatizations completed or under pervision and regulation are poor. Since weak way and seventeen private bank consolidation banking systems in turn make economies vul- transactions concluded. In Mexico an earlier nerable to shocks, it is important to address loan to restructure the financial system was these vulnerabilities quickly. fully disbursed in fiscal 1997, and Bank support continued through ongoing technical assistance TABLE 3-13. LENDING TO BORROWERS IN LATIN AMERICA AND THE CARIBBEAN, BY SECTOR, FISCAL YEARS 1988-97 (millions of us dollars) Annual average, Sector FY88-92 FY93 FY94 FY95 FY96 FY97 Agriculture 759.5 390.0 363.9 440.3 226.3 730.6 Education 289.7 548.7 1,083.3 747.1 493.1 61.5 Electric power 419.8 345.1 - 161.5 465.4 - Environment 149.8 16.3 501.0 103.9 301.5 86.5 Finance 515.8 525.0 604.5 1,909.5 11.9 630.2 Health, population and nutrition 182.0 329.0 331.0 94.6 1,086.4 136.8 Industry 565.9 - - - 8.0 - Mining 50.0 250.0 14.0 - 41.0 - Multisector 937.0 918.1 122.2 328.6 110.9 132.1 Oil and gas 86.5 11.8 - 11.0 10.6 - Public sector management 292.2 443.0 58.3 596.4 666.4 584.0 Social sector 19.8 85.0 130.0 500.0 262.0 405.0 Telecommunications 13.4 - - - - - Transportation 515.8 1,697.5 595.0 371.0 530.0 1,496.0 Urban development 535.1 170.0 422.0 575.0 20.0 100.0 Water supply and sanitation 261.5 439.0 521.5 221.5 204.0 200.0 Total 5,593.8 6,168.5 4,746.7 6,060.4 4,437.5 4,562.7 Of which: IBRD 5,381.2 5,851.8 4,434.5 5,715.2 4,047.2 4,437.5 IDA 212.6 316.7 312.2 345.2 390.3 125.2 NOTE: Details may not add to totals because of rounding. - Zero. SECTION THREE LATIN AMERICA AND THE CARIBBEAN 77 for establishing an incentive framework for fi- IFC's field presence in the country is forging nancial intermediaries, strengthening banking deeper links with private firms, and a separate fi- supervision and regulation, and improving legal nancing facility, the Small Enterprise Fund, has and regulatory infrastructure for credit and been established. The competitiveness strategy is capital market transactions. also being supported by the Foreign Investment Advisory Service (FIAS) and MIGA through invest- Improving the legal and regulatory ment promotion and information dissemination environment services. FIAS is also a partner in the Bank- To facilitate private sector development, as financed Trinidad and Tobago Business Expan- well as to safeguard consumer interests, the sion and Industrial Restructuring Project, where Bank is helping several countries establish clear, it is providing advice on investment regime re- impartial legal and regulatory environments forms. In Brazil the Bank undertook a study of with predictable enforcement. It is helping the elements of "Custo Brazil," the various finan- Guatemala prepare selected infrastructure sec- cial, regulatory, and infrastructure costs that have tors for privatization and concessioning through impaired Brazilian producers' competitiveness. a technical assistance project that includes sup- port to prepare legislation and strengthen regu- Governance and public sector latory agencies. A technical assistance loan to modernization Colombia is also supporting regulatory reform. To be sustainable, reforms depend on efficient, El Salvador's overall competitive posture is be- modern states, professionally staffed and focused ing revised through the ongoing Competitive- on policy formulation and evaluation. A large ness Enhancement Technical Assistance Project, Bank program is helping to sustain reforms and during the 1996 Annual Meetings a special through modernizing public sectors and improv- country seminar on El Salvador's competitive- ing governance. In fiscal 1997, eight loans total- ness program was widely attended by potential ing $600 million supported public sector man- investors. The IFc is also playing a key role in agement and modernization (including three supporting the competitiveness program loans totaling $420 million to support pension through its Extended Reach Initiative program. reform); these included loans to El Salvador, TABLE 3-14. WORLD BANK COMMITMENTS, DISBURSEMENTS, AND NET TRANSFERS IN LATIN AMERICA AND THE CARIBBEAN, FISCAL YEARS 1992-97 (millions of us dollars) Argentina Brazil Mexico Total region start start start start Item 1997 1997 1992-97, 1997 1997 1992-97, 1997 1997 1992-97a 1997 1997 1992-97, Undisbursed commitments 3,152 4,236 3,893 17,431 Commitments 1,480 7,355 993 5,173 960 8,047 4,563 31,637 Gross disbursements 1,127 4,795 1,560 5,133 943 7,246 5,018 25,692 Repayments 295 2,003 1,099 7,575 1,363 7,018 4,193 26,692 Net disbursements 831 2,793 461 -2,442 -421 228 825 -1,000 Interest and charges 326 1,635 351 3,114 803 5,404 2,198 16,235 Net transfer 505 1,158 110 -5,556 -1,224 -5,176 -1,373 -17,235 NoTE: The countries shown in the table are those with the largest borrowings of Bank funds during fiscal 1996-97. Details may not add to totals because of rounding a. Disbursements from the IDA Special Fund are included through fiscal 1996. 78 THEWORLD BANKANNUAL REPORT 1997 BOX 3-5. SUPPORTING PEACE IN GUATEMALA The final peace accord signed in Guatemala on social services and community infrastructure while December 29, 1996, saw all of CentralAmerica recognizing and nurturing the nation's linguistic, eth- finally free of civil strife and under democratically nic, and cultural diversity. To ensure commitments elected governments. The region's priority battle now are met efficiently, the accord stressed the need for is against poverty, which affects about half the popu- greater consultation with communities and NGOs as lation. Bank strategies focus on improving social in- well as including them in the implementation of new frastructure and services by modernizing the public programs. To facilitate this, a meeting was held with sector; promoting increased reliance on community- 200 Mayan elders from twenty-one groups, Xinca based project management; strengthening basic edu- people, and Bank staff in December 1996. cation; removing constraints to rural growth, such as While the Bank is supporting many of Guatemala's restricted access to smallscale credit; and continuing programs, the government also needs to collect structural reforms to enhance competitiveness. The greater revenues to finance the peace program. At Central America Department was established by the less than 8 percent of GDP, revenue collection is his- Bank early in fiscal 1997 to support this important torically among the lowest in Latin America. A Bank agenda; and to maintain a strong working transition loan to support the government's tax and customs to sustained peace, a resident mission has been law reform is under preparation. It will make tax established in Guatemala City. evasion a criminal offense and set up a modern tax Guatemala's poor are overwhelmingly indigenous administration. These important initiatives, which people, those living in rural areas, and women. The will provide funding for the social commitments of peace accord recognized this and committed the gov- the peace accord, are also part of the government's ernment to rapidly improve poor people's access to bold anticorruption initiative. Honduras, and Jamaica. In addition, two loans Improving operations to Brazil are supporting reform at the state A major focus in fiscal 1997 was to improve level. The Colombian national evaluation sys- the quality and effectiveness of Bank operations tem for assessing public sector performance was through greater attention to portfolio manage- reviewed, drawing on New Zealand and ment and encouraging greater participation in, Australia's experience of civil service reform. and sharpening client focus on, new projects. An important goal for countries modernizing Portfolio management. Improving portfolio their public sectors is reducing opportunities for performance remains a major priority in the LAC corruption. Many of the market-oriented re- region. Issues that negatively affect project forms undertaken over the last decade have re- implementation include lack of availability of duced the scope for discretionary economic ac- counterpart funds; weak project management; tion and therefore for corruption. Though not delays in procurement for procedural reasons; containing explicit anticorruption objectives, slow legislative action; and difficulties in adapt- nearly all of the Bank-financed public sector re- ing project designs to reflect decentralized pow- form loans in fiscal 1997 contain anticorruption ers in federal systems. To address these weak- objectives. An Economic Development Institute nesses, an increased share of the Bank's (EDI) seminar on governance and public sector administrative budget is being allocated to port- management in El Salvador focused on methods folio management, while resident missions are of improving service delivery, increasing ac- playing an increasing role and discussions of countability and transparency, and promoting portfolio issues are taking place at a senior level. more regular communication between govern- In some cases, joint Bank-government com- ments and stakeholders. missions have been set up to address portfolio issues. In Brazil, an open and intense process led to an historic opportunity to effect portfolio- wide change. The final report of the respective SECTION THREE LATIN AMERICA AND THE CARIBBEAN 79 TABLE 3-15. OPERATIONS APPROVED DURING FISCAL YEAR 1997, LATIN AMERICA AND THE CARIBBEAN Principal amount (millions) Country/project name Date of Approval Maturities SDR US$ Argentina Second Social Protection Project Jun 20, 1997 2003/2012 n.a. 200.00 AIDS and Sexually Transmitted Diseases Control Project May 22, 1997 2002/2012 n.a. 15.00 Buenos Aires Urban Transport Project May 15, 1997 2002/2012 n.a. 200.00 Second Maternal and Child Health and Nutrition Project May 15, 1997 2003/2012 n.a. 100.00 Provincial Agricultural Development Project Apr 22, 1997 2002/2012 n.a. 125.00 National Pension Administration Technical Assistance Project Jan 21, 1997 2002/2012 n.a. 20.00 Provincial Pension Reform Adjustment Loan Dec 11, 1996 2002/2012 n.a. 300.00 Flood Protection Project Dec 11, 1996 2002/2012 n.a. 200.00 Provincial Roads Project Sep 12, 1996 2002/2011 n.a. 300.00 Native Forests and Protected Areas Project Sep 5, 1996 2002/2011 n.a. 19.50 Belize Social Investment Fund Project Mar 18, 1997 2002/2014 n.a. 7.00 Bolivia Capitalization Program Adjustment Credit Nov 14, 1996 2005/2035 3.80 5.40 Brazil Federal Highway Rehabilitation and Decentralization Project Jun 12, 1997 2002/2012 n.a. 300.00 Mato Grosso State Privatization Project Jun 12, 1997 2001/2012 n.a. 45.00 Water Resources Management Pilot Project-State of Ceara Jun 12, 1997 2001/2012 n.a. 9.60 Agricultural Technology Development Project May 22, 1997 2002/2012 n.a. 60.00 Rio Grande do Sul State Highway Management Project May 15, 1997 2001/2012 n.a. 70.00 Land Reform and Poverty Alleviation Pilot Project Apr 22, 1997 2000/2012 n.a. 90.00 Natural Resources Management and Rural Poverty Alleviation Project Apr 22, 1997 2000/2012 n.a. 100.00 Rio Grande do Sul State Reform Project Mar 4, 1997 2000/2012 n.a. 125.00 Bahia Municipal Infrastructure Development and Management Project Mar 4, 1997 2000/2012 n.a. 100.00 Northeast Rural Poverty Alleviation Project- Rio Grande do Norte Dec 12, 1996 2002/2011 n.a. 24.00 Northeast Rural Poverty Alleviation Project-Piaui Dec 12, 1996 2002/2011 n.a. 30.00 Northeast Rural Poverty Alleviation Project-Pernambuco Dec 12, 1996 2002/2011 n.a. 39.00 Colombia Financial Markets Development Project Jun 20, 1997 2001/2012 n.a. 15.00 Regulatory Reform Technical Assistance Project Feb 25, 1997 2000/2012 n.a. 12.50 Dominican Republic National Highway Project Dec 19, 1996 2000/2012 n.a. 75.00 Ecuador Agricultural Research Project Jul 25, 1996 2003/2017 n.a. 21.00 Judicial Reform Project Jul 18, 1996 2002/2016 n.a. 10.70 El Salvador Public Sector Modernization Technical Assistance Loan Sep 3, 1996 2002/2013 n.a. 24.00 commission emphasizes the need for more effi- lope programs" in which a framework for assis- cient procedures, stronger dialogue on country tance is approved and in which several projects assistance strategy, and new forms of assistance are developed to suit different state borrowers; to meet the needs of a changed environment. decentralizing project implementation in line The report recommends dividing projects into with location advantage; and simplifying both successive multistage phases; preparing "enve- Bank and borrower procedures. 80 THEWORLD BANKANNUAL REPORT 1997 Principal amount (millions) Country/project name Date of Approval Maturities SDR US$ Guatemala Basic Education Reform Project May 20, 1997 2001/2012 n.a. 33.00 Private Participation in Infrastructure Technical Assistance Loan Apr 22, 1997 2000/2012 n.a. 13.00 Guyana Private Sector Development Adjustment Credit Nov 14, 1996 2005/2035 1.50 2.20 Haiti Second Technical Assistance Project Sep 17, 1996 2006/2036 8.30 12.00 Forest and Parks Protection Technical Assistance Project Sep 17, 1996 2007/2036 15.00 21.50 Honduras Rural Land Management Project Mar 20, 1997 2007/2037 23.50 34.00 Public Sector Modernization Structural Adjustment Credit Nov 14, 1996 2006/2035 14.00 20.10 Jamaica Social Investment Fund Project Sep 5, 1996 2002/2013 n.a. 20.00 Public Sector Modernization Project Sep 3, 1996 2002/2013 n.a. 28.40 Student Loan Project Jul 25, 1996 2002/2013 n.a. 28.50 Mexico Federal Roads Modernization Project Jun 25, 1997 2002/2012 n.a. 475.00 Aquaculture Development Project May 1, 1997 2001/2012 n.a. 40.00 Community Forestry Project Feb 18, 1997 2002/2012 n.a. 15.00 Contractual Savings Development Program Dec 17, 1996 2000/2008 n.a. 400.00 Rural Finance Technical Assistance and Pilot Project Oct 10, 1996 2000/2012 n.a. 30.00 Nicaragua Rural Municipalities Project Sep 12, 1996 2006/2036 20.90 30.00 Panama Social Investment Fund Project Jun 17, 1997 2003/2014 n.a. 28.00 Rural Poverty and Natural Resources Project May 8, 1997 2002/2014 n.a. 22.50 Paraguay Maternal Health and Child Development Project Sep 5, 1996 2000/2011 n.a. 10.90 Maternal Health and Child Development Project Sep 5, 1996 2000/2013 n.a. 10.90 Peru Debt and Debt Service Reduction Loan Feb 11, 1997 2002/2014 n.a. 183.00 Pension Reform Adjustment Loan Feb 11, 1997 2002/2014 n.a. 100.00 Sierra Natural Resources Management and PovertyAlleviation Project Jan 16, 1997 2001/2014 n.a. 51.00 Irrigation Subsector Project Jul 25, 1996 2001/2013 n.a. 85.00 Second Social Development and Compensation Fund Project Jul 16, 1996 2002/2013 n.a. 150.00 Uruguay Forest Products Transport Project Jun 25, 1997 2002/2012 n.a. 76.00 Total 87.00 4,562.70 n.a. = not applicable (IBRD loan). Greater participation. Facilitating greater par- whose roles are to ensure that local and com- ticipation in projects is one of the Bank's guid- munity concerns are incorporated into pro- ing principles. The LAC region's resident mis- grams and projects. In Central America and the sions in Argentina, Bolivia, Brazil, Colombia, Andean countries, where indigenous peoples Costa Rica, Ecuador, Jamaica, Mexico, Peru, and represent significant percentages of the popula- Venezuela have NGO coordinators on staff tion, the Bank has extended Institutional SECTION THREE LATIN AMERICA AND THE CARIBBEAN 81 The Bank is supporting implementation of Guatemala's peace accords. Development Fund grants to help eleven indig- design and monitoring of poverty reduction enous NGOs in nine countries strengthen their programs. The Bank joined forces with the IDB capacity to define their own development needs. and the United Nations Economic Commission Partnerships. To take advantage of the special for Latin America and the Caribbean (ECLAC) in skills and expertise of others, the Bank began a multiyear regional and country program to working with the IDB and the Pan American help national statistical offices improve the col- Health Organization (PAHO) on a pilot program lection and interpretation of national living- to address serious emerging issues related to condition surveys. The first four countries to rapid urbanization-problems of at-risk youth, participate in this project are Argentina, El Sal- urban poverty, and crime and violence. These vador, Paraguay, and Peru; additional countries concerns also were discussed at length at the under consideration are the Dominican Repub- second Annual Bank Conference for Develop- lic and Haiti. ment Economics for Latin America and the Car- An innovative environment project that sup- ibbean.8 EDI was a partner in organizing this con- ports the Mesoamerican Biological Corridor ex- ference, which brought together policymakers, emplifies the strength of working with partners. private sector participants, and leading academ- Here the Bank and the Global Environment Fa- ics to focus on international economic integra- cility (GEF) are working to help conserve Central tion and commerce. Another partnership is helping secure better, 8. Jointly sponsored with the government of Colombia and more accurate statistics crucial to improving the the University of the Andes and held in Bogota in July 1996. 82 THE WORLD BANK ANNUAL REPoRT 1997 America's biodiversity through projects in Honduras, Nicaragua, and Panama. They are also contributing to a joint initiative of the seven countries in Central America to ensure that a mosaic of natural habitats extending from southern Mexico to Colombia is conserved and that the critical natural link between the conti- nental masses of North America and South America is maintained. This biological link is important to sustain not only Central America's biological processes but also those of North and South America. Increasing client focus. Consistent with the Bankwide renewal effort, the Latin America and Caribbean regional office is improving its busi- ness processes to focus more closely on client needs, strengthen accountability and delegation, improve cost effectiveness, simplify procedures, and enhance professional standards. A range of alternative models was tested and evaluated, based on which an overall design for regionwide renewal was prepared. Consequently, country assistance strategy and client relationships will, as of July 1, 1997, be managed by seven country- management units, which in turn will contract with four regionwide sector departments to de- liver most operational products. The Mexico country-management unit is already managed from the field, and others are also expected to be devolved. SECTION THREE LATIN AMERICA AND THE CARIBBEAN 83 MIDDLE EAST AND NORTH AFRICA Countries in the Middle East nearly 7 percent in Tunisia, 1997 reflect these priorities and North African region experi- 4-5 percent in Egypt, Iran,10 within the framework of enced significant economic Jordan, and Lebanon, and 3-4 country-specific needs. The growth and stability for the sec- percent in Algeria and Yemen. fiscal year's operations also re- ond year in a row. The Bank's Only the West Bank and Gaza, flect a broadening product assistance strategy in fiscal 1997 where economic performance mix, renewed efforts to en- centered on supporting countries continues to be bound up hance responsiveness to cli- as they built on earlier reform ef- with progress on the Middle ents, and closer partnerships forts-especially those that pro- East peace process, was unable with counterparts at the mote rapid private sector-led to share in the brightening grassroots. Capacity building growth (with IFC and MIGA also picture-growth during 1996 was supported by the Eco- playing significant roles); encour- was marginally negative. nomic Development Institute age human capital development The improvement in (EDI), which organized the and help to ensure that the fruits growth prospects reflects a Mediterranean Development of growth are widely shared; and payoff from the determined Forum in May 1997 in support environmentally sustain- efforts by the countries of the Marrakech, Morocco. able growth. New and innova- region to secure and maintain Policymakers, parliamentar- tive products and instruments- macroeconomic stability and ians, NGOS, academics, and including a World Bank to undertake fundamental journalists from around the guarantee-have been key to programs of economic reform. world came together to par- meeting changing clients needs in The depth and pace of ticipate in more than a dozen the region. And efforts to improve progress in individual cases learning programs on regional and speed up lending processes, reflect specific country condi- development issues ranging reduce problem projects by inten- tions, but there is now a broad from unleashing the economic sified portfolio management, and consensus among the Bank's potential of the rural poor to work more closely with clients active borrowers on the need managing reform. and local people have been cen- to open up economies to the World Bank loans and Inter- tral elements. In the West Bank outside world and create national Development Asso- and Gaza, the Bank's support market-friendly domestic ciation (IDA) credits (including through the Trust Fund for Gaza policy and operational envi- financing on IDA terms pro- and the West Bank is expanding ronments in which the private vided from the Trust Fund for and moving from a concentration sector is increasingly the Gaza and the West Bank) ap- on emergency assistance to pro- engine of growth. proved by the executive direc- moting private sector-led growth Rapid private sector-led tors in fiscal 1997 totaled and development. growth is at the core of the $998.3 million. Table 3-16 Bank's strategy for the region, shows the sectoral distribution After a long period of slow along with two other critical of lending to the region for growth, most economies in the factors-support for human the 1988-97 period. Table Middle East and North Africa capital development and pro- 3-17 compares commitments, (MENA) region in which the grams to ensure that the fruits disbursements and net trans- Bank has current operations9 of growth are widely shared fers to the region for fiscal recorded significant improve- throughout society; and sup- years 1992-97, and table 3-18 ments in gross domestic prod- port for environmentally uct (GDP) for the second year responsible growth to ensure 9. Algeria, Egypt, Iran, Jordan, Lebanon, Morocco, Tunisia, the West in a row. Growth estimates for that development is sustain- Bank and Gaza, and Yemen. 1996 ranged from a high of able. Both lending and non- 10. Source: Islamic Republic of Iran nearly 12 percent in Morocco, lending services during fiscal government estimates. 84 THEWORLD BANKANNUAL REPORT 1997 shows IBRD and IDA-funded operations in the (MIGA) issued seven guarantee contracts for in- MENA region approved by the Executive Board vestments in Algeria, Bahrain, Egypt and Saudi during fiscal 1997 by country. The number of Arabia totaling $23 million in issued coverage operations approved rose to a historic high of and facilitating more than $250 million in for- twenty-four compared with a 1994-96 average eign investment. Both IFc and MIGA provided of seventeen, largely reflecting a sharp upswing technical advice to support private sector and in the West Bank and Gaza program (see box 3- financial market-development and investment- 6). In addition to Bank and IDA operations, the promotion activities in MENA countries. Bank's private sector affiliate, the International While individual country circumstances vary, Finance Corporation (IFC), invested in twenty- the prospects for achieving and maintaining a five operations in MENA countries during the regional average annual rate of growth on the year. IFC financing totaled $420 million, an in- order of 5-6 percent now look brighter than crease over the eighteen investments totaling they have at any time over the past decade. But $288 million in fiscal 1996. Meanwhile, the turning these prospects into reality will require Multilateral Investment Guarantee Agency continuing work on a substantial unfinished TABLE 3-16. LENDING TO BORROWERS IN MIDDLE EAST AND NORTH AFRICA, BY SECTOR, FISCAL YEARS 1988-97 (millio;s of us dollars) Annual average, Sector FY88-92 FY93 FY94 FY95 FY96 FY97 Agriculture 283.6 463.0 574.2 231.6 100.0 176.5 Education 138.4 115.2 33.0 158.3 138.3 98.0 Electric power and other energy 152.9 165.0 80.0 - - 65.0 Environment - - 33.5 113.0 78.0 - Finance 83.2 - 120.0 - 408.7 75.0 Health, population and nutrition 53.1 188.0 - 35.7 85.2 - Industry 98.5 - - - - Mining 11.2 - - - - - Multisector 325.0 - - 150.0 380.0 120.0 Oil and gas 49.9 - - - 35.0 - Public sector management 37.6 - 19.9 - 20.0 85.0 Social sector 28.0 - - - 223.0 30.0 Telecommunications 7.2 100.0 20.0 - - - Transportation 105.6 35.0 - 239.1 37.0 42.0 Urban development 108.7 684.0 - 51.0 50.0 100.0 Water supply and sanitation 23.4 130.0 270.0 - 40.0 123.3 Total 1,506.2 1,880.2 1,150.6 978.7 1,595.2 914.8 Of which: IBRD 1,396.0 1,756.4 1,050.6 925.4 1,276.7 769.6 IDA 110.2 123.8 100.0 53.3 318.5 145.2 NoTE: Does not include loans to the West Bank and Gaza from the Trust Fund for Gaza and the West Bank. Details may not add to totals because of rounding. - Zero. SECTION THREE MIDDLE EAST AND NORTH AFRICA 85 FIGURE 3-10 Middle East and North Africa: IBRD and IDA Commitments by Sector, FiscalYear 1997 Social sector, 3% Transportation, 5% Electric power and other energy, 7% Agricu ture, 20% Finance, 8% Public sector managment, 9% Water supply and sanitat on, !3% Education, 11% Multisector 13% Urban development, 1 % X policy agenda and on large investments in economic integration, investment, and savings, key areas for securing rapid, widely shared, will help develop Jordan's banking and financial and environmentally sustainable growth. Bank sectors. Both operations also feature support for Group operations during the year were de- government privatization programs. signed to support countries' efforts in each of Earlier reform efforts undertaken with these respects. Bank support are beginning to pay off in terms of improved growth prospects and other Promoting rapid growth benefits that are reflected in the daily lives of Support for countries' programs of policy re- ordinary people. One dramatic example is the form to speed the growth process by promoting $80 million Yemen Economic Recovery Credit, international competitiveness and opening up approved by the Bank's board in fiscal 1996. to global markets continues to be a major stra- As a result of the stabilization and reform tegic focus of Bank operations. Two of the program supported by the credit, the inflation year's larger Bank operations-the $120 million rate has already dropped to less than one-third Jordan Second Economic Reform and Develop- of its 1994 level, the exchange rate has stabi- ment Loan and the $75 million Tunisia Eco- lized, and the growth rate has improved to nomic Competitiveness Adjustment Loan-pro- the point where the erosion in living standards vide good examples of such support. Both were has been halted. The main beneficiaries have designed to promote enhanced private sector included wage earners and the poor, who have participation in the wider world economy, seen prices of basic commodities that figure thereby also facilitating important recent initia- heavily in their expenditures-such as wheat tives such as the proposed association of MENA and wheat flour, sugar, rice, and milk-level off countries with the European Union (EU); Tunisia or even decline. was the first country in the region to sign a Free At the other end of the scale in terms of Trade Agreement (FTA) with the EU, and Jordan project size, an innovative $5 million loan on has also signed. Egypt and Lebanon are cur- IDA terms is helping promote microenterprise rently negotiating an agreement. The Tunisia development in the West Bank and Gaza, focus- operation was prepared in cooperation with the ing on firms with less than ten employees and EU and features efforts to ready Tunisian firms limited access to credit. This operation was the for full participation in the FTA and to accelerate first in the region to be jointly prepared by the FTA implementation; the Jordan loan, in addition Bank and the FC; its financing includes a $7.5 to supporting a range of measures to promote million IFC investment as well as the Bank loan. 86 THE WORLD BANKANNUAL REPORT 1997 Well-functioning infrastructure services-es- V pecially electric power, transportation systems, and telecommunications networks-are critical for the growth of internationally competitive private sectors. Despite heavy past investment, much of the region's infrastructure is unable to provide the levels of service that industry needs. Meanwhile, government budgets are increas- ingly constrained, both by the nieed to maintain fiscal balances and by new demands for expen- ditures in other areas, such as human resources development. In recent years there has been a growing worldwide trend for private investment - to supplement or supplant public financing of .l_L__ infrastructure, but private participation has as X yet been very limited in MENA. 'During fiscal 1997, however, the Bank helped to promote private financing with a $ 100 mnillion guarantee for a power sector restructuring and transmis- sion expansion operation in Lebanon (for which the Bank also made a $65 million loan). This guarantee operation, and the expected further expansion of the guarantee program, represents an important broadening of the product mix that the Bank offers its clients. In addition to ,______ the direct financial impact of guarantees, their spin-off benefits are expected to be substan- tial-for example, helping to improve the overall climate for private investment in MENA ______ infrastructure by introducing MENA borrowers to the longer end of the international bond mar- ket; reducing private investors' perception of risk; and lowering the costs of funds to borrow- M - : ers. Meanwhile, the IFC has beern a leader in pro- Bank support for the West Bank and Gaza is evolving moting private participation in infrastructure away from emergency assistance toward support for and expects to increase its infrastructure sup- broad-based economy building. port activities substantially in MENA. In fiscal 1997, the IFC invested in the first regionwide specialized leasing management company, headquartered in the United Arab Emirates; opportunity to find jobs and participate fully in the company will help meet infrastructure the economy. Education is increasingly impor- requirements by providing lease finance. tant because it provides the essential foundation for a well-trained, flexible, internationally Sharing the fruits of growth competitive labor force. Past Bank support for The World Bank has historically devoted sub- major overhauls of education systems-such as stantial resources to supporting expanded and Jordan's comprehensive ten-year education re- upgraded education and health services in MENA form program-are beginning to bear fruit. In countries so that more people could share the Jordan's case the payoffs include a range of SECTION THREE MIDDLE EAST AND NORTH AFRICA 87 quantitative and qualitative improvements, in- public works, focusing on agricultural infra- cluding more and better classrooms, reduction structure and environmental protection. The in class crowding and double-shifting, and project will not only help generate short-term teachers who are better trained to use teaching jobs but also improve long-term employment methods based on problem solving rather than prospects through asset creation via, for ex- rote learning. A $75 million fiscal 1997 IDA ample, on-farm land improvement, better credit to Egypt for a national edlucation en- erosion control, and opening of rural roads. hancement program is expecteci to help pro- mote a similarly significant outcome over time. Securing environmentally sustainable growth The credit, expected to be the first in a series of A number of operations approved in fiscal operations, is designed to support Egypt's long- 1997 focused on environmental constraints to term basic education goals-to improve access growth-especially in the water sector, where to school, especially for girls; raise the quality of the region faces increasing shortages of renew- student learning and performance; and enhance able freshwater. A $25 million Water and Sani- overall system efficiency. tation Services project in Gaza approved in fis- Supporting shared growth also involves pro- cal 1997 (see box 3-6) will support the develop- viding assistance for countries' t fforts to en- ment of water and sanitation services by an in- hance socioeconomic cohesion and reduce pov- ternational private contractor under a manage- erty by bringing new opportunities to people ment contract. This is the first project of its who may have been previously neglected or kind in the region and an example of the Bank's whose current prospects may be at least tempo- interest in encouraging the injection of not only rarily worsened by the effects of reform. An $89 private capital hut also private sector manage- million loan to Algeria for the Rural Employ- ment expertise into activities previously exclu- ment Project addresses these concerns. The op- sively carried out by public authorities. A $10.2 eration is helping create jobs for rural people million IDA credit to Yemen (the Taiz Water (whose unemployment rate-26 percent-is Supply Project) exemplifies the participatory substantially above the national average of 20 approach increasingly being used in project de- percent) through support for labor-intensive velopment. The operation involves bringing wa- TABLE 3-17. WORLD BANK COMMITMENTS, DISBURSEMENTS, AND NET TRANSFERS IN MIDDLE EAST AND NORTH AFRICA, FISCAL YEARS 1992-97 (millions of us dollars) Algeria Morocco Tunisaa Ttal region srt start start strt Item 1997 1997 1992-97' 1997 1997 1992-97- 1997 1997 1992-97 1997 1997 1992-97' Undisbursed commitments 921 1,330 707 5,114 Commitments 89 1,443 108 1,992 242 1,410 915 8,002 Gross disbursements 118 1,860 302 2,182 203 1,096 1,214 7,727 Repayments 249 1,251 326 1,827 175 1,016 1,057 6,023 Net disbursements -131 609 -24 355 28 S0 157 1,075 Interest and charges 129 737 231 1,548. 102 709 641 4,241 Net transfer -260 -128 -255 -1,393 -74 -629 -484 -2,536 NoTE: The countries shown in the table are those wuth the largest borrowings of Bank funds duringfiscal 1996-97. Details may not add to totals because of rounding a. Disursementsfrom the IDA Specal Fund are induded through fiscal 1996. 88 THE WORLD BANK ANNUAI. REPORT 1997 ter to the city of Taiz from rural communities and Morocco; a major review of the status and about thirty kilometers away. Such transfers can prospects of Morocco's rural sector (where liv- be difficult, but in this case, local communities ing standards and the quality of life are substan- were consulted fully and early by the govern- tially lower than in urban areas) along with ment; they participated in the process of water proposals for integrating the rural sector more allocation; and they will take part in monitoring effectively into the economy as a whole; a water water extraction from local aquifers. strategy study in Yemen (one of the countries already hardest hit by water scarcity); and a Participatory analytical work groundbreaking health sector study in Jordan, A participatory approach was also used in which is expected to presage a major reform of preparing a number of important pieces of ana- the sector. Health was also the subject of inten- lytical work in fiscal 1997.These included sified dialogue with Egypt, involving a large Country Assistance Strategy Papers for Egypt conference attended by intemational experts, TABLE 3-18. OPERATIONS APPROVED DURING FISCAL YEAR 1997, MIDDLE EAST AND NORTH AFRICA Prncipal ount (millions) Countr/project name Date ofApproval Maturities SDR USS Rural Employment Project Mar 25, 1997 2002/2014 n.a. 89.00 Egypt Education Enhancement Program Dec 24, 1996 2007/2031 51.50 75.00 Jorden Second Economic Reform and Development Loan Dec 11. 1996 2001/2014 n.a. 120.00 Housing Finance and Urban Sector Reform Project Jul 25, 1996 2002/2016 n.e. 20.00 Lebanon Coastal Pollution Control and Water Supply Project Feb 18, 1997 2002/2014 n.a. 53.10 Power Sector Restructuring and Transmission Expansion Project Nov 26, 1996 2006/2006 n.s. 65.00 Agriculture Infastructure Development Project Sep 12, 1996 2002/2013 n.a. 31.00 National Roads Project Jul 11, 1996 2002/2013 n.a. 42.00 Morocco Railway Restructuring Project Dec 19, 1997 2002/2016 n.a. 85.00 Third Private Sector Development Project Sep 12, 1996 2002/2016 n.a. 23.00 Tunisi Second Munidpal Development Project Jun 24, 1997 2001/2012 n.a. 80.00 GreaterTunis Sewerage and Reuse Project May 29, 1997 2001/2013 n.a. 10.00 Greater Tunis Sewerage and Reuse Project May 29, 1997 2001/2013 n.a. 50.00 Natural Resources Management Project May 13, 1997 2000/2011 n.a. 26.50 Economic Competitiveness Adjustment Loan Jul 25, 1996 2000/2011 n.a. 75.00 Yemen Social Fund for Development Project May 22, 1997 2007/2037 21.70 30.00 Emergency Flood Rehabilitation Project Dec 23. 1996 2007/2036 20.80 30.00 Taiz Water Supply Pilot Project Sep 3, 1996 2007/2036 7.10 10.20 Total 101.10 914.80 n.a. = not ap$licable (IUaD loan). NonE: Excldes loans on mA terms to the West Bank and Gaza from tke Bank-managed Trust Fund fir Gaza and the West Bank. SEC1IION THREE MIDDl.E EASTI AN) NtRIniH AFRICA 89 BOX 3-6. THE WEST BANK AND GAZA-EXPANDING AND DIVERSIFYING BANK GROUP SUPPORT The World Bank has played a prominent role in vestment Guarantee Fund. The Fund will enable supporting economic development in the West Bank MIGA to provide investment guarantees against the and Gaza since 1993. Duringfiscal 1997 this role major political risks of expropriation, transfer restric- expanded substantially in terms of the number and tion, war and civil disturbance, and breach of con- value of operations approved by the executive direc- tract, for new cross-border investments in West Bank tors. It also broadened in the scope and diversity of and Gaza. activities supported as the lending program evolved * Legal development, under which technical as- away from its initial concentration on emergency as- sistance, training and materials will be provided to sistance and toward support for broad-based economy help build the legal framework essential for a mod- building over the medium term. Over the past three ern market economy; and years the program has grown in aggregate volume * Palestinian expatriate professionals pro- and value from one commitment for $20 million in gram, under which skilled expatriates are being re- fiscal 1995, to two commitments for a total of $60 cruited to fill skills and experience gaps in the upper million in fiscal 1996, to seven for a total of $83.5 ranks of Palestinian Authority ministries. Substan- million in fiscal 1997. This year's lendingfocused on tial support has also been provided by bilateral and support for sector policy and institution building as multilateral donors and the private sector well as on helping to build a better enabling environ- Financing for these operations was provided on IDA ment for private sector development. It included op- terms from the Bank-managed Trust Fund for Gaza erations for: and the West Bank, which is supported by transfers * Water and sanitation in Gaza, the first project from IBRD income. During fiscal 1997 the executive in the region to involve contracting out the manage- directors approved a transfer of $90 million to the ment of water and wastewater services to an inter- trust fund, raising trust fund financing since fiscal national commercial operator; 1994 to a total of $230 million, about one-third of * Microenterprise development, the first joint which had already been disbursed by the close offis- operation in the region with the rFc, providing credit cal 1997. The Bank also administers the multidonor to small businesses through local commercial banks; Holst Trust Fund, which helps to finance the Pales- * Community development, supporting commu- tinian budget as well as emergency employment pro- nity participation in designing, implementing and grams. At the height of their operation at the begin- maintaining small-scale public works, building on ning of fiscal 1997, Holst Trust Fund employment the job-creation programs initiated under the Holst schemes provided the bulk of the funding for more Fund (see below); than 40,000 jobs. * Housing, a market-oriented initiative to estab- The Bank also played a leading role in helping to lish institutional and financial mechanisms to pro- coordinate overall donor support for Palestinian eco- mote long-term development of the housing sector, in- nomic development, as Chair of the Consultative cluding a secondary mortgage facility and support Group (cG) for the West Bank and Gaza, as the for low-income housing; Secretariat for the multidonorAd Hoc Liaison Com- * Guarantee trust fund for private investment. mittee (AHLC), and as Co-Chair of the Local Aid MIGA signed an agreement with the Palestine Lib- Coordination Committee (LAcc). Duringfiscal 1997 eration Organization, on behalf of the Palestinian the CG held one ministerial meeting, the AHLC met Authority, to establish the West Bank and Gaza In- three times, and the LACC met on ten occasions. donors, and stakeholders. The Bank is using its the year. Project processing was streamlined (to policy dialogue to support Egyptian-generated shorten the time between identification of strategies for comprehensive health reform. country need and project approval); undis- bursed balances on loans were reduced (so that Responding to clients more money went to beneficiaries faster); and Substantial efforts went into improving the intensified portfolio management has reduced Bank's responsiveness to clients' needs during the proportion of "problem projects" in the 90 THE WORLD BANK ANNUAL REPORT 1997 portfolio for the fourth year in succession. Au- During fiscal 1997, TCP activities included thority continues to be delegated to the field macroeconomic analyses and policy advice in through existing regional offices, and decisions the areas of labor markets, private sector devel- were taken during the year to relocate the new opment and privatization, and export promo- Egypt Country Management Unit to Cairo and tion, together with sectoral studies in power, to open a new resident mission in Morocco. health, tourism, and water. Reimbursable ac- tivities during the year accounted for nearly fif- Technical cooperation with Gulf countries teen years of staff time and were valued at Over the past twenty years the Bank has op- nearly $5 million. Nonreimbursable activities erated a technical cooperation program (TCP) of amounted to an additional two years of staff reimbursable (and sometimes nonreimbursable) time and nearly $0.5 million. technical assistance to support the development efforts of the upper-middle- and high-income countries of the Cooperation Council for the Arab States of the Gulf (GCc)--Bahrain, Ku- wait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE). The program helps GCC countries realize key aspects of their eco- nomic development strategies (for example, in the areas of economic diversification, private sector development, human resources policy, and environmental protection); supports part- nerships for pursuing local and regional devel- opment activities; and makes available to GCC partners technical advice and best professional practice based on Bank experience. SECTION THREE MIDDLE EAST AND NORTH AFRICA 91 SUMMARIES OF OPERATIONS APPROVED FOR IBRD, IDA, IDA INTERIM TRUST FUND, AND TRUST FUND FOR GAZA AND THE WEST BANK ASSISTANCE IN FISCAL 1997 AGRICULTURE t§0Algeria IBRD-$89 million. Some 40,000 man-years of rural employment will be generated in poor rural areas of northwest Algeria to create productive assets through natural resources management and to protect the environment. Total cost: $123.6 million. tO Argentina IBRD-$125 million. About 120,000 small and medium-size commercial farmers will benefit as land use is intensified to increase and diversify agricultural productivity, and basic agricultural support services and rural infrastructure are improved. Total cost: $357.2 million. 0 Argentina IBRD-$19.5 million. Native forests and protected areas will be better managed and conserved, and the rural economy will be boosted as tour- ism is increased while ensuring the sustainability of natural resources. Total cost: $30 million. § Azerbaijan IDA-$14.7 million. Farm incomes are expected to rise as land is priva- tized and farms are restructured in six raions. Vulnerable groups will be provided with training and employment opportunities. Total cost: $28.82 million. f-0§Brazil IBRD-$90 million. About 15,000 poor farmer families will be able to own land thus raising their incomes, quality of life, and productivity. The project is testing a new approach to land reform which, if successful, will be replicated. Total cost: $150 million. tO§Brazil IBRD-$24 million. Some 520,000 poor people in the rural areas of Rio Grande do Norte will benefit from access to water supply and other basic infrastructure and services, and from increased production, incomes, and employment. Total cost: $32 million. *O§Brazil IBRD-$39 million. Some 650,000 of Pemambuco's rural poor will ben- efit from access to water and other basic infrastructure and services, and from increased production, incomes, and employment. Total cost: $52 million. tO§Brazil IBRD-$100 million. About 132,000 rural households, especially small farmer and poor households, will benefit from better land management, soil and water conservation, increased incomes, better living conditions and access to basic services. Total cost: $208.4 million. tO§Brazil IBRD-$30 million. Some 810,000 poor people living in the rural areas of Piaui will benefit from access to water and other basic infrastructure and services, and from increased production, incomes, and employment. Total cost: $40 million. Data in this section have been compiled from documentation provided at the time of project approval. Projects marked by § are included in the Program of Targeted Interven- tions, and those marked by t are poverty-focused adjustment operations. Projects marked by 0 indicate NGO involvement, from information sharing and consultation to active participation. Projects with mechanisms for stakeholders to exercise shared decisionmaking and higher levels of control and ownership are marked by t. Other projects, although not so marked, also involve significant and systematic consultation with stakeholders to enhance the prioritization of local needs and to engender ownership. 92 THE WORLD BANK ANNUAL REPORT 1997 :tO§Brazil IBRD-$60 million. A competitive grants system will promote high- quality agricultural research and technological transfer in family farm development, advanced technologies, natural resource management, and agribusiness. Priority will be given to the generation and transfer of tech- nology for poor, smallholder farmers. Total cost: $120 million. 0§ Brazil IBRD-$9.6 million. A pilot project will test and evaluate water resource management methodologies for a major project targeted to provide wa- ter supplies to poor rural and urban populations in the semiarid State of Ceara. Total cost: $12 million. § Cambodia IDA (ITF)-$27 million. Smallholder farmers will benefit from increased food security and income-earning opportunities. Total cost: $35.1 mil- lion. tO§ China IBRi)-$30 million; IDA (ITF)-$150 million. Poverty will be reduced in twenty-six of western China's poorest counties by increasing the incomes and productivity and improving the health and educational status of about 2.3 million upland poor. Total cost: $360 million. 0 China IBRD-$430 million. About 103 million people in the North China Plain will be protected from floods, much needed hydropower will be gener- ated, irrigation water for about 2 million hectares provided, and stable water supplies ensured for downstream cities and industries. Total cost: $2,855.8 million. China IBRi)-$400 million. Water supply will.be expanded and the land and water environment improved in Shanxi Province. Total cost: $1,351.6 million. 0 China IBR]D-$120 million. About 53,000 rural families will increase their farm incomes; livestock, fishery, and agroprocessing production will increase; employment opportunities will be generated; and agricultural and rural enterprises will be commercialized. Total cost: $239.8 million. tO Comoros IDA-$1.6 million. Foodcrop production will be increased through a pilot project to improve agricultural services and strengthen institutional ca- pacity. Total cost: $2.8 million. tO§ Cte d'Ivoire IDA (ITF)-$41 million. Natural resource and environmental degradation will be reversed to secure sustainable agricultural production and growth, alleviate poverty, and improve the living conditions of rural people. Total cost: $61.5 million. 0 Croatia IBRD-$42 million. Coastal forests destroyed by the war will be restored and protected from fire. Total cost: $67.3 million. 0 Ecuador IBRD-$21 million. Agricultural research capacity will be strengthened, leading to increased agricultural productivity and output at the same time as the natural resource base is enhanced or preserved. Total cost: $27 million. § Georgia IDA-$15 million. Agricultural productivity will be increased through de- velopment of private sector farming and agroprocessing, the establish- ment of credit unions, and land registration for the majority of the country's poorest farmers. Total cost: $26.3 million. SUMMARIES OF OPERATIONS APPROVED 93 10§ Ghana IDA (ITF)-$30 million. Poverty will be reduced and the quality of life improved for at least 500,000 rural households through development of basic sustainable village-level infrastructure. Total cost: $60 million. tO§ Haiti IDA-$21.5 million. A program to protect Haiti's forest and parks will be initiated and alternative employment opportunities and agricultural sup- port services will be available to farmers in the areas surrounding the Pine Forest National Reserve and the Pic Macaya and La Visite National Parks Reserve. Total cost: $22.5 million. tO India IDA-$150 million; IBRD-$175 million. The productivity and income of farm families in two regions of Andhra Pradesh will be improved by completing irrigation works and a social improvement program begun under the Second Andhra Pradesh Irrigation project. Total cost: $473.97 million. tO§India IDA-$28 million. Local communities will be involved in conserving glo- bally significant biodiversity in seven protected areas. The project targets the poorest people including tribal people and forest fringe villagers. Total cost: $67 million. t Kenya IDA-$39.7 million. The second phase of the national agricultural research program will be supported. Total cost: $179.9 million. 0§ Lebanon IBRD-$31 million. Farmers' incomes will increase and the environment will be protected as agricultural land is terraced, runoff water harvested, and new agricultural roads reach isolated areas. Poor farmers and the most depressed rural areas are targeted. Total cost: $104.8 million tO§Mali IDA (ITF)-$4.2 million. Technical assistance will relieve constraints to small-scale private irrigation development, helping to increase farm pro- ductivity and food security of smallholders. Total cost: $4.67 million. O§Mauritania IDA-$18 million. Farmers and herders from the poorest areas of the ru- ral community will be empowered to better manage their natural re- sources so that crop and livestock production are increased, and village habitats preserved. Total cost: $25.9 million. tO§Mexico IBRD-$15 million. The people of 236 poor, indigenous communities will be empowered to manage their forestry resources sustainably, and the range of income-generating options available to them will be increased. Total cost: $23.6 million. 0§ Mexico IBRD-$40 million. About 7,800 low-income and poor aquaculture pro- ducers and their families will benefit from better living standards, en- hanced rural productivity, and proper environmental management in the aquaculture sector. Total cost: $58.8 million. tO§Pakistan IDA-$56 million. Groundwater resources will be privatized and some 380,000 farm families, mostly small farmers cultivating less than six hectares, will benefit from reduced water costs and enhanced agricultural production. Total cost: $104.8 million. t0 Peru IBRD-$85 million. Twenty-five irrigation systems will be rehabilitated, benefiting more than 50,000 families, enhancing agricultural productiv- ity, and promoting a market-oriented approach to water. Total cost: $172.4 million. 94 THE WORLD BANK ANNUAL REPORT 1997 tO Peru IBRD-$51 million. The incomes of 75,000 poor rural families will in- crease and poverty will be reduced through better natural resource man- agement, soil conservation and reforestation, increased irrigation, and im- proved agricultural practices. Total cost: $93.2 million. O§Philippines IBRD-$58 million. Improvements and repairs to the national irrigation system and better water resources planning, development, and manage- ment will increase the productivity and incomes of about 20,000 small- farmer families. Total cost: $85.2 million. *O§ Philippines IBRD-$50 million. Farmers in agrarian reform communities will benefit from improved rural infrastructure, agriculture and enterprise develop- ment, and community development. Total cost: $105.7 million. t Romania IBRD-$350 million. Support for the government's medium-term agricul- tural policy will improve agricultural production, provide income- earning opportunities for rural people, contribute to rural employment generation, and raise rural living standards. Senegal IDA-$1.8 million. Funds from IDA reflows will be used to supplement the Agricultural Sector Adjustment Credit approved in fiscal 1995. t Tajikistan IDA-$50 million. The government's reform program, aimed at stabilizing the economy, easing foreign exchange shortages, reforming agricultural policy, and targeting and improving social safety nets, will be supported. tO Tanzania IDA-$3 1.1 million. Smallholder farmers, many of whom are women, will benefit from improved extension services that will increase livestock and agricultural productivity. Total cost: $32.9 million. tO Tanzania IDA-$26.3 million. Water resources will be better managed and the effi- ciency of smallholder farmers' irrigation schemes will be improved. Total cost: $30.8 million. t§ Tunisia IBRD-$26.5 million. Natural resources will be restored and conserved and the incomes of poor smallholders in fragile rural areas will increase. Local people will be involved in development programs. Total cost: $51.32 million. t Ukraine IBRD-$300 million. Support for the government's reform program to transform the agriculture sector to a market-based system will increase market competition and encourage private ownership and investment in land and other productive assets. Yemen IDA-$30 million. More than 124,000 people affected by the floods of the summer of 1996 will benefit from restoration of agricultural infra- structure, roads, bridges, and water supply. The impact of future floods will also be reduced. Total cost: $35 million. EDUCATION O§ Burkina Faso IDA (ITF)-$26 million. More and better-trained students will graduate from secondary schools at reduced subsidy costs, and gender and income equality will be increased. The project iargets ten provinces with the lowest access to secondary education and the highest percentage of people living below the poverty line. Total cost: $36.6 million. SUMMARIES OF OPERATIONS APPROVED 95 China IBRD-$10 million; IDA-$20 million. The supply of skilled labor will be improved and increased as eighty-two secondary schools, which helped prepare the project, upgrade the quality and efficiency of their voca- tional education programs. Total cost: $68.4 million. tO§ China IDA-$85 million. About 6.2 million of the poorest children will benefit from increased access to schools and better quality education. Total cost: $136.6 million. 40§ Comoros IDA (ITF)-$7 million. Access to quality basic education, especially for the poor, will be improved; learning and academic achievement at the pri- mary school level improved; and a vocational training system will be launched. Total cost: $7.53 million. 0 Egypt IDA (ITF)-$75 million. Girls will have greater access to education, in- structional quality will be improved at all levels, and the education system's efficiency will be improved. Total cost: $835 million. t$§Guatemala IBRD-$33 million. More children will be enrolled in pre-primary and pri- mary schools and the quality of education will be improved. The project targets the rural population, in particular indigenous children and girls, in the poorest areas. Total cost: $46.8 million. 4O§Guinea-Bissau iDA-$14.3 million. The first stage of the government's ten-year educa- tion sector development program will be supported, expanding the cov- erage of basic education and improving the quality of schools, especially in poor rural areas. Total cost: $18.8 million. t0§1ndonesia IBRD-$104 million. Schoolchildren and out-of-school youth, particularly those from rural areas and particularly girls, will benefit as junior and secondary education is expanded and improved. Total cost: $154.1 mil- lion. Indonesia IBRD-$71.2 million. The quality of undergraduate study programs will be improved, providing a pool of better-trained graduates in fields of na- tional priority, and public funds will be allocated more cost-effectively. Total cost: $109.06 million. § Indonesia IBRD-$98 million. Schoolchildren and out-of-school youth in five prov- inces will have access to more and better Junior Secondary education. The project is targeted especially to reach poor children in rural areas, and girls. Total cost: $144 million. § Jamaica IBRD-$28.5 million. The student loan program will be expanded, releas- ing public resources for basic education and increasing opportunities for students from poor families to finance their higher education. Total cost: $38.5 million. tO§Kenya IDA (ITF)-$27.8 million. About 1.5 million pre-schoolers from poor families will have access to early childhood development centers provid- ing education, nutrition, and health services. Total cost: $35.1 million. Moldova IBRD-$16.8 million. About 636,000 students and 45,000 teachers will benefit from education reforms, including improved curricula, new text- books, in-service teacher training, and a modern assessment system. Total cost: $20 million. Morocco IBRD-$23 million. Workers' skills will be improved and enterprise com- petitiveness increased. Total cost: $95.3 million. 96 THE WORLD BANK ANNUAL REPORT 1997 t§ Philippines IBRD-$113.4 million. About 2.3 million 6- to 12-year-old children-70 percent of whom are from poor families-will benefit from improved schools, textbooks, and educational material and better-quality education. Total cost: $569.4 million. Romania IBRD-$50 million. The higher education system will be reformed to pro- vide the skilled and knowledgeable managers, technical professionals, en- trepreneurs, and societal leaders needed to sustain the transition to a market economy. Total cost: $84 million. O Russia IBRD-$71 million. The quality, quantity, governance, and efficiency of education will be improved through a higher education innovation fund, school textbook reform, and a pilot textbook procurement fund. Total cost: $96.6 million. Thailand IBRD-$143.4 million. To provide more and better-trained scientists and engineers to industry, undergraduate science and engineering pro- grams will be improved in twenty-one public universities. Total cost: $261.5 million. ELECTRIC POWER AND OTHER ENERGY Bosnia and IDA-$35.6 million. Electricity services will be restored in major Herzegovina cities and vital industries. Total cost: $196.4 million. China IBRD-$400 million. Electricity supply and trade will be increased in North China through construction of the Tuoketuo thermal power plant and improvements in electricity transmission and distribution in Beijing. Total cost: $1,103.6 million. China IBRD-$400 million. Shanghai's power shortages will be reduced, a pro- gram for cost-effective air quality management developed, power sector reform supported, and power entities' access to international financial markets promoted. Total cost: $1,656.6 million. O Georgia IDA-$52.3 million. Electricity supply will be increased, power shortages reduced, and the security, reliability, and quality of the power supply im- proved. Total cost: $75.8 million. Hungary IBRD-$60 million. Two complete single-cycle gas turbines will provide more than 200 MW of generation reserve capacity enabling reliable and stable power supply consistent with international standards. Total cost: $96.1 million. Indonesia IBRD-$20 million. Rural households without access to grid electricity will be able to improve their living conditions as solar home systems and related credit are made available. Total cost: $118.1 million. Indonesia IBRD-$66.4 million. Private sector-led development of small power pro- jects, using renewable energy, will be promoted. Total cost: $141 million. O Kenya IDA-$125 million. Support will be extended for major policy and insti- tutional reforms to create an efficient and environmentally sustainable energy sector and promote investments to meet electric power demand. Total cost: $699.9 million. Lebanon IBRD-$65 million. Power sector restructuring will be supported and transmission capacity will be expanded. Total cost: $486 million. SUMMARIES OF OPERATIONS APPROVED 97 Mali IDA-$17.1 million. 200 MW of power generation capacity will be in- stalled at the Manantali dam to provide electric power to Mali, Senegal, and Mauritania through about 1,300 kilometers of transmission lines. Total cost: $445 million. Mauritania IDA-$ 11.1 million. See project description for the regional hydropower development project in Mali, above. Russia IBRD-$40 million. Government planning and implementation of an elec- tricity sector reform will be supported. Total cost: $70.3 million. 0 Senegal IDA-$10.5 million. See project description for the regional hydropower development project in Mali, above. 0 Sri Lanka IDA-$24.2 million. About 26 MW of environmentally sustainable gener- ating capacity, including a pilot wind farm and grid-connected mini- hydros, will be installed and electricity services will be available for up to 32,000 off-grid rural customers through solar home systems and village hydro schemes. Total cost: $55.3 million. Thailand IBRD-$145 million. The power distribution system in Bangkok will be upgraded and electricity distribution reliability improved. Total cost: $373 million. Thailand IBRD-$ 100 million. The power distribution network will be automated, upgraded, and expanded to deliver power to new areas and meet a surge in demand. Total cost: $347 million. Ukraine IBRD-$317 million. A competitive electricity market will be developed to increase power supply, improve maintenance of power plants, and up- grade emission control equipment. Total cost: $377.6 million. ENVIRONMENT 40§Honduras IDA-$34 million. Modernizing the land administration system and im- proving natural resources management will enhance land security for more than 1 million people, improve nutrition and food security for 6,500 rural poor families, and improve forest and biodiversity conserva- tion. Total cost: $41.8 million. India IDA-$50 million. Environmental management capacity will be enhanced to help the government implement environmental priorities outlined in the Environment Action Program. Total cost: $61.48 million. t0 Kenya IDA-$12.8 million. Fisherfolk, smallholder farmers, and local communi- ties surrounding Lake Victoria in Kenya, Tanzania and Uganda will ben- efit from restoration of the lake's ecosystem. Total cost: $77.6 million. i0 Madagascar IDA (ITF)-$30 million. Environmental degradation will be reversed and sustainable use of natural resources promoted through support of the second phase of Madagascar's National Environmental Action Plan. Total cost: $155 million. 10 Malawi IDA (ITF)-$12.4 million. Environmentally sustainable development will be promoted and environmental issues integrated throughout the devel- opment process through support for Malawi's Environmental Support Programme. Total cost: $13.7 million. 98 THE WORLD BANK ANNUAL REPORT 1997 1O§Nicaragua IDA--$30 million. Rural poverty will be reduced and natural resources management improved to benefit about 300,000 people-mainly poor farmers and fisherfolk. Total cost: $40.4 million. nt§Panama IBRD-$22.5 million. Rural poverty and natural resource degradation will be reduced and priority biodiversity areas conserved through a pilot pro- gram to channel financial resources to rural communities to help them promote sustainable productive systems. Total cost: $39 million. t§ Senegal IDA-$5.2 million. The growing demand for household fuels will be met without loss of forest cover, the ecosystem's carbon sequestration poten- tial, or biodiversity. Rural communities, and especially rural women, will benefit from employment opportunities and economic development. Low-income households will have increased access to more reliable and efficient charcoal stoves and modern fuels. Total cost: $19.9 million. tO Sri Lanka IDA (ITF)-$14.8 million. The government's program to improve environ- mental management, integrate environmental considerations in the de- velopment process, and pilot programs to reverse environmental degrada- tion will be supported. Total cost: $20.76 million. $0 Tanzania IDA-$10.1 million. See project description for Kenya, above. $0 Uganda IDA-$12.1 million. See project description for Kenya, above. $0 Zambia IDA-$12.8 million. The government's efforts to achieve sustainable de- velopment by building capacity to improve the management of natural resources at the national and local level will be supported. Total cost: $20.8 million. FINANCE O§ Bangladesh IDA-$105 million. About 1.2 million poor people, 90 percent of whom are women, will have access to credit so they can start small businesses such as basket weaving, poultry and livestock rearing, street vending, and rice husking. Total cost: $137 million. Colombia IBRD-$15 million. The environment and regulatory capacity for financial markets and pension reform will be improved. Total cost: $20 million. Ghana IDA-$20.9 million. Support will be provided for the government's Pub- lic Financial Management Reform Program to enhance efficiency, ac- countability, and transparency of public financial management functions. Total cost: $30.81 million. Guyana IDA-$2.2 million. Funds from IDA reflows will be used to supplement the Private Sector Development Adjustment Credit, approved in fiscal 1995. Hungary IBRD-$225 million. Enterprise and financial sector reform will be sup- ported. Indonesia IBRD-$16.4 million. The financial and performance audit capabilities of the country's supreme audit board will be enhanced. Total cost: $26.5 million. 4O Kyrgyz Republic IDA-$16 million. Private farmers and agribusiness enterprises will have access to credit and community-based financial institutions will provide financial services to rural people. Total cost: $21 million. SUMMARIES OF OPERATIONS APPROVED 99 0§ Mexico IBRD-$30 million. Technical assistance to establish rural financial mar- kets and pilot a project to test and develop financial services for small and microentrepreneurs in rural areas will help reduce rural poverty and will demonstrate the suitability of rural financial markets for private sec- tor participation. Total cost: $103 million. Mexico IBRD-$400 million. The first phase of the government's Contractual Sav- ings Development Program, which will establish legal, regulatory, and in- stitutional frameworks for reforming the old-age security system, will be supported. Mongolia IDA-$ 10 million. The government's banking and enterprise reform pro- gram will be supported. Mongolia IDA-$2 million. The govemment's program to restructure the enterprise and financial sectors will be supported. Peru IBRD-$183 million. Support will be provided to restructure commercial bank and private suppliers' debt. Slovenia IBRD-$49.3 million. The investment needs of the emerging private sec- tor will be supported as long-term financing is made available through three borrowing banks. Tunisia IBRD-$75 million. International competitiveness will be improved and the private sector upgraded to accelerate Tunisia's integration in world markets. West Bank and Gaza Trust Fund for Gaza and West Bank-$5 million. A microenterprise credit program, provided through three participating banks, will help re- duce poverty, promote private sector development, and create employ- ment. Total cost: $23 million. West Bank and Gaza Trust Fund for Gaza and West Bank-$10 million. The climate for at- tracting foreign investment and promoting private sector development will be improved through a political risk guarantee scheme. Total cost: $50 million. West Bank and Gaza Trust Fund for Gaza and West Bank-$3 million. Management and tech- nical skills will be improved in key ministries and agencies and transpar- ent, independent, and international recruitment processes established. Total cost: $9 million. 0 Zambia IDA-$45 million. The ongoing reform program will be supported through private sector, financial intermediation, and institutional devel- opment. New investments will be generated, exports will increase, and new employment will be created as firms become and stay internation- ally competitive. Total cost: $52.25 million. HEALTH, POPULATION, AND NUTRITION 40§Argentina IBRD-$ 100 million. The health of women and children in about twenty poor municipalities will be improved through maternal, child health and nutrition, and early childhood development programs. Total cost: $171 million. 0§ Argentina IBRD-$15 million. The risk of contracting HIV will be reduced through HIV/AIDS- and STD-related health promotion and disease prevention activi- ties. Total cost: $30 million. 100 THE WORLD BANK ANNUAL REPORT 1997 Bosnia and IDA (ITF)-$15 million. Support for developing a modem, cost-effective, Herzegovina and fiscally sustainable hospital service to reduce the burden of disease and suffering for people most affected by the war, will be provided. Total cost: $33.5 million. tO§ Cambodia IDA (irT)-$30.4 million. Death and sickness from preventable diseases, especially malaria, tuberculosis and HIV/AIDS-to which the rural poor disproportionately fall victim-will be reduced and the health system in- frastructure will be rehabilitated. Total cost: $35.6 million. O§ India IDA-$142.4 million. More than 1.5 million tuberculosis patients will be cured and many more people potentially freed from risk of infection: the poor are most susceptible to tuberculosis and are the main users of TB services. Total cost: $176.4 million. tO§India IDA-$164.8 million. An enhanced and more effective malaria control program mainly to benefit the rural poor, including tribal and indigenous people, will reduce death and illness from malaria. Total cost: $203.9 million. tO§ India IDA (ITF)-$248.3 million. The government's family welfare program will be improved, reducing death and sickness among mothers and infants and reducing unwanted fertility. Total cost: $308.8 million. !:O§India IDA-$19.5 million. The health, economic and social status of women liv- ing in rural areas in six participating states will be improved. Total cost: $53.8 million. § Indonesia IBRD-$28.5 million. The prevalence of iodine deficiency will be lowered. Total cost: $45.3 million. O§Niger IDA-$40 million. Health sector development will be supported in five districts, resulting in improved access to preventive and curative health care for 1 million people. § Paraguay IBRD-$21.8 million. The health of poor people, particularly women and children, will be improved in six of the poorest and most rural depart- ments of Paraguay. Total cost: $31.2 million. Russia IBRI)-$66 million. Improving the quality and efficiency of health care in two pilot oblasts will test and evaluate reform measures for national rep- lication. Total cost: $98.4 million. Senegal IDA-$14.9 million. The burden of malaria, schistosomiasis and onchocer- ciasis, and other infectious diseases will be reduced, especially benefiting people in rural areas where the diseases are most prevalent. Total cost: $17 million. t0 Sri Lanka IDA-$18.8 million. The government will address major public health problems, including malaria, STD/AIDS, and malnutrition. Total cost: $22.6 million. § Turkey IBRD-$14.5 million. The access and quality of primary health care ser- vices, particularly for poorer people, will be improved in two provinces and will serve as the basis for extending primary health care reforms nationwide. Total cost: $18.6 million. SUMMARIES OF OPERATIONS APPROVED 101 INDUSTRY 0 Armenia IDA(ITF)-$16.8 million. The viability and bankability of Armenian com- panies will be increased and the lending capacity of the banking system strengthened. Total cost: $40.33 million. Bosnia and IDA(ITF)-$10 million. Industry and production will be supported Herzegovina through an emergency industrial restart project, which includes a set- aside for a political risk guarantee facility. Total cost: $350 million. 0 Madagascar IDA-$23.8 million. The government's reform program aimed at develop- ing the private sector and privatizing state-owned enterprises will be supported. Total cost: $35.5 million. Philippines IBRD-$60 million. The Subic Bay Metropolitan Authority's regulatory and management capacity will be strengthened and infrastructure devel- opment supported. Total cost: $108 million. Russia IBRD-$85 million. Enterprise reform will be supported. More than 250 medium and large private enterprises will be restructured and a sus- tainable capacity will be developed in the private sector for market-based restructuring. Total cost: $100 million. MINING/OTHER EXTRACTIVE 0§ Burkina Faso IDA(ITF)-$21.4 million. Private investment in mining will be promoted, the capacity for environmental management established, and social, health, safety, and environmental conditions in the artisan mining community, a disadvantaged group, will be improved. Total cost: $22.5 million. t Ukraine IBRD-$300 million. The first stage of the coal sector reform program will be supported, reducing the need for fiscal subsidies by enhancing pro- ductivity and addressing urgent social issues. MULTISECTOR Bosnia and IDA-$90 million. Economic growth and political stability will be Herzegovina supported through measures to develop new government structures on the state and federation levels, reintegrate the economic system, reorganize public finance, and create employment. t Bulgaria IBRD-$40 million. Shortages of vital commodities will be reduced to al- leviate some of the day-to-day hardship of the public and build confi- dence in the government's stabilization and reform program. t Bulgaria IBRD-$30 million. The government's stabilization and reform program will be supported and social safety nets strengthened. t Chad IDA(ITF)-$25 million. The government's program to restore critical public sector capacity, reorient expenditures toward priority develop- mental sectors, and create an environment favorable to private sector development will be supported. Croatia IBRD-$95 million. The government's enterprise and banking reform program will be supported. 102 THEWORLD BANKANNUAL REPORT 1997 Croatia IBRD-$102 million. Transport networks within Croatia and between Croatia and Bosnia and Herzegovina will be repaired and reconstructed and land mines will be cleared. Total cost: $122.3 million. Ghana IDA-$3.5 million. Funds from IDA reflows will be made available to fi- nance the Private Sector Adjustment Credit approved in fiscal 1995. Haiti IDA-$12 million. Institutions implementing the government's economic reform program will receive technical and financial support to improve tax and customs administration, public expenditure management and human resources management and to modernize and reorient the role of the state. Total cost: $58.2 million. Honduras IDA-$20.1 million. Funds from IDA reflows will be made available to supplement the Public Sector Modernization Structural Adjustment Credit, approved in fiscal 1996. Jordan IBRD-$120 million. The government's cross-cutting reforms targeted at close integration with global markets and establishing an investment- friendly, efficient business environment will be supported. Kenya IDA-$26.6 million. Funds from IDA reflows will be used to finance the Structural Adjustment Credit approved in fiscal 1996. t Latvia IBRD-$60 million. The government's efforts to promote private sector development and improve public sector management, including delivery of basic social services, will be supported. Lithuania IBRD-$80 million. Government reforms to continue the transition to- ward a market economy will be supported, placing the economy on a sustainable growth path with a dynamic private sector as its engine of growth. t Macedonia, Former IBRD-$30 million; IDA-$30 million. The government's reform program, Yugoslav Republic of which includes measures to help mitigate the adverse affects of unemployment and the losses of small producers, will be supported. t Madagascar IDA (ITF)-$70 million. Government reforms aimed at reviving investor confidence and accelerating investment and economic activity, and in- creased social spending, in particular on basic health and primary educa- tion, will be supported. Madagascar IDA-$0.6 million. Funds from IDA reflows will be used to supplement the Structural Adjustment Credit (see immediately above). Malawi IDA-$3.4 million. Funds from IDA reflows will be used to supplement the Fiscal Restructuring and Deregulation Program Credit, approved in fiscal 1996. Mauritania IDA-$0.6 million. Funds from IDA reflows will help finance the Public Resource Management Credit approved in fiscal 1996. t Mozambique IDA (ITF)-$ 100 million. The government's medium-term economic re- form program will be supported. The component to liberalize the cashew market will enhance the incomes of over 1 million small farmers, half of whom are women. SUMMARIES OF OPERATIONS APPROVED 103 t Niger IDA-$30 million. Government reforms aimed at restoring macroeco- nomic balance and confidence, improving public resource management- including reallocating public funds for primary education and basic health care-and promoting efficient private sector growth will be supported. Peru IBRD-$ 100 million. The pension system will be reformed and capital market efficiency will be improved. Russia IBRD-$600 million. The government's reform program, to lay the founda- tion for renewed economic growth and maintain macroeconomic stabili- zation over the medium term, will be supported. Rwanda IDA-$50 million. The Emergency Reintegration and Reconstruction Pro- gram will be supported providing basic services to returning refugees and the existing population and consolidating economic recovery and stability. Sierra Leone IDA-$0.15 million. Funds from IDA reflows will be provided to supple- ment the structural adjustment credit approved in fiscal 1994. South Africa IBRD-$46 million. Sustainable economic growth and job creation will be promoted as South African firms, especially smaller firms, become more effective in adjusting to ongoing trade liberalization and meeting the chal- lenges of competing in global markets. Total cost: $88.6 million. t Tanzania IDA-$125 million. The government's program to reform public expendi- ture, social services (particularly basic education and primary health ser- vices for the rural poor), privatization of parastatals and the banking and petroleum sectors will be supported. Tanzania IDA-$3.9 million. Funds from IDA reflows will be provided to support the structural adjustment credit (see immediately above). Ot Uganda IDA(ITF)-$125 million. The government's reform program to enhance fiscal sustainability and public expenditure management-including allocating public funds to improve services delivery in primary health and education, agricultural extension services, and road maintenance- will be supported. Ukraine IBRD-$70 million. The export potential of newly emerging private and privatized enterprises will be developed. Total cost: $84 million. West Bank and Gaza Trust Fund for Gaza and West Bank-$5.5 million. Support for establish- ing a modern and unified legal framework and an effective and efficient judiciary will be provided. Total cost: $5.624 million. t Zambia IDA-$90 million. The government's economic reform program-aimed at reducing poverty through private sector-led growth and improving the delivery of social services-will be supported. Zambia IDA-$7.8 million. Funds from IDA reflows will be used to finance the Second Economic and Social Adjustment Credit (see immediately above). OIL AND GAS Azerbaijan IDA-$20.2 million. The country's natural gas system will be rehabilitated and modernized. Total cost: $24.6 million. Georgia IDA-$1.4 million. Georgia's capacity to develop its oil sector, by attract- ing large-scale private investment in oil transit, will be enhanced. Total cost: $1.5 million. 104 THEWORLD BANKANNUAL REPORT 1997 Kazakhstan IBRD-$109 million. The Uzen oil field will be rehabilitated and modem- ized to reduce declining oil production, clean up and protect the sur- rounding environment, and facilitate commercialization. Total cost: $136 million. Turkey IBRD-$5 million. The viability of building an environmentally sustain- able pipeline route for exporting crude oil from Baku in Azerbaijan through Turkey to the international markets will be independently evalu- ated. Total cost: $5.25 million. PUBLIC SECTOR MANAGEMENT Argentina IBRI-$300 million. The government's provincial pension fund reform program will be supported. Argentina IBRD-$20 million. About 3.4 million pensioners will benefit from improved allocation of pension benefits and payments. Total cost: $40 million. Bangladesh IDA-$2.9 million. Funds from IDA reflows will be made available to help finance the Jute Sector Adjustment Credit, approved in fiscal 1996. Bolivia IDA-$5.4 million. Funds from IDA reflows will be made available to help finance the Capitalization Program Adjustment Credit, approved in fiscal 1996. Brazil IBRD-$125 million. The costs of reform and high-priority investments in the state of Rio Grande do Sul will be supported. Total cost: $461 million. Brazil IBRD-$45 million. Support for the State of Mato Grosso's reform efforts will enhance efficiency in public service delivery through privatization, restructuring, or liquidation of state enterprises, and concessioning of public services. Total cost: $281 million. Cameroon IDA-$25.2 million. Funds from IDA reflows will help finance the Second Structural Adjustment Credit approved in fiscal 1996. Colombia IBRD-$12.5 million. Regulatory and policy reform will promote private participation in infrastructure services. Total cost: $33 million. C6te d'Ivoire IDA-$54.6 million. Funds from IDA reflows will be made available to help finance the Private Sector Development Adjustment Credit ap- proved in fiscal 1996. Djibouti IDA-$6.5 million. Technical assistance will help the government imple- ment its economic reform program. Total cost: $7.3 million. 0 Ecuador IBRD-$10.7 million. Support for this first phase of the govemment's ju- dicial reform program will improve the efficiency of the judicial system and make decisionmaking more predictable. Total cost: $14.3 million. El Salvador IBRD-$24 million. Technical assistance support will assist the govern- ment in modernizing and more effectively and efficiently managing the public sector, and enhancing private sector development. Total cost: $51.5 million. Gabon IBRD-$ 10 million. Technical assistance for privatization and regulatory capacity building to increase private sector investment will be supported. Total cost: $12 million. SUMMARIES OF OPERATIONS APPROVED 105 Guatemala IBRD-$13 million. Selected infrastructure sectors will be readied for privatization and concessioning and related legal and regulatory frame- works will be established. Total cost: $18.5 million. Hungary IBRD-$7.75 million. The government's borrowing needs and borrowing costs will be reduced through development of the central treasury sys- tem and optimization of the budgeting and debt-management processes. Total cost: $10.7 million. Jamaica IBRD-$28.4 million. The government's efforts to. modernize public enti- ties into performance-oriented executive agencies, operating with greater autonomy and a modern resource base, will be supported. Activities that can be better performed by the private sector will be privatized. Total cost: $57 million. Kazakhstan IBRD-$15.8 million. The treasury department's management will be modernized and computerized to help improve management of govern- ment expenditure. Total cost: $21.7 million. Kazakhstan IBRD-$ 10 million. A pilot real estate registration system will be estab- lished in accordance with recently adopted legislation. Total cost: $13.28 million. t Kyrgyz Republic IDA (ITF)-$44 million. The government's program to streamline the bud- getary planning, execution and audit system, and intergovernmental rela- tions, will be supported and essential social services in health and educa- tion, including those targeted to the poorest oblasts, will be ensured. Madagascar IDA-$13.83 million. Reform of public administration and the judiciary will be supported, thereby increasing effectiveness, efficiency, and trans- parency in the public sector and providing critical support to the long- term success of economic and social reform. Total cost: $15.09 million. Moldova IDA-$9 million. Support for government reforms to strengthen the com- petitive environment and develop the private sector will be provided and the managerial capacity of recently privatized enterprises will be in- creased. Total cost: $14 million. Morocco IBRD-$85 million. The railway system will be restructured. Total cost: $614 million. Pakistan IDA-$28.8 million. Public sector accounting standards, reporting sys- tems, and financial administrative procedures that conform to interna- tionally accepted accounting principles will be developed. Total cost: $37.2 million. Russia IBRD-$22.6 million. The institutional capacity for sound economic analysis in support of market-oriented structural reforms will be built. Total cost: $36.8 million. SOCIAL SECTOR tO§Argentina IBRD-$200 million. Temporary income support will be provided for about 350,000 poor unemployed workers to implement public works programs that will improve social and economic infrastructure in poor communities. Total cost: $1,200 million. 106 THEWORLD BANKANNUAL REPORT 1997 tO§Belize rBRD-$7 million. Poor people in disadvantaged communities will have greater access to basic social and economic infrastructure and services, in- cluding water and sanitation, health, education and training, and credit. Total cost: $11.67 million. 0 Bosnia and IDA-$7.5 million. Demobilized soldiers, returning refugees, and others Herzegovina displaced by war will be reintegrated into productive jobs in the civilian economy. Total cost: $20 million. 0 Bosnia and IDA-$10 million. 100,000 man-months of labor-intensive employment Herzegovina will be created and people unemployed as a result of war will clear war damage and rehabilitate small-scale public infrastructure. Total cost: $45 million. $0§Bosnia and IDA (iTF)-$7 million. About 7,000-10,000 microenterprises or Herzegovina income-generating activities will provide employment and help restart the economy and local institutions. NGOS that provide services to the self-employed and microenterprises will be strengthened. Total cost: $18 million. Bulgaria IBRD-$24.3 million. The government's reform of the social insurance program will be supported to eliminate the need for budgetary subsidy and lay the groundwork for guaranteeing old-age income security. Total cost: $32.3 million. tO§Jamaica IBRD-$20 million. Support for small-scale social and economic infra- structure and social services will be channeled to the poorest and most vulnerable communities through the Jamaica Social Investment Fund. Total cost: $50 million. t0§Latvia IBRD-$ 18.1 million. The social insurance program will be reformed to improve the affordability and equity of the social safety net and improve resource allocation while increasing public savings. Total cost: $38.6 million. t$§Lithuania IBRD-$3.7 million. Government institutions will be strengthened to pro- vide affordable social security and develop community social care ser- vices. Total cost: $12.31 million. 0§ Panama IDA-$28 million. Communities in the poorest districts will have access to small-scale infrastructure and disadvantaged people will have access to social services. Pilot programs will improve school attendance of children in the poorest districts and microcredit will be provided to poor micro- entrepreneurs. Total cost: $80 million. t$§Peru IBRD-$150 million. The government's poverty alleviation efforts will be supported; they target the poorest areas and people, including indigenous people, by providing social infrastructure and assistance. Total cost: $430 million. t Romania IBRD-$50 million. Support for the government's social protection pro- gram will protect the most vulnerable groups of society from the nega- tive effects of economic reform and stabilization measures to be carried out throughout 1997-98. SUMMARIES OF OPERATnONS APPROVED 107 t Russia IBRD-$800 million. The adverse effects of the transition to a market economy on poor and vulnerable people will be mitigated and an effec- tive and sustainable system of income support and poverty relief, to meet the requirements of a market economy, will be built. I O§ Tajikistan IDA-$12 million. The incomes of about 250,000 poor people will be im- proved and local capacity to implement participatory methods of reduc- ing poverty will be developed. Total cost: $12.7 million. Ukraine IBRD-$2.6 million. The government's housing and municipal pricing re- form program will be supported. Administration of the Housing and Mu- nicipal Services Allowance Program will be improved by automating ap- plications and data. Total cost: $3 million. West Bank and Gaza Trust Fund for Gaza and West Bank-$ 10 million. Financing for small- scale infrastructure projects in villages and small municipalities will be provided. Total cost: $30 million. 0§Yemen IDA-$30 million. Poverty will be reduced, living conditions improved and income-generation opportunities for the poor will result from com- munity development services for poor communities and development of small and microenterprises. Total cost: $80 million. TRANSPORTATION Argentina IBRD-$300 million, Provincial roads will be improved and maintained. Total cost: $1,500 million. 0 Argentina IBRD-$200 million. The Buenos Aires mass transport system will be im- proved, private sector participation in railways will be supported, traffic accidents will be reduced, and air quality improved. Total cost: $400 mil- lion. Armenia IDA-$15 million. Supplemental financing will be provided for the Arme- nia Highway Project approved in fiscal 1996 to expand the level of main- tenance of Armenia's road network. Total cost: $36.9 million. t0§1Bangladesh IDA-$133 million. Improved rural transport and markets will reduce poverty by creating employment and income-generating opportunities. Total cost: $192.36 million. 0 Benin IDA-$40 million. Support for the government's Transport Investment Program will reduce transport time and vehicle operating costs, reduce the cost of transporting goods, and encourage trade and agricultural pro- duction. Total cost: $45.22 million. Bosnia and IDA-$7.5 million. Land mines will be cleared to make way for urgent Herzegovina reconstruction and recovery priorities. Total cost: $67 million. Brazil IBRD-$300 million. Improvements and sustainable maintenance of the main highway network will reduce road transport costs. Total cost: $1,250 million. Brazil IBRD-$70 million. The Rio Grande do Sul State highway network will be made more serviceable and road transport costs will be reduced. Total cost: $168 million. 108 THE WORLD BANK ANNUAL REPORT 1997 China IBRD-$300 million. Traffic congestion will be relieved and socio- economic development stimulated along the Urumqi-Kuitun Highway. Total cost: $658 million. China IBRD-$400 million. Two key sections of the Jingzhu expressway will be constructed, relieving traffic congestion and improving interregional trade and commerce between Hunan and Guangdong. Total cost: $1,132.8 million. 0 Dominican Republic IBRD-$75 million. The highway network will be modernized and bottle- necks to the main engines of development growth, tourism, and free trade zones will be removed. Total cost: $122.5 million. Eritrea IDA-$6.32 million. A feasibility study and technical assistance will pro- vide the basis for improving the road network. Total cost: $7.2 million. India IBRD-$350 million. Lower freight and passenger transport costs will re- duce transport bottlenecks affecting economic development and will benefit the traveling public, agricultural and industrial producers, con- sumers, and local communities in Andhra Pradesh. Total cost: $485.5 million. 0 India IBRD-$51.5 million. Technical assistance will be provided to state gov- ernments to support road infrastructure finance and maintenance reform. Total cost: $68 million. tO India IBRD-$50 million; IDA-$100 million. Assets lost in the floods and cy- clones in Andhra Pradesh last year will be restored and actions will be taken to reduce future hazards. Total cost: $220 million. Indonesia IBRD-$105 million. The service and economic efficiency of Indonesia's railways will be improved. Total cost: $207.3 million Lao People's IDA-$48 million. Transport costs will be reduced through construction Democratic Republic and upgrading roads and establishing a road maintenance program. Total cost: $68.92 million. Latvia IBRD-$20 million. Roads will be safer and better maintained, transport costs will be reduced, and a private road construction industry will be developed. Total cost: $56.9 million. Lebanon IBRD-$42 million. A component of the government's road rehabilitation program (about 400 kilometers of road) will be supported and a user charge system established to help finance the overall program. Total cost: $67.8 million. Lithuania IBRD-$19 million. The road network will be preserved and road mainte- nance operations improved, prolonging the life of the highway system, reducing road maintenance costs, improving road conditions, and reduc- ing vehicle operating costs. Total cost: $45 million. Mexico IBRD-$475 million. Transport efficiency will be increased and costs on the federal road network, particularly along major export transport corri- dors, will be reduced. Total cost: $865 million. 0 Poland IBRD-$67 million. Access to the ports of Gdansk, Gdynia, and Szczecin- Swinoujscie will be improved making services more efficient and com- petitive. Total cost: $145.6 million. SUMMARIES OF OPERATIONS APPROVED 109 Romania IBRD-$150 million. Roads will be rehabilitated and brought to interna- tional standards, traffic congestion will be reduced and traffic safety im- proved. Total cost: $553 million. Senegal IDA (ITF)-$6.6 million. More affordable, more reliable and safer public transport services will be provided in Dakar, and private sector provision of urban transport services will be promoted. Total cost: $8.7 million. Turkmenistan IBRD-$34.2 million. The efficiency and cost-effectiveness of urban trans- port will be improved, on a sustainable basis, in three municipalities. Total cost: $38.29 million. Uruguay IBRD-$76 million. Transport infrastructure will be rehabilitated to facili- tate cost-efficient transport of forestry products from forest to port-of- exit. Total cost: $152 million. Vietnam IDA (ITF)-$195.6 million. Transport infrastructure will be improved and transport costs reduced. Total cost: $236.7 million. § Vietnam IDA-$55 million. Access to rural communities will be improved and upgraded in fifteen of the country's poorest provinces. Total cost: $60.9 million. URBAN DEVELOPMENT Bosnia and IDA-$15 million. About 20,000 war-damaged homes will be Herzegovina repaired on an emergency basis enabling displaced people to return to their communities. Total cost: $50 million. § Brazil IBRD-$ 100 million. Low-income residents' access to basic urban infra- structure will be improved in seventy-seven of Bahia's municipalities. To- tal cost: $222 million. 0 Indonesia IBRD-$1 10 million. About 1.6 million people living in fifty-three of Bali's urban centers will benefit from improved urban infrastructure services in- cluding water, sanitation, roads, drainage and flood control, and solid waste management. Total cost: $334.7 million. t§ Indonesia IBRD-$155 million. Urban services-including roads, water supply, sanita- tion, drainage, solid waste management, markets, and transport termi- nals-will be improved in Sulawesi, where a disproportionately large per- centage of people still live in poverty. Total cost: $272 million. tO§Indonesia IBRD-$140.1 million. Five million villagers on Java and Sumatra will have better lifestyles as drinking water is made available in the dry season and roads, bridges, and other infrastructure give them access to markets and basic services, normally unreachable in the rainy season. Total cost: $159.6 million. Jordan IBRD-$20 million. Market-based financing for mortgage lending will be mobilized and responsibility for developing land and housing will be shifted to the private sector. Total cost: $142 million. t0 Lithuania IBRD-$ 10 million. Energy efficiency will be improved in residential and public buildings and privatization of the housing sector will be supported. Total cost: $20.6 million. 110 THE WORLD BANK ANNUAL REPORT 1997 t0§Madagascar IDA-$35 million. Roads, drainage, and other infrastructure will be im- proved in Antananarivo and six regional towns, and poor people's income and employment will be increased. Total cost: $45.8 million. 0§ Mali IDA (ITF)-$80 million. One-and-a-half million people in ten cities will benefit from improved basic infrastructure services. Living conditions, es- pecially of low-income people, will be improved through affordable in- frastructure services and income-generating employment opportunities. Total cost: $93.5 million. § Niger IDA-$20 million. Labor-based methods of rehabilitating urban infra- structure will reduce poverty by creating employment opportunities for the unskilled urban poor, provide municipalities with skills to develop and manage their infrastructure, and promote local firms and materials. Total cost: $28 million. Russia IBRD-$31 million. A program to rehabilitate St. Petersburg's City Center will be supported. Total cost: $46.1 million. $0 Tunisia IBRD-$80 million. Local government infrastructure and services will be enhanced and efficiency of public sector management at the local level will increase. Total cost: $220 million. West Bank and Gaza Trust Fund for Gaza and West Bank-$25 million. More and better af- fordable housing will be available and housing mortgage and buyer assis- tance systems will be established to benefit lower-income families. Total cost: $30 million. 0 Zimbabwe IDA (ITF)-$12.25 million. Rural District Councils' capacities to plan, implement, and manage essential welfare, growth, and rural development services will be developed within the context of the government's overall decentralization program. Total cost: $19.75 million. WATER SUPPLY AND SANITATION t0 Argentina IBRD-$200 million. Loss of life and devastation of property from flood- ing will be reduced and flood-damaged infrastructure will be restored. Total cost: $488 million. Bangladesh IDA-$80.3 million. Dhaka's first primary water treatment plant will be built to relieve the city's water shortages. Total cost: $175.8 million. 40§China IDA(ITF)-$70 million. The well-being of 4.6 million poor rural people will improve through better drinking water and sanitation conditions. Total cost: $134 million. 0§ Guinea IDA(ITF)-$25 million. Living and health condition's of poor people will be improved through better access to safe, affordable water and sanita- tion. Total cost: $28 million. 0§ Kazakhstan IBRD-$7 million. A pilot water supply project will be implemented in the Aralsk and Kazalinsk Rayons in the Aral Sea disaster zone and a de- tailed engineering design for an Aral Sea Community Rehabilitation Project will be prepared. Total cost: $7.4 million. Lebanon IBRD-$53.1 million. Water resources will be protected, safe drinking wa- ter provided, and harmful wastewater pollution in three coastal cities will be eliminated. Total cost: $308 million. SUMMARIES OF OPERATIONS APPROVED 111 $0 Nepal IDA-$18.3 million. About half a million rural people will benefit from raised living standards and better health and hygiene through improve- ments in water supply and sanitation. Total cost: $21.25 million. Romania IBRD-$25 million. Bucharest's water supply system will be rehabilitated and repaired giving the city's people more reliable and better quality wa- ter. Total cost: $50 million. 0 Tunisia IBRD-$60 million. The health of the urban population, including about 150,000 people living in low-income areas, will be improved, the sewer- age infrastructure to meet future demand provided, urban and coastal pollution reduced, and natural resources conserved. Total cost: $106.74 million. IO§Turkmenistan IBRD-$30.3 million. Safe drinking water, basic sanitation, and basic pub- lic health interventions will be provided to about 200,000 people in an area where 50 percent of the population are children under age 14 and women. Total cost: $33.7 million. tO§Uzbekistan IBRD-$5 million. A pilot project will provide citizens of Kizkitken, a peri-urban settlement of 34,000 people in the Aral Sea disaster zone, with access to safe drinking water, while laying the groundwork for a full-scale project. Total cost: $5.4 million. t Vietnam IDA (ITF)-$98.61 million. About 2.5 million residents in four major cities will have improved access to acceptable quality water. Total cost: $142.66 million. West Bank and Gaza Trust Fund for Gaza and West Bank-$25 million. The quality, quantity and management of water and wastewater services will be improved in sixteen towns and villages in Gaza. Total cost: $28 million. tO Yemen IDA-1 0.2 million. A pilot project to mitigate immediate water shortages in the city of Taiz and identify new water sources to avert a sustained wa- ter shortage will, if successful, be replicated in other parts of the country. Total cost: $1 1.1 million. A project must meet at least one of two criteria to be included in the im: (a) the project includes a specific mechanism for identifying and reaching the poor; or (b) the proportion of the poor among project beneficiaries is significantly larger than their proportion in the overall population. An adjustment operation is considered to be poverty-focused when it meets at least one of the following criteria: (a) it reorients public expenditures in favor of the poor, including spending on basic social services and rural infrastructure; (b) it elimi- nates distortions and regulations that limit poor people's access to labor and credit mar- kets, productive resources, and basic social services-as well as policy-induced distortions in input or output pricing-in order to help the poor to increase their income-generating oppor- tunities; (c) or it supports safety nets that protect the most vulnerable. 112 THE WORLD BANK ANNUAL REPORT 1997 SECTION FOUR WORLD BANK OPERATIONS AND ADMINISTRATION Institutional renewal Throughout the fiscal year, ships, developing better will be measured and justified every part of the Bank has products and services, and by the development impact of been involved in shaping a strengthening staff capacities; everything it does. Demand long-term framework for the many examples are discussed for products and services and institution's future direction throughout the regional and progress in meeting business and laying the groundwork for program sections of this standards and performance renewal. At the heart of the Annual Report. will be among the indicators resulting Strategic Compact Retooling the Bank's knowl- of success. The Bank will track lies the objective of increasing edge base. Because access to progress made by client coun- development impact to reduce lessons learned and best prac- tries using the World Develop- poverty more effectively. tice is key to development ment Indicators.2 This assess- The compact requires sus- effectiveness, a world-class ment of broad development tained commitment to four knowledge-management sys- progress in borrowing member related priorities for renewing tem is being built across the countries complements the the Bank over the next thirty institution to collect, synthe- Bank's ongoing work to en- months. size, and disseminate knowl- hance the quality and impact Refueling current business ac- edge and make it more readily of its operations by strength- tivity. Reallocating resources to accessible to staff, clients, and ening evaluation of its activi- frontline services to protect partners. Better access to infor- ties; and it is in line with rec- the level and quality of client mation is also a prerequisite ommendations made by the service will enable the Bank to for a more decentralized Development Committee's respond to priority programs, Bank-a key factor for the Task Force on Multilateral De- such as the rapid growth of institution's renewal. The four velopment Banks and the IDA the Europe and Central Asia thematic networks set up dur- Deputies. The foundation for regional portfolio. It will allow ing fiscal 1997,1 the capacity- establishing a stronger more the Bank to fund the increased building work of the Eco- comprehensive framework to costs of operating field offices, nomic Development Institute track the progress of Bank op- speed up improvement of (EDI), and the Learning and erations and assess their im- portfolio management, Leadership Center's expanded pact was put in place in July strengthen overall quality as- training programs already are 1996, when all new operations surance, meet its commit- playing pivotal roles in making were required to be fitted ments under the HIPc Debt learning a priority throughout with specific performance- Initiative, and meet new client the institution. monitoring indicators. For demands. Revamping institutional ca- education projects, for ex- Refocusing the development pabilities. To achieve the objec- ample, performance is moni- agenda. Effectiveness is being tives of the Strategic Com- tored through indicators such increased through more atten- pact, the Bank is realigning its tion to social and environmen- information systems, location 1. The Human Development tal sustainability and the of work, human resource strat- Network; the Environmentally and Socially Sustainable Development changing roles of the private egy, and financial management Network; the Finance, Private Sector and public sectors. The to support a more agile, cre- and Infrastructure Network; and the groundwork for refocusing the ative, and client-oriented work Poverty Reduction and Economic development agenda already environment. Management Network. 2. World Bank. 1997. World Develop- has begun, through building The Strategic Compact de- ment Indicators 1997. Washington, and strengthening partner- mands that the Bank be ac- D.C. countable, and the results of the Bank's renewal program SECTION FOUR WORLD BANK OPERATIONS AND ADMINISTRATION 113 as net enrollment by level and gender, repetition systems for distilling and using the lessons and dropout rates, student-teacher ratios and learned from evaluations and from successes textbook-pupil ratios; for environment projects, and failures. indicators include rate of deforestation, area of Quality Assurance Group. Established in fiscal natural habitat, soil nutrient levels, pollution 1996 to help improve development effective- levels, and water quality. ness, QAG encourages quality in Bank perfor- Performance indicators are drawn from six- mance by undertaking assessments of a sample teen sector-specific "menus" (such as agriculture, of the Bank's work and promoting systemic im- education, finance, and poverty reduction) ad- provements by catalyzing changes in the Bank's justed to the needs of each operation and the policies, programs, and processes based on as- feasibility of collecting data in particular coun- sessment results. QAG operates mainly through tries. About 40 percent of operations approved expert panels, which are customized for each before July 1996 have also been retrofitted with assignment and are drawn from Bank managers performance indicators, and the remainder will and staff as well as experts from outside the be retrofitted before the end of fiscal 1998. Bank. The Bank has also set targets for its own per- During fiscal 1997, QAG supported two main formance that are measured in terms of respon- objectives: improving the quality of the overall siveness to clients (setting business standards for portfolio through the Portfolio Improvement elapsed times between the stages of project de- Program (PiP) and ensuring the highest quality velopment, for example) and by quality-at- in new projects entering the portfolio through entry and portfolio-management evaluations. quality-at-entry assessments. Progress toward these targets will be reported The PiP uses the new concept of "projects at annually to the Executive Board. risk" to identify projects that may not achieve Good performance is a prerequisite for their objectives and focuses on projects, sectors, effectiveness. Therefore, in addition to improv- lending instruments, and countries with the ing portfolio-management practices, selectivity most serious performance problems, where in- in lending will be exercised through the country creased management attention is expected to assistance strategy (CAS) process. Policy perfor- have a high payoff. In fiscal 1997, for example, mance will continue to be reflected in the the PIP targeted twenty-five country portfolios, assessment of creditworthiness and risk for IBRD fourteen sectors or lending instruments, and countries and the criteria for IDA lending fifty of the largest projects at risk. Proactive allocations. portfolio management had a positive impact on several country portfolios that had high concen- Development effectiveness trations of projects at risk; for example, almost Quality in operations. Improving the quality of half of projects in the Brazilian portfolio were the portfolio has been a prominent objective in restructured, closed, or upgraded, and intensive fiscal 1997. Senior management elevated it to supervision of the Russian portfolio paid off the highest levels in discussions with clients, through fewer problem projects and higher dis- and regional management has pursued it aggres- bursement ratios. sively. To spearhead efforts to develop improved Quality-at-entry assessments aim to improve systems for measuring operational effectiveness the quality of new projects entering the portfo- and for strengthening dissemination and learn- lio. Twenty-five sample projects were assessed ing, a vice president was appointed to address for appropriate project concept, institutional ca- three major issues: to find ways to evaluate pacity, technical, economic and social soundness, lending and other services more systematically and for the quality of Bank decisionmaking. Both and comprehensively; to evaluate the impact of Bank staff and borrowers responded well to the Bank operations at an earlier stage so programs program, and based on experience with quality- can be amended, redesigned, and refined as they are being implemented; and to develop better 114 THE WORLD BANK ANNUAL REPORT 1997 at-entry assessments, work began in 1997 to evaluation work undertaken by the regional develop similar programs to assess the quality of offices and other departments, independent supervision and the quality of Bank economic evaluation is undertaken by the Operations and sector work. Evaluation Department (OED). While CODE, Despite these efforts and the significant im- Bank management, and OED maintain their dis- provement in some country portfolios this year, tinctive institutional roles and perspectives, they it will take many years before work done in fis- work collaboratively to encourage learning, dis- cal 1997 is fully reflected in improved project semination, and organizational change. completion ratings and evaluation results. In fiscal 1997, OED shifted its emphasis from The Annual Report on Portfolio Perfonnance mainly project-by-project reviews to more (ARPP) for fiscal 1996,3 which informed the country program evaluations (the country assis- board of the status of the portfolio of ongoing tance reviews) and assessments of the Bank's operations, used the concept of projects at risk overall contribution to global development this year to better identify projects likely to priorities. require attention. Participatory evaluation. The Bank's ongoing The ARPP showed that problem projects were transition toward a full-service institution re- concentrated in a relatively small number of quires a self-evaluation system for nonlending countries and noted the importance of country- services as well as increased involvement of or borrower-related factors for portfolio perfor- borrowers and stakeholders in evaluation. To mance-especially those related to political sta- measure development effectiveness properly, bility, macroeconomic policies and performance, the views of people affected by a project are and implementation capacity. While the Bank considered. has little control over these factors, other inputs In Sri Lanka, two rural development projects under Bank control can and are being addressed. were evaluated using stakeholder participation. In fiscal 1997 these included improving project Evaluators obtained the views of principal design, promoting greater borrower commit- stakeholders, direct beneficiaries, line agencies, ment and beneficiary participation, increasing project managers, and the government through supervision, and focusing management attention interviews and focus groups. Conclusions of the more directly, all of which are expected to im- resulting report were discussed at a workshop prove the ultimate development impact of organized by the Sri Lankan authorities. Similar Bank-financed operations. techniques were used to evaluate two projects in support of Bolivia's successful social invest- Operations evaluation ment fund. Operations evaluation at the World Bank has Lending. While much of the evaluation of a twofold mandate: to measure the extent and completed operations in the Bank is decentral- efficiency of results of operational programs and ized and is based on self-assessments, such as activities and to feed the information back into implementation completion reports (ICRS) pre- the formulation of new directions, policies, and pared by the regional offices, these assessments procedures. The results and recommendations are subject to independent OED review, and a drawn from evaluation are reported to the sample of operations is subjected to field perfor- Board of Executive Directors and form the basis mance audits. In fiscal 1997, OED reviewed 313 for designing and implementing policies and ICRs and reported on their quality to the Bank's new lending operations. board and management; issued Project Perfor- Operations evaluation is overseen by the mance Audits for seventy-nine completed director general (DGO), who reports directly to operations; and completed impact evaluation the executive directors through the Committee on Development Effectiveness (CODE). In addi- tion to monitoring the large volume of self- 3. World Bank. 1997. Annual Report on Portfolio Performance for Fiscal 1996. Washington, D.C. SECTION FOUR WORLD BANK OPERATIONS AND ADMINISTRATION 115 reports for eighteen projects and two sectors tention to coordination with other donors, an along with six sector policy evaluations and two increased role for the Bank's resident mission, country assistance reviews. The cumulative total and more economic and sector work and port- of operations subjected to ex post evaluation to- folio management. The OED country assistance taled 4,442 at the end of the fiscal year. Several review for Morocco identified obstacles to sta- studies were completed during the year, includ- bilization and recommended a stronger focus on ing a synthesis of the Bank's experience with fiscal problems. Many of the recommendations fifty agricultural adjustment operations since made in an OED study of the Bank's assistance to 1979.4 Poland were reflected in the 1997 country assis- OED's country assistance reviews evaluate the tance strategy. And an OED study of the Bank's relevance of the Bank's overall country assis- relationship with Argentina led to greater focus tance strategy and the efficacy of lending and on the fiscal performance of provincial govern- nonlending instruments. The Zambia country ments, the level and efficiency of social sector assistance review, for example, examined the spending, and the financial sector in the CAS. Bank's focus on policy-based operations and its 4. Meerman, Jacob. 1997. Reforming Agriculture: The World effects on the country's adjustment efforts over Bank Goes to Market. A World Bank Operations Evaluation the last decade. It recommended continued at- Study. Washington, D.C. BOX 4-1. WORKSHOP ON LARGE DAMS Large dams used to be synonymous with modern- developing world's dams that are funded by others. ization and development, but over the past two de- The World Conservation Union (IucN) offered to co- cades their adverse environmental and social conse- host a two-day workshop with the World Bank at quences have made these investments the subject of IUCN headquarters in Gland, Switzerland, in April considerable public criticism. Over the years the 1997. This event brought together dam builders and World Bank has been at the forefront of introducing some of their strongest critics and included represen- new policies and standards to mitigate potentially tatives of construction companies, governments, negative impacts. Nevertheless, controversy has NGOs, and other experts to try to find a common ap- continued to surround these projects, and the proach to these divisive investments. public debate has become polarized in the wake While the workshop participants were not unani- of some highly visible cases of shortcomings in mous on all the issues, there was a widespread ac- implementation. ceptance that dams can deliver benefits but that they Early in fiscal 1997, OED prepared a desk assess- must be planned within an overall water and energy ment of fifty Bank-financed large dams that sought sector strategy that takes full account of all economic, to address the fundamental issues at the heart of engineering, social, and environmental costs. There this debate. Most of the dams had undergone project was also a consensus on the need for continued appraisal before the introduction of the Bank's re- World Bank involvement to help ensure that invest- settlement and environmental guidelines, and many ments in this sector are economically, socially and projects had not, therefore, been implemented to the environmentally sustainable. Participants also standards that are now demanded. The report noted agreed that if beneficiaries and affected people were that the Bank's threshold of acceptability for dams involved earlier in the planning, minor incremental has been reformed in fundamental ways as the costs up front could deliver substantial benefits to Bank learned the lessons of experience and grew people and the environment. more sensitive to social and environmental concerns. The meeting concluded with agreement on a spe- The report was discussed by the Committee on cific timetable for follow-up, with the Bank and IUCN Development Effectiveness, which agreed that it pro- agreeing to work with other participants to create an vided a useful platform to engage the various stake- independent review body. It would look at costs and holders in large dams in an informed discussion. benefits of dams already built and establish interna- This could result in an improvement in the stan- tionally acceptable standards to govern the assess- dards observed not only for the large dams that the ment, planning, operating, and financing of future Bank finances but also for the 97 percent of the dams. 116 THE WORLD BANK ANNUAL REPORT 1997 TABLE 4-1. TRENDS IN IBRD AND IDA LENDING, FISCAL YEARS 1995-97 (millions of us dollars) 1995 1996 1997 Sector IBRD IDA Total IBRD IDA Total IBRD IDA Total Agriculture 853.3 1,232.0 2,085.3 1,413.8 1,105.1 2,518.9 2,810.6 735.9 3,546.5 Education 1,280.6 816.2 2,096.8 920.8 784.9 1,705.7 762.3 255.1 1,017.4 Electric power and other energy 1,802.5 439.0 2,241.5 2,459.2 347.9 2,807.1 1,613.4 275.8 1,889.2 Environment 755.1 68.9 824.0 534.6 348.1 882.7 22.5 224.2 246.7 Finance 2,935.4 129.3 3,064.7 1,199.2 231.2 1,430.4 993.7 201.1 1,194.8 Health, population and nutrition 451.3 671.2 1,122.5 1,495.2 858.2 2,353.4 245.8 694.1 939.9 Industry 175.0 123.2 298.2 217.0 31.7 248.7 145.0 50.5 195.5 Mining/Other extractive - 24.8 24.8 570.8 121.2 692.0 300.0 21.4 321.4 Multisector 2,295.0 821.5 3,116.5 906.3a 759.2 1,665.5 1,373.0 813.6 2,186.6 Oilandgas 461.5 141.6 603.1 30.0 25.6 55.6 114.0 21.6 135.6 Public sector management 636.2 236.4 872.6 1,036.0 840.2 1,876.2 729.7 190.2 919.9 Social sector 644.0 290.8 934.8 440.0 554.5 994.5 1,303.7 66.5 1,370.2 Telecommunications 325.0 - 325.0 35.0 - 35.0 - - - Transportation 2,099.3 104.1 2,203.4 2,236.9 535.7 2,772.6 3,084.7 607.0 3,691.7 Urban development 1,466.0 261.0 1,727.0 632.0 236.5 868.5 646.1 162.3 808.3 Water supply and sanitation 672.3 309.2 981.5 529.1 80.7 609.8 380.4 302.4 682.8 Total 16,852.5 5,669.2 22,521.7 14,655.9 6,860.7 21,516.6 14,524.9 4,621.7 19,146.6 -Zero. a. Includes the refinanced/rescheduled overdue charges of $168 million for Bosnia and Herzegovina. A workshop on large dams, held in fiscal Trust Fund). A total of 141 IBRD loans to forty- 1997, is a model for OED's efforts to use Bank two countries were approved; the 100 IDA cred- evaluation of projects to engage in participatory its went to fifty countries. workshops to ensure that lessons do not simply The biggest increase in commitments was in remain on paper but lead to action for im- the Europe and Central Asia region, where proved policies and projects (see box 4-1). sixty-seven projects were approved for a total of During the year, OED issued its annual review $5,054.8 million. Comparable figures for the of evaluation results,5 which synthesizes trends previous year were sixty-one projects for in the Bank's operational performance and re- $4,394.6 million. The sharpest drop occurred in views experience gained in special topic areas, the Africa region. The decrease is largely ex- and its annual report on operations evaluation. plained by greater selectivity in lending, the ac- celerated move by the Bank out of failed invest- Commitments and guarantees ment models, and the slow uptake of new World Bank commitments (IBRD and IDA com- strategies focused on decentralized implementa- bined) amounted to $19,146.6 million in fiscal tion. Figure 4-1 provides a picture of IBRD and 1997, a decrease of $2,370 million (11 IDA lending by region. percent) over fiscal 1996's total (see table 4-1). Adjustment lending amounted to $5,085.7 Commitments by the IBRD amounted to million or 26.5 percent of Bank commitments, $14,524.9 million, while IDA credits totaled SDR 3,260 million or $4,621.7 million equiva- lent (SDR 1,1 68 million was from the Interim 5. Mora, Linda, and Ulrich Thumm. 1997. 1995 Evaluiation Results. Washington, D.C.: World Bank. SECTION FOUR WORLD BANK OPERATIONS AND ADMINISTRATION 117 FIGURE 4-1 Lending for transportation-at $3,691.7 Projects Approved for Bank and IDA million-led all sectors by volume, followed by Assistance by Region, Fiscal Year 1997 agriculture at $3,546.5 million and lending for (US$ millions) multisector purposes at $2,186.6 million (see figure 4-2). LAC 4,5631 In fiscal 1997, three World Bank guarantees, totaling $420 million, were approved by the Executive Board. Disbursements ECA 5,055 Gross disbursements by the IBRD to countries totaled $13,998 million, an increase of $626 million, or 4.48 percent, over fiscal 1996's $13,372 million. IDA disbursements amounted to $5,979 million, up $95 million from the pre- EAP 4,866 vious year. The increase in disbursements for both IBRD and IDA was particularly noteworthy in the Europe and Central Asia region. Disbursements, by source of supply. Projects financed by the World Bank require procure- up from the previous year's 21 percent. The fis- ment from foreign and local sources to achieve cal 1997 adjustment total includes $120 million project goals. Disbursements are made pri- in rehabilitation import loans and a $183 mil- marily to cover specific costs for foreign pro- lion debt reduction loan (see table 4-2). curement and some local expenditures. The three largest borrowers from the IBRD The procurement rules and procedures to were China ($2,490 million), Russia ($1,715.6 be followed in the execution of each project million), and Argentina ($1,479.5 million). The depend on individual circumstances. Three three largest borrowers of IDA credits were India considerations generally guide the Bank's ($903 million), Vietnam ($349.2 million), and requirements: the need for economy and effi- China ($325 million). ciency in the execution of a project; the re- Seven projects in the West Bank and Gaza, quirement to give all eligible bidders from bor- totaling $83.5 million and funded from the rowing and nonborrowing member countries an Trust Fund for Gaza and the West Bank, were opportunity to compete in providing goods and approved. works financed by the Bank; and the need to FIGURE 4-2 IBRD and IDA Commitments, FiscalYear 1997 (US$ millions) Environment $247 1% Industry $196- 1% M lning and other extractive, $321 - 2% Oil and gas, $136 1% * Urban development, $808 4% e-.- V Water supply and sanritation, $683 - 4% Agriculture, $3,547 - 19% * v Education,$1,017-5% - Health, population and nutrition, $940 -5% Public sector management, $920 5% Transportation, $3,692- 19% Finance,$1,195-6% Multisector $2,187- 1% e - Socia sector, $1,370-7% Electric power and other energy, $1,889 10% 118 THE WORLD BANK ANNUAL REPORT 1997 TABLE 4-2. WORLD BANK ADJUSTMENT OPERATIONS, FISCAL YEAR 1997 (amounts in millions of us dollars) World Bank financing Country Project IBRD IDA Total Sector adjustment loans Bangladesh Jute Sector Adjustment Credit (IDA reflows) 0.0 2.9 2.9 Bolivia Capitalization Program Adjustment Credit (IDA reflows) 0.0 5.4 5.4 C6te d'lvoire Private Sector Development Adjustment Credit (IDA reflows) 0.0 54.6 54.6 Croatia Enterprise and Financial Sector Adjustment Loan 95.0 0.0 95.0 Ghana Private Sector Adjustment Credit (IDA reflows) 0.0 3.5 3.5 Guyana Private Sector Development (IDA reflows) 0.0 2.2 2.2 Hungary Enterprise and Financial Sector Adjustment Loan 225.0 0.0 225.0 Jordan Second Economic Reform and Development Loan 120.0 0.0 120.0 Mauritania Public Resource Management Credit (IDA reflows) 0.0 0.6 0.6 Mexico Contractual Savings Development Program 400.0 0.0 400.0 Mongolia Banking and Enterprise Sector Adjustment Credit 0.0 10.0 10.0 Romania Agriculture Sector Adjustment Loan 350.0 0.0 350.0 Russia Social Protection Adjustment Loan 800.0 0.0 800.0 Senegal Agricultural Sector Adjustment Credit (IDA reflows) 0.0 1.8 1.8 Ukraine Agriculture Sector Adjustment Loan 300.0 0.0 300.0 Ukraine Coal Sector Adjustment Loan 300.0 0.0 300.0 Structural adjustment loans Argentina Provincial Pension Reform Adjustment Loan 300.0 0.0 300.0 Bosnia and Herzegovina Transition Assistance Credit 0.0 90.0 90.0 Cameroon Second Structural Adjustment Credit (IDA reflows) 0.0 25.2 25.2 Chad Second Structural Adjustment Credit 0.0 25.0 25.0 Honduras Public Sector Modernization Honduras Structural Adjustment Credit (IDA reflows) 0.0 20.1 20.1 Kenya Structural Adjustment Credit (IDA reflows) 0.0 26.6 26.6 Kyrgyz Republic Public Sector Resource Adjustment Credit 0.0 44.0 44.0 Latvia Structural Adjustment Loan 60.0 0.0 60.0 Lithuania Structural Adjustment Loan 80.0 0.0 80.0 Macedonia, FYR of Structural Adjustment Loan and Credit 30.0 30.0 60.0 Madagascar Structural Adjustment Credit (IDA reflows) 0.0 0.6 0.6 Madagascar Structural Adjustment Credit 0.0 70.0 70.0 Malawi Fiscal Restructuring and Deregulation Program Credit (IDA reflows) 0.0 3.4 3.4 Mozambique Third Economic Recovery Credit 0.0 100.0 100.0 Niger Public Sector Adjustment Credit 0.0 30.0 30.0 Peru Pension Reform Adjustment Loan 100.0 0.0 100.0 Romania Social Protection and Adjustment Loan 50.0 0.0 50.0 Russia Structural Adjustment Loan 600.0 0.0 600.0 Sierra Leone Structural Adjustment Credit (IDA reflows) 0.0 0.1 0.1 Tanzania Structural Adjustment Credit 0.0 125.0 125.0 Tanzania Structural Adjustment Credit (IDA reflows) 0.0 3.9 3.9 Tunisia Economic Competitiveness Adjustment Loan 75.0 0.0 75.0 Uganda Third Structural Adjustment Credit 0.0 125.0 125.0 Zambia Second Economic and Social Adjustment Credit 0.0 90.0 90.0 Zambia Second Economic and Social Adjustment Credit (IDA reflows) 0.0 7.8 7.8 Debt-Reduction Loans Peru Debt and Debt Service Reduction Loan 183.0 0.0 183.0 Rehabilitation-Import Loans Bulgaria Rehabilitation Loan 30.0 0.0 30.0 Bulgaria Critical Imports and Rehabilitation Loan 40.0 0.0 40.0 Tajikistan Agricultural Recovery and Social Protection Credit 0.0 50.0 50.0 Total 4,138.0 947.7 5,085.7 SECTION FOUR WORLD BANK OPERATIONS AND ADMINISTRATION 119 TABLE 4-3. IBRD AND IDA DISBURSEMENTS FOR FOREIGN AND LOCAL EXPENDITURES (amounts in millions of us dollars) IBRD and IDA Net advance Foreign' Local disbursementsb Total Period Amount % Amount % Amount % amount Cumulative to June 30, 1992 112,471 58 77,730 40 5,129 3 195,330 Fiscal 1993 9,813 56 7,887 45 -325 -2 17,375 Fiscal 1994 9,010 56 7,442 47 -473 -3 15,979 Fiscal 1995 9,094 51 8,724 49 -97 - 17,720 Fiscal 1996 10,013c 52 8,787 46 456 2 19,256 Fiscal 1997 8,733 44 10,543 53 487 2 19,763 Cumulative to June 30, 1997 159,134 56 121,112 42 5,176 2 285,423 NoTE: This table corresponds to Table 2-3 in the 1996 Annual Report. Foreign expenditures are expenditures in the currency of any country other than that of the borrower or guarantor, for goods or services supplied from the territory of any country other than the territory of the borrower or guarantor Local expenditures are expenditures in the currency of the borrower or guarantor or for goods or services supplied from the territory of the borrower or guarantor Details may not add to totals because of rounding. a. Amounts exclude debt-reduction disbursements of $2,523 million through FY92, $515 million in FY93, $655 million in FY95, and $213 million in FY97. Amounts include disbursements under simplified procedures for structural and sectoral adjustment loans of $556 million in FY96 and $3,333 million in FY97. b. Net advance disbursements are advances made to special accounts net of amounts recovered (amounts for which the Bank has applied evidence of expenditures to recovery of the outstanding advance). c. Disbursements for FY96 include the refinanced/rescheduled overdue charges of $168 million for Bosnia and Herzegovina. help the development of local contractors and Appendix 7 shows disbursements made in manufacturers in borrowing countries. The Bank fiscal 1997 by the IBRD and IDA for local pro- prescribes conditions under which preferences curement by current borrowing countries and may be given to domestic manufacturers and, disbursements made for goods, works, and where appropriate, to domestic contractors. services procured from them by other Bank Table 4-3 shows consolidated foreign and lo- borrowers (foreign procurement) for projects cal disbursements for the IBRD and IDA through funded by the Bank. the end of fiscal 1992 and for the period fiscal Appendix 8 shows the amounts disbursed 1993 through fiscal 1997. Advance disburse- from the IBRD and IDA separately for foreign pro- ments consist of payments made into special curement of goods, works, and services from se- accounts of borrowers, from which funds are lected member countries in fiscal 1997 and paid to specific suppliers as expenditures are cumulatively through fiscal 1997. incurred. Because balances in these accounts Appendix 9 shows the proportion of foreign cannot be attributed to any specific supplying disbursements from the IBRD and IDA for specific country until expenditures have been reported categories of goods and services provided by se- to the Bank, these are shown as a separate lected member countries in fiscal 1997. category. Appendix 10 provides a summary listing Table 4-4 provides details on foreign dis- of the amounts paid to eligible World Bank bursements by countries eligible to borrow from the World Bank and nonborrowing coun- tries6 for the IBRD and IDA separately. 6. Appendix 5 lists countries eligible for IBRD and IDA funds. 120 THEWORLD BANKANNUAL REPORT 1997 borrowing country suppliers and nonborrowing credits. Disbursements for Project Preparation country suppliers in each fiscal year from 1995 Facility advances are excluded for both the IBRD to 1997 under investment projects. Amounts and IDA. disbursed are compared with respect to signifi- cant categories of goods procured from foreign Cofinancing and trust fund programs suppliers. The extent to which eligible borrow- Cofinancing and trust funds are important ing countries and nonborrowing countries mechanisms through which the Bank pursues participated in supplying these major categories partnerships. They provide additional resources of goods in each of the past three fiscal years is to support development activities and are a also compared. forum to exchange information and views with Under simplified procedures for structural other institutions. A principal focus of the and sectoral adjustment loans, approved by the Bank's renewal effort during fiscal 1997 was Executive Board in fiscal 1996, disbursements building and maintaining such partnerships. are no longer directly linked to procurement In addition to working with partner institu- under adjustment loans. Thus, while appendixes tions through parallel or joint cofinancing and 7 to 10 report on disbursements from the IBRD trust funds activities, the Bank is also expanding and IDA, they do not include disbursements its efforts to coordinate more broadly its funds under adjustment loans. The information in with financing from other donors within the appendix 11 reflects adjustment loan disburse- context of country and sector investment pro- ments to each borrower as prorata shares of that grams. An important pillar of these efforts is the borrower's eligible imports from supplying Special Program of Assistance for Africa (SPA). countries, using import data drawn from United The fourth phase of the SPA was launched in fis- Nations trade statistics. cal 1997: donors indicated that they would In all these tables and appendixes, IBRD figures make available about $5 billion in highly exclude disbursements for loans to the IFc and concessional quick-disbursing cofinancing and "B" loans. IDA figures include Special Facility for coordinated financing during calendar years Sub-Saharan Africa and Interim Trust Fund 1997-99. These resources would be used in TABLE 4-4. IBRD AND IDA DISBURSEMENTS FOR FOREIGN EXPENDITURES, BY SOURCE OF SUPPLY (amounts in millions of us dollars) IBRD IDA Countries Countries Countries Countries not eligible eligible not eligible eligible to borrow to borrow Total to borrow to borrow Total Period Amount % Amount % amount Amount % Amount % amount Cumulative to June 30, 1992 75,997 91 7,880 9 83,877 24,202 85 4,393 15 28,595 Fiscal 1993 5,488 79 1,489 21 6,976 2,141 75 696 25 2,837 Fiscal 1994 4,548 83 909 17 5,457 2,490 70 1,062 30 3,553 Fiscal 1995 4,959 84 938 16 5,896 2,211 69 986 31 3,197 Fiscal 1996 5,371 79 1,434 21 6,806 1,811 68 842 32 2,652 Fiscal 1997 3,146 87 456 13 3,602 1,455 81 343 19 1,798 Cumulative to June 30, 1997 99,507 88 13,106 12 112,613 34,310 80 8,322 20 42,632 NOTE: This table corresponds to Table 2-4 in the 1996 Annual Report. Countries eligible to borrow from IBRD and IDA are listed in Appendix 5. Amounts exclude disbursements for debt reduction, net advance disbursements, and disbursements under simplified procedures for structural and sectoral adjustment loans. Details may not add to totals because of rounding. SECTION FOUR WORLD BANK OPERATIONS AND ADMINISTRATION 121 TABLE 4-5. TOTAL IBRD AND IDA LENDING AND COFINANCING OPERATIONS, FISCAL YEARS 1994-97 (amounts in billions of us dollars) 1994 1995 1996 1997 Amnount Amount Amount Amount Lending 20.8 22.5 21.4 19.1 Cofinancinga 9.0 8.7 8.2 7.2 Cofinancing/Lending (ratio) 43.3 38.7 38.3 37.8 a. Based on cofinancing plans presented at the time of Board approval. Includes cofinancing with Bank loans, IDA credits and Bank guarantees and projects financed by Bank-managed trust funds. conjunction with World Bank and International composition of Bank lending, including delays in Monetary Fund programs in support of eco- some large infrastructure projects. nomic reforms in Africa countries. * Cofinancing continued to play a critical Trends in colfinancing. Despite a decline in role in Bosnia and Herzegovina's reconstruction Bank lending, the proportion of cofinancing to efforts, with nine projects with estimated cofin- Bank lending remained stable at 38 percent (see ancing amounting to $381 million in fiscal table 4-5). The absolute level of cofinancing an- 1997. ticipated in support of Bank operations in fiscal * Private cofinancing (through parallel lend- 1997, however, dropped from $8.2 billion in fis- ing and guarantees) rose from $724 million in cal 1996 to $7.2 billion.7 Most cofinancing con- fiscal 1996 to $1,143 million in fiscal 1997. tinued to be provided by official sources (78 This included projects in both Africa and MENA, percent), of which the largest amounts were two regions in which private cofinancing has provided by the Inter-American Development traditionally been limited. Most private Bank ($1.9 billion), the institutions of the cofinancing continues to be provided in parallel European Union ($1 billion), and Japan ($582 with Bank lending. However, the use of Bank million). The major use of cofinancing contin- guarantees to support private financing in- ued to be for specific investment projects (59 creased almost threefold, from $125 million in percent), particularly in the infrastructure sec- fiscal 1996 to $372 million in fiscal 1997.8 tor. Highlights for the year include: Cofinancing management. The Bank finalized * Cofinancing helped to moderate swings in comprehensive framework agreements with Bank lending in both Africa and the Middle Spain and Switzerland, entered into a letter East and North Africa (MENA). Figure 4-3 and of understanding with Caisse Franqaise de table 4-6 show cofinancing by region. While Developpement, and introduced an accelerated Bank lending fell in these regions, the ratio of cofinancing to Bank lending rose significantly, from 42 percent to 82 percent in Africa-largely 7. Cofinancing figures represent planned cofinancing at the time of approval of each operation by the Bank's because of the sPA-and from 46 percent to Executive Board. The amounts of official cofinancing, in 138 percent in MENA-where it exceeded Bank most cases, are firm commitments by this stage; export lending. credits and private cofinancing, however, are generally only estimates at this stage and are firmed up during Cofinancing fell more steeply than Bank lend- project implementation. ing in South Asia, with the ratio of cofinancing 8. Partial credit guarantees are recorded in net present to Bank lending dropping from 69 percent to 5 value terms in cofinancing statistics. The total level of Bank percent. This was largely due to changes in the guarantees, in absolute terms, was $420 million in fiscal 1997. 122 THE WORLD BANK ANNUAL REPORT 1997 FIGURE 4-3 Cofinancing by Region, Fiscal Years 1996-97 (US$ millions) 2500 -- 9~~~~~~~~~~~~~~~~~97 2000 996 1500 1000 500 0 LAC ECA Africa EAP SAS MENA cofinancing procedure with the Overseas Eco- and Herzegovina), and the Middle East and nomic Cooperation Fund (OECF) of Japan. North Africa. The Bank also established a forum Bankwide cofinancing consultations were held through which senior management of the major with seventeen donors, including first formal multilateral institutions now consult regularly cofinancing consultations with Belgium and on matters of shared concern. Denmark, and have been deepened to include During the fiscal year the Bank also sought to more policy content. The Bank also kept donors deepen its dialogue with export credit agencies informed about its cofinancing needs through (ECAS) to promote private sector investment its biannual "Cofinancing Opportunities with more effectively in developing countries. This the World Bank."9 has included regular consultations with ECAs, ex- In addition, the Bank deepened its dialogue changing information with them on cofinancing with other multilateral institutions. In particu- opportunities, promoting joint participation in lar, the Bank strengthened its relationship with seminars, and increasing contacts with the the European Union with the official opening of Berne Union. its office in Brussels on July 1, 1996, and by establishing a closer regional dialogue on Africa, Europe and Central Asia (particularly Bosnia 9. "Cofinancing Opportunities with the World Bank" can be obtained through the Resource Mobilization and Cofinancing Vice Presidency (RMC). SECTION FOUR WORLD BANK OPERATIONS AND ADMINISTRATION 123 TABLE 4-6. WORLD BANK COFINANCING OPERATIONS, BY REGION, FISCAL YEARS 1996-97 (amounts in millions of us dollars) Source of cofinancing Private (of which Projects Export Total IBRD World Bank Total cofinanced Official' credit private guarantees) contribution project Region and year No. Amount No. Amount No. Amount No. Amount No. Amount IBRD IDA costs Africa 1996 34 1,155 33 1,146 - - 2 9 - - - 1,618 4,828 1997 26 1,425 25 1,161 - - 2 265 - - - 756 2,727 East Asia and Pacific 1996 9 869 7 664 - - 2 205 (1) (50) 1,109 207 3,805 1997 15 1,011 12 286 3 320 2 405 - - 2,246 174 8,433 South Asia 1996 12 2,032 11 1,271 3 433 3 328 (1) (75) 900 710 6,669 1997 5 93 5 93 - - - - - - - 285 544 Europe and Central Asia 1996 41 1,342 41 1,340 - - 1 2 - - 1,544 153 4,020 1997 32 1,047 30 719 - - 4 328 (2) (320) 1,011 380 2,870 Latin America and the Caribbean 1996 25 2,056 24 1,876 - - 2 180 - - 1,266 262 4,914 1997 26 2,384 26 2,384 - - - - - - 2,796 12 9,866 Middle East and North Africa 1996 9 741 9 741 - - - - - - 364 196 1,782 1997 15 1,261 15 985 1 130 1 146 (1) (52) 536 135 4,801 Total 1996 130 8,195 125 7,039 3 433 10 724 (2) (125) 5,183 3,146 26,019 1997 119 7,221 113 5,628 4 450 9 1,143 (3) (372) 6,590 1,742 29,241 - Zero. NOTE: The number of operations shown under different sources add up to a figure exceeding the total number of cofinanced projects because a number of projects were cofinanced from more than one source. Cofinancing data are reported by the fiscal year in which the project is presented to the Bank's Executive Board. Details may not add to totals because of rounding a. These figures include cofinancing with untied loans from the Export-Import Bank of Japan. Trends in trust funds. Trust fund activities con- and program development. Highlights of fiscal tinue to grow, with disbursements increasing 1997 include: from $1.2 billion in fiscal 1996 to $1.3 billion * The largest external contributors to trust in fiscal 1997 (see figure 4-4). Donors use trust funds were Japan ($210 million), the Nether- funds to channel funds to priority development lands ($207 million), Denmark ($72 million), activities, either through programs managed by Norway ($66 million), and Sweden ($60 mil- the Bank-sometimes in concert with other do- lion). The Bank contributed $653 million to trust nors or organizations-or through freestanding funds through transfers from IBRD income. trust funds (see table 4-7). Aside from those as- * Disbursements under the Global Environ- sociated with cofinancing, trust funds primarily ment Facility and Montreal Protocol trust funds, finance debt relief, technical assistance (includ- including transfers to UNDP and UNEP, climbed ing training, project preparation, research, and significantly from $139 million in fiscal 1996 to studies), and Bank activities related to lending $227 million. 124 THEWORLD BANKANNUAL REPORT 1997 FIGURE 4-4 * Contributions under the Japanese-funded Trust Fund Contributions and Policy and Human Resources Development Disbursements, Fiscal Years 1994-97 Fund (PHRD)-which supports a variety of tech- (US$ billions) nical assistance activities (see box 4-2)-declined from $222 million in fiscal 1996 to $175 mil- 2.0 lion in fiscal 1997. This decline is due to both Contributions lower real contributions and exchange rate ad- justments, as Japan's contribution is provided in yen. 1.5 * Use of the Consultant Trust Fund (CTF) pro- gram rose from $79 million in allocations dur- Disbursements ing fiscal 1996 to $96 million in fiscal 1997. The Bank established an important new 1.0 debt relief fund, the HIPC Trust Fund (see box in Overview section). Trust fund management. In fiscal 1997, trust fund policies and procedures were updated, and 0.5 the comprehensive Trust Fund Handbook was 05 I1994 1995 1996 1997 issued for use by Bank task managers. TABLE 4-7. TRUST FUND DISBURSEMENTS (amounts in millions of us dollars) FY96 FY97 Multidonor special programs Global Environment Fund (GEF) Montreal Protocol (MP) 138.8 226.9 Consultative Group on International Agricultural Research (CGIAR) 85.3 51.5 Holst Fund for West Bank and Gaza 68.9 50.6 Onchocerciasis Control 32.5 10.4 Africa Capacity Building 11.8 10.9 Other trust fund programs Policy and Human Resources Development (PHRD) Funda 168.7 164.6 Consultant Trust Fund (crF) Programb 58.1 69.0 Institutional Development Fund (IDF) 17.2 18.4 Other trust fundsc 611.0 662.0 Total 1,192.3 1,264.3 a. These figures exclude the portion of PHRD that is allocated to Japanese Consultant Trust Funds. b. These figures include Japanese Consultant Trust Funds. c. This category includes smaller programs as well as single-purpose trust funds that finance debt reduction, cofinancing with Bank-financed operations, technical assistance, and other advisory senrices. SECTiON FOUR WORLD BANK OPERATIONS AND ADMINISTRArION 125 BOX 4- 2. THE POLICY AND HUMAN RESOURCES DEVELOPMENT (PHRD) FUND The PHRD Fund, a collaborative effort between the Ulaanbaatar Services Improvement Project and an government of Japan and the Bank, extends untied effective means of supporting capacity building. grants to meet the technical assistance needs of devel- * In India, a PHRD grant provided the means to fo- oping countries: it funds project preparation activi- cus special attention on the health needs of the poor, ties, including pre-feasibility and feasibility studies, who are particularly prone to certain diseases. The sector studies in support of adjustment lending, envi- effort supported the design of several health projects ronmental assessments, training, and study tours. to reduce the incidence of leprosy, blindness, malaria, The PHRD Fund was established in 1990 as a succes- and tuberculosis. sor to the Japanese Grant Facility, which was estab- The PHRD Fund also supports EDI training activi- lished in 1987. ties and reconstruction efforts in postconflict regions, PHRD funding aims to strengthen the quality of as well as Japanese expertise through the Consultant project design, and between 1991 and 1997 some Trust Fund. PHRD responded to the needs of Bosnia 500 PHRD grants have resulted in projects. For these and Herzegovina with support to the Emergency Re- completed grants, each dollar of PHRD funding has covery Program. PHRD also finances several special mobilized $261 in follow-up investments, thus help- programs; among those carried out in fiscal 1997 ing develop a pipeline of quality projects for Bank was a seminar on industrial and financial sector and iDA funding. During fiscal 1997, the mHRD fund strategies for eastern and southern Africa countries provided 254 grants totaling $138.6 million and in that drew heavily on the experience of East Asian fiscal 1996, 260 grants totaling $162.2 million for countries. project preparation activities. Examples of PHRD The PHRD also funds the Joint Japan/World Bank grants that have contributed to successful project Graduate Scholarship Program, managed by EDI, preparation include: which funds graduate studies for mid-career officials * In Mongolia, PHRD-funded consultants prepared from Bank member countries. In fiscal 1997 the pro- a feasibility study on the priorities for rehabilitation gram supported 360 students who studied in 111 services, an important input in the preparation of the universities in nineteen member countries. With the exception of the CTF program, most focused on engineering-assistance in designing trust funds are untied. To increase the effective- bridges, dams, highways, and telecommunica- ness of the CTF program, the Bank reached tions systems-which involves working with agreement with most major donors to untie identifiable products that are based on well- their CTFs by at least 25 percent to fund consult- established technology that can be transplanted ants from developing countries and from other or modified relatively easily. In recent years, donor countries that have taken similar mea- however, TA increasingly has been directed at ca- sures to untie their contributions. pacity building, which entails a more complex process of creating and disseminating knowl- Technical assistance edge for development purposes at all levels of Technical assistance (TA) came under consid- society. Capacity is induced and enhanced as erable scrutiny in fiscal 1997 because of legiti- much as it is transferred and built. TA for capac- mate concerns that its performance has been ity building involves assisting, supporting, and less than satisfactory. This performance record is facilitating rather than supplanting and pre- common to most donors of technical assistance scribing. It is largely culture bound and process and is the subject of an ongoing review by the oriented, and experience in one situation might Bank. be entirely irrelevant in another. Experimenta- Bank-supported TA in the early years, and tion often governs action. TA for capacity build- through the 1970s and much of the 1980s, ing is thus costly, time consuming, and often 126 THEWORLDBANKANNUALREPORT 1997 risky. In fiscal 1997 the Bank began to examine fected by a Bank-supported project or projects its tools for designing and delivering this type of can ask the panel to investigate complaints that TA to identify methods of reducing risks and in- the Bank has failed to abide by its policies and creasing the chances of success. procedures. The executive directors decide, on The Bank offers its clients a number of instru- the recommendation of the panel, whether an ments to promote capacity building. Most are inspection will take place. financed through loans for freestanding projects The Inspection Panel continues to receive nu- or for components of broader projects. One in- merous queries concerning potential requests creasingly important instrument is the Institu- for inspection. It has received ten formal re- tional Development Fund (IDF) established in quests for inspection to date, eight of which fiscal 1993 as a $25 million annual grant instru- were found to be admissible: five were acted ment. The IDF provides grants for capacity- upon in fiscal 1997 (see box 4-3). In fiscal 1997 building activities not directly linked to Bank the executive directors asked the panel to re- operations. Between its inception and the end of view the extent of progress of a November calendar year 1996, the IDF made 345 grants to 1995 plan of action, which was undertaken by 108 countries. While the ceiling for each grant Bank management in response to a (fiscal 1996) is $500,000, grants extended to date have aver- request for inspection of the Rondonia Natural aged less than $300,000 each. Among its many Resources Management Project in Brazil. The beneficiaries, the IDF has funded capacity build- panel's report noted mixed progress but con- ing for poverty monitoring and social policy in cluded that local people affected by the project Angola; for developing the Quipus craft pro- considered its continuation preferable to ending gram in Bolivia; for strengthening project man- Bank involvement. The board accepted the agement and monitoring capacity related to the panel's recommendation to continue with the protection of children in Vietnam; for establish- project. ing institutional capacity to secure private in- The resolution that established the Inspection vestors and operators in Tunisia; for external as- Panel required a review of its functions by the sistance management capacity in Kazakhstan; Bank's Executive Board after two years of op- and for capacity building in, and modernizing eration. The review was completed in fiscal of, Sri Lanka's Central Bank Library. 1997. The board agreed on the usefulness of the The Bank and the United Nations Development inspection mechanism and approved several Programme (UNDP). The Bank maintains close technical clarifications to the resolution, which working relationships with UNDP. One of the key have led to improvements in processing requests. aspects of this relationship in fiscal 1997 was the conclusion of a new agreement on aid coor- Public Information Center dination. At the same time, the Bank's role of The Pic continued to improve the quality and executing agency for UNDP projects has substan- quantity of information it makes available to cli- tially diminished with the introduction in 1992 ents, with the number of documents carried by of UNDP'S system of devolving execution to the the Pic increasing by 1,160 between July 1, 1996 countries themselves. and June 30, 1997, to reach a total of 4,024 by the end of the fiscal year. In fiscal 1997 the Inspection Panel highest demand for information from the Pic An independent inspection panel established came from the business community, followed by by the executive directors in September 1993 academics and representatives of public agencies. helps to ensure that the Bank's operations ad- Since its inception, the largest proportion here to the institution's operational policies and of Pic usage has come from members of the procedures regarding the design, preparation, or business community who are interested in implementation of a project. Any group of indi- project-specific information. In addition, Pic viduals who may be directly or adversely af- clients include public agencies, NGOS, academia, and the general public interested in obtaining SECTION FOUR WORLD BANK OPERATIONS AND ADMINISTRATION 127 BOX 4-3. REQUESTS FOR INSPECTION Jamuna Bridge Project in Bangladesh. Request- mills claimed that their interests had been harmed ers representing people living on chars (islands in the through design flaws and delays in implementation Jamuna River) claimed that their livelihood and of the IDA-supported reform program-which was property rights have been or may be harmed because intended to benefit the private sector The panel did IDA policies, especially on resettlement, compensation, not recommend a formal investigation because it and participation, were not observed in the design considered that this would not resolve the and implementation of the project. After the Inspec- program's design and implementation problems. tion Panel received the request, compensation policies IDA's executive directors accepted the recommenda- and an implementation plan acceptable to the re- tion. questers were adopted. IDA's Board of Executive Itaparica Resettlement and Irrigation Project Directors accepted the panel's recommendation that in BraziL The requesters claim that their standards there was no need for further investigation at that of living, health, and economic well-being have not time but asked management to submit a progress been maintained or improved because of design report on execution of measures to compensate the failures and faulty execution of this project. The char dwellers early in fiscal 1998. The panel will be project was designed to mitigate adverse effects re- invited to give its comments on this report. sultingffrom the construction of the Itaparica hydro- Yacyreta Hydroelectric Project in Argentina electric dam. The panel recommended that the and Paraguay. The requesters representing people Executive Board authorize an investigation. The living in the project area claimed that their stan- board will consider the recommendation early in dards of living, health, and economic well-being have fiscal 1998. been, and may be potentially, harmed as a result of National Thermal Power Corporation (NTPc) Bank omissions and failure to observe policies in re- Power Generation Project in India. The request- lation to execution of the project and filling the ers in the project area, located in the Singrauli re- Yacyreta Reservoir The panel recommended an in- gion, claim that they have been and may be ad- vestigation. The Bank's executive directors asked the versely affected as a result of execution of the panel to review the project's environmental and re- project, which they allege violates aspects of various settlement problems and to provide an assessment Bank policies, including those on environmental as- of the adequacy of a remedial action plan agreed on sessment, indigenous peoples, and resettlement. The between the Bank and the two countries. panel will deliver its recommendation to the Execu- Jute Sector Adjustment Program in tive Board early in fiscal 1998. Bangladesh. The requesters from private sector jute economic information on countries and sectors reorganized and improved and its search capa- and numerous documents on a variety of topics. bility upgraded to be more user friendly and re- Because accessing any one piece of Bank infor- sponsive. Links were established with other mation can be a formidable challenge, the Pic Bank Group Web sites, including those of the monitors a telephone hotline to respond to Operations Evaluation Department, the Inspec- questions on many different aspects of the tion Panel, and the Global Environment Facility. Bank's work and to help guide clients through the Bank's organizational structure. The PIC pro- Administrative budget gram has enabled a break in what was per- and corporate planning ceived as an impenetrable barrier to informa- The Bank's total administrative budget for tion about the Bank and has helped to create fiscal 1997, as approved by the executive direc- better understanding of the Bank's mission. tors in fiscal 1996, was $1,374.7 million (see In fiscal 1997 the PIC continued to improve appendix 6), a drop of 3.6 percent in real terms and expand its operations. To serve the bulk of from the fiscal 1996 budget. its clients better-those who access the PIC through*the Internet'-the Pic's Web site was 10. Hits to the PIC's Internet program totaled about through tne Internet -tne PIC'S WeD s1te was 2 million in fiscal 1997. 128 THEWORLD BANKANNUAL REPORT 1997 The net administrative budget for fiscal 1997 of the Economic Development Institute); and which takes into account reimbursements and putting in place the supporting infrastructure to fee revenues that offset the costs of programs sustain institutional change. not financed from the regular budget, was set at Management noted that for the fiscal 1998- $1,177 million. This implied a reduction in real 2000 period, it would present a further, more terms of 4.6 percent over fiscal 1996 and a 10.7 comprehensive review of institutional priorities percent reduction over fiscal 1995. Fiscal 1997 as well as a proposed plan for implementing a was the third consecutive year of decline in the program of renewal-including costs and ben- Bank's net administrative expenditures in real efits. This review was subsequently encapsu- terms. Figure 4-5 shows IBRD and IDA income lated in the Strategic Compact, which was and expenditure at a glance. unanimously approved by the Executive Board The fiscal 1997 budget also reflected the on March 31, 1997. initial phase of the Bank's effort to undertake In June 1997, the executive directors institutional renewal; it proposed specific mea- approved a total administrative budget for sures to support that process, including taking fiscal 1998 totaling $1,423.9 million to imple- immediate steps to raise the quality of the ment the program envisaged by the Strategic Bank's services for its clients; strengthening the Compact. (The net administrative budget, tak- quality of country assistance strategies and the ing into account off-setting reimbursements and portfolio; enhancing executive development and fee revenues, is $1,219 million.) staff training programs; expanding partnerships Corporate Planning and Resource Management. and support for building client capacities In fiscal 1997 the priority of the various units (through, for example, a substantial expansion that comprise Corporate Planning and Resource FIGURE 4-5 IBRD/IDA Income and Expenditure at a Glance, Fiscal Year 1997 Where the money comes from Commitment fees- IBRD, 1% Other income, 2% : - Income from investments IDA, 5% Income from development cmedits, 6% ncome from investments - IBRD, 8% Income from loans - IBRD, 77% Where the money goes Other expenses, 2% Management fee IDA, 5% Changes from operations IDA, 6% (operating surplus) Administrative expenses -IBRD, 7% Net income - IBRD; 14% Borrowing expenses - IBRD. 66% Note: For details see IBRD Financial Statements: Statement of Income and IDA Special Purpose Financial Statements: Statement of Changes in Accumulated Surplus, June 30, 1997. SECTION FOUR WORLD BANK OPERATIONS AND ADMINISTRATION 129 Management was to support the Bank's emerg- public expenditure analysis, social safety nets, ing renewal program. In many ways the key to and lessons of adjustment. Another LLC partner- the Bank's relevance and effectiveness in the fu- ship, with the IMF Institute, brought staff from ture is the efficient interplay among its human the International Monetary Fund to participate resources, financial resources, and technology- in Bank courses and vice versa. the key components of corporate planning and Health Services Department. HSD provided a resource management. variety of clinical and occupational health ser- Human resources. The Bank's change effort in vices, including an on-site clinic to assist staff fiscal 1997 was supported by a new managerial with episodic, acute illnesses; a comprehensive selection process built on openness and trans- breast care program; and a travelers' health ad- parency; launching an improved performance- visory service that gives advice on immuniza- management process that emphasizes agreed re- tion, illnesses and diseases common to countries sults; and supporting the launch of the four sec- of destination, as well as food and water precau- tor networks. A multisource feedback program tions. Associated dimensions of HSD'S work pro- was also piloted this year. gram included occupational health research The Bank also implemented a program to rec- focusing on health concerns of staff and on ognize staff achievement, the Awards for Excel- travel-related illnesses, which serves as a guide lence program, which recognizes teams and in- to targeted interventions to keep staff healthy dividuals who demonstrate outstanding service and productive, and a communications program to clients and who deliver results in an innova- to strengthen staff health awareness. tive, collaborative, and responsive manner. Information and Technology Services (ITS). Pro- Learning and Leadership Center To help viding the communications and technological achieve a higher level of excellence and better support for devolving responsibility to resident results, the LLC provided a notable increase in missions and providing infrastructure for the staff training and education in fiscal 1997. Bank's knowledge-management initiative were * More than 2,000 staff attended over 150 primary foci for ITS in fiscal 1997. Deployment courses or technical workshops, and twenty- of the Bank's global communications network seven "Sector Weeks" brought together staff and was carried out in collaboration with United outside experts from specific disciplines. Nations agencies, and the Enterprise Network * Fifty managers completed the Executive was extended to about one-third of the Bank's Development Program (EDP) at ten leading busi- resident missions during the fiscal year. ness schools or academic institutions; another Cost-effective measures to streamline proce- 180 attended an in-house EDP organized with a dures, share information, and promote team- consortium of leading training institutions. work across the Bank were enhanced through * Training opportunities targeted to reach use of collaborative tools such as Lotus NotesTM. resident mission staff included seven programs, Already in use by a large portion of headquar- held in regional "hubs" such as Budapest, ters staff, by the end of fiscal 1998 all staff at Islamabad and Jakarta, which were attended headquarters and resident missions will have by about 200 local staff access to these tools. * Exchange and secondment programs were A prototype knowledge management system initiated with other major organizations. (KMS) was developed to serve as a single reposi- * The Presidential Fellows program brought tory of knowledge and information about devel- eminent scholars to the Bank to discuss their opment. The KMS is accessible in multiple ways views on critical issues such as social justice, and will be scaled up and linked with expanded poverty, and inequality. electronic document repositories. The LLC and EDI offered twelve joint programs where Bank staff and participants from client countries studied important subjects such as 130 THEWORLD BANKANNUAL REPORT 1997 A high-level systems architecture study car- Staffing. At the end of fiscal 1997, regular and ried out in fiscal 1997 resulted in initiation of fixed-term staff-excluding staff on special leave major reforms in supporting systems and data. and leave without pay-numbered 5,443, down General Services Department. GSD continued from 5,681 as of June 30, 1996. The World Bank its efforts to support the Bank's drive for in- Group recruited 207 staff, of whom 30 percent creased efficiency and cost savings. Highlights of were from developing countries and 40 percent the year included the occupancy of Phase 2 of were women. Recruitment is expected to remain the Bank's Main Complex, which is accommo- at a higher level in the next fiscal year to provide dating about 1,300 staff; achievement of $9.4 new skills for the new areas of emphasis under the million in travel savings through the lowest- Strategic Compact. cost-fare program, negotiated hotel rates, and free airline tickets; and utilization of new tech- nology, including a pilot robotic "mailmobiles" program. "Greening" efforts continued and will be em- bedded in GSD's annual work program from the next fiscal year. This year's efforts included us- ing breakaway partitions in headquarters office space to decrease significantly the consumption and waste of internal building materials; switch- ing to environmentally conscious, energy-efficient materials; and increasing the use of recycled products. As more staff were being devolved to the field, GSD undertook twenty field office projects, three in Bank-owned space and the remaining seventeen in leased premises; an additional twelve projects were commissioned and surveyed. Headquarters construction. The second phase of construction of the new Main Complex buildings was completed during the year, and office operations started at the 1818 H Street site on December 6, 1996. The cost of construc- tion was within the budget approved by the Executive Board in fiscal 1995. Built to the latest health and safety standards and with high energy efficiency, the new build- ing creates additional office space, permits mod- ern communications and other technology, and has enabled the Bank to reduce its reliance on rented office space. SECTION FOUR WORLD BANK OPERATIONS AND ADMINISTRATION 131 : a : 0 0 0 1 0 . 0 S 0 | X W00: ; X: \ \~~~ A r :: i i~~~~~~~~~~~~~~~~~~~~~~7 '~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~; F M E E v >S S S rW~~~~~~~~~~~~~~~~~~~~~L 7: _ = ~~~~~~~~~~~~~~~~~~~~L i _ , ~ ~ ~ ~ ~ ~ ~~~~~~~~F :: :::~~~~~~>~ SECTION FIVE WORLD BANK FINANCES IBRD financial highlights Poor Countries (HiPc) Debt reflect the offered currency of Initiative Trust Fund in sup- their choice. Under this offer, In the fiscal year ending port of the HIPC debt initiative. which extends from Septem- June 30, 1997, the IBRD ber 1996 to June 1998, bor- achieved solid financial perfor- Financial policies rowers have three options: mance, highlights of which Increasing client orientation * they may retain the terms are: by offening currency choice for of their existing currency-pool * net income of $1,285 new and existing IBRD loans. On loans million; June 25, 1996, the executive * they may convert un- * loan disbursements to directors approved two initia- disbursed loan amounts to member countries of $13,998 tives to provide borrowers single-currency loan terms; million; flexibility to select IBRD loan and * medium- and long-term terms that are consistent with * they may convert dis- borrowing the equivalent of their debt-management strat- bursed loan balances and $15.1 billion in eighteen cur- egy and suited to their debt- undisbursed loan amounts rencies; servicing capacity. First, they (to the extent not converted * average medium- to long- removed the lending volume to single-currency loan terms) term borrowing costs, after limitation on new single- to one of four new single- swaps, of 5.01 percent; currency loan commitments. currency pools. * financial returns on the During the fiscal year ending At June 30, 1997, there investment portfolio of 5 June 30, 1997, there was were $5,764 million of undis- percent; strong borrower demand for bursed balances that borrow- * a healthy reserves-to-loan the single-currency loan prod- ers had requested conversion ratio of 14 percent. uct. Of total new commit- into single-currency loan The Board of Governors ments of $14.5 billion, bor- terms. In addition, the Bank agreed at the October 1996 rowers selected LIBOR-based had accepted requests to con- Annual Meeting to allocate single-currency loan terms for vert $9.9 billion of loan bal- net income earned during fis- $10.6 billion, fixed-rate single- ances to single-currency pool cal 1996 as follows: currency loan terms for $2.3 terms on July 1, 1997. * $250 million to the gen- billion, and currency-pool loan Portfolio concentration man- eral reserves to maintain the terms for $1.6 billion. Single- agement. On January 28, 1997, reserves-to-loan ratio and to currency loans were commit- the executive directors ap- prefund partial waivers of in- ted in five currencies: United proved a new policy on IBRD terest charges; States dollars ($11.9 billion), portfolio concentration man- * $300 million equivalent in deutsche mark ($668 million), agement. Under this policy, SDRS as of June 30, 1996, as an French francs ($226 million), IBRD exposure to large borrow- immediate grant to IDA; Japanese yen ($53.1 million), ers is subject to a dollar limit. * the remainder, $637 mil- and Spanish pesetas This limit will be established lion, to surplus. ($42.5 million). at the time of the annual The Board of Governors Second, the executive direc- allocation of IBRD net income also authorized the following tors approved a policy to offer and will be the lower of: transfers from the IBRD sur- currency choice for all IBRD (i) 10 percent of the Statutory plus: currency-pool loans for which Lending Limit,' and (ii) IBRD'S * $300 million equivalent in the invitation to negotiate was ability to bear the risk of port- SDRS as of June 30, 1996, as an issued by September 1, 1996. immediate grant to IDA; The purpose of this offer is to 1. The Statutory Lending Limit is * $500 million by way of a provide borrowers flexibility defined as subscribed capital plus reserves plus the portion of the grant to the Heavily Indebted to amend the terms of their surplus account available to meet existing currency-pool loans to IBRD'S obligations toward its creditors. SECTnON FIvE WORLD BANK FINANCES 133 folio concentration. Thus, the new approach en- outstanding plus the present value of callable sures that all borrowers have equal access to guarantees. At the end of the year there were IBRD's resources and that IBRD's exposure to seven countries with loans in nonaccrual status, portfolio-concentration risk cannot exceed its and the accumulated provision for loan losses risk-bearing capacity. amounted to $3,210 million. Previously, IBRD exposure to large borrowers was managed so that the amount outstanding to Loans any one borrower did not significantly exceed Disbursements. The IBRD'S gross disbursements 10 percent of the total IBRD loan portfolio. The to countries during fiscal 1997 were $13,998 new policy has several advantages over the pre- million, up $626 million from fiscal 1996's total vious policy. First, it de-links exposure to indi- of $13,372 million. Net disbursements, exclud- vidual borrowers from IBRD'S total loan portfo- ing prepayments, to current borrowers were lio, thereby allowing the lending levels for large $4,301 million, an increase of $1,419 million borrowers to be set independently from devel- over the previous year's total of $2,882 million. opments in other countries. Second, it allows Lending rates. For loans made under, or con- IBRD to manage its exposure to large borrowers verted to, the IBRD'S variable lending rate (VLR) proactively on the basis of its risk-bearing ca- system, established in 1989, the interest rate pacity. Third, it clarifies what is considered to was 6.94 percent for the first semester and 6.70 be an equitable share of IBRD'S total resources. percent for the second semester for fiscal 1997. Liquidity policy. On April 18, 1997, the IBRD's By comparison, the interest rates for older vari- executive directors approved a new approach to able rate loans (established in 1982) that have maintaining and managing its liquid assets. Be- not been converted to the current system were ginning with fiscal 1998, the IBRD'S liquid asset 6.90 percent and 6.65 percent for the first and holdings will not be allowed to fall below a second semesters, respectively. specified minimum; that minimum is equivalent The single-currency lending rates for the fis- to the highest six months of debt service plus cal year ranged from 5.79 percent to 6.22 per- one-half of net loan disbursements as projected cent in United States dollars, from 3.35 percent for the year, which amounts to $17.3 billion for to 3.72 percent in deutsche mark, from 3.53 fiscal 1998. Holding at least this level of liquid- percent to 4.44 percent in French francs, and ity at all times provides additional assurance from 0.72 percent to 1.02 percent in Japanese that the IBRD will have the resources necessary yen (the only currencies outstanding on loans). to meet its financial obligations, even in the un- These rates are based on the six-month LIBOR likely event that it is prevented from accessing (PIBOR for French francs) plus a total spread (in- capital-market funding for a significant period. cludes contractual lending spread plus or minus Liquid assets over and above the specified mini- the Bank's weighted-average cost margin rela- mum will be held to provide flexibility in tim- tive to LIBOR/PIBOR). Single-currency loan fixed ing the IBRD's borrowing transactions and to rates for the fiscal year (applicable to disbursed meet working capital needs. Previously the IBRD amounts during an interest period) ranged from had maintained a target for fiscal year-end liq- 6.67 percent to 7.75 percent in United States uid holdings of at least 45 percent of its pro- dollars, from 5.15 percent to 6.26 percent in jected net cash requirements for the succeeding deutsche mark, and from 5.01 percent to 6.86 three years. percent in French francs. Accumulated provision for loan losses. The level Interest waivers. During fiscal 1997 the IBRD of the accumulated provision for loan losses is continued to waive twenty-five basis points of based on an assessment of the collectibility of the semester interest rate of loans to all borrow- loans in nonaccrual status, plus an evaluation ers that had made all loan-service payments of the collectibility risk in the rest of the portfo- within thirty days of their due date. At June lio. For fiscal year 1997, the accumulated provi- 30,1997, approximately 95 percent of the IBRD'S sion for loan losses was maintained at a level total volume of outstanding loans was eligible equal to 3 percent of total loans disbursed and for the interest-spread waiver. This waiver was 134 THE WORLD BANK ANNUAL REPORT 1997 in addition to the continuation during the year The IBRD'S liquid assets are invested exclu- of a waiver of part of the IBRD'S commitment sively in fixed-income markets, and most are ac- fee on undisbursed balances that resulted in a tively traded. Portfolio-management activities reduction of that fee from seventy-five to are supported by risk-management and moni- twenty-five basis points. Together, the partial toring procedures covering both credit risk waivers on loan charges amounted to $485 and interest rate risk. Trading performance of million in fiscal 1997. actively managed portfolios is measured against Loans in nonaccrual status. At the end of benchmark portfolios of three months' duration. fiscal 1997, six member countries (Bosnia and At the end of fiscal year 1997 the IBRD'S Herzegovina, Democratic Republic of the Congo, liquidity totaled $18,107 million. Iraq, Liberia, Sudan, Syrian Arab Republic) and During fiscal 1997 the IBRD'S financial return one successor republic of the former Socialist on its portfolio was 5 percent. The financial Federal Republic of Yugoslavia-the Federal Re- return on the portfolio in fiscal 1996 was 4.43 public of Yugoslavia (Serbia and Montenegro)- percent. were in nonaccrual status. Of these countries, all but Bosnia and Herzegovina have payments Borrowings and liability management in arrears to the Bank. All overdue payments The goal of the IBRD'S funding and liability- from Bosnia and Herzegovina were cleared management operations is to mobilize the fi- in June 1996, but the country remains in nancing needed for development at the lowest nonaccrual status because of the high level of achievable cost and on a sustainable basis. In collectibility risk associated with its outstanding pursuit of this goal, the IBRD issues debt in a debt stock. Loans in nonaccrual status at the wide range of currencies, maturities, and struc- end of fiscal 1997 amounted to 2.23 percent of tures, and it does so in a variety of markets, pay- the total IBRD portfolio. ment systems, and legal environments. It also uses interest rate and currency swaps and other Liquid asset management derivatives as an integral part of this effort to The liquid asset portfolio serves a number of minimize costs and to manage risks-both purposes for the IBRD. It provides flexibility in when it takes on new debt and in managing the timing the execution of the borrowing program, stock of outstanding liabilities. Almost all of the allowing it to take advantage of attractive mar- IBRD'S outstanding loans to its developing-coun- ket conditions and funding opportunities on be- try borrowers are priced on a cost pass-through half of its borrowers. It functions as a source of basis, so the benefits of low-cost funds flow cash to meet operational requirements in the through directly to the debt-service payments normal course of business and is also a reserve of these countries. that could be mobilized in case of adverse fi- In fiscal 1997 the IBRD employed many avail- nancial conditions affecting the IBRD. Further- able market instruments to raise $15.1 billion in more, the availability of liquid assets enhances medium- and long-term debt, to increase its the overall level of investor confidence in the outstanding short-term debt by $3.3 billion, to IBRD'S creditworthiness. prepay or buy back $1.8 billion of its securities, A new policy specifying the minimum size of and to transform the currency or interest rate the liquid portfolio was approved by the execu- characteristics of another $27.4 billion of its tive directors in April 1997. It will be imple- outstanding liabilities. mented beginning with fiscal year 1998. As part of its efforts to raise funds in world As a result of another policy change approved capital markets as cost-effectively as possible, by the executive directors in May 1996, based the IBRD issued debt in eighteen different cur- on asset-liability management reasons, the IBRD rencies during the year, including for the first began funding its liquidity portfolio utilizing time Korean won, Philippine pesos, Polish zloty, floating-rate debt on a currency-by-currency basis in fiscal year 1997. SECTION FIVE WORLD BANK FINANCES 135 TABLE 5-1. IBRD MEDIUM- AND LONG-TERM BORROWINGS, FISCAL YEAR 1997 (amounts in millions) Currency US dollar Type Issue Currency amount equivalent Globals 6.625% Bond due 2006 US$ 1,000.0 1,000.0 Structured 6.70% Callable Notes due 1999 US$ 50.0 50.0 6.62% JPY/AUD Dual Currency Bonds due 1998 X 9,850.0 90.7 7.00% JPY/NZD Dual Currency Bonds due 1997 X 4,925.0 46.3 5.10% JPY/USD Dual Currency Bonds due 1998 X 7,000.0 64.7 Callable Multi-up Loan due 2006 X 1,000.0 9.2 Zero-Coupon Callable Notes due 2011 Lit 272,060.0 178.1 5.00% JPY/USD Dual Currency Bonds due 1999 X 49,175.0 443.0 6.00% Step-up Callable Notes due 1999 US$ 119.9 119.9 Zero-Coupon Callable Notes due 2006 Lit 587,450.0 386.8 9.50% Reverse Floater Callable Bond due 2007 Lit 645,159.6 400.1 Reverse Floater Callable Bond due 2007 US$ 100.0 100.0 5.60% JPY/GBP Dual Currency Bonds due 2000 A! 14,745.0 119.4 7.45% Callable Bond due 2002 Lit 199,510.0 117.6 Callable Multi-up Loan due 2007 X 1,000.0 7.9 5.25% Range Structure Bond due 2000 DM 100.0 58.3 Multi-Callable Capped Floater Bond due 2007 Lit 199,300.0 117.7 Capped Floater Notes due 2007 Lit 54,821.4 32.6 Capped Floater Bond due 2004 Lit 497,450.0 300.8 Forex-Indexed Bond due 2012 X 5,000.0 43.3 7.05% Callable Notes due 2004 Lit 299,340.0 177.0 6.75% Callable Bond due 2002 $A 99.8 75.0 Conventional 8.25% Bond due 1999 (Reopening of a FY96 Issue) $A 50.2 39.5 9.00% Bond due 1999 (Reopening of a FY96 Issue) $NZ 50.0 34.0 13.625% Bond due 1999 R 199.8 45.7 7.50% Notes due 1999 $A 148.5 116.9 7.00% Notes due 2000 $A 99.5 76.9 8.75% Notes due 2005 Lit 29,730.0 19.6 6.50% Bond due 2002 Can$ 99.5 72.8 5.68% Notes due 1999 US$ 1,000.0 1,000.0 8.00% Notes due 1998 $NZ 99.6 68.9 6.375% Notes due 2003 DKr 398.8 68.4 7.20% Bond due 2001 Ptas 9,898.0 77.9 Zero-Coupon Notes due 2016 Lit 661,260.0 435.0 Floating Rate Notes due 2001 Lit 50,015.0 32.8 7.625% Notes due 2003 Lit 299,390.0 196.6 Zero-Coupon Notes due 2016 DM 414.4 268.1 14.50% Notes due 1998 R 99.7 21.6 4.00% Notes due 2004 DKr 428.2 73.4 Slovak koruny, and South African rand (see table and liquid assets. In view of the increased 5-1). The use of currency swaps allowed the demand for single-currency loans from its cli- IBRD to transform the cash flows from these ents, and especially for loans denominated in securities into the funding needed for its loans United States dollars, the bulk of the IBRD's new 136 THE WORLD BANK ANNUAL REPORT 1997 Currency US dollar Type Issue Currency amount equivalent Conventional 4.625% Notes due 2001 DM 1,009.0 625.4 6.65% Notes due 1998 $NZ 99.5 70.5 5.15% Notes due 2000 US$ 1,000.0 1,000.0 15.00% Notes due 2002 R 98.9 21.1 Zero-Coupon Notes due 2000 £ 274.0 449.1 7.25% Notes due 2002 $NZ 199.2 141.0 10.25% Notes due 2001 Dr 20,180.0 81.7 15.00% Notes due 1999 R 499.7 108.3 Zero-Coupon Bonds due 2007 Lit 513,300.0 331.0 14.50% Bonds due 2002 R 99.8 22.3 6.75% Bonds due 2001 $A 99.9 76.3 6.00% Bonds due 2000 £ 247.6 402.0 6.50% Bonds due 2004 Lit 796,400.0 479.8 7.50% Notes due 2000 $NZ 99.4 68.9 6.10% Bonds due 2000 £ 296.5 483.5 Zero-Coupon Bond due 2017 R 415.8 93.6 14.5% Notes due 2002 R 149.7 33.5 Zero-Coupon Notes due 2022 R 258.5 58.5 10.25% Notes due 2002 V 3,995.2 151.5 4.75% Bond due 2002 DM 248.3 148.7 10.375% Notes due 1999 KY( 998.2 35.6 7.58% Notes due 2007 HK$ 996.1 129.1 8.25% Notes due 2000 $NZ 99.5 69.0 9.80% Notes due 2002 W 88,666.4 99.3 Step-Down Coupon Notes due 2007 X 4,970.0 39.7 Zero-Coupon Notes due 2012 R 401.2 89.9 5.375% Bond due 2000 Ptas 14,943.8 103.3 6.625% Notes due 2001 US$ 298.4 298.4 8.00% Notes due 2007 $NZ 97.5 67.5 6.95% Notes due 2002 Lit 299,515.0 174.5 7.00% Bond due 2002 $NZ 746.6 1,220.6 6.45% Loan due 2002 US$ 30.0 30.0 19.50% Notes due 1999 Zi 99.6 31.7 14.625% Notes due 2000 R 199.3 44.6 7.625% Notes due 2002 $NZ 99.7 68.9 7.00% Notes due 2000 $NZ 99.4 68.2 Zero-Coupon Notes due 2027 R 89.0 19.8 7.00% Bond due 1999 $NZ 124.5 206.4 6.00% Bond due 1999 US$ 250.0 250.0 5.375% Notes due 2002 Can$ 99.1 71.2 6.50% Bonds due 2007 Lit 991,980.0 588.6 Total 15,139.2 NoTE: Borrowing amounts are based on net proceeds. US. dollar equivalents are expressed at the exchange rate prevailing at the time of launch. liabilities, on an after-swaps basis, in fiscal 1997 Spurred in part by the changing composition also took the form of United States dollars (see and structure of its balance sheet, the IBRD'S table 5-2). asset liability-management operations have been growing. During the year, the IBRD entered into SECTION FIVE WORLD BANK FINANCES 137 TABLE 5-2. IBRD BORROWINGS, AFTER SWAPS, FISCAL YEAR 1997 (amounts in millions of us dollars equivalent) Before swaps Currency After swaps Maturity swaps Maturity Cost Item Amount % (years) (amount) Amount % (years) (%) Medium- and long-term borrowings U.S. dollars 3,848.3 25 4.9 8,740.3 12,588.6 83 6.5 5.6 Deutsche mark 1,100.5 7 8.4 558.6 1,659.1 11 2.9 2.9 Japanese yen 864.1 6 3.6 27.5 891.5 6 3.0 0.3 Others 9,326.3 62 6.2 - - - - - Totala 15,139.2 100 5.9 9,326.4 15,139.3 100 5.9 5.0 Short-term borrowings outstandingb Central bank facility (U.S. dollars) 2,200.0 29 0.5 5.1 Discount notes (U.S. dollars) 3,015.0 39 0.3 5.7 Other U.S. dollars 1,985.0 26 0.6 5.6 Deutsche mark 394.0 5 0.8 2.8 Japanese yen 88.0 1 0.5 0.2 Total 7,682.0 100 0.4 5.3 NoTE: Details may not add to totals because of rounding. a. Excludes the costs of Liability Management Funding and the volume, maturity, and cost of Contingent Funding. b. As of June 30, 1997. $1.6 billion in interest rate swaps to hedge the market to reduce debt costs and better manage risk on its fixed-rate single-currency loans; it its liabilities. completed $5.1 billion in currency swaps asso- ciated with managing the currency composition Capital of the currency pool; and it kept a greater share The IBRD seeks to avoid exchange risks by of the liabilities allocated to the currency pool matching its liabilities in various currencies with on a floating rate basis to facilitate meeting bor- assets in those same currencies and by matching rowers' requests for the conversion of loans to the currencies of its retained earnings and accu- single-currency terms beginning July 1, 1997. In mulated provision for loan losses with those of its swap operations the IBRD ensures that its its outstanding loans. credit risk exposures are tightly controlled. It The IBRD presents its financial statements in enters into swaps only with highly rated coun- United States dollars. Accordingly, changes in terparts, subject to diversification requirements, the value of the United States dollar vis-a-vis and under master agreements that-for swaps other currencies have an effect on the reported longer than one year-must provide for mark- balances for assets and liabilities. For the June ing to market and collateralization. The IBRD 30, 1997 financial statements, expressed in also called or prepaid $951 million in debt, and United States dollar terms, the loan portfolio it repurchased $851 million in securities in the was reduced by $6,429 million, the borrowing portfolio by $4,701 million, and accumulated 138 THEWORLD BANKANNUAL REPORT 1997 BOX 5-1. THE INTERIM TRUST FUND The establishment of the Interim Trust Fund (iTF) iTF totaled SDR 1,971 million; SDR 163 million in with resources of SDR 2.2 billion was part of the pledges from five donors remained outstanding and funding arrangements proposed by IDA deputies in are expected to be paid by the end of December March 1996 for the iDA- II Replenishment period 1997. On this basis, total ITF resources are expected (fiscal 1997-99). Its aim was to ensure adequate to reach SDR 2,134 million. availability of resources to fund credits in fiscal In February 1997 the ITF donors reached an agree- 1997-99 in the face of the inability of one of the ma- ment, later confirmed by IDA'S executive directors, af- jor IDA donors (the United States) to contribute to fecting the implementation of the ITF. The agreement IDA- II until fiscal 1998, pending fulfillment of its stipulated that up to SDR 700 million in ITF funds commitments to IDA-IO. Decisionmaking and pro- uncommitted as of the end offiscal 1997 would curement eligibility affecting credits funded by the iTF remain unallocated. It also specified that the use of are limited to rTF donor countries and to countries such funds (that is, with or without procurement that are eligible to borrow from the IBRD and IDA. restrictions) would be determined by December 31, Because of the procurement restrictions attached to 1997. the ITF, the selection offiscal 1 997 projects to be As of June 30, 1997, thirty-one ITF projects for SDR funded by the ITF was carried out through a random 1,168 million had been approved-as part of total and transparent process. Sixty-six projects were se- IDA lending of 100 projects for SDR 3,260 million in lected for iTF funding at a drawing held on July 9, fiscal 1 997-and thirteen ITF projects for SDR 313 1996, with a regional distribution consistent with million, which were postponed beyond fiscal 1997 that of the overall fiscal 1997 IDA lending program. after the February agreement, were part of the fiscal The list of ITF projects, together with the main fea- 1998 (twelve projects) and 1999 (one project) IDA tures of the eFr, notably its procurement restrictions, lending program. In addition, consistent with the was widely disseminated (and updated as needed) February 1997 agreement, SDR 653 million in ITF outside the Word Bank-mainly through the Bank's funds remained unallocated and pending determina- World Wide Web site and through Development tion of their use by rrF donors. This included SDR 405 Business,' a United Nations publication aimed at million in iTF projects that had been postponed be- potential suppliers, to which the World Bank yond fiscal 1997, before the February agreement, Monthly Operational Summary is attached. and that were subsequently reclassified from ITF to The ITF became effective in November 1996, and regular IDA funding. the first iTF projects were approved in December 1996. As of June 30, 1997, donor payments to the 1. United Nations. Development Forum Business Edition. New York. provision for loan losses by $193 million. In to- Reserves. On June 30, 1997, reserves tal, expressed in United States dollar terms, the amounted to $16,279 million, and the reserves- total assets fell by $8,206 million and total li- to-loan ratio stood at 14 percent. abilities by $6,734 million. On June 30, 1997, the total subscribed capital IDA finances of the IBRD was $182.4 billion, or 97 percent of IDA'S commttment authority. IDA is mainly authorized capital of $188 billion. During fiscal funded by donor contributions. Such funds are year 1997, subscriptions to the 1988 general "replenished" by an agreement among donors capital increase (GCI) were closed. Twenty-seven every three years. Fiscal 1997 was the first year countries subscribed an aggregate $1.8 billion of the eleventh replenishment of IDA (IDA-I 1). during the year. Total subscriptions under the The total expected commitment authority for 1988 GCI were $79.1 billion from 157 countries. IDA-l l is SDR 14.4 billion, including the Interim At the end of fiscal 1997, the permissible in- Trust Fund (ITF) administered by IDA (see box crease of net disbursements ("headroom") 5-1), which was established by all IDA donors, was $92.8 billion, or 47 percent of the IBRD'S except the United States, to fund operations lending limit. SECTION FIVE WORLD BANK FINANCES 139 BOX 5-2. REVIEW OF IDA ACTIVITIES IN FISCAL YEARS 1994-96 In January 1997 the executive directors of the evaluate how IDA is achieving its objectives. They Bank met to discuss a report' on the use of resources welcomed the summaries of assistance strategies for during the three-year period covered by the tenth re- fifty-four IDA countries that were included in the re- plenishment of IDA (fiscal years 1994-96, or IDA- I 0). port. They noted that recipient country officials and IDA increased the scope of its activities to meet new community leaders increasingly participate in deter- challenges as the number of IDA-eligible countries rose mining development priorities and that wider partici- from seventy to seventy-nine during the IDA- l Ope- pation should be used to increase the effectiveness of riod. These seventy-nine countries are the world's IDA's programs and projects in the years to come. poorest and are home to 3.3 billion people-some 57 They also recommended that IDA redouble its effort to percent of the world's population. support economic growth that would reach the poor- The report examines how IDA helped its borrowers' est and particularly enhance the well-being and sta- efforts to improve the living standards of their people tus of women. and achieve faster, environmentally sustainable More than 900 IDA-financed projects were under growth. The directors emphasized that there is a implementation during the iDA-IO period, and there widely shared sense of urgency and commitment on was growing emphasis on effective portfolio manage- IDA's poverty reduction goal but also noted that the ment. The directors welcomed the quickened pace of objective is still far out of reach. disbursements-which exceeded $17 billion over the The directors welcomed the increased emphasis on three-year period under review. The quality of IDA's policy performance and the resulting concentration of portfolio has started to improve. The report shows lending in countries with sound policies where IDA re- how this assistance is supporting the borrowers' sources can be used most effectively. They noted IDA's economies and helping deliver basic public services to efforts to improve economic governance but also that poor people. The directors asked that monitoring of public institutions remained weak in many IDA coun- the impact of projects and programs continue to be tries. Strengthening of basic capacity in public ad- improved. ministration and in enforcement of laws governing The directors noted that iDA had a critical and commercial contracts, investment, and other market unique role in assisting countries with formulation of activities was particularly important. During the sound economic policies, particularly in public expen- iDA-i O period, IDA lending to Sub-Saharan Africa, at diture and aid coordination, but that the low health 40 percent of the total, was less than originally pro- and education status of the people in iDA countries jected due to poor policy performance and civil con- means that much remains to be done. Increasing the flicts in some African countries. The rate of commit- effectiveness of public expenditure, especially in the ments to the region also slowed because of iDA's social sectors, can significantly enhance the develop- sharper focus on advancing existing operations before ment prospects in the poorest countries. The report launching new ones and because greater attention shows that IDA made a significant direct contribution was paid to the quality of new projects. The execu- to delivering better social services, as disbursements tive directors appreciated the efforts by governments for investment projects in the social sectors grew and the Bank to increase attention to implementa- rapidly to reach $1.5 billion in fiscal year 1996. The tion, which enabled IDA to increase disbursements directors felt that renewed emphasis on agriculture substantially to African countries during the iDA-1 0 and rural development may be warranted in the fu- period. ture and that this would be considered in individual IDA assistance strategies are tailored to country cir- country assistance strategies. cumstances. The directors noted that IDA's strategy formulation process had matured and that the CAS 1. World Bank. 1997. IDA in Action 1993-1996: The Pursuit of Sustained Poverty Reduction. Washington, D. C (Also available documents are now a useful means for them to as a summary report.) while the United States becomes current on period July 1, 1996 to June 30, 1999. The IDA-1 0. commitment authority for IDA-l comprises IDA- 11 is intended to provide IDA with the re- SDR 4.7 billion from IDA-l I donor contribu- sources to fund credits committed during the tions, SDR 2.2 billion from donor contribu- 140 THE WORLD BANK ANNUAL REPORT 1997 tions to the ITF, SDR 1.3 billion from the went to Africa, 17 percent to East Asia and the unreleased portion of contributions carried over Pacific, 30 percent to South Asia, 11 percent from the IDA-IO period, and SDR 6.2 billion from to Europe and Central Asia, and 3 percent to other resources (mainly commitments of ex- both Latin America and the Caribbean and the pected repayments of past IDA credits), includ- Middle East and North Africa. ing IBRD net income transfers. ITF donor contri- Box 5-2 reviews IDA activities for the IDA-1 0 butions were made available in one tranche period. during 1997. As of June 30, 1997, IDA has re- IDA'S commitment fee. For each fiscal year the ceived ITF contributions from thirty donors. To- level of commitment fee is set by the executive tal contributions received at the end of fiscal directors based on an annual review of IDA's fi- 1997 amount to SDR 1,971 million. IDA-1 I do- nancial position. The commitment fee for fiscal nor contributions are to be made available in 1998 was set at 0 percent for all IDA credits. two annual tranches during fiscal 1998 and fis- IDA'S commitment fee has been 0 percent from cal 1999. fiscal year 1989 through fiscal 1997. In addition to the ITF, commitment authority for IDA-Il operations during fiscal 1997 was provided mainly by other resources, including the transfer of SDR 416 million from the IBRD'S fiscal 1996 net income and SDR 1,860 million of commitment authority against repayments and other income. Of the latter amount, SDR 1,750 million is for regular credits and another SDR 110 million is for supplementary credits for IDA borrowers with IBRD loans outstanding. IDA-II commitment authority was also augmented by SDR 783 million in the release of donor contri- butions carried over from the IDA- I0 period. This amount was made available when the United States paid $700 million toward its IDA-I 0 contribution. This payment triggered the release of the corresponding amount in Germany's contribution that had been unavail- able for commitment authority. At the end of fiscal 1997, available resources for IDA-l l operations totaled SDR 3,059 million, bringing total available resources for all of IDA-i 1 to SDR 5,030 million. Against these resources, IDA has made com- mitments of SDR 3,260 million during fiscal 1997, of which SDR 1,168 million was funded by the ITF and SDR 2,092 million was funded by IDA-1 resources. Of this amount, 36 percent SECTfON FIVE WORLD BANK FINANCES 141 IBRD/IDA APPENDICES 1. Governors and Alternates of the World Bank 144 2. Executive Directors and Alternates of the World Bank and their Voting Power 149 3. Officers of the World Bank 152 4. Offices of the World Bank 153 5. Country Eligibility for Borrowing from the World Bank 157 6. World Bank Budget by Expense Category and Administrative Program, Fiscal Years 1995-98 159 7. IBRD and IDA Payments to Supplying Eligible Borrowing Countries for Local and Foreign Procurement in Fiscal Year 1997 160 8. IBRD and IDA Payments to Supplying Countries for Foreign Procurement 162 9. IBRD and IDA Payments to Supplying Countries for Foreign Procurement, by Description of Goods, Fiscal Year 1997 164 10. IBRD and IDA Disbursements for Foreign Expenditures, by Description of Goods, (for Investment Lending), Fiscal Years 1995-97 166 11. Estimates of IBRD and IDA Payments to Supplying Countries for Foreign Procurement under Adjustment Lending, Fiscal Year 1997 167 12. IBRD and IDA Cumulative Lending Operations, by Major Purpose and Region, June 30,1997 168 13. IBRD and IDA Cumulative Lending Operations, by Borrower or Guarantor, June 30,1997 170 14. Projects Approved for IBRD and IDA Assistance in Fiscal Year 1997, by Region and Country 174 15. Projects Approved for IBRD and IDA Assistance in Fiscal Year 1997, by Sector 176 16. Development Committee Communiques, Fiscal Year 1997 182 APPENDICES 143 GOVERNORS AND ALTERNATES OF THE WORLD BANK APPENDIX 1 Juzne 30, 1997 Member Governor Alternate Afghanistan Abdul Hadi Arghadiwal Mohammad Ehsan Albania Arben Malaj Edmond Leka Algeria Abdelkrim Harchaoui Ali Hamdi Angola Emmanuel Moreira Carneiro Sebastiao Bastos Lavrador Antigua and Barbuda t John E. St. Luce Ludolpb Brown Argentina Roque Benjamin Fernandez Pedro Pou Armenia Vahram Avanessian Bagrat Asatryan Australia Peter Costello Andrew Thomson Austria Rudolph Edlinger Hans Dietmar Schweisgut Azerbaijan Elman Siradjogly Rustamov Fuad Akhundov Bahamas, The t Hubert A. Ingraham Ruth Millar Bahrain t Ibrahim Abdul Karim Zakaria Ahmed Hejres Bangladesh Shah A.M.S. Kibria Masihur Rahman Barbados t Owen S. Arthur Erskine R. Griffith Belarus t Pyotr P. Prokopovich Vladimir N. Shimov Belgium Philippe Maystadt Alfons Verplaetse Belize Manuel Esquivel Yvonne S. Hyde Benin Albert Tevoedjre Felix Adimi Bhutan Dorji Tshering Yeshey Zimba Bolivia Juan Fernando Candia Castillo Gonzalo Afcha Bosnia and Herzegovina Hasan Muratovic Drago Bilandzija Botswana Festus G. Mogae O.K. Matambo Brazil Pedro Sampaio Malan Gustavo J. Laboissiere Loyola Brunei Darussalam t Sultan Haji Hassanal Bolkiah Haji Selamat Haji Munap Bulgaria t Muravei Radev Plamen S. Lltchev Burkina Faso Tertius Zongo Patrice Nikiema Burundi Niyibigira Gerard Minani Evariste Cambodia Keat Chhon Sun Chan Thol Cameroon Edouard Akame Mfoumou Isaac Njiemoun Canada Paul Martin Huguette Labelle Cape Verde Antonio Gualberto do Rosario Jose Ulisses Silva Central African Republic Christophe Bremaidou Anicet-Georges Dologuele Chad Bichara Cherif Daoussa Abderhamane Dadi Chile Eduardo Aninat Joaquin Vial China Liu Zhongli Liu Jibin Colombia Jose Antonio Ocampo Cecilia Lopez Comoros Mohamed Ali Soilihi Ali Boina Mze Congo, Democratic Republic of (vacant) (vacant) Congo, Republic of Nguila Moungounga-Nkombo George Tsiba Costa Rica Francisco de Paula Gutierrez Rodrigo Bolanos Zamora 144 THE WORLD BANK ANNUAL REPORT 1997 Member Governor Alternate C6te d'lvoire Daniel Kablan Duncan N'Goran Niamien Croatia Bozo Prka Josip Kulisic Cyprus Christodoulos Christodoulou Antonis Malaos Czech Republic Ivan Kocarnik Jan Vit Denmark Poul Nielson Ellen Margrethe Loj Djibouti Mohamed Ali Mohamed Hawa Ahmed Youssouf Dominica Julius C. Timothy Gilbert Williams Dominican Republic Hector Manuel Valdez Albizu Luis Manuel Piantini M. Ecuador Carlos Davalos-Rodas Ernesto Perez-Cajiao Egypt, Arab Republic of Atef Mohamed Mohamed Ebeid Yousef Boutros Ghali El Salvador Manuel Enrique Hinds Jose Roberto Orellana Milla Equatorial Guinea Baltasar Engonga Edjo Antonio Nve Ngu Eritrea Haile Woldense Gebreselassie Yosief Estonia t Mart Opmann Agu Lellep Ethiopia Sufian Ahmed Girma Birru Fiji Berenado Vunibobo Tevita K. Banuve Finland Sauli Niinisto Pekka Haavisto France Jean Arthuis Jean Lemierre Gabon Jean Ping Richard Onouviet Gambia, The Dominic Mendy Yusupha A. Kah Georgia David Iakobidze Vladimer Papava Germany Carl-Dieter Spranger Juergen Stark Ghana Richard Kwame Peprah Kwesi Amissah-Arthur Greece Yannos Papantoniou Christos Pachtas Grenada Keith Mitchell Linus Spencer Thomas Guatemala Jose Alejandro Arevalo Alburez Willy W Zapata Sagastume Guinea Ousmane Kaba Cellou Dalein Diallo Guinea-Bissau Issufo Sanha Paulo Gomes Guyana Bharrat Jagdeo Michael Sheer Chan Haiti Fred Joseph Jean Erick Deryce Honduras Guillermo Bueso Juan Ferrera Hungary Peter Medgyessy Almos Kovacs Iceland Halldor Asgrimsson Fridrik Sophusson India P. Chidambaram Montek Singh Abluwalia Indonesia Mar'ie Muhammad Boediono Iran, Islamic Republic of Morteza Mohammad-Khan Aliakbar Arabmazar Iraq Issam Rashid Hwaish Hashim Ali Obaid Ireland Charlie McCreevy Paddy Mullarkey Israel Jacob A. Frenkel Shmuel Slavin Italy Antonio Fazio Mario Draghi APPENDIX ONE 145 GOVERNORS AND ALTERNATES OF THE WORLD BANK (continued) APPENDIX June 30, 1997 Member Governor Alternate Jamaica t Omar Lloyd Davies Wesley Hughes Japan Hiroshi Mitsuzuka Yasuo Matsushita Jordan Rima Khalaf Hunaidi Nabil Ammari Kazakhstan Alexander S. Pavlov Umizrak E. Shukeev Kenya W. Musalia Mudavadi Simeon S. Lesrima Kiribati Beniamina Tinga Kaburoro Ruaia Korea, Republic of Kyong Shik Kang Kyung Shik Lee Kuwait Nasser Abdullah Al-Roudhan Bader Meshari Al-Humaidhi Kyrgyz Republic Talaybek J. Koichumanov Askar 1. Sarygulov Lao People's Democratic Republic Xaysomphone Phomvihane Phiane Philakone Latvia Roberts Zile Guntars Krasts Lebanon Fuad A.B. Siniora Nabil Al-Jisr Lesotho Leketekete Victor Ketso Esselen Motiatsi Matekane Liberia Francis M. Carbah Lasanah V Kromah Libya Mohamed A. Bait Elmal Bashir Ali Khallat Lithuania t Algirdas G. Semeta Jonas Niaura Luxembourg Marc Fischbach Yves Mersch Macedonia, former Taki Fiti Zlatka Popovska Yugoslav Republic of Madagascar Pierrot J. Rajaonarivelo Constant Horace Malawi Aleke K. Banda Kalonga Stambuli Malaysia Anwar bin Ibrahim Clifford Francis Herbert Maldives Fathulla Jameel Adam Maniku Mali Soumaila Cisse Ibrahima Konate Malta t Leo Brincat Joseph P. Portelli Marshall Islands Ruben R. Zackhras Michael Konelios Mauritania Mohamed Ould Amar Mohamed Lemine Ould Deidah Mauritius Rajkeswur Purryag Dharam Dev Manraj Mexico Guillermo Ortiz Martin M. Werner Micronesia, Federated John Ehsa Sebastian L. Anefal States of Moldova Valeriu Sergiu Kitsan Dumitru Ursu Mongolia Puntsagiin Tsagaan Jigjid Udenbat Morocco Mohamed Kabbaj Abdelfettah Benmansour Mozambique Adriano Afonso Maleiane Luisa Dias Diogo Myanmar Win Tin Soe Lin Namibia t Saara Kuugongelwa Usutuaije Maamberua Nepal Rabindra Nath Sharma Ram Binod Bhattarai Netherlands Gerrit Zalm Johannes Pieter Pronk New Zealand Winston Peters Murray J. Horn Nicaragua Esteban Duque Estrada Mario De Franco Niger Amadou Boubacar Cisse Ahmadou Mayaki 146 THE WORLD BANKANNUAL REPORT 1997 Member Governor Alternate Nigeria Anthony A. Ani Umaru A. Alkaleri Norway Jens Stoltenberg Kari Nordheim-Larsen Oman Abmed Bin Abdulnabi Macki Mohammed Bin Musa Al Yousef Pakistan Sartaj Aziz Javed Burki Panama Guillermo 0. Chapman, Jr. Miguel Heras Papua New Guinea Christopher Haiveta Isaac Lupari Paraguay Miguel Angel Maidana Zayas Jose Ernesto Buttner Limprich Peru Jorge Camet Alfredo Jalilie Awapara Philippines Roberto F de Ocampo Gabriel C. Singson Poland Hanna Gronkiewicz-Waltz Witold Kozinski Portugal Antonio de Sousa Franco Fernando Teixeira dos Santos Qatar t Mohammed Bin Khalifa Al-Thani Abdullah Bin Khalid Al-Attiyah Romania t Mircea Ciumara Vladimir Soare Russian Federation Anatoly Chubais Yevgeni Yasin Rwanda Jean Berchmans Birara Jean Marie Karekezi St. Kitts and Nevis Denzil Douglas Timothy Harris St. Lucia Kenny D. Anthony Cletus Springer St. Vincent and James E Mitchell Maurice Edwards the Grenadines Sao Tome and Principe Acacio Elba Bonfim Maria das Neves Batista de Sousa Saudi Arabia Ibrahim A. Al-Assaf Jobarah Al-Suraisry Senegal Papa Ousmane Sakho Papa Salla Mboup Seychelles t (vacant) Emmanuel Faure Sierra Leone Thaimu Bangura Samura Kamara Singapore t Richard Hu Tsu Tau Ngiam Tong Dow Slovak Republic Sergej Kozlik Vladimir Masar Slovenia Mitja Gaspari Stanislava Zadravec Caprirolo Solomon Islands Edmund Andresen Snyder Rini Somalia (vacant) (vacant) South Africa Trevor Andrew Manuel Gill Marcus Spain Rodrigo de Rato Figaredo Jose Manuel Fernandez Nomiella Sri Lanka Chandrika Bandaranaika Kamaratunga B.C. Perera Sudan Abdel Wahab Osman Izzedin Ibrahim Hassan Suriname t Motilall Mungra Henk 0. Goedschalk Swaziland Albert Shabangu Musa D. Fakudze Sweden Erik Asbrink Pierre Schori Switzerland Jean-Pascal Delamuraz Flavio Cotti Syrian Arab Republic Mohammed Khaled Al-Mahayni Adnan Al-Satti Tajikistan Yakyo N. Azimov Murotali M. Alimardanov Tanzania Nassoro Malocho Raphael 0. Mollel Thailand Thanong Bidaya M.R. Chatu Mongol Sonakul APPENDIX ONE 147 GOVERNORS AND ALTERNATES OF THE WORLD BANK (continued) APPENDIX I June 30, 1997 Member Governor Alternate Togo Kwassi Klutse Kossi Assimaidou Tonga Kinikinilau Tutoatasi Fakafanua 'Aisake V. Eke Trinidad and Tobago Brian Kuei Tung T Ainswortb Harewood Tunisia Mohamed Ghannouchi Taoufik Baccar Turkey Mehmet Kaytaz Cuneyt Sel Turkmenistan t Hudaiberdy A. Orazov Ovez Agaev Uganda Jehoash Mayanja-Nkangi Richard H. Kaijuka Ukraine t Roman Shpek Vasiliy Gureyev United Arab Emirates Hamdan bin Rashid Al-Maktoum Mohamed Khalfan bin Kharbash United Kingdom Clare Short Gordon Brown United States Robert E. Rubin Joan E. Spero Uruguay t Luis Mosca Ariel Davrieux Uzbekistan Bakbtiyar S. Hamidov Akram Mukhidov Vanuatu Willie Jimmy Malachai Russel Venezuela t Luis Raul Matos Azocar Teodoro Petkoff Vietnam Cao Sy Kiem Le Duc Thuy Western Samoa Tuilaepa S. Malielegaoi Epa Tuioti Yemen, Republic of Abdul Kader Bajamal Mutahar A. Al-Saeedi Zambia Ronald Damson Siame Penza Benjamin Mweene Zimbabwe Herbert M. Murerwa Leonard Ladislas Tsumba t Not a member of IDA 148 THE WORLD BANK ANNUAL REPORT 1997 EXECUTIVE DIRECTORS AND ALTERNATES APPENDIX 2 OF THE WORLD BANK AND THEIR VOTING POWER June 30, 1997 IBRD IDA Executive Total % of Total % of director Alternate Casting votes of votes total votes total Appointed Jan Piercy Michael Marek United States 265,219 17.04 1,650,557 15.31 Atsuo Nishihara Rintaro Tamakib Japan 94,020 6.04 1,154,286 10.70 Helmut Schaffer Erika Wagenhofer Germany 72,649 4.67 747,221 6.93 Marc-Antoine Olivier Bourges France 69,647 4.47 451,054 4.18 Autheman Gus O'Donnell David Stanton United Kingdom 69,647 4.47 540,211 5.01 Elected Luc Hubloue Namik Dagalp Austria, Belarus,' Belgium, Czech 76,720 4.93 457,116 4.24 (Belgium) (Turkey) Republic, Hungary, Kazakhstan, Luxembourg, Slovak Republic, Slovenia, Turkey Pieter Stek Mioara lonescu Armenia, Bosnia and Herzegovina, 72,208 4.64 385,177 3.57 (Netherlands) (Romania) Bulgaria,' Croatia, Cyprus, Georgia, Israel, Macedonia (former Yugoslav Republic of), Moldova, Netherlands, Romania,' Ukraine' Enzo Del Bufalo Roberto Costa Rica, El Salvador, Guatemala, 69,110 4.44 233,470 2.17 (Venezuela) Jimenez-Ortiz' Honduras, Mexico, Nicaragua, (El Salvador) Panama, Spain, Venezuela' Leonard Good Winston Cox Antigua and Barbuda,'The 62,217 4.00 437,950 4.06 (Canada) (Barbados) Bahamas,' Barbados,' Belize, Canada, Dominica, Grenada, Guyana, Ireland, Jamaica,' St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines Joaquim R. Godfrey Gaoseb Angola, Botswana, Burundi, 55,190 3.55 442,655 4.11 Carvalho (Namibia) Eritrea, Ethiopia, The Gambia, (Mozambique) Kenya, Lesotho, Liberia, Malawi, Mozambique, Namibia,' Nigeria, Seychelles,' Sierra Leone, South Africa, Sudan, Swaziland, Tanzania, Uganda, Zambia, Zimbabwe Franco Helena Cordeiro Albania, Greece, Italy, Malta,' 55,093 3.54 389,870 3.62 Passacantando (Portugal) Portugal (Italy) Surendra Singh Syed Ahmed Bangladesh, Bhutan, India, 54,945 3.53 457,908 4.25 (India) (Bangladesh) Sri Lanka Kacim Brachemi Abdul Karim Lodhi Afghanistan, Algeria, Ghana, 54,602 3.51 237,006 2.20 (Algeria) (Pakistan) Iran (Islamic Republic of), Iraq, Morocco, Pakistan, Tunisia Ruth Jacobyd JorgenVarder Denmark, Estonia,'a Finland, 50,839 3.27 516,892 4.79 (Sweden) (Denmark) Iceland, Latvia, Lithuania,' Norway, Sweden APPENDIX Two 149 EXECUTIVE DIRECTORS AND ALTERNATES APPENDIX 2 OF THE WORLD BANK AND THEIR VOTING POWER (continued) June30, 1997 IBRD IDA Execultive Total % of Total 'Y5 of director Alternate Casting votes of votes total votes total Juanita D. Murilo Portugal Brazil, Colombia, Dominican 49,148 3.16 303,203 2.81 Amatong (Brazil) Republic, Ecuador, Haiti, (Philippines) Philippines, Suriname,' Trinidad and Tobago Young-Hoi Lee Christopher Y Legg Australia, Cambodia, Kiribati, 49,089 3.15 316,906 2.94 (Republic of (Australia) Korea (Republic of), Marshall Korea) Islands, Micronesia (Federated States of), Mongolia, New Zealand, Papua New Guinea, Solomon Islands, Vanuatu, Western Samoa Jean-Daniel Gerber Jan Sulmicki Azerbaijan, Kyrgyz Republic, 46,096 2.96 367,389 3.41 (Switzerland) (Poland) Poland, Switzerland, Tajikistan, Turkmenistan,' Uzbekistan LiYong Zhao Xiaoyu China 45,049 2.89 217,996 2.02 (China) (China) Khalid H.Alyahya Ibrahim M. Saudi Arabia 45,045 2.89 377,100 3.50 (Saudi Arabia) Al-Mofleh (Saudi Arabia) Andrei Bugrov Eugene Miagkov Russian Federation 45,045 2.89 28,202 0.26 (Russian (Russian Federation) Federation) Khalid M. Al-Saad Mohammed W Bahrain,' Egypt (Arab Republic of), 43,984 2.83 250,660 2.32 (Kuwait) Hosny Jordan, Kuwait, Lebanon, Libya, (Arab Republic Maldives, Oman, Qatar,' Syrian of Egypt) Arab Republic, United Arab Emirates, Yemen (Republic of) Jannes Hutagalung Sun Vithespongse Brunei Darussalam,a Fiji, Indonesia, 41,096 2.64 292,376 2.71 (Indonesia) (Thailand) Lao People's Democratic Republic, Malaysia, Myanmar, Nepal, Singapore,a Thailand, Tonga, Vietnam Juan Cariaga Julio Nogues Argentina, Bolivia, Chile, 37,499 2.41 200,001 1.85 (Bolivia) (Argentina) Paraguay, Peru, Uruguaya Ali Bourhane Luc-AbdiAden Benin, Burkina Faso, Cameroon, 32,252 2.07 327,811 3.04 (Comoros) (Djibouti) Cape Verde, Central African Republic, Chad, Comoros, Congo (Democratic Republic of), Congo (Republic of), C6te d'Ivoire, Djibouti, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Madagascar, Mali, Mauritania, Mauritius, Niger, Rwanda, Sao Tome and Principe, Senegal, Togo 150 THE WORLD BANK ANNUAL REPORT 1997 In addition to the executive directors and alternates shown in the foregoing list, the following also served after October 31, 1996: Executive director End of period of service Alternate director End of period of service Huw Evans March 14,1997 Sergiy Kulyk May 31, 1997 (United Kingdom) (Ukraine) Peter WE. Nicholl May 31, 1997 Mustafiqur Rahman December 17,1996 (New Zealand) (Bangladesh) Zhu Guangyao December 31, 1996 (China) NOTE: Somalia (802 votes in iBRD and 10,506 votes in IDA) did not participate in the 1996 Regular Election of Executive Directors. a. Member of the IBRD only. b. To be succeeded by Akira Kamitomai (Japan) effective July 14, 1997. c. To be succeeded by Inigo Fernandez de Mesa (Spain) effective July 1, 1997. d. To be succeeded by Ilkka Niemi (Finland) effective August 5, 1997. APPENDIX Two 151 OFFICERS OF THE WORLD BANK APPENDIX 3 June 30, 1997 President James D. Wolfensohn Managing Director, Corporate Planning & Resource Management Sven Sandstrom Managing Director, Finance and Resource Mobilization Jessica P. Einhorn Managing Director, Operations Gautam S. Kaji Managing Director, Operations Caio K. Koch-Weser Managing Director and Chairman, Private Sector Development Group Richard H. Frank Vice President, Africa Callisto Madavo Vice President, Africa Jean-Louis Sarbib Vice President and Controller Jules W. Muis Senior Vice President, Development Economics, and Chief Economist Joseph E. Stiglitz Vice President, East Asia and Pacific Jean-Michel Severino Head, Environmentally and Socially Sustainable Development Network M. Ismail Serageldin Vice President, Europe and Central Asia Johannes Linn Vice President, External Affairs Mark Malloch Brown Head, Finance, Private Sector Development, and Infrastructure Network Jean-Francois Rischard Vice President, Financial Policy and Risk Management Brian Wilson Senior Vice President and General Counsel Ibrahim E I. Shihata Head, Human Development Network David de Ferranti Vice President, Human Resources Dorothy Hamachi Berry Vice President, Latin America and the Caribbean S. Javed Burki Vice President, Middle East and North Africa Kemal Dervis Director-General, Operations Evaluation Robert Picciotto Head, Poverty Reduction and Economic Management Network Masood Ahmed Vice President, Resource Mobilization and Cofinancing Hiroo Fukui Vice President and Secretary ZHANG Shengman Vice President, South Asia Mieko Nishimizu Vice President, Strategy and Resource Management Mark Baird Vice President and Treasurer Gary Perhn 152 THE WORLD BANK ANNUAL REPORT 1997 OFFICES OF THE WORLD BANK APPENDIX 4 June 30, 1997 Headquarters: 1818 H Street, N.W.,Washington, D.C.20433, U.S.A. New York Office: The World Bank Mission to the United Nations/New York Office, 809 United Nations Plaza, Suite 900, New York, N.Y. 10017, U.S.A. European Office: The World Bank, 66, avenue d'lena, 75116 Paris, France Brussels: The World Bank, 10 rue Montoyer, B-1000 Brussels, Belgium London: The World Bank, New Zealand House, 15th Floor, Haymarket, London, SWI Y4TE, England Tokyo Office: The World Bank, Fukoku Seimei Building, 10-F, 2-2-2 Uchisaiwai-cho, Chiyoda-ku, Tokyo 100, Japan Regional Mission in Eastern Africa: The World Bank, Hill Park Building, Upper Hill, Nairobi, Kenya (mailing address: P.O. Box 30577) Regional Mission in Western Africa: The World Bank, Corner of Booker Washington and Jacques AKA Streets, Cocody, Abidj an 01, C6te d'lvoire (mailing address: B. P. 1850) Regional Mission in Thailand: The World Bank, 14th Floor, Tower A, Diethelm Towers, 93/1 Wireless Road, Bangkok 10330, Thailand Regional Mission in Latvia: The World Bank, Kalku Street 15, Riga, Latvia LV-1 162 Baltics Regional Mission Satellite in Estonia: The World Bank, Kohtu 8, Tallinn EE01 00, Estonia Baltics Regional Mission Satellite in Lithuania: The World Bank, Vilniaus Str. 28, 2600 Vilnius, Lithuania Albania: The World Bank, Deshmoret e 4 Shkurtit, No. 34, Tirana, Albania Angola: Banco Mundial, Rua Alfredo Troni (Edificio BPC), 150 Andar, CP 1331, Luanda, Angola Argentina: Banco Mundial, Avenida Leandro N. Alem 628-30, Piso 12, Buenos Aires, Argentina Armenia: The World Bank, Republic Square, 2 Khorhertarani Street, Yerevan 10, Armenia Azerbaijan: The World Bank, Neftchilar Avenue, Apartment 65, Baku, Azarbaijan Bangladesh: The World Bank, 3A Paribagh, Dhaka, Bangladesh (mailing address: G.P.. 97, Dhaka 1000) Belarus: The World Bank, 6A Partizansky Avenue, 5th Floor, Minsk 220033, Republic of Belarus Benin: The World Bank, Zone R6sidentielle de la Radio, Cotonou, Benin (mailing address: B. P. 03-2112) Bolivia: Banco Mundial, Edificio BISA, Piso 9, 16 de Julio 1628, La Paz, Bolivia (mailing address: Casilla 8692) Bosnia and Herzegovina: The World Bank, c/o National Bank of Bosnia and Herzegovina, Marsala Tito 25, 71000 Sarajevo, Bosnia and Herzegovina Brazil: Banco Mundial, SCN Quadra 02-LoteA, Ed. Corporate Financial Center, Conjuntos 303/304, 70.712-900 Brasilia, DF, Brazil Brazil: Banco Mundial, Avenida Isaac Povoas, No. 1251, Edificio Nacional Palacios, Sala 603, Centro, 78.045-640 Cuiaba, Mato Grosso (MT), Brazil APPENDIX FOUR 153 OFFICES OF THE WORLD BANK (continued) APPENDIX 4 June 30, 1997 Brazil: Banco Mundial, Edificio SUDENE, S/IS-108 Cidade Universitaria, 50670-9001 Recife PE, Brazil Bulgaria: The World Bank, World Trade Center-Sofia, 36 Dragan Tsankov Boulevard, Sofia, 1057 Bulgaria Burkina Faso: The World Bank, Immeuble BICIA (3eme etage), Ouagadougou, Burkina Faso (mailing address: B. P. 622) Burundi: The World Bank, Avenue du 18 Septembre, Bujumbura, Burundi (mailing address: B. P. 2637) Cameroon: The World Bank, New Bastos, Yaound6, Cameroon (mailing address: B. P. 1128) Central African Republic: Banque Mondiale, Rue des Missions, Bangui, C.A.R. Chad: The World Bank, 3244 P.67, Quartier Curvette St. Martin, N'djamena, Chad (mailing address: B.P. 146) China: World Bank Resident Mission in China, 9th floor, Building A, Fuhua Mansion, No. 8 Chaoyangmen Beidajie, Dongcheng District, Beijing 100027, China Colombia: Banco Mundial, Diagonal 35 No. 5-98, Bogota, D.E., Colombia (mailing address: Apartado Aereo 10229) Congo, Democratic Republic of: World Bank Liaison Office, c/o UNDP, P 0. Box 7248, Kinshasa, Democratic Republic of the Congo Congo, Republic ofi Banque Mondiale, Immeuble Arc (56me etage), Avenue Amilcar Cabral, Brazzaville, Congo (mailing address: B. P. 14536) Costa Rica: Regional Implementation Mission-Banco Mundial, Bulevar Robrmoser, 150 mts. Oeste Residencia Ex-Presidente Oscar Arias, San Jose, Costa Rica (mailing address: C.P. 11925-1000) Ecuador: Banco Mundial, Calle Juan Le6n Mera 130 yAve. Patria, Edificio Corporaci6n Financiera Nacional, 6to Piso, Quito, Ecuador Egypt: The World Bank, World Trade Center, 1191 Corniche El-Nil, 15th Floor, Cairo, Egypt Ethiopia: The World Bank, Africa Avenue, Bole Road, Addis Ababa, Ethiopia (mailing address: P.O. Box 5515) Georgia: The World Bank, 18A Chonkadze Street, Tbilisi, Georgia Ghana: The World Bank, 69 Dr. Isert Road, Northridge Residential Area, Accra, Ghana (mailing address: P.O. Box M27) Guatemala: The World Bank, 13 Calle 3-40, Zona 10, Edificio Atlantis, 14 nivel, Guatemala City, Guatemala Guinea: Banque Mondiale, Immeuble de l'Archeveche, Face Baie des Anges, Conakry, Guinea (mailing address: B. P. 1420) Haiti: The World Bank, c/o IDB, Bourdon 386, Port-au-Prince, Haiti (mailing address: B.P. 1321) Hungary: The World Bank, Bank Center, Granite Tower, Szabadsag ter 5-7, 1944 Budapest, Hungary India: The World Bank, 70 Lodi Estate, New Delhi 110 003, India (mailing address: P.O. Box 416, New Delhi 110 001) 154 THE WORLD BANK ANNUAL REPORT 1997 Indonesia: The World Bank, Lippolife Building, 3rd floor, J1. H. R. Rasuna Said, Kav. B-10, Kuningan, Jakarta 12940, Indonesia (mailing address: P.O. Box 324/JKT) Jamaica: The World Bank, Island Life Center, 3rd floor/north, 6 St. Lucia Avenue, Kingston 5, Jamaica Kazakhstan: The World Bank, Samal-1, Bldg. No. 36, 3rd Floor, Almaty, Republic of Kazakhstan 480099 Kyrgyz Republic: The World Bank, Moskovskaya and K. Akieva Streets, Bishkek 720000, Kyrgyz Republic Macedonia, FeR of: The World Bank, 34 Leninova Street, 3rd floor, Skopje, Former Yugoslav Republic of Macedonia Madagascar: Banque Mondiale, I Rue Patrice Lumumba,Antananarivo 101, Madagascar (mailing address: B. P.4140) Malawi: The World Bank, Development House, Capital City, Lilongwe 3, Malawi (mailing address: P.O. Box 30557) Mali: Banque Mondiale, Immeuble SOGEFIH, Centre Commercial Rue 321, Quartier du Fleuve, Bamako, Mali (mailing address: B. P. 1864) Mauritania: The World Bank, Villa No. 30, Lot A, Quartier Socofim, Nouakchott, Mauritania (mailing address: B. P. 667) Mexico: The World Bank, Centro Insurgentes, Insurgentes Sur 1605, Piso 24, Col. San Jose Insurgentes, Del. Benito Juarez, 03900 Mexico, D.E Moldova: The World Bank, 76/6 Sciuev Street, 277033 Chisinau, Moldova Mozambique: The World Bank, Ave. Kenneth Kaunda, 1224, 2-Andar, Maputo, Mozambique (mailing address: Caixa Postal 4053) Nepal: World Bank, Hotel Yak and Yeti Complex, Kathmandu, Nepal (mailing address: P.O. Box 798) Niger: Banque Mondiale, 42 Rue des Dallols, Niamey, Niger (mailing address: B. P. 12402) Nigeria: The World Bank, Ist Floor, Plot PC-10, Engineering Close, off Idowu Taylor Street, Victoria Island, Lagos, Nigeria (mailing address: P.O. Box 127) Nigeria: The World Bank, Plot 433, Ecowas Road, Opposite Ecowas Secretariat, Assokoro District, Abuja, Nigeria (mailing address: P.O. Box 2826, Garki) Pakistan: The World Bank, 20 A, Shahra-e-Jamhuriyat Ramna 5, G-5/1, Islamabad, Pakistan (mailing address: PO. Box 1025) Paraguay: The World Bank, Edificio City, Tercer Piso, Estrella 345, Casa Chile, Asunci6n, Paraguay Peru: Banco Mundial, Avenida Pardo y Aliaga 640, Piso 16, San Isidro, Lima, Peru Philippines: The World Bank, Central Bank of the Philippines, Multi-Storey Building, Room 200, Roxas Boulevard, Manila, Philippines Poland: The World Bank, INTRACO I Building, 17th Floor, 2 Stawki Street, 00-193 Warsaw, Poland APPENDIX FOUR 155 OFFICES OF THE WORLD BANK (continued) APPENDIX 4 June 30,1997 Romania: The World Bank, Boulevard Dacia 83, Sector 2, Bucharest, Romania Russia: The World Bank, Sadovo-Kudrinskaya No. 3, Moscow 123242, Russian Federation Rwanda: The World Bank, Blvd. de la R6volution, SORAS Building, Kigali, Rwanda (mailing address: P.O. Box 609) Saudi Arabia: The World Bank Resident Mission, UNDP Building, King Faisal Street, Riyadh, Saudi Arabia 11432 (mailing address: P.O. Box 5900) Senegal: The World Bank, Immeuble S.D.I.H., 3 Place de lIndependance, Dakar, Senegal (mailing address: B. P. 3296) South Africa: The World Bank, Grosvenor Gate, First Floor, Hyde Park Lane, Hyde Park 2196, Johannesburg, South Africa (mailing address: P.O. Box 41283, Craig Hall 2024) Sri Lanka: The World Bank, Development Finance Corporation of Ceylon (DFCC) Building, 1st Floor, 73/5 Galle Road, Colombo 3, Sri Lanka (mailing address: P.O. Box 1761) Tajikistan: Dushanbe, Tajikistan Tanzania: The World Bank, NI.C. Building (7th Floor, B), Samora Avenue, Dar-es-Salaam, Tanzania (mailing address: P.O. Box 2054) Togo: Banque Mondiale, 169 boulevard du 13 Janvier, Immeuble BTCI (8eme etage), Lom6, Togo (mailing address: B. P. 3915) Turkey: The World Bank, Ataturk Bulvari, No. 211, Gama-Guris Building Kat 6, 06683 Kavaklidere, Ankara, Turkey Turkmenistan: Liaison Office, UNDP Building, Ashkhabad, Turkmenistan Uganda: The World Bank, Rwenzori House, 1 Lumumba Avenue and 4 Nakasero Road, Kampala, Uganda (mailing address: P.O. Box 4463) Ukraine: The World Bank, 26, Shovkovychna St., Suites Two and Three, Kiev 252024, Ukraine Uzbekistan: World Bank Field Office, 43, Academician Suleimanova St., Tashkent, Uzbekistan Venezuela: Banco Mundial, Edificio Parque Cristal, Torre Oeste, Piso 15, Oficina 15-05, Avenida Francisco de Miranda, Los Palos Grandes, Caracas, Venezuela Vietnam: The World Bank, 53 Tran Phu Street, Hanoi, Vietnam West Bank and Gaza: The World Bank, Gaza City, Gaza Yemen: The World Bank, 14 Djibouti St., Sana'a, Republic of Yemen (mailing address: PO. Box 18152) Zambia: The World Bank, Red Cross House, 2nd Floor, Long Acres, Lusaka, Zambia, (mailing address: P.O. Box 35410) Zimbabwe: The World Bank, Finsure House, 5th Floor, 84-86 Union Avenue, Harare, Zimbabwe (mailing address: P.O. Box 2960) 156 THE WORLD BANK ANNUAL REPORT 1997 COUNTRY ELIGIBILITY FOR BORROWING APPENDIX 5 FROM THE WORLD BANK (as of June 30, 1997) COUNTRIES ELIGIBLE FOR IBRD FUNDS ONLY Income category 1996 GNP Income category 1996 GNP and country per capita (IJS$)a and country per capita (US$)a Per capita income over $5,435 Latvia 2,310 Slovenia 9,160 Lithuania 2,290 Argentina 8,410 Colombia 2,190 Antigua and Barbuda 7,330 Belarus 2,170 Seychelles 6,960 Namibia 2,080 Uruguay 5,910 Micronesia 2,050 St. Kitts and Nevis 5,820 Tunisia 2,000 Marshall Islands 1,860 Per capita income $3,116-$5,435 Paraguay 1,860 Chile 4,920 El Salvador 1,750 Czech Republic 4,620 Jamaica 1,620 Brazil 4,360 Jordan 1,610 Malaysia 4,300 Algeria 1,570 Hungary 4,180 Dominican Republic 1,570 Gabon 3,980 Ecuador 1,530 Trinidad and Tobago 3,970 Botswana n.a. Croatia 3,830 Iran, Islamic Republic n.a. Mauritius 3,690 Panama n.a. Mexico 3,640 Slovak Republic 3,390 Per capita income $786-$1,505 Poland 3,220 Guatemala 1,470 SouthAfrica 3,140 Romania 1,440 Kazakhstan 1,310 Per capita income $1,506-$3,115 Morocco 1,280 Estonia 3,040 Bulgaria 1,190 Lebanon 3,030 Philippines 1,190 Thailand 3,020 Ukraine 1,180 Venezuela 2,990 Syrian Arab Republic 1,160 Turkey 2,890 Papua New Guinea 1,150 Belize 2,740 Indonesia 1,090 Costa Rica 2,640 Suriname 1,050 Fiji 2,470 Uzbekistan 1,010 Peru 2,410 Turkmenistan 940 Russia 2,400 Swaziland n.a. COUNTRIES ELIGBLE FOR A BLEND OF IBRD AND IDA FUNDSb Income category 1996 GNP Income category 1996 GNP and country per capita (US$)a and country per capita (US$)a Per capita income $3,116-$5,435 Per capita incone $785 or less St. Luciac 3,430 China 750 Grenadac 3,130 Armenia 620 Zimbabwe 610 Per capita income $1,506-$3,115 Moldova 600 Dominicac 3,090 Kyrgyz Republic 570 St. Vincent and the Grenadinesc 2,360 Pakistan 490 Azerbaijan 480 Per capita income $786-$1,505 India 380 Egypt 1,090 Nigeria 240 Macedonia, FYR of 920 Bosnia and Herzegovina n.a. Georgia 850 (continued next page) APPENDIX FIVE 157 COUNTRY ELIGIBILITY FOR BORROWING APPENDIX 5 FROM THE WORLD BANK (continued) (as of June 30, 1997) COUNTRIES ELIGIBLE FOR IDA FUNDS ONLYb Income category 1996 GNP Income category 1996 GNP and country per capita (US$)' and country per capita (US$)' Per capita income $1,506$3,115 Sao Tom6 and Principe 350 Tongac 1,640 Angola 340 Kenya 330 Per capita income $786-$1,505 Tajikistan 330 Vanuatuc 1,290 Central African Republic 310 Western Samoac 1,200 Cambodia 300 Cape Verde 1,090 Haiti 300 Solomon Islands 960 Togo 300 Bolivia 930 Yemen, Republic of 300 Kiribati 870 Uganda 290 Albania 800 Vietnam 290 Djibouti n.a. Bangladesh 260 Maldives n.a. Guinea-Bissau 250 Madagascar 240 Per capita income $785 or less Mali 240 Sri Lanka 740 Burkina Faso 220 Guyana 710 Nepal 220 Lesotho 670 Niger 200 Honduras 650 Sierra Leone 200 Congo, Republic of 620 Rwanda 190 C6te d'Ivoire 620 Malawi 180 Cameroon 610 Chad 160 Guinea 560 Burundi 140 Senegal 560 Tanzania 130 Equatorial Guinea 510 Ethiopia 110 Mauritania 470 Mozambique 90 Comoros 460 Afghanistan n.a. Zambia 430 Congo, Democratic Republic of n.a. Bhutan 400 Eritrea n.a. Nicaragua 400 Gambia, The n.a. Lao People's Democratic Republic 380 Liberia n.a. Benin 360 Myanmar n.a. Ghana 360 Somalia n.a. Mongolia 360 Sudan n.a. n.a. Precise figures not available. a. World Bank Atlas methodology; per capita GNP figures are in 1996 US. dollars. b. Countries are eligible for IDA on the basis of (a) relative poverty and (b) lack of creditworthiness. The operational cutofffor iDA eligi- bility for Fr98 is a 1996 GNP per capita of $925, usingAtlas methodology. To receive IDA resources, countries also meet tests of perfor- mance. In exceptional circumstances, IDA extends eligibility temporarily to countries that are above the operational cutoff and are undertaking major adjustment efforts but are not creditworthy for IBRD lending. An exception has also been made for small island economies (see footnote c). c. During the IDA-1I period (Fe97-99), an exception to the GNP per capita operational cutofffor IDA eligibility ($925 for Fe98) has been made for specific small island economies, which otherwise would have little or no access to Bank Group assistance because they lack creditworthiness. For such countries, IDA funding is considered case by case for the financing of projects and adjustment programs designed to strengthen creditworthiness. 158 THE WORLD BANK ANNUAL REPORT 1997 WORLD BANK BUDGET BY EXPENSE CATEGORY APPENDIX 6 AND ADMINISTRATIVE PROGRAM, FISCAL YEARS 1995-98 (millions of US dollars) Actual 1998 Item 1995 1996 1997 Program Expense Category Staff costs 875.3 832.6 809.8 771.7 Consultants 111.9 119.5 118.5 144.7 Contractual services/representation 62.3 72.3 83.1 118.1 Operational travel 127.5 126.1 125.1 141.1 Overhead 232.2 219.6 221.3 223.8 Direct contributions to Special 110.9 105.3 112.5 114.1 Grants Programa President's contingencyb n.a. n.a. n.a. 14.2 Reimbursements (111.2) (102.5) (108.1) (104.7) Pending Benefit InitiativesC n.a. 3.2 n.a. 1.1 Total 1,409.0 1,376.1 1,362.3 1,423.9 Administrative programd Regional 730.2 712.0 695.5 765.7 Financial 100.9 99.7 100.2 104.0 Networkse 65.9 65.4 63.5 80.4 Research and development training! 70.2 69.2 77.4 86.9 Administrative programs 133.9 125.1 121.4 138.6 Corporate management, and legal services 90.8 95.5 96.7 99.9 Total 1,191.9 1,166.9 1,154.8 1,275.5 Centrally managed overhead/benefits 119.1 126.6 116.7 28.69 Reimbursable escrow n.a. n.a. n.a. 1.8 President's contingency n.a. n.a. 14.2 Pending benefit initiativesc n.a. n.a. n.a. 1.1 Cost effectiveness review n.a. 3.4 1.5 Salary price reserve n.a. n.a. 1.0 Reimbursements (111.2) (102.5) (108.1) (104.7) Net administrative programs 1,199.8 1,191.0 1,166.9 1,219.0 Non-discretionary Items 18.5h n.a. n.a. n.a. Special programs' 119.1 113.0 120.4 122.1 Boards 55.8 56.1 58.6 65.7 Operations evaluation 15.7 16.0 16.3 17.1 Total Budget 1,409.0 1,376.1 1,362.3 1,423.9 NOTE: Details may not add to totals because of rounding. n.a. Not applicable. a. Includes Institutional Development Fund. b. Allocations from president's contingency have been included in respective categories/programs for FY94-96. c. Accrual/provisional allocations subject to Board approval of the policy initiatives. d. The expenditures allocations by program are based on program reclassification in FY97 as showm in The World Bank Programs and FY98 Budgets (Annex B.3). e. Budgets remapped expenditures of four networks (Human Development; Finance, Private Sector and Infrastructure, Environmentally and Socially Sustainable Development; and Poverty Reduction and Economic Management, which were created out of units previously classified under Development and Advisory Services. f. Includes Economic Development Institute and funds for Foreign Investment Advisory Service (FLMs). g. Reflects reduction in benefits expenses resultingffrom (i) one-time savings in pension contribution ($76 million), and (ii) charging management fees for retirement ($28.1 million) to the respective pension assets instead of the administrative budget. h. One-time charges of $9.1 million to fund accrual for local staff termnination grants for prior years, and $9.4 million to fund accruals for benefit costs of redundant staff processes prior to February 21, 1995. i. Includes direct contributions to and administrative costs of the Special Programs. APPENDIX SIX 159 IBRD AND IDA PAYMENTS TO SUPPLYING APPENDIX 7 ELIGIBLEa BORROWING COUNTRIES FOR LOCAL AND FOREIGN PROCUREMENT IN FISCAL YEAR 1997 (millions of US dollars) Percentage BorroNving Local Foreign Total of total countries procurement procurement amount disbursementsb Albania 11 1 12 0.06 Algeria 32 4 36 0.18 Angola 10 - 10 * Argentina 459 22 481 2.44 Armenia 17 1 18 0.09 Bangladesh 152 t 152 0.77 Belarus t 10 10 0.05 Benin 14 t 14 0.07 Bolivia 77 t 77 0.39 Bosnia and Herzegovina 18 - 18 0.09 Brazil 1,393 46 1,439 7.28 Bulgaria 4 3 6 * Burkina Faso 33 2 34 0.17 Burundi 6 t 7 * Cambodia 11 - 11 0.06 Cameroon 6 t 6 * Cape Verde 5 5 * Central African Republic 5 t 5 * Chad 15 t 15 0.08 Chile 74 4 78 0.40 China 1,268 147 1,415 7.16 Colombia 117 3 120 0.61 Costa Rica 8 7 15 0.07 C6te d'Ivoire 126 12 137 0.69 Croatia 51 1 52 0.26 Cyprus 5 13 18 0.09 Czech Republic 14 4 18 0.09 Dominican Republic 15 t 15 0.07 Ecuador 32 12 44 0.22 Egypt,ArabRepublicof 109 3 113 0.57 El Salvador 18 t 19 0.09 Estonia 8 1 8 * Ethiopia 16 t 16 0.08 Fiji 7 1 8 * Gambia, The 9 t 9 * Georgia 7 2 9 * Ghana 84 1 85 0.43 Guatemala 11 t 11 0.06 Guinea 21 t 21 0.11 Guinea-Bissau 7 - 7 * Guyana 8 t 8 * Haiti 35 - 35 0.17 Honduras 26 1 28 0.14 Hungary 42 11 53 0.27 India 1,234 88 1,322 6.69 Indonesia 623 9 632 3.20 Iran, Islamic Republic of 47 3 50 0.25 Jamaica 22 t 22 0.11 Jordan 20 7 27 0.14 Kazakhstan 4 1 5 Kenya 46 7 52 0.26 Korea, Republic of 112 147 260 1.31 Lao People's Democratic Republic 34 - 34 0.17 Latvia 25 t 25 0.13 Lebanon 10 3 12 0.06 Lesotho 7 - 7 * Madagascar 46 t 46 0.23 160 THE WORLD BANK ANNUAL REPORT 1997 Percentage Borrowing Local Foreign Total of total countries procurement procurement amount disbursementsb Malawi 33 t 33 0.17 Malaysia 67 12 79 0.40 Mali 42 3 45 0.23 Mauritania 23 - 23 0.12 Mauritius 6 2 8 * Mexico 968 6 974 4.93 Morocco 165 t 165 0.84 Mozambique 84 - 84 0.43 Nepal 25 t 25 0.13 Nicaragua 27 - 27 0.14 Niger 49 1 49 0.25 Nigeria 144 1 144 0.73 Pakistan 352 3 355 1.80 Panama 11 4 14 0.07 Papua New Guinea 35 - 35 0.18 Paraguay 25 2 27 0.14 Peru 87 1 87 0.44 Philippines 154 2 156 0.79 Poland 161 36 197 1.00 Romania 28 6 33 0.17 Russia 406 22 428 2.16 Rwanda 15 t 15 0.07 Senegal 61 6 67 0.34 Sierra Leone 7 t 7 * Slovak Republic 3 1 5 * Slovenia 2 7 9 * Sri Lanka 61 t 61 0.31 Tajikistan 49 - 49 0.25 Tanzania 40 1 41 0.21 Thailand 50 17 67 0.34 Togo 11 2 13 0.07 Trinidad andTobago 12 1 13 0.07 Tunisia 139 2 141 0.71 Turkey 211 142 352 1.78 Uganda 47 1 48 0.24 Ukraine 28 11 38 0.19 Uruguay 37 t 38 0.19 Venezuela 20 10 31 0.15 Vietnam 90 4 93 0.47 Yemen, Republic of 24 - 24 0.12 Zambia 91 t 91 0.46 Zimbabwe 17 7 25 0.12 Other 20 11 36 0.83 Total 10,543 901 11,444 57.90 - Zero, t less than $0.5 million, less than 0.05 percent. NorE: Details may not add to totals because of rounding. a. Countries eligible to borrow from IBRD and IDA are listed in Appendix 5. In addition, payments under disbursing loans to Barbados, Cyprus and Korea, which are no longer eligible borrowing countries, are included. Amounts exclude disbursements for debt reduction, net advance disbursements, and disbursements under simplified procedures for structural and sectoral adjustment loans. b. Refers to the share of all IBRD and IDA payments forfiscal 1997 (excluding disbursements for debt reduction), which totaled $19,763 million. APPENDIX SEVEN 161 IBRD AND IDA PAYMENTS TO SUPPLYING APPENDIX 8 COUNTRIES FOR FOREIGN PROCUREMENT (amounts in millions of US dollars) IBRD cumulative IDA cumulative to June 30, 1997 IBRD fiscal 1997 to June 30,1997 IDA fiscal 1997 Supplying country Amount % Amount % Amount % Amount % Algeria 42 * 4 0.10 13 * 1 * Argentina 834 0.74 18 0.50 111 0.26 5 0.26 Australia 1,172 1.04 42 1.17 672 1.58 35 1.97 Austria 1,652 1.47 68 1.88 244 0.57 9 0.51 Azerbaijan 3 * - * 24 0.06 t Bahamas, The 95 0.08 1 * 8 * t * Bahrain 68 0.06 - * 128 0.30 1 0.08 Bangladesh 16 * t * 47 0.11 t * Belarus 54 * 10 0.28 1 * t * Belgium 1,582 1.41 20 0.56 1,048 2.46 20 1.13 Brazil 1,909 1.69 32 0.88 339 0.79 14 0.79 Bulgaria 42 * 2 0.06 51 0.12 t * Burkina Faso 1 * - * 10 * 2 0.08 Cameroon 5 * t * 27 0.06 t * Canada 2,609 2.32 113 3.13 781 1.83 42 2.35 Chile 382 0.34 4 0.11 36 0.08 t * China 1,442 1.28 61 1.71 1,225 2.87 86 4.76 Colombia 245 0.22 1 * 22 0.05 3 0.14 Costa Rica 46 * 3 0.10 39 0.09 3 0.17 C6te d'Ivoire 50 * 5 0.15 247 0.58 6 0.36 Cyprus 75 0.07 12 0.34 34 0.08 1 * Czech Republic 78 0.07 3 0.09 7 * t * Denmark 770 0.68 34 0.95 318 0.75 10 0.56 Djibouti t * - * 25 0.06 t * Ecuador 179 0.16 10 0.29 10 * 2 0.09 Egypt, Arab Republic of 60 0.05 2 0.06 37 0.09 1 0.08 Finland 545 0.48 34 0.94 127 0.30 4 0.20 France 8,008 7.11 317 8.79 4,584 10.75 289 16.08 Germany 12,794 11.36 491 13.62 3,536 8.29 72 3.99 Greece 211 0.19 3 0.08 80 0.19 5 0.29 Guinea 4 * - 40 0.09 t * Hungary 306 0.27 10 0.28 27 0.06 1 0.06 India 436 0.39 29 0.82 848 1.99 59 3.25 Indonesia 165 0.15 3 0.08 123 0.29 6 0.32 Iran, Islamic Republic of 145 0.13 1 * 196 0.46 2 0.09 Iraq 459 0.41 - * 30 0.07 - * Ireland 169 0.15 9 0.24 113 0.26 11 0.63 Israel 260 0.23 7 0.19 109 0.26 8 0.44 Italy 6,719 5.97 251 6.97 1,830 4.29 85 4.70 Japan 14,590 12.96 275 7.64 4,221 9.90 97 5.39 Jordan 50 * 1 * 146 0.34 7 0.38 Kazakhstan 75 0.07 * 32 0.08 1 0.07 Kenya 28 * t * 279 0.65 7 0.36 Korea, Republic of 1,685 1.50 65 1.81 829 1.95 82 4.57 Kuwait 268 0.24 - * 257 0.60 - * Lebanon 96 0.09 2 0.06 24 0.06 1 * Libya 98 0.09 - * 7 * - * Luxembourg 72 0.06 2 0.06 36 0.08 t * Malaysia 339 0.30 4 0.11 241 0.57 8 0.46 Mali t * - * 10 * 3 0.15 Mauritius I * - * 20 * 2 0.13 Mexico 567 0.50 5 0.14 99 0.23 1 0.06 Morocco 176 0.16 t * 52 0.12 t * Netherlands 2,167 1.92 56 1.56 1,207 2.83 57 3.17 NewZealand 184 0.16 6 0.16 105 0.25 2 0.11 Nigeria 389 0.35 - * 407 0.96 1 * Norway 466 0.41 87 2.42 148 0.35 8 0.44 Pakistan 120 0.11 1 * 176 0.41 3 0.15 Panama 393 0.35 2 0.07 51 0.12 1 0.06 162 THE WORLD BANK ANNUAL REPORT 1997 IBRD cumulative IDA cumulative to June 30, 1997 IBRD fiscal 1997 to June 30, 1997 IDA fiscal 1997 Supplying country Amount % Amount % Amount % Amount /o Paraguay 114 0.10 1 * * 1 0.08 Peru 128 0.11 t * 20 * t * Philippines 72 0.06 t * 83 0.19 1 0.07 Poland 274 0.24 30 0.84 52 0.12 6 0.33 Portugal 72 0.06 6 0.18 316 0.74 35 1.96 Qatar 123 0.11 - * 17 * 7 * Romania 316 0.28 5 0.15 75 0.18 t * Russia 722 0.64 11 0.32 79 0.19 10 0.56 SaudiArabia 580 0.51 4 0.12 237 0.56 11 0.63 Senegal 27 t * 96 0.23 6 0.34 Singapore 1,091 0.97 41 1.14 698 1.64 17 0.92 Slovenia 44 * 6 0.15 3 * 1 0.07 South Africa 427 0.38 13 0.36 992 2.33 39 2.17 Spain 1,372 1.22 58 1.60 297 0.70 15 0.83 Sudan 5 * I * 19 * 5 0.27 Swaziland 34 * 1 * 31 0.07 1 0.06 Sweden 1,662 1.48 25 0.69 467 1.09 15 0.84 Switzerland 4,469 3.97 81 2.26 1,172 2.75 84 4.65 Tanzania 7 * - * 29 0.07 1 0.06 Thailand 147 0.13 2 0.06 372 0.87 15 0.83 Togo 31 * t * 27 0.06 2 0.10 Trinidad and Tobago 21 t * 23 0.05 1 * Tunisia 91 0.08 - 38 0.09 2 0.09 Turkey 518 0.46 140 3.88 114 0.27 2 0.13 Turkmenistan 5 * - * 51 0.12 - * Ukraine 167 0.15 9 0.24 49 0.11 2 0.11 UnitedArab Emirates 570 0.51 3 0.09 362 0.85 11 0.59 United Kingdom' 8,436 7.49 236 6.55 5,615 13.17 227 12.61 United States 22,016 19.55 621 17.24 4,182 9.81 166 9.23 Uruguay 113 0.10 t * 5 * t Venezuela 519 0.46 10 0.29 201 0.47 t * Viet Nam 46 * t * 54 0.13 3 0.19 Yemen, Republic of t * - * 207 0.49 t * Yugoslavia (former)b 857 0.76 t * 174 0.41 3 0.15 Zambia 52 * - * 112 0.26 t * Zimbabwe 34 t * 110 0.26 7 0.41 Other 2,045 2.39 192 5.44 733 2.13 45 2.84 Total 112,614 100 3,602 100 42,633 100 1,799 100 -Zero, t less than $0.5 million, less than 0.05 percent NoTE: Amounts exclude disbursements for debt reduction, net advance disbursements, and disbursements under simplified procedures for structural and sectoral adjustment loans. Amounts may not add to totals because of rounding. a. United Kingdom includes Hong Kong b. Figures represent payments to subcontractors in respect to contracts awarded to suppliers from Yugoslavia (fonner). APPENDfX EIGHT 163 IBRD AND IDA PAYMENTS TO APPENDIX 9 SUPPLYING COUNTRIES FOR FOREIGN PROCUREMENT, BY DESCRIPTION OF GooDs, FISCAL YEAR 1997 (amounts in millions of US dollars) Equipment Civil works Consultants All other goods Total disbursements Amount % Amount % Amount % Amount % Amount %t Albania 1 0.13 I * - * I * Algeria I * - * - * 3 1.28 4 0.08 Argentina 15 0.44 3 0.36 4 0.49 - 22 0.42 Armenia 1 * I* - * - * 1 * Australia 48 1.44 6 0.64 23 2.65 - * 77 1.43 Austria 63 1.89 9 1.01 3 0.37 1 0.37 77 1.42 Bahamas 1 * - * t * - * 1 * Bahrain * 1 0.13 t * - * I * Belarus t * 10 1.08 - * - * 10 0.19 Belgium 27 0.8 2 0.17 10 1.14 2 0.86 40 0.75 Brazil 12 0.37 27 2.94 3 0.35 3 1.28 46 0.85 Bulgaria 1 * - * t * 1 0.58 3 * Burkina Faso -t * t * 1 0.55 2 * Canada 87 2.59 6 0.6 58 6.55 5 2.21 155 2.87 Chile 2 * 1 0.08 2 0.19 t 0.12 4 0.08 China 49 1.46 91 9.85 7 0.76 t 0.13 147 2.72 Colombia 2 0.06 - * 1 0.11 - * 3 0.06 Congo, Republic of 2 0.07 - * 1 0.06 - * 3 0.05 Costa Rica 3 0.09 t * 4 0.41 - * 7 0.12 C6te d'Ivoire 1 * 5 0.53 1 0.08 5 2.19 12 0.22 Croatia I * _I * _ * 1 * Cyprus 3 0.1 7 0.81 2 0.19 t 0.14 13 0.24 Czech Republic 3 0.1 - * t * - * 4 0.07 Denmark 34 1.01 t * 10 1.15 t * 44 0.82 Dominica 1 * * - * - 1 * Ecuador - * t * 12 1.34 * 12 0.22 Egypt, Arab Republic of 2 0.06 1 0.07 1 0.08 t * 3 0.06 Estonia 1 * t * I * - * I * Fiji 1 * I * t t * 1 * Finland 27 0.8 6 0.66 4 0.44 1 0.30 38 0.70 France 408 12.16 89 9.57 96 10.95 13 5.39 606 11.22 Gabon I * * - * * 1 * Georgia 1 t 1 0.16 - 2 * Germany 386 11.5 129 13.97 34 3.91 13 5.36 562 10.41 Ghana t * t * 1 0.09 t * 1 I Greece 2 * 4 0.47 2 0.18 t 0.17 8 0.15 Honduras 1 * - * t * - * 1 * Hungary 11 0.32 - * t t 0.07 11 0.21 Iceland t * - * 1 0.1 - * 1 * India 69 2.05 14 1.47 5 0.56 1 0.25 88 1.63 Indonesia 9 0.26 - t * - * 9 0.16 Iran, Islamic Republic of I * - * 1 0.14 - * 3 * Ireland 2 0.07 - * 16 1.82 2 0.66 20 0.37 Israel 8 0.24 - * 7 0.76 t 0.06 15 0.28 Italy 107 3.19 174 18.75 27 3.11 28 11.47 336 6.21 Japan 326 9.71 30 3.29 12 1.41 3 1.45 372 6.89 Jordan 7 0.2 t * 1 0.06 - * 7 0.14 Kazakhstan 1 * - * t * - * I * Kenya 3 0.1 t * 3 0.32 t 0.15 7 0.12 Korea, Republic of 68 2.02 78 8.38 t * 2 0.75 147 2.73 Lebanon t * t 2 0.23 - * 3 * Luxembourg 2 0.06 - * t * t 0.09 3 * Malaysia 10 0.31 1 0.08 1 0.13 - * 12 0.23 Mali t * - * t * 2 1.02 3 * Mauritius 2 0.06 - * t * * 2 * Mexico 3 0.09 2 0.21 1 0.12 - * 6 0.11 Netherlands 43 1.28 32 3.49 35 3.95 3 1.37 113 2.10 New Zealand 1 * - * 6 0.73 - * 8 0.14 Niger t * - * 1 0.08 - * 1 * 164 THE WORLD BANK ANNUAL REPORT 1997 Equipment Civil works Consultants All other goods Total disbursements Amount % Amouount % Aunt % Amount % Amount % Nigeria t t * t * I 5 I * Norway 86 2.57 - * 9 1.01 t 95 1.76 Pakistan 2 0.05 1 0.08 1 0.1 - * 3 0.06 Panama 3 0.09 t * t * t * 4 0.07 Paraguay - * 1 0.16 1 0.1 - * 2 Peru 1 0.07 I Philippines t * - * 1 0.17 - 2 * Poland 24 0.71 - * 1 0.09 11 4.75 36 0.67 Portugal 12 0.36 17 1.81 12 1.41 t 0.21 42 0.77 Romania 5 0.14 1 0.1 t * _ * 6 0.10 Russia 12 0.37 - 1 0.11 8 3.40 22 0.40 SaudiArabia 15 0.45 - * t * 16 0.29 Senegal I * 4 0.43 1 0.13 1 0.26 6 0.12 Singapore 56 1.66 1 0.11 t 0.06 t 0.17 58 1.07 Slovak Republic I i _ * t * - * I Slovenia 6 0.18 t * t * - * 7 0.13 South Africa 32 0.96 2 0.23 8 0.97 9 3.81 52 0.96 Spain 45 1.35 15 1.59 7 0.83 5 2.23 73 1.34 Sudan - * 5 0.49 1 0.1 - * 5 0.10 Swaziland I 1 0.1 t * 2 Sweden 26 0.78 3 0.27 10 1.15 1 0.33 40 0.73 Switzerland 142 4.23 3 0.33 19 2.15 1 0.49 165 3.06 Tanzania I * t * t * - * I * Thailand 16 0.48 t * 1 0.15 - 17 0.32 Togo 1 * - * t * 1 0.45 2 * Trinidad and Tobago - t t * 1 0.25 1 * Tunisia t * - * 1 0.16 t 2 * Turkey 136 4.06 1 0.09 t 4 1.87 142 2.63 Uganda t t t 0.05 - I Ukraine 2 0.07 - t 8 3.41 11 0.20 United Arab Emirates 8 0.24 6 0.65 - * t * 14 0.26 United Kingdorna 277 8.24 31 3.36 152 17.25 4 1.51 463 8.57 United States 536 15.98 53 5.69 183 20.84 15 6.25 787 14.57 Venezuela 3 0.09 4 0.44 3 0.37 t * 10 0.19 Vietnam 3 0.1 - * t * - * 4 0.07 Yugoslavia (former)b - * 3 0.28 t * _ * 3 0.06 Zimbabwe I * 3 0.37 1 0.08 3 1.07 7 0.14 Other 44 1.94 43 4.78 64 7.38 79 31.27 214 4.89 Total 3,357 100 926 100 878 100 240 100 5,401 100 - Zero, t less than $0.5 million, less than 0.05 percent. NOTE: Amounts exclude disbursements for debt reduction, net advance disbursements, and disbursements under simplified procedures for srructural and sectoral adjustment loans. Details may not add to totals because of rounding a. United Kingdom includes Hong Kong b. Figures represent payments to subcontractors in respect to contracts awarded to suppliers from Yugoslavia (fonner). APPENDIX NINE 165 IBRD AND IDA DISBURSEMENTSa FOR FOREIGN APPENDIX 10 EXPENDITURES, BY DESCRIPTION OF GOODS (FOR INVESTMENT LENDING), FISCAL YEARS 1995-97 1995 1996 1997 Item Countries Countries Countries Countries Countries Countries not eligible eligible Total not eligible eligible Total not eligible eligible Total to borrow to borrow to borrow to borrow to borrow to borrow Millions of US dollars Civil works 783 154 937 641 158 799 746 178 924 Consultants 689 77 766 800 79 879 784 80 864 Goods 2,971 211 3,183 2,902 320 3,222 2,626 398 3,024 All other 137 18 155 484 33 517 151 18 169 Total 4,580 460 5,041 4,827 590 5,417 4,307 671 4,977 Percentb Civil works 84 16 19 80 20 15 81 19 19 Consultants 90 10 15 91 9 16 91 9 17 Goods 93 7 63 90 10 59 87 13 61 All other 88 12 3 94 6 10 89 11 3 Total 91 9 100 89 11 100 86 14 100 NOTE: Countries eligible to borrow from iBRD and IDA are listed in Appendix 5. Details may not add to totals because of rounding. a. Amounts exclude disbursements for debt reduction and net advance disbursements. Amounts also exclude disbursements for struc- tural and sectoral adjustment loans, and hybrids (loans that support policy and institutional reforms in a specific sector by financing both a policy component disbursed against imports and an investment component). b. Percentages are based on the dollar amounts shown under the total disbursements section. These percentages show both the break- down between countries eligible to borrow fromn the IBRD and/or IDA, and countries not eligible to borrow, for individual goods categories and the share of each goods category compared with total disbursements. 166 THE WORLD BANK ANNUAL REPORT 1997 ESTIMATESa OF IBRD AND IDA PAYMENTS APPENDIX 11 TO SUPPLYING COUNTRIES FOR FOREIGN PROCUREMENT UNDER ADJUSTMENT LENDINGb, FISCAL YEAR 1997 (millions of US dollars) Supplying countries Amount Percent Supplying countries Amount Percent Algeria 7 0.2 Kuwait * 0.0 Argentina 15 0.4 Latvia 11 0.3 Asia (other) 20 0.6 Macau * 0.0 Australia 20 0.6 Madagascar * 0.0 Austria 67 2.0 Malaysia 14 0.4 Barbados * 0.0 Martinique * 0.0 Belgium 72 2.2 Mauritius * 0.0 Belize * 0.0 Mexico 15 0.4 Bolivia 7 0.2 Moldova 21 0.6 Brazil 184 5.5 Morocco 4 0.1 Cameroon * 0.0 Nepal * 0.0 Canada 18 0.5 Netherlands 86 2.6 Chile 29 0.9 New Zealand 3 0.1 China 86 2.6 Nicaragua 0.0 Colombia 10 0.3 Norway 10 0.3 Costa Rica 1 0.0 Oman 8 0.3 Croatia 47 1.4 Pakistan 6 0.2 Cyprus 2 0.1 Panama * 0.0 Czech Republic 40 1.2 Paraguay 2 0.1 Denmark 32 1.0 Peru 2 0.1 Dominica * 0.0 Philippines * 0.0 Ecuador 5 0.1 Poland 90 2.7 Egypt 10 0.3 Portugal 10 0.3 Finland 24 0.7 Romania 22 0.7 France 222 6.7 Singapore 16 0.5 Germany 560 16.8 Slovenia 28 0.8 Greece 44 1.3 South Africa 62 1.9 Guadeloupe * 0.0 Spain 73 2.2 Guatemala 3 0.1 Sweden 34 1.0 Honduras * 0.0 Switzerland 44 1.3 Hungary 98 2.9 Thailand 19 0.6 India 24 0.7 Trinidad 2 0.1 Indonesia 13 0.4 Tunisia * 0.0 Ireland 9 0.3 Turkey 108 3.2 Israel 31 0.9 United Kingdom 105 3.1 Italy 348 10.4 United States 322 9.7 Jamaica * 0.0 Uruguay 10 0.3 Japan 53 1.6 Venezuela 5 0.1 Jordan 2 0.1 Zimbabwe 6 0.2 Korea, Republic of 88 2.6 TOTAL 3,333 *Amount below $1.0 million. NoTE: Amounts exclude disbursements under investment lending. See Appendix 8 for payments to supplying countries for foreign procurement under investment lending, fiscal 1997. Details may not add to total because of rounding. a. Based on import data drawn from the latest information available on borrowers' trade statistics compiled by the United Nations trade system COMTRADE b. Under the simplified procedures for structural and sectoral adjustment loans, approved by the Executive Board in fiscal 1996, disbursements are no longer directly linked to procurement under adjustment loans. APPENDIX ELEVEN 167 IBRD AND IDA CUMULATIVE LENDING APPENDIX 12 OPERATIONS, BY MAJOR PURPOSE AND REGION, JUNE 30, 1997 (millions of US dollars) IBRD loans to borrowers, by region' Europe Latin Middle East Asia and America East and and South Central and the North Purposeb Afiica Pacific Asia Asia Caribbean Africa Total Agriculture 3,596.8 12,616.4 2,883.0 7,674.2 16,087.8 5,172.3 48,030.5 Education 558.5 5,427.4 55.0 1,116.1 5,172.0 2,038.5 14,367.5 Electric power and other energy 1,881.9 15,013.6 10,537.6 6,067.0 12,422.3 2,222.8 48,145.2 Environment 21.9 1,174.2 310.0 372.1 1,682.5 224.5 3,785.2 Finance 717.2 5,145.1 3,440.2 4,862.8 8,893.5 2,220.4 25,279.2 Health, population, and nutrition 267.9 954.2 31.3 1,030.5 3,070.6 535.3 5,889.8 Industry 1,289.1 3,728.2 3,420.7 3,738.4 5,721.3 1,916.3 19,814.0 Mining/Other extractive 216.5 503.0 774.0 840.8 1,109.3 131.7 3,575.3 Multisector 2,275.2 4,004.3 680.0 10,100.2 9,281.9 2,890.4 29,232.0 Oil and gas 381.2 1,646.9 3,359.7 2,595.1 1,397.5 711.2 10,091.6 Public-sector management 105.1 538.3 150.0 1,665.7 3,767.8 582.2 6,809.1 Social sector 21.5 57.5 - 1,362.2 1,207.0 78.0 2,726.2 Telecommunications/informatics 557.4 1,859.7 747.5 545.3 530.3 691.5 4,931.7 Transportation 3,006.4 14,555.0 3,342.6 6,495.2 14,757.8 2,963.7 45,120.7 Urban development 928.2 4,274.1 294.1 1,308.5 5,906.6 1,916.7 14,628.2 Water supply and sanitation 1,251.9 1,794.4 605.4 1,520.6 5,144.7 2,520.6 12,837.6 Total 17,076.7 73,292.3 30,631.1 51,294.7 96,152.9 26,816.1 295,263.7 168 THE WORLD BANK ANNUAL REPORT 1997 IDA credits to borrowers, by region Europe Latin Middle Total East Asia and America East and IBRD and South Central and the North and Purposeb Africa Pacific Asia Asia Caribbean Africa Total IDA Agriculture 7,709.6 6,163.3 13,746.0 355.1 431.1 933.7 29,338.8 77,369.2 Education 3,440.5 1,726.9 3,426.9 14.6 268.4 490.8 9,368.1 23,735.5 Electric power and other energy 2,228.6 693.8 3,666.1 181.8 291.4 252.9 7,314.6 55,459.8 Environment 325.1 385.7 718.0 - 183.7 - 1,612.5 5,397.8 Finance 2,253.2 333.8 797.0 199.4 185.1 74.8 3,843.3 29,122.5 Health, population, and nutrition 1,649.7 1,008.7 3,220.5 81.8 88.2 180.8 6,229.7 12,119.5 Industry 1,262.4 151.2 1,829.4 26.8 19.4 84.4 3,373.6 23,187.5 Mining/Other extractive 178.5 51.0 82.0 - 66.7 - 378.2 3,953.5 Multisector 6,457.3 439.7 3,676.2 581.1 654.6 80.0 11,888.9 41,120.9 Oil and gas 518.2 66.0 520.7 42.4 94.2 101.0 1,342.5 11,434.1 Public-sector management 1,943.5 221.7 512.5 181.7 264.0 13.7 3,137.1 9,946.2 Social sector 565.8 259.7 557.5 90.4 283.8 315.0 2,072.2 4,798.4 Telecommunications/informatics 488.1 101.8 884.2 18.0 - 83.0 1,575.1 6,506.8 Transportation 5,974.2 1,533.0 3,294.6 108.5 475.7 301.9 11,687.9 56,808.5 Urban development 1,633.8 548.4 1,657.0 78.3 117.2 114.5 4,149.2 18,777.4 Water supply and sanitation 1,300.6 582.8 1,971.2 72.6 111.1 213.4 4,251.7 17,089.3 Total 37,929.1 14,267.5 40,559.8 2,032.5 3,534.6 3,239.9 101,563.3 396,826.9 - Zero. NoTE: Details may not add to totals because of rounding. a. No account is taken of cancellations subsequent to original commitment. iBRD loans to the iFc are excluded. b. Operations have been classified by the major purpose they finance. Many projects include activity in more than one sector or subsector APPENDIX TWELVE 169 IBRD AND IDA CUMULATIVE LENDING APPENDIX 13 OPERATIONS, BY BORROWER OR GUARANTOR, JUNE 30, 1997 (amounts in millions of US dollars) IBRD loans IDA credits Total Borrower or guarantor Number Amount Number Amount Number Amount Afghanistan - - 20 230.1 20 230.1 Africa region 1 15.0 1 45.5 2 60.5 Albania - - 22 272.5 22 272.5 Algeria 61 5,408.5 - - 61 5,408.5 Angola - - 9 272.8 9 272.8 Argentina 84 13,155.7 - - 84 13,155.7 Armenia 1 12.0 9 268.2 10 280.2 Australia 7 417.7 - - 7 417.7 Austria 9 106.4 - - 9 106.4 Azerbaijan - - 6 199.7 6 199.7 Bahamas 5 42.8 - - 5 42.8 Bangladesh 1 46.1 150 7,473.7 151 7,519.8 Barbados 11 103.2 - - 11 103.2 Belarus 3 170.2 - - 3 170.2 Belgium 4 76.0 - - 4 76.0 Belize 8 71.8 - - 8 71.8 Benin - - 44 650.1 44 650.1 Bhutan - - 6 28.2 6 28.2 Bolivia 14 299.3 51 1,176.9 65 1,476.2 Bosnia and Herzegovina - - 11 207.6 11 207.6 Botswana 20 280.7 6 15.8 26 296.5 Brazil 226 24,109.3 - - 226 24,109.3 Bulgaria 13 933.3 - - 13 933.3 Burkina Faso - 1.9 47 840.7 47 842.6 Burundi 1 4.8 46 694.0 47 698.8 Cambodia - - 7 237.1 7 237.1 Cameroon 44 1,294.4 22 793.8 66 2,088.2 Cape Verde - - 9 67.8 9 67.8 Caribbean region 5 89.8 2 47.7 7 137.5 Central African Republic - - 24 403.5 24 403.5 Chad - - 34 576.0 34 576.0 Chile 57 3,425.4 - 19.0 57 3,444.4 China 117 19,108.9 67 9,230.7 184 28,339.6 Colombia 145 8,616.4 - 19.5 145 8,635.9 Comoros - - 14 81.8 14 81.8 Congo, Democratic Republic of 7 330.0 59 1,151.5 66 1,481.5 Congo, Republic of 10 216.7 10 183.6 20 400.3 Costa Rica 38 888.9 5.5 38 894.4 C6te d'lvoire 62 2,887.9 16 1,384.8 78 4,272.7 Croatia 9 518.5 - - 9 518.5 Cyprus 30 418.8 - - 30 418.8 Czech Republic 2 326.0 - - 2 326.0 Czechoslovakia 1 450.0 - - 1 450.0 Denmark 3 85.0 - - 3 85.0 Djibouti - - 9 58.1 9 58.1 Dominica 1 3.1 3 14.1 4 17.1 Dominican Republic 24 706.9 3 22.0 27 728.9 East African Community 10 244.8 - - 10 244.8 Eastern Africa region - - 1 45.0 1 45.0 Ecuador 61 2,271.6 5 36.9 66 2,308.5 170 THE WORLD BANK ANNUAL REPORT 1997 IBRD loans IDA credits Total Borrower or guarantor Number Amount Number Amount Number Amount Egypt 58 4,002.5 34 1,657.0 92 5,659.5 El Salvador 30 674.6 2 25.6 32 700.2 Equatorial Guinea - - 9 45.0 9 45.0 Eritrea - - 2 23.8 2 23.8 Estonia 7 125.7 - - 7 125.7 Ethiopia 12 108.6 56 2,158.5 68 2,267.1 Fiji 13 152.9 - - 13 152.9 Finland 18 316.8 - - 18 316.8 France 1 250.0 - - 1 250.0 Gabon 13 222.0 - - 13 222.0 Gambia,The - - 23 160.2 23 160.2 Georgia - - 10 262.6 10 262.6 Ghana 9 207.0 86 3,124.3 95 3,331.3 Greece 17 490.8 - - 17 490.8 Grenada 1 3.8 1 8.8 2 12.7 Guatemala 26 780.5 - - 26 780.5 Guinea 3 75.2 47 998.8 50 1,074.0 Guinea-Bissau - - 20 223.2 20 223.2 Guyana 12 80.0 15 292.3 27 372.3 Haiti 1 2.6 36 626.5 37 629.1 Honduras 33 717.3 19 680.7 52 1,398.0 Hungary 36 3,965.6 - - 36 3,965.6 Iceland 10 47.1 - - 10 47.1 India 164 24,360.1 219 24,432.9 383 48,793.0 Indonesia 222 23,735.0 46 931.8 268 24,666.8 Iran, Islamic Republic of 39 2,058.1 - - 39 2,058.1 Iraq 6 156.2 - - 6 156.2 Ireland 8 152.5 - - 8 152.5 Israel 11 284.5 - - 11 284.5 Italy 8 399.6 - - 8 399.6 Jamaica 62 1,326.0 - - 62 1,326.0 Japan 31 862.9 - - 31 862.9 Jordan 44 1,605.0 15 85.3 59 1,690.3 Kazakhstan 13 958.6 - - 13 958.6 Kenya 46 1,200.0 72 2,813.3 118 4,013.3 Korea,Republicof 110 8,599.0 6 110.8 116 8,709.8 Kyrgyzstan - - 13 373.5 13 373.5 Lao People's Democratic Republic - - 24 511.5 24 511.5 Latvia 9 248.4 - - 9 248.4 Lebanon 14 720.5 - - 14 720.5 Lesotho 1 110.0 24 264.2 25 374.2 Liberia 21 156.0 14 114.5 35 270.5 Lithuania 11 273.2 - - 11 273.2 Luxembourg 1 12.0 - - 1 12.0 Macedonia, FYR 4 106.0 4 193.8 8 299.8 Madagascar 5 32.9 68 1,497.1 73 1,530.0 Malawi 9 124.1 61 1,610.5 70 1,734.6 Malaysia 83 3,446.6 - - 83 3,446.6 Maldives - - 6 47.3 6 47.3 Mali - 1.9 57 1,180.0 57 1,181.9 (continued next page) APPENDIX THIRTEEN 171 IBRD AND IDA CUMULATIVE LENDING APPENDIX 13 OPERATIONS, BY BORROWER OR GUARANTOR, JUNE 30, 1997 (continued) (amounts in millions of US dollars) IBRD loans IDA credits Total Borrower or guarantor Number Amount Number Amount Number Amount Malta 1 7.5 - - 1 7.5 Mauritania 3 146.0 38 457.5 41 603.5 Mauritius 29 400.7 4 20.2 33 420.9 Mexico 160 27,292.5 - - 160 27,292.5 Moldova 8 247.8 1 9.0 9 256.8 Mongolia - - 8 142.0 8 142.0 Morocco 113 7,795.3 3 50.8 116 7,846.1 Mozambique - - 29 1,600.0 29 1,600.0 Myanmnar 3 33.4 30 804.0 33 837.4 Nepal - - 65 1,412.4 65 1,412.4 Netherlands 8 244.0 - - 8 244.0 New Zealand 6 126.8 - - 6 126.8 Nicaragua 27 233.6 14 494.5 41 728.1 Niger - - 42 706.0 42 706.0 Nigeria 84 6,248.2 14 902.9 98 7,151.1 Norway 6 145.0 - - 6 145.0 Oman l1 157.1 - - 11 157.1 Pakistan 82 6,014.2 103 4,820.3 185 10,834.5 Panama 38 1,016.8 - - 38 1,016.8 Papua New Guinea 28 592.0 9 113.2 37 705.2 Paraguay 35 767.9 6 45.5 41 813.4 Peru 78 4,543.1 - - 78 4,543.1 Philippines 141 9,807.3 5 294.2 146 10,101.5 Poland 24 4,120.5 - - 24 4,120.5 Portugal 32 1,338.8 - - 32 1,338.8 Romania 50 4,725.3 - - 50 4,725.3 Russia 36 8,162.9 - - 36 8,162.9 Rwanda - - 46 744.4 46 744.4 Sao Tome and Principe - - 8 58.9 8 58.9 Senegal 19 164.9 65 1,352.0 84 1,516.9 Seychelles 2 10.7 - - 2 10.7 Sierra Leone 4 18.7 21 403.7 25 422.4 Singapore 14 181.3 - - 14 181.3 Slovak Republic 2 135.0 - - 2 135.0 Slovenia 3 153.2 - - 3 153.2 Solomon Islands - - 6 33.9 6 33.9 Somalia - - 39 492.1 39 492.1 South Africa 12 287.8 - - 1 2 287.8 Spain 12 478.7 - - 12 478.7 SriLanka 12 210.7 68 2,114.9 80 2,325.6 St. Kitts and Nevis 1 1.5 - 1.5 1 3.0 St. Lucia 3 8.5 - 11.2 3 19.7 St. Vincent and the Grenadines 1 1.4 1 6.4 2 7.8 Sudan 8 166.0 48 1,352.9 56 1,518.9 Swaziland 12 104.8 2 7.8 14 112.6 Syrian Arab Republic 17 613.2 3 47.3 20 660.5 Tajikistan - - 3 67.0 3 67.0 Tanzania 18 318.2 88 3,016.3 106 3,334.5 Thailand 111 5,899.1 6 125.1 117 6,024.2 172 THE WORLD BANK ANNUAL REPORT 1997 IBRD loans IDA credits Total Borrower or guarantor Number Amount Number Amount Number Amount Togo 1 20.0 37 622.3 38 642.3 Tonga - - 2 5.0 2 5.0 Trinidad andTobago 20 298.8 - - 20 298.8 Tunisia 103 4,007.7 5 74.6 108 4,082.3 Turkey 118 12,639.4 10 178.5 128 12,817.9 Turkmenistan 3 89.5 - - 3 89.5 Uganda 1 8.4 61 2,378.0 62 2,386.4 Ukraine 12 2,005.4 - - 12 2,005.4 Uruguay 41 1,448.2 - - 41 1,448.2 Uzbekistan 4 252.0 - - 4 252.0 Vanuatu - - 4 15.4 4 15.4 Venezuela 33 3,171.7 - - 33 3,171.7 Vietnam - - 15 1,650.9 15 1,650.9 Western Africa region 1 6.1 3 52.5 4 58.6 Western Samoa - - 8 46.6 8 46.6 Yemen, Republic of - - 106 1,324.9 106 1,324.9 Yugoslavia 90 6,114.7 - - 90 6,114.7 Zambia 28 679.1 40 1,757.9 68 2,437.0 Zimbabwe 24 983.2 8 525.6 32 1,508.8 Othera 14 329.4 4 15.3 18 344.7 Total 4,064 295,263.9 2,780 101,563.4 6,844 396,827.4 - Zero NoTE: Joint IBRD/IDA operations are counted only once, as IBRD operations. When more than one loan is made for a single project, the operation is counted only once. Details may not add to totals because of rounding. a. Represents IBRD loans and IDA credits made at a time when the authorities on Taiwan represented China in the World Bank (prior to May 15, 1980). APPENDIX THIRTEEN 173 PROJECTS APPROVED FOR IBRD AND IDA APPENDIX 14 ASSISTANCE IN FISCAL YEAR 1997, BY REGION AND COUNTRY (amounts in millions of US dollars) IBRD loans IDA credits Total Region and Country Number Amount Number Amount Number Amount Africa Benin - - 1 40.0 1 40.0 Burkina Faso - - 2 47.4 2 47.4 Cameroon - - - 25.2 - 25.2 Chad - - 1 25.0 1 25.0 Comoros - - 2 8.6 2 8.6 C6te d'lvoire - - 1 95.6 1 95.6 Djibouti - - 1 6.5 1 6.5 Eritrea - - 1 6.3 1 6.3 Gabon 1 10.0 - - 1 10.0 Ghana - - 2 54.4 2 54.4 Guinea - - 1 25.0 1 25.0 Guinea-Bissau - - 1 14.3 1 14.3 Kenya - - 4 231.9 4 231.9 Madagascar - - 5 173.2 5 173.2 Malawi - - 1 15.8 1 15.8 Mali - - 3 101.3 3 101.3 Mauritania - - 2 29.7 2 29.7 Mozambique - - 1 100.0 1 100.0 Niger - - 3 90.0 3 90.0 Rwanda - - 1 50.0 1 50.0 Senegal - - 4 39.0 4 39.0 Sierra Leone - - - 0.1 - 0.1 South Africa 1 46.0 - - 1 46.0 Tanzania - - 4 196.4 4 196.4 Uganda - - 2 137.1 2 137.1 Zambia - - 3 155.6 3 155.6 Zimbabwe - - 1 12.3 1 12.3 Total 2 56.0 47 1680.7 49 1,736.7 East Asia and Pacific Cambodia - - 2 57.4 2 57.4 China 9 2,490.0 2 325.0 11 2815.0 Indonesia 11 914.6 - - 11 914.6 Lao People's Democratic Republic - - 1 48.0 1 48.0 Mongolia - - 2 12.0 2 12.0 Philippines 4 281.4 - - 4 281.4 Thailand 3 388.4 - - 3 388.4 Vietnam - - 3 349.2 3 349.2 Total 27 4,074.4 10 791.6 37 4,866.0 South Asia Bangladesh - - 3 321.2 3 321.2 India 4 626.5 6 903.0 10 1529.5 Nepal - - 1 18.3 1 18.3 Pakistan - - 2 84.8 2 84.8 Sri Lanka - - 3 57.8 3 57.8 Total 4 626.5 15 1385.1 19 2,011.6 Europe and Central Asia Armenia - - 1 31.8 1 31.8 Azerbaijan - - 2 34.9 2 34.9 Bosnia and Herzegovina - - 9 197.6 9 197.6 Bulgaria 3 94.3 - - 3 94.3 174 THE WoRLD BANK ANNUAL REPORT 1997 IBRD loans IDA credits Total Region and Country Number Amount Number Amount Number Amount Croatia 3 239.0 - - 3 239 Georgia - - 3 68.7 3 68.7 Hungary 3 292.7 - - 3 292.7 Kazakhstan 4 141.8 - - 4 141.8 Kyrgyz Republic - - 2 60.0 2 60.0 Latvia 3 98.1 - - 3 98.1 Lithuania 4 112.7 - - 4 112.7 Macedonia, FYR 1 30.0 - 30.0 1 60.0 Moldova 1 16.8 1 9.0 2 25.8 Poland 1 67.0 - - 1 67.0 Romania 5 625.0 - - 5 625.0 Russia 8 1,715.6 - - 8 1715.6 Slovenia 1 49.3 - - 1 49.3 Tajikistan - - 2 62.0 2 62.0 Turkey 2 19.5 - - 2 19.5 Turkmenistan 2 64.5 - - 2 64.5 Ukraine 5 989.6 - - 5 989.6 Uzbekistan 1 5.0 - - 1 5.0 Total 47 4,560.9 20 493.9 67 5,054.8 Latin America and the Caribbean Argentina 10 1,479.5 - - 10 1479.5 Belize 1 7.0 - - 1 7.0 Bolivia - - - 5.4 - 5.4 Brazil 12 992.6 - - 12 992.6 Colombia 2 27.5 - - 2 27.5 Dominican Republic 1 75.0 - - 1 75.0 Ecuador 2 31.7 - - 2 31.7 El Salvador 1 24.0 - - 1 24.0 Guatemala 2 46.0 - - 2 46.0 Guyana - - - 2.2 - 2.2 Haiti - - 2 33.5 2 33.5 Honduras - - 1 54.1 1 54.1 Jamaica 3 76.9 - - 3 76.9 Mexico 5 960.0 - - 5 960.0 Nicaragua - - 1 30.0 1 30.0 Panama 2 50.5 - - 2 50.5 Paraguay 1 21.8 - - 1 21.8 Peru 5 569.0 - - 5 569.0 Uruguay 1 76.0 - - 1 76.0 Total 48 4,437.5 4 125.2 52 4,562.7 Middle East and North Africa Algeria 1 89.0 - - 1 89.0 Egypt, Arab Republic - - 1 75.0 1 75.0 Jordan 2 140.0 - - 2 140.0 Lebanon 4 191.1 - - 4 191.1 Morocco 2 108.0 - - 2 108.0 Tunisia 4 241.5 - - 4 241.5 Yemen, Republic of - - 3 70.2 3 70.2 Total 13 769.6 4 145.2 17 914.8 GrandTotal 141 14524.9 100 4621.7 241 19,146.6 - Zero. NoTE: Supplements are included in the amount but are not counted as separate lending operations. Joint IBRD/IDA operations are counted only once, as /BRD operations. APPENDIX FOURTEEN 175 PROJECTS APPROVED FOR IBRD AND IDA APPENDIX 1 5 ASSISTANCE IN FISCAL YEAR 1997, BY SECTOR' (amounts in millions of US dollars) IBRD IDA Total Agriculture Algeria 89.0 89.0 Argentina 125.0 - 125.0 Argentina 19.5 - 19.5 Azerbaijan - 14.7 14.7 Brazil 90.0 - 90.0 Brazil 24.0 - 24.0 Brazil 39.0 - 39.0 Brazil 100.0 - 100.0 Brazil 30.0 - 30.0 Brazil 60.0 - 60.0 Brazil 9.6 - 9.6 Cambodia - 27.0 27.0 China 30.0 150.0 180.0 China 430.0 - 430.0 China 400.0 _ 400.0 China 120.0 - 120.0 Comoros - 1.6 1.6 C6te d'Ivoire - 41.0 41.0 Croatia 42.0 - 42.0 Ecuador 21.0 - 21.0 Georgia - 15.0 15.0 Ghana 30.0 30.0 Haiti - 21.5 21.5 India 175.0 150.0 325.0 India - 28.0 28.0 Kenya _ 39.7 39.7 Lebanon 31.0 - 31.0 Mali - 4.2 4.2 Mauritania - 18.0 18.0 Mexico 15.0 - 15.0 Mexico 40.0 - 40.0 Pakistan - 56.0 56.0 Peru 85.0 - 85.0 Peru 51.0 - 51.0 Philippines 58.0 - 58.0 Philippines 50.0 - 50.0 Romania 350.0 - 350.0 Senegal - 1.8 1.8 Tajikistan - 50.0 50.0 Tanzania - 31.1 31.1 Tanzania - 26.3 26.3 Tunisia 26.5 - 26.5 Ukraine 300.0 - 300.0 Yemen, Republic of - 30.0 30.0 Total 2,810.6 735.9 3,546.5 Education Burkina Faso - 26.0 26.0 China 10.0 20.0 30.0 China - 85.0 85.0 Comoros 7.0 7.0 Egypt - 75.0 75.0 Guatemala 33.0 - 33.0 Guinea-Bissau - 14.3 14.3 Indonesia 104.0 - 104.0 Indonesia 71.2 71.2 176 THE WORLD BANK ANNUAL REPORT 1997 IBRD IDA Total Indonesia 98.0 - 98.0 Jamaica 28.5 - 28.5 Kenya - 27.8 27.8 Moldova 16.8 - 16.8 Morocco 23.0 - 23.0 Philippines 113.4 - 113.4 Romania 50.0 - 50.0 Russia 71.0 - 71.0 Thailand 143.4 - 143.4 Total 762.3 255.1 1,017.4 Electric power and other energy Bosnia and Herzegovina - 35.6 35.6 China 400.0 - 400.0 China 400.0 - 400.0 Georgia - 52.3 52.3 Hungary 60.0 - 60.0 Indonesia 20.0 - 20.0 Indonesia 66.4 - 66.4 Kenya - 125.0 125.0 Lebanon 65.0 - 65.0 Mali - 17.1 17.1 Mauritania - 11.1 11.1 Russia 40.0 - 40.0 Senegal - 10.5 10.5 Sri Lanka - 24.2 24.2 Thailand 145.0 - 145.0 Thailand 100.0 - 100.0 Ukraine 317.0 - 317.0 Total 1613.4 275.8 1889.2 Enviromnent Honduras - 34.0 34.0 India - 50.0 50.0 Kenya - 12.8 12.8 Madagascar - 30.0 30.0 Malawi - 12.4 12.4 Nicaragua - 30.0 30.0 Panama 22.5 - 22.5 Senegal - 5.2 5.2 Sri Lanka - 14.8 14.8 Tanzania - 10.1 10.1 Uganda - 12.1 12.1 Zambia - 12.8 12.8 Total 22.5 224.2 246.7 Finance Bangladesh - 105.0 105.0 Colombia 15.0 - 15.0 Ghana - 20.9 20.9 Guyana - 2.2 2.2 Hungary 225.0 - 225.0 Indonesia 16.4 - 16.4 Kyrgyz Republic - 16.0 16.0 (continued next page) APPENDIX FiFrEEN 177 PROJECTS APPROVED FOR IBRD AND IDA APPENDIX 15 ASSISTANCE IN FISCAL YEAR 1997, BY SECTOR a (continued) (amounts in millions of US dollars) IBRD IDA Total Mexico 30.0 30.0 Mexico 400.0 - 400.0 Mongolia - 10.0 10.0 Mongolia - 2.0 2.0 Peru 183.0 - 183.0 Slovenia 49.3 49.3 Tunisia 75.0 - 75.0 Zambia - 45.0 45.0 Total 993.7 201.1 1,194.8 Health, population and nutrition Argentina 100.0 - 100.0 Argentina 15.0 - 15.0 Bosnia and Herzegovina - 15.0 15.0 Cambodia - 30.4 30.4 India - 142.4 142.4 India - 164.8 164.8 India - 248.3 248.3 India - 19.5 19.5 Indonesia 28.5 - 28.5 Niger - 40.0 40.0 Paraguay 21.8 - 21.8 Russia - 66.0 - 66.0 Senegal - 14.9 14.9 Sri Lanka - 18.8 18.8 Turkey 14.5 - 14.5 Total 245.8 694.1 939.9 Industry Armenia - 16.8 16.8 Bosnia and Herzegovina 10.0 10.0 Madagascar - 23.8 23.8 Philippines 60.0 - 60.0 Russia 85.0 - 85.0 Total 145.0 50.5 195.5 Mining Burkina Faso -2. 21.4 Ukraine 300.0 300.0 Total 300.0 21.4 321.4 Multisector Bosnia and Herzegovina - 90.0 90.0 Bulgaria 30.0 - 30.0 Bulgaria 40.0 - 40.0 Chad - 25.0 25.0 Croatia 95.0 95.0 Croatia 102.0 - 102.0 Ghana - 3.5 3.5 Haiti 12.0 12.0 Honduras - 20.1 20.1 Jordan 120.0 - 120.0 178 THE WORLD BANK ANNUAL REPORT 1997 IBRD IDA Total Kenya - 26.6 26.6 Latvia 60.0 - 60.0 Lithuania 80.0 - 80.0 Macedonia, FYR 30.0 30.0 60.0 Madagascar - 70.0 70.0 Madagascar - 0.6 0.6 Malawi - 3.4 3.4 Mauritania - 0.6 0.6 Mozambique - 100.0 100.0 Niger - 30.0 30.0 Peru 100.0 - 100.0 Russia 600.0 - 600.0 Rwanda - 50.0 50.0 Sierra Leone - 0.1 0.1 South Africa 46.0 - 46.0 Tanzania - 125.0 125.0 Tanzania - 3.9 3.9 Uganda - 125.0 125.0 Ukraine 70.0 - 70.0 Zambia - 90.0 90.0 Zambia - 7.8 7.8 Total 1,373.0 813.6 2,186.6 Oil and gas Azerbaijan - 20.2 20.2 Georgia - 1.4 1.4 Kazakhstan 109.0 - 109.0 Turkey 5.0 - 5.0 Total 114.0 21.6 135.6 Public sector management Argentina 300.0 - 300.0 Argentina 20.0 - 20.0 Bangladesh - 2.9 2.9 Bolivia - 5.4 5.4 Brazil 125.0 - 125.0 Brazil 45.0 - 45.0 Cameroon - 25.2 25.2 Colombia 12.5 - 12.5 Cote d'lvoire - 54.6 54.6 Djibouti - 6.5 6.5 Ecuador 10.7 - 10.7 El Salvador 24.0 - 24.0 Gabon 10.0 - 10.0 Guatemala 13.0 - 13.0 Hungary 7.7 - 7.7 Jamaica 28.4 - 28.4 Kazakhstan 15.8 - 15.8 Kazakhstan 10.0 - 10.0 Kyrgyz Republic - 44.0 44.0 Madagascar - 13.8 13.8 Moldova - 9.0 9.0 Morocco 85.0 - 85.0 Pakistan - 28.8 28.8 Russia 22.6 - 22.6 Total 729.7 190.2 919.9 (continued next page) APPENDIX FIFTEEN 179 PROJECTS APPROVED FOR IBRD AND IDA APPENDIX 15 ASSISTANCE IN FISCAL YEAR 1997, BY SECTOR (continued) (amounts in millions of US dollars) IBRD IDA Total Social sector Argentina 200.0 - 200.0 Belize 7.0 - 7.0 Bosnia and Herzegovina - 7.5 7.5 Bosnia and Herzegovina 10.0 10.0 Bosnia and Herzegovina - 7.0 7.0 Bulgaria 24.3 - 24.3 Jamaica 20.0 - 20.0 Latvia 18.1 - 18.1 Lithuania 3.7 - 3.7 Panama 28.0 - 28.0 Peru 150.0 - 150.0 Romania 50.0 - 50.0 Russia 800.0 - 800.0 Tajikistan - 12.0 12.0 Ukraine 2.6 - 2.6 Yemen, Republic of - 30.0 30.0 Total 1,303.7 66.5 1,370.2 Transportation Argentina 300.0 - 300.0 Argentina 200.0 - 200.0 Armenia - 15.0 15.0 Bangladesh - 133.0 133.0 Benin - 40.0 40.0 Bosnia and Herzegovina - 7.5 7.5 Brazil 300.0 - 300.0 Brazil 70.0 - 70.0 China 300.0 - 300.0 China 400.0 - 400.0 Dominican Republic 75.0 - 75.0 Eritrea - 6.3 6.3 India 350.0 - 350.0 India 51.5 - 51.5 India 50.0 100.0 150.0 Indonesia 105.0 - 105.0 Lao People's Democratic Republic - 48.0 48.0 Latvia 20.0 - 20.0 Lebanon 42.0 - 42.0 Lithuania 19.0 - 19.0 Mexico 475.0 - 475.0 Poland 67.0 - 67.0 Romania 150.0 - 150.0 Senegal - 6.6 6.6 Turkmenistan 34.2 - 34.2 Uruguay 76.0 - 76.0 Vietnam - 195.6 195.6 Vietnam - 55.0 55.0 Total 3,084.7 607.0 3,691.7 Urban development Bosnia and Herzegovina - 15.0 15.0 Brazil 100.0 - 100.0 Indonesia 110.0 - 110.0 Indonesia 155.0 - 155.0 180 THE WORLD BANK ANNUAL REPORT 1997 IBRD IDA Total Indonesia 140.1 - 140.1 Jordan 20.0 - 20.0 Lithuania 10.0 - 10.0 Madagascar - 35.0 35.0 Mali - 80.0 80.0 Niger - 20.0 20.0 Russia 31.0 - 31.0 Tunisia 80.0 - 80.0 Zimbabwe - 12.3 12.3 Total 646.1 162.3 808.4 Water supply and sanitation Argentina 200.0 - 200.0 Bangladesh - 80.3 80.3 China _ 70.0 70.0 Guinea - 25.0 25.0 Kazakhstan 7.0 - 7.0 Lebanon 53.1 - 53.1 Nepal - 18.3 18.3 Romania 25.0 - 25.0 Tunisia 60.0 - 60.0 Turkmenistan 30.3 - 30.3 Uzbekistan 5.0 - 5.0 Vietnam - 98.6 98.6 Yemen, Republic of - 10.2 10.2 Total 380.4 302.4 682.8 Grand total 14,524.9 4,621.7 19,146.6 - Zero. a. Many projects include activity in more than one sector or subsector APPENDIX FiFrEEN 181 DEVELOPMENT COMMITTEE COMMUNIQUES APPENDIX 16 FISCAL YEAR 1997 COMMUNIQUE HIPC Initiative through special ESAF operations, including long maturity loans or grants. The 53rd Meeting of the Development Committee was 5. Members supported the World Bank's proposed held in Washington, D.C. on September 30, 1996, US$500 million initial contribution and noted Presi- under the chairmanship of Mohamed Kabbaj, Minis- dent Wolfensohn's announced readiness to recom- ter of Finance and Foreign Investment of Morocco. mend to the Board of Executive Directors additional James D. Wolfensohn, President of the World Bank, contributions, provided future net income of the Michel Camdessus, Managing Director of the Intemna- Bank would so permit and that there is equitable tional Monetary Fund, and Qazi Alimullah, Deputy burden-sharing by creditors, and that these funds are Chairman of the Planning Commission of Pakistan for needed to meet the Bank's own share of the burden. Finance and Economic Affairs and Chainnan of the Members supported as well the enhanced assistance Group of Twenty-Four, addressed the plenary session. (including IDA grants) that the Bank intends to pro- Observers from a number of international and vide in selected cases when needed. regional organizations also attended. 6. Given the significant share of debt owed by the 1. Resolving debt problems of the heavily-idebted poorest and most indebted countries to bilateral poor countries (HIPc). The Committee expressed its creditors, Ministers welcomed the indication from appreciation to the Bank and Fund for the the Paris Club that it was ready to go beyond progress made since its last meeting and endorsed Naples Terms to provide debt reduction of up to 80 the Action Program for the HIPC Initiative. It urged percent for countries qualifying for additional relief the Bank and Fund, working closely with donors within the HIPC Initiative and that its decisions will and other creditors, to move swiftly to implement be made on a case-by-case basis according to its the Initiative. usual rules, to help poor countries achieve an exit 2. Members reiterated their support for the Initia- from unsustainable debt. They suggested that the tive's basic objective-ensuring that HIPCs demon- Paris Club, the international financial institutions strating a track record of sustained strong policy and all involved creditors coordinate their actions performance are able to achieve overall external to deliver needed debt relief consistent with the debt sustainability, enabling them to exit from the Initiative's basic principles. rescheduling process and to strengthen their pov- 7. Ministers welcomed the readiness to participate erty reduction programs. They recognized that the in the Initiative indicated by several multilateral HIPC Initiative commits the international financial agencies and urged other multilaterals to define community to additional action to reduce eligible their participation as soon as possible. The Com- countries' debt burdens to sustainable levels, where mittee agreed that the proposed multilateral HIPC full use of existing debt relief mechanisms is Trust Fund, to be administered by IDA, would make unlikely to be sufficient. an effective contribution to the success of the Ini- 3. Members agreed that coordinated action by all tiative. Members expressed appreciation to those creditors was critical to the Initiative's success. The bilateral donors who had indicated at this early assistance to be provided by each group of creditors stage their intention to contribute to the Trust Fund should be consistent with the guiding principles and encouraged others to do so as well. agreed at the Committee's April 1996 meeting and 8. Ministers requested the IMF and World Bank to would be based on the need to a) deliver debt sus- begin implementation of the Initiative for the first tainability; b) share broadly and equitably the cost potentially eligible countries before the end of of the Initiative; and c) preserve the preferred cred- 1996 and to report back to the Committee at its itor status of the multilateral financial institutions. next meeting on progress achieved in implementing Ministers stressed that the Initiative should be the Initiative. implemented flexibly, on a case-by-case basis, and 9. International Development Association (IDA). with full participation by debtor governments. Ministers reiterated their strong support for IDA and 4. Ministers also welcomed the commitment of its central importance to the global effort to reduce the IMF, reflected in the statement of the Interim poverty; therefore, it is important that all donors Committee on September 29,1996, to participate ensure the success of IDA 1I1 by fully supporting in the enhanced assistance to be provided under the their commitments on time. The Committee wel- 182 THE WORLD BANK ANNUAL REPORT 1997 comed the increased IBRD grant to IDA of US$600 the Group of Twenty-Four, and Richard H. Kaijuka, million this year. Minister of Planning and Economic Development of 10. Ministers recognized that the IDA I I agreement Uganda attended the plenary session. Observers from reflects a significant reduction in donor contribu- a number of international and regional organizations tions from previous levels. They asked IDA manage- also attended. ment and donor representatives to work together in 1. Implementation of the Debt Initiative for Hipcs. the ensuing months to.help ensure adequate and The Committee welcomed the substantial secure future funding for IDA. progress made since its last meeting in implement- 11. Multilateral Investment Guarantee Agency ing the HIPC Initiative: the Bank and the Fund (MIGA). Ministers noted that MIGA's activities had Executive Boards took a decision on Uganda that grown appreciably with the expansion of foreign would-subject to satisfactory assurances on the private investment in developing countries. They participation of other creditors and following a welcomed the recent rapid expansion in demand review of Uganda's further progress on adjustment for MIGA services and recognized that as a result, and reform-have an effect on its debt service of a MIGA is quickly approaching the limits of its finan- reduction in its multilateral and bilateral debt by cial capacity. Ministers requested that the MIGA about 20 percent, or about US$700 million by management and Board of Directors address MIGA'S April 1998. There was also preliminary agreement resource constraints soon and report on this subject on the eligibility of three other countries (Bolivia, at the Committee's next meeting. Burkina Faso, and C6te d'Ivoire), and the neces- 12. World Trade Organization (wro). The Commit- sary analysis for several other countries was well tee expressed its appreciation to wTo Director- underway. General Renato Ruggiero for his valuable briefing 2. Ministers reaffirmed the importance of imple- on key issues likely to be addressed at the First wTO menting the Initiative in accordance with the guid- Ministerial Meeting in December. Ministers agreed ing principles and the Program of Action agreed with Mr. Ruggiero on the importance of trade as a upon by the Committee in 1996. Ministers stressed formidable engine of economic growth for all the importance of adequate interim financing by all nations and on the opportunities and challenges creditors. They welcomed the recent Bank and offered by globalization. They requested the Bank Fund decisions on implementing the Initiative that and Fund to assist those countries not yet members demonstrate that with determination and cose col- of the wTo to join the organization and to assist all laboration by all partners, governments that show members, particularly the poorest, to become more strong commitment to reform and economic and fully integrated into the multilateral trading system. social development can achieve a sustainable exter- Ministers expressed their support for closer collab- nal debt position. oration between the wTo, the Fund and the Bank 3 Ministers expressed appreciation for the close and offered the Director-General and the wTo best working elatonsip among the B o os wishs fo a sccesful iniseria Meeing.working relationships among the Bretton Woods wishes for a successful Ministerial Meeting. institutions, other multilaterals, the Paris Club, and The 54th meeting of the Development Committee was other bilateral creditors. They also expressed appre- held in Washington, D.C. in the winter and addressed ciation to the governments that have made volun- administrative business matters only. tary contributions to the HIPC Trust Fund and to administrative business matters only. those that have indicated their readiness to contrib- COMMUNIQUE ute to the IMF ESAF/HIPc Trust; they urged other gov- ernments to do so as well. The 55th meeting of the Development Committee was 4. MIGA. Ministers noted the progress made by held in Washington, D.C. on April 29, 1997, under MiGA's Board and Management in addressing MIGA's the chairmanship of Mohamed Kabbaj, Minister of resource constraints. The Committee expressed Finance and Foreign Investment of Morocco. James D. broad support for MIGA's continued growth in Wolfensohn, President of the World Bank, Michel response to expanding demand for its services. As Camdessus, Managing Director of the International MIGA is rapidly approaching the limits of its finan- Monetary Fund, Antonio Casas Gonzalez, Governor cial capacity, Ministers urged the MIGA Board, of the Central Bank of Venezuela and Chairman of together with other parties involved, to resolve in APPENDIX SIXTEEN 183 an expeditious manner the remaining issues on how accepted goals such as those focused on poverty best to obtain adequate resources and report to the reduction, human welfare, and the environment Committee at its next meeting. help demonstrate development achievements and 5. Partnership for Capacity Building in Africa. lessons learned. Ministers welcomed the recent Africa's future economic and social progress will endorsement by OECD donors of such goals. depend heavily on today's investments in human 9. Ministers agreed that the primary beneficiaries capital and institutional capabilities. Past efforts in of development aid should be those poor coun- capacity building have not had wide success in fos- tries committed to economic growth and the tering effective institutions and sustainable transfer reduction of poverty through sound policies and of skills, in part because they did not foster local effective use of domestic and external resources. ownership. Thus, the Committee welcomed the ini- The Committee encouraged IDA and other multi- tiative taken by African governments to identify lateral agencies to strengthen further the role of and address this fundamental requirement. The policy performance in the allocation of their Committee appreciated the high degree of African resources, bearing in mind factors beyond the con- ownership and African governments' commitment trol of governments, while continuing to help to take their own action on capacity building, build the capacity of all countries to improve per- which is reflected in this effort. Ministers encour- formance. Bilateral donors were encouraged to aged the World Bank to continue to provide strong move further in this direction as well. support for this African initiative and to help build 10. Ministers welcomed the IMF support for adjust- support from others in the international commu- ment and reform programs under the ESAF and nity as the Partnership's program develops. emphasized the importance of continuing ESAF 6. Strengthening Support for Development Coopera- operations to assist low-income countries. tion. Developing countries have made progress in 11. Ministers emphasized the great importance reducing poverty in recent years, but in the poorest they attach to successful implementation of the IDA countries it remains pervasive and deep. Further 11 agreement. The Committee was encouraged by advances depend primarily on domestic efforts, but recently concluded agreements for several other integration into the international trading system multilateral development bank (MDB) replenish- and access to adequate extemal resource flows are ments and reiterated that continued strong support also essential. Ministers stressed the central impor- for MDBS by all shareholders, on a fair burden-shar- tance of improving the enabling environment for ing basis, is essential to preserve their multilateral private investment; moreover, the need to ensure character and to meet the key challenges of sustain- adequate access to Official DevelopmentAssistance able development. (ODA), notwithstanding donors' increasing budget- 12. Strategic Compact. The Committee welcomed ary pressures and competing demands, is a matter the World Bank's Strategic Compact, which aims to of great concem. improve the level and quality of front-line services 7. To strengthen support for development coop- and strengthen overall development effectiveness eration and help generate necessary ODA flows, by enhancing project quality and by making the Ministers agreed to redouble their efforts to Bank more cost-effective, participatory, flexible, ensure that aid resources are effectively mobi- and responsive to client needs. Members invited lized, delivered, and used.The Committee agreed the World Bank Board to monitor closely the that improved coordination and strengthened implementation of the Strategic Compact and partnerships among developing countries, the pri- requested periodic reports on progress achieved. vate sector, and bilateral and multilateral agencies 13. Facilitating Private Involvement in Infrastructure. are essential to improving aid effectiveness. Ministers welcomed the work underway in the 8. Ministers urged the World Bank to continue to World Bank Group to promote private sector invest- work closely with its partners on realistic and mon- ment in infrastructure, and they asked the Bank itorable development goals, adapted to specific Group to prepare an action program on this subject country conditions and with full ownership by the for the Committee's next meeting, which would be countries themselves. In this respect, generally taking place in Hong Kong on September 22. 184 THE WORLD BANK ANNUAL REPORT 1997 FINANCIAL STATEMENTS OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Balance Sheet 186 Statement of Income 188 Statement of Changes in Retained Earnings 188 Statement of Changes in Cumulative Translation Adjustment 188 Statement of Cash Flows 189 Summary Statement of Loans 190 Statement of Subscriptions to Capital Stock and Voting Power 192 Notes to Financial Statements 196 Report of Independent Accountants 217 IBRD FINANCIAL STATEMENTS 185 BALANCE SHEET June 30, 1997 and June 30, 1996 Expressed in millions of US. dollars 1997 1996 Assets Due from Banks Unrestricted currencies $ 26 $ 27 Currencies subject to restrictions-Note A 615 612 641 639 Investments-Notes B and E Trading 17,229 15,001 Held-to-maturity 1,279 1,169 18,508 16,170 Securities Purchased Under Resale Agreements-Note B 97 1,282 Nonnegotiable, Noninterest-bearing Demand Obligations on Account of Subscribed Capital 1,902 1,765 Amounts Receivable to Maintain Value of Currency Holdings 574 732 Other Receivables Amounts receivable from currency swaps-Notes D and E 29,031 18,010 Amounts receivable from investment securities traded 29 2,365 Amounts receivable from covered forwards-Notes B and E 4,571 204 Accrued income on loans 1,932 2,127 Accrued interest on investments 143 92 35,706 22,798 Loans Outstanding (see Summary Statement of Loans, Notes C and E) Total loans 157,381 164,766 Less undisbursed balance 51,576 54,520 Loans outstanding 105,805 110,246 Less accumulated provision for loan losses 3,210 3,340 Loans outstanding net of accumulated provision 102,595 106,906 Other Assets Unamortized issuance costs of borrowings 492 412 Miscellaneous-Notes Iand J 1,430 1,300 1,922 1,712 Total assets $161,945 $152,004 186 THE WORLD BANK ANNUAL REPORT 1997 1997 1996 Liabilities Borrowings-Notes D and E Short-term $ 7,648 $ 4,328 Medium- and long-term 89,031 92,391 96,679 96,719 Securities Sold Under Repurchase Agreements and Payable For Cash Collateral Received-Note B 294 2,439 Amounts Payable to Maintain Value of Currency Holdings 4 4 Other Liabilities Amounts payable for currency swaps-Notes D and E 29,687 19,427 Amounts payable for investment securities purchased 135 1,508 Amounts payable for covered forwards-Notes B and E 4,694 202 Accrued charges on borrowings 2,167 2,352 Payable for Board of Governors-approved transfers-Note F 201 205 Accounts payable and miscellaneous liabilities 856 848 37,740 24,542 Total liabilities 134,717 123,704 Equity Capital Stock (see Statement of Subscriptions to Capital Stock and Voting Power, Note A) Authorized capital (1,558,478 shares-June 30,1997 and June 30, 1996) Subscribed capital (1,512,211 shares-June 30, 1997; 1,497,325 shares-June 30, 1996) 182,426 180,630 Less uncalled portion of subscriptions 171,378 169,636 11,048 10,994 Deferred Amounts to Maintain Value of Currency Holdings (106) 136 Payments on Account of Pending Subscriptions-Note A 7 15 Retained Earnings (see Statement of Changes in Retained Earnings, Note F) 16,194 16,099 Cumulative Translation Adjustment (see Statement of Changes in Cumulative Translation Adjustment) 85 1,056 Total equity 27,228 28,300 Total liabilities and equity $161,945 $152,004 The Notes to Financial Statements are an integral part of these Statements. IBRD FINANCIAL STATEMENTS 187 STATEMENT OF INCOME For the fiscal years ended June 30, 1997 and June 30, 1996 Expressed in millions of US. dollars 1997 1996 Income Income from loans-Note C Interest $7,122 $ 7,804 Commitment charges 113 118 Income from investments-Note B Trading Interest 718 673 Net gains/(losses) Realized 47 31 Unrealized (43) (83) Held-to-maturity Interest 103 100 Income from securities purchased under resale agreements-Note B 53 66 Other income 12 11 Total income 8,125 8,720 Expenses Borrowing expenses-Note D Interest 5,827 6,455 Prepayment costs 16 9 Amortization of issuance and other borrowing costs 109 106 Interest on securities sold under agreements to repurchase and payable for cash collateral received-Note B 44 67 Administrative expenses-Notes G, H, I and J 651 733 Provision for loan losses-Note C 63 42 Other expenses 10 8 Total expenses 6,720 7,420 Operating Income 1,405 1,300 Less contributions to special programs-Note G 120 113 Net Income $1,285 $ 1,187 STATEMENT OF CHANGES IN RETAINED EARNINGS For the fiscal years ended June 30,1997 and June 30,1996 Expressed in millions of US. dollars 1997 1996 Retained earnings at beginning of the fiscal year $16,099 $15,502 Board of Governors-approved transfers to-Note F International Development Association (600) (250) Debt Reduction Facility for IDA-Only Countries - (100) Trust Fund for Gaza and West Bank (90) (90) Trust Fund for Bosnia and Herzegovina - (150) Heavily Indebted Poor Countries Debt Initiative Trust Fund (500) Net income for the fiscal year 1,285 1,187 Retained earnings at end of the fiscal year $16,194 $16,099 STATEMENT OF CHANGES IN CUMULATIVE TRANSLATION ADJUSTMENT For the fiscal years ended June 30, 1997 and June 30, 1996 Expressed in millions of US. dollars 1997 1996 Cumulative translation adjustment at beginning of the fiscal year $1,056 $ 3,308 Translation adjustment for the fiscal year (971) (2,252) Cumulative translation adjustment at end of the fiscal year $ 85 $ 1,056 The Notes to Financial Statements are an integral part of these Statements. 188 THE WORLD BANK ANNUAL REPORT 1997 STATEMENT OF CASH FLOWS For the fiscal years ended June 30, 1997 and June 30, 1996 Expressed in millions of US. dollars 1997 1996 Cash flows from lending and investing activities Loans Disbursements $(14,009) $(13,321) Principal repayments 10,710 11,494 Principal prepayments 1,311 812 Investments: Held-to-maturity Purchases (8,911) (5,417) Maturities 8,895 5,422 Net cash used in lending and investing activities (2,004) (1,0103 Cash flows from Board of Governors-approved transfers to International Development Association (599) (250) Debt Reduction Facility for IDA-Only Countries (1) (86) Trust Fund for Gaza and West Bank, Trust Fund for Bosnia and Herzegovina, and for Emergency Assistance for Rwanda (91) (179) Heavily Indebted Poor Countries Debt Initiative Trust Fund (500) - Net cash used in Board of Governors-approved transfers (1,191) (5153 Cash flows from financing activities Medium- and long-term borrowings New issues 14,928 9,851 Retirements (14,137) (10,330) Net short-term borrowings 3,277 340 Net currency swaps (266) (649) Net capital stock transactions 71 111 Net cash provided by (used in) financing activities 3,873 (677) Cash flows from operating activities Net income 1,285 1,187 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 541 399 Provision for loan losses 63 42 Changes in other assets and liabilities Decrease in accrued income on loans and investments 18 176 Increase in miscellaneous assets (153) (80) Decrease in accrued charges on borrowings (49) (214) Increase (decrease) in accounts payable and miscellaneous liabilities 35 (18) Net cash provided by operating activities 1,740 1,492 Effect of exchange rate changes on unrestricted cash and liquid investments (319) (1,632) Net increase (decrease) in unrestricted cash and liquid investments 2,099 (2,342) Unrestricted cash and liquid investments at beginning of the fiscal year 14,730 17,072 Unrestricted cash and liquid investments at end of the fiscal year $ 16,829 $ 14,730 Composed of Investments held in trading portfolio $ 17,229 $ 15,001 Unrestricted currencies 26 27 Net (payable) receivable for investment securities traded/purchased (106) 857 Net (payable) receivable from covered forwards (123) 2 Net payable for securities purchased/sold under resale/repurchase agreements and payable for cash collateral received (197) (1,157) $ 16,829 $ 14,730 Supplemental disclosure Increase (decrease) in ending balances resulting from exchange rate fluctuations Loans outstanding $ (6,429) $(14,436) Investments: Held-to-maturity 94 (29) Borrowings (4,701) (11,731) Currency swaps (495) (1,184) The Notes to Financial Statements are an integralpart of these Statements. IBRD FINANCLAL STATEMENTS 189 SUMMARY STATEMENT OF LOANS June 30, 1997 Expressed in millions of US. dollars Loans Undisbursed Percentage approved balance of of total Total but not yet effective Loans loans Borrower or guarantor loans effective' loanS2 outstanding outstanding Algeria $ 2,624 $ 89 $ 720 $ 1,815 1.72 Argentina 8,483 1,259 1,852 5,372 5.08 Armenia 11 - 1 10 0.01 Bahamas, The 8 - - 8 0.01 Bangladesh 43 - - 43 0.04 Barbados 32 - 18 14 0.01 Belarus 158 - 36 122 0.12 Belize 56 7 14 35 0.03 Bolivia 48 - - 48 0.05 Bosnia and Herzegovina 579 - 579 0.55 Botswana 58 - 58 0.05 Brazil 9,529 943 2,691 5,895 5.57 Bulgaria 768 40 263 465 0.44 Cameroon 475 - 8 467 0.44 Chile 1,434 - 404 1,030 0.97 China 16,765 2,181 6,647 7,937 7.50 Colombia 2,813 15 819 1,979 1.87 Congo, Democratic Republic of 84 - - 84 0.08 Congo, Republic of 77 - 1 76 0.07 Costa Rica 287 - 62 225 0.21 C6te d'Ivoire 1,191 - 2 1,189 1.12 Croatia 544 135 185 224 0.21 Cyprus 89 - 27 62 0.06 Czech Republic 519 101 418 0.40 Dominica 4 - 4 Dominican Republic 376 112 37 227 0.21 Ecuador 1,255 21 322 912 0.86 Egypt, Arab Republic of 1,257 20 262 975 0.92 El Salvador 473 - 191 282 0.27 Estonia 117 - 50 67 0.06 Fiji 45 - 11 34 0.03 Gabon 113 10 18 85 0.08 Ghana 35 - - 35 0.03 Grenada 4 - 4 - Guatemala 274 46 32 196 0.19 Guyana 23 - - 23 0.02 Honduras 311 - - 311 0.29 Hungary 2,172 60 604 1,508 1.43 India 12,560 575 3,102 8,883 8.40 Indonesia 15,269 284 4,444 10,541 9.96 Iran, Islamic Republic of 795 - 384 411 0.39 Iraq 44 - - 44 0.04 Jamaica 656 - 179 477 0.45 Jordan 940 - 168 772 0.73 Kazakhstan 917 17 412 488 0.46 Kenya 257 - - 257 0.24 Korea, Republic of 2,083 - 434 1,649 1.56 Latvia 233 38 89 106 0.10 Lebanon 597 53 407 137 0.13 Lesotho 87 - 29 58 0.05 Liberia 141 - - 141 0.13 Lithuania 267 4 156 107 0.10 Macedonia, former Yugoslav Republic of 111 - 38 73 0.07 Madagascar 4 - - 4 * Malawi 39 - - 39 0.04 Malaysia 947 - 126 821 0.78 Mauritania 7 - - 7 0.01 Mauritius 182 - 61 121 0.11 Mexico 15,341 960 2,669 11,712 11.07 190 THE WORLD BANK ANNUAL REPORT 1997 Loans Undisbursed Percentage approved balance of of total Total but not yet effective Loans loans Borrower or guarantor loans effectivel loans2 outstanding outstanding Moldova $ 237 $ 17 $ 82 $ 138 0.13 Morocco 4,488 90 881 3,517 3.32 Nicaragua 30 - - 30 0.03 Nigeria 2,917 - 352 2,565 2.42 Oman 16 - - 16 0.02 Pakistan 3.958 - 1,019 2,939 2.78 Panama 368 50 98 220 0.21 Papua New Guinea 353 - 70 283 0.27 Paraguay 369 - 233 136 0.13 Peru 2.756 - 876 1,880 1.78 Philippines 5,653 230 1,009 4,414 4.17 Poland 2,830 - 678 2,152 2.03 Portugal 18 - 2 16 0.02 Romania 2,467 548 839 1,080 1.02 Russian Federation 7,778 316 3,787 3,675 3.47 St. Kitts and Nevis 3 - 2 1 * St. Lucia 10 - 6 4 * St. Vincent and the Grenadines 3 - 2 * * Senegal 18 - - 18 0.02 Seychelles 6 - 2 4 * Sierra Leone 2 - - 2 * Slovak Republic 270 - 28 242 0.23 Slovenia 212 43 27 142 0.13 South Africa 46 46 - Sri Lanka 35 - 35 0.03 Sudan 6 - - 6 0.01 Swaziland 37 - 25 12 0.01 Syrian Arab Republic 360 - - 360 0.34 Tanzania 45 - - 45 0.04 Thailand 2,495 288 705 1,502 1.42 Trinidad and Tobago 158 - 81 77 0.07 Tunisia 2,273 162 567 1,544 1.46 Turkey 5,100 15 1,218 3,867 3.65 Turkmenistan 89 65 20 4 * Ukraine 1,937 88 845 1,004 0.95 Uruguay 717 201 88 428 0.40 Uzbekistan 230 - 79 151 0.14 Venezuela 1,998 - 691 1,307 1.24 Yugoslavia, Federal Republic of (Serbia/Montenegro)3 1,146 - - 1,146 1.08 Zambia 78 - - 78 0.07 Zimbabwe 622 - 122 500 0.47 Subtotal5 156.744 9,027 42,519 105,198 99.42 Caribbean Development Bank4 35 - 27 8 0.01 International Finance Corporation 602 - 3 599 0.57 Total-June 30, 19975 $157,381 $9,027 $42,549 $105,805 100.00 Total-June 30, 1996 $164,766 $9,500 $45,020 $110,246 ' Indicates amounts less than $0.5 million or less than 0.005 percent. NOTES 1. Loans totaling $6,417 million ($5,170 million-June 30, 1996) have been approved by IBRD, but the related agreements have not been signed. Loan agreements totaling $2,610 million ($4,330 million-June 30, 1996) have been signed, but the loans do not become effective and disbursements thereunder do not start until the borrowers and guarantors, if any, take certain actions and furnish certain documents to IBRD. 2. Ofthe undisbursed balance, IBRD has entered into irrevocable commitments to disburse $1,937 million ($2,258 million-June 30, 1996). 3. See Notes to Financial Statements-Notes A and C 4. These loans are for the benefit of The Bahamas, Barbados, Grenada, Guyana, Jamaica, Trinidad and Tobago, and territories of the United Kingdom (Associated States and Dependencies) in the Caribbean Region, who are severally liable as guarantors to the extent of subloans made in their territories. 5. May differ from the sum of individual figures shown due to rounding The Notes to Financial Statements are an integralpart of these Statements. IBRD FINANC[AL STATEMENTS 191 STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCK AND VOTING POWER June 30, 1997 Expressed in millions of U.S. dollars Subscriptions Voting power Amounts Numnber Percentage Percentage Total Amounts subject of of Member Shares of total amounts paid in' to call1 votes total Afghanistan 300 0.02 $ 36.2 $ 3.6 $ 32.6 550 0.04 Albania 830 0.05 100.1 3.6 96.5 1,080 0.07 Algeria 9,252 0.61 1,116.1 67.1 1,049.0 9,502 0.61 Angola 2,676 0.18 322.8 17.5 305.4 2,926 0.19 Antigua and Barbuda 520 0.03 62.7 1.3 61.5 770 0.05 Argentina 17,911 1.18 2,160.7 132.2 2,028.4 18,161 1.17 Armenia 1,139 0.08 137.4 5.9 131.5 1,389 0.09 Australia 24,464 1.62 2,951.2 181.8 2,769.5 24,714 1.59 Austria 11,063 0.73 1,334.6 80.7 1,253.9 11,313 0.73 Azerbaijan 1,646 0.11 198.6 9.7 188.8 1,896 0.12 Bahamas,The 1,071 0.07 129.2 5.4 123.8 1,321 0.08 Bahrain 1,103 0.07 133.1 5.7 127.4 1,353 0.09 Bangladesh 4,854 0.32 585.6 33.9 551.6 5,104 0.33 Barbados 948 0.06 114.4 4.5 109.9 1,198 0.08 Belarus 3,323 0.22 400.9 22.3 378.5 3,573 0.23 Belgium 28,983 1.92 3,496.4 215.8 3,280.6 29,233 1.88 Belize 586 0.04 70.7 1.8 68.9 836 0.05 Benin 868 0.06 104.7 3.9 100.8 1,118 0.07 Bhutan 479 0.03 57.8 1.0 56.8 729 0.05 Bolivia 1,785 0.12 215.3 10.8 204.5 2,035 0.13 Bosnia and Herzegovina 549 0.04 66.2 5.8 60.4 799 0.05 Botswana 615 0.04 74.2 2.0 72.2 865 0.06 Brazil 24,946 1.65 3,009.4 185.1 2,824.2 25,196 1.62 Brunei Darussalam 2,373 0.16 286.3 15.2 271.1 2,623 0.17 Bulgaria 5,215 0.34 629.1 36.5 592.6 5,465 0.35 Burkina Faso 868 0.06 104.7 3.9 100.8 1,118 0.07 Burundi 716 0.05 86.4 3.0 83.4 966 0.06 Cambodia 214 0.01 25.8 2.6 23.2 464 0.03 Cameroon 1,527 0.10 184.2 9.0 175.2 1,777 0.11 Canada 44,795 2.96 5,403.8 334.9 5,068.9 45,045 2.89 Cape Verde 508 0.03 61.3 1.2 60.1 758 0.05 Central African Republic 862 0.06 104.0 3.9 100.1 1,112 0.07 Chad 862 0.06 104.0 3.9 100.1 1,112 0.07 Chile 6,931 0.46 836.1 49.6 786.6 7,181 0.46 China 44,799 2.96 5,404.3 335.0 5,069.3 45,049 2.89 Colombia 6,352 0.42 766.3 45.2 721.1 6,602 0.42 Comoros 282 0.02 34.0 0.3 33.7 532 0.03 Congo, Democratic Republic of 2,643 0.17 318.8 25.4 293.5 2,893 0.19 Congo,Republicof 927 0.06 111.8 4.3 107.5 1,177 0.08 Costa Rica 233 0.02 28.1 1.9 26.2 483 0.03 C6te d'Ivoire 2,516 0.17 303.5 16.4 287.1 2,766 0.18 Croatia 2,293 0.15 276.6 17.3 259.3 2,543 0.16 Cyprus 1,461 0.10 176.2 8.4 167.9 1,711 0.11 Czech Republic 6,308 0.42 761.0 45.9 715.0 6,558 0.42 Denmark 10,251 0.68 1,236.6 74.6 1,162.0 10,501 0.67 Djibouti 559 0.04 67.4 1.6 65.9 809 0.05 Dominica 504 0.03 60.8 1.1 59.7 754 0.05 Dominican Republic 2,092 0.14 252.4 13.1 239.3 2,342 0.15 Ecuador 2,771 0.18 334.3 18.2 316.1 3,021 0.19 Egypt, Arab Republic of 7,108 0.47 857.5 50.9 806.6 7,358 0.47 El Salvador 141 0.01 17.0 1.7 15.3 391 0.03 Equatorial Guinea 715 0.05 86.3 2.7 83.5 965 0.06 Eritrea 593 0.04 71.5 1.8 69.7 843 0.05 Estonia 923 0.06 111.3 4.3 107.1 1,173 0.08 Ethiopia 978 0.06 118.0 4.7 113.3 1,228 0.08 192 THE WORLD BANK ANNUAL REPORT 1997 Subscriptions Voting power Amounts Number Percentage Percentage Total Amounts subject of of Memnber Shares of total amounts paid in' to call1 votes total Fiji 987 0.07 $ 119.1 $ 4.8 $ 114.3 1,237 0.08 Finland 8,560 0.57 1,032.6 61.9 970.8 8,810 0.57 France 69,397 4.59 8,371.7 520.4 7,851.3 69,647 4.47 Gabon 987 0.07 119.1 5.1 113.9 1,237 0.08 Gambia, The 543 0.04 65.5 1.5 64.0 793 0.05 Georgia 1,584 0.10 191.1 9.3 181.8 1,834 0.12 Germany 72,399 4.79 8,733.9 542.9 8,190.9 72,649 4.67 Ghana 1,525 0.10 184.0 12.7 171.2 1,775 0.11 Greece 1,684 0.11 203.1 14.1 189.1 1,934 0.12 Grenada 531 0.04 64.1 1.4 62.7 781 0.05 Guatemala 2,001 0.13 241.4 12.4 229.0 2,251 0.14 Guinea 1,292 0.09 155.9 7.1 148.8 1,542 0.10 Guinea-Bissau 540 0.04 65.1 1.4 63.7 790 0.05 Guyana 1,058 0.07 127.6 5.3 122.3 1,308 0.08 Haiti 1,067 0.07 128.7 5.4 123.3 1,317 0.08 Honduras 641 0.04 77.3 2.3 75.0 891 0.06 Hungary 8,050 0.53 971.1 58.0 913.1 8,300 0.53 Iceland 1,258 0.08 151.8 6.8 144.9 1,508 0.10 India 44,795 2.96 5,403.8 333.7 5,070.1 45,045 2.89 Indonesia 14,981 0.99 1,807.2 110.3 1,697.0 15,231 0.98 Iran, Islamic Republic of 23,686 1.57 2,857.4 175.8 2,681.5 23,936 1.54 Iraq 2,808 0.19 338.7 27.1 311.6 3,058 0.20 Ireland 5,271 0.35 635.9 37.1 598.8 5,521 0.35 Israel 4,750 0.31 573.0 33.2 539.8 5,000 0.32 Italy 44,795 2.96 5,403.8 334.8 5,069.0 45,045 2.89 Jamaica 2,578 0.17 311.0 16.8 294.2 2,828 0.18 Japan 93,770 6.20 11,311.9 703.5 10,608.5 94,020 6.04 Jordan 1,388 0.09 167.4 7.8 159.6 1,638 0.11 Kazakhstan 2,985 0.20 360.1 19.8 340.3 3,235 0.21 Kenya 2,461 0.16 296.9 15.9 281.0 2,711 0.17 Kiribati 465 0.03 56.1 0.9 55.2 715 0.05 Korea, Republic of 9,372 0.62 1,130.6 67.9 1,062.7 9,622 0.62 Kuwait 13,280 0.88 1,602.0 97.4 1,504.6 13,530 0.87 Kyrgyz Republic 1,107 0.07 133.5 5.7 127.9 1,357 0.09 Lao People's Democratic Republic 178 0.01 21.5 1.5 20.0 428 0.03 Latvia 1,384 0.09 167.0 7.8 159.2 1,634 0.10 Lebanon 340 0.02 41.0 1.1 39.9 590 0.04 Lesotho 663 0.04 80.0 2.3 77.6 913 0.06 Liberia 463 0.03 55.9 2.6 53.3 713 0.05 Libya 7,840 0.52 945.8 57.0 888.8 8,090 0.52 Lithuania 1,507 0.10 181.8 8.7 173.1 1,757 0.11 Luxembourg 1,652 0.11 199.3 9.8 189.5 1,902 0.12 Macedonia, formerYugoslavRepublicof 427 0.03 51.5 3.2 48.3 677 0.04 Madagascar 1,422 0.09 171.5 8.1 163.5 1,672 0.11 Malawi 1,094 0.07 132.0 5.6 126.4 1,344 0.09 Malaysia 8,244 0.55 994.5 59.5 935.0 8,494 0.55 Maldives 469 0.03 56.6 0.9 55.7 719 0.05 Mali 1,162 0.08 140.2 6.1 134.1 1,412 0.09 Malta 1,074 0.07 129.6 5.4 124.1 1,324 0.09 Marshall Islands 469 0.03 56.6 0.9 55.7 719 0.05 Mauritania 900 0.06 108.6 4.1 104.4 1,150 0.07 Mauritius 1,242 0.08 149.8 6.7 143.1 1,492 0.10 Mexico 18,804 1.24 2,268.4 139.0 2,129.4 19,054 1.22 Micronesia, Federated States of 479 0.03 57.8 1.0 56.8 729 0.05 Moldova 1,368 0.09 165.0 7.6 157.4 1,618 0.10 IBRD FINANCIAL STATEMENTS 193 STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCK AND VOTING POWER (continued) June 30, 1997 Expressed in millions of Us. dollars Subscriptions Voting power Amounts Number Percentage Percentage Total Amounts subject of of Member Shares of total amounts paid in' to call1 votes total Mongolia 466 0.03 $ 56.2 $ 2.3 $ 53.9 716 0.05 Morocco 4,973 0.33 599.9 34.8 565.1 5,223 0.34 Mozambique 930 0.06 112.2 4.8 107.4 1,180 0.08 Myanmar 2,484 0.16 299.7 16.1 283.6 2,734 0.18 Namibia 1,523 0.10 183.7 8.8 174.9 1,773 0.11 Nepal 968 0.06 116.8 4.6 112.1 1,218 0.08 Netherlands 35,503 2.35 4,282.9 264.8 4,018.1 35,753 2.30 New Zealand 7,236 0.48 872.9 51.9 821.0 7,486 0.48 Nicaragua 608 0.04 73.3 2.1 71.3 858 0.06 Niger 852 0.06 102.8 3.8 99.0 1,102 0.07 Nigeria 12,655 0.84 1,526.6 92.7 1,433.9 12,905 0.83 Norway 9,982 0.66 1,204.2 72.6 1,131.6 10,232 0.66 Oman 1,561 0.10 188.3 9.1 179.2 1,811 0.12 Pakistan 9,339 0.62 1,126.6 67.8 1,058.9 9,589 0.62 Panama 385 0.03 46.4 3.2 43.2 635 0.04 PapuaNewGuinea 1,294 0.09 156.1 7.1 149.0 1,544 0.10 Paraguay 1,229 0.08 148.3 6.6 141.6 1,479 0.09 Peru 5,331 0.35 643.1 37.5 605.6 5,581 0.36 Philippines 6,844 0.45 825.6 48.9 776.7 7,094 0.46 Poland 10,908 0.72 1,315.9 79.6 1,236.3 11,158 0.72 Portugal 5,460 0.36 658.7 38.5 620.2 5,710 0.37 Qatar 1,096 0.07 132.2 9.0 123.3 1,346 0.09 Romania 4,011 0.27 483.9 30.5 453.4 4,261 0.27 Russian Federation 44,795 2.96 5,403.8 333.9 5,070.0 45,045 2.89 Rwanda 1,046 0.07 126.2 5.2 120.9 1,296 0.08 St. Kitts and Nevis 275 0.02 33.2 0.3 32.9 525 0.03 St. Lucia 552 0.04 66.6 1.5 65.1 802 0.05 St. Vincent and the Grenadines 278 0.02 33.5 0.3 33.2 528 0.03 Sao Tome and Principe 495 0.03 59.7 1.1 58.6 745 0.05 Saudi Arabia 44,795 2.96 5,403.8 335.0 5,068.9 45,045 2.89 Senegal 2,072 0.14 250.0 13.0 237.0 2,322 0.15 Seychelles 263 0.02 31.7 0.2 31.6 513 0.03 Sierra Leone 718 0.05 86.6 3.0 83.6 968 0.06 Singapore 320 0.02 38.6 3.9 34.7 570 0.04 Slovak Republic 3,216 0.21 388.0 23.0 365.0 3,466 0.22 Slovenia 1,261 0.08 152.1 9.5 142.6 1,511 0.10 Solomon Islands 513 0.03 61.9 1.2 60.7 763 0.05 Somalia 552 0.04 66.6 3.3 63.3 802 0.05 South Africa 13,462 0.89 1,624.0 98.8 1,525.2 13,712 0.88 Spain 23,686 1.57 2,857.4 175.6 2,681.7 23,936 1.54 Sri Lanka 3,817 0.25 460.5 26.1 434.3 4,067 0.26 Sudan 850 0.06 102.5 7.2 95.3 1,100 0.07 Suriname 412 0.03 49.7 2.0 47.7 662 0.04 Swaziland 440 0.03 53.1 2.0 51.1 690 0.04 Sweden 14,974 0.99 1,806.4 110.2 1,696.2 15,224 0.98 Switzerland 26,606 1.76 3,209.6 197.2 3,012.4 26,856 1.72 Syrian Arab Republic 2,202 0.15 265.6 14.0 251.7 2,452 0.16 Tajikistan 1,060 0.07 127.9 5.3 122.5 1,310 0.08 Tanzania 1,295 0.09 156.2 10.0 146.2 1,545 0.10 Thailand 6,349 0.42 765.9 45.2 720.7 6,599 0.42 Togo 1,105 0.07 133.3 5.7 127.6 1,355 0.09 Tonga 494 0.03 59.6 1.1 58.5 744 0.05 TrinidadandTobago 2,664 0.18 321.4 17.6 303.7 2,914 0.19 Tunisia 719 0.05 86.7 5.7 81.1 969 0.06 Turkey 7,379 0.49 890.2 52.9 837.2 7,629 0.49 194 THE WORLD BANK ANNUAL REPORT 1997 Subscriptions Voting power Amounts Number Percentage Percentage Total Amounts subject of of Member Shares of total amounts paid in' to call' votes total Turkmenistan 526 0.03 $ 63.5 $ 2.9 $ 60.5 776 0.05 Uganda 617 0.04 74.4 4.4 70.1 867 0.06 Ukraine 10,908 0.72 1,315.9 79.3 1,236.6 11,158 0.72 UnitedArab Emirates 2,385 0.16 287.7 22.6 265.1 2,635 0.17 United Kingdom 69,397 4.59 8,371.7 539.5 7,832.2 69,647 4.47 United States 264,969 17.52 31,964.5 1,998.4 29,966.2 265,219 17.03 Uruguay 2,812 0.19 339.2 18.6 320.7 3,062 0.20 Uzbekistan 2,493 0.16 300.7 16.1 284.7 2,743 0.18 Vanuatu 586 0.04 70.7 1.8 68.9 836 0.05 Venezuela 20,361 1.35 2,456.2 150.8 2,305.5 20,611 1.32 Vietnam 968 0.06 116.8 8.1 108.7 1,218 0.08 Western Samoa 531 0.04 64.1 1.4 62.7 781 0.05 Yemen, Republic of 2,212 0.15 266.8 14.0 252.8 2,462 0.16 Zambia 2,810 0.19 339.0 20.0 319.0 3,060 0.20 Zimbabwe 3,325 0.22 401.1 22.4 378.7 3,575 0.23 Total-June30, 19972 1,512,211 100.00 $182,426 $11,048 $171,378 1,557,211 100.00 Total-June 30, 1996 1,497,325 100.00 $180,630 $10,994 $169,636 1,542,325 NOTES 1. See Notes to Financial Statements-Note A. 2. May differ from the sum of individual figures dute to rounding. The Notes to Financial Statemnents are an integral part of these Statements. IBRD FINANCIAL STATEMENTS 195 NOTES TO FINANCIAL STATEMENTS PURPOSE AND AFFILIATED ORGANIZATIONS standard does not apply to financial instruments. The The International Bank for Reconstruction and Devel- adoption of this standard had no material impact on opment (IBRD) is an international organization which rsRD's financial statements. commenced operations in 1946. The principal purpose During the fourth quarter of fiscal year 1997, IBRD of IBRD is to promote economic development in its adopted International Accounting Standards (IAS) No. member countries, primarily by providing loans and 32 entitled "Financial Instruments: Disclosure and Pre- related technical assistance for specific projects and for sentation." IAS No. 32 specifies the disclosure of certain programs of economic reform in developing member information on various risk elements associated with countries. The activities of IBRD are complemented by financial instruments. These disclosures are contained those of three affiliated organizations, the Intema- in Notes B, C, and D. tional Development Association (IDA), the Interna- tional Finance Corporation (IFC), and the Multilateral In 1996 the Financial Accounting Standards Board Investment Guarantee Agency (MIGA). Each of these issued the Statement of Financial Accounting Stan- organizations is legally and financially independent dards No. 125, entitled 'Accounting for Transfers of from IBRD, with separate assets and liabilities, and IBRD Assets and Servicing of Financial Assets and Extin- is not liable for their respective obligations. IDA'S pur- guishments of Liabilities," which requires new pose is to promote economic development in the less accounting and reporting standards for transfers of developed areas of the world included in IDA'S mem- assets, securitizations, collateral, and servicing of bership by providing financing on concessionary terms, receivables and other financial assets, and extinguish- IFC's purpose is to encourage the growth of productive ments of liabilities. While the standard is effective for private enterprises in its member countries through fiscal year 1997, the provisions which would have an loans and equity investments in such enterprises with- impact on IBRD relating to transfers involving repur- out a member's guarantee. MIGA was established to chase/resale agreements, collateral agreements and encourage the flow of investments for productive pur- securities lending for transfers of financial assets will poses among member countries and, in particular, to not be effective until the beginning of 1998. The developing member countries by providing guarantees adoption of this standard is expected to have no mate- against noncommercial risks for foreign investment in rial impact on IBRD'S financial statements. its developing member countries. Certain reclassifications of the prior year's information SUMMARY OF SIGNIFICANT ACCOUNTING have been made to conform to the current period's AND RELATED POLICIES presentation. IBRD's financial statements are prepared in conformity Translation of Currencies: IBRD'S financial statements with the accounting principles generally accepted in are expressed in terms of U.S. dollars solely for the the United States and with International Accounting purpose of summarizing IBRD'S financial position and Standards. the results of its operations for the convenience of its mnembers and other interested parties. The preparation of financial statements in conformity with generally accepted accounting principles requires IBRD is an international organization which conducts its management to make estimates and assumptions that operations in the currencies of all of its members. affect the reported amounts of assets and liabilities and IBRD's resources are derived from its capital, borrow- disclosure of contingent assets and liabilities at the date ings, and accumulated earnings in those various cur- of the financial statements and the reported amounts of rencies. IBRD has a number of general policies aimed at revenue and expenses during the reporting period. minimizing exchange-rate risk in a multicurrency envi- Actual results could differ from these estimates. Signif- ronment. IBRD matches its borrowing obligations in any icant judgments have been used in the computation of one currency (after swaps) with assets in the same cur- estimated and fair values of loans and borrowings, the rency, as prescribed by its Articles of Agreement, pri- adequacy of the Accumulated Provision for Loan marily by holding or lending the proceeds of its Losses, determination of net periodic pension cost, and borrowings (after swaps) in the same currencies in the present value of obligations under the Staff Retire- which they are borrowed. In addition, IBRD periodi- ment and Retired Staff Benefits Plans. cally undertakes currency conversions to more closely match the currencies underlying its Retained Earnings During the first quarter of fiscal year 1997, IBRD with those of the outstanding loans. adopted prospectively the Statement of Financial Accounting Standards No. 121, entitled 'Accounting Assets and liabilities are translated at market exchange for the Impairment of Long-Lived Assets and for rates at the end of the period. Income and expenses Long-Lived Assets to Be Disposed of," which pre- are translated at the market exchange rates on the scribes that long-lived assets and certain intangibles be dates on which they are recognized or at average mar- reviewed for impairment whenever events or changes ket exchange rates in effect during each month. Trans- in circumstances indicate that the carrying amount lation adjustments are charged or credited to Equity. of an asset may not be recoverable. This accounting 196 THE WORLD BANK ANNUAL REPORT 1997 Valuation of Capital Stock: In the Articles of Agree- Trading portfolio, comprising obligations of the United ment, the capital stock of IBRD is expressed in terms of States Government, its agencies, and other official "U.S. dollars of the weight and fineness in effect on entities. The allocation of such commissions to the July 1, 1944" (1944 dollars). Following the abolition Special Reserve was discontinued in 1964 with respect of gold as a common denominator of the monetary to subsequent loans and no further additions are being system and the repeal of the provision of the U.S. law made to it. defining the par value of the U.S. dollar in terms of The General Reserve consists of earnings from prior gold, the pre-existing basis for translating 1944 dollars into current dollars or into any other currency disap- fiscal years that in the judgment of the Executive peared. The Executive Directors of IBRD have decided, Directors should be retained in RD's operatons. until such time as the relevant provisions of the Arti- Surplus consists of earnings from prior fiscal years cles of Agreement are amended, that the words "U.S. which are retained by IBRD until a further decision is dollars of the weight and fineness in effect on July 1, made on their disposition or the conditions of transfer 1944" in Article II, Section 2(a) of the Articles of for specified uses have been met. Agreement of IBRD are interpreted to mean the Special Drawing Right (SDR) introduced by the International Unallocated Net Income consists of earnings in the Monetary Fund, as the SDR was valued in terms of U.S. current fiscal year. Commencing in 1950, a portion or dollars immediately before the introduction of the all of the unallocated Net Income has been allocated basket method of valuing the SDR on July 1, 1974, such to the General Reserve. The Board of Governors, con- value being $1.20635 for one SDR sisting of one Governor appointed by each member, periodically approves transfers out of unallocated Net Maintenance of Value:Article II, Section 9 of the Income and Surplus, components of Retained Earn- Articles of Agreement provides for maintenance of the ings, after an assessment by the Executive Directors of value, at the time of subscription, of such restricted IBRD's reserve needs, to various entities for develop- currencies (see Note A), requiring (1) the member to ment purposes consistent with IBRD's Articles of make additional payments to IBRD in the event that the Agreement. par value of its currency is reduced or the foreign exchange value of its currency has, in the opinion of Loans:All of IBRD'S loans are made to or guaranteed by IBRD, depreciated to a significant extent in its territo- members, except loans to iFc. The majority of IBRD's ries and (2) IBRD to reimburse the member in the event loans have repayment obligations in various currencies that the par value of its currency is increased. determined on the basis of a currency pooling system, which is designed to equalize exchange-rate risks Since currencies no longer have par values, mainte- among borrowers. IBRD also offers single currency nance of value amounts are determined by measuring loans. Except for certain loans which were converted the foreign exchange value of a member's currency to the currency pooling system, loans negotiated prior against the standard of value of IBRD capital based on to July 1980 and all single currency loans are repayable the 1974 SDR Members are required to make pay- in the currencies disbursed. ments to IBRD if their currencies depreciate signifi- cantly relative to the standard of value. Furthermore, Incremental direct costs associated with originating the Executive Directors have adopted a policy of reim- loans are expensed as incurred as such amounts are bursing members whose currencies appreciate signifi- considered immaterial. cantly in terms of the standard of value. IBRD'S policy is to not reschedule interest or principal The net maintenance of value amounts relating to payments on its loans or participate in debt reschedul- restricted currencies out on loan are included in ing agreements with respect to its loans. In exceptional Deferred Amounts to Maintain Value of Currency cases, however, such as when implementation of a Holdings and shown as a component of Equity since financed project has been delayed, the loan amortiza- maintenance of value becomes effective only as such tion schedule may be modified to avoid substantial currencies are repaid to IBRD. repayments prior to project completion. In addition, in the special case of Bosnia and Herzegovina, IBRD has Retained Earnings: Retained Earnings consists of allo- refinanced/rescheduled, through three new IBRD con- cated amounts (Special Reserve, General Reserve, and solidation loans, certain loans made to the former Surplus) and unallocated Net Income. Socialist Federal Republic of Yugoslavia (SFRY) for The Special Reserve consists of loan commissions set which Bosnia and Herzegovina has accepted liability. aside pursuant to Article IV, Section 6 of the Articles IBRD'S special treatment in this case was based on the of Agreement, which are to be held in liquid assets. following criteria: the country (i) has emerged from a These assets may be used only for the purpose of current or former member of IBRD, (ii) is assuming meeting liabilities of IBRD on its borrowings and guar- responsibility for a share of the debt of that member, antees in the event of defaults on loans made, partici- (iii) has limited creditworthiness for servicing the debt pated in, or guaranteed by IBRD. The Special Reserve that it assumes, because of a major armed conflict in assets are included under Investments held in the its territory involving extensive destruction of physical IBRD FINANCIAL STATEMENTS 197 assets, and (iv) can improve significantly its repayment chase. Securities which management has the intention capacity through refinancing/rescheduling, if appro- and ability to hold until maturity are included in the priate supporting measures are taken. At the balance Held-to-maturity portfolio and reported at amortized sheet dates no other country met these criteria. cost. All other investment securities are held in a Trad- ing portfolio and classified as an element of liquidity in Delays in receiving loan payments result in present val the Statement of Cash Flows due to their nature and losses to IlRD since it does not charge fees or additional lORD'S policies governing the level and use of such interest on any overdue interest or loan charges. These . I present value losses are equal to the difference between caistments heldmin ities ad rtfioare th prsn vau of pamet fo ineetan.hre cial instruments held in IBRD'S Tracling portfolio are the presentvlueofpymentsfr it carried and reported at market value. Unrecognized made according to the related loan's contractual terms gains and losses for financial instruments held in the and the present value of their expected future cash flows Trading portfolio are included in income. Derivative discounted at the loan's contractual interest rates. Such instruments are used in liquidity management to take present value losses are considered in the determination advantage of profitable trading opportunities and as a of the Accumulated Provision for Loan Losses. .. proxy for cash securities. These instruments include It is the policy of IBRD to place in nonaccrual status all short-term, over-the-counter foreign exchange for- loans made to or guaranteed by a member of rORD if wards and exchange-traded futures and options on principal, interest, or other charges with respect to any fixed income instruments. These derivatives are car- such loan are overdue by more than six months, unless ried at market value. From time to time, IBRD enters IBRD management determines that the overdue into forward contracts for the sale or purchase of amount will be collected in the immediate future. In investment securities; these transactions are recorded addition, if development credits made by IDA to a at the time of commitment. member government are placed in nonaccrual status, Securities Purchased Under Resale Agreements and all loans made to or guaranteed by that member gov- Securities Sold Under Repurchase Agreements: Secu- ernment will also be placed in nonaccrual status by rities purchased under resale agreements and securities lORD. On the date a member's loans are placed in non- sold under repurchase agreements are treated as secu- accrual status, unpaid interest and other charges rities lending and borrowing transactions and are car- accrued on loans outstanding to the member are . . . . deducted from the income of the current period. Interest and other charges on nonaccruing loans are Borrouings: To ensure funds are available for lending included in income only to the extent that payments and liquidity purposes, IBRD borrows in the worldwide have actually been received by lBRD. If collectibility capital markets offering its securities to private and risk is considered to be particularly high at the time of governmental buyers. IBRD issues short-term and arrears clearance or if IBRD refinances/reschedules non- medium- and long-term debt instruments denomi- accruing loans to a member so that no debt-service nated in various currencies with both fixed and adjust- payments remain overdue, the member's loans may able interest rates. Borrowings are carried on the not automatically emerge from nonaccrual status, even balance sheet at their par value (face value) adjusted though the member's eligibility for new loans may for any unamortized premiums or discounts. Issuance have been restored. The previously overdue interest costs associated with a bond offering are deferred and and other charges are not recognized as income in the amortized over the period during which the related period the refinancing/rescheduling occurs. A decision indebtedness is outstanding. The unamortized balance on the restoration of accrual status is made on a case- of the issuance costs is included in Other Assets on the by-case basis after a suitable period of payment perfor- balance sheet, and the issuance costs amortization is mance has passed from the time of arrears clearance, presented as a separate element under Borrowing Expenses on the income statement. Amortization of IORD determines the Accumulated Provision for Loan d n d u s d n e Losses based on an assessment of collectibility risk in the total loan and callable guarantees portfolio, includ- Borrowing Expenses on the income statement. ing loans in nonaccrual status. The accumulated provi- IORD uses derivatives in its borrowing and liability man- sion is periodically adjusted based on a review of the agement activities to create synthetic debt instruments prevailing circumstances. Adjustments to the accumu- to take advantage of cost saving opportunities across lated provision are recorded as a charge or credit to capital markets and lower its funding costs, to delink income. In the context of determining the adequacy of the time at which its borrowing costs are fixed from the Accumulated Provision for Loan Losses, IlRD con- the timing of the actual market borrowings, and to siders the present value of expected cash flows relative establish an appropriate match between the currency to the contractual cash flows for loans in making the and interest rate characteristics of its assets and liabili- required assessment. ties. These instruments include currency and interest Investments: Investment securities are classified based rate swaps, swap spread-locks, foreign exchange for- onR aaeetsinett of pur wards, exchange-traded futures, options and deferred and anticipatory rate setting contracts. These deriva- 198 THE WORLD BANK ANNUAL REPORT 1997 tives are used to modify the interest rate and/or cur- which were repurchased by members with U.S. dol- rency characteristics of the borrowing portfolio and are lars, and (ii) $435 million ($419 million-June 30, linked to the related borrowings at inception and 1996) which were the proceeds from encashments of remain so throughout the terms of their contracts. The U.S. dollar-denominated notes which are included in interest component of these derivatives is recognized as the amounts mentioned in (2) above, are freely usable an adjustment to the borrowing cost over the life of the by IBRD in any of its operations. The portion of the derivative contract and included in Interest under Bor- amounts paid in U.S. dollar-denominated notes are rowing Expenses on the income statement. Upon ter- encashed by IsRD in accordance with the schedules mination, the change in the derivative's market value is agreed between the members and IBRD. The remaining recorded as an adjustment to the carrying value of the amounts paid in the currencies of the members, underlying borrowing and recognized as an adjustment referred to as restricted currencies, are usable by IBRD of the borrowing cost over the remaining life of the in its lending operations only with the consent of the borrowing. In instances where the underlying borrow- respective members, and for administrative expenses. ing is prepaid, the change in the associated derivative's The equivalent of $5,299 million ($5,522 million- market value is recognized immediately as an adjust- June 30, 1996) has been used for lending purposes, ment to the cost of the underlying borrowing instru- with such consent. ment and accordingly into income. Currency swap payables and receivables are recorded on a historical Membership: In February 1993 IBRD's Executive Direc- cost basis and are separate items on the balance sheet. tors decided that the SFRY had ceased to be a member The notional principal on interest rate swaps is treated of IBR and that the Republic of Bosnia and Herzegov- as an off-balance sheet item, ina (now called Bosnia and Herzegovina), the Republic of Croatia, the former Yugoslav Republic of Mace- Fair Value Disclosures: Financial instruments for donia, the Republic of Slovenia, and the Federal which market quotations are available have been val- Republic of Yugoslavia (Serbia and Montenegro) (FRY) ued at the prevailing market value. Financial instru- are authorized to succeed to the SFRY's membership ments for which market quotations are not readily when certain requirements are met, including entering available have been valued using methodologies and into a final agreement with IBRD on IBRD'S loans made to assumptions that necessarily require the use of subjec- or guaranteed by the SFRY which the particular succes- tive judgments. Accordingly, the actual value at which sor Republic would assume. Four of the five successor such financial instruments could be exchanged in a Republics-Bosnia and Herzegovina, the Republic of current transaction or whether they are actually Croatia, the Republic of Slovenia, and the former exchangeable is not determinable. Yugoslav Republic of Macedonia-have become mem- NOTE A-CAPITAL STOCK, RESTRICTED CUR- bers of iBRD. The paid-in portion of the SFRY'S sub- RENCIES, MAINTENANCE OF VALUE AND scribed capital allocated to the FRY is included under MEMBERSHIP Payments on Account of Pending Subscriptions until the requirements of succession are met. Capital Stock:At June 30,1997, IBRD'S capital com- prised 1,558,478 (1,558,478-June 30, 1996) autho- NOTE B-INVESTMENTS rized shares, of which 1,512,211 (1,497,325-June 30, As part of its overall portfolio management strategy, 1996) shares had been subscribed. Each share has a par IBRD invests in government and agency obligations, time value of 0. I million 1974 SDRS, valued at the rate of deposits and related financial instruments with off-bal- $1.20635 per 1974 SDR Of the subscribed capital, ance sheet risk including futures, forward contracts, $11,048 million ($10,994 million-June 30,1996) has covered forward contracts, options and short sales. been paid in, and the remaining $171,378 million ($169,636 million-June 30, 1996) is subject to call On April 18, 1997, the Executive Directors approved only when required to meet the obligations of IBM cre- changes in IBRD'S general investment authority to per- ated by borrowing or guaranteeing loans. As to $145 940 mit IBRD to invest in marketable bonds, notes, and million ($144,504 million-June 30, 1996) the restric- other debt obligations or securities (including asset- tion on calls is imposed by the Articles of Agreement backed securities) issued or unconditionally guaran- and as to $25,438 million ($25,132 million-June 30 teed by corporate entities or trusts. Such obligations or 1996) by resolutions of the Board of Governors. securities require a credit rating of AAA. IBRD was also authorized to enter into currency swaps for liquid Restricted Currencies: The portion of capital subscrip- asset management purposes. tions paid in to IBRD is divided into two parts: (1) $1,105 million ($1,100 million-June 30,1996) ini- Government and Agency Obligations:These obliga- tially paid in gold or U.S. dollars and (2) $9,943 mil- tions include marketable bonds, notes and other obli- lion ($9,894 million-June 30, 1996) paid in cash or gations. Obligations issued or unconditionally noninterest-bearing demand obligations denominated guaranteed by governments of countries require a either in the currencies of the respective members or minimum credit rating of AA, if denominated in a cur- in U.S. dollars. The amounts mentioned in (1) above, rency other than the home currency of the issuer, and (i) $777 million ($777 million-June 30, 1996) otherwise no rating is required. Obligations issued by IBRD FINANCIAL STATEMENTS 199 an agency or instrumentality of a government of a The initial price of an option contract is equal to the country, a multilateral organization or any other offi- premium paid by the purchaser and is significantly less cial entity require a minimum credit rating of AA. than the contract or notional amount. IBRD does not Time Deposits:Time deposits include certificates of write uncovered option contracts. deposit, bankers' acceptances, and other obligations Repurchase and Resale Agreements and Securities issued or unconditionally guaranteed by banks and Loans: Repurchase agreements are contracts under other financial institutions. which a party sells securities and simultaneously agrees to repurchase the same securities at a specified Futures and Forwards: Futures and forward contracts future date at a fixed price. The reverse of this transac- are cnrac ts f e de ivr of seurities eo tion is called a resale agreement. Securities loans are money market instruments in which the seller agrees contracts under which securities are lent for a specified to make delivery at a specified future date of a speci- pod .of time atia fedurice. fled instrument, at a specified price or yield. Futures contracts are traded on regulated United States and Short Sales: Short sales are sales of securities not held international exchanges. IBRD generally closes out most in IBRD'S portfolio at the time of the sale. IBRD must open positions in futures contracts prior to maturity. purchase the security at a later date and bears the risk Therefore, cash receipts or payments are mostly lim- that the market value of the security will move ited to the change in market value of the futures con- adversely between the time of the sale and the time tracts. Futures contracts generally entail daily the security must be delivered. settlement of the net cash margin. Covered Forwards: Covered forwards are agreements Options: Options are contracts that allow the holder in which cash in one currency is converted into a dif- of the option the right, but not the obligation to pur- ferent currency and, simultaneously, a forward chase or sell a financial instrument at a specified price exchange agreement is executed providing for a future within a specified period of time from or to the seller exchange of the two currencies in order to recover the of the option. The purchaser of an option pays a pre- currency converted. mium at the outset to the seller of the option, who then bears the risk of an unfavorable change in the Liquid Porpoolo:A summary of IBRD'S position in trad- price of the financial instrument underlying the ing and other liquid portfolio instruments at June 30, option. IBRD only invests in exchange-traded options. 1997 and June 30, 1996 is as follows: In millions of US. dollars equivalent Other All Deutsche nark Japanese yen US. dollars currencies currencies 1997 1996 1997 1996 1997 1996 1997 1996 1997 1996 Trading: Government and agency obligations: Carrying value 642 524 - 1,119 2,873 3,536 20 238 3,535 5,417 Average balance during fiscal year 429 879 324 2,738 2,237 3,473 182 257 3,172 7,347 Net gains (losses) for the fiscal year (2) 19 (2) (45) (13) (41) 10 7 (7) (60) Average yield (O) 3.22 4.60 - 1.35 5.92 5.03 3.52 4.82 5.40 4.12 Average maturity (years) 2.03 5.10 - 2.94 5.35 3.80 0.19 8.40 4.71 3.87 Time deposits: Carrying value 1,311 1,041 3,569 1,775 7,664 5,822 1,149 942 13,693 9,580 Average balance during fiscal year 578 411 2,126 1,562 6,847 3,793 1,055 1,035 10,606 6,801 Net gains (losses) for the fiscal year - - - - - - - (*) - (*) Average yield(%) 3.11 3.38 0.49 0.50 5.91 5.52 3.76 3.96 4.05 4.21 Average maturity (years) 0.23 0.02 0.20 0.07 0.13 0.01 0.17 0.02 0.16 0.03 Futures and forxvards: Carrying value 1 1 3 - - - 1 4 Average balance during fiscal year 1 1 2 3 - - * e 3 4 Net gains (losses) for the fiscal year (*) (2) 1 (3) 11 15 (8) 12 10 (table continued on next page) 200 THE WORLD BANK ANNUAL REPORT 1997 (table continued) In millions of US. dollars equivalent Other All Deutsche mark Japanese yen U.S dollars currencies currences 1997 1996 1997 1996 1997 1996 1997 1996 1997 1996 Options: Carrying value - - * * * (*) Average balance during fiscal year - - Net gains (losses) for the fiscal year (*) (*) (*) (*) (1) (2) (*) (1) (2) Total Trading Investments*** Carrying value 1,954 1,566 3,569 2,897 10,537 9,358 1,169 1,180 17,229 15,001 Average balance during fiscalyear 1,008 1,291 2,452 4,303 9,084 7,266 1,237 1,292 13,781 14,152 Net gains (losses) for the fiscal year (2) 17 (*) (48) (3) (28) 10 7 4 (52) Repurchase agreements and Securities loans: Carrying value - - - - (294) (2,394) - (45) (294) (2,439) Average balance during fiscal (34) (142) - - (716) (1,406) (80) (27) (830) (1,575) year Average yield(%) - - - - 5.73 5.20 - 4.06 5.73 5.18 Average maturity (years) - - - - 0.02 0.02 - 0.02 0.02 0.02 Resale agreements: Carrying value 2 571 - - 95 655 - 56 97 1,282 Averagebalanceduringfiscal 305 463 - - 721 775 92 68 1,118 1,306 year Average yield (%) 2.90 3.49 - - 5.46 5.17 - 4.40 5.41 4.39 Average maturity (years) 0.02 0.01 - - 0.06 0.03 - 0.06 0.02 Short sales Carrying value - (25) - - (92) (54) - (*) (92) (79) Average balance during fiscal (42) (44) - (5) (134) (133) (15) (12) (191) (194) year Net covered forwards: Carrying value (908) 60 (3,226) (91) 4,571 (17) (560) 50 (123) 2 Average balance during fiscal (198) 162 (694) (88) 1,047 (423) (142) 348 13 (1) year Average yield (0) 3.10 3.33 0.48 0.43 5.78 5.40 3.69 3.17 3.55 3.69 Average maturity (years) 0.33 0.01 0.21 0.04 0.24 0.02 0.27 0.01 0.24 0.02 Less than $0.5 million. Less than 0.005 years. May differ from the sum of individual figures due to rounding. IBRD FINANCIAL STATEMENTS 201 Held to-maturity portfolio:The carrying and fair values of investment securities in the Held-to-maturity portfolio at June 30, 1997 and June 30, 1996 are as follows: In millions 1997 Average Gross Gross Carrying yield unrealized unrealized value (%) gains losses Fair value Government and agency obligations $1,140 8.74 $110 $_ $1,250 Time deposits 139 6.38 - - 139 Total $1,279 8.49 $110 $- $1,389 In millions 1996 Average Gross Gross Carrying yield unrealized unrealized value (° gains losses Fair value Government and agency obligations $1,055 8.74 $56 $- $1,111 Time deposits 114 5.81 - - 114 Total $1,169 8.46 $56 $= $1,225 At June 30, 1997 and June 30, 1996, the Held-to- The expected maturities of investment securities in maturity portfolio comprised investments in pounds the Held-to-maturity portfolio at June 30, 1997 and sterling only. The annualized rate of return on average June 30, 1996 are summarized below investments in the Held-to-maturity portfolio held during the fiscal year ended June 30, 1997 was 8.31 percent (8.35 percent-June 30, 1996). In milions In millions 1997 1996 Net Net Carrying Fair unrealized Carrying Fair unrealized value value gains value value gains July 1, 1997 through July 1, 1996 through June 30, 1998 $ 139 $ 139 $ - June 30, 1997 $ 114 $ 114 $_ July 1, 1998 through July 1, 1997 through June30,2002 172 177 5 June30,2001 162 170 8 July 1, 2002 through July 1, 2001 through June 30, 2007 255 277 22 June 30, 2006 236 252 16 Thereafter 713 796 83 Thereafter 657 689 32 Total $1,279 $1,389 $110 Total $1,169 $1,225 $56 NOTE C-LOANS, COFINANCING AND Average maturity: IBRD maintains a targeted currency GUARANTEES composition in its multicurrency loans. The present target ratio is one U.S. dollar for every 125 Japanese yen and two Multicurrency Loans Deutsche mark equivalents (consisting of Deutsche mark, Fixed rate loans: On loans negotiated prior to July Netherlands guilders and Swiss francs). These five major 1982, IBRD charges interest at fixed rates. currencies comprise at least 90 percent of the multicur- Adjustable rate loans: In 1982 IBRD mitigated its interest rency loans' U.S. dollar equivalent value, with the remain- rate risk by moving from fixed rate to adjustable rate der in other currencies. This ratio has been maintained lending. This rate, reset twice a year, is based on IBRD'S S tce 199m1, and i revlwedopesidffcted by the selection of own cost of qualified borrowings plus a 50 basis point cre disburemens on te d by the spread, resulting in a pass-through of its average borrow- currencies for d fsbursements on those loans and by the ing costs to those members that benefit from IBRD loans. currencies selected for the billing of the pricipal repay- 202 THE WORLD BANK ANNUAL REPORT 1997 ments. Along with the selection of disbursement curren- will be maintained at or above that level thereafter. The cies, IBRD manages the selection of repayment currencies rates that will be charged on single currency pool loans to maintain the alignment of the multicurrency loans' will be variable based on the average cost of outstanding composition with the target ratio. The selection of cur- borrowings allocated to fund loans in each individual rencies for repayment billing by IBRD precludes the deter- single currency pool plus a 50 basis point spread. Con- mination of average maturity information for versions to the new single currency pool terms will be multicurrency loans by individual currency. Accordingly, implemented on one of three conversion dates (July 1, mBRD only discloses the maturity periods for its multicur- 1997, January 1, 1998 or July 1,1998), depending rency loans on a combined U.S. dollars equivalent basis. upon the date the conversion request is approved by IBRD. At June 30, 1997, borrowers had requested and Single Currency Loans IBRD had converted $6,412 million of undisbursed mult- Fixed rate loans: IBRD introduced fixed rate single cur- icurrency pool loan amounts to single currency loan rency loans in 1995. The rates charged on fixed rate terms and $5,764 million remained to be converted at single currency loans are set on semi-annual rate fixing that date. At June 30, 1997, borrowers had requested dates for loan amounts disbursed during the preceding that $9,794 million of outstanding multicurrency pool six-month period and remain fixed for such disbursed loan amounts and $71 million of undisbursed multicur- amounts until they are repaid. For the interim period rency pool loan amounts be converted to single cur- from the date each disbursement is made until its rate rency pool loan terms on July 1, 1997. fixing date, interest accrues at a variable rate equal to the rate on LIBoR-based single currency loans (PIBOR- Waivers of Loan Interest and Charges based for French franc denominated loans) applicable On August 1, 1996, IBRD's Executive Directors for such interim period. The fixed lending rate com- approved a one-year interest waiver of 25 basis points prises a base rate reflecting medium- to long-term on disbursed and outstanding loans for all payment market rates on the rate fixing date, plus a total spread periods commencing in the fiscal year ending June 30, consisting of (a) IBRD'S funding cost margin for these 1997 for all eligible borrowers. A similar waiver of 25 loans, (b) a risk premium (intended to compensate basis points was in effect for the fiscal year ended June IBRD for market risks incurred in funding these loans), 30, 1996. In fiscal year 1995 IBRD's Executive Direc- and (c) a spread of 50 basis points. tors approved a one-time 10 basis point interest waiver, for two consecutive six-month interest periods, LIBoR-based loans: fBRD introduced LIBoR-based single on currency pool loans which a borrower converts currency loans in 1993. The rates charged on LIBOR- from loan interest rate terms in effect between 1982 based single currency loans are a direct pass-through of and 1989 to interest rate terms in effect since 1989. IBRD's cost of funding for these loans, and are reset For the fiscal year ended June 30, 1997, the combined semi-annually. They comprise a base rate equal to the effect of these waivers was to reduce Net Income by six-month reference interbank offered rate for the $259 million ($286 million-June 30 1996). applicable currency on the rate reset date and a total spread consisting of (a) IBRD's average funding cost mar- Further, on August 1, 1996, the Executive Directors gin for these loans and (b) a spread of 50 basis points. approved a one-year commitment fee waiver of 50 Since September 1, 1996, IBRD has offered its borrow- basis points on undisbursed loans to all borrowers for ers, in addition to its loan products, the option to con- all payment periods commencing in the fiscal year end- vert inaddition . t its pool loan products, meopn too ing June 30, 1997. A similar waiver of 50 basis points vert undlisbursed multicurrency pool loan amounts to wsi fetfrtefsa ereddJn 0 96 single currency loan terms. Further, borrowers have the was or the fiscal year eendedeune 30, 1997, the effect of option to convert disbursed and undisbursed multicur- Fthe fcmitent fee wier was to9reduce Net no renc poo loa amut.onwsnlurnypo the commitment fee waiver was to reduce Net Income rency poOl loan amounts to new single currency pool by $226 million ($235 million-June 30, 1996). loans. Borrowers selecting single currency pool loans' have their choice of four different pools (U. S. dollars, A summary of IBRD'S outstanding loans by currency and Japanese yen, Deutsche mark or Swiss francs). Each sin- product at June 30, 1997 and June 30, 1996 follows: gle currency pool will be a multicurrency pool at incep- tion, but will be adjusted to reach a level of at least 90 percent in the designated currency by July 1, 1999 and IBRD FINANCIAL STATEMENTS 203 In millions of U.S. dollars equivalent 1997 Multicurrency loans Single currency loans Total loans Weighted Weighted Average Weighted average average maturity average Currency Rate type Amount rate (%)/ Amount rate (to) (years) Amount rate (%) Deutsche mark Fixed $ 1,937 8.77 S - - $ 1,937 8.77 Adjustable 27,269 6.70 83 3.48 7.07 27,352 6.69 Japanese yen Fixed 1,954 8.87 - - - 1,954 8.87 Adjustable 30,154 6.70 5 0.81 3.51 30,159 6.70 Netherlands guilders Fixed 179 8.42 - - - 179 8.42 Adjustable 1,155 6.70 - - - 1,155 6.70 Swiss francs Fixed 1,064 8.02 - - - 1,064 8.02 Adjustable 3,438 6.70 - - - 3,438 6.70 U.S. dollars Fixed 1,578 8.78 2,315 7.03 6.63 3,893 7.74 Adjustable 27,848 6.70 4,515 6.01 8.99 32,363 6.60 Others Fixed 154 9.11 133 6.35 7.17 287 7.83 Adjustable 2,020 6.70 4 3.53 7.80 2,024 6.69 Loans outstanding Fixed 6,866 8.68 2,448 6.99 6.66 9,314 8.24 Adjustable 91,884 6.70 4,607 5.96 8.95 96,491 6.66 Total $ 98,750 6.84 $ 7,055 6.32 8.16 105,805 6.80 Less accumulated provision for loan losses 3,210 Loans outstanding net of accumulated provision $102,595 * Excludes effects of any waivers of loan interest. In millions of US. dollars equivalent 1996 Muficurrency loans Single currency loans Total loans Weighted Weighted Average Weighted average average maturity average Currency Rate type Amount rate (%) Amount rate (oo) (years) Amount rate (%) Deutschemark Fixed $ 3,111 8.68 $ - - - $ 3,111 8.68 Adjustable 26,838 6.98 - - - 26,838 6.98 Japanese yen Fixed 3,093 8.88 - - - 3,093 8.88 Adjustable 31,259 6.98 - - - 31,259 6.98 Netherlands guilders Fixed 325 8.58 - - - 325 8.58 Adjustable 1,845 6.98 - - - 1,845 6.98 Swiss francs Fixed 1,989 8.18 - - - 1,989 8.18 Adjustable 7,029 6.98 - - - 7,029 6.98 U.S.dollars Fixed 2,266 8.85 1,119 6.79 7.17 3,385 8.17 Adjustable 27,640 6.98 1,096 5.66 10.11 28,736 6.93 Others Fixed 255 9.16 42 7.29 7.20 297 8.89 Adjustable 2,331 6.98 8 5.07 7.80 2,339 6.97 Loans outstanding Fixed 11,039 8.69 1,161 6.81 7.17 12,200 8.51 Adjustable 96,942 6.98 1,104 5.66 10.09 98,046 6.96 Total $107,981 7.15 $ 2,265 6.25 8.59 110,246 7.13 Less accumulated provision for loan losses 3,340 Loans outstanding net of accumulated provision $106,906 * Excludes effects of any waivers of loan interest. 204 THE WORLD BANK ANNUAL REPORT 1997 The maturity structure of IBRD's loans outstanding, by product, at June 30, 1997 and June 30, 1996 is as follows: In millions 1997 MuLiicurrency loans Single currency loans All loans Period Rate type: Fixed Adjustable Fixed Adjustable Fixed Adjustable Total July 1,1997 through $2,844 $ 9,150 $ - $ 4 $2,844 $ 9,154 $11,998 June 30, 1998 July 1, 1998 through 3,675 37,141 773 774 4,448 37,915 42,363 June 30, 2002 July 1, 2002 through 335 33,585 1,365 2,283 1,700 35,868 37,568 June 30, 2007 Thereafter 12 12,008 310 1,546 322 13,554 13,876 Loans outstanding $6,866 $91,884 $2,448 $4,607 $9,314 $96,491 $105,805 In millions 1996 Multicurrency loans Single currency loans All loans Period Rate type: Fixed Adjustable Fixed Adjustable Fixed Adjustable Total July 1, 1996 through $ 3,837 $ 8,868 $ - $ - $ 3,837 $ 8,868 $ 12,705 June 30, 1997 July 1, 1997 through 6,437 38,825 302 245 6,739 39,070 45,809 June 30, 2001 July 1,2001 through 734 35,281 646 433 1,380 35,714 37,094 June 30, 2006 Thereafter 31 13,968 213 426 244 14,394 14,638 Loans outstanding $11,039 $96,942 $1,161 $1,104 $12,200 $98,046 $110,246 Estimated Value of Loans ings, since the interest rate for such loans is based on All of IBRD'S loans are made to or guaranteed by coun- the interest rate of the qualified borrowings. tries that are members of IBRD, except for those loans Single Currency Loans:The estimated value of fixed made to IFC. IBRD does not currently sell its loans, nor rate single currency loans has been based on dis- is there a market of loans comparable to those made counted future cash flows using the rate at which IBRD by IBRD. could make similar loans of comparable maturities at Multicurrency loans:The estimated value of fixed rate June 30, 1997. The estimated value of LIBOR-based sin- loans negotiated prior to July 1982 has been based on gle currency loans has been based on the relationship discounted future cash flows using the rate at which of the fair value to the carrying value of the underlying IBRD could undertake borrowings of comparable matu- borrowings funding these loans. rities at June 30, 1997 plus a 50 basis point spread. The following table reflects the carrying and estimated The estimated value of adjustable rate multicurrency values of the loan portfolio based on current borrow- loans is based on the relationship of the fair value to ing rates net of the Accumulated Provision for Loan the carrying value of the underlying qualified borrow- Losses at June 30, 1997 and June 30, 1996: In miUions 1997 1996 Carrying value Estimated value Carrying value Estimated value Multicurrency loans Fixed $ 6,866 $ 7,655 $ 11,039 $ 12,383 Adjustable 91,884 99,775 96,942 103,080 Single currency loans Fixed 2,448 2,497 1,161 1,067 Adjustable 4,607 4,844 1,104 1,108 Total loans Fixed 9,314 10,152 12,200 13,450 Adjustable 96,491 104,619 98,046 104,188 105,805 114,771 110,246 117,638 Less accumulated provision for loan losses 3,210 3,210 3,340 3,340 Loans outstanding net of accumulated provision $102,595 $111,561 $106,906 $114,298 IBRD FIiNANCLtL STATEAMENTS 205 Cofinancing and Guarantees ($122 million-June 30, 1996). IBRD has partially IBRD has taken direct participations in, or provided par- guaranteed the timely payment of interest amounts on tial guarantees of, loans syndicated by other financial certain loans that have been sold. At June 30, 1997, institutions for projects or programs also financed by these guarantees, approximating $1 million ($1 mil- IBRD through regular loans. IBRD also has provided par- lion-June 30, 1996), were subject to call. tial guarantees of securities issued by an entity eligible Statutory Lending Limit for IBRD loans. JBRD'S partial guarantees of bond issues are included in the guarantees amount mentioned Under the Articles of Agreement, the total amount below. IBRD's direct participations in syndicated loans outstanding of callable guarantees, participations in are included in the reported loan balances. loans, and direct loans made by IBRD may not be increased to an amount exceeding 100 percent of the Guarantees of loan principal of $1,593 million at June sum of Subscribed Capital, reserves, and surplus. At 30, 1997 ($1,537 million-June 30,1996) were not June 30, 1997 and June 30, 1996, the status of the included in reported loan balances. At June 30, 1997, statutory lending limit is as follows: $148 million of these guarantees were subject to call In mnillions 2997 1996 Statutory lending limit Subscribed capital $182,426 $180,630 Retained earnings 16,194 16,099 Cumulative translation adjustment 85 1,056 $198,705 $197,785 Loans and guarantees outstanding Loans outstanding $105,805 $110,246 Principal guarantees callable 148 122 Interest guarantees callable 1 I $105,954 $110,369 Loans and guarantees outstanding as a percentage of statutory lending limit 53% 56% Overdue Amounts were in nonaccrual status. At such date, overdue inter- At June 30, 1997, no loans payable to IBRD other than est and other charges in respect of these loans totaled those referred to in the following paragraphs were $893 million ($808 million-June 30, 1996). If these overdue by more than three months. loans bad not been in nonaccrual status, income from loans for the fiscal year ended June 30, 1997 would At June 30, 1997, the loans made to or guaranteed by have been higher by $146 million ($188 million- certain member countries and the FRY with an aggre- June 30,1996). gate principal balance outstanding of $2,360 million ($2,520 million-June 30, 1996), of which $1,314 A summary of countries with loans or guarantees in million ($1,227 million-June 30,1996) was overdue, nonaccrual status follows: In millions 1997 Principal and charges Nonaccrual Borrower Principal outstanding overdue since With overdues Congo, Democratic Republic of $ 84 $ 72 November 1993 Iraq 44 68 December 1990 Liberia 141 252 June 1987 Sudan 6 4 January 1994 Syrian Arab Republic 360 513 February 1987 Yugoslavia, Federal Republic of (Serbia/Montenegro) 1,146 1,298 September 1992 Total 1,781 2,207 Without overdues Bosnia and Herzegovina 579 - September 1992 Total $2,360 $2,207 206 THE WORLD BANK ANNUAL REPORT 1997 In connection with the cessation of the membership of An analysis of the changes to the Accumulated Provi- the SFRY discussed in Note A, in February 1993 IBRD sion for Loan Losses for the fiscal years ended June 30, reached an agreement with the FRY for the apportion- 1997 and June 30,1996 appears below: ment and service of debt due to IBRD on loans made to or guaranteed by the sFRY and assumed by the FRY, In nmlions which confirmed a February 1992 interim agreement between the sFRY (then consisting of the Republics of 1997 1996 Bosnia and Herzegovina, Macedonia, Montenegro and Balance, beginning of $3,340 $3,740 Serbia) and IBRD pertaining, among other things, to the fiscal year such loans. As of the date hereof, no debt-service pay- Provision for loan losses 63 42 ments have been received by IBRD from the FRY. Translation adjustment (193) (442) In June 1996 the accumulated arrears on loans to the Balance, end of the fiscal former SFRY assumed by Bosnia and Herzegovina were year $3,210 $3,340 cleared through three new consolidation loans extended by IsRD. These new loans consolidated all outstanding principal and overdue interest on the loans assumed by Bosnia and Herzegovina. This IERD has endorsed a multilateral initiative for addressing resulted in an increase in loans outstanding of $168 the debt problems of a group of countries identified as million and the deferral of the recognition of the heavily indebted poor countries (HiPcs) to ensure that related interest income. The first consolidation loan the reform efforts of these countries will not be put at was a currency pool loan of $29 million carrying IBRD's risk by unsustainable external debt burdens. Under this adjustable lending rate for such loans at the time, 6.98 initiative, creditors are to provide enhanced debt relief percent, plus 41 basis points. The second consolidation for those countries that demonstrated good policy per- loan was also a currency pool loan in the amount of formance over an extended period to bring their debt $285 million carrying IsRD's adjustable lending rate for burdens to sustainable levels. On November 7, 1996, such loans at the time, 6.98 percent, plus 4 basis the HIPC Debt Initiative Trust Fund was established, points. The third consolidation loan was a U. S. dollar constituted by funds to be contributed by creditors of LiBoR-based single currency loan of $307 million carry- HIPCS, to assist eligible beneficiary countries reduce their ing [BRD's lending rate for such loans at the time, 5.38 overall debt burden. The HIPC Debt Initiative Trust Fund percent. All three consolidation loans have a final is administered by IDA. IBRD has taken the situation of maturity of 30 years, which includes a five-year grace these countries into account in its review of the ade- period. The consolidation loans aggregated the existing quacy of the Accumulated Provision for Loan Losses. assumed loans which had final maturities ranging from Fifth Dimension Program April 1, 1992 to May 15, 2001 and a combined wreighted-average interest rate of 7.95 percent. Under IDA'S Fifth Dimension program established in September 1988, a portion of principal repayments to Tihe average recorded investment in nonaccruing loans IDA are allocated on an annual basis to provide supple- during the fiscal year ended June 30, 1997 was $2,430 mentary IDA credits to IDA-eligible countries that are no million ($2,466 million-June 30, 1996). longer able to borrow on LBRD terms, but have outstand- During the fiscal years ended June 30, 1997 and June ing IBRD loans approved prior to September 1988 and 30, 1996, no loans came out of nonaccrual status. have in place an IDA-supported structural adjustment 30, 1996, no loans came out of nonaccr-ual status. program. Such supplementary IDA credits are allocated Accumulated Provision for Loan Losses to countries that meet specified conditions, in propor- IBRD has never suffered a loss on any of its loans, with tion to each country's interest payments due that year the exception of losses resulting from the difference on its pre-September 1988 IBRD loans. To be eligible for between the present value of payments for interest and such IDA supplemental credits, a member country must charges made according to the related loan's contractual meet IDA's eligibility criteria for lending, must be ineligi- terms and the present value of their expected future ble for IsRD lending and must not have had an IBRD loan tem and the prsn vau of thixetdftr approved within the last twelve months. To receive a cash flows discounted at the loan's contractual rates. spplementa it the program, a memer Certain borrowers have found it difficult to make supplemental credit from the program, a member timely payments for protracted periods, resulting in country cannot be more than 60 days overdue on its their loans being placed in nonaccrual status. Several d p borrowers have emerged from nonaccrual status after a IDA had approved credits of $1,526 million ($1,379 mil- of time by bringing up-to-date all principal pay- lion-June 30, 1996) under this program from incep- period tion ofe whic $1,435 millionat ($132 millionpy-June ments and all overdue service payments, including ton, ofwhich $1,435 millon ($1,327 million-June interest and other charges. In an attempt to recognize 30, 1996) had been disbursed to the eligible countries. the risk inherent in these and any other potential over- due payments, IBRD maintains a provision for loan losses. IBRD FINANCIAL STATEMENTS 207 NOTE D-BORROWINGS Forward interest rate swaps:A forward interest rate Providing liquidity and minimizing the cost of funds swap is an agreement under which the cash flow are key objectives to IBRD'S overall borrowing strategy exchanges of the underlying interest rate swaps would IBRD uses swaps in its borrowing strategy to lower the begin to take effect from a specified date. overall cost of its borrowings for those members who Swaptions:A swaption is an option that gives the benefit from rBRD loans. IBRD undertakes swap transac- holder the right to enter into an interest rate or cur- tions with a list of authorized counterparties. Credit rency swap at a certain future date. limits have been established for each counterparty. Deferred rate setting (DRs) agreements: DRs allows an Currency swaps: Currency swaps are agreements com- entity to fix the effective interest cost of all or a portion prised of a conversion of the proceeds of a borrowing of debt issues over a specified period of time after the into a different currency and a forward exchange agree- issue date of the respective debt issues. IBRD enters into ment providing for a schedule of future exchanges of DRS agreements in conjunction with some of its bond the two currencies in order to recover the currency issues. The agreements provide for payments to be converted. The combination of a borrowing and a cur- made to or by IBRD reflecting gain or loss on one or more rency swap produces the financial equivalent of substi- government securities or related financial instruments. tuting a borrowing in the currency obtained in the The potential credit loss to IBRD from nonperformance initial conversion for the original borrowing. is limited to any amounts due, but unsettled, from the Interest rate swaps: Interest rate swaps are agreements financial intermediary. However, periodic mark-to-mar- wbicn transform a fixed rate payment obsgation in a ket settlements on these agreements limit this risk. At particular currency into a floating rate obligation in June 30, 1997 and June 30, 1996, the effective interest that currency or vice-versa. cost of all principal amounts had been fixed. 208 THE WORLD BANK ANNUAL REPORT 1997 A summary of IBRD's borrowings portfolio at June 30, 1997 and June 30, 1996 follows: Medium- and Long-term Borrowings and Swaps at June 30, 1997 In millions of US. dolars equivalent Currency Interest rate Direct borrowings swap agreements swap agreements Net currency obligations Notional Wgtd. Average Amount Wgtd. anount Wgtd. Average Amount Wgtd. avg. matu- payable avg. Average payable avg. matu- payable avg Average Currency/ cost rity (receiv- cost maturity (receiv- cost rity (receiv- cost inaturity' Rate type Amount (%) (years) able) (%) (years) able) (°/°) (years) able) (%) (years) Deutsche mark Fixed $12,468 6.58 5.43 $ 3,071 7.47 2.33 $ 6,800 6.93 2.74 $ 22,339 6.81 4.19 (393) 5.93 14.05 (2,878) 5.25 4.48 (3,271) 5.33 5.63 Adjustable 203 7.54 6.12 8,921 3.05 2.98 2,936 3.24 4.53 12,060 3.17 3.41 (22) 5.58 0.99 (6,858) 3.35 2.78 (6,880) 3.35 2.77 Japanese yen Fixed 24,501 5.15 4.48 529 5.63 2.39 2,148 3.60 1.87 27,178 5.04 4.23 (1,251) 5.99 6.07 (3,123) 3.02 4.39 (4,374) 3.85 4.86 Adjustable 1,223 1.83 2.66 506 0.05 1.20 3,123 0.57 4.39 4,852 0.83 3.62 (44) 4.45 14.98 (2,148) 1.34 1.87 (2,192) 1.41 2.13 Netherlands guilders Fixed 1,873 7.25 3.28 80 6.31 0.19 - - - 1,953 7.21 3.15 (1,123) 7.62 2.05 (1,123) 7.62 2.05 Swiss francs Fixed 3,916 6.02 5.63 1,862 5.20 2.94 780 7.11 2.77 6,558 5.91 4.52 (3,050) 5.79 2.84 (3,050) 5.79 2.84 Adjustable - - - 780 0.74 2.70 780 0.74 2.70 (780) 1.73 2.77 (780) 1.73 2.77 U.S. dollars Fixed 23,725 7.49 6.63 178 8.98 2.99 6,095 6.81 3.67 29,998 7.36 6.01 (1,023) 9.19 3.12 (10,518) 6.29 5.69 (11,541) 6.55 5.46 Adjustable 1,213 5.14 3.59 12,111 5.49 6.26 10,646 5.77 5.64 23,970 5.59 5.85 (2,511) 5.57 2.31 (6,223) 5.78 3.62 (8,734) 5.72 3.24 Others Fixed 18,112 8.71 4.80 157 8.34 2.09 113 5.77 7.17 18,382 8.68 4.79 (16,029) 8.59 4.43 (424) 7.12 5.73 (16,453) 8.55 4.46 Adjustable 1,798 5.92 4.95 13 0.85 0.32 424 3.35 5.73 2,235 5.46 5.07 (2,149) 5.61 5.08 (113) 3.46 7.17 (2,262) 5.50 5.18 Total Fixed 84,595 6.86 5.32 5,877 15,936 106,408 6.79 4.82 (22,869) (16,943) (39,812) 6.95 4.70 Adjustable 4,437 4.65 4.00 22,331 17,129 43,897 4.31 4.83 (4,726) (16,122) (20,848) 4.31 3.16 Principal at face value 89,032 6.75 5.25 613 89,645 6.07 5.26 Net unamortized discounts (1) - (1) Total $89,031 6.75 5.25 $ 613 $ - $ 89,644 6.07 5.26 * At June 30, 1997 the average repricing period of the net currency obligations for adjustable rate borrowings is four months. IBRD FINANCIAL STATEMENTS 209 Medium- and Long-term Borrowings and Swaps at June 30, 1996 In millions of US. dollars equivalent Currency Interest rate Direct borrowings swap agreements swap agreements Net currency obligations Notional Wgtd. Average Amount Wgtd. amount Wgtd. Average Amount Wgtd. avg matu- payable avg. Average payable avg matu- payable avg Average Currency/ cost rity (receiv- cost Xnaturity (receiv- cost rity (receiv- cost mnaturity Rate type Amount (%) (years) able) (%) (years) able) f(%) (years) able) (f%) (years) Deutsche mark Fixed $14,287 6.71 5.58 $ 2,000 7.75 2.51 $ 8,544 7.08 3.41 $24,831 6.92 4.59 (2,134) 5.26 5.51 (2,134) 5.26 5.51 Adjustable 229 7.54 7.12 9,919 2.93 3.53 2,199 3.37 5.57 12,347 3.09 3.96 (8,609) 3.47 3.45 (8,609) 3.47 3.45 Japanese yen Fixed 29,466 5.24 4.78 335 5.51 2.21 1,329 5.49 3.15 31,130 5.26 4.68 (964) 6.12 8.07 (2,528) 2.64 5.72 (3,492) 3.59 6.36 Adjustable 1,232 2.04 3.21 71 0.03 1.59 2,528 0.67 5.72 3,831 1.09 4.83 (92) 0.25 0.48 (1,329) 2.09 3.15 (1,421) 1.97 2.97 Netherlands guilders Fixed 2,837 7.23 3.33 91 6.31 1.19 - - - 2,928 7.20 3.26 (1,447) 7.70 2.77 (1,447) 7.70 2.77 Swiss francs Fixed 4,996 6.04 6.28 2,523 5.19 3.39 892 7.11 3.77 8,411 5.90 5.15 (873) 6.47 3.46 (873) 6.47 3.46 Adjustable - - - 892 0.84 3.70 892 0.84 3.70 (892) 2.08 3.77 (892) 2.08 3.77 U.S. dollars Fixed 23,305 7.84 6.91 178 8.98 3.99 4,002 7.10 3.72 27,485 7.74 6.43 (1,198) 9.02 3.73 (6,211) 6.45 7.50 (7,409) 6.87 6.89 Adjustable 1,453 4.90 3.87 3,344 5.06 4.49 6,449 5.55 7.27 11,246 5.32 6.00 (848) 4.94 4.66 (4,240) 5.53 3.58 (5,088) 5.43 3.76 Others Fixed 13,180 9.30 3.72 36 6.62 7.20 13,216 9.29 3.73 (10,904) 9.25 2.97 (287) 7.43 4.37 (11,191) 9.21 3.01 Adjustable 1,419 6.38 4.62 417 5.24 4.57 1,836 6.12 4.61 (1,610) 5.97 4.51 (166) 8.74 5.47 (1,776) 6.22 4.60 Total Fixed 88,071 6.90 5.36 5,127 14,803 108,001 6.87 4.98 (15,386) (11,160) (26,546) 7.33 4.74 Adjustable 4,333 4.70 4.10 14,226 11,593 30,152 3.79 4.87 (2,550) (15,236) (17,786) 4.12 3.59 Principal at face value 92,404 1,417 - 93,821 Net unamortized discounts (13) (13) Total $92,391 6.80 5.29 $ 1,417 $ - $93,808 6.26 5.29 210 THE WORLD BANK ANNUAL REPORT 1997 Short-term Borrowings and Swaps at June 30, 1997 and June 30, 1996 In millions of US. dollars equivalent 1997 1996 Currency Interest Interest swap rate swap Net Wgtd. swap rate swap Net Wgtd payable payable currency avg. payable payable currency avg. Currencyl Principal (receiv- (receiv- obliga- cost Principal (receiv- (receiv- obliga- cost Rate type outstanding able) able) tions* (%) outstanding able) able) tions (%) Short-term Notes U.S. dollars Fixed $3,015 $ - $ - $3,015 5.68 $1,369 $- $ - $1,369 5.46 Global Multicurrency Notes Czech koruny Fixed 220 - 220 10.88 54 - - 54 10.91 (220) - (220) 10.88 (54) - (54) 10.91 Deutsche mark Fixed - - - - - - 20 - 20 3.09 Adjustable - 394 - 394 2.80 - 54 - 54 3.05 Italian lire Fixed 148 - - 148 6.80 20 - - 20 8.62 (148) - (148) 6.80 (20) - (20) 8.62 Japanese yen Fixed 95 88 - 183 3.16 - - - - - (95) - (95) 5.93 - - - - - New Zealand dollars Fixed 137 - - 137 7.96 - - - - - (137) - (137) 7.96 Slovak koruny Fixed 67 - - 67 12.65 - - - - - (67) - (67) 12.65 - - - - - U.S. dollars Fixed 1,100 120 - 1,220 4.93 300 - - 300 5.52 (900) (900) 4.65 - - - - - Adjustable - 877 900 1,777 5.52 - - - - - (112) - (112) 5.40 - - - - - South African rand Fixed 657 - - 657 15.07 - - - - - (657) - (657) 15.07 - - - - - Central Bank Facility U.S. dollars Adjustable 2,200 - - 2,200 5.14 2,586 - - 2,586 5.47 Total Fixed 5,439 208 - 5,647 6.90 1,743 20 - 1,763 5.65 (1,324) (900) (2,224) 8.99 - (74) - (74) 10.29 Adjustable 2,200 1,271 900 4,371 5.09 2,586 54 - 2,640 5.42 (112) (112) 5.40 Principal at face value 7.639 43 - 7,682 5.28 4,329 - - 4,329 5.43 Net unamortized premiums (discounts) 9 9 (1) (1) Total $7,648 $ 43 S - $7,691 5.28 $4,328 $ - S - $4,328 5.43 * At June 30, 1997 the average repricing period of the net currency obligations for short-term borrowings is three months. IBRD FINANCIAL STATEMENTS 211 The maturity structure of IBRD'S Medium-and Long-term borrowings outstanding at June 30, 1997 and June 30, 1996 is as follows: In uillions In millions Period 1997 Period 1996 July 1,1997 through June 30, 1998 $13,185 July 1, 1996 through June 30,1997 $12,467 July 1, 1998 through June 30, 1999 9,492 July 1, 1997 through June 30,1998 13,949 July 1, 1999 through June 30, 2000 17,430 July 1, 1998 through June 30, 1999 9,526 July 1, 2000 through June 30, 2001 8,173 July 1, 1999 through June 30, 2000 14,262 July 1, 2001 through June 30,2002 9,498 July 1, 2000 through June 30, 2001 7,529 July 1, 2002 through June 30, 2007 21,806 July 1, 2001 through June 30, 2006 25,886 Thereafter 9,448 Thereafter 8,785 Total $89,032 Total $92,404 The following table reflects the carrying and estimated fair values of the borrowings portfolio at June 30, 1997 and June 30, 1996: In millions 1997 1996 Estimated fair Estimated fair Carrying value value Carrying value value Short-term $ 7,648 $ 7,699 $ 4,328 $ 4,371 Medium- and long-term 89,031 96,310 92,391 99,250 Swaps Currency Payable 29,687 30,098 19,427 19,841 Receivable (29,031) (30,375) (18,010) (19,203) Interest rate - 654 - 1,064 Swaptions - 1 - 1 Total $ 97,335 $104,387 $ 98,136 $105,324 The estimated fair values are based on quoted market lated Provision for Loan Losses. IBRD also uses a simula- prices where such prices are available. Where no tion model to assess the adequacy of its reserves in the quoted market price is available, the fair value is esti- case a major borrower, or group of borrowers, stops mated based on the cost at which IBRD could currently servicing its loans for an extended period of time. undertake borrowings with similar terms and remain- Commercial Credit Risk: For the purpose of risk man- ing maturities, using the secondary market yield curve. The fair value of swaps represents the estimated cost agement, TBRD is party to a variety of financial instru- of rep s c rs tha date. ments, certain of which involve elements of credit risk in excess of the amount recorded on the balance sheet. NOTE E-CREDIT RISK Credit risk exposure represents the maximum potential Country Credit Risk:This risk includes potential losses accounting loss due to possible nonperformance by obli- arising from protracted arrears on payments from bor- gors and counterparties under the terms of the contracts. rowers. IBRD manages country credit risk through indi- Additionally, the nature of the instruments involve con- vidual country exposure limits according to tract value and notional principal amounts that are not creditworthiness. These exposure limits are tied. to per- reflected in the basic financial statements. For both on- formance on macroeconomic and structural policiesd In and off-balance sheet securities, IBRD limits trading to a formance on .. macroeconomic and structural policies.In list of authorized dealers and counterparties. Credit risk addition, IBRD establishes absolute limits on the share of outstanding loans to any individual borrower. The is controlled through application of eligibility criteria country credit risk is further managed by financial and volume limits for ransacons with individual coun- incentives such as pricing loans using IBRD'S own cost of terparties and through the expanding use of mark-to- borrowing and partial interest charge waivers condi- market collateral arrangements for swap transactions. tioned on timely payment that give borrowers self- IBRD may also accept collateral in the form of cash or interest in IBRD'S continued strong intermediation other approved liquid securities from individual counter- capacity. Collectibility risk is covered by the Accumu- parties in order to mitigate its credit exposure. 212 THE WORLD BANK ANNUAL REPORT 1997 The contract value/notional amounts and credit risk exposure, as applicable, of these financial instruments at June 30, 1997 and June 30, 1996 are given below: In milions 1997 1996 INVESTMENTS-TRADING PORTFOLIO Futures and forwards * Long position $ 6,620 $ 1,499 * Short position 6,675 5,875 * Credit exposure due to potential nonperformance by counterparties 1 2 Options * Long position 134 679 * Short position - 429 Covered forwards * Credit exposure due to potential nonperformance by counterparties 36 2 BORROWINGS PORTFOLIO Currency swaps * Credit exposure due to potential nonperformance by counterparties 1,255 728 Interest rate swaps * Notional principal 33,965 26,396 * Credit exposure due to potential nonperformance by counterparties 393 96 Swaptions * Notional principal 74 30 * Credit exposure due to potential nonperformance by counterparties - - NOTE F-RETAINED EARNINGS, out of Surplus: an amount equivalent to $300 million in ALLOCATIONS AND TRANSFERS SDRs (valued at June 30, 1996) to IDA and amounts up Retained Earnings: Retained Earnings comprises the to $500 million to the Heavily Indebted Poor Countries following elements at June 30, 1997 and June 30, 1996: (HIPC) Debt Initiative Trust Fund or other arrangements in support of the HIPc Debt Initiative when other credi- In millions tors of the eligible beneficiary countries are determined 1997 1996 by IBRO to have agreed to meet their share of the costs Special reserve $ 293 $ 293 envisaged within the framework of the initiative. On General reserve 14,159 13,909 February 3, 1997, the Board of Governors approved a Surplus 457 710 transfer from Surplus, by way of grant, of $90 million to Unallocated net income 1,285 1,187 the Trust Fund for Gaza and West Bank. Total $16,194 $16,099 Transfers to International Development Association: The Board of Governors had approved aggregate On August 1,1996, the Executive Directors allocated transfers through June 30, 1996 to IDA totaling $4,831 $250 million of the net income earned in the fiscal year million from unallocated Net Income. On October 3, ended June 30, 1996 to the General Reserve. On Octo- 1996, the Board of Governors approved a transfer to ber 3,1996, the Board of Governors approved the fol- IDA, by way of grant, of $300 million in an equivalent lowing transfers, out of unallocated Net Income: an amount in SDRS out of unallocated Net Income. On the amount equivalent to $300 million in sDRs (valued at same day, the Board of Governors approved a transfer, June 30, 1996) to IDA, by way of grant, and $637 mil- by way of grant, out of Surplus of $300 million in an lion to Surplus. On the same day, the Board of Gover- equivalent amount in SDRS. At June 30, 1997, there nors approved the following transfers, by way of grant, was no payable to IDA. IBRD FINANCIAL STATEMENTS 213 Transfers to Debt Reduction Facility for IDA-Only program is expected to result in costs associated with Countries:The Board of Governors had approved staff reductions during the fiscal years 1997 through aggregate transfers through June 30, 1996 to the Debt 1999. At June 30, 1997, 57 staff had been identified for Reduction Facility for IDA-Only Countries (DRF) totaling separation at a cost of $ 10 million. Included in the total $300 million. At June 30, 1997, $ 118 million ($119 charge of $ 10 million are costs associated with outplace- million-June 30, 1996) remained payable. ment consulting, job search assistance, training, medical Transfer to Trust Fund for Gaza and West Bank:The insurance plan contributions and related tax allowances. Of the total charge of $10 million, $4 million has been Board of Governors had approved aggregate transfers crd to ida for fiscal year 1997 consistent with nor- through June 30, 1996 to the Trust Fund for Gaza and con c pu , . ~~~~~~~~~mal cost apportionment procedures applied in the calcu- West Bank (TFG), totaling $140 million. On February aIon of the management fee. 3, 1997, the Board of Governors approved a transfer from Surplus, by way of grant, of $90 million. At June Administrative Expenses for the fiscal year ended June 30,1997, $83 million ($70 million-June 30, 1996) 30, 1997 are net of the management fee of $416 mil- remained payable. lion ($508 million-June 30, 1996) charged to IDA and $108 million ($102 million-June 30, 1996) charged Tranferto TustFundforBosia ad Hrzegvin:In to reimbursable prog=rams. Included in the amounts February 1996 the Board of Governors approved a transfer from Surplus, by way of grant, of $150 million charged to reimbursable programs are allocated to a trust fund administered by IDA to finance an emer- charges of $21 million ($22 million-June 30, 1996) genmin Bosnia and Herzegov- charged to iFc and $1 mlllion ($1 million-June 30, gency reconstruction program 1996)s chargedrzeoto 1MICA. ina. At June 30, 1997, there was no payable to the Trust ) charge to MIGA. Fund. At June 30, 1996, $16 million remained payable. Contributions to special programs represent grants for Transfers to the Heavily Indebted Poor Countries agricultural research, the control of onchocerciasis Debt Initiative Trust Fund: On October 3,1996, the and other developmental activities. Board of Governors approved a transfer from Surplus, NOTE H-TRUST FUNDS by way of grant, of amounts up to $500 million to the IBRD, alone or jointly with [DA, administers on behalf of HIPC Debt Initiative Trust Fund contingent upon IBRD's donors including members, their agencies and other determination that the other creditors of the eligible I fud r f s u which beneficiary countries have agreed to meet their share ' of the costs envisaged under the HIPc Debt Initiative. include the cofinancing of IBRD lending projects, debt reduction operations, technical assistance for borrow- On May 5, 1997, upon management's determination er nldn esblt tuisadpoetpeaa that creditors holding a substantial portion of the ers including feasibility studies and project prepara- debts of countries eligible under the HIPC Debt Initia- tion,iglbaloandregionasprogras and reserch and tiehv agee to mee thi shre of th.otsevs training programs. These funds are placed in trust and are not included in the assets of IBRD. The distribution aged under the Initiative, IBRn's Executive Directors of trust fund assets by executing agent at June 30, approved the transfer of the $500 million that had 1 . been set aside in Surplus for the HIPC Debt Initiative Trust Fund. At June 30, 1997, there was no payable to 1997 1996 the HIPC Debt Initiative Trust Fund. Total Total fiducary Number fiduciary Number NOTE G-ADMINISTRATIVE EXPENSES AND assets of trust assets of trust CONTRIBUTIONS TO SPECIAL PROGRAMS (in fund (in fund In fiscal year 1995 the Executive Directors authorized mil7ions) accounts milions) accounts expenditures for costs associated with planned staff IBRD reductions. The total cost of this program was $112 executed $ 552 1,622 $ 548 1,314 million, of which $45 million was charged to IDA. At Recipient June 30, 1997, $64 million ($26 million-June 30, executed 1,513 1,236 1,308 935 1996) has been charged against the accrual of $112 million. This accrual included costs associated with job Total $2,065 2,858 $1,856 2,249 search assistance, training, outplacement consulting, pension plan contributions, medical insurance contri- The responsibilities of IBRD under these arrangements butions and related tax allowances, vary and range from services normally provided under On March 31, 1997, the Executive Directors approved its own lending projects to full project implementation a multiyear program of institutional renewal to improve including procurement of goods and services. During IBRD's and IDA's business processes, products and ser- the fiscal year ended June 30, 1997, IBRD received $15 vices, strengthen their human resources through more million ($15 million-June 30, 1996) as fees for skilled and better trained staff, and achieve a higher level administering trust funds. These fees have been of development effectiveness. Implementation of this recorded as a reduction of administrative expenses. 214 THE WORLD BANK ANNUAL REPORT 1997 NOTE I-STAFF RETIREMENT PLAN The following table sets forth the Plan's funded status IBRD has a defined benefit retirement plan (the Plan) at June 30, 1997 and June 30, 1996: covering substantially all of its staff. The Plan also cov- ers substantially all the staff of IFc and MIGA. Under the In 1997 1996 Plan, benefits are based on the years of contributory 1997 199 service and the highest three-year average of pension- Actuarial present value of benefit able remuneration as defined in the Plan, with the staff obligations contributing a fixed percentage of pensionable remu- Accumulated benefit obligation neration, and IBRD contributing the remainder of the Vested $(3,760) $(3,543) actuarially-determined cost of future Plan benefits. Nonvested (49) (36) The actuarial present values of Plan obligations Subtotal (3,809) (3,579) throughout the fiscal year are determined at the begin- ning of the fiscal year by the Plan's actuary. All contri- Effect of projected compensation levels (1,783) (1,718) butions to the Plan and all other assets and income Projected benefit obligation (5,592] (5,297) held for the purposes of the Plan are held by rBRD sep- Plan assets at fair value 8,698 7,033 arately from the other assets and income of IBRD, IDA, Plan assets in excess of projected lFc and MIGA and can be used only for the benefit of the benefit obligation 3,106 1,736 participants in the Plan and their beneficiaries, until all Remaining unrecognized net liabilities to them have been paid or provided for. Plan transition asset (78) (91) assets consist primarily of equity and fixed income Unrecognized prior service cost 66 74 securities, with smaller holdings of cash, real estate Unrecognized net gain from past experience different from that and other investments. assumed and from changes in Net periodic pension cost for IBRD participants for the assumptions (2,881) (1,719) fiscal years ended June 30, 1997 andJune 30, 1996 Prepaidpensioncost $ 213 $ - consisted of the following components: _ _ _ _ In minions Of the $213 million prepaid at June 30, 1997 ($nil at 1997 1996 June 30, 1996), $184 million is attributable to IRD ($nil at June 30, 1996) and is included in Miscella- Service cost-benefits earned neous Assets on the balance sheet. The remainder has during the fiscal year $ 189 $ 216 been attributed to IFC and MIGA. Interest cost un projected benefit obligation 342 360 The weighted-average discount rate used in determin- ing the actuarial present value of the projected benefit Actual return on plan assets (1,472) (917) obligation was 7.5 percent (7.5 percent-June 30, Net amortization and deferral 842 437 1996). The effect of projected compensation levels Net periudic pension (income) cost $ (99) $ 96 was calculated based on a scale that provides for a decreasing rate of salary increase depending on age, beginning with 1 1.0 percent (13.3 percent-June 30, 1996) at age 20 and decreasing to 5.5 percent (6.8 IBRD has re-evaluated the economic assumptions percent-June 30, 1996) at age 64. The expected underlying its pension expense methodology. Based on long-term rate of return on assets was 9 percent (9 changes arising from this re-evaluation and changes in percent-June 30, 1996). the Plan assets at their fair value, IBRD recorded $63 million in pension income for the fiscal year ending June 30, 1997 versus pension expense of $60 million for the fiscal year ended June 30, 1996. For the fiscal year ended June 30, 1997, the employers' cash contri- bution for all participants in the Plan was $94 million, of which $49 million is attributable to IBRD and is included in Miscellaneous Assets on the balance sheet. For the fiscal year ended June 30, 1997, the manage- ment fee charged to IDA was reduced by $36 million representing the portion of the pension income allo- cated to IDA. For the fiscal year ended June 30, 1996, a pension expense of $36 million was included in the management fee charged to IDA. IBRD FINANCIAL STATEMENTS 215 NOTE J-RETIRED STAFF BENEFITS PLAN The following table sets forth the RsBP's funded status rsRD has a Retired Staff Benefits Plan (RSBP) that pro- at June 30, 1997 and June 30, 1996: vides certain health care and life insurance benefits to In minions retirees. All staff who are enrolled in the insurance programs while in active service and who meet certain 1997 1996 requirements are eligible for benefits when they reach Accumulated postretirement benefit early or normal retirement age while working for IBRD. obligation The RSBP also covers the staff of IFC and MIGA. Retirees $(320) $(293) Retirees contribute a level amount toward life insur- Fully eligible active plan participants (142) (128) ance based on the amount of coverage. Retiree contri- Other active plan participants (277) (285) butions toward health care are based on length of (739) (706) service and age at retirement. IBRD annually contrib- utes the remainder of the actuarially-determined cost Plan assets at fair value 1,177 937 for future benefits. The actuarial present values of RSBP Plan assets in excess of accumulated obligations throughout the fiscal year are determined postretirement benefit obligation 438 231 at the beginning of the fiscal year by the RSBP's actuary. Unrecognized prior service costs (I0) (12) All contributions to the RSBP and all other assets and Unrecognized net loss from past income held for purposes of the RSBP are held by IBRD experience different from that assumed separately from the other assets and income of IBRD, and from changes in assumptions (99) 107 IDA, IFC, and IvIlGA and can be used only for the benefit Prepaid postretirement benefit cost $ 329 $ 326 of the participants in the RSBP and their beneficiaries until all liabilities to them have been paid or provided for. RSBP assets consist primarily of fixed income and Of the $329 million prepaid at June 30, 1997 ($326 equity securities. million-June 30,1996), $296 million is attributable Net periodic postretirement benefits cost for IBRD par- to ImRD ($295 million-June 30, 1996) and is included ticipants for the fiscal years ended June 30, 1997 and in Miscellaneous Assets on the balance sheet. The June 30, 1996 consisted of the following components: remainder has been attributed to IFC and MIGA. For June 30, 1997, the accumulated plan benefit obli- In milions gation (APEo) was determined using health care cost 1997 1996 trend rates of 13.7 percentto 10.8 percent, decreasing Service cost-benefits earned gradually to 5.5 percent in 2009 and thereafter. The during the fiscal year $ 38 $ 32 health care cost trend rates used for June 30, 1996 Interest cost on accumulated were 14.4 percent to 11.2 percent decreasing gradu- postretirement benefit ally to 5.5 percent in 2010 and thereafter. Obligation 47 45 Actugalreturn on4plan7assets (200) (130) The health care cost trend rates assumption has a sig- Actual return on plan assets (200) (130) nificant effect on the amounts reported. To illustrate, Net amortization and deferral 139 87 increasing the assumed health care cost trend rates by Net periodic postretirement one percentage point would increase the APBo at June benefits cost $ 24 $ 34 30, 1997 by $139 million and the net periodic postre- tirement benefit cost for the fiscal year then ended by $21 million. The portion of this cost that relates to IBRD and is The weighted average discount rate used in determin- included in Administrative Expenses for the fiscal year ing the APED was 7.5 percent (8 percent-June 30, ended June 30, 1997 is $15 million ($22 million- -g the epet long-terent of retun 30, June 30, 1 996). The balance has been included in the 1996). The expected long-term rate of return on plan June30,1996. Te baanc ha bee inlude inthe assets was 7.5 percent (8 percent-June 30, 1996). management fee charged to IDA. 216 THE WORLD BANK ANNUAL REPORT 1997 REPORT OF INDEPENDENT ACCOUNTANTS Price Waterhouse The Hague New York (International Firm) Beijing Tokyo Hong Kong Wasilington London Price Waterhouse 0 July28, 1997 President and Board of Governors International Bank for Reconstruction and Development In our opinion, the financial statements appearing on pages 186 through 216 of this Report present fairly, in all material respects, in terms of United States dollars, the financial position of the Interna- tional Bank for Reconstruction and Development at June 30, 1997 and 1996, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted account- ing principles in the United States and with Intemational Accounting Standards. These financial state- ments are the responsibility of management of the International Bank for Reconstruction and Development; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards, including International Standards on Auditing, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material mis- statement. An audit includes examining, on a test basis, evidence supporting the amounts and disclo- sures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. IBRD FINANCIAL STATEMENTS 217 218 THE WORLD BANK ANNUAL REPORT 1997 SPECIAL PURPOSE FINANCIAL STATEMENTS OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION Statement of Sources and Applications of Development Resources 220 Statement of Changes in Accumulated Surplus 222 Statement of Cash Flows 223 Summary Statement of Development Credits 224 Statement of Voting Power, and Subscriptions and Contributions 227 Notes to Special Purpose Financial Statements 231 Report of Independent Accountants on Special Purpose Financial Statements 239 IDA SPECIAL PURPOSE FINANCIAL STATEMENTS 219 STATEMENT OF SOURCES AND APPLICATIONS OF DEVELOPMENT RESOURCES June 30, 1997 and June 30, 1996 Expressed in millions of US. dollars 1997 1996 Applications of Development Resources NET RESOURCES AVAILABLE FOR DEVELOPMENT ACTIVITIES Cash and investments immediately available for disbursement Due from banks $ 29 $ 15 Obligations of governments and other official entities- Notes B and F 2,044 2,487 Obligations of banks and other financial institutions- Notes B and F 3,174 2,257 Net payable on investment securities transactions- Notes B and F (55) (307) 5,192 4,452 Cash and investments not immediately available for disbursement Due from banks 1 8 Obligations of governments and other official entities- Notes B and F 2,669 1,413 Obligations of banks and other financial institutions- Notes B and F 811 273 Net payable on investment securities transactions- Notes B and F (14) _ 3,467 1,694 Restricted cash and notes 66 69 Nonnegotiable, noninterest-bearing demand obligations on account of member subscriptions and contributions 15,034 21,232 Other resources, net 239 166 Total net resources available for development activities 23,998 27,613 RESOURCES USED FOR DEVELOPMENT CREDITS (see Summary Statement of Development Credits, Notes E and F) Total development credits 96,473 97,450 Less undisbursed balance 20,349 24,629 Total resources used for development credits 76,124 72,821 Total applications of development resources $100,122 $100,434 220 THE WORLD BANK ANNUAL REPORT 1997 1997 1996 Sources of Development Resources Member subscriptions and contributions (see Statement of Voting Power, and Subscriptions and Contributions, Note C) Unrestricted $ 89,790 $ 90,614 Restricted 286 287 Subscriptions and contributions committed 90,076 90,901 Less subscriptions and contributions receivable-Note C 633 1,517 Subscriptions and contributions paid in 89,443 89,384 Deferred amounts receivable to maintain value of currency holdings (223) (2213 Payments on account of pending membership-Note C 7 7 Transfers from the International Bank for Reconstruction and Development-Note D 5,430 4,831 Cumulative translation adjustment on development credits 2,373 4,291 Accumulated surplus (see Statement of Changes in Accumulated Surplus) 1,998 1,790 Securities sold under agreements to repurchase and payable for cash collateral received-Notes B and F 1,094 352 Total sources of development resources $100,122 $100,434 The Notes to Special Purpose Financial Statements are an integral part of these Statements. IDA SPECIAL PURPOSE FINANCIAL STATEMENTS 221 STATEMENT OF CHANGES IN ACCUMULATED SURPLUS For the fiscal years ended June 30, 1997 and June 30, 1996 Expressed in millions of US. dollars 1997 1996 Income from development credits-Note E $ 537 $ 512 Income from investments-Note B 450 345 Management fee charged by the International Bank for Reconstruction and Development-Notes G and H (416) (508) Amortization of discount on subscription advances (13) (9) Changes from operations 558 340 Effect of exchange rate changes on accumulated surplus (350) (545) Net changes 208 (205) Balance at beginning of the fiscal year 1,790 1,995 Balance at end of the fiscal year $1,998 $1,790 The Notes to Special Purpose Financial Statements are an integral part of these Statements. 222 THE WORLD BANK ANNUAL REPORT 1997 STATEMENT OF CASH FLOWS For the fiscal years ended June 30, 1997 and June 30, 1996 Expressed in millions of U.S. dollars 1997 1996 Cash flows from development activities Development credit disbursements $(5,836) $(5,884) Development credit principal repayments 615 563 Net cash used in development activities (5,221) (5,321) Cash flows from member subscriptions and contributions 5,115 5,087 Cash flows from International Bank for Reconstruction and Development transfers 599 250 Cash flows from operating activities Changes from operations 558 340 Less income from restricted investments 175 80 Adjustments to reconcile changes from operations to net cash provided by operating activities Amortization of discount on subscription advances 13 9 Net changes in other development resources 148 240 Net cash provided by operating activities 544 509 Effect of exchange rate changes on cash and investments immediately available for disbursement (297) (430) Net increase in cash and investments immediately available for disbursement 740 95 Cash and investments immediately available for disbursement at beginning of the fiscal year 4,452 4,357 Cash and investments immediately available for disbursement at end of the fiscal year $ 5,192 $ 4,452 Supplemental disclosure Decrease in ending balances resulting from exchange rate fluctuations Development credits outstanding $(1,918) $(4,532) The Notes to Special Purpose Financial Statements are an integralpart of these Statements. IDA SPECLAL PURPOSE FINANCIAL STATEMENTS 223 SUMMARY STATEMENT OF DEVELOPMENT CREDITS June 30, 1997 Expressed in millions of US. dollars Percentage of Total Undisbursed Developmentcredits development credits Borrower or guarantor development credits development credits' outstanding outstanding Afghanistan $ 75 $ - $ 75 0.10 Albania 268 126 142 0.19 Angola 273 146 127 0.17 Armenia 241 62 179 0.24 Azerbaijan 181 112 69 0.09 Bangladesh 6,870 1,147 5,723 7.52 Benin 671 155 516 0.68 Bhutan 27 5 22 0.03 Bolivia 1,169 284 885 1.16 Bosnia and Herzegovina 171 46 125 0.16 Botswana 11 11 0.01 Burkina Faso 779 138 641 0.84 Burundi 679 98 581 0.76 Cambodia 170 52 118 0.16 Cameroon 734 231 503 0.66 Cape Verde 67 24 43 0.06 Central African Republic 451 37 414 0.54 Chad 525 92 433 0.57 Chile 10 - 10 0.01 China 9,550 1,855 7,695 10.11 Colombia 10 - 10 0.01 Comoros 78 10 68 0.09 Congo, Democratic Republic of 1,253 - 1,253 1.65 Congo, Republic of 173 5 168 0.22 Costa Rica 2 - 2 C6te d'Ivoire 1,302 281 1,021 1.34 Djibouti 54 8 46 0.06 Dominica 15 3 12 0.02 Dominican Republic 16 - 16 0.02 Ecuador 25 - 25 0.03 Egypt, Arab Republic of 1,444 328 1,116 1.47 El Salvador 19 - 19 0.02 Equatorial Guinea 53 2 51 0.07 Eritrea 48 20 28 0.04 Ethiopia 2,008 467 1,541 2.03 Gambia,The 175 8 167 0.22 Georgia 255 95 160 0.21 Ghana 3,375 782 2,593 3.41 Grenada 10 3 7 0.01 Guinea 1,023 152 871 1.14 Guinea-Bissau 254 36 218 0.29 Guyana 285 74 211 0.28 Haiti 580 123 457 0.60 Honduras 655 183 472 0.62 India 22,368 4,651 17,717 23.27 Indonesia 725 - 725 0.95 Jordan 66 - 66 0.09 Kenya 2,698 646 2,052 2.70 Korea, Republic of 77 - 77 0.10 KyrgyzRepublic 317 114 203 0.27 Lao People's Democratic Republic 515 164 351 0.46 Lesotho 234 72 162 0.21 Liberia 107 3 104 0.14 Macedonia, former Yugoslav Republic of 181 35 146 0.19 Madagascar 1,468 318 1,150 1.51 Malawi 1,669 332 1,337 1.76 Maldives 48 10 38 0.05 Mali 1,135 216 919 1.21 Mauritania 485 111 374 0.49 Mauritius 16 - 16 0.02 224 THE WORLD BANK ANNUAL REPORT 1997 Percenage of Total Undisbursed Developmentcredits development credits Borrower or guarantor development credits development credits' outstanding outstanding Moldova $ 9 $ 9 $ - * Mongolia 140 67 73 0.10 Morocco 31 - 31 0.04 Mozambique 1,551 446 1,105 1.45 Myanmar 744 - 744 0.98 Nepal 1,290 235 1,055 1.39 Nicaragua 482 127 355 0.47 Niger 766 136 630 0.83 Nigeria 798 422 376 0.49 Pakistan 4,557 1,034 3,523 4.63 Papua New Guinea 103 - 103 0.14 Paraguay 33 _ 33 0.04 Philippines 269 75 194 0.25 Rwanda 692 155 537 0.71 St. Kitts and Nevis 2 - 2 St. Lucia 13 5 8 0.01 St. Vincent and the Grenadines 10 2 8 0.01 Sao Tome and Principe 67 9 58 0.08 Senegal 1,433 231 1,202 1.58 Sierra Leone 394 118 276 0.36 Solomon Islands 35 5 30 0.04 Somalia 414 - 414 0.54 Sri Lanka 1,896 380 1,516 1.99 Sudan 1,220 - 1,220 1.60 Swaziland 6 - 6 0.01 Syrian Arab Republic 44 - 44 0.06 Tajikistan 66 16 50 0.07 Tanzania 3,047 794 2,253 2.96 Thailand 99 - 99 0.13 Togo 649 80 569 0.75 Tonga 4 - 4 0.01 Tunisia 46 46 0.06 Turkey 121 - 121 0.16 Uganda 2,342 444 1,898 2.49 Vanuatu 16 3 13 0.02 Vietnam 1,293 806 487 0.64 Western Samoa 46 3 43 0.06 Yemen, Republic of 1,219 298 921 1.21 Zambia 1,782 386 1,396 1.83 Zimbabwe 490 159 331 0.43 Subtotal members2 96,362 20,308 76,054 99.91 West African Development Bank3 61 21 40 0.05 Caribbean Development Bank4 43 20 23 0.03 Subtotal regional development banks 104 41 63 0.08 Other5 7 - 7 0.01 Total-June 30, 19972 $96,473 $20,49 $76J24 100.00 Total-June 30, 1996 $97,450 $24,629 $72,_821 * Indicates amounts less than 0.005 percent. NoTEs 1. Of the undisbursed balance at June 30, 1997, IDA has entered into irrevocable commitments to disburse $271 million ($349 mil- lion-June 30, 1996). 2. May differ from the sum of individual figures shown because of rounding. 3. These development credits are for the benefit of Benin, Burkina Faso, Cote d'Ivoire, Mali, Niger, Senegal, and Togo. 4. These development credits are for the benefit of Grenada and territories of the United Kingdom (Associated States and Dependen- cies) in the Caribbean region. 5. Represents development credits made at a time when the authorities on Taiwan represented China in IDA (prior to May 15, 1980). IDA SPECIAL PURPOSE FINANCIAL STATEMENTS 225 SUMMARY STATEMENT OF DEVELOPMENT CREDITS (continued) June 30, 1997 Expressed in millions of US. dollars Maturity Structure of Development Credits Outstanding Period July 1, 1997 through June 30, 1998 $ 861 July 1, 1998 through June 30, 1999 883 July 1, 1999 through June 30, 2000 1,033 July 1, 2000 through June 30, 2001 1,243 July 1, 2001 through June 30, 2002 1,455 July 1, 2002 through June 30, 2007 10,315 July 1, 2007 through June 30, 2012 13,288 July 1, 2012 through June 30, 2017 15,038 July 1, 2017 through June 30, 2022 13,607 July 1, 2022 through June 30, 2027 10,478 July 1, 2027 through June 30, 2032 6,069 July 1, 2032 through June 30, 2037 1,853 July 1, 2037 through June 30, 2042 1 Total $76,124 The Notes to Special Purpose Financial Statements are an integral part of these Statements. 226 THE WORLD BANK ANNUAL REPORT 1997 STATEMENT OF VOTING POWER, AND SUBSCRIPTIONS AND CONTRIBUTIONS June30, 1997 Expressed in millions of US. dollars Subscriptions and Nunmber Percentage contributions Memtber1 of votes of total comnmited Part I Members Australia 141,883 1.31 $ 1,546.7 Austria 71,910 0.67 749.7 Belgium 126,316 1.17 1,510.9 Canada 325,422 3.01 3,980.2 Denmark 104,317 0.97 1,180.4 Finland 68,091 0.63 598.8 France 451,054 4.18 6,254.2 Germany 747,221 6.92 10,407.7 Iceland 24,561 0.23 16.4 Ireland 30,401 0.28 103.8 Italy 295,641 2.74 3,700.0 Japan 1,154,286 10.69 19,914.1 Kuwait 69,834 0.65 649.1 Luxembourg 25,959 0.24 47.4 Netherlands 234,735 2.17 3,367.2 New Zealand 30,575 0.28 105.4 Norway 105,156 0.97 1,116.8 Portugal 24,702 0.23 22.0 Russian Federation 28,202 0.26 141.2 South Africa 30,365 0.28 82.2 Spain 58,166 0.54 407.2 Sweden 214,153 1.98 2,320.2 Switzerland2 95,430 0.88 979.5 United Arab Emirates 1,367 0.01 5.6 United Kingdom 540,211 5.00 6,602.3 United States 1,650,557 15.29 21,831.5 Subtotal Part I Members3 6,650,515 61.62 87,640.4 Pail II Members Afghanistan 13,557 0.13 1.3 Albania 24,389 0.23 0.3 Algeria 27,720 0.26 5.1 Angola 45,662 0.42 7.9 Argentina 112,879 1.05 58.0 Armenia 584 0.01 0.5 Azerbaijan 644 0.01 0.9 Bangladesh 61,951 0.57 7.2 Belize 1,788 0.02 0.2 Benin 5,297 0.05 0.6 Bhutan 12,272 0.11 0.1 Bolivia 30,397 0.28 1.4 Bosnia and Herzegovina 17,871 0.17 2.3 Botswana 23,815 0.22 0.2 Brazil 176,169 1.63 91.9 Burkina Faso 19,466 0.18 0.7 Burundi 23,006 0.21 1.0 IDA SPECIAL PURPOSE FINANCIAL STATEMENTS 227 STATEMENT OF VOTING POWER, AND SUBSCRIPTIONS AND CONTRIBUTIONS (continued] June 30, 1997 Expressed in millions of US. dollars Subscriptions and Number Percentage contributions Membery of votes of total committed Cambodia 7,826 0.07 $ 1.3 Cameroon 19,459 0.18 1.3 Cape Verde 5,012 0.05 0.1 Central African Republic 10,920 0.10 0.6 .Chad 10,990 0.10 0.6 Chile 31,782 0.29 4.5 China 217,996 2.02 39.7 Colombia 43,080 0.40 22.5 Comoros 13,141 0.12 0.1 Congo, Democratic Republic of 12,164 0.11 3.8 Congo, Republic of 6,685 0.06 0.6 Costa Rica 12,480 0.12 0.3 C6te d'Ivoire 18,669 0.17 1.3 Croatia 29,526 0.27 5.5 Cyprus 28,236 0.26 1.1 Czech Republic 40,537 0.38 23.7 Djibouti 532 * 0.2 Dominica 15,049 0.14 0.1 Dominican Republic 25,658 0.24 0.6 Ecuador 23,800 0.22 0.8 Egypt, Arab Republic of 49,528 0.46 6.7 El Salvador 6,244 0.06 0.4 Equatorial Guinea 6,167 0.06 0.4 Eritrea 23,363 0.22 0.1 Ethiopia 21,353 0.20 0.7 Fiji 7,206 0.07 0.7 Gabon 2,093 0.02 0.6 Gambia,The 15,366 0.14 0.3 Georgia 22,523 0.21 0.9 Ghana 22,131 0.21 3.0 Greece 45,138 0.42 24.9 Grenada 18,999 0.18 0.1 Guatemala 25,634 0.24 0.5 Guinea 28,087 0.26 1.3 Guinea-Bissau 5,090 0.05 0.2 Guyana 18,160 0.17 1.0 Haiti 17,143 0.16 1.0 Honduras 21,570 0.20 0.4 Hungary 80,902 0.75 33.3 India 338,901 3.14 54.8 Indonesia 103,697 0.96 14.7 Iran, Islamic Republic of 15,455 0.14 5.7 Iraq 9,407 0.09 1.0 Israel 35,331 0.33 2.6 Jordan 24,865 0.23 0.4 Kazakhstan 806 0.01 1.8 Kenya 27,105 0.25 2.2 Kiribati 4,777 0.04 0.1 Korea, Republic of 43,668 0.40 112.1 Kyrgyz Republic 580 0.01 0.5 228 THE WORLD BANK ANNUAL REPORT 1997 Subsciptions and Number Percentage contributions Member' of votes of total committed Lao People's Democratic Republic 11,723 0.11 $ 0.6 Latvia 614 0.01 0.7 Lebanon 8,562 0.08 0.6 Lesotho 23,874 0.22 0.2 Liberia 23,379 0.22 1.1 Libya 7,771 0.07 1.3 Macedonia, former Yugoslav Republic of 15,759 0.15 1.0 Madagascar 11,600 0.11 1.2 Malawi 27,960 0.26 1.0 Malaysia 41,061 0.38 3.6 Maldives 22,916 0.21 8 Mali 22,407 0.21 1.2 Marshall Islands 4,914 0.05 * Mauritania 10,885 0.10 0.6 Mauritius 29,011 0.27 1.2 Mexico 78,854 0.73 121.3 Micronesia, Federated States of 18,424 0.17 * Moldova 612 0.01 0.7 Mongolia 24,389 0.23 0.3 Morocco 48,482 0.45 4.8 Mozambique 6,815 0.06 1.7 Myanmar 37,470 0.35 2.9 Nepal 26,166 0.24 0.7 Nicaragua 24,865 0.23 0.4 Niger 16,541 0.15 0.7 Nigeria 8,257 0.08 4.2 Oman 24,870 0.23 0.4 Pakistan 97,461 0.90 13.5 Panama 5,657 0.05 * Papua New Guinea 13,050 0.12 1.1 Paraguay 11,419 0.11 0.4 Peru 13,524 0.13 2.2 Philippines 16,583 0.15 6.5 Poland 249,421 2.31 52.0 Rwanda 17,979 0.17 1.0 St. Kitts and Nevis 5,082 0.05 0.2 St. Lucia 22,535 0.21 0.2 St. Vincent and the Grenadines 514 * 0.1 Sao Tome and Principe 4,714 0.04 0.1 Saudi Arabia 377,100 3.49 2,033.2 Senegal 28,447 0.26 2.2 Sierra Leone 12,667 0.12 1.0 Slovak Republic 20,893 0.19 7.0 Slovenia 18,956 0.18 3.0 Solomon Islands 518 * 0.1 Somalia 10,506 0.10 1.0 Sri Lanka 44,784 0.41 4.0 Sudan 23,689 0.22 1.3 Swaziland 11,073 0.10 0.4 Syrian Arab Republic 7,651 0.07 1.2 IDA SPECIAL PURPOSE FINANCIAL STATEMENTS 229 STATEMENT OF VOTING POWER, AND SUBSCRIPTIONS AND CONTRIBUTIONS (continued) June 30, 1997 Expressed in millions of U.S. dollars Subscriptions and Number Percentage contributions Member] of votes of total committed Tajikistan 20,568 0.19 $ 0.5 Tanzania 34,943 0.32 2.1 Thailand 44,784 0.41 4.2 Togo 22,455 0.21 1.0 Tonga 11,380 0.11 0.1 Trinidad andTobago 770 0.01 1.6 Tunisia 2,793 0.03 1.9 Turkey 70,837 0.66 75.2 Uganda 22,438 0.21 2.2 Uzbekistan 746 0.01 1.5 Vanuatu 13,821 0.13 0.2 Vietnam 8,889 0.08 1.9 Western Samoa 13,061 0.12 0.1 Yemen, Republic of 33,296 0.31 2.0 Zambia 26,868 0.25 3.4 Zimbabwe 10,657 0.10 5.0 Subtotal Part II Members3 4,143,008 38.38 2,947.4 Total-June 30,1997 2,3 10,793,523 100.00 $90,587.8 Total-June 30, 1996 10,728,072 100.00 $91,413.0 indicates amounts less than $0.05 million or less than 0.005 percent. NoTEs 1. See Notes to Special Purpose Financial Statements-Note A for an explanation of the two categories of membership. 2. $512.3 million of Switzerland's subscription and contribution have not been included in the Statements of Sources and Applications of Development Resources at June 30, 1997 and June 30, 1996 since this represents the difference between the total co,financing grants of $580.1 million provided by Switzerland directly to IDA borrowers as cofinancing grants between the fourth and the ninth replenish- ments of the IDA resources, and the July 1992 contribution by Switzerland of $67.8 million. 3. May differ from the sum of individual figures shown because of rounding The Notes to Special Purpose Financial Statements are an integral part of these Statements. 230 THE WORLD BANK ANNUAL REPORT 1997 NOTES TO SPECIAL PURPOSE FINANCIAL STATEMENTS NOTE A-ORGANIZATION, OPERATIONS AND reported in the financial statements of the periods to SIGNIFICANT ACCOUNTING AND RELATED which they relate. POLICIES PUTRPOSE AND AFFILIATED ORGANIZATIONS Translation of Currencies IDA's special purpose financial statements are The International Development Association (IDA) is an expressed in terms of U.S. dollars solely for the pur- international organization established on September pose of summarizing IDA'S financial position and the 24, 1960 to promote economic development in the results of its operations for the convenience of its less developed areas of the world included in IDA'S members and other interested parties. membership by providing financing on concessionary terms. IDA has three affiliated organizations, the Inter- IDA is an international organization which conducts its national Bank for Reconstruction and Development operations in the currencies of all of its members. (IBRD), the International Finance Corporation CiFC), Development resources and sources of development and the Multilateral Investment Guarantee Agency resources are translated at market rates of exchange at (MIGA). Each of these organizations is legally and finan- the end of the accounting period, except Member cially independent from IDA, with separate assets and Subscriptions and Contributions which are translated liabilities, and IDA is not liable for their respective obli- in the manner described below. Income and expenses gations. The principal purpose of IBRD is to promote are translated at the market rates of exchange at the the economic development of its member countries dates on which they are recognized or at an average of primarily by providing loans and related technical the market rates of exchange in effect during each assistance for specific projects and for programs of eco- month. Translation adjustments relating to the revalu- nomic reform in developing member countries. IFC'S ation of development credits denominated in Special purpose is to encourage the growth of productive pn- Drawing Rights (SDRS) are charged or credited to vate enterprises in its member countries through loans Cumulative Translation Adjustment on Development and equity investments in such enterprises without a Credits. Other translation adjustments are charged or member's guarantee. MIGA was established to encour- credited to the Accumulated Surplus. age the flow of investments for productive purposes Member Subscriptions and Contributions among member countries and, in particular, to devel- oping member countries by providing guarantees Recognition against noncommercial risks for foreign investment in Member Subscriptions and Contributions for each its developing member countries. IDA replenishment are recorded in full as Subscrip- SUMMARY OF SIGNIFICANT ACCOUNTING tions and Contributions Committed upon effective- AND RELATED POLICIES ness of the relevant replenishment. Replenishments Due to the nature and organization of IDA, these finan- become effective when IDA has received commit- cial statements have been prepared for the specific ments from members for subscriptions and contribu- purpose of reflecting the sources and applications of tions of a specified portion of the full replenishment. member subscriptions and are not intended to be a Amounts not yet paid in, at the date of effectiveness, presentation in accordance with generally accepted are recorded as Subscriptions and Contributions accounting principles in the United States or with Receivable and shown as a reduction of Subscriptions International Accounting Standards. These special pur- and Contributions Committed. These receivables pose financial statements have been prepared to com- come due throughout the replenishment period (gen- ply with Article VI, Section 11 (a) of the Articles of erally three years) in accordance with an agreed Agreement of IDA. maturity schedule. The actual payment of receivables when they become due from certain members is con- IDA'S special purpose financial statements are prepared ditional upon the respective member's budgetary in accordance with the accounting policies outlined appropriation processes. below. The Subscriptions and Contributions Receivable are Certain reclassifications of the prior year's infor-mation settled through payment of cash or nonnegotiable, have been made to conform to the current period's noninterest-bearing demand notes. If the receivable is presentation. settled in cash, the cash is recorded in Cash and Investments Not Immediately Available for Disburse- Basis of Accounting ment, until such time as it becomes available in accor- IDA'S special purpose financial statements are pre- dance with the replenishment agreement. The notes pared on the accrual basis of accounting for develop- are encashed by IDA as provided in the relevant replen- ment credit income, investment income and ishment resolution over the disbursement period of administrative expenses. That is, the effects of trans- the credits committed under the replenishment and actions and other events are recognized when they the cash received is recorded in Cash and Investments occur (and not as cash or its equivalent is received or Immediately Available for Disbursement. paid) and are recorded in the accounting records and IDA SPECIAL PURPOSE FINANCIAL STATEMENTS 231 In certain replenishments, members have had the gold, the pre-existing basis for translating 1960 dollars option of paying all of their subscription and contribu- into current dollars or any other currency disappeared. tion amount in cash before it becomes due and receiv- The Executive Directors of IDA have decided, with ing a discount. In these cases, IDA and the member effect on that date and until such time as the relevant agree that IDA will invest the cash and retain the provisions of the Articles of Agreement are amended, income. The related subscription and contribution is that the words "U.S. dollars of the weight and fineness recorded at the full undiscounted amount. The cash in effect on January 1, 1960" in Article II, Section 2(b) and investments are recorded in Cash and Investments of the Articles of Agreement of IDA are interpreted to Not Immediately Available for Disbursement until the mean the SDR introduced by the International Mone- date when it would have become due, at which time it tary Fund as the SDR was valued in terms of U.S. dollars becomes available. The discount is recorded in Sub- immediately before the introduction of the basket scriptions and Contributions Receivable and amor- method of valuing the SDR on July 1, 1974, such value tized over the projected encashment period. being equal to $1.2063 5 for one SDR (the 1974 SDR), Under the Articles of Agreement and the arrange- and have also decided to apply the same standard of Under~ ~ ~ ~ ~ ~~~~~ ~au toe amounts exrese Agenen 1960 dolar anrthnreee ments governing replenishments, IDA must take appro- vant resolutons of theessed n 960 dollars m the rele- priate steps to ensure that, over a reasonable period of time, the resources provided by donors for lending by The subscriptions and contributions provided through IDA are used on an approximately pro rata basis. As dis- the third replenishment are expressed on the basis of cussed in the previous paragraph, donors sometimes the 1974 SDP Prior to the decision of the Executive contribute resources substantially ahead of their pro Directors, IDA had valued these subscriptions and con- rata share. Unless otherwise agreed, IDA does not dis- tributions on the basis of the SDR at the current market burse these funds ahead of donors' pro rata shares. value of the SDP Cash and Investments Not Immediately Available for The subscriptions and contributions provided under Disbursement represents the difference between the amount contributed and the amount available for us- themfou rrepleishment and are expressed bursements on a pro rata basis, in members' currencies or SDRS and are payable in members' currencies. Beginning July 1, 1986, sub- Transfers to IDA from IBRD are recorded as Sources of scriptions and contributions made available for dis- Development Resources and are receivable upon bursement in cash to IDA are translated at market rates approval by IBRD's Board of Governors, of exchange on the dates they were made available. Prior to that date, subscriptions and contributions sor the purposes of its financial resources, the member- which had been disbursed or converted into other cur- ship of IDA is divided into two categories: pt) Part I rencies were translated at market rates of exchange on members, which make payments of subscriptions and dates of disbursement or conversion. Subscriptions contributions provided to IDA in convertible currencies and contributions not yet available for disbursements which may be freely used or exchanged by IDA in itS ancotiuosntyeavlbefrdsusmns operations mand be Pareel d or mex ger, wbih IDAk p- i are translated at market rates of exchange at the end of operations and (2) Part II members, which make pay- the accounting period. ments of ten percent of their initial subscriptions in freely convertible currencies, and the remaining ninety Article IV, Section 2(a) and (b) of IDA's Articles of percent of their initial subscriptions, and all additional Agreement provides for maintenance of value pay- subscriptions and contributions in their own currencies ments on account of the local currency portion of the or in freely convertible currencies. Certain Part II mem- initial subscription whenever the par value of the bers provide a portion of their subscriptions and contri- member's currency or its foreign exchange value has, butions in the same manner as mentioned in (1) above. in the opinion of IDA, depreciated or appreciated to a IDA'S Articles of Agreement and subsequent replenish- significant extent within the member's territories, so ment agreements provide that the currency of any Part long as and to the extent that such currency shall not 11 member paid in by it may not be used by IDA for have been initially disbursed or exchanged for the cur- projects financed by IDA and located outside the terri- rency of another member. The provisions of Article IV, tory of the member except by agreement between the Section 2(a) and (b) have by agreement been extended member and IDA. These subscriptions of Part 11 mem- to cover additional subscriptions and contributions of bers are recorded as Restricted Cash and Notes. IDA through the third replenishment, but are not applicable to those of the fourth and subsequent Valuation replenishments. The subscriptions and contributions provided through The Executive Directors decided on June 30, 1987 that the third replenishment are expressed in terms of "U.S. settlements of maintenance of value, which would dollars of the weight and fineness in effect on January result from the resolution of the valuation issue on the 1, 1960" (1960 dollars). Following the aboltion of basis of the 1974 SDR, would be deferred until the Exec- gold as a common denominator of the monetary sys- utive Directors decide to resume such settlements. tem and the repeal of the provision of the U.S. law These amounts are shown as Deferred Amounts defining the par value of the U.S. dollar in terms of Receivable to Maintain Value of Currency Holdings. 232 THE WORLD BANK ANNUAL REPORT 1997 Development Credits lished because it is not practicable to determine such All development credits are made to or guaranteed by an amount in view of the nature and maturity struc- member governments or to the government of a terri- ture of the credit portfolio. Should actual losses occur, tory of a member (except for development credits they would be charged against IDA'S Sources of Devel- which have been made to regional development banks opment Resources. In a development credit refinanc- for the benefit of members or territories of members ing/restructuring (such as that for the heavily indebted of IDA). In order to qualify for lending on IDA terms, a poor countries (HIPcs), see Note I), the difference country's per capita income must be below a certain between the cash received from the development level and the country may have only limited or no credit refinancing/restructuring and the carrying value creditworthiness for IBRD lending. Development cred- of the credits will be reflected separately as a reduction its carry a service charge of 0.75 percent and generally in Sources of Development Resources, and would be have 35- or 40-year final maturities and a 10-year recognized when binding agreements are signed. grace period for principal payments. Development The repayment obligations of IDA's development cred- credits are carried in the Special Purpose Financial its funded from resources through the fifth replenish- Statements at the full face amount of the borrowers' ment are expressed in the development credit outstanding obligations. agreements in terms of 1960 dollars. In June 1987, the It is the policy of IDA to place in nonaccrual status all Executive Directors decided to value those develop- development credits made to a member government ment credits at the rate of $1.20635 per 1960 dollar or to the government of a territory of a member if on a permanent basis. Development credits funded principal or charges with respect to any such develop- from resources provided under the sixth replenish- ment credit are overdue by more than six months, ment and thereafter are denominated in SDRS; the prin- unless IDA management determines that the overdue cipal amounts disbursed under such development amount will be collected in the immediate future. In credits are to be repaid in currency amounts currently addition, if loans by IBRD to a member government are equivalent to the SDRs disbursed. placed in nonaccrual status, all development credits to Investments that member government will also be placed in nonac- crual status by IDA. On the date a member's develop- IDA carries its investment securities and related finan- ment credits are placed in nonaccrual status, charges cial instruments at market value. Both realized and that had been accrued on development credits out- unrealized gains and losses are included in Income standing to the member which remained unpaid are from Investments. deducted from the income from development credits I.nte-m Trust Fund of the current period. Charges on nonaccruing devel- opment credits are included in income only to the The Interim Trust Fund, established by IDA's Board of extent that payments have actually been received by Governors in June 1996, is administered by IDA to help IDA. On the date a member pays in full all overdue fund operations during the period July 1, 1996 to amounts to IBRD and IDA, the member's credits emerge June 30, 1997 and its funds have a separate legal, pro- from nonaccrual status, its eligibility for new credits is curement and accounting status. The Interim Trust restored, and all overdue charges (including those Fund became effective on November 14, 1996. Credits from prior years) are recognized as income from devel- financed by the Interim Trust Fund are made on the opment credits in the current period. If collectibility same terms and conditions as those of IDA credits with risk is considered to be particularly high at the time of two exceptions. First, eligibility for procurement under arrears clearance, or if IBRD or IDA refinances/resched- the Interim Fund Credits is extended only to nationals ules nonaccruing loans or credits to a member so that of countries that either have contributed to the Interim no debt-service payments remain overdue, its loans or Trust Fund or are eligible to borrow from IBRD or IDA. credits may not automatically emerge from nonaccrual Second, the Interim Fund Credits are approved by status, even though its eligibility for new loans or cred- IDA'S President after consultation with a committee of its may have been restored. The previously overdue Executive Directors representing the donors and eligi- interest and other charges are not recognized as ble borrowers. Charges paid by borrowers on Interim income in the period the refinancing/rescheduling Fund Credits are received by IDA to compensate it for occurs. After a suitable period of payment perfor- its services as administrator. The Interim Trust Fund is mance has passed from the time of arrears clearance, a expected to be terminated when the credits it financed decision on the restoration of accrual status is made on have been substantially disbursed. Upon termination, a case-by-case basis. its assets and liabilities will transfer to IDA. In fulfilling its mission, IDA makes concessional loans to NOTE B-NVESTMENTS the poorest countries, therefore there is significant As part of its overall portfolio management strategy, credit risk in the portfolio of development credits. IDA invests in government and agency obligations, Management continually monitors this credit risk. time deposits and related financial instruments with However, no provision for credit losses has been estab- off-balance sheet risk including futures, forward IDA SPECIAL PURPOSE FINANCLL STATEMENTS 233 contracts, covered forward contracts, options, and exchange of the two currencies in order to recover the short sales. currency converted. Government and Agency Obligations:These obliga- Options: Options are contracts that allow the holder tions include marketable bonds, notes and other obli- of the option the right, but not the obligation to pur- gations. Obligations issued or unconditionally chase or sell a financial instrument at a specified price guaranteed by governments of countries require a within a specified period of time from or to the seller minimum credit rating of AA if denominated in a cur- of the option. The purchaser of an option pays a pre- rency other than the home currency of the issuer, oth- mium at the outset to the seller of the option, who erwise no rating is required. Obligations issued by an then bears the risk of an unfavorable change in the agency or instrumentality of a government of a coun- price of the financial instrument underlying the try, a multilateral organization or any other official option. IDA only invests in exchange-traded options. entity require a credit rating of AAA. The initial price of an option contract is equal to the premium paid by the purchaser and is significantly less Time Deposits:Time deposits include certificates of than the contract or notional amount. IDA does not deposit, bankers' acceptances, and other obligations write uncovered option contracts. issued or unconditionally guaranteed by banks and other financial institutions. Short Sales: Short sales are sales of securities not held in IDA'S portfolio at the time of the sale. IDA must pur- Futures and Forwards: Futures and forward contracts ca the scrit at te te a r the risk that are contracts for delayed delivery of securities or chase the security at a later date and bears the risk that money market instruments in which the seller agrees between the time of the sale and the time the security to make delivery at a specified future date of a speci- must be delivered. fied instrument, at a specified price or yield. Futures contracts are traded on regulated United States and Repurchase and Resale Agreements and Securities intemational exchanges. IDA generally closes out most Loans: Repurchase agreements are contracts under open positions in futures contracts prior to maturity. which a party sells securities and simultaneously Therefore, cash receipts or payments are mostly lim- agrees to repurchase the same securities at a specified ited to the change in market value of the futures con- future date at a fixed price. The reverse of this transac- tracts. Futures contracts generally entail daily tion is called a resale agreement. Securities loans are settlement of the net cash margin. contracts under which securities are lent for a specified Covered Forwards: Covered forwards are agreements period of time at a fixed price. in which cash in one currency is converted into a dif- A summary of IDA'S investment portfolio by instrument ferent currency and, simultaneously, a forward for Investments Immediately Available for Disburse- exchange agreement is executed providing for a future ment at June 30, 1997 and June 30,1996 is as follows: In millions 1997 1996 Average Net gains Average Net gains daily balance (losses) daily balance (losses) Carrying during the for the Carrying duting the for the value fiscal year fiscalyear value fiscalyear fiscalyear Government and agency obligations $1,923 $1,928 $20 $2,282 $1,900 $(6) Time deposits 3,174 3,254 - 2,257 2,309 - Futures and forwards * 1 (2) 1 1 4 Covered forwards - (3) - (1) - Options * * (5) * * (1) Resale agreements 121 578 - 204 629 - $5,218 $5,758 $18 $4,744 $4,838 $(3) Short sales $ (53) $ (100) $- $ (34) $ (32) $_ Repurchase agreements and securities loans (447) (562) - (319) (281) * Less than $0.5 million. 234 THE WORLD BANK ANNUAL REPORT 1997 A summary of IDA'S investment portfolio by instrument for Investments Not Immediately Available for Disburse- ment at June 30, 1997 and June 30, 1996 is as follows: In nillions 1997 1996 Average Net gains Average Net gains daily balance (losses) daily balance (losses) Carrying during the for the Carrying during the for the value fiscal year fiscal year value fiscal year fiscal year Government and agency obligations $2,653 $2,089 $37 $1,320 $ 963 $(1) Time deposits 811 422 - 272 327 - Futures and forwards 1 1 (1) 1 1 4 Covered forwards - (1) - Options ( ) Resale agreements 15 131 - 93 93 - $3,480 $2,642 $36 $1,686 $1,384 $ 3 Short sales $ (15) $ (42) $- $ (24) $ (8) $_ Repurchase agreements and securities loans (648) (416) - (33) (138) * Less than $0.5 mnillion. A summary of the currency composition of Investments Immediately Available for Disbursement and Not Imme- diately Available for Disbursement at June 30, 1997 and June 30, 1996 is as follows: In nillions of U.S. dollar equivalent 1997 1996 Not Not Imendiately immediately Immediately imnediately available for available for available for available for disbursement disbursement Total disbursement disbursement Total Canadian dollars $ 28 $ - $ 28 $ - $ - $ - Deutsche mark 1,691 707 2,398 1,739 321 2,060 French francs 449 289 738 387 167 554 Japanese yen 67 506 573 542 299 841 Pound sterling 917 324 1,241 425 146 571 U.S. dollars 2,066 1,654 3,720 1,651 753 2,404 Other currencies - - * * $5,218 $3,480 $8,698 $4,744 $1,686 $6,430 * Less than $0.5 million. For the purpose of risk management, IDA is party to a the instruments involve contract value and notional variety of financial instruments, certain of which principal amounts that are not reflected in the basic involve elements of credit risk in excess of the amount financial statements. For both on- and off-balance reflected in the Statement of Sources and Applications sheet securities, IDA limits trading to a list of autho- of Development Resources. Credit risk represents the rized dealers and counterparties. Credit limits have maximum potential accounting loss due to possible been established for each counterparty by type of nonperformance by obligors and counterparties under instrument and maturity category. the terms of the contracts. Additionally, the nature of IDA SPECIAL PURPOSE FINANCIAL STATEMENTS 235 The credit risk exposure and contract value, as applica- Eleventh Replenishment. In June 1996 the Board of ble, of these financial instruments at June 30, 1997 Governors of IDA adopted resolutions authorizing the and June 30, 1996 are given below: Eleventh Replenishment of IDA'S resources. The Elev- enth Replenishment provides IDA with resources to In millions fund credits and grants committed during the period 1997 1996 July 1, 1996 to June 30, 1999. The total amount of Futures and Forwards donor contributions pledged during this period, Long position $1,880 $ 759 induding supplementary contributions provided by Short position 2,704 2,840 certain members, is equivalent to SDR 6,929 million. Credit exposure due to The Eleventh Replenishment will become effective potential nonperformance by when IDA has received commitments for subscriptions counterparties 9 7 and contributions of SDR 3,746 million. As part of the Options Eleventh Replenishment, an Interim Trust Fund con- Long position 46 179 sisting of donor contributions pledged equivalent to Short position - 36 SDR 2,228 million has been established and is adminis- tered by iDA. Covered forward contracts Membership: In February 1993 the Socialist Federal Credit exposure due to Republic of Yugoslavia (SFRY) ceased to be a member potential nonperformance by of IDA due to the cessation of its membership in IBRD. counterparties - Four of the five successor Republics-Bosnia and NOTE C-MEMBER SUBSCRIPTIONS AND Herzegovina, the Republics of Croatia and Slovenia CONTRIBUTIONS and the former Yugoslav Republic of Macedonia- have since become members of IDA. At December 31, Subscriptions and Contributions Receivable: At June 1996, the subscription and contributions allocated to 30, 1997, receivables from subscriptions and contribu- the other successor country the Federal Republic of tions was $633 million ($1,517 million-June 30, Yugoslavia (Serbia and Montenegro) are included 1996) of which $564 million ($945 million-June 30, under Payments on Account of Pending Membership. 1996) was due and $69 million ($572 million- June 30, 1996) was not yet due. In May 1992 Switzerland became a member of IDA. 3Before that date Switzerland had contributed to IDA an Subscriptions and contributions due at June 30, 1997 equivalent of $51 million. As agreed between the Swiss Confederation and IDA, these grant contributions in millions were converted to an IDA subscription. Further, during Amounts initially due on the commitment periods between the fourth and the ninth replenishments of IDA resources, Switzerland July 1,1996 through June 30, 1997 $329 had cofinanced projects by making available to IDA July 1, 1995 through June 30, 1996 235 borrowers untied grants in the aggregate amount of July ', 1994 through June 30, 1995 - Swiss francs 1,055 million (historical U.S. dollar July 1, 1994 through June 30,1995 amount of $580 million). In July 1992, as agreed June 30, 1994 and earlier * between the Swiss Confederation and IDA, these grant contributions were converted to an IDA subscription Total $564 and contribution when Switzerland contributed a fur- ther $68 million, representing the present value of future reflows of the cofinancing grants if they had been made through IDA on IDA'S repayment terms. At June 30,1997, $512 million ($512 million-June 30, Subscr1ptions and contributions not yet due at June 1996), representing the difference between the total 30, 1997 will become due as follows: cofinancing grants of $580 million and the present In mi1ions value of future reflows of $68 million, have not been Period included in the Member Subscriptions and Contribu- tions in the Statement of Sources and Applications of July 1,1997 through June 30, 1998 $11 Development Resources. July 1, 1998 through June 30, 1999 10 NOTE D-TRANSFERS FROM IBRD Thereafter 48 Thereafter 48 IBRDIs Board of Governors had approved aggregate transfers to IDA totaling $5,430 million through June Total $69 30,1997 ($4,831 million-June 30,1996). 236 THE WORLD BANK ANNUAL REPORT 1997 NOTE E-DEVELOPMENT CREDITS an IDA-supported structural adjustment program. Such At June 30,1997, principal installments of $0.1 mil- supplementary IDA credits are allocated to countries AtiJunen30,h1997, principalminstallmentsbof $0.1D mil- that meet specified conditions, in proportion to each lion and charges of $0.3 million payable to IDA oni country's interest payments due that year on its pre- development credits, other than those referred to in September 1988 IBRD loans. To be eligible for such IDA the following paragraph, were overdue by more than supplemental credits, a member country must meet three months and the aggregate amounts outstanding IDAplsmelblt creite,a forbending, must e nelbet on these development creclits were $414 million. IDA's eligibihty criteria for lending, must be ineligible for IBRD lending and must not have had an IBRD loan At June 30, 1997, the development credits made to or approved within the last twelve months. To receive a guaranteed by certain member countries with an supplemental credit from the program, a member aggregate principal balance outstanding of $3,235 mil- country cannot be more than 60 days overdue on its lion ($3,183 million-June 30, 1996), of which $130 debt-service payments to IBRD or IDA. million ($95 million-June 30, 1996) was overdue, A summary of cumulative IDA credits committed and were in nonaccrual status. At such date, overdue disbursed under this program from inception at June charges in respect of these development credits totaled 30, 1997 and June 30, 1996 is given below: $108 million ($86 million-June 30, 1996). If these development credits had not been in nonaccrual sta- In millions tus, income from development credits for the fiscal year ended June 30, 1997 would have been higher by 1997_199 $24 million ($24 million-June 30, 1996), which is Commitments $1,526 $1,379 net of charges received from such members during the Less: undisbursed 91 52 period. A summary of member countries with credits Ls___91 or guarantees in nonaccrual status is as follows: Disbursed and In millions Outstanding $1,435 $1,327 June 30, 1997 Principal and NOTE F-FAIR VALUE OF FNANCIAL Principal charges Nonaccrual INSTRUMENTS Borrower outstanding overdue since Investments: Since IDA carries its investments at mar- With overdues ket value, the carrying amount represents the fair Afghanistan $ 75 $ 1 1 June 1992 value of the portfolio. These fair values are based on Congo, quoted market prices, where available. If quoted mar- Democratic ket prices are not available, fair values are based on Republic of 1,253 76 November 1993 quoted market prices of comparable instruments. The Liberia 104 17 April 1988 fair value of short-term financial instruments approxi- Somalia 414 41 July 1991 mates their carrying value. Sudan 1,220 81 January 1994 Syrian Arab Development Credits: IDA development credits have a Republic 44 12 April 1988 significant grant element because of the concessional Total 3, 110 238 nature of IDA'S terms. Discounting IDA'S credits using the standard 10% discount rate of the Development Without overdues Assistance Committee (DAC) of the Organization for Bosnia and Economic Cooperation and Development provides an Herzegovina 125 - September 1992 estimate for the grant element of IDA credits. Using the 10% DAC discount rate indicates that the typical IDA Total $3,235 $238 credit contains a grant element of 75% to 80% of the nominal credit amount at the time the credit is com- mitted. This grant element calculation considers inter- During the fiscal years ended June 30, 1997 and June est rates, maturity structures and grace periods for the 30, 1996, no development credits came out of nonac- credits. It does not consider credit risk, portfolio sea- crual status. soning, multilateral and sovereign credit preferences and other risks or indicators that would be relevant in Under a program established in September 1988, a calculating fair value. Estimating the impact of these portion of principal repayments to IDA are allocated on factors is not practicable. However, the fair value of an annual basis to provide supplementary IDA credits Total Development Credits is substantially lower than to IDA-eligible countries that are no longer able to bor- the $96,473 million reflected on the Statement of row on IBRD terms but have outstanding IBRD loans Sources and Applications of Development Resources. approved prior to September 1988 and have in place IDA SPECIAL PURPOSE FINANCIAL STATEMENTS 237 NOTE G-INCOME AND EXPENSES the fiscal year ended June 30, 1997, IDA received $11 IDA receives charges paid by borrowers on Interim million ($10 million-June 30, 1996) as fees for Fund Credits as compensation for its services as admimstering trust funds. administrator. NOTE I-HEAVILY INDEBTED POOR IDA pays a management fee to IBRD representing its COUNTRIES share of the administrative expenses incurred by [BRD. IDA has endorsed a multilateral initiative for addressing The management fee for the fiscal year ended June 30, the debt problems of a group of countries identified as 1997 was reduced by $72 million allocated from IBRD HIPCS to ensure that reform efforts of these countries will upon completion of a review of pension accounting not be put at risk by unsustainable extemal debt burdens. expense estimates by IBRD. For the fiscal year ended Under the initiative, creditors are to provide enhanced June 30,1996, the management fee included $36 mil- debt relief for those countries that demonstrated good lion of pension expense. policy performance over an extended period in order to NOTE H-TRUST FUNDS bring their debt burdens to sustainable levels. On November 7, 1996, the HmPc Debt Initiative Trust IDA, alone or jointly with IBRD, administers on behalf of Fun wa salse,cntttdb lnst ecn donors, including members, their agencies and other Fund was established, constituted tofhelp benficie con- entities, funds restricted for specific uses which tributed by creditors of HIPCS, to help beneficiaries include the cofinancing Of IDA lending projects, debt reduce their overall debt, including IDA debt. The HIPC reduction operations for IDA members, technical assis- Debt Initiative Trust Fund is administered by IDA. The tance for borrowers including feasibility studies and HIPC Debt Initiative Trust Fund will pay cash to IDA for project preparation, global and regional programs and specific credits in amounts equivalent to the present research and training programs. These funds are placed value of the debt servicing obligations of the credits. in trust and are not included in the development The total development credits outstanding will be iesources of IDA. At June 30, 199 7 and June 30, 1996 decreased by the carrying value of the credits sold. the distribution of trust fund assets by executing agent The difference between the cash received from the is as followsn HIPC Debt Initiative Trust Fund and the carrying value of the credits will be reflected separately as a reduction 1997 1996 in Sources of Development Resources. Total Number Total Number At June 30, 1997, one IDA borrower has been fiduciary of trust fiduciary of trust approved by IDA's Executive Directors for debt relief, assets fund assets fund subject to the confirmation of other multilateral credi- (tn rnnons) accounts (in rrallons) accounts sta he ilpoie rprinlreifo hi IDA tors that they will provide proportional relief on their executed $ 714 583 $235 454 claims and subject to agreement with the borrower. Recipient Details regarding IDA'S Board approval are as follows: executed 512 510 537 384 In millons Total $1,226 1,093 $772 838 Estimated Reduction in _Net sources of Carrying present development Country value value resources The responsibilities of IDA under these arrangements vary and range from services normally provided under U d its own lending projects to full project implementation ganda $300 $138 $162 including procurement of goods and services. IDA receives fees for administering trust funds as a reduc- tion of the Management Fee Charged by IBRD. During 238 THE WORLD BANKANNUAL REPORT 1997 REPORT OF INDEPENDENT ACCOUNTANTS ON SPECIAL PURPOSE FINANCIAL STATEMENTS Price Waterhouse The Hague New York (International Firm) Beijing Tokyo Hong Kong Washington London Price Waterhouse H July 28,1997 President and Board of Governors International Development Association We have audited the special purpose Statement of Sources and Applications of Development Resources as of June 30, 1997 and 1996, the Summary Statement of Development Credits and the Statement of Voting Power, and Subscriptions and Contributions as of June 30, 1997, and the related special purpose Statements of Changes in Accumulated Surplus and of Cash Flows for the years ended June 30, 1997 and 1996, expressed in terms of United States dollars, of the International Development Association (IDA), which appear on pages 220 through 238 of this Report. These financial statements are the responsibility of man- agement. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards, including International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a rea- sonable basis for our opinion. The special purpose financial statements were prepared to reflect the sources and applications of develop- ment resources and the development credits, voting power, and subscriptions and contributions of IDA to comply with Article VI, Section 11 (a) of the Articles of Agreement of IDA as described in Note A, and are not intended to be a presentation in conformity with generally accepted accounting principles in the United States or with International Accounting Standards. In our opinion, the special purpose financial statements referred to above present fairly, in all material respects, in terms of United States dollars, the sources and applications of development resources as of June 30, 1997 and 1996, the development credits, voting power, and subscriptions and contributions of IDA at June 30, 1997 and the changes in its accumulated surplus and its cash flows for the years ended June 30, 1997 and 1996, on the basis of accounting described in Note A. This report is intended solely for the information of the Board of Governors, management and members of IDA. However, under IDA's Articles of Agreement, this report is a matter of public record and its distribu- tion is not limited. IDA SPECIAL PURPOSE FINANCIAL STATEMENTS 239 SPECIAL PURPOSE FINANCIAL STATEMENTS OF THE INTERIM TRUST FUND Statement of Sources and Applications of Development Resources 241 Statement of Changes in Accumulated Surplus 242 Statement of Cash Flows 242 Summary Statement of Interim Fund Credits 243 Statement of Contributions 244 Notes to Special Purpose Financial Statements 245 Report of Independent Accountants on Special Purpose Financial Statements 248 240 THE WORLD BANK ANNUAL REPORT 1997 STATEMENT OF SOURCES AND APPLICATIONS OF DEVELOPMENT RESOURCES June 30, 1997 Expressed in millions of U.S. dollars Applications of Development Resources NET RESOURCES AVAILABLE FOR DEVELOPMENT ACTIVITIES Cash and investments immediately available for disbursement Due from banks $ 1.1 Obligations of governments and other official entities- Notes B and D 0.6 Obligations of banks and other financial institutions- Notes B and D 41.3 43.0 Nonnegotiable, noninterest-bearing demand obligations on account of contributions 2,538.9 Other resources, net (0.4) Total net resources available for development activities 2,581.5 RESOURCES USED FOR INTERIM FUND CREDITS (see Summary Statement of Interim Fund Credits, Notes D and E) Total Interim Fund Credits 1,628.0 Less undisbursed balance 1,484.4 Total resources used for Interim Fund Credits 143.6 Total applications of development resources $2,725.1 Sources of Development Resources Contributions (see Statement of Contributions) Contributions committed $2,708.8 Less unamortized discount on contributions 2.0 2,706.8 Less contributions receivable-Note C 3.8 Contributions paid in 2,703,0 Cumulative translation adjustment of Interim Fund Credits 0.8 Accumulated deficit (see Statement of Changes in Accumulated Surplus) (0.7) Short-term borrowing 22.0 Total sources of development resources $2,725.1 The Notes to Special Purpose Financial Statements are an integral part ofthese Statements. INTERIM TRUST FUND SPECIAL PURPOSE FINANCIAL STATEMENTS 241 STATEMENT OF CHANGES IN ACCUMULATED SURPLUS For the fiscal year ended June 30, 1997 Expressed in millions of US. dollars Income from investments-Note B $ 2.0 Amortization of discount on contribution advances (0.1) Changes from operations 1.9 Effect of exchange rate changes on accumulated surplus (2.6) Net changes (0.7) Balance at beginning of the fiscal year Balance at end of the fiscal year $(0 7) STATEMENT OF CASH FLOWS For the fiscal year ended June 30, 1997 Expressed in millions of US. dollars Cash flows from development activities Interim Fund Credit disbursements $(142.8) Cash flows from financing activities Net short-term borrowings 22.0 Donor contributions 164.0 Net cash provided by financing activities 186.0 Cash flows from operating activities Changes from operations 1.9 Adjustments to reconcile changes from operations to net cash provided by operating activities Amortization of discount on contribution advances 0.1 Net changes in other development resources 0.2 Net cash provided by operating activities 2.2 Effect of exchange rate changes on cash and investments immediately available for disbursement (2.4) Net increase in cash and investments immediately available for disbursement 43.0 Cash and investments immediately available for disbursement at beginning of the fiscal year Cash and investments immediately available for disbursement at end of the fiscal year $ 43.0 The Notes to Special Purpose Financial Statements are an integral pant of these Statements. 242 THE WORLD BANK ANNUAL REPORT 1997 SUMMARY STATEMENT OF INTERIM FUND CREDITS June30, 1997 Expressed in millions of US. dollars Percentage Total Undisbursed Credits of credits Borrower or guarantor credits credits outstanding outstanding Armenia $ 16.2 $ 16.1 $ 0.1 0.04 Bosnia and Herzegovina 31.1 25.9 5.2 3.60 Burkina Faso 45.7 45.7 _ - Cambodia 54.9 54.7 0.2 0.13 Chad 25.1 25.1 - - China 222.9 222.9 - - Comoros 7.1 7.1 - - C6te d'lvoire 41.3 41.3 - - Egypt, Arab Republic of 71.8 71.8 - Ghana 29.0 29.0 - Guinea 25.1 25.1 - India 250.2 250.2 - - Kenya 26.9 26.9 - - Kyrgyz Republic 44.6 22.3 22.3 15.53 Madagascar 96.5 28.7 67.8 47.17 Malawi 12.1 12.1 - Mali 81.6 81.6 - - Mozambique 96.3 48.1 48.2 33.53 Senegal 6.8 6.8 - - Sri Lanka 14.9 14.9 - - Uganda 126.0 126.0 Vietnam 289.4 289.4 - Zimbabwe 12.4 12.4 - Total-June 30,19971 $1,628.0 $1,484.4 $143.6 100.00 NoTE: 1. May differ from the sum of individual figures shown because of rounding. SUMMARY STATEMENT OF INTERIM FUND CREDITS June 30, 1997 Expressed in millions of US. dollars Maturity Structure of Interim Fund Credits Outstanding Period July 1,1997 through June 30, 2002 $ July 1, 2002 through June 30, 2007 1.1 July 1,2007 through June 30, 2012 24.6 July 1,2012 through June 30, 2017 23.5 July 1,2017 through June 30, 2022 44.1 July 1, 2022 through June 30, 2027 23.2 July 1,2027 through June 30, 2032 13.6 July 1, 2032 through June 30, 2037 13.5 Total $143.6 The Notes to Special Purpose Financial Statements are an integral part of these Statements. INTERIM TRUST FUND SPECIAL PURPOSE FINANCIAL STATEMENTS 243 STATEMENT OF CONTRIBUTIONS June 30, 1997 Expressed in millions of US. dollars Contributions Donor deposited Austraha $ 83.5 Austria 37.5 Belgium 58.0 Botswana 0.5 Brazil 6.7 Canada 156.7 Czech Republic 2.0 Denmark 50.2 Finland 21.0 France 281.5 Germany 414.2 Greece 1.9 Hungary 2.8 Iceland 1.3 Japan 752.5 Korea, Republic of 11.8 Luxembourg 3.7 Mexico 4.6 Netherlands 222.3 New Zealand 7.2 Norway 69.4 Poland 1.3 Portugal 7.8 Russian Federation 11.2 Saudi Arabia 25.0 Slovak Republic 1.4 South Africa 2.9 Sweden 110.5 Switzerland 64.1 United Kingdom 295.4 Total, $2,708.8 NoTE: 1. May differ from the sum of individual figures shown because of rounding. The Notes to Special Purpose Financial Statements are an integralpart of these Statements. 244 THE WORLD BANK ANNUAL REPORT 1997 NOTES TO SPECIAL PURPOSE FINANCIAL STATEMENTS NOTE A-ORGANIZATION, OPERATIONS AND at the dates on which they are recognized or at an SIGNIFICANT ACCOUNTING AND RELATED average of the market rates of exchange in effect dur- POLICIES ing each month. Translation adjustments relating to Purpose the revaluation of Interim Fund Credits denominated in Special Drawing Rights (SDRs) are charged or cred- The Interim Trust Fund, established by the International ited to Cumulative Translation Adjustment on Interim Development Association's (IDA) Board of Governors on Fund Credits. Other translation adjustments are June 26, 1996, is administered by IDA to help find oper- charged or credited to the Accumulated Surplus. ations during the period July 1, 1996 to June 30, 1997 and it has a separate legal, procurement and accounting Contributions status. The Interim Trust Fund became effective on Contributions to the Interim Trust Fund are paid in cash November 14, 1996 when contributions in excess of and nonnegotiable, noninterest-bearing demand notes. SDR 400 million from seven donors were received. The demand notes are encashed by IDA, on behalf of the The Interim Trust Fund is expected to be terminated Interim Trust Fund, on an approximately pro rata basis when the credits it financed have been substantially among donors, at reasonable intervals over the projected disbursed. Upon termination, its assets and liabilities encashment period (approximately seven years) to meet will transfer to IDA. Voting rights in IDA on account of the Interim Trust Fund's operational commitments. contributions made to the Interim Trust Fund will be Interim Trust Fund contributions are expressed and are allocated to contributors upon termination of the payable in contributors' currencies, freely convertible Interim Trust Fund. currencies and SDRS. Contributions made available for Summary of Significant Accounting disbursement in cash are translated at market rates of and Related Policies exchange on the dates they were made available. Con- tributions not yet available for disbursements are Due to the nature of the Interim Trust Fund, these translated at market rates of exchange at the end of financial statements have been prepared for the specific the accounting period. purpose of reflecting the sources and applications of contributions and are not intended to be a presentation Interim Fund Credits in accordance with generally accepted accounting prin- Interim Fund Credits finance specific development ciples in the United States or with International projects or programs. The policies, practices and proce- Accounting Standards. These special purpose financial dures governing the allocation of Interim Trust Fund statements have been prepared consistent with Article resources, the selection and appraisal of projects or pro- VI, Section 11 (a) of the Articles of Agreement of IDA, grams to be financed out of such resources and the and Section 2(e) of the Board of Governors' Resolution approval and administration of Interim Fund Credits, establishing the Interim Trust Fund. including the terms and conditions thereof, are the same The Interim Trust Fund's special purpose financial as those applicable with respect to development credits statements are prepared in accordance with the made under IDA's Eleventh Replenishment with two accounting policies outlined below. exceptions. First, eligibility for procurement under the Interim Fund Credits is extended only to nationals of Basis of Accounting countries that either have contributed to the Interim Trust The Interim Trust Fund's special purpose financial Fund or are eligible to borrow from the International Bank statements are prepared on the accrual basis of for Reconstruction and Development (IBRD) or IDA. Sec- accounting for investment income. That is, the effects ond, the Interim Fund Credits are approved by iDA's Presi- of transactions and other events are recognized when dent after consultation with a committee of Executive they occur (and not as cash or its equivalent is received Directors representing the donors and eligible borrowers. or paid) and are recorded in the accounting records Interim Fund Credits are denominated in SDRs and are and reported in the financial statements of the periods to be repaid in currency amounts currently equivalent to which they relate. to the SDRS disbursed. Principal repayments of Interim Translation of Currencies Fund Credits will be part of the resources of the Interim Trust Fund until it is terminated. The Interim Trust Fund's special purpose financial state- ments are expressed in terms of U.S. dollars solely for It is the policy of the Interim Trust Fund to place in non- the purpose of summarizing the Interim Trust Fund's accrual status all Interim Fund Credits made to a mem- financial position and the results of its operations for the ber government or to the government of a territory of a convenience of its donors and other interested parties. member if principal or charges with respect to any such Interim Fund Credits are overdue by more than six The Interim Trust Fund conducts its operations in the months, unless IDA management determines that the various currencies contributed to it. Development overdue amount will be collected in the immediate resources are translated at market rates of exchange at fuLiture. In addition, if loans by IBRD or development cred- the end of the accounting period. Contributions are its by IDA to a member government are placed in nonac- translated in the manner described below. Income and crual status, all Interim Fund Credits to that member expenses are translated at the market rates of exchange government will also be placed in nonaccrual status by INTERIM TRUST FUND SPECIAL PURPOSE FINANCIAL STATEMENTS 245 the Interim Trust Fund. On the date a member's Interim A summary of the currency composition of Invest- Fund Credits are placed in nonaccrual status, charges ments Immediately Available for Disbursement at that had been accrued by IDA, as administrator, on June 30, 1997 is as follows: Interim Fund Credits outstanding to the member which remained unpaid are deducted from IDA's income from In millions of US. dollars equivalent development credits of the current period. Charges on nonaccruing development credits are included in IDA'S Canadian dollars $ 5.5 income only to the extent that payments have actually Canadin dars $1.5 been received by IDA. On the date a member pays in full Deutsche mark 11.7 all overdue amounts to IBRD, IDA and the Interim Trust French francs 6.9 Fund, the member's Interim Fund Credits emerge from Japanese yen 10.4 nonaccrual status, its eligibility for new Interim Fund Pounds sterling 7.4 Credits is restored, and all overdue charges (including $41.9 those from prior years) are recognized by IDA as income $41.9 from development credits in the current period. If col- lectibility risk is considered to be particularly high at the time of arrears clearance, or if IBRD, IDA or the Interim NOTE C-DONOR CONTRIBUTIONS Trust Fund refinances/reschedules nonaccruing loans, At June 30, 1997, receivables from contributions was development credits or Interim Fund Credits to a mem- $3.8 million, all of which was not yet due. Subscrip- ber so that no debt-service payments remain overdue, its tions and contributions not yet due at June 30, 1997 loans, development credits and Interim Fund Credits will become due as follows: may not automatically emerge from nonaccrual status, even though its eligibility for new loans, development credits or Interim Fund Credits may have been restored. In mulions The previously overdue interest and other charges are Period not recognized as income by IDA in the period the refi- July 1, 1997 through June 30, 1998 $0.8 nancing/rescheduling occurs. After a suitable period of July 1, 1998 through June 30, 1999 0.8 payment performance has passed from the time of Thereafter 2.2 arrears clearance, a decision on the restoration of accrual Total $3.8 status is made on a case-by-case basis. Totl_3_ Investments The Interim Trust Fund carries its investment securi- NOTE D-FAIR VALUE OF FINANCIAL ties and related financial instruments at market value. INSTRUMENTS Both realized and unrealized gains and losses are Investments: Since the Interim Trust Fund carries its included in Income from Investments. investments at market value, the carrying amount rep- NOTE B-INVESTMENTS resents the fair value of the portfolio. These fair values are based on quoted market prices, where available. Interim Trust Fund resources are invested in time The fair value of short-term financial instruments deposits including certificates of deposit, bankers' approximates their carrying value. acceptances, and other obligations. A summary of the Interim Trust Fund's investment portfolio by instru- Interim Fund Credits: Interim Fund Credits have a ment for Investments Immediately Available for Dis- significant grant element because of the concessional bursement at June 30, 1997 is as follows: nature of their terms. Discounting the Interim Fund Credits using the standard 10% discount rate of the In milions Development Assistance Committee (DAC) of the Average Net gains Organization for Economic Cooperation and Develop- daily balance (losses) ment provides an estimate for the grant element of Carrying during the for the value period period Interim Fund Credits. Using the 10% DAc discount Government rate indicates that the typical Interim Fund Credit and agency contains a grant element of 75% to 80% of the nomi- obligations $ 0.6 $ 4.2 $- nal credit amount at the time the credit is committed. This grant element calculation considers interest rates, Time deposits 41.3 44.4 - maturity structures and grace periods for the credits. It does not consider credit risk, portfolio seasoning, mul- $41.9 $48.6 $ tilateral and sovereign credit preferences and other risks or indicators that would be relevant in calculating fair value. Estimating the impact of these factors is not practicable. However, the fair value of Total Interim Fund Credits is substantially lower than the $1,628.0 million reflected on the Statement of Sources and Applications of Development Resources. 246 THE WORLD BANK ANNUAL REPORT 1997 NOTE E-INTERIM FUND CREDITS NOTE F-INCOME AND EXPENSES At June 30, 1997, Interim Fund Credits made to or Charges paid by borrowers on Interim Fund Credits guaranteed by Bosnia and Herzegovina with an aggre- are paid to IDA as compensation for its services as gate principal balance outstanding of $5.2 million, administrator of the Interim Trust Fund. none of which was overdue, were in nonaccrual status, consistent with IBRD and IDA policy by which all Bosnia and Herzegovina debt is in nonaccrual status. INTERIM TRUST FUND SPECIAL PURPOSE FINANCIAL STATEMENTS 247 REPORT OF INDEPENDENT ACCOUNTANTS ON SPECIAL PURPOSE FINANCIAL STATEMENTS Price Waterhouse The Hague New York (International Firm) Beijing Tokyo Hong Kong Washington London Price Waterhouse 0 July 28, 1997 President and Board of Governors International Development Association, as Administrator of the Interim Trust Fund We have audited the special purpose Statement of Sources and Applications of Development Resources, the Sum- mary Statement of Interim Fund Credits, and the Statement of Contributions as of June 30, 1997, and the related special purpose Statements of Changes in Accumulated Surplus and of Cash Flows for the year ended June 30, 1997, expressed in terms of United States dollars, of the Interim Trust Fund, which appear on pages 241 through 247 of this Report. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards, including International Stan- dards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assess- ing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The special purpose financial statements were prepared to reflect the sources and applications of development resources and the Interim Fund Credits, and contributions of the Interim Trust Fund to comply with Section 2(e) of the Board of Governors' Resolution of International Development Association (IDA) and Article VI, Section I I (a) of the Articles of Agreement as described in Note A, and are not intended to be a presentation in conformity with generally accepted accounting principles in the United States or with International Accounting Standards. In our opinion, the special purpose financial statements referred to above present fairly, in all material respects, in terms of United States dollars, the sources and applications of development resources, and the Interim Fund Cred- its, and contributions of the Interim Trust Fund at June 30, 1997 and the changes in its accumulated surplus and its cash flows for the year then ended, on the basis of accounting described in Note A. This report is intended solely for the information of the Board of Governors, IDA's management as Administrator of the Interim Trust Fund, contributors to and borrowers from the Interim Trust Fund, and members of IDA. However, under IDA's Board of Governors' Resolution establishing the Interim Trust Fund, this report is included in the Annual Report of the Executive Directors to the Board of Governors of IDA and is therefore a matter of public record and its distribution is not limited. 248 THE WORLD BANK ANNUAL REPORT 1997 INDEX Adjustment lending, 117-118, 119 (table) Gender, 12,21-2,62 Administrative Budget, 3, 79, 128-9 Global Coalition for Africa, 45 African Development Bank, 2 (box), 27, 45 Global Environment Facility (GEF), 25, 27, 54, 73,82-3, 124, 128 Africa region, 37-45, 117, 122, 123,140 (box) Governance, 60, 78-9 AIDS, 18, 35, 36, 44, 62 Grameen Bank, 63 (box) Annual Report on Portfolio Performance, 115 Guarantees (World Bank guarantees), 10, 29, 32-3, 60, 87, Argentina, 1, 18, 19, 25, 26, 74, 76, 77, 81, 116, 118 118, 122 Asian Development Bank, 24, 56, 59 Guatemala, 76, 79 (box) Asia Pacific Economic Cooperation (APEC), 54 Headquarters construction, 131 Banking Sector, 6 (see also Financial sector) Health, nutrition, and population, 7, 17, 17 (figure), 18 in Central and Eastern Europe, 6, 68, 69 Heavily Indebted Poor Countries (HiPc) Debt Initiative, 1, in EastAsia, 48, 55 2 (box), 11, 40, 113, 125, 133 in Latin America, 77-8 Human development, 17-21 in South Asia, 60 in South Asia, 62 Bosnia and Herzegovina, 6, 10, 65, 66, 73,122, 123, 126, 135 in Latin America and the Caribbean, 75 Bulgaria, 6, 19, 65, 68 Human Development Network, 7, 21, 62, 75 Business Partnership Center, 6 Human resources 3, 130 Capacity building, 25, 84, 126-7 Implementation completion reports (ICRs), 4, 115 in Africa, 1, 10,39, 45 (box) India, 10, 18, 25, 27, 35, 118, 126 (box) China, 10, 21, 25, 33, 35, 36, 44, 57, 79, 130, 131 InfoDev (Information for Development) Program, 34 Cofinancing, 121-3, 124 (table) Infrastructure, private participation and, 7, 31-2, 32 (table) Committee on Development Effectiveness (CODE), 11-12, in East Asia and the Pacific, 49-5, 54 (box) 19, 115 in the Middle East and North Africa, 87 Communications, 21, 26, 35, 36 in South Asia, 61 Consultant Trust Fund, 125, 126 Inspection Panel, 127, 128 (box) Consultative Group for International Agricultural Research Institutional Development Fund (IDF), 81 -2, 127 (CGIAR), 28-9 Inter-American Development Bank, 2 (box), 24, 76, 122 Consultative Group to Assist the Poorest (CGAP), 34 Interim Trust Fund, see International Development Association Corruption, 4-5, 10, 51, 64, 79 International Bank for Reconstruction and Development (IBRD) Country Assistance Strategies (cAss), 6, 11, 13, 19, 22, 28, 39, assistance to the poorest countries, 9, 9 (figure) 56, 61, 83, 89, 114, 116, 129 borrowings, 133, 135-8 Dams, 116 (box), 117 capital subscriptions, 139 Debt see HIPC Debt Initiative interest waivers, 134 Development Committee, 2 (box) Lending: Development effectiveness, 4, 11-2,34, 114-7 commitments, 5 (figure), 8 (table), 117 Disbursements, by source of supply 118-121 disbursements, 5 (figure), 8 (table), 118, 134 East Asia and the Pacific Region, 48-56 lending rate, 134 Economic Development Institute (EDM), 5, 6, 15, 19, 22, 22 loans in non-accrual status, 135 (box), 25,30, 36, 44-5, 47, 55, 59-60, 66, 68, 69, 73, 79, 82, sigle-currency loan program, 9, 133, 134 84, 113, 129, 130liudastmaaeet7,1413 Education, 87-8 membership, 9 lending for, 17, 17 (figure), 18-9, 51-3 net income, 133, 141 of girls 19, 28, 53, 62, 88 portfolio concentration management, 133-4 Emergency assistance and reconstruction, 6 provision for possible loan losses, 134, 138-9 and Bosnia, 6, 67, 73 reserves, 139 Energy Sector Management Assistance Program (ESMAP), 34 International Crops Research Institute for the Semi-Arid Environment, 24-8, 35, 53-5, 73, 82-3, 88-9 Tropics (IcRisAT), 28 (box) (see also Global Environment Facility) International Development Association (iDA) Environmental assessments, 24, 25 assistance to the poorest countries, 9, 9 (figure) Environmentally and Socially Sustainable Development commitment authority, 139 Network, 7 comtntment fee, l Europe and Central Asia Region, 65-73, 113, 117,123 eleventh replenishment, 139-141 European Union (Eu), 1, 45, 65, 67-8, 73, 74, 86, 122, 123 Interim Trust Fund, 117, 139 (box), 141 Executive Directors, 10-12 Lending: see also Committee on Development Effectiveness (CODE) commitments, 4, 5 (figure), 8 (table), 117 disbursements, 4, 5 (figure), 8 (table), 118 Field offices see Resident Missions membership,9 Financial sector, 1, 6, 10, 31 (see also Banking sector) review of the 1994-96 (IDA- IO) program, 140 (box) in Latin America and the Caribbean 77-8 International Finance Corporation, 6, 25, 29, 31, 38,41,49, 56, Finance, Private Sector and Infrastructure Development 60-1, 66, 69, 75, 76, 78, 85, 86, 87 Network, 7 International Labour Organization, 14, 21 Focus Initiative, 28, 40, 80 International Monetary Fund, 2 (box), 5, 10, 31, 37, 40, Foreign Investment Advisory Service (FIAS), 29, 30, 33, 41, 78 68-9, 122, 130 Forest Market Transformation Initiative, 15 Internet, 6, 14, 20, 22, 45, 128 INDEX 249 Japan, 7, 34, 35, 59, 122, 123, 124 Resident missions, 7, 14, 56, 63-A, 73, 79, 81, 83, 91, 113, see also Policy and Human Resource Development Fund (ruxRD) 130, 131 Knowledge Management, 3, 7,319, 20, 22, 26-7, 36, 41-5, 113, Road Maintenance Initiative, 45-6 130 Rural development, 7, 10, 2 7-8 in Africa, 40 Labor market issues, 51 in South Asia, 62 Latin America and the Caribbean Region, 74-83 Russia, 6, 10, 16, 19, 32, 68, 69 (box), 72Ri1626b73 Lending- see Intemeat tional Bank for Reconstruction and Russia, 6,10,16,19,32,68,69 (box), 72, 73, 114 Development and International Development Association Safety nets, 1, 13, 17, 72-3 Learning and Leadership Center, 130 Sector investment programs, 39-40, 47 Market transformation initiative, 26 Sector strategy papers, 7, 19 see alo Forst Maket Tansfomatio InitativeSingle-currency loans see International Bank for Reconstruction Mexican crisis (1994-95) effects of, 57, 74 al aesslopments, 23 Microcredit, 62, 63 (box) Social dimentsion odevelpent, 10, 22-4 Microenterprises, 40-4 1 Social densionsofSevelopmentTroup, 11, 23 Middle East and NorthAfrica Region, 84-91, 122, 123 Social proecone,t 17,k 17G(figur, 19, 692(box) Multilateral Insurance Guarantee Agency (MbGA), 29, 30, 38, Social safety nets, see safety nets 41, 49, 56, 60-1, 65, 75, 78, 85 Social security reform, 76, see also pension systems rejorms Net transfers South Asia region, 5 7-64, 122 Africa region, 41 (table) Special Program of Assistance for Africa (sPA), 37, 121-2 East Asia and Pacific region, 51 (table) Staff training see Learning and Leadership Center South Asia region, 60 (table) Staffing, 131 Europe and Central Asia region, 67 (table) Strategic Compact, 14, 11, 24, 31, 38, 113, 129 Latin America and Caribbean region, 78 (table) Task Force on Multilateral Development Banks, 113 Middle East and North Africa region, 88 (table) Technical assistance, 30, 31, 91, 124, 126-7 Networks, 113 Telecommunications, 3 0, 3 2 see also Human Development Netwvork, Environmentally and Trust funds, 34, 121, 124-6 Socially Sustainable Development Network, Finasnce, Private Sector and Infrastructure Development Network, and Poverty Uganda, 2 (box), 22, 25, 40, 41,U46 Reduction and Economic Management Network Ukraine, 1, 19, 30, 32, 35, 65, 69, 72 Nongovernmental organizations (NGns), 6, 14-7, 15 (figure), United Nations Children's Fund (UNICEF), 14, 21, 35 16 (table), 25, 38, 40,447, 56, 62, 67, 72, 127 United Nations Development Programme, 14, 21, 34, 35, NiGO haison coordinators, 6, 14, 81 124, 127 NGo-World Bank Committee, 15 Vietnam, 20, 25, 48, 50, 55, 56, 118, 127 Operations evaluation, 7, 12, 63, 115-7, 128 West Bank and Gaza, 29, 84, 85, 86, 88,W90 (box), 118 Participation in Bank activities, 15, 19, 24, 62, 81-2, 89-90 Trust Fund for Gaza and the West Bank, 8, 84, 90 (box) sn evaluation, 11 5 World Development Indicators, 4, 36, 113 Partnerships, 3, 5-6, 15, 16-7, 21, 25-6, 34, 35-6, 41, 56, 59, World Developsent Report, 14, 3 5 72, 82, 113 World Food Summit, 28 Pension reform, 21, 56, 67, 69 (box) World Health Organization (wi-on), 21, 35 see also social security system reform World Links for Development, 45 Performance monitoring indicators, 1 1344 World Trade Orgaenization (wTO), 5 Policy and Human Resource Development Fund, 125, 126 (box) Portfolio improvement in Africa, 46-7 in EastAsia and Pacific, 55-6 in East Europe and Central Asia, 73 in MENA, 90-1 In Latin America and the Caribbean, 79-83 in South Asia, 62-4 Portfolio improvement program, 4, 114 Poverty assessments, 6, 13, 22 Poverty Reduction and Economic Management Network, 7, 13 Private sector development, 3, 29-31, 30 (figure) in Africa, 40-1 in South Asia, 60-1 in Latin America and the Caribbean, 78 Program of targeted interventions (PTI), 13, 14 (table), 92-112 Projects at risk, 4, 114 Public expenditure reviews (PERs), 44, 69 Public Information Center (Pic), 127-8 Quality Assurance Group, 114-5 Research program, 34-6, 44, 56 250 THEWORLD BANKANNUAL REPORT 1997 THE WORLD BANK 1818 H Street N.W. Washington, D.C. 20433. U.S.A. TELEPHONE (202) 477- 1 234 FACSIMILE (202) 477-6391 TELEX MCI 64145 Worldbank MCI 248423 Worldbank CABLE ADDRESS INTBAFRAD WASHINGTON DC WORLD WIDE WEB http://www.worldbank.org/ E-MAIL Books@worldbank.org ISBN 0-8213-3760-2