ECSPF, the World Bank and the IMF

1
ECSPF, the World Bank and the IMF

• presentation by
• Dr. Khaled F. Sherif,
• Sector Manager
• Europe and Central Asia
• Private and Financial Sector Development Unit
• The World Bank

2
An Overview of the World Bank Group

• Founded in 1944, the World Bank Group consists of
  five closely associated institutions. They are
• International Bank for Reconstruction and
  Development (IBRD),
• International Development Association (IDA),
• International Finance Corporation (IFC),
• Multilateral Investment Guarantee Agency (MIGA),
  and
• International Center for the Settlement on
  Investment Disputes (ICSID)

3
World Bank at a Glance

• Seeks to promote the economic development of the
  worlds poorer countries
• Assists developing countries through long-term
  financing of development projects and programs
• Provides to the poorest developing countries
  whose per capita GNP is less than 400 a year
  special financial assistance through the
  International Development Association (IDA)
• Encourages private enterprises in developing
  countries through its affiliate, the
  International Finance Corporation (IFC)
• Acquires most of its financial resources by
  borrowing on the international bond market
• Has an authorized capital of 95 billion, of
  which members pay in about 9 percent
• Has a staff of 6,500 from over 100 member
  countries

4
International Bank for Reconstruction and
Development (IBRD)

• provides loans and development assistance to
  middle-income countries and creditworthy poorer
  countries.
• voting power is linked to members' capital
  subscriptions, which in turn are based on each
  country's relative economic strength.
• not a profit-maximizing organization but has
  earned a net income every year since 1948.
• established in 1945
• 181 member countries (shares allocated to each
  member reflect its quota in the IMF, i.e. the
  countrys relative economic strength in the world
  economy)
• Source of funds paid-in capital, capital market
  borrowings, repayments on earlier loans, retained
  earnings.

5
International Development Association (IDA)

• provides long-term loans at zero interest to the
  poorest of the developing countries.
• supports efficient and effective programs to
  reduce poverty and improve the quality of life in
  its poorest member countries.
• helps build the human capital, policies,
  institutions, and physical infrastructure needed
  to bring about equitable and sustainable growth.
• IDA's goal is to reduce the disparities across
  and within countries, to bring more people into
  the mainstream, and to promote equitable access
  to the benefits of development.
• established in 1960, includes 160 member
• Source of funds Contributions from governments,
  transfers from IBRD profits, repayments on
  earlier IDA credits.

6
International Finance Corporation (IFC)

• IFC shares the primary objective of all Bank
  Group institutions to improve the quality of the
  lives of people in its developing member
  countries.
• finances and provides advice for private sector
  ventures and projects in developing countries in
  partnership with private investors and, through
  its advisory work, helps governments create
  conditions that stimulate the flow of both
  domestic and foreign private savings and
  investment.
• promotes economic development by encouraging the
  growth of productive enterprise and efficient
  capital markets in its member countries.
• established in 1956, includes 174 members
• Source of Funds Member capital, borrowings from
  capital markets (80) and IBRD (20)

7
Multilateral Investment Guarantee Agency (MIGA)

• encourages the flow of foreign direct investment
  to its developing member countries.
• facilitates investment primarily by providing
  investment guarantees against noncommercial risks
  (currency transfer, expropriation, and war, for
  example).
• provides technical assistance to help countries
  disseminate information on investment
  opportunities, and to build capacity for
  investment promotion.
• MIGA has its own operating and legal staff and is
  legally and financially a separate entity from
  the World Bank, on which it draws, however, for
  certain services.
• established in 1988, has 149 members
• Source of Funds Member capital

8
International Center for the Settlement on
Investment Disputes (ICSID)

• provides facilities for the settlement, by
  conciliation or arbitration, of investment
  disputes between member countries and nationals
  of other member countries.
• provisions referring to arbitration under the
  auspices of ICSID are a common feature of
  international investment contracts, investment
  laws, and bilateral and multilateral investment
  treaties.
• an autonomous international organization with
  close links with the World Bank. All of its
  members are also members of the Bank. Unless a
  government makes a contrary designation, its
  Governor for the Bank sits ex officio on ICSID's
  Administrative Council. Established in 1966, has
  131 members.
• The expenses of the ICSID Secretariat are
  financed out of the Bank's budget, although the
  costs of individual proceedings are borne by the
  parties involved.

9
WBs Development Assistance Strategy Process

• The Comprehensive Development Framework (CDF)
  Principles
• helps countries think about the priorities for
  development and how to get there
• helps countries build a holistic vision and
  strategy for development that relies on
  partnership and the activities of many different
  players.
• comprehensive focus on the relations between
  macro, structural, social and institutional
  elements of poverty reduction
• emphasis on institutional change for long-term
  success, process rather than a product, focus on
  programs and policies and not on projects

10
WBs Development Assistance Strategy Process
(contd)

• The Country Assistance Strategy (CAS)
• vehicle for Board review of the Banks assistance
  strategy for IDA and IBRD borrowers.
• describes the Banks strategy based on an
  assessment of priorities in the country,
• indicates the level and composition of assistance
  to be provided based on the strategy and the
  countrys portfolio performance.
• prepared with the government in a participatory
  way its key elements are discussed with the
  government prior to Board consideration.

11
Lending Products

• Different forms of lending products are
• Adjustment Operations SAL, PSAL, FSAL, PAL
• Investment Operations -- TAs, general
  development projects
• Learning and Innovation Loans (LILs) Gateway,
  information development projects

12
Project Cycle

• A typical World Bank project goes through the
  following 5 project cycles
• IDENTIFICATION
• APPRAISAL
• NEGOTIATIONS
• BOARD APPROVAL
• SUPERVISION

13
Europe and Central Asia Private and Financial
Development Unit (ECSPF)

• assists its clients to reduce poverty on a
  sustainable basis through growth led by the
  development of their private and financial
  sectors.
• formed on July 1, 1997.
• serves Europe and Central Asia region, covering
  28 countries
• FSU Armenia, Azerbaijan, Belarus, Estonia,
  Georgia, Kazakhstan, Kyrgyz Republic, Latvia,
  Lithuania, Moldova, Russian Federation,
  Tajikistan, Turkmenistan, Ukraine, Uzbekistan
• Central and Eastern Europe Albania,
  Bosnia-Herzegovina, Bulgaria, Croatia, Czech
  Republic, Hungary, FYR Macedonia, Poland,
  Romania, Slovak Republic, Slovenia, Turkey, FR
  Yugoslavia

14
Example of ECSPFs projects

• Albania
• Financial Sector Adjustment Credit
• continued reform of the banking sector including
  the privatization of the Savings Bank and further
  strengthening of the banking regulation and
  supervision,
• enhancement of the bankruptcy and debt resolution
  framework,
• reform of the nonbank financial sector, including
  further development of the regulatory and
  supervisory framework for the insurance sector
  and the privatization of the Insurance Institute
  of Albania (INSIG).
• The credit (US15 million) to be released in 2
  tranches subject to the Government's achievement
  of specific benchmarks necessary for the
  successful implementation of the program
• privatization of the Savings Bank and the INSIG
• strengthening of the regulatory framework for
  banks and the insurance sector
• strengthening the bankruptcy, secured
  transactions and debt workout frameworks
• further improvement in the financial sector
  infrastructure.

15
Example of ECSPFs projects

• Ukraine
• Private Sector Development (PSD)
• Enterprise Restructuring (market adjustment) to
  support and help accelerate Government's reform
  effort by
• providing advisory services through the
  implementing agency, the Ukrainian Center for
  Enterprise Restructuring and Private Sector
  Development (UCER) aimed at improving the
  profitability, productivity, and general
  operational, financial and managerial efficiency
  of private and privatized enterprises
• supporting and facilitating development of a
  highly qualified domestic consulting industry
  which thoroughly understands the unique local
  business and political climate in the process of
  economic development and transition
• To strengthen constituency for reform at the
  oblast level consisting of entrepreneurs,
  managers, local academia, consultants and other
  stakeholders benefiting from enterprise
  restructuring and market-friendly business
  environment.

16
Example of ECSPFs projects

• FR of Yugoslavia
• Privatization and Restructuring of Banks and
  Enterprises
• launching the restructuring and privatization
  (RP) process of some of the most problematic
  large SOEs in Serbia
• establish a consistent approach and methodology
  for the RP process of large SOEs that cannot be
  sold as is
• support the RP of a number of large loss-making
  enterprises by funding expert restructuring
  agents
• supporting the implementation of a comprehensive
  bank resolution strategy aimed at the creation of
  viable financial sector.
• support the restructuring or liquidation of
  insolvent banks under the control of Bank
  Rehabilitation Agency (BRA) and the privatization
  of all state-majority owned banks

17
Example of ECSPFs projects

• Turkey
• Export Finance Intermediation Loan (EFIL)
• provide, through the management of Turkish
  Eximbank and by utilizing the Participating
  Financial Institutions (PFIs), short and medium
  term working capital and investment finance to
  private exporting enterprises to assist the
  Turkish exporting sector.
• enable a strategic dialogue and close interaction
  with the major banks and the Bankers Association
  in Turkey, through setting up of stricter and
  upgraded prudential eligibility criteria and
  banking standards for capital adequacy, foreign
  exchange exposure, connected and insider lending
  and risk management systems.
• facilitate further efficiency gains and other
  institutional development of Turk Eximbank
  itself.

18
The International Monetary Fund at a Glance

• Oversees the international monetary system
• Promotes exchange stability and orderly exchange
  relations among its member countries
• Assists all members -both industrial and
  developing countries- that find themselves in
  temporary balance of payments difficulties, by
  providing short-to medium - term credits
• Supplements the currency reserves of its members
  through the allocation of SDRs (special drawing
  rights) to date 21.4 billion SDRs have been
  issued to member countries in proportion to their
  quotas
• Draws its financial resources principally from
  the quota subscriptions of its member countries
• Has at its disposal fully paid-in quotas now
  totaling SDR 90 billion (more than 120 billion)
• Has a staff of 1,700 from over 100 member
  countries