SUSTAINABLE ECONOMIC DEVELOPMENT: THE ROLE and EXPERIENCES OF THE MULTILATERAL DEVELOPMENT BANKS

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SUSTAINABLE ECONOMIC DEVELOPMENT THE ROLE and
EXPERIENCES OF THE MULTILATERAL DEVELOPMENT BANKS

• AYSE DÖNMEZER
• MAY 2005

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MULTILATERAL DEVELOPMENT BANKS (MDBs) KEY
PARTNERS IN DEVELOPMENT

• World Bank Group
• IBRD, IDA, IFC, MIGA, ICSID(WBIBRDIDA)
• African Development Bank
• Asian Development Bank
• Inter-American Development Bank
• European Bank for Reconstruction and Development
• Other important IFIs
• International Monetary Fund
• European Investment Bank

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The Global trends are shaping the role of the
World Bank

• Public Sector, Infrastructure dams, roads,
  irrigation etc.
• Private Sector with Sovereign Guarantee
• New areas, education, health, rural-urban
  development etc.
• Policy Based Lending
• Structural Adjustment Loans
• Sectoral Adjustment Loans
• The development strategy of the World Bank
• 1-Building an investment climate for investment
  and growth and
• 2-The empowerment of poor people to participate
  growth.

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EBRD- Unique mandate- advancing economic and
political transition in Eastern Europe and the
Former Soviet Union

• Focus on the private sector-deeply needed
• Early Stages of Transition infrastructure,
  natural resources, financial sector development
• Operational Priorities
• To support the creation of sound financial
  sectors
• To develop SMEs
• To demonstrate ways of restructuring large state
  enterprises
• To take an active approach to equity investment
• To promote sound investment climate and stronger
  institutions.

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SOME IMPORTANT CONCEPTS FACTS

• INSTITUTIONAL BUILDING- Central task-core of
  development effectiveness
• Sustainabilitypart of a macro-stabilization and
  economic reform strategy
• Beyond changing organizational structures and
  rules
• long established habits
• Patterns of behavior
• Recent experience
• South east Asia Financial crisis weak
  institutions
• Better and sustainable outcome Institutional
  reform and capacity building (takes time) for
  effective governance

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ROME DECLARATION OF HARMONIZATION

• Collaboration among MDBs, Strongest commitment to
  Harmonization
• Need to harmonize the MDB policies (11S)
• G-7 Countries instructions to 5 MDBs and IMF
• -Improve the effectiveness of development
  assistance,
• -Improve public accountability
• -Focus on concrete development results
• -Development assistance consistent with countries
  priorities.

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CONDITIONALITY

• All donors use conditionality
• To Ensure that assistance actually contributes to
  the countries development objectives
• Outcomes of International seminar of WB, on role
  and effectiveness of conditionality in lending
  programs
• Traditional understanding of conditionality as
  leverage was in the past
• Conditionality policy dialogue capacity
  building participation
• Policy advice not prescriptive, help counties to
  develop own solutions

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The PhaseWASHIGTON CONSENSUS Set of policies
believed to be the formula for promoting economic
growth!

• Fiscal discipline
• Public expenditure prioritization killing white
  elephants
• Reducing or elimination subsidies
• Tax reform
• Financial liberalization, unified and competitive
  exchange rate
• Trade liberalization, Liberal foreign direct
  investment regime, privatization
• Wedding out regulations which do not serve the
  public interest and strengthening necessary ones.
• Discussions
• Anti-globalization protestors, developing country
  politicians and officials, trade negotiators
• Some- no such consensus exists
• Augmented Washington Consensus

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HOW THE MDBs AND IMF WORKING WITH THE COUNTRIES
TURKEY

• Since 1961, Turkey has signed 17 IMF Stand-by
  agreement
• In 1999, Three year disinflation program
  supported by IMF Stand-by and ERL-Economic Reform
  Loan of the World Bank
• Economic Crisis and Recovery
• February 2001-severe crisis
• May 2001- New Economic Program (NEP)
• Support from IMF and World Bank
• July 15 2004, Letter of Intend ending the
  stop-go economic policies.Strong ownership.

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BULGARIA

• Bulgaria had a command economy based on
  centralized planning
• Transition process, 1992, Restitution and
  Privatization Laws
• 1996-1997 crisis
• 1999 membership talks with the EU accession
• Behind other countries in the CEB
• October 2002 fully functioning market economy
• Risks on the way to become member of the EU
• IMF (Stand-by), World Bank (PAL), EBRD, EIB, EU
• Commitment to EU accession and completing the
  transition to a market economystronger

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TRANSITION/DEVELOPING PROCESSQUESTIONS TO BE
ASKED

• The Growth Question
• Why has some transition/developing economies
  performed better than others?
• Political Economy Question
• The advantages of economic reforms are so
  obvious, why have some governments been so
  reluctant to accept them?
• The Policy Question
• Do we need to reassess the policy prescriptions
  with which we began with?

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GUIDANCE FOR NORTHERN PART OF CYPRUS

• Carrot matter Reform progress in 2004 most
  pronounced in EU candidates of South Eastern
  Europe and integration of 8 Central Eastern
  Europe and Baltic Countries to the world economy
• Challenge To find a way to encourage the
  developing and transition counties to undertake
  necessary institutional reforms and
  liberalization
• Regional Cooperation open doors to achieve
  greater things
• Strong Government targeting to improve prosperity
  for their people

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./

• The achievement of sustainable economic growth is
  among the most important challenge
• Ensuring growth sustainability will require
  consistent and credible advances in the
  structural and institutional reform agenda
• Implementation and enforcing law and
  regulations
• Maintaining momentum-new reform initiatives
• Implementation capacity
• Realistic country assistance strategies, projects
  and programs- Taylor made approach-
• Government commitment and ownership of reforms
• Degree of political support or opposition

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• Institutional reformTA and Investment aid is
  necessary. To be sustainable have to be part of
  broader macro-stabilization and economic reform
  strategy
• Coordinated approach from Donors
• Conditionality includes policy dialogue and
  capacity building