News: World Bank and Structural Readjustments

Classes have once again started for me, and the topic of IMF/WB loans came up last week. Nevermind how class actually went though. Anyway, with all the focus right now being on Haiti there is really not much news coming out about E.Europe/Central Asia. There was some information on loans that was posted a couple of days ago:

Reflecting pre-existing vulnerabilities in many countries (in particular current account deficits arising from large private sector savings-investment imbalances), developing Europe and Central Asia was hardest hit by the crisis, with GDP falling by an estimated 6.2 percent in 2009. Although GDP is projected to rise by 2.7 percent in 2010 and 3.6 percent in 2011, growth rates in most economies will remain below potential and unemployment and bank restructuring will continue to be pervasive. Much higher non-performing loans, higher interest rates and weak international capital flows will remain key challenges in the near term. Compared to the pre-crisis period, high non-performing loans, weak public finances and low international capital flows are likely to dampen investment growth in many countries. Moreover, significant downside risks persist, including the possibility of a double-dip recession or increased financial difficulties for banks in the region. Despite better international financing conditions and domestic adjustments, the region’s external financing needs are expected to exceed inflows by as much as $54 billion in 2010.

source

Press Release: Improved Logistics

The World Bank issued a press release on January 15th talking about the improved logistics of trade. This is good news and should encourage more investment in developing nations.

According to the study, logistics performance is heavily influenced by the quality of public sector institutions and the effective coordination of border clearance processes among all border management agencies. In this area, customs performs better than many other agencies, pointing to the need for border management reforms. In low performing countries, on average, half of the containers are physically inspected and one container out of seven at least twice.



Other areas for improvement include better transport policies, increasing competition in trade-related services such as trucking, freight forwarding and railways; and better trade-related infrastructure. For many low-income countries the most binding constraints are often in logistics services and international transit systems. Given they perform better on many other indicators, improving trade infrastructure is often reported to be a priority for middle-income countries.



The World Bank Group has a number of projects designed to improve trade logistics in developing countries. The US$250 million East Africa Trade and Transport Facilitation Project improved the corridor infrastructure and upgraded the main border crossing between Uganda and Kenya at Malaba, reducing border crossing times from three days to three hours. In Tunisia, a US$250 million operation is improving competitiveness by reducing trade costs and streamlining border clearance procedures. And in Afghanistan, the Bank is providing funding for a US$31.2 million project to modernize and computerize four major border crossings, increasing customs revenues from US$50 million when the project started in 2004 to over US$399 million in 2008.

Better transportation policies, tarriffs, and more funding of infrastructure seem to be working pretty well. What's interesting is that the release mentions that infrastructure is a middle-income country improvement. It would be interesting to see the impacts of transportation infrastructure in transition economies. Oh wait. I'm doing that.

Source, with graphs

Other Projects

Things have been slow in the CIS project world with the UN being focused on climate change. A couple of projects outside of my thesis area that were approved for new or additional funding: Yemen and Sri Lanka.

Hopefully with some additional time I can start on the meat of my thesis- data coding.

Turmoil at Twenty: Part 3

Part 3 of the series culling through the Turmoil at Twenty bank report. Here are the main points, well mostly. This is dense, there's a lot of graphs and numbers, and I probably should have had another cup of coffee before reading this.

How Much Adjustment? How Much Financing?
Two main issues in financially less stable ECA nations: external debt is maturing and new money to finance current deficits may not happen.

- High inflation and other adjustments are happening
- Decrease in imports from western Europe and the US coupled with credit tightening are increasing the problem
- Sharp decline in the price of oil impacting Russia and Kazakhstan
- This chapter compares the current crisis with the one in the mid to late 90’s when there was a considerable about of finance and adjusting going on.
- Middle and lower income nations have less budget fluctuation due to financing being for direct official sources and not FDI, however poverty is increasing and other humanitarian issues are becoming more prevalent.
- There’s a lot of info about bank and parent-host relationships between donating countries and recipient countries. As always, not all type of aid is considered equal.

IEG Report: Annual Review of Development Effectiveness, Part II

Part II: Achieving Sustainable Development

This is the second part of the IEG: Annual Review of Development Effectiveness for the World Bank. Here are the main points from the report, which is focused on sustainable development in the second half:

- The World Bank ahs a critical role to play in assisting nations in addressing environmental challenges and promoting sustainable practices.

- Sustainable development, poverty reduction, and economic growth are not mutually exclusive.

-The World Bank has evolved over the years with how they handle environmental issues, but need to do more promoting sustainable development for poverty reduction.

- Environmental issues are also quality of life issues

- The process of “mainstreaming” environmental sustainability for development projects and projects in other sectors is not as good as hoped, it is up to The Bank to lead the way and encourage better/smarter practices.

- Most of the funding for sustainable development is going into Africa.

- Bank awareness of biodiversity and other environmental issues is pretty good, and there’s been a large increase in funding for these types of projects in the last decade.

- Global and international environmental policies and sustainable development practices need to be developed.

I see the validity in encouraging sustainable development. On a note outside the report, I do want to point out that building roads isn’t necessarily an unsustainable practice. There has been a large push to mass transit in the west as an effective way of moving people, but in many emerging economies pollution issues have more to do with industry and factories than building roads. Steel for rail has to come from some rendering process, and even solar panels require a lot of chemicals. No one really considers what to do with unused sustainable energy products since that hasn’t become an issue yet, but what’s going to happen when the solar panels in the farms need to be replaced? Can they be reused or are we creating waste that is more difficult to deal with? Roads require maintenance, but so does all types of infrastructure. Traffic impacts and pollution from cars is another regulatory mechanism completely.

News: Fall of the Berlin Wall

There is a lot of coverage happening stateside about the fall of the Berlin wall. The New York Times has quite a few articles on this, and the more interesting one is how the meaning of the fall is still contested.

While 1989 was a very important year, a lot of changes are still taking place. Some argue that it's the beginning of the end of the Cold War, and others point to the policy changes and political actions in 1990 and 1991. Regardless, Germany was once half a country in transition and the East still partially is.

Although this isn't directly CIS related, the question begs to be asked: Would the transition states of the CIS have done better in the last 20 years if they were truely able to depend on an more democratic and economically stable second half? Since this isn't the reality it's hard to say, but I can only imagine that the economic reforms that the World Bank has done (they claim it's successful) would have taken quicker and been more effective if there was some local understanding and knowledge in that field.

At any rate the wall fell, Germany reunited, and the dissolution of the USSR would take place in the years to follow.

World Bank: Turmoil at Twenty Part II

So since the introduction was actually covered in the post prior, I'm going to sum up chapter one of the Turmoil at Twenty report.

There's a lot of data and it mostly points to restructuring being the cause of development. This is the most interesting graph out of the chapter:

World Bank Report: Turmoil at Twenty

For those who don’t have time to slog through 276 pages of World Bank Reports, here are the main points from the introduction of the report:

> The nature of the transitional economy made the impacts of the current financial crisis more severe due to not as strong financial policy and banking oversight. Avoiding a humanitarian crisis is critical.

>Utility infrastructure is important, but only if it’s going to be open to private enterprise and make revenues to attract foreign investment.

>The high growth (up to 7%) in the last decade has created capacity constraints in terms of an educated work force and infrastructure.

>The economy will recover and development will surpass where it was in about 20 years.

While the World Bank is talking mostly about electricity infrastructure the reality is that electricity is only good if you have other public goods as well. Water, electricity, telecommunication, and transportation infrastructure are all important to development. The reason electricity is coming up (and sometimes natural gas) is because there is a potential for foreign direct investment and a potential for profit. It’s probably a good time for a large utility company to come in and buy the land or surface easements for their future power lines. But it’s harder to plan for utilities when you don’t have enough transportation infrastructure to facilitate centralized development along the corridors.

World Bank: ECA 20 Years After the Fall of the Berlin Wall

Lots of publications coming out of the World Bank this week on ECA (Europe and Central Asia) which includes memberstates of the CIS too. The summary of the report on 20 years after the fall is linked here.

It looks like a pretty mixed bag of successes and failures, but transportation infrastrucre seems to have improved. In general, World Bank project ratings have improved. These ratings are from the report linked earlier today from the IEG.

Here's an interesting footnote though on how countries are classified:

The International Monetary Fund’s World Economic Outlook (October 2009) projects GDP in Centraland Eastern Europe and in the Commonwealth of Independent States (the former Soviet Union excluding the Baltic States) to contract by 5 percent and 6.7 percent, respectively, in 2009. In this book, Central and Eastern Europe comprises Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Kosovo, Latvia, Lithuania, FYR Macedonia, Montenegro, Poland, Romania,
Serbia, the Slovak Republic and Slovenia. Turkey is part of the World Bank’s ECA region but is not a transition country; thus, it is added selectively to the discussion. The Commonwealth of Independent States (CIS) includes Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, the Kyrgyz Republic, Moldova,
the Russian Federation, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan. Georgia is not part of the CIS but is included in the group because its economy shares many features of the other countries.

Looks like I'll have to add the IMF's outlook from last month to my reading list.

World Bank Performance Review 2009

The Independent Evaluation Group (IEG) just came out with the 2009 report for World Bank project performance. Here's some info on the IEG from the introduction of the report:

"The Independent Evaluation Group (IEG) is an independent, three-part unit within the World Bank Group. IEG-World Bank is charged with evaluating the activities of the IBRD (The World Bank) and IDA, IEG-IFC focuses on assessment of IFC’s work toward private sector development, and IEG-MIGA evaluates the contributions of MIGA
guarantee projects and services. IEG reports directly to the Bank’s Board of Directors through the Director-General, Evaluation."

Once I get through this 179 page report I'll be writing about it. For now, here is the direct link to the full report

Projects: Armenia Road Rehabilitation

Looking back on the World Bank transportation infrastructure improvements for 2009, the most recently approved project is actually additional funding for the Armenia: Lifeline Roads Improvement Project which is funded out of the IRBD. $36.6 million USD with a standard 25 year loan (with a 10 year grace period) to rehab 140 km of roads in rural Armenia. Here's the reason for the additional funds (available in the project description):

This project paper concerns to provide an additional loan to the Republic of Armenia for the Lifeline Roads Improvement Project (LRIP). The additional loan will finance the scaling up of the project's activities through rehabilitating an additional 140 kilometers of the lifeline road network. This additional loan will also help mitigate the impact of the financial crisis by creating temporary jobs in road construction. This additional financing (AF) will also finance the design of project roads, supervision of works, capacity development in pavement design and road safety, project operating costs, and financial and technical audits. The project development objective (PDO) will remain the same as in the original project. The results framework and the monitoring indicators have been revised to reflect the increased scope of the project. The implementation arrangements remain the same as in the original project. There will be no co-financing from other donors. The closing date is being extended by one year, from December 31, 2010 to December 31, 2011.

The additional funds were approved of August of this year, but no new project proposals for transportation have happened in the second half of the year. Looks like the World Bank is setting the stage with government reform programs/money in Georgia and Armenia and adding additional funding to infrastructure projects in Azerbaijan. Hopefully a more exciting project will come out of the World Bank next year, otherwise it looks like private developers are having all the fun.

News: World Bank Reform

As of October 16th, the World Bank is discussing solutions to a lot of the general issues that are out there in the world. The most relevant thus far is the discussion on how to deal with corruption which can greatly impact what is actually spent on developing public goods. In many parts of the world, including Eastern Europe and Central Asia, bribes and favoritism are a way of life and a way of climbing the social ladder. Here is the overview, directly from their site:

The World Bank Group has been working on issues related to governance and anticorruption—in areas such as public sector performance, public financial management, civil service reform, decentralization, transparency and accountability—for more than a decade. Since 2007, the Bank’s new strategy, Strengthening World Bank Group Engagement on Governance and Anticorruption (GAC), is enabling a more systematic and central approach to making GAC an element of Bank operations across sectors and countries. Commitment and championship of this agenda emanates from the senior levels of the Bank’s management—including the president, managing directors, and the high-level GAC Council.

The strategy identifies governance and anticorruption issues as critical to improving development outcomes such as better delivery of services in health, education, roads, water, and electricity, better management of natural resource revenues, and more efficient investment in infrastructure. For instance: support for better and more transparent management of public finances narrows the scope for resource misallocations or leakages; assistance to strengthen local governments enables them to be more responsive to citizen needs; and support for oversight bodies and transparency mechanisms strengthens the accountability of public officials for delivery of services.
Source: World Bank

Post Cold War: World Bank and CIS

The creation of the Commonwealth of Independent States (CIS) on December 21, 1991, was tasked with the burden of carrying on the reforms started by Gorbachev under the SovietUnion. The political and social pressures that were facing these new states were also coupled with the economic disaster under transition governments and economies. In order to create stability in the region, “the task of restructuring and reconstructing Eastern Europe [after the collapse of the Soviet Union] was taken up by private investors, by Western governments (in bilateral-assistance projects and some debt relief), and through the European Bank for Reconstruction and Development (EBRD)” (Grieve 1992-1993). After the dissolution of the Soviet Union, the World Bank and the IMF also turned their interest to the newly forming states and the rest of the developing world. Many of the loans provided by the World Bank and IMF provided assistance for economic and political liberalization, and the funding of social and transportation infrastructure projects.

Specifically for transportation planning, the discussion after the collapse of the Soviet Union and the “profound changes in economic and spatial policy have brought about a re-orientation in transportation with a clear focus on supply-driven mechanisms, in which the crucial role of the public sector is increasingly no longer taken for granted” (Nijkamp et al 1995). Although the World Bank does not financially support infrastructure projects at the level it did during the 1950s and 60s, the fiscal allocation for transportation projects in 2007 was 20% of the budget, with an additional 12% marked for water, sanitation, and flood protection. Regionally, 15% of the funds went to Europe and Central Asia. (World Bank 2009: Our Focus) According to the project documents available on the World Bank website, all CIS nations are receiving or have recently received project financing for transportation projects including financing for a highway in Azerbaijan and infrastructure retrofitting in Belarus. The World Bank has also put more focus into obtaining the United Nation’s Millennium Development Goals, which calls for the elimination of extreme poverty by 2015 as well as universal education, lowering infant mortality rates, gender equality, maternal health, combating HIV/AIDS, environmental sustainability and forging global partnerships. (UN 2009: Millennium Goals) The World Bank works most closely with the first half of the goals, which are related to development and the availability of social services. The ability for citizens to reach schools and health clinics is paramount in order for the development goals of poverty reduction and health to be truly achieved with sustainable results.

Topic Introduction

In the wake of the Second World War many of the Eastern European nations were devastated by the bombing and occupation that occurred during the war years. Prior to the end of the war, the Allied powers sought to create peace in the international community and started talks for the recreation of a stronger, more widespread League of Nations. The creation of the United Nations also resulted in the creation of the International Monetary Fund (IMF) and World Bank, both of which have a significant amount of autonomy from the United Nations, and deal with financing, lending, and development. While the understanding of the IMF and World Bank today are more in line with poverty reduction, the initial creation of the institutions were due to the “two serious problems [facing] policymakers in the last stages of the Second World War. First, Europe had been devastated by war and needed to be reconstructed. Second, the ‘beggar thy neighbor’ economic policies of the interwar years had led to disastrous outcomes” (Woods, 1996). Although the second problem was mostly contained within developing nations, the failure of economic policies left a void for loans and guidance that needed to be filled in order to avoid a larger collapse of civil society. It was under these circumstances that the first economically focused international organizations of the IMF and World Bank came into existence.

The focus of the World Bank on reconstruction of industrialized nations shaped how the World Bank went about loaning money: with definite projects in mind. Most of the original World Bank assistance was in rebuilding infrastructure such as roads, railway, bridges, and public utilities. During the first decade, approximately three-quarters of the funds were spent on public utilities (Lewis and Kapur 1973). Although the original intention of the World Bank was funding for a project-approach to lending and the reconstruction of war torn Europe, the introduction of the Marshall Plan in 1947, quickly changed the role of the World Bank, resulting in a “loan portfolio dominated by power and transportation projects, which came to account for 78 percent of lending to poorer countries by the end of the 1950s” (Woods, 2006). This shift from redevelopment of industrialized nations to assisting developing nations with the industrialization process occurred at the end of the 1940’s with the implementations of the Marshall Plan and the Anglo-American Loan Agreement in Western Europe. This change of view and location did not influences the internal structure and regulations of the World Bank, and thus the types of projects it funded did not change drastically until later in the century, ensuring that its loans to the borrowing parties had conditions to ensure development programs and public overhead capital.

Institutionally the World Bank also encompasses two other organizations, the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). While the IDA focuses its loans and assistance on reducing poverty the poorest nations, the IBRD “aims to reduce poverty in middle-income and creditworthy poorer countries by promoting sustainable development through loans, guarantees, risk management products, and analytical and advisory service” (World Bank 2009: IRBD). While both the IDA and IRBD provide development assistance, the IDA tends to promote smaller scale, social development programs whereas the IRBD tends to do more project assistance for nations. World Bank funding for social programs is about 41% of the total budget, with the breakdown as follows: 8% for education, 11% health and other social services, and 22% to law and justice, and public administration. (World Bank 2009: Our Focus)

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