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Investment Lending Reform:

Investment Lending Reform: . Modernizing and Consolidating Operational Policies and Procedures. Context: Part of Broader Reform Efforts. Overall modernization effort. Important element of Investment Lending (IL) Reform.

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Investment Lending Reform:

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  1. Investment Lending Reform: Modernizing and Consolidating Operational Policies and Procedures

  2. Context: Part of Broader Reform Efforts Overall modernization effort Important element of Investment Lending (IL) Reform IDA Internal Controls Review found the complexity, inconsistency, and magnitude of the IL policy architecture had an adverse affect on the efficiency and effectiveness of Bank staff and clients in IL delivery Response to demands from clients and staff as current structure is hard to understand and comply • Complemented by other efforts especially • Procurement reform • Safeguards Review • Both of these areas are not included in the current exercise.

  3. IL Reform: Five key pillars Risks & Results

  4. Proposed Structure of New IL Policy • One IL Operational Policy (OP) and Bank Procedure (BP) consolidating 20 OPs and 18 BPs (and cleaning up OpMemos). • The OP will be a short, focused statement providing direction for decisions and action. • The BP will summarize procedures staff must follow to fulfill policy requirements. • Excludes procurement and safeguards. Coverage • Incorporating recent IL reform initiatives and recommendations (e.g. risk-based approach). • Consistent with approach taken for other financing instruments (Program-for-Results & Development Policy Lending). 4

  5. Limited Number of Proposed Policy Changes(1) Clarifying that situations of fragility and weak capacity (including small states) can utilize the flexibility previously provided for post-conflict and emergencies situations Fragility Maintain the requirement of rigorous economic analysis in each operation. Solidifying the principle but better tailoring to country and sector conditions Modernized approach to economic analysis Consider performance and consistency of development objectives as the basis of moving from one stage to the next (instead of using triggers, usually defined five years in advance as the basis for such decision) Phased series of operations …continued on next slide. While mostly a consolidation effort, a few policy changes were identified and proposed:

  6. Limited Number of Proposed Policy Changes(2) Allow for more flexibility in the implementation period for additional financing that is currently limited to three years. Additional financing Limited additional flexibility under audit requirements in terms of the timing of the annual reports to be better aligned with country conditions and hence improve compliance Audits Increasing the current limits of Project Preparation Advances from $ 3 million for regular operations to $ 6 million and in cases of fragility to $6 and $ 10 million Project Preparation Advances While mostly a consolidation effort, a few policy changes were identified and proposed: that is curren

  7. Complementary Activities Parallel exercises for Procurement and safeguard policy review and operational manual updates Guidance materials Training for staff. Systems and tools / Updated processes Application of new Accountability and Decision making framework In addition to the consolidated OP and BP, these will be complemented by:

  8. How will it add up?

  9. Consultation Process • Internal and external consultations would take place from early June through end of August 2012. • Consultations would be: • Mainly web-based and with a targeted number of face-to-face meetings • Additional focus on clients, through Country Directors • Touch base with MDBs and Bilateral Donors • Touch base with CSOs on modernization agenda, including IL Policy Reform • Feedback summarized and included in the final Board paper.

  10. Feedback Requested • We would appreciate your feedback to the following questions: • Do you agree with the overall direction and approach of IL policy consolidation? If not, why not? Please provide any additional comments on the overall approach. • Do you agree with the proposed policy changes? If not, why not? • Do you have other suggestions or comments regarding IL policy reform?

  11. Thank You! For more information, please see www.worldbank.org/ilconsultations

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