World Bank: Promoting Development and Environmental Sustainability

1. UN-Institutions related to Environment (simplified)

2. International “Development Disparities” • esp. the role of the Worldbank • Background: • Postulate for equitable allocation of well-being, economic prosperity • Migration towards “ islands of prospertity” • Depletion of natural resources

3. International Bank for Reconstruction and Development (IBRD) • What Is the World Bank? • The World Bank Group is one of the world's largest sources of development assistance. • In Fiscal Year 2005, the institution provided more than US$ • 22.3 billion in loans to its client countries. It works in more than 100 developing economies with the primary focus of helping the poorest people and the poorest countries. For all its clients the Bank emphasizes the need for: • Investing in people, particularly through basic healthand education • Focusing on social development, inclusion, governance, and institution-building as key elements of poverty reduction • Strengthening the ability of the governments to deliver quality services, efficiently and transparently • Protecting the environment • Supporting and encouraging private business development International Development Association (IDA) International Finance Corporations (IFC) Multilateral Investment Guarantee Agency (MIGA) International Centre for the Settlement of Investment Disputes (ICSID)

4. Appr. 200 bill. $ legal stock • only to 20 validated, 80 % only bond • From each member country (184) acc. to its economical strength

5. The International Bank for Reconstruction and Development • Established 1945 184 Members • Cumulative lending: $407.4 billion • Fiscal 2005 lending: $13.6 billion for 118 new operations in 37 countries • The International Development Association • Established 1960 165 Members • Cumulative commitments: $161 billion (includes credits, grants, and guarantees) • Fiscal 2005 commitments: $8.7 billion 160 new operations in 66 countries • The International Finance Corporation • Established 1956 178 Members • Committed portfolio: $24.6 billion (includes $5.3 billion in syndicated loans) • Fiscal 2005 commitments: $5.4 billion for 236 projects in 67 countries • The Multilateral Investment Guarantee Agency • Established 1988 165 Members • Cumulative guarantees issued: $14.7 billion (includes funds leveraged through the Cooperative Underwriting Program) • Fiscal 2005 guarantees issued: $1.2 billion • The International Centre for Settlement of Investment Disputes • Established 1966 142 Members • Total cases registered: 184 • Fiscal 2004 cases registered: 25

6. Multilateral and Bilateral Development Agencies • Four Regional Development Banks: • The African Development BankThe Asian Development BankThe European Bank for Reconstruction and DevelopmentThe Inter-American Development Bank Group • These banks are characterized by a broad membership, including both borrowing developing countries and developed donor countries, and not limited to member countries from the region of a regional development bank. Each bank has its own independent legal and operational status - but with a similar mandate and a considerable number of joint owners, the MDBs maintain a high level of cooperation. • Several other banks and funds that lend to developing countries are also identified as multilateral development institutions, and are often grouped together as other Multilateral Financial Institutions (MFIs). They differ from the MDBs in a more narrow ownership/membership structure or in focusing on special sectors or activities. Among these are: • The European Investment Bank (EIB)International Fund for Agricultural Development (IFAD)The Islamic Development Bank (IDB)The Nordic Development Fund (NDF) and The Nordic Investment Bank (NIB)The OPEC Fund for International Development (OPEC Fund) • A number of Sub-Regional Banks, established for development purposes, are also classified as multilateral banks, as they are owned by a group of countries (typically borrowing members and not donors). Among these are banks such as Corporacion Andina de Fomento (CAF); Caribbean Development Bank (CDB); Central American Bank for Economic Integration (CABEI); East African Development Bank (EADB); West African Development Bank (BOAD). • National agencies for (technical) DA: }appr. 40% of total lending

7. Partnerships • Partnerships are a key element of the Bank’s Strategy and a number of very successful partnerships are currently sustained (e.g. in the forest sector) • The World Bank/WWF Alliance for Forest Conservation and Sustainable Use hasa set of ambitious targets for 2010: establishing of 25 million ha. of new protected areas in the world’s most outstanding, least represented, and most highly threatened forest ecoregions; bringing 75 million ha. of existing forest protected areas under improved management to achieve conservation and development outcomes; and bringing 300 million ha. of forest outside strict protected areas under improved forest management. • The multi–donor Program on Forests (PROFOR) partnership develops and disseminates knowledge and best practices on forest livelihoods, finance, governance and cross-sectoral cooperation. A prominent PROFOR product this year is an analysis of forest-livelihood linkage and an accompanying toolkit for assessing this linkage. • The Bank is a member of the Collaborative Partnership on Forests (CPF), an inter-agency group set up to support the United Nations Forum on Forests (UNFF). • The Critical Ecosystems Partnership Fund (CEPF) is a forests protection partnership between the Worldbank , The Global Environment Facility (GEF), the MacArthur Foundation, the Japanese Government, and Conservation International.

10. Ten Largest IBRD/IDA Borrowers in Fiscal 2005 (millions of dollars)

11. Eligibility of Expenditures inWorld Bank Lending: The Policy Framework • Three guiding principles: • that expenditures financed by the Bank need to be productive; • that the impact the operations financed have on the country's fiscal sustainability needs to be acceptable; • that acceptable oversight arrangements, including fiduciary oversight arrangements, need to be in place to ensure that loan proceeds are used only for the purposes intended, with due attention to considerations of economy and efficiency.

12. Country Classification • For operational and analytical purposes, the World Bank’s main criterion for classifying economies is gross national income (GNI) per capita. Based on its GNI per capita, every economy is classified as • low income, $825 or less • middle income (subdivided into lower middle $826 - $3,255 and upper middle $3,256 - $10,065), • or high income $10,066 or more • Definitions of groups • All World Bank member countries (184), and all other economies with populations of more than 30,000 (208 total) are classified acc.: • Geographic region: Classifications and data reported for geographic regions are for low-income and middle-income economies only. Low-income and middle-income economies are sometimes referred to as developing economies. The use of the term is convenient; it is not intended to imply that all economies in the group are experiencing similar development or that other economies have reached a preferred or final stage of development. Classification by income does not necessarily reflect development status. • Income group • Indebtedness: (Standard World Bank definitions of severe and moderate indebtedness are used to classify economies9  • Severely indebted • Moderately indebted • All other classified low- and middle-income economies are listed as less indebted. • Example:

13. Current Project example: Armenia: Rural Enterprise and Small-Scale Commercial Agriculture Development Project WASHINGTON, July 7, 2005:The following project was approved today by the World Bank’s Board of Executive Directors: IDA CREDIT AMOUNT:$20.0million TERMS:Grace period = 10 years; Maturity = 40 years PROJECT DESCRIPTION: This project’s main objective is to assist the government in supporting the development of Armenia’s small and medium-scale rural businesses by improving the ability of farmers and rural entrepreneurs to access markets and by stimulating market-oriented private and public investments in rural areas.

15. Boards Of Directors The World Bank Group Boards of Executive Directors are responsible for conducting the day-to-day business of the World Bank. The Boards are composed of 24 Directors, who are  appointed or elected by member countries or by groups of countries, and the President, who serves as its Chairman. Four institutions of the World Bank Group: International Bank for Reconstruction and Development (IBRD), International Development Association (IDA), International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA) have a Board of Executive Directors.

16. INTERNATIONAL DEVELOPMENT ASSOCIATION VOTING POWER OF EXECUTIVE 24 DIRECTORS 19 elected directors represent all other member countries 61.55% 5 Total: 38.45%

17. Operations • The World Bank's two closely affiliated entities—the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA)—provide low or no interest loans and grants to countries that have unfavorable or no access to international credit markets. Unlike other financial institutions, they do not operate for profit. The IBRD is market-based, and uses the high credit rating to pass the low interest to pay for money on to our borrowers—developing countries. • where does the money come from to operate the World Bank • and how do the WB use the funds to carry out ist mission? • Fund Generation • Loans • Grants • Analytic and Advisory Services • Capacity Building

18. Critics: • Over-seized, giant projects with negative environmental impacts and with the depth trap effect • Top-down management – no participation • 3. No transparency • 4. Unbalanced voting power

19. The World Bank and Forests • The Forest Sector • Over 90 percent of the 1.2 billion people living in extreme poverty depend on forests for some part of their livelihoods. • Forests are home to at least 80 percent of the world’s remaining terrestrial biodiversity and are a major carbon sink that regulates the global climate. • Forests help to maintain the fertility of the soil, protect watersheds and reduce the risk of natural disasters such as floods and landslides. • Forests and the forest product industry are a source of economic growth and employment,with global forest products traded internationally in the order of $270 billion, of which developing countries account for 20 percent. • The global deforestation rate remains dangerously high at 0.2 percent per year. • Lending Trends • Sustainable management of forests is critical to the Bank’s mission because of their contribution to the livelihoods of the poor,the potential they offer for economic development, and the essential global environmental services they provide.Implementation of the proactive approach to Bank engagement in forests embodied in the Forests Strategy is underway with visible results in the Bank’s growing forests portfolio, up from $11 million in FY01 to $63 million for FY05. This figure is strictly for lending in the forest sector, however many projects outside the forest sector include a forest component. Estimates for Bank lending related to forests are significantly higher – $20 million (FY01) and $187 million (FY05) – when a broader perspective is taken.

20. Key Challenges Weak governance, illegal logging and corruption: An estimated $15 billion in revenue is lost per year to Bank clients due to illegal logging. Widespread failure of forest governance undermines any nation’s attempt to achieve sustainable economic growth, societal equity, and environmental conservation. It puts poor and forest-dependent populations who rely on timber and non-timber forest products at risk, undermines responsible forest enterprises by distorting timber markets, and results in loss of revenue that could be invested in sustainable forest management or economic development. Conversion of forestland to agriculture:Conversion of forestland to agriculture is a significant cause of deforestation. Expansion of the agriculture frontier in some countries of West Africa, the Amazon and South East Asia regions is inevitable. Landscape-based planning and management approaches must be pursued to ensure that forests are integrated the agriculture landscape and that agricultural expansion avoids critical forests and does not negatively impact on indigenous forest-dwelling communities. Reform of forest tenure arrangements:Ownership of forest resources is a contentious issue, with vested interests often impeding adoption of more equitable use and/or ownership arrangements. Secure rights and use of forest resources for forest-dependent communities encourages long-term forest management practices and provides economic security. Innovative tenure arrangements granting communities secure rights over forest resources are emerging and a challenge is to engender these changes and ensure forest ownership arrangements benefit those who are most dependent on the resources, which often are indigenous and extremely poor people. Climate change and deforestation:The clearing and burning of forests constitutes an estimated 20-30 percent of global carbon emissions. This deforestation accounts for about one-fifth of annual anthropogenic global warming. There is a need to develop better awareness and understanding of this issue and to develop market-based incentives to reverse deforestation. Impacts from other sectors:Macro-policies and decisions in other sectors, such as energy, transportation or mining, can impact negatively on forests. For example, reforms in the energy sector can force poor households to resort to wood fuel for energy. In these situations, the main challenge is to guide and design macro-policies that achieve their original objective without comprising forest environmental and social functions of forests. Private Sector Engagement:Currently, private sector investment for forests in Bank client countries is seven times combined ODA. Engaging the private sector to ensure that these investments are made in a socially and environmentally sustainable manner is critical to successful forest outcomes. In collaboration with the IFC, the Bank is pursuing innovative company-community partnerships which empower and provide livelihood opportunities to rural poor populations.

21. Current Bank Initiatives on Forests Ensuring due diligence in Bank lending activities:World Bank Operations Policy requires due diligence with regards to impacts on environment, forests and other natural resources for all development policy lending activities.  ForestLaw Enforcement and Governance:The Bank has contributed to regional Forest Law Enforcement and Governance (FLEG) initiatives in partnership with donor agencies, governments, NGOs and industry. World Bank Group Alignment:The IFC’s involvement in the forest sector is growing quickly, with investments increasing from $45 million in FY2001 to $300 million in FY05. The Bank is increasingly collaborating with the IFC, including through the WB/WWF Alliance and PROFOR partnerships, to promote socially and environmentally sustainable investments, for example through certification requirements in line with Bank policy.