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 world’s 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 country’s 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. WB’s 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. WB’s Development Assistance Strategy Process (cont’d) • The Country Assistance Strategy (CAS): • vehicle for Board review of the Bank’s assistance strategy for IDA and IBRD borrowers. • describes the Bank’s 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 country’s 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 ECSPF’s 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 (US$15 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 ECSPF’s 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 ECSPF’s projects • FR of Yugoslavia • Privatization and Restructuring of Banks and Enterprises • launching the restructuring and privatization (R&P) process of some of the most problematic large SOEs in Serbia • establish a consistent approach and methodology for the R&P process of large SOEs that cannot be sold “as is” • support the R&P 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 ECSPF’s 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