Transcript Evolving role of the World Bank for countries like Sri Lanka

The Evolving Role of the World
Bank for Countries like Sri Lanka
The 25th Anniversary Lecture
of the Centre for Banking Studies
14 Dec 2006
World Bank, Naoko Ishii
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The Gap between Harrod-Domar
and Reality in Zambia
20500
Income if Aid for
Investment for
Growth Model
had held
18500
16500
1985 Dollars
14500
12500
10500
8500
6500
4500
Zambian per
capita income
2500
1993
1989
1985
1981
1977
1973
1969
1965
1961
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Easterly（1997） “The Ghost of Financing Gap”
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WB’s Role is “Evolving”
 In 1990’s – criticism towards lack of progress
in poverty reduction
 From projects to programs
 From Bank-dictated projects / programs to
supporting country strategies
 Emphasis on ownership and partnership
 Decentralization of offices and operations
 Combining global knowledge with local
expertise
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World is Changing
 WB no longer has “monopoly” in development
Private capital is 5-6 times larger than aid
flows
 Consultancy services are readily available
 Globalization and interdependence
 Booming Asia
 Role of state changing

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Sri Lanka in the World
 Sri Lanka has achieved 25 years of growth
 In transition in income level


From LIC (Low Income Country) (less than $875 per
capita GNI)
To Lower MIC (Middle Income Country) ($876 ~
$3,465)
 WB lending terms is to change

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
From IDA only (~ $1,025)
To IDA hardened
To IBRD
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Sri Lanka in Transition
 Make sure Sri Lanka not fall into MIC trap
(sluggish growth)
 Achievements in human capital development
have lead to MIC problems
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
Transition to an aging society
Facing non-communicable diseases
Unemployment in educated youths
 WB’s role is to help Sri Lanka complete its
transition in a smooth manner
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Factors to Smooth Transition
from LIC to MIC
 MIC require “different things” to overcome
challenges and sustain growth

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How to swim in capital markets
How to compete in global markets
How to cope with domestic disparities
How to provide social protection
How to define the role of state against private
sector
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GoSL’s 10 Year Vision has identified
challenges
 Equitable development, integration of lagging
regions
 Increase in productivity
 Dynamic private sector development
 International competitiveness and global
integration
 Shifting to commercial agriculture through
modern technology
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World Bank’s role is:
 To help GOSL identify institutions required
for smooth transition and develop, regulate
and manage them
 To help GOSL think through cross-cutting
issues and formulate strategy to cope with

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Integration with global markets
Increase in competitiveness and productivity
Dealing with disparities
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How World Bank delivers:
 Conduct studies before lending
 Combine global knowledge with local
expertise
 Leverage lending (project or program) with
policy dialogue, advisory services, capacity
building and technical assistance
 Maximize impact beyond direct impact of
original project
 Partnership with other partners under
“strategic complementarity”
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World Bank IBRD and IDA Commitments
35,000
30,000
25,000
20,000
15,000
10,000
5,000
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70
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72
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74
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76
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80
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84
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86
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88
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90
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98
20
00
20
02
20
04
20
06
0
IBRD Commit Amt
IDA Commit Amt
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IDA Lending to South Asia since 1990 by Theme
Trade and Integration
Social Protection 2%
and
Urban Development
Economic
Risk Management
4%
Management
8%
3%
Social Development,
Gender, and Inclusion
15%
Rural Development
17%
Environmental and
Natural Resource
Management
8% Financial and Private
Sector Development
12%
Human Development
20%
Rule of Law
1%
Public Sector
Governance
10%
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IBRD Lending to South Asia since 1990 by Theme
Trade and Int egrat ion
Urban Development
5%
15%
Social Prot ect ion and Risk
Management
Economic Management
2%
2%
Environment al and Nat ural
Resource Management
13%
Social Development , Gender, and
Inclusion
2%
I
Rural Development
11%
Financial and Privat e Sect or
Development
39%
Rule of Law
Public Sect or Governance
2%
5%
Human Development
4%
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Change in Distributionb of SAR Lending by Sector
Other
100%
90%
Water, Sanitation, and
Flood Protection
80%
Transportation
70%
Law and Justice and
Public Administration
60%
Inf ormation and
Communication
50%
Industry and Trade
40%
Health and Other Social
Services
30%
Finance
20%
Energy and Mining
10%
Education
0%
Avg 93-97
Avg 02-06
Agriculture, Fishing, and
Forestry
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Percent of Developm ent Policy Lending to
Com m itm ents
60.0
50.0
40.0
30.0
20.0
10.0
0.0
2002
2003
2004
South Asia
2005
2006
Global
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Macroeconomic Institutions
 Support macroeconomic stability in the
context of more liberalized capital markets
 Modernization of Ministry of Finance
 Public financial management
 Debt management
 Output-based budgeting
 Monitoring and evaluation
 Modernization of Central Bank & NonFinancial Regulatory Bodies
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Financial Institutions
 Objectives include:
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
Bangladesh
India
Nepal
Pakistan
Sri Lanka
Memo items:
China
Korea, Rep. of
Malaysia
Thailand
Access to international capital markets
Bringing banking sector to Basel II
Financial Assets/GDP (%)
54.06
173.00
74.89
68.40
155.00
Credita /GDP (%)
28.4
40.0
..
30.0
35.6
207.60
290.00
400.70
900.60
150.2
90.2
104.7
75.4
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Increasing Long-term Financing
 Infrastructure, Industry, Housing, Agriculture,
etc, require more efficient and effective
private sources of long term finance
 Equity & Bond Market Development (report
on India)
 Securitization & Derivative Markets
 Developing the Institutional Investor base
 introduction of risk based supervision for
the insurance sector; legal frameworks for
the mutual funds industry
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Increasing Access to Finance
 The considerable segments of the population
currently excluded from the formal financial
system need to be provided with greater
access to a full range of services
 New approaches for SME financing to be
developed
 Rural Financing and agricultural insurance to
be designed
 Strong and viable MFIs for Microfinance to be
built
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Improving Financial Sector
Infrastructure
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Improve the legal framework for market
regulation and supervision
Help move towards international accounting
and auditing standards
Assess and strengthen corporate
governance and disclosure of banks and
non-bank financial institutions, and also of
non-financial firms.
Support efficient payments systems and
credit bureaus
Develop sounder markets for risk sharing
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Raising Competitiveness
 Investment climate to attract FDI and knowledge
Regulatory regime and enforcement
 Political and macro-stability
 Infrastructure
 “Stronger” state as “regulator”
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Meeting global standards (food, environment)
 Focus on R& D in partnership with private sector
 A high quality education system to move up the value
chain of industrial and service activities
 Increase in productivity of labor, land and water
resources
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PPP for Infrastructure
 What are PPPs?

Form of government procurement involving
private sector participation for the delivery of
specific public services

Agreement between the government and a
private sector entity to share in the risk and
rewards of a business venture involving public
services
 Areas: ICT, power, transport, water/urban
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PPP types of Operations
Partnership Models
In-House Development
Outsource
Privatization
Managed Service Provider
Application Service Provider
Fully Managed
Build, Own & Operate
Hosting only
Build, Own, Operate & Transfer
Transaction Fee Based
Build, Operate & Transfer
Public-Private Partnerships
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WB group role in infra-PPP
 Develop consensus and frameworks -- TA
 PPP approach defined, political buy-in established
 Develop pilot transactions – IFC advisory,
investment and WB lending

The first sets of transactions developed and
brought to the market
 Scale-up successful pilots – evaluation TA,
lending

Larger scale programs based on the lessons from
the pilot
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Coping with Disparities
 Identify sources of economic disparities
 Create opportunities through rural
development
 Commercial orientation of R&E
 Scaling up of CDD (community
empowerment)
 Make service delivery work for the poor
 Provide social safety net
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Addressing Governance
 Help countries to improve governance
through entry-points
 Demand for governance
 Core governance
 Private sector development
 Local governance
 Governance in sectors
 Anti-corruption in WB operations
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World Bank in Sri Lanka
in the past
 What we have done?
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World Bank in Sri Lanka
in the future
 What we will do?
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CAS (Country Assistance Strategy) for 20072010
Annual lending level – $150 million
Build on government’s 10 Year Vision
Focus on areas / theme where WB has
comparative advantage
Work with the government counterparts
Explore the possibility of partnership
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