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FIAS CONSULTATIVE COMMITTEE OF DONORS MEETING. Vienna, Austria – October 22-23, 2008. FIAS Governing Body and Management Team . FIAS Supervisory Committee members. Lars Thunell Executive Vice President and CEO, IFC. Michael Klein

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FIAS CONSULTATIVE COMMITTEE OF DONORS MEETING

Vienna, Austria – October 22-23, 2008


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FIAS Governing Body and Management Team

  • FIAS Supervisory Committee members

Lars Thunell

Executive Vice President and CEO, IFC

Michael Klein

Vice President, FPD, World Bank Group, and Chief Economist, IFC

Rachel Kyte

Vice President, Advisory Services, IFC

Izumi Kobayashi

Executive Vice President, MIGA

  • FIAS Management Team

Pierre Guislain

General Manager, FIAS, and Director, Investment Climate Department, IFC

Thomas Davenport

Senior Manager, Regulatory Simplification

Cecilia Sager

Manager, Investment Generation

Marialisa Motta

Manager, DB Reform

Cecile Fruman

Manager, CIC Strategy and Analysis

Russell Muir

Manager, EAP program, and IFC BEE Regional Manager for EAP

David Bridgman

Manager, Africa program, and IFC BEE Regional Manager for Africa


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Our Funding Partners in FY08

Australia

Ireland

Norway

Austria

Italy

Sweden

European Union

Luxembourg

Switzerland

United Kingdom

France

The Netherlands

United States

Iceland

New Zealand


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Program Overview

DAY 1 – WEDNESDAY:

  • Welcome and Opening Remarks

  • WBG Strategy for PSD and Investment Climate Reform, and Impact of Financial Crisis

  • FY08 Highlights

  • Project Spotlight: “Invest-in-the Western Balkans” Program: Institutionalizing Capacity for Investment Promotion

    DAY 2 – THURSDAY:

  • Doing Business Reform Advisory – A New FIAS Program

  • FY09 Work Program and Funding

  • Evolving Partnerships and Donor Feedback


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Update on WBG Strategy for Private Sector Development and Investment Climate Reform, and Impact of Financial Crisis

Michael Klein, VP, WBG/FPD, and Chief Economist, IFCPierre Guislain, GM, FIAS, and Director, IC Department, WBG


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FIAS – proposed response to the financial crisis

  • Expand Doing Business Reform Advisory capacity, especially in the areas of:

    • Insolvency, liquidation, bankruptcy

    • Contract enforcement

    • Creditor rights

    • Investor protection

  • Scale up Secured Lending in the areas of

    • Legislation

    • Collateral registries

    • Training and information

  • Scale up Trade Logistics Advisory to further facilitate trade through increased competitiveness

  • Refocus attention to existing investors via improved investor aftercare programs


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Impacts and Adjustments, by Product

Product:

Effect:

Response:

: post-registration, liquidation

L

Business Entry

Business Operations

M

: risks/better reg.

Business Taxation

M -

H

M -

H

Trade Logistics

Secured Lending

H

Insolvency, creditor rights, contract enforcement, corporate governance, property

DB Reform Advisory

H

L

- M

Sub-Nat DB

Industry Competitiveness/ SEZs

L

Investment Policy & Promotion

M

: after-care


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FIAS – Financial Crisis & Funding Implications

  • Crisis is evolving – we need additional core funds to be able to react flexibly and quickly

  • Be more frugal, cost-effective in our interventions


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FY08 Highlights


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Key FY08 Trends

  • Sustained growth and demand (from $22.3 million spending in FY07 to $27.7 million in FY08)

  • On track for delivering on FY08-11 strategy

  • Continued focus on FIAS/BEE products as our key areas of expertise

  • Creation of DB Reform Advisory unit and product

  • Three IFC awards for:

    • Kenya - Business Licensing Reform Project (IDA Impact Award)

    • Liberia - Investment Climate Reform Project (IDA Impact Award)

    • China – Secured Lending Project (Corporate Award)

  • Complete and successful integration of MIGA TA

  • Further decentralization and strengthening of regional delivery capacity


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FIAS Products

  • Contribution to FPD work on Financial Market Infrastructure

  • Close cooperation with Indicators and Analysis dept (DB and Enterprise Surveys)

  • Access to Land

  • Public Private Dialogue

  • Two Main Practice Areas: Regulatory Simplification and Investment Generation

WB

IFC Infr. BL

IFC BEE Products

developed in development other/emerging

IFC A2F

Products

Compe-

tition

Private

Health

ADR

Busin.

Entry

Busin.

Entry

Busin.

Operation

Busin.

Operation

Busin.

Taxation

Busin.

Taxation

Invest-

ment

Policy &

Promotion

Investmt.

Policy &

Promotion

Sub-

National

DB

DB

Reform

Advisory

Trade

Logistics

Industry

Specific

BEE

Sec.

Len-

ding

Other A2F Pro-ducts

Other CIC

Products

FIAS Products


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Drive for Results/Moving Beyond Diagnostics

  • FY08: transition year from counting deliverables to counting results

  • Strategy target for FY08-11: 400 reforms

  • FY08 reform count: 108 reforms (see details in Annex 2 of FIAS Annual Report)

    • Contributed to 51 of the reforms reported by the DB 2009 report

    • FIAS’ work is also reflected in improvements of DB indicators

      Breakdown of reforms

      facilitated (by region):

  • Target for FY09: 120 reforms


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FY08 Project Expenses – IDA and Regional Breakdown

IDA versus non-IDA Regional breakdown

DBRA expenses included in IDA/BICF expenses (approximately $3.5

non-IDA expenses and regional million) not included in SAR

expenses if related to country-specific spending

projects


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High Client Satisfaction

  • High level of client satisfaction: 92 percent of BEE clients said they were satisfied with services provided (2008 IFC Client Survey)

  • BEE outperforms corporate average in many categories


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FY08 Project Highlights

  • For details, refer to FIAS 2008 Annual Report and additional slides in hand-outs (Annex)


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FIAS Performance Scorecard


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M&E Outlook: Improving Results Management

  • New M&E Framework

    • Rolling out and refining M&E framework built around the concept of “major reforms”

    • Ensuring quality and timely availability of M&E data

    • Current focus is on Monitoring/Tracking >> move towards Evaluation

  • Investing in staff training

  • Developing an outcome-based performance management system


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Business Taxation – M&E Logical Model

DB indicators

Stakeholderconsultation

Discussions withgovernment officials

Activities

Assessment /diagnosis

Consultations onpotentialrecommendations

Assessment /recommendations /action plan

Inputs into draft law,policy, policystatement

Inputs intotax administrationinstitutions

Inputs intotax administrationadministration

Outputs

Reform

Reform

Reform

Reform

Reduction in tax rateand widening the tax base

Reduction in thenumber of taxes

Replacement of tax holidays with investment incentives

Implementation ofSME tax regime

Reform

Reform

Reform

Reform

Implementation ofbest practice taxenforcement procedures

Implementation ofbest practice tax auditsystem

Implementation of bestpractice tax appealprocess

Implementation of practices to reducecorruption

Outcomes

Reform

Reform

Reform

Reform

Change in numberof ways of fillingtax returns

Change in paymentoptions fortaxpayers

Change in time it takesto get tax relatedcredits and refunds

Implementation orimprovement of a taxpayer education syst.

Implementation risks

Increased

investment

Impact

Economic growth

Poverty reduction


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FIAS Staff Profile – Staff Mix and Diversity

  • FIAS staff complement includes IFC, MIGA and Bank staff, and staff on special assignments financed by development partners (secondments, staff exchanges)

    Staff Composition (FY08 and 09): Diversity Profile (end FY08)

GE-GF/GG-GH

Staff Ratio 146% 120%

(incl. ETCs):


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FIAS Staff Profile – Further Decentralization

FIAS Field Staff vs. HQ

(FY04 to FY09)

FY04 FY05 FY06 FY07 FY08 FY09 (est)

  • Decentralization expected to accelerate as products mature and skill level and implementation capacity is increasingly built up in the field

  • FY09 Targets: 32% field-based staff; 40% of projects managed in field

  • Vision: HQ serving as technical support center and knowledge hub for country teams


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“Invest-in-the-WesternBalkans” Program

Building Capacity for Investment Promotion


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Invest in the Western Balkans Program (IWB):Background and Objectives

Background

  • Established as a pilot project in 2004 by MIGA with financial support from Austrian Federal Ministry of Finance

  • Follow-on Phase: 2006-09 – extension and scaling-up after positive initial results (supported by Austrian MoF and European Commission)

  • Implemented by a core team of 4 people from Vienna

  • Built upon and leveraged several country-specific TA activities MIGA was undertaking in the region (Serbia, BiH, FYR Macedonia, Croatia)

    Objectives

  • Generate FDI (greenfield investment) for the Western Balkans region

  • Strengthen the capability of IPAs to implement targeted, pro-active FDI promotion programs

  • Contribute to the regional integration of the W Balkans region


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IWB - Features and Value Added

Features

  • Proactive approach to investors in concert with IPAs in the region

  • Concrete results oriented with a strong emphasis on “learning by doing”

  • Rich source of “lessons learnt” derived from investor contacts; as feedback into the policy reform agenda

    Value Added

  • Quality information and WBG brand provide “comfort” to investors

  • Access to investors and best practice investment promotion skills transfers to IPAs


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Agency for Foreign Investments

of the Republic of Macedonia

Viktor Mizo, CEO

2008


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Invest Macedonia

  • IPA Law(June 2004)

  • IPA creation(January 2005)

  • Latest developments:

  • Marketing Campaign (Over 80 newspapers in more than 40 countries worldwide. Online advertising on 25 web sites.)

  • New legislation:

    - Directly accountable to the Government

    - Director nominated by the Government, reports to a Management Board of 7 members

    - ‘Primary budgetary’ - not depending on the Ministry of Economy


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Goals

IMAGE

BUILDING

GENERATING

INVESTMENTS

INVESTORS

SERVICING

POLICY

ADVOCACY


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Macroeconomic indicators

*I-VII, ** I-VIII, ***I-VI

  • Low inflation: avg <2% annually over the last 10 years

  • Macedonian Denar pegged to the DM/€ for the last 10 years (€1= MKD 61.3)

  • Average gross salary is €415 per month (VI.2008)

CREDIT RATINGS


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Doing Business

  • Doing Business 2007 rank – 92

  • Doing Business 2008 – 4th Best Reformer in the world


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IWB/FIAS/WB Support

  • Initiating dialogue with Macedonian Government

  • IPA Strategy

  • Business Plan

  • Capacity Building

  • Advisory services

  • Outreach events

  • Sector specific events

  • Country Officer

  • E-learning

    Priorities for the upcoming period:

  • Strategy Review

  • Aftercare Program

  • Direct contacts with target companies


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Operational results(as of 30th June 2008)

54 marketing events organized in 17 countries, 1.067 potential leads attended

111 serious enquries by companies handled

67 site visits facilitated

IWB Key performance indicators

  • 10 (70%) investments proceeding according to plan

  • 2 investments are delayed

  • 2 investments commenced but are abandoned for the moment

  • Total job potential of the investments is 800 direct jobs

Facilitated 14 *investment decisions


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Key Lessons and the Future

Lessons

  • Region lacks competitiveness in the sectors with most potential ( Missed opportunities)

  • Weak Institutions ( 100% turnover of Directors of IPAs )

    The Future

  • Embedding the program in the beneficiary countries

  • Providing a platform for the Vienna IG office by applying the lessons learned.


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FIAS CONSULTATIVE COMMITTEE OF DONORS MEETING

Vienna, Austria – October 22-23, 2008


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Program Overview

DAY 2 – THURSDAY, OCTOBER 23:

  • Doing Business Reform Advisory – A New FIAS Program

  • FY09 Work Program and Funding Priorities

  • Evolving Partnerships and Donor Feedback


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Doing BusinessReform Advisory:

Product Status, Delivery Model, Challenges and Future Plans


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DBRA: Objective and Delivery Model

Objective: Improve countries’ environment for doing business and DB indicators

Delivery Model:

Phases

Partners

WBG, DB project, IFC

1. Receive Government request

2. Prepare DB Reform Memo

  • Discussions with the Government

  • Identify priority areas for reform

  • Reform action plans

  • Design a TA reform program

Regional and product teams; WB Sector and Country Units, donors

DB Project

4. Monitoring & evaluation


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How do we measure what we do

Outcomes and Impact

Outputs

  • Improvements in DB indicators

  • New firms registered

  • Firms’ growth

  • Reduced informality

  • Higher employment

  • Reform memos

  • Reform action plans

  • Technical assistance

    • Legislation review

    • Support for procedural changes


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Belarus

Poland

Greece

Albania

Macedonia

Montenegro

Armenia

Azerbaijan

Kazakhstan

Kyrgyz Rep.

India

Pakistan

Sri Lanka

Burkina Faso

Cote d’Ivoire

Ghana

Liberia

Mali

Mauritania

Senegal

Djibouti

Jordan

Iran

Lebanon

Yemen

OECS

Colombia

Dominican Republic

El Salvador

Guatemala

Haiti

Honduras

Jamaica

Mexico

Cambodia

Indonesia

Lao PDR

Solomon Islands

Timor Leste

Tonga

Vietnam

Mozambique

Kenya

Rwanda

DRC

Madagascar

Central African Rep.

Countries that have asked for DB reform support (October 2007 – September 2008)

DB reform: entry point for broader IC work


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Outputs

Strong demand from IDA countries

Active Projects: Africa leads

50

25

16


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Reforms by Region

Total reforms reported by DB09: 239 (215 excluding OECD)

Reforms supported by DBRA with WBG: 51 (24% of 215)

24%

23%

26%

40%

34%

23%

11%

51


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Reforms by Topic

19%

21%

34%

33%

31%

44%

32%

12%

51


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DB Reforms in Colombia

DB Areas

Actions

Results (DB indicators)

Starting

a business

Cheaper and faster registration; elimination of mandatory zoning certificate

Lower cost and time to start a business

Silence-is-consent principle for building permits; single form

Dealing with licenses

Lower time to deal with permits

Trading across borders

Better banking; e-payment; data exchange; coordinated inspections

Lower time to export and import


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DB Reforms in Burkina Faso

DB Areas

Actions

Results (DB indicators)

Inspection number reduced; one-stop-shop for permits

Lower cost and fewer procedures

Dealing with licenses

Employing

Workers

Review of the Labor Code

More flexible labor regulations

Fewer requirements and lower taxes to transfer property

Lower time and cost

Registeringproperty

Paying taxes

Reduction of CIT rate and tax on dividends

Lower cost


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DB Reforms in India: national and subnational

Government team: Industrial Policy and Promotion

Our main partners: SASPF, IFC, FIAS-BEE, Country Unit

DB reform workshops with state-level governments

Cities: New Delhi, Mumbai, Chennai and Kolkata

Topics: starting a business, construction permits, paying taxes and property registration

Sharing of international and local best practices

DB reform memo for Mumbai

Next steps:

DB reform action plans at both national and state level

DB in India 2009: new sub-national report


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Doing Business Reform Advisory: future agenda

  • Support DB reform in more countries and more areas; deepen and broaden reform initiatives with BEE partners and donors

  • Integrate work at the national and regional levels aimed at improving countries’ and cities’ performance on the DB indicators

  • Analyze the process of DB reform in different countries (write case studies of successful DB reforms and tools to implement them)

  • Study effect of DB reforms on firm performance in partnership with the research department

  • Offer DB training and establish capacity for future DB reforms across WBG teams


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Conclusions: DB triggers reforms

  • Visibility of DB Report increases governments’ willingness to reform; DB tight deadlines help focus actions and increase speed of reforms

  • DB triggers several factors that are needed for successful reforms:

    • Identify a “champion” to drive reforms; establish reform committees; identify technical leaders and working groups; get inputs from the private sector

    • Start with simple reforms: focus on administrative changes first, while preparing the ground for long-term reforms


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Conclusions: implications for the WBG

  • Responsiveness to governments

  • Provide high-quality assistance and support for implementation

    • Partnering with colleagues with in-depth knowledge of DB and IFC; WB technical experts to broaden the reform dialogue; country-based colleagues for sustained presence on the ground; donors

    • Remain flexible: DB reform partners change depending on the country, topics, available resources and presence on the ground

  • Analyze the process of reform: what works and what does not


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Diagnostic tool

Reform

instrument

M&E instrument

  • Comparisons within countries are strong drivers of reform

  • Uncovers bottlenecks and local good practices

  • Promotes peer to peer learning

  • Creates baseline

  • Allows locations to compete locally and globally

  • Entry point in countries averse to international comparisons

  • Puts regulatory reformon political agenda

  • Measures progress over time

  • Creates an incentive to maintain reform effort even when governments change

Doing Business Subnational (DBSN)

  • Extends Doing Business indicators beyond the most populous city to other cities

  • Combines the media appeal of Doing Businesswith a strategy to actively involvelocal governments in reform process

  • It creates demand for other WB/IFC products and converts WB/IFC BEE teams into reform facilitators


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How does it work?

  • Preparation Phase

  • Demand driven

  • Government involvement

  • Road-Show

  • Data Collection

  • Customized surveys

  • Training on DB methodology

  • Local government survey responses

  • Period of Reply

  • Confidential results

  • Reform dialogue

  • Ownership

Active government participation throughout the project


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How does it work?

  • Launch

  • Media coverage

  • Country ownership

  • “We only have winners in Colombia: winners of today and winners of tomorrow” President Alvaro Uribe

  • Report

  • Compares performance of different cities in same country

  • Identifies bottlenecks and local good practices

  • Provides reform recommendations

  • Follow-up

  • Demand for reform at local and national level

  • Peer-to-peer learning and rapid response

  • Sustainability strategy / transfer

  • of methodology


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Subnational DB uncovers best practices within countries

*2007 data


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Starting a

Business

  • Introduced electronic registration of statutes

  • Eliminated operational license requirements

Cut time from 29 days to 12 and registration fees by 10%

Registering Property

  • Improved registration processes

  • Trained personnel

  • Introduced electronic payment of transfer taxes and property fees

Cut time from 44 to 26 days and fees by 1%

What gets measured, gets done: Mexico

Subnational Doing Business inspired reforms in9 out of 12 states

between 2005 and 2006

The state of Guanajuato reformed two areas following recommendations of Doing Business in Mexico


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Development results: Colombia 2009

  • Report launched in January 2008 –2,963 visitors hit the Colombia website during first two weeks after launch

  • Presidential mandate to share the best practices across cities to improve Colombia’s performance in DB 2009

    • Workshop for department/municipal officials organized by the Colombian government in March 2008

  • Official request received from High Commissioner of Competitiveness and Productivity for a 2nd study to include more cities

  • Reform recommendations to be included in national competitiveness plans


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Subnational DB projects all around the world

Countries: 32

Cities: 230

2005

2006

2007

2008


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http://subnational.doingbusiness.org

Doing Business


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FY09 Work Program and Funding


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FY09 Strategic Priorities

  • Further strengthen product focus

    • Further development and pilot roll-outs of FIAS/BEE products

    • Continued work on industry competitiveness, with focus on agribusiness and tourism; but exit from mining sector

  • Emphasize KM, training, learning, regional cross-support, M&E and related activities and quality control/enhancement

    • Organization of deep dive events for all products

    • Further strengthening of communities of practice and advisory panels

  • Increase cross-product and WBG cooperation within project design and implementation phases

  • Adjustments to respond to financial crisis

  • Further strengthen synergies with and extend reach through regional partners and offices (IFC facilities, Vienna Program Office, etc.)

  • Continue managing growth


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FY09 Budget and Staffing Plan

  • FY09 budget range: $32-34 million (+16% to +23% over FY08)

  • Higher range subject to demand and funding

  • Budget supports staffing plan with target of126 staff at end of FY09 (+24% over FY08)


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FY09 Funding Projections

  • WBG contribution will be low in FY09 as we had to draw down IFC’s contribution in FY08 due to cash flow issues

  • Program- and project-specific contributions are looking strong but come with tight earmarks

  • Low level of core funding remains a major issue:

    • Limits flexibility

    • Creates ongoing cash flow issue

    • Jeopardizes business model

  • Core funding gap is about $5 million


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Fund-raising Priorities

  • In Response to Financial Crisis:

    • Doing Business Reform Advisory, in particular insolvency

    • Secured Lending

    • Trade Logistics

    • Access to Land?

  • Other Priorities:

    • Investing Across Borders Indicators

    • OHADA

    • Doing Agribusiness in Africa

    • Alternative Dispute Resolution (ADR)?


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DBRA: Insolvency

Insolvency as a new area of FIAS involvement?

  • Demand for increased engagement in the context of the current financial crisis

  • Harmonization of insolvency laws with secured transactions, mortgage, leasing, labor, tax and other legislation

  • Collaboration with the Legal Vice-Presidency’s Insolvency and Creditor Rights Program (e.g., Rwanda, Nepal)

  • Voluntary liquidation program


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Secured Lending/Collateral Registries

  • Program Objective

    Facilitate Access to Credit through transparent and secured mechanisms allowing the use of movable assets as collateral for capital. We do this through:

    • Creating appropriate Secured Lending legal frameworks

    • Creating electronic/web-based collateral registries

    • Building the local capacity of users and main stakeholders

  • Project Portfolio

  • 8 active projects: AFRICA (Ghana, OHADA), MENA (Yemen, Afghanistan), ASIA (China, Vietnam, Lao PDR, Nepal)

  • Early Impact in China

    • Property Law enacted and first nation-wide electronic registry for receivables was established in October 2007.

    • The electronic registry recorded over 20,000 new registrations of interests in receivables, representing loans with a value estimated at over US$300 billion.

    • The % of movable based lending went from 12% to 20 %.

  • 9 projects in pipeline: LAC (Ecuador, Guatemala),AFRICA (Rwanda), MENA (Jordan, West Bank & Gaza), ASIA (Bangladesh, Indonesia, Pacific Islands), ECA (Azerbaijan)


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Secured Lending/Collateral Registries

  • Secured Lending and the financial crisis:

    • Origin of crisis: unsecured lending and immovable assets

    • What the regulators and financial institutions will be looking for in the future

      • More transparency in the system, more secured infrastructure and systems, better regulations

      • Diversification of lending portfolios in Financial Institutions (FI), towards movables and cash based (intangible) guarantees like receivables, cash flows, etc.

  • The Secured Lending program provides solutions for that. What we need to do:

    • Learn from current crisis to avoid mistakes in the future

    • More empirical evidence on impact and what types of movables are less risky for FI to accept


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Secured Lending/Collateral Registries

  • The way forward:

    • Continue the implementation of our current portfolio and expand the program into 10 more countries in the next 2 years

    • More consistent and systematic WBG approach to this topic – coordinating work of different parts (IBRD’s ROSC’s, FSAPs, PSD loans and IFC’s Financial Infrastructure, DB Reform, Leasing, Housing and SME Banking)

    • Strengthening impact evaluation to have better data on overall impact for the financial sector

    • Need for more resources and leverage current WBG resources in this area to face increasing demand


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Trade Logistics

  • Net effects depend on whether countries are net exporters or net importers; how globally integrated they are.

  • OECD countries recession implies it is even more critical for export-oriented countries to be competitive and cost effective

  • Implications of preferential and free trade agreements could become even more significant for client countries

  • Intense pressure for leaner firms, through reducing trade transactions cost and time

  • Demand for reliable, efficient trade logistics services will increase as a way to shore up confidence in global markets

  • Demand for Trade Logistics assistance will remain high and even increase


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Access to Land: What is FIAS’ Focus?

Long-Term

Solutions

(WB, IFC, DIFD, AFD, GTZ, USAID, MCC, Others)

Diagnostics

Identifying major constraints/bottlenecks facing investors

Short-to-Medium

Term Solutions

(FIAS, DB, MIGA)

  • Land Market Development

  • Land privatization (sell or long-term lease)

  • Move from informal to formal tenureship

  • Entry Point -- Regulatory Simplification:

  • Access to state-owned land by investors

  • Access to customary land by investors

  • Commercial land (mortgage) transactions – time and cost

  • Accessing Land:

  • State land allocation system

  • Tribal land negotiation

  • Ownership restrictions

  • Information scarcity

  • Securing Land

  • Titling system

  • Registration process

  • Collaterals

  • Transfer of property rights

  • Developing Land

  • Location permits

  • Construction permits

  • Environment Impact Assessment

  • Utility connections

  • Modernization of Land Adm.

  • Cadastre

  • Land registry (comprehensive)

  • Land information (complete)

  • Entry Point -- Investment Generation:

  • SEZs/ Industrial zones

  • Sector specific (e.g., agriculture and tourism);

  • Land concessions/Long-term lease regimes

  • Land Information for IPA (investment facilitation)

  • Financial sector development

  • Secured lending (movable and

  • immovable collaterals)

  • Land use Planning and management systems

  • Urban Plan / Zoning

  • Environment protection

  • Rural land and natural resource conservation

  • Infrastructure development

65


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Why?

Most land reform programs are long-term, but client countries need short-to-medium term solutions to attract investment immediately.

“Quick Wins” in pilot reforms are also needed to demonstrate results and gain public support for more complex land reforms.

The investment focus often gains the high level political supported -- an advantageous entry point for FIAS.

Partnering with other donors will enable FIAS to help sustain the “short-term” reforms into long-terms reforms.

Access to Land

66


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Investing Across Borders Project: Benchmarking Countries’ Openness to FDI

  • Objectives: Extend the thematic coverage of DB indicators into areas of FDI regulation, in order to:

    • Stimulate appetite for investment climate reforms

    • Respond to the information needs of (1) policy makers and IPAs, (2) WBG, FIAS and other TA providers, and (3) academics

    • Provide data of immediate relevance for assessing IFC and MIGA investment and guarantee opportunities

  • Project managed by FIAS in collaboration with DB

    • Methodology is consistent with DB and anchored in standardized surveys administered primarily to investment lawyers, accountants and consultants

    • Various partnerships on the project’s research agenda (Harvard, Berkeley, etc.) and operational collaboration (IBA, etc.) are being explored

  • Next steps: Secure critical mass of financial and human resources for rollout in 80 countries in Jan ‘09


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Investing Across Borders Project:Focus on 4 Areas of FDI Regulation


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OHADA: constraints to firms highlight the need for further reform both at national and regional level

Doing Business rankings in Sub-Saharan Africa:

non-OHADA

vs.

OHADA countries

(Source: DB 2009)

  • Data reveals that OHADA members share a heavily regulated business climate. All OHADA countries rank in bottom 20% on the global ease of doing business

  • Poor performance across the 10 indicators, both in areas where OHADA law affects a DB indicator (e.g., starting a business) as well as areas not impacted by OHADA (e.g., paying taxes).

  • Conclusion: OHADA countries need to reform both at national and regional (OHADA) level…


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OHADA Project: Highlights

Diagnostic Work under Implementation: FIAS and the OHADA Secretariat have commissioned 30 international lawyers to review the 8 OHADA laws (“actes uniformes”) currently in force. Focus is to identify un-necessary costs and constraints imposed on businesses, and to identify proposed changes.

Improving the OHADA Laws and Engaging Stakeholders

  • Company Law

  • Commercial Law

  • (incl. Registry)

  • Secured Lending

  • Arbitration

  • Bankrupcty

  • Debt Recovery

  • Transport of Goods

  • Accounting

A Participatory Approach: the project will engage a broad range of stakeholders in the OHADA countries (government, private sector, civil society) to discuss the proposed changes and build consensus around certain reforms

An Opportunity for Donors: FIAS is inviting donors to join this ambitious, regional initiative. Benefits include:

1) multiplier effect: working on 16 countries and 8 laws

2) Improving business environment for private sector firms (from OHADA and other countries incl. donor countries)

3) Sharing visibility and credit for vital reforms

8 Laws critical for

the Private Sector


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Doing Agribusiness in Africa Program

  • Objective: Develop agribusiness-specific analytical framework and implementation plan

    • Addresses microeconomic issues in the business environment to enhance the productivity of the sector and attract private investment.

    • Employs a quick, scalable, and replicable model focused on industry-specific logistics across the value chain and input markets

    • Focused on frontier markets in Africa (piloting in Kenya, Madagascar, Mali, Senegal Uganda, and Zambia)

    • Collaboration with PEP-Africa, IFC AS and Investments, WGB, donors, etc.

  • Two-phased program roll-out

    • Phase I: Rapid scoping and selection of sectors (1-2 months), followed by sector analysis (2-4 months) to design reform recommendations through existing diagnostic tools

    • Phase 2: Assistance in reform implementation, Public-Private reform platforms, and investor targeting campaign

    • Underlying themes along both phases: Improving social/environmental standards through partnerships (IFC Gender, better-work program, etc.)


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Doing Agribusiness in Africa Program

  • Knowledge Management and Communication

    • Designing an agribusiness portal that serves as a tool for staff and consultants on the project as well as an information point for clients;

    • Building a network/ group of practitioners on Agribusiness;

    • A Doing Agribusiness in Africa event to energize focused reforms;

    • Design and implementation of a rapid diagnostic and benchmarking framework

Quick scoping to confirm countries and industries and identify key players

1-2 months

Implementation program design based on sector analysis: identification of issues, reform recommendations through diagnostic tools that include industry benchmarks, value chain analysis and/or investor surveys

2 – 4 months

Industry focused reforms: microeconomic reforms in the input markets through a competition policy lens, producer market competition issues across the value chain, such as access to markets, industrial licenses and standards, access to land, etc.

Investor targeting:develop and strengthen promotion programs and institutions. Drive for tangible investment results that maximize development impact..

Improving social/environmental standards:Assist government in design/ implementation of sector-specific /issue-specific CSR strategies (Better Work Program).

Public-private dialogue and infrastructure development: mobilize relevant stakeholders in government and private sector.

12 – 24 months

Phased-approach

VA2F, Infrastructure, Sustainability, Better-Work , Linkages, relevant WB programs


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DBRA - Alternative Dispute Resolution (ADR)

  • ADR is a product under IFC’s BEE business line, but not covered at present by FIAS

  • Supports the establishment of self-sustainable ADR/commercial mediation mechanisms, hence allowing businesses better access to justice

  • Approach: advice for legal framework, training mediators, setting up pilot projects/ mediation centers, awareness raising, focus on partnerships (government and local stakeholders); testing the use of ADR in construction industry and with major private sector participation

  • Results: Close to 3000 cases mediated under supported projects, USD86 million released, 11 centers opened, over 200 mediators trained.


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ADR – To Be Covered by FIAS?

  • ADR is currently not part of FIAS’ mandate/portfolio

  • Close links to other BEE work that FIAS is implementing (e.g. Doing Business Reform Advisory – contract enforcement indicator)

  • Crisis relevance: importance of expeditious dispute resolution at time of increased claims

  • What is donors’ opinion about integrating ADR into FIAS?


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Evolving Partnerships and Donor Feedback


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Cooperation with Development Partners

  • FIAS is growing… but 100+ people is smallvis-a-vis fast-growing worldwide demand.

  • FIAS presence in field is growing… but modest vs. need for sustained engagement with clients.

  • FIAS has deep expertise in selected areas… but need to pool knowledge, especially for new products under development

  • Effective investment climate reform requires coordinated action by all players… particularly in difficult environments where client capacity is limited


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Phase I

Phase II

FIAS & other WBG

Donor partner

Four Ways to Partner:

Donors provide funds, FIAS delivers projects

1

2

FIAS and donors sequence project phases

FIAS:&

Donor:&

Joint product development, including via Advisory Panels

3

Joint implementation teams, with FIAS and donor staff

4


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Advisory Committees

  • Advising on strategies for product development

  • Validating product approaches

  • Connecting with good international practice

  • Contributing to strong KM

  • Establishing closer, more strategic partnerships with international experts and donors


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BEE/FIAS Advisory Committees

  • Existing Committees:

    • Tax

    • Secured Lending

    • Better Regulation for Growth

    • Trade Logistics

    • Investment Generation

    • ADR

  • Under Development

    • Access to Land

  • Typical Membership:

    • WBG senior staff

    • Staff from other multilateral organizations

    • Experts from or recommended by donors and partners

    • Experts from key bodies at national level

    • Academics

    • Private sector representatives


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Cooperating with Development Partners via Staff Exchanges and Secondments

  • In FY08, FIAS resources were leveraged through 6 incoming and 1 outgoing staff exchanges/secondments

  • 4-5 more incoming assignments are in the pipeline for FY09

  • Often in context of strategic partnerships, such as DFID (e.g., on reform management), AFD (on OHADA), Austria (on Investment Generation)

  • Excellent way to leverage FIAS’ expertise and to collaborate with partners at substance level


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Concluding Thoughts

  • We greatly value the partnerships with our donors, whichever form and shape these partnerships may take

  • We couldn’t do what we are doing without your support

  • We appreciate not only your financial support, but also your input and cooperation on substance

  • We are working hard to make the relationship with our donor partners a two-way street that is beneficial for both and above all for our clients


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Annex


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CIC/FIAS Org Chart – September 2008

Director

Investment Climate Department (WBG)

BEE Business Line Leader (IFC)

Pierre Guislain

South Asia

Irina Niederberger

Donor Relations

Beat Heggli

BICF

James Crittle

FIAS General Manager

CIC Finance and Admin.

MENA: BEE

Frank Sader

LAC: BEE

Alvaro Quijandria

FIAS Finance and Admin.

Sharon Sullivan4

MENA FIAS

LAC FIAS

ECA: BEE

Sanda Liepina

PEPSE: BEE

Margo Thomas

ECA FIAS

IgorArtemiev

W. Balkans FIAS

Africa: BEE

EAP: BEE

CIC Strategy & Analysis

Africa FIAS

David Bridgman1

EAP FIAS

Russell Muir2

Regulatory Simplification

Tom Davenport

Investment Generation

Ceci Sager

DB Reform

Marialisa Motta3

FIAS Strategy & Analysis

Cecile Fruman

DB Reform Advisory

Marialisa Motta (acting)

Investment Policy

& Promotion

Robert Whyte

BEE (incl. ADR)

Andrei Mikhnev

Business Entry

Andrei Mikhnev

White: WBG Investment Climate Dept.

KM & Web

(E-govt)

John Wille

Regulatory Governance/ Licensing

Peter Ladegaard

Sub-National DB

Mierta Capaul

Green: FIAS

Industry Competitiveness

Gokhan Akinci

Purple: IFC BEE regional teams

M&E

Eduardo Hernandez

Green/Purple: BICF is a joint venture between FIAS and IFC South Asia, funded by the EC and DFID

Trade Logistics

Uma Subramanian

Vienna Office

Karin Millett

Communications

Tax Simplification

Rich Stern

1. Secondary Supervisor: JeanPhilippe Prosper

2. Secondary Supervisor: Warrick Smith

3. Secondary Supervisor: Penelope Brook

4. Secondary Supervisor: Simon Fowler

5. Secondary Supervisor: Peer Stein

Health Investment

Policy

Alex Preker

Secured Lending

Alejandro Alvarez de la Campa5


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Financial Crisis Response –CLOSING A BUSINESS/INVESTOR PROTECTION

  • Increased credit defaults, resulting in insolvency

  • Equity investment decreasing in markets perceived to be high-risk

  • Lenders requiring multiple forms of collateral for loans

  • Creditors flooding the courts to enforce loan agreements

Approach

Short-term (~FY10) -10 countries assisted

  • Assist the drafting of new bankruptcy and collateral laws for more efficient company liquidation, reorganization

  • Strengthen investor protections through changes to national corporate and securities legislation

  • Funding required: $1,500,000

  • Primary entry point for country requests, following DB popularity

  • Rapid response legal assistance in areas most affected by the crisis: closing a business, protecting investors, enforcing contracts and getting credit

  • Leverage and deepen current partnerships with LEGPS, FPD corporate governance and PREM

  • Link up with Bank and donor-funded court institution-building efforts

Mid-term (FY11~) -20 countries assisted

  • Same as above, plus:

    • Assist reforms to speed court enforcement of loan agreements and bankruptcy cases

  • Funding required: $3,000,000


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Financial Crisis Response – Secured lending

  • Banks to diversify from immovable to other more liquid assets (accounts receivables, cash flows, patents, etc). Lack of liquidity will drive FIs to look for less risky guarantees

  • More than 2/3 of client countries have deficient frameworks. Markets which need SL most (Africa and IDA countries). Exceptions: Brazil, Mexico, India, Russia, Turkey.

  • Regulators (CB and MoF) will require more transparent systems and better regulation (as opposed to “deregulation)

  • Publicly available credit information will be critical (credit bureaus and collateral registries)

Approach

Short-term (~FY10) - 15 countries assisted

  • Review past experience of financial crisis on collateral. Strategy put in place on new approach

  • Ramp up SL program due to stronger demand. Specific targets:

    • Structured knowledge products / templates developed (1 toolkit, survey of 75 registries, checklists, standard methodology).

    • Focus on IDA remains (60% of projects will be IDA), the rest middle income countries affected by crisis (Brazil, Mexico, India, Russia, Turkey). Target: 5 new projects before the end of this FY09.

Delivery mechanism:

  • Leveraging internal resources

    - better coordination with Bank units e.g. ROSCs, DB Reform teams; and

  • Establish “standard implementation framework” with tools that can be used externally to scale up the program

Funding required: $900,000 (staff costs: 100,000, operations: 650,000, KM: 150,000)

Mid-term (FY11~) – 30 countries assisted

  • 2 research papers on collateral lending efficiency/impact of crisis, etc.

  • Scale up program. Target indicators: (i) By FY11, 30 countries with new functioning movable collateral systems; (ii) Toolbox with systematic approach to reform available for external experts (IQC contracts, outsourcing, etc); and (iii) average of 15/20 new projects a year

  • Overall Financial Infrastructure approach completed (methodology finalized)

  • External networks (i.e., IACA) developed.

Funding required: $1,700,000 (staff costs: 300,000, operations: 1,350,000,

KM: 50,000)


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Financial Crisis Response – Trade logistics

  • Net effects depend on whether countries are net exporters or net importers; how globally integrated they are.

  • Downturn in OECD countries makes it even more critical for export-oriented countries to be competitive and cost effective

  • Implications of preferential and free trade agreements could become even more significant for client countries

  • Intense pressure for leaner firms, through cutting trade transactions cost and time, to free up scarce working capital in a finance constrained environment

  • Demand for Trade Logistics assistance will remain high and even increase!

Approach

Short-term (~FY10) (12-15 countries)

  • Analytic and review pieces of crisis impact on trade (policy notes, research)

  • Develop modular assistance tools

  • Ramp up Trade Logistics program. Specific targets:

    • Modules for advisory services (light, mezzo and systemic); selected KM; checklists;

    • Focus on IDA (60%); meet demand from MIC (Mexico, India) and net exporters (Vietnam). Target: 12-15 countries assisted in FY09 (light and mezzo approaches).

    • Funding: $1 million(operations: 600K; KM: 400K)

  • Rapid review of previous crisis on countries by typology. Quick analysis of DB09 top 34 trade reformers

  • Adapt Trade Logistics Product to reach out quickly still keeping tight on focus areas

  • Adjust strategy; develop modular assistance tools by typology of countries (IDA, MIC, export-oriented, etc).

  • Increase internal resources plus leverage external resources with IFC, DB, WB, IMF, WCO, others. Also outsourcing models (IQC, etc)

Mid-term (FY11~) (30+ countries)

  • Scaled up program. Target indicators (FY10-11):

  • 30 countries with TL reforms; 15/20 new projects a year

  • Modules developed for rollout by WBG/IFC regions/ experts (IQC contracts);

  • Funding: $3.2 million (operations:2.4 million; KM: 800K).


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FY08 Project Highlights – Regulatory Simplification

Completed first-ever inventory of business formalities: 206 licenses issued by 48 agencies impose a $10B administrative burden Government committed to a 30% reduction by end of 2009

Regulatory Simplification

Madagascar

Yemen

Implemented first phase of tax simplification program, including new tax code, compliance cost survey and benchmarking of compliance costs and procedures

Rwanda

Government implemented 10 recommendations to improve trade logistics, including reforms to payment systems, risk-based customs inspection and procedural simplification

China

By June 2008, secured assets registry had received over 20,000 registrations, representing loans totaling over $300 billion


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FY08 Project Highlights – DB Reform Advisory

Top reformer in DB09; improved in 7 of the 10 DB areas. Implemented a one-stop shop for business registration, halving time, cost and procedures involved; Credit Registry eliminated the $1,100 minimum loan size, doubling borrower coverage; introduced online filing and payment of taxes

Doing Business Reform Unit: Reform Advisory

Azerbaijan

Colombia

Top LAC reformer in DB09 and #8 globally; DBRA helped simplify business registration and cut more than a month off the time to obtain a construction permit; introduced online filing and payment of taxes

Improved in 4 DB areas and jumped 10 places in the rankings; dramatically easier start-up process and shorter times to receive a construction permit; reduced costs of exporting and importing goods

Liberia

Albania

Second top reformer, jumping 49 places in the rankings; top reformer in Protecting Investors for overhauling its company law; new Public Credit Registry and easier business registration and tax administration


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FY08 Project Highlights – Sub-National DB

Published new sub-national DB reports for:

Morocco, Egypt, Colombia, China, Nigeria

and the Philippines

Doing Business Reform Unit: Sub-national

New reports

Country reports initiated in:

Russia, Mexico, Ukraine , Pakistan and India

Ongoing

projects

Published report on South-East Europe

New regional

initiatives


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FY08 Project Highlights – Investment Generation

Began piloting of new IAB Indicators in 20 countries

Investment Generation

IAB Indicators

Assisted Philippines in implementing investor aftercare program to anchor and expand existing FDI, establishing a pipeline of $1 billion in potential new investment

Philippines

Indonesia, Libya,

Yemen and Liberia

Provided advice on upgrading the legal framework for FDI in Indonesia, Libya, Yemen and Liberia

Assisted in launching the Central America Tourism and Hotel Investment Exchange, a pioneering approach to regional investment promotion

Central America

Vienna Office

Inception of Vienna Investment Generation Program Office

Global

Established Access to Land as a new product under development


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FY08 Highlights – M&E and KM

M&E and Knowledge Management

M&E Tools

Completed initial development of four M&E tools :

  • Product-specific M&E frameworks

  • Logical models and indicators

  • Standard matrices for project design and M&E

  • Reform tracking sheets and FIAS performance scorecard

Other FY08 outputs:

  • extensive study on special economic zone performance and lessons learned

  • Survey of FDI trends and investor perceptions in SE Europe

  • One FPD Note on Reform Teams

  • Six Smart Lessons

Other FY08

outputs


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DB Reforms in Liberia

DB Areas

Actions

Results (DB indicators)

Starting

a business

Eliminate procedures and plan for a one-stop shop

Lower cost and time to start a business

Getting credit

Improve information available at the Credit Registry

Improved credit information on borrowers

Trading across borders

Reduce customs fees and plan for a single window custom clearance

Lower time and cost to clear customs


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DB Reforms in Macedonia

DB Areas

Actions

Results (DB indicators)

Employing

Workers

Review of the Labor Code

More flexible labor regulations

Review of the Enterprise Act and SEC regulations

Protecting

investors

Improved investor protection

Analysis & recommendations on resolution of business disputes

Reduction in time and cost to enforce a contract

Contract

enforcement


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DB Reforms in Albania

DB Areas

Actions

Results (DB indicators)

Starting

a business

Online publication; reduction of cost; single application; one-stop-shop

Lower cost and time to start a business

Shareholders’ approval mandatory; enhanced disclosure policies; director’s duties reinforced

Protecting

investors

Improved investor protection

Getting credit

New public credit registry; positive and negative credit info recorded

Improved access to credit


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DB Reforms in Kyrgyzstan

DB Areas

Actions

Results (DB indicators)

Starting

a business

Reduce number of procedures, cost and time to start a business

Reduction of cost; single application; one-stop-shop

Shareholders’ rights increased; independent oversight added; director’s duties reinforced

Protecting

investors

Improved investor protection

Dealing with

construction

permits

One stop shop; Mayor’s Office involvement eliminated;

Reduced number of procedures, time and cost


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Investing Across Borders Project: Initial Feedback

  • Consultations with over 400 FDI specialists in 25 countries

    • Extensive indicator-specific collaboration has been established with IFC, World Bank, MIGA, ICSID, IMF, OPIC, International Bar Association, various law firms, etc.

  • Commendations from high-level Expert Consultative Group

    • Members include FDI experts from OECD, UNCTAD, HBS, Georgetown, Nestlé Corporation, etc.

  • Well-received presentations at global conferences

    • OECD Global Forum on International Investment (Paris, March ‘08)

    • WAIPA / UNCTAD World Investment Forum (Accra, April ’08)

  • Encouraging feedback from client countries

    • “What you have in the survey is the type of questions I keep encountering when I am providing services to new investors.” – survey respondent in Ghana

    • “It is very important that an external institution is doing this evaluation … government will not reform until there is a credible outside evaluation.”– survey respondent in Chile


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Investing Across Borders Project:Examples of Preliminary Results from Pilot Tests

(1) Many countries continue to have sector- specific restrictions on FDI:

(2) Several countries in Sub-Saharan Africa require an additional approval for foreign investors:

- Yes

- No

sectoral openness index (0-100)

(3) The quality of land rights for foreign investors varies considerably across the world:

(4) Sub-Saharan African countries vary significantly in the type of land occupancy rights they offer:

quality of land use rights index (0-100)

Source: Investing Across Borders Database 2009, this data is confidential and subject to change


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Investing Across Borders Project: Timeline and Deliverables

  • Project design and pilot testing phase (Nov ’06 - Oct ’08)

  • Preparation for a rollout in 80 countries (Oct - Dec ’08)

    • Report on pilot results for all six indicators

    • Workshops at the Donor Meetings and BEEnet Annual Meeting

    • Partnerships on the research agenda and methodology, operational collaboration, etc.

  • Rollout and operation in 80 countries (Jan ’09 - fall/winter ’09)

    • Data collection and verification per DB timeline (spring ’09)

    • Finalization of the scoring methodology and academic papers (summer ’09)

    • Board review of the Report without a country rank (summer/fall ’09)

    • Data release (fall/winter ’09)

  • Expansion to 120+ countries (2010 onward on an annual basis)


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OHADA Project – Putting Law to Work for Regional Integration and Economic Development

What it is: OHADA is an ambitious African initiative that aims at harmonizing the Business Legal Framework of Member States in order to create a safer, more attractive environment for private investment & economic development.

16 Sub-Saharan Africa Countries

Benin

Burkina Faso

Cameroon

Centrafrique

Chad

Comoros

Congo (Brazzaville)

Côte d’Ivoire

Gabon

Guinea-Bissau

Guinée-Conakry

Guinée Equatoriale

Mali

Niger

Senegal

Togo

How it works: launched in 1993, with an International Treaty, and 4 institutions:

- Council of Ministers

  • Regional Court of Justice and Arbitration (CCJA)

  • Regional School for Magistrates (ERSUMA)

  • Permanent Secretariat –> a coordinating body

Innovative and ambitious process: once adopted, laws are directly applicable in all Member States with no need for implementing legislation.

Joining: Democratic

Republic of Congo (DRC)


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FIAS and the Governance and

Anti-corruption Agenda (GAC)


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FIAS and GAC

  • Strong evidence that regulatory simplification, by reducing red tape, reduces opportunities for corruption and increases transparency and accountability

  • Benchmarking is another powerful way of increasing transparency. All Sub-National Doing Business data produced by FIAS is available online and readily accessible for all to see.

  • Public Private Dialogues supported by FIAS address the "demand side of governance" by enabling firms to participate in the development of policies and promoting good public and corporate governance.

  • Thus, FIAS' work has an impact on improving governance, but

    • it is not an explicit objective of our work: only 3 out of 80 active projects mention better governance or anti-corruption as an objective.

    • we have not studied or documented this impact through rigorous analysis.


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FIAS and GAC: Looking Ahead

  • FIAS can further its work on this agenda in the following areas:

    • Assess the impact of its work: Enterprise surveys and DB indicators provide a very good basis for this and can be supplemented by project evaluations. These evaluations should also measure any possible adverse effects of FIAS' work.

    • Based on these evaluations, determine areas of high impact and articulate a strategy for deepening work in these areas.

    • Pilot a more deliberate approach to improving governance in a few countries, bringing to bear several FIAS products.

    • Continue to create and make available benchmarking data, i.e. FDI indicators.


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Non-FIAS Programs Supported by CIC (I)

  • Bangladesh Investment Climate Fund (BICF)

    Continues to scale up activities related to regulatory reform, economic zones, capacity building and stakeholder engagement

    Jointly managed by IFC SA region and CIC

BICF

ICF for Africa

  • Investment Climate Facility for Africa (ICF)

    Secured $170 million in donor contributions over 7 years (including $30 million from IFC) – so far committed $29 million to projects

    Is supporting or working with FIAS on programs in Liberia, Rwanda, Burkina Faso, Madagascar, Ghana; others in the pipeline

    Established task forces, led by private sector members, to look at power and finance needs in Africa – IFC provides inputs to both


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Non-FIAS Programs Supported by CIC (II)

  • Health in Africa Initiative

    Joint WBG team (IFC Health & Education, Bank - Africa HD, CIC) is being assembled for implementation of IFC’s Health in Africa initiative

    CIC will lead the implementation of policy components (MOU signed; team leader joined CIC in August)

    Funding from Gates Foundation; cost-neutral for CIC

Health in Africa


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