BICF: Part of a larger investment climate family

1. BICF: Part of a larger investment climate family Dhaka, Bangladesh June 12, 2007

2. Overview • The big IC picture • New at FIAS • How can FIAS support BICF? • FIAS core products

3. Leveraging FIAS’ unique business model and positioning within WBG • Demand driven • Responsive • Incentive to cooperate and integrate across partners IFC Facilities Donors IFC FIAS MIGA IBRD/IDA Clients

4. Investment Climate Advisory Services: Delivery Platform • From 4 WBG client interfaces on IC/BEE: FPD & PREM Facilities/BEE MIGA TA FIAS CSM/BEE • Towards 2 primary interfaces: • Integration of FIAS regional teams with Facilities BEE teams (ongoing) • Integration of MIGA TA into FIAS (Jan. 23, 2007 MIGA Board decision) BEE BL Committee BEE Leadership Team BEEnet FPD Sector Board IFC/FIAS BEE Teams WB FPD & PREM Joint Teams Joint Strategies Africa (02/06) South East Europe (07/06) East Asia & Pacific (02/07) China (07/05) Pacific (07/06) Bangladesh (07/06) All Regions (02/07) FIAS-CSM/BEE for knowledge sharing • And 1 consolidated WBG BEE Program in selected countries: WBG BEE Program in Pacific, Indonesia, Bangladesh, Kenya, Madagascar, Zambia

5. FIAS, BEE/Facilities, Doing Business Entry-point: DB triggers demand for reforms Operational Delivery: Joint work FIAS/BEE Facilities Results: DBI and deeper BEE reforms Improved DBI: Quick wins strengthen demand for deeper reforms Doing Business FIAS Doing Business Reform Support Demand: Fixing DBI Demand: Deeper BEE reform • In-depth Improved Investment Climate • In-depth improvements in the business environment going beyond Doing Business indicators, leading to: • Attracting productive foreign investment • Enterprise creation, • More jobs, • Aggregate cost savings for businesses FIAS Technical expertise Other Diagnostic tools: Enterprise Benchmarking ICA’s Admin. Barriers Review BEE FacilitiesRegional expertise Etc. Enterprise Surveys Globalization: driver of reform Demand: Quick wins on DBI strengthens demand for deeper BEE reforms

6. Current IC trends • Broad agreement around strategy, now challenge of implementation • Continued interest in indicators • Peer-to-peer learning, not preaching • Still important to tell the story: tie “ecology of firms” to jobs to poverty reduction

7. How can FIAS support BICF? • Program and project support (product leaders, KM, networks of practitioners and experts, M&E, communications) • Administrative support (Finance, HR assistance) • Coordination with WBG HQ (Matilde)

8. How can we connect better? • BBLs • Staff meetings (score: 0 today) • Internal communications • BEEnet meeting & other field events • New Sharepoint intranet coming soon…

9. Core Areas of Expertise • Business registration • Licensing/regulatory governance • Taxes • Trade • Secured lending • Land/SEZ • Industry competitiveness – agribusiness, tourism and mining • Policy advocacy • Investment promotion/facilitation • Investment law Regulatory simplification Investment generation Fewer stand-alone diagnostics

10. Director Investment Climate Front Office SME BEE Unit Buiness Registration Andrei Mikhnev BEE BL Leader (IFC) FIAS General Manager Pierre Guislain Regulatory Simplification Tom Davenport Investment Generation Ceci Sager DB Reform Support X (Simeon Djankov: Sec. Sup.) KM Vincent Palmade Africa FIAS + ICF Nigel Twose EAP FIAS Russell Muir KM & Web (E-govt) John Wille DB Rapid Response X Invest. Policy & Promotion Robert Whyte X M&E Eduardo Hernandez DB Sub-National Mierta Capaul Trade Uma Subramanian Industry (Land/SEZ) Gokhan Akinci Taxes Richard Stern EMN Michael Kubzansky Finance Igor Tutnjevic Administration (Vacant) Secured Lending Sevi Simavi (Peer Stein: Sec. Sup.) RPCs ECA* – Igor Artemiev Balkans – Margo Thomas MNA –Xavier Forneris LAC – Damien Shiels SAR/BICF – Vacant (*Except PEP-SE) Donor Relations Beat Heggli Communications Christine Bowers FIAS Organization Chart Other IFC BEE Regional Prog.Managers Africa: BEE EAP: BEE Reg.Reform Management (Licensing) Peter Ladegaard

11. Core Products

12. Regulatory Management and Reform Status, Activities, ObjectivesFIAS Program Development

13. Why and why now? • We know regulation matters… • …even more so in developing countries • DB and real world developments are raising demand • We have the tools… • But further testing and consolidation is required

14. We know regulation matters… Source: IMF (2003), using Kaufmann, Kraay, and Zoido-Lobatón (1999); World Bank, World Development Indicators (2002); and IMF staff calculations. This index measures the overall quality of governance, including the degree of corruption, political rights, public sector efficiency, and regulatory burdens Source: Doing Business

15. …even more so in developing countries • Regulatory systems out of control • Insufficient capacities to manage (and re-do) piecemeal reform • Radical deregulation and simplification good starting points… • …but insufficient principles for sustainable reform

16. We have the tools… Flow Stock • Scrap and build • Process reengineering • Quantitative targets (SCM) • Staged repeal (Guillotine) • Review/sunset clauses • RIA • Public consultation • Forward planning • Admin.Procedure law • Silence is consent/denial Institutions • Central unit for Reg.Ref. • Gov’tal Reform Committee • Business Advisory Council • Regulatory Registry • Central licensing authority

17. …but further testing and consolidation is needed • From OECD to DCs: Adaptation and reinvention • Client segmentation and targeting • Scaling, sequencing • “Replicable tailoring” • Assuring sustainability

18. Programme Development Along three parallel tracks • Knowledge Management – The Better Regulation for Growth Programme • Project Development and Experimentation • Core Product: Regulatory Simplifiction - Business Licensing Reform

19. Better Regulation For Growth • A joint initiative between FIAS, DFID, and The Netherlands • Overall objective to strengthen regulatory frameworks to promote investment, growth and poverty reduction • Demand from policy-makers/donor staff for practical operational guidance • Lack of policy guidance geared to developing country needs and contexts • Emphasis on dissemination (regional/country workshops, dedicated website for regulatory governance)

20. Main themes and outputs of the BRG

21. Programme Implementation • Project duration March 2007-March 2009 • 4 phases: • project validation & design • policy research • develop guidance • dissemination • Programme Steering Committee • Expert Advisory Panel • FIAS programme management • Will seek integration with country reform programmes and link to existing projects

22. Project Development and Experimentation • Albania • Croatia • Macedonia • Bangladesh • Kenya

23. Core Product: Business Licensing Reform • BEE Core Product under development • Narrow and quick-win focussed approach to business licensing reform based on experiences from the Balkans and Kenya • Top-down, fast-track, strong leadership • Standard review criteria • Reversal of burden of proof • FIAS leadership gradually transferred to facilities • Possible add-ons: RIA, Regulatory Reform Unit, Regulatory Registry • 5+ pilots; 3 years • Funding: FMTAAS, FIAS, Facilities, donors

24. …1-2 years from now… Leaders in regulatory management and reform • A well-tested Regulatory Governance product • Scalable and replicable • Combining “quick wins” with a sustainable reform infrastructure • Regulatory capacity diagnostics • Comparisons with regional and int’l best practice • Specific operational guidelines and reform action plans • Implementation facilitation on the ground • In partnership with lead donors

25. FIAS Contacts • Alberto Criscuolo • Margo Thomas • Roy Pepper • Peter Ladegaard

26. Secured Lending

27. Assets Accepted as Collateral 73% Land and real estate Composition of Assets Firms Hold 22%Land and real estate real estate 78% Movable Assets Why secured lending? 27% movable assets Source: World Bank Enterprise Surveys. Data taken from surveys conducted in over 60 countries, 2001- 2005.

28. CHE FIN DNK GBR IRL Access to loans- firm perceptions SWE AUS LTU TUN PAN NZL DOM IND NAM ZAF TWN LVA LBN UGA SLV HKG NLD DNK LKA SGP TZA BRA THA YUG NIC FRA BEL AUT GHA BOL EGY IDN BWA CAN ROM BDI CHL MWI NGA ZWE COL JOR ISR PAN PRT NOR THA GRC ESP SVN MYS KWT USA TGO ARE HND AUT KOR ISR MOZ MDA MAR PHL URY ETH DEU MKD TUK BGR ESP ITA DEU SVK TWN ETH MLI HRV SLE HTI PER SVN NPL MAR CHN PAK VNM ZWE SEN POL HUN DOM ZAR PNG MDG COG MLI NOR BFA RUS GTM JAM KEN OMN BEN GRC GTM TCD SWE CHL SAU HTI JAM EGY PRY MOZ CRI MDG CHE AGO ECU DZA PRY ECU CMR ITA MWI FIN LKA KOR CZE FRA CMR NIC AGO BGD HND UKR CIV HRV ARM TUN KHM HUN JPN ZMB CRI AZE GIN PER GHA PHL SEN SYR CZE YEM VNM LTU BOL MKD SLV COL KAZ PAK BGD BLR TZA IRN BWA UGA BIH POL VEN MEX DZA ROM VEN BRA ARG URY IND IDN RUS MEX TUK ARG JPN Access to loans 6 -4 -2 0 2 4 Collateral Index Why secured lending? Private Credit to GDP PRT HKG MYS IRL NZL NLD JOR SGP USA GBR Private Credit to GDP ZAF MNG AUS KGZ BEL SVK TCD NER CAN GEO KEN ZMB LVA BGR ALB NGA UKR -4 -2 0 2 4 Collateral Index Modern collateral laws = more credit to private sector = better investment climate =1-2% additional GDP growth Source: Doing Business 2005

29. What is this product? Goal: • Make more credit available at better terms Means: • Setting up an adequate legal infrastructure • Creating a centralized, electronic collateral registry • Direct assistance to and capacity building of end users and key stakeholders

30. Where are we today? Armenia China Nepal Senegal Vietnam Burkina Faso Ghana Pacific Malawi

31. Next Steps 2 phased approach: Phase I - Comprehensive product development (FY 08) • Deliver the ongoing commitments • Put together common, replicable product delivery methodology and a package of project materials • Focus on M&E • Develop web-based resources Phase II - Global roll out and project support (FY 09 and beyond) • Roll-out selected projects in regions, provide support in project design, project management, execution and follow up • Retain a team of global experts to provide operational support on both technical issues and political economy, reform and stakeholder management issues • Collaboration with the World Bank on joint programs

32. FIAS CGFIB Advisory Committee Jointly funded and managed 1 Program Coordinator 2 short term advisors 1 Program Analyst GLOBAL EXPERT POOL Expert for Africa Expert for Africa Expert for Asia Global Banking andFinance Expert Lawyer Project delivery through regions IFC PEP Facilities – WB Regions Staffing and Quality Control

33. Tax Through the Growth Lens • Setting the stage for a new type of BEE work in Tax

34. The Tax Product – Evolving Goals • Traditional revenue goal • to raise revenue for government expenditure • Development/Growth goals • to create “a culture of taxation”…paying tax is a civic responsibility • to reduce informality/unofficial activities • to increase the size of the formal sector • to promote growth

35. The Tax Product- Why it is important • Tax policy is an effective instrument to alleviate poverty and promote growth • Tax regimes affect international competitiveness • Tax rates influence foreign investor decisions • Tax corruptions generate resources and opportunities for corruptions in other areas • A stable, transparent, even-handed tax regime is a sign of established rule of law • Tax regime is a pillar of the legislative and regulatory system • Tax compliance facilitates economic activity (can be part of the value chain)

36. The Tax Product- Where does FIAS fit within the WBG and with IMF World Bank Group IFC Facilities PSD PREM Public Sector ICA Implementation work on SME Taxation and Tax Policy Simplification Civil Service Reform PER IMF Tax Policy Tax Authority/Admin

37. The Tax Product- Where does FIAS fit within the WBG and with IMF The FIAS Approach: • Comprehensive in nature: integrated focus on tax policy and tax administration • Richer in context: bringing in both the public and private sector dimensions • Rigorous in analysis: quantitative rigour (METR) and qualitative analysis (in-depth interviews with tax officials and private sector) of sectoral burden of tax policy and administration; • Sectoral approach in focus: detailed microeconomic focus on the impact of tax policy and administration in specific economic sectors • Collaborative in design and implementation: leverage on the WBG and IMF work; partnership with the WBG and IMF colleagues on tax studies; leverage on the WBG and IMF work on implementation; partnership with the donors in terms of diagnostics, solution design, and implementation

38. The Tax Product-Resources FIAS can Offer • FIAS is the leader on tax product within the WBG • FIAS has: - a competent pool of in-house staff - an extensive in-house knowledge base (FIAS-DFID joint studies in 13 countries over the past 2 years) • A wide network with external experts and consultants specialized on specific tax instruments and sectors • An extensive network with the practitioners (local tax officials) in Africa and the MENA region • Ability to levarge on the WBG and IMF work and collaborate with them in implementation • Proven track-record of effective collaboration with the donors on tax work

39. The FIAS Tax Product: FY08 • Goals • To improve the business enabling environment by reducing the time and financial cost of complying with tax (measured in part by the existing 3 Doing Business indicators and others) • Together with our development partners, provide targeted solution design and implementation in specific areas of the tax system aimed at streamlining and making more accessible the entire tax system to encourage investment • To establish a network of tax practitioners (international experts and local tax officials) which will participate in the replication and scaling up of implementation programs, built on the start made in Zambia February 2007.

40. Trade Logistics Product

41. Trade logistics is important for growth… “Behind the border” trade issues – e.g. import/ export procedures, poor customs, inspections regime • increase the cost of doing business • inhibit trade and investment opportunities • constrain growth and employment

42. Time for Import Procedures: Bangladesh 60 50 40 Bangladesh: 57 days Vs. Singapore: 3 days 30 20 10 0 Assemble and Vessel Waiting Berthing and Customs Technical Inland Process Time Unloading Inspection Control Transportation Documents Singapore Bangladesh Source: Doing Business 2007

43. 35 30 25 Bangladesh: 35 days Vs. Singapore: 6 days 20 15 10 5 0 Assemble and Inland Customs Technical Pre-shipment Terminal Loading Process Transportation clearance Control inspection handling Container Documents activities Bangladesh Singapore Source: Doing Business 2007 Time for Export Procedures: Bangladesh and Singapore 40

44. Costs for a Typical Trade Transaction: US$ for a 20’ Container Source: Doing Business 2007

45. Improved trade logistics services would result in: • Expanded and diversified exports • Higher investment in key sectors • More and better jobs • Transfer of technology and know-how

46. Trade Product: Objective • Generate reform momentum with the Doing Business "Trading Across Borders" indicators facilitating data-based public- private dialogue • Develop downstream Advisory Services projects prioritized by the stakeholder dialogue, that trigger target reforms • Lead and support FIAS/ IFC BEE teams on the design and implementation of TA projects to improve regulatory and policy constraints: • Streamlining of existing border control procedures, • Simplification and harmonization of documentation procedures • Technical support to improve efficiency in customs and technical clearance • Capacity building on risk based management practices • Effectively support IFC in: • ongoing efforts to improve business environment in client countries • opening up opportunities for IFC investments in logistics infrastructure.

47. Program Development: Key Components Component 1: Product Development and KM Component 2: Product testing in 3-5 Pilots (Pilots proposed: Liberia, Rwanda, China + 2 more pilots) Component 3: Rollout

48. FIAS focus will be on policy and regulatory dimensions of trade logistics… For effective Product delivery FIAS will … • Form integral teams with PEPs in implementation of the pilots and the rollout • Collaborate with: • IFC infrastructure department for potential IFC investments in: warehouses, logistics parks, inland container depots (ICD), cool chains etc. • World Bank infrastructure group (e.g. roads, rail. etc) • WBG groups for trade policy issues such as tariffs, trade agreements etc. • Partner with external agencies e.g. Africa ICF, UNCTAD, WTO, etc.

49. Staffing Proposed FIAS: Program Lead (Uma Subramanian) + 2 Trade Logistics staff (ETCs) for the product development and pilot Facilities: Propose that at least 1 staff in each facility on implementation of pilots; then full-time recruitment once product roll-outs are initiated. Currently plans to recruit a full time PEP Africa staff in Johannesburg

50. business environment reform at the sub-national levelusing doing business