Professional Documents
Culture Documents
2013
FIAS
2014 The World Bank Group 1818 H Street NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org All rights reserved. This volume is a product of the staff of the World Bank Group. The ndings, interpretations, and conclusions expressed in this volume do not necessarily reect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank Group does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Ofce of the Publisher, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. About the Facility for Investment Climate Advisory Services (FIAS) Through the FIAS program, the World Bank Group and donor partners facilitate investment climate reforms in developing countries to foster open, productive, and competitive markets and to unlock sustainable private investments in sectors that contribute to growth and poverty reduction. The FIAS program is managed by the Investment Climate Department under the joint oversight of the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the World Bank (IBRD). For more information, visit www.wbginvestmentclimate.org. Cover and interior photo credits, p. 77.
Contents
Message from the Director . . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 2 Main Achievements and Milestones . . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 4 Special Topic: Promoting Market Competition through Investment Climate Interventions .. . . . 12 Operational Highlights. . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .20 Core Thematic Areas in Investment Climate Interventions . . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .34 Collaboration, Knowledge and Learning . . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .42 Financial Results and Resource Use . . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .50 Annexes . . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .60
Annex 1: Reforms and Other Results Supported by FIAS in FY13. . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .62 . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .71 Annex 2: Portfolio of FIAS-Funded Projects in FY13 . Annex 3: Abbreviations. . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .76
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
and encourage entrepreneurship and investment. This Annual Review highlights our work in the area of competition policy, which is gaining momentum and where FIAS is emerging as a global thought leader. The degree of competition in key markets in developing economies lags far behind developed countries, hampering rm productivity and reducing the competitiveness of domestic rms. More than 40 percent of emerging markets exhibit a monopolistic structure. In Sub-Saharan Africa, for example, regulations and practices restrict business entry in sectors that are key for doing business such as nancial services, air transportation, telecommunications, and professional services, and limit the ability of existing rms to compete. FIAS-supported teams are producing measurable results in countries as varied as Armenia, El Salvador, Honduras, Kenya, and Tunisia. Addressing rules that limit competition is a priority area of focus for FIAS-supported work. Implementation of the ve-year FIAS strategy is unfolding at a time of change and renewal in the World Bank Group. The reorganization being led by World Bank Group President Jim Kim emphasizes themes and areas of activity in which the Investment Climate Department already has a strong record. President Kim stresses the importance of global knowledge, owing just in time to the countries that need it: The FIAS model is built on developing and sharing global knowledge on investment climate reform, delivered through regional and country teams. President Kim wants a more integrated World Bank Group, where the World Bank, IFC, and MIGA work more seamlessly together: FIAS is a World Bank Group facility, implemented through the Investment Climate Departmentthe only joint World Bank Group operational department. He also wants more effective, focused, and timely delivery of services to clients: The FIAS business model relies on specic product expertise deployed rapidly in partnership with other World Bank Group units and our donors, and supported by a strong results focus (Managing for Impact is the title of our FY12-16 strategy). Likewise, FIAS projects and programs bring an important dimension to the Shared Prosperity agenda, with our focus on the private sector as the key engine of sustainable growth, and on helping the poorest countries maximize their economic potential, thus contributing to the elimination of extreme poverty. In FY13, we deepened our collaboration with IFC, World Bank, and MIGA teams, partnering with more than 45 different World Bank Group units to leverage maximum results from FIAS-supported programs. We are immensely grateful to our FIAS donors and partners, not only for their nancial support which is core to our business model, but also for their substantive engagement in multiple areas of our work, from designing specic interventions to shaping our ambitious impact evaluation program.
Pierre Guislain Director Investment Climate Department and FIAS World Bank Group
1
4
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
$329 million
in new investment generated, more than a threefold increase over FY12 total
94% 75
client satisfaction rating, a three percentage point increase from FY12 rating
Momentum
In FY13, FIAS-funded activities continued to deliver the results and outcomes expected under the FY1216 strategy. Strong momentum is the theme of FY13. FIAS-funded activities produced a substantial increase in the number of investment climate reforms implemented in client countries, generated $329 million in new investment from FIASsupported work on key industries, and supported projects that have achieved high levels of development effectiveness ratings and client satisfaction. Through the work we do with client governments, FIAS projects help private sector investors and entrepreneurs by creating a level playing field for enterprise, streamlining regulation, easing business start-up, and fostering competition and trade.
FIAS-Supported Reforms by Region 100% = 75 Reforms n Sub-Saharan Africa, 49 (65%) n Latin America and the Caribbean, 14 (19%) n Europe and Central Asia, 10 (13%) n East Asia and Pacic, 1 (1%) n South Asia, 1 (1%)
IBRD 40623 JANUARY 2014
Regional distribution: 65 percent of reforms occurred in Sub-Saharan Africa; 19 percent in Latin America and the Caribbean; 13 percent in Europe and Central Asia; 1 percent in East Asia and Pacic; 1 percent in South Asia.
South Asia: 1
Bangladesh
Sub-Saharan Africa: 49
Benin Burkina Faso Burundi Chad Cameroon Comoros Congo, D.R. of Cte dIvoire Djibouti Gabon Guinea Guinea-Bissau Liberia Malawi Mauritania Mozambique Niger Rwanda So Tom and Prncipe Senegal Swaziland Togo Uganda Zambia
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
27 additional reforms achieved by the Investment Climate Business Line and at least $92 million in investment generated from activities not funded by FIAS beneted from expertise and knowledge contributed by FIAS-supported teams. Doing Business 2014 lists 10 countries as showing the most improvement across three or more areas measured in the report. All 10 have beneted from FIAS-funded projects, and sevenBurundi, Cte dIvoire, Djibouti, Guatemala, Kosovo, Rwanda, and Ukraineimplemented FIAS-supported reforms in FY13.
Compliance cost savings for FY13 surpassed $30 million for ve projects where the data has been validated. Another $16 million of compliance cost savings is being validated.
Focus on Priority Client Groups: Conict Situations, Low-Income Countries, Sub-Saharan Africa
Reform totals in priority client areas are in line with associated expenditures. IDA countries2 accounted for 76 percent of reforms and 78 percent of expenditures; Sub-Saharan Africa, 65 percent of reforms, 57 percent of expenditures; and countries in fragile and conict-affected situations, 32 percent of reforms and 28 percent of expenditures.
Fiscal Year 2013 maiN achieVemeNts aNd milestoNes
Results by Priority Client Group, FY13 Share of Total Reforms and Client-Facing Project Expenditures
100%
n Share of Client-Facing Project Expenditures (Targets) n Share of Client-Facing Project Expenditures (Actual) n Share of Total Reforms
80%
60%
40%
20%
0%
IDA-eligible countries
Sub-Saharan Africa
The planning, expenditures, and results of FIAS-supported work are in close alignment.
FY12 investment generated numbers were revised from $120 million to $108 million based on corrections acquired from investor surveys in the FIAS-funded project in Brazil. International Development Association (IDA) countries are those reporting per capita income in FY13 of less than $1,195 and lacking the nancial ability to borrow from the International Bank of Reconstruction and Development of the World Bank Group.
FIAS Development Effectiveness Ratings, FY08-FY13 (Share of completed projects with positive rating)
100% 80% 60% 40% 20% 0% 47% 57% 73% 67% 86% 83%
FY08
FY09
FY10*
FY11*
FY12
FY13
Client satisfaction with advisory services provided by IFCs Investment Climate Business Line in FY13, through which a majority of FIAS-funded programs are implemented, reached 94 percent.
FIAS-supported projects received a client satisfaction rating of 92 percent (FY12: 95 percent). FIAS-funding was used to cofinance 49 projects directly managed by the Investment Climate Department (including 20 non-client-facing projects focused on knowledge management and product development), and 40 projects managed by regional IFC Advisory Services units.6 Total budget for these FIAS activities amounted to $141 million; total project spending in FY13 was $30.3 million, of which spending from FIAS sources of funds was $15.7 million. FIAS-funded project spending for non-client-facing activities related to knowledge management and product development projects amounted to $7 .2 million (from $5 million in FY12).
Investment Climate Business Line Client Satisfaction, FY08-FY13 (Share of clients satised)
100% 80% 60% 40% 20% 0% FY08 FY09 FY10* FY11* FY12 FY13 92% 91% 94%
85%
88%
89%
Majority of Investment Climate Department projects are FIAS funded. Development effectiveness rating is a synthesis of the scores on strategic relevance, output achievement, outcome achievement, impact achievement, and efciency dimensions at completion. 5 Investment Climates work in special economic zones, which previously represented a sizeable part of industry sector work, was transferred in FY12 to the Competitive Industries Global Practice and so is excluded from the gures provided. Accounting for special economic zones work, the FIAS 0811 baseline would stand at 15 percent, and the FY12 and FY13 share would stand at 18 percent and 19 percent respectively. 6 Receiving at least 10 percent of their FY13 spending from FIAS trust funds and other FIAS-related funding sources.
3 4
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
Regional spending distribution is highest for Sub Saharan Africa with 57 percent, followed by Europe and Central Asia and World Projects at 11 percent each. Funding administered via FIAS contributed to 27 percent of total Investment Climate Business Line spending in FY13, and FIAS funding was involved in projects that supported the implementation of 73 percent of all Business Line reforms (75 of 102 reforms). The increasing share of expenditures devoted to knowledge and product development, from 26 percent in FY12 to 32 percent in FY13, reects the shift to knowledge products in line with the FIAS strategy.
Business regulation activities drew the largest share of expenditures in FY13 with 25 percent, followed closely by business taxation work, indicator-based reform advisory, and industry-specic activities.
n Business Regulation (25%) Industry-specic Real Sectors, and n related (19%) n Business Taxation (17%) Indicator-based Reform n Advisory (16%) n Trade Logistics (9%) n Debt Resolution & Business Exit (5%) n Other (5%) n Investment Policy (4%)
n World (11%) n Latin America and the Caribbean (8%) n Middle East and North Africa (5%) n South Asia (5%) n East Asia and Pacic (3%)
Enforcing contracts
Starting a business
Investor protection
Property transfers
Getting electricity
Trade logistics * * * 10 7
Inspections
Region Country EAST ASIA AND PACIFIC Timor-Leste1, 2 East Asia aND Pacific TOtal EUROPE AND CENTRAL ASIA Armenia1 Belarus Kosovo1, 2 Moldova1 Ukraine EUrOpe aND CeNtral Asia TOtal Colombia LATIN AMERICA AND THE CARIBBEAN Costa Rica El Salvador Guatemala Haiti1,2 Honduras1 Jamaica Nicaragua1 Panama Trinidad and Tobago LatiN AMerica aND tHe CariBBeaN TOtal SOUTH ASIA Bangladesh1 SOUtH Asia TOtal SUB-SAHARAN AFRICA Benin1 Burkina Faso1 Burundi1, 2 Cameroon1 Chad1, 2 Comoros1, 2 Congo, Dem. Rep.1, 2 Cte dIvoire1, 2 Djibouti1 Gabon Guinea1, 2 Guinea-Bissau1, 2 Liberia1, 2 Malawi1 Mauritania Mozambique1 Niger1 Rwanda1 So Tom and Principe1 Senegal1 Swaziland Togo1, 2 Uganda1 Zambia1 SUB-SaHaraN Africa TOtal GRAND TOTAL Reforms captured by Doing Business 2014 report
1 NA
9 9
2 2
2 2
3
5 NA
4 NA
2 2
4 NA
11 11
2 2
1 NA
20 20
* 2 1
Reforms from FIAS-conanced projects mapped to regional IFC Advisory Services units. 1 International Development Association (IDA) countries. 2 Fragile or conict-affected situations.
Industry-investment climate category includes agribusiness, tourism, and other industries. * Reforms under Doing Business topics not validated by the Doing Business report.
10
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
Total 1 1 3 1 3 2 1 10 2 2 1 2 1 1 1 1 2 1 14 1 1 2 2 6 1 1 2 1 4 1 2 2 1 1 1 1 3 2 7 1 1 2 1 2 2 49 75 56
FY13 In US$, Thousands 36% 24% 12% 8% 5% 11% 63% 17% 20% 26% 1% 100% 11,754 8,000 4,000 2,400 1,600 3,754 16,435 5,532 5,447 5,456 90 28,279 1,021 27,258 In US$, Thousands Share of Total 21,855 6,099 3,603 31,557 Share of Total 42% 28% 14% 8% 6% 13% 58% 20% 19% 19% 0.3% 100%
In US$, Thousands 12,089 8,188 4,088 2,500 1,600 3,901 21,390 5,730 6,678 8,982 484 33,9633 1,122 32,841
Share of Total
Includes FY12 and FY13 Advisory Services adminstration budget and expenditures of approximately $1.2 million provided by IFC to cover a number of Investment Climate Business Line positions and their related staff and travel costs. 2 Includes IFC project-specic contributions ($2,968,000 in FY12 and $3,084,000 in FY13) to support a range of global knowledge management and product desing initiatives and other IFC contributions ($934,000 in FY12 and $670,000 in FY13) to support activities indirectly related to projects, including initial project designs, portfolio management, monitoring and evaluation, and knowledge sharing associated with the global portfolio. 3 FY12 donor contributions amended to correct a typographic error in the FY12 Expenditures table on page 6 of the FIAS 2012 Annual Review.
11
2
12
SPECIAL TOPIC
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
24
23
13
13
High productivity in key input markets such as telecommunications, transport, and professional services benets other sectors and sustainably increases productivity across the economy. Growth resulting from the multiplier effect of investment climate reforms is already evident in key markets. For example, actions by competition agencies to deter anticompetitive behavior in key sectors in Kenya and Zambia have spurred changes in pricesbeneting cotton farmers in Zambia, and maize and sugar consumers in Kenya. Additionally in Kenya, opening up competition in pyrethrin (a pesticide derived from a ower) will lead to at least $3 million in investment and growth in exports. The reforms in Zambia are expected to generate some $10 million in private sector savings. Eliminating anti-competitive regulation in inland water transport in the Philippines is expected to spur at least $9 million in additional investment per year in the maritime sector. An enhanced public procurement framework open to more competitors in El Salvador is expected to generate at least $14 million in savings over the course of a year as a result of more competitive pricing among rival rms. FIAS-supported work will continue to expand targeted, market-level interventions that implement an effective policy framework for promoting competition. The policy goal is to facilitate entry into markets, ensure a level playing eld, enable rms to freely decide on business and market variables, and penalize anti-competitive behavior.
restrain competition and to increase the effectiveness of competition policy implementation in 13 countries: Cambodia, Honduras, Kenya, Mexico, Moldova, Namibia, Nepal, Peru, the Philippines, Romania, Rwanda, Uganda, and Zambia. These efforts fall into three areas of focus. The rst helps clients eliminate market-specic constraints and open markets to competition by addressing anti-competitive product market regulation and discriminatory rules. The second helps clients increase the effectiveness of their antitrust and pro-competition frameworks, an area that includes anti-competitive agreements between rival rms, effective and non-intrusive merger control policies, and measures to reduce anti-competitive behavior from government bodies. The third area aims to minimize distortions generated by government aid granted on a selective basis that unduly benets specic players.
Tackling Anti-competitive Behavior and Regulations for Increased Productivity and Shared Prosperity
Well-functioning markets depend on competitive rm behavior and market rules and regulations that promote entry and rm rivalry. Over the past two years, the work of the FIAS-supported expert team to prevent anti-competitive regulation and cartel behavior has been carried out in a total of 16 countries: Armenia, Cambodia, El Salvador, Georgia, Kenya, Mexico, Mongolia, Namibia, Nepal, Peru, Romania, Russia, Rwanda, Tunisia, Turkey, and Zambia. Eliminating and preventing price xing and market sharing agreements among competitors is critical to preventing rms from overcharging customers by as much as 42 percent compared with a competitive scenario. In Kenya, for example, the FIAS-supported competition team helped implement a new competition framework making clear that cartel agreements are illegal and enhancing the governments capacity to expose and punish cartels. In Zambia, legal immunity for whistle blowers who provide evidence exposing illegal cartel agreements is seldom available due to insufcient secondary regulation to effectively implement this law. The FIAS-supported team is helping Zambia implement a comprehensive reform
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
program, including working protocols with relevant government bodies and peer-to-peer learning. These efforts will help replicate successes such as the recent exposure and elimination of anti-competitive behavior by a fertilizer cartel that overcharged the government by an estimated $20 million. In addition, reducing anti-competitive regulations fosters productivity growth. FIAS support has focused on eliminating and tackling regulations in key sectors where they are particularly harmful to the overall economy. As a rst step, FIAS support generated a framework for identifying and assessing such regulations to help prioritize reform areas (see box below). Client countries have employed the framework over the past two years to eliminate regulations that restrict the number of rms, limit private investment in specic industries, or favor particular rms. Based on this framework, the FIAS-supported team has been working on removing restrictions and policies that limit private sector participation in client countries. In 1980, for example, Kenya was the worlds leading supplier of pyrethrin, an organic insecticide made from the pyrethrum ower. Over the next 30 years, Kenyas share of the pyrethrin market plummeted from 82 to 4 percent. In large part this was because a state monopoly, the Pyrethrum Board of Kenya, was the only rm allowed to purchase and process the owers. The FIASsupported team has helped draft reforms and is providing implementation support to remove this monopoly, unlocking investment opportunities for at least two local
companies and potentially three international investors. This effort benets close to 40,000 farmers who will be able to grow and sell pyrethrum to new manufacturers and exporters. A project in Cambodia, meanwhile, has opened up competition among providers of fumigation services at the countrys main port of entry, reducing fumigation costs by around 40 percent. Various countries allow professionals to x prices and establish regulations that make it harder for new rms to compete. Kenya, with FIAS support, is working to eliminate minimum prices in insurance and legal services. Removal of minimum prices for business insurance would generate at least $18 million in savings. FIAS support helped eliminate regulations that prevented competition in public procurement, a key sector in many client countries. In El Salvador, more than $100 million in public procurement, or 12 percent of procurement contracts, was allocated over one year without mandatory competitive selection. The public procurement bylaws were ambiguous on whether competitive bidding was required. In some instances only a single bidder participated. The FIAS-supported team partnered with the Competition Agency to support changes to public procurement bylaws. Since May 2013, ofcials must publicize their procurements via an electronic system and assure competition between at least three market players. Direct involvement of the private sector and different government agencies favoring competition was critical to achieving these improvements.
15
measures that tended to benet only a few favored rms. This practice distorts the market by having government pick winners and losers. State aid regulations and the effective management of the state aid inventory are expected to prevent these situations and clear the way to rewarding the most efcient investors.
16
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
Estimates of the benets and savings that greater competition can generate have proved useful to gathering stakeholder support for competition reforms. The estimations are typically carried out at the sector level, measuring the effects of competition on key variables such as productivity, prices, and consumer welfare. Results are shared with policymakers and stakeholders with an eye to increasing demand for pro-competition reforms.
Optimized registration procedures for agricultural inputs. Enforced process manuals to ensure consistency and equal treatment of applicants.
An online database of registered input products and their associated crops by rm, with tracking information on the product registration process.
Now, approximately 35,000 farmers have access to lower-priced agricultural inputs (up to 9 percent lower for certain products) and more products are available to help farm productivity. In 2013, 300 products were registered, as compared to 68 in 2011. In some cases, average registration times decreased from around 220 days (as much as three years in one case) to less than 90 days.
17
In Tunisia, the competition team calculated that the Tunisian economy could gain up to 5 percent in labor productivity per year if margins between the price of products and the cost of producing them declined by 5 percentage points as a result of more contestable markets. These potential gains informed the governments discussion to change the current competition rules and improve its implementation in key sectors such as telecommunications. In Armenia, the team estimated that consumer losses due to limited competition in food markets were at least $87 million per year, 2.3 percent of per capita gross domestic product (see box, p. 26). The team also calculated that Turkeys labor productivity growth would have been 4.5 percent higher each year between 2003 and 2008 if the degree of competition intensity had been 10 percent higher during this period. The FIAS-supported team analyzed nine Latin American and Caribbean countries to show how less restrictive regulations correlate with increased entrepreneurship. Results of the research have informed policy recommendations for Mexico and Honduras and inuenced the private sector development agenda in Costa Rica, Dominican Republic, El Salvador, Jamaica, and
Peru. This is an example of how, in addition to technical considerations, the team works to identify early on allies, champions, and beneciaries of competition interventions to generate reform momentum.
18
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
aviation policy. Overall, the forum was praised as among the best pre-ICN conference events in recent years. With support from the FIAS-funded team and the Canadian International Development Agency (CIDA),7 a peer-to-peer event in Lima, Peru, provided another forum to discuss the benets of integrating competition policy principles into government policies. The event attracted international experts and 40 government representatives from 14 countries in the Latin and Central American region. Overall, the discussion on competition reform work generated high-level interest in developing a regional initiative among Central American countries to facilitate trade with the promotion of competition as a pillar. Competition work is undertaken in collaboration with external development partners such as the Organization for Economic Co-operation and Development (OECD), the International Competition Network, and experienced competition agencies to ensure synergies in encouraging competition and strengthening competition policy in client countries. In addition, the FIAS-supported team provides
extensive cross support throughout the World Bank Group and in FY13, it has collaborated with 18 units to implement competition reforms or conduct studies to identify areas for potential reform and estimate the expected benets. Advisory services that incorporate competition objectives have expanded throughout the Bank Group. Efforts to identify competition issues have been applied by World Bank and IFC teams in 16 countries across all regions, including seven IDA countries. By the end of June 2013, 11 IFC projects with implementation plans approved in FY13 included objectives that aimed to increase competition in specic sectors or economy-wide. Just over half of projects in agribusiness, tourism, trade logistics, and investment policy embedded competition principles in their project design and implementation. Overall, over the past three years, demand for competition policy work has seen a signicant increase, from nine countries with competition interventions in 2011 to 24 in 2013 (see below).
7
30
20
10
Number of countries with pro-competition interventions in design or implementation, by region (excluding regional projects)
25 20 15 10 5 0 FY10 FY11 FY12 FY13
South Asia Middle East and North Africa East Asia and Pacific Sub-Saharan Africa Latin America and the Caribbean Europe and Central Asia
19
3
20
OPERATIONAL HIGHLIGHTS
In scal year 2013, FIAS funding continued to emphasize support for Sub-Saharan Africa, fragile and conict-affected states, as well as IDA countries.
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
76%
share of total reforms in IDA countries
65%
32%
21
The FY13 portfolio shows continued momentum in investment climate work focusing on countries in fragile and conict-affected situations. Project expenditures in these countries were up 34 percent in FY13 and FIASsupported investment climate activities yielded 24 reforms in a dozen fragile and conict-affected countries, up from 11 reforms in six fragile countries in FY12 (see box below). FIAS-funded investment climate projects were recognized within the World Bank Group and by client countries for innovation and effectiveness in FY13, and also for fostering collaborative approaches drawing expertise from different parts of the Bank Group to offer clients holistic solutions to investment climate issues. Projects in Brazil, the Europe
and Central Asia Region, Haiti, Rwanda, and So Tom and Prncipe, were among winners of World Bank Group awards. The FIAS-funded portfolio delivered results to clients on an accelerated pace in FY13 in three strategic themes identied as crucial to the success of the ve-year strategy cycle:
n n n
Fostering enterprise creation and growth. Facilitating international trade and investment.
Unlocking sustainable investment opportunities in key industries, particularly agribusiness and tourism.
FY12 investment generated numbers were revised from $120 million to $108 million based on corrections acquired from investor surveys in the FIAS-funded project in Brazil.
22
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
these areas. In line with the FIAS FY1215 strategy, the continued trend is for scaling up work in the industryspecic sectors, stemming from the growing recognition that within individual countries, some of the most signicant barriers to growth reside in specic industries. Industry-specic work is up markedly to 19 percent of client-facing project expenditures, and it is on track to reach the target share of 30 to 40 percent by FY16. Activities related to enterprise creation and growth remain the biggest area of FIAS-supported work, accounting for 47 percent of expenditures on activities in the FIAS-funded portfolio. International trade and investment accounts for 30 percent of expenditures.
to an external evaluation, these reforms have yielded $8 million in private sector investments, the formalization of 1,000 new businesses and the establishment of about 2,400 new jobs within the past three years. Licensing, a major constraint to doing business in Burkina Faso, is on the path to being streamlined. In FY13, the program prepared an inventory of all business licenses in the country. More than 300 licenses were identied and recommendations were submitted to the government, which established a secretariat to lead the licensing reform process in January 2013. Saturnin Zoetany recently took advantage of Burkina Fasos new streamlined business procedures and registered his company, Zoetanyande Distributing, which manufactures and sells yogurt to an expanding market, now including several large hotels. I started my rst informal business when I was 12 years old, making yogurt and goat cheese in my aunts kitchen. I now employ six people and have a small farm where we raise goats and cattle to supply the milk for the yogurt, says Zoetany. Only 23 years old, he is quickly establishing himself as one of Burkina Fasos brightest young entrepreneurs. As a member of the Organization for the Harmonization of Business Law in Africa (OHADA), a unique organization that enacts common business laws for 16 member countries, Burkina Faso has recently endorsed a series of measures to signicantly reduce costs and increase access to credit, and to encourage the development of economic activities. During FY13, a number of training sessions for national stakeholders were held in Ouagadougou and Bobo-Dioulasso to raise awareness of the OHADA-inspired reforms. In Burundi, a country still recovering from civil war, regulatory changes offer entrepreneurs new opportunities to rebuild. With FIAS support, Burundi has pushed ahead with its reform agenda in FY13, making it easier for new rms to register and pay taxes, obtain building permits, and start a business. Burundi was recognized in Doing Business 2014 as a top reformer for the third year running, recording sustained reforms that are paving the way for economic growth and job creation. Since the Burundi Investment Climate Programs launch in November 2010, the pace of business registration has doubled, increasing from fewer than 674 new businesses registered per year in 2010 to 1,346 in 2012, a gure that includes the rst half of FY13. The sharp increase stems in part from the improved ease of registering a business, the 13-day process required in 2010 was cut to ve days as of FY13. The cost of registering a business plunged from 145.7 percent of per capita income in 2010 to 17 .5 percent in FY13, reecting a meaningful savings in a country where the average revenue per capita is $240 per year. FIAS funding also supported a reform in FY13 to speed up Burundis construction permit process. This has allowed small businesses to build the infrastructure they require to grow and thrive. The change was accomplished in part
OperatioNal Highlights
23
by lowering the cost of geotechnical studies needed for building permits, and by a newly created one-stop shop for construction permits. This reform has reduced the cost of construction permit registration by more than 70 percent since 2009. The Burundi Investment Climate Program is launching an agribusiness program component to open up privatesector opportunities in areas where growth potential exists and continuing to build on the strong reform momentum that has been established. FIAS-funded business regulation projects continue to focus on reforming business entry and business licensing. The work on construction regulations and business inspections has been scaled up in response to increased demand from clients. New areas in the effort to add value include product regulations (standard and certication), procurement payment delays, and environmental regulations. In addition, the program is focusing more on contributing to public goods and increasingly applying governance tools, such as beneciary feedback and disclosure of information. For example, Jordan and Tajikistan have beneted from innovative FIAS-funded regional projects that enable inspected businesses to provide the government with feedback via mobile phone application on the quality of inspections and to lodge complaints about abuses. Such beneciary
feedback mechanisms are being piloted to assess the extent to which they reduce arbitrary behavior and lead to improvements in the quality of government regulatory services. The business regulation work has also been key to creating a better enabling environment for businesses in fragile and conict-affected situations as evidenced by the work in Burundi and Timor-Leste (see box below).
24
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
OperatioNal Highlights
Increasing global trade volumes and the complexity of global supply chains continue to drive both domestic and foreign businesses to seek speedy and efcient dispute resolution mechanisms. The FIAS-supported program is providing assistance to countries in developing commercial mediation mechanisms for resolving business disputes, as well as arbitration regimes. Countries that have adopted the New York Convention on the Recognition and Enforcement of Arbitral Awards, for example, have provided a measure of comfort to foreign investors that basic contractual disputes will not be tied up in local courts. Technical assistance to the government of Burkina Faso helped establish the rst mediation law in West Africa. The law, which came into effect in February 2013, established a dispute resolution system, now in use, by removing civil and commercial cases from overburdened domestic courts. The increases are now settled through more exible and cost-efcient mediation procedures, which is expected to improve access to justice, particularly for micro and small businesses. Mediation work has helped fragile states like the Comoros, where in May 2013 the Board of Directors of the Court of Arbitration of the Comoros formally adopted new mediation regulations that comply entirely with international best practices. This new regime should also serve as a demonstration effect model for other SubSaharan Africa countries within the OHADA jurisdiction. Expected results include:
n n n n
A rise in the number of cases referred to mediation annually. Speedier resolution of contract disputes and debt recovery matters. Signicant reduction in administrative and litigation costs. Enhanced access to credit for smaller businesses.
25
A report, Doing Business in Hargeisa, focusing on a city in the conict-affected Somaliland region of Somalia, was one of three issued in FY13 showing how government regulations and their implementation can ease or constrain business activity; the others focused on cities in Russia and Italy. The Hargeisa report was the rst to provide this kind of data and analysis in Somaliland where, as in other conict-affected regions, the generation of jobs and government revenue is essential to establishing peace and sustaining growth. Smart and transparent regulations foster predictability and level the business playing eld, particularly for small and medium-size domestic rms. The report identied regulatory bottlenecks, highlighted opportunities for improvement, and presented international and regional good practices.
26
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
on options for harmonizing its foreign investment regime across economic sectors, strengthening investor protection clauses consistent with international investment agreements, and distinguishing between investment and tax policies to increase the governments ability to meet scal requirements while adjusting to the changing nature of FDI.
Helping Countries Develop and Implement Policies to Attract and Retain Investments
As a result of the strategic revamping of the investment policy product under FIAS, in FY13 a set of innovative areas of technical assistance covering the entire investment cycle has been developed to help governments attract, retain, and benet from private investment. The product has focused on developing advisory solutions in investment policy strategy, investment incentives, investment entry regime, investor protection, linkages and spillovers, and investment facilitation through regional integration. In each of these areas, toolkits providing step-by-step guidance on the rationale and process of reform are being developed to assist governments and practitioners undertaking such reform initiatives. In FY13, 24 investment incentive activities commenced in ve regions. In Bosnia and Herzegovina, for example, with the help of funding provided by Austria through FIAS, the government has taken a major step toward creating a level playing eld for investors and strengthening governance mechanisms related to incentives administration. The government agreed to publish and disclose the complete inventory of investment incentives to foster transparency and increase access to information. In Morocco, FIAS supported the development of a guide and framework, enabling the government to assess the anticipated costs and benets associated with investment incentives. This toolkit provided the foundation for the government to allocate scarce budget resources in the most effective way to achieve its desired development objectives. In Mongolia, FIAS funding was used to help the government remove legal and regulatory barriers to equal treatment for national and foreign investors and to strengthen investor protection measures. The FIAS co-funded project helped the government of Mongolia identify the underlying causes for the countrys worsening investment climate. Extensive discussions revealed investor concerns about a series of government actions during the year leading up to elections. In May 2012, in a politically charged environment, the government passed legislation perceived as being adverse to foreign direct investment (FDI). These developments, combined with issues surrounding the Oyu Tolgoi mine negotiations and the draft mining law, contributed to a 40-percent drop in FDI to Mongolia in less than a year. Under the FIAS-funded project, the World Bank Group advised the government
OperatioNal Highlights
from 3,993 to 4,686. In interviews, truckers indicate they expect the number of trips they can manage in a given time period to double. In FY13, FIAS funding continued to support regional trade logistics programs in South Asia, Latin America and the Caribbean, and East and West Africa. In a concerted effort to integrate developing countries into the global economy, trade logistics projects strengthened systems and services at and across borders, and realized economies of scale through reforms that further regional integration. With conancing support from FIAS, the South Asia Regional Integration in Trade and Investment Project, involving Bangladesh, Nepal, and Eastern India, is working towards improving the overall cargo movement efciency at key customs stations between these countries. The project was launched in August 2012 and quickly began delivering results. Nepal harmonized its customs working hours with those of India and China, prompting banks in the major customs ofces to follow suit and resulting in a 14-percent increase in the number of active trading days. Traders may now submit their personal account number, pay value-added tax, and provide rm registration and agent authorization letters once per year rather than for each consignment. Additional checkpoints between the border and Kathmandu have been eliminated, speeding cargo transit. In FY13, Nepal implemented ASYCUDA in 18 customs ofces, allowing traders to enter declaration data directly in the system. In the Southeastern Europe region, FIAS supported the Western Balkans Trade Logistics Project, with its mandate to facilitate cross-border trade. Albania Customs introduced an e-payment system which enabled traders to pay customs dues online, eliminating the need to submit a payment receipt and speeding the release by up to a day. The project supported negotiations between food authorities and customs in Kosovo and Albania toward their agreement to facilitate the transit of goods arriving at the port of Durres, Albania, and destined for Kosovo. In Bosnia and Herzegovina, the project extended the working hours of federal inspectors at the three busiest border crossings with Croatia to align them with the working hours of Croatia Customs, cutting the lead time for clearing plant goods by 7 .2 percent. These three border points handle 70 percent of Bosnia and Herzegovinas entire trade volume. In the FYR Macedonia, the project, in collaboration with the World Bank, started training inspection agency ofcials to apply a risk-based approach to import controls. This initiative is to be completed in the fall of 2013, resulting in fewer inspections and sampling, thus speeding up border clearance. In Serbia, the project held an Inland Waterways Conference attended by stakeholders from government and the private sector to discuss streamlining clearance procedures along the Danube and Sava Rivers. One recommendation, to mandate the use of the River Information Services (RIS) system, which can be used for pre-arrival information, has already been implemented by the government.
28
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
supported Bank Group teams helped introduce a simplied tax regime in BiharIndias poorest statethat has helped relieve administrative burdens, reducing tax compliance costs by 31 percent and generating $7 million annually in private sector savings. Straightforward procedures for small businesses have helped increase formalization and led to a 24-percent increase in the tax base. In addition, FIAS-supported teams helped implement an electronic tax payment and ling system for larger businesses. Electronic tax ling is now commonplace in Bihar: the number of businesses that led online grew from 146 in 2009 to 78,000 by March 31, 2013. Tax revenues in the state increased by more than 300 percent within ve years from approximately $678 million in 2008 to $3 billion in 2013. Risk-based inspection is another instrument that helps reduce compliance costs and uncertainty for taxpayers. The risk-based approach for planning and conducting tax inspections, which achieved a reform in FY12 in the Kyrgyz Republic, is being replicated in Tajikistan under the Central Asia Tax project. In 2013, a risk-based approach was fully incorporated into the audit module of the new Integrated Tax Administration System, developed with Asian Development Bank assistance. Region-wide, close to 13,000 rms beneted from reformed and streamlined inspection requirements. The Kyrgyz Republic reform is helping to improve the selection process for planned audits and internal administration for audits resulting in a signicant 50 percent reduction in the number and duration of inspections and a rise in tax revenue per audit.
By the end of 2012, the risk-based audit system was used in 17 of 64 local tax ofces, and 63 percent of planned audits were selected through the new system.
OperatioNal Highlights
$9.5 million in garments sector investment in Haiti, a project selected for a World Bank Group Vice Presidential Unit Team Award. $305.8 million in a range of light manufacturing and information technology sectors in Brazil a fully client-funded project that beneted from extensive FIAS-supported advisory services and created 2,728 jobs in the northern frontier region and an additional 1,347 elsewhere in Brazil.
29
$9 million generated in the agribusiness sector by investor outreach and investment climate reforms in Rwanda. $4.6 million in energy efciency investments by four companies generated by a low-carbon industry initiative in Bangladesh.
These totals do not include $92 million of investment generated in a project in Rajasthan, India, not directly funded by FIAS but which beneted from substantial advisory services delivered by FIAS-supported teams (see box, p. 32).
regulation and warehouse receipts, inspections regimes, and investment promotion, expertise supported by FIAS funding has established a growing reputation with client countries and within the Bank Group. Development of follow-on reform programs in several African countries has been enhanced by leveraging the diagnostic work of bilateral agencies, such as the U.S. Agency for International Developments (USAID) Agribusiness Commercial, Legal and Institutional Reform, and the agribusiness indicator work undertaken by the World Banks Agriculture and Rural Development Department. In developing these reform programs, much of this work builds on wider World Bank Group expertise and policy platforms. Project development work in Cte dIvoire is a prime example (see box below.) Work in South Asia ramped up signicantly in FY13 with pilot projects launched in Bangladesh and India. In the Indian state of Odisha, investments are increasing but generally centered on extractive industries. This has had distorted distributive effects, with investments concentrated in mineral-rich and environmentally fragile regions. The government of Odisha has recognized this, assigned priority to diversifying its investment base, and begun work with IFC to launch the Odisha Inclusive Growth Partnership. The project focuses on the agribusiness and tourism sectors and aims at catalyzing new private investments in non-natural resource-based sectors and unlocking compliance cost savings through regulatory streamlining aimed at the agribusiness sector. The most important theme in Eastern Europe and Central Asia is food safety reform, as in Moldova, where the government has aligned its food safety regulations with those of the European Union and streamlined regulatory oversight. In Moldova, FIAS funding has been used to support an investment climate reform project aimed at making the agribusiness sector more investor-friendly and its exports more competitive in European Union markets. Improving the food safety legislation and other agribusiness-related regulations was among the conditions
30
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
for a World Bank Development Policy Loan concluded in November 2012. The joint IFC-World Bank effort helped ensure the inclusion of key triggers intended to improve Moldovas investment climate and contributed to the adoption of a series of reforms supporting the development of agribusiness. The reforms helped simplify Moldovas agribusiness regulations and align them with EU standards. FIAS funding was also used to help strengthen Armenias competitiveness in agribusiness under the Armenia Investment Climate Reform Project. The project supports the government in promoting private sector growth by creating business-friendly regulations and administrative processes. For example, the governments new electronic tax system is making tax ling easier for businesses like Euroterm, Armenias leading food and drink producer. Previously, Euroterm led its taxes and communicated with government ofcials through postal services or faceto-face interaction with ofcials. Under the new system, our accounting department saves notable time, said Vahe Ghazaryan, general manager of Euroterm. He said Euroterm staff is able to focus on tasks such as improving logistics to make the company more efcient. Euroterm, backed by a $2.5 million loan from IFC, is planning to grow, employ more workers, encourage farmers to boost production, and explore foreign markets. To help companies more quickly access new markets, the project has advised the government on legislation to simplify export procedures. In addition, the FIAS-funded Food Safety Improvement Project is helping Euroterm and other agribusiness rms adopt an international food safety management systemone of the preconditions for exporting to demanding foreign markets. According to Karine Minasyan, Deputy Minister of Economy, the advice from the project helps use the governments resources more efciently, enables businesses to reduce costs needed to comply with the regulations, and contributes to an improved investment climate that can attract more investments. Improving key economic sectors in fragile states has been an important aspect of the FIAS-supported industry work. In Cte dIvoire, the team has employed a collaborative approach working with different parts of the Bank Group to design a client solution (see box, p. 30). In Bosnia and Herzegovina, signicant progress was made on agribusiness in FY13 with the government adopting the secondary food safety legislation needed for an effective implementation of the food safety regulations aligned with the European Union model. The effort was funded by lead donor SIDA (Swedish International Development Cooperation Agency) with nancial support from FIAS and the government of Bosnia and Herzegovina. It provided the government with advice on the drafting and development of regulations aimed at boosting exports by better integrating food processing, inspection and labeling systems with those of the EU. The project has resulted in adoption of the following regulations:
Four implementing rules on dairy, microbiological sampling and production and processing of poultry meat adopted by the governments veterinary ofce and food safety agency. Ofcial adoption of the rulebook on labeling a key part of the national hygiene package of regulations designed to help local companies export to EU markets beginning in 2014.
FIAS support has led the way on agribusiness diagnostics and product development. Competitiveness assessments were done for three agribusiness value chains in the dairy, meat, and fruit and vegetables sectors. Most competitive value chains (dairy and fruits and vegetables) have been approved by the Bosnia and Herzegovina and Republika Srpska governments. Work has been initiated on strategies for increasing competitiveness and attracting investments. In parallel, FIAS funding has been used to develop a set of recommendations for streamlining of export-import procedures for key trade sectors. FIAS support is also helping the client governments adopt more than 60 streamlined procedures at the national and subnational levels, yielding a reduction in processing time and associated costs (over 19,000 days in total saved for all businesses exporting or importing, based on 2012 actual frequency, representing private sector cost savings estimated to be $830,000 annually in reduced waiting time).
OperatioNal Highlights
31
$109 to $27 and travelers can apply without mailing in their passports for processing. Prior to the implementation of the online visa portal, the tourist visas issued by So Tom and Prncipe ranged from 4,000 to 7 ,500 per year. In only its rst year, the online system is helping to boost the tourism industry, drawing more than 7 ,000 new tourist visa applications in addition to traditional visa applications, which continue to be led at about the same rate. Helping fragile states generate greater revenues by developing a thriving tourism industry has also been a focus of FIAS support. In some countries, such as Nepal, where investment in the tourism sector is lagging and tourism expenditure per capita is in decline, merely maintaining the status quo is a challenge. A FIAS-supported project launched in FY13 was designed to streamline procedures and regulations that constrain tourism growth, build investment in a series of key subsectors and, at the same time, build standards and thus competitiveness in tourism services such as air safety, food safety, and trekking activities. A capacity-building event involving key stakeholders on aviation safety resulted in a safety action plan, and a concept note on offering concessions at national parks was submitted to the government. The project has generated encouraging early results on the investment front; a number of potential tourism-related investment projects have been identied and are now being assessed for further support.
32
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
and Pernambuco, creating some 2,700 jobs, or more than two-thirds of the jobs the project has generated nationwide. In Para, the project generated $145 million in investment (included in the above total) related to agroindustry, particularly fruticulture, packaging and other supplies for concentrated fruit drinks and wood recycling bricks. In Pernambuco, $15 million (included above) of new investment was generated in equipment manufacturing projects focused particularly in the renewable energy eld, such as wind component manufacturing.
and opportunities are maximized through these networks. The Climate Efcient Industries initiative has initially focused on light manufacturing, but it will expand its offering in construction, agribusiness, and low-carbon cities initiatives in the World Bank. As an example, in Bangladesh, IFC assisted the government in adopting low-carbon zone guidelines for its export processing zones (see box below).
OperatioNal Highlights
33
4
34
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
GREEN GROWTH
GENDER
TRANSPARENCY
PUBLIC-PRIVATE DIALOGUE
35
an audit of business licenses, the program helped launch a business licensing information portal (http:// www.businesslicenses.gov.rw/index.php) to reduce the administrative and regulatory burdens associated with operating a business. It serves as the authoritative online source for entrepreneurs seeking information on licenses and permits required for operating their businesses. The web application developed in Rwanda is also serving as a model elsewhere. It has been deployed in four more countries in Africa and eight others worldwide, with more roll-outs expected. Targeting micro and small enterprises, the program also supported the development of a new mobile application currently in pilot and expected to be ofcially launched in the rst half of FY14. The application enables online ling and tax payment and will save time and money for entrepreneurs, particularly those operating in remote locations. This innovation builds on a successful tax simplication program that streamlined most of the standard administrative procedures faced by taxpayers, thus contributing to a fourfold increase in tax compliance between 2009 and 2012.
36
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
In FY13, FIAS-funded expertise contributed to a more proactive engagement in this area by supporting technical assistance projects underway in Bangladesh, China, Colombia, Indonesia, the Philippines, and Vietnam. International partners such as the Global Green Building Council also play a critical role in supporting these efforts. In April 2013, the rst green building code supported by IFC was implemented in the province of Jakarta, Indonesia, a year after passage of the source legislation crafted with the help of investment climate teams funded by FIAS. Experience in construction regulation and enforcement reform has proved a decisive advantage in FIAS support of projects to help design and implement energy and water efciency components of new building codes. Green buildings can save 20 to 40 percent in operating costs through a range of proven insulation solutions. Client countries can achieve $3.2 billion in cost savings by 2030 derived from energy savings of 25 million megawatt hours. This will translate into 19 million metric tons of avoided carbon dioxide emissions per year, roughly equivalent to the annual emissions of 4 million cars. FIAS-supported expertise also contributed to the launch of the new EDGE Market Transformation Program, an IFC-wide corporate initiative endorsed in April 2013 which builds on the considerable growth of IFCs investment portfolio last year, with total commitments close to $500 million. The objective of the program is to get 20 percent of new buildings in target markets to meet green building standards within seven years from the start of local market interventions. Initial estimates indicate that by 2020 the program could cumulatively catalyze $309 billion in bank nancing and direct investment in green buildings and abate annual emissions equivalent to taking about one million cars off the road. The EDGE program pulls resources from multiple elds of in-house World Bank Group expertise. Specically, FIAS-supported activities will continue to assist regional IFC teams in developing effective green building codes and green building compliance instruments with a focus on good practice enforcement such as promoting private third-party checks and private inspection systems. Moving forward, FIAS-supported assistance will primarily help global teams designing and initiating new country programs with an initial focus on large and emerging economies such as Brazil, China, and India. In FY13 FIAS also continued to support green solutions in its industry-focused work, in particular in the area of industrial zones (see box, p. 33).
economic development. Through several innovative pilot projects, FIAS funding has supported an increased focus on reforms in FY13 that address constraints to womens economic empowerment. The years key achievement in the gender arena was the enactment of reforms based on indicators in the joint World Bank-IFC Women, Business and the Law report. Implementing such reforms is a key theme of the FIAS-supported gender program and is expected to drive investment climate gender work going forward. FIAS support enabled progress in understanding and measuring regulatory discretion that can negatively affect women entrepreneurs, such as laws that bar women access to or membership in business institutions and associations. The investment climate gender program seeks to explore and better understand instances in which laws and regulations that appear gender neutral sometimes constrain women seeking entrepreneurship opportunities due to the discriminatory implementation of rules.
Core Thematic Areas iN INVestmeNt Climate INterVeNtioNs
FIAS funding has been used to help identify legal barriers to womens economic participation in Cte dIvoire and recommend specic amendments to legislation. The government enacted reforms to its family law in early 2013, removing the requirement of a husbands authorization for his wifes employment, choice of residence, and receipt of a passport. Reforms also made married women eligible for income tax deductions based on head-of-household status, adjusting a married womans net income to her husbands. By lowering barriers and providing incentives to women in the workplace, these measures are expected to enhance womens physical and economic mobility. A study on the economic impact of these reforms was launched and the team continues to assist the government in implementing the enacted reforms through efforts to increase public awareness. In many countries, opening up sectors with growth potential does not automatically translate into jobs, decent wages, or better working conditions for women. In Haiti, FIAS is supporting the development of an integrated economic zones regime, which has the potential to generate over 380,000 jobs in the next two decades. Integrated economic zones are instrumental to fully realizing the high potential of Haitis textile and apparel industry, which in 2012 employed more than 30,000 Haitianstwo-thirds of whom were women. Thus far, the project has supported the creation of new employment opportunities for over 2,000 workers while maintaining the same gender ratio. The garment sector, and economic zones in particular, often offer an entry point for women into formal employment. By improving working conditions and creating sustainable economic opportunities for women, the zones present a unique way to economically empower women. The program has the opportunity to introduce gender-balanced employment policies and good practices in Haitian zones and industrial parks. These measures would include appropriate regulations, gender-sensitive professional development
37
and disclosure of key indicators. The project is supporting government agencies in three areas: procurement payment delays, VAT reimbursement delays, and construction permits. It aims to strengthen government accountability and eventually provide better implementation of regulations. In Nepal and Guinea, investment climate teams are working with government agencies on the publication of reform outcome data as another element in providing transparency into the followthrough on implementing investment climate reforms. To help clients assess the degree of transparency in investment climate-related policies, regulations, and administrative practices, FIAS funding is helping develop transparency check-lists for relevant investment climate products. In FY13, work has begun on two such check-lists: business regulation, covering items such as entry into business and construction permitting as well as investment policy, including policy incentives for investment. First drafts of these check-lists have been completed and those on construction and investment incentives have been piloted in Morocco to test their relevance. A literature review of the impact of transparency on the investment climate is also underway and will serve as the basis for focusing on the most relevant products. FIAS is also supporting the development of tools to increase transparency and disclosure requirements in key areas of the investment climate.
Promoting transparency is important for establishing level playing elds to promote economic growth, avoid corruption and inefciency, and reward the best business performers. Strengthening economic governance and transparency is a key element of the current FIAS strategy. In FY13, the frontiers of FIAS-supported transparency work expanded in three directions:
n
Enhancing accountability and closing implementation gaps through business feedback on actual reform experiences. Reducing arbitrary and undue discrimination by government ofcials in the application of policies, laws, and regulations.
Applying information and communication technologies as a transparency-enhancing tool. Implementation gaps occur when there is an uneven enforcement of laws and regulations intended to encourage transparency. Investment climate teams are helping client governments use the power of information to avoid these situations and incentivize accountability. Feedback mechanisms being piloted in Central Asia, in the Kyrgyz Republic and Tajikistan, will generate useful information from businesses on their experience with inspection reforms on the ground. Government agencies in these countries have agreed on which inspection reforms to use in the feedback exercises, and which jurisdictions to cover. In the Kyrgyz Republic, the rst round of pilots focuses on ecology-related inspections in the capital city of Bishkek. The survey ndings will be discussed in meetings involving both the reforming agency and the affected businesses, leading to agreement on where implementation gaps remain and what remedial actions need to be taken. A second round of surveys will validate the results of the remedial actions. It is expected that businesses and government agencies alike will nd value in these exercises, and lessons learned can be integrated into government policies. An investment climate project in Morocco is helping several government agencies improve the measurement of regulatory performance and increase transparency 38
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
Nepals efforts to move from conict and poverty to peace and prosperity. To date 55 recommendations by the Nepal Business Forum have been implemented, yielding substantial benets for private sector development by promoting investments, facilitating trade, improving market opportunities, and establishing a social security fund, among other measures. Follow-on work at the industry level in Nepal, funded by FIAS, is leveraging this platform to improve the competitiveness and investment levels in the tourism sector. Three Investment Climate Business Line reforms in the tax, export credit, and hydropower sectors have generated $6 million in private sector savings. The results of this PPD project are informing work funded by FIAS in other countries and regions that leverages successes achieved in Nepal. The drive for innovation has pushed PPD to venture into sector-specic applications that can provide an integrated response to factors constraining sector growth and improve the pace of sector reform. Industrycentered PPD can be particularly helpful in improving competitiveness and provide a highly valued platform for collaboration along the supply chain and across governments, businesses, and communities. Sector PPD can also be implemented at a subnational or regional
level. PPD principles have been rened and adapted to facilitate business reforms which are sector-specic, such as agribusiness in Cte dIvoire around the cashew nut supply chain, extractive industries in Guinea, infrastructure in Myanmar, and trade and logistics in Pakistan. In the case of extractive industries for example, areas that could benet from PPD interventions include: informing local communities about mining projects, enhancing transparency around contractual agreements, establishing the relationship between large investors and local suppliers, identifying local content and training needs, improving communication between stakeholders, fostering dialogue around security issues, and projects are under development. In the Philippines, agribusiness is a critical sector of the countrys economy. It accounts for 18 percent of GDP and employs over 11.5 million people accounting for almost 35 percent of the workforce. While critical to livelihoods and poverty alleviation, the sector is underperforming. The Bank Group uses public-private dialogue as a tool and platform to advance a structured stakeholders dialogue, help dene and advocate for policy and regulatory-
39
related reform, and ultimately contribute to broadening the private sector base for agribusiness development. It is expected the project will contribute to $7 million in private sector savings from trade logistics reform and $9 million in investments generated from shipping and logistics reform. Taking into consideration the need to be more inclusive and integrate a broad-based approach to project design and stakeholder dialogue, there are also shortterm, nimble applications of PPD to deliver project objectives and goals. For example, in Haiti, the project to set up and facilitate the Leadership Group and the Extended Consultative Group aims to accelerate the drafting, discussion, buy-in, and adoption of a law on economic zones. These PPD interventions are designed to strengthen the private sector, facilitate dialogue among private stakeholders and with the public sector, and increase outreach to civil society and disengaged communities. Responding to the needs of changing economic and business environments, PPD mechanisms range from large national-level platforms anchored at the highest level, to sector-specic or subnational platforms, to an informal platform, all of which seek to convene stakeholders in a trusted environment with the ultimate goal of fostering private sector development and creating jobs.
An independent evaluation of the business operations product was completed in FY13 and has been shared widely. The ndings of the evaluation have been fed back into FIAS operations, contributing to the development of the strategy for the second generation of business regulation service offerings. Evaluations of the business taxation, indicator-based reform advisory, and industryspecic agribusiness products are planned for FY1415. Product evaluations are managed and coordinated together with the Corporate Development Impact Department of IFC. Preparations for the mid-term FIAS FY1216 strategy cycle evaluation are also under way. FIAS donors will be consulted as to the scope of the evaluation, and it is expected that the ndings and results of the evaluation will be shared with donors at the 2014 Annual Meeting of the FIAS Consultative Committee of Donors.
Measuring Impact
Deepening our understanding of the impacts of investment climate reforms is a major FIAS priority. The latest strategy therefore called for a scaling up of efforts to learn from past investment climate activities and feed this learning back into the design and implementation of new projects. To carry out this objective, FIAS established the Investment Climate Impact Measurement Work Program, which operates with continued support from USAID and the United Kingdoms Department for International Development (DFID). The program aims to increase the cost-effectiveness of investment climate reform advisory projects by developing improved measurement tools and mainstreaming evidence-based operational practices. Clients and donors are also increasingly interested in rigorously assessing the impact of trade and investment reforms and in identifying the best incentives to promote formalization, market linkages, and rm growth. Responding to this interest, in FY13 the Impact Program launched a systematic impact evaluation practice (see box, p. 41). Projects in the portfolio are designed not only to answer questions about overall impacts of business registration interventions on informality and rm performance, but also measure and compare the impacts of interventions packaged with a common goal. This latter contribution is aligned to the World Bank Group science of delivery agenda, and will be fundamental to shaping the next generation of FIAS-supported investment climate products. The Bank Group and registration agencies in Benin, Malawi, and Nepal agreed to assess the impacts of alternative packages of business entry reforms aimed at promoting sustainable business growth through various incentives that reduce formalization costs. These include access to nance and tax ling support, and improving access to markets through network connections. These reform alternatives are transformative; they go beyond simply increasing registration rates to focus on long-term
New Monitoring and Evaluation Framework Better Reects Investment Climate Achievements
FIAS support in FY13 delivered signicant economic impact in client countries, and that impact can now be measured and veried much more thoroughly thanks to a variety of industry projects that received FIAS support. FIAS is supporting innovative ways to capture data and assess impactbuilt into project designthat will add maximum value in lessons learned. In FY13, FIAS successfully rolled out an enhanced monitoring and evaluation (M&E) framework, developed and implemented with a high level of engagement and coordination with the regional operations staff, who were also trained to use the new system. The framework focuses on using a practical calculation methodology and ensuring consistency in its application. It better reects the achievements expected from projects through improved guidance on indicators and reforms, the addition of relevant reform topics, internal tools for documenting reforms, and measures for tracking investment generation and private sector savings in trade and compliance costs. Tracking indicators for reach and compliance cost savings have not yet been fully adopted due to difculties in collecting data in some regions for some types of projects. It is expected this will improve in FY14, and guidance and methodologies will be adjusted as necessary.
40
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
The impact program is signicantly changing current internal practices and slowly shifting the organizational culture towards more evidence-based decision making. For instance, teams in Afghanistan, Kosovo, and Nepal are piloting a sustainability diagnostic model developed in FY13 with FIAS support. This tool is used to assess the degree to which projects include key elements linked to reform sustainability. The value-for-money component under the program will help establish cost benchmarks and develop guidelines that are intended to improve value for money and the decision-making process. This will shape the way project budgets are prepared, enabling the comparison of key outcome costs in relation to the overall project impact. For increased global access, the Impact Program created an online repository (www. wbginvestmentclimate.org/results/impact-program.cfm) to share information, including literature reviews and impact evaluation methodology notes, and sustain the momentum for action amongst the impact community of practice it has established. In mid-FY13, the Development Impact Evaluation Initiative, in partnership with the Investment Climate Department, organized a ve-day workshop in Paris on Innovations in Investment Climate Reforms under the impact evaluation practice. The workshop aimed at establishing a systemic impact evaluation practice for investment climate reforms. About 90 participants were grouped into nine country-specic project teams designed to facilitate a process of discussion, agree on the policy questions, and develop an initial design for the impact evaluation of their interventions. Each team included country clients, project representatives, and impact evaluation and sector experts providing support, with the objective of enhancing the technical capacity and ability of participants to design and implement impact evaluations.
Core Thematic Areas iN INVestmeNt Climate INterVeNtioNs
integration among rms, registries, and other related agencies and institutions such as tax authorities and banks. Under the trade and investment policy impact evaluations, agreement was reached with agencies from four countries in Southeastern Europe to test the effects of incentives and risk management solutions on promoting transparency, improving border performance, reducing delays, and ultimately increasing local and international trade and investment.
41
5
42
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
1,806
200+ 23
key publications, including toolkits, reports, technical papers, notes, and journal articles
senior investment promotion and policy officials from 70+ countries attending events on Global Investment Promotion Best Practices
43
Leveraging Knowledge
FIAS support for investment climate projects is a unifying force in the World Bank Group, encouraging and thriving on collaboration, the sharing of expertise and learning among partners, donors, and public and private sector clients. Individual country projects in specific topic areas can deliver substantial positive impact, benefiting thousands of businesses and entrepreneurs. But a significant share of the contribution FIAS makes toward growth and poverty eradication in developing countries stems from the cumulative impact of projects and knowledge dissemination.
In FY13, FIAS-funded efforts to deliver comprehensive investment climate solutions to clients, not only through individual projects and reforms but also through knowledge sharing and learning programs, were further intensied. A key part of this effort entails bringing together different parts of the World Bank Group, combining the resources and expertise of teams in the investment climate space across IFC, the World Bank, and MIGA. In FY13 FIAS-funded programs deepened the collaboration between IFC, World Bank, and MIGA teams by partnering in a signicant manner with more than 45 Bank Group units. This collaboration helped to align strategies and create synergies in the investment climate work. This unied approach to investment climate reform helps provide a stronger value proposition and builds strong client commitment when governments receive an end-to-end development solution through a range of nancial and advisory instruments. Lessons from recent collaborationsuch as the essential role of public-private dialogue in the reform processare helping improve how World Bank Group teams work together, design, and deliver their projects.
insolvency regime and improve implementation of the new law. Rules and regulations relating to insolvency practitioner registration and a code of conduct were published. As a result, 31 insolvency practitioners have registered and are subject to the code of conduct. To encourage the business rescue of nancially distressed but viable businesses, an out-of-court framework was developed, with the endorsement of the Mauritius Bankers Association and the Bank of Mauritius, and published in January 2013. The World Bank and IFC also helped improve the business environment in Afghanistan. Since September 2011, FIAS funding has been used to support the Afghan government in facilitating business entry, streamlining the construction permitting process, and strengthening minority investor protections. Funded by the World Banks New Market Development project, Afghanistans Private Sector Development Directorate led the dialogue with government agencies to ensure successful implementation of reforms with strong results. In FY13, procedures for business registration and construction permitting were streamlined; license fees for new small and medium enterprises were also halved. FIAS funding supports not only the passage of reforms by clients but also effective implementation. Knowledge dissemination can be crucial, as in Morocco, where private sector representatives have raised concerns that the impacts of the reforms are not yet evident. A joint World Bank and IFC team partnered with the National Committee for the Business Environment, a public-private entity in Morocco that has coordinated a number of business reforms, to help improve efciency, transparency, and traceability of services in these three pilot areas: construction permit delivery, value added tax refunds, and public sector payments. The team is working with relevant agencies to develop performance indicators and provide recommendations to increase transparency through the use of public-private dialogue. IFC and the World Bank are designing solutions to improve Ugandas business environment, bringing different resources and skill sets that deliver timely and
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
effective support. Drawing from FIAS-supported reform expertise in the area of business regulation and ICT, a World Bank and IFC initiative is simplifying business licensing in Uganda and developing the countrys capability to move licensing processes to an online licensing information portal. Collaboration played a major role in the Comoros, where IFC teams worked closely with counterparts from MIGA. FIAS-supported investment climate teams directly advised the government on the ratication of the MIGA Convention, which had been signed two years earlier. Together with MIGA, the team provided technical information on various aspects of the membership process, functioned as an intermediary between the government and MIGA, and supported MIGA colleagues during a joint IFC-MIGA mission to the Comoros. This allowed MIGA to move forward with its engagement in the Comoros, furthering the nations investment attractiveness by providing political risk insurance to investors and lenders against non-commercial risks. In March 2013, the Comoros ofcially became MIGAs 179th member country.
reports for the individual participating investment promotion intermediaries. More directly, clients showed improvements in GIPB performance between 2009 and 2012 after receiving technical assistance under FIASsupported industry-specic projects. Wider collaboration with external partnersincluding the Asia Pacic Economic Cooperation organization, the European Commission, the Caribbean Association of Investment Promotion Agencies, and the governments of Spain, Austria, Turkey, and the Sultanate of Omanhas resulted in the publication of two special GIPB regional reports in FY13. One covers the Africa, Caribbean, and Pacic regions. The other covers the Middle East and North Africa region. A series of regional GIPB conferences and training events were attended by over 200 senior investment promotion and policy ofcials from more than 70 countries. In FY13, some 25 detailed planning sessions were conducted with individual investment agencies around the world. The sessions led to the adoption of detailed action plans designed to improve the level and quality of investor services offered by investment promotion intermediaries. The GIPB 2012 report also received considerable government and media attention, with over 220 media citations during the year. Knowledge sharing and learning has also been a feature of the FY13 work program. An online agribusiness primer was launched to provide training for Bank Group staff. The online training brings together videos and presentations of leading global experts on retail transformation in food. Other topics covered include seeds and fertilizer markets, warehouse receipts, and the globalization of food. The program unfolds within a strategic framework for staff to build knowledge around the Bank Groups agribusiness objectives. Over 150 staff accessed the training materials in the rst six weeks after the launch. In FY13, a series of knowledge and learning events engaged practitioners, government and private sector clients, donor partners, and other stakeholders. FIAS funding was used to support 43 investment climate learning and knowledge-sharing events in 10 countries that attracted 1,806 staff, clients, and other participants. These seminars, including deep dive learning events and client peer-to-peer workshops (see box, p. 47), earned an average quality rating of 4.57 of 5, based on participant evaluations.
45
Strong reputation among internal and external partners: FIAS-supported activities gained more prominence within the World Bank Group in FY13, earning key spots in the IFC and World Bank intranets and participating in corporate newsletters, external publications, and other products (such as the IFC Advisory Services Stories of Impact series). Communications efforts around FIAS-supported activities encouraged conversations on investment climate among World Bank Group staff and management, development and donor partners, and clients.
46
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
Drawing from Experience: Peer-to-Peer Learning Events Inform and Encourage Reforms
Thought leadership was a major component of FIAS-supported activities in FY13. From a forum that convened over 100 competition policy experts in Warsaw, Poland, to the range of training services offered for stakeholders and development practitioners alike, such events complemented FIAS-supported advisory work for client governments and encouraged bilateral cooperation in improving business environments. Encouraging the establishment of regional networks of reforming countries has been a central theme of the FIAS-supported indicator based advisory work. Regional representatives and global experts came together in Panama for a high-level, peer-to-peer learning event on how to improve the investment climate in Latin American and the Caribbean. More than 100 participants from 15 countries attended the two-day forum in June 2013, co-hosted by FIAS-supported project teams and Panamas Ministry of the Presidency. The forum helped to encourage collaboration and bring together a network of reformers across the region. Participants embraced the opportunity to share experiences. Chiles success in business entry reforms drew interest from representatives of Honduras and Nicaragua, while delegations from El Salvador, Grenada, and Jamaica were among the participants interested in learning from Panama on how to facilitate trade. FIAS-supported teams are facilitating follow-up discussions between countries and similar peer-to-peer learning events will be integrated into ongoing reforms for client countries. A similar network of reformers hosted in Johannesburg in April 2013 by the government of South Africa, focused on regulatory reforms in Sub-Saharan Africa. The forum, the fourth in a series of peer-to-peer learning events, provided 180 delegates from 14 countries an opportunity to leverage regional synergies to inform and improve their reform strategies. In Nairobi, Kenya, more than 70 delegates representing from some 20 jurisdictions across the African continent came together in September 2012 for a peer-to-peer learning event on insolvency reforms. Participating policymakers and insolvency practitioners discussed challenges such as outdated bankruptcy laws and the lack of a business rescue culture, that are hindering the development of insolvency regimes in Africa. Knowledge sharing around the adoption of technology solutions was the focus of a peer-to-peer learning event in Zambia on an upgrade to ASYCUDA, an automated system for customs data, and a workshop on e-government services in Georgia. FIAS-supported project teams partnered with the Zambian Revenue Authority and the United Nations Conference on Trade and Development to bring together over 50 development and government practitioners in Zambia to share lessons learned from trade facilitation reforms stemming from the ASYCUDA upgrade. In Georgia, a workshop jointly hosted with the Georgian Ministry of Justice gathered over 100 representatives from over 20 countries to discuss ways governments can use online services to reduce the cost of doing business, increase transparency, and improve access, particularly for small and medium-size rms. In December 2012, a one-week study tour to Thailand and the Lao Peoples Democratic Republic, attended by ofcials from South Asia, sought to share lessons and practices in trade competitiveness, transport, and logistics services, and to showcase the benets of economic cooperation. Organized jointly by World Bank and IFC teams working on trade and transport facilitation in South Asia and East Asia, the tour highlighted the importance of regional integration for access to global markets, particularly for the poorer landlocked countries. The tour brought 22 transport, trade, and customs ofcials from Bangladesh, India, Nepal, and Pakistan to ports, border posts, and logistics infrastructure facilities. Customs and economic development authorities from Lao PDR and Thailand briefed the participants on the countries services and systems. The tour also included participants from the private sector, a critical constituency for improved trade competitiveness. The tour exemplied the World Bank Groups emphasis on collaboration across organizational, sectoral, and regional lines. Participants evaluated the tour favorably, noting the value of an opportunity to form professional relationships and the potential for increased cross-country knowledge exchange.
47
48
FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs 2013 ANNUaL REVIEW >
Electricity Reforms: What Some Countries Did Right and Others Can Do Better, based on a review including the experiences of developing countries indicates the standard reform model when correctly implementedwith competition, unbundling, and effective regulationcan lead to performance gains. Small-Scale Generation: Issues in Standardizing Power Purchase Agreements discusses key considerations in designing a standardized agreement for a small power producer program. Feed-in Tariffs or Auctions? Procuring Renewable Energy Supply in South Africa looks at the countrys recent experience, rst exploring feed-in tariffs and then turning to competitive tenders, resulting in encouraging initial outcomes. Nuts & Bolts: Technical Guidance for Reform Implementation series (published by the Investment Climate Department) Implementing a Shared Inspection Management System: Insights from Recent International Experience, summarizes the experiences and provides research insights from 12 jurisdictions and helps identify emerging best practices in the development of shared inspections management capabilities. Introducing a Risk-based Approach: How to Build a Risk Matrix to Classify Enterprises or Activities offers guidance for practitioners developing risk matrices to classify establishments and adapt business regulations accordingly, which supports an effective, efcient use of resources and minimizes the administrative burden. SmartLessons (published by IFC) Of nine notes published on investment climate topics in FY13, two authored or co-authored by Investment Climate Department staff were rst prize winners in World Bank Group competitions: It Started in Ghana: Implementing Africas rst collateral registry by Alice Ouedraogo, Isabel Caruana, Elsa Rodriguez, Susann Tischendorf (1st prize winner) When the Wind Blows: Shifting Strategies without Breaking the Cradle by Cecile Fruman (1st prize winner)
Journal articles
Commonwealth Business Council Trade & Investment Report 2013: Transfer Pricing for Developing Countries FDI Magazine (December 2012): Investment Promotion Agencies Must Take Off Their Blinkers Handshake (IFC quarterly journal, July 2012): The 4 Cs of Trade Logistics Handshake (IFC quarterly journal, April 2013): Open for Business: A favorable investment climate speeds post-conict recovery
49
6
50
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
93%
of expenditures are project related
$27
million
received in total FY13 contributions from FIAS donors, clients, and the World Bank Group
million
$16
received from donors, 61 percent of all contributions 51
Shared Investment
FIAS-supported activities covered in the FIAS 2013 Annual Review are cofinanced via a set of FIAS trust funds managed by the World Bank Groups Investment Climate Department. In addition to FIAS trust funds, the Investment Climate Department manages additional funds received from the World Bank and IFC for operational and administrative tasks related to FIAS as well as the departments anchor or backbone function in the investment climate space (for example, as backbone and anchor for IFCs Investment Climate Business Line and the World Bank FPD Investment Climate Global Practice), and administers donor funds for activities managed outside the scope of FIAS (such as the policy and advisory component of IFCs Health in Africa initiative and work related to policies and regulations affecting private participation in infrastructure).
The Investment Climate Department also hosts the Water Resources Group, funded by IFC and other public and private partners to help governments set up multi-stakeholder platforms to address water resource issues; this mandate is also outside the scope of the FIAS program and not covered in this report, as is the departments mandate to host IFCs coordination team for fragile and conict-affected situations. The nancial results reported in this section only cover the funds managed by the Investment Climate Department under the FIAS trust fund structure as well as supplemental funds earmarked for the implementation of the FIAS strategy. The Investment Climate Department follows IFCs standard accounting policies and procedures, as noted below.9 FIAS nancial reports use cash-based reporting in alignment with the quarterly nancial reports on IFCs donor-funded operations.
Luxembourg (C) Multilateral Investment Guarantee Agency (C) The Netherlands (C) Norway Sweden (C) Switzerland (C) Trademark East Africa United Kingdom (C) United States
Most donors who supported FIAS during the FY0811 cycle also provided consent to roll over the unused portions (fund balances) of their FY0811 contributions to the FY1216 strategy cycle. In addition to the core donors listed above, roll-over consents were provided by Australia and France.
n Contributions
Funding
New FIAS-related contributions received in FY13 from the following donors, World Bank Group partners, and clients are gratefully acknowledged:
n Direct
for FIAS projects made available through IFCs Technical Assistance Trust Funds program:
n Client
Additional client contributions were received by IFC regions for IFC region-managed projects receiving conancing from FIAS trust funds. Such client contributions are accounted for at the regional program level.
Annual contributions from IFC, MIGA, and the World Bank are treated in the same manner as core donor funds and are co-mingled with other donor funds in the FIAS Parent Trust Fund account, as terms and conditions allow. Contributions from the IFC Investment Climate Business Line are treated as an additional source of project-specic funding. Contributions received from IFC in the form of regular administrative budget as part of the mainstreaming of contributions from the Funding Mechanism for Technical Assistance and Advisory Services (FMTAAS) are treated as separate from the trust fund contributions. The total of IFCs contribution to the FIAS Core Trust Fund and its contribution to FIAS in the form of regular administrative budget reect IFCs core contribution in line with the funding targets in the FIAS FY1216 strategy. *Donors contributing some or all of their funding in the form of core contributions are are marked with C.
52
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
($9.5 million, including two large contributions from the European Commission for investment climate projects in Kenya and Eastern Africa) but above the $4.9 million target for FY13. Client contributions received in FY13 totaled $0.09 million, a signicant decrease compared to client contributions collected in FY12 and below the funding target set forth in the FIAS FY1216 strategy. The potential to generate signicant cash contributions from clients continues to remain modest given the high concentration of FIAS activities in IDA as well as fragile and conict-affected countries. Also, in the case of FIAS conanced projects managed by IFC regional units, client contributions typically are accounted for under the regional programs. Efforts to increase client contributions are ongoing and will be supported in FY14 with the roll-out of a new IFC Advisory Services Pricing Policy. Project-specic contributions from IFC, received in the form of project-specic FMTAAS allocations,10 amounted to $3.1 million in FY13. These allocations primarily supported a range of global knowledge management and product design and development initiatives implemented under the FIAS umbrella (see Table 2). Other contributions from IFC, amounting to $0.7 million in FY13, supported activities indirectly related to projects, including initial product design and development, portfolio management, monitoring and evaluation, and knowledge sharing associated with the global portfolio implemented under the FIAS umbrella.
Project-Specic Funding
In FY13, project-specic contributions from donor partners, clients, and IFC amounted to $8.6 million, including $5.4 million from donor partners, $0.09 million from clients, and $3.1 million from IFCs Investment Climate Business Line. As compared to FY12, projectspecic contributions signicantly decreased in FY13, a 33 percent decrease from FY12 total project-specic contributions of $12.9 million. Project-specic contributions from donors totaled $5.4 million in FY13. This is a signicant decrease compared to project-specic contributions raised from donors in FY12
10
FMTAAS is IFCs Funding Mechanism for Technical Assistance and Advisory Services.
53
Administration fees are collected by IFC to cover trust fund administration costs and are deducted from donor contributions at the time of receipt. In FY13, IFC collected trust fund administration fees of $1.0 million from FIAS donor contributions.11 At the end of FY13, fund balances in the various FIAS trust funds totaled $ 20.9 million,12 including $11.3 million of core funds and about $9.6 million of program and project-specic funds received under multi-year donor agreements. This reects about 70 percent of the average annual budget for FIAS and is an appropriate level to maintain sufcient liquidity for FIAS. The level of endof-year fund balances is expected to drop to around 50 percent as FIAS activities are scaled up over the coming years. In FY13, project-related expenditures, both direct and indirect, accounted for 93 percent of total FIAS expenditures with the remaining 7 percent for general and administration, including rent, communications, equipment, and other non-overhead costs such as administrative and back-ofce support staff (see Table 4, Expenditures by Advisory Services Activity). Direct project implementation expenditures increased 20 percent in FY13. As reported above, this increase is due in large part to the allocation of FIAS funds for the implementation of regional investment climate client-facing projects. In comparison, average project-related expenditures for the FY0811 cycle accounted for 83 percent of total FIAS expenditures with the remaining 17 percent for general and administration.13
Use of Funds
In FY13, FIAS trust fund expenditures for investment climate reform activities reached $30.4 million (Table 1, Uses of Funds); this is a 14 percent increase in FIAS expenditures from FY12 ($26.7 million). In addition, $1.2 million of expenditures were incurred against the administrative budget provided by IFC, bringing the total expenditures to $31.6 million. The increase in FY13 expenditures is due in large part to the allocation of additional FIAS core funding (approximately $3.0 million) to support the development and implementation of investment climate activities in Sub-Saharan Africa, Latin America, South Asia, and Eastern Europe and Central Asia. A focus on FIAS priority clients in Sub-Saharan Africa, IDA, and fragile and conict-affected countries, as well as industry-specic sectors, formed the basis for the funds allocation.
11 FIAS trust funds established after July 1, 2009 are subject to the standard IFC trust fund administration fee of 5 percent. Trust fund administration fees collected by IFC are included in Table 1, Sources of Funds. 12 FIAS trust fund cash balances excluding outstanding consultant commitments. 13 In July 2010, IFC implemented a new cost allocation methodology for Advisory Services which resulted in a redistribution between direct and indirect project costs. As a result of this change, some gures in Table 4 are not consistent with gures reported in FIAS Annual Reports/Reviews, FY0810. General and administration expenditures, however, are not affected by this change in methodology (see Table 4).
54
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
WOrlD BaNK GrOUp PrOJect-Specific aND OtHer CONtriBUtiONs 2,672 IFC IC Business Line - Project Specic IFC IC Business Line - Administration IFC AS Contingency 150 IFC Global Fund Subtotal World Bank Group Contributions 9,922 COre DONOr CONtriBUtiONs Australiac Austria Canada Francec Ireland Italy Luxembourgc Netherlands (Global Program)d New Zealand Norway Sweden Switzerland United Kingdom Subtotal Core Donor Contributions PrOgraMMatic DONOr CONtriBUtiONs Austria (Investment Climate Cooperation Program) Austria (Investment Generation) Austria (Crisis Response) Ireland (Africa) Italy (Africa) Korea (Trade Logistics) Luxembourg (Crisis Response) Luxembourg (Tax Transparency) Netherlands (Investing Across Borders) Netherlands (Tax Transparency) Netherlands (Trade Logistics) Netherlands (Secured Lending) Norway (Business Entry) Norway (Trade Logistics) Sweden (Africa) Switzerland (Industry) Switzerland (Secured Lending) Switzerland (Tax) Switzerland (Tax Transparency) Switzerland (Western Balkans) United Kingdom (Western Balkans) United Kingdom (Tax) United States (Doing Business) Subtotal Programmatic Donor Contributions DONOr CONTrIbUTIONs (PrOjECT SpECIfIC)e Total Donor Contributions
TOtal WOrlD BaNK GrOUp aND DONOr CONtriBUtiONs
10,554 621 985 186 1,033 750 1,494 300 163 5,532 1,841 559 200 646 500 400 500 300 501 5,447 5,456 16,435 26,989 90 27,079 1,021 26,079
676 373 1,281 1,414 539 2,350 276 475 285 240 494 8,401 2,608 280 750 400 450 340 630 500 500 600 440 183 1,150 8,830 4,436 21,667 31,589 1,093 32,682 973 31,709
ClieNt CONtriBUtiONs TOTaL RECEIpTs Trust Fund Administrative Fees f TOTaL (NET) RECEIpTs
55
a. The FIAS Annual Review is prepared as a reporting tool for FIAS donors and management, utilizing management accounting principles. b. IFC contributions during the FY0811 strategy cycle amounted to $4.0 million per annum ($16 million over the duration of the cycle), with disbursements frontloaded in FY08 (by $4.0 million) and FY09 (by $2.0 million). IFC contributions during the FY1216 strategy cycle include direct contributions to the FIAS core trust fund ($2.9 million in FY12 and $2.8 million in FY13), and IFC Advisory Services administrative budget ($1.2 million each in FY12 and FY13), to cover staff costs of a number of mainstreamed Investment Climate business line positions related to FIAS. As a result, total IFC core contributions to FIAS amounted to $4.1 million in FY12 and $4.0 million in FY13. c. While Australia and France did not make fresh core contributions to FIAS in FY12 and FY13, they provided consent to roll over their remaining shares in core funding from the FY0811 cycle to the new FIAS cycle that started in FY12. Luxembourg signed a new agreement with IFC in September 2012 to contribute core (and other) funding; Luxembourg contributions for FY12 and FY13 were received and recorded in FY13. d. The Netherlands core contributions are earmarked for activities in IDA countries. e. For details of FY13 project specic contributions, see Table 2. f. Administration fees collected by IFC cover cost of trust fund administration. g. The Uses of Funds table does not include the use of $1.2 million of regular administrative budget received from IFC in FY12 and FY13 under the FMTASS mainstreaming (see note b).
56
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
57
a. $200,000 provided by IFCs Technical Assistance Trust Fund program through delegated authority to the Investment Climate Department and included in Table 1: Sources of Funds. b. Advisory Services administrative budget provided by IFC for certain mainstreamed Investment Climate Business Line positions associated with the management of FIAS and the Investment Climate Business Line. IFCs FY13 total contribution to FIAS: $4.0 million; $2.8 million as direct contribution to the FIAS core trust fund; $1.2 million as administrative budget. [IFCs direct contribution to FIAS ($2.8 million) is included in Table 1: Sources of Funds.]
a. Direct Project Expenditures include project preparation, implementation, and supervision costs. b. Indirect Project Expenditures include program management and operational support costs (product development, M&E, knowledge sharing and staff development, donor relations, and public relations) previously reported separately and consolidated under the new IFC cost allocation methodology introduced in July 2010. c. General & Administration includes overheads (rent, communications, equipment, and so on) and other non-overhead costs such administrative and back-ofce support staff. d. Due to the change in IFCs cost allocation methodology, some gures in Table 4 are not consistent with gures reported in FIAS Annual Reports/Reviews, FY0810. The new cost allocation methodology redistributes expenditures between direct and indirect project costs. Although General & Administration expenditures are not affected by the change in the cost allocation methodology, FY08FY10 G&A expenditures restated to exclude trust fund administration fees previously reported as expenditures. FY08FY12 trust fund administration fees are reported on Table 1: Sources and Uses of Funds as a reduction to receipts.
58
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
WORLD BANK GROUP CONTRIBUTIONS n Core (28%) n Project Specic (11%) n Administrative Support (2%) DONOR CONTRIBUTIONS n Core (20%) n Program Specic (19%) n Project Specic (20%)
*Includes administrative fees of $1,021,000 and $1,225,000 IFC Advisory Services administrative budget to cover staff costs of certain mainstreamed Investment Climate Business Line positions.
59
7
60
ANNEXES
n Reforms and Other Results Supported by FIAS in FY13 n Portfolio of FIAS-Funded Projects in FY13 n Abbreviations
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
REFORMS BY REGION
REFORM description
PROJECT FUNDING
PROJECT SPENDING
61
Region Country EAST ASIA AND PACIFIC Timor-Leste1, 2 East Asia aND Pacific TOtal EUROPE AND CENTRAL ASIA Armenia1 Belarus Kosovo1, 2 Moldova1 Ukraine EUrOpe aND CeNtral Asia TOtal LATIN AMERICA AND THE Colombia CARIBBEAN Costa Rica El Salvador Guatemala Haiti1,2 Honduras1 Jamaica Nicaragua1 Panama Trinidad and Tobago LatiN AMerica aND tHe CariBBeaN TOtal SOUTH ASIA Bangladesh1 SOUtH Asia TOtal SUB-SAHARAN AFRICA Benin1 Burkina Faso1 Burundi1, 2 Cameroon1 Chad1, 2 Comoros1, 2 Congo, Dem. Rep.1, 2 Cte dIvoire1, 2 Djibouti1 Gabon Guinea1, 2 Guinea-Bissau1, 2 Liberia1, 2 Malawi1 Mauritania Mozambique1 Niger1 Rwanda1 So Tom and Principe1 Senegal1 Swaziland Togo1, 2 Uganda1 Zambia1 SUB-SaHaraN Africa TOtal GRAND TOTAL Reforms captured by Doing Business 2014 report
1 NA
9 9
2 2
2 2
3
5 NA
4 NA
2 2
4 NA
11 11
2 2
1 NA
20 20
* 2 1
Reforms from FIAS-conanced projects mapped to regional IFC Advisory Services units. 1 International Development Association (IDA) countries. 2 Fragile or conict-affected situations.
Industry-specic investment climate category includes agribusiness, tourism, and other industries. * Reforms under Doing Business topics not validated by the Doing Business report.
62
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
Total 1 1 3 1 3 2 1 10 2 2 1 2 1 1 1 1 2 1 14 1 1 2 2 6 1 1 2 1 4 1 2 2 1 1 1 1 3 2 7 1 1 2 1 2 2 49 75 56
1 ANNeXes
63
1.2 R eforms and Results from FIAS-Funded Projects Mapped to the World Bank Group Investment Climate Department (continued)
Country Guatemala Reform Topic Construction Permits Number of Reform Description reforms 1 Reducing requirements for low-impact construction. An administrative resolution adopted by Guatemala in May 2012 establishes a simplied approval window for activities with minimal impact on the environment, including 39 different cases, such as storage warehouses. Qualied projects undergo an expedited permitting process. 1 A single, simplied business registration form. Guatemala launched an online platform in March 2013 providing new companies with a single form to register with the commercial registry, the tax authority, the social security institute, and the Ministry of Labor, reducing the time required for an entrepreneur to obtain denitive registration, tax and social security numbers, as well as the authorization to print invoices. 1 Honduras leveled the playing eld for new entrants in agribusiness by eliminating discriminatory treatment of applicants and increasing transparency of the registration process for pesticides and fertilizers. More than 400 new products have been registered since the reform and prices have dropped by up to 9 percent for some pesticides. Previously, regulations on fertilizer and pesticide registration had constituted a key barrier for new competitors, with some rms waiting more than three years to enter the market while others were approved in less than 20 days. A new, expedited process for registering products now takes less than 90 days. 1 Saving a trip to the tax ofce. In October 2012, the Companies Ofce began electronic stamping of articles of incorporation. Company founders no longer need to visit the Stamp Duty and Transfer Tax Department to obtain this service prior to the incorporation of their limited liability companies. 1 One-stop shop for registration and licensing. In June 2012, the municipality of Managua made available a single document that allows simultaneous registration for sales taxes, social security, and the pre-municipal license at the one-stop shop. Payment of the premunicipal license can be made at the one-stop shop. 1 Transparency in major business transactions. In November 2012, the Securities Commission enacted a provision of law designed to increase the transparency of major acquisitions by public companies. The amendment requires that sale or acquisition of assets worth 10 percent or more of the value of the company be publicly disclosed, providing investors and the public with information relevant to origins and features of the transaction. The previous reporting threshold was 20 percent. 1 Streamlining business entry. Beginning in April 2012, the Ministry of Trade and Industry and the municipality of Panama became interconnected through the online platform Panama Emprende, eliminating the need for entrepreneurs to visit the municipal ofces to obtain a taxpayer number. Municipal taxpayer numbers are issued automatically along with the operations permit. 1 Eliminating business entry paperwork. Under a law that took effect in February 2013, businesses are no longer required to submit a separate statutory declaration of compliance before a certied commissioner of afdavits. Instead, this declaration is now part of the standard articles of incorporation form. Lowering the carbon footprint in zones. The Low-carbon Export Processing Zone Guidelines provide industries in Bangladesh EPZs and other zones, as well as rms in these zones, with guidance on how to signicantly lower their their carbon footprint. It provides specic business friendly guides based on the projects technical evaluation of energy efciency opportunities in the EPZs. The Low-carbon EPZ Roadmap is a policy document for the Bangladesh Export Processing Zone in Chittagong to reduce carbon emissions by a set percentage. The guidelines and roadmap have been adopted by the Bangladesh Export Processing Zone Authority. Industries in the Bangladesh Export Processing Zone in Chittagong voluntarily adopted many of the guidelines, generating $4.6 million in investments in energy-saving technologies that will more than cover the costs of the upgrades. Business entry improvements. Benin reforms in starting a business have reduced time to register a business from 31 to 15 days, cut the number of procedures to register a business from 5 to 4, and reduced the cost to register a business by 27 percent. Easing barriers to trade. Trade reforms implemented in FY13 include elimination of the requirement for a packing list and customs release order, establishment of a system for managing shipping berth turnover and reducing berthing time, and implementation of measures to improve trafc inside and around the Cotonou Port, leading to lower transit delays from the warehouse to the seaport and making it easier for traders to arrange for road transportation. 1 Doing Business Validated 1
Guatemala
Starting a Business
Honduras
Jamaica
Starting a Business
Nicaragua
Starting a Business
Panama
Investor Protection
Panama
Starting a Business
Starting a Business
Benin
Trade Logistics
64
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
Burundi
Construction Permits
Burundi
Getting Electricity
Burundi
Property Transfers
Burundi
Starting a Business
Burundi
Construction Permits
Cte dIvoire
Enforcing Contracts
Reform Description Connecting joint border customs clearance. Customs authorities in Burkina Faso and Togo have improved the border clearance system at their joint border post of Cinkance by connecting the countries customs clearance systems, increasing cargo ows between Togo, Burkina Faso, and other countries using the corridor. For Burkina Faso, this reform is crucial because the corridor represents between 15 and 20 percent of the countrys total trade volume. This reform will enhance the regional integration and ease development of the customs union in the region. Construction permitting at a single window. The Ministry of Planning and Habitat created a one-stop shop for construction permits in the city of Bujumbura in March 2013. The move places in one location all services for sewer, water, and landline connections and land registry. Construction permits, utility connections, and inspections can now be arranged at the same time at a single window. The total number of required procedures has been reduced from 21 to 15. Improved access to electricity. Burundi made getting electricity connection easier and cheaper by giving free will to sell or buy transformers and other equipment in the local or international market. Property registration made easy. Burundi made it easier to transfer property by creating a one-stop shop for property registration, reducing the number of procedures from 8 to 5, and the number of days from 64 to 26. In March 2013, Burundi initiated a one-stop shop for property transfer, combining services of the municipality of Bujumbura, the Burundi Revenue Authority, and the Land Registry, and eliminating the need for multiple visits to different agencies. The regulation also sets a four-day time limit for processing all procedures. Previously, these procedures took 27 days. The municipality of Bujumbura implemented a decision in April 2013 eliminating the cost of the non-encumbrance certicate for property transfer. The Land Registry issued a public notice in April 2013 stating that it would conduct inspections at the same time as the Burundi Revenue Authority in generating valuation reports. Expedited business registration. Burundi made starting a business easier by allowing registration with the Ministry of Labor at a one-stop shop and expediting the process of obtaining the registration certicate. A decree issued in April 2013 allows entrepreneurs to register with the Ministry of Labor without visiting the ministry. The time to obtain the registration certicate at the one-stop shop was reduced from 32 to 3 days through such steps as elimination of the company seal requirement, as well as merging of the different registration procedures for the Ministry of Labor and Social Security. New tax simplication laws. A new Law on Income Taxation took effect in January 2013, improving and simplifying tax policy and rationalizing tax rates and the tax base for small and medium-size enterprises. Among other improvements, the revised law abolished accounting requirements, ling, and payment of tax forfeiture for micro and small enterprises, eliminating a burden which fell heavily on the smallest rms. It also established exemptions for incomes at the subsistence level in agriculture, shing, and livestock. The law reduces the corporate income tax rate from 35 to 30 percent, aligning it with the personal income tax rate, which should improve clarity and understanding among businesses, in particular smaller rms, which sometimes have similar personal and business incomes. The new rate is aligned with rates in the East African Community countries. Reducing required documentation for trade. Burundi reduced the number of documents required to import from 11 to 10. Tax certicates may now be obtained free of charge. A reduction in property transfer tax. Chad adopted a law in 2013 reducing the property transfer tax from 17.9 percent of property value to 15.4 percent. Streamlined business entry. The Democratic Republic of Congo reduced the time required to start a business and eliminated a requirement that rms obtain a certicate conrming the location of their headquarters. Quicker, streamlined procedures. The number of days for delivering a construction permit was reduced from 474 to 364 days: electricity, water, and civil protection permit process was reduced from 7 to 5 days, the urbanism and sanitation visa was consolidated in one visa, treatment of dossier at the one-stop shop was reduced time from 200 to 90 days due to the introduction of an online client record mechanism. The team supported the Ministry in streamlining procedures at the Guichet Unique by helping develop new procedures and draft corresponding regulation. A website for the Commerce Tribunal. Cote dIvoires Commerce Tribunal became functional in October 2012 and, as of March 2013, was publishing on its website key reference documents, statistics, and decisions rendered by the Tribunal. Trial and judgment proceedings now take no more than 30 days.
Number of reforms 1
1 1
1 1
ANNeXes
1 1 1
1 1 1
65
1.2 R eforms and Results from FIAS-Funded Projects Mapped to the World Bank Group Investment Climate Department (continued)
Country Cte dIvoire Reform Topic Property Transfers Reform Description Reduced property transfer tax. An ordinance that went into effect in May 2013 reduced the property transfer tax from 10 to 7 percent. The government also streamlined the registration process of new titles to simplify property transfers at the land registry. Applicants are no longer required to obtain a topographic survey to transfer property. Helping businesses get started. Djibouti eliminated minimum capital requirements that must be put up by new businesses, put in place efciency reforms, and established a company registry, reducing the time new businesses must spend on required start-up procedures. Streamlining construction permitting. Gabon has reduced the time required to obtain a construction permit and eliminated the requirement for businesses to have an on-site inspection before construction can begin. Background checks for business founders eased. Gabon instituted a change in law eliminating the requirement that criminal records of founders of new businesses be provided. The law now requires founders to provide a sworn declaration. Guinea made trading across borders easier by improving port management systems. Since September 2012, the Conakry port has implemented a system of berthing windows known as fentres daccostage whereby vessels have xed weekly time-tables and given schedules to dock and unload their merchandise. This contrasts with the rst-come, rst-served system that was previously in place, and the new system has resulted in productivity gains and a reduction in layover time. The port now records 35 movements per hour compared to 15 prior to the new system. Staff increase to speed property transfers. Guinea-Bissau has increased the number of notaries available to process property transfers. Reduced stamp duty. Malawi has made transferring property easier by reducing the stamp duty from 3 percent of property value to 1.5 percent. Easing trade through risk-based inspections. Mauritania made cross-border trading easier by introducing a new risk-based inspection system using scanners. Reducing fees for property transfers. Niger has reduced registration fees for property transfers. Background checks for business founders eased. Niger now requires a sworn declaration by the business founder, replacing the requirement that founders provide copies of their criminal record. Better prices for Greenleaf tea. The Greenleaf pricing reform approved by the government is showing positive impact, with farmers realizing higher prices for their Greenleaf crop in 2013 and, as a result, improving their livelihoods and productivity. By 2017, the government is committed to raising the prices farmers obtain to a level equal to 50 percent of the price of Greenleaf tea at auction. The new pricing is expected to increase the net income of over 60,000 farmers and will enable sustainability as the government embarks on an expansion plan to double tea exports from Rwanda by 2020. An online platform for construction permitting. Rwanda implemented an online platform for requesting construction permits in February 2013, establishing a new fee schedule, reducing the number of procedures from 14 to 13, and cutting the average time to obtain a construction permit, down from 166 to 104 days. Smoother resolution of insolvency. The government made resolving insolvency easier by: clarifying the commencement standards for insolvency; preventing the separation of assets from the insolvency estate during reorganization proceedings; setting clear limits for the submission of a reorganization plan; and implementing an automatic stay of creditors enforcement actions. A new insolvency law became effective in May 2013. Among its provisions, the law claries the commencement standards for insolvency, allowing cessation of payments as well as over-indebtedness as grounds for debtors to le for insolvency. It introduces an automatic stay provision for a period of up to six months, applicable to all creditors claims in cases in which the debtor shows intent to submit a reorganization plan. The law also sets a three-month time limit for the submission of a reorganization plan and gives secured creditors priority over unsecured creditors with claims arising prior to the insolvency case. Easing tax clearance documentation in property transfers. Rwanda eliminated the procedure and the fee for obtaining a tax clearance certicate. Easing resolution of insolvency. Rwanda made resolving insolvency easier by clarifying the commencement standards for insolvency, preventing the separation of assets from the insolvent estate during reorganization proceedings, setting clear limits for the submission of a reorganization plan, and implementing an automatic stay of creditors enforcement actions. Number of reforms 1 Doing Business Validated 1
Djibouti
Starting a Business
Gabon
Construction Permits
Gabon
Starting a Business
Guinea
Trade Logistics
Property Transfers Property Transfers Trade Logistics Property Transfers Starting a Business
1 1 1 1 1
1 1 1 1 1
Rwanda
Rwanda
Construction Permits
Rwanda
Investor Protection
Rwanda Rwanda
1 1
1 1
66
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
Senegal Swaziland
Swaziland
Trade Logistics
Togo
Starting a Business
Uganda
Property Transfers
Reform Description One-stop shop for starting a business. Rwanda has accelerated the process of issuing a registration certicate at its one-stop shop for business registration. Unclogging the trade system. Rwanda introduced an electronic single window at the border, reducing time required to clear exports from 29 to 26 days, and the time to import from 31 to 30 days. Reducing the property transfer tax. Senegal adopted a tax law decreasing the property transfer tax to 10 percent. Easier business start-up. Swaziland shortened the administrative processing times of registration of new businesses and obtaining the trading license. The Ministry of Commerce, Industry & Trade and the Swaziland Investment Promotion Agency launched the Swaziland Investment Road Map 2013 in April 2012. As a result of ongoing administrative reforms including computerization and the streamlining of the Registry and the Ministry of Commerce, Industry & Trade, the time it takes to register and obtain a trading license have been reduced. Streamlined trade process. The Swaziland Revenue Authority allows certication to be done at the same time as customs clearance and under the same roof. The new process also allows blank certicates to be issued to manufacturers and exporters for each shipment by the clearing agent. These are submitted to the Swaziland Revenue Authority for stamping along with the other export documents. As a result, the time to obtain a certicate of origin has been reduced. Speeding the process of business entry. Introduction of a one-stop shop improved the workow for company registration by requiring that founders provide a sworn declaration at the time of registration rather than a copy of their criminal records. Reforms reduced the number of days needed to register a business from 38 to 19. The process was accelerated by bringing together all the agencies involved in the registration processsocial security, tax administration, labor inspection, and so onat the one-stop shop. The cost for business registration, excluding notary fees, was reduced as a result of a 50 percent cut in the registration fee. Guidelines for trading licenses. Local government authorities simplied guidelines and forms for obtaining trading licenses, and they also reduced fees for obtaining such licenses by 25 percent. Online means to certify documents. Uganda introduced a new procedure (eStamp) to certify documents subject to stamp duty.
Number of reforms 1 1
1 1
1 1
ANNeXes
1 54
1 49
67
Improved food inspection system. A government decree adopted in February 2013 established a risk-based inspection methodology for imported food. Food imports with high health risks will require documents, sampling, and laboratory examination. In low-risk categories, only document checking will be conducted. Inspections Armenia Bringing inspections in line with international standards. The risk-based inspection methodology that entered into force in February 2013 divides entities into the following three categories: high, medium, and low risk, with low-risk food products inspected no more than once in ve years; medium risk no more than once in three years; and high risk no more than once per year. In addition to simplifying inspection activities, the methodology establishes a system that is consistent with international standards, a change that could prove highly benecial to Armenian producers. Simplifying tax calculations. The government approved a new law on turnover tax for 2013 Tax Simplication Armenia beneting smaller entities with a simplied tax calculation to help reduce their tax burden. and Compliance The measure aims to create a more favorable business environment, clarify and simplify the Management taxation system, eliminate misinterpretation of the law, make the system more efcient, and reduce opportunities for tax evasion. Inspections Improving the inspection system. An October 2012 decree seeks to improve the risk-based Belarus inspection system and reduce the number of overall inspections and the number of scheduled inspections of bona de businesses. Absent a violation of the law, scheduled inspections will be conducted no more than once every ve years, regardless of the risk group of such businesses. The measure steps up preventive efforts through training events and roundtables with businesses to raise awareness of the importance of compliance and provide information about typical violations and how to correct or prevent them. The number of scheduled inspections decreased by 20.1 percent in the rst six months of 2013 compared to inspections in the same period of 2012. Moldova Inspections Modernized inspections process. The government instituted reform of inspection bodies, leading to a reduction from 64 to 33 in the number of of authorities initiating inspections. A risk-based inspections system has been adopted. The reform included creation of an oversight authority at the level of the State Chancellery and of an inspection e-registry with credentialed access to stakeholders from the private and public sectors. A new law sets up clear and straightforward processes and procedures for planned inspections repeated inspections, and unplanned inspections, and it sets clear deadlines and appeal procedures. Moldova Resolving Insolvency Simplied insolvency process. A sweeping new Law on Insolvency institutes a number of reforms designed to speed and simplify the process of closing a business due to insolvency, an important ingredient in helping economies clear obstacles to growth by shedding businesses that are failing. The law establishes rules governing the duration of procedures, the rights and obligations of parties, priority of claims and the cost of procedures. It also shifts most technical responsibilities from a judge to an administration practitioner. Businesses can now seek an accelerated restructuring or reorganization without going through a preliminary procedure in cases where the business is in trouble but still able to cover debts. Decisions of the insolvency court are nal in all but a few exceptions, replacing a cumbersome procedure for ling objections that slowed resolution to a crawl. Now there are xed maximum time limits for the duration of certain phases. LatiN AMerica aND tHe CariBBeaN Strengthening economic zones in Haiti. In 2012, Haitian President Michel Martelly Haiti Special Economic Zones signed into law a measure strengthening the Free Zones Law of July 2002 to include implementation of regulations related to environmental, social, and construction standards.
68
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
Country
Reform Topic
Reform Description Regulating modern medical clinics. A decree in FY13 set conditions for opening and operating modern and traditional medical establishments. An absence of regulations had allowed private actors to operate informally. Under the new system, these establishments will be formalized, leading to improved services delivered from modern clinics. More than 32 businesses have been formalized since the decree. Faster construction permitting. On the recommendation of the Cameroon Business Forum, an organization established by IFC, the government has implemented reforms that have reduced the time to obtain a construction permit from 147 to 139 days. The time involved in approving a project upon completion has been reduced from 45 to 30 days. Accelerating use of ADR. The number of commercial judgment sessions has doubled and is expected to reduce the time required to resolve commercial disputes. Business entry paperwork reduction. The government reduced the number of procedures from 9 to 8 and the number of days required to start a business from 20 to 15. Reducing fees for starting a business. Notary fees were reduced from $760 to $240 for documents relating to starting a business, and the publication charge has been cut from $140 to $30. These savings, signicant for a small business in Africa, have been supplemented with the creation of a one-stop shop for business registration. Lower rates for property transfers. A tax law passed in December 2012 that took effect for 2013 decreased the general business tax rate for property transfers from 10 to 5 percent. For industries, the rate declined from 10 to 2 percent. Eliminating fees to start a business. The Ministry of Commerce and Industry issued an Administrative Notice in June 2012 canceling the business trade license fees previously payable at the Liberian Business Registry. This cancellation took effect as of June 27, 2012. Abolishment of pre-inspection procedures. The government enacted new commercial licensing regulations which have eliminated the need for pre-inspections for most businesses except food products and/or certain types of chemicals. Approved in May 2013, the new regulations have reduced the number of activities subject to inspections. Reducing the cost of business compliance. In May 2013, the government enacted new commercial licensing regulations which harmonize fees, resulting in a reduction of about 9 percent overall in the compliance costs of business regulation. The changes range from a 73 percent cost reduction for certain licensesfrom $89 to $24to a cost increase of 165 percent for othersfrom $9 to $24. Boosting tourism through simplied regulation. Tourism reforms enacted in February 2012 have yielded signicant reductions in costs, time, and procedures in the licensing of tourismrelated activities, including motels, guesthouses, bars, and coffee shops. The average cost for tourism-related licenses declined from $724 to $46, an 88 percent reduction, and the license is now valid indenitely. The number of days required to comply with regulations for tourism-related activities has declined by 92 percent; the simplied license can be obtained on the same day upon submission of required documentation and payment of the applicable fee. The number of procedures needed to comply with regulations has declined by 33 percent. And tourism activities under the licensing regime no longer require pre-inspection. Electronic manifest for trade. In adopting an electronic manifest system for trade logistics based on the ASYCUDA World system, the government promulgated a decree that manifests can no longer be processed in handwritten form but must be processed exclusively through the system. This had an immediate and positive effect on customs duty revenues and related fees. Within the rst two weeks of the application of the new system, revenues more than doubled against a very similar volume of trade. The results stem from much improved transparency in revenue collection and a reduction in corruption. Easing business entry through tax reform. The governments Value-Added Tax Order 2012, issued in December 2012, increased the VAT registration threshold as of January 1, 2013 and simplied registration formalities, making it easier to start a business. A reform action plan used to monitor the activities and risk contributed to the efforts success.
Number of reforms 1
Cameroon
Construction Permits
1 1 1 1 1
ANNeXes
Guinea
Property Transfers
Liberia
Starting a Business
Mozambique Inspections
Mozambique Tourism
Trade Logistics
Zambia
Starting a Business
69
1.3 R eforms and Results from FIAS-Conanced Projects Mapped to Regional IFC Advisory Services Units (continued)
Country Zambia Reform Topic Trade Logistics Reform Description Applying international best practices to trade. Zambia implemented an improved risk management and compliance policy and institutional infrastructure. The system facilitates legitimate, low-risk trade and focuses control efforts on high or unknown risks. It also encourages voluntary compliance by providing information, assistance, and support to help businesses understand requirements. The system rewards highly compliant, low-risk clients through streamlined processing and related privileges. It enforces compliance through riskbased actions to deter, detect, and sanction violations and, over time, reduce interventions at the time of clearance while placing greater reliance on pre-arrival processing and postclearance verication. Number of reforms 1 Doing Business Validated
GRAND TOTAL
21
70
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
$1,992,030
$294,881
$181,776
62%
PORTFOLIO
Middle East and Doing Business Reform Middle East and North Africa North Africa Region Bangladesh Benin Burkina Faso Burundi2 Eastern Africa Region Kenya Kenya Kenya Rwanda Uganda Western Africa Region World Region Low-Carbon Industry Initiative in Bangladesh Benin Investment Climate Reform Program Trade Logistics Burkina Faso Burundi Investment Climate Reform Program East African Community Investment Climate Phase 2 Kenya Investment Generation Program Trade Logistics Kenya Kenya Regulatory Reform Rwanda Investment Climate Reform Program Uganda Investment Climate Program OHADA Uniform Acts Reform Phase 2 Global Investment Promotion Benchmarking 2012 Tax Transparency Technical Assistance Program Competition Policy for Investment Climate Doing Business Reform East Europe and Central Asia Brazil Frontier States Investment Generation (National-Subnational) Doing Business Reform Latin America and the Caribbean OHADA: Building the Capacity to Improve the Quality of the Legislation (Phase 1) Doing Business Reform Sub-Saharan Africa Kenya: Improving Regulatory Performance and Capacities
$1,441,247
$534,836
$534,836
100%
PORTFOLIO ANNeXes
$775,000 $700,000 $823,591 $2,501,990 $8,100,000 $1,500,000 $2,532,939 $4,042,265 $4,500,000 $1,553,000 $2,565,000 $2,000,613 $4,600,000 $1,355,000 $863,602
$429,979 $600,188 $75,513 $754,362 $2,294,890 $240,573 $443,270 $450,045 $1,157,239 $637,688 $746,823 $366,885 $775,068 $594,312 $61,638
$375,051 $387,342 $27,176 $749,914 $2,294,890 $240,573 $223,591 $117,117 $185,452 $633,924 $704,160 $316,761 $775,068 $594,312 $22,470
87% 65% 36% 99% 100% 100% 50% 26% 16% 99% 94% 86% 100% 100% 36%
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO COMPLETED (DE3 Rating: Positive) COMPLETED (DE3 Rating: Positive) COMPLETED (DE3 Rating: Positive) COMPLETED (DE3 Rating: Negative) COMPLETED (DE3 Rating: Positive) COMPLETED (DE3 Rating: Positive)
Continued on next page
SUBSAHARAN AFRICA
WORLD
$2,142,259
$212,750
$212,750
100%
$1,896,102
$411,035
$411,035
100%
$4,690,056
$15,848
$15,848
100%
SUBSAHARAN AFRICA
Africa Region
$1,842,609
$193,357
$193,357
100%
Kenya
$4,925,000
$1,506
$1,506
100%
71
2.1 F IAS-Funded Client-Facing Projects Mapped to the World Bank Group Investment Climate Department (continued)
Region Name MIDDLE EAST AND NORTH AFRICA Project Name Morocco Quality of Public Service Delivery and Transparency to Improve the Investment Climate Middle East and Indicator-Based Reform Advisory Project in the Middle East and North North Africa Africa Region Region Africa Region Indicator-Based Reform in SubSaharan Africa Guinea2 Guinea Conakry Investment Climate Reform Program Western Africa West Africa Trade Logistics Reform Region Western Africa West Africa Investment Policy Region Reform Country Name Morocco Total FY Total FY FIAS Total Funding Expenditures Expenditures % FIAS US$ US$ Share Expenditures Project Stage1 $555,000 $111,525 $111,525 100% PIPELINE
$824,900
$43,160
$43,160
100%
PIPELINE
$68,520,203
$11,778,144
$9,651,764
Portfolio includes active and hold projects. Fragile and conict situations. DE abbreviates: development effectiveness.
72
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
LATIN AMERICA AND THE CARIBBEAN MIDDLE EAST AND NORTH AFRICA
Bosnia and Herzegovina2 Georgia Kosovo2 Europe and Central Asia Macedonia, Former Yugoslav Republic of Moldova Europe and Central Asia Haiti2 Honduras Egypt, Arab Republic of India Nepal2 Southern Asia Region Burkina Faso Cameroon Comoros2 Cte dIvoire2
ANNeXes
SOUTH ASIA
SUBSAHARAN AFRICA
9% 19% 7%
73
2.2 FIAS-Conanced Client-Facing Projects Mapped to Regional IFC Advisory Services Units (continued)
Total FY Total FY FIAS Total Funding Expenditures Expenditures % FIAS US$ US$ Share Expenditures Project Stage1 $1,018,000 $354,718 $107,180 30% PORTFOLIO $1,136,786 $920,000 $871,000 $3,040,000 $2,150,000 $91,069 $1,330,000 $1,855,800 $1,643,500 $1,772,000 $256,606 $20,543 $231,521 $922,768 $476,784 $61,069 $172,145 $106,486 $145,727 $145,414 $234,583 $20,543 $16,071 $503,606 $26,659 $61,069 $122,193 $106,486 $104,615 $118,464 91% 100% 7% 55% 6% 100% 71% 100% 72% 81% PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PIPELINE PIPELINE PIPELINE PIPELINE PIPELINE
Region Name
SUBSAHARAN AFRICA
EUROPE AND CENTRAL ASIA LATIN AMERICA AND THE CARIBBEAN SUBSAHARAN AFRICA Grand Total
1 2 3
Project Name Mozambique Investment Climate Program So Tom and So Tom and Principe Investment Principe Climate Project Tanzania Tanzania Investment Climate Program Togo2 Togo Investment Climate Reform Program Zambia Zambia Iinvestment Climate Program II Zambia Investment Climate Rapid Response Uzbekistan Uzbekistan Tax Simplication Project Azerbaijan Azerbaijan Investment Climate Phase II Georgia Georgia Investment Climate Project Southern Europe Europe and Central Asia Debt Region Resolution and Business Exit Central America Regional Latin America Region Agribusiness Trade Logistics Project
Ethiopia Uganda
Ethiopia Investment Climate [Advisory] Program Uganda Investment Climate for Industry
87% 100%
PIPELINE PIPELINE
Continued on next page Portfolio includes active and hold projects. Fragile and conict situations. Project on hold.
74
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
$474,132
$98,869
$98,869
100%
$1,183,000
$299,382
$299,382
100%
$450,000 $27,885,865
$46,705 $8,038,336
Grand Total
1 2 3 4 5
Portfolio includes active and hold projects. Project managed by Global indicator and Analysis Unit with funding from FIAS. DE abbreviates: development effectiveness. MEC abbreviates: meets exclusion criteria. The Debt Resolution and Business Exit project is a continuation of the Commercial Mediation Product Development and Knowledge Management (completed during FY13) and the Restructuring and Insolvency Advisory Services program (completed in FY12). The Business Regulation Product Development and Knowledge Management project is a continuation of the Business Regulation Product Management and Knowledge Management (completed during FY13). The ICT-enabled Investment Climate Reform Theme Project is a continuation of the ICT Cross-Cutting Theme project (completed during FY13).
75
ANNeX 3: ABBreViatiONs
ASYCUDA CIDA COMESA FDI FIAS GIPB IBRD ICT IDA IFC M&E MIGA OECD OHADA PPD USAID Automated Systems for Customs Data Canadian International Development Agency Common Market for Eastern and Southern Africa foreign direct investment Facility for Investment Climate Advisory Services Global Investment Promotion Best Practices International Bank for Reconstruction and Development information and communication technologies International Development Association International Finance Corporation monitoring and evaluation Multilateral Investment Guarantee Agency Organisation for Economic Co-operation and Development Organization for the Harmonization of Business Law in Africa public-private dialogue U.S. Agency for International Development
76
2013 ANNUaL REVIEW FIAS - THE FaCILITY FOR INVEsTMENT CLIMaTE ADVIsOrY SErVICEs
PHOTO CREDITS
Cover: Vietnamese farmer in the eld, Dreamstime. Chapter introduction photos:* Chapter 1, pages 4-5, Brazilian renewable energy generation, Paulo Capiotti. Chapter 2, pages 12-13, Cambodian market, Katherine Jao. Chapter 3, pages 20-21, people and hay in Bangladesh, Mohamed Fahad Ifaz, World Bank Group. Chapter 4, pages 34-35, Afghanistan Ministry of Telecommunications, Graham Crouch, World Bank Group. Chapter 5, pages 42-43, Liberian marketplace, Shoana Solomon for the World Bank Group. Chapter 6, pages 50-51, Bangladesh sherman, Mohamed Fahad Ifaz, World Bank Group. Chapter 7 , pages 60-61, Mongolia camel herd, Kathy Khuu, World Bank Group.
Other photos: Page 39, Peruvian landscape with solar panels, Dreamstime. Page 46: Textile workers in a small factory in Old Delhi, in Delhi, India.
Acknowledgements: FIAS would like to thank the participants of the 2013 Investment Climate Photo Contest for contributing many of the photographs in this publication. More than 45 photos depicting investment climate activities and private sector engagement were submitted by World Bank Group staff. The images seen on pages 12-13, 20-21, 50-51, and 60-61 were chosen from this years contest.
III
Through the FIAS program, the World Bank Group and donor partners facilitate investment climate reforms in developing countries to foster open, productive, and competitive markets and to unlock sustainable private investments in sectors that contribute to growth and poverty reduction. The FIAS program is managed by the Investment Climate Department under the joint oversight of the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the World Bank (IBRD). For more information, visit www.wbginvestmentclimate.org.