Transcript Iraq--Economic Context

Iraq Reconstruction, Rehabilitation and
Reform Program
Progress and the Way Ahead
The World Bank
Amman, July 2005
The Storyline
 The Economic Context
 The World Bank in Iraq- Operational Context
 Work to Date- The Iraq Reconstruction/Reform
Agenda with the World Bank
 How We Do Business
 Some Lessons Learned
 The Way Forward
Economic Context
 Iraq has many resources- 3rd Largest Oil Reserves, 7 million labor
force, abundant water
 Successful transitions over the past year Interim Government and Transitional Administrative Law in June 04
 Elections for 275-member Transitional National Assembly in Jan 05
 Constitutional Referendum in October 05, Elections in end-05
 Several important measures since mid 03
 Donor Coordination and Iraqi Strategic Review Board
 Central Bank Law, Trade Liberalization, Banking and Company Laws, etc.
 WTO Observer Status, IMF Emergency Post-Conflict Assistance
 National Development Strategy- Governance, PSD, Safety Nets
 Recent Higher Committees on Economic Development, and Reconstruction
Economic Context
 Strong Recovery. GDP down to $12 billion in 03, recovered to $26 billion in
04. GDP per capita of around $940.
 Schools opened, goods flowed, wages increased.
 Reconstruction of infrastructure/basic services.
 Security has affected reconstruction and diversification. Growth driven by oil.
 GDP may increase by 7% in 05.
GDP/capita will remain 25% of
its level 25 years ago.
 Oil production at 2 mbpd,
exports of 1.5 mbpd.
 Inflation down from %34 in 03
to 32% in 04. Still expected in
double-digits.
25
US$ billion
 Oil is 70% of GDP and 98% of
budget.
30
20
15
10
5
0
1997
1998
1999
2000
GDP at market prices
2001
2002
2003
2004e
Oil Exports
2005p
Economic Context
 Private non-oil activity up, and imports up, but insecurity/unemployment
remain an issue for reconstruction and private sector growth
 Maybe 10% live on under $1/day
 About 25% completely dependent on Food Distribution (WFP, 2004), which
with other subsidies, eats two thirds of the budget
 2 million unemployed, about 30% of workforce (ILO, 2004)
 Unemployed and underemployed closer to 50% (highest among young urban
males, and women)
 Many of SOEs (over 190) remain idle. They employ over 500,000 workers
Algeria
Iraq
Bottom Line…Private Sector
Will be the key driver for growth
And employment
Morocco
Jordan
Yemen
Syria
Lebanon
Egypt
-
5
10
15
20
percent of labor force
25
30
The Storyline
 The Economic Context
 The World Bank in Iraq- Operational Context
 Work to Date- The Iraq Reconstruction/Reform
Agenda with the World Bank
 How We Do Business
 Some Lessons Learned
 The Way Forward
The Operational Context
 Iraq is a founding member of the Bank
 6 Loans between 1950-1973, in arrears since 90’s
 Return to Iraq in 2003, after 25 years- data collection and
assessment of the economy
 Joint UN-WB Needs Assessment
 Madrid Conference (Oct 03)- WB promises $3-5 bn over
coming years. First $500 mn in IDA credits
 International Fund Facility for Iraq (IRFFI)- $1 bn of which
$400 mn went to the WB window.
 Trust Fund Operations guided by World Bank Interim
Strategy for Iraq (January 04)
The Operational Context
Context?
Resolution 1483 and G7 requested
international institution help
International Community requested
UN, WB to carry out Needs
Assessment and set up TF
WB-UN Needs
Assessment
Interim Strategy for WB
Operations (Jan 04)
Vehicle?
ISRB
Iraqi Donor
Coordination
Outputs?
Players?
International Reconstruction Fund
Facility for Iraq
World Bank TF
9 Emergency Operations, Training of over 900 civil servants and
policy support
Iraqi
World Bank
UN and
Intl and Local
Ministries
Group
other Partners
Private Sector
The Storyline
 The Economic Context
 The World Bank in Iraq- Operational Context
 Work to Date- The Iraq Reconstruction/Reform
Agenda with the World Bank
 How We Do Business
 Some Lessons Learned
 The Way Forward
First WB Interim Strategy
 Prepared end-January, based on Needs Assessment, and covers
WB work until mid 05- a Second Strategy to follow
 Uses Donor Funds until Bank accesses IDA/IBRD funds
 In consultations with Iraqis, UN & donors
 Focus on Iraqi implementation, with WB support and capacity
building.
 Three Pillars:
 Emergency Operations (about $370 mn)
 Build capacity for Recipient Execution
 Policy support
Elements of First Interim
Strategy
Cross-Sectoral. 3 Pillars:
 Emergency Operations
 Build Iraqi Institutional Capacity to absorb
external funding, and implement policy
reforms
 Lay Groundwork for Medium Term
Reconstruction & Development
Pillar 1: Emergency
Operations
 Restore urgent infrastructure/services
 Building sustainable capacity: Iraqi
Implementation (Ministry PMTs)
 Other donors to leverage
 Jump-starting economic activity
 IFC and SME TF
 MIGA looking into FDI
 Community-based employment generation
Emergency Operations
 Each project tries to spread assistance to governorates,
depending on the availability of donor funds.
 In total, Emergency Operations covering all the 18
Governorates.
Emergency Operations
 Nine Emergency Operations (most began
implementation in early 05)
 One project (First Capacity Building) is completed
and another eight projects underway- US$367 mn
in assistance
 First Capacity Building Project (US$3.6 million) –
(completed) 600 Iraqi officials trained (completed).
 Emergency Textbook Provision Project (US$40 million) –
since mid-May 2004, 69 million textbooks for 6 million students
in primary and secondary schools in 18 governorates for the
2004/05 school year.
 Emergency School Construction Rehabilitation Project
(US$60 million) –since October 2004, finances construction of
new buildings for 110 existing primary and secondary schools,
and major rehabilitation of about US$140 schools. 84 rehabs by
September 05.
Emergency Operations
 Second Capacity Building Project (US$7 million)– a follow-up to the successful
First Capacity Building Project, over 350 trained to date.
 Emergency Baghdad Water and Sanitation Project (US$65 million)– water
supply/sanitation in Baghdad, large portion of sewerage system rehabilitation and
extension in Sadr City, and a comprehensive city development plan for Baghdad.
 Emergency Water Supply and Sanitation and Urban Development Project
(US$90 million)– water supply/sanitation in nine governorates; and urban
reconstruction (roads, sidewalks, community centers, etc.).
 Emergency Health and Rehabilitation Project (US$25 million)– rehabilitation
of emergency services, including emergency obstetric care, in 12 hospitals; basic
medical/laboratory equipment; 3-6 month supply of 37 emergency medicines.
 First Private Sector Development Project (US$55 million)– finance part of
telecom network (US$43 million) to connect parts of Central Bank’s
payments/settlements system; institutional framework for investment/export
promotion, SME reform; direct support to private firms to access finance and
foreign markets.
 Emergency Community Infrastructure Project (US$20 million) –laborintensive water supply/sanitation, and irrigation rehab in rural areas throughout
Pillar 2: Institutional Capacity
and Training
 First Use of Donor Funds (EC)
 Support/Training to Iraqis Ministries to implement
reconstruction directly- PMT
 Emphasis on procurement, Financial Management and
environmental/social safeguards
 Capacity building to the public and private sectors, NGOs, on
policy issues: PSD, Education, Health, Telecom, infrastructure
reform, gender, Iraqi women businessmen workshop and study
tour, etc.
 Training on Data Collection and Dissemination.
 Sector Specific Training, Internships, Study Tours.
 Training in Amman, Beirut, Canada, Washington, UK, Tunisia,
Egypt, Ireland, and Baghdad through VCs
Theme 3: Policy Support
Laying the Basis for Medium-Term Development
Three Cornerstones, one goal: Iraq back on the path of
growth and wealth:
A Sustainable and Open Economy that Relies on Iraq’s
Private Sector- Macro Stabilization & Transition to a
Market Economy.
A Supporting & Transparent Public Sector that Encourages
Private Sector Resources and Initiative to their Maximum,
and Ensures Public Welfare- Public Sector Reform.
A System to Ensure that the Poor and Vulnerable do not
Lose Out from the Reforms Above- Poverty, Social
Protection & Social Development
WB discussions on Policy Work with MOF, MOPDC, CBI,
MMPW, MOH, MOED, MOLSA, etc.
Theme 3: Policy Support
 Economic Reform and Transition

Support to National Development Strategy, Incentive Framework, Trade,
Finance/PSD, SOE/Investment Climate, Transport Reform, Urban Mgmt,
Water Utility Mgmt, Infrastructure Regulation-July, Payment Systems and
Banking Supervision
 Public Sector Reform

Legal Reviews, Public Finance, Intergovernmental Finance, Civil Service
Reform, Health Policy and NHA, Education Policy and plan for Teacher
Training, Utility Sector Policy, Judicial Reform, Assessment of Public
Sector Procurement and FM
 Poverty, Social Protection and Social Development

Pension and Social Safety Nets, WFP Collaboration on Food Markets
and PDS
Other Parts of the Bank Group:
IFC and MIGA
 International Finance Corporation (IFC)
 Co-located with the WB Iraq Office, has begun investments in 1 Iraqi
bank, in partnership with international banks. Others on the way*
 Small Business Financing Facility, to finance micro and small businesses
and TA to banks (a bank has been identified)
 The Private Enterprise Partnership for the Middle East (PEP-MENA) has
trained over 250 private bankers
 Multilateral Investment Guarantee Association (MIGA)




Iraq is still not a member of MIGA, but talks have begun to join
Will provide investors with some insurance against non-commercial risks
Will provide TA to Govt on Investment Promotion
Can also provide on-line services on investment opportunities in Iraq
* For additional IFC info/contacts: www.ifc.org or through WB website
The Storyline
 The Economic Context
 The World Bank in Iraq- Operational Context
 Work to Date- The Iraq Reconstruction/Reform
Agenda with the World Bank
 How We Do Business
 Some Lessons Learned
 The Way Forward
How We Do Business
 Iraqi institutions implement WB-financed projects in Iraq- Bank
appraises and supervises only
 Procurement for WB-financed projects through the Ministries
 WB International and National Competitive Bidding Procedures
 Learning by Doing
 Ministry Project Management Teams PMT trained, before and on-thejob, in procurement, financial management
 Same procedures for Trust Funds and Loans/Credits- consistency
 Avoid overlap by getting ISRB approval of projects
 TF Disbursements are copied to MOF to ensure budgeting. All
future loans/credits reflected in budget
 Coordination with donors directly, with heavy reliance on ISRB
and Iraqi priorities
How We Do Business
The Project Cycle
Recipient/Borrower defines objectives, problems & constraints
WB analyzes sector policy and strategy
Implementation
Completion
&
Evaluation
START
Sector
Strategy
Recipient defines general
project objectives
WB analyses soundness
of objectives
Identification
Recipient implements
WB supervises
Once WB reviews
procurement work
Implementation
and determines
& Supervision
that procurement
guidelines have been
followed, funds will be
disbursed through direct
payment to the contractor
Negotiations
&
Approval
Preparation
Recipient is responsible
for preparation
WB provides technical &
financial assistance
Appraisal
WB reviews work conducted
during Identification & preparation
How We Do Business
Making It Work




Reliance on local implementation by Iraqis (PMTs)
Interim Iraq Office in Amman
Core Iraqi senior staff and consultants in the field
Videoconference Facilities (International Zone, MOF, MOP, CBI,
linked to other facilities in MMPW, MOE, etc.)
 Simple project design…focusing on the basics
 Coordination with UN, USAID, DFID, PCO, JBIC and other
partners…leveraging each other
The Storyline
 The Economic Context
 The World Bank in Iraq- Operational Context
 Work to Date- The Iraq Reconstruction/Reform Agenda with the
World Bank
 How We Do Business
 Some Lessons Learned
 The Way Forward
Some Lessons Learned
 Simplicity- Focusing on the Basics
 Sequence Training with Recipient Implementation- Reliance on
Local Implementation
 Innovation- use of local consultancies, Interim Office, local staff
 Need for realism in project timelines and disbursements
 Focus on practical implementation arrangements very early on
 Balance between Speed and Sustainability- Focus on the WB’s
experience in Institutional Development
 Coordination with donors is key
The Storyline
 The Economic Context
 The World Bank in Iraq- Operational Context
 Work to Date- The Iraq Reconstruction/Reform
Agenda with the World Bank
 How we do Business
 The Way Forward
The Way Forward
 Government cleared arrears to WB in December 04
 Request for $500 mn in World Bank IDA Credits
 Concessionary loans: 20 years, .5% commitment fee, .75% service fee
 MOF counterpart on IDA
 WB in discussions with Government on use of Funds
 Second Interim Strategy (for next 2 years) for discussion by Board
of Directors in the summer
 Guides all future WB work
 Covers both $500 in IDA credits and additional Donor funds
 Builds on experience in Iraq, focuses on simplicity/flexibility
 Current sectors, plus some new ones (power, transport, etc.)
Our Approach: Money is only as good as its use…to put in place the
procedures and local mechanisms, to increase absorption and
leverage other donor funds
After All, the Remaining Needs Are Great…
A few cases
Electricity
UN/WB NA=$12,122 mn
Water Supply and Sanitation
UN/WB NA=$6,842 mn
US Supplemental
US Supplemental
World Bank Program in
Interim Strategy (04)
World Bank Program in
Interim Strategy (04)
UN Strategy (04)
UN Strategy (04)
Remaining Needs (UN W/B
Needs Assessment)
Transportation and Telecommunication
UN/WB NA=$3,409 mn
Remaining Needs (UN W/B
Needs Assessment)
Housing and Urban Management
UN/WB NA=$1,831 mn
US Supplemental
US Supplemental
World Bank Program in
Interim Strategy (04)
UN Strategy (04)
World Bank Program in
Interim Strategy (04)
UN Strategy (04)
Remaining Needs (UN W/B
Needs Assessment)
Remaining Needs (UN W/B
Needs Assessment)
* Based on 2003 UN/WB Needs Assessment, US Supplemental figures, the WB Interim Strategy and UN plans for CY04.
Remaining Needs Are Great…
(continued…)
Education
UN/WB NA=$4,805 mn
Agriculture and Water Resources
UN/WN NA=$3,027 mn
US Supplemental
US Supplement al
World Bank Program in Int erim St rat egy
(04)
World Bank Program in
Interim Strategy (04)
UN St rat egy (04)
UN Strategy (04)
Remaining Needs (UN W/ B Needs
Assessment )
Remaining Needs (UN W/B
Needs Assessment)
Health
WB/UN NA=$1,600 mn
US Supplemental
World Bank Program in
Interim Strategy (04)
UN Strategy (04)
Remaining Needs (UN W/B
Needs Assessment)
Where to Go for Information…
www.worldbank.org
www.irffi.org
Thank You
The World Bank