World Bank History Conceived during World War II at Breton Woods, New Hampshire, the World Bank initially

helped rebuild Europe after the war. Its first loan of $250 million was to France in 1947 for post-war reconstruction. Reconstruction has remained an important focus of the Bank's work, given the natural disasters, humanitarian emergencies, and post conflict rehabilitation needs that affect developing and transition economies. Today's Bank, however, has sharpened its focus on poverty reduction as the overarching goal of all its work. It once had a homogeneous staff of engineers and financial analysts, based solely in Washington, D.C. Today, it has a multidisciplinary and diverse staff including economists, public policy experts, sectoral experts, and social scientists. 40 percent of staff are now based in country offices. Bretton Woods Conference, July 1-22, 1944 World War II was still on, D-Day took place less than one month before. International concern over the competing currency devaluations and inflationary tendencies which characterized the interwar years and the fear of a post-war economic depression had been the genesis of the Conference and the Fund proposal. The Bank was conceived of primarily as an instrument through which the physical assets of the post-war world might be rebuilt. Development financing would come later. It was the Latin American countries which were principally responsible for the emphasis on development. Soviet Union represented at Bretton Woods, but did not subsequently ratify the Articles of Agreement of the Bank or Fund. World Bank was the first multilateral development bank.

Affiliates of the World Bank: (1) Economic Development Institute (EDI) Established January 9, 1956 Purpose: Help member countries improve the degree of economic management in government by increasing the number of administrators skilled in dealing with problems of economic policy and with the planning and administration of development programs. (2) International Finance Corporation (IFC) Established July 20, 1956 Purpose: Promote sustainable private sector development primarily by: Financing private sector projects located in the developing world. Helping private companies in the developing world mobilize financing in international financial markets. Providing advice and technical assistance to businesses and governments.

(3) International Development Association (IDA) Established September 24, 1960 Purpose: Act as the World Banks concessional lending window. It provides long-term loans at zero interest to the poorest of the developing countries. (4) International Centre for the Settlement of Investment Disputes (ICSID) Established October 14, 1966 Purpose: Assist Contracting States and their nationals in settling, by means of conciliation or arbitration, investment disputes between governments and foreign investors. (5) Operations Evaluation Unit Established September 2, 1970 Purpose: Established by the President, the Operations Evaluation Unit evaluates Bank Group operations. It is placed in the Programming and Budgeting Department. (6) Consultative Group on International Agricultural Research (CGIAR) Established May 19, 1971 Purpose: An informal association of public and private donors supporting a network of international agricultural research centers. CGIAR convenes in Washington under chairmanship of the Bank, but with its Technical Advisory Group (TAG) headquartered at FAO, Rome. (7) World Bank Staff Association Established February 28, 1972 Purpose: Working Party of twelve established by the Provisional Delegate Assembly to investigate various aspects of establishing a staff association. Its report recommended the formation of a staff association and outlined its functions, objectives and general structure. Constitution drafting committee of three established to draft a constitution and rules of procedure. Referendum held January-February 1972. Out of 2,998 eligible voters, 2,528 cast ballots, of which 2,339 voted yes and 189 voted no. Nine yes votes arrived too late to be counted. Provisional Delegate Assembly first met on April 26, 1971; two delegates from each department; assembly would decide whether or not there would be a staff association and, if so, which form it would take. (8) World Bank Administrative Tribunal Established July 1979 Purpose: A judicate staff grievances. September 1978: Round Table Conference on Legal Rights composed of staff and management representatives. Conference was to examine the terms and conditions of employment at the Bank to determine whether they should be enforceable through access to an Administrative Tribunal.

An Appeals Committee had been established in 1976 to help to adjudicate staff grievances, but its recommendations are not binding on the Bank. National courts have been reluctant to adjudicate grievances of staff against the Bank. Staff Association played a significant role in the process of establishing the Administrative Tribunal. Members of the Administrative Tribunal are selected by the Executive Directors from a list drawn up by the President of the Bank after due consultation. First session began July 1, 1980 in London. (9) Multilateral Investment Guarantee Agency Established April 12, 1988 The purpose of the Agency is not solely to provide investment insurance. Insurance is the main instrument of the Agency but will be used along with other instruments to create a better investment environment based on mutual confidence between investors and their host countries. (10)Inspection Panel Established September 22, 1993 Purpose: The Inspection Panel is three-member, non-judicial body created by the Board of Executive Directors of IBRD and IDA to provide an independent forum to private citizens who believe that their rights or interests have been or could be directly harmed by a project financed by the Bank. Affected people may bring their concerns to the attention of the Panel by filing a Request for Inspection.

INTRODUCTION The World Bank Group, originated as a result of the Bretton Woods Conference of 1944. It is one of the worlds largest sources of development assistance and it has extended assistance to more than 100 developing economies, bringing a mix of finance and ideas to improve living standards and eliminate the worst forms of poverty. For each of its clients, the Bank works with Government agencies, nongovernmental organizations and the private sectors to formulate assistance strategies. Together with the separate International Monetary Fund, the World Bank organizations are often called the "Bretton Woods" institutions, after Bretton Woods, New Hampshire, where the United Nations Monetary and Financial Conference that led to their establishment took place (1 July-22 July 1944). The Bank came into formal existence on 27 December 1945 following international ratification of the Bretton Woods agreements. Commencing operations on 25 June 1946, it approved its first loan on 9 May 1947 ($250m to France for postwar reconstruction, in real terms the largest loan issued by the Bank to date) The World Bank is a vital source of financial and technical assistance to developing countries around the world. It is not a bank in the common sense. Since it was set up in 1944 as the International Bank for Reconstruction and Development, the number of member countries increased sharply in the 1950s and 1960s, when many countries became independent nations. As membership grew and their needs changed, the World Bank expanded and is currently made up of five different agencies The World Bank Group consists of five closely associated institutions, each institution playing a distinct role in the mission to fight poverty and improve standard of living for the people in the developing world. The term World Bank refers specifically to two of the five i.e. The International Bank for Reconstruction and Development (IBRD) and The International Development Association (IDA). The other institutions are The International Finance Corporation (IFC), The Multilateral Investment Guarantee Agency (MIGA) and The International Centre for Settlement of Investment Disputes (ICSID). While all five specialize in different aspects of development, they use their comparative advantages to work collaboratively towards the same overarching goal-poverty reduction. Each institution plays a different but supportive role in the mission of global poverty reduction and the improvement of living standards. The IBRD focuses on middle income and creditworthy poor countries, while IDA focuses on the poorest countries in the world. Together it provides low-interest loans, interest-free credit and grants to developing countries for education, health, infrastructure, communications and many other purposes The World Bank's activities are focused on developing countries, in fields such as human development (e.g. education, health), agriculture and rural development (e.g. irrigation, rural services), environmental protection (e.g. pollution reduction, establishing and enforcing regulations), infrastructure (e.g. roads, urban regeneration, electricity), and governance (e.g. anti-corruption, legal institutions development). It provides loans at preferential rates to member countries, as well as grants to the poorest countries. Loans or grants for specific projects are often linked to wider policy changes in the sector or the economy. For example, a loan to improve coastal environmental management may be linked to development of new environmental institutions at national and local levels and to implementation of new regulations to limit pollution.

The World Bank is one of the most highly-regarded financial institutions in the world, especially in the field of development economics and related research. In addition, World Bank standards and methods have been adopted in many areas such as transparent procedures for competitive procurement and environmental standards for project evaluation. World Bank also engages in funding the education of promising young people from developing countries through its graduate scholarship programs OPERATIONS The World Bank's two closely affiliated entitiesthe International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA)provide low or no interest loans and grants to countries that have unfavorable or no access to international credit markets. Unlike other financial institutions, we do not operate for profit. The IBRD is market-based, and we use our high credit rating to pass the low interest we pay for money on to our borrowersdeveloping countries. We pay for our own operating costs, since we dont look to outside sources to furnish funds for overhead. I. Fund Generation IBRD lending to developing countries is primarily financed by selling AAA-rated bonds in the world's financial markets. While IBRD earns a small margin on this lending, the greater proportion of its income comes from lending out its own capital. This capital consists of reserves built up over the years and money paid in from the bank's 184 member country shareholders. IBRDs income also pays for World Bank operating expenses and has contributed to IDA and debt relief. IDA, the world's largest source of interest-free loans and grant assistance to the poorest countries, is replenished every three years by 40 donor countries. Additional funds are regenerated through repayments of loan principal on 35-to-40-year, no-interest loans, which are then available for re-lending. IDA accounts for nearly 40% of our lending. II. Loans Through the IBRD and IDA, we offer two basic types of loans and credits: investment loans and development policy loans. Investment loans are made to countries for goods, works and services in support of economic and social development projects in a broad range of economic and social sectors. Development policy loans (formerly known as adjustment loans) provide quick-disbursing financing to support countries policy and institutional reforms. Each borrowers project proposal is assessed to ensure that the project is economically, financially, socially and environmentally sound. During loan negotiations, the bank and borrower agree on the development objectives, outputs, performance indicators and implementation plan, as well as a loan disbursement schedule. While we supervise the implementation of each loan and evaluate its results, the borrower implements the project or program according to the agreed terms. As nearly 30% of our staff is based in some 100 country offices worldwide, three-fourths of outstanding loans are managed by country directors located away from the World Bank offices in Washington.

IDA long term loans (credits) are interest free but do carry a small service charge of 0.75 percent on funds paid out. IDA commitment fees range from zero to 0.5 percent on undisbursed credit balances; for FY06 commitment fees have been set at 0.30 percent. For complete information about IBRD financial products, services, lending rates and charges, please visit the World Bank Treasury . Treasury is at the heart of IBRD's borrowing and lending operations and also performs treasury functions for other members of the World Bank Group. III. Grants Grants are designed to facilitate development projects by encouraging innovation, cooperation between organizations and local stakeholders participation in projects. In recent years, IDA grantswhich are either funded directly or managed through partnershipshave been used to: Relieve the debt burden of heavily indebted poor countries Improve sanitation and water supplies Support vaccination and immunization programs to reduce the incidence of communicable diseases like malaria Combat the HIV/AIDS pandemic Support civil society organizations Create initiatives to cut the emission of greenhouse gasses

IV. Analytic and Advisory Services While we are best known as a financier, another of our roles is to provide analysis, advice and information to our member countries so they can deliver the lasting economic and social improvements their people need. We do this in several ways: through economic research on broad issues such as the environment, poverty, trade and globalization and through country-specific economic and sector work, where we evaluate a country's economic prospects by examining its banking systems and financial markets, as well as trade, infrastructure, poverty and social safety net issues, for example. We also draw upon the resources of our knowledge bank to educate clients so they can equip themselves to solve their development problems and promote economic growth. By knowledge bank we mean the wealth of contacts, knowledge, information and experience we've acquired over the years, country by country and project by project, in our development work. Our ultimate aim is to encourage the knowledge revolution in developing countries. These are only some of the ways our analyses, advice and knowledge are made available to our client countries, their government and development professionals, and the public Poverty Assessment Social and Structural Review. Public Expenditure Review Sector Reports Country Economic Memoranda

 Knowledge Sharing. V. Capacity Building Another core bank function is to increase the capabilities of our own staff, our partners and the people in developing countriesto help them acquire the knowledge and skills they need to provide technical assistance, improve government performance and delivery of services, promote economic growth and sustain poverty reduction programs. Linkages to knowledge-sharing networks such as these have been set up by the bank to address the vast needs for information and dialogue about development: Advisory Services and Ask Us help desks make information available by topic via telephone, fax, email and the web. There are more than 25 advisory services at the bank. Staff members who respond to inquiries add value to the work of our own staff, clients and partners by responding quickly to their knowledge needs. Often, they are the first and possibly the only contact the public at large and the people in developing countries have with the World Bank. Global Development Learning Network is an extensive network of distance learning centers that uses advanced information and communications technologies to connect people working in development around the world. World Bank Institute Global and Regional Programs bring together leading development practitioners online and face-to-face to exchange experiences and to develop skills. B-SPAN web casting service is an Internet-based broadcasting station that presents World Bank seminars, workshops and conferences on sustainable development and poverty reduction.

MISSION OF THE WORLD BANK

STRATEGIES: The World Bank continually strives to improve the delivery of its aid based on the lessons learned from experience. Recognizing that in virtually all successful past assistance efforts the country itself was driving the agenda, the Bank strives to help governments take the lead in preparing and implementing development strategies to shape the future of their countries. This is the philosophy behind the Bank's Comprehensive Development Framework which, since 1999, has guided the way its assistance has been delivered to developing countries. The four main principles of the CDF are:

Development strategies should be comprehensive and shaped by a long-term vision, Development goals and strategies should be "owned" by the country, based on local stakeholder participation in shaping them, Countries receiving assistance should lead the management and coordination of aid programs through stakeholder partnerships, and Development performance should be evaluated through measurable results on the ground, in order to adjust the strategy to outcomes and a changing world.

For low-income countries, the Bank's plans for assistance are based on Poverty Reduction Strategies. In preparing theses strategies, the government consults a wide cross-section of local groups and combines this with an extensive analysis of the country's poverty and economic situation. The process is designed to develop country ownership of the strategy, as well as to foster greater openness in policymaking and increase government commitment to policies. After the consultations, the government identifies the country's priorities and targets for reducing poverty over a three to five year period. The Bank and other aid agencies then align their assistance efforts with the country's own strategy - a proven way of boosting aid effectiveness. The Bank's main vehicle for making strategic choices about the program design and resource allocations for individual countries is its Country Assistance Strategy which, since July 2002, has been based on PRSPs when dealing with low-income countries. In producing its Country Assistance Strategy, the Bank conducts extensive analysis of the country's economic and social situation in consultation with the government. Studies may be conducted into issues such as poverty levels, agriculture, the health and education systems, environmental policies, government procurement or financial management. Additionally, the Bank has recently reviewed its role, activities, and effectiveness and the development needs of countries in specific circumstances: Low Income Countries Under Stress, Middle-Income Countries (MICs), and Small States.

Comprehensive Development Framework

The Comprehensive Development Framework (CDF) encompasses a set of principles to guide development and poverty reduction, including the provision of external assistance. Poverty Reduction Strategies (PRS) underpinned by the CDF are the way forward to enhance country ownership and the achievement of the Millennium Development Goals. We intend to continue to direct the energy of our institutions to make this a reality. Eliminating poverty, reducing inequity, and improving opportunity for people in low- and middle-income countries are the World Bank Group's central objectives. The CDF is an approach by which countries can achieve these objectives. It emphasizes the interdependence of all elements of developmentsocial, structural, human, governance, environmental, economic, and financial. The CDF advocates: a holistic long-term vision; the country in the lead, both "owning" and directing the development agenda, with the Bank and other partners each defining their support in their respective business plans; stronger partnerships among governments, donors, civil society, the private sector, and other development stakeholders in implementing the country strategy; and a transparent focus on development outcomes to ensure better practical success in reducing poverty. POVERTY REDUCTION STRATEGY Poverty Reduction Strategy Papers (PRSPs) are one of the most tangible outcomes of the new approach to development defined in the Bank's Comprehensive Development Framework. Under the PRSP process, low-income countries write their own plans for reducing poverty. Since July 2002, the World Bank has based its Country Assistance Strategies, its plans for assistance to low-income countries, on PRSPs. PRSPs are produced according to five principles:

They are country-driven, involving broad-based participation by civil society and the private sector as they are produced.

They are directed toward achieving results and focused on outcomes that would benefit the poor. They recognize that tackling poverty requires a comprehensive approach because poverty is more than just a lack of income but that poor people also suffer from a lack of opportunity, security, and voice in decisions that affect their lives. They are partnership-oriented in that they encourage the coordinated involvement of bi-lateral, multilateral and non-government organizations in the country's poverty reduction program.

They are based on a long-term perspective for poverty reduction. PRSPs foster greater openness in policymaking. Governments have sought increasingly to include traditionally marginalized groups, the private sector and civil society in developing them and because of this, poverty-reduction strategies developed through this process tend to have broader community and stakeholder support and are "owned" by the government COUNTRY ASSISTANCE STRATEGY The World Bank prepares a Country Assistance Strategy (CAS) for active borrowers from the International Development Association (IDA) and the International Bank for Reconstruction and Development (IBRD). The CAS takes as its starting point the countrys own vision for its development, as defined in a Poverty Reduction Strategy Paper or other country-owned process. Oriented toward results, the CAS is developed in consultation with country authorities, civil society organizations, development partners, and other stakeholders. The purpose of the CAS is to set out a selective program of Bank Group support linked to the countrys development strategy and based on the Bank Groups comparative advantage in the context of other donor activities. CASs are designed to promote collaboration and coordination among development partners in a country. The CAS includes a comprehensive diagnosisdrawing on analytic work by the Bank, the government, and/or other partnersof the development challenges facing the country, including the incidence, trends, and causes of poverty. The CAS identifies the key areas where the Bank Group's assistance can have the biggest impact on poverty reduction. In its diagnosis, the CAS takes into account the performance of the Banks portfolio in the country, the countrys creditworthiness, state of institutional development, implementation capacity, governance, and other sectoral and cross-cutting issues. From this assessment, the level and composition of Bank Group financial, advisory, and/or technical support to the country is determined. To track implementation of the CAS program, the CAS is increasingly results-focused. It includes a framework of clear targets and indicators to monitor Bank Group and country performance in achieving stated outcomes.

HOW LOANS ARE MADE? The World Bank offers two basic types of loans: investment loans for goods, work and services to support economic and social development projects in a broad range of sectors; and adjustment loans to support policy and institutional reforms. During loan negotiations, the World Bank agrees with the borrowing country on the development objective of the project or program, outputs, performance indicators (to measure the impact and success of the project) and a plan to put it all into practice. Once a loan is approved and becomes effective, the borrower puts the project or program into practice according to the terms agreed with the World Bank. The World Bank supervises how each loan is used and evaluate the results. All loans are governed by operational policies, which make sure that operations are economically, financially, socially and environmentally sound. HOW ARE CITIZENS REPRESENTED AT THE WORLD BANK? The World Bank is run like a cooperative, with member countries as shareholders. The number of shares a country has is based roughly on the size of its economy. The United States is the largest single shareholder, with 16.41 percent of the votes, followed by Japan (7.87 percent), Germany (4.49 percent), the United Kingdom (4.31 percent) and France (4.31 percent). The rest of the shares are divided among the other member countries. Every member government is represented by an Executive Director. The five largest shareholders (France, Germany, Japan, the United Kingdom and the United States) appoint an executive director each, while other member countries are represented by 19 Executive Directors. The 24 Executive Directors make up our Board of Directors. They normally meet twice a week to oversee business, including reviewing loans and guarantees; new policies; the administrative budget; country support strategies; and borrowing and financial decisions. Dhanendra Kumar is the Executive Director for India. He also represents Bangladesh, Bhutan, and Sri Lanka. VOTING POWERS Like all corporate organizations, each of the agencies of the World Bank Group has shareholders; these are the member countries. Every shareholder is allocated a certain number of votes linked to the size of its shareholding. The votes include a specified number of membership votes (which is the same for all members) and additional votes based on the number of shares of the stock held. The number of votes of a member expressed as a percentage of the total number of votes held by all shareholders is the members voting power.

TYPES OF LOAN The Bank has two basic types of lending instruments: investment loans and development policy loans. Investment loans have a long-term focus (5 to 10 years), and finance goods, works, and services in support of economic and social development projects in a broad range of sectors. Development Policy loans have a short-term focus (1 to 3 years), and provide quick-disbursing external financing to support policy and institutional reforms. Investment Lending Investment loans provide financing for a wide range of activities aimed at creating the physical and social infrastructure necessary for poverty alleviation and sustainable development. Over the past two decades, investment lending has, on average, accounted for 75 to 80 percent of all Bank lending. The nature of investment lending has evolved over time. Originally focused on hardware, engineering services, and bricks and mortar, investment lending has come to focus more on institution building, social development, and building the public policy infrastructure needed to facilitate private sector activity. Projects range from urban poverty reduction (involving private contractors in new housing construction, for example) to rural development (formalizing land tenure to increase the security of small farmers); water and sanitation (improving the efficiency of water utilities); natural resource management (providing training in sustainable forestry and farming); post-conflict reconstruction (reintegrating soldiers into communities); education (promoting the education of girls); and health (establishing rural clinics and training health care workers). Eligibility. Investment loans are available to International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA) borrowers not in arrears with the Bank Group. Disbursement. Funds are disbursed against specific foreign or local expenditures related to the investment project, including pre-identified equipment, materials, civil works, technical and consulting services, studies, and incremental recurrent costs. Procurement of these goods, works, and services is an important aspect of project implementation. To ensure satisfactory performance, the loan agreement may include conditions of disbursement for specific project components. Instruments. The large majority of investment loans are either Specific Investment Loans or Sector Investment and Maintenance Loans. Adaptable Program Loans and Learning and Innovation Loans were recently introduced to provide more innovation and flexibility. Other instruments tailored to borrowers' specific needs are Technical Assistance Loans, Financial Intermediary Loans, and Emergency Recovery Loans.

Development Policy Lending Development Policy loans provide quick-disbursing assistance to countries with external financing needs, to support structural reforms in a sector or the economy as a whole. They support the policy and institutional changes needed to create an environment conducive to sustained and equitable growth. Over the past two decades, development policy lendingpreviously called adjustment lendinghas accounted, on average, for 20 to 25 percent of total Bank lending. Development Policy loans were originally designed to provide support for macroeconomic policy reforms, such as in trade policy and agriculture. Over time, they have evolved to focus more on structural, financial sector, and social policy reform, and on improving public sector resource management. Development Policy operations now generally aim to promote competitive market structures (for example, legal and regulatory reform), correct distortions in incentive regimes (taxation and trade reform), establish appropriate monitoring and safeguards (financial sector reform), create an environment conducive to private sector investment (judicial reform, adoption of a modern investment code), encourage private sector activity (privatization and publicprivate partnerships), promote good governance (civil service reform), and mitigate shortterm adverse effects of development policy (establishment of social protection funds). Eligibility. Development policy loans are available to IBRD and IDA borrowers not in arrears to the Bank Group. Eligibility for a development policy loan also requires agreement on monitorable policy and institutional reform actions, and satisfactory macroeconomic management. Coordination with the IMF is an essential part of the preparation of a development policy loan. Disbursement. Funds are disbursed in one or more stages (tranches). Tranches are released when the borrower complies with stipulated release conditions, such as the passage of reform legislation, the achievement of certain performance benchmarks, or other evidence of progress toward a satisfactory macroeconomic framework. Instruments. The new policy OP/BP 8.60 applies uniformly to all development policy lending, replacing the previous different types of lending (e.g., RILs, SALs, SECALs, SNALs, PSALs). Development policy operations in PRSP countries may continue to be called "PRSCs", because this is by now a well-established "brand name."

World Bank Group Agencies The World Bank Group consists of:(1) The International Bank for Reconstruction Development (IBRD), established in 1945, (2) The International Finance Corporation (IFC), established in 1956, (3) The International Development Association (IDA), established in 1960, (4) The Multilateral Investment Guarantee Agency (MIGA), established in 1988 and (5) The International Centre for Settlement of Investment Disputes (ICSID), established in 1966. Governments can choose which of these agencies they sign up to individually. The IBRD has 184 member governments, and the other institutions have between 140 and 176 members. The institutions of the World Bank Group are all run by a Board of 24 Executive Directors, with each Director representing either one country (for the largest countries), or a group of countries. Directors are appointed by their respective governments or the constituencies. The agencies of the World Bank are each governed by their Articles of Agreement that serve as the legal and institutional foundation for all of their work

I. International Bank for Reconstruction and Development History Commencing operations on June 25, 1946, it approved its first loan on May 9, 1947 ($250m to France for postwar reconstruction, in real terms the largest loan issued by the Bank to date). The IBRD was established mainly as a vehicle for reconstruction of Europe and Japan after World War II, with an additional mandate to foster economic growth in developing countries in Africa, Asia and Latin America. Originally the bank focused mainly on large-scale infrastructure projects, building highways, airports, and power plants. As Japan and its European client countries "graduated" (achieved certain levels of income per capita), the IBRD became focused entirely on developing countries. Since the early 1990s the IBRD has also provided financing to the post-Socialist states of Eastern Europe and the former Soviet Union. CURRENT SCENARIO: International Bank for Reconstruction and Development (IBRD) is one of the five institutions consisting the World Bank Group. The IBRD is an international organization whose original mission was to finance the reconstruction of nations devastated by WWII. Now, its mission has expanded to fight poverty by means of financing states. Its operation is maintained through payments as regulated by member states. It came into existence on December 27, 1945 following international ratification of the agreements reached at the United Nations Monetary and Financial Conference of July 1 to July 22, 1944 in Bretton Woods, New Hampshire. The IBRD provides loans to governments, and public enterprises, always with a government (or "sovereign") guarantee of repayment. The funds for this lending come primarily from the issuing of World Bank bonds on the global capital markets - typically $12-15 billion per year. These bonds are rated AAA (the highest possible) because they are backed by member states' share capital, as well as by borrowers' sovereign guarantees. (In addition, loans that are repaid are recycled (relent).) Because of the IBRD's credit rating, it is able to borrow at relatively low interest rates. As most developing countries have considerably lower credit ratings, the IBRD can lend to countries at interest rates that are usually quite attractive to them, even after adding a small margin (about 1%) to cover administrative overheads.

MISSIONS AND PRINCIPLES: The mission of the Bank is to: Fight poverty with passion and professionalism for lasting results. Help people help themselves and their environment by providing resources, sharing knowledge, building capacity and foreign partnership in the public and private sectors. Be an excellent institution able to attract, excite and nurture diverse and committed staff with exceptional skills who know how to listen and learn. The Principles of the Bank is: Client Centric Working in partnership Accountable for quality results dedicated to financial integrity and costeffectiveness Inspire and be innovative PURPOSES: The purposes of the Bank, as laid down in its Articles of Agreement are: To assist in the reconstruction and development of the territories of the members, by facilitating the investment of capital for productive purposes including the restoration of economies destroyed by war, the reconversion of productive facilities to peace time needs, and the encouragement of the development of productive facilities and resources in the less developed countries. To promote private foreign investment by means by means of guarantees or participation in loans and other investments made by private investors and when private capital is not available on reasonable terms, to supplement private investments by providing on suitable conditions, finance for productive purposes out of its own capital funds raised by it and other resources. To promote long-range balanced growth of internal trade and the maintenance of equilibrium in the balance of payments, by encouraging international investments of the productive resources of members, thereby assisting in raising productivity, the standard of living and conditions of labour in their territories. ORIENTATION: The main focus is on helping the poorest people and the poorest countries, but for all its clients the Bank emphasises the need for : Investing in people, particularly through basic health and education. Focusing on social development, inclusion, governance and institution-building as key elements of poverty reduction.

Strengthening the ability of the governments to deliver quality services, efficiency and transparency. Protecting the environment. Supporting and encouraging private business development. Promoting reforms to create a stable macro-economics environment, conducive to investment and long-term planning.

Through its loans, policy advice and technical assistance, the World Bank supports a broad range of programmes aimed at reducing poverty and improving standard of living in the developing world. The global fight against poverty is aimed at ensuring that people everywhere in this world have a chance for a better life for themselves and for their children. Over the past generation, more progress has been made in reducing peverty and raising standard of living than during any other period in history in developing countries. GUIDING PRINCIPLES: In its lending operation, the Bank is guided by certain policies which have been formulated on the basis of Articles of Agreement First, the Bank should properly assess the repayment prospects of the loans. For this purpose, it should consider the availability of natural resources and productive plant capacity to exploit the resources, and operate the plant and the countrys past debt record. Secondly, the Bank should lend only for specific projects which are economically and technically sound and of a high priority nature. Most Bank loans have been made for basic utilities, such as power and transport which are prerequisites for economic development. The Bank also places considerable emphasis upon proper management of the projects. Thirdly, the Bank lends only to enable a country to meet the foreign exchange content of any project cost, it normally expects the borrowing country to mobilise its domestic resources. Fourthly, the Bank does not expect the borrowing country to spend the loan in a particular country, in fact, it encourages the borrowers to procure machinery and goods for Bank financed projects in the cheapest possible market consistent with satisfactory performance. Fifthly, it is the Banks policy to maintain continuing relations with borrowers with a view to check the progress of the projects and keep in touch with financial and economic developments in borrowing countries. This also helps in the solution of any problem which might arise in the technical and administrative field. Lastly, the Bank indirectly attaches special importance to the promotion of local private enterprise.

LENDING PROGRAMMES The World Bank has traditionally financed all kinds of capital infrastructure such as roads and railways, telecommunications and ports and power facilities, its development strategy also places an emphasis on investment that can directly affect the well being of the masses of poor people of developing countries by integrating them as active partners in the development process. The following are the Lending Programmes of the Bank: Structural Adjustment Lending: The Bank in response to the deteriorating prospects for the developing countries during the 1980s, inaugurated a programme of Structural Adjustment Lending (SAL). This lending supports programmes of specific policy changes and institutional reforms to achieve a more efficient use of resources and thereby: (a) Contribute to a more sustainable balance of payment in the medium and long term and to the maintenance of growth in the face of severe constraints, and (b) Lay the basis for regaining momentum of future growth. Special Action Programme: In 1983, the Bank initiated its Special Action Programme (SAP), designed to increase assistance to countries that were making efforts to cope with the exceptionally difficult economic environment brought on by a global recession. B-Loan and Export Credit: In January 1983, the Executive Director authorised the establishment of a new set of financing instruments to help the Banks borrowers increase and stabilise flows of private capital on approved terms by linking part of commercial bank flows to IBRD operations. These instruments which comprises the B-loan pilot programme, include three options i.e. (a) Direct Bank participation in the late maturities of a B-Loan. (b) Bank guarantee of late maturities with the possibility of release from all or a part of its share, and (c) Bank acceptance of a contingent obligation to finance an element of deferred principal at final maturity of a loan with level-debt service payment with floatingrate interest and variable amounts of principal repayment.

IBRD: Votes and Subscriptions

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT SUBSCRIPTIONS AND VOTING POWER OF MEMBER COUNTRIES TOTAL SUBSCRIPTIONS AMOUNT PERCENT (*) OF TOTAL 30.0 .02 83.0 .05 925.2 .59 267.6 .17 52.0 .03 1,791.1 1.14 113.9 .07 2,446.4 1.56 1,106.3 .70 164.6 .10 107.1 .07 110.3 .07 485.4 .31 94.8 .06 332.3 .21 2,898.3 1.84 58.6 .04 86.8 .06 47.9 .03 178.5 .11 54.9 .03 61.5 .04 3,328.7 2.12 237.3 .15 521.5 .33 86.8 .06 71.6 .05 21.4 .01 152.7 .10 4,479.5 2.85 50.8 .03 VOTING POWER NO. OF PERCENT VOTES OF TOTAL 550 .03 1,080 .07 9,502 .59 2,926 .18 770 .05 18,161 1.12 1,389 .09 24,714 1.53 11,313 .70 1,896 .12 1,321 .08 1,353 .08 5,104 .32 1,198 .07 3,573 .22 29,233 1.81 836 .05 1,118 .07 729 .05 2,035 .13 799 .05 865 .05 33,537 2.07 2,623 .16 5,465 .34 1,118 .07 966 .06 464 .03 1,777 .11 45,045 2.78 758 .05

MEMBER AFGHANISTAN ALBANIA ALGERIA ANGOLA ANTIGUA AND BARBUDA ARGENTINA ARMENIA AUSTRALIA AUSTRIA AZERBAIJAN BAHAMAS, THE BAHRAIN BANGLADESH BARBADOS BELARUS BELGIUM BELIZE BENIN BHUTAN BOLIVIA BOSNIA AND HERZEGOVINA BOTSWANA BRAZIL BRUNEI DARUSSALAM BULGARIA BURKINA FASO BURUNDI CAMBODIA CAMEROON CANADA CAPE VERDE

II. INTERNATIONAL DEVELOPMENT ASSOCIATION: History The International Bank for Reconstruction and Development (IBRD), better known as the World Bank, was established in 1944 to help Europe recover from the devastation of World War II. The success of that enterprise led the Bank, within a few years, to turn its attention to the developing countries. By the 1950s, it became clear that the poorest developing countries needed softer terms than those that could be offered by the Bank, so they could afford to borrow the capital they needed to grow. With the United States taking the initiative, a group of the Banks member countries decided to set up an agency that could lend to the poorest countries on the most favourable terms possible. They called the agency the "International Development Association." Its founders saw IDA as a way for the "haves" of the world to help the "have-nots." But they also wanted IDA to be run with the discipline of a bank. For this reason, US President Dwight D. Eisenhower proposed, and other countries agreed, that IDA should be part of the World Bank (IBRD). Current Scenario: The International Development Association (IDA) created on September 24, 1960, is a UN specialized agency. It is responsible for providing long-term interest-free loans to the poorest of developing countries on terms more lenient than those of the World Bank proper, and forms part of the World Bank Group based in Washington, D.C. The International Development Association (IDA) provides grants and "soft loans", with repayment periods of some 30 years and no interest, to the poorest countries (generally with per capita incomes below $500 per year). IDA concessionary lending is funded by direct contributions from member states, which subsidise the difference between the IBRD's costs and the price charged to IDA borrowers. IBRD and IDA are run on the same lines. They share the same staff and headquarters, report to the same president and evaluate projects with the same rigorous standards. But IDA and IBRD draw on different resources for their lending, and because IDAs loans are deeply concessional, IDAs resources must be periodically replenished (see "IDA

Funding" below). A country must be a member of IBRD before it can join IDA; 165 countries are IDA members. IDA's Articles of Agreement became effective in 1960. The first IDA loans, known as credits, were approved in 1961 to Chile, Honduras, India and Sudan IDAs Mission The International Development Association (IDA) is the part of the World Bank that helps the earths poorest countries reduce poverty by providing interest-free loans and grants for programs aimed at boosting economic growth and improving living conditions. IDA funds help these countries deal with the complex challenges they face in striving to meet the Millennium Development Goals. They must, for example, respond to the competitive pressures as well as the opportunities of globalization; arrest the spread of HIV/AIDS; and prevent conflict or deal with its aftermath. IDAs long-term, no-interest loans pay for programs that build the policies, institutions, infrastructure and human capital needed for equitable and environmentally sustainable development. IDAs goal is to reduce inequalities both across and within countries by allowing more people to participate in the mainstream economy, reducing poverty and promoting more equal access to the opportunities created by economic growth. IDA's Borrowers IDA lends to those countries that had an income in 2005 of less than $1,025 per person and lack the financial ability to borrow from IBRD. Some "blend borrower" countries like India and Indonesia are eligible for IDA loans because of their low per person incomes but are also eligible for IBRD loans because they are financially creditworthy. Eighty-one countries are currently eligible to borrow from IDA. Together these countries are home to 2.5 billion people, half of the total population of the developing world. Most of these people, an estimated 1.5 billion, survive on incomes of $2 or less a day. IDA Lending IDA credits have maturities of 20, 35 or 40 years with a 10-year grace period before repayments of principal begins. IDA funds are allocated to the borrowing countries in relation to their income levels and record of success in managing their economies and their ongoing IDA projects. There is no interest charge, but credits do carry a small service charge, currently 0.75 percent on funds paid out. See the terms of IDA lending. In fiscal year 2006 (which ended June 30, 2006), IDA commitments totaled $9.5 billion. New commitments in FY06 comprised 167 new operations. Fifty percent of new commitments went to Sub Saharan Africa, 27 percent to South Asia, 11 percent to East Asia and the Pacific, 5 percent to Eastern Europe and Central Asia, and the remainder to poor countries in North Africa and in Latin America. The leading IDA borrowers in FY06 are listed in Table 1.

Since 1960, IDA has lent $170 billion to 108 countries. Annual lending figures have increased steadily and averaged about $9.1 billion over the last three years. Most loans address basic needs, such as primary education, basic health services, and clean water and sanitation. IDA also funds projects that safeguard the environment, improve conditions for private business, build infrastructure, and support reforms to liberalize countries' economies and strengthen their institutions. All these projects pave the way toward economic growth, job creation, higher incomes and better living conditions.

FY06 Top Ten IDA Borrowers Pakistan Vietnam Tanzania Ethiopia India Bangladesh Nigeria Democratic Republic of Congo Ghana Afghanistan IDA Funding

$million 1183 768 751 505 500 462 422 365 355 240

While the IBRD raises most of its funds on the world's financial markets, IDA is funded largely by contributions from the governments of the richer member countries. Additional funds come from IBRD's income and from borrowers' repayments of earlier IDA credits. See the list of cumulative contributions to IDA Replenishments and donor shares of total contributions. Donors get together every three years to replenish IDA funds. Donor contributions account for more than half of the US$33 billion in the IDA14 replenishment, which finances projects over the three-year period ending June 30, 2008. The largest pledges to IDA14 were made by the United States, the United Kingdom, Japan, Germany, France, Italy and Canada, but less wealthy nations also contribute to IDA. Turkey and Korea, for example, once IDA borrowers, are now donors. Countries currently eligible to borrow from IBRD (but not from IDA) Brazil, Czech Republic, Hungary, Mexico, Poland, Russia, the Slovak Republic, and South Africa are also IDA14 donors. Other contributors include Australia, Austria, Barbados, Belgium, Denmark, Finland, Greece, Iceland, Ireland, Israel, Kuwait, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Saudi Arabia, Singapore, Slovenia, Spain, Sweden, Switzerland and Venezuela. To increase openness and help ensure that IDAs policies are responsive to country needs and circumstances, representatives from each IDA region were invited to take part in the IDA13 and IDA14 replenishment negotiations. The number of borrower representatives

was expanded to a total of nine during the IDA14 replenishment negotiations. In both IDA13 and IDA14, background policy papers were publicly released, as well as drafts of the replenishment reports prior to their finalization. PURPOSE IDA helps to reduce poverty by collaborating with other development partners, as well as through its own programs. IDA has learned from experience that development programs are most successful when the borrower country not just the government, but nongovernmental organizations (NGOs) and other representatives of civil society acquires a sense of ownership of the programs through deep involvement in their design and execution. The borrower country now leads in preparing the Poverty Reduction Strategy (PRS) that establishes priorities for IDA support. In each country, IDA works with local development partners to ensure that the PRS is carried out in a coherent way and that IDA focuses on areas where it has comparative advantage. In IDA13, IDA targeted human-development projects in areas like education, health, social safety nets, water supply and sanitation (36%); law, justice and public administration (23%); industry (18%); infrastructure (14%), and agriculture and rural development (8%). ORIENTATION

Sound economic policies, rural development, private business and sustainable environmental practices Investment in people, in education and health, especially in the struggle against HIV/AIDS, malaria and TB Expansion of borrower capacity to provide basic services and ensure accountability for public resources Recovery from civil strife, armed conflict and natural disaster, and Promotion of trade and regional integration

IDA carries out analytical studies to build the knowledge base that allows intelligent design of policies to reduce poverty. IDA also advises governments on ways to broaden the base of economic growth and protect the poor from economic shocks. The one billion children who live in countries that receive funds from IDA are the main beneficiaries of IDA-backed investments in basic health, primary education, literacy and clean water. IDA is now the single largest source of donor funds for basic social services in the poorest countries. IDA also coordinates donor assistance to provide relief for poor countries that cannot manage their debt-service burden. Globalization the increasing integration of world markets and societies has allowed China, India and many other developing countries to achieve faster growth through expanded foreign direct investments and access to export markets. IDA is re-invigorating its work in trade to assist the poorest and most marginalized countries to limit adverse

disruptions from globalization and to enhance net benefits from it. IDAs work in this area emphasizes measures to improve the investment climate; enhance regional integration, particularly in Africa; strengthen competitiveness; remove barriers to the markets of industrial countries; and forge partnerships that enable acquisition of appropriate skills and infrastructure LENDING PROGRAMME: IDA's 81 eligible borrowers have very significant needs for concessional funds. But the amounts of funds available for lending which is virtually fixed once donations are pledged by donor governments, tends to be well below the countries' need. IDA therefore must allocate scarce resources among eligible borrowing countries. This note describes how this is done on the basis of borrowers' policy performance and institutional capacity in order to concentrate resources where they are likely to be most helpful in reducing poverty. 1. Eligibility Three criteria are used to determine which countries are eligible to borrow IDA resources:

Relative poverty, defined as GNP per capita below an established threshold, US$1025 (as of July 1, 2006). Lack of creditworthiness to borrow on market terms and therefore a need for concessional resources to finance the country's development program. Good policy performance, defined as the implementation of economic and social policies that promote growth and poverty reduction.

2. Allocation Criteria The main factor that determines the allocation of IDA resources among eligible countries is each country's performance in implementing policies that promote economic growth and poverty reduction. This bas been assessed by the Country Policy and Institutional Assessment (CPIA). To fully underscore the role of the CPIA in the IDA Performance Based Allocations, the overall country score is referred to as the IDA Resource Allocation Index (IRAI). In addition to the IRAI, portfolio performance and governance also feature in the allocation process. Together, the IRAI, portfolio performance and governance constitute the IDA Country Performance Rating (CPR). In addition to the CPR, population and per capita income also determine IDA allocations. 3. Performance Ratings Every year World Bank staff assesses the quality of each borrower's policy performance. The criteria and methodology of these assessments have evolved over time to incorporate lessons from experience as well as research findings. Beginning in 1998, the country performance assessment was broadened to include an appraisal not only of the

government's policies but also of the institutions in place to implement them. The 16 performance criteria are grouped into four clusters

Structural Policies Policies for Social Inclusion/Equity Public Sector management and Institutions

At the time of the IDA14 replenishment negotiations the World Bank Executive Board agreed that, starting with the results for 2005, the numerical IDA country performance ratings would be disclosed. The performance assessment also takes into account the performance of the country's active project portfolio performance. The combined rating is scaled up or down depending on the strength of the country's governance performance, resulting into the IDA Country Performance Rating (CPR). 4. Allocation Process The allocation of IDA's resources is determined primarily by each borrower's rating in the annual country performance and institutional assessment. In addition, the IDA14 Agreement recommends that because the acceleration of economic and social development in Sub-Saharan Africa remains foremost among IDA's priorities, these countries should receive priority in the allocation process, provided their policy performance warrants it. In the case of borrowers that are eligible for both IDA and IBRD funds ("Blend countries"), the IDA allocations must also take into account those countries' creditworthiness for and access to other sources of funds. Individual country performance-based allocations serve as an anchor for the formulation of Country Assistance Strategy (CAS) lending programs. 5. Lending and Performance IDA management monitors actual lending to each country in relation to the planning allocations. As a result, actual lending on per capita terms is robustly correlated with performance levels. The strong link between lending and performance has resulted in an increasing concentration of lending to countries where policy performance is most conducive to effective resource use.

IDA-Votes and Subscription

INTERNATIONAL DEVELOPMENT ASSOCIATION

VOTING POWER OF MEMBER COUNTRIES

MEMBER PART I COUNTRIES AUSTRALIA AUSTRIA BELGIUM CANADA DENMARK FINLAND FRANCE GERMANY GREECE ICELAND IRELAND ITALY JAPAN KUWAIT LUXEMBOURG NETHERLANDS NEW ZEALAND NORWAY PORTUGAL RUSSIAN FEDERATION SLOVENIA SOUTH AFRICA SPAIN SWEDEN SWITZERLAND UNITED ARAB EMIRATES UNITED KINGDOM UNITED STATES PART II COUNTRIES AFGHANISTAN ALBANIA ALGERIA

III. INTERNATIONAL FINANCE CORPORATION For several years officials of the World Bank had been supporting the creation of a new and different entity to complement their own. The Bank had been founded to finance post-World War II reconstruction and development projects by lending money to member governments, and had been doing so effectively. Yet in its initial years, some senior staff had seen the need for creating a related institution to spur greater private sector investment in poor countries. The economies of poor countries were still in very early stages of development, lacking the human resources, physical infrastructure and sound institutions needed to raise incomes and improve living standards. The responsibility for development was almost universally assigned to the public sector. Private sector investment in developing countries was small, and not much thought was given to increasing it. It was into this environment that IFC was born. CURRENT SCENARIO: The International Finance Corporation (IFC) promotes sustainable private sector investment in developing countries as a way to reduce poverty and improve people's lives. IFC is a member of the World Bank Group and is headquartered in Washington, DC. It shares the primary objective of all World Bank Group institutions: to improve the quality of the lives of people in its developing member countries. IFC Mission Statement. Established in 1956, IFC is the largest multilateral source of loan and equity financing for private sector projects in the developing world. It promotes sustainable private sector development primarily by: 1. Financing private sector projects located in the developing world. 2. Helping private companies in the developing world mobilize financing in international financial markets. 3. Providing advice and technical assistance to businesses and governments. MISSION and PRINCIPLES: Our mission is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives Shared Principles and Practices IFC, a member of the World Bank Group, is a global investor and advisor that is committed to promoting sustainable projects in our developing member countries that are economically beneficial, financially and commercially sound, and environmentally and socially sustainable. We believe that sound economic growth is key to poverty reduction; that it is grounded in the development of entrepreneurship and successful private investment; and that a

conducive business environment is needed for the latter to thrive and contribute to improving people's lives. We seek to continuously improve our performance by responding to clients promptly, sharing our successes, and learning from our experience. The following are the principles of IFC: (a) Added Value: IFC adds value to our developing member countries by:

Taking educated risks that the private sector will not take alone; Pioneering opportunities in frontier countries and sectors, to maximize our projects' demonstration effect and catalytic role; Innovating by developing new products and services that better meet our clients' needs; Providing quality advice when the private sector is unwilling or unable to do so; Sharing knowledge to promote successful private investment, entrepreneurship, and enabling business environments; Integrating fully best environmental, social, and corporate governance practices in all our work; and Being responsive to their needs and those of our private sector clients in a timely manner.

(b) Integrity:

Holding ourselves and our clients to the highest professional and ethical standards; Recognizing, in every investment, the importance and value of good corporate governance; Seeking to be transparent, accountable, and equitable; and Being honest, open and fair in our dealings with each other, with our clients and with local communities.

(c) Environmental and Social Sustainability:

Ensuring that our projects attain high environmental and social standards; Consulting with local communities on project-specific environmental and social impacts and opportunities; Working with responsible clients and other lenders, and local NGOs; and Listening actively and responding to stakeholders and their concerns.

GUIDING PRINCIPLES: To be eligible for IFC funding, a project must meet a number of criteria. The project must:

Be located in a developing country* that is a member of IFC; Be in the private sector; Be technically sound; Have good prospects of being profitable; Benefit the local economy; and Be environmentally and socially sound, satisfying IFC environmental and social standards as well as those of the host country.

The following are the Guiding Principles of the IFC: (a) Investment Proposal: A company or entrepreneur seeking to establish a new venture or expand an existing enterprise can approach IFC directly by submitting an investment proposal. After this initial contact and a preliminary review, IFC may proceed by requesting a detailed feasibility study or business plan to determine whether or not to appraise the project. IFC's project/investment cycle illustrates the stages a business idea goes through as it becomes an IFC-financed project. (b) Government Cooperation Although IFC is primarily a financier of private sector projects, it may provide finance for a company with some government ownership, provided there is private sector participation and the venture is run on a commercial basis. Although IFC does not accept government guarantees for its financing, its work often requires close cooperation with government agencies in developing countries. (c) Pricing and Financing Ceilings: To ensure the participation of investors and lenders from the private sector, IFC limits the total amount of own-account debt and equity financing it will provide for any single project. For new projects the maximum is 25 percent of the total estimated project costs, or, on an exceptional basis, up to 35 percent in small projects. For expansion projects, IFC may provide up to 50 percent of the project cost, provided its investments do not exceed 25 percent of the total capitalization of the project company.

IFC provides a wide variety of financial products and services to its clients and can offer a mix of financing and advice that is tailored to meet the needs of each project. However, the bulk of the funding, as well as leadership and management responsibility, lie with private sector owners. LENDING PROGRAMMES: IFC's equity and quasi-equity investments are funded out of its net worth: the total of paid in capital and retained earnings. Strong shareholder support, triple-A ratings, and the substantial paid-in capital base have allowed IFC to raise funds for its lending activities on favorable terms in the international capital markets. Retained earnings now represent almost three-quarters of IFC's net worth of $9.8 billion (end-June 2006). Within the World Bank Group, the World Bank finances projects with sovereign guarantees, while the IFC finances projects without sovereign guarantees. This means that the IFC is primarily active in private sector projects, although some projects in the public sector (at the municipal or sub-national level) have recently been funded. Private sector financing is IFC's main activity, and in this respect is a profit-oriented financial institution (and has never had an annual loss in its 50-year history). Like a bank, IFC lends or invests its own funds and borrowed funds to its customers and expects to make a sufficient risk-adjusted return on its global portfolio of projects. IFC's activities, however, must meet a second test of contributing to a reduction in poverty in line with its mandate. In practice, this is broadly interpreted, but considerable time and effort is devoted to both (i) (ii) selecting projects with positive developmental outcomes, and improving the developmental outcome of projects by various means.

Apart from its core investment activities, IFC also carries out technical cooperation projects in many countries to improve the investment climate. These activities may be linked to a specific investment project, or, increasingly, to broader goals such as improving the legislative environment for a specific industry. IFC's technical cooperation projects are generally funded by donor countries or from IFC's own budget.

IFC: Votes and Subscriptions

INTERNATIONAL DEVELOPMENT ASSOCIATION VOTING POWER OF MEMBER COUNTRIES VOTING POWER MEMBER PART I COUNTRIES AUSTRALIA AUSTRIA BELGIUM CANADA DENMARK FINLAND FRANCE GERMANY GREECE ICELAND IRELAND ITALY JAPAN KUWAIT LUXEMBOURG NETHERLANDS NEW ZEALAND NORWAY PORTUGAL RUSSIAN FEDERATION SLOVENIA SOUTH AFRICA SPAIN SWEDEN SWITZERLAND UNITED ARAB EMIRATES UNITED KINGDOM UNITED STATES PART II COUNTRIES AFGHANISTAN 17,896 .11 195,130 108,386 172,388 442,902 158,811 94,474 654,788 1,043,130 39,635 36,795 44,943 426,350 1,626,574 84,679 40,561 330,811 45,489 161,004 42,015 44,455 34,947 43,501 113,072 304,694 173,112 1,367 794,820 2,102,894 9,361,727 1.24 .69 1.10 2.82 1.01 .60 4.16 6.63 .25 .23 .29 2.71 10.34 .54 .26 2.10 .29 1.02 .27 .28 .22 .28 .72 1.94 1.10 .01 5.05 13.37 59.51 NO. OF VOTES PERCENT OF TOTAL

IV. MULTILATERAL INVESTMENT GUARANTEE AGENCY CURRENT SCENARIO: The Multilateral Investment Guarantee Agency (MIGA) is a member of the World Bank group. It was established to promote foreign direct investment into developing countries. MIGA was founded in 1988 with a capital base of $1 billion and is headquartered in Washington, D.C. MIGA promotes foreign direct investment into developing countries by insuring investors against political risk insurance, advising governments on attracting investment, sharing information through on-line investment information services, and mediating disputes between investors and governments. MIGA also requires host country government approval for every project. MIGA tries to work with host governments - resolving claims before they are filed. MISSION: As a member of the World Bank Group, MIGA's mission is to promote foreign direct investment (FDI) into developing countries to help support economic growth, reduce poverty, and improve people's lives. Foreign direct investors can play a critical role in reducing poverty, by building roads, for example, providing clean water and electricity, and above all, providing jobs. By taking on these tasks, the private sector can help economies grow and avert the need for governments to use funds better spent on acute social needs, while taking advantage of the opportunity to make profitable investments. PURPOSE: MIGA's operational strategy plays to our foremost strength in the marketplace attracting investors and private insurers into difficult operating environments. The agency's strategy focuses on specific areas where we can make the greatest difference:

Infrastructure development is an important priority for MIGA, given the estimated need for $230 billion a year solely for new investment to deal with the rapidly growing urban centers and underserved rural populations in developing countries. Frontier marketshigh-risk and/or low-income countries and marketsrepresent both a challenge and an opportunity for the agency. These markets typically have the most need and stand to benefit the most from foreign investment, but are not well served by the private market. Investment into conflict-affected countries is another operational priority for the agency. While these countries tend to attract considerable donor goodwill once conflict ends, aid flows eventually start to decline, making private investment

critical for reconstruction and growth. With many investors wary of potential risks, political risk insurance becomes essential to moving investments forward. South-South investments (investments between developing countries) are contributing a greater proportion of FDI flows. But the private insurance market in these countries is not always sufficiently developed and national export credit agencies often lack the ability and capacity to offer political risk insurance.

GUIDING PRINCIPLES: Confidence, security, and credibility. MIGA gives private investors the confidence and comfort they need to make sustainable investments in developing countries. As part of the World Bank Group, and having as our shareholders both host countries and investor countries, MIGA brings security and credibility to an investment that is unmatched. Our presence in a potential investment can literally transform a "no-go" into a "go." We act as a potent deterrent against government actions that may adversely affect investments. And even if disputes do arise, our leverage with host governments frequently enables us to resolve differences to the mutual satisfaction of all parties. Market leader. MIGA is a leader when it comes to assessing and managing political risks, developing new products and services, and finding innovative ways to meet client needs. But we don't stop there. We also provide expert advice to help countries attract and retain quality foreign investment, and a host of online services to make sure investors know about business opportunities in our developing member countries. Complex deals. MIGA can be the difference between make or break, by providing that all-critical lynchpin that enables a complex transaction to go ahead. MIGA offers innovative coverage of the nontraditional sub-sovereign risks that often accompany water and other infrastructure projects. We can also cover interest rate hedging instruments, as we did for a power project in Vietnam, as well as provide capital markets guarantees, which we recently did for residential mortgage-backed securities in Latvia. PRI market. MIGA complements the activities of other investment insurers and works with partners through its coinsurance and reinsurance programs. By doing so, we are able to expand the capacity of the political risk insurance industry to insure investments, as well as to encourage private sector insurers into transactions they would not have otherwise undertaken LENDING PROGRAMMES: MIGA provides guarantees against noncommercial risks to protect cross-border investment in developing member countries. Guarantees protect investors against the risks of Transfer Restriction, Expropriation, War and Civil Disturbance, and Breach of Contract (for contracts between the investor/project enterprise and the authorities of the host country). These coverages may be purchased individually or in combination.

MIGA can cover only new investments. These include:

new, greenfield investments; new investment contributions associated with the expansion, modernization, or financial restructuring of existing projects; and acquisitions involving privatization of state enterprises.

Unlike other insurers, MIGA is backed by the World Bank Group and its member countries

MIGA: Votes and Subscriptions

MULTILATERAL INVESTMENT GUARANTEE AGENCY SUBSCRIPTIONS AND VOTING POWER OF MEMBER COUNTRIES

TOTAL SUBSCRIPTIONS VOTING POWER MEMBER CATEGORY I COUNTRIES AUSTRALIA AUSTRIA BELGIUM CANADA CZECH REPUBLIC DENMARK FINLAND FRANCE GERMANY GREECE ICELAND IRELAND ITALY JAPAN LUXEMBOURG NETHERLANDS NORWAY PORTUGAL SLOVENIA SPAIN SWEDEN SWITZERLAND UNITED KINGDOM UNITED STATES CATEGORY II COUNTRIES AFGHANISTAN 1.18 .07 384 .18 30.19 13.66 35.77 52.25 7.84 12.65 10.57 85.65 89.36 4.93 .90 6.50 49.70 89.79 2.04 38.22 12.32 6.73 1.80 22.65 18.49 26.43 85.65 325.64 1,029.73 1.73 .79 2.06 3.00 .45 .73 .61 4.92 5.14 .28 .05 .37 2.86 5.16 .12 2.20 .71 .39 .10 1.30 1.06 1.52 4.92 18.71 59.17 3,285 1,632 3,843 5,491 1,050 1,531 1,323 8,831 9,202 759 356 916 5,236 9,245 470 4,088 1,498 939 446 2,531 2,115 2,909 8,831 1.50 .75 1.76 2.51 .48 .70 .60 4.04 4.21 .35 .16 .42 2.39 4.23 .21 1.87 .68 .43 .20 1.16 .97 1.33 4.04 AMOUNT (*) PERCENT OF TOTAL NO. OF PERCENT VOTES OF TOTAL

32,830 15.01 109,357 50.00

ALBANIA ALGERIA ANGOLA ANTIGUA AND BARBUDA ARGENTINA ARMENIA AZERBAIJAN BAHAMAS, THE BAHRAIN BANGLADESH BARBADOS BELARUS BELIZE BENIN BOLIVIA BOSNIA AND HERZEGOVINA BOTSWANA BRAZIL BULGARIA BURKINA FASO BURUNDI CAMBODIA CAMEROON CAPE VERDE CENTRAL AFRICAN REPUBLIC CHAD CHILE CHINA COLOMBIA CONGO, DEM. REP. OF CONGO, REPUBLIC OF COSTA RICA COTE D'IVOIRE CROATIA CYPRUS DOMINICA DOMINICAN REPUBLIC ECUADOR

1.02 11.44 1.87 .50 22.10 .80 1.15 1.76 1.36 5.99 1.20 2.33 .88 1.08 2.20 .80 .88 26.06 6.43 .61 .74 1.64 1.07 .50 .60 .60 8.55 55.30 7.70 5.96 1.15 2.06 3.10 3.30 1.83 .50 1.47 3.21

.06 .66 .11 .03 1.27 .05 .07 .10 .08 .34 .07 .13 .05 .06 .13 .05 .05 1.50 .37 .04 .04 .09 .06 .03 .03 .03 .49 3.18 .44 .34 .07 .12 .18 .19 .11 .03 .08 .18

368 1,410 453 316 2,476 346 381 442 402 865 386 499 354 374 486 346 354 2,872 909 327 340 430 373 316 326 326 1,121 5,796 1,036 862 381 472 576 596 449 316 413 587

.17 .64 .21 .14 1.13 .16 .17 .20 .18 .40 .18 .23 .16 .17 .22 .16 .16 1.31 .42 .15 .16 .20 .17 .14 .15 .15 .51 2.65 .47 .39 .17 .22 .26 .27 .21 .14 .19 .27

EGYPT, ARAB REPUBLIC OF EL SALVADOR EQUATORIAL GUINEA ERITREA ESTONIA ETHIOPIA FIJI GABON GAMBIA, THE GEORGIA GHANA GRENADA GUATEMALA GUINEA GUINEA-BISSAU GUYANA HAITI HONDURAS HUNGARY INDIA INDONESIA IRAN, ISLAMIC REPUBLIC OF ISRAEL JAMAICA JORDAN KAZAKHSTAN KENYA KOREA, REPUBLIC OF KUWAIT KYRGYZ REPUBLIC LAO PEOPLE'S DEM. REP. LATVIA LEBANON LESOTHO LIBYA LITHUANIA MACEDONIA, FYR OF MADAGASCAR

8.09 1.22 .50 .50 1.15 1.23 .71 1.69 .50 1.11 4.32 .50 1.40 .91 .50 .84 .75 1.78 9.94 53.71 18.49 16.59 8.35 3.19 1.71 3.68 3.03 7.91 16.39 .77 .60 1.71 2.50 .88 5.49 1.87 .88 1.76

.46 .07 .03 .03 .07 .07 .04 .10 .03 .06 .25 .03 .08 .05 .03 .05 .04 .10 .57 3.09 1.06 .95 .48 .18 .10 .21 .17 .45 .94 .04 .03 .10 .14 .05 .32 .11 .05 .10

1,075 388 316 316 381 389 337 435 316 377 698 316 406 357 316 350 341 444 1,260 5,637 2,115 1,925 1,101 585 437 634 569 1,057 1,905 343 326 437 516 354 815 453 354 442

.49 .18 .14 .14 .17 .18 .15 .20 .14 .17 .32 .14 .19 .16 .14 .16 .16 .20 .58 2.58 .97 .88 .50 .27 .20 .29 .26 .48 .87 .16 .15 .20 .24 .16 .37 .21 .16 .20

MALAWI MALAYSIA MALDIVES MALI MALTA MAURITANIA MAURITIUS MICRONESIA, FED. STATES OF MOLDOVA MONGOLIA MOROCCO MOZAMBIQUE NAMIBIA NEPAL NICARAGUA NIGERIA OMAN PAKISTAN PALAU PANAMA PAPUA NEW GUINEA PARAGUAY PERU PHILIPPINES POLAND QATAR ROMANIA RUSSIAN FEDERATION RWANDA ST. KITTS AND NEVIS ST. LUCIA ST. VINCENT & THE GRENADINES SAMOA SAUDI ARABIA SENEGAL SERBIA SEYCHELLES SIERRA LEONE

.77 10.20 .50 1.43 1.32 1.11 1.53 .50 .96 .58 6.13 1.71 1.07 1.22 1.80 14.87 1.66 11.63 .50 2.31 .96 1.41 6.57 4.84 7.64 2.41 9.78 55.28 1.32 .50 .88 .88 .50 55.28 2.56 4.07 .50 1.32

.04 .59 .03 .08 .08 .06 .09 .03 .06 .03 .35 .10 .06 .07 .10 .85 .10 .67 .03 .13 .06 .08 .38 .28 .44 .14 .56 3.18 .08 .03 .05 .05 .03 3.18 .15 .23 .03 .08

343 1,286 316 409 398 377 419 316 362 324 879 437 373 388 446 1,753 432 1,429 316 497 362 407 923 750 1,030 507 1,244 5,794 398 316 354 354 316 5,794 522 673 316 398

.16 .59 .14 .19 .18 .17 .19 .14 .17 .15 .40 .20 .17 .18 .20 .80 .20 .65 .14 .23 .17 .19 .42 .34 .47 .23 .57 2.65 .18 .14 .16 .16 .14 2.65 .24 .31 .14 .18

SINGAPORE SLOVAK REPUBLIC SOLOMON ISLANDS SOUTH AFRICA SRI LANKA SUDAN SURINAME SWAZILAND SYRIAN ARAB REPUBLIC TAJIKISTAN TANZANIA THAILAND TIMOR-LESTE TOGO TRINIDAD AND TOBAGO TUNISIA TURKEY TURKMENISTAN UGANDA UKRAINE UNITED ARAB EMIRATES URUGUAY UZBEKISTAN VANUATU VIETNAM YEMEN, REPUBLIC OF ZAMBIA ZIMBABWE TOTAL

2.72 3.91 .50 16.62 4.78 2.06 .82 .58 2.96 .74 2.48 7.42 .50 .77 3.58 2.75 8.14 .66 2.33 13.46 6.56 2.02 1.75 .50 3.88 1.55 3.18 2.36 710.42 1,740.15

.16 .22 .03 .96 .27 .12 .05 .03 .17 .04 .14 .43 .03 .04 .21 .16 .47 .04 .13 .77 .38 .12 .10 .03 .82 .22 .09 .18 .14 40.83 100.00

538 657 316 1,928 744 472 348 324 562 340 514 1,008 316 343 624 541 1,080 332 499 1,612 922 468 441 316 1,693 654 421 584 502

.25 .30 .14 .88 .34 .22 .16 .15 .26 .16 .23 .46 .14 .16 .29 .25 .49 .15 .23 .74 .42 .21 .20 .14 .77 .30 .19 .27 .23

VENEZUELA, REP. BOLIVARIANA DE 14.27

109,346 50.00 218,703 100.00

INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES History

In the past, the World Bank as an institution and the President of the Bank in his personal capacity have assisted in mediation or conciliation of investment disputes between governments and private foreign investors. The creation of the International Centre for Settlement of Investment Disputes (ICSID) in 1966 was in part intended to relieve the President and the staff of the burden of becoming involved in such disputes. But the Bank's overriding consideration in creating ICSID was the belief that an institution specially designed to facilitate the settlement of investment disputes between governments and foreign investors could help to promote increased flows of international investment. ICSID was established under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the Convention) which came into force on October 14, 1966 Current Scenario The International Centre for Settlement of Investment Disputes (ICSID), an institution of the World Bank group, was founded in 1966 pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention or Washington Convention). As of May 2005, 155 countries had signed the ICSID Convention. ICSID is an autonomous international organization. However, it has close links with the World Bank. All of ICSID's members are also members of the Bank. Unless a government makes a contrary designation, its Governor for the Bank sits ex officio on ICSID's Administrative Council. The expenses of the ICSID Secretariat are financed out of the Bank's budget, although the costs of individual proceedings are borne by the parties involved. ICSID has an Administrative Council, chaired by the World Bank's President, and a Secretariat. It provides facilities for the conciliation and arbitration of investment disputes between member countries and individual investors. During the past decade, with the proliferation of bilateral investment treaties (BITs), most of which refer present and future investment disputes to the ICSID, the caseload of the ICSID has substantially increased. As of June 30, 2005, ICSID had registered 184 cases more than 30 of which were pending against Argentina Argentina's economic crisis and subsequent Argentine government measures led several foreign investors to file cases against Argentina. ICSIDs headquarters are located in Washington, D.C. EVALUATION OF INTERNATIONAL MONETARY FUNDS (IMF) & WORLD BANK

The International Monetary Fund (IMF) and the World Bank were the outcomes of the international conference of 44 nations held at Bretton Woods in July 1944 to plan the post-war monetary system. Despite their common origin, the IMF and World Bank are independent institutions with different objectives. The World Bank was established at the Bretton Woods Conference at the same time as the IMF. Its purpose was to help war-ravaged countries rebuild. The earliest recipients of its loans were the European countries and Japan. By the early 1960s, these countries no longer needed World Bank assistance, and its lending was redirected to the newly independent and emerging nations of Africa, Asia, Latin America, and the Middle East, and, in the 1990s, to the transition countries of Central and Eastern Europe. The IMF and the World Bank complement each other's work. While the IMF's focus is chiefly on macroeconomic and financial sector issues, the World Bank is concerned mainly with longer-term development and poverty reduction. Its loans finance infrastructure projects, the reform of particular sectors of the economy, and broader structural reforms. Countries must join the IMF to be eligible for World Bank membership. The contribution made by IMF and World Bank in helping the member countries in different ways cannot be ignored. Studies show that the project assisted by the World Bank group could make significant impact in the respective countries. IMF has played an important role in providing international liquidity and in the structural adjustment programmes. There is, however a wide gap between the aspirations and achievements. A criticism often made is that these institutions, which are dominated by the developed countries, have not been paying adequate attention to the needs of the developing countries. The objective of the Bretton Woods Conference was to establish global monetary and financial system to promote stable exchange rates, foster the growth of world trade, and international movement of capital in the desired directions. At the time of establishment of these institutions, most of the developing countries were colonies and therefore, not represented at the Bretton Woods. The major concern of these institution was, naturally the major problem of the main participants, i.e. the developed countries, and there was an almost inevitable lack of concern for the interests of the developing countries. Even after the developing countries have outnumbered the developed ones in the total membership of these institutions, the dominance of the developed countries continues because the voting system which gives clear control to the large contributors. However, concern for developing countries was not completely absent; the mandate of the World Bank included the provision of development assistance. But in the early postwar years, financing the reconstruction of war devastated Europe and Japan received much more attention than the crying development needs of the developing countries. The proposal for Special United Nations Fund for Economic Development (SUNFED), which would offer large-scale aid on easy terms to developing countries, was rejected in the 1950s mainly because developed countries objected to the United Nations becoming involved in financial aid to developing countries.

The view that in the international management of balance of payment disequilibrium, there should be pressure to adjust on both surplus countries and deficit countries, rather than only on those in deficit, was also ignores. In fact, Keynes original proposal for an International Clearing Union (the prototype for the IMF) included the possibility of a penalty on surplus countries-one percent of the surplus pr month to encourage them to make adjustments, too. Again, only very little could be done by the IMF in solving the international liquidity problem of the developing countries in comparison with those of the developed countries. Indeed developing countries need much larger attention of the multilateral institution than the developed countries for various reasons. The developed countries have the capability for, and ready access to commercial borrowing whenever the reserves run short. The United States, which has had the largest deficit among the developed countries, has also had option of running permanent deficit since other countries have been content to hold dollars. The situation for the developing countries is quite different. Due to their poor economic conditions, the relative burden of their payment deficit is much more that that of the absolute burden; the absolute deficit itself has been huge. Not only that the commercial borrowing capability of these nations are limited, the accessibility has also been limited because of their poor creditworthiness. It may be recalled that, in the early 1990s when Indias Foreign Exchange reserves position became very critical, the sources of short-term commercial borrowings dried up due to fall in the credit rating. To make matters worse, because of poor credit ratings, the developing countries have had to pay an average rate of interest which was about four times the rate applied to the developed countries on commercial borrowing. Against the background, the IMF system has been ironic as far as the developing countries are concerned. The unconditional borrowing rights based on the quota highly discriminate against the developing countries. What is more draconic has been the allocation of SDRs, the created liquid assets, in proportion to the quota. One of the important problems of the developing countries is the increase in the debt service due to the payment commitments of the past debt. There has been a transfer of large amounts of funds from the developing countries to the creditors as debt services. This has not been compensated by an increased flow from the IMF to the developing countries. During certain period, IMF was actually withdrawing funds from developing countries. The Bretton Woods institution thus failed many developing countries at their times of great need. Stiglitz very categorically observes that a half century after its founding, it is clear that the IMF has failed in its mission. It has not done what it was supposed to do-provide funds for countries facing an economic downturn, to enable the country to restore itself to close to full employment. In spite of the fact that our understanding of economic process has increased enormously during the last fifty years, and in spite IMFs efforts during the past quarter century, crises around the world have been more frequent and (with the exception of the Great Depression) deeper, by some reckoning, close to hundred countries have faced crises. Worse, many of the policies that the IMF pushed, in a particular premature capital market liberalization, have contributed to global instability. And once a country was in crisis, IMF funds and programs not only failed to stabilize the situation but in many cases actually made matters worse, especially for the poor. The

IMF failed in its original mission of promoting global stability; it has also been no more successful in the new mission that it has undertaken, such as guiding the transition of countries from communism to a market economy. One problem as far as the proper functioning of the IMF is concerned, has been that it has not had any control over the rich nations. It could not, therefore, avert the breakdown of the Bretton Woods monetary systems. It has been rightly observed that the World Bank is no closer to meeting its mandate either. It was established to borrow the savings of the rich nations and to lend them to the poor nations- to finance sound development projects and programmes, particularly where private investments failed or was inadequate. In fact, it has done little to recycle global surplus to deficit nations. Only a small portion of the total World Bank assistance is in the form of soft loans (IDA credits). The IDA now represents only 30 percent of the World Bank lending. The major part of the World Bank lending to many developing countries like India is on commercial terms. This is one of the reasons for the increase in their debt-service problem. The IBRD lending rates now float in line with the world market rates. This is a major shift from the Banks original role of cushioning developing countries against fluctuations in market interest rates. The Bank was supposed to raise capital and lend it rates that it could afford to subsidies because of its own strength and that of its industrial country partners. Another limitation is the size of funds available to the Bank. The availability of funds depends on, inter alia, the willingness of the developed countries to contribute. It is pointed out that the United States which is the largest contributor, is not only reluctant to increase its own contribution, but also reluctant to let other countries to do so since its own voting power would be correspondingly reduced. In short the quantity and composition of World Bank lending is clearly inadequate for the challenges it faces in developing countries. Some of the failures of IMF-World Bank have been highlighted above. One should as the same time recognize the useful role they have played all these years by extending different types of assistance to the different categories of countries. The increase in the membership of these institutions is clear evidence of their utility. Although the communists in the past had described these institution as organs of capitalist imperialism, several communist countries have become members of these institutions and recently all the states of former Soviet Union and East European countries have becomes members.

DIFFERENCE BETWEEN IMF AND WORLD BANK

Sr. No 1. Purpose 2. Activities

IMF Monetary Institution Stabilisation of the international monetary system. Finance of temporary balance of payment deficits. Official reserves and countries currencies. Special Drawing Rights (SDRs). All members

WORLD BANK Development Institution Promotion of economic growth and development in developing countries.

3.

Source of funds

Capital quotas. Issues in the international market.

4.

Eligible Borrowers Outlook

Developing countries.

5. 6.

Short Term

Long-Term 15-20 year loan (maximum 50 years) 9,500

Credit Horizon 3-5 year loans (maximum 10 years) Staff 2,700

7.

INDIA & THE WORLD BANK

With some 1.1 billion people, diverse regions, and a vibrant democracy, India has been making progress on a scale, size and pace that is unprecedented in its own history. In the nearly 60 years since its independence, the country has been successful on a number of fronts: It has maintained electoral democracy Banished the specter of famines Reduced absolute poverty by more than half Dramatically improved literacy Vastly improved health conditions Become one of the worlds fastest growing economies with average growth rates of 8% over the past three years Emerged as a global player in information technology, business process outsourcing, telecommunications, and pharmaceuticals Is now the worlds fourth largest economy in purchasing power parity terms. Challenges

The countrys achievements have, however, created new challenges. Some of the most prominent are: 1. Improving the Delivery of Core Public Services As incomes rise, citizens are demanding better delivery of core public services such as water and power supply, education, policing, sanitation, roads and public health. And as physical access to services improves, issues of quality have become more central. Education: While India has made huge progress in getting more children into primary school, learning outcomes have yet to make more headway. Health: Although population growth has fallen below 2% per year due to declining fertility, there has been little improvement in maternal mortality rates. Despite falling child mortality, rates remain high as they are strongly related to child malnutrition where little progress has been made. Infrastructure: Power networks, roads, transportation systems and ports are facing huge demands from Indias rapidly growing economy. But, shortages are eroding the countrys competitiveness and hurting the growth of labor-intensive enterprises, particularly exportoriented manufacturing which has the potential to absorb Indias fast-growing working population. 2. Making Growth More Inclusive Substantial disparities persist within the country. In a marked departure from previous decades, reforms of the 1990s were accompanied by a visible increase in income inequality. Although this continues to be relatively low by global standards, disparities between urban and rural areas, prosperous and lagging states, skilled and low-skilled

workers are growing. Inequality can have huge social costs, and evidence of social unrest in some disadvantaged regions is growing. Agriculture: Slow agricultural growth is a concern for policymakers as some two-thirds of Indias people depend on rural employment for a living. Current agricultural practices are neither economically nor environmentally sustainable and India's yields for many agricultural commodities are low. Poorly maintained irrigation systems and almost universal lack of good extension services are among the factors responsible. Farmers' access to markets is hampered by poor roads, rudimentary market infrastructure, and excessive regulation. Jobs: While the services sector booms with promising job opportunities for skilled workers, some 90% of Indias labor force remains trapped in low productivity informal sector jobs. Lagging States: Faster economic growth has seen rising inter-state disparities. While Indias higher-income states have successfully reduced poverty to levels comparable with richer Latin American countries, its poorer states - Assam, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, and Uttar Pradesh - have not kept pace and are lagging behind their more prosperous counterparts. 3. Sustaining Growth Maintaining high growth will also require attention to some basics: Fiscal deficit: While the country has improved its fiscal indicators recently, further improvements will be needed to reduce risks to fiscal stability and, more importantly, to create the space to fund the countrys large infrastructure needs and ambitious social development programs. Trade Deficit: The trade deficit is large and has widened due to high oil prices and increased non-oil imports. Nevertheless, Indias vulnerability to an external crisis remains limited due to its large foreign exchange reserves - which now exceed US$160 billion its low levels of external debt, and buoyant exports of services. Ongoing Reform: Redoubling of reforms that address the basic constraints to growth is essential, as international experience shows that the recipe for slow growth is complacency about pushing ahead with reforms in times when growth is high. Priorities Government policy and programs are looking beyond maintaining rapid growth to making this growth more inclusive. The 11th Plan approach paper lays out the Governments priorities in this direction.A variety of Government initiatives have been launched: to build rural infrastructure (Bharat Nirman), address employment (NREGA), uplift rural health (NRHM), address primary education (SSA), and renew urban infrastructure (NURM).

But for these and other programs to be effective, it is increasingly being recognized that deeper institutional reforms are needed to strengthen capacity and enforce accountabilities at all levels. Public sector services reform: Indias core public services such as healthcare, education, power, water supply and transportation need urgent improvement. This will require systemic reform of the public sector service providers, implementing effective systems of accountability to citizens, decentralizing responsibilities, and expanding the role of non-state service providers. Infrastructure: India needs to invest an additional 3-4% of GDP on infrastructure to sustain its current levels of growth and to spread the benefits of growth more widely. Although this will clearly require a government role, the relative roles of the government and private sector need to be defined. Agricultural and rural development: Raising agricultural productivity requires a return to investments in agricultural technology and infrastructure. Getting the rural economy moving will also require facilitating rural - non-farm - entrepreneurship. The bright spot on the horizon is that the private sector is now looking at the rural areas as a potentially important market and is increasing its investments accordingly, thereby opening up new opportunities for Indian farmers. Labor regulations: Indias labor regulations - among the most restrictive and complex in the world - have constrained the growth of the formal manufacturing sector where these laws have their widest application. Better designed labor regulations can attract more labor- intensive investment and create jobs for Indias unemployed millions and those trapped in poor quality jobs. Given the countrys momentum of growth, the window of opportunity must not be lost for improving the job prospects for the 80 million new entrants who are expected to join the work force over the next decade. Lagging states: Lagging states need to bring more jobs to their people by creating an attractive investment destination. Reforming cumbersome regulatory procedures, improving rural connectivity, establishing law and order, creating a stable platform for natural resource investment that balances business interests with social concerns, and providing rural finance are important. HIV/AIDS: The disease has the potential to upset much of the Indias recent progress. While less than one percent of the adult population is currently estimated to be infected, the numbers will soon be greater than any other country in the world because of India's large population. Other strategic challenges: These require long-term vision and urgent action:

Adapting to increasing water scarcity Improving energy efficiency and ensuring adequate energy supplies Adapting to climate change which could impact India more than most countries Coping with accelerating urbanization through strengthened urban governance

Protecting Indias fragile environment in the face of the rising pressures created by economic success Making India a driving force in technical innovation.

World Bank Support to India The assessment of the development effectiveness evaluation of the Banks assistance to India began during the 1990s. India was one of the Bank's founding members and remains one of its largest and most influential borrowers. The Bank has been India's largest source of external long-term capital and has financed a sizable share of its public investment. Its lending and non-lending services have been thinly spread over many central and state agencies and have addressed many different objectives. India entered the decade with substantial economic and social achievements but also with closed trade and investment regimes, fiscal imbalances, and a large and unwieldy public sector. After a balance of payments crisis in 1991 it deregulated the trade and investment regimes. Economic growth rebounded quickly and proved resilient even during the 1997 East Asian crisis. Social indicators also improved. India, however, failed to sustain the reform process in the fiscal area and to broaden it to other structural areas. Moreover, there was little progress in reducing rural poverty, largely due to the absence of an effective agricultural and rural development strategy and low growth in the poorer northern and eastern states. In the second half of the 1990s, a few states initiated substantial policy and institutional changes, but there remains a large outstanding reform agenda at both the state and federal levels. India has built strong foundations for development. The Bank's main challenge is to support far-reaching reforms, at both the state and central government levels, with high quality and widely disseminated policy studies and policy based sector and program loans. The five pillars and the fiscal and structural reform triggers of the 1997 Country Assistance Strategy remain valid. Thus, only adjustments to accelerate and assure the full application of those pillars and triggers appear necessary. The World Bank works in close partnership with Indias Central and State Governments, aligning its strategies with the countrys own development agenda. It lays emphasis on investing in people through better health and education, empowering communities to participate in their own development, improving the effectiveness of government, and promoting private sector-led growth to achieve the countrys development goals. Its four-year Country Strategy for 2005-2008 focuses on lending for infrastructure, human development, and improving rural livelihoods. The Bank is increasingly focusing on providing analytical reports on the countrys major development challenges, and extending practical advice to policy makers by sharing good practices and experience from within the country and abroad. Lending

India is one of the oldest members of the World Bank having joined the institution in 1944. New lending to the country in FY06 (July 2005-June 2006) was US$1.416 billion. Of this, US$500 million was from the IDA, the World Banks concessional lending arm, and US$916 million from the IBRD. At end of June 2006, the Bank group had 56 active projects with a net commitment of about US$ 11.3 billion. Total IBRD/IDA Commitments as of end FY06: US$ 11.3 billion (by fiscal year, in nearest US$ billion) Commitments New Total No. of Active Projects FY 01 2.6 13.5 76 FY 02 2.2 13.0 69 FY 03 1.5 13.0 70 FY 04 1.4 12.0 63 FY 05 2.9 12.8 64 FY 06 1.4 11.3 56

Key Development Indicators GROWTH: (2004/05-2005/06 Revised Estimates) Population:1.6% GDP: 8.4% Agriculture: 3.9% Industry: 7.6% Services: 10.3% Merchandize Exports: 23% Poverty (at $1 a day, 2000, PPP): 35% Fertilityrate 2004:3 births per woman Average life expectancy at birth (1998-02): 63 years Infant mortality (per 1000 live births, 2004): 62 Maternal Mortality (per 100,000 live births, 2001):540 Child Malnutrition (below 5 years, 1998): 47% Primary school enrollment, net 2004: 87%; Gap between boys and girls enrollment reduced Male Adult literacy 2000-04: 73.4% Female Adult literacy 2000-04: 47.8% Access to improved water source 2001: 86% Access to improved sanitation facilities 2002: 30% Lending by Sector (As on June 30, 2006, in US$ millions)

Lending by State (% of total Bank lending to India as on June 30, 2006)

MACRO INDICATORS 2001 2002 2003 2004 2005

A. Real Expenditure Growth 1. GDP at market prices 2. Private consumption 3. Government consumption 4. Fixed investment 5. Exports, GNFS 6. Imports, GNFS B. Contribution to GDP Growth 1. Private consumption 2. Government consumption 3. Fixed investment 4. Net exports C. Price Deflators 1. GDP at market prices 2. Private consumption 3. Exports, GNFS 4. Imports, GNFS D. Share of GDP 1. Private consumption 2. Government consumption 3. Fixed investment 4. Change in stocks 5. Total investment 6. Exports, GNFS 7. Imports, GNFS E. Memo 1. Nominal GDP (USD billions) 2. Population (millions) 3. GDP per capita, current USD 4. Real per capita GDP growth 5. USD Fx rate 6. Current account balance (% GDP) 7. General government bal. (% GDP)

5.2 5.6 3.0 4.4 5.6 3.4 3.7 0.4 1.0 0.3 -0.5 1.0 -3.9 -2.6 65.7 12.5 22.0 0.4 22.4 13.5 14.2 476.6 1037.8 459.2 3.5 47.7 0.3 -9.9

4.1 3.3 -2.4 5.0 21.9 10.3 2.1 -0.3 1.1 1.6 1.0 1.0 -1.2 6.9 65.4 12.0 22.6 0.4 23.0 15.5 15.9 501.0 1054.4 475.2 2.5 48.4 1.4 -9.7

8.6 8.2 3.7 12.5 9.8 11.7 5.3 0.4 2.8 -0.2 6.9 1.1 5.2 10.8 66.1 11.7 23.5 0.3 23.8 15.4 16.9 581.7 1070.8 543.2 6.9 46.0 1.2 -9.1

6.9 8.5 4.5 8.9 13.4 25.0 5.5 0.5 2.0 -1.7 3.1 1.2 3.4 11.9 68.4 11.7 24.7 0.3 25.0 16.4 21.5 641.3 1087.1 589.9 5.3 45.3 -0.5 -8.5

8.0 9.0 6.0 9.2 12.4 16.0 5.9 0.7 2.1 -0.8 5.6 1.2 7.2 14.0 70.1 11.8 25.5 0.3 25.8 17.3 24.9 731.0 1101.6 663.6 6.6 44.1 -2.9 -8.4

THE INDIA and WORLD BANK PARTNERSHIP Given the vast development challenges and the modest size of the World Bank Group programs relative to the population and the economy of India, the Bank Group cannot

support India in every effort toward achieving its Tenth Plan goals and the Millennium Development Goals. Instead, since 1977 Bank Group strategies have been to engage selectively in India and primarily at the state levels, with knowledge resources and financing geared towards reform. The main thrust of the strategy has been to support the programs of lending reform states in order to create demonstration effect that might stimulate reforms across other states, or in other sectors of a reforming state. The focus of IFC activity has been on investments in manufacturing, financial services and infrastructure. Recent Bank Group programs have been ambitious in their efforts to catalyze and expand the state reform process in areas that are central to reducing poverty in India- and when progress in reforms was slower than expected, Bank strategy was also well structured to deal with the slowdown in reform implementation that took place in several states. While concluding that the FY02-04 strategy was broadly appropriate, the review points to some lessons of experience which suggested an evolution of the strategy going forward. These include: the need to address growing disparities in state development performance, especially given the importance to the poorest state for achievement of the MDGs; the importance of long-term engagement with state on cross-cutting reform issues; and the disadvantages of concentrating investment lending in states that are recipients of adjustment lending. For the Banks ongoing portfolio, Indias portfolio performance declined in FY03 after five years sustained improvement in most quality indicators and showed mixed results in FY04 after a number of improvement actions were taken on projects that were either slow disbursing or closing with large undisbursed balances. These actions resulted in an improvement in disbursement performance, but also in an increase in the riskiness rating of the portfolio. The disbursement ratio reached 19.9% at the end FY04 which is slightly below the Bank average of 21.4% and ratios for other large borrowers such as China (22%) and Indonesia (27.2%). The percentage of projects at risk increased to 16% in FY04 compared to 11% in FY03 and the Bank wide average of 16%. Many of these projects have clearly not been ready for implementation at approval, and hence suffered one or two years at the outset in which little was disbursed. At current implementation and disbursement rates, none of the ongoing projects in the portfolio can be completed within the 5-year implementation period which has been the business standard for Bank projects in the South Asia region. The causes of slow disbursement included a weakening of project readiness for implementation and weakening of follow-up and proactive actions to address slow disbursing projects. The increase in portfolio riskiness rating results from more candid reporting and proactive portfolio management, which is reflected in the end FY04 realism and proactivity indices of 90% and 83, respectively. In order to improve portfolio and support the strategy for scaling up Bank support to India, the Bank and Government of India engaged in ways to improve portfolio during FY04 and agrees on a Portfolio Improvement Strategy. The Banks lending volumes have been reduced when states have slowed in their implementation of fiscal, governance and power reforms. The slowdown in some state reforms reduced Bank financing, during FY03 and FY04 the AAA program of the Bank was stepped up. The country team continued with reforms and provided non-lending Technical Assistance in UP when further adjustment lending was put on hold as the states

reform process faltered. Substantial policy advice and non-lending Technical Assistance have also been provided in states where adjustment lending has been under preparation namely AP, Karnataka, Tamil Nadu and Orissa. Important analytical work on the investment climate and fiscal, governance and power sector reforms was also initiated in states where the Bank had not previously been engaged, including Maharashtra, Bihar and Punjab. For IFC programs, commitments in India grew strongly over CAS period, albeit with considerable variation in response to changing market and regulatory conditions. Over the last two years IFC achieved record commitment in India, nearly doubling its portfolio, improving profitability and investing in high impact projects, making Indias IFCs second largest exposure. In FY03, IFC committed a record US$348 million and in FY04 commitments were US$290 millions, with a concentration in manufacturing, as well as investments in agribusiness, power, oil and gas, finance and health care. The expansion was mainly in long-term debt, aided by introduction of local currency lending, which is better suited to sectors such as infrastructure, housing finance and health care that do not generate foreign exchange STRENGTHS: The Bank Group offers a number of strengths: Firstly, the Bank Groups ability to gather and share global knowledge and experience with Government of India Secondly, the Bank Group has a broad array of tools that it can offer to help mobilize private financing and foster greater private sector participation in Indias development. Thirdly, through lending and investment, the Bank Group can help catalyze greater effectiveness and more efficient spending towards ultimate goal of reducing poverty and encouraging Indias sustainable development. STRATEGIC PRINCIPLES: To achieve this enhanced impact three strategic principles will underpin the Bank Groups work: Focusing on outcomes: To ensure all of the work of the Bank Group is explicitly geared towards supporting Indias achievement of its development goals. The Bank Group will support achievement of these outcomes with all of its finance and knowledge resources in India; the outcomes will in turn serve as goal posts to measure the effectiveness of Bank Group support over the medium term timeframe of the assistance strategy. Selectivity: Due to complexity of Indias development challenges, Bank Group programs will necessarily span a wide range of sectors and types of inventions. Nevertheless selectivity will be applied, to target limited resources to activities where assistance is welcomed and where contributions can also be most effective. An important element of this working closely with major donors and financing partners remaining in India, taking their programs into account and seeking to work together for co-financing of country-led programs. Lending selectivity will also be exercised by choosing projects in a way that seeks to maximize their impact. Selectivity therefore means a greater emphasis on project that either

pilot/demonstrate new approaches for possible scaling up later, projects that move from successful pilots to lager scale inventions, and projects that supports expansion of proven government programs on sector-wide basis. Knowledge provider and generator: The Bank will also aim to substantially expand its role as politically realistic knowledge provider and generator. To achieve this shift, changes are envisioned on a number of fonts, includin: (i) Strengthening the Banks capacity to act as a channel of ides and lessons for international experience. (ii) Placing greater emphasis on understanding the motivation of interest groups and different stakeholders in the reform process. (iii) Helping clients to better communicate the potential benefits of their reform programs; and (iv) Operating on a more strategic and integrated fashion across different organizational units of the Banks leverage knowledge resource more effectively. VOLUME OF LENDING TO INDIA: Given Indias enormous needs, the expansion will primarily be in: (i) Infrastructure (roads, transport, water supply and sanitation, irrigation and urban development-to underpin both accelerated growth and improved service delivery) (ii) Human Development (education, health, social protection-priorities to support specific MDGs); and (iii) Rural Livelihoods (with an emphasis on community driven approaches). Cross-cutting reforms at the state level will also remain an important focus. Expansion in lending for human development and rural livelihoods will depend critically on availability on IDA resources. These programs will provide increased opportunity for collaboration across the Bank Group to promote innovative Public-Private Partnership (PPPs) for infrastructure development-particularly in power and transport. The Private Sector Development Strategy suggests some areas where this collaboration might be developed. IFC and MIGA assistance will encompass activities that fall within the private sectors role. IFC will continue to provide equity and loan financing and guarantees to supplement what is available from Indian financial institutions or capital markets, and will help to mobilize financing from both domestic and international sources. This will include pioneering investments in infrastructures and long tenors are required; and investments in projects which are constrained by limited risk appetite of other investors, including medium-sized manufacturing countries, agribusiness companies and companies entering new markets domestically and internationally. IFC adds value to projects it invests in by mobilizing finance from other sources, advising on structuring, acting as an honest broker between various project parties and facilitating international partnership, particularly with other developing countries. The Bank Group focuses on adding value through advice on environment and social sustainability, public and corporate governance and the transfer of global knowledge and best practices. By doing so, IFC promotes higher corporate standards of social and

environmental responsibility and the Bank works to improve implementation of environmental and social frameworks and strengthen the national and state-level frameworks for procurement and financial management. Additionally, Country Financing Parameters, which allow increased flexibility in the type of expenditures that are eligible for Bank financing in India are also being developed. In order to also scale up the impact of the Bank Groups global knowledge resources in India, the AAA program is being reshaped to focus on: (i) Preparation and dissemination of a limited number of major reports on key issues in Indias development (ii) Just-in-time activities primarily in response to Government of Indias request Since India has underutilized trust fund and grant programs offered through Bank Group in the past, at the request of Government of India, greater effort will be made to enhance the participation with these programs in the coming strategy period. In particular, Government of India and the Bank will seek to help strengthen project readiness via upfront analytical work and strengthen implementation capacity or the capacity of key institution. WORKING AT THE NATIONAL LEVEL Scaling up will require expanded Bank support at the national level. A large part of this expansion will be in the form of AAA: for instance the series of major reports will primarily assess issues of national consequences. Some of these issues are expected to be: the Implication of Indias Gender Imbalance, Employment Issues, the Long-Term Economic Impacts of HIV/AIDS, Building Indias Knowledge Economy, Indias adaptation to climate Change and Disability Issues and Impacts. The increase in overall lending will also involve more national level lending as compared to recent years. The use of new approaches, including co-financing with other development partners under common arrangements, for national programs in the areas most critical to meeting the MDGs. Using such approaches, the Bank will seek to step up its national level engagement and work closely with partners that can join the Bank in providing substantial assistance. Such operations are already beginning to materialize, with the first being a major new Sector-Wide Approach (SWap) supporting Government of Indias national elementary education program- Sarva Shiksha Abhiyan (SSA).

WORKING WITH THE STATES The Bank Group strategy will retain an essentially reform and performance-based approach to the states, it will also change in ways that are intended to go as far as possible in opening up new opportunities for engagement with these largest and poorest states.

A number of steps are envisaged. Firstly, in consultation with Government of India, the Bank is seeking in this CAS to ensure that all the largest and poorest states of India that are engaged in cross-cutting reforms that focus on adjustment lending, regardless of their eligibility for adjustment lending. Twelve of Indias 28 state account for 90% of Indias poverty. Secondly, the Bank will work proactively to try to build a productive development relationship with four states where poverty is increasingly concentrated in India and where public institutions are considered to be at their weakest- Bihar, Jharkand, Orissa and UP. This support could go beyond the basic dialogues on cross-cutting reforms. The expanded support to these states could take several forms during the strategy period. The Bank would also seek to mobilize limited grant funding resources to finance innovative governmental and non-governmental activity targeted to poverty reduction and progress towards MDGs. The Bank would also work to help these states meet guidelines for engagement for investment lending in support of critical poverty-focused projects. Thirdly, State-Level Adjustment lending operations (SALs), aimed at supporting achievements of the MDGs, are also expected to remain an important part of the Bank program- up to 15% of total lending. While in the initial phase such lending was limited to three states (UP, AP, Karnatak), Government of India has adopted guidelines for untied official external financing of state budget which provide transparent criteria for such support and have opened the way for additional states to receive such funding on a performance basis. Fourthly, there is no longer an upfront decision to concentrate substantial state-level investment lending on focus-state that are also receiving adjustment lending in support of cross-cutting reforms. Instead, investment lending will be channeled more broadly to states that are able to comply with new guidelines for engagement for relevant sectors. These guidelines attempt to set out the sector-specific conditions that experience has show to be necessary for project success.

IFC and INDIA Since 1956, IFC has invested in 210 companies in India, providing nearly $3.5 billion in financing for its own account and $925 million for the accounts of participants in IFCs loan syndication program.

Our held portfolio of $1.26 billion (as of July 2006) makes India IFC's third largest country of operations. In recent years, we have grown our business substantially, with new commitments reaching $402.8 million in FY 2006. To reduce poverty and promote sustainable economic growth, we believe that India needs a vibrant private sector which will:

increase the availability of high-quality infrastructure accelerate rural growth develop competitive manufacturing and service industries strengthen the financial sector

We are therefore focusing our activities on supporting:

private sector involvement in infrastructure financing restructuring and modernization of the manufacturing and services sectors to become internationally competitive the development of new financial institutions and products

We are committed to working on the frontiers of private investment, helping bring commercial disciplines and entrepreneurial dynamism to new areas of the economy. We therefore also support private investment in health and education, and innovative applications of information technology.