10 April 2008
Nigel Twose, director of the IFC-IDA Secretariat
Aki Nishio, director of the Resource Mobilisation Department (FRM)
Aki on the IDA 15 replenishment
- $41 billion, a 30% increase, 45 donors
- Money from IFC was $1.75 billion
- IDA14 emphasis was on Private sector development (PSD)
- IDA funds are based on development plans and are not earmarked
- 40% of IDA funds go into "PSD-related" sectors like transport and infrastructure
Nigel on the Secretariat
- The rationale
- the Secretariat is jointly funded by the WB and the IFC – 50/50 split; Nigel reports both to Vicenzo La Via (WB vice-president) and Lars Thunell
- a blend of public-private finance are necessary to solve problems like low incomes, missing MDGs on health, etc.; it is necessary to meet a lack of access to basic services
- Zoellick is a "true" World Bank Group president – wants joint work to capitalise on synergies across the group
- the board endorsed the recent IFC roadmap for the next 3 years – it wants 50% investment in "frontier" countries by FY11; this means more joint work with IDA
- In many cases, the private sector will not deliver and the public sector can not deliver key services
- The money IFC gave to IDA is not earmarked – this is not round tripping
- We don’t expect an increase in the share of IDA money dedicated to PSD-related activities – already at about $2 billion a year
- Three types of collaboration are possible
- Advisory services – matching IFC TA with IDA credits
- Sequencing: An IDA credit goes in; policy space is created; then later the IFC goes in
- IFC and IDA credits going in together for the same project
- Secretariat will focus on the third option – better cooperation on joint projects
- In the last decade 17 such projects were done ($900 million IDA; $700 million IFC); mostly in Africa and mostly in finance and energy sectors
- There are so few because they are hard to do internally – the two systems don’t mesh – ie environmental and social safeguards
- All 17 projects were silent on gender issues
- The secretariat wants to improve outcomes on such collaboration: clarify the business model and get agreement on joint targets for scale up
- Methods of the Secretariat
- First: find a shortlist of pipeline projects where collaboratrion can happen – this will happen between now and annual meetings
- Then get practical experience on the ground from the collaboration on those projects to assess the problems and needs for imrpovement
- Finally – based on that experience work on the policies and systems that need refining; get systems to mesh better with a new protocol for such projects
- Examples of projects:
- Rural electrification in India for new generation capacity and distribution – looking at private sector operators using solar and biomass
- Transport in the Pacific Island states – using smart subsidies -> incentives and targets on provision
Questions and discussion
Who created the Secretariat?
NT – the money from IFC to IDA came out of discussion on the net income; the creation of the Secretariat was in a board endorsed paper
Question: The IFC is strong on labour standards, IDA is not. How will joint projects deal with that?
NT: The preference is one standard, but meanwhile they will aim at a "protocol" between the two agencies so that one standard will not "trump" the other.
Question: In Nigeria, donor funds went to firms on electrical contracts, but without results.
NT: That was w/o WB funding.
Question: How will the priorities one agency affect the lending of the other? Fore example, despite problems with unsuccessful outcomes, Pakistan is the lead recipient of IDA funds ($1b 2007, $1.5b 2006), plus IBRD. Is there a possibility that IFC partnership with IDA tend to attract even more WB funds to the country?
AN: IDA’s resource allocation is all performance based. Pakistan is a large country, and a PBA system applied would give it even more – with India and Indonesia the three countries would get 60% of IDA’s resources.
NT: Our process is not PBA, but sector-based.
Question: How will IFC and IDA talk to government and private sector? How to make sure that IFC will not "capture" IDA?
Akino Nishio: IDA is pretty transparent, annual report, how to get a better impacts? IFC cannot play a role in allocation of IDA money – allocation decided on the bases of a formula agreed with donors and IFC does not have a say in it. Allocation is a formula-based transparent process – find it in Annex 1 of the IDA 15 report – based on country performance, size of the country.
Question: Why was the decision of forming a joint secretariat taken before doing an assesment of development impact of IFC lending to private sector?
Nigel Twose: There will be an assessment done.
Q: Why you have not done it before?
NT: Ask Lars Turnell about it!
Question: Note the failure of PPPs model specially in provision of basic services. The private sector looks for profit, division of services and results have been that the private did no manage to reach the poorest off grid or to bring water in rural areas because too expensive and not profitable. Why proposing the same model if showed unsuccessful? The fact that there was extra money from IFC committed to this but only accessible if the governments opt for PPP-type provision would distort the incentives, making more difficult for governments to take a balanced view to either public or private provision. Say that basic services cannot be provided by the public and that private needs incentives to provide them. Why decision to subsidize the private? Why not providing subsidy to the public? Why has this option have not been considered?
Nigel Twose: we clearly have different conceptions about the role of PPPs, and the private sector. We also have disagreements on the evaluation of how government provision and subsidies had worked in the past. In terms of subsidy, the private sector would be forced to compete. In the OBA model, those able to provide the service with the least subsidy were the winners. Example of successful PPPs – Madagascar. Private financial sector not willing to lend to small enterprises. IFC/IDA technical assistance to banks to help them to assess risks of lending to small borrowers. Guarantee institution, first loss provision means that the World Bank will share the risk. We don’t say that all money will go to the private sector. IDA will continue to go public, IFC contribution to IDA basket. Understand in which sector a combination of public and private has capacity to give successful responses? Can we identify these sectors? No change in allocation system. IDA has grown, IFC is growing – how do you maximise the synergies? Where private sector may be a better form of delivery than private?