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TRANSCRIPT
FIAS2004 ANNUAL REPORT
F O R E I G N I N V E S T M E N T A D V I S O R Y S E R V I C E
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The Foreign Investment Advisory Service (FIAS) advises developing-
country governments on how to attract and retain foreign direct
investment and maximize its impact on poverty reduction. Since our
founding in 1985, FIAS has advised more than 130 countries in almost
600 projects.
FIAS is a joint service of the International Finance Corporation and
the World Bank. We are funded by these institutions and through
contributions from donors and clients.
Table of Contents
From the General Manager 2
Year in Review 4
The Mixed Messages of Current FDI Flows 6
FIAS Introduction 9
Core ProductsImpact on the Ground 13Investment Climate Diagnostics 14FDI Policies for Attracting Investors 16Administrative Barriers Reform 18Investment Promotion 20
New ProductsCorporate Social Responsibility 23Sector-Focused Solutions 24
New FocusesContract Enforcement and Secured Lending 25Access to Land 25
Regional News Focusing on the Regions Most in Need of FDI 26Sub-Saharan Africa 27East Asia & the Pacific 28South Asia 29Europe & Central Asia 30Latin America & the Caribbean 31Middle East & North Africa 32
Project Table 33
Reaching Out The “How-to” of Reform 37FIAS Published and Speaking Out 37
Measuring Success 39
Funding 41
About Our Team 43
2
Dear Friends,These are exciting times for us in the foreigndirect investment (FDI) business:
■ China dramatically emerged as the top world-wide destination for FDI (net) in the past year;
■ net flows to developing countries (in spite ofChina’s growth!) modestly declined but areexpected to rebound in the next couple of years;
■ south-south and south-north investment hassignificantly risen in the last few years;
■ FDI into the manufacturing and services sectorsin less developed countries has grown whilehistorically important primary sectors havedeclined; and
■ developing-country governments today areshowing an unprecedented desire to attract FDI.
Not surprisingly then, the past year has been asimilarly exciting period for FIAS. I believe thatwe have made significant strides in positioningourselves to meet the challenges of the comingyears.With the addition of the new managementteam, the last six months have seen an extensivebottom-up exercise to develop our three-yearstrategy (FY 2005-2007). Building on FIAS’s 19years of experience, the strategy titled “Drivingfor Impact” has four main areas of focus: increas-ing FIAS’s emphasis on the solution design andimplementation aspects of the reform process,adopting a more “programmatic” multi-yearapproach with our clients and spending moretime with them, developing a substantial knowl-edge management program, and increasing ourcollaboration with the rest of the World BankGroup and other stakeholders.
While many of these changes have been in processover the past year or two, their implementation hasnow been accelerated.They also very much reflectmarket demand.The annual International FinanceCorporation (IFC) client survey, a number ofindependent evaluations of FIAS this past year, andour own direct experience all highlight that, whileour clients are generally very satisfied with thequality of FIAS services, they need more help inthe way of downstream support of reforms. WithFIAS situated in the joint IFC/World BankInvestment Climate Department, it is increasinglypossible to leverage off the diagnostic work donethrough the Doing Business and InvestmentClimate Assessment programs. Equally significant,with the high importance now given to invest-ment climate work in the Bank Group, there isgreat opportunity to partner even more with theBank’s projects and IFC’s advisory services (e.g.,the project development facilities), particularly forthe implementation phase of the reform process.
Operationally, FY 2004 has also proved to be a verysuccessful year.The completion of 60 projects wasthe most ever for FIAS—up from the previous highof 49 that was achieved last year. Africa continuedto be the single largest region of FIAS projects, rep-resenting roughly a quarter of the program. Eastand South Asia also showed strong demand, partic-ularly from the lower-income markets of Bhutan,East Timor, Pakistan, Cambodia, and Vietnam.Theyear also saw the first FIAS project in many years inChina—this time in the underdeveloped andunder-invested northeast part of the country. InEastern Europe and the former Soviet Union, theprogram remained solid, with continued strongdemand for our administrative barriers product.Turkey also emerged as a very important FIASclient. Here FIAS completed a competition policy
From the General Manager
3
project and also supported the establishment of thefirst-ever Investor Advisory Council. In LatinAmerica and the Caribbean, a number of innova-tive initiatives were undertaken, including theimplementation of a competition policy programin Nicaragua, a review of corporate social responsi-bility policies in El Salvador, and a promising proj-ect to rationalize business red tape and inspectionsat the municipal level in Lima, Peru.
None of our accomplishments could have been pos-sible without the hard work and dedication of FIASstaff over the past 12 months.Of course I would alsolike to thank our donors, including the International
Finance Corporation and the World Bank, for theircontinued enthusiastic support.
All in all this has been a most successful year andone that has set FIAS up for what should be aninteresting and challenging future.
Sincerely,
Neil RogerGeneral Manager
4
Year in Review Operational Results of FY 2004
FIAS Activities
FY01 FY02 FY03 FY04
Advisory projects 48 49 49 60
Conferences and workshops 1 3 4 3
Research publications 3 9 6 1
FIAS completed an all-time high of 60 advisoryprojects this year.
Our goal is to reach 90projects a year by FY2007.
While the number ofcompleted advisoryprojects increased by22 percent in FY 2004,expenses increased by16 percent.
40
50
60
Projects
Num
ber
of Pro
ject
s
US$
Millions
FY04FY03FY02 FY01 $6
$8
$10
Expenditure
Advisory Projects and Expenditures
Sources of FundsIn US$ Thousands
FY01 FY02 FY03 FY04
Starting balance 5,005 5,645 6,308 6,077
General trust fund contributions 4,514 4,595 4,749 5,102
Project co-funding from 2,257 2,383 2,529 2,668 clients and donors
TOTAL 11,776 12,623 13,585 13,847
In FY 2004, FIAS receivedgeneral and regional trustfund contributions fromAustralia, Ireland, Luxem-bourg, Netherlands, NewZealand, Norway, Sweden,Switzerland, and theUnited Kingdom.
5
Advisory Projects by Region
FY01 FY02 FY03 FY04
Sub-Saharan Africa 14 14 12 15
East Asia & the Pacific 13 9 9 11
South Asia 1 4 2 5
Europe & Central Asia 13 10 13 17
Latin America & the Caribbean 4 7 6 10
Middle East & North Africa 3 5 7 2
TOTAL 48 49 49 60
Advisory Projects by Type
FY01 FY02 FY03 FY04
Core products: Investment Climate Diagnostics 9 10 6 9
FDI Policies for Attracting Investors* 24 25 16 26
Administrative Barriers Reform 11 10 16 20
Investment Promotion 11 6 15 6
New products: Corporate Social Responsibility 1
Sector-Focused Solutions 2
New focus areas: Contract Enforcement and Secured Lending
Access to Land
TOTAL** 55 51 56 64
* FDI Policies includes 11 Laws and Regulations projects in in FY 2001, 20 in FY 2002, and 13 in FY 2003. FDI Policies includes 8 TaxIncentives projects in FY 2001, 5 in FY 2002, and 3 in FY 2003. In FY 2004, FDI Policies includes 17 Laws and Regulations projects, 5Competition Policy projects, and 4 Tax Incentives projects.
** Total project type numbers exceed total project numbers because some projects involve more than one product or focus area.
In FY 2004, FIAS continued to focus on“frontier countries,”with over half of ouradvisory projects dedi-cated to those nations.Eighty-four percent of our projects werecompleted in low and lower-middle in-come countries.
Over the next threeyears, at least 60 per-cent of our projects willbe conducted in fron-tier countries.
In FY 2004:
Europe & Central Asia
LatinAmerica &the Caribbean
Sub-Saharan Africa
East Asia & the Pacific
South Asia
Middle East& North Africa
In FY 2004:
InvestmentPromotion
InvestmentClimateDiagnostics
FDI Policies for Attracting Investors
Administrative Barriers
Corporate SocialResponsibility
Sector-FocusedSolutions
We greatly expanded ourscope of products and focusareas in FY 2004. We devel-oped two new products andhave expanded FDI Policiesfor Attracting Investors tofocus also on access to landand on contract enforce-ment and secured lending.
$0
$50
$100
$150
$200
Figure 1: China Receives Bulk of FDI Flows to Developing Countries
Figure 2: FDI Flows by Sector to Largest 20 Developing Countries
Sources: ECLAC, ASEAN, UNCTAD, and government statistics.
US$
Billion
US$
Billion
$0
$50
$100
$150
$200
2002200120001999199820021999199619931990
All otherdeveloping countries
China Other sectors
Infrastructure, financial & petroleum
Developing countries are concerned by themarked decline of FDI flows since 1999 andChina’s increasing share of those flows. However,an in-depth look at the situation reveals some newand promising trends. FDI is originating frommore countries, including China, and is going tomore sectors like critical domestic service sectorssuch as retail.The conditions under which coun-tries can attract and benefit from FDI vary by sec-tor and have little to do with providing oneroustax incentives. For example, while functioninginfrastructure and customs are key to exporters,equal enforcement of taxes and access to land arekey to retailers. Sorting out these microeconomicissues sector by sector should increase not onlyFDI flows but also domestic private investment,and thus increase growth and reduce poverty.
The Apparent Gloom Overall FDI flows to developing countries havedeclined by 26 percent since 1999, while China’sshare increased from 21 to 39 percent. (SeeFigure 1.)
Many developing countries see China as over-whelming in manufacturing, with an infinite poolof qualified and flexible labor willing to work forone dollar a day. They see India following suit inthe promising offshore services sector. This feelingis particularly strong among Latin American andSoutheast Asian countries, which were once thedarlings of FDI. Eastern Europe is hoping thatintegration in the EU will enable it to catch a sec-ond wind of FDI, while Africa, the Middle East,and South Asia remain with low levels.
The Brighter PerspectiveFirst, FDI growth over the last 13 years has beenphenomenal (despite the recent decline), withmore than 17 percent average annual growth indollar terms. The decline since 1999 occurredmostly as a result of the one-off privatization dealsin the infrastructure, financial, and petroleum sec-tors, while the other sectors remained mostly con-stant. (See Figure 2.) Another and, it is hoped,one-time cause of the decline has been the macro-
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The Mixed Messages ofCurrent FDI Flows
7
economic crisis and uncertainties that affectedLatin America.
Several in-depth studies have revealed that inalmost all cases the impact on productivity, the keycriterion by which to assess long-term economicperformance, was largely positive. For example, astudy by the McKinsey Global Institute showedthat removing FDI restrictions in the Indian auto-motive sector unleashed competition and invest-ments and resulted in a threefold increase inproductivity and output. (See Figure 3.)
Although China does account for 39 percent ofFDI to developing countries, it also accounts foralmost 30 percent of developing-country popula-tion. As a percentage of GDP, China’s FDI per-formance is not extraordinary at 3.8 percent.Nineteen developing countries fared much betterover the same period (1999–2002). Furthermore,China’s performance looks even less impressive ifadjusted for FDI round-tripping through HongKong, which could amount to as much as 30 per-cent of China’s FDI.
Another reason to be hopeful is that the sources ofFDI are increasingly varied. “South-south” FDIflows have expanded from 17 percent of FDI todeveloping countries in 1995 to 30 percent in2001, the latest year for which statistics are avail-able. For example, China and South Africa arebecoming major players in Africa with aboutUS$2.7 billion and US$1.6 billion respectively ofFDI invested there by 2001.These new FDI play-ers tend to be better equipped to invest in difficultand remote markets and develop products andservices more adapted to developing-country con-sumers. For example, Chinese electronic producers
such as TCL now produce US$50 color TVs inIndia and Vietnam, while Marutti in India canexport cars for US$2,000. Consumers in develop-ing countries need these low spec products, as theironly options are usually unaffordable Westernproducts and relatively expensive, very low spectraditional products.
An additional good sign is that the destination ofFDI has expanded to economic sectors such asbanking, retail, construction, tourism, and offshoreservices. For example, the cumulative FDI flows tothe retail sector in developing countriesamounted to US$45 billion for the period 1998-2002 (about 7 percent of the total). More coun-tries can develop comparative advantages in thisincreasing set of sectors.
Implications for theGovernments ofDeveloping Countries
Although governments should be hopeful, they willhave to shift their mindset both in terms of scopeand approach in order to win FDI in this increas-ingly competitive market. First, the scope has toencompass all economic sectors. Most developingcountries still have major FDI restrictions in theservice sectors while they waste fortunes to attractFDI for manufacturing in an uphill battle againstChina. Market-seeking FDI in domestic sectorssuch as retail carries great development impact. Forexample, FDI in retail has been a key driver of pro-ductivity growth, lower prices, and higher con-sumption in Brazil, Poland, and Thailand. Theselarge-scale retailers are also forcing wholesalers and
99-0092-93
Barriers Removed■ Licensing abolished■ FDI allowed
Figure 3: Positive Impact of FDI in the Indian Automotive Industry
LabourProductivity
100 356
Index: India = 100 in 92-93
99-0092-93
Output
100 380
99-0092-93
Employment
100111
food processors to improve, becoming importantsources of exports, and increasingly sourcing localproducts to feed their global supply chains.
Second, the battle of attracting FDI will increas-ingly be fought at the microeconomic level by sec-tor. Microeconomic conditions vary significantlybetween industries—e.g., exporters are looking forefficient customs and infrastructure, while retailers
need equal enforcement of taxes and functioningland markets.
Resolving these microeconomic issues sector bysector will increase FDI flows as well as benefitdomestic private investors—and thus it is key toachieving higher growth and reducing poverty.Both the good and the bad news is that mostdeveloping countries have a long way to go.
8
9
What Does FIAS Do?FIAS advises developing-country governments onhow to attract and retain foreign direct investmentand maximize its impact on poverty reduction byfocusing on six core areas:
■ investment climate diagnostics;
■ FDI policies for attracting investors, including■ laws and regulations,■ tax incentives,■ competition policy,■ access to land, and ■ contract enforcement and secured lending;
■ administrative barriers reform;
■ investment promotion;
■ sector-focused solutions; and,
■ corporate social responsibility.
FIAS develops long-term strategies that are cus-tomized to fit each client country’s needs andobjectives. Our specialists identify practices thatimpede productive FDI, design financially and
politically practical plans of action, and supporttheir clients through all phases of transition andimplementation. FIAS has increasingly collabo-rated with other international financial institutionsand bilateral partners to assure that our clients areprovided the appropriate support throughout theprocess. Progress is continually monitored andevaluated for effectiveness.
Where Does FIAS Operate?FIAS advises governments of developing nationsaround the world, with an increasing focus on“frontier countries.” Frontier countries are thosecountries considered by the World Bank Group tobe high risk and/or low-income countries with anInstitutional Investor Country Credit Rating of 30or less, and a gross national income per capita of$765 or less. By 2007, we expect to increase ourfrontier country projects from a current 50 percentof all projects to 60 percent.
Why Was FIAS Created?FIAS dates back to late 1985 when the StatePlanning Commission of China requested that theInternational Finance Corporation review thecountry’s foreign direct investment policies. Thusbegan FIAS, an advisory service of IFC. We havealways had a relatively narrow mandate: to adviseon host country policies that affect the flow of
Government–Business Dialogue
Monitoring andEvaluation
Dia
gnos
ticSolution
Design
Implementation
Iden
tify
prob
lems Recom
mend
changes
The FIAS Project Process
Introduction to FIAS
FY01 FY02 FY03 FY04
Frontier market 34 32 31 32project
Non-frontier 14 17 18 28market project
productive foreign private direct investment indeveloping countries.The creation of FIAS was alogical progression for IFC, an organization thatserves as the private-sector arm of the World BankGroup, that is owned by both developing anddeveloped governments, and that has extensiveexperience as a debt and equity investor in emerg-ing markets. At the same time, as FIAS’s primary clients would be developing country gov-ernments, it was important to have an institutionalconnection with the World Bank, which isengaged with those same governments.
By September 1987, FIAS was formally consid-ered a joint service of IFC and the World Bankand was given approval to establish its own trustfund. This fund enabled FIAS to receive criticaldonor contributions. Today, IFC contributesapproximately 30 percent, the World Bank con-tributes 15 percent, and the remaining 55 percentof our funding comes from donor and client gov-ernment contributions.
Central to our existence for the past 19 years andgoing forward is that FDI is an important form ofprivate investment that enables countries toengage in a rapidly globalizing economy. FDI is nopanacea for the problems of development, but ifcombined with a neutral trade regime, favoringneither export-oriented nor domestically focusedindustries, it can be an effective catalyst for eco-nomic growth. The benefits of FDI in terms ofemployment generation, wages, linkages with local
firms, capital flows, and exports are well estab-lished. In addition, a liberal regime of trade andinvestment that allows for competition fromdomestic and foreign sources promotes innovationand formulation of skills through experience.
Efforts aimed at improving the institutional andpolicy fundamentals that increase an economy’sattractiveness to FDI, including reducing excessiveregulation, enforcing property rights and appropri-ate competition policies, and reducing corruption,are also those that increase the quality and quantityof domestic investment and the competitiveness ofdomestic firms. In addition, environmental poli-cies, labor laws, and health and safety standards thatapply to all enterprises, and that are consistent withnon-discrimination and national treatment princi-ples, serve the interests of foreign investors andhost country citizens alike.
Going Forward…OurThree-Year StrategyFIAS is presently embarking on a three-year strat-egy for fiscal years 2005-2007. Central to the planis to build on our success by improving the impactof our advisory work and expanding the quantityof our services by an additional 50 percent.Specifically, we will:
■ increasingly support governments in the solutiondesign and implementation phases of the reformmanagement, in addition to providing diagnos-tic analysis;
■ move toward a multi-year programmatic approachin which diagnostic studies are followed by aprogram of interlinked projects that trigger dis-cussions on the next step or project;
■ increase upstream planning and downstreamimplementation through collaboration with theWorld Bank Group and other stakeholders;
■ differentiate between clients more clearly, interms of their commitment and capacity, andapply different advisory methodologies;
■ develop product lines in new critical areas;
■ improve the knowledge management systemand its dissemination by taking stock of our past
10
Growth in Projects and Staff
0
10
20
30
40
50
60
Projects Staff
2004200119981995199219891986
experiences and those of others, increasing ourWeb site presence, and holding seminars andworkshops; and,
■ increase the time that we spend with our clients.
How Does FIAS Fit intothe World Bank Group?
CollaborationFIAS is one of the first joint IFC-World Bankservices. With this parentage, FIAS benefits from,and leverages, IFC’s extensive developing-countryinvestment experience. FIAS is also able to linkanalysis with ongoing or upcoming Bank pro-grams to ensure downstream implementation andsupport to governments.
In 2002, FIAS was located in the newly createdInvestment Climate Department (CIC) of the alsonew joint IFC/World Bank Private SectorDevelopment Vice Presidency. In addition to FIAS,the CIC also includes the Monitoring and AnalysisGroup that creates the Doing Business report andInvestment Climate Unit that oversees InvestmentClimate Assessments (ICA). Indeed, both theDoing Business and ICA reports often serve as anexcellent analytic starting point for FIAS in devel-oping its assistance in a country.
Another important institutional relationship forFIAS is with the Multilateral InvestmentGuarantee Agency (MIGA), which has an advisorygroup that provides tailored advice and capacitybuilding assistance to developing country invest-ment promotion agencies. FIAS works very closelywith the group to provide a comprehensive pack-age of investment promotion assistance to govern-ments and investment promotion agencies. FIASassists governments in improving the businessenvironment in their countries so that they canattract and retain more beneficial FDI, includingthrough assistance in designing strategic and insti-tutional frameworks for investment promotion.
GovernanceOverall operations of FIAS are reviewed by theSupervisory Committee that consists of PeterWoicke, Executive Vice President of IFC; Assaad
Chronology of FIAS Experience and Expertise
New Regions New Products
1986 East Asia Investment Climate Diagnostics
1987 Sub-Saharan FDI Policies to Attract InvestorsAfrica Investment Promotion:
Institutions
1988 South Asia Tax Incentives
1989 Europe
1990 Backward Linkages FDI Databases Investment Promotion: Strategy
1991 Latin America Middle East North Africa
1992 The Pacific
1993 Central Asia
1996 Administrative Barriers
2002 Competition Policy
2004 Post-Conflict Sector-Focused SolutionsAfrican countries Corporate Social Responsibility
Contract Enforcement and Secured Lending
Access to Land
11
Jabre, Vice President, Operations of IFC; andMichael Klein,Bank-IFC Vice President, PrivateSector Development and Chief Economist, IFC.
Within FIAS, Regional Program Coordinators(RPCs) are primarily responsible for maintainingclient relationships and liaising with World BankGroup country-based colleagues.The RPCs pres-ent proposed projects to the Approval Committee,which is composed of the FIAS General Managerand the two FIAS Managers and LeadEconomists. Once client projects are completeand their respective reports have been written,they must be approved by Neil Roger, FIAS
General Manager and Director of the InvestmentClimate Department, who is responsible for theoverall delivery of the FIAS Program and reportsto the Supervisory Committee.
FIAS management also meets annually with the Consultative Committee of Donors (CCD) toreview the financial and operational results and todiscuss future strategic orientations. The CCDcomprises all active FIAS donors and presentlyincludes of representatives from the governmentsof Australia, Canada, Ireland, Luxembourg,Netherlands, New Zealand, Norway, Sweden, andthe United Kingdom.
12
Where We Fit
World Bank
Private Sector DevelopmentVice-Presidency
Investment ClimateDepartment
Foreign InvestmentAdvisory Service
International Finance Corporation
Investment ClimateUnit
Monitoring and Analysis Group
Impact on the Ground
FIAS staff works closely with client governmentsto identify the advisory support that would bemost useful in attracting FDI and that is mostlikely to be successfully implemented.This identi-fication process, which typically involves meetingswith a wide range of stakeholders, takes account ofthe client government’s capacity and its level ofcommitment to policy reform.
The last year saw a continued growth in demandfor removing unnecessary administrative barriers(30 percent of our projects). Reducing administra-tive barriers is part of the continuing global tran-sition from state-led to market-led growth. Wecontinued strong engagement with differentaspects of FDI Policies (39 percent), followed byAdministrative Barriers Reform, and thenInvestment Climate Diagnostics (17 percent).
This year, per client government feedback, webegan to shift away from a focus on diagnosticstoward an emphasis on solution design and help-ing to plan reform implementation.We started tofocus our advice more systematically on broaderstakeholder engagement, on sequencing theimplementation of different recommendations, onthe choice of institutions and institutional design,and on the skills and incentives that determine thebehavior of authorities charged with implement-ing the reforms.
We have decreased our investment in diagnostics bydrawing on the new diagnostic instruments andsurveys of our colleagues in the World Bank Group.We have started to improve our leverage with theGroup by engaging our colleagues—upstream and
downstream—as collaborators in helping govern-ments implement our FDI-focused advice.
This year we also began to consider more explicitchanges in the design of our methodology,depending on country circumstances. This hasresulted in three broad categories:
(1) When governments request our service and weare confident in their commitment and capacity,wehave started to move toward multi-year program-matic approaches because when we pull togethercritical constraints into a cohesive action plan,investment climates improve. Under this approach,a broad diagnostic of a country’s FDI-related poli-cies, regulations, and institutional arrangements isfollowed by a program of interlinked advisory proj-ects over a multi-year period.This approach retainsindividual advisory projects and assesses implemen-tation of short-term priority recommendationsfrom one project as explicit triggers to begin dis-cussions on the next step or project.The approachshould also reduce unnecessary gaps between dif-ferent areas of advisory support.
(2) In countries where government capacity isweak or where its commitment to sustained policyreform is still unproved, we have started to designshorter interventions with clear break points andactions required from the government before thenext step in the advisory support. This bite-sizedapproach has found positive initial results, particu-larly in post-conflict countries.
(3) In those countries where government commit-ment to reform is questionable, we will be muchmore selective.We are a small team, and the fundsentrusted to us are precious: Our minimum crite-rion from our clients is commitment.
Core Products
13
Investment ClimateDiagnostics:An
Entrée for FIAS ProgramsInvestment climate diagnostic studies are typicallythe first piece of work that FIAS carries out in acountry or region. In some cases, a diagnosticstudy may also be done if there has been a hiatusin a past program or where a new government hastaken office.
Diagnostic studies comprise broad reviews of var-ious aspects of the investment environment. Mostfrequently, they examine the legal and regulatoryenvironment (commercial code and company law,bankruptcy law, and investment legislation andrelated secondary laws, such as licensing, trade reg-ulation, product certification, and other adminis-trative procedures); direct and indirect taxationregimes, including investment incentives; andinvestment promotion policies and institutions. Inrecent years, some diagnostic studies have also
examined competition policy, linkages, and marketstructure and privatization. Others have looked atthe investment environment in a group of coun-tries participating in economic unions.
Diagnostic studies identify key constraints facinginvestors and key areas that governments mustimprove in order to increase the country’s attrac-tiveness to both domestic and foreign investors.The studies therefore provide a framework for thegovernment’s own strategy, priorities for improv-ing the country’s investment and FDI perform-ance, and also a tentative program of more detailedFIAS assistance in specific areas such as administra-tive barriers reform and investment policy advice.The studies may also establish the basis for addi-tional FIAS assistance in strengthening the institu-tional framework for investment promotion andfor MIGA assistance on capacity building forinvestment promotion agencies.
A key element of these studies is that FIAS obtainsinformation directly from the private sector aboutits perceptions of the investment environment ina particular country. In the past, this informationwas usually secured by interviews with investorsand representatives of business associations, eitherindividually or in focus group settings. TodayFIAS is increasingly making use of survey results,whether Investment Climate Assessments carriedout by the World Bank or new surveys of inter-mediaries or “runaway investors” now beingpiloted by FIAS.
Diagnostics to Follow-up Reform Projects
0
5
10
15
20
Number of diagnostics that did not lead to reform projects
Number of diagnostics that led to reform projects
200119981995199219891986
The Gambia
Diagnostic: In 2003, FIAS received a requestfrom the government for assistance in determiningmajor impediments to investment, with an empha-sis on exports.The government had embarked onan economic diversification and growth programand was receiving assistance from the World Bankthrough a Gateway project designed to turn TheGambia into an attractive location for investment.The government asked FIAS to carry out a generaldiagnostic analysis, to be followed by an adminis-trative barriers study and a review of taxes, and towork in collaboration with the World Bank to fur-ther the broader agenda of the Gateway project.
Solution Design: FIAS carried out the diagnos-tic study to identify major constraints and to establish a framework for public-private dialogueand subsequent pieces of work to be carried outin a three- to four-year program of assistance.This project has been a pilot for the “program-matic” approach now advocated by FIAS.
Results:The study revealed that constraints foundin the export sector also existed in all sectors andthat the environment for FDI was hampered by ageneral lack of implementation capacity withinresponsible agencies. General problems includedpoor intergovernmental coordination, lack of public-private dialogue, and a large amount of dis-cretion in administrative decisions, such as imple-mentation of investment incentives.The study alsoidentified major weaknesses in infrastructure, legalframeworks, the judicial system, and tax and customs administration.
The FIAS report is now being used by the govern-ment as a catalyst for engaging the private sector ina dialogue about economic policy and for devel-oping an explicit action plan. FIAS coordinationwith the Bank’s program in The Gambia is provid-ing resources for the studies and for the implemen-tation of recommendations arising from thestudies. The diagnostic’s broad focus provides thecontext for the design of follow-up studies in theareas of administrative procedures and taxes.
West Africa
Diagnostic: FIAS has conducted a variety of advi-sory projects over the past decade in membercountries of the West Africa Monetary andEconomic Union (WAEMU) and provided advicein the preparation of a regional investment code forthe group. On the basis of FIAS’s experience andafter discussions with the WAEMU Commission,Agencie Internationale de la Francophonie (AIF)requested FIAS assistance in the implementation ofan investment climate improvement program. FIASwas asked to prepare a regional diagnostic studyfocusing on fiscal, financial, and trade policies andadministrative barriers and legal frameworks forinvestment, with a view to contributing to regionalintegration and har-monization efforts.FIAS considered thestudy a pilot project,the approach andresults of which couldbe applied to othereconomic groupingsin Africa, such asSADC, COMESA,and other regions.
Solution Design:The study providedan agenda of issuesand recommendationsto be submitted to a regional seminar in preparationfor developing a regional strategic action plan forWAEMU and its members. All parties agreed thatthe study would be supervised by a Comite dePilotage, comprising the major regional and inter-national organizations and the WAEMU Secretariat.
Results: The abundance of material on the eco-nomic circumstances of the WAEMU members,coupled with FIAS’s past experience with theeconomies, permitted a timely report with robustfindings and recommendations.A draft action planbased on the report has been prepared and will bediscussed in a seminar in October 2004.
INVESTMENT CLIMATE DIAGNOSTICS CASE STUDIES
15
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FDI Policies for Attracting Investors
Investment Laws and RegulationsEfficient legislation is a simple tool to attract FDI.As long as it is supported by governmental deci-sions and administrative practices on the ground,investment policy serves as the greatest comfortand reassurance for foreign investors. A soundbusiness climate includes policies that—
■ allow foreign investors to invest in all sectors ofthe economy (perhaps with a few exceptionssuch as defense);
■ place no limit on foreign investor participationin domestic companies;
■ do not impose performance requirements onforeign investors (e.g. minimum local content);
■ treat domestic and foreign investors alike(national treatment) and do not discriminateamong foreign investors from different countries;
■ do not require investor screening by a regulatoryagency, but rather establish a simple notificationor registration system for statistical reasons; and,
■ let foreign investors run their operations as theywish, as long as they are in compliance with alllaws of the land (e.g., employ expatriate workers,freely repatriate dividends and funds, access arbi-tration), and assure them that they will be pro-tected against expropriation or nationalization.
FIAS advises clients to draft investment legislationthat supports the country’s objectives and imple-ments best-practice foreign investment policy.Once countries can ensure that the basic rightsand guarantees mentioned above will be upheld bya court of law or an arbitral panel, they should thenfocus on areas such as access to land and right totransfer property to third parties, establish branchesor subsidiaries, borrow abroad, and obtain insur-ance from abroad.
Tax IncentivesGenerous tax incentives and low tax burdens donot attract FDI by themselves. In fact, many incen-tive schemes attract very little additional invest-
ment but instead cost countries millions of dollars,make investment procedures too complex, andlead to significantly greater corruption. FIAS helpsclients with the design of cost-effective tax systemsthat enhance private investment and minimizeeconomic distortions and revenue losses. FIASassistance focuses on the following questions:
■ Would this country benefit from investmentincentives, or does it have major impedimentsto FDI that should be addressed before consid-ering incentives?
■ How can the tax system be simplified to makeit more attractive to private investors?■ Which taxes penalize private investors
the most?■ What is the tax impact on government
revenues?■ Are investment incentives effectively used by
private investors? If so, which ones?
■ If there is a case for recourse to investmentincentives, what form should they take?
■ What are the revenue implications of the vari-ous proposals?
■ What is the impact of the various proposals onthe effective tax burden on investment, and howdoes it compare with competing investment sites?
Competition PolicyA key component of a sound business environ-ment is a competition framework that fosters theflow of economic benefits to all segments of soci-ety. This framework includes both general pro-market policies, such as trade liberalization andprivatization, and more specific provisions to fightcollusive behaviors, rent-seeking behavior, andother abuses of market power.
FIAS responds to competition policy requests byreviewing the legal framework, institutional setup,and level of technical skills and coordinationamong the national institutions and ministriesconcerned. While many economies have adoptedpro-market reforms, technical assistance is in highdemand to build staff and institutional capabilities.To respond to this demand, FIAS has various proj-ects that are in the pipeline for FY 2005, includingthose in Ethiopia and Turkey.
Tanzania: Competition Assignment
Analysis of three strategic sectors: tea,cement, and tobacco
Diagnostic: The FIAS 2002 study concerned (i) the deterioration of the farmers’ position rela-tive to that of processing companies in both thetobacco and tea markets and (ii) the protection ofthe cement industries at the expenses of local con-sumers and the state.According to Tanzanian offi-cials, in the past the emphasis was on privatizationwithout paying sufficient recognition to the simul-taneous introduction of competition frameworkand safeguards. As a consequence, in certain sectorsprivatization had led to entrenchment of monop-olistic firms.
Solution Design: FIAS recommended changesto regulations that were adding to market imper-fections.
Implementation: In 2004, the government ofTanzania revised and enacted a new competitionlaw. The priorities became to change regulationsthat were adding to market imperfections and toestablish an agency to play the role of competitionpolicy advocate, as well as a supervisory role indomestic markets.
Fiji: Investment Legislation
Diagnostic: In 2002, the Fiji Cabinet Sub-Committee on Investment concluded that the1999 Foreign Investment Act required amendingand redrafting. The committee knew that anychanges to the act would contribute to a crucialcomponent of the government’s wider develop-ment objective of sustaining moderate to higheconomic growth in the coming years, as set out inits Strategic Development Plan. The governmentrequested FIAS assistance.
Solution Design: Working closely with theMinistry of Commerce, Business Development,and Investment (MCBDI), FIAS provided adviceregarding the government’s overall approach toforeign investment, as input to a government pol-icy paper on foreign investment, and recom-mended proposed amendments to the act withbest-practice legal drafting guidelines to convertthe agreed policy into legislative amendments.FIAS also designed an assistance project in consul-tation with the Fiji Trade and Investment Bureau(FTIB) to address its functional needs, which com-plemented the amendments to the act.
Implementation: The new Foreign InvestmentAct and its associated implementing regulationscame into effect on July 26, 2004. The FTIBintroduced a foreign investment registry, whichbecame operational concurrently with implemen-tation of the new act.The FTIB has also prepareda detailed investment promotion strategy, in asso-ciation with FIAS and MIGA’s InvestmentMarketing Services Department.
Result:The amendments to the Foreign InvestmentAct also prompted the government to address thereform of the regulatory environment, for which thecabinet recently authorized a program of reform,monitoring, and evaluation initially focused on theinvestment approvals processes. To implementchange in identified investment approvals processes,FIAS, in conjunction with the World Bank, has dis-cussed and agreed with the MCBDI on a programof activity to start in September 2004 with full-time in-country advisory support for one year.A new public/private-sector task force will beestablished to oversee the program.
FDI POLICIES FOR ATTRACTING INVESTORS CASE STUDIES
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Administrative Barriers Reform:
Cutting the Red TapeTo start a business in a developing country, aninvestor may need to comply with as many as 53different procedures that may take about 443 daysand cost around US$6,000 (often over 10 timesthe annual income of the average citizen in thatcountry). Although over the last two decadesmany developing countries have undergonemacroeconomic reform and trade liberalization,investment response to such improvements hasbeen disappointing because of overburdening regulation. Tedious administrative procedures deter investment, inspire corruption and blackmarket activities, and encourage capital flight fromcapital-scarce countries. Furthermore, the mostimpoverished people within a nation bear a dis-proportionately larger share of the regulatory burden, as they have neither the money to satisfyrent-seekers nor enough political power to tamebureaucratic predators.
FIAS helps developing-country governmentsimprove their country’s investment climate byremoving administrative barriers to investmentthrough conducting diagnostic studies, designingsolutions, and developing action plans for reform.The diagnostic study examines all of the adminis-trative procedures that an investor must follow inorder to start up, locate, and operate a business.
After the diagnostic study, FIAS facilitatespublic/private-sector dialogue to develop anaction plan that prioritizes recommendations anddefines what reforms will be undertaken, who willbe responsible for implementing them, when theyshould be completed, and how they should beassessed. Implementation is then monitored andevaluated annually for three years. By eliminatingunnecessary procedures and streamlining regula-tions, governments can encourage new investmentand thereby improve growth and alleviate poverty.Reducing key barriers to entry can result in an0.25 percent increase in the annual income growthof a developing country.*
Administrative Procedures
ImmigrationBusiness registrationTaxpayer registrationStatistical registrationAnti-monopoly clearanceIssuance of sharesLicensing
Start-up:
Investor
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* Doing Business in 2005: Remaining Obstacles to Growth, WorldBank, IFC, and Oxford University Press
Turkey
Diagnostic: Administrative barriers to investmentin investment legislation, taxation and incentives,company registration, customs and standards, intel-lectual property rights, sectoral licenses, employ-ment, and municipal location issues.
Solution Design: FIAS made recommendationsfor 32 changes in procedures and laws and for theestablishment of an investment council to developand oversee implementation of an action plan.
Implementation: The government enacted a“Decree on Improving the Investment Climate in Turkey” that set out a three-phase strategy:establishment of the Coordination Council for the Improvement of the Investment Climate(YOIKK), development of an action plan, andmonitoring of progress.YOIKK, with private-sec-tor observation and participation, was chargedwith proposing the legislation to streamlineadministrative procedures in a range of areas.
Results: YOIKK produced an impressive volumeof reform legislation on the recruitment of foreignpersonnel, foreign direct investment, companyregistration, and labor. The council is currentlyengaged in reforming the areas of sectoral licens-ing, customs, intellectual and industrial propertyrights, and land acquisition and site development.The process has been aided, monitored, and sup-ported by an unprecedented participation of theprivate sector. Business associations are currentlymonitoring the implementation progress of allFIAS recommendations. Fifty-six percent of thoserecommendations have already been implemented.
A D M I N I S T R A T I V E
SUCCESSFULBUSINESS
Tax administrationCustoms proceduresInspectionsForeign exchangeProduct certificate
Identifying landPhase I approvalUtility connectionsProperty registrationBuilding permissionInspections and occupancy
Locating: Operating:
Latvia
Diagnostic: In 1999, FIAS found that the Latvianinspection system subjected investors to inconsis-tent and discretionary implementation of laws andregulations, the imposition of unclear fines andsanctions, and ineffective appeal procedures,among other administrative barriers to investment.
Solution Design: FIAS developed an action planfor the identification and implementation of newlaws, regulations, and practices regarding inspec-torate reform, including:
■ systematic identification of problems;
■ structured stakeholders’ dialogue on reform pri-orities and action plan;
■ implementation of the action plan by policymakers; and,
■ continuing reform process monitoring.
Implementation: With guidance from FIAS andcofinancing from EU/Phare, the governmententered into a dialogue with the private sectorregarding inspectorate reform. Subsequently, theLatvian government negotiated with the WorldBank to include some of the recommendationsfrom the action plan as conditionalities for a newStructural Adjustment Loan. FIAS worked withthe World Bank to help the country develop newregulations to clarify the rights and responsibilitiesof both inspectors and “inspectees” and to developa training program that encouraged a more“client-oriented” approach to inspections. Theaction plan developed by the country with FIASguidance became a living document continually
including the new items to be implemented andtracking those that have been completed.
Impact: Latvia was designated as “CC Best”* bythe European Commission’s director general ofenterprise, making Latvia a positive example forother EU candidate countries. In 2003, FIASproduced a follow-up study, which documented,inter alia:
■ decreased burden of inspections and associatedbribes, and constant or improved inspectionquality;
■ significant progress in enterprise registration,tax administration, customs and border crossing,real estate, and expatriate residency; and,
■ successful implementation of 91 out of 106tasks in the action plan by December 31, 2003.
* Candidate Country—Business Environment Simplification Task Force
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2001
in h
ours
2003
2
4
0
6
8
10
12
Sanitary inspectorateLabor inspectorateConstruction inspectorateEnvironmental inspectorateFire and rescue inspectorate
Inspection Durations
B A R R I E R S R E F O R M C A S E S T U D I E S
Investment Promotion:Getting the Basics
Right and Showing Product ImprovementCountries need investment promotion becauseinvestors often have limited search horizons and find it difficult to access information. On theother hand, product image matters to them.Investment marketing and promotion help allevi-ate these issues.
To compete for FDI effectively, a country mustdemonstrate that it offers some comparativeadvantage in addition to a sound business environ-ment. The 160 national investment promotionagencies (IPAs) and approximately 250 sub-national agencies established throughout the worldare evidence that countries are actively promotingthemselves as destinations for foreign direct invest-ment. Similar to marketing a private company,IPAs typically carry out the following functions:
■ information-gathering for potential and exist-ing investors;
■ investment facilitation services—assisting exist-ing investors through the administrative proce-dures and clearances needed to establish andoperate a business;
■ image-building—branding and improving acountry’s image as a favorable location forinvestment;
■ investor targeting and generation—industry orsector-specific “sales pitch” to potentialinvestors;
■ aftercare and linkages—monitoring and follow-up to respond to the needs of existing investorsand facilitating linkages between foreign anddomestic investors; and,
■ policy advocacy—identifying policy issues thatneed to be addressed in order to improve theoverall investment climate and advocating forspecific policy changes;
FIAS investment promotion assistance to devel-oping and transition economies consists of rec-ommendations for a combination of policy,regulatory, and procedural reform; institutionalframeworks for investment promotion; and meth-ods of monitoring effectiveness. FIAS projectsinclude advice in the following areas:
■ developing strategic approaches to attract FDI;
■ designing the legal foundation for investmentpromotion: investment law and the legal basisfor an investment promotion function;
■ designing the organizational framework ofnational and sub-national IPAs: location withingovernment, linkages with government and theprivate sector, internal structure and functions;and,
■ Conducting surveys to help client governmentsbetter understand how prospective and lostinvestors perceive the country. Specifically, thesurveys attempt to answer the following ques-tions: Is the country or region on the radarscreen of the international investment commu-nity? What are the country’s strengths andweaknesses in the eyes of potential and “run-away” investors, especially in comparison withother regions competing for investment? Whatare the sectors or activities that are most likelyto be attractive to potential foreign investors?
Whenever possible, FIAS collaborates with MIGA to pro-vide investment assistance that reflects MIGA’s expertise incapacity-building for investment promotion intermediaries.
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New in 2004: Surveys of BusinessIntermediaries
FIAS clients are encouraged to carry out self-assess-
ments of administrative barriers under FIAS supervi-
sion and based on FIAS methodology and training.
This year, FIAS introduced a new survey tool,
the Business Intermediary Survey (BIS). The BIS
gathers detailed and accurate information because
intermediaries (law firms, accounting firms, customs
brokers, real estate brokers, and other consultants)
help businesses overcome administrative barriers on
a regular basis. FIAS piloted the BIS in Russia,
where it has proved invaluable in providing detailed
information about highly problematic procedures for
land privatization and construction permits.
Bangladesh: Board of InvestmentStrategic Plan
Diagnostic: In April 2002, the executive chair-man of the Board of Investment (BOI) requestedFIAS assistance in developing a strategy for invest-ment promotion, preparing and implementing aplan, and training the executive management teamin strategic management. FIAS undertook theproject in collaboration with MIGA’s InvestmentMarketing Services Department.
Solution Design: FIAS organized and delivereda three-day strategic planning workshop for 15 keymembers of the BOI executive management team.The intensive and highly participatory processproduced a strategic framework for 2003-2007, thebasis for developing the 2003 Action Plan, and therestructuring of the organization’s investment pro-motion activities.
Implementation: In February 2003, the BOIBoard approved the strategic plan. This decisionwas announced publicly and covered extensively inthe media. Following the workshop, FIAS assistedthe BOI in finalizing the strategy and detailedaction plan.
Results: The implementation of the action plan isongoing. The first-ever BOI survey of reinvest-
ment activity by existing foreign investors was suc-cessfully completed.Approval for the restructuringof the BOI is expected in July 2004 with immedi-ate implementation to follow.
Peru: Institutional Framework
Diagnostic: In 2002, faced with significantdecline in FDI inflows, the government of Perusought to increase FDI levels as part of a strategyto stimulate economic growth and alleviatepoverty. The government requested FIAS assis-tance in developing an investment promotionstrategy and institutional framework to implementthe strategy.
Solution Design: FIAS conducted interviewswith existing and potential investors, analyzed theFDI environment and made recommendations foran investment promotion strategy and for theestablishment of the new IPA, ProInversión.
Implementation: ProInversión accepted andimplemented the FIAS recommendations on theneed to make a fundamental shift in its investmentpromotion strategy toward a promotion effort thatfocuses on policy advocacy and investment facili-tation services to new and incoming investors andthe institutional framework.
I N V E S T M E N T P R O M O T I O N C A S E S T U D I E S
I N V E S T M E N T P R O M O T I O N C A S E S T U D I E S
Bosnia and Herzegovina:Institutional Framework
Diagnostic: Following the devastating war,Bosnia and Herzegovina started on the path toreconstruction. By 1999, the government recog-nized the critical importance of FDI as a catalystfor growth and the achievement of its develop-ment objectives. Following a request for FIASassistance in preparing a national FDI Law, thegovernment sought FIAS assistance in outlining astrategic framework for investment promotion andestablishing a national investment promotionagency, as agreed under the Dayton Accord.
Solution Design: FIAS made recommendationsfor addressing key policy issues to improve thebusiness environment and the country’s attractive-ness to investors. In addition, FIAS designed theinstitutional framework for investment promotion,including the internal and external structure of a
national investment promotion agency that couldeffectively represent the interests of the state andboth entities.
Implementation: On the basis of FIAS recom-mendations, the government established theForeign Investment Promotion Agency (FIPA)with a strong mandate for promoting the countryas a destination for foreign investment. The EUprovided resources and technical assistance forimplementation of the strategy and initial staffingof the agency.The government is now the primarysource of funding for the agency.
Results: The agency has essentially “graduated”and has established itself as one of the most activein the Southeast Europe region. Responding towide-ranging efforts to improve the country’scompetitiveness, FDI flows have actually increasedover the past five years, and the country has suc-cessfully attracted some investment in the servicesand manufacturing sector.
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23
Corporate SocialResponsibility:
Good for Business andGood for Development
Firms in emerging markets are realizing signifi-cant improvements in revenue, market access, pro-ductivity, and risk management as a result ofcorporate social responsibility initiatives. CSRmeans operating a business in a manner that meetsor exceeds legal and societal expectations, to fos-ter both business benefits and positive develop-ment impacts. CSR implementation systemsinclude the standards that are applied; the mecha-nisms that are used to implement them; and theassociated capacity-building, monitoring, inspec-tion, and reporting frameworks.
Governments are coming to see CSR as a usefulvoluntary business mechanism that can help ensureenforcement of agreed standards in the workplaceand the surrounding community more effectivelythan public-sector inspections alone. In this way,CSR offers governments a cost-effective means toenhance sustainable poverty-reduction strategies.
At the same time, it helps the country’s competi-tiveness by ensuring appropriate labor and envi-ronment standards in the workplace.
Governments have a critical role to play in creatingthe enabling environment for businesses to adoptthose voluntary social and environmental standardsthat complement national development strategies.
FIAS draws on the expertise of the CSR Practice,also located in the Investment Climate Department.Advisory projects help governments develop the following.
■ CSR activities in the sectors most closely linkedto national competitiveness. Investors increas-ingly consider poor labor, environmental,human rights, and gender standards as key riskissues and look for evidence of systems toensure implementation.
■ Strategies to enhance transparency andaccountability and harmonize existing laws andregulations. Governments can promote good governance and can design sector-specific edu-cational and training opportunities that improveskills to simultaneously enhance national com-petitiveness and meet the needs of business.
■ Approaches that maximize the synergiesbetween public-sector inspectorates and supplychains’ voluntary monitoring, inspection, andreporting systems.
FIAS’s first CSR advisory project was this fiscalyear in El Salvador. FIAS helped the governmentidentify the importance of labor and environmen-tal standards in the country’s coffee and apparelindustries, recommended public-private partner-ship arrangements to bolster these standards, andtook advantage of CSR pressures down interna-tional supply chains.
New Products
Sector-FocusedSolutions: Optimizing
Value ChainsWorking along industry value chains, FIAS helpsits clients streamline investment climate policies topromote linkages and maximize the benefits tothe local economy. We also design programs tostrengthen supplier skills and bring togethermultinational buyers, selected suppliers, traininginstitutions, and governments.
Addressing sector-specific policy and institutionalissues along industry value chains fosters invest-ment and productivity growth as well as linkagesbetween multinational companies and local firms.A strong local supplier base in turn helps to retainand attract foreign investors and enhancesnational competitiveness. However, imperfectionsin governmental policies, lack of supplier techni-cal skills and experience, information gaps, and
other inefficiencies often prevent local companiesand multinational corporations from workingtogether, even where the preconditions for link-ages exist.
In 2004, FIAS has been advising the governmentof the Philippines on how to enhance benefitsfrom diffusion and linkages between multinationaland domestic firms in three key sectors. FIAS hasalso analyzed the FDI impacts of sector linkages inPacific Island economies. Successful advisory proj-ects have been implemented in Thailand andHungary.The FIAS project in the Czech Republicresulted in $18 million in new business in 2003.
Going forward, FIAS will offer complete sector-level solutions that will encompass dimensions ofFDI, linkages, competition, corporate social respon-sibility, and the removal of bottlenecks throughoutindustry value chains. FIAS will focus on the fol-lowing sectors: agro-processing (including forestry),apparel, electronics, retail, and tourism.
25
Contract Enforcement and Secured LendingEffective protection of property and creditorrights and efficient enforcement of contracts andresolution of disputes have been getting increasedattention from the donor community over thelast several years.The inability to enforce securityinterests—ownership interests or pledges onmovables (equipment, machinery) or mortgageson real estate property—has a negative impact onaccess to credit, hinders economic performance,and stifles growth. For instance, highly liquidbanks in Africa are reluctant to extend credit todomestic firms, even those with significant assetsto offer as collateral, unless the banks can be cer-tain that they will be able to enforce securityinterests through the court system.
In addition to hindering access to credit, poorcourt system performance and corruption alsodeter foreign investment in countries rangingfrom frontier economies in Sub-Saharan Africathrough middle-income countries in CentralEurope and South and East Asia.
FIAS addresses some of these issues in its tradi-tional products (investment climate diagnostics,administrative barriers, investment code reform),but we are now looking at ways to advise coun-tries more directly on contract enforcement andaccess to credit. For example, in Poland, in part-nership with the Bank’s Legal Department andEBRD, we are looking at the enforcement of con-tracts and creditor rights and judicial perform-ance. In China, FIAS, in partnership with IFC’sCPDF, is helping the People’s Bank of Chinastrengthen the lending environment by improvingcreditors’ rights and developing modern rules onmovable asset financing.
Access to Land: Lack ofPolicies is GroundingInvestments Land-related issues that FIAS helped client gov-ernments address this year are particularly difficultbecause of the political sensitivity and institutionalcomplexity involved.
Albania, 2003-2004. When investors seeking landfor investment purpose followed the country’s lawsand regulatory requirements, they got stuck in alengthy, unpredictable, and costly process.Circumventing the laws and regulations was rela-tively easy, but investors ran a risk of losing theirland property rights or finding that their construc-tion had been illegal.
Botswana, 2003. Investors found plenty of idle landaround the capital city that was suitable for invest-ment. However, the land was state-owned andgranted to citizens who lacked the finances todevelop it but who were prohibited by state leasecontracts from selling it.
Kenya, 2004. Investments and bank lending wereput on hold due to land property concerns.Massive illegal allocation of state land in the past10 to 15 years caused state land depletion, dubioustitling, and illegal construction.The state was con-sidering “repossession,” but it had to avoid hurtingthe innocent investors who had purchased thoseland titles and the financiers who had acceptedthose titles as collateral for loans.
FIAS work in these countries raised awareness of theland-related needs and concerns of investors andstressed the importance of combined policy, legisla-tive, and institutional land reform efforts. FIAS hopesto support implementation of key reforms anddevelop short- to medium-term strategies to encour-age investment during its clients’ transitional periods.
New Focuses
26
Focusing on the CountriesMost in Need of FDI
FIAS serves a wide range of clients—from thelowest-income countries that are trying to attractinvestment in basic commodities and raw materi-als to create a first basis for economic growth andemployment, to middle-income countries thatstruggle to enhance the value added from FDIprojects and are trying to attract investments inmore sophisticated manufacturing and serviceindustries. These clients require varying types ofassistance, but they are equally important, as largepockets of poverty exist even in the apparentlybetter-off countries.
That said, FIAS maintains its strong focus on thepoorer countries to ensure that our program meetsthe most pressing needs. Over half of our 60 advi-sory projects and 52 percent of the budget this fis-cal year were dedicated to “frontier countries”characterized by a high-risk or low-income envi-ronment. Eighty-four percent of FIAS clients werelow- and lower middle-income countries.
The regional composition of this year’s advisoryassistance was driven by the expansion of technicaladvice and implementation assistance to our poor-est clients. Europe and Central Asia proved to bethe largest region this year with 17 projects, prima-rily because of the strong demand for implementa-tion assistance in the removal of administrativebarriers to investment. Sub-Saharan Africa was, asalways, a focal region for FIAS, with 15 completedprojects. The 11 projects in East Asia and thePacific as well as another five projects in South Asia also focused heavily on the poorest countrieswith the most difficult investment environments.In Latin America and the Caribbean, FIAS com-pleted 10 advisory projects with a strong emphasison the needier clients in Central America and theCaribbean. Two projects were completed in theMiddle East and North Africa.
Sub-Saharan Africa
BotswanaBurkina FasoThe GambiaGuinea BissauKenyaKenyaLesothoNigeriaSeychellesSierra LeoneTanzaniaUgandaZambiaWest Africa Regional
East Asia & the Pacific
CambodiaChinaEast TimorFijiMarshall IslandsPapua New GuineaVietnamPacific Regional
South Asia
AfghanistanBhutanIndiaPakistanSri Lanka
Europe & Central Asia
AlbaniaBulgariaCroatiaGeorgiaLatviaMacedonia, Federal Yugoslav Republic of
MoldovaRussian FederationSerbia and
MontenegroTurkeyCentral Asia Regional
Latin America & the Caribbean
Costa RicaEl SalvadorGrenadaGuatemalaGuyanaHondurasJamaicaNicaraguaPeruLAC Regional
Middle East & North Africa
MaltaSyrian Arab Republic
Where FIAS Worked in FY 2004
This section follows the regional categories of theWorld Bank; some countries are categorized differentlyby IFC.
Sub-Saharan AfricaSub-Saharan Africa continues to receive a very lowand decreasing share of global FDI, falling fromUS$13 billion in 2001 to US$7.4 billion in 2002.To attract more private investment, diversify their economies, and reduce poverty, governmentsurgently need to tackle the key constraints that affect the investment climate. FIAS thereforeintensified its engagement in the region in FY 2004by extending its assistance to critically impoverishedand even post-conflict countries.We have also madesignificant advances in product design to respond to the capacity limitations of frontier countries.
Innovation in 2004 and Beyond:New Products, New ApproachThe FIAS Sub-Saharan Africa strategy has devel-oped along a programmatic approach, which isbeing implemented in countries such as Gabon,The Gambia, and Zambia.With this approach, aprogram of assistance over a two- to three-yearperiod is agreed upon with the government and cancomprise three FIAS projects.This approach enablesFIAS to address a large number of issues in thecountry’s investment climate but in a progressivemanner, typically starting with a general diagnosticof the business environment and then diggingdeeper with a thorough review of administrativebarriers to investment or an analysis of the corpo-rate tax system.This sequences the reform effort andenables subsequent reviews to build on each other.
Maximizing Capacity in Frontier and Post-Conflict CountriesAt the same time, we have adapted one of ourmain products (the review of administrative barri-ers to investment) to fit the capacity constraints ofthe countries most in need of assistance. By break-ing down this large review of administrative barri-ers in two to three phases, the country’s reformeffort can focus on one given category of admin-istrative procedures. The country can then buildcapacity to design and implement an action planwith a few priority recommendations and asmaller number of governmental agenciesinvolved. Once these procedures are being effec-tively tackled, a second phase can be launched totarget another class of procedures. Both govern-
ments and World Bank country teams haveapplauded FIAS’s efficient work in low-capacity,post-conflict countries such as Sierra Leone andthe Democratic Republic of Congo.
New products have also been introduced in theregion, including competition policy, trade facilita-tion, and regulatory reform studies. For instance,FIAS undertook a competition policy study inBurkina Faso (covering inter alia the cotton, fruitsand vegetables, and cattle/leather sectors). Finally,FIAS held a regional conference on CompetitionPolicy in Tanzania. In South Africa, FIAS isplanning a series of small, focused studies on regu-lation, trade, and competition policy that will spantwo to three years.
Post-Conflict Africa: RemovingAdministrative Barriers in the Democratic Republic of Congo
With the restoration of political stability after years
of civil war, in late 2003 the newly installed transi-
tional government began a growth and poverty
reduction strategy aimed, in part, at facilitating
private-sector development as the engine of
growth. In response, FIAS developed a two-phase
project to recommend ways to remove the coun-
try’s administrative barriers to investment. Key rec-
ommendations were integrated into the World
Bank’s Private Sector Development loan for the
implementation and monitoring phase of the proj-
ect. The first of the two phases, which focused on
start-up and entry barriers to investment, was
completed in FY 2004. An action plan was devel-
oped, and the implementation process should
begin in late 2004.
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East Asia & the PacificDeveloping countries in countries in East Asia andthe Pacific share the challenge of developing andimplementing appropriate reform to improve theirrespective business environments. The bright newsfor the domestic economies of East Asian nationsis that profitability, capital inflows, and bank lend-ing are rising; and financial markets are stronger.However, to provide sustainable growth, the gov-ernments in the region will need to continue toimprove foreign investment policies and increasethe private sector’s contribution to developmentand poverty reduction.
Pacific Island countries face the unique economicchallenge of being a collection of islands and atollswith a land area only about twice the size ofBelgium,but scattered across an area 15 times the sizeof the United States. However, the region also facesissues familiar to many developing countries: toomuch state involvement in the economy and the pri-vate sector, inadequate delivery of public goods andservices, corruption and other forms of rent-seekingbehavior, and mediocre economic performance.
FIAS assists in the region through the SydneyOffice in order to provide more efficient andspeedy service to one of our most traditionallyactive regions. The location also provides forincreased and closer coordination with multilateraland bilateral donor agencies and other relevantstakeholder groups with interests in the region—co-location with the World Bank office for thePacific and the Pacific Enterprise DevelopmentFacility (PEDF), for example.
FIAS’s objective in the region is to develop andintroduce appropriate institutional change,improve administrative procedures, and build localcapability and capacity to implement reform. Amajor area of assistance this year was in the legalenvironment. FIAS drafted guidelines and regula-tions to be included in Cambodia’s newInvestment Law. Passed this year, the law substan-tially changed the responsibilities of the Council
for the Development of Cambodia. In theSolomon Islands, FIAS provided the foundationfor new legislation that will establish a transparentand automatic system for registering and regulat-ing foreign investment.
Another common thread this year was investmentpromotion. In East Timor, FIAS recommenda-tions regarding the strategy and operation of a pro-posed Investment and Export Promotion Agencyare currently being implemented through a WorldBank-funded project. Similarly, FIAS collaboratedwith MIGA and the Commonwealth Secretariatto design a nine-month capacity-building programfor investment promotion agencies (IPAs) from all14 member countries of the Pacific IslandsForum Secretariat. The initiative enabled theIPAs to develop and maintain an investment pro-motion Web site to alleviate distance and geo-graphical problems.
FIAS helped Vietnam and Fiji improve variousfacets of their respective foreign investment strate-gies. In Vietnam, FIAS helped draft a newUnified Enterprise Law and ComprehensiveInvestment Law in order to level the playing fieldfor all investors and introduce international bestpractice. We also prepared a strategic plan for thenew IPA and recommended measures to alleviateinvestors’ project start-up problems. To move Fijifrom regulation and approval of foreign investmentto promotion and registration of foreign invest-ment, FIAS assisted with drafting guidelines foramending the Foreign Investment Act. In collabo-ration with MIGA, FIAS also helped develop thecountry’s investment promotion strategy, and plansto provide capacity building assistance.
Converting advisory assistance into effective out-comes can be problematic, particularly in smallercountries that often suffer from limited absorptionand implementation capacity. FIAS has developed,and will continue to develop, new modalities ofassistance to increase reform “ownership” and toimprove implementation and its positive impactwithin the region.
South AsiaSouth Asia is home to some 23 percent of the world’s population (and 27 percent of peoplein the developing world). Although 2003 net FDIflows increased from 2002 and amounted to someUS$5 billion, they represent a mere 0.3 percent ofglobal FDI flows and 4 percent of that of thedeveloping world. This primarily has to do withthe limited performance of India, which econom-ically and in terms of population represents somethree-quarters of the region.* However, with thepossible exception of the Maldives, even the betterperformers of the region such as Sri Lanka are stillreceiving on a per capita basis one-third of the EastAsia average, and one-tenth of the average ofEastern Europe. India FDI flows amount toapproximately US$2.50 per person andBangladesh US$1.40, compared with an average of US$30 for Asia, nearly US$90 for EasternEurope, and US$230 for Latin America.
Although some macro-level factors—overall polit-ical and economic performance—have certainlyinfluenced investor decision making in countrieslike Bangladesh, Nepal, and Pakistan, most influen-tial have been restrictions on FDI participation incertain sectors (e.g., India and the retail sector),weak infrastructure, and an unreceptive businessenabling environment. According to DoingBusiness, it takes twice as long to start up a businessor enforce a contract in India as it does in China.
But there are signs that governments of the regionsare increasingly committed to improving theirrespective investment climates.To this end, throughproactive business development, FIAS completedfive projects this past year and developed a prom-ising pipeline, particularly in Bangladesh, Bhutan,and Pakistan.
FIAS has coordinated closely with many develop-ment partners to deliver projects to South Asia thisfiscal year. For example, in cooperation with theBank, FIAS reviewed and made recommendationsto the Investment Act of Afghanistan. FIAS alsodeveloped a policy note on the use of negative listsin the screening of foreign investment in FDI leg-islation for Afghanistan, in cooperation with theAmerican Bar Association.
In Pakistan, also in cooperation with the WorldBank, FIAS developed a private sector develop-ment policy and strategy for the government ofthe North West Frontier Province.With fundingfrom the U.S. Trade Development Agency, FIASalso reviewed administrative barriers to invest-ment in Pakistan.
In Bhutan, in collaboration with the UNDP,FIAS designed technical assistance for foreigninvestment registration and promotion unitswithin the Ministry of Industry and Trade andassisted IFC in its review of the commercial legalenvironment in the country. FIAS is currentlyconducting its fifth project in three years forBhutan. FIAS projects assisted in the country’sjoining IFC in late 2003 and led to IFC’s firstinvestment in Bhutan.
FIAS also held two major FDI-related workshopsin South Asia this fiscal year. In India, in cooper-ation with IFC, FIAS organized and conductedthe South Asia Special Economic ZoneConference, which was attended by 200 peoplefrom around the region. In Sri Lanka, FIAS con-ducted an Asia Competition Policy Workshop incooperation with the European Union, the WorldBank, and IFC.
* This report follows the World Bank in classifying Afghanistan and Pakistan in South Asia; IFC classifies them under Middle East and North Africa.
Europe & Central Asia
The headline event in the Europe & Central Asiaregion this year was the accession of ten newmembers to the European Union, of which allbut Cyprus were FIAS clients. Prominent amongthem was Latvia, the poorest of the accessioncountries, which nevertheless was cited by theEU as “CC Best”* in reforming its business envi-ronment. This designation was earned largely as aresult of cooperation with FIAS in removingadministrative barriers to investment, which theEU encouraged as a positive model for other EUaccession countries to follow. FIAS subsequentlyworked with Latvian consultants to provide assis-tance on developing effective and sustainableadministrative regulatory reform programs inArmenia, Bosnia and Herzegovina, Croatia,Georgia, and Macedonia.
FIAS often works in partnership with our col-leagues in the World Bank Group, including WorldBank structural adjustment (SAC) and private-sector development (PSD) loans, IFC’s South EastEurope Enterprise Development Fund (SEED),and the Private Enterprise Partnership (PEP). Anexample of such collaboration was in Bosnia andHerzegovina, where FIAS, the World Bank, andIFC worked together to help improve the country’sbusiness environment within the context of itspoverty reduction strategy. FIAS is also currentlyundertaking a joint project with the SEED facilityto conduct a mini-administrative barriers review inone municipality in Serbia and Montenegro.
FIAS collaboration also extends to the larger donorcommunity. For example, FIAS was consulted by donors in Bosnia and Herzegovina, and theUnited Kingdom Department for InternationalDevelopment financed a substantial business regis-tration reform project based on FIAS recommen-dations. Most recently, FIAS and the World Bankprovided inputs for and participated in a USAID-sponsored workshop to discuss the small andmedium enterprise (SME) business environment.
FIAS has been working at the request of the gov-ernment of Russia to remove administrativebarriers to investment in a dozen regions fromKaliningrad on the Baltic Coast to Magadan inthe Far East. In addition to influencing federal-level reforms (such as simplification of businesstaxation, registration, licensing, inspections, andcertification), FIAS worked with regional andlocal administrations, particularly on access toland and construction permits, which are someof the most severe barriers faced by investors inthe Russian Federation.
Other successes in the region:
■ Turkey, where FIAS worked with the govern-ment and the private sector to set up anInternational Investment Advisory Councilthat recommended priority reforms, all ofwhich were passed. FIAS is currently analyzingthe role of competition policy in the attractionof FDI.
■ Georgia, where FIAS worked closely with thenew government, the World Bank, and USAIDto enhance the investment climate based onpublic/private-sector dialogue.
■ The Czech Republic, where FIAS’s work withCzechInvest on reform priorities contributed tothe country’s attracting significantly more FDI.
■ Slovenia, where FIAS helped improve access toland for investment, land-use planning, cadastre,land-titling reform, and site development andconstruction permit procedures.
■ Croatia, where government inspection reformsreduced the burden of inspections on businesswhile wider government objectives of ensuringhuman health, safety, and the environment weremaintained.
■ The Slovak Republic, where FIAS helpeddevelop registries of movable property andother pledges as collateral, which helpedstrengthen and deepen financial markets andimproved access of SMEs to medium and long-term finance.
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* Candidate Country—Business Environment Simplification Task Force
Latin America &the CaribbeanDuring the heyday of privatization in the mid-1990s, Latin America and the Caribbean receivedclose to US$110 billion in annual FDI inflows.Today flows are much lower, having dropped toUS$49 billion in 2003.To boost FDI, these coun-tries must look more attractive to investors, notonly in traditional natural resource-based activities,but especially to efficiency-seeking investors ingreenfield manufacturing and services projects.The recently completed Central American FreeTrade Agreement (CAFTA) with the UnitedStates, as well as ongoing negotiations with severalSouth American countries, provide a vehicle tostrengthen the region’s ability to compete abroadand attract investment. However, in order to takeadvantage of improved global market access, coun-tries must systematically improve their domesticbusiness environment. FIAS has responded to thegrowing pressures faced by the region by provid-ing increasingly specialized and sophisticated advi-sory services, as well as the technical assistanceneeded to implement reforms.
While the newly elected government ofGuatemala requested a traditional diagnostic ofthe country’s business climate to set reform priori-ties, FIAS delivered more technically demandingservices to Costa Rica and Jamaica by reviewingtheir fiscal incentives systems. Our services werediverse, but all three clients have in common thesuccessful impact of FIAS recommendations:Guatemala has requested more specialized follow-up assistance from FIAS, Costa Rica has incorpo-rated FIAS recommendations into a draft corporateincome tax reform package submitted to Congress,and Jamaica is currently incorporating FIAS rec-ommendations into a broader tax reform initiative.
The reduction of administrative barriers alsoplayed an increasingly important role in reformefforts this year. Based on a FIAS assessment withWorld Bank support, the mayor of the municipal-ity of Lima in Peru has adopted an administrativesimplification program in collaboration with FIASand IFC’s LAC SME Facility. Efforts are under wayto spread the initiative to other municipalities as
part of the country’s decentralization process.Similarly, in Nicaragua, FIAS is helping the gov-ernment design and implement a reform programfollowing its assessment of administrative barriersin collaboration with the World Bank.
Nicaragua and other countries have also takenadvantage of FIAS’ specialized work in newer areas.In Honduras, FIAS has analyzed the country’slabor-skills training program and provided detailedrecommendations on how to reform the system,including new draft legislation. FIAS is also helpingNicaragua and Honduras introduce a legal andinstitutional framework for competition policy.
Another new area of focus is corporate socialresponsibility. Prior to elections in El Salvador,FIAS assessed the role of private CSR activities andthe importance of sound labor and environmentalstandards in the country’s apparel and coffee indus-tries. The newly elected government is currentlyconsidering integrating the FIAS-recommendedCSR strategies into the country’s overall competi-tiveness strategy supported by the World Bank.
In addition to project-specific assistance in 2004,FIAS placed a strong emphasis on knowledgemanagement activities within the region. FIAS co-sponsored two regional conferences with IFC par-ticipation: one in Central America in collaborationwith the World Bank on post-CAFTA challenges,and one with the Corporación Andina deFomento on administrative barriers to investmentin the Andean countries.
Middle East & North Africa
In a good year, the MENA region (excluding GulfCooperation countries) receives about US$2 billionin net FDI inflows.This represents less than 1 per-cent of global FDI inflows to all developing coun-tries, for a region that has 5 percent of the world’spopulation.* Meanwhile, the countries of theregion face enormous challenges to boost growth,diversify the economy, create sufficient jobs for therapidly growing workforce, and reduce poverty.Attracting a bigger share of global FDI inflowswould help these countries face these challenges,particularly in the context of declining oil rents.
To boost FDI (and helpthe domestic private sectoras well), MENA countriesmust make major improve-ments to the business environment, includingfostering governance andtransparency, adoptingmore open investmentpolicies, restructuring thepublic sector, liberalizingservices and utilities, tack-ling labor market issues,removing non-tariff barri-
ers to trade, modernizing physical infrastructure,and investing in education and training.The asso-ciation agreements that some MENA countries(particularly in the Maghreb) have concluded withthe European Union and the process of accedingto the WTO have given much-needed momentumto address some of these policy issues, notably inthe trade area. But much remains to be done, andFIAS is providing the specialized advisory andtechnical assistance to support the reform efforts.
In the 2004 fiscal year, FIAS conducted diagnosticsin various countries and also participated in vari-ous workshops to assist government officials intheir own reform efforts. For example, after FIAS’sfirst review of the Investment Code of Syria, thegovernment requested a broader diagnostic of thecountry’s business climate in order to identifyreform priorities and promote economic diversifi-
cation. The comprehensive review is now wellunder way. In Malta, FIAS proposed ways to bringthe country’s fiscal and non-fiscal incentiveregimes in line with both international best prac-tices and EU standards on incentives and state aid,in preparation for the country’s acceptance intothe EU in May 2004. FIAS can work with MENAcountries that already have or are considering asso-ciation agreements or customs union arrange-ments, and who will face issues similar to those ofMalta.
In addition to project- and country-specificassistance in 2004, FIAS increased its collabora-tion with the MENA region of the World Bank.Such collaboration during FY 04 includes FIASparticipation in the ongoing field review of theLibyan economy and the mission to pilot a newICA survey in Morocco; contributions to theTunisia Country Assistance Strategy and otherstrategic documents; and participation in a pol-icy reform brainstorming session on Investmentand Trade in Maghreb Countries. FIAS alsoorganized the Capacity Building TrainingProgram for Iraqi Businesswomen in Vancouver.The program covered both the policy dimen-sion of women’s entrepreneurship and the prac-tical aspects of women’s business associationsand their various roles. In addition, FIAS gave athree-day course on investment climate reformsto MENA officials at the InternationalDevelopment Law Organization.
FIAS looks forward to working with MENAcountries in traditional areas of FIAS interven-tion as well as in newer ones, such as competitionpolicy, backward linkages, labor skills, or corpo-rate social responsibility. In the area of competi-tion policy, although many countries have hadthe basic legal and institutional framework inplace for many years, firms consistently complainabout anti-competitive practices and an unlevelplaying field. FIAS has developed a new tool toanalyze the overall competition policy frameworkand propose concrete measures to improve itseffectiveness, while also looking at competitionand competitiveness issues in a few key sectors ofthe economy. FIAS is also participating in theOECD-led initiative on Mobilizing Investmentfor Growth in the MENA region.
* This report follows the World Bank in classifying Afghanistan and Pakistan in South Asia; IFC classifies them under Middle East and North Africa.
Region/Country*
Sub-Saharan Africa
Botswana
Burkina Faso
Gambia,The
Guinea Bissau
Kenya
Kenya
Lesotho
Nigeria
Seychelles
Sierra Leone
Tanzania
Uganda
Zambia
Zambia
Project Description
Conducted a review of the commercial legal framework, anadministrative and registration cost survey, and a study of admin-istrative barriers to investment.
Analyzed the country’s competition policy and and made rec-ommendations to promote competition in various sectors of theeconomy.
Conducted a diagnostic study of the country’s investment climate.
Reviewed and provided recommendations for the improvementof the tax and incentive systems.
Reviewed the commercial legal framework at the request of thegovernment and provided inputs for the World Bank’s economicand sector work in the country.
Conducted a study of administrative barriers to investment atthe request of the government and provided inputs for theWorld Bank’s economic and sector work in the country.
Provided technical assistance in designing a modernized andcomputerized company registry and for the reform of thelicensing system for manufacturing and trading enterprises.
Assisted in the design of the business registration reform com-ponent of the Micro, Small, and Medium Enterprise (MSME)program that aims to help the country increase the growth ofMSMEs in selected non-oil subsectors.
Conducted a qualitative diagnostic review of the investmentenvironment for FDI and domestic investment.
Conducted a diagnostic review of the country’s investment cli-mate and customized recommendations for a post-conflictenvironment.
Conducted a conference to analyze the relationship betweencompetition, productivity, competitiveness, economic growth,and poverty reduction and to review the state of competition.
Reviewed the administrative barriers to investment and focusedon specific issues affecting key export-oriented sectors.
Reviewed proposals submitted by the Zambia InvestmentCenter to amend the Investment Act and to reintroduce invest-ment incentives to investment strategy and policy.
Provided guidance to the government in the design and imple-mentation of an administrative barriers reform program toincrease investment and business activity.
Project Type
FIAS Advisory Projects
33
Investment Climate Diagnostics FDI Policies for Attracting Investors Administrative Barriers
Investment Promotion Corporate Social Responsibility Sector-Focused Solutions
* Based on World Bank regional classifications.
Region/Country
West Africa Regional
East Asia & the Pacific
Cambodia
China
East Timor
East Timor
Fiji
Marshall Islands
Papua New Guinea
Vietnam
Pacific Regional
Pacific Regional
Pacific Regional
Project Description
Assessed the investment climate of eight West African Economicand Monetary Union (WAEMU) member countries in the con-text of regional integration. Identified and addressed commonconstraints to conducting business in order to shape WAEMU’sreform agenda toward improving member countries’ investmentclimates through regional initiatives.
Assisted the government in preparing and implementing regula-tions. Produced drafting guidelines for the Amended Law onInvestment.
Held workshop with government officials from China’s north-east to discuss the enhancement of the FDI environment toattract investment to the region.
Evaluated a proposal for the establishment of an investment pro-motion agency.The proposal was included in a World Bank aidememoire that was discussed and agreed upon with the govern-ment of East Timor.
Reviewed and commented on the draft External InvestmentLaw and the draft Domestic Investment Law.
Assisted with appropriate policy and legislative recommenda-tions for amendments and changes to the 1999 ForeignInvestment Act and subsequently supported passage of theamended legislation through the Cabinet and Parliament.
Assisted the government in reviewing, refining, and updating itsnational investment policy statement.The changes clarified policyregarding investments and particularly foreign direct investment.
Conducted an independent review of the FDI environment,with prioritized recommendations on practical actions thatcould improve the investment climate.
Prepared a discussion note on creating a Unified Law onForeign and Domestic Investment in Vietnam.
Gathered information on a cross section of screening practicesand approval mechanisms used by Pacific Island countries andexamined their impact on foreign investment decisions andinvestment flows in the Pacific region.
Prepared a monitoring and evaluation review, reported onprogress made by Pacific Forum Island Countries (FICs) in adopt-ing and implementing investment policies that comply with Asia-Pacific Economic Cooperation (APEC) non-binding investmentprinciples, and suggested options to enhance the implementationof policies that comply with the APEC principles.
In two FICs, examined the impact of investment-related policiesand programs on the creation and development of linkagesbetween foreign investors and domestic businesses, especiallywith small and micro businesses. Identified linkages that occurfollowing a foreign investment and assessed their subsequentflow-on impacts. Provided recommendations to promote, widen,and deepen economic linkages that maximize benefits and limitdisadvantages that might be incurred by foreign investment.
Project Type
34
Investment Climate Diagnostics FDI Policies for Attracting Investors Administrative Barriers
Investment Promotion Corporate Social Responsibility Sector-Focused Solutions
35
Region/Country
South AsiaProject DescriptionAfghanistan
Bhutan
India
Pakistan
Sri Lanka
Europe & Central Asia
Albania
Bulgaria
Croatia
Georgia
Georgia
Latvia
Macedonia
Moldova
Russian Federation
Russian Federation
Russian Federation
Russian Federation
Project Description
Reviewed the country’s investment law for the Annual GeneralMeeting Workshop on Afghanistan Trade and Investment.
Recommended an institutional structure to support the govern-ment’s efforts to attract and manage FDI. Designed a package oftechnical assistance to support the establishment of this structure.
Organized and conducted a workshop on the impact, effective-ness, and good practice of Special Economic Zones (SEZs).
Prepared a PSD strategy for the Northwest Frontier Province.
Held a conference to review the state of competition in the country and to analyze the relationships among competition,productivity, competitiveness, economic growth, and povertyreduction.
Assisted the government in establishing the institutional frame-work for the development and implementation of an adminis-trative barriers reform action plan.
Instituted a comprehensive self-assessment methodology toreview the impact of administrative procedures for doing busi-ness and implemented a reform mechanism based on structureddialogue between the public and private sectors.
Assisted the government in implementing the findings of the2002 Administrative Barriers to Investment Study aimed atstreamlining procedures for doing business in the country.
Assisted the government in designing the scope of the country’sinvestment climate program and set up the institutional frame-work for further reforms.
Assisted in implementing recommendations of FIAS’s adminis-trative barriers reform study in the country by building thecapacity of counterparts and fostering private-public dialogue.
Analyzed impact of Latvia’s reforms to remove administrativebarriers to investment.
Provided recommendations for institutionalizing the govern-ment’s capacity for business environment reform and deliveredtechnical inputs on access to land, construction permits, andbusiness registration.
Reviewed the government’s proposed draft law on foreigninvestment, discussed recommendations with government offi-cials responsible for drafting the law, and met separately withrepresentatives of the government, foreign investors, and donorsregarding the law.
Analyzed and provided recommendations for removing admin-istrative barriers to investment in Perm Oblast.
Provided implementation assistance for recommendations toremove administrative barriers to investment in Tomsk Oblast.
Conducted a survey of potential and “runaway” investors inthree Russian regions.
Analyzed and provided recommendations for removing admin-istrative barriers to investment in Kaliningrad Oblast.
Project Type
Region/Country
Serbia and Montenegro
Serbia and Montenegro
Turkey
Turkey
Regional (Central Asia)
Latin America &the Caribbean
Costa Rica
El Salvador
Grenada
Guatemala
Guyana
Honduras
Jamaica
Nicaragua
Peru
Caribbean Regional
Middle East & North Africa
Malta
Syria
Project Description
Provided a diagnostic study of the investment environment inMontenegro and recommended ways, including privatization, toimprove it.
Analyzed and provided recommendations for removing admin-istrative barriers to investment.
Provided policy directions to the country’s Competition Boardand delivered keynote speech and presentations on the invest-ment climate and the role of competition policy.
Assisted the government in establishing an Investment AdvisoryCouncil to support ongoing investment climate reforms basedon international best practices.
Conducted a joint expert workshop with the European Bankfor Reconstruction and Development and the Organisation forEconomic Cooperation and Development on a Partnership forDevelopment program with Central and Eastern Asia thatfocused on trade and investment policy issues and next steps forpolicy reforms and technical assistance in the region.
Reviewed the existing corporate income tax and incentive sys-tem to help the government structure a reform proposal in theform of a draft law to Congress.
Assessed the corporate social responsibility initiatives in thecountry’s coffee and apparel industries in order to design sup-porting policy tools to support and strengthen these initiatives.
Assisted the Grenada Industrial Development Corporation inanalyzing the country’s investment climate.
Conducted a detailed diagnostic of the country’s investment climatein preparation for a dialogue with the country’s new government.
Reviewed the investment code and compared it with best practices.
Advised the government on strengthening the framework forlabor training through vocational and technical training schemes.
Assisted in the government’s evaluation of different alternativesfor the country’s future corporate income taxes and incentivesregimes by developing a more appropriate incentives and taxregime that would be attractive to foreign as well as domesticinvestors while reflecting sound fiscal policies.
Analyzed constraints to competition in key industries andassisted in the design of a legal and institutional framework forcompetition policy in the country.
Conducted a pilot assessment of administrative procedures at themunicipal level in Lima to improve the local business environ-ment through simplifying municipal business regulations.
Implemented an enterprise survey across Jamaica,Trinidad andTobago, and select Organization of Eastern Caribbean Statescountries to identify and assess high-cost constraints in theirbusiness environments. Also assessed the countries’ relativestandings in the region and globally and set priorities for reform.
In preparation for Malta’s EU membership, assessed the coun-try’s incentive provisions and how they differed from EU rulesand international best practice.
Reviewed Investment Law No. 10 and its amendments and pro-vided recommendations to make the legal framework moreconducive to attracting FDI.
Project Type
Investment Climate Diagnostics FDI Policies for Attracting Investors Administrative Barriers
Investment Promotion Corporate Social Responsibility Sector-Focused Solutions
37
Sharing the “How-to”of Policy ReformFIAS clients have increasingly asked us the “how-to” question, as opposed to “why” or even “what,”regarding maximizing foreign investment and itsbenefits.Therefore, the next challenge for FIAS isto develop and diffuse knowledge of best practiceswith respect to policies, institutional arrangements,and reform processes in the areas that are critical toattracting FDI and stimulating private-sectorgrowth.To meet the challenge, FIAS, in coopera-tion with CIC is launching an educational pro-gram that will focus on private sector developmentdiagnostics, solution design, and implementation.
This joint effort will include content develop-ment and a training program.The content devel-opment phase will involve the publication ofabout 50 presentations, four-page notes, and strat-egy papers covering FIAS’s existing areas ofexpertise (e.g. administrative barriers and invest-ment laws) and new products under development(contract enforcement, collateral, and access toland) and will be based on analysis of best prac-tice cases.
The publications will serve as the basis for the firstannual three-day training program that will takeplace in regional hubs: Bangkok, Istanbul,Johannesburg, and Washington. The audience forFY 2005 will be professionals from the WorldBank Group who will help us fine-tune the pro-gram before we open it to government officials inyears to come. These “how-to” projects will helpFIAS better serve its clients as well as contribute toa new but critical area in development economics.Research will be made publicly available throughour Web site and publications.
FIAS Published andSpeaking OutCapacity-Building Training Program forIraqi Women in BusinessIn March 2004, FIAS sponsored its first stand-alonegender project in response to a request from IraqiGoverning Council (IGC) members for assistancein maximizing backward linkages from FDI, devel-oping international business linkages, and learningabout best-practice policy environments for womenentrepreneurs. A delegation of 12 Iraqi business-women and policymakers led by IGC member Dr.Rajaa H. Khuzai attended the Capacity BuildingTraining Program for Iraqi Women in Business heldin Vancouver, Canada.The program, cosponsored bythe World Bank’s Middle East and North Africaregion, consisted of a two-day workshop designedand coordinated by the PSD-Gender Initiative anda three-day “Women Trading Globally” trade mis-sion for international women entrepreneurs.
Covering both the policy dimension of women’sentrepreneurship and the practical aspects ofwomen’s business associations and their various roles,the workshop included sessions on introduction
Reaching Out
38
to investment climate and gender issues, how tomaximize backward linkages for women entrepre-neurs in FDI, and the role of women’s businessassociations in providing both coordinated inputon women’s business issues to policymakers and insupporting women’s entrepreneurship develop-ment. In addition, a communication skills sessionintroduced the delegates to concepts of network-ing and strategic alliances, and a brainstormingsession devised practical methods to translate les-sons learned from the training program into tangi-ble commitments.
The Iraqi delegates planned three major projects asa result of the FIAS/MNA workshop: (1) explorefurther connections with the U.S. NationalWomen’s Business Council as a potential modelfor Iraqi businesswomen to provide input to poli-cymakers on investment climate issues, (2) intro-duce the business incubator concept to helpdisadvantaged women start their own businesses,and (3) run a training program in Iraq to highlightthe main messages of the workshop with a broadrange of Iraqi women.
Opportunities and Challenges of theCentral American Free Trade Agreement The Central American Free Trade Agreement(CAFTA) among the United States and CostaRica, El Salvador, Guatemala, Honduras, andNicaragua opened the U.S. market for CentralAmerican exporters. CAFTA presents an enor-mous opportunity as does the availability ofcheaper import commodities for local consumers.But there are also challenges: Some traditional,often protected, industries fear losing in the com-petitive struggle for market share.
The World Bank country team and FIAS thereforeheld a conference, hosted by the government of ElSalvador, to discuss these issues. Over 400 repre-sentatives from the five governments, the privatesector, and civil society participated in the confer-ence, including the five ministers who acted asmain negotiators from Central America.Presentations and discussions well reflected theexpectations of the private sector and concerns ofcivil society, thereby providing the governmentswith an opportunity to formulate their future
strategy across a range of issues, including infra-structure, education, policy reform, social protec-tion, and investment attraction.
Investment Promotion AgenciesVideoconferenceIn February 2004, FIAS hosted a videoconfer-ence about best practice in investment promotionagencies for the government of Ukraine. Thevideoconference linked participants in Kiev andWashington, D.C., and included internationalexperts in the design of IPAs, as well as partici-pants from several different government agencies.Ukrainians were particularly interested in alter-native mechanisms for financing IPAs and inlearning which approaches were most effectiveand sustainable.
Investment Climate, Capabilities and FirmPerformance: Evidence from the WorldBusiness Environment Survey The World Business Environment Survey provideda unique look at the impact of the investment cli-mate on enterprise performance, employing astandard core questionnaire to more than 10,000firms in 80 countries between late 1998 and mid-2000.This paper examines results of a special mod-ule of the survey and confirms that key attributesof the investment climate such as corruption,financing, tax administration, regulations, and pol-icy uncertainty all matter in explaining firm per-formance as measured by sales growth,employment growth, and investment growth.Further, excessive labor regulation is negativelyassociated with both employment and investmentgrowth.The new data on firm capabilities suggestthat investments in technology and skills are alsocritically associated with firm performance.Investment in technological capacity strongly cor-relates to sales growth, while international techno-logical acquisition correlates clearly to employmentand investment growth. Training matters as well,and it is quite clear that investments in privatetraining services are significantly associated with alldimensions of firm growth. Firms that make noinvestments in training appear disproportionatelyinfluenced by three types of market failure. Thislink has direct implications for governments as theyshape technology and training policy.
Measuring Success
FIAS evaluates performance, the extent to whichinterventions achieve their objectives, and how wemight improve our impact in the future byemploying three main monitoring and evaluationsystems: the Performance Information Manage-ment System (PIMS), IFC Client Survey, andindependent product or program evaluations.
Performance InformationManagement System PIMS is an internal monitoring system. The taskmanager of each advisory project tracks the extentto which client governments implement majorrecommendations. Task managers review their
projects once a year for three years and rate eachmajor recommendation on the degree to which ithas been implemented, weighted with the relativeimportance of each recommendation.
FY 2004 data are currently being analyzed. FY2003 data show that 30 percent of FIAS recom-mendations were fully implemented, and another34 percent were partially implemented. In 34 per-cent of cases, clients accepted recommendationsbut have not yet implemented them.Two percentof recommendations were rejected. The trend ofimprovements over time in implementation iscommon to policy advisory work, reflecting thatpolicy reforms take time to implement.
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The strength of PIMS is that it enables users tocompare impact measurement across differentinterventions in three-year project cycles. Themain limitation is, of course, that self-assessmentdata collected by the task manager is open to bias.We aim to correct this through the independentprogram-level evaluation.
IFC Client SurveyEach year, the IFC Client Survey measures thelevel of satisfaction of FIAS clients in 29 differentaspects of FIAS services.The survey also providesuseful feedback to management concerning theextent to which FIAS achieves its goals.Highlights of the 2003 survey are that 100 per-cent of respondents reported overall FIAS per-formance as “good, very good, or excellent.” Inprocess management, we received an average rat-ing of 95 percent, and in technical dimensions,we received an average of 93 percent.Performance ratings in technical competence,delivery, project planning and execution, projectfollow-up, and long-term development impactimproved substantially—increasing by more than20 points.
Independent EvaluationFIAS has always undertaken periodic reviews ofproducts or geographic programs. During the lastfiscal year, this included evaluation of the East Asia& the Pacific program managed from the Sydney
office and an evaluation of the administrative barriers advisory product.
The East Asia & the Pacific Regional Program eval-uation revealed that FIAS “…met the evaluation cri-teria overall and, in many cases, performedexceptionally well.” The strategy and approach wererelevant and functioned well but had potential limi-tations because of (1) the nonconditional nature ofFIAS advice and recommendations, (2) limited insti-tutional capacity for reform, and (3) the potential fora lack of ownership of the reform agenda.
The administrative barriers product evaluationfound that, “No organization is more identifiedthan FIAS with the fight against the corrupting,distorting, resource-sapping administrative junglethat discourages market entrants and plagues busi-ness operations around the world…. This is themost important innovation of the FIAS program.”The evaluators concluded FIAS needs improvedregional prioritization, as well as greater clientselectivity, and that we should expand our rolefrom diagnosis to solution design and implementa-tion support.
For the coming three-year period, we haveplaced FIAS on a three-year results-based,program-level independent evaluation cycle,linked to the three-year strategy and budgetcycle, with the next full program-level evaluationscheduled for FY 2007. The evaluation will draw on the PIMS data that will be verified byindependent evaluators.
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FIAS Funding
Sources of FundsIn US$ Thousands
2001 2002 2003 2004
Balance Carry-Forward (from previous FY) 1 5,005.4 5,645.3 6,307.5 6,077.1
General Trust Fund Contributions in Current FY
World Bank Group ContributionsIFC 1,903.0 1,960.0 2,019.0 2,079.6 IBRD 953.0 1,040.0 1,072.0 1,104.2
Other Donor ContributionsCanada 195.9 - - - Ireland 50.0 50.0 129.8 155.5 Italy - 266.5 - - Luxembourg 270.9 - - 500.3Netherlands 190.9 264.8 276.0 380.8 Norway - - 250.0 250.0Spain 150.0 - - - Sweden 187.5 390.8 - 272.6Switzerland 250.0 - 500.0 - United Kingdom 165.6 166.0 182.9 210.4
General Trust Fund Sub-Total 9,322.2 9,783.4 10,737.2 11,030.5
Interest Earned 2 197.2 457.0 319.1 148.5
Total General Trust Fund 9,519.4 10,240.4 11,056.3 11,179.0
Regional Contributions from DonorsAustralia (APRO) 132.0 337.9 358.6 430.7New Zealand Trust Fund (APRO) 89.8 127.9 136.2 164.3 Switzerland (Africa) 236.3 53.9 35.0 99.6 Switzerland (Balkans) 90.8 79.4 129.4 75.6
Regional Contributions from Donors Sub-Total 548.9 599.1 659.2 770.2
Interest Earned - 33.8 29.9 20.6
Total Regional Contributions from Donors 548.9 632.9 689.1 790.8
Client Reimbursements 3 1,708.0 1,749.6 1,839.7 1,877.3
TOTAL SOURCES OF FUNDS 11,776.3 12,622.9 13,585.1 13,847.1
1 Includes minimum balance for prudential reasons, currently calculated at $4.5 million.
2 Interest is earned on sub-total minus $1,018.3 drawn down from the General Trust Fund in 2001, $966.8 in 2002, $1,918.1 in 2003, and$2858.8 in 2004.
3 Includes cross-support (fees paid by other areas of the World Bank Group for FIAS services). FY 2002 includes off-budget contributionsof US$581,900 and US$408,390 in FY 2003. Off-budget contributions of US$1.4 million are not included in FY 2004.
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Uses of FundsIn US$ Thousands
2001 2002 2003 2004
Total Sources of Funds Beginning July 1, 2003 11,776.3 12,622.9 13,585.1 13,847.1
PersonnelStaff Cost 2,889.8 3,267.2 3,526.3 4,535.0 Consultant and Temporary 1,343.6 1,304.3 1,531.6 1,485.6
Total Personnel Costs 4,233.4 4,571.5 5,057.9 6,020.6
TravelStaff Travel 450.5 479.5 740.1 1,124.8 Consultant Travel 646.9 394.6 699.6 573.5
Total Operational Travel 1,097.4 874.1 1,439.7 1,698.3
OperationsOffice Occupancy 170.4 176.7 232.9 288.1 Office Equipment 98.2 28.3 12.3 53.7 Other Operating Costs 106.7 137.5 169.7 198.5 Other Costs 424.4 526.4 595.7 430.8
Total Operating Costs 799.7 868.9 1,010.6 971.1
TOTAL USES OF FUNDS 6,130.5 6,314.5 7,508.2 8,690.1
Ending FY04 Balance 5,645.8 6,308.4 6,076.9 5,157.1
Funding Analysis
Total expenditures for the year increased to $8.7million, representing a 16 percent increase on the$7.5 million spent in FY 2003. This increasereflected the growth in FIAS business over the pastyear, as our number of projects increased by 20percent. To this end, most of the cost increase wasdue to the net addition of some new professionalstaff and the new management team. As a service-based operation, not surprisingly, around 70 per-cent of total costs were for personnel-relatedcharges—FIAS staff constituted $4.5 million of the$6.0 million total, and consultants represented the$1.5 million balance.
Client reimbursements, which FIAS uses as aproxy of client commitment, amounted to 22 per-
cent of total operating costs. This number doesnot include clients’ in-kind contributions such asstaff time and provision of facilities.
On the funding side, total sources of funds roseslightly from $13.6 million to $13.9 million.Sources comprised a balance carry-forward of$6.1 million from FY 2003, $5.2 million in newdonor contributions to the General Trust Fund,$0.8 million in regional contributions fromdonors, and $1.9 million in client reimbursements.Of the new donor contributions to the GeneralTrust Fund, $3.2 million came from IFC andthe World Bank, and $1.8 million came as newdisbursements from Ireland, Luxembourg,Netherlands, Norway, Sweden, and the UnitedKingdom. FIAS also received new donor contri-butions for specific activities from Australia, NewZealand, and Switzerland.
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About Our Team
Meet Some of Our Team
Gokhan Akinci is theRegional Program Coordinatorfor Central Asia, Caucasus,Turkey, and Nigeria. Before join-ing FIAS in 2000, he was with aninternational management andeconomic consulting firmfocusing on competitiveness,trade and investment policies,
and corporate location.This year, Gokhan saw fruitsof his previous work in Azerbaijan and Turkey as thecountries’ investment climates improved. He is nowconcentrating on medium-term implementationassistance programs, as well as new FIAS productssuch as competition policy and FDI spillovers.
Jacqueline Coolidge has beenwith FIAS since 1996 and wearsthree hats here: Lead InvestmentPolicy Officer, Regional Pro-gram Coordinator for Europe,and Product Coordinator forAdministrative Barriers toInvestment. Having grown up ina family of business owners, she
sees her primary responsibility as bringing an entre-preneur’s sensibility to her advice to governments.In addition to building FIAS’s program in Centraland Eastern Europe, she expanded administrativebarriers studies into a program that builds capacityfor ongoing reform. Notably in FY 2004, she ana-lyzed the impact of inspectorate reforms in Latviaand developed a more accurate and cost-effectivesurvey methodology using business intermediarieswho help businesses through the labyrinth of admin-istrative procedures.
Sean Duggan, Regional Pro-gram Coordinator for thePacific, is based in the SydneyOffice. Sean recently saw hispolicy advice and legal draftingguidelines implemented inamendments to the Fiji ForeignInvestment Act. Passed in April2004, the act has provided impe-tus for a wider reform of invest-
ment approvals throughout the Fiji government.Sean has been with FIAS for 3 years and has 17 yearsof international economic and industry policy, loca-tion development, and investment promotion expe-rience. Fortunately Sean enjoys flying, so travelingacross a region that covers about 28 percent of theworld’s surface to work with clients is less of a draw-back than you might imagine.
Margo Thomas, Senior Invest-ment Policy Officer, has beenwith FIAS since 1989. In FY2004, she developed FIAS’sstrategic approach to strength-ening the link between its policywork and investment promotionby providing to clients a com-prehensive package of advice
and capacity-building on investment promotion.Margo also continued to develop an innovative pro-gram in Bosnia and Herzegovina and Macedonia todesign sustainable reform mechanisms and buildcapacity for implementation. In the coming year,she will be a visiting research fellow at the Universityof Manchester with a focus on international goodpractice in regulatory governance and institutionalframeworks.
As an advisory service, FIAS is only as good as the32-member team that joins us from around theworld.We have strong technical skills in our areas ofspecialization, and we listen, analyze, and communi-cate clearly with our clients to ensure that werespond to their needs. FIAS staff is dedicated and
passionate about what we do, and perhaps mostimportantly, we are pragmatists. We not only havestrong academic credentials, but we also have consid-erable applied experience in policy reform—frombeing chief advisor to a reforming government, toworking in investment promotion agencies.
Staff Expertise
Sector
Investment Climate Diagnostics Joseph Battat Xavier Forneris Xiaofang Shen
Administrative Barriers Reform Gokhan Akinci Jacqueline Coolidge Roy Pepper Aminur Rahman
Regional
Sub-Saharan AfricaXavier FornerisRoy PepperXiaofang Shen Richard Stern
Middle East &North AfricaXavier Forneris
Latin America & the CaribbeanGeeta Batra (Central America & the Caribbean)Frank Sader (South America)
East Asia & the PacificJoseph Battat (China)Sean Duggan (Pacific)Michael LesterRussell Muir (East Asia)Xiaolun Sun
South AsiaJames CrittleAminur Rahman
Europe & Central AsiaGokhan Akinci (Central Asia)Jackie Coolidge (Europe)Katarina MathernovaTatyana PonomarevaMargo Thomas
FDI Policies for Attracting Investors Geeta Batra (Labor Policies) Xavier Forneris (Contract Enforcement and Secured Lending) Katarina Mathernova (Access to Finance) Russell Muir (Land Policies) Frank Sader (Competition Policy) Xiaofang Shen (Land Policies) Richard Stern (Tax Incentives) Xiaolun Sun (Tax Incentives)
Investment Promotion Sean Duggan Margo Thomas
Corporate Social Responsibility Amanda Blakeley Amanda Ellis (Gender) Thais Leray Nigel Twose
Sector-Focused Solutions James Crittle (Special Economic Zones) Thomas Davenport Vincent Palmade
Manager for Latin America & the Caribbean, Middle East & North Africa, and Sub-Saharan AfricaNigel Twose
Manager for Europe & Central Asia, South Asia, and East Asia & the PacificThomas Davenport
44
Project Manager and Editor: Brielle Dravin
Editor: Caroline Taylor
Design: Patricia Hord.Graphik Design
Printer: MasterPrint, Inc.
Photography: FIAS, IFC, and World Bank Staff
Printed on recycled paper with soy-based inks.
Supervisory CommitteePeter Woicke, Executive Vice President of IFC
Assaad Jabre,Vice President, Operations of IFC
Michael Klein, Bank-IFC Vice President,Private Sector Development and Chief Economist, IFC
Approval Committee and Management TeamNeil Roger, FIAS General Manager and
Director of the Investment Climate Department
Thomas Davenport, Manager
Nigel Twose, Manager
Russell Muir, Lead Economist
Vincent Palmade, Lead Economist
Consultative Committee of DonorsAustralia
Canada
Ireland
Luxembourg
Netherlands
New Zealand
Norway
Sweden
Switzerland
United Kingdom
Financial OperationsDanilo Anzures
Wenhang Huang
AdministrationTeresa Andaya
Nessa Busjeet
Zai Fanai
Montaha Feghali
Madan Gera
Nora Mangalindan
Loretta Matthews
Gloria Orraca-Atayi
Susan Winning
Foreign Investment Advisory Service2121 Pennsylvania Avenue, NWFourth FloorWashington, DC 20433 USA
Telephone: 202-473-7443 or 202-458-5011Facsimile: 202-522-3262 or 202-522-2138
Web site: www.fias.net
Other offices:
Level 18, CML Building14 Martin PlaceSydney, NSW 2000Australia
Telephone: 61-2-9223-7155Facsimile: 61-2-9223-7152
c/o International Finance Corporation36/1 Bolshaya Molchanovka StreetThird FloorMoscow 121069, Russian Federation
Telephone: 7-095-411-7555 Facsimile: 7-095-411-7556