FIAS CONSULTATIVE COMMITTEE OF DONORS MEETING

1. FIAS CONSULTATIVE COMMITTEE OF DONORS MEETING Vienna, Austria – October 22-23, 2008

2. FIAS Governing Body and Management Team • FIAS Supervisory Committee members Lars Thunell Executive Vice President and CEO, IFC Michael Klein Vice President, FPD, World Bank Group, and Chief Economist, IFC Rachel Kyte Vice President, Advisory Services, IFC Izumi Kobayashi Executive Vice President, MIGA • FIAS Management Team Pierre Guislain General Manager, FIAS, and Director, Investment Climate Department, IFC Thomas Davenport Senior Manager, Regulatory Simplification Cecilia Sager Manager, Investment Generation Marialisa Motta Manager, DB Reform Cecile Fruman Manager, CIC Strategy and Analysis Russell Muir Manager, EAP program, and IFC BEE Regional Manager for EAP David Bridgman Manager, Africa program, and IFC BEE Regional Manager for Africa

3. Our Funding Partners in FY08 Australia Ireland Norway Austria Italy Sweden European Union Luxembourg Switzerland United Kingdom France The Netherlands United States Iceland New Zealand

4. Program Overview DAY 1 – WEDNESDAY: • Welcome and Opening Remarks • WBG Strategy for PSD and Investment Climate Reform, and Impact of Financial Crisis • FY08 Highlights • Project Spotlight: “Invest-in-the Western Balkans” Program: Institutionalizing Capacity for Investment Promotion DAY 2 – THURSDAY: • Doing Business Reform Advisory – A New FIAS Program • FY09 Work Program and Funding • Evolving Partnerships and Donor Feedback

5. Update on WBG Strategy for Private Sector Development and Investment Climate Reform, and Impact of Financial Crisis Michael Klein, VP, WBG/FPD, and Chief Economist, IFCPierre Guislain, GM, FIAS, and Director, IC Department, WBG

6. FIAS – proposed response to the financial crisis • Expand Doing Business Reform Advisory capacity, especially in the areas of: • Insolvency, liquidation, bankruptcy • Contract enforcement • Creditor rights • Investor protection • Scale up Secured Lending in the areas of • Legislation • Collateral registries • Training and information • Scale up Trade Logistics Advisory to further facilitate trade through increased competitiveness • Refocus attention to existing investors via improved investor aftercare programs

7. Impacts and Adjustments, by Product Product: Effect: Response: : post-registration, liquidation L Business Entry Business Operations M : risks/better reg. Business Taxation M - H M - H Trade Logistics Secured Lending H Insolvency, creditor rights, contract enforcement, corporate governance, property DB Reform Advisory H L - M Sub-Nat DB Industry Competitiveness/ SEZs L Investment Policy & Promotion M : after-care

8. FIAS – Financial Crisis & Funding Implications • Crisis is evolving – we need additional core funds to be able to react flexibly and quickly • Be more frugal, cost-effective in our interventions

9. FY08 Highlights

10. Key FY08 Trends • Sustained growth and demand (from $22.3 million spending in FY07 to $27.7 million in FY08) • On track for delivering on FY08-11 strategy • Continued focus on FIAS/BEE products as our key areas of expertise • Creation of DB Reform Advisory unit and product • Three IFC awards for: • Kenya - Business Licensing Reform Project (IDA Impact Award) • Liberia - Investment Climate Reform Project (IDA Impact Award) • China – Secured Lending Project (Corporate Award) • Complete and successful integration of MIGA TA • Further decentralization and strengthening of regional delivery capacity

11. FIAS Products • Contribution to FPD work on Financial Market Infrastructure • Close cooperation with Indicators and Analysis dept (DB and Enterprise Surveys) • Access to Land • Public Private Dialogue • Two Main Practice Areas: Regulatory Simplification and Investment Generation WB IFC Infr. BL IFC BEE Products developed in development other/emerging IFC A2F Products Compe- tition Private Health ADR Busin. Entry Busin. Entry Busin. Operation Busin. Operation Busin. Taxation Busin. Taxation Invest- ment Policy & Promotion Investmt. Policy & Promotion Sub- National DB DB Reform Advisory Trade Logistics Industry Specific BEE Sec. Len- ding Other A2F Pro-ducts Other CIC Products FIAS Products

12. Drive for Results/Moving Beyond Diagnostics • FY08: transition year from counting deliverables to counting results • Strategy target for FY08-11: 400 reforms • FY08 reform count: 108 reforms (see details in Annex 2 of FIAS Annual Report) • Contributed to 51 of the reforms reported by the DB 2009 report • FIAS’ work is also reflected in improvements of DB indicators Breakdown of reforms facilitated (by region): • Target for FY09: 120 reforms

13. FY08 Project Expenses – IDA and Regional Breakdown IDA versus non-IDA Regional breakdown DBRA expenses included in IDA/ BICF expenses (approximately $3.5 non-IDA expenses and regional million) not included in SAR expenses if related to country-specific spending projects

14. High Client Satisfaction • High level of client satisfaction: 92 percent of BEE clients said they were satisfied with services provided (2008 IFC Client Survey) • BEE outperforms corporate average in many categories

15. FY08 Project Highlights • For details, refer to FIAS 2008 Annual Report and additional slides in hand-outs (Annex)

16. FIAS Performance Scorecard

17. M&E Outlook: Improving Results Management • New M&E Framework • Rolling out and refining M&E framework built around the concept of “major reforms” • Ensuring quality and timely availability of M&E data • Current focus is on Monitoring/Tracking >> move towards Evaluation • Investing in staff training • Developing an outcome-based performance management system

18. Business Taxation – M&E Logical Model DB indicators Stakeholderconsultation Discussions withgovernment officials Activities Assessment /diagnosis Consultations onpotentialrecommendations Assessment /recommendations /action plan Inputs into draft law,policy, policystatement Inputs intotax administrationinstitutions Inputs intotax administrationadministration Outputs Reform Reform Reform Reform Reduction in tax rateand widening the tax base Reduction in thenumber of taxes Replacement of tax holidays with investment incentives Implementation ofSME tax regime Reform Reform Reform Reform Implementation ofbest practice taxenforcement procedures Implementation ofbest practice tax auditsystem Implementation of bestpractice tax appealprocess Implementation of practices to reducecorruption Outcomes Reform Reform Reform Reform Change in numberof ways of fillingtax returns Change in paymentoptions fortaxpayers Change in time it takesto get tax relatedcredits and refunds Implementation orimprovement of a taxpayer education syst. Implementation risks Increased investment Impact Economic growth Poverty reduction

19. FIAS Staff Profile – Staff Mix and Diversity • FIAS staff complement includes IFC, MIGA and Bank staff, and staff on special assignments financed by development partners (secondments, staff exchanges) Staff Composition (FY08 and 09): Diversity Profile (end FY08) GE-GF/GG-GH Staff Ratio 146% 120% (incl. ETCs):

20. FIAS Staff Profile – Further Decentralization FIAS Field Staff vs. HQ (FY04 to FY09) FY04 FY05 FY06 FY07 FY08 FY09 (est) • Decentralization expected to accelerate as products mature and skill level and implementation capacity is increasingly built up in the field • FY09 Targets: 32% field-based staff; 40% of projects managed in field • Vision: HQ serving as technical support center and knowledge hub for country teams

21. “Invest-in-the-WesternBalkans” Program Building Capacity for Investment Promotion

22. Invest in the Western Balkans Program (IWB):Background and Objectives Background • Established as a pilot project in 2004 by MIGA with financial support from Austrian Federal Ministry of Finance • Follow-on Phase: 2006-09 – extension and scaling-up after positive initial results (supported by Austrian MoF and European Commission) • Implemented by a core team of 4 people from Vienna • Built upon and leveraged several country-specific TA activities MIGA was undertaking in the region (Serbia, BiH, FYR Macedonia, Croatia) Objectives • Generate FDI (greenfield investment) for the Western Balkans region • Strengthen the capability of IPAs to implement targeted, pro-active FDI promotion programs • Contribute to the regional integration of the W Balkans region

23. IWB - Features and Value Added Features • Proactive approach to investors in concert with IPAs in the region • Concrete results oriented with a strong emphasis on “learning by doing” • Rich source of “lessons learnt” derived from investor contacts; as feedback into the policy reform agenda Value Added • Quality information and WBG brand provide “comfort” to investors • Access to investors and best practice investment promotion skills transfers to IPAs

24. Agency for Foreign Investments of the Republic of Macedonia Viktor Mizo, CEO 2008

25. Invest Macedonia • IPA Law(June 2004) • IPA creation(January 2005) • Latest developments: • Marketing Campaign (Over 80 newspapers in more than 40 countries worldwide. Online advertising on 25 web sites.) • New legislation: - Directly accountable to the Government - Director nominated by the Government, reports to a Management Board of 7 members - ‘Primary budgetary’ - not depending on the Ministry of Economy

26. Goals IMAGE BUILDING GENERATING INVESTMENTS INVESTORS SERVICING POLICY ADVOCACY

27. Macroeconomic indicators *I-VII, ** I-VIII, ***I-VI • Low inflation: avg <2% annually over the last 10 years • Macedonian Denar pegged to the DM/€ for the last 10 years (€1= MKD 61.3) • Average gross salary is €415 per month (VI.2008) CREDIT RATINGS

28. Doing Business • Doing Business 2007 rank – 92 • Doing Business 2008 – 4th Best Reformer in the world

29. IWB/FIAS/WB Support • Initiating dialogue with Macedonian Government • IPA Strategy • Business Plan • Capacity Building • Advisory services • Outreach events • Sector specific events • Country Officer • E-learning Priorities for the upcoming period: • Strategy Review • Aftercare Program • Direct contacts with target companies

30. Operational results(as of 30th June 2008) 54 marketing events organized in 17 countries, 1.067 potential leads attended 111 serious enquries by companies handled 67 site visits facilitated IWB Key performance indicators • 10 (70%) investments proceeding according to plan • 2 investments are delayed • 2 investments commenced but are abandoned for the moment • Total job potential of the investments is 800 direct jobs Facilitated 14 *investment decisions

31. Key Lessons and the Future Lessons • Region lacks competitiveness in the sectors with most potential ( Missed opportunities) • Weak Institutions ( 100% turnover of Directors of IPAs ) The Future • Embedding the program in the beneficiary countries • Providing a platform for the Vienna IG office by applying the lessons learned.

32. FIAS CONSULTATIVE COMMITTEE OF DONORS MEETING Vienna, Austria – October 22-23, 2008

33. Program Overview DAY 2 – THURSDAY, OCTOBER 23: • Doing Business Reform Advisory – A New FIAS Program • FY09 Work Program and Funding Priorities • Evolving Partnerships and Donor Feedback

34. Doing BusinessReform Advisory: Product Status, Delivery Model, Challenges and Future Plans

35. DBRA: Objective and Delivery Model Objective: Improve countries’ environment for doing business and DB indicators Delivery Model: Phases Partners WBG, DB project, IFC 1. Receive Government request 2. Prepare DB Reform Memo • Discussions with the Government • Identify priority areas for reform • Reform action plans • Design a TA reform program Regional and product teams; WB Sector and Country Units, donors DB Project 4. Monitoring & evaluation

36. How do we measure what we do Outcomes and Impact Outputs • Improvements in DB indicators • New firms registered • Firms’ growth • Reduced informality • Higher employment • Reform memos • Reform action plans • Technical assistance • Legislation review • Support for procedural changes

37. Belarus Poland Greece Albania Macedonia Montenegro Armenia Azerbaijan Kazakhstan Kyrgyz Rep. India Pakistan Sri Lanka Burkina Faso Cote d’Ivoire Ghana Liberia Mali Mauritania Senegal Djibouti Jordan Iran Lebanon Yemen OECS Colombia Dominican Republic El Salvador Guatemala Haiti Honduras Jamaica Mexico Cambodia Indonesia Lao PDR Solomon Islands Timor Leste Tonga Vietnam Mozambique Kenya Rwanda DRC Madagascar Central African Rep. Countries that have asked for DB reform support (October 2007 – September 2008) DB reform: entry point for broader IC work

38. Outputs Strong demand from IDA countries Active Projects: Africa leads 50 25 16

39. Reforms by Region Total reforms reported by DB09: 239 (215 excluding OECD) Reforms supported by DBRA with WBG: 51 (24% of 215) 24% 23% 26% 40% 34% 23% 11% 51

40. Reforms by Topic 19% 21% 34% 33% 31% 44% 32% 12% 51

41. DB Reforms in Colombia DB Areas Actions Results (DB indicators) Starting a business Cheaper and faster registration; elimination of mandatory zoning certificate Lower cost and time to start a business Silence-is-consent principle for building permits; single form Dealing with licenses Lower time to deal with permits Trading across borders Better banking; e-payment; data exchange; coordinated inspections Lower time to export and import

42. DB Reforms in Burkina Faso DB Areas Actions Results (DB indicators) Inspection number reduced; one-stop-shop for permits Lower cost and fewer procedures Dealing with licenses Employing Workers Review of the Labor Code More flexible labor regulations Fewer requirements and lower taxes to transfer property Lower time and cost Registeringproperty Paying taxes Reduction of CIT rate and tax on dividends Lower cost

43. DB Reforms in India: national and subnational Government team: Industrial Policy and Promotion Our main partners: SASPF, IFC, FIAS-BEE, Country Unit DB reform workshops with state-level governments Cities: New Delhi, Mumbai, Chennai and Kolkata Topics: starting a business, construction permits, paying taxes and property registration Sharing of international and local best practices DB reform memo for Mumbai Next steps: DB reform action plans at both national and state level DB in India 2009: new sub-national report

44. Doing Business Reform Advisory: future agenda • Support DB reform in more countries and more areas; deepen and broaden reform initiatives with BEE partners and donors • Integrate work at the national and regional levels aimed at improving countries’ and cities’ performance on the DB indicators • Analyze the process of DB reform in different countries (write case studies of successful DB reforms and tools to implement them) • Study effect of DB reforms on firm performance in partnership with the research department • Offer DB training and establish capacity for future DB reforms across WBG teams

45. Conclusions: DB triggers reforms • Visibility of DB Report increases governments’ willingness to reform; DB tight deadlines help focus actions and increase speed of reforms • DB triggers several factors that are needed for successful reforms: • Identify a “champion” to drive reforms; establish reform committees; identify technical leaders and working groups; get inputs from the private sector • Start with simple reforms: focus on administrative changes first, while preparing the ground for long-term reforms

46. Conclusions: implications for the WBG • Responsiveness to governments • Provide high-quality assistance and support for implementation • Partnering with colleagues with in-depth knowledge of DB and IFC; WB technical experts to broaden the reform dialogue; country-based colleagues for sustained presence on the ground; donors • Remain flexible: DB reform partners change depending on the country, topics, available resources and presence on the ground • Analyze the process of reform: what works and what does not

47. Diagnostic tool Reform instrument M&E instrument • Comparisons within countries are strong drivers of reform • Uncovers bottlenecks and local good practices • Promotes peer to peer learning • Creates baseline • Allows locations to compete locally and globally • Entry point in countries averse to international comparisons • Puts regulatory reformon political agenda • Measures progress over time • Creates an incentive to maintain reform effort even when governments change Doing Business Subnational (DBSN) • Extends Doing Business indicators beyond the most populous city to other cities • Combines the media appeal of Doing Businesswith a strategy to actively involvelocal governments in reform process • It creates demand for other WB/IFC products and converts WB/IFC BEE teams into reform facilitators

48. How does it work? • Preparation Phase • Demand driven • Government involvement • Road-Show • Data Collection • Customized surveys • Training on DB methodology • Local government survey responses • Period of Reply • Confidential results • Reform dialogue • Ownership Active government participation throughout the project

49. How does it work? • Launch • Media coverage • Country ownership • “We only have winners in Colombia: winners of today and winners of tomorrow” President Alvaro Uribe • Report • Compares performance of different cities in same country • Identifies bottlenecks and local good practices • Provides reform recommendations • Follow-up • Demand for reform at local and national level • Peer-to-peer learning and rapid response • Sustainability strategy / transfer • of methodology

50. Subnational DB uncovers best practices within countries *2007 data