The World Bank Group In the Greater Mekong Sub-region

1. The World Bank GroupIn the Greater Mekong Sub-region By Ian Porter World Bank Country Director, SEA November 13, 2007

2. What is the World Bank Group? • Operates like a cooperative, with 185 developing and developed country members • Mission: fight poverty • Promote economic opportunities through growth • Help poor people reach opportunities 5 organizations • IBRD: International Bank for Reconstruction and Development - provide loans to Middle-Income Countries • IDA: International Development Association - provide interest-free loans and grants to the poorest countries • IFC: International Finance Corporation - provide private investment financing • MIGA: Multilateral Investment Guarantee Agency - provide political risk insurance • ICSID: International Centre for Investment Dispute Settlement

3. How Do We Fight Poverty? • In FY07, we provided $34.3 billion in loans, grants, equity investments and guarantees to Middle- and Low-Income Countries - up $2.7 billion, or 7.8%, from FY06 • In FY07, Bank funding supported 531 analytical studies/research, 430 technical assistance activities, and 700 learning activities by World Bank Institute (WBI) as well as broader policy advice and knowledge sharing • We also use our “convening power” for leveraging support from and coordinating with other donors, and encouraging debate or dialogue on key development issues with a wide range of other stakeholders, including from private sector and civil society

4. The World Bank Annual Report 2007 IBRD/IDA Lending by Sector FY07 Law & Justice Transportation Water, Sanitation, & &Public 20% Flood Protection Administration 12% 22% Information & Agriculture, Fishing, & Forestry 7% Communication 1% Industry & Trade Education 5% Finance Energy & mining 8% Health & Social 7% 7% Services 11% Total Lending: $24.7 billion

5. IFC Lending by Industry

6. Our Financial Support is Increasing …

7. … But Our Financial Support is Declining as a Proportion of Total Financial Flows In FY06, Bank lending of $31.6 billion was small compared to net private and official flows of $571 billion that year

8. Agenda of New WB President • Fight poverty • How to continue reducing poverty and spurring sustainable growth? • Help states coming out of conflict • Sudan, Liberia, Sierra Leone, Timor Leste, Pacific Islands, etc • Different business models for MICs • Countries getting richer, looking for more “competitive menu” of development solutions

9. Agenda of New WB President (Cont.) • More active role in fostering regional & global “public goods” • HIV/AIDS, malaria, avian flu, climate change, etc • Support development in Arab world • Several countries made progress in business reform (Egypt, for example), but more development work still needed • Strengthen WB role as “Brain Trust” of the world • Apply vast experience & knowledge to help countries address five preceding themes

10. World Bank Support in East Asia and Pacific • Overall WB support increased from less than $2 billion in FY02 to $4 billion in FY07 • China was largest WB borrower at $1.6 billion (41% of total lending in region) • IFC invested $944 million in 38 projects in 8 countries • WBG shared knowledge through analytical work, training, institutional capacity building, technical assistance, and other advisory activities • In general, governments are relying less on WB financing and more on private financing and other donors

11. Strong growth & overall poverty reduction Strong export performance Uneven development Enhanced cooperation could maximize development benefit The Greater Mekong Sub-Region (GMS)Regional Context

12. GMS Regional Context

13. Cooperation in the GMS • GMS regional cooperation program launched with support of ADB in 1992 • Promote high priority projects (transport, telecom, HR development, tourism, etc) • Mekong River Commission - created in 1995 • Secretariat of inter-governmental cooperation; supports integrated water resource management (IWRM) • Members: CLTV; China, Myanmar dialogue partners • ACMECS - initiated by Thailand in 2003 • Provide technical assistance to CLMV; increase country competitiveness • Promote investment & cooperation among private sectors (ACMECS Business Council) • Fora / Organizations with broader mandates • ASEAN, UN Organizations (UNDP, UNESCAP), MDBs (ADB, WB) • Bilaterals - Japan, China, Thailand, and many others

14. Opportunities • Rich natural resources • Minerals, forests, hydro • Mekong is one of least developed major rivers in the world • Economic structures in transition • More diversified & open to trade • Fast integrating into regional & global economies • Increased intra-sub-regional trade, investment, migration flows • Large economies in EAP drive sub-regional growth • Thailand & China • Governments favor increased sub-regional cooperation • Expanding regional trade • Benefiting from ASEAN Free Trade Agreement

15. Challenges • Integrated system for power production and trade – high growth in demand, but variation in ability to supply, e.g.: • Thailand: would need to increase generating capacity by almost 20,000 MW to meet demand; would require $3 billion investment annually • Lao PDR: could produce up to 25,000 MW (mostly hydro), but low national demand growth • Cambodia: could produce up to 10,000 MW, but absence of national grid and low access/demand makes it difficult to exploit economies of scale • South China: need to increase capacity by 164 GW (currently 64 GW). Rapid demand growth led to peak power shortfall of 9.4 MW in ’05. • Vietnam: need to increase capacity by 15,000 MW to meet 15% annual demand; would require annual $2 billion investment over next decade

16. Challenges in GMS (cont.) • Better management of national and shared natural resources needed • Forests in Cambodia • Hydropower in Lao PDR • Mekong river basin development not well coordinated, etc • Better physical linkages to underpin strong growth, cooperation, and connectivity • Landlocked Lao • More efficient flows of goods & services b/w countries, main ports of region

17. Challenges in GMS (cont.) • Better framework for flow of human resources • Cross-border migration supports growth, but need stronger framework, policies to reduce harmful illegal migration, human trafficking, etc • Environmental, social, economic and political risks …if each country pursues development without cooperation

18. World Bank Support for GMS • Regional work program to complement country assistance strategies • Support for GMS economic cooperation program • Support existing donor coordination mechanism led by ADB • Build on WB experience in other regions

19. Our GMS Work Program • Regional Power Trade • Build on 2002 Intergovernmental Agreement supported by ADB; support power sector in individual countries & regional integrated planning • Mekong Water Resource Management • Enhance regional cooperation by strengthening MRC’s capacity • Trade and Transport Facilitation • Complement ADB’s cross-border trade program; build on completion of sub-regional transport corridors • Labor Migration • Analytical work to improve knowledge of & info on socio-economic impact of migration in sending & receiving countries

20. Our resources for GMS are small compared to ongoing development assistance in region: 3 proposed regional projects over next 3 years totaling about $100 million compared with proposed $1.5 billion for ADB’s 29 projects Complement our overall longer country-level commitments We will use: Regional and country grants, credits (e.g. $33.5 million grants for transmission lines in Lao PDR, Cambodia) Analytical work and policy advice Previous experience of successful regional work, including in Africa and Europe Instruments and Resources

21. Nam Theun 2 Hydropower Project: Example of Country-Level Project with Major Regional Impacts • 1,070 megawatt project costs $1.45 billion • 6,200 people in Nakai Plateau relocated • WB supports project through $20 million IDA grants, $42 million IDA partial risk guarantee, and $92 million MIGA risk guarantee • Complements support by ADB, EIB, NIB, and AfD • Project to provide Lao PDR $2 billion in revenues over 25 years • All 10 WB social & environmental safeguards are triggered for this project • WB requires revenues to be used for poverty reduction & environmental protection • Project implementation heavily monitored by independent experts

22. Other Areas for Potential WB Support in GMS • Environment & Forestry Sector • Management of forest resources • Establish linkages b/w cross-border national protected areas through trans-boundary corridors • Improve enforcement & monitoring against poaching & illegal logging • Harmonize cross-border custom practices to control timber & wildlife trade • Health issues with cross-border implications • HIV/AIDS, avian flu, SARS • Capacity Building

23. WB in Thailand and Malaysia: Focus on Knowledge Sharing Partnerships • Bringing international experience and expertise to countries through: • Monitoring and diagnostic work e.g. investment climate assessments, and knowledge economy, higher education and urban development studies • In depth implementation support e.g. health financing, banking supervision, school based management, river basin development • Sharing MIC experience with lower income countries and working with MICs on regional issues and as increasingly important donors to LICs

24. WB in Cambodia, Lao PDR and Myanmar • Cambodia – major focus on governance issues at macro and project levels; also on investments needed to achieve MDGs; and on strengthened partnerships • Lao PDR – focus on drivers of continued growth, improving social outcomes, strengthening capacity and partnerships, and implementing NT2 project as best practice • Using a variety of instruments including budget support, sector and technical assistance operations; knowledge activities and policy dialogue; and convening/facilitating role with other stakeholders • In Myanmar – in watching brief mode; but with substantial engagement with other donors

25. Thank you! For more information on the World Bank, please visit www.worldbank.org