The World Bank s Evolving Role in the New EU Member States and Candidate Countries. Luxembourg March 15, PDF Free Download

The World Bank s Evolving Role in the New EU Member States and Candidate Countries Luxembourg March 15,2005

Beyond Transition? Impact of Transition: Political, Economic & Spatial Shock Turnaround: Systemic transformation market economy Disintegration of economic space costly and chaotic Violent ethnic conflicts in the 90s Collapse in output rapid rise in poverty Most growing since 2000, all since 2002 47 million people lifted out of poverty Legacy issues: Today: Shift in Development Priorities Spatial allocation of people and assets Demography Weak local institutions Degrading economic and social infrastructure Unfinished enterprise restructuring agenda 2

The New ECA Policy Agenda Emerging Economic Drivers EU Integration EU 8 EU Candidates EU Perspective EU / Russia Neighborhood Growth in Russia Central Asia Russia Growth & Competitiveness Lisbon Agenda - Investment Climate - Knowledge Economy -Investment Climate - Education - Investment Climate / Infrastructure -Education - Investment Climate / Infrastructure -Education -Economic Diversification - Investment Climate / Infrastructure - Economic Diversification Social Inclusion Roma - Ethnic Minorities / Roma -Poverty - Ethnic Minorities / Roma -Poverty -Poverty & MDGs -Post-conflict issues Poverty & MDGs -Regional Disparities -Poverty& MDGs Governance - Sub-regional Public Mgmt. - Quality of Public Services Quality of Public Services -Weak Public Institutions - Quality of Public Services -Weak Public Institutions - Quality of Public Services -Weak Public Institutions - Quality of Public Services -Weak Public Institutions - Quality of Public Services Global Issues Environment, Natural Disasters Environment, Natural Disasters HIV/AIDS, Natural Disasters, Money Laundering, Drugs, Human Trafficking - HIV/AIDS, - Environment - Natural Disasters -Money Laundering, Drugs, Human Trafficking - HIV/AIDS -Environment - Money Laundering, Drugs, Human Trafficking - HIV/AIDS - Environment -Money Laundering, Drugs, Human Trafficking 3

Growth Performance ECA: Real GDP Growth (In percent change, population weighted) In, the ECA region grew by an average of 6.8% compared to 6.6% in 2003 CIS collectively had an average growth rate of 7.9% compared with 4.9% for the rest of ECA 10.0 7.5 5.0 2.5 0.0-2.5-5.0-7.5-10.0-12.5-15.0 Central Europe & Baltic Countries 1990 ECA Region 1991 1992 1993 1994 1995 Real GDP Growth in : Regions, OECD, World G 1996 1997 CIS 1998 1999 2000 2001 2002 2003 p Aggregate GDP for ECA in has exceeded 1990 levels Overall ECA is the 2 nd fastest growing region in the World 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 6.8 7.8 4.7 6.0 ECA EAP LAC SAP MENA AFR World Sources: WDI, Global Economic Prospects 2005, ECA Regional Tables Note: data are estimates; ECA is population weighted. 4.7 3.2 4.0 4

Regional Growth Performance - An Income Perspective - GDP per Capita (current $US) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000-1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 CIS (all) pop w eigthed CIS7 (pop w eighted) Other CIS (pop w eighted) EU8 (pop w eighted) EU Candidates (pop w eighted) Source: ECA Regional Tables 5

Regional Growth Performance - A Benchmarking Exercise - EU8 and EU15 Regional Comparison 6.0 EU8 EU15 ECA EAP LAC SAP MENA AFR World 5.0 10.0 4.0 3.0 2.0 1.0 0.0 8.0 6.0 4.0 2.0 0.0 Note: ECA data are population weighted. SE Europe, Turkey, OECD CIS, Russia, Brazil, China, India 9.0 SE Europe Turkey OECD 10.0 CIS Rus sia Brazil China India 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 8.0 6.0 4.0 2.0 0.0-2.0 Note: data are estimates Sources: WDI, Regional Tables, Global Economic Prospects 2005. 6

Progress on MDGs Mixed If growth rates are sustained, most countries are expected to reach poverty and education MDGs by 2015 However, many countries are unlikely to meet the goals for child and maternal mortality, as well as for HIV/AIDS While access to water is improving, water quality remains a serious issue Albania Armenia Azerbaijan Belarus Bosnia & Herzegovina Bulgaria Croatia Georgia Kazakhstan Kyrgyz Republic Macedonia, FYR Moldova Romania Russian Federation Serbia & Montenegro Tajikistan Turkey Ukraine Uzbekistan Key Likely Maybe Unlikely No data MDG1 MDG2 MDG3 MDG4 MDG5 MDG6 MDG7 poverty school equality child maternal HIV/AIDS & water enrollment in school mortality mortality TB incidence Access Source: Achieving the Human Development MDGs in ECA, World Bank,. Notes: 1. These assessments represent the best estimate of staff at the time of publication. 2. For countries that already have attained very high levels in those categories, measuring by percentage, improving by 50% may simply not be attainable; hence, those particular MDGs may need to be revisited 7

Unemployment in ECA (1994 and 2001) 35 30 25 20 15 1994 10 5 1994 1994 1994 1994 1994 0 CIS (excl. Russia) Russia EU8 BLG, CRO, ROM Turkey W. Balkans 1994 Source: WDI, ILO 8

Social Inclusion in ECA Vulnerability Children, women, ethnic minorities and IDPs are the most vulnerable. Severe impoverishment and exclusion of ethnic minorities Conflict-related destruction of lives, livelihoods, assets, and communities, stalemated conflicts create continued vulnerability to ethnic and civil violence in several sub-regions Spatial Disparities Demise of one-company towns mass unemployment, pockets of vulnerability, community breakdown Restructuring of agriculture, closure of off-farm enterprises growing rural impoverishment and isolation 9

Governance - Slow but Steady Progress - - Most countries improved with exception of SEE - Progress mostly on policy issues and legal frameworks, but implementation and compliance remain major concerns PUBLIC SECTOR REFORM LEGAL & JUDICIAL CORRUPTION ISSUES Institutions still poorly suited to market economy Extensive state capture Weak public service delivery Poorly functioning judiciaries Weak rule of law High administrative corruption Limited civil society voice 10

Post-Conflict, Peace & Security - While most of the region continues to stabilize, many conflicts are still simmering - Post- Yugoslavia Resolution of key issues will determine pace of continued development in Western Balkans (e.g., future status of Kosovo, future of Dayton arrangements in Bosnia & Herzegovina, continued stabilization of Macedonia, pace of reforms in Serbia & Montenegro) CIS Many frozen conflicts which continue to pose risks to regional development (e.g. Nagorno-Karabakh, Transnistria, breakaway provinces in Georgia) 11

Natural Disasters Risk in ECA Hazard types vary throughout the region: Armenia, Turkey and South-Eastern Europe are in one of the most seismically active regions in the world Central Europe is vulnerable to floods 700 Russian towns threatened by landslides $70 billion economic losses reported in the ECA region in the past 30 years Underdeveloped infrastructure and response mechanisms cause higher death rates per year in the region compared to US or Japan despite less people being exposed to hazards Average expected annual loss for ECA region estimated at $2 billion, concentrated in Armenia, Poland, Romania, Russia and Turkey Most threatened cities include Istanbul (Turkey), Bucharest (Romania), Skopje (FYR Macedonia), Gyumri (Armenia) Tajikistan Kyrgyzstan Armenia Iran Georgia Russia Romania Azerbaijan Turkey Japan United States 12

Exposure to Natural Disasters in ECA Region - Two Examples - Earthquake Risk in Istanbul Seismic risk comparable to San Francisco, Los Angeles and Tokyo Probability of occurence of a large earthquake > 50% in next 30 years, > 20% in next 10 years A probable 7.5 Richter scale earthquake in Istanbul would result in app. 70,000 dead, 120,000-400,000 injured people, direct economic loss estimated at $30 billion Source: Presentation of Turkey Prime Ministry / Project Implementation Unit Radioactive Landslides Risks in Kyrgyz Active tectonic and erosion processes threaten radioactive tailing dumps in southern Kyrgyz Rep. 4 million tons of radioactive wastes from uranium mining have been stored in 23 tailing dumps, many of which in river flood land The breakage of a similar tailing dump in the region (Mailu-Suu 7) in 1958 released 600,000 cubic meters radioactive pulp into the Mailu-Suu river Source: The Kyrgyz Republic - Disaster Hazard Mitigation Project (PAD) 13

Trafficking Major drug trafficking routes extend through the region Volume of drug trafficking growing along the Silk Road and other parts of the region Estimated 175,000 people trafficked per year in the region, 25% of trafficking worldwide The financial systems in the ECA region are estimated to be particularly vulnerable to money laundering activities Estimates of People Trafficked per Year 225,000 Drug Trafficking Heroine & Morphine Seizures 2001-2002 175,000 150,000 100,000 50,000 Southeast Asia Europe and South Asia Latin America Africa Central Asia and Carribean Source: Congressional Research Service, 2000 Source: Global Illicit Drug Trends (United Nations, 2003) 14

ECA Demography: The Third Transition - From Red to Grey - Many MICs in ECA face declining & aging populations, especially in Russia, Ukraine and EU accession countries; Bulgaria is Europe s most rapidly aging country Pressures on social security and health systems 45 40 35 Source of fiscal imbalance Impact on labour market Spatial implications Migration is becoming a key regional issue Another indicator of increasing diversity of region country by country look needed % change 2000-2025 30 25 20 15 10 5 0-5 -10-15 -20 Bulgaria Latvia Ukraine Russia Estonia Belarus Georgia Lithuania Hungary Romania Source: World Bank Population Projections Czech Croatia Slovenia Moldova Slovak Armenia BiH Kazakhstan Azerbaijan Albania Turkey Kyrgistan Turkmenistan Uzbekistan Tajikistan 16

Outlook for ECA Countries EU 8 EU Candidates Prospects increasingly tied to progress across rest of EU Western Balkans Political fragility and simmering ethnic tensions Deeper integration with European Union provides positive stimulus to continue reform Belarus, Moldova, Ukraine South Caucasus Central Asia Economic integration or close partnership pursued with both European Union and Russia Significant poverty and development issues - a long term challenge - Russia, Kazakhstan, Azerbaijan Resource rich countries need to broaden economic base, diversify 17

Framework for World Bank Activities in the New Member States TA lending under Social and Institutional Development and Economic Management Technical Assistance Program (SIDEM) to build capacity and support convergence goals Niche lending to support growth, competitiveness, social inclusion and poverty reduction in areas where WB knowledge value-added offsets higher financial costs Cross country and programmatic AAA based on common assessments of priorities, client demand and WB value-added Increasing reliance on use of country systems consistent with Boardapproved pilot 18

Framework for WBG in Southeast Europe A framework for formulating individual country assistance strategies ensure programs have greatest impact at country and regional levels Identifies areas where there are: Cross-border externalities Economies of scale Opportunities for scaling-up Identifies opportunities for regional cooperation, provides a common path toward integration in EU structures Within the framework, the Bank is already collaborating on initiatives and studies including: Institutional reforms for investment and growth Regional transport Energy Trade Water Social development HIV/ AIDS 19

World Bank Support to EU8 and Accession Candidate Countries Use of Sector Wide Approaches and Country Systems Project Example: Poland Road Maintenance and Rehabilitation Use of Regional Strategies to Solve Country Issues Project Example: Horizontal APL for Energy Community of SEE WBG Collaboration Project Example: Partial Risk Guarantee operation for Romania New Business Model for TA Project Example: Umbrella TA facility for the EU8 Monitoring & Advisory Services, and Workshops Example: EU8 Quarterly Economic Reports; Knowledge Economy Assessments, and KE Forum New Financial Products Example: Currency Swap (Bulgaria MDA), Debt Management Services (Bulgaria & Croatia pilots), RAMP Country Partnership Strategy (CPS) Slovak Republic; Upcoming: Poland Based on annual business plans Flexibility and adjustment to real time demand Lending program adjust to client demand Partnership with EU: WB very conscious that acquis communautaire sets overall EU accession agenda Countries and European Commission in driver s seat WB, EC and partner institutions (IMF, EIB, EBRD) closely align analysis, policy advise, and financing to facilitate EU accession 20

Knowledge is Foundation of World Bank - More Advanced Knowledge Products in Demand - Strategic Flagship Priorities Flagship Products Reports Other Flagship AAA Products Reports Growth & Competitiveness Governance Social Inclusion Global Issues From Disintegration to Reintegration: ECA in the World Marketplace Infrastructure Challenges in Europe and Central Asia: 15 Years of Transition Anti-Corruption II Growth, Poverty and Inequality in Eastern Europe and Central Asia: 1998-2003 (ECAPOV II) Creating More and Better Jobs in ECA: Labor Markets in East Europe and Central Asia Roma in an Expanding Europe: Challenges for the Future Averting AIDS Crisis in Eastern Europe & Central Asia: Regional Support Strategy Power s Promise: Electricity Reforms in Eastern Europe and Central Asia From Knowledge to Wealth: Transforming Russian Science and Technology for a Modern Knowledge Economy Seminar: Towards strong and sustained economic growth in Russia. Conference on Public Expenditure Management Challenges in ECA/PRSP Countries Central Asia Regional Framework Paper Russian Federation: Accelerating Poverty Reduction through Growth and Social Policies Poland: Living Standards Assessment Central Asia HIV/AIDS Study Disaster Risk Mitigation: A Regional Strategy The Environment MDG in ECA: Targets, Monitoring Indicators & Policies 21

V. Annexes 22

New EU Members and Accession Candidates Economic Scorecard The EU8 includes: Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovak Republic and Slovenia EU8 1994 p GDP p c (cur US$) 3,005 7,503 Growth 3.6 5.0 Private sector share of GDP 60 78 Debt/GDP 21 56 Net FDI, % of GDP 1.9 2.7 Unemployment, % of labor force 10 13 TI Corruption Index 4.4 4.4 Bulgaria, Croatia, Romania 1994 p GDP p c (cur US$) 1,537 3,645 Growth 3.7 4.9 Private sector share of GDP 45 70 Debt/GDP 21 57 Net FDI, % of GDP 1.1 4.5 Unemployment, % of labor force 15 16 TI Corruption Index 3.0 3.5 Turkey 1994 p GDP p c (cur US$) 2,140 4,030 Growth -5.5 8.0 Private sector share of GDP.... Debt/GDP 51 71 Net FDI, % of GDP 0.5 0.8 Unemployment, % of labor force 8 9 TI Corruption Index 3.6 3.2 Notes: Unemployment data are for 2001; GDP pc and GDP growth are population weighted averages, all other indicators are medians Sources: WDI, ECA Regional Tables, EBRD, Transparency Int l 23

The Western Balkans Economic Scorecard Western Balkans 1994 p GDP p c (cur US$) 1,035 2,460 Growth 5.2 4.6 Private sector share of GDP 50 58 Debt/GDP 41 34 Net FDI, % of GDP 2.0 4.1 Unemployment, % of labor force 30 23 TI Corruption Index 2.2 2.7 The Western Balkans include: Albania, Bosnia and Herzegovina, FYR Macedonia, and Serbia & Montenegro (including Kosovo) Notes: Unemployment data are for 2001; GDP pc and GDP growth are population weighted averages, all other indicators are medians Sources: WDI, ECA Regional Tables, EBRD, Transparency Int l 24

The Commonwealth of Independent Economic Scorecard States (CIS) CIS 1994 p GDP p c (cur US$) 1,780 2,557 Growth -14.4 7.4 Private sector share of GDP 30 62.5 Debt/GDP 12 35 Net FDI, % of GDP 1.0 3.3 Unemployment, % of labor force 1 8 TI Corruption Index 2.3 2.2 Barents Sea Kara Sea Laptev Sea East Siberian Sea The CIS includes: Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyz Republic, Moldova, Russian Federation, Tajikistan, Turkmenistan, Ukraine, Uzbekistan Sea of Okhotsk CIS7 1994 p GDP p c (cur US$) 611 597 Growth -12.4 5.4 Private sector share of GDP 30 60 Debt/GDP 21 40 Net FDI, % of GDP 1.0 3.4 Unemployment, % of labor force 1 8 TI Corruption Index 2.2 2.2 Black Sea Caspian Sea Yellow Sea The CIS7 includes: Armenia, Azerbaijan, Georgia, Kyrgyz Republic, Moldova, Tajikistan, Uzbekistan Notes: Unemployment data are for 2001; GDP pc and GDP growth are population weighted averages, all other indicators are medians Sources: WDI, ECA Regional Tables, EBRD, Transparency Int l 25

The World Bank s Evolving Role in the New EU Member States and Candidate Countries. Luxembourg March 15,2005