The World Bank and African Development Bank—Working to Support Middle Income Countries

Washington, D.C. – April 17, 2008 – A two-day conference hosted by the World Bank Group (Africa and MENA Regions) and African Development Bank in Cairo March 11-12 focused on understanding and adapting to the needs and challenges of Middle Income Countries (MICs) in Africa and mapping the way forward for future support with a special focus on competitiveness including the investment climate, science and technology and infrastructure.

Ambassador Badr, AfDB's Eichenberger and World Bank's Mbi at opening session.

Delegates welcomed the rich discussions on the steps required to further close the gap between the MICs’ needs and MDBs' responses. Dr. Talaat AbdelMalek, executive director of PEMA and economic advisor to the Minister of the International Cooperation of Egypt, stressed that it is not about lending.

“What is needed is not aid but building the MICs own capacity to address problems,” he said. “We need to move from development lending to development partnership.”

The conference brought together representatives from 11 African MICs: Algeria, Botswana, Egypt, Gabon, Mauritius, Morocco, Namibia, Seychelles, South Africa, Swaziland, and Tunisia as well as the Multi-Lateral Development Banks (World Bank Group, African Development Bank, Asian Development Bank, Islamic Development Bank). The conference was also attended by BADEA (Arab Bank for Economic Development in Africa), IFAD (International Fund for Agricultural Development), Arab Fund for Technical Assistance, Intel Corporation and Global Clearing House.

The conference discussed the following four issues:

• How the Multilateral Development Banks are adapting to the needs of the MICs
• Increasing competitiveness: Investment climate reforms and beyond
• Increasing competitiveness: Science and Technology
• Increasing competitiveness: Financing National and Regional Infrastructure

Expanding engagement with MICs in the next five years is one of six strategic themes outlined by President Robert B. Zoellick as the Bank moves forward. Ritva Reinikka, World Bank Poverty Reduction and Economic Management director in the Middle East and North Africa Region, told delegates that the World Bank is a development cooperative and that MICs are an indispensable element of its membership.

View of the delegates at the conference.

“The African MICs are the engines of growth in Africa,” he said. ‘They also provide important, home grown success lessons for the poor countries. In the near future, many new countries will be knocking at the MIC door and we need to be prepared to provide them the best possible services.”

Delegates said the MDBs need to provide services better, faster and cheaper.

"Progress has been made, but more needs to be done on response time,” said Neil Cole, chief director of the National Treasury in South Africa. “If the country sends a request for funding to Wall Street on Friday, it will receive an answer by Monday morning. The same request will take the MDBs 18 months to deliver on. This needs to change."

But most MICs still face serious development challenges and Africa’s MICs stand out on this front. Schafer noted on non-income development dimensions, Africa’s MICs, especially the small states, are often indistinguishable from much poorer IDA countries. In many of them income distribution is highly unequal, poverty is deep and widespread, and growth has not generated enough jobs.

“The HIV/AIDS pandemic in Southern Africa deserves a special mention. In some of Africa’s Middle Income Countries it is derailing development, or at risk of doing so -- the burden of disease, due to HIV/AIDS, is among the highest in the world.” Schafer said the World Bank Group can be a valuable partner in tackling these challenges. Following are the outcomes of the conference:

• general recognition that MICs are mainly looking for knowledge transfer and capacity building rather than funding
• the need for support, possibly with the use of concessional funds, for global public goods (GPGs), such as environment, climate change, health, and especially HIV/ AIDS
• though progress has been made, MDBs need to further reduce non-financial cost of borrowing
• MDBs need to broker a greater involvement, partnership and dialogue with the private sector, and they can play a greater role in mitigating the risks of private sector investment, especially in infrastructure
• the need to provide more assistance for regional integration programs with a stronger emphasis on policy reforms
• the need for greater partnerships: between the MDBs and MICs, between the MICs and private sectors, between the MICs and other actors (NGOs, etc.), as well as between the African MICs and other countries -- South-South cooperation, twining arrangements, staff exchange programs, etc.

Schafer said the World Bank will continue to change and adapt to their needs.

“We need to provide services better, faster, and cheaper. This is the key objective of MIC Action Plan, being developed by the Africa Regional Department at the World Bank.”

For operational and analytical purposes the World Bank’s main criterion for classifying economies is gross national income (GNI) per capita. Every economy is classified as low income, middle income (subdivided into lower middle and upper middle), or high income.

Low-income economies are those with a GNI per capita of $875 or less in 2005. Middle-income economies are those with a GNI per capita of more than $875 but less than $10,726. Lower middle-income and upper middle-income economies are separated at a GNI per capita of $3,465. High-income economies are those with a GNI per capita of $10,726 or more.

African Development Bank Vice President Joseph Eichenberger encouraged everyone at the conference to take into account the conclusions of the meeting as a way forward to improve partnerships between MDBs, MICs and other development partners. He also stressed the need for MDBs to adapt to the changing MIC environment and develop instruments to respond in a timely manner to the demands of MIC.

Ambassador Marwan Badr, supervisor of the cabinet of the Minister of International Cooperation in Egypt, noted that MICs in Africa and elsewhere have felt the lack of alignment between the existing policies and practices of the MDBs with the priority of the MICs.

“Time has come to stop talking about financing development and start translating this into concrete agreements and programs for a more appropriate development partnership approach.”

The conference was a follow-up to the one held in 2006 in Tunis aimed at promoting and better aligning services provided to MICs in Africa. As Schafer noted, the Cairo conference is not the end of such consultations.

Contributed by Mallory Saleson, World Bank South Africa