Contacts:
World Bank - Washington: Erik Nora202 458 4735
Enora@worldbank.org
IFC - New Delhi: Minakshi Seth +91 11 4111 1000
mseth@ifc.org
MIGA – Washington: Angela M. Gentile 202 473-3509
agentile@worldbank.org WASHINGTON, DC, September 4, 2007 – The World Bank Group extended loans, credits, grants, equity investments, and guarantees totaling nearly US$6.9 billion to South Asia in fiscal year 2007. This is an increase of US$2.3 billion over the previous year, demonstrating the institution’s continuing role in fighting poverty as South Asian countries look for ways to tackle their social challenges even while most of their economies grew aggressively. The eight countries of South Asia are using World Bank Group support in more than 78 projects designed to overcome poverty and enhance growth – for example, by improving education and health services, promoting private sector development, building infrastructure, and strengthening governance and institutions. Contributing to this increase was: US$1.6 billion from the International Bank for Reconstruction and Development (IBRD), which provides financing, risk management products, and other financial services; US$4.03 billion from the International Development Association (IDA), which provides interest-free loans and grants; US$1.18 billion from the International Finance Corporation (IFC), which makes equity investments, and provides loans, guarantees and advisory services to private-sector business in developing countries; and US$76 million from the Multilateral Investment Guarantee Investment Agency (MIGA), the group’s political risk insurance agency. “South Asia is home to the largest number of people in the world living below one dollar a day, so the agenda for poverty alleviation in the region remains very large,” said Praful Patel, World Bank Vice President for South Asia. “The lending numbers from the IDA and IBRD in Fiscal Year 2007 are in line with the scaling up strategy we developed for the region three years ago.” Globally, the World Bank Group committed US US$34.3 billion in fiscal year 2007, up US$2.7 billion (7.8 percent) from fiscal year 2006. India was by far the largest borrower from IBRD and IDA, accounting for US$3.75 billion, or 15 percent of total lending from these two institutions. The World Bank’s program in India focuses on providing basic services such as access to clean water and education, improving infrastructure for rural areas, and employment. The increase also reflects US$700 million in lending to the health sector to India which was carried over from the previous year. Pakistan was the Bank’s seventh largest borrower with US$985 million in loans and credits. Nearly 60 percent of the World Bank Group’s commitments to South Asia came from IDA, and more than two-thirds of this lending financed projects in the areas of rural development and human development such as health, education, nutrition, and HIV/AIDS. “There’s a huge demand for IDA resources in South Asia and there’s a huge prospect for making a real impact on the ground to reduce poverty,” said Patel. “These types of programs would not be possible without IDA funding. IDA leverages government programs, enabling them to innovate and scale up.” Many of the Bank’s projects in the last fiscal year supported existing programs that are delivering results. For instance, in Afghanistan the Bank approved a US$120 million IDA grant for the Second National Solidarity Program, a community-led reconstruction and rural infrastructure initiative that has reached about 14 million rural people—74 percent of Afghanistan’s rural population—since its inception in 2002. Looking ahead, the Bank will focus on cross-cutting reforms such as governance and fiscal management, and continue addressing deficiencies in the region’s investment climate, such as weak infrastructure, red tape, and corruption. It will also deepen its engagement in states where poverty is increasingly concentrated, such as Orissa and Bihar in India and Sindh in Pakistan. IBRD lending in the past year focused on helping South Asia close its infrastructure gap with road and irrigation projects. Looking ahead, the Bank will broaden its commitment to infrastructure with the first hydro project in a generation up for consideration early in the fiscal year just started. IFC’s investment commitments in the South Asia region reached US$1.07 billion for 30 projects in FY07, and it mobilized an additional US$102 million through syndications. Its portfolio spreads across eight sectors in Bangladesh, Bhutan, India, Maldives, Nepal, and Sri Lanka. The financial and manufacturing sectors are the largest with infrastructure displaying the most rapid growth. Three quarters of the $2.6 billion of the disbursed and outstanding regional portfolio is in India, with Bangladesh at $147 million, the second largest. Private sector projects worth US$3 billion were supported as a result of IFC’s assistance to the Indian corporate sector. IFC doubled its committed portfolio in India in the infrastructure sector, to US$600 million. Investments ranged from natural gas to wind power and from port services to a fund for developing public-private projects in infrastructure sector. “IFC’s strategic priorities in South Asia include addressing constraints in infrastructure, health, and education,” said Paolo M. Martelli, IFC Regional Director. “IFC supports local mid-tier manufacturing companies in agribusiness, engineering, automotive components and other sectors and helps them become globally competitive. We work towards local financial market development through institution-building and promoting innovative financial products. Investment climate improvement programs and small and medium enterprise development are the primary areas of focus for our Advisory Services in the region.” Also active in the region is MIGA, which provided US$76.4 million in insurance guarantees in support of three investments and undertook two technical assistance projects in the region, including support for the new Bangladesh Investment Climate Facility. To date, MIGA has issued US$640 million in insurance guarantees for foreign direct investments in South Asia. In the past year, Afghanistan received a major cash injection with a MIGA-backed investment in a state-of-the-art telecommunications network. The US$85 million project represents roughly a third of total flows of foreign direct investment into the country from March 2006-2007 (the Afghan calendar year). This is the fourth investment guaranteed by MIGA in Afghanistan. “Foreign direct investment can have a strong, positive impact on rebuilding conflict-affected countries, bringing much-needed private capital and jobs, developing local skills, and stimulating spin-off industries,” said MIGA’s Executive Vice President, Yukiko Omura. “Investments supported by MIGA send an important signal to others that it is safe to do business with the appropriate mitigation of risks.” Equally important is the World Bank’s knowledge assistance to South Asia. The Bank delivered over 90 analytical and advisory activities, ranging from a detailed exposé of Afghanistan’s drug economy to an analysis of Sri Lanka’s plantation sector to the economic impact of HIV/AIDS in India. “The South Asia Region has been acknowledged as a leader in impact evaluations—to better understand what works and what doesn’t work, so governments and the Bank can decide what should be scaled up and what should be scaled down,” said Shanta Devarajan, World Bank Chief Economist for South Asia. This year also saw earlier Bank analytical work having policy impact. Estimates of teacher absenteeism in India, for example, have contributed to a shift in the focus of India’s major primary education program towards improved education quality. In response to the Bank’s Doing Business report, the Indian government set up a Committee of Secretaries in November 2006. This Committee has directed that action is taken to reduce the time and cost of doing business in the country. For more information about the World Bank’s work in South Asia, visit http://www.worldbank.org/sar For more information about IFC’s work in South Asia, visit http://www.ifc.org/southasia/ For more information about MIGA, visit www.miga.org | 
