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© World Bank
The economy of the East Asia and Pacific region is growing rapidly, and income poverty is falling. The region grew at 8.5 percent in 2004 and accounted for a third of the growth in world trade. The number of East Asians living on less than $2 a day declined by about 250 million between 1999 and 2004—at a time when the population grew by 80 million. Countries in the region are on track to meet the Millennium Development Goal for poverty reduction, although there is wide variation in the pace of progress across and within countries. China continues to exert strong economic influence, through trade and cross-border production networks. Its growth has helped strengthen economic integration within East Asia and has increased the region's integration into the global economy. Many countries are considering how to maximize the opportunity China presents while managing the challenges. High prices for natural resources, especially oil, likely will slow growth in the year ahead. Several other risks also threaten to reduce the rate of growth. In some countries, corruption is impeding investment—and imposing a heavy burden on poor and vulnerable people. If rapid growth is to continue, more attention needs to be paid to preserving the environment, managing natural resources, providing more and better infrastructure, improving capital markets, and continuing to strengthen institutions responsible for managing the economy. As the devastating earthquake and tsunami in December 2004 demonstrated, the region is also vulnerable to sudden natural or external shocks, adding to the challenge of maintaining stability and growth. WORLD BANK ASSISTANCE The Bank's overall strategy for the region aims to support broad-based economic growth, promote higher levels of trade and integration within the region and with the global economy, enhance the environment for governance at both the national and subnational levels, increase social stability, and achieve the Millennium Development Goals. To help reach those goals, the Bank approved $2.9 billion for the region in fiscal 2005, $1.1 billion in IDA grants and credits and $1.8 billion in IBRD loans. Carbon trust fund contracts in the amount of $33.1 million were signed this year, bringing the regional total committed for reducing global greenhouse gas emissions to $44.9 million. To support the new Indonesian government's efforts to better manage public finances and fight corruption, the Bank approved a $300 million development policy loan and a $60 million financial management reform program just months after the new administration took office. The Bank also approved new assistance strategies for Cambodia, the Lao People's Democratic Republic, the Pacific Island states, and the Philippines. Following the December 26, 2004, tsunami and earthquake, the Bank established a new multidonor trust fund at the Indonesian government's request to help coordinate some $500 million in grant funding contributed for reconstruction. Also, $20 million from previous Bank financing was redirected toward the tsunami reconstruction effort, and a $25 million grant was made. An additional $19 million in IDA credits was approved for this purpose in fiscal 2005. To tailor its approach to individual countries, the Bank is increasingly working in partnership with other organizations (see “Connecting East Asia: Addressing the Infrastructure Challenge”). This fiscal year it began preparing a joint assistance strategy for Cambodia with the United Kingdom's Department for International Development and the Asian Development Bank. In Thailand the Bank entered into a partnership with the Thai government, the Japan Bank for International Cooperation, the United States–Asia Environment Partnership, and the United Nations Development Programme to strengthen environmental management. Fiscal 2005 also saw the publication of the first joint study on infrastructure by the Asian Development Bank, the Japan Bank for International Cooperation, and the World Bank. (See also the IFC and MIGA annual reports.) BUILDING THE CLIMATE FOR INVESTMENT The Bank completed four investment climate assessments in the region in fiscal 2005, and another four are under way. In China city leaders are focusing on problems identified in the 23-city investment climate survey. The Harbin city government is working to reduce, from 400, the number of court days needed to resolve commercial disputes. With Bank support, the Indonesian government is proposing to replace its system of licensing and approval of investments with one of registration and investment promotion. Efforts are focusing on streamlining procedures required to start a business—a process that currently takes 151 days. The Bank is helping Cambodia develop a strategy for economic growth by promoting private sector development following the end of its preferential quotas on garments. In China the Bank is supporting efforts to improve cross-border links with Mongolia and the Russian Federation and to modernize the banking system. In Vietnam the Bank is helping to strengthen the customs system and modernize the banking system. In the Pacific Island states and the Philippines, measures to strengthen remittance and labor migration systems are being developed with the Bank's support and advice. Governance continues to be a major emphasis for the Bank in East Asia. In fiscal 2005 the Bank conducted a regional study on decentralization that focuses on ways frontline officials can make local governments more effective. The findings were published by the Bank in East Asia Decentralizes: Making Local Government Work. In selected countries the Bank sought ways to identify and minimize fraud and corruption at various stages of the Bank project cycle. It is supporting judicial reform at the local level in Indonesia and systemic reform in the Philippines. Governance is also a cornerstone of the Country Assistance Strategies for Cambodia and the Philippines. FOSTERING PARTICIPATION IN DEVELOPMENT Community development initiatives are at the core of the Bank's work to increase social stability in the region. In Aceh, Indonesia, where tsunami reconstruction work is being carried out alongside efforts to bring peace and stability to the region, the Kecamatan Development Program is bringing communities together to plan for the future with the help of trained local facilitators. Fighting communicable diseases, increasing access to education, and improving the environment are the focus of Bank efforts to help countries in the region achieve the Millennium Development Goals. In Papua New Guinea and Vietnam, the Bank is working to arrest the spread of HIV/AIDS. In the Philippines it is helping the government improve access to clean water and sanitation with an IFC investment for drinking water and a World Bank project for wastewater treatment in Manila. As countries comply with the Kyoto Protocol, the demand for carbon finance is growing, particularly in China but also in the Philippines, Vietnam, and other countries in the region. In China the Bank and the Global Environment Facility are cofinancing a Renewable Energy Scale-Up Program, and the Bank is financing the China Heat Reform and Building Energy Efficiency Project, which will improve indoor and outdoor air quality. | 
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