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Fishery development under the Assam Rural Infrastructure and Agricultural Services Project (India).
© Prabir Joardar/World Bank
South Asia has the opportunity to reduce poverty significantly in the coming decades. Gross domestic product in the region grew an average of 5.6 percent a year between 1995 and 2004 and is expected to grow 6.2 percent in 2005. With increased foreign reserves and stable macroeconomic policies, prospects for continued growth in the region remain strong. Bangladesh, Sri Lanka, and some states in South India have already made substantial progress in human development. But South Asia still faces enormous challenges. Of the region's 1.4 billion people, 500 million live on less than $1 a day–about half the world's poor. Human deprivation is severe, particularly for disadvantaged populations and children. The rate of illiteracy, at 44 percent, is the highest in the world, and the region accounts for one-third of all maternal deaths. Extraordinary events took place in South Asia in late 2004 and early 2005. Sri Lanka, southern India, and the Maldives were devastated by the tsunami (see “Responding to the Tsunami Disaster in the Indian Ocean”); Bangladesh was plagued by floods and a rise in political violence; and Nepal continues to face a volatile political situation. At the same time, elections in Afghanistan created conditions for improved governance and development, changes in elected governments in India and Sri Lanka resulted in a shift toward policies that benefit the rural poor, and Pakistan enjoyed significant growth for the fourth consecutive year. Dialogue among members of the South Asian Association for Regional Cooperation is providing new opportunities for economic integration–together with new challenges. Infrastructure needs to be developed within and between countries, and a private sector that can respond to new demands needs to be fostered. WORLD BANK ASSISTANCE The World Bank approved lending of nearly $5 billion to South Asia in fiscal 2005, $2.1 billion from IBRD and $2.9 billion from IDA. This assistance seeks to help meet the region's vast urban and rural infrastructure needs and address the deficiencies in its investment climate. Bank support fosters accelerated human development in the region by focusing on four cross-cutting issues: equity and inclusion, public accountability, HIV/AIDS, and regional integration. A strong component of the Bank's strategy is its analytic and advisory work (see “Analytic and Advisory Services” in “Summary of Fiscal Year Activities”). A recent report on fiscal decentralization to rural governments in India reviewed panchayat council finances and made recommendations for improving the system. The Bank discussed a poverty and vulnerability study on Afghanistan, completed a study on persistent malnutrition in India, and completed a gender assessment of Pakistan, which is under discussion with the government. (See www.worldbank.org/sar.) Partnerships with other development agencies are playing an increasing role in the Bank's assistance in the region. Support for human development is strong. Sectorwide approaches, as well as development policy loans, are becoming the norm for health and education operations in Bangladesh, India, Nepal, and Pakistan. A new Country Assistance Strategy for India was discussed by the Bank in fiscal 2005. The strategy underscores equity and inclusion by signaling a shift in emphasis toward lagging regions, such as Orissa, one of the country's poorest states. (See also the IFC and MIGA annual reports.) BUILDING THE CLIMATE FOR INVESTMENT The Bank completed several investment climate assessments in South Asia in fiscal 2005. These included the Bank's first postconflict assessment of Afghanistan, a third assessment of India, the first subnational assessment (for the Indian state of Orissa), and a rural and urban assessment of Sri Lanka. Together with IFC and MIGA, the Bank held workshops for stakeholders on this work throughout the region. The Bank approved $100 million to support the reform of tax administration and $300 million to support banking sector reforms in Pakistan. It also approved a $400 million loan to support India's rural roads program and a $620 million loan to improve part of the national highway system in the states of Uttar Pradesh and Bihar. It approved a $120 million loan to India to support the development of small and medium enterprises and a $53 million credit to Sri Lanka to develop information technology that will improve public service delivery, increase private sector competitiveness, and bridge the digital divide. FOSTERING PARTICIPATION IN DEVELOPMENT Central to the Bank's strategy in the region is the principle that South Asia's main resource is its people. Bank assistance is geared toward helping improve the standard of living across all tiers of society and removing obstacles that prevent people from participating in development and sharing in its benefits. During fiscal 2005 the Bank increased its support to rural development, education, and health, with an emphasis on improving the delivery of social services. In Afghanistan the Bank provided a $35 million credit to improve the quality of education and a $40 million grant to fund higher education. In Bangladesh it provided $100 million to improve access to and the quality of secondary education. In Nepal it approved a $50 million credit in support of the country's Education for All goals. In health the Bank provided $50 million to fund essential health care services for underserved populations in Nepal, $21.5 million to help Pakistan fight polio, $110 million to the Indian state of Tamil Nadu to support development of its health system, and $300 million to Bangladesh to improve the quality of and access to health care. In India the Bank approved a $125 million loan to support development in Orissa. The credit will help reduce fiscal stress and debt, freeing up resources for poverty reduction. The Bank approved a $200 million Development Support Credit to help Bangladesh pursue broad reforms to accelerate growth and reduce poverty. A similar operation was approved for Pakistan, making $300 million available to support that country's poverty reduction strategy. An area of ongoing concern is HIV/AIDS, which has infected about 5 million people in South Asia. The Bank has stepped up its assistance to national programs to prevent the spread of the disease among highly vulnerable population groups, youth, and the general population. It is also facilitating dialogue between countries to share lessons learned and effective intervention practices. | 
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