-- Related Links -- Middle-Income Countries Board Announces Simplification and Reduction in Loan Costs for Middle-Income Countries. Financial Services for Members Strengthening the World Bank’s Engagement with IBRD Partner Countries (pdf) Development Committee communiqué (pdf)

At a Glance

• World Bank Group (WBG) President Robert B. Zoellick has identified improving the strategic, financial, and knowledge services offered to middle-income countries (MICs) as one of six strategic themes for the WBG.
• The global financial crisis has added a new dimension to the MIC agenda, compelling the Bank to rethink its relationship with its MIC clients, and respond to their immediate and pressing needs.
• The Bank is drawing on MIC capacity to reduce the cost of doing business, and develop innovative financial instruments and new partnership approaches.
• The Bank is undertaking a series of initiatives to work faster, be more responsive to client needs, and become more externally—rather than internally—focused
• The Bank is creating a dynamic organization, bringing together the best of its public and private sector arms (International Bank for Reconstruction and Development (IBRD), IFC, and MIGA) to solve development problems at the regional, national, and sub-national levels,

Overview

At its Annual Meetings in September 2006, the Bank committed to making further improvements to the strategic, financial, and analytic and advisory services the IBRD offers middle-income countries (MICs).[1]  WBG President Zoellick gave the strategy new impetus, committing the WBG to providing middle-income countries with a diversified menu of “development solutions” as one of his six strategic themes for the institution. The global financial crisis has added a new dimension to the MIC agenda, compelling the Bank to rethink its relationship with its MIC clients, and respond to their immediate and pressing needs.

The Bank’s MIC Business Model and Response to the Financial Crisis

Prior to the onset of the financial crisis, progress had accelerated in MICs. The WBG’s efforts to make financial services more attractive were starting to show results, but the onset of the financial crisis is disrupting the MICs’ previously strong growth performance, and is slowing their efforts to reduce poverty. MICs are therefore facing difficult credit market conditions—limited access to capital markets, shorter-maturity access, and higher interest rate spreads; and the growing worldwide downturn has led to collapsing growth, escalating unemployment, and declining trade, commodity prices, tourism, remittances, and investment. Therefore the Bank’s activities in MICs have shifted toward crisis response and precautionary elements focused on capital market access, social safety nets, and sustaining infrastructure expenditures. Between October 2008 and September 2009, the Bank provided US$40 billion in financial support to IBRD borrowers, in addition to ramping up its analytical work in crisis-relevant areas. Throughout the crisis, and beyond, the WBG is continuing to adjust its business model to be more responsive, flexible, and innovative.  WBG is also working with the MICs as responsible stakeholders who will play an increasing role in a range of global issues from climate change and energy security, to trade and food production.

Drawing on MIC Capacity.  Work in MICs is an engine for change, and the Bank is drawing on MIC capacity to reduce the cost of doing business, and develop innovative financial instruments and new partnership approaches. The Bank is strengthening its knowledge and learning agenda in order to ensure that it continues to be a center of knowledge and technical excellence on the issues and challenges that MICs are facing in the 21^st century. Global Expert Teams (GETs) have been formed in 10 areas, many of which are relevant to our MIC clients, providing them with up-to-date knowledge and expertise. Last year the Bank also launched a new Trust Fund for South-South knowledge sharing—the South-South Knowledge Exchange Facility—and the WBG is continuing to expand its role as a catalyst and facilitator of South-South cooperation on innovative programs by formalizing cooperation in MICs, across regions and networks, to engage these clients on global knowledge and thematic issues, and develop new partnership methods. The Bank is also working to increase the voice of MICs in GPGs, beginning with climate change. The global consultation process of the Strategic Framework on Climate Change and Development is underway; specific climate change mitigation interventions will be identified upon completion of the India Carbon Growth Strategy; the Abu Dhabi dialogue in water initiatives is being expanded; and the Amazon Partnership Framework has been developed with Brazil.

Becoming More Agile and Demonstrating Best Practice.  The Bank is working to become faster, more responsive to client needs, and more externally—rather than internally—focused. Initiatives underway include the streamlining of investment lending procedures, the expansion of the use of country systems, the development of new instruments, and the modernization of existing ones. The Bank has introduced a new credit allocation model to allocate capital more efficiently across borrowers, lowered borrowing costs to IBRD clients, and extended and equalized loan maturities for all IBRD clients. The Bank is also exploring options to expand country systems pilots for procurement and safeguards, increased additional financing, and launching investment lending reform. In expanding the choice of services it offers, the Bank is also continuing work to expand lending to sub-nationals and state-owned enterprises without sovereign guarantee. Furthermore, the Board has approved an enhanced DPL Deferred Draw Down instrument, and the Bank has introduced other market-based financing instruments for catastrophic risk, including contingent financing to provide immediate liquidity in event of a catastrophe (CAT-DDO) and weather hedges for IBRD/International Development Association (IDA). The Bank has also revised OP 8.40, operationalizing the Fee-based Services policy adopted in FY 2008. Finally, the Bank is continuing to produce higher-quality, more focused, and flexible Country Partnership Strategies, reflecting a flexible portfolio of expertise (best practices) and financing. Recent CPSs endorsed by the Board for Brazil, Chile, Colombia, Mexico, and Panama are narrowly focused on specific government requests. The financial envelopes are flexible, partnership activities are to be reviewed and decided annually rather than established ex ante for the entire CPS period, and partnership instruments and services include fee-based services and the use of sophisticated TRE derivatives, local country finance, and advisory services.

Making the Most of Bank Group Cooperation.  The Bank is creating a dynamic organization, bringing together the best of its public and private sector arms (IBRD, IFC, and MIGA) to solve development problems at the regional, national, and sub-national levels. It is developing a more pragmatic approach to cooperation across the WBG, and as a result of significant collaboration across IBRD, IFC and MIGA, has been able to broaden the geographic pipeline of sub-national business in Russia, Colombia, Morocco, Peru, and Philippines. In FY09, the Bank completed a Joint Climate Change Strategy, introducing regular formal planning and coordination at the strategy level, and developing a joint sector strategy. It has also launched an IDA-IFC pilot joint CAS program, which will include MICs, and it is working with IFC to enhance the compatibility of Bank safeguard policies and IFC performance standards, particularly in joint projects. The Bank has collaborated very closely with IFC during the financial crisis, coordinating on many IFC initiatives and the Bank’s INFRA facility. Furthermore, the Bank is continuing efforts to integrate knowledge services activities across the WBG.

Progress Status and Next Steps.  Given the WBG’s long-standing focus on middle-income countries, it is expected that there will be continued progress in expanding the range and flexibility of financial services it offers as the effects of the global financial crisis begin to dissipate. Further synergies are being developed by expanding links between the Bank's work in MICs at the country level, and though the work on global public goods, particularly climate change. A sharp focus on knowledge and learning, as well as improving the understanding and broadening the use of the financial and risk management products and services available, will further increase the WBG's contribution to development in middle-income countries.

Media Contact:

Geetanjali Chopra, (202) 473-0243, Gchopra@worldbank.org 

Updated September 2009