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Wednesday, May 25, 2011

Swaziland needs investors, reforms: World Bank

Swaziland might be forced to devalue its currency unless the crisis-hit kingdom urgently cut government spending, a World Bank economist said yesterday.
“It is getting to the point of reckoning – when Swaziland will no longer be able to sustain its deficit,” World Bank economist Jean van Houtte warned ahead of a meeting today organised by the bank.
“We have said if you need a little time to get your house in order you can re-peg at a different level.” Swaziland’s currency, the lilangeni, is pegged at parity with the rand.
But pressure to devalue is growing as the country faces a financial crisis brought on by a 60 percent drop last year in revenues from the Southern African Customs Union, the government’s main source of income.
Finance Minister Majozi Sithole warned on state radio last week that it would be “difficult” for the government to pay May salaries, adding: “I do not even want to mention June” – a bombshell he later retracted, promising the government would find a way.
The International Monetary Fund (IMF) said Swaziland’s central bank had to issue an emergency loan for the government to pay salaries in February.
The IMF says Swaziland has one of the world’s highest wage bills – almost half of government spending – and a deficit that stood at 13 percent of gross domestic product at the end of March, nearly double that of the previous year.
The key issues for Swaziland to focus on are securing broad-based economic growth, attracting foreign direct investment, and improving the investment climate by implementing business-friendly reforms,John Panzer, World Bank manager on poverty alleviation in Africa.
A World Bank team have been in Swaziland this week to try to generate ideas on how to kick start the country's economy.
The Bank has emphasised the tiny kingdom's advantages for investors, including a high literacy rate, lower wages than in neighbouring South Africa and relatively good roads and infrastructure.
"This is a time of crisis and it is easy to lose sight of the many opportunities that are within the reach of Swaziland," said Ruth Kagia, World Bank country director for Swaziland.
Swaziland is seeking loans, but the International Monetary Fund says government needs to implement tighter fiscal reforms before it is eligible.
The governor of Swaziland's Central Bank on Tuesday denied the country's currency was in danger of losing its peg to the rand because of the current economic crisis.
The World Bank said it was not its role to advise on exchange rate policy, which is the purview of the International Monetary Fund.

World Bank sets $6 bln in aid for Egypt, Tunisia

U.S. — The World Bank said Tuesday it was willing to provide up to $6 billion to support political and economic change in Egypt and Tunisia and to help them weather declines in tourism and other industries.
The money is intended to seed a broader package of international support for the two countries’ postrevolution governments.
The World Bank wanted “to help the people there and seize the opportunities of historic change to modernize their economies and build more open and inclusive societies,” said the agency’s president, Robert B. Zoellick.
Both Egypt and Tunisia are short on cash after their political upheavals, and the problems are unlikely to subside anytime soon. Tourists have yet to return in significant numbers to either country.
Ahead of the G-8 meetings this week in France, World Bank president Robert Zoellick said the funds would be used for stablilizing and modernizing the two countries' economies, long run down under rigid undemocratic regimes.
"The people of the Middle East and North Africa want dignity, respect, jobs and the chance for a better life," said Zoellick.
"Fulfilling the promise of the Arab Spring will mean real reforms that deepen inclusion, promote participation and expand opportunity."
Leaders at the Group of Eight meeting in Deauville, France on Thursday and Friday are expected to muster new financial support for Middle East and North African countries facing political and economic upheaval.
The Bank said it would provide up to $4.5 billion to Cairo over the next two years. It will include $1 billion tied to reforms improving governance and openness, and another $1 billion after that, "dependent on progress.
Gulf support
Qatar's planned investments in Egypt are expected to be consummated during a visit to Egypt by Qatar's emir this Saturday.
"I believe these projects, when implemented, will surpass $10bn and they will be productive products in Egypt," said the Qatari ambassador, Saleh al-Buainein.
The emirate may also buy up Egyptian government bonds in order to help fund its deficit.
It comes after the US and Saudi Arabia offered the new Egyptian government financial support.
The US said it would cancel $1bn in debts and provide a further $1bn in loan guarantees to support infrastructure finance.
Meanwhile, Saudi Arabia has offered a $4bn aid package.

Tuesday, May 24, 2011

World Bank Africa

World Bank Manager Macroeconomics for Southern Africa John Panzer said only Swazis must take a decision on the current financial crisis and international partners must advise where possible.
He said the decision and stand of the population was what mattered.
Panzer was speaking during a seminar hosted by the Economic Recovery Strategy and the World Bank at Mountain Inn yesterday. It was themed ‘Restoring Swaziland Pathway to Growth: Stronger Push on Trade and Investment-friendly Reforms Needed’.
Minister of Economic Planning and Development Prince Hlangusemphi said the solution to the country’s economic crisis must be found by locals only with the assistance of international and regional partners. He said such partners must assist and not impose.
“We cannot work on the situation if people impose. Recommendations and outcomes of this meeting will be implemented accordingly. One of the missions we have embarked on as a country is to work on the current economic situation,” he said before a panel of World Bank and International Monetary Fund (IMF) representatives.
He said considering the country’s ailing economy, there would be need for openness to get more solutions so as to move forward. The minister said the country must embrace the World Bank’s assistance.

Swaziland boasts of a supportive business environment as people have access to finance which brings it at par with South Africa, says World Bank Senior Communications Officer Sarwat Hussain.
In a press release issued on a seminar held yesterday at the Mountain Inn organised by the bank and Economic Recovery Strategy committee, World Bank Senior Communications Officer Sarwat Hussain noted that other backbone business services were generally of a high standard in the country.
He said the primary purpose of the meeting was to present, share and discuss early results of the latest analytical work conducted by the World Bank with a view to informing policy-making.

Hussain said a policy note covering main topics of the seminar would be finalised based on inputs received and presented to government.
“At the seminar, the discussion centred around the opportunities that exist for Swaziland to build on its latent sources of comparative advantage, making it attractive as a investment destination of choice. These include education, labour costs and relations, sound infrastructure as well as supportive business environment,” he said.
He said at the seminar it was noted that Swaziland was part of a rich market in the Southern African Customs Union (SACU) and had a degree of economic sophistication as well as diversification that could connect to the South African economy.
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Monday, May 23, 2011

Europe’s push to head IMF riles other nations

France — European officials are rallying around Christine Lagarde, the French finance minister, as their choice to succeed Dominique Strauss-Kahn as managing director of the International Monetary Fund, despite fresh warnings that handing the job to another European could undermine the fund’s legitimacy.

The British chancellor of the Exchequer, George Osborne, backed Lagarde over Gordon Brown, the former prime minister, on Saturday, effectively ending Brown’s bid for the post.

Strauss-Kahn resigned last week to fight charges that he sexually assaulted a housekeeper in a New York hotel May 14.

Osborne said he thought it would be “a very good thing to see the first female managing director of the IMF in its 60-year history.’’ Osborne’s announcement followed endorsements by Germany, Italy, and other European countries.

But other countries are taking a dark view of the aggressive European push.

Australia and South Africa issued an unusual joint statement yesterday, criticizing a longstanding arrangement between Europe and the United States in which a European typically heads the IMF and an American leads the World Bank. A European has held the top IMF post for more than 40 years.

In a sense, the Fund followed the Bank – particularly with the Robert S. McNamara [1968-81] presidency. McNamara, in expiation for his perceived Vietnam War role, shanghaied it from its original financing of long-term infrastructure into “soft” balance of payments lending [a former Fund monopoly] and ephemeral “social” goals. Both bureaucracies, as used to be said of 19th century Hawaiian missionaries, increasingly came to Washington to do good and did well — an overpaid, tax free, highly ideological, self-annointed “priesthood.”

In any case, in a new world of megabillion investment lending through all sorts of new combines — at least before the 1007-8 meltdown — the Bank grew increasingly irrelevant. That was not true of the Fund — as the Euro crisis has proved. European politicians, initially rebuffed Fund participation.

They feared, despite Washington’s own problems, it would bring America directly into their family fracas. And they suspected Mr. Strauss-Kahn would try to mitigate North European pressure on their Southern European profligates to straighten up and fly right. In the end, with the hodgepodge of band-aid solutions requiring constant renegotiation for all the myriad European political reasons, Mr. Strauss-Kahn would play a major role. And he publicly did call for more slack when Greek politicians were endangered by austerity many in northern Europe already thought too little and too late.

Selecting a new IMF director is likely to be more than usually messy in always sordid multilateral organization leadership selection. As though the world financial policymakers needed one more problem, l’affaire Strauss-Kahn has injected new indecision into the long goodbye to the European Union’s common currency, postponing getting on with the closely-related but perhaps more-threatening problem of massive East Asian currency imbalances.

World Bank Leadership

President of the Bank, currently Robert B. Zoellick, is responsible for chairing the meetings of the Boards of Directors and for overall management of the Bank. Traditionally, the Bank President has always been a US citizen nominated by the United States, the largest shareholder in the bank. The nominee is subject to confirmation by the Board of Governors, to serve for a five-year, renewable term.
The Executive Directors, representing the Bank's member countries, make up the Board of Directors, usually meeting twice a week to oversee activities such as the approval of loans and guarantees, new policies, the administrative budget, country assistance strategies and borrowing and financing decisions.
The Vice Presidents of the Bank are its principal managers, in charge of regions, sectors, networks and functions. There are 24 Vice-Presidents, three Senior Vice Presidents and two Executive Vice Presidents.


World Bank is an international financial institution that provides loans to developing countries for capital programmes. The World Bank's official goal is the reduction of poverty. By law,which? all of its decisions must be guided by a commitment to promote foreign investment, international trade and facilitate capital investment.
The World Bank differs from the World Bank Group, in that the World Bank comprises only two institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), whereas the latter incorporates these two in addition to three more:International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA), and International Centre for Settlement of Investment Disputes (ICSID).

Clean Technology Fund management

The World Bank has been assigned temporary management responsibility of the Clean Technology Fund (CTF), focused on making renewable energy cost-competitive with coal-fired power as quickly as possible, but this may not continue after UN's Copenhagen climate change conference in December, 2009, because of the Bank's continued investment in coal-fired power plants.

Clean Air Initiative (CAI) is a World Bank initiative to advance innovative ways to improve air quality in cities through partnerships in selected regions of the world by sharing knowledge and experiences. It includes electric vehicles.
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World bank Poverty reduction strategies

For the poorest developing countries in the world, the bank's assistance plans are based on poverty reduction strategies; by combining a cross-section of local groups with an extensive analysis of the country's financial and economic situation the World Bank develops a strategy pertaining uniquely to the country in question. The government then identifies the country's priorities and targets for the reduction of poverty, and the World Bank aligns its aid efforts correspondingly.
Forty-five countries pledged US$25.1 billion in "aid for the world's poorest countries", aid that goes to the World Bank International Development Association (IDA) which distributes the loans to eighty poorer countries. While wealthier nations sometimes fund their own aid projects, including those for diseases, and although IDA is the recipient of criticism, Robert B. Zoellick, the president of the World Bank, said when the loans were announced on December 15, 2007, that IDA money "is the core funding that the poorest developing countries rely on.

World Bank criticism

World Bank has long been criticized by non-governmental organizations, such as the indigenous rights group Survival International, and academics, including its former Chief Economist Joseph Stiglitz who is equally critical of the International Monetary Fund, the US Treasury Department, US and other developed country trade negotiators. Critics argue that the so-called free market reform policies which the Bank advocates are often harmful to economic development if implemented badly, too quickly ("shock therapy"), in the wrong sequence or in weak, uncompetitive economies.
In Masters of Illusion: The World Bank and the Poverty of Nations (1996), Catherine Caufield argued that the assumptions and structure of the World Bank harms southern nations. Caufield criticized its formulaic recipes of "development". To the World Bank, different nations and regions are indistinguishable and ready to receive the "uniform remedy of development". She argued that to attain even modest success, Western practices are adopted and traditional economic structures and values abandoned. A second assumption is that poor countries cannot modernize without money and advice from abroad.
A number of intellectuals in developing countries have argued that the World Bank is deeply implicated in contemporary modes of donor and NGO imperialism, and that its intellectual contributions function to blame the poor for their condition.
One of the strongest criticisms of the World Bank has been the way in which it is governed. While the World Bank represents 186 countries, it is run by a small number of economically powerful countries. These countries choose the leadership and senior management of the World Bank, and so their interests dominate the bank.
The World Bank has dual roles that are contradictory: that of a political organization and that of a practical organization. As a political organization, the World Bank must meet the demands of donor and borrowing governments, private capital markets, and other international organizations. As an action-oriented organization, it must be neutral, specializing in development aid, technical assistance, and loans. The World Bank's obligations to donor countries and private capital markets have caused it to adopt policies which dictate that poverty is best alleviated by the implementation of "market" policies.
In the 1990s, the World Bank and the IMF forged the Washington Consensus, policies which included deregulation and liberalization of markets, privatization and the downscaling of government. Though the Washington Consensus was conceived as a policy that would best promote development, it was criticized for ignoring equity, employment and how reforms like privatization were carried out. Many now agree that the Washington Consensus placed too much emphasis on the growth of GDP, and not enough on the permanence of growth or on whether growth contributed to better living standards.
Some analysis shows that the World Bank has increased poverty and been detrimental to the environment, public health and cultural diversity. Some critics also claim that the World Bank has consistently pushed a neoliberal agenda, imposing policies on developing countries which have been damaging, destructive and anti-developmental.
It has also been suggested that the World Bank is an instrument for the promotion of US or Western interests in certain regions of the world. South American nations have even established the Bank of the South in order to reduce US influence in the region. Criticism of the bank, that the President is always a citizen of the United States, nominated by the President of the United States (though subject to the "approval" of the other member countries). There have been accusations that the decision-making structure is undemocratic as the US has a veto on some constitutional decisions with just over 16% of the shares in the bank; Decisions can only be passed with votes from countries whose shares total more than 85% of the bank's shares. A further criticism concerns internal management and the manner in which the World Bank is said to lack accountability.
Criticism of the World Bank often takes the form of protesting as seen in recent events such as the World Bank Oslo 2002 Protests, the October Rebellion, and the Battle of Seattle. Such demonstrations have occurred all over the world, even amongst the Brazilian Kayapo people.
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World Bank's Structural adjustment policies

Effect of structural adjustment policies on poor countries has been one of the most significant criticisms of the World Bank. The 1979 energy crisis plunged many countries into economic crises. The World Bank responded with structural adjustment loans which distributed aid to struggling countries while enforcing policy changes in order to reduce inflation and fiscal imbalance. Some of these policies included encouraging production, investment and labour-intensive manufacturing, changing real exchange rates and altering the distribution of government resources. Structural adjustment policies were most effective in countries with an institutional framework that allowed these policies to be implemented easily. For some countries, particularly in Sub-Saharan Africa, economic growth regressed and inflation worsened. The alleviation of poverty was not a goal of structural adjustment loans, and the circumstances of the poor often worsened, due to a reduction in social spending and an increase in the price of food, as subsidies were lifted.
By the late 1980s, international organizations began to admit that structural adjustment policies were worsening life for the world's poor. The World Bank changed structural adjustment loans, allowing for social spending to be maintained, and encouraging a slower change to policies such as transfer of subsidies and price rises. In 1999, the World Bank and the IMF introduced the Poverty Reduction Strategy Paper approach to replace structural adjustment loans. The Poverty Reduction Strategy Paper approach has been interpreted as an extension of structural adjustment policies as it continues to reinforce and legitimize global inequities. Neither approach has addressed the inherent flaws within the global economy that contribute to economic and social inequities within developing countries. By reinforcing the relationship between lending and client states, many believe that the World Bank has usurped indebted countries' power to determine their own economic policy.
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World Bank and United Nations

Based on an agreement between the United Nations and the World Bank in 1981, Development Business became the official source for World Bank Procurement Notices, Contract Awards, and Project Approvals. In 1998, the agreement was re-negotiated, and included in this agreement was a joint venture to create an electronic version of the publication via the World Wide Web. Today, Development Business is the primary publication for all major multilateral development banks, United Nations agencies, and several national governments, many of whom have made the publication of their tenders and contracts in Development Business a mandatory requirement. Currently, the subscription to "online version only" is not free, but costs US$ 550

World Bank's environment strategy

World Bank ongoing work to develop a strategy on climate change and environmental threats has been criticized for (i) lacking of a proper overall vision and purpose, (ii) having a limited focus on its own role in global and regional governance, and (iii) having limited recognition of specific regional issues, e.g. issues of rights to food and land, and sustainable land use. Critics have also commented that only 1% of the World Bank's lending goes to the environmental sector, narrowly defined.
Environmentalists are urging the Bank to stop worldwide support for the development of coal plants and other large emitters of greenhouse gas and operations that are proven to pollute or damage the environment. For instance, protesters in South Africa and abroad have criticized the 2010 decision of the World Bank's approval for a $3.75 billion loan to build the world's 4th largest coal-fired power plant in South Africa. The plant will greatly increase the demand for coal mining and corresponding harmful environmental effects of coal.