The World BankThe World Bank is based in Washington DC and is the oldest and largest multilateral financing institution. It was established in 1946 to foster economic reconstruction after World War II. The World Bank comprises the International Bank for Reconstruction and Development (IBRD) which makes loans at near-to-commercial terms and conditions and the International Development Association (IDA) established in 1960 which makes concessional loans to poorer developing countries. The World Bank Group also comprises the International Finance Corporation (IFC) whose role is to encourage private sector investment activities, along with the Multilateral Investment Guarantee Agency (MIGA). IFC and MIGA are legally and financially separated from the World Bank.
IBRD loans are only made to creditworthy borrowers. Loans have a maturity of 15-20 years with from three to five years of grace. They carry an interest rate reflecting resource mobilization on capital markets. IBRD offers three loan products: currency pool loans, LIBOR based single currency loans, and fixed rate single currency loans. IDA loans are provided on highly concessional terms to member countries with relative poverty, lack of creditworthiness and per capita GNP inferior to US$905 (as of 1995). IDA loans are interest-free loans repayable over 50 years including ten years of grace and carry an annual service charge of 0.5% of the undisbursed amount of each credit. The IFC provides loans and makes equity investments to finance projects, mobilizes large volumes of additional funding from other sources, and offers a broad range of advisory services and technical assistance to businesses and governments. Unlike most multilateral financing institutions, the IFC does not accept government guarantees for its financing and shares full project risks with promoters. IFC's investment is usually limited to 25% of the total cost to ensure participation of other private investors.
Priorities for the forestry sector
Forestry sector policy
In October 2002 the World Bank approved a new forest sector policy emphasizing the need to balance environmental protection with the needs of poor people and their resource management. The policy covers all forest types and stresses three interdependent pillars:
- protecting vital local and global environmental services and values provided by forests;
- harnessing the potential of forests to reduce poverty;
- integrating forests in sustainable economic development.
Project preparation process
At country level, World Bank staff regularly produce a Country Assistance Strategy (CAS) in close collaboration with the government and respective operational departments and divisions involved. The CAS specifies the development policies, targets, means and investment priorities for the bank and the country. An agricultural sector review and a forestry subsector review can be carried out when felt necessary. Within the framework of the CAS and taking into account recommendations of the sectoral reviews, project opportunities are identified by a task manager (a World Bank employee usually based in Washington DC) in close coordination with the respective resident mission in the country. The task manager drafts an executive project summary (EPS) which outlines the project, and is reviewed and endorsed by the responsible operational division (usually the agricultural and natural resources division of the responsible geographical department) or the country director (in case of the Africa department) in World Bank headquarters for inclusion in the project pipeline. Consistency between the CAS and the proposed EPS is given much consideration. If agreed, project formulation follows, covering the usual subsequent steps of the project cycle: identification, preparation, appraisal and negotiation.
Generally, the identification and preparation stages are not carried out by World Bank staff but are assigned to consultancy firms or agencies such as the FAO Investment Centre through the FAO-World Bank Cooperative Programme. The World Bank takes responsibility for project appraisal. The bank promotes the active participation of project beneficiaries in project formulation. National consultants, non-governmental organizations (NGOs) and the local population take part in the different steps of the project cycle. The time needed to fully formulate a project, from the identification stage up to the appraisal, is variable and may take up to two years. In IDA-eligible countries (i.e. poorer, less creditworthy countries), a forestry project generally costs about US$10 to US$20 million and lasts from five to seven years.Funding for project preparation.
In most cases project preparation costs are not charged to the borrowing country. The World Bank has several mechanisms to provide funds to assist governments to formulate investment projects and carry out preparatory studies:
- The bank may utilize existing trust funds and propose establishment of specific trust funds from its richer members to pay for preparatory and other technical assistance activities associated with a loan or credit. For example, Japan is funding a lot of preparation work in relation to forestry, natural resources and environment projects. When the bank has received agreement for the donor country it generally administers the resources and uses it to hire consultants.
- Following a request from the government, the bank may provide funds from its Project Preparation Facility (PPF) as an advance to be paid from the subsequent project loan if approved. This procedure is reserved to richer countries or to ensure maximum commitment of governments for project formulation and implementation.
Contact detailsHeadquarters address:
The World Bank
1818 H Street, N.W.
Washington, DC 20433
Tel: (1) 202 473-1000
Fax: (1) 202-477-6391
Web site: http://www.worldbank.org