2011 ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES. In partnership with:

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1 2011 ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES In partnership with:

2 FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

3 FIAS 2011 ANNUAL REVIEW Through the FIAS program, the World Bank Group and donor partners assist developing countries and transition economies in reforming their environments at economy-wide as well as industry levels. FIAS projects aim to deliver tangible results leading to measurable improvements in the investment climates of client countries. The FIAS program is managed by the Investment Climate Department under the joint oversight of the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the World Bank (IBRD). For more information, visit

4 2011 The World Bank Group 1818 H Street NW Washington DC Telephone: Internet: All rights reserved. This volume is a product of the staff of the World Bank Group. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank Group does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: ; fax: ; Internet: All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: ; Cover photo credit: Bessarabsky fresh market, Kiev, Ukraine; May 2011 (World Bank Group)

5 CONTENTS FIAS Results at a Glance 2 Message from the Director 6 FY11 Results and Reforms 8 Delivering Results, Reforms, and Impact: FY08 11 Strategy Cycle Highlights 16 FY11 Operational Highlights 20 Knowledge Management, Learning, and Communications 32 Financial Results and Resource Use 36 Annexes Annex 1: Reforms and Results Supported by FIAS in FY11 44 Annex 2: Other Reforms and Results Supported by FIAS in FY11 64 Annex 3: Active and Closed Projects 76 Annex 4: Abbreviations 79

6 FIAS RESULTS AT A GLANCE In FY11, our clients in 31 countries implemented 128 investment climate results and 42 reforms. Forty-five percent of the FY11 results and 55 percent of the reforms were achieved in the world s poorest countries, where 62 percent of FIAS expenditures for client-facing project implementation were made. FIAS RESULTS BY REGION Percent of FIAS FY11 Results FIAS REFORMS BY REGION Percent of FIAS FY11 Reforms 1% East Asia and Pacific [1] 30% Europe and Central Asia [38] 22% Latin America and the Caribbean [28] 8% Middle East and North Africa [11] 39% Sub-Saharan Africa [50] 100% = 128 results 26% Europe and Central Asia [11] 17% Latin America and the Caribbean [7] 12% Middle East and North Africa [5] 45% Sub-Saharan Africa [19] 100% = 42 reforms A majority of results (39 percent) occurred in Sub-Saharan Africa (50), followed by Europe and Central Asia (38), Latin America and the Caribbean (28), Middle East and North Africa (11), and East Asia and Pacific (1). This year FIAS contributed to 42 reforms, of which 36 were validated by Doing Business and 6 were in areas not covered by the Doing Business report. (See Annex 1 for a detailed breakdown of reforms by country.) FIAS supported 7 of the 12 countries recognized in Doing Business 2012 as the most improved economies in the ease of doing across three or more areas of regulation (Morocco, Moldova, FYR Macedonia, Sierra Leone, Burundi, Armenia, and Colombia). FY11 PROJECT IMPLEMENTATION EXPENDITURES Breakdown of FIAS FY11 Project Implementation Expenditures CLIENT-FACING: 74% OF TOTAL East Asia and Pacific [12% of Client-Facing] Europe and Central Asia [19% of Client-Facing] Latin America and the Caribbean [6% of Client-Facing] Middle East and North Africa [5% of Client-Facing] South Asia [1% of Client-Facing] Sub-Saharan Africa [51% of Client-Facing] World [6% of Client-Facing] NON-CLIENT-FACING: 26% OF TOTAL Knowledge Management/Product Development [100% of Non-Client-Facing] Focus on Priority Client Groups: IDA 62% Sub-Saharan Africa 51% Fragile and Conflict-Affected States 28% As a share of client-facing project expenditures, base $14.2 million 100% = $19,057,471 Sub-Saharan Africa accounted for the largest share of project expenditures (51 percent of client-facing project expenditures) ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

7 RESULTS BY REGION AND COUNTRY IN FY11 Region Country Access to finance Business licensing and regulatory governance Business taxation East Asia and Pacific China 1 1 EAST ASIA AND PACIFIC TOTAL 1 1 Europe and Central Asia Hungary Closing a Dealing with construction permits Enforcing contracts Investment policy and promotion Protecting investors Public private dialogue Registering property Special economic zones Kazakhstan Macedonia, FYR Moldova* Montenegro Romania 1 1 Serbia 4 4 Tajikistan*+ 3 3 EUROPE AND CENTRAL ASIA TOTAL Latin America and the Caribbean Brazil Colombia Mexico Paraguay 2 2 Peru LATIN AMERICA AND THE CARIBBEAN TOTAL Middle East and North Africa Jordan 1 1 Morocco Syrian Arab Republic 1 1 United Arab Emirates 3 3 Yemen, Republic of*+ 1 1 MIDDLE EAST AND NORTH AFRICA TOTAL Sub-Saharan Africa Africa Region (OHADA)* Benin* Burkina Faso* 3 3 Burundi* Central African Republic* Côte d'ivoire*+ 1 1 Liberia* Madagascar* 2 2 Mali* Rwanda* Senegal* 1 1 Sierra Leone* SUB-SAHARAN AFRICA TOTAL TOTAL RESULTS * IDA Country + Fragile and Conflict-Affected Country Starting a Trade logistics TOTAL RESULTS FIAS RESULTS AT A GLANCE 3

8 REFORMS BY REGION AND COUNTRY IN FY11 DOING BUSINESS TOPICS NON-DOING BUSINESS TOPICS Access to finance Business taxation Construction permits Enforcing contracts Protecting investors Registering property Region Country Europe and Hungary Central Asia Kazakhstan Macedonia, FYR Moldova* Montenegro Romania Serbia Tajikistan* EUROPE AND CENTRAL ASIA TOTAL Latin America and Colombia the Caribbean Mexico Paraguay Peru LATIN AMERICA AND THE CARIBBEAN TOTAL Middle East and Jordan North Africa Morocco Syrian Arab Republic United Arab Emirates Yemen, Republic of* MIDDLE EAST AND NORTH AFRICA TOTAL Sub-Saharan Africa Africa Region* Benin* Burundi* Central African Republic* Côte d Ivoire* Liberia* Madagascar* Mali* a Rwanda* Sierra Leone* SUB-SAHARAN AFRICA TOTAL GRAND TOTAL (Doing Business + non-doing Business) b 5 42 Reforms captured by the Doing Business 2012 report N/A 0 * IDA Country + Fragile and Conflict-Affected Country This reform is recognized retroactively: it was validated by Doing Business 2011, but was not reported as a reform in FY10. a. This reform is on a Doing Business topic, but it affects only small construction projects and therefore is not captured in the Doing Business report. b. Of the 37 reforms, 36 were validated by the Doing Business report. One is about a Doing Business topic that does not affect the standard case (see note a, above). Resolving insolvency Starting a Trade logistics TOTAL REFORMS DOING BUSINESS TOPICS Alternative dispute resolution Business operations (incl. general licenses) Industry Investment policy Public private dialogue Special economic zones TOTAL REFORMS NON-DOING BUSINESS TOPICS TOTAL IC REFORMS ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

9 FY11 FUNDING AND EXPENDITURES FY11 Contributions In US$ thousands World Bank Group Contributions (Core Funding) 8,300 World Bank Group Contributions (Project-Specific/Other Contributions) 4,481 Donor Contributions (Core) 4,552 Donor Contributions (Programmatic) 7,413 Donor Contributions (Project-Specific) 8,267 Client Contributions 283 TOTAL CONTRIBUTIONS 33,296 Less Trust Fund Administration Fees 1,212 TOTAL (NET) CONTRIBUTIONS 32,084 FY11 Expenditures In US$ thousands Staff Costs (incl. consultants) 21,229 Operational Travel Costs 5,678 Indirect Costs (incl. office and operating) 3,366 TOTAL EXPENDITURES 30,273 In FY11, donors, clients, and the World Bank Group contributed a total of $32.1 million to FIAS. Expenditures reached $30.3 million, a 10 percent increase over FY10 expenditures, reflecting a slight expansion in the work program thanks to strong donor support and additional contingency funding received from IFC. FIAS RESULTS AT A GLANCE 5

10 MESSAGE FROM THE DIRECTOR I am pleased to present the FIAS 2011 Annual Review, which reports FIAS-supported results for fiscal year 2011 and highlights cumulative results for the FIAS strategy cycle. I am grateful for the steadfast commitment of our donors and partners that has enabled a focused response to the sustained demand for investment climate work, particularly in view of the difficult global context. Your financial and operational support made possible the successful implementation of the FIAS strategy, as illustrated by more than 600 legal, regulatory, policy, and other improvements enacted with FIAS support by client governments, and by the positive independent evaluation released in February Pierre Guislain In fiscal year 2011, FIAS-funded activities supported 128 investment climate results achieved by our clients in 31 countries, with 45 percent achieved in IDA countries and 39 percent in Sub-Saharan Africa. These results contributed to 42 broader reforms. Over the entire strategy cycle, FIAS supported a total of 641 investment climate results in 81 countries, far exceeding the target of 400 set for the four-year strategy cycle. Individually, these results and reforms translate into environments that support more efficient, productive operations for es and investors. In this past year we have developed an initial impact measurement framework that will allow us to capture how investment climate reforms contribute to the creation of new firms, investment, private sector savings, and jobs, among other economic variables. It is also helping us better allocate resources and manage projects to maximize their impact. The framework will be further refined and rolled out more broadly in the coming years. Recent examples help illustrate the wider impact of our work: A FIAS-funded tax simplification project in Sierra Leone resulted in a 40 percent increase in the number of tax returns filed and a 44 percent increase in tax collection. As a result of reforms in several South East European countries, some supported by FIAS since 2008, 740 national laws and regulations have been cut and simplified, yielding annual cost savings to the private sector of more than $260 million ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

11 In Ghana, FIAS funding supported the reform of the country s movable collateral framework, resulting in more than 20,000 loans for $800 million backed by movable assets registered by banks and other institutions in the new collateral registry created in March FIAS-supported activities to generate investment in Haiti are expected to bring an estimated 1,150 jobs through two new investments totaling $6 million and a $4 million expansion project from an existing garment manufacturer. We continue to provide strong operational support to client governments, as detailed throughout this Annual Review. Four investment climate projects in Bangladesh, South Sudan, Southeast Europe, and in Africa with the Organisation pour l Harmonisation en Afrique du Droit des Affaires (OHADA) received the coveted IFC 2011 Corporate Award. Selected from 136 submissions, the winning projects were recognized as strong examples of our focus on delivering development impact, work in IDA countries, responsiveness, client relationship management, partnership building, efficiency, innovation, commitment to knowledge sharing, and teamwork. FIAS-funded projects that received IFC or World Bank awards are highlighted on pp During the past year we worked with our partners and other stakeholders on the preparation of the FIAS FY12 16 Strategy, titled Managing for Impact, which was adopted by IFC s Board of Directors on May 3, 2011, and we began laying the groundwork for its implementation. For the FY12 16 strategy cycle, we are organizing our advisory offering around three targeted objectives: fostering enterprise creation and growth, facilitating international trade and investment, and unlocking sustainable investments in key industries. Working closely with colleagues in the World Bank s Financial and Private Sector Development network, we helped design and establish the new Investment Climate Global Practice to connect more effectively with our Bank regional colleagues. A new Web site was launched to share information and showcase FIAS-supported investment climate work to a broad audience of donors, clients, partners, and other stakeholders. The Web portal also showcases the broad range of our knowledge management products as well as multimedia clips, videos, and slideshows of our project work. As we embark on the FIAS FY12 16 strategy cycle, we stand ready to support countries seeking help in creating a more open and dynamic environment for the private sector. Much remains to be accomplished in many parts of the world. Unexpected, urgent priorities will arise: who could have imagined the calls for sweeping reform across the Middle East and North Africa that have highlighted the need for strong institutions and better legal frameworks for es? With the help of our partners, FIAS is well-equipped to respond to these challenges. I look forward to continued collaboration and, as always, welcome your feedback and insights. Pierre Guislain Director, World Bank Group Investment Climate Department and FIAS MESSAGE FROM THE DIRECTOR 7

12 FY11 RESULTS AND REFORMS Through the multidonor FIAS program, the World Bank Group and its partners continued to assist developing countries and transition economies in improving their environments, with an emphasis on regulatory simplification and investment generation. FIAS also continued to play an essential role in the provision of investment climate advisory assistance to clients around the globe through the Investment Climate Business Line (part of IFC advisory services) and the World Bank s Financial and Private Sector Development Vice Presidency (FPD). The Investment Climate Department (CIC) manages the FIAS program under the joint oversight of IFC, MIGA, and the World Bank. FIAS IN THE WORLD BANK GROUP INSTITUTIONAL STRUCTURE World Bank Financial & Private Sector Development Network IFC Advisory Services b East Asia and Pacific FPD East Asia and Pacific IC Europe and Central Asia FPD Europe and Central Asia IC Latin America and the Caribbean FPD Middle East and North Africa FPD South Asia FPD FIAS Supervisory Committee a Latin America and the Caribbean IC Middle East and North Africa IC South Asia IC & BICF Sub-Saharan Africa FPD World Bank Group Investment Climate Department / FIAS c Sub-Saharan Africa IC Business Regulation Fostering Enterprise Creation and Growth International Trade and Investment Unit Facilitating International Trade and Investment Investment Climate for Industry Unit Unlocking Sustatinable Investments in Key Sectors Private Participation in Infrastructure and Social Sectors (not FIAS-funded) a. The FIAS Supervisory Committee consists of: Executive Vice President, IFC (Chair), Executive Vice President MIGA, Vice President FPD (World Bank-IFC), Vice President Business Advisory Services (IFC), Vice President Africa Region (World Bank). b. IC abbreviates Investment Climate; BICF abbreviates Bangladesh Investment Climate Facility; FPD abbreviates Financial and Private Sector Development Vice Presidency. c. This is the new structure for CIC / FIAS starting July 1, ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

13 CONTINUED FOCUS ON RESULTS During FY11, the final year of the FY08 11 strategy cycle, FIAS-funded activities supported the achievement of 128 investment climate results 1 in 31 countries, 2 and via its role in product incubation and development supported programs in another 13 countries. This year s results compare with in FY10, in FY09, and 108 in FY08. These results indicate that countries continue to recognize the need for investment climate reform, implementing policy-level reforms to help them in the face of a global recession. (Summaries of each of the results achieved in FY11, grouped by country, are presented in Annex 1.) There were fewer results recorded in FY11 than in FY10, mainly due to: Tightening of management control on results tracking and counting, in particular limiting the count of closely related measures. Deepening of reform efforts, with more emphasis on longer term interventions that may improve impact but yield fewer short-term results. The shift of part of FIAS project portfolio to IFC regional investment climate teams, including the whole FIAS portfolio (eight projects) in East Asia and Pacific, and FIAS projects in Europe and Central Asia. These projects continue to receive funding from FIAS; however, given they are not implemented by the Investment Climate Department, the results and reforms from these projects are included in the table in Annex 2 (Other Results Supported by FIAS in FY11). 1 A result is a change implemented by a client with support from a FIASsupported project that significantly improves the investment climate in a given country, region, or sector. These changes are tangible achievements brought about with FIAS assistance and for which there is wide technical and expert consensus regarding their relevance in inducing private sector-led development. 2 The region encompassed in the OHADA results (16 African countries) is counted as one country for tracking purposes. 3 Since the publication of the 2010 Annual Review, which reported 177 results, an additional result was validated bringing the total result count to The FY09 result total is higher than reported in the 2009 Annual Report (224). Three results associated with alternative dispute resolution were added to the total. An increased focus at the global level on strengthening product development and knowledge sharing. In FY11, 26 FIAS projects (42 percent) were global (up from 31 percent in FY10). For example, the Global Investment Promotion Benchmarking (GIPB) and Investing Across Borders (IAB) projects do not contribute directly to the result and reform counts. Closure of several large country programs in FY11, which had contributed significantly to the result and reform counts in previous years. Investment climate programs in Liberia, Sudan, South Sudan, and Sierra Leone were completed in FY11. Among the total recorded results, 39 percent occurred in Sub-Saharan Africa, followed by Europe and Central Asia (30 percent), Latin America and the Caribbean (22 percent), Middle East and North Africa (8 percent), and East Asia and the Pacific (1 percent). FY11 results were concentrated in the following areas: starting a (32), dealing with construction permits (23), investment policy and promotion (14), trade logistics (14), closing a (9), public-private dialogue (8), licensing/regulatory governance, taxation, and registering property (5 each). Of the 128 results reported for FIAS-supported projects this year, 12 were specifically achieved working with subnational governments. In FY11, the 128 results achieved by FIAS-supported projects contributed to 42 reforms. Of these 42 reforms, 36 were validated by Doing Business. 5 Five reforms are in topic areas not covered by Doing Business, and they have been captured by the aggregation methodology (see Annex 1 for detailed information and country breakdown). 6 FIAS supported 7 of the 12 countries recognized in Doing Business 2012 for the most improved ease 5 Of 36 reforms, 32 were captured in Doing Business 2012 and 4 in the 2011 report. 6 One additional reform is about a Doing Business topic that does not affect the standard case, and thus it was not validated in the report. FY11 RESULTS AND REFORMS 9

14 of doing across three or more areas of regulation (see box on Moldova, below). While FIAS core funding is increasingly focused on product development and knowledge generation and sharing, the global product teams in the Investment Climate Department (which hosts FIAS) continue to provide strong technical assistance to programs implemented by IFC and World Bank departments that do not receive FIAS funding. Thus, the outcomes of these programs are not captured in FIAS results. For example, Investment Climate technical assistance has supported programs in South Asia [such as the Bangladesh Investment Climate Facility (BICF)], in East Asia and Pacific, and in Europe and Central Asia. FIAS, through BICF, provided indirect support to the government of Bangladesh in major legislative reforms related to economic zones, including improvements to women s working conditions in these zones (see box, p. 29). DELIVERING IMPACT IN AFRICA Sub-Saharan Africa continues to be a primary focus of FIAS activities (examples of FIAS-supported country-specific and regional activities can be found throughout this report). In FY11, FIAS-funded projects were operational in 15 countries in the region. 7 In FY11, FIAS support contributed to firm and job creation in Africa, as reported in the external evaluations of the Burkina Faso, Liberia, Rwanda, and Sierra Leone country programs (see box, p. 17), and FIAS-funded activities supported legal reforms critical to es in 16 African countries through the OHADA program (see box, p. 11). Moldova Creates More Business-Friendly Economy Ranked 2nd in Doing Business 2012 of 12 economies with most-improved regulation The government of Moldova is showing rapid progress in improving the country s investment climate, ranking 81st of 183 economies measured in Doing Business 2012 on ease of doing an improvement of 18 places to its ranking in the 2011 report. Since 2010, a FIAS-supported program has helped Moldova remove or reduce regulatory barriers to operation and growth. Strengthening the environment is especially important to Moldova as one of the poorest and most vulnerable countries in the Eastern Europe and Central Asia region. Moldova s income per capita in 2011 was $1,590. The reforms signal the government s drive for developing a healthy environment and desire to ease the regulatory burden for small and medium-sized enterprises, says Nicolae Cuconescu, member of the Timpul Businessmen Association of Moldova. In addition to improving the environment of Moldova, these reforms offer an effective mechanism to mitigate the ongoing global financial and economic crisis that poses a negative impact on investment and growth in the country. Results Moldova s impressive reform path is largely a result of new legislation, designed and introduced with support from the FIAS-funded project. The new legislation makes it easier for entrepreneurs to start a and obtain construction permits. Several laws were passed to increase the efficiency of the court system, which resulted in decreasing the time to enforce a contract from 365 to 352 days. Amendments to the Company Law were approved in FY11, eliminating the minimal capital requirement to register a. Today it takes 9 days to open a in Moldova. The new law also creates the basis for a one-stop shop, planned to become operational in FY12. In July 2010, a new law streamlining the construction permitting process was approved. The law establishes clear procedures for the construction or demolition of buildings and provides a complete list of documents that authorize the execution of construction works. To protect investors, amendments to the Law on Joint-Stock Companies were adopted in April 2011, improving disclosure obligations for transactions involving conflicts of interest. 7 Each of the regional projects OHADA, EAC, and DBRA Sub-Saharan Africa count as one of the fifteen countries for tracking purposes ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

15 PRIORITIZING FRAGILE AND CONFLICT-AFFECTED STATES FIAS-funded activities have continued to focus on fragile and conflict-affected states. In addition to the programs in Sierra Leone, Liberia, and Rwanda achieving strong results, in FY11 FIAS supported 30 investment climate results in 7 conflict-affected countries. FIAS-supported Investment Climate Department teams, in collaboration with IFC and World Bank regional teams, started work in a number of countries which have recently come out of conflict, such as Guinea and the Central African Republic. A key feature of this work, as exemplified in Guinea, is FIAS contribution to the overall Bank Group investment climate work in close collaboration with the World Bank team. FIAS-funded support to the newly created independent state of South Sudan helped the nascent government enact institutional reforms, including setting up a legal framework for entry, operations, and exit, developing an Investment Promotion Act, removing administrative barriers to trade, and reestablishing an operational registry (see box, p. 24). In the Republic of Yemen, another fragile and conflictaffected country, FIAS-funded activities supported the passage of a new income tax law, reducing the general tax rate from 35 to 20 percent and creating a simplified filing process for micro, small, and medium-size taxpayers. These measures are expected to foster participation in the formal economy and increase tax revenues by encouraging compliance. The project effectively streamlined six procedures, which is expected to reduce corruption and result in an estimated $3.1 million in direct cost savings over the next three years. Support for entry reforms in Timor-Leste helped reduce the time a new needs to verify the company Breakthrough Reforms to Business and Lending Regulations in 16 African States Recent changes to laws in West Africa pave the way for a more entrepreneurial future. The latest sweeping reforms were adopted by the Organization for the Harmonization of Business Law in Africa, a unique organization in Africa that enacts common laws for all 16 member countries a (a 17th member, the Democratic Republic of Congo, is expected to join OHADA soon). As a result of FIAS-funded advisory support, the countries unanimously approved legal changes in December 2010 that will likely make an estimated $250 million in credit available to small es. The legislation is expected to encourage thousands of entrepreneurs to join the formal economy rather than operate off the books. Small and medium-sized enterprises are the heart of the African economy, said M. Biossey Kokou Tozoun, Togo s Minister of Justice. It is therefore essential that small entrepreneurs can turn to banks for loans and that everything be done to encourage them to formalize. a. OHADA member countries are Benin, Burkina Faso, Cameroon, the Central African Republic, Chad, the Comoros, the Republic of Congo, Côte d Ivoire, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Mali, Niger, Senegal, and Togo. Under the new rules, banks may now accept a much wider range of assets as collateral, rather than only real estate (most people do not have formal title to real estate). Businesses may more easily pledge all kinds of present and future movable goods, including accounts receivable, cash flow, or equipment. Banks will also be able to better manage and limit risk, and lend in a more secure environment. One of the major breakthroughs of the legal reform is the creation of a new category entreprenant that will simplify procedures for micro- and small owners who cannot afford to hire lawyers to register their es. It is expected that women entrepreneurs will be most interested in this new status, because it will ease their access to formal credit. OHADA oversees nine laws (general commercial, secure transactions, company law, arbitration, debt recovery, bankruptcy, accounting, transportation of goods by road, and cooperatives). Any change in these laws requires unanimous agreement among all countries and applies throughout the entire bloc. The World Bank Group began supporting legal reform effort four years ago, with support from FIAS, France, and the Investment Climate Facility for Africa. FY11 RESULTS AND REFORMS 11

16 name and register at the Ministry of Justice (from 65 to 19 days). 8 The government was able to tap into the reform experiences of other countries through regional peer-to-peer learning events and study tours. FIAS support also helped in building the capacity of the Better Business Initiative, a forum for public-private dialogue, by establishing a chamber of commerce and industry that unifies operational policy and procedures for 17 associations in one body. The forum has provided input into the national procurement law to allow for outsourcing of projects over $1 million and streamlined customs clearance procedures approved by the Council of Ministers that will reduce gridlock at the port and provide clear guidelines for importers. In addition, the project has improved regulations for microfinance institutions, which will strengthen their ability to develop, while protecting consumers from bad practices such as pyramid schemes and other abuses. FIAS-funded activities in fragile and conflict-affected states are implemented in close coordination with broader Bank Group initiatives to support communities coming out of conflict. One key partner is IFC s Conflict Affected States in Africa (CASA) initiative, which has supported work in a number of African countries. CASA programs seek to understand the causes of the conflict and tailor programs that contribute to peace and stability. Investment climate work usually comprises much of the early engagement in these states. One of the risks of work in fragile and conflict-affected countries is that it is more difficult to achieve results as quickly and effectively as in other settings. Of the three projects this fiscal year that did not receive high development effectiveness rating scores (see next section), all were in countries where significant political upheaval halted project activities and progress. DEVELOPMENT EFFECTIVENESS, CLIENT SATISFACTION, AND INTERNAL RECOGNITION REMAIN HIGH IFC measures development effectiveness of projects by looking at five areas: strategic relevance, outputs, outcomes and impacts, and efficiency, giving greater weight to outcomes and impact. Building an Entrepreneurial Future in Post-Conflict Central African Republic With FIAS support, the government of the Central African Republic is taking steps to improve the country s overall conditions for private sector growth, including measures that make it easier and less expensive for entrepreneurs to set up, register, and operate their es. The program, which began in 2007, focused initially on improving the dialogue between public officials and the community. The Public-Private Dialogue Forum [Cadre Permanent de Concertation Etat / Secteur Privé (CPC)], a consultative forum created by the government in late 2006, was the main driver of this approach. The forum gives entrepreneurs a voice in policymaking and helps reduce any tensions that might exist between the two interest groups. Another important milestone in the country s path to reform was the establishment of the Joint Committee for the Improvement of the Business Environment (Comité mixte chargé de l amélioration de l environnement des affaires en République Centrafricaine) by a decree signed in April The Joint Committee is a decision-making body of public and private sector representatives that complements the CPC and is chaired by the prime minister. It has a clear mandate to improve the environment and full authority to approve CPC-developed reform proposals. With FIAS support, in FY11 the Committee has offered policy recommendations and proposed key legislation to further the reform agenda. The Central African Republic, which ranks 182nd of 183 economies on ease of doing in the Doing Business 2012 report, is starting to show momentum in areas tracked by the Doing Business indicators for starting a and registering property. In December 2010, the government amended provisions on the registration tax in the national budget law and also adopted a new financial law. These measures cut in half the registration and property transfer taxes and eliminated several obsolete, ineffective, and costly requirements. 8 Registry survey of data processing times; data not yet verified in the Doing Business report ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

17 Development effectiveness ratings for client-facing projects implemented by the Investment Climate Department and funded by CIC/ FIAS were at 73 percent for FY11. This significantly exceeds the rating for the overall Investment Climate Business Line (63 percent) and is in line with IFC Advisory Services score of 69 percent. Of the 10 projects included in the analysis, 7 were rated positively by IFC s Development Impact Department; the 3 projects that received lower ratings were in countries (Madagascar, Nepal, Pakistan) where project progress was halted due to external, political factors (see Annex 3 for development effectiveness ratings of projects closed in FY11). Client satisfaction for investment climate projects was also rated high with 89 percent of clients reporting their satisfaction with services being delivered. 9 FY DEVELOPMENT EFFECTIVENESS RATINGS 80% 77% 70% 73% 68% 68% 69% 60% 64% 63% 57% 58% 50% 52% 47% 48% 40% 30% 20% 10% 0% FY08 FY09 FY10 FY11 Investment Climate Investment Climate IFC Advisory Services Department Business Line FY CLIENT SATISFACTION Investment Climate Business Line 100% 80% 60% 92% 77% 85% 88% 88% 87% 89% 87% The work FIAS supports to implement improvements and reforms in the most difficult of environments has been 40% 20% recognized at the corporate level within the Bank Group. The investment climate programs in South Sudan (see box, p. 24), in Southeast Europe (see box, p. 14), 0% FY08 Investment Climate Business Line FY09 IFC Overall FY10 FY11 with OHADA (see box, p.11), as well as the WORLD BANK GROUP ENTREPRENEURSHIP SNAPSHOTS DATABASE 9 This figure relates to the overall IFC Investment Climate Business Line rather than FIAS-funded projects alone. FY11 RESULTS AND REFORMS 13

18 Unleashing Business Opportunities in Southeast Europe Supported by FIAS and donor partners Austria, Switzerland, and the United States, the Investment Climate Program in South Eastern Europe is helping accelerate regional governments progress toward accession to the European Union. The program was recognized with the 2011 IFC Corporate Award for its excellence in improving the region s regulatory and judicial environment. Since the program s start in 2008, about 740 national laws and regulations have been cut and simplified, with over 2,280 recommendations adopted at the local level. To date, these reforms have yielded an estimated annual private sector cost savings of $264.7 million. Alternative dispute resolution (ADR) projects have resulted in releasing $120 million in tiedup funds through mediation, and this impact continues to build through self-sustaining mediation centers and partners. In addition to Moldova (see box, p. 10), the former Yugoslav Republic of Macedonia was recognized among the 12 economies with the most-improved regulation in the Doing Business 2012 report. Macedonia recorded reforms supported by FIAS-funded activities in the areas of dealing with construction permits and closing a. The government amended two laws related to construction permitting, eliminating the preliminary design requirement, reducing municipal fees by 95 percent, and setting shorter deadlines for issuing permits. These improvements cut two procedures and 22 days from the process. In the area of closing a, the Company Law was amended to set a 15-day limit for liquidators to announce liquidation. The Bankruptcy Law was amended to require that bankruptcy trustees use the e-bankruptcy system. The Central Registry further decreased the fee for voluntary liquidation. registration program in Bangladesh each received the 2011 IFC Corporate Award. Also, the Rwanda investment climate program received a team award from the World Bank Africa Vice Presidency for its efforts in promoting agri. The Entrepreneurship Snapshots project, which included several members of the FIAS-funded team, won the 2011 Team Award from the World Bank s Development Economics Vice Presidency. The Entrepreneurship Snapshots aims to understand the dynamics of private enterprises around the world through the collection of data on creation at the international level that can be comparable across heterogeneous legal, economic, and political systems. The data provides a picture of the impact of regulatory, political, and macroeconomic institutional changes on entrepreneurship and an understanding of what drives entrepreneurs from the informal to the formal sector (see screen shot, p. 13). PROGRESS ON APPROACHES TO MEASURE IMPACT FIAS, in collaboration with other partners, continues to support reforms that are likely to have a positive effect on the creation of new firms, investment, and job creation. In 2011, reviews of existing literature continued to identify tangible measures of impact associated with investment climate reform (see box, p.15). Models that estimate the impact of reforms on entry, trade logistics, taxation, insolvency, ADR, construction permits, and industry are currently being developed. These models will be used to forecast the impacts of new FIAS-funded projects and provide information to optimize the allocation of resources. Impact projections for the new FIAS FY12 16 strategy include: Private sector savings of over $600 million, which includes $350 million in compliance cost savings and $250 million in savings from streamlined trade logistics services. Three billion dollars in investment generation $1 billion from foreign direct investment (FDI) facilitation in priority sectors and $2 billion from new firms created as a result of entry reforms. Increase in trade flows by $2.5 billion following trade logistics reforms. Increased returns to stakeholders by $1.5 billion resulting from 11,000 firms continuing as going concerns after debt resolution reforms ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

19 The Impact of Investment Climate Reform: Evidence from the Literature Reviews Three literature reviews were completed in the areas of entry, alternative dispute resolution, and insolvency reform in order to gather evidence about the impact of FIAS-supported work. The main findings of the literature reviews include: Business Entry i. More firms enter the market when registration procedures and costs are cut. The average entry rate is 5 percent for selected country studies and 10.5 percent for cross-country studies. ii. A large percentage of these new firms survive and grow. Studies show that the survival rate two years after entry ranges from percent and percent seven years after entry. iii. New firms increase competition, forcing incumbents to become more efficient or to exit the market, boosting overall productivity and investment. Cross-country studies show that a 10-day reduction in the time to start a is associated with a 0.3 percentage point increase in the investment rate and a 0.36 percent increase in the gross domestic product growth rate. ADR i. ADR reforms reduce the cost of dispute resolution relative to litigation. Estimates of the total costs incurred by firms that use an ADR process range from 3 to 50 percent of the costs incurred by firms that go through a court litigation process. ii. ADR can also do better than traditional litigation in reducing the time to resolve a dispute. Time savings range from one month to about a year. Insolvency i. Reforms that improve insolvency regimes increase the probability of timely repayments, reduce the cost of debt and interest rates, and increase the aggregate level of credit. ii. Insolvency reforms also help reduce the rate of failure among small and medium-size enterprises, particularly the liquidation of stronger firms. iii. Evidence from high-income countries suggests that reforms to individual bankruptcy laws can increase household credit, which might also benefit entrepreneurs and non-limited-liability firms. iv. Total costs incurred by firms that use an ADR process range from 3 to 50 percent of the costs incurred by firms that go through a court litigation process. v. ADR can also do better than traditional litigation in reducing the time to resolve a dispute. Time savings range from one month to about a year. A 10 percent increase in the number of enterprises complying with tax requirements within three years of FIAS-supported tax reforms. Two impact evaluations funded by FIAS were begun in collaboration with other Bank Group departments to assess, in Georgia, work done to simplify the tax regime for small and medium enterprises (SMEs), and in Romania, the impact of the introduction of out-of-court resolution of disputes. These evaluations are intended to analyze the impact of specific investment climate advisory programs. The compliance cost savings methodology has gained traction in monitoring impact, especially in the area of taxation. In developing and transitional countries, es especially small ones often face heavy costs in the process of preparing, filing, and paying taxes in addition to the burden of tax payments. Measuring compliance costs through rigorous data collection can provide useful information for the design of reforms and to reduce costs and risks for small es. Workshops introducing the methodology to measure compliance costs were organized in six different regions in November and December Forty-one projects from 31 countries in all regions are now effectively measuring the direct compliance cost savings indicator for investment climate projects. In FY11, 33 projects reported targets of $285 million in annual direct cost savings, and 14 projects reported actual cost savings of $70 million. These projects had total expenses of $26 million, resulting in a bang for the buck of 2.7 dollars of impact for each dollar spent. FY11 RESULTS AND REFORMS 15

20 DELIVERING RESULTS, REFORMS, AND IMPACT: FY08 11 STRATEGY CYCLE HIGHLIGHTS The Phase 1 report of the independent external evaluation of CIC / FIAS concluded that in a time of global economic and financial crisis FIAS has achieved the objectives set out in the FY08 11 strategy. The evaluation was conducted with the oversight of IFC s Development Impact Department. 10 Investment climate results significant improvements to a country s investment climate, as defined in the FIAS monitoring and evaluation framework were used as the primary performance indicator during the FY08 11 cycle. During the four years of the strategy cycle, FIAS-funded projects supported the implementation of more than 600 investment climate results, versus a cycle target of 400. A majority (60 percent) of these results were achieved in countries classified as IDA 11 or post-conflict, and in frontier regions of middle-income countries. Globally, FIAS contributed to 186 Doing Business reforms (as documented by the Doing Business reports) over the FY08 11 cycle. Sixty percent of the 186 Doing Business reforms were in IDA countries and 19 percent were in fragile and conflict-affected countries, with Sub-Saharan Africa accounting for 39 percent of the reforms validated by Doing Business. An extensive review of the literature on the impact of reforms suggests that investment climate reforms of the type supported by FIAS can have substantial impacts on private sector investment, trade, formation, and growth. This was confirmed by an independent evaluation that reviewed the impact of FIAS-funded investment climate reform projects in Burkina Faso, Liberia, Rwanda, and Sierra Leone (see box, p.17). The country studies suggest that these projects resulted in clear benefits to the private sector, including significant private sector cost savings, creation of new es, investments and jobs. Other benefits an expanded tax base, increased tax revenue, and higher trade flows were not quantified but are believed to be positive Nexus Associates Independent Evaluation of CIC/FIAS Strategy and Program, Phase I: Final Report. Phase 1 of the evaluation covers FY08 10, the initial three years of the strategy cycle. A supplemental report, expected to be issued in early 2012, will expand coverage to the fourth year of the cycle and add three country case studies. 11 Members of the International Development Association (IDA). Eligibility for IDA is restricted to countries with a gross national income per capita of less than $1, Economisti Associati srl (Italy) Investment Climate in Africa Program, Four-Country Impact Assessment Comparative Report. https://www. wbginvestmentclimate.org/uploads/comparative_report_ pdf ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

21 Supporting Development Impact in Four Fragile and Post-Conflict African Countries A recent independent evaluation of FIAS-funded investment climate programs in Burkina Faso, Liberia, Rwanda, and Sierra Leone reported tangible progress on measures of private sector impact within three years after the programs began. The four programs were undertaken in partnership with the African Development Bank, Austria, Denmark, France, Ireland, Italy, Japan, the Netherlands, Norway, and Sweden. The assessment, conducted by Economisti Associati, was commissioned by IFC to capture interim results of substantial programs in African countries facing considerable challenges to reform. The evaluators reported these aggregated results for the programs: $13.2 million in cost savings for es; 23,000 new es registered; $75 90 million invested; and 51,500 new jobs created. a More than 70 reforms were implemented, making it easier and less costly for entrepreneurs to start up and operate as formal, registered es. Each country program was designed to tackle areas most likely to have an early and positive impact on the regulatory environment governing growth, investment, and employment opportunities, providing a foundation to address poverty and income security. The programs introduced reforms in registration, construction permits, real estate transactions, and trade logistics. They sought to reduce owners direct costs by eliminating or reducing fees, save staff time and labor costs by streamlining procedures, and improve cash flow through adjustments in the payment schedules of certain fees and taxes. For example, registering a in Rwanda currently costs $25 (less than 5 percent of income per capita) or no charge if conducted online, and it requires just one day. It is important to register your because you are legally recognized, so you can bid on government tenders and get invited to forums, says Rwema Mimable, coowner of a small information technology in Rwanda. Three of the programs are in countries recovering from civil war (Liberia, Rwanda, and Sierra Leone), and their infrastructure and some government institutions are in disrepair. Burkina Faso and Rwanda are landlocked and face inordinate costs for transporting goods. All four countries rely on small-scale farming as their main industry and are very poor by global standards, with gross national income per capita ranging from $550 per year in Burkina Faso to just $190 in Liberia. a. The assessment methodology relied on the data reflecting new company formulation as the basis to project investment and job creation. Using regression analysis of the new company data, the evaluators established trendlines that allowed them to compare actual data after the project interventions with the expected trends in the absence of any reforms. They then used data on average investment and employment levels for new firms to estimate the overall impact of project reforms on investment and employment. To calculate the private sector cost savings, the evaluators identified reforms supported by World Bank Group projects that yielded reductions in official fees and staff time needed to complete the procedures. DELIVERING RESULTS, REFORMS, AND IMPACT: FY08 11 STRATEGY CYCLE HIGHLIGHTS 17

22 KEY OBJECTIVES OF THE FY08-11 STRATEGY REALIZED According to the FIAS evaluation (findings of Phase 1 Report, issued in February 2011), other key elements of the FY08 11 strategy were implemented as follows: FIAS-funded projects moved beyond diagnostic assessments to deepen the Bank Group s core areas of investment climate expertise, met client needs through customized interventions, and focused on knowledge management and outreach. The FY08 11 strategy transformed FIAS approach from standalone diagnostic assessments and ad-hoc interventions to reform implementation around core products. In line with this strategy, FIAS funding was used to strengthen technical expertise in 14 product areas, responding to evolving client demand. Projects supported by FIAS were larger and often incorporated multiple products (see box on Sierra Leone program, p.19). Moreover, FIAS resource use concentrated on 26 major country programs, complemented by shorter-term interventions (often along the Doing Business agenda) in more than 50 countries. Considerable funding was devoted to knowledge management efforts, resulting in a wide range of technical papers, practitioner guides, and toolkits, Investment Climate In Practice notes, and SmartLessons, as well as numerous deep-dive learning and peer-to-peer, knowledge-sharing events. FIAS funding allowed the Bank Group to respond to increased demand from IDA countries and Sub-Saharan Africa. With successful fundraising, $89.5 million was spent on FIAS-related activities in FY08 10 (that is, the initial three years of the FY08 11 strategy cycle, covered in the Phase 1 evaluation report), roughly 6 percent more than the amount originally contemplated in the strategy. FIAS-funded projects met high levels of client satisfaction (between 88 and 92 percent annually); and planning and control systems related to FIAS activities were strengthened. CIC, the department managing FIAS, increased staffing levels in the field and transferred project management responsibility for most client-facing projects from headquarters to the field. IFC also strengthened planning and control and developed and implemented a robust system to track results and reforms. The overall recommendation of the FIAS evaluation in Phase I reads as follows: FIAS has demonstrated its ability to develop new products, disseminate best practices, and help countries reform their investment climates. Most elements of the FY08 11 strategy have been implemented as planned, yielding over 400 results and more than 150 reforms over the initial three years of the strategy period. While the impact of reforms is difficult to quantify, the general literature and preliminary findings from studies of FIAS projects suggest that benefits may be substantial. Provided that it continues to strengthen its strategy and operations, the World Bank Group and donors should be prepared to support FIAS in the next strategy cycle ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

23 Sierra Leone Acts on Bold Agenda to Create Firms and Jobs Places 6th among Most-Improved Countries for Business Regulation in Doing Business 2012 Supported by FIAS and the United Kingdom s Department for International Development (DfID) during the current strategy cycle, the Removing Administrative Barriers to Investment (RABI) program in Sierra Leone helped the government develop conditions for private sector growth. Sierra Leone has implemented bold reforms and is recognized in the Doing Business 2012 report as one of twelve economies with the most improved ease of doing across several indicators. The country improved its ranking from 150th in Doing Business 2011 to 141st in the 2012 report. The impacts of the program, which began in 2004, have been significant, encouraging job creation and laying a foundation for the country s economic growth. An external evaluation completed in FY11 estimated that the program had resulted in creating nearly 6,000 new es and 15,000 jobs. The evaluation also cited an increase in the tax base, with new taxpayer registrations leading to incremental revenues from corporate and self-employment taxes of $ million (3.5 percent increase in income tax revenues). This finding is supported by the Sierra Leone Ministry of Finance s reported increase in the tax to gross domestic product ratio of 13 percent (from 10 percent in 2008). Under the RABI program, we have seen great progress on the ease of doing in this country, says Minister of Trade and Industry David Carew. Results In FY11, FIAS-supported improvements are reflected in the areas of dealing with construction permits and registering property, among others. The government moved the construction permitting process from the Ministry of Lands to the Ministry of Works, which led to a 31-day reduction in the time required to issue location clearances and building permits. The total time es need to obtain permits and utility connections was cut from 269 to 238 days. The government lifted the moratorium on land transfer, significantly improving the time it takes to transfer property. The time needed to register property was cut from 235 to 86 days. The Land Survey Act was amended, allowing for the digitization of land surveys and enabling a modern cadastre system in the medium term. Several improvements were implemented that make it easier for taxpayers to make payments. The tax and registration offices are now linked together, allowing tax and registration to be conducted at the same location. Taxpayers can also make their payments at any of eight major banks. FIAS funding also supported initial work on developing a Taxpayer Management Module for Tax Administration to improve compliance with tax filing. A fast-track commercial court became operational in May 2011, and it will be fully automated and have real-time transcription of the proceedings. DELIVERING RESULTS, REFORMS, AND IMPACT: FY08 11 STRATEGY CYCLE HIGHLIGHTS 19

24 FY11 OPERATIONAL HIGHLIGHTS In the last year of the FY08 11 strategy cycle, FIAS-funded projects continued to demonstrate results using established reform approaches on regulation, tax, trade logistics, and investment generation. Progress was made in adapting these offerings to address key sectors, such as agri, and high-priority issues, including tackling reform in conflict-affected countries and unlocking investments in sub-saharan Africa. FIAS activities also continued to use technology and innovation as a means for sustainable growth and to help clients put in place regulatory frameworks encouraging models for green growth. FIAS-funded teams continued to work closely with other teams across the World Bank, MIGA, and IFC. New partnerships have been built and existing ones strengthened with external good practice institutions, and collaboration with donor partners has gone beyond funding to include learning and staff exchanges. A wealth of knowledge products and tools have been produced, including establishment of a new external investment climate Web site that has further consolidated the facility s presence as a leader in the investment climate arena, in terms of both research and practical, results-based implementation. HELPING CLIENTS BUILD BETTER REGULATORY FRAMEWORKS FIAS funding continued to support the first-response technical assistance related to Doing Business which contributed to 31 reforms in 20 countries in conjunction with regional World Bank and IFC investment climate teams. Of these reforms, 29 percent were in fragile and conflict-affected countries and 45 percent were in IDA countries. Countries supported include Armenia, Burundi, the Central African Republic (see box, p. 12), Moldova (box, p.10), Montenegro, and Sierra Leone (box, p. 19). the Bank and IFC regional project teams on the ground to deliver targeted advisory services. In Serbia, 625 procedures (of 5,900) were simplified or eliminated, resulting in annual aggregated cost savings of around $26 million to small es. FIAS support in South Sudan also led to solid results (see box, p. 24). FIAS-supported activities helped Morocco improve its performance as measured by the Doing Business indicators, and the country was recognized in Doing Business 2012 as the most-improved economy in ease of doing across several areas of regulation. Working very closely with the national reform coordination unit placed under the Ministry of General Economic Affairs and with Morocco s first public-private dialogue mechanism (the National Council for the Investment Climate), the team In FY11, FIAS funding supported the implementation of regulation reforms in more than 20 countries. The merger of the entry and operation practices into one regulation product allowed more efficient use of expertise to support a broad spectrum of reforms. Global experts were teamed with ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

25 focused on four Doing Business topics: enforcing contracts, resolving insolvency, starting a, and dealing with construction permits. As a result, a decree published in May 2011 considerably simplified start-up procedures. 13 The minimal capital requirement for starting a was eliminated, cutting start-up costs by 42 percent. Half of the 6 procedures for starting a were eliminated, and the company name search can now be handled online at the one-stop shop. In the area of construction permitting, the one-stop shop established in Casablanca at the end of 2005 became fully operational and widely used by entrepreneurs, who can obtain a permit in 15 days. Investment climate projects aimed at improving taxation systems in developing countries now span countries in every World Bank Group region. In FY11, FIAS supported tax interventions in Armenia, Bangladesh, Bosnia-Herzegovina, Burundi, Georgia, India (Bihar), the Kyrgyz Republic, the Lao People s Democratic Republic, Liberia, Mali, Rwanda, Sierra Leone (see box, p.19), Tanzania, Uganda, Vietnam, the Republic of Yemen, and the East African Community (EAC). The tax team also provided advice to governments in Bulgaria, Dominica, Guinea-Bissau, Kenya, Mexico, Poland, and Tajikistan, through tax reform projects led by World Bank Group regional departments. A key FIAS-supported activity has been the development and launch of a new initiative to improve tax transparency. It has the objectives of promoting international cooperation in the global fight against tax evasion and improving developing countries ability to administer and enforce their tax laws. This initiative addresses growing demand from developing countries and supports the G20 mandate that the World Bank Group, and other organizations, promote the link between tax and development and foster tax transparency in developing countries. In particular, the technical assistance focuses on helping 13 Due to the recent timing of the legislation, the improvements reflected in the decree were not acknowledged in the Doing Business 2012 report. countries to develop transfer pricing legislation, administrative procedures, audit capacity, and appropriate accounting rules and to ensure their legal and administrative frameworks meet international tax transparency standards. Regional assistance was provided in Latin America and the Caribbean, East Asia and Pacific, and Africa, and country-level assistance was provided following requests from Georgia, Ghana, Kenya, Thailand, Vietnam, and several economies in the Western Balkans. Strong partnerships have also been formed on this agenda with external and internal groups (see p. 31). Tools for improving the frameworks for alternative dispute resolution (ADR), restructuring and insolvency, and secured transactions and collateral registries in client countries were further strengthened in FY11. At a time when many countries continue to face recession, these tools support reforms that reduce the time and cost of exit proceedings for firms and enhance the likelihood of viable es being rescued. A closer alignment of these products in FY12 is expected to leverage and scale up the expertise, experiences, and lessons learned from all three. In Montenegro, a FIAS-supported ADR and insolvency project created the legal framework and sustainable mediation centers to provide alternatives to slow court settlements and also amended the insolvency law to include a special provision stipulating the opportunity for mediation. This legislation has contributed to the release of funds through mediation, with the project s impact increasing every day through self-sustaining mediation centers and partners. Mediation proceedings can now be started (even before the ruling on initiating bankruptcy proceedings is passed), thus offering the possibility of preventive action during bankruptcy and envisioning mediation as an option during the bankruptcy litigation process. These reforms are expected to improve the country s -rescue culture (roughly 96 percent of insolvency cases in Montenegro result in liquidation), improve the current low recovery rates, and reduce the overall cost to recover disputed claims. FY11 OPERATIONAL HIGHLIGHTS 21

26 Helping Clients Leverage Technology to Realize and Sustain Investment Climate Reform Innovative uses of technology provide powerful tools to transform the way public services are delivered to citizens, and they can enhance transparency in government. FIASsupported technical assistance to implement information and communication technologies (ICT) is helping es in client countries register and obtain licenses and permits online, which reduces costs and the time firm owners must spend to comply with registration requirements. For example, through an e-registry of licensing information in Kenya, entrepreneurs now have one-stop access to specific licensing requirements, costs, contact information, and application forms. By simplifying regulatory compliance and reducing opportunities for corruption, this initiative is expected to help encourage es to formalize and benefit from access to government services. In Liberia, FIAS support enabled the launch of the Liberia Business Registry in April The registry brings together agencies involved in the registration process under a single roof, reducing the time to register a from 99 days (as reported in Doing Business 2008) to 36 hours (as tracked by the registry Web site). a By fully automating the process of enterprise formalization, permitting online registration and access to information services (including search and reservation of corporate names), the registry has seen an annual 75 percent increase in new registrations. a. These recent improvements are not yet reported in Doing Business. In FY11 new laws related to secured transactions were enacted in Lao PDR, Liberia, Moldova, and the Republic of Yemen. Laws were drafted in Ghana, Jordan, and Malawi. In Ghana, FIAS supported the reform of the country s movable collateral framework to encourage SME financing against valuable movable assets. Through a new law, the Borrowers and Lenders Act of 2008, Ghana set up a collateral registry at the Bank of Ghana a temporary solution that is being upgraded into a Web-based electronic registry and reported these early results: Increased volume of financing for SMEs: More than 20,000 loans have been registered by banks and non-banking financial institutions in the collateral registry since its creation in March These loans account for more than $800 million in financing secured with movable property. Wider use of movable assets as collateral by es: Businesses and SMEs are now using a wider variety of collateral beyond real estate. Types of collateral include: inventory and accounts receivable (used in 32 percent of the loans); investment instruments such as shares, cash, bonds, and deposit accounts (19 percent); household assets (13 percent); motor vehicles (10 percent); real estate property (10 percent); and machinery, equipment, all enterprise assets, other (16 percent). Increased financing by banks and non-bank financial institutions taking movable property as collateral: Of 52 financial institutions, 33 institutions (17 banks, 13 non-bank financial institutions, 4 foreign-based banks, and 2 rural banks) have registered with the collateral registry and granted loans secured with movable property. However, a considerable number of the rural and community banks have not yet benefitted from the new infrastructure in place. Electronic collateral registries were also created in India, Sri Lanka, and Vietnam, and a Web-based collaborative secured transactions platform was launched to link secured transactions experts from around the world. The use of innovative information and communication technology solutions has been a key feature of the secured transactions and other regulation work supported by FIAS. New technologies can improve the quality and accessibility of regulatory information; ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

27 increase the reach, cost-effectiveness and transparency of government service delivery through online transactions; as well as enable es to participate in the digital economy via trade single windows and secured transaction registries. ICT can enhance, and even transform, the services and operations of government, as evidenced by the number of significant technology-related reforms worldwide documented by the Doing Business report. In the past year, FIAS has supported 14 client countries in implementing ICT-based applications to improve government-to- service delivery, increase transparency, reduce the regulatory cost burden and opportunities for corruption, and improve management and regulatory oversight through information-sharing across government and process automation (see box, p. 22). Given the strong client demand for more sophisticated assistance with ICT applications, FIAS-supported projects are working to implement technically and financially sustainable technology solutions across different program areas, exploiting emerging technologies such as cloud computing, mobile phone platforms, and social media to enhance public service delivery and improve economic governance. IMPROVING INVESTMENT POLICY AND ENABLING CROSS-BORDER TRADE FIAS-funded activities continued to enable efficient and effective trade logistics systems and services that allow for streamlined import and export of goods, as well as the creation of strong institutional capacity to serve private firms engaged in cross-border trade and investment. In FY11, this work was conducted in more than 18 countries, including 10 IDA and 4 conflict-affected countries. These projects focus on reducing non-tariff barriers and rationalizing trade logistics systems and services by streamlining border clearance processes, introducing risk management systems, and supporting automation in trade-related clearance services such as electronic payment. Improved automation in trade services supports better coordination among key technical agencies including customs, standards, veterinary, health, and transport agencies. In Colombia, FIAS-supported activities further improved the electronic system for filing documents as well as measures to manage risks associated with trade. Importers now electronically file the declaration of value, a key document for cargo entering the country. In FY11, the government passed legislation formalizing the automatic online connections between the single-window system and the agencies for health and agriculture and the Bureau of Standards. Customs established qualifications for customs brokers, freight forwarders, and warehouses, and they are required to assess their clients risks by obtaining corporate, financial, and tax information through mandatory visits and inspections. Traders can electronically file import documents in advance of ship arrival, allowing Customs officials time to identify the companies, goods, and risks each shipment represents prior to its arrival. In other areas tracked by Doing Business, FIAS-supported projects helped Colombia implement reforms that cut start-up costs and shortened the time to register property. The government also enacted a bill to reduce backlog in its courts, creating 30 municipal courts. Colombia was recognized in Doing Business 2012 as one of twelve economies with the most-improved regulation, as measured by the report, which ranks the country 42nd (of 183 economies) in overall ease of doing. FIAS funding has continued to enable advisory support to client governments on developing investment policy, attracting new investment, and diversifying the portfolios of existing investors through reinvestment opportunities. These initiatives include the development of programs to attract and facilitate investment in competitive sectors, create greater numbers of new investment leads, and become more effective at translating needs into actual investment decisions. FY11 yielded results in seven countries including Brazil, China, Haiti, Liberia, Rwanda, South Sudan, and Ukraine. In FY11, 57 percent of clients of FIAS-supported FY11 OPERATIONAL HIGHLIGHTS 23

28 investment generation work were IDA countries and 43 percent were fragile and conflict-affected states. In Brazil, investment was attracted to two frontier states, Para and Pernambuco, through a fully client-funded project that has linked the country s national and state investment promotion agencies to provide a more coherent framework of support for investors. Interventions to help improve investment generation practices (partnerships, systems, Web sites, outreach, facilitation, aftercare, and policy advocacy) have led investors to announce plans for 15 projects in Pernambuco and Para following FIAS-supported assistance. The team has also helped Apex-Brasil, the national agency, in developing investorfriendly strategies and a best-practice approach, resulting in eight announced investments since support began in May To date, $25.7 million in new investment has been secured and 765 jobs created as a result of this project (confirmed by direct interviews with investors). In Yinchuan, a poor western province in China, FIAS funding has supported the enactment of numerous investment climate reforms in recent years, including in FY11 the removal of some 96 mandatory investment approvals, a reduction in investment approval times from 202 to 96 days, and a reduction in the time to register a new from 55 to 14 days. In addition, the government opened a new investor one-stop shop, Government Hall, and launched its investor-focused Web site. As a result of these and other reforms, Yinchuan has attracted significant new investment into the province investment inflows in 2010 alone rose by a staggering $32 billion relative to estimated baselines, with the client government in Yinchuan attributing much of the increase to further liberalization of the provincial economy and enhanced investment promotion efforts. An important catalyst was the province s first regional investment summit in September 2010 organized by the Yinchuan Investment Promotion An Independent South Sudan Creates an Enabling Environment for Business The new country of South Sudan declared independence in July 2011 and began setting conditions for private sector growth, especially for local smaller es that are critical in creating jobs and increasing living standards. An IFC and World Bank team supported by FIAS has worked closely with the government during the past three years in building a nascent private sector. The recently launched Doing Business in Juba 2011 finds that the government is making strides in improving the environment for small and medium enterprises. The report cites that at 15 days, the start-up time for a in Juba is comparable to the average 13.8 days in developed economies of the Organisation for Economic Co-operation and Development (OECD). While the report ranks Juba 159th (of 183 economies) on overall ease of doing, a new legal framework for investors is now in place that will help improve conditions for investment. Results Legal framework. Eight laws have been enacted enabling entry, operations, and exit. Another nine that allow basic registration, contract, agency, property rights, and insolvency are ready to be enacted. Business entry. The registry was improved, allowing es to be incorporated within a day. About 12,000 es most domestic and small or medium-size have registered since July A -registration campaign resulted in an additional 1,100 es within the first six months of Investment policy and promotion. The Southern Sudan Investment Authority, established by the Investment Promotion Act 2009, is pursuing potential investors and re-investors in targeted sectors including agri, power generation, manufacturing, and services. A target has been set of 15 closed investments by the project s end in Drawing on their experiences in helping set the conditions for SME-friendly growth in challenging frontier markets, IFC and World Bank teams have helped the country create the South Sudan Business Forum, a mechanism for public-private dialogue, to give local entrepreneurs a voice in policymaking. This process would not have been easy if we had not gotten this unlimited support from the World Bank Group, says John Luk Jok, South Sudan s Minister for Legal and Constitutional Affairs ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

29 Bureau, which resulted in the signing of 134 new investment agreements worth $2.76 billion. A good example of FIAS-supported work this fiscal year through increasingly comprehensive, programmatic approaches is in South Sudan, where complementary interventions around core products and areas of expertise were combined to deliver maximum results for clients (see box, p. 24). CLIENT ENGAGEMENT THROUGH ESTABLISHED BENCHMARKING TOOLS FIAS funding continues to support the development of strong indicator-based tools and knowledge resources as an entry point for broader investment climate reforms. The Investing Across Borders flagship report released in July 2010 examines and quantifies the laws, regulations, and practices affecting how foreign companies invest across sectors, start es, access industrial land, and arbitrate commercial disputes. The data generated by IAB provides a starting point for governments looking to boost their global competitiveness in attracting FDI. In FY11, the IAB team provided specific reform recommendations based on IAB indicators to more than 10 client governments worldwide. IAB is serving as a catalyst for other Bank Group projects that look for improvement of the environment in client countries. For example, the arbitration indicators have helped drive advisory work in Bangladesh, the Comoros, and Malawi. The land indicators have informed reforms in land information systems in Bosnia and Herzegovina. The starting a foreign indicators are being used to facilitate entry in the East African Community. The IAB 2012 report, planned for release in the summer of 2012, will identify the full set of reforms that have been informed or motivated by the IAB indicators. The third Global Investment Promotion Benchmarking survey was launched in FY11, in close collaboration with MIGA, to assess the capabilities of 189 nationallymandated investment promotion intermediaries in providing information to investors, focusing on agri and tourism in this round. GIPB is a powerful tool for governments to assess the competitiveness of their promotional efforts to attract investment. It enables investment promotion intermediaries in improving their information provision and monitors their performance over time and against competitors. The full results of the GIPB survey will be released in FY12. Subnational and regional Doing Business reports capture differences in regulations and their enforcement across locations in a single country or region. This FIASsupported comparative domestic and international benchmarking tool fosters competition to reform. In collaboration with World Bank Group country offices, four subnational Doing Business reports were published in FY11 for Juba (South Sudan), Zanzibar, the Philippines (covering 25 cities), and South East Europe (22 cities). The reports show how government regulations and their implementation ease or constrain activity in selected locations. FY11 results show that subnational Doing Business studies continue to be a powerful tool to inspire reforms at the local and regional level. Second round studies measure reform progress over time. This year the reports for South East Europe covering Albania, Bosnia and Herzegovina, Kosovo, FYR Macedonia, Moldova, Montenegro, Serbia and the Philippines influenced 48 reforms. LEVERAGING FIAS EXPERIENCE TO TARGET REFORMS IN STRATEGIC SECTORS In FY11 FIAS-funded activities have strategically supported enhanced engagement in two key sectors that have broad relevance to development in many low-income countries: agri and tourism (see box on Mozambique, p. 27). Both sectors can have significant impact on growth and poverty reduction; also, these two sectors are major sources of employment. Better investment and conditions in the agri sector will contribute directly to improving food security in developing countries, through an increase in investment, higher outputs, and efficiency improvements in the distribution channels for agricultural products. Removal of barriers that restrict market entry or suppress competition in the agri sector will open up input markets, logistics chains, and marketing mechanisms that are highly concentrated at present in many countries. More competition also increases efficiency along the supply chain. These improvements increase the competitiveness of locally produced agricultural goods and boost internal food security. An example is the introduction of a warehouse receipts system as a financial FY11 OPERATIONAL HIGHLIGHTS 25

30 tool that expands the range of goods that can be used as loan collateral by farmers. This helps to improve storage of harvested crops, lowers post-harvest losses, minimizes the impact of brokers, and stabilizes prices. In FY11, the FIAS-supported agri global product team engaged closely with other Bank Group partners to create multidisciplinary teams in support of agri development. For example, in Eastern Europe and Central Asia FIAS support enabled the IFC regional investment Planting the Seeds for Agri in Ukraine Ukraine has a large untapped potential to export foodstuffs and the ability to play a global role in food security. Through the global product team for agri (housed in the Investment Climate Department), FIAS funding provided technical support to the IFC regional team in designing and implementing key investment climate reforms in Ukraine s agri sector (although FIAS did not directly fund this project). In 2010 the Cabinet of Ministers abolished the requirement of mandatory certification of most food products by the State Committee for Technical Regulations and Consumer Policy, which was identified as a burdensome requirement for food processors. Its abolition reduced compliance costs for the private sector by $20 million and opened up new agricultural export opportunities. Food producers have so far reaped the most benefit from regulatory improvements, including: Cancellation of mandatory certification of food products (excluding baby food, tobacco, and alcoholic products) Cancellation of costly duplicative licenses for certain agri activities, including wholesale seed trading, rearing of domestic animals, and manufacturing of agrochemicals Licenses for trading of agrochemical and selling of biogas and biofuel, previously subject to five-year renewals, made permanent $200) for a certificate for each delivery of raw materials. In approximate terms, the cost savings to my per year is up to 30,000 UAH (around $3,750) and the 500 man hours it took to obtain the certificates, he explained. Building on the results related to food product certification, in FY11 the FIAS-supported and IFC Ukraine investment climate teams helped draft and advocate for the Law on Market Surveillance. Adopted in December 2010, the law establishes a risk-based market surveillance system, eliminating burdensome and duplicative controls and inspections by different regulatory agencies. In the rest of Europe, technical standards are voluntary-based. These are considered and adopted by associations, scientists, and other industry stakeholders and the responsibility of quality control lies with es, said Svetlana Mikhaylovska, a member of the European Business Association. In Ukraine, we faced double mandatory regulation both in terms of safety and quality provided by technical regulations and standards, respectively. By working with the World Bank Group, we were successful in removing this outdated system. Preparations are currently underway for the project s next phase, which will focus on agri investment climate reform in the areas of input markets regulation, post-harvest infrastructure and logistics, and food safety for the grain, fresh fruit, and vegetable sectors. President Viktor Yanukovych s commitment to establish a single food-safety controlling agency instead of several agencies undertaking duplicative responsibilities. Abolishing mandatory certification has helped tremendously, said Serhiy Samonenko, a director at Vimel Company, which produces potatoes and starch. There is now one less regulatory body duplicating the same type of controls on food products. I no longer need to pay 1,600 UAH (around ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

31 Mozambique Tourism Anchor Investment Program: From Potential to Reality In March 2011, a landmark agreement launched the development of a $3 million eco-lodge in Mozambique s Maputo Special Reserve, a 70,000-hectare prime protected area. Bordering the Indian Ocean, the reserve offers tourists a varied experience of beaches, bays, coral reefs, forests, lakes, rivers, and a host of wildlife including an estimated 350 elephants. Co-financed by Switzerland and other donors through the FIAS platform, the Mozambique Anchor Tourism Investment Program assisted the government in developing and implementing a private-sector investment strategy and procurement approach to attract qualified eco-tourism investors for the Maputo Special Reserve. Following investment in the Maputo reserve, a standardized set of procedures was compiled and a toolkit developed for future use by Mozambican authorities. The Maputo model has been replicated to attract a $30 million investment for a 200-bed eco-lodge in Mozambique s Zambézia Province. The program is also assisting in sustainable tourism development. Through new investment zone regulations, for example, the government can reserve land with unique natural, cultural, or historic attributes for tourism development. The Inhassoro and Crusse-Jamali sites along Mozambique s coasts have been declared the country s first tourism investment zones, securing over 4,500 hectares. The 25-year partnership agreement creates a joint venture between a local community association, A Hi Zameni Chemucane, and a private investor, the Bell Foundation, to build and operate a 36-bed lodge at Ponta Chemucane in the reserve. It is Mozambique s first agreement granting a community long-term concession rights for a tourist area within one of the country s leading national parks. The lodge is expected to create 60 full-time jobs and help spur local growth in an area that has few opportunities for formal employment. In addition, annual concession fees to be paid to the government will be used for park and longerterm conservation management. climate team to promptly respond to burgeoning client demand for agri-specific investment climate reforms, resulting in fivefold growth of the regional industry portfolio within the fiscal year. Building on the success of the Ukraine investment climate project in abolishing duplicative Soviet-era regulations on food safety in 2010 (see box, p. 26), the product team worked with a range of regional teams in Europe and Central Asia (IFC investment climate advisory, World Bank, IFC Investment, IFC Sustainable Business Advisory, and Access to Finance) to launch programmatic interventions on agri reform and investment generation. This work is ongoing in Armenia, Bosnia and Herzegovina, Moldova, Tajikistan, and Ukraine. The teams are also collaborating in Central Asia, where a product development project is underway encompassing tax transparency and industry-specific regulatory reform. In Rwanda, FIAS funding is supporting investment promotion in the tea and horticulture sectors. The agri agenda focuses on addressing critical constraints at the industry level while leveraging the improved investment climate to generate investment impact. This approach to investment promotion in agri is being replicated in various other countries in Africa, Latin America, and beyond. Overall, FY11 saw significant growth of the investment climate agri portfolio globally, from 5 projects in FY10 to 14 pipeline and operational projects at the end of the fiscal year, with the Africa region witnessing the strongest demand by clients. The ramp-up in FY11 sets the stage for the FY12 16 FIAS strategy cycle, during which agri is expected to remain a major growth area in the portfolio. This FY11 OPERATIONAL HIGHLIGHTS 27

32 increased focus comes at an opportune time and is part of a wider World Bank Group initiative. On one hand, it informed the IFC Agri Action Plan for FY12 14, which was endorsed by IFC Senior Management in March On the other, it is leveraging links with the World Bank s Agriculture and Rural Development Department to incorporate investment climate reform in long-term agricultural and agri transformations. FIAS funding in FY11 has contributed to the establishment of a strong foundation for investment climate projects focused on the tourism sector, an important, and in some cases the most significant, service sector for many IDA countries. Eighty percent of Bank Group client countries have identified tourism as a key economic sector in their economic diversification and poverty reduction strategies, 14 and the sector is second to agriculture only in terms of employment generation per unit of investment. During FY11, a standardized mode of engagement for FIAS-supported tourism work was articulated, with diagnostic, regulatory, and investment facilitation dimensions, resulting in an active portfolio covering nine countries. A further pipeline of projects in 14 countries has been generated. There has been strong regional demand for tourism work, and FIAS resources have been significantly leveraged by regional teams in South Asia, the Middle East and North Africa, and Africa, in particular. The relevance of the tourism sector and the issues around sector governance, competition policy, and debt resolution have been especially prominent in the wake of the Arab Spring and discussions with the emerging administrations. The gender gap in economic participation remains vast. Women own fewer es only one-third of firms surveyed by the World Bank in 118 economies have female participation in ownership. 15 Businesses owned by women also tend to have fewer employees, lower sales, and lower invested capital. 16 There are fewer women than men in the global labor market, and women in every economy are paid less for their work than men with the wage gap averaging 17 percent in The Hawkins, Donald E The World Bank s Role in Tourism Development. Annals of Tourism Research, Vol. 34, No.2: Data from World Bank Enterprise Surveys on 118 countries (see 16 Bruhn, Miriam Female-Owned Firms in Latin America: Characteristics, Performance, and Obstacles to Growth. Policy Research Working Paper 5122 (November). World Bank. World Development Report, which focused on Gender Equality and Development and other recent World Bank Group publications like Women, Business and the Law 2012 are bringing attention to such issues. FIAS is responding, including by incorporating genderspecific reform targets in its projects particularly on the industry side (see box, p. 29, about FIAS-supported technical assistance to a BICF economic zones project in Bangladesh). FIAS is also supporting follow-up technical assistance for on-the-ground applications of the practitioner s guide, Gender Dimensions of Investment Climate Reform, released in FY10. In FY11, FIAS technical assistance to develop public-private dialogue led to the establishment of the Women In Sustainable Enterprises (WISE) organization in Tonga. WISE seeks to connect women across all industries and provide them with a platform to lobby for reforms that encourage women to set up es, create jobs, support their families, and foster sustainable economic growth across communities and the country. In the Middle East and North Africa region, the FIASsupported alternative dispute resolution global product team provided technical assistance to help improve women s access to out-of-court mechanisms for resolving disputes. In focus group discussions, women entrepreneurs have indicated that they feel more comfortable seeking mediation with female mediators; in response, the ADR projects made an explicit effort to train female mediators. Of the 58 female mediators trained in FY11, 30 were accredited (representing a third of the total accredited mediators). Female entrepreneurs were among the parties in 144 cases referred to the mediation centers supported by projects funded through FIAS and IFC regions. Eightythree of these cases were successfully resolved through mediation. FOSTERING INNOVATION AND COMPETITION FIAS-supported programs increasingly consider innovative approaches to harness green or low carbon patterns of growth to meet the twin challenges of poverty reduction and climate change. The quality of the investment climate will play a key role in a transition to a green economy by setting standards and attracting much-needed private investment into low carbon, more resource-efficient ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

33 economic activities. In FY11, FIAS made progress in incubating and piloting new investment climate tools that can be used to promote green growth, including projects in Indonesia (see box, p. 30) and Colombia helping local governments in the capital cities design and implement green building codes. These approaches will continue to be developed during the FY12 16 cycle, in support of broader World Bank Group climate change-related efforts. With FIAS support, Rwanda s first special economic zone (SEZ) near Kigali is developing as a green zone. The government has received technical advice on developing low-carbon regulations for the zone, including through stakeholder consultations with the City of Kigali, the Ministry of Infrastructure, the Rwanda Energy, Water, and Sanitation Authority, the Rwanda Environmental Management Authority, the United Nations Industrial Development Organization, and the United Nations Environmental Program. The five key policy areas to be addressed, as prioritized by a task force of stakeholders, are energy, building codes and construction, water and sanitation, urban planning, and waste management. Competition plays a central role in fostering growth, investment, and job creation. Demand for competition policy reforms increased during the past fiscal year. FIASsupported work on competition focuses on removing constraints that stifle growth of competitive market structures in key strategic sectors. It also supports the development of effective competition policies to prevent discriminatory treatment and discourage anti-competitive actions. In FY11, the framework for competition policy reforms was developed and applied to the preparation, design, and implementation of eight investment climate projects in four different regions including the Middle East and North Africa, Sub-Saharan Africa, Latin America and the Caribbean, and East Asia and Pacific. The framework includes rapid-assessment tools to address economy-wide issues and sector-specific constraints to competition. The Creating Gender-Inclusive Economic Opportunities in Bangladesh FIAS-funded global product teams continue to provide technical expertise in project design and implementation to IFC regional programs, including the Bangladesh Investment Climate Fund (BICF). a In one such case, a global investment generation team working on a BICF-funded project helped the government of Bangladesh in formulating and implementing a social compliance management system in Bangladesh s export processing zones (EPZs). These zones house more than 300 factories and employ nearly 300,000 workers, mostly women, who manufacture garments and other products. One key component of the project is to increase female participation in the workers welfare associations in the zones. As a result of BICF s recommendation, 30 percent of seats on the association were allocated for women. Also, the role of female labor counselors who advocate on-site for women employees rights was strengthened. Shamela Begun, a worker at one of the factories in an EPZ shared her experience. Workers in factories outside the a. Results from BICF projects are reported in the BICF Annual Report, and they are not covered in the FIAS results reported in Annexes 1 and 2 of this review. EPZs don t have the facilities that we have in the zones and complain about not getting holidays or about getting paid late, she said. Here it is safe and comfortable. We have a feeling of community. I feel a part of things. Thanks to her hard work, Shamela now takes home about $100 each month. She also receives benefits at her garment factory, including free medical coverage, lunch, and flexible sick leave allowance. Both her sons have university degrees and supplement their mother s income. BICF, managed by IFC in partnership with DfID and the European Union, has facilitated $203 million of FDI and 17,000 new jobs to the economic zones of the country through an aggressive investment promotion capacitybuilding program for the government of Bangladesh. The project actively supported enactment of the Economic Zones Act, opening up the zones program to private developers and paving the way for a potential 1.5 million new jobs in private zones by Also, the project facilitated a new central effluent treatment plant in the Dhaka EPZ which, by August 2011, had increased the amount of properly-treated industrial water from 0 to 15,000 cubic meters. FY11 OPERATIONAL HIGHLIGHTS 29

34 Curbing Greenhouse Gases in Jakarta As one of the world s largest greenhouse gas emitters, Indonesia s building sector accounted for more than a quarter of total energy use in 2004 a share that is expected to increase to nearly 40 percent in the next two decades. In response, IFC advisory services in the region is helping the government of the capital province, Jakarta, develop a green buildings code. FIAS activities have supported the code s incubation and development. The code sets energy and water efficiency requirements for buildings, and will require climate change adaption practices to be included in building designs. Implementation of the code is expected to reduce energy consumption in large commercial and high-rise residential buildings, potentially cutting around 2.7 million tons of carbon dioxide per year by This is equivalent to carbon sequestered annually by 60 million grown trees or equivalent to the current annual emission of Macau SAR (2.4 million tons of carbon dioxide). The goal is to create a code that is simple to implement, effective, and easy to monitor. The project s analysis modeled a range of possible changes for each commercial building type in Jakarta which met clear criteria for market preparedness and ease of implementation, while maximizing the benefits of energy (CO 2 ) and water reductions in a cost-effective manner. The details of the code have been developed in close consultation with government as well as private sector stakeholders, including developers, landlords, and professional associations. To help achieve [the national target of cutting carbon emissions by 26 percent by 2020], Jakarta has been working on a number of sustainable city initiatives since 2008, said Jakarta Governor Fauzi Bowo at the launch of the project. With effective implementation of the green buildings code in Jakarta, the city can serve as a model for implementation in other cities in Indonesia. The project is evaluating the feasibility of various measures under the draft green building code and hosting a series of consultation workshops with key private sector players. It is providing support for the local government through a series of training and capacity-building initiatives, and to the private sector through a review of financing needs and incentives for firms to retrofit existing buildings. global competition team also provided inputs and technical feedback to client countries as part of cross-support to five World Bank projects including in Russia and Turkey. Advisory services on competition allowed repealing price controls proposals, minimizing distortive state aid schemes, and reducing discriminatory actions by government officials. Improvements to the competition framework have been proposed and implemented in two countries Armenia and Romania and more than five interventions are in the pipeline in at least three IDA countries. SUPPORTING PRODUCTIVE PARTNERSHIPS FIAS continued its rich legacy of setting up new partnerships and strengthening existing collaboration with donors, clients, teams across the World Bank Group, and external good practice institutions in the investment climate arena. An array of tools and services to support investment climate improvements is available within the Bank Group, but for any given project these key products may not be offered through any one department. FIAS-funded teams in the Investment Climate Department, working closely with MIGA, IFC, and the World Bank, often provide a critical link to unlocking synergies and bringing technical expertise from different parts of the institution together to provide comprehensive reform solutions for clients. In Rwanda, for example, a FIAS-supported advisory project is partnering with IFC and the World Bank to attract possible investments in the agri sector. Removing critical constraints to increased investment and exports in the horticulture and tea sectors, in particular, is considered key to achieving this goal. MIGA guarantee staff attended the Rwanda Investor Conference, which highlighted recent improvements to the country s investment climate and showcased new investment opportunities in agri. Collaboration with MIGA on specific activities of mutual interest was expanded in FY11. In order to gauge marked demand for the planned MIGA Facility for Conflict-affected and Fragile Economies, FIAS-funded activities included organizing a number of focus group discussions with private sector participants in Bosnia and Herzegovina, Georgia, Liberia, and Sierra Leone. Moreover, a MIGA staff member was posted to the Vienna office under an ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

35 assignment jointly funded by FIAS and MIGA. As part of the assignment, the linkages between investment climate reforms and political risks are being researched, with the goal of developing a new political risk assessment tool that can be used by countries interested in lowering noncommercial risks for cross-border investors. FIAS-supported global product teams continued in FY11 to collaborate closely with practitioners in their respective reform arenas within and outside the Bank Group. On the tax work, for example, the FIAS-funded product team partnered closely with different units within the World Bank Group including Poverty Reduction and Economic Management and IFC s Legal Department. In Tunisia, the team is supporting the World Bank s assistance to the transition government, working with the Ministry of Finance in designing and implementing a reform of tax and customs formalities affecting es with the objective of streamlining procedures, cutting costs, and improving transparency. Externally, the global tax work is closely coordinated with the International Tax Dialogue, which comprises all major players providing tax technical assistance including the International Monetary Fund, the OECD, regional tax groupings, and major donors. Tax transparency-related collaboration includes the G20, the OECD, the Global Forum for Tax Transparency and Exchange of Information, the International Bureau of Fiscal Documentation, and the European Commission on supporting the global mandate to improve tax transparency in countries through technical assistance. The team also works with regional tax administrators forums such as the Africa Tax Administrators Forum. During FY11 other innovative partnerships with leading institutions in the investment climate arena were organized, including a tripartite cooperation with the Norwegian Agency for Development Cooperation and the Bronnoysund Registration Centre (BRC) in Norway. The first agreement of its kind, it allows FIAS-supported teams to draw on the regulation experience of state agencies from developed economies to benefit projects in developing countries. Experts from BRC shared their firsthand experiences with clients in Nepal, Sierra Leone, Tanzania, and Togo. In addition, a comprehensive case study of registration reforms in Norway was developed and made available to reform practitioners. This pilot approach to partnerships with relevant state agencies from developed countries is a model to be replicated in similar partnerships going forward. Partnerships on competition policy issues with the OECD, the International Competition Network, and the International Development Research Centre have been nurtured through collaboration on analytical work, participation in knowledge events, and coordination to take advantage of synergies among partners. On trade, the FIAS-supported team engaged with international organizations such as the World Trade Organization, the Caribbean Community and Common Market, and the United Nations Conference on Trade and Development. Benchmarking tools such as the subnational Doing Business reports (see p. 25 for more detail) also rely on strong partnerships. Increasing demand from client countries to conduct repeated benchmarking studies in 16 economies have paved the way to gradually transfer the methodology, share best practices, and develop expertise in client countries by partnering with local institutions and governments. Currently, the team is working in partnership with think tanks and academic institutions in Mexico, Indonesia, the Russian Federation, and the Philippines. After benchmarking 38 economies and more than 300 cities, a new franchising model is being developed in Mexico, the pioneer country for such subnational studies. There, the local strategic partner is responsible for implementing the project in collaboration with the government, while the role of the Bank Group focuses on providing quality control and the Doing Business brand. Strong engagement with donor partners, not only on funding but also through staff learning and knowledge activities, continues to provide the cornerstone for the success of FIAS activities. This engagement occurs through platforms such as the Donor Committee for Enterprise Development, donor participation on advisory panels for different global products, as well as learning events sponsored by global product teams and at the project level. For more details on funding and staff exchanges, see Financial Results and Resource Use section, p. 36. FY11 OPERATIONAL HIGHLIGHTS 31

36 KNOWLEDGE MANAGEMENT, LEARNING, AND COMMUNICATIONS The knowledge management and learning program is designed to establish the thought leadership of FIAS-supported activities in the area of investment climate reform within and outside the Bank Group. In FY11, the program was further strengthened, engaging with practitioners, government and private sector clients, and donor partners and other stakeholders. As part of this approach, over 45 events attracting more than 1,500 staff and external participants including seminars, deep dive learning events, and client peer-to-peer workshops were supported by FIAS in FY11 (see box, p. 34). One such activity was the global networking and learning event for the investment policy product held in Vienna, Austria. Attended by more than 120 participants from 43 countries, it helped deepen the technical skills of operations officers and established strong networks with government officials and investment policy practitioners. To help increase staff capacity on investment climate issues and themes, intensive learning events such as the trade logistics, registration, agri and tourism product workshops were organized during the Bank Group s 2011 Financial and Private Sector Development Forum in Washington, D.C. Under the theme of Building Competitiveness, the forum brought together more than 600 Bank Group colleagues, private sector development executives, academics, and donor representatives to discuss the latest issues in financial sector and private sector development. Furthermore, contributions to the World Bank Group Entrepreneurship Snapshots one of the most comprehensive datasets on cross-country firm entry data have been created in cooperation with the World Bank Development Research Group, IFC, and the Kauffman Foundation, yielding wide recognition across the World Bank Group (see pp.13 14). In FY11 several flagship reports were published, including: Investing Across Borders, Rebuilding Business and Investment in Post-conflict Sierra Leone, and Managing for Impact FIAS Strategy for FY These are also available electronically on the investment climate Web site. A wide range of other publications were produced including handbooks, guidebooks, technical papers, the Investment Climate In Practice note series, a viewpoint note, and a number of SmartLessons (see p. 35 for a listing of key FY11 publications, including short summaries of each). COMMUNICATIONS Communications activities in FY11 were geared to showcase how FIAS-supported investment climate work across the globe has contributed to results and had a substantive impact on clients development objectives, including a more vibrant private sector, new es, jobs, and growth. This results communications agenda has relied on solid monitoring, evaluation, and impact data as the basis for feature stories, multimedia, and other communications products. Through client, private sector, and other stakeholder testimonials, on-the-ground stories provided a human face to the data, presenting results in a compelling and balanced way. In FY11, the investment climate thematic Web site (www.wbginvestmentclimate.org) was successfully launched. The Web site is among the top-10 search results for the term investment climate on Google. It ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

37 is receiving strong interest, with page views rising from 3,000 when it was launched in October 2010 to 136,000 views by June 2011, becoming the main platform for disseminating investment climate-related knowledge products and information. Electronic versions of most popular investment climate handbooks including the Investment Generation Toolkit, How to Reform Business Licenses, and the Health Policy Toolkit are now available, making these knowledge products easily accessible and highly interactive for practitioners. Several slideshows and short films documenting success stories through compelling client and entrepreneur testimonials were produced in FY11. Four investment climate videos were well received by viewers, garnering a total of 8,000 views on YouTube. Cultivating a community of social media contributors and leveraging World Bank Group social media platforms created opportunities for direct conversations and discussions about investment climate reforms. Stories featuring investment climate project activities and results were posted across the World Bank Group s social media channels, such as the IFC and World Bank corporate, country- and region-specific Facebook and Twitter accounts. Investment climate staff actively contributed to thematic blog sites, including the World Bank s Private Sector Development Blog. Investment Climate toolkits are available online at KNOWLEDGE MANAGEMENT, LEARNING, AND COMMUNICATIONS 33

38 Collaborating Across the World Bank Group to Encourage Client Peer-to-Peer Learning A peer-to-peer workshop organized jointly with IFC Advisory Services in the Middle East and North Africa brought together over 70 e-government experts in Amman, Jordan in May 2011 to explore how technology and ICT solutions could improve and regulatory environments in the region. The event assessed how governments in the region are using technology to ease the regulatory burden on es, making it easier for new entrepreneurs to register their es and access government services. Speakers highlighted innovations such as cloud computing, social media, and mobile applications as new opportunities for governments to improve cost-effectiveness, increase transparency, facilitate the government-to- dialogue, and extend access to information and services to entrepreneurs in underserved segments of the economy. The event enabled participants to learn more about institutional and change-management considerations they must address in reengineering government service delivery. All participants expressed their satisfaction with the learning and knowledge sharing, and asked the Bank Group team to offer more specialized training for larger target groups. Also in FY11, the FIAS-funded secured transaction and collateral registries product jointly with the IFC Access to Finance Business Line organized the Financial Infrastructure- Secured Transactions International Conference in Rio de Janeiro, Brazil in March The purpose of the conference was twofold: to educate and train public- and privatesector stakeholders on recent developments and best practices in secured transactions and collateral registries; and to develop a greater awareness of clients innovative approaches to carrying out secured transactions reform and the adoption of collateral registries. More than 70 participants attended the secured transactions sessions at the event. Attendees included government officials, representatives from national central banks, stakeholders from private financial institutions, individuals from the and legal communities, bilateral donors (the United States Agency for International Development and Switzerland s State Secretariat for Economic Affairs), and multilateral organizations ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

39 KEY KNOWLEDGE PRODUCTS PUBLISHED IN FY11 Flagship Reports The Investing Across Borders 2010 report, launched in July 2010, compares regulation of FDI in 87 economies and offers recommendations for governments looking to improve their competitiveness in attracting investment. The Rebuilding Business and Investment in Post-Conflict Sierra Leone (RABI) report features the perspectives of entrepreneurs, key government reformers, and FIAS practitioners in tracing Sierra Leone s path to revive and grow the private sector following its long civil war. The publication, Managing for Impact: FIAS Strategy for Fiscal Year , outlines FIAS mission and reform activities for the FY12 16 strategy period. Investment Climate IN PRACTICE note series The flagship note series for clients and practitioners featured handson topics in investment promotion, investment regulation, taxation, and strategic communications. Using Strategic Communications to Engage Stakeholders in Tax Reform (no. 15, March 2011) outlines a strategic communications approach tested in tax reform projects in the Republic of Yemen, Sierra Leone, and Lao PDR. Investment Regulation and Promotion: Can They Coexist in One Body? (no. 16, March 2011) outlines how investment promotion is correlated with investment regulation. The note argues that the two functions should be kept separate and offers policy advice for countries that have them combined. Leveraging Technology to Support Business Registration Reform: Insights from recent country experience (no. 17, June 2011) discusses key findings of a recent Bank Group survey examining the experience of 34 company registrars in implementing new or upgraded technology solutions. It identifies several factors influencing the registrars approaches, and summarizes key lessons in choosing and implementing ICT solutions. Viewpoint note series (published by the World Bank Group Financial and Private Sector Development Vice Presidency) Attracting FDI: How Much Does Investment Climate Matter? analyzes how improving the investment climate offers an excellent opportunity for countries seeking to attract FDI. Handbooks, Technical Papers, and Reports How to Reform Business Inspections: Design, Implementation, Challenges is a practitioners handbook that provides would-be reformers, inside and outside of the Bank Group, with a comprehensive range of tools that enable them to tackle all essential aspects of regulatory simplification and smarter regulation. Surveying Businesses on Tax Compliance Costs analyzes surveys of taxpayers regarding their experiences with tax compliance costs and their attitudes toward tax compliance. Tax Perception and Compliance Cost Surveys: A Tool for Tax Reform analyzes surveys of taxpayers and shows how understanding perceptions and experience is important to gauging changes in tax morale and general trends in tax compliance. Alternative Dispute Resolution Guidelines provides a framework for setting up a system for alternative dispute resolution. It highlights and draws upon experiences of many countries within the investment climate reform agenda. Alternative Dispute Resolution Center Manual: A Guide for Practitioners on Establishing and Managing ADR Centers summarizes best practice guidelines in the establishment of an ADR center, provides a rich body of case studies incorporating ADR centers globally, and provides a comprehensive appendix of pro forma documents for use by ADR centers. Special Economic Zones in Africa: Comparing Performance and Learning from Global Experiences provides the first systematic and comprehensive analysis of zone programs in sub-saharan Africa. It is the result of detailed surveys and case studies conducted during 2009 in ten developing countries, including six in sub-saharan Africa. Four Country Impact Evaluations are external assessments of FIAS programs in Burkina Faso, Liberia, Rwanda, and Sierra Leone. The reports analyze the efficacy of the programs in achieving their initial objectives and the quantitative impacts generated from program achievements. Inspections Reform: Do Models Exist? is an analytical review of Inspections reforms in 25 countries worldwide, with analysis of models and features of reforms undertaken. SmartLessons In FY11 staff authored and co-authored 17 Smartlessons, highlighting experiences from FIAS-supported activities with Bank Group staff through this IFC-sponsored learning note series, one that is also increasingly sharing Bank Group lessons with external audiences. Three of these notes Pilot Land Reforms in Nigeria: Think Big, Start Small, Move Fast But Where Do We Start?, Show Me the Money! Using Peer-To-Peer Learning for Accelerated Investment Climate Reforms, and VAT Media Campaign in Lao PDR Results in a Big Bang for the Buck were first-prize winners in Bank-wide SmartLessons competitions. KNOWLEDGE MANAGEMENT, LEARNING, AND COMMUNICATIONS 35

40 FINANCIAL RESULTS AND RESOURCE USE FIAS activities covered in the Annual Review are co-financed via a set of FIAS trust funds managed by the World Bank Group s Investment Climate Department. In addition to FIAS trust funds, the Investment Climate Department manages additional funds received from the World Bank and IFC for operational and administrative tasks related to the department s anchor or backbone function in the investment climate space (for example, as backbone for IFC s Investment Climate Business Line and for the World Bank Group s Financial and Private Sector Development Vice Presidency), as well as donor funds for activities managed outside the scope of FIAS (such as the policy and advisory component of IFC s Health in Africa program or work on private infrastructure). The financial results reported in this section cover only those funds managed by the Investment Climate Department under the FIAS trust fund structure. The Investment Climate Department follows IFC s standard accounting policies and procedures. 17 FIAS financial reports use cash-based reporting in alignment with the quarterly financial reports on IFC s donor funded operations. FUNDING Contributions received in FY11 from the following donors and clients are gratefully acknowledged: Direct contributions to FIAS trust funds (core donors are in bold): 18 Austria European Commission France Ireland Kauffman Foundation Korea Luxembourg the Netherlands Norway Sweden Switzerland the United Kingdom the United States 17 Annual contributions from IFC, MIGA, and the World Bank are treated in the same manner as core donor funds and are co-mingled with other donor funds in the FIAS Master Trust Fund account, as terms and conditions allow. Contributions from the IFC Investment Climate Business Line are treated as an additional source of project-specific funding. 18 The FIAS program received financial contributions in FY08 10 from other donor countries including Australia, Iceland, Italy, and New Zealand to support the implementation of the FIAS investment climate program outlined in the FIAS FY08 11 strategy. Contributions for FIAS projects received via IFC s Technical Assistance Trust Funds (TATF) program: Japan Client contributions: Asia-Pacific Economic Cooperation Spain Denmark Mexico Poland Core and Programmatic Funding In FY11, FIAS donors, clients, and the World Bank Group contributed a total of $32.1 million (net of trust fund administration fees of $1.2 million) to the various FIAS trust funds, supporting the implementation of a broad-based investment climate reform program under the FIAS umbrella (see details in Tables 1 and 2). This amount is roughly equal to the total contributions received for FIAS in FY10 ($32.7 million) and reflects the strong and continued commitment by donors to support investment climate reform at the global level, despite severe budget constraints ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

41 experienced by many donor partners due to the global financial crisis. World Bank Group core contributions totaled $8.3 million in FY11, including $4.0 million from IFC, $2.7 million from MIGA, and $1.6 million from the World Bank. Core contributions received from donors amounted to $4.6 million in FY11 (significantly down from $6.7 million in FY10). These contributions include an allocation of $1.5 million from the Netherlands earmarked for activities in IDA countries. Overall, the amount of core funding for FIAS dropped from $18.3 million in FY08 to $12.8 million in FY11, a significant decrease which seriously limited the flexibility of the FIAS program over the FY08 11 strategy cycle. Programmatic contributions from donors, made available through thematic and regional FIAS Trust Funds, totaled $7.4 million in FY11, slightly down from donor contributions of $8.6, $8.8, and $7.5 million in FY08, FY09, and FY10, respectively. Project-Specific Funding Reduced levels of core and programmatic contributions were offset in FY11 by increased project-specific contributions received from clients, donors, and the World Bank Group including the World Bank Group s Trade Facilitation Facility and Gender Action Plan. Project-specific contributions from IFC, donor partners, and clients amounted to $11.3 million in FY11, including $8.2 million from donors, $0.3 million from clients, and $2.8 million from IFC s Investment Climate Business Line. Client contributions received from four clients ($0.3 million) were significantly down from contributions received from clients in FY09 and FY10 ($1.1 million and $1.8 million, respectively). The potential to generate significant cash contributions from clients remains modest given the high concentration of FIAS activities in IDA as well as fragile and conflict-affected countries. Project-specific contributions from donors remained consistent at $8.3 million in FY11 and $8.8 million in FY10, reflecting strong donor interest in client-facing investment climate reform interventions and an ongoing trend among some donors to decentralize their aid budgets to the field. Project specific contributions from IFC, received in the form of project-specific FMTAAS allocations, 19 amounted to $1.9 million in FY11. These allocations primarily supported a range of global knowledge management and product design and development initiatives implemented under the FIAS umbrella. In addition, the Investment Climate Department received IFC Advisory Service contingency funds in the amount of $0.9 million to finance FIAS-related advisory and technical assistance activities (see Table 2). Other contributions from IFC, amounting to $1.7 million in FY11, supported non-project activities including portfolio management, monitoring and evaluation, and knowledge sharing associated with the global portfolio implemented under the FIAS umbrella. Contributions Outside FIAS Regular Financial Structure A range of indirect contributions for FIAS-related advisory activities were made available to the Investment Climate Department via non-fias specific funding mechanisms and are listed in Table 3. These contributions include projectspecific financial support from Japan and Spain, made available via the IFC s Technical Assistance Trust Funds (TATF) program (a total of $1.0 million). Moreover, a range of World Bank and IFC regional advisory services units helped leverage FIAS-funded activities through cross support, a mechanism under which Bank or IFC units cover the costs of Investment Climate Department staff working on investment climate projects managed by these units. The level of cross-support 19 FMTAAS is IFC s Funding Mechanism for Technical Assistance and Advisory Services. FINANCIAL RESULTS AND RESOURCE USE 37

42 received throughout FY11 from World Bank and IFC units and related to FIAS-funded activities amounted to approximately $3.0 million. Funding from TATF, World Bank supplemental budget allocations, and cross-support are managed outside the regular FIAS trust fund structure and thus are not included in Table 1. Shift Away from Core to Project-Specific Contributions The composition of funding for FIAS has changed significantly over the past two to three years and is negatively affecting the degree of flexibility the program has to respond quickly to new demands for investment climate reform support. FIAS core funding has been steadily shrinking from $18.3 million in FY08 to $12.8 million in FY11. On the other hand, project-specific funding has increased from $9.4 million in FY08 to $11.3 million in FY11. The shift towards project-specific funding is even more dramatic if funding components managed outside the Investment Climate Department are taken into account (in particular TATF funding and cross-support from Bank and IFC units). As a result, the FIAS program is increasingly driven by specific project activities for which donors are willing to provide funding, and less by overall client needs and a global strategic investment climate reform agenda. Also, core funding is typically used to fund the knowledge management and learning agenda under FIAS, as well as new, innovative approaches and products that are under development. Given the ongoing scarcity of core funds, there is a risk that such activities will have to be scaled back significantly over the coming years. In-Kind Support Via Staff Exchanges and Secondments The FIAS program has continued to benefit from in-kind resources that several donors have made available in the form of secondees and staff exchanges. Throughout the year, senior staff members from Agence Francaise de Developpement (AfD), the United Kingdom s Department for International Development, the Italian Ministry of Foreign Affairs, the Korean Ministry of Knowledge Economy, the Norwegian Ministry of Foreign Affairs, and the Spanish Institute for Foreign Trade have been seconded to the Investment Climate Department where they have been working on FIAS-funded activities. In return, one Investment Climate Department staff member was on a long-term assignment with AfD. Such staff exchanges and secondments offer an attractive way for FIAS partners to be directly involved in the program and establish direct connections between their respective private sector development programs and FIAS. USE OF FUNDS FIAS trust fund expenditures for investment climate reform activities reached $30.3 million in FY11, an increase of 10 percent over FY10 expenditures of $27.6 million (Table 1, Uses of Funds). The increase in FY11 expenditures is due in large part to expenditures associated with the additional contingency funding received from IFC ($0.9 million) and a conscious effort to use earmarked donor funds to the fullest extent possible to close the FIAS FY08 11 funding cycle. As a result, staff and consultant costs as well as travel costs increased, whereas indirect costs (infrastructure, office space, rent) remained relatively flat. Administration fees are collected by IFC to cover trust fund administration costs and are deducted from donor contributions at the time of receipt. In FY11 IFC collected trust fund administration fees of $1.2 million from FIAS donor contributions. 20 At the end of FY11, fund balances in the various FIAS trust funds totaling $18.4 million 21 were carried over into FY12. This amount is relatively large as it includes $8.0 million of core funds and about $10.4 million of program- and project-specific funds received under multi-year donor agreements. In line with prudent financial management principles, FIAS resources are strategically managed to avoid liquidity and cash-flow issues as experienced at the beginning of the FY08 11operational cycle. In this context, the transition into the new FIAS FY12 16 strategy cycle presents specific challenges which required the carry-over of core funds to ensure FIAS operations into FY FIAS trust funds established after July 1, 2009 are subject to the standard IFC trust fund administration fee of 5 percent. Since most of FIAS trust funds were established prior to July 2009, a 3.5 percent trust fund administration fee applies. Trust fund administration fees collected by IFC are included in Table 1, Sources of Funds for FY FIAS trust fund cash balances less commitments and balances refunded to donors ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

43 Project-related expenditures (both direct and indirect) accounted for 88 percent of total FIAS expenditures and general and administration expenditures (rent, communications, equipment, and other non-overhead costs such as administrative and back-office support staff) accounted for 12 percent of total expenditures (see Table 4). In July 2010 IFC introduced a new cost allocation methodology for Advisory Services which resulted in a re-distribution between direct and indirect project costs. Due to this change, some figures in Table 4 are not consistent with figures reported in FIAS Annual Reports/Reviews for FY Although general and administration expenditures are not affected by this change in methodology, FY08 10 general and administration expenditures are restated to exclude trust fund administration fees previously reported as expenditures. FINANCIAL RESULTS AND RESOURCE USE 39

44 TABLE 1: SOURCES AND USES OF FUNDS 1 In US$ Thousands FY08 FY09 FY10 FY11 SOURCES OF FUNDS WORLD BANK GROUP CORE CONTRIBUTIONS IFC 2 8,000 2,000 2,000 4,000 IBRD 2,000 1,600 1,600 1,600 MIGA 4,000 3,500 3,000 2,700 Subtotal World Bank Group Core Contributions 14,000 7,100 6,600 8,300 WORLD BANK GROUP PROJECT-SPECIFIC AND OTHER CONTRIBUTIONS IFC IC Business Line Project-Specific 3,800 2,672 1,862 1,915 IFC IC Business Line Administration 1,687 IFC Advisory Services Contingency 880 IFC Global Fund SUBTOTAL WORLD BANK GROUP CONTRIBUTIONS 17,800 9,922 8,862 12,782 CORE DONOR CONTRIBUTIONS Australia ,502 Austria France 1,281 1,403 Iceland 45 Ireland 735 Italy 1,414 Luxembourg Netherlands (Global Program) ,350 1,950 1,550 New Zealand Norway ,138 Sweden Switzerland United Kingdom Subtotal Core Donor Contributions 4,310 8,401 6,746 4,552 PROGRAMMATIC DONOR CONTRIBUTIONS Austria (Investment Generation) 2,571 2,608 2,489 2,287 Austria (Crisis Response) Luxembourg (Crisis Response) Netherlands (Trade Logistics) Netherlands (Secured Lending) Norway (Business Entry) Norway (Trade Logistics) Ireland (Africa) Italy (Africa) 508 Sweden (Africa) ,122 Switzerland (Secured Lending) Switzerland (Tax) Switzerland (Western Balkans) United Kingdom (Western Balkans) United Kingdom (Tax) 1, United States (Doing Business) 632 1, ,704 Subtotal Programmatic Donor Contributions 8,620 8,830 7,466 7,413 DONOR CONTRIBUTIONS (PROJECT SPECIFIC) 4 5,525 4,436 8,868 8,267 TOTAL DONOR CONTRIBUTIONS 18,455 21,667 23,080 20,231 TOTAL WORLD BANK GROUP AND DONOR CONTRIBUTIONS 36,255 31,589 31,941 33,013 CLIENT CONTRIBUTIONS 129 1,093 1, TOTAL RECEIPTS 36,384 32,682 33,771 33,296 Trust Fund Administration Fees 5 1, ,140 1,212 TOTAL (NET) RECEIPTS 35,285 31,709 32,631 32, ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

45 TABLE 1: SOURCES AND USES OF FUNDS In US$ Thousands (continued) USES OF FUNDS STAFF COSTS FY08 FY09 FY10 FY11 Staff 9,961 11,636 11,181 13,128 Consultants and Temporaries 9,322 10,268 7,634 8,101 Total Staff Costs 19,283 21,905 18,815 21,229 TRAVEL 6,217 6,488 5,229 5,678 INDIRECT COSTS Office Occupancy 683 1,071 1,018 1,073 Office Equipment Other Operating Costs Other Costs 108 1,693 2,256 1,718 Total Indirect Costs 1,122 3,681 3,573 3,366 TOTAL USES OF FUNDS 26,622 32,073 27,616 30,273 1 FIAS Annual Review is prepared as a reporting tool for FIAS Donors and Management, utilizing management accounting principles. 2 IFC contribution of $4.0 milllion per annum, front-loaded as follows: FY08: $4.0 million; FY09: $2.0 million. 3 The Netherlands core contributions are earmarked for activities in IDA countries. 4 For details of FY11 project specific contributions, see Table 2. 5 Administration fees collected by IFC to cover cost of trust fund administration. TOTAL FIAS FY11 DONOR CONTRIBUTIONS Percentage of FY11 Source of Funding (Gross) Receipts a CORE CONTRIBUTIONS World Bank Group Core Contributions [25% of Total] Core Donor Contributions [14% of Total] PROGRAMMATIC CONTRIBUTIONS Programmatic Donor Contributions [22% of Total] CLIENT CONTRIBUTIONS Client Contributions [1% of Total] PROJECT SPECIFIC DONOR CONTRIBUTIONS Project Specific Donor Contributions [38% of Total] 100% = $33,296,000 a. Includes Administration fees of $1,212,000 FINANCIAL RESULTS AND RESOURCE USE 41

46 TABLE 2: PROJECT-SPECIFIC DONOR AND CLIENT CONTRIBUTIONS In US$ Thousands PROJECT DONOR 1 AMOUNT WORLD BANK GROUP CONTRIBUTIONS (IFC IC BUSINESS LINE AND IFC AS CONTINGENCY) Crisis Response (Insolvency) IFC IC BL 392 Impact Measurement IFC IC BL 224 Agri IFC IC BL 200 Trade Logistics IFC IC BL 199 Doing Business Reform Advisory in Conflict-Affected Countries IFC IC BL 191 Green Investment Climate IFC IC BL 140 Public-Private Dialogue IFC IC BL 116 Tax Haven, Transfer Pricing IFC IC BL 106 Subnational Doing Business IFC IC BL 101 Tourism IFC IC BL 97 Donor Committee for Enterprise Development IFC IC BL 70 Tax Transparency IFC IC BL 49 Business Regulation Deep Dive IFC IC BL 30 Advisory Services Tax Transparency IFC AS Contingency 500 Investing Across Borders IFC AS Contingency 280 Central Asia: Investment Services /Advisory Services Investment Climate Agri Tax IFC AS Contingency 100 Subtotal World Bank Group Contributions 2,795 DONOR CONTRIBUTIONS Kenya: Investment Climate Program (formerly, Regulatory Performance/Capacity Building) European Commission 2,353 Global Investment Promotion Benchmarking (GIPB) European Commission 1,461 Subnational Doing Business in Russia European Commission 259 OHADA Business Law Reform Program France 1,324 Entrepreneurship Project Kauffman Foundation 32 Low Carbon Green Economic Zones Korea 300 Kenya: Investment Climate Program (formerly, Regulatory Performance/Capacity Building) Netherlands 676 Regulatory Reform Netherlands 86 Agri USAID 483 Impact and Knowledge Management USAID 154 Mali Investment Climate Program USAID 676 Subnational Doing Business (Sao Tome) U.S. Treasury 63 Alternative Dispute Resolution (ADR) Developing/Building Trade Logistics Gender Action Plan (multidonor Trust Fund) Trade Facilitation Facility (multidonor Trust Fund) Subtotal Donor Contributions 8,267 CLIENT CONTRIBUTIONS Investing Across Borders Asia-Pacific Economic Cooperation 120 Regulatory Reform Review Denmark 32 Doing Business Reform Mexico 105 Doing Business Reform Poland 26 Subtotal Client Contributions 283 TOTAL FY11 PROJECT SPECIFIC DONOR AND CLIENT CONTRIBUTIONS 11,345 1 Abreviations: IFC IC BL (IFC Investment Climate Business Line); IFC AS (IFC Advisory Services); USAID (United States Agency for International Development) ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

47 TABLE 3: OTHER FUNDING INDIRECT SUPPORT TO FIAS PROGRAM In US$ Thousands OTHER FUNDING INDIRECT SUPPORT TO FIAS PROGRAM DONOR AMOUNT PROJECT-SPECIFIC FUNDING IFC TECHNICAL ASSISTANCE PROGRAM Commercial Mediation Product Development and Knowledge Management Japan 385 Global Investment Promotion Benchmarking Spain 226 Global Trade Logistics Advisory Program Spain 206 Public-Private Dialogue Product Development and Knowledge Management Spain 220 TOTAL FY11 OTHER FUNDING 1,038 TABLE 4: EXPENDITURES BY ADVISORY SERVICES ACTIVITY STANDARD ACTIVITY EXPENDITURES 4 PROJECT-RELATED EXPENDITURES FY08 ACTUAL % FY08 ACTUAL FY09 ACTUAL % FY09 ACTUAL FY10 ACTUAL % FY10 ACTUAL FY11 ACTUAL % FY11 ACTUAL Direct Project Expenditures 1 17,620,579 66% 21,993,742 69% 18,988,606 69% 19,057,472 63% Indirect Project Expenditures 2 4,117,228 15% 3,734,697 12% 3,322,980 12% 7,679,623 25% TOTAL PROJECT-RELATED EXPENDITURES 21,737,807 82% 25,728,439 80% 22,311,586 81% 26,737,095 88% GENERAL & ADMINISTRATION COSTS 3 4,883,706 18% 6,344,667 20% 5,304,256 19% 3,535,986 12% TOTAL STANDARD ADVISORY SERVICES ACTIVITY EXPENDITURES 26,621, % 32,073, % 27,615, % 30,273, % 1 Direct Project Expenditures include project preparation, implementation, and supervision costs. 2 Indirect Project Expenditures include program management and operational support, including new development, product development, monitoring and evaluation, knowledge sharing and staff development, donor relations, and public relations previously reported separately and consolidated under the new IFC cost allocation methodology introduced in July General & Administration includes overheads (rent, communications, equipment, etc.) and other non-overhead costs such as administrative and back-office support staff. 4 Due to a change in IFC s cost allocation methodology, some figures in Table 4 are not consistent with figures reported in FIAS Annual Reports/Reviews, FY The new cost allocation methodology redistributes expenditures between direct and indirect project costs. Although General & Administration expenditures are not affected by the change in the cost allocation methodology, FY08 10 G&A expenditures are restated to exclude trust fund administration fees previously reported as expenditures. FY08 11 trust fund administration fees are reported as a reduction to receipts in Table 1: Sources and Uses of Funds. TOTAL FIAS FY11 EXPENDITURES Percent of Total FIAS FY11 Expenditures PROJECT-RELATED EXPENDITURES Direct Project Expenditures Client-Facing [47% of Total] Non-Client-Facing [16% of Total] Indirect Project Expenditures Indirect Project Expenditures [25% of Total] GENERAL & ADMINISTRATION EXPENDITURES General & Administration Expenditures [12% of Total] 100% = $30,273,081 TOTAL FIAS FY11 PROJECT IMPLEMENTATION EXPENDITURES Percent of FIAS FY11 Direct Project Expenditures 50% IDA 24% Non-IDA 26% Knowledge Management/Product Development 100% = $19,057,472 FINANCIAL RESULTS AND RESOURCE USE 43

48 ANNEX 1: REFORMS AND RESULTS SUPPORTED BY FIAS IN FY11 The following tables summarize the reforms and results supported by the FIAS program in FY11 across the various investment climate topics. They are summarized by type of reform or result and include a brief description of the achievements. The results that have contributed to a particular reform are shaded together with the reform in the same background color. COUNTRY TOPIC REFORM DESCRIPTION RESULT INDICATOR RESULT DESCRIPTION AFRICA REGION Access to finance Starting a On December 13 and 14, 2010, the Organization for the Harmonization of Business Law in Africa (OHADA) amended the Uniform Act on Secured Transactions. The amended Act was published in the official gazette on February 15, 2011 and entered into force on May 15, The revised Act on Secured Transactions allows for the creation of possessory and nonpossessory security interests on all types of movable property, present and future, and guarantees all kinds of obligations (future, conditional, monetary, or non-monetary). In addition, it harmonizes the legal framework of mechanisms such as the gage (Art. 92 to Art.124) and the nantissement (Art. 125 to Art. 179). Furthermore, new types of security interests such as the nantissement de compte de titre financiers and the cession de créances à titre de garantie were introduced in the revised version of the Act. The amended Act also simplifies and establishes a general publicity regime for security interests on movable property (Art. 52 to Art. 66). Finally, the amendments also allow out-ofcourt enforcement of security interests on some movable property (Art. 104). On December 15, 2010, the OHADA Council of Ministers amended the Uniform Act on General Commercial Law. The Uniform Act was published in the OHADA official journal on February 15, 2011 and took effect on May 16, According to Article 45 of the General Commercial Law, entrepreneurs are required to provide a sworn declaration stating that they have not committed any crime and are not subject to any restriction on carrying out commercial activities (Article 10 of the Uniform Act on General Commercial Law). They are required to obtain copies of their criminal records within 75 days after incorporation of their companies. In addition, the amendments created a new category, entreprenant, that will simplify procedures for micro and small owners by allowing them to register a without hiring a lawyer. Enactment of new/ revised secured lending legislation Enactment of new/ revised entry related legislation OHADA s member states adopted in December 2010 two amended laws and three new regulations for the modernization of the registries for companies and secured transactions, which will significantly improve the legal and institutional framework for private sector activities in the 16 countries. The law includes acceptance of a much wider range of assets as collateral, such as future movable goods including accounts receivable, cash flow, and equipment. OHADA s Council of Ministers adopted the revised OHADA General Commercial Law in December The law creates a new category, entreprenant, which will simplify procedures for micro and small owners who cannot afford to hire lawyers to register their es. RESULT TYPE (National/ Subnational) REFORM RESULT 1 1 AFRICA REGION TOTAL 2 2 continued on next page ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

49 COUNTRY TOPIC REFORM DESCRIPTION RESULT INDICATOR RESULT DESCRIPTION BENIN Enforcing contracts Starting a Starting a Starting a Following the amendments to the OHADA Uniform Act on General Commercial Law, the Minister of Justice issued a letter on December 30, 2010 addressed to courts staff with a model of sworn declaration to replace the submission of criminal record. As a result, the number of procedures to start a was reduced from 7 to 6, time needed from 31 to 29 days, and cost from 154 to 150 percent of income per capita. Enactment of new/revised civil procedural rules Reduction in the cost to comply with regulations related to entry Reduction in the number of days it takes to comply with regulation related to Business Entry Reduction in the number of procedures to comply with regulation related to entry In October 2011 the Parliament adopted the new civil, commercial, administrative, and social procedure code, which is expected to reduce the time for contract enforcement. The code is expected to reduce the length of proceedings (by limiting the number of hearing postponements), facilitate case filing, and accelerate the settlement of disputes. Under the new code, the time to file an appeal was reduced from two months to one, and the time to take a case to the Supreme Court was reduced from five to three months. The Minister of Justice issued a letter to Courts staff and sent them a model of sworn declaration to replace the submission of criminal record, cutting $1 from the cost of starting a. The government cut 2 of the overall 31 days entrepreneurs spend in starting a and $1 from the cost. The government reduced the required procedures to start a from 7 to 6. RESULT TYPE (National/ Subnational) REFORM RESULT 1 BENIN TOTAL 1 4 BRAZIL Investment policy and promotion Subnational 2 Improved institutional framework related to investment generation Apex-Brasil and the Secretary of Economic Development for the state of Pernambuco signed a cooperation agreement formalizing a collaborative approach towards facilitating FDI for Pernambuco, significantly changing how FDI is attracted and marking an important step in creating a national investment generation network. SEDECT in Para and partners in FDI promotion (the executivelevel working group representing key public and private sector actors) signed a collaboration agreement to coordinate investment attraction activities in the state of Para. continued on next page ANNEXES 45

50 COUNTRY TOPIC REFORM DESCRIPTION RESULT INDICATOR RESULT DESCRIPTION BRAZIL (continued) Investment policy and promotion Investment policy and promotion Investment policy and promotion Improvement in the conversion rates of investment leads from relevant sectors Increase in the number of leads from relevant sectors into investment generation pipeline Increase in the number of leads from relevant sectors into investment generation pipeline RESULT TYPE (National/ Subnational) The three investment promotion intermediaries, Subnational 4 Apex-Brasil (the national investment promotion agency), Invest in Pernambuco, and Invest in Para, each increased their conversion rates of leads to announced investments. Apex-Brasil reported a 12 percent conversion rate (8 cumulative announced investments from 67 leads); Invest in Pernambuco reported a 13 percent conversion rate (10 cumulative announced investments from 77 leads), and Invest in Para reported a 20 percent conversion rate (5 cumulative announced investments from 25 leads). In the second half of FY11, each of the three investment promotion intermediaries Apex-Brasil, Invest in Pernambuco, and Invest in Para increased its investment generation pipeline of active leads by more than 10 percent. Apex-Brasil reported 67 active leads; Invest in Pernambuco reported 77; Invest in Para reported 25. In the first half of FY11, each of the three investment promotion intermediaries Apex-Brasil, Invest in Pernambuco, and Invest in Para increased its investment generation pipeline of active leads by more than 10 percent. Apex-Brasil reported 60 active leads; Invest in Pernambuco reported 44; Invest in Para reported 11. REFORM RESULT Subnational 3 Subnational 3 BRAZIL TOTAL 12 BURKINA FASO Trade logistics Trade logistics Implementation or improvement of best practice procedures related to the flow of cargo Implementation or improvement of processes at technical control agencies related to trade logistics The Ministry of Agriculture agreed to merge the Phytosanitary Bulletin Verification document (a requirement of the Economic Community of West African States) and the Certificate of Phytosanitary Inspection (a national regulation). This improvement allows traders to obtain only one document when their goods are subject to phytosanitary inspection. The Ministry of Commerce and the Ministry of Finance agreed to allow importers to import goods into Burkina Faso and obtain specific standards approval from the Ministry of Commerce after the goods have been cleared. This is the country s first trade reform agreed between different government agencies. It facilitates a more efficient process for traders importing goods that require standards certification. continued on next page ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

51 COUNTRY TOPIC REFORM DESCRIPTION RESULT INDICATOR RESULT DESCRIPTION BURKINA FASO (continued) Trade logistics Improved institutional framework related to trade logistics RESULT TYPE (National/ Subnational) The government passed a decree establishing a formal committee within Customs to manage the implementation of risk management for border inspection and clearance. This improvement is significant as it is the first step required by an entity implementing a risk-based inspections regime. BURKINA FASO TOTAL 3 BURUNDI Dealing with construction permits 1 Protecting investors Starting a The National Laboratory for Building Construction and Public Works changed the fee structure, reducing the fee for a geotechnical study from BIF 6,500,000 to BIF 2,574,460 ($4,899 to $1,940). This cut the total cost to obtain a building permit and utility connections from 6,296 to 4,066 percent of income per capita. The new Company Law enacted on May 30, 2011 strengthened investor protections by introducing new requirements for the approval of transactions between interested parties; requiring greater corporate disclosure to the board of directors and in the annual report; and making it easier to sue directors in cases of prejudicial transactions between interested parties. Reduction in cost to comply with construction permitting Enactment of legislation related to company legislation Enactment of legislation related to entry The government made dealing with construction permits easier by reducing the cost to obtain a geotechnical study from BIF to BIF BIF 2,574,460 ($4,899 to $1,940), reducing total cost from 6,296 to 4,066 percent of income per capita. The government enacted the new Company Law on May 30, 2011, strengthening investor protections by introducing new requirements for the approval of transactions between interested parties, by requiring greater corporate disclosure to the board of directors and in the annual report, and by making it easier to sue directors in cases of prejudicial transactions between interested parties. The government adopted a New Company Law on May 30, 2011 which simplifies the conditions for incorporating a company and starting a. REFORM RESULT 1 BURUNDI TOTAL 2 3 CENTRAL AFRICAN REPUBLIC Registering property In December 2010, the new Financial Law was adopted. The Article 301 reduced the property transfer tax ( droits d enregistrement ) by 50 percent, from 15 to 7.5 percent, and the total cost of registering property was reduced from 18.5 to 11 percent of property value. Reduction in the fees to register property The government reduced by half the property transfer tax (from 15 to 7.5 percent). 1 Starting a Starting a The National Budget Law of December 2010 (Article 11) amended the relevant tax provisions about the registration tax (Articles 301 and 302 of the Code de l Enregistrement ), cutting it by more than a half, from 150,000 to 70,000 XAF (from $312 to $146). As a result, the total cost to start a decreased from 228 to 176 percent of income per capita. Reduction in the cost to comply with regulations related to entry Reduction in the number of days it takes to comply with regulations related to entry Several reforms cut the cost to start a by $186 as follows: the very high registration tax was cut from $312 to $146; the professional traders card was eliminated as a requirement for registering a ; the ministerial license and the mandatory registration fee for the chamber of commerce were removed; and the cost of publication to the Web site was reduced. The government implemented several reforms that reduced the time required to start a from 22 to 13 days. 1 continued on next page ANNEXES 47

52 COUNTRY TOPIC REFORM DESCRIPTION RESULT INDICATOR RESULT DESCRIPTION CENTRAL AFRICAN REPUBLIC (continued) Starting a Reduction in the number of procedures to comply with regulation related to entry RESULT TYPE (National/ Subnational) The government reduced the required steps to start a from 8 to 7 by eliminating the professional traders card. CENTRAL AFRICAN REPUBLIC TOTAL 2 4 CHINA Investment policy and promotion Improvement in the score of investment promotion intermediaries in the Global Investment Promotion Benchmarking (GIPB) The Yinchuan Investment Promotion Agency improved the score of its investment promotion intermediary in the current GIPB report by 8 percentage points compared to previous editions. The project worked in particular on the Web site, which scored an increase of 20 percentage points. CHINA TOTAL 1 COLOMBIA Enforcing contracts Registering property Starting a The Law 1429 of 2010 and Decree 545 of 2011 introduced a progressive fee schedule for new companies, which exonerates them from an upfront payment of fees for the first few years in operation. In particular, the fee associated with the commercial license matricula comercial no longer needs to be paid at the time of start-up. As a result, the cost to start a was reduced by 45 percent, and the total cost to start a decreased from 14.7 to 8 percent of the income per capita. Enactment of legislation related to enforcing contracts Reduction in number of days to register property Creation or improvement at the legal/regulatory level of institutions dealing with entry An administrative agreement of March 2011 created 18 municipal courts (11 to process and adjudicate enforcement procedures and 7 for ordinary procedures) and 12 municipal courts to process commissions as part of enforcement procedures. An administrative resolution issued on March 8, 2011 established time limits for notaries preparation of public deeds. As a result of this and related improvements within the framework of the pilot project, the time to transfer property was reduced by 11 days (55 percent). A new law and decree introduced a progressive fee schedule for new companies, exonerating them from an upfront payment of fees for the first few years in operation. In particular, the fee associated with the commercial license no longer needs to be paid at the time of start-up. As a result of this improvement, the cost to start a was reduced by 45 percent. REFORM RESULT 1 continued on next page ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

53 COUNTRY TOPIC REFORM DESCRIPTION RESULT INDICATOR RESULT DESCRIPTION COLOMBIA (continued) Trade logistics Trade logistics Trade logistics Trade logistics Trade logistics Implementation or improvement of a single window system related to trade Implementation or improvement of electronic submission of documents related to trade logistics Implementation or improvement of risk targeting strategies related to trade logistics Implementation or improvement of system for computerization of documents and information related to trade logistics Implementation or improvement of trade logistics standards and quality RESULT TYPE (National/ Subnational) The government implemented connecting Web services between the single window system (VUCE) and the agencies for health and agriculture, creating automatic linkages among the systems and allowing faster release of licenses. The VUCE import module was upgraded allowing traders to electronically submit conformity certificates to the Bureau of Standards. The system will automatically reject the request (without generating a payment) if there is a mistake in the license sent by the trader. Traders now must electronically submit the Andean Declaration of Value through the MUISCA system. This document is a required supporting document for cargo to enter the country. Previously traders had to file this information physically to Customs. The government issued a resolution which requires customs brokers, freight forwarders, and warehouses to assess clients risks. Customs brokers now must make their financial statements public. Also, customs brokers, warehouses, and freight forwarders must visit and inspect the warehouses of their clients to obtain corporate, financial, and taxation information, especially important for importers of sensitive goods. This information is also submitted to Customs, which allows for easier movement of cargo since the companies are fully identified before the cargo ships. The MUISCA system that allows traders to do advanced filing of information prior to ship arrival was improved. Imports, including the import returns for sensitive goods, and all supporting documents are now filed through the system at least 48 hours in advance. This allows for early identification of companies, goods, and cargo risks prior to cargo arrival. Customs established a series of minimum qualifications for companies to exist as customs brokers, freight forwarders, and warehouses. Based on the companies assets and size, they are qualified on a level of 1 to 4 (with 1 as the safest). This improvement helps in assessing risk and controlling money laundering. COLOMBIA TOTAL 1 8 continued on next page REFORM RESULT ANNEXES 49

54 COUNTRY TOPIC REFORM DESCRIPTION RESULT INDICATOR RESULT DESCRIPTION COTE D IVOIRE Starting a Due to a reorganization of the Courts Clerk Office where entrepreneurs file their company documents, the time to start a was reduced from 40 to 32 days. Reduction in the time to comply with regulation (related to entry) The Courts Clerk Office where entrepreneurs file their company documents was reorganized, resulting in an 8-day reduction (20 percent) in the time required to start a. REFORM RESULT TYPE (National/ Subnational) 1 COTE D IVOIRE TOTAL 1 1 HUNGARY Dealing with construction permits The government passed a new building regulation that reduced the statutory time limit to issue a building permit by 15 days. Enactment of legislation related to construction permits A new Permits Law was passed in March 2011 setting statutory limits for issuing construction permits. 1 Dealing with construction permits Dealing with construction permits Dealing with construction permits Trade logistics Reduction in the cost to comply with construction permitting Reduction in the number of days to comply with construction permitting Reduction in the number of procedures to comply with construction permitting Reduction in the number of procedures at Customs related to trade logistics The government adopted statutory limits for issuing construction permits. If deadlines are breached, authorities are obliged to reimburse clients for fees and pay the client additional compensation in the amount of a one-time official fee. As a result of the reduction in required procedures, the time companies must spend to comply with construction permitting procedures is expected to be cut by 15 percent, from 189 to 160 days. Under the new Permits Law, five procedures were eliminated. The government streamlined the functioning of the single window for trade, which connects eight national authorities involved in the trade logistics process. The government also continued to implement ongoing reforms, including the introduction of post-clearance audits and the application of risk management systems to border controls. RESULT HUNGARY TOTAL 1 5 JORDAN Starting a 1 The Decree number 17/2011, which entered into force on May 16, 2011, reduced the minimum capital requirement from JD 1,000 to JD 1 (from $1,333 to $1.3), of which 50 percent must be deposited prior to company registration. Enactment of legislation related to entry A decree entered into force on May 16, 2011 reduces the minimum capital requirement from JD 1,000 to JD 1, of which 50 percent has to be deposited prior to company registration. JORDAN TOTAL 1 1 KAZAKHSTAN Protecting 1 investors The amendments to the Law on the Issues of Mortgage Loans and Protection of the Rights of Financial Services Consumers and Investors, which were passed on Feb. 10, 2011, regulated the approval of transactions between interested parties and made it easier to sue directors in cases of prejudicial transactions between interested parties. Enactment of legislation related to disclosure (outside company law) A law passed on Feb. 10, 2011 increases disclosure requirements and ease of shareholder suits. continued on next page ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

55 COUNTRY TOPIC REFORM DESCRIPTION RESULT INDICATOR RESULT DESCRIPTION KAZAKHSTAN (continued) Starting a Starting a Starting a Enactment of new legislation related to entry Reduction in the number of days it takes to comply with regulations related to entry Reduction in the number of procedures it takes to comply with regulations related to entry A government decree eliminated 4 procedures for entrepreneurs in starting a. A government decree reduced the time entrepreneurs must spend in starting a by 48 percent (from 19 to 10 days). The decree says that the registration process should be completed in no more than 5 working days. The government eliminated 4 procedures in starting a, cutting required procedures from 6 to 2. REFORM RESULT TYPE (National/ Subnational) RESULT KAZAKHSTAN TOTAL 1 4 LIBERIA Enforcing contracts Investment policy and promotion Public private dialogue The government passed a new investment code in May 2010 that provides for transparency in the granting of investment incentives and protects investors against expropriation. It also allows for repatriation of profits, protection of intellectual property rights, and provides investors with access to international dispute resolution mechanisms. Under the new law, the number of sectors reserved exclusively for the indigenous population has been reduced by 50 percent, which opens the remaining half to international investment. Liberia Better Business Forum supported a highly successful effort to draft, advocate, and support the passage of eight laws establishing the country s first commercial code, which were passed by the legislature on September 16, These laws cover general provisions, sales, leases, finance leases, negotiable instruments, secured transactions, mortgages, and commercial arbitration. The passage of the laws has contributed to an improved investment climate, greater security for commercial transactions, improved access to finance, and greater confidence in Liberia as an investment destination. Enactment of legislation related to enforcing contracts Improved regulatory framework related to investment policy and promotion Number of PPD-sponsored Investment Climate reforms enacted which were directly supported by the PPD project team A law to establish the country s first Commercial Court and eight laws to promulgate the first Commercial Code were passed. The Commercial Court is part of the government s reform initiatives undertaken through the Central Bank of Liberia, which had prioritized the need to set up a dispute settlement mechanism within the economy s commercial sector. The government passed a new investment code in May 2010 that provides for transparency in the granting of investment incentives and protects investors against expropriation. It also allows for repatriation of profits, protection of intellectual property rights, and provides investors with access to international dispute resolution mechanisms. Under the new law, the number of sectors reserved exclusively for the indigenous population has been reduced by 50 percent, which opens the remaining half to international investment. Eight laws establishing Liberia s first commercial code were passed by the legislature on September 16, These laws cover general provisions, sales, leases, finance Leases, negotiable instruments, secured transactions, mortgages, and commercial arbitration. The passage of the laws has contributed to an improved investment climate, greater security for commercial transactions, improved access to finance, and greater confidence in Liberia as an investment destination. 1 8 continued on next page ANNEXES 51

56 COUNTRY TOPIC REFORM DESCRIPTION RESULT INDICATOR RESULT DESCRIPTION LIBERIA (continued) Trade logistics Trade logistics The Bureau of Customs and Excise enhanced and broadened the efficacy of the risk-based inspection regime at the border and implemented online submission of customs forms. As a result, the time to export decreased from 17 to 15 days and the time to import from 15 to 14 days. Reduction in the number of procedures at Customs related to trade logistics Implementation or improvement of risk targeting strategies related to trade logistics RESULT TYPE (National/ Subnational) It is no longer necessary for cargo to be 1 physically escorted when in transit or being transshipped through Liberia, enhancing the value of the port of Monrovia as a transit port. This improvement will help reduce costs for the private sector, specifically brokers and importers who use Liberia as a transit country for importing goods into Guinea and Sierra Leone. International best practice calls for not physically escorting cargo (by customs officers) when an appropriate bond has been paid to cover customs charges. The Liberian Bureau of Customs signed a border cooperation agreement with the National Customs Department of the Republic of Guinea. This agreement allows for the exchange of information and intelligence between the two countries regarding border management issues and strategies to help improve the targeting of high risk cargo across land and sea borders. LIBERIA TOTAL 3 12 MACEDONIA, Closing a 1 FYR Closing a Closing a Dealing with construction permits Dealing with construction permits In February 2011, the Company Law was amended to set a limit of 15 days for a liquidator to announce that a company is undergoing liquidation. In April 2011, the Bankruptcy Law was amended to require bankruptcy trustees to use the e-bankruptcy system to record all phases and process actions during bankruptcy proceedings. The Law on Construction and the Law on Urban and Spatial Planning were amended in October 2010 and February The amendments eliminate the preliminary design requirement, reduce municipal fees and set shorter deadlines for issuing permits. As a result, the number of procedures to obtain a construction permit and utility connections decreased from 20 to 10, the time needed from 139 to 117 days, and the cost from 1,600 to 553 percent of income per capita. Enactment of legislation related to closing a Reduction in the fees to close a Reduction in the number of days to close a Enactment of legislation related to construction permits Reduction in the cost to comply with construction permitting The Company Law was amended in February 2011 to set a limit of 15 days for liquidators to announce liquidation. In April 2011 the Bankruptcy Law was amended, requiring bankruptcy trustees to use the e-bankruptcy system. The Central Registry further decreased the fee for voluntary liquidation of a company (by 60 percent), reducing costs for registration from MKD 1300 to MKD 500. Amendments to the Company Law and the Bankruptcy Law reduced the number of days needed to close a. The Law on Construction and the Law on Urban and Spatial Planning were amended in October 2010 and February The amendments eliminate the preliminary design requirement, reduce municipal fees, and set shorter deadlines for issuing permits. As a result of amendments to the Law on Construction and the Law on Urban and Spatial Planning, the government reduced municipal fees by 95 percent. REFORM RESULT 1 continued on next page ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

57 COUNTRY TOPIC REFORM DESCRIPTION RESULT INDICATOR RESULT DESCRIPTION MACEDONIA, FYR (continued) Dealing with construction permits Reduction in the number of days to comply with construction permitting RESULT TYPE (National/ Subnational) Amendments to the Law on Construction and the Law on Urban and Spatial Planning eliminated two procedures and set shorter deadlines for issuing permits, reducing the time required to comply with construction permitting by 22 days. MACEDONIA, FYR TOTAL 2 6 MADAGASCAR Business taxation 1 Business taxation Effective January 1, 2009, corporate income tax and tax on interest have both been reduced from 25 to 24 percent. These rates were further reduced to 23 percent in Implementation or improvement of payment options for taxpayers Rationalization in the tax rate and the tax base In 2010 the government began implementing its 2009 decision to simplify payment by taxpayers. This improvement covers means and frequency of payment and allows payment by bank transfer. The government rationalized the tax system, base, and rates. The Taxe Professionnelle, two stamp duties, and the transactions tax were eliminated. Three distinct taxes on individuals were merged into a single personal income tax. The tax base was broadened, and the corporate income tax rate was reduced from 25 to 23 percent. Value-added tax (VAT) recommendations were implemented. A simplified tax (with simpler declaration and a reduced rate of 5 percent) was introduced for small taxpayers (both companies and individuals). REFORM RESULT MADAGASCAR TOTAL 1 2 MALI Dealing with construction permits 1 Dealing with construction permits A new regulation (Arrete No of October 11, 2010) simplified the process of obtaining a construction permit for industrial and commercial buildings of one story and not exceeding 300 square meters. As a result, the number of procedures required to deal with construction permits and obtain utility connections for these types of structures was reduced from 15 to 14, the time from 179 to 109 days, and the cost from 505 to 276 percent of income per capita. Enactment of legislation related to construction permits Implementation or improvement of inspection regime for construction permitting The government enacted two measures on October 11, 2010 to improve and simplify construction permits. Arrete No , related to small buildings, reduced the number of required documents and procedures. Arrete No implemented an arbitration committee of urbanism and construction to handle appeals in cases when the application for construction permit is rejected. The arbitration committees in each region and Bamako district can manage cases that previously needed to go to court. Commercial constructions of two stories classified as category C will not be required to obtain an environmental study. Under the new decree, builders would need to submit a notice outlining the project s potential hazards to the environment. This notice needs to be approved by a DNACPN (the national agency for sanitation, nuisances, and pollution control) inspection carried out within 15 days of submission of the notice. If DNACPN discovers that the hazards to the environment are greater than stated in the notice, the agency can ask the project to carry out a full environmental impact study. continued on next page ANNEXES 53

58 COUNTRY TOPIC REFORM DESCRIPTION RESULT INDICATOR RESULT DESCRIPTION MALI (continued) Starting a Starting a Starting a Starting a Trade logistics Trade logistics Trade logistics The one-stop shop for company registration improved its operation by adding two additional steps into its workflow: (i) employee registration with the Social Security; (ii) filing employee contract with the labor authorities. As a result, the number of procedures to start a decreased from 6 to 4. Enactment of legislation related to entry Creation or improvement at the legal and regulatory level of institutions dealing with entry Reduction in the number of days it takes to comply with regulations related to entry Reduction in the number of procedures it takes to comply with regulations related to entry Implementation or Improvement of best- practice procedures related to the flow of cargo Implementation or improvement of systems for computerization of documents related to trade logistics Reduction in days to trade RESULT TYPE (National/ Subnational) Article 75 of Annex 3 of the new Tax 1 Code exempted stamp duty for company registration. Two agencies have been merged and now offer services within a one-stop shop. The government introduced a signed affidavit to certify no criminal record for entrepreneurs starting a, reducing start-up time by 7 days. In about 10 minutes, the entrepreneur can sign the affidavit and then continue the procedures while he waits to get the required two copies of the criminal record. Two procedures have been integrated within the one-stop shop: filing an employee registration request with the Institut National de Prevoyance Sociale and filing every employee contract with the Direction Nationale du Travail. The process of scanning cargo was implemented, reducing costs for customs brokers and importers who are now able to make the goods declaration prior to having their goods scanned. International best practice calls for scanners to be used as a verification tool, allowing scan results to be compared with documents submitted by the broker or importer. The direct release form for imports was computerized. Brokers and importers are now able to process within the customs automation system cargo shipments that qualify for direct release from customs control. The time required to import was cut from 37 to 31 days (16 percent) and for exports from 32 to 26 days (18 percent). REFORM RESULT MALI TOTAL 2 9 MEXICO Access to 1 finance The government strengthened the secured transactions system by implementing a centralized collateral registry with an electronic database. Now registrations for all types of security interest over movable property can be made online at no cost. Enactment of legislation related to secured lending The government strengthened the secured transactions system by implementing a centralized collateral registry with an electronic database accessible online. As a result, Mexico s score on the legal rights index increased by 1 point. continued on next page ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

59 COUNTRY TOPIC REFORM DESCRIPTION RESULT INDICATOR RESULT DESCRIPTION MEXICO (continued) Dealing with construction permits Dealing with construction permits The government consolidated internal processes and hired more personnel to issue zoning certificates. As a result, the time to complete this procedure was reduced from 43 to 20 days, and the overall time to obtain a construction permit and utility connections from 104 to 81 days. Reduction in the number of days it takes to comply with regulations related to operations Implementation or improvement of inspection regime for construction permitting The government consolidated some internal processes, hired more staff to issue zoning certificates, and better integrated and coordinated activities between the cadastre and municipality on urban planning. Improvements in the inspection regime for construction permitting helped cut the time to complete construction permitting procedures from 43 to 20 days (57 percent). REFORM RESULT TYPE (National/ Subnational) 1 RESULT MEXICO TOTAL 2 3 MOLDOVA Dealing with construction permits Enforcing contracts Several laws were passed to increase the efficiency of the court system. The Law on Court Bailiffs adopted on June 17, 2010 and enacted on July 23, 2010 made the first step in changing public enforcement procedures into private ones. Amendments to the Enforcement Code were adopted on July 2, 2010 and enacted on September 7, Under the new provisions, the bailiff initiates the enforcement proceedings without having to give the debtor a term to comply voluntarily with the judgment, but offers the possibility of conciliation to the parties. As a result, the time to enforce a contract decreased from 365 to 352 days. Enactment of legislation related to construction permits Enactment of legislation related to enforcing contracts The Parliament adopted a new law on authorization of execution of construction works on July 9, 2010 which is expected to streamline processes for construction permits. The law establishes the procedure of authorization, notification, and control over the design, construction, or demolition of any kind of building, irrespective of the category, destination or type of property, except for those with military or secret objectives. The law provides a complete list of documents that authorize the execution of construction works, as well as their content, conditions and terms of issuance. Amendments to the Enforcement Code 1 were adopted on July 2, 2010 and enacted on September 7, Under the new provisions, the bailiff initiates the enforcement proceedings without having to give the debtor a term to comply voluntarily with the judgment, but offers the possibility of conciliation to the parties. If the parties agree to a settlement, the bailiff will record the settlement terms and then terminate enforcement proceedings. The amendments to the Enforcement Code also supplement the bailiffs rights in enforcement proceedings. The Law on Court Bailiffs adopted on June 17, 2010 and enacted on July 23, 2010 made the first step in changing public enforcement procedures into private ones. Under the law, a court bailiff has powers vested by the state to meet the public interest activities in enforcement proceedings. Bailiffs activities are supervised by the Ministry of Justice jointly with the National Union of the Bailiffs, which is a non-commercial, professional association. continued on next page ANNEXES 55

60 COUNTRY TOPIC REFORM DESCRIPTION RESULT INDICATOR RESULT DESCRIPTION MOLDOVA (continued) Protecting investors Starting a New amendments to the Company Law were passed, creating the legal basis for the one-stop shop. As a result, the number of procedures to start a decreased from 8 to 7, and the time needed to start a from 10 to 9 days. Enactment of legislation related to disclosure (outside company law) Enactment of legislation related to entry Amendments to the Law on Joint Stock Companies were adopted on April 15, 2011, improving disclosure obligations for transactions involving conflicts of interest. New amendments to the Company Law were passed, eliminating the minimum capital requirement from registration and creating the legal basis for the one-stop shop. REFORM RESULT TYPE (National/ Subnational) RESULT 1 MOLDOVA TOTAL 2 4 MONTENEGRO Business licensing and regulatory governance Closing a Closing a Closing a A new Bankruptcy Law was passed in December 2010 and entered into force in January The law, harmonized with the contemporary Bankruptcy Law of Europe, introduced reorganization and liquidation proceedings, sets time limits for these proceedings, and provides the possibility of recovery of secured creditors claims and settlement before completion of the entire bankruptcy procedure. Implementation or improvement of consultation mechanisms in the regulatory process Enactment of legislation related to closing a Improved regulatory framework related to restructuring and insolvency Reduction in the number of days to close a The formally established legal and institutional mechanism for permanent consultations (the Council) began acting as an oversight authority with monthly meetings involving the private sector. At the regulatory level, working groups became active and seven consultations were held with the private sector to solicit recommendations for improving or abolishing regulations. The seven consultations included: three meetings on construction permits with three companies, the Association of Builders, and the Association of Architects; one meeting with the chamber of commerce on the draft Omnibus law on construction permits; one consultation with the chamber of commerce on the Law on Spatial Planning; one consultation with the chamber of commerce on the Law on Labor; one consultation with trade unions on the Law on Labor. A new Bankruptcy Law passed in December 2010 and entered into force in January 2011 sets deadlines for bankruptcy proceedings, introduces mediation, and outlines the functions of a bankruptcy court. The law is harmonized with the contemporary Bankruptcy Law of Europe. A new Bankruptcy Law was adopted by Parliament on December 22, 2010, facilitating the use of mediation in the resolution of insolvencies. As a result of the new Bankruptcy Law, the time needed to close a is expected to decrease by around 20 percent (from 24 to 19 months). 1 continued on next page ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

61 COUNTRY TOPIC REFORM DESCRIPTION RESULT INDICATOR RESULT DESCRIPTION MONTENEGRO (continued) Dealing with construction permits Dealing with construction permits Dealing with construction permits Registering property Starting a Starting a Starting a A one-stop shop for company registration was established within the Central Registry of the Commercial Court. As a result, the number of procedures to start a decreased from 7 to 6. Enactment of legislation related to construction permits Reduction in the number of days to comply with construction permitting Reduction in the number of procedures to comply with construction permitting Reduction in the number of procedures to register property Enactment of new legislation related to entry Reduction in the number of days it takes to comply with regulations related to entry Reduction in the number of procedures it takes to comply with regulations related to entry RESULT TYPE (National/ Subnational) Six laws related to construction were amended and set up a one-stop shop for construction permitting as follows: Law on Amendments to the Law on Spatial Planning and Construction, Law on Amendments to the Law on Electronic Communication, Law on Amendments to the Law on Protection and Rescue, Law on Amendments to the Law on Waters, Law on Amendments to the Law on Agricultural Land, and Law on Amendments to the Law on Geological Researches. As a result of amendments to six construction-related laws, the time required to comply with construction permitting was reduced by 50 days (21 percent). Amendments to six construction-related laws reduced the number of required procedures from 14 to 2. A new decree was passed promulgating the Law on the Improvement of the Business Environment. The decree reduces a number of administrative fees, including the court fee associated with the signing and authentication of signatures in the transfer of property title at the Municipal Court. The Law on Accounting and Auditing, the Law on Tax Administration, and the Company Law were amended to account for the establishment of a one-stop shop. The number of days required to start a was cut from 10 to 5. The number of procedures required to start a was cut from 7 to 6. REFORM RESULT 1 MONTENEGRO TOTAL 2 11 continued on next page ANNEXES 57

62 COUNTRY TOPIC REFORM DESCRIPTION RESULT INDICATOR RESULT DESCRIPTION MOROCCO Dealing with construction permits Dealing with construction permits Dealing with construction permits Starting a Starting a The one-stop shop for construction permitting established in Casablanca at the end of 2005 became fully operational and widely used by entrepreneurs by the second half of As a result, the number of procedures to obtain a construction permit and utility connections decreased from 16 to 15, the time needed from 104 to 97 days, and the cost from 246 to 235 percent of income per capita. The construction permit can be obtained in 15 days (down from 20 last year), and the land registry plan in 7 days (down from 9). Reduction in the number of days to comply with construction permitting Enactment of legislation related to construction permits Reduction in the number of procedures to comply with construction permitting Enactment of legislation related to entry Reduction in the number of procedures to comply with regulations related to entry The construction permit can be obtained in 15 days, the land registry plan in 7 days (a decrease of 2 days), and a certificate of conformity in 30 days. The one-stop shop for construction permitting established by a decision of the Wali of Casablanca in November 2005 became fully operational and widely used by entrepreneurs. Entrepreneurs no longer need to request and receive a technical inspection for building control from the Ministry of Economic Development. As of June 2010, the company in charge of water and sewerage and electricity connections requires only one application for these two services. The government eliminated the minimum capital requirement, cutting the cost of starting a new firm by 42 percent. The government eliminated 3 of 6 procedures. The requirement that the company s statutes and leasing contracts be legalized to establish proof of residence was eliminated. The company s name search can be dealt with online and confirmed as part of an integrated set of registration formalities at the onestop-shop of Casablanca. The procedure at the prefecture has no legal basis and is no longer required. REFORM RESULT TYPE (National/ Subnational) 1 RESULT MOROCCO TOTAL 1 5 PARAGUAY Dealing with construction permits 1 The Municipality of Assuncion created a single window for building permit approvals. This initiative includes the implementation of a new checklist system for accepting building permit applications and a risk-based approval system. As a result, the time to obtain a building permit was shortened by 42 days, (from 63 to 21), and the overall time to obtain all permits and utility connections fell from 179 to 137 days. Enactment of legislation related to construction permits Paraguay made dealing with construction permits easier by implementing a risk-based approval system, a more comprehensive checking process for applications, and a single window to obtain construction permits. continued on next page ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

63 COUNTRY TOPIC REFORM DESCRIPTION RESULT INDICATOR RESULT DESCRIPTION PARAGUAY (continued) Dealing with construction permits Reduction in the number of days to comply with construction permitting Improvements in the process of obtaining a construction permit resulted in a reduction of 42 days (from 63 to 21). REFORM RESULT TYPE (National/ Subnational) PARAGUAY TOTAL 1 2 PERU Business 1 taxation Protecting investors Starting a The Law of July 9, 2010 led to improvements in electronic filing and payment of three major taxes. As a result, the time to prepare, file, and pay taxes decreased from 380 to 309 hours. On July 28, 2010, the government amended the Companies Law by adopting Law no The law strengthened investor protections by allowing minority shareholders, holding 5 percent of a company s paid capital, to request access to non-confidential corporate documents. The Law No , published on July 9, 2010 (implemented by Decree No PRODUCE, January 23, 2011) eliminated the requirement for micro and small enterprises to deposit start-up capital in a bank before registration. As a result, the number of procedures to start a decreased from 7 to 6, the time from 27 to 26 days, and the cost from 13.6 to 11.9 percent of income per capita. Reduction in time of days it takes to file taxes Enactment of legislation related to company legislation Enactment of legislation related to entry A law was enacted in July 2010 to improve the investment climate and facilitate payment of taxes in Peru. Amendments to the Companies Law strengthened investor protections by allowing minority shareholders (holding 5 percent of the company s paid capital) to request access to non-confidential corporate documents. Previously an individual shareholder did not have the right to inspect internal documents and minority shareholders (holding 10 percent) could only demand inspection by independent third parties such as auditing firms. As a result, Peru s score on the shareholder suit index increased by 1 point, from 7 to 8 (of 10), and by 0.3 on the Ease of Protecting Investors Index. The government enacted a law on July 9, 2010 to improve the investment climate and facilitate payment of taxes. The law makes starting a easier by eliminating the requirement for micro and small enterprises to deposit start-up capital in a bank before registration. RESULT 1 1 PERU TOTAL 3 3 ROMANIA Closing a 1 The government promulgated in September 2010 the Corporate Debt Restructuring Guidelines for out-of-court workouts, which have been published on the Web sites of the Ministry of Justice, Ministry of Finance, and the Central Bank. The guidelines will contribute to an increase in the resolution of insolvency cases out of court, which can be expected to reduce the time and transaction cost of insolvency cases and increase the rate of successful turnaround. Implementation or improvement of best practice voluntary/ informal restructuring procedures The government promulgated in September 2010 the Corporate Debt Restructuring Guidelines for out-of-court workouts, which have been published on the Web sites of the Ministry of Justice, Ministry of Finance, and the Central Bank. The guidelines will contribute to an increase in the resolution of insolvency cases out of court, which can be expected to reduce the time and transaction cost of insolvency cases and increase the rate of successful turnaround. ROMANIA TOTAL 1 1 continued on next page ANNEXES 59

64 COUNTRY TOPIC REFORM DESCRIPTION RESULT INDICATOR RESULT DESCRIPTION RWANDA Closing a Special economic zones The Special Economic Law #05/2011 was enacted on March 21, The law regulates the establishment, development, operation and maintenance of special economic zones, including description of permitted activities (all activities, unless specifically prohibited), thereby allowing for broad economic development and diversification. In addition, a SEZ Regulatory Unit was established at the Rwanda Development Board to ensure fair and transparent treatment of es within the zone, while acting as an honest broker between es and the government, and also to reduce the administrative burden on es in the zone. Enactment of legislation related to closing a Improved institutional framework related to special economic zones The government introduced the Insolvency Law, the country s first complete bankruptcy regulation. The law s main objectives are the maximization of value of the debtor s assets, the equitable treatment to creditors of the same category, the preservation of insolvent estates, and the facilitation for honest debtors to be discharged from residual debt. These objectives are aligned with international leading practices. The government enacted the Special Economic Law of March 21, 2011, which regulates the establishment, development, operation, and maintenance of special economic zones in Rwanda. A SEZ Regulatory Unit was established at the Rwanda Development Board to ensure fair and transparent treatment of es within the zone. Draft SEZ regulations were prepared. REFORM RESULT TYPE (National/ Subnational) RESULT 1 RWANDA TOTAL 1 2 SENEGAL Dealing with construction permits Reduction in the number of days to comply with construction permitting A single window for construction permits has centralized the processing of applications at the municipal level, reducing the number of procedures and the time required to obtain a permit (by 30 percent). SENEGAL TOTAL 1 SERBIA Business licensing and regulatory governance Change in the costs to comply with regulations related to 1 operation The Decision on the Office for Regulatory Reform and Regulatory Impact Assessment was adopted by the government on November 18, As a result of a regulatory reform: 625 (11 percent) of 5,900 proposed procedures were simplified or improved; 355 (11 percent) of 3,170 inventoried and reviewed laws and regulations were abrogated or improved; and annual aggregated private-sector direct costs were reduced by $44,555,541 (63 percent of the baseline). Following improvements in Serbia s procedures, annual aggregated private-sector direct costs were reduced by $44,555,541 (63 percent of the baseline) based on Standard Cost Model data after recommendations were adopted and implemented. continued on next page ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

65 COUNTRY TOPIC REFORM DESCRIPTION RESULT INDICATOR RESULT DESCRIPTION SERBIA (continued) Business licensing and regulatory governance Business licensing and regulatory governance Business licensing and regulatory governance Enactment of legislation related to the regulatory system Rationalization in the number of procedures to comply with regulations related to operations Rationalization in the number of regulations related to operations RESULT TYPE (National/ Subnational) The Decision on the Office for Regulatory Reform and Regulatory Impact Assessment was adopted by the government on November 18, It establishes the agency as part of the civil service, subordinate to the government, with ex officio authority for oversight of the regulatory framework. The Office will apply regulatory governance principles and criteria. Of 5,900 proposed procedures, 625 (11 percent) were simplified, improved, or eliminated as a result of regulatory reform. All of these improvements were introduced into the legal system through the adoption or abrogation of appropriate legal acts. Of 3,170 inventoried and reviewed laws and regulations, 355 (11 percent) were abrogated or improved as a result of regulatory reform. REFORM RESULT SERBIA TOTAL 1 4 SIERRA LEONE Business taxation Business taxation Closing a Dealing with construction permits A fast-track commercial court became operational in May The court will expedite commercial cases, including insolvency proceedings The government made dealing with construction permits easier by moving the process from the Ministry of Lands to the Ministry of Works. This led to a reduction of 31 days in the time to issue location clearances and building permits, reducing the total time es need to obtain permits and utility connections from 269 to 238 days. Implementation or improvement of best practice tax enforcement procedure and practices Implementation or Improvement of payment options for taxpayers Creation or improvement at the legal and regulatory level of institutions dealing with closing a Reduction in the number of days to comply with construction permitting The National Revenue Authority made compliance easier for taxpayers by allowing tax payments to be made at any of eight major banks. Previously payments had to be made at tax offices. The National Revenue Authority combined the tax and registration offices, allowing registration for new and registration for tax purposes to be conducted at the same location. Previously, new es were required to complete their tax registration at a tax office, which could present opportunities for harassment and demands for prepayment of taxes. The government established specialized industrial courts to deal with reorganization proceedings, which expedited the hearing of commercial cases involving these proceedings. The government made dealing with construction permits easier by moving the process from the Ministry of Lands to the Ministry of Works. This led to a reduction of 31 days in the time to issue location clearances and building permits. 1 1 continued on next page ANNEXES 61

66 COUNTRY TOPIC REFORM DESCRIPTION RESULT INDICATOR RESULT DESCRIPTION SIERRA LEONE (continued) Enforcing contracts Registering property Registering property A fast-track commercial court became operational in May The court will be fully automated and have real-time transcription of the proceedings. The government lifted the moratorium of land transfer, significantly improving the time it takes to transfer property. The time needed to register property was reduced from 235 to 86 days. Creation or improvement at the legal and regulatory level of institutions dealing with enforcing contracts Reduction in the number of days to register property Enactment of legislation related to registering property RESULT TYPE (National/ Subnational) A fast commercial court was set up and 1 started to hear cases in May The court will be fully automated and have real-time transcription of the proceedings. Prior to the court s opening, the team recommended the establishment of the reform coordination mechanism that ensured the commercial courts would start their operations. This coordination included raising awareness among the legal community and a broad communications campaign to help ensure that cases are brought to the commercial court. The government lifted the moratorium of 1 land transfer, significantly improving the time it takes to transfer property. The time needed to register property was reduced from 235 to 86 days. The Land Survey Act was amended in January 2011 to allow the digitization of land surveys. Work to improve the survey map will enable a modern cadastre system in the medium term. SIERRA LEONE TOTAL 4 7 SYRIAN ARAB REPUBLIC Starting a 1 The Legislative Decree 29 of 2011 reduced the minimum capital requirement from SYP 1,000,000 to SYP 400,000 (from $21,070 to $8,428). Enactment of legislation related to entry A legislative decree reduced the minimum capital requirement from SYP 1,000,000 to SYP 400,000 (from $21,070 to $8,428). SYRIAN ARAB REPUBLIC TOTAL 1 1 TAJIKISTAN Starting a 1 Starting a Starting a Amendments to the Law of the Republic of Tajikistan On Limited Liability Companies adopted on December 29, 2010 removed the requirement to pay 50 percent of the minimum capital before registration. Instead, this amount may be paid in up to one year after registration. As a result, the number of procedures to start a decreased from 8 to 5, the time needed from 27 to 24 days, and the cost from 37 to 33 percent of income per capita. Enactment of new legislation related to entry Reduction in the number of days it takes to comply with regulations related to entry Reduction in the number of procedures it takes to comply with regulations related to entry Amendments to the Law on Limited Liability Companies were adopted on December 29, 2010, eliminating the minimum capital required to start a. The government reduced the time entrepreneurs need to start a from 27 to 24 days. The government eliminated three procedures: registering the company with the State Registration of Legal Entities and Individual Entrepreneurs and obtaining the state registration certificate; obtaining a statistics code at the Statistics Committee; and registering with the Agency for Social Protection and Pension and obtaining a social insurance number. REFORM RESULT TAJIKISTAN TOTAL 1 3 continued on next page ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

67 COUNTRY TOPIC REFORM DESCRIPTION RESULT INDICATOR RESULT DESCRIPTION UNITED ARAB EMIRATES Starting a Starting a Starting a The newly established online registration system was launched in October The online portal allows the entrepreneur to file a single form for registration, licensing, and membership with the Dubai Chamber of Commerce. As a result, the number of procedures to start a was reduced from 9 to 8, the time needed from 15 to 13 days, and the cost from 6.4 to 5.6 percent of income per capita. Creation or improvement at the legal and regulatory level of institutions dealing with entry Reduction in the number of days it takes to comply with regulations related to entry Reduction in the number of procedures it takes to comply with regulations related to entry The newly established online registration system was launched in October The introduction of a single form for registration, licensing, and membership with the Dubai Chamber of Commerce reduced the time needed to start a from 15 to 13 days. In early 2011 the online portal process was improved to allow the entrepreneur to file a single form for registration, licensing, and membership with the Dubai Chamber of Commerce. REFORM RESULT TYPE (National/ Subnational) 1 RESULT UNITED ARAB EMIRATES TOTAL 1 3 YEMEN, 1 REPUBLIC OF Special economic zones The government passed the law that created the board for the new special economic zone authority, providing it with powers that helped streamline zone approval and development. The decree decentralizes regulations of zones and their enterprises to the regional authority. It also allows for private sector representation on the board. Improved regulatory framework related to investment generation The government passed legislation creating the board for the new special economic zone authority, providing it with powers that helped streamline zone approval and development. The decree decentralizes regulations of zones and their enterprises to the regional authority. It also allows for private sector representation on the board. YEMEN, REPUBLIC OF TOTAL 1 1 GRAND TOTAL ANNEXES 63

68 ANNEX 2: OTHER REFORMS AND RESULTS SUPPORTED BY FIAS IN FY11 The following table summarizes the 81 results of projects not mapped directly to the FIAS program but that received at least 10 percent of their budgets from FIAS in FY11. They are summarized by type of result and include a brief description of the achievements. Of these results, 43 were achieved at the subnational level. These results contributed to 14 Doing Business reforms (in addition to the 42 investment climate reforms to which the results in Annex 1 contributed). The results that have contributed to a particular reform are shaded together with the reform in the same background color. COUNTRY TOPIC IC REFORM DESCRIPTION RESULT INDICATOR EDITED TEXT ARMENIA Business Enactment of licensing and legislation related regulatory to the governance regulatory system Business licensing and regulatory governance Business taxation Dealing with construction permits The Decision #1493, Oct. 18, 2010, instituted an inspection moratorium, which prohibits the inspection agencies from inspecting smaller es until the agencies adopt a risk-based inspection system. The moratorium does not apply to tax inspections. Amendments to tax laws made tax compliance for firms easier by reducing the number of payments for corporate income and labor taxes. As a result, the number of tax payments made by a medium-size company in Armenia decreased from 50 to 34 and the time to prepare, file, and pay taxes decreased from 581 to 500 hours. The Decision #1617-N on Amendments to the earlier Decision on Mandatory Environmental Expertise, adopted Dec. 9, 2010, introduced a risk-based approach to the construction permitting process, eliminating the requirement to obtain an environmental impact assessment for small projects. As a result, the number of procedures to obtain a building permit decreased from 19 to 18, the time needed from 136 to 79 days, and the cost from 122 to 57 percent of the income per capita. Enactment of legislation related to the regulatory system Enactment of legislation related to taxation Enactment of legislation related to construction permits The government instituted an inspection moratorium on October 18, 2010 which prohibits the inspection agencies from inspecting smaller es until the agencies adopt a risk-based inspection system. The moratorium does not apply to tax inspections. A presidential decree issued on December 11, 2010 merged the food safety and veterinary inspection and the phytosanitary inspection of the Ministry of Agriculture and created a new food safety agency. On June 23, 2011 the government adopted the Law on Urban Development. The government reduced the number of property tax and land tax payments from 12 to 6; the number of reports, statements, and returns from 71 to 42; and the time spent on tax accounting and filing of reports from 581 (Doing Business 2011) to 500 hours (Doing Business 2012). The requirement that taxpayers file certain applications and other documents (around 30) was eliminated. The government adopted amendments to its two decisions: Mandatory Environmental Expertise and Construction Process. Also, two decisions of the Public Services Regulation Council established new deadlines for approval (and submission to the Municipality) of plans for electricity and gas connections. A risk-based approach to the permitting process for different categories was defined, and the time allowed for the permitting process was reduced and differentiated for each risk category. REFORM RESULTS RESULT TYPE (National/ Subnational) continued on next page ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

69 COUNTRY TOPIC IC REFORM DESCRIPTION RESULT INDICATOR EDITED TEXT ARMENIA (continued) Starting a Trade logistics Trade logistics Trade logistics In December 2010 the Parliament adopted a package of amendments to Laws On State Registration of Legal Entities and On Tax Registration and Deregistration of Organizations and Individuals, which led to the creation of a one-stop shop for registration. Companies and individual entrepreneurs can now obtain the name reservation, registration, and tax identification number at a single location at the same time. As a result, the number of procedures to start a decreased from 5 to 3, and the time needed to complete the process from 14 to 8 days. Enactment of legislation related to entry Implementation or improvement of payment systems for trade Implementation or improvement of processes at technical control agencies Implementation or improvement of processes at technical control agencies related to trade logistics On Dec. 21, 2010 the Parliament adopted a package of amendments, eliminating three procedures: the state registry will provide a Tax Identification Number, which eliminates the need for visits to the tax office; commercial organizations are no longer required to provide a bylaw for registration; and individual entrepreneurs are not required to pass the state registration process (a simple application form will be enough to start a ). The government allocated funding to establish an effective link between the customs clearance system and the banking/payment system. Traders can now pay customs fees and duties and receive confirmation of payment via the electronic system. The government also introduced provisions which allow customs officers to electronically approve the customs declaration and release goods. Both improvements reduce transaction costs by eliminating the need for traders to visit the Customs office. The government adopted 10 legal acts to improve and simplify trade procedures for mandatory certification during importation; certification and permissions during import of measuring devices; certification of product origin during export and import; permission for export of dual use goods; veterinary controls during the import and export of animal products; and phytosanitary controls during import/export of plants. These changes are expected to reduce the cost and time of trade procedures. They also target improvements in risk-based control and clarification of the documentation and functions of agencies involved in the import and export process. The government introduced provisions which allow customs officers to approve the customs declaration and release goods via the electronic system. Previously traders visited the customs office to obtain a seal on the paper copy of the declaration. The government also allocated funding to establish an effective link between the customs clearance system and the banking/payment system. REFORM RESULTS RESULT TYPE (National/ Subnational) 1 continued on next page ANNEXES 65

70 COUNTRY TOPIC IC REFORM DESCRIPTION RESULT INDICATOR EDITED TEXT ARMENIA (continued) Trade logistics Trade logistics Trade logistics Trade logistics Implementation or improvement of risk management related to trade logistics Implementation or improvement of trade logistics standards and quality Reduction in the number of days to trade Reduction in the number of documents related to trade The government amended the Customs Code and adopted measures to ensure the effective use of a risk management system for customs clearance and control. The measures aim to reduce the rate of physical inspections of cargo crossing Armenia s borders, thus saving time and money. Amendments to the Customs Code aimed at simplifying customs valuation procedures were drafted, submitted to the Parliament for adoption, and two legal acts were adopted. The legal acts set limits on the customs authority s response time for importers applications during the customs clearance process. The deadline of 2 days (previously 5 days) was set for acceptance or rejection of the customs value of imported goods based on the transaction value method. If the decision is not made within 2 days, the customs value presented by the applicant is deemed accepted. The government reduced the time exporters and importers must spend in conducting their trade procedures. The number of days for export was reduced by 4 ( a more than 10 percent reduction from the baseline), and the number of days to import was reduced by 2 (as reported in Doing Business 2011). The number of trade documents was reduced by 3 including two export and one import documents, as reported in Doing Business Close cooperation with customs authorities and joint efforts contributed significantly to this improvement, which reflects a 10 percent reduction from the baseline. REFORM RESULTS RESULT TYPE (National/ Subnational) ARMENIA TOTAL 4 12 BELARUS Closing a Improved regulatory framework related to restructuring and insolvency A presidential decree improved procedures for economic insolvency, providing for: creditors to acquire the debtor s immovable assets without documents certifying their state registration (although there is no efficient mechanism for application); a debtor to transfer illiquid assets against the debt; more options to dispose of receivables; and tax exemption on sale turnover and profit from sale of the debtor s entity property complex. BELARUS TOTAL 1 continued on next page ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

71 COUNTRY TOPIC IC REFORM DESCRIPTION RESULT INDICATOR EDITED TEXT BOSNIA AND HERZEGOVINA Business licensing and regulatory governance Business licensing and regulatory governance Business licensing and regulatory governance Business licensing and regulatory governance Business licensing and regulatory governance Business licensing and regulatory governance Creation or improvement at the legal and regulatory level of institutions dealing with regulatory management and reform Creation or improvement at the legal and regulatory level of institutions dealing with regulatory management and reform Implementation of an e-registry of administrative procedures Implementation of an e-registry of administrative procedures Implementation or improvement of a Regulatory Impact Analysis Rationalization in the number of procedures to comply with regulations related to operations As a result of the enactment of legislation at the local level, a regulatory body dealing with regulatory management and reform was created in the municipality of Siroki Brijeg. This sort of institution did not previously exist and the concept is new for the municipality. Regulatory bodies dealing with regulatory management and reform were created in six localities. Responsibilities and tasks of these bodies are defined in the legal acts adopted at the local level. Changes are implemented after regulatory review by these bodies and approval of the proposal by the local authorities. E-registries were completed, tested, and became fully operational in Modrica, Zvornik, Novi Grad, and Gorazde. The e-registries contain all information on local administrative procedures and documents and forms can be downloaded. Six e-registries of administrative procedures were established in the municipalities of Bijeljina, Bihac, Tesanj, Doboj, Visegrad, and Siroki Brijeg. The e- registries help inform es of licensing and other requirements to operate, including all relevant information related to each single formality (department, documentation and information needed, taxes, fees, waiting time, deadlines, contacts, and forms to file). A systematic review of regulations proposed the simplification and elimination of regulations at the municipal level and related to specific sectors (such as tourism, SMEs, crafts, financial). Municipal regulations were structurally changed to eliminate/improve procedures as follows: in Bijeljina (3 regulations changed); in Tesanj, Doboj, and Bihac (3); in Visegrad and Siroki Brijeg (2). Thirteen regulations that apply across the federation were changed related to sectors such as forestry, tourism, geology, and mining. Of 96 procedures inventoried in Siroki Brijeg municipality, 65 were improved (67 percent of all inventoried procedures). Legislation was enacted enabling implementation of the recommended improvements, which reduce time spent on the procedures, eliminate documentation, and simplify forms and information obligations. REFORM RESULTS RESULT TYPE (National/ Subnational) Subnational 1 Subnational 6 Subnational 4 Subnational 6 Subnational 1 Subnational 1 continued on next page ANNEXES 67

72 COUNTRY TOPIC IC REFORM DESCRIPTION RESULT INDICATOR EDITED TEXT BOSNIA AND HERZEGOVINA (continued) Business licensing and regulatory governance Business licensing and regulatory governance Investment policy and promotion Investment policy and promotion Rationalization in the number of regulations related to operations Reduction in the cost to comply with regulation related to operation Enactment of legislation related to investment policy and promotion Implementation or improvement of procedures related to investment policy and promotion In the Republika Srpska, a Regulatory Impact Analysis on sections of the labor law, including a cost-benefit analysis, was completed and the government began implementing its recommendations. The Ministry of Labor was asked to engage with social partners and find ways to formulate changes to the labor law. The Republika Srpska empowered its Ministry of Economic Relations to establish a unit with authority to oversee comments and report on the quality of regulatory proposals. Improved procedures at the municipal level resulted in cost savings in Bijeljina (20 percent less than baseline), Doboj (31 percent), Bihac (25 percent), Visegrad (25 percent), Siroki Brijeg (27 percent), and Tesanj (31 percent). The government adopted an amendment to the Law on FDI, issued instructions for implementing the new FDI registration policy, and assisted local governments in implementing it. The policy abolished the registration of es with the Ministry of Foreign Trade and Economic Relations. Foreign investors and domestic companies need only register at the municipal/basic court. The instructions also regulate how the courts submit, record, and disclose data on registered FDI entities. An electronic tracking and analyzing system was established at the Ministry of Foreign Trade and Economic Relations, which acts as the principal government source on FDI inflows. In addition, new unified procedures for issuing work permits to foreigners were drafted and put into force in June The by-law provides for a single and streamlined process. REFORM RESULTS RESULT TYPE (National/ Subnational) Subnational 6 Subnational 6 Subnational 1 Subnational 2 BOSNIA AND HERZEGOVINA TOTAL 34 BURKINA FASO Business taxation 1 In January 2010, the Parliament adopted a new law creating a corporate tax by merging three different taxes. The new corporate tax has been lowered to 27.5 percent. Effective January 2010, apprentice tax has been reduced from 4 to 3 percent. Also, a new tax procedure book has been adopted to provide uniform tax procedures across different offices. Enactment of legislation related to taxation The Parliament adopted in January 2010 and promulgated in March 2010 a new law creating a corporate tax by merging three different taxes. The new corporate tax has been lowered from 30 to 27.5 percent. A new tax procedure book was created. continued on next page ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

73 COUNTRY TOPIC IC REFORM DESCRIPTION RESULT INDICATOR EDITED TEXT BURKINA FASO (continued) Dealing with construction permits Enforcing contracts Enforcing contracts Starting a Dealing with construction permits became less costly and easier as a result of a reduction in the cost of the soil survey by a half [from XOF 600,000 to XOF 300,000 ($1,232 to $616)] and a reduction in the time to process a building permit application by a third (from 30 to 20 days). As a result, the total cost to obtain a building permit and utility connections decreased from 668 to 524 percent of income per capita, and the time decreased from 108 to 98 days. The commercial court provided for under Law n of May 2009 became operational in October It is competent for all commercial matters with a claim value in excess of XOF 1,000,000 ($2,053). Following the amendments to the OHADA Uniform Act on General Commercial Law, the Ministry of Justice adopted in May 2011 a sworn declaration that replaces the requirement to submit a copy of criminal record at the time of company registration. As a result, the number of procedures to start a was reduced from 4 to 3, time needed from 14 to 13 days, and cost from 53.4 to 47.7 percent of income per capita. Reduction in cost to comply with construction permitting Enactment of legislation related to enforcing contracts New/reorganized institution becomes operational Enactment of legislation related to starting a The cost of the soil survey was reduced from XOF 600,000 to XOF 300,000 (from $1,232 to $616), and the time to process a building permit application was cut by a third. The government adopted in June 2010 two joint ministerial decrees appointing 64 new consular judges at the commercial court and also initiated a strong training program for the commercial court judges and clerks. Prior to this, the program funded the design and set-up of the case management at the lower court and supported the lower court in implementing the automated case management system. Following adoption in May 2009 of the law creating the commercial courts, the government set up specialized commercial courts in the capital city, Ouagadougou, and in the economic capital, Bobo Dioulasso. Following the adoption of the revised OHADA law on general commercial law, the Ministry of Justice adopted in May 2011 a sworn declaration and a circular letter was sent to all courts related to the registration process and the deadline for providing the criminal record. Further to this, the Maison de L Entreprise signed a notice to all users of the registry and made the sworn declaration available online and to lawyers and notaries. REFORM RESULTS RESULT TYPE (National/ Subnational) BURKINA FASO TOTAL 4 5 GEORGIA Business taxation 1 The new tax code enacted from January 2011 simplified the system of filing valueadded tax (VAT). According to the tax code, companies can choose quarterly, instead of monthly, VAT payments. Implementation or improvement of mechanism for filing tax returns The system for filing VAT returns was improved. Effective with enactment of the new Tax Code, companies can file quarterly, rather than monthly, VAT payments. continued on next page ANNEXES 69

74 COUNTRY TOPIC IC REFORM DESCRIPTION RESULT INDICATOR EDITED TEXT GEORGIA (continued) Business taxation Implementation or improvement of a SME tax regime The tax system for micro and smaller es was reformed following the adoption of the new Tax Code enacted in January 2011 and two pieces of secondary legislation. Easy-to-read materials were developed to help micro and small es understand the new system and reduce their compliance costs. REFORM RESULTS RESULT TYPE (National/ Subnational) GEORGIA TOTAL 1 2 HAITI Investment policy and promotion 1 Three companies have materialized investment and job creation in this period: Timberland with $3 million and 400 employees, Propper with $3 million and 400 employees; and Willbes, an existing garment company, with $4 million and 350 employees. Increase in the number of leads from relevant sectors into investment generation pipeline In FY11 investment leads increased from 5 to 11, which resulted in investments and job creation from three companies in this period: Timberland with $3 million and an estimated 400 employees; Propper with $3 million and an estimated 400 employees; and Willbes, an existing garment company, with $4 million and hiring 350. HAITI TOTAL 1 1 PAPUA NEW 1 GUINEA Alternative dispute resolution Alternative dispute resolution The time to resolve a commercial dispute through mediation was reduced from 60 to 48 days for the entire process, including a reduction from 4 days to 1 for the time spent in court. The private sector cost savings are estimated at $350,000 as a result of savings in reduced legal fees. Reduction in the cost and time for to a dispute Implementation or improvement of a more gender inclusive investment climate related to ADR The cost savings for es that resolved disputes through mediation is estimated at $350,000, primarily as a result of reduced legal fees. Time saved in court days alone is estimated at 3 days per case (from 4 days to 1). Total time saved, based on court-provided data, is estimated at 12 days per case (from 60 to 48 days) including waiting time from the date the judge referred the case to the start of the mediation. Thirty-six new mediators were trained and accredited in November 2011, including seven women. This was the first group of mediators trained and accredited in the country under the new mediation program. PAPUA NEW GUINEA 1 2 PHILIPPINES Starting a Subnational 1 Enactment of legislation related to entry The Business Permit and Licensing System standards were enacted in January PHILIPPINES TOTAL 1 continued on next page ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

75 COUNTRY TOPIC IC REFORM DESCRIPTION RESULT INDICATOR EDITED TEXT SERBIA Business licensing and regulatory governance Business licensing and regulatory governance Business licensing and regulatory governance Creation or improvement at the legal and regulatory level of institutions dealing with regulatory management and reform Enactment of new/revised legislation improving the regulatory system Rationalization in the number of procedures to comply with regulations related to operations Regulatory bodies were established in the municipalities of Niska Banja and Crveni Krst. The inter-municipal Central Working Body for Regulatory Reform, comprised of representatives of five municipalities, is responsible for quality control and regulatory management and reform, ensuring the harmonization of administrative procedures for the municipalities. In addition, a small operation team for each municipality was formed to initiate the process of regulatory impact assessment and to support the Inter-municipal Central Working Body for Regulatory Reform. Final decisions on the registration, amendment, and repeal of administrative procedures will be made by existing Municipal Councils in each municipality, taking into account the opinion of the Inter-municipal Central Working Body for Regulatory Reform. Legal acts were adopted in the municipalities of Crveni Krst and Niska Banja, with the goal of improving the regulatory system, ensuring the legal security of the e-registry, and establishing the responsible bodies for its operation. Of a total 19 formalities inventoried in the municipality of Niska Banja, 18 formalities (or 95 percent) were simplified, improved, or eliminated as a result of regulatory reform. Improvements were achieved in terms of reducing the number of necessary procedures; in cutting taxes and costs; and in eliminating documentation and simplifying forms and information requirements. All improvements were introduced into the legal system of Niska Banja through the adoption of appropriate legal acts. REFORM RESULTS RESULT TYPE (National/ Subnational) Subnational 2 Subnational 2 Subnational 1 continued on next page ANNEXES 71

76 COUNTRY TOPIC IC REFORM DESCRIPTION RESULT INDICATOR EDITED TEXT SERBIA (continued) Business licensing and regulatory governance Reduction in the cost to comply with regulations related to operations RESULT TYPE (National/ Subnational) Three municipalities reported private Subnational 3 sector cost savings as a result of improvements in regulations. All figures include both direct and indirect costs. Post-reform figures are based on Standard Cost Model data. For Pantelej, the baseline for annual aggregated private-sector costs prior to reform was $2,552,412. Post-reform annual aggregated private-sector savings amounted to $1,637,480 (64 percent of baseline), reducing annual aggregated private-sector costs to $914,932. For Medijana, the baseline for annual aggregated private-sector costs prior to reform was $15,347,976. Post-reform annual aggregated private-sector savings were $8,083,844 (53 percent of baseline), reducing annual aggregated private-sector costs to $7,264,132. For Niska Banja, the baseline for annual aggregated private-sector costs prior to reform was $1,988,467. Post-reform, annual aggregated private-sector savings were $848,227 (43 percent of baseline), reducing annual aggregated private-sector costs to $1,140,240. SERBIA TOTAL 8 SUDAN Public private dialogue National 2 Starting a Number of PPD-sponsored Investment Climate reforms enacted which were directly supported by the PPD project team Increase in number of newly registered es Two laws drafted with IFC support were enacted by Parliament in May The Sale of Goods Act (2011) provides the legislative framework for wholesale and retail trading in South Sudan. The Cooperatives Provisional Order provides a legal framework to encourage formation of cooperatives as legal entities, a key strategy for opening up commercial agriculture in South Sudan. A total of 2,869 new entities were registered in FY11, and a total of 12,373 new entities have been registered since project inception. REFORM RESULTS SUDAN TOTAL 3 TIMOR-LESTE Starting a 1 The company registry was reorganized in order to streamline the registration process and reduce the time necessary to receive, analyze, and process new applications. As a result, the time to start a decreased from 147 to 103 days. Enactment of legislation related to entry The decree-law establishing the Fast Incorporation procedure (FIP) became effective on January 1, 2011, and followup workshops were held with staff. TIMOR-LESTE TOTAL 1 1 continued on next page ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

77 COUNTRY TOPIC IC REFORM DESCRIPTION RESULT INDICATOR EDITED TEXT TONGA Public private dialogue Implementation or improvement of a more gender inclusive investment climate related to PPD The Tonga Women in Business organization, Women in Sustainable Enterprises (WISE), was registered in July WISE was created as the result of the Women in Business conference sponsored by IFC in Vanuatu in March REFORM RESULTS RESULT TYPE (National/ Subnational) TONGA TOTAL 1 VIETNAM Business licensing and regulatory governance 2 Business licensing and regulatory governance Business licensing and regulatory governance The government reviewed six licenses related to transportation and eliminated two. Also, in the area of advertisement licenses, of 11 different types, 8 licenses were reviewed and replaced with postsupervision checks. Rationalization in the number of regulations related to operations (licenses, construction permits, inspections) Creation or improvement at the legal and regulatory level of institutions dealing with regulatory management and reform Rationalization in the number of regulations related to operations (licenses, construction permits, inspections, etc.) The government reviewed six licenses related to transportation and eliminated two. It is no longer necessary for es to register to change the label of charter buses. The government also approved the proposal to stop exploiting fixed, city inner, nearby interprovincial, and 1000 km or less interprovincial transportation routes. Related to the area of Clean Development Mechanism, the government eliminated five requirements that es must: prepare dossiers to get approval or comments from the provincial authority and relevant agencies; submit an approval letter of the provincial authority; submit the Assessment Report on Environmental Impact; submit the license on the exploitation of surface water and groundwater; and submit the contract/agreement with the electricity company. The government also reduced the requirement that es submit 18 dossiers in Vietnamese and 3 dossiers in English to just 1 dossier in Vietnamese, and it also reduced the number of ministries represented on the steering board from 14 to 3. An advisory council was established in the new control agency to support the review of draft new and amended legal documents related to re-registration and conversion of foreign-invested companies; registration for private placement of shares; and licensing of micro-finance institutions and insurance companies and brokers. The government amended the advertisement licensing procedure by eliminating eight of eleven types of licenses and the resolution was approved by the Prime Minister. VIETNAM TOTAL 1 4 continued on next page ANNEXES 73

78 COUNTRY TOPIC IC REFORM DESCRIPTION RESULT INDICATOR EDITED TEXT YEMEN, REPUBLIC OF Business taxation Business taxation Business taxation Business taxation The government enacted a new tax law in August 2010 that reduced the general corporate tax rate from 35 to 20 percent and harmonized tax incentives with investment law. Implementation or improvement of practices to reduce corruption related to taxes Implementation or improvement of a SME tax regime Implementation or improvement of a tax incentive regime Implementation or improvement of mechanisms for filing tax returns RESULT TYPE (National/ Subnational) The new income tax law based on 1 self assessment and the six streamlined procedures reduce corruption related to taxes. Taxpayers now determine the tax base and assess the payable tax in accordance with the provisions of this law. The taxpayer is liable for payment of the tax, on the basis of the filed return, at the same date it is filed without the need for a claim from the tax authority. Prior to this law, the tax authority determined tax payable, which could result in a negotiation between the official and the taxpayer and open opportunities for corruption. The government introduced a new income tax law and executive regulations to create a tax regime for smaller es. The tax base (net profit) of the taxable small enterprises for the commercial and industrial profit tax and the tax on the net profit of non-commercial and non-industrial professions is determined as a percentage of turnover based on the type of activity. The government reformed its approach to incentives to ensure they do not harm the tax base while encouraging private sector growth. The new income tax law harmonizes incentives with investment law and uses incentives based on accelerated depreciation and job creation. The government implemented a new streamlined system for filing tax payments. Under the new streamlined process, a taxpayer files two tax declaration forms (one form for corporate income tax and one integrated form for general sales tax and pay as you earn, if possible) and no attachments are required. Businesses of all sizes and tax types can use one unified process at one location, or taxpayers can file through registered mail and pay directly to the bank. The refund application is merged with the tax declaration form, allowing the taxpayer to claim a tax refund when submitting the tax declaration. continued on next page REFORM RESULTS ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

79 COUNTRY TOPIC IC REFORM DESCRIPTION RESULT INDICATOR EDITED TEXT YEMEN, REPUBLIC OF (continued) Business taxation Business taxation Implementation or improvement of payment options for taxpayers Rationalization of the tax rate and the tax base The tax payment process was redesigned to incorporate the necessary steps for a self-assessment tax system. The new streamlined process allows for voluntary tax payment and the automatic issuance of a tax certificate every time the taxpayer s account is settled. The taxpayer can and should only pay tax liabilities directly to banks and the post office. A new income tax law reduced the tax rate from 35 to 20 percent (and 15 percent, in some cases). The introduction of the tax regime for smaller es is expected to increase the tax base. REFORM RESULT TYPE (National/ Subnational) YEMEN, REPUBLIC OF TOTAL 1 6 GRAND TOTAL RESULTS ANNEXES 75

80 ANNEX 3: ACTIVE AND CLOSED PROJECTS The following table summarizes the portfolio of active and closed FIAS projects mapped to the World Bank Group s Investment Climate Department. All projects listed below received FIAS funding at one point in time during the project life. TABLE 1: FIAS PROJECTS (ACTIVE/CLOSED) REGION COUNTRY PROJECT NAME EUROPE AND Central Asia Region Tax Transparency and Industry-Specific Regulatory Reform Product CENTRAL ASIA Development in Central Asia LATIN AMERICA AND THE CARIBBEAN MIDDLE EAST AND NORTH AFRICA SUB-SAHARAN AFRICA APPROVED PROJECT BUDGET 1 PROJECTS STATUS $300,000 Active Eastern Europe Region Doing Business Reform East Europe and Central Asia $1,354,780 Active Montenegro National Business Enabling Environment Reform $569,050 Active Brazil Frontier States Investment Generation (National-Subnational) $2,300,000 Active Colombia Trade Logistics Advisory Program $1,099,053 Active Latin America Region Doing Business Reform Latin America and the Caribbean $1,411,082 Active Middle East and Doing Business Reform $1,341,636 Active North Africa Region Yemen, Republic of Investment Generation Program $1,338,630 Active Yemen, Republic of Special Economic Zones Investment Generation $504,271 Active Africa Region OHADA: Building the Capacity to Improve the Quality of the $1,882,479 Active Legislation Africa Region Doing Business Reform Sub-Saharan Africa $867,380 Active Burkina Faso Trade Logistics $823,591 Active Burundi Investment Climate Reform Program $1,500,000 Active Eastern Africa Region East African Community Investment Climate Reform Program $1,457,020 Active Ghana Ghana Collateral Reform $1,449,508 Active Kenya Improving Regulatory Performance and Capacities $4,925,000 Active Kenya Trade Logistics $1,082,939 Active Liberia Trade Logistics Project $850,000 Active Mali Investment Climate Reform Program, Phase 2 $1,896,000 Active Nigeria Subnational Investment Climate Program $3,863,000 Active Rwanda Investment Climate Reform Program $4,500,000 Active Sierra Leone Tax Simplification Rollout $2,050,000 Active Sierra Leone Promoting Investment and Export $1,632,050 Active Sierra Leone Tourism $1,999,500 Active Uganda Investment Climate Program $1,442,399 Active $175,000 Active WORLD Netherlands Knowledge Management: Ad-hoc Support to Regulatory Governance in the Netherlands DEVELOPMENT EFFECTIVENESS 2 World Region Donor Committee for Enterprise Development $2,524,000 Active World Region Global Secured Transactions and Collateral Registries Program $1,829,045 Active World Region Global Investment Law and Policy Research and Advisory Project $224,544 Active World Region Subnational Doing Business Product Development and Global $1,613,178 Active Rollout Support World Region Investment Policy and Promotion Core Product $540,000 Active World Region Investing Across Borders Indicators $3,399,209 Active World Region Tax Product Program Design $2,722,249 Active World Region Commercial Mediation Product Development and Knowledge $1,500,000 Active Management World Region Doing Business Reform Advisory -- Global $2,908,833 Active World Region Tourism Investment and Development Advisory Services -- Global $397,144 Active World Region Land Market for Investment -- Global Knowledge Management $500,700 Active and Product Development World Region Role of Incentives in Promoting Investments $526,564 Active continued on next page ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

81 APPROVED REGION COUNTRY PROJECT NAME PROJECT BUDGET 1 PROJECTS STATUS WORLD World Region Restructuring and Insolvency Advisory Services Program $1,998,785 Active (continued) World Region Public Private Dialogue Product Development and Knowledge $607,500 Active Management World Region Global Investment Promotion Benchmarking 2011 $1,752,125 Active World Region Special Economic Zones Product Development Knowledge $200,000 Active Management Phase 2 World Region Global Trade Logistics Advisory Program $1,200,000 Active World Region Knowledge Management: Best Practice in Investment Climate $378,000 Active Reforms and Incentives to Promote Low-Carbon Growth World Region Business Regulation Product Management and Knowledge $717,131 Active Management World Region Investment Climate Business Line Impact Estimations and $1,249,438 Active Evaluations EAST ASIA AND PACIFIC EUROPE AND CENTRAL ASIA China East Asia and Pacific Region Russian Federation Serbia MOFCOM Investment Promotion Support for Lesser-Developed $570,060 Closed Positive Regions Pacific Gender Mainstreaming Program $412,500 Closed Positive Removing Administrative Barriers for Investment, Business Development in Republics of the North Caucasus Regulatory Impact Analysis Improvements in Efficiency and Transparency of the Legislative Process $731,890 Closed TETJ $809,938 Closed Positive DEVELOPMENT EFFECTIVENESS 2 LATIN AMERICA Colombia Subnational Doing Business $681,907 Closed Positive AND THE CARIBBEAN MIDDLE EAST AND Pakistan Subnational Doing Business $297,428 Closed Negative NORTH AFRICA SOUTH ASIA India Subnational Doing Business $430,000 Closed Positive Nepal Investment Climate Reform Program 3 $800,000 Closed Negative SUB-SAHARAN AFRICA Liberia Liberia Private Sector Development in Post-Conflict Program: $4,600,925 Closed Positive Phase 2 Madagascar Investment Climate Reform to Reduce the Cost of Private-Sector $2,000,000 Closed Negative Transactions Rwanda Investment Climate Reform Project $2,833,000 Closed Positive Sierra Leone Removing Administrative Barriers to Investment Ext Phase 2 $1,860,858 Closed Positive Zambia Investment Climate Program $643,681 Closed Positive WORLD World Region Entrepreneurship and Economic Development $484,572 Closed MEC World Region Business Environment Snapshots $353,136 Closed MEC World Region Knowledge Management: The Better Regulation for Growth $698,000 Closed MEC Programme Developing and Adapting Regulatory Management Tools World Region Business Entry Product Development and Knowledge $791,023 Closed MEC Management World Region Business Operations Product Development and Knowledge $825,000 Closed MEC Management World Region Knowledge Management Trade Logistics Advisory Services $1,445,476 Closed MEC Program TOTAL $90,672,207 1 Approved Project Budget is the total approved budget for a project and includes allocations from FIAS and other sources of funds. 2 Development Effectiveness: MEC: Meets exclusion criteria (knowledge management, diagnostics, etc.); TETJ: Too early to judge (development effectiveness will be judged later as new data becomes available); Positive: Project is rated positive (mostly successful, successful, highly successful); Negative: Project is rated negative (partly unsuccessful, unsuccessful, highly unsuccessful). 3 The Nepal project was initiated and designed by the Investment Climate Department and received limited funding from FIAS during the design/pre-implementation phase. Management/implementation responsibility was transferred to IFC s South Asia region in late 2007, and financing during the implementation phase came exclusively from the South Asia Enterprise Development Facility. ANNEXES 77

82 The following table shows active and closed projects not mapped directly to the Investment Climate Department but which received at least 10 percent of their overall budget from FIAS. TABLE 2: OTHER PROJECTS WITH FIAS FINANCIAL CONTRIBUTIONS (ACTIVE/CLOSED) REGION COUNTRY PROJECT NAME APPROVED PROJECT BUDGET 1 PROJECTS STATUS DEVELOPMENT EFFECTIVENESS 2 EAST ASIA AND PACIFIC Mongolia Business Inspection Reform $1,184,452 Active Papua New Guinea New Guinea Regulatory Simplification and $1,049,546 Active Investment Policy and Promotion Project Philippines Doing Business Plus $2,343,000 Active Timor-Leste Business Registration and Licensing Reform $631,049 Active Project Tonga Regulatory Simplification and Investment Policy $1,291,264 Active and Promotion Program Vietnam Business Enabling Environment Land Stage 2 $421,679 Active Vietnam Business Enabling Environment Licensing $770,129 Active EUROPE AND CENTRAL ASIA Albania Subnational Regulatory Simplification and $699,760 Active Investment Generation Armenia Regulatory Simplification Doing Business $1,539,307 Active Reform Belarus Regulatory Simplification and Investment $3,030,841 Active Generation Bosnia Subnational Competitiveness $2,982,452 Active Georgia Tax Simplification Project $1,034,900 Active Serbia Subnational Competitiveness $978,546 Active South East Europe Subnational Doing Business Report $857,402 Active LATIN AMERICA AND THE Haiti Investment Generation Strategy $2,291,692 Active CARIBBEAN MIDDLE EAST AND NORTH AFRICA Yemen, Republic of Tax Simplification Rollout 1 $3,765,700 Active SUB-SAHARAN AFRICA Burkina Faso Doing Business Better in Burkina Faso $2,444,328 Active Mozambique Tourism Anchor Investment Program $1,855,149 Active Southern Sudan Southern Sudan Investment Climate Reform $3,000,000 Active Program Phase 2 EAST ASIA AND PACIFIC Papua New Guinea Country Special Economic Zone Strategy $348,106 Closed Negative Solomon Islands Regulatory Simplification and Investment Policy $891,739 Closed Negative and Promotion Project SUB-SAHARAN AFRICA Sudan Administrative Barriers Reform Program $1,615,000 Closed Positive TOTAL $35,026,041 1 Approved Project Budget is the total approved budget for a project and includes allocations from FIAS and other sources of funds. 2 Development Effectiveness: Positive: Project is rated positive (mostly successful, successful, highly successful); Negative: Project is rated negative (partly unsuccessful, unsuccessful, highly unsuccessful) ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

83 ANNEX 4: ABBREVIATIONS ADR AfD BICF CASA CIC DfID EPZs FDI FIAS FPD FY GIPB IAB IBRD ICT IDA IFC MIGA OECD OHADA SEZ SMEs VAT alternative dispute resolution Agence Française de Développement (France) Bangladesh Investment Climate Fund Conflict Affected States in Africa (IFC) Investment Climate Department (IFC/World Bank) Department for International Development (United Kingdom) export processing zones foreign direct investment Facility for Investment Climate Advisory Services (formerly Foreign Investment Advisory Service) Financial and Private Sector Development (Vice Presidency/Network) fiscal year Global Investment Promotion Benchmarking report Investing Across Borders (project and report) International Bank for Reconstruction and Development information and communication technologies International Development Association International Finance Corporation Multilateral Investment Guarantee Agency Organisation for Economic Co-operation and Development Organisation pour l Harmonisation en Afrique du Droit des Affaires special economic zone small and medium enterprises value-added tax All dollar amounts are in current U.S. dollars unless otherwise noted. ANNEXES 79

84 PHOTO CREDITS p. i: World Bank Group, Armenia Tax Center p. 16: istock.com p. 17: istock.com p. 19: Government of Sierra Leone, Aubrey Wade p. 20: IFC p. 22: ShutterStock.com p. 23: World Bank Group, Port in Cartagena, Colombia p. 26: World Bank Group, Ukraine p. 27: World Bank Group, Mozambique p. 39: World Bank Group, Ukraine ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

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86 THROUGH THE FIAS PROGRAM, THE WORLD BANK GROUP AND DONOR PARTNERS ASSIST DEVELOPING COUNTRIES AND TRANSITION ECONOMIES IN REFORMING THEIR BUSINESS ENVIRONMENTS AT ECONOMY-WIDE AS WELL AS INDUSTRY LEVELS. FIAS PROJECTS AIM TO DELIVER TANGIBLE RESULTS LEADING TO MEASURABLE IMPROVEMENTS IN THE INVESTMENT CLIMATES OF CLIENT COUNTRIES.

87 FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

88 FIAS 2011 ANNUAL REVIEW Through the FIAS program, the World Bank Group and donor partners assist developing countries and transition economies in reforming their environments at economy-wide as well as industry levels. FIAS projects aim to deliver tangible results leading to measurable improvements in the investment climates of client countries. The FIAS program is managed by the Investment Climate Department under the joint oversight of the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the World Bank (IBRD). For more information, visit

89 2011 The World Bank Group 1818 H Street NW Washington DC Telephone: Internet: All rights reserved. This volume is a product of the staff of the World Bank Group. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank Group does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: ; fax: ; Internet: All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: ; Cover photo credit: Bessarabsky fresh market, Kiev, Ukraine; May 2011 (World Bank Group)

90 CONTENTS FIAS Results at a Glance 2 Message from the Director 6 FY11 Results and Reforms 8 Delivering Results, Reforms, and Impact: FY08 11 Strategy Cycle Highlights 16 FY11 Operational Highlights 20 Knowledge Management, Learning, and Communications 32 Financial Results and Resource Use 36 Annexes Annex 1: Reforms and Results Supported by FIAS in FY11 44 Annex 2: Other Reforms and Results Supported by FIAS in FY11 64 Annex 3: Active and Closed Projects 76 Annex 4: Abbreviations 79

91 FIAS RESULTS AT A GLANCE In FY11, our clients in 31 countries implemented 128 investment climate results and 42 reforms. Forty-five percent of the FY11 results and 55 percent of the reforms were achieved in the world s poorest countries, where 62 percent of FIAS expenditures for client-facing project implementation were made. FIAS RESULTS BY REGION Percent of FIAS FY11 Results FIAS REFORMS BY REGION Percent of FIAS FY11 Reforms 1% East Asia and Pacific [1] 30% Europe and Central Asia [38] 22% Latin America and the Caribbean [28] 8% Middle East and North Africa [11] 39% Sub-Saharan Africa [50] 100% = 128 results 26% Europe and Central Asia [11] 17% Latin America and the Caribbean [7] 12% Middle East and North Africa [5] 45% Sub-Saharan Africa [19] 100% = 42 reforms A majority of results (39 percent) occurred in Sub-Saharan Africa (50), followed by Europe and Central Asia (38), Latin America and the Caribbean (28), Middle East and North Africa (11), and East Asia and Pacific (1). This year FIAS contributed to 42 reforms, of which 36 were validated by Doing Business and 6 were in areas not covered by the Doing Business report. (See Annex 1 for a detailed breakdown of reforms by country.) FIAS supported 7 of the 12 countries recognized in Doing Business 2012 as the most improved economies in the ease of doing across three or more areas of regulation (Morocco, Moldova, FYR Macedonia, Sierra Leone, Burundi, Armenia, and Colombia). FY11 PROJECT IMPLEMENTATION EXPENDITURES Breakdown of FIAS FY11 Project Implementation Expenditures CLIENT-FACING: 74% OF TOTAL East Asia and Pacific [12% of Client-Facing] Europe and Central Asia [19% of Client-Facing] Latin America and the Caribbean [6% of Client-Facing] Middle East and North Africa [5% of Client-Facing] South Asia [1% of Client-Facing] Sub-Saharan Africa [51% of Client-Facing] World [6% of Client-Facing] NON-CLIENT-FACING: 26% OF TOTAL Knowledge Management/Product Development [100% of Non-Client-Facing] Focus on Priority Client Groups: IDA 62% Sub-Saharan Africa 51% Fragile and Conflict-Affected States 28% As a share of client-facing project expenditures, base $14.2 million 100% = $19,057,471 Sub-Saharan Africa accounted for the largest share of project expenditures (51 percent of client-facing project expenditures) ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

92 RESULTS BY REGION AND COUNTRY IN FY11 Region Country Access to finance Business licensing and regulatory governance Business taxation East Asia and Pacific China 1 1 EAST ASIA AND PACIFIC TOTAL 1 1 Europe and Central Asia Hungary Closing a Dealing with construction permits Enforcing contracts Investment policy and promotion Protecting investors Public private dialogue Registering property Special economic zones Kazakhstan Macedonia, FYR Moldova* Montenegro Romania 1 1 Serbia 4 4 Tajikistan*+ 3 3 EUROPE AND CENTRAL ASIA TOTAL Latin America and the Caribbean Brazil Colombia Mexico Paraguay 2 2 Peru LATIN AMERICA AND THE CARIBBEAN TOTAL Middle East and North Africa Jordan 1 1 Morocco Syrian Arab Republic 1 1 United Arab Emirates 3 3 Yemen, Republic of*+ 1 1 MIDDLE EAST AND NORTH AFRICA TOTAL Sub-Saharan Africa Africa Region (OHADA)* Benin* Burkina Faso* 3 3 Burundi* Central African Republic* Côte d'ivoire*+ 1 1 Liberia* Madagascar* 2 2 Mali* Rwanda* Senegal* 1 1 Sierra Leone* SUB-SAHARAN AFRICA TOTAL TOTAL RESULTS * IDA Country + Fragile and Conflict-Affected Country Starting a Trade logistics TOTAL RESULTS FIAS RESULTS AT A GLANCE 3

93 REFORMS BY REGION AND COUNTRY IN FY11 DOING BUSINESS TOPICS NON-DOING BUSINESS TOPICS Region Europe and Central Asia Country Access to finance Business taxation Construction permits Enforcing contracts Protecting investors Registering property Resolving insolvency Starting a Hungary Kazakhstan Macedonia, FYR Moldova* Montenegro Romania Serbia Tajikistan* EUROPE AND CENTRAL ASIA TOTAL Latin America and the Caribbean Colombia Mexico Paraguay Peru LATIN AMERICA AND THE CARIBBEAN TOTAL Middle East and North Africa Jordan Morocco Syrian Arab Republic United Arab Emirates Yemen, Republic of* MIDDLE EAST AND NORTH AFRICA TOTAL Sub-Saharan Africa Africa Region* Benin* Burundi* Central African Republic* Côte d Ivoire* Liberia* Madagascar* Mali* a Rwanda* Sierra Leone* SUB-SAHARAN AFRICA TOTAL GRAND TOTAL (Doing Business + non-doing Business) b 5 42 Reforms captured by the Doing Business 2012 report N/A 0 * IDA Country + Fragile and Conflict-Affected Country This reform is recognized retroactively: it was validated by Doing Business 2011, but was not reported as a reform in FY10. a. This reform is on a Doing Business topic, but it affects only small construction projects and therefore is not captured in the Doing Business report. b. Of the 37 reforms, 36 were validated by the Doing Business report. One is about a Doing Business topic that does not affect the standard case (see note a, above). Trade logistics TOTAL REFORMS DOING BUSINESS TOPICS Alternative dispute resolution Business operations (incl. general licenses) Industry Investment policy Public private dialogue Special economic zones TOTAL REFORMS NON-DOING BUSINESS TOPICS TOTAL IC REFORMS ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

94 FY11 FUNDING AND EXPENDITURES FY11 Contributions In US$ thousands World Bank Group Contributions (Core Funding) 8,300 World Bank Group Contributions (Project-Specific/Other Contributions) 4,481 Donor Contributions (Core) 4,552 Donor Contributions (Programmatic) 7,413 Donor Contributions (Project-Specific) 8,267 Client Contributions 283 TOTAL CONTRIBUTIONS 33,296 Less Trust Fund Administration Fees 1,212 TOTAL (NET) CONTRIBUTIONS 32,084 FY11 Expenditures In US$ thousands Staff Costs (incl. consultants) 21,229 Operational Travel Costs 5,678 Indirect Costs (incl. office and operating) 3,366 TOTAL EXPENDITURES 30,273 In FY11, donors, clients, and the World Bank Group contributed a total of $32.1 million to FIAS. Expenditures reached $30.3 million, a 10 percent increase over FY10 expenditures, reflecting a slight expansion in the work program thanks to strong donor support and additional contingency funding received from IFC. FIAS RESULTS AT A GLANCE 5

95 MESSAGE FROM THE DIRECTOR I am pleased to present the FIAS 2011 Annual Review, which reports FIAS-supported results for fiscal year 2011 and highlights cumulative results for the FIAS strategy cycle. I am grateful for the steadfast commitment of our donors and partners that has enabled a focused response to the sustained demand for investment climate work, particularly in view of the difficult global context. Your financial and operational support made possible the successful implementation of the FIAS strategy, as illustrated by more than 600 legal, regulatory, policy, and other improvements enacted with FIAS support by client governments, and by the positive independent evaluation released in February Pierre Guislain In fiscal year 2011, FIAS-funded activities supported 128 investment climate results achieved by our clients in 31 countries, with 45 percent achieved in IDA countries and 39 percent in Sub-Saharan Africa. These results contributed to 42 broader reforms. Over the entire strategy cycle, FIAS supported a total of 641 investment climate results in 81 countries, far exceeding the target of 400 set for the four-year strategy cycle. Individually, these results and reforms translate into environments that support more efficient, productive operations for es and investors. In this past year we have developed an initial impact measurement framework that will allow us to capture how investment climate reforms contribute to the creation of new firms, investment, private sector savings, and jobs, among other economic variables. It is also helping us better allocate resources and manage projects to maximize their impact. The framework will be further refined and rolled out more broadly in the coming years. Recent examples help illustrate the wider impact of our work: A FIAS-funded tax simplification project in Sierra Leone resulted in a 40 percent increase in the number of tax returns filed and a 44 percent increase in tax collection. As a result of reforms in several South East European countries, some supported by FIAS since 2008, 740 national laws and regulations have been cut and simplified, yielding annual cost savings to the private sector of more than $260 million ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

96 In Ghana, FIAS funding supported the reform of the country s movable collateral framework, resulting in more than 20,000 loans for $800 million backed by movable assets registered by banks and other institutions in the new collateral registry created in March FIAS-supported activities to generate investment in Haiti are expected to bring an estimated 1,150 jobs through two new investments totaling $6 million and a $4 million expansion project from an existing garment manufacturer. We continue to provide strong operational support to client governments, as detailed throughout this Annual Review. Four investment climate projects in Bangladesh, South Sudan, Southeast Europe, and in Africa with the Organisation pour l Harmonisation en Afrique du Droit des Affaires (OHADA) received the coveted IFC 2011 Corporate Award. Selected from 136 submissions, the winning projects were recognized as strong examples of our focus on delivering development impact, work in IDA countries, responsiveness, client relationship management, partnership building, efficiency, innovation, commitment to knowledge sharing, and teamwork. FIAS-funded projects that received IFC or World Bank awards are highlighted on pp During the past year we worked with our partners and other stakeholders on the preparation of the FIAS FY12 16 Strategy, titled Managing for Impact, which was adopted by IFC s Board of Directors on May 3, 2011, and we began laying the groundwork for its implementation. For the FY12 16 strategy cycle, we are organizing our advisory offering around three targeted objectives: fostering enterprise creation and growth, facilitating international trade and investment, and unlocking sustainable investments in key industries. Working closely with colleagues in the World Bank s Financial and Private Sector Development network, we helped design and establish the new Investment Climate Global Practice to connect more effectively with our Bank regional colleagues. A new Web site was launched to share information and showcase FIAS-supported investment climate work to a broad audience of donors, clients, partners, and other stakeholders. The Web portal also showcases the broad range of our knowledge management products as well as multimedia clips, videos, and slideshows of our project work. As we embark on the FIAS FY12 16 strategy cycle, we stand ready to support countries seeking help in creating a more open and dynamic environment for the private sector. Much remains to be accomplished in many parts of the world. Unexpected, urgent priorities will arise: who could have imagined the calls for sweeping reform across the Middle East and North Africa that have highlighted the need for strong institutions and better legal frameworks for es? With the help of our partners, FIAS is well equipped to respond to these challenges. I look forward to continued collaboration and, as always, welcome your feedback and insights. Pierre Guislain Director, World Bank Group Investment Climate Department and FIAS MESSAGE FROM THE DIRECTOR 7

97 FY11 RESULTS AND REFORMS Through the multidonor FIAS program, the World Bank Group and its partners continued to assist developing countries and transition economies in improving their environments, with an emphasis on regulatory simplification and investment generation. FIAS also continued to play an essential role in the provision of investment climate advisory assistance to clients around the globe through the Investment Climate Business Line (part of IFC advisory services) and the World Bank s Financial and Private Sector Development Vice Presidency (FPD). The Investment Climate Department (CIC) manages the FIAS program under the joint oversight of IFC, MIGA, and the World Bank. FIAS IN THE WORLD BANK GROUP INSTITUTIONAL STRUCTURE World Bank Financial & Private Sector Development Network IFC Advisory Services b East Asia and Pacific FPD East Asia and Pacific IC Europe and Central Asia FPD Europe and Central Asia IC Latin America and the Caribbean FPD Middle East and North Africa FPD South Asia FPD FIAS Supervisory Committee a Latin America and the Caribbean IC Middle East and North Africa IC South Asia IC & BICF Sub-Saharan Africa FPD World Bank Group Investment Climate Department / FIAS c Sub-Saharan Africa IC Business Regulation Fostering Enterprise Creation and Growth International Trade and Investment Unit Facilitating International Trade and Investment Investment Climate for Industry Unit Unlocking Sustatinable Investments in Key Sectors Private Participation in Infrastructure and Social Sectors (not FIAS-funded) a. The FIAS Supervisory Committee consists of: Executive Vice President, IFC (Chair), Executive Vice President MIGA, Vice President FPD (World Bank-IFC), Vice President Business Advisory Services (IFC), Vice President Africa Region (World Bank). b. IC abbreviates Investment Climate; BICF abbreviates Bangladesh Investment Climate Facility; FPD abbreviates Financial and Private Sector Development Vice Presidency. c. This is the new structure for CIC / FIAS starting July 1, ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

98 CONTINUED FOCUS ON RESULTS During FY11, the final year of the FY08 11 strategy cycle, FIAS-funded activities supported the achievement of 128 investment climate results 1 in 31 countries, 2 and via CIC/ FIAS role in product incubation and development supported programs in another 13 countries. This year s results compare with in FY10, in FY09, and 108 in FY08. These results indicate that countries continue to recognize the need for investment climate reform, implementing policy-level reforms to help them in the face of a global recession. (Summaries of each of the results achieved in FY11, grouped by country, are presented in Annex 1.) There were fewer results recorded in FY11 than in FY10, mainly due to: Tightening of management control on results tracking and counting, in particular limiting the count of closely related measures. Deepening of reform efforts, with more emphasis on longer term interventions that may improve impact but yield fewer short-term results. The shift of part of FIAS project portfolio to IFC regional investment climate teams, including the whole FIAS portfolio (eight projects) in East Asia and Pacific, and FIAS projects in Europe and Central Asia. These projects continue to receive funding from FIAS; however, given they are not implemented by the Investment Climate Department, the results and reforms from these projects are included in the table in Annex 2 (Other Results Supported by FIAS in FY11). 1 A result is a change implemented by a client with support from a FIASsupported project that significantly improves the investment climate in a given country, region, or sector. These changes are tangible achievements brought about with FIAS assistance and for which there is wide technical and expert consensus regarding their relevance in inducing private sector-led development. 2 The region encompassed in the OHADA results (16 African countries) is counted as one country for tracking purposes. 3 Since the publication of the 2010 Annual Review, which reported 177 results, an additional result was validated bringing the total result count to The FY09 result total is higher than reported in the 2009 Annual Report (224). Three results associated with alternative dispute resolution were added to the total. An increased focus at the global level on strengthening product development and knowledge sharing. In FY11, 26 FIAS projects (42 percent) were global (up from 31 percent in FY10). For example, the Global Investment Promotion Benchmarking (GIPB) and Investing Across Borders (IAB) projects do not contribute directly to the result and reform counts. Closure of several large country programs in FY11, which had contributed significantly to the result and reform counts in previous years. Investment climate programs in Liberia, Sudan, South Sudan, and Sierra Leone were completed in FY11. Among the total recorded results, 39 percent occurred in Sub-Saharan Africa, followed by Europe and Central Asia (30 percent), Latin America and the Caribbean (22 percent), Middle East and North Africa (8 percent), and East Asia and the Pacific (1 percent). FY11 results were concentrated in the following areas: starting a (32), dealing with construction permits (23), investment policy and promotion (14), trade logistics (14), closing a (9), public-private dialogue (8), licensing/regulatory governance, taxation, and registering property (5 each). Of the 128 results reported for FIAS-supported projects this year, 12 were specifically achieved working with subnational governments. In FY11, the 128 results achieved by FIAS-supported projects contributed to 42 reforms. Of these 42 reforms, 36 were validated by Doing Business. 5 Five reforms are in topic areas not covered by Doing Business, and they have been captured by the aggregation methodology (see Annex 1 for detailed information and country breakdown). 6 FIAS supported 7 of the 12 countries recognized in Doing Business 2012 for the most improved ease 5 Of 36 reforms, 32 were captured in Doing Business 2012 and 4 in the 2011 report. 6 One additional reform is about a Doing Business topic that does not affect the standard case, and thus it was not validated in the report. FY11 RESULTS AND REFORMS 9

99 of doing across three or more areas of regulation (see box on Moldova, below). While FIAS core funding is increasingly focused on product development and knowledge generation and sharing, the global product teams in the Investment Climate Department (which hosts FIAS) continue to provide strong technical assistance to programs implemented by IFC and World Bank departments that do not receive FIAS funding. Thus, the outcomes of these programs are not captured in FIAS results. For example, Investment Climate technical assistance has supported programs in South Asia [such as the Bangladesh Investment Climate Facility (BICF)], in East Asia and Pacific, and in Europe and Central Asia. FIAS, through BICF, provided indirect support to the government of Bangladesh in major legislative reforms related to economic zones, including improvements to women s working conditions in these zones (see box, p. 29). DELIVERING IMPACT IN AFRICA Sub-Saharan Africa continues to be a primary focus of FIAS activities (examples of FIAS-supported country-specific and regional activities can be found throughout this report). In FY11, FIAS-funded projects were operational in 15 countries in the region. 7 In FY11, FIAS support contributed to firm and job creation in Africa, as reported in the external evaluations of the Burkina Faso, Liberia, Rwanda, and Sierra Leone country programs (see box, p. 17), and FIAS-funded activities supported legal reforms critical to es in 16 African countries through the OHADA program (see box, p. 11). Moldova Creates More Business-Friendly Economy Ranked 2nd in Doing Business 2012 of 12 economies with most-improved regulation The government of Moldova is showing rapid progress in improving the country s investment climate, ranking 81st of 183 economies measured in Doing Business 2012 on ease of doing an improvement of 18 places to its ranking in the 2011 report. Since 2010, a FIAS-supported program has helped Moldova remove or reduce regulatory barriers to operation and growth. Strengthening the environment is especially important to Moldova as one of the poorest and most vulnerable countries in the Eastern Europe and Central Asia region. Moldova s income per capita in 2011 was $1,590. The reforms signal the government s drive for developing a healthy environment and desire to ease the regulatory burden for small and medium-sized enterprises, says Nicolae Cuconescu, member of the Timpul Businessmen Association of Moldova. In addition to improving the environment of Moldova, these reforms offer an effective mechanism to mitigate the ongoing global financial and economic crisis that poses a negative impact on investment and growth in the country. Results Moldova s impressive reform path is largely a result of new legislation, designed and introduced with support from the FIAS-funded project. The new legislation makes it easier for entrepreneurs to start a and obtain construction permits. Several laws were passed to increase the efficiency of the court system, which resulted in decreasing the time to enforce a contract from 365 to 352 days. Amendments to the Company Law were approved in FY11, eliminating the minimal capital requirement to register a. Today it takes 9 days to open a in Moldova. The new law also creates the basis for a one-stop shop, planned to become operational in FY12. In July 2010, a new law streamlining the construction permitting process was approved. The law establishes clear procedures for the construction or demolition of buildings and provides a complete list of documents that authorize the execution of construction works. To protect investors, amendments to the Law on Joint-Stock Companies were adopted in April 2011, improving disclosure obligations for transactions involving conflicts of interest. 7 Each of the regional projects OHADA, EAC, and DBRA Sub-Saharan Africa count as one of the fifteen countries for tracking purposes ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

100 PRIORITIZING FRAGILE AND CONFLICT-AFFECTED STATES FIAS-funded activities have continued to focus on fragile and conflict-affected states. In addition to the programs in Sierra Leone, Liberia, and Rwanda achieving strong results, in FY11 FIAS supported 30 investment climate results in 7 conflict-affected countries. FIAS-supported Investment Climate Department teams, in collaboration with IFC and World Bank regional teams, started work in a number of countries which have recently come out of conflict, such as Guinea and the Central African Republic. A key feature of this work, as exemplified in Guinea, is FIAS contribution to the overall Bank Group investment climate work in close collaboration with the World Bank team. FIAS-funded support to the newly created independent state of South Sudan helped the nascent government enact institutional reforms, including setting up a legal framework for entry, operations, and exit, developing an Investment Promotion Act, removing administrative barriers to trade, and reestablishing an operational registry (see box, p. 24). In the Republic of Yemen, another fragile and conflictaffected country, FIAS-funded activities supported the passage of a new income tax law, reducing the general tax rate from 35 to 20 percent and creating a simplified filing process for micro, small, and medium-size taxpayers. These measures are expected to foster participation in the formal economy and increase tax revenues by encouraging compliance. The project effectively streamlined six procedures, which is expected to reduce corruption and result in an estimated $3.1 million in direct cost savings over the next three years. Support for entry reforms in Timor-Leste helped reduce the time a new needs to verify the company Breakthrough Reforms to Business and Lending Regulations in 16 African States Recent changes to laws in West Africa pave the way for a more entrepreneurial future. The latest sweeping reforms were adopted by the Organization for the Harmonization of Business Law in Africa, a unique organization in Africa that enacts common laws for all 16 member countries a (a 17th member, the Democratic Republic of Congo, is expected to join OHADA soon). As a result of FIAS-funded advisory support, the countries unanimously approved legal changes in December 2010 that will likely make an estimated $250 million in credit available to small es. The legislation is expected to encourage thousands of entrepreneurs to join the formal economy rather than operate off the books. Small and medium-sized enterprises are the heart of the African economy, said M. Biossey Kokou Tozoun, Togo s Minister of Justice. It is therefore essential that small entrepreneurs can turn to banks for loans and that everything be done to encourage them to formalize. a. OHADA member countries are Benin, Burkina Faso, Cameroon, the Central African Republic, Chad, the Comoros, the Republic of Congo, Côte d Ivoire, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Mali, Niger, Senegal, and Togo. Under the new rules, banks may now accept a much wider range of assets as collateral, rather than only real estate (most people do not have formal title to real estate). Businesses may more easily pledge all kinds of present and future movable goods, including accounts receivable, cash flow, or equipment. Banks will also be able to better manage and limit risk, and lend in a more secure environment. One of the major breakthroughs of the legal reform is the creation of a new category entreprenant that will simplify procedures for micro- and small owners who cannot afford to hire lawyers to register their es. It is expected that women entrepreneurs will be most interested in this new status, because it will ease their access to formal credit. OHADA oversees nine laws (general commercial, secure transactions, company law, arbitration, debt recovery, bankruptcy, accounting, transportation of goods by road, and cooperatives). Any change in these laws requires unanimous agreement among all countries and applies throughout the entire bloc. The World Bank Group began supporting legal reform effort four years ago, with support from FIAS, France, and the Investment Climate Facility for Africa. FY11 RESULTS AND REFORMS 11

101 name and register at the Ministry of Justice (from 65 to 19 days). 8 The government was able to tap into the reform experiences of other countries through regional peer-to-peer learning events and study tours. FIAS support also helped in building the capacity of the Better Business Initiative, a forum for public-private dialogue, by establishing a chamber of commerce and industry that unifies operational policy and procedures for 17 associations in one body. The forum has provided input into the national procurement law to allow for outsourcing of projects over $1 million and streamlined customs clearance procedures approved by the Council of Ministers that will reduce gridlock at the port and provide clear guidelines for importers. In addition, the project has improved regulations for microfinance institutions, which will strengthen their ability to develop, while protecting consumers from bad practices such as pyramid schemes and other abuses. FIAS-funded activities in fragile and conflict-affected states are implemented in close coordination with broader Bank Group initiatives to support communities coming out of conflict. One key partner is IFC s Conflict Affected States in Africa (CASA) initiative, which has supported work in a number of African countries. CASA programs seek to understand the causes of the conflict and tailor programs that contribute to peace and stability. Investment climate work usually comprises much of the early engagement in these states. One of the risks of work in fragile and conflict-affected countries is that it is more difficult to achieve results as quickly and effectively as in other settings. Of the three projects this fiscal year that did not receive high development effectiveness rating scores (see next section), all were in countries where significant political upheaval halted project activities and progress. DEVELOPMENT EFFECTIVENESS, CLIENT SATISFACTION, AND INTERNAL RECOGNITION REMAIN HIGH IFC measures development effectiveness of projects by looking at five areas: strategic relevance, outputs, outcomes and impacts, and efficiency, giving greater weight to outcomes and impact. Building an Entrepreneurial Future in Post-Conflict Central African Republic With FIAS support, the government of the Central African Republic is taking steps to improve the country s overall conditions for private sector growth, including measures that make it easier and less expensive for entrepreneurs to set up, register, and operate their es. The program, which began in 2007, focused initially on improving the dialogue between public officials and the community. The Public-Private Dialogue Forum [Cadre Permanent de Concertation Etat / Secteur Privé (CPC)], a consultative forum created by the government in late 2006, was the main driver of this approach. The forum gives entrepreneurs a voice in policymaking and helps reduce any tensions that might exist between the two interest groups. Another important milestone in the country s path to reform was the establishment of the Joint Committee for the Improvement of the Business Environment (Comité mixte chargé de l amélioration de l environnement des affaires en République Centrafricaine) by a decree signed in April The Joint Committee is a decision-making body of public and private sector representatives that complements the CPC and is chaired by the prime minister. It has a clear mandate to improve the environment and full authority to approve CPC-developed reform proposals. With FIAS support, in FY11 the Committee has offered policy recommendations and proposed key legislation to further the reform agenda. The Central African Republic, which ranks 182nd of 183 economies on ease of doing in the Doing Business 2012 report, is starting to show momentum in areas tracked by the Doing Business indicators for starting a and registering property. In December 2010, the government amended provisions on the registration tax in the national budget law and also adopted a new financial law. These measures cut in half the registration and property transfer taxes and eliminated several obsolete, ineffective, and costly requirements. 8 Registry survey of data processing times; data not yet verified in the Doing Business report ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

102 Development effectiveness ratings for client-facing projects implemented by the Investment Climate Department and funded by CIC/ FIAS were at 73 percent for FY11. This significantly exceeds the rating for the overall Investment Climate Business Line (63 percent) and is in line with IFC Advisory Services score of 69 percent. Of the 10 projects included in the analysis, 7 were rated positively by IFC s Development Impact Department; the 3 projects that received lower ratings were in countries (Madagascar, Nepal, Pakistan) where project progress was halted due to external, political factors (see Annex 3 for development effectiveness ratings of projects closed in FY11). Client satisfaction for investment climate projects was also rated high with 89 percent of clients reporting their satisfaction with services being delivered. 9 FY DEVELOPMENT EFFECTIVENESS RATINGS 80% 70% 60% 50% 40% 30% 20% 10% 0% 47% 48% FY08 68% Investment Climate Department 57% 52% 58% FY09 Investment Climate Business Line FY CLIENT SATISFACTION Investment Climate Business Line 100% 80% 60% 92% 77% 85% 68% 77% FY10 73% 69% 64% 63% FY11 IFC Advisory Services 88% 88% 87% 89% 87% The work FIAS supports to implement improvements and reforms in the most difficult of environments has been 40% 20% recognized at the corporate level within the Bank Group. The investment climate programs in South Sudan (see box, p. 24), in Southeast Europe (see box, p. 14), 0% FY08 Investment Climate Business Line FY09 IFC Overall FY10 FY11 with OHADA (see box, p.11), as well as the WORLD BANK GROUP ENTREPRENEURSHIP SNAPSHOTS DATABASE 9 This figure relates to the overall IFC Investment Climate Business Line rather than FIAS-funded projects alone. FY11 RESULTS AND REFORMS 13

103 Unleashing Business Opportunities in Southeast Europe Supported by FIAS and donor partners Austria, Switzerland, and the United States, the Investment Climate Program in South Eastern Europe is helping accelerate regional governments progress toward accession to the European Union. The program was recognized with the 2011 IFC Corporate Award for its excellence in improving the region s regulatory and judicial environment. Since the program s start in 2008, about 740 national laws and regulations have been cut and simplified, with over 2,280 recommendations adopted at the local level. To date, these reforms have yielded an estimated annual private sector cost savings of $264.7 million. Alternative dispute resolution (ADR) projects have resulted in releasing $120 million in tiedup funds through mediation, and this impact continues to build through self-sustaining mediation centers and partners. In addition to Moldova (see box, p. 10), the former Yugoslav Republic of Macedonia was recognized among the 12 economies with the most-improved regulation in the Doing Business 2012 report. Macedonia recorded reforms supported by FIAS-funded activities in the areas of dealing with construction permits and closing a. The government amended two laws related to construction permitting, eliminating the preliminary design requirement, reducing municipal fees by 95 percent, and setting shorter deadlines for issuing permits. These improvements cut two procedures and 22 days from the process. In the area of closing a, the Company Law was amended to set a 15-day limit for liquidators to announce liquidation. The Bankruptcy Law was amended to require that bankruptcy trustees use the e-bankruptcy system. The Central Registry further decreased the fee for voluntary liquidation. registration program in Bangladesh each received the 2011 IFC Corporate Award. Also, the Rwanda investment climate program received a team award from the World Bank Africa Vice Presidency for its efforts in promoting agri. The Entrepreneurship Snapshots project, which included several members of the FIAS-funded team, won the 2011 Team Award from the World Bank s Development Economics Vice Presidency. The Entrepreneurship Snapshots project aims to understand the dynamics of private enterprises around the world through the collection of data on creation at the international level that can be comparable across heterogeneous legal, economic, and political systems. The data provides a picture of the impact of regulatory, political, and macroeconomic institutional changes on entrepreneurship and an understanding of what drives entrepreneurs from the informal to the formal sector (see screen shot, p. 13). PROGRESS ON APPROACHES TO MEASURE IMPACT FIAS, in collaboration with other partners, continues to support reforms that are likely to have a positive effect on the creation of new firms, investment, and job creation. In 2011, reviews of existing literature continued to identify tangible measures of impact associated with investment climate reform (see box, p.15). Models that estimate the impact of reforms on entry, trade logistics, taxation, insolvency, ADR, construction permits, and industry are currently being developed. These models will be used to forecast the impacts of new FIAS-funded projects and provide information to optimize the allocation of resources. Impact projections for the new FIAS FY12 16 strategy include: Private sector savings of over $600 million, which includes $350 million in compliance cost savings and $250 million in savings from streamlined trade logistics services. Three billion dollars in investment generation $1 billion from foreign direct investment (FDI) facilitation in priority sectors and $2 billion from new firms created as a result of entry reforms. Increase in trade flows by $2.5 billion following trade logistics reforms. Increased returns to stakeholders by $1.5 billion resulting from 11,000 firms continuing as going concerns after debt resolution reforms ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

104 The Impact of Investment Climate Reform: Evidence from the Literature Reviews Literature reviews were completed in the areas of entry, alternative dispute resolution, and insolvency reform in order to gather evidence about the impact of FIAS-supported work. The main findings of the literature reviews include: Business Entry i. More firms enter the market when registration procedures and costs are cut. The average entry rate is 5 percent for selected country studies and 10.5 percent for cross-country studies. ii. A large percentage of these new firms survive and grow. Studies show that the survival rate two years after entry ranges from percent and percent seven years after entry. iii. New firms increase competition, forcing incumbents to become more efficient or to exit the market, boosting overall productivity and investment. Cross-country studies show that a 10-day reduction in the time to start a is associated with a 0.3 percentage point increase in the investment rate and a 0.36 percent increase in the gross domestic product growth rate. ii. ADR can also do better than traditional litigation in reducing the time to resolve a dispute. Time savings range from one month to about a year. iii. Reforms that improve insolvency regimes increase the probability of timely repayments, reduce the cost of debt and interest rates, and increase the aggregate level of credit. iv. Insolvency reforms also help reduce the rate of failure among small and medium-size enterprises, particularly the liquidation of stronger firms. v. Evidence from high-income countries suggests that reforms to individual bankruptcy laws can increase household credit, which might also benefit entrepreneurs and non-limited-liability firms. ADR and Insolvency i. ADR reforms reduce the cost of dispute resolution relative to litigation. Estimates of the total costs incurred by firms that use an ADR process range from 3 to 50 percent of the costs incurred by firms that go through a court litigation process. A 10 percent increase in the number of enterprises complying with tax requirements within three years of FIAS-supported tax reforms. Two impact evaluations funded by FIAS were begun in collaboration with other Bank Group departments to assess, in Georgia, work done to simplify the tax regime for small and medium enterprises (SMEs), and in Romania, the impact of the introduction of out-of-court resolution of disputes. These evaluations are intended to analyze the impact of specific investment climate advisory programs. The compliance cost savings methodology has gained traction in monitoring impact, especially in the area of taxation. In developing and transitional countries, es especially small ones often face heavy costs in the process of preparing, filing, and paying taxes in addition to the burden of tax payments. Measuring compliance costs through rigorous data collection can provide useful information for the design of reforms that help reduce costs and risks for small es. Workshops introducing the methodology to measure compliance costs were organized in six different regions in November and December Forty-one projects from 31 countries in all regions are now effectively measuring the direct compliance cost savings indicator for investment climate projects. In FY11, 33 projects reported targets of $285 million in annual direct cost savings, and 14 projects reported actual cost savings of $70 million. These projects had total expenses of $26 million, resulting in a bang for the buck of 2.7 dollars of impact for each dollar spent. FY11 RESULTS AND REFORMS 15

105 DELIVERING RESULTS, REFORMS, AND IMPACT: FY08 11 STRATEGY CYCLE HIGHLIGHTS The Phase 1 report of the independent external evaluation of CIC / FIAS concluded that in a time of global economic and financial crisis FIAS has achieved the objectives set out in the FY08 11 strategy. The evaluation was conducted with the oversight of IFC s Development Impact Department. 10 Investment climate results significant improvements to a country s investment climate, as defined in the FIAS monitoring and evaluation framework were used as the primary performance indicator during the FY08 11 cycle. During the four years of the strategy cycle, FIAS-funded projects supported the implementation of more than 600 investment climate results, versus a cycle target of 400. A majority (60 percent) of these results were achieved in countries classified as IDA 11 or post-conflict, and in frontier regions of middle-income countries. Globally, FIAS contributed to 186 Doing Business reforms (as documented by the Doing Business reports) over the FY08 11 cycle. Sixty percent of the 186 Doing Business reforms were in IDA countries and 19 percent were in fragile and conflict-affected countries, with Sub-Saharan Africa accounting for 39 percent of the reforms validated by Doing Business. An extensive review of the literature on the impact of reforms suggests that investment climate reforms of the type supported by FIAS can have substantial impacts on private sector investment, trade, formation, and growth. This was confirmed by an independent evaluation that reviewed the impact of FIAS-funded investment climate reform projects in Burkina Faso, Liberia, Rwanda, and Sierra Leone (see box, p.17). The country studies suggest that these projects resulted in clear benefits to the private sector, including significant private sector cost savings, creation of new es, investments and jobs. Other benefits an expanded tax base, increased tax revenue, and higher trade flows were not quantified but are believed to be positive Nexus Associates Independent Evaluation of CIC/FIAS Strategy and Program, Phase I: Final Report. Phase 1 of the evaluation covers FY08 10, the initial three years of the strategy cycle. A supplemental report, expected to be issued in early 2012, will expand coverage to the fourth year of the cycle and add three country case studies. 11 Members of the International Development Association (IDA). Eligibility for IDA is restricted to countries with a gross national income per capita of less than $1, Economisti Associati srl (Italy) Investment Climate in Africa Program, Four-Country Impact Assessment Comparative Report. https://www. wbginvestmentclimate.org/uploads/comparative_report_ pdf ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

106 Supporting Development Impact in Four Fragile and Post-Conflict African Countries A recent independent evaluation of FIAS-funded investment climate programs in Burkina Faso, Liberia, Rwanda, and Sierra Leone reported tangible progress on measures of private sector impact within three years after the programs began. The four programs were undertaken in partnership with the African Development Bank, Austria, Denmark, France, Ireland, Italy, Japan, the Netherlands, Norway, and Sweden. The assessment, conducted by Economisti Associati, was commissioned by IFC to capture interim results of substantial programs in African countries facing considerable challenges to reform. The evaluators reported these aggregated results for the programs: $13.2 million in cost savings for es; 23,000 new es registered; $75 90 million invested; and 51,500 new jobs created. a More than 70 reforms were implemented, making it easier and less costly for entrepreneurs to start up and operate as formal, registered es. Each country program was designed to tackle areas most likely to have an early and positive impact on the regulatory environment governing growth, investment, and employment opportunities, providing a foundation to address poverty and income security. The programs introduced reforms in registration, construction permits, real estate transactions, and trade logistics. They sought to reduce owners direct costs by eliminating or reducing fees, save staff time and labor costs by streamlining procedures, and improve cash flow through adjustments in the payment schedules of certain fees and taxes. For example, registering a in Rwanda currently costs $25 (less than 5 percent of income per capita) or no charge if conducted online, and it requires just one day. It is important to register your because you are legally recognized, so you can bid on government tenders and get invited to forums, says Rwema Mimable, coowner of a small information technology in Rwanda. Three of the programs are in countries recovering from civil war (Liberia, Rwanda, and Sierra Leone), and their infrastructure and some government institutions are in disrepair. Burkina Faso and Rwanda are landlocked and face inordinate costs for transporting goods. All four countries rely on small-scale farming as their main industry and are very poor by global standards, with gross national income per capita ranging from $550 per year in Burkina Faso to just $190 in Liberia. a. The assessment methodology relied on the data reflecting new company formulation as the basis to project investment and job creation. Using regression analysis of the new company data, the evaluators established trendlines that allowed them to compare actual data after the project interventions with the expected trends in the absence of any reforms. They then used data on average investment and employment levels for new firms to estimate the overall impact of project reforms on investment and employment. To calculate the private sector cost savings, the evaluators identified reforms supported by World Bank Group projects that yielded reductions in official fees and staff time needed to complete the procedures. DELIVERING RESULTS, REFORMS, AND IMPACT: FY08 11 STRATEGY CYCLE HIGHLIGHTS 17

107 KEY OBJECTIVES OF THE FY08-11 STRATEGY REALIZED According to the FIAS evaluation (findings of Phase 1 Report, issued in February 2011), other key elements of the FY08 11 strategy were implemented as follows: FIAS-funded projects moved beyond diagnostic assessments to deepen the Bank Group s core areas of investment climate expertise, met client needs through customized interventions, and focused on knowledge management and outreach. The FY08 11 strategy transformed FIAS approach from standalone diagnostic assessments and ad-hoc interventions to reform implementation around core products. In line with this strategy, FIAS funding was used to strengthen technical expertise in 14 product areas, responding to evolving client demand. Projects supported by FIAS were larger and often incorporated multiple products (see box on Sierra Leone program, p.19). Moreover, FIAS resource use concentrated on 26 major country programs, complemented by shorter-term interventions (often along the Doing Business agenda) in more than 50 countries. Considerable funding was devoted to knowledge management efforts, resulting in a wide range of technical papers, practitioner guides, and toolkits, Investment Climate In Practice notes, and SmartLessons, as well as numerous deep-dive learning and peer-to-peer, knowledge-sharing events. FIAS funding allowed the Bank Group to respond to increased demand from IDA countries and Sub-Saharan Africa. With successful fundraising, $89.5 million was spent on FIAS-related activities in FY08 10 (that is, the initial three years of the FY08 11 strategy cycle, covered in the Phase 1 evaluation report), roughly 6 percent more than the amount originally contemplated in the strategy. FIAS-funded projects met high levels of client satisfaction (between 88 and 92 percent annually); and planning and control systems related to FIAS activities were strengthened. CIC, the department managing FIAS, increased staffing levels in the field and transferred project management responsibility for most client-facing projects from headquarters to the field. IFC also strengthened planning and control and developed and implemented a robust system to track results and reforms. The overall recommendation of the FIAS evaluation in Phase I reads as follows: FIAS has demonstrated its ability to develop new products, disseminate best practices, and help countries reform their investment climates. Most elements of the FY08 11 strategy have been implemented as planned, yielding over 400 results and more than 150 reforms over the initial three years of the strategy period. While the impact of reforms is difficult to quantify, the general literature and preliminary findings from studies of FIAS projects suggest that benefits may be substantial. Provided that it continues to strengthen its strategy and operations, the World Bank Group and donors should be prepared to support FIAS in the next strategy cycle ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

108 Sierra Leone Acts on Bold Agenda to Create Firms and Jobs Places 6th among Most-Improved Countries for Business Regulation in Doing Business 2012 Supported by FIAS and the United Kingdom s Department for International Development (DfID) during the current strategy cycle, the Removing Administrative Barriers to Investment (RABI) program in Sierra Leone helped the government develop conditions for private sector growth. Sierra Leone has implemented bold reforms and is recognized in the Doing Business 2012 report as one of twelve economies with the most improved ease of doing across several indicators. The country improved its ranking from 150th in Doing Business 2011 to 141st in the 2012 report. The impacts of the program, which began in 2004, have been significant, encouraging job creation and laying a foundation for the country s economic growth. An external evaluation completed in FY11 estimated that the program had resulted in creating nearly 6,000 new es and 15,000 jobs. The evaluation also cited an increase in the tax base, with new taxpayer registrations leading to incremental revenues from corporate and self-employment taxes of $ million (3.5 percent increase in income tax revenues). This finding is supported by the Sierra Leone Ministry of Finance s reported increase in the tax to gross domestic product ratio of 13 percent (from 10 percent in 2008). Under the RABI program, we have seen great progress on the ease of doing in this country, says Minister of Trade and Industry David Carew. Results In FY11, FIAS-supported improvements are reflected in the areas of dealing with construction permits and registering property, among others. The government moved the construction permitting process from the Ministry of Lands to the Ministry of Works, which led to a 31-day reduction in the time required to issue location clearances and building permits. The total time es need to obtain permits and utility connections was cut from 269 to 238 days. The government lifted the moratorium on land transfer, significantly improving the time it takes to transfer property. The time needed to register property was cut from 235 to 86 days. The Land Survey Act was amended, allowing for the digitization of land surveys and enabling a modern cadastre system in the medium term. Several improvements were implemented that make it easier for taxpayers to make payments. The tax and registration offices are now linked together, allowing tax and registration to be conducted at the same location. Taxpayers can also make their payments at any of eight major banks. FIAS funding also supported initial work on developing a Taxpayer Management Module for Tax Administration to improve compliance with tax filing. A fast-track commercial court became operational in May 2011, and it will be fully automated and have real-time transcription of the proceedings. DELIVERING RESULTS, REFORMS, AND IMPACT: FY08 11 STRATEGY CYCLE HIGHLIGHTS 19

109 FY11 OPERATIONAL HIGHLIGHTS In the last year of the FY08 11 strategy cycle, FIAS-funded projects continued to demonstrate results using established reform approaches on regulation, tax, trade logistics, and investment generation. Progress was made in adapting these offerings to address key sectors, such as agri, and high-priority issues, including tackling reform in conflict-affected countries and unlocking investments in sub-saharan Africa. FIAS activities also continued to use technology and innovation as a means for sustainable growth and to help clients put in place regulatory frameworks encouraging models for green growth. FIAS-funded teams continued to work closely with other teams across the World Bank, MIGA, and IFC. New partnerships have been built and existing ones strengthened with external good practice institutions, and collaboration with donor partners has gone beyond funding to include learning and staff exchanges. A wealth of knowledge products and tools have been produced, including establishment of a new external investment climate Web site that has further consolidated the facility s presence as a leader in the investment climate arena, in terms of both research and practical, results-based implementation. HELPING CLIENTS BUILD BETTER REGULATORY FRAMEWORKS FIAS funding continued to support the first-response technical assistance related to Doing Business which contributed to 31 reforms in 20 countries in conjunction with regional World Bank and IFC investment climate teams. Of these reforms, 29 percent were in fragile and conflict-affected countries and 45 percent were in IDA countries. Countries supported include Armenia, Burundi, the Central African Republic (see box, p. 12), Moldova (box, p.10), Montenegro, and Sierra Leone (box, p. 19). the Bank and IFC regional project teams on the ground to deliver targeted advisory services. In Serbia, 625 procedures (of 5,900) were simplified or eliminated, resulting in annual aggregated cost savings of around $26 million to small es. FIAS support in South Sudan also led to solid results (see box, p. 24). FIAS-supported activities helped Morocco improve its performance as measured by the Doing Business indicators, and the country was recognized in Doing Business 2012 as the most-improved economy in ease of doing across several areas of regulation. Working very closely with the national reform coordination unit placed under the Ministry of General Economic Affairs and with Morocco s first public-private dialogue mechanism (the National Council for the Investment Climate), the team In FY11, FIAS funding supported the implementation of regulation reforms in more than 20 countries. The merger of the entry and operation practices into one regulation product allowed more efficient use of expertise to support a broad spectrum of reforms. Global experts were teamed with ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

110 focused on four Doing Business topics: enforcing contracts, resolving insolvency, starting a, and dealing with construction permits. As a result, a decree published in May 2011 considerably simplified start-up procedures. 13 The minimal capital requirement for starting a was eliminated, cutting start-up costs by 42 percent. Half of the six procedures for starting a were eliminated, and the company name search can now be handled online at the one-stop shop. In the area of construction permitting, the one-stop shop established in Casablanca at the end of 2005 became fully operational and widely used by entrepreneurs, who can obtain a permit in 15 days. Investment climate projects aimed at improving taxation systems in developing countries now span countries in every World Bank Group region. In FY11, FIAS supported tax interventions in Armenia, Bangladesh, Bosnia-Herzegovina, Burundi, Georgia, India (Bihar), the Kyrgyz Republic, the Lao People s Democratic Republic, Liberia, Mali, Rwanda, Sierra Leone (see box, p.19), Tanzania, Uganda, Vietnam, the Republic of Yemen, and the East African Community (EAC). The tax team also provided advice to governments in Bulgaria, Dominica, Guinea-Bissau, Kenya, Mexico, Poland, and Tajikistan, through tax reform projects led by World Bank Group regional departments. A key FIAS-supported activity has been the development and launch of a new initiative to improve tax transparency. It has the objectives of promoting international cooperation in the global fight against tax evasion and improving developing countries ability to administer and enforce their tax laws. This initiative addresses growing demand from developing countries and supports the G20 mandate that the World Bank Group, and other organizations, promote the link between tax and development and foster tax transparency in developing countries. In particular, the technical assistance focuses on helping 13 Due to the recent timing of the legislation, the improvements reflected in the decree were not acknowledged in the Doing Business 2012 report. countries to develop transfer pricing legislation, administrative procedures, audit capacity, and appropriate accounting rules and to ensure their legal and administrative frameworks meet international tax transparency standards. Regional assistance was provided in Latin America and the Caribbean, East Asia and Pacific, and Africa, and country-level assistance was provided following requests from Georgia, Ghana, Kenya, Thailand, Vietnam, and several economies in the Western Balkans. Strong partnerships have also been formed on this agenda with external and internal groups (see p. 31). Tools for improving the frameworks for alternative dispute resolution (ADR), restructuring and insolvency, and secured transactions and collateral registries in client countries were further strengthened in FY11. At a time when many countries continue to face recession, these tools support reforms that reduce the time and cost of exit proceedings for firms and enhance the likelihood of viable es being rescued. A closer alignment of these products in FY12 is expected to leverage and scale up the expertise, experiences, and lessons learned from all three. In Montenegro, a FIAS-supported ADR and insolvency project created the legal framework and sustainable mediation centers to provide alternatives to slow court settlements and also amended the insolvency law to include a special provision stipulating the opportunity for mediation. This legislation has contributed to the release of funds through mediation, with the project s impact increasing every day through self-sustaining mediation centers and partners. Mediation proceedings can now be started (even before the ruling on initiating bankruptcy proceedings is passed), thus offering the possibility of preventive action during bankruptcy and envisioning mediation as an option during the bankruptcy litigation process. These reforms are expected to improve the country s -rescue culture (roughly 96 percent of insolvency cases in Montenegro result in liquidation), improve the current low recovery rates, and reduce the overall cost to recover disputed claims. FY11 OPERATIONAL HIGHLIGHTS 21

111 Helping Clients Leverage Technology to Realize and Sustain Investment Climate Reform Innovative uses of technology provide powerful tools to transform the way public services are delivered to citizens, and they can enhance transparency in government. FIASsupported technical assistance to implement information and communication technologies (ICT) is helping es in client countries register and obtain licenses and permits online, which reduces costs and the time firm owners must spend to comply with registration requirements. Through an e-registry of licensing information in Kenya, entrepreneurs now have one-stop access to specific licensing requirements, costs, contact information, and application forms. By simplifying regulatory compliance and reducing opportunities for corruption, this initiative is expected to help encourage es to formalize and benefit from access to government services. In Liberia, FIAS support enabled the launch of the Liberia Business Registry in April The registry brings together agencies involved in the registration process under a single roof, reducing the time to register a from 99 days (as reported in Doing Business 2008) to 36 hours (as tracked by the registry Web site). a By fully automating the process of enterprise formalization, permitting online registration and access to information services (including search and reservation of corporate names), the registry has seen an annual 75 percent increase in new registrations. a. These recent improvements are not yet reported in Doing Business. In FY11 new laws related to secured transactions were enacted in Lao PDR, Liberia, Moldova, and the Republic of Yemen. Laws were drafted in Ghana, Jordan, and Malawi. In Ghana, FIAS supported the reform of the country s movable collateral framework to encourage SME financing against valuable movable assets. Through a new law, the Borrowers and Lenders Act of 2008, Ghana set up a collateral registry at the Bank of Ghana a temporary solution that is being upgraded into a Web-based electronic registry and reported these early results: Increased volume of financing for SMEs: More than 20,000 loans have been registered by banks and non-banking financial institutions in the collateral registry since its creation in March These loans account for more than $800 million in financing secured with movable property. Wider use of movable assets as collateral by es: Businesses and SMEs are now using a wider variety of collateral beyond real estate. Types of collateral include: inventory and accounts receivable (used in 32 percent of the loans); investment instruments such as shares, cash, bonds, and deposit accounts (19 percent); household assets (13 percent); motor vehicles (10 percent); real estate property (10 percent); and machinery, equipment, all enterprise assets, other (16 percent). Increased financing by banks and non-bank financial institutions taking movable property as collateral: Of 52 financial institutions, 33 institutions (17 banks, 13 non-bank financial institutions, 4 foreign-based banks, and 2 rural banks) have registered with the collateral registry and granted loans secured with movable property. However, a considerable number of the rural and community banks have not yet benefitted from the new infrastructure in place. Electronic collateral registries were also created in India, Sri Lanka, and Vietnam, and a Web-based collaborative secured transactions platform was launched to link secured transactions experts from around the world. The use of innovative information and communication technology solutions has been a key feature of the secured transactions and other regulation work supported by FIAS. New technologies can improve the quality and accessibility of regulatory information; ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

112 increase the reach, cost-effectiveness and transparency of government service delivery through online transactions; as well as enable es to participate in the digital economy via trade single windows and secured transaction registries. ICT can enhance, and even transform, the services and operations of government, as evidenced by the number of significant technology-related reforms worldwide documented by the Doing Business report. In the past year, FIAS has supported 14 client countries in implementing ICT-based applications to improve government-to- service delivery, increase transparency, reduce the regulatory cost burden and opportunities for corruption, and improve management and regulatory oversight through information-sharing across government and process automation (see box, p. 22). Given the strong client demand for more sophisticated assistance with ICT applications, FIAS-supported projects are working to implement technically and financially sustainable technology solutions across different program areas, exploiting emerging technologies such as cloud computing, mobile phone platforms, and social media to enhance public service delivery and improve economic governance. IMPROVING INVESTMENT POLICY AND ENABLING CROSS-BORDER TRADE FIAS-funded activities continued to enable efficient and effective trade logistics systems and services that allow for streamlined import and export of goods, as well as the creation of strong institutional capacity to serve private firms engaged in cross-border trade and investment. In FY11, this work was conducted in more than 18 countries, including 10 IDA and 4 conflict-affected countries. These projects focus on reducing non-tariff barriers and rationalizing trade logistics systems and services by streamlining border clearance processes, introducing risk management systems, and supporting automation in trade-related clearance services such as electronic payment. Improved automation in trade services supports better coordination among key technical agencies including customs, standards, veterinary, health, and transport agencies. In Colombia, FIAS-supported activities further improved the electronic system for filing documents as well as measures to manage risks associated with trade. Importers now electronically file the declaration of value, a key document for cargo entering the country. In FY11, the government passed legislation formalizing the automatic online connections between the single-window system and the agencies for health and agriculture and the Bureau of Standards. Customs established qualifications for customs brokers, freight forwarders, and warehouses, and they are required to assess their clients risks by obtaining corporate, financial, and tax information through mandatory visits and inspections. Traders can electronically file import documents in advance of ship arrival, allowing Customs officials time to identify the companies, goods, and risks each shipment represents prior to its arrival. In other areas tracked by Doing Business, FIAS-supported projects helped Colombia implement reforms that cut start-up costs and shortened the time to register property. The government also enacted a bill to reduce backlog in its courts, creating 30 municipal courts. Colombia was recognized in Doing Business 2012 as one of twelve economies with the most-improved regulation, as measured by the report, which ranks the country 42nd (of 183 economies) in overall ease of doing. FIAS funding has continued to enable advisory support to client governments on developing investment policy, attracting new investment, and diversifying the portfolios of existing investors through reinvestment opportunities. These initiatives include the development of programs to attract and facilitate investment in competitive sectors, create greater numbers of new investment leads, and become more effective at translating needs into actual investment decisions. FY11 yielded results in seven countries including Brazil, China, Haiti, Liberia, Rwanda, South Sudan, and Ukraine. In FY11, 57 percent of clients of FIAS-supported FY11 OPERATIONAL HIGHLIGHTS 23

113 investment generation work were IDA countries and 43 percent were fragile and conflict-affected states. In Brazil, investment was attracted to two frontier states, Para and Pernambuco, through a fully client-funded project that has linked the country s national and state investment promotion agencies to provide a more coherent framework of support for investors. Interventions to help improve investment generation practices (partnerships, systems, Web sites, outreach, facilitation, aftercare, and policy advocacy) have led investors to announce plans for 15 projects in Pernambuco and Para following FIAS-supported assistance. The team has also helped Apex-Brasil, the national agency, in developing investorfriendly strategies and a best-practice approach, resulting in eight announced investments since support began in May To date, $25.7 million in new investment has been secured and 765 jobs created as a result of this project (confirmed by direct interviews with investors). In Yinchuan, a poor western province in China, FIAS funding has supported the enactment of numerous investment climate reforms in recent years, including in FY11 the removal of some 96 mandatory investment approvals, a reduction in investment approval times from 202 to 96 days, and a reduction in the time to register a new from 55 to 14 days. In addition, the government opened a new investor one-stop shop, Government Hall, and launched its investor-focused Web site. As a result of these and other reforms, Yinchuan has attracted significant new investment into the province investment inflows in 2010 alone rose by a staggering $32 billion relative to estimated baselines, with the client government in Yinchuan attributing much of the increase to further liberalization of the provincial economy and enhanced investment promotion efforts. An important catalyst was the province s first regional investment summit in September 2010 organized by the Yinchuan Investment Promotion An Independent South Sudan Creates an Enabling Environment for Business The new country of South Sudan declared independence in July 2011 and began setting conditions for private sector growth, especially for local smaller es that are critical in creating jobs and increasing living standards. An IFC and World Bank team supported by FIAS has worked closely with the government during the past three years in building a nascent private sector. The recently launched Doing Business in Juba 2011 finds that the government is making strides in improving the environment for small and medium enterprises. The report cites that at 15 days, the start-up time for a in Juba is comparable to the average 13.8 days in developed economies of the Organisation for Economic Co-operation and Development (OECD). While the report ranks Juba 159th (of 183 economies) on overall ease of doing, a new legal framework for investors is now in place that will help improve conditions for investment. Results Legal framework. Eight laws have been enacted enabling entry, operations, and exit. Another nine that allow basic registration, contract, agency, property rights, and insolvency are ready to be enacted. Business entry. The registry was improved, allowing es to be incorporated within a day. About 12,000 es most domestic and small or medium-size have registered since July A -registration campaign resulted in an additional 1,100 es within the first six months of Investment policy and promotion. The Southern Sudan Investment Authority, established by the Investment Promotion Act 2009, is pursuing potential investors and re-investors in targeted sectors including agri, power generation, manufacturing, and services. A target has been set of 15 closed investments by the project s end in Drawing on their experiences in helping set the conditions for SME-friendly growth in challenging frontier markets, IFC and World Bank teams have helped the country create the South Sudan Business Forum, a mechanism for public-private dialogue, to give local entrepreneurs a voice in policymaking. This process would not have been easy if we had not gotten this unlimited support from the World Bank Group, says John Luk Jok, South Sudan s Minister for Legal and Constitutional Affairs ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

114 Bureau, which resulted in the signing of 134 new investment agreements worth $2.76 billion. A good example of FIAS-supported work this fiscal year through increasingly comprehensive, programmatic approaches is in South Sudan, where complementary interventions around core products and areas of expertise were combined to deliver maximum results for clients (see box, p. 24). CLIENT ENGAGEMENT THROUGH ESTABLISHED BENCHMARKING TOOLS FIAS funding continues to support the development of strong indicator-based tools and knowledge resources as an entry point for broader investment climate reforms. The Investing Across Borders flagship report released in July 2010 examines and quantifies the laws, regulations, and practices affecting how foreign companies invest across sectors, start es, access industrial land, and arbitrate commercial disputes. The data generated by IAB provides a starting point for governments looking to boost their global competitiveness in attracting FDI. In FY11, the IAB team provided specific reform recommendations based on IAB indicators to more than 10 client governments worldwide. IAB is serving as a catalyst for other Bank Group projects that look for improvement of the environment in client countries. For example, the arbitration indicators have helped drive advisory work in Bangladesh, the Comoros, and Malawi. The land indicators have informed reforms in land information systems in Bosnia and Herzegovina. The starting a foreign indicators are being used to facilitate entry in the East African Community. The IAB 2012 report, planned for release in the summer of 2012, will identify the full set of reforms that have been informed or motivated by the IAB indicators. The third Global Investment Promotion Benchmarking survey was launched in FY11, in close collaboration with MIGA, to assess the capabilities of 189 nationally mandated investment promotion intermediaries in providing information to investors, focusing on agri and tourism in this round. GIPB is a powerful tool for governments to assess the competitiveness of their promotional efforts to attract investment. It enables investment promotion intermediaries in improving their information provision and monitors their performance over time and against competitors. The full results of the GIPB survey will be released in FY12. Subnational and regional Doing Business reports capture differences in regulations and their enforcement across locations in a single country or region. This FIASsupported comparative domestic and international benchmarking tool fosters competition to reform. In collaboration with World Bank Group country offices, four subnational Doing Business reports were published in FY11 for Juba (South Sudan), Zanzibar, the Philippines (covering 25 cities), and South East Europe (22 cities). The reports show how government regulations and their implementation ease or constrain activity in selected locations. FY11 results show that subnational Doing Business studies continue to be a powerful tool to inspire reforms at the local and regional level. Second round studies measure reform progress over time. This year the reports for South East Europe covering Albania, Bosnia and Herzegovina, Kosovo, FYR Macedonia, Moldova, Montenegro, Serbia and the Philippines influenced 48 reforms. LEVERAGING FIAS EXPERIENCE TO TARGET REFORMS IN STRATEGIC SECTORS In FY11 FIAS-funded activities have strategically supported enhanced engagement in two key sectors that have broad relevance to development in many low-income countries: agri and tourism (see box on Mozambique, p. 27). Both sectors can have significant impact on growth and poverty reduction; also, these two sectors are major sources of employment. Better investment and conditions in the agri sector will contribute directly to improving food security in developing countries, through an increase in investment, higher outputs, and efficiency improvements in the distribution channels for agricultural products. Removal of barriers that restrict market entry or suppress competition in the agri sector will open up input markets, logistics chains, and marketing mechanisms that are highly concentrated at present in many countries. More competition also increases efficiency along the supply chain. These improvements increase the competitiveness of locally produced agricultural goods and boost internal food security. An example is the introduction of a warehouse receipts system as a financial FY11 OPERATIONAL HIGHLIGHTS 25

115 tool that expands the range of goods that can be used as loan collateral by farmers. This helps to improve storage of harvested crops, lowers post-harvest losses, minimizes the impact of brokers, and stabilizes prices. In FY11, the FIAS-supported agri global product team engaged closely with other Bank Group partners to create multidisciplinary teams in support of agri development. For example, in Eastern Europe and Central Asia FIAS support enabled the IFC regional investment Planting the Seeds for Agri in Ukraine Ukraine has a large untapped potential to export foodstuffs and the ability to play a global role in food security. Through the global product team for agri (housed in the Investment Climate Department), FIAS funding provided technical support to the IFC regional team in designing and implementing key investment climate reforms in Ukraine s agri sector (although FIAS did not directly fund this project). In 2010 the Cabinet of Ministers abolished the requirement of mandatory certification of most food products by the State Committee for Technical Regulations and Consumer Policy, which was identified as a burdensome requirement for food processors. Its abolition reduced compliance costs for the private sector by $20 million and opened up new agricultural export opportunities. Food producers have so far reaped the most benefit from regulatory improvements, including: Cancellation of mandatory certification of food products (excluding baby food, tobacco, and alcoholic products) Cancellation of costly duplicative licenses for certain agri activities, including wholesale seed trading, rearing of domestic animals, and manufacturing of agrochemicals Licenses for trading of agrochemical and selling of biogas and biofuel, previously subject to five-year renewals, made permanent $200) for a certificate for each delivery of raw materials. In approximate terms, the cost savings to my per year is up to 30,000 UAH (around $3,750) and the 500 man hours it took to obtain the certificates, he explained. Building on the results related to food product certification, in FY11 the FIAS-supported and IFC Ukraine investment climate teams helped draft and advocate for the Law on Market Surveillance. Adopted in December 2010, the law establishes a risk-based market surveillance system, eliminating burdensome and duplicative controls and inspections by different regulatory agencies. In the rest of Europe, technical standards are voluntary-based. These are considered and adopted by associations, scientists, and other industry stakeholders and the responsibility of quality control lies with es, said Svetlana Mikhaylovska, a member of the European Business Association. In Ukraine, we faced double mandatory regulation both in terms of safety and quality provided by technical regulations and standards, respectively. By working with the World Bank Group, we were successful in removing this outdated system. Preparations are currently underway for the project s next phase, which will focus on agri investment climate reform in the areas of input markets regulation, post-harvest infrastructure and logistics, and food safety for the grain, fresh fruit, and vegetable sectors. President Viktor Yanukovych s commitment to establish a single food-safety controlling agency instead of several agencies undertaking duplicative responsibilities. Abolishing mandatory certification has helped tremendously, said Serhiy Samonenko, a director at Vimel Company, which produces potatoes and starch. There is now one less regulatory body duplicating the same type of controls on food products. I no longer need to pay 1,600 UAH (around ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

116 Mozambique Tourism Anchor Investment Program: From Potential to Reality In March 2011, a landmark agreement launched the development of a $3 million eco-lodge in Mozambique s Maputo Special Reserve, a 70,000-hectare prime protected area. Bordering the Indian Ocean, the reserve offers tourists a varied experience of beaches, bays, coral reefs, forests, lakes, rivers, and a host of wildlife including an estimated 350 elephants. Co-financed by Switzerland and other donors through the FIAS platform, the Mozambique Anchor Tourism Investment Program assisted the government in developing and implementing a private-sector investment strategy and procurement approach to attract qualified eco-tourism investors for the Maputo Special Reserve. Following investment in the Maputo reserve, a standardized set of procedures was compiled and a toolkit developed for future use by Mozambican authorities. The Maputo model has been replicated to attract a $30 million investment for a 200-bed eco-lodge in Mozambique s Zambézia Province. The program is also assisting in sustainable tourism development. Through new investment zone regulations, for example, the government can reserve land with unique natural, cultural, or historic attributes for tourism development. The Inhassoro and Crusse-Jamali sites along Mozambique s coasts have been declared the country s first tourism investment zones, securing over 4,500 hectares. The 25-year partnership agreement creates a joint venture between a local community association, A Hi Zameni Chemucane, and a private investor, the Bell Foundation, to build and operate a 36-bed lodge at Ponta Chemucane in the reserve. It is Mozambique s first agreement granting a community long-term concession rights for a tourist area within one of the country s leading national parks. The lodge is expected to create 60 full-time jobs and help spur local growth in an area that has few opportunities for formal employment. In addition, annual concession fees to be paid to the government will be used for park and longerterm conservation management. climate team to promptly respond to burgeoning client demand for agri-specific investment climate reforms, resulting in fivefold growth of the regional industry portfolio within the fiscal year. Building on the success of the Ukraine investment climate project in abolishing duplicative Soviet-era regulations on food safety in 2010 (see box, p. 26), the product team worked with a range of regional teams in Europe and Central Asia (IFC investment climate advisory, World Bank, IFC Investment, IFC Sustainable Business Advisory, and Access to Finance) to launch programmatic interventions on agri reform and investment generation. This work is ongoing in Armenia, Bosnia and Herzegovina, Moldova, Tajikistan, and Ukraine. The teams are also collaborating in Central Asia, where a product development project is underway encompassing tax transparency and industry-specific regulatory reform. In Rwanda, FIAS funding is supporting investment promotion in the tea and horticulture sectors. The agri agenda focuses on addressing critical constraints at the industry level while leveraging the improved investment climate to generate investment impact. This approach to investment promotion in agri is being replicated in various other countries in Africa, Latin America, and beyond. Overall, FY11 saw significant growth of the investment climate agri portfolio globally, from 5 projects in FY10 to 14 pipeline and operational projects at the end of the fiscal year, with the Africa region witnessing the strongest demand by clients. The ramp-up in FY11 sets the stage for the FY12 16 FIAS strategy cycle, during which agri is expected to remain a major growth area in the portfolio. This FY11 OPERATIONAL HIGHLIGHTS 27

117 increased focus comes at an opportune time and is part of a wider World Bank Group initiative. On one hand, it informed the IFC Agri Action Plan for FY12 14, which was endorsed by IFC Senior Management in March On the other, it is leveraging links with the World Bank s Agriculture and Rural Development Department to incorporate investment climate reform in long-term agricultural and agri transformations. FIAS funding in FY11 has contributed to the establishment of a strong foundation for investment climate projects focused on the tourism sector, an important, and in some cases the most significant, service sector for many IDA countries. Eighty percent of Bank Group client countries have identified tourism as a key economic sector in their economic diversification and poverty reduction strategies, 14 and the sector is second to agriculture only in terms of employment generation per unit of investment. During FY11, a standardized mode of engagement for FIAS-supported tourism work was articulated, with diagnostic, regulatory, and investment facilitation dimensions, resulting in an active portfolio covering nine countries. A further pipeline of projects in 14 countries has been generated. There has been strong regional demand for tourism work, and FIAS resources have been significantly leveraged by regional teams in South Asia, the Middle East and North Africa, and Africa, in particular. The relevance of the tourism sector and the issues around sector governance, competition policy, and debt resolution have been especially prominent in the wake of the Arab Spring and discussions with the emerging administrations. The gender gap in economic participation remains vast. Women own fewer es only one-third of firms surveyed by the World Bank in 118 economies have female participation in ownership. 15 Businesses owned by women also tend to have fewer employees, lower sales, and lower invested capital. 16 There are fewer women than men in the global labor market, and women in every economy are paid less for their work than men with the wage gap averaging 17 percent in The Hawkins, Donald E The World Bank s Role in Tourism Development. Annals of Tourism Research, Vol. 34, No.2: Data from World Bank Enterprise Surveys on 118 countries (see 16 Bruhn, Miriam Female-Owned Firms in Latin America: Characteristics, Performance, and Obstacles to Growth. Policy Research Working Paper 5122 (November). World Bank. World Development Report, which focused on Gender Equality and Development and other recent World Bank Group publications like Women, Business and the Law 2012 are bringing attention to such issues. FIAS is responding, including by incorporating genderspecific reform targets in its projects particularly on the industry side (see box, p. 29, about FIAS-supported technical assistance to a BICF economic zones project in Bangladesh). FIAS is also supporting follow-up technical assistance for on-the-ground applications of the practitioner s guide, Gender Dimensions of Investment Climate Reform, released in FY10. In FY11, FIAS technical assistance to develop public-private dialogue led to the establishment of the Women In Sustainable Enterprises (WISE) organization in Tonga. WISE seeks to connect women across all industries and provide them with a platform to lobby for reforms that encourage women to set up es, create jobs, support their families, and foster sustainable economic growth across communities and the country. In the Middle East and North Africa region, the FIASsupported alternative dispute resolution global product team provided technical assistance to help improve women s access to out-of-court mechanisms for resolving disputes. In focus group discussions, women entrepreneurs have indicated that they feel more comfortable seeking mediation with female mediators; in response, the ADR projects made an explicit effort to train female mediators. Of the 58 female mediators trained in FY11, 30 were accredited (representing a third of the total accredited mediators). Female entrepreneurs were among the parties in 144 cases referred to the mediation centers supported by projects funded through FIAS and IFC regions. Eightythree of these cases were successfully resolved through mediation. FOSTERING INNOVATION AND COMPETITION FIAS-supported programs increasingly consider innovative approaches to harness green or low carbon patterns of growth to meet the twin challenges of poverty reduction and climate change. The quality of the investment climate will play a key role in a transition to a green economy by setting standards and attracting much-needed private investment into low carbon, more resource-efficient ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

118 economic activities. In FY11, FIAS made progress in incubating and piloting new investment climate tools that can be used to promote green growth, including projects in Indonesia (see box, p. 30) and Colombia helping local governments in the capital cities design and implement green building codes. These approaches will continue to be developed during the FY12 16 cycle, in support of broader World Bank Group climate change-related efforts. With FIAS support, Rwanda s first special economic zone (SEZ) near Kigali is developing as a green zone. The government has received technical advice on developing low-carbon regulations for the zone, including through stakeholder consultations with the City of Kigali, the Ministry of Infrastructure, the Rwanda Energy, Water, and Sanitation Authority, the Rwanda Environmental Management Authority, the United Nations Industrial Development Organization, and the United Nations Environmental Program. The five key policy areas to be addressed, as prioritized by a task force of stakeholders, are energy, building codes and construction, water and sanitation, urban planning, and waste management. Competition plays a central role in fostering growth, investment, and job creation. Demand for competition policy reforms increased during the past fiscal year. FIASsupported work on competition focuses on removing constraints that stifle growth of competitive market structures in key strategic sectors. It also supports the development of effective competition policies to prevent discriminatory treatment and discourage anti-competitive actions. In FY11, the framework for competition policy reforms was developed and applied to the preparation, design, and implementation of eight investment climate projects in four different regions including the Middle East and North Africa, Sub-Saharan Africa, Latin America and the Caribbean, and East Asia and Pacific. The framework includes rapid-assessment tools to address economy-wide issues and sector-specific constraints to competition. The Creating Gender-Inclusive Economic Opportunities in Bangladesh FIAS-funded global product teams continue to provide technical expertise in project design and implementation to IFC regional programs, including the Bangladesh Investment Climate Fund (BICF). a In one such case, a global investment generation team working on a BICF-funded project helped the government of Bangladesh in formulating and implementing a social compliance management system in Bangladesh s export processing zones (EPZs). These zones house more than 300 factories and employ nearly 300,000 workers, mostly women, who manufacture garments and other products. One key component of the project is to increase female participation in the workers welfare associations in the zones. As a result of BICF s recommendation, 30 percent of seats on the association were allocated for women. Also, the role of female labor counselors who advocate on-site for women employees rights was strengthened. Shamela Begun, a worker at one of the factories in an EPZ shared her experience. Workers in factories outside the a. Results from BICF projects are reported in the BICF Annual Report, and they are not covered in the FIAS results reported in Annexes 1 and 2 of this review. EPZs don t have the facilities that we have in the zones and complain about not getting holidays or about getting paid late, she said. Here it is safe and comfortable. We have a feeling of community. I feel a part of things. Thanks to her hard work, Shamela now takes home about $100 each month. She also receives benefits at her garment factory, including free medical coverage, lunch, and flexible sick leave allowance. Both her sons have university degrees and supplement their mother s income. BICF, managed by IFC in partnership with DfID and the European Union, has facilitated $203 million of FDI and 17,000 new jobs to the economic zones of the country through an aggressive investment promotion capacitybuilding program for the government of Bangladesh. The project actively supported enactment of the Economic Zones Act, opening up the zones program to private developers and paving the way for a potential 1.5 million new jobs in private zones by Also, the project facilitated a new central effluent treatment plant in the Dhaka EPZ which, by August 2011, had increased the amount of properly-treated industrial water from 0 to 15,000 cubic meters. FY11 OPERATIONAL HIGHLIGHTS 29

119 Curbing Greenhouse Gases in Jakarta As one of the world s largest greenhouse gas emitters, Indonesia s building sector accounted for more than a quarter of total energy use in 2004 a share that is expected to increase to nearly 40 percent in the next two decades. In response, IFC advisory services in the region is helping the government of the capital province, Jakarta, develop a green buildings code. FIAS activities have supported the code s incubation and development. The code sets energy and water efficiency requirements for buildings and will require climate change adaption practices to be included in building designs. Implementation of the code is expected to reduce energy consumption in large commercial and high-rise residential buildings, potentially cutting around 2.7 million tons of carbon dioxide per year by This is equivalent to carbon sequestered annually by 60 million grown trees or equivalent to the current annual emission of Macao SAR, China (2.4 million tons of carbon dioxide). The goal is to create a code that is simple to implement, effective, and easy to monitor. The project s analysis modeled a range of possible changes for each commercial building type in Jakarta which met clear criteria for market preparedness and ease of implementation, while maximizing the benefits of energy (CO 2 ) and water reductions in a cost-effective manner. The details of the code have been developed in close consultation with government as well as private sector stakeholders, including developers, landlords, and professional associations. To help achieve [the national target of cutting carbon emissions by 26 percent by 2020], Jakarta has been working on a number of sustainable city initiatives since 2008, said Jakarta Governor Fauzi Bowo at the launch of the project. With effective implementation of the green buildings code in Jakarta, the city can serve as a model for implementation in other cities in Indonesia. The project is evaluating the feasibility of various measures under the draft green building code and hosting a series of consultation workshops with key private sector players. It is providing support to the local government through a series of training and capacity-building initiatives, and to the private sector through a review of financing needs and incentives for firms to retrofit existing buildings. global competition team also provided inputs and technical feedback to client countries as part of cross-support to five World Bank projects including in Russia and Turkey. Advisory services on competition helped in repealing price controls proposals, minimizing distortive state aid schemes, and reducing discriminatory actions by government officials. Improvements to the competition framework have been proposed and implemented in two countries Armenia and Romania and more than five interventions are in the pipeline in at least three IDA countries. SUPPORTING PRODUCTIVE PARTNERSHIPS FIAS continued its rich legacy of setting up new partnerships and strengthening existing collaboration with donors, clients, teams across the World Bank Group, and external good practice institutions in the investment climate arena. An array of tools and services to support investment climate improvements is available within the Bank Group, but for any given project these key products may not be offered through any one department. FIAS-funded teams in the Investment Climate Department, working closely with MIGA, IFC, and the World Bank, often provide a critical link to unlocking synergies and bringing technical expertise from different parts of the institution together to provide comprehensive reform solutions for clients. In Rwanda, for example, a FIAS-supported advisory project is partnering with IFC and the World Bank to attract possible investments in the agri sector. Removing critical constraints to increased investment and exports in the horticulture and tea sectors, in particular, is considered key to achieving this goal. MIGA guarantee staff attended the Rwanda Investor Conference, which highlighted recent improvements to the country s investment climate and showcased new investment opportunities in agri. Collaboration with MIGA on specific activities of mutual interest was expanded in FY11. In order to gauge marked demand for the planned MIGA Facility for Conflict-affected and Fragile Economies, FIAS-funded activities included organizing a number of focus group discussions with private sector participants in Bosnia and Herzegovina, Georgia, Liberia, and Sierra Leone. Moreover, a MIGA staff member was posted to the Vienna office under an ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

120 assignment jointly funded by FIAS and MIGA. As part of the assignment, the linkages between investment climate reforms and political risks are being researched, with the goal of developing a new political risk assessment tool that can be used by countries interested in lowering noncommercial risks for cross-border investors. FIAS-supported global product teams continued in FY11 to collaborate closely with practitioners in their respective reform arenas within and outside the Bank Group. On the tax work, for example, the FIAS-funded product team partnered closely with different units within the World Bank Group including Poverty Reduction and Economic Management and IFC s Legal Department. In Tunisia, the team is supporting the World Bank s assistance to the transition government, working with the Ministry of Finance in designing and implementing a reform of tax and customs formalities affecting es with the objective of streamlining procedures, cutting costs, and improving transparency. Externally, the global tax work is closely coordinated with the International Tax Dialogue, which comprises all major players providing tax technical assistance including the International Monetary Fund, the OECD, regional tax groupings, and major donors. Tax transparency-related collaboration includes the G20, the OECD, the Global Forum for Tax Transparency and Exchange of Information, the International Bureau of Fiscal Documentation, and the European Commission on supporting the global mandate to improve tax transparency in countries through technical assistance. The team also works with regional tax administrators forums such as the Africa Tax Administrators Forum. During FY11 other innovative partnerships with leading institutions in the investment climate arena were organized, including a tripartite cooperation with the Norwegian Agency for Development Cooperation and the Bronnoysund Registration Centre (BRC) in Norway. The first agreement of its kind, it allows FIAS-supported teams to draw on the regulation experience of state agencies from developed economies to benefit projects in developing countries. Experts from BRC shared their firsthand experiences with clients in Nepal, Sierra Leone, Tanzania, and Togo. In addition, a comprehensive case study of registration reforms in Norway was developed and made available to reform practitioners. This pilot approach to partnerships with relevant state agencies from developed countries is a model to be replicated in similar partnerships going forward. Partnerships on competition policy issues with the OECD, the International Competition Network, and the International Development Research Centre have been nurtured through collaboration on analytical work, participation in knowledge events, and coordination to take advantage of synergies among partners. On trade, the FIAS-supported team engaged with international organizations such as the World Trade Organization, the Caribbean Community and Common Market, and the United Nations Conference on Trade and Development. Benchmarking tools such as the subnational Doing Business reports (see p. 25 for more detail) also rely on strong partnerships. Increasing demand from client countries to conduct repeated benchmarking studies in 16 economies has paved the way to gradually transfer the methodology, share best practices, and develop expertise in client countries by partnering with local institutions and governments. Currently, the team is working in partnership with think tanks and academic institutions in Mexico, Indonesia, the Russian Federation, and the Philippines. After benchmarking 38 economies and more than 300 cities, a new franchising model is being developed in Mexico, the pioneer country for such subnational studies. There, the local strategic partner is responsible for implementing the project in collaboration with the government, while the role of the Bank Group focuses on providing quality control and the Doing Business brand. Strong engagement with donor partners, not only on funding but also through staff learning and knowledge activities, continues to provide the cornerstone for the success of FIAS activities. This engagement occurs through platforms such as the Donor Committee for Enterprise Development, donor participation on advisory panels for different global products, as well as learning events sponsored by global product teams and at the project level. For more details on funding and staff exchanges, see Financial Results and Resource Use section, p. 36. FY11 OPERATIONAL HIGHLIGHTS 31

121 KNOWLEDGE MANAGEMENT, LEARNING, AND COMMUNICATIONS The knowledge management and learning program is designed to establish the thought leadership of FIAS-supported activities in the area of investment climate reform within and outside the Bank Group. In FY11, the program was further strengthened, engaging with practitioners, government and private sector clients, and donor partners and other stakeholders. As part of this approach, over 45 events attracting more than 1,500 staff and external participants including seminars, deep dive learning events, and client peer-to-peer workshops were supported by FIAS in FY11 (see box, p. 34). One such activity was the global networking and learning event for the investment policy product held in Vienna, Austria. Attended by more than 120 participants from 43 countries, it helped deepen the technical skills of operations officers and established strong networks with government officials and investment policy practitioners. To help increase staff capacity on investment climate issues and themes, intensive learning events such as the trade logistics, registration, agri and tourism product workshops were organized during the Bank Group s 2011 Financial and Private Sector Development Forum in Washington, D.C. Under the theme of Building Competitiveness, the forum brought together more than 600 Bank Group colleagues, private sector development executives, academics, and donor representatives to discuss the latest issues in financial sector and private sector development. Furthermore, contributions to the World Bank Group Entrepreneurship Snapshots one of the most comprehensive datasets on cross-country firm entry data have been created in cooperation with the World Bank Development Research Group, IFC, and the Kauffman Foundation, yielding wide recognition across the World Bank Group (see pp.13 14). In FY11 several flagship reports were published, including: Investing Across Borders, Rebuilding Business and Investment in Post-conflict Sierra Leone, and Managing for Impact FIAS Strategy for FY These are also available electronically on the investment climate Web site. A wide range of other publications were produced including handbooks, guidebooks, technical papers, the Investment Climate In Practice note series, a viewpoint note, and a number of SmartLessons (see p. 35 for a listing of key FY11 publications, including short summaries of each). COMMUNICATIONS Communications activities in FY11 were geared to showcase how FIAS-supported investment climate work across the globe has contributed to results and had a substantive impact on clients development objectives, including a more vibrant private sector, new es, jobs, and growth. This results communications agenda has relied on solid monitoring, evaluation, and impact data as the basis for feature stories, multimedia, and other communications products. Through client, private sector, and other stakeholder testimonials, on-the-ground stories provided a human face to the data, presenting results in a compelling and balanced way. In FY11, the investment climate thematic Web site (www.wbginvestmentclimate.org) was successfully launched. The Web site is among the top-10 search results for the term investment climate on Google. It ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

122 is receiving strong interest, with page views rising from 3,000 when it was launched in October 2010 to 136,000 views by June 2011, becoming the main platform for disseminating investment climate-related knowledge products and information. Electronic versions of most popular investment climate handbooks including the Investment Generation Toolkit, How to Reform Business Licenses, and the Health Policy Toolkit are now available, making these knowledge products easily accessible and highly interactive for practitioners. Several slideshows and short films documenting success stories through compelling client and entrepreneur testimonials were produced in FY11. Four investment climate videos were well received by viewers, garnering a total of 8,000 views on YouTube. Cultivating a community of social media contributors and leveraging World Bank Group social media platforms created opportunities for direct conversations and discussions about investment climate reforms. Stories featuring investment climate project activities and results were posted across the World Bank Group s social media channels, such as the IFC and World Bank corporate, country- and region-specific Facebook and Twitter accounts. Investment climate staff actively contributed to thematic blog sites, including the World Bank s Private Sector Development Blog. Investment Climate toolkits are available online at KNOWLEDGE MANAGEMENT, LEARNING, AND COMMUNICATIONS 33

123 Collaborating Across the World Bank Group to Encourage Client Peer-to-Peer Learning A peer-to-peer workshop organized jointly with IFC Advisory Services in the Middle East and North Africa brought together over 70 e-government experts in Amman, Jordan in May 2011 to explore how technology and ICT solutions could improve and regulatory environments in the region. The event assessed how governments in the region are using technology to ease the regulatory burden on es, making it easier for new entrepreneurs to register their es and access government services. Speakers highlighted innovations such as cloud computing, social media, and mobile applications as new opportunities for governments to improve cost-effectiveness, increase transparency, facilitate the government-to- dialogue, and extend access to information and services to entrepreneurs in underserved segments of the economy. The event enabled participants to learn more about institutional and change-management considerations they must address in reengineering government service delivery. All participants expressed their satisfaction with the learning and knowledge sharing and asked the Bank Group team to offer more specialized training for larger target groups. Also in FY11, the FIAS-funded secured transaction and collateral registries product jointly with the IFC Access to Finance Business Line organized the Financial Infrastructure- Secured Transactions International Conference in Rio de Janeiro, Brazil in March The purpose of the conference was twofold: to educate and train public- and privatesector stakeholders on recent developments and best practices in secured transactions and collateral registries; and to develop a greater awareness of clients innovative approaches to carrying out secured transactions reform and the adoption of collateral registries. More than 70 participants attended the secured transactions sessions at the event. Attendees included government officials, representatives from national central banks, stakeholders from private financial institutions, individuals from the and legal communities, bilateral donors (the United States Agency for International Development and Switzerland s State Secretariat for Economic Affairs), and multilateral organizations ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

124 KEY KNOWLEDGE PRODUCTS PUBLISHED IN FY11 Flagship Reports The Investing Across Borders 2010 report, launched in July 2010, compares regulation of FDI in 87 economies and offers recommendations for governments looking to improve their competitiveness in attracting investment. The Rebuilding Business and Investment in Post-Conflict Sierra Leone (RABI) report features the perspectives of entrepreneurs, key government reformers, and FIAS practitioners in tracing Sierra Leone s path to revive and grow the private sector following its long civil war. The publication, Managing for Impact: FIAS Strategy for Fiscal Year , outlines FIAS mission and reform activities for the FY12 16 strategy period. Investment Climate IN PRACTICE note series The flagship note series for clients and practitioners featured handson topics in investment promotion, investment regulation, taxation, and strategic communications. Using Strategic Communications to Engage Stakeholders in Tax Reform (no. 15, March 2011) outlines a strategic communications approach tested in tax reform projects in the Republic of Yemen, Sierra Leone, and Lao PDR. Investment Regulation and Promotion: Can They Coexist in One Body? (no. 16, March 2011) outlines how investment promotion is correlated with investment regulation. The note argues that the two functions should be kept separate and offers policy advice for countries that have them combined. Leveraging Technology to Support Business Registration Reform: Insights from recent country experience (no. 17, June 2011) discusses key findings of a recent Bank Group survey examining the experience of 34 company registrars in implementing new or upgraded technology solutions. It identifies several factors influencing the registrars approaches, and summarizes key lessons in choosing and implementing ICT solutions. Viewpoint note series (published by the World Bank Group Financial and Private Sector Development Vice Presidency) Attracting FDI: How Much Does Investment Climate Matter? analyzes how improving the investment climate offers an excellent opportunity for countries seeking to attract FDI. Handbooks, Technical Papers, and Reports How to Reform Business Inspections: Design, Implementation, Challenges is a practitioners handbook that provides would-be reformers, inside and outside the Bank Group, with a comprehensive range of tools that enable them to tackle all essential aspects of regulatory simplification and smarter regulation. Surveying Businesses on Tax Compliance Costs analyzes surveys of taxpayers regarding their experiences with tax compliance costs and their attitudes toward tax compliance. Tax Perception and Compliance Cost Surveys: A Tool for Tax Reform analyzes surveys of taxpayers and shows how understanding perceptions and experience is important to gauging changes in tax morale and general trends in tax compliance. Alternative Dispute Resolution Guidelines provides a framework for setting up a system for alternative dispute resolution. It highlights and draws upon experiences of many countries within the investment climate reform agenda. Alternative Dispute Resolution Center Manual: A Guide for Practitioners on Establishing and Managing ADR Centers summarizes best practice guidelines in the establishment of an ADR center, provides a rich body of case studies incorporating ADR centers globally, and provides a comprehensive appendix of pro forma documents for use by ADR centers. Special Economic Zones in Africa: Comparing Performance and Learning from Global Experiences provides the first systematic and comprehensive analysis of zone programs in sub-saharan Africa. It is the result of detailed surveys and case studies conducted during 2009 in ten developing countries, including six in sub-saharan Africa. Four Country Impact Evaluations are external assessments of FIAS programs in Burkina Faso, Liberia, Rwanda, and Sierra Leone. The reports analyze the efficacy of the programs in achieving their initial objectives and the quantitative impacts generated from program achievements. Inspections Reform: Do Models Exist? is an analytical review of Inspections reforms in 25 countries worldwide, with analysis of models and features of reforms undertaken. SmartLessons In FY11 staff authored and co-authored 17 Smartlessons, highlighting experiences from FIAS-supported activities with Bank Group staff through this IFC-sponsored learning note series, one that is also increasingly sharing Bank Group lessons with external audiences. Three of these notes Pilot Land Reforms in Nigeria: Think Big, Start Small, Move Fast But Where Do We Start?, Show Me the Money! Using Peer-To-Peer Learning for Accelerated Investment Climate Reforms, and VAT Media Campaign in Lao PDR Results in a Big Bang for the Buck were first-prize winners in Bank-wide SmartLessons competitions. KNOWLEDGE MANAGEMENT, LEARNING, AND COMMUNICATIONS 35

125 FINANCIAL RESULTS AND RESOURCE USE FIAS activities covered in the Annual Review are co-financed via a set of FIAS trust funds managed by the World Bank Group s Investment Climate Department. In addition to FIAS trust funds, the Investment Climate Department manages additional funds received from the World Bank and IFC for operational and administrative tasks related to the department s anchor or backbone function in the investment climate space (for example, as backbone for IFC s Investment Climate Business Line and for the World Bank Group s Financial and Private Sector Development Vice Presidency), as well as donor funds for activities managed outside the scope of FIAS (such as the policy and advisory component of IFC s Health in Africa program or work on private infrastructure). The financial results reported in this section cover only those funds managed by the Investment Climate Department under the FIAS trust fund structure. The Investment Climate Department follows IFC s standard accounting policies and procedures. 17 FIAS financial reports use cash-based reporting in alignment with the quarterly financial reports on IFC s donor funded operations. FUNDING Contributions received in FY11 from the following donors and clients are gratefully acknowledged: Direct contributions to FIAS trust funds (core donors are in bold): 18 Austria European Commission France Ireland Kauffman Foundation Korea Luxembourg the Netherlands Norway Sweden Switzerland the United Kingdom the United States 17 Annual contributions from IFC, MIGA, and the World Bank are treated in the same manner as core donor funds and are co-mingled with other donor funds in the FIAS Master Trust Fund account, as terms and conditions allow. Contributions from the IFC Investment Climate Business Line are treated as an additional source of project-specific funding. 18 The FIAS program received financial contributions in FY08 10 from other donor countries including Australia, Iceland, Italy, and New Zealand to support the implementation of the FIAS investment climate program outlined in the FIAS FY08 11 strategy. Contributions for FIAS projects received via IFC s Technical Assistance Trust Funds (TATF) program: Japan Client contributions: Asia-Pacific Economic Cooperation Core and Programmatic Funding Spain Denmark Mexico Poland In FY11, FIAS donors, clients, and the World Bank Group contributed a total of $32.1 million (net of trust fund administration fees of $1.2 million) to the various FIAS trust funds, supporting the implementation of a broad-based investment climate reform program under the FIAS umbrella (see details in Tables 1 and 2). This amount is roughly equal to the total contributions received for FIAS in FY10 ($32.7 million) and reflects the strong and continued commitment by donors to support investment climate reform at the global level, despite severe budget constraints ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

126 experienced by many donor partners due to the global financial crisis. World Bank Group core contributions totaled $8.3 million in FY11, including $4.0 million from IFC, $2.7 million from MIGA, and $1.6 million from the World Bank. Core contributions received from donors amounted to $4.6 million in FY11 (significantly down from $6.7 million in FY10). These contributions include an allocation of $1.5 million from the Netherlands earmarked for activities in IDA countries. Overall, the amount of core funding for FIAS dropped from $18.3 million in FY08 to $12.8 million in FY11, a significant decrease which seriously limited the flexibility of the FIAS program over the FY08 11 strategy cycle. Programmatic contributions from donors, made available through thematic and regional FIAS Trust Funds, totaled $7.4 million in FY11, slightly down from donor contributions of $8.6, $8.8, and $7.5 million in FY08, FY09, and FY10, respectively. Project-Specific Funding Reduced levels of core and programmatic contributions were offset in FY11 by increased project-specific contributions received from clients, donors, and the World Bank Group including the World Bank Group s Trade Facilitation Facility and Gender Action Plan. Project-specific contributions from IFC, donor partners, and clients amounted to $11.3 million in FY11, including $8.2 million from donors, $0.3 million from clients, and $2.8 million from IFC s Investment Climate Business Line. Client contributions received from four clients ($0.3 million) were significantly down from contributions received from clients in FY09 and FY10 ($1.1 million and $1.8 million, respectively). The potential to generate significant cash contributions from clients remains modest given the high concentration of FIAS activities in IDA as well as fragile and conflict-affected countries. Project-specific contributions from donors remained consistent at $8.3 million in FY11 and $8.8 million in FY10, reflecting strong donor interest in client-facing investment climate reform interventions and an ongoing trend among some donors to decentralize their aid budgets to the field. Project specific contributions from IFC, received in the form of project-specific FMTAAS allocations, 19 amounted to $1.9 million in FY11. These allocations primarily supported a range of global knowledge management and product design and development initiatives implemented under the FIAS umbrella. In addition, the Investment Climate Department received IFC Advisory Service contingency funds in the amount of $0.9 million to finance FIAS-related advisory and technical assistance activities (see Table 2). Other contributions from IFC, amounting to $1.7 million in FY11, supported non-project activities including portfolio management, monitoring and evaluation, and knowledge sharing associated with the global portfolio implemented under the FIAS umbrella. Contributions Outside FIAS Regular Financial Structure A range of indirect contributions for FIAS-related advisory activities were made available to the Investment Climate Department via non-fias specific funding mechanisms and are listed in Table 3. These contributions include projectspecific financial support from Japan and Spain, made available via the IFC s Technical Assistance Trust Funds (TATF) program (a total of $1.0 million). Moreover, a range of World Bank and IFC regional advisory services units helped leverage FIAS-funded activities through cross support, a mechanism under which Bank or IFC units cover the costs of Investment Climate Department staff working on investment climate projects managed by these units. The level of cross-support 19 FMTAAS is IFC s Funding Mechanism for Technical Assistance and Advisory Services. FINANCIAL RESULTS AND RESOURCE USE 37

127 received throughout FY11 from World Bank and IFC units and related to FIAS-funded activities amounted to approximately $3.0 million. Funding from TATF, World Bank supplemental budget allocations, and cross-support are managed outside the regular FIAS trust fund structure and thus are not included in Table 1. Shift Away from Core to Project-Specific Contributions The composition of funding for FIAS has changed significantly over the past two to three years and is negatively affecting the degree of flexibility the program has to respond quickly to new demands for investment climate reform support. FIAS core funding has been steadily shrinking from $18.3 million in FY08 to $12.8 million in FY11. On the other hand, project-specific funding has increased from $9.4 million in FY08 to $11.3 million in FY11. The shift towards project-specific funding is even more dramatic if funding components managed outside the Investment Climate Department are taken into account (in particular TATF funding and cross-support from Bank and IFC units). As a result, the FIAS program is increasingly driven by specific project activities for which donors are willing to provide funding, and less by overall client needs and a global strategic investment climate reform agenda. Also, core funding is typically used to fund the knowledge management and learning agenda under FIAS, as well as new, innovative approaches and products that are under development. Given the ongoing scarcity of core funds, there is a risk that such activities will have to be scaled back significantly over the coming years. In-Kind Support Via Staff Exchanges and Secondments The FIAS program has continued to benefit from in-kind resources that several donors have made available in the form of secondees and staff exchanges. Throughout the year, senior staff members from Agence Francaise de Developpement (AfD), the United Kingdom s Department for International Development, the Italian Ministry of Foreign Affairs, the Korean Ministry of Knowledge Economy, the Norwegian Ministry of Foreign Affairs, and the Spanish Institute for Foreign Trade have been seconded to the Investment Climate Department where they have been working on FIAS-funded activities. In return, one Investment Climate Department staff member was on a long-term assignment with AfD. Such staff exchanges and secondments offer an attractive way for FIAS partners to be directly involved in the program and establish direct connections between their respective private sector development programs and FIAS. USE OF FUNDS FIAS trust fund expenditures for investment climate reform activities reached $30.3 million in FY11, an increase of 10 percent over FY10 expenditures of $27.6 million (Table 1, Uses of Funds). The increase in FY11 expenditures is due in large part to expenditures associated with the additional contingency funding received from IFC ($0.9 million) and a conscious effort to use earmarked donor funds to the fullest extent possible to close the FIAS FY08 11 funding cycle. As a result, staff and consultant costs as well as travel costs increased, whereas indirect costs (infrastructure, office space, rent) remained relatively flat. Administration fees are collected by IFC to cover trust fund administration costs and are deducted from donor contributions at the time of receipt. In FY11 IFC collected trust fund administration fees of $1.2 million from FIAS donor contributions. 20 At the end of FY11, fund balances in the various FIAS trust funds totaling $18.4 million 21 were carried over into FY12. This amount is relatively large as it includes $8.0 million of core funds and about $10.4 million of program- and project-specific funds received under multi-year donor agreements. In line with prudent financial management principles, FIAS resources are strategically managed to avoid liquidity and cash-flow issues as experienced at the beginning of the FY08 11operational cycle. In this context, the transition into the new FIAS FY12 16 strategy cycle presents specific challenges which required the carry-over of core funds to ensure FIAS operations into FY FIAS trust funds established after July 1, 2009 are subject to the standard IFC trust fund administration fee of 5 percent. Since most of FIAS trust funds were established prior to July 2009, a 3.5 percent trust fund administration fee applies. Trust fund administration fees collected by IFC are included in Table 1, Sources of Funds for FY FIAS trust fund cash balances less commitments and balances refunded to donors ANNUAL REVIEW FIAS: THE FACILITY FOR INVESTMENT CLIMATE ADVISORY SERVICES

128 Project-related expenditures (both direct and indirect) accounted for 88 percent of total FIAS expenditures and general and administration expenditures (rent, communications, equipment, and other non-overhead costs such as administrative and back-office support staff) accounted for 12 percent of total expenditures (see Table 4). In July 2010 IFC introduced a new cost allocation methodology for Advisory Services which resulted in a re-distribution between direct and indirect project costs. Due to this change, some figures in Table 4 are not consistent with figures reported in FIAS Annual Reports/Reviews for FY Although general and administration expenditures are not affected by this change in methodology, FY08 10 general and administration expenditures are restated to exclude trust fund administration fees previously reported as expenditures. FINANCIAL RESULTS AND RESOURCE USE 39

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