An Evaluation of World Bank Investment Climate Activities

Abstract

The Investment Climate Study is a
 evaluation of the Operations Evaluation Department (OED).
 The OED report reviews the Bank’s investment climate lending
 and non-lending activities during fiscal years 1993 through
 2002-03. The report presents the collected findings of
 several evaluative exercises: a literature review; an
 analysis of investment climate themes in country assistance
 strategies and sector strategies; an analysis of lending
 operations as well as economic and sector work including
 survey-based diagnostic assessments; discussions with groups
 of international investors as well as with Bank staff; and
 client consultations and country case studies for five
 countries of Indonesia, Romania, India, Mozambique, and
 Peru. The key lessons learned are as follows: (i) the Bank’s
 non-lending intellectual and coordinating contributions can
 be as important as its financial contributions; (ii)
 institutional weaknesses in the form of administrative and
 regulatory barriers and poor property rights, as well as
 inadequate infrastructure and capability problems in public
 administration and private business, can continue to
 constrain growth; (iii) reform efforts must be coupled with
 a convincing analysis of the costs and benefits of reform,
 together with an exercise to set reform priorities, capacity
 building to address weaknesses of executing agencies, and
 efforts on the ground to achieve political consensus and
 commitment by government leaders to adopt and implement
 required reforms; (iv) partial programs may fall well short
 of achieving their objectives; (v) in cases where
 comprehensive reform programs are politically impossible,
 greater effort may be needed to prioritize what needs to be
 fixed first and what needs to be worked on in the longer
 run; (vi) reform efforts need people on the ground to help
 build required political commitment; and (vii) there may be
 a need for interventions to assist firms in these areas by
 way of vocational and in-firm training and cost-sharing
 subsidies for technology transfer to increase the
 possibilities for a growth response to investment climate
 reforms. The OED evaluation concludes with the following
 recommendations to improve Bank support for investment
 climate reforms: (i) pay more attention to institutions and
 the political economy of reform; (ii) improve the focus and
 use of survey-based diagnostics; (iii) do a better job of
 prioritizing and packaging investment climate reforms in
 lending operations; and (iv) find organizational solutions
 that help integrate microeconomic and macroeconomic reform agendas.