An Evaluation of World Bank Investment Climate Activities

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.