World Bank Offers Loans for African Cellphone Networks

IFC, the private sector arm of the World Bank Group, has announced its largest financing to date in Sub-Saharan Africa, a US$320 million package, to five operations of Celtel International (an MTC subsidiary) to help expand and upgrade its fast growing mobile networks in the Democratic Republic of Congo, Madagascar, Malawi, Sierra Leone and Uganda. The investment will result in better quality mobile access in countries with extremely limited telephone services, creating new opportunities for businesses and consumers across the economic spectrum.

IFC will provide a $160 million loan for its own account; it's largest to date in Sub-Saharan Africa. That loan is complemented by another $160 million in syndicated loans with participating commercial banks and parallel loans from bilateral financial institutions. The transaction also marks the first ever mobilization of IFC syndicated loans in Madagascar, Malawi and Sierra Leone, helping to bring long-term (7 year) commercial financing to markets at the frontier of private sector development. The syndication includes three South African banks that are participating in IFC's B-loan program for the first time.

Celtel, which was acquired by MTC of Kuwait in April 2005, will use the funds to modernize and develop the mobile networks in countries with obsolete and inadequate fixed-line networks and very low telephone penetration rates, ranging from just over four phones for every 100 people in Malawi and Madagascar to about 10 per 100 people in Sierra Leone. Since the MTC's acquisition of Celtel it has invested $10 billion in African mobile telecom services.

"Investment in infrastructure such as telecommunications is crucial for Africa's economic development, and our long term collaboration with IFC shows that the private sector can play an important role in fulfilling that need" said Mo Ibrahim, Celtel's Chairman.

World Bank part of Malawi–Moz interconnector engagement

The World Bank, the lead financier of the $84-mil- lion Mozambique–Malawi electricity interconnector project, is engaged in a series of discussions with stakeholders in Mozambique and Malawi in order to kick-start the long-awaited project.

The interconnector project will involve the construction of a 200-km, 220-kV power line from the Matambo substation, in Mozambique, to Phalula, north of Malawi’s commercial capital, Blantyre.

Augusto de Souza Fernando, the director of power production and transport at Mozambican electricity utility EdM, says a World Bank team has visited Mozambique to discuss the implementation of the project with various stakeholders.

“This is a project which is 100% owned by EdM, [but] in implementation, there will be some coordination with Cahora Bassa Hydroelectric (HCB), which owns the Matambo substation. “The arrangement is that HCB will operate the line, as is the case with the line to Zimbabwe,” says Fernando.

He says the stakeholders have agreed that there will be initial financing of $60-million for the project, of which about $25-million will be invested on the Mozambican side.

The Swedish Agency for International Development and the Norwegian International Development Agency have joined the World Bank as financiers of the project.

Electricity Supply Corporation of Malawi (Escom) CEO Kandi Padambo says the parastatal expects to seal a power-purchase agreement with HCB before the end of the year.

“So far, there are no obstacles in our discussions with HCB, the supplier, and the World Bank as the lead financier. We just have to finalise some processes,” says Padambo.

The discussions between Escom and HCB hit a snag a year ago because Escom was discouraged by the high price demanded by HCB.

As Escom was considering engaging into discussion with another supplier from the southern Africa region, HCB revised the price downwards forcing Escom to rescind its decision and continue with the arrangements to purchase power from the Mozambican firm.

The Mozambique–Malawi power interconnector is part of the Southern African Power Market project that is being implemented under the auspices of the Southern Africa Power Pool.

World Bank Funds Improved Water Supply for Country's Urban Areas

Washington, D.C.

The World Bank Board of Directors today approved US$50 million of International Development Association (IDA) funds for Malawi's Second National Water Development Project (NWSP II). Of these funds, US$27.5 million is a grant and US$22.5 million a credit.

The project aims to increase access to sustainable water supply and sanitation services for people living in cities, towns, market centres, and villages and improve water resources management at the national level. The project will also contribute to building sector capacity through improved monitoring, regulation, incentive structures, public private partnerships, and coordination among the sector stakeholders.

The NWSP II is the World Bank's contribution to the Government's five year National Water Development Program (NWDP) estimated to cost $260million.

Multiple donors are supporting the Government in the water development program whose purpose is to improve the management of the Nation's water resources and to ensure the delivery of efficient, reliable, and sustainable water supply and sanitation services to an increasing country population. Through the NWDP, the Government and its partners aim to increase water supply from the current 67% of the population to 79% by 2012. The overall goal for the Government is to achieve universal coverage by 2025.

"Through this project, we envisage that 250,000 more people in Malawi will have access to clean and safe water. We would like supply disruptions especially in Blantyre to be a thing of the past, and we would like to see the water boards function better," says Timothy Gilbo, Country Manager for Malawi.

The NWSP II has four components. The first component is water supply and sanitation for the cities of Blantyre and Lilongwe. This will consist of priority investments for essential spare parts and materials to prevent water supply disruptions in Blantyre and urgent rehabilitation works in both cities. Through this component, unserved areas will be reached through piloting of water supply and sanitation services to low income areas in Blantyre. Aqueduct planning in Lilongwe will also be done through this component.

The second component is water supply and sanitation for town and market centres, and rural piped water supply and sanitation. This component will expand water supply facilities and improvements in operational efficiency in the cities of Mzuzu and Zomba, the fastest-growing towns of Kasungu and Mangochi, and the smaller towns of Likuni and Mponela. The component will also develop community-managed water supplies in market centers and rural piped systems. It will also train the regional water boards, the staff of the program implementation unit, district assemblies, and local communities in relevant skills.

The third component is on water resources management, which will consist of development and support for the promulgation of enabling legislation for the National Water Policy of 2005, and development of an integrated water resources investment strategy. The component will also design independent environmental and social assessments for Lake Malawi level control; and strengthen institutional capacity for water resource management including the establishment of a National Water Resources Authority. It will also carry out feasibility studies, designs, and environmental and social assessments for the development of future water sources.

The last component is sector management and urban water sector reform. Through this component, there will be support to the Ministry of Irrigation and Water Development in the establishment of a management system for the sector investment program; development of a strategic sanitation plan for Lilongwe and Blantyre; and design and implementation of a sustainable reform plan for Blantyre and Lilongwe.

NWDP II provides continuing support to NWDP I which supported the implementation of the Malawi Government's water resources management policy by reforming and upgrading the management o f water resources and the provision of water-related service. The project is expected to run from 2007 to 2012. In this project, donors have agreed with Government to strong coordination, joint monitoring, collective policy dialogue, and common implementation arrangements.NWDP,

Malawi Gets $15m Grant for Investment Cl...

WASHINGTON, May 24, 2007 – The World Bank Board of Directors today approved an International Development Association (IDA) grant of US$15million for the Business Environment Strengthening Technical Assistance Project (BESTAP) which is designed to support capacity development and investment climate reforms to accelerate economic growth in Malawi.

The project will support the Government’s strategy of a private sector-led economic growth. ”The foundations for economic growth have been laid in Malawi with improvements in the macro-economic situation, and this opportunity needs to be seized. The project aims to support the development of the private sector in Malawi as an engine for sustained economic growth,” says Malawi’s Country Manager, Timothy Gilbo.

The Malawi Government considers the project a major initiative in its economic growth program: “BESTAP is part of Malawi’s unprecedented efforts to accelerate economic growth and achieve poverty reduction through the improvement of the business environment and the facilitation of increased private sector investment,” says Dr. Ken Lipenga, Minister of Industry and Trade.

The Bank will co-finance the project with the European Commission which is contributing $3.7 million to make a total of $18.7 million for BESTAP. All the funding will be on grant terms, which means there are no repayment obligations for Malawi.

“Malawi’s strong progress in regaining macro stability means that the Government is increasingly looking to a “second generation” of reforms in the domestic business environment which will seek to stimulate private sector investment and employment creation,” says Constantine Chikosi, Project Task Team Leader. He adds that “the reforms proposed in the project were identified in consultation with Government, the private sector, civil society and donors, and were also informed by the Bank’s studies on private sector issues in Malawi such as Doing Business and the Investment Climate Assessments which identified a wide range of constraints on the growth o f the private sector in Malawi.”

The Project has four components designed to strengthen property rights institutions, private sector support institutions, growth and development of Small and Medium Enterprises (SMEs), and government capacity to implement reforms.

The first component is on strengthening private property rights institutions and business

facilitation. This will address the large legislative backlog of economic laws that inhibit private sector development in Malawi. Many of these laws require wholesale revision. This component will also support the introduction of key new legislation. The first component will also improve access to commercial justice by providing support for strengthening and expanding the capacity of the newly established Commercial Division of the High Court to relieve the current large backlog of commercial cases in Malawi’s court system and to strengthen contract enforcement. Another aspect of the first component is on improving business and land registration services. This will enable the business and land registries to improve their effectiveness in establishing businesses and facilitating the registration and securitization of land-based assets.

The second component is on strengthening private sector development support institutions and services. This component will build capacity in institutions that provide essential services to the private sector in order to improve the quality and volume of services delivered, and to strengthen institutions that provide policy direction on private sector development issues. Main activities will be the establishment of an Investment and Trade Centre; establishment of an institutional framework for Public Private Partnerships; strengthening the Department of Private Sector Development in the Ministry of Industry and Trade; and supporting a framework for Public Private Dialogue through the Malawi Confederation of Chambers of Commerce and Industry.

The third component will support the growth and development of micro and small enterprises through improved access to finance and productivity enhancement. The component will support the establishment of a sustainable SME Investment Fund that will be managed by the private sector. It will also strengthen capacity of private firms as well as their representative organizations through provision of financial and technical assistance to build the capacity and international competitiveness of private businesses.

The fourth component of the project will provide implementation support of the project through the project implementation unit (PIU). In addition, the project will build capacity within the Department of Private Sector Development to prepare it to take over the implementation support functions from the PIU in due course.

BESTAP will be implemented over a period of five years.

For more information on the World Bank’s work in sub-Saharan Africa visit www.worldbank.org/afr

For more information about World Bank’s activities in Malawi visit

www.worldbank.org/malawi

For more information about this project visit:

http://web.worldbank.org/external/projects/main?pagePK=64283627&piPK=73230&theSitePK=355870&menuPK=355906&Projectid=P103773

IMF and World Bank Face Declining Authority as Venezuela Announces Withdrawal

Venezuela's decision this week to pull out of the IMF and the World Bank will be seen in the United States as just another example of the ongoing feud between Venezuelan President Hugo Chavez and the Bush Administration. But it is likely to be viewed differently in the rest of the world, and could have an impact on both institutions, whose power and legitimacy in developing countries has been waning steadily in recent years.

Other countries may follow. President Rafael Correa of Ecuador announced last week that it was kicking the World Bank's representative out of the country. It was an unprecedented action, which President Correa punctuated by stating that "we will not stand for extortion by this international bureaucracy." In 2005, the World Bank withheld a previously approved $100 million loan to Ecuador to try to force the government to use windfall oil revenues for debt repayment, rather than the government's choice of social spending.

This is the way these two institutions have operated for decades. With the IMF as leader, and the U.S. Treasury department holding veto power, they have run a "creditors' cartel" that has been able to exert enormous pressure on governments over a wide variety of economic issues. This pressure has not only generated widespread resentment, but has also often led to economic failure in the countries and regions where the IMF and World Bank have had the most influence. Over the last 25 years Latin America has had its worst long-term economic growth performance in more than a century.

Venezuela also has specific grievances against the IMF, which are likely to generate sympathy in other developing countries with democratic, left-of-center governments. On April 12, 2002, just hours after Venezuela's democratically elected government was overthrown in a military coup, the IMF stated publicly that it was "ready to assist the new administration [of Pedro Carmona] in whatever manner they find suitable."

This instantaneous show of financial support for a newly installed dictatorship - one which immediately dissolved the country's constitution, general assembly, and Supreme Court - was unprecedented in the IMF's history. Typically the IMF does not react so quickly, even to an elected government. It is no wonder that this move was seen in Venezuela and elsewhere as an attempt by the IMF to support the coup itself. Washington, which dominates the Fund, had advance knowledge of the coup, supported it, and funded some of its leaders - according to U.S. government documents.

In additions, Venezuela has not been happy with the IMF's consistently under-projecting its economic growth in recent years, as the Fund has also done with Argentina. The IMF's forecasts are widely used and can therefore influence investors.

But the resentment against the IMF and World Bank, and demands for change, are worldwide. The scandal over Paul Wolfowitz's leadership at the World Bank, which is about to topple the Bank's most unwanted president ever, is just the tip of the iceberg. Last month the IMF's Independent Evaluation Office stated that since 1999, nearly three-quarters of aid to the poor countries of Sub-Saharan Africa are not being spent. Rather, at the IMF's request, it is being used to pay off debt and accumulate reserves. This is a terrible thing to do to some of the poorest countries in the world, who desperately need to spend this money on such pressing needs as the HIV/AIDS pandemic.

Venezuela's decision is likely to strengthen the hand of developing nations within the IMF and World Bank who are demanding serious reforms. Right now the United States, with less than 5 percent of the world's population, has more votes in the IMF than countries representing the majority of the planet. The world's developing countries, which bear the brunt of these institutions' mistakes, have little or no voice in their decision-making. Venezuela's move - and any other countries that follow - will show the IMF and World Bank that the option of quitting these institutions altogether is a real one.

Whether this will spur reform that can actually change the colonial relationship that these institutions maintain with their borrowers remains to be seen. More likely, they will simply continue to become less relevant to the developing world, as has happened drastically over the last decade.