EVALUATING WORLD BANK GROUP SUPPORT
TO THE PRIVATE SECTOR
Marvin Taylor-Dormond
Director, Private Sector Evaluation
African Development Bank
December 4, 2012
Key Topics
PRIVATE SECTOR AND DEVELOPMENT
1.
2.
3.
2
Private Sector and Development: A key
driving force
Nature of WBG Operations in support for
Private Sector
Select Findings and Lessons at IFC from
Micro and Macro Independent Evaluation
Private Sector and Development
 Primary contributor to jobs, growth, innovation
 Often impeded by market and institutional
failures
 Private Public interface is critical
 Role of International Development Agencies
3
WBG Activities in the Private Sector
International Finance Corporation (IFC, 1956):
•
Purpose: “to further economic development by encouraging the growth of productive
private enterprise”
•
Instruments: Investment services (debt, equity, and other forms); advisory services;
asset management company -- Staff: 3,700
Multilateral Investment Guarantee Agency (MIGA, 1988):
►
Mandate: enhance foreign investment for productive purposes consistent with
countries’ development needs
►
Instrument: political risk insurance (PRI) -- Staff: 110
Financial and Private Sector Development VP (WB/IFC):
►
Focuses on creating institutional foundations for effective markets, open and
competitive markets, and social safety nets with market-based instruments
►
Instruments: lending; indicators and diagnostics, advisory services – Staff: 637
4
Types of WBG Private Sector Interventions
1. Interventions through the Public Sector to influence the
Private Sector
 WB Financial and Private Sector Development projects,
 IFC’s Advisory Services projects to government
(Investment Climate, PPP)
2. Direct interventions in partnership with the private sector
and public entities operating commercially
 IFC’s investments and MIGA’s guarantees
3. Blend interventions
 IFC’s Advisory Services to private companies, but with a
strong public good component
5
Dramatic growth in commitments
New Commitments, Investments, and Guarantees for the World Bank,
IFC, and MIGA ($ million; Fiscal 1990–2011)
Source: World Bank Business Warehouse, IFC MIS, MIGA.
Note: World Bank data include IBRD/IDA new loans and new supplemental loans.
.
6
Direct PSD Operations have three important
characteristics
1. Operations Subject to Market Test
 Direct Beneficiaries pay for service
 Some degree of competition
 Sponsors motivated by profitability
2. Third Party Effects with no Market Feedback
 Economic distortions
 Positive and negative externalities
 Provide rationale for public intervention
3. Development Agency’s Involvement
 Consistent with market principles
 Focused on third party effects
7
Results and Lessons from IFC: Project to Higher
Plane Evaluations
Meta, Synthesis
Evaluations
INTEGRATED
(JOINT)
SINGLE
INSTITUTION
Sectoral, Thematic,
Corporate
Evaluations
Country-Level Evaluations
Project-Level Evaluations
8
Some Results and Lessons From Micro
Evaluation: Development Results
% Mostly Successful or Higher
IFC Advisory Services
IFC Investments
MIGA
90%
90%
80%
80%
80%
70%
70%
70%
60%
60%
60%
50%
50%
50%
40%
40%
30%
30%
All IFC
All Regions
20%
Africa
30%
20%
20%
Africa
40%
2010
2009
2008
2000-10
2000-08
0%
2004-06
0%
2002-04
0%
2000-02
10%
1998-00
10%
1996-98
10%
All MIGA
Africa
9
IFC’s Performance by Criteria
Success rates
All IFC
Africa
100%
90%
74% 72%
80%
70%
60%
63%
67%
66%
59%
51%
50%
50%
52%
44%
40%
30%
20%
10%
0%
Development
Outcome
Private Sector
Development
Environmental &
Social Effects
Economic
Sustainability
Source: IEG.
Note: Based on 995 investment projects evaluated in 1996-2011, 117 of which in Africa.
1
0
Business
Success
Aggregating Project Results
4
3
24%
13%
LOW
53%
HIGH
1
1
2
10%
Africa
Development Outcome
HIGH
LOW
Development Outcome
All Regions
HIGH
LOW
1
1
42%
9%
4
3
32%
16%
HIGH
LOW
Investment Outcome
Investment Outcome
1996-2011
2



Win-win outcomes (1)
Mixed outcomes (2,3)
Low-low outcomes (4)
1
1
53%
3
23%
HIGH
LOW
Investment Outcome
HIGH
1
2
69%
13%
4
LOW
19%
5%
Development Outcome
HIGH
1
2
4
LOW
Development Outcome
IFC: High Work Quality associated with High-High
Outcomes
10%
3
9%
HIGH
LOW
Investment Outcome
Low Work Quality:
High Work Quality:
1996-2011
12
45%
3
30%
HIGH
LOW
Investment Outcome
Low Work Quality:
HIGH
1
2
63%
13%
4
LOW
19%
6%
Development Outcome
HIGH
1
2
4
LOW
Development Outcome
Africa: High Work Quality associated with HighHigh Outcomes
19%
3
5%
HIGH
LOW
Investment Outcome
High Work Quality:
Africa Region Projects: 1996-2011
Globally, the High-High cell jumps to 69% from
13
19% with High work quality
Results Drivers
► IFC Investments
• Key drivers of project outcomes: IFC work quality, sponsor quality, risk
intensity, sector choices and business climate
• Business performance drives overall Development Outcome results.
• MIGA Guarantees
• Successful outcomes linked to experienced investors, sound business
models and sector choice.
• Business performance drives overall Development Outcome results.
• IFC Advisory Services
• Key success factors include: client commitment, customization of services
to local needs, identification of the right partner, innovation brought to
market/sector
14
Recent IEG Macro-Evaluations
► IFC’s Poverty Focus and Results
•
Assessed whether IFC’’s priorities are consistent with inclusive growth.
► Information and Communication Technologies
•
Reviewed the role and effectiveness of the WBG in the fast evolving ICT sector
► Safeguards and Sustainability Policies
•
Highlighted strengths and weaknesses of the systems used in the WBG and
prompted a reform process
► Results and Performance 2011 (Annual Report)
•
Reviewed effectiveness of the WBG in supporting core development goals.
► Global Financial Crisis
•
Produced findings based on real-time evaluation
► Peru Country Program Evaluation
•
First truly joint CPE identified areas for greater WBG impact
► Guarantee Instruments
•
Strengthened management attention to arrangements for delivery of future
WBG guarantee operations across MIGA, WB, IFC
15
Select Lessons from Recent Macro
evaluations
► PRIVATE SECTOR AND POVERTY REDUCTION
• Attention to the type of growth that IFC supports is critical for the institution’s effectiveness in
poverty reduction. Impact of growth on poverty reduction depends on both the pace and pattern of
growth.
• Poverty focus need not come at the expense of profitability: a broad range of IFC’s
interventions can be simultaneously pro-growth, profitable and pro-poor.
► PRIVATE SECTOR AND NEW TECHNOLOGIES (ICT)
• Access for the poor has been more effectively supported through general, non-targeted
interventions focused on the enabling environment and direct support to private investments.
But positive examples of Bank Group support indicate the potential of targeted approaches,
including those carried through PPP. Speed of Support is critical: Support to universal access
programs was largely superseded by the rollout of phone services by the private sector , in some
cases with Bank sector reforms.
• Assessment of risky interventions with growth potential needs to be done on a portfolio
basis. On a project-by-project basis, IFC support to IT applications has not been successful—only
one quarter achieved objectives. On a portfolio basis, however, IFC’s returns have been positive
and consistent with private equity/venture capital industry benchmarks.
1
6
Select Lessons from Recent Macro
evaluations (2)
► PRIVATE SECTOR AND CRISIS RESPONSE
• Timely and effective crisis response in support of the private sector should
be based on existing delivery platforms. Setting new institutional platforms
for targeted crisis response during crisis delays implementation.
► PRIVATE SECTOR AND ENVIRONMENTAL AND SOCIAL
SUSTAINABILITY
• IFC’s Performance Standards have been a reasonably effective
approach to manage social and environmental risks and impacts and to
enhance development opportunities in its private sector financing.
• Greater disclosure of environmental and social information, including to
local communities, and verification of results are needed to capture fully
public good concerns. The Performance Standards paradigm is based on a
commitment by the private sector client to the principles and the Standards
to be achieved. It places greater responsibilities for implementation and
monitoring of performance indicators specified by IFC on the business
client.
1
7
Select Lessons from Recent Macro
evaluations (3)
► PRIVATE SECTOR AND THE GOVERNMENT (LESSONS
FROM IMPACT EVALUATIONS)
• Government policies and market conditions are critical factors in
determining program success. (Energy efficiency in China)
• A discriminate and dynamic approach to subsidies in the energy
efficiency business is needed because of the combination of
private and public benefits in energy efficiency projects.
Indiscriminate use of subsidies impedes the commercialization of
energy efficiency finance.
• Simplification reduces costs and raises the number of firms
registering as formal enterprises, but no evidence to support the idea
that higher formality leads to improved enterprise performance
(Business License Simplification in Peru)
1
8
EVALUATING WORLD BANK GROUP SUPPORT
TO THE PRIVATE SECTOR
Marvin Taylor-Dormond
Director, Private Sector Evaluation
African Development Bank
December 4, 2012