Closing report on actions relating to recommendations of the evaluation study of bank operations in Colombia of May 1972

R e p o r t No. 853 Confidential INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT A S S O C I A T I O N CLOSING REPORT ON ACTIONS RELATING TO RECOMMENDATIONS O F THE EVALUATION STUDY O F BANK OPERATIONS I N COLOMBIA O F MAY 1 9 7 2 Janitary 1 9 7 5 (with amendments August 1975) Operations Evaluation Department  CLOSING REPORT ON ACTIONS RELATING TO RECOMMENDATIONS OF THE EVALUATION STUDY OF BANK OPERATIONS I N COLOMBIA TABLE OF CONTENTS Page No . I . Introduction ................................. 1 I1 . General P o l i c y and Procedures ................ 4 2.1 P e r s p e c t i v e ............................. 2.2 Land Reform ............................. 2.3 C r e d i t f o r Small Farmers ................ 2.4 Development Impact ...................... 2.5 Housing ................................. 2.6 P u b l i c Health ........................... 2.7 F i n a n c i a l Market Development ............ 2.8 S e c t o r Lending .......................... 2.9 P r o j e c t Spread E f f e c t ................... 2.10 Economic Reporting ...................... 2.11 P r o j e c t Monitoring ...................... 2.12 Evaluation of C o n s u l t a n t s ............... 111. Major S e c t o r s of T r a d i t i o n a l Bank Emphasis ... 31 3.1 T r a n s p o r t a t i o n Information System ....... 32 3.2 Comprehensive Planning Approach ......... 32 3.3 P r o j e c t s ' Regional Development Impact ... 33 3.4 Market S t r u c t u r e of Transport S e r v i c e s .. 35 3.5 Vehicle F l e e t Composition ............... 35 3.6 Railway Performance T a r g e t s ............. 36 3.7 Highway S e c t o r Lending .................. 36 3.8 Feeder Roads ............................ 37 IV . Miscellaneous P o i n t s About Other S e c t o r s ..... 37 4.1 I n d u s t r i a l P r o j e c t s : N a t i o n a l Framework and A n a l y s i s of Components ......... 38 4.2 Agricultural Project Objectives and Farmer I n c e n t i v e s .............. 38 4.3 School Operating C o s t s .................. 39 4.4 Multi-Purpose Rural Development C e n t e r s . 40 4.5 Water Supply P r o j e c t s ................... 40 4.6 T r a i n i n g Elements i n Bank P r o j e c t s...... 41 4.7 Management T r a i n i n g a t ED1 .............. 42 TABLE OF CONTENTS (Cont 'd) Page No . V . P o i n t s S p e c i f i c t o Operations i n Colombia ........ 42 5.1 I n s t i t u t i o n Building a s the Prime ............ Project S e l e c t i o n C r i t e r i o n 43 5.2 Government and Borrower Salary Structures ... 45 5.3 Improving A l l o c a t i ~ nand D i s t r i b u t i o n of D F ........................... C Funds 45 5.4 Financiera Promotional A c t i v i t y ............. 47 5.5 Agricultural S t a t i s t i c s ..................... 48  I. o- I -n-t r.- d .-u -t--i o -c n. - -. T?lc f i r s t s t u d v u n d e r t a k e n by t h e s a n k ' s i n d e p e n d e n t e v a l u a t i o n u n i t when i t was si?t up, l a t e i n 1976. was a conlprehensive r e v i e w of v i r t u a l l y a11 t!:nt t h e Ilorlc! Bank had done -- i n p r o j e c t f i n a n c i n g , t e c h n i c a l a s s i s t a n c e , ~>olicv a d v i c e ant1 m o b i l i z a t i o n o f o t h e r f o r e i g n a s s i s t a n c e - - i n s u p p o r t of tlie devel.opment of Colombia, a c o u n t r y somewhat u n i q u e i n t h e e x t e n t ancl c o n t i n u i t y oE Bank a s s i s t a n c e . ' The. f i n a l v e r s i o n of t h e r e p o r t on t h e M s t u d y , e n t i t l e d 'Bank O p e r a t i o n s i n Colonibi a : An E ~ r a l u a t i o n " , was i s s u e d May 25, 1972 (Ronrd docurwnt R77-131) and d i s c u s s e d bv t h e E x e c u t i v e D i r e c t o r s s h o r t - l y t h e r c a f t e r . 4. b r i e f i n t e r i n f o l l o w - u p r e p o r t , r e v i e w i n g s t e p s t a k e n o r pl.an!led by t h e Rank re1 e v n n t t o t h e r~cor::r:enc!3tions c o n t n l n e d i n t h e o r i g i n a l d o c ~ ~ r : c ~wasl t , p r e p a r e d b y t h e O p e r a t i o n s t v n l u a t i o n Department i n the f i r s t h a l f o f 1973 and c i r c u l n t e d t o t!lc tLxecutive D i r e c t o r s on J u l s 1 2 , 1 9 7 3 (Board Document SecM73-414). The c u r r e n t p a p e r , a g a i n c e n t e r i n g on t h e e x t e n t o f r e l . e v a n t a c t i o n t a k e n by t h e Hank i n t h e i n t e r i ~ : : , r e p r e s e n t s a f i n a l review by t h e Operat i o n s Eva1 n a t i o n Department o f t h e rcccmmendations and s u g g e s t i o n s t h a t i t had o r i p i n a l l v made. T h i s r e p o r t i s r e a l l v a b o u t t h e Bank, t h e a d d r e s s e e of t h e o r i g i n a l e v a l u a t i o n s t u d y , r a t h e r t h a n a h o u t Colombia. A s t h e f o c u s o f t h e O p e r a t i o n s E v a l u a t i o n Department i s on Bank Group p o l i c i e s , p r o c e d u r e s and p r a c t i c e s , t h e c a s e of Colombia had o r i p i n a l l y been s e l e c t e d f o r s t u d y , w i t h t h e generous c o n s e n t o f t h e Government, a s a n i n s t r u c t i v e c o u n t r y c o n t e x t i n which t o r c - view t h e i r a p p l i c a t i o n . The P r e f a c e t o t h e 1972 r e p o r t sur;gested t h C ? t few o f t h e problems i d e n t i f i e d w e r e p e c u l i a r t o Colombia o r unknown t o t h o s e f a m i l i a r w i t h Bank o p e r a t i o n s more g e n e r a l l y , and i t p o i n t e d o u t t h a t most o f t h e l e s s o n s d r a m cons t i t u t e d reinforcer3en t t o v a r i o u s t r e n d s i n then- c u r r e n t Rank think in^. Although b a s e d o n l y on thorough review of Cblombia's e x p e r i e n c e , many o f t h e recommendations were t h e r e f o r e couched i n somewhat more y e n e r a l t e r m s , and follow-up d i s c u s s i o n s D v t h e O p e r a t i o n s C v n l u a t i o n Denartri~ent have c e r t a i n l y e x t e n d e d f a r heyonti t h o s e i n t h e Eank d i r e c t l v concerned w i t h o p e r a t i o n s i n Colombia. D e s p i t e t h e d i f f i c u l t i e s of t h e u n d e r t a k i n g , p a r t i c u l a r l v due t o t h e g r e a t i n c r e a s e i n v o l u n e and d i v e r s i t y of Bank a c t i v i t i e s s i n c e 1 9 7 1 , we h a v e , i n p r e p a r i n g t o w r i t e t h i s r e p o r t , e q u a l l v a t t e m p t e d a broad c o v e r a g e o f t h e Bank's work r a t h e r t h a n emphasis s i m p l y on o p e r a t i o n s i n Colombia. But t h e b r e a d t h o f view a t t e m p t e d s h o u l d n o t be a l l o w e d t o mislead t h e r e a d e r . I n some p l a c e s t h e r e p o r t may r e a d l i k e a comprehensive revie\< of major p o l i c y i s s u e s of c o n c e r n t o t h e Bank i n t h e l a s t few y e q r s . I n r e a l i t y i t f a l l s s u h s t a n t i a l l y s h o r t o f t h a t , p a r t i c u l a r l y i n two ways. F i r s t , many such i s s u e s - p r o ~ ~ o t i o n l o c a l contracting industry, a g r i c u l t u r a l re- of s e a r c h , f e r t i l i z e r i n d u s t r y problems, and e n v i r o n r l e n t a l c o n c e r n s a r e a f e w o b v i o u s ones - d i d n o t cove up s u b s t a n t i a l l y i n t h e e v a l u a t i o n s t u d y and con- s e q u e n t l y a r e n o t t r e a t e d h e r e ; and t h e ' e n e r g y c r i s i s ' was s t i l l i n t h e fa- t u r e . Second, t h e recommendations theinselves a r e quoted h e r e i n t!leLr r a t h e r d o g ~ n a t i csummary form and no a t t e m p t i s made t o r e p e a t t h e f u l l e r u n d e r l y i n g d i s c u s s i o n i n t h e body o f t h e e v a l u a t i o n r e p o r t i n o r d e r t o o b t a i n a more b a l a n c e d p r e s e n t a t i o n . Furthermore, t h e d i a l e c t i c j u x t a p o s i t i o n , i n t h i s r e p o r t , o f o r i g i n a l recommendation, Bank r e s p o n s e and r e v i e w o f s u b s e q u e n t Bank a c t i o n , w i t h o u t much r e f e r e n c e t o e a r l i e r t r e n d s , s h o u l d n o t b e t a k e n t o imply a n y t h i n g about t h e c a u s a t i v e r o l e o f t h e e v a l u a t i o n recommendations, which i s n o t a p a r t i c u l a r f o c u s of t h i s r e p o r t . E v a l u a t i o n o f t h e p a s t i s n e v e r more t h a n o n e among marly f a c t o r s and i n f l u e n c e s b e a r i n g i n t h e e v o l u t i o n o f Bank p r o c e d u r e s and p o l i c i e s . B e f o r e t a k i n g up t h e i n d i v i d u a l s u g g e s t i o n s l i s t e d i n t h e e v a l u a - t i o n r e p o r t i t i s w o r t h v e r y b r i e f l y r e c a p i t u l a t i n g i t s main themes. Examin- i n g Colombian development from t h e time o f t h e Bank's f i r s t involvement i n 1948 t h r o u g h 1970, i t w a s found t h a t , d e s p i t e d i f f i c u l t i e s imposed by i n t e r - n a t i o n a l commodity p r i c e g y r a t i o n s , o v e r a l l GNP had grown m o d e r a t e l y w e l l , v e r y l a r g e advances had been made i n t h e i m p l a n t a t i o n o f a b a s i c i n f r a s t r u c - t u r e , and n a t i o n a l economic management had s h a r p l y improved; n o n e t h e l e s s d i s a p p o i n t i n g l y l i t t l e had b e e n made o f t h e c o u n t r y ' s r i c h d o m e s t i c r e s o u r c e s -- l a r g e p o t e n t i a l l a b o r f o r c e , good and v a r i e d l a n d , much t i m b e r and s e v e r a l u s e f u l m i n e r a l s , and s u b s t a n t i a l s a v i n g s p o t e n t i a l -- a n d , n o t u n r e l a t e d t o t h i s , t h e w i d e s p r e a d p o v e r t y e s p e c i a l l y i n r u r a l a r e a s which had s o i m p r e s s e d t h e Bank i n 1949 had i f a n y t h i n g become more s e r i o u s . The Bank had g r e a t l y improved i t s p a r t i c i p a t i o n o v e r t h e y e a r s , making i n c r e a s i n g l y e f f e c t i v e con- t r i b u t i o n s i n t h e form o f w e l l - p l a n n e d i n f r a s t r u c t u r e p r o j e c t s , u s e f u l u r g i n g of measures t o r a i s e p u b l i c r e v e n u e s and e x p o r t e a r n i n g s , s t r e n g t h e n i n g o f de- velopment i n s t i t u t i o n s i n s e c t o r s where i t had b e e n d i r e c t l y i n v o l v e d f o r a c o n s i d e r a b l e p e r i o d , and a s s i s t a n c e i n i n t e r e s t i n g o t h e r c o u n t r i e s i n Colombia's development. An e x c e s s i v e l y s h o r t - r a n g e and l i m i t e d p o i n t o f view o n how t o maximize Colombia's growth, a n o t always s u c c e s s f u l p r e o c c u p a t i o n w i t h avoid- i n g r i s k , undue c o n f i d e n c e i n t h e e f f i c i e n c y o f o p e r a t i o n o f t h e p r i v a t e s e c - t o r i r r e s p e c t i v e o f much o f t h e framework o f p u b l i c p o l i c y , and t h e l i m i t e d r a n g e o f p r o j e c t s which t h e Bank was p r e p a r e d t o c o n s i d ~ rseemed t o h a v e been t h e major f a c t o r s c a u s i n g t h e Bank's e f f o r t s t o b e s o h e a v i l y o r i e n t e d t o t h e modern, urban economy and t h e few i n i t i a t i v e s t a k e n o u t s i d e of t h i s system t o show l i m i t e d p r o s p e c t s o f s u c c e s s . Y e t t h e r e seemed no r e a s o n why t h e t e c h - n i q u e s o f t h e combined p r o j e c t i n v e s t m e n t bank and b r o a d e r development i n s t i - t u t i o n , s o c a r e f u l l y and i m a g i n a t i v e l y developed by t h e Bank o v e r t h e y e a r s , c o u l d n o t now b e a p p l i e d s u c c e s s f u l l y t o c o p i n g w i t h development, e s p e c i a l l y t h e e s s e n t i a l i n s t i t u t i o n a l improvements, i n more d i f f i c u l t a r e a s . d i r e c t l y i n v o l v i n g more o f t h e Colombian p e o p l e , and e s p e c i a l l y o f t h e more needy, and b e t t e r e x p l o i t i n g t h e c o u n t r y ' s d o m e s t i c r e s o u r c e s ; t h e r e were a few s i g n s such a p r o c e s s w a s a l r e a d y s t a r t i n g , f o r i n s t a n c e w i t h new i n i t i a t i v e s i n t h e form of p r o j e c t s i n w a t e r s u p p l y and s e c o n d a r y e d u c a t i o n . Following t h e E x e c u t i v e D i r e c t o r s ' d i s c u s s i o n o f t h e r e p o r t a few of t h e t o p i c s r a i s e d were s e l e c t e d by Bank management a s s u i t a b l e s u b j e c t s f o r p o l i c y p a p e r s , b u t most of t h e recommendations w e r e h a n d l e d by d i r e c t c o r r e s p o n d e n c e and d i s c u s s i o n between t h e o p e r a t i o n s e v a l u a t i o n u n i t and t h e o p e r a t i n g d e p a r t m e n t p r i n c i p a l l y concerned w i t h each m a t t e r . Ey e a r l y 1 9 7 3 a l a r g e measure of agreement had been r e a c h e d a b o u t tile meaning o f t h e recom- mendations and, i n t h e l a r g e m a j o r i t y of c a s e s , about t h e d e s i r a b i l i t y of a c t i o n on them, and t h e o p e r a t i o n s e v a l u a t i o n u n i t had i n hand w r i t t e n res- ponses t o almost a l l tile o r i g i n a l p o i n t s , s t a t i n g e i t h e r what was b e i n g done o r was i n t e n d e d t o b e done ( i n Colombia a n d / o r more g e n e r a l l y ) o r , i n t h e c a s e of t h o s e r e j e c t e d , t h e r e a s o n s t h e r e f o r . S t a r t i n g l a t e i n 1973, b u t mainly i n the m i d d l e o f 19 74, t h e O p e r a t i o n s E v a l u a t i o n Department c a r r i e d o u t a series of i n t e r v i e w s w i t h some s e n i o r Bank o f f i c i a l s and a review o f r e l e v a n t docu- ments produced by t h e Bank o v e r t h e p a s t two y e a r s i n o r d e r t o e s t a b l i s h what had a c t u a l l y been done a b o u t each s p e c i f i c recomqendation. I ,'.- @rrospondZng t o -~& stag& IO Ln U the~ trq&ent of &ha r e c o m e n i $ i i ~ ~ehi, diecu?&iiw;df each poqat M,"ffse foS:laipg p i j is nor- ; m a l l y divtded into eree sectioris: quptatioti (or patkphrsae) af the o r i ~ i n . 1 r e c o m m ~ n d & < i ~a n , note the Bank's reappibe a t the t i m e , and f i n a l l y a review of r e l e v a n t a c t i o n a c t u a l l y t a k e n by t h e Bank. I n one o r two c a s e s where follow-up d i s c u s s i o n l e d t o s i g n i f i c a n t e l a b o r a t i o n by t h e o p e r a t i o n s e v a l u a t i o n u n i t o f i t s o r i g i n a l s t a t s m e n t , t h e s u b s t a n c e of t h i s i s a l s o g i v e n i n a s e p a r a t e paragraph under t h e s e c t i o n p r e s e n t i n g t h e recommendation. E l e s e c t i o n s on t h e r e s p o n s e and t h e review d e a l w i t h t h e Bank o p e r a t i o n s f i r s t i n Calombia and t h e n e l s e w h e r e , wherever b o t h a r e r e l e v a n t . b v e r y i m p o r t a n t p o i n t t o b e a r i n mind i n r e a d i n g t h e r e p o r t con- c t r n s c o s t s of implementation o f recommendations and r e l a t e d t o t h i s , t h e ~ ~ ~ t of u rt hs e O p e r a t i o n s E v a l u a t i o n ~ e p a r t m e n t ' s follow-up assignment. A l - i.l:eugh t h e o p e r a t i o n s e v a l u a t i o n u n i t h a s always t o b e r e s p o n s i b i e i n s u g g e s t - 'ng m y c h , ~ n g e si n Bank p o l i c y o r p r o c e d u r e s , i n t h e s e n s e of keeping budget- :.ry limits r e a s o n a b l y i n mind, i t i s n o t p a r t of i t s r e s p o n s i b i l i t y e i t h e r t o . ~ ; s e s s pri+.-.isely t h e c o s t s o f implementing i t s p r o p o s a l s ( a s p o i n t e d o u t i n ::ha o r i g i . n : ~ le v a l u a t i o n r e p o r t ) o r t o d e c i d e whether implementation has been .:;dequate i n l i g h t of o v e r a l l b u d g e t a r y c o n s t r a i n t s and o t h e r c a l l s on b u d g e t s ; .- ,-,,ese I. a r e c l e a r l y management r e s p o n s i b i l i t i e s . What t h e o p e r a t i o n s e v a l u a - t i o n u n i t must do i s t o r e p o r t o b j e c t i v e l y and i n d e p e n d e n t l y on what h a s :< : u a l l y bikec, d.one o r not. done, r e l a t i v e b o t h t o o r i g i n a l p r o p o s a l and t o . :f.ritentions e x p r e s s e d by r e s p o n d e n t s i n l i g h t of b u d g e t a r y c t j n s t r a i n t s a s t h e y t i e n foresaw them, and p o i n t a g a i n t o m a t t e r s which, i n i t s broad p e r c e p t i o n a s c o l o r e d by i t s p a r t i c u l a r job o f r e t r o s p e c t i v e assessment of Bank opera- t i o n s , meri,t c o n s i d e r a t i o n f o r f u r t h e r e f f o r t . To go beyond t h i s a d v i s o r y r o l e i s c l e a r l y n o t p a r t o f t h e terms o f r e f e r e n c e of a n o p e r a t i o n s e v a l u a - tion unit . The s p e c i f i c recommendations of t h e 1972 r e p o r t can u s e f u l l y be d i v i d e d i n t o f o u r broad c a t e g o r i e s -- G e n e r a l P o l i c y and P r o c e d u r e s , Major S e c t o r s , Miecellaneous P o i n t s about Other S e c t o r s , and P o i n t s S p e c i f i c t o O p e r a t i o n s i n Colombia -- which a r e d e a l t w i t h i n t u r n i n t h e f o l l o w i n g f o u r p a r t s o f t h i s p a p e r . Major m a t t e r s a r e covered i n t h e f i r s t o n e .  11. G e n e r a l P o l i c y and P r o c e d u r e s 2.1 Perspective O r i g i n a l Recommendation-: Underlying i t s o p e r a t i o n s i n a c o u n t r y l i k e ~ o l o r n c i aand o r i e n t i n g them, t h e Bank s h o u l d have a l o n g e r - r u n view t h a n i t h a s had i n t h e p a s t o f how t h e l a n d and p e o p l e c a n b e m o b i l i z e d t o t h e maximum e x t e n t f o r development o r , i n o t h e r words, o f how t h e economy can move t o " f u l l employment" -- o f p e o p l e and a l s o o f n a t u r a l and p h y s i c a l r e s o u r c e s -- and i n d i c a t i n g , f o r i n s t a n c e , w h e t h e r , w i t h t h e l a b o r f o r c e and r e s o u r c e s e x i s t i n g and i n p r o s p e c t , t h i s c a n b e a c h i e v e d by a c c e l e r a t e d urbanization, with high technology, o r whether t h e country should r a t h e r p u r s u e a more g r a d u a l p a t h , emphasizing t h e u s e o f t e c h n o l o g i e s (and r e l a t e d incentives) appropriate t o existing r e l a t i v e a v a i l a b i l i t i e s of land, labor and c a p i t a l . I m p o r t a n t e l e m e n t s i n t h i s o v e r a l l framework a r e m a t t e r s such a s demographic t r e n d s , employment, r u r a l - u r b a n m i g r a t i o n , c o s t s a n d produc- t i v i t y o f i n f r a s t r u c t u r e i n towns o f d i f f e r e n t s i z e s , t h e f a c t o r s a f f e c t i n g p a t t e r n s o f urban and r u r a l development, t h e r o l e and e f f e c t i v e n e s s o f i n - s t i t u t i o n s i n d i f f e r e n t s e c t o r s and r e g i o n s , a l t e r n a t i v e p r o d u c t i o n techno- l o g i e s and adequacy of t e c h n o l o g i c a l r e s e a r c h . These i s s u e s c l e a r l y h a v e a d i r e c t b e a r i n g on t h e s e l e c t i o n and d e s i g n o f t h e k i n d o f long-run develop- ment p r o j e c t s w i t h which t h e Bank is p r i n c i p a l l y concerned. What i s needed is n o t s o much any e l a b o r a t e model a s maintenance o f a rough s t r a t e g y - framework showing i n a b r o a d way how Colombia's r e s o u r c e s c a n b e s t b e com- bined now and i n t h e f u t u r e , a l l o w i n g f o r a n t i c i p a t e d growth o f l a b o r f o r c e , s a v i n g s c a p a b i l i t y and p u b l i c r e v e n u e s , e t c . and i n c o r p o r a t i n g up-to-date information about c o s t s of job-creation, i n f r a s t r u c t u r e requirements i n towns of d i f f e r e n t s i z e s , p r o d u c t i v i t i e s i n d i f f e r e n t j o b s and p l a c e s , e t c . Bank Response: T h e Bank s u g g e s t e d t h a t t h i s t y p e o f work c o u l d o n l y be done f o r Colombia i n t h e c o n t e x t o f a major economic m i s s i o n such as t h e one s c h e d u l e d f o r 1975 ( f i v e y e a r s a f t e r t h e major 1970 m i s s i o n and r e p o r t ) , b u t i t n o n e t h e l e s s i n d i c a t e d t h a t a n e f f o r t would b e made t o i n i t i a t e t h e proposed framework i n t h e c o u r s e of an economic m i s s i o n planned f o r 1973. Review of A c t i o n : O t h e r c a l l s o n s t a f f t i m e , preoccupying s h o r t - term f a c t o r s i n Colorr~bia's economic development and d i f f i c u l t i e s of s e c u r i n g t h e a d d i t i o n a l economic e x p e r t i s e t h a t had been e x p e c t e d p r e v e n t e d a s t a r t on t h i s f o r Colombia i n 1973, and t h e m a j o r economic m i s s i o n planned f o r 1975 has been postponed t o 1977, The Colombian Governments' long-term development s t r a t e g y has been i n f l u x o v e r t h e l a s t few y e a r s , and Bank e f f o r t on t h e framework proposed would s t i l l seem a w o r t h w h i l e endeavor. Taking a b r o a d e r v i e w o f t h e Bank's work r h e r e i s no doubt t h a t major economic m i s s i o n s have shown a n i n c r e a s i n g tendency toward i n c l u s i o n i n t h e i r scope of a longer-run p e r s p e c t i v e , d e a l i n g with m a t t e r s l i k e urbani- z a t i o n t r e n d s and u n d e r u t i l i z e d n a t u r a l r e s o u r c e s and t r y i n g t o i d e n t i f y long-run employment p r o s p e c t s and p o s s i b l e r e s o u r c e c o n s t r a i n t s (e.g. water, o r s k i l l e c i manpower). Somet-imes t h e a n a l y s i s t e n d s t o b e somewhat mechanical ( f o r i n s t a n c e s h o v i n g no more t h a n t h a t , o t h e r t h i n g s b e i n g r q u a l , f u l l employment o f t h e p r o s p e c t i v e l a b o r f o r c e by some f u t u r e t a r g e t d a t e would r e q u i r e a s u b s t a n t i a l l y g r e a t e r growth o f G?JP t h a n i s a c t u a l l y e x p e c t e d o r even a s a c r i f i c e o f G?IP growth f o r e q u i t y ) and t o o much c o n f i n e d t o t h e p u r e l y macroeconomic l e v e l , w i t h l i t t . l e o r no i n d i c a t i o n o f a c o h e r e n t s t . r a t e g y f o r a c t u a l l y combining resourcc2s o p t i ~ ~ a l l r e v e n o f what t h e oy i n l p l i c a t . i o n s a r e f o r development p r o j e c t s . And t h e proposed a n a l y s e s of t h e f i n a n c i a l f e a s i b i l i t y and c o m p a r a t i v e a d v a n t a g e of a l t e r n a t i v e p o s s i b l e p a t t e r n s o f s e c t o r a l employment, and o f d i s t r i b u t i o n o f p o p u l a t i o n by towns o f d i f f e r e n t s i z e s , a r e seldom d o n e . . Lack o f good d a t a on m a t t e r s s u c h a.s breakdown o f l a b o r f o r c e and i n v e s t m e n t by s e c t o r and c o s t s o f p e r c a p i t a i n f r a s t r u c t u r e by s i z e o f s e t t l e m e n t v e r y o f t e n p r e v e n t any r e f i n e d c a l c u l a - t i o n s , a l t h o u g h supplementirig p r e s e n t q u a l i t a t i v e judgments w i t h some i l l u s - t r a t i v e f i g u r i n g would a l s o he.lp t o i n d u c e g e n e r a t i o n o f t h e inore d e t a i l e d i n f o r m a t i o n needed. However a v e r y good (and n o t u n i q u e ) example o f thorough t r e a t m e n t of s t r a t e g i c i s s u e s i s a m a j o r economic r e p o r t . i s s u e d i n J a n u a r y 1974, b a s e d on a m i s s i o n i n M a r c h / A p r i l 1973, on Kenya, a c o u n t r y where open unemployment i s less i m p o r t a n t t h a n w i d e s p r e a d p o v e r t y i n l o w - p r o d u c t i v i t y a g r i c u l t u r e . C o n c e n t r a t i n g on p r o s p e c t s f o r t h e 19 70s, u s i n g p r o j e c t i o n s t h r o u g h 1985, t h e m i s s i o n showed t h a t c o n t i n u a t i o n o f p a s t t r e n d s , a t a somewhat f a s t e r p a c e , was i n f e a s i b l e i n t e r m s o f t h e c a p i t a l i m p o r t r e q u i r e n ~ e n t s i t would impose and u n a c c e p t a b l e t o t h e c o u n t r y i n terms o f t h e v e r y modest i n c r e a s e i n incomes o f t h e p o o r e s t ( a s m a l l f r a c t i o n o f t h e n a t i o n a l a v e r a g e i n c r e a s e ) t h a t i t would p e r m i t . A f t e r a n a l y z i r l g v a r i o u s a p p r o a c h e s and r e j e c t i n g t h e n , i t t h e n s u g g e s t e d t h e main dimensions o f an a l t e r n a t i v e , more e f f i c i e n t and more e q u i t a b l e s t r a t e g y -- s m a l l deval.uation , s u b s t a n t i a ' l i n c r e a s e i n bor:row- i n g and l e n d i n g i n t e r e s t - r a t e s , a b o l i t i o n o f c e r t a i n t a x i n c e n t i v e s t o c a p i t a l investruen t ' , a f e a s i b l e i n c r t a s e i n t h e p r o p o r t i o n o f i n v e s t m e n t de- v o t e d t c a g r i c u l t u r e i n a r e a s o f mkdi.um a s w e l l a s h i g h p o t e n t i a l and t o o t h e r r e s o u r = & - b a s e d p r o j e c t s -- and showed how measures o f t h i s s o r t could be e x p e c t e d t o g e n e r a t e s u b s t a n t i a l a d d i t i o n a l employment and t o raise t h e incomes o f t h e r u r a l poor a t a r a t e much c l o s e r t o t h e n a t i o n a l a v e r a g e . The ana1vsi.s Is backed up with d i s c u s s i o n o f t h e p r a c t i c a l f e a s i b i l i t y and i m p l i c a t i o n s of t h e b r o a d steps s u g g e s t t d , o f t h e i n s t i t u t i o n a l mechanisms (for instance for supporting s ~ a l p l r o d u c e r s i n a g r i c u l t u r e and i r t d u s t r y ) . t h a t need t o b e s t r e n g t h e n e d , a n d o f how t h e f i n d i n g s r e l a t e t o some o f t h e b r o a d a r e a s i n which t h e Bank i s d i r e c t l y i n v o l v e d i n i n v e s t m e n t deci-. s i o n s ( e .g. t r u n k higllwavs and f o r m a l e d u c a t i o n , which a r e shown t o have deve1ope.d e x c e s s i v e momentum). Key f a c t o r s a s s i s t i n g t h e s u c c e s s o f t h i s economic r e p o r t i n g e f f o r t a p p e a r t c h a v e b e e n e x p l i c i t r e s e r v a t i o n o f some 3-4 months ' p r e p a r a t i o n t i m e b e f o r e t h e m i s s i o n l e f t f o r t h e c o u n t r y , s u p p l e - mented by t h e a v a i l a b i l i t y o f a r e c e n t m a j o r I L O Employment M i s s i o n r e p o r t g a t h e r i n g and a n a l y z i n g much o f t h e b a s i c i n f o r m a t i o n r e q u i r e d . Shortage o f country economist t i m e , e s p e c i a l l y f o r t h i s kind of work r e l a t i v e t o w r i t i n g of u p d a t i n g economic r e p o r t s , p r o d u c t i o n o f P r e s i d e n t ' s R e p o r t s t o accompany l o a n documents and r o u t i n e d a t a p r e p a r a t i o n , seems t o b e a m a j o r o b s t a c l e t o i t s e x p a n s i o n more b r o a d l y . However, a comprehensive  review o f country economic work and i t s u s e s by t h e r e s p o n s i b l e p o l i c y d e p a r t - ment a t t h e end of 1974 h a s r e s u l t e d i n t e n t a t i v e p r o p o s a l s t o c u t t h e r o u t i n e l o a d s u b s t a n t i a l l y , p r e c i s e l y i n o r d e r t o e n a b l e more e f f o r t t o b e devoted t o t h e more i n t e r e s t i n g , as w e l l a s more r e l e v a n t , longer-term development is- s u e s . The t i m e l i b e r a t e d could probably b e more e f f i c i e n t l y used i f some suggested a l t e r n a t i v e frameworks could b e p r e p a r e d , t o a s s i s t t h e economist i n t h e a r e a of developing an i n t e g r a t e d long-run p e r s p e c t i v e f o r h e l p i n Bank (and o t h e r aid-agency) o p e r a t i o n s i n a country. Experimentation on an i n d i - vidual-country b a s i s may now have g o t s u f f i c i e n t l y f a r t h a t i t can be s ~ i r ~ s e d - ed by p r e p a r a t i o n , on t h e b a s i s o f work done i n s i d e and o u t s i d e t h e Bank t o d a t e , o f such a l t e r n a t i v e p o s s i b l e frameworks i n t e g r a t i n g t h e v a r i o u s dimen- s i o n s t h a t need t o b e considered (some of c o u r s e o f much g r e a t e r r e l e v a n c e t o some c o u n t r i e s t h a n t o o t h e r s ) and showing how t h e y r e l a t e back t o p r o j e c t d e c i s i o n s , n o t o n l y i n t h e form o f "shadow p r i c e s " b u t a l s o a s p h y s i c a l , r e g i o n a l and i n s t i t u t i o n a l d e s i d e r a t a . G r e a t l y i n c r e a s e d a t t e n t i o n appears t o have been given o v e r t h e l a s t two y e a r s t o t h e s u b j e c t o f p r o j e c t r e p l i c - a b i l i t y , e s p e c i a l l y from t h e p o i n t o f view o f c o s t s p e r p a r t i c i p a n t / b e n e f i - c i a r y , b u t i t i s worth c o n s i d e r a t i o n whether country economic a n a l y s i s should n o t correspondingly g i v e more emphasis t o c a l c u l a t i o n o f t h e investment c o s t s of job c r e a t i o n , b o t h o v e r a l l and i n d i f f e r e n t s e c t o r s and p a r t s o f p a r t i c u l a r s e c t o r s , t o provide a h e l p f u l background f o r p r o j e c t assessment. 2.2 Land Reform O r i g i n a l Recommendation: The Bank should make some e s t i m a t e s o f t h e f e a s i b l e combination of p o l i c i e s which could cope w i t h r u r a l poverty i n Colombia w i t h i n a g e n e r a t i o n . I f i t i s determined t h a t t h e implementation o f a l a n d reform is one of t h e major p o l i c i e s r e q u i r e d , then t h e Bank should c l e a r l y e x p r e s s t h a t i t f a v o r s such a p o l i c y , and i t should demonstrate t h a t i t could e f f e c t i v e l y c o n t r i b u t e i n i t s implementation. Assuming t h a t t h e e f f e c t i v e implementation o f a l a n d reform program would s i g n i f i c a n t l y improve Colombian development, t h e Bank should c o n c e n t r a t e i t s c o n t r i b u t i o n t o t h e a g r i c u l t u r a l s e c t o r , p r i o r t o t h e e f f e c t i v e implementation of t h i s p o l i c y , on t h e f i n a n c i n g of s m a l l f a n n e r s c u l t i v a t i n g h i g h v a l u e c r o p s , f o r example f r u i t s , f l o w e r s and v e g e t a b l e s f o r e x p o r t . Bank Response: While e x p r e s s i n g s k e p t i c i s m t h a t any combination of p o l i c i e s would e l i m i n a t e r u r a l poverty w i t h i n a g e n e r a t i o n and maintain- i n g t h a t continued l e n d i n g i n s u p p o r t of l a r g e r farmers was n e c e s s a r y t o meet production and e x p o r t o b j e c t i v e s , t h e Bank d i d d e c i d e t o send a m i s s i o n , d e s p i t e s t a f f i n g d i f f i c u l t i e s , t o i n j t i a t e a review of l a n d reform i s s u e s i n Colonlbia and a s e a r c h f o r ways t o a s s i s t small-farm development. I n addi- t i o n , i t was decided t o undzrtake a g e n e r a l reassessment of t h e Bank's a t t i t u d e toward land refornl and t o p r e p a r e a p o l i c y paper on t h e s u b j e c t . Review of Action: I n i t s r e p o r t completed e a r l y F n 1973 a f t e r a thorough review of t h e a g r i c u l t u r a l s e c t o r t h e m i s s i o n t o Colombia con- cluded, i n l i n e with t h e e v a l u a t i o n r e p o r t , t h a t t h e s i z e d i s t r i b u t i o n of farms was t h e n as unequal a s i t had been t e n y e a r s b e f o r e , t h a t s u b s t a n t i a l a r e a s of good land i n l a r g e farms were u n d e r e x p l o i t e d , t h a t about 800,000 poor r u r a l f a m i l i e s were i n d i r e need of a s s i s t a n c e , and t h a t a 5-6% annual r a t e of growth o f a g r i c u l t u r a l o u t p u t , needed t o improve t h e i r l o t a s w e l l a s t o m e e t p r o d u c t i o n and e x p o r t e a r n i n g r e q u i r e m e n t s , " w i l l r e q u i r e changes i n o r g a r l i z a t i o n a l forms and a g r i c u l t u r a l t e c h n i q u e s , d i v i s i o n o f l a t i f u n d i a , c o n s o l i d a t i o n o f m i n i f u n d i a , r a t i o n a l i z a t i o n o f l a n d u s e , a j u d i c i o u s ap- proach t o m e c h a n i z a t i o n , and a s h i f t i n c r o p n i x toward h i g h e r - v a l u e and more l a b o r - i n t e n s i v e commodities". The r e p o r t made many s p e c i f i c recommenda- t i o n s with r e g a r d t o a g r i c u l t u r a l p l a n n i n g and p o l i c y and urged deemphasis of i r r i g a t i o n and c o l o n i z a t i o n programs t h a t r e a c h o n l y r e l a t i v e l y s m a l l nuxbers of b e n e f i c i a r i e s i n f a v o r o f l a n d d i s t r i b u t i o n and s u p e r v i s e d c r e d i t schemes t h a t can b e m u l t i p l i e d t o h e l p hundreds o f thousands o f farm f a m i l i e s . It s a i d t h a t " t h e prime c r i t e r i o n f o r a n expanded f o r e i g n a s s i s t a n c e e f f o r t ougllt t o be t h a t f a v o r e d programs b e s u i t a b l e f o r r e p l i c a t i o n on a grand scale .... I f a s p e c i f i c program p r o p o s a l r e q u i r e s s u c h a h i g h expendi- t u r e of f i n a n c i a l a n d / o r managerial r e s o u r c e s t h a t i t could n o t b e m u l t i - p l i e d t o r e a c h t e n s o f thousands o f needy f a m i l i e s t h i s s h o u l d normally b e grounds f o r r e j e c t i o n " . The r e p o r t was welcomed by t h e Colombian a u t h o r i t i e s , b u t a p p a r e n t - l y l i t t l e o r no a c t i o n was t a k e n . The l a n d reform l e g i s l a t i o n , whose r e v i - s i o n e a r l y i n 1973 was c i t e d w i t h a p p r o v a l by t h e m i s s i o n , h a s y e t t o b e ap- plied with vigor. I n p a r t i a l contrast t o the evaluation r e p o r t ' s suggestion t h a t f i n a n c i a l a s s i s t a n c e t o Colombian a g r i c u l t u r e should b e s e v e r e l y l i m i t e d u n t i l a more e f f i c i e n t t e n u r e s t r u c t u r e began t o m a t e r i a l i z e , t h e Bank h a s d e t e m i n e d t h a t it should nonetheless a s s i s t o t h e r p r o j e c t s , e s p e c i a l l y those o r i e n t e d t o s m a l l e r f a r m e r s . It h a s t r i e d t o h e l p by working on a second :.tage t o a c o l o n i z a t i o n p r o j e c t e a r l i e r f i n a n c e d and on a n i r r i g a t i o n l d r a i n - age r e h i t b i l i t a t i o n program. I / C a p i t a l c o s t s p e r f a r m e r b e n e f i t t e d a r e esti- clated t o b e less t h a n $10,005 i n b o t h c a s e s , and s p e c i a l a t t e n t i o n h a s been g i v e n t o arrangements f o r p a r t i a l r e c o v e r y o f c o s t s , e s p e c i a l l y from w e a l t h i e r b e n e f i c k a r i e s , b u t comparison o f c o s t s w i t h t h e investment t h a t Colombia may he a b l e t o a f f o r d o v e r a l l p e r new job c r e a t e d i n t h e economy, 21 t o a s s u r e l a r g e - s c a l e r e p l i c a b i l i t y , does n o t seem t o have been done. 1 ; the f a l l of 1973 t h e Bank was a b l e t o send a m i s s i o n under t h e FAOlI'3RD Cooperative! Pro- gram t o develop a g e n e r a l n a t i o n a l program of i n t e g r a t e d r u r a l development and t o i d e n t i f y a f i r s t - p h a s e p r o j e c t f o r e a r l y f i n a n c i n g . The m i s s i o n had more d i f f i c u l t y t h a n e x p e c t e d i n o u t l i n i n g a n a p p r o p r i a t e program, and prepa- r a t i o n of a f i r s t p r o j e c t t h a t t h e Bank c o u l d f i n a n c e i s e x p e c t e d t o t a k e any- way u n t i l M 1977. Except i n c i d e n t a l l y and on a v e r y s m a l l - s c a l e i n c o n n i x t i o n w i t h t h e p r e - e x i s t i n g A t l a n t i c 0 p r o j e c t , t h e s u g g e s t i o n o f t h e e v a l u a t i o n re- p o r t t h a t t h e Bank might h e l p develop p r o d u c t i o n of f r u i t s and v e g e t a b l e s by s m a l l f a r m e r s h a s n o t been pursued by t h e Bank ( a p p a r e n t l y mainly due t o d i f - f i c u l t y q o f o b t a i n i n g n e c e s s a r y s p e c i a l i s t manpower a n d , i n t h e absence o f t h e 11 - Loans were e v e n t u a l l y made f o r b o t h p r o j e c t s i n 1975: Loan 1118-CO of $19.5 m i l l i o n of J u n e 1975 f o r t h e Caqueta R u r a l S e t t l e m e n t P r o j e c t Phase I1 (about 3,000 farmers) and 3 loan of $21.0 m i l l i o n approved i n June 1 9 i 5 f o r t h e Cordoba 2 Drainage and A g r i c u l t u r a l Development P r o j e c t (about 3,800 f a r m e r s , of whom h a l f a r e l a n d reform b e n e f i c i a r i e s ) . 2/ - See Bank O p e r a t i o n s i n Colombia: An E v a l u a t i o n (May 23, 1972) p. 13. n e c e s s a r y rcarket s t u d i e s , d o u b t s about how w i d e l y r e p l i c a b l t . s u c h an e f f o r t c o u l d b e ) , a l t h o u g h t h e a g r i c u l t u r a l m i s s i o n d i d p o i n t o u t t h a t t h e s e were c r o p s whose p r o d u c t i o n c o u l d b e w e l l h a n d l e d by s m a l l Earme-rs. Piore g e n e r a l l y t h e Rank, r e c o g n i z i n g t h e r e l e v a n c e of l a n d reform t o many ttivugh n o t a l l d ~ v . A o p i u gc o u n t r i e s , h a s r e a s s e s s e d i t s own a t t i t u d e and produced f o r t h e f i r s t t i m e a n e x p l i c i t s t a t e m e n t o f p o l i c y which was d i s c u s s e d by r h e E x e c u t i v e D i r e c t o r s i n J u n e 1 9 7 4 . C o n s i d e r a b l e e v i d e n c e was f o u n d , from many s t u d i e s , t h a t y i e l d s p e r h e c t a r e were h i g h e r on s m a l l t h a n on l a r g e farms. Recent e x p e r i e n c e s u g g e s t e d f o u r key l e s s o n s -- that s t r o n g p o l i t i c a l w i l l i s a p r e c o n d i t i o n t o s u c c e s s , t h a t b e n e f i c i a r i e s must b e o r g a n i z e d i n permanent p r e s s u r e g r o u p s , t h a t s e r v i c e s t o farms need t o b e a d j u s t e d t o a new t e n u r e s t r u c t u r e and t h a t t h e b e n e f i t s c o n t i n u e t o a c c r u e g r a d u a l l y o v e r many y e a r s . Key p o l i c y c o n c l u s i o n s were t h a t : - The Bank s h o u l d i n t e n s i f y e f f o r t s t h r o u g h s e c t o r and economic work t o i d e n t i f y , and draw a t t e n t i o n t o , t h e need and o p p o r t u n i - t i e s f o r l a n d r e f o r m and i t s h o u l d t r y t o e s t a b l i s h a d i a l o g u e w i t h Governments o n t h i s b a s i s , e v e n where t h e p o l i t i c a l w i l l was l a c k i n g . It was p o i n t e d o u t t h a t many Bank r e p o r t s had n o t i n f a c t covered t h e s e i s s u e s and s o a p p r o p r i a t e g u i d e l i n e s were being developed. - The Rank s h o u l d g i v e p r i o r i t y i n a g r i c u l t u r a l l e n d i n g t o c o u n t r i e s p u r s u i n g broad-based a g r i c u l t u r a l s t r a t e g i e s d i r e c t e d toward t h e promotion o f a d e q u a t e new employment o p p o r t u n i t i e s w i t h s p e c i a l a t t e n t i o n t o t h e p o o r e s t g r o u p s and i t s h o u l d s u p p o r t l a n d reform p o l i c i e s and programs d e s i g n e d t o f u r t h e r ' t h e s e o b j e c t i v e s . - The Bank s h o u l d s u p p o r t p r o j e c t s where l a n d r i g h t s were such t h a t a major s h a r e of t h e b e n e f i t s w i l l a c c r u e t o h i g h income groups o n l y i f i n c r e a s e s i n o u t p u t and improvements i n t h e b a l a n c e o f payments were o v e r r i d i n g c o n s i d e r a t i o n s a n d , i n t h e s e c a s e s , i t s h o u l d s p e c i a l l y examine f i s c a l a r r a n g e m e n t s t o v e r i f y t h a t a r e a s o n a b l e s h a r e o f b e n e f i t s would a c c r u e t o Government. The Bank h a s d i r e c t l y s u p p o r t e d a few l a n d r e f o r m p r o j e c t s i n t h e p a s t -- p r i n c i p a l l y c o o p e r a t i v e s i n T u n i s i a , where t h e program r a n i n t o d i f f i c u l t i e s from e x c e s s i v e s p e e d a n d , i n a minor way, i n Malawi where t h e Bank a s s i s t e d l a n d r e g i s t r a t i o n and t i t l i n g . But a l a r g e number o f p r o j e c t s have been o r i e n t e d h e a v i l y t o t h e beneficiaries o f l a n d r e f o r m , a n d t h e Bank h a s been giving i n c r e a s i n g a t t e n t i o n t o t h e d i s t r i b u t i o n of b e n e f i t s i n such p r o j e c t s and t h e a c t u a l a p p l i c a t i o n o f t h e l a n d reform l e g i s l a t i o n . I n o t h e r c a s e s i t h a s a s s i s t e d needed c o n s o l i J a t i o n and r a t i o n a l i z a t i o n f o l l o w i n g l a n d reform (as i n I r a n and S y r i a ) . And i n a few c o u n t r i e s , p a r t i c u l a r l y E t h i o p i a and Morocco, i t h a s been making m a j o r e f f o r t s t o convince t h t a u t h o r i t i e s o f t h e need f o r a c t i o n on l a n d t e n u r e matters t o e a s e development; r e c e n t l y , i n t h e l a t t e r c o u n t r y , i t proved p o s s i b l e t o a g r e e on a s p e c i f i c t i m e t a b l e f o r d i s - t r i b u t i o n o f l a n d i n a p r o j e c t b e i n g f i n a n c e d w i t h Bank s u p p o r t t o t h e p o o r e s t s n i a l l h o l d e r s and l a n d l e s s f a m i l i e s . 2.3 C r e d i t f o r Small Farmers . --- O r i g i n a l Recommendation: The Bank s h o u l d s e e k t o d e v e l o p and a s s i s t programs and i n s t i t u t i o n s which c o u l d promote more employment- g e n e r a t i n g a g r i c u l t u r e and a s s i s t s n a l l f a r m e r s . P r i n c i p a l commodities a f f e c t e d by p r e v i o u s Bank p r o j e c t s h a d r e l a t i v e l y low employment g e n e r a t i n g c o e f f i c i e n t s , b u t Colombia had s i g n i f i c a n t p o t e n t i a l f o r e x p o r t i n g p a r t i c u - l a r l y l a b o r - i n t e n s i v e c r o p s s u c h as v e g e t a b l e s , f r u i t s and f l o w e r s . A n agency s u c h a s C a j a A r r a r i a o r IPiCOM s h o u l d b e h e l p e d t o become a n e f f e c - t i v e i n t e r m e d i a r y s e r v i c i n g t h e s n a l l f a r m e r s and managing t h e m a r k e t i n g and a g r i c u l t u r a l p r o c e s s i n g n e t w o r k r e q u i r e d t o s u s t a i n t h e p r o d u c t i o n o f such h i g h - v a l u e c r o p s . Bank Response: The Bank a g r e e d t h a t t h e f l o w o f c r e d i t t o s m a l l f a r m e r s i n Colombia needed t o b e i n c r e a s e d and i t i n d i c a t e d a n i n t e n t i o n t o d e v o t e more t i m e t o i d e n t i f i c a t i o n and p r e p a r a t i o n o f a p p r o p r i a t e p r o j e c t s . Bank management a l s o i d e n t i f i e d t h i s t o p i c i n t h e r e p o r t a s o n e r e q u i r i n g more g e n e r a l t r e a t m e n t i n a p o l i c y p a p e r . Review o f A c t i o n : The a g r i c u l t u r e s e c t o r m i s s i o n t o Colombia c a r r i e d o u t a f u l l r e v i e w o f t h e c r e d i t s i t u a t i o n and found t h a t some 70-75% o f f a r m e r s w i t h more t h a n 20 h e c t a r e s were r e c e i v i n g i n s t i t u t i o n a l c r e d i t , compartd w i t h l i t t l e more t h a n a t h i r d o f t h o s e w i t h l e s s t h a n 20 h e c t a r e s and c o n s i d e r a b l y less o f t h o s e w i t h less t h a n 1 0 h e c t a r e s . It s u g g e s t e d t h a t a s u b s t a n t i a l rise i n i n t e r e s t r a t e s o n a l l a g r i c u l t u r a l l o a n s , t o l e v e l s n e a r e r t h o s e a p p l i e d o u t s i d e a g r i c u l t u r e , would s i g n i f i c a n t l y i n c r e a s e t h e a v a i l a b i l i t y o f c r e d i t t o s m a l l f a r m e r s , who c o u l d a l s o b e a s s i s t e d b e t t e r t h a n t h e y t h e n were by a p p l y i n g t h e s u b s i d i e s t o e x t e n s i o n s e r v i c e s o r i n - puts. A s r e g a r d s Bank f i n a n c i a l a s s i s t a n c e t h e s p e c i f i c s u g g e s t i o n s of t h e e v a l u a t i o n r e p o r t h a v e n o t been t a k e n u p , b u t some l e n d i n g f o r a g r i c u l t u r a l c r e d i t t o a few s m a l l e r f a r n i e r s i s e n v i s a g e d a s p a r t o f t h e a g r i c u l t u r a l p r o j - e c t s mentioned i n t h e p r e c e d i n g s e c t i o n . The Bank h a s , however, d e v o t e d c o n s i d e r a b l e t h o u g h t t o t h e s u b j e c t of c r e d i t f o r s m a l l f a r m e r s and produced a p o l i c y p a p e r which was d i s c u s s e d by t h e X x e c u t i v e D i r e c t o r s i n May 1974 and r e a c h e d a number o f i m p o r t a n t con- clusions : - Rank a n d I D A l e n d i n g f o r a g r i c u l t u r a l c r e d i t f o r f a r m e r s w i t h less t h a n 5 h e c t a r e s would i n c r e a s e from a b o u t $250 m i l l i o n f o r o n e p e r c e n t o f t h e 100 m i l l i o n s m a l l f a r m e r s i n d e v e l o p i n g c o u n t r i e s i n 1969-73 (25% o f t o t a l l e n d i n g f o r a g r i c u l t u r a l c r e d i t ) t o a b o u t $650 m i l l i o n i n 1974-78 (50% o f l e n d i n g en- visaged f o r a g r i c u l t u r a l c r e d i t ) . - C r e d i t would b e made a v a i l a b l e f o r p r o d u c t i v e p r o j e c t s , i n - cluding appropriate support f o r purchase of current inputs, which t h e Bank h a s n o t o f t e n f i n a n c e d i n t h e p a s t .  - E f f o r t s would be made t o e x p e r i m e n t w i t h s i m p l i f i e d proced- u r e s , c r o p l i e n s , conimunity r e s p o n s i b i l i t y , package l e n d i n g , e t c . i n o r d e r t o reduce t h e serious c o s t obstacle t o effec- t i v e provision of c r e d i t t o small farmers. - The Bank would a d o p t a more f l e x i b l e a t t i t u d e on i n t e r e s t r a t e s f o r l o a n s t o s m a l l f a r m e r s , i n l i g h t of a c o u n t r y ' s o v e r a l l i n t e r e s t r a t e and p r i c e s t r u c t u r e a n d t h e s p e c i f i c o b j e c t i v e s o f t h e p r o j e c t p r o p o s e d , b u t t h e aim s h o u l d b e a n i n t e r e s t r a t e r e f l e c t i n g t h e c o s t o f c a p i t a l and o f p r o v i d i n g i t , n o r m a l l y i n t h e r a n g e o f 15-20% p.a. i n r e a l t e r m s . - R e p o r t i n g and e v a l u a t i o n s y s t e m s would b e i n c o r p o r a t e d , a t l e a s t i n l a r g e r r u r a l c r e d i t p r o j e c t s , t o make i t p o s s i b l e t o know what e f f e c t t h e y w e r e h a v i n g a t t h e farm l e v e l . The 51 l o a n s and c r e d i t s , a g g r e g a t i n g j u s t u n d e r $1 b i l l i o n , which w e r e ap- proved i n FYI974 f o r a g r i c u l t u r e and r u r a l development were e x p e c t e d t o assist more t h a n 1.5 m i l l i o n f a r m e r s i n 42 c o u n t r i e s , most o f them small f a r m e r s and most with credit. 2.4 Development Impact O r i g i n a l Recommendation: J u s t as p r o j e c t s s h o u l d b e s e l e c t e d w i t h a view t o maximizing t h e Bank's development i m p a c t , s o more a t t e n t i o n s h o u l d b e g i v e n t h a n i n t h e p a s t t o e n s u r i n g t h a t t h e p r o j e c t s chosen w i l l h a v e a s g r e a t a development impact a s t h e y c a n have. T h i s a p p l i e s p a r t i c u l a r l y t o i n f r a s t r u c t u r e p r o j e c t s and i t r e q u i r e s l o o k i n g a t unemployment a n d u n u t i l i z e d o r u n d e r u t i l i z e d r e s o u r c e s i n t h e a r e a t o b e a f f e c t e d by t h e p r o j e c t and a t t h e i n s t i t u t i o n a l mechanisms f o r s e c u r i n g t h e p r o j e c t ' s p o t e n t i a l c o n t r i b u - t i o n t o m o b i l i z a t i o n of t h e s e r e s o u r c e s . I n power f o r i n s t a n c e , a t t e n t i o n s h o u l d b e g i v e n t o u t i l i t y p o l i c i e s r e g a r d i n g new c o n n e c t i o n s and s y s t e m ex- t e n s i o n s , p o s s i b l e c o n s t r a i n t s t o r e a l i z a t i o n o f development b e n e f i t s imposed by r i g i d i t y i n t h e t a r i f f s t r u c t u r e o r by d e f i c i e n c i e s i n m u n i c i p a l p l a n n i n g and p o s s i b l e need f o r s e l f - h e l p e f f o r t s ( e . g . , i n Colombia, under Accion Comunal a u s p i c e s ) f o r d i s t r i b u t i o n system e x t e n s i o n . I n t r a n s p o r t i n f r a - s t r u c t u r e , a t t e n t i o n s h o u l d b e g i v e n t o t h e development p o t e n t i a l o f t h e a r e a t r a v e r s e d and t h e adequacy o f p l a n s , p u b l i c a g e n c i e s , and o t h e r i n f r a s t r u c t u r e i n t h e a r e a f o r o b t a i n i n g t h e most p o s i t i v e impact p o s s i b l e from t h e highway o r r a i l w a y ; t h i s may mean a t t e n t i o n t o f e e d e r r o a d p l a n s , a g r i c u l t u r a l e x t e n - s i o n a n d m a r k e t i n g s e r v i c e s , r e g i o n a l development p l a n s , c o n s e r v a t i o n p r a c - t i c e s , . c o m p e t i t i v e n e s s of b u s and f r e i g h t s e r v i c e s -- o r e v e n t o a d e q u a c y o f m u n i c i p a l w a t e r s u p p l y s e r v i c e s , which t u r n e d o u t t o h a v e b e e n a significant o b s t a c l e t o r e a l i z a t i o n o f r e g i o n a l development b e n e f i t s i n s o many c s e s studied. - 11 Comparable l e n d i n g i n N 1975 amounted t o a b o u t $1.8 b i l l i o n f o r a b o u t 70 p r o j e c t s , of which more t h a n o n e h a l f was f o r r u r a l development and was e x p e c t e d t o b e n e f i t some 3.0 m i l l i o n f a r m e r s .  Bank - - Response: The Bank e x p r e s s e d a l a r g e measure o f agreement w i t h the ; e p o i n t s and r e f e r r e d t o r e l a t e d r e s e a r c h t h e n underway o r p l a n n e d and t o s e c t o r g u i d e l i n e s t h a t i t was p l a n n e d t o i s s u e . -Re.viov ---- . .---- o f Action: P a r t i c u l a r l y u s e f u l r e s e a r c h h a s i n f a c t been <!oneon t h e economics o f r u r a l e l e c t r i f i c a t i o n , m a i n l y on t h e b a s i s of a c a s e s t u d y i n E l S a l v a d o r . The r e s e a r c h shows t h a t r u r a l e l e c t r i f i c a t i o n c a n o f t e n b e e c o n o m i c a l l y w o r t h w h i l e and t h a t much depends o n t h e r e s p o n s e of demand t o t h e p r o v i s i o n o f power s u p p l y , o r i n o t h e r words t o t h e p a c e o f growth oi: denand t h a t c a n b e e x p e c t e d . B e n e f i t s which may n o t b e r e f l e c t e d I n r:eveuIles o f t h e power s u p p l y company a r e p r i n c i p a l l y f u e l c o s t s a v i n g s t o vsr.:rs, i.r!creases i n p r o d u c t i o n made p o s s i b l e by e l e c t r i f i c a t i . o n and t h e v a l u e t o ? o v e r consumers of improvements i n q u a l i t y o f e n e r g y s u p p l y ; i t i s g e n e r a l - l y t o o J . i f f i c u f i r i:o e s t i m a t e t h e s e a c c u r a t e l y f o r r e s i d e n t i a l consumers,, b u t i';ry can a n d s h o u l d b e e s t i m a t e d f o r i n d u s t r i a l a n d a g r i c u l t u r a l consumers i::4 *+,' den... t z power company r e v e n u e s i n o r d e r t o g e t a n a d e q u a t e measure o f :< K d :. ,.. 1 3 ~cononi enefits. . S~ I proposed r u r a l e . l e c t r i . f i c a t i o n p r o j e c t i n Iridia ;-.as :3j.rcr.dy bezn a p p r a i s e d a l o n g t h e s e l i n e s , b e n e f i t t i n g s u b s t a n t i a l l y from ~ ~ 1 . i < : ( . i . ; ?c.:arcisd s s u t by t i l e I n d i m R u r a l E l e c t r i f i c a t i o n C o r p o r a t i o n . - I / For ,I: 82 ~ r a l , . : : p o r ts e c t o r some usefu! r e s e a r c h h a s b e e n g e t t i n g underway on f e e d e r :.*F..I:~ ,:;;-:oatmi c I.mpact , 5 u t pre.;p.?ratiori o f a p l a n n e d p o s i t i o n p a p e r o n t h e .-;.;b 1 .!- t i. f ?;ax i??+ s i n g r e g i o n a l ?el~e.lopmenti a p a c t was u n f o r t u n a t e l y d e l a y e d +,: , . +.. ... . . : : . a.I, . . - Rowever & mzjoz- e f f o r t , d e s c r i b e d more f u l l y i n C h a p t e r - I I " i i, i 2.t.. ,-c,i.:m~:idat l.m 3 . 3 ) of :hi.; r e p o r t , was i n i t i a t e d i n 1974 t o d e v e l o p '2:>.i:!-cr. ~ , i y sair' dealj..r,g w i t h t h e s u b j e c t o n t h e b a s i s o f s p e c i a l work on : . Ir,:.::e;I :,r!:j;1::::~ L OW u n d e r pr'c:paa-atic;n, . .- ~ r~?:.-F~e .-.;li:31 2.roa31.;: - i t i p:?ssib ?e to ~ c i n t f . o a l a r g e number of ~h c 3rivJL sine:.. - 97:! 3 h e l p z s s u r e tIlat i t s c s p e r a t i o n s h a v e . . : . :- 1 ,111.7 l j - , . - : : . 'I"-'-:-;; : ! z s heza 3 zuticeablc-: t r e n d tswarils a c ~ r e -,cl-:.:.-i,,:i :;....11;~~:,- C.J' ; i ~ ~ : ) i, . c ; . :. ~ - ~ . i ; t E I:I: :i:ldorut?.'..fz&t.io~: o f n a t u r a l r e s o u r c e s 5: , . , ,.' , ; ' ,,* .. '~ . ! - . , . ' - : . 7 3 4~.:*ie . : . - ,, ' . .12:?.- '.- .-,:. - .;....:: -.t.h.zt I?c?ve z.dceiv;.d ;r.nppnrf. h a v e besrl. > .... . , - < , . J ~ . , , L . , . ~ . L - . . t , . , . 1 i t h e - sli;il :is f o r c s ~ r y . ... - * -. ...-,-, j: .,,.., I+!-?. :.-;)::.. : : i- .:, . IZ;: :~ - .$ -.,.,l,.-.:r!?~.is .,I,~,. e d t ~ ~ ~ t.:.nd , p i :+alhtural scheines i ~ rig ,, , - . ? . :'m,;.ig tlie ;rew prof:cts f o r r-rhich !.oans have. been approved .-** d L : ; .:;< ,.~. ;< . -J-? .;I ".-' .* . = l t ? a ~ ::t i l t i n c r e a s t r . g :lumber nf: p r o j e c t s d e f i n e d more i n . . " - <, -'-.yi -->na: -. 3. f!i.;?i ~ e : 0r2.l :: Lem.s, s t a r t i n g f rorr? t h e r e g i o n ' s p o ? : e n t i a l s , and lesi,;iaed to ;,co-i;iid t-1-LC: o p t $mum a £f o r d a b l e c o m b i n a t i o n o f s e r v j c e s ;:zd ir.-- f r a s t r u c t u r k works n e c e s s a r y t o criable t h e i n h a b i t a n t s tc: e x p l o i t b e t t e r t h e region's r e s o u r c e s ; n o t a b l e examples among p r o j e c t s approved i n t h e l a s t q u a r t e r sf FYI974 are t h e I n d i a n Chambal Command Area Development, M a l i I n t e g r a t e d R u r a l 3 e v e l o p n e n t and S o u t h e r n Sudan A g r i c u l t u r a l R e h a b i l i t a t i o n . ?lost o f t h e m u l t i - f a c e t e d r u r a l development p r o j e c t s s o f a r s u p p o r t e d h a v e i n c l u d e d some p r o v i s i o n f o r r o a d development, and a few f o r e l e c t r i f i c a t i o n . One of t h e best examples o f c o n s i d e r a t i o n o f l o c a l development i m p a c t h a s I/ - An I D A C r e d i t , t h e Bank G r o u p ' s f i r s t commitment e n t i r e l y f o r r u r a l e l e c t r i f i c a t i o n , was a p p r o v e d f o r t h i s p r o j e c t i n J u l y 1975. b e t n t h e I n d o n e s i a B a l i Tourism P r o j r c t , p r e p a r e d w i t h t h e h e l p of a n a n t h r o - p o l o g i s t , designed t o i n c l u d e a s s i s t a n c e t o t h e l o c a l a g r i c u l t u r a l s e c t o r t o e n a b l e i t t o s u p p l y t h e market c r e a t e d , and w i t h o t h e r s p e c i a l p r o v i s i o n s intended t o i n c r e a s e t h e l o c a l population's p a r t i c i p a t i o n i n t h e o p p o r t u n i t i e s provided by t h e scheme and i n i t s b e n e f i t s . However t h e l a r g e m a j o r i t y o f t h e Rank's s u p p o r t f o r i n f r a s t r u c t u r e development c o n t i n u e s t o b e c h a n n e l l e d i n l o a n s s p e c i f i c t o e a c h s e c t o r , and a r e v i e w of a p p r a i s a l s f o r p r o j e c t s o f t h e s e t y p e s approved i n EY1974 r a i s e s a q u e s t i o n w h e t h e r much a t t e n t i o n is i n f a c t b e i n g g i v e n t o maximizing t h e i r development i ~ n p a c t , a s s u g g ~ s t e d . Seldom i f e v e r do t h e a p p r a i s a l r e p o r t s f o r e l e c t r i c power p r o j e c t s d i s c u s s any o f t h e s p e c i f i c p o i n t s mentioned i n t h e quoted recommendation from t h e e v a l u a t i o n r e p o r t . New c o n n e c t i o n p o l i c i e s a r e n o t e v a l u a t e d , and d i s t r i b u t i o n components a r e sometimes i n c l u d e d i n l o a n s w i t h o u t any s e p a r a t e economic a s s e s s l n e n t . Even p r o j e c t i o n s of t h e number of new consumers e n v i s a g e d are s t i l l o f t e n o m i t t e d . The t r a n s p o r t p r o j e c t ap- p r a i s a l s do u s u a l l y d i s c u s s t h e c o m p e t i t i v e n e s s o f t h e t r a n s p o r t s e r v i c e s and sometimes p r o j e c t t h e n e t i n c r e a s e i n a g r i c u l t u r a l p r o d u c t i o n a t t r i b u t a b l e a s b e n e f i t t o t h e t r a n s p o r t i n f r a s t r u c t u r e i n v e s t m e n t , b u t seldom do t h e y i n d i c a t e s e r i o u s a s s e s s m e n t o f t h e c o n s t r a i n t s t h a t may l i m i t t h e developmental impact o f t h e i n v e s t m e n t on t h e a r e a t r a v e r s e d ; a n d n o r m a l l y a t t e n t i o n a p p e a r s s t i l l l a r g e l y c o n f i n e d t o a s s u r i n g t h a t t h e r a t e o f r e t u r n from p r o j e c t e d s a v i n g s i n road u s e r and maintenance c o s t s i s above t h e t h r e s h o l d l e v e l con- sidered acceptable. T h i s may p a r t l y b e a q u e s t i o n o f t i m e - l a g -- t h a t many o f t h e p r o j - e c t s approved i n FY 1974 began t o b e p r e p a r e d some t i m e b e f o r e -- and of pre- f e r e n c e f o r a p p r a i s i n g more p r o j e c t s on b a s i c c r i t e r i a ' r a t h e r t h a n l e s s on more e l a b o r a t e c r i t e r i a . The r e l e v a n t t e c h n i c a l d e p a r t m e n t s a p p e a r t o have been aware o f t h e problem and have been g i v i n g i n c r e a s i n g a t t e n t i o n t o t r y t o e n s u r e t h a t new a p p r o a c h e s and t h e r e s u l t s o f r e s e a r c h a r e r e f l e c t e d m o r e q u i c k l y and more w i d e l y i n o p e r a t i o n s o f t h e t r a d i t i o n a l t y p e f i n a n c e d by t h e Eank. More g u i d e l i n e s , r e f l e c t i n g new a p p r o a c h e s and o u t l i n i n g how t o a p p l y them, may b e o n e p a r t i a l s o l u t i o n . E q u a l l y i f n o t more i m p o r t a n t i s a c t i v e p a r t i c i p a t i o n o f t h o s e who h a v e u n d e r t a k e n r e s e a r c h o r p r e p a r e d guide- l i n e s i n o p e r a t i o n a l m i s s i o n s , t o implement and i l l u s t r a t e t h e i r p r o p o s a l s , t o the extent possible with the limited s t a f f available. Housing O r i g i n a l Recommendation: J u d g i n g by e x p e r i e n c e i n Colombia, which is p r o b a b l y p a r a l l e l e d i n t h i s r e s p e c t i n s e v e r a l o t h e r c o u n t r i e s , t h e Bank s h o u i d r e c o n s i d e r i t s p a s t r e f u s a l t o s u p p o r t t h e t ~ o u s i n gs e c t o r , d e s p i t e t h e poor e x p e r i e n c e o f some o t h e r a i d a g e n c i e s i n t h i s f i e l d and p r i n c i p a l l y be- c a u s e of t h e i n s t i t u t i o n a l c o n t r i b u t i o n s i t c o u l d make. Although house con- s t r u c t i o n i s p a r t i c u l a r l y i n t e n s i v e i n u s e of l a b o r and r a t h e r i n d e p e n d e n t of i m p o r t s , h o u s i n g s u p p l y i n Colombia i s l a g g i n g s e r i o u s l y behind e f f e c t i v e demand, and more s e r i o u s l y b e h i n d n e e d s , p a r t l y due t o d e f i c i e n t i n s t i t u - t i o n a l arrangements f o r m o b i l i z i n g s a v i n g s and o r g a n i z i n g c o n s t r u c t i o n and s t r u c t u r a l d e f i c i e n c i e s i n t h e urban l a n d market. The f i r s t s t e p s h o u l d b e a t:!iorough s t u d y t o a s s e s s t h e econ.or:iic of t h e housing i n d u s t r y , i t s r e l a - tions r ~ i i : l ~ i;lie r e s t of t h e economic a c t i v i t i e s , and t h e e f f e c t s a major expan- s i o n h e r e wn~i! tl have on o t h e r sect:urs, ernployrne~lt, import r e q u i r e m e n t s , e t c . I f thi..: r;tudl7 shows t h a t housing Ss a. s e c t o r w i t h c o n s i d e r a b l e economic poten- t i a l and a l s o t:iint institutional 5.nr;oi.ations would b e r e q u i r e d t o relea:;e l . h a t p o t e n t i - a l , t k e n t h e second s t e p v o u l d b e i n i t i at.ion o f an experimental program. -Bank Response: A g e n e r a l P o l i c y Paper on t h i s t o p i c was o r i g i n a l l y e n v i s a g e d , d i r e c t l y d e a l i n g w i t h t h e q u e s t i o n : What i s t h e p o t e n t i a l o:E t h e housing s e c t o r , p a r t i c u l a r l y i n r e l a t i o n t o einployment and use of u n d e r u t i - l i z e d r e s o u r c e s , what a r e t h e o b s t a c l e s t o i t s e x p a n s i o n , ar,d what r o l e should t ~e Eank play ( i f a n y ) ? Review ---- of Action: T h i s recc9mmendat.ioiz w a s w r i t t e n a t a t h e when ----- t h e Bank was j u s t moving i n t o t h e P i n a ~ l c i n gof S i t e s and Seririces p r o j e c t s , t o a s s i s z t h e development of s e l f - h e l p housing f o r t h e urban p o o r , and t h i s Elas remained t h e p r i n c i p a l form o f p r a c t i c a l Bank i n ~ r o l v e r n e ~ i~n t t h e hotlsing s e c t o r , Conmitments have r i s e n extremely f a s t . The f i r s t S i t e s and S e r v i c e s p r o j e c t ,:5ssisted by t h e Hank Group, i n S e n c g d , was approvrd i n June 1972, w i t h an .IDA c r e d i t o f $8 m i l l i o n . Loans and c r e d i t s have s i n c e been made t o s e v e r a l #:ither c o u n t r i e s f o r p r o j e c t s i m r o l v l n g Sites and S e r v i c e s a:ld incrcaso- i n g l y , 50 reach s t i l l p o o r e r r e c i p i c l z t s , Sqcatter a r e a upgradl.ng. A further 58 millicln was lent i n I T 1973 and m o z e t h a n S2r3 m d l L i ~ h sir- FY 1974, vhen t h r e 2 p r o j e c t s were approved. - I/ Sirr.uLt;a.r;.eously ZFC bias moved i n t o t h e c o n t r i b u t i . 0 ~ 1 cf i n i t i a l x i s k c a y l t a l ,:or f i n a n c i a . 1 i r ; s t i t u t i o n . s o r j . m . t e d more t o the. :nidrlle arzd upper class 'i101151!7g m a r k e t : , . w n : 9 7 3 a $ 3 2 0 , O C O equ::ty .jr.lbecripti:rn vas r?s.',e t:c o n e a -, u f c.: ~i;r - . : ~ J ~ s ~ T I c ~ : ' o I I i ~ ~ l r s i :+~~g ~c?~?r?rati~ e.r- - : ~ in ::ai~;i;ri~.i.a s. j.2 ' & a. ijiJ;1 ;..~~lg~::$:; :.i; :ha F%l!i? cp>vt:yn.r;.renr e f fo.it -s,H~)cc . c ~ i r , , r 1 ^ : . - 4t:?:c ~e CL~~S<:.~*I::;J':-.~; 7 . . : L < ; - : . ~ t : - y 2,! . ..,. i, .i:sefu.i guide: ;:.,e pse,-ar-n$.;c.:.l - + 3i.e s.s i i:il . ; - ; : , sc?rd , . l *:+.sor,:,js:c:.;i; r i ~ D::.~:K ;;loup [ i , ~ a g c : i n g~.;.,-,l;asizi-itg , . . :.:::je.,;cr .,r,tal-.f-a;-;i i:~::;'ct'-; e;? ;\I,? ; : . . : i . i : - , - . a,oq, of .j; ?--. ay.9 s u z f i c i e n r . d . : r ~ ~ ' r ; ~ . : ! ~ i s i ;i~;l: \ :f-. . - : l : ' . , . ~ . ~ ~ ~ . :sr: -, i ~, : t i i.-g ." 2 repli.salc>db y S i ~ v e ~ n e l jl fti 3 :nucii i a r g e r sea:;.::, ;;.as i-~-!r. s ~e . c i n A T ? T I ~f 9 7 4 . P o l i c y Payer, 3 u t aga5.n conce~!:caElag p r l i i c i p a l l y on t h e p r c 5 - A much h ~ " o a d e r Pen o i housing for t h e urban poor atid t h e r o l e the Bank could p l a y i n h e i p i n g V. s o l v e i t , was completed f n J a n u a r y 1935 and d i s c u s s e d by t h e E x e c u t i v e o D i r e c t o r s i n February. While p o i n t i n g o u t t h a t housing can be a ' t o o l f o r macroeconomic development' , g e n e r a t i n g employment and g r e a t e r use o f underutf l i z e d r e s o u r c e s , - 1/ And about $90 m i l l i o n f o r s i x p r o j e c t s i n FY1975. 2/ - i n 1975 a $1.25 m i l l i o n e q u i t y s u b s c r i p t i o n was made t o a new mort- ~ n d gage bank i n Lebanon. and compiling t h e s p a r s e s t a t i s t i c s t h a t seem t o b e a v a i l a b l e i n t h i s r e g a r d , t h e P o l i c y Paper does n o t g i v e s o much emphasis t o t h i s approach, s t r e s s e d i n t h e e v a l u a t i o n , a s t o t h e more d i r e c t , b u t h i g h l y complex, q u e s t i o n o f how t o meet t h e needs of t h e v e r y l a r g e low-income market, where t h e main gap between supply and demand c l e a r l y l i e s . The Paper t r a c e s t h e problem above all t o p a s t a t t e m p t s t o a t t a i n e x c e s s i v e , and u n a f f o r d a b l e , s t a n d a r d s i n housing programs, and t h e p a r t i a l f a i l u r e o f e a r l i e r e f f o r t s of o t h e r a i d a g e n c i e s p r i n c i p a l l y t o i n s u f f i c i e n t r e g a r d f o r t h i s a s p e c t and undue concen- t r a t i o n on t h e f i n a n c i a l s i d e . C a l c u l a t i o n s f o r s i x l a r g e c i t i e s s t u d i e d i n v a r i o u s developing c o u n t r i e s , i n c l u d i n g Colombia, s u g g e s t t h a t from one- t h i r d t o two-thirds of t h e p o p u l a t i o n are unable t o a f f o r d t h e lowest-cost housing p r e s e n t l y being produced by t h e formal s e c t o r , b u t t h a t t h i s r a t i o could be brought down t o 20 p e r c e n t o r less, w i t h a c c e p t a b l e a d j u s t m e n t s t o s t a n d a r d s ; t h e needs o f t h e p o o r e s t 20% could b e m e t very l a r g e l y w i t h q u i t e s m a l l s u b s i d i e s i n t h e r i c h e r developing c o u n t r i e s , w h i l e s q u a t t e r a r e a up- g r a d i n g may be t h e b e s t t h a t can be done f o r t h e very poor i n t h e lowest- income c o u n t r i e s . One of t h e more important ways t o make h o u s i n g s t a n d a r d s cheaper i s t o i n c r e a s e u s e o f l o c a l b u i l d i n g m a t e r i a l s . Finding much t h e same s h o r t a g e s and i n s t i t u t i o n a l problems world- wide a s i d e n t i f i e d i n Colombia i n t h e e v a l u a t i o n s t u d y , t h e P o l i c y Paper g e t s much c l o s e r t o t h e microeconomic h e a r t of t h e q u e s t i o n and consequently stresses t h e c a t a l y t i c r o l e t h a t t h e Bank, even w i t h l i m i t e d s t a f f and f i n a n - c i a l r e s o u r c e s , can p l a y i n h e l p i n g develop and i n t r o d u c e t e c h n i c a l and o r - g a n i z a t i o n a l s o l u t i o n s t h a t could be s p r e a d , t o have t h e macroeconomic impact a t t r i b u t e d t o housing i n t h e e v a l u a t i o n . S q u a t t e r a r e a upgrading and S i t e s and S e r v i c e s p r o j e c t s a r e t o c o n t i n u e t o b e t h e main f o c u s o f Bank e f f o r t s i n t h i s f i e l d , a l t h o u g h t h e Bank would a l s o b e prepared t o provide a s m a l l amount of f i n a n c e f o r medium- and h i g h - r i s e housing i f , w i t h i n an i n t e g r a t e d p l a n f o r housing t h e poor, t h e s e c o n s t i t u t e d t h e most e f f i c i e n t and e q u i t a b l e s o l u - t i o n f o r some. The D i r e c t o r s a l s o i n d i c a t e d t h a t a s s i s t a n c e t o f a c t o r i e s producing improved p r e f a b r i c a t e d housing p a r t s could a l s o b e a p p r o p r i a t e i n some i n s t a n c e s and would be compatible w i t h t h i s g e n e r a l approach. It was a l s o proposed i n t h e P o l i c y Paper, and g e n e r a l l y a g r e e d , t h a t p r o v i s i o n o f "seed c a p i t a l " f o r housing f i n a n c e i n s t i t u t i o n s and p a r t i c u l a r l y f o r mortgage i n s u r a n c e companies, would be a n a p p r o p r i a t e u s e of Bank Group f u n d s , e s p e c i a l - l y w i t h i n t h e framework o f a n o v e r a l l program f o r upgrading f i n a n c i a l i n t e r - mediation and w i t h s t r o n g p r e f e r e n c e f o r t h e avoidance o r g r a d u a l e l i m i n a t i o n of t h e s u b s i d i e s now o f t e n g i v e n , a s a r e s u l t o f Government p o l i c i e s , t o such i n s t i t u t i o n s ' t y p i c a l l y middle- and upper-class c l i e n t e l e . T h i s mechanism t o o would t h e r e b y g a i n p o t e n t i a l broad r e p l i c a b i l i t y and macroeconomic impact. 2.6 P u b l i c Health O r i g i n a l Recommendation: Tine Bank should c o n s i d e r f u r t h e r broaden- ing - i t s i n K l v e m e n t i n p u b l i c h e a l t h , beyond family p l a n n i n g , i n s o f a r a s t h i s is a n a r e a of need, w i t h important p o t e n t i a l c o n t r i b u t i o n t o economic e f f i - c i e n c y , i n which t h e Bank, once having developed a p p r o p r i a t e o r g a n i z a t i o n a l and t e c h n i c a l e x p e r t i s e , could make s i g n i f i c a n t i n s t i t u t i o n a l c o n t r i b u t i o n s .  Bank Response: The Bank d e t e r m i n e d n o t t o p u r s u e t h i s matter formal- l y a t t11e t i m e , i n view o f t h e n e e d t o l e t t h i n k i n g m a t u r e , b u t i t was sub- sequently decided t o prepare a p o l i c y paper on t h e s u b j e c t . Review o f A c t i o n : ? Q a i n l y a s a r e s u l t o f i t s i n c r e a s i n g i n t e r e s t i n a r e a development programs o r i e n t e d t o t h e p o o r and g r e a t e r awareness of t h e e c o 1 o ~ i r : a l d a n g e r s o f l a r g e p u b l i c works p r o j e c t s , t h e Bank h a s been i n c r e a s - i n g l y drawn i n t o p u b l i c h e a l t h i n v e s t m e n t s , a l t h o u g h s t i l l on a s m a l l s c a l e . The number o f p r o j e c t s a p p r o v e d e a c h y e a r w i t h s i g n i f i c a n t p u b l i c healt.11 com- p o n e n t s h a s g r a d u a l l y i n c r e a s e d from o n e o r two p e r y e a r i n t h e e a r l y 1970s t o 8 i n FY1974, a s l i s t e d below, w i t h a n a p p r o x i m a t e i n d i c a t i o n o f t h e amount o f t o t a l p r o j e c t c o s t s and o f Bank/IDA f u n d i n g i n t e n d e d f o r s u c h components (figures i n $ millions) : Total P r o j e c t Cost IBRD/ IDA Health Total Health - , Total J a m a i c a S i t e s and S e r v i c e s : 7 Health Centers 0.32 34.90 0.17 15.00 Botswana F r a n c i s t o w n Urban Development: 2 Community C l i n i c s 0.54 4.36 0.37 3.00 M a l i I n t e g r a t e d R u r a l Development: Equipment and op. c o s t s o f D i s p e n s a r i e s 0.43 18.90 0.18 8 .OO X a u r i f i u s R u r a l Development: 5 I n t e g r a t e d R u r a l H e a l t h C e n t e r s , and o p . c o s t s 0.86 1 1 .OO 0.31 4 -00 E t h i o p i a Drought A r e a s R e h a b i l i t a t i o n : h o s p i t a l expansion, 2 h e a l t h c e n t e r s , 1 6 health stations 0.80 10.00 0.80 10.00 Tanzania G e i t a Cotton: 4 Health Centers 0.40 23.80 0.29 17.50 T a n z a n i a Cashewnut: 5 factory dispensaries 0.05 30.30 0.03 21 .OO S y r i a Bal.ikh I r r i g a t i o n : 14 v i l l a g e c l i n i c s 0.20) 170.4 '*03) 0.30) 73-00 B i l h a r z i a and M a l a r i a C o n t r o l Program 9.33) - The Bank G r o u p ' s p o p u l a t i o n p r o j e c t s ( o f which two were approved i n FYI974 : $12.0 m i l l i o n s u p p o r t f o r a $15.4 m i l l i o n p r o j e c t i n Kenya and $5.0 m i l l i o n s u p p o r t f o r a $13.5 m i l l i o n p r o j e c t i n Egypt) h a v e a l s o been moving t o w a r d s a c l o s e r i n t e g r a t i o n of family planning i n t o general health-delivery systerls; n o s t o f t h e f i n a n c e h a s gone f o r a r e a h e a l t h c e n t t r s a n d mec?ical t r a i n i n g s c h o o l s . Also t-!ie Back h a s c o n t i n u e d some i n d i r e c t b u t s i p n i E i c a n t c o n t r i b u - t i o n T O p u b l i c h e a l t h s e r v i c e s t h r o u g h t h e f i n a n c i n p of m e d i c a l t r a i n i n g f a c i l i t i e s under e d u c a t i o n p r o j e c t s ; t h e o n l y e d u c a t i o n p r o j e c t approved i n FYI974 with a s i g n i f i c a n t i d e n t i f i a b l e medical component a p p e a r s t o have been t h a t f o r Singapore, where about $5 m i l l i o n of $ 4 2 m i l l i o n t o t a l p r o j e c t c o s t (and $2.5 m i l l i o n o u t o f $1 9 . 5 m i l l i o n IBRD loan) r e l a t e t o f a c i l i t i e s f o r t r a i n i n g of d o c t o r s , d e n t i s t s and pharmacists. Addition of a l l t h e s e items i n d i c a t e k t h a t about 0.5% of t o t a l I B R D I I D A l e n d i n g approved i n FYI974 was intended t o c o n t r i b u t e d i r e c t l y o r i n d i r e c t l y t o t h e p r o v i s i o n o f p u b l i c h e a l t h s e r v i c e s , about 75% of t h i s i n t h e form of family planning p r o j e c t s . The Bank,Group h a s a l s o t a k e n o t h e r important i n i t i a t i v e s i n t h e f i e l d of p u b l i c h e a l t h . I n 1972 i t undertook, on a c o n t i n u i n g b a s i s , t h e l e a d e r s h i p of a consortium t o r a i s e f i n a n c e f o r a 20-year $120 m i l l i o n pro- gram t o f r e e e x t e n s i v e r i v e r v a l l e y s i n Western A f r i c a o f r i v e r b l i n d n e s s ( o n c h o c e r c i a s i s ) and make t h e s e f e r t i l e a r e a s i n h a b i t a b l e a g a i n . Having i n - cluded a n u t r i t i o n component i n one family planning p r o j e c t ( i n I n d i a ) , it went on t o h i r e n u t r i t i o n e x p e r t s and t o produce a p o l i c y paper on Bank a c t i v i t i e s i n t h i s f i e l d which was d i s c u s s e d by t h e Executive D i r e c t o r s l a t e i n 1973 and i n c l u d e s a p r o p o s a l t o p r o v i d e BankIIDA f i n a n c i n g f o r two n u t r i - tion projects -- i n c l u d i n g such i t e m s a s production and d i s t r i b u t i o n of i m - proved f o o d s , f o r t i f i c a t i o n of c e n t r a l l y processed food s t a p l e s and n u t r i t i o n e d u c a t i o n . 11 I n September 1974 t h e Bank added t h e f i r s t P u b l i c Health S p e c i a l i s t t o i t s s t a f f . The Bank Group h a s o f c o u r s e long been involved i n t h e f i n a n c i n g o f urban water supply systems and i s beginning t o extend i t s a t t e n t i o n t o r u r a l systems, e s p e c i a l l y through m u l t i - f a c e t e d r u r a l development p r o j e c t s . Cooperation w i t h WHO h a s begun t o be expanded from water supply and p o p u l a t i o n q u e s t i o n s t o t h e h e a l t h s e c t o r more g e n e r a l l y . A p o l i c y p a p e r , on t h e g e n e r a l t o p i c of h e a l t h i n c o n n e c t i o n with IBRD a c t i v i t y and p r o j e c t s , was prepared i n 1973174 and d i s c u s s e d by t h e Executive D i r e c t o r s i n December 1974. It r e f e r s t o r e q u e s t s from t h e African Governors, WHO and U.S. A I D f o r a l a r g e r Bank Group r o l e i n p u b l i c h e a l t h planning and f i n a n c i n g and c o n s i d e r s how f a s t t h e Bank should move i n t o - t h i s f i e l d . The b a s i c conclusion drawn was a g a i n s t a s u b s t a n t i a l i n i t i a t i v e , b u t i n f a v o r of a c a u t i o u s , b u t a c t i v e and i n n o v a t i v e , c o n t i n u a t i o n of e x i s t i n g g r a d u a l t r e n d s , w i t h e a r l i e r p r o f e s s i o n a l review of h e a l t h a s p e c t s and com- ponents of p r o j e c t s d e s t i n e d p r i n c i p a l l y t o o t h e r ends (such a s t h o s e l i s t e d a t t h e o u t s e t of t h i s s e c t i o n ) , more e x p e r i m e n t a t i o n w i t h new o r g a n i z a t i o n a l fonns i n t h e s e r u r a l p u b l i c h e a l t h components, o c c a s i o n a l deeper reviews o f c o u n t r i e s ' t o t a l h e a l t h d e l i v e r y systems and more ready acceptance of b e t t e r h e a l t h a s a j o i n t o b j e c t i v e w i t h o t h e r g o a l s of p r o j e c t s f i n a n c e d ( p a r t i c u l a r - l y i n family p l a n n i n g ) . / - - 11 The Bank is now, i n 1975, c o n s i d e r i n g t h e p o s s i b i l i t y of s u p p o r t f o r t h e major e f f o r t t h a t t h e Colombian Government h a s decided t o undertake i n n u t r i t i o n , p u b l i c h e a l t h and family planning, e s p e c i a l l y f o r t h e p o o r e s t classes. - 21 R e s p o n s i b i l i t y f o r t h i s work and f o r f u r t h e r development of Bank Group p o l i c i e s w i t h r e g a r d t o t h e h e a l t h s e c t o r was s p e c i f i c a l l y a s s i g n e d i n February 1975, by expansion o f t h e o f f i c e p r e v i o u s l y r e s p o n s i b l e f o r environmental q u e s t i o n s i n t o an O f f i c e of Environmental and IIealth A f f a i r s .  Alt!iough m e d i c a l s e r v i c e s and f a c i l i t i e s a c c o u n t f o r a s m a l l pro- p o r t i o c o f t v f a l Bank Group a s s i s t a c c e compared w i t h t h a t o f o t h e r d i v e r s i - f i e d a g e n c i e s i n t h e devel.opmc.nt: f i ~ l d ,t h e r e a r e n a j o r r e a s o n s f o r a cau- t i o u s a p p r o a c h . F i r s t , t h e c o s t - e f f t c t i v e n e s s and p r i o r i t y o f expanded pr.ii1l.i~.h e a l t h s e r v i c e s a s means t o ir.!prove p u b l i c h e a l t h -- a s compared w i t h t h o s e o f o t h e r m e a s u r e s , i n which t h e Bank is a l r e a d y much more h e a v i l y i n - vol.ved , s u c h a s more a d e q u a t e pub 1 i . c w a t e r - s u p p l y s e r v i c e s and improvements i n srnall f a r m e r p r o d u c t i v i t y -- remain u n e s t a b l i s i i e d , and h a r d t o e s t a b l i s h . Second, y l ~ i l emany c o u n t r i e s ' h e a l t h d e l i v e r y s y s t e m s a p p a r e n t l y s u f f e r from s i n i i l a r g r e a t i n e f f i c i e n c i e s t o t h o s e t h a t t h e Colombian a u t h o r i t i e s c . i t e d i n t h e E v a l u a t i o n R e p o r t had found i n t h e i r c o u n t r y , t h e r e is doubt how f a s t t h e Governments would f i n d it p o l i t i c a l l y f e a s i b l e t o i n i t i a t e t h e n e c e s s a r y reforms -- i n t h e way t h a t t h e Colombian Government d i d e x p r e s s i t s i n t e n t i o n t o do i n 1968-69. T h i r d , a n a j o r i n i t i a t i v e could have s i z e a b l e bugetary implications. T h e r e a r e o f c o u r s e s i g n i f i c a n t c o n s i d e r a t i o n s which would a r g u e i n t h e o t h e r d i r e c t i o n , toward a more r a p i d b u i l d - u p o f t h e o r g a n i z a t i o n a l and t e c h n i c a l e x p e r t i s e s u g g e s t e d i n t h e E v a l u a t i o n ~ e p o r t ' srecommendation - t h k p o t t n t i a l a d v a n t a g e o f i n t e r n a t i o n a l f i n a n c i n g and a d v i c e i n a n a r e a where i n d u s t r i a l i z e d c o u n t r y p r a c t i c e s a n d e x p e r i e n c e may b e s o p a r t i c u l a r l y i n a p p r o p r i a t e , and t h e impact t h a t i t i s w i d e l y a g r e e d t h e Bank's t r a d i t i o n a l c o n c e r n w i t h c o s t - e f f e c t i v e n e s s c o u l d h a v e on t h e v e r y s u b s t a n t i a l expendi- t u r e s and i n v e s t m e n t s a l r e a d y b e i n g made i n h e a l t h s e r v i c e s . However, a n e a r n e s t e f f o r t a t e x p e r i m e n t a t i o n w i t 1 1 o r g a n i z a t i o n a l and i n s t i t u t i o n a l forms and a t g r a d u a l l y b r o a d e n i n g f a m i l y p l a n n i n g p r o j e c t s , as now e n v i s a g e d by t h e Uank Group, i s p r o b a b l y i n f a c t t h e most e x p e d i t i o u s a p p r o a c h t o d e v e l o p t h e c o m p a r a t i v e a d v a n t a g e on which member c o u n t r i e s want t o b e a b l e t o c a l l . 2.7 F i n a n c i a l Plarket Development O r l k- - i n a l Recommendation: ------- The Bank s h o u l d d e v e l o p a b e t t e r c o o r d i - n a t e d s t r a t e g v a n d pancply f o r h e l p i n g t o s t r e n g t h e n d e v e l o p i n g c o u n t r i e s ' domkstic f i n a n c i a l m a r k e t s , tile weakness of which i s a s e r i o u s c o n s t r a i : n t t o e f f e c t i v e m o b i l i z a t i o n and a l l o c a t i o n o f r e s o u r c e s and h a s a n e g a t i v e e f f e c t on t h e developctent con t r i h u t i o n o f Bank-supported p r o j e c t s i n v e r y d i v e r s e ways s u c h a s c a u s i n g d e l a y s , c o s t i n . c r 2 a s e s and e x c e s s i v e f o r e i g n p r o c u r e - ment f o r i n f r a s t r u c t u r e p r o j e c t s and d i r e c t i n ? c r e d i t u n d e r l o a n s f o r t h e p r i v a t e s e c t o r ( e . g . i n a g r i c u l t u r e a n d m a n u f a c t u r i n g ) t o p r o d u c e r s who may n o t b e tile most e f f i c i e n t . The Bank s h o u l d c o n c e r n i t s e l f w i t h f i n a n c i a l p e r f o n n a a c e bevond t h e p u r e . 1 ~ f i s c a l on which i t h a s h i t h e r t o f o c u s s e d a t t e n - t i o n and a c t i v e l v e n c o u r a g t Co1onbi.a t o p u r s u e u n i f i c a t i o n of c r e d i t m a r k e t s and n o r t a p p r o p r i a t t : r e g u l a t i o n o f then>, w i t h more c o m p e t i t i o n , i n o r d e r t o m o b i l i z e s a v i n g s , g e n e r 2 t e p r o j e c t s u s i n g l o c a l r e s o u r c e s , and e n c o u r a g e u s e o f t e c h n i q u e s a p p r o p r i a t t t o the. s c a r c i t y o f c a p i t a l i n Colombia. T a x a t i o n of u n d e r u t i l i z e d and u n u t i l i z e c l u r b a n l a n c i s'nould b e encouraged a s a means t o st r t ! ? : ~ t . i e ~c m a n i t a l . market-s b y provi:!in? a d i s i n c e n t i v e t o i n v e s t i n ].and a ~ d ,at t h e samt tir,le, r t - d u c i uneconcmic u s e of i n s t a l l e d u r b a n i n f r a s t r u c - curt. T ~ F E a n k s h o u l d i n v e s t i g a t e t h t meanin?:, n c c h a n i c s and i m p l i c a t i o n s of t h e nc:yntive a s s o c i a r i o n t h a t a p p e a r s t o e x i s t f o r t h e 1960s between i n - flows o f l o w - t e r n ~ c a p i t a l from a b r o a d t o t i l t 1 , r i v a t e s e c t o r and ciomestic p r i v a t e s a v i n g s . P a r t l y thanks t o a v a l u a b l e T e c h n i c a l Symposium on C a p i t a l Markets i n Colombia sponsored by I D B i n A p r i l 1971, enough seems t o b e known and agreed about c r u c i a l s t e p s needed i n connection w i t h c a p i t a l market devel- opment t h a t t h e Bank could play i t s u s e f u l e x p e d i t i n g r o l e ( a s i n connection with f i s c a l and exchange r a t e p o l i c y on occasions i n t h e p a s t ) by a g r e e i n g w i t h t h e Government on s p e c i f i c measures t o be adopted, f o r i n s t a n c e t o re- move i n t e r e s t r a t e c e i l i n g s and reduce f o r c e d investments by commercial banks and o t h e r f i n a n c i a l i n t e r m e d i a r i e s ; such agreement could b e reached i n con- n e c t i o n w i t h a l o a n f o r f u r t h e r f i n a n c i n g of t h e i n d u s t r i a l sector. Bank Response: While p o i n t i n g o u t t h a t t h e a v a i l a b l e f i g u r e s on Colombian p r i v a t e s a v i n g s were weak ( t o o weak, i n i t s view, t o a t t a c h much s i g n i f i c a n c e t o t h e above-mentioned n e g a t i v e a s s o c i a t i o n between c a p i t a l inflows t o t h e p r i v a t e s e c t o r and p r i v a t e s a v i n g s ) and t h a t l e g i s l a t i o n regard- i n g t a x a t i o n of u n d e r u t i l i z e d urban l a n d had been blocked i n t h e Colombian Congress f o r two y e a r s , t h e Bank expressed agreement w i t h t h e g e n e r a l t h r u s t of t h e s e recommendations, s p e c i f i c a l l y emphasizing t h e need t o understand b e t t e r t h e behavior of p r i v a t e s a v i n g s and t o s t r e n g t h e n Colombia's p r i v a t e c a p i t a l markets. An economic mission i n October 1972 was t o focus i n p a r t on t h e c a p i t a l market i s s u e s r a i s e d , w i t h a view t o reaching s p e c i f i c p o l i c y recommendations and p r o j e c t covenants which would be d i s c u s s e d w i t h t h e Colombian a u t h o r i t i e s p a r t i c u l a r l y i n connection w i t h a f u r t h e r l o a n t h a t w a s expected t o be made t o t h e Colombian F i n a n c i e r a s (DFCs). It was a l s o decided t h a t a more g e n e r a l p o l i c y paper should be pre- pared s i m i l a r t o t h o s e a l r e a d y r e f e r r e d t o f o r l a n d reform and c r e d i t f o r small f a r m e r s , and d e a l i n g w i t h t h e q u e s t i o n of what r o l e t h e Bank Group should play i n h e l p i n g develop f i n a n c i a l markets i n borrowing member c o u n t r i e s . Review of Action: The 1972 a g r i c u l t u r e s e c t o r m i s s i o n t o Colombia concluded i t s review of a g r i c u l t u r a l c r e d i t w i t h recommendations t h a t t h e Colombian a u t h o r i t i e s should review i n d e t a i l a g r i c u l t u r a l i n t e r e s t r a t e p o l i c i e s and t h a t e x t e r n a l l e n d e r s should d i s c u s s t h e m a t t e r w i t h t h e Colom- b i a n Government and develop a common p o s i t i o n s i n c e i n t e r e s t - r a t e i n c r e a s e s could n o t be implemented on a piecemeal b a s i s . The May 1973 Economic Report explored some o f t h e problems o f Colombia's f i n a n c i a l markets -- p a r t i c u l a r l y t h e v o l a t i l e r e g u l a t o r y framework, t h e problem o f forced investments and i n t e r e s t - r a t e c e i l i n g s , t h e f a i l u r e of t h e tax system t o r e c o g n i z e i n f l a t i o n , t a x o b s t a c l e s t o sound s e c u r i t i e s market development, t h e s h o r t a g e of c r e d i t f o r working c a p i t a l f o r i n d u s t r y and f o r low income housing and t h e danger of a d d i t i o n a l d i s t o r t i o n s r e s u l t i n g from t h e i n t r o d u c t i o n i n 1972 of f u l l y in- dexed c o n s t r u c t i o n and housing f i n a n c e i n s t r u m e n t s -- which w e r e e l a b o r a t e d i n a f u l l e r paper given t o t h e Colombian a u t h o r i t i e s i n October 1973. The l a t t e r paper reached t h e c o n c l u s i o n t h a t c u r r e n t r e g u l a t i o n s d i r e c t e d flows of f i n a n c i a l r e s o u r c e s " i n a complex, i n d i r e c t and c o n f l i c t i n g f a s h i c n a t a high and i n e q u i t a b l y d i s t r i b u t e d c o s t." N e i t h e r document, however, reached any s p e c i f i c s u g g e s t i o n s a s t o reform measures t o be t a k e n , and t h e s e broader i s s u e s of f i n a n c i a l markets were not d i s c u s s e d d u r i ~ i gn e g o t i a t i o n s f o r t h e l a r g e f u r t h e r loan t o t h e F i n a n c i e r a s t h a t was n e g o t i a t e d i n February 1 9 7 3 and s i g n e d i n June (although v a r i o u s p o i n t s r e l a t i n g d i r e c t l y t o t h e a c t i v i t i e s  n l S e c t i o n 5 . 3 below), o f t h e F i r r a n c i e r a s t h e m s e l v e s wtl-6: covereti, a s d i s c ~ s s c _ : ~ n o r a p p a r e n t l y i n any c n n c r d t e way i n c o n n e c t i v n w i t h t h e economic r e p o r t . ??routla mid-1 974 t h e ;,,I,, prubleins appeared t o remain v e r y xuch a s d e s c r i b e d i n t h e e v a l u a t i o n r e p o r t n i ~ d , i n a d d i t i o n , t h e f i s c a l system tended t o weaken, A few measures s t e : ~ r l i n g l a r g e l y from t h e 19 71 t e c h n i c a l symposium mentioned - s u c h a s s e l e c t i v e i n s r e a s c s i n i n t e r e s t r a t e s and r e d u c t i o n o f f o r c e d Snvestments f o r c e r t a i n t y p e s o f f i n a n c i a l i n s t i t u t i o n s - were i n t r o - duced. B u t t h e new Covemment which assumed o f f i c e i n August 1974 i n t r o d u c e d , w i t h i n a v e r y s h o r t t i m e , major rbforms 1,' o f b o t h t h e f i n a n c i a l system and of t h e whole t,w s t r u c t u r e which, w h i l e n a t u r a l l y n o t e l i m i n a t i n g a l l t h e problems r e f e r r e d t o above, have s h a r p l y reduced many o f them and c r e a t e a p o t e n t i a l f o r more e f f i c i e n t and e q u i t a b l e o p e r a t i o n i n t h k f u t u r e . Many i n t e r e s t r a t e s have been s h a r p l y i n c r e a s e d , by up t o l o o % , w h i l e o t h e r s have been b r o u g h t down, t o c r e a t e a more u n i f l e d s y s tern; numerous f o r c e d i n v e s t m e n t r e q u i r e m e n t s have been e l i m i n a t e d , a s h a s p r e f e r e n t i a l t a x t r e a t m e n t f o r p u b l i c d e b t i n s t r u m e n t s ; and a more e f f e c t i v e , u n i f i e d r e d i s c o u n t system h a s been i n t r o d u c e d t o b e t t e r c o n t r o l t h e money s u p p l y . The f i s c a l reform touched a l l m a j o r t a x e s and, i n p a r t i c u l a r , i n t r o d u c e d a new t a x o n c a p i t a l g a i n s , a n economy-wide p r e s u m p t i v e income t a x and s u b s t a n t i a l i n c r e a s e s i n sales t a x r a t e s , e s p e c i a l l y o n l u x u r y i t e m s . T o g e t h e r , t h e v a r i o u s measures g r e a t l y b r i g h t e n t h e p r o s p e c t s f o r development o f a n e f f e c t i v e c a p i t a l market i n Colonbia. A s r e g a r d s t h e more g e n e r a l p o l i c y p a p e r e n v i s a g e d i t i s a p p a r e n t l y due t o l a c k of agreement w i t h i n t h e Rank Group and l a c k of r e c o g n i t i o n o f t h e imports:-~ce a n d b r e a d t h o f t h e t o p i c t h a t no such p a p e r i s y e t n e a r i n g comple- t i o n , a.Lthough u s e f u l a d v i s o r y work h a s c o n t i n u e d t o b e c a r r i e d o u t by t h e I F C ' s C a p i t a l '.;arkets D e p a r t n ~ e n t anc! o n e o r tuo s t u d i e s o f s p e c i f i c s u b - t o p i c s , a s f o r i n s t a n c e i n d e x i n g , a r e underway i n t ! ~ e8std-i i t s e l f . D e s p i t e the! un- doubt-ed d i f f i c u l t y o f t h e s u b j e c t w e b e l i e v ~t h a t i t i s i n c r e a s i n g 1y i n ~ p o r t a n , t w i t h t h growing ~ anwunt- o f dtveloplncrlt f i ~ ~ a c c i r b.e~ in. g provided b y ;.he Ennk and Il)i?,..t o st.rengt:hen a n d broaden tilt Hank's underslantiing o f t h e opzratic;n l o f d c . r w r - - t i c f i n a l ? c i ~ i ntarket r; i n d t v t lo!)ini; c o u f l t r i k s and o f t h e i.r;:pact i t s o p e r a t i c l n s :lo h a v t ar,d c c i ~ l dhave or1 tiler;. I t may b e t h a t t h e prime need is f o r a b r o a d fr;tc;ework o f a n a l y s i s i.utrorlrlcing tile Ice). i s s u e s -- sucn a s Gov- ernment borrowing, f i s c a l a s p e c t . s , t t r c - s t r u c t u r e o f i n t e r e s t r a t e s , r a n g e of i n s t i t u t i o n s and i n s t r u m e n t s , impact o f i n f l a t i o n , b r e a d t h of c r e d i t a v a i l - a b i l i t y , s t a n d a r d s o f f i n a n c i a l a u d i t i n g and t a x a d m i n i s t r a t i o n -- and i l l u s - t r a t i n g them on t h e b a s i s o f p a s t experience, p a r t i c u l a r l y t h e l a r g e nur~.ber of s t u d i e s o f i n d i v i d u a l c o u r : t r i e s ' f i n a n c i a l s y s t e m s done by I F c ' s C a p i t a l 9arket.s Departmtnt i n i t s b r i e f e x i s t e n c e . T h i s s h o u l d e n a b l e some p o l i c y p o s i t i o n s t o be d e f i n e d on i . s s u r s t h a t f r e q u e n t l y a r i s e and i t would s e n s i t i z e tile Rank's Regional O f f i c e s t o t h e c o m l e x problems o f f i n a n c i a l market cievel- opment . 1; - Uesg:ribed more f u l l y i n I B R G Report Xo. 596-CO, "Economic P o s i t i o n arld P r o s p e c t s of Colombia", d a t e d May 20, 1975.  2.8 S e c t o r Lending O r i g i n a l Recommendation: The Bank s h o u l d c o n s i d e r l e n d i n g t o n a t i o n a l a g e n c i e s f o r s e c t o r a l o r s u b - s e c t o r a l development programs, a s op- posed t o i n d i v i d u a l p r o j e c t s , e s p e c i a l l y where t h e main need now i s t o h e l p improve s e c t o r p o l i c i e s , as f o r i n s t a n c e i n Colombia i n i n d u s t r y . Adoption of a s e c t o r a l approach would a l s o have a number o f a d v a n t a g e s f o r highway l e n d i n g -- f o c u s s i n g g r e a t e r a t t e n t i o n o n how much r e s o u r c e s i n t o t a l s h o u l d be d e d i c a t e d t o t h e s e c t o r and how p a r t i c u l a r r o a d s and highways should b e a l l o c a t e d among d i f f e r e n t c l a s s i f i c a t i o n s , i n t e r m s o f d e s i g n s t a n d a r d s , g i v e n t h e budget c o n s t r a i n t ; l e a v i n g more f l e x i b i l i t y f o r a d j u s t i n g t h e t i m i n g o f t h e v a r i o u s components o f t h e program i n l i g h t o f i n t e r i m developments; h e l p i n g t o e x t e n d t h e improved p l a n n i n g , e n g i n e e r i n g and c o n t r a c t i n g proce- d u r e s , i n t r o d u c e d w i t h Bank a s s i s t a n c e and p r e s e n t l y l i m i t e d t o Bank-financed higliways , t o o t h e r r o a d s as a p p r o p r i a t e ; e n a b l i n g s p e c i a l Bank e f f o r t s , w i t h - i n t h e o v e r a l l l o a n , on any weak area s u c h a s f e e d e r r o a d s and t h e i n s t i t u t i o n r e s p o n s i b l e . The Bank might make i t a s p e c i f i c o b j e c t i v e t o t r y t o develop a g e n c i e s which would b e a p p r o p r i a t e c h a n n e l s f o r s u c h s e c t o r l e n d i n g , f o r i n s t a n c e i n water s u p p l y o r l a b o r - i n t e n s i v e a g r i c u l t u r a l development schemes. The Bank had a l r e a d y i n t h e p a s t , i n a few c a s e s s u c h as Mexico power and I n d i a n r a i l w a y s , r e p l a c e d f i n a n c i n g o f d e f i n e d p r o j e c t s w i t h f i n a n c - i n g o f a whole n a t i o n a l s e c t o r program. I n o t h e r c a s e s t h e c o u n t r y i s some- times small enough t h a t p r o j e c t and s e c t o r approaclles are e f f e c t i v e l y combined, because t h e s e c t o r program c o n t a i n s o n l y a few p r o j e c t s a l l o f which c a n b e p a r t i a l l y f i n a n c e d , and t h e mode o f a p p r a i s a l , n a t u r e o f l o a n c o n d i t i o n s and means o f s u p e r v i s i o n are t h e same f o r p r o j e c t s and program a l i k e . But t h e r e a r e many c a s e s between t h e s e e x t r e m e s . In a n o t e expanding on t h e r e p o r t ' s recommendation and drawing l a r g e l y on Colombian e x p e r i e n c e , t h e O p e r a t i o n s . E v a l u a t i o n Department s u g g e s t e d t h a t when borrowing i n s t i t u t i o n s a r e weak, t h e r e i s l i t t l e q u e s t i o n b u t t h a t p r o j e c t borrowing and t h e d i s c i p l i n e i n v o l v - ed i n i t , w i t h d i s b u r s e m e n t s a g a i n s t p a r t i c u l a r c o n t r a c t s and s t r i c t s u p e r v i - s i o n o f c o n s t r u c t i o n p r o g r e s s on t h e p a r t i c u l a r p r o j e c t s c o v e r e d , are t h e b e s t c o u r s e ; b u t when borrowing i n s t i t u t i o n s grow s t r o n g e r , l e n d i n g a p a r t of t h e f i n a n c i a l r e q u i r e m e n t s of a whole program mag become more a p p r o p r i a t e , f o r the following principal reasons: i) Maintenance o f p r o j k c t a p p r o a c h , combined w i t h o r i e n t a t i o n towards a t t a i n i n g a c e r t a i n l e v e l o f r e s o u r c e t r a n s f e r , t e n d s t o mean t h a t l a r g e p r o j e c t s ( e . g . , power i n l a r g e c i t i e s o r main highways), b u i l t t o r e l a t i v e l y h i g h s p e c i f i - . c a t i o n s , have p r e f e r e n t i a l a c c e s s t o f o r e i g n f i n a n c i n g , which c a n i n t u r n d i s t o r t t h e i n v e s t m e n t program o r c a u s e p r o j e c t s t o b e g i v e n h i g h e r s t a n d a r d s t h a n would o t h e r w i s e b e n e c e s s a r y , simply t o g e t them i n t o t h e f o r e i g n - f i n a n c e d program. ii) P r o j e c t d i s c i p l i n e , i n s o f a r as i t a r i s e s from t h e i n f l e x i - b i l i t y o f a d e s i g n a t e d p r o j e c t and t h e commitment t o b u i l d  i t , h a s a d v a n t a g e s , as p o i n t e d o u t , b u t i t a l s o h a s d i s - advantages, introducing r i g i d i t i e s i n t o t h e s e c t o r a l i n v e s t - ment program and p r e v e n t i n g a d j u s t m e n t i n t h e tinking o f program e x e c u t i o n i n l i g h t o f i n t e r i m developments. iii) E x p e r i e n c e h a s showfi t h a t , w h a t e v e r t h e e f f o r t i n t h e c o n t r a r y d i r e c t i o n , t h e main f o c u s o f a t t e n t i o n i n c o n n e c t i o n w i t h a l o a n f o r a p r o j e c t d o t s remain concen- t r a t e d o n t h e p r o j e c t r a t h e r t h a n on s e c t o r i s s u e s , L e s s a t t e n t i o n i s g i v e n t o t h e economics and b a l a n c e o f t h e whole s e c t o r program, t o adequacy o f s e c t o r a l p l a n n i n g a s opposed t o p r o j e c t p l a n n i n g , t o s e c t o r a l i n s t i t u t i o n s as compared w i t h p r o j e c t i n s t i t u t i o n s , t o c o n t r a c t i n g proce-, d u r e s and p r o j e c t p r e p a r a t i o n f o r t h e s e c t o r program a s compared w i t h t h o s e f o r t h e p r o j e c t s t o b e f i n a n c e d by t h e Bank. Hence t h e s p r e a d of t h e Bank's impact on i n s t i t u t i o n s , p l a n n i n g , program b a l a n c e and economic v a l i d i t y , s e c t o r p o l i c y , c o n t r a c t i n g p r o c e d u r e s , e t c . , i s more l i m i t e d t h a n would b e d e s i r a b l e . I t was s u g g e s t e d t h a t t h e Bank might g i v e a s p e c i a l o r i e n t a t i o n t.o i t s i n s t i - t u t i o n - b u i l d i n g e f f o r t s w i t h a view t o b u i l d i n g up s e c t o r a l i n s t i t u t i o n s w h i c h , i n t e r a l i a , would b e a b l e t o s e r v e as c h a n n e l s f o r s e c t o r l o a n s and t h a t s p e c i a l m o n i t o r i n g s y s t e m s m i g h t need t o b e d e v e l o p e d t o e n s u r e a d e q u a t e c o r l t r o l o f program e x e c u t i o n . Bank Response: A t t h e t i m e t h e Bank f e l t t h a t t h i s recommendation w a s more s u i t a b l e f o r e . x p e r i m e n t a t i o n i n i n d i v i d u a l p r o j e c t s t h a n f o r p r e p a r a - t i o n o f a g e n e r a l p o l i c y p a p e r , a l t h o u g h a p a p e r o n highway s e c t o r l e n d i n g was p l a n n e d f o r l a t e 1974 o r e a r l y 1975. Review o f A c t i o n : D e t e r i o r a t i o n o f t h e Colombian M i n i s t r y of P u b l i c Works s i n c e 1970 h a s c a u s e d t h e Bank t o c o n s i d e r t h a t a f u r t h e r highway - loan t h e r e would have t o b e on a p r o j e c t b a s i s t o e n s u r e s a t i s f a c t o r y irnplementa- t i o n , w h i l e p a r t i a l e f f o r t s t o move t o a s e c t o r b a s i s f o r i n d u s t r i a l l e n d i n g h a v e s u f f e r e d from t h e c o n t i n u i n g s h o r t a g e o f a d e q u a t e s t a f f i n t h e c e n t r a l c h a n n e l i n t h e Banco d e l a R e p u b l i c a . The Bank however t o o k i n 1974 t h r e e o t h e r i m p o r t a n t i n i t i a t i v e s i n t h e d i r e c t i o n o f s e c t o r l e n d i n g , a l l i n L a t i n America. F i r s t , o n t h e b a s i s o f a n a p p r a i s a l r e p o r t which reviewed q u i t e f u l l y t h e o v e r a l l highway p l a n 1973-76, t h e E x e c u t i v e D i r e c t o r s approved i n F e b r u a r y 1974 a $90 m i l l i o n l o a n t o Mexico f o r i 6 highways o f which 6 ( c o r r e s p o n d i n g t o $50 m i l l i o n o f t h e l o a n amount) were s t i l l s u b j e c t t o c o m p l e t i o n o f d e t a i l e d e n g i n e e r i n g , v e r i - f i c a t i o n o f p r o j e c t e d economic r e t u r n , and p o s s i b l e s u h s t i t u t i o n by o t h e r r o a d s w i t h t h e S a n k ' s a p p r o v a l ; i n d i s c u s s i o n o f t h e p r o p o s a l , i t was p o i n t e d o u t t h a t i t was d e s i g n e d t o a l l o w t h e Mexican Governmtnt t o p l a n f o r construe-- t i o n s t a r t s i n a more o r d e r l y f a s h i o n t h a n p o s s i b l e wit-h t h e B a n k ' s normal highway f i n a n c i n g methods. Second, i n J u n e 1374, t h e Bank approved a $36 m i l l i o n l o a n t o t h e B r a z i l i a n b i a t i o n a l Housing Rank f o r m u n i c i p a l w a t e r s u p p l y and sewerage i n t h e s t a t e o f Minas G e r a i s u n d e r which t h e r e s p o n s i b l e s t a t e e n t i t y and t h e Housing Bank would h a v e v i r t u a l l y f u l l r e s p o n s i b i l i t y f o r ap- p r a i s i n g and a p p r o v i n g a l l b u t t h e l a r g e s t and most d o u b t f u l s u b - p r o j e c t s w i t h i n an o v e r a l l s e c t o r program a n a l y z e d i n t h e B a n k ' s a p p r a i s a l r e p o r t . T h i r d , abandoning i t s p r e v i o u s P r o j e c t U n i t approach i n t h i s c a s e , t h e Bank h a s p r e p a r e d a proposed $46 m i l l i o n p r o j e c t I -/ under which t h e n a t i o n a l Colombian e n t i t y r e s p o n s i b l e f o r w a t e r s u p p l y (IKSFOPAL) w i l l b e r e o r g a n i z e d and w i l l b e g i n t o t a k e main r e s p o n s i b i l i t y f o r p r e p a r i n g and a p p r a i s i n g s m a l l - town projects a c c o u n t i n g f o r some 15-20% o f t o t a l p r o j e c t c o s t s ; a r e o r g a n i z a - t i o n Ilecree, p r o v i d i n g f o r g r a d u a l d i v e s t i t u r e o f o p e r a t i n g f u n c t i o n s and per- m i t t i n g c o n c e n t r a t i o n on p l a n n i n g and f i n a n c i n g , was approved by t h e Govern- ment i n May 1 9 7 4 . T h e s e developments have prompted t h e Bank t o p r e p a r e g e n e r a l i n - s t r u c t i o n s a b o u t S e c t o r Lending, s e t t i n g down f i v e c r i t e r i a : - a s e c t o r a l / s u b s e c t o r a l i n v e s t m e n t program reviewed and a p p r o v e d by t h e Bank a t a p p r a i s a l , - a d e q u a t e i n s t i t u t i o n a l c a p a b i l i t y t o e x e c u t e program, - agreement o n i n v e s t m e n t c r i t e r i a f o r s u b - p r o j e c t s , - agreement o n s e c t o r o b j e c t i v e s , c o n d i t i o n s , r e f o r m s , - s a t i s f a c t o r y procurement/disbursement a r r a n g e m e n t s f o r IBRU f u n d s . The i n s t r u c t i o n s s u g g e s t t h a t t h e r e is p r o b a b l y more s c o p e f o r a p p l i c a t i o n of t h i s l e n d i n g t e c h n i q u e t h a n h a s s o f a r been r e a l i z e d . I t must o f c o u r s e b e r e c o g n i z e d t h a t t h e r e a r e two d i r e c t i o n s t h a t c a n b e t a k e n w i t h s e c t o r l e n d i n g -- o n e economizing Bank s t a f f t i m e (by r e q u i r - i n g o n l y s p o t c h e c k s o f i n d i v i d u a l p r o j e c t s and p r o j e c t documents, e t c . ) and t h e o t h e r a p p l y i n g t h a t s t a f f t i m e ( a n d maybe even more) i n d i f f e r e n t d i r e c - t i o n , toward g r e a t e r emphasis on s e c t o r p o l i c y i s s u e s and r e f o r m s . I t is l i k e l y t h a t t h e s e c t o r l e n d i n g t e c h n i q u e w i l l prove i m p o r t a n t f o r e n a b l i n g t h e Bank t o r e d u c e manpower e x p e n d i t u r e s o n t r a d i t i o n a l s e c t o r s and b o r r o w e r s and a l s o t o b r o a d e n i t s involvement t o a f f e c t more p e o p l e d i r e c t l y ( a s i n t h e w a t e r s u p p l y c a s e s d i s c u s s e d a b o v e ) . More a t t e n t i o n may need t o b e g i v e n t o t r y i n g e x p l i c i t l y t o d e v e l o p i n s t i t u t i o n s t o a p o i n t where t h e y c a n b e chan- n e l s f o r s e c t o r l o a n s and t o a p p r o p r i a t e m o n i t o r i n g s y s t e m s f o r t h e much more numerous s u b - p r o j e c t s l i k e l y t o b e i n v o l v e d t h a n u n d e r s t a n d a r d Bank i n f r a - s t r u c t u r e l o a n s ; t h e s e e f f o r t s c a n t a k e c o n s i d e r a b l e manpower i n t h e e a r l y y e a r s , as i l l u s t r a t e d by t h e work w i t h t h e Colombian w a t e r s u p p l y agency. - - - - I/ For which Loan 1072-CO o f $27 m i l l i o n was approved i n J a n u a r y 1 9 7 5 . 2.9 - P r o j e c t Spread E f f e c t O r i g i n a l Recommendation: The Bank s h o u l d a c t i v e l y s e e k means f o r maximizing t h e s p r e a d t o o t h e r p j e c t s and i n s t i t u t i o n s o f t h e t e c h n o l o g i c a l . r o. and m a n a g e r i a l i n n o v a t i o n s i n t r o d u c e d i n c o n n e c t i o n w i t h i t s p r o j e c t s , s i n c e t h e e v i d e n c e s u g g e s t s t h a t t h i s s p r e a d does n o t o c c u r a u t o m a t i c a l l y . Bank Response: C o n s i d e r a t i o n was g i v e n t o t h e p r e p a r a t i o n o f a p o l i c y p a p e r on t h i s t o p i c , b u t i t was f i n a l l y d e c i d e d t h a t t h e most con- s t r u c t i v e way t o h a n d l k i t , i n view o f t h e s m a l l amount o f s y s t e m a t i c t h i n k i n g p r e v i o u s l y done about i t , might b e t o r e v i e w a number o f p r o j e c t s o r programs a l r e a d y f i n a n c e d by t h e Bank i n which i t was b e l i e v e d t o have been a s i g n i - ficant factor. Review o f A c t i o n : A f t e r p r e l i m i n a r y i n v e s t i g a t i o n s i n s i d e and o u t - s i d e t h e Bank, p i l o t s t u d i e s o f s e l e c t e d p r o j e c t s i n I n d i a , S p a i n and Uruguay a l o n g t h e s e l i n e s were i n i t i a t e d by t h e O p e r a t i o n s E v a l u a t i o n Department l a t e in P Y 1974, and a f i n a l s y n t h e s i s o f t h e f i n d i n g s , c o n c e n t r a t i n g o n methods o f a n a l y z i n g t h e s u b j e c t and p o s s i b l e means f o r t h e Bank t o h e l p i n c r e a s e ' s p r e a d ' , i s a w a i t i n g p r e p a r a t i o n ; a follow-up p h a s e , c o v e r i n g a w i d e r r a n g e o f p r o j e c t s , might be i n i t i a t e d l a t e r . Meantime, q u i t e a p a r t from l e n d i n g g r e a t e r amounts t o r e a c h l a r g e r numbers o f p e o p l e d i r e c t l y w i t h i n t h e framework o f p r o j e c t s s u p p o r t e d , t h e Bank h a s c o n t i n u e d t o s e e k w i d e r d i f f u s i o n o f i n n o v a t i o n s i n - t r o d u c e d . Some o f t h e p r o j e c t s f o r which l o a n s were made i n 1973-74 where such a d e m o n s t r a t i o n e f f e c t was i n p a r t i c u l a r e x p e c t e d t o b e i m p o r t a n t are B r a z i l L i v e s t o c k , I n d i a Family P l a n n i n g , I r a q I r r i g a t i o n , T a n z a n i a C o t t o n , Upper V o l t a A g r i c u l t u r a l Development, I n d i a K a r n a t a k a D a i r y , T u r k i s h S t a t e I n v e s t m e n t Bank (DYB), and s e v e r a l S i t e s and S e r v i c e s p r o j e c t s . Economic R e p o r t i n g O r i g i n a l Recommendation: W i t h i n t h e framework of t h e l o n g e r view d e s c r i b e d ( s e e recommendation 2.1) t h e Bank s h o u l d c o n c e n t r a t e i t s s c a r c e economic e x p e r t i s e t o a g r e a t e r e x t e n t t h a n i n t h e p a s t on h i g h l y f o c u s s e d problem-solving s t u d i e s o f t e n d e a l i n g w i t h i s s u e s o f a more s t r u c t u r a l and l o n g e r - r u n n a t u r e such a s , i n Colombia, u r b a n i z a t i o n and employment, d i s t r i - b u t i v e impact o f exchange r a t e changes, r e l a t i o n between f o r e i g n c a p i t a l . i n f l o w s and d o m e s t i c s a v i n g s , u n i f i c a t i o n o f f i n a n c i a l m a r k e t s , f a c t o r s a f f e c t i n g urban l a n d development, development o f l u m b e r / f u r n i t u r e i n d u s t r y . It may w e l l b e w o r t h w h i l e t o c a r r y o u t more s t u d i e s of t h i s s o r t t h a n t h e Bank c o u l d p o s s i b l y manage w i t h i t s own s t a f f and s p e c i a l i s t s , even a f t e r reducing. c u r r e n t economic r e p o r t i n g t o a minimum (and p r o b a b l y t a k i n g g r e a t e r a d v a n t a g e o f IMF work t o h e l p meet t h o s e n e e d s ) . Then t h e r e a r e s e v e r a l a l t e r n a t i v e s : ( a ) t o ask t h e Colombian N a t i o n a l P l a n n i n g Department t o c a r r y o u t t h e s t u d y , (b) t o h i r e s p e c i a l c o n s u l t a n t s , ( c ) t o s u b c o n t r a c t s t u d i e s w i t h r e s e a r c h i n s t i t u t e s i n Colombia o r e l s e w h e r e o r (d) t o encourage o t h e r C o n s u l t a t i v e Group members t o p r o v i d e a p p r o p r i a t e t e c h n i c a l a s s i s t a n c e . R e p o r t s , w h e t h e r g e n e r a l o r s p e c i a l , w h e t h e r p r t p a r e d b y t h e Eank o r sponsored by i t , s h o u l d b e made a v a i l a b i e more w i d ~ l yi n Colombia t h a n t h e y have been; perhaps t h e Government s h o u l d be encouraged t o d i s t r i b u t e Bank r e p o r t s more b r o a d l y o r t h e y c o u l d b e made a v a i l a b l e from t h e o f f i c e o f t h e Bank's R e s i d e n t R e p r e s e n t a t i v e i n Eogota. Bank Response: There was g e n e r a l agreement about t h e s e p o i n t s w i t h r e g a r d t o Colombia, a l t h o u g h i t was s u g g e s t e d t h a t t h e scope f o r reducing cur- r e n t economic r e p o r t i n g was l i m i t e d by t h e need f o r t h e Bank t o keep members of t h e C o n s u l t a t i v e Group (which i t heads) informed and t o make up i t s own mind a b o u t Colombia's c u r r e n t performance and c r e d i t w o r t h i n e s s . Those respon- s i b l e f o r o p e r a t i o n s i n Colombia a l s o s a i d t h a t more s p e c i a l i z a t i o n of econo- mic work between t h e Bank and t h e IMF would b e d e s i r a b l e and t h a t more h e l p s h o u l d be a v a i l a b l e from t h e Developtnent P o l i c y S t a f f ( p o s s i b l y by t r a n s f e r of personnel) . Review o f Action: D e s p i t e t h e d i f f i c u l t i e s of f r e e i n g s t a f f from e l s e w h e r e , i t was p o s s i b l e t o p u t t o g e t h e r teams f o r t h e s p e c i a l s t u d i e s of t h e A g r i c u l t u r e S e c t o r and F i n a n c i a l Markets a l r e a d y mentioned, and t h e Bank's p r i n c i p a l p r o d u c t s about Colombia i n 1973 were t h e r e p o r t s on t h e s e two s t u - d i e s and a u s e f u l r e s e a r c h p a p e r a b o u t t h e d i s t r i b u t i v e impact o f investment i n e d u c a t i o n ; o n l y a b r i e f economic r e p o r t w a s p r e p a r e d , a l o n g w i t h o t h e r r e l a t e d documentation, t o meet t h e needs o f t h e C o n s u l t a t i v e Group meeting i n J u n e 1973. The Bank h a s a l s o used t h e s u g g e s t e d means f o r promoting s t u d i e s , some of them f o r t h e f i r s t time. For i n s t a n c e , i t c o n t r a c t e d a n economic e v a l u a t i o n o f s e l e c t e d p r o j e c t s f i n a n c e d by t h e F i n a n c i e r a s w i t h a l o c a l Colombian r e s e a r c h i n s t i t u t e . To supplement t h e work of a b r i e f economic m i s s i o n e a r l y i n 1974 i t c o n t r a c t e d a s m a l l s t u d y o f t h e Colombian e n e r g y s i t u a t i o n w i t h a Colombian e x p e r t . I t was a l s o i n v o l v e d i n t h e arrangements f o r a major s t u d y o n t h e f u t u r e e l e c t r i c power development which is t o b e c a r r i e d o u t under German T e c h n i c a l A s s i s t a n c e . I n March 1974 i t made a l o a n of $8 m i l l i o n f o r t h e Government's Fund f o r P r o j e c t S t u d i e s (FONADE) t o h e l p meet t h e need f o r more pre-investment s t u d i e s , t o e n a b l e a w i d e r r a n g e o f i n t e r n a t i o n a l e x p e r t i s e t o b e tapped and t o h e l p t h e agency t o cope w i t h s t u d i e s i n more d i f f i c u l t a r e a s l i k e urban and r u r a l development. As r e g a r d s d i s t r i b u t i o n o f r e p o r t s , t h e Bank's major economic s t u d y o f 1970 w a s t r a n - s l a t e d i n t o Spanish and p u b l i s h e d i n book form i n 1973, t h e e d u c a t i o n r e s e a r c h s t u d y was publishbd i n 1974 and t h e s p e c i a l a g r i c u l t u r a l s e c t o r s t u d y was q u i t e w i d e l y d i s t r i b u t e d , from Washington, among Government o f f i c i a l s . Bow- e v e r r e p o r t s a r e s t i l l n o t r d a d i l y a v a i l a b l e , f o r i n s t a n c e t o academic eco- n o m i s t s and o t h e r p e r s o n s o u t s i d e Government, from t h e Bank's Bogota o f f i c e . Much more g ~ n e r a l l yi n t h e Bank t h e r e does seem t o have been a s i g n i f i c a n t s h i f t , which i s s t i l l c o n t i n u i n g , from g e n e r a l economic r e p o r t i n g toward s t u d i e s more f o c u s s e d t o s p e c i f i c i s s u e s and s p e c i f i c s e c t o r develop- ment. Bank-wide f i g u r e s on manpower e x p e n d i t u r e s f o r Economic and S e c t o r work on c o u n t r i e s g i v e some i n d i c a t i o n of t h i s .  I B R D zlanpvwer hxpencfitures on P r o d u c t i o n o f C o - u a , Economic and S e c t o r R e p o r t s - a n d S t u d i c s 1972-75 ( i n manweeks) Actual Planned FY 1972 -Y E' -1973 FY 1 9 7 4 PY 1975 B a s i c Economic R e p o r t s 781 1747 1324 1483 Updating Economic R e p o r t s /a - 3362 2394 2448 - 2008 Sub-total 4143 4141 3772 349 1 S p e c i a l Economic S t u d i e s 465 31 0 61 0 81 9 S e c t o r Surveys 2026 1741 1955 21 72 Sector ~ e v l e w s / ~ t u d i e s 446 39 1 6 82 1094 O t h e r S e c t o r Work /b - 340 -400 530 805 Total - /a i n c l u d i n g i n i t i a l Economic R e p o r t s on newly a c t i v e member c o u n t r i e s . - / b i n c l u d i n g S e c t o r B r i e f s , and o t h e r a d v i s o r y work. The t a b l e shows t h a t manpower e x p e n d i t u r e on g e n e r a l economic r e p o r t s h a s been d e c l i n i n g i n a b s o l u t e terms, w h i l e t h a t f o r b r o a d comprehensive s e c t o r s u r v e y s h a s remained r a t h e r c o n s t a n t . The a r e a s o f p a r t i c u l a r growth have been economic s t u d i e s o f p a r t i c u l a r t o p i c s , s e c t o r s t u d i e s and r e v i e w s (gene r a l l y c o n c e n t r a t e d more on a p a r t i c u l a r i s s u e o r s u b - s e c t o r t h a n t h e b r o a d s e c t o r s u r v e y ) and s e c t o r b r i e f s . F u r t h e r e f f o r t s t o improve economic and s e c t o r r e p o r t i n g and a n a l y - sis, and t o make i t n o r e e f f i c i e n t , a r e underway. Most s i g n i f i c a n t l y , com- p r e h e n s i v e Bank-wide r e v i e w s by t h e r e s p o n s i b l e p o l i c y d e p a r t m e n t s , a t t h e end o f 1 9 7 4 , o f b o t h Economic R e p o r t i n g and S e c t o r R e p o r t i n g h a v e l e d t o v e r y p a r a l l e l c o n c l u s i o n s t l - a t t h e t r e n d s o f t h e l a s t few y e a r s s h o u l d b e e x t e n d e d by g r e a t l y i n c r e a s i n g t h e number o f s t u d i e s f o c u s s e d on p a r t i c u l a r i s s u e s and problems ( g e n e r a l l y o f a long-run n a t u r e ) and by c u t t i n g down c o n s i d e r a b l y b o t h on t h e r e p e t i t i v e p r o d u c t i o n , u p d a t i n g and r e c a s t i n g o f comprehensive a s s e s s m e n t s ( o f a n economy o r a s e c t o r w i t h i n a n economy) f o r d i f f e r e n t pur- p o s e s and on t h e s c a l e and n u n b e r o f comprehensive s e c t o r s u r v e y s . S i n g l e s h o r t Country Economic Elemoranda and Country S e c t o r Memoranda would b e pre- p a r e d o n a r e g u l a r b a s i s ( b u t n o r m a l l y l e s s t h a n o n c e a y e a r ) t o meet t h e b a s i c r e q u i r e m e n t s f o r o p e r a t i o n a l p u r p o s e s , and t h e t i m e f r e e d would b e devoted t o more s e l e c t i v e i n - d e p t h s t u d i e s t h a t would b e planned o v e r a p e r i o d o f y e a r s t o e v e n t u a l l y c o n t r i b u t e t o an i n t e g r a t e d long-run view i n a B a s i c Economic R e p o r t , produced e v e r y 5-8 y e a r s . I t was s u g g e s t e d , f o r i n s t a n c e , t h a t e a c h c o u n t r y economist s h o u l d work p a r t o f e a c h y e a r i n f u t u r e on a t l e a s t o n e i n - d e p t h s t u d y o f a problem i n t h e c o u n t r y r o r which h e was respons- i b l e . S e c t o r work is t o b e g i v e n a s h a r p e r f o c u s by c a r e f l ~ ld i s c u s s i o n of i s s u e s papers b e f o r e d e p a r t u r e o f t h e mission and by p r e p a r a t i o n o f model g u i d e l i n e s f o r such work i n each s e c t o r . A s r e g a r d s g r e a t e r r e l i a n c e on t h e I W , a s p e c i a l e x p e r i m e n t a l program was agreed i n A p r i l 1974 t o t e s t , d u r i n g F Y 1975, d i f f e r e n t ways of increasing collaboration. For t h r e e c o u n t r i e s ( F i j i , W . Samoa and I r e l a n d ) planned Bank economic m i s s i o n s were dropped and f u l l r e l i a n c e was t o be placed on t h e IbIF m i s s i o n s , s u i t a b l y b r i e f e d . For f o u r c o u n t r i e s (Botswana, I r a n , S i e r r a Leone and Yemen A.R.) s e p a r a t e Bank and Fund m i s s i o n s have been sche- duled s i m u l t a n e o u s l y , w i t h c l o s e c o o p e r a t i o n b e f o r e , during and a f t e r t h e f i e l d m i s s i o n s , t o reduce t h e workload o f b o t h t h e missions and Government o f f i c i a l s . For I n d o n e s i a a j o i n t Bank/Pund mission was planned, w h i l e f o r two f u r t h e r c o u n t r i e s (Uruguay and Panama) a Bank s t a f f member i s t o be a t - tached t o an 1 % m i s s i o n t o p r e p a r e a b r i e f r e p o r t s p e c i f i c a l l y f o r Bank pur- poses. A t t h e end o f t h e process each o f t h e s s t e n experiments i s t o be e v a l u a t e d , t o s e e what f u r t h e r s t e p s a r e needed t o improve c o l l a b o r a t i o n . The Bank i s a l s o a t t e m p t i n g t o e a s e and e x p e d i t e t h e d i s s e m i n a t i o n of r e p o r t s produced. Delay between completion and d i s s e m i n a t i o n f o r t h o s e r e p o r t s t h a t a r e made widely a v a i l a b l e h a s been s u b s t a n t i a l l y reduced. 2.1 1 P r o j e c t Monitorinq O r i g i n a l Recommendation: P r o j e c t s u p e r v i s i o n i n most f i e l d s needs s t r e n g t h e n i n g by f u l l e r i n f o r m a t i o n flows on p r o j e c t performance and more a n a l y s i s of t h i s i n f o r m a t i o n . A t t e n t i o n h a s tended t o b e c o n c e n t r a t e d on l o a n disbursements a s an i n d i c a t o r o f p r o j e c t performance, i n t h e absence of more r e l e v a n t d a t a , o r e l s e on a few g e n e r a l f i n a n c i a l i n d i c a t o r s which sometimes h i d e problems r a t h e r t h a n r e v e a l them. I t should be p o s s i b l e t o d e v i s e a t t h e t i m e of p r o j e c t a p p r a i s a l a system of i n f o r m a t i o n flows about a few key v a r i a b l e s , g e n e r a l l y of a t e c h n i c a l n a t u r e , o r concerned w i t h r e g i o n a l impact, which w i l l show whether t h e main b e n e f i t s expected o f t h e p r o j e c t a r e m a t e r i a l - i z i n g on s c h e d u l e o r n o t ; i n some c a s e s , e s p e c i a l l y where t h e r e a r e d i f f i c u l t problems i n i n s t i t u t i o n a l performance, i t may be a p p r o p r i a t e a t t h e t i m e of l o a n n e g o t i a t i o n s t o a g r e e on s p e c i f i c t a r g e t s f o r t h e s e v a r i a b l e s w h i l e i n o t h e r c a s e s t h e comparison may be r a t h e r w i t h f o r e c a s t s made. The need f o r t h i s t y p e of i n f o r m a t i o n flow may have t o b e t a k e n i n t o account more w p l i c i t - l y i n t h e d e s i g n of management i n f o r m a t i o n systems f o r borrowers, f o r which t h e Bank h a s o f t e n financed c o n s u l t a n t a s s i s t a n c e . Improved flows of perform- ance d a t a a r e p a r t i c u l a r l y r e q u i r e d f o r s u b - p r o j e c t s financed by l o a n s t o i n - d u s t r i a l and a g r i c u l t u r a l f i n a n c e i n t e r m e d i a r i e s . I n t h e s e c a s e s t h e purpose should be. p a r t l y t o e n a b l e t h e Bank t o know what r e s u l t s i t s l o a n funds a r e producing and p a r t l y t o provide case d a t a which would deepen understanding of t h e f a c t o r s a t work a f f e c t i n g t h e s e c t o r s o t h a t improvements could be made i n p r o j e c t d e s i g n o r a d v i c e could be given t o Governments about appro- p r i a t e p o l i c y changes. Strengthened i n f o r m a t i o n flows about p r o j e c t s and sub- p r o j e c t s w i l l b e a l l t h e more important t o t h e e x t e n t t h a t t h e Bank makes more use of i n t e r m e d i a r i e s i n d i f f e r e n t f i e l d s and of s e c t o r l e n d i n g techniques. I n Colombia b e t t e r i n f o r m a t i o n systems of t h e t y p e d e s c r i b e d a r e a l s o needed by t h e N a t i o n a l Planning Department and work on t h i s s u b j e c t f o r Colombia might perhaps u s e f u l l y be c o o r d i n a t e d with i t .  While t h e r e was a g r e a t d e a l o f g e n e r a l agreement t h a t t h e Bank needed t o complement t h e t r a d i t i o n a l l y r e a s o n a b l y a d e q u a t e i n f o r m a t i o n f l o w s i t h a s r e c e i v e d o n c o n s t r u c t i o n and procurement p r o g r e s s w i t h b e t t e r and more t i m e l y d a t a a b o u t p r o j e c t r e s u l t s , t h e r e was c o n s i d e r a b l e d i s a g r e e m e n t as t o t h e p r i n c i p a l p u r p o s e s s u c h a s y s t e m s h o u l d b e d e s i g n e d t o s e r v e -- w h e t h e r t o improve f u t u r e f o r e c a s t i n g by b e t t e r knowledge of p a s t e r r o r s , f o r example, o r t o e n a b l e b e t t e r comparisons between c o u n t r i e s and b o r r o w e r s , o r t o pro- duce b e t t e r answers t o E x e c u t i v e D i r e c t o r s ' q u e s t i o n s , o r t o g i v e e a r l y warn- i n g o f p r o j e c t problems o r m e r e l y t o e n a b l e p r o j e c t p r o g r e s s r e p o r t i n g t o be h a n d l e d i n t h e Bank by l o w e r g r a d e s t a f f . C o n s e q u e n t l y t h e O p e r a t i o n s Evalua- t i o n Department p r e p a r e d a s u p p l e m e n t a r y n o t e c l a r i f y i n g t h a t t h e i n f o r m a t i o n s y s t e m e n v i s a g e d was i n t e n d e d p r i n c i p a l l y t o e n a b l e more e f f e c t i v e p r o j e c t s u p e r v i s i o n (and b e t t e r a l l o c a t i o n o f s u p e r v i s i o n r e s o u r c e s ) by t h e Bank and s e c o n d l y t o h e l p m e e t t h e f r e q u e n t l y e n c o u n t e r e d n e e d o f b o r r o w e r s , and more e s p e c i a l l y of t h e i r n a t i o n a l planning a u t h 0 r i t i . e, ~ f o r b e t t e r i n f o r m a t i o n on a c t u a l performance o f on-going p r o j e c t s . F i v e key f e a t u r e s t o t h e i n f o r m a t i o n system were i d e n t i f i e d . F i r s t , a p a r t p o s s i b l y from o n e o r two, t h e perform- a n c e i n d i c a t o r s chosen would n o r m a l l y b e n o n - s t a n d a r d i z e d as between p r o j e c t s ; t h e y would b e s e l e c t e d t o c a p t u r e performance on key e l e m e n t s i n t h e economic s u c c e s s o f t h e p a r t i c u l a r p r o j e c t o r i n t h e r e s o l u t i o n of problems i d e n t - i f i e d a t tile t i m e of a p p r a i s a l . Second, t h e i n d i c a t o r s used would b e l i m i t e d t o 8 u r 10 pe-r p r o j e c t , i n o r d e r t o f o c u s a t t e n t i o n on t h e most i m p o r t a n t i s s u e s . I h i r d , t a r g e t l e v e l s o f t h e . i n d i c a t o r s f o r , s a y , six-monthly p e r i o d s i n t h e C u t u r e would n o r m a l l y b e d i s c u s s e d and a g r e e d a t t h e t i n e o f a p p r a i s a l and cic.gotiat.:.oms, a l t h o u g h t h e s y s t e m would a l s o sometimes b e u s e d t o g e n e r a t e i n f o r n a t j o n f o r comparison w i t h f o r t c a s t s ( f o r example, o f t r a f f i c i n t r a n s - p : i r t prefects) o r e v e n s i m p l y t o i n d i c a t e t r e n d s n o t f o r e c a s t e d ( f o r example, f o r s u b - - p r o j e c t s o f t r a d i t i o n a l DFC l o a n s ) . F o u r t h , t h e systeiii f o r g e n e r a t - irxy,, a s s o n b l i n g and s ~ n n m a r i z i n gt h e i n f o r m a t i o n would b e a g r e e d a t t h e t . i m e . cf a p p r a ! s a l --- and i t s e s t a b l i s h m e n t would b e i n t e g r a t e d w i t h any management ass-Estanc..e p r o v i d e d . F i f t h , as t h e p r o j e c t u n f o l d e d , thc?. a c t u a l v a l u e s o f t1:e i n d i c . a t c r s would b e r e p o r t e d i n r e a d i l y u n d e r s t a n d a b l e form, w i t h t a . r g e t d r t o r e c s s r v a l , . ~ e s f o r c o ~ z p a r i s o nwherever a p p r o p r i a t e , i n p r o j e c t p r o g r e s s r , ~ p o r r _ s . W i t ' i l i r ~t h e Bank t h e y would b e r e g u l a r l y g i v e n : '.I supervision reports 21:d eve;3?tunLiy i n t h e summary r e p o r t i n g form f o r p r o j e c t s u p e r v i s i o n work. F i n a l - l y I t w a s s u g g e s t e d t h a t s i n c e t h e i n d i c a t o r s s e l e c t e d would n o r m a l l y b e no more t h a n t h e p i n n a c l e o f a b o r r o w e r ' s e x i s t i n g management i n f o r m a t i o n system t h e r e shou1.d n o t b e t o o much d i f f i c u l t y i n implementing t h e proposed system a t a n e a r l y d a t e e x c e p t i n t h e c a s e o f a g r i c u l t u r a l c r e d i t pro;cc'ts r a i s i n g d i f f i c u l t s u r v e y , samp1in.g and c o n t r o l group problems - which s h o u l d however become e a s i e r t o s o l v e w i t h t h e e x p e r i e n c e t h e Bank was t h e n a l r e a d y a c c u m u l a t i n g i n m o n i t o r i n g work o n s u c h p r o j e c t s , p a r t i c u l a r l y i n Mexico. -- Bank Response: T h e s e p r o p o s a l s a p p e a r e d t o r e c e i v e a w i d e measure of agreement a t t h e t i m e , a l t h o u g h j u s t i f i a b l e c o n c e r n was e x p r e s s e d a b o u t a s p e c t s s u c h a s t h e i n i t i a l s t a f f - c o s t i n v o l v e d i n t h e i r i n t r o d u c t i o n i n some c a s e s , o r t h e d i f f i c u l t i e s o f i n t r o d u c i n g t h e system w i t h b o r r o w e r s who were n o t even f u l f i l l i n g t h e e x i s t i n g c o n s t r u c t i o n p r o g r e s s r e p o r t i n g r e q u i r e m e n t s . However, r e v i s e d f o r m a l r e s p o n s e s w e r e n o t o b t a i n e d s i n c e t h e s u b j e c t remained under c o n t i n u o u s d i s c u s s i o n .  -Review o f A c t i o n : I n p r a c t i c e o n l y 10% o f t h e a p p r o x i m a t e l y 170 nev p r o j e c t a p p r a i s a l s p r e s e n t e d t o t h e E x e c u t i v e D i r e c t o r s i n F Y 1974 con- tained indicators of t h e type suggested -- v i r t u a l l y a l l t h o s e i n Railways ( a s f o r some y e a r s p r e v i o u s l y ) , a l t h o u g h sometimes t o o numerous; a l l i n Tele- communications, a l t h o u ~ I ie x c t s s i v e l v s t a n d a r d i z e d a n d n o t r e l a t e d t o t h e bor- rowers ' p a r t i c u l a r problems ; one d u c a t i o n p r o j e c t ( S i n g a p o r e ) , b u t w i t h o u t t a r g e t v a l u e s t o t h e i n z i c a t o r s s e l e c t e d ; b o t h S i t t s and S e r v i c e s p r o j e c t s ; and b o t h Urban T r a n s p o r t p r o j t c t s , i n a p a r t i c u l a r l y m e a n i n g f u l manner and t o b e i n t e g r a t e d i n t o f u l l - s c a l e programs o f a c t i o n by c o n s u l t a n t s and b o r r o w e r s i n t h e months f o l l o w i n g l o a n a p p r o v a l . A n o t h e r 10% o f t h e a p p r a i s a l r e p o r t s - a l l f o r complex p r o j t c t s i n A g r i c u l t u r e , E d u c a t i o n and R u r a l D e v e l o p ~ e n t -- made s p e c i f i c m e n t i o n o f a r r a n g e m e n t s t h a t had b e e n made, w h e t h e r w i t h f o r e i g n o r l o c a l c o n s u l t a n t s o r by e s t a b l i s h m e n t o f a s p e c i a l p r o j e c t e v a l u a - t i o n u n i t o r by e x e c u t i o n o f p a r t i c u l a r t y p e s o f s t u d i e s ( s u c h a s t r a c e r s t u - d i e s o f e d u c a t i o n p r o j e c t s ' g r a d u a t i n g s t u d e n t s ) , f o r follow-up on a c o n t i n u - Ing b a s i s t o r e s u l t s o f p r o j e c t s p r e v i c u s l y f i n a n c e d and proposed t o b e f i - nanced. F o r most of t l w r e m a i n i n g 80% o f p r o j e c t s proposed d u r i n g E Y 1974 t h e r e i s no e v i d e n c e t h a t b e t t e r i n f o r m a t i o n t h a n i n t h e p a s t w i l l b e a v a i l - a b l e on a t i m e l y b a s i s a b o u t p r o j e c t r e s u l t s , e x c e p t b y l a b o r i o u s s t u d y . Despite these r a t h e r disappointing o v e r a l l trends, individual i n i - t i a t i v e i n t h e Bank h a s r e s u l t e d n o t o n l y i n t h e performance t a r g e t t i n g and l o c a l m o n i t o r i n g a r r a n g e n e n t s f o r t h e p r o j e c t s mentioned b u t a l s o i n p o s i t i v e s t e p s i n many i n d i v i d u a l s e c t o r s . A u s e f u l handbook o f p o t e n t i a l l y s u i t a b l e i n d i c a t o r s f o r P u b l i c Utilities p r o j e c t s h a s been produced. I/ P r o g r e s s h a s been made i n b r i n g i n g t h e work or: t h e DFCs P r o j e c t s D a t a ~ a n c ,s t a r t e d i n September 1971, t o t h e s t a g e where a c o n s i d e r a b l e a r r a y o f i n d i c a t o r s can b e c o l l e c t e d a b o u t DFCs ' s u b p r o j e c t s . E x p e r i e n c s is b e g i n n i n g t o a c c r u e on t h e a c t u a l o p e r a t i o n of e v a l u a t i o n systems b u i l t i n t o population p r o j e c t s i n t h e two p r i n c i p a l c a s e s ( I n d i a and I n d o n e s i a ) where p r o v i s i o n was made f o r t h i s ( a s opposed t o s p e c i a l one-shot e v a l u a t i o n s t u d i e s on p a r t i c u l a r p r o b l e m s ) . S p e c i a l " b e f o r e and a f t e r t ' s t u d i e s o n t h e e f f e c t s o f f e e d e r r o a d s , i n i t i a t e d a f e v y e a r s a g o , a r e underway i n E t h i a ~ i a a n d b e g i n n i n g i n Yemen Arab E e p u b l i c and 1Ialagasy R r p u b l i c . The s i g n i f i c a n t e f f o r t devoted t o i n t r o d u c t i o n of a f a r m - l e v e l m o n i t o r i n g system, based m a i n l y on f a r m e r s ' r e c o r d b o o k s , i n Mexico h a s been summarized, 2/ and t h e r e s u l t s o f t h e f i r s t f u l l a p p l i c a t i o n a r e a b o u t t o come i n . Research o r i e n t e d t o m o n i t o r i n g t h e a c h i e v e m e n t o f educa- t i o n o b j e c t i v e s and s t u d e n t performance on a n i n t e r n a t i o n a l l y comparable b a s i s i s reaching t h e s t a g e of f i e l d - t e s t i n g . And t h e Bank h a s w i s e l y g i v e n s p e c i a l a t t e n t i o n t o i n c l u s i o n o f a n e x t e n s i v e l o c a l m o n i t o r i n g s y s t e m (sometimes w i t h f o r e i g n a s s i s t a n c e ) i n most o f t h e more e x p e r i m e n t a l p r o j e c t s i n which i t h a s been i n v o l v e d - s u c h a s i n FY 1 9 7 4 , S e n t g a l S i t e s and S e r v i c e s , I n d i a n lfarke t s P r o j e c t s , Mauri r i u s K u r a l ; ) e v e l o p n e n t , Colombia E d u c a t i o n , Mali 1/ - G u i d e l i n e s f o r P r o j e c t b I o n i t o r i n l ; System f o r P u b l i c U t i l i t i e s P r o j e c t s (Sov. 8, 1973). - 2/ Gu i d e l i n e s f o r Farrn/~anch-lAeve.l?lonit o r i n g o f A g r i c u l t u r e and L i v e s t o c k E n t e r p r i s e s U t i l i z i n g Bank/IDA F i n a n c i n g ( J u n e 1 9 7 4 ) . I n t e g r a t e d R u r a l :)evelopmefit, Upper V o l t a E d u c a t i o n - where c l o s e and t i m e l y m o n i t o r i n g i s p a r t i c u l a r l y e s s e n t i a l t o g i v e t h e p r o j e c t flexibility t o a d a p t i n l i g h t of experience. F i n a l l y , a very u s e f u l o v e r a l l review of t h e then s t a t u s o f p r o j e c t m o n i t o r i n g i n t h e Hank was u n d e r t a k e n l a t e i n 1973. A t t h i s s t a g e i t would s w n t h a t two key s t e p s would seem worth t h e Bank's c o n s i d e r a t i o n . F i r s t , i t c o u l d b e i n t r o d u c e d a s a s t a n d a r d pro- c e d u r e i n t h e n e a r f u t u r e t h a t t h e main p o i n t s i d e n t i f i e d i n p r e p a r a t i o n and a p p r a i s a l ahout a p r o j e c t ' s o b j e c t i v e s (whether economic, i n s t i t u t i o n a l , p h y s i c a l o r f i n a n c i a l ) would b e s u i m a r i z e d i n a set of composite i n d i c a t o r s , w i t h t a r g e t v a l u e s ( a g r e e d w i t h borrowers) a s s i g n e d , p r e s e n t e d on a s i n g l e annex page t o e a c h a p p r a i s a l r e p o r t ; such i n d i c a t o r s would no doubt improve w i t h more e x p e r i e n c e , b u t i t would n o t seem t o o e a r l y t o s t a r t . Second, and complementary t o t h i s , r e s p o n s i b i l i t y n e e d s t o b e a s - s i g n e d t o a s m a l l u n i t w i t h i n t h e Bank f o r a d v i c e t o o p e r a t i n g d e p a r t m e n t s a b o u t t h e l o c a l m o n i t o r i n g s y s t e m s which a r e i n c r e a s i n g l y b e i n g found neces- s a r y i n some o f t h e Bank's newer and more complex p r o j e c t s . T h e r e are a l a r g e number o f r e l a t i v e l y t e c h n i c a l problems which seem t o b e l a r g e l y common b e t - ween s e c t o r s -- sample d e s i g n and s e l e c t i o n , c h o i c e o f c o n t r o l group and means of g e t t i n g t h e i r c o o p e r a t i o n , i m p o r t a n c e o f c l e a r b a s e - l i n e s , ways o f v e r i f y - ing o r assessing t h e accuracy of responses t o questionnaires, c h a r a c t e r i s t i c s and s e l e c t i o n o f i n t e r v i e w e r s , e t c . E x p e r i e n c e h a s begun t o come i n on t h e e a r l i e s t m o n i t o r i n g s y s t e m s f o r complex a g r i c u l t u r a l p r o j e c t s w i t h which t h e Bank w a s a s s o c i a t e d , and i t shows t h a t i n some c a s e s major t e c h n i c a l m i s t a k e s w e r e made -- f o r i n s t a n c e i n t h e Zlalawi Lilongwe p r o j e c t where most o f t h e e f f o r t was s p e n t t o g a t h e r d t t a i l e t l farm management d a t a which i t was t h e n d e c i d e d ?as n o t worth a n a l y s i s , m a i n l y b e c a u s e o f f a n n e r s ' l i m i t e d s c o p e f o r c h o i c e , and i n t n e Kenya L i v e s t o c k p r o j e c t where t h e i n i t i a l farm r e c o r d book i n t r o d u c e d w a s s i m p l y t o o c o m p l i c a t e d f o r most f a r m e r s t o f i l l i n a c c u r a t e l y . 3ow rlre rianlr i s i n c r c a s i n g l y promoting t h e development of l o c a l m o n i t o r i n g s v s t e v s , and not i n f r e c i u c n t l v r e q u i r i n g b o r r o w e r s ' commitment t o e s t a b l i s h therr as 3 c o n d i t j o r ! o f l o a n a p p r o v a l , b u t i t i s n o t c l e a r t h a t m i s t a k e s a r e n o t a ~ a i bein; r ~ made -- s t a r t i n g t o o l a t s s o t h a t c r i t i c a l b a s e - l i n e d a t a can n e v e r b e a v a i l a b l e , f o r j n s t a n c e , i n some c a s e s , o r n e g l e c t i n g t o pirovide f o r anv : d u t r o l group i n oLilers, o r s p c n d i n g s u b s t a n t i a l sums on one-shot e v a l u a t i o n e f f o r t s w h t r e what i s r e q u i r e d i s a c o n t i n u i n g e v a l u a t i o n and m o n i t o r i n g s y s t e n . And few i f any o f t h e s e s y s t e m s seem t o b e d e s i g n e d i n t h e a p p r o p r i a t e c o n i c a l way f o r a management i n f o r m a t i o n s y s t e m , t o procluce i n c r e a s i n g l y i n t e g r a t e d i n f o r m a t i o n f o r t h e management of t h e p r o j e c t and e v e n t u a l l y f o r t h e n a t i o n a l p l a n n i n g a u t h o r i t i e s and t h e Bank i t s e l f . 2.12 Ev -- aluation of Consultants O r i g i n a l Recommer.dation: The Bank s h o u l d make a more s y s t e m a t i c e f f o r t a t e v a l u a t i o n o f c o n s u l t a n t s ' performance. E s p e c i a l l y i n c a s e s where t h e Bank h a s recommende~lo r r e q u i r e d t h e h i r i n g o f c o n s u l t a n t s , o r where i n t e r n a t i o n a l f i r m s a r e involved, i t should b e a s t a n d a r d requirement t h a t s t a f f r e s p o n s i b l e f o r s u ~ e r v i s i n pa p r o j e c t d i s c u s s c o n s u l t a n t s ' performance w i t h t h e b o r r o l w r and o t h e r s , and w r i t e a b r i e f e v a l u a t i o n , a t l e a s t once  a y e a r , o f t h e performance o f t h e c o n s u l t a n t s a s a f i r m ant1 as i n d i v i d u a l s . These e v a l u a t i o n s would g i v e t h e Bank a n up-to-date view o f f i r m s ' c u r r e n t l e v e l o f performance f o r u s e i n a d v i s i n g b o r r o w e r s a b o u t s e l e c t i o n o f con- s u l t a n t s f o r f u r t h e r j o b s and i n h i r i n g c o n s u l t a n t s i t s e l f . The e v a l u a t i o n s h o u l d b e comprehensive, b r i e f l y c o v e r i n g a l l t h e p r i n c i p a l t a s k s t h e con- s u l t a n t w a s expected t o perform, i n c l u d i n g t r a i n i n g . A procedure of t h e s o r t d e s c r i b e d could h e l p t o s e c u r e b e t t e r c o n s u l t a n t performance f o r bor- rowers i n g e n e r a l and a l s o h e l p t o i n t r o d u c e new c o n s u l t a n t s , i n i t i a l l y e n c o u n t e r e d i n t h e i r own c o u n t r y , t o work i n o t h e r c o u n t r i e s . Bank Response: The Bank s t a t e d t h a t i t v e r y l a r g e l y c o n c u r r e d w i t h t h i s recommendation, q u e s t i o n i n g o n l y t h e f e a s i b i l i t y o f p - rep - a r i n g sound r e p o r t s a n n u a l l y o n t h e members o f c o n s u l t a n t teams a s opposed t o t h e teams a s a whole b u t a g r e e i n g t h a t t h i s s h o u l d b e done i n t h e f i n a l r e p o r t t o t h e e x t e n t p o s s i b l e . I t w a s p o i n t e d o u t t h a t work had i n f a c t a l r e a d y been p u t underway t o s t r e n g t h e n s t a n d i n g i n s t r u c t i o n s on t h i s m a t t e r and t o d e v e l o p a s y s t e m f o r i n t e r n a l r e p o r t i n g on t h e performance o f a l l c o n s u l t i n g f i r m s r e t a i n e d by t h e Bank, o r i n c o n n e c t i o n w i t h B a n k - a s s i s t e d p r o j e c t s , a t t h e end o f t h e i r a s s i g n m e n t . Review o f A c t i o n : The p l a n n e d r e p o r t i n g s y s t e m w a s completed and i n s t r u c t i o n s i s s u e d i n t h e summer o f 1 9 7 3 , p r o v i d i n g n o t f o r a n n u a l r e v i e w s b u t i n p a r t i c u l a r f o r p r e p a r a t i o n o f comprehensive f i n a l r e p o r t s w i t h i n t h r e e months o f t h e c o n s u l t a n t s c o m p l e t i n g t h e i r a s s i g n m e n t , f o r a l l c o n s u l t a n t s r e t a i n e d by t h e Bank ( e . g . , u n d e r UNDP/Bank t e c h n i c a l a s s i s t a n c e g r a n t s ) , and f o r t h o s e r e t a i n e d by b o r r o w e r s f o r B a n k - a s s i s t e d p r o j e c t s whenever t h e s t a f f is s u f f i c i e n t l y i n v o l v e d t o form sound judgments b a s t d on d i r e c t c o n t a c t s w i t h t h e c o n s u l t a n t s ' work. Very few s u c h r e p o r t s h a v e i n f a c t been p r e p a r e d , a p p a r e n t l y p a r t l y due t o t h e l a r g e amount o f s t a f f r e a s s i g n m e n t t h a t h a s oc- . c u r r e d o v e r t h e l a s t two y e a r s s o t h a t few p e o p l e h a v e been a b l e t o s e e a c o n s u l t a n t c o n t r a c t r i g h t t h r o u g h . However, f r a n k a s s e s s m e n t of c o n s u l t a n t s ' performance by Bank o p e r a t i n g s t a f f h a s become a more prominent p a r t of re- g u l a r i n t e r n a l r e p o r t s on t h e p r o g r e s s o f B a n k - a s s i s t e d p r o j e c t s and a t t h e i r c o m p l e t i o n , and t h e s y s t e m o f f u l l f i n a l r e p o r t s w i l l p r o b a b l y b e g i n t o ope- r a t e when f u l l e r s u p e r v i s i o n o f i t i s i c i t i a t e d . Whether t h e s e s t r i c t l y i n t e r n a l and c o n f i d e n t i a l r e p o r t s d o , o r could, s u b s t a n t i a l l y s e r v e t h e o r i g i n a l l y suggested purposes o f securing b e t t e r c o n s u l t a n t performance and h e l p i n g t o i n t r o d u c e new c o n s u l t a n t s t o work i n o t h e r c o u n t r i e s i s q u e s t i o n a b l e . The Bank h a s b e e n i n s t r u m e n t a l i n t h e a p p o i n t m e n t o f c o n s u l t a n t s n o t amung t h e t r a d i t i o n a l well-kncwn names t o p r o j e c t s i n o t h e r c o u n t r i e s -- f o r i n s t a n c e a p Argent int f i r m for a p r o j e c t i n Z a i r e and a P h i l i p p i n e f i r m f o r p r o j e c t s elsGwhere i n Asia -- b a t t h i s h a s been more i n c i d e n t a l t h a n as t h e r e s u l t o f any s y s t e m . And t h e r e a r e c a s e s where f i r m s seem t o have shown v e r y much t h same ~ sl~~rtcorning isn l a t e r pro- j e c t s as i n e a r l i e r o n e s , witllout any e v i d e n c e t h z t t h e Bank a d v i s e d t h e new borrower o f t h e poor e a r l i e r p e r f o r n a n c c -- f o r i n s t a n c e i n t h t c a s e of a f i r m which worked on an I D A p r o j e c t i n P a k i s t a n , and t h e n i n I n d o n e s i a , and a n o t h e r which had t o b e r e l i e v e d of a j o b i n Colosibin, o n l y t o b e t a k e n on l a t e r f o r a r a t h e r s i n i l a r a s s i g n m e n t i n Turkey. A s y s t e m which produces  r e p o r t s s o c o n f i d e n t i a l t h a t t h e y cannot even b e widely known i n t h e Bank -- which may be n e c e s s a r y f o r t r u e s e c r e c y -- can h a r d l y b e expected t o do much t o s t i m u l a t e f i r m s t o b e t t e r performance and a l s o i n c r e a s e s t h e p o s s i b i l i t y of inaccuracy. There a r e of c o u r s e good reasons f o r keeping t h e r e p o r t s confiden- tial. A f a i r assessment i n i n h e r e n t l y d i f f i c u l t , because of t h e complex r o l e the c o n s u l t a n t p l a y s i n a t r i p a r t i t e r e l a t i o n Bank-Consultant-Borrower, be- cause of h i s dependence on t h e borrower's c o o p e r a t i o n and p r o v i s i o n of good c o u n t e r p a r t s , and b e c a u s e o f t h e d e t a i l e d f a m i l i a r i t y w i t h h i s work t h a t would r e a l l y b e r e q u i r e d ; moreover Bank staff-members a r e n o t e n t i r e l y d i s i n t e r e s t e d p a r t i e s . An a d v e r s e assessment could have s e r i o u s consequences f o r a c o n s u l t - a n t ' s b u s i n e s s p r o s p e c t s . And q u e s t i o n s of Bank l e g a l l i a b i l i t y could a r i s e , although t h i s does n o t appear very l i k e l y and t h e Bank would a p p e a r t o b e f a i r l y f u l l y p r o t e c t e d by i t s i n s u r a n c e coverage. The o b j e c t i v e s o f s e c u r i n g b e t t e r c o n s u l t a n t performance and i n - t r o d u c i n g f i r m s more b r o a d l y seem t o us s u f f i c i e n t l y i m p o r t a n t t o make t h e r i s k s of an o c c a s i o n a l mistaken assessment worth running -- particularly i f t h i s r i s k i s g r e a t l y d i l u t e d , a s it can b e , by opening t h e whole system and s e c u r i n g a n e v a l u a t i o n from t h e borrower, who s h o u l d b e most f a m i l i a r w i t h t h e performance of h i s c o n s u l t a n t , and g i v i n g t h e c o n s u l t a n t t h e chance t o coinrnent on any o p i n i o n s expressed by t h e borrower o r by t h e Bank. It would b e important t o g u i d e any comments t o b e a s s p e c i f i c as p o s s i b l e , p a r t i c u l a r l y about a r e a s o f weakness, and t o make s u r e t h a t t h e assessments would i n c l u d e t h e c r u c i a l q u a l i t a t i v e judgments and n o t b e confined merely t o q u e s t i o n s o f c l e a r l y u n e t h i c a l o r u n p r o f e s s i o n a l p r a c t i c e s . Given t h e l a r g e and growing volume of c o n s u l t a n t c o n t r a c t s w i t h which t h e Bank is concerned and t h e importance of i t s r o l e i n c a u s i n g borrowers t o h i r e c o n s u l t a n t s i n t h e f i r s t . p l a c e , e f f o r t t o reach a b e t t e r system o f c o n s u l t a n t e v a l u a t i o n seems worth- w h i l e ; a p e r f e c t system, which produced o n l y thorough and d i s i n t e r e s t e d com- ]:lents , is probably i m p o s s i b l e . 111. Major S e c t o r s o f T r a d i t i o n a l Bank Emphasis Some 40% of t o t a l Bank-IDA l e n d i n g commitments t o Colombia through 1970 (and n e a r l y 45% of disbursements) had been f o r 1 7 e l e c t r i c power pro- j e c t s , and a n o t h e r 30% o f commitments (and 35% of disbursements) had been f o r t h e t r a n s p o r t s e c t o r , i n t h e form o f f i v e l o a n s f o r r a i l w a y s and s i x f o r hi&,ways. These f a i r l y l a r g e samples of p a s t l e n d i n g t h u s provided t h e b a s i s f o r a c e r t a i n number of s u g g e s t i o n s , some o f p o t e n t i a l l y wide a p p l i c a - b i l i t y , w i t h r e g a r d t o Bank a c t i o n i n t h e s e s e c t o r s , Many o f t h e p o i n t s which emerged w i t h r e s p e c t t o power were a l s o i n v e s t i g a t e d i n a wider s t u d y , covering power l e n d i n g i n seven o t h e r c o u n t r i e s a s w e l l a s Colombia, t h a t was c a r r i e d o u t c o n c u r r e n t l y w i t h t h e Colombia e v a l u a t i o n ; 1 / s i n c e a follow- up review t o t h a t r e p o r t i s a l s o b e i n g done a t t h i s t i m e , 2 7 i t seemed most c o n s t r u c t i v e t o d e a l with t h e Colombia s t u d y ' s s p e c i f i c s u F g e s t i o n s w i t h regard t o power i n t h a t c o n t e x t . Consequently t h i s c h a p t e r c o n c e n t r a t e s e n t i r e l y on t h e i d e a s put forward about t h e t r a n s p o r t a t i o n s e c t o r . 3.1 T r a n s p o r t a t i o n Information System O r i g i n a l Recommendation: The Bank should encourage, and i f neces- s a r y provide. t e c h n i c a l and f i n a n c i a l a s s i s t a n c e f o r , t h e e s t a b l i ~ h r n e ngf ~ an e f f i c i e n t i n f o r m a t i o n system f o r t r a n s p o r t a t i o n i n Colombia ( r e l i a b l e t r a f f i c c o u n t s , d e t a i l e d c o s t s and t a r i f f s , c a p a c i t y u t i l i z a t i o n f i g u r e s , performance i n d i c a t o r s , v e h i c l e f l e e t composition, e t c . ) which would e n a b l e more adequate a p p r a i s a l of t r a n s p o r t p r o j e c t s and b e t t e r s e c t o r s t u d i e s and policy-making. Bank Response : The Bank agreed about t h e need f o r a b e t t e r d a t a base on t h e t r a n s p o r t s e c t o r i n Colombia, although i t pointed o u t t h a t o t h e r s e c t o r s s u f f e r e d s i m i l a r problems. The issue wa6 t o b e taken up i n a t r a n s p o r t s e c t o r s t u d y which might b e included i n t h e p r o j e c t t o b e supported by t h e Bank's s i x t h l o a n f o r r a i l w a y s t h e n under c o n s i d e r a t i o n o r a l t e r n a t i v e l y carried out separately. Review of Action: The l o a n f o r r a i l w a y s was made i n August 1973 and t h e s e c t o r s t u d y h a s n o t been done, b u t Colombia is one of t h e f o u r coun- tries ( o t h e r s a r e B r a z i l , Honduras and Peru) included i n t h e j o i n t program of t h e Bank w i t h t h e UN Economic Commission f o r L a t i n America (ECLA) whose purpose is t o h e l p c o u n t r i e s s e t up Transport S e c t o r F i l e s b r i n g i n g t o g e t h e r , on a c o n t i n u i n g b a s i s and i n a well-ordered manner, a l l s t a t i s t i c s needed f o r t r a n s p o r t planning. Work s t a r t e d i n Colombia i n A p r i l 1973. A coordin- a t i n g committee has been set up i n t h e M i n i s t r y o f P u b l i c Works, a d r a f t pre- s i d e n t i a l d e c r e e has been prepared t o f o r m a l i z e t h e work, p r o g r e s s is c l o s e t o schedule and p o s i t i v e r e s u l t s a r e beginning t o m a t e r i a l i z e . 3.2 Comprehensive Planning Approach O r i g i n a l Recommendation: The Bank should have a b e t t e r understand- i n g t h a n i t now has of t h e impact o f t r a n s p o r t on t h e r e s t of t h e economy, e s p e c i a l l y when i t i s involved i n massive improvements i n t r a n s p o r t over a long p e r i o d , a s i n Colombia. To a t t a i n t h i s o b j e c t i v e , t h e Bank can follow t h r e e c o u r s e s . F i r s t , i t can a c c e l e r a t e t h e t e s t i n g of t e c h n i q u e s , such a s t h e Harvard T r a n s p o r t Model, t h a t w i l l allow t h e kind of o v e r a l l view r e q u i r e d . - 11 See "Operations E v a l u a t i o n Report: dated March 10, 1972. E l e c t r i c Power", IBRD Report No, 2-17 2/ - I s s u e d a s IBRD Report No. 690, "Closing Report on Actions R e l a t i n g t o Recormnendations of t h e E l e c t r i c Power E v a l u a t i o n Report of March 1972" (See M75-247) dated A p r i l 11, 1975. Second, i t can a c t i v e l y promote such comprehensive t r a n s p o r t planning i n s e l e c t e d c o u n t r i e s , perhaps providing t e c h n i c a l a s s i s t a n c e . T h i r d , i t can g i v e more t a p h a s i s t o t h e interactions of t r a n s p o r t w i t h t h e o t h e r s e c t o r s i n i t s t r a n s p o r t s e c t o r reviews. Bank Response: Tile Bank agreed w i t h t h i s s u g g e s t i o n and s a i d t h a t s o e c i a l a t t e n t i o n would c o n t i n u e t o b e given t o t h i s broad approach i n opera- t i o n a l work. A s r e g a r d s t r a n s p o r t s e c t o r models, i n c l u d i n g t h e Eiarvard Elodel which was t h e n b e i n g a p p l i e d i n a t r a n s p o r t s t u d y i n New Zealand under Bank a u s p i c e s , t h e Bank planned a small amount of work t o review t h e i r p o t e n t i a l and what would b e r e q u i r e d t o make them o p e r a t i o n a l f o r Bank work more widely, b e f o r e embarking on any major e f f o r t . Review of Action: I n Colombia t h e Bank has continued t o p r e s s f o r b e t t e r t r a n s p o r t s e c t o r planning, reaching agreement w i t h t h e Government i n connection w i t h t h e s i x t h railway l o a n f o r c e n t r a l i z a t i o n , by t h e end of 1974, of a l l t r a n s p o r t planning i n t h e M i n i s t r y of P u b l i c Works; p r e v i o u s l y t h e National Planning Department had done most of what s m a l l i n t e n n o d a l work was done, i n connection w i t h i t s r e s p o n s i b i l i t y f o r s e c t o r a l budget a l l o c a t i o n s and f o r s c r e e n i n g p r o j e c t s a s s i s t e d by f o r e i g n l o a n s . It is s t i l l t o o e a r l y t o judge t h e e f f e c t i v e n e s s of t h i s p o l i c y . Apparently p a r t l y a s a r e s u l t of t h e d i s s o l u t - i o n of t h e s p e c i a l i z e d u n i t s r e s p o n s i b l e , i n connection w i t h t h e Bank's October 19 72 r e o r g a n i z a t i o n , and p a r t l y because a l a r g e number o f major s e c t o r surveys had been done by t h e Bank o r w i t h UNDP f i n a n c i n g i n e a r l i e r y e a r s , t h e Bank's own s e c t o r work i n t r a n s p o r t ( i n c l u d i n g s e c t o r a l c o n t r i b u t i o n s t o economic r e p o r t s ) h a s , ac- cording t o a v a i l a b l e d a t a , f a l l e n s u b s t a n t i a l l y from accounting f o r some 600 manweeks i n FY 1972, t o less t h a n 400 i n FY 1973 and l e s s t h a n 100 i n FY 1974, b u t it w a s planned t o i n c r e a s e a g a i n t o about 250 manweeks i n N 1975; compre- h e n s i v e t r a n s p o r t s e c t o r surveys have n o t been produced s i n c e Ns 1972/73 ( t h e r e were seven produced o v e r t h e c o u r s e o f t h e two y e a r s ) . However t h e Bank has continued t o p r e s s f o r t h e e s t a b l i s h m e n t of s t r o n g t r a n s p o r t planning bodies w i t h i n c o u n t r i e s where i t h a s been involved i n t r a n s p o r t investments, normally d i s c u s s i n g t h e s u b j e c t i n connection w i t h p r o j e c t a p p r a i s a l and sorrie- times i n c l u d i n g i n l o a n s p r o v i s i o n f o r a p p r o p r i a t e t e c h n i c a l a s s i s t a n c e . The work done t h u s f a r on t r a n s p o r t models s u g g e s t s t h a t , although p a r t s of them have proved u s e f u l f o r a p p r a i s a l and e v a l u a t i o n s t u d i e s , they g e n e r a l l y r e q u i r e more improvement and p r a c t i c a l t e s t i n g b e f o r e they can b e widely used f o r planning work; t h i s a p p l i e s p a r t i c u l a r l y t o t h e p a r t s r e l a t i n g t r a n s p o r t w i t h o t h e r economic s e c t o r s . A t p r e s e n t i t appears t h a t t r a n s p o r t models w i l l be a p p l i e d by t h e Bank p r i m a r i l y i n t h e urban f i e l d . 3.3 p r o j e c t s ' Regional Development Impact O r i g i n a l Recommendation: The Bank should i n c l u d e i n t r a n s p o r t pro- j e c t a p p r a i s a l s a q u a n t i f i c a t i o n of t h e r e g i o n a l impact of investments, and some review of t h e c a p a b i l i t y of o t h e r s e c t o r s t o respond t o t h e o p p o r t u n i t i e s opened by t h e t r a n s p o r t improvements, i n c l u d i n g p o s s i b l e i n s t i t u t i o n a l con- s t r a i n t s . From a p r a c t i c a l viewpoint, t h e i s s u e i s t o f i n d workable ways o f  i n c o r p o r a t i n g t h e s e a s p e c t s i n t o normal p r o j e c t a p p r a i s a l s . Resource under- u t i l i z a t i o n could b e d e t e c t e d i n s e v e r a l ways, from simple economic i n d i c a t o r s (unemployment l e v e l s , l a n d u s e , production techniques) c o n s i d e r e d a t t h e p r o j e c t s e l e c t i o n s t a g e , t o a f u l l - s c a l e r e g i o n a l development s t u d y . The method t o b e followed w i l l depend on d a t a a v a i l a b i l i t y i n each r e g i o n . Bank Response: Expressing agreement with t h i s s u g g e s t i o n , t h e Bank planned a p o s i t i o n paper on t h e s u b j e c t , t o b e completed by t h e end of 1973, and pointed t o on-going " b e f o r e and a f t e r " s t u d i e s of f e e d e r road p r o j e c t s ( i n E t h i o p i a and Yemen Arab Republic) a s l i k e l y t o g e n e r a t e u s e f u l experience and empirical data. Review of Action: S t a f f i n g d i f f i c u l t i e s prevented work on t h e p o s i t i o n paper, and o n l y very few r e c e n t p r o j e c t a p p r a i s a l s have included e i t h e r t h e proposed q u a n t i f i c a t i o n o r review of c o n s t r a i n t s t o response. g e n e r a l l y l i m i t i n g themselves t o p r o j e c t i o n s of s a v i n g s i n maintensnce and road u s e r c o s t s t o j u s t i f y t h e investment,. The s u b j e c t is d i f f i c u l t . However t h e "before and a f t e r " s t u d i e s have continued and are being extended t o t h e Malagasy Republic. The Operations E v a l u a t i o n Department completed a s t u d y of s e l e c t e d p a s t highway p r o j e c t s l/ which attempted t o t r a c e t h e i r e f f e c t s through t h e l o c a l economy, confirmed t h e need f o r a b r o a d e r approach i n s e l e c - t i o n and a p p r a i s a l o f highway p r o j e c t s and m a d e f u r t h e r more d e t a i l e d pro- p o s a l s r e g a r d i n g t h e t y p e of r e g i o n a l economic s t u d i e s t h a t country a u t h o r i - t i e s might o r g a n i z e p a r a l l e l with e n g i n e e r i n g f e a s i b i l i t y and d e s i g n work. A f t e r some p r e p a r a t o r y work t h e Bank launched, toward t h e end o f FY 1974, a s p e c i a l new e f f o r t t o d e a l w i t h t h i s i s s u e . The terms of r e f e r e n c e f o r t h i s work s t a r t from t h e p r o p o s i t i o n t h a t " t h e economic a n a l y s i s of high- way p r o j e c t s -- of a l l t y p e s -- should b e broadened t o examine more e x p l i c i t l y . three aspects : a) t h e l o c a l development impact of t h e investment r e s u l t i n g from a r e d u c t i o n i n t r a n s p o r t c o s t s and how t h i s might b e enhanced; b) t h e development p o t e n t i a l and c o n s t r a i n t s of t h e a r e a of i n f l u e n c e with a view t o i d e n t i f y i n g complementary investments, i f any, needed t o b e undertaken t o maximize t h e impact of t h e highway i n v e s t m e n t s ; and c) t h e income d i s t r i b u t i o n i m p l i c a t i o n s of t h e p r o j e c t and how t h e s e might b e a f f e c t e d f o r more d e s i r a b l e r e s u l t s . " The paper p o i n t s o u t t h e importance of t h e s e q u e s t i o n s i n connection with t h e s h i f t i n Bank l e n d i n g p o l i c i e s and p r i o r i t i e s toward r u r a l and r e g i o n a l dev- elopment and r a i s i n g t h e p r o d u c t i v i t y of lower income groups. To t r y t o en- s u r e u s e f u l o p e r a t i o n a l r e s u l t s and e a r l y i n c o r p o r a t i o n of t h e s e q u e s t i o n s 1/ - Issued as "Comparative Evaluation of S e l e c t e d Highway P r o j e c t s " , IBRD Reoort No. 349, dated Mnreh 5, 1974.  i n t o t h e Bank's r o u t i n e approach t o t r a n s p o r t p r o j e c t s , t h e program of spe- c i a l work is t o c o n c e n t r a t e on s e l e c t e d p r o j e c t s a l r e a d y under p r e p a r a t i o n , i u i t i a l l y t h r e e : a proposed R u r a l Roads P r o j e c t i n B r a z i l where t h e e x e r c i s e w i l l Foctis on road s e l e c t i o n c r i t e r i a and t h e mechanism f o r t r a n s f e r of p r o j - e c t b e n e f i t s ; a p o s s i b l e F e e d e r Roads P r o j e c t i n Kenya, which i s a t a n e a r l y s t a g e o f p r e p a r a t i o n , where t h e r e g i o n a l economic s u r v e y approach would b e t e s t e d as a means t o s p e c i f y l o c a l development impact and t o h e l p choose t h e r c a d s which would maximize t h i s impact; and t h e planned n a t i o n w i d e PIexican I n t e g r a t e d R u r a l Development P r o j e c t , where t h a f o c u s w i l l b e on t h e q u e s t i o n of how t o maximize t h e r o a d b e n e f i t s ( a c c o u n t i n g f o r a b o u t 10% o f t h e i n v e s t - ment c o s t o f t h e program) t h r o u g h complementary i n v e s t m e n t s . The l i s t o f p r o j e c t s f o r such s p e c i a l e f f o r t s i s b e i n g expanded, i n p a r t i c u l a r t o i n c l u d e o n e i n Western A f r i c a . 3.4 Market S t r u c t u r e o f T r a n s p o r t S e r v i c e s O r i g i n a l Recommendation: T h e r e s h o u l d b e i n c o r p o r a t e d i n t h e s e l e c t i o n and a p p r a i s a l o f highway p r o j e c t s a number o f t e s t s o r i n d i c a t o r s t o show w h e t h e r t h e b e n e f i t s o f t h e p r o j e c t , i n terms o f t r a n s p o r t c o s t s a v - i n g s , w i l l b e p a s s e d o n t o t h e t r u c k u s e r s (middlemen) and by them t o con- sumers and p r o d u c e r s . Some o f t h e s e tests o r i n d i c a t o r s c o u l d b e b a s e d on t h e s t r u c t u r e o f t h e t r u c k i n g i n d u s t r y , t a r i f f s , n a t u r e o f s e r v i c e s , and s o on. Bank Response: The Bank a g r e e d o n t h e need f o r f u l l e r a s s e s s m e n t of t h e d i s t r i b u t i o n a l e f f e c t s o f t r a n s p o r t p r o j e c t s and i n d i c a t e d t h a t . - guide- l i n e s would b e p r e p a r e d b e f o r e t h e e n d o f 1973; Review o f A c t i o n : Although s t a f f s h o r t a g e s h a v e p r e v e n t e d t h e p r e p a r a t i o n o f t h e proposed g u i d e l i n e s , review o f a p p r a i s a l r e p o r t s f o r ' p r o j e c t s approved i n FY 1974 does s u g g e s t t h a t t h i s s u b j e c t i s now r e c e i v i n g a t t e n t i o n much more g e n e r a l l y t h a n i n t h e p a s t . The d e p t h o f t h e Bank's u n d e r s t a n d i n g and t r e a t m e n t o f i t w i l l n o doubt b e improved as a r e s u l t of t h e s p e c i a l work program j u s t d e s c r i b e d , i n which t h e e f f i c i e n c y o f m a r k e t channels is an important s u b s i d i a r y a s p e c t . 3.5 V e h i c l e F l e e t Composition O r i g i n a l Recommendation: The Rank s h o u l d e n c o u r a g e t h e s i m u l t a n e o u s c o n s i d e r a r i o n o f d e s i g n s t a n d a r d s and t h e t y p e o f v e h i c l e s t o b e used. Even i f t h i s i s n o t done, v e h i c l e c o m p o s i t i o n s h o u l d b e a c r u c i a l f a c t o r i n d e f i n - ing design standards. Bank Response: The Bank s a i d t h a t t h i s p o i n t was by t h e n b e i n g e x p l i c i t l y t a k e n i n t o a c c o u n t i n a l l good highway d e s i g n s t u d i e s and t h a t t h e ~ a n k ' s own a p p r e c i a t i o n o f t h e s u b j e c t , i n c l u d i n g t h e n o r m a t i v e a s p e c t s , would be enhanced by t h e m a j o r r e s e a r c h p r o j e c t on Highway Design S t a n d a r d s t h a t is b e i n g c a r r i e d o u t o v e r a l o n g p e r i o d , i n c l u d i n g e x t e n s i v e f i e l d work and t e s t s o f a l t e r n a t i v e d e s i g n s i n B r a z i l , I n d i a and kenya.  - of Action: I t i s not c l e a r whether t h i s s u b j e c t i s i n f a c t Review --- - r e c e i v i n g t h e a t t e n t i o n i t w a r r a n t s i n o p e r a t i o n a l work.. C x v l i c i t t r e a t m e n t of i t was n o t i n c l u d e d i n t h e terms o f r e f e r e n c e f o r t h e Highway Design Stand- a r d s s t u d y , b u t t h e nodel developed can b e used t o a n a l y z e t h e e f f e c t of v e h i c l e flow composition on t r a n s p o r t c o s t s , and t h e Bank lias agreed t o c a r r y o u t s e n s i t i v i t y t e s t i n g on t h e b a s i s o f assumed d a t a t o determine i f f u r t h e r e m p i r i c a l r e s e a r c h on t h e m a t t e r would b e w a r r a n t e d . Railway Performance .- Tar~ets O r i g i n , a l Recommendation: Nhen t h e Bank p a r t i c i p a t e s i n a railway investment program i t should i n s i s t , a s i t has begun t o do i n t h e l a s t two y e a r s , on a p a r a l l e l o p e r a t i o n a l program s p e c i f y i n g i n d e t a i l t h e way i n which t h e new investments a r e going t o b e used and c o n t a i n i n g d e t a i l e d management and o p e r a t i o n a l t a r g e t s . P r o j e c t a p p r a i s a l s s h o u l d t a k e i n s t i t u t i o n a l i n e f - f i c i e n c i e s e x p l i c i t l y i n t o a c c o u n t , by assuming t h a t c e r t a i n o p e r a t i o n a l standards w i l l not m a t e r i a l i z e u n t i l a l a t e r date. Bank Kesponse: The Bank s a i d t h a t use of such performance t a r g e t i n g had become s t a n d a r d o p e r a t i n g procedure f o r railway l e n d i n g and t h a t t h e main f u r t h e r e f f o r t would be t o focus i t b e t t e r on c r i t i c a l o p e r a t i n g problems of p a r t i c u l a r r a i l w a y systems and t o improve t h e a n a l y t i c a l b a s i s . Review of Action: V i r t u a l l y a l l loans f o r railways s i n c e t h a t t i m e have indeed provided f o r agreed programs of o p e r a t i o n a l improvement, of one s o r t o r a n o t h e r , w i t h s p e c i f i c performance t a r g e t s on key i t e m s ( i n a n e a r l y y e a r o r y e a r s ) e x p l i c i t l y s t a t e d i n t h e a p p r a i s a l r e p o r t , and o f t e n a l s o i n t h e l o a n documents. For i n s t a n c e , t h e s i x t h l o a n f o r t h e Colombian Railways h e l p s f i n a n c e a program t h a t c o n t a i n s d e t a i l e d o p e r a t i o n a l t a r g e t s and a d e c r i p t i o n of t h e way i n which i t i s expected t o a t t a i n them; planned l i n e c l o s u r e s and r e d u c t i o n s o f s e r v i c e , f o r uneconomic l i n e s , a r e s p e c i f i e d i n d e t a i l and a s p e c i a l s c h e d u l e , w i t h p h y s i c a l and f i n a n c i a l performance t a r g e t s f o r each y e a r from 1973 t o 1976, i s included i n t h e Loan Agreement. To be f u l l y e f f e c t i v e and u s e f u l t h e s e d e t a i l e d o p e r a t i o n a l programs r e q u i r e very i n t e n s i v e s u p e r v i s i o n -- which t h e y do g e n e r a l l y seem t o b e g e t t i n g , In t h e Colombian c a s e a s p e c i a l c o n s u l t a n t h a s been c o n t r a c t e d t o make f r e q u e n t v i s i t s t o Colombia and t o do t h i s work. 3.7 Highway S e c t o r Lending Ori~inal Recommendation: Eighway s e c t o r l e n d i n g -- l e n d i n g t o h e l p f i n a n c e a highway - program - - a t a n a t i o n a l ( o r r e c i o n a l ) l e v e l -- is an a l t e r n a - t i v e t h a t w a r r a n t s s e r i o u s s t u d y . The s e c t o r focus would h e l p t o avoid i m ~ b a l a n c e between trunk and secondary and f e e d e r r o a d s , and highway overdesign. A highway program w i l l provide a c l e a r e r s e t of p r i o r i t i e s a t a n a t i o n a l l e v e l and more f l e x i b i l i t y . The advantages from t h e viewpoint of c o n t r o l (construc- t i o n , c o n t r a c t i n g p r o c e d u r e s , procurement) o f t h e p r o j e c t approach can s t i l l be maintained f o r s p e c i f i c r o a d s o r p a r t s of t h e program, a s n e c e s s a r y .  ---- Rank R c s ----~ons -e----- and k -c t i o l l : 'L'he Eank e x p r e s s e t i s t r o n g agreement w i t h - t h i s s u g g e s t i o n i n p r j n c i p l e , and i m p o r t a n t i r : i t i n t i v e s have been t a k e n , a s reviewed i n t h e more g e n e r a l d i s c u s s i o n o f t h e S e c t o r Lending c o n c e p t i n Chap- t e r 11. 11 Feed -- e r Roads ----- - - Original Reccmmendation: Af t e r t w e n t y y e a r s o f l e n d i n g f o r t r u n k highways, t h e Bank s h o u l d c a r e f u l l y c o n s i d e r p r o v i s i o n o f a s s i s t a n c e t o Colombia f o r const:ruct.ion o f f e e d e r . r o a d s , which seem t o b e a s e r i o u s t r a n s - p o r t a t i o n b o t t l e n e c k now, and f o r s t r e n g t h e n i n g o f t h e agency r e s p o n s i b l e , Bank Response: P o i n t i n g o u t t h a t i t h a d a l r e a u y become i n v o l v e d --- w i t h f e e d e r r o a d s (and t h e d i f f i c u l t i r s o f a s s u r i n r m a i n t e n a n c e f u n d s f o r them) i n o n e p a r t i c u l a r s m a l l a r e a o f Colombia i n c o n n ~ c t i o n with a settlement p r o j e c t , t h e Bank u n d e r t o o k t o g i v e t h i s l i l a t t t r s p e c i a l a t t e n t i o n i n d e t e r - mining i t s o v e r a l l s t r a t e g y f o r a s s i s t i n g r u r a l d e v e l o p v e n t ; b u t i t d i d n o t e x p e c t t o b e a b l e t o t a k e a c t i v e s t e p s on t h e m a t t e r o f f e e d e r r o a d s i n the n e a r f u t u r e b e c a u s e o f d e t e r i o r a t i o n i n t h e k i i n i s t r y o f P u b l i c Works, which had i n v o l v e d postponement from FY 1 9 7 3 t o FY 1975 of a f u r t h t r l o a n e n v i s a g e d for hi~hways. Review o f A c t i o n : Both t h e need f o r f e e d e r r o a d improvement and t h e s h o r t a g e o f Peso f u n d s f o r b u i l d i n g and m a i n t a i n i n g them a p p e a r e d t o bc- come more s ~ r i o u s ,b u t t h e e n t i t y r e s p o n s i b l e may h a v e - a s much- e x t e r n a l fund- i n g a s i t can h a n d l e , from t h e I D B . The two a g r i c u l t u r a l p r o j e c t s f o r which Bank f i n a n c i n g h a s been under p r e p a r a t i o n 21 i n c l u d e s m a l l r o a d components. The Bank i s a p p a r e n t l y no l o n g e r e n v i s a g i n g a n y s i g n i f i c a n t a c t i v i t y i n Colombia i n t h e area o f f e e d e r r o a d s . - 3/ IV. - ther S e c t o r s ?fiscellaneous P o i n t s about O During t h e 196r3s t h e Rank's l e n d i n g i n Colombia h a d expanded i n t o a much w i d e r r a n g e o f s e c t o r s -- i n c l u d i n g a g r i c u l t u r e , i n d u s t r y , telecommuni- -- c a t i o n s , e d u c a t i o n and m u n i c i p a l w a t e r s u p p l y s u c h t h a t , by t h e end of t h e d e c a d e , t h e Bank had a s s i s t e d a t l e a s t . o n e p r o j e c t i n e a c h o f t h e s e a r e a s and I/ - A b r i e f p o l i c y p a p e r on t h e s u b j e c t w a s d i s t r i b u t e d t o t h e E x e c u t i v e D i r e c t o r s on J u n e 27, 1975 ( S e e M75-487). 21 - And w a s e v e n t u a l . 1 ~ a p p r o v e d , i n 1975. - 31 Worldwide, IBRDITDA commitments f o r f e e d e r r o a d s i n t h e c o u r s e o f FY 1975, o t h e r t h a n a s p a r t o f r u r a l development and a g r i c u l t u r a l p r o j e c t s , amounted t o a b o u t $25 m i l l i o n . i n most c a s e s more than one. Some of t h e s e p r o j e c t s w e r e s t i l l i n t h e con- s t r u c t i o n p h a s e , b u t almost a l l of then were rtonetheless reviewed i n t h e e v a l - uation report. The c a s e s t u d i e s gave rise t o a few p a r t i c u l a r s u g g e s t i o n s r e l a t i n g t o Bank approaches t o t h e s e v a r i o u s s e c t o r s more g e n e r a l l y t h a n simply i n Colombia. These p o i n t s a r e grouped t o g e t h e r h e r e . 4,1 I n d u s t r i a l Projects: N a t i o n a l Framework and A n a l y s i s o f Components O r i g i n a l Recommendation: I n d u s t r i a l p r o j e c t s , e s p e c i a l l y b a s i c i n d u s t r i e s , must b e analyzed from a broad n a t i o n a l p o i n t of view and i n a long-term framework i f m i s t a k e s a r e t o b e avoided; such a n a l y s i s s h o u l d o r i e n t i n s t i t u t i o n - b u i l d i n g e f f o r t s , which may r e q u i r e p r e l i m i n a r y s m a l l p r o j e c t s i n a long-term s t r a t e g y . The p r i n c i p a l components o f such p r o j e c t s , n o t o n l y t h e p r o j e c t as a whole, should b e s u b j e c t e d t o d e t a i l e d c o s t - b e n e f i t a n a l y s i s i n a framework of p r o j e c t i o n s s u f f i c i e n t l y l o n g f o r e a c h component t o come t o f u l l p r o d u c t i o n and w i t h allowance f o r t h e f i n a n c i a l i m p l i c a t i o n s of n e c e s s a r y complementary equipment. Bank Response: The Bank p o i n t e d o u t t h a t d i s a g g r e g a t e d c o s t - b e n e f i t a n a l y s i s o f p r o j e c t components was n o t always f e a s i b l e o r r e l e v a n t b u t i t s a i d t h a t t h e approaches and t e c h n i q u e s used s i n c e t h e e s t a b l i s h m e n t of a s e p a r a t e I n d u s t r i a l P r o j e c t s Department i n 1969, p a r t i c u l a r l y emphasis on n a t i o n a l market s t u d i e s and s e c t o r p l a n s , long-run p r o j e c t i o n s o f t e n covering a f u r t h e r round of p l a n t expansion, and concern w i t h long-term b a l a n c e among component p a r t s of p r o j e c t s , s h o u l d b e s u f f i c i e n t t o avoid r e p e t i t i o n of t h e s e r i o u s problems which l e d t o t h e s e recommendations. Review o f Action: P r o v i s i o n o f a s s i s t a n c e t o major i n d u s t r i a l p r o j e c t s is now g e n e r a l l y prefaced by e x t e n s i v e a n a l y s i s of long-run n a t i o n a l (and, where r e l e v a n t , i n t e r n a t i o n a l ) supply and demand p r o s p e c t s f o r p r o j e c t o u t p u t and by c a r e f u l c o n s i d e r a t i o n of a l t e r n a t i v e p o s s i b l e c o n f i g u r a t i o n s of p r o j e c t s , i n some c a s e s l e a d i n g t o s u b s t a n t i a l r e s t r u c t u r i n g o f components. The s i x major i n d u s t r i a l p r o j e c t s f o r which t h e Bank approved l o a n s i n FY 1974 i n c l u d e d , f o r example, t h e Las Truchas s t e e l p r o j e c t i n Mexico, where a N a t i o n a l S t e e l Commission had been formed and a n a t i o n a l s t e e l s t u d y c a r r i e d o u t pursuant t o Bank recommendations a t an e a r l y s t a g e o f p r o j e c t p r e p a r a t i o n , and t h e Tecuci F e r t i l i z e r p r o j e c t i n Romania, w i t h a product-mix and p r o j e c t scope modified i n l i g h t of Bank-sponsored s t u d i e s of t h e i n t e r n a t i o n a l market and o f Romanian a g r i c u l t u r e ' s needs. A p p r a i s a l s o f a l l such p r o j e c t s i n c l u d e p r o j e c t i o n s f o r a t l e a s t 10-20 y e a r s . 4.2 A g r i c u l t u r a l P r o j e c t O b j e c t i v e s and Farmer I n c e n t i v e s O r i g i n a l Recomnendation : G r e a t e r c a r e should b e t a k e n t o knsure t h a t t h e i n c e n t i v e s and o p p o r t u n i t i e s open t o i n d i v i d u a l farmers a r e c o n s i s - t e n t w i t h t h e o b j e c t i v e s of a g r i c u l t u r a l p r o j e c t s . Bank Response: The Bank agreed w i t h t h e importance o f t h i s p o i n t and s a i d t h a t s p e c i a l a t t e n t i o n was b e i n g g i v e n t o i t , on a permanent b a s i s , i n review of a g r i c u l t u r a l p r o j e c t s and of t h e i r a p p r a i s a l s . Reference was  dlso i?i;ide t o a s p e c i a l r e s e a r c h p r o j e c t t h e n underway on methods of p r e s e n t - illt; and a n a l y z i n g farm budgets and farm p l a n s which show t h e s i t u a t i o n of t h e ; n d i v i d u a l farmer and t h e p r o f i t a b i l i t y of t h e v a r i o u s c r o p s e n v i s a g e d . Review o f A c t i o n : -- T h i s remains an a r e a of s p e c i a l a t t e n t i o n by i 1:e Bank's a g r i c u l t u r e s p e c i a l i s t s i n t h e i r reviews o f p r o j e c t s , b u t whether . i t is g e t t i n g a s much emphasis a s i t w a r r a n t s could o n l y b e a s c e r t a i n e d from , I milch more thorough review o f r e c e n t l y approved a g r i c u l t u r a l p r o j e c t s t h a n has been p o s s i b l e f o r t h i s r e p o r t . The r e s e a r c h p r o j e c t mentioned above y i e l d e d r e s u l t s t o o complicated and t h e o r e t i c a l t o b e of u s e f o r Bank opera- t.J c n a l work, b u t t r e a t m e n t o f farm b u d g e t s i n t h e Bank s h o u l d b e n e f i t sub- s 1 : a n t i a l l y from a n in-house e f f o r t now under way t o s t a n d a r d i z e terminology a d t a b u l a r f o r m a t s , and t o b r i n g t o t h e o p e r a t i n g s t a g e v a r i o u s s i m p l e com- p : ~ L e r models f o r p r o j e c t i n g farm b u d g e t s ; t h e a v a i l a b i l i t y o f s u c h models kould make i t e a s i e r t o test q u i c k l y t h e e f f e c t o f d i f f e r e n t p o s s i b l e sets vf i n c e n t i v e s t o t h e f a r m e r s and t o do s e n s i t i v i t y tests. School O p e r a t i n g C o s t s O r i g i n a l Recommendation: The Bank s h o u l d g i v e more a t t e n t i o n t o a c c u r a t e d e f i n i t i o n i n concept and i n p r a c t i c e o f s c h o o l o p e r a t i n g c o s t s a n d t o t h e l e v e l o f such c o s t s f o r s c h o o l s f i n a n c e d under such p r o j e c t s a s rumpared w i t h o t h e r s c h o o l s . Bank Response: The Bank a g r e e d w i t h t h e need f o r improving a n a l y s - is o f s c h o o l o p e r a t i n g c o s t s and s a i d t h a t i t would i n s t r u c t p r o j e c t a p p r a i s - a 1 nlissions t o pay more a t t e n t i o n t o t h e m a t t e r ; p a r t o f t h e problem l a y w i t h your budgetary procedures i n borrowing c o u n t r i e s , which t h e Bank was a l s o t r y i n g t o h e l p improve. Review of A c t i o n : Review o f p r o j e c t a p p r a i s a l r e p o r t s s u b m i t t e d t o t h e E x e c u t i v e D i r e c t o r s d u r i n g FY 1 9 7 4 shows t h a t t h e s u b j e c t of o p e r a t i n g c o s t s p e r s t u d e n t ( a n d / o r p e t g r a d u a t e , sometimes a more meaningful i n d i c a t o r ) i l l b o t h Bank-assisted and o t h e r e x i s t i n g s i m i l a r s c h o o l s was t r e a t e d f a i r l y n~lL,;untely i n t h e a p p r a i s a l s of t h e Colombia T h i r d Education p r o j e c t and of . . I o t h e r p r o j e c t s i n t h e L a t i n America and Caribbean r e g i o n , b u t t h i s was O , ~ I I O ~g e n e r a l l y t h e case f o r p r o j e c t s e l s e w h e r e . The Colombia a p p r a i s a l i n - di r a t e s t h a t , a s f o r e c a s t i n t h e e v a l u a t i o n r e p o r t , per-student operating a o s t s i n Bank-assisted s c h o o l s a r e s u b s t a n t i a l l y above t h o s e i n most o t h e r +,;oqdary ~ c h o o l si n t h e c o u n t r y r a t h e r t h a n below, a s e x p e c t e d a t o r i g i n a l qppraisal. The O p e r a t i o r ~ sE v a l u a t i o n ~ e ~ a r t m e's n t own s t u d y i n 1 9 7 4 of an ~~lucatio pn r o j e c t i n Kenya I / a l s o showed t h a t p e r - s t u d e n t o p e r a t i n g c o s t s i n k i n k - a s s i s t e d s c h o o l s were n o t a s much below t h o s e i n t h e t y p i c a l ( s m a l l e r ) r:,condary s c h o o l a s appeared t o have been e x p e c t e d . Higher o p e r a t i n g c o s t x . . 13Y of c o u r s e b e more t h a n compensated by b e t t k r q u a l i t y of e d t ~ c a t i o n ,more p r . * c t i c a l c o u r s e s u s i n g equipment, lower drop-out r a t e s , b t c . , b u t t h e s u b j e c t 1 1/ - Report No. 328, " E v a l u a t i o n o f F i r s t Kenya Education P r o j e c t " d a t e d February 1 2 , 1 9 7 4 . w a r r a n t s e x p l i c i t t r e a t m e n t . The Bank a g r e e d i n J a n u a r y 1975 t o p r e p a r e g u i d e l i n e s on t h e c a l c u l a t i o n of p e r s t u d e n t and p e r g r a d u a t e o p e r a t i n g c o s t s i n Bank-assisted and o t h e r s c h o o l s . Multi-Purpose Rural Developnknt C e n t e r s O r i g i n a l Kecommendation: The Bank s h o u l d c o n s i d e r a s s i s t i n g i n t h e development and c o n s t r u c t i o n o f r u r a l c e n t e r s t o s e r v e m u l t i p l e purposes: more and b e t t e r r u r a l primary e d u c a t i o n , a d u l t e d u c a t i o n , p u b l i c h e a l t h and n u t r i t i o n s e r v i c e s , a g r i c u l t u r a l e k t e n s i o n , m o b i l i z a t i o n f o r r u r a l works and s o c i a l organization. Bank Response: The Bank s a i d t h a t i t s own r e c e n t f u r t h e r i n v e s t i - g a t i o n s had l e d i t l a r g e l y t o agre.e w i t h t h i s s u g g e s t i o n , and i t was c o n s i d e r - i n g w i t h t h e Colombian a u t h o r i t i e s a l t e r n a t i v e p o s s i b l e programs f o r Bank s u p p o r t ; however development o f a well-defined Bank s t r a t e g y i n t h i s a r e a was l i k e l y t o t a k e s e v e r a l y e a r s i n view o f t h e complexity o f such p r o j e c t s . Review o f A c t i o n : Nearly o n e - q u a r t e r o f t h e T h i r d Education P r o j e c t i n Colombia s u p p o r t e d by Bank Loan 920-CO o f J u l y 1973 was i n f a c t envisaged t o b e devoted t o ( a ) e x t e n s i o n of t h e Bank-promoted comprehensive secondary s c h o o l concept t o r u r a l a r e a s i n t h e form of 13 lower-cycle secondary s c h o o l s , providing education o r i e n t e d t o a g r i c u l t u r e , extension a s s i s t a n c e f o r l o c a l primary s c h o o l s and non-formal a d u l t c o u r s e s , and forming t h e f o c u s of R u r a l Development C e n t e r s d e s i g n e d t o p r o v i d e e s s e n t i a l s e r v i c e s and i n c r e a s e r u r a l incomes by improving a g r i c u l t u r a l p r o d u c t i v i t y and promoting s m a l l - s c a l e i n d u s t r y and (b) expansion o f a p r o t o t y p e R u r a l Development S e r v i c e s Center i n t h e e a s t e r n p l a i n s (Llanos), providing a g r i c u l t u r a l , education, h e a l t h , g e n e r a l s u p p l y and communication s e r v i c e s on a c o o p e r a t i v e b a s i s t o t h e s p a r s e p o p u l a t i o n of t h e a r e a , and e s t a b l i s h m e n t o f t h r e e a f f i l i a t e d c e n t e r s i n t h e s u r r o u n d i n g r e g i o n s . The Bank i s a l s o moving towards d i r e c t involvement i n r u r a l primary e d u c a t i o n i n Colombia. More g e n e r a l l y t h e Bank has shown i n c r e a s i n g i n t e r e s t and involve- ment i n development o f c e n t e r s of t h e t y p e d e s c r i b e d , sometimes i t s e l f sup- p l y i n g f i n a n c e f o r o n l y one o r two of t h e s e r v i c e s e n v i s a g e d t o be provided a t t h e same t i m e and p l a c e ( a s i n t h e Colombia p r o j e c t i n t h e main) and some- times s u p p o r t i n g many o r a l l dimensions, a s i n v a r i o u s r u r a l development p r o j e c t s , p a r t i c u l a r l y i n E a s t and West A f r i c a (e.g. Mali and Tanzania). 4.5 - Water Supply P r o j e c t s O r i g i n a l Recorninendation-: Water d i s t r i b u t i o n should c o n t i n u e t o e n j o y t h e i n c r e a s i n g s t r e s s t h a t i t h a s been g i v e n i n c o n s i d e r a t i o n of w a t e r supply p r o j e c t s . Rank Response: The Bank a g r e e d w i t h t h i s recornmeridation. Review of Acti-on: F u r t h e r e v i d e n c e of c a s e s where t h e r e h a s been s u b s t a n t i a l d e l a y i n i n s t a l l a t i o n o f c o n n e c t i o n s a f t e r completion of mains ( e . g . I h a n a sewernye and Burundi w a t t . . s u ~ p l y p r o j e c t s ) , o r ,ases where d i s t r i b u t i o n l o s s i s h a v e remained big11 o r e v e n i n c r k s s e d ( e , ~ .P a k i s t a n IJahort: w a t e r s u ~ p l yp r o j e c t - ) , rc:ii - r f x e t i ,t ,ii,,urtance u f t h i s p o i n t . T h e r e , . i3.-- seems t o be b l d e s p r e n d a w a r e n e s s i , . i h d Uank o f t h t problems o f t h i s s o r t t h a t have a r i s e n i n t h e p a s t , b u t ! h e ,:tbject may need p a r t i c u l a r l y c l o s e a t t e n t i o n i n s i t r l a t i o n s where p r o j e c t c o s t o v e r r u n s o r r e v e n u e s h o r t f a l l s r a i s e t h e t e m p t a t i o n -- and sometimes a l m o s t t h e n e c e s s i t y , i n view o f con- t r a c t u a l o b l i g a t i o n s -- t o c o n c e n t r a t e a l l a v a i l a b l e f u n d s on t h e b u l k s u p p l y p r o j e c t underway and t o n e g l e c t o r p o s t p o n e t h e u s u a l l y more immediately r e m u n e r a t i v e d i s t r i b u t i o n i n v e s t m e n t . The Bank h a s r e i t e r a t e d its agreement w i t h t h e n e e d f o r s p e c i a l v i g i l a n c e i n t h i s a r e a , p a r t i c u l a r l y s i n c e i t is u s u a l l y t h e p o o r e r s e c t i o n s o f a c i t y t h a t a r e most a f f e c t e d by i n a d e q u a t e d i s t r i b u t i o n . The 1975 a n n u a l s t a f f t r a i n i n g c o u r s e , i n J a n ~ . . a r y ,was e n t i r e - l y d e v o t e d t o w a t e r d i s t r i b u t i o n , and a r e s e a r c h p r o j e c t on t h e d e s i g n and o p e r a t i o n o f p u b l i c h y d r a n t s i s underway. T r a i n i n g Elements i n Bank Non-Ecucation P r o j e c t s O r i g i n a l Recommendation: The Bank might u s e f u l l y c o n s i d e r t r a i n i n g - i n b r o a d e r c o n t e x t t h a n t h e d i r e c t n e e d s of t h e and a s s i s t a n c e t o t r a i n i n g e n t i t y ( e . g . u t i l i t y o r X i n i s t r y ) b e i n g f i n a n c e d , t o h e l p meet needs i n t h e rest o f t h e s e c t o r . Keview o f A c t i o n : T r a i n i n g , and t h e o p p o r t u n i t i e s f o r t h e Bank t o h e l p t h r o u g h i t s p r o j e c t l o a n s t o improve and expand i t , h a v e been r e c e i v i n g i n c r e a s i n g a t - t e n t i o n o v e r t h e p a s t few y e a r s , a s s i s t e d i n p a r t by t h e e s t a b - l i s h m e n t of a s e p a r a t e o f f i c e o f T r a i n i n . g A d v i s o r w i t h i n t h e Bank. V i r t u a l l y a l l p r o j e c t a p p r a i s a l r e p o r t s now d e a l t o some e x t e n t w i t h t h e adequacy o f r e l a t e d t r a i n i n g programs, and many l o a n s i n c l u d e some amount i n s u p p o r t o f training. NO p r o j e c t s approved f o r a s s i s t a n c e t h r o u g h 1974 a p p e a r t o have i n c l u d e d , i n a d d i t i o n t o r e g u l a r p h y s i c a l works, p r o v i s i o n o f t h e s o r t e n v i - saged i n t h e e v a l u a t i o n r e p o r t -- e x p a n s i o n o f t h e t r a i n i n g program o f a r e l a t i v e l y s t r o n g b o r r o w e r , o r o f a r e l a t e d n a t i o n a l e n t i t y , t o h e l p meet: t h e needs o f o t l l e r weaker e n t i t i e s i n t h e same f i . e l d ( e . g . i n t o u r i s m , b a n k i n g , a g r i c u l t u r e , municipal w a t t r supply, f i k l d s where borrowers' r e s p o n s i b i l i t i e s a r e u s u a l l y n o t c o t e r m i n o u s w i t h t h e n a t i o n as a whole) -- wlilch was e x p e c t e d t o b e q u i r e w i d e l y r e l e v a n t . Ilowever t h e n a t i o n w i d e t r a i n i n g program i n w a t e r :;upply was examined i n c o n n e c t i o n w i t h t h e Minas G e r a i s w a t e r s u p p l y p r o j e c t i n B r a z i l a l r e a d y mentioned and p r o v i s i o n f o r i t would llavc b e e n i n c l u d e d i n t h e Hank's l o a n had t h e B r a z i l i a n a u t h o r i t i e s n o t e v e n t u a l l y decided t o c a r r y i t o u t w i t h t h e i r own f u n d s , and t h e Bank h a s b e e n i n v i t e d t o p a r t i c i - p a t e i n s u p e r v i s i n g i m p l e m e n t a t i o n o f t h e t r a i n i n g program. And s i m i l a r b r o a d a t t e n t i o n , f o r t h e n a t i o n a s a w h o l e , was b e i n g g i v e n t o s e c t o r - w i d e t r a i n i n g I n c o n n e c t i o n w i t h a l o a n e n v i s a g e d i n s u p p o r t o f w a t e r s u p p l y works i n Teherarl; the m a t t e r is a l s o b e i n g d i s c u s s e d more g e n e r a l l y f o r t h e w a t e r s u p p l y s e c t o r i n L a t i n America. >loreover t h e Bank made, i n J u n e 1974, i t s f i r s t l o a n e n t i r e l y d i r e c t e d t o a s e c t o r - w i d e t r a i n i c g program -- f o r h o t e l enployees i n T u n i s i a ; o t h e r t r a i n i n g p r o j e c t s of siiiiilar sector-wide scope a r e under c o n s i d e r a t i o n , f o r i n s t a r i c e f o r r u r a l d e v e l o p n ~ e n t i n I n d o n e s i a and f o r f i s h e r i e s i n t h e P h i l i p p i n e s . ?lore a t t e n t i o n i s a l s o b e i n g g i v e n t o t h e p o s s i b i l i t y of i n c l u d i n g i n e d u c a t i o n p r o j e c t s p r o v i s i o n s r e l e v a n t t o t h e pre- p a r a t i o n o f s t a f f r e q u i r e d f o r o t h e r a r e a s o f Bank-assisted endeavor. One problem o f l i n k i n g a s s i s t a n c e f o r a normal p h y s i c a l expansion p r o j e c t i n one r e g i o n w i t h a s s i s t a n c e f o r a t r a i n i n g program of b r o a d e r s c o p e i s t h a t con- s i d e r a b l e f o r e s i g h t i s r e q u i r e d t o have t h e two ready s i m u l t a n e o u s l y . The Bank h a s a g r e e d t o keep t h i s matter, and t h e p o s s i b i l i t y o f expanding l o c a l t r a i n i n g programs t o meet l a r g e r r e g i o n a l o r n a t i o n a l n e e d s , under review. 1/ 4.7 Management T r a i n i n g a t E D 1 O r i g i n a l Recommendations: The Bank's Economic Development I n s t i t u t e should c o n s i d e r p r o v i d i n g c o u r s e s i n u t i l i t y management i n a d d i t i o n t o i t s p r e s e n t c o u r s e s i n g e n e r a l p l a n n i n g and p r o j e c t p r e p a r a t i o n and a n a l y s i s . Bank Response: The Bank proposed t o i n c l u d e a s m a l l management component i n t h e f i r s t e x p e r i m e n t a l p u b l i c u t i l i t i e s c o u r s e -- i n Water Supply and Water D i s p o s a l -- t h a t i t was p l a n n i n g t o t r y o u t i n mid-1973. Review o f Action: A s p l a n n e d , a n e i g h t - w e e k c o u r s e on Water Supply and Wastewater D i s p o s a l , f o c u s s i n g mainly on p r o j e c t e v a l u a t i o n and s e c t o r p o l i c y b u t i n c l u d i n g one week on p r o j e c t and o p e r a t i o n s management, was i n - troduced by t h e Development 1 n s t i t u t . e f o r t h e f i r s t t i m e i n 1973, r e p e a t e d i n 1974 and i s now planned t o t a k e p l a c e a n n u a l l y ; i t h a s a t t r a c t e d wide- s p r e a d i n t e r e s t and had e x p e r i e n c e d p a r t i c i p a n t s . The management component ( f o c u s s i n g on p r o j e c t a s opposed t o o p e r a t i o n s management) i s expected t o be i n c r e a s e d t o 3 weeks w i t h t h e 1976 v e r s i o n o f t h e c o u r s e , A c o u r s e on e l e c t r i c power is now a l s o e n v i s a g e d f o r i n i t i a t i o n i n 1976, And p r e l i m i n a r y t h i n k i n g i s going i n t o t h e p o s s i b i l i t y of f u l l - l e n g t h c o u r s e s on p r o j e c t management i n a g r i c u l t u r e and r u r a l development and i n highway c o n s t r u c t i o n and maintenance i n 1977 o r 1978. I t seems t o b e q u i t e widely agreed w i t h i n t h e Bank t h a t t h e r e i s , a s t h e e v a l u a t i o n was implying, a major gap i n t h e a v a i l a b i l i t y of b r i e f f o c u s s e d t r a i n i n g i n p r o j e c t and o p e r a t i o n s management, which t h e ED1 would seem w e l l p l a c e d t o m e e t -- and which c o u l d b e e q u a l l y a s I m p o r t a n t , i n terms of s u p p o r t t o Bank o p e r a t i o n s , a s p r e s e n t t r a i n i n g i n p r o j e c t and p o l i c y s e l e c t i o n and a p p r a i s a l , V. P o i n t s S p e c i f i c t o O p e r a t i o n s i n Colombia Most o f t h e s u g g e s t i o n s emerging from t h e e v a l u a t i o n r e p o r t have a l r e a d y been d e a l t w i t h i n t h e p r e c e d i n g pages, r e f e r r i n g t o a c t i o n s t a k e n i n c o n n e c t i d n w i t h Bank o p e r a t i o n s i n Colombia a s w e l l a s e l s e w h e r e , b u t a few m i s c e l l a n e o u s m a t t e r s w e r e r a i s e d and d i s c u s s e d i n t h e r e p o r t i n a manner 11 - General i n s t r u c t i o n s f a v o r i n g t h e o r g a n i z a t i o n o f t r a i n i n g on a s e c t o r - wide b a s i s r a t h e r than a p r o j e c t - b y - p r o j e c t b a s i s have been i s s u e d i n J u l y 1975.  which had d i r e c t r e l e v a n c e o n l y t o t n e Bank's work i n Colombia; t h e purpose of t h i s c h a p t e r i s t o t r e a t t h e s e . 5.1 I n s t i t u t i o n B u i l d i n g a s t h e Prime P r o j e c t S e l e c t i o n C r i t e r i o n O r i g i n a l Recommendation: I n s t i t u t i o n a l and s t r u c t u r a l c o n s t r a i n t s t o development a r e s o i m p o r t a n t i n Colombia t h a t t h e prime c r i t e r i o n i n s e l e c - t i o n of p r o j e c t s f o r f i n a n c i n g by t h e Bank, r a t h e r t h a n some o t h e r s o u r c e , s h o u l d b e t h e e x t e n t of i n s t i t u t i o n a l development and improvement t h a t c o u l d b e e x p e c t e d t o r e s u l t , even a t t h e r i s k o f s l o w i n g down t h e l e n d i n g p a c e (which would b e compensated t o some e x t e n t by u s e o f s e c t o r l e n d i n g , a s pro- posed). Projects should be selected i n l i g h t of t h e o v e r a l l i n s t i t u t i o n a l s t r e n g t h s o f t h e c o u n t r y f o r making t h e most o f r e s o u r c e s a v a i l a b l e t o i t and o r i e n t e d t o s t r e n g t h e n i n g weak p o i n t s , as f o r i n s t a n c e i n h o u s i n g , l a b o r - i n t e n - s i v e h i g h - v a l u e c r o p s , r u r a l e d u c a t i o n , s m a l l town w a t e r s u p p l y and p u b l i c health a t present. T h i s w i l l r e q u i r e g r e a t e r i n i t i a t i v e and e f f o r t i n p r o j e c t p r e p a r a t i o n , more i n t e n s i v e s u p e r v i s i o n a n d , i n some a r e a s , development o f new Bank c a p a b i l i t i e s . Giving s u f f i c i e n t p r i o r i t y t o i n s t i t u t i o n a l corlsidera- t i o n s r e q u i r e s c a r e f u l a t t e n t i o n t o a p r o j e c t ' s b a s i c economic v a l i d i t y , more e x p l i c i t r e c o g n i t i o n o f r i s k e l e m e n t s i n development and g r e a t e r emphasis t o : (a) s t a f f , t r a i n i n g , i n c e n t i v e s and p e r s o n n e l p o l i c i e s , ( b ) i n t e r n a l o r g a n i z a - t i o n a l s t r u c t u r e , ( c ) p l a n n i n g c a p a b i l i t i e s and ( d ) management i n f o r m a t i o n s y s t e m s p r o v i d i n g l i n k s between d e p a r t m e n t s and t o management and y i e l d i n g performance d a t a more s i g n i f i c a n t t h a n t h e p u r e l y f i n a n c i a l . Bank Response: The Bank n e v e r a c c e p t e d t h i s recommendation i n p r t n c i p l e , s t a t i n g t h a t i t a l s o h a d o t h e r o b j e c t i v e s i n Colombia, p a r t i c u l a r l y h e l p i n g t o improve f o r e i g n exchange e a r n i n g s , which i t presrlrnably f e l t c o u l d be e f f i c i e n t l y a c h i e v e d w i t h o u t i n s t i t u t i o n - b u i l d i n g e f f o r t ; i t d i d however . a g r e e t h a t , f o r p r o j e c t s t h a t were s e l e c t e d mainlv w i t h a view t o a s s i s t i n g i n s t i t u t i o n a l development, t h e p a r t i c u l a r a s p e c t s mentioned ( i n t h e l a s t s e n t e n c e above) w a r r a n t e d t h e stress g i v e n t o them i n t h e e v a l u a t i o n r e p o r t . Review o f A c t i o n : I n p r a c t i c e , w i t h i n t h e s i p r i f i c a n t l y s m a l l e r l e n d i n g program t h a n e n v i s a g e d i n 1972 which h a s a c t u a l l y m a t e r i a l i z e d o v e r t h e l a s t few y e a r s , i n s t i t u t i o n b u i l d i n g h a s b e e n a more i m p o r t a n t c o n s i d e r a - t i o n t h a n i m p l i e d : two o f t h e s i x l o a n s made t h r o u g h FY 1974 w e r e mainly o r i e n t e d t o s t r e n g t h e n i n g i n s t i t u t i o n a l development ( m u n i c i p a l w a t e r s u p p l y and r a i l w a y s ) w h i l e t h e o t h e r f o u r (power, DFCs, e d u c a t i o n and pre-investment s t u d i e s ) a l l had s i g n i f i c a n t i n s t i t u t i o n a l o b j e c t i v e s among t h e i r aims. Two of t h e s e s i x l o a n s were a l s o p a r t l y o r i k n t e d t o s t r e n g t h e n i n g development i n two pf t h e a r e a s s p e c i f i c a l l y n e n t i o n e d above -- r u r a l e d u c a t i o n and s m a l l town w a t e r s u p p l y . Moreover, o v e r t h e l a s t y e a r s , t h e Bank h a s had t o d e v o t e a s i z e a b l e p r o p o r t i o n o f i t s e f f o r t i n Colombia t o h e l p i n g r e s o l v e i n s t i t u - t i o n a l problems, b o t h i n c o n n e c t i o n w i t h on-going p r o j e c t s p r e v i o u s l y approved and i n t h e e f f o r t t o d e v e l o p new p r o j e c t s , some o f t h e 3 t o u c h i n g on o t h e r s of t h e s p e c i f i c a r e a s mentioned. IFC h a s a l s o b e e n concerned w i t h i x s t i t u t i o n a l (16-velcprnrnt, n o t o n l y i n c o n n e c t i o n w i t h i t s e q u i t y c o n t r i b u t i o n t o onE o f t!ie c o n s t r u c t i o n f i n a n c e c o r p o r a t i o n s , b u t a l s o i n t h e p r o p o s a l i t h a s put up f o r a s h o r t - t e r m money market i n s t i t u t i o n .  The Bank's p r i n c i p a l r e c e n t e f f o r t s i n i n s t i t u t i o n a l s t r e n g t h e n i n g a r e both c o n t i n u a t i o n s , on r e v i s e d b a s e s , of e a r l i e r very p a r t i a l l y success- f u l work and they b o t h show more promise. For t h e w a t e r s u p p l y f i e l d t h e Bank has s t a t i o n e d a s t a f f member i n Bogota, t o h e l p overcome t h e problems a r i s i n g on t h e s e v e r a l l o a n s p r e v i o u s l y committed f o r municipal w a t e r supply and t o p a r t i c i p a t e i n t h e p r e p a r a t i o n o f a new p r o j e c t I j f o r o t h e r towns and c i t i e s ; h e h a s played a major p a r t i n developing t h e new approach t o INSFOPAL a l r e a d y mentioned i n t h e d i s c u s s i o n of S e c t o r Lending i n Chapter I1 (recom- mendation 2 . 8 ) . I n connection w i t h t h e new r a i l w a y s l o a n made i n August 1973 agreement was reached, a s a l r e a d y .mentioned, on a Plan of A c t i o n , w i t h phys- i c a l and f i n a n c i a l performance t a r g e t s f o r t h e y e a r s 1973-76, and management c o n s u l t a n t s have been c o n t r a c t e d t o examine i n d e t a i l p e r s o n n e l p o l i c i e s , s a l a r y s t r u c t u r e and t r a i n i n g , planning c a p a b i l i t i e s , o r g a n i z a t i o n a l s t r u c t u r e , management i n f o r m a t i o n systems and r e l a t e d t o p i c s . E a r l i e r , mcre e x p l i c i t r e c o g n i t i o n of t h e prime importance of i n s t i t u t i o n a l development i n Colombia, i n t h e t r a d i t i o n a l a r e a s of Bank l e n d i n g b u t even more i n t h e newer f i e l d s i n v o l v i n g people and t h e c o u n t r y ' s b a s i c r e s o u r c e s more, a s emphasized i n t h e e v a l u a t i o n r e p o r t , would probably a s s i s t t h e Bank's o p e r a t i o n a l p l a n n i n g . For i n s t a n c e i t i s o n l y i n t h e l a s t two y e a r s , a f t e r s i x y e a r s of previous l e n d i n g and n e a r l y t e n o f d i s c u s s i o n , t h a t a n e f f o r t has f i n a l l y s t a r t e d t o s t r e n g t h e n t h e r e l e v a n t o f f i c e i n t h e Banco de l a Republica t o t h e p o i n t where i t could h a n d l e , a s i t s h o u l d , much of t h e work i n a p p r a i s i n g and a d v i s i n g t h e f i n a n c i a l i n t e r m e d i a r i e s through which t h e Bank's l o a n s i n s u p p o r t of g e n e r a l i n d u s t r i a l development a r e r e t a i l e d . And i t i s s u r p r i s i n g t h a t more a t t e n t i o n h a s not been given t o p a r t i c i p a t i o n i n t h e Bank's e f f o r t s t o i d e n t i f y and p r e p a r e r u r a l development p r o j e c t s of a l o c a l team which could c a r r y forward t h e work t o e v e n t u a l e x e c u t i o n . E f f o r t two y e a r s ago t o h e l p s t r e n g t h e n and make more p r a c t i c a l t h e agency concerned with a g r i c u l t u r a l r e s e a r c h and e x t e n s i o n would probably have r e s u l t e d i n t h e Bank being much c l o s e r t o being a b l e t o f i n a n c e p r o j e c t s a p p r o p r i a t e t o s m a l l farmers than i t now a c t u a l l y i s . The Bank d i s a g r e e s w i t h t h i s assessment and c o n s i d e r s t h a t i t h a s " c o n s i s t e n t l y attempted t o r e c o g n i z e , a t t h e r i g h t t i m e , t h e importance of t h e i n s t i t u t i o n a l a s p e c t s of p r o j e c t e x e c u t i o n . W e may n o t always have suc- ceeded i n a c h i e v i n g p r o g r e s s w i t h i n s t i t u t i o n - b u i l d i n g a t t h e d e s i r a b l e r a t e . But t h a t is t o be expected i n a s i t u a t i o n where w e o b v i o u s l y do n o t e x e r c i s e complete c o n t r o l o v e r t h e s i t u a t i o n . A f t e r a l l , we a r e d e a l i n g w i t h Govern- ments (be i t c e n t r a l o r l o c a l ) and o t h e r i n s t i t u t i o n s which a r e understand- ably r e l u c t a n t t o let us d i c t a t e t h e i r actions." - I/ E v e n t u a l l y a s s i s t e d w i t h Loan 1072-CO of J a n u a r y 1975 t o p r o v i d e $27 m i l l i o n , s p r e a d among some f o r t y towns. Other l o a n s w i t h an important Y 1975 were Loans 1071-CO i n s t i t u t i o n - b u i l d i n g o b j e c t i v e approved i n F f o r t h e F i n a n c i e r a concerned w i t h s m a l l - s c a l e i n d u s t r y , an i n n o v a t i v e p i l o t o p e r a t i o n , and Loan 1073-CO, r e p r e s e n t i n g a f u r t h e r s t a g e i n t h e Bank's e f f o r t s t o s t r e n g t h e n t h e n a t i o n a l telecommunications company. 5.2 - _ I _ _ Borrower S a l a r k S t r u c t u r e s Government and _ I _I__--___--- I_--- O r i g i n a l Y~colnrilenclation: The Bank s h o u l d r i v e more a t t e n t i o n t o - -- adequacv o f s a l a r i e s , s a l a r y s t r u c t u r e s , i n c e n t i v e s f o r t r a i n i n g and a c t u a l payment o f s p e c i a l p r e m i a i n C o l o ~ i b i - ? . P o o r s a l a r y s t r u c t u r e s and i n s t a b i l i t y of s a l a r i e s i n r e a l t e r m s seem t o b e a t t h e h e a r t o f many problems i n Colom- b i a n Government a p , e n c i e s , a l s o c a u s i n g e x c e s s i v e r e l i a n c e on c o n s u l t a n t s . Hank Response: The Gank a g r e e d w i t h t h i s p o i n t and t o o k t h e view t h a t an i n - d e p t h s t u d y o f t h e s a l a r y s t r u c t u r e o f t h e whole Colombian Govern- ment ( i n c l u d i n g t h e ' d e c e n t r a l i z e d ' a g e n c i c s ) was a r i e c e s s a r y s t a r t i n g p o i n t , b u t i t d i d n o t f e e l t h a t t h i s s t u d y had s u f f i c i e n t p r i o r i t y t o w a r r a n t t h e Bank u n d e r t a k i n g i t o r promoting i t . -Kevie1.r -- of A --c t i o n : Poor s a l a r i e s and s a l a r y s t r u c t u r e s have con- t i n u e d t o b e s i g n i f i c a n t problems i n manv p a r t i c u l a r a r e a s i n which t h e Eank h a s b e e n i n v o l v e d -- f o r i n s t a n c e , r e c k n t l y , P f i n i s t r y o f P u b l i c Works ( h i g h - w a y s ) , R a i l w a y s , P f i n i s t r y o f E d u c a t i o n and a l s o t h e Banco d e l a X e p u b l i c a , where t h i s problem h a s b e e n c o n s i d e r e d a m a j o r o b s t a c l e t o i t s p l a y i n g a l a r g e r r o l e i n t h e E a n k ' s i n d u s t r i a l l e n d i n g . N o n e t h e l e s s o v e r t h e l a s t few y e a r s a comprehensive s t u d y , u s e f u l as i t would h a v e b e e n , m i g h t w e l l n o t h a v e l e d t o t h e f u n d a m e n t a l r e f o r m s nkeded s i n c e t h e more b a s i c d i f f i c u l t y h a s b e e n s e r i o u s l a g s i n f i s c a l p e r f o r m a n c e and i n a d j u s t m e n t o f p u b l i c s e r v i c e t a r i f f s t o ac- celerated inflation. The Bank h a s a l s o withdrawn from t h e p o s i t i o n t a k e n i n t h e o r i g i n a l r e s p o n s e , now c o n s i d e r i n g t h a t a b r o a d view i s n o t r e q u i r e d and t h a t i t is o n l y " j u s t i f i e d " i n t a k i n g up t h e m a t t e r when i t f e e l s t h a t t h e p r o g r e s s o f p a r t i c u l a r programs o r p r o j e c t s i n which t h e Bank i s d i r e c t l y i n v o l v e d are d e m o n s t r a b l y hampered, o r i n d a n g e r o f b e i n g hampered, by i n a d e q u a t e s t a f f compensation p o l i c i e s . 5.3 Ic,provi- and D i s t r i b u t i o n g A l l o c a t i o n---- -- - .- - n o f DFC Funds - - I f t l i e I3ank c a n n o t t a k e t h e more a c t i v e O r i g i n a l Kecommtndation: - and c o ~ s t r u c t i v e ,b u t e x p e n s i v e , r o l e p r o p o s e d w i t h r e g a r d t o developrr.ent of Colombian f i n a n c i a l m a r k k t s ( s e e c h a p t e r 11, recommendation 2 . 7 above) , t h e n i t s h o u l d c o n s i d e r t a k i n g v a r i o u s o t i i e r s t e p s t o irrlprove t h e a l l o c a t i o n and d i s t r i b u t . i v e impact o f i t s lerrditlg t h r o u g h i n t e r m e d i a r i e s f o r g e n e r a l i n d u s - t r i a l development: ( a ) c h a n n e l l i n g f u n d s and t e c i - m i c a 1 a s s i s t a n c e t o t h e Cor!,oracion F i n a n c i e r a P o p u l a r ( f o r mediut:~anti s m a l l i n c ' u s t r y ) , which remains p r e s e n t l y v e r v s n ~ a l lr e l a t i v e t o t h e n e e d , ( b ) r a i s i n g t h e e f f e c t i v e i n t e r e s t c e i l i n p , on s u b - l o a n s by t h e F i n a n c i k r a s p r e s e n t l v f i n a n c e d t o a r a t e which would c l e a r t-lirjir market -- p r o b a b l y a b o u t 21ii a t . p r e s e n t , ( c ) t y i n g i t s l o a n s t o t i l e F i r i a n c i c r a s ' o!~n e f f o r t s t o r a i s e f u n d s i n the clor?estic m a r k e t , pos- s i b l y b y us in:^; a m a t c h i n g f u n d t e c h n i q u e , o r ( d ) r e q u i . r i n g t h e f i n a l b o r r o w e r t o c a r r y t h e f o r e i g n exchange r i s k h i m s e l f . ,Fanl< Response: Tlic Balll; ncceptt...i t 1 : t s e s u p , ~ c i s t i o n se x c e p t f o r t h e last or:^, whicir it rejectt-ilr OT? grounds i t : ~ o u l dslow t h e p a c e of r e l e n d i n g t o o much, due t o t h e r e l u c t a n c e o f most Colombian e n t r e p r e n e u r s t o c a r r y t h e exchange r i s k . It i n d i c a t e d t h a t c o n t a c t s had a l r e a d y begun w i t h t h e Corpor- a c i o n F i n a n c i e r a P o p u l a r and t h a t t h e n e x t l o a n f o r t h e F i n a n c i e r a s t h r o u g h which t h e Bank had t r a d i t i o n a l l y l e n t would p r o v i d e f o r w i d e r d i s t r i b u t i o n of f u n d s , e s p e c i a l l y t o i n c l u d e s m a l l e r f i r m s , a l e n d i n g r a t e t o t h e f i n a l borrower of 232 w i t h p o s s i b l e i n t r o d u c t i o n o f i n d e x i n g on any s u b s e q u e n t l o a n , and f u l f i l l m e n t of c e r t a i n t a r g e t s f o r r a i s i n g l o c a l r e s o u r c e s b e f o r e t h e second h a l f of t h e l o a n would become a v a i l a b l e f o r u s e . Review o f A c t i o n : The $60 m i l l i o n l o a n f o r t h e F i n a n c i e r a s s i g n e d i n J u n e 1973 a c t u a l l y i n v o l v e d two measures d e s i g n e d t o s e c u r e a w i d e r d i s - t r i b u t i o n of funds by a d m i n i s t r a t i v e a c t i o n : a d d i t i o n of one new F i n a n c i e r a t o t h e t r a d i t i o n a l f i v e a c c e p t e d a s c h a n n e l s by t h e Bank and p o s s i b l y o f two more, c o n d i t i o n a l o n s a t i s f a c t o r y f i n d i n g s by t h e Banco d e l a R e p u b l i c a , 11 and a l i m i t o f $4 m i l l i o n t o t h e c u m u l a t i v e amount o f IBRD f u n d s t h a t c o u l d b e o u t s t a n d i n g ( i n c l u d i n g u n d i s b u r s e d ) t o any o n e f i r m o r group. The new F i n a n c i e r a s have n o t y e t i n f a c t been v e r y a c t i v e p a r t i c i p a n t s i n t h e l o a n a n d , w h i l e t h e $4 m i l l i o n l i m i t h a s e f f e c t i v e l y p r e v e n t e d some l a r g e e n t e r - p r i s e s from h a v i n g a c c e s s t o t h e IBRD f u n d s ( t h e Bank h a s b e e n e m p h a t i c a b o u t n o t g r a n t i n g e x c e p t i o n s , on grounds s u c h e n t e r p r i s e s could raise t h e i r own f o r e i g n f i n a n c i n g ) and may a c c o u n t i n p a r t f o r t h e p r o p o r t i o n o f new sub- borrowers i n t h e t o t a l b e i n g l a r g e r s o f a r t h a n under t h e p r e v i o u s l o a n , it is n o t c l e a r t h a t i t h a s s t i m u l a t e d t h e F i n a n c i e r a s t o t a k e any i n i t i a t i v e s t o f i n d promising s m a l l e r b o r r o w e r s . More i m p o r t a n t i n t h e e f f o r t t o b r o a d e n a c c e s s t o f i n a n c i n g o n r e a s o n a b l e terms are t h e c o n s i d e r a b l e work t h e Bank h a s been doing t o p r e p a r e a l o a n t h r o u g h t h e C o r p o r a t i o n F i n a n c i e r a P o p u l a r f o r medium- and s m a l l - s c a l e i n d u s t r y 21 a n d , p o t e n t i a l l y , t h e economic e v a l - u a t i o n t h a t t h e Bank h a s s p o n s o r e d o f s e l e c t e d p a s t Financiers-financed p r o j - e c t s which i s i n p a r t i n t e n d e d t o y i e l d e v i d e n c e r e l e v a n t t o t h e d o u b t s r a i s e d i n t h e e v a l u a t i o n r e p o r t , on t h e b a s i s o f e x c e s s i v e l y a g g r e g a t e d d a t a , a b o u t t h e economic and f i n a n c i a l e f f i c i e n c y o f l a r g e m a n u f a c t u r i n g e n t e r p r i s e s i n Colombia r e l a t i v e t o t h o s e of medium- and s m a l l - s c a l e . 3/ - 1/ One o f , t h e s e h a s now been a c c e p t e d as a c h a n n e l . - 2/ Signed i n J a n u a r y 1975 a s Loan 1071-CO o f $5.5 m i l l i o n , t h e f i r s t Bank Group l o a n i n L a t i n America e x c l u s i v e l y f o r smaller i n d u s t r y . The s t u d y had t o o small and p a r t i c u l a r a sample of ' s m a l l - $ c a l e f e n t e r - pri,ses, a l r e a d y f i n a n c e d by t h e F i n a n c i e r a s , t o b e v e r y d e f i n i t i v e o n t h i s matter ( a l t h o u g h i n s e v e r a l r e s p e c t s t h e m e d i m - s c a l e e n t e r p r i s e s a g a i n s t o o d o u t as t h e most efficient), b u t it d i d v e r y i n t e r e s t i n g work o n i n d i r e c t employment g e n e r a t i o n ( u n e x p e c t e d l y g r e a t e r f o r t h e s m a l l e r e n t e r p r i s e s t h a n t h e l a r g e r o n e s ) and showed t h a t t h e F i n a n c i e r a - a s s i s t e d s u b p r o j e c t s have g e n e r a l l y had v e r y s a t i s f a c t o r y economic r a t e s of re- t u r n , a v e r a g i n g some 30% among t h e 29 s u b p r o j e c t s s t u d i e d .  I n e x t e n d e d n e g o t i a t i o n s f o r t h e $60 m i l l i o n l o a n t h e Colombian Goverrnnent r e f u s e d t o a c c e p t t h e 23% o n - l e n d i n g i n t e r k s t r a t e p r c p o s e d by t h e Bank ( t h e r a t e a t which t h e F i n a n c i e r a s w e r e t h e n l e n d i n g t h e i r Peso r e s o u r c e s ) , m a i n l y o n grounds o f p o s s i b l e i n f l a t i o n a r y i m p a c t , and a compro- rnise was e v e n t u a l l y r e a c h e d whereby t h e i n t e r e s t r a t e would b e 20% (compared w i t h 18.75% u n d e r t h e p r e c e d i n g l o a n ) , s u b j e c t t o r e v i s i o n f o r any l o a n s made more t h a n s i x months a f t e r t h e l o a n h a d become e f f e c t i v e i f a d e l a y e d - a c t i o n fornlula shoved i n f l a t i o n t o have p r o c e e d e d o u t s i t l e t h e r a n g e 12-16% p . a . With s u p p o r t from a s t a b i l i z a t i o n fund e s t a b l i s h e d by t h e Banco d e l a Republics t h e F i n a n c i e r a s h a v e been a b l e t o s e l l bonds i n somewhat l a r g e r q u a n t i t y t h a n e x p e c t e d , and b e f o r e t h e end o f 1 9 7 3 t h e y reached t h e t a r g e t (of a b o u t $10 m i l l i o n e q u i v a l e n t a d d i t i o n a l bond i s s u e s ) e s t a b l i s h e d i n t h e Bank's Loan Agrekment. ':'here i s some c o n c e r n i n C o l o n ~ b i at h a t l e n d i n g s u b s t a n t i a l amounts of I B R D f u n d s t o t h e p r i v a t e s e c t o r i n f o r e i g n e x c h a n g t might g r a d u a l l y b u i l d up a p o w e r f u l i n t e r e s t group a g a i n s t c o n t i n u a t i o n o f o n e o f t h e main a c h i e v e - ments of t h e l a t e 1960s -- t h e s l i d i n g exchange r a t e whereby t h e Peso is ~ r a d u a l l yd e v a l u e d r e l a t i v e t o t h e US d o l l a r . From t h i s p o i n t o f view, i t may b e f o r t u n a t e t h a t t h i s s u g g e s t i o n o f t h e e v a l u a t i o n r e p o r t was n o t a c c e p t - e d . The i n c r e a s i n g involvement o f Colombian m a n u f a c t u r e r s in e x p o r t s may make t h i s p o i n t less p e r s u a s i v e i n t h e f u t u r e and renew t h e r e l e v a n c e t o Colombia of t h e Bank's normal p r o c e d u r e i n o t h e r c o u n t r i e s o f h a v i n g t h e exchange r i s k passed t o t h e f i n a l borrower. 5.4 F i n a n c i e r a Promotional A c t i v i t y O r i g i n a l Recommendation: The Bank s h o u l d a c t i v e l y p u r s u e w i t h t h e F i n a n c i e r a s t h e p o s s i b i l i t y o f t h e i r u n d e r t a k i n g promotions i n f i e l d s where t h e r e seem t o b e u n r e a l i z e d i n d u s t r i a l p o t e n t i a l s , w i t h a view t o i d e n t i f y i n g t h e o b s t a c l e s and what m e a s u r e s , i f a n y , t h e Bank might b e a b l e t o t a k e t o h e l p overcome them. Examples t h a t h a v e corn& t o t h e a t t e n t i o n o f t h e e v a l u a - t i o n m i s s i o n a r e lumber r e s o u c e s ( f o r f u r n i t u r e ) and c o a l ( f o r c a r b o - c h e m i c a l s ) . Rank Respons?: T h e Bank s a i d i t a g r e e d w i t h t h e view t h a t some of t h e F i n a n c i e r a s had n o t been s u f f i c i e n t l y p r o m o t i o n a l i n t h e p a s t and t h a t more emphasis s h o u l d b e g i v e n t o t h e i r p r o m o t i o n a l a c t i v i t i e s . Review o f A c t i o n : ?!ainlp b e c a u s e o f t h e b r o a d e r problem d i s c u s s e d -- i n t h e e v a l u a t i o n r e p o r t , o f t h e e x t r e m e weakness o f t h e e q u i t y m a r k e t , t o - g e t h e r w i t h e a r l y u n s u c c e s s f u l p r o r n o t i o ~ l a le x p e r i e n c e s o f most o f t h e Finan- c i e r a s , i t h a s n o t been p o s s i b l e f o r t h e Eank t o r a i s e s u b s t a n t i a l i n t e r e s t among them i n t h i s k i n d of a c t i v i t y . N o r e o v t r t h t y h a v e f a i r l y ample b u s i n e s s coming forward w i t h o u t much a c t i v e i n t e r v e n t i o n on t h e i r p a r t , a l t h o u g h n o t much i n t h e f i e l d s mentionst1 above and n o t n e c e s s a r i l y i n l i n e s b e s t s u i t e d t o meeting Coloc.bials oh j e c t i v k s o f ernploymr2nt c r e a t i o n and exchange e a r n i n g s . One o f t h e F i n a n c i e r a s h a s been q u i tt: s u c c e s s f u l l y a c t i v e , i n a minor way, i n h e l p i n g t o d e v e l o p t h t e x ~ l o i t a t i o nof n a t u r a l r e s o u r c k s ( p a r t i c u l a r l y f i s h and l i v e s t o c k ) on t h e n o r t h c o a s t , and t h e r t i s p r o t ~ i n gi n t e r e s t i n Colombia i n t h e f u r t h e r domestic p r o c e s s i n g of t h e c o u n t r y ' s r i c h raw m a t e r i a l s f o r e x p o r t . The Bank now c o n s i d e r s t h a t t h e main need is f o r "an i n s t i t u t i o n a l framework t o f a c i l i t a t e t h e f o r m u l a t i o n o f a n a t i o n a l i n d u s t r i a l p o l i c y : a c e n t r a l i z e d body t o c o l l e c t and p u b l i s h market and c o s t d a t a , t o i d e n t i f y .. i n d u s t r i e s f o r which Colombia h a s comparative advantages, t o conduct indus- t r i a l promotion, and t o c o o r d i n a t e promotion w i t h r e s e a r c h , t e c h n o l o g i c a l a d a p t a t i o n , i n c e n t i v e s , t r a i n i n g , etc." It a p p a r e n t l y p l a n s t o g i v e f u t u r e l e n d i n g f o r i n d u s t r y i n Colombia much more o f a s e c t o r a l f o c u s , aiming p a r t i c - u l a r l y a t t h e c r e a t i o n o f such a multi-purpose i n s t i t u t i o n as d e s c r i b e d . 5.5 Agricultural S t a t i s t i c s O r i g i n a l Recommendation: To h e l p i n t h e f o r m u l a t i o n of b e t t e r s e c - t o r p o l i c i e s and e f f e c t i v e implementation, t h e Bank should encourage d e s i g n of a system f o r c o l l e c t i o n of comprehensive and r e l i a b l e a g r i c u l t u r a l s t a t i s t i c s and, i f n e c e s s a r y , f i n a n c e a p p r o p r i a t e t e c h n i c a l a s s i s t a n c e . Bank Response: While a g r e e i n g t h a t a s e r i o u s problem e x i s t s , t h e Bank w a s n o n e t h e l e s s d o u b t f u l o f b e i n g a b l e t o make a n e f f e c t i v e c o n t r i b u t i o n towards s o l v i n g i t , i n v i e w o f t h e i n s t i t u t i o n a l and a t t i t u d i n a l o b s t a c l e s i n Colombia. However, i t expected t o c o n t i n u e t o emphasize i t s d i s s a t i s f a c t i o n w i t h t h e p r e s e n t s i t u a t i o n t o t h e Colombian a u t h o r i t i e s and i t f e l t t h a t i t might b e a b l e t o p r o v i d e some a p p r o p r i a t e t e c h n i c a l a s s i s t a n c e i n connection with lending f o r t h e a g r i c u l t u r a l s e c t o r . Review of Action: The Bank's 1973 A g r i c u l t u r e S e c t o r Study d i d examine t h e s i t u a t i o n and u n d e r l i n e d t h e need f o r a c t i o n . One o f i t s p r i n c i - p a l recommendations was t h a t "A permanent, h i g h - l e v e l A g r i c u l t u r a l S t a t i s t i c s Committee s h o u l d b e assembled under t h e chairmanship of t h e M i n i s t e r o f Agri- c u l t u r e t o p r e p a r e an a c t i o n program f o r improving t h e q u a n t i t y , q u a l i t y and timeliness of s t a t i s t i c a l d a t a f o r t h e sector..... A t e c h n i c i a n of t h e M i n i s t r y o f A g r i c u l t u r e ' s planning o f f i c e , t r a i n e d i n d a t a h a n d l i n g and management i n f o r m a t i o n systems, should b e a p p o i n t e d t o a d v i s e t h e M i n i s t e r and t h e heads o f t h e o p e r a t i n g a g e n c i e s on ways t o g e n e r a t e r e l i a b l e informa- t i o n about on-going f i e l d a c t i v i t i e s . T h i s p e r s o n should r e p o r t back a s quickly a s possible with suggestions f o r strengthening t h e s t a t i s t i c a l o f f i c e s of t h e v a r i o u s agencies." I n t h e l a t t e r r e g a r d a small p r o v i s i o n f o r manage- ment and a c c o u n t i n g c o n s u l t a n t s e r v i c e s t o INCORA, t h e l a n d reform agency, was i n c l u d e d i n t h e Drainage and Land Development p r o j e c t p r e p a r e d i n 1974, I / - b u t t h e main, b r o a d e r problem o f a g r i c u l t u r a l s t a t i s t i c s does n o t appear t o have been pursued by t h e Bank. - 1/ And financed by a loan of $21.0 m i l l i o n approved by t h e Executive D i r e c t o r s i n J u n e 1975.