Announcement of World Bank Lends Three Hundred Four Million US Dollars to Colombia for Public Sector Reform on December 13, 1990

FOR IMMEDIATE RELEASE World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. *Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 91/31 Contact: Ciro Gamarra (202) 473-8721 WORLD BANK LENDS $304 MILLION TO COLOMBIA FOR PUBLIC SECTOR REFORM WASHINGTON, December 13, 1990 -- Colombia's public-sector reform program will be assisted by a $304 million, quick-disbursing World Bank loan. The loan supports the implementation of the country's medium-term economic modernization program. The reform program aims at making more productive and efficient use of public sector assets and at improving efficiency in allocating resources in critical economic sectors. The program includes the elimination of public monopolies and the implementation of measures that will increase competition. Central to the government's strategy to improve the productivity of public sector assets will be the modernization of the management of public sector entities through the establishment of a performance planning and evaluation system. The system will be initially applied to: Empresa Colombiana de Petr6leos (ECOPETROL), Empresa Colombiana de Telecomunicaciones (TELECOM), Instituto de Cr4dito Territorial (ICT) and Instituto Colombiano de Hidrologia, Meteorologia y Adecuaci6n de Tierras (HIMAT). Later on, performance plans will be applied to Puertos de Colombia (COLPUERTOS), Corporaci6n Elctrica del AtlAntico (CORELCA), Instituto de Mercadeo Agricola (IDEMA) and Instituto Colombiano de Electrificaci6n (ICEL). Similar plans will be prepared for the Servicio Nacional de Aprendizaje (SENA), Interconexi6n El4ctrica, S.A. (ISA), Corporaci6n Regional del Valle del Cauca (CVC), and Instituto de Seguridad Social (ISS). The operation will also assist the government to deepen and broaden its decisions aimed at promoting private sector development in railways, ports, shipping, low-income housing, agricultural marketing and in the industrial and financial sectors. The loan will be disbursed in three tranches of $100 million over two years. Disbursements will be linked to progress in the implementation of the reform program and the maintenance of macroeconomic performance consistent with the objectives of the modernization program. NOTE: Money figures are expressed in U.S. dollar equivalents. Disbursements of the first tranche will be made available at the time of loan effectiveness. The second and third tranches are expected to be released by December 31, 1991 and December 31, 1992, respectively. These three tranches will finance imports by the public and private sectors, except luxury and military goods and those financed by other sources. The remaining $4 million of the loan will be used to finance technical assistance, including the preparation of performance plans by selected public entities and studies required to define policies and action plans in the area of shipping, railways, ports, banking, public enterprise restructuring and agricultural marketing. The reforms are expected to result in significant increases in the productivity of resource use by the public sector, leading ultimately to improvements in the public sector fiscal performance, a basic condition for the successful implementation of the government economic modernization program. The elimination of entry and competition constraints in areas that have been dominated by the public sector will increase efficiency in the allocation and use of resources and improve the economy's ability to adjust to an open and competitive environment. The World Bank loan to the Republic of Colombia is for 17 years, including five years of grace, with a variable interest rate, currently 7.72 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.25 percent on the undisbursed balances. -0-