INVESTMENT LENDING REFORM:
MODERNIZING AND CONSOLIDATING OPERATIONAL
POLICIES AND PROCEDURES
Operations Policy and Country Services
October 1, 2012
This document is being made publicly available prior to Board consideration. This does not
imply a presumed outcome. This document may be updated following Board consideration and
the updated document will be made publicly available in accordance with the Bank's policy on
Access to Information.
ABBREVIATIONS AND ACRONYMS
APL Adaptable program loan
BP Bank Procedure
CAS Country Assistance Strategy
CODE Committee on Development Effectiveness
DL Disbursement letter
DO Development objective
DPL Development policy loan
ERL Economic recovery loan
ERR Economic rate of return
FIL Financial intermediary loan
FM Financial management
GEF Global Environment Facility
IAD Internal Audit Department
IDA International Development Association
IEG Independent Evaluation Group
IFC International Finance Corporation
IL Investment lending
ISDS Integrated Safeguards Data Sheet
ISP Implementation Support Plan
ISR Implementation Status and Results Report
IT Information technology
LIL Learning and innovation loan
MOP Memorandum of the President
MP Montreal Protocol (on Substances that Deplete the Ozone Layer)
NPV Net present value
OMS Operational Manual Statement
OP Operational Policy
OpMemo Operational Memorandum
ORAF Operational Risk Assessment Framework
PAD Project Appraisal Document
PCN Project Concept Note
PID Project Information Document
PPA Project Preparation Advance
PPF Project Preparation Facility
SECPO Corporate Secretary, Policy Operations Unit
SIL Specific investment loan
SIM Sector investment and maintenance loan
TAL Technical assistance loan
TTL Task team leader
INVESTMENT LENDING REFORM:
MODERNIZING AND CONSOLIDATING OPERATIONAL POLICIES AND PROCEDURES
CONTENTS
Executive Summary ..................................................................................................................... iii
I. Introduction ............................................................................................................................... 1
II. Parameters of the Consolidation ............................................................................................ 3
III. Policy Changes for Board Approval ................................................................................... 11
A. Fragility ....................................................................................................................... 11
B. Economic Analysis of Investment Operations ............................................................ 12
C. Series of Projects ........................................................................................................ 13
D. Additional Financing .................................................................................................. 14
E. Additional Flexibility in Audit Requirements ............................................................ 14
F. Increasing the Project Preparation Advance Limits ................................................... 15
G. General Policy Consolidation ..................................................................................... 15
V. Challenges And Risks ............................................................................................................ 15
VI. Next Steps and Request for Approval ............................................................................... 16
Annexes
Annex A. Summary of Consultations ........................................................................................... 19
Annex B. Draft Operational Policy Statement (OP) 10.00— Investment Project Financing ....... 29
Annex C. Draft Bank Procedures (BP) Statement 10.00—Investment Project Financing ........... 36
Annex D. Disposition of Existing Investment Lending (IL) OPs, BPs: Summary ...................... 46
Annex E. Draft Consolidated Operational Policy (OP) for Investment Project Financing:
Disposition of Existing Investment Lending Policy Statements .................................. 47
Annex F. Draft New Consolidated Bank Procedure (BP) for Investment Lending ...................... 51
Annex G. Draft New Consolidated Operational Policy (OP) and Bank Procedure (BP) for
Investment Lending: Disposition of Existing Operational Memoranda ...................... 54

INVESTMENT LENDING REFORM:
MODERNIZING AND CONSOLIDATING OPERATIONAL POLICIES AND PROCEDURES
EXECUTIVE SUMMARY
1. The work to modernize and consolidate the World Bank’s investment lending (IL)
policies and procedures, though conceived under the IL reform initiative, is a key step in moving
from a process culture to a results culture. The consolidation is one of the pillars that facilitates
the Bank’s broader modernization agenda—an agenda that involves modernizing the institution
to simplify its services and processes and to strengthen the focus on institutional performance,
results, openness, and accountability of its services and processes.
2. IL Reform Process. Investment lending is essentially the Bank’s original financing
instrument and remains its most-used form of financial support to client countries. It has been
modified over the years but not explicitly considered for overall modernization until the launch
of IL reform in 2009. In planning for IL reform, Bank Management proposed an initial phase
focused on five key elements: (a) a risk-based approach, (b) enhanced implementation support,
(c) a rationalized menu of financing options, (d) a better enabling environment, and (e) policy
reform.1 With the first four elements substantially in place, Management is now addressing the
“policy reform” element—that is, rationalizing the statements of policy and procedure governing
investment lending. This paper presents the results of that work and proposes a small number of
important and urgent policy changes for Board consideration.
3. Responding to an Identified Need. In recent years, reviews by the Independent
Evaluation Group (IEG) and the IDA14 Internal Controls Review2 formally note what most
Bank staff already knew: the maze of 35 policies that apply to IL, with their gaps, overlaps,
inconsistencies, and sheer volume, affects the efficiency and effectiveness of clients and Bank
staff in IL delivery. The IDA Internal Controls Review, in particular, identified this maze as a
source of significant operational risk. This was consistent with feedback from staff, who asked
for the simplification of the overall framework governing the instrument.
4. A Step in a Broader Policy and Procedure Reform Effort. This modernization and
consolidation is a first step in a wider policy and procedure reform. Responding to a
recommendation from the Internal Audit Department,3 the World Bank Group is developing a
group-wide policy and procedure framework, modernizing the design, processing, adoption, and
changing of policies and procedures covering administrative, human resource, and operational
policies. Under that umbrella, the Bank will update its entire Operational Manual to make it an
accessible and well-organized compilation of policies and procedures that is user-friendly and
facilitates the focus on substance.4 The preparation of this paper has been informed by the wider
work on the policy and procedure framework.
1 Investment Lending Reform—Concept Note (SecM2009-0026), January 29, 2009.
2 Review of IDA Internal Controls: An Evaluation of Management’s Assessment and the IAD Review,
Independent Evaluation Group, World Bank, April 2009.
3 Audit of the World Bank Group Framework for Policies and Procedures (AC2012-0011), February 10, 2012.
4 The Bank’s Operational Policy Manual: Issues and Prospects for Reform - Approach Paper (CODE2011-
0024), April 1, 2011.
iv
5. Purpose of the Exercise. The exercise pulls together in one policy and one procedure
statement content now scattered across 19 separate Operational Policy (OP) statements, 18 Bank
Procedure (BP) statements, and 9 Operational Memoranda (OpMemos). The consolidation of
these statements into the new OP/BP 10.00, Investment Project Financing, eliminates overlaps,
more precisely delineates between policy content, non-policy (but still binding) content, and
guidance; rationalizes inconsistencies; addresses gaps; and provides the basis for a clearer
decision-making and accountability framework. It is the final action item to complete
Management’s response to the IDA Internal Controls Review by providing users with a much
more coherent, understandable, and easy-to-use articulation of the Bank’s IL policies and
procedures. It also, as discussed with Executive Directors in 2009,5 meets one of the original
goals of IL reform—clarifying and consolidating the extensive IL menu with a single IL
instrument that builds in the flexibility to respond to clients’ diverse development and financing
needs. In addition, it supports the newly-adopted framework for accountability and efficiency of
decision-making, as it is written to be consistent with that framework.
6. Parameters of the Consolidation. This consolidation does not include the Bank’s
policies on procurement or safeguards—although they are still integral to IL operations—
because they are being reviewed separately. Additional to and consistent with the approach paper
discussed by the Board’s Committee on Development Effectiveness (CODE) on guarantee
reform in October 2011,6 an option is being considered as a follow-up step to the IL policy and
procedure consolidation to incorporate relevant project-based guarantee elements into OP 10.00.
This would mirror the proposed integration of relevant policy-based guarantee elements into OP
8.60 on development policy financing. Consistent with this policy and procedure consolidation,
work is underway to significantly streamline IL documents and on quality assurance reforms to
support front-line teams, focusing on implementation and results.
7. Feedback from Consultations. The draft paper discussed by CODE was revised based
on CODE recommendations, notably removing unclear language and ambiguities; clarifying the
centrality of poverty and gender policy; the importance of economic analysis; and flexibility in
dealing with situations of fragility; and further elaborating on the change proposed for additional
financing.
8. Internal and external consultations were held on the revised draft. Feedback highlighted
broad support for consolidation and modernization. Many welcomed the special considerations
in situations of fragility. At the same time, concerns were raised regarding leaving too much to
the interpretation of staff on the one hand and a danger of inadvertently imposing new
unproductive requirements and reducing needed flexibility on the other hand.
9. Policy Changes. For the most part this work entails revising the policy and procedures
statements but not the policy content. That said, Management identifies areas where it believes
adjustments to policy would make sense. Section III covers these changes in detail.
10. Request for Approval. Management requests the Executive Directors’ approval to the
proposed policy changes:
5 Investment Lending Reform—Concept Note, (SecM2009-0026), January 29, 2009.
6 Modernizing the World Bank’s Operational Policy on Guarantees: Approach Paper (CODE2-11-0053),
October 11, 2011.
v
? extending the options for additional flexibility currently available under OP 8.00 for
countries faced with natural or man-made disasters and conflict to countries affected
by fragility or specific vulnerabilities, including for small states;
? revising and updating the policy on the economic analysis of IL operations;
? revising the approval procedures for a series of IL projects that represent part of a
programmatic engagement over time with client(s);
? dropping the three-year limit for additional financing;
? retaining the requirement of annual audits but adding more flexibility to their timing
to better take into account country conditions and to allow for the use of country
systems when appropriate; and
? increasing the current Project Preparation Advance limits of US$3 million in normal
circumstances to US$6 million, and from US$5 million, currently just for crises and
emergencies, to US$10 million for countries faced with natural or man-made
disasters, conflict, fragility or specific vulnerabilities, including for small states.
11. Reclassification. In addition to the specific policy changes described above, the
consolidation process identifies elements of existing OP statements that, taking into account the
OP/BP definitions and distinctions, should be classified as Bank procedure and included in BP
statements or moved to internal processing steps or guidance. Management requests that the
Executive Directors approve such proposed reclassification of OP statements.
12. Next steps. If the policy changes above are approved, Management will issue the new OP
and BP as well as make the necessary changes to other OPs and BPs that are listed in paragraph
33 of the paper. Management will also take the actions necessary for these reforms’ smooth
introduction, including guidance, training, and outreach. While it is not expected that the
exercise will raise any additional policy issues, given the magnitude of the effort, if such
inadvertently omitted policy issues are identified, Management will consult with the Board
accordingly.
INVESTMENT LENDING REFORM:
MODERNIZING AND CONSOLIDATING OPERATIONAL POLICIES AND PROCEDURES
I. INTRODUCTION
1. A clear investment lending (IL) policy framework that is easy to understand and
implement is key for World Bank modernization to succeed. During the past decades, the Bank’s
IL policies have not kept pace with the changes in the portfolio, and new needs were often met in
an ad hoc manner. The result is that today the Bank has a policy architecture that is wordy,
cluttered, not well organized, and often confusing. Bank modernization is aimed at helping
clients with effective development solutions in an increasingly complex world and a growing
diversity of client needs.1 For investment lending to contribute what it can and should in
supporting effective development solutions across diverse client needs requires policy
modernization and consolidation.
2. Reform Context. The IL consolidation, therefore, should be seen as part of that broader
reform agenda—an agenda that involves modernizing the institution through new, streamlined,
and consolidated policies and clearer accountability and decision-making processes. The efforts
on major modernization initiatives are complementary. For instance, the newly-introduced
framework for efficient decision-making with accountability specifies protocols for the
assignment of responsibility, accountability, and authority and clearly defines staff roles in
decision-making—a key component in risk management. The consolidated Bank procedure
statement discussed in this paper is written to be fully compatible with that framework. Other
elements of reform, not covered in this paper, are also designed to enhance the performance of IL
operations: these other areas include specifically work on operational quality and reviews of
procurement and social and environmental safeguard policies and procedures, as well as
guarantee policy.
3. IL Reform. As the oldest and still the main instrument in Bank support for clients,
investment lending has naturally been at the center of Bank business modernization. A special
effort to reform investment lending and respond to findings from the earlier IDA Controls
Review started in 2009. Bank Management outlined an IL reform program that was based on five
elements: (a) implementing a risk-based approach for investment lending; (b) enhancing
implementation support; (c) consolidating and rationalizing the menu of financing options; (d)
providing a better enabling environment, including an enhanced information technology (IT)
system for investment lending; and (e) modernizing the IL policy framework, consolidating the
policy, embedding these IL reforms, and taking advantage of the enhanced enabling
environment. The next phases of investment lending modernization will focus on procurement
and environmental and social safeguards.
4. Feedback from Discussions at the Committee on Development Effectiveness (CODE).
Management has had two discussions with Executive Directors at CODE on investment lending
1 See Update on the Bank’s Business Modernization: Results, Openness, and Accountability Spring 2012
(DC2012-0005), April 10, 2012.
2
policy modernization. The first, in April 2010, was a discussion of the approach paper2 that set
out the background work and rationale for the consolidation and modernization of IL policy. A
companion paper on the Bank’s Operational Manual3 was discussed at the same time. CODE
supported the efforts aimed at the Bank’s business modernization and the approach to IL policy
that is reflected in this policy paper. The second discussion, in June 2012, was on the earlier draft
of this policy paper.4 The committee’s report from the June meeting5 notes that “The committee
broadly supported the overall direction of the Investment Lending (IL) policy consolidation
effort, the six major policy changes proposed, and management moving forward with external
and further internal consultations. The committee also appreciated IL reform’s link to the
Modernization Agenda and its focus on performance, results, openness, accountability and
simplification. The committee also noted that the proposed changes to the operational policies
would make the Bank better-aligned with other multilateral and regional development banks.”
The report also observes that “Members voiced support for the expansion of the scope of OP
8.00 [Rapid Response to Crises and Emergencies] to also apply to situations of fragility, noting
in particular that this added flexibility would be important for conflict-affected and small states.”
Members underscored the importance of economic analysis and that the work on poverty and
gender should apply to all Bank instruments. CODE asked for a number of revisions to reflect
comments and clarify issues in advance of consultation. That was revised accordingly.
5. Feedback from Consultations. The revised draft paper was posted on June 11, 2012,
followed by a consultation period from June 11 to September 14. A multi-prong approach was
adopted where field based offices played an important role in the outreach; special events and the
web provided an important platform for the consultations. Special effort was made to reach key
constituencies to inform those interested about the process. To this end, Country Directors
forwarded a package of materials to client countries and face-to-face consultations were carried
out on demand. Meetings were held with a number of multilateral development banks and civil
society organizations (CSOs). A summary of consultations is provided in Annex A to this paper.
Overall, the feedback was positive and supportive and many wondered what took us so long to
carry out this exercise. They noted the value of the flexibility provided by the special
considerations in cases of fragility. Several noted the importance of working with multilateral
development banks and other donors to ensure to the extent possible an alignment that would
help reduce unnecessary engagement costs for clients. Some feedback providers wanted more
clarity that the policy covers investment projects financed through trust funds and asked if feebased
services (for which the Bank is reimbursed for its work) should come under the policy in
the future. Most emphasized the need for coordination with clients and guidance and training for
staff in rolling out the policy. On the other hand, a few expressed concern that in separating
policy from guidance certain project preparation and implementation aspects, notably economic
analysis, could be left too much to the interpretation of staff. Some noted the importance of the
2 Investment Lending (IL) Policy Reform: Fixing the Policy Maze, Approach Paper (CODE2011-0025), April 1,
2011.
3 The Bank’s Operational Policy Manual: Issues and Prospects for Reform – Approach Paper (CODE2011-
0024), April 1, 2011.
4 Investment Lending Reform: Modernizing and Consolidating Operational Policies and Procedures
(CODE2012-0025), May 22, 2012.
5 Report to the Board from the Committee on Development Effectiveness—Investment Lending Reform:
Modernizing and Consolidating Operational Policies and Procedures, Meeting of June 6, 2012
(CODE/GS2012-0017).
3
Bank to be able to act flexibly in various country contexts and expressed concern that the
consolidation might reduce that flexibility. Lastly, questions were raised regarding the separation
of the procurement and safeguard policy reviews from this consolidation process; commentators
sought and received assurance that it would not affect the scope of those exercises.
6. Organization of the Paper. Following this introduction, Section II outlines parameters of
the policy and procedure consolidation and modernization. In the process of consolidation, a few
policy issues arose where Management finds that policy changes would be beneficial, and
Section III sets those out for Board consideration. Section IV summarizes some of the risks and
challenges associated with the introduction of the new policy and procedure framework. Section
V reviews the proposed next steps and includes the request for approval of the policy changes.
Annex A summarizes the feedback from consultations. Draft OP and BP 10.00 are attached as
Annexes B and C, respectively. Annex D gives an overview of the disposition of existing OPs
and BPs in the consolidation process. Annex E-G provides details on the disposition of existing
OPs, BPs, and Operational Memoranda.
II. PARAMETERS OF THE CONSOLIDATION
7. The IL policy and procedure consolidation is the result of analytical work over several
years.6 One of the most important pieces of analysis was the extensive and detailed IDA Internal
Controls Review, an unprecedented undertaking for a multilateral institution. (The IDA review
examines internal controls applicable to both IDA and IBRD.) In 2009, the summary document
from the review found that “with some important qualifications, IDA’s internal controls
framework operates to a high standard overall.” It highlighted operational policy as a matter for
further work. It recommended—with support from Bank Management, IEG, and Executive
Directors—a shift from a narrowly prescriptive to a principles-based policy framework.7 This
along with simple, clear language, ease of access, elimination of duplication, and separation of
policy from guidance were key elements in the approach that governed the preparation of the IL
OP as well as Management’s goal to reform the entire Operational Manual (see Box 1). It builds
on the same logic used in developing OP/BP 8.60, Development Policy Lending, and OP/BP
9.00, Program-for-Results Financing. The 2011 approach paper for Operational Manual reform
(which was welcomed by CODE) sets out the following operational architecture:8
? OPs should be relatively short, focused statements of overall goals, results, and core
driving principles, providing high-level direction for decisions and actions to achieve
the Bank’s development mandate.
? BPs should summarize the procedures that Bank staff must follow to achieve specific
institutional goals and fulfill policy requirements.
6 See the investment lending reform and investment lending policy reform approach papers cited above.
7 Review of IDA Internal Controls: An Evaluation of Management’s Assessment and the IAD Review,
Independent Evaluation Group, World Bank, April 2009.
8 The Bank’s Operational Policy Manual: Issues and Prospects for Reform, Approach Paper (CODE2011-
0024), April 1, 2011.
4
? Footnotes to OPs and BPs should generally be limited to references and not used for
critical policy instructions.
? In addition to the OPs and BPs, which make up the Operational Manual, internal
processing steps describe the various internal roles and accountabilities at the
decision points set out in the BPs. These include, for instance, instructions to staff on
internal clearance requirements, or instructions on how and where to submit an
operation to the Board for approval. In the past, some of these internal steps with no
operational content have been embedded in OPs and, more often, in BPs. Grouping
into a separate classification allows the OPs and BPs to be coherent and more to the
point, and provides a clearer framework of accountability and decision-making. The
processing steps are progressively being linked electronically to the web-based
project processing portal, hence contributing to a user-friendly “seamless” platform
for project processing.
The OP statements reflect policy content approved by the Executive Directors. Bank
Management approved the BP statements and issued processing steps and guidance set out for
internal use. Box 1 highlights work that has begun recently on a wider reform of the Bank Group
policy framework and policy-making process. Management expects to present the initial
assessment to Board Committees (Audit/CODE) before the end of the calendar year. At that
stage, Management will take stock of the implications of this exercise regarding next steps.
However, the substantive content and organization of the proposed IL policy and procedure is
unlikely to be affected, as the preparation of this paper and the associated draft OP 10.00 have
been coordinated with the wider work on accountability and decision-making reforms and
informed by early work on the policy and procedure framework.
5
Box 1: World Bank Group Policy, Procedure, and Process Modernization Efforts Ongoing
Efforts to modernize and consolidate the operational policy framework for IL are related to the following ongoing
efforts under way as part of the World Bank modernization agenda. These include:
Modernizing the Overall Framework for Policies and Procedures.a Responding to findings from and audit by the
Internal Audit Department, the World Bank Group is developing a protocol for the preparation and design,
processing, adoption, and changing of policies and procedures. The protocol will affect administrative, human
resource, and operational policies. The initial design proposal is expected to go to the Audit Committee and CODE
in late 2012. Since the work on IL policy is a two-stage process (pending results of consultations on procurement
and safeguards and discussions on guarantees), the second stage will benefit from this Bankwide initiative. In
general, this work is not likely to affect IL policy content, but it could lead to changes in its form and presentation.
Accountability and Decision-making. As part of the Bank’s ongoing institutional reforms, a new accountability
and decision-making framework has been developed and launched.b The IL policy and procedure consolidation has
proceeded in parallel with the development of the new framework. Thus the draft BP 10.00 incorporates the
language of that framework and is aligned with its decision points, simplified and straightforward processing steps,
and the roles of the actors at each point in the IL process. Once OP/BP 10.00 is finalized and the new processing
steps are in place, IL will have a clear accountability framework around processing steps that will allow for more
efficient decision-making and enhance the ability to take measured risks.
Reforming the Operational Manual. Under the umbrella of modernizing the overall framework for policies and
procedures, the Bank will update its entire Operational Manual to make it easier to access and interpret by staff, clients,
and the public, to eliminate duplicative or obsolete sections, and to distinguish clearly the mandatory rules from advisory
guidance. The update does not aim to change the substance of the Bank’s operational policies but to make it easier to
implement them effectively.
The proposal to consolidate multiple OPs and BPs that govern IL into a single policy and procedure statement is
one of the keystones of the Operational Manual reform, and is fully in line with the guiding principles endorsed by
CODE:
? Streamlining the overall architecture of the Operational Manual and organizing it around the Bank’s main
instruments and services;
? Clarifying and rationalizing the hierarchy of rules to focus OPs more sharply on core operational goals
and principles; establishing more clearly that the BPs are mandatory Bankwide; imposing a better order
on the non-mandatory guidelines and good practice materials; and
? Placing the OM on a more flexible and accessible web-based platform.
Consolidating the IL-related OP and BP statements offers a good testing ground for the principles of the overall
Operational Manual reform.
a See Audit of the World Bank Group Framework for Policies and Procedures (AC2012-0011), February 10, 2012.
b Update on the Bank’s Business Modernization: Results, Openness, and Accountability Spring 2012 (DC2-12-0005), April 11,
2012.
c The Bank’s Operational Policy Manual: Issues and Prospects for Reform (CODE2011-0024), April 1, 2011.
8. The draft OP and BP 10.00 consolidate 19 current IL-related OPs and 18 IL-related BPs.
Specifically, the content from the following statements is proposed to be a part of the new
OP/BP 10.009:
9 For more detailed information on the disposition of the OP and BPs listed here see the annexes.
6
Identification/Preparation/Appraisal/Board Presentation
OP / BP 6.00, Bank Financing
OP / BP 8.10, Project Preparation Facility
OP / BP 10.00, Investment Lending: Identification to Board Presentation
OP / BP 10.04, Economic Evaluation of Investment Lending
OP / BP 13.00, Signing of Legal Documents and Effectiveness of Loans and Credits
Supervision (Implementation Support)
OP / BP 13.05, Project Supervision
OP / BP 13.20, Additional Financing for Investment Lending
OP / BP 13.25, Use of Project Cost Savings
OP / BP 13.40, Suspension of Disbursements
Completion and Evaluation
OP / BP 13.30, Closing Dates
OP / BP 13.50, Cancellations
OP / BP 13.55, Implementation Completion Reporting
OP 13.60 Monitoring and Evaluation*
Fiduciary
OP / BP 10.02, Financial Management
OP / BP 12.00, Disbursement
Specific IL Subinstruments
OP / BP 8.00, Rapid Response to Crises and Emergencies*
OP / BP 8.30, Financial Intermediary Lending
OP / BP 8.40, Technical Assistance*
Other
OP / BP 14.40, Trust Funds*
*Contains non-IL components that would be separated and maintained in the Operational Manual
In addition, the IL content of 9 Operational Memoranda (OpMemos) is incorporated into the
draft OP and BP statements. OpMemos are interim instructions issued from time to time by
Management with the understanding that once the OpMemos are incorporated into revisions of
the pertinent OPs/BPs, they will be retired. See Annexes E-G.
9. Poverty and Gender. Supporting poverty alleviation is central to all of the Bank’s work.
And addressing gender disparities and inequalities that are barriers to development and poverty
reduction and assisting member countries in formulating and implementing their gender and
development goals are part of Bank policy. These two high-priority areas are cross-cutting and
span all aspects of country support programs. OP 1.00 is the Bank’s operational policy statement
on poverty. OP/BP 4.20 are the Bank’s gender policy and Bank procedure statements. These two
policies are not changed or affected by this exercise. In addition, there is extensive guidance on
poverty and gender analysis and on the operational use of the information from that analysis.
Hence, those policies are not instrument-specific and are applicable across all Bank instruments.
10. Enhanced Implementation Support. The new OP and BP 10.00 statements also
incorporate the rebalancing of efforts from preparation to implementation support. This
rebalancing reflects the Bank’s evolution from its role of “supervising” (basically checking on)
adherence to prescribed rules to a more collaborative role in which the client is a genuine partner
in finding solutions to problems during implementation. Underpinning the Bank’s
7
implementation support is the link to risks and results. As now formulated (from earlier IL
reform), risk assessment and management is a dynamic process that begins with preparation and
continues during implementation. The new risk-based approach refocuses the attention of teams
and Management on addressing risks that arise during implementation and may impact the
achievement of the development objectives. The revised project reporting serves as a tool not
only for clients, task teams, and Management, but also since it is now disclosed as part of the
access to information reform, for all stakeholders who can now monitor project progress. A new
initiative on quality assurance and monitoring has also been launched, increasing Management’s
attention to implementation issues and strengthening the tools available for task teams as they
provide implementation support to client countries.
11. Exclusions. The new OP/BP 10.00 does not incorporate the 10 IL safeguard OPs/BPs,
the procurement OP/BP, or a few other OPs/BPs relevant for investment lending because further
analysis of these complex policies is needed, before consideration for incorporation. (In
particular, the BP covers the project documents that the Bank makes publicly available. It does
not cover documents that the borrower discloses in order to comply with social and
environmental safeguard policies.) The following OPs/BPs are therefore excluded from the
consolidation exercise:
Identification/Preparation/Appraisal/Board Presentation
OP / BP 3.10, Financial Terms and Conditions of IBRD Loans, IBRD Hedging Products, and IDA
Credits
OP 4.76, Tobacco
OP 7.00, Lending Operations: Choice of Borrower and Contractual Agreements
OP 7.20, Security Arrangements
OP 7.30, Dealing with De Facto Governments
OP / BP 14.25, Guarantees
Fiduciary
OP / BP 7.40 Disputes over Defaults on External Debt, Expropriation, and Breach of Contract
OP / BP 11.00, Procurement
Safeguards and Related OPs and BPs
OP / BP 4.00, Piloting the Use of Borrower Systems to Address Environmental & Social Safeguard
Issues in Bank-Supported Projects
OP / BP 4.01, Environmental Assessment
OP / BP 4.02, Environmental Action Plans
OP / BP 4.04, Natural Habitats
OP 4.07, Water Resources Management
OP 4.09, Pest Management
OP / BP 4.10, Indigenous Peoples
OP / BP 4.11, Physical Cultural Resources
OP / BP 4.12, Involuntary Resettlement
OP / BP 4.36, Forests
OP / BP 4.37, Safety of Dams
OP / BP 7.50, Projects on International Waterways
OP / BP 7.60, Projects in Disputed Areas
Several of the OPs/BPs excluded from the consolidation are currently under review.
8
? Procurement policy. Revised Procurement Guidelines were issued in 2011 to reflect
updates to the procurement policy framework. Management has since shared with
Executive Directors an approach paper for a more fundamental review of the policy
architecture for procurement in operations.10 Consultations are now underway. After
further analysis and discussions with Executive Directors and consultations on a draft
statement of procurement policies, it is planned to present the revised policy paper to
Executive Directors for approval by December 2013.
? Safeguard policies. The Bank has recently initiated a process for updating and
consolidating the Bank’s safeguard policies. Since the safeguard policies were put in
place, many client countries have developed regulatory frameworks to address
environmental and social issues in development. Significant investments made since
the 1990s have led to success in developing such frameworks and in building client
capacity, which in many countries provides the foundation for country ownership.
The updating and consolidation process will capture Management’s lessons learned
from past experience with safeguard policy application, including a stronger focus on
the use of safeguard polices to support environmentally and socially sustainable
development; greater emphasis on assessing potential social impacts and risks;
improvements in implementation support; and more effective approaches to
monitoring, evaluation, and completion reporting, including the enhanced use of
indicators. After the conclusion of discussions on the review approach with Executive
Directors, consultations would follow.
? Guarantees. Currently the Bank’s policy and procedure statements for project-based
guarantees (partial risk or partial credit guarantees) and policy-based guarantees are
self-standing under OP/BP 14.25. However, guarantees can be viewed as simply
another financing mechanism for ILs and DPLs. As part of the effort to mainstream
guarantees11, Management is considering updating and embedding policy and
procedures on project-based guarantees within the revised OP 10.00, and embedding
policy and procedures on policy-based guarantees into an expanded OP 8.60 on
Development Policy Lending. The use of guarantees in ongoing country programs
would be fostered through the proposed simplification and mainstreaming.
12. Design of the New OP and BP. The draft OP and BP 10.00 are attached as Annexes B
and C, respectively. They incorporate the design features highlighted above. The drafts are
intended to be readily accessed and easily understood by clients and staff, and to assist them in
better balancing risk and results in IL. The draft OP statement is written to provide the space for
enhanced Bank support, notably for institution building, during operational implementation,
taking into account the risks involved in an operation. It translates policy content into one clear
statement, providing client countries and staff with the requirements for IL support (referencing,
as needed, the areas that are not part of the consolidation). It describes the kinds of activities that
IL supports. It sets out the elements of the assessment process that the Bank undertakes in
10 The Bank’s Procurement Policies and Procedures: Proposed Policy Review Approach Paper (AC2012-0010),
February 9, 2012.
11 Modernizing the World Bank’s Operational Policy on Guarantees: Approach Paper (CODE2-11-0053),
October 11, 2011.
9
deciding whether or not to support the client’s proposal and present it to the Board for approval.
It incorporates Bank policy on exceptional arrangements for the use of IL in situations of
fragility, crisis, and emergency. Moreover, it sets out roles and responsibilities during
implementation and incorporates recent modifications to the Bank’s policy on restructuring IL
operations. Lastly, it covers monitoring during implementation and ex-post evaluation, both vital
elements of the results architecture for IL. The BP statement provides a roadmap for meeting the
policy requirements set out in the OP. For ease of use by clients and task teams, it is organized
around the operational cycle. It is written to be fully compatible with the new accountability and
decision-making framework, setting out what is required in advance of each decision point and
what decisions are required at each of those points.
13. Clarity around a Single IL Instrument. One of the original goals of IL reform as
discussed with Executive Directors in 2009 was to consolidate and clarify the IL menu to
respond to clients’ diverse development and financing needs. First, IL operations will use risk as
a key element in determining which projects will get fuller preparation and due diligence efforts
and which projects can be prepared in a more streamlined way. As part of the single policy,
exceptional provisions will be set out for rapid response to crises and emergencies. Support in
fragile and conflict-affected situations, for which risk tolerance has to be higher, will also be
incorporated under exceptional provisions. Second, other submenu options have in practice
provided no additional value. Clarifying that there is only a single IL instrument will allow the
Bank to do everything it can do today in support of clients, but without the potential for
misunderstandings that have led to some of the policy implementation issues that were raised in
the internal and independent reviews. The current subforms of IL have been incorporated into the
draft OP and BP as follows (Table 1 shows the current levels of use of each of these forms):
? Specific investment loan (SIL) is the most common title used for IL support. It has
traditionally provided ample flexibility: it can cover a mix of investment expenditures
and recurrent expenditures and can support capacity building. Projects that would
have been classified as SILs will fit naturally under the new single IL product.
? Sector investment and maintenance loan or program (SIM/SIP) has been used as a
title (there is no specific SIM/SIP policy) for operations that focused on public
expenditure programs in particular sectors. The SIM/SIP aimed to bring sector
expenditures, policies, and performance in line with a country’s development
priorities by helping to create an appropriate balance among new capital investments,
rehabilitation, reconstruction, and maintenance. They also often supported the
development of institutional capacity to plan, implement, and monitor an expenditure
or investment program—features that are now standard in IL projects in general.
? Adaptable program loan (APL) is brought under the overall single policy framework
umbrella. The draft OP recognizes that programs may need support from a series of
loans (although funding could also come through the use of additional financing or
through a low-risk IL project if the program is going well). If a formal series is
identified in the first loan, follow-up operations in a series would use a new approval
process proposed as a policy change in Section III. In a rapidly changing world the
use of triggers for later operations has proven unwieldy and is dropped in favor of
policy and procedure similar to the well-functioning practice for additional financing.
10
Cross-country (including regional) programs (informally “horizontal” APLs) are
covered in the new OP and BP.
? Learning and innovation loan (LIL) is eliminated. The LIL was designed to focus on
experimental learning. However, experience has shown that, with a financing cap of
US$5 million and little or no savings in preparation costs, these loans were not
appropriate to their intended purpose, and client demand for LILs essentially ended
several years ago. In their place, countries now often build impact evaluation into ILsupported
operations when they seek Bank assistance in testing a new approach
before mainstreaming it.
? Emergency recovery loan (ERL) responds to a special set of conditions that need to be
addressed through rapid action. Those quick-action features are retained and built into
the proposed new single policy under special considerations for countries faced with
natural or man-made disasters, conflict, fragility or specific vulnerabilities, including
for small states.
? Technical assistance loan (TAL) is no longer needed as a separate category, since
support for institutional capacity can be the central or even the only feature of support
in an operation processed under the single OP and BP.
? Financial intermediary loan (FIL) is brought fully under the single IL policy framework.
In recent years, IFC has provided the bulk of support under the World Bank Group
umbrella for stand-alone operations to financial intermediaries, because client countries
prefer not to provide a sovereign guarantee in such situations. Still, this is an important
option for some countries, and clients will continue to be able to seek Bank support for
their financial intermediaries through the single instrument. Lending through IL to FILs
will continue to be tagged, and the procurement and safeguard policies specific to FILs
remain applicable. Because these loans will be tagged, monitoring their preparation and
implementation, notably the special procurement and safeguard features, will be
straightforward. (The current FIL OP and BP are overly prescriptive, setting out in detail
material that is more suited for guidance to staff.)
? Global Environment Facility (GEF) and Montreal Protocol (MP) operations are
brought under the single IL policy and procedure framework umbrella, since the
supported operations are, in practice, the same as other investment operations and the
draft OP 10.00 confirms the continued applicability of the relevant OPs/BPs.
? Additional financing remains as an element under the single IL policy framework.
11
Table 1. Use of the Investment Lending Instrument in Recent Years
(number of projects)
Subform of IL FY06 FY07 FY08 FY09 FY10 FY11 FY12
Adaptable program loan 36 34 31 36 28 34 21
Emergency recovery loan 33 39 36 47 29 33 16
Financial intermediary loan 3 5 4 5 11 6 5
Learning and innovation loan 0 1 0 0 0 0 1
Specific investment 206 207 209 194 238 248 181
Sector investment and maintenance 10 8 8 0 7 6 2
Technical assistance loan 15 23 18 17 20 25 16
Total* 303 319 306 300 333 352 244
* Two operations in FY07, one in FY09, and two in FY12 did not designate a specific instrument.
14. Mapping the Changes. Dedicated annexes to this paper provide a mapping of the
changes and how the earlier versions of various OP/BPs and OpMemos are reflected under the
new architecture. Annex D summarizes the disposition. Annexes E-G shows the details regarding
the disposition of existing OPs, BPs, and OpMemos relative to the draft OP/BP 10.00. With
respect to the existing OPs, policy content has been retained, but material dealing with nonpolicy
matters is proposed to be included in BP 10.00 while content that is neither policy nor
procedure is to be included under internal processing steps or guidance, if still relevant. With
respect to the existing OPs, policy content has been retained, but material dealing with nonpolicy
instructions to staff is included in BP 10.00. Content that covers internal processing steps
is moved to internal processing arrangements. Guidance material is separated and included in IL
guidance notes. With respect to the current IL BPs, again content covering internal processing
steps and guidance has been similarly removed. In addition, content already covered in the IBRD
General Conditions for Loans, IDA General Conditions for Credits and Grants, Standard
Conditions for Grants Made by the World Bank Out of Various Funds, or in Standard Conditions
for Advances Made by the World Bank under its Project Preparation Facility is no longer
repeated in OPs and BPs, allowing for a more concise OP/BP formulation.
III. POLICY CHANGES FOR BOARD APPROVAL
15. In drafting the single OP and BP and consolidating the various OP/BP statements,
Management has identified several areas in which it recommends specific policy changes for the
Executive Directors’ consideration and approval. These policy changes are provisionally
reflected in the draft OP (Annex B) statement; if approved, the changes would all be reflected in
the final OP 10.00 statement.
A. Fragility
16. As noted in the Approach Paper discussed at CODE in April 2011, the incorporation of
OP/BP 8.00, Rapid Response to Crises and Emergencies, into the consolidated OP/BP 10.00 would
clarify that the scope of the policy also applies to situations of fragility. Lack of political stability and
security, linked with often-weak institutions, poses fundamental challenges for development efforts.
Fragile situations exhibit a twofold risk dynamic: the risk of failure is high (e.g., in markets,
government, results), and the impact of such failure can be more catastrophic, implying a high risk
from inaction or delayed action. When a borrower does not have sufficient institutional capacity
because of prolonged fragility or conflict, special considerations apply. That clarification in policy is
12
a step forward in delivering on the Board-endorsed operationalization of the 2011 WDR.12 Such
considerations would allow for better implementation support, simplified operational procedures, and
alternative implementation arrangements to reflect the specific challenges in situations of fragility. In
addition, some countries due to specific vulnerabilities, including for small states, may also need this
added flexibility, which could be considered under the new policy. These existing special
considerations carried over from OP/BP 8.00 include provisions for fiduciary, environmental, and
social requirements, a higher limit on Project Preparation Advances, and the option of special
procurement arrangements and alternative start-up implementation arrangements. In all cases, the
justification for using these special considerations would be included in Project documents.
B. Economic Analysis of Investment Operations
17. Rigorous economic analysis is a key element of IL operations. However, the approach
needed to be adapted to the changing demand and to ensure that the appropriate analysis is used
for different types of operations. This is the main driver behind the proposed revisions of the
policy. For instance, in reviewing cost-benefit analysis in IL operations, IEG concludes, “The
Bank needs to define the scope for cost-benefit analysis in a way that recognizes the legitimate
difficulties in quantifying benefits while it preserves a high degree of rigor in justifying
projects.”13 Management engaged some of the same experts who worked in the early 1990s to
develop the existing policy to help formulate the new proposal. Their conclusion, set out in
Annex 6 of the IL policy consolidation paper discussed by CODE in June,14 is that rigorous
economic analysis remains just as important for project consideration and should be maintained
as a requirement. However, with almost 20 years of experience, they also conclude that the
emphasis should be on better use of economic analysis in making choices in project selection and
design. It should not be on just one number, a projected economic rate of return (projected ERR)
or projected net present value (projected NPV), which even when data are readily available
inevitably results in a highly uncertain estimate when projections need to go out 10, 20, or even
30 years. While quantification remains the norm, they note that, in practice, (a) projects are not
isolated activities but are embedded in a government development strategy supported through an
agreed country partnership with the Bank, (b) the availability of all of the relevant quantitative
information and its costs differ dramatically across countries and types of projects, (c) country
conditions, from fragility to well-functioning institutions, have implications for the analysis, and
(d) timing is often crucial in the provision of project support. The proposed new policy continues
to require rigorous economic analysis with quantification as the norm, and sets out an approach
that helps Management answer three key questions:
? What is the project’s expected development impact? This is the traditional question
underlying the Bank’s approach to cost-benefit analysis. It requires the careful
consideration of the expected stream of project benefits (whether quantifiable in dollar
12 See World Development Report, 2011: Conflict, Security and Development, World Bank, 2011, and
Operationalizing the 2011 World Development Report: Conflict, Security and Development (DC2011-0003),
April 4, 2011.
13 See Cost-Benefit Analysis in World Bank Projects, Independent Evaluation Group, World Bank, 2010.
14 Investment Lending Reform: Modernizing and Consolidating Operational Policies and Procedures
(CODE2012-0025), May 22, 2012.
13
terms or not) and expected costs, grounded in an explicit causal framework linking
project activities to targeted development objectives.
? Is public sector provision or financing the appropriate vehicle? This question probes
the rationale for public involvement with respect to financing and/or implementation,
given limited public sector resources and many competing demands.
? What is the World Bank’s value added? This question examines the World Bank’s
contribution to the project. It seeks to determine the expected benefit from Bank staff
involvement and whether the proposed project makes good use of staff effort toward
helping client countries achieve development impact.
18. The draft calls for a decision at the concept stage on the type of economic analysis to be
undertaken, a change that means that task team and decision-makers’ thinking on expected
benefits and costs will come earlier and economic analysis used more proactively in preparation
stages through appraisal. The objective is to shift away from what is often too narrow a focus on
projecting an expected ERR required for late-stage project documents to a more conceptual
understanding earlier on of what the project is attempting to achieve and how it plans to do so.
This current approach also allows for taking into account the diversity of the portfolio and the
sectoral implications for the type of analysis that is best suited for them.
19. A further change in the draft policy statement reflects the much stronger results focus in
IL projects since the existing policy was issued almost 20 years ago. The draft makes an explicit
link between the project development objectives and the economic analysis. Another change is
the focus on risks to the achievement of the desired results—built into the draft policy. Staff
guidance ties the economic analysis (notably sensitivity and sustainability analysis) to the
assessment of risks to the achievement of project development objectives. It will provide teams
with direction on choosing the appropriate framework for economic analysis for their projects
and guidance and tools for doing the analysis. Connected to ongoing work on strengthening peer
review of IL projects, the guidance includes good practice on reviewing economic analysis.
C. Series of Projects
20. For a multiphase or multi-country series of projects, the Executive Directors approve the
first project under regular procedures and succeeding ones on an absence-of-objections basis
unless there are significant modifications. That will not change. However, currently, multiphased
series over time use triggers as a signal of readiness for the successive phases. As noted earlier,
triggers have proven to be an unwieldy tool for measuring readiness for subsequent support and
would be dropped as a requirement. Instead, approval of financing for follow-on projects would
be based on the performance of the initial phase as well as consistency with the development
objectives established for the series. This change does not affect projects traditionally referred to
as horizontal APLs: loans to multiple borrowers following a standard template (such as the
Avian Influenza Control and Human Pandemic Preparedness and Response series).
14
D. Additional Financing
21. The progress report on additional financing15 notes that “quick” and “simple” are two
words not normally associated with Bank IL support, but that they are well suited to the
experience with additional financing. These loans have proven themselves as a way to provide
low-cost, high-return support in an environment that presents relatively low risk, since they build
on the underlying operation’s solid experience in meeting development objectives. Additional
financing is provided to address one or a combination of three situations: (a) completion of the
original project activities in the event of an unanticipated cost overrun or financing gap; (b)
implementation of additional or expanded activities that scale up a project’s impact and
development effectiveness; and/or (c) implementation of modified or additional project activities
included as part of project restructuring when the original loan amount is insufficient to cover
such activities Clients uniformly appreciate these loans. These criteria have not changed as a
result of the current IL policy consolidation exercise.
22. To reduce the risk that this type of financing is used when a completely new operation
would be more appropriate, the current policy requires that the additional loan be expected to
close within three years after closing of the original loan. Experience has shown that other policy
elements are adequate to ensure the appropriate use of additional financing without this
stipulation. Additional financing would only be provided if implementation of the project,
including substantial compliance with loan covenants, is satisfactory and the additional loan is
economically justified. Teams are also expected to consider alternative financing options first.
Also, each operation is expected to have an updated appraisal and risk and results framework.
These measures, as well as managerial oversight, are in place to provide needed assurance that
additional financing is used in accordance with the three criteria noted in the paragraph above.
Therefore, Management proposes that the three-year provision be deleted from the policy. To
minimize the risk of extensive delays in the evaluation of IL operations, Management has added
a new requirement. If the original Project has been under implementation for ten years or more,
an ICR will be prepared before an additional financing may be processed. A supplemental ICR is
prepared upon the Project completion. If the additional financing is solely for the purposes of
completion of Project activities when there is a financing gap or cost overrun, hence
implementation record is limited to allow for a meaningful ICR, Management may provide an
exception to the report requirement.
E. Additional Flexibility in Audit Requirements
23. At present, borrowers are required to furnish audits within six months after the project
year-end. While that would remain the norm, experience shows that, in some cases, there are
good reasons for having more flexibility in terms of timing. The revised policy will continue to
explicitly require annual audited project financial statements. It would, as a standard, call for
those statements to be furnished six months after the close of the borrower’s financial year.
However, it will permit agreeing to an alternative time limit for furnishing the required annual
audits, without the need for a policy waiver. The greater flexibility will allow the Bank to better
take into account country considerations and, where appropriate, the use of country systems in
cases in which the six-month rule might unnecessarily preclude their use. Specific guidance
15 See Additional Financing: Responding to New Needs—Progress Report (SecM2009-0025), January 29, 2009.
15
would explain when this might be an option, and Management-executed monitoring and
reporting would guard against its unwarranted application.
F. Increasing the Project Preparation Advance Limits
24. The Bank currently limits its Project Preparation Advances to US$3 million normally and
US$5 million in situations of rapid response to crises and emergencies. These limits have not
been changed for several years and no longer reflect the costs countries often face in preparing
projects. Management is proposing to increase the current Project Preparation Advance limits
and to broaden the application of the higher limit from just crises and emergencies to projects
responding to fragility and special vulnerabilities (including small states). The proposed new
limits are US$6 million and US$10 million respectively.
G. General Policy Consolidation
25. In addition to the specific policy changes described in A-F above, the consolidation
process has identified a number of elements of OP statements that, taking into account the
OP/BP definition and distinction, should be classified as BP statements, processing steps or
guidance. In some cases, elements of the current BP statements are more appropriate for
processing steps or guidance. Annex E-G details these reclassification changes and Management
presents these changes for Board consideration and approval.
V. CHALLENGES AND RISKS
26. Management believes that the consolidation and modernization of IL policy responds to
client demand and will be an important contribution to the goals of the overall Bank
modernization—results, openness, and accountability. At the same time, it presents some
challenges and risks.
27. Scope and Timing of the Reform. Since the exercise is mainly a consolidation, there is a
risk that it disappoints many clients and stakeholders, who may have been looking for broader IL
policy reform. In many cases, clients, staff, and stakeholders specifically cite procurement and
safeguard policies and operational processes.
28. As noted above, the Bank is considering procurement and environmental and social
safeguard policies in the context of separate ongoing reviews and consultations, but neither will
be completed before the end of calendar 2013. The greater risk is delaying the current
consolidation, given that analysis has found major risks arising from obsolete, duplicative, and
unclear policy and guidance for investment lending. By moving forward now with the
consolidation, the Bank will have in place an IL policy and procedure statements that address in
a timely manner pressing issues around IL policy clarity and compatibility. The new BP
statement is consistent with the accountability and decision-making framework that is a key
component of business modernization. Any policy changes resulting from the procurement and
safeguard reviews can be submitted for approval when they are ready; ideally they would be
operationalized through incorporation into the consolidated OP 10.00 policy statement. Under
the modernization agenda, there are ongoing discussions between Executive Directors and
Management on steps that could be taken to further simplify Bank processes, simplify
16
documentation, and streamline project approval. Any relevant changes resulting from that work
can be incorporated when that work is completed.
29. Implementation of the Economic Analysis Policy. The new policy requires rigorous
economic analysis but provides greater flexibility in its form and content, taking into account
sector and country considerations. There is a risk that the new policy will be taken as reducing
the importance of economic analysis.
30. To address this challenge, the guidance and training accompanying the rollout, together
with the requirement to explicitly document the scope and form of economic analysis at an early
stage, are designed to reinvigorate the use of economic analysis in investment lending. The
guidance sets out the basic concepts, the work that goes into making the choice on the form of
economic analysis, considering alternative approaches and designs, the use of sensitivity
analysis, dealing with externalities, and the updating of economic analysis at project completion.
Mandatory training for operational staff wishing to become IL team leaders will highlight the
need for rigorous economic analysis, with links to more detailed training and guidance.
VI. NEXT STEPS AND REQUEST FOR APPROVAL
31. As part of the modernization and corporate governance agenda aimed at strengthening the
focus on results, openness and accountability, this paper describes the proposed consolidation,
update, and clearer restatement of 19 current OPs, 18 BPs, and 9 OpMemos. The consolidation
incorporates the risk management approach to achieving results and links IL to the new access to
information policy. Its clarity allows for an enhanced focus on accountability.
32. Next Steps. If Executive Directors approve Management’s proposal described in
paragraph 37 below, Management will undertake the following actions to ensure smooth
implementation of the IL OP/BP reforms.
33. Updating Policy and Procedure Statements:
? Management will issue the new OP/BP 10.00. Management will also make a number of
changes to other OPs and BPs affected by this exercise. While it is not expected that the
exercise will raise any additional policy issues, given the magnitude of the effort, if such
inadvertently omitted policy issues are identified, Management will consult with the
Board accordingly.
? OP/BP 8.60 (Development Policy Lending) and OP/BP 9.00 (Program-for-Results
Financing) would be updated to include provisions similar to those proposed for OP/BP
10.00 which replace current stand-alone OPs/BPs (which will be retired), specifically,
OP 12.00, Disbursement, OP/BP 13.00, Signing/Effectiveness, OP/BP 13.30, Closing
Dates, OP/BP 13.40, Suspension of Disbursements, and OP/BP 13.50, Cancellations.
? Policy and procedure statements, including OP/BP 8.00, Rapid Response to Crises and
Emergencies, OP/BP 8.40, Technical Assistance, OP 13.60, Monitoring and Evaluation,
and OP 14.40, Trust Funds, that currently cover both IL related and non-IL related topics
17
would be redacted to remove the IL-related material but retained in the Operations
Manual, pending the larger work on the Operations Manual highlighted above.
? The Operations Manual would be edited to update all relevant references.
34. Staff Guidance and Training. Staff will be provided with updated guidance on all the
key steps in the project cycle, from identification through self-evaluation and on the key
assessment tools, including technical, economic, and financial management analysis.
Management will update the IL training that is part of the Operational Core Curriculum and is a
mandatory prerequisite for staff to lead IL teams.
35. Accountability, Decision-Making, and Quality Assurance. The consolidated BP
statement is written to be consistent with the new accountability and decision-making
framework, a key element of business modernization. The enhanced IL quality assurance
mechanisms are also elements of these processing steps. Staff will be given guidance and
training on these internal process changes. These changes will also be incorporated into the
Operations Portal, ensuring their implementation.
36. Communications and Outreach. While the exercise is mainly a consolidation, update
and reclassification, Country Directors, who reached out to client countries during the
consolidation period, will brief their clients on the new OP and BP. This will be especially
important with regard to the expansion of the special considerations in situations of crisis and
emergency to situations of fragility and specific capacity vulnerabilities, including for small
states.
37. Recommendation. While mainly a consolidation and updating, there are a few policy
changes for which Management would request the approval of Executive Directors. Management
recommends that the Executive Directors approve the proposed policy changes:
(a) the proposal to extend the special policy provisions available in situations of crises and
emergencies to cases of fragility and specific vulnerabilities, including for small states, as
described in paragraph 16 of the paper (as reflected in paragraph 11 in draft OP 10.00);
(b) the proposal on economic analysis as described in paragraph 17-19 of the paper (as
reflected in paragraphs 3 and 5 in draft OP 10.00)16;
(c) the proposal on revised requirements for approval of follow on operations in a series as
described in paragraph 20 of the paper (as reflected in paragraph 14 of draft OP 10.00);
(d) the proposal to drop the three year limit for additional financing as described in
paragraphs 21-22 of the paper;
(e) the proposal to add more flexibility to the timing of financial audits as described in
paragraph 23 of the paper;
(f) the proposal to increase the PPA limits, as described in paragraph 24 of the paper;
and
16 See also paragraphs 6 and 17 of the draft BP.
18
(g) the proposed reclassification of various statements contained in specific OPs as BPs,
processing steps, or guidance, as described in paragraph 25 of the paper and as reflected
in OP 10.00 (see Annexes E-G of the paper).
ANNEX A. SUMMARY OF CONSULTATIONS
1. The World Bank undertook a consultation process from June 11, 2011 to September 14,
2012 to seek views and inputs on the proposed IL policy consolidation. Consultations were both
internal and external. The consultation draft paper, the basis for the consultations, was the result
of revisions made to take into account discussions at CODE. The paper and annexes were posted
and available in Arabic, English, French, Russian, and Spanish.
2. Whom did we consult? While consultations relied heavily on the web-based process,
significant outreach was made to reach key constituencies and to inform those interested
regarding the process. To this end, Country Directors forwarded a package of materials to client
countries and face-to-face consultations were carried out on demand. A special effort was made
to reach multilateral development banks and civil society organizations (CSOs). While staff were
consulted during the preparation of the proposal, given the largely internal nature of the proposed
changes, a second round of internal consultations was held in parallel with the external
consultations.
Feedback Highlights
3. Overall, the feedback was positive and supportive. All understood the overall rationale
for IL policy and procedure consolidation as part of the Bank’s business modernization agenda.
Many wondered why the consolidation exercise had not been undertaken earlier. Table 1 of this
annex provides a summary of the feedback from public consultations.
4. Alignment. Several noted the importance of working with multilateral development
banks and other donors to ensure to the extent possible an alignment that would help reduce
unnecessary engagement costs for clients.
5. Coverage. Some wanted more clarity that the policy covers investment projects financed
through trust funds and asked if fee-based services (for which the Bank is reimbursed for its
work) should come under the policy in the future. A few expressed concerns around separating
policy from guidance, notably with regard to economic analysis. Some had questions and sought
more clarity regarding results frameworks, monitoring implementation progress, and supporting
client countries when project restructuring might be needed. Some noted the importance of the
Bank to be able to act flexibly in various country contexts and expressed concern that the
consolidation might reduce that flexibility. Lastly, questions were raised regarding the separation
of the procurement and safeguard policy reviews from this consolidation process; commentators
sought and received assurance that it would not affect the scope of those exercises.
6. Fragility. They noted the value of the flexibility provided by the special considerations in
cases of fragility. They asked for more clarity on what was new and different, notably regarding
small states.
7. Staff training and client outreach. Most emphasized the need for coordination with
clients and guidance and training for staff in connection with rolling out the consolidated policy
and procedure statements.
20
Conclusion
8. The consultation process elicited client, stakeholder, and staff views that helped in
refining the policy consolidation paper, notably to refine and better explain the consolidation. As
noted above, all supported the rationale of the consolidation in the context of Bank’s business
modernization agenda.
21
TABLE A1. SUMMARY OF FEEDBACK FROM PUBLIC AND INTERNAL CONSULTATION
Feedback Bank Response
Scope and Content of the Policy Consolidation
By modernizing and
consolidating investment
lending (IL) policy, is there a
risk that the policy will be
weakened?
The effort to consolidate and modernize IL policy responds to
recommendations of earlier reviews that pointed out to the high degree of
complexity of the policy architecture. More specifically, the IDA14
Internal Controls Review noted that the existing OPs and BPs covering
IL were obsolete, duplicative, and provided unclear policy and guidance
that could create confusion among staff and affect the efficiency of
delivery. It is also important to note that during the effort to consolidate,
policy content of various OPs/BPs and OpMemos has been retained
(unless that was pointed out in the document as an actual change in
policy). Moreover, having a clear policy framework can strengthen IL
policy by setting out much more clearly what staff are accountable for in
supporting clients in preparation and implementation of investment
operations.
What is the relationship of the
policy and Bank procedures to
guidance and processing steps?
The overall architecture as envisaged in the paper calls for an OP, BP,
processing steps or instructions and guidance to staff. The OP
concentrates on broad principles of policy designed to achieve wide
institutional goals. The BP includes granular instruments providing
additional details to the principles noted in the OP. Compliance with both
are obligatory. The processing steps/instructions would contain
procedural directions (as opposed to substantive ones) issued by
Management in order to implement the OP or the BP or both. These
documents would describe the mechanics of business transactions,
inform staff what documents and information needs to be prepared before
various business decisions can be taken, state who has the authority to
make key decisions, and who must participate in the decision-making
process. Guidance would contain explanations issued by Management
with regard to OP, BP and/or procedures. Guidance to staff can include
recommended courses of action, best practices, examples, sample
documents/templates, and other advice to assist staff in performing
various activities.
Are the requirements for various
stages of the project cycle being
changed especially requirements
related to appraisal and
completion reports?
As noted above, there are only few policy changes that have been made
as a result of the consolidation and those have been highlighted in the
document. There are no policy changes in terms of the appraisal
requirements or requirements to have ICR within a specified time of
project closing.
What does the policy no longer
refer to interim audit reports?
The revised policy does not ask for such interim reports to be dropped. In
fact, interim audit reports are one among many reports that are required
under loan agreements and are reviewed as part of monitoring the client’s
compliance with its contractual undertakings. However to provide greater
clarity, the BP does now refer to “unaudited interim financial reports.”
Are teams no longer required to
prepare for implementation
during project preparation?
Implementation support planning has been mainstreamed into project
preparation. Each Project Appraisal Document has an annex detailing
implementation support.
Are supervision and appraisal
requirements related to
safeguards weakened by the
consolidation of non-safeguard
policies?
The appraisal and supervision/implementation support requirements for
IL will be covered in the revised IL policy. Please note that there have
been no policy changes with regards to appraisal, implementation support
and supervision beyond the six policy revisions highlighted in the paper.
22
Feedback Bank Response
Has the emphasis on
supervision decreased as a
result of the policy
consolidation? Why use
implementation support instead
of supervision?
As part of the modernization efforts as well as the IL reform, the Bank
has been placing more emphasis on implementation support. The change
in name does not imply a lesser effort. On the contrary, it is a signal that
our efforts should go beyond supervising and work with government and
development partners to address implementation issues. For instance, in
addition to the requirements to address compliance and contractual
agreements, we have now placed additional emphasis on measuring and
reporting on results as well as identification and management of the risks
to results. This emphasis has been reflected in the revised OP/BP. In
addition, we now disclose our implementation monitoring reports to the
public. This is part of a broader effort at the institution to enhance focus
on results and better manage risks to the achievement of those results.
Why are many of the details on
responsibilities dropped from
the draft BP?
As noted above regarding the overall hierarchy, some of the details that
were previously included in the BP related to processing steps which are
best articulated in documents that provide such instructions to staff. From
a policy perspective, the respective responsibilities of the Bank and the
Borrowers have been maintained.
Are Result Frameworks
optional under the new policy?
The draft OP and BP retain the requirements for Monitoring and
Evaluation. The requirements regarding results frameworks have not
changed and each operation is expected to have one. Results frameworks
are developed in collaboration with the Borrower during preparation and
after approval of the Project, progress on the PDO and indicators are
monitored in the Implementation Status and Results Report (ISR). The
results framework is disclosed to the public at the time of approval and
are updated and disclosed as part of each ISR.
Has the consolidation of the
OP/BP lessened the expectation
that Bank staff should be more
proactive in identifying and
managing risks?
The current version of the revised OP/BP emphasizes the importance of
focusing on the risks to the achievement of the development objectives.
Risk assessment and management is a dynamic process that begins with
preparation and continues during implementation. The new risk-based
approach refocuses the attention of teams and Management on addressing
risks that arise during implementation and may impact the achievement
of the development objectives. Risk is now part of monitoring reports
and will eventually be incorporated into the Corporate Scorecard.
Are restructuring requirements
changed?
The current version of the revised OP/BP incorporates the updated
language of the latest restructuring policy that was approved by the
Board on October 22, 2009. No new changes to that policy were
introduced as part of the consolidation effort.
Are restructuring papers no
longer disclosed to the public?
As per the new Access to Information Policy, once a restructuring has
been approved by the Board or Management, the restructuring paper is
made publicly available.
Are project restructurings no
longer institutionally
recognized by IEG
(Independent Evaluation
Group) upon project exit?
The current restructuring policy approved by the Board in October 2009,
retained such recognition and the current version of BP 10 has been
revised to reflect the same.
23
Feedback Bank Response
Does the new policy change the
requirements for evaluation
and drawing lessons learned to
improve the design of future
projects, sector and country
strategies and policies?
The draft OP and BP retain requirements for reporting on project outcomes.
While Management does not make policy for IEG, as now, IEG will verify
the Bank self-assessment. The high technical quality of operations is
something that has not changes and operations are expected to draw on the
best practices and lessons learned in the country and sector, as appropriate
for the specific operation. Moreover, the Bank is strengthening the emphasis
on the knowledge work and is putting in place a number of initiatives to
facilitate knowledge sharing for staff, including drawing on lessons learned
from IL project completion reports and IEG validation.
How will the quality of financial
intermediary lending, including
the viability of the financial
institutions in question, be
assessed?
Quality assurance of all IL is critical and the Bank is undertaking a number
of initiatives to strengthen this process across the Board. As for FILs, they
will to go through a rigorous review process like all IL. As for the specific
question at hand, the guidance notes to staff will set out the methodologies
for assessing financial intermediary lending project quality and the
processing steps will include appropriate review arrangements.
To what extent does the
consolidated policy and Bank
procedure (including
supervision requirements)
apply to trust funds?
The policy does not specify the source of financing. In fact, the OP states
in footnote 1 that “Bank financing of investment projects refers to the
provisions of loans, credits, or grants financed by the Bank (including
IBRD and IDA) from its resources or from trust funds financed by other
donors and administered by the Bank, or a combination of these.”
Are fee-based services, which
are growing in some Bank
Regions, covered under the
consolidated IL policy?
The policy for fee-based services is not affected by the current
consolidation effort. The policy has been attached to the OP 8.40
(technical assistance). While the IL components of that policy are
included in the consolidation, the non-IL specific aspects including those
related to fee-based-services are retained.
We note that the specific
assignments of Bank staff, in
particular task team, team
leader, lawyer and finance
officer are not in the revised
OP/BP?
As noted above, the revised OP and BP focus on key policy issues and
are complemented with processing steps/instructions that would contain
procedural directions (as opposed to substantive ones) issued by
Management in order to implement the OP or the BP or both. Guidance
notes will also be issued and those would provide the technical details,
examples, best practices and so forth for staff to use while implementing
the new policy. The areas that were not included in the revised OP/BP
were judged to be better fit in the processing steps/instructions or
guidance to staff. One example to illustrate why this will not affect how
the Bank does business that can be noted here is the requirement that the
TTL prepare an implementation status report every 12 months. While this
is not written into policy, it is in the instructions to staff. In fact, these
reports are now disclosed publicly, which enhances our transparency,
openness and accountability. Another example is the specific reporting
requirements for each operation, those are normally listed in the legal
agreements of each operation, and the legal agreements are available to
the public.
Why does the new OP/BP 10
drop some details like the need
to identify problems promptly
and recommend ways to resolve
them and that the Bank needs
to draw on lessons to improve
the design of future projects,
sectors and country strategies
and policies?
While we agree these are all important areas, they are all covered in the
guidance to staff and some are also strengthened. The shifting from
supervision to implementation support is precisely to ensure the Bank
focuses more effort on working with the client to address implementation
issues, quickly resolve problems, and build capacity. The changes to the
restructuring policy in October 2009 were also designed to help improve
implementation performance.
24
Feedback Bank Response
Does the consolidated OP/BP
10.00 drop the role of IEG in
reviewing ICRs?
Management does not make policy for IEG nor does it have any authority
over its work program. IEG reports directly to the Executive Directors.
However, IEG’s role is not affected as a result of the current
consolidation effort. (see OP 13.60, Monitoring and Evaluation).
Are Implementation Status and
Results Reports (ISRs) no
longer required under the
revised policy?
Teams are still required to prepare an ISR every twelve months. This
requirement is reinforced through processing steps/instructions,
reminders through the operations portal, and guidance. In many regions,
ISRs are completed more than once a year. All ISRs are made publicly
available. Management reviews compliance with ISR preparation,
submission, and disclosure quite regularly.
Will transparency principles
and Access to Information
continue to apply to all
documentation?
Yes, the Access to Information Policy applies to all Bank products
including IL.
Economic Analysis
How is the revised policy for
economic analysis likely to
affect the quality economic
analysis that will support
investment project
preparation?
The main driver for the change in the policy on economic analysis is to
ensure that our policy is better suited to provide answers needed for a
range of operations in various country and sectoral settings. The change
also calls for starting economic analysis earlier in the process of project
preparation and to better tailor the analysis to the type of operation at
hand, taking into account the best practices in this area for a specific
issue or country. In other words, the revised policy moves away from a
focus on just one number, the expected economic rate of return,
calculated relatively late in project preparation and focuses more on
economic analysis as an active input into project selection and design. It
does so by requiring the choice and content of economic analysis to be
made at the project concept stage and linking the analysis more closely
with the project development objectives and the work on assessing the
risks to those objectives. To justify the form and content they propose for
the economic analysis, teams will need to think more clearly early on
about potential benefits and costs and the data and techniques available
for their measure, sharpening project design and identifying key
information gaps that can be addressed during preparation or project
implementation. In addition, by the time of approval, projects need to
demonstrate not only their economic rationale but also the rationale for
public sector involvement and the value added of Bank support. New
economic analysis guidance will lead staff through the process and
provide links to relevant reference material and concrete examples.
What will be the treatment of
externalities or the link to
environmental assessment?
The current effort does not include changes to the policy on
environmental assessment. The economic analysis guidance includes the
technical details of how such analysis will be carried out including issues
related to the concept of externalities, notes the importance of
incorporating externalities in the economic analysis, and provides links to
examples. It also notes that the Bank’s environmental and social
safeguards normally address the relevant issues, which are then reflected
in the project design.
25
Feedback Bank Response
Does the draft policy drop the
requirement for cost-benefit
analysis? What replaces that?
The World Bank believes in rigorous project economic analysis and the
changes proposed are designed to increase the attention to economic
analysis in helping the client with project choice and project preparation.
The current policy sets out good guidance on doing project economic
analysis has been well suited for certain types of operations that lend
themselves naturally to cost-benefit analysis but not to others. Hence, the
aim in the revised policy is to maintain the strong rigor while adapting to
the changing demands taking into account the best practice in each of the
areas we work on. Moreover, we believe that economic analysis should
be used to show that, under reasonable assumptions, a project can be
expected to return net benefits that justify its support—its development
impact. That is the goal of the draft policy. The guidance will set out that,
as now, staff will use either cost-benefit or cost-effectiveness analysis (or
a combination of both) but the scope of the work done to demonstrate the
project’s economic rationale will depend on data availability, internal to
the project or external, the time frame for preparation, and country and
sectoral factors.
Does the policy drop the
requirement for the robust
analysis of alternatives?
The policy requires rigorous economic analysis for all IL operations. The
guidance to staff emphasizes the importance of explicitly considering
realistic alternatives (including alternatives to public provision or
involvement) as part of the economic analysis and provides links to
examples.
What will be the timing of
economic analysis and its
tracking during
implementation?
The draft BP is explicit that economic analysis must be considered early
in the preparation cycle of an operation. More specifically, it calls for
such analysis to start at the concept stage. The Bank procedure calls for
the team to identify the type of economic rationale and/or analysis
appropriate for the project. This would allow for an early identification of
the form and scope of economic analysis to be done during preparation.
The draft guidance sets out how teams should go about gathering the
necessary information before the concept meeting, carrying out the
analysis during preparation, monitoring whether the project is generating
the key data during implementation.
Has the current economic
analysis requirement been
dropped? If so, how will the
Bank ensure that the potential
risks and costs (to people and
the environment) will be
appropriately factored into
Bank decisions of whether or
not to proceed with a project?
Economic analysis remains a mandatory requirement for all IL
operations. Hence, that has not been changed with the policy
consolidation. In fact, we have moved the discussion of economic
analysis earlier in the process (concept stage), and it continues through
preparation. With regard to potential risks and costs to people and the
environment, the draft policy statement is clear that existing
environmental and social safeguard requirements apply. The draft Bank
procedure statement notes that the environmental and social requirements
(to be clear, these requirements have not been affected by the
consolidation of IL policies), must be analyzed at concept and appraisal
stages and the Integrated Safeguards Data Sheet prepared for the project
be disclosed if the decision is to go forward with preparation.
26
Feedback Bank Response
Other Proposed Policy Changes
What is new in terms of support
in situations of fragility? Why
are small states addressed in
this policy change?
The consolidated policy calls for the application of the provisions
included as part of OP/BP 8.00, Rapid Response to Crises and
Emergencies, to situations of fragility and specific vulnerabilities that
may affect small states. Lack of political stability and security, linked
with often-weak institutions, poses fundamental challenges for
development efforts. Fragile situations exhibit a twofold risk dynamic:
the risk of failure is high (e.g., in markets, government, results), and the
impact of such failure can be more catastrophic, implying a high risk
from inaction or delayed action. As noted in the paper, when a borrower
does not have sufficient institutional capacity because of prolonged
fragility or conflict, special considerations apply. That clarification in
policy is a step forward in delivering on the Board-endorsed
operationalization of the 2011 World Development Report that focused
on fragility. In addition, some countries due to specific vulnerabilities,
including for small states, may also need this added flexibility, which
could be considered under the new policy. In all cases, the justification
for using these special considerations would be included in project
documentation.
Will the proposed changes
affect regional projects?
There are no changes to the application of IL operations to regional
projects as a result of the current consolidation efforts.
Will the proposed change in
policy on a phased series of
operations, which can have help
support a country’s longer-term
vision, contribute to their use?
The proposed change is designed to maintain the spirit of a phased series of
operations that can support a longer-term country agenda but to remove what
has proven to be an unnecessary obstacle—the use of triggers identified
during the preparation of the first project as the determinant for readiness for
the next phase. In practice, even when that project has contributed to the
achievement of the overall development objective set out for the series, the
triggers set years before are no longer relevant. Instead, it is proposed to use
the performance of the previous project as the determinant of readiness to
move to the next phase. (There is no change proposed for the current Board
approval process.)
What is the rationale for
dropping the three-year limit
for additional financing (AF)?
If that limit is removed, how to
we avoid significant delays in
evaluation of operations?
Implementation of AF has been successful as noted in the review
presented to the Board in February 2009. However, there has been
occasions when implementation of an AF is delayed due to reasons that
are not foreseen at the time of its processing (for example, procurement
issues). The current policy poses rigidity in that regard. During the
consultations with countries and staff, they pointed this out as a
constraint at times. As for the timing of evaluation, at present, the AF and
the parent operation have one Implementation Completion Report. To
prevent lengthy delays in the evaluation of operations once the three year
limit is removed, Management has added a new constraint, that once an
operation reaches 10 years under implementation, an ICR should be
prepared, even if the implementation continues.
27
Feedback Bank Response
Links to Other Reforms
Will the consolidation reduce
the policy space for the
upcoming safeguards and
procurement reviews?
The current consolidation does not affect procurement or safeguard
policies, currently under review. Once these policy reviews have been
completed, consideration will be given to integrating them into the single
IL OP and BP.
What is the relationship
between the policy
consolidation and work on
quality assurance, given that
IEG is reporting a trend decline
in its ratings of the outcomes of
investment projects?
Management is concerned with the IEG data on outcome ratings and is
analyzing the reasons behind the declines. Management is already taking
steps to enhance quality assurance processes, with more emphasis on
results and transparency. Moreover, modernization and consolidating IL
policy and making procedure fully consistent with the newly adopted
accountability and decision-making framework is an important element
in the work on quality.
How is similar work on
modernizing guarantee policy
related to IL policy
modernization and
consolidation?
An approach paper describing the proposed guarantees reform was
discussed in October 2011. Consistent with that paper, an option being
considered as a follow-up step to this OP10.00 consolidation is to
incorporate relevant project-based guarantee elements into OP 10.00.
This would mirror the proposed integration of relevant policy-based
guarantee elements into the development policy financing OP, OP 8.60.
How does the consolidation
relate to the safeguards review
in terms of addressing
supervision and appraisal with
respect to safeguards?
The appraisal and supervision/implementation support requirements for
IL operations are covered in the IL policy. Please note that there have
been no policy changes with regard to implementation support and
supervision. The safeguards review focuses on safeguard specific issues.
Can you explain reference made
in the paper to mandatory
instructions – potentially
embedded in software -- that
would replace a lot of the detail of
the BPs and perhaps some
elements of existing OPs?
In addition to the OP and BP, staff will be provided with processing steps
that specify key management processes at various stages of IL
operations. Such processes are then mirrored in our operational portal to
ensure the automation of the processes and to provide the right level of
controls and accountability. It is important to distinguish such process
from policy—which they are not.
How will the Bank address IEG
recommendations (not
mentioned in the Approach
Paper) to strengthen
supervision arrangements,
monitoring, evaluation and
completion reporting as they
pertain to safeguards?
As part of IL reform, we have placed more emphasis on implementation
support to better achieve and monitor results and manage risks. This is
reflected by including the risk and results dimensions into the OP and BP
and through our revamping of the implementation support report, which
has now been expanded to include more emphasis on risks and results
and that, in the past two years, became available to the public.
Partnerships and Harmonization
Will the IL policy consolidation
be harmonized with other
multilaterals? Is there a risk that
the new policy may increase the
burden on client countries? Are
there areas where the changes
may help countries?
The draft paper was discussed with other multilateral agencies, all of
whom are working to update policies. They report no concerns that the
World Bank’s proposed changes would raise harmonization issues for
clients. The consolidation is designed to set out IL policy and procedure
statements that are more straightforward in terms of client
responsibilities; client feedback has been positive.
28
Feedback Bank Response
Will the consolidated OP and
BP affect the ability of CSOs to
be involved in IL, externally as
good watchdogs or internally in
participating as part of a client
country’s IL project?
The policy consolidation itself has little impact vis-à-vis accountability
of the Bank. However, earlier IL reforms (maintained as part of the
consolidation) are important. Over the past couple of years, we have been
posting information reported in implementation reviews in the public
domain. That allows the public to know much more about
implementation and to monitor the achievement of development results
in each Bank operation. Moreover, all previous requirements in terms of
disclosure have been maintained and are not affected by the
consolidation effort.
Will the reforms improve
ability to harmonize with
country systems?
The policy will have little effect on the use of country systems as those
efforts have been underway mostly with regard to procurement and
safeguards, and each of these policy areas is going through a separate
review process.
What will happen to the old
policy and Bank procedure
statements?
Will the policy apply
retroactively to current
projects?
Once the consolidation is approved, the new OP and BP statements will
be issued to staff and apply to all new operations for which preparation
begins after their issuance. The statements that are fully replaced will be
archived. The statements that have remaining non-investment-lending
content will be revised to remove the IL content and reissued. All
statements that reference the earlier IL OPs/BPs that were affected by the
consolidation will be updated to ensure accuracy.
Rollout
Will there be training for staff? Training staff is an important element of the roll out of the revised
policy. Online material and communications will be sent to all staff. In
addition, clinics and webinars for headquarter and field based staff will
be carried out from January to June and after that, as needed.
Will there be communication to
client countries? What role will
field offices play in that?
Field offices have played a key role in the overall consultation process
and will continue to be a major component of the communications with
clients. Documentation that will summarize the process, changes and
provide the new OP and BP will be made available online and through all
field offices to provide to clients. We will continue to see client feedback
during implementation and provide any additional support needed.
29
ANNEX B. DRAFT OPERATIONAL POLICY STATEMENT (OP) 10.00—
INVESTMENT PROJECT FINANCING
OP 10.00 – Investment Project Financing
This operational policy statement (OP) was prepared for use by World
Bank staff and is not necessarily a complete treatment of the subject.
OP 10.00
______, 2012
Bank-financed investment projects are governed by this OP, the related BP, and the following OPs and BPs, as appropriate
(including any relevant Operational Memoranda):
OP 1.00, Poverty Reduction
BP 2.11, Country Assistance Strategies
OP/BP 2.30, Development Cooperation and Conflict
OP/BP 3.10, Financial Terms and Conditions of IBRD Loans, IBRD Hedging Products, and IDA Credits
OP/BP 4.00, Piloting the Use of Borrower Systems to Address Environmental & Social Safeguard Issues in Bank-Supported
Projects
OP/BP 4.01, Environmental Assessment
OP/BP 4.02, Environmental Action Plans
OP/BP 4.04, Natural Habitats
OP 4.07, Water Resource Management
OP 4.09, Pest Management
OP/BP 4.10, Indigenous Peoples
OP/BP 4.11, Physical Cultural Resources
OP/BP 4.12, Involuntary Resettlement
OP/BP 4.20, Gender and Development
OP/BP 4.36, Forests
OP/BP 4.37, Safety of Dams
OP 4.76, Tobacco
OP/BP 7.00, Lending Operations: Choice of Borrower and Contractual Arrangements
OP 7.20, Security Arrangements
OP/BP 7.30, Dealing with De Facto Governments
OP/BP 7.40, Disputes Over Defaults on External Debt, Expropriation, and Breach of Contract
OP/BP 7.50, Projects on International Waterways
OP/BP 7.60, Projects in Disputed Areas
OP/BP 8.00, Rapid Response to Crises and Emergencies
OP/BP 8.40, Technical Assistance
OP/BP 8.45, Grants
OP/BP 10.20, Global Environmental Facility Operations
OP/BP 10.21, Montreal Protocol
OP/BP 11.00, Procurement
OP/BP 13.16, Country Portfolio Performance Reviews
OP 13.60, Monitoring and Evaluation
OP/BP 14.10, External Debt Reporting and Financial Statements
OP/BP 14.20, Cofinancing
OP/BP 14.40, Trust Funds
BP 17.30, Communications with Executive Directors
BP 17.55, Inspection Panel
1. Bank financing of investment projects (hereinafter “Investment Project Financing”)1 aims
to promote poverty reduction and sustainable development of member countries by providing
financial and related operational support to specific projects that promote broad-based economic
growth, contribute to social and environmental sustainability, enhance the effectiveness of the
public or private sectors, or otherwise contribute to the overall development of member states.
Investment Project Financing supports projects (hereinafter “Projects”) with defined
1 Bank financing of investment projects refers to the provisions of loans, credits, or grants financed by the Bank
(including IBRD and IDA) from its resources or from trust funds financed by other donors and administered by
the Bank, or a combination of these.
30
development objectives, activities, and results, and disburses the proceeds of Bank financing
against specific eligible expenditures.
2. Subject to the other applicable requirements of this operational policy statement (OP),
Investment Project Financing may be extended to any type of activities and expenditures,
provided they are productive and necessary to meet the development objectives of the Project,
the impact of Projects on the borrowing country’s fiscal sustainability is acceptable, and
acceptable oversight arrangements, including fiduciary arrangements, are in place to ensure that
Investment Project Financing proceeds are used only for the purposes for which the financing is
granted, with due attention to considerations of economy and efficiency. Under appropriate
circumstances, such as to provide the borrower with resources to allow the Project to start or to
facilitate implementation of the Project, the Bank may, at the borrower’s2 request, disburse a
portion of the proceeds of the Investment Project Financing as an advance.
Considerations in Investment Project Financing
3. The Bank’s assessment of the proposed Project is based on various country and Projectspecific
considerations, including consistency with the Bank’s strategy in support of the country,
Project development objectives, taking into account technical, economic, fiduciary,
environmental, and social considerations, and related risks.
4. Technical Analysis. The Bank assesses technical aspects of the Project, including design
issues, appropriateness of design to the needs and capacity of the borrower and any project
implementation entity, institutional arrangements, and organizational issues for the
implementation of the Project in the context of the long term development objectives of the
borrower.
5. Economic Analysis. The Bank undertakes an economic analysis of the Project. Taking
into account the Project expected development objectives, the Bank assesses the Project’s
economic rationale, using approaches and methodologies appropriate for the Project, sector, and
country conditions, and assesses the appropriateness of public sector financing and the value
added of Bank support.
6. Financial Management. The entity or entities responsible for Project implementation
maintain financial management arrangements that are acceptable to the Bank and that, as part of
the overall arrangements in place for implementing the Project, provide reasonable assurance
that the proceeds of the Investment Project Financing are used for the purposes for which they
are granted. Financial management arrangements are the planning, budgeting, accounting,
internal control, funds flow, financial reporting, and auditing arrangements of the entity or
entities responsible for Project implementation. The financial management arrangements rely on
the borrower’s existing institutions and systems, with due consideration of the capacity of those
institutions.
2 In this OP, unless the context requires otherwise, references to “borrower” include the borrower or recipient of
record, and any other entities involved in Project implementation.
31
7. Procurement. Procurement policies applicable to Investment Project Financing are set
out in OP 11.00, except for procurement referred to in paragraph 11(d) below, in which case the
Bank’s Administrative Manual Statement requirements apply.
8. Environmental and Social. Environmental and social policies applicable to Investment
Project Financing are set out in the following OPs: 4.00, 4.01, 4.02, 4.04, 4.07, 4.09, 4.10, 4.11,
4.12, 4.36, and 4.37.
9. Risks. The Bank assesses the risks to the achievement of the Project development
objectives with due consideration for the risks of inaction, taking in to account the assessments
noted above and other relevant information.
Special Considerations
10. The following types of Projects may have specific policy requirements and special
considerations.
11. Projects in Situations of Urgent Need of Assistance or Capacity Constraints. In cases
where the borrower/beneficiary is deemed by the Bank to (i) be in urgent need of assistance
because of a natural or man-made disaster or conflict; or (ii) experiences capacity constraints
because of fragility or specific vulnerabilities (including for small states), the Bank may provide
support through Investment Project Financing under normal Investment Project Financing policy
requirements with the following exceptions:
(a) The fiduciary and environmental and social requirements set out in OP/BP 4.01,
OP/BP 4.10, OP/BP 4.11, OP/BP 4.12, BP10.00, and OP/BP 11.00 that are applicable
during the Project preparation phase may be deferred to the Project implementation
phase.
(b) Such Projects may be processed under special procurement arrangements referred to
in paragraph 20 of OP 11.00 and may finance a positive list of goods procured in a
manner that satisfies the considerations of economy and efficiency (including national
procurement procedures of the borrower).
(c) Such projects are subject to special limits on the use of Project Preparation Advances
(PPAs) and retroactive financing.
(d) When the beneficiary’s capacity to implement the needed activities is insufficient, the
Bank may, at the request of the beneficiary, agree to the following alternative legal
and operational Project implementation arrangements: (i) the Bank may enter into
arrangements with relevant international agencies, including the United Nations,
national agencies, private entities, or other third parties; and (ii) where no viable
implementation alternatives exist, the Bank may execute start-up activities financed
as a grant from the Project Preparation Facility (PPF) or a trust fund, following
applicable internal Bank procurement rules.
(e) Alternative implementation arrangements referred to under subparagraph (d) above
are limited to the time necessary to establish or restore borrower capacity and, in all
32
cases, are adopted in Projects that include capacity-building measures to enable a
timely transfer of implementation responsibilities to the borrower. Proposals for
Bank-executed start-up activities are limited to activities which involve the
procurement of small contracts for goods and works, and the provisions of technical
assistance necessary to enable the borrower to undertake the execution of subsequent
Project activities.
12. Disaster prevention and preparedness and capacity-building activities may be supported
by a stand-alone Project with a contingent financing feature or be embedded in a regular Project
through a contingent emergency response component that, once triggered, is subject to the
exceptional policy requirements in situations of emergencies, crises, and fragility set out in
paragraph 11 above.
13. For existing Projects being restructured to add contingent emergency response
components that meet the requirements of the Immediate Response Mechanism (IRM), the
Executive Directors have delegated to Management the authority to approve Level One
restructurings (see paragraph 22 of this OP) that require changes in the Project development
objectives.
14. Series of Projects. Investment Project Financing may support a series of Projects: (a) to
a single borrower, when agreed objectives require support designed as part of a program
consisting of a series of two or more Projects; and (b) to multiple borrowers facing a set of
common development issues; when two or more borrowers share common development goals,
individual Projects prepared for each county may be designed as part of a series of Projects with
standard well-defined eligibility criteria and design features.
15. Projects Involving Financial Intermediaries. Investment Project Financing may be used
to provide funds to eligible financial intermediaries to be used by them for sub-loans to or as
equity in final borrowers/beneficiaries. Procurement policies applicable to Projects involving
financial intermediaries are set out in OP 11.00, and environmental and social policies applicable
to such Projects are set out in the following OPs: 4.00, 4.01, 4.02, 4.04, 4.07, 4.09, 4.10, 4.11,
4.12, 4.36, and 4.37.
Project Preparation Facility (PPF)
16. The Bank may make a Project Preparation Advance (PPA) from the PPF to a prospective
borrower to finance (a) preparatory and limited initial implementation activities for the Project or
(b) preparatory activities for operations to be financed by Development Policy Lending or
Program-for-Results Financing. PPAs are approved by Management under special authority
granted by the Executive Directors, who determine, from time to time, the ceiling on the
commitment authority of the PPF and the maximum amount of individual PPAs.
17. The following can be borrowers of PPAs: (a) in the case of PPAs made by IDA, a
member country or regional organization; and (b) in the case of PPAs made by IBRD, any
IBRD-eligible borrower. If the IBRD borrower is not a member country, the member country’s
or countries’ guarantee(s) of the repayment of the PPA is required. A PPA is made only when
there is a strong probability that the Bank financing for which the PPA is granted will be made,
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but granting a PPA does not obligate the Bank to finance the operation for which it is granted.
Once approved, a PPA is implemented as an Investment Project Financing. The PPA may be
refinanced from the proceeds of any Bank financing. If such financing does not materialize, the
PPA is repaid by the borrower, unless at the time of PPA approval by the Bank, the PPA was
financed by an IDA grant, in which case the PPA is not required to be repaid, but the amount is
deducted from the IDA allocation of the country in question.
Borrower and Bank Roles and Responsibilities in Investment Project Financing
18. The borrower prepares the Project for which it seeks Investment Project Financing. The
Project’s scope, objectives, and contractual rights and obligations are set out in the legal
agreement(s) with the Bank. The obligations include the requirement to maintain appropriate
implementation monitoring and evaluation arrangements, comply with procurement, financial
management, disbursement, social and environmental obligations, and to deal in a timely and
effective manner with actual or alleged problems or violations (individual or systemic) in these
areas. The borrower measures and reports against the achievement of the Project development
objectives and agreed results and provides agreed financial and audit reports.
19. The Bank appraises the proposed Project in accordance with this OP and other applicable
policies. During Project implementation, the Bank monitors borrower compliance with the
Project obligations as set out in the legal agreements and provides implementation support to the
borrower by reviewing the borrower’s information on implementation progress, progress toward
achievement of Project development objectives and related results, and updates the risks and
related management measures. Implementation support and monitoring carried out by the Bank
during the implementation period ends at the completion of the Project.
Managing Investment Project Financing
20. Approval. The Executive Directors consider Investment Project Financing proposals for
approval under regular or streamlined procedures.3 In the case of a multi-phase or multi-country
series of Projects, the Executive Directors consider the Investment Project Financing proposal
for the first Project in the series. Subsequent Investment Project Financings are submitted for
consideration by the Executive Directors under the absence-of-objection procedures, provided
that the overall program in the series as described in the documentation for the first approved
Investment Project Financing in the series has not been significantly modified. Except for IDA
grants and trust-fund-financed grants explicitly requiring approval by the Executive Directors, all
other grants are approved by Management.
21. Signing. Signing of legal agreements for Investment Project Financing take places after
all required authorizations have been issued and there are no overdue payments to the Bank with
respect to other Bank financings to the borrower or financings to or guaranteed by the borrower
beyond the number of days that would give the Bank the right to suspend disbursements, unless,
in exceptional circumstances, Management approves the signing and reports such information to
Executive Directors.
3 For more details, see guidance from the Corporate Secretariat.
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22. Restructuring. During implementation the Bank and the borrower, may agree to
restructure the Project to strengthen its development effectiveness, modify its development
objectives, improve Project performance, modify indicators, address risks and problems that
have arisen during implementation, make appropriate use of undisbursed financing, extend the
closing date, or otherwise respond to changed circumstances. A restructuring involving a
modification of the original Project development objectives or a change in safeguard category—
from a lesser category to a Category A (as defined in OP 4.01) or the trigger of a safeguard
policy not triggered originally by the Project—is referred to as a Level One restructuring and is
submitted for consideration by the Executive Directors under the absence-of-objection
procedures (or by Management, in cases where the original Investment Project Financing was
approved by Management). A restructuring involving any other modification of the Project is
referred to as a Level Two restructuring. Management has the delegated authority to approve
Level Two restructurings. Management periodically informs the Executive Directors of the
Level Two restructurings.
23. Closing Date. The “closing date” is the date after which the Bank may stop accepting
withdrawal applications under the Investment Project Financing and cancel any undisbursed
balance in the financing account. In appropriate circumstances, the Bank may extend the closing
date. The closing date is not extended (a) for Projects subject to suspension of disbursements,
except for items exempted from suspension, or (b) for any financing to a borrower with any
outstanding audit reports or with audit reports which are not satisfactory to the Bank, unless the
borrower and the Bank have agreed on actions to address the deficiencies. In exceptional
circumstances, retroactive extensions of a closing date may be approved by Management.
24. Investment Project Financing Completion Report. After the Project is completed, the
Bank evaluates and reports on the performance of the Project. The report seeks to include the
borrower’s evaluation of the Project. For Projects that do not become effective or are canceled
before significant implementation is initiated, Management provides the Executive Directors
with a summary note explaining the circumstances. For Projects for which the legal agreements
are not signed, Management informs the Executive Directors of that as part of periodic reporting.
Recourse, Remedies, and Sanctions
25. If the borrower does not comply with its contractual obligations, the Bank consults with
the borrower, and requires the borrower to take timely and appropriate corrective measures. The
Bank’s legal remedies are specified in the relevant legal agreements and include the right to
suspend disbursement and to cancel the Investment Project Financing. The Bank exercises such
remedies when warranted and as it deems appropriate, taking into account, among other things,
country-, sector-, and investment-specific circumstances, the extent of possible harm caused by
circumstances giving rise to the remedy, and borrower’s commitment and actions to address the
identified problems. However, when a loan payment from the borrower to the Bank is 60 days
overdue, the Bank suspends disbursement on all loans to or guaranteed by the country.
Additional Financing
26. The Bank may provide additional financing to an ongoing, well-performing Project for
completion of Project activities when there is a financing gap or cost overrun, for scaling up the
35
development effectiveness of the Project, and/or in cases of Project restructuring, when the
original financing is insufficient for the modified or additional activities. The Bank considers the
proposed additional Investment Project Financing on the basis of, as necessary, updated or
additional assessments of areas specified in Para 3-9 of this OP. Additional financing financed
by IBRD loans, IDA credits or grants and trust-fund-financed grants are submitted for approval
by the Executive Directors unless authority for approval of the specific financing source rests
with Management.
Disclosure of Information
27. During Investment Project Financing preparation and implementation support and in
evaluating after closing, the Bank discloses Investment Project Financing-related information in
accordance with the Bank’s Access to Information Policy.
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ANNEX C. DRAFT BANK PROCEDURES (BP) STATEMENT 10.00—INVESTMENT PROJECT
FINANCING
1. The Bank assesses a project proposed by the borrower1
for Investment Project Financing
(hereinafter the “Project”) and, upon Investment Project Financing approval, provides
implementation support to the borrower in accordance with the requirements set forth in OP
10.00 and this BP.2
2. The structure of this BP follows the Project cycle: identification, preparation, appraisal,
approval, implementation, and completion. The documentation requirements and decision points
differ for Investment Project Financing depending on Project risk and special considerations,
including exceptional arrangements in situations of urgent need of assistance or capacity
constraints, Projects that are part of a series, financial intermediary financing, and small grants.
Additional Financing and restructurings of Investment Project Financing during implementation
also have differing documentation requirements and decision points as set out below.
A. Preparation Phase
3. The preparation phase includes identification, assessment, and appraisal of the Project,
various interim processing and decision steps, approval, signing, and Investment Project
Financing effectiveness.
From Identification through Concept
4. By the end of this stage, the Bank decides whether to proceed with further preparation of
an Investment Project Financing.
5. Identification Stage. At the identification stage, the Bank consults with the borrower on
the proposed Project, and seeks to identify the Project’s overall parameters, objectives, financing
requirements, possible level of Investment Project Financing, and other general information.
After the Bank and borrower have reached preliminary understanding on the Project concept and
parameters, a decision is made to form a task team and allocate resources for further Project
preparation leading to the concept decision point.
6. The Bank preliminarily, and in consultation with the borrower:
(a) identifies the Project and its components and assesses its development objectives
(DOs), and assesses its rationale and relation to the relevant country assistance
strategy;
(b) identifies the key results expected to be achieved under the Project, overall expected
Project expenditures, type of activities and overall implementation arrangements;
(c) estimates the possible scope of Investment Project Financing;
1 In this BP, unless the context requires otherwise, references to “borrower” include the borrower or recipient of
record and any other entities involved in Project implementation.
2 BP 10.00 is derived from and accompanies OP 10.00.
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(d) proposes, in accordance with OP/BP 4.01, an environmental assessment category for
the Project and indicates any other potentially applicable requirements under the
Bank’s social, environmental, and other policies;
(e) briefly identifies the type of economic rationale and/or analysis appropriate for the
Project; and
(f) assesses the main risks to achieving the Project’s development objectives and results,
taking into account the attendant risks of inaction.
After the Project concept is developed, the Bank prepares documentation to be considered at the
concept decision point.
7. Concept Decision. A decision is made at the concept decision point as to whether the
Bank should proceed with the preparation of the Investment Project Financing along with
appropriate guidance to teams on the future preparatory work. Decisions are also made on the
safeguards classification and scope of safeguards work, the environmental assessment category,
and subsequent processing and documentation requirements.
8. Upon the decision to continue with the preparation of the Project, the Bank discloses the
Project Information Document (PID) and Integrated Safeguards Data Sheet (ISDS).
Project Preparation Advances
9. Management decides on the provision of a Project Preparation Advance (PPA) from the
Project Preparation Facility and on its refinancing on the following basis:
10. Upon a request from the borrower, the Bank prepares documentation to be considered at
the decision point for a PPA. Management decides whether to provide the PPA and the amount,
subject to the limits set out below. When that decision is taken, the PPA is made in US dollars
and carries interest on IBRD fixed spread terms and service charges on IDA credit or IDA grant
terms, depending on the country’s borrowing status. Payment of interest or service charges,
where applicable, is deferred until the PPA is refinanced out of the proceeds of the Investment
Project Financing or Development Policy Lending or Program-for-Results Financing, as
applicable, or other repayment terms take effect.
11. One or more PPAs may be made for the Project at any stage before the Bank approves
the Investment Project Financing, up to an aggregate maximum amount of US$6 million for the
Project (or for each Investment Project Financing in a regional Project), with the exception of
Projects responding to situations in which the borrower is deemed by the Bank to be in urgent
need of assistance because of a natural or man-made disaster or conflict or experiences capacity
constraints because of fragility or specific vulnerabilities(including for small states) as described
in OP 10.00 and in Section C of this BP, in which case the maximum amount of the PPA is
US$10 million for each Project. Management informs the Executive Directors of approved
PPAs.
12. When a PPA is not yet refinanced by an Investment Project Financing, Development
Policy Lending, or Program-for-Results Financing, the Bank may prepare documentation for
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consideration of an extension to the refinancing date. Management decides whether to provide
the extension.
13. If a PPA is not refinanced or the refinancing date is not extended and the PPA is required
to be repaid, then, upon notice by the Bank, the PPA is repaid by the borrower in ten
approximately equal semiannual installments over a five-year period after the refinancing date,
unless the borrower elects to repay the full amount up front. If the disbursed amount of the PPA
is US$50,000 or less, the PPA borrower is required to repay it within 60 days after receiving the
Bank’s notice to repay.
Retroactive Financing
14. If requested by the borrower, the Bank may agree to provide retroactive financing under
Investment Project Financing. Retroactive financing may be provided when: (a) the activities
financed by retroactive financing are related to the DOs and are included in the Project
description; (b) the payments are for items procured in accordance with the applicable Bank
procurement procedures; (c) the total amount of retroactive financing is 20 percent or less of the
Investment Project Financing amount (40 percent for Projects in situations in which the borrower
is deemed by the Bank to be in urgent need of assistance because of a natural or man-made
disaster or conflict or experiences capacity constraints because of fragility or specific
vulnerabilities(including for small states); and (d) the payments are made by the borrower not
more than 12 months before the expected date of Investment Project Financing legal agreement
signing.
From Concept through Appraisal
15. By the end of this stage, the Bank decides whether to proceed to negotiation with the
borrower on the provision of an Investment Project Financing. If decided at the concept stage,
the appraisal stage may incorporate a decision point. The Bank (a) works with the borrower as
the borrower prepares the proposed Project, and (b) conducts various analyses. The level and
nature of expected results and risks, as well as the specific nature of the Project, determine the
content, methodology, scope, and depth of the analysis.
16. Technical Assessment. The Bank assesses the Project technical design or approach, and
its appropriateness to the borrower’s needs. This work includes consideration of the borrower’s
organizational and managerial structures and capacity, including for monitoring and evaluation.
17. Economic Analysis. The Bank undertakes an economic analysis of the Project. The
methodology takes into account the guidance provided at concept stage and focuses on
quantitative analysis and, where appropriate, on qualitative analysis and contributions. The three
key questions that the economic analysis addresses relate to the Project’s expected contribution
to the country’s socioeconomic development, the rationale for the public sector provision, and
the value added of the Bank’s support. While these key questions are relevant for all analysis,
the specifics take into account country circumstances, Project context, alternatives and risks,
information and data availability, including existing knowledge on the economic contributions of
similar Projects, as well as time constraints.
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18. Financial Management. The financial management assessment considers the degree to
which (a) the budgeted expenditures are realistic, prepared with due regard to relevant policies,
and executed in an orderly and predictable manner, (b) reasonable records are maintained and
financial reports produced and disseminated for decision-making, management, and reporting,
(c) adequate funds are available to finance the Project, (d) there are reasonable controls over
Project funds, and (e) independent and competent audit arrangements are in place.
19. Procurement, Environmental and Social and Other Safeguard Considerations. The
Bank considers the procurement, environmental and social and other safeguard aspects of the
proposed Project in accordance with OP/BP 11.00 (on procurement), and applicable
environmental, social and other safeguard policies.
20. Fraud and Corruption. Investment Project Financing is subject to the Guidelines on
Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA
Credits and Grants (dated October 15, 2006 and revised in January, 2011).
21. Risk Assessment. The Bank analyses the risks to the achievement of the Project DO.
22. Decision. For Investment Project Financing for which a decision on authorizing
appraisal is required, once most Project design issues have been addressed, a decision is made—
taking into account the above analysis and information on any known breaches by the borrower
of its obligations to the Bank under existing Bank financed operations—whether to proceed to
appraisal.
23. Prior to Appraisal. The PID and the draft ISDS are disclosed by the Bank prior to
appraisal. For Category A Projects (as defined in OP/BP 4.01), the summary of the
Environmental and Social Impact Assessment report is provided to Executive Directors before
appraisal.
24. Appraisal. The Bank appraises the Project to confirm any relevant Project and
Investment Project Financing information and resolve any outstanding legal, design, and
implementation issues. After appraisal, the Bank finalizes the draft Project documentation,
including draft legal documentation.
25. Generally, the following information is finalized by the Bank following Project appraisal:
(a) the Project’s definition, rationale, DOs, and scope, planned expenditures and their
relation to country financing parameters, financing requirements, and implementation
and funds flow arrangements;
(b) the results framework and the monitoring and evaluation arrangements;
(c) the economic, financial, financial management, technical, procurement, social and
environmental, and risk assessments, and, as necessary, the relevant risk management
actions undertaken or to be undertaken;
(d) information regarding proposed Bank financed expenditures that are deemed to raise
particular risks (including expenditures for land acquisition, compensation for
40
involuntary resettlement, severance payments, demining, secondhand goods, and
compensation for vendors for late payments) to be described in the Project documents
along with any related mitigation measures;
(e) the main legal terms and conditions, and disbursement arrangements as set out in a
draft Disbursement Letter, including the provisions of the Disbursement Guidelines
for Projects;
(f) cofinancing or other collaboration arrangements with other development partners and
stakeholders; and
(g) any proposed exceptions to or waivers from Bank policies or procedures.
From Appraisal through Approval
26. At the end of this stage, the Bank makes the decision whether to approve the provision of
Investment Project Financing to the borrower.
27. Negotiation. Management decides to authorize negotiation of the Investment Project
Financing, based on the relevant documentation and taking into account information on any
known breaches by the borrower of its obligations to the Bank under existing Bank financed
operations. After the decision to authorize negotiations (which may be taken at the appraisal
decision point), the Bank and borrower conduct the negotiations and seek to finalize agreement
on the relevant issues and documentations. If new substantive issues or significant changes in
the design of the Investment Project Financing are raised during the negotiations, based on a
consideration of these issues, Management decides whether to proceed.
28. Approval. For Investment Project Financing requiring approval by the Executive
Directors, Management informs the Executive Directors when the negotiations have been
scheduled and then when they have been completed. After the negotiations, the Bank finalizes
the draft Project documents and Management decides on their submission to the Executive
Directors. If any information in the Project documents raises issues of confidentiality or
sensitivity for the borrower, or may adversely affect relations between the Bank and the
borrower, and this information is deemed to be relevant to the Executive Directors in their
decision-making process, such information is not included in the project document and is
described in the Memorandum of the President. When there are overdue payments to the Bank
with respect to other Bank financings to the borrower or financings to or guaranteed by the
borrower beyond the number of days that would give the Bank the right to suspend
disbursements, Project documents are not submitted to the Executive Directors unless an
exception is granted by Management. After all requirements for Board presentation have been
met, the Executive Directors decide on the approval of the proposed Investment Project
Financing, following regular or streamlined procedures.
29. Management decides on the approval of Investment Project Financings that do not
require approval by the Executive Directors.
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From Approval through Effectiveness
30. By the end of this stage, Management decides whether to proceed to Investment Project
Financing implementation.
31. Signing. After approval of the Investment Project Financing, the Bank arranges for
signing of the relevant legal documents as soon as the relevant signing requirements are met.
For Investment Project Financings approved by the Executive Directors, Management informs
the Executive Directors when the signing has taken place, or when signing has been delayed for
more than six months following the approval. If the legal documents are not signed 18 months
following approval, the Bank normally withdraws the offer of the Investment Project Financing;
however in certain circumstances Management may decide to provide the borrower with
additional time to sign. If the offer of the Investment Project Financing is withdrawn, the
Executive Directors are informed through regular operational reporting.
32. Effectiveness. The legal agreements terminate if the conditions for their effectiveness, if
any, are not met by the date specified in the agreements, normally 90 days after signing. When
warranted, Management may decide to extend the effectiveness deadline; normally the deadline
is not extended beyond 18 months after the Investment Project Financing approval. When the
effectiveness deadline is extended, dated covenants whose dates fall before the new effectiveness
deadline become additional conditions of effectiveness. Any decision by Management to declare
the legal agreement(s) effective or to extend the effectiveness deadline is taken before the
expiration of the effectiveness deadline. However, in exceptional circumstances, if the legal
agreement(s) have terminated for failure to become effective by the effectiveness deadline,
Management may decide to retroactively reinstate such agreement(s).
33. Informing the Executive Directors. For Investment Project Financing approved by the
Executive Directors, Management informs the Executive Directors as part of regular operational
reporting of the following: (a) the effectiveness deadlines; (b) effectiveness delays of more than
nine months after approval by the Executive Directors; (c) legal agreements that terminate for
failure to become effective; and (d) terminated legal agreements that are reinstated by
Management.
34. Changes in Conditions Prior to Signing or Effectiveness. If prior to signing or
effectiveness, the conditions under which the Investment Project Financing was originally
approved change substantially, the legal agreement(s) are not signed or declared effective until
the Bank and the borrower agree on the necessary changes to respond to the new conditions.
Management or the Executive Directors decide on the approval of such changes in accordance
with the restructuring requirements set out below. After such decision, the legal agreement(s)
are amended, as necessary, to reflect the new agreement(s) with the borrower, guarantor, and
other parties involved.
B. Implementation Support and Monitoring
35. After the Bank declares the legal agreement(s) to be effective, the borrower carries out its
Project implementation, with Bank implementation support and monitoring that continue up to
the completion of the Project.
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36. Borrower’s Role. The borrower is responsible for implementing the Project, monitoring
its progress, evaluating results on completion, and meeting the relevant contractual obligations
set out or referred to in the Investment Project Financing legal agreement(s) with the Bank.
Unless otherwise agreed by the Bank, the borrower submits annual audited Project financial
statements six months after the close of the borrower’s financial year and unaudited interim
financial reports. Audits need to be carried out by auditors with independence and capacity
acceptable to the Bank, under terms of reference acceptable to the Bank.
37. Bank’s Role. In providing implementation support, the Bank pays particular attention to
reviewing the monitoring of the performance of the Project and the borrower’s compliance with
its contractual undertakings. The Bank periodically assesses the Project, and reviews the
monitoring of results and risk, updating Project information as necessary. The Bank monitors the
timeliness of the receipt of the annual audited financial statements and audit reports and reviews
their content and quality.
38. Disbursements and Suspension of Disbursements. After the legal agreement(s) have
been declared effective, the Bank disburses the proceeds of the Investment Project Financing in
accordance with the terms and conditions set out in the legal agreement(s) and in the
Disbursement Letter. If the Bank decides to suspend disbursements, items whose exemption is,
in the Bank’s judgment, in the interest of the Project, including items whose exemption will
minimize delays and cost in the event that the suspension is lifted, or permit an orderly
termination of the Project, may be exempted from suspension. Special commitments to third
parties that the Bank has entered into at the borrower’s request are always exempted.
39. Cancellation. The borrower or the Bank may decide to cancel an amount of Investment
Project Financing. When the borrower decides to cancel an amount of Investment Project
Financing in accordance with the terms of the legal agreement(s), and gives notice to the Bank,
the cancellation is effective as of the date of receipt of the request. The Bank does not accept
requests for retroactive cancellations.
40. If the Bank cancels an amount of Investment Project Financing in accordance with the
terms of the legal agreement(s), it notifies the borrower, and provides a revised withdrawal
schedule. The cancellation is effective as of the date of the notice, except in the case of
cancellation of the remaining balance of Investment Project Financing after the closing date.
The cancellation of an amount of Investment Project Financing is reflected in the amortization of
the financing; the canceled amount is normally prorated to the remaining Investment Financing
principal maturities. For Projects cofinanced by other lenders, the Bank follows internal
procedures concerning communications with cofinanciers on any proposed cancellation. Except
in the case of cancellation of the remaining balance of Investment Project Financing after the
closing date, the cancellation of any amount of Investment Project Financing constitutes a
restructuring of the Project.
41. Restructuring. If the borrower proposes changes to the Investment Project Financing, the
Bank determines if this is a Level One or Level Two restructuring, as defined in OP 10.00 and
prepares the documentation accordingly. The documentation describes the rationale for the
proposed restructuring, and the analysis of associated benefits and risks. Executive Directors or
Management decide on the restructuring approval as appropriate. Restructurings take effect
43
through amendments to the legal agreement(s) or, if so established in the original legal
agreement(s), by written notices to the borrower. A list of all approved restructurings is included
in regular operational reporting to the Executive Directors. All restructurings are taken into account
in conducting self- and independent evaluation.
From Implementation to Closing
42. During Project implementation, the Bank monitors the approach of the closing date of the
Investment Project Financing and works with the borrower to ensure that closing procedures as
set out below are followed. After completion, the Bank prepares a report evaluating the
performance of the Project.
43. Extension of Closing Date. Upon a request from the borrower, the Bank may decide to
extend the closing date if the Project DOs remain achievable, and the Bank and the borrower
agree on actions that will be undertaken by the borrower to complete the Project. The Bank
processes the extension as a restructuring.
44. Withdrawals after the Closing Date. The Bank may decide, without formally extending
the closing date, to disburse or approve the use of proceeds of Investment Project Financing for
withdrawal applications received within four months after the closing date for payments made or
payments due for eligible expenditures prior to the closing date. In exceptional cases and upon
the borrower’s request, the Bank may decide to extend the period for receipt of such withdrawal
applications. In addition the Bank may decide to finance out of the proceeds of the Investment
Project Financing the cost of a final audit that will be completed after the closing date.
45. Closing the Investment Financing Account. The Bank closes the Investment Project
Financing account within two months after the deadline set by the Bank for receipt of withdrawal
applications or, if no such additional period is granted, within two months after the closing date.
Any undisbursed balance of the Investment Project Financing is cancelled. The Bank notifies
the borrower of the final disbursement position.
46. Investment Project Financings under Suspension of Disbursements. If a suspension of
disbursements is in effect on the closing date, any Investment Project Financing balance is
normally canceled and the Investment Project Financing account is closed. In exceptional cases,
Management may decide to authorize a delay in canceling the Investment Project Financing
balance and closing the Investment Project Financing account if suspension is likely to be lifted
imminently and Project and/or country circumstances warrant such a delay. Once the Bank
decides to lift the suspension, Management may decide to approve an extension of the closing
date in accordance with the procedures set out above.
47. Investment Project Completion Report. After the completion of the Project the Bank
prepares an Implementation Completion and Results report (ICR). The ICR covers, among other
things, the degree to which the Project DOs and results have been achieved and the overall
Project performance, taking into consideration the Project operating environment. The ICR
incorporates the borrower’s evaluation of the Project, as well as of its own performance and the
performance of the Bank, if available. Management decides on the submission of the ICR to the
44
Executive Directors, normally within six months of Project completion, and can decide to
authorize an extension for the completion of the ICR and its submission to Executive Directors.
C. Projects with Special Considerations
48. Exceptional Arrangements in Situations of Urgent Need of Assistance or Capacity
Constraints. The borrower may request the use of exceptional arrangements for an Investment
Project Financing set out in OP 10.00, paragraph 11. If Management determines that the
borrower is eligible for such arrangements, the following provisions apply:
(a) when compliance with the environmental and social requirements is permitted to be
deferred to the Project implementation stage, Project documents include an action
plan addressing the application of environmental and social policies.
(b) when exceptional alternative legal and operational implementation arrangements are
used, Project documentation sets out the relevant capacity-building measures planned
for timely transfer of implementation activities to the borrower; and
(c) the normally sequential stages of identification, preparation and appraisal may be
consolidated; and the decision to authorize negotiation may be taken after a single
consolidated review of a complete negotiations package.
49. Series of Projects. In cases of single-borrower sequential Projects, in addition to regular
requirements, the documentation for the first Project presents the rationale for a phased
approach, the potential benefits and risks of such an approach, the overarching DOs for the
series, overall expected results, and timeline for expected completion of each phase and the
series; it also gives an indicative funding envelope for the entire series. Subsequently, each
Project in the series is prepared and appraised individually, taking into account the performance
of the preceding Project(s) to date.
50. After the approval by Executive Directors of the first Investment Project Financing in a
series to a single borrower, Management decides whether subsequent Investment Project
Financing is submitted for approval by the Executive Directors under regular or streamlined
procedures, or is submitted to the Executive Directors for approval under Absence-of-Objection
procedures. A subsequent Investment Project Financing is submitted for decision for approval
by Executive Directors under regular or streamlined procedures if it involves a modification of
the development objectives for the series, a change in safeguard category—from a lesser
category to a Category A or the trigger of a safeguard policy not triggered by a previous Project
in the series—or if the previous project underwent a Level 1 restructuring.
51. In the case of a multi-borrower series of Projects following a similar Project template, the
first Investment Project Financing in the series sets out the rationale for the series, an indicative
funding envelope, and the standard design features, with the program documentation for the first
Investment Project Financing providing the general template for subsequent Projects. After
approval by Executive Directors of the initial Investment Project Financing, all subsequent
Investment Project Financings that follow the Project template are submitted to Executive
Directors for decision for approval under Absence of Objection procedures.
45
52. Financial Intermediary Financing. If Investment Project Financing is proposed to be
made to a financial intermediary, at the concept review a decision is taken on the appropriateness
of such financing, taking into consideration the availability and appropriateness of alternative
sources of financing.
53. Small Projects. For a Project financed by the Bank through a borrower-executed grant of
less than US$5 million, the Bank follows simplified procedures set out in internal processing
arrangements, requiring simplified assessments and risk analysis, streamlined procedures from
appraisal through approval, and streamlined ex-post evaluation.
D. Additional Financing
54. When additional financing is requested by the borrower during implementation of a
Project, the Bank follows normal Investment Project Financing procedures with the following
exceptions. Management decides on proceeding with preparation on the basis of documentation
justifying the need for additional financing and summarizing the implementation record and
results to date. The Bank prepares documentation for additional financing, including an updated
appraisal-stage PID and ISDS (covering the original Project and the new activities) for a single
decision point on appraisal and negotiation. Additional financing is provided through an
amendment to the original legal agreement and/or a new legal agreement. The relevant legal
agreement(s) are signed before the closing date of the original Investment Project Financing. The
ICR for the original Investment Project Financing covers the original project and additional
financings. If the original Project has been under implementation for ten years or more, an ICR
will be prepared before an additional financing may be processed. A supplemental ICR is
prepared upon the Project completion. If the additional financing is solely for the purposes of
completion of Project activities when there is a financing gap or cost overrun, Management may
provide an exception to the report requirement.
46
ANNEX D. DISPOSITION OF EXISTING INVESTMENT LENDING (IL) OPS, BPS: SUMMARY
Content Retained Completely
or in Part (with rewording
for clarity & brevity)
Some Content
Removed/ Already
in General
Conditions
Some Content
that Goes Beyond
IL to OM
Some Content Moved to
Processing Steps and
Guidance or Archived
Content Missing and Added to
OP BP Draft Single OP/BP
OP 6.00 Bank
Financing
OP/BP 6.00 Bank
Financing
BP 6.00 Bank
Financing
OP 8.00 Rapid
Response to
Crises and
Emergencies
OMS 2.20 (Note: not an
Operational Policy)
Bank’s role in operational
assessment; supporting Bank
practice on appraisal and
analytic requirements
OP 8.00, Rapid
Response to
Crises and
Emergencies
BP 8.00 Rapid
Response to
Crises and
Emergencies
OP/BP 12.00
Disbursement
OP 8.40 TA OP/BP 6.00 Bank Financing Incorporation of fragility and
specific vulnerabilities,
including small states under
special considerations
OP/BP 8.10, PPF OP/BP 8.10 PPFs OP 13.00 Signing
and Effectiveness
BP 14.40 BP 8.00 Rapid Response to
Crises and Emergencies
Adding the possibility of using
a PPA in preparing PforR
Financing
OP 8.30 FILs OP 8.30 Financial
Intermediary
Lending
OP 13.30 Closing
Dates
OP/BP 8.10, Project Preparation
Facility
Statement that IL financed by
grants is covered by the single
IL policy
Current OP 10.00
IL
BP 10.02 FM OP 13.40
Suspension of
Disbursements
OP/BP 8.30 FILs Special considerations for FILs
in draft BP
OP 10.02 FM BP 12.00
Disbursement
OP 13.50
Cancellations
OP/BP 8.40 TA Statement on fraud and
corruption
OP 10.04
Economic
Evaluation
OP 13.00 Signing
and Effectiveness
Current OP/BP 10.00 IL Listing of questions for
economic analysis; planning of
analysis advanced
OP 12.00
Disbursement
BP 13.20 AF OP/BP 10.02 FM Cross-referencing of Project
legal agreement and
Disbursement Letter
OP 13.00 Signing
and Effectiveness
OP/BP 13.30
Closing Dates
OP/BP 10.04 Economic
Evaluation
Policy and procedure statements
on restructurings
OP 13.05 Project
Supervision
OP 13.40
Suspension of
Disbursements
OP/BP 12.00 Disbursement Inclusion of treatment of cost
savings under restructuring;
OP 13.20 AF OP/BP 13.50
Cancellations
OP/BP 13.00 Signing and
Effectiveness
Statement that cancellation
prior to the closing date
constitutes a restructuring
OP 13.30 Closing
Dates
OP 13.55 ICR OP/BP 13.05 Project
Supervision
Treatment of extension of
closing date as a restructuring
OP 13.40
Suspens. of Disb.
BP 14.40 BP 13.20 AF Lifting of three-year restriction
on AF
OP 13.55 ICR OP/BP 13.25 Use of Project
Cost Savings
Broad, unified section on
recourse, remedies, and
sanctions
OP 13.60,
Monitoring and
Evaluation
OP/BP 13.30 Closing Dates
OP/BP 13.40 Suspension of
Disbursements
OP/BP 13.50 Cancellation
BP 13.55 ICR
ANNEX E. DRAFT CONSOLIDATED OPERATIONAL POLICY (OP) FOR INVESTMENT PROJECT
FINANCING: DISPOSITION OF EXISTING INVESTMENT LENDING POLICY STATEMENTS1
Current OP
Retained
(with rewording
where necessary for clarity
and brevity)
Moved to Bank Procedure
(with rewording
where necessary for clarity
and brevity) Archived Missing—and Added
OMS 2.20
Project
Appraisal
(Note—not an
Operational
Policy Statement
or Bank
Procedure
Statement)
Predates the modern concept
of binding OPs; it is far too
long and not true policy: a
mixture of policy direction,
guidance, and good advice;
overlaps and is inconsistent
with existing BP 10.00 on
appraisal. It does not provide
clear direction to staff;
archived—see next column.
Clear, concise statement of
the Bank’s role and
responsibilities in
operational assessment, now
included in the draft OP,
paragraphs 3-9; Bank
practice on appraisal, now
included in the draft BP,
paragraphs 23 and 24.
OP 6.00 Bank
Financing
Guiding principles in
paragraph 1 and first
sentence of paragraph 2
incorporated in draft OP,
paragraph 2.
Footnote 1 has been
reformulated and in the draft
OP as Footnote 1.
Paragraph 2 (e) and Footnote
3 on retroactive financing,
clauses (a)-(d) incorporated
in draft BP, paragraph 21.
The remainder is advisory;
archived and moved to
guidance.
OP 8.00 Rapid
Response to
Crisis and
Emergencies
Paragraphs 1, most of 2, 36,
and 11 go beyond IL; in the
interim to be retained outside
IL policy in updated OP 8.00
until overall Operational
Manual reform.
Remaining paragraphs
consolidated and included in
the draft OP, paragraphs 11-
12 under special
considerations.
Incorporation of fragility and
specific vulnerabilities,
including small states, along
with crises and emergencies
under special considerations.
OP 8.10 Project
Preparation
Facility
Paragraphs 1, 2, parts of 3-5
and 8 slightly rewritten
incorporated in draft OP,
paragraphs 16-17.
Parts of paragraphs 3, 4, and
8 moved to draft BP,
paragraphs 9-13 (including
raising the ceilings on limits
for individual PPAs to US$6
million normally and US$10
million in cases of crises,
emergencies, and fragility).
Remainder covered in the
Standard Conditions for all
PPAs.
Adding preparatory activities
for operations to be financed
by Program-for-Results
Financing as a possible use.
Parts of BP 8.10 more
appropriate for OP, notably
the special authority for
Management approval of
PPAs and ED authority over
the commitment ceiling for
the PPF and the maximum
amount of individual PPAs.
Included in draft OP,
paragraph 15.
1 IL policy reform does not cover safeguard and procurement policies.
48
Current OP
Retained
(with rewording
where necessary for clarity
and brevity)
Moved to Bank Procedure
(with rewording
where necessary for clarity
and brevity) Archived Missing—and Added
OP 8.30
Financial
Intermediary
Lending
The draft OP includes in
paragraph 15, under special
considerations, those
considerations covering
lending to financial
intermediaries, notably
highlighting that specific
elements of procurement and
safeguard policies are
applicable to these projects.
Appropriateness of such
financing addressed in the
draft single BP. paragraph
52.
This OP was designed for a
different world, notably
predating, for example, the
Financial Services Advisory
Program and the general
modernization of financial
intermediation in IBRD and
IDA recipient countries.
Currently, there are very few
IL operations directly
supporting financial
intermediaries (an average of
six FILs per year since
FY06). Appropriately, the
IFC now generally provides
this type of support without a
government guarantee.
Archived and moved internal
processing arrangements
(including those specifically
for Project including
financial intermediary
lending) and staff guidance
(particularly concerning to
techniques of economic and
financial analysis of loans to
financial intermediaries).
OP 8.40
Technical
Assistance
Paragraphs 5-7 not relevant
for IL and retained outside
the draft OP.
TA already a routine use of
IL and, as such, is covered
under draft OP. Except for
paragraphs 5-7, remainder
archived with relevant parts
updated and moved to staff
guidance.
OP 10 IL:
Identification to
Board
Presentation
Key general principles from
paragraph 1, 2 and from
paragraph 3 incorporated in
draft OP, paragraph 1
Principles also incorporated
into BP paragraph 5.
Remainder archived.
OP 10.02
Financial
Management
Key elements of paragraphs
1, 2, 4, 5 incorporated in
draft OP, paragraphs 6, 18,
19, 23 and, 25.
Paragraph 3 moved to draft
BP paragraph 36
OP 10.04
Economic
Evaluation of
Investment
Operations
The key element of
paragraph 1 (the requirement
for economic evaluation)
retained in paragraph 5 of
the draft OP.
Policy as it is currently
written to be archived, with
major elements moved to
staff guidance.
The draft OP draws on
recent thinking and permits a
wider array of options for
economic analysis
techniques, appropriate for
the wide array of activities
currently supported through
IL.
49
Current OP
Retained
(with rewording
where necessary for clarity
and brevity)
Moved to Bank Procedure
(with rewording
where necessary for clarity
and brevity) Archived Missing—and Added
OP 12.00
Disbursement
Key principle from
paragraph 1 retained in draft
OP, paragraphs 1, 2 and 6.
Paragraph 3, last sentence
reworded in draft OP,
paragraph 23. Paragraph 4
retained under draft OP
paragraph 18 on the
recipient’s contractual
obligations, which include
disbursement conditions.
Paragraph 13 already
covered under OP 8.60,
Development Policy
Lending, paragraph 18.
The remainder of the current
OP is already covered under
the General Conditions for
Bank support included in
operational legal agreements
and mandatory
Disbursement Guidelines.
OP 13.00 Signing
of Legal
Documents and
Effectiveness of
Loans and
Credits
Paragraph 1, condensed and
reworded, incorporated in
the draft OP, paragraph 21.
Paragraph 4 moved to draft
BP, paragraph 31.
Paragraph 5 moved to draft
BP, paragraph 32.
The remainder is already
covered under the General
Conditions for Bank support
included in operational legal
agreements.
OP 13.05 Project
Supervision
Paragraph 1 reworded and in
draft OP, paragraph 1, 2 18,
19, and Articles of
Agreement. .Paragraph 2,
condensed and reworded, is
included in draft OP,
paragraph 19, second
sentence.
Section on restructuring
incorporating OpMemo on
project restructuring
following Board approval on
October 22, 2009 of new
policy on restructuring (see
paragraph 21 of the proposed
OP).
OP 13.20
Additional
Financing
Paragraph 1, most of
paragraph 2, and paragraph 3
rewritten and incorporated
into the draft OP, paragraph
26.
Proposed policy change
incorporated into draft OP,
lifting the three-year
limitation for additional
financing.
OP 13.25 Use of
Project Cost
Savings
As envisioned at the time
that the new restructuring
policy was approved, this
policy is to be archived,
since cost savings are now
covered in the draft OP,
paragraph 21 on
restructuring.
OP 13.30 Closing
Dates
Much of paragraphs 1, 2,
and 6 (notably defining the
closing date) incorporated
into the draft OP, paragraph
23.
Paragraph 3, simplified and
reworded, regarding the
conditions for an extension
of closing date moved to
draft BP, paragraph 43.
The remainder archived; key
element already covered by
the General Conditions.
50
Current OP
Retained
(with rewording
where necessary for clarity
and brevity)
Moved to Bank Procedure
(with rewording
where necessary for clarity
and brevity) Archived Missing—and Added
OP 13.40
Suspension of
Disbursements
Paragraph 2 is reworded and
reflected in draft OP,
paragraph 25. Paragraph 3
wording on delays in signing
in situations of suspension
included in draft OP,
paragraph 21.
Paragraph 5 reworded and
moved to draft BP,
paragraph 38.
Rest of the policy is
redundant, as it is covered in
the General Conditions.
Details on processing moved
to internal processing
arrangements.
Replaced by a broader,
unified section on recourse,
remedies, and sanctions,
paragraph 25 in the draft OP.
OP 13.50
Cancellations
Paragraphs 1 and 2 moved to
draft BP, paragraphs 39 and
40.
Remaining provisions are
either part of the General
Conditions or cover
processing and moved to
internal processing
arrangements.
Replaced by a broader
section on recourse,
remedies, and sanctions,
paragraph 24 in the draft OP.
OP 13.55
Implementation
Completion
Report
Except for paragraph 2, the
entire policy statement,
rewritten and condensed, is
incorporated into the draft
OP, paragraph 24.
Paragraph 2 condensed and
moved to draft BP,
paragraph 47.
OP 13.60
Monitoring and
Evaluation
Paragraph 1 revised and
reflected in draft OP
paragraph 1, 19. Parts of
paragraph 4 are reflected in
the draft OP, paragraphs 18
and 19. The remainder goes
beyond IL; in the interim to
be retained outside IL policy
in updated OP 13.60 until
overall Operational Manual
reform.
ANNEX F. DRAFT NEW CONSOLIDATED BANK PROCEDURE (BP) FOR INVESTMENT LENDING
DISPOSITION OF EXISTING INVESTMENT LENDING PROCEDURES1
Current Bank
Procedure
Statement
Retained
(with possible rewording for
clarity and brevity)
Moved to Internal
Processing Arrangements/
Guidance Archived Missing and Added
BP 6.00 Bank
Financing
Paragraph 3 and 5 and Annex
A rewritten, simplified and
clarified, removing internal
processing arrangements,
included in draft BP,
paragraph 25(a) (d).
Paragraphs 1, 2, and 4 on
country financing parameters
to be rewritten, simplified and
moved to BP 2.11.
Parts of paragraph 3 and 5 and
Annex A covering internal
clearances moved to internal
processing arrangements, with
decisions and any related
mitigation measures recorded
in the PAD; Parts of
paragraph 3 covered in
General Conditions (notably
taxes and duties);
Some of language on Country
Financing Parameters with
regard to calculation no longer
relevant and to be archived.
Demining added to the list of
expenditures deemed to raise
particular risk, draft BP
paragraph 24 (d).
BP 8.00 Rapid
Response to
Crises and
Emergencies
Paragraph 4 included in draft
BP, paragraph 48 (e).
Paragraph 7 clarified and
rewritten in draft BP,
paragraph 48. Paragraph 5
covered under BP paragraphs
24 and 27.
Paragraphs 1-3, 7 (e), 8, and 9
cover internal steps; moved to
internal processing
arrangements.
BP 8.10 Project
Preparation
Facility
Parts of paragraph 1 moved to
draft OP, paragraph 16.
Paragraph revised and in draft
BP paragraph 12 and 13
Paragraphs 2-7 on processing
steps moved to internal
processing arrangements.
BP 8.30
Financial
Intermediary
Lending
Content updated as staff
guidance, notably for
economic analysis of Bank
support to financial
intermediaries.
Archived. Draft BP sets out special
considerations for Financial
Intermediary Financing in
paragraph 52.
BP 8.40
Technical
Assistance
Some portions of the sections
on design, supervision, and
documentation moved to staff
guidance.
Archived.
BP 10.00
Investment
Lending:
Identification to
Board
Presentation
Detailed processing
provisions—outdated in
current BP—updated and
moved to internal processing
arrangements.
Archived and replaced by
draft BP10.00.
Missing: the spelling out of
the basic analytic
requirements—technical,
economic, financial
management, procurement,
social, environmental and
risk—included in draft BP,
paragraphs 15-19 and 21.
1 IL reform does not cover safeguard and procurement policies and procedures.
52
Current Bank
Procedure
Statement
Retained
(with possible rewording for
clarity and brevity)
Moved to Internal
Processing Arrangements/
Guidance Archived Missing and Added
BP 10.02
Financial
Management
Preparation elements
reworded to remove internal
processing arrangements and
included in draft BP,
paragraph 18 and paragraph
36. Annex A replaced with
broader procedures for
handling breaches in
compliance with recipient
obligations; see draft BP,
paragraphs 22 and 27.
Processing provisions moved
to internal processing
arrangements.
Missing: statement that
Investment Project
Financing is subject to the
Guidelines on Preventing
and combating Fraud and
Corruption in Projects
Financed by IBRD Loans
and IDA Credits and
Grants—draft BP, paragraph
19.
BP 10.04
Economic
Evaluation of
Investment
Operations
Staff guidance will provide
instructions on carrying out
economic analysis across
types of activities supported
and examples of good
practice.
Archived and replaced—see
draft BP, paragraph 17.
BP 12.00
Disbursement
The essence of paragraph 3
included in draft BP,
paragraph 25 (e).
All of the content on internal
steps moved to internal
processing arrangements.
The rest of the BP duplicative
of the General Conditions, the
Disbursement Letter for the
Investment Financing, and
binding Disbursement
Guidelines and, therefore,
archived.
Section in draft BP,
paragraph 37, cross
referencing Project legal
agreement and
Disbursement Letter.
BP 13.00 Signing
of Legal
Documents and
Effectiveness of
Loans and
Credits
Essence of paragraph 7 is
included in draft BP,
paragraph 31; paragraph 13,
15, 16, 17-20 have been
revised slightly and included
in draft BP paragraphs 31, 32,
33 and 34.
Current BP covers internal
steps rather than procedures;
updated and moved to internal
processing arrangements.
Archived.
BP 13.05 Project
Supervision
Paragraph 1 retained with
slight rewording to remove
internal processing
arrangements; see paragraph
37 of the draft BP; Paragraphs
2(a)-(c) and 3 reworded and
found in draft BP paragraphs
18 and 25. Paragraph 9
revised and found in draft BP
paragraph 37.
Internal steps and guidance
content moved to internal
processing arrangements and
staff guidance.
Archived. Procedures for
restructurings, based on
OpMemo, Project
Restructuring: New
Procedures, November 18,
2009; see paragraph 40 of
draft BP.
BP 13.20
Additional
Financing for
Investment
Lending
Retained with slight
rewording to remove internal
processing arrangements; see
paragraph 54 of the draft BP.
Components that cover
internal processes and not
procedure moved to internal
processing arrangements.
BP 13.25 Use of
Project Cost
Savings
Archived as envisioned at the
time of the approval of the
policy on restructuring.
53
Current Bank
Procedure
Statement
Retained
(with possible rewording for
clarity and brevity)
Moved to Internal
Processing Arrangements/
Guidance Archived Missing and Added
BP 13.30 Closing
Dates
Paragraphs 2-5 and 8-9,
rewritten to remove internal
processing instructions,
included in draft BP,
paragraphs 43 -46.
Remainder of the current BP
moved to internal processing
arrangements and staff
guidance.
Paragraph linking extension
of the closing date to
practice on restructuring,
since a closing date
extension is now covered
under restructuring policy
(see paragraph 41 of the
draft single IL BP).
BP 13.40
Suspension of
Disbursements
Content is entirely internal
process and not procedure;
moved to internal processing
arrangements.
Archived
BP 13.50
Cancellations
Paragraphs 1-2, 5-6 and 8
retained in single IL BP,
reworded to remove internal
arrangements; see paragraph
39 and40 of the draft BP.
Paragraphs 3-4 and 7 moved
to internal processing
arrangements and staff
guidance.
Statement noting that
cancellation prior to the
closing date constitutes a
restructuring; see paragraph
39 of the draft BP.
BP 13.55
Implementation
Completion
Reporting
Paragraph 3 has been
reformulated and in draft BP
paragraph 47.
Current content covers
internal processes and does
not contain procedural
content; moved to internal
processing arrangements.
Archived.
BP 14.40, Trust
Funds
Elements of paragraphs 9 and
10 have been incorporated
into the draft OP, paragraphs
7 and 11(d) and BP 19 and 53.
The remainder goes beyond
IL; in the interim to be
retained outside IL policy in
updated OP 13.60 until
overall Operational Manual
reform.
54
ANNEX G. DRAFT NEW CONSOLIDATED OPERATIONAL POLICY (OP) AND BANK PROCEDURE
(BP) FOR INVESTMENT LENDING: DISPOSITION OF EXISTING OPERATIONAL MEMORANDA
Current OpMemo
Incorporated into Draft
OP
Incorporated into Draft
BP
Moved to Internal Processing
Arrangements/ Archived/Not
Relevant for Investment
Financing OP or BP
Missing—to be
Added
Placing Bank Loans
in Non-Performing
Status and Restoring
Loans to Performing
Status
The content covers internal
processes and will be
incorporated into internal
processing arrangements
covering Investment Project
Financing.
Tracking and
Recovery of Cash
Refunds arising
from Ineligible
Expenditure
The content covers internal
processes and will be
incorporated into internal
processing arrangements
covering Investment Project
Financing.
Project
Restructuring: New
Procedures
(Revised)
Paragraph 2 and section of
paragraph 4 on cost savings
incorporated into draft OP
(without content dealing
with internal processing
arrangements); see draft
OP, paragraph 22.
Paragraph 3 incorporated
into draft BP (without
content dealing with
internal processing
arrangements); see draft
BP, paragraph 41.
Paragraphs 1 (informing staff of
Board approval of the change in
policy) and 5 (noting that the
OpMemo would be incorporated
into the overall IL policy
framework as part of IL reform)
archived.
Specific Expenditure
Eligibility and Cost
Sharing
Requirements for
Investment Projects
in Countries
Without Approved
Country Financing
Parameters
Archived. (See comments on
disposition of BP 6.00, Bank
Financing.)
Retroactive
Extensions of
Closing Dates:
Approval Authority
Archived—treats internal
processes; to be incorporated
into internal processing
arrangements for Investment
Financing.
Demining--
Operational
Guidelines for
Financing Land
Mine Clearance
Covered under paragraph
25 (d) of the draft BP.
Treatment of
Environmental
Externalities in the
Evaluation of
Investment Projects
Archived and replaced by staff
guidance on carrying out the
economic analysis required
under draft OP.
55
Current OpMemo
Incorporated into Draft
OP
Incorporated into Draft
BP
Moved to Internal Processing
Arrangements/ Archived/Not
Relevant for Investment
Financing OP or BP
Missing—to be
Added
Tranching in
Loans/Credits for
Investment Projects
Archived, although the principle
of strongly discouraging
tranching in Investment Project
Financing will be included in
staff guidance.