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Folder Title: Country Files - Arab Bank for Economic Development in Africa (BADEA) - Correspondence -Volume 1

Folder ID: 1774547

Dates: 10/13/1981 - 4/9/1984

Fonds: Other - No OUI Name Provided - 1990/000 - 3965 President A.W. Clausen country files - 3965.01 Allextant records

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1774847A1990.013 Other#: 2 204848Country Files: Arab Bank for Economic Development in Amoa (BADEA)Correspondence 01

DECLASSIFIEDWBG Archives

THE WORLD BANK/INTERNATIONAL FINANCE CORPORATION

OFFICE MEMORANDUM

Date : April 9, 1984

To : Files 2

From : A. Edward Elmendorf, Chief , B

Subject: IBRD/BADEA Cooperation

1. During his recent visit to the Sudan, Mr. Clausen called on thePresident of BADEA, Mr. Chedly Ayari. Messrs. Wapenhans, Tadros and Iattended the meeting. BADEA senior staff were also present.

2. Opening the discussion, Mr. Ayari complimented Mr. Clausen andMessrs. Wapenhans and Knox on the Bank's work in Africa. He alluded to apaper given to Mr. Wapenhans the previous evening: The World Bank andBADEA: Some Coordination Issues, March 1984 (copy attached). He referredparticularly to the desirability of strengthened cooperation in thefollowing areas:

(a) development strategies, particularly at the subregional level,e.g. Sahel;

(b) projects: joint identification missions and IBRD help to BADEAin supervison;

(c) training of BADEA staff; and

(d) technical assistance and feasibility studies.

Mentioning the next regular IBRD/Arab Funds coordination meeting, Mr. Ayari

suggested that co-financing experience and private sector issues might beincluded in the agenda.

3. Mr. Clausen also expressed the wish that IBRD/BADEA cooperationbe strengthened, explained that the Bank's work was focussing increasinglyon the economic policy framework for projects, and alluded to budget

constraints as a factor that would limit the extent of IBRD help to BADEA.

He promised that the BADEA paper and proposals would be carefully reviewed.

4. Speaking on general policy issues, Mr. Ayari said that all the

Arab funds had been asked by their Governors to enter the field of trade inrelation to development, to encourage trade among their members. In thisconnection BADEA was examining a proposal to enter the field of

Arab-African trade, and possibly use some of its liquid assets for thispurpose. He planned to be in touch with the IBRD when and if the proposalmatured.

-2-

5. Repeating BADEA's earlier request for technical assistance to helpreview and revise the operational manual, Mr. Wapenhans explored with Mr.Ayari the possibility of identifying a suitable qualified former Bank staffmember to work as a consultant for BADEA. Mr. Ayari thought this to be auseful approach and would expect to hear from us regarding suitablepeople. Mr. Takahashi should follow up on this together with PMD and ourmission.

Attachment

Cleared with and cc: Mr. Wapenhans

cc: Messrs. Clausen, Stern, Knox, Ohuchi, de la Renaudiere, Gue, Alisbah,Kraske, Gulhati, Takahashi, El Rifai, Tadros, (with attach-ment)

AEE: enm/eam

00 4w *0 a

ARAB 'BANK FOR, ECONONICI DEVELQPKENT IN AFRICA

BANNUE ARABE. DE DEVELOPPEMENT ECONOM11HE EN'AFRIGUE

HEADQUARTERS:SAYED ABDUL RAHMAN STREET, DATE:

P. 0. BOX 2640, KHARTOUM - SUDANTEL: 73646/73709/70498, ISSUE N0:

TLX.: BADEA 22248 SD

THE WORLD BANK AND BADEA :

SOME COORDINATION ISSUES

MARCH, 1984

I * BACKGROUND

1-1 Cooperation between the World Bank and BADEA was

initiated since the inception of the latter.This

cooperation took the form of co-financing develo-

pment projects already conceived and prepared by

the World Bank. The significance of this early

cooperation with the World Bank on the one hand,

and the other Arab/Islamic Development Institut-

ions on the other, is that it made it feasible

for BADEA to launch its operations immediately

after its establishment. However, in the course

of its operations and while building its own ins-

titutional framework, it became increasingly evi-

dent to BADEA, that there is a further need for

reinforcement and perhaps rationalization of such

cooperation in the interest of the aid recipient

countries. In case of Africa, where BADEA oper-

ates, this need expressed itself much more succ-

inctly in the wake of the so called African eco-

nomic crises the result of which was an increase

in the number of countries requiring resources

which are beyond the capacity of a single fina-

ncing institution.

1-2 Regarding World Bank/BADEA co-financing activities

it is to be noted that "it was not a mere coinci-

dence that nine out of ten projects approved by

BADEA in 1975 were co-financed with the World Bank

and its affiliate the International Development

Association (IDA). The proportion has decreased

after that date to between three and four projects

out of 10-12 annually". The World Bank Group

cofinanced with BADEA 36 projects over the period

* BADEA's Co-financing during the period 1975-1981,BADEA, Khartoum, P.20.

IBRD, IDA and IFC.

-2-

1975 - July 1983. The total cost of these projects

was approximately US$ 3204.776 million. BADEA's

participation amounted to US$ 254.24 million repre-

senting around 8% of the total cost while that of

the World Bank Group amounted to US$ 722.057 million

representing around 22.5% of the total cost. In

other words the contribution of both institutions as

a percentage of the total projects costs stands at

about 30.5% while BADEA's contribution accounts to

about 35.2% of the World Bank contribution (Annex 1).

1-3 It is also worth noting that the major part of funds

allocated by the World Bank to the projects cofinan-

ced with BADEA were from the International Development

Association (IDA). Out of the 36 projects co-financed

with World Bank, IDA alone participated in the finan-

cing of 27 projects. Co-financing activities also in-

volved IBRD and IFC but with a lesser degree than in

case of IDA financing (Annex 1).

1-4 The geographical coverage of co-financing activities

between the two institutions includes 27 countries in

East and West Africa in addition to one regional pro-

ject (CIMAO) which involved Togo, Ghana and Ivory Coast.

On the other hand, the sectoral distribution of co-fin-

anced projects indicates that out of the 36 projects 11

were in the agricultural sector, 2 and 4 in the indust-

rial and energy sectors respectively, while 18 were in

the infrastructure sector.

1-5 Cursory as it may be, the above review of World Bank/

BADEA co-financing activities, should serve as a use-

ful background against which the major cooperation

issues could be discussed, properly appreciated and

appropriately acted upon.

- 3 -

2. COORDINATION ISSUES :

2-1 Needless to note that the motivation for identifying

major issues relating to cooperation with the World

Bank is a felt desire on part of BADEA to improve wor-

king relations and to explore ways and means of inten-

sifying coordination activities. To this end, subjec-

ting previous experience to an objective scrutinj re-

veals that :-

i. There is a need for an enligthened exchange

of views on development strategies;

ii. There exists a room for further cooperation

in the field of project identification;

iii. There exists a room for closer coordination

in the field of mounting joint missions;

iv. There is a need for a continuous exchange

of views on project implementation problems;

v. There exists a room for cooperation in the

filed of projects' impact analysis;

vi. There exists a room for a much closer re-

lation in the filed of training, staff

secondment etc.

2-2 There is felt need for more dialogue between the

two parties on policies and strategies of develop-

ment with emphasis on national development plans

orientation, sectoral priorities, complimentarity

in development actions as well as cooperation L.

the field of Technical Assistance programmes. While

conceding that BADEA has not as yet articulated a

coherent 'development strategy' of its own, its

actions are nonetheless guided by its Article of

Establishment, and policy guidelines which spell

4-

out in general terms the sectoral priorities and

the modalities of financing and hence implicitly

a general approach to development. Added to this

BADEA entertains the guidelines of strategies to

development stipulated in Amman Strategy as well

as Lagos Plan of Action . It is to be noted

that Amman Strategy, as far as BADEA is concerned,

reiterates the role that BADEA could play in the

promotion of Afro-Arab cooperation specially with

regards to mobilization of Arab private capital

for investment in Africa.

The Lagos Plan of Action on the other hand offers

a comprehensive approach to development in Africa.

This approach compares with that of IBRD embodied

in the Accelerated Development in the Sub-Saharan

Africa

2-3 Identification of projects is one of the most cru..

cial stages of the project cycle which merits ut-most consideration by development financing instit-

utions. The experience of the World Bank in terms

of its physical and technical capacities in relation

to recognition, selection and definition of projects,

represents a potentially wide area of cooperation.

As such, therefore, a more regular and systematic

access to the World Bank's Project Briefs (PB) would

greatly facilitate the identification process for

* The league of Arab States, A Strategy of Joint ARABECONOaIC ACTION, TUNIS (1982)

** Organization of African Unity, Lagos Plan of Actionfor the Development of Africa, 1980 - 2000.

Accelerated Development in Sub-Saharan Africa : AnAgenda for Action, The World Bank, Washington D.C.,

1981.

- - 5 -

cooperating donors. According to official docu-ments of the World Bank "Project Brief (PB) is anintegral part of the process of project generationand design in the Bank. Normally the P.B. is pre-pared initially at the earliest feasible stage inthe project cycle, and is updated whenever the Bank'sknowledge of the project's definition or preparationis significantly increased. It is a working documentintended to define project concepts, issues, alterna-tives and critical steps necessary in the appraisalphase of project processing" . Such a type of coordi-nation and consultation in the early stages of theproject cycle will have its positive effects in broa-dening the scope of cooperation pertaining to co-fin-ancing between the two parties.

2-4 The experience in mounting joint missions, thoughlimited to certain type of missions, has proven tobe very useful.

Complimentarity of expertise required for such mis-sions is the prime objective of this joint endeavourwhile the effectiveness of early coordination by wayof early agreement on co-financing arrangements faci-litated through appraisal missions does not need moreemphasis. These will mainly include, settlement ofissues relating to:-

a) Lay-Out of the Projects' Financing Plan

In many cases, the role of some Arab Funds in

the lay-out of the projects' financing plans

considered for co-financing arrangements is

rather subsidiary if not non-existant. This

situation leads to relegating the role of

such institutions to a status of "gap-filling"

partners! This we suggest, is.a natural re-sult of lack of coordination at tne early stages

* The World Bank Mannual Circular, Washington D.C., 1978.

- 6 -

of the project cycle. As such, therefore, it seemsreasonable to argue that this state of affairs couldeasily be overcome by early coordination preferablyat the appraisal stage or immediately following it.Added to this, the presence of potential co-finan-cing at an early stage of the project cycle will makeit easier for them to improve on their financing pro-grammes in terms of priorities attached to projectsbased on their respective policies and hence take arelatively more active role in expediting projectpreparation for financing and implementation.

b) '.ioice of Projects' Components

In a number of cases related to co-financing of pro-jects there exists a problem associated with alloca-tion of projects' components among the financing ins-titutions. This problem has also emanated from lack,of coordination at an early stage of the project cycle.In many cases some Funds, which find themselves playingthe role of "gap fillers", invariably end up with re-sidual project components, rejected by promoting fin-ancing institutions, which do not fully portray theobjectives in co-financing the project. Recent casesof this nature relating to co-financing of projectsin Africa were hard to accept and were none-the-lessonly accomodated because of prior firm commitment tothe recipient country. Equally disturbing is therecent feeling that exists among some of the Fundsthat their allocations in a project are consideredby leading financing institutions as a "stand-by"contribution which will be resorted to only in caseof failure to firm up the financing plan previouslyconceived.

It is also worth mentioning that co-financing effortswhether by way of lay-out of projects' financing plansor choice of projects' components will assume a level

- 7 -

of mutual satisfaction when it reaches a stageof a two-way channel. Thus, for example, in thecourse of their development, newly establishedinstitutions would inevitably reach a stage ofidentifying and promoting some projects of theirown. The two-way channel would take the form ofconsidering participation in financing of suchprojects by other institutions, it being under-stood that institutions would subject such pro-jects to their own established technical feasi-bility and economic viability vetting mechanisms.Needless to note that this type of approach willnot only lead to establishment of a New "Coopera-tion Order", to coin a phrase, between financinginstitutions but will also enable such relativelynew institutions to proceed with the task of es-tablishing their own identities. The result ofthis two way channel approach, we suggest, willbe a much more" effective cooperation" which hasso far been an illusive goal of aid agencies.

2-5 One of the major problems resulting from defaults in pay-merits by recipient countries is the freezing of disburse-ments effected by lending institutions. The adverse eff-ects of this action on progress of project implementationare probably self-evident and do not need much emphasis.All donor agencies -are aware of this situation and fullyrecognize its implications on the overall development pro-cess. In other words, all efforts initiated by them throughcoordination of co-financing for the realization of the pro-ject are jeoperdised by 'freezing' actions.

On the question of defaults in payment by recipient coun-tries it is to be noted that .larger lending institutions,are probably in a better position in terms of influencingsuch countries to meet their obligations in a timely manner.It is in this context that donor agencies may find it bene-ficial to study these problems and explore ways and means of

- 8 -

solving them in conformity with their respective

policies and procedures of financing. The sens-

itivity associated with problems of defaults is

very well understood and appreciated but parallel

to this, the negative implications of freezing of

disbursements on project implementation are equally

obvious. In light of the above, a regular and pur-

poseful dialogue on such a problem is deemed to be

needful.

2-6 The objective of co-financing can be further ex-

tended beyond implementation activities imparting

of know-how on youngerinstitutions, from older ones,

to include in such areas as the preparation of com-

pletion report and impact analysis of co-financed

and other projects. Experience acquired by the World

Bank in this respect is highly needed to be extended

to some (Arab Funds) through interdonor Technical Ass-

istance arrangements. The mechanism of the proposed

Technical Assistance can be studied by both sides so

as to assure its effectiveness.

2-7 Cooperation between Arab Funds and World Bank could

be further reinforced through exchange of expertise

in the various fields of development finance. The

modalities of training that would be adopted for the

orientation of the proposed training have to emphasise

on-the-job training of Arab Funds Professionals. Eff-

orts already exerted by both parties in the area of

in-service training are fully acknowledged but the

scope of intensifying such efforts is still wide. It

is also worth noting that presently Arab Funds are

planning to make a start on joint training for their

own personnel and it is in this respect that the World

Bank , and other specialised agencies in the field

of training in-Development Banking, cooperation may be

envisioned. Referring once more to the "on the job"

* A number of Arab Funds cooperate with EDI of the World Bank fortraining of individuals as well as organization of "in house"training for the Funds' Staff.

- 9 -

training it is also worth mentioning that famili-

arisation and full awareness of mechanisms, pro-

cedures modalities of financing of the different

donor agencies may represent a useful channel for

the promotion of co-financing among them.

3. CONCLUDING REMARKS

3-1 As mentioned earlier the objective of the above

observations is to pave the way for further coo-

peration with respect to co-financing activities

between the World Bank and the Arab Funds. Exper-

ience has manifested beyond any doubt the validity

of the prevailing level of cooperation between the

two parties while at the same time such an exper-

ience has made it possible for laying hands on some

issues which could be, if properly addressed, ins-

trumental for the promotion of co-financing between

the two parties.

3-2 While the approaches to development leading to the

evolution of strategies to growth may be contro-

versial it is important to initiate discussions on

such approaches so as to narrow the gaps in outlook

relating to project priorities and selection. On

the other hand, the policy and procedural issues

pertaining to co-financing and which are operational

in nature are easier to resolve through such regular

meetings.

3-3 In conclusion, it is propably obvious to state that

the development process being dynamic in nature and

encompassing interwoven variables that are affected

by a complexity of parameters necessitates continual

revision and adaption of approaches, strategies, po-

licies and modalities. A corallary, that follows

immediately, is that exchange of views by way of

- 10 -

coordination will invariably enrich the revision

and adaption processes and will most certainly im-

prove our understanding of the complex issues involved.

4. AGENDA FOR ACTION

Following is a proposed immediate agenda for action

A. Cofinancing

- Joint country identification missions for

the preparation of economic memos, selection

of priority projects (list of countries to be

defined);

- Joint technical assistance identification

missions (sectors survey, feasibility studies

etc....);

- Joint supervision missions (selected projects);

and

- A programme for the preparation of PCR (list of

a maximum of 3 projects to be agreed upon).

B. Expertise and Training

- Secondment of experts (from the World Bank

Group) for the finalization of BADEA's Opera-

tional Manual, during the second hald of 1984;

- Secondment of World Bank Staff, (financial ana-

lysts, specialized engineers...etc) to assist

BADEA staff in appraisals, preparation of re-

ports and analysis of projects' impact.

- A programme for "on the job" workshops for a

group of staff from the interested Arab Funds

(second half 1984).

- 11 -

BADEA - WORLD BANK CO-FINANCED PROJECTS

( 1975 - DECEMBER, 1983 )

( MILLION US$ )

BADEA's WORLD BANK CONTRIBUTION

YEAR COUNTRY PROJECT TOTAL CONTRI- IBRD IDA IFC TOTALBUTION

Cameroon Douala Port 112.10 10.00 20.00 5.00 - 25.00

Congo Railways 335.00 5.00 61.00 - - 61.00

Ghana Ashanti Co-

Coa 21.90 5.00 - 14.00 - 14.00

Madagascar Road 38.36 5.00 - 22.00 - 22.00

1975 Niger Road 28.20 7.00 - 15.60 - 15.60

Senegal Livestock 12.60 1.60 - 4.20 - 4.20

Tanzania Maize 38.137 5.00 - 18.00' - 18.00

Zaire Water Supply 39.00 10.00 - 21.50 - 21.50

Regional CIMAO 284.00 10.00 60.00 - - 60.00

Total 909.297 63.60 141.00 100.30 - 241.30

Gambia Rural Dev-

elopment 11.74 3.30 - 4.10 - 4.10

Kenya Rural Deve-

lopment 35.70 5.00 10.00 10.00 - 20.00

1976 Sierra

Leone Power III 15.20 5.00 - 8.20 - 8.20

Upper Rural Deve-

Volta lopment 16.20 4.50 - 9.40 - 9.40

Total 78.84 17.80 10.00 31.70 - 41.70

Ghana Kpong Dam 265.877 10.00 39.00 - - 39.00

Madagascar Power 150.000 10.00 - 43.WG - 43.00

Mali Rural Deve-

1977 lopment 44.600 5.00 - 15.50 - 15.50

Senegal Port 23.700 7.20 6.00 - - 6.00

Total 484.177 32.20 45.00 58.50 - 103.50

Benin CotonouPort 1 46.00 4.60 - 1.1.00 - 11.00

1978 Burundi Road 24.00 6.00 - 14.00 - 14.00

Liberia Power 31.50 3.92 10.00 - - 10.00

Total 101.50 14.52 10.00 25.00 - 35.00

1979 Guinea Road 28.70 6.00 - 13.00 - 13.00

- 12 -

BADEA's WORLD BANK CO TRIBUTION

YEAR COUNTRY PROJECT TOTAL CONTRI- IBRD IDA IFC TOTALBUTION

Comoros Port 46.54 8.00 - 7.25 - 7.25

Senegal I.C.S. 210.00 10.00 19.00 - 25.00 44.00

1980 Sierra Agric.Leone Dev. 25.00 8.50 - 12.00 - 12.00

Total 281.54 26.50 19.00 19.25 25.00 63.25

Benin CotonouPort II 9.20 2.70 - 2.00 - 2.00

1981 Madagascar Forest Dev 34.00 8.00 - 20.00 - 20.00

Sao Tome Power 12.85 5.00 - 5.10 - 5.10

Total 56.05 15.70 - 27.10 - 27.10

Botswana Power 261.851 10.00 32.032 - - 32.032

Comoros Port 25.520 10.00 - 7.12 - 7.12

G.Bissau Port 47.40 10.00 14.00 - - 14.00

1982 Ivory Coast SoubreDam 507.00 10.00 50..00 - - 50.00

Rwanda Road 84.86 8.00 - 22.00 - 22.00

Zimbabwe Road 79.97 10.00 - 20.00 - 20.00

Total 1006.601 58.00 96.032 49.12 - 145.154

C.A.R. Agric.Dev. 51.20 1.92 - 10.43 - 10.43

Uganda LugaziSugar 62.851 8.00 5.62. 8.00 13.625

1983 Regional NangbetoDam 144.02 10.00 - 30.00 - 30.00

Guinea 3rd Hig-way 81.30 - - 15.00 - 15.00

Total 339.371 19.920 - 61.055 8.00 69.55

G. TOTAL 8286.076 254.24 737.057

* Zaire projects are excluded

9-25-83

Dr. Husein and Dr. Mamoun will attend meeting with Dr. Ayari

as well as Mr. Wapenhans.

HH

- : --...

1983 Annual Meeting Briefing Paper

Arab Bank for Economic Development in Africa(BADEA)

Background

1. BADEA was set up to strengthen economic, financial and technical

cooperation between African and Arab countries. It finances development

projects in Africa, promotes and stimulates Arab investment in Africa and

provides technical assistance to African countries. Founded in November

1973, it began operations in July 1975.

2. All members of the Arab League except the two Yemens, Somalia and

Djibouti are members of BADEA and provide its capital. BADEA's subscribed

capital on December 31, 1982 amounted to $738,250,000. The initial capital

was $291 million. In 1979 Egypt's membership was suspended because of

the Camp David Accord.BADEA lends to those member countries of the'

Organization for African Unity (OAU) which are not members of the Arab

League.

3. Total loans granted by BADEA during the first seven years of its

operations amounted to $459.7 million. The Special Arab Aid Fund for

Africa (SAAFA), which was incorporated into BADEA's capital in 1977, made

loans totalling $214 million. Total lendia incld-ing SA , oans amounted

to $738 million as of the end of 19 2.

4. The level of BADEA's operations had shown a declining tendency in

1979, but expanded slightly in 1980 and 81 and rose sharply in 1982. BADEA

is in the process of strengthening its organization and operational

capacity. Initially it depended on other institutions including the World

Bank, particularly through co-financing operations. In the past several

years BADEA appears to be trying to be less dependent on other institutions

and has also become more active in its role of promoting and coordinating

Arab investments in Africa. It also coordinated the Arab emergency aid

program for SAHEL countries in 1978 and completed a comprehensive study on

development prospects in the SAHEL and the role of Arab aid.

5. The Bank Group has had frequent contacts with BADEA at various

conferences, periodic exchanges of visits and continuing correspondence on

projects of mutual interest. Mr. Ayari, President of BADEA, and his staff

have visited the Bank on many occasions and annual consultations are held

to discuss cooperation and co-financing with the Eastern and Western Africa

Regions of the Bank. The Bank has also assisted BADEA in its staff training

program through EDI which has helped organize workshops for BADEA staff.and

in advising on the management of liquid resources.

6. During FY83, BADEA provided co-financing for the following Bank

/IDA supported projects.

Botswana Power I $10.0 million

Zimbabwe Highway I $10.0 million

Cape Verde Port $10.0 million

Central African Republic Rural Development $ 3.4 millionTOTAL $33.4 million

-2-

7. A record of all co-financing and activities with BADEA is given

in Annex II.

Items for Discussion

8. alla-Lo between BADEA and the Banks g6 . While the number

and amounts of co-financing have declined since B e first year of

operation, when nine out of BADEA's eleven operations were co-financing

operations with Bank/IDA, Bank/IDA co-financing is still important to BADEA

and will probably continue to represent a significant share of BADEA.

9. Mr. Ayari may wish to discuss the follow up on the Bank's

Sub-Saharan Africa report. The most recent BADEA annual report (Annex III)

is quite critical of the Bank's Sub-Saharan AfricaReort stressing the

d rences betweenitand the Laos Plan. Unfortunately it~1nterprets the

Ban s report as calling for de-industrialization and a pastoralisation of

the continent while the Lagos Plan gives emphasis to an autonomous and self

sustained economy. While you may not wish to enter into a detailed

discussion with Mr. Ayari on these points the following should be stressed:

a. The Bank has emphasized the need for increasing agricultural

exports to restore Africa's share in the markets. It has also

encouraged member countries to restore incentives and facilities

for food producers and financed many projects aimed at expanding

food production. The principal concern is the restoration of

adequate producer incentives in agriculture, indirectly those for

export commodities.

b. The Bank agrees with the long-term objectives of the Lagos

Plan of Action but stresses the priorities for the medium-term

and the need for growth particularly in agriculture to allow

countries to emerge from their present crisis.

c. The broad concerns of the Bank are now also shared by ECA

- the deteriorated global environment and prospects, the

failures of many past development programs and strategies of

African governments, the need for reducing the rate of population

growth. On energy policy ECA also emphasizes the need to keep the

energy intensity of GNP growth low and to use pricing policy to

induce efficient substitution of other domestic power sources for

imported oil.

d. In industry the Bank's Sub-Saharan Report envisaged a more

rapid expansion than in agriculture, initially based on efficient

import substitution, and on heavy reliance on the small scale

and informal sectors. In the present crisis situation the

emphasis surely must be on rehabilitation and full utilization of

existing capacity. Large scale expansion of capital intensive

new industries clearly cannot be justified economically at this

time.

-3-

10. Other issues which may be raised are cooperation in monitoring

missions and staff training. Mr. Gittinger of EDI recently visited BADEA

and was informed that BADEA would like to receive some help in the field of

economic analysis of projects but no specific requests have been received

as yet. If the issue is raised you may wish to assure him that the Bank is

quite prepared to consider a reauest for assistance to BADEA with its staff

training program. Mr. Ayari may alsorequest assistance in the preparation

i rcniiTanuals and in developing capacity for the evaluation of

development impact of projects supported by BADEA. You should ask Mr.

Ayari to present a specific request that could be considered by OPS and

OED, the most likely sources of assistance in this regard.

11. Biographical information on Mr. Ayari is given in Annex I.

12. - BADEA Joint Financing List Annex II.

Attachments:

EANVP09/22/83

BIOGRAPHICAL STATEME!T

Chedley Ayari -presidents Chairman and General Manager of the

Arab Bank for Economic Development in Africa

Mr, Ayari was born in August 1933 in Tunis. He holds the highest

French degree (agregation) in Economics and has a good command of English. His

professional career gAncludesc various posts at the Societe Tunisienne de Banque,

the largest bank in Tunis:i (1959), teacher and dean at the Law Faculty of the

University of Tunis (1967 to present), economic counsellor at Tunisia's

permanen mission to the UN (196-64). Dring this latter period, he chaired

UpCTAD' Industrial Committee (1962-1964) and was Alternate Executive Director

at the orld Bank Group (196419 65). in 1967, he was Director of the Center for

Economic and Social Studies and Research and was appointed in 1969 Secretary of

State for Planning- From 1970 to October 1971 Mr. Ayari was Minister of

Educaito, Youth and Sports,. From oM(arcb 1972 to 1974, he was Minister of thc

ENational Economy; he was appointed Planning Minister in October 1974- He was

appointed President Chairman and General

Manager of BADEA in late 1974.

08/83

A A

SUMMARY OF OPERATIONS WITH BADEA BY FISCAL YEAP

FY73-81

Fiscal No. of Amount

Year Operations (US$M)

1976 12 61.4

77 5 42.2

78 6 33.8

80 1 6.0

81 2 12.782 1 8.0

83 4 33.4

TOTAL 31 197.5

SUMMARY OF OPERATIONS WITH BADEA BY SECTOR

FY73-83No. of Amount

Sector Operations (US$M)

Agriculture & Rural Development 11 49.9

Industry 3 10.0

Power 5 43.7

Transportation 11 83.9

Water Supply & Sewerage 1 10.0

TOTAL 31 197.5

SUMMARY OF OPERATIONS WITH BADEA BY COUNTRY

FY73-83

No. of Amount

Country Operations (US$1)

Botswana 1 10.0

Burundi 1 6.1

Kenya 1 5.0

Madagascar 3 19.2

Rwanda 1 5.0

Tanzania 1 5.0

Zaire 2 14.4

Benin, Peoples Republic 1 4.6

Cameroon 1 10.0

Congo 1 10.0

Gambia 1 3.3

Ghana 3 23.3

Guinea 1 6.0

Ivory Coast 1 3.4

Liberia 1 3.7

Niger 1 7.0

Rwanda 1 8.0

Senegal 2 8.8

Sierra Leone 2 13.5

Togo 1 3.3

Upper Volta 1 4.5

Zimbabwe 1 10.0

Cape Verde 1 10.0

CAR 1 3.4

TOTAL 31 197.5

Excerpt from BADEA's 1982 Annual Report

Bringing Africa Out of th tRoad to Take.

In the course of the year under review the Bank has tried to

remain in close touch with ideas, theories and discussios concerning a

better perception of development problems and a more efficient

administration of aid and cooperation. Adaptation of conditionality in all

its forms, incltling both micro-and macr r teconomic. to the economic

circumstances of the borrowers, assistance for structural adjustment and

financing of- trade, are some of the themes currently dominating the

cooperation scene and which the Bank has been examining in a continuous

effort to improve its work. The malaise and disarray to which reference

has already been made should not lead us to abandon hope; rather than

abdicate, we should redouble our efforts, our thinking, our commitent and

our enthusiasm in discharging a task that calls for overcoming all the

barriers and problems standing in the way of progress among the

underprivileged nations, in such a way as to adjust and modify our actions

and objectives. In this respect the critical, scr! 4 toj which the

celebrated World Bank report on Afric was subjected in t eary uder

rve xpii M Furnt concern. BADEA for its part played an

actye role in most of the discussions held about the study, prepared by

Elliot Berg, an American expert on Africa, under the title of "Accelerated

Development in Sub-Saharan Africa: A Programme for Action. Challenged,

attacked and criticised by some, the Report has been saluted and applauded

by others. It has, together with the crop of counter reports, articles in

the press, commentaries, and discussions to which it has given rise,

undoubtedly broadened the knowledge of African realities. One will have

noticed, before making any comment on its contents, that the wide-ranging

document has provoked the most differences of opinion amongspecialists,

Africa experts and- organisations concerned with the Continent. Yet these

differences are, in the final analysis, positive and frutiful to the extent

that they shake up old theories, challenge accepted ideas and principles

and advance knowledge. The Berg Report, which was published at the end of

1981, was prepared at the request of the African Governors of the iorl

Bank. One will notice at once that it is not the state of affairs as

described by the Report which has provoked and nourished the controversy

but rather the choice and nature of the political and economic options that

it recommends. In other words, there has been little quarrel with the

diagnosis of the disease but a great deal with the remedies suggested.

There can indeed be no argument about such facts given in the Report as

these:

average annual growth rate of GNP per inhabitant in

Africa south of the Sahara was 0.8 percent between 1970

and 1979 (-0.3 percent in low income African countries)

against 2.7 percent in the developing countries as a

whole and 4.1 percent in industrialised countries;

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agricultural production fell by -0.9 percent a year in

the same period; annual exports declined by 3.5 percent

by volume; literacy rate remained below 28 percent in

1976 against 57 percent for the developing countries

life expectancy in the region in 1970 was 47 years

against 58 years in the developing countries as a

group, and 74 years in the industrialised countries;

population growth of 2.7 percent per annum between 1970

and 1979 was the highest in the world, with every

likelihoPd of being even higher in future as hygiene

improves and infant mortality declines. The population

explosion has meant that there are more people

- under-age in Africa than there are economically active

people and more consumers than producers;

projections of economic browth, including production

and exports, place Africa at the bottom of the league

table of world regions, leading to very gloomy

forecasts.

One of the fundamental conceptual criticisms made of the Berg

Report is that it am at d indutrIalisation (although the secondary

sector may still be in its infancy and a pastoal setio r o the

. "They want us to be a people of peasants and shepherds,

remarked a senior African official. In fact, the World Bank Report regards

agriculture as the sole prime mover of economicrw O e othen

the Lagos Plan of Action, adopted by the first African Economic Summit in

April 1980, and regarded by African countries, the OAU, the ECA and

regional and international organisations concerned with Africa, as the

chief reference material for economic planning in the next twenty years,

does not link growth necessarily with agriculture but considers It to be

conditioned by the nature and availability of natural resources.

The Lagos Plan thus appears to be offering an ideological concept

for development which is very different from that of the Berg Report.

Controversy has now centred around these two different views. BADEA for

its part has meanwhile embarked on a comparative study of the two

strategies, which are diametrically opposed to each other on a large nu:ber

of points.

The World Bank Report favours an outward-oriented economy based

on agriculture and specialised to supply external markets; the Lagos Plan

gives emphasis to an autonomous and self-sustained economy. The

specialisation recommended by the Berg Report is ostensibly aimed at

increasing export earnings required for the process of growth. This view

has been challenged, and with reason, as one knows fro= experience how

volatile and wjdely-fluctuating primary commodity prices can be, as one is

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aware of the menace of protectionism, manipulation of stocks by cartels and

marketing monopolies, worsening terms of trade, the impact made by

synthetic and other substitution products posing a constant threat to the

incomes of primary producers. Also criticised is the Berg Report's

insistance on a close relationship betweeen economic growth and increase of

GDP, as well as, if to a minor degree, its Ideological bias in favour of

private enterprise. Furthermore, several observers have resented what they

see as an imelied c s, in the Report to make an increase in exte

aid conditional on the imrpl&maati n of political and economic reforms,

including devaluation, the virtues of which are particularly .extold by

the document.

-Recommendations regarding industry, to which the Report allocates

a minor, -even marginal role, should be seen in context of the docuent' s

more-or-less explicitly-stated contention that the Continent ought to

remain a supplier of unprocessed commodities, practically devoid of any

value-added and dependent on external markets.

The content, options and recommended policies of the Berg Report

are in many ways totally opposed to those suggested by the Lagos Plan. One

advocates the view that no salvation can be sought other than by recourse

to the world at large; the other pleads for food self-sufficiency,

self-sustained development and regional economic integration.

WORLD BANK / INTERNATIONAL FINANCE CORPORATION

OFFICE MEMORANDUMTO: Mr. A.W. Clausen DATE: Oct. 13, 1981

Thru' Mr. E. St rn

FROM: Willi A. Wapenh4n

SUBJECT: Arab Bank for Economic Development in Africa (BADEA)

1. You are scheduled to meet with Mr. Chedley Ayari, President,Chairman and General Manager of the Arab Bank for Economic Developmentin Africa (BADEA) on Wednesday, October 14 at 5.00 p.m.. The attachedbrief provides background material on BADEA and biographical informationon Mr. Ayari who was reappointed last year to a second five-year termas President.

2. Mr. Ayari will be interested in the recent discussions of theSub-Saharan Africa Study particularly with reference to proposed nextsteps. He will have received a briefing on the Study prior to hiscalling on you. In its role of promoting and coordinating Arab investmentsin Africa, BADEA can help to mobilize support from other Arab funds inincreasing aid to Africa. You may wish to emphasise the need for closecoordination, the need to adhere to agreed priorities, and the need toincrease net capital flows to Sub-Sahara Africa on appropriate terms.To ensure effective use and maximum impact of additional capital flows,domestic policy reforms are inevitable.

3. To date, about 30 percent of BADEA's funds have been used forco-financing with the Bank Group. About 70 percent of BADEA's paid incapital and reserves have been committed. You may want to ask Mr. Ayariwhat his future plans for both capital increases and commitment levelsare. The Bank and BADEA have had frequent consultations to exchange in-formation on prospective co-financing possibilities. Both OPD and theTreasury Department have from time to time provided assistance to BADEAfor financial management and organization and procedures. Mr. Ayari willagain meet with the respective staffs during his visit to Washington.

4. Consistent with the Sub-Saharan Africa Study the Bank will en-deavour to increase cooperation with other donor agencies. This willmost likely mean more consultative groups and other aid coordinatingarrangements. The Western Africa Region is supporting an aid coordinationmeeting for Senegal which is taking place in Paris on October 19-24.BADEA and Arab Funds have been invited. BADEA can operate only in countrieswhich are not members of the Arab Fund for Social and Economic Development.Therefore BADEA is a member of all Consultative Groups in the EasternAfrica Region except Sudan. Meetings are planned for Mauritius, Tanzania,Uganda (and Sudan) sometime in the second half of FY1982. Eff-rts con-tinue in the Bank to improve communications and make project data morereadily available to potential co-financing agencies including BADEA.

2.

You may wish to enquire whether BADEA would be prepared to participate in

further aid coordination efforts and in the provision of well conceivednon-project assistance especially for sectoral operations.

Attachment

1981 Annual Meeting Briefing PaperArab Bank for Economic Development in Africa

(BADEA)

Background

1. BADEA was set up to strengthen economic, financial and

technical cooperation between African and Arab countries. It finances

development projects in Africa, promotes and stimulates Arab invest-

ment in Africa and provides technical assistnace to African countries.

Founded in November 1973, it began operations in July 1975.

2. All members of the Arab League except the two Yemens,

Somalia and Djibouti are members of BADEA and provide its capital.

In 1979 Egypt's membership was suspended. BADEA lends to those member

countries of the Organization for African Unity (OAU) which are not

members of the Arab League.

3. BADEA's subscribed capital on December 31, 1980, amounted

to $738,250,000. The initial capital was $291 million.

4. Total loans granted by BADEA during the six years of its

operations amounted to $383.63 million. The Special Arab AiVd Fund

for Africa (SAAFA), which was incorporated into BADEA's capital in 1977,

made loans totalling $214 million. Total including SAAFA loans amounted

to $598 million or about 70 percent of paid-in capital and reserves.

5. The level of BADEA's operations had shown a declining tendency

in 1979, but expanded slightly in 1980. BADEA is in the process of strengthen-

ing its organization and operational capacity. Initially it depended on

other institutions including the World Bank, particularly through co-finan-

cing operations. In the past several years BADEA appears to be trying

to be less dependent on other institutions and has also become more active

in its role of promoting and coordinating Arab investments in Africa. Also

the emergency aid program for SAHEL countries in 1978 took considerable

staff resources.

6. The Bank Group has had frequent contacts with BADEA at various

conferences, periodic exchanges of visits and continuing correspondence

on projects of mutual interest. Mr. Ayari, President of BADEA, and

Mr. Hadjeri, Director of the Operations Department, visited the Bank during

the 1980 annual meeting to discuss cooperation and co-financing with the

Eastern and Western Africa Regions of the Bank. At that time Mr. Ayari

expressed interest in obtaining assistance in strengthening BADEA's

organization and procedures. Subsequently EDI has assisted BADEA in

drawing up a training program.

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Issues

7. Cooperation between BADEA and the Bank is good. While the

number and amounts of co-financing have declined since BADEA's first

year of operation, when nine out of BADEA's eleven operations were

co-financing operations with Bank/IDA, Bank/IDA co-financing is still

important to BADEA and will probably continue to represent a signifi-

cant share of BADEA operations.

8. Biographical information on Mr. Ayari is given in Annex I.

9. BADEA Joint Financing List Annex II.

Attachments:

EANVP08/ 24/ 81

ANNEX I

BIOGRAPHICAL STATEMENT

Chedley Ayari - President, Chaitman and General Manager of the

Arab Bank for Economic Development in Africa

Mr. Ayari was born in August 1933 in Tunis. He holds the

highest French degree (agregation) in Economics and has a good command

of English. His professional career includes: various posts at the Societe

Tunisienne de Banque, the largest bank in Tunisia (1959), teacher and

dean at the Law Faculty of the University of Tunis (1967 to present),

economic counsellor at Tunisia's permanent mission to the UN (1960-64).

During this latter period, he chaired UNCTAD's Industrial Committee (1962-

1964) and was Alternate Executive Director at the World Bank Group (1964-1965).

In 1967, he was Director of the Center for Economic and Social Studies and

Research and was appointed in 1969 Secretary of State for Planning. From

1970 to October 1971, Mr. Ayari was Minister of Education, Youth and Sports.

From March 1972 to 1974, he was Minister of the National Economy; he was

appointed Planning Minister in October 1974. He was appointed President,

Chairman and General Manager of BADEA in late 1974.

09/79

ANNEX II

BADEA JOINT FINANCING WITH NA TIONAL AND INTERNA TIONAL INSTITUTIONS (1)OTHER THAN ARAB NA TIONAL AND REGIONAL DEVELOPMENT INSTITUTIONS AS A T

31-12-1980 (2)

(in $ m)

BeneficiaryProject Country B!ADEA ADBAF iBRD IDA IFC EDF EIB CCCE CDA SIDA SIFIDA FAC KFW DEG UNDP

1 Railway Angola 10.0 - - - - - - - - - - - - - 032 Pon Benin . 4.6 2.9 - 11.0 - 3-0* - 31 10-0 - - 1.5 - -3 Livestock Botswana i 2.2 - - - - 1.9 - -A Airport Bots ana 7.25 10.33 - - -- 966 - -SSewerage ~ Burundi 4.0 5.261 Highway Burund . 6.0 - - 14.0 - - -- - - - - - - 0.97 Pon Cameroon 10.0 12.7 25.0 5.0 - - - 34 29,0 3.4 7.7 - -EH hway Cameroon 9.0 13.0 - - - - - - -9 Te;cormmunja ions Conoros 1.57 - - - - 3.33 - -1 Po'i ~ Comnoros 80 6.0 - -11 Rairway Conoo 10.0 17.56 58.7 - - 51.7 - 21.95 166 2243 -12 Rj-a' devekpment Gambia 3.3 - - 4.1 - - - -13 Cocoa Ghana 5.0 - 14.0 - - -14 Ipong dam Ghana 10.0 - 39.0 - - 10.0 11.0 39.01E Highway Guinea 6.0 - - 13-0 - 4.01E Pura development Kenya 50 - 10.0 10.0 - - -17 A!port Lesoiho 6.0 104 - - - 345 - - -

E Hghway Lesotho 39 - - - - 3 55 - - -59Energy Lineria 392 - 1010 - - - 472? H;hway M-',~zsca- 50 - - 22.0 - - - -21 Energy * escar 10 .0 - 330 - - - - 136 220 - - -72 S'ngj bam Ma, 150 11.5 - - - 31.9 - 7.5 9 0 422 ;;e--& p-e- Mal 50 6 0 - 15 5 - - - 30 -. 36 -2' wnay Mai 10 0 10 0 -- -- - - - 17.2 - -

I fu S iCs100 - - - - - 100 536 - -IC 10 C, - - - - 1- - .6

27 hznw-ay -ae- 7.0 3.6 15 - --265rerg. *I - 70 67 - - - - - 163 - 5.0* 2 R'e osvelpmem Fwaeo 5C - - 14 0 - - - - 3 -X0 neg F Va"aj 61) - - - - 22.5 - -31 Lvestoc Senoea 1.6 - - 4 237.2 - 6C - - - -ec -n- --- -33 Chemica rniustr Spneg o 100 20 0 93 - 200 - 280 23 E - 10 -'4 Enerpv Sierra Leone ' 5 C - - S 2 - - -35 Agnulture

IxveioomenT Sierra Leone. 8 I - - 1210 -39Maim T anana 50 - - 160-37 Hichwa, Ilanzania 80 - - - - 14C3S CIMAD ceme logo Ghana

tactorn Worv Coast 100 120 600 - - 20 5 296 200 17 - - - 22 9 -39 Rural oevekopner1 Upoer Vota 45 - - 94 - - - - - - - 0f - - 0 44Z Water supp i Zare 100 60 - 21 ' - - - - - - - - - 141 Palm0 i Zarre 44 - 90 - - - 4 .

2ta:79.94 159.99 280.00 1909 0- 169.83 83 50 136.85 - 142 6 18 0 5 0 38 93 57.54 10 5 0BADLA financing 279.94 1137.25 88.12 88.9 10.0 83.27 43.92 103.20 696 1010 7 0 54 10 3720 10 39 00

BADEA contrinoution as percentageof tie other tinancong - 100 85.8 31.5 46.6 .50 49.0 52.6 754 48.8 55,5 140 139 64 7 100 772

(1) ADB. African Develooment Bank; ADF African Development Fund. IBRD Internpational Bank for Reconstruction and Leveiopment, IDA InternationaLevetopment Association; IFC. International Fanance'Crydtratun; ED#. Euroeanteveiopment Fund. EIB. European investment bank. CCCL Central f und icEconomic Cooperation. CIDA. Canaaman international Development Agency. SIDA: Swedish international Development Agency; SIF IDA international Financia'Company for investment and Development in Atica. FAC. Funo for jkssistance and Co-operation. KF W German bank for Reconstruction lKreartanstatt iu'Wieoeraufoau). DE G German Deveiopment CorporatioA. I4NE .UniiedNatlons b)eveIoment Frogrammf(2) Status of certain financial contrioutions is not yet confirmed Amounts representing the contrioutions of institutions ahocated in currencies otier than 5 ha.rveen convened in S counter-value as per oates of their allocation arqor comrfittmienI * ) EEC - SAF EEC Special Action FunC

57

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