Professional Documents
Culture Documents
CV MENA
In-a-Nutshell
Connecting Voices (CV) Middle East and North Africa (MENA) is a
regional initiative and partnership that promotes governance and
improved financial management practices in the public and private
sectors. The ultimate aim is to support the demands of citizens
throughout the Arab World for jobs, better governance, a voice in
public affairs, and social and economic inclusion as reflected in the
World Banks MENA Regional strategy. CV MENA plans to seize on the
windows of opportunity available in the region. It will support capacity
building in the area of governance, facilitate the development of a
professional community, as well as the sharing and transfer of
knowledge both within countries and within the region as a whole. CV
MENA will help foster greater transparency and accountability, thereby
engendering enhanced public trust. In addition, building public and
private sector governance and financial management capacity will also
help attract and provide comfort to much-needed foreign direct
investment in the region.
The Exchange is a major annual forum that provides a channel for dialogue,
enabling countries to share experiences and promote societal-governmental
consensus building. It fosters intra-regional cooperation and stimulates
interest in improving public sctor governance, public financial management,
and corporate governance and financial reporting in MENA. The Exchange
facilitates knowledge-sharing from transitional democracies and showcases
successful experiences from fragile and conflict states. The Exchange starts
where public sector and public financial management diagnostics leave off,
that is, in supporting the creation of an enabling environment for reforms to
move from concept to reality. It helps catalyze innovative activities to develop
regional public goods and enables the World Bank to fulfill its mission as a
Solutions Bank.
www.cvmena.org
cvmena@worldbank.org
Note: The posts in the Connecting Voices magazine should not be reported as representing the views of The World Bank.
The views expressed are those of the authors and do not necessarily represent those of the The World Bank or its policy.
Editors Note
Hisham WALY
Practice Manager
Governance Global Practice / MENA
The World Bank
From
Vulnerability
To
Resilience
The concept of VUCA volatility,
uncertainty, complexity, and ambiguity
was introduced in the late 1990s after the
end of the Cold War. It followed a shift
from a world of problems which
demanded
speed,
analysis,
and
elimination of uncertainty, to a world of
dilemmas which demand patience, sensemaking, and an engagement in the midst
of uncertainty. Volatility (the rate of
change), uncertainty (a lack of clarity
about the present situation and future
outcomes), complexity (a multiplicity of
key decision factors), and ambiguity
(conflicting interpretations) shape the
new normal in many parts of the world
where attempts to develop elegant,
immediate and complete solutions are
unrealistic, nave and even detrimental (1)
Today in the Middle East and North Africa
(MENA) region, we are living mostly in a
VUCA environment, where we are faced
with a diverse and discouraging picture
especially with Iraq, Libya, Syria and
Yemen mired in violent conflicts that are
devastating peoples lives, infrastructure
and national economies. Conflict
spillovers are also impacting neighboring
countries such as Jordan, Lebanon and
Tunisia. The transition countries of Egypt,
Jordan, Morocco and Tunisia are slowly
but steadily reforming their economies,
albeit in a context of anemic growth, high
fiscal deficits, rising youth unemployment
and security concerns. Also, low oil prices
are dragging down economic growth in
oil-exporting countries.
The Gulf
4
Resilient states exhibit the capacity and
legitimacy of governing a population and
its territory. They can manage and adapt
to
changing
social
needs
and
expectations, shifts in elite and other
political agreements, and growing
institutional complexity. (3)
Strengthening resilience thus demands a
twin-track approach. On the one hand, it
is important to create policies that place
resilience center stage (for example,
those that are based on an assessment of
the risks to which a country is exposed
and its relative vulnerability).
On the other hand, the adaptive capacity
needs to be reinforced so as to
strengthen a states inherent ability to
take decisions and renew itself in light of
changes in its environment ( for example,
at the subnational level). It is important
to note that there is a risk that too much
emphasis will be placed on the resilience
of state institutions while other sources
of resilience outside the state will be
ignored. (4)
According to a World Bank 2009 Policy
Note on The Global Economic Crisis:
Assessing Vulnerability with a Poverty
Lens, the capacity of governments to
cope with the impacts of the crisis on
poverty depends on: (i) the fiscal
capacity/space to incur an increased
fiscal deficit; and (ii) institutional capacity
to implement programs aimed at
mitigating the poverty impact of the
crisis. This includes the countrys
institutional abilities to manage the
budget process, design and implement
policies, provide services, and deliver
accountable and transparent government
5
Having sound public administration
systems, including civil service and public
financial management systems, can help
enhance Iraqs macroeconomic stability,
efficient allocation of resources, service
delivery and state-building activities.
These measures would help Iraq become
more resilient and better equipped in
handling future crises.
Notes:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Content
Public Financial
Management (PFM)
Corporate Governance
& Financial Reporting (CGFR)
08 Performance-Based Budgeting
Strengthening External and Internal
Accountability along Service Delivery Chain
19 State-Owned Enterprises
Numerous Reform Attempts,
but Limited Results
21 Audit Committees
The Significance of Audit Committees in
Improving Governance in MENA
Cover
Governance
Global
Practice
10 PFM Reform
Fragile-, Conflict- and
Violence-Affected Environments
22 Small & Medium Practices
SMP Quick Poll 2014 MENA
35 Overview
Centrality of Governance in
Sustainable Development
24 Integrated Reporting
Three Facts Every MENA Company Should
Know About Integrated Reporting
12 Procurement under
Public Private Partnerships
MENA Shares Global Knowledge
37 Interview
Mario MARCEL, Senior Director
Governance Global Practice
26 Sustainability Reporting
A Corporate Tool for Communicating
Sustainability Performance and Impacts
Public Sector
(PS)
14 Procurement
A strategy to rebalance implementation
support and institutional development and
capacity building
28 Civil Service
Behaviour Bias
15 Pathways to Fiscal
Decentralization
Challenges and Opportunities
30 Rule of Law
Its all about the Politics
33 Anti-Corruption
Role of technology
in the Fight against Corruption
7
Maghreb
Story
Unity
in
Diversity
41
51 Libya
Gulf
69 Kuwait
Supporting Kuwaits
Capital Projects
53 Morocco
More than Ten Years after Moroccos
Family Code Reforms
70 Islamic Finance
Introducing the Newly Launched (IASB)
Consultative Group on Shariah-Compliant
Instruments and Transactions
Events
74 Exchange
Integrated Reporting <IR>
43 Point-of-View
A Conversation about Governance
with the GGP Staff
Mashreq
59 Lebanon
Interview: Internal Audit Developments
61 Jordan
Working with Universities to Strengthen the
Accounting Curriculum in Jordan
46 Maarefah
Member
Face-to-Face Meeting
81 Maarefah
81 Solutions Lab
82 Bootcamps
62 Egypt
Launching Program and Performance
Budgeting in Egypt
Cross-Cutting
89 Books
65 KRG-Iraq
Interview: Supreme Audit Institutes
67 Iraq
Supreme Audit Institution Parlementary
Public Financial
Management
PBB 08
PFM Reform 10
Procurement 12
Decentralization 15
Performance-Based Bugeting
Strengthening External and Internal Accountability
along the Service Delivery Chain
Fabian SEIDERER
Senior Public Sector Specialist
Joey GHALEB
Senior Public Sector Specialist
Strategic Objectives
Every year, governments across the MENA
region spend billions of dollars for the
provision of key public programs and
services
to
foster
socio-economic
development. However, the results indicate
uneven outcomes across countries, sectors
and over time. Thus, both governments and
parliaments are now considering new ways
to: (i) improve the allocative efficiency of
scarce public resources to priority policies
and services; (ii) strengthen the operational
efficiency of public expenditures and
services; and (iii) improve the responsibility
and accountability for results across the
public sector. A forth objective is also gaining
momentum increasing fiscal transparency
and citizen voice/engagement in the
budgetary process. Demand for quality
public services and programs is increasing
even as governments operate in a fiscally
constrained environment. The public sector
is being asked to modernize its public
financial management systems in order to
strengthen fiscal sustainability, while at the
same time improving allocative and
operational efficiency and accountability for
results. In parallel, there is an increase in the
complexity of service delivery and financing,
further exacerbating the challenges of
existing management and accountability
frameworks. Performance-based budgeting
may be the answer, as it can help strengthen
both external and internal accountability
9
following dimensions: strategic budget
planning
and
budget
preparation;
programmatic
budget
classification;
program costing and budgeting; managerial
flexibility and responsibility of program
heads;
multi-annual
budgeting;
development of multi-annual performance
objectives and indicators (external and
internal);
performance
contracting;
performance monitoring and evaluation;
and information systems. Maximizing the
synergies of these mutually reinforcing
reform levers requires careful planning,
coordination and change management.
Experience shows that such complex reforms
require a sequenced iterative and adaptive
approach. Those involved in the process
should seek to avoid the capability trap1
during implementation or worse,
isomorphic mimicry,2 or giving the illusion of
change.
Fortunately, there is a wealth of knowledge
and
country
experience
regarding
performance budgeting, its components,
reform elements, and implementation
process knowledge and experience that
MENA countries can use.
countries where PFM systems are semiadvancedsuch as Lebanon and the United
Arab Emirates work can focus on themes
such
as
Medium-Term
Expenditure
Frameworks, gaps in the budget system law,
multi-year budgeting, and complete Chart of
Accounts classification. The TP can also
support countries that are considered to be
the most advanced in terms of their PFM
systems, such as Morocco and Tunisia. For
these, the TP can engage in program
budgeting,
multi-year
budgeting,
performance monitoring and evaluation, and
implementation support to the Ministries of
Finance as well as the line ministries.
1many
2)
Foster
and
support
country
engagement: The TP will coordinate
with staff on the agenda design and
implementation,
provide
quality
assurance through peer review, and
contribute to proposals (for example,
by sharing documents, providing
feedback, and transferring lessons
10
Michael SCHAEFFER
Senior Public Sector Specialist
Emmanuel CUVILLIER
Senior Public Sector Specialist
fragile/conflict-affected
environment,
especially because government revenues fall
significantly during civil conflict (IMF 2004).
General misuse of public financial resources
will undermine the credibility of any newly
installed government, as well as impede the
recovery of the private sector.
Can public financial reform processes
continue to take place in an environment
where political dynamics are in continuous
flux?
There are two broad schools of thought on
the matter of how rapidly reform progress
can be made even under the best of
circumstances in post-conflict environments.
Schick (1998) and others emphasize the
difficulty of short-term reforms, and the
need for internally consistent basic budget
structures that reflect their equally basic
public sector context. A second school of
thought looks at PFM reforms as having a
relatively clear end point that is achievable
within the scope and timeframe of
contemporary budget reforms. The IMF
(2004) affirms that fragile states must follow
a three-step sequence, starting with a
reformed legal framework, then establishing
a strong central fiscal authority, and finally
designing appropriate fiscal policies.
A critical feature of public financial
management intervention in FCV-affected
environments is to achieve a measure of
expenditure control, especially in low
capacity situations.
11
transparency and building stakeholder
interests; and
References
Figure 1: Public Financial Management Dimensions in Fragile-, Conflict- and Violence-Affected Environments
Context
High Reform Commitment
(High Incentives)
Middle Income
Intermediate Reform
Commitment
(High Volatility)
Low Income
12
Rachel LIPSON
Procurement Specialist
Ala AL-KAZZAZ
Procurement Specialist
Introduction: This article highlights the key
lessons learned from the workshop entitled:
Procurement Under Public private
Partnerships (PPP): A Learning Event for the
Water and Energy Sectors, held in Beirut,
Lebanon on October 13-15, 2014. The event
was organized by the Governance Global
Practice Team at the World Bank Office in
Beirut in coordination with the Public-Private
Partnership Cross Cutting Solutions Area
(GPCDR-PPP-CCSA). The event provided a
platform to expose clients to best practices
on PPP procurement, particularly in projects,
sectors, and countries with upcoming PPP
operations, as well as in countries that are
exploring the possibility of utilizing PPP
arrangements and are interested to learn
more about the approach and the legal
framework to support it.
Responding to client needs: The workshop
had its roots in the efforts of the Kurdistan
Regional Government (KRG) of Iraq to
modernize its legal framework for
procurement. This has been a long-term
engagement between the KRG and the
World Bank, as part of the Iraq Technical
Assistance and Capacity Building Fund
(TACBF). The program aims to build capacity
and develop practices to bring about more
efficient and effective management and use
of Iraqs public resources. Over the course of
this dialogue, PPPs emerged as an area of
particular interest and importance for the
KRG. The government viewed PPPs as a
critical opportunity to close both funding and
capacity gaps by collaborating with the
private sector to deliver needed public
services and infrastructure.
However, the KRGs current legal framework
does not provide an adequate foundation to
establish these kinds of long-term
partnerships and contracts. Understanding
the complexity of the subject and task, the
KRG Ministry of Planning made a formal
request to the World Bank for support on
this important topic. The KRG government
was interested in learning from international
examples of legal provisions for PPP
procurement. They also requested support
13
investors, and extensive client-facing
experience.
Sameh Mobarek, Senior
Counsel in the Energy & Extractives Global
Practice added a unique view that integrated
his PPP experience (including in the Morocco
Noor solar project) and combined legal and
power engineering training. The PPP CCSA
contributed
a
broad
international
knowledge of PPP and sector legislation and
regulation. The CCSA also shared valuable
resources with participants, including their
PPP Infrastructure Resource Center (IRC)
data base which features sample publicprivate partnership (PPP) agreements and
concessions, checklists, sample clauses,
terms of references, risk matrices, standard
bidding
documents
developed
by
government agencies and sample PPP
legislation. Finally, the staff of the MENA
region hosted the event, and provided
important
regional
knowledge
and
information to make the learning more
concrete for the participants.
The Importance of PPP for the MENA Region:
This workshop came at an important time for
MENA countries. Meeting the exponentially
growing demands for infrastructure will
continue to strain the pocketbooks of MENA
governments in the coming years.3 In the
Mashreq
countries,4
the
required
infrastructure investment for electricity
alone is estimated at US$ 130 billion by
20205. Quite simply, the public budget will
not be able to meet these needs by itself.
Therefore, PPP is becoming an important
project financing option for governments in
MENA to respond to the large financing
needs to improve infrastructure and service
delivery in water, energy, transport, solid
waste management and others. In some
cases, the public sector budgetary
constraints can mean that the only
alternative to a PPP project is no project at
all.
However, the infrastructure financing gap is
not the only reason why governments in
MENA have started to think more seriously
about PPPs. PPPs are often more effective
than traditional projects in delivering ontime and on-budget project implementation.
A European Investment Bank study found
that only three of ten PPP projects financed
by the Bank experienced time delay and cost
overruns (which were borne by private
contractor). In comparison, 60% of the 50
public infrastructure projects under
conventional procurement were more than
one year late.6 Similarly, a study of 50 large
public procurements in the UK found that
capital expenditure for the PPPs in the
sample was only 1% over budget, on
average, compared to an average cost
overrun of 47% for traditional procurement.7
Given this context, its not surprising that
MENA countries like Jordan, Morocco,
Oman, and Saudi Arabia have embarked on,
and
in
many
cases,
successfully
implemented PPP projects. Today we see
other countries like Egypt, Iran, Iraq and
Lebanon actively pursuing private sector
investment in infrastructure.
Unfortunately, though, many governments
in MENA have faced obstacles to successfully
procuring PPPs, including a lack of technical
know-how to implement these complex,
long-term arrangements, and outdated legal
and regulatory frameworks. Systemic
governance challenges are also prevalent,
and lack of transparency can open doors to
corruption as well as major delays and
inefficiencies. When the private sector
perceives that the system is not open and
fair, they are less likely to participate in the
bidding process. In 2010 an IFC Survey of PPP
14
The Road Ahead: This workshop was only the
beginning of a long work plan ahead for the
KRG. Implementation of PPP procurement
will have to be systematic and gradual,
starting with the current commitment to
promulgate a proper legal framework. To
ensure success, public officials will need to
recognize the potential need for private
participation, familiarize themselves with
other countries experience and establish a
national capacity building program on how
to plan and implement PPP agreements. All
documents/evaluation-of-the-demonstration-effect-ofifc2019s-involvement-in-infrastructure-inafrica/at_download/file
2See:
http://wwwwds.worldbank.org/external/default/WDSCo
ntentServer/IW3P/IB/2014/03/25/000158349_2014032
5092905/Rendered/PDF/WPS6810.pdf
3
http://www.worldbank.org/en/news/pressrelease/2014/10/09/world-bank-group-launches-newglobal-infrastructure-facility
4 The Mashreq countries include Iraq, Jordan, Lebanon,
and Syria.
5 Over the Horizon: A New Levant.
http://beta.cmimarseille.org/highlights/report-overhorizon-new-levant
6 http://www.eib.org/attachments/ev/ev_ppp_en.pdf
7http://www.parliament.vic.gov.au/images/stories/com
mittees/paec/201011_Budget_Estimates/Extra_bits/Mott_McDonald_Flyvb
erg_Blake_Dawson_Waldron_studies.pdf
Procurement
A strategy to rebalance implementation support and
institutional development and capacity building
Yolanda TAYLER
Practice Manager, PIO, GGP
In August 2014 the Public Integrity and
Openness Department (PIO) of the
Governance
Global
Practice
(GGP)
established a Task Force to design a
comprehensive and actionable strategy to
rebalance implementation support and
institutional development and capacity
building. The Transition Strategy is a
culmination of dialogues, contributions, and
advice from World Bank colleagues. It is bold
and ambitious while remaining grounded in
reality and what is feasibly possible. It seeks
to demonstrate that procurement is a
powerful tool that, when executed well, can
have profound, positive repercussions for
governance and inclusive economic growth
in countries. The Transition Strategy
envisions that this will be realized through
mainstreaming
four
Transformational
Engagements and creating Global Talent
Pools (GTPs).
15
Nadi MASHNI
Financial Management Specialist,
Lobna AHMED
Resident Advisor
16
Table 1: Fiscal Decentralization in Developed, Developing and Fragile and Conflict Countries
Triggers for
Decentralization
Country
Developed
Countries
Developing
Countries
Fragile &
Conflict
Countries
Pathway
Threats
Capacity concerns.
Elite capture and devolved
corruption.
Issues with Finance Follows
Function and unfunded
mandates.
Contest and confusion over
functions and mandates.
Low taxing powers as threats to
accountability.
17
arrangements
(both
revenues
and
expenditures), as well as developing better
systems for their management. While there
have been a number of reform efforts
conducted in conjunction with the World
Bank and the International Monetary Fund,
more work will be required to restructure
the country into a federal system.
No consistent
structure exists.
local
governance
18
19
Corporate Governance
& Financial Reporting
State-Owned Enterprises 19
Audit Committees 21
Small & Medium Practices 22
Integrated Reporting 24
Sustanability Reporting 26
State-Owned Enterprises
Numerous Reform Attempts, but Limited Results
Lydia HABHAB
Public Sector Analyst
The MENA region has seen the rise and fall
(and rise again) of State-Owned Enterprises
(SOEs) beginning as early as the 1950s. SOEs
play a dominant role in the region,
accounting for 20-25 percent of economic
value added and close to 30 percent of total
employment. SOEs span a wide array of
sectors including tourism, manufacturing,
transport, banking, public utilities, and retail,
to name a few.
Given the central and strategic role that SOEs
play in the social, political, and economic
fabric of the region, maximizing their
performance and efficiency could be a
potential entry point to addressing
challenges, such as high unemployment,
limited fiscal space, and lack of
competition all of which have been
exacerbated since the Arab Spring.
With regard to assessing performance and
efficiency, the latest World Bank study looks
at the governance structure of SOEs in four
MENA countries: Egypt, Iraq, Morocco, and
Tunisia.
The study analyzes the legal and institutional
framework of SOEs along four of the
Organization for Economic Co-operation and
Development (OECD)-formulated corporate
governance guidelines:
through
20
Moreover, in the MENA region, most SOEs
operate in a noncompetitive environment
and derive part of their revenues from a
monopoly situation. There is no pressure to
innovate,
compete,
and
increase
performance. Even given a monopoly
situation, many SOEs still operate at a loss
due to a vicious circle whereby a poor
governance system results in poor public
resource management. This can lead to
strengthened political controls, divesting
managers of responsibilities and further
weakened
management.
Increased
recapitalizations and/or subsidies would
then be given to keep SOEs afloat despite
the weakened financial and economic
situation and inefficiencies so the State
can achieve its social or political objectives.
In terms of a way forward, one must take
into consideration the broader political
context of operations, in order to make
reforms effective. It is important to avoid
institutional mimicry, whereby there is a
gap between what is on paper and what is
Table 1. Study Findings of Country Practices following OECD Guidelines (in law and in practice)
Egypt
Iraq
Morocco
1. State as Owner
(a.) Central permanent structure monitoring SOEs
(b.) Frequent Reporting on SOEs
(c.) Performance contracting between the State and SOEs
(d.) Monitoring of contracts
2. SOE Autonomy vis-a-via the State
(a.) Did not increase employment substantially in the last 2 years
(b.) No frequent recapitalizations or cross-subsidies
3. Corporatization and Boards
(a.) Independent board members
(b.) Board decisions not legally subject to minister's approval
4. Transparency and Disclosure
(a.) Financial statements published regularly without delays
(b.) Annual published reports on SOEs
Yes
Partial Implementation
No
Figure 1: Share of Total SOE Losses as a Share of Gross Domestic Product (GDP) in Selected MENA Countries
7.0
6.0
5.8
5.0
4.0
3.0
2.0
1.2
0.6
1.0
0.0
0.0
Egypt, Arab Rep.
Iraq
Morocco
Tunisia
Source: Authors calculations from World Bank (2015), Governance Reforms of SOEs in MNA: Limited Results Despite Numerous Reforms.
Note: Figures for Egypt, Iraq, and Morocco are for 2011; for Tunisia, 2007.
Tunisia
Audit Committees
The Significance of Audit Committees
in Improving Governance in MENA
Walid AL-NAJAR
Financial Management Specialist
Anna STASZEWICZ
Senior Risk Management Specialist
Audit committees, a common practice in the
private sector, central banks and stateowned enterprises (SOEs), play an important
role in effective governance.
They
strengthen oversight of financial reporting,
external and internal auditors, internal
control, risk management, and compliance.
Public sector entities have been establishing
audit committees or similar oversight
arrangements as a mechanism for improving
governance.
Since the Arab Spring, voices in the MENA
public and private sectors have being calling
for implementing transparent and effective
governance processes. The establishment of
audit committees was one of these requests.
Keen interest in the formation of audit
committees has been expressed by the
champions of development of the internal
audit profession in MENA. They appreciate
the importance of mutual reliance between
the audit committees and internal auditors
in the development of the internal audit
function.
Likewise, audit committees in organizations
without internal audit functions usually
support the development of the internal
21
22
disclosures from annual financial reports and
proxy statements to corporate responsibility
reports and investor presentations. Further,
they support the move from financial toward
integrated reporting. In this context, audit
committees for multinational companies
have been keen to consider macroeconomic
issues such as market turmoil, transfer
pricing, interest rates, as well as observe
global compliance issues.
Boards of directors and management might
need to look into the broadening mandate of
the audit committee, review its cost-benefit
analysis, rationale for the mandate
Riham HUSSEIN
Financial Management Specialist
The accounting profession plays an
important role in the growth and
development of any economy and high
quality accountancy services are needed by
both businesses and government. Small &
Medium Practices (SMPs) typically make up
a majority of accounting firms in a country.
These firms face unique challenges.
Recognizing the importance of SMPs and the
importance of understanding the issues that
face them, the Governance Global Practice
and specifically the Corporate Financial
Reporting (CFR) technical practice teamed
up with the International Federation of
Accountants (IFAC) SMP Committee to
collect feedback for the 2013 SMP Quick Poll
which IFAC conducts on an annual basis. The
2014 SMP Quick Poll results have also been
released which creates an opportunity to
23
Attracting new clients and retaining clients
were highly ranked as key challenges which
is similar to the prior year. Keeping up with
new regulations and standards was also a
key challenge identified in the current year.
Again, this is an interesting change from
prior year where only 7% of those surveyed
stated that as a challenge. This could also
mean that regulators in this industry are
more active and that SMPs are more aware
of the regulations they have to keep up with.
In The News
MENA Day at the Forthcoming World Banks Law, Justice and
Development Week in November 2015
Each year, the World Bank sponsors a Law, Justice and Development
(LJD) week that brings together partners of the Global Forum on Law,
Justice and Development (GFLJD), Bank staff and senior officials from
international financial institutions, international
practitioners,
government officials, lawyers, judges, scholars and representatives
from civil society.
Each year, LJD Week takes an in-depth look at legal, economic and
social developments in a particular country or region. This year, LJD
Week will focus on the Middle East and North Africa.
Possible themes to be discussed on MENA Day include:
24
Integrated Reporting
Three Facts Every MENA Company Should Know
About Integrated Reporting
Amy PAWLICKI
Director--Business Reporting,
Assurance & Advisory Services and
XBRL at the American Institute of CPAs
Raji HATTAR
Chief Sustainability and Compliance
Officer for Aramex
25
there are privately owned, and the majority
are small and medium-sized entities. There is
a common misperception that IR is designed
for large public companies. While many of
the U.S. companies that participated in the
IIRC's Pilot Programme on IR were large,
there is a growing excitement about IR
among many private companies in the
United States and elsewhere. IR helps
companies of any size better manage and
communicate with stakeholders, lenders and
customers and proprietors. In the United
States, Certified Public Accountants (CPAs)
are increasingly recognizing the value of the
IR framework in internal communications
and coordination across departments and
divisions to improve strategic planning and
decision making.
Organizations can also broaden their lens to
look at all forms of capital and how the
company's management of such capital
relates to its ability to create value in the
short, medium and long term. For CPAs in
industry, this richer perspective is also of
great interest in external reporting to
providers of financial capital and other key
stakeholders. For private companies, the
benefits of IR include improving external
reporting to creditors, so that they can
consider elements of IR in lending
decisions. (The IIRC is also preparing to
launch an IR public sector initiative.)
26
Sustainability Reporting
A Corporate Tool for Communicating Sustainability
Performance and Impacts
Shirley FORONDA
Financial Management Specialist
27
sustainability issues that most stakeholders
are concerned with, and to use globallyaccepted performance indicators and
methods for calculating performance and
reporting in a way that it can be compared
with peer organizations.
What is the future of Sustainability
Reporting?
Sustainability reports are stand-alone
reports currently disconnected from the
financials.
However,
as
economic,
environmental and social issues have an
impact on a companys ability to operate and
generate profit, it appears necessary to
ensure an alignment of business reporting
with business strategy. This helps to show
the
linkage
between
sustainability
performance and business value. To reach
this point, sustainability reporting needs to
move from a view that essentially shows the
relationship between a business, society, the
economy and environment to a more
integrated vision that can help stakeholders
understand how this relationship is being
managed, as well as the impact that this may
have on the creation of value and
sustainability of a business. Some advocates
of sustainability reporting believe that the
next step for sustainability reporting is for
this information to be combined into an
Integrated Report. As defined by the
International Integrated Reporting Council
(IIRC), integrated reporting or IR is a process
founded on integrated thinking that results
in a periodic integrated report by an
organization about value creation over time
and related communications regarding
aspects of value creation.4 This IR report
provides concise communication about how
an organizations strategy, governance,
performance and prospects, in the context of
its external environment, leads to the
creation of value in the short, medium and
long term.5 Regardless of the next steps that
Sustainability Reporting takes, what is sure is
New Paper
Economic Effects of the Syrian War and the Spread of the Islamic
State on the Levant
World Bank Policy Research Working Paper 7135,
By Elena Ianchovichina and Maros Ivanic,
December 2014.
This Paper uses a global computable general-equilibrium framework
with new detail on six countries the Arab Republic of Egypt, Iraq,
Jordan, Lebanon, the Syrian Arab Republic, and Turkey to quantify
the direct and indirect economic effects of the Syrian war and the
advance of the Islamic State on the Levant. Syria and Iraq bear the
brunt of the direct economic costs, while the other Levant countries
lose in per capita but not in aggregate terms.
The fact that the Islamic State's spread has undermined regional trade
adds in varying degrees to the direct costs in all Levant economies and,
in the case of Syria and Iraq, doubles the welfare losses. All of these
countries are foregoing opportunities to expand intra-Levant trade
and the associated gains in economic efficiency and diversification.
The average welfare effects are not indicative of within-country
incidence, which varies among workers, landowners, and capitalists.
For the entire Paper, see:
http://documents.worldbank.org/curated/en/2004/12/22316371/ec
onomic-effects-syrian-war-spread-islamic-state-levant
28
Public Sector
Civil Service 28
Rule of Law 30
Anti-Corruption 33
Civil Service
Behaviour Bias
employment agencies, or encourage people
to take out supplementary pensions etc., all
of which should be done at minimal cost4. In
the UK, for instance, it has been shown how
a letter sent to people who were overdue
with their income tax payments mentioning
that most UK taxpayers paid their taxes on
time reduced the number of late payers by
an average 15%. Social norms have a big
impact on taxpayers behaviour.
How is it relevant to the design of public
reforms?
Gal RABALLAND
Senior Public Sector Specialit
How behavioural biases are important for
civil service reforms?
Neo-classical economic models are based on
the economic rationality of individuals.
However, laboratory experiments show that
rationality is often limited, especially from
choices made in the face of risk and
uncertainty. These results have therefore
demonstrated the importance of taking
account of the cognitive limitations of
individuals, the role of emotions in making
decisions, and the influence of social
interactions on individual choices. The 2015
29
reform that is synonymous with significant
short-term risks. Behavioural economics also
teaches us that the individual, by simplifying
reality, often suffers from being too
optimistic, that is, individuals always think
they can do more than they actually can.
Thus, in a context of public sector reform,
bureaucrats and donors have a chronic
tendency to be over-optimistic about what
can be done. And so, together, they may lay
down a huge programme of reforms but it
will only be partially implemented and, at
the end of the project, the blame will often
be placed on a lack of political will rather
than on the fact that the programme was
overly optimistic in the first place. Similarly,
experiments demonstrate the dynamics of
groups. Group decisions can diminish
collective well-being because groups form
around shared individual interests which
they then defend and are more rational than
individuals. For instance, in trust games
groups send and return lower amounts of
money than individuals. Finally, behavioural
economics demonstrates the importance of
cultural norms and of the impacts of
reputation: individuals take decisions in a
specific socio-cultural environment and have
to take account of their reputation in that
environment when doing so, which can
greatly bias their decisions. A decision which
may appear irrational at first sight can, on
the contrary, be totally rational in view of
these factors. Non-financial incentives and
building good reputations for certain officials
is also crucial. It is increasingly becoming
clear that officials in public administrations
often have motivations which differ from
those in the private sector, and that the
feeling of being part of a State elite and being
recognized as such is very important. Hence,
communication campaigns (internal and
external) must be fully-fledged components
of reforms to give credit to the reformers of
the institution. There is often a
disproportionate focus on the issue of
wages. Although financial incentives are one
element, they are not the only element.
Social recognition within the institution and
outside count as much. Behavioural
economics is important because it reminds
us that an institution it is made up of
individuals. Thus, the simple fact of setting
up an institutional structure does not mean
that behaviours and practices will change.
For example, the fact that an autonomous
agency integrating Customs and taxation is
created does not mean that the services will
cooperate. The fact that post-clearance
control appears on an organizational chart
does not mean that it actually happens in
practice, etc. there are countless potential
examples. Therefore, any reform process has
to identify the behaviour of an individual in a
given context then seek to change it (at the
margin), which is obviously much more
difficult than creating a new institution on an
organizational chart. In practice, these
concepts are very relevant both for decisionmakers and for donor representatives.
The potential consequences on donorfunded civil service reforms...
As mentioned in the World Bank strategy on
public sector reforms (World Bank 2012), it is
challenging to change the actual behaviour
of public agents since they may be built on
beliefs/social norms that change slowly.
Most of the time such behavioural biases are
not even considered as actual constraints for
projects design and implementation.
However, as Varun Gauri, one of the codirectors of the WDR 2015, mentioned:
sadly, we ourselves development
professionals are not exempt from this
universal phenomenon [of behavioral
biases]. In our survey of World Bank staff,
which many staff members were game
enough to participate in, the WDR team
found that we, too, are susceptible to
confirmation bias, sunk cost bias, and other
cognitive illusions. In addition, our models of
how poor individuals think and behave are
sometimes inaccurate7.
First, it is important for donors
representatives to remember that people
have mental models consciously or
unconsciously influencing their thoughts,
perceptions and actions, and that the
transposition
(or
implementation
/
application) of international best practices
may very well not work in another context.
Thus, it is important not to simply think that
an institutional model which works in
country A will also work in country B. That
does not mean either that some principles of
reforms do not apply but the best practices
cannot be transplanted as such in various
countries. Moreover, to achieve successful
30
diagnosis and experimentation so that
evidence can feed back into midcourse
adaptations and future intervention
designs. (World Bank 2014, p. 193).
However, this is easier said than done but
should be increasingly taken into account to
make more successful aid projects in this
field of public sector reform projects.
1. http://www.worldbank.org/en/publication/wdr2015
2. http://blogs.worldbank.org/developmenttalk/story2015-world-development-report-mind-society-andbehavior
3. See the website of the UK behavioural insights
team:
www.gov.uk/government/organisations/behaviouralinsights-team.
4. Benefits for the State must be more than 10 times
higher than their cost in the UK.
5. Behavioral Design - A New Approach to Development
Policy, CGD Policy Paper 16, available at
www.cgdev.org/files/1426679_file_Datta_Mullainathan
_Behavioral_Design.pdf.
6. For more details on those biases, see the WDR 2015.
7. http://blogs.worldbank.org/developmenttalk/story2015-world-development-report-mind-society-andbehavior
8. Raballand, Gael and Rajaram, Anand, 2013. "Behavioral
economics and public sector reform: an accidental
experiment and lessons from Cameroon,", Policy
Research Working Paper Series 6595, The World Bank.
Rule of Law
Its all about the Politics:
Laws, Policies and their Implementation in MENA
Edouard AL-DAHDAH
Senior Public Sector Specialist
Rule of Law Definitions
The rule of law is a multifaceted concept that
has taken time to gel. In their recent survey
of the rule of law and development,
Trebilcock and Daniels differentiate between
thick and thin definitions. With thick
definitions, the rule of law is viewed as the
backbone of a just and open society. The
open-access order theory of North, Wallis,
and Weingast (2009) provides a good
example: the rule of law ensures open
access and equality of opportunity for
individuals in the political, economic, and
social domains. Thin definitions of the rule
of law focus more on specific laws and
institutions, as well as on their beneficial
effects on economic outcomes. These rules
do not have to be just or promote open
access; their positive impact comes from the
fact that they regulate human interactions,
thus promoting better coordination within
society. Property rights are a prime example
of this.
The Rule of Law in the Middle East and
North Africa
The MENA region performs poorly on rule of
law measures for developing countries. With
the exception of the United Arab Emirates,
all MENA countries rank below the
developing country average for all aggregate
measures on the rule of law according to the
Global Integrity (GI), an international NGO
(Table 1). The average for the aggregate
Overall Score was 50 in MENA as opposed
to 67 for all other developing countries.
Going beyond aggregate indicators, it is
analytically useful to distinguish between
formal rules on paper and their application
on the ground. Nobel Prize winner Douglas
North (1990), for instance, defined an
institution (or a law) as the combination of a
formal rule, an informal norm, and an
enforcement mechanism. All three are
needed simultaneously in order for a formal
31
Conversely, if a rule, law or regulation
provides concrete benefits to entrenched
political stakeholders, it is more likely to be
systematically implemented. This approach
builds on the assumption that he adoption
and implementation of formal rules is always
the outcome of negotiations and struggles
between converging or opposing interests,
and often results in some actors losing out
for example in situations where corruption
and rent extraction are used as a means to
support powerful interests Consequently,
the identification of specific political
economy variables that determine which,
whether and to what extent laws are passed,
applied and enforced is necessary to better
understand the rule of law and its influence
on economic development outcomes.
Numerous quantitative and qualitative
studies found that the following factors
affect governments willingness or the
incentives of leaders to pass and enforce the
rule of law:
a)
The citizens willingness to comply
and the governments anticipation of it: In
some cases, leaders deliberately decide not
to enforce rules and regulations because, in
the absence of bureaucratic capacity, they
cannot take political credit for tangible and
visible policy outcomes (Tsai, 2001). Other
times, the lack of willingness to enforce
comes from pragmatic policy calculations of
anticipated low societal compliance with the
law (Tsai 2007, 2010; Von Oenen 2001;
Yashar 2005; Mares and Carnes 2009).
b)
The nature of the regulatory
agency and the type of service it delivers:
the international visibility of the
enforcement agency is likely to drive
effective enforcement. Similarly, its location
in the policy domain is expected to lead to
better implementation. If the agency
governs an economic sector perceived as
vital for the state, applicable laws and
regulations are more likely to be
systematically enforced (Schrank 2009,
Gingerich 2007, Hydemann 2004, Hibou
2006). The MENA region seems to be
particularly well-suited for a test of these
hypotheses. The tourism industry is central
to the economies of Egypt, Jordan, and
Morocco, whereas Tunisia developed
different regulatory regimes for on-shore
and off-shore investors, the latter
contributing significantly to economic
growth.
c)
The threat of collective action from
key groups in society: one of the most robust
results in political economy argues that
policy outcomes often favor powerful groups
who can effectively mobilize and lobby, to
the detriment of the diffuse interests of
ordinary citizens. A similar logic is likely to
apply in the case of law enforcement; if elite
groups organize effectively and resist
regulatory implementation, governments
may not be willing to go against them
(Lieberman 2003, 2009; Levitsky and Murillo
2009).
d)
Political survival considerations
and regime type: in non-democratic regimes,
Table 1
Country
Year
Overall Score
Legal Framework
Score
Actual
Implement.
Score
Implement.
Gap
2009
2011
2010
68
57
56
63
67
66
68
46
46
-5
21
20
West Bank
Qatar
2010
2009
57
42
73
41
41
38
32
3
Algeria
Egypt
2011
2010
54
54
68
70
37
34
31
36
Iraq
Syria
2008
2009
53
29
75
35
32
16
43
19
Yemen
Kuwait
Tunisia
2010
2008
2008
33
55
45
44
15
29
50
60
37
23
67
84
50
34
MENA Average
Other Developing Average
2011
32
In the News
An Additional US$77 Million in Budget Support
to the Palestinian Authority
PRESS RELEASE (source: World Bank.org)
WASHINGTON, May 20, 2015 The World Bank transferred today an amount of about US$77 million to the Palestinian Authority from the
Palestinian Reform and Development Plan Trust Fund (PRDP-MDTF), a multi-donor budget support mechanism administered by the Bank. The
funds contributed by the governments of Norway, Australia, Japan, Kuwait and the United Kingdom, will help support the urgent budget needs
of the Palestinian Authority (PA), providing inter alia support for ongoing macroeconomic and public financial management reforms. The World
Bank PRDP Trust Fund was established on April 10, 2008, through an agreement signed between the World Bank and the Palestinian Authority.
It is a central component of a World Banks effort to support the ongoing Palestinian Reform and Development Plan. Currently, the PRDP-MDTF
donors are the governments of Australia, France, Kuwait, Norway, the United Kingdom, and Japan. With the new tranche release, the PRDPMDTF will have disbursed about US$1.36 billion.
For further information on the PRDP MDTF and the World Banks program in the Palestinian Territories, please visit: www.worldbank.org/we
New Report
Plunging Oil Prices Bring Gains and Losses to MENA
Yemen and Libya are among the most vulnerable oil producers, while
Iran and Iraq could experience a worsening of the oil trade balance
(net oil exports) in excess of 10 percent of GDP in 2015. The oilexporting countries of the GCC are in a much better position due to
their ample reserves, but they too could endure over a US$215 billion
loss in oil revenues more than 14 percent of their combined GDP.
The oil shock could threaten the ability of some of the oil exporters
to meet domestic spending commitments, said Lili Mottaghi, World
Bank MENA Economist and the author of the report. Their options
include drawing down reserves, accumulating debt, and cutting
spending on fuel subsidies and public-sector salaries.
Oil importers such as Egypt, Jordan and Lebanon face a risk as their
economies receive large flows of remittances and aid from the GCC.
However, based on previous episodes, the MENA Quarterly Brief
concludes that lower oil prices will likely lead to slower growth, but
not a decline in remittances.
For more information, see the World Banks Quarterly MENA Brief:
http://www.worldbank.org/en/region/mena/publication/menaquarterly-economic-brief-january-2015-plunging-oil-prices
33
Anti-Corruption
Role of Technology in the Fight against Corruption
by Victoria Lemieux,
Senior Public Sector Specialist GGODR,
professor, the university of British Columbia
.
134
.2013 - 2012
.
/ 2014
.
.
:
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.
.
.
.
.
.
: ISO15489
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.
:
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:
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.
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Supervizor
.
34
Cover Story
Governance
Global Practice
Overview 35
Interview 37
Perspectives 41
Points-of-View 43
Maarefah 46
35
Overview
Centrality of Governance in Sustainable Development
The recognition that governance is a
key element in sustainable economic
development has been gaining in
ascendance. As part of a recent
World Bank Group reorganization into
14 Global Practices (GPs) and 5 CrossCutting Areas, governance has
assumed a central role. The new
Governance Global Practice (GGP) is
the largest of all of the new GPs,
bringing together professionals in
procurement, financial management,
taxation, public sector management,
regulatory policy, transparency,
digital
governance,
law
and
development, anticorruption, and
social accountability to develop
innovative, integrated solutions to
governance
and
institutional
challenges.
In our cover story we present an
overview of the new GPs, including
the GGP; an interview with Mario
Marcel, Senior Director of the Governance Global Practice; as well as Senior Management and Staff views and perspectives on governance and
its role in economic development in general, and with respect to the World Banks twin goals of eliminating extreme poverty and boosting shared
prosperity, in particular.
36
The New Governance
Global Practice
Good governance is at the
heart of the development
agenda so it is an integral
part of the World Bank
Group's twin goals of
ending extreme poverty
and
boosting
shared
prosperity.
The
new
Governance
Global
Practice (GGP) aims to
support
countries
in
building open, effective,
and
accountable
institutions for inclusive
development. In this
context, the GGP will take
a new, more inclusive
approach to governance
issues by concentrating on
the fundamental aspects
of
the
engagement
between
public
institutions and citizens.
This approach will place
increased emphasis on
engaging citizens and civil
society organizations as
part of the solution, and
focus on the political
economy
aspects
of
development,
including
transparency and social
accountability, which will
lead to improved design of
institutional reforms. The
GGP
brings
together
professionals
in
procurement,
financial
management,
taxation,
public
management,
regulatory
policy,
transparency,
digital
governance, law and
development,
anticorruption, and social
accountability to develop
innovative,
integrated
solutions to pernicious
institutional
problems.
Governance is the Banks
largest and most diverse
GP, bringing together
roughly 770 staff in 97 countries, and
providing lending, fiduciary, knowledge,
advisory, and technical assistance services
(including Economic and Sector Work,
Reimbursable Advisory Services, and
Technical Assistance).
The practice utilizes a problem-driven,
diagnostic approach, combining global
37
Interview
Mario Marcel
Senior Director - Governance Global Practice
By Manuel Vargas,
Lead Financial Management Specialist
CV MENA: Please share with us some of your
reflections as a leader of this new global
practice in these first few months.
Mario Marcel: I would say that when I came
onboard, I felt the weight of the responsibility
because the Governance Global Practice
represented one of the most substantial
changes from the previous structure of the
World Bank. Therefore, we had a number of
challenges that perhaps other GPs did not
have in terms of building a cohesive team,
creating an agenda, and updating the Bank's
narrative on governance issues. I would say
that during this time, even though there were
so many things that were necessary in terms
of dedicating time to organization, resources
and so on, I became very impressed with the
reach of the Bank across different countries,
regions, and cultures and by the wealth of
knowledge that our staff have. I have worked
with very capable teams in different places,
but in terms of being able to have a deep
discussion on many governance issues, I feel
that the response that I am getting from our
Bank colleagues is extremely heartening.
CV MENA: The two goals of the World Bank
are to end extreme poverty and to boost
shared prosperity. How do you see the links
between these objectives and the
governance agenda?
Mario Marcel: I would say that the
governance agenda has to do with basically
two things. It has to do with the ability to
deliver public policies, and with the capacity
to build inclusive institutions. I think that the
main connection with the poverty reduction
goal is in terms of the need to mobilize
resources and capabilities to provide better
services to the poor. The impact of good
institutions is very significant when it comes to
addressing inequity and contributing to
inclusive development. Institutions can
overcome the kind of divisions that are
sometimes generated by market forces. When
citizens come to these institutions,
independently of their wealth and power or
influence, it represents a huge difference in
terms of inclusive growth.
CV MENA: When looking at the global
perspective beyond the World Bank, what
should be done to give governance more
weight in the development agenda?
38
when we do this, we will discover new
perspectives in the work on audit of which we
were not previously so much aware. These
may in turn feed into the kind of projects that
we support in client countries. Similarly with
any of the other issues, including also our role
with regard to the ability to integrate these
different elements, when citizens interact
with public institutions, they do not see
human resource management, audit, or
procurement. They may be seeing whether
governments are being fair, or whether they
can be trusted. I think that combining and
integrating citizen perspectives opens up a
whole world of new issues and ways of
articulating governance responsiveness.
CV MENA: Regarding the Banks Governance
Global Practice specifically, you mentioned
some of the new challenges of bringing
different groups together. How are you
tackling these initial challenges?
Mario Marcel: Indeed, this Global Practice is
more diverse in its original configuration
because we are not the immediate successor
of anything that existed before. People usually
refer to the three big strands of work related
to procurement, financial management and
public sector management. However, this
Global Practice goes beyond these three
functions. It comprises eight different groups
because we also have colleagues joining us
from the Legal Department, the World Bank
Institute, and others. So, there is actually a
large diversity. In terms of our global
footprint, you will see that we are also the
most decentralized of all 14 GPs. To me,
diversity and decentralization are two very
positive elements. However, they are also
important challenges because in order to
build cohesion and make diversity and
decentralization work for better outcomes,
we need ways of building dialogue and
knowledge inside of the Global Practice. This
has been the focus of a lot of my attention
over these first few months. I think that one
important part of this is building a new
narrative for the Bank on governance issues.
Previously, the Bank lacked such a narrative.
We had the strategy on public sector
management, on financial management, and
the governance and anti-corruption (GAC)
agenda. However, in terms of having a
narrative that is able to integrate all of these
different elements and connect with the
development challenges, I think that it is now
a very central part of what we are trying to do.
Integration has an administration perspective
and dimension. It has a cultural dimension
too, but also a dimension in terms of the
substance of what we do and how we organize
ourselves to deliver results.
CV MENA: The governance agenda is quite
vast. How do you ensure that there is
prioritization and focus in terms of what the
Governance Global Practice delivers for the
Bank and its clients?
39
CV MENA: Building upon the structure and
the narrative of the Governance Global
Practice, how do you see these efforts being
reflected in terms of the services that are
provided to clients? What would you like to
hear from the clients in terms of how they
perceive the services received from the
Practice?
Mario Marcel:
I have been a client of the
Bank and other international organizations, so
I can articulate this from the perspective of
what I saw from that role. Normally, one seeks
a couple of supporting mechanisms from
international organizations.
One is to help you frame
problems and link these to
solutions. Sometimes, as a
policy-maker one is trying to
resolve
something,
but
perhaps not seeing all the
perspectives and solutions.
One is not aware of the
alternatives to address them. I
think
the
international
organizations
and
development institutions may
be especially helpful in this
regard. The second element,
which is particularly strong
with the World Bank, is the
ability to mobilize global
knowledge to address local
needs. Policy-makers do not
have the time or political
space
to
experiment.
Sometimes they cannot afford
to innovate completely. Also,
the penalty for failure is too
big. Therefore, the Bank can
be an asset in providing global
knowledge, of knowing what
others have done that works or does not
work in a specific area. Now that we are
organized globally, we can mobilize our staff
across the world. This was not easy in the
previous structure. Now, we may need to look
even beyond our own knowledge base of
operations, because not everything happens
through us. We need to reach out and learn
from those valuable experiences and then use
this knowledge in support of our clients. This
is why I also attach great importance to
supporting policy networks at the regional and
global levels as a way of engaging with policymakers, enabling them to share with us
experiences beyond their direct involvement
with the Bank.
CV MENA: Regarding the MENA Region, as
you know very well, many countries are
affected by vulnerability, uncertainty, and
conflict.
What are your thoughts on
advancing governance reforms in such
difficult circumstances?
Mario Marcel: MENA is a region that faces
many challenges. It has undergone major
political changes in the last few years, changes
that will continue for some time. We do not
40
constructive cooperation. They articulated a
need to invest in systems, knowledge, and
capacity. The Bank is seeking to meet these
needs.
CV MENA: Is there any other message that
you would like to convey to the governance
community?
Mario Marcel: I would say that one of the
problems that the governance agenda has had
over time is that it tends to be subject to
certain waves. It ascends in the development
agenda, and then a few years later it goes
down again. I have seen that, over time, one
of the big challenges that we face is how to
build a consistent governance agenda that is
able to withstand these trends, that is, how
we can remain engaged in a more systematic
way over time. Regarding the Sustainable
Development Goals (SDGs), many actors in
this process have been very actively
supporting the inclusion of governance. I
foresee that governance will have a much
greater role and recognition that it had with
the Millennium Development Goals (MDGs).
This will be a great opportunity to update our
agenda, and to maintain awareness about
working on governance issues in a sustainable
way, so that it does not get lost or replaced in
years to come.
OUR MISSION:
Support countries in building open, effective, and
accountable institutions for inclusive
developement.
DELIVERY STRUCTURE:
1. Region Focused: Practice Managers and Teams
2. Global Solutions Groups (Technical Streams)
3. Global programs and partnerships supporting
Regional Practice Managers and the Global
Solutions Group
4. Cross support to all Global Practices and Bank
portfolio;
5. Collaboration and joint operations with other
Global Practices
41
Steven Schonberger
Practice Manager, Water Global Practice:
Governance matters because it is the basis
for trust between government and the
citizenry and amongst the citizenry. When
people believe that others are acting fairly,
they become constructive participants and
contributors to development.
When
governance is broken, everyone believes
they are justified in focusing only on their
immediate, narrow personal interests
even at the expense of others and the
basic collective action needed to build a
healthy and wealthy country is impossible.
Therefore, it is particularly important to build
confidence in good governance amongst
young people, who naturally tend toward
collective action, and whose energy and
impatience inevitably drive a countrys
development.
Nadir Mohammed
Country Director, MNA Strategic
Cooperation Department:
Eileen Murray
Country Manager, Tunisia:
Ferid Belhaj
Country Director, Iran, Iraq, Jordan,
Lebanon, Syria:
42
Governance matters for it is the only
sustainable
path
to
sustainable
development. The rule of law, transparency
in transactions, open and predictable due
processes and accountability for all. All are
one, forming the compounded and
indivisible underpinning of governance.
Without it, we, as the World Bank, a leading
development
institution,
and
the
international community at large, would not
be in any position to help achieve our goal of
providing a credible way to prosperity, and a
compelling argument for eradicating
poverty.
Haleh Z. Bridi,
Director, Regional Programs and
Partnerships:
Gerard A. Byam
Director, Strategy and Operations,
MENA Vice Presidency:
Franck Bousquet
43
Point-of-View
A Conversation with the GGP Staff
Rima Koteiche
Senior Financial
Management Specialist
Pierre Messali
Senior Public Sector
Specialist
Rachel Lipson
Analyst, Public Integrity
and Openness
Moad Alrubaidi
Senior Financial
Management Specialist
Francesca Recanatini
Senior Public Sector
Specialist
44
lower price to the taxpayer. Such reforms
should also help to foster an open and fair
environment where new ideas and
innovation can thrive, thereby creating the
space for economic growth, job creation,
and shared prosperity.
Moad Alrubaidi: While we may have good
constitutions and regulatory frameworks in
the MENA region, often what is lacking is the
implementation of such regulations, as well
as an accountability and sanctions process.
45
What are the top three factors for
governance reform success in your
opinion? Why?
Rima Koteiche: In my view, it would be: (i)
Political will: if it exists, then the consent of
the legislators, regulators and executives will
be obtained and reforms will be passed
smoothly and successfully. (ii) Building
institutions so that governments can
efficiently deliver public goods, and conduct
sound economic management. Regulators
ensure the rule of law, and the legislators can
provide leadership and oversight. Capable
and accountable states also constitute the
strongest defense against corruption. (iii)
Participation and citizen engagement:
Greater participation and oversight by civil
society and media that have adequate access
to information regarding the operation of
state institutions can play a crucial role in
fostering accountability.
Moad Alrubaidi: I believe that the top three
factors for governance reform success must
involve: (i) Development of the relevant
strategic plan for the country context and a
commitment to it. (ii)
Focus on the
priority areas where governance reforms will
have the most impact. (iii) Leading by
example.
Rachel Lipson: I would add to that: (i)
Leadership buy-in and commitment. (ii)
High-profile driving forces and demand for
change (which could come from the media,
or social sentiment). (iii) Visibility to citizens,
that is, changes and reforms have to be
tangible and produce some initial results for
people for the momentum to continue.
46
Gabriella Kusz
Senior Financial Management Specialist
Sarah Mousa
Consultant
The Maarefah Community of Practice (CoP)
is a vibrant, interactive online platform
introduced by the World Bank to facilitate
dialogue and provide resources for
governance practitioners and stakeholders
in the Middle East and North Africa (MENA).
Specifically, the online platform addresses
the topics of: procurement reform, public
sector management, public financial
management,
decentralization
and
corporate financial reporting. The World
Bank developed this innovative platform in
response to the need for a collaborating and
sharing common governance knowledge,
experiences and lessons among MENA
practitioners.
47
Maarefah Event Objectives
In terms of gathering CoP members face-toface, the event successfully drew a total of
250 participants from the region. The
participants included key governance
stakeholders, CoP members, and World Bank
staff from all countries in the MENA region.
The event served as an important platform
for generating dialogue and knowledge
exchange about key governance issues and
challenges facing the region.
48
Decentralization
Internal Controls
Procurement Transparency
Budget Execution
in
in
Your participation in Maarefah is essential to achieving our common goal of sharing knowledge on governance, financial management
and procurement in the MENA region.
The membership procedure is quick and only takes a few minutes.
If you are not already a member, please join us today at:
http://www.maarefah.net/user/register page
49
Maarefah Event
Agenda
Day 1
Day 2
Day 3
Welcome
Decentralization
Coffee Break
Coffee Break
Coffee Break
Internal Controls
Lunch
Lunch
Lunch
Coffee Break
Coffee Break
State-Owned Enterprises
50
MAAREFA
51
Maghreb
Libya 51
Morocco 53
Tunisia 55
Libya 56
Libya
A Snapshot of Public Investment Management in Libya
Michael Schaeffer
Senior Public Sector Specialist
Wesal Ashur
Public Sector Analyst
From 2003-2011, public expenditure in
Libya was high by international standards.
At 39 percent of gross domestic product
(GDP) on average during 200305 (and 35
percent in 2008), consolidated public
expenditure was among the highest in the
world.
This level of public spending
exceeded levels recorded in economies in
transition in Eastern Europe and Central
Asia, as well as in fast-growing Middle East
and North African (MENA) countries, such as
Algeria and Tunisia. However, due to the
ongoing nature of political turmoil over the
past few years, development budget
spending during fiscal year (FY) 2012-2014
virtually collapsed as a share of total budget
spending (Figure 1).
Figure 2: Libyan Development Spending as
a Percent of Total Budget (FY 2012-2014)
Source: Ministries of Finance and Planning,
Libya, 2015.
Although the annual recurrent and
development budgets in Libya are
presented and approved as a single
document, their preparation follows
parallel, bottom-up approaches.
The
annual budget itself is still split between
recurrent and development expenditures,
with preparation of the recurrent budget
covering wages (Chapter I), goods and
services (Chapter II), and subsidies and
transfers (Chapter IV) under
the
responsibility of the Ministry of Finances
Budget Department. The preparation of the
development budget (Chapter III) is the
responsibility of the Budget and Follow-up
52
some systems and measures in place, but
there are still areas that need strengthening.
There are fewer areas that need bolstering if
a score of B is given compared to a score of
C.
The PIM diagnostic revealed substantial
weaknesses
in
Libyan
institutional
arrangements for public investment
management. As provided in the diagnostic,
Libya is experiencing a significant degree of
fragmented institutional arrangements. An
integrated approach to public investment
ensures that an appropriate balance
between recurrent and development
expenditure is achieved within expenditure
programs and that operating and
maintenance costs of investment proposals
are not forgotten. An integrated approach
needs to be introduced at four levels4, the
first two of which have implications for the
way public investment management is
organized at the center of government: (i)
organizational and staffing integration, (that
is, no separation of responsibilities for
capital and recurrent expenditure between
organizations or between departments); (ii)
integrated budget preparation, (that is, the
same staff are responsible for recurrent and
capital budgeting); (iii) unified budget
documentation and presentation; and (iv)
unified reporting and accounting systems.
Stage
PIM 11 Guidance and
preliminary screening
PIM 12 Formal project
appraisal
PIM 13 Independent review
of appraisal
PIM 16 Project selection and
budgeting
PIM 17 Project
implementation
PIM 21 Adjustment for
changes in project
circumstances
Rating
CD+
D+
CCC-
C-
Morocco
More than Ten Years after
Moroccos Family Code Reforms:
Are Gender Gaps Closing?
Paul PRETITORE
Senior Public Sector Specialist
53
54
registered to them acquired during, or prior
to, their marriage. In case of divorce, each
party takes from the marriage any assets
registered under their names. The
Moudawana now allows married couples to
sign a contract separate from the marriage
contract establishing the terms under
which assets acquired during marriage are
managed. One option is for married couples
to establish a community property regime
whereby any assets acquired during the
marriage are considered jointly-owned and
evenly divided upon divorce.
A community property regime is particularly
beneficial to a spouse who is outside of the
formal labor force, and performs primarily
non-compensated tasks related to the
household.
Moroccan
civil
society
organizations (CSOs) have offered assistance
to women in arranging favorable provisions
in these contracts. However, there are no
comprehensive data available as to the
extent to which married couples are entering
into such agreements. Given the relatively
low labor force participation of women,
these arrangements could prove beneficial
in terms of increasing womens control of
economic assets both during marriage and
after divorce.
New Paper
The Quest for Subsidy Reforms in Libya
World Bank Policy Research Working Paper 7725, By Abdelkrim
Araar, Nada Choueiri, and Paolo Verme, March 2015
Shortly before the 2011 Libyan revolution, consumer subsidies were
rapidly increased by the regime in an effort to reduce social
discontent. In the aftermath of the revolution, these subsidies became
important for people's subsistence, but were also a very heavy burden
for the state budget. Since then, the Libyan government has been
confronted with the necessity of reforming subsidies in a politically
and socially complex environment. The Paper uses household survey
data to provide a distributional analysis of food and energy subsidies
and a simulation of the impact of subsidy reforms on household wellbeing, poverty, and the government's budget. Despite the focus on
direct effects only, the results indicate that subsidy reforms would
have a major impact on household welfare and government revenues.
The elimination of food subsidies would reduce household
expenditure by about 10 percent and double the poverty rate while
saving the equivalent of about 2 percent of the government budget.
The elimination of energy subsidies would have a similar effect on
household welfare, but a larger effect on poverty. Government
savings would be almost 4 percent of the budget. The size of these
effects, the weakness of market institutions, and the current political
instability make subsidy reforms extremely complex in Libya. It is also
clear that subsidy reforms will call for some form of compensation for
55
56
Libya
Helping Libya Build Strong, Effective and Accountable
State Institutions
In April 2015, the World Bank organized a
capacity building activity for Libyan civil
servants in Istanbul, Turkey. The event was
funded by the multi-donor World Bankadministered State and Peace Building Fund.
The objective of the event was to offer an
overview of how governments work in liberal
democracies, specifically how some
countries have built their state institutions
and public administrations after years of
autocratic rule and severe wars.
Transition and conflict-affected country
experts from the World Bank, the United
Nations Development Program, the
International Republican Institute, as well as
from countries such as Croatia, Romania and
Turkey shared their experiences and
knowledge with Libyan officials. Participants
had the opportunity to discuss and explore
how experiences from other countries might
be relevant and applicable to the current
Libyan context.
Twenty-eight Libyan senior civil servants and
technical
staff
participated,
with
representatives from these agencies: the
Bureau of Statistics and Census, Vision 2030,
the National Audit Bureau, State Property
Authority, and the General Information
Authority. Participants also came from a
number of Libyan government ministries,
57
58
In The News
Advancing the Fiscal Transparency Agenda:
A World Bank and Tunisian Government Partnership
The World Bank and Tunisias Ministry of Finance organized a two-day
orientation workshop in February 2015 entitled Advancing Public
Participation in the Budget ProcessLinking Budget Analysis to
Service Delivery Outcomes. The training aimed to empower civil
society and improve accountability by addressing the institutional
bottlenecks and capacity gaps of stakeholders.
The objective was also to expand the capacity of think tanks and civil
society organizations working on issues related to fiscal transparency.
Transparency mechanisms include using existing data on budget
allocation and expenditure; understanding key entry points for budget
analysis to help motivate social accountability; knowing how to
present and disseminate such analysis in an user friendly format using
budget briefs; and becoming enablers of public dialogue by
learning how to argue for improvement.
59
Lebanon 59
Jordan 61
Egypt 62
KRG-Iraq 65
Iraq 67
Mashreq
Lebanon
Internal Audit Developments
Interview
Malek COSTA
President IIA Lebanon
60
CVMENA: To what extent is IIA-Lebanon
reaching out to and coordinating with
universities in Lebanon?
MC: IIA-Lebanon is working in coordination
with the universities to launch the Internal
Auditing Education Partnership (IAEP)
program, developed to respond to the
growing interest in internal audit education
at institutions of higher learning. The
program also addresses a general need by
practitioners interested in hiring students
who possess a well-rounded skill set for
conducting internal auditing.
The IAEP program prepares students with
the skills and knowledge to help them
conduct basic internal audits immediately
upon hire. It also provides a foundation to
begin preparing them for the Certified
Internal Auditor (CIA) examination. Currently
this program is being taught by the Lebanese
American University and our aim is expand it
to most universities in Lebanon.
CVMENA: As you know, Lebanon is
committed to establishing the internal
audit function in the public sector in the
near future with the support of a World
Bank-financed project entitled Public
Financial Management Reform II. How can
IIA-Lebanon contribute to this reform?
MC: Internal auditing of the public sector is
arguably one of the most challenging
segments of the audit industry especially
with the constant media attention and the
eyes of the citizens sharply focused on their
governments operations and finances. IIA
has developed the Internal Audit Capability
Model (IA-CM) which is intended to be used
globally as a basis for implementing and
institutionalizing effective internal auditing
in the public sector, and as a road map for
Obligatory certification
Strategic thinkers
Boardroom presence
Leadership skills
Business oriented
61
Jordan
Working with Universities to Strengthen the
Accounting Curriculum in Jordan
Riham HUSSEIN
Financial Management Specialist
Corporate Financial Reporting or CFR is a
technical practice within the Governance
Global Practice which includes a number of
work-streams. Among the various streams
are ensuring a sound legal and regulatory
environment, promoting high quality
university and technical education in the
accountancy, supporting strong capacity
within
professional
accountancy
organizations, and finally enabling regulators
and government entities to oversee the
accounting profession. In the Middle East &
North Africa (MNA), the CFR technical
practice is working on several projects within
these work-streams. One of the projects
undertaken to ensure high quality university
and technical accounting education is an
assessment which was recently conducted
on the academic curriculum in accountancy
in Jordan. This was a project funded by the
World Bank under an Institutional
Development Fund (IDF), working in
cooperation with the Jordan Association of
Certified Public Accountants (JACPA). This
assessment was an important first step in
improving the curriculum and came up with
a number of recommendations which will be
a corner-stone of any future projects in this
area.
Accounting Education in Universities
Accountancy education is one of the core
pillars of good quality CFR. Education in CFR
and specifically in accountancy is governed
by the International Accounting Education
Standards Board (IAESB) International
Education Standards (IESs). IESs assist
professional accountancy organizations,
regulators, employers, academics, and
students by prescribing principles for the
learning and development of professional
accountants.1 They seek to unify standards
globally to reduce differences in the quality
of accounting professionals. This assessment
compared the current accounting curriculum
to identify gaps and divergences that need to
be bridged in order to bring the Jordanian
accounting curriculum in line with IESs and
good practice. Education in universities is the
first important step in the gaining of
knowledge
by
future
accounting
professionals. Through its IESs, the IAESB
outlines the key elements of technical
competence; professional skills, and
professional values, ethics and attitudes that
improve
the
Jordanian
accounting
curriculum. A sample of eight universities
and two community colleges were selected.
A mix of private and public universities were
selected with the highest numbers of
accounting students. Only two community
colleges were selected as all accounting
curricula in community colleges is identical.
The accounting curricula was reviewed for
the eight universities and two community
colleges and compared to the standards set
by the accrediting accounting education
programs in Jordanian universities and the
community college standard set by the HEAC
in Jordan.
62
which are considered valuable for students
who are considering entering the accounting
profession. Other than the number of credit
hours and the subjects being taught, the
assessment also looked at the method of
teaching. Teaching should provide a student
with the tools for self-directed learning after
graduation. Teaching should also focus on a
broad range of teaching methods which
include case studies and projects while
encouraging group work and the use of
technology. The assessment found that
there was a deficiency in the range of
teaching tools that university professors
employed.
Recommendations
Egypt
Program and Performance Budgeting in Egypt:
Accounting and Control Considerations
Mohamed YEHIA
Senior Financial Management Specialist
Pierre MESSALI
Senior Public Sector Specialist
Program and Performance Budgeting (PPB)
is a useful tool in enabling the alignment of
the national budget with a countrys
strategic priorities and policies. Performance
and output indicators can measure the
extent to which government organizations
pursue value-for-money principles. The PPB
is particularly significant for meeting the
demands
of
accountability
and
transparency, whereby line ministries can be
held accountable for program delivery and
achieving targeted results within the
approved program budget.
The new Egyptian Constitution of January
2014 specified minimum budget allocations
to certain sectors as percentages of Gross
National Product (GNP), including education,
health, higher education and scientific
research.
The
specified
minimum
percentages are 4, 3, 2 and 1 percent of GNP
respectively. Program budgeting should be
an effective tool to help discharge this
constitutional mandate. However, there is
some overlap in some sectoral programs
between more than one Ministry (for
example, hospitals belonging to entities
other than the Ministry of Health). Similarly,
some economic classifications do not
consistently recognize the sectoral mapping.
For example, part of the grants, subsidies
and social benefits under Chapter 4 of the
budget economic classification can belong to
health or education programs.
has mandated
the respective
their budget
(i) presenting
63
Ensuring that the expenditure control
system as well as the accounting system
operate on a program basis.
The expenditure control system should
prevent commitments from being made
for spending on programs in excess of
the amount voted by Parliament for
that respective program.
If there are program transfer limits, the
expenditure control system will also
need to manage this. Subject to
appropriate authorization, it should
permit transfers between programs up
to an established limit (percentage), but
not in excess of that stipulated limit.
In The News
World Bank Group Engages Stakeholders on
New Country Strategy for Egypt
The World Bank Groups second round of Country Partnership
Framework (CPF) discussions with various stakeholders throughout
Egypt took place recently in Cairo, Alexandria and Aswan.
Consultations in Upper Egypt demonstrate the significance of lagging
regions as a development priority for Egypt and also underline the
World Banks keen interest in listening to input and feedback from
stakeholders across the country. The consultations around the CPF
were launched last year and benefited from a wide spectrum of input
from the government, civil society, youth, private sector, academia
and development partners. Furthermore, online consultation took
place to maximize reaching out to online users and listen to their
development priorities. The aim of these consultations is to prepare
for a new partnership strategy which will guide the Groups
engagement in the country over the next five years. The Country
Partnership Framework is a joint document of the three WBG
institutions - the World Bank, International Finance Corporation (IFC)
and the Multilateral Investment Guarantee Agency (MIGA) - and will
build on their respective strengths and areas of expertise. The 20152019 CPF aims at supporting Egypts development priorities
consistent with the regional strategy of the World Bank Group in the
Middle East and North Africa as well as the World Bank Groups
overarching goal of ending extreme poverty and boosting shared
64
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.
The first World Bank transport project to Iraq was the $23 million
Road Project of June 23, 1966. The project covered the following five
road sections totaling 390 kilometers scattered from the south to the
north of the country: (i) a link to the new port of Umm Qasr; (ii) the
)reconstruction of the only outlet to the north of the port of Basra; (iii
a new road connecting the Euphrates and Tigris rivers through an
intensively cultivated area; (iv) the final link in the new highway
between Baghdad and the Kirkuk oilfields; and (v) the last leg of the
Baghdad-Mosul highway. In addition, the construction of the Fallujah
Bridge over the Euphrates River was expected to improve Iraq's
communications with the neighboring countries to the west and with
ports on the Mediterranean and the Red Sea. The project also
supported a road transport study, a program for the reorganization of
maintenance operations, and the procurement of maintenance
equipment.
65
KRG-Iraq
Supreme Audit Institutes: Interview
Jad MAZAHREH
Senior Financial Management
Specialist, Governance Global Practice,
The World Bank
/
1
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1991
/
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3
2
11 .
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2008
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/
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4
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2008
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66
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328
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25 /
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New Project
Equal Access and Simplified Environment for Investment
(EASE) in Egypt
The Equal Access and Simplified Environment for Investment in Egypt
project aims specifically at addressing regulatory, institutional and
governance issues that have plagued private sector dynamism in Egypt
for years. The current context and the strong will of the government
authorities to address these longstanding regulatory reforms offers a
unique opportunity for making progress in these areas.
A new window of opportunity for ambitious reforms. Egypts Cabinet
recently approved significant amendments to the Investment Law, a
long awaited reform. It is an important step in the right direction to
improve the business climate and level the playing field for investors.
Effective implementation of the amended law will be essential. The
World Bank Group is preparing this Technical Assistance project to
support the Ministry of Investment and the General Authority for
Investment (GAFI) to implement their mandates under the new law.
GAFI aims to reduce stifling bureaucracy and room for discretion in the
licensing and permitting process and land allocation for new
investments. Most importantly, the law aims to empower GAFI to act as a one-stop shop for investors and to empower it to seek the necessary
approvals from various agencies that investors need to obtain. The Project aims to support GAFI in becoming the national platform facilitating
business entry, licensing, and access to investor information at the sub-national level through its One-Stop Shops and GAFI Information Portal.
This would entail addressing GAFIs processes and interfaces with all of the involved regulators, including primarily the Industrial Development
Authority, but also other line ministries and local authorities involved in licensing. Further, it would involve developing an information technology
system to deliver business entry, licensing services, and investor information, as well as capacity building and technical assistance to support the
GAFI in this enhanced client-facing role, particularly of its one-stop shops.
67
Iraq
Parliament
Interview
.2
.
14 / 2014
by Mona El Chami and May Ibrahim
.1
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2003
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68
Infographic
(Source: The World Bank)
69
GCC
Kuwait
Supporting Kuwaits Capital Projects
In the context of volatile international oil
prices, Kuwait more than ever is seeking
ways to achieve greater efficiency and
improved outcomes for its investment
spending. At the request of the Ministry of
Finance, the World Bank conducted a
comprehensive review of the Capital Project
Implementation Cycle (CPIC).
The review and findings which were
collected over a 3-year period (2011-2014)
and cover all sectors except petroleum and
defense were a joint effort between the
Bank and the government. The Report is
particularly timely given the strong emphasis
placed in Kuwaits National Development
Plan, Strengthening the implementation of
capital projects is a critical step for achieving
Kuwaits national goals of improving social
and physical infrastructure to encourage
more effective service delivery and
productive employment, said Nadir
Mohammad, World Bank Country Director.
70
The Report findings were discussed at an
event sponsored by the Ministry of Finance.
The workshop was attended by high level
government representatives including Her
Excellency Hind Al-Sabeeh Minister of Social
Affairs and Labor and Minister of State for
Planning and Development, private sector
experts and Bank staff. The event was very
well received and widely covered in the
media.
The CPIC review was challenging and
rewarding. We learned a lot from this review
and we hope that it ignites discussion on how
to conduct assessments of project
implementation readiness under Bank
financed operations such as Results Based
Lending and Program for Results, said
Majed M. El-Bayya, Task Team Leader and
Lead Procurement Specialist of the World
Banks Governance Public Integrity and
Openness Department (PIO).
Islamic Finance
Introducing the Newly Launched (IASB) Consultative
Group on Shariah-Compliant Instruments and
Transactions
consultant with his own practice. In
November 2000, he was appointed Chief
Accountant of the Australian Securities and
Investment Commission, and following that
he was Manager, Financial Management, for
the South Asia region of the World Bank.
Ian MACKINTOSH
Chairman of the International
Accounting Standards Board (IASB)
Consultative Group on ShariahCompliant Instruments and
Transactions and IASB Vice-Chairman
By:
Nadi Mashni, Financial Management
Specialist
Gabriella Kusz, Senior Financial
Management Specialist
Mr. Mackintosh was formerly Chairman of
the United Kingdoms Accounting Standards
Board (ASB). Originally from New Zealand, he
has spent much of his career in Australia,
first with Coopers & Lybrand, and later as a
71
To continue exploration of this important
subject, in 2011, with the strong support of
the MASB and then-Chairman Azmi, the IASB
conducted a consultation about whether the
topic of Islamic Finance should be included in
its technical agenda. The responses to this
consultation from countries where Islamic
Financial activities were taking place was
very positive. These countries were eager for
the IASB to undertake activity and begin
engagement on this important subject. As a
result of this consultation, the IASB Board
decided to enhance its exploratory efforts
through the establishment of the
Consultative Group on Shariah-Compliant
Instruments and Transactions.
In July 2013, the Consultative Group held its
first meeting with a focus on discussing
Sharia-compliant
instruments
and
transactions. The meeting, chaired by the
IASB, was structured to draw those
individuals and organizations working with
Shariah-compliant
instruments
and
transactions together to provide input as to
how this Consultative Group could further
this subject area and provide benefit and
guidance to those in practice. One outcome
of this meeting, was the decision to
undertake research and reflection upon the
issues in the classification of Islamic financial
instruments under IFRS 9 Financial
Instruments.
This research culminated in the Paper
entitled Issues in the Application of IFRS 9 to
Islamic Finance, which posed a series of
issues in the application of IFRS 9 to those
products, and began discussion regarding
what steps (if any) the IASB might take to
clarify this standard. This Paper was
preliminarily discussed during the second
meeting of the Consultative Group held in
Kuala Lumpur, Malaysia in 2014.
Ahead of its third meeting, the Consultative
Group is still in an exploratory stage, seeking
to answer the question: How can the
Consultative Group further support
organizations in applying IFRS to Shariahcompliant instruments and transactions? It is
72
financial instruments. Most Islamic financial
transactions involve financial instruments of
one sort or another, and this is where
Shariah law brings about the greatest
potential for differences in financial
reporting and application of standards.
Other than this issue, we have not heard very
much in regard to significant challenges in
applying
IFRS
to
Shariah-compliant
instruments and transactions. For example,
the Kingdom of Saudi Arabia has been
successfully implementing IFRS with small
modifications in order to comply with
Shariah law. Areas of modification are slight,
for example, inclusion of requirements for
additional disclosures on certain relevant
issues. Modifications of standards for
additional disclosure are not a key concern
to the Consultative Group as they do not
change the nature of the application of the
standard. The main issues the Consultative
Group will be directed toward are financial
instruments and will likely seek to answer
the following three questions:
CV MENA:
envision at
judging the
could be
compliant?
73
In The News
Kuwait to Test and Translate the Public Expenditure and
Financial Accountability (PEFA) Upgrade into Arabic
Kuwait has decided to use the upgraded PEFA testing version in
cooperation with the World Bank and the PEFA Secretariat. His
Excellency, Khalifa Hamada, Kuwaits Undersecretary for Finance said,
We have been examining the PEFA methodology for some time and
consider that the upgraded version is most suited to our needs as part
of our PFM strengthening initiative. It will also be useful for
monitoring progress against our PFM goals.
Kuwait will be one of the first Arab countries to apply the upgraded
framework. It will join a select group of countries from Europe and
Central Asia, Africa, South America, South Asia, the Caribbean and the
Pacific Islands which will use the testing version in 2015.
The Kuwaiti government has also decided to sponsor the preparation
of the upgraded PEFA Framework document in Standard Arabic
language. His Excellency, Khalifa Hamada commented, In addition to
applying the PEFA methodology in our own country, we would like to
help people in other Arabic speaking countries to understand and
benefit from PEFA.
The Head of the PEFA Secretariat, Mr. Lewis Hawke said, It is very
encouraging to have Kuwaits support for the upgraded PEFA and we
deeply appreciate their generosity in sponsoring the translation. I am
sure Kuwait experience with PEFA will be of interest to many
countries. Translation of the PEFA testing version will be a very
important expansion of our suite of multi-lingual editions.
74
CV MENA
Exchange 74
Maarefah 81
Solutions Lab 81
Bootcamps 82
Events
The EXCHANGE
Global Conference
Integrated Reporting in the Public Sector:
An Impetus to Introducing Integrated Thinking
in Public Sector Management
World Bank, Washington D.C.,
November 17-18, 2014
Rama KRISHNAN
Lead Financial Management Specialist
An Introduction to Integrated Reporting
There are growing expectations that
organizations, both public and private, are
responsible for more than the primary
objectives for which they were created. They
must operate and be perceived to
operate in a manner that is responsible,
ethical, and sustainable, that minimizes
negative impacts on the environment, that
takes into consideration the varied needs of
a spectrum of stakeholders, and that
positively contributes to the communities in
which they operate and the planet more
generally. As sustainable value creation
becomes the raison detre of organizations,
they require a different perspective on how
to report their performance and satisfy their
accountability obligations, both regulatory
and social, to their stakeholders. Traditional
financial reporting, comprising financial
statements and audit reports, is inadequate
in dealing with this wider organizational
agenda. This has resulted in the genesis of a
movement toward integrated reporting,
which is a more comprehensive model that
combines traditional financial reporting with
a broader set of reporting measures that
75
manufactured, intellectual, human, social
and relationship, and natural. Integrated
reporting seeks to clarify the relationships
between the six forms of capital, the
organizations business model, external
factors and strategic thinking. IR provides a
window to understanding how these forms
of capital are used by the organization as well
as how these forms of capital, business and
society are impacted through the process of
value creation. An earlier IIRC discussion
paper entitled Towards Integrated
Reporting: Communicating Value in the 21st
Century (2011) highlights a number of areas
where integrated reporting is expected to
challenge current practices:
Thinking.
Integrated
Reporting
supports
thinking
outside
of
bureaucratic silos and recognizes the
Figure 1: The complete picture of an organizations value creation process, showing the interaction of the Content Elements and the forms
of capital in the context of the organizations external environment.
Source: The International Integrated Reporting Framework. Copyright December 2013 by the International Integrated Reporting Council
(the IIRC).
Why is IR important for organizations?
76
entitys activities or that interprets for
users what all of the information currently
reported by public service organizations
means holistically. Furthermore, there is an
extent to which public sector reporting
frequently lives in the shadow of the budget.
In the public sector, the budget is usually a
public document setting out the
organization's plans for the provision of
services and/or regulatory activities and
their funding. In many parts of the world, it
is the subject of extensive and sometimes
heated public debate, often including the
consideration of alternative plans and
proposals put forward by political parties in
opposition. The adoption of integrated
Washington DC.
3 IPSASB
www.ifac.org/publications-resources/ifac-sustainabilityframework-20
Global Conference on IR
The Conference on Integrated Reporting for
the Public Sector organized by the MENA
Governance Global Practice (GGP) team
helped to bring together several
stakeholders interested in increasing the
acceptance and application of IR in the public
sector. The inaugural Integrated Reporting in
the Public Sector Conference was conducted
in partnership with the Association of
Chartered Certified Accountants (ACCA), and
supported by the International Integrated
Reporting Council (IIRC), the Said Business
School at Oxford University, and the United
Nations Global Compact (UNGC), with
additional support from the American
Institute of Certified Public Accountants
(AICPA). Professor Robert Eccles of the
Harvard Business School along with Samia
Msadek, Director of Public Resources
Mobilization and Management, Governance
Global Practice, and Hisham Waly, Practice
Manager, Governance Global Practice for
the MENA region at the World Bank, led the
discussions. In the same way that integrated
reporting is catalyzing integrated thinking for
private sector companies, this conference,
77
which combined formal presentations with
interactive engagement from conference
participants, sought to introduce World Bank
staff to key IR concepts. Further, it sought to
increase awareness in the public sector
about how IR can be used to support
integrated thinking to improve the
performance of government agencies, cities
and
non-governmental
organizations
(NGOs). This conference also served as the
official launch of the IIRCs Public Sector
Pioneer Network.
Summary of the main discussion themes
1.
Intergenerational
equity
and
stewardship: Cities and other public sector
organizations create value by their ability to
sustain institutions and infrastructure to
support present and future human activity.
These organizations struggle to find how
best to account for future generations
needs. As highlighted by David Walker4,
Dont tax you, dont tax me, tax the baby on
your knee is a commonly heard phrase
touted as a politically expedient solution to
public finance dilemmas. However, what
happens when we are making decisions for
definition, governments exist for the longterm: they have the right to tax, and their
services are provided well into the future. As
such, are policies they pursue sustainable?
The question remains as to how public sector
leaders make and address an audience for
the forms of capital that do not exist at the
time these decisions are being made.
Structuring the answer to this question goes
to the essence of intergenerational
stewardship.
2. Leadership and adoption: Many public
sector entities express interest in IR, but few
want to make the first move. Unlike the
private sector, there are few pioneering
examples in the public sector. Everyone
wants to be a leader, but no one wants to go
first. How, then, do we get the IR ball rolling?
Solving this conundrum is the aim of the
IIRCs Public Sector Pioneer Network. Fayez
Choudhury6 suggested that you have to talk
quantity, not just quality. One or two highquality outcomes are not as good as a large
number of medium-quality outcomes
progressing in the right direction.
Conversely, Samia Msadek7 stressed the
Power of One. With one or two notable
Implement
a
comprehensive
communication strategy and identify
early adopters;
78
4. Accountability and incentives in the
public sector: Material nonfinancial value
creation activities are not being accounted
for in the management of cities and other
public sector entities. It is unclear who is
accountable at large, nor is it clear how to
hold public sector managers accountable.
Incentivizing people in the public sector may
be possible by aligning newly transparent
non-financial measures and standards with
personal
performance
and
growth
opportunities for public officials. Public
sector entities and in particular public
officials have to take a long-term view
with no defined limit since they need to think
10
12
13
11
79
How can IR help to clarify who helps create,
or destroy, value in a city or public sector
organization? Answering these strategic,
audience-dependent questions requires
public sector governance officials to pass
judgment on materiality. The impacts of one
part or constituency of the city on another
are not evident because, many times, city
government-stakeholder connections are
weak or indirect. Although IR can help clarify
or solve this connectivity challenge, we have
to think about future value by giving the
public sector a framework a plan and
performance metrics to measure the
answers to strategic questions about these
complex systems. Accounting metrics are
indicators of value, but not full indicators
because, besides measuring only past
activity, they do not capture an entitys use
of and impact on all six forms of capital. Here
too, IR can play a key role. However cities
create, sustain, or destroy value, they do so
in a space directly adjacent to their
stakeholders. It is this close physical and
social proximity that provides the greatest
opportunity for IR to empower value
creation for future generations of citizen
stakeholders. IR offers the opportunity to
create an engagement space where it is
possible to see the options in the round
and involve more stakeholders in the
decision-making process, thus reflecting a
wider thought spectrum. IR brings many
positive benefits to the effective
management and engagement in cities,
particularly through: (i) a focus on value
creation; (ii) lateral integration of the six
forms of capital, beyond simply financial
capital; and (iii) long-term planning beyond
current short-term budget processes.
During the discussions, it was repeatedly
emphasized that the integrated thinking to
improve the performance of public sector
organizations that arises from the IR process
is of greater significance than the IR itself. In
this context, the IR framework needs to be
customized
to
meet
the
unique
characteristics and challenges of the public
sector. The discussants agreed that IR can
have immediate applicability to public sector
organizations, such as SOEs and cities. The
conference saw the launch of the IIRCs
Public Sector Pioneer Network for sharing
knowledge and experience among all
stakeholders. Though the conference
discussions brought out the various facets of
IR relevant to the public sector, it was also
evident that much more needs to be done to
adapt the IR principles and framework to a
public sector context. Although there were
some participants who suggested that there
should be an IR light for the public sector,
the majority of the participants were of the
opinion that since the IIRC framework is
principles based, there is no need to dilute
the framework to suit the public sector.
Instead, what is required is to help public
80
organization.
However, as brought out in the conference
discussions, there exists a critical knowledge
and experience gap in applying the IIRCs IR
framework to the public sector that needs to
be addressed immediately. This requires the
development of technical notes, practical
guidance and other knowledge material that
are based on a first hand understanding of
81
dissemination and advocacy with key
stakeholders such as civil society
organizations (CSOs), Parliamentary
bodies, Supreme Audit Institutions, and
so on.
9. Prioritize to ensure that the Bank does
not overwhelm its clients.
10. Engage with other Global Practices
(such as Social, Urban, Rural and
Resilience, Water, and Environment
and others) as well as Controllers in the
.
Maarefah Online
Basel III and the
Implications
for Islamic Banking
April 2015
Online
The World Banks Connecting Voices
Maarefah Community of Practice hosted an
online event in April 2015 in cooperation
with the World Banks Global Islamic Finance
Development Center. It featured Ms. Canan
Ozkan, Senior Financial Sector Specialist,
who presented the recent research she and
the Global Islamic Finance Development
Center have done regarding the implications
of Basel III for Islamic banks.
The discussion was moderated by the
Maarefah Coordinator, Ms. Leila Hanafi. It
highlighted post-Basel III challenges for
Islamic banks, as well as supervisory,
regulatory and accounting standards
challenges. Following the close of the formal
presentation, an interactive question and
answer session was hosted by Ms. Gabriella
Kusz and Mr. Nadi Mashni, Financial
Management Specialists with the World
Bank Governance Global Practice. To view
presentations, participate in the ongoing
dialogue on this subject, and learn more
about Basel III implications for Islamic
banking please visit the Maarefah website
and join our Community of Practice at
www.maarefah.net.
WBG
to
promote
integrated
development.
11. Coordinate with key players in the IR
area, such as the IIRC, IFAC, CIPFA and
donors.
12. Establish a Community of Practice (CoP)
for IR.
Based on these action areas, the GGP in
MENA has taken the initiative to form a CoP
with the aim of bringing together the various
Maarefah Online
Women in AntiCorruption
in the Middle East
and North Africa
March 2015
Online
The World Bank Connecting Voices Maarefah
Community of Practice, in cooperation with
Transparency International (TI), hosted an
online event in March 2015 featuring Ms.
Ghada Zughayer, TIs Regional Director of the
Middle East and North Africa Department.
Ms. Zughayer gave a presentation about the
Womens Project, an influential initiative
that has supported women leaders in
academia, business and the public sector
from throughout the MENA region in
advocating for gender-sensitive strategies to
strengthen integrity in their sectors and on a
national level. The discussion was moderated
by the Maarefah Coordinator Ms. Natacha
Draghi, and highlighted the work that TI and
its partners have done to host sectoral
workshops, encourage sharing of corruption
experiences, develop ideas to address
specific corruption issues and discuss
advocacy plans to implement them.
Following the close of the formal
presentation, an interactive question and
answer session was hosted by Ms. Francesca
Recanatini, Senior Economist with the World
Bank Governance Global Practice and a
member of the European Union Group of
Experts
on
Corruption.
To
view
presentations, participate in ongoing
dialogue, and learn more about women in
anti-corruption, please visit the Maarefah
website and join our Community of Practice
at www.maarefah.net.
Solutions Lab
Islamic Finance as a
Tool for Financial
Inclusion:
Micro-, Small-, and
Medium Enterprise
Development
February 26, 2015
Online
On February 26, 2015, the World Banks
Middle East and North Africa (MENA)
Corporate Financial Reporting (CFR)
Technical Practice, with the support of the
MENA Micro, Small and Medium Enterprise
(MSME) Facility, warmly welcomed over
seventy participants from around the region
to the Solutions Lab virtual conference
event on Islamic Finance as a Tool for
Financial Inclusion for Micro-, Small-, and
Medium Enterprise (MSME) Development.
Participants joined in from Egypt, Jordan,
Lebanon, Morocco, the West Bank and Gaza
and Tunisia. They represented a variety of
institutions including Central Banks, Islamic
Banks, Sharia Boards, Audit Firms,
Professional Accountancy Organizations, and
Universities.
Solutions Lab events form part of the
Connecting Voices Middle East and North
Africa (CV MENA) initiative, a regional
knowledge platform which aims to
strengthen governance throughout MENA
countries. Solutions Lab events connect
participants from across the MENA region
82
through the World Bank Global Development
and Learning Network (GDLN) and
videoconferencing technology to share
experiences and lessons learned on key
issues of governance including corporate
financial reporting facing the region.
This particular event was positioned at the
crossroads of accounting and auditing,
Islamic Finance, and MSME business
development. The focus was on the strong
opportunity which the development of
Islamic Finance offers for economic growth,
poverty reduction and shared prosperity in
many developing and emerging economies.
Despite these potential benefits, however,
Islamic Finance in emerging economies faces
several challenges, including a weak and stillevolving regulatory and supervisory
environment, non-standardized corporate
governance practices and a need for skilled
and
experienced
Islamic
Finance
professionals. A common theme which
draws these three challenges together is that
of accountancy. As such, the Solutions Lab
event addressed the accountancy-related
aspects of these challenges by focusing on
the need for:
Bootcamp
Iraq Accounting
Curriculum
Enhancement (ACE)
Toolkit Workshop
September 29-30, 2014
Dubai, UAE
The
Iraq
Accounting
Curriculum
Enhancement Toolkit Workshop was held in
Dubai, United Arab Emirates on September
29-30, 2014.
83
university accounting professors and deans.
This workshop was designed to support the
Iraqi Ministry of Higher Education and
Scientific Research representatives, as well
as the heads of all public and private
university
accounting
education
departments in Iraq who work on
strengthening
university
accounting
education in line with international
standards and good practices. This two-day
workshop featured speakers from the World
Bank, the International Association of
Accounting Education and Research (IAAER),
and the Global Accountancy Development
Institute at Tillburg University in the
Netherlands.
Bootcamp
The Evolving Field of
Audit Regulation
Charting the Path toward
Independent Audit Regulation
in Morocco and Tunisia with a
View to Enhancing Audit
Quality for Small and Medium
Practices (SMP) and Large
Practice Firms
By: Gabriella Kusz, Senior Financial
Management Specialist, World Bank
84
(vi)
Bootcamp
Training Egypts
Supreme Audit
Institution in the SAI
PMF Assessment
Tool
December 2014
Egypt
In December 2014, a 4-day International
Organization of Supreme Audit Institutions
(INTOSAI) Development Initiative-certified
training in SAI PMF took place. The main
objective of this training was to increase the
knowledge of Egypts SAI in the SAI PMF
assessment tool. Egypts SAI has expressed
interest in carrying out a SAI PMF selfassessment, and has formed a team of
experienced professionals to familiarize
themselves with the tool before moving
forward with the actual assessment. The
training followed the standard SAI PMF
program developed by the INTOSAI
Development Initiative. In addition to the
standard training program, experiences from
the Bank-led SAI PMF assessment of the
Palestinian SAI were shared.
Bootcamp
Pillars of Public
Financial
Management
Strategy Workshop
February 2015
A one-day workshop with the Egyptian
Ministry of Finance regarding the pillars of
Public Financial Management (PFM) Strategy
took place in February 2015. The World
Bootcamp
Supreme Audit
Institutions
Performance
Measurement
Framework
Bootcamp
Forensic Audit Boot
Camp and Learning
Visit for the Iraq
Federal Board of
Supreme Audit
Rabat, Morocco,
September 22-26, 2014
September 2014
Egyot
During this workshop which took place in
September 2014, the World Bank provided
an overview of the Supreme Audit
Institutions (SAI) Performance Measurement
Framework (PMF) to a selected team from
Egypts
Supreme
Audit
Institution.
Participants
represented
relevant
specializations and multiple managerial and
operational levels. The workshop covered
the objectives, values and benefits of the SAI
PMF. It also explained the scoring
mechanism and different approaches to
undertake this performance measurement
exercise.
Bootcamp
Connecting the
Supreme Audit
Institutions of Egypt
and Brazil for SAI
PMF KnowledgeSharing
October 2014
Online
A video conference connecting the SAIs of
Egypt and Brazil was held in October 2014.
This was a virtual knowledge exchange
between the Supreme Audit Institutions of
Brazil and Egypt on the topic of how to
conduct a Supreme Audit Institution
Performance Measurement Framework (SAI
PMF) using a self-assessment approach.
Egypt SAI expressed interest in this
Objective
A Forensic Audit Boot Camp and Learning
Visit for the benefit of the Iraq Federal Board
of Supreme Audit (FBSA) was recently held in
Rabat, Morocco. The event was supported
by the World Banks Strengthened Financial
Management Project and the Strengthening
External Accountability Component of the
Iraq Technical Assistance and Capacity
Building Fund for Improving Governance. The
objective of these events was to help the
FBSA examine its forensic pilot audits and
revisit its forensic audit manual in light of the
Moroccan experience. In addition, the two
sides shared their knowledge and experience
with relevant risk analysis, investigation
techniques,
and
quality
assurance
arrangements in relation to the forensic
audit work and report.
85
Participants
Mr. Ahmad Dhari, Director-General of
Administrative Affairs at the FBSA, headed
the FBSA delegation that comprised 15
participants (including six women), mainly
working on forensic and procurement audits.
The participants evaluated the Boot Camp
and Learning Visit as exemplary, considering
them one of the best peer-to-peer capacity
enhancement events.
Memorandum of Understanding
The Iraqi delegation visited the Moroccan
Court of Account premises, where a
Memorandum of Understanding for further
cooperation on both procurement and
forensic audits was signed between the First
President of the Morocco Court of Accounts,
H.E. Mr. Driss Jettou, and the Iraqi FBSA, with
Dr. AbdulBasit Turki, in the presence of Iraq
Ambassador to Morocco.
Results and the Way Forward
The Boot Camp and Learning Visit achieved
their objectives, with deliverables including:
an in-depth knowledge about the Moroccan
system, an expert review of the forensic
audit manual, as well as a review of the
executed pilot forensic audits. The revised
forensic audit manual is in the works and is
expected to be completed by the end of the
project.
Related summary reports,
Bootcamp
Egypt: Boot Camp on
University
Accounting Education
April 2015
Egypt
A Bootcamp on University Accounting
Education in Egypt took place in April 2015.
The
workshop
brought
together
stakeholders of accounting education in
Egypt. They discussed the role of accounting
education in promoting strong financial
systems. In addition, they shared insights
regarding the strengths and challenges
facing university accounting education in the
country and possible directions for future
reform activities. An emphasis was placed on
the key role that university accounting
education reform may play in building skills
and capacity for micro, small and medium
enterprise (MSME) development, as well as
broader economic growth and development.
86
Bootcamp
Libya
Medium Term
Budget Framework
& Public Investment
Management
Medium Term Budget Framework
December 8 - 11, 2014
Public Investment Management Workshop
December 15 - 18, 2014
Michael Schaeffer - Istanbul, Turkey
Even under the current dual public
administration environment that exists in
Libya today, the World Bank has continued to
develop training programs and capacity
building to help improve public financial
governance in Libya. In December 2014, the
World Bank, in cooperation with the
International Monetary Fund, provided
Projects We Like
Supporting Start-Ups and
Enhancing Access to Finance in Jordan
87
www.cvmena.org
88
In The News
Supporting Better Parliamentary Oversight
Parliaments have played a more important role in some countries in
the Middle East and North Africa since the 2011 Arab Spring. Indeed,
recent events have reinforced the central role parliaments should
have in strengthening the publics voice and its participation, as well
as in introducing reforms linked to oversight. In this context, the
World Bank is working with parliamentarians and administrative staff
to help them assess public policy and government expenditures.
Internationally, the experience of many parliaments testifies to the
role effective, representative legislatures have in strengthening
governance and improving democratic processes. Parliamentary
oversight is considered one of the cornerstones of good governance
an essential link in the chain of accountability. Such oversight is
important in terms of ensuring that a governments policies and
programs achieve their desired effect; in shedding light on the
workings of government through parliamentary debate; on improving
the efficiency and effectiveness of expenditure; and in upholding the
rule of law. The capacity of legislatures to function effectively is still a
major concern, though, in many MENA countries. The international
watchdog, Global Integrity, places most of MENA well below Latin
America and the Caribbean and South Asia.
Capable parliaments are crucial to good governance in MENA.
They foster popular participation in politics and promote a more
responsive style of government. This depends on political and
electoral systems, formal parliamentary powers, political will and
space, and technical capacity.
Hisham Waly, Practice Manager of Governance Global Practice at
the World Bank.
Recent reforms across MENA are slowly encouraging parliaments to
play a more proactive role in parliamentary standards of transparency
and integrity as well. As the only institution with authority to oversee
government and play an active role in budget oversight, parliament is
Abdellatif Berroho,
Quaestor and Member of the Board,
Parliament of Morocco
89
Cross-Cutting
Books 89
Recommandation 92
In Their Own Words 93
BOOKS
Suggested New Books
MENA
Jobs or Privileges: Unleashing the Employment Potential of the Middle East and North Africa. MENA Development Report.
The World Bank.
This report maintains that Middle East and North Africa (MENA) countries face a critical choice in their quest for higher private
sector growth and more jobs: promote competition, equal opportunities for all entrepreneurs and dismantle existing
privileges to specific firms or risk perpetuating the current equilibrium of low job creation. The report shows that policies
which lower competition in MENA also constrain private sector development and job creation. Chapter one analyzes the
dynamics and determinants of job creation and tests whether the fundamentals of job creation in MENA are similar to those
in fast growing developing and high income countries. Chapter two shows how different policies in MENA countries shaped
private sector competition and thus the firm dynamics associated with job growth identified in chapter one. Chapter three documents past
industrial policies in MENA and compare the experiences in MENA with the experiences of East Asian countries, highlighting how the differences
are linked to policy objective, design, and implementation. Chapter four analyzes how privileges to politically connected firms result in policy
distortions that undermine competition and constrain private sector growth and jobs in MENA. The report concludes by laying out the
implications for policy of the various findings and lays out the specific areas for policy reform to the roadmap for more private sector growth
and jobs in MENA.
Islamic Banking Opportunities across Small and Medium Enterprises in MENA. International Finance Corporation, IFC
Advisory Services in MENA.
There is a huge demand for Islamic products by SMEs in the MENA region and, according to this study, approximately 35
percent of such businesses remain excluded from the formal banking sector because of a lack of Shariah-compliant products.
In order to reach out to SMEs demanding Islamic products, and as part of IFCs initiative to enhance its SME investment and
advisory services offerings to Islamic financial institutions, we needed to better understand the market from both the
demand and supply sides in order to identify any gaps or niches where IFC could assist and add value. IFC commissioned a
study in nine countries of the MENA region to better understand the demand and supply for Islamic banking products (both
asset & liability products and other banking services) in the SME sector. The countries chosen for this study are: (1) Iraq, (2) Pakistan, (3) Yemen,
(4) Kingdom of Saudi Arabia, (5) Egypt, (6) Lebanon, (7) Morocco, (8) Tunisia, and (9) Jordan. The scope of the study was to: (i) identify the
countries in the MENA region facing gaps in financing and banking needs of SMEs in the Islamic products space; (ii) conduct a supply side
benchmarking to review current capacity of financial institutions to offer Islamic products to this sector; (iii) conduct a demand side
benchmarking to identify key SME customer needs for Islamic products and see how well they are currently being served; and (iv) review the
current enabling environment and readiness levels of banks in terms of the regulatory framework and Shariah compliance. The study reiterates
several of the now well researched and documented reasons for the lack of access to finance for SMEs. However, more importantly, the study
reveals that, there is a potential gap of $8.63 billion to $13.20 billion for Islamic SME financing, with a corresponding deposit potential of $9.71
billion to $15.05 billion across these countries. This is due to the fact that several un-served and underserved SMEs do not borrow from
90
conventional banks, owing to religious reasons. This potential is a new to bank funding opportunity, which is still untapped, as banks and other
financial institutions lack adequate strategic focus on this segment to offer Shariah-compliant products.
Regional Economic Outlook: Middle East and Central AsiaLearning to Live with Cheaper Oil amid Weaker Demand.
International Monetary Fund.
A large and possibly persistent decline in oil prices, and slower-than-projected growth in the euro area, China, Japan, and
Russia, have substantially altered the economic context for countries in the Middle East and Central Asia. The appropriate
policy response will depend on whether a country is an oil exporter or importer. A common theme, however, is that these
developments present both an opportunity and an impetus to reform energy subsidies and step up structural reform
efforts to support jobs and growth. Lower oil prices have weakened the external and fiscal balances of oil exporters,
including members of the Gulf Coperation Council (GCC). Large buffers and available financing should allow most oil
exporters to avoid sharp cuts in government spending, limiting the impact on near-term growth and financial stability. Oil
exporters should prudently treat the oil price decline as largely permanent and adjust their medium-term fiscal consolidation plans so as to
prevent major erosion of their buffers and to ensure intergenerational equity. Outside the GCC, a source of risk in Algerias banking system is
the public banks extensive and direct exposures to large state-owned enterprises in various industries, which are subject to fiscal strains as a
result of lower oil prices. Yemen is at high risk because its banks are highly exposed to government debt against the backdrop of a weak fiscal
position and limited financing options. Selected oil-importing countries (such as Egypt, Jordan, and Lebanon) for which remittances are a major
source of liquidity could experience tighter liquidity conditions if remittances decline.
The
Arab
Uprisings
Explained:
New
Contentious Politics in the
Middle East. Edited by
Marc Lynch. Columbia
University Press.
The Shifts and the Shocks: What Weve Learned and Still Have to Learn from the Financial Crisis.
By Martin Wolf. Penguin Press.
From the chief economic commentator for the Financial Times, The Shifts and the Shocks is the tour dhorizon of the new world
economy. Wolf is one of the most farseeing and imaginative economic commentators. Wolf makes us see how partial and
confused our view of the economic events of the last five years has been. No other book offers such a thoroughly global
perspective, nor one that understands the connection between the macroeconomics and the financial system with Wolfs level
of sophistication and insight. It is not a book for those looking for a cheerful prognosis on the future of the European Union, or
any number of other vital issues hanging fire, and it offers solutions that will seem extremely radical to some, but neither is it
without hope. The new global economic order is lifting tens of millions of people out of poverty and creating new winners and losers at an
unimagined scale and pace. Its simply high time, indeed past time, for our economics to keep pace with our economy. Now, with The Shifts and
the Shocks, it has.
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The Great Recession:
Lessons for Central
Bankers. Edited by Jacob
Braude, Zvi Eckstein,
Stanley Fischer, and Karnit
Flug. MIT Press.
Strengthening
Governance Globally:
Patterns of Potential
Human Progress. Volume
5, by Barry B. Hughes,
Devin K. Joshi, Jonathan D.
Moyer, Timothy D. Sisk
and Jose R. Solorzano.
Paradigm Publishers.
New Paper
Turn Down the Heat in the Arab World
strongly help Arab countries, enabling them to decrease the
vulnerability of their existing energy systems Using wind and solar
energy will also increase electricity production, which is important as
demand in the majority of the countries is expected to increase
steeply in coming decades due to demographic and economic
development as well as to the increasing need for space cooling as
temperatures rise.
Climate change is already affecting the Arab World in dire ways. It will
cause extreme heat to spread across more of the land for longer
periods of time, making some regions unlivable and reducing growing
areas for agriculture. Cities will feel an increasing heat island effect
and most capital cities in the Middle East could face four months of
exceedingly hot days every year. Rising temperatures will put intense
pressure on crops and already scarce water resources, potentially
increasing migration and the risk of conflict.
The World Bank Turn Down the Heat reports warn that without
concerted action, temperatures are on pace to rise to 4C above preindustrial times by the end of this century, and the MENA region will
be hit harder with higher temperatures and more severe droughts.
Energy
Arab World countries have some of the highest wind and solar energy
potentials in the world. Exploiting this wind and solar potential would
Air pollution
Sources of air pollution in the Arab World vary from transportation
systems, greenhouse gas emissions, and other gases from industries.
Coupled with a shortage of institutional capabilities to manage air
pollution, air quality has become unbreathable in most MENAs
largest cities, with tremendous impact on peoples health.
Unprecedented unplanned urbanization, industrialization and
migration of traditionally rural peoples and resettlement of refugees
strain city services and give rise to air pollution.
Natural resources
In most MENA countries, scarce fresh water is diverted, misused, and
polluted with hazardous wastes, sewage, agricultural waste, and
other chemicals. Arable land is being lost to desertification and
unplanned urbanization. Coastal zones are mismanaged and polluted
with oil, threatening fragile ecosystems and biodiversity.
As a result of global warming, especially changes in precipitation
patterns, water availability will decrease in most parts of the MENA
region throughout the 21st century, with decreases possibly
exceeding 15 percent in a 2C world and 45% in a 4C world.
To access the full report, go to:
http://www.worldbank.org/en/region/mena/brief/turn-down-theheat-in-the-arab-world
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CVMENA Recommends
Opening the Black Box:
The Contextual Drivers of Social Accountability
This publication fills an important knowledge gap by providing guidance on how to assess contextual drivers of
social accountability effectiveness. It aims to strategically support citizen engagement at the country level and for
a specific issue or problem. The report proposes a novel framing of social accountability as the interplay of
constitutive elements: citizen action and state action, supported by three enabling levers: civic mobilization,
interface and information. For each of these constitutive elements, the report identifies 'drivers' of contextual
effectiveness which take into account a broad range of contextual factors (e.g., social, political and interventionbased, including information and communication technologies). Opening the Black Box offers detailed guidance on
how to assess each driver. It also applies the framework at two levels. At the country level, the report looks at
'archetypes' of challenging country contexts, such as regimes with no formal space or full support for citizen-state
engagement and fragile and conflict-affected situations. The report also illustrates the use of the framework to
analyze specific social accountability interventions through four case studies: Sierra Leone, Pakistan, Yemen, and
the Kyrgyz Republic.
Source: https://openknowledge.worldbank.org/handle/10986/21686
April 2015
by Helene Grandvoinnet, Ghazia Aslam, Shomikho Raha
93
Helen Clark,
Administrator, United Nations Development
Programme (UNDP)
Christine Lagarde
Managing Director, IMF
Ban Ki-moon,
Secretary-General, United Nations
New Paper
94
Comic Relief
95
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