Reuters
January 21, 1999
WASHINGTON -- Financial turmoil in East Asia has
sharply increased the number of World Bank projects in the region
plagued by problems and has nearly doubled the percentage at risk of
failure, a bank report said Thursday.
More than 16 percent of World Bank projects in East Asia faced ``serious problems'' in 1998, up from 10.5 percent in 1997 and 4.7 percent in 1993, according to the World Bank's Operations Evaluation Department. It said 27.5 percent of the bank's projects in the region were at risk of not achieving their objectives in 1998, up from 14.6 percent in 1997 and 10.5 percent in 1993. For Indonesia alone, more than half of the bank's ongoing portfolio of projects were at risk of failure.
``They have not failed; they are at risk, which means we have to concentrate on finding out how to salvage them, restructure them, cancel them, renew them,'' Robert Picciotto, director-general of the operations evaluation department, told a news conference in Washington. ``What we have, following the East Asia crisis, is a major job of reevaluating our ongoing portfolio.''
The World Bank did not spell out the problems facing specific projects in specific countries. But as a rule, when the World Bank lends money to a government to fund a project, it spells out targets. It may set a timetable for construction of roads and schools or ask the government to change certain economic policies before more money is paid out.
The World Bank attributed the growing number of problem-projects in East Asia to the region's financial crisis, which has crippled government spending on social programs and increased poverty. The International Monetary Fund, the World Bank and other lenders have responded to the turmoil by rushing billions of dollars in aid to the hardest-hit states -- Indonesia, South Korea and Thailand.
Despite last year's sharp increase in problems with projects, the World Bank said East Asia was in line with other developing regions, which have made progress over the last year. The bank said Africa and Latin America have been particularly successful. The report stressed that more than three-quarters of World Bank-supported development projects had ``satisfactory outcomes'' in 1998, but Picciotto said: ``The bank still needs to improve its performance in getting sustainable results.''
The World Bank said the number of problem-plagued projects in Asia could increase in the months ahead if growth does not pick up. ``We have not yet probed the downside,'' Picciotto said. ``The risks are higher.'' Progress in Latin America might also be set back because of recent turmoil in financial markets.
The World Bank report, based on a review of 298 projects, also warned of a sharp increase in inequality between the rich and poor in developing nations. The bank estimates that Asia's financial crisis has pushed at least 20 million people back into poverty in the last year.
It recommended that the World Bank give greater emphasis to social sector development.
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