WORLD TRADE
ORGANIZATIONWT/IFSC/W/9
12 October 2001
(01-5000)
Integrated Framework Steering Committee
THE EXTENSION OF THE INTEGRATED FRAMEWORK PILOT PHASE:
SELECTION OF PILOT COUNTRIES AND THE CALENDAR
Report by the World Bank,
on behalf of the Inter-Agency Working Group
1. This report provides a technical and factorial background for the eleven LDCs that have been
identified as potential candidates for the extension of the IF Pilot Scheme.  The implementation of the
Pilot Scheme began in May 2001 in three countries, namely, Cambodia, Madagascar and Mauritania.
The extension of the Pilot Scheme will be considered at the Fourth WTO Ministerial Conference in
Doha, Qatar, 9-13 November 2001.1
2. Pursuant to Paragraph 11 of the framework document of the IF Pilot Scheme, the Inter-
Agency Working Group (IAWG) at its 27th Meeting, 6-7 September 2001, reviewed the on-going
implementation of the Pilot Scheme in the LDCs  and considered its extension to other LDCs.2  As a
result, the IAWG agreed that the following eleven LDCs be considered for the next phase of the IF
Pilot Scheme: Burundi, Djibouti, Ethiopia, Eritrea, Guinea, Lesotho, Malawi, Mali, Nepal, Senegal
and Yemen.
3. The selection of the above countries for the extension of the IF Pilot Scheme was considered
on the basis of the requests by the Governments and their consultations with the core IF agencies.
The selection was assessed on the basis of the criteria agreed by the IAWG at its 25th Meeting, 27
March 2001, and endorsed by the IF Steering Committee at its Second Session, 3 May 2001.  The
criteria are: (i) demonstration of strong commitment by the government to integrate trade into its
national development strategy and its PRSP; (ii) the preparatory stage of the PRSP; (iii) the
preparatory stage of upcoming meetings of the World Bank Consultative Group or UNDP Round
Table; and (iv) conducive operational country environment (e.g. level of infrastructure, resource baseof the World Bank/IMF and UNDP country offices, donor response, and the pace of domestic
reform).
4. On the basis of the technical background provid ed in this document, the IAWG would like to
propose that the implementation of the IF Pilot Scheme, led by the World Bank, begin in Eritrea,
Malawi, Lesotho, Senegal and Yemen, immediately after the Fourth Ministerial Conference.
3  T h e
timetable for the other countries is proposed for 2002 (Table 1).
                                                     
1 Paragraph 11 of the proposal for the Integrated Framework Pilot Scheme, contained in WTO
document WT/LDC/SWG/IF/13, states that "consideration shall be given, no later than the WTO Fourth
Ministerial Conference, to extend the initiative to other LDCs".
2 The report of the 27th IAWG meeting is contained in document WT/IFSC/W/5, 8 October 2001.
3 The work to be undertaken in Eritrea and Yemen will depend on political developments in the
countries.WT/IFSC/W/9
Page 2
1. Burundi
(a) Situation of the economy and trade sector
5. The economy is mainly subsistence-based, with coffee and tea as the main sources of foreign
exchange.  It has shrunk by an estimated 25 percent since 1996, largely as a result  of economic
sanctions imposed by regional leaders following the military coup.  Continuous conflict had led to
destruction of social infrastructure and productive capacities, including in the export sectors.  Thevolume of coffee production reached all time low level during this period.  The declining output,
coupled with negative terms of trade shocks in the post-conflict period, had dramatic effects on
foreign reserves, which fell to all time low level, and are now expressed in terms of days of imports.
The acute shortage of foreign reserves is cited as a major constraint for imports of essential goods and
services.
6. Burundi’s arrears to its external creditors increa sed rapidly in the post-conflict period, with its
external debt reaching unsustainable levels in 2000.  The amount of external debt, which represented91.5 percent of GDP in 1992, reached 150 percent in 2000.  The projected external debt services in
2001 is estimated at US$57 million, equivalent to 110 percent of exports.
(b) Commitment of the Government to trade openness
7. Burundi is a member of the Organization of African Unity (OAU) and the Common Market
for Eastern and Southern Africa (COMESA).  The Burundian authorities have recently expressedinterest in Bank assistance in the implementation of necessary trade reforms which would facilitate
their entry into the common market area within the COMESA region and would increase the
competitiveness of their industries.  They have also requested institutional support from the Bank to
foster international trade and exchange.  Other donors assisting Burundi in this area include the
European Union through the STABEX Fund.
(c) Trade and the national development strategy
8. Burundi qualifies to the debt relief under the Enhanced HIPC Initiative.  The country is
currently preparing its Interim Poverty Reduction Strategy, whose process was officially launched in
July 2001.  Since then, it has completed the participatory diagnostic processes.  The Interim PRSP is
expected to be ready in November 2001.  Moreover, in July 2001, Burundi reached an agreement withthe Fund on a Staff Monitored Program covering the period from 1 July through 31 December, 2001.
A successful implementation of this program could pave the way for a program that could be
supported by the use of Fund resources, and eventually allow Burundi to benefit from HIPC relief.  As
a follow-up to the Paris Conference, there has been a concerted effort, within the international
community, to set up a multi-donor Trust Fund to assist Burundi clear its arrears and pay its debt to its
multilateral creditors during the period leading to its access to the enhanced HIPC Initiative.
9. The World Bank approved in April 2001 a Regional Trade Facilitation Project in Burundi,
Kenya, Malawi, Rwanda, Tanzania, Uganda, and Zambia.  The objective of the project is to jump-
start private sector activities.  The project consists of a political risk insurance facility in support of
commercial financing for productive transactions, in volving enterprises in participating countries and
their foreign partners.
(d) Request for assistance from the Integrated Framework
10. The IF work was initiated in Burundi in 1998, but had been disrupted due to the internal
conflict.  An IF Launch Workshop was held on 18 January 2001 in Bujumbura, in cooperation with IF
partners, together with the AIF and UNIDO.  The workshop, which was attended by Burundi's major
development partners, provided an occasion to discuss the first draft of the strategy for tradeWT/IFSC/W/9
Page 3
development.  The Government also established an IF Steering Committee where the country's
priority sectors, such as fresh vegetables and essential oils have been discussed.
(e) Governance
11. The Burundian authorities are committed to fiscal transparency and sound economic
management.  The Bank has provided technical assistance in the form of public expenditure reviewspanning several years, in order to (i) increase transparency in budgetary processes and execution, (ii)
achieve a more equitable and efficient allocation and use of increasingly limited public resources, (iii)
advance ongoing efforts for peace and national reconciliation is ongoing.  The Government has also
requested assistance from the Bank to increase transparency in the area of public procurement and
resource mobilization.
12. As a result of continuous political instability fuelled by ethnic tensions, Burundi’s CPIA
rating on governance related issues remains slightly below average.  This is likely to improve asprogress are made towards the implementation of transitional arrangements. .
(f) The actors
13. The key actors include: Burundi’s regional de velopment partners, member countries of the
COMESA, the European Union through the STABEX program, the World Bank through the Regional
Trade Facilitation Project, and the World Bank and IMF through ongoing policy dialogue.
(g) Conclusion
14. In the past, the Burundian authorities demonstrated strong interest and commitment to
international trade.  This interest has been growing in the context of globalization and rapid
development of the COMESA.  Institutional reforms in the trade-related areas are part of the policy
dialogue with the Bank, and will be mainstreamed in ongoing work program, following the recentrequest by the Government, and in light of the development in the COMESA.  Moreover, trade, in
particular through the promotion of exports, as means to alleviate shortage of foreign exchange is
central to Burundi's development strategy, as articulated in its poverty reduction documents.  The
IAWG, therefore, strongly recommends the inclusion of Burundi in the scheduled extension of the IF
Pilot Scheme.
2. Djibouti
(a) Situation of the economy and trade sector
15. Djibouti has an open economy based on service activities, primarily the port and related
activities, which account for over two-thirds of its GDP.  The production structure of Djibouti is
characterized by a large share of the non-tradable sector, which is composed of public administration,
transport and telecommunications services, and public works.  The economy is based on services,
mainly in the port, railway, civil service, and French  military garrison.  Due to soil infertility and poor
rainfall, there is hardly any agriculture – the arable land accounts for 0.4% of the total area.  Fisheries
and water resources offer an interesting, but untapped potential, due to the lack of domestic demand
and non-competitive labour and pricing policies.  Mining resources consist of a geothermal
endowment and salt deposits.
16. Most of Djibouti’s population and its important economic assets are concentrated in Djibouti
ville.  Future economic prospects therefore depend largely on Djibouti’s ability to upgrade its port
facilities and improve its trade and transit links with Ethiopia.  The formulation and evaluation of
policy is hampered by the dearth of reliable economic data.  Economic management since 1991 hasWT/IFSC/W/9
Page 4
been characterized by short-term crisis management and pressure from external donors, particularly
France.
17. Djibouti faces many size-related challenges and vulnerability to external shocks common to
most small states - limited scope for the promotion of competitive markets, economic diversification
and innovation, as well as limited scope for economies of scale.  Djibouti has suffered from the
neighbouring countries' continuous wars and other social conflicts over the past two decades.  Theensuing influx of refugees escaping these conflicts have exacerbated economic difficulties and social
tensions, and stretched thin already inadequate basic social services.
(b) Commitment of the Government to trade openness
18. Djibouti is a member of the Common Market for Eastern and Southern Africa (COMESA).
(c) Trade and the national development strategy
19. The authorities have initiated the preparation of a PRSP, with the support of Djibouti's main
development partners, especially the IMF and the World Bank.  The I-PRSP is forthcoming
20. To address its economic and financial difficulties which worsened considerably in the
aftermath of the civil war, the Government has embarked upon the implementation of a program of
economic reforms, with the technical and financial assistance from the IMF since 1996.  The focus of
those reforms continues to be on the State's financial operations with a view to attaining
macroeconomic stabilization.  As part of its stabilization efforts, measures have been taken to increasepublic revenue and control public spending.
21. On structural reforms, the authorities have indicated willingness to reform the public
enterprise sector, including the privatization of large state-owned enterprises.  The management of the
Port has been recently contracted out to the Dubai Port Authority.
(d) Request for assistance from the Integrated Framework
22. The Government requested the assistance from the IF agencies to formulate an issue paper on
trade development on the basis of the IF approach.  In response to the request, an ITC consultant
assisted the authorities to prepare a document which was discussed at the meeting of trade
consultations in September 2000.
(e) Governance
23. On the two proposed indicators of economic governance (regulatory framework and rule of
law), Djibouti scores above the LDC average.
(f) The actors
24. The Government is engaged in preparing several reform activities with the support of the
World Bank and the IMF, including a PRGF and the PRSP
(g) Conclusion
25. Given Djibouti’s strong interest in the IF program and the active preparation towards the full
PRSP, the IAWG recommends that it be included as one of countries for the extension of the IF Pilot
Scheme.WT/IFSC/W/9
Page 5
3. Ethiopia
(a) Situation of the economy and trade sector
26. Ethiopia has traditionally relied on agriculture for a large share of export earnings.  This has
continued during the 1990s, with agriculture accounting for 80 to 90 percent of total exports.
Ethiopia's agriculture exports include coffee and chat (representing some 52 percent and 14 percent ofmerchandise exports respectively in 1999/00), oilseeds (primarily sesame seeds), hides and skins and
pulses.  Manufactured exports are negligible.  Agriculture will remain the dominant export earner for
Ethiopia in the immediate future.  Substantial potenti al exists for increasing export earnings in many
agriculture sectors if a number of policy changes are made.  In addition, there are new market
opportunities which could form the basis for manufactured export take-off over the next two to three
years.  One of the most important opportunities is  represented by the African Growth and Opportunity
Act (AGOA) of the United States, which enables Sub-Saharan African countries to export garments tothe US market free of duty and quota.  Besides garments, a number of market opportunities are
opening up for other value-added exports, particularly in the horticulture sector.
27. Ethiopia was hit by a severe terms of trade decline during 1998/99 and 1999/2000, in addition
to the impact of the war and the drought.  Much of this was due to a fall in export prices.  While
volume of coffee was initially maintained, export values declined by more than 30 percent in 1998/99and a further 10 percent in 1999/2000.  The trade deficit increased from US$755 million in 1997/98 to
US$1074 million in 1998/99, reaching US$1246 million in 1999/2000.  As a result, Ethiopia's
currency came under pressure, and in January 2000, the Government imposed temporary restrictions
to protect its exchange rate.  The restrictions included a 10 percent import duty surcharge; a 100
percent advance deposit requirement for import applications; and, ceilings on import permits.  Despitethese measures, the current account deficit remained high at 7.5 percent of GDP in 1999/2000, up
from 1.6 percent in 1997/98.  Foreign exchange reserves declined to only 2 months of imports .
28. With the signing of the peace agreement, the Government has intensified the implementation
of its reform program.  In January 2001, the Government lifted the import restrictions in anticipation
of external support from the donor community and debt relief with the Enhanced HIPC Initiative.
(b) Commitment of the Government to trade openness
29. The Government of Ethiopia is engaged, with Bank’s assistance, in a process of improving
the business environment and increasing the international competitiveness of  the economy.  The
policy agenda discussed in the recent Economic  Rehabilitation Support Credit includes specific
measures to facilitate access to inputs at world ma rket prices, eliminate ex-post price controls, and
improve export finance.
30. Ethiopia is an observer to the WTO, however , has not communicated its intention to proceed
with the accession.
(c) Trade and the national development strategy
31. Since 1992, Ethiopia has instituted major policy reforms and stabilized macroeconomic
environment.  In 2001, the GFDRE submitted a well received I-PRSP, paving the way for HIPC debt
relief.  As indication of greater openness,  163 foreign investment projects were approved from 1992-98.  However, many impediments remain at the micro level, especially in terms of transportation,
access to credit, and government regulation.WT/IFSC/W/9
Page 6
(d) Request for assistance from the Integrated Framework
32. Ethiopia has undergone the needs assessment process under the ‘old’ IF.  An initial trade
report was developed in October 1999.  The Government was eager to start the process, however, it
was postponed due to border conflicts.  An inform al meeting of the donors took place on Dec. 6, 1999
under chairmanship of the World Bank.  The meeting clarified some of the concerns by donors and
promised to revise the project document updating what the government had already achieved.
(e) Governance
33. On the two proposed indicators of economic governance (regulatory framework and rule of
law), Ethiopia scores above the LDC average.
(f) The actors
34. After most of the trade work in Ethiopia was suspended because of the war, the programs
have been re-started.  The World Bank prepared an Export Development Strategy in 1997 and is
currently working on a study on Ethiopia’s integration into the world economy.  FIAS has recentlyprepared a study on investment promotion strategy framework.  UNCTAD conducted a survey on
investment.  DFID is holding workshops on priv ate sector issues.  UNIDO has undertaking a large
program on enterprises and capacity building.  USAID also has a project on customs and the
implementation of ASEYCUDA.
(g) Conclusion
35. A significant amount of trade-related work was recently carried out in Ethiopia.  The
Government is eager to tackle on the capacity building aspect.  It is proposed that a mission in
December 2001 will explore with the Government and the Bank's Country Team any specific areas of
interest where the analysis needs to be deepened further.
4. Eritrea
(a) Situation of the economy and trade sector
36. At independence in 1993, over two thirds of Eritrea’s exports went to Ethiopia, including
nearly all of its manufactured exports.  In addition, the bulk of Ethiopian imports and exports went
through the Eritrean port of Assab.  Since the war, port fees and charges have fallen from 22 percent
of total revenue in 1997 to almost zero in 2000.  This trade virtually stopped with the introduction ofnakfa, Eritrea’s own currency in November 1997, and the May 1998 conflict led to a complete halt in
trade.    It is likely that there has been a significant amount of informal trade and capital movement
prior to the war because of the open borders and use of the Ethiopian Birr in Eritrea.  While these are
not reflected in the official statistics, they are certain to have been curtailed too.  Total imports and
GDP are $150 million and $900 million, respectively.  Exports of goods totaled about US$54 million
in 1997, in US$28 million in 1998, US$20 million in 1999, and only $35 million in 2000.
(b) Commitment of the Government to trade openness
37. The Government’s objective is that Eritrea will eventually be an export-led economy.  It has
taken a number of supportive policy measures after the independence, including elimination of almost
all quantitative barriers and prohibition on imports.  Currently, there are only three import tariff rates,
with the maximum tariff at 25 percent, which is imposed on non-essential consumer goods and luxury
items.  Export taxes have also been eliminated.  Customs procedures have been substantiallysimplified, and an IMF advisor is assisting in the preparation of a modern Customs proclamation.
With the recent lifting of exchange controls imposed  during the war, the exchange rate system is aWT/IFSC/W/9
Page 7
managed float and the black market premium has been eliminated.  Eritrea is a member of the
COMESA and the IGAD.
38. The Government has asked support from the World Bank in developing an export and global
integration strategy.  In 1999, the Bank prepared an Export Development Strategy report, focusing on
(i) the systemic issues of the trade regime, including the tariff and customs system, foreign investmentregime, and infrastructure and other service support for exports; and (ii) a preliminary assessment of
Eritrea's key sectors, such as textiles, shoes, leather, fisheries, minerals, livestock and horticulture.  As
a follow-up to the report, a Crash Program for Exports has been launched to quickly ramp up exports
to compensate for the loss of the Ethiopian market.  UNDP has been funding this program and is
supporting the dialogue on trade issues.  This prog ram is underway, with the President himself calling
a meeting of exporters to signal Government’s support at the very highest level.
39. Eritrea is not a Member or Observer to the WTO.  However, a workshop on WTO Accession,
jointly organised by UNCTAD and the WTO in February 2001, has stimulated interest in the WTO
matters.
(c) Trade and the national development strategy
40. Since Eritrea is not currently applying for HIPC resources, preparations for an I-PRSP have
been slow, however, are now underway.  The Government has prepared a Transitional EconomicGrowth and Poverty Reduction Strategy (TEGPRS) to guide the post-conflict transition, which was
presented to a meeting of donors in Asmara on September 11-13, 2001.  Trade features prominently in
this document.  Senior policy makers, starting with the President, has demonstrated that trade is a very
high priority, and it is even more so following the break in economic relations with Ethiopia.  The
TEGPRS is expected to serve as the basis for the I-PRSP.
(d) Request for assistance from the Integrated Framework
41. The Integrated Framework has been discussed by Bank staff with the Economic Advisor in
the Office of the President and the Minister of Trade and they are both extremely keen that Eritrea be
selected as one of the countries under the Integrated Framework for Trade Related Technical
Assistance.
(e) Governance
42. Eritrea has very low levels of corruption and is considered a high trust society.  Eritrea’s
policy and regulatory framework is also good with a strong market orientation.  However, Eritrea is
currently undergoing some political turmoil, with questions being raised concerning lack of openness
in decision-making and the transition to democracy.  Several dissidents have been arrested and
independent newspapers shut down.  While this represents a setback in governance, Government is
continuing preparations for Eritrea’s first ever elections.
(f) The actors
43. With the exception of the Bank’s export study, there has been little analytical work on trade in
Eritrea, partly because of the war, but also because it is a small country.  UNDP has been supporting
the crash program.  In addition. a number of donors, including UNIDO, Italy and the US, have small
programs intended to increase exports.  Moreover, as mentioned above, the IMF has a customsadvisor in place.WT/IFSC/W/9
Page 8
(g) Conclusion
44. The Government of Eritrea have demonstrated a commitment to trade, and it is thus likely
that the Integrated Framework w ill have a great impact here.  Ex isting work by the Bank and UNDP
provides a strong platform for the IF work.  Given the strong interest in trade and active preparation of
the PRSP, the IAWG recommends that Eritrea be included as one of countries for the extension of the
IF Pilot Scheme.
5. Guinea
(a) Situation of the economy and trade Sector
45. Real GDP growth in 2000 has been severely af fected by external events, including negative
terms of trade shocks and large security-related expenditures, due to border conflicts.  However, the
current projections for 2002-2004 are that real GDP gr owth will more than recover to an average of
5.9 percent.  Inflation is projected to decline from 6.8 percent in 2000 to less than 3 percent by 2004.
Guinea’s external current account deficit, excluding official transfers, is projected to average 5.5percent of GDP during 2001-2004.
(b) Commitment of the Government to trade openness
46. The Trade Policy Review Body of the WTO acknowledged, at the first review of Guinea’s
trade policies in February 1999, the country's significant progress in liberalizing its trade regime.
4
Guinea has completed an I-PRSP in October 2000, in which the Government declared its commitment
to regional integration and trade liberalization in the context of the creation of a secondary zone
within the ECOWAS by 2003.
47. With a view to aligning the common external tariff (CET) of the WAEMU, the Government
is undertaking a study of the impact of the introduction of the CET on Guinea.  Based on the results of
this study, a strategy and timetable for implementing the CET in Guinea over the medium term will beestablished.
48. Guinea's trade restrictiveness is currently rated at 3 on a 10-points scale (1 indicating
complete openness and 10 indicating complete restrictiveness).  The average MFN tariff stands at
16.4 percent.  As Guinea does not apply non-tariff barriers, the planned introduction of the CET of the
WAEMU is expected to bring about a further reduction of the average tariff by about 2 percent.Subsequently, Guinea's ranking on the scale of trade restrictiveness is expected to improve further.
(c) Request for assistance from the Integrated Framework
49. Guinea has been active in the IF since 1997.  Representatives of Guinea’s private sector, the
Trade Ministry, and the Chamber of Commerce participated the donors' meeting on the Integrated
Program of Support for LDC on Trade and WTO Issues in 1999.  An IF Launch Workshop was held
in Conakry on 6-7 December 2000 to sensitize local stakeholders and discuss trade development
issues and private sector support.  Moreover, a Work Plan was developed by the local IF SteeringCommittee, with the support of ITC, UNDP and UNIDO,  to strengthen the country's participation in
the IF and maximize benefits expected from the country's participation in this approach.
(d) Governance
50. Based on the International Country Risk Guide (ICRG), Guinea has a slightly better score on
the ICRG’s corruption measure, but a slightly worse score on the ICRG’s law and order measure.  The
                                                     
4 See the Concluding Remarks by the Chairperson of the Trade Policy Review Body in the Press
Release of February 26. 1999; available on the internet: http://www.wto.org/english/tratop_e/tpr_e/tp105_e.htm .WT/IFSC/W/9
Page 9
recently established National Anti-Corruption Committee has begun to play an active role in the drive
toward better governance and integrity.
(e) Support for the Government’s trade efforts
51. The Bank and Fund country teams are fully supportive of undertaking a diagnostic trade
integration study under the IF Pilot Scheme.  In April 2000, joining forces with the IFC and the WorldBank, MIGA provided assistance to the Guinean Ministry of Mines in facilitating the Guinea 2000
Mining Symposium, which presented the results of six years of Bank-financed mining reforms aimed
at improving the regulatory environment and updating the geological database of the country. The
mission had participated in discussions led by the MIGA mission to provide assistance to the
Government in promoting foreign investment in the sectors of agri-business, mining and tourism.
Subsequently, an investors meeting was organize d jointly with another donor’s meeting, under the
aegis of the WTO, to strengthen Guinea’s integration into the world economy.
(f) Conclusion
52. Given Guinea’s record on trade liberalization and its active preparation of the full PRSP, the
IAWG recommends that it be included as one of countries for the extension of the IF Pilot Scheme.
6. Lesotho
(a) Situation of the economy and trade sector
53. Lesotho is one of the world’s poorest countries, with GDP per head estimated at just US$408
in 2000.  It remains heavily dependent on remittances from migrants working in South African mines.
However, the country’s economic prospects are slowly being transformed by the exploitation of its
rivers to sell water and, in the future, hydroelectric power to South Africa.
54. A sharp contraction in GDP occurred in 1998 as a result of the destruction associated with a
failed army mutiny.  At the same time, the construction boom caused by the first phase of the Lesotho
Highlands Water Development Project (LHWP) ended.  Agricultural production is erratic, and there
have been serious droughts in recent years.  Only about 13% of the land area is suitable for crop
cultivation.  Agriculture’s share of national output has declined to around 10% because of serious soil
erosion caused by population pressure and overgrazing.  Mining declined after the closure of the maindiamond mine in 1983.  However, the mine has now reopened, and there are signs of further positive
developments in the sector.
55. Other sectors have been growing rapidly thanks to a favorable tax regime and trading
arrangements.  The most notable development has been the growth of export-oriented manufacturing,
led by the clothing and footwear subsector se lling into the South African and US markets.
(b) Commitment of the Government to trade openness
56. With support from the IMF, a structural adjustment program (SAP) was launched in 1988.
The program sought to increase the efficiency of the public sector and to improve the private-sector
environment through tax reform and streamlined investment incentives.  A privatization program was
adopted and the first sales of public enterprises were carried out in 1997.
57. The government entered into a nine-month program of policies, monitored by the IMF, in
2000.  The program was not supported by financial resources, but was intended to pave the way for amedium-term program of support under the Fund’s pove rty reduction and growth facility (PRGF).  As
well as making progress on privatization, the program included measures to strengthen the financial
sector and to improve the government’s revenue base.  Performance under the program was deemedWT/IFSC/W/9
Page 10
satisfactory.  In March 2001, it was announced that a three-year PGRF had been agreed, with the
Fund committing resources of about US$32 million.
58. The government completed the Interim-PRSP in February 2001.  The Government is
committed to preparing a full PRSP, including developing institutional capacity to implement
programs aimed at poverty reduction.  The full PRSP is expected to be ready by June 2002.  UNDP
and the major development agencies have provided assistance for the preparation of the PRSP.  EUprovides assistance on the area of agricultural trade.
(c) Trade and the national development strategy
59. Dependence on revenue from the Southern African Customs Union (SACU), dominated by
South Africa, has been gradually reduced, from over 75% of total revenue in the early to mid-1980s to
just under 50% in recent years. The new export trade has helped to diversify Lesotho’s export
markets, to the extent that South Africa is no longer by far the largest export destination.  In 1985,
exports to countries in the SACU accounted for 87% of Lesotho’s total exports; by 1999, this figurewas only 52%.  Lesotho has benefited from Asian textile manufacturers’ relocation of their operations
to take advantage of the preferable terms that Lesotho enjoys, and to avoid the quota restrictions
which apply to exports from some countries.  The slowdown in the US economy in 2001 may affect
this growth.  However, there are opportunities for significant further expansion in the medium term,
especially as Lesotho has gained a reputation for efficient production in the textile sub-sector.Imports from Asia have also increased, because Asian firms in Lesotho have bought significant
amounts of raw materials from their home countries, notably Taiwan, Hong Kong and Singapore.
(d) Request for assistance from the Integrated Framework
60. Further to a request by the Government, ITC provided assistance during year 2000 for
updating the country's needs assessment and preparing for a national consultation on trade.  A nationalsensibilization meeting was held in Maseru on 15 March 2000.
(e) Governance
61. Anti-corruption task force has been recently established.  Lesotho is following the same
governance structure as South Africa.
(f) The actors
62. The Ministry of Industry and Trade is the main agency of Lesotho.  IMF has an ongoing
PRGF.  UNIDO and UNCTAD have been providing assistance working through the UNDP office in
Maseru.  The World Bank has ongoing programs on private sector development.
(g) Conclusion
63. Given Lesotho’ strong interest in the IF program and the active preparation towards the full
PRSP, IAWG recommends that it be included as one of countries for the extension of the IF Pilot
Scheme.  The preliminary visit to the country can take place in early November 2001.  The mainmission can take place around January or February 2001.
7. Malawi
(a) Situation of the economy and trade sector
64. Malawi has pursued economic reform programs supported by the IMF and the International
Development Association (IDA) since the 1980s.  The focus of economic policy in recent years hasbeen to reduce inflation, improve the fiscal position, and liberalize domestic markets and externalWT/IFSC/W/9
Page 11
trade .  The reform program has made Malawi’s trade  system liberal and transparent.  Non-tariff
barriers were almost completely eliminated in 1997.  Maximum tariffs have progressively been
reduced from 45 percent in 1995 to 25 percent, effective 1 July, 1999.  The average tariff fell from 19
percent in 1994 to 14 percent in 1999.  Foreign currency deposit accounts are allowed for exporters.
Malawi has liberalized restrictions on capital movements by non-residents.  Foreigners are allowed tomake direct investments and repatriate investment proceeds without restriction.
(b) Commitment of the Government to trade openness
65. Over the past few years, the Government has set up a large number of institutions to help
businesses and attract domestic and foreign investments.  In addition to the Ministry of Commerce
and Industry, these include: the Malawi Inve stment Promotion Agency (MIPA), the Export
Processing Zones (EPZs), the Malawi Revenue Authority (for duty drawbacks) and a number of
working groups to interpret the regional trade agreements.  Moreover, there are variety of industryassociations in the private sector.
66. Malawi is a member of the COMESA.  It has agreed to fully participate in the creation of a
free trade zone along with eight others, out of the 21 members.  The country removed all barriers on
international trade, but retains tari ffs on imports from non-COMESA sources.
67. Based on an IMF index of the restrictiveness of trade regimes, Malawi has a rating of 3 (on a
scale of I to I 0, with 10 being the most restrictive), compared to an average rating of 5 for sub-
Saharan African countries.
(c) Trade and the national development strategy
68. Trade policy reform is clearly a key element of the national development strategy.  The
Government recognizes that restructuring its trade regime is essential for creating the necessaryenvironment for private sector development, especially in the area of small and medium scale
enterprises.  Such growth has direct linkage to poverty reduction.  The Government is also concerned
about the large number of regional trade agreements that it has entered into, many of which may be
internally inconsistent.
69. Malawi is currently preparing a full PRSP and an analysis of trade policy is being addressed
by one of the technical working groups.  A first draft of the PRSP is expected to be ready by the end
of December 2001.
(d) Request for assistance from Integrated Framework
70. Although the trade policy is being addressed in  the context of the PRSP, the Government is
keen that further analytical work be carried out to provide the necessary basis for a more informed
policy formulation in this area. In this regard some  elements of such analysis are already included in
the ongoing country Economic Memorandum.   The Government and the country team believe thatthe policy formulation in the trade area will immensely benefit from the work proposed under the
Integrated Framework as proposed above.  The IF st udy is also expected to build on the findings from
the first Trade Policy Review of Malawi by the WTO, which is currently underway.
(e) Governance
71. Malawi has improved in governance.  The countr y is an active participant in the seven-nation
WBI anti-corruption program.  On the two propos ed indicators of economic governance (regulatory
framework and rule of law), Malawi scores above the LDC average.WT/IFSC/W/9
Page 12
(f) The actors
72. The WTO is currently undertaking its first Trade Policy Review for Malawi, which is to be
discussed by the TPR Body on 29 and 31 January 2002.  Moreover, many donors have large programs
for studies and technical assistance in Malawi.  The IF diagnostic study will involve integrating
existing work and filling in the gaps.
(g) Conclusion
73. IAWG recommends Malawi to be included in the extension of the IF Pilot Scheme, given the
strong interest in trade and the ongoing PRSP preparation activities.  A preparatory visit by the
mission chief can take place end-November 2001.  This visit can be coordinated with a World Bank
Economic mission planned for the same period to prepare the TORs and involve the Government and
agencies and donors.  The main mission can be undertaken in January 2002.
8. Mali
(a) Situation of the economy and trade sector
74. Mali is suffering from a deepening domestic crisis in the cotton sector, which has seen a
slump in production, as well as from the economic and political crisis in neighbouring Côte d’Ivoire,
Mali’s largest export destination and source of workers’ remittances.  The external sector is
dominated by the fluctuating output of Mali’s main traditional exports, which are cotton and gold.
(b) Commitment of the Government to trade openness
75. Mali is a member of the UEMOA and has adopted the UEMOA tariff structure.
(c) Trade and the national development strategy
76. Trade is considered important by the Government.  In the view of the Bank country team,
however, Mali confronts serious macro-economic, political and sectoral challenges that are also
priorities.  The country is progressing towards a full PRSP.  The I-PRSP was presented at the Boardof the World Bank in September 2000.  A PRSC is being prepared to be taken to the Board in
December 2001.  Another one will be prepared for 2002.
77. The Bank/IMF country economists are interested in trade issues and in working with the IF
program.  The time line for PRSP preparation, due to be completed in December 2001, provides some
scope for assistance in integrating trade into the development strategy.
(d) Request for assistance from the Integrated Framework
78. Mali has been active in the IF.  The Government has prepared a strategy for trade
development with the assistance of IF partners.   The strategy includes the preparation of a document
identifying priority actions for intervention and the organization of consultations with the country's
major development partners.
79. USAID is starting trade work in October 2001, which will complement the work by the IF
partners.
(e) Governance
80. Mali scores above average on the two governance indicators reported in Table 2.WT/IFSC/W/9
Page 13
(f) Conclusion
81. Trade integration is a key element of future growth for Mali.  Given the planned work by
USAID, the IAWG recommends that Mali be consid ered for startup of the IF process after May 2002.
9. Nepal
(a) Situation of the economy and trade sector
82. Nepal’s trade has been expanding rapidly in recent years following singing a preferential
trade treaty with India.  Currently, Nepal has one of the largest trade to GDP ratios, i.e. around 48% in
2000-01.  There are very few quantitative restrictions.  The average statutory tariffs are 14%.  Ready-
made garments have overtaken woollen carpets to become Nepal’s largest export item.  Garment
exports grew by 43.5% in 1999/2000 to reach NRs13.9bn (US$188m).  Nepalese carpets and
pashmina, exported mainly to OECD countries, are now Nepal’s second and third largest exports.
Recently, Nepal’s export growth has slowed down.
(b) Commitment of the Government to trade openness
83. The country has undertaken trade liberalization.  Nepal is an observer to the WTO and is in
the process of accession.  Nepal applied for GATT/WTO in 1990, and submitted to the Memorandum
on Foreign Trade Regime in 1990 and 1998.  The first Working Party on Nepal's Accession was held
in May 2000.
(c) Trade and the national development strategy
84. The government considers trade and export growth a high priority in their development
strategy. However, the revised I-PRSP does not reflect a trade emphasis and the Bank/Fund have
flagged this in their dialogue with the national PRSP team.
(d) Request for assistance from the Integrated Framework
85. Nepal has undergone the needs assessment process and participated in follow-up activities.
(e) Governance
86. Nepal scores above average on the economic governance indicators reported in Table 2.
(f) The actors
87. The Government is engaged in preparing several related major reform activities with support
from the World Bank and IMF, including a PRGF, financial and budget reform, as well as the PRSP.
As a result of these activities, and given Nepal’s relative progress in trade reforms compared to
neighbouring countries, an intensive focus on trade at this time is considered to be difficult to attain
by Bank/Fund staff, and explains why trade has been placed a bit on the back burner.  However, there
is strong interest by the Bank/IMF country economists to help the Government in the trade area.
(g) Conclusion
88. Nepal is a good candidate for inclusion in the extension of the IF Pilot Scheme.  However,
given other activities supported by international development agencies, the IAWG recommends that
the IF process in Nepal start after May 2002.WT/IFSC/W/9
Page 14
10. Senegal
(a) Situation of the economy and trade sector
89. The policy reforms since early 1994 have led to a marked recovery of economic activity and a
significant improvement in Senegal’s financial po sition.  The average real GDP growth between 1995
and 1999 was 5.2 percent, which is the first sustained increase in average per capita growth since
1960s.  Effective control of inflation resulted in a 35 percent depreciation of the real exchange rate.Continuous good performance on inflation helped preserve the depreciation and this led to a
substantive increase in its competitiveness.  This re sulted in a significant growth in exports of fish,
groundnut products, phosphates and tourism services.
(b) Commitment of the Government to trade openness
90. In the aftermath of the devaluation, the Government implemented trade  and tax reform.
Tariffs lowered from a pre-reform bracket of 6-124 percent to one of 5-50 percent.  Most of the
quantitative restrictions on imports of certain goods were lifted during 1994-1996 and replaced bytemporary import surcharges.  Two prior authorizations remain, for imports of gold (for monetary
policy purposes), and for second-hand clothing (for health reasons).  Export subsidies were
eliminated.  Moreover, the VAT was simplified, with the number of categories reduced from six to
three, the rates reduced from a pre-reform range of 0-34 percent to a new range of 0-20 percent.
91. In April 1998, Senegal  participated in the WAEMU's (West African Economic and Monetary
Union) first step toward the Common External Tariff  (CET), by introducing a four-tier external tariff
structure in the range of 5-30 percent (including the customs stamp), down from a pre-reform level of
5-50 percent.  In January 2000, Senegal implemented the final stage of the CET by introducing the
WAEMU external tariff structure with three rates of 5, 10, or 20 percent, with zero tariffs imposed on
fellow WAEMU members.
(c) Trade and the national development strategy
92. The Government is committed to trade liberalization, through simplification of trade and tax
procedures.  The World Bank is currently providing assistance under the program Senegal Trade
Reform and Competitiveness Credit.  This credit supports reforms in customs and tax procedures, as
well as other trade facilitation measures.
(d) Request for assistance from the Integrated Framework
93. Senegal will complete its PRSP by the end of 2001.  It is expected that next year the
Government will begin the implementation of its poverty reduction strategy.  A major component of
the strategy is the policy agenda for increasing economic growth and competitiveness through
improving the environment for the private sector.  Policies to promote economic growth must be
situated squarely in the global market context, given the new liberalized environment in the region.
(e) Governance
94. Senegal has an above-average score on public sector management.  The country has
undertaken reforms to improve performance systems in the civil service, while meeting WAEMU
requirements on submitting audited public accounts.  The program supported by the trade credit
mentioned above contributes to increasing transparency and accountability, by computerising and
linking customs and tax databases in a way to increase both efficiency and timely surveillance ofrecords.WT/IFSC/W/9
Page 15
(f) The actors
95. The Government is engaged in major reform projects with the World Bank and IMF support.
UNDP also has a substantial program in Senegal.  Senegal has also been making use of WTO
technical assistance in helping it define measures of customs clearance time and actions that can help
reduce it.
(g) Conclusion
96. Given Senegal’s expressed interest in the IF and active preparation of the full PRSP, the
IAWG recommends that it be included as one of countries for the extension of the IF Pilot Scheme.
The preliminary visit to the country can take place in early November 2001, and the main mission can
take place around January or February of 2001.
11. Yemen
(a) Situation of the economy and trade sector
97. Real GDP grew by 5.1% in 2000, mainly due to high oil prices and recovery in the
manufacturing and services sectors.  The macroeconomic performance was good in the first half 2001.
Favorable economic developments this year include: (i) good rainfall and continued high oil prices are
expected to boost agricultural and industrial output and consequently a relatively high GDP growth
rate; (ii) inflation rate continued to decline; (iii) at tainment of a fiscal surplus in the first half of the
year, and stability in the foreign exchange market and interest rates; (iv) current account and overall
Balance of Payment (BOP) surpluses, and record accumulation of foreign reserves (more than one-
year of imports); and, (v) continued decline in total external debt and its burden.
98. Forecasts for GDP growth in 2001-02 stand at 4.1% and 4.3%, respectively.  The
macroeconomic outlook for 2001-02 is positive, with oil prices expected to be high (though volatile).The forecasts for Yemen’s economy are currently complicated by the fact that the impact of the
events in the US is still not clear.  Yemen’s economy is highly dependent on oil prices, and as long
they remain high, the Yemeni economy will be shielded from other expected external shocks (decline
in FDI, tourism, remittances, etc.).  Yemen receives little FDI, and tourism does not contribute more
than one percentage points of GDP.  Inflation, which declined to single digit in 1999 and 2000, isexpected to average 9.3% in 2001 and to decline in the following years.
99. Mainly due to high oil prices, the current account in Yemen achieved a record surplus
surpassing 24% of GDP in 2000.  Oil exports increased from US$ 2.1 billion in 1999 to US$ 3.66
billion in 2000.  The Government’s share in oil exports reached US$ 1.9 billion in 2000, while the
share has reached US$ 1.1 billion until end August 2001.
(b) Commitment of the Government to trade openness
100. Tariffs are currently low, and there are no significant non-tariff barriers.  Since 1995, the
Government of Yemen (GoY) has undertaken a number of  reforms in the trade sector, as part of its
overall program for financial, economic and administrative reforms.  Upon unification, the mean
nominal tariff was about 27%.  Imports were subject to custom duty under a 15-bands tariff structure
with the range from 5% to 200%.  In addition, imports were also subject to numerous taxes and
surcharges.  Furthermore, virtually all imports required licenses.  In 1996, a comprehensive reform tothe tariff and trade system was implemented to reduce effective protection.  The 15-band tariff
structure was replaced with a 4-band structure with tariff rates of 5, 10, 15, and 30% ad valorem.  All
import bans were abolished, and import licensing was eliminated for most commodities.  The customs
valuation rate was also unified with the market exchange rate.  In 1997, all imports fees and
surcharges were eliminated, and government controls over exports were eliminated.  In October 1997,WT/IFSC/W/9
Page 16
the maximum tariff was further reduced by 5 percentage points.  During 1998-2000, most of the
remaining tariff and non-tariff barriers were eliminated.5
101. The trade regime in Yemen today is closer to standard international rules.  The mean tariff
rate is now estimated at 12%.  And with elimination of most non-tariff barriers, Yemen trade
restrictiveness index declined from 10 (closed or very restrictive) in 1990 to 2 (open).6  Furthermore,
Yemen embarked on institutional reforms in the customs area with the assistance of a number ofdonors (e.g., ASCUDA system).  The banking system is also open to foreign entry.
102. Since early 1998, the GoY has undertaken several steps towards the accession to the WTO.  A
ministerial committee was established to study the issue, and based on its recommendation, the GoY
recommended to the Parliament “accession to the WTO” in May 1998.  Consequently, the GoY
applied for an “Observer Status” with the WTO which was accepted in April 1999.  A year later,
Yemen applied for “Full Membership Status” and the WTO General Council accepted Yemen’s
formal application for the WTO membership in July 2000.  Yemen is currently preparing the“Memorandum on Foreign Trade Regime", which serves as the basis for its accession negotiations.
(c) Trade and the national development strategy:
103. In the I-PRSP, the Government highlights the importance of continuing trade liberalization
policies through: (i) revising custom tariffs to encourage exports and ultimately attract more foreign
investments; and (ii) seeking accession to the WTO.
104. In the Second Five-Year Plan (SFYP), the Go vernment stresses the importance of the
integration of the Yemeni economy with the global economy by strengthening Arab and regional
economic cooperation and integration and by accession to the WTO.  Yemen’s foreign trade goals
include: (i) continued implementation of commercial sector reforms and the foreign trade
liberalization policy (e.g., review of foreign trade legislation, regulations, and institutions); (ii)boosting and diversification of non-oil resources and increasing the share of non-oil exports in total
merchandise exports; (iii) encouragement and development of the potentially competitive export
sectors (manufacturing, fishing, and tourism)s; boos ting of the added value of agricultural exports;
and the attraction of foreign capital to joint investme nts to strengthen these activities; (iv) exploitation
of bilateral and multilateral agreements and Arab and regional economic blocs to establish free tradeand industrial zones, strengthening of the role of these zones in the development of the national
economy, completion of the implementation of the free zone in Aden, and a study of the
establishment of other free zones; (v) efforts toward Yemen’s accession to the WTO, and preparation
of the conditions suited to this accession in cooperation and coordination with the various agencies
and institutions to enhance exploitation of the benefits and exceptions granted to LDCs and to reduce
the burdens of Yemen’s accession on the national economy.
(d) Request For Assistance From the Integrated Framework:
105. On 17 June 2001, the Chief of Communications and Coordination Office with WTO and
advisor to the Minister of Trade and Industry requested the Bank to provide more assistance to
Yemen’s effort to join the WTO. He indicated that Yemen is very keen to utilize the Trade-Related
Technical Assistance provided through the Integr ated Framework Program (IF). He indicated that
Yemen was among the countries proposed for the IF pilots and urged the Bank to assist in enrollingYemen in the IF program as soon as possible.
                                                     
5 IMF (2001) “Republic Of Yemen: Selected Issues” April 2001.
6  Ibid, page 55-60.WT/IFSC/W/9
Page 17
(e) Support for the Government’s trade efforts:
106. Following a request by the Government, the World Bank sent a mission to Yemen in June
2000 to provide assistance and advise on the accession of Yemen to the WTO.7  The mission made
several presentation and left the GoY with a report on WTO issues.
107. An analysis of the support provided to the agriculture sector, as required by the WTO, has
been undertaken with the assistance of FAO and preliminary work on TRIPS has been initiated with
the help of  WIPO.
108. The Bank is fully supportive of undertaking the trade integration study envisaged in the pilot
phase of the IF,  Given past and ongoing work on the PRSP and trade-related issues, there is a very
good prospect that trade will be integrated into the PRSP.  The GoY understands that the integration
study to be undertaken under the IF would assist in its efforts for the accession to the WTO.
(f) The actors
109. In addition to the National Committee for Preparation and Negotiations with WTO (NCPN-
WTO, established by Ministerial Decree 239 on 18 December 1998), the Government agencies that
are related to trade policy matters are: the Ministry of Trade and Industry, the Chamber of Commerce,
the Tax and Custom Authorities, the Parliamentar y Committee for Trade and Industry, the Aden Free
Zone, and the General Investment Authority.
(g) Governance
110. Yemen's public administration was severely impacted by a series of events since 1990.  The
unification of the North and the South required the merger of two very different systems, creating a
much larger civil service that at times duplicated functions.  The return of around 800,000 Yemenis
following the Gulf War required the Government to  absorb a large number into the civil service for
social reasons, further exacerbating the problem of over-staffing.  The economic turmoil throughout
1990-95 caused civil service wages to decline substantially in real terms.  The overall result is a very
large, poorly-trained and poorly-paid public administration that lacks adequate enforcement of civil
service processes and procedures.
111. The Economic Freedom Indicator of the Heritage  Foundation (HF) is a composite index that
ranges from 1 to 5, with 1 being most free and 5 being least free, based on 50 measures of trade
policy, foreign investment environment, fiscal burden of government, levels of government
intervention, banking and finance, wages and prices, property rights, regulation, and the black market.
Yemen, with a score of 3.85, is judged “mostly unfree”, performing somewhat less well than most of
the countries in the region (average 3.30.)
(h) Conclusions
112. Yemen has expressed to the World Bank its strong interest for inclusion in the extension of
the IF Pilot Scheme.  Trade issues have also been addressed in the Second Five Year Plan (2001-
2006) which underscores the importance of trade for growth and poverty reduction and calls for
concerted efforts to enable Yemen to join the WTO.  The forthcoming PRSP is expected to
incorporate trade issues in the growth/poverty reduction nexus.
                                                     
7 The Mission consisted of Mr. David Tarr, Mr. Constantine Michalopoulos, and Mrs. Linda Van
Gelder. The mission held a series of meetings with key government and Central Bank officials and made
presentations on issues related to the WTO accession at a workshop organized by the Ministry of Supply andTrade.WT/IFSC/W/9
Page 18
Table I.  Timetable for the second phase of the Integrated Framework Pilot Scheme
Countries Preparatory Main mission Interim-PRSP
Or PRSPCommitment
to trade in
PRSPBank
Country
team interest
Burundi * * I-PRSP
forthcomingHigh
Djibouti * * I-PRSP
forthcomingHigh
Eritrea Mid-November
2001January 2002 I-PRSP
forthcomingYes High
Ethiopia December 2001 TBD I-PRSP submitted
in March 2001.
PRSP planned forMarch-April 2002Low
Guinea I-PRSP Oct 2000 High
Lesotho Early to mid-
November 2001January 2002 I-PRSP Feb 2001
PRSP June  2002 Yes High
Malawi Late October
2001January 2002 I-PRSP Dec 2000 Yes High
Mali March April
2002May 2002 I-PRSP board Sept
2000Yes High
Nepal May 2002 TBD Interim PRSP 2001,
PRSP ongoingYes Moderate
Senegal November 2001 January 2002 High
Yemen January 2002 February 2002 I-PRSP Feb 2001;
PRPS forthcomingHigh
Notes:
1. The exact timing of the Yemen and Eritrea missions are dependent on military/political
developments in the region.
2. * For Burundi and Djibouti the timing of the missions are not determined yet.WT/IFSC/W/9
Page 19
Table 2.  20 Least Developed Countries: Governance Characteristics
LDC Regulatory Framework Rule of Law
Estimate Stand Error Estimate Stand Error
Bangladesh -0.155 0.395 -0.929 0.276
Cambodia -0.036 0.602 -0.235 0.601
Chad -0.740 0.597 -0.827 0.450
Djibouti -0.522 0.602 -0.235 0.601Ethiopia -0.033 0.333  0.269 0.429
Gambia, The -0.250 0.520  0.274 0.443
Guinea  0.197 0.517 -0.762 0.371
Hait i -1.133 0.520 -1.495 0.443
Lesotho -0.058 0.351 -0.240 0.566Liberia -1.248 0.718 -1.289 0.549
Madagascar -0.209 0.517 -0.825 0.371
Malawi  0.081 0.332 -0.409 0.281
Mali  0.290 0.517 -0.465 0.371
Mauritania -0.846 0.602 -0.558 0.601
Mozambique -0.227 0.332 -1.046 0.363
Nepal -0.360 0.602 -0.558 0.601Tanzania  0.183 0.291  0.161 0.253
Uganda  0.184 0.291 -0.013 0.253
Yemen, Rep. -0.523 0.520 -1.008 0.314
Zambia  0.252 0.291 -0.402 0.253
LDC Average -0.620 0.488 -0.758 0.432
Memo:
Other Low
Income-0.526 0.339 -0.605 0.245
Lower Middle
Income-0.032 0.378 -0.158 0.279
Upper Middle
Income 0.521 0.315  0.292 0.255
High Income  0.784 0.272  1.301 0.242
Note:
The governance indicators reported in this file reflect the statistical compilation of perceptions of the quality of
governance of a large number of survey respondents in Industrial and developing countries, as well as non-governmental organizations, commercial risk rating agencies, and think-tanks during 1991 and 1998. They in no
way reflect the official position of the World Bank, its Executive Directors, or the countries they represent.  As
discussed in detail in the accompanying papers, countries’ relative positions on these indicators are subject tolarge margins of error that are clearly indicated in an available data file.
The 2 governance indicators in this worksheet are measured in units ranging from about –2.5 to 2.5, with higher
values corresponding to better governance outcomes.  The column labeled “Estimate” provides the point
estimate.  The column labeled “Standard Error” contai ns the corresponding standard error.  The regulatory
framework focuses on government’s good policies:  measures of incidence of market un-friendly policies suchas price controls, or inadequate bank supervision, as well as perceptions of the burdens imposed by excessive
regulation in areas such as foreign trade and business development.   The rule of law index includes severalindicators which measure the extent to which agents have confidence in and abide by the rules of society.  TheseWT/IFSC/W/9
Page 20
include perceptions of the incidence of both violent and non-violent crimes, the effectiveness and predictability
of the judiciary, and the enforceability of the contracts.
The indicators are based on data referring to 1997-1998.  Details on the concepts measured by each indicator, its
components, and the interpretation of the point estimates and standard errors can be found in the research papersby Kaufmann, Kraay and Zoido-Lobaton (1999a,b). All indicators are subject to a margin of error.
__________