U.S. Position on World Bank’s Interim Strategy Note (2012-2014), IDA’s National 

Community-Driven Development Project, and Proposed IFC Investment in ACLEDA

(November 1, 2012)

Interim Strategy Note 

The United States welcomes this Interim Strategy Note and the positive changes underway that

have set the stage for World Bank re-engagement in Burma. The international financial 

institutions have an important role in building capacity to support nascent reforms in Burma in 

the near term, and to support economic growth and poverty reduction in the longer term.

Over the past six months, the United States has taken a number of steps in recognition of the 

economic and political reforms underway, including relaxing bans on financial services, new 

investment, and imports of most products of Burma. The introduction by the Government of 

Burma of best practices of good governance and sound financial management, together with

these steps, should help the economy begin to grow.

That said, it is very important to bear in mind that the United States retains the authority to 

sanction individuals and entities, including, among others, those facilitating public corruption,

threatening the peace, security, or stability of Burma, or engaging in certain arms trade with 

North Korea. In addition, the United States is concerned that military-affiliated companies 

continue to have a strong presence in the economy, a problem not only for economic efficiency, 

but also for the civilian authorities' ability to oversee the full scope of military expenditure. 

Critically, as demonstrated by the U.S. Department of the Treasury’s recent designation of the 

Directorate of Defense Industries (DDI) for importing arms or related materiel from North Korea 

into Burma, the United States remains concerned about military trade with North Korea. The 

United States is encouraged by the commitment of Burmese officials to ending the relationship; 

if this relationship is not addressed, it could drastically set back the direction of normalization 

and undermine regional stability.

Normalizing relations with international creditors, including the World Bank, is a cornerstone of 

the re-engagement process. The United States appreciates that the government has begun 

working with the World Bank, Asian Development Bank (ADB), and IMF on priority reforms to 

support sound macroeconomic development, and looks forward to successful completion of the 

arrears clearance exercise early next year. In advance of this step, the United States expects the 

Burmese government will begin making payments on its World Bank and ADB debts as they are

due, which is generally a minimum expectation of countries in the arrears clearance process.

The United States believes it necessary to have continued World Bank coordination and 

collaboration with the ADB and bilateral creditors (including the Paris Club) on arrears clearance 

as part of a comprehensive multilateral effort. The United States welcomed the authorities' 

commitment, made in Tokyo, to work expeditiously with the IMF to articulate a framework to 

underpin macroeconomic stability. The United States would prefer to see this framework in 

place ahead of MDB arrears clearance. It behooves the Burmese government to demonstrate to 

creditors, donors, and investors that macroeconomic policies are coherent, achievable, and 

sustainable.
The Interim Strategy Note sets out an appropriately modest near-term plan for Bank engagement 

focused on diagnostic work, capacity building, and limited interventions in community-based 

development, financial sector strengthening, microfinance, and possibly ICT and emergency 

electricity rehabilitation. The United States welcomes the Bank playing a lead role in 

strengthening public financial management, including enhanced fiscal transparency, which is a 

centerpiece upon which many other reforms will depend. The United States also appreciates that 

the ISN highlights the need to support the three separate transitions taking place.

The United States commends the ISN’s recognition of the Bank’s currently limited knowledge 

base, the government’s weak implementation capacity, and the importance of both engaging civil 

society organizations and supporting bottom-up approaches. In this context, working closely 

with, and learning from, development partners with on-the-ground experience will be important. 

The United States applauds the Bank’s intention to make all of its diagnostic work publicly 

available to help inform debate on the country’s development priorities. 

While the outlook is positive and supportive, it is tempered by caution and realism in recognition 

of the decades of isolation and deep distortions that characterize the country’s economy and 

economic governance. The international community has incomplete information about socioeconomic and governance dynamics in this country, including the existing land rights regime. In 

designing and implementing projects, the Bank should go beyond its normal due diligence in 

supervision and financial monitoring. The Bank must actively promote sensitivity, greater 

transparency, and consultation at every stage to help address issues of human rights abuses and 

ethnic tensions in this splintered and impoverished society. In this regard, the United States 

supports efforts to promote the Extractive Industries Transparency Initiative and welcomes the 

ISN’s focus on social inclusion, particularly with respect to ethnic groups and gender. The 

United States strongly supports a deep and comprehensive program of analysis and technical 

assistance, to which the United States and other bilateral partners will be contributing. Caution

is necessary, however, before moving to investment, including co-financing with donors that are 

prepared to move quickly.

As always, the IFC should employ high corporate governance standards and prudent judgment, 

including careful screening of local sponsors and avoiding engagement with compromised 

individuals, even where such individuals may appear to have high capacity. Achieving broadbased economic growth will require the World Bank Group to avoid working only with those 

who are already in command of many of the country’s assets.

National Community-Driven Development Project

The United States supports the proposed pre-arrears clearance grant for the National 

Community-Driven Development project, recognizing the special circumstances that warrant 

Board consideration of a project that is still far from disbursement, with most critical design 

aspects still to be determined through the consultation process. As the first MDB project in this 

country in decades, the project faces enormous challenges in implementation, but this project 

must be successful to demonstrate tangible benefits to the citizens of Burma of MDB assistance 

and gain their support. The United States urges management, the authorities, and civil society 
groups to work with due care in forging the partnerships and building the capacity at the local 

level that will be essential to the success of the project. All parties involved are impatient to 

demonstrate results on the ground, thereby confirming the authorities' decision to normalize 

relations with its creditors. However, while the Bank has much experience in how to design 

CDD projects, there are still many unanswered questions about the needs and capacity at the 

local level to successfully manage a CDD project. Bank management should avoid pressures to 

speed disbursements for disbursement's sake.

The United States recently heard concerns from some local NGOs that were not included in 

initial consultations and notes that the Bank will need to take care to build trust with local groups 

from the outset. The United States understands that many elements of project design are still 

being developed and will be detailed in an Operations Manual that will benefit from further 

consultations with donors and NGOs. As part of these next steps, consultations should be broadranging, including independent NGOs and community representatives, and not only those who 

have been associated with government. Consultation materials should be translated into the 

relevant local languages. 

Several areas are highlighted below that will require special attention during implementation, 

noting the atypical circumstances of government implementation of donor-financed assistance at 

the local level, and with civil society engagement in this country.

• The project will work largely through village tract-level committees for decision-making 

and oversight. Ordinarily, the Bank should promote working through existing local 

structures, to the extent possible, to avoid over-burdening localities with parallel 

structures. In this case, however, the United States cautions that existing structures may 

require significant reforms to improve transparency and accountability.

• Securing sufficient operations and maintenance (O&M) financing is necessary for the 

sustainability of project-financed community infrastructure. The United States 

encourages the Bank to monitor the effectiveness of the envisioned voluntary village 

funds for O&M and make adjustments in approach, if necessary, so that project benefits 

can be sustained.

• Quality control and general technical oversight, including for environmental and social 

safeguards, will rest on the NGOs/firms to be selected to support each of the townships. 

It will be essential that the NGOs/firms selected have the breadth and depth of technical 

expertise required to provide strong support across each of the townships. At the same 

time, local groups that have not previously been affiliated with the government may be 

well positioned to work with the project.

Finally the United States urges close monitoring. Implementing a CDD project in this fragile 

environment where the Bank does not have the benefit of prior engagement amplifies the risk. 

While the specific risk mitigating aspects of the project are laudable – such as the social auditing, 

capacity building, and the grievance mechanisms – the Bank will need to strengthen its M&E 

activities above and beyond what it conducts in typical operations. 
Proposed Investment in ACLEDA

The United States also supports the IFC’s proposed investment in ACLEDA, and the Bank’s 

separate but related work in strengthening microfinance supervision highlighted in the ISN. The 

World Bank Group has the experience and the instruments to facilitate the welcome economic 

and political changes now underway in Burma, and that microfinance will be an effective tool for 

raising standards of living in this country which suffers from extremely low financial 

penetration, especially in rural areas.

As the IFC’s first foray into Burma, however, it is important that this investment be accepted 

broadly across government, parliament and civil society. Noting that microfinance has 

encountered a number of problems in the region, and that a major regulatory reform of the sector 

underway now has engendered some controversy, the U.S. holds outstanding concerns as to what 

assurances can management provide regarding the support for this investment by the 

government, leading figures in parliament, and civil society, including existing players in the 

sector. Also, the United States remains interested in how this investment will deliver new 

services to previously under-served populations, and/or compete with existing providers and 

other new foreign entrants.