Journal Issue
Share
Finance & Development, September 1976
Article

Bank activity: Increased lending for development of energy resources; results of Singapore traffic project; Bank loans and IDA credits

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
September 1978
Share
  • ShareShare
Show Summary Details

Bank increasing energy lending; loans now for oil and gas development

The Bank is the largest external lender in the energy sector, and it is expected to continue expanding this lending over the next few years, mainly due to the sharp increase in oil and energy prices in 1973–74 and the growing balance of payments deficits of oil and energy importing developing countries. About one fifth of all past World Bank financing has gone toward the development of energy resources. This has included over 300 loans amounting to more than $9 billion for power projects, principally electric power, in 69 countries. Coal mining and the transportation and processing of oil and gas have also been financed.

The Conference on International Economic Cooperation held in Paris as part of the “North-South Dialogue” had urged the Bank in June 1977 to increase its support in this area. In the 12-month period since June 1977 the Bank has sent missions to 16 developing countries for the identification and preparation of oil and gas projects.

Over the last five years the Bank has lent $4.5 billion for 90 power projects. These figures are projected to increase to $6.9 billion for 106 projects over the next five years. Special emphasis is being given to non-oil sources of energy—hydro, coal/lignite, and geothermal. A larger proportion of assistance will be allocated to investments in distribution systems to provide service to the poor, especially in rural areas. The Bank will concentrate its lending in countries, especially in Africa, which are not able to secure capital from private capital markets.

The Bank has loaned $750 million for 15 projects aimed at developing oil and natural gas resources (mostly for pipeline projects) and for 4 coal development projects. Until recently it had not financed petroleum production because international prices for oil were low and supplies abundant, and because finance was readily available from other sources. The situation changed significantly with the quadrupling of oil prices in 1973–74. The Bank made its first loan for oil and gas production at the end of fiscal year 1977—a $150 million loan to India for the development of the Bombay High offshore field.

In July 1977, a greatly enlarged program for fuel development was approved by the Bank’s Executive Directors and a new Petroleum Projects Division was established within the Bank. The Bank’s lending for oil and gas projects is expected to increase steadily to cover eight such operations by fiscal year 1981, and the amount of annual lending is expected to rise from $150 million in 1977 to $500 million. Studies completed by the Bank indicate that while 14 oil importing countries are producers of oil and/or gas at present, 50 to 60 have a potential for production. Production costs for crude oil would range in these countries between $3 and $6 per barrel, comparing favorably with the price of imported oil of over $12 per barrel. Intensive petroleum development in these countries would reduce their dependence on oil imports from 80 per cent of their needs in 1977 to below 50 per cent in 1990, despite continued increases in consumption. However, most of the oil importing developing countries lack the technical skills and the financial resources to develop this potential. The Bank’s increased lending to these countries is expected to cover only between 10 and 20 per cent of project costs, but could encourage finance of up to about $3 to $4 billion a year from other sources, such as foreign investors, suppliers’ credits, and private banks.

The Bank also plans to increase its technical and other assistance to member countries to enable them to attract investments for exploration, including geological and geophysical surveys, drafting petroleum legislation and model agreements, and hiring advisors to assist in negotiations with foreign investors.

Pushpa Nand Schwartz

Update: Bank traffic project in Singapore yields results that are widely applicable

In the March 1976 issue of Finance & Development we reported on a Bank project in Singapore that was designed to assist the control of traffic congestion in urban areas (“Congestion pricingthe example of Singapore,” by Peter L Watson and Edward P. Holland). This problem is common in a growing number of cities in both the developing and the developed world. This report, by one of the authors of the earlier piece, reviews the experience of Singapore on the completion of the Bank project.

The Singapore Traffic Restraint Study, undertaken by the Bank’s Urban Projects Department, was recently completed and the final report issued. The report concludes that the form of “road pricing” used in Singapore—the requirement to purchase and display a special license to drive into the Central Business District (CBD) during the morning peak hours—is a highly successful method of reducing localized traffic congestion. Faced with the high license fee, car drivers changed the time of their trips, found new routes, formed car pools, or switched to the bus. The result was a 75 per cent reduction in the number of cars entering the CBD during the restricted hours. Delays and frustration were reduced; pollution levels fell; pedestrian conditions improved; and public opinion was in general favorable. No adverse effects on business were reported.

Bank staff believe that this type of urban transport policy is an essential part of the “toolkit” of a modern transport planner and are disseminating the results widely. Already, a similar scheme has been included in a Bank loan for Kuala Lumpur, Malaysia, and one is being planned for Bangkok, Thailand. Bank loans to Brazil and Costa Rica include funds to study the applicability of the concept in those countries. In addition, preliminary reports have been used to assist urban transport planning discussions in London, Manila, and Nairobi.

At a more general level, Bank staff associated with the Singapore study have participated in an Organization for Economic Cooperation and Development working group on traffic limitation, using Singapore as an example, and in the Steering Group for a U.S. Department of Transportation program to promote a “road pricing” demonstration project in the United States. Papers based on preliminary reports were presented by the study team at international conferences in Mexico City, Rotterdam, and Warwick (England), as well as at several universities.

It is through efforts like these that the Bank attempts not only to learn about promising new techniques, but also to spread the results as widely as possible, giving the research a truly operational character.

Peter L. Watson

IDA credits approved during fourth quarter of fiscal year 1978(Ended June 30, 1978)
CountryaPurposeAmount

(In millions of U.S. dollars)
Bangladesh (2)Agricultural research, small-scale industry13.00
BeninPort development11.00
ChadEducation8.30
Egypt (2)Agricultural development and

credit, sites and services
46.00
EthiopiaGrain storage and marketing24.00
Gambia, The (2)Development finance company, education8.50
GuyanaIrrigation10.00
HaitiTransportation15.00
India (7)Dairy development, fisheries,

horticulture, irrigation, seeds,

thermal power
608.50
IndonesiaRural credit30.00
Kenya (2)Education, urban developmentb48.00
LesothoRural development6.00
MadagascarHydroelectric power33.00
MalawiRural development10.70
Nepal (2)Irrigation, telecommunications44.50
Niger (2)Development finance company,

forestry
9.50
PakistanAgricultural development and

extension
12.50
PhilippinesRural infrastructure28.00
Somalia (2)Technical assistance, water

supply
9.00
Sri Lanka (2)Tea crop rehabilitation and

diversification
25.50
Sudan (2)Agricultural research, mechanized

farming
31.00
Tanzania (4)Cashew nuts, rural development,

textiles,c tobacco
73.50
TogoFeeder roads5.80
Yemen Arab Republic (3)Agriculture, highways, textile

rehabilitation
29.00
Yemen, People’s

Democratic

Republic (2)
Power, water supply6.20
ZaireOil palm9.00
ZambiaHighwaysd11.25
Total1,166.75

Figures in parentheses are the number of credits approved for the respective country.

With a $25 million World Bank loan.

With a $25 million World Bank loan.

With an $11.25 million World Bank loan.

Figures in parentheses are the number of credits approved for the respective country.

With a $25 million World Bank loan.

With a $25 million World Bank loan.

With an $11.25 million World Bank loan.

World Bank loans approved during fourth quarter of fiscal year 1978(Ended June 30, 1978)
CountryaPurposeAmount

(In millions of U.S. dollars)
Algeria (2)Education, sewerage172.00
ArgentinaAgricultural credit60.00
BoliviaHighway maintenance25.00
BotswanaUrban development8.00
Brazil (5)Agricultural extension, highways,

petrochemicals, rural

development, urban transport
424.00
Colombia (5)Development finance companies,

electric power, industry,

urban development
315.80
Costa RicaIndustrial credit15.00
El SalvadorTelecommunications, vocational

training
32.00
FijiHydroelectric power15.00
GreeceVegetable production and

marketing
30.00
GuatemalaPower72.00
HondurasAgricultural development10.50
India (2)Thermal power, telecommunications225.00
Indonesia (4)Industry, irrigation, nucleus estates

and smallholders
246.00
Ivory Coast (2)Rubber, sewerage53.00
KenyaUrban developmentb25.00
KoreaDevelopment finance companies110.00
Liberia (2)Highways, power23.80
Malaysia (2)Ports, land settlement41.00
MauritiusElectric power15.00
Mexico (5)Development finance companies,

livestock credit, tropical

agriculture, urban development,

agriculture and rural

development
419.50
MoroccoRural development65.00
Nigeria (2)Industrial development and finance,

oil palm
90.00
PanamaHighway maintenance12.00
Papua New
GuineaPort development3.50
Philippines (4)Agriculture, development

finance companies, rural

electrification
305.00
Portugal (2)Agricultural and fisheries credit,

education
91.00
RomaniaEarthquake rehabilitation and

reconstruction
60.00
Syrian Arab RepublicHighways58.00
TanzaniaTextilesc25.00
ThailandSites and services8.60
TunisiaRural roads32.00
Turkey (3)Forestry, livestock, steel205.00
UruguayVocational training and technological development9.70
YugoslaviaHydroelectric power73.00
ZambiaHighwaysd11.25
Total3,386.65

Figures in parentheses are the number of loans approved for the respective country.

With a $25 million IDA credit.

With a $20 million IDA credit.

With an $11.25 million IDA credit.

Figures in parentheses are the number of loans approved for the respective country.

With a $25 million IDA credit.

With a $20 million IDA credit.

With an $11.25 million IDA credit.

Other Resources Citing This Publication