Client Countries Research Articles

Oil and gas financing by the World Bank

The World Bank has developed a flexible oil and gas programme that is structured to meet the changing needs of the sector as they arise. The Bank became prominent in the oil and gas sector after the oil crises of the 1970s, when it began assisting client countries in developing their indigenous energy resources. At the beginning, Bank lending concentrated on exploration and development of hydrocarbon resources where the level of lending expanded to US$1 billion in 1983. This rapid expansion caused some concern that Bank activities might preempt those of the private sector. In response, the Bank imposed in 1984 strict limitations on petroleum exploration and oil production lending. In combination with the perception that future oil demand would be weak, this caused the lending programme to fall off sharply (to US$300 million by 1986). By 1990, the Bank was again moving actively into hydrocarbon sector lending, but then the emphasis was on promoting private sector development and supporting the development of natural gas as a substitute for coal and oil. Bank lending to the sector has been on the increase since 1990; a lending level of about US$1 billion yearly is expected for the second half of the 1990s. In addition to its direct lending, the World Bank facilitates contributions by other financiers through its cofinancing and risk mitigation arrangements.

Can “1992” reduce unemployment in Europe? On welfare and employment effects of Europe's move to a single market

This paper provides a general-equilibrium investigation of welfare and employment consequences of Europe's move to a unified market, using a static multicountry, multisector applied general equilibrium model with imperfect competition, increasing returns to scale and product differentiation at the firm level. Following Smith and Venables (1988), “Europe 1992” is interpreted as the elimination of the possibility for oligopolistic firms to price-discriminate between client countries within the Community. Experiments are performed under alternative noncompetitive behavior (Bertrand-Nash vs Cournot-Nash), industry structure (fixed vs variable number of firms) and wage determination mechanism (flexible wages with fixed employment vs rigid real wages with endogenous unemployment). The results suggest that with flexible wages the gains for consumers should prove modest even though unambiguously positive. In contrast, with the alternative wage setting arrangement, the “1992” program could provide a significant impetus to employment recovery in Europe: productivity gains would then be absorbed by employment creation rather than wage increases, so that the reduction in unemployment is estimated between 2.7 and 0.5 percent depending on the country considered (with an EEC average of 1.5 percent) and welfare gains range between 2.1 and 0.4 percent. The paper also provides some methodological innovations that may prove useful to applied general equilibrium modelers not interested by “Europe 1992.”

Soviet policy in the Third World

Margot Light argues that the dramatic change in Soviet Third World policy after 1985—away from support for ‘wars of national liberation’ and loyal maintenance of socialist-oriented client countries, towards diplomatic expansion, economic expediency and facilitating East-West trade and technology transfer—was not a byproduct of the end of the Cold War, but a precondition for it. She examines recent Soviet policy in Cuba, Afghanistan, Angola and in the Gulf crisis. She writes that conservative opposition can have little effect on the new policy, mainly for economic reasons. A return to the old role in the Third World is impossible now.