POVERTY REDUCTION STRATEGY PAPERS AND RELATED ACTIVITIES

Most of the world’s poorest people live in low-income countries. The World Bank’s strategy for attacking poverty in these countries continues to be founded in the Poverty Reduction Strategy Paper (PRSP) approach. During fiscal 2003 the Executive Directors considered 21 more full country-owned PRSPs and 2 Interim PRSPs (I-PRSPs), bringing the totals to 28 and 46, respectively. Work to strengthen the role of stakeholders in the PRSP process has included a “Democratizing Development” conference for nongovernmental organizations and a program for parliamentarians in PRSP countries. Regional outreach has included an initiative in Africa for trade unions and regional poverty forums in the Commonwealth of Independent States-7 (CIS-7) and the Balkans. Dissemination of guidance on the PRSP approach has included extensive distribution of the PRSP Good Practice pamphlet, updating of the PRSP Sourcebook, and development of the Attacking Poverty course for Bank staff. (See www.worldbank.org/poverty/strategies.)

Key challenges for the Bank are to strengthen the alignment of its assistance strategies with countries’ poverty reduction strategies (PRSs), and to support the knowledge base and skills for carrying out these strategies. To improve alignment, Bank and International Monetary Fund (IMF) staff, consulting with other donors, have outlined a framework for coordinating budget support with countries’ implementation of their PRSs. With the IMF and the United Kingdom, the Bank has cosponsored a workshop on macroeconomic analytical issues arising from poverty reduction strategies to identify and fill knowledge gaps.

Important initiatives were undertaken during fiscal 2003 to support countries in preparing and implementing their PRSs and to improve the results orientation of the Bank’s own poverty reduction activities. One such effort was the launch of a work program in the area of pro-poor growth. The program is designed to enhance understanding of the relationship between growth and poverty, and of the key operational levers to increase the impact of growth on the well-being of poor people. A workshop in March 2003 laid out the scope of work, which is expected to include six to nine focused country studies as well as cross-cutting analytical work.

A second initiative that moved forward during the year was work in the field of poverty and social impact analysis (PSIA), which informs policy choices by analyzing the impact of reforms on poor and vulnerable people and the tradeoffs among alternative policy options. During fiscal 2003, the Bank and other donors have supported PSIA activities within the PRSP process in 20 countries. The Bank has also employed PSIA in its own work, initially concentrating on PRSCs. (See www.worldbank.org/psia.)

The Bank expanded its support for the empowerment agenda during the year. The Empowerment Sourcebook for staff was published in July 2002, and groundbreaking work was undertaken during the year on measuring empowerment, establishing a Bank-wide community of practice on empowerment issues, and supporting a national strategy for civil society capacity building and empowerment in Ethiopia. (See www.worldbank.org/empowerment.)

TRADE

The Bank's primary objectives on international trade are to promote a world trading system that is more conducive to economic development and to assist countries in capturing the benefits of global opportunities. Evidence suggests that increased trade raises productivity, and hence growth, which in turn is key for reducing poverty. In fiscal 2003 the Bank created a new Trade Department. This action substantially increased the Bank’s capacity, activities, and engagements in trade. It led to strengthened partnerships with international organizations, the increased publication of research relevant to the pro-development trade agenda, and intensified efforts to integrate trade into country and regional strategies such as the PRSP.

With the World Trade Organization (WTO) and the United Nations Conference on Trade and Development (UNCTAD), the Bank is the main coordinating and implementing agency for the Integrated Framework (IF) Initiative, and it plays a key role in advancing the program (see box 4.1). Much of the Bank’s global effort on trade this year is directed toward the next milestone in the international trade arena—the WTO Ministerial meeting in Cancun in September 2003—that will review progress on the development agenda launched at the Doha Ministerial meeting in 2001.

The Bank provided support to key actors in the global trading system, including studies on the impact of trade and services liberalization on income distribution for Brazil; an analysis of WTO accession implications for Russia; and assistance to India on the design of a collaborative program on WTO-related issues such as services. Capacity-building activities were delivered through the World Bank Institute (WBI) to help countries analyze the economic implications of national trade policies and regulatory frameworks and to assist policymakers in formulating domestic trade reform agendas and international negotiating strategies. The Bank is expanding its assistance to low-income countries not eligible for the IF through, in the first instance, diagnostic trade studies that cover both the border and “behind-the-border” (that is, internal impediments) trade agendas.

Two aspects of the behind-the-border agenda to which the Bank has been paying increasing attention are trade facilitation and compliance with international product standards. Bank support for trade facilitation includes both analytical work and lending operations. Lending for trade facilitation makes up by far the largest amount of Bank trade lending. During the last two fiscal years, lending to support trade facilitation—including lending for institution building and physical infrastructure and for trade financing—made up 86 percent of total Bank lending to trade. The Bank has been increasing its support for client-country capacity building in standards development and implementation both at the country level (through lending operations) and at the cross-country level (such as through the launching of a Standards and Trade Development Facility with the WTO, the World Health Organization, and the Food and Agriculture Organization).

In advance of the Cancun Ministerial meeting, the Bank released Global Economic Prospects 2004, an annual publication that is one of the key Bank tools for analysis and advocacy of the global trade agenda. Other key research products related to the global trade agenda in fiscal 2003 include Agriculture, Trade, and the WTO; Options for Global Trade Reform: A View from the Asia-Pacific; and Regional Integration and Development.

Trade Law

During the past year, demand continued for training dealing with the practical aspects of international trade law and policy in such matters as market access, antidumping, countervailing measures, the General Agreement on Trade in Services, trade-related aspects of intellectual property rights, regional integration, environment, and labor standards, as well as dispute-settlement mechanisms in the WTO. Among other related seminars, the Bank sponsored an Afro-Latin Seminar on International Trade Law and Policy in December 2002. This distance learning program was carried out in partnership with the WBI, the International Law Institute, the Uganda African Center of Legal Excellence, and the Fundação Getulio Vargas of Brazil. It linked approximately 90 participants in Kampala, Paris, São Paulo, Vienna, and Washington, D.C. Led by world trade law experts, participants shared knowledge on international trade law and policy and explored new areas for Bank operational work, including relevant legal reform activity.

Bank operations have also provided support for legal and regulatory activities to implement WTO members’ specific commitments in telecommunications and to assist accession countries in meeting their WTO accession goals. (See also "Promoting Appropriate Legal and Judicial Systems" in this chapter.)

Transportation and Trade

Transportation is a critical element of trade competitiveness. In March 2003 the transportation sector and the Trade Group of the Bank’s Poverty Reduction and Economic Management Network agreed to establish a joint Transport and Trade Facilitation Task Force. The Task Force was developed to help the Bank address the issues identified by the WTO as priorities in the Doha Development Agenda. This joint unit will help client nations identify and take action to alleviate the constraints to wider external trade and economic growth.

Trade Research

The Bank’s newly created Trade Department has identified several areas for research, many of which are already ongoing: behind-the-border trade policies and institutions, focusing on policies and institutions that directly affect trade costs; the effects of trade liberalization on poverty, focusing on the direct impact of changes in the prices of goods as a result of trade liberalization on the welfare of poor people; the ways in which multilateral and regional trade agreements can be used to maximum advantage in supporting the development process; the sources of growth and their effects on poverty reduction, economic structure, and trade, focusing on ways to link trade policy more fully to development policy; the effect of international product standards on trade volumes and patterns; the existing pattern of payments for the use of intellectual property rights and the likely impact of stronger enforcement of property rights laws on developing countries; ongoing work on impacts of trade liberalization on services performance, in particular telecom services, and on other infrastructure services such as port facilities and international transportation; and the compiling of new data on trade and trade policy to be made available to the wider research community. (See box 4.2.)

GENDER AND DEVELOPMENT

There was substantial progress during the initial year of carrying out the Bank’s gender mainstreaming strategy. Work included the integration of gender equality issues in the majority of country assistance and poverty reduction support strategies, and increased attention to gender issues in Bank-financed projects, particularly in education, health, and social protection.

More than 20 borrowing countries conducted gender assessments. Progress in mainstreaming gender is strong in countries and sectors where relevant gender analysis has already been completed, reinforcing the key role of gender assessments in addressing critical development issues and priorities.

Ongoing Bank-supported operations that promote gender equality include an HIV/AIDS project in Zambia, a community-based empowerment project in southern India, and a tourism and regional development project in Honduras. Innovative initiatives in gender-based development, such as a rural roads project in Peru, a women’s empowerment and rural electrification project in Bangladesh, and a water and sanitation project in Ghana, continue to receive funding and technical assistance from the Bank. A new research initiative on gender and economic policy is developing a substantial body of analytical work to enhance policies in areas such as trade and competitiveness and public sector streamlining. The Bank also promoted research on measuring women’s empowerment, partnering with international development agencies on research that empirically demonstrates the importance of gender equality to all of the MDGs. Investment climate assessments prepared by the Bank this year have incorporated questions to capture gender-based differences.

GOVERNANCE AND PUBLIC SECTOR REFORM

Considerable research and country experience have shown that good governance, development, and poverty reduction are fundamentally linked. An increasingly important area of the Bank’s work, approximately $2.5 billion in loan commitments in fiscal 2003 promote governance and public sector reform. The Bank’s strategy for governance and public sector reform notes that change-resistant institutions can best be reformed through systematic approaches, such as revising institutional rules and processes, and promoting demand for reforms through citizen participation, transparency, accountability, and partnerships. Successful reforms reflect the nuances of a country’s institutional setting, and are based on careful analysis of institutions, incentives, and influence.

In fiscal 2003 the Bank and the IMF prepared joint papers on public expenditure issues and an update on implementation of the heavily indebted poor countries’ action plans, and collaborated on civil service reform. The Bank is developing a second generation of governance indicators in tandem with intermediate indicators of progress on governance projects. A flagship Governance and Anticorruption Core Course was launched in fiscal 2003. The Bank organized a day-long conference with Transparency International on ways to enhance the effectiveness of our anticorruption and governance work.

ECONOMIC POLICY

Sound macroeconomic analysis underpins the Bank’s operational and policy work in these areas: economic growth; debt management, fiscal sustainability, and volatility management; subnational economic management; integrative policy analysis; and country strategy development.

In fiscal 2003 a series of thematic group handbooks is being produced to provide guidance to practitioners on policy design and implementation issues at the forefront of the development agenda. The Bank actively supports regional development efforts through diagnostic reports such as the Development Policy Review and Country Economic Memoranda. These reports provide an integrated view of a country’s development priorities and cross-sectoral links to poverty reduction. As such, the reports have a key role in underpinning policy dialogue, the Bank’s Country Assistance Strategies (CASs), and the Bank’s approach to policy-based lending. (See box 4.3.)