Building the Climate for Investment, Jobs, and Sustainable Growth

The first pillar is creating a good investment climate that fosters entrepreneurship by encouraging small and large firms to invest, create jobs, and increase productivity. This pillar comprises several elements:

• Stable macroeconomic conditions that promote the confidence of firms to make production decisions and engage in production; and trade policies that foster open trade, innovation, and entrepreneurship
• Governance and institutions that are without corruption, excessive bureaucracy, or organized crime, and where the enforcement of contracts and regulations is known to be ethical and reliable
• Physical and financial infrastructure (e.g., transportation systems, utilities, and banking systems) of good quality and quantity, both affordable and reliable, so that individuals and firms can participate in economic activities.

Investing in Poor People and Empowering Them to Participate in Development

It is important to expand the opportunities for people to participate in decisions that affect their lives and the lives of their families. This is the second pillar in the Bank’s development strategy. Essential are human and legal rights that protect livelihoods and assets and enable poor people to invest in their futures and be included in the society in which they live.

Although there is still much to learn about empowerment, the Bank’s studies and project experience indicate that successful efforts to empower poor people and increase their freedom of choice share four elements: access to information, so that poor people can make informed decisions; participation, which gives poor people a voice in public programs; accountability, which ensures that public officials and institutions are responsive to their citizens; and local organizational capacity, so that public institutions run effectively. These elements help foster an informed populace capable of contributing to its country’s development plans.

There is an essential link between empowering poor people and attaining the Millennium Development Goals (MDGs). To meet the education, gender equality, health, and environment goals, in particular, investment in people is key. Empowering people to have an impact on the local delivery of services can pave the way toward meeting the MDGs. Examples of such empowerment at work include community involvement in running schools, local health groups, and water users’ associations. All of these activities can play a powerful role in tailoring such services to the needs of poor people and thereby improving their lives.

In many communities, empowering women is the most important challenge. Empirical evidence shows that expanding opportunities for girls and women not only improves their position in society but also has a major impact on the overall effectiveness of development. Studies show that education of mothers has a powerful effect on the health of their children. Also, when women have more control over the family’s income, productive assets, or transfers, the family as a whole benefits.

The Bank’s Strategy and the Multisectoral Nature of the Millennium Development Goals

The twin pillars of the Bank’s strategic framework are critical to success in achieving sustainable poverty reduction and helping countries meet the goals. Different groups of client countries have different needs. Working with the Bank on the MDGs is the priority in most low-income countries, whereas middle-income clients more often seek to work with the Bank on building the investment climate.

During fiscal 2003 the Bank analyzed its regional strategies and country demands and examined its capacity and limitations against the needs of the development goals. It recognized that a multisector chain of activities is needed to meet the goals. The Bank is now moving to align its programs to support activities that go beyond strictly defined sectors such as health, education, and environment. For example, although infrastructure is not explicitly mentioned in the MDGs, infrastructure investments are crucial to attaining the goals. Roads and electricity are essential to building proper schools so that a country can achieve universal primary education; and they are essential to building health care facilities so that child mortality can be reduced, maternal health can be improved, and communicable diseases such as HIV/AIDS can be treated. The involvement of poor people in identifying their countries’ infrastructure needs also is vital.

The Bank’s own contribution to achieving any specific development goal must be identified realistically, taking into account the demands of Bank clients, their options to work with other partners, and the limitations of Bank financing and staff capacity. The Bank recognizes that gaps also exist in the wider development community—in both funding and capacity—that impede overall progress toward the MDGs. The compact between developing and developed countries can play an important role in addressing those gaps. To better define its own contribution the Bank has examined the alignment between its potential commitments and its client-driven work programs, and discussions have been intensified among networks, country directors, and clients to enhance this alignment. That examination is helping clarify what the Bank can contribute to the MDG agenda. It is clear that some of the goals are unlikely to be achieved in certain countries without a major effort by developing countries, developed countries, and the entire development community. The Bank seeks to energize a concerted focus on these countries both through the Poverty Reduction Strategy Paper (PRSP) approach for country-owned poverty strategies and through its monitoring reports to the Development Committee (DC).

Monitoring Policies and Actions toward the Millennium Development Goals

The DC, at its meeting in September 2002, stated its intention to regularly monitor developing- and developed-country policies and actions needed to achieve the MDGs and related outcomes. It requested that the Bank and the Fund develop proposals for taking this forward, while recognizing the role of the United Nations (U.N.) in monitoring the goals. In response to the DC request, Bank and Fund staff, working in consultation with the staff of the U.N., other multilateral development banks (MDBs), the World Trade Organization (WTO), and the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD), have designed a monitoring framework and carried out an initial application of that framework.

The proposed monitoring envisages regular reporting to the DC to anchor and provide continuity to its assessment of progress on policy implementation and areas for priority attention. Underpinning the reporting will be an open data platform, posted on the Development Gateway (see box 1.2), which is designed to facilitate transparent monitoring and enable countries to benchmark their performance vis-à-vis comparators. This monitoring also will help ensure that development partners live up to the commitments they make toward attaining the MDGs. The monitoring proposals were submitted to the April 2003 meeting of the DC, and they received broad support from ministers. In light of the guidance provided by the ministers, the Bank and the Fund, in collaboration with partner agencies, are now implementing the monitoring framework.

Results

An essential building block for effective monitoring is the ability to measure results. During fiscal 2003 the Bank developed its results agenda into an action plan aimed at increasing management attention to results. See Improving Development Efffectiveness - The Results Agenda for a full discussion of the results agenda.