MANAGING FOR DEVELOPMENT RESULTS

Managing for development results—using information to improve decision making and to steer country-led development processes toward well-defined goals—is at the forefront of the global development agenda and a core element of the Bank’s strategic objectives. It builds on the Bank’s efforts to increase aid effectiveness by improving the quality of lending and nonlending activities. A conceptual framework and Bank-wide action plan on managing for results were developed in fiscal 2003. During fiscal 2004 the Bank began to implement the action plan.

The framework recognizes that the Bank needs to focus on results throughout the project cycle: early on, for strategic planning and program design; during implementation, for day-to-day management and corrections to program design; and toward the end, for evaluation and feedback that can inform future work. The plan emphasizes action in three areas:

• In countries—where results are achieved, to strengthen the planning, statistical, monitoring, and evaluation capacity needed to manage for results, and to build public demand for greater accountability for results.
• In the Bank—to be a more relevant and effective partner by strengthening the focus on results in strategies, instruments, incentives, and reporting systems.
• Across development agencies—to foster a global partnership that manages for results by encouraging common approaches and better coordinated support to strengthen country capacity.

Progress was made in all three areas in fiscal 2004.

Strengthening Capacity in Countries

The motivation and capacity of developing countries to manage for results are fundamental for success. Progress requires the political will to demand information on results as well as the institutions and expertise to produce the information and use it to make informed policy and management decisions. But many countries lack basic data on development outcomes, monitoring and evaluation systems, and institutional mechanisms for providing information on results to managers and policy makers.

The Bank contributes to countries’ efforts to meet these challenges by supporting a focus on results in their national poverty reduction strategies, by assessing the readiness of their institutions to manage for results, and by helping them employ results-based approaches in government institutions through sharpened analytical work, public sector reform, and better fiscal management. An important advance in fiscal 2004 was the development and initial implementation of an umbrella lending program—the Statistical Capacity Building Program—to strengthen statistical systems, institutional capacity, and planning in developing countries. The Bank’s knowledge-sharing activities—in which it distills and disseminates experience on activities that achieve results under various country circumstances—are another vehicle the Bank uses to help countries achieve development results. (See also “Knowledge Sharing and Advisory Services” in chapter 5.)

Increasing the Bank’s Contribution to Development Results

The Bank’s purpose has always been to achieve development results. Historically, however, it gauged its success mainly by measuring the volume and, more recently, the quality of its individual lending operations. In recent years the widening array of Bank products and services—including analytical work, capacity-building initiatives, and global programs—and a shift in focus from individual operations to the country level created a need for a broader understanding of results.

The Bank is responding to this demand by increasing the focus on measurable results in its Country Assistance Strategies and sector strategies, lending instruments, reporting systems, and internal incentives. In fiscal 2004 the Bank introduced a pilot for the results-based Country Assistance Strategy to better link the Bank’s products and services with country-level results (see box 4.1). The Bank’s Sector Boards have strengthened the results frameworks and outcome monitoring of their sector and thematic strategies. Basic documents and procedures have been revised to strengthen the articulation of outcome-oriented objectives and the monitoring and evaluation of Bank operations. The Bank is also developing a long-term learning strategy to help staff and management meet the growing demand for skills in results-based approaches. These approaches are becoming an increasingly important and accepted part of the Bank’s culture.

The Bank also developed an enhanced results measurement system for the 14th Replenishment of IDA (IDA14, covering fiscal 2006–08). The system will reflect the priorities of national poverty reduction strategies and will be linked with the Millennium Development Goals. It will provide aggregated information on countries’ progress toward achieving development results and on IDA’s contribution to their progress.

Development of a more comprehensive results-reporting system across the Bank—integrating country, sector, and global results information—is an important goal of the results agenda. Because such a system will be based on information from results-based Country Assistance Strategies and from operations and programs with a stronger focus on results, it will achieve its full potential only after these approaches are adopted throughout the Bank’s work.

Coordinating with Other Development Agencies

Achieving better results requires greater collaboration between countries and development agencies and better coordination among development agencies themselves. Development agencies need to align their requirements for results reporting with countries’ national monitoring and evaluation systems. At the same time, these agencies need to coordinate their support for countries’ efforts to strengthen capacity to manage for results.

In fiscal 2004 the Bank promoted these aims by helping establish and actively participating in two formal partnerships on managing for results—one among multilateral development agencies, the other between multilateral and bilateral development agencies. The Bank also cosponsored international events on managing for results, including the Second International Roundtable on Managing for Development Results, held in Morocco in February 2004. These partnerships and events enable agencies and countries to raise the profile of managing for results, share good practices, and learn from one another.

The cosponsors of the Second Roundtable endorsed core principles, a joint memorandum, and an action plan on managing for development results, providing a basis for a broad consensus on what managing for results means and how to go about achieving it. At the same roundtable, the international statistical community reached agreement on a medium-term global action plan to strengthen international statistical systems, including collaborative mechanisms. Through these initiatives, the Bank and other development agencies are building the foundations for harmonized results-based approaches and reporting.

SIMPLIFYING AND HARMONIZING POLICIES AND PROCEDURES

To modernize and simplify its assistance to borrowers, the Bank is streamlining and updating its policies for investment and adjustment lending. This effort includes expanding the items eligible for financing under investment lending; modernizing mechanisms for disbursement, financial management, and procurement; streamlining procedures for fiduciary and safeguard reviews of projects; and harmonizing the Bank’s policies with those of other development organizations.

The international community has recognized that the quantity and variety of donor requirements attached to development financing generate additional transaction costs for developing countries. As a result, multilateral and bilateral development institutions are working to better coordinate their policies, procedures, and practices. Donor institutions are working to improve development effectiveness by eliminating duplicative programs and aid requirements and by providing assistance in line with their comparative advantage.

The Bank is working with the Organisation for Economic Co-operation and Development to develop a harmonization toolkit in areas such as financial management, procurement, environmental and social safeguards, and analytical work. It is also developing a Web site that will bring together information about harmonization for practitioners and a country-level tracking tool for sharing experiences and best practices.

To ensure that laws adequately and consistently reflect Bank safeguard policies, the Bank is assisting Mexico, Poland, Sri Lanka, and other client countries by reviewing their national laws and helping them design adequate national environmental and social management frameworks.

GLOBAL MONITORING OF PROGRESS TOWARD THE MDGs

The first Global Monitoring Report, issued in April 2004, reviewed global prospects for reaching the MDGs. It identified reasons for optimism, as well as reasons for grave concern. At the global level, the first goal—of halving income poverty between 1990 and 2015—will most likely be met, because of stronger economic growth spurred by improvements in policies. East Asia has already met the goal. Africa, however, is seriously off track, with just eight countries, representing about 15 percent of Africa’s population, likely to achieve the goal. In other regions that will probably meet the goal at the aggregate level, a number of countries will not. Low-income countries under stress, about half of which are in Africa, are especially at risk of falling far short.

Progress on the human development goals, in particular education and health, depends on the scale and effectiveness of interventions directed toward them. At the same time, the multiple factors that determine success in meeting these goals cut across sectors. Prospects for achieving the goals are brighter in education than in health. Given current trends, several regions will achieve or approach the goal of providing universal primary education. But shortfalls are likely in Africa and are possible in South Asia and the Middle East and North Africa. Gender gaps are the most serious in these three regions as well. Although the MDG target date for gender equality in primary and secondary education is 2005, it appears that, globally, about a third of developing countries will not achieve this goal even by 2015.

In health, the prospects are grave. Just 15–20 percent of countries are currently on track to achieve the goals of reducing child and maternal mortality. If current trends continue, most regions will not attain either goal. The incidence of HIV/AIDS, malaria, and tuberculosis is rising, making the goal of halting and reversing their spread daunting. The spread of these diseases exacerbates conditions that increase child and maternal mortality rates—and it has grim economic and social consequences. The risks of failure to halt HIV/AIDS are especially high in Africa but are substantial in many countries in other regions as well.

Large gaps in access to safe drinking water and basic sanitation make achieving the health goals more difficult. The gaps are largest in Africa for water and in South Asia for sanitation. To halve the proportion of people without access to safe water and sanitation by 2015, another 1.5 billion people will need safe water, and 2 billion will need sanitation. Since current rates of progress are about half what is needed, most regions will fall far short: only about 20 percent of countries will achieve the target on access. Among low-income countries, just 1 in 10 is expected to do so.

Global and regional trends hide considerable variation within regions—and often within countries. East Asia provides a good example. The region’s middle-income countries have already met or will soon meet several of the MDGs. But its low-income countries are unlikely to meet them, as are many poor countries in Africa. There is also diversity within countries, especially large ones.

Middle-income countries are much better positioned to achieve the MDGs than low-income countries, and many of them have already met the goals or are well on the way to achieving them. Yet, even in those countries, hundreds of millions of people live in poverty.

Urgent Action Is Needed

The implication is clear. To achieve the MDGs, countries must substantially accelerate the pace of development—and do so swiftly. In line with the principles and partnership established at Monterrey, in March 2002, all parties—developing and developed countries, as well as multilateral agencies—must scale up their action. The policy agenda for achieving the MDGs has three essential elements:

• Accelerate and deepen reforms to achieve stronger economic growth, which directly reduces income poverty and expands resources for use toward the other goals.
• Empower and invest in poor people, and improve the delivery of human development and related key services. Deliver better education and health services, as well as related infrastructure services such as water and sanitation and rural roads.
• Speed up action on the Monterrey partnership, matching stronger reform efforts by developing countries with stronger support from developed countries and international agencies. Developing countries need expanded access to markets in developed countries to increase exports and spur growth, and they need more aid to finance development programs.

The Global Monitoring Report provides an integrated assessment of the policies and actions of all development partners. It is an accountability framework for monitoring how the various parties are living up to the commitments made at the Monterrey summit and for focusing attention on the priorities for action.

The framework for monitoring developing-country policies classifies the policy agenda into four areas: economic and financial policies, public sector governance, human development, and environmental management (figure 4.1).

The Monterrey Consensus envisaged increased support by developed countries in two key areas that directly affect outcomes in the developing world: trade and aid. Policies in developed countries also greatly affect the outcomes of global collective action, such as the preservation of the global environmental commons. The monitoring framework focuses on four key aspects of developed-country policies: macrofinancial policies, trade policies, aid, and global public goods (figure 4.2).

The international financial institutions have an important role to play in helping countries achieve the MDGs. The monitoring framework for assessing their contribution focuses on four key dimensions: country programs, global programs, partnership, and results (figure 4.3).

The Cost of Achieving the MDGs

Developed countries and financial institutions are called upon to provide more and better aid, but there is a concern that countries may not be able to absorb it effectively. However, aid increases pledged since the Monterrey summit, if realized, are still below the level of the early 1990s relative to gross national income in recipient countries. A recent Bank study found that countries with relatively good policies and institutions could absorb a substantial increase in aid that could be used effectively to boost progress toward the MDGs. As a conservative estimate, such countries could absorb at least $30 billion annually. As countries improve their policies and governance over time, the amount of aid that can be used effectively would increase to $50 billion or more per year, the amount that most estimates suggest is necessary to support adequate progress toward the MDGs.

The cost of achieving the MDGs is difficult to estimate for several reasons. One is that putting a price tag on achieving these goals requires distinguishing between average and marginal cost. In education, the marginal cost of enrolling a child could be higher than the average cost, because children not in school might be harder to induce to attend school or may live in more scattered populations. Another is that progress on one goal contributes to progress on other goals. For example, safe drinking water and good sanitation promote better health. There are multiple determinants for each goal, and they cut across many sectors. The interdependence of goals implies that costing each goal separately could result in double counting.

The effectiveness of additional expenditure also depends on appropriate changes in policies and institutions.

Bank Lending for the MDGs

In fiscal 2004 the Bank analyzed the level of all new commitments in relation to the individual Millennium Development Goals. Table 4.1 shows the breakdown of lending aimed at goals 2–8.

ASSESSING THE QUALITY OF BANK ACTIVITIES

The Bank’s Quality Assurance Group has a mandate to monitor the quality of the Bank’s projects and analytical work. It reports directly to senior management but shares its reports with the Board. (The reports are posted at www.worldbank.org.) Its assessments are conducted by peer review panels that draw on several hundred senior staff as well as seasoned professionals from other development agencies, think tanks, universities, and civil society organizations. This approach lends credibility and allows the Bank to provide timely feedback to frontline operations.

The Quality Assurance Group assesses the quality of new projects in “real time,” providing immediate feedback to task teams and their managers when a project is approved (quality at entry) and during implementation (quality of supervision). It also assesses Bank analytical and advisory services, known as economic and sector work, just after delivery to client countries.

In fiscal 2004 the Quality Assurance Group initiated a pilot program for assessing country lending portfolios on demand from country managers. Its flagship Annual Report on Portfolio Performance explores the scale, structure, performance, and quality of the active portfolio. It also presents an analytical perspective on one or two key challenges to ongoing Bank operations.

Quality indicators derived from quality assurance reviews have documented broad improvement over the past several years, although the trend for quality at entry has flattened somewhat over the past two years. During fiscal 2003, 85 percent of projects received satisfactory ratings for quality at entry—down from the average of 90 percent for fiscal 2000–02. For fiscal 2002, 90 percent of projects were rated satisfactory in terms of quality of supervision, and 92 percent of projects received satisfactory ratings for their economic and sector work. The fiscal 2003 Annual Report on Portfolio Performance notes that the proportion of satisfactory development outcomes as evaluated by the Operations Evaluation Department (OED) in projects exiting the portfolio fell. Project supervision ratings of performance had failed to give sufficient early warning of the decline in outcomes. Based on these findings, Bank management has initiated a comprehensive program to enhance development outcomes and increase the reliability of project performance monitoring and reporting. Figures 4.4, 4.5, and 4.6 show the Bank’s Active Project Portfolio by region, theme, and sector.

INDEPENDENT EVALUATION

The Operations Evaluation Department is an independent unit within the World Bank that reports directly to the Bank’s Board of Executive Directors. OED’s evaluations seek to provide an objective basis for gauging the results of the Bank’s work, to ensure accountability in the achievement of the Bank’s objectives, and to allow Bank staff to learn from experience. OED helps improve Bank work by identifying and disseminating the lessons learned from experience and by framing recommendations drawn from evaluation findings.

The overall objective of OED’s flagship Annual Review of Development Effectiveness is to apprise the Bank’s Board of Executive Directors of the Bank’s development effectiveness. The 2003 Annual Review of Development Effectiveness: The Effectiveness of Bank Support for Policy Reform found that the Bank’s current strategy treats policy reform and institutional development as instruments for creating an environment conducive to pro-poor growth and widespread, sustainable poverty reduction. The report examined the Bank’s effectiveness in helping client countries put in place policies conducive to sustainable poverty reduction and emerged with three key messages:

• Two-thirds of developing countries improved their economic and social policies over the past four years. Countries that did so grew at about twice the rate of countries that did not. In many cases Bank programs (including all forms of Bank support, not just adjustment lending) contributed to policy improvements.
• Bank country assistance had satisfactory outcomes in about 70 percent of the cases evaluated by OED. Where outcomes were not satisfactory, contributing factors included inadequate country knowledge, poor alignment between programs and country policy-making styles, overoptimism about debt sustainability, and attempts to transplant policies or institutions without adequate consideration of country-specific factors.
• During fiscal 2002, 79 percent of project outcomes were satisfactory, exceeding the strategic compact target of 75 percent. About 84 percent of the fiscal 2003 projects have been evaluated, and of these, 74 percent are rated satisfactory (see figure 4.7).

Corporate Evaluations

Corporate evaluations are produced in response to a Board request or to address particular concerns. They assess ongoing activities for overall effectiveness, efficiency, and consistency with stated objectives. The corporate evaluations completed in fiscal 2004 included Comprehensive Development Framework and Sharing Knowledge: Innovations and Remaining Challenges.

The Comprehensive Development Framework evaluation concluded that to achieve the benefits of this approach, countries need to put disciplined budget processes in place; donors need to support efforts to strengthen budget processes and align their assistance with national development strategies; and all donors, particularly the World Bank, need to show leadership in developing better mechanisms for designing and implementing cross-sectoral programs.

Sharing Knowledge: Innovations and Remaining Challenges found that more strategic direction and oversight of the Bank’s knowledge processes are required and that network and regional units should link their knowledge-sharing activities more closely to core operational processes. The evaluation stated that the Bank’s commitment to a comprehensive knowledge initiative was timely and appropriate and that Bank knowledge can now be accessed more quickly and easily, but it concluded that improved oversight, monitoring, and incentives are needed.

Country Assistance Evaluations

Country Assistance Evaluations examine Bank performance in a particular country, usually over the previous four to five years. They assess how well performance conforms to the relevant Bank Country Assistance Strategy, and they evaluate the overall effectiveness of the strategy. The fiscal 2004 Country Assistance Evaluation for Armenia concluded that Bank assistance should focus on improving the environment for private sector development and supporting public sector reform. Together, progress in these areas can generate the job creation and export expansion necessary to sustain progress. The Bosnia and Herzegovina evaluation found that the Bank needs to work closely with the International Monetary Fund and the European Union to present a common approach on critical reforms.

Since 1990 the Bank has played an important supportive role, through policy advice and institution building, in China’s enormous progress. In fiscal 2004 OED recommended that the Bank continue to play a role in China. However, with a reduced lending program and without IDA resources, both the Bank and China will need to adapt their policies and procedures to make the best use of Bank assistance.

In Croatia the Bank should turn its attention to fostering growth, attacking unemployment, and strengthening debt sustainability through private sector development, including working to create a better environment for new firms. In Rwanda OED recommended that IDA assistance focus on reducing poverty and inequality, using the Millennium Development Goals as an organizing framework. OED concluded that analytical and advisory work and adaptation of projects to country conditions are crucial for Rwanda’s development. A joint evaluation on Tunisia undertaken with the Islamic Development Bank recommended that the World Bank help the government improve the environment for private investment, enhance the efficiency and quality of social spending, and strengthen institutions and safety nets in the rural sector.

Sector and Thematic Evaluations

Sector and thematic evaluations examine Bank performance and experience in a lending sector or a cross-cutting theme over 5 to 10 years and report on how well they conform to Bank policy and good practice and on how well Bank objectives have been met. The Review of Social Development in Bank Activities helped define the Bank’s work on social development, showed its importance to development effectiveness, and provided messages on how social development work could be made more effective. OED recommended that the Bank identify and promote the use of social-thematic combinations that improve outcomes. It suggested that strategic planning needs to address current skills, monitoring, and evaluation. OED’s report Promoting Improvements in Ghana’s Basic Education concluded that the delivery of hardware inputs to Ghana’s basic education system has had a substantial impact on higher enrollments, as well as on better learning outcomes, but it recommended that more attention be paid to less privileged schools.

The Extractive Industries and Sustainable Development evaluation highlights the need to address governance issues squarely, strengthen project implementation, and use the Bank’s convening power to reach out to stakeholders more vigorously. The evaluation found that to enhance extractive industries’ contribution to sustainable development, the World Bank Group needs to formulate and implement integrated strategies at the sector and country levels. The Transition Economies evaluation showed how the Bank supported the huge transition that took place in the former socialist countries of Eastern Europe and the Soviet Union. It pointed out that an earlier focus on governance, growing poverty, and the privatization process would have helped the transition economies. OED concluded that Bank assistance was largely successful but recommended that active programs of stakeholder inclusion should be widely replicated and that Country Assistance Strategies should be used to bolster reform capacity.

OED Reviews of CAS Completion Reports

An important change introduced in OED’s fiscal 2004 work program was the OED review of piloted CAS (Country Assistance Strategy) Completion Reports. These completion reports are important new self-evaluation instruments that are validated by OED reviews. OED reviews of the completion reports are expected to be mainstreamed starting in fiscal 2005, with an eventual 20–25 reviews undertaken each year. In fiscal 2004 OED undertook reviews of the Brazil, Cameroon, Mozambique, Ukraine, and Zambia CAS Completion Reports.

INSPECTION PANEL

The Board created an independent Inspection Panel in 1993 to address more closely the concerns of people affected by Bank projects and to ensure that the Bank adheres to its operational policies and procedures in designing, preparing, and implementing projects. Any group of two or more people that believes it is or may be harmed by a Bank-supported project may ask the Panel to investigate its complaint that such harm stems from the Bank’s failure to abide by its policies and procedures.

The Executive Directors decide, on the recommendation of the Panel, whether an investigation will take place. The Inspection Panel provides a vehicle for private citizens, and especially poor people, to directly access the World Bank’s highest governing body, the Board of Executive Directors. The process for addressing claims has empowered and given voice to people who may have been adversely affected by World Bank–financed projects.

As one of the World Bank’s mechanisms for addressing compliance, the existence of the Panel has enabled the Bank to listen to complaints brought forward, consider the Panel’s assessments of those claims, and adopt better policies and operational procedures to successfully implement the Bank’s poverty reduction mission.

In fiscal 2004 the Panel received six new requests for inspection involving Bank projects in the Philippines (Manila Second Sewerage Project), Cameroon (Petroleum Development and Pipeline Project), Mexico (Indigenous and Community Biodiversity Project), Colombia (Cartagena Water Supply, Sewerage and Environmental Management Project), and India (Mumbai Urban Transport Project, two requests). The Panel also published its second book, Accountability at the World Bank: The Inspection Panel 10 Years On, which traces the evolution of the Panel and reviews its experiences over the years. It discusses eligibility issues and the Panel’s effect on World Bank practices and policies. The book was translated and published in French, Spanish, and Portuguese.

Thirty-three requests for inspection have been filed since the Panel was established: 10 from Africa, 11 from Latin America and the Caribbean, 9 from South Asia, and 3 from East Asia and Pacific. Of the 33 formal requests received, the Panel has recommended investigations in 14 cases, 6 under the rules that applied before the April 1999 clarifications to the resolution that established the Panel, and 8 since those clarifications were adopted.

Requests for inspection, Panel recommendations, Panel investigation reports, and management recommendations for projects reviewed this fiscal year can be found at www.worldbank.org/inspectionpanel.

EXTERNAL EVALUATION

The World Bank Group began the Extractive Industries Review in 2000 to determine how effective its investments in the oil, gas, and mining industries have been in advancing sustainable development—and to help define the future role of such investments, which represent about 2 percent of annual lending commitments. Developing countries often find Bank Group involvement crucial to achieving positive outcomes, and projects with Bank Group funding often set examples on environmental, social, and governance safeguards that industry subsequently follows.

The review consisted of two evaluations by groups operating independently of Bank Group management: one by the operations evaluation units of the World Bank Group and the Compliance Advisor Ombudsman for IFC and MIGA (discussed above); and the other through a stakeholder consultation process. The reviews found that Bank Group involvement in extractive projects has resulted in positive contributions to sustainable development, but not uniformly. The stakeholder report, in particular, suggested reforms in a number of areas, including a greater emphasis on renewable energy sources, more transparent reporting of revenue figures, increased consultation with local stakeholders, and fuller disclosure of project information.

Bank Group management released a reform proposal for the Bank Group’s activities in the extractive industries on June 18, 2004. The proposal, released at the request of the Board of Directors, was available for public comment for 30 days in order to have the benefit of additional views before the Board authorized an official Bank response. The full proposal, encompassing a response to both internal and external reviews, can be found at www.worldbank.org/ogmc. Additional information about the various extractive industries reviews can be found at www.eireview.org, www.ifc.org/oeg, and www.caoombudsman.org/ev.php.

Among the Bank’s shareholder nations, broad support remains for involvement in extractive industries. In addition to promoting and raising standards for industry, the Bank assists with public sector reforms, provides technical advice and training, and offers expertise and innovative financing for environmental protection and alternative energy.