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Chapter 5

Several lessons emerge from this review's assessment of the Bank's experience in implementing the core principles of the LICUS approach. Many of the issues covered under these lessons were noted as areas in need of improvement in the 2002 LICUS Task Force report (World Bank 2002)—such as the need to anchor strategies in
stronger sociopolitical analysis or to support highly focused reform agendas—and have also been emphasized in the Bank's 2005 LICUS reports. The lessons derive from the Bank's own implementation experience, but may also be useful in guiding other donor assistance in LICUS countries.

LICUS engagement
Staying engaged is only a means to an end and needs to be quickly followed by a clear and relevant reform agenda in LICUS. In the absence of a clear and relevant reform agenda, early successes of engagement may be short lived and contribute little to the achievement of country strategy objectives. The examples of the Central African Republic and Haiti show that obstacles may make the follow-up to a successful initial LICUS engagement difficult. Because political successes were insufficiently backed up on the economic side, the government of the Central African Republic is now faced with a potentially disastrous budget crisis. In Haiti, the donor community seems to have given inadequate attention to ensuring a minimum level of security. In both cases, good initial results of the LICUS Initiative are now at risk of being diminished.

In certain instances, strategic disengagement—with the exception of in-house analytical work—may be needed, at least for periods of time. This is a particularly appropriate strategy when involvement with the Bank is seen as inappropriately giving legitimacy to the LICUS government or when it dampens internal pressure for reform, thus potentially hindering the emergence of conditions needed to bring about serious and sustainable political reform.

In the deterioration and prolonged crisis or impasse business models, where there is often little consensus between donors and government on development strategy, engagement needs to include policy dialogue aimed at creating an opening for reform, while simultaneously working on a reform agenda should a window of opportunity appear. In the postconflict or political transition and gradual improvement business models, engagement will need to have more of a technical content and a stronger focus on implementing the reform agenda, given the greater reform consensus between donors and government.

The Bank's guidance for prolonged conflict or political impasse countries states that "relatively non-controversial development issues may provide an entry point for constructive dialogue between the parties to a conflict." For deteriorating governance countries, the Bank's guidance states that the Bank should provide "input on specific economic issues which are important for mediation efforts and may serve as a way to restart dialogue".

Country ownership and absorptive capacity constraints apply as much to knowledge products as to financial products. The involvement of country counterparts in the Bank's analytical work remains limited to administrative aspects, with much less country-client participation in selecting topics and undertaking analysis, thereby reducing national buy-in. Yet the involvement of country counterparts is essential to ensuring client ownership and improving the impact of analytical work.

In Tajikistan, the lack of government involvement in the selection and preparation of the Bank's analytical work limited the government's interest in the results, which hindered
effective implementation. In Angola, some Bank-led analytical work (for instance, the recent Country Economic Memorandum) was perceived by senior government officials as an imposition of Bank views on their internal affairs, which led to limited ownership and
capacity development. Without country ownership, the chance of analytical work influencing government policy is small.

LICUS governments' absorptive capacity constraints in using analytical work may also limit possible knowledge transfer. The Angolan government, for instance, endorsed the Bank Interim Strategy Note but expressed concern about the amount of analytical and advisory activities foreseen. This has raised doubt about whether the analytical products would be fully utilized by the government. The absorptive capacity of the government is severely limited, and analytical and advisory activities undertaken mostly by the Bank risk straining relations with the government, regardless of their technical quality. In Cambodia, plans for analytical and advisory services in the 2005 CAS—totaling 30 tasks to be completed over fiscal 2005–07—appear overly ambitious considering the country's limited institutional capacity.

Political understanding and its use in country strategy
Commissioning and consuming—not necessarily producing—good political analysis is critical for donors in LICUS. The objective of a country team should be to commission or consume (not necessarily produce) analysis that is directly relevant to, and usable in, the development of a strategy. In LICUS, especially in environments where speed is critical, donors need to ensure that existing political analysis is mined before commissioning new analysis.

In Lao People's Democratic Republic, the Bank effectively tapped existing political analysis and invited a political scientist who had published extensively about the country to make a presentation to the country team on politics and reform in the country. This allowed for the preparation of an independent summary of relevant political analysis (tailored to the needs of the donor community in general and the Bank in particular) and its dissemination to a relevant group of Bank staff and other donors. It avoided the higher costs of preparing a "Bank" analysis, as well as potential tension with the government, by allowing the Bank to avoid getting bogged down in some of the sensitivities surrounding the analysis. For the Bank, the acquisition of existing knowledge, as well as its dissemination, proved more important and effective in this case than knowledge creation.

The main focus of donor efforts needs to be on helping staff internalize political analysis in strategy design and implementation. While the Bank has conducted or had access to good political analysis in some LICUS, such analysis has not been adequately reflected in its strategy. For example, the Interim Strategy in Papua New Guinea contains a good discussion of the political system and recognizes problems such as clan loyalties, political patronage, corruption, and lack of capacity. Yet the strategy treats these problems as technical matters and does not adequately use them to underpin the overall approach.

Focused reform agenda
In complex LICUS environments, where virtually every sector requires reform, appropriate sequencing of reforms and sufficient time to implement them are crucial for achieving results without overwhelming limited LICUS capacity. While donors must strive for collective donor selectivity, this is far from being achieved, as Afghanistan's donor-endorsed reform agenda and Haiti's Interim Cooperation Framework (ICF), presented below, indicate. However, even if collective donor selectivity is not immediately achieved, the Bank needs to ensure focus and selectivity in its own assistance program, based on its core competences. Such Bank selectivity has been increasing in recent years but remains a challenge.

In Afghanistan, the reforms covered by donors are wide ranging, show lack of sufficient priority, and have led to 120 pieces of pending legislation. These reforms, dealing with virtually every economic and social aspect of the country, need to be carefully prioritized and sequenced, but donors have yet to do so. In Haiti, the ICF is meant to guide international assistance and cooperation with Haiti through September 2006, and covers practically all basic state functions, ranging from security, to national dialogue, to economic governance, to economic recovery, to basic services. Individually, each of these areas seems important, but together they
add up to a formidable agenda.

With respect to the Bank's own assistance program, São Tomé and Principe is an example where the Bank was far too ambitious in relation to the resources allocated to the country, with the result that many of the CAS objectives were not achieved or were only partially achieved.

Beyond selectivity in CASs, it is critical to ensure that actual reform agendas on the ground are focused and well prioritized. The lack of selectivity and prioritization in the reform agendas raises questions of effectiveness, especially given the limited capacity in LICUS. While it is difficult to be selective in a country where there is an urgent need to fix many things, the appropriate sequencing of reforms is crucial to ensuring that limited LICUS capacity is not overtaxed, while also avoiding partial solutions. Well-sequenced reforms spanning a sufficient number of years, along with donor commitment to see them through, will be essential.

In Timor-Leste, donors may have pulled out too quickly, without sufficiently dealing with the country's pressing capacity needs. In Haiti, development assistance has greatly fluctuated over the years. The country has gone through several "feast or famine" cycles in its relations with the donor community. This might have been avoided had various donors better timed and sequenced their aid.

Capacity development in post-conflict LICUS
Capacity development and governance programs need to start early, even in post-conflict LICUS. Immediately following the cessation of conflict, the international donor community tends to focus its assistance on physical reconstruction. Because capacity to use aid effectively in postconflict LICUS is low and governance is often poor, the focus from day one also needs to be on the development of capacity and improvement of governance, not merely the reconstruction of physical infrastructure. This may require the creation or strengthening of public institutions, civil service reform, and use of local expertise. If foreign experts are brought in to provide technical assistance, it must be ensured that this will not compromise the long-term development of local capacity.

Donor coordination
Donor coordination cannot succeed without a common vision and purpose among donors—when donor objectives cannot be fully harmonized, it is important that they at least be complementary. The Bank's approach has not fully recognized the differing motivations of donors for engaging with LICUS. Although the broad concept of
fragility is widely understood and accepted, the countries identified by donors as fragile vary. The motivations for supporting fragile states range from security, to aid effectiveness, to equitable development, to poverty reduction, to state building, to peace-building and conflict prevention.

In both Afghanistan and Tajikistan, IEG's fieldwork found that major donors did not subscribe to a single clear objective. Without a common overall objective, policy coherence is unlikely. The Bank's donor coordination efforts and modalities are insufficiently informed by the objectives of the different players in a country. That said, donor coordination is a form of collective action, requiring that other donors similarly improve their outreach to the Bank and subordinate bilateral agendas to agreed multilateral objectives.

Coordination needs to begin within each donor agency. Coordination is not only important among multilateral and bilateral donor agencies. It is also a vital issue within each donor agency. Projects in different sectors of the same country often work in parallel and fail to tap synergies. This was the case in the Bank's Community Empowerment and Agricultural Projects in Timor-Leste.

A side-effect of the Bank's decentralization to country offices has been the concentration of country knowledge among local staff and inadequate dissemination of this knowledge to the country team, especially to those based in Washington. Addressing the problems of coordination across the various departments of donor agencies (such as among Bank departments dealing with public sector management, conflict prevention and reconstruction, LICUS, capacity development, and research) is particularly important in LICUS, where problems are complex and widespread and often require multisectoral solutions.

Results measurement and monitoring
Monitoring and evaluation are at least as important in LICUS as they are in any other country. Monitoring and evaluation are crucial in LICUS for a number of reasons:

• First, the Bank, like other donors, is still learning what approaches work in LICUS contexts. Closely monitoring experiences in order to draw lessons is critical, and learning and sharing needs to become a more prominent feature of LICUS work.
  
• Second, given that progress is often slow in these countries, it is important to reassess continually whether the program is on course to achieve the desired outcomes.
  
• Third, a constantly changing and volatile LICUS environment where progress is often nonlinear means that program adaptation is essential—closely tracking performance will help determine when and what kind of adaptation is necessary.

Improving internal organizational support for LICUS work
Field presence alone is insufficient for effective country strategy implementation—it needs to be complemented by adequate communication between field and headquarters donor agency staff, as well as an adequate number of field staff with the appropriate authority and skills. Understanding of country circumstances is often best achieved through substantial field presence, although that alone is not enough. Internalizing analysis of the country conditions throughout all donor agency departments involved and applying its lessons to all interventions is equally important. In Cambodia, for example, the Bank's field presence has significantly improved understanding of the political situation, but discussions with country team members and other stakeholders suggest that this knowledge may still be highly concentrated among
a few managers and staff (mostly in the country office and Bangkok hub), with relatively limited dissemination to the broader country team.

The issue appears to have shifted from a partial understanding of the political realities of Cambodia to a question of where within the Bank's country team this knowledge is located and how it is used to guide decision making in strategy and program implementation. The concentration of in-depth country knowledge among just a few staff members implies that only some Bank activities and interventions benefit. In general, greater knowledge transfer is needed between donor country offices and their headquarters-based country and sector staff.

Despite the cost, field offices need to be adequately staffed if they are to engage
effectively with clients. In Angola, the initially small group of field staff faced a multiplicity of tasks, from strategic dialogue with government and donors to logistics such as moving the office to new premises. The situation was made more difficult by the lack of operational-level staff in the field office who could, in consultation with Ministry staff, prepare the ground before high-level meetings between the ministers and the Bank. Moving issues to the top too quickly— because the lower levels were not staffed—led
to unnecessary tensions. Donor decisions regarding the number of staff in each LICUS
should reflect the extent and nature of intended engagement considering respective donors' objectives in those countries.

Apart from the absolute numbers, field office staff also needs sufficient authority in relation to headquarters to ensure that not every decision has to be approved by headquarters. An effective field presence requires that the right kind of staff be involved in the country. In semi-structured interviews done for this review, several donors emphasized that coordination is unusually susceptible to the strengths and the foibles of the individuals involved. More appropriate training for staff being posted to difficult field assignments and improved incentives within the Bank that encourage staff to collaborate with other donors might ameliorate these idiosyncratic
risks.

In the deterioration business model, where there might be a breakdown of dialogue with the government, donor agency staff will need strong diplomatic and persuasive skills to ensure that the door remains open for a dialogue with the government, while simultaneously mobilizing nongovernmental groups, including civil society.

In the prolonged crisis or impasse business model, where problems are chronic or there is political stalemate, the necessary staff skills will include immense patience as well as creativity, with constant innovation to break persistent log-jams.

In the post-conflict or political transition business model, the necessary staff skills will include specific technical knowledge of how to develop sound economic systems, institutions, and key infrastructure. Staff should also possess the ability to act quickly and decisively in these environments, before the optimism following peace dissipates and to help guard against the countries falling back into conflict. Since these situations often attract massive international aid, donor staff needs strong coordination and sequencing skills to organize both development partners and their activities.

In the gradual improvement business model, the primary staff skill needed is the ability to provide customized technical assistance and work hand-in-hand with a client that is already reforming.

Sharing experiences —both positive and negative— is essential for learning, but doing so effectively requires a receptive institutional environment and management support. Sharing experiences of what is working in different LICUS situations, and what is not, can foster learning. Learning is especially important in LICUS work because the donor community is continuing to grapple with the question of how best to assist these challenging countries. Although the Bank has shared some lessons through its LICUS Learning Group Seminar Series, much more attention is needed to intensify the systematic stock-taking and dissemination of emerging LICUS experiences—both those of the Bank and of other donors, and both positive and negative.

Creating a more receptive institutional environment and ensuring management
support for the sharing of negative experiences will be critical. So far, the Bank seems mainly willing to share positive examples, as in its recent LICUS reports.

Effective communication is essential both for ensuring country acceptance of donor approaches for LICUS and for tempering unrealistic country expectations about what can be achieved, especially immediately following the cessation of conflict. Better communication of donor objectives and approaches in LICUS will be needed to ensure country buy-in. It can also prevent disillusionment by tempering unrealistic expectations among stakeholders about what can be achieved in a specific period of time. In the Bank's deterioration and prolonged crisis or impasse business models, where the economic and social situation is for the most part worsening or stagnant, the communication strategy would need to disseminate actively the benefits of reform to both the government and civil society. In the Bank's post-conflict or political transition business model, in order to prevent the disillusionment that follows unrealistic expectations, the communication strategy should target the entire population and be explicit about what donors will do, when, how, and what results should be expected. The communication strategy in the gradual improvement business model will need to be more informational, presenting relevant cross-country and cross-sectoral experiences.

Immediately following the cessation of conflict, international donors, including the
Bank, have often committed large amounts of aid coupled with overly ambitious agendas. This has frequently created high expectations among the population and led to disillusionment when expectations have remained unfulfilled and there are few tangible improvements day to day. Avoiding overambitious agendas and utilizing
better communication are critical, and the Bank needs to invest in these strategies.

Better operational guidance is needed for tailoring donor approaches to the special conditions of LICUS. The LICUS Initiative has raised awareness of the need to act differently in LICUS, but the Bank and other donors have yet to identify precisely
how to do so. The extent to which donor approaches to LICUS need to, and can,
efficiently address the causes—not just symptoms— of countries becoming or remaining
LICUS also needs greater attention. Solutions that view causes as givens may miss all important contextual factors. Donor operational guidance must ensure that areas outside the comparative advantage of particular donors be left to others, while their own work both adequately factors in and complements the work done by others.

The Bank's deterioration and prolonged crisis or impasse business models, and the transition and development phases that follow the immediate reconstruction phase in the post-conflict or political transition business model, pose some of the biggest challenges faced by the donor community. These are also areas where there has been relatively little innovative thinking. There is a pressing need for operational guidance in
several areas, including ways to prioritize and sequence reforms while avoiding partial
solutions; ways to deliver services quickly without harming long-term government capacity development; ways to foster political reconciliation while also contributing to effective and legitimate governance; ways to internalize political understanding in country strategy design and implementation; and ways to address linkages among politics, security, and development effectively.

The balance of the Bank's recent guidance on LICUS is tilted more toward what instruments should be used rather than outlining actual operational approaches for what needs to be done differently—and how—in varying groups of LICUS. LICUS country teams would also benefit from more narrative-based guidance, of the kind presented in chapter 2 of this review, and from short, problem-oriented notes, rather than the more formal guidance notes that are often too condensed and devoid of sufficient country context.