00~ 0~~~~~% i ~~~~~~~~~~~~~~~~~~C 0u 73~~~~~~~~~~~~~~~~~7 p 81~~~~~~~~~~~E OPERATIONS EVALUATION DEPARTMENT ENHANCING DEVELOPMENTEFFECTIVENESS THROUGH EXCELLENCEAND INDEPENDENCE IN EVALUATION The Operations Evaluation Department (OED) is an independent unit withm the World Bank, it reports directly to the Bank's Board of Executive Directors. OED assesses what works, and what does not; how a borrower plans to run and maintam a project; and the lasting contribution of the Bank to a country's overall development The goals of evaluation are to learn from experience, to provide an objective basis for assessing the results of the Bank's work, and to provide accountability mn the achievement of its objectives It also improves Bank work by identifying and disseminating the lessons learned from experience and by framing recommendations drawn from evaluation findings WORLD BANK OPERATIONS EVALUATION DEPARTMENT (0)ED kJ St, rP , 2001 Annual Review of * evelopment Effectiveness Making Choices William Battaile 2002 THE WORLD BANK http://N,www. \oricibannk.org/oecd Washington, D.C. © 2002 The International Batik for ReconstruLction and Development / The Worldl Bank 1818 H Street, NW Washington, DC 20433 All rights reserved. Mamnfactured in the United States of America First Printing May 2002 1 2 3 4 03 02 01 The findings, interpretations, and conclusionis expressed here are those of the author(s) and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent. The World Bank cannot guarantee the accuracy of the data included in this work. The boundaries, colors, denomiina- tions, and other information shown on any map in this work do not imply on the paIlt of the World Bank any judcgmiient of the legal status of any territory or the endorsement or acceptance of suchi boundaries. Rights and Permissions The material in this work is copyrightecl. No part of this work may be reproduced or transmittedl in any form or by any means, electronic or mechanical, inclucling photocopying, recording, or inclusion in any informiation storage ancI retrieval system, without the prior written permission of the Worlcl Bank. The World Bank encourages dissemination of its work ancI will normnally grant permission promptly. For permission to photocopy or reprint, please sencl a request with complete information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA, telephone 978-750-8400, fax 978-750-4470, www.copyright.com. All other queries on rights and licenses, including subsidiary rights, shIouldC be addressed to the Office of the Publisher, World Bank. 1818 H Street NW, Waishington, DC 20433, USA, fax 202-522-2422, e-mail pubrights@worldbank.org. Cover photo: World Bank photo library. ISBN 0-8213-5139-7 Library of Congress Cataloging-in-Publication Data has been appliedl for. to Printed on Recycled Paper Contents vii Acknowledgments ix Foreword, Prefacio, Avant-Propos xiii Executive Summary, Resumen, Resume Analytique xxix Abbreviations and Acronyms 1 1. Making Development Choices 5 2. Instruments of Bank Assistance 5 Financial Services 5 Investment, Adjustment, anid Other Instruments 7 Recent Lending Choices 9 Non-financial Services 9 ESW Reflecting Corporate Priorities 10 Clear Instrument Guidance Is Key 13 3. Performance at the Instrument Level 13 Performance of Lending Assistance 14 Performance Trends 14 Outcome Trencls 15 Institutional Development Impact 15 Sustainability 15 Aggregate Project Performance Index (APPI) 17 Performance by Region 17 Performance by Sector 19 Performance by Lending Instrument 22 Determinants of Success 22 Country Conditions Matter 24 Project-Level Performance Also Matters 25 P'erform-lanice of Nonlencling Assistance 2001 Annual Review of Development Effectiveness 29 4. Country Strategies, Instruments, and Outcomes 29 Corporate Selectivity and Country Strategies 32 Country Strategies and Instrument Choice 32 Defining Comparative Advantage Depends on Partners 33 Logical Framework Application in the CAS 34 Country Strategies Are Dominated by Lencling 35 Country Strategies in the Absence of a Lencling l'rogram 37 Risk Management Through Gradual Engagement/Disengagement 37 How Instruments Contribute to Country Outcomes 37 Country Capacity 38 Borrower Commitment and Policy Environment 39 Directions for Effective Instrument Use in Country Strategies 41 5. Sector and Thematic Strategies, Instruments, and Outcomes 41 Selectivity Across Sectors 43 InstruLmlenit Choice and Performance 43 Instlument Choice Among Sectors 44 Sector-Specific Issues in Instrument Choice 46 Combining and Sequencing Instruments 48 Innovative Approaches to Sector Assistance: SWAPs and Social Funds 51 Policies and Actions in Support of Thematic Strategies 53 High-Potential Approaches for Implementation 57 6. Findings and Implications 57 Continued Gains in Performance 57 Implications for Policy 57 Corporate Selectivity 58 Enhancing Country Strategies 59 Instrument Selection in Support of Sector Strategies 59 Implications for Evaluation Annexes 61 Annex A: The Bank's Lending Instruments 63 Annex B: A List of Disclosed OED Country Assistance Evaluations 65 Annex C: Statistical Tables 65 Table C.1. Outcome, Sustainability, Institutional Development (ID) Impact and Aggregate by Various Dimensions, Weighted by Projects, FY96-99 and FYOO-O1 Exits; Projects at Risk, Similarly Disaggregated, for the Active Portfolio 66 Table C.2. Outcome, Sustainability, Institutional Development (ID) Impact and Aggregate by Various Dimensions, Weighted by Disbursements, FY96-99 and FYOO-01 Exits; Disbursements at Risk, Similarly Disaggregatecl, for the Active Portfolio 67 Annex D: OED Evaluation Methodology 71 Annex E: Managing Development Effectiveness: An Overview from the CODE Chairperson 73 Endnotes 77 Bibliography iv Col t e rt Boxes 20 Box 3.1. Which Objectives Have Bank Projects Been Mlost Effective in Achieving? 27 Box 3.2. Bank-Managed Special Programs 28 Box 3.3. Quality of the Bank's Poverty Assessments 35 Box 4.1. Synergy Between Sector Work and Lending 36 Box 4.2. Kenya: Enhancing Lending Strategy in a Poor Plolicy Environment 38 Box 4.3. Getting Better Instriment Results in Poorly Performing Countries 48 Box 5.1. Combining Investment and Adjustnent Lencling for Institutional ReformPv Tables 9 Table 2.1. Evolution of Diagnostic ESW 10 Table 2.2. Country Coverage of Fiduciary Diagnostic ESW (FY97-01) 25 Table 3.1. Reasons for Unsatisfactory Outcomes 34 Table 4.1. Country Program and Portfolio Performance 39 Table 4.2. Quality of ESW by Country Policy ancl Institutional Environment 50 Table 5.1. Core Features of SWAPs and Social Funcds 51 Table 5.2. Tools to Support Thematic Strategies Figures 2 Figure 1.1. Three Dimensions of Selectivity 6 Figure 2.1. The Instrument Toolkit 6 Figure 2.2. Lending Instrument Choice (FY90-01) 8 Figure 2.3. Lending Risks, by CPIA and Credit Ratings (FY96-01 Approvals) 8 Figure 2.4. Costs Differ by Lending Instrument (FY96-01 Exits) 14 Figure 3.1. Approval Years of Recently Evaluatecd Projects 15 Figure 3.2. Trends in Outcomes 16 Figure 3.3. Trends in Institutional Development Impact 16 Figure 3.4. Trends in Sustainability 17 Figure 3.5. Trends in Outcomes for Africa and Other Regions 18 Figure 3.6. Trends in Outcomes by Region 18 Figure 3.7. Trends in Outcomes by Sector 19 Figure 3.8. Trends in Outcomes of Adjustment Operations 21 Figure 3.9. Trends in Outcomes of Investment Operations 22 Figure 3.10. Risks and Rewards of Lending Instruments 23 Figure 3.11. The Cost Dimension, by CPIA Groups (FY90-FY01 Exits) 23 Figure 3.12. Instriment Performance Is Sensitive to Country Conclitions (FY96-01 Exits) 24 Figure 3.13. Adjustment Outcomes in Africa Related to the CFA Devaluation 26 Figure 3.14. Improvecl Bank Performance as Evaluated by OED and QAG 31 Figure 4.1. Better Lending Outcomes Associated witlh I-liglher l'olicy and Institutional Quality (FY96-01 Exits) 31 Figure 4.2. More Lencling to Countries w^ith Better Project OItcomlles (FY96-01 Exits) 2001 Annual Review of Development Effectiveness 42 Figure 5.1. Major Shifts in Sectoral Commitments (FY90-92 to FY99-01 Approvals) 43 Figure 5.2. Different Sectors Rely on Different Instrument Groups (FY96-01 Approvals) 44 Figure 5.3. The Move to Adjustment Lending in Finance (FY90-01 Approvals) 47 Figure 5.4. Costs and Outcomes Are Influenced by Quality of Operating Environment vi Acknowledgments T his report was prepared by a team led Munoz, David Hughart, Shawki Barghouti, Jaime by William Battaile. Carlos Reyes was Biderman, Aloysius Ordu, and Tim johnston. The responsible for Chapter 3 on instrument Review was completed uncier the guidalnce of performance trends. Other team members were Victoria Elliott, Manager of OEDCM. Zamir Islamshah, Gillian Perkins, and Deepa This study was published in the Partnerslhips Chakrapani. The team received excellent support ancl Knowledge Group (OEDPK) by the Out- from Parveen Moses, Annisa Cline-Thomas, and reach and Dissemination Unit. The task teamll Bill HurIbut. The report benefited from exten- inclucles Elizabeth Campbell-Page (task team sive contributions from OED staff, and drew on leacder), Caroline McEuen (editor), and juicy a wide range of recent OED country, sector, and Qureislhi-Huq (aclministrative assistant). thematic evaluations. Backgrouncd papers and supplemental analyses were provided by Manuel Penalver-Quesacla, Laurie Effron, Nalini Kumar, DieCt0,-GCn11.:I, Oplel'klionlS E'a\ULMUt01: RUbCil 1'ic civtlh Jed Shilling, Catherine Gwin, Diana Qualls, DileCtol.' Opera';ti011S FIVAlEIuati(0 Dep.11t11le1t: Anara Omarova, and Oliver Rajakaruna. Grem;:,v hr,',} m The comments and guidance from peer N.laig.l, Corpo-te Ic v:diu;Iionl :11d Meitodis: reviewers are gratefully acknowledged, includ- Viclorial lli/ll ing Susan Stout, Irene Xenakis, Marisela Montoliu T'ask Mlanager: W'lia//i, 13Wil/i/it FOREWORD PREFACIO J AVANT- | q S ~~~~PROPOS In the face of a rapidly En el actual contexto de rap- Confrontee a l'evolution changing development ida transformacion de las rapide de l'ordre du jour du agenda, the World Bank has proven actividades de desarrollo, el Banco developpement, la Banque mondiale remarkably flexible in adapting and Mundial ha demostrado una notable a reussi a adapter et elargir la expanding its operational toolkit. flexibilidad para adaptarse y gamme de ses instruments opera- New lending instruments, analytical ampliar sus instrumentos operacio- tionnels avec une souplesse remar- tools, and partnership arrangements nales. Han aparecido nuevos dispo- quable. Elle a su repondre aux have emerged to respond to the myr- sitivos crediticios, herramientas besoins multiples des emprunteurs iad needs and preferences of bor- analiticas y mecanismos de asocia- et satisfaire leurs preferences en rowers and to implement corporate ci6n en respuesta a las innumera- creant de nouveaux instruments de strategies. These innovations have bles necesidades y preferencias de pret et de nouveaux outils d'analyse, contributed to improvements in pro- los prestatarios y para aplicar las et en forgeant des accords de parte- ject and program performance. estrategias institucionales. Estas nariat. Ces innovations ont contribue The broad enclorsement of the innovaciones han significado mejo- a ameliorer les r6sultats des projets Millennium Development Goals ras en los resultados de los proyec- et des programmes. within the development commllllu- tos y los programas. L'adoption cles / Objectil's de nity has put the spotlight on the La amplia aceptaci6n cle los dcveloppement poui le milIl- results of development activities. objetivos de desarrollo clel mile- naire n par leensemble cle la corin- Accordingly, attainment of tan- nio entre las instituciones intere- mullaute internationale a mis en gible, measurable, ancl sustainable saclas en el clesarrollo hia puesto evidence l'importance cles resul- improvements in the health, edu- en primer plano los resultados cle tats cles activites cle developpe- cation, and standard of living of las actividacles cle clesarrollo. En ment. La mission primordiale ClUe the worlcl's poor is the overarch- consecuencia, el logro de mejoras se sont fixee la Banque et cle ses ing challenige facing the Bank and tangibles, cuantificables y sosteni- partenaires poui le developpe- its clevelopment partners. bles en los terrenos cle Ia salucl, ment, cl'ameliorer cle facon tangi- This is the fifth AnnualReview educaci6n y nivel de vida de los ble, mesurable et Clurable la sante, of Development Effectiveness pobres de todo el mundo es el l'eclucation et le niveau cle vie cles (ARDE). The 1997 Review con- desafio general con que se pauvres clu moncle entier. est centratecl on the linkages between enfrentan el Banco y sus asocia- clonc plus que jamais cl'actualit6. aid and development. The 1998 dos en el desarrollo. Nous publiois cette ann6e la Review reflectecl the lessons of Este es el quinto Examneni cinCiukL6me eclitioll cle I Evamen the East Asia financial crisis. The anual de la eficacia en termninos aunnuel le l'efJicacitd cl. develop- 1999 Review looked at the chal- cle desarrollo. El Examen de 1997 pement (ARDE). Lexamen lenges of implementing the Coin- se centr6 en las vinculaciones de 1997 clecrivait les liens entre prehensive Development existentes entre la ayuda y el des- Iaicle et le cleveloppement et Framework, ancd iclentified prom- arrollo. En el de 1998 se consicle- celui de 1998 tirait les lecons cle ising practices for dealing with raron las ensenanzas extraiclas de la crise financiere d'Asie cle I'Est. them, predicated on strong coun- la crisis financiera cle Asia orien- L'examen de 1999 se penchait sur try commitment to poverty reduc- tal. En el de 1999 se analizaron les probleines de mise en o uvre tion ancl sustainable growth. The los clesafios que representaba Ia cdl Cacdre de cldveloppement int&- 2000 Review concluded that the aplicaci6n clel Marco Integral de gre et d6gageait des moyenis pr-o- Bank could implement its strate- Desarrollo, y se icdentificaron las metteurs pour les r6soudre, gies more effectively by judicious practicas mas prometedoras para reposant sur la fermie volontc des ix 2001 Annual Review of Development Effectiveness adaptation to diverse insti- - superarlos, basadas en un pays de faire reculer la tutional and social environ- decidido compromiso de ' pauvrete et de promiouvoir akents, as well as by los paises con la reducci-n une croissance durable. 3 macknowledging and manag- de la pobreza y el creci- uL'examen de 2000 notait en ing differences between miento sostenible. En el conclusion que la Banque client and Bank priorities. Examen de 2000 se con- pourrait mettre en ceuvre This year's Review high- cluy6 que el Banco podria ses strategies plus efficace- lights the choice of lending aplicar sus estrategias con ment en s'adaptant judi- and nonlending instruments and mayor eficacia si se adaptaba pru- cieusement au contexte activities to achieve development dentemente a los distintos entor- institutionnel et social, tout en objectives. It complements the nos institucionales y sociales, y prenant en compte et en gerant Quality Assurance Group's annual reconocia y resolvia las diferen- les differences entre les priorites assessment of the active lending cias entre las prioridades de los des clients et celles de la Banque. portfolio and of recent analytical clientes y del Banco. L'examen de cette annee met and advisory services. As in prior En el Examen del presente anio en evidence la gamme des instru- years, the Review concentrates on se hace hincapie en la gama de ments de pret et des services hors long-term development effective- instrumentos y actividades de pret qui permettent d'atteindre les ness trends. It finds that selecting financiamiento y de otro tipo dis- objectifs de developpement. Il the right combination and ponibles para el logro de los complete l'cvaluation annuelle du sequence of activities for a partic- objetivos del desarrollo. Es un portefeuille actif et des services ular set of objectives can make complemento de la evaluaci6n recents d'analyses et de conseil the difference between success anual del Grupo de garantia de effectuee par le Groupe d'assu- and failure. calidad sobre la cartera de presta- rance de la qualite. Cormme les This conclusion holds at all mos activos y sobre los recientes annees pr6cedentes, l'examen se levels-the individual project, the servicios de analisis y asesoria. concentre sur les tendances de country assistance program, and Como en afios anteriores, el Exa- l'efficacite du developpement a the Bank's global, sectoral, and men se concentra en las tenden- long terme. Il aboutit a la conclu- thematic priorities. At each level cias a largo plazo de la eficacia en sion que la difference entre le there is unexploited potential to terminos cle desarrollo. Se com- succes et l'echec reside dans le make judicious use of lending prueba que la selecci6n de la dosage et l'echelonnement d'acti- and nonlending activities, to combinaci6n y secuencia adecua- vites adaptees a une serie particu- choose instruments that are das de actividades para un con- liere d'objectifs. adapted to the problems faced, junto determinado de objetivos Cette conclusion est valable a and to leverage work done by puede representar la diferencia tous les niveaux - les projets indi- partners. Such strategic selectivity entre el exito y el fracaso. viduels et les programmes cl'aide is especially important in coun- Esta conclusi6n es valida en aux pays comme les priorites glo- tries with a poor policy frame- todos los niveles: proyectos indi- bales, sectorielles et thematiques work, small or newly reactivated viduales, programas de asistencia de la Banque. Il existe a chaque lending programs, or acute institu- a los paises y prioridades mundia- niveau un potentiel que l'on tional development needs. les, sectoriales y tematicas del pourrait exploiter en utilisant judi- The findings of the 2001 ARDE Banco. En cada nivel, hay margen cieusement des services de pret et demonstrate sustained progress in para utilizar sabiamente las activi- hors pret, en choisissant des portfolio performance and suggest dades de financiamiento y otro instruments adaptes aux proble- several directions for future Bank tipo, elegir instrLmentos que mes qui se posent et en tirant operations. First, the ongoing esten en consonancia con los pro- parti des travaux accomplis par upclating of the policy framework blemas existentes, y conseguir un les partenaires. Il est particuliere- for investment and acljustment efecto multiplicador con las activi- ment important de faire preuve lending offers a good opportunity dades realizadas por las institucio- de cette selectivite strategique to offer operational guidance and nes asociadas. Esta selectividad dans les pays oui le cadre cle x Foreword improve instrument choice. estrategica es especial- I I'action cles pouvoirs Seconcl, in poorly perform- _ mente importanite en los " publics est defaill.an1t, clont ing low-income countries, - paises con un rnarco de les programmes cle pr&ts simple operations, pilot M politicas poco adcecuado, sollt limites ou ont ete projects, and nonfinancial programnas de finanicia- reactives clepuis peu ou activities have particular miento cle pequefia escala - clont les besoins cle dclve- potential to deliver results. o recientemente reactiva- loppement institutionnel Third, for adjustment oper- dos o con necesidacles sont aigus. ations-a growing share of Bank agudas de desarrollo institucional. L'Examen annuel cle l'efficacite lending-success is more likely Las conclusiones cle este Exa- du developpement 2001 revele wlhen the domestic consensus for men anual de la eficacia en trmii- clue des progres durables ont ete reform is strong and other Bank nos de desariollo revelall un rcalises en matiere cle perfor- instruments are brought to bear continuado progreso en los resul- mance clu portefeuille, et propose both upstream and downstream tados cle la cartera y parecen incli- plusieurs orientations pour les of the adjustment process. car varias orientaciones para las op1ratioCIs futures cle la Banque. operaciones futuras cle Banco. En PremiL-rerellt, une mise ai jour primer lugar, la actualizaci6n reguliere du cadre clais lequel constante del marco de politicas s'inscrivenit les prets d'investisse- para la inversi6n y los pr6starnos melnt et les prets . l'ajustelmlellt est cle ajuste representa una buena un bon moyeni d'imprimiier des oportiniclad cle ofrecer asesora- orientationis opr&ationnelles et miento operacional y mejorar Ia d'amcliorer le choix cles instru- gama cle instrumentos disponi- menits. Deuxiememnent, clans les bles. En segunclo lugar, en los pays a faible reveIu clont les paises cle ingreso bajo con resul- rcsultats SOnlt mediocres, des op- tados inadecuadcos, puedlen resul- rations simples, cles projets pilotes tar especialmente eficaces las et des activites autles Cque finliln- operaciones de peLiuefla enverga- cieres sont les plus aptes ai don- dura, los proyectos piloto y las ner cles r6sultats. Trroisielm-nemlerit, activiclacles no financieras. En ter- les operations d'ajustemnent - qui cer lugar, por lo que se refiere a rcpr6sentelnt ulle part croissante las operaciones cle ajuste -una cles prets cle la BalnClue - ont parte creciente de los prestamos cdavantage cle chances cle rLussir del Banco- es inis probable que lorsque le consensus national en se consigan exitos cuando el con- faveur des r6formes est solicle, et senso interno en favor de la que dlautres instruments cle la reforma es firme y se cuenta con Banque interviennent tanlt en otros instrumentos del Banco amonit qu'en aval clu processus tanto en las fases iniciales como d'ajuscement. finales del proceso de ajuste. Robert Picciotto Director-General, Operations Evaluation xi EXECUTIVE RESUMEN RESUME SUMMARY ANALY[IQUE The challenge of develop- El desafio del desarrollo, Le defi du developpement, ment, never straightforward, siempre complicado, ha i qui n'a jamais ete simple, has become even more complex as adquirido mayor compleiidad toda- devient encore plus complexe a the number of actors has grown and via a medida que se ha multiplicado mesure que davantage d'acteurs the desire for demonstrable results el numero de agentes y se ha inten- interviennent et que la volonte has intensified. In seeking to imple- sificado el deseo de resultados d'obtenir des resultats tangibles ment its poverty reduction mission, demostrables. El Banco Mundial, s'intensifie. Pour accomplir sa mis- the World Bank has to match over empenlado en cumplir su misi6n de sion de faire reculer la pauvrete, la 100 client countries tackling innu- reducci6n de la pobreza, tiene que Banque mondiale doit offrir a plus merable development issues with a integrar la realidad de sus mas de d'une centaine de pays clients financial product line ranging from 100 paises clientes -con innumera- confrontes a d'innombrables proble- small grants to large loans, a bles problemas de desarrollo- con mes de developpement l'acces a diverse nonfinancial product line, una linea de productos financieros ceux de sa ligne de produits finan- and a growing cast of public, pri- que van desde pequenias donaciones ciers, allant de dons modestes a des vate, and civil society partners. If a grandes prestamos, una amplia prets importants, et a ceux de sa the Bank is to continue improving its linea de productos no financieros y vaste gamme de produits non finan- development effectiveness, it will un grupo cada vez mas numeroso de ciers dont ils ont precisement have to make the right choices interlocutores del sector publico y besoin chacun, et les mettre en rap- about how, when, and with whom to privado y de la sociedad civil. Para port avec les partenaires de plus en engage (and disengage). Making the que el Banco continue mejorando su plus nombreux des secteurs public right choices with client countries eficacia en terminos de desarrollo, et prive et de la societe civile qui and other development partners- tendra que tomar las decisiones ade- conviennent. Si la Banque veut what is often called selectivity-is cuadas sobre como, cuando y con continuer a ameliorer l'efficacite du the theme of this Review. quien va a mantener (o dejar de developpement, elle devra choisir T'he Bank exercises selectivity tener) relaciones. El tema del pre- judicieusement dans quelles condi- through the choices it makes in sente Examen es precisamente tions, quand et avec qui prendre des tlhree climensions: its corporate c6mo tomar las decisiones adecua- engagements (ou se desengager). goals, strategies for countries, and das con los paises clientes y otras Faire les choix qui s'imposent avec specific activities or instr-uLments. instituciones interesadas en el des- les pays clients et les autres parte- Decisions on each of these arrollo: lo que suele conocerse con naires du d6veloppement, ce qu'on dimensions help determine the el nombre de selectividad. appelle souvent la selectivite, sera institution's development effec- El Banco ejerce la selectividad le theme du present Examen. tiveness. The overarching corpo- a traves de las decisiones que La Banque fait cles choix selec- rate mission-to recluce poverty aclopta en tres dimensiones: sLIs tifs clans trois clomaines: ses through a focus on results-has metas institucionales, las estrate- objectifs institutionnels, les strat& - been translated into corporate gias para los paises y las activida- gies pour les pays et les activitE-s goals ancl institLtional initiatives des o instruLmentos especificos. ou les instruments pa-ticuliers. Les in support of them. Individual Las decisiones sobre cada una de clecisions prises clans chacun cle country strategies are expected to estas dimensiones ayuclan a deter- ces clomaines contribuent a cleter- reflect the Bank's corporate goals, minar la eficacia en t6rminnos cle miner l'efficacit6 cle l'institutioll while at the same time matching desarrollo de la instituci6n. La enr matiere de cli-veloppemnent. La client needs and the comparative misi6n institucional general - mission institItionIelle pnmim0- advantages of partners in particu- reducir la pobreza mecliante una diale, a savoirl dce faire reculer lia x I i 2001 Annual Review of Development Effectiveness lar settings. Even with the mayor atenci6n a los resul- pauvrete en se concentrant right strategies in place, tados- se ha traduciclo en sur les resultats, se concre- results on the ground - metas e iniciativas institu- tise par des buts et des 3 clepencl on choosing the 1 cionales en apoyo cle estos. initiatives institutionnels a right instruments-the I Se espera que las estrate- adaptes. Les strategies 4 focus of this report. gias de los distintos paises adoptees pour chaque pays The ARDE's review of esten en consonancia con doivent refleter les buts selectivity identifies three las metas institucionales del institutionnels cle la Ban- themes common to the project, Banco, y que al mismo tiempo que, tout en faisant coyncicler les sector, and country levels of correspondan a las necesidades besoins des clients et les avanta- analysis: del cliente y a las ventajas compa- ges comparatifs des partenaires en • Good diagnosis, providecl by rativas de los socios en los dife- fonction dies circonstances parti- high-quality economic and sec- rentes contextos. Aun cuando se culieres. Meme si des strategies tor work, is critical for estab- apliCquen las estrategias pertinen- adequates sont mises en place, les lishing realistic development tes, los resultaclos sobre el terreno resultats sur le terrain ne peuvent objectives. Country assistance depenclen de la elecci6n cle los etre obtenus qu'en choisissant les strategies, sector strategies, and instrumentos adecuaclos: ese es instruments adequats. C'est l'objet operational guidance all inform precisamente el tema del presente de ce rapport. the matchiing of instruments informe. L'examen de la selectivite, dans with objectives. El examen sobre la selectividad le cadre de l'ARDE, permet de * The choice of instrument revela la existencia de tres temas definir trois themes communs aux shouldl reflect not only the comunes en los tres niveles de trois niveaux de lanalyse (projet, objectives of the individual anilisis (proyectos, sectores y secteur et pays): operation, but also past perfor- paises): * il est essentiel, pour fixer des mance in the country and sec- * Un cliagn6stico correcto, conse- objectifs de developpement tor context. Appropriate guido a traves cle estuclios eco- realistes, de realiser un bon sequencing and tapping of n6micos y sectoriales cle alta diagnostic a lissue d'etudes complementarities among caliclacl, es conclici6n decisiva economiques et sectorielles de instruments help improve para establecer objetivos cle qualite. Les strategies d'aide- outcomes. desarrollo realistas. Las estrate- pays, les strategies sectorielles . A poor policy and institutional gias de asistencia a los paises, et les orientations opcrationnel- enviromnent compromises the las estrategias sectoriales y la les sont autant de moyens de effectiveness of both lending orientaci6n operacional contri- faire coincider les instrnments and nonlending interventions buyen a emparejar los instruL- et les objectifs; and calls for a nuanced selec- mentos con los objetivos. * Ie choix d'un instriment doit tion of instriments. In weak * La elecci6n de instrumento cadrer non seulement avec les country environments, stand- debe corresponder no s6lo a objectifs d'une operation parti- alone technical assistance oper- los objetivos de cada operaci6n culiere, mais egalement avec ations have performed best, sino tambien al rendimiento les antecedents cli pays et du while structural adjustment anterior del pais y el contexto secteur. En choisissant le lending tends to be the riskiest sectorial. Los resultados pue- moyen approprie d'chelonner instriment. Simple project den mejorar gracias a una ade- les instruments et d'exploiter designs-or a series of simple cuada selecci6n del orden de leurs compl6mentarites, on interventions-provide better los instrumentos y al aprove- peut ameliorer les resultats results than complex and multi- chamiento cle las complemen- * Ia mediocrite des politiques et faceted unclertakings. Even if tarieclades entre distintos des institutions compromet lending is constrainedc by poor instrumentos. 1'efficacite des interventions cle performance, carefully selected * Un entorno normativo e insti- pret et hors pret et exige in nonlending activities can be tucional desacertado pone en choLx nuance des instruments. xiv Executive Summary _ useful, especially peligro Ia eficacia cle las i Dalnls les pays oO IC to keep the Bank pre- interveniciones crediti- I cadre d'action est faible. pared for possible re- 3 cias v no crecliticias y l es ope0lItionl.s cle puLe engagement. reqluiere una selecci6n assistance techili(Lue A EvolvingToolkit mratizadla de instrumen- clonilent g6nir-alernerit 3 An Evolving Toolkit tos. En los paises cloncle les mteilleuls rn-sUIltats, Development effectiveness las circunstancias son tinclis Clue les pre^ts a depends on selecting the poco favorables, las I l'ajustelmlelnt structurel righlt instl-uments and cleploying operaciones cle asistencia tec- sont les instrumelnts les plus them in appropriate secluence and nica inclepenclientes han daclo risques. La formllullationi cle pro- combination, in light of country los mejores resultados, mien- jets simples, oLU uLne scrie and sector characteristics. The tras que el prestamo para fines dinterventions simples. doni- framework for the Bank's activ- cle ajuste estructural suele ser nent cle meilleurs resultats cLue ities, as set out in the Articles of el instrumento cle mayor cles operations complexes et Agreemenit, is sufficiently broad to riesgo. La sencillez del cliseno multiclimensioni nelles. i\l&re permit a wide range of clevelop- cle los proyectos -o de Ulla clans les cas oU les prets sont ment assistance activities as well serie cle intervenciones- per- limites par ulle performance as innovation over time as cir- mite obtener mejor resultadclo mediocre, cles activit6s hors cumstances have changed and que iniciativas complejas y en pr&t choisies avec soin perLIVelIt understanding of the develop- clistintos frentes. AuLn cuaLIIdCo se revelel utiles, en par.Iticulier ment process has improvecl. Many los crelitos se vean limitados pouL prepr.Ier la 1.l3nlue aI Lin innovations to the Bank's financial por un mal clesempeno, una eventulel reengagement. and nonfinancial toolkit were selecci6n esmeracla de activida- introcduced over the 1990s. For des no crediticias puede resul- Un eventail d'instruments en example, the newv adaptable lencl- tar Citil, sobre toclo para que el evolution ing instruments promise to Banco este preparaclo para un Le d6veloppement ne peut etre increase the Bank's flexibility, posible nuevo compromiso. efficace cqLe si I'on chioisit les reduce risks to borrowers and the instiuments adC1ualts et si on les Bank, and facilitate exit from Instrumentos en evoluci6n cleploie en les 6chelonnant et en floundering operations. Similarly, La eficacia en terminos de cles- les combinant cle facon appro- nonfinancial activities became arrollo clepende cle la selecci6n priee, en fonction cles caract6risti- more cliversified and participatory de los inst-umentos aclecuaclos y ques CLu pays et CLu secteur. Le with greater emphasis on nurtur- de su utilizaci6n en un orden y cadre des activites cle la Banque, ing reform and enhancing the con una combinaci6n adecuados, tel qu'il est defini clants les Statuts, quality of partnerships. teniendo en cuenta las caracteris- est suffisamment large pour per- Distinctions among lending ticas de cada pais y sector. El mettre non settlemilent cle mener instrLments reflect their ability to marco para las activiclacles del une vaste ganmme d'activites address differing development Banco, establecido en el Conve- d'aide au dcveloppement, mais objectives and their costs, syner- nio Constitutivo, es lo suficiente- aussi dlinnover ai mesure cIlue Ia gies, and complementarities. mente amplio coIIIo para permitir situation evolue et qcue le proces- Sharper operational guidance una gran variedad de actividades sus de d6veloppernent est mieux would help country assistance cle asistencia para el desarrollo asi compris. Dans les annees 90, la strategies choose instruments como para introducir innovacio- Banqtie a introduit cle nombleux appropriate to specific objectives nes a lo largo clel tiempo a instruliments financiers et n1on1 and to sector and country condi- medida que vayan cambiando las finianciers nova\teurs. Ainsi, les tions. In particular, now that con- circunstancias y se llegie a una nouve.Lux prets evolutifs promet- siderable effort has been devoted mejor comprensi6n del proceso tent cldaugilmenter Ia souplesse dC to establishing the standards and de desariollo. Durante el decenio la Banqlue, cle reduire les risCtles scope of diagnostic instruments, cle 1990 se introclujeroni muclias auxquels s'exposent les empruLn- xv 2001 Annual Review of Development Effectiveness they should be deployed to innovaciones en el instru- teurs et la Banque et de ensure priority coverage of mental financiero y no ' faciliter le retrait en cas countries with high financiero del Banco. Por d'echec. De meme, les acti- vulnerability. r ejemplo, los nuevos instru- vites non financieres sont mentos crecditicios adapta- clevenues plus diversifiees Improved Instrument bles ofrecen posibilidacles et participatives et privile- Performance de aumentar la flexibilidad gient davantage les refor- As forecast in last year's del Banco, reducir los ries- mes et l'arnlioration cle la Review, the Strategic Compact tar- gos para los prestatarios y el qualite des partenariats. get of 75 percent satisfactory out- Banco y facilitar el abandono de Ce qui distingue les instruments comes for lending has been met. operaciones condenadas al fra- de pr&t, c7est leur capacite a viser The latest project evaluation data caso. De la misma manera, las cles objectifs cle developpement confirm significant improvement actividades no financieras son cdifferents ainsi que leurs coOts, les in the Bank's lencling perfor- ahora mais diversificadas y basa- synergies qu'ils permettent et leurs mance, especially for FY00 exiting clas en la participaci6n, y hacen complementarites. Des directives projects. The upward trend contin- mayor hincapie en fomentar la operationnelles plus precises aide- ues into FY01. The first half of reforma y mejorar la caliclad cle raient ai choisir les instruments qui FY01 exiting projects, now evalu- las asociaciones. conviennent a des objectifs parti- ated by OED, has 82 percent satis- Las distinciones entre los ins- culiers et qui sont aclaptes ai la factory outcome ratings. Solid trumentos crediticios responcden a situation d'un secteur et d'un pays improvements in sustainability and su capacidad de abordar los clife- donnes dans le cadre des Strat& institutional development impact rentes objetivos del desarrollo y gies d'aide aux pays. Alors que are also evident. Seventy-one per- sus costos, sinergias y comple- cles efforts considerables sont cent of projects exiting during the mentariedades. Una orientaci6n aujourd'hui deployes pour definir FYOO-01 period are rated to have operacional mas acertada ayuda- les normes et la portee des outils likely or highly likely resilience to ria a las estrategias de asistencia - de diagnostic, il est particuliere- future risks; one of every two pro- los paises a elegir instrumentos ment important d'appliquer ces jects evaluated during the same adaptados a objetivos especificos outils en priorite aux pays les plus period also shows substantial or y a la situaci6n de cada sector y vulnerables. better institutional development pais. En particular, ahora que se impact ratings. han desplegado notables esfuer- Des instruments plus Recent evaluations show zos por establecer las normas y performants improved performance from pro- alcance de los instrumentos de Comme le prevoyait l'examen de jects in the Africa Region follow- cliagn6stico, deberian utilizarse I'an dernier, Iobjectif dlu Pacte ing its portfolio improvement estos para garantizar una cober- strategique, qui fixait a 75 % la drive. Looking at lending instru- tura prioritaria de los paises mas proportion des prets clevant obte- ment groups, the outcomes of vulnerables. nir cles resultats satisfaisants, a ete adjustment operations declined atteint. Les dernieres donnees sur slightly for the FYOO-01 exit Mejor desempenio de los 1'evaluation des projets confirment period, while investment project instrumentos que les resultats des prets de la outcomes improved markedly. Como se preveia en el Examen Banque se sont sensiblement The quality of project-level inputs del afho pasado, se ha alcanzado ameliores, en particulier pour les remains a key determinant of el objetivo del Pacto Estrategico projets sortis du portefeuille project success. The outcomes of de un 75% de resultados satisfac- durant l'exercice 00. Cette ten- projects are also closely correlated torios para las actividades crediti- dance s'est poursuivie durant with the Bank's Country Policy cias. Los datos mas recientes de 1'exercice 01. La premiere moitie and Institutional Assessment las evaluaciones de proyectos des projets sortis du portefeuille (CPIA) ratings. Moreover, invest- confirman una significativa mejora durant l'exercice 01 (qui ont ment interventions cost signifi- en el desempeno de los presta- aujourd'hui et evalues par xvi Executive Summary cantly more, per amount mos del Banco, sobre todo l'OED) ont obtenu des disbursed, when under- en lo que respecta a los resultats satisfaisants pour- taken in low C1l'A proyectos vigentes en el 82 % cl'entre eux. De nettCs countries. ejercicio cie 2000. La ten- ameliorations en matiure The Strategic Compact ldencia ascendente se pro- cle viabilite et dcimpact Sur goal-of 85 percent satis- longa en el ejercicio cle le d&veloppemient institu- factory-has also been 2001. La primera mitacl cle tioninel sont 6galement evi- achieved in nonilending los proyectos finalizaclos I clentes. Soixante et onze services. Self-evaluation results en este ultimo ejercicio, evaluados pOUl cent cles projets sortis cIu show a broad improvement in the ahora por el Departamento de portefeuille clurant les exercices cluality of economic and sector Evaluaci6n de Operaciones 00-01 ont et juges susceptibles work (ESW) as it becomes more (DEO), ha mereciCdo un 82% cle o0 trc-s susceptibles cle resister a participatory, client-oriented, ancd calificaciones satisfactorias. Se des risclues futurs. Pairmi les pro- result-focusecl. There remains observan tambien mejoras consis- jets evalues CLurant cette mime room for improvement in the tentes en la sostenibilidad y en periode, oll sur cleux est consi- poverty focus of these instru- los efectos del clesarrollo institu- clerC- comrine avant au moimis Ull ments, as well as in the quality cional. Se considera que el 71% imipact appreciahble Sur le Cove- and impact of ESW in poorly de los proyectos existentes loppemenit institutioninel. performing countries, especially durante los ejercicios 2000-01 Les 6valuations r6centes inci- ficduciary reviews. resistinin probablemente -o muy quent que les r6sulta.ts des projets probablemente- a los riesgos cle Ia rcgion Afrique se sonl am&1e- Instrument Choice Affects fIturos; uno de cada clos proyec- liores gralce au lancernent cdl pro- Country-Level Results tos evaluados cdLrante el niismo gramimille d[ameli6oration cdl The outcome of country pro- pernoco tendria efectos cuando portefeuille. En mati4lre clinstIU- grams, as measured in the more menos considerables en el cles- nients cle pr&t, le resultat cies ope- than 50 Country Assistance Evalu- arrollo institucional. rations cdajustemI1enIt a legerement ations (CAEs) conducted thus far Evaluaciones recientes revelan decline pOUl les projets sortis cld by OED, clepends in part on how una mejora en los resultados cle portefeuille cluranMlt les exercices well selectivity has been exercised los proyectos en la regi6n cle 00-01, alors CiLle le rIsuat cles at the corporate, country, and Africa tras la campana empren- projets cl'investissemilenit s'est nola- instrument levels. Corporate prior- dicla para mejorar su cartera. Si se blement amldior La (lu.lite cles ities are conveyed to individual consicderan los grupos cle instru- apports aux projets reste onll ee- country programs througIl the mentos crediticios, los resultados ment d6terminant cIu succes cles Bank's support for the Compre- de las operaciones cle ajuste dis- projets. Le resultat cles projets est hensive Development Framework minuyeron ligeramente en el peri- cgalement etioiteimeit liz ai Ia and the Poverty Reductioll Strat- odo cle salida correspondiente a note qui leur est attrilbuLe clans le egy Initiative, inter-country lend- los ejercicios (ce 2000-01, Inien- cacire de l'Evaluation cle la politi- ing allocation decisions, and the tras que los resultaclos dce los pro- que et des institutions nationales distribution of administrative yectos cle inversi6n mejoraron (El'IN). En outre, les operations resources among Regions and notablemente. La calidacd de los d(investissement sont be.Lucoup Networks. OED's recent IDA insumos de los proyectos conti- plus coCIteLses, par mo1n01tant Review finds that the nua siendo un determinante clave decaissc, lorsqlu'elles sont entre- performance-based lending allo- del exito de los mismos. Los prises clans des pays clont la per- cation system has evolved over resultados estan tambien estrecha- formance est jugee faible daris le the past decacde to reflect new mente correlacionacdos con las cadre cle l'ElIN. development knowledge and calificaciones cle la cvaluaci6n de L'objectif do Pacte str.atgique, evolving corporate priorities. las politicas e institicionies nacio- d'obtenir 85 % de projets satisfai- These changes have strengthened nales (EPIN), del l3anco Munclial. sants, a egalement ete atteint pOUr the link between countries' policy Ademnis, las intervericiones en les services hor-s prt. Les rtsultats xviI 2001 Annual Review of Development Effectiveness and institutional perfor- forma de inversi6n tienen des auto-evaluations r6ve- mance and lending levels. un costo significativamente ' lent une nette amelioration In its allocation decisions 3 mayor, por cantidad des- de la quaite des et udes 3 n for IBRD lonternational embolsada, cuando se rea- conomiquLies et sectorielles Bank for Reconstruction lizan en paises doncle la (ESW), qui font davantage and Development; also EPIN ha ofrecido califica- ! appel a la participation et World Bank) borrowers, ciones bajas. sont plls ax6es sur les the Bank has also recog- Se ha conseguido tamn- besoins des clients et les nized that better development bien la meta de Pacto Estrategico resultats. Ces instruments doivent prospects result from lending -85% de calificaciones satisfacto- encore accorder davantage under good country policies and rias- en los servicios no crediti- d'importance au probleme de la institutions. There is untappecl cios. Los resultados de la pauvrete, et il y a egalement potential to select and sequence autoevaluaci6n revelan una nature a ameliorer la qualite et instruments more strategically in amplia mejora de la calidad de los l'impact des ESW, en particulier individual country programs, link- estudios econ6micos y sectoriales, les examens ficluciaires, dans les ing them more explicitly to objec- que ahora estan mas basados en pays dont la performance est tives. When country circum- la participaci6n, mas orientaclos a jugee faible. stances require unanticipated los clientes y mas centrados en changes in the assistance pro- los resultados. Sigue habiendo Le choix des instruments gram, it is important to use timely margen cle mejora en la orienta- conditionne les r6sultats au CAS updates and progress reports ci6n cle estos instrumentos hacia niveau des pays to provide an agreecl-upon strate- la pobreza, asi como en la calidad Les resultats des programmes par gic context for Bank activities. y efectos de los estudios econ6- pays, mesures d'apres plus de cin- A special challenge is getting micos y sectoriales en los paises quante evaluations de l'aide aux better results in poor policy and con resultados deficientes, sobre pays (CAE) effectuees jusqu'a pre- institutional environments. todo en los examenes fiduciarios. sent par l'OED, dependent en par- Reviews of country ancl project tie de la qualite cle la selectivite au evaluations show that the perfor- La elecci6n del instrumento niveau de l'institution, du pays et mance of both lending and non- influye en los resultados de l'instrument. La Banque fait lending instruments is under- obtenidos en los paises passer ses priorites dans les pro- mined by weak policies and Los resultaclos de los programas grammes-pays en apportant son institutions. In such adverse envi- por paises, cuantificados en m1is soutien au Cadre cle developpe- ronments, stand-alone technical de 50 evaluaciones cle asistencia a ment integre et au Cadre strategi- assistance fares better than other los paises realizaclas hasta ahora que de reduction de la pauvrete, forms of lending, suggesting that por el DEO, dependen en parte en decidant de l'affectation des the Bank should continue focus- del acierto con que se ha practi- prets entre les differents pays et ing on capacity and institution cado la selectividad en cuanto a en repartissant les ressources building in such countries. Partic- la instituci6n, el pais y el instru- administratives entre les Regions ular care is needed for adjustment mento. Las prioridades institucio- et les Reseaux. L'examen de l'IDA operations, which tend to have a nales se transmiten a los recemment realis6 par l'OED lower likelihoocl of success in low programas de cada pais a traves revele que le systeme d'octroi des CPIA countries. For all lending, del apoyo del Banco al Marco credits en fonction des resultats a recent CAEs show that a series of Integrado de Desarrollo y la ini- evolue en dix ans, et reflete les simple interventions provides bet- ciativa de lucha contra la pobreza, nouvelles connaissances acquises ter results than complex undertak- las decisiones de asignaciones en matiere de developpement, ings. Pilot programs also provicle crediticias entre los distintos pai- ainsi que l1'volution des priorites a valuable instrument to test ses y la distribuci6n de los recur- institutionnelles. Ces changements uncertain environments and to sos administrativos entre regiones renforcent le lien entre l'efficacite build capacity. The success of y redes. En el reciente examen cle des politiques et des institutions xviii Executive Summary pilot initiatives suggests la AIF realizaclo por el nation-ales et les nive.tux de scope for their expanded DEO se observa que el sis- ' financement. Dans ses cleci- use in poorly perforimling tema cle asignaci6n de cr e- sions relatives a l'affectation countries-with a gradual M clitos en funci6n del a.ux emprunteuIs cles res- shift to up-scalinig as imple- resultaclo ha evolucionaclo sources cle la Banque inter- imentation conditions clurante el pasado decenio nation-ale pour la impr-ove. Diagnostic stuclies de acLIerdo con Ia nueva reconstructioni et le cleve- are critical in these coun- concepci6n del desarrollo I loppement (BIRD ou 13all- tries to ensure accurate assess- y las nuevas prioridades institu- que moncliale) la Banque tient ment of borrower ownershiip and cionales. Estos cambios han inten- comIlpte aussi dlI fait que les per- program risks. sificado la relkci6n entre la spectives c cleveloppemenit sont Across the spectrum of country politica y resulIclos instituciona- meilleures lorsque les prets sont environments, recent evaluative les de los palises y el volumell cle accorcles clans le cadre cle bonnes evidence confirms country capac- financiamiento. En sUs clecisiones politiques nationales et cl'institu- ity and borrower commitment as de asignaci6n par-a los prestitarios tions solides. Tl est possibleh clans key cirivers of effectiveness. The del Banco Interna-cionil cle le cadre cle chaqKue prograimme- evidence suggests that the Bank Reconstrucci6n y Fomenito (BIRF), pays, de choisir les instruments et can clo more to take these factors el Banco ha reconocido tambi6n d'6ichelonner leur utilisation1 cle into account-for example, que los pr6stamos en el miarco cle maniere plus strat6gique, en les throughi better assessments of politicas e instituiciones nacionales liant plIus prIcis6ment au x objec- implemilentation capacity and adecuadas se manifiestan en tifs. Lorscque les circonstances par- greater reliance on local knowl- mejores perspectivas para el des- ticuliires d'un pays obligent a edge. Since many borrowers are arrollo. Sigue habienido posibilida- apporter des modifications impre- unfamiliar with the full menu of cles cle seleccionar y ordenar vues au programme d'aide, il est Banik instruments, the Bank needs clebiclamente los instiLimentos en import-anit Clutiliser les acttLalisa- to keep themil abreast of the forma mris estrategica en los pro- tions de Ia Strattgie cl'aicle au pays choices offered by the Bank's gramas de los clistintos paises, et les rappoIlts tablis SUr 1Iavance- expanding toolkit so as to secure vincuLIinclolos mris expresamente ment cle sa mise en oeuvr-e pour their full ownership. con los objetivos. Cuando las cir- convenir du conltexte strat6giClUe cunstancias de un pais requieren des activites de la 13ainclue. Implementing Sector and cambios imprevistos en el pro- 11 est particulierement difficile Thematic Strategies gram.a de asistencia, es importante d'amildiorer les rtesultats clans les The evolution of the Bank's cor- utilizar actualizaciones oportunas pays oCt le cadre clirectif et institu- porate priorities is reflected in the de las estrategias cle asistencia a tionnel est dchfavorable. L'examen recent expansion of lending for los paises e informes cle situaci6n des evaluations nationales et cles social protection, economic pol- para ofrecer un contexto estrate- evaluations des projets revele CLue icy, and finance, and in a stronger gico convenido para las activida- la performance des instrumiLenits focus on public sector manage- des del Banco. de pret et services hlors pret est ment and institutional reform. Un desafio especial es conseguil- compromise lorsque les politiclues Declines in the share of lendinig mejores resultaclos cuanclo las con- et les institutions laissent . desi- for rural development and educa- cliciones normativas e instituciona- rer. Dans ces conclitions cldfavora- tion, by contrast, seem inconsis- les no son las mejores. Del examen bles, les operations classistance tent with clefinecd priorities and de las evaluaciones sobre paises y teciniqcue pure clonnent alois cle highilighit the neecd for upcdated proyectos se desprende Clue el des- meilleurs resultats que les pl-&ts operational strategies in these sec- empeno cle los instiLumlenitos ci-ecliti- ce Cqui tend 1i incliCLuel que hL tors. Specific investment loans cios y no crecliticios se ve afectado Banque clevli.it contillnte a se continue to be tihe predominant cuando lIs politicas e instituciones concentrer SUr le reniforcemilenit lending instrument, and the use of son cdebiles. En estas concliciones des capacites et cles institutionIs new programmatic lending instrnL- adversas, la asistencia tecnica por si dans ces pays. 1I faut &tre particu- xix 2001 Annual Review of Development Effectiveness menits is growing. Overall, sola da mejores frLtos que lierement vigilant pour les the sequencing of opera- otras formas de financia- Y operations clajustement, i tions and the synergies 3 miento, lo que parece indi- qui ont en general moins 3 vbetween them are particu- en car qre el Banco deberia de anclaes de raussir dans larly important when objec- continuar concentrandose - les pays dont la perfor- ;tives include corplex insti- aen el foraleciaiento de la d mance est jugde faible dans tutional reforms. In capacidad de las institucio- le cadre des EPIN. Les eva- particular, success is more nes de esos paises. Debe luations cle l'aide aux pays likely where lending is uncler- prestarse especial atenci6n a las realisees recemment montrent que pinned by upstream analytical operaciones de ajuste, que suelen dans toutes les operations de pret, work together with parallel sulp- ofrecer menor probabilidad de une serie d'interventions simples port for piloting and flexible exito en los paises donde la EPIN donne de meilleurs resultats que downstream implementation, and no ha sido satisfactoria. En relaci6n des operations complexes. Les by continuity in policy dialogue con el conjunto cle todos los presta- programmes pilotes sont egale- where relevant. mos, las recientes evaluaciones ment un moyen precieux d'eva- The Bank's crosscutting the- sobre la asistencia a los paises reve- luer des situations mal connues et matic objectives, such as environ- lan que una serie de intervenciones de renforcer les capacites. Le suc- mental sustainability and gender, sencillas permite mejores resultaclos ces des programmes pilotes incli- can best be achieved through que iniciativas mas complejas. Los que aussi qu'il y a matiere a les complementary use of both lend- programas piloto son tambien un utiliser davantage dans des pays ing ancd nonlending tools. Of the instalmllento valioso para compro- dont la performance est mediocre, strategies recently reviewed by bar entornos inciertos y para el des- en 6largissant progressivement OED, environmental sustainability arrollo de la capacidad. El exito de leur champ d'application a has exploited the widest range of Las iniciativas piloto inclica que hay mesure que les conditions de instr-uments, leveraging effective margen para una mayor utilizaci6n mise en ceuvre s'ameliorent. Les implementation of safeguards, en los paises con resultados bajos, etudes de diagnostic sont essen- along with direct environmental donde se poclria avanzar gradual- tielles dans ces pays, afin d'eva- lencling and substantial reliance mente hacia iniciativas de mas luer precisement l'adhesion des on regional and global partner- envergadura a medicla que mejora- emprunteurs et les risques du ships. Successftil mainstreaming ran las condiciones cle aplicaci6n. programme. of thematic initiatives requires the Los estLdios de diagn6stico son Quel qute soit le contexte qui strategic use of instruments as fundamentales en estos paises para prevaut dans les dlifferents pays, well as clearer Regional ancl Net- garantizar una evaluaci6n adecuacla les evaluations recentes confir- work accountability. de la identificaci6n de los prestata- ment que les capacites des pays For the successful implementa- rios y de los riesgos cle los et le degre d'engagement de tion of both sector ancl thematic programas. 1'emprinteur sont les facteurs strategies, several broacd lessons Evaluaciones recientes confir- determinants cle lefficacite. Tout emerge. Making the right choice man que, cualquiera que sea la porte a croire que la Banque peut of instrument when undertaking sitUaci6n nacional, la capacidad faire plus pour tenir compte de institLtional reform requires clarity clel pais y el compromiso del ces facteurs, par exemple en eva- about the operation's objectives prestatario son factores decisivos luant mieux la capacite de mise and a goocl understanding of de la eficacia. Los testimonios en ccuvre et en faisant davantage country and sector conditions. For parecen indicar que el Banco appel au savoir local. Etant donne example, programmatic invest- puede hacer mas para tener en que de nombreux emprunteurs ne ment lending may be appropriate cuenta estos factores -por ejem- connaissent pas toute la gamme where the emphasis is on a sus- plo, mejoranclo las evaluaciones des instruments cle la Banque, tainecl medium- to long-term pro- de la capacidacl de aplicaci6n y celle-ci doit les tenir informes des gram of phased policy and recurriendo mas al conocimiento options que leur offre l'eventail institution-building reforms- local. Como muchos prestatarios toujours plus grand d'instruments xx ExecuLtive Summary especially when the range no estin familiarizados con - i leur clisposition, afin cle of stakeholders and institu- todos los instrumentos del s'assurer de leur pleine tions involved is large, and hBanco, ste clebe ayudarles adhesion. when there are substantial a actualizar sus conoci- challenges for consultation, mientos sobre las opciones Mise en ceuvre de consensus building, pilot- cada vez mrns amplias ofre- strategies sectorielles ing, monitoring, and evalu- ciclas por el Banco, con el et thematiques ation. The Bank's system- fin cle conseguir su total I L'evolution des priorites atic interactions with international identificaci6n. institutionnelles cle la Banque se and national stakeholclers have traduit par l'accroissement recent improved Bank policies and Aplicaci6n de estrategias des prets destines ai la protection helped build a broad consensus sectoriales y tematicas sociale, cles operations portant SUr around some of its thematic prior- La evoluci6n cle las prioriclades la politique economique et les ities, but consultative processes institucionales clel Banco se pone finances, et par une attention need to become more expeditious de manifiesto en la reciente accrue ai la gestion clu secteul and businesslike. At the countly expansi6n del credito para fines public et aux r6formes institution- level, partnerships have a crucial de protecci6n social, las politicas nelles. Par comparaison, la haisse role in setting the pace and direc- econ6micas y el financiamniento, y cle la proportion des prcts en tion of reform, particularly in la mayor atenci6n a la gesti6n del faveur du d6veloppemnent rural et large countries where selectivity is sector publico y la reforma institu- cle l'elucation semble aller ai essential to leveraging the Bank's cional. La disminuci6n de la parte 1'encontre des priorites clefinies, et relatively small share in external de los pr6starnos para desarrollo souligne la nrcessit cl'actualiser assistance. The transaction costs rural y educaci6n, por el contra- les strategies operationnelles clans can be high in some cases, and rio, parece estar en contradicci6n ces secteurs. Les prets cl'investis- more strategic attention is needecd con las prioridades estableciclas y sement specifiques continuenit to improve cost effectiveness and subraya Ia necesidad cle estrate- cl'&tre l'instruLiment prndominant, selectivity in the use of partner- gias operacionales actualizadas en et les nouve.Lux instrUlments cle ships. Finally, the effectiveness of esos sectores. Los prestamos pret programmatiques sont de lencling operations for sector and orientaclos expresamente a la plus en plus utilises. Dans thematic objectives is strongly inversi6n contindian siendo el ins- 1'ensemble, 1'6chelonnerrment cles influenced by the extent and trnimiento crediticio predominante, operations et les synergies sollt quality of stakeholder y estA aumentando la utilizaci6n particulierement importants lors- participation. de nuevos instrumentos de finan- que les objectifs comprennent cles ciamiento programitico. En termi- reformes institutionnelles coIll- Corporate Implications nos generales, la secuencia de las plexes. En particulier, les chances In the continuing drive to operaciones y las sinergias entre cle succes sont accrues lorsque les enhance the impact of develop- ellas adquieren especial importan- prets sont etayes par des travaux ment assistance on poverty and cia cuando entre los objetivos se analytiques en amont, parallele- growth, this Review has high- incluyen complejas reformas insti- ment a un appui a des experien- lighted areas in which the Bank tucionales. En particular, es mtis ces pilotes et a une mise en can further increase its develop- probable que se consiga el exito oeuvre souple en aval, et ii un ment effectiveness-by making cuando los prestamos estan sus- dialogue permanent sur les mesu- the right choices in line with tentaclos en estuLdios analiticos res a prendre, le cas echeant. country performance and poten- previos -junto con un apoyo Le meilleur moyen pour la tial, corporate priorities, and com- paralelo a la experimentaci6n y Banque d'atteindre ses objectifs parative advantage. una aplicaci6n mas flexible en th6matiques pluridisciplinaires, At the instruLmlent level, a uni- etapas sucesivas- y en un conti- tels que la pr6servation a long form treatment covering each nuaclo cdialogo sohre politicas, terme de l'environnemiienit et la instrument's role, clesign, and les- cuando convenga. parite des sexes, est cl'utiliser cle xx i 2001 Annual Review of Development Effectiveness sons from past perfor- Los objetivos tematicos facon complementaire les mance could constructively transversales del Banco, ' instruments de pr&t et les inform instrlmlent choice coImlO la sostenibiliclacd services hors pret. Parmi for Bank managers and P ambiental y el genero, pue- les strategies recemment borrowers. The ongoing den lograrse mas facil- examinees par l'OED, c'est 4jg update and conversion of imente mediante la celle ayant trait au deve- the Operational Policy on utilizaci6n complementaria loppement ecologiquement adjustment lending, to be de instrumentos crediticios viable clui a exploite la followed by a similar process for y no crediticios. De las estrategias plus vaste gamme d'instiuLments, investment lending, will offer a recientemente examinadas por el en tirant parti des mecanismes de good opportunity to incorporate DEO, la sostenibilidaci ambiental protection efficaces mis en place these improvements. es la que ha utilizado la mayor et de prets directs en faveur de The Bank is devoting renewed variedad de instrumentos, habi- 1'environnement, et en forgeant attention to achieving better endo multiplicado la aplicaci6n de nombreux partenariats regio- results in countries with poor pol- eficaz de salvaguardias junto con naux et mondiaux. L'integration icy and institutional environments, el financiamiento ambiental reIssie des initiatives th6matiques with a current focus on nonlend- directo y una considerable utiliza- passe par une utilisation strategi- ing support. It has established a ci6n de asociaciones regionales y que cles instriments, et par une highi-level task force devoted to muncliales. La incorporaci6n efi- definition plus claire des respon- improving Bank support to low- caz de las iniciativas temaiticas sabilites des Regions et des income, poorly performing coun- requiere la utilizaci6n estrategica Reseaux. tries. This Review presents evalua- de instruLmlentos asi como una On peut tirer plusieurs lecons tion findings that are germane to dlelimitaci6n mais clara cle respon- generales en vue de la bonne this difficult task. Recognizing the sabilidades entre regiones y redes. mise en Ocuvre de strategies sec- significant performance differen- En lo que se refiere a la aplica- torielles et thematiques. Pour tial across instrLments is an ci6n eficaz de las estrategias secto- choisir judicieusement l'instru- important first step. In adclition, riales y tematicas, pueden ment adequat lorsqu'on veut reali- over-complexity of projects when extraerse varias ensehianzas gene- ser des reformes institutionnelles, country capacity is limited leads rales. Para elegir adecuadamente il faut une bonne connaissance to excessive risks. More conscious el instrumento cuando se des objectifs de l'operation, ainsi tailoring of instruments and part- emprencle la reforma institLcional que de la situation du pays et du nerships to country conditions se requiere claridacl acerca de los secteur. Ainsi, des prets program- should bring precious develop- objetivos cle la operaci6n y una matiques peuvent etre incliques ment effectiveness gains in diffi- comprensi6n adecuada de las lorsque laccent est mis sur un cult operating environments. concliciones clel pais y el sector. programme continu a moyen/long Experimentation with outcome- Por ejemplo, los prestamos para terme de reformes progressives based operations and innovative inversiones programaticas pueden cles politiques et des institutions - partnerships with private and vol- resultar indicados cuanclo lo que en particulier lorsque les parties untary sector organizations should interesa es un programa conti- prenantes et les institutions be encouraged. Lastly, the role of nuado a mediano o largo plazo de concernees sont nombreuses et nonfinancial activities in poorly reformas escalonadas normativas y qu'il existe des besoins importants performing countries deserves de fortalecimiento institucional - de consultation, de recherclhe de special attention, even when cli- sobre todo cuando la varieclacd de consensus, d'interventions pilotes, ents are not actively borrowing. partes interesadas e instituciones de suivi et d'evaluation. Les con- Implementation of sector strat- es considerable, y cuando existen tacts etroits que la Banque entre- egies within countries requires dificultades notables para entablar tient systematiquement avec les clarity about the country's devel- consultas o lograr el consenso y parties prenantes au niveau natio- opment objectives and a good para las actividades de experimen- nal et international ont ameliore understanding of country and sec- taci6n, seguimiento y evaluaci6n. les politiques de la Banque et xxii Executive Summary tor conditions. Adjustment Las interrelaciones sistema- contribuc- a forger un vaste lending, supported as nec- ticas del Baznco con las ' consensus autour cle certai- essary by capacity-building partes interesaclas interna- nes cle ses priorites th6mna- assistance, is more effective M cionales y nacioniales han ticques. Le processLus cle when national ownership mejorado las politicas cle consultation cloit cependanit and consensus on sector e ste y ayudclaco a conseguir devenir plus rapicle et pro- reforms are strong and un amplio consenso en fessionnel. Au niveau cles when monitoring and eval- torno a algunas de las prio- i pays, les partenariats ont uationi arrangements are in place. riclacles temiticas, pero los proce- un r6le clucial a jouer en fixant le In sectors where these prerequi- sos consultivos deben ser mnis iythme et [orientation cles refor- sites are lacking-for example, aceleraclos y sistematicos. Dentro mes, en particulier clans les education and healtlh in some de los paises, las asociaciones grands pays ou Ia selectivite est countries-programmatic invest- pueclen clesempeniar un papel essentielle pour assurel un maxi- ment lending may be the pre- decisivo para establecer el ritmo y mumLl d'efficacite a la part relative- ferred approach, supportecl where orientaci6n cle Ia reforma, sobre ment faible de la Banclue dans relevant by Learning and Innova- todo en los grancles paises donde Iaide ext6rieuLre. Les couts de tion Loans (LILs) and targeted la selectividacl es funclamental transaction peuVellt etre 61ev6s capacity building. Support of the para multiplicar los efectos de la clans certains cas, et il faut s'atta- Bank's crosscutting, thematic parte relativamente pequefia del cher clavantage, sur un plan stra- objectives depends less on the Banco en la asistencia externa. tegique, a recouL-ir- aux use of specific lending instru- Los costos de transacci6n pueclen partenariats cle facon plus econo- ments than on genuine main- ser elevaclos en algunos casos, y mique et selective. Enfini, 1'effica- streaming of these operational se requiere mins atenci6n estrate- cite cles operations cle prct clu emphases across instruments and gica para mejorar la eficacia en point cle vue des objectifs secto- on strategic application of safe- fuLnci6n cle los costos y la selecti- riels et thematiques est fortement guards and partnerships. viclacd en el uso de asociaciones. influencee par le degre et la qua- The findings in this Review Finalmente, la eficacia cle las ope- lite de la participation cles parties have implications for evaluation: raciones crediticias con respecto a prenantes. * Nonfinancial activities continue los objetivos sectoriales y tem'ati- to grow in importance. A cos depende fuertemente clel Implications pour I'institution strong evaluative framework is alcance y calidad de La participa- S'inscrivant dans la ligne cle l'ac- needed to ensure their contin- ci6n de las partes interesaclas. tion menee pOuIr accroitre ['impact uecl effectiveness, building on cle ['aide au developpement sur Ia the Quality Assurance Group's Repercusiones institucionales pauvrete et la croissance, le prc- current assessments of their En el constante esfuerzo por sent Examen appelle [attention cluality at entry-extending aumentar los efectos de la asisten- sur les doomaines clans lesquels la quality assurance to all services cia para el desarrollo en la B3anque peut encore ameliorer of the Knowledge Bank. pobleza y el crecimiento, en el son efficacite sur le cleveloppe- * The quality of Poverty RedLuc- presente Examen se han clesta- ment, en operant les choix qui tion Strategy Papers (PRSPs) is cacdo las direas en que el Banco s'imposent compte tenu cle la per- critical to the Bank's develop- puede aumentar todavia su efica- formance et cdu potentiel clu pays, ment effectiveness because cia en t6mrinos de clesarrollo, de ses priorites institutionnelles, I'RSPs provicle the framework adoptando las clecisiones adecua- et cle son avantage comparatif. for a comprehensive approach das de conformiclad con el cles- En ce qui concerne les instru- to ownership, partnership, and empenio y potencial cle un pais, ments, une etucle analysant cle la results orientation. PRSPs las prioridades institucionales y m&me mani6-e le r6le cle chaclue already emphasize monitoring las ventajas comparativas. instrument, leur conception et les progress on selectecd incdicators; En lo que se refiere a los ins- lecons a tirer des resultats obte- this now shIouldC be comple- trumentos, un tratarniento ULlli- IIUS parl ChIaCuLIII pOUrrait 6clairer XXiil 2001 Annual Review of Development Effectiveness mented by comparable forme en que se considere utilement les choix des res- attention to capacity la funci6n, diseno y ense- NA ponsables de la Banque et building for systematic 3 nanzas del pasado de cada des emprunteurs. L'actuali- program evaluation of / uno de ellos podria orien- sation et l'adaptation en interventions and their tar a los administradores cours de la Politique opera- results. del Banco y a los prestata- tionnelle sur l'ajustement Country and sector strat- rios a tomar decisiones con structurel, ainsi que la egies can be strength- conocimiento de causa. El demarche similaire prevue ened through a more transpar- actual proceso de actLalizacion y pour la politique relative aux ent and objective record of conversi6n de la Politica Opera- prets d'investissement, offrent une past performance. A stronger cional sobre financiamiento para bonne occasion d'introduire ces independent and self- fines de ajuste, que debera ir ameliorations. evaluation focus would be seguida de un proceso semejante La Banque s'emploie plus que facilitated by a closer alignment con los prestamos para proyectos jamais a obtenir de meilleurs of inputs to results, using a log- de inversi6n, ofrecera una buena resultats dans les pays ou les poli- ical results chain and verifiable oportunidad de incorporar esas tiques et les institutions laissent a performance indicators- mejoras. desirer, en privilegiant une assis- Country Assistance Strategies El Banco esta dedicando reno- tance hors-pret. Elle a mis en and Sector Strategy Papers. vada atenci6n a lograr mejores place un groupe de travail de Finally, since evaluation find- resultados en los paises con haut niveau ayant pour mandat ings testify to the importance entornos normativos e institucio- d'ameliorer la qualite de son of instrument selection and nales poco adecuados, y actual- action en faveur des pays a faible sequencing for clevelopment mente insiste en los instrumentos revenu peu performants. L'Exa- effectiveness, country, sector, no crediticios. Ha establecido un men cle cette annee presente les and thematic evaluations grupo de trabajo de alto nivel conclusions de l'evaluation se should address more systemati- cuya finalidacl es mejorar el rapportant a cette tache difficile. 11 cally whether the right instru- apoyo del Banco a los paises de est important, dans un premier ments were used for the devel- ingreso bajo y con resultados temps, de constater les ecarts opment goals selected, and poco satisfactorios. En este Exa- significatifs qui existent entre la whether the complementarity men se presentan las conclusio- performance des differents instru- of instruments was exploited nes de la evaluaci6n relacionadas ments. Par ailleurs, opter pour des judiciously. Similarly, project- con esta dificil tarea. El reconoci- projets trop complexes lorsque le level evaluation should capture miento de la importante diferen- pays a des capacites limitees synergies from complementary cia de resultados entre los introduit des risques excessifs. Un or sequenced instruments (for distintos instrumentos es un pri- plus grand souci d'adaptation des example, adjustment loans mer paso importante. Ademas, instruments utilises et des parte- and stand-alone technical unos proyectos demasiado com- nariats i la situation du pays assistance). plejos cuando la capacidad del devrait conduire a des ameliora- pais es limitada generan excesivos tions fructueuses de l'efficacite du riesgos. Una adaptaci6n mras developpement dans les contextes consciente de los instrumentos y operationnels difficiles. 11 faut asociaciones a la situaci6n del encourager des operations dont le pais cleberia permitir valiosas financement est subordonne a mejoras de la eficacia en terminos l'obtention de resultats, ainsi que de desarrollo en condiciones rea- des partenariats novateurs avec le les dificiles. Deberian alentarse la secteur prive et les organismes du experimentaci6n con las opera- secteur associatif. Enfin, dans les ciones basadas en los resultados y pays peu performants, il faut las asociaciones renovadoras con consacrer des efforts particuliers a xxiv Executrve Summary organizaciones del sector cles activites autres que _ privaclo y el voluntariado. ' financieres qui peuvent i 3 Finaltriente, merece espe- jouer un r6le important. 'M4 cial atenci6n 1a funci6n de m&rnle lorsque les pays las activiclacles no financie- I clients ne sonlt pas cles ras en los paises con des- empruLnteurs actifs. empeno poco satisfactorio, La mise en Ceuvre cle aun cuanclo los clientes no i strategies sectorielles natio- sean prestatarios activos. nales exige que les objectifs cle La aplicaci6n de estrategias cleveloppernent CIu pays soient sectoriales en toclos los paises clairs, et la situaLtion clu pays et CIu requiere clariclad acerca de los secteur hien conlue. Les plets a objetivos de desarrollo del pais y lajusternent, appuLyes en tant Cque una comprensi6n adecuacla de las de besoini par unle aide au renfor- condiciones nacionales y sectoria- ceement des capacites, sont plus les. El pr6stamo para fines cle efficaces lorsque ie pays est veri- ajuste, respaldado en la medidca tablement aux comm.anldes Ct CILe necesaria con ayuda para el forta- les r6formes sectorielles recueil- lecimniento de Ia capacidclad, es lent l'adhesion de la population, mIis eficaz cualnclo el protago- en meme temps qcue des clisposi- nismo nacional y el consenso tions cle suivi et d'evaluation ont sobre las reformas sectoriales son ete mises en place. Dans les sec- s6lidos y cuando se han instau- teurs otl ces conclitions prealables rado mecanismos de seguiimiienrto ne sont pas reunies, par exemple, y evaluaci6n. En los sectores en ceux de l'education et de ia sante los que no se dan esos requisitos clans certains pays, il peut etre -por ejemplo, la educaci6n y La preferable de recourir a des prets salud, en algunos paises- quizas d'investissemenit programmniati- sea mns adecuado el prestamo (ues, confort6s le cas 6ch6ant p.r para inversiones programiticas, cles Prets au developpement cles respaldado cuando convenga con connaissances et `1 l'innovation pr6stamos para el aprendizaje y Ia (LIL) et par un renforcement cible innovaci6n y actividades selecti- cles capacites. L'engagement en vas de fortalecimiento de la capa- faveur des objectifs thematiques cidad. El apoyo a los objetivos pluridisciplinaires quca acIoptes la transversales y temniticos clel Banque est davantage fonction Banco no depende tanto cle la uti- cd'une veritable prise en compte lizaci6n dce instrumentos especifi- de ces priorites op6rationnelles cos de financiamiento cuanto de clans le caclre de l'utilisation de una autentica incorporaci6n de tous les instruments et de l'appli- esos enfoques operacionales en cation strat6giclue dce politiqLes cle los distintos instrumentos y de la sauvegarde et de la formationi cle aplicaci6n estrategica de salva- partenariats que de l'utilisation dce guardlias y asociaciones. tel ou tel instruiment de pret. Las conclusiones de este Exa- Les conclusions clu present Exa- men tienen repercusiones para la men ont cles conlsequences pouir evaluaci6n: I'evaluationl des operations: Las activiclades no financieras * Les activites autres que financi&- son cacia vez mas importantes. res continuent dce se develop- xxv 2001 Annual Review of Development Effectiveness Un s6lido marco de per. IL faut les doter d'un evaluaci6n es condicion cadre d'evaluation solide necesaria para conseguir pour preserver leur effi- iuna eficacia continuada, cacite, en s'appuyant sur basada en evaluaciones les evaluations de leur actuales del Grupo de qualit ai l'entr6e garantia dce calidacl qu'effectue actuellement acerca del nivel cle le Groupe cl'assurance calidad inicial -que amplia la de la qualite - il s'agit d'elargir garantia de calidad a todos los Iassurance dce la qualite a tous servicios del Banco de les services assures par la Ban- conocimientos. que du Savoir. La calidaci de los clocumentos . L'efficacite de l'action de la de estrategia de lucha contra la Banque en faveur du develop- pobreza (DELP) es fundainen- pement repose sur Ia qualite tal para la eficacia del Banco des Documents de Strategie en terminos de desarrollo, ya pour- la Reduction de la Pau- que ofrecen el marco para un vrete (DSRP), car ceux-ci per- planteamiento integrado de la mettent d'aborder l'appropria- identificaci6n con las activida- tion par le pays de ses des, las relaciones de asocia- objectifs cle developpemnent, ci6n y la orientaci6n hacia los les partenariats et la mise en resultados. Los DELI' hacen ya avant dce l'obtention cle resul- hincapie en la supervisi6n dce tats dans une perspective glo- los progresos con respecto a bale. Les DRSP mettent d'ores algunos indicadores selecciona- et deja l'accent sur le suivi de cos; ello deberia completarse certains indicateurs ; il faut ahora con una atenci6n corn- maintenant porter la mrne parable al fortalecimiento cle la attention aux renforcement des capacidad para la evaluaci6n capacites en vue dune evalua- programatica y sistematica de tion de programme systemati- las intervenciones y de sus que des interventions et de resultados. leurs resultats. * Las estrategias relativas a los * Dresser un bilan plus objectif paises y sectores se pueden et transparent des resultats reforzar mediante un registro anterieurs contribue a renforcer mdis transparente y objetivo del les strategies nationales et sec- renclimiento anterior. Se puede torielles. Une mise en corres- conseguir una atenci6n mayor, pondance plus etroite des independiente y basada en la apports avec les resultats, a autoevaluaci6n mediante una I'aide d'un enchainement logi- armonizaci6n mas estrecha que des resultats et d'inclica- entre los insumos y los resulta- teurs de performance verifia- clos, utilizando una cadena de bles (fournis par les Strategies resultados 16gicos e indicaclo- d'aide-pays et les Documents res de desempeno verificables: de strategie sectorielle) facilite- estrategias de asistencia a los rait un renforcement de l'auto- paises y documentos de estra- evaluation et de I'evaluation tegia sectorial. indlependante. xxvi Execut ve Summary Finalmente, como los * Enfin, pLIiscjLIe leS _ resLiltaclos cie la evalua- conclusions dte l'evalua- ci6n acreclitan la impor- tion attestent (le l'impor- tancia cle la selecci6n y taIce (ILI choix cleS ordlenaci6n cronol6gica 4 instruLImenlts et de l6che- cle los instrumentos para lonnlemilenit cles interven- la eficacia en terminos tions pouL leifficfacidt clu cle clesarrollo, las eva- cdeveloppefnent, les eva- luacionies nacionales sectoria- luations nationales, sectorielles les y termiticas cleberian consi- et thematiques CIevI-aielnt etu- derar de forma m'is sistemaitica (ier plus systO6MatiCjuelnelnt Si si se utilizaron los instrulimentos I'on a utilise les instIumilelIts aclecuados para los objetivos ackaptes aux objectifs retenius et de desarrollo seleccionados, y si Ion a exploite comimle il si se aprovech6 sensatamente convenait Ia complementarite la complementariedad cle los cles instruments. De m4r-me, instrumentos. De la misma l'cvaluation Cd'unL projet cdevra.lit maniera, Ia evaluaci6n de los analyse r les synergies qcui nais- proyectos deberia aprovechar sent (le l'utilisation 6chelonn6e las sinergias entre instiLimentos ou complchmentaire cle clivers complementarios o debida- instriments (par ex. pr&ts a menite escalonados (por ejem- lajustement et assistance techi- plo, pr6stamos para fines cle niqlue auton1o00e). ajuste y asistencia tecnica indepencdiente). xxvii ABBREVIATIONS AND ACRONYMS AFR Africa Region APL Adaptable Program Loan APPI Aggregate Project Performance Index ARDE Annual Review of Development Effectiveness AROE Annual Report on Operations Evaluation BP Bank proceclures CAE Country Assistance Evaluation CAS Country Assistance Strategy CDF Comprehensive Development Framiiework CEM Country Economic Memorandum C1A Communaute Financiere Africaine CFAA Country Financial Accountability Assessment CODE Committee on Development Effectiveness Cl'AR Country Procurement Assessment Report CPFA Country Profile of Financial Accountability CPIA Country P'olicy and Institutional Assessment DDO Deferred Drawclown Option DRL Debt Reduction Loan EAP' East Asia and Pacific Region ECA Europe ancl Central Asia Region ERL Emergency Recovery Loan ESW Economic and sector work FIL Financial Intermecliary Loan FRM Resource Mobilization Department FSAP Financial Sector Assessment Program GEF Global Environmental Facility HNP Health, nutrition, and populaltioll IBRD International B3ank for Reconstruction anid Development (World Bank) ICR Implementation Completion Report ID Institutional development IDA International Development Association IFC International Finance Corporation IGR Institutional Governance Review IMF International Monetary Fund LCR Latin America and the Caribbean Region LIL Learning and Innovation Loan MIGA Multilateral Investment Guarantee Agency MNA Middle East and North Africa Region MT Montreal Protocol Fund NGO Nongovernmental organization NSSI National Social Security Institute OED Operations Evaluation Departmenit OP Operational Policy OPCS Operations Policy and Country Services P'A Poverty Assessment PBA Performance-based allocation xxix 2001 Annual Review of Development Effectiveness PER Public Expenditure Review PPAR Project Performance Assessment Report PRSC Poverty Reduction Support Credit PRSI Poverty Reduction Strategy Initiative PRSP Poverty Recduction Strategy Paper PSAL Programmatic Structural Adjustment Loan PSM Public sector management QAE Quality at entry QAG Quality Assurance Group RIL Rehabilitation Import Loan SAL Structural Adjustment Loan SAR South Asia Region SECAL Sector ACdjustmenit Loan SF Special Financing Grants SIL Specific Investment Loan SIM Sector Investment and Maintenance Loan SNAL Sub-National Adjustment Loan SSAL Special Structural Adjustment Loan SSP Sector Strategy Paper SSR Social and Structural Review SWAP Sectorwide approach TAL Technical Assistance Loan UNDP United Nations Development Program WID Women in Development xxx Maaking Development Choices T he challenge of development, never straightforward, has become even more complex as the number of actors has grown and the de- sire for demonstrable results has intensified. In seeking to implement its poverty reduction mission, the World Bank has to match over 100 client countries tackling innumerable development issues with a financial product line ranging from small grants to large loans, a diverse line of nonfinancial products, and a growing cast of public, private, and civil society partners. If the Bank is to continue improving its development effectiveness, it will have to make the right choices about how, when, and with whom to engage (and disengage). Making the right choices with client countries and other devel- opment partners-what is often called selectivity-is the theme of this Review. Some of the emerging challenges emanate 2001, have exacerbated a global economic slow- from the development community. Donors are down, pushing hincdreds of thousands of peo- under rising pressure to satisfy taxpayers that aicd ple below the poverty line. Concern is rising that achieves results. Donors and recipients alike demands for urgent liquidity ancd humanitarian are impatient with the high transaction cost of assistance to directly affected countries may aid and seek to eliminate overlap and "aid bom- sideline or supplant longer-term efforts toward bardment," especially in small countries. The social and structural development in these ancl Millennium Development Goals-with their spot- other low-income countries. light on measurable outcomes-set daunting Against these challenges, the World Bank has benchmarks. Progress (or lack of progress) to- learned from experience, amassed a store of ward the goals will be plain for all to see. Mean- knowledge, and diversified its toolkit. These as- while, the operating environment has become sets have been enhanced in three significant subject to new threats-the AIDS pandemic, il- ways. First, research has clemonstratecl that poli- legal drugs, terrorism, armed conflicts, and failed cies, institutions, and governance are critical to states-that intensify the unlclerlying structural development success. These factors are now causes of poverty. The attacks of September 11, squarely "on the table" in the allocation of aid 2001 Annual Review of Development Effectiveness resources. Second, attention to quality assur- set and that the CDF principle of partnership im- ance ancd evaluation-as noted by OED's plies that the Bank should "let go" of areas 2000-2001 An nual Report on Operations Eval- where it does not have a comparative advantage. uationl-has helped lending and nonlending The ARDE for 2000, From Strategy to Results, ex- proclucts to cleliver improvements in perform- plorecd how the Bank's strategies translate into ance. Thircd, new development paradigms and results on the ground. It demonstrated that cle- aid processes (such as the Comprehensive De- velopment interventions are more successful velopment Framework [CDF], the Poverty Re- when they are judiciously selected so as to cduction Strategy process, and sectorwide match country circumstances and leverage the approaches) have been created to address prob- comparative advantage of the Bank and its part- lems collaboratively-at the country, regional, ners. Selectivity does not necessarily mean doing and global levels. less. Instead, it implies making informecl choices OED's Annual Review of Development Ejftc- about the right kind and number of activities to tiveness (ARDE) tracks the Bank's imprint on this increase development effectiveness. In this year's complex landscape. Over the past few years, ARDE, Making Choices, with a special focus on evaluations at the project, country, sector, ancl instrument selection, selectivity takes center global levels-as synthesizecd in successive stage as a privileged driver of development ARDEs-have pointed to selectivity as a vital effectiveness. tool for achieving development results, and as The Bank exercises selectivity througlh the a continuing area of challenge for the Bank. Most choices it makes in three dimensions, as mod- recently, the 1999 ARDE, Toward a Compre- eled in figure 1.1: its corporate goals, strategies hensive Development Strategy, showed that the for countries, and specific activities or instru- CDF means that a "one-size-fits-all" mentality ments.2 Selectivity at each level contributes to de- needs to be replaced by a 'ccustomization" mind- velopment effectiveness. F i g u r e 1 . 1o l aU a r . or, * CDF/PRSI processes * Effective mix and * PRSP/CDF support * Corporate goals sequence of financial * CountryAssistance * Sector strategies and nonfinancial Strategies (CASs) (SSPs) instruments * Partnerships and aid * Corporate constraints * Instruments/Policy coordination (e.g., PBA, exposure, framework budget) 2 Making Developrnent Choices Today's corporate goals are more clearly Bank clients have gained access to a spectrum articulated and uncderstood than ever before. of alternative financing sources-some involv- The overarching mission-to reduce poverty ing transaction costs lowver than the Bank's. througlh a focus on results-has been translatecl Second, for poor andc highly aid depenclent bor- into corporate processes (e.g., Sector Strategy Pa- rowers, there is a continuing cdrive to enhance pers, new budget priorities). The Bank has also the impact of development assistance on poveity taken on a broad range of institutional initiatives and growtlh. Third, most borrowers can access in support of its core goals. At the country level, global knowledge-whetlher thlougLh the Inter- exposure limits and the administrative budget net or through local knowleclge networks- have served to define the overall financial en- more readily than in the past, thereby raising the velopes for wlhat the Bank can take on. Selec- bar for the value adcled of the Bank's knowlecdge tivity at the corporate level, basecl on an products. Finally, it has become increasingly appreciation of the Bank's unique knowledge clear (see 2000 ARDE, Aidc and Rebrm in Af`ica) andl partnership assets, is an important tool to that development outcomlles depend on Coun.try help ensure that corporate initiatives enr-ich, but policies and capacities, making a correct ull- clo not overcrowd, the institutional agenda. clerstanding of the country context critical to the However, the Bank's adoption of a country choice of instruments ancl their clevelopment ef- focus and of a comprehensive development fectiveness. Accordingly, this year's ARDE focuses perspective means that operational selectivity is on effective choice of activities and instLum11ents essentially a country-level challenge. to implement poverty reduction strategies. Country Assistance Strategies are expectecl This Review describes the Bank's toolkit and to reflect the Bank's corporate goals, while at the its evolution (Chapter 2), tracks the performance same time matching the needs ancl comparative of Bank instrLments and operations (Chapter 3), advantages of partners in particular settings, as examines the use of instLlments at the country provided for under the Bank's business model.3 level (Chapter 4), provides a sector/themriatic This involves the resolution of inevitable tensions perspective (Chapter 5), and summarizes the between client ownership and corporate prior- findings and implications of the analysis (Chap- ities as well as between responsiveness and ter 6). In addition to sources outside OED and budget limits. As the 2000 ARDE demonstrated, the World Bank, it draws upon OED evaluation it is therefore critical to understand what strate- findings from: gies succeecl in different country circumstances * Project performance assessment reports (for- and to fully exploit the potential of partnerships merly audit reports) and evaluation SUlml- in shaping and delineating the Bank's own role. maries for 348 projects evaluated since the last Even with the right strategies in place, results Review. In addition, over 5,000 previously on the ground depend on the effectiveniess of evaluated projects in OED's database allow the instruments available within the Bank's assessment of long-term trencls. toolkit. Over the past decade, the Bank has de- * Country Assistance Evaluations of 50 bor- voted effort and creativity to adapting its finan- rowing countr-ies, especially the 15 completedl cial and nonfinancial services to meet a wide most recently. variety of client needs and to implement cor- * Studies of sectors and thematic areas, a study porate initiatives. New instruments have been of the IDA10 througlh 12 replenishment createcl, others phased out. What has stimu- periods, and the Annual Report on Operations lated this attention to instrlments? First, many Evaluation. 3 Instruments of Bank Assistance D evelopment effectiveness depends on selecting the right instruments and deploying them in appropriate sequence and combination, in light of country and sector characteristics. This chapter sets the stage for later discussions of performance, by providing an overview of the Bank's instrument toolkit and analyzing recent instrument choices. Innovations have been introduced over the 1990s, in both the financial and nonfinancial areas. To leverage these improvements, effective instrument selection in di- verse environments requires clear operational guidance in a comprehensive and consistent framework. The Bank's development effectiveness cle- facilitative rather than restrictive, promoting the pencls on the judicious choice of instruLmlents use of ftinds for productive purposes while highi- from its diversifiecl toolkit. At the broadest level, lighting that Bank funds must be used only for Bank assistance is either financial or nonfinan- the puLposes intenclecl. TI'hey are sufficienitly cial (figure 2.1). Traditionally the Bank has fo- broad and flexible to permit a wicle range of lencl- cused on the former. More recently attention has ing instruments to have evolved over time as cir- been paicd to the role of nonfinancial assistance, cumstances have changed and understanding especially in poorly performing countries. of the development process has improved. This Greater differentiation is being introducecl be- flexibility allowed the introduction of adjustment tween diagnostic services and client-driven ad- lending in the early 1980s, and the subsequLent visory services, ancl witlhin diagnostic services classification of Bank lending into two basic clearer standards and structure of core proclucts types of instruments: investrment ancd adjustment. are emerging. Specific instruments reflect variations withinl these broacd groups. The specific policies ancl Financial Services guidance governing the instrLments used and their design are left to the Boarcl ancl manage- Investment, Adjustment, and Other Instruments ment to elaborate as neecded. The use of financial services is prescribed in the Over the past 10-12 years, the Bank's menu Bank's Alticles of Agreement. These Articles are of financial instrlments has clhangecl in response 5 2001 Annual Review of Development Effectiveness Figu re 2. 1 T O O I k it - - - - - - -~ ~~- - - - - - - - - - - - - - - - - - - - - - - - - - - nesment Adu ent Ote DiaQrotc Avsr SIL,-SIM, SAL,..PSAL, Guarantees. Rovertv As-essments Sector Studies APL, LIL, PS,Grants C6u-n[rVEc6dnqmiic Mem. Special Studies Specific TAL, FIL, SECA, LI'ilr)XOl 'diw Instruments: ERL RIL SAL C1ia -Ac *Assmis SSAL, DDO. C~irTocure Assmts DRL Other Oragikistic Reports Note: Abbreviations and acronyms for specific investment and adjustmenit lending instruments are defined in Anrnes A. to an increasingly complex economiic and social Asia crisis, has always constituited the largest environment. As figure 2.2 shows, investment share of Bank lending activities. lencding remains the Bank's lending workhiorse, Innovations in specific investment lend- and, with the exception of the periocd of the East ing instruments. Within the br-oad investment category of investm-ent lending, several specific ~~~~~~~~~~instrum ents have been developed. Sector In- Figure 2.2 vestment and Maintenantce Loans (SIMs) miade Llup about a quarter of investmient lending until Other Inv $1 billion the 1990s. Duiring the 1990s their share dropped to less than 10 percent of total lending as they ~~APL $4 billion were partially replaced by new adaptable lend- ERL $6 billion ing SLuch as Adapta ble- Program Loans (APLs) and SECAL $28 billion FIL $8 billion Learning and Innovation Loans (LILs), intro- SIM $18 billion duced by the Bank in 1998. The main motiva- tion for introduicing APLs and LILs was to SAL $40 billion increase the Bank's flexibility, to reduce risks to borrowers and the Bank when operating in Other Adj ~~~~~~~~~~areas of uncertainty, and to facilitate exit from Other Adi ~~~~~~~~~~flouindering operations. The APL supports long- $7 billion ~~~~~~~~term development programs with a phased ap- TAL $5 billion proach, which is more easily adapted to changes SIL $143 billion in the country environment. This allows subse- quent phiases to leverage lessons learned and -- ~~~~~~~~build necessary capacity or consensus in early Note: Abbreviations andascronyms are defined in Annex A. phases. The puirpose of LILs is to pilot innova- tions, build consensus, and learn in order to scale 6 Instruments of Bank Assistance up and apply promising models to other re- portant transactions, but also improved the fi- gions in the country. These new instruments now nancial viability of transactions, and helped account for a quarter of active investment op- client countries to access or re-enter financial erations, or 10 percent by dollar volume, with markets, establish a track record, and build miar- annual commitments of about US$1 billion for ket confidence. Another review of the IDA par- APLs and US$100 million for LILs. The volume tial risk guarantees program prepared for FRIv for LILs is lower than expectecl. An effort is in the context of the IDA13 replenlislhment in Oc- under way to reduce processing requirements, tober 2001 points to similar conclusions. To preparation time, and costs for LILs, which have clarify the relation of the IDA/IBRD guarantee been greater than originally anticipated. with IFC and MIGA instruments, the December Experience on completed APLs and LILs is 2000 Board report included a matrix that set out limited, with only a few APLs having completed the role of the various World Bank Group guar- their first phase, including projects in India antee instruments. The Board callecl for greater power, Philippines urban water, and Tunisia collaboration among the Bank, IFC, and MIGA transport. One of these, the -laryana Power to ensure that guarantees and other Bank ser- Project in India, was discontinued after it failed vices are used in a synergistic fashion. to meet trigger requirements, an illustration of the automatic exit feature of APLs. Recent Lending Choices Innovations in specific adjustment lend- Instrument choice is influenced bV many factors, ing instruments. The broad instrlmaent cate- including the riskiness of the counltry's imnple- gory of adjustment lencling has been dominated menting environment and internal considera- by use of the StnrcturalAdjustmentLoan (SAL), tions suchI as corporate priorities ancl budget covering more than half of the adjustment lend- implications. The following section examines ing projects approved between FY98 and FY00. lending instrument choice along these related SALs ancl Sector Adjustment Loans (SECALs) dimensions. constitute the Bank's 'traditional" adjustment As part of its risk managemenit procedures, the lending instrument set, to which, in the early Bank takes into account the country's risk envi- 1990s, the Bank added two new instruments- ronment in deciding whether and how Illuch to the Debt Reduction Loan (DRL) and the Reha- lend and with what instruLmlent. Lencling alloca- bilitation Import Loan (RIL). The use of these tions to countries with low Country Policy ancd instruments has been mocdest given the recent Institutional Assessment (CPIA) ratings have to introduction of new programmatic lending in- balance the possible rewarcls against the risks. struments-the Special Structural Adjustment Where the policy environment is weak, non- Loan (SSAL), the Sub-National Adjustment Loan lending services are often a more appropriate op- (SNAL), the Programmatic StructuralAdjustment tion. The Bank is also proactive in seeking to Loan (PSAL) and its specific derivative for IDA achieve policy reform through lendling. Among countries, the Poverty Reduction Support Credit the 44 IBRD borrowers rated by Standard ancl (PRSC). The focus of the PSAL is on medium- Poor's, it is those with the lowest sovereign rat- term policy ancd institution building, while the ings that received the majority of recent Bank PRSC supports the implementation of poverty commitments. For higher-rated countries, whichi recluction strategies. have better access to international capital mar- Guarantees. The Bank's 14 approvecd guar- kets, Bank commitments have been limitecl. As antees represent roughly US$2 billion in con- figure 2.3 shows, the amount of adjustment lencl- tingent liabilities. Ten of the 14 are accompanied ing in low CPIA performers has been larger than by Bank loans, and most of these are targeted for investment, even though outcomes for ad- to the power sector. A review of the guarantee justment lending interventions in low CPTA COUnI- program prepared for the Board in December tries have been particularly weak (Chapter 3). 2000 suggested that the Bank guarantees have Costs d/jr by .specific lending instruments. Fig- not only helped catalyze private finance to im- ure 2.4 provides a breakdown of the total costs 7 2001 Annual Review of Development Effectiveness Figur e 2. 3 * Ri'sks, by CPI A and Credit ~ 3L IFY96-01 Approvals) 134 IBRD & IDA Countries 45 IBRD Countries 70 D Adjustment 70 D Adjustment 60 * Investment 60 Investment 50 50- 40 rn 40 _ 30 - 30 - EE 20 C20- 10 1 0- - 0/ Low Medium High BBB+ or BB+ to BBB BB or Lower (41 Countries) (69 Countries) (24 Countries) Better (14 Countries) (24 Countries) (7 Countries) CPIA Standard & Poor's Sovereign Ratings (preparation and supervision) by lending in- dollar amount clisbursed. These cost differences strLuments per projects approved as well as per are highly relevant to country managers facing choices among instruments and relatively rigid budget ceilings. Per project, SILs, SIMs, and F i g u r e 2 . 4 CO s t s SECALs have the highest lending costs. LILs .D ! f f e r b Y' hliave the highest costs per dollar disbursed, ie n d X n g, whereas SALs, given their large size, had the low- 9 6 - 0 1 - est costs. As mentioned earlier, the LILs' higher- _. than-expectecl costs and preparation time have 900 - resultecl in a more modest roll-out of LILs than 800 -~ Sim expected. 80 O*ECL5SIL A noteworthy application of adjustment lend- SECAL 0APL 8 700- ------ ing has been in response to major financial cri- a 600- _ sis. During the 1990s, developing countries in ' 500 *SAL TAL Asia ancl Latin America experienced economic 500 - XERL ancl financial crises that halted their economic . 400 - ____ _ growth and severely threatened the gains from X 300 - __. _ _ I previous reforms. The Bank responded to IBRD LXL 200- _borrowers' demands for quick clisbursing lend- 20 ing with adjustment operations. Overall the 100 - - Bank approved 15 "crisis lencling" operations.' 0 - l l l l l All were to IBRD borrowers ancl involved large 0 10 20 30 40 50 60 70 80 90 resource transfers. Commitments, totaling US$17 Total Costs Per US$1 Million billion, were fully disbursed. The objectives of Lent ($000s) these operations were to supply balance of pay- ments support, weather short-term risks, 8 Instruments of Bank Assistance strengthen social safety nets, and induce struc- Beginning in the early 1990s, economilic and tural improvements in the policy framework. sector work became increasingly infiuenicecd by corporate mandates ancl priorities. As table 2.1 Nonfinancial Services shows, there has been a surge in the procduction Formal nonfinancial services encompass knowl- of poverty ancd environmental assessments in cli- edge services of two main types: diagnostic and rect response to the prior-ity given by the IDA advisory, as categorized in figure 2.1.2 The di- donors, the Boarcl, ancl Management to the agnostic reports refer to the standardized non- broadening of the Bank's development agencda. financial products that have their own toolkits ancl The nulimber of PERs triplecl between the 1980s quality assurance arrangements, and are divided ancd 1990s, reflecting concerns about growinig at the specific instrument level into five core di- emphasis on reviewing a couLitry's overall pub- agnostic products which underpin the analysis lic expenditure allocations and expenditure man- for the CAS and the Bank's overall policy dia- agement, rather than tracking specific loan logue, and other diagnostic reports that addlress proceecis. Gender assessments have likewise sector-specific or thematic issues of higih prior- shown a large jump following the issuaIce of ity and provide upstream analysis to support fu- operational directives and increased attention by ture lending opportunities.3 The advisory reports Bank stakeholders to issues of gencler inequaLl- are customized to provide advice on special top- ity. Durinig FY98-O1, there las been a significant ics, and include sector and special studies. change in the allocation of ESW expenclitures; the share of core diagnostics reports has in- ESW Reflecting Corporate Priorities creased, while the shares of other diagnostic ancl Through the 1980s, most economic and sector acdvisoiy reports have declined. work (ESW) was advisory in nature; the type and l'overty Reduction Strategy Papers, although number of ESW products were driven by the produced by the borrower authiorities, typically neecl to support the lencling program and by bor- requiire extensive Bank support. The source- rowers' particular neecis for technical advice. books and other materials that unclerpin PRSPs Table 2.1 Li Ocn0 0QD2 (D FEm) 0 q J; 1 1 CCO iC~ td C.. Fiscal year FY80-89 FY90-99 FY00 FY01 (est) Core Diagnostics: PovertyAssessments 1 112 11 14 Public Expenditure Reviews 29 89 14 14 Country Profile of Financial Accountability _ 40 '4 0 Country Financial Accountability Assessments - 15 1 11 Country Procurement Assessment Reports _ - ;15 15 Other Diagnostics: Environmental Assessments 10 87 3 3 Private Sector Assessments 40 55 '1 2 Gender Assessments 1 30 ' 5 8 Financial Sector Assessment Programs - - 12' 20 Social and Structural Reviews _ 4 2 I-PRSP/PRSP - _ 9 32 Note:Genderassessments for FY90-00 exclude regional genderaction plans and countrygenderprofiles and are likelyto be undercounts, as manyrepons never reached the final stage. Source: OPCS. 9 2001 Annual Review of Development Effectiveness have helped to provide a poverty-focused frame- The current guidance on instruments could be work for much of the ESW program. Table 2.1 strengthened along three main dimensions. First, also reveals the quick ramp-up of CFAAs and the distinctions among the different instruments- CPARs, two core fiduciary diagnostic products currently linked mainly to different internal pro- which, along with an integrative, crosscutting as- cessing procedures-should instead be anchored sessment of a country's social, structural, and key in their differing development objectives. In- sectoral development policies, are expected to vestment and adjustment instruments should be underpin the development of Poverty Reduction covered within a common policy framework, so Support Credits. Finally, the FSAP is an ESW that their costs, synergies, and complementarities product stimulated by the corporate response to are clear. Instrument choices should be driven by the East Asia crisis. It is a collaborative Bank/ IMF development considerations, without regard to the instrument that attempts to identify vulnerable varying applicability of safeguards or other pro- countries and to recommend remedial meas- cedures. Second, each instrument should be as- ures to reduce their vulnerability to financial sociated with the sector and country conditions crises. Initially funded with exceptional re- to which it has proven suitable or successful. It sources, its continuation and coverage will de- is important for staff and borrowers to receive pend on the futLre availability of resources from guidance which draws on available experience Bank budgets and trust funds. of the effectiveness of instrument variations in dif- ferent country circumstances. Third, the rules, Clear Instrument Guidance Is Key procedures, and guidance concerning different in- For financial instruments, the policy framework, struments, which are now set out in a non- as it has evolved, gives considerable discretion uniform variety of OPs, BPs, memos, and to Bank managers in the selection of instru- websites, should be consolidated and clarified. ments. Optimal selection of instruments requires For nonfinancial instruments, budget and clear guidance on the appropriateness of each strategic considerations are important. In an in- instrument to specific objectives and conditions, dividual country program, the core diagnostic as well as consistent coverage of all instruments products such as poverty assessments, CEMs, and (investment and adjustment) in an explicit frame- PERs produce important baselines for monitor- work. Functionally driven choices require clear ing progress on the outcomes of assistance on operational guidance. basic objectives. At the corporate level, the over- Table 2.2 C.ountry Coverage of Fiduciary Diagnostic ESW (FY97-01) #,l*oE i - CPAR . i j PER By Lending Volume: : : .; Larqc-[, dp.:limwio Bu,rr,,vver. i 0ll:3E 50: L.~retiErHi E.l cH r,rr,:,er ... . . 11-1 F0,L:. .11 A l'II,.- L irqe I:. 1 i0 urrcvw,rc 10 E,( lI By Policy Environment: I.Lc,*jiuni I A l cuniri.e : 'S ;. . Hunx I.Pl. :,:,,J-tIe,el 13 -3:1". 31 , 31°'.:. Note: It is generally recommended to update fiduciary diagnostics every five years. Largest adjustment borrowers are based on total net commitment value of adjustment operation approvals in FYOO-01. Largest IDA/IBRD borrowers are based on net commitments values in the FY01 ARPP. CPIA breakdown excludes small countries or borrowers under suspension or those with net commitments below US$50 million as of June 30, 2001. Source: OPCS. 1 0 Instrurnents of Bank Assistance all coverage of core diagnostics has increased in While increased production of CPARs and FY01. Attention is needed to ensure these di- CFAAs is underway and considerahle effort has agnostics cover country programs involving the been clevoted to establishing the standards and greatest ficluciary risk and the largest vulnerability scope of diagnostic instruments, it is paracloxi- to governance dysfunctionis. As shown in table cal that those completed to clate have not been 2.2, in terms of volume of lending, fewer than focusecd on poor policy environments. Of the 22 half of the 10 largest IDA and IBRD borrowers CFAAs carried out between FY98 and FY01, have been subject to a CFAA. Only 4 percent of only one was concluctecl in a poor policy envi- the Bank's active borrowers with low CPIA ronment (borrowers with a low CPIA score). Of scores have had a CFAA, compared with 28-31 the 49 ClARs conclucted by end FY01, 10 (20 per- percent by higher-scoring borrowers. In the cent) were uncdertaken in borrowers witlh low Africa Region, only 16 percent of borrowers CPIA scores; the corresponding figure for the 45 have a current CFAA.4 Among large IBRD bor- PERs is 10 (22 percent). With the figures in table rowers, Brazil has the least coverage among 2.2, this suggests that fiduciary diagniostics may core ESW procducts-it does not have an updated nee(l to be better aimed at countries where the PER, CPAR, or CFAA. All suclh gaps for active bor- potential vulnerability to development risks is the rowers are expected to be acldressed in FY02-04. greatest. Performance at the Instrument Level T he Strategic Compact targets of 75 percent satisfactory outcomes for lending and 85 percent satisfactory quality for nonlencling have been met. The latest project evaluation data confirm a significant improve- ment in the Bank's lending performance, especially for FY00 exiting projects. The upward trend continues into FY01. The first half of FY01 exiting proj- ects evaluated by OED have 82 percent satisfactory outcome ratings. Thei-e are solid improvements in sustainability and institLtional development impact as well. Recent evaluations also show strong performance from the Africa Region following its internal portfolio improvement drive. Self-evaluation results for nonlending instruments show a broad improvement in quality, with par- ticular gains in the likely impact of economic and sector work as it becomes more participatory, client-oriented, and result-focused. 'There remains room for improvement in the poverty focus of these instruments, as well as in the quality of fiduciary reviews and of ESW in poorly performing countries. Bank lending hias a matUre evaltiation sys- Performance of Lending Assistance tem, grounded in self-evaluation and incle- Since last year's ARDE, OED has evalua.ted 348 pendent desk review by OED of every closecl projects covering US$33.8 billion in nomn- IDA/IBRD operation, as well as OED field inal commititments and US$29.5 billion in nomn- performance assessments for one in four oper- inal disbursements. The evaluations, most of ations. The evaluation results produced by which cover projects exiting the Bank's portfolio this system provicle the basis for the first cluring FYOO and FY01, comprise 279 ICR reviews section on lending performance. The section of completed projects ancl performance assess- on nonlencling performance relies on self- menits of 69 completed projects. This evaluateCd evaluation evidence as well as selected OED cohort inclucles the first closed Al'L as well as stuclies on public expenditure reviews and the second-evel-evaluated LIL. The majority of pover-ty assessments. the recently evaluated acdjustmenit operationis 1 3 2001 Annual Review of Development Effectiveness were approved in the past three years, as shown to achieve roughly 80 percent satisfactory in figure 3.1, while most of the investment proj- outcomes. ects were approved during the mid-1990s. Since achieving a peak of 84 percent satis- This section is divided into two parts. The factory for FY99 exits, satisfactory outcomes first part describes the trends of the Bank's weighted by disbursements have been lower for main performance dimensions-outcome, sus- the FYOO-01 period. Strong performance from tainability, and institutional development (ID) the second half of FY00 exits, as forecast in last impact-for the projects that exited during year's Review, brought satisfactory outcomes the FY96-01 period. The second, focusing on for the FY00 exiting portfolio to 80 percent. Sat- Determinants of Success, discusses the fac- isfactory outcomes for the preliminary FY01 tors contributing to the lending performance disbursement-weighted portfolio continue to trencls. fall below the project-weighted portfolio, at 78 percent satisfactory, as shown in figure 3.2. Performance Trends The overall results weighted by disburse- ments confirm the portfolio's sensitivity to the Outcome Trends effects of jumbo loans. The outcome of a US$1 The Strategic Compact target of 75 percent sat- billion operation can make a difference of up to isfactory outcomnes has been met. Of the projects 4 percentage points in the disbursement that exited the portfolio in FY00, 76 percent weightecl aggregate outcome. The unsatisfactory had satisfactory outcomes, meeting the Strategic performance of two Russia adjustment opera- Compact target outcome rate of 75 percent. As tions, as assessed by the Region and validated figure 3.2 shows, the upward trend continues into by OED's independent review, has depressed the FY01.' Of the first half of FY01 exits evaluated aggregates not only for ECA but also for adjust- by OED, 82 percent had satisfactory outcomes. ment lending and for the economic policy and Results for the entire FY01 exiting portfolio will social protection sectors.2 This volatility is likely be available by the encl of FY02 and are expected to continue given the number of large adjustment _- Years of Recently I.y r 10 ec,t s 70 - * Adjustment 60.. Dj investment Ca ______________ _______ =50 -40- -- -n 30- E 20 E Pre-1990 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Approval FY 14 Perforrnance at the Instrumrent Level Figure 3.2 90 - 80 - _ 70 - --- --- -~ ,,60.__ CA 'g 50 - - - - - - - -- - -- - - - By Project Weighted by Disbursements 30 - 20- I l l l l l l l 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001* Exit FY *Preliminary; see chapter 3 endnote 1. loans in the active portfolio. As risk management organizational capacity. All lending instrumllents in the Bank receives more attention, it may be addressed both aspects of institutional devel- useful to consider adcling special quality assur- opment-strengtheniing organizations and ance arrangements for very large projects. reforming the institutional environment. Thlis suggests that appropriate use of instruLiments is Institutional Development Impact being macle from an institutiolnal developmenit One of evety two projects evaliuated during the perspective. FYO0-01 exit cohort had substantial or betterID impact. Improvement in the ability of the bor- Sustainability rower to make more efficient, equitable, and sus- Sustainability continues to imnprove /br the tainable use of its resources is funcdamental to FYOO-01 exit cohort. Seventy-one percent of move further toward full borrower ownership of projects exiting during the FY00-01 periocv were lencling operations. As figure 3.3 slhows, 52 per- rated to have likely or highly likely resilience to cent of projects that exited the portfolio during future risks, using a recently introciuced 4-point the FYOO-01 period had substantial or better insti- rating scale.3 This represents continLuecd tLtional development ratings, an increase of 15 improvement since the mid-1990s, though the percentage points over the FY96-99 period aver- higher risks of the operating environment and age. The results for the first half of FY01 exits the partial sample of FY01 exits raise concerns are the highest on record, weighted by projects about the durability of those gains, as figure 3.4 ancl by disbursements. shows. Similar results are founcl when weightecl Analysis of institutional development objec- by disbursements. tives by lending instrument shows that adjust- ment operations in general have given more Aggregate Project Performance Index (APPI) emphasis to reform of policies and the institu- The A1'PI combines ratings of outcome, sus- tional environment, whereas investment opera- tainability, and ID impact into a 'bottomn line' tions have tended to aclclress skills formation and for development effectiveness of lencling. 1 5 2001 Annual Review of Development Effectiveness 90- 80 - -= By Project 70 Weighted by Disbursements m 50- ------ - ------- - .----.-.----.-------_---- -----_---------------- -- co 70 X60 _- _,__ 3° 0 - , ,,,.--- ------ - - ~----- --- ~-'--'' *--' ___ - -__-_ - 7.-' ----_-- 2140- - _ / --- 30 - 20 - l l l l l l l l l 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001* Exit FY *Preliminary; see chapter 3 endnote 1. 90 - - - By Project - 3-point scale Introduction of the 4| By Project - 4-point scale point scale (June 2000). X 70- _ __ _ -_ --- -_--__ O 60 -- --. -. =50 - . ...... _ __ ._ _ . _. 'Ui 40-.-. _ .. . - ._ _ _ .. . - - .- 40- 30 - __ _ __ 20- 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001* *Preliminary; see chapter 3 endnote 1. Exit FY 16 Performance at the Instrument Level Weighted by projects, the APPI index is at a 12- 'not at risk ratings for the active cohort, as fig- year high for the projects exiting during the ure 3.6 shows. MNA is the only region for wvhich FYOO-01 period, with an average of 7.1. This cleterioration in future outcomes is suggested by increase largely reflects the improvement in sat- the Quality Assurance Group (QAG) ratings. isfactory outcomes. Using OED's 6-point out- This is mostly due to a difficult operating envi- come scale, there has been a modest decrease ronment in Lebanon, with a US$729 million in the share of moderately satisfactory projects lending portfolio, the fouLthl largest in the regioni, and a subsequenit increase in the number of proj- 65 percent of which is "at r isk.' ects rated fully or highly satisfactory. For the FYOO-01 exits, the A1'PI index weightecd by dis- Performance by Sector bursernents also stands at a 12-year hlighi. Transportation, eCLucatioll, anld public sector management are the best-performing sectors Pefformance by Region for the FYOO-01 exiting portfolio, as figule 3.7 A/fiicca noarrowvs the peiJbrrmance gcip. The Africa below slhows, wlhile the ener-gy sector contin1ues Region continues its record of improvemiient to lag. The hiigh ratings for projects in the trans- witlh 71 percent satisfactory outcomes for the pre- portation sector are partially dlue to an increased liminary FY01 exits. This reduces the Region's focus on the independence of borrower's finan- satisfactory outcomes gap with the Bank's other cial resoulces, together with improvecd buldget Regions, as figure 3.5 shows. allocations for maintenance works. A similar For the FYO0-01 exiting portfolio, MNA ancd sectoral performance pattern is obtained wlen SAR are the top performers, followed by EAP, weiglhted by disbursements. LCR, and ECA. Comparing the latest evaluated Using the QAG "projects at risk" ratings as a cohort, FYOO-01, with the active regional port- leacling incdicator of futuLre satisfactory outcomiies. folio, AFR shows the largest improvement, 19 the results for the active portfolio show a conI- percentage points, between the latest satisfactory siclerable improvement in the agriculture and outcolmie ratings for the evaluated cohort and the energy sectors. The closing and restructiring of Figure 3.5 90 - 80 - ----.- - - - - X 60- ___- 0 0 40 - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Other Regions Africa Region 20- I - l 1996 1997 1998 1999 2000 2001* Exit FY *Preliminary; see chapter 3 endnote 1. 1 7 2001 Annual Review of Development Effectiveness Figure 3.6 f 'j. LC;1 tl3i IC it22 Cih7) 2 13 n 100 U -/ 80 -60 - 40 - 2 0 -j ~ 0 0 . _ _ _ AFR EAP ECA LCR MNA SAR Bankwide Average D FY96-99 exits S] FY00-01* exits [j Active portfolio "Not at Risk" *Preliminary; see chapter 3 endnote 1. j -1~~~~~~~~~~~~~~~~~~~~~~~~~~~~ F i gu re 3 .7 _1 - j IL ) l S Wi1 ~,;,> J9D \. 100 80 / Z,60- co 4 40 'U 0 Trans. Educ. PSM HNP Agr. Energy Bankwide Average D FY96-99 exits U FY00-01* exits 7 Active portfolio "Not at Risk" *Preliminary; see chapter 3 endnote 1. 18 Performance at the Instrumetnt Level poorly performing energy projects largely large Russia adjustmiient operations (one SAIL explains the expected improvement in this sec- andl one SECAL) severely depresses the aggre- tor. For the agriculture sector, increased atten- gates for the partial FY01 adjustmiient cohort. tion to community participation together with The above figures are based on OED's CUr- increased knowledge sharing through the Bank's rent evaluation methodology for adjustmen-t internal thematic groups underlies the forecast lending. Last year's ARDE pointed to the diffi- improvement. culty of providing reliable ratings in the absence of monitorable goals set at the approval stage. Performance by Lending Instrument Since many operations do not yet specify veni- Adjustment lending outcomes slightly declined.for fiable perforlmlance indicators, ratings for these the FYO-01 exit period. Satisfactory outcomes projects can be based only on specified inter- of acljustment operations fell from 82 percent for mecliate objectives. In adclition, the timing of FY96-99 exits to 79 percent for FYOO-01 when evaluations frequently makes it (lifficult to use weighted by projects, ancl from 87 percent to 70 projectecd impacts or even genuine outcomes for percent when weighted by clisbursements. For rating purposes. Hence, until adjustment oper- the adjustment operations that exited the port- ations are designecl so as to be evaluable, e.g., folio during FYOO-01, outcomiie performance througlh the use of a logical framework, evalu- weighted by disbursements is mixed and volatile: ation ratings for such lending will continue to satisfactory outcomes for FY00 reached 93 per- be geared more to compliance witlh condition- cent but the preliminary FY01 exits fell below ality and achievement of intermediate outcomes the 50 percent mark, as figure 3.8 shows. The than to final outcomes and impacts. OED seeks preliminary results for FY01 exits are based on to work in tandem with management on over- only 13 acljustment operations, hence not robust coming these limitations, for example throughl enough to draw any inference for this exit year the upcoming revision to the Bank's policy onl alone. Additionally, as mentioned above, the adjustment lending. These reservations do not unsatisfactory outcome performance of the two detract from the substantial progress whichi has Figure 3.8 Selected Specific Adjustment Instruments All Adjustment Lending (Weighted by Disbursements) 100 - 100- 90 - _ - 9- 90- ._ \ r; 80 .= 80. 4 ca 70 ~ ~ ~ ~ ~~. u 70- Cu I~~~~~~~~~~~~~~C C.) ,,60 -_ _<,60 - 50--- --~ By Project * SECALs 50- - -- 50 -- - -- - - Weighted by Disbursements SALs 40- II I I 40- - 1996 1997 1998 1999 2000 2001* 1996 1997 1998 1999 2000 2001* *Preliminary; see chapter 3 endnote 1. 1 9 2001 Annual Review of Development Effectiveness zf;;: , ;@Il, g l , : .S t > / <, r) 1 i_ ., { 1 1 FI a1] f .'p 0' .-;- 1D ' 1-9 a F B ox 3 . 1 ? i2;:;bi i A separate review of performance assessments was Average Performance on Intermediate Objectives conducted by OED to consider the achievement effec- tiveness of individual project objectives. While OED evaluation methodology focuses on overall outcome at P 4.3 the project level,this exercise consideredthe multiple - ------------------_...... .-....-_-. development objectives within-projects, as summa- 4.1 rized in the figures shown. The sample inciuded 45 - ----- - performance assessments performed by OED during . the last four exit fiscal years. Based on the assess- .; Pol alE -im ent 3.5 ment of performance on project objectives in the PARs, . . . a rating of 1 (Highly Unsatisfactory) to 6 (Highly Satis- Skillsad Organizatienal cpct 3.4 factory) was assigned for each objective in each sam- pie project. The review yields multiple ratings for _ individual projects, which, were then categorized by Bii llmediion 2.5 time frame into intermediate and long-term goals. - l l l 0 1 2 3 4 5 6 Intermediate Objectives . Average Outcome Rating Intermediate objectives were classified. into five cat-. t - ' ' ' ~~~~~~~~~~~~Average Performance on Longer-Term Goalsj egories: Financial Intermediation, Skills and Organi- _ - _ i zational Capacity, Policy and Institutional Environment. Short-Term Emergency, and Physical-Outputs. Analysis 4.8 of the sample suggests that.the Bank's development. . . '"' 1 impactwas mostsuccessful in achieving physical out- a ln m 4.5 puts, which averaged 4.3, followed by short-termemer- X - gency objectives. Performance for.the two institutional ' ;; development objective . . Private Sector evel pet3.9 | development objectives was roughly even, while per- '-, j_ 3.9rw formance in financial intermediation was weakest, 8 - averaging only 2.5. Human andoca eelopment 3.8 Longer-Term Goals 'The pattern for longer-term goals mirrorsthatfor inter- P 3.6 mediate objectives, with more success on physical- - . i outputs than institutional change. Long-term goals were 0 1 2 3 4 5 6 classified into five categories:. Public Sector Perfor- Average Outcome Rating mance, Human and Social Development. Private Sector Development, Natural Environment, and Physical Infrastructure. development, and private sector development scored roughly The Bank was most successful in achieving goals in physical even. The Bank was least successful in impacting public sec- infrastructure, with an average score of 4.8, and natural envi- tor performance, with an average of 3.6, in contrast with the ronment, with an average score of 4.5. Humran and social improved record of freestanding PSM projects. been made in enhancing the overall efficacy of satisfactory outcomes for investment projects adjustment lending. have shown some recent improvements. Satis- Investment project ouitcomes show improve- factory outcomes for investment projects rose mentfortheFYOO-01 exitperiod. After a constant from 69 percent for FY96-99 exits to 78 percent outcome performance throughout the late 1990s, satisfactory for FYO0-01 exits, as shown in figure 20 Performance at the Instrument Level 3.9. Regions achieving the largest improvement percent of ERL disbursemrents were rated satis- were MNA (23 percentage points), SAR (22 per- factory. For FILs, the percentage wvas only 46. centage points), and AFR (9 percentage points). Projects were most successful in achieving objec- Ninety percent of the adjustment operations tives related to physical infrastructure and to the evaluated by OED during the FY96-01 periocd natural environment. The primary objectives of were either SALs or SECALs. With the reserva- ERLs are to support physical objectives suchI as tions noted above, as figure 3.8 shows, weighted the restoration of assets and production levels by disbursements, SECAL performance improved immediately after an extraordinary event-such fairly steadily over the mid-1990s, surpassin-g as war, civil disturbance, or natural disaster-that that of SAL, which has been more volatile, for ha-s seriously clisrupted a borrower's economy. FY00 exits. No operations using the new adjust- OED has so far evaluated only one Al'L and menit lencling instruments-SSALs, PSALs, two LILs. These three evaluations do not con- PRSCs-have been evaluated so far by OED. stitute a large enough samplc to draw, any accu- About 75 percent of investment disbursements rate analysis of their performance. Looking at the evaluated by OED for the FY96-01 exit cohort active projects supportecl by Al'Ls and LILs, QAG were supported by SILs. The remainder were dis- assessments inclicate that of the 96 active APLs tributed among SIMs (15 percent), FILs (5 per- in the Bank's portfolio, 93 percent are consiclered cent), ERLs (4 percent), and TALs (2 percent) "not at risk." Similarly, QAG assessmenits indicate projects. As figure 3.9 shows, the satisfactory that of the 84 LILs currenitly active in the port- outcome ratings for SILs and SIMs inclicate a folio, 89 percent are consiclerecd not at risk.' strong performance for both lending instruLments InstruLmlents have different risks and rewards, since FY99. The performance of SIMs since FY99 wlhich can be factored into their choice. Figure is also strong, with 89 percent satisfactory out- 3.10 places major lencling instrumenits into fouL- come ratings for the preliminary FY01 exits. risk/reward quadrants, wlher-c rewvards are meas- Outcomesjbr other specific investment instrll- urecl by the average APPI and( risk by the Al'I's ments ure uneven. For the FY96-01 exits, 96 standard deviation. This comrparison is not meant Figure 3.9 Selected Specific Investment Instruments All Investment Lending (Weighted by Disbursements) 100 - 100- 90- , 90- - - - - i, S co 70---- cc- 70 D-- 60 - -X 60 - Cu Cu Y By Project / SiMs 50 -_' - -- -*---.-- ... . _ _ _. ....50 _ 50-- , - _- _ __ Weighted by Disbursements SILs 40- I 40- l l l l 1996 1997 1998 1999 2000 2001* 1996 1997 1998 1999 2000 2001* *Preliminary; see chapter 3 endnote 1. 21 2001 Annual Review of Development Effectiveness F i g u r e 3 .10 0 e . _ T _ X High Risk- High Risk- Low Reward 0.2 Risk High Reward FIL SIL 0.1 SAL ° I II ^> .0 II I u.u Reward -0.1 -0.2 -O0.3 TAL -0.4 -0.5 Low Risk- SECAL Low Reward -0.6 Low Risk- High Reward -0.7 -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 to imply substitutability of lending instrunments success. These cleterminants are highly relevant but rather to provide a relative risk versus reward for the implementation of the approximately 1,500 framework in which to assess the potential active lending projects, and for design and imple- strengths and weaknesses of these instruments, mentation of projects in the futLre. in conjunction with country conditions and sec- tor choices. Country Conditions Matter The cost dimension. The varying perform- The outcomes of projects are closely correlated ance of lending instrLuments in differing coun- with the borrower country policy and institLtional try environments also has a cost dimension. environment, as measured by the CPIA ratings. Figure 3.11 shows the Bank's cost per US$1 For FY96-01 exits, low CPIA countries had only million disbursed (in terms of preparation and 48 percent satisfactory disbursements, whereas supervision) related to aclievement of objectives. medium CPIA countries had 81 percent and The results confirm the finding that outcomes for high CPIA had 93. objectives pursued through adjustment lending Recent evaluations for stand-alone Teclmical show a higher sensitivity to country conditions Assistance Loans (TALs) showed this instrument than those for investment. Costs of adjustment fared better in low CPIA countries than any other lending in terms of dollars lent do not show a form of lending. This reflects a change from high level of variation. On the other hancl, invest- findings in last year's Review, due to recent ment interventions cost considerably more to results from ECA which now accounts for two- complete in low-CPIA countries. thirds of evaluated TALs exiting during the FY96-01 period. As figure 3.12 shows, investment Determinants of Success projects that used SILs or SIMs as their main This section follows on the moclel of determinants lending instrument averaged 47 percent satis- of project outcomes used in previous Reviews. This factory outcome rates, heavily influenced, though, model, whichi has been econometrically tested, by eight large disbursements operations in three confirms that country conditions and the quality countries. On the other hand, stand-alone tech- of project-level inputs are the key determinants for nical assistance averaged 75 percent satisfactory. 22 Performance at the Instrument Leve -tF, 1j, ,_,D b ij:- 1_1 m- c-1'0¢ . 3 0 oi; aj, 1 a) :Dl | h W r Q 8 o ' 1-C!c-, I? c- Il 1, (:O F| Gi {( C- IJl1D=L i 3 tl * 3 25,000 - E INV-LowCPIA * 20,000 -. _ __\__-_--_ O 15,000- - ---- o10,000- _ __ . INV-Medium CPIA' INV-High CPIA , 5,000- ___ADJ-Medium CPIA ci 10~~~~~~~~~~~~7 ADJ-Low CPIA ADJ-High CPIAL 0- I I I 0 20 40 60 80 100 Percent Satisfactory Outcome (Weighted by Disbursements) While the goals against which such operations institution building in these countries, rather were judgecl were not always geared to critical than using a traclitional lending strategy. Satis- policy reform areas, their broadly satisfactory factory outcomnes for low CPIA countries at the performance in low CPIA countries suggests that sector level showed that those projects imple- the Bank should focus on increasing capacity and mented in the transportation and agriculture sec- ---------- - -----------~~~~~~~~~~~~~~~ {{ I .- 1 a .-! I_J -- (|i I I I 13 .,, 13 t . k 1 I) ;~~~QJj~_- gi'C ~ C, Q ct, . i -. - Highmm~~fl';.r, CPIA ' cj. Medim r r, CPA3 CDd'Low CPIA 100 E - - MI ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~2 60 - __ ci 40- 20 - ----. 20 SECAL SAL SIL Sim TAL Bankwide D- High CPIA F- Medium CPIA ED Low CPIA 2 3 2001 Annual Review of Development Effectiveness tor performed on average about 10 percentage analysis focusing on 45 projects evaluated since points higher than the average. last year's Review.7 Project design weaknesses For medium CPL4 countries, projects using were identified as important factors in every sectorvide instruments (SECALs and SIMs) were sample project rated unsatisfactory, as shown in less stccess/il than others. As figure 3.12 shows, table 3.1. Weak monitoring and evaluation were the satisfactory outcome rates, weighted by clis- also cited as factors in more than one in three bursements, of SECALs in medium CPIA coun- projects. For projects with highly satisfactory tries were 12 percentage points lower than the outcomes, project design was found to be the average for SALs in the same countries. The most widespread factor, followed by borrower lower-than-average satisfactory outcome is pri- implementation performance. Among project marily due to the performance of several large design weaknesses, lack of realism (in scope SECALs in the finance sector. The satisfactory out- and complexity of objectives and/or in proposed come of SIMs fares similarly, under-performing time frame) was by far the most important, con- the satisfactory outcome rating average for SIL tributing to poor project performance in no less investment projects by 10 percentage points; than 72 percent of the unsatisfactory sample the lower-than-average results are ciriven by the projects, includcing all the adjustment projects poor performance of projects in the education rated unsatisfactory. The next most prevalent sector. One of every two dollars disbursed in factors were the quality of technical and/or insti- education sector projects of medium Cl'IA coun- tutional design, which affected investment oper- tries, using a SIM or a SECAL, received unsatis- ations more than adjustment. factory outcome ratings from OED. Both QAG and OED assess the quality at In addition to country-specific conditions, entry (QAE) of projects. For projects that have exogenous regional variables can be a signiticant already closed and been evaluated, OED finds factor affecting the outcome ofadjustment oper- that QAE improved steaclily through the 1990s. ations. The Commilunaute Financiere Africaine4 And for projects still uncder implementation, (CFA) franc devaluation of January 1994 playecl QAG documents a continuing upward trend. a significant role in the economic recovery of These trends are shown in figure 3.14. member countries during the mid-1990s5 and the satisfactory outcomes of adjustment operations. Before 1994, the overvalued CFA franc exacer- bated the effects of a terms of trade deteriora- F i g u r e 3 . 1 3 Outcomes tion, making the economic downturn of 1987-93 -;-rt A f r i c a more severe in CFA countries than in the other h e CFA African countries. Figure 3.13 shows that the share of satisfactory adjustment operations6 in , CFA countries prior to the clevaluation was 54 l00 E CFA E Non-CFAAfrica percent, compared with the 62 percent rate for ___ l______ non-CFA countries. After the devaluation, satis- E8800 factory outcomes of adjustment opertions in CFA countries increased by over 30 percentage points, i 60 - to 84 percent satisfactory outcomes, outstripping - the 76 percent rate for adjustment operations in ! . % 40- non-CFA countries. CA Project-Level Performance Also Matters X 20 In addition to country-specific conditions, proj- ect quality and direct implementation support 0 L from the Bank and borrower are key determi- Pre-Devaluation Post-Devaluation nants of success. This is supportedl by a separate 24 Performance at the Instrumrent Level Factor nWviestment Adjustment Total °b M -e3lne:: ir, pru:lp,:i ,e:,,i-, o,,;e;, nl 1:111: Po,o,r t.orroer fnltIeirdt nri,,:nri pert in' 1r ni -n 'oJi 44 rJe,-1i,y e.:.en,,u: tf.:i r; ir 3:f U Source: Review of recent PPARs for projects with unsatisfactory outcomes. OED evaluators assess preparation, imple- to present reliable performance trencds for all mentation, and compliance with legal covenants nonlending services provicledc by the Bank (e.g. when considering borrower performance. The research, WBI, aid coordinazition, grants). This seconcl most prevalent reason for unsatisfactory section draws from the self-evalultion system outcome performance, weak borrower commit- used by the QAG, whlichl covers a sample of ment, affectecl more than half the projects and inclivicdual ESW reports, as well as several OED was especially significant for adjustment opera- studies of individual nonlencling instruLmlents. tions. Satisfactory performance for borrower As the Bank has moved toward country- preparation and implementation increased by 5 based approaches anci increasecd programmatic percentage points each between the FY96-99 and lending, country-level ficduciary work has the FYOO-01 periods. The pattern is similar when assumecl greater strategic relevance. In FY01, weighted by projects. Compliance performiiance managemenit has recognizecd three assessments- shows an increase between the two periods Public Expencliture Reviews (PERs), Country when weighted by projects but a decrease when Procurement Assessment Reports (CPARs), and weighted by disbursements, highlighting once Countty Financial Accountability Assessments again the influence that very large projects have (CFAAs)-as the core ficluciary cliagnostics on the FYOO-01 exit evaluated cohort. required in every client country. Consideration should be given to classifying safeguard policy Performance of Nonlending Assistance reviews at the country level as core ESW. As cliscussecd in Chapter 2, nonlending assistance QAG's most recent evaluation of traditional includes an evolving range of activities. Some are ESW tasks (which is focused on formal and aimed at improving the Bank's knowledge base informal economic and sector reports) high- in order to provide a solid foundation for the lights an improvement in overall quality from 73 Bank's policy clialogue with clients and the devel- percent satisfactory in 1998 to 86 percent satis- opment of country strategies. Others directly factory in 2000.8 This exceeds the Strategic Comi- relate to supporting lending assistance. Perfor- pact target of 85 percent. Furthermore, QAG mance of the first set of these activities is not as notes that as the Bank's ESW has evolved to be rigorously measured as lending assistance, as the participatory, client-oriented, and result-focused, fiamework in the Bank for evaluation of individual the likely impact of the tasks has also improved nonlending instruments is less mature. A caveat significantly since 1998. is in order: as noted in the recent AROE, evalu- The QAG reviews cite four key areas wlhere ation gaps still exist with respect to the "knowl- there is room to further- enhance quality: in edge and partnership Bank," and it is not possible poverty reduction strategies and poverty-related 25 2001 Annual Review of Development Effectiveness Fig u re 3 1 4 Quality at Entry 900 - CIAG Q 80-- ---___= £4 .!2 OED , 70- ----------_ o 60- 0L. 50- 40 - I l l I l l l I 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Approval FY Quality of Supervision 100 - °580 - _ 8, 60- ________QAG ___ CA 70 - - --- ___ __ _____ __._._ _ __ 50 40- 1 l l l I 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Exit FY analysis; in the quality of conclusions and in pri- pation and other policy shifts on the poor, and oritizing recommendations; in improving the to the impact of reforms on the most vulnera- quality of ESW undertaken in poor policy envi- ble groups. This is also evident from the com- ronments; and in fiduciary ESW. Poverty focus prehensive OED evaluations and QAG ratings of of ESW is identified as a key concern. In 2000, Poverty Assessments (box 3.3). There is con- for the first time, QAG began rating ESW tasks siderable room to clarify the extent to which dif- on their "analysis of implications on the poor" ferent kinds of ESW are expected to address and found 61 percent of tasks to be satisfactory. poverty-related issues and to mainstream poverty It cited several weaknesses such as poor analy- analysis into the scope of the ESW.9 sis and links to policy options; as well as lack A second area mentioned by QAG for fur- of attention to regional differences in income and ther attention is the clarity and substance of con- poverty, to the impact of private sector partici- clusions (one in three tasks rated less than 26 Performance at the Instrument Level Box 3.2 - 3SjOGJ @D(Gi3bOU J9re JsO J This year for the first time OED-reports on the evaluation of operations financed under three special programs. Forty-six such oper- ations exited the Bank's portfolio during the FY96-01 period. GlobalEnvironmentalFacility(GEF):The GEFwas established in 1991 as'a pilot programto assist inthe protection ofthe global environment and to promote environmentally sound and sustainable economic development. Overall, 143 full-size projects (with commitments greater than US$1 million) have been approved, of which 32 have been evaluated by OED. Montreal Protocol Fund (MT): The World Bank is one of four implementing'agencies*(along with UNDP, UNIDO, and UNEP) for the Multilateral Fund for the Implementation of the Montreal Protocol to reduce ozone-depleting substances. Eleven projects have been approved under this fund, of which OED has evaluated four. Special Financing Grants (SF): The SF grants cover special emergency assistance provided to recent post-conflict countries such as Bosnia-Herzegovina, East Timor, Kosovo, and West Bank and Gaza. Outcome Performance of Bank-Managed Special Programs % Satisfactory Outcome % Satisfactory Outcome Special Program Type (Weighted by Projects) AWeighted by Disbursements) GEF 84 85 MT 100 100 SF 100 100 satisfactory) and the sequencing and prioriti- logue is satisfactory, and for countries witlh good zation of recommendations. QAG rates 50 per- CPIA ratings is fully satisfactory. cent of ESW tasks satisfactory on prioritizing The fourth area of focus mentionecl by QAG recommendations. Selectivity thus remains an is the quality of core fiducialy ESW. The PER is issue at the instrument level and coulcl affect the oldest instrument and is the only fiduciary actutal impact on the ground. Improving the ESW to benefit from systematic evaluation. The quality of the conclusions and recommen- relative dearth of evaluative evidence on the dations, along with enhancements to the qual- experience with and impact of CPARs and CFAAs ity of presentation and improved "user- is largely on account of the evolving natlre of friendliness" of ESW could contribute to better the Bank's thinking in the area of country-level dissemination, and increase the likelihood of fiduciary management. There has been little for- significant impact. mal evaluation of quality and content of these A third area for improvement is the quality of core fiduciary products. ESW in poor policy and institutional environ- OED's 1998 Review notecl that PERs had a ments. In 2000, QAG rated 92 percent of ESW modest impact on Bank lending strategies, client tasks in high CPIA countries satisfactory; the expenditure policies, and aid coordination. It score for low CPIA countries is 72 percent. This noted that the quality of analyses in the PER has is confirmed by OED's analysis of the quality of improved and lauded the impact of the informial ESW as reflected in CAEs.10 The analysis indicates PER. The review suggested improving both the that in countries with poorer average CPIA rat- PER content and the process. II Since then, there ings, ESW tends to have more limited impact on have been significant changes to the nature of Bank products and is barely satisfactory overall. the PER process and its contents. However, The impact on country dialogue is also on aver- QAG 2000 notes that the quality of Public Expen- age not satisfactory. By contrast, for countries diture Reviews continues to be mixed. Where with medium CPIA ratings, the impact of ESW quality was poor, reasons included inadequate both on Bank products and on country dlia- funcling, low-quality teams and/or management, 27 2001 Annual Review of Development Effectiveness Box 3 .3 lC:''7 EJ i. A.- : ' - The Poverty Assessment (PA) is a key instrument to serve the ments and inclusion of all relevant groups; fostering and sus- Bank's overarching objective of poverty reduction. Evaluative taining ownership; rigor and meaningfulness of the policy analy- evidence suggests considerable scope to increase the Bank's sis; and quality of and prioritization among recommendations. capacity to effectively analyze and develop poverty reduction The OED 1999 review also notes that surveyed stakeholders strategies through the PA. OED's review of 46 Poverty Assess- viewed knowledge transfer, and local consultation and part- ments in 1996 noted that 54 percent of the assessments met the nerships as the least satisfactory aspects. Forty-two percent of requirements set forth in OD 4.15. Since then, there has been.some stakeholders felt that the PA had not provided even a moderate improvement. The 1998 QAG review of 15 Poverty Assessments increase in local capacity. rated 43 percent of them satisfactory and OED's follow-up review QAG 2000 reports a further improvement in overall quality to in 1999 of the assessments completed between FY96 and FY98 69 percent satisfactory in 2000, but the Bank's processes as rated 63 percent of them satisfactory. related to Poverty Assessment are satisfactory 38 percent of GAG 1998 raised several weaknesses in poverty-related thetime. QAG notedthatmostPAs"lackacoherent(Bankassis- analysis such as lack of access to reasonable data and inade- tance) strategy for poverty reduction." This weakness is expected quate data mining; poor technical skills and inadequate men- to be addressed through the PRSP process; the PRSP process toring; lack of attention to the most salient policy issues: and poor is likely to make the PA a more technical background report that quality assurance mechanisms. feeds into in-country discussions of the most effective strategy OED's 1999 follow-up evaluation of Poverty Assessments to reduce poverty. found that 62 percent of the assessments did not adequately specify goals and where multiple goals were specified, there 'Note Inclusionofasetofrelatedpovertyindicators;theescopeanddepthofpoverty was seldom anV prioritization. The OED review also noted sys- diagnosis;the breadth and scope of policy prescriptionsforpovertyreduction; and temic weaknesses in areas such as:-design of Poverty Assess- the strategic content of such prescriptions. unclear goals, ancl inadequate coverage (in some fiduciary documents as well as with the CAS cases several PERs for the same country). process. Until FY01, the CPAR and CFAA were Although there is no formal evaluation of the not treated as formal ESW and hence did not CFAA and CPAR, there is evidence to suggest that come under the purview of the institutional ESW their findings are yet to be fully integrated into review mechanism or QAG. QAG is currently in the CAS process and influence the Bank's assis- the process of rating the quality of the CFAAs and tance. Internal Audit Department 2001 notes that CPARs undertaken in FY01. "weaknesses" in the capacity for sound financial The launch of an ESW reform effort in July accountability "identified through the CFAA are 1999 has led to significant improvements to the not being adclressed" and that the expectation "to quality of ESW. Yet, QAG notes that these link CFAA findings ancl recommendations to the improvements are not mirr-ored in commensu- CAS has not been met." The Annual Procurement rate gain in the effectiveness of Bank processes Review for FY00 (draft) also notes that few CPARs such as sustained managerial attention and peer carriecl out since 1998 have "resulted in specific reviews. For instance, there has been significant reform actions" (although the review argues that improvement in the quality and process of peer there has not been enough time for significant reviews, but peer review advice does not often reforms to take place). It however notes that a have an impact on the final product. The monitoring system would be implemented to 2000-01 AROE notes that the networks' current ensure that the CPAR coverage supports the CAS "support" role does not fully exploit their com- and other strategic requirements regarding lencd- parative advantage. Task teams need to draw ing, country risk assessment, and capacity builcl- adequately upon the analytical expertise or ing. Work is currently under way in OPCS to knowledge base in the networks, Development endure greater linkage and integration within the Economics Department, or World Bank Institute. 28 Country Strategies, Instruments, and Outcomes E ffective country strategies are shapecl by corporate priorities and require strategic instrument choices. Equally, instrument design must be tailored to country operating environments. Recent evaluative evi- dence yields lessons on instrument choice and use in a range of country con- ditions. This chapter identifies areas in which the Bank can further increase its development effectiveness at the countiy level. It points to performance- based allocations, strategic selectivity in line with comparative advantage, results-based strategies backed by verifiable performance indicators, trans- parent CAS linkages with PRSP), and agreed policy frameworks as the major challenges of country strategy. Strengthened risk management, reliance on businesslike partnerships, and adoption of participatory approaches emerge as the best antidotes to risk aversion, especially in post-conflict situations and in countries where policy reform and capacity building are uphill tasks. Individual instruments of the Bank's assis- * How cloes corporate selectivity help define tance need to complement each other within an country strategies? appropriate strategy in order to achieve quality * How co country assistance strategies select outcomes. At the country level, this requires the and combine instriments to maximize clevel- Bank to adapt assistance to the country context opment effectiveness? while maintaining the link between corporate * How do lending and nonileniding instrumelnts selectivity, the country assistance strategy process, contribute to country program outcomes and the appropriate use of instruments. Coun- uncler differing country conditions? try program outcomes have been measured in the fifty-odcl CAEs conducted thus far by OED.' Corporate Selectivity and Country Drawing primarily from these evaluations, this Strategies chapter assesses dlevelopment effectiveness at the Country assistance programs are shaped within country level by addressing three Cluestions: the constraints of corporate priorities andcl 29 2001 Annual Review of Development Effectiveness resource envelopes. Corporate selectivity defines ments and the development risk profile of the the institution's goals and priorities, reflecting its ongoing IDA operations portfolio-combined in core competencies, its global mandate, and its an overall performance rating in an 80:20 ratio. areas of comparative advantage for country In recent years, the combined performance rat- assistance. The corporate framework aims at ing has been reduced by one-third for borrow- poverty reduction through a country-driven ers with severe governance problems. Evaluation framework. It recognizes that development effec- results confirm that the CPIA ratings are strongly tiveness depends on the country policy and associated with project outcomes, as shown in institutional environment, and on judicious figure 4.1, for both IDA and IBRD countries. sequencing between lending and nonlending Countries with poor CPIA ratings show well- activities. Corporate choices are conveyed to below-average portfolio results. individual country programs through three main OED's recent IDA Review2 finds that the mechanisms: performance-based allocation system has * the policy and assistance framework pro- evolved over the last decade to reflect new vided by the CDF and PRSP development knowledge and evolving corpo- * inter-country lending allocations for IDA ancl rate priorities. These changes have strength- IBRD countries enecd the link between countries' policy and * the allocation of administrative resources to institutional performance and lending levels. prepare and supervise lending and nonlend- Today, the system directs more resources to ing activities. good performance than it clid a decade ago. The Review proposes several additional adjustments The CDFand PRSIprocesses are designed to cen- to further strengthen the link, achieve greater ter the Bank's mission on poverty reduction consistency of treatment among countries, and through support of a country-driven, results- increase transparency: establishment of a writ- oriented framework jointly owned by the pub- ten record of country ratings; adjustment of lic, private, and voluntary sectors. In turn, the specific CPIA criteria to ensure that they assess individual country's framework (as articulated in policy performance rather than level of devel- the PRSP for low-income countries) provides opment; revision of the "governance discount"; the grounding for the Bank's assistance strat- and broader disclosure of ratings to borrowers egy, and constitutes a key platform for articulating and the wider international community. IDA the country's development goals. These rela- management has initiated enhancements to the tively new mechanisms are beginning to influ- performance-based allocation system drawing ence country assistance strategies. Initially seen on these recommendations.3 as a Bank requirement for further adjustment For IBRD borrowers, lending allocations are lending, the April 2001 Interim PRSP for Vietnam necessarily shaped by global financial system developed into a central component of the gov- considerations, Bank exposure, and credit- ernment:s own 10-year development strategy. worthiness. Nevertheless, the Bank has sought to In Ghana, the government's Ghana Vision 2020 increase the weight of performance in its alloca- document provided a long-term holistic vision of tion decisions for middle-income countries in development, which has underpinned the CDF, recognition of the better development prospects and has helped to solidify country ownership. expected from lending under good country poli- Theperformance-based allocation of lending cies and institutions. Figure 4.2 shows that both resources is the Bank's principal mechanism for IDA and IBRD lend more on a per capita basis exercising inter-country selectivity. Since the to countries with better project results. late 1970s, the allocation of IDA resources has The scope and scale of the Bank's activities been influenced by country performance. As in a country are necessarily constrained by currently defined, performance is assessed the country's administrative budget. The size through explicit indicators reflecting the sound- of country budgets is still closely linked to the ness of country policies and institutional arrange- size of the country's lending portfolio. Non- 30 Country Strategies, Instrumnents, and Outcomes F ig u re 4. 1 100- 1 _ _ _Li_Li so - - - - -i- - C- -a- E_ --l Li FI -~ 80- ------------ < = _ BankwideAverage E El ib@70 ------- ---- --- - -- - - - ---- --- - L 6 30 - 2 20 ----- ------ - - --------- - _D __ __ 30 - - --- ____ _ _______... 1 0 --- -----_------------- ----- -- Bankwide Average 0 I I I I I I I I I I I Low Medium High CPIA Average FY98-00 lencding allocations tend to be residually derived level development effectiveness, especially after accommoclating the "fixed costs" associ- wlhere lending is limited suchi as in new bor- ated with lending ancl supervision of the ongo- rowers or countries in lenclinig hiatus. Several ing portfolio. This feature of the budget process recent CAEs emphasizecl the neecl for sound is being reviewed as it may hamper country- country knowledge before initiating or resum- 100- I n E 90-- - _. _ _ _ 1 I-------- - --- - 8 70 - - - - - - - - - [-- --- __-- _ _ _ _ _ Bankwide Average 070 160- ______ 4- ------------------ --------- --- - - -- ¢ 20 -.___ ________________ ___ 10 XI-- --- 0 | | ~~~Bankwide Average I 0 - I__ _ _ _ _ _ _ _ _ _ a n w d I I I I 0 5 10 15 20 25 30 35 40 Lending per Capita (FY99-O1 Approvals) 3 1 2001 Annual Review of Development Effectiveness ing lending. Thus, maintaining a base of performance. Eight programns were rated sub- standard ESW coverage may be more cost- stantially or highly attentive to instrLment selec- effective than the steep learning curve, lost tivity, and seven were rated modest to negligible. opportunities, and costly project restructuring Most of the strategies dealt extensively with the whiclh usually result from inaclequate lending balance between lending and nonlending, but preparedness (e.g., Chile in the 1980s). In fewer than half stated the strategic rationale for addition, the Worlcd Bank "knowledge bank" is the particular mix of lending instriments adopted expected to support countries where knowl- in relation to program objectives. The rationale edge, not financing, is the priority (e.g., Bhutan for specific lending instrunment choice was made and Chile in the 2000s), or wlhere the policy explicit only in a few cases, usually in connec- and governance environment needs nurturing tion with the use of an APL or LIL. The Review upstream of lending (e.g., Haiti now). also highlights a lack of specific instriment pref- The close link between budgets and lending erence on the part of some borrowers, especially volumes poses a special challenge in very small for new borrowers or countries borrowing after couLntries. In the Maldives, for instance, the Bank an extended period of disengagement, where makes one loan only eveiy four or five years governments were not aware of, or had limited while carrying out basic economic work in experience with, the full menu of Bank instru- between. The CAE found that this ESW hacl ments. This emphasizes the need for the Bank to high value to the client, but that budget con- keep borrowers fully informed of changes in the straints prevented the Bank from undertaking Bank's toolbox so as to encourage fLill ownerslhip additional higlh-priority work on private sector of instrument choice decisions. development and environmlenital issues in a What are the obstacles to more strategic use timely fashioni. Special arrangements to fund of instruments in country programs? One issue, and implement such work in collaboration with already explored in Chapter 2, is the lack of rel- like-minded partners may be required to meet evant and sufficiently dletailed operational guid- suclh needs. ance in matching instrLumenits with development objectives. Three other factors emerge at the Country Strategies and Instrument country level. First, partnerships may not always Choice be adequately leveraged. Second, a logical frame- Within the country's budget and lending allo- work and results chain linking instriments with cation, the Country Assistance Strategy provides objectives is not a standard feature of country the vehicle for the Bank and borrower to decide strategies. And third, country circumstances may on the right combination of instruments based require unanticipated changes in the assistance on the country's development objectives. As program in between the preparation of periodic noted in the IDA Review, "selectivity in lending CASs. This makes it important to use CAS upclates instrLment choice is a strategic matter and ought and progress reports to provide an updated to be treated as such in the CAS."4 This is becom- strategic context for Bank activities. The fol- ing more important given the desire of most lowing sections describe these obstacles and development partners to demonstrate a sharper how they might be addressed. clivision of labor through the use of CDF prin- ciples. For borrowers as well as their external Defining Comparative Advantage Depends on partners, instrument choices must be based on Partners a sound understanding of the frill menu of instru- To enhance the effectiveness of country strate- ments available. gies, the Bank needs to address program selec- OED evaluations find that there is untapped tivity in consultation with borrowers and other potential to use the choice of instruments more assistance partners. The IDA Review emplhasizes strategically in country programs. In 15 CAEs that the Bank should clefine more sharply its com- completed last year, country programs were rated parative advantage as an institution and follow for their treatment of instrLment relevance and through on the implications for its programs at 32 Country Strategies, Instruments, and Outcomes the COuiltl-y and sector levels. At a country level sector/thematic objectives and to instrumlients. this involves leveraging its comparative advan- The CDF and PRS processes provide the folAvard tage and identifying areas in whiich other clonors linkages that relate the CAS process to meCdiulIl- may effectively take the lead. or longer-term outcomiies sucIh as the Millen- Partnerships are key to improving the impact nitlim Development Goals and tailor-made goals of aict resources, enabling areas of comparative customized to countr-ies' own clevelopmelnt advantage to be identified and exploitecl. A visions (e.g., Ghana Vision 2020). With the review of OED's recent CAEs provides evicdence CDFs and PRSPs providing the links to the of modest progress made toward more effective poverty reduction framework, the CAS foctises partnering at the cotintry level. For example, cul- on providing the businless model relating Bank tivating partnerships and a focus on aicl coor- instruments to sector and themilatic objectives. clination were strong elements of the Bank's Recent clecisions for costing of CAS programs and assistance to Vietnam, particularly in nonlencl- linking to the budget are steps in the right clirec- ing services. The Bank and UNDP worked tion. Increased partnerships are also critical for closely together in Vietnam, with the Bank exe- CASs to be appropriately selective in the Blank's Cutillg a number of UNDP-financecl projects assistance. whien it was tinable to lend itself. According to The CAS guiclelinies clearly clistinguishi the Vietnamn CAE, the Banik's work in aid coor- between Bank and coulitry priorities. Where dination created a collaborative spirit according there are differences, the risk of misre.aclinig the to CDF principles well before it was selected as borrower's comimlitimient is high and this mray lead a CDF pilot cotintry. Sector working groups to inappropriate initiatives or to the hoice of tile were establishiecd along with businesslike part- wrong instuiment. In Morocco, the FY97 CAS nerships in technical assistance and ESW. Expe- proposed a programn of predominantly invest- rience in Vietnam also highlighits the tradeoff ment lending to target social and rural devel- often required between improved coordination opment. Investment lending was perceived to be ancl the additional time required to reach a con- the best means to affect public expenditure for sensus. Partnership means letting the borrower critically important health, education, anld rural and other clonors lead even if the resulting pace programs. The proposed strategy, however, mis- does not ftilly mirior Bank preferences. jitdged the level of government comimiitimient to Effective aid coordination is particularly impor- social spending. The government was not eager tant in countries with a large volume of assis- to borrow from the Bank for programs withi tance and many donors, especially countries high social content, for whichi funcis on con- withi limited administrative capacity and post- cessional terms were reacdily available from other conflict countries. Uncoordinated aid programs sources. In addition, investment lending had a impose heavy buLrdens on recipient countries and poor track recorcl in Morocco. As a result, the limit the impact of aid agencies' programs. In actual lending program differed substantially West Bank and Gaza, the Bank established a from that presented to the Boarcd in the CAS withi unique structtire to coordinate the activities of the bulk of Bank lending going to adjustment a large number of donors delivering high vol- lending for policy reform. umes of aid. In addition to the usual Consulta- Establishing clear and sequential links tive Group, the aid coordination architecture between each instrument andc the CAS objectives incIlcIes several Liaison Committees. These pro- is crucial to achieve efficacy. This requires a vicle a forum for donors and authiorities to strong link between instruments and perform- address policy questions and to coordinate activ- ance indicators based on upfi-ont analysis whichi ities at the operational level. includes recognition of risks as well as learning from past results-especially for the adaptable Logical Framework Application in the CAS ancl programmatic lencling instruments. Evalu- The CAS should trace throtIgh the linkages from ative evidence woulcl allow the Bank to learn the country's long-term development goals to from the past in terms of what instruLiments have 33 2001 Annual Review of Development Effectiveness had what results, but CASs seldom give atten- assistance were readily accommodated (Chile, tion to past instrument performance in order to Mexico, Inclia). In some cases lending was used illuminate lending pipeline choices. It is also to achieve goals better met with nonlending important to adjust strategies for changing coun- instruments. During the 1980s and early 1990s, try conditions, through timely CAS upclates and the Indian government's unwillingness to accept progress reports that provide an agreed strate- policy-based instruments restrictecl Bank assis- gic context for Bank activities. tance to investment lending. This led to prepa- ration of some investment projects of low Country Strategies Are Dominated by Lending relevance and weak effectiveness. Similarly, the Satisfactory country outcomes require more than Bank opened its dialogue on transport reform just successful projects. Table 4.1 shows that with Kazakhstan in the context of a loan that hacd for a sample of CAEs, project performance (as a primary focus on misguided support for a measured by the aggregate outcome ratings) state-owned transport enterprise. And in Bulgaria, often went hand in hand with country outcomes because of the authorities' limited interest in in the CAEs, but deviations served as reminders primary health care, the dialogue on health sec- that country outcomes are determined by the tor reforms was launched via the financing of combination of lending and nonlending instuLi- ambulances. This approach, while pragmatic, ments, as well as other factors. generated disproportionate Bank investnment for An emphasis on lending appears to have limn- low-priority activities. ited the Bank's effectiveness in some countries. The effectiveness of Bank lending has proved Lending pressures were reported in 5 out of 13 to be influenced by the quality and coverage of recently evaluated countries. Three of these nonlending. Accordingly, the amount and type were large or higher-income borrowers, in which of nonlending assistance shoullc be carefully government instrument preferences for financial calibrated to enhance Bank lending and improve (>8% at sUlgr I S l*-Jl _ 1 1 Perforrnanceii 9 | % Disbursements Country prog Satisfactory k_ Partially-Satisfactory _ nal Unsatisfactory i i l . ~~Kazakhstan (1991-99) Costa Rica (199G-00) High s iKyrgyz (1 993-00) t Bulgaria (1 990-97) I> 87% sat) ., _ Upper Middle Burkina Faso (1989-99) nes -98 (75-87% sat) Egypt (1990-00) L Mexico (1989-99) Lower Middle lIndia (1990-00) (62-74% sat) n Cameroon (1996-00) Uganda (1986-99) Tanzania (1996-00) Morocco _ Cameroon (1982-95) Low _ Papua NG (1989-00) (<62% sat) U Paraguay (1990-00) Haiti (1986-01) Note. Portfolio performance quartiles are based on Bank-wide country averages of OED evaluated project performance for projects exiting FY9G-01, weighted by disbursements. Country program outcome ratings are taken from the relevant CAEs. All CAEs have been disclosed with the exception of Bulgaria, which is expected to be disclosed by March 2002. Source: OED. 34 Country Strategies, Instruments, and Outcomes the relevance of Bank assistance strategies. Non- strategy underwent a major change in an effort lencling was rated "supply clriven" in 8 of the 15 to link lencling to improvecl governance. Lencl- countries programs reviewecl. In most cases ing pressures, however, were a significant fac- CAE task managers citecd a lack of borrower tor in undermining the strategy (box 4.2). preference and inadequate consultation by the Bank as reasons for the supply-driven services. Country Strategies in the Absence of a Lending There is considerable scope for the Bank to Program increase borrowers' awareness of its menu of There are at least 30 countries in which the Bank nonlencling instruments. Recent evaluative evi- is not providing lencling support for a vwide ranllge dence offers examples of the way synergy of reasons. This situation poses speciail chal- between nonlending and lending programs con- lenges for countiy strategy formulakition. 0ED's tributes to satisfactory outcomes. For example, recent couLntry evaluations yieldI lessons for box 4.1 illustrates how lending to the Lesotho enhancing the Bank's assistance strategy in three education sector had a higlhly satisfactory out- scenarios uLnder which lencling is constrainecl. come based on relevant and timely nonlending First time or renewed borrowers. An initial services. periocl of nonlencling before lencling to new or CAEs found instances where gaps in ESW 'renewed" borrowers can help clevelop both coverage reducecd the relevance and effective- goocl relations with the governmient andic other ness of Bank lencling. Lending in spite of poor, partners and a souncl basis for lencling. In Viet- outdated, or insufficient knowledge was a fea- nam, the Bank carried out substantial ESW from ture of assistance programs to a number of new FY88 ulntil it resumecl lencling in FY94. Antici- and "renewed" Bank borrowers. In Kazakhstan pating that lending woulc eventually resum1e, the ancd the Kyrgyz Republic, for example, insuffi- Bank conclucted work in sectors whiele Bank cient analytic work in some areas prevented credits were later approved (healtl, finance, clear diagnoses, altlhough ESW was notably and energy). The recent CAE founld this ESW to effective in others (suchI as pension reform). have been very effective in its impact on both Reductions in resources devoted to nonlencling the selection and the clesign of Bank crecdits as posecd special problems in transition economies, well as the country dialogue by helping to win where limitecd experience with reforms meant the conficlence of Vietnamese officials. If the that changes needecl quickly to be captured. The lapse in lending is protracted, the payoff from need to update and maintain a substantial knowl- continued nonlending engagement may take a edge base is a priority also in countries that have long time to materialize. The Bank has sus- experiencecl long interriptions in Bank lencling, pended lending to Haiti twice in the past 10 because they lack a network of officials farnil- years, from 1991 to 1994 ancl from 1997 to the iar with Bank policies. For its part, the Bank may present, but carried out nonlencling activities need to update staff knowledge of current coun- both times. During the first hiatus, ESW was part try contexts. In Kenya, the Bank's assistance of a multi-donor effort to examine development Box 4. 1 In Lesotho. ESW ii dniiM _hticant impact on the outcomes of projects. Bank analytical services in the education sector were highly relevant:1iyiAlahdlinitune"with government and CAS objectives. The FY90 report Improving fluality and Efficiency in Education helped to establish a coherent policy framework for education reform in the 1990s. This alleviated past problems with prioritizing goals and coordinating donor activities in the sector.. Strong.analytic work also provided a platform for subsequent Bank lending, leading to satisfactory outcomes in education, despite-the weaker quality of the rest of the country-lending pro- gram. It also led to a strong and sustained relationship with the Min'istry, even through a time of political turmoil. 35 2001 Annual Review of Development Effectiveness Box 4.2 FlMuCLU "ciis 4i LtI,J L tl l ,1 ' GJŽiliKC07! lii -1r Bank assistance to Kenya over the last two decades has been increased lending in the absence of real and sustained progress characterized by weak government compliance and poor per- implementing conditions set out in the Bank strategy. Lending formance in the context of dismal economic govemance. The out- further increased with the approval of emergency operations come of Bank assistance deteriorated in recent years to one of which moved Kenya to a high case lending scenario that, the lowest levels in the Bank, and in 1998 lending to the country according to the CAS, should have been triggered by substantial was halted. A complete re-evaluation of Bank assistance to reforms. Kenya resulted in a landmark assistance strategy in the September Action plans are no substitute for action in countries with 1998 CAS. It proposed a primarily nonlending strategy, with lend- weak or inconsistent track records of reform. Further, experience ing linked to improvements in economic governance. This move in Kenya highlights the need for greater discussion of Bank pol- to nonlending and the focus on governance was highly relevant, icy on emergency lending to poor performers. The need for particularly as past Bank strategies had continued to push lend- emergency lending stemmed in part from weak enforcement ing in spite of poor portfolio results and under-funded analytic and implementation of past Bank projects in Kenya. In the long and advisory services. While the focus on economic governance run, emergency lending may undermine the effectiveness of to trigger lending levels was a firstin Bank history, the Kenya CAS Bank conditionality and may not fit well with institutional devel- illustrates a more general trend of strengthened links between opment in poor performers. At a minimum, all unenvisaged country policy performance and Bank lending. lending to poor performers should be accompanied by a one-year This highly relevant and innovative strategy was not fully CAS or country progress report, to anchor it within overall Bank implemented. Initial steps toward reform were rewarded with strategy. and assistance needs. In the more recent period, fully ready to pick up its part of the dialogue. The the Bank focused on social sector issues in the experience in Bulgaria suggests that the Bank hope that they would have some impact on should find instruments to continue dialogue policies and with the expectation that lending and promote reforms when not lending. There will some day be resumed. The recent CAE con- is, in fact, considerable room for innovation of siderecl these activities to have had negligible nonlending assistance. For example, the Bank direct impact on policy dialogue thus far, as might usefully systematize its engagement with would be expected in light of the extremely client countries to ensure a stable and reliable unstable country context. Benefits could be two-way channel between decision-makers that expected to accrue upon resumption of lending, would, if warranted, prepare countries to borrow. in addition to the more immediate donor coor- NVo clear intent to lend. In some cases, the dination benefits. Nonlending, properly designed, Bank engaged in substantial nonlending where should be viewed as a long-term investment in it did not have a clear expectation of lending. such cases, requiring regular maintenance. In West Bank and Gaza, effective nonlending Stop-and-go-reformers. Maintaining ESW dur- assistance resulted in a coordinated program of ing breaks in lending enables the Bank to financial assistance to the territory. The result- respond quickly to changes in political commit- ing consultations enabled the Bank to demon- ment or economic environments. Bulgaria fol- strate its political neutrality and created a network lowed a "stop-and-go" pattern of policy for furtlher dialogue in the territory. Greater implementation from the onset of its transition resort to this option might be considered in in 1989 to mid-1997. The Bank reduced its ana- countries with poor policy environments and lytic work and policy dialogue when conditions weak institutions. In addition, clients may only in Bulgaria deteriorated and Bank lending want ideas. The Bank should continue to sup- declined. This meant that when a new reformist port countries where knowledge, rather than government took over in 1997, the Bank was not financing, is required. 36 Country Strategies, Instruments, and Outcomes Risk Management Through Gradual client countries no longer ContinuuLsly or 1e;av- Engagement/Disengagement ily clependent on IBRD financing. Country evaluation1s find that a modulated response to engagement may increase the rel- How Instruments Contribute to Country evance and effectiveness of Bank assistance. Outcomes Early and extensive pre-lencling engagement Even though counitly contexts vary dramatically, provides a souncl basis for lencling, while the recent evaluative eviclence iclentifies cOunltry phasecd graduation of countries througlh con- capacity and borrower commitment as key clriv- tintiecl nonlencding and innovative lencling ers of instrLment effectiveness. The evidence sLIg- arrlngements allows progress and sustainability gests that the Bank can do more to tailor its to be assessed on a timely basis. The highly sat- assistance within the context of these two vari- isfactory outcome of the lending program in El ables. Three specific tools are recommenided to Salvador was basecl to a large extent on a grad- improve instrument performance in all contexts. uatecl engagement strategy. The Bank pro- Enhancing the effectiveness of country strategies posecd a strategy of progressive involvement in in poorly perfor-ming environmenits is cliscussecl orcler to deal with the risks inherent in a post- in box 4.3. conflict setting following 10 years of clisen- gagement. An extensive period of nonlencling Country Capacity during the peace process was followed by Sinpler1projectdesign. Several recent CAEs make lending for adjustment and social programs. similar recommiiiiendations to impr-ove Bank lencl- The recent CAE for El Salvador notes that this ing effectiveness. Projects sl-houldl have simple approach allowed the Bank to gauge the designs even when addressing complex prob- government's commitment to peace and reform lems. Time frames should be less ambitioLs and and provicdecl a coherent framework for the gov- the Bank shouldc make more realistic assess- ernment and the Bank to establish priorities. ments of implementation capacity. This is par- Grounding the CAS in recently conductecd ESW ticularly important for new borrowers, transition resulted in goocl project quality at entry, and economies, capacity constrained countries, and contributecd to a highly satisfactory program. poor performers. In the Kyrgyz RepLiblic and Recent country evaluations (and recent events) Lesotho, Bank assistance was less well calibrated. emphasize that the Bank also needs to refrain The initial Bank strategy in Kyrgyz emphasized from abrupt disengagement. There is consider- a flexible learning-by-doing approach, but incli- able demand for Bank involvement in countries vidual operations overestimated the govern- even after a lending program winds down (e.g., ment's implementation capacity and commitnent. Chile). The Chile CAE recommends gradLial with- A series of large, ambitious, anid complex proj- drawal from Bank assistance and, given the ects was approved in an uncertain economic country's susceptibility to external shocks, the environment. This led to only a moderately sat- maintenance of a nonlending program to mon- isfactory country outcomie. Bank assistance to itor anic to assist the country. The recently Lesotho was also cleliverecl in the context of approved IBRD Deferred Drawdown Option economic and political uncertainty. While the (DDO) provicles one mechanism by which coun- assistance program was based on a correct diag- tries can extend their financial engagement witlh nosis of the country's problemls, the outcome was the Bank. Available to both IBRD and blend also moderately satisfactory over the 1990 to countries to whom the Bank makes a single- 2001 period, largely as a result of over-ambitious tranche adjustment loan, the DDO gives bor- objectives whichl stressecl weak government own- rowers access to long-term IBRD resources to ership and stretched implementation capacity. manage ongoing structLral programs if market Most projects With unsatisfactory oLItcomiies hacd borrowing becomnes clifficult andl unforeseen clesigns that were too complex in relation to financing needs materialize. The DDO expands local capalcity and failed to involve beneficiaries the menu of risk management tools available to early in the process. 37 2001 Annual Review of Development Effectiveness (-i G ~L wJ Oi i3~o'G f Le`U [IC 11 Toh-E iji [i-zfl.l Box 4.3 LIU9i,;,Thbir) > LI tTlI_l Strengthening the Bank's assistance in poorly performing coun- interventions providing better results than a single complex tries hinges on looking at what has and has not worked well. undertaking. Pilot programs also provide a valuable instrument Both lending and nonlending instruments are undermined in for the Bank to test uncertain environments and to build capac- poor policy and institutional environments. For lending, project ity. The success of pilot initiatives suggests considerable scope outcomes are closely tied to country policy and institutional for their expanded use in poor performers. environments, as measured by the CPIA ratings. CAEs also sug- In terms of nonlending instruments, diagnostics are critical gest the quality and impact of nonlending are lower in poor pol- in poor performers for the assessment of ownership and risks. icy environments. These results underscore the need for more .However, the balance between core diagnostic versus advisory strategic selection of instruments in poorly performing countries. work should be related to country conditions. Coverage of diag- Stand-alone Technical Assistance Loans (TALs) fared better nostic exercises should be aimed at countries where potential in low CPIA countries than any other form of lending, due largely vulnerability is the greatest. There is also a need for greater to recent evaluations in ECA, suggesting that the Bank should focus on the nonlending process and product. Remaining engaged continue focusing on capacity and institution building, a criti- in poor policy environments requires, not prescriptive ESW, but cal objective for low-capacity countries. Operational results a focus on knowledge services that encourage debate and engage confirm that major policy reforms supported by adjustment lend- stakeholders. Another important lesson is the need to leverage ing had a particularly weak success rate in countries with analytic work conducted by partners. This is particularly impor- poorly committed governments. While true generally for all tant in Bank budgetary environments constrained by poor per- lending, adjustment lending results are -relatively more sensi- formance. Drawing on analytic work conducted by partners tive to country conditions as proxied by CPIA results. Recent CAEs allows the Bank to strategically direct its resources to maximize identify more general enhancements across instruments to raise impact Finally, new forms of enclave assistance focused on out- effectiveness in poor performers. For example, instrument design comes may be experimented with, tapping the expertise of pri- should be tailored to capacity levels, with a series of simpler vate companies and nongovernmental organizations. Tailor nonlending to coutntry characteris- nerships should involve particular attention to tics. Nonlending activities, like lending, have helping build quality "home-grown" analysis. more impact when adapted to country charac- The recent Chile CAE offers a model for sup- teristics. In Lesotho and Kyrgyz, the analytic porting countries where knowledge, not financ- capacity in government has in the past been so ing, is needed. It recommends using short limited that the impact of Bank country reports policy notes that inform and guide the decision was restricted to a few officials and scholars. of the moment, and more detailed sector work The impact of the Bank's nonlending activities only if lending operations require it. While is dampened in countries with ample domes- cost recovery is an option, the full cost pricing tic capacity. In India, Bank recommendations policy of the Bank has proven to be a signifi- were often lost among competing domestic cant obstacle. Wlhen charged for, Bank advice analyses of comparable quality. The Mexico must be of extremely high standards in order CAE recommends that the Bank put into per- to satisfy demand, and it should be limited to spective the relative weight of its financial and areas where the knowledge market has failed advisory services in countries where advanced and the Bank has a unique capacity to help its in-country analytic capacity exists. This suggests member countries. a need to be far more selective as recom- mended by the Task Force on Middle-Income Borrower Commitment and Policy Environment Countries, which emphasized the need to work Borrower commitment is the second strong as much as possible in collaboration with clients determinant of countly outcomes. In Bulgaria, and other partners. In weak institutional envi- the Bank took appropriate action in the face of ronments, on the other hand, nonlending part- weak government commitment. A key element 38 Country Strategies, Instruments, and Outcomes of the Bank's assistance programii was a Finan- engage stakeholders. Ininovationi in nonilendcinlg cial and Enterprise Sector Adjustment Loan approaches and partnerships should be a key (FESAL). When it became clear that the gov- feature of risk management with respect to poor ermnent would not deliver on its commitment performers and a powerful anticlote to unwar- to follow throughl with reforms the Bank took ranted risk aversion. a pruclent stance and delayecl the FESAL. The Bank then focused on supporting institutional Directions for Effective Instrument Use in changes and specific sectoral neecds through Country Strategies investment lending. The FESAL was put on hold Diagnostics and dcue diligence. The Banlk's move for five years until a more appropriate environ- toward a country-based approach anic increased ment existed for the reforms. The Bulgaria CAE programmatic lending is being supportecl by a notes that in hindsiglt, the move to clelay FESAL movement to standardize analytic coverage in was higlhly relevant and the project outcome was each client country. Project-level fiduciaLry con- rated satisfactory by OED. In Mexico, the Bank trols are being complemiientecd with country-level approved two single-tranche SALs for pension cliagnostics and capacity-building initiatives. In reform. Policy actions were agreed upon and FY01, management fuirther enhlanced the role of taken in advance of the approval of each loan. fiduciary assessments in its operational work by Use of simple single-tranche loans allowed the including Country Financial Accountability Assess- Bank to maintain an appropriately low profile ments (CFAAs), Country Procurement Assess- on politically charged issues. ment Reports (CPARs), and the Public Expenditure 7he ejfectiveness of nonlending varies by coun- Review (PERs), together with Poverty Assess- tiy policy environment. There is a strong con- ments (PAs) ancl Country Economic Memoranda nection between nonlending effectiveness and (CEMs) as part of core diagnostic reports. the quality of country policy environments. As The Bank couldc clo more to clarify the table 4.2 illustrates, ESW carried out in countries intended impact anic consequences of its core with lower average C1'IA ratings had less impact assessments. The guidcelines for the CPAR, CFAA, on Bank products and on countly dialogue than and PER suggest that findings and recommen- it did in countries with medium ancl high CPIA dations are to be fed into the CAS process, but ratings. However, the returns of ESW which do not elaborate on how the instrumllents are lead to policy turnarouncls are so high that a expected to achieve this linkage. There is no coII- lower rate of success may be acceptable provided sensus in the Bank on the minimum fiduciary the activity is carried out with the clear objec- stanclarcds for borrowing countries. More impor- tive of nurturing reform and capacity building. tantly, the consequences of the ficluciary assess- Remaining engaged in poor policy environ- ment findings for Bank assistance programs are ments also requires a focus on activities beyond unclear. The Bank's policy currently does not prescriptive ESW. The Bank must use the full require fiduciary assessments to be carriecl out range of its ESW toolkit to encourage debate and in all borrower countries, and coverage to date T a b I e 4 . 2 _) ITI E] C 0 -u (-'. ',' ' .' 'L- @t &~ M L.- 9 g2 "- L? S J ., C. g XI 0 (3t Table 4.2 . *l GtL 4 1_1 0 -) 0 -1L, illf idCD i n: } S L' c. {E o [a a1 2- GI CPIA ratings Relevance Impact on Bank products 4irnpact on country dialogue' Low 4.9 3.7 - 2.9_ Medium 4.5 ' 4.2 -3.9 High 5.4 5.2 5.1. Average rating 4.7 4.3 3.9 Note: The analysis is on a scale of t-6. with above 3.5 representing overall satisfactory rating. Ratings based on a review of ESW quality in 50 countries with CAEs. 2001 Annual Review of Development Effectiveness appears to be based on demand from country teams that adopted intensive policy dialogue teams, the budget, or available skills. Current and pilot projects improved the relevance of their guidelines do not provide criteria for selecting interventions ancd achieved better quality at and prioritizing across countries; in particular the entry. Positive experience with pilot investment volume of adjustment loans in countries does not lending has resulted in an expanded scope for appear to be an explicit criterion. the application of LILs. JP,l.:rv,,i projects allows uncertain environ- Dissemination and otitreach. Recent CAEs ments to be tested. Evidence in the most recent show a mixed quality of clissemination of ESW country evaluations suggests that on the whole, as a weakness in many Bank programs. The pilot projects contributed greatly to the effec- modest impact of earlier Bank reports in Mex- tiveness of lending, by building institutional ico and India was influenced by government capacity or convincing stakeholders of the ben- reticence over the dissemination of external efit to reform. In Chile, positive results from analysis and recommendations. Conversely, pilots in health care stimulated public debate ancl the payoff from wide dissemination and out- helped to launch institutional reforms in thie reach is substantial. In Vietnam, the earliest sector more generally. In the Kyrgyz Republic, economic and sector reports were translated limited Bank experience in the country ham- into Vietnamese and sold in street kiosks. Since pered the relevance and effectiveness of the the introduction of the CDF in 1999, analytic early lending program. The Kyrgyz CAE notes work has been produced in closer partnership that piloting new approaches through LILs might with many stakeholders and dissemination has have resulted in more realistic perceptions of been extended through workshops and con- government capacity, simpler project clesigns, ferences. The FY97 Morocco CAE notecl that the and more effective lending. OED evaluations for large amount of good-quality ESW producecl did India also reinforce the need for a better under- not have an impact, largely because the efforts standing of capacity constraints and the context excluded building a constituency for the analy- of reforms before project preparation. Recom- sis and recommendations. But recently there has mendations include using small-scale pilots to been a successful change of approach, and provide insight into the current policy ancl insti- the FY01 CAE notes that Bank efforts to dis- tutional framework and to test reforms and inno- seminate studies have contributed to the pub- vations. OED findings in India suggest that Bank lic policy debate. 40 Sector and Thematic Strategies, Instruments, and Outcomes T he evolution of the Bank's corporate priorities is reflected in the r ecent expansion of lending for social protection, economic policy, public sector management, and finance, and in a stronger focus on institu- tional reform. Declines in lending for rural development and education, by contrast, seem inconsistent with defined priorities and highlight the need for updated operational strategies in these sectors. Specific investment loans continue to be the predominant lending instrument, and the use of new programmatic lending instruments is growing. Innovations in lending arrangements aiming to support corporate priorities include sectorwide approaches and social funds. The Bank's crosscutting thematic objectives, such as environmental sustainability ancl gender, can best be achieved through complementary use of both lending and nonlending tools. This chapter reviews recent trends in the ment, security, and social inclusion; the investmiient lencling among sectors in relation to corporate climate; public sector governance; eclucation; and priorities and acldresses the following questions: health. Recent shifts in the stuLcture of lencling are * How is corporate selectivity reflected in sec- broadly consistent with these priorities, ancl witlh toral strategies and lending commitments? the defined "core competencies" of the organi- * -low effective have been the choice, combi- zation. The biggest sectoral shifts over the last nation, and cleployment of instruments decade, as measurecl by the Bank's own sector between sectors? classification,' are higlhlighted in figure 5.1. * What instaLments are used to support the Between FY90-92 and FY99-01, lending for eco- Bank's crosscutting thematic strategies ancl nomic policy quadruplecl, growing to a fill one- with what results? fifth of total lending. Social protection and public sector management were other fast-growing sec- Selectivity Across Sectors tors. Meanwhile, lending for agriculture shrank to The Bank's Strategic Directions give emphasis to just 9 percent, and lending for electric power five priorities for corporate advocacy: empower- ancd energy was at one-quarter the earlier level. 41 2001 Annual Review of Development Effectiveness Fig u re 5 . 1 ~~~~~~~]- Apmpr 14 E FY9O-92 12 - F FY99-01 10 = m~~~~~~~~~~~ E4 E l _ I LM I - 2 Agriculture Energy Social PSM Finance Economic Protection Policy The declines in agricultlral and infrastructure governance ancd anti-corruption issues. Lend- lending represent a reaction to policy shifts since ing in the finance sector increased in the latter the late 1980s in response to the disappointing half of the 1990s, supporting the priority of record of public agencies in agricultlral market- improving the investment climate. Within lend- ing and extension and in support of private ing for finance, the balance has shifted from sup- investment in several sectors, particularly electric porting the development of individual financial power and energy, oil and gas, industry, ancl institutions and markets to encouraging the telecommunications. Together, these four sectors reform of financial systems. Rapid growth in accounted for 20 percent of lending in FY90-92 the volume and share of lending for economic but only 4 percent in FY99-01. In the case of policy is also consistent with the Bank's "core power and energy, the decline represents a delib- competencies" in economic management and erate shift by the Bank toward nonlending activ- financial systems, and with the corporate advo- ity designed to create new regulatory ancl policy cacy priority of the investment climate (although environments. Lending for transportation, which the levels of lending for both economic policy continues to depend more heavily on public and finance also reflect the Bank's role in emer- investment,2 was maintained at 11-14 percent gency lending to countries in crisis). throughout the period, with a shift in the focus of Lending to two of the sectors identified as cor- lending from purely infrastructLre investment to porate advocacy priorities-health and ecluca- reform of the institLtional framework for better tion-has not grown. The health portfolio service delivery and sustainability of investments. remained at about 5 percent of total commit- The expansion of lending for social protec- ments from FY90 to FY01, while lending for eclu- tion, from 1 percent of commitments in FY90-92 cation fell to only 5 percent in FY99-01: annual to 9 percent in FY99-01, matches the priority education sector commitments dropped sharply now given by the Bank to social safety. Similarly, in the last two years to less than half their aver- the priority of public sector governance is age for FY90-99. This measure does not reflect reflected in the doubling of lending for public the inclusion of health or education compo- sector management (PSM) to 10 percent of the nents in multi-sectoral investment or adjustment Bank's portfolio, with increasing attention to operations. The share of policy conditions 42 Sector and Thematic Strategies, Instruments, and Outconmes appliecl in adjustment lending to the social sec- staff resources combined with skill shortages. tors expanded rapidly in the 1990s to 18 percent OED's rural poverty review identifies additional in FY98-00, with humllan development account- factors: recluced demand from borrowers wlho ing for 15 percent of tranche conditions. give higher priority to social sectors wlheni food The sharp fall in lending for agriculture also supplies appear secure; changing incentives for appears inconsistent with corporate priorities, country directors faced with pressure to lencl at considering that rural development is one of the low cost; and a lack of analytical metlhocdologies crosscutting themes within the Bank's defined within the Bank to adequately demonstrate core competencies ancd is critical to poverty poverty impact and social retuLns to rural ancl recduction in many client countries. A decrease agriculture investment.3 in some traditional lencling areas-such as large- scale irrigation ancd clrainage and agricultural Instrument Choice and Performance credit to large borrowers-accounts for part of the decline. Even thoughl a growing share of Instrument Choice Among Sectors lending for agricultural operations has been The recent expansion of adjustmiient lending in assigned to other categories such as environment, the Bank's portfolio has occ urrecl primarily in there is a real decline, given also the relatively four sectors-economic policy, finance, public small share of lencling clirected to rural devel- sector management, and social protection. Fig- opment as a whole. A portfolio review of all sec- ure 5.2 shows the distribution of investment tors/categories of lending for FY99-00 reports and adjustment commitments in each sector in a decline in rural lending in most regions in FY96-01. Adjustment operations have beenL used FY00, from the average for FY98-99, attributed only on a limited scale in agriculture andc on a to a fall of 50 percent in expenditure on ESW very small scale in education, healtlh, ener-gy, aind relative to lending costs, the high-risk and highi- transportation. While most investment projects cost image of rural operations, and a decline in incorporate technical assistance, significant use F i g u r e 5 .2 100- - 80 20 Urban Water Trans. Energy Oil & Edu. Env. HNP Agr. Soc PSD Mult. Finance PSM Econ Gas Prot. Pol 3 Investment [ Adjustment FM Investment (TAL) 4 3 2001 Annual Review of Development Effectiveness of stand-alone Technical Assistance Loans has opment, environment, and water projects-SILs occurred in parallel with adjustment lending. are the predominant instrument. Where policy Within investment lending, SILs remain the reform or fiscal management is the goal, adjust- dominant instrument in all sectors. Some sectors, ment lending dominates. And when institutional though, have made significant changes in their development combined with policy reform is an use of instriments over the 1990s, as sector important objective, both investment and adjust- strategies have been enhanced and the new ment instruments are used. Adjustment loans, adaptable lending instruments introduced. The often supported by Technical Assistance Loans, use of FILs, predominantly in finance and on a have been particularly effective when the ID smaller scale in agriculture, urban development, focus is on policy and regulatory reform, wvhereas and other sectors, has dropped sharply. The investment operations appear to offer advantages use of SIMs has also declined in all the sectors when sector conditions require substantial con- where their use had been significant, primarily sultation and consensus building among multi- in transport, education, agriculture, and health- ple stakeholder groups and institutions, and the same sectors that have made most use of when piloting, monitoring, and evaluation activ- APLs since their introduction in 1998. Social ities warrant high priority. protection has taken the lead in the use of LILs, In the fmnance sector, the move from invest- whichi accounted for more than 20 percent of ment to adjustment lending (figure 5.3) has projects and commitments in the sector in matched the concurrent shift in the Bank's objec- FY98-01, followed closely by education. tives, from expanding access to investment finance through indiviclual financial institutions Sector-Specific Issues in Instrument Choice to the reform of financial systems. Financial The following section looks at selected sectors Intermediary Loans (FILs) performed poorly of Bank operation and how the different instru- because of weaknesses in the policy and insti- ments perform in achieving sectoral goals. Where tLtional environment, shifting attention to over- physical assets are a significant intermediate coming these weaknesses. Financial adjustment objective-as in many transport, urban devel- loans (denoted as FSALs and including SECALs Figure 5.3 to Adjustment L e n d i G7- Fi ure5*3.in ance (FY90-O1 App r o v a I 1,200 - FSAL 1,000 -. ..- 800 - -._ -._.---.-- cm~ 'E 600- _ ___ 400- - 200-- __________________ __________ _ ;_- coI 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Note: Time trends reflect three-year moving averages, and exclude several outlier jumbo loans that were in response to severe financial crises. 44 Sector and Thematic Strategies, Instruments, and Outcomnes or finance-focused SALs) have proven more latter .ccouLnting for about ont in four opcl-ations) effective thani FILs to support wide-ralnginig have performed above the 13anik average. 'I'he reforms in the financiatl sector, and their- per- Bank's strategy for the sector envisages a sivgnif- formance has improveci (to more than 85 per- icant complementary role for programmatic cent satisfactory for projects exiting FY96-01) investment anid adjuistment lendcing in supporting since OED's review of the sector in 1998. Still, public sector reform.7 Long-term institutional con- FSALs have been more successful in removing cerns do not fit easily in a traditional investmenit distortions and improving financial infrastructure project with limited scope and the neecd to clis- than in restructuring institutions or imilprovinlg burse against actual project expenclitures. APLs competition, and their effectiveness in sUppolt- have been approved or are uliclel- consicderaltion ing the difficult financial restructuring needed for Ghana, Bolivia, Tanzania, ancl Zambia, to after a cr-isis is over is still uncer-tain. To address facilitate a longer-term focus on institition build- these longer-teriml issues, the Bank's finiancial sec- ing ancd to link disbursements more closely withi tor strategy proposes that loans shouldc be fre- governments' needs ancl withi improvements in quently monitorecd (as recommendecl by OED),'i monitorable indicators. Traditional adjustmIent ancl that vehicles such as technical assistance lencling, on tle other lhancl, may foculs onl systemnic components, acLiptable program lending, and institutional concerns, but its typically short time partnerships with other clonors shouldc be usecl frame and irregular disbursement pattern are not to maintain continuing dialogue, well-suitecl to sustainecl efforts at institution build- In the social protection sector, acljustment ing. The new programmatic adjustment loans are loans account for more than half of all commit- expectecl to overcome some of these limitations ments for the 59 evaluateCd projects exiting in by encouraging a longer-term and mor-e svstem- FY97-01. Ninety-two percent of the adjustment atic approach to public sector reform througIl a operations had satisfactory outcome ratings, medlium-terimi programii of annual single-tranche compared withi 84 percent for investment oper- operations. ations in the sector. The recent movement of the In the agriculture sector, a significant change Bank's clients towarcd "multi-pillar" reforms cre- in instrument use has been the decline in the use ated the opportunity to focus acljustment loans of FILs, from 15 percent of projects exitinig in directly on pension reform.5 Client countries FY94 to non-e in FYOO-01. Adjustment lendinlg have called on the Bank to finance the initial continues to play a i-ole, accounting for- 14 per- expenditures involved in honoring existing pen- cent of commitments for projects exiting in sion commitments, allowing them to clivert con- FY97-01, with 16 of the 19 operations rated sat- tribution revenue from the public pay-as-you-go isfactory on exit-stronger performance on aver- system to new funcled schemies. When well- age than for investmenit lencling in the sector. designed, the reform results in reduced costs to OED's 1997 review of agricultre SECALs' found the governmenit in the future, providing the that performance had improvecd in loanis resources to repay the loan. The first adjustment approvecl from the early 1990s (whien the Bank's loan based purely on pension reform took place policies for the sector shifted fromil the public- in December 1996 to Argentina, quickly fol- production-and-control model to liberalization lowed by operations in Mexico, Peru, Uruguay, ancd competitive marketing), withi more attention anid Kazakhstan. The Mexican loan helped given to borrower ownership and the time finance transition costs and improve the regu- needed to implement reforms, but that furthier latory framework for the funded pillar. The proj- measures were needed to match the Bank's ect in Uruguay fostered increased efficiency aCljustimient lencling instruliment to the long-term among the seconcl pillar pension fund admin- needs of institutional reforim. These measures istrators and promoted the clevelopment of the included frontloading of policy refor-mils, anicl private securities market .6 systematic nurturing of borrower comm11itmi1enit In the public sector management sector, throughi nonlending services andc participation both investment projects and acljustment loans (the prior to lencling. Investment loans were founcl 45 2001 Annual Review of Development Effectiveness to have been effective in reform of public expen- tions. OED's review of the sector recommends diture in the agriculture sector but had rarely cov- greater use of adaptable lending instruLmlents and ered such comprehensive policy reform the development of new, cost-effective, programs. The Bank's strategy for rural and agri- performance-based approaches in deploying cultural development in the ECA Region envis- these instruments.12 Since 1989, Bank strategy ages little future use of Sector Adjustment Loans, has focused on facilitating the privatization process despite their relatively good outcome ratings: the in water supply and sanitation. For this purpose, bulk of lending for policy reforn will be througlh lending operations have been increasingly sup- structural adjustment operations, with agricultuLral ported by other instruments, leveraging the Bank's and rural reform components, while much cross-country experience, relationships and capac- greater weight will be given to investment lend- ity to connect clients with addlitional sources of ing with particular concern for community-based finance, technical expertise, and partnerships. development and poverty reduction.9 The cost dimension of sectoral operations. At Adjustment loans have rarely been used in the the sectoral level, country conditions influence health and education sectors despite the pol- both the performance and the costs of lencling icy constraints often present in these sectors. operations. Figure 5.4 illustrates costs and out- The mixed performance of a few education comes at the sectoral level for selected acljustment SECALs in the 1990s (five of the nine operations and investment instruments under different coun- were ratecl unsatisfactory at completion) has try conditions. The figure demonstrates that costs been an inhibiting factor: the instrument has not for investment lending are considerably higher been used for an education project exiting since across all sectors in low CPIA countries. The 1997. The education sector strategy paper envis- health, nutrition, and population (HNP) sector ages greater use of the new investment lending clemonstrates consiclerable movement in terms instruments bec.ause of the importance in this sec- of cost of lending and outcome between coun- tor of process-driven goals that involve many try contexts. HNP investment lending in low stakeholders and institutions.'0 APLs and LILs CPIA countries has among the highest costs and are permitting more open-ended lending, based lowest outcomes, but cost is halved and outcome on specific objectives and a long-term develop- ranks among the highest when undertaken in ment strategy, and allowing for piloting and medium/high CPIA countries. Investment lencl- innovation over a shorter time frame.1' Of the two ing in the education sector exhibits an equally health SECALs exiting in the 1990s, one was strong movement, with lending costs decreasing rated satisfactory. When Bank investments rep- dramatically from low to medium/high CPIA and resent only a small share of health sector spend- outcomes improving with country conditions. ing, their impact depends on leveraging wider The costs associated with sectoral interventions changes in the sector. In this respect, adjust- using adjustment lending are not as sensitive to ment operations may help focus attention on pol- country environment. Figure 5.4 shows that for icy dialogue, but they are not good vehicles for all sectors the cost of lending for SALs/SECALs testing new approaches through piloting, for rig- only modestly decreases between low and higlher orous monitoring and evaluation to provide evi- CPIA countries. Country environment does, how- dence on what works, or for helping to scale up ever, have a strong positive impact on outcome successful approaches. Nevertheless, there is for adjustment lending in all sectors. The agri- room for them, and the Bank's strategy envisages culture sector is the only exception, with costs a more significant role for SECALs in health and for adjustment lending increasing in medium/high education in some regions in the future. CPIA countries, though this is also accompanied Traditional specific investment lending con- by higher outcome ratings. tinues to dominate Bank operations in the water sector. SIMs and APLs have not been used on a Combining and Sequencing Instruments significant scale, although activities in the sector Few Bank-finded projects stand alone. Many have included complex programmatic opera- are one of a sequence of similar loans and/or are 46 Sector and Thematic Strategies, Instruments, and Outcomes Fig u re 5 .4 Investment-SILs 50,000 - 121 Low-CPIA Countries O Medium/High-CPIA Countries , 40,000 -- D HNP El Educ o 30,000… - -Agr o All ,) 20,000 -. Urban FlEnergy UHNP UAr _ jTrans U Educ O 10,000 - - U Urban *AII U Energy Trans 0- I l I 0 20 40 60 80 100 Percent Satisfactory Outcome (Weighted by Disbursement) Adjustment-SALs/SECALs 10,000 - El Low-CPIA Countries U Medium/High-CPIA Countries ," 8,000 - . .............. ElPSM .l Multi Agr 5 6,000 -____ ___--------A All Ec,n 4 , 0 0 0 S-M1:1EcnPSM 2,000 -_- . _______ _ .-.-. CL. 0 - II I I 0 20 40 60 80 100 Percent Satisfactory Outcome (Weighted by Disbursement) supportecl by concuirent or overlapping opera- to ensure continuity in policy dialogue and the tions with similar or related objectives. The necessary analytical work over a long period, sequencing of operations, and the synergies together with support to piloting and imple- between different operations, may be particularly mentation (box 5.1). This was demonstrated important when project objectives include corn- effectively, for example, in Armenia's education plex institutional reforms, and when the course sector. The Bank supportecd the government's far- of these reformis cannot be clearly predicted. reaching reforimi progr-am fromil 1996 throughl two Successful adjustment lending in these conclitions kincls of instruments-a SIL ancl two SALs-nei- requires the use of complementary instiLiments ther of wlhich could have been fully effective on 47 2001 Annual Review of Development Effectiveness Box 5 . 1 Two examples from the ECA Region illustrate effective combi- were technically sound and publicly acceptable, allowing quick nation of investment and adjustment lending for sectoral reform passage through parliament of the legislation needed to support objectives. restructuring of the system. Reform of social protection system in Bulgaria. The Bulgaria Restructuring of the mining sector in Ukraine. The Ukraine Social Protection Adjustment Loan (SPAL), in 1999, supported an Coal Pilot Project, rated highly satisfactory, played a crucial role ambitious and comprehensive program to establish the legal in setting in motion a major restructuring program, in combina- basis for reform of the pension system,' labor markets, and social tion with the (almost) parallel Coal SECAL Although the launch- assistance. Although the full scope of the program proved unre- ing of the SECAL did not wait for the results of the pilot project. alisticandnotallthemeasureswereaccomplished,theprogress the SECAL was restructured to incorporate lessons from the made on pension reform was strong. The success of the SPAL pilot. The achievement of the pilot in demonstrating a feasible in its objectives on reform of thepension system can be attrib- processfor closure of mineswassufficienttotrigger an accel- uted in large part to the support provided through an invest- erated mine closure program and thus substantially reduce the ment project, the Social Insurance Administration Project (SIAP), drain on the national budget for operation of uneconomical effective two years prior to the SPAL at a time when the gov- mines. Taking a flexible approach (the project was amended ernment was committed to reform but consensus was lacking three times to reallocate resources as priorities changed) in on specific policies. Contrary to usual Bank practice in the adverse institutional conditions, the investment project focused region, this project included no policy conditionality. Itfocused on the technical, political, and social issues for mine closure, l solely on building technical and administrative capacity in the building understanding and consensus on the need for mine country-in the National Social Security Institute (NSSI)-for closures through consultation, information sharing, and social pension policy development and implementation. With the ben- assessments, and by demonstrating approaches that were tech- efit of high-quality technical assistance through the project, nically, financially, environmentally, and socially viable. The the NSSI was instrumental in developing policy proposals that SECAL facilitated acceleration and a scaling-up of the program. its own. Policy conclitionalities in the SALs sup- logue have been instruimental in gaining gov- ported the necessary legal ancl regulatory erminent commitment and inmproving policies for changes, as well as crucial provisions in the edu- the environment in a number of countries, cation budget needed to finance the reforms including China, Mozambique, Costa Rica, Inclia, and encourage public support. The SIL, mean- and Vietnam. The importance of diagnostic ana- while, supported the Ministry of Education's lytical work is further enhanced by the CDF capacity for analysis and policy making, decen- framework, which calls for coordination of tralized school management, and textbook donor support on the basis of comparative production. advantage withini a country-owned develop- Even though most sector strategies focus on ment strategy. Yet, OED's rural poverty stLdy the use of lending to achieve sector objectives, notes the modest and declining spending on nonlending instruments also play a critical role. rural ESW, while the environment review finds Most directly, sector analytical work drives the a decline from the 1990s in both the number of effectiveness of lending assistance. OED's sec- stLdies and budgetary allocations. tor reviews confirm the role of economic and sector work in gaining government commit- Innovative Approaches to Sector Assistance: ment and producing good results in lending SWAPs and Social Funds operations. In the water sector, for example, The design of Bank interventions is not limited recent economic and sector work has had a sub- to the choice of lending instriments. The avail- stantial positive impact on the design of Bank able instruments can be applied to a wide vari- water projects. Good analysis and policy clia- ety of approaches designed to match specific 48 Sector and Thematic Strategies, Instruments, and Outcomes development needs. Sectorwide approaches capital and recul-rent spencing. Reviews of the (SWAPs) and social funds are two approaches that Ghana health program have dIocumentecl have assumed growing significance in the Bank's progress in program transparency, in riepro- lending. I'lTey provicle mechanisms to coordi- ductive health services, and in the quallity of ha.sic nate the use of donor resources in support, health care. Still, no SWAP hals yet resultecl in all respectively, of sectorwide refomis and small-scale external funcling being supported thl-oughl a sin- communllity-level investments. Table 5.1 outlines gle unifiecl donor-coordinated lencling instrl- the objectives and core features of each approach. meit. Moreover, challenges reemain in buildinIg SWAP's aim to achieve long-term improvement in country ownership and capacity beyond central sector performance. The prereCquisites for suc- governmient, establishing baselinie data and cessful use of a SWA1I inclucle macroeconomic sta- agreecl indicators for monitor-ing progra.m per- bility in the recipient COuntIty ancl country formnance and progress, and getting significant leadership of a sound sector strategy and expen- harmonization of donor procedul-es. diture framework. Success also depencds critically Social funds are multi-sectoral ancl usually on clonor willingness to align and coordinate have broad, cross-sectoral objectives sucIh as assistance in support of the government pro- alleviating poverty and strenigthieniing comImIlullity gram, using a joint annual review process. BuilC- organization. Bank lending to social funcis began ing the consensus necessaiy to set up a SWAP is in 1989 and has expanded rapidly to somile 58 time-consuming, and the anticipated benefits are couLitr-ies. Social fuLid projects creaite auton1omi1ous long-term. Social funds, in contrast, can be estab- implemilenitinig agencies to finance small projects lishecd to produce visible results rapidly in adverse in several sectors, based on proposals submit- economic and instititional conditions. They may tecl by local groups. Most social funcls were set be appropriate when action is neecled urgently up as temporary mechanisms to channel to address small-scale infrastrictuire ancl other resouL-ces to needy communLities at a time of cri- needs at the community level ancd existing agen- sis, Iut virtually all are still in operation, sup- cies lack the capacity to respond. But they offer portecd by successive Bank SILs and grants fi-o limited long-term impact on sector performance multiple clonors, and have assuMCed longer-terim or wider institutional developmiient and tiey can objectives. OED's social funds review13 findCs be misusecl to undermine budget discipline and that the approachi has been effective in respond- sector policy standards. ing rapidly in emergenicy situations, mobilizing SWAPs signify a process-not a program or nongovermnent resources, an cl deliverinig small- specific financial instrument. Bank support to scale inl'rastructule in poor commiiunlities, SWA's, in some 20 countries, has taken the althougil performance has varied across sec- form of SILs, SIMs, and increasingly, APLs. The tors. Projects have been less successful in achiev- approach was introduced in the early 1990s in ing consistent impr-ovemilenits in clevelopment response to the proliferation of poorly coordi- or welfare indicators, or in facilitating institutional nated donor-supported projects, weak govern- clevelopment. ment commitment to programs ancl reforms, SWAPs and social funds can be used to meet and failure to budget adequately for recurrent complementary sector objectives at national andic costs. The approach has the potential both to grassroots levels although some tension exists reduce aid transaction costs and to strengthen between the two approaches. A social fund oper- countries' management and accountability stric- ating on a significant scale in a given sector is tires. In practice, SWAPs have had some success normally channeling funds outsicle the in introducing common implementation arrange- expenditure framework that is at the core of a ments and pooled donor funding, greater coher- sector-wicle reform program, and risks under- ence in sector policy and planning, enhanced mining this programir-even wheni steps are taken country ownership of a long-term strategy and to promote coordination. In Zambia, for exam- priority programis, improvecl allocation of pub- ple, the Bank has been supporting a social fuLnic lic resources, anct elimination of imbalances in whicih has allocated some 70 percent of its expen- 49 Sector and Thematic Strategies, Instruments, and Outcomes tions of central and local officials, it has tended Policies and Actions in Support of to inhibit development of the permanent insti- Thematic Strategies' tutional capacity and accountability structures The Bank has enunciatecl strategies in a nu-Il- needed for sustainable sectorwide improvements. ber of crosscutting thematic areas. These thematic OED's social funds review recommends strong areas are not "sectors" in the tradlitional sense, country team coordination to ensure consistency but represent dimensions that enhance the qual- of social fuincd activities with a couLitry's sector ity ancd equity of the development process across reform strategies, as well as the Bank's sectoral sectors. To implement these strategies, the Blank policies and tecniical standards. It also cautions seeks to mainstream the operational emphases against allowing lending throuIgh social funds to they imply at the sector andic country levels by displace sector policy-intensive initiatives in drawing on a wide range of tools. OED has whiich the Bank has comparative advantage. recently reviewed four sucIh themnatic strate- Optimally, exit strategies for social fund pro- gies--environment, gender, culture, anic partic- graims can be facilitated by SWAPs. ipation.'4 These reviews h1ave Cdocumlienitecl the The sectoral focus of SWAPs can be comple- instititional constrainits to m.ainstrearning ancl the mentecd and enhanced by the new PRSCs' focus ctifficulties (often underestimated) of usitig lencl- on cross-sectoral challenges of poverty redluction ing, corporate nonlencling activities, and couLn- and institutional development. In this context, try-level nonlending activities indivicdually and SWAPs provicle a means of advancing the sector together to achieve themilatic objectives. Table 5.2 reforms ancl addressing the capacity constraints summarizes the specific combinations usecl in for implementing poverty reduction strategies. each of the four areas, in wlhichi "`)" dellotes The interface between SWAPs and PRSCs neecis strong use of the activities, "X" denotes some use, careful design in the context of a country's and blank incdicates no or negligible use. poverty reduction strategy. The implications need Of the foul strategies reviewed by OED, envi- to be drawn as the Bank's new business mocdel ronmental sustainiability has exploitecl the widest for low-income countries is refined. range of actions and instruments. Direct lencl- Table 5.2 C- t'a Ž,_) 3 L, )Co3 Q[' i 'C: d 12E ;- O Environment - Gender Culture Participation Targeted lending . i , .. Dedicated investment projects XX ' X X X~~~~~~~~ Investment project components XX X X Adjustment lending components X Corporate nonlending activities . . "Do no harm" policies (incl. safeguards) XX X "Do good" policies I XX X X X Monitoring and structures for consistent compliance . . - with policies/guidelines XX X Staff training and capacity building XX X X X Global/regional partnerships XX X X Country-level nonlending activities CAS/PRSP X X X X Economic and sector work (ESW) XX -A X X Country-level partnerships X; ', t X ' X X 5 1 2001 Annual Review of Development Effectiveness ing has been particularly effective in improving ments and foundations, witlh the objective of natural resource management. Lending is com- mainstreaming culture in development. plemented by a strong implementation of cor- All the thematic strategies have effectively porate policies, especially "do no harm" used analytical work to support thematic objec- safeguard policies. Provisions for monitoring tives. Gender assessments at the country level and supporting the implementation of environ- have increasingly involved local consultants and mental safeguards were introducecl in fiscal partners and in some cases (as in Ghana, 2001, through creation of the Quality Assurance Ethiopia, and Yemen) have relied on participa- and Compliance Unit. The environment strategy tory assessments. These assessments are not is also supported by country-level nonlencling mandatory. Where they have been carried out, instruments, including National Environmental they have contributecd substantially to integration Action Plans, as well as diagnostic work on spe- of Women in Development (WID) and gender cific issues. This not only supports direct Bank issues in the Bank's CAS and lending portfolio- lending, but also serves to integrate awareness as in India. In the absence of a timely gender of environmental issues into national programs. assessment, these issues can be neglected in the In Morocco, for example, the Bank's involvement CAS. This issue is acknowledged in the recently led to mainstreaming of environmental issues in completed Gender Mainstreaming SSP, which line ministries. Country environmental assess- envisages that all countries with an active Bank ments are increasingly being prepared with the program will be covered by a gender assessment participation of local experts and through in- within the next three years.15 country partnerships with other clonors. The gender strategy has been less effective Leveraging regional and global partner- than the environment strategy in linking cor- ships has been a key element of the Bank's porate nonlending activities with lending and strategy for the environment. The Bank has nonlending operations. The significant efforts used its advisory services and convening power made in the past to establish internal struc- to raise awareness of global environmental con- tures, notably the Gender Sector Board and cerns among members, and it supports multi- Themiiatic Groups, were not accompanied by a country partnerships for sustainable water clear implementation strategy. Policy on gendcer resource development, forest issues, and envi- was scattered among several different docu- ronment conservation. One example is the ments, leaving the operating environment unclear CEOs' Forum on Forests, launched by President and subject to different inteipretations. Although Wolfensohn in 1997, to forge a working part- the Bank has sponsored sectoral training ancl nership between international forest industries, knowledge services through its WBI and Gen- environmental and social clevelopment organ- der Sector Board-inclucling specific training izations, and the Bank. Beyond its own lencl- (such as integrating gender considerations in ing, the Bank is a major implemiienting agency micro-level economic activities), conferences for the Montreal Protocol and the Global Envi- and publications-no systematic training on ronment Facility which help the institution fur- Bank gender policy and implementation strat- ther its environment agenda at the local as well egy is available to staff. In fact, a recent exter- as the global level. nal evaluation found the World Bank to be the Partnerships have also been used with par- "least developed" among multilateral organiza- ticularly good results in cultural heritage. The tions in mainstreaming gender goals. 16 The new Bank has done a limited amount of lencling for Gender Mainstreaming Strategy Paper focuses preservation of cultural heritage sites, but the sharply on addressing these weaknesses and strategy for culture has focused mainly on coor- aims to clarify accountabilities, costing, funding dinating efforts with other multilateral and bilat- mechanisms, and M&E arrangements for imple- eral donors, and through the Culture Assets for mentation across the Bank. An interim Opera- Poverty Reduction Group, on fostering partner- tional Memo has already been made available ships with technical agencies, NGOs, govern- to staff. 52 Sector and Thematic Strategies, Instruments, and Outcomes Participation is a strategy that has exploited The challenge for the Bank's "clo no harimi' poli- only a limited range of instruments, with the cies is to strike the right balance between comn- result that the quantity of participation by primaly pliance andc results, withi serious ancl inclepenclent stakeholders has increased substantially in Bank- oversight to ensure that safeguards meet accept- assistecl projects and CAS and PRSP processes, able international standarcls combinecl withi rea- but without a corresponding increase in quality. sonable adaptation to nationazil conclitions and OED's participation review notes that the main priorities so as to avoid the creation of a risk- activity has been building staff capacity, averse mentality amiong Bank managers and througIl the Sourcebook ancl Leaming Group, and staff. OED's water review notes, for example, that draws attention to the need for a more system- some countries (including Nepal) have found the atic ancl strategic approach to participation. Par- Bank's "do no har-m" policies too demnanding and ticipation, unlike environment and gender, has have turned to alternative souices of finance. The been viewed as a means of improving the qual- OED forestry review fincis thLit the Bank's strat- ity ancl effectiveness of the Bank's own opera- egy fostered an "overly cautious approachi" that tions rather than a development objective in was ineffective in slowilig the global rate of itself. Some attention has been given to policies tropical forest destiLiction. A pilot program to har- as a means to advance participation, but on- monize the country's enabling regulatory envi- going work has not been strategically coorclinatecd ronmient withi the Bank's safeguarcl policy or revieweed for quallity. Relevant safeguarcd poli- framework has been proposeci for Vietnam. cies are limited to the issues for indigenous peo- ples and involuntary resettlement, through High-Potential Approaches for environmental assessments. Implementation Two directions for future work emerge from To pursue its sector objectives, the Bank's hasic OED's evaluations of thematic initiatives. First, business moclel is lencling based on sector successful mainstreaming requires the strategic knowlecige. New approaches have emer-gecd for use of a set of instruments as well as clearer financing. To implement its thematic strategies, Regional accountability ancl greater network on the othe hancl, the Bank cdraxws on a wider authority to achieve results. As the participation range of activities, including COun1try an1cd global1 study showed, staff guiicelines ancl training are partnerships. The following broad lessons not sufficient. Even in the Bank's most "mature" emerge for both sector and thematic strategies. thematic strategy, the policy framework is far Selecting lending instruments to support clearer for the "do no harm" than the "do goocl" institutional development. All the Bank's aspects of the strategy. For example, the corpo- instruLiments can be effectively usecd to help build rate goal of environmental sustainability remains institutional capacity and support reforimi. Mak- to be translated into comprehensive operational ing the right choice, though, requires clarity guidance and monitorable performance goals. To about the operation's objectives and gooc ulicler- more fully mainstream its thematic goals, the standing of country and sector conclitions. Bank should give more attention to monitoring Adjustment lending, supportecd as necessary by outcomi-es; clarifying accountability for proiiotion/ technical assistance, can be effective whieni perforiance on a particular thematic strategy; and national ownership and consensus on sector creating processes, operating environments, and reforms is strong. Programmatic investmienit lend- incentives that promote internal compliance with ing may be the preferred approach, supported themnatic strategies. if relevant by LILs, when the range of stake- A seconcl challenge going forward concerns holders and institutions involved is large, and the application of safeguard policies, as an whien there are challenges for consultation, con- important instrument in promoting crosscutting, sensus building, piloting, monitoring, and eval- thematic objectives throughout Bank operations. uation. More work is needecl to assess the Issues for the future of these policies are being effectiveness of multi-sectoral addjustrnent instiu- addressed by the Bank in a forthcoming paper. ments in adldressing sector-specific issues, espe- 53 2001 Annual Review of Development Effectiveness cially considering the growing significance of framework for gender, thereby reducing the PRSCs. In this context, potential complementarity overall effectiveness of its assistance at the coun- and synergy between PRSCs and SWAPs should try level. The participation review notes that be exploited. Finally, a combination of adjust- lack of follow-up was one of the weakest aspects ment lending (supporting relevant budgetary of participation in CAS preparation. Follow-up and regulatory changes) and investment lend- and dissemination of gender assessments have ing (supporting piloting and implementation of been variable. The Gambia, Cote d'Ivoire, and sector reforms) may be the best prescription. Zambia WID assessments remained internal doc- Importance of partnerships. The Bank's uments and, in Poland, even women's NGOs partnerships-at the global, regional, and coun- were unaware of the in-depth treatment of gen- try levels-have played an increasingly signifi- der issues in the Poverty Assessment. In contrast, cant role, both in building understanding and the process of preparing gender and WID assess- consensus on sector strategies within the devel- ments in Yemen ancl Ecuador, with the govern- opment community and in setting the pace and ment in the lead and substantial stakeholder direction of reform in client countries. The Bank participation, resulted in increased gender aware- has used its convening power and knowledge ness and capacity in the country, enhanced the base to advance dialogue and joint initiatives in relevance of the reports for the clients, and support of thematic objectives. The Bank's part- ensured timely dissemination. The environment nerships with international and national stake- review cites China, Mozambique, and Costa Rica holders have helped the institution to improve as examples where substantial progress has the relevance of its policies and to build a broad been achieved in gaining government commit- consensus around some of its thematic priorities. ment and improving the design and application Over the years, the Bank has also built internal of a country's own environmental policies capacity to manage sectoral knowledge and through high-quality analytical work combined support these priorities. At the country level, part- with sustained policy clialogue. nerships have a crucial role in setting the pace Participation in lending and nonlending and direction of reform, particularly in large operations. The effectiveness of lending oper- countries where selectivity is essential to lever- ations for sector and thematic objectives is influ- aging the Bank's relatively small share in exter- enced by the extent and quality of stakeholder nal assistance. This has been demonstrated in the participation. This has been particularly evident water sector, for example, in China, India, Mex- in the environment and water sectors, where ico, and Brazil. While such partnerships are improved results have been closely associated clearly an essential and valuable instrument of with participation. Participation has also helped the Bank in promoting sector and thematic in the design and implementation of culture objectives, the transaction costs in some cases projects and has been a key element in a num- can be high ancd more strategic attention may be ber of social fund projects, as well as commu- needed in the future to cost effectiveness and nity-based sector projects. It has played an selectivity in the use of partnerships. important role in the Bank's gender objectives. Better ESW. The value of economic and sec- In Morocco, for example, where the CAS called tor work in support of sector and thematic objec- for a strategy note on gender issues to be devel- tives can be greatly enhanced through attention oped through a participatory process, the Bank to three aspects: timing; institutional assessment; played a catalytic role by funding consultants and and follow-up through dissemination, consul- workshops that brought together government tation, and policy dialogue. The timing of diag- institutions and women's associations in public nostic studies is crucial to ensure that sector and meetings. Much of the participation, however, thematic priorities are reflected in the CAS, as has been too limited or rushed to make a dif- high-lighted in OED's gender review. This Review ference. OED's audit on Nepal forestry, for also finds that the Bank has been weak in assess- example, found that lack of sufficient time for ing and improving the borrower's institutional building the spirit of community forestry at the 54 Sector and Thematic Strategies, Instruments, and Outcomiies grassroots level negatively affected community building approach to participation, as reconi- forestry in the country. OED's social funds study mended in the Participation Review, would take found that the nature of community participa- more time and resources for consultation, train- tion was sufficient for executing subprojects but ing, ancd technical assistance, and greater depend- not for building significant community capacity. ence on local partners who have appropriate A shift by the Bank toward a long-term capacity- expertise. 55 Findings and Implications A s the Bank works with partners to tackle the increasingly complex challenge of development, selectivity has become more important. In the continuing drive to enhance the impact of development assis- tance on poverty and growth, this Review has highlighted areas in which the Bank can further increase its development effectiveness-by making the right choices in line with country performance and potential, corporate priorities, and comparative advantage. Continued Gains in Performance cial instrumenits is an encouraging sign of the Given the adverse operating environment and payoff from heightened attention in the Bank the increasecl external risks associated with the to quality and results, supported by strengthened current global economic decline, it is fortLnate evaluation. that the internal constraints to development effectiveness are being overcome. The Strategic Implications for Policy Compact targets of 75 percent satisfactory out- As the quality of individual operations improves, comes for lending and 85 percent satisfactory judicious selectivity can furtlher leverage these quality for nonlending have been met. The lat- gains into country-level development impact. est project evaluations point to further quality This Review identifies three broad areas where gains for lending instruments beyond these tar- better selectivity can produce even better results. gets. There are also solid improvements in the sustainability of project achievements and their Corporate Selectivity institutional development impact. Recent eval- Corporate selectivity defines the institution's uations show encouraging improvements in the goals and priorities, in the context of support- Africa Region following its internal drive for port- ing overall client country priorities, and reflects folio improvement. Nonlending instruments the institution's core competencies ancl areas of also show a broad improvement in quality, as comparative advantage. The transmission of ESW becomes more participatory, client- these goals and priorities to incliviclual country oriented, and result-focused. The improved programs occurs thl-ougll the CDF and corporate craftsmanship of both financial and nonfinan- resource allocation, and through the l'RSI's for 57 2001 Annual Review of Development Effectiveness low-income countries. These processes are work- Partne7sbips can be better leeraged. To enhance ing well, but can be fully leveraged using the the effectiveness of country strategies, the Bank PRSP platform for harmonizing country-specific needs to address selectivity of programs in con- goals and CAS business plan objectives. Track- sultation with borrowers and other assistance ing the results will require improved capacities partners. The CDF pilot countries have broken new for monitoring and evaluation both in countries ground in this area, but continued focus on busi- and within the Bank. nesslike partnerships is needed, laying out more The broad framework governing instruments explicitly shared objectives, distinct accountabil- has proven flexible, allowing innovations to ities, and reciprocal obligations among partners. meet new challenges. Within the framework of Betterstrategies inpoorlyperforming countries. the broad instrument groups of investment and The Bank is devoting renewed attention to adjustment lending, sharper operational guidance achieving better results in countries with poor for specific instruments would help country policy and institutional environments, with a assistance strategies choose instruments appro- current focus on nonlending support. This priate to specific objectives and to sector and Review presents evaluation findings that are country conditions. Instead of the current vari- germane to this difficult task, and may be of use ety of OPs, BPs, memos, and websites, a uniform to the Task Force on World Bank Assistance to treatment covering each instrument's role, design, Low-Income Countries Under Stress. Effective- and lessons from past performance could con- ness of both lencling and nonlending activities structively inform instrument choice for country is undermined in poor policy and institutional and sector managers as well as borrowers. The environments. However, some instruments per- current update and conversion process uncler form better than others in poorly performing way for the operational policy and guidance on countries. For example, there are cases where adjustment lending, to be followed by investment technical assistance lending geared to the devel- lending, will offer a good opportunity to incor- opment of domestic capacities has been effec- porate these improvements. tive. On the other hand, adjustment lending may be particularly ill-suited for these countries Enhancing Country Strategies until they have demonstrated the consensus and More strategic treatment of instruments in CAS. the conviction to reform based on concrete The CAS is a strong strategic vehicle whose upfront actions. In addition, over-complexity of potential for achieving selectivity has not yet projects when country capacity is limited leads been fully tapped. CASs should deal with selec- to excessive risks. More conscious tailoring of tion of instruments more directly and transpar- instruments and partnerships to country con- ently. A logical framework should be used (and ditions should bring precious gains in these results chains specified) to link specific instru- difficult environments. Experimentation with ments with country objectives and the Millen- outcome-based operations and innovative part- nium Development Goals as adapted to country nerships with private and voluntary sector organ- conditions and taking full account of past per- izations should be encouragecl. formance. Unanticipated changes to country The role of nonfinancial activities in poorly programs should be captured in timely CAS performing countries deserves special attention. updates and progress reports to provide an Diagnostic work is especially needed in poor per- agreed-upon strategic context for Bank activities. formers for the assessment of ownership and The CAS needs to leverage catalytic and scaling- risks, thus; in general, coverage of diagnostic up effects among instruments as well. Interac- exercises should be aimed at countries where tions between investment and adjustment, for potential vulnerability is the greatest. The bal- instance, can greatly enhance the potential ance between core diagnostic and advisory work impact of individual interventions. The forth- should be related to country conditions. Further, coming CAS retrospective may offer insight on coordination of fiduciary products should be how to approach these tasks. improved and more targeted country diagnos- 58 Findings and Implications tics toward countr-ies likely to benefit from adjust- graclual implementation of sector reforms) may ment lending would help the Bank improve its be the best prescription. This might be pre- risk management. cedeci by LILs or other small-scale interventions Nonlending activities should be strategically in collaboration with partners to ensure that chosen. The amount and type of nonlencling aclequate knowledge ancd commitment are in assistance should be carefully calibrated to place upstream of large-scale lencling. enhance Bank lending and improve the relevance of Bank assistance strategies. Resource allocation Implications for Evaluation to ESW should not be exclusively linkecl to a This Annual Review has confirmled the impor- country's lending program because an up-to- tance of nonfinancial activities. ESW has been clate knowledge base is a prerequisite to good a key driver of performance improvements in lencling even for new or renewed borrowers. lending over recent years, as well as being crit- ically important for effective country progranms. Instrument Selection in Support of Sector A strong evaluative framework is neeclecl to Strategies ensure the continued effectiveness of these Different instruments perform differently in dif- instruments, building on the current practice by ferent sectors. This should be a consideration for QAG to assess their quality at entry. instrument choice and deliberate experimenta- PRSPs are critical to the Bank's COUlltlry strate- tion with new instruments and partnerships. gies and development effectiveness because Sector strategies must be based on reliable they lay out the pace of achievements of clevel- knowledge about what works and what does opment outcomes. Monitoring progress on not, to inform choices at the country level. selected indicators is already a stronig emphasis Selecting lending instnrments to support sec- in PRSI's. This shouldc be complemenited by tor relbrms. With appropriate piroduct design, comparable attention to systemtatic program most Bank instruments can be used to help evaluation of PRSP interventions and their results, build institutional capacity and support sector for example in the upcoming Bank/IMF com- reformii. Making the right choice, though, requires prehensive review of the PRSP approach. clarity about the operation's objectives and a As business models, CASs and SSPs can be good understanding of country ancl sector con- strengthenecl throughi a more transparent ancl ditions. Adjustment lending, supported as nec- objective record of past performanice. A stronger essary by capacity-building assistance, can be independent and self-evaluation focus wouldc be more effective when national ownership and facilitated by a closer alignmllent of inputs to consensus on sector reforms are strong, when results, using a logical results chain6 and verifi- the range of stakeholders and institutions able performance indicators. involvecl is relatively small, and when monitor- Finally, the Review has presented project ing and evaluation arrangements are in place. In evaluation findings supporting the importance sectors where these conditions are largely absent, of instrumllent selection for development effec- suclh as in education and health in some coun- tiveness, and potential gains to development tries, programmatic investment lending may be impact from leveraging synergies among instru- the preferred approach, supportecd where rele- ments ancl their sequencing. Accorclingly, coun- vant by LILs ancd targeted capacity building. The try, sector, and themlatic evaluations shoulcl multi-sectoral approachl has had limitecl success address more systematically whether the riglht in addressing sector-specific issues, ancl this instruments were used for the development should be factored into the use of PRSCs. In this goals selected, and also whetlher the comple- context, potential complementarity and synergy mentarity of instruments was exploitecl judi- between PRSCs and SWAPs should be exploited. ciously. In acldition, project-level evaluation Finally, a combination of adjustment lending shoulcl capture synergies from complementary (to support relevant budgetary and regulatory or sequenced instruments (e.g., adjustment loans changes) and investment lending (to support ancl stand-alone technical assistance). 59 ANNEXES ANNEX A: THE BANK'S LENDING INSTRUMENTS This annex clescribes the various types of lend- types of lending facilitated by the Bank: Invest- ing used by the World Bank. There are two ment Lencling ancd Adjustmernt Lencling. Invesiment Lending n i J9 t .g,e-:l: In,,: I,rn-f-, L,ir, I J.L) I f ic . :r i sr n r :ro 1.1 r.1 jreni r,r-t l C'3'' ( ':.lii c.: 1) a pi rrtic -rcc,,r;ri t:,r lr, t,-, r Lr i IP4'jiu I refr IA, 1 L PSAtL) L. 1ri111114 jril Irrrl.-,I i,i.n (litl IE I l i:,nJl4 U r Li,rn lSS4L T|:lll,:l<:,-ir,:L,:,il;lT4L) # . 4 ' F.-;e ~,-il, I jr::|F (EHrI Pcien kvt R1: jc1,Rr ~uj(~ Li(fR I 1 L,7,3r, 'E HiJi u l'rJA - INVESTMENT LENDING They involve a series of 1loanS that build on1 thle lessons learned from the previous loan(s) in Specific Investment Loans the series. Specific Investment Loans (SILs) support the creation, rehabilitation, and maintenance of eco- Learning and Innovation Loans nomic, social, ancl institutional infrastructure. Learning ancl Innovation Loans (LILs) support In addition, SILs may finance consultant services small pilot-type investment and capacity- and management ancl training programs. builcling projects that, if successful, coulc lead to larger projects that wouldc mainstreamiii the Sector Investment and Maintenance Loans learning and results of the LIL. Sector Investment and Maintenance Loans (SIMs) focus on public expenditure programs in partic- Technical Assistance Loans ular sectors. They aim to bring sector expenditures, The Technical Assistance Loan (TAL) is used to policies, and performance in line with a country's build institutional capacity in the borrower coun- development priorities by helping to create an try. It may focus on organizational arrange- appropriate balance among new capital invest- ments, staffing methods, and teclnical, physical, ments, rehabilitation, reconstruction, and main- or financial resources in key agencies. tenance. They also help the borrower clevelop the institutional capacity to plan, implement, ancl Financial Intermediary Loans monitor an expencliture or investment program. Financial Intermecliary Loans (FILs) provide long-term resources to local financial institu- Adaptable Program Loans tions to finance real sector investment needs. The Aclaptable Program Loans (APLs) provicle phased financial institutions assume creclit risk on each support for long-term development programs. subproject. 61 2001 Annual Review of Development Effectiveness Emergency Recovery Loans structure and&productive facilities. The focus is Emergency Recovery Loans (ERLs) support the on key short-term macroeconomic and sector restoration of assets and production levels imme- policy reforms needed to reverse declines in diately after an extraordinary event-such as infrastructure capacity and productive assets. war, civil disturbance, or natural disaster-that seriously disrupts a borrower's economy. They Debt Reduction Loans are also used to strengthen the management The Debt Reduction Loan (DRL) supports gov- and implementation of reconstruction efforts, and ernment policy reform programs aimecd at cre- to develop disaster-resilient technology and early ating an environment conducive to private sector warning systems to prevent or mitigate the investment, where foreign exchange is required impact of future emergencies. for urgent rehabilitation of key infrastructure and productive facilities. The focus is on key ADJUSTMENT LENDING short-term macroeconomic ancl sector policy reforms needed to reverse declines in infra- Structural Adjustment Loans structure capacity and productive assets. The Structural Adjustment Loan (SAL) supports reforms that promote growth, efficient use of Poverty Reduction Support Credit resources, and sustainable balance of payments The Poverty Reduction Support Credit (PRSC) over the medium and long term. program is expected to consist of a series of oper- ations, typically two or three, which together sup- Sector Adjustment Loans port IDA countries' medium-term policy and The Sector Adjustment Loan (SECAL) supports institutional reform programs to help implement policy changes and institutional reforms in a their poverty reduction strategies. Its specific specific sector. structure depends on country circumstances, including the objectives and nature of the coun- Programmatic Structural Adjustment Loans try's reform program that it supports and the tim- The Programmatic Structural Adjustment Loan ing of the requirement for assistance. (PSAL) is provided in the context of a multi-year framework of phased support for a medium-tern Deferred Drawdown Option government program of policy reforms and insti- The Deferred Drawdown Option (DDO) is avail- tution building. able to both IBRD and Blend countries to whom the Bank makes a single-tranche adjustment Special Structural Adjustment Loans loan. The DDO gives borrowers access to long- The Special Strictural Adjustment Loan (SSAL) term IBRD resources to manage ongoing supports structural and social reforms by cred- structural programs if market borrowing becomes itworthy borrowers approaching a possible cri- difficult and unforeseen financing needs sis, or already in crisis, and with exceptional materialize. external financing needs. These loans help coun- tries to prevent a crisis or, if one occurs, to mit- Sub-National Adjustment Loans igate its adverse economic and social impacts. The Sub-National Adjustment Loan (SNAL) sup- ports reforms that promote growth, efficient use Rehabilitation Import Loans of resources, and sustainable balance of pay- The Rehabilitation Import Loan (RIL) supports ments at a sub-national level. government policy reform programs aimed at creating an environment conducive to private * Drawn from World Bank Lending Instruments: sector investment, where foreign exchange is Resources for Development Impact, OPCS, July required for urgent rehabilitation of key infra- 2000. 62 ANNEX B: A LIST OF DISCLOSED OED COUNTRY ASSISTANCE EVALUATIONS Region r Countryl Evaluation FY Africa (AFR) lihana I .111 2I]i Zambia 1996 Cote d'lvoire 1998 Mozambique,'. 1998 Togo 1998 Kenya 1998, Malawi 1998 Ethiopia - 1999 Burkina Faso 2000 Tanzania 2000 Cameroon 2000 Uganda 2000 Botswana 2001 Lesotho 2002 East Asia and Pacific (EAP) Philippines 1998 Thailand ' 4 1998 Indonesia 1999 Cambodia 1999 Papua New Guinea 2000 Vietnam 2002 South Asia (SAR) Bangladesh, 1998 Sri Lanka 1999 Nepal ' 1999 Maldives 1999 India 2001 Europe and Central Asia (ECA) Poland 1997 -Albania 1998 Ukraine 1999 (yi; , ,,' Azerbaijan 1999 K3z3khst3n 2001 2001 Bulqaria 2002 63 2001 Annual Review of Development Effectiveness Region n Evaluation FY Middle East and North Africa (MNA) Morcco1997, 2001 1999 2000 Latin America and the Caribbean (LCR) A _ 1996, 2000 1998 Jamaica 1999 Ecuador 1999 2000 8osta Rica 2000 Paraguay ~~~~~~~2001 2001 2001 E-l Salvador 2001 2002 2002 64 T ab I e C. 1 flAJ&AX.VJ(oiGy[trw WX3mc6Th 4vJ W C'iX Exit FY96-99 Exit IFY0O041* Active Portfolio - ~~~~~~~~~~~~~~~~~~~~~Sust % k Suit 94 ID Impac Soul 94 likely or ID Impact94 -Projects Share 94uStcm b-- i.' L , urre ,1. i &iE Oulcom ii I o 4 P,.)~~~~~~,, I 'rhO ii~~~I.n. ihEI, *:~~r O,:rt. ~I , nt-a I .HIP I H Sector Group {~ * :l Agriculture 'vi 20 67 -. J4~. Economic Policy 83 8 7 56 a 67 15 4 87 93 80 47 7.3 1 2jC Education 9': 90 944 a 6 34 9 82 75 53 47 7.2 I rjH Electric Power & Other Energy 6 7 64 7 v31 8 58 57 51 52 6,5 IAC Environment "24 2 71 54 70 13 3 69 69 87 46 68 ', 7~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~242 1 5 70133696 6 6 . Finance 66~ 7' 67 56 44 67" 15 4 80 87 63 67 7 3 59- 4 -8 Health Nutrition 8 Population ' 59 6 63 49 31: 63 26 4 73 56 44 46 6.7 1144 10 83 H Mining 9 7 7 7 3 i 3 1 100 67 67 67 83 i 14 1 to Moltitector 15 ~ ~ ~~~ ~~ ~ ~ ~~~~1 73- 33 7 6.2 5 1 100 75 67 33 7.8 1915 Oil & Gaos 22 2 "'73 64 36 6.8 13 3 62 58 50 38 6~5 18 1 89 CI PSO/Indantry (' ~~ ~ ~ ~ ~~ ~~45' 4 58 55 36 8.2 20 5 58 63 50 42 6.6 63 14 81 C Puhlic Sector Management 1 6 6 84 65 45 7.0 1 33 9 82 84 79 55 7.2 89 6 85' Social Protection 48 5. 83 35' 42 681 25 7 92 86 63 52 7.7 1 98 7 92 Tulecommunications & Informatics 18 2 78 2.;72 : 56 7.4 6 2 100 100 160 83 8.8 I 121 10 Tranoportalion 1 60 9 85 4.. '61.'<'t>6~~~~~~~~~~~~~~Z 3 T 48 13 93 87 79 76 8.0 15 1 8 Niletw or ijl , .. n, I. :1 3'.." cI.m? I C.t h C a i K. r~~~~~~~~~~~~~~i 4 i r i. 9 ' V a r Lending Type afm 84 FA 1 8 ' i t 51 i i s 5 Lending Source IL'~~ U a8'i . 'a '6 68 ~~t ' I': C 3 83 43 C. . n.,A 4-8 :7. IDA/blend V519' ~ -5 - -,68 '4' -.3 64 212 55 78 64 54 47 66 9 80 ..'55 8 .7:1 Region T.. ,' Africa 304 30- 57 . 34 .31, 60 ~fill1 29 66 51 46 41 6.4 i, 357 . 2S 85 Eaut Atia and Pacific 2153 ~~~ ~~~~15 81 - '59 43 7.1 i 57 15 80 71 66 61 7.2 260 18 91 Europe and Central Atm * 130 13 - 82 ' ~~~~~~~~~~65' 45 7.1 90 23 81 81 69 53 7.3 289. 20 88 Latin America and Caribbean 215 2 81 . ' 60 44, 7,1 6 6 8 6 6 3 7 289 2 20 88' Middle Easttand North Africa [I- 78.; 8 - -71 ' 44,. '9' "63 28 7 88 92 58 60 7.6 r 115 ' 8- 83- South Asa I i; 43 68 61 rJ -,7? I$43 3 i F 0- "9 Income Group 11 :.i F-I S x.1 i-" L - : I I - LS - Ur Noies' ExitFY deontes theyeariinwhich thepiaject loaves threWorldBtank's actineporrfolio. normally at theenodof disursomertu.Peiconragorsexcude projoctnsnot rated. Sectoroesignations aretakenfrorvintheW iloBaturk'sCommonDautu Stoies analf end FY01. lncomo gioups designatiurs vie taken from thevWorld Developmeni Indicators 2001. Artion Portfolio data refloci Ptojects act e as of July 1. 2001, vnd s provideo hy ine Quality Assurance Group (aAGI. For details ono GAG's 'Prujncts at Risk" inidicator pleaue refer to the FY01 Annual Review an Porrfol o Performnanco 1. Son endirote number 14 of rho ARTE teport for differences hotwoon the otd and the current oustuinability ocale. 'fIre data for FY01 units ropresont a partial lBRD/IDA lending samplen(t31 out of 2751 and inflect ai OED pTo1eci evaluationr throughr Ocitobr 1 5. 2001 Trio processing of the iema odor nf the FYOt earts is aong no. expected tu hto completed by sprint 2002. Ta blIe C .2 0 3fjf~o c~~ ® 0 ~ ~ di~h 0)~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ _____________________________ ~~~~~~~Exit FY96-99 Exit FYOD-01* Active Portfolio> Sunst % Sust % ID0 Impact Sust % likely or ID Impact Disburse Share Outcome likely or, % sub or .: Disburse Share Outcome likely or better % sub or IDisburse . .Share Disbur se $ Millions % % Sat better better - 'AP'PI $ Millions % % Sat better (Old Scale)' better APPI IS Millions % not at Risk