Capacity Development 40431 briefs S h a r i n g k n o w l e d g e a n d l e S S o n S l e a r n e d CapaCity development in the world bank group: a review of nonlending approaChes by nansia Constantinou, world bank institute The World Bank Group has consistently spent considerable sums and emphasized the importance of capacity development to achieving the Millennium Development Goals (MDGs). Capacity development is included as a development objective of two-thirds of the Bank's lending operations and is increasingly a focus of the Bank's country assistance strategies. But it is often in the Bank's nonlending work--which is spread across the institution--where much innovation and experimentation take place. This nonlending business draws both on the Bank's own budget as well as on donor trust funds, Bank-wide grant instru- ments, and other funding mechanisms. The business models guiding this work are diverse and evolving, and some may point the way to successful practices that could be used elsewhere. This brief focuses on capacity development approaches in the growing area of nonlending programs. It discusses differences in these approaches in terms of design, instruments, delivery mechanisms and funding, and highlights an often overlooked, but large and growing part of the Bank's overall work. The World Bank Group supports capacity development ties to external clients. The World Bank Treasury assists in almost all of its work. But although capacity develop- member central banks in developing the expertise neces- ment interventions are widespread within lending opera- sary to manage their foreign currency reserves through tions, the Bank's nonlending activities are a growing and the Reserves Advisory and Management Program increasingly innovative laboratory for capacity develop- (RAMP). The Bank's Development Economics group ment practice. Roughly adding together the budgets of (DEC) attempts to build statistical capacity within client some of the Bank's major programs suggests that total countries, and the Bank's networks and regions receive spending for nonlending capacity development is about significant funding to support capacity development in $550 million annually, financed by Bank-executed trust their work. funds, the Bank's own budget, and through direct sup- port from donors. a Counting problem This work, which for the purposes of this brief is Compiling a clear inventory of nonlending capacity defined broadly as activities that have a stated goal development programs within the Bank Group presents a of improving individual, organizational and broader number of difficulties. Although the growing literature on institutional capacities in a country, is spread widely capacity development has clarified the concept somewhat, throughout the Bank. It includes specific, well-defined the lack of a widely accepted operational definition within Bank products, such as nonlending technical assistance, the Bank Group impedes efforts to categorize, measure, training, some economic and sector work, as well as and quantify this work, which is often integrated within some research and other knowledge-sharing activities larger programs and units. Many task managers define that the Bank facilitates for its partner countries. World support to capacity development as a limited number of Bank units directly carry out much of this work. To cite specific interventions within projects or programs, such a few examples, the International Finance Corporation as training and technical assistance, while others use a (IFC) Advisory Services unit provides training and tech- much broader definition that encompasses all analytic nical assistance to small and medium enterprises and and advisory work, as well as support for policy reforms, its Foreign Investment Advisory Services (FIAS) works certain kinds of equipment, and other spending. closely with governments on regulatory reforms. The World Bank Institute (WBI) offers technical assistance, The definitional question also means that it is difficult training, and knowledge- and consensus-building activi- to extract data from existing Bank systems or quantify JUNE 2007 NUMBER 23 spending on capacity development. Based on data from program provides assistance to member central banks various Bank Web sites and program documents, the in building the expertise necessary to manage their for- $550 million estimate for fiscal 2006 includes support from eign currency reserves and has been highly successful both bilateral trust funds and the Bank's own budget. in helping partner central banks develop the capacity to This includes $135 million for IFC's Advisory Services, manage their reserves. $147 million from the Bank's trust fund programs for capacity building, $172 million from the Development The program employs many of the good practice Grants Facility, $43 million for WBI1, and another $50 approaches that have been associated with improved million through a variety of other smaller programs, outcomes in capacity development programs.3 The meth- such as the Treasury's RAMP program, DEC's Statistical odology includes the following features: Capacity Program, the Carbon Finance Assist Initiative, and the Mediterranean Technical Assistance Program. · Initial on-site diagnosis carried out by senior Capacity Development within Bank Networks and Regions Treasury staff · In-depth assistance, which may include a program Overall, Bank regions and networks are collectively of training, workshops, seminars, internships, or the largest producers of nonlending capacity develop- other technical support requested by the client ment programs, implementing well more than half of the · Real-time, peer-to-peer exchanges with Bank Bank's total output.2 Among the networks with the high- Treasury staff who follow up with ongoing long- est engagement in capacity development programs is the term support for specific problems that partici- Sustainable Development Network, which supports ini- pants encounter back home. tiatives such as the Consultative Group on International Agricultural Research (CGIAR) and the Nile Basin Initiative, which focus on strengthening environmen- After the clients leave the initial program, Bank tal capacities. Under the Infrastructure Network, major Treasury staff are given time to spend on follow-up vis- capacity development programs include the Sub-Saharan its, e-mail exchanges, telephone calls, or other activities Africa Transport Policy Program, Cities Alliance Program, with client staff. This personal engagement is highly val- and Water and Sanitation Program. The Human ued among the clients and has proved highly effective in Development Network supports capacity development getting results at partner central banks. through programs such as the Global Forum for Health Research, UNAIDS, and Population, and Reproductive An important part of the RAMP model is its financial Health Capacity Building Program. arrangements, which encourage strong client ownership. The services are not provided free of charge, but coun- Because this work is financed mainly by trust funds tries pay for RAMP engagements by either placing assets and spread throughout the Bank, few of these programs with the Bank Treasury for management or simply pay- are subject to a common design principle or results ing fees for services. framework. Indeed, according to a review of nonlending IFC Advisory Services technical assistance (NTLA) carried out by the Quality Assurance Group (QAG) in 2005, lack of rigor in coding IFC supports capacity development through its of NTLA in the Bank's management accounting systems Advisory Services unit, which is intended to enhance makes it difficult for the Bank simply to quantify much private sector development and improve the investment of this work. Close to 50 percent of the NTLA tasks climate at the country level. Increasingly playing a piv- reviewed by QAG were improperly coded, explaining one otal role in IFC's investment operations, this advisory of the main reasons the Bank faces an ongoing problem work has grown rapidly in recent years; expenditures analyzing, quantifying, and reporting on its capacity increased from $84.7 million in fiscal 2004 to $135.5 development activities. Nevertheless, much of the work supported by Regions and Networks was found to be 1 The WBI figure includes $33 million in Bank budget and $10 relatively successful in achieving its intended objectives. millionintrustfundsforthematicandsectorprogramsinfiscal2007. Moreover, because it tends to be closely related to overall 2 Capacity development programs within the Bank's networks Bank goals and country objectives, this work received high and regions are funded mainly by trust funds that are used to ratings from QAG for its strategic relevance and timeliness. support a broad range of activities. In fiscal 2006, total funds dis- bursed reached $4.4 billion, of which $147 million was labeled as RAMP: Fee-Based, Peer-to-Peer Support for Central Banks supporting capacity building and technical assistance. However, a large number of other trust-funded programs within the networks Other parts of the Bank have also made strides in and regions also include embedded capacity development com- developing results-focused approaches to capacity devel- ponents making it difficult to give exact numbers for the capacity opment. One innovative business model for nonlending development components. 3 For a discussion on "good practice" in capacity development, capacity development programs has been developed see for example, OECD/DAC (2006): The Challenge of Capacity by the Bank Treasury under the name of RAMP. This Development: Working towards Good Practice. JUNE 2007 NUMBER 23 an example from ifC: Combining investment with advisory services An example of how the two arms of IFC--investment and advisory services--can enhance each other's contribution is the case of the privatized Algerian fertilizer company Fertial. The new owners and the government of Algeria agreed that Fertial would commit to developing products for the local market in support of the agricultural sector. The company approached IFC's PEP facility in Cairo to help them create training centers for farmers and government workers to learn how to improve their use of fertilizer. As a first step, IFC investment and advisory service units arranged for joint meetings, provided investment training for technical assistance staffers, and organized combined appraisal trips. Through joint discussions with Fertial, the two IFC groups worked together to make sure the investment would be well spent to maximize the development impact. million in fiscal 2006. Donor trust funds finance about WBI: Capacity Development through Knowledge Sharing 60 percent of this work, whereas IFC income finances the rest. These services are usually provided on a stand- WBI supports development by building knowledge, alone basis, although they may be coupled with invest- awareness, and consensus on policy issues. Its programs ment financing to provide a full package of services to are designed to build individual skills through training the client. Less than 15 percent of this work is currently and knowledge-sharing activities and also to strengthen linked to investment operations, but teams increasingly organizational entities and country enabling environ- see the value of linking advisory work to lending, argu- ments through technical assistance. WBI currently ing that such packaging increases the chances of favor- employs a country-focus strategy that is aligned with the able development outcomes. Bank's operational priorities and supports country assis- tance strategies. Similar to other Bank units offering technical assis- tance, IFC may adopt either a wholesale or a retail Over the years, WBI has developed pedagogical and approach in delivering these services. Where existing blended learning methods to enhance learning among local capacities are weak and sustainability of reforms is adults from different backgrounds. For example, the a concern, IFC helps local consulting firms build up their Shanghai poverty conference in 2004, which attracted product line to offer advisory and training services on more than a thousand participants from more than 60 a for-profit basis. This approach ensures that capacity countries, was preceded by a menu of case studies, stays within the country, is scaled up and offered in ways online dialogues and on-site visits to successful projects. that are relevant to local market needs. At other times, WBI also acts as a knowledge hub on capacity develop- IFC uses a one-business-at-a-time retail model through ment issues and disseminates good practices and lessons which foreign consultants offer direct assistance that is learned within the Bank and the international com- not available in the local market. munity. One of the best-known areas of this knowledge generation is governance and anticorruption, through Another element in IFC's advisory work is systematic which international and country-level measures and internal monitoring, which is intended not only to track diagnostics are widely used to help build consensus on spending, but also improve project quality. IFC uses reforms. iDesk, an internal platform that requires task managers to provide details of project design and implementation Bank operational units often ask WBI to help project progress. Managers from a variety of sectors review the teams design capacity development interventions. Many projects before they start to ensure that they have incor- clients see WBI as a relatively neutral platform to help porated recognized good practice and that indicators of facilitate policy debates and to coordinate dialogues not progress have been carefully defined. The system also only with the Bank's traditional government partners, allows IFC to monitor progress along the way. but also with diverse stakeholders, such as civil society, media, and parliament. Although IFC specializes in working with private sector companies, significant work is also under way to sup- Like IFC and RAMP, WBI has recognized the critical port country governments in improving their investment role of careful, up-front design and work within a cus- climate to attract foreign investors. Funded by multiple tomized results framework. The framework focuses on donors, FIAS is a largely demand-driven service of IFC delivering results in six broad categories: that responds rapidly to advisory needs of client govern- ments on regulatory reforms. In recent years, FIAS work · Raising awareness has shifted from pure investment climate diagnoses to a · Developing leadership and teams stronger focus on solutions and implementation. It has · Formulating strategy and policy also expanded to include the Multilateral Investment Guarantee Agency's technical assistance unit, which · Implementing know-how focuses on strengthening the capacity of investment pro- · Building skills motion intermediaries to attract more investment. · Fostering consensus and networks. an example from wbi: strengthening policy analysis in the bangladesh Central bank WBI has helped to strengthen the Bangladesh Central Bank's analytical capacity through a long-term technical assistance pro- gram. With WBI support, the bank created a policy analysis unit within its research department to provide guidance to the bank on emerging policy issues and advise the Bangladesh government on economic and fiscal policy. The Bank also produces several pub- lic policy papers, such as financial sector reviews and monetary policy reviews, which have been seen as indicating the growing policy influence of the central bank. From the beginning of the program, WBI focused on building local ownership for reforming work processes and incentives: annual work plans were outlined and budgets and product lines were clearly defined. WBI follows up and supervises the development of the unit and provides customized input on specific areas of demand. It also provides a plat- form for knowledge exchange by bringing in national, regional, and international expertise and experience. DEC: Trust Fund for Statistical Capacity Building viding direct grant support for innovative programs that DEC attempts to build statistical capacity through cannot be supported through traditional Bank instru- STATCAP, a program that is financed by both lending ments. In fiscal 2006 DGF dispensed about $172 million and trust funds. The Trust Fund for Statistical Capacity to support 56 capacity development programs across Building is a multidonor fund administered by the World networks and regions. DGF also allocates funds to the Bank, which helps strengthen statistical systems in devel- Institutional Development Fund (IDF), another mecha- oping countries in such areas as data collection, analysis nism to fund quick, upstream capacity development and dissemination, and the use of good quality statistics activities linked to the Bank's policy dialogue and coun- needed for policy-level decision makers. For example, try assistance strategies. in fiscal 2006 the fund allocated about $1 million for programs such as "National Strategies for Development Conclusion of Statistics for the Central American Countries," and "Development of a Reference Regional Strategic Although the Bank's nonlending capacity development Framework for Statistical Capacity Building in Africa." work is diverse, it is clear that, with time, it has been evolving toward stronger attention to some of the good Country ownership, commitment, and sustainability practices that have been identified through international are critical elements within programs. In this respect, reviews and evaluations. These include much more recipient countries are required to demonstrate their attention to up-front diagnosis and design, stronger commitment by contributing to the overall cost of the results frameworks, and attention to country leadership, program in cash or in services. ownership, and commitment. Programs such as RAMP and DEC's statistical capacity development work suggest bank-wide funding mechanisms for Capacity that a client's willingness to pay for part of these services development programs is one important way to ensure commitment and owner- The Bank's Trust Funds Department supports selected ship. IFC's and WBI's focus on up-front design and care- programs within the Bank that are intended to build ful monitoring of progress may provide useful models capacity. A few examples include the Africa Capacity for more results-focused work in the complex field of Building Foundation, the Bank-Netherlands Partnership capacity development. With time, this stronger attention Program, and the Policy and Human Resource to design could help the Bank to remedy one of the most Development Fund. In addition, the Development Grant challenging areas: clearly defining capacity development Facility (DGF) is the Bank's central mechanism for pro- and finding ways to measure its impact. peer reviewer: Chris richards, advisor, international finance Corporation about world bank institute (wbi): Unleashing the Power of Knowledge to Enable a World Free of Poverty The World Bank Institute (WBI) helps countries share and apply global and local knowledge to meet development chal- lenges. WBI's capacity development programs are designed to build skills among groups of individuals involved in per- forming tasks, and also to strengthen the organizations in which they work, and the sociopolitical environment in which they operate. wbi Contact: Mark Nelson; program manager, Capacity Development Resource Center Tel: 202-458-8041, e-mail: mnelson1@worldbank.org Ajay Tejasvi; program coordinator, Capacity Development Resource Center Tel: 202-458-4064, e-mail: anarasimhan@worldbank.org Visit our website for more information and download the electronic copies of all Capacity Development Briefs at http:// www.worldbank.org/capacity JUNE 2007 NUMBER 23