31105 'v -,-nv -,- -- _and the World Bank Progress in Fiscal 1999 A WB (S) HE WORLD BANK Poverty Reduction and the World Bank Progress in Fiscal 1999 The World Bank Washington, D.C. Copyright © 2000 The International Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, N.W Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printing November 2000 1 23404030201 00 The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. 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Contents Acknowledgments vii Abbreviations and Acronyms viii Executive Summary 1 Trends in Poverty Over Time 3 Global trends in income poverty 3 Prospects for poverty reduction 3 Social indicators for the poor 11 Education outcomes 11 Health outcomes and access to health care 13 AIDS 1 3 What the poor say 14 2 World Bank Activities in Fiscal 1999 17 Country Assistance Strategies 17 Poverty reduction as overall goal of Country Assistance Strategies 18 Use of time-bound performance benchmarks 18 Poverty diagnosis 19 Poverty reduction strategy and its formulation 20 Impact of past assistance programs 20 Poverty analysis 21 Country-level poverty monitoring 25 Project impact evaluation 26 Poverty-focused lending 28 Program of Targeted Interventions 29 Poverty-focused adjustment operations 30 Sharing global knowledge 31 iii iv POVERTY REDUCTION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 3 Achieving Faster Poverty Reduction: Elements of a Program of Action 35 A program of action to help low-income countries fight poverty more effectively 36 Principles underlying the approach 36 Linking debt relief and concessional assistance to poverty reduction strategies 37 Debt relief 38 Concessional assistance from the IMF under the Poverty Reduction and Growth Facility 38 Concessional assistance from IDA 38 Strengthening the link between poverty diagnosis and strategies 39 Changes in the way we work 39 How is the process moving forward? 40 Initiatives to address constraints at the global level 41 Improving the global environment 41 Promoting global public goods 42 A program of action to empower communities 42 Collecting, sharing, and disseminating knowledge and building capacity 43 World Development Report 2000/2001 43 The Poverty Reduction Strategies Sourcebook 43 Sector Strategies 44 Conclusion 45 Annexes 47 A. Summaries of Completed Poverty Assessments, Fiscal 1999 48 Algeria 49 Armenia 56 Bulgaria 60 Burundi 66 Georgia 69 Haiti 73 Kyrgyz Republic 76 Macedonia, FYR 79 Nepal 88 Panama 90 Peru 97 Russia 101 B. Poverty Assessments, Completed and Scheduled, Fiscal 1989-2000 104 C. Poverty Assessments, Completed and Scheduled (By Country), Fiscal 1989-2000 105 D. Poverty Assessments Completed, Fiscal 1989-1999 106 E. Program of Targeted Interventions, Fiscal 1999 109 F. Poverty-Focused SALS and SECALs, Fiscal 1999 136 G. Poverty-Focused ERLs, Fiscal 1999 153 H. Annual Lending to Selected Sectors, Fiscal 1999 155 I. Household Survey Availability by Region 158 Bibliography 165 Tables 1.1. Population living on less than $1 a day and headcount index in developing and transition economies, selected years, 1987-98 5 CONTENTS v 1.2. Population living on less than $2 a day and headcount index in developing and transition economies, selected years, 1987-98 5 1.3. Projected growth rates in real per capita private consumption and changes in Gini coefficients for 1999-2008, under scenarios of slow growth and rising inequality (scenario A) and inclusive growth (scenario B) 6 1.4. Number of people living on less than $1 a day and headcount index in developing and transition economies, under scenarios of slow growth and rising inequality (scenario A) and inclusive growth (scenario B), 1998 and 2008 7 1.5. Number of people living on less than $2 a day and headcount index in developing and transition economies, under scenarios of slow growth and rising inequality (scenario A) and inclusive growth (scenario B), 1998 and 2008 8 1.6. Estimated and projected population, 1998 and 2008 8 1.7. Share of poor and rich children ages 6-14 in school 12 1.8. Percentage of children in school 12 1.9. Under-5 mortality rates (deaths per 1,000 live births) in four countries 13 1.10. Percentage of the rural and urban ill population seeking treatment 14 2.1. Evaluation of CASs based on poverty focus, old criteria, fiscal 1996 to fiscal 1998 18 2.2. Evaluation of CASs based on poverty focus, new criteria, fiscal 1998 and fiscal 1999 18 2.3. Examples of quantifiable and time-bound progress benchmarks in fiscal 1999 CAS 19 2.4. Data availability 25 2.5. Data availability by region 26 2.6. Fiscal 1998 and 1999 investment projects with either good evaluation plans or the potential for good evaluation (share of lending) 27 2.7. Fiscal 1998 and 1999 investment projects with either good evaluation plans or the potential for good evaluation (share of projects) 28 2.8. Number and amount of lending for PTI projects, fiscal 1992-99 29 2.9. Number and amount of lending for PTI projects, IDA countries only, fiscal 1992-99 29 2.10. Number and amount of lending for poverty-focused adjustment operations, fiscal 1992-99 30 2.11. Number and amount of lending for poverty-focused adjustment operations, IDA countries only, fiscal 1992-99 30 2.12 World Development Report conferences and workshops, 1998-99 31 E-1. Program of Targeted Interventions (PTIs), fiscal 1992-99 110 E-2. Program of Targeted Interventions (PTIs) by sector, fiscal 1992-1999 115 E-3. Program of Targeted Interventions (PTIs) lending by region, fiscal 1999 115 E-4. Program of Targeted Interventions, fiscal 1999 116 F-1. Poverty-focused adjustment operations, fiscal 1999 136 F-2. Poverty-focused components of adjustment operations, fiscal 1999 140 F-3. Poverty-focused adjustment lending, fiscal 1992-1999 141 F-4. Poverty-focused SALs and SECALs, fiscal 1999 142 G- 1. Poverty-focused ERL lending, fiscal 1992-1999 153 G-2. Poverty-focused ERLs, fiscal 1999 154 H-1. Average lending to selected sectors, fiscal 1982-1999 156 H-2. Annual lending to selected sectors, fiscal 1992-1999 157 Boxes 1.1. Details on the methodology for the global income poverty estimates 4 1.2. Technical assumptions underlying the poverty projections for 2008 6 1.3. Can the international development target for reducing income poverty be achieved? 10 1.4. Combining methods to assess the impact of the crisis in Indonesia 15 2.1. Poverty issues in the Europe and Central Asia Region 22 vi POVERTY REDUCTION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 2.2. Governance and poverty 23 3.1. Development of the Bank's strategy on poverty reduction 35 3.2. Principles underlying the Comprehensive Development Framework approach and country poverty reduction strategies 37 3.3. Proposed guidelines for poverty diagnoses underpinning PRSPs 39 3.4. Themes of the World Development Report 2000/2001 43 Figures 1.1. Number and share of people living below $1 a day in developing and transition economies, 1987, 1998, and 2008 9 1.2. Poor-rich inequalities in access to different types of health care 14 2.1. Distribution of fiscal 1998-99 projects by category of evaluation 27 H-1. Trends in lending for human capital development, fiscal 1982-1999 155 Acknowledgments This report was prepared by Giovanna Prennushi under the Poverty Reduction Board, and others: Sadiq Ahmed, the direction of Michael Walton, Director, Poverty Re- Harold Alderman, Antonella Bassani, Yonas Biru, Rui duction Group, and the guidance of Masood Ahmed, Coutinho, Lucia Fort, Jesko Hentschel, Norman Hicks, Vice-President, Poverty Reduction and Economic Man- Christine Jones, Christine Fallert Kessides, Valerie Kozel, agement Network. Simone Cecchini, Gloria Rubio, and Ruben Lamdany, Pierre Landell-Mills, Sarwar Lateef, Radha Seshagiri provided invaluable assistance. Chapter Tamar Manuelyan Atinc, Pilar Maisterra, Karen Mason, 1 relies on work by Shaohua Chen and Martin Ravallion Pradeep Mitra, Marisela Montoliu Munoz, Mustapha on global poverty and by the Prospects Group (all in Nabli, Amy Osborne, Tatiana Proskuryakova, Martin DEC) on growth prospects; Davidson Gwatkin, Adam Ravallion, Jo Ritzen, Marcelo Selowsky, Eric V. Swanson, Wagstaff and Deon Filmer on social indicators; and Deepa Willem van Eeghen. Comments from the members of Narayan and her team on voices of the poor. The Annexes the Committee on Development Effectiveness (CODE) were prepared by Parita Suebsaeng with assistance from of the Bank's Board of Executive Directors are gratefully Alexander Arenas, Jean-Francois Wipf and Kathleen With- acknowledged. Alexander Arenas provided excellent tech- ers. The report benefited from comments from the World nical support. The poverty assessment summaries in Annex Bank's vice presidencies and Sector Boards, members of A come from completed poverty assessment reports. vii Abbreviations and Acronyms CAS Country Assistance Strategy NGO Nongovernmental organization CDF Comprehensive Development Framework OECD Organisation for Economic Co-operation and CIS Commonwealth of Independent States Development DAC Development Assistance Committee OED Operations Evaluation Department (World DHS Demographic and Health Survey Bank) ECA Europe and Central Asia PA Poverty Assessment ERL Emergency Reconstruction Loan PF Poverty-focused (adjustment loans) ESAF Enhanced Structural Adjustment Facility PPA Participatory Poverty Assessment (IMF) PREM Poverty Reduction and Economic Manage FSU Former Soviet Union ment (Network) GDP Gross domestic product PRGF Poverty Reduction and Growth Facility (IMF) GNP Gross national product PRSP Poverty Reduction Strategy Paper HIPC Heavily Indebted Poor Countries (Initiative) PTI Program of Targeted Interventions IBRD International Bank for Reconstruction and QAG Quality Assurance Group (World Bank) Development SAL Structural Adjustment Loan IDA International Development Association UNDP United Nations Development Programme IDG International Development Goals WBI World Bank Institute (formerly EDI) IMF International Monetary Fund WDI World Development Indicators LIL Learning and Innovation Loan WDR World Development Report LSMS Living Standards Measurement Survey WTO World Trade Organization viii Executive Summary The main objective of this report on poverty reduction for More in detail, the first chapter of the report takes fiscal 1999 is to provide a synthetic overview of what the stock of what is known on poverty worldwide. Data from Bank is doing to help countries face the challenge of reducing household surveys and other quantitative sources indicate poverty. For this purpose, it covers three main topics: that progress in reducing income poverty has been slow in * The status of poverty around the world, based on both the 1990s and that there are worrying signs of increases in quantitative data and the voices of the poor themselves. inequality across and in some cases within countries. Sce- * A retrospective look at the poverty focus of World Bank narios for income poverty to 2008 indicate that, with plau- activities in fiscal 1999. sible assumptions on growth and inequality, the world is not * A forward look at the direction of the Bank's poverty on track to achieve the target of reducing the incidence of work in the years ahead. income poverty by half by 2015. Only East Asia and the On these topics the report carries three main messages: Pacific (under the assumptions of relative fast growth in that * Poverty remains pervasive and hundreds of millions con- region) would extend its great gains for the 1990s and tinue to live lives of deprivation and hardship; progress clearly reach the goal. By contrast, if the scenario of more at the bottom is very slow, especially when the bene- rapid and inclusive growth were to occur, the target could fits of growth are not shared equally. The target of be also be achieved in South Asia and in the world as a whole halving the incidence of income poverty by 2015 will (driven by the potential gains in Asia), but neither Latin not be met if growth is accompanied by increases in in- America nor Sub-Saharan Africa would be on track to reach equality. the target. * Bank activities are more clearly focused on poverty re- Improvements in social indicators have been substantial duction than in past years: good poverty analysis informs over the past twenty-five years, but they have not been the the formulation of Country Assistance Strategies more same for those at the top and bottom of the distribution- than in the past, and poverty reduction outcomes on the those at the bottom continue to have worse (in some cases, ground are replacing resources invested as the yard- much worse) social indicators. For example only 27 percent stick against which to measure progress. But more ef- of poor children age 6-14 were in school in Morocco in 1992 forts are needed to keep up with higher standards for as compared to almost 90 percent of rich children (Filmer the poverty focus of strategies and to expand learning 1999). through careful impact evaluation, so as to ensure that The report also looks at the experience of poverty as seen a higher focus on poverty translates in sustainable im- by poor people themselves, using results from new partic- provements in poverty outcomes. ipatory studies. The poor do not feel economic opportu- * While a new strategic statement on poverty reduction nities have improved and find government institutions will await completion of the World Development rarely responsive to their needs. They usually judge their own Report 2000/2001 (WDR 2000/2001) process, sev- institutions and social networks as more reliable and call for eral elements are emerging: action to support the for- more control over resources, but recognize that they can only mulation of country-owned poverty reduction strategies go so far and need resources and support from govern- for low-income countries; work on global constraints; ment programs. and action to empower communities at the local level. The second chapter looks back at fiscal 1999 activi- Action in these three directions forms the basis for on- ties to see to what extent a concern for poverty was their going Bank work. driving force. The picture that emerges is similar to that 2 POVERTY REDUCTION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 of fiscal 1998: Country Assistance Strategies are more fo- Looking ahead, the third chapter discusses three areas cused on poverty than in previous years, though there re- in which action to help the poor is taking shape. At the mains scope for further improvement, for example in the national level, action is ongoing to support low-income degree to which strategies specify the patterns of growth countries in the formulation of national poverty reduc- which would be pro-poor and in the assessment of the im- tion strategies, which would form the basis for debt re- pact of past assistance. It is hoped that this enhanced lief and concessional assistance. At the global level, the focus, coupled with a clearer targeting of resources to Bank is leveraging its comparative advantage as a global countries which display stronger commitment to fight institution to address constraints, such as the debt bur- poverty, will lead to more effective use of both foreign and den or commodity price volatility, which affect the abil- domestic resources. ity of poor countries to deal with poverty, and it is helping With respect to fiscal 1998 there has been an improvement foster the provision of global public goods. At the com- in the quality and availability of poverty analysis to underpin munity level, the Bank is testing innovative approaches strategy formulation: 12 poverty assessments of satisfactory to empower communities to take control over resources quality were completed and the information base-from while strengthening their capacity to do so. Action on these both quantitative and qualitative sources-was expanded. three fronts represents the beginnings of a new strategic Impact evaluation of Bank projects, which is one of the direction, to be formulated in an implementation note building blocks of the overall assessment of the impact of after the process of discussing the WDR 2000/2001 on our country assistance strategies, is still below what would poverty is completed. This new strategic direction includes be desirable. Only 8 percent of a sample of fiscal 1999 pro- a major program of knowledge sharing dissemination, jects reviewed had good evaluation plans, and an additional training and informed debate, centered around the World 38 percent had the potential to carry out good evaluations. Development Report and the Poverty Reduction Strategy Progress in some regions, notably Latin America, indicate Sourcebook. that commitment to learning from evaluations is a key in- To make a significant contribution to fighting gredient in raising the quality and number of evaluations car- poverty, the Bank needs to work closely with its clients- ried out. While one would not expect all projects to require governments and people in developing countries-and its a careful evaluation, the opportunity to learn lessons from partners-other aid agencies, the Unitded Nations family, experience should be exploited in a larger number of cases- nongovernmental organizations (NGOs), and increasingly possibly around one in four or five. Lending targeted to the the private sector. Hopefully, this report will provide a poor rose in fiscal 1999. And work to collect and share common basis to move forward together in the spirit of global knowledge was brought forward through a variety of partnership laid out by the Comprehensive Development tools, especially Web sites and workshops. Framework. CHAPTER 1 Trends in Poverty Over Time At the threshold of the new millennium, one fact is painfully * In Latin America the share of poor people (below both $1 clear: too many people still live in conditions of abject poverty, and $2 per day, the latter being more relevant for the re- and progress is too slow to improve their lives significantly within gion) remained roughly constant over the period, and the the next 15 years. Too many still have consumption levels in- numbers increased. sufficient to meet basic needs and the gap between rich and * In the countries of the former Soviet bloc, poverty rose poor is large and growing-not just in incomes but in edu- markedly-both the share and the numbers increased.' cation and health outcomes as well. Moreover, a new study on people's perceptions of poverty finds that the majority of the Prospects for poverty reduction poor people interviewed feel that they are worse off now, that they have fewer economic opportunities and that they live with What are the prospects for reducing income poverty in the greater insecurity than in the past. medium term? The share of people who will be living on less than $1 or $2 per day depends on how much per capita con- Global trends in income poverty sumption levels will change and whether the changes will af- fect people with different levels of consumption equally or will The World Bank updated its estimates of the number of peo- affect some groups more than others. For example, if per ple living in poverty (see box 1.1 for methodological details). capita consumption levels increase equally for all-the poor What story do these figures tell? First, both the share of pop- as well as the rich-then the share of those consuming less than ulation and the number of people living on less than one or the threshold will decline. However, if consumption levels in- two dollars a day declined substantially in East Asia through crease for the rich only, then the share of the poor will remain the mid-1 990s, driving down global poverty figures. But the unchanged. The processes that affect how changes in aggre- numbers did not decline elsewhere, and rose again even in East gate consumption levels are distributed across the population Asia in the aftermath of the global financial crisis (tables 1.1 are not well understood, so forming a judgment on how many and 1.2). In more detail: people will be living in poverty in the future is difficult. * The dedine in the number of poor between 1993 and 1998 The World Development Report 1990 on poverty is due almost exclusively to a reduction in the number of (World Bank 1990) projected the proportions of the popula- poor people in East Asia, most notably in China. But tion that would be living on less than $1 per day in the year progress was reversed by the crisis, although only partly as 2000 under the assumption that "the strategy recommended poverty remains well below what it was a decade ago, and in the report gained wider acceptance" (World Bank 1990, p. appears to have stalled in China. 138). Under this assumption, the report forecast that the * In South Asia, the share of the population living in poverty global poverty rate would fall from 32.7 percent in 1985 to dedined moderately through the 1990s, but not sufficiently 18.0 percent in 2000, representing a compound rate of decline to reduce the absolute number of poor. The actual num- of 3.9 percent per year. The Bank's latest estimates indicate a ber of poor people in the region has been rising steadily fall in the poverty rate from 28.3 percent in 19872 to 24.0 per- since 1987. cent in 1998, implying a compound rate of reduction in * In Africa the share dedined slightly but the number of peo- poverty of only 1.5 percent per year. So the World Develop- ple in poverty increased. The new estimates indicate that ment Report 1990projections overestimated the subsequent Africa is now the region with the largest share of people rate of poverty reduction (the report did state that "it would living below $1 per day. be possible to do somewhat better-or much worse", p. 138). 3 4 POVERTY REDUCTION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 BOX 1. 1 Details on the methodology for the global income poverty estimates The World Bank has been estimating global income poverty Poverry lines figures since 1990 The latest round of estimation, carried out The calculations made in 1990 to calculate the international in October 1999, uses new survey data and price informa- poverny lines had to be updated using 1993 PPP prices Ir, tion to obtain corriparable figures for 1987, 1990, 1993, 1996, 1990, national poverty lines for 33 countries were converted and 1998 (the figures for 1998 are preliminary estirmatesi The into 1985 PPP prices and the most typical line among the low methodology followed is the same used in past estimates income countries for wvhich poverty lirnes were available was (World Bank 1990; 1996, and Ravallion and Chen 1996) selected In 1999, the same lines were convened in 1993 PPP prices and the new line was obtained as the average irnedian) Consumption and income /evels of the ten lowest poverty lines The line so obtained is equal Poverty estimates are based on consumption or income data to $1 08 per day in 1993 PPP terms (referred to as '$1 per collected through household surveys. Data for 96 countries, day" in the text). This methodology maintains the purchas- corresponding to 88 percent of the world's population, are ing power of the line constant while changing the reference now available, as compared to data for only 22 countries in prices The upper poverty line was calculated by doubling the 1990 Of particular note is the fact that the share of popu- amount of the lower poverty line, as in 1990. lation covered in Africa increased from 66 to 73 percent as a result of extensive efforts to improve household data in the Estimates for 1998 region Where survey data on incomes but not on con- To obtain consumption levels for 1998 where survey data uere surption are available, an estimate of consumption is obtained not yet available, estimated growth rates of private con- by multiplying all incomes for the share of aggregate privale sumption per capita from national accounts statistics were consumption in national income based on National Accounts used to update consumption dara from the latest survey data This procedure, unchanged from past exercises, scales year to 1998 This meant assuming that the distribution of back income to obtain consumption but leaves the distribu- consumption did not change from ihe time of the last sur- lion unchanged. vey to 1998 The per capita private consumption growth rates used come from estimates based on the model used for Prices other World Bank forecasts tWorld Bank 1999gj. Surveys To compare consumption levels across countries, estimates of were available for 1997-98 for some of the larger countries price levels are needed Purchasing Power Parity (PPP) estimates iChina, India and Russia, among others) but there are prob- for 1993 produced by the World Bank were used These es- lems in interpreting these data, particularly for China and India timates are based on new price data generated by the Inter- So the 1998 figures should be considered tentative and national Comparisons Programme (ICP). which now covers 115 trends should be interpreted cautiously. countries, as compared to 64 in 1985, and a more compre- hensive set of commoditlies In the past, Purchasing Power Par- Use of intemational versus national poverty lines ities from the Penn World Tables produced by Summers and It should be stated very clearly that the $1 and $2 per day Heston at the University of Pennsylvania were used However, poverty estimates are useful only as an indicator of global a Penn World Table for 1993 was not prepared, so 1993 PPP progress, not to assess progress at the country level or guide estimates produced by the World Bank were used. The Bank country policy and program formulation Country-specific has been vvorking closely with the Penn team to agree on a poverty lines that reflect what it means to be poor in each consistent methodology The 1993 PPPs used here are the same particular country's situation and are not affected by inter- as those used tor the World Development Report 2000/2001 national price comparisons should be used at the counrry level Why did the World Development Report 1990 pro- pectedly low growth and consequendy less poverty reduction jections turn out to be too optimistic? In terms of the aggregate than expected. numbers, China and India have the greatest weight, and The case of India is worth highlighting. During the 1990s, both experienced a slower pace of poverty reduction than an- the growth rate of consumption expenditure per person mea- ticipated, even though growth was actually higher than pre- sured by the Indian National Sample Survey has been appre- dicted. Rising inequality may have contributed to slower ciably lower than that of the private consumption component poverty reduction in both countries.3 In the rest of the world, of the national accounts. Possibly this captures actual devel- Central and Europe experienced a slowdown in output, opments, reflecting the underlying differences in the con- while Latin America and the Caribbean, the Middle East and sumption concepts used by household survey and national North Africa, and Sub-Saharan Africa experienced unex- accounts. However, it is more likely that this discrepancy TRENDS IN POVERTY OVER TIME 5 TABLE 1.1 Population living on less than $1 a day and headcount index in developing and transition economies, selected years, 1987-98 Population covered by at least Number of people living on less than $1 a day (millions) Region one survey (percent) 1987 1990 1993 1996 1998 (est.) East Asia and Pacific 90.8 417.5 452.4 431.9 265.1 278.3 (excluding China) 71.1 114.1 92.0 83.5 55.1 65.1 Europe and Central Asia 81.7 1.1 7.1 18.3 23.8 24.0 Latin America and the Caribbean 88.0 63.7 73.8 70.8 76.0 78.2 Middle East and North Africa 52.5 9.3 5.7 5.0 5.0 5.5 South Asia 97.9 474.4 495.1 505.1 531.7 522.0 Sub-Saharan Africa 72.9 217.2 242.3 273.3 289.0 290.9 Total 88.1 1,183.2 1,276.4 1,304.3 1,190.6 1,198.9 (excluding China) 84.2 879.8 915.9 955.9 980.5 985.7 Population covered by at least Headcount index (percent) Region one survey (percent) 1987 1990 1993 1996 1998 (est.) East Asia and Pacific 90.8 26.6 27.6 25.2 14.9 15.3 (excluding China) 71.1 23.9 18.5 15.9 10.0 11.3 Europe and Central Asia 81.7 0.2 1.6 4.0 5.1 5.1 Latin America and the Caribbean 88.0 15.3 16.8 15.3 15.6 15.6 Middle East and North Africa 52.5 4.3 2.4 1.9 1.8 1.9 South Asia 97.9 44.9 44.0 42.4 42.3 40.0 Sub-Saharan Africa 72.9 46.6 47.7 49.7 48.5 46.3 Total 88.1 28.3 29.0 28.1 24.5 24.0 (excluding China) 84.2 28.5 28.1 27.7 27.0 26.2 Note: The numbers are estimated from those countries in each region for which at least one survey was available during the period 1985-98. The proportion of the population covered by such surveys is given in column 1. Survey dates often do not coincide with the dates in the above table. To line up with the above dates, the survey estimates were adjusted using the closest available survey for each country and applying the consumption growth rate from national accounts. Using the assumption that the sample of countries covered by surveys is representative of the region as a whole, the numbers of poor are then estimated by region. This assumption is obviously less robust in the regions with the lowest survey coverage. The headcount index is the percentage of the population below the poverty line. Further details on data and methodology can be found in Ravallion and Chen 2000. Source: World Bank 19999; Ravallion and Chen 2000. TABLE 1.2 Population living on less than $2 a day and headcount index in developing and transition economies, selected years, 1987-98 Population covered by at least Number of people living on less than $2 a day (millions) Region one survey (percent) 1987 1990 1993 1996 1998 (est.) East Asia and Pacific 90.8 1,052.3 1,084.4 1,035.8 863.9 892.2 (excluding China) 71.1 299.9 284.9 271.6 236.3 260.1 Europe and Central Asia 81.7 16.3 43.8 79.4 92.7 92.9 Latin America and the Caribbean 88.0 147.6 167.2 162.2 179.8 182.9 Middle East and North Africa 52.5 65.1 58.7 61.7 60.6 62.4 South Asia 97.9 911.0 976.0 1,017.8 1,069.5 1,095.9 Sub-Saharan Africa 72.9 356.6 388.2 427.8 457.7 474.8 Total 88.1 2,549.0 2,718.4 2,784.8 2,724.1 2,801.0 (excluding China) 84.2 1,796.6 1,918.8 2,020.5 2,096.5 2,168.9 Population covered by at least Headcount index (percent) Region one survey (percent) 1987 1990 1993 1996 1998 (est.) East Asia and Pacific 90.8 67.0 66.1 60.5 48.6 49.1 (excluding China) 71.1 62.9 57.3 51.6 42.8 45.0 Europe and Central Asia 81.7 3.6 9.6 17.2 19.9 19.9 Latin America and the Caribbean 88.0 35.5 38.1 35.1 37.0 36.4 Middle East and North Africa 52.5 30.0 24.8 24.1 22.2 21.9 South Asia 97.9 86.3 86.8 85.4 85.0 84.0 Sub-Saharan Africa 72.9 76.5 76.4 77.8 76.9 75.6 Total 88.1 61.0 61.7 60.1 56.1 56.0 (excluding China) 84.2 58.2 58.8 58.6 57.7 57.6 Note: The numbers are estimated from those countries in each region for which at least one survey was available during the period 1985-98. The proportion of the population covered by such surveys is given in column 1. Survey dates often do not coincide with the dates in the above table. To line up with the above dates, the survey estimates were adjusted using the closest available survey for each country and applying the consumption growth rate from national accounts. Using the assumption that the sample of countries covered by surveys is representative of the region as a whole, the numbers of poor are then estimated by region. This assumption is obviously less robust in the regions with the lowest survey coverage. The headcount index is the percentage of the population below the poverty line. Further details on data and methodology can be found in Ravallion and Chen 2000. Source: World Bank 1999g; Ravallion and Chen 2000. 6 POVERTY REDUCTION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 BOX 1 2 Technical assumptions underlying the poverty projections for 2008 Several assumptions underlie the poverty projections. First, utional analysis, but represents only one of the possible ways the projections do not allow for any correlation between in which inequality may change. Poverny projections can be growth rates and changes in inequality, for example higher sensitive to seemingly subtle differences in how the Lorenz inequality accompanying higher growth. Experience does not curve shifts over time (Ravallion 1999i This can be a sen- suggest that a statistically significant correlation exists across ous problem when the poverty rate is low, because estimates developing countries as a whole (Ravallion and Chen 1997) at the tails of the distribution can naturally be quite sensi- In reality, most countries have grown without experiencing tive. but for the bulk of the developing countries poverty any long-term increase in inequality rates are a safe distance from the tails. How much of a dif- Second, the projections are based on an assumption ference this would make for aggregate poverty numbers is about the precise way inequality changes, namely, that the unclear, errors in one direction in one country could be off- distribution of per capita expenditures (the Lorenz curve) set to some extent by errors in the other direction elsewhere shifts by an equal proportion at all points. Alternatively, an Third, the calculations do not use fixed growth elasticities increase in inequality may affect only the nonpoor. in which of poverty, because researchers have found that these can case the poor would maintain their share of income, and change substantially over time and vary from country to coun- poverty would decline lust as it would with no change in try Rather, a model of the distribution that uses flexible func- inequality. To explain this assumption in more detail, we need tional forms for the Lorenz curve is fitted to the data for each to consider the Lorenz curve, giving (on the vertical axis) the country at each base date, tested to assure that it fits well and share of total income, L p), held by the poorest p fraction satisfies the properties required of valid Lorenz curves, and used of people (on the horizontal axis) The projeciions assume to project the impact of changes in growth and inequality. Thus, that the Lorenz curve shifTs in or out by the same proportion elasticities varies over time and between countries consis- at all points, relative to the line of equality (in which every- tently with the data. For example, the elasticities of the nci- one has the same income, that is, Li p) = p) So the new dence of poverty to growth tend to be lower (in absolute value) Lorenz curve is given by L(p) - g (p - L( p)) where A p) is in high-inequality countries (Ravallion 1997j, the rate of the old Lorenz curve and g is the proportionate increase in poverty reduction at any given rate of growth will then be lower the Gini index (Kakwani 1993) This assumption, which is in countries with initially more unequal distributions, and it will computationally convenient, is commonly made in distrib- tend to fall when inequality increases stems from data problems in one or both sources. For exam- ing a progressively larger share of their incomes. If this is ple, if household surveys fail to capture growth in expenditures not the case, the figures reported here, which are based on at the high end of the distribution, they would underestimate an estimate of consumption (obtained from income data growth in both average expenditure and inequality. The In- by applying an average savings rate), may underestimate the dian data are being further analyzed to better understand the actual progress achieved over the last few years. As with the sources of this discrepancy. Indian data, ongoing work aims to gain a better under- Recent data for China also pose problems. Income- standing of the observed trends. based estimates of the incidence of poverty, used by the Gov- To project future trends in poverty, this report follows a ernment, show a much larger reduction after 1993 than methodology similar to that employed in the World Devel- consumption-based estimates. Income and consumption opment Report 1990, but the underlying assumptions in- would have diverged as observed if households had been sav- corporate the lessons learned from that experience, in addition TABLE 1.3 Projected growth rates in real per capita private consumption and changes in Gini coefficients for 1999-2008, under scenarios of slow growth and rising inequality (scenario A) and inclusive growth (scenario B) (percent) Scenario A Scenario B Region Growth rate Inequality change Growth rate Inequality change East Asia and Pacific 4.0 +10 4.9 0 Europe and Central Asia 2.7 +20 3.7 0 Latin America and the Caribbean 0.6 +10 1.7 0 Middle East and North Africa 0.4 +10 1.5 0 South Asia 2.4 +20 4.0 0 Sub-Saharan Africa -0.1 +10 1.0 0 Source: World Bank 1999g. TRENDS IN POVERTY OVER TIME 7 to being based on survey information for many more coun- attendant spillover effects-with a pattern of medium-term tries. The projections should not be treated as forecasts, but recovery and subsequent relapse of global growth (table 1.3).4 rather as representing a plausible range of possible outcomes The developing regions most adversely affected are those with for poverty based on alternative assumptions about growth and a high dependence on commodity exports (the Middle East inequality. Our understanding of the quantitative dynamics and North Africa and Sub-Saharan Africa) or a reliance on for- of inequality remains incomplete, and there are many uncer- eign capital flows (Latin America). Moreover, although less ex- tainties inherent in projecting output growth. Moreover, there posed to external developments, fiscal and financial difficulties are large uncertainties about the relationship between growth in China and India are heightened, spurring remedial policy and inequality. While most countries have experienced little responses that dampen growth further during the downturns. change in aggregate inequality over time, this is generally the Scenario A also assumes that inequality increases from cur- result of powerful countervailing forces. For example, most ex- rent levels (which are based on the distribution of consump- panding economies experience both a rise in the relative de- tion from the latest available surveys for each country). While mand for skills and a rise in the relative supply of skills as inequality has increased markedly in the transition economies, education expands that can lead to small or negligible changes this has not been true of all developing countries: inequality in inequality as these effects balance out. Moreover, the rela- has increased in some, but has fallen in others. However, sce- tionship between inequalities in the return to skills and in- nario A captures the widespread concern about upward pres- equalities in overall income or consumption is also highly sure on inequality by building in a rising trend. The Gini complex, and depends on patterns of labor force participation, coefficient is assumed to increase by 10 percent in all regions household composition, and transfers, among other factors. except Europe and Central Asia and South Asia, where it in- Two scenarios were developed for the next decade. In creases by 20 percent. In Europe and Central Asia this is con- keeping with the experience of the last decade, scenario A- sistent with recent experience, although the increase in inequality slow growth and rising inequality-entails little progress in re- appears to be leveling off.5 In South Asia the 20 percent in- ducing the total number of poor. Scenario B-inclusive crease is in keeping with the rising inequality observed in growth-tries to capture what is achievable if the right com- some countries in the region such as Bangladesh. For India, bination of policies and interventions leads to sustained growth we assume that the weaker effects of growth on poverty ob- without increases in inequality. served in the 1990s stem in part from rising inequality that In scenario A all regions experience relatively low growth the survey data do not fully capture. Under this scenario, in- rates of output because of cydical boom and bust episodes. The equality in South Asia reaches the levels found in regions of recent experience of large volatility in growth rates in devel- medium inequality, such as East Asia and the Middle East and oping countries, together with substantial short-term risks to North Africa, while Latin America and the Caribbean and Sub- the outlook centered in the industrial countries, suggest that Saharan Africa remain the two regions with the highest aver- longer-term growth rates could be low, especially among the age inequality. Note that this scenario implies increasing developing countries. This scenario combines elements of the inequality also in regions with very low or negative growth rates near-term risk scenario developed in Global Economic (Latin America, the Middle East and North Africa, and Sub- Prospects 2000- "hard landing" for the U.S. economy and Saharan Africa). As the recent example of Russia indicates, ris- TABLE 1.4 Number of people living on less than $1 a day and headcount index in developing and transition economies, under scenarios of slow growth and rising inequality (scenario A) and inclusive growth (scenario B), 1998 and 2008 Number of people living below $1 a day Headcount index (percent) 1998 2008 2008 1998 2008 2008 Region (est.) Scenario A Scenario B (est.) Scenario A Scenario B East Asia and Pacific 278.3 182.8 72.1 15.3 9.2 3.6 (excluding China) 65.1 58.3 18.2 11.3 9.2 2.9 Europe and Central Asia 24.0 45.7 7.4 5.1 9.6 1.6 Latin America and the Caribbean 78.2 130.8 74.7 15.6 22.9 13.1 Middle East and North Africa 5.5 11.4 4.7 1.9 3.3 1.4 South Asia 522.0 465.0 205.9 40.0 31.0 13.7 Sub-Saharan Africa 290.9 406.2 329.8 46.3 51.5 41.8 Total 1,198.9 1,241.8 694.7 24.0 21.9 12.3 (excluding China) 985.7 1,117.3 640.8 26.2 25.9 14.9 8 POVERTY REDUCTION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 TABLE 1.5 Number of people living on less than $2 a day and headcount index in developing and transition economies, under scenarios of slow growth and rising inequality (scenario A) and inclusive growth (scenario B), 1998 and 2008 Number of people living below $2 a day Headcount index (percent) 1998 2008 2008 1998 2008 2008 Region (est) Scenario A Scenario B (est.) Scenario A Scenario B East Asia and Pacific 892.2 632.0 482.7 49.1 31.8 24.3 (excluding China) 260.1 218.3 169.8 45.0 34.5 26.8 Europe and Central Asia 92.9 100.8 46.3 19.9 21.2 9.7 Latin America and the Caribbean 182.9 227.3 183.9 36.4 39.8 32.2 Middle East and North Africa 62.4 74.7 47.8 21.9 21.7 13.9 South Asia 1,095.9 1,083.0 945.4 84.0 72.2 63.0 Sub-Saharan Africa 474.8 604.2 568.0 75.6 76.6 72.0 Total 2,801.0 2,721.9 2,274.1 56.0 48.0 40.1 (excluding China) 2,168.9 2,308.2 1,961.2 57.6 53.5 45.5 Note: Scenario A-slow growth and rising inequality-entails little progress in reducing the total number of poor, in keeping with the experience of the last decade, and Scenario B-inclusive growth-tries to capture what is achievable if the right combination of policies and interventions leads to sustained growth without increases in inequality. Source: World Bank 1 999g. ing inequality has greater social implications in the context of The assumptions underlying the two scenarios are re- worsening standards of living than at a time of general im- ported in table 1.3, and the resulting poverty projections provements in living standards. Hopefully, as more data points for $1 and $2 per day are in tables 1.4 and 1.5. Table 1.6 comparable over time become available for inequality, our un- reports population figures for ease of reference. derstanding of long-term trends and short-term movements The two scenarios yield very different results. Under sce- will improve. nario A, the number of people living in poverty would re- Scenario B uses the growth forecasts in the base case of main virtually unchanged, as in the experience of the past Global Economic Prospects 2000 (World Bank 1 999g). decade: in 2008, 1.2 billion people would still be living on This base case posits a fairly smooth growth path for both less than $1 per day (figure 1.1). The regional composition, industrial and developing countries beyond near-term re- however, would change considerably: the number of poor covery from the recent episode of financial crises, toward in Sub-Saharan Africa would increase dramatically from 291 stable growth rates by the end of the ten-year forecast hori- to 406 million people-almost 52 percent of the region's zon. Scenario B also assumes that inequality remains un- population-and numbers would also increase elsewhere ex- changed, thus describing what could be achieved if countries cept in East and South Asia. Similarly, more than 2.7 bil- adopted policies and interventions that foster inclusion lion people would still be living on less than $2 per day, more and all benefited equally from growth. (See box 1.2 for more than a billion of whom in South Asia alone, with about 600 detail on the assumptions underlying the two scenarios.) million more in Africa and 400 million in China. In Latin America and Central and Europe and Central Asia, both the incidence of poverty and the numbers of poor would TABLE 1.6 increase, while in the Middle East and North Africa a Estimated and projected population, 1998 and 2008 minor reduction in incidence would be inadequate to re- (millions) duce the numbers of poor. Population Scenario B yields brighter results. The number of Region 1998 (est.) 2008 (proj.) people living on less than $1 per day would decline to East Asia and Pacific 1,817.1 1,987.4 about 700 million by 2008, and the number of those liv- (excluding China) 578.5 632.7 ing on less than $2 per day to about 2.3 billion. How- Europe and Central Asia 466.1 475.5 Latin America and the Caribbean 501.9 571.1 ever, even under the more optimistic assumptions Middle East and North Africa 285.1 344.1 underlying this scenario, progress in Latin America and South Asia 1,305.3 1,500.0 Sub-Saharan Africa 628.3 788.7 especially In Sub-Saharan Africa would be iadequate to Total 5,003.8 5,666.9 make significant inroads into the numbers of the poor, (excluding China) 3,765.2 4,312.2 with a continued increase in numbers in Sub-Saharan Source: World Bank 1999g Africa in particular. TRENDS IN POVERTY OVER TIME 9 FIGUREM1.1 Number and share of people living on less than $1 a day in developing and transition economies, 1987, 1998, and 2008 Millions 1987 1998 (estimate) Middle East and Middle East and North Africa North Africa Eastern Europe and 9.3 (0.8%) Eastern Europe and 5.5 (0.5%) EasterntEuroe asa Latin America and Central Asia Latin America and n1 t0a 1A the Caribbean 24.0 (2.0%) the Caribbean 1 1) l 63.7 (5.4%) 78.2 (6.5%) South Asia 'ub-Saharan 474.4 (40.1%) rica Sub-Saharan 2 1 7.2 (18.4%) -Af rica 290.9 (24.3%) South Asia 522.0 (43.5%) E 3:i Asia si * . ~~~~r.d Pacific 417.5 (35.3%) 278.3 (23.2%) Number of poor: 1,183.2 million Number of poor: 1,198.9 million 2008 Scenario A MdeEatndScenario B Middle East and Middle East and North Africa North Africa Eastern Europe and 11.4 (0.9%) Eastern Europe and 4.7 (0.7%) Central Asia 45.7 (3.7Asi) Latin America and Central Asia Latin America and ,_ the Caribbean 7.5 (1.1%) _ the Caribbean South Asia - \130.8 (10.5%) .74.7(10.8%) 465.0 (37.4%) South Asia 205.9 (29.6%) Sub-Saharan W 4 s l X Africa East Asia 406.2 (32.7%) and Pacific Sub-Saharan East ., . ! | 406.2 (32 7%) 72.1 (10.4%) Africa and Pacific . 329.8 (47.5%) 182.8 (14.7%) Number of poor: 1,241.9 million Number of poor: 694.7 million Source: World Bank 1999e. 10 POVERTY REDUCTION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 little gains can be achieved. Achieving inclusive growth is BOX 1.3 also crucial: the downside risks of not achieving inclusive Can the international development target for growth are devastating for millions of people in the de- reducing income poverty be achieved? veloping world-those now living in desperately poor The international development target for income poverty, conditions, those who would be born into a life of poverty one of the targets of the International Development Goals, and those at risk of falling into poverty because of the na- is to reduce the proportion of people in absolute poverty tional, local, and personal risks that will certainly persist. by half between 1990 and 2015 (see www.oecd.org/dac/ What policies and interventions could lead to a pattern Indicators/). At a global level, this is interpreted as reducing of inclusive growth? This is one of the central topics of the the share of people living below $1 per day. The projec- World Development Report 2000/2001 on poverty and lion exercise undertaken for this report does not explic- d itly assess whether this target is achievable (see Demery development (World Bank forthcomig) and the issues will and Walton 1998). However, the implications of the ex- only be touched on here. At the international level, mea- ercise are illustrative Under a scenario with a plausible, sures to ensure steady growth in demand for products pro- but pessimistic, range of assumptions on growth and in- duced by the developing world are crucial. This can be equality changes (scenario A), the world would not be on fostered through sustained growth in the industrial coun- track to achieve the target. Only East Asia and the Pacific tries; opening of trade, especially in agriculture but also in (under the assumptions of relative fast growth in that re- trlabop ensive t ivities;ections tha t redut als gion) would extend the great gains of the 1990s and other labor-intensive activities; actions that reducevolatil- clearly reach the goal. By contrast, if the scenario of more ity; and, of great importance for low-income aid-depen- rapid and inclusive growth were to occur (scenario B), the dent countries, the effective implementation of an enhanced target could also be achieved in South Asia and in the world Highly Indebted Poor Countries Initiative within the as a whole (driven by the potential gains in Asia), but nei- framework of an overall, poverty-oriented program of in- ther Latin America nor Sub-Saharan Africa would be on track to reach the target. As noted. these findings are not ternational assistance. predictions, but are intended to underline the centrality At the national level, rapid and equitable growth re- of achieving inclusive development in all countries and the quires institutions and policies that encourage high lev- magnitude of the challenge in regions with weaker els of private and public investment to create jobs, services, prospects, especially Sub-Saharan Africa and the infrastructure necessary to expand opportunities for the poor and lead to gains in their human and phys- ical assets. Examples are policies that reduce disparities The difference between the two scenarios is large, il- in growth rates between urban and rural areas by foster- lustrating the high degree of uncertainty about whether the ing balanced regional development, policies that ensure future pattern of development will be accompanied by se- access to good quality education and an equitable distri- rious progress in reducing poverty and whether the inter- bution of productive assets such as land for the poor and national development target for reducing income poverty for women, measures that tackle the economic and phys- will be achieved (box 1.3). The range of what might rea- ical insecurity that the poor face, and policies that foster sonably occur may be even larger than portrayed here-it mechanisms that give a voice to the poor, especially at the could be argued that if structural and social problems are local level, and ensure that formal institutions respond ef- not effectively tackled in South and East Asia the relatively fectively to their demands. robust growth now forecast even under the more pessimistic Many observers would judge that India, for example, scenario would not be achieved. Conversely, based on ex- which is central to the global picture of poverty, could ex- perience from across the developing world, more rapid perience rising inequality even, or perhaps especially, if it growth and reductions in inequality could in principle be undergoes rapid overall growth. For structural and institu- achieved in Latin America and Sub-Saharan Africa, as well tional reasons the poor may be particularly ill-equipped to as elsewhere. Problems in interpreting data from China participate in such growth, notably because of low levels of and India, which together account for most of the world's education and health, and because many are living in states poor, add to the uncertainty in the scenarios. with weak institutions, a heritage of distorted policies, and These uncertainties notwithstanding, the fundamen- complex and deep social divisions. To include the poor in tal message of the scenarios is that effective public action the growth process, the large differences between rapidly is needed at the international and country levels to develop growing and laggard states and the dismal state of the ed- the institutions and policies that will bring about inclusive, ucation system and other public services, especially in the equitable growth. Growth remains crucial: with low growth poorer states, would have to be confronted, and the gov- TRENDS IN POVERTY OVER TIME 11 ernment would need to ensure that the poor do not lose out * The magnitude of the gap in outcomes between poor with decentralization of service provision. In China, the gov- and rich varies considerably across countries. ernment would have to confront poverty in the more back- * Cross-country differences remain significant: on average, ward regions and among minority groups. If equitable outcomes for the poor in wealthier countries are better than growth were achieved, the number of poor people in South outcomes for the better-off in poorer countries; under Asia would be cut by more than half and in China to a fourth most conditions, improvements in overall social indicators of current levels. correlate strongly with improvements in social indicators As noted earlier, in Sub-Saharan Africa and Latin among the poor. America even the combination of a smooth transition to One key message that emerges from these numbers is higher growth and stable inequality used in scenario B that policies which take impacts on the poor into account would not lead to a reduction in the number of the poor. matter: countries with good policies-for example, Faster growth rates and a reduction in inequality would Bangladesh on girls' education-achieve better outcomes be needed. In Latin America, a reduction in inequality of than countries with similar social and cultural background the order of 10 percent could reduce the number of peo- and income levels but with less appropriate policies.7 ple living on less than $2 per day from 184 to 142 mil- lion. In Sub-Saharan Africa that would not be sufficient: Education outcomes a decline in inequality of 10 percent or more and an in- crease in growth rates of 20 percent or more above the as- Education contributes to economic growth and poverty re- sumptions of scenario B would be needed just to keep the duction by enabling people to expand their capabilities and number of poor people constant. participate more fully in society. The IDGs set a target of uni- Note that we have only examined the implications of the versal primary enrollment by 2015. Some regions-East Asia expected growth rates for the total number and share of the and Pacific, Europe and Central Asia-are close to reaching income poor. This hides many issues. First, even when the the target; others-most notably Latin America-have made aggregate poverty rate is falling, there will typically be both good progress in the last decade and could reach the target; losers and gainers among the poor, reflecting heterogeneity in others still-Africa and South Asia-the target appears too in the circumstances of poor people. Second, even if poor fam- distant. There are more than 110 million primary-school-age ilies enjoy rising incomes, they may not be able to get ade- children in developing countries who do not attend school quate health care or schooling for their children if not enough today.8 And the quality of education remains an issue. of the economys growth is being used to improve key pub- Within countries the gap between the educational attain- lic services or, if they live in urban areas, they may suffer from ment of the rich and of the poor is often huge. In many coun- increased violence, environmental pollution, congestion, and tries, children from the poorest households have no schooling. the loss of support from traditional social networks. Conversely, In India and Pakistan, as well as in Benin and Mali even with slow growth in incomes, effective public action can (among other West African countries), the majority of result in gains in other dimensions of well-being. The results 15 to 19 year olds from the bottom 40 percent of presented here paint only a broad picture. households has completed zero years of schooling. In India, by comparison, the majority of 15 to 19 year olds Social indicators for the poor from the richest 20 percent of households have com- pleted ten years of schooling. Social indicators have generally been improving over the last These differences are due in part to lower school enroll- three decades. But progress in many areas has been too slow ment rates and higher school drop-out rates among the poor: to meet the targets set for the International Development * The rich-poor gap in school enrollment in Western and Goals (IDG), and social indicators for the poor remain Central African countries ranges from 21 percentage systematically worse than those for the better off. This sec- points (Ghana) to almost 52 percentage points (Sene- tion reviews progress in achieving the international devel- gal). The same order of magnitude is seen in North opment goals, and reviews a number of recent studies that Africa, as well as in South Asia (table 1.7). looked at social indicators by economic status using data * In Brazil, whereas almost all 15 to 19 year olds from the from Living Standards Measurement Surveys and Demo- poorest households have attended school only about 15 graphic and Health Surveys.6 These studies confirm that: percent have completed primary school. * The poor have generally worse educational and health out- Gender differences in educational outcomes and access comes than the better-off. also remain substantial. 12 POVERTYREDUCTIONANDTHEWORLD BANK: PROGRESS IN FISCAL 1999 TABLE 1.7 Share of poor and rich children ages 6-14 in school Rich-poor Rich-poor gap gap (percentage (percentage Country Year Poor (o) Rich (%) points) Country Year Poor (°%) Rich (°%) points) Westem Africa East Asia Senegal 1992-93 14.1 65.6 51.5 Philippines 1993 70 86.3 16.3 Ghana 1993 69.3 90.8 21.5 Indonesia 1997 80.5 95.0 14.5 Eastem Africa South America Madagascar 1997 46.8 90 43.2 Colombia 1995 80.9 97.6 16.7 Malawi 1996 87 93.3 6.3 Peru 1996 85.8 94.6 8.8 North Africa Central America and Morocco 1992 26.7 89.5 62.8 the Caribbean Egypt 1995-96 67.6 95.5 27.9 Guatemala 1995 46.4 90.8 44.4 Dominican Rep. 1996 88.7 97.8 9.1 South Asia Europe and Central Asia Pakistan 1990-91 36.6 85.6 49 Turkey 1993 61 80.1 19.1 Bangladesh 1996-97 66.8 83.4 16.6 Uzbekistan 1996 80.2 81.1 0.9 Source: Filmer 1999. Data for more countries are available in the article. In 1995, 872 million adults in developing countries (one * In 1995, girls made up only 43 percent of gross primary in four) were illiterate. Of these, 64 percent (557 mil- school enrollment in low-income countries. By 2005 they lion) were women. In South Asia only one-third of will still make up only 47 percent ofall primary enrollment. women are literate compared to two-thirds of men. In * In 1996, girls made up about 40 percent of secondary en- Nepal and Afghanistan, fewer than 15 percent of women rollment. Girls' secondary enrollment has been rising at are literate; in Pakistan it is 25 percent. a faster rate than boys, but by 2005 girls will still make The International Development Goals call for equal en- up only about 47 percent of gross secondary enrollment. rollments of girls and boys in primary and secondary school This is particularly worrisome because it is well- by the year 2005, but this target is unlikely to be achieved. documented that educated mothers are better able to care * Of the 110 million children estimated to be out of for themselves and their children and participate in the life school, 60 percent were girls. of their communities-for example, a study for five coun- TABLE 1.8 Percentage of children in school Low/ no High female Percent Percent Male- female Percent Percent Male- disadvantage Survey of girls of boys female disadvantage Survey of girls of boys female countries year ages 6-14 ages 6-14 gap countries year ages 6-14 ages 6-14 gap Nepal 1996 55.5 76.1 20.6 Kenya 1998 87.0 87.9 0.9 Benin 1993 32.6 53.1 20.5 Haiti 1994-95 73.4 73.7 0.3 Pakistan 1990-91 44.3 64.7 20.4 Zambia 1996-97 60.4 60.1 -0.3 Morocco 1992 45.8 63.9 18.1 Brazil 1996 93.8 93.4 -0.4 Cen.ral Afr. Rep. 1994-95 48.9 65.9 17.0 Indonesia 1997 86.6 86.0 -0.6 India 1992-93 59.1 75.7 16.6 Madagascar 1997 58.6 58.0 -0.6 Cote d'lvoire 1994 41.7 55.8 14.1 Kazakhstan 1995 85.3 84.6 -0.7 Turkey 1993 63.7 74.5 10.8 Malawi 1996 89.7 88.9 -0.8 Egypt 1995-96 75.7 85.6 9.9 Bangladesh 1996-97 73.8 72.6 -1.2 Burkina Faso 1992-93 22.1 31.9 9.8 Dominican Rep. 1996 94.2 92.8 -1.4 Mozambique 1997 51.7 61.0 9.3 Colombia 1995 89.7 87.9 -1.8 Comoros 1996 48.3 57.2 8.9 Tanzania 1996 48.6 45.8 -2.8 Senegal 1992-93 27.4 35.8 8.4 Uzbekistan 1996 82.9 80.0 -2.9 Mali 1995-96 22.3 30.4 8.1 Namibia 1992 87.1 83.6 -3.5 Niger 1997 18.9 26.7 7.8 Philippines 1998 88.4 83.5 -4.9 Source. World Bank staff calculations. TRENDS IN POVERTYOVERTIME 13 tries found that under-five mortality rates in families with TABLE 1.9 mothers that had completed primary school were two-thirds Under-5 mortality rates (deaths per 1,000 live births) in to half those in families where mothers had no education. four countries The extent of female disadvantage in education varies enor- Country Period Average Poorest Richest Poor! mously across countries. Gender gaps in education are large rate 20% 20% Rich in Western and Central Africa, North Africa and South Asia: Brazil * In India there is a 16.6 percentage point difference between (NE & SE) 1987-92 63 116 1 1 10.4 the school enrollment of girls and boys aged 6 to 14. In PGahkstan 1978-89 142 155 145 1.2 Niger, the enrollment rate of boys aged 6 to 14 is 41 per- South Africa 1985-89 113 155 71 2.2 cent higher than the enrollment rate of girls (table 1.8). Note: Rates use information from more than one LSMS survey, and so are * The figures for Bangladesh are encouraging, in that averages across a period. Poverty is defined in terms of consumption per capita. they show what can be achieved even in a region (South Source: Wagstaff 1999. Asia) with high gender gaps when policies supportive of girls' education are followed: girls' enrollment rates almost all countries, with the difference between the poor there are now 1.2 percentage points higher than boys'. and the nonpoor being less pronounced for wasting, which is the more short-term indicator. Differences between the Health outcomes and access to health care poor and nonpoor vary across countries. * In Peru, the rates of underweight and stunting among Actual and projected data on infant mortality indicate the poorest 20 percent are nearly five times those among progress between 1990 and 1997 in all regions, but re- the richest 20 percent, while in Egypt, for example, the ductions in East Asia, Eastern Europe and Central Asia, gaps are far smaller.9 South Asia and Sub-Saharan Africa, which were of the The poor are also more affected by communicable dis- order of 10 percent, appear too slow to meet the target eases than are the rich: In 1990, 59 percent of all deaths set in the International Development Goals for 2015 (a among the poorest 20 percent of the world population two-third reduction over 1990 levels). Mortality rates were caused by communicable diseases, compared to 8 per- have been declining with rising output. However, even cent for the rich. assuming high output growth, infant and child mortal- One of the factors behind these differences in health out- ity rates would be substantially above the IDG target in comes is differences in access to health care. 2015. Moreover, children born into poor families have a * The smaller percentage of births among the poor tak- higher chance of dying before their 5th birthday than chil- ing place in the presence of trained health profession- dren born into better-off families. The difference in als contributes to higher infant and maternal mortality under-5 mortality rates between rich and poor varies rates: evidence from ten developing countries between considerably within countries-rates for the poor are ten 1992 and 1997 shows that only 22 percent of births times higher than those of the rich in Eastern Brazil but among the bottom twenty percent of the population were only 1.1 times as high in Pakistan (table 1.9). Rates also attended by medically trained health staff, compared with vary considerably across countries: the poorest 20 percent 76 percent of those in the top twenty percent (figure 1.2). in Brazil still have lower rates (116 per thousand live * Similarly, fewer poor people get treated when they fall births) than the richest 20 percent in Ghana and Pakistan. ill. In Peru, for example, only 20 percent of the rural So it is small consolation to poor Pakistani children that poor and 35 percent of the urban poor sought treat- their survival chances are not dissimilar from those of the ment when ill, compared with 39 percent and 57 per- richest 20 percent of children, given that the latter still cent of the rural and urban rich (table 1.10). face a risk of dying before their 5th birthday as high as * Often there are large differences between urban areas, 145 per 1,000. Among the policies which have proven ef- with indicators being much worse for the poor than the fective in reducing infant and child mortality are educa- better-off. There are also wide differences in indicators tion and economic opportunities of women, better hygiene between big cities and medium and small cities. and feeding practices, immunization and community health programs. AIDS Malnutrition indicators such as wasting (low weight for height), stunting (low height for age), and underweight (low When the Human Immunodeficiency Virus (HIV) was first weight for age) are found to be higher among the poor in tracked, the rates of infection appeared to be unrelated to the 14 POVERTY REDUCTION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 FIGURE 1.2 proportions of poor and nonpoor people who are in- Poor-rich inequalities in access to different types fected in developing countries, but if trends for devel- of health care oped countries are replicated worldwide the poor will (unweighted average of 10 developing countries) be more likely to become infected than the nonpoor. Percent * AIDS deepens and spreadspoverty. Poor households 80 are more adversely affected by an AIDS death of a medically trainedb prime-age adult than other households because they 70 health staff have fewer assets to draw on to cope with medical ex- penses and the loss of income and services that a prime- 60 Immunization of children age adult typically provides. AIDS is also likely to 12-23 months / increase poverty through the rise in the number of 50(all vaccinations) Aute respiratorychlrnwolsoeorbtpans.Einesos infections treatment children who lose one or both parents. Evidence shows 40 / in health facility that orphans have significantly lower enrollment rates and are more likely to be malnourished than non- s- -- Diarrhea treatment 30 - in health facility orphans. Lack of schooling and inadequate nutrition will make it more difficult for orphans to escape poverty. 20 AIDS is also making it difficult to achieve the infant and Poorest Second Middle Fourth Richest child mortality targets set in the IDGs, because many chil- 20% 20% 20% 20% 20% dren are born infected. In the countries with the highest preva- Asset-based distribution group lence even maintaining current levels will be difficult. Source: World Bank 1999e. What the poor say poverty of the country or to income within a country. Now, however, the rate of new infection is higher in poor countries In preparing its World Development Report 2000/2001 on and among the poor in these countries (World Bank 1999d). the theme of poverty and development, the World Bank * AIDS is a disease ofpoverty in the sense that most wanted to make sure the voices of the poor-their experi- people with HIV/AIDS are poor. The disease struck ences, priorities, and recommendations-would be taken very hard in poor countries: 95 percent of infected peo- into account. The result is Voices of the Poor, a qualita- ple are in the developing world and a full two-thirds are tive research initiative that gathered the voices of 60,000 poor in Sub-Saharan Africa. Moreover, infection rates are men and women from 60 countries. 10 The study consisted stable or rising in most developing countries, while of two parts: a review of more than 75 participatory poverty they are declining in the developed world. studies conducted in the mid- to late 1 990s, which covered * Recent studies in developed countries have shown approximately 40,000 poor people in 41 countries around AiDS incidence to be highest among the verypoor. the world; and a series of new studies undertaken in 1999 At the moment, there are no data to assess the precise in 23 countries, which engaged approximately 20,000 poor men and women." The new studies were carried out in part- TABLE 1.10 nership with research institutes and NGOs from the 23 par- Percentage of the rural and urban ill population ticipating countries.12 seeking treatment The research approach featured open-ended, partici- Income group patory methods, which enable poor people to define, de- Country Poorest 20% Richest 20% PoorMich scribe, and analyze their views and experiences. Poor men Rural and women participated in small group discussions and in- C6te d'lvoire 1988 23 44 1.9 dividual interviews, sharing their perceptions on four top- Ghana 1989 26 46 1.8 ics: perceptions of a good life and a bad life; their most Jamaica 1989 44 56 1.3 Peru 1990 20 39 2.0 pressing problems and priorities; the quality of their inter- Urban actions with key public, market and civil society institutions; CGte d'Ivoire 1988 49 64 1.3 and changes in gender and social relations. Ghana 1989 40 59 1.5 Jamaica 1989 43 60 1.4 Voices of the Poorhighlighted six main findings:'3 Peru 1990 35 57 1.6 * The poor view well-being holistically. Poverty means Source: Baker and van der Gaag 1993. much more than just lack of income. For the poor, the good TRENDS IN POVERTY OVER TIME 15 life or well-being is multidimensional, with both material alcoholism among men, family breakdown and domes- and psychological dimensions. Well-being is peace of tic violence. Violence against women in the household mind; it is good health; it is belonging to a community; it remains widespread. On the positive side, in some coun- is safety; it is freedom of choice and action; it is a steady tries, awareness raising by NGOs, churches and women's source of income; it is food; it is a dependable livelihood. groups is contributing to changing social norms and even- Insecurity has increased. By and large poor people tually to harmony and equity within the household. feel they have not been able to take advantage of new * Government institutions are seen as corrupt and economic opportunities because of lack of connec- ineffective. Corruption emerges as a core poverty issue. tions and lack of information, skills and credit. Un- Poor people report hundreds of incidents of corruption employment, lack of food and money appeared as the as they attempt to seek health care, educate their chil- number one problem in many places. Today's poor, who dren, claim social assistance, get paid, attempt to access are engaged primarily in rural work and the urban in- justice or police protection, and attempt to enter the mar- formal sector, report experiencing life as more insecure ket place. Poor people are subject to insults, rudeness, and unpredictable than a decade or so ago. This is harassment, force and sometimes assault by officials. Ha- linked to unpredictability of agriculture, loss of tradi- rassment of vendors in urban areas is widespread. In- tional livelihoods, breakdown of the state, breakdown stitutional analyses shows that although politicians, of traditional social solidarity, social isolation, increased state officials and public servants are sometimes viewed crime and violence, lack of access to justice, extortion as important they rarely show up as effective, trust- and brutality from the police rather than protection. worthy, or participatory in poor people's ratings of in- Illness is dreaded and lack of affordable health care stitutions. But there are exceptions. Provision of basic pushes many families into indebtedness and destitution. infrastructure is valued and has made a difference. * Gender inequity is uidespread and gender relations * NGOs receive mixed ratings. Where NGOs are pre- stressed. With increased economic hardship and a de- sent they are appreciated, but they are not as present as cline in poor men's income earning opportunities, poor often believed. In the absence of public services, NGOs women across the world report "swallowing their pride" fulfill vital roles in the lives of the poor. While there are and going out to do even demeaning jobs in the infor- regional differences, NGOs are often touched by the mal economy to bring food to the family. This move away same problems as the state; the poor feel they are ex- from traditional roles is traumatic for both, leading to cluded from the decisions that affect them. BOX 1.4 Combining methods to assess the impact of the crisis in Indonesia Indonesia's efforts to monitor the impact of the financial cri- of 2000 households covered in the second Indonesian Family sis were among the most comprehensive The Social Moni- Lrfe Survey, which was carried out between August 1997 and toring and Early Response Unit (SMERU), a collaborative February 1998, so mostly prior to the crisis, were re-inter- multi-donor effort led by the World Bank with support frorn viewed from August to December 1998 Households inter- AusAID, ASEM and USAID, was established with the oblec- viewed in the survey of 100 villages conducted by the statistics tive of providing real-time qualitative information and ana- office lusg pnor to the crisis in May 1997 were re-interviewed lyzing quantiiative information on the social impact of the fourteen months later in August 1998 at the peak of the cri- crisis and on the operations of the social safety net pro- sis, and then again in December 1998, thus providing infor- grams. SMERU is undertaking rapid field appraisals on issues mation on the impact of the crisis over time Processing of the such as crop failures, food shortages, employment, health and regular household survey-the 1998 and 1999 SUSENA5-was education problems In 1998, SMERU fielded a qualitative sur- accelerated to provide more timely information on poverty, ed- vey ol kecamatan (administrative unitsi in all the sub-districts ucation and health inipacts for a nationally representative in the country, the survey was completed in record time the sample The timeliness of these different analytical pieces pro- results were available less then three months after the sur- vided solid evidence on the impact of the crisis and influenced vey was conceived. The analysis documented the heteroge- the debate and helped in the design of the safety net opera- neous impact of the crisis and the coping niechanisms used tions, which included a sirong community monitoring com- by households ponent. SMERU ,as been conducting continuous analysis of On the quantitative side, recently completed surveys were the quantitative data sets as they become available and com- re-fielded strategically to provide panel data to illuminate howv bining insights from both types of sources. The SMERU Web households responded to the economic crisis. A sub-samr,ple site (www smeru or id) makes all this analysis publicly available 16 POVERTY REDUCTION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 The poor depend primarily on their own local in- 4. See World Bank 1999g, also available at www.world- stitutions. The poor rely on their own informal and in- bank.org/prospects/gep2000. digenous institutions, networks and local people, 5. Not all countries in the region have experienced signifi- including the local holy man and the local nurse. These cant increases in inequality. Countries such as Hungary and emerge as the key institutions which help out in times Poland have not, but others such as Russia have experienced sig- of crisis. However, the poor recognize that there are lim- nificant increases. its to how much "one hungry man can help another hun- 6. Filmer (1999) looks at educational outcomes; Gwatkin et gry man." They seek institutions that are "effective, al (1999) and Wagstaff (1999) look at health outcomes. Gwatkin trustworthy, uniting, dependable, respectful, courteous, and Filmer use data from the Demographic and Health Surveys truthful, listening, not corrupt and not corrupting." (DHS) carried out by Macro International in over 60 countries Poor people want to develop their own organizations so (see www.macroint.com/dhs); Wagstaff uses data from Living they can effectively negotiate fair partnerships with gov- Standards Measurement Surveys (LSMS) carried out in more ernments, with traders and with NGOs; they want di- than 25 countries with World Bank support (see www.world- rect assistance and local ownership of funds through bank.org/lsms). LSMS surveys collect consumption data, so eco- community-driven programs, with governments and nomic status can be defined with reference to consumption levels. NGOs accountable to them. DHS surveys do not collect information on consumption or These findings raise many issues for reducing poverty income but contain information on assets owned by a household in the developing world. They need to be combined with (radios, bicycles, and so on.), so economic status is defined on the information from other sources, such as sample surveys basis of assets owned. Both indicators are good proxies of the level and quantitative analysis, to evaluate the impact of public of economic well-being of a household, with the asset indicator action and of Bank support on the poor and to provide guid- capturing perhaps more adequately long-term status, especially ance at the country and local level on the policies and in- where households do not have mechanisms to smooth stitutional designs that hold the greatest promise to bring consumption over good and bad periods. See www.world- about inclusive growth. Box 1.4 provides an example of how bank.org/poverty/health/data for country information sheets. qualitative and quantitative data sources were used together 7. A report prepared jointly by the OECD/DAC, the UN, to get a sense of the impact of the crisis in Indonesia; other the World Bank and the IMF discusses progress in achieving the examples of the insights brought about by combining dif- International Development Goals as well as the policies needed ferent methods-for example the work done in the Indian to reach the goals. The report, A Better World for All, is avail- states of Uttar Pradesh and Bihar-can be found in Poverty able at www.oecd.org/dac/htm/bwa.htm. Reduction and the World Bank: Progress in Fiscal 8. UNESCO 2000, available at www2.unesco.org/wef/ 1998 (World Bank 1 999c, chapter 3). en-docs/findings/efastatdoc.pdf. 9. See Wagstaff (forthcoming). Notes 1o. See www.worldbank.org/poverty/voices/. 11. New studies were conducted in Argentina, Bangladesh, 1. For more detail on regional poverty trends, see World Bank Bolivia, Bosnia-Herzegovina, Brazil, Bulgaria, Ecuador, Egypt, 1999e. Ethiopia, Ghana, India, Indonesia, Jamaica, Kyrgyz Republic, 2. This uses a different price base than the 1985 estimate, so Malawi, Nigeria, Russia, Somaliland, Thailand, Uzbekistan, the two numbers are not comparable. Vietnam, and Zambia. See www.worldbank.org/poverty/voices/re- 3. Note that urban survey data for China do not include mi- ports.htm#national. grants from rural areas to the cities, which probably leads to an un- 12. See Brock (1999); Narayan, Patel, Schafft, Rademacher derestimation of urban poverty. Measurement methods in the and Koch-Schulte (2000); Narayan, Chambers, Shah, and Petesch official tabulations from the survey data for rural China are also (1999); and World Bank (1999f). These studies, as well as the believed to overestimate the rate of increase in inequality (Raval- methodology guide and the national reports, are available at lion and Chen 1999). If increases in inequality from a low base www.worldbank.org/poverty/voices/reports.htm. are accompanied by increases in efficiency, as in some transition 13. See the Global Reviews at www.worldbank.org/poverty/ economy, they may not be detrimental to growth. voices/reports.htm#glrev. CHAPmR 2 World Bank Activities in Fiscal 1999 Dealing with the restructuring agenda following the cri- now have data for two or more points in time, and par- sis remained at the center of Bank activities in fiscal 1999. ticipatory studies were conducted in 23 countries. As discussed in the 1999 Annual Report (World Bank * Bank lending continued to support measures to mitigate 1999h), the Bank continued to provide support to the impact of crises on the poor and investments in strengthen financial markets and corporate governance, as human development, and communities and beneficiaries well as protect social expenditures and safety nets in East were involved directly in project design and implemen- Asia, Latin America, and Europe and Central Asia. Private tation in a substantial number of projects. sector development to foster growth and human develop- * Significant progress was made towards sharing global ment figured prominently in Bank activities in Africa, knowledge on poverty reduction through the consultations South Asia and the Middle East and North Africa. The Bank related to the WDR 2000/2001 on poverty and the continued to respond to natural disasters-floods in working of the global research networks. Bangladesh and Hurricane Mitch in Central America, for * Less progress than expected was made in the area of pro- example-and man-made crises, such as conflicts and ject impact evaluation. Still only less than 10 percent of refugee crises in Africa and Kosovo. Whether responding Bank projects contain good plans for impact evaluation, to present crises or helping countries reduce their vulner- and probably these plans are implemented in an even ability to future crises, Bank activities aimed at helping the smaller percentage of cases. While it is clearly not afford- poor improve their situation, as stressed in the institu- able, and possibly not necessary, to conduct careful im- tion's Mission Statement: to fight poverty with passion and pact evaluations for all Bank projects, lessons on impact professionalism for lasting results. need to be learned from a larger number of projects. Bank activities in support of poverty reduction continued Clear guidance on methodology is now available. to be guided by the two principles laid out in the fiscal 1997 These achievements and weaknesses are reviewed in the Progress Report (World Bank 1998): following sections; chapter 3 will then focus on how to de- * Moving from describing poverty to formulating strategies sign future Bank activities so as to increase their impact on and placing poverty reduction at the center of country as- poverty reduction. sistance strategies and policy dialogue. * Shifting from tracking inputs to assessing outcomes in eval- Country Assistance Strategies uating Bank performance. These two principles found wide application throughout Country Assistance Strategies (CASs) are the key docu- Bank activities in fiscal 1999. This chapter looks at progress ment laying out the Bank's strategy to assist countries in the made in a number of areas: implementation of their development plans. In fiscal 1996 * Country Assistance Strategies had a stronger poverty the Bank began assessing the poverty focus of CASs based focus. on the quality of the poverty diagnosis and on the consis- * The quality and timeliness of poverty analysis increased; tency of the strategy laid out.2 Based on these "old" crite- 12 poverty assessments were completed and their quality ria, the share of "good or best practice" plus "acceptable or was satisfactory.' minimally acceptable" CASs increased from 72 percent in * Information on poverty at the country level from both fiscal 1996 to 92 percent in fiscal 1999, and the share of household surveys and especially participatory studies be- CASs that were unsatisfactory declined from 28 percent to came available for more countries: eight more countries 8 percent (table 2.1). This finding is in line with that of 17 18 POVERTY REDUCTION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 OED's report on the effectiveness of the 1990 WDR strat- TABLE 2.1 egy for poverty reduction, which found that Bank instru- Evaluation of CASs based on poverty focus, old ments, including CASs, had largely been aligned with the criteria, fiscal 1996 to fiscal 1998 1990 two-and-a-half-part strategy.3 (percent) Beginning in fiscal 1998, a more stringent set of criteria Fiscal Best practice! Acceptablel was used to review CASs, reflecting the fact that expectations year good minimally acceptable Unsatisfactory of what makes a good poverty-focused CAS have risen. Ac- 1996 20 52 28 cording to these new criteria, which were defined by the 1997 25 71 4 Reduction 1998 56 37 7 Poverty Group with the guidance of the Poverty Reduction 1999 67 25 8 Board, a CAS is satisfactory in its focus on poverty when, in addition to fulfilling the old criteria, it lays out clearly indi- cators of progress in reaching poverty outcomes, discusses the impact of past Bank activities on the poor, and articulates dearly A hierarchy of development objectives is present in the the expected impact of the new strategy and program on the Panama CAS: "The thrust of the Bank's future program poor. Based on the new criteria, 56 percent of the fiscal 1998 is to assist Panama in effectively implementing its Poverty and 67 percent of the fiscal 1999 CAS were judged satisfac- Strategy and Action Plan. [ ...] To achieve this, the CAS tory or highly satisfactory, while the remaining 43 and 33 per- would focus on accelerating growth; expanding access of cent respectively were judged marginally unsatisfactory or the poor to social services, infrastructure and assets; im- unsatisfactory (table 2.2).4 The improvement observed between proving safety nets; and fostering environmentally sus- fiscal 1998 and fiscal 1999, though not as large as one might tainable development." have hoped, is nonetheless important. Three of the 24 fiscal * In the Malaysia CAS, country circumstances call for 1999 CASs were rated as highly satisfactory: those for Malaysia, giving priority to the poverty reduction objective in Panama and Nepal.5 the short run, with other objectives being pursued in a The 1998-99 review looked at five main aspects: the over- longer time frame. all goal of the Bank's engagement, indicators of progress (in- cluding strategies to acquire poverty information), poverty Use of time-bound performance benchmarks diagnosis (poverty profile and developments over time), dhe links between poverty diagnosis and proposed strategies, and impact For the past couple of years the Bank has been shifting its assessment of past interventions. The improvement observed focus from measuring inputs to tracking outcomes- in CASs between fiscal 1998 and fiscal 1999 is due mosdy to keeping track of how, and how much, people's lives have a marked improvement in the identification of indicators of improved as opposed to just what resources were spent on progress and the development of strategies to acquire and uti- trying to do so. In line with this shift, CASs should spec- lize information on poverty. On the positive side was also an ify monitorable, time-bound indicators of performance, increase in the extent to which program activities were for- both for a country as a whole and for Bank activities. More mulated with the active participation ofgovernments, civil so- CASs included monitorable progress indicators in fiscal ciety and other donors. The two main weak spots remain 1999 than the year before-29 versus 23 percent-but this linkages between pattems of growth and poverty reduction and is clearly an area where further improvements are needed. evaluation of the impact of past activities; no improvement was Being concerned about poverty reduction does not noted here between fiscal 1998 and fiscal 1999. mean only being concerned about reducing the number of those living on less than $1 per day. Poverty should Poverty reduction as overall goal of Country Assistance Strategies TABLE 2.2 Evaluation of CASs based on poverty focus, new Given the Bank's mission, poverty reduction should be the criteria, fiscal 1998 and fiscal 1999 overall goal of every CAS. About 80 percent of the fiscal 1999 (percent) CAS made poverty reduction the overall goal of the World Fiscal Highly Marginally Bank's engagement, and to an increasing degree CASs pre- year satisfactory Satisfactory unsatisfactory Unsatisfactory sent other goals, such as economic growth or private sector 1998 10 47 33 10 development, as instrumental to achieving poverty reduc- 1999 1 3 54 21 1 2 tion. For example: Source: World Bank analysis. WORLD BANKACTIVITIES IN FISCAL 1999 19 TABLE 2.3 Examples of quantifiable and time-bound progress benchmarks in fiscal 1999 CAS Development Country progress Country/World Bank Group Country objective benchmark progress benchmark Nepal Improve By 2004: lower infant mortality to 60 per Good supervision, training and health thousand; reduce total fertility rate to 4.2; career development for maternal and family improve sustainable access to safe water by 15 and child health workers; increase planning percentage points. contraceptive prevalence rate to 36 percent by 2004; 900 user-group managed water schemes by March 2002. Panama Reduce Reduce incidence of malnutrition in children Reduce incidence of malnutrition malnutrition and breastfeeding and pregnant women in the in children and breastfeeding and 28 poorest districts to 31 percent in 1999. pregnant women in the 28 poorest districts to 31 percent in 1999. Panama Improve Overall literacy rate from 92 percent to 94 percent Literacy rate of the poor from education by 2001, literacy rate of the poor from 83 percent 83 percent to 87 percent by 2001, outcomes to 87 percent by 2001, and of Indigenous People and of indigenous people from 62 from 62 percent to 67 percent. percent to 67 percent. Source: World Bank analysis. be defined in a multi-dimensional way and in terms of Poverty diagnosis what is relevant to the society in question. In practice, this means using national poverty lines to capture the in- For a country strategy to be poverty focused, it needs to be come dimension of poverty alongside measures of other built on good information about the poor. While 75 percent dimensions of well-being deemed important for the so- of CASs in fiscal 1999 had information on where the poor ciety in question-usually health and education status, live (compared to 70 percent in fiscal 1998), other crucial in- vulnerability to shocks, exclusion from the mainstream formation on the poverty profile and on changes over time of society, and so on. Examples of quantifiable and time- was not provided in the majority of CASs. Sixty-three per- bound progress indicators reflecting nonincome di- cent of the documents in fiscal 1999 (as compared to 60 per- mensions of poverty used in fiscal 1999 CASs are cent in 1998) provided no or insufficient information on presented in table 2.3. income poverty by occupation, ethnic group, gender, edu- In fiscal 1999 a much greater proportion of CAS sep- cation level or other major socio-economic characteristics. This arated country indicators from Bank indicators than in fis- could be easily improved, as three-quarters of CASs had cal 1998 (57 versus 17 percent). The relationship between completed poverty assessments that could be used to build country goals, on the one hand, and Bank goals, on the their poverty strategy. Eleven out of twenty-four CASs could other, depends on a number of factors and is far from sim- also draw on the results of participatory poverty assessments. ple. In smaller countries where the World Bank is propos- As pointed out in the fiscal 1998 Progress Report, it is ing major operations and reforms in key sectors, indicators important to go beyond the income dimension of poverty of the success of Bank activities can be the same as those to other aspects-malnutrition, educational attainment, of progress in the country, as in the case of reducing mal- social integration and so on. Information on such nonincome nutrition in the Panama CAS, or could be a subset of coun- aspects was scarce, in fact more so than in the fiscal 1998 try progress indicators, if Bank-supported activities are CASs: only 30 percent of fiscal 1999 CASs explored other targeted to a specific population group. In larger countries, dimensions of poverty, compared to 57 percent in fiscal 1998. Bank performance indicators typically refer to geographic This is in part to be expected, as geographically or socially areas or population subgroups; an example from the Nepal disaggregated data on dimensions of poverty other than in- CAS is the achievement of better child health in the 900 come poverty are not always available. communities where water schemes were set up with World * An excellent and in-depth diagnosis of poverty is included Bank support. The new guidelines for CAS under prepa- in the Malaysia CAS. It builds on timely quantitative in- ration (OP/BP 2.10) indicate that all CASs should include formation, as well as tailor-made rapid participatory as- benchmarks for assessing future performance, distin- sessments and describes the most vulnerable groups, their guishing between country and Bank performance. characteristics, and location, as well as channels through 20 POVERTY REDUCTION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 which the crisis was transmitted to them. Furthermore, ened. Similarly, urban-rural linkages and the implications the document reviews the main impacts of the crisis in the of urbanization for poverty reduction should receive more education, health, and agricultural sectors. attention. This is consistent with OED's finding that, while In terms of improving poverty information in the future, generally in line with the 1990 WDR strategy, CASs remain in 90 percent of the cases where good (or recent) information a bit too general in their discussion of the patterns of on poverty was lacking the CAS acknowledged the situation growth that would benefit the poor. and proposed actions to gather data in the majority of cases. Sixty-seven percent of CASs adequately addressed how to build up the human capital of the poor, and 37 percent Poverty reduction strategy and its formulation of CASs addressed well how to protect the poor from shocks through safety nets. In particular, virtually all of the Europe The process of CAS formulation is increasingly reflecting the and Central Asia CASs have a strong focus on social safety partnership approach proposed in the Comprehensive De- net reforms. velopment Framework (CDF): 83 percent of fiscal 1999 * The Yemen CAS addresses the issue of improving edu- CASs were judged satisfactory with regard to the participa- cation opportunities for poor girls: strategies to reach tion of government, civil society, the private sector and the "targeted social improvements for poverty alleviation" in- donor community in the preparation of the CAS document, clude increases in public education expenditure in poorer compared to 66 percent in fiscal 1998. The Vietnam CAS areas; more high schools for girls; and fee rebates for girls is a good example of the participatory nature of the process of poor families followed in defining the strategy. The focus on achieving poverty outcomes helps the Recent CASs distinguish better between the country's Bank to be more selective in its interventions, while work- and the World Bank's strategies, highlighting both areas of ing together with other partners strengthens the need to build overlap and of disagreement. In fiscal 1999 71 percent of on each partner's comparative advantage. The Mexico CAS CAS explained how the Bank strategy fitted into the coun- articulates this clearly: try strategy, compared to 57 percent in fiscal 1998. * "The CAS is driven by three main selectivity criteria. The Where country strategies are built on a good analysis of first is marginal impact on poverty reduction. This poverty and Bank strategies fit well into the country strat- underlines, for example, the primary importance of egy, the links between Bank activities and poverty reduc- avoiding the adverse macro-economic shocks that would tion are clearer-the CAS articulates how the proposed likely hurt the poor-first and most severely. The second activities are expected to affect the sectors from which the is the client's expressed needs. The World Bank Group poor draw their livelihood, their access to services, and support agenda will be sensitive and proactive toward the generally their ability to take advantage of opportunities. authorities' sweeping reforms and pressing needs, such as This is the case of the Panama CAS: the decentralization process [. . .]. The final criterion is * The strategy was developed in stages. Building on in- comparative advantage [. . .]. The World Bank Group depth collaborative work between the Government and needs to focus its resources where its capabilities can the Bank on a poverty report, the Panamanian government produce the largest return for Mexico." approved a Poverty Action Plan in September 1998. This action plan then provided the framework for the largest Impact ofpast assistance programs part of Bank support to the country, and the CAS linked the proposed activities to the different parts of the coun- Generally, progress is needed in the area of self-evaluation of try's action plan. Since the action plan itself is built around the impact of the Bank's past programns on poverty reduction: an in-depth analytical assessment of poverty, the expected two-thirds of all CAS documents were judged unsatisfactory impact of the Bank's assistance strategy is clearly articu- or only marginally satisfactory in this respect. Good CASs lated. should move beyond standard indicators of Bank performance Good examples notwithstanding, this is generally an area such as the disbursement ratio or delays in project comple- for improvement: only 58 percent of CASs argued con- tion and assess whether the benchmarks established for Bank vincingly that the suggested assistance strategy would help performance have been achieved; this is where the frontier reduce poverty. More specifically, four out of five CASs in lies in improving the poverty focus of CASs. fiscal 1999 failed to qualify what type of growth might be When assessing the impact of past Bank activities on most beneficial to the poor, and the discussion of the links poverty is impossible because of lack of data, as often is the between growth and poverty reduction should be strength- case, CAS documents should at least outline a strategy to WORLD BANKACTIVITIES IN FISCAL 1999 21 fill the information gap. Although none of the fiscal 1999 tent and process. Some of the goals include: building in- documents could rely on good information on the impact country capacity for poverty analysis; contributing an inde- of past activities, some did evaluate critically both the coun- pendent assessment to an ongoing debate; outlining a strategy try's advance in poverty reduction as well as the World to reduce poverty; and moving the Bank program in a new Bank's contribution towards it. For example: direction. Given the diversity of goals, it is not surprising that * The Nepal CAS took a look at the effectiveness of aid the coverage of poverty assessments, and especially updates, in the country: "Aid has been much higher per capita in ranges from a single issue to a broad analysis of the poverty Nepal than in most other South Asian countries, with and social situation in a country. Similarly, some assessments a plethora of donors quite eager to provide financial involve many stakeholders, while others are essentially desk assistance [. . .]. But [. . .] the potential of donor studies. assistance has not been fully realized. Although aid has * The Burundi study aimed to lay out options to assist the had some successes, the question can be asked as to country in case of continued security problems. The re- whether the quite significant aid volumes should not have port could neither rely on extensive information nor be produced more results, particularly among the most comprehensive, but it provided timely guidance on how disadvantaged-the rural population that still represent to respond to the existing crisis situation. the overwhelming majority of Nepal's people. Lately, there * The Kyrgyz Republic poverty assessment update was is a growing recognition among many, if not all, donors part of a process of institutionalizing in-country capac- that the past approach to development aid simply can- ity for survey work and data analysis. It is a very good not go on since, even when there are results, their sus- example of selectivity in the use of resources: it focused tainability is often far from certain." on data analysis and capacity building, and brought * Noting that the absence of data makes it impossible to as- country staff to the Bank to work with experts for an ex- sess the impact of past Bank assistance, the Lesotbo CAS tended period of time. outlined a strategy to monitor the Government's Poverty The Panama assessment also aimed at building capac- Action Plan, supported by the Bank through various op- ity, but went beyond analysis to strategy formulation. As erations. The poverty monitoring system is a trigger to such, it started a process that led to the formulation of a move from the base-case to the high-case scenario for national poverty reduction strategy through a number of Bank lending.6 debates and consultations. The quality of a poverty assessment has to be assessed rela- Poverty analysis tive to the goals set out for it. Even a desk review of the target- ing of social assistance may constitute a good poverty assessment The higher poverty focus reflected in fiscal 1999 CASs was if this is what is needed to inform the debate in the country, or also translated into stronger efforts to carry out poverty if this is all that can be covered well given existing data or avail- analysis. Twelve poverty assessments were completed in fis- able resources. Similarly, a study which is more descriptive than cal 1999, almost twice the number completed in fiscal prescriptive but lays the foundation for strategic discussions in 1998, and their overall quality was satisfactory.7 Seven the country may well have achieved its main objectives. were first-time assessments (Algeria, Bulgaria, Burundi, The need for clarity on objectives is one of the find- Georgia, Haiti, Macedonia, Panama) and five were updates ings of the review of poverty assessments carried out by the (Armenia, Kyrgyz Republic, Nepal, Peru, Russia). Half Bank's Operations Evaluation Department in 1999. The the assessments completed were for countries in the Eu- review recommended that poverty assessments define-from rope and Central Asia region, which is quickly complet- the concept paper on-clear goals and priorities, provide ing a first round of poverty assessments for all countries and adequate justification for prioritization of issues and for any carrying out timely updates as well (see box 2.1 for a dis- selectivity in scope and coverage, and link work programs cussion of how poverty issues are being addressed in the and analysis to goals.8 Europe and Central Asia region). Among various goals, transferring knowledge and This review focuses on three aspects of fiscal 1999 poverty building capacity is particularly challenging: the OED re- assessments: their goals, the features of the poverty reduction view found six out of seven stakeholders were satisfied over- strategies discussed, and some of the innovative techniques all with the poverty assessment for their country, but they employed. Finally, we review the treatment of gender issues. viewed knowledge transfer and local partnership and con- Goals. The twelve poverty assessments reviewed differ sig- sultation as the least satisfactory aspects of poverty as- nificantly as to their goals, and consequently as to their con- sessments. 22 POVERTY REDUCTION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 BOX 2.1 Poverty issues in the Europe and Central Asia Region Poverty has increased in the transition countries of the re- at the beginning of the fiscal year These additional re- gion over the past decade, and quite significantly in the Com- sources helped governments maintain their levels of social monwealth of Independent States countries, primarily a spending and forestall the build up of wage, pension and result of the sharp decline in output. The Bank's Country social assistance arrears More recently, the Bank has been Assistance Strategies have sought to identify the major chal- heavily involved in making additional resources available to lenges countries face in making the transition to market- the countries that bore the brunt of the Kosovo crisis. As- oriented economies and how the Bank can best support that sistance to Albania included two post-conflict grants sup- transition With a strong human capital base, ihere is good porting institutional and infrastructural needs of the refugee reason to think that the maloritv of the population will ben- program and an emergency rehabilitation operation aimed efit from ihe opportunities created by the new economic to provide budget support; assistance to Macedonia in- stiuctures and the resumption of grovvth. There has been cluded an emergency rehabilitation credit to finance critical strong emphasis on moving fron-i subsidizing enterprises to imports, a post-conflict grant, and a social support prolect ensuring an adequate safety net for the unemployed, elderly Looking forward, the Bank faces a number of chal- pensioners and other poor left behind and protecting basic lenges in ensuring that poverty is a central objective of health and education expenditures With public expenditures Country Assistance Strategies. With the strong grounding around 40 percent of GDP in many countries, there is sig- provided by the completion of poverty assessments for most nilicant scope for reallocation in favor of berter targeted so- countries in the region, including qualitative work, re- cial spending gional staff share with country counterparts a better un- Adjustment operations have been the main vehicle to sup- derstanding of which groups of the poor are likely to port the reallocation of expenditures described above. Out benefit from renewed growth, which are likely to be left of 18 IBRD and IDA adlusiment operations (accounting for behind in the short term, and which may remain in long- about two-thirds of total lending in the region), 14 had a term structural poverty. Social safety net programs will poverty tocus The share is even higher for IDA adjustment need further reforms to address the needs of different operations alone. 10 out of 1 1 operations were poverty-fo- groups of poor people. Health and education systems are cused The strengthening of social safety nets was a prior- showing increasing signs of strain, with evidence emerg- ity in 12 out of the 14 poverty-focused adjustment operations. ing that the access of the poor is being undermined by their For example, operations in Bulgaria, Georgia, the Kyrgyz Re- inability to make the informal payments that service public, Macedonia, Moldova, and Talikistan included mea- providers have come to expeci. However, there is increas- sures to improve social assistance targeting; operations in ing evidence that improvements in health and education Bulgaria, the Kyrgyz Republic and Macedonia supported outcomes for the poor can only occur if systemic reforms reforms that help assure the sustainability of pension systems, address the malor inefficiencies in these sectors. Improved and programs in Georgia, Poland and Romania provided un- governance and progress in fighting corruption will help employment benefits and redeployment assistance to work- ensure that the benefits of growth are more evenly dis- ers laid off due to enterprise restructuring tributed as the climate for small businesses improves, and The Bank has also responded to crises in the region af- that the more profitable businesses and better-off individuals fecting the poorest countries. It successfully mobilized ad- pay their fair share of taxes Regional staff will give par- ditional resources for the IDA countries in the Commonwealth ticular attention to linking the poverty diagnosis more of Independent States that were hard hit by the August 1998 tightly with the country strategy and to set periormance Russian financial crisis; total commitments to these countries indicators and monitoring strategies that will make it pos- for fiscal 1999 were some 30 percent higher than planned sible to assess progress. Poverty reduction strategies. Several assessments by lack of secure tenure rights; and cuts in spending for contain examples of policies that could help reduce poverty health and education are likely to have had negative ef- in the areas traditionally discussed in poverty assessments: fects on the human capital and productivity of the poor the impact of growth on poverty, human capital develop- in the medium term. ment and poverty, and safety nets. On the links between * The Bulgaria and Macedonia assessments con- growth and poverty: tained extensive analysis of the links between labor mar- The Algeria assessment looked at the impact on the poor ket policies and poverty. The Panama assessment of the deteriorating macroeconomic situation between looked at the impact of labor market policies and 1987 and 1995. Disposable income declined and un- trade protection on growth and poverty reduction, employment increased, hurting those with lower levels and found that the working poor are paid less than the of education more than the average; farmers were hurt minimum wage and do not receive mandated benefits. WORLD BANK ACTIVITIES IN FISCAL 1999 23 Simulations were conducted to show that these labor policies actually increase poverty and inequality. BOX 2 2 * The Peru assessment sought to identify pro-poor growth Governance and poverty areas by looking at growth prospecs for the sectors in which the poor work. ~~~~~~~Good governance supports the goal ot poverty reduc- the poor work. tion through a variety of channels The most direct In terms of analyzing how human capital development channel is via its impact on service delivery Poverty helps the poor avail themselves of opportunities for a better reduction depends in part on improvements in the life, the best assessments are those that take a broad look at quality and accessibility to poor people of basic thedeterminantsofhealthandeducationoutcomesandatthe education, health, potable water and other social and impact of public expenditures, rather than focus narrowly on intrastructural services, including police and legal services impact ofrpubli expenditures , Achieving this generally calls for government aciton- seroral, expenditures. financing, active facilitation, and in many instances the * TheAlgeriaassessmentmovedbeyondasectoralviewin direct delivery of services. Yet in all too many countries identifying determinants of poverty outcomes; for exam- public aclors in the social and infrastructural sectors have ple, interventions such as sanitation and maternal edu- neither the incentives nor the resources to play this cation, which are outside the traditional purview of the role Reforming the institutional rules of the game thus health sector, are identified as key to improving health out- becornes key to irnproving the availability of services for the poor comes. A less immediate impact comes via the contribution * TheNepalandPanamaassessmentslookedatthein- of good institutions to growth and related changes in cidence of education subsidies, and found that, as is usu- the ways in which scarce public resources are allocated ally the case, spending on higher education benefits the and policies are formulated In countries where institu- better-off more than the poor. tions are weak, policymaking and resource allocation typically proceed in nontransparent ways, with deci- Problems related to the management of safety nets are sions generally skevved in favor of those who are well particularly acute in the countries of the former Soviet bloc, connected to centers of power. All too often the result and were discussed extensively in the assessments for Ar- is that services valued by elites receive disproportionate menia, Bulgaria, and Georgia. The main policy issue is funding (for example tertiary rather than primary how to attain fiscal sustainability while ensuring that ben- education) and policies are adopted that benefit a fevv efits go to the most needy. at the expense of broad sectors of society (for example The granting of monopoly privileges) institutional reforms Issues ofgovernance are foremost in Haiti, and the poverty in both policymaking and budgeting fosier openness and assessment identified political instability, poor governance and explicit debate among competing alternatives, thereby corruptionaskeyfactorsbehindthecountry'spervasivepoverty. making it more difficult to conceal decisions that are Corruption in particular resulted in a marked decline in the qual- systematically biased against ihe poor ity , public services, induding as of clear public responsi- The most profound impact of institutional reform on biity pubc asthervices inclthjudin ralsy poverty may be the potential for increases in citizen bilitysuchas the police and the judicial system(seebox2.2for participation There are a variety of ways in which a discussion of the links between governance and poverty). strengthening 'voice" in general-arid the voice of the poor in particular-can improve public performance At Innovative techniques. From a methodological point the micro level, they include fostering participation of of view, all the fiscal 1999 poverty assessments are sound, but parents in the governance of schools or working with communities to provide access to wvater At the macro some use up-to-date techniques to deal with complex method- they ioclude decentaizaion At genuiel r ~~~~level, they include de-centralization that genuinely ological issues and provide examples to follow in the fiture. empovvers the poor and more broadly democratic or * Householdandindividualconsumption.Generally, other forms of representative decision making and welfare measures such as consumption or income are political oversight. As the Public Sector Strategy constructed on the basis of household-level data, as sur- emphasizes, institutional reform is not simply a matter veys do not usually collect individual-level expenditure of changing the ways in which public hierarcrhies are do incot ually ollrrivecat individual-level mexpenditur arranged. Its focus is on the broad array ol rules of the or income data. To arrive at individual-level measures of game that shape the incentives and actions of public welfare, household-level measures need to be adjusted to actors-including the voice mechanisms that promote accountforthenumberofpeoplein the household. One the rule of law and the accountability of government way to obtain per capitaconsumption is to simplydivide to its citizens tsee the section on sector strategies in household consumption by the number of household chapter 3). members. This is fine as a first approximation, but it over- looks the fact that not all household members consume 24 POVERTY REDUCTION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 equal amounts of food and other items. It also ignores culate the average incidence of public expenditures, that the fact that the consumption of some items can be is, the extent to which different income groups benefit from shared by more people without reducing the amount con- public expenditures for a certain service at a given point sumed by each person (for example, use of household in time. A common finding is that the poor benefit more durables), that is, that there are economies of scale in con- from public expenditures in primary than in secondary sumption. For these reasons, straight per capita mea- or tertiary education. Thus, a common recommenda- sures can lead to faulty conclusions on the links between tion is that expenditures on primary education should be household size and poverty, which often contrast with re- increased. But does additional money spent on primary sults from participatory work-for example, that larger education necessarily reach the poor? When data from two households are worse off or that widows are not worse or more points in time are available, it is possible to cal- off than the average. When simple per capita measures culate the marginalincidence of public expenditures, that are used, no inference should be drawn on aspects such is, whether additional expenditures reached the poor. In as household size/composition and poverty. The Kyrgyz the Peru assessment, panel data on household access to Republic assessment, for example, is very careful not to services were combined with data on public expenditures draw such conclusions. Whenever possible, analysts for those services over the same period to assess whether should construct measures of consumption that adjust for the poor benefited from additional expenditures on par- different consumption needs and take economies of scale ticular services. into account, and should check how sensitive any results * Poverty maps. Income poverty maps can be generated on links between household size and composition and by extrapolating information on income poverty from the poverty are with respect to the consumption measure used. small sample generally covered in a household survey to The Georgia assessment is a very good example of this the population as a whole using information that is com- kind of sensitivity analysis. A further issue that should be mon to the survey and the most recent population cen- considered is that in reality there are significant gender sus. Once maps are constructed, they can be combined differences in the amounts consumed by household with information on the geographical distribution of ser- members; new techniques to measure these differences vices and other characteristics and can assist decision- are being developed and will hopefully be applied in the making at a much more disaggregated level than previously future. possible. This is particularly valuable where local agencies * Changes over time. Data on living standards for two are given more responsibilities under decentralization. points in time are becoming available for a larger num- Poverty maps have now been developed for a number of ber of countries, making it possible to study the dy- countries-for example Ecuador, Peru, South Africa-and namics of poverty. The Peru update is an excellent their use is expanding. example of how to use cross-sectional data to iden- tify which factors help families move out of poverty (in Gender aspects ofpoverty. The Gender and Poverty Peru's case, important factors were job creation in the Groups in PREM recently conducted a review of the treat- informal sector and the provision of a package of in- ment of gender issues in poverty assessments completed in frastructure services-water, sanitation and electric- IDA countries in fiscal 1997-1999.9 The objectives of the ity). The Bulgaria assessment uses panel data to look review were to: at the characteristics of families who were among the * Assess the extent to which poverty assessments for IDA poor in both survey years, finding that the households countries reflect IDA's mandate to incorporate gender whose head had only primary education or' less and who considerations into the analysis of poverty in these relied on social transfers or incomes from a variety of countries. sources were more likely to remain poor. The Russia * Assess the degree to which gender concerns are being assessment uses panel data from the 1994-1996 Russ- mainstreamed into this important area of the Bank's ian Longitudinal Monitoring Survey to analyze the analytical work. emergence of a new group: the long-term poor. Poverty * Highlight best practice examples to help guide future work in Uganda (still underway) uses data from five gender and poverty analysis.1" consecutive household surveys spanning the period The review examined the poverty assessments in terms 1993-1998. of analysis of gender issues and policy recommendations * Marginal incidence oj public expenditures. Most as well as use of participatory methods, taking into con- poverty assessments and public expenditure reviews cal- sideration country circumstances such as the availability WORLD BANKACTIVITIES IN FISCAL 1999 25 of gender-disaggregated data, the socio-economic situation TABLE 2.4 of women in the region and cultural realities. The review Data availability rated the assessments on a scale of 1 (poor) to 5 (excel- (percent) lent) and found that the average quality of gender treat- ment improved over the three-year period from 2.5 in fiscal Share of population covered by 1995 1998 1999 1997 to 3.7 in fiscal 1999. Among the best practice ex- At least one survey with data on amples were C6te d'Ivoire (1997), Djibouti (1998), and consumption and/or income 83 96 97 Comparable data for at least two Georgia (1999). Cpoints in time 45 85 86 The fiscal 1999 poverty assessments looked at various Open access to data - 41 46 gender issues: Total number of countries 121 124 124 * Educational attainment of girls and women. Sig- - Not available. nificant gender gaps are found in Algeria and Nepal but Source: World Bank 1995 and 1998 censuses of household surveys and Poverty nificnt gnder aps re fond i Algeia ad Neplbut Monitoring Database (www.worldbank.org/poverty/data/povmon.htm). not in Bulgaria, and gender gaps appear to be declining in Nepal and Peru. tries, as compared with 96 percent in 1998 and 83 per- * The status offemale-headed households. Analyses for cent in 1995.12 Bulgaria, the KyrgyzRepublic, and Nepalindicate that * Sixty eight countries have comparable data for at least two there are significant differences between households where points in time, eight more than last year. Since such data male members are not present but contribute to the fam- are available for the largest countries, the share of population ilys upkeep and those where male members have deserted covered by at least two comparable surveys is high-86 the household; only the latter are consistently poorer than percent, only marginally higher than in 1998 (when it was the average. In Macedonia, single elderly women with- 83 percent), but a great improvement since 1995.13 out pensions are one of the most vulnerable groups. Only 39 countries, covering 46 percent of the population, * The status of womenz in the laborforce. Evidence of make their household consumption/income survey data gender discrimination in hiring and wages is found in the accessible to researchers and other interested parties. data for Macedonia! and young women are more likely Nonetheless, this is an improvement compared to 1998: than young men to be unemployed in Peru. seven more countries, covering an additional five percent In addition to the 12 poverty assessments completed in of the population (see table 2.4 and Annex I for regional fiscal 1999, several regional studies are underway. Major work and country-level information.) on analyzing household survey data is being carried out for Differences persist among regions in coverage, availabil- the Africa region to obtain a better understanding of poverty ity of comparable surveys over time, and data access. The Mid- dynamics; it will include case studies of success and failure dle East and North Africa region continues to lag behind: and an inter-country analysis of welfare trends based on data * Coverage (the availability of at least one survey) is between from the Demographic and Health Surveys. A study on 93 percent and 100 percent of the population for all re- poverty and inequality in Latin America and the Caribbean gions except the Middle East and North Africa, where it and a study on poverty and inequality in the transition stands at 77 percent. economies of the former Soviet bloc are being completed." i Availability of comparable surveys over time is above 80 percent in all regions apart from the Middle East and North Country-level poverty monitoring Africa and Africa, where only 45 percent of the popula- tion is covered by comparable surveys. The availability of country-level data on household con- * Data access is almost universal in South Asia, fairly fre- sumption, income, and other indicators has continued to quent in Europe and Central Asia and in East Asia (apart improve, although at a slow pace, over the last fiscal year. from China), and still low in Africa and Latin America. Survey data exist for most countries, more countries have In the Middle East and North Africa only seven percent comparable data sets that make it possible to assess trends of the surveys are openly accessible (table 2.5). over time, and more data sets are openly accessible to civil In fiscal 1999 there was firther progress on poverty mon- society than in fiscal 1998: itoring data in the Africa region, with new surveys having been * One hundred thirteen out of 124 countries with more than conducted or having become available in C6te d'Ivoire, one million people have data from at least one con- Ghana, Nigeria, Uganda and Zambia. In Ghana, remarkable sumption/income survey, three more than last year. This progress was made in reducing the lead time between field work corresponds to 97 percent of the population of Part II coun- and the beginning of data analysis: while the 1992 survey took 26 POVERTY REDUCTION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 TABLE 2.5 Data availability by region (percent) Africa East Asia and Europe and Latin America and Middle East and South Share of population covered by (Sub-Saharan) Pacific CentralAsia the Caribbean North Africa Asia At least one survey with data on consumption and/or income 95 99 93 98 77 100 Comparable data for at least two points in time 45 96 82 96 45 98 Open access to data 21 26 51 10 7 99 Total number of countries 39 15 28 22 15 5 Source: World Bank 1998 census of household surveys and Poverty Monitoring Database (www.worldbank.org/poverty/data/povmon.htm). three years to prepare, the 1998/99 was ready in six months. Database, to facilitate the work of researchers and policy an- A system for data archiving has been developed and piloted alysts.'9 The database contains information on household for the Djibouti household survey: all the data, documenta- surveys and participatory studies that have been conducted, tion, and relevant papers are stored on CD-ROMs for easy including contact names; summaries of completed poverty as- access and archiving.14 sessments; and social indicators data sheets to provide a fuller In the Latin America and the Caribbean region the Pro- picture of poverty in a country. In addition, the Africa Region gram for the Improvement of Surveys and the Measure- developed a new Web site and a tool to find data for coun- ment of Living Conditions (ISLC/MECOVI), jointly tries in the region.20 sponsored by the Inter-American Development Bank, the Major progress was made in fiscal 1999 in conducting World Bank and the Economic Commission for Latin participatory poverty studies: as reported in chapter 1, new America and the Caribbean, is supporting country-level studies were conducted in 23 countries to hear the views and regional activities to improve the design and imple- of the poor on what constitutes well-being, pressing prob- mentation of household surveys.'5 The second meeting of lems and priorities, the role of public and private institu- the ISLC/MECOVI Steering Committee, held on July 27, tions in their lives, and the changing nature of gender and 1998, emphasized the importance of setting up a house- social relations. These studies, which are available on the hold survey data bank accessible to the research commu- Web, provide a rich picture of poverty and vulnerability.21 nity. Sixteen Latin American countries have so far responded positively, authorizing the inclusion of their data Project impact evaluation in the data bank. In the East Asia and the Pacific region much work took As discussed in last year's Progress Report, the shift towards place to assess the impact of the financial crisis. All crisis- focusing on outcomes rather than inputs requires raising hit countries were conducting household surveys regularly, the standards on evaluating the impact of Bank inter- but the frequency (annual or biannual) and the long time ventions on households. A review of 240 fiscal 1998 in- lag between data collection and the availability of data for vestment operations indicated that a very small number analysis diminished their usefulness during the crisis when of projects (12, or 5 percent) included outcome and/or im- the situation changed rapidly and the need for current in- pact indicators, a baseline survey, and control groups, formation was paramount. The responses varied by coun- which make it possible to conduct a good evaluation. An try and included a mix of instruments-from rapid additional 77 projects (32 percent) included some of the qualitative assessments to accelerated processing of ongoing elements necessary for a good evaluation but not all, and surveys, special modules, or new surveys (see box 1.4 for in particular did not lay out plans for assessing the impact a summary of the data collected in Indonesia). New sur- of interventions relative to a control group; for projects veys were conducted in Cambodia, China, Indonesia, in this category evaluations could still be conducted, but Malaysia, Mongolia, the Philippines and Thailand. 16 In were clearly not well-planned at the time of project Europe and Central Asia surveys were conducted in Rus- approval. As many as 151 projects (63 percent) did not sia and Tajikistan.'7 In the Middle East and North Africa make adequate provisions for evaluation (figure 2.1).22 region a survey was conducted in Morocco.18 While one would not expect all projects to plan a careful The World Bank has also made publidy available on the impact evaluation on account of its cost, the shares above PovertyNet Web site a new tool, the Poverty Monitoring were judged too low. WORLD BANK ACTIVITIES IN FISCAL 1999 27 FIGURE 2.1 gion improved substantially its performance: the percentage Distribution of fiscal 1998-99 projects of lending for projects with well-developed evaluation plans by category of evaluation increased from two percent to 16 percent, whereas the per- Percent centage of lending to projects with incomplete plans but with 80 potential for evaluation increased from 30 percent to 50 70 percent. Increases in the share of lending with good or po- tential evaluation plans took place in the Africa region as well. In sectoral terms, significant positive changes occurred in 50 Fiscal the social sectors and in social protection (table 2.7), where Fiscal 1999 the share of lending for projects with good evaluation plans _40 1998 _ or the information base to conduct sound evaluations increased 30 from 39 percent to 67 percent and from one percent to 40 20 percent, respectively. Impact evaluation performance in the 10 rest of the sectors remained roughly the same as fiscal 1998. In sum, less progress was made than expected. Still 0 Inade ate Evaluation possible Good evaluation only less than 10 percent of Bank projects contain good plans evaluation plansa but not well plansc for impact evaluation, and probably these plans are imple- developedb mented in an even smaller percentage of cases. While it is a. Projects with: no outcome or impact indicators and no baseline survey; clearly neither affordable nor necessary to conduct careful outcome and/or impact indicators, but no targets and no baseline; and outcome and/or impact indicators and targets, but no baseline, impact evaluations for all Bank projects (careful quantita- b. Projects with: outcome and/or impact indicators, baseline survey and tive evaluations require household and often community sur- possibly financing, but no control groups. c. Projects with: outcome and/or impact indicators, baseline survey and veys that are costly and time-consuming to carry out), control groups. lessons on impact need to be learned from a larger num- Source: World Bank analysis. matlre ber of projects. A monitoring and evaluation strategy is being A similar review was conducted on a sample of 173 fis- prepared. For country-level monitoring and evaluation of cal 1999 investment operations.23 The results indicate poverty trends, the strategy will discuss how monitoring and that, while there has been some improvement with re- evaluation strategies will be systematically integrated within spect to the previous year, plans for impact evaluation re- main limited. The percentage of projects with plans for a TABLE 2.6 sound impact evaluation increased from five to eight per- Fiscal 1998 and 1999 investment projects with either cent, and the percentage of projects with incomplete plans good evaluation plans or the potential for good but with potential for good evaluations increased from 32 evaluation (share of lending) percent to 38 percent. The percentage of Bank lending for (percent) projects with well-planned impact evaluations remained the Share of lending, same-six percent-indicating that the improvement in im- Fiscal 1998 Fiscal 1999 pact evaluation performance is attributable to better eval- Region uation plans in smaller-size Bank loans. Encouragingly, Africa 36 42 Learning and Innovation Loans, or LILs, are among the East Asia and Pacific 68 59 Europe and Central Asia 25 20 small loans with good evaluation plans: 19 percent of LILs Latin America and the Caribbean 32 66 have good evaluation plans compared to 6 percent of non- Middle East and North Africa 30 21 LILs, and of all projects with good evaluations 28 percent 28 26 are LILs (LILs represent 11 percent of the sample). How- Sector ever, this may still be lower than desirable, as LILs are meant A\riculture and Environment 4 35 to learn whether a certain project design or intervention Social sectors (education, health, nutrition, and so on) 39 67 works or not. Social protection (pensions, Progress on impact evaluation was not even across regions safety nets, and so on) 23 246 and sectors (table 2.6). Last year, East Asia and the Pacific stood Total 39 46 out with a relatively high proportion of projects with good Note: Covers projects with outcomes and/or impact indicators, baseline survey evaluation plans or the information base to conduct sound and possibly financing, but no control groups, and projects with outcomes and/or impact indicators, baseline survey and control groups. evaluations. This year the Latin America and Caribbean re- Source: World Bank analysis 28 POVERTY REDUCTION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 country assistance strategies over time; for sector strategies, TABLE 2.7 the Sector Strategy Papers stocktaking planned for the first Fiscal 1998 and 1999 investment projects with either half of fiscal 2001 will examine the scope and timetable for good evaluation plans or the potential for good Sector Strategy Papers to systematically improve or intro- evaluation (share of projects) duce monitorable sector-relevant poverty outcome indica- (percent) tors and intermediate indicators, as well as evaluation plans. Share of projects The strategy will also discuss how to strengthen incentives. Fiscal 1998 Fiscal 1999 Incentive constraints are now being addressed in various Region ways: the lack of desire to find out that an intervention has Africa 36 42 East Asia and Pacific 58 49 not worked is being addressed to some degree by placing Europe and Central Asia 17 36 increasing emphasis on results overall and changing be- Latin America and the Caribbean 46 62 Middle East and North Africa 22 44 haviors; and a plan is being discussed to provide funds for South Asia 42 43 impact evaluations when the lessons to be learned are rel- evant beyond a country context, so as to address the un- Agriculture and Environment 42 42 derprovision inherent in the public-good nature of Infrastructure 34 35 evaluations. Capacity constraints are being addressed through Social Sectors (education, health, nutrition, and so on) 44 70 training for staff and country counterparts and the prepa- Social Protection (pensions, ration of a Handbook on Impact Evaluation.24 safety nets, and so on) 9 54 Others 32 33 It should be stressed that, while the evaluation of the Total 37 46 poverty impact of specific interventions at the project level has poverty impac of specific interventions at t*e project levelha Note: Covers projects with outcomes and/or impact indicators, baseline survey an important role to play in order to learn what works and and possibly financing, but no control groups, and projects with outcomes what does not, it is a complement, not a substitute, for pro- and/or impact indicators, baseline survey and control groups. gram evaluations. The impact of an overall poverty reduction strategy on key poverty indicators should be monitored, and China is a good example of the essential role played by in- efforts should be made to assess the Bank's contribution. This frastructure in improving the lives of the rural poor: this and is a much more complex exercise, given that it is not possible the three previous projects will have provided clean water to to establish a clear counterfactual, and one in which judgments about 25 million poor rural people, enabling them to enjoy would have to be made, based on existing analysis. better health and conduct more productive working lives. In looking at Bank projects, it is important to keep in Poverty-focused lending mind that the poverty impact of Bank lending operations has to be assessed in the context of the country assistance In fiscal 1999 the World Bank continued to assist countries strategy as a whole, as Bank operations complement one affected by financial and other crises, attempting to mitigate another as well as what is done by the government and other their impact on the poor through carefully designed reform donors. It would be incorrect to judge Bank assistance on programs and assistance packages. For example, in Indone- the basis of single projects considered in isolation. sia, the Bank designed and put in place a back-to-school cam- While most Bank lending aims to contribute, directly paign of great proportions which, despite some shortcomings, or indirectly, to poverty reduction, since 1992 the World has kept many children from dropping out of school, thus Bank has been tracking lending with an expected direct im- providing an essential and effective safety net to cushion the pact through the Program of Targeted Interventions and impact of the crisis.25 The Bank also continued to lend a sig- poverty-focused adjustment loans. The amounts lent under nificant share of its resources for human capital development. these categories give an indication of the inputs that go to Lending for education, health and social protection in fis- the poor-resources targeted directly to the poor or which cal 1999 based on the new classification amounted to $7,274 go to areas with a higher-than-average incidence of poverty. million (25 percent of total Bank lending), as compared to To be classified as part of the Program of Targeted In- $7,821 in fiscal 1998 (27 percent).26 But projects in the so- terventions, an investment operation must meet the fol- cial sectors represent only one way to help countries attack lowing criteria: poverty; in many contexts investments in productive sectors * The project has a specific mechanism for targeting the poor. and in infrastructure are just as important to ensure that * The proportion of the poor among project beneficia- growth is sustainable and that the poor share in its benefits. ries is significantly larger than their proportion in the The Fourth Rural Water Supply and Sanitation project in overall population. WORLD BANK ACTIVITIES IN FISCAL 1999 29 TABLE 2.8 Number and amount of lending for PTI projects, fiscal 1992-99 Total number of Number of PTI Total investment Total PTI investment projects projects Percent lending lending Percent (US $ millions) (US $ millions) 1992 187 57 31 15,542 3,836 25 1993 214 72 34 17,603 4,674 27 1994 197 63 32 17,581 4,441 25 1995 208 75 36 16,958 5,437 32 1996 222 79 36 16,698 5,408 32 1997 203 77 38 13,890 4,090 29 1998 240 101 42 16,789 6,733 40 1999 216 ill 51 12,426 6,165 50 Source: World Bank analysis The project components that meet either of these crite- to OED's evaluation (mainly on account of more involve- ria must account for at least 25 percent of the total IBRD/IDA ment of beneficiaries in design and implementation and better loan or credit amount.27 use of performance indicators). But it should be said also that To be classified as poverty-focused, an adjustment op- the report did not find sufficient information to draw firm eration must meet the following criteria: conclusions on the achievement of poverty-related objectives. * Focuses specifically on eliminating distortions that espe- While the PTI is useful as a poverty marker system, it should cially disadvantage the poor. be noted that non-PTI operations may have an equal or * Supports a reorientation of public expenditures toward greater impact on the poor through their indirect impact on physical infrastructure or basic social services for the poor. local or national growth. * Supports programs that provide safety nets or that target specific groups of the poor.28 Program of Targeted Interventions The classification of projects is carried out by project teams in the regional vice-presidencies and reviewed by The number of projects classified as being part of the Pro- the Poverty group in the PREM Network to ensure that gram of Targeted Interventions (PTIs) increased from 42 the criteria are applied correctly and uniformly across percent of the total in fiscal 1998 to 51 percent in fiscal 1999. regions.29 Similarly, the amount lent for PTI projects increased from Operations that meet these criteria are more likely than 40 percent to 50 percent of total investment lending (table others-based on the assessment of Bank regional staff and 2.8). These increases are partly due to increases in lending managers-to have a significant direct impact on poverty. for projects classified as poverty-targeted in the financial, OED's recent report on the effectiveness of the Bank's transportation, and urban development sectors, as well as poverty reduction strategy found that projects in the PTI a large increase in overall PTI lending to countries in the performed better in terms of outcome, institutional East Asia and Pacific region (see Annex D for details on the developments, Bank and borrower performance according sectoral and regional composition of PTI loans). PTI loans TABLE 2.9 Number and amount of lending for PTI projects, IDA countries only, fiscal 1992-99 Total number of Number of PTI Total investment Total PTI investment projects projects Percent lending lending Percent (US $ millions) (US $ millions) 1992 91 34 37 4,081 1,812 44 1993 112 44 39 5,187 2,137 41 1994 84 35 42 4,336 1,853 43 1995 91 46 51 4,510 2,423 54 1996 106 50 47 5,160 3,246 63 1997 81 36 44 3,504 1,874 54 1998 113 55 49 6,053 3,267 54 1999 116 69 59 4,731 3,033 64 Source: World Bank analysis. 30 POVERTY REDUCTION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 TABLE 2.10 Number and amount of lending for poverty-focused adjustment operations, fiscal 1992-99 Total number Number PF adjustment adjustment Total Adjustment Total PF operations operations Percent lending lending Percent (US $ millions) (US g millions) 1992 32 18 56 5,847 2,838 49 1993 23 6 26 5,253 1,165 22 1994 28 20 71 2,868 1,665 58 1995 30 14 47 5,324 1,648 31 1996 30 17 57 4,509 2,227 49 1997 30 18 60 5,086 2,649 52 1998 37 16 43 11,289 7,235 64 1999 48 36 75 15,449 10,689 69 Source: World Bank analysis. to IDA countries alone, rather than to all countries, increased from fiscal 1998 levels (table 2.11). Between these two years, significantly from 54 percent to 64 percent of all IDA lend- IDA lending for poverty-focused adjustment operations al- ing between fiscal 1998 and 1999 (table 2.9). most doubled from US$630 million to US$1,239 million, with the share of IDA poverty-focused lending in total IDA Poverty-focused adjustment operations adjustment lending jumping from 47 percent to 82 percent. More than half of the funds were for structural adjustment The share in the number of poverty-focused adjustment op- loans to African countries (see annex E for more details). erations increased significantly from 43 percent of the total Looking at all projects, not only those classified in the in fiscal 1998 to 75 percent in fiscal 1999, its highest level PTI or poverty focused, a recent review by the Bank's in- since the Bank started tracking these operations. Similarly, ternal Quality Assurance Group (QAG) found that atten- the share of lending for such operations over total adjust- tion to vulnerable social groups and the poor is increasingly ment lending increased from 64 percent in fiscal 1998 to being mainstreamed. In the sample of 85 investment pro- 69 percent in fiscal 1999 (table 2.10). This increase is due, jects reviewed under QAG's second round of the Quality at least in part, to three very large loans to Argentina, In- at Entry study, which covered fiscal 1999 projects, 39 donesia, and Korea that included measures to protect the demonstrated significant and well-designed activities tar- poor from the impact of financial crises. The Europe and geted at poverty reduction. While 29 of these were desig- Central Asia region accounted for over one-third of the total nated PTI, 10 more that were not classified as PTI, also number of adjustment operations with poverty-focused included substantial provisions for poverty reduction. components, and over 75 percent of the adjustment oper- Among the 15 adjustment loans, several incorporated ations in the region had a poverty-focused component. appropriate and effective provisions addressing poverty. Poverty-focused adjustment lending to IDA countries also The findings on gender mainstreaming were similar. Revised increased dramatically in both absolute and percentage terms guidelines on adjustment lending are being prepared. TABLE 2.11 Number and amount of lending for poverty-focused adjustment operations, IDA countries only, fiscal 1992-99 Total number Number PF adjustment adjustment Total Adjustment Total PF operations operations Percent lending lending Percent (US $ millions) (US $ millions) 1992 16 10 63 2,152 1,168 54 1993 8 3 38 1,423 645 45 1994 18 11 61 1,998 875 44 1995 15 9 60 1,069 598 56 1996 19 13 68 1,679 1,027 61 1997 11 9 82 948 689 73 1998 17 9 53 1,354 630 47 1999 22 20 91 1,512 1,239 82 Source: World Bank analysis. WORLD BANK ACTIVITIES IN FISCAL 1999 31 TABLE 2.12 World Development Report conferences and workshops, 1998-99 Date Events September 1-3, 1998 Mediterranean Development Forum, Marrakech: Session on relevance of WDR themes in the region September 1-30, 1998 First electronic consultations with representatives of civil society October 19-20, 1998 Forum on Poverty, Inequality and Vulnerability, and Latin American and Caribbean Economic Association Meeting, Buenos Aires January 12-14, 1999 Conference on Values, Norms and Poverty and consultations with civil society, Johannesburg (organized by the World Faiths Development Dialogue and sponsored by the Archbishop of Canterbury) February 2-4, 1999 Policy Dialogue on Inclusion, Justice, and Poverty Reduction, Berlin (organized by the Development Policy Forum of the German Foundation for International Development) February 4-5, 1999 Conference on Social Protection and Poverty, Washington (organized by the Inter-American Development Bank) March 24-25, 1999 Workshop on Environment and Poverty, Washington (sponsored by IDRC and the World Bank) March 29-30, 1999 Workshop on How to Reduce Poverty and Inequity in Latin America (sponsored by IDRC) April 4-6, 1999 Workshop on Rural Development and Poverty, Dhaka, Bangladesh April 16-18, 1999 Second African Consultation on the WDR, Dakar, Senegal (organized by the Inter Africa Group) May 10-12, 1999 Conference on Macro Shocks and Poverty and consultations with civil society, Kuala Lumpur May 11-12, 1999 Workshop on Social Policy Reform in Latin America , sponsored by IDRC June 14-15, 1999 World Bank Conference on Evaluation and Poverty Reduction (sponsored by OED and WBI) June 28, 1999 World Faiths Development Dialogue Meeting (sponsored by the World Faiths \ Development Dialogue and the World Bank) July 6-8, 1999 Stiglitz Summer Research Workshop on Poverty, Washington, D.C. September 22-23, 1999 Voices of the Poor "Global Synthesis Workshop," Washington, D.C. Source: WDR 2000/2001 Calendar of Events (www.worldbank.org/poverty/wdrpoverty/events/calendar htm). While the findings suggest that poverty and gender issues change. Work has been underway since September 1998 need more attention in Bank operations, it should be recognized and much more extensive consultations were conducted that, as discussed earlier, the proper unit of analysis for evalu- than for previous reports.30 WDR team members also ating the Bank's impact on poverty is the Country Assistance spent some time in villages over the summer. A very im- Strateg,. The linkages between Country Assistance Strategies portant contribution to the WDR is the Voices of the and poverty reduction are expected to be discussed more explicidy Poorstudy, whose findings were presented in Chapter 1.31 as countries move forward with the preparation and imple- Table 2.12 lists all the conferences and workshops con- mentation of the Poverty Reduction Strategy Papers and the ducted in the last year. Comprehensive Development Framework (see chapter 3). The World Bank Institute (formerly the Economic De- velopment Institute) supports poverty reduction in client Sharing global knowledge countries through a combination of awareness raising, train- ing, network strengthening and the use of new information tech- The World Bank shares knowledge about development nologies. A few examples of innovative fiscal 1999 activities are: and poverty reduction through a variety of tools: Web sites, * The Virtual Souk (www.elsouk.com) provides a market- publications, conferences, courses. Some examples of the place on the Internet for crafts produced by talented ar- work done in fiscal 1999 are presented here. tisans in the south for potential buyers in the north. The The World Development Report 2000/2001 is pro- souk contributes to poverty reduction by increasing viding the opportunity for a major reassessment of the de- the incomes of isolated groups of artisans. terminants of poverty reduction and social progress in the * After developing and piloting an innovative approach to context of global forces for integration and technical training poor groups of women, the Grassroots Man- 32 POVERTY REDUCTION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 agement Training program is now being mainstreamed of the Bank's poverty reduction strategy been addressed: labor-in- into Bank operations through LILs in Peru and Ethiopia. tensive growth, human capital development, safety nets? The In both cases, GMT is reaching the poorest of the poor analysis was relative to what was known about poverty. A CAS was with tools that empower them to take control of their lives. not required to treat each of the three elements, only those that * The Civic Association Outreach and Training program were appropriate for the country and the Bank's comparative ad- trained community organizers in some of the poorest dis- vantage in that particular country. tricts in Romania and Uganda on how to better identify 3. OED 2000. development needs and articulate them with local au- 4. These results are consistent with those of the CAS Retro- thorities to deliver services. spective, (World Bank 1999i). * The Partnerships for Poverty Reduction program 5. This year's review was conducted by a team of staff in the (www.worldbank.org/ppr) has succeeded in promot- Poverty Group of the Poverty Reduction and Economic Manage- ing the adoption of a partnership approach among sev- ment and was reviewed by the Poverty Reduction Board, which eral governments, NGOs and businesses in countries in comprises representatives from all the regions and from other the Latin America region by building a strong case for networks. such an approach based on hundreds of actual experi- 6. The Lesotho CAS is a fiscal 1998 CAS. ences of public-private-civic collaboration. 7. This finding is consistent with QAG's assessment. QAG The World Bank Institute also carries out courses for staff reviewed three examples of poverty work in fiscal 1999 (one and partners. In fiscal 1999 a new course was developed that was a poverty assessment) and found them satisfactory. This integrated previous training programs on economic growth is an improvement over QAG's assessment of poverty work in and on poverty issues. The coordination between internal fiscal 1998. and external training was instrumental in making that pos- 8. The OED review examined the country-level impact of 19 sible. Three regional courses reached external partners in poverty assessments and updates (all those done in fiscal 1997 and Africa, South Asia and Central Asia, and set the basis for an 1998, plus a sample from fiscal 1996), following up on a first re- expanded training program in fiscal 2000. Providing train- view conducted by OED in 1996 (OED 1999). ing for country counterparts is important to strengthen 9. A total of 17 poverty assessments were completed for IDA local capacity, especially on poverty monitoring and evalu- borrowers during this period: six in fiscal 1997; five in fiscal 1998; ation. A Poverty Analysis Initiative was launched to support and six in fiscal 1999. regional capacity building initiatives on poverty analysis. Ac- 10. For a guide on how to incorporate gender aspects into tivities, currently planned for East Asia and the English-speak- poverty analysis, see Mason and Lampietti 1999. ing Caribbean countries, as well as Africa, include hands-on 11. For Latin America and the Caribbean, see Wodon (2000). training followed by guided studies on the poverty situation, 12. The 1995 census was less extensive than the 1998 census aimed at providing background for the design of poverty re- and may have underestimated coverage, so the difference between duction strategies. 1995 and 1998 may be slightly overestimated. The World Bank external Web site continued to expand 13. The figure for 1995-45 percent-is not directly compa- in fiscal 1999 in terms of both content and usage. In par- rable, but is sufficiently lower to be sure of an improvement. ticular PovertyNet, the Bank's home page on poverty, reached 14. See www4.worldbank-org/afr/poverty/databank/default.htm. almost 55,000 page requests per month by August 1999 (an 15.Countries covered by the project are currently Argentina, amount of information roughly equivalent to 1,500 books El Salvador, Paraguay, Peru, Nicaragua (joined in June 1998), Bo- per month) at the end of its first year of operation, and usage livia (joined in May 1999), and Guatemala (since September went up to 200,000 page views by July 2000. 1999). 16. Cambodia: 1999 Cambodia Socioeconomic Survey; Notes Indonesia: Susenas 1999; Malaysia: 1999 Household Income/ Basic Amenities Survey; Mongolia: 1999 Living Standards 1. This is consistent with the findings of the Bank's Quality Monitoring Survey; Philippines: 1999 Annual Poverty Indicators Assurance Group review of the quality of poverty-related studies Survey; Thailand: 1998 Socio-Economic Survey (SES). for fiscal 1999, and represents an improvement over fiscal 1988. 17. Completion of the second phase of the Russia Longitu- 2. The criteria were the following: Is the diagnosis of poverty dinal Monitoring Survey, with Round 8 in 1998, and Tajikistan adequate and does it incorporate the findings of the poverty as- 1999 Living Standards Survey. sessment and/or other relevant analysis that is available? Under that 18. Enquete nationale sur les niveaux de vie des menages particular country's circumstances, have the following elements 1998. WORLD BANK ACTIVITIES IN FISCAL 1999 33 19. The Poverty Monitoring database is available at www.world- 26. These figures reflect a reclassification of Bank lending bank.org/poverty/data/povmon.htm. by sector, which eliminated the "multi-sector" category and clas- 20. Available at www4.worldbank.org/afr/poverty/databank. sified multi-sector lending on the basis of project components. 21.Countries covered are Argentina, Bangladesh, Bolivia, 27. Criterion refers to narrow targeting with specific mech- Bosnia-Herzegovina, Brazil, Bulgaria, Ecuador, Egypt, Ethiopia, anisms for identifying and reaching the poor at the individual Ghana, India, Indonesia, Jamaica, Kyrgyz Republic, Malawi, or household level (for example, a nutrition project for mal- Nigeria, Russia, Somalia, Thailand, Uzbekistan, Vietnam, and nourished children); criterion refers to broad targeting at the Zambia. The studies are available at wwwworldbank.org/poverty/ level of the expenditure category, sub-sector or geographic re- voices/reports.htm and through the Poverty Monitoring Database gion (such as a water supply project in the poorest region). Al- at www.worldbank.org/poverty/data/povmon.htm. though benefits will accrue to all, the poor are more likely to 22. A baseline survey is desirable but not necessary for sound benefit relative to the nonpoor because they are more likely to evaluation: it is possible to use statistical techniques to establish a lack access to the services being provided, and because the de- counterfactual without a baseline, for example by "matching" mand by the nonpoor for these services is likely to be satisfied households affected by the project with unaffected ones using data from already. a survey covering both kinds of households. However, there was no 28. These criteria and trends over time can be found also at: evidence that this was planned in the cases without a baseline survey. www.worldbank.org/poverty/wbactivities. 23. The 173 projects are a random sample of the 216 fiscal 1999 29. Before the creation of the PREM network, this work was investment projects stratified by region. See Rubio and Subbarao 2000. carried out by the Poverty and Social Policy group. 24. See Baker (2000), available at www.worldbankorg/poverty/ 30. See the report's Web site at www.worldbank.org/ library/impact.htm. poverty/wdrpoverty. 25. This effort involved multiple ministries, agencies, and 31. See www.worldbank.org/poverty/wdrpoverty/newsl/ donors; the Bank playedalead role but enjoyed and elicited excellent newsllO99.htm for the village visit reports and www.world partnership from ADB, UNICEF, AUSAID and other players. bank.org/poverty/voices/ for Voices of the Poor. CHAPER 3 ACHIEVING FASTER POVERTY REDUCTION: ELEMENTS OF A PROGRAM OF ACIION Poverty reduction remains the overarching objective of the September 2000. In parallel, a study by the OED has re- World Bank. As J.D. Wolfensohn, the World Bank's Pres- viewed the effectiveness of the 1990 strategy. A forthcom- ident, said at the 1999 Joint Bank-Fund Annual Meetings: ing note will discuss how to operationalize the findings of "We have learned that we must put poverty front and cen- these reports in Bank work, and Operational Directive ter." Progress was made last year-for example in increas- 4.15 will be revised accordingly (see box 3.1 for an overview ing the poverty focus of country strategies, improving the of the Bank's strategic documents). information available on poverty and listening to the voices Some key elements of the Bank's strategy for the next of poor people, and involving communities in the design decade have already emerged: and implementation of projects-but the challenge re- * A program of action to help low-income countries fight mains formidable. poverty more effectively. At the core of the World Bank poverty reduction strat- egy remains the approach proposed in the World Devel- opment Report 1990, the 1991 policy paper on Assistance BOX 3.1 Strategies to Reduce Poverty, and Operational Directive 4.15: Development of the Bank's strategy on poverty support policies that promote broad-based, labor-inten- reduction sive growth, investments in human capital, and the provi- sion of safety nets for those unable to share in the benefits The most recent major effort at conceptualizing the Bank's of growth. Experience in a number of countries over the last throughthreedkeydocumentsn the 1990 World Develop- decade has confirmed that this approach is valid. Nonethe- ment Report on poverty (World Bank 1990), the 1991 pol- less, in the decade since the WDR 1990 several themes have icy paper on Assistance Strategies to Reduce Poverty emerged which were not prominent in the 1990 strategy, (World Bank 1991), and Operational Directive 4.15 on but which play an important role in determining success Poverty Reduction (issued in December 19911 in poverty reduction. In 1996, the Strategic Compact re- Progress in the mid- 1990s was tracked through the An- in poeryreutin I 19,hSrteicCmpcr- nual Progress Reports on Poverty Reduction, of which emphasized the importance of rural development, focused this is the seventh Previous reports in this series were is- attention on social development-the role of institutions, sued in 1993, 1994, 1995. 1996, 1998 and 1999 (see social exclusion, social capital-and warned about vulner- World Bank 1993, 1994,1995, 1996, 1998, and 1999c). ability of poor households and communities to shocks. The Strategic Compact, issued in 1996, reaffirmed the im- Even before the crisis hit East Asia, there was growing con- portance of rural development and recognized the im- portance of social and institutional factors (World Bank cern over inequality, which remained high in Latin Amer- 19971. ica, and appeared to be increasing in countries making the We are now entering a newv phase of strategy and pol- transition to market economies as well as in some East and icy formulation. The World Development Report 2000/2001 South Asian countries. The financial crisis heightened con- and the OED report on the effectiveness of the 1990 cerns on inequality and vulnerability and brought to the fore- strategy are providing an opportunity to take stock of what front concerns over governance. has worked and what has failed in poverTy reduction over front cppon rtuns tove governantoge,her allthesethemesan the last decade, and will recommend actions for the Bank The opportunity to bring together all these themes and and other international institutions Subsequently, anim- synthesize current thinking is provided by the World De- plementdtion note will explore the implications of the re- velopment Report 2000/2001 on poverty and develop- ports for Bank work ment (WDR 2000/2001), which will be published in 35 36 POVERTY REDUCTION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 * A set of initiatives to address constraints at the global level. their sources of livelihood. Poverty is multi-dimen- * A program of action to help communities become ac- sional, extending from low levels of income and con- tors in their own development. sumption to poor health and lack of education and to * Actions to collect, share and disseminate knowledge other 'nonmaterial' dimensions of well-being, includ- and build capacity. ing gender disparities, insecurity, powerlessness and so- This chapter discusses these areas of action in turn. cial exclusion. A good understanding of the nature of poverty enables a comprehensive exploration of poverty A program of action to help low-income determinants. countries fight poverty more effectively * Choosing public actions that have the highest im- pact on poverty. A solid understanding of the nature There is a strong belief, backed by empirical evidence, that and determinants of poverty allows prioritization of more progress in poverty reduction has been made in coun- potential public actions according to their expected tries where the strategies pursued were fully owned by the impact on the chosen poverty goals. Social sector pro- government and by society at large. The Comprehensive De- grams will generally be a significant component of a velopment Framework (CDF), formulated in fiscal 1999, poverty reduction strategy, but actions on the macro- lays out an overall conception of development and part- economic front and in other sectors-such as rural de- nership with governments in the driver's seat. Following up velopment, local infrastructure, private sector on the lines of the CDF, at the 1999 Annual Meetings the development and job creation-as well as actions to re- Finance Ministers agreed that the Bank and the Fund duce insecurity will usually be of equal importance in should devote a substantial share of their concessional fi- an effective program. The choice of priority actions nancing resources, including debt relief, to support poverty would be based on both country information and cross- reduction strategies prepared by client countries. This de- country experience. cision has three major implications: countries, not donors, * Selecting and tracking outcome indicators. Se- would lead the process, assuming management and own- lecting and tracking indicators for the chosen poverty ership; the formulation of strategies would be broadly par- outcomes is crucial to assess whether the actions taken ticipatory; and the Bank and Fund would work much more are having the expected impact. Regular monitoring en- closely together and with other development partners in sup- sures that policies and programs can be adjusted if port of country-owned strategies. needed. The choice of indicators and their monitoring should be done transparently and in a participatory Principles underlying the approach way, so as to ensure that there is broad societal consensus on how to judge the impact of the strategy. The Inter- The country poverty reduction strategies to be supported by national Development Goals provide a useful point of the Bank and Fund will be developed based on the approach departure in the selection of country-specific goals and proposed in the paper on Building Country Strategiesfor indicators. Available data sources and indicators should Poverty Reduction Strategies presented to the Bank and be reviewed to ensure that data collection and analysis Fund Boards in September 1999 and the paper on Poverty is done in an efficient way without unduly burdening Reduction StrategyPapers: Operational Issues presented country statistical agencies. in December 1999.1 The key elements of the approach are: In terms of process, the approach has the following an understanding of the nature of poverty in a country and implications: the identification of the poverty reduction outcomes a coun- * Countries would be leading the process, taking re- try wishes to achieve; the identification of the key public ac- sponsibility for articulating their development vision, tions-policy changes, institutional reforms, programs, preparing poverty reduction strategies, and assuming projects, and so on-that are needed to achieve the desired ownership for implementation. outcomes; and the adoption of a participatory process to iden- * Participatory processes would be followed to prepare tify outcomes and actions and monitor implementation. poverty reduction strategies in countries, recognizing that More in detail, in terms of substance country poverty the quality of governance and the broad-based support reduction strategies would focus on the following elements: underpinning a country's strategy is key to success and * Understanding the nature and locus of poverty. sustainability. Strategy formulation starts from a disaggregated un- * The Bank and Fund would work closely together, and derstanding of who the poor are, where they live, and with other development partners, to help countries for- ACHIEVING FASTER POVERTY REDUCTION: ELEMENTS OF A PROGRAM OF ACTION 37 mulate their strategies and provide external support to complementary roles to play (box 3.2). The PRSP process their implementation. builds upon the valuable experience of CDF pilot countries. The design and implementation of poverty reduc- What is new is the closer link between the preparation tion strategies will be guided by a comprehensive vision of country poverty reduction strategies and the provision of that integrates macroeconomic, structural and social fac- debt relief and concessional assistance on the part of the Bank tors, taking into account the inter-sectoral determinants and Fund, as well as the changes that this approach will re- of poverty. This reflects a wide acceptance of the view that quire in the way donor organizations in general, and the Bank not only is growth essential to reduce poverty but that and Fund in particular, work with client countries. poverty, inequality and social exclusion in turn influence a country's growth and poverty reduction prospects, and Linking debt relief and concessional assistance that institutions-the public administration, the courts, to poverty reduction strategies the police-play a key role in helping to reduce (or per- petuate) poverty. Under the new framework, the country-led poverty reduc- This approach is not new; it builds on the experience of tion strategy would be reflected in the Poverty Reduction Strat- many countries as well as on cross-country analytical work and egy Paper (PRSP), which would be presented to the Boards current best practice in development assistance. It builds on of the Bank and the Fund. The Boards would endorse the recent experience in implementing the Comprehensive De- PRSP as a context for Bank and Fund assistance.2 A PRSP velopment Framework (CDF), with which it shares the ob- "endorsed" by the Board of the Bank and the Fund would jective of poverty reduction and the key principles that then provide a context for IMF concessional lending under strategies need to be owned by the societies which would im- the Poverty Reduction and Growth Facility (PRGF) program, plement them, results-oriented, comprehensive, long-term, and the Bank's Country Assistance Strategy, and debt relief under carried out in partnerships among development actors with the Highly Indebted Poor Countries (HIPC) Initiative. BOX 3 2 Principles underlying the Comprehensive Development Framework approach and country poverty reduction strategies The process is driven by the countr) * A poverty reduction strategy should integrate instilu- Counmry ownership of a poverty reduction strategy is rional, structural and sectoral interventions into a con- paramount Broad-based participation of civil society in sistent macroeconomic framework the adoption and monitoring of the poveny reduction strategy tailored to country circumstances will enhance Strategies should adopt a long-term perspective its sustained implementation. * A medium- and long-term perspective is needed, rec- ognizing that poverty reduction will require institutional Strategies should aim to achieve resulvs on the ground changes and capacity building-including efforts to * An understanding of the nature and determinants of strengthen governance and accountability-and is there- poverty, and the public actions that can help reduce it, fore a long-term process is required for the formulation of an effective strategy. * The willingness of national and international partners to * Medium- and long-term goals for poverty reduciion, in- make mediumn-erm commitments will enhance the ef- cluding key outcome and intermediate indicators, are fectiveness of their support for a poverty reduction strat- needed to ensure that policies are well designed, and ef- egy fectively implemented through improved efficiency and accountability Strategies should be developed rransparently and implemented in partnership Strategies should be comprehensive * Government development of a strategy can provide the * Sustained poverty reduction vvill not be possible vvithout context for improved coordination of the work of the Bank rapid economic grovth,. macroeconomic stability, struc- and the Fund, as well as that of regional development tural refornis and social stability are required to move banks and other multilaterals, bilateral assistance agen- countrie. to a higher path of sustainable growth cies, NGOs, academia, think tanks, and private sector or- * PoverTy is multidimensional, specific actions are needed ganizations to enable the poor to share in the benefits from growth, * Civil society and the media have an important role to play increase their capabilities and well being, and reduce in raising awareness, informing and educating the pub- their vulnerabilities w risks lic at large on process and issues. 38 POVERTY REDUCTION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 Debt relief ate. However, IDA CASs will continue to be discussed, dis- closed, and finalized as stated in the current Board-ap- Civil society organizations, especially NGOs and faith- proved policy.4 based organizations, have strongly criticized the ongoing The managements of the Bank and Fund hope that all HIPC initiative for its failure to have an impact on the countries receiving concessional assistance will be able to living conditions of the poor. Linking debt relief to the launch and in many cases make significant progress to- preparation and implementation of poverty reduction wards the design and implementation of satisfactory PRSPs strategies and involving civil society organizations in within the next two or three years, and that about half monitoring progress in implementation should help en- would have PRSPs in place by the end of 2001, beginning sure that any savings resulting from debt relief are used with countries facing urgent HIPC initiative deadlines and for programs that benefit the poor, and that the social im- PRGF-active countries. pacts of macroeconomic and structural policies which are In order to avoid disrupting ongoing concessional part of the strategy are taken into account fully and mit- assistance and creating unnecessary delays in the provi- igated where necessary. sion of debt relief, there will be a period of transition to the new arrangements while countries develop poverty re- Concessional assistance from the IMF under the duction strategies. During the transition, countries will Poverty Reduction and Growth Facility (PRGF) prepare Interim PRSPs, which will include the following elements: All programs supported by a loan from the Poverty Re- * An interim report prepared by the Government, pre- duction and Growth Facility (the successor to the En- senting its commitment to poverty reduction and the hanced Structural Adjustment Facility, or ESAF) would main elements of its poverty reduction strategy stem from, and be drawn from, the PRSP, and be for- consistent with the extent of diagnosis that has been mulated with the country authorities in close coordina- conducted. This would include commitments to a tion with the World Bank. A major implication of this timeline and a consultative process by which the is that most targets and policies embodied in PRGF PRSP will emerge with support from the Bank, Fund programs will emerge directly from the country's poverty and other partners. reduction strategy. * A three-year macroeconomic framework and three-year policy matrix, both of which will focus on poverty re- Concessional assistance from IDA duction, jointly agreed with the Bank and Fund (pol- icy commitments and targets for the outer years would In countries receiving IDA assistance, an "endorsed" PRSP be tentative and would need to be revised when the in- will provide a context for the Bank's CAS and, in the con- terim document is replaced by a PRSP). text of the CAS, will be a necessary condition for a high- In the near term, the content of an interim PRSP may case lending scenario and adjustment lending, except in be limited given that countries are at different levels of special circumstances such as crisis situations. This condi- preparedness. During the transition period, the Boards of tion will become effective as HIPCs reach a decision point the Bank and the Fund would see somewhat different coun- or countries come up for approval or review of a PRGF try documents in individual cases, with the form and con- arrangement. For IDA borrowers without a HIPC or PRGF tent of these documents reflecting the degree of progress program, the date at which this condition will apply has not towards a PRSP yet been determined, but it is to be decided no later than The decision to link debt relief and concessional as- January 1, 2001.3 The emergence of the CDF and the sistance to the preparation of country-led long-term poverty PRSP has changed the operating environment for the Bank's reduction strategies stems in part from the recognition CAS, which has hitherto served two main functions: to pre- that aid achieves the most in countries with good policies sent and diagnose the country development context and and institutions, and where there is real participation. Par- strategic challenges, and to set forth a selective Bank pro- ticularly difficult issues are posed in countries where there gram to support the government's strategy. PRSPs (in IDA is limited commitment to poverty reduction and where in- country programs) and/or CDFs will increasingly perform stitutions are weak. In such cases, Country Assistance the first function. As this happens over time, CAS documents Strategies will lay out actions to engage governments con- will be slimmed down, cross-referencing the PRSP and/or structively while strengthening civil society, possibly rely- CDF for the country context and diagnosis, as appropri- ing more on nonlending services than on lending. ACHIEVING FASTER POVERTY REDUCTION: ELEMENTS OF A PROGRAM OF ACTION 39 BOX 3.3 Proposed guidelines for poverty diagnoses underpinning PRSPs Guidance on PRSP content and approach is currently under donor agency, or other development partner, in which case preparation. In principle, every PRSP should contain a recent the PRSP Staff Assessment vvould either endorse it or discuss diagnosis of the poverty situation differences in views. Interim PRSPs would contain as much * The poverty diagnosis underpinning a PRSP would be ex- of the diagnosis as possible given data and time available. pected to cover at a minimum the extent of poverty and The Poverty Reduction Board will provide good-practice its evolution over time (best if based on more than lust examples of poverty diagnosis to guide the work of coun- income poverty indicatorsi; the geographic distribution try teams, and will continue to oversee the provision of of poverty; the correlation between income poverty and training. The Poverty Reduction Board will track the avail- other indicators of well-being; the gender, ethnic or re- ability of poverty diagnoses (instead of tracking poverty as- ligious or other group dimensions of poverty; sources of sessments, which cover only a part of the poverty analysis livelihood for the poor, access to services and respon- conducted in the Bank) and review its quality for the Annual siveness of institutions, sources of vulnerability; impact Progress Report on Poverty. of past policies and prograrrms. The diagnosis could be These guidelines do not weaken current requirements; based on quantitative as well as qualitative approaches rather, the guidelines strengthen the requirements by spec- Data sources should be clearly indicated and discussed ifying a minimum content for the diagnosis contained in In-depth analysis will be needed in most cases to support PRSPs, and should help increase the effectiveness of Bank the diagnosis, but the areas and topics on which in- activities by linking diagnosis and strategy formulation more depth analysis would be carried out would be deter- closely ' The guidelines also recognize that poverty analysis mined by country conditions (More detailed guidelines is increasingly being carried out by researchers in countries are being prepared by the Poverty Reduction Board ) rather than by Bank staff and provide a mechanism to val- * The diagnosis should be recent, generally no more ihan idate and use analysis done by others. two years old. While many poverty indicators are not avail- These guLidelines are also designed to respect the speci- able every year, some new information is generally avail- ficity of country conditions by not mandating the content able every couple of years of in-depth poverty studies and allow country teams the flex- The analysis underlying the diagnosis may be contained ibility to choose how poverty analysis would be integrated in a recent poverty assessment, a recent Social and Structural with other country work-the fiscal 1999 Country Eco- Review, project preparation document, the CAS or PRSP it- nomic Memorandum for China, for example, discussed the self, or other document. It may also be contained in a doc- poverty and income distribution impacts of the globaVregional ument prepared bv the government, research institution, crisis, thus integrating poverty and macroeconomic trends I This, , in line vilh the iDA12 Agreement vhiCh *ayS that the Interrnational Development Assocai,on iiDA. the arm of Ehe Worid Bank working with the poorest .:ountr,e51 must * undertake n-depth anal-es oil ihe naiture arnd cau,e; c t overtr .n borrc,wing countrie: that IDA [muAIl work w,th borrowers to develop and strengiher. capacit Ahere weaknesses hinder the cornpmieion cr ilrr.it the quaitra ot i,ch asseisments Strengthening the link between poverty diagnosis views. Teams conducting PERs will be working closely and strategies with those advising governments on PRSPs. A good strategy needs to be underpinned by a good diag- Changes in the way we work nosis of the poverty situation. Reflecting the findings of the review of CASs discussed in chapter 2 and the recent CAS First, the new approach requires a change in the way Retrospective Review,5 all CASs should report on the main donor agencies work with countries. Countries are at var- characteristics of poverty and its determinants, trends over ious stages of readiness in undertaking what will be a de- time, and linkages between poverty and patterns of growth. manding process of assembling relevant data, weighing As a further step towards strengthening the link between difficult policy options, forging internal consensus and diagnosis and strategy in IDA-eligible countries, the Bank making the right choices on one hand, and effective im- will ensure that good poverty diagnoses underpin every plementation in the face of serious institutional and gov- Poverty Reduction Strategy Paper. Proposed guidelines are ernance capacity constraints on the other hand. The in box 3.3. emergence of genuine country-owned and managed Additionally, given the importance of accountability and poverty reduction strategies will require time and flexibility. transparency in budgetary processes in the implementation Timetables and requirements try to strike a careful balance of poverty reduction strategies, PRSPs should also take between the need for sufficient time for preparation and into account the results of recent Public Expenditure Re- the desire not to delay needed financial assistance. More- 40 POVERTY REDUCTION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 over, Bank and Fund staff will need to be sensitive to the velopment Boards-are providing support across the spec- challenges faced by countries and provide analytical and trum of sectors. For example the Gender Board, which policy advice in ways that do not undermine country comprises representatives from all regions and networks and ownership. Careful experimentation, learning by doing, other key units in the Bank, is developing a new strategy and forging a shared community of interests in achieving to facilitate and accelerate gender mainstreaming in poverty results will be critical in the next few years. Since achiev- reduction strategies and country assistance strategies. The ing goals in poverty reduction takes time, governments and Policy Research Report on Gender and Development (see donors will need to take a longer-term approach, which section on sector strategies in chapter 3) and the Gender- may necessitate using longer-term planning horizons and Net Web site are part of this effort.6 In drafting a new en- support instruments than is the case now. vironmental strategy for the Bank, the Environment Board Second, Bank and Fund staff will need to collaborate is looking at the link between environmental activities and more closely than has generally been the case in the past. This poverty by focusing on how to achieve sustainable devel- will involve forming a common understanding of the poverty opment and improve environmental health outcomes. reduction situation in a country and its determinants; con- Particularly important is the work on the links between ducting joint missions; and assisting governments in im- good governance and poverty reduction. The contribution plementing an integrated and coherent set of macroeconomic, of some elements of good governance-good management social and structural policy and program actions. of public resources, management of public financial insti- Third, Bank and Fund staff will need to work closely tutions and utilities, rule of law-is fairly clear; other ele- with other donor agencies, namely the regional develop- ments, related to the extent to which the poor can influence ment banks, the bilateral donors, and the UN agencies, as policy and program decisions and exert pressure on service experimented recently in the countries that piloted the providers to use resources efficiendy, are less well understood Comprehensive Development Framework. It is expected and lessons need to be learned from activities in all sectors. that the PRSP would become a key instrument for a coun- This points to the need to strengthen monitoring and eval- try's relations with the wider donor community, beyond the uation capacity. In particular, projects that support decen- Bank and the Fund. This will be a departure from current tralization and participatory processes to improve voice, practice marked by a proliferation of country strategies, accountability and local relevance should include good often originating from external sources and not always monitoring and evaluation mechanisms so as to facilitate consistent with the development and poverty reduction adaptation and learning. needs of the country. Fourth, Bank staff will need to work more across sectoral How is theprocess movingforward? lines than in the past, identifying the links between actions in the sector and poverty reduction. Sector Boards are sup- Work has moved ahead on six fronts: porting this shift by developing a knowledge base that docu- * Extensive discussions were held at the Bank and Fund ments the links between sectoral actions and poverty outcomes, to clarify the links between country poverty reduction testing out new approaches, and elaborating strategies to ac- strategies and financial support, culminating with the quire knowledge through the evaluation of the impact of discussion of the Operational Note on Poverty Reduc- projects; this work is being summarized in the Poverty Re- tion Strategy Papers by the two Boards. duction Strategies Sourcebook (see the section on the Poverty * Bank and Fund staff initiated the process of discussing Reduction Strategies Sourcebook in chapter 3). Under the the new approach with country counterparts, staff and Urban Sector Board, for example, a Thematic Group on Ser- external partners. A joint letter from the managements vices for the Urban Poor is mounting, through the Cities Al- of the Bank and Fund was sent to the countries involved, liance, a multi-sectoral and multi-partner initiative to scale up as well as to regional development banks and to UN in- citywide and nationwide programs to provide services and eco- stitutions to involve them in the process. The IMF or- nomic opportunity for the poor in urban slums. Linked to ganized a meeting ofAfrican Heads of State in Libreville, the national poverty reduction strategies now being developed, Gabon in January 2000, and the Bank organized a meet- the initiative has the potential to foster true multi-sectoral ap- ing of African Finance Ministers in Addis Ababa, Ethiopia, proaches and overcome the traditionally narrow sectoral men- in March 2000. A meeting with representatives of African tality that still characterizes investment projects. NGOs was held in February 2000 in Addis Ababa. Boards responsible for cross-cutting themes-such as the * A process of wide consultations with country repre- Gender, Environment, Poverty, Public Sector and Social De- sentatives, officials of partners agencies, and other key ACHIEVING FASTER POVERTY REDUCTION: ELEMENTS OF A PROGRAM OF ACTION 41 stakeholders has been carried out, with extensive meet- pletion point; and broader debt relief, through an increase ings with UN agencies, bilateral and multilateral de- in the number of potential beneficiaries. This approach was velopment agencies, and other partners. endorsed, and debt relief was linked to country poverty re- * Bank and Fund teams began to prepare training mate- duction strategies to strengthen its positive impact on the poor rials (the Poverty Reduction Strategies Sourcebook, see (see the discussion on PRSPs above). below) to support country counterpart teams in ac- quiring the necessary tools and build capacity to pre- Assisting countries affected by conflict. Some half pare poverty reduction strategies. Training and capacity a billion people live in conflict situations. The Bank has building initiatives based on the sourcebook were con- been supporting governments of countries emerging from ducted in Washington in April 2000 and Yamous- conflict through a variety of interventions including emer- soukro, C6te d'Ivoire, in June 2000. gency budgetary support (Rwanda, Tajikistan), demobi- * A paper taking stock of the experience to date was pre- lization and reintegration of combatants (Cambodia, Sierra pared for the Spring Meeting of the Development Com- Leone), co-chairing (with the European Commission) of mittee. the High Level Steering Group to coordinate the donor re- * Processes to prepare the strategies were started in about sponse to countries affected by the Kosovo crisis, support twenty countries; six interim PRSPs and two full PRSPs to the implementation of the Wye Accord in the West Bank have been prepared and presented to the Bank and and Gaza, and provision of operational support to more Fund Boards by June 30, 2000. than 30 countries and technical assistance to peace nego- tiations. The Bank also administers a Post-Conflict Trust Initiatives to address constraints at the Fund making grants to governments, international agen- global level cies, and NGOs for priority reconstruction activities. While good poverty-focused country strategies would go a Helping commodity-dependent countries deal long way towards enhancing the impact of public action on with volatility. Managing risks in highly. volatile com- poverty, many of the issues facing poor countries-debt, modity markets remains a major challenge for more than trade agreements, commodity price fluctuations, the AIDS 50 developing countries, mostly in Africa, which depend pandemic, and others-are global in nature, and require on three or fewer leading commodities for more than half measures beyond the sphere of influence of any single gov- of their export earnings. The inability to manage uncertainty ernment. Thus, the World Bank has also launched a series makes it difficult for farmers to plan crops, obtain credit for of initiatives to help countries deal with global issues. In part, inputs, and even simply recover costs. An International these efforts aim to improve the global environment in Task Force on Commodity Risk Management led by the which countries operate, for example by helping countries World Bank is exploring ways to enhance the access of de- manage risks associated with commodity price volatility. In veloping countries to user-friendly risk management in- part, these efforts aim to ensure the provision of global pub- struments widely available and used in international markets. lic goods, such as vaccines and agricultural research. Work is also ongoing to select the key global initiatives in which Supporting developing countries on international the Bank has a comparative advantage, so as to maximize trade issues. The World Bank is supporting developing the impact of Bank involvement given limited resources. countries' efforts to address trade issues in a number of areas. Examples include operational support and dissemination Improving the global environment of best practice for trade policies and for facilitating trade by financing trade-related infrastructure (ports, telecom- Enhancing debt relieffor the heavily indebtedpoor munications, export corridors) and by strengthening the countries (HIPC). Following extensive consultations with institutional, regulatory, and social environment. shareholders and NGOs, a joint World Bank-International Monetary Fund paper "Modifications to Heavily Indebted Contributing to the international financial ar- Poor Countries (HIPC) Initiative," proposed deeper debt re- chitecture. The recent wave of financial crises has under- lief through a lowering of sustainability targets and calcula- scored the need for a systematic focus on structural and tions of assistance based on decision rather than completion institutional sources of macroeconomic vulnerability and points; faster debt relief through interim relief, floating com- on the effectiveness of mechanisms to protect the poor pletion points, and front-loading of debt relief after the com- during crises. The Bank has been active in helping with set- 42 POVERTY REDUCr1ION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 ting and implementing international norms and good prac- imentation going on in sectoral projects, especially those in- tices in the areas of public sector reform, financial systems, volving service delivery, on how community involvement can corporate governance, legal systems, and social protection, be effectively used to get better design, accountability, im- with capacity building a major focus. plementation, and alignment with the interests of the poor and the excluded. It has been argued that all programs in- Promoting global public goods volving direct service delivery to the poor should have some form of community involvement, and the Bank is moving Creating vaccines against disease prevalent in in this direction. the developing world. Examples of World Bank support More innovative is the approach that advocates that com- include the Onchocerciasis Control Programme, which munities ought to be given power over the allocation of re- has virtually eliminated river blindness from an 11-country sources, before these are channeled into sectoral priorities area in West Africa, and support to current efforts to de- determined elsewhere. This would essentially push decision- velop a malaria vaccine. making on the choice of activities down to communities. While there is some experience in this area, this is essentially Improving crop yields. With support from the World a new direction of action. There are issues on pace and de- Bank, the Consultative Group on International Agricultural sign, and it will be essential to learn from experience, Research, a network of 16 international agricultural re- through structured evaluations where needed, and on a search centers, has stimulated much of the research needed country-specific basis, but this is clearly an important ele- to support the spread of new technologies, helping devel- ment of a strategic approach that advocates greater em- oping countries to ensure that food production keeps ahead powerment of poor communities. of population growth. Actions to give communities more control over resources need to proceed in parallel with actions to strengthen the ca- Nurtuing think tanks that support the design of pacity of organizations of the poor. This includes measures country-owned development policies and strategies. both to support local and intermediary organizations of the The goal of the Global Development Network (GDN) is poor, and to provide a voice for the poor in broader settings, to support and link research and policy institutes involved including international fora. This is particularly important in the field of development, and whose work is predicated to limit the extent to which decentralization of decision on the notion that ideas matter. The initiative, still in its making on resource use becomes a channel to spread cor- early phase, has proceeded on two fronts: knowledge gen- ruption down to lower levels and empower local elites, a con- eration and knowledge sharing. First, since early 1998, the cern expressed in the consultations with African NGOs on regional networks have used World Bank funding to cre- the Poverty Reduction Strategy Papers Initiative held in ate or strengthen competitive peer-review grant mechanisms Addis Ababa in February 2000. Without knowledge on re- for generating research. Second, starting with an initial con- sources and uses and the capacity for planning, budgeting, sultative meeting in June 1998, the regional networks and implementation and monitoring, communities will not be the World Bank have initiated several knowledge-sharing effectively empowered to take actions that improve their well- programs, including training for researchers, a series of re- being. gional workshops focusing on building the capacity of re- Two issues remain to be explored in operationalizing an search and policy institutes, and planning for future approach that decentralizes control over resources in Bank activities. work. The first is how to reform Bank (and other donor) Work is now underway in the context of the Strategic procedures related to procurement, audit, etc. so as to make Forum to systematize Bank involvement in global initiatives a community-based approach practical. The second is how so as to ensure that adequate resources are devoted to the to integrate community-based approaches into wider coun- activities with highest priority. try strategies, so as to ensure that decisions are decentral- ized at the appropriate level, efficiency gains are realized A program of action to empower where scale issues are involved, and global issues are ade- communities quately dealt with-one example being AIDS prevention and treatment, which seldom appears as a community pri- A major theme emerging from the WDR 2000/2001 is ority because of lack of knowledge and taboos in address- that of empowering the poor to have a say in decisions that ing the issue. Work on how to address these issues in have an impact on their well-being. There is a lot of exper- practice is ongoing. 42 ACHIEVING FASTER POVERTY REDUCTION: ELEMENTS OF A PROGRAM OF ACTION 43 Collecting, sharing, and disseminating Bretton Woods Project, an independent organization. knowledge and building capacity The report was then finalized and will be published in ad- vance of the 2000 Bank-Fund Annual Meetings. The Country, global and local initiatives need to be supported final version of the WDR 2000/2001 will be available on by the creation and dissemination of knowledge on what the Web at www.worldbank.org/poverty/wdrpoverty. works and what does not, and by capacity building. Much of what the Bank does generates and spreads knowledge, so The Poverty Reduction Strategies Sourcebook this section only touches briefly upon some key analytical work in progress. A major initiative is underway to prepare a Sourcebook to support the preparation of Poverty Reduction Strategies by World Development Report 2000/2001 country counterparts. The Sourcebook looks at key poverty outcomes (malnutrition, literacy, and others) and their de- An outline of the World Development Report 2000/2001 terminants and reviews international experience as to the pub- on poverty and development was discussed with the Board lic actions that have been shown to have an impact on such of Executive Directors (box 3.4),7 and the first draft of the determinants. For example, what actions have proven effective report was made public in January 2000. to reduce malnutrition and under what circumstances? The draft report was discussed extensively in January- What gains have been achieved over what periods of time? March 2000 through conferences and electronic consul- It also provides guidance on how to assess the poverty im- tations. Electronic consultations involving NGO and civil pact of macroeconomic and other economy-wide policies. society representatives from countries in the North and The preparation of the Sourcebook is in line with the South took place in February-March, moderated by the recommendation in the recent OED report (OED 2000) BOX 3.4 Themes of the World Development Report 200012001 The core strategy of the World Bank and of much of the other analyses of poverty conditions and causes international development community was built around Drawing on the lessons of experience from a wide range of the influential WUDR 1990O labor-intensive growth and ex- sources, the lorthcoming WZDR 20002001 is proposing that pansion in human capabilities via social service provision, poverty be attacked on three fronts: complemented by safety nets for Ihose unable to benefit * Creating opportunities, by putting in place the conditions from growth This strategy is sound as far as it goes- for sustainable economic expansion, and supporting the countries that have enjoyed labor-intensive growth and expansion of the assets of the poor, in order to provide expansion of human capabilities have experienced gains for the material basis for poverty reduction. the poor unprecedented in human history. But the strategy * Ensuring empowerment of the poor by increasing their for the first decade of the new millennium needs to address participation and voice in decision-making and con- the challenges posed by the experience of the Nineties the fronting issues of social and economic inequality where lack of progress in reducing poverty outside of East Asia, these are obstacles to poverty reduction. the double-edged impact of globalization, the heightened * Providing security against shocks at the household and concern over insecurity (not least in the wake of the East national levels and protection for those who are unable Asian crisis); the recognition of the central influence of To share in the benefits of growth how societies work, including on the effectiveness of in- Growth is a central ingredient of a development path that stitutions; the devastating impact of conflict; and the un- will bring about lasting poverty reduction. Aggregate growth equalizing processes that have accompanied the transition is powerfully associated with reductions in income poverty, of many formerly centrally planned countries into market and also correlated with reducing many other dimensions economies. of poverty (notably deprivations relating to health and ed- Many examples from the Voices of the Poor exercise, a 23- ucation) But growth alone is not enough; nor is growth a country participatory ,tudy conducted in the context of the iwfR policy that can be switched on. Direct public action and ef- 2IxJO 2001, and frm a review of 75 participatory poverty stud- feciive and inclusive informal and formal institutions are nec- ies recently completed, reveal deep concerns over the failure essarv both to underpin growth and to ensure effective of institutions, their often oppressive nature, and povverless- involvement of the poor in the development process. It is not ness, the deep concern over insecurity and vulnerability, and just growth, but a pattern of development that brings ef- the lack of opportunities for economic advancement These fective reduction of the multiple deprivations faced by the findings powerfully complement the results from statislical and poor that must be the goal of developing countries 44 POVERTY REDUCTION AND THE WORLD BANK: PROGRESS IN FISCAL 1999 that the increased focus on poverty and the new directions knowledge base in areas where there are open questions- in thinking and operationalization of poverty reduction and their results should be systematically captured in the strategy require stepping up the effort on policy guidance sourcebook and other knowledge management and training and training. As pointed out in the OED report, more materials. guidance is needed in operationalizing the micro dimensions The Public Sector Board has finalized a Public Sector of the strategy, namely institutional aspects of policy im- Strategy, which aims to strengthen Bank work in the areas plementation and service delivery. While the initial focus of governance and institution building. The strategy aims to is on low-income countries, the Sourcebook is designed to deepen the focus on long-term institution building, strengthen be relevant for all Bank clients. institutional assessments and lending that fosters good gov- The Sourcebook is being designed to form the um- ernance, while building capacity within the Bank and pro- brella for all knowledge management on good practice for viding a knowledge base for governance work. Poor people core poverty analysis, strategy, and macro and sectoral links consulted in the study on Voices of the Poor identified cor- to poverty, and covers outcome indicators, poverty de- ruption as a key obstacle; a stronger focus on the working of terminants, poverty monitoring systems and impact eval- institutions and on mechanisms to provide voice and fight uation, participation, and the links between poverty and corruption is an essential part of the Bank's poverty reduc- macroeconomic stability, human development, gover- tion strategy. nance and decentralization, infrastructure; environment, Over the last several decades, gender issues have attained private sector development, and urban and rural devel- increased prominence in the debate over development pol- opment. A first draft was discussed at a workshop in icy. There is a growing body of evidence and experience link- Washington in January 2000 and with country counter- ing gender awareness in policy and projects to equitable, parts in three countries through videoconferencing, and efficient, and sustainable outcomes in development. How- has been posted on the PovertyNet Web site.' As men- ever, these links are still not widely understood nor have tioned, workshops were held in Washington and C6te these lessons been fully integrated by donors or national d'Ivoire. policy makers. To strengthen the conceptual and empiri- To facilitate the development of country-owned cal underpinnings of the link between gender, public pol- poverty reduction strategies, it will be important to icy, and development outcomes and provide insights to provide support for capacity building in the areas of data national policy makers and donors the World Bank Gen- collection, poverty analysis and impact evaluation. The der Sector Board and the Research Group began work in Sourcebook will be an input into the design of training mid- 1998 on a Policy Research Report on Gender and programs. The Bank and several of its partners have ex- Development. pertise in these areas, and discussions are underway, The Policy Research Report focuses on gender, eco- particularly with the British Department for Interna- nomic exclusion and development policy. With gender is- tional Development and Norway's NORAD, on capac- sues cutting across the many sectors of an economy, the ity building initiatives in support of the preparation of report tries to answer some fundamental policy questions: Poverty Reduction Strategy Papers. What do policymakers gain by including gender as a cen- tral analytical and design component of development Sector strategies strategies, policies, and programs? What are the implica- tions for policy analysis and public action-by national pol- Several sector strategies are under preparation. As recom- icymakers, donors, academia, and civil society? Which mended by OED (OED 2000), sector strategy papers in- types of interventions are particularly cost effective? Where creasingly include: do policymakers face difficult trade-offs and how can these * Monitorable poverty outcome indicators (poverty in- trade-offs be addressed effectively? The current outline of tended in a multidimensional sense, as in the WDR the report includes chapters on the myth of gender-neutral 2000/2001) and intermediate indicators. policy, unequal resources by gender, the uneven playing field, * A discussion of the links between actions in the sector gender relations and household allocations, and the roles and these indicators. of public policy, civil society and the donor community. * Evaluation plans for selected program interventions A draft of the report, which draws on extensive consulta- that contribute to the realization of planned outcomes. tions with civil society as well as researchers and academics These evaluation plans should be systematically linked from outside the World Bank, can be found on the Gen- to knowledge management-they should contribute to our derNet Web site.9 ACHIEVING FASTER POVERTY REDUCTION: ELEMENTS OF A PROGRAM OF ACTION 45 Other sector strategies under preparation include en- Notes vironment, energy, and small and medium enterprises. All will look at the linkages between actions in these sectors and 1. These Board papers are available at wwwl .worldbank.org/ broad poverty outcomes and contain monitorable indica- prsp/PRSP_Policy-Papers/prsp-policypapers.html together with tors of progress. other relevant PRSP documents. 2. The term "endorsement" is not intended to constitute Conclusion formal approval of the PRSP, which is a country-owned document. It rather implies an opportunity for the Board to provide guid- While a new strategic statement on poverty reduction is not ance to Management and for Board views to be taken fully into yet ready, some key elements have emerged: work with coun- account, especially with regard to the contents of the joint Bank- tries to develop poverty reduction strategies that are genuinely Fund Staff Assessment. country-owned; work to remove global constraints; and work 3. See Poverty Reduction Strategy Papers: Internal Guidance Note to empower communities to take action for their own de- - Revised (R99-239/1), January 19, 2000, available at: wwwl. velopment; all backed up by a solid understanding of what worldbankorg/prsp/PRSP-PolicyPapers/prsp-policy-papers.htrnl. works and what does not and by wide capacity building ef- 4. See OPS 1998 and IDA 1998. forts. If there is one key message that emerges from this 5. World Bank 1999i. work it is that fighting poverty is a huge undertaking, one 6. See www.worldbank.org/gender. which will require concerted efforts by all those involved over 7. The oudine is available at www.worldbank.org/poverty/wdr- a long period of time-and the Bank is taking steps to work poverty/appr999.hrm. more closely with actors at all levels. Hopefully in a few 8. The PRS Sourcebook is available at www.worldbank.org/ years' time it will be possible to report greater progress on poverty/strategies/sourctoc.htm poverty reduction than has been the case in the past decade. 9. For more information, see www.worldbank.org/gender/prr. Annexes ANNEXA. SUMMARIES OF COMPLETED POVERTYASSESSMENTS, FISCAL 1999 Country Page Algeria .................. 49 Armenia (update)* .................. 56 Bulgaria .................. 60 Burundi* .................. 66 Georgia* .................. 69 Haiti* .................. 73 Kyrgyz Republic (update)* .................. 76 Macedonia, FYR* .................. 79 Nepal (update)* .................. 88 Panama .................. 90 Peru (update) .................. 97 Russia (update) .................. 101 * IDA borrower Note: These assessment summaries were prepared by the World Bank country teams. They are based on completed poverty assessment reports (see Annex D for full report titles and document numbers). 48 Annex A Algeria A. Overview structural changes, which are needed to restore the level of sustainable growth, are likely to increase the The Government of Algeria is revising its strategy for social costs. International experience indicates that, poverty alleviation and social promotion. This report during a transition from a centrally planned to a is a contribution to such a strategy. The report market economy, the private sector is the most analyzes and assesses the nature and dimension of sustainable engine of growth and of new jobs. poverty in Algeria, discusses the role of past and Therefore, while deepening the process of structural current public policies on poverty, and provides reform, achieving and maintaining macroeconomic recommendations for policy interventions to further stability, and promoting private sector development, improve the living standards of the poor. Algeria needs to redefine its strategic objectives in such fields as education, health, and economic Like many centrally planned economies, Algeria infrastructure so as not to undermine a broad-based tried, from independence in 1962, to guarantee the economic recovery and to be able to fully meet the living standard of the population through challenges of the future. To assist those who will be employment generation in the public sector and hurt by structural reform and facilitate the adjustment extensive social sector investment and social of vulnerable groups to the new economic protection schemes. This was possible when oil environment, the government should continue prices were high, from 1973 to the early 1980s, and enhancing safety net programs that will rely on more during this time progress in social indicators was self-targeting. impressive. But the decline in world oil prices in the 1980s made manifest the economy's fragility. The B. Poverty Incidence and Profile Trends in inefficient publicly dominated industrial structure Poverty Incidence Between 1988 and 1995 and the drop in oil revenues led to economic stagnation and to deterioration in living standards, A comparison between the 1988 Household high unemployment, and an increase in the incidence Consumption Survey and the 1995 Living Standards of poverty. The cumulative impact of these effects Survey indicates that the percentage of the population has aggravated the country's present social crisis with average consumption below the poverty line considerably. The government implemented initial increased from around 8 percent to around 14 percent reforms, in the late 1980s, to liberalize the system on during that period. Changes in poverty over time and both the political and economic fronts. However, the structure of the poverty profile in Algeria should mainly because of structural rigidities, uncompetitive be treated with caution due to comparability business practices ingrained during 25 years of problems between the surveys and to problems centralized planning, and lack of sufficient changes, underlying the measurement of living standards. the institutional reforms failed to reverse the Moreover, the choice of a poverty line inevitably economic decline during 1989-94. Efforts at involves some element of arbitrariness. However, structural adjustment were resumed and intensified the conclusion that poverty increased from 1988 to since 1994. 1995 appears to be robust to various choices of poverty lines and measures. The incidence of poverty increased significantly between 1988 and 1995. The main causes of this Trends in Social Indicators increase were the lack of economic growth and the resulting decline in employment opportunities. Some aggregate social indicators and non-income Broad-based economic growth is crucial for reducing measures of welfare, generally in education and basic poverty in Algeria. It can both directly raise the social infrastructure, compare favorably with the income of the poor by creating income-earning average for lower-middle income countries. In other activities in which they can participate, and it will areas however, such as health, indicators compare help them indirectly by freeing financial resources, less favorably. Moreover, there appear to be which can be directed to productive investments and important disparities between urban and rural areas to priority social sectors. The latter are also and among regions in access to social services. important determinants of growth. Further delays in 49 Annex A The illiteracy rate is about 35 percent (50 percent indicates that rural poverty, at about 19 percent of the decline since 1970s). The primary gross enrollment population, is more than twice as prevalent as in rate is about 99 percent, and important improvements urban areas, where it affected 9 percent of the were made in female primary and secondary population. enrollment rates over the last two decades. Beyond the primary level, however, there are considerable The poor in urban and rural areas have some differences in enrollments among regions and income common characteristics. Both tend to have larger groups: total urban secondary enrollment is about 82 than average household sizes, a large proportion of percent, compared with about 77 percent for the children and a high dependency ratio. Most own urban poor, and total rural secondary is about 64 their dwellings, with 80 percent living in houses. percent, compared with about 59 percent for the rural Poverty is strongly associated with low education and poor. Repetition and dropout rates are high and schooling. Enrollment rates are lower for the poor, increase substantially at the secondary level. particularly in secondary education, in rural areas and among women. Past progress in health has been significant. Data from 1995 indicate virtually no difference in Most of the working-age poor (16 - 59 years of age) vaccination coverage among poor and non-poor are employed, but poor households have a higher households. However, some reversals in health ratio of non-working members to working members. status have appeared in recent years. For example, In both rural and urban areas, most of the poor live in the infant mortality rate, which had dropped households where the head is a wage earner. substantially during the 1980s, is now stagnating. However, compared with the non-poor, the poor are Progress in reducing infectious diseases has also been also more likely to live in households where the head reversed, and the incidence of these diseases is is unemployed. In rural areas, people living in increasing. While the deterioration in health households where the head is working in agriculture, conditions can be presumed to affect lower income either as farmers or as agricultural workers, have groups more than others, the data available do not higher than average rates of poverty. Furthermore, provide the detailed information needed to test this most of the poor in rural areas are landless and they presumption. are involved in field crops (cereals). While diversification of income sources is more common in Progress in access to basic physical services has also urban areas for both the poor and non-poor, most been impressive. About 80 percent of the total secondary activities of the urban poor are population-and about 60 percent of the poor-have concentrated in the commercial and services sectors. access to safe piped water. As with access to health and education, however, disparities continue to be Among those not working, the incidence of poverty important between urban and rural areas, as well as is higher among the unemployed than among the across regions. Access to electricity, almost as inactive. While unemployment is more of an urban widespread in rural as in urban areas, is equitably phenomenon in Algeria, the incidence of distributed: about 96 percent of both the rural unemployment among the poor is higher than among population and the rural poor have access to the non-poor: in 1995, the unemployment rate among electricity. the poor was 44 percent in urban areas and 35 percent in rural areas, compared with 29 percent and Who Are The Poor? 24 percent for the non-poor in the two areas, respectively. Finally, among the economically According to 1995 data, about 4 million people, or inactive population, the highest incidence of poverty 14 percent of the population, live below the poverty is found among the elderly men in rural areas. line; Raising the poverty line by 25 percent increases the number of poor by 2.5 million. Thus, about 22 C. How Economic Development From 1987 to percent of Algerians are vulnerable to even a small 1995 Affected the Living Standards of the Poor deterioration in economic conditions. In both 1988 and 1995, almost 70 percent of the poor lived in rural The macroeconomic stabilization and structural areas, but the share of the urban poor has increased. reforms undertaken since 1987 failed to reverse the In 1988, the incidence of poverty in rural areas was economic decline that began in the mid-1980s: all about twice that in urban areas. This disparity did basic macroeconomic indicators continued to not change much by 1995: the headcount index deteriorate from 1987 to 1995. Important reversals 50 Annex A in economic policy during the first phase of transition employment. After the oil price collapse, to a market economy (1989-94) resulted in prolonged however, total public sector employment slowed, economic recession, accompanied by increasing and employment in the public industrial sector inflationary pressure, high external debt, growing declined. The non-agricultural private sector unemployment, and mounting social discontent. was unable to offset this decline, and average During the second phase of the transition, beginning agricultural employment stagnated over the in 1994, Algeria introduced radical structural period. Because the incidence of unemployment reforms, re-launched the stabilization and adjustment is higher among the poor than among the non programs, and restored macroeconomic balances. poor, rising unemployment in both urban and The full effects of these changes and the rural areas has been an important cause of implementation of further structural changes to the increasing poverty, particularly in urban areas. economy will take some time. The stop-and-go implementation of the reform programs since 1989 * Changes in the characteristics of unemployment and the lack of economic growth until 1995 resulted are of great concern from a poverty perspective. in a substantial deterioration of living standards for Unemployment is spreading to older adults while all and increased the incidence of poverty. the proportion of unemployed youth is declining, and unemployment among those with lower Per capita GNP declined by 45 percent, from levels of education is increasing. Since illiterates US$2,880 in 1987 to US$1,580 in 1995, and per have relatively low employment expectations, capita private consumption fell by an average of 2.5 increasing unemployment among poorly percent per year over the same period. Inequality educated household heads indicates that job seems unchanged according to the available data opportunities are lacking. surveys, but this finding requires further investigation. Several features of the economy from * Agricultural policies have had mixed effects. 1987 to 1995 are particularly relevant to increasing Because most of the poor are concentrated in poverty during that period. rural areas, the government's agricultural policies have a substantial impact on poverty. Since the * Without economic growth, disposable income late 1980s, the government has introduced declined Despite high investment rates, average reforms in agricultural input and output prices, in annual GDP growth from 1987 to 1995 was trade in products other than cereals, and has about 0.3 percent per year, while non-oil and eliminated the input distribution parastatal. As a non-agriculture real GDP fell on average by result of liberalized input and output prices, rural about 2 percent per year. Declining productive farm households have been, in the short term, sector growth was due mainly to inefficient receiving less for certain products as protection performance in the industrial and manufacturing is decreased while paying more for inputs they sectors, which continue to be dominated by large consume, with obvious negative implications for public enterprises, and lack of private financial profitability, changes in products, and investment. Returns to investment outside the product mix. While the maintenance of cereal oil sector were thus very low (five-year ICOR price supports acts as an income safety net for ranging from 10 to 40). Disposable household households that are net sellers of grain, poor income was also severely affected by the rural households are often net consumers of recession and followed a pattern similar to that basic foodstuffs. Protection of grain prices may of consumption, falling by about 36 percent in not compensate adequately for the higher cost of real terms over the period. This sharp decrease food staples in their consumption basket. was mainly caused by the decline in wage Reduced agricultural protection, which leads to income. loss of employment and income for some vulnerable rural groups, requires govemment * Without economic growth, creation ofproductive assistance in the short term. employment has been absent. The unemployment rate increased from 17 percent in * The government's land privatization reform is 1985 to 27 percent in 1994. In the past, the not yet completed. In 1987, farmlands formerly government had responded to exploding growth operated by the state (about 40 percent of in job seekers by expanding public sector Algeria's arable land), were distributed to 51 Annex A individual (EAI) and collective farms (EAC) with usufruct rights. The remaining 60 percent D. A Strategy For Reducing Poverty of arable land were already in private hands. As a result, a new farm community of individual Key elements for a strategy to reduce poverty farms and farmers has arisen. This community include: restoring and maintaining macroeconomic requires a strong, competitive market sector to balances; enhancing labor-intensive growth; speeding address its agricultural services needs. However, up privatization and public enterprise reform; because EAI/EAC farmlands are still owned by continuing agriculture reforms; investigating reforms the State, and because a program to give official needed in the labor market to promote growth; deeds to private farm owners has not yet been emphasizing human capital development and implemented, lack of secure title to land and, improving the efficiency and the quality of the social hence, fixed assets for collateral limits farmers' sectors benefiting the poor; and continuing cost- access to credit. This in turn constrains efforts to effective safety net measures for those segments of increase agricultural productivity. The rural the population unable to take advantage of income- poor have limited access to EAI/EAC land, earning opportunities. None of these elements, providing only the labor needed for cultivation. without the others, can provide sustainable reductions Most cultivation, however, is still heavily in poverty. mechanized, a legacy of machinery and fuel subsidies from the formerly public sector farms. Sustainable Labor-Intensive Growth is Prerequisite: Lack of economic growth from 1987 * Fiscal adjustment has resulted in cuts in social to 1995 is the most important factor contributing to sector spending. Despite the consistent national increasing poverty in Algeria. A primary imperative focus on improving social conditions and high for any poverty alleviation strategy should be public investments in the social sectors, the employment creation through broad-based economic returns are low and there appears to have been growth, ensuring that the benefits of growth are deterioration of some.social indicators in recent distributed across all income groups. Over the years (particularly in health and education). medium- and long-run, this can be achieved by Central government social sector spending as a promoting labor-intensive activities in agriculture, share of GDP declined from 12 percent in 1987 manufacturing, and services, especially in export- to about 9 percent in 1995; as a share of oriented sectors and, to some extent, in the informal government expenditures, social sector spending sector. In the medium term, the impact of growth on declined from 38 percent in 1987 to 29 percent poverty reduction is expected to be high. The in 1995. The aggregate impact on the poor is not elasticities of poverty measures to growth in mean clear. While some spending cuts appear to have per capita consumption expenditures suggest that, been made through increases in efficiency, the with a distributionally neutral growth path, 10 evidence is unclear. But fiscal policy pursued percent per capita growth would reduce poverty by cuts in both capital and current health and 26 percent nationally, 32 percent in urban areas, and education expenditures. This policy undermines 23 percent in rural areas. the country's prospects for future growth, because of its medium- and long-term negative Disengaging the State and Promoting the Private effects on living standards and on the Sector. Encouraging competition, promoting the productivity of the poor. Declining quality and private sector, and disengaging the State from availability of social services may result in involvement in production and trade are the three further erosion of past achievements in the social main measures needed to increase economic growth. sectors and may pave the way for higher poverty Promoting private sector growth should help reduce levels in the future. In addition, the elimination unemployment and help alleviate poverty. of food subsidies has been estimated to cost the Development of the private sector, and of small and poor about one-fifth of their purchasing power. medium industrial and agricultural enterprises in While average outlays under the safety net particular, will require State disengagement and programs appear to compensate for the loss of improvement of the investment climate. This would food subsidies, it is unclear whether pro-poor lead to an increase in budgetary savings, which in targeting by these programs was adequate turn should finance the required growth in private enough to prevent an increase in poverty. sector investment. Furthermore, progressive withdrawal of the State from productive and 52 Annex A commercial sectors would free up public funds to and more liberal trade import policies will lead finance activities beneficial to the poor, as well as to greater efficiency and competitiveness in the safety nets necessary to assist those who will be hurt long term, but in the short term it will decrease in the short term by enterprise restructuring. employment among many of the poor rural Consequently disengagement of the State should be households who will have difficulties adjusting accelerated. Reforms designed to make the economy to the new environment. To help these groups, more responsive to market signals can be expected, government assistance programs should focus on in the medium term, to improve employment and (i) labor-intensive civil works programs, and (ii) income opportunities for the entire population. economically viable alternative cropping patterns to absorb labor (i.e., labor-intensive Pro-Agricultural Growth Strategy. Since most of horticulture production, processing, and export). the poor live in rural areas, creating rural income earning opportunities (farm and non-farm activities) * Continuing progress in macroeconomic reform: should be a main priority. Policy interventions to Progress in macroeconomic reform should increase agricultural productivity could encourage continue in order to eliminate foreign exchange farmers to grow whatever crop is best suited to the market distortions as a source of anti-export, land they work. The government's abandonment in pro-import bias. 1994 of the "self-sufficiency" policy for food production is an important positive step in this Structural Changes Needed to Promote Growth direction. The government priorities should focus on: and Generate Employment. The expansion of employment may require changes in labor market Building an efficient and high productivity policies and regulations. Greater labor market agriculture and rural sector that will be more flexibility (regulations and wages) can promote competitive: The agricultural adjustment process privatization and facilitate public enterprise reform should continue in order to establish an incentive by enabling the industrial, agricultural and service suutaaapublic sectors to absorb more labor, and by allowing greater utorutues thateallowsemarketscratherctha n labor mobility. Experience shows that increases in authors tom determactiine. ,rource allo the minimum wage should be kept below the rate of across competing activities. The program should lao prdciiygot.Hwee,frhrrsac focus on: (i) natural resource management, labor productivity growth. However, ftirther research focus on (ion atural er management, i. is needed to understand: (i) the link between labor especallyin eosionand atermanagment (i' market policies and expansion of employment; (ii) delivering agricultural and rural credit, as well as irrigation services; (iii) full privatization of the effects of relaxation of labor regulations on the public lands and enterprises; (iv) reducing public poor; (iii) the importance of the informal sector as expenditures and making remaining investments source of income for the poor; (iii) the costs of labor and expenditures more efficient; and (v) fuirther (wage and non-wage); (iv) the cost of retrenchments reducing or eliminan p i is .in during the enterprise restructuring; and (iv) the agricultural trade and marketing, and promoting obstacles to obtaining productive employment for the~~ ~ ~ deeomn.fsalad mdu women, and alternatives to increasing women's the development of small and medium enterprises, access to the labor market. Improving the Efficiency and Quality of Priority * Creating the policy environment to be conducive Social Sectors. Public spending is a powerful tool to new investment: To create an environment for reducing poverty and inequity, in both the short conducive to private investment, policies need to and long terms. In the short term, poverty reduction be consistent, transparent, and non-arbitrary in measures will only bear fruit if resources are their implementation. Moreover, current legal, managed more efficiently and redirected to priority regulatory, and judicial frameworks need to be social sectors. In the longer term, primary health and reviewed for the impact they have on the private basic education are the priority sectors for Algeria in sector. its attempts to reduce poverty and improve human capital, because they are essential to achieving * Using public expenditures and targeted programs sustainable growth. Faced with growing to facilitate the adjustment of vulnerable groups demographic pressures, besides improving quality in rural areas: Reduced agricultural protection and increasing returns in the priority social sectors, 53 Annex A the government needs to prevent actual spending per capita from falling. While necessary, the introduction Health Care. The Algerian public health care of various safety net measures for those segments of system, which suffers from inefficient resource use, the population that are temporarily or permanently faces the difficult challenge of expanding and more unable to take advantage of income-earning equitably providing services while simultaneously opportunities is not a sustainable or sufficient improving quality with limited funding increases. strategy for reducing poverty. The government needs to focus on the following priorities: Education and Training. Investing in the human capital of the poor is necessary for sustainable growth * Providing good-quality basic public health and ensures that the poor have the skills necessary to services to low-income groups and in rural benefit from the jobs created as a result of structural areas. The recent deterioration in health status reforms. The government, therefore, needs to suggests that greater emphasis should be given to emphasize the following priorities: primary and preventive care, in particular for low income groups (e.g., immunization, sewage, * Ensure universal access to basic education, for sanitation, maternal education and family both females and males. Particular attention planning). should be given to reducing the large urban-rural and gender disparities in enrollment rates at the * Improve equity and expand health coverage. secondary level, with rural girls the ultimate The present bias against poorer regions and target. This would require: (i) abolishing the between rural and urban areas needs to be quota system at the secondary level; (ii) using reversed. Increasing the level of resources cost-recovery and alternative financing sources targeted towards poorer groups or regions would in higher education, in order to increase likewise increase the marginal benefit of health availability of public resources for financing spending. Extending services and coverage to basic education; and (iii) further analyzing poor and marginal groups may require the constraints to female school attendance in order government to enter into operational to better understand how to design appropriate partnerships with non-governmental policy to increase female enrollments. organizations and local communities. * Increase access to education for the rural poor. * Revise the Pricing Structure. By improving the While it is necessary to further investigate the managerial environment and by designing and causes of dropouts in primary and junior implementing a detailed monitoring system, secondary school, early dropout among the poor price discrimination can be used to target may be determined to a large extent by indirect subsidies to the poor. Geographical price out-of-pocket schooling costs (e.g., clothing, discrimination, disease targeting, and appropriate transportation, etc.) and by the opportunity cost use of lower levels of the system will need to be of lost labor. Strategies to improve the closely examined. educational profile of the poor will need to account for their financial constraints so that * Involve the private sector. To make the best use they can take advantage of increasing of combined public and private resources, the opportunities for schooling. government may choose to reduce its role as a direct provider while expanding its capacity to * Improve the quality of education and vocational purchase private health services, as well as training to better prepare graduates for labor regulate the sector (i.e., policy setting, planning, market opportunities. Improving the quality of pricing determination, and quality control). education would require the introduction of a detailed system of quality assessment. The Basic Physical Infrastructure publicly operated vocational training system, which is presently designed to address social Safe Water Supply. Government policies should considerations, needs far reaching reforms in focus on maximizing efficiency of water use and order to improve the skills of youth for the providing safe, adequate and easily accessible water emerging market economy. supplies and sanitation services, with particular 54 Annex A attention to low-income households. A higher level shows that the average transfer level under these of cost recovery will help increase both financial programs adequately compensates for the value of sustainability and sector efficiency. In particular, food subsidies lost. However, it is unclear whether experience suggests that water investments in both the coverage provided is broad enough to prevent an urban and rural areas without cost recovery may increase in poverty arising from the removal of food involve considerable waste, under-funding of subsidies. In the short term, strategies to enhance the recurrent costs, and poor service delivery. employment prospects of the poor should continue to be complemented by present safety net measures to Electricity. Worldwide experience shows that reach those who are unable to work (due to disability subsidies to electricity consumption are not cost or age) and the unemployed. The targeting of these effective in reaching and helping the poor. In programs could, however, be improved, and this Algeria as elsewhere, the non-poor, who consume would require identifying a well-focused set of much greater quantities of electricity, are probably objectives. Better socioeconomic indicators at the the main beneficiaries of high subsidies. Policy household level are needed to identify the reform should work towards reaching economic cost characteristics of poverty groups and refine a set of as the basis of electricity pricing. indicators for monitoring living conditions. These indicators could form the basis for self-targeting and Housing. The upcoming Housing operation (HSAL) improving the targeting of the poverty alleviation will help authorities to shift from a supply-driven and strategy. publicly dominated housing sector to a demand- driven market-oriented sector. It is strongly Improving the Statistical Base and Future Poverty advisable to gradually eliminate housing subsidy Monitoring. Targeting the poor requires that the schemes given the evidence that the non-poor are the government continuously identify the poor and primary beneficiaries of the current scheme and understand how they would respond to changing because of the difficulties in targeting housing public policies. Algeria's National Household subsidies to the poor. Moreover, the private sector Surveys provide a good start for describing income should take increased responsibility for providing poverty. However, better data are needed to measure housing since there is no economic or social rationale poverty accurately, develop a detailed and policy- for the public sector to do so. Promoting private relevant poverty profile, and assess changes over sector development and ensuring an adequate time. Two key steps are needed to improve the regulatory framework and enforcement should statistical base: (i) institutionalization of a single eventually be the only areas of public sector standardized, integrated and improved household involvement. information base at the national level, and (ii) establishment of a monitoring system of key Enhancing Social Assistance and Safety Net socioeconomic indicators by region and other Programs. Social assistance (e.g., cash and in-kind relevant disaggregations such as gender. The first of transfers, family allowances) and safety net programs these steps would allow collection of a in Algeria are targeted to various groups. comprehensive welfare indicator based on Unfortunately, little is known about the impact of consumption expenditures. This would represent the these programs on poverty, although it is clear that single most important and feasible means of some schemes (i.e., scholarships, family allowances) identifying the poor and tracking poverty trends. In don't reach the poorest. Given political economy addition, social indicators provide supplementary constraints and administrative and other costs of information important in determining access levels targeting, the overall transfer programs may be and effectiveness of social services, and would having a reasonable impact on living standards. indicate changes in living standards not always However, additional schemes may be needed to help captured by the income measure. Second, given the those not currently reached. The new safety net rapid pace of economic and social change in Algeria, programs (AFS and IAIG) are expected to favor the the government needs to establish a regular poor, and these may have played an important role in monitoring system to have a timely and clear picture recent poverty alleviation efforts. Analysis of the of how its policies are performing and how they elimination of consumer food subsidies and the affect the level and depth of income and non-income compensation schemes instituted to replace them poverty in the country. 55 Annex A Armenia In recent years Armenia has made significant work, employment does not guarantee sufficient prog recen yeforming its economy, restoring a earnings to support a family. Education remains a sustainable path for growth and maintaining relatively poor predictor of poverty, as those with a macroeconomic stability. Despite these advances the high level of education are only slightly less likely to recovery remains fragile. Although overall living be poor. Overall, the urban population continues to standards have improved since 1994, poverty is still be poorer than the rural population; however, in widespread, and little or no impact has been made on contrast with 1994, the incidence of extreme poverty the incidence of extreme poverty. It is urgent, was found to be higher in rural than in urban areas, therefore, to assess how the goveement's poverty suggesting that agriculture has become less effective reduction strategy can be made more effective and to as a safety net for the rural population. There now identify the role social assistance can play in this appears to be a link between household size and area. The objectives of this study are to better poverty, but the evidence is not very strong. Some understand the changes in poverty since 1994, to groups that would intuitively be considered as poor reassess options and priorities for the government's have not fared worse than the rest of the population; reassess opdutions strategy, and p i f the g overnment s for example, refugees and pensioners living alone peovmertynedutioon stpratengy,an thepovery prove owere found to have a slightly lower-than-average risk recommendations on improving the poverty focus of ofpvry social assistance programs. of poverty. Households remain poor mainly because of inactivity After the sharp descent into poverty from 1992 to resulting from the lack of remunerated employment 1994, when the vast majority of the population opportunities or assets for investment in private experienced conditions of absolute poverty, some activities, low wages, lack of mobility, poor health improvements in living conditions have been and physical isolation. Unemployment is not only achieved. The average wage doubled in real terms high-at 25 percent, as measured by SDS surveys in between 1994 and 1996, and substantial increases 1996/97-it is also stagnant. Half of the unemployed were achieved in the proportion of households with have been without work for more than a year. electricity and piped water. Nevertheless, poverty in Recent job creation has been concentrated mostly in Armenia remains widespread and severe. From the self-employment and informal activities. At the same 1996/97 Household Budget Survey, about 55 percent time, because of low wages, employment does not of the population was estimated to be living in necessarily protect families against poverty. Salaries poverty and 28 percent of the population was under constitute a mere 13 percent of the average current the food line. The average wage was still only one- income of the population, the same share as private third of its 1992 level. Vulnerability to poverty also transfers and remittances from abroad (both 13 continued to be high, with many households moving percent). Seasonal labor migration to other CIS in and out of poverty. The trend of rapidly countries has become an extremely important source increasing inequality appeared to have stabilized in of income for Armenians. The population's heavy 1994 but remained very high. In 1996/97, per capita reliance on irregular sources of income from private consumption was still 18 times higher in the top transfers, humanitarian aid and remittances, means decile than for the poorest decile. that households experience drastic extremes of income depending on the timing of the receipt. State The poverty correlates typical of market economies transfers and the declining institutional transfers of are still not evident in Armenia. The correlation humanitarian aid have not been targeted effectively between poverty and unemployment was found to be to the poor and have, therefore, had a very limited stronger than in 1994, but still very weak compared impact on poverty reduction. with non-Commonwealth of Independent States (CIS) countries. Although the incidence and depth of Evidence from the qualitative assessment indicates poverty is highest among the unemployed, the that social exclusion is increasing in Armenia and is highest number of poor consists of the working poor. closely linked to extreme poverty. The lack of a Because of the low level of public sector wages, the strong social network is a significant determinant of large number of workers on administrative leave poverty. This is most likely to affect people with without pay, and the high prevalence of part-time weak kinship ties, such as orphans and households 56 Annex A composed of single parents. However, social self-employment, and public works. Recent exclusion is also related to lack of mobility, to poor experience, in particular of the Agriculture Credit health, and to psychological passivity due to repeated Bank of Armenia (ACBA), shows that micro-credit failure to integrate into the labor market or a support programs can be successful when they are well- network. designed, with minimal subsidies, and are administered by competent financial institutions. With IDA (Armenia Social Investment Fund) and NGOs play an important role in delivering programs Worl FD Progra (WFPa supprt publi wok that trenthen ocia safey nes in ome aste World Food Program (WFP) support, public works that strengthen social safety nets in some Eastern poet eindt tmlt h oa cnm European countries such as Poland and Hungary. through the use of small contractors and to improve The role of NGOs and the private sector (foundations social infrastructure have already been successfully and private donations, mostly from the Diaspora) is implemented in Armenia. However, with the also growing in Armenia. Most of the local and exepti o a fewi, potentiao pbi intemational NO groups werecreated in th exception of a few pilots, the potential of public intermational theOegroupsa weref createdoin then works designed to create employment through labor- aftermath of the earthquake of 1988. More than intensive activities has not yet been thoroughly 1,200 NGOs are now registered and active in areas of explored. elderly and nursing care, child support, employment P generation activities, and protection of refugees and the disabled. Most operate on a very small scale, Social insurance programs, in particular old-age hampered by limited funds. State collaboration is pension and unemployment benefits, do not still at the embryonic stage. NGOs are often viewed effectively provide protection from poverty in the more as competitors than collaborators. The legal short term because savings levels, and consequently framework for NGOs is still incomplete and the levels of benefits, are very low and the poor are unfriendly. not well-targeted. In the long term, however, if the ongoing reforms are maintained, the pension system T rn v t oi he could become a more efficient tool to protect the The recet evoluton of pverty imlies th elderly from poverty. Unemployment benefits government's need to review its poverty reduction strategy. As pcannot be efficient as long as the informal economy strategy. As poverty Is still primarily a transitional continues to flourish, which will probably be the case phenomenon affecting more than half the population, fortanlon time iniArmenia Another tan are the main pillar of a poverty reduction strategy of t govrmen povertyere ion sra remains the acceleration of economic growth. Further involves protectng the poor's access to quality social efforts are needed to increase public and private services. In this area, deepening the social sector savings and to promote private investment. The reforms will be very important, in particular restructuring of the public sector needs to move . . ' forward, as do reforms in the judicial and legal strengthening primary health care services and systems. In many sectors, reforms should be general education. Additional mechanisms are deepened to increase transparency, reduce distortion needed to target health programs and education and strengthen capabilities; to restore viability of the subsidies to the poor. energy, water and transport sectors; and to meet the In this context, social assistance is one of the very human capital requirements for economic growth. few instruments available to protect the poor not benefiting from economic growth in the short and When unemployment and low wages are primary medium termn. The objective of social assistance reasons for poverty, the labor market should play a should be to protect the poorest of the poor and the role in reducing poverty and inequalities. Existing most vulnerable groups from becoming socially labor market regulations, however, are not creating excluded. For such a strategy, targeting is crucial. major rigidities. An important question asked by Social assistance should not create or promote many policymakers today is the potential role of dependence on charitable support, but provide the proactive labor market policies in stimulating growth means for those who have been marginalized to and employment. Under present economic reenter society. This presents an enormous challenge conditions in Armenia, neither job subsidies nor for Armenia because (i) the approach is contrary to training and retraining programs are likely to be the Soviet principles of social assistance on which effective in facilitating job creation. However, more values and expectations still tend to be based; (ii) can be done in the areas of micro-credit, support to both public and private resources are severely 57 Annex A limited; and (iii) the large scale of the informal difficulty of using proxies in the Armenian context economy makes it extremely difficult in practice to and the lack of home visits for the purpose of control. identify the poor. Until the introduction of the Family Benefit in January 1999, the state-run system Many changes can be made in the system to improve of social assistance-including cash transfers (child targeting of the poor. It appears that changing the allowances and social pensions), residential proxy formula would provide some improvements, institutions for a variety of vulnerable groups, and and that changing the weight of the indicators used in some very limited outreach programs for the elderly the existing formula would also improve the targeting and the handicapped-had not been poverty-targeted. outcome. On the other hand, an increased customization of benefits would not change the Aware of the system's shortcomings, the government targeting outcome. Several reforms can be has begun its reform of social assistance. In introduced to improve the administration of the Paros December 1997, it passed a decree to replace child system: decentralize the process of assessing allowances and other social benefits with a family household scores; improve public information on the benefit targeted to the poor. The introduction of this formula and the registration mechanisms; integrate a new benefit in January 1999 represents a major shift more systematic outreach by the social workers with from the categorical system, oriented to socially the help of local governments and NGOS; set up deserving members of society, to a system focusing formal and informal appeal systems; and create a on protecting the poor. The government has also mechanism for program monitoring and evaluation. taken other actions to improve outreach, train social The family benefit program will also require the workers and improve the capacity of the social development of a streamlined, credible payment services centers. Reforms need to be deepened to mechanism, and clear procedures for managers and create an adequate institutional framework to deliver staff of the social services centers, through a unified the targeted programs and to use humanitarian operational manual and training of social workers. assistance more effectively. Outreach could be After these reforms have been introduced and the improved by increasing the role of elected local impact of the targeted family benefit has been governments and NGOs in the design and delivery of assessed, more thought should be given to using the social assistance programs and by strengthening proxy means testing system to support other partnerships with state structures. In addition, programs in health, education or social services. incentive systems needs to be improved, both to encourage social assistance centers to perform Alternatives to the proxy means test for poverty outreach activities and to encourage families and targeting are limited. Because of the localized nature communities to support the poor and minimize of poverty in Armenia, geographic targeting could dependence on the state. provide an administratively efficient mechanism for targeting of social sector spending; however, this To target the new family benefit, the government would require more comprehensive and plans to use the Paros proxy means testing system. disaggregated data on poverty than are currently This system, introduced in Armenia in 1994 to available, at least until the forthcoming census is improve the targeting of humanitarian assistance, was carried out. The new capitation systems for financing the first proxy means testing system adopted in of general schools and primary health care will need Eastern Europe and Central Asia (though Russia is to take into account the large variations in poverty now experimenting with it on a pilot basis). The rates between districts and communities and targeting performance of the Paros system was incorporate a poverty weighting in the funding evaluated using the results of the Household Budget formula. Until better data are available, adjustments Survey. About 71 percent of Armenian households could possibly be based on the number of recipients report they were registered with Paros in the fall of of the family benefit in the catchment area. More 1996. Registration by decile shows very little self- assessments and analysis are also needed to explore selection in the system. Errors of exclusion were the feasibility of community-based targeting of found to have essentially three causes: barriers in health and education subsidies, such as the school- registration for the poor; problems with measurement based targeting mechanism recently introduced to of proxies; and informal procedures used by social waive textbook rental fees for the poorest pupils. workers to pre-screen beneficiaries before registering them. Errors of inclusion were related to the Considering the limitations to the development of social insurance in the short and medium term, and 58 Annex A the relatively limited scope for interventions in terms targeting and outreach to ensure that social assistance of proactive labor market policies, strengthening helps poor groups integrate into the economy and social assistance is critical to support the very poor society, and to prevent undue dependence on the and socially excluded groups that are not in a welfare system. At the same time, the system needs position to benefit from the impact of growth. A to be closely monitored and remain flexible in order number of measures can be taken to improve to adapt to an ever changing situation. 59 Annex A Bulgaria The transition from a planned to a market economy BIHS).2 While the precise level of poverty is a has not been easy in Bulgaria. Macroeconomic function of the chosen poverty line, there can be little performance has been worse than the average for doubt that there was a substantial increase in poverty Central and Eastern Europe (CEE). Output has between 1995 and 1997 since levels of consumption dropped by more, and inflation has been higher than declined substantially between the two years, and other countries in the region. As a result, households people at levels of consumption in 1995 suffered a have seen a sharper contraction in their standard of clear deterioration in their standard of living. living. It was only in 1998-when output had begun to recover and, simultaneously, inflation had been Who is at risk of poverty? controlled-that prospects for reversing the decline in living standards had emerged. Promoting a The analysis shows that about 36 percent of the recovery in living standards by continuing these population, or some 3 million people, were living in positive macroeconomic trends, accompanied by poverty in 1997. A more detailed analysis of poverty structural reforms and programs to reduce poverty, is rates among different sub-groups of the population now one of the greatest challenges confronting the reveals that poverty rates are higher in rural areas. government. Over 41 percent of rural residents are found to be poor compared with 33 percent in urban areas. Extent of poverty in Bulgaria Poverty also varies by region. The regions with the highest poverty rates in 1997 were Sofia and Plovdiv, In early 1997, over 36 percent of the population in followed by Russe and Sofia city. Together, the poor Bulgaria was living in poverty. Moreover, poverty from these four parts of the country account for 58 increased sharply over the period 1995-97, when percent of all poor. The higher-than-average poverty macroeconomic conditions took a sharp turn for the rates in Plovdiv, Sofia region and Sofia city are in worse. The bulk of the rise in poverty can be marked contrast to 1995, when poverty rates in these explained by the fall in consumption and incomes. areas were lower than average. Poverty rates are also However, a significant share is due to widening found to be higher among ethnic minorities,3 and inequality in earnings and, consequently, large households. Also vulnerable are elderly, single consumption. Since this time, the government has women, especially those in urban areas outside Sofia implemented a wide range of reforms stabilizing the city and in rural areas. economy, leading to a recovery in growth and an anticipated reduction in poverty. The poverty assessment relies on data from two specially commissioned multi-purpose household surveys conducted in 1995 and 1997,' as well as 2 Since 1991, when poverty was first formally research undertaken by the government, Bulgarian recognized in Bulgaria, the country has lacked an and foreign researchers, and intenational agencies. official poverty line. The absence of a meaningful To measure poverty, the poverty assessment uses a official poverty line has complicated the task of poverty line equal to two-thirds of average determining the level of and monitoring changes in consumption in Bulgaria in 1997 (as measured by the poverty. A recently concluded joint project of the Ministry of Labor and Social Policy and ILO/UNDP has however made specific recommendations on the The surveys were carried out by Gallup subject. The poverty line used in this report (BGL International, Sofia with technical support from the 45,466 in June 1997 prices) is close to the lower Ministry of Labor and Social Protection, the National poverty line (BGL 40,000) recommended by the joint Statistics Institute, and the World Bank. They shall team. be referred throughout as the Bulgarian Integrated Household Survey (BIHS) with the relevant date- Over 40 percent of Bulgarian Turks and 84 percent 1995 or 1997. of the Roma were found to be poor in 1997. 60 Annex A Characteristics of the poor households with heads who had primary education or less, and households more reliant on social transfers The level of education and, therefore, earning or a mix of incomes are over-represented among opportunities of the poor appear remarkably lower those who are found to be poor in both survey years. than for the population at large. As a result, labor In general, households found to be "persistently" force participation rates are lower and unemployment poor between 1995 and 1997 are similar to those rates are higher among the poor.4 Due to their found to be poor in 1997. The only exception has to greater employment opportunities and higher do with residence in Sofia city. While residents of earnings, the non-poor rely more on wages as their Sofia city show higher-than-average poverty rates main source of income, while poor people depend and are, consequently, over-represented among the more on social transfers, including pensions, or a mix poor in 1997, they are under-represented among of incomes. individuals who find themselves to be "persistently" poor. This suggests that the higher poverty rates The poor have lower access to public services observed in Sofia city in 1997 may be an aspect of compared with the rich, especially in rural areas. The the 1996-97 crisis and may well change in the future poor also have lower access to proper sanitation and given that Sofia city residents are relatively well- telephone services. They rely more heavily on coal placed to benefit from economic growth (due to, for (for both heating and cooking), wood, and kerosene example, their significantly higher educational as sources of fuel. In rural areas, 76 percent of the achievements). poor use coal or kerosene stoves for cooking compared with 62 percent of the non-poor. In urban Labor market developments and poverty areas, where access to district heating is greater, 55 percent of the poor still rely on wood or coal, Looking more closely at the labor market we see that compared with 35 percent of the non-poor. Within the labor market in Bulgaria is fairly stagnant. the city of Sofia itself, 20 percent of the poor use Employment rates have risen by a fraction in the past wood or coal for heating, compared with 14 percent four years (from 43 percent to 45 percent of all of the non-poor. people aged 15 or older), and unemployment has remained high. Although unemployment has Not surprisingly, the poor allocate a larger amount of declined recently, it may increase again (at least in their budget to food (72.3 percent compared with the short run) as the restructuring process accelerates. 68.5 percent for the non-poor) and consume larger amounts of cheaper staple grain commodities. In The turnover of the unemployment pool is low. An fact, they spend nearly 29 percent of their budget on unemployed person has a low chance of finding a cereals compared with 14 percent for the non-poor. job.5 As a result, many of the unemployed become They also spend a larger proportion of their budget discouraged and withdraw from the labor force. on energy and fuel (14.2 vs. 11.9 percent). Although Average job search duration is long and, thus, the out-of-pocket spending on education does not appear incidence of long-term unemployment is high. This is prohibitively high, enrollment rates in primary and a worrisome feature of the Bulgarian labor market, as secondary education among children from poor the long-term unemployed face increasingly lower households are below average. chances of finding a job due to erosion of their skills. The nature of the BIHS, which followed the same The problem of unemployment in Bulgaria is households over 1995 and 1997, allows us to accentuated by a skills "gap." Many of the examine the characteristics of those who remained poor over th- period covered by the two surveys. Residents of rural areas, ethnic minorities, large According to the BIHS, the probability that an unemployed person will find a job within twelve months is around 6.2 percent. This is roughly one- The unemployment rate among the poor (33 sixth of the yearly exit rate from unemployment percent) is over twice as high as among the non-poor observed in CEE countries such as Poland, and less (15 percent). Only one-third of the working-age poor than one-eight of those prevailing in high are employed, compared with almost one-half of the unemployment Western European countries such as non-poor. Spain. 61 Annex A unemployed will not be able to find a job even if replacement or a poverty relief function there are enough vacancies because their educational satisfactorily, nor-given the large numbers of attainments fall short of those required by employers. beneficiaries-is it able to raise individual benefits to Young, low-educated persons, especially those meaningful levels without upsetting the fiscal belonging to ethnic minorities, face the highest risks balance. Despite relatively high costs, the quality of unemployment. The link between low educational and impact of services within some unemployment attainment and unemployment is particularly strong. programs and social assistance is open to question. Moreover, the present system is probably acting as a Many of the unemployed in Bulgaria do not look hindrance to economic growth, inter alia by raising intensively for a job and confine themselves to labor costs in the formal sector and by encouraging visiting labor offices. At the same time, they have increased informalization of the economy. excessive wage expectations; that is, the wages they are prepared to work for are much higher than what In practical terms, while the incidence of cash they can bargain for. These unrealistic expectations transfers is higher among the poor, and the average may contribute to the persistence of high benefit received (with the exception of pensions) is unemployment. The receipt of unemployment higher for poor households, cash transfers are a benefits does not appear to reduce the intensity of job relatively small share of total household expenditure. searching. They have a relatively small impact on poverty: only about a third of (ex-ante) poor households are moved As mentioned above, one factor accentuating poverty out of poverty as a result of social benefits. This can in Bulgaria has been the increase in earnings be explained by a combination of factors: low inequality. Between 1995 and 1997, there was a incidence, low benefit levels, and, to an extent, poor sharp increase in the incidence of low pay. Low pay targeting (over a third of households receiving in Bulgaria is mainly associated with low educational various forms of social assistance, and 58 percent of attainment, but also with working in a low paying those receiving child allowances were not poor industry, such as agriculture, trade, and the social before the receipt of the benefit). services. The incidence of low pay is higher in the private sector. More generally, private sector jobs Turning to in-kind transfers, we see that education are less attractive than public sector jobs, although spending is, more or less, equally distributed across this may be reflective of a greater degree of under- the population, with the poor benefiting the most reporting of earnings in the private sector as a form from spending on kindergartens and basic education. of payroll tax evasion. In particular, the private Health spending, however, favors the rich because sector offers substantially lower educational premia, the bulk of public health spending occurs on which is peculiar to Bulgaria, since in other transition hospitals, which tend to be used less frequently by economies well-educated workers are better off in the the poor. private than in the public sector. Conclusions and Recommendations Many of the poor do work, but their "earning power" is weaker than that of the non-poor. Thus, the A. Ensuring macroeconomic stability and "working poor" account for a substantial proportion undertaking structural reforms of all poor. To a large extent, this reflects the fact that the poor are employed in low-productivity Given the magnitude of output decline (over 30 industries, such as agriculture, or work in low-paying percent since 1990) and the limitations imposed on jobs in the social services. In families with workers, the government by the need to maintain fiscal poverty is a consequence of low earning capacity and discipline, it should be clear that sustained growth, low effective labor supply. Both factors tend to go which raises wages and reduces unemployment, will hand-in-hand: households with lower earning power be critical to reducing poverty in Bulgaria. It will be tend to have a lower number of earners. necessary to establish and maintain a sound macroeconomic environment conducive to growth, The incidence of public spending reduce inherited price distortions, and create conditions conducive to private sector development. Bulgaria's system of cash transfers (both social The new government, which has been in place since insurance and social assistance), as currently April 1997, has taken a number of steps to restore structured, is unable to fulfill either an income macroeconomic stability, and has initiated a program 62 Annex A of structural reform, including privatization in the creating new jobs. At the same time, sound labor banking, agriculture and financial sectors. A key market policies can encourage employment growth. first element of a poverty reduction strategy for Bulgaria would, thus, consist of maintaining the Policies for encouraging the growth of employment, current policy environment and canrying through relative to the development of skills and much-needed reforms. qualifications of individuals, include: One fact highlighted earlier is the greater incidence * Long-term reform of the education system: In of poverty in rural areas in Bulgaria. The growth of order to take full advantage of a growing the non-agricultural sector, coupled with agricultural economy individual skills, especially of the reforms that provide titles to land, develop land unemployed, will need to be upgraded. Bulgaria markets, increase the supply and timeliness of does have a well-educated, skilled labor force. agricultural inputs, and improve marketing As in other economies, there is scope for arrangements will all have an important role in improvement and over the long term, there are at raising average incomes in rural areas, thereby least two areas of reform in the education sector reducing poverty. It will be important to ensure that that would assist in expanding the labor market any initiatives to raise agricultural productivity (e.g., opportunities of the population: (i) greater extension services) do not bypass the poor. An emphasis on raising the educational achievement investigation into the factors that restrict access to the of the population as a whole, by increasing use of credit, or inputs, by poor agricultural secondary enrollments; and, (ii) greater emphasis households would also need to be undertaken to on general secondary education at the expense of guide policy on how to (if possible) reduce these obsolete or non-transferable vocational skills. distortions. Raising enrollments among children from Major sectoral reforms are also likely to occur in the poor households: While education reform is energy sector. Given the existing structure of probably best considered a medium-term household spending, it will be important to design objective, the fall in enrollment rates among suitable safety net schemes to protect the poor from children from poor households is of immediate unaffordable price increases, and to prevent the concern. Reversing these negative trends will be adjustment of prices to economic levels from having important if children from poor households are an adverse impact on the poor not to be at a disadvantage in the future labor market. Whatever combination of policies and measures is adopted by the government, it will be important to * More and better labor market information: monitor poverty on a regular basis, as well as to While the report finds no evidence that the monitor the effectiveness of poverty alleviation system of unemployment benefits has significant programs. Perhaps the first step would be to finalize disincentives for job searching, the unemployed a poverty line, drawing upon the recommendations of do seem to have excessive wage expectations, the joint MOLSP/ILO/UNDP study, or using the which may get in the way of their accepting jobs poverty line used in this study (which is close to the that are offered to them. This suggests that there lower poverty line of the MOLSP/ILO/UNDP study). is a role for public employment services to Follow-up work on national and regional trends in provide more and better information on what poverty and the incidence of public spending will be employment prospects exist and at what rates of necessary. Closer analysis of a number of social remuneration, thereby facilitating a reduction in protection initiatives is also warranted. The capacity unemployment. to undertake such an analysis will need to be developed. * Improvements in active labor market programs (ALMPs): In addition to running the B. Encouraging growth in employment employment services, the government also conducts three ALMPS: (i) temporary works, (ii) Unemployment in Bulgaria is high and is one of the wage subsidies, and (iii) training. Given the major causes of poverty. Economic growth is essential to increasing the demand for labor and 63 Annex A limitations on resources,6 it would be important leave; reforming sick-pay regulations; and easier to evaluate existing programs from an outcomes, termination for misconduct or economic reasons. targeting, and cost-effectiveness perspective. The findings could then be used to guide policy Poverty can be expected to fall given a return to development. International evidence suggests economic growth and a rise in average incomes. that ALMPs are often most effective when they Simulations indicate that with uniform growth of 3.0 are used to assist the most disadvantaged groups percent per annum for 5 years, the proportion in in the labor market. From this point of view, the poverty would fall from 36.0 percent to 27.6 percent, emphasis that the new Act on Unemployment a reduction of over 23.0 percent. At a higher rate of places on ALMPs aimed at the youth, the long- growth, say 5 percent, the proportion in poverty term unemployed, and ethnic minorities, is to be would fall to 25.1 percent after 5 years, a reduction welcomed. The recently announced review of of over 30.0 percent. ALMPs by the government is a very positive step. The simulations ignore changes in inequality, or the fact that not all individuals may benefit equally from Factors that would encourage employment generation growth. Changes in distribution, as well as growth, include: will have an impact on poverty. With no change in inequality, poverty will fall from 36.0 percent to 33.7 * Reduction in social insurance taxes: High percent, if there is one-time growth of 4 percent; 32.0 payroll taxes associated with social insurance is percent, if growth is 6 percent; 30.9 percent, if likely to have a strong negative impact on growth is 8 percent; and 29.9 percent, if growth is 10 employment creation in Bulgaria, particularly in percent. With worsening inequality, the poverty- the formal sector.7 A significant reduction of reducing impact of growth is diminished. A these tax rates will primarily depend on the widening of the distribution by as much as occurred successful implementation of pension reform between 1995 and 1997 would require rates of (pensions are the largest source of tax), as well economic growth of 6 to 8 percent to merely as the continued reduction of unemployment maintain current poverty levels. insurance contributions. Likewise, the 6 percent payroll tax that will be imposed by the Health C. Strengthening the social safety net Insurance Fund from mid-1999 will need to be offset by corresponding reductions in other These simulations draw attention to the fact that a payroll taxes. strong social safety net that targets those who are least likely to benefit from growth will be essential to * Encouraging greater flexibility in the market reducing poverty. The system of social assistance in for labor: The Labor Code governing labor Bulgaria prior to 1998 suffered from some key market institutions in Bulgaria has had several drawbacks: revisions and is generally well-suited to the needs of a market economy-avoiding some of * fragmentation; the most restrictive provisions found in some * inadequate funding; neighboring transition economies (e.g., * poor targeting; and prohibition of fixed-term, part-time and * poorly defined financing responsibilities. additional work, restrictions on enterprise-level collective bargaining, unduly onerous standards As a result, overall coverage of the system is very for firings and layoffs, etc.). Nonetheless, further low. The overlap of programs with different improvements can be made, including: reducing targeting mechanisms undermines the ability to reach requirements with respect to maternity and child the poorest groups in the population. Over a third of households receiving social assistance are not poor (ex-ante). The overall level of spending on social assistance, especially on income support, is low: 6 Total spending in 1996 on all ALMPs was less than spending on all social assistance was 0.7 percent of 0.25 percent of GDP. GDP; and spending on income support (the Basic Minimum Income (BMI) program) was 0.07 percent 7 Social insurance taxes in Bulgaria currently average of GDP in 1996. This should be raised to a level of 47.5 percent of net wages. 64 Annex A 1.5 percent of GDP to provide a well-targeted basic minimum income guarantee. Improved targeting: In general, social assistance in Bulgaria appears to be relatively Reforms in four areas, some of which have been well-targeted. However, there is scope for underway since 1998, would increase the poverty improvement. Discretionary social assistance reduction impact of the social assistance system: payments, for example, often tend to be regressive (i.e., they accrue disproportionately to * Reduced fragmentation: Following the passage the non-poor). The government has already of the Social Welfare Act early in 1998, the taken steps to reduce the scope for leakage from government has taken key steps to reduce the system by altering the provisions for one-off fragmentation, including combining eligibility discretionary payments to households. There is criteria for the BMI program and the program of a need to further analyze the extent of leakage in-kind support for utilities. However, there is from the BMI scheme in order to determine and scope for further consolidation. In principle, this reduce the extent of leakages. could proceed to the point where the means- tested BMI program becomes the principal * Clear responsibilities: The decentralization of source of social assistance. social assistance in Bulgaria has generally not worked well. However, the new Social Welfare * Increased funding: In addition to expanding the Act is a step in the right direction. It clarifies envelope for social assistance, as indicated institutional roles and helps strengthen the above, more resources could be made available administrative capacity of the system. In order to for the poorest by looking for savings within improve the viability of the scheme, the BMI programs. Increased funding could also be program will be funded on a cost-sharing basis sought by cutting back on untargeted programs. between central and municipal budgets, and Perhaps the most significant program in this incentives for municipal authorities to meet context is maternity leave for uninsured mothers, social welfare payments on time will be which costs over twice as much as the BMI introduced. The central government budget will program (0.2 percent of GDP versus less than provide earmarked funds toward program costs, 0.1 percent for BMI), and which benefits rich as well as an additional contribution to the and poor alike. Finally, increased NGO general municipal budget if social benefit participation in the provision of social assistance payments are made on time. Implementation and social welfare is likely to further expand deserves careful monitoring to ensure that the funding, as well as raise the standards of care for program develops on the lines envisaged. clients in social care institutions. 65 Annex A Burundi In late 1993, Burundi plunged into a deep political damaged; health and educational personnel have and economic crisis from which it is yet to emerge, withdrawn to urban areas to avoid security risks; and as a wave of violence swept the country following agricultural projects funded by donors have closed. the assassination of the first democratically elected It is estimated that over one-third of local water president in 1993. The security situation continued supplies have been destroyed or ceased to function to deteriorate through mid-1996, and was due to lack of maintenance since the crisis. accompanied by a 21 percent drop in GDP and a sharp rise in inflation. To add to the woes caused by Causes of the rise in poverty. The crisis continued insecurity, following the 1996 coup d'etat exacerbated structural problems in the agricultural which brought President Buyoya back to power, sector, where the limits of extensification, declining Burundi has been subject to an embargo by soil fertility, low use of modem inputs and adverse neighboring countries. The embargo was suspended incentives for investment in the state-controlled cash on January 23, 1999. The security situation has crop sector had already set in motion a slide in yields. shown some improvement since the change of The crisis and the embargo have exacerbated these regime, and the new government is seeking to problems in the form of looting and destruction of achieve a real paradigm shift in the peace process household goods and livestock, population through external negotiations with the rebel displacement, and collapse of distribution channels movements and through an internal political process for agricultural inputs. The embargo has raised the to increase popular participation in decision-making. price of non-food goods in rural areas because of the rise in both import and petrol prices: the impact of Changes in the poverty profile. The poverty profile this, however, is cushioned by high food shares in the has worsened rapidly since the beginning of the budget of poor rural households. crisis. Rural poverty incidence is estimated to have increased by 80 percent since 1993, with a doubling In urban areas, many unskilled workers have been of urban poverty incidence. Poverty depth is laid off from formal private sector enterprises in estimated to be among the highest in sub-Saharan response to a drop in industrial GDP of almost 60 Africa. Over 14 percent of the population were percent since 1992. The urban informal sector has displaced from their homes during 1997. also suffered, as enterprises have closed and laid off workers due to difficulties in the supply of materials This has resulted in a sharp deterioration in social from abroad and from the interior of the country, and indicators, which had shown a steady improvement a drop in demand for services from formal sector and in the years preceding the crisis. Malnutrition, expatriate workers. Rapidly rising urban prices measured by wasting among children under five, is following the 1996 embargo-with inflation at 28 estimated to have increased from 6 percent to 20 percent in 1997-have further eroded the real percent since 1993. Reported cases of major incomes of the urban poor. endemic diseases have increased by over 200 percent, and HIV prevalence is rapidly rising. In addition to population displacement and damage to Primary school enrollment has plummeted since the infrastructure, a sharp drop in the availability of crisis, from 70 percent to 44 percent. National social financing for health and education is a major factor in indicators show an even worse picture at the regional declining access to, and quality of, social services. level: four provinces had primary school enrollment Government revenue has fallen as a result of the below 30 percent in 1996-7, reaching a nadir of 9 contraction of the tax base, from 20 percent to 12.6 percent in one of the most violence-stricken areas. percent of GDP since 1992. The withdrawal of donor developmental aid-from $300 million per The tragedy for the poor is that, at a time of annum in 1990-1992 to $39 million in 1997-has widespread food insecurity, declining monetary drastically reduced the funds available for incomes and rising health problems, the provision of reconstruction and social investment. public services has been drastically reduced. Many schools and health clinics have been destroyed or 66 Annex A The need for action on social protection. The by the crisis in 1993. This unfinished agenda poverty trends described above represent a slow slide includes several reforms that are likely to have a into crisis. Burundi has averted a full-scale direct impact on the incomes of poorer households, humanitarian emergency since 1993, but the namely: (i) decreased reliance on export taxation, population is inexorably sliding-via declining which should improve coffee producer prices; (ii) health and nutrition, and rapidly eroding real accelerated liberalization in the pricing and incomes-towards a situation where households have marketing of cash crops; and (iii) simplification and no buffer against external shocks. In other words, reduction of tariffs, which should encourage growth many households are the right side of the survival in labor intensive industries. In addition, a number of line by a whisker; a bad harvest or another round of reforms that aim to improve fiscal sustainability, the population displacements can send them over the efficiency of the civil service, and the poverty edge. However, the majority of the population is still incidence of public expenditure remain outstanding, able to respond to development initiatives, since they namely: (i) improved transparency of budget are still in their own homes, in regions where relative allocation and execution; (ii) further increases in security prevails, and still undertaking their normal budgetary allocations to the social sectors; (iii) rapid economic activities. The same is true for institutional progress on privatization, and use of funds generated and social capital; the public administration and local for public investment; and (iv) civil service reform, institutions are damaged but still holding together, including a review of incentive and benefit although this may not be the case if current pressures structures. These reforms are critical for the success continue. Investment in social protection is, of poverty reduction strategies, once conditions have therefore, an economic and moral imperative: the stabilized, in providing for a more effective civil cost of rebuilding economic, political and service to implement development strategies, and administrative systems will increase exponentially higher current expenditure on the social sectors to the further the social situation is allowed to staff, equip and maintain investments in deteriorate. Increased efforts by donors and by the infrastructure. government to provide the population with a minimum level of social protection represent an Secondly, macroeconomic reforms and a long-term investment in Burundi's human and social capital. solution to the conflict would permit more comprehensive development investment. Priorities However, there are substantial constraints in for investment under these conditions would include: Burundi's political, economic and policy (i) geographical and sectoral expansion of environment, which, if not addressed, are likely to infrastructure rehabilitation and public works limit the effectiveness of social protection initiatives. programs; (ii) programs to address structural reforms These include: (i) the security situation, which makes in agriculture, including a review of land reform it impossible to undertake normal developmental options, investment in marshland drainage, fertilizer activities in about 20 percent of the territory; (ii) very promotion, rural finance programs and the limited public resources, due to contraction of strengthening of extension services; (iii) a line of government revenues, the dramatic drop in external credit programs and vocational training for the urban aid and the increasing burden of public debt private sector; (iv) in health, the development of repayments; (iii) inadequate social orientation of more sustainable finance mechanisms, an expansion government budget allocations, with high military of contraceptive promotion programs to limit expenditure and large subsidies to secondary and population growth, and more vigorous efforts for tertiary education; (iv) regulatory and incentive AIDS prevention; and (v) in education, the barriers, in particular low producer prices for state- resumption of investment to expand secondary controlled cash crops and lack of land tenure school enrollment and achieve universal primary security; (v) limited institutional capacity, due to education. declining compensation-and, as a consequence, professionalism and skill levels-in the civil service, The need for action. The situation remains very relatively low civil society organization, and the fragile for the majority of the population. Greater withdrawal of expatriate staff. intervention is urgently needed in social protection to diminish vulnerability to a full-scale humanitarian Firstly, a more stable political and security situation emergency. Responsible and visionary action by would permit the resumption of the program of government and opposition groupings is needed to structural economic reforms, which was interrupted ensure that political conflict does not further 67 Annex A jeopardize the prospects for recovery, and to maximize the poverty orientation of public policy To ensure a minimum level of sustainability for these and expenditures. Given the limitations on domestic social protection initiatives, the critical short-term revenues, a resumption of international aid flows is issues in macroeconomic management are control of also desirable to assist in financing initiatives to the fiscal deficit and an improvement in the structure protect households from the vulnerability caused by of government expenditure. In other words, ensuring five years of insecurity. Without public assistance in that any gains in social protection are not rebuilding their asset base, poor households in immediately eroded by escalating inflation, and Burundi remain too vulnerable to income shocks, and ensuring that sufficient current expenditures are are unable to break out of the vicious cycle of allocated to the social sectors to protect investment in declining incomes, ill health and malnutrition. As a infrastructure rehabilitation. To be sure, farmer interviewed during the participatory poverty macroeconomic management will continue to be assessment described the problems posed by the "crisis management" as long as military instability downward poverty spiral of the last five years: "if the and the embargo persist, but even within these fairly public powers do nothing to break this circle, we will rigid constraints, some actions may be taken to all disappear." improve outcomes. These include: (i) actions to increase revenue, through the elimination of all Under these circumstances, what can be done? discretionary tax and customs duty exemptions'; a While there is little-to-no potential for growth- concerted effort to collect back taxes; and programs oriented development interventions under current to increase the efficiency and effectiveness of the circumstances, there is scope for undertaking basic revenue departments; (ii) a reorganization of the social protection initiatives that will help preserve budget to increase the poverty incidence of Burundi's human and social capital and prevent government spending, in particular through a phased further deterioration of social indicators. Such reduction in military expenditures; a reduction in the initiatives should: (i) be targeted regionally, to take subsidy to secondary schooling (accompanied by an account of the dramatically different conditions increase in the school fee); and the imposition of hard prevailing in different geographical areas; (ii) be budget constraints on all public enterprises. designed and implemented through a participatory approach that increases community involvement in What could be achieved if the economic and project design and community ownership of local political context improved? The political situation infrastructure; and (iii) combine efforts to rehabilitate remains fluid; the government has recently launched infrastructure in the more stable rural regions, with an initiative to debate revisions to representational activities to boost household incomes, to ensure that structures and constitutional powers, with the aim of households can access the services provided. reaching a more stable political consensus. If this initiative bears fruit in halting civil conflict and Appropriate mechanisms for delivering social dismantling the embargo, a more comprehensive protection initiatives include the use of social fund or range of poverty reduction initiatives would be community development project instruments, which possible. can work directly with communities to ensure that projects are sustainable and respond to priority needs. Priority activities for social protection under such projects should include: (i) "jumpstart" distribution of inputs and seasonal credit for agricultural activities; (ii) group grants and/or loans for agricultural investment and for rural non-agricultural activities; (iii) labor-intensive public works programs for local infrastructure rehabilitation; and (iv) credit for informal sector enterprises in urban areas. These will need to be backed up at the national level by efforts to strengthen agricultural extension services; In particular, there is scope to rapidly increase continued financing of medical imports and revenue through the elimination of import duty initiatives to strengthen pharmaceutical distribution exemptions, which amounted to nearly 50 percent of channels; and teacher training for new unqualified potential import duty revenue in 1993. teachers, together with provision of school materials. 68 Annex A Georgia A significant fraction of the population in Georgia Most poverty is transient. At the new realistic is poor. Years of crisis and civil war caused the poverty line, only about 2 percent of the population impoverishment of a large section of the Georgian remains poor for a full year. Nearly 80 percent of population. In the last five years, greater social and the poor escape poverty over the course of a year. political stability, along with the resumption of Employment status of the household is the strongest economic growth, have brought about a significant correlate of long-term poverty. Households where reduction in poverty. Per capita consumption has the head is inactive or unemployed face the highest increased in real terms for almost all Georgian chances of being chronically poor. The majority of households, and increased the most for those in the the chronic or long-term poor are urban (73 lowest quintile of the distribution. However, about 11 percent). Nearly one-half live in Imereti (48 percent of the population remains poor when percent), and another one-fifth (2 1percent) in Tbilisi. measured by a realistic standard; and nearly 43 percent of the population can be considered poor if Growth can have a big impact on poverty. Simple measured by the (much more generous) official projections of poverty rates under different growth poverty line.9 The most important correlates of scenarios reveal that economic growth can have a poverty in Georgia are employment status and very big impact on poverty. The elasticity of the ownership of productive assets. Those who are poverty headcount with respect to growth in average unable to work (the inactive, elderly or disabled) or per capita consumption is very high, and fast growth do not have work (the unemployed) are much more leads to a more than proportional reduction of likely to be poor. In general, urban poverty is more poverty rates. Growth of 5-6 percent per year, for widespread, deeper and more severe than rural example, would lower poverty to one-half its current poverty, although recent trends suggest that this may level in just 5 years. Sustained economic growth and change in the future. stable macroeconomic performance are, hence, crucial components of any poverty alleviation Regional differences in standards are very wide, strategy. with the incidence of poverty in the poorest regions being several times that in the richer areas. The downside of this high growth elasticity is that Regardless of the poverty line used, Adjaria and poverty is very sensitive to a slowdown in per capita Samegrelo appear to have the lowest incidence of consumption growth. A slowdown in GDP growth poverty while Imereti has the highest. No region is (because of the Russia crisis, for example) or GDP exempt from poverty or from extreme poverty. The growth that does not translate into growth in per region with the lowest incidence of poverty, capita consumption, would have an immediate Samegrelo, still has 4.3 percent of its population that negative effect on poverty rates. can be considered extremely poor. The poorest region, Imereti, has three times as many. The impact of growth can be offset by rising inequality. Income inequality in Georgia is very high. In 1996, the Gini coefficient for money income was 0.59-a level comparable to the most unequal 9 Poverty rates in Georgia are also very sensitive to economies in Latin America. In this context, any assumptions made about economies of scale in the worsening of the income distribution would household. Our estimates for Georgia suggest that to undermine the positive impact of growth. If the achieve the same welfare as a single person spending distribution were to worsen to the same level as in I lari, a family of three would spend only 1.8 lari- Brazil (the most unequal country in the world, with i.e., there are very significant economies of scale. But an income Gini of 0.61), the economy could grow at if we simply counted the number of people in a an impressive 11 percent each year, and it would still family and used a per capita measure (as is done in take almost 10 years to restore the incidence of neighboring countries), we would get much higher poverty to present levels! The government's capacity measures of poverty. On a per capita standard, the to tax and redistribute income will, hence, play a very poverty rate in Georgia at the end of 1997, under the significant role in determining poverty outcomes in new poverty line, would have been 32 percent. the future. Without a significant improvement in this 69 Annex A capacity the future prognosis for poverty in Georgia looks bleak. Poverty in Georgia is intrinsically linked to labor market status. The collapse of productivity and real Regional differences in poverty will not disappear incomes following independence was the main cause with growth. The above scenarios all assume that of impoverishment of the Georgian population. And growth is uniform across the whole economy. In inactivity, unemployment and lack of sufficiently reality, growth rates are likely to differ across sectors remunerated employment remain the root cause of and consequently across regions, and poor regions why families get stuck in poverty. Labor market may well lag the average in growth. Carrying out the adjustment following the collapse of output was projections while allowing growth to vary across achieved mainly through the growth of self- regions in response to sectoral composition shows employment, and through the reallocation of labor exactly that: poor regions such as Imereti or Guria towards small-scale agriculture. The resulting grow more slowly than the average. As a result, informalization of employment has dampened the existing regional differences in poverty do not impact of the crisis and served to protect the poor. disappear quickly with growth. Addressing these But it remains a short-term response. Today, a large differences may require special "regional" and growing fraction of the Georgian labor force still interventions, particularly aimed at Imereti, which is relies on self-employment as the primary means to home to the bulk of the poor. earn an income. For some, this is an avenue for earnings mobility and growth; for the majority, Reported incomes do not accurately measure real however, self-employment remains constrained to consumption. There is a very large discrepancy low-productivity agricultural or trading activities, between household cash consumption and monetary with little earnings stability and little potential for incomes, equivalent on average to about 40 percent long-term earnings growth. Prospects for future of total consumption. The gap between consumption growth in living standards hinge critically on the and income is lowest at both ends of the distribution economy's ability to generate new private (for the poorest and richest quintiles), and highest in employment, and to reallocate labor away from these the middle, where it represents about 45 percent of low-productivity activities into higher value-added total consumption. Almost all of the observed gap is sectors. The biggest constraints are the lack of between reported total cash expenditures and investment and financing sources. reported total cash income, and represents underreporting of money incomes. The magnitude of The rural economy has played a crucial role as a underreporting is positively associated with the safety net during the crisis years. Building on the degree of informalization of household employment, almost universal access of the rural population to and with the prevalence of "gray" economic land, the rural economy has been able to absorb a transactions. Underreported cash incomes are largest huge inflow of labor released from other sectors. As among those employed in restaurants and hotels, for a result, overall unemployment in Georgia has whom unreported tips are an important fraction of remained row. The downside, however, has been a income, and among health care workers, who rely on sharp decline in labor productivity and consequently out-of-pocket payments by patients. But weak growth in rural incomes. In contrast to what underreporting is also large for those employed in the has happened in urban areas, real rural incomes have public administration and in public utilities (perhaps remained practically stagnant during the recent high reflecting widespread bribes or other petty corruption growth period, despite a record grain harvest and practices), as well as for those employed in favorable weather conditions. This poor performance education. can be attributed to unequal access to inputs complementary to labor (fertilizers, tractors, capital As "formal" incomes tend to be reported accurately equipment); barriers to land transactions and (estimates from the household survey of public sector consolidation of holdings; lack of market access and wages and pensions are close to budget numbers), we information; scarcity of rural credit; and limited off- assume that the gap between total monetary spending farm earnings opportunities. and incomes of households represent informal sector incomes. Using this methodology we arrive at an A small but well targeted safety net can play an estimate of the share of informal economy equal to important role in reducing poverty. The collapse of about 28 percent of GDP, or almost 1.9 bln. lari in fiscal revenues in Georgia reduced the formal safety 1997. net to a bare minimum. An extensive informal safety 70 Annex A net emerged in its place. However, the coverage of Eliminating tariff discounts to special population this informal safety net is limited, and many families groups and other in-kind benefits. Replace with slip through the cracks. The main challenge for the a direct payment (through a modest increase in formal safety net for the near future will continue to the family allowance system) for those groups of be a lack of fiscal resources. Despite these recipients who are truly needy, mainly the constraints, however, the formal safety net has an disabled (categories I and 11). important role to play in poverty alleviation. Given * Eliminating direct payments from the budget for the small overall poverty gap, a well targeted poverty electricity. This can be phased in benefit, even if small, can play a crucial role in geographically, starting with Tbilisi, as dampening poverty. If the family allowance were to electricity distribution companies are privatized. be kept at the very low level observed in the 1997 * Improving the targeting of assistance to IDPS. budget (relative to GDP), but were accurately Through self-targeted public works, proxy targeted, it would still be sufficient to reduce the means testing or frequent registration incidence of poverty by several percentage points. requirements. Redirect released resources to the And if the social assistance budget were to be family allowance program or towards increased more rapidly (to I percent of GDP by establishing public works programs as discussed 2007), the impact on poverty would be much larger. below. Continue to support the integration of IDPs Internally Displaced Persons (IDPs) receive a housed in institutions into local communities. disproportionate share of State and humanitarian The evidence from the household survey assistance. The IDP program is one of Georgia's suggests that once this happens, IDPs are able to largest safety net programs, ranking second only to dramatically improve their living conditions on old age and invalidity pensions. However, IDPs do their own. not appear to be more vulnerable than other population groups. In fact, IDPs that have resettled Over the medium term (1999-2001), a more on their own or have integrated themselves into local comprehensive strategy can be put in place, based on communities face a lower risk of poverty than the the following two principles: average Georgian household (4 percent of them are poor as opposed to 10 percent of the total a Cash benefits should remain limited to population). And they face the lowest risk of individuals not able to work and not supported extreme poverty of almost any population group. by families with members able to work (i.e., The contrast between benefits received by IDPs and mainly pensioners living alone and the disabled). those received by other, often more needy, families * The poor who are able to work should be highlights the need to improve the targeting of supported through self-targeted employment assistance to IDPS. In addition, in-kind benefits schemes that are organized to provide a should be phased out, or at a minimum, their costs minimum level of subsistence. Such programs should be fully budgeted. would combine the best features of an Employment Guarantee Scheme with those of How can the safety net be improved in the short and Social Funds aimed at promoting labor-intensive medium term? In the very short term (1999), actions projects in poor areas. To ensure that the money can focus only on improving targeting and goes only to those who need it, without redirecting resources to the truly needy, mainly by: undermining the incentives to seek a normal job, the wage offered has to be low (at the level of * Protecting thefamily allowance system. Ensure local wage rate for unskilled manual labor in that the allocation in the 1999 budget is at least "normal" times). the same level as in the 1998 budget and that, unlike in 1998, it is fully paid out. 71 Annex A Table 1. Poverty in Georgia Poverty incidence Official poverty line New poverty line Extreme poverty line (% of population that is poor Average All Areas 42.7 11.1 8.9 Urban 45.0 12.1 10.0 Rural 40.1 9.9 7.5 Table 2. Incidence of poverty by regions'" Regions Poverty incidence Poverty incidence Poverty incidence (official poverty line) (new poverty line) (extreme poverty line) Kakheti 34.8 10.0 8.2 Tbilisi 43.8 8.6 7.3 Shida Kartli/Mtskheta-Mtianeti 41.1 9.8 7.5 Kvemo Kartli 36.8 11.4 8.4 Samtskhe Javakheti 38.1 11.5 10.5 Adjara 32.6 7.5 7.3 Guria 54.8 13.1 10.3 Samegrelo 33.6 6.7 4.3 Imereti/Racha-Lechkhumi/L.Swaneti 58.9 19.3 14.8 Total 42.7 11.1 8.9 ' Fourth quarter, 1997. Two sparsely populated administrative regions were included in larger regions during stratification. Racha-Lechkhumi and Lower Swaneti are included in the Imereti region, and Mtskheta-Mtianeti is sampled with the Shida Kartli region. Abkhazia and South Ossetia (Tskhinvali region) were not part of the sampling frame. 72 Annex A Haiti Haiti is the poorest country in the Western levels of private investment. The political Hemisphere and one of the poorest countries in the factors just enumerated have had a severely developing world. Its per capita income-$ 250-is negative impact on private investment, both considerably less than one-tenth the Latin American domestic and foreign. The investment/GDP ratio average. About 80 percent of the rural Haitian in Haiti is only about 10 percent-on the order population lives in poverty. Moreover, far from of one-third, for example, the ratio in Chile. This improving, the poverty situation in Haiti has been report estimates that Haiti would require annual deteriorating over the past decade, concomitant with growth rates of at least 5 percent to achieve a rate of decline in per capita GNP of 5.2 percent a significant progress in poverty reduction. year over the 1985-95 period. Instead, as noted above, the country has experienced negative growth of about that The staggering level of poverty in Haiti is associated magnitude in recent years, and prospects for with a profile of social indicators that is also meaningful improvement on the growth front are shocking. Life expectancy is only 57 years compared not in sight. with the Latin American average of 69. Less than half of the population is literate. Only about one child * Underinvestment in human capital and the in five of secondary-school age actually attends poor quality of the expenditures that are secondary school. Health conditions are similarly made. In the public sector, still only 20 percent poor; vaccination coverage for children, for example, of resources go to rural areas, where is only about 25 percent. Only about one-fourth of approximately two-thirds of the people live. Per the population has access to safe water. In short, the capita health spending, both public and private, overwhelming majority of the Haitian population is is about $21, compared with $38 in Sub-Saharan living in deplorable conditions of extreme poverty. Africa and $202 in Latin America. In the face of this daunting reality, Haiti's population continues to grow at a high rate estimated at almost * A "poverty trap." The interaction of these 200,000 people per year. various factors, including high population growth, produces a downward spiral, a "poverty What accounts for the dire extent of poverty in Haiti? trap" from which there frequently appears no Over time, numerous observers have given many and exit nor hope. Some aspects of that trap diverse answers to this difficult question. This report discussed in this report include: highlands; points to a number of key factors: rampant environmental degradation, especially in rural areas; an increase in crime and violence, * Political instability, woefully poor governance, systematic abuse of human rights and outward and corruption. Fundamental to the pervasive migration from the country to escape a life of problem of poverty in Haiti is the long history of misery. In short, the lack of good governance, political instability and the lack of governance. the low levels of growth and investment, the lack Corruption and misuse of public funds have of attention to basic human needs, and a set of resulted in a decline in the quality of all public understandable, if lamentable, behavioral services, including fundamental areas of consequences interact in numerous and complex traditional governmental responsibility, such as ways, all with one outcome: an increase in the police, the justice system, and the provision poverty and the associated human, physical, of basic infrastructure. While the restoration of social, and environmental degradation. democracy in Haiti is highly welcome development and one, which has resulted in If the foregoing are the causes of the Haitian poverty some encouraging progress, the basic problems dilemma then what, if anything, can be done to of governance remain and are at the core of the alleviate matters and improve living standards for the country's poverty problems. general population of the country? The report that follows lays out the elements of a recommended * Inadequate growth, as a result of distortions approach but in doing so urges modesty and caution. at the macroeconomic level and inadequate Poverty will not decline in Haiti overnight. There is 73 Annex A no "magic bullet." The road ahead is paved with executive and parliament and a genuine will to pitfalls, and progress will at best be incremental and succeed. slow. Nevertheless, the return of democracy, the manifest aspirations of the Haitian people for a better * Strengthen macroeconomic stability and life for themselves and their children, the lessons reduce distortions in order to encourage learned from a number of program and project private sector investment and increase initiatives already underway, as well as the productivity. Boosting private investment will determined and sustained support of the external provide the underpinnings of Haiti's future donor community and non-governmental economic growth. An important first step will organizations offer grounds for guarded optimism be implementing the capitalization program, in concerning the prospects for poverty reduction in particular of telecommunications, electricity, Haiti. water sector, ports and airports. Privatization of these sectors will increase the productivity of the The challenge for all those concerned with Haitian economy and demonstrate the government's development is to identify a coherent, mutually commitment to redefine the role of the state and consistent set of priorities around which efforts can set the economy on a modern course. The be planned and effective implementation pursued. Of government has made significant efforts to the priorities discussed, none is more important than maintain macroeconomic stability, which needs reforms aimed at overcoming the historically to be continued and strengthened. endemic political, institutional, and governance obstacles to a better life for the Haitian poor. In the * Improve the quality of government spending, absence of such fundamental reforms, the other invest in the provision of basic human needs, proposed reforms-as important as they are in their and raise the level of human capital. A huge own right-are likely to prove ineffective and challenge for the Haitian government will be inadequate. increasing resources allocated to financing social services. In education, health, water and What, then, is to be done? sanitation, and family planning, the government should continue to leave the delivery of these * Strengthen essential public sector institutions, services to NGOs and the private sector to the improve coordination and consultation within maximum extent possible, while it strives to government, and reestablish and consolidate improve the regulatory framework and political stability. Given the limited capacity of coordinates its own activities, those of private the state, refocusing the government's role in actors, and the poor themselves. Limited critical areas is urgent. These include government resources should be directed at maintaining public order and economic stability, programs targeted to the very poor, particularly securing property rights, building a regulatory those in rural areas that have been neglected in role for some sectors, and designing a the past. Until the benefits of these longer-term framework to help increase provision of primary investments in human capital are felt, the health and education services and for investment existence of targeted transfers and social safety in and maintenance of infrastructure. The net programs will continue to be important to the modernization of the Central Bank, and the survival of the Haitian population. achievements in the creation of the Haitian Police Force with improvements in the penal * Rationalize the assistance provided by system can serve as reference points for the external donors. External support remains modernization of the state. The latter will also crucial to Haitian economic recovery and efforts require enhancing the role of the private sector in to reduce poverty, accounting for about 15 providing services and ensuring the full percent of GDP in 1997. But there are serious integration of civil society in sector planning and problems of donor coordination that hinder the policymaking. On that front, good progress is effectiveness of the aid provided. The being made through the government's education multiplicity of donors and programs in almost strategy. Achieving political stability will every sector complicates both government and require more open communication between the donor efforts to coordinate planning and implementation. In some sectors donors have 74 Annex A formed working groups that can contribute to Moreover, it is doubtful that these efforts will be harmonizing the provision of external assistance, effective in the absence of a stronger yet these groups have not been very active since coordinating role from the government. the onset of the June 1997 political crisis. 75 Annex A Kyrgyz Republic The Kyrgyz Republic was one of the poorest independence, coupled with declining spending on republics in the former Soviet Union. Since social welfare programs, does, however, suggest that independence, the country has undergone enormous poverty has increased since independence. Poverty declines in production and GDP. While a stage of does appear to have leveled off in the 1996-97 renewed growth had emerged in 1996-97, the recent period, reflecting the positive economic growth regional financial crisis has taken a toll. As a result, occurring in these years. But the distribution of the transition has carried with it a legacy of poverty. growth is not uniform, and inequality is increasing. Poverty measurement. The welfare of individuals Consumption patterns. More than half of total is measured by total per capita consumption. Once consumption of poor households is food per capita consumption is calculated for each consumption. One-fifth of food consumption comes household, the household, and all the people in it, is from home production. Home production is less classified as poor if the level of per capita important for the non-poor in general, but in urban consumption is below the poverty line. Two poverty areas such production may be a significant factor in lines are constructed here. The first, or food poverty maintaining consumption levels among this group. line, measures extreme poverty and is set at the level The shift from publicly provided, essentially free, of consumption below which, even if all resources services to services for which fees are charged, were devoted to food, the minimum caloric whether publicly or privately provided, can be seen requirement could not be met. The second, or general in the share of consumption going to items such as poverty line, represents a minimum level of utilities and education. By 1997, education consumption taking into account both food and expenditures represented 10.2 percent of the total nonfood necessities. In 1996, the value of the consumption of the poor. extreme poverty line was 2177 Som, and the general poverty line was 4460 per capita per annum. In Characteristics of households. Poor households are 1997, these were estimated at 2439 Som and 4647 much larger than non-poor households (by almost Som, respectively. two members). In 1997, the average ratio of dependents per working adult was 2.3 for the whole Poverty. One-half of the population is poor and, country, significantly lower than in 1996. Such overall, this poverty rate has held steady between dependency rates fell for both the poor and the non- 1996 and 1997. Extreme poverty did, however, poor during 1996-1997, but the poor still have higher decline in the period. In 1996, 19.1 percent of the rates. For every working adult in poor households, population lived in extreme poverty, in 1997 this had 2.5 people depend on this income, compared with 2.1 fallen to 14.8 percent. Poverty is fundamentally a among non-poor households. Thus, even if poor and rural phenomenon: 80 percent of the poor live in non-poor workers receive the same pay for their rural areas, and the gap between urban and rural labor, poor households would have fewer resources areas appears to be growing. The decline in extreme available per person. The education of the household poverty between 1996 and 1997 appears to have head is strongly linked to the poverty level of the benefited urban areas: the share of the extremely household, as are the head's gender (female-headed poor living in rural areas has increased. As expected, households are less poor), age (younger ones are less given historic patterns, Naryn oblast is the poorest in poor) and ethnicity (Kyrgyz headed households are the country while Chui is the least poor. poorer). Poverty trends. Due to changes in methodology Education. Enrollment rates are high for children between the pre- and post- independence years, as ages 6-15, regardless of poverty level and/or well as the economic transition in recent years, geographic area. Rates drop sharply at age 16 and, at identifying trends in poverty is complex. Published this age, poor children become less likely to attend poverty figures are not comparable and, without school than non-poor children. The costs to further analysis, cannot be used for establishing households of sending children to school are high, trends in poverty. The enormous decline in GDP and and they represent a greater share of the poor the contraction of the economy in the years following households' budgets than those of the non-poor. 76 Annex A of all rural households relied solely on own-farm Labor force participation and unemployment. The activities. Households were engaged in wage labor contraction in the economy is reflected in the (agricultural and non-agricultural), as well as own- significantly lower participation rates seen in 1996 farm activities. In 1997, almost all households compared with 1993 (51.1 percent and 70.3 percent, engaged in agriculture were involved in both respectively) and in the higher unemployment rates livestock and crop production. Reliance on (10.2 percent and 6.3 percent, respectively). agricultural wage earnings, however, is associated Nonetheless, economic growth does seem to be with greater poverty. having a positive impact on the labor market: in 1997, labor force participation rates increased to 65 The overall picture of agriculture that emerges is one percent, and unemployment fell to 7.3 percent. of subsistence farming. More than one-third of all Underemployment, and not just unemployment, persons growing crops in 1997 did so purely for appears to be an increasingly important explanation home consumption; they sold no part of their harvest. of poverty. In 1997, labor force participation rates The average size of land available to the population were fairly similar across the poverty groups and, is 1.4 hectares. However, the average land available while unemployment was highest in the poor oblast, for the many with access only to garden plots (and this rate was practically the same in the two least orchards) was one-fifth of an hectare. poor oblasts. Unemployment is also lowest among the extreme poor. Consistent patterns relating types of agriculture to Changes in female labor patterns are emerging: the poverty groups are hard to find due to a proliferation labor force participation rate for women in 1997 is of recent reforms in the agricultural sector. The poor further from its 1993 levels than the male rate is. In appear to have equal access to land and, indeed, other words, the reversal of the negative changes in appear to have more land than the non-poor labor has been lower among women than among (although no data on land quality was available). men. Also, reversing the pattern found in 1993 and The poor seem to be more likely to be growing cash 1996, women have higher unemployment rates than crops than the non-poor. It will take several years men. before it becomes clear what activities are profitable, what the remaining barriers to growth are, and how Housing and services. Social infrastructure is household characteristics affect this. seriously lacking in rural areas and in many parts of urban areas. Only 56.8 percent of the rural Determinants of poverty. A multivariate analysis population have access to running water: even in was carried out to identify the effects of household, urban areas, 15 percent are not connected to piped economic, and location characteristics, while holding water. Sanitation facilities are even more limited all other characteristics constant. The results with 94 percent of the rural population and a generally underlined the findings in the rest of the surprising 47 percent of the urban population using study. They also show that households relying latrines. Centralized systems of heat, water, and gas heavily on agriculture are poorer, while those relying are practically exclusive to urban areas. The limited on self-employment have higher consumption levels. access to basic water and sanitation is expected to have serious implications for health. And the greater Poverty alleviation. The magnitude of the poverty reliance on centralized services by the non-poor problem requires a variety of approaches. Economic means that the subsidies for these services growth is key; by itself, it can lower poverty disproportionately benefit the non-poor. Electricity substantially. In the short run, social assistance is the only universally provided service; still, there programs are needed to keep people out of abject are sharp differences in the quality of service poverty. To make these programs feasible and/or received by the poor and the non-poor, and by urban sustainable, a variety of targeting mechanisms will be and rural areas. needed. Targeting in urban areas will be more costly, but relatively inexpensive geographic or self- Rural Poverty. In rural areas, households exhibit a selection targeting mechanisms may be feasible in fair degree of diversification in terms of income- rural areas. In the medium run, attention needs to be generating activities. Agriculture is an important paid to improving the human capital of the country. economic activity, but it is not the only one, nor is it restricted to own-farm work. In 1996, less than half 77 Annex A Agenda. Further investigations tightly related to the outcomes; (iii) estimating willingness to pay for social and economic policies under discussion could utilities, as well as the impact of changes in utility significantly add to the effectiveness of such rates on the use of services and welfare; (iv) programs. Key areas of investigation include: (i) determining the main barriers to increased identifying the causes of the increasing disparity productivity in agriculture; and (vi) evaluating the between urban and rural areas; (ii) determining the effectiveness of the present (and previous) targeting effects of education and gender on labor market mechanisms for social assistance. 78 Annex A Macedonia, Former Yugoslav Republic of Poverty Trends and Characteristics major decline in real consumption. Inequality in consumption grew, but contributed far less to poverty Poverty is not a new phenomenon in the country. growth. Prior to 1990, the former Yugoslav Republic of Macedonia was one of the poorest Yugoslav In 1996, the country overcame the deep recession of Republics heavily subsidized by transfers from the early 1990s and realized a small positive growth Belgrade, and greatly reliant on internal markets for rate (I percent) for the first time since independence. trade." Although literacy was almost universal (94 However, the incidence of poverty increased further percent according to the 1994 Census) and life between 1995-96. As real consumption remained expectancy (72 years) at par with many higher- roughly constant over this period, the main reason for income transition economies, infant mortality rates poverty growth was a growing inequality in the compared unfavorably with Central and Eastern distribution of income.14 The modest growth realized Europe norms, and were particularly high in rural in 1997 and 1998 may have reduced poverty over areas and for ethnic minorities.'2 The poorest 1996 estimates, but these gains may well be eroded, households were mainly rural and derived their at least over the short term, by the contraction of income primarily from agricultural sources.'3 A economic activity resulting from the Kosovo crisis. cradle-to-grave protection system was also in place with the intention of providing individuals with full The diverse characteristics of poverty. In 1996, protection against income loss and other lifetime according to the official poverty line, approximately risks. The system provided guaranteed employment, 20 percent of the population was poor. An child allowances, free education and health care, and overwhelming share (two thirds) of the poor lived in pensions upon retirement. However, open rural areas. About 60 percent of the poor lived in unemployment was high compared with regional households headed by individuals who worked.'5 Of norms, and was concentrated among new entrants to these, almost two-thirds were wage/seasonal workers, the labor force. The socialist worker management and the rest were farmers. The remaining non- system gave the employed (or insiders) extensive working poor were roughly evenly divided between powers to push up wages, restrict hiring and pensioners and the unemployed/transfer recipients. termination practices, and keep out younger and less The report identifies three distinct groups of poor: skilled workers. * The traditional poor. Rural, agricultural The transition exacerbated the poverty situation in households with more than three children, as the country. Independence from Yugoslavia, the loss earlier, have among the highest incidence of of federal transfers, the external conflict among its poverty in the country. These households are neighbors, and the economic transformation from a larger in size (with many children) and are socialist system to a market economy led to a sharp characterized by the very low education status of economic contraction. Inflation rates soared, real household heads and, particularly, of female wages declined and unemployment increased. Not household members. The poorest are those that surprisingly, poverty increased from 4 percent of the survive exclusively on agricultural income. population in 1991 to approximately 20 percent in 1996. The increase in poverty was not uniform. Poverty rates remained largely unchanged between 1990-91, but increased sharply between 1993-95. The main reason for the increase in poverty was a Consistent with this trend, the poverty gap, an indicator of the depth of poverty, remained constant Former Yugoslav Republic of Yugoslavia: An between 1993-95, but deepened between 1995-96. Introductory Economic Report. World Bank, 1995. '5 The high number of employed poor is a result of 12 The Joint Country Assistance Strategy, the large population of employed in the population. Memorandum of the President, World Bank, July, The incidence of poverty among the employed is 1998. however far less than that of unemployed and other " The 1990 Household Budget Survey. groups. 79 Annex A * The new poor. The transition has changed the Low-wage share, indicative of low-wage jobs, is face of poverty in the country. Poverty remains an important indicator of welfare in FYR of a rural phenomenon, with nearly two-thirds of Macedonia in both rural and urban areas. the poor living in rural areas. However, non- However, unemployment is a strong poverty agricultural households (now two-thirds of all marker only in urban areas. In contrast, poor) have replaced agricultural households as remittances and the ownership of a household the largest group of poor. Among enterprise reduce the chances of being poor in socioeconomic groups, the unemployed/transfer rural, but not urban, areas. recipients have emerged as the new group of poor and have the highest incidence of poverty, * Poor living conditions. Living conditions (very followed by farmers, and wage earners. poor sanitation, lack of water supply) are a Pensioner-headed households have the lowest hallmark of poverty in FYR of Macedonia. poverty rates overall. These conditions are particularly worse for the rural poor but are also difficult for peri-urban * The chronic poor. The elderly poor, particularly residents. Electricity is universally available in non-pensioners, the disabled, aged farm both rural and urban areas, but the poor often households without pension or other fixed cannot afford to pay for this service. income, and individuals not in households (institutionalized elderly, disabled, orphans) * Low health status. Low education levels emerge as the most disadvantaged groups in (particularly for women) coupled with poor society. These groups are least capable of work living conditions contribute to the low health and are, therefore, the least likely to benefit status of the poor. The higher infant and directly from economic growth. maternal mortality rates in rural vs. urban areas indicates that this problem is more severe in The common characteristics of the poor. In 1996, rural areas. the common characteristics of poverty included limited asset ownership (durables and land), a large Labor Markets and Poverty household size, and a high share of food in total consumption. However, low education attainment, Recent labor market developments have been at the labor force status, poor living conditions and low root of growing poverty and the changing health status are also closely linked to poverty. composition of the poor in FYR of Macedonia. The While ethnicity is likely an important dimension of report finds that, in 1996, particular labor force poverty, the sources of data for the report were not participants have been harder hit than others over the adequate to explore this important issue.'6 transition to a market economy. * Low levels of education: Nearly 80 percent of The working poor. The decline in real wages is the the poor live in households headed by main reason for growing poverty among low-wage individuals with primary education or less. workers. Wage disparity has increased, mainly as a Rural household heads report a much lower result of private sector growth, but has contributed education status compared with urban far less to the increase in poverty. However, wage households. Most worrisome, poverty rates are dispersion remains among the lowest in CEE much higher in households with non-attending countries. Wage uncertainty has also increased, as children (25 percent) vs. those with children many of the employed do not receive their wages on attending school (10 percent). This means that time, or not at all, reducing worker welfare. poverty among these households may persist in the future. . Low-wage less-educated workers have lost in both relative and absolute terms during the * Labor force status. Unemployment, low-wage transition. The returns to education are high in share, and lack of enterprise ownership are the the country. Well-educated and top-paid main labor market determinants of poverty. workers have gained in both absolute and relative terms over less-educated and less-paid workers. 6 The qualitative assessment of poverty sheds some light on the ethnic dimensions of poverty. 80 Annex A * Private sector growth has helped employ a large and (iii) a cash transfer system, including a pay-as- number of the low-wage poor. The private you-go public pension system; means-tested child sector has grown mostly in trade, services, and in allowances for the employed, and two new agriculture. Over half of low-paid jobs are in the programs-an unemployment insurance system, and a private sector.'7 The private sector also employs means-tested social assistance system established to the top-paid workers in the country. combat increasing joblessness over the transition. * Poor informal sector workers complain of the Real spending on social programs declined between occasional and seasonal nature of work, the 1990-96, as the economy contracted. The decline inability to get wages on time, the problems of was not uniform across social programs. Real surviving the winter, and the difficulties of spending on health, education, and pensions fell starting up small enterprises (fees, limited sharply, but real spending on social assistance and collateral, and high interest rates). Seasonal unemployment insurance increased over the same workers have the highest poverty rates among all period.'9 The composition of social expenditures has workers. changed over the transition. The share of current social spending-unemployment benefits, pensions The unemployed. In 1996, unemployment affected and social assistance programs-increased while the a large number of poor. Nearly half of the poor live share of investment spending on (mainly) health and in households with one or more unemployed worker. education has declined. In 1996, the government spent roughly 70 percent of total budget (30 percent * The majority of the unemployed are new entrants of GDP) on these programs. Of this, the largest share to the labor force. Unlike many countries in the was spent on pensions (44 percent), followed by region, layoffs comprise a small proportion of education (21 percent) and health (22 percent). Child the unemployed, indicating that limited entry, allowances (I percent), social assistance (4 percent), not exit, is the reason for unemployment. and unemployment benefits (8 percent) comprised only a small share of public outlays. * The duration of unemployment is extremely high Education. The country has made significant gains (relative to other countries in the region). in raising the education status of the population. Unemployment of long duration discourages Younger cohorts-regardless of income, gender or labor force participation, depreciates labor force rural/urban status-are much better-educated than skills, and signals a "less productive worker" to older persons. The gender gap has been virtually the employer. eliminated at all levels of the education system in both rural and urban areas. Moreover, in 1996, * New rivat sectr hirs math the rural/urban and income differences have been characteristics of the unemployed These are rually oem incatendance sory basi less-educated, less-skilled, and mainly urban eduationerThe in findin forp1996rareas workers. The only exception are women, who follows: are least likely to be hired by the private sector. follows: Women are also more likely to receive lower Quality of the education system. The quality of the wages for the same work, particularly in the education system, or its contribution to leaning, has private sector." Public Poverty Alleviation Programs: Does Public An increase in real benefits and number of Spending Reach the Poor? beneficiaries in both newly created programs The main social programs include: (i) the public explains this trend. The decline in real resources has health care system; ii thepubliceducationalso often caused benefit payment delays in all public health care system;)thepubliceucationstransfers, compromising the poverty alleviation objectives of all cash transfer programs. Real "7 These results are from the 1996 Household Budget declines in pension spending are a result of a fall in Survey (additional modules). real benefits; the number of pensioners increased 18 The Law on Labor Relations mandates equal pay over this period as a result of early retirement for equal work. This problem is far less severe in the policies that were used to facilitate large scale public sector. layoffs. 81 Annex A not been formally assessed, either internally, or also egalitarian. Primary education subsidies relative to international standards. Few students comprise nearly 13 percent of total consumption report being repeaters or dropouts and some school- of the poor. The poor receive a share of age children do not attend school because of failure education spending that is roughly equal to their and expulsion. This merits considerable concern and share in the population. bears further investigation. Secondary and higher education spending is less Low enrollment rates of the poor. In 1996, effective than primary education spending; it is enrollment rates at all levels of the education system also strongly non-poor. The top 20 percent of were lower than regional norms, but were the lowest the population receives nearly half of all for the rural poor, particularly in secondary and spending on higher education and scholarships; higher education. The reasons for non-participation and over 20 percent of total spending on in the education system are diverse and include: secondary education. The low effectiveness and efficiency of public spending on education for * Indirect costs: The need to earn a living to the poor merits considerable concern. support their families is an important reason for not participating in the secondary education Cash transfers. The four major cash transfer system for the rural poor. Some secondary age programs (pensions, social assistance, child children work. This is more characteristic of allowances, unemployment benefits), taken together, rural areas than urban areas.20 have an important poverty alleviation impact. All else being equal, in the absence of public transfer * Direct costs: The cost of attending school is programs the incidence of poverty would have been another reason for lack of participation in the more than double the current level. The poverty gap school system. The poor spend more on would be almost five times as high and the severity education per enrolled child (relative to their of poverty would be even more greatly affected. income) than the rich. Books and supplies are (This analysis is based on first quarter 1997 the most important components of private costs household data). in primary and pre-school education. Transportation costs dominate private spending Pensions are extremely effective but very at the secondary and post-secondary levels, inefficient in targeting the poor. This is not while admissionfees are important at the tertiary surprising as pension benefits are linked to an level. individual's past wages. However, the pension system has the largest poverty alleviation impact of any cash transfer program. Public spending on education is overall very effective and egalitarian, but this result varies across programs. The pension system has protected pensioners against poverty. Poverty rates for pensioners are * Primary education is the most effective"' public among the lowest compared with other program. Public spending on the program is population groups. However, many elderly women are not covered by the pension system and, therefore, have high poverty rates. This is However, unemployment rates are high for this mainly the result of low labor force participation group as a whole. Result is from the Household of women in the past, which means that they do Budget Survey, Additional Module, 1996. not receive pensions. 21 Effectiveness is measured as the share of public transfers or subsidies in household consumption. The higher this share, the more effective the program. Efficiency is defined in terms of the share total population. Programs that are moderately of public spending accruing to the poor. Highly or efficient are those where the share in spending extremely efficient programs are those in which the accruing to the poor is higher than their share in total share of public spending accruing to the poor is consumption, but less than their share in total higher than their share in total population. population. Inefficient programs are those where the Egalitarian programs are those where the share of share of public resources going to the poor is less public spending on the poor is equal to the share in than their share of total consumption. 82 Annex A The protection ofpensioners against poverty has difficulties in monitoring and penalizing false come at a very high fiscal cost imposing a large claims. tax burden on current workers. This decline in the number of contributors due to early Child allowance benefits are neither effective nor retirement, growing unemployment, and a very efficiently targeted to the poor. Child allowances generous pension system (relative to other are a very small share of household income, and they countries in the region) is the source of current are not well-targeted to the poor. financial problems of the system. In the future, an aging population will lead to increasing Unemployment benefits are neither effective nor pension fund deficits. efficiently targeted to the poor. Unemployment insurance benefits are progressive and do reduce The means-tested social assistance system, the poverty, though their impact is marginal. It should only poverty alleviation program, is efficient and be noted that the primary purpose of unemployment effective in reducing the incidence and depth of benefits is to replace income. The program is not poverty. In recent years, the government has made intended to be pro-poor. many changes to the program that have improved its efficiency. In 1998, the Social Assistance Decree was Institutional care. Some poor or disadvantaged revised to target benefits to households with incomes groups are without families and are under the care of less than 60 percent of the poverty line. (Targeting all institutions. These groups, marginalized from households up to the poverty line is not affordable traditional family structures, are perhaps the most for the government.) Complicated adult/child disadvantaged groups in the population. equivalence scales were revised and work incentives were introduced. In addition, administrative * A growing number of (mainly Macedonian) problems, including an influx of beneficiaries on the elderly are becoming institutionalized as family same day and fixed monitoring of claims, were structures break down either due to financial addressed. However, problems that still plague the problems or as a result of the migration of program include: younger family members from rural to urban areas. * Benefits have often not been paid on time. There are often two- to three-month delays in benefit * Disabled children and adults are institutionalized payments to the poor. under poor conditions and receive limited care and attention. Their education possibilities are * The new decree may have reduced inclusion limited. errors (many ineligible households receiving assistance) which, in 1996, were found mainly in * Orphans are also a vulnerable group. There is a urban areas. Income is difficult to measure in a growing problem with older institutionalized transition economy, where income sources are children (18 or so) who are having difficulty variable and records and registration procedures integrating into society, particularly given the are in a nascent form. As a result, the new lack of jobs. On the positive side, there appears program may have to be fine-tuned to correct to be some demand for adoptive children in FYR any remaining problems. The report finds that of Macedonia. However, adoptive parents are the exclusion errors (eligible households who do not screened properly and post-adoptive not receive assistance) of the social assistance monitoring is limited. program are very small. * Disability allowances for children and foster * Information difficulties constrain delivery of care allowances have often been delayed due to benefits (to clients) and verification of claims budgetary constraints. (for social welfare officers). Social assistance recipients claim that lack of information about Policy Implications the program, delayed benefits, and onerous documentation requirements limit the program's The profile of the poor suggests that medium- to effectiveness. Social workers also relate long-term poverty alleviation programs and policies should focus on six basic elements: 83 Annex A and reducing poverty, particularly in rural areas. * The promotion of economic growth that Second, and more importantly, private sector growth increases employment and real wages to help has been concentrated in less skill-intensive alleviate poverty among the new poor. Easing industries -agriculture and trade. This is a striking rigidities in financial, land, and labor markets difference between FYR of Macedonia and other would help ease constraints for the promotion of economies where the private sector has generated small and medium enterprises. demand for highly skilled workers. As such, private sector growth has helped employ a large share of the * Investment in human capital (both its quality and low-wage workers, particularly in rural agricultural availability), particularly of the rural poor, to jobs. Without this development, the unemployment promote economic growth and alleviate long- and rural poverty problems in the country would term poverty; have been far worse. Growth in the private sector that is skewed towards the creation of less-skilled * Well-targeted, financially viable cash transfers jobs should help reduce the depth of poverty among (with adequate work incentives), for the short- the unemployed. term unemployed; Measures to spur economic growth led by the private * Investment in community infrastructure (water, sector will need to focus on increasing labor market sanitation, electricity), particularly in rural areas, flexibility. Labor market restrictions and a weak to improve living standards. This invesment in financial sector continue to curtail robust economic physical infrastructure, together with investment activity. Labor turnover remains low, and the in education and health sector reform,"2 would unemployment rate had increased to over 30 percent hlimrhpopulation. by 1998. Despite privatization, labor adjustment remains incomplete. Many enterprises remain * Community-based care (and cash/in-kind insolvent and over-staffed, supported through the accumulation of wage arrears and soft loans from transfers), based on an assessment of the banks. And despite real declines in wages, labor financial and economic feasibility of these css(rs ae/D swl iigfrn programs, for the chronic poor. Such programs restrictions ec)emnGhe tan hingeig ring col poetal fou.ncidena-ik h restrictions, etc.) remain higher than in neighboring could potentally focus on children-at-risk, the countries with similar levels of income. Efforts are also required to promote the development of efficient financial markets that would help lower the cost of * Continuous poverty monitoring to identify capital to small entrepreneurs, institute land titling changing poverty patterns and to assess the procedures that would allow individuals to use land impact of the government's poverty alleviation as collateral for loans, and ease fees and other programs. restrictions on registration of small enterprises. Creating off-farm employment and agricultural sector Each element of this strategy is discussed in detail reforms that ease rigidities in the pricing, sales, and below. marketing of agricultural products ensure that extension services and information services reach the Promote economic growth. The decline in real poorest farmers. income and wages and growing joblessness are the main reasons for increasing poverty in the country, There are five caveats. First, the poor are earlier and also as a result of the recent crisis. Thus, concentrated along the poverty line. Thus, small efforts to promote economic growth that raise real changes in economic growth will have a large impact wages and increase employment will be essential for on poverty. However, it will take considerable, poverty reduction, particularly once the Kosovo crisis sustained economic growth to reduce poverty has abated and trade is no longer constrained. Two completely. Second, the creation of low-paid jobs positive trends can be noted in this regard. First, will not reduce 'poverty' among workers. Given the private transfers, in the form of remittances, have large pool of unemployed and the potential for been very important in improving household welfare further layoffs, it will require a significant growth in real wages of less-skilled workers to reduce poverty 22 Health reform issues are outside the scope of this among the employed. Third, private sector growth report. may further increase disparities among workers. The 84 Annex A worsening of the distribution of income, even as the this group. However, if public minimum wages decline in consumption has leveled off, should be are introduced, they should be kept as low as monitored carefully. If recent trends are any possible. indication, less-educated individuals are the most vulnerable to this process. Fourth, the resumption of Investment in human capital. Education has a high growth will require an aggressive restructuring of rate of return in FYR of Macedonia. Investment in insolvent and overstaffed enterprises. While this will human capital is likely to be the most important help improve economic performance over the long longer-term poverty alleviation and growth strategy run, poverty among affected workers may actually for the country. The government is in the process of increase over the short term. Fifth, many poor, developing a strategy to improve the quality, particularly those not capable of work, may not efficiency, and equity of the education system. The benefit directly from economic growth. strategy should also focus on improving the participation of the poor in the education system: Reduce labor market restrictions. Reducing labor market restrictions (wage rigidities, hiring/firing . Increase participation of the poor in the costs, high minimum mandatory benefits) that education system The participation of poor constrain the employment of less-skilled workers students at all levels of the education system who are most vulnerable to the restructuring process should be increased, but efforts should focus on will be critical to reducing poverty. Four measures the rural poor, and on secondary and higher are recommended: education. Efforts should also focus on integrating minority populations (e.g., gypsies) * Reduce high labor costs. The government has to and those with disabilities (cost effectively) into take important steps in this regard: e.g., hiring the education program. While qualitative reports restrictions and excessive termination restrictions pointed to a potential cultural, security constraint on small entrepreneurs should be reduced, and to the participation of Albanian girls in the court review of the rationale for small-scale secondary education, it was difficult to assess terminations should be severely curtailed. ethnic differences using available data. * Reduce remaining labor market rigidities and * Reduce the direct costs of the education system. adverse work incentives. These include: (i) Reducing the costs of education for the poor is eliminating or significantly reducing special one way of increasing their participation in the benefits to the unemployed with 25 years of education system. The direct costs are essentially contributions. (ii) further reducing the duration textbooks and books/supplies at the primary of unemployment benefits. school level, transportation/boarding for the poor at secondary and higher education levels, and * Reduce high payroll tax rates and contain the fees at the tertiary level. Introducing merit and growing informalization of the economy by needs-based scholarships and redirecting reforming the social insurance systems (health, boarding subsidies towards the poor might be pensions, and unemployment insurance). considered for increasing the enrollment rates of Arresting the informalization of the economy poor students. would help improve tax compliance, allow an enforcement of (less-restrictive) labor contracts . Improve efficiency of education spending, (including addressing discrimination against including targeting the poor. Real spending on women), and promote timely payment of wages education should not be reduced. However, in the private sector, there is scope for (i) shifting public spending on education from non-poor to poor through greater * Minimum wages, if introduced, should be kept cost recovery in secondary and higher education; low as possible. There is no public minimum (iii) shifting public spending over time away wage in the country and this policy should from financing wage costs to non-wage continue given the high level of unemployment investment costs; (iv) shifting social spending of unskilled workers. Minimum wages tend to from current benefits (mainly pensions) towards discriminate against the hiring of less-skilled, spending on education. poorer workers and perpetuate poverty among 85 Annex A Investment in community infrastructure. downward in the future if it constrains the Investment in water supply and sewerage availability beneficiary outflow from the system. In will be essential, particularly in rural and peri-urban addition, while the recent changes in the decree areas. Along with investment in education, this type may have reduced inclusion errors, further of community-based investment would help improve tightening of eligibility conditions may be the living standards and the health status of the poor. required to further reduce false claimants from Lifeline electricity rates that provide a subsidized rate gaining access to the system. for the first few kilowatt hours used might be considered to help defray electricity costs for the * Work incentives may be difficult to administer poor. and should be monitored carefully. The introduction of a four-year term limit to social Well-targeted cash transfers. Cash transfers, assistance, and a gradual reduction in benefit particularly pensions, help alleviate poverty but at over this time, may be difficult to enforce and considerable costs. Spending on pensions should be administer. The ability of this incentive to keep reduced, while other cash benefits should be better individuals off social assistance rolls will have to targeted and include incentives to work. be monitored carefully and fine-tuned over time. Reduce the scope of the public system and * Pilot proxy means test approach to social introduce private pensions. Alleviating poverty in assistance benefits This approach targets social old age in a fiscally sustainable way requires major assistance to the poor based on simple, pension reform that will reduce the scope of the identifiable characteristics of poverty, thereby public system, and allow individuals to save in well- reducing the administrative burden of the social regulated privately managed schemes. This reform assistance system. Empirical estimates indicate would help reduce high payroll tax rates and should that such a program could help identify the bulk help reduce poverty among the young without any of the poor in the country, but an assessment of adverse impact on pensioners. Over time, greater its fiscal costs and targeting efficiency vis-a-vis. provision of private life and disability insurance the current program and potential would allow individuals to obtain greater coverage implementation issues would require further against disability and loss of life of the earning work and a pilot test. member. Phase out child allowance program. Targeting the Fine tune and monitor social assistance reforms. small amount of child allowances to households with The program has been recently reformed, based in two or more children will not have a large impact on part on the findings of the poverty assessment. The poverty reduction. In any case, the social assistance reform has eliminated unjustified rural/urban is fairly effective in reaching poor households with differences in benefits levels, simplified a complex many children. One possibility will be to use the benefit scale, introduced work incentives, and number of children as an indicator for poverty in a improved benefits administration. proxy means test for the social assistance system. Reduce disincentives to work. The level of the Develop a community-based approach to alleviate social assistance benefit is established on the chronic poverty. Institutionalized care is costly, and basis of fiscal considerations, with the poverty removing individuals from their own communities line as a point of reference. However, minimum reduces the welfare of the chronic poor. Developing benefits also need to coordinate with wage a community-based care program, focusing on developments. Currently, the minimum income poverty alleviation for children at risk, disabled, and for a single person household is 17 percent of non-pensioned elderly, with NGO involvement and average wage, but for a four-person household support could be the focal point, along with cash (the average family size) the minimum income transfers, of poverty alleviation efforts for the guarantee is 40 percent of wages. Given the chronic poor. To de-institutionalize vulnerable growth in low-wage jobs, this level of benefit groups, foster and adoption programs might be (almost equal to the minimum pension) reduces publicized, and the screening and monitoring of incentives to work. This benefit scale reflects foster and adoptive parents could be improved. A recent reductions, but will have to be adjusted full evaluation of the costs and associated benefits of 86 Annex A this approach should be undertaken. Further child efficiency measures, based on the Household disability allowances and allowances for foster Budget Survey, should be investigated on a parents, often delayed in the past, should be regular basis. A periodic sampling of client adequately budgeted and paid on time. concerns in all programs through a social assessment of poverty should be instituted for all Improve poverty monitoring capacity. The main social programs. This social or client- government has taken considerable interest in based assessment could be carried out by the understanding the nature of poverty in the country. Ministry of Labor and Social Policy, with the The Poverty Monitoring Group, comprised of involvement of other ministries, and with the members of the Ministry of Labor and Social Policy assistance of research institutes and the and the Statistical Office of FYR of Macedonia, has Statistical Office. It could also be investigated been active in participating in the development of the through an add-on questionnaire along with the Poverty Report-both quantitative and qualitative Household Budget Survey. aspects. The Group has expanded to include the Macedonian research community to evaluate the * Improvements in household survey sampling qualitative aspects of poverty. The poverty efficiency and measurement. Measures include monitoring capacity of the government could be improvements in the sampling efficiency of the improved through the following measures: survey, the measurement of consumption (less detailed), and the separation of the consumption * Monitor poverty incidence and the effectiveness and income modules to reduce under-reporting and efficiency of cash transfer programs. The of income. incidence of poverty, program effectiveness and 87 Annex A Nepal Since the completion of the 1991 study on Poverty percent reduction in the number of poor people over and Incomes, much work has been conducted to learn the next ten years-are achievable, but require more about the extent and causes of poverty in growth rates of output that are higher than those Nepal. A number of new data sources have become experienced over the last couple of years, and closer available, major changes have taken place in the to those of the first part of the 1990s. Achieving such political situation and the country's economy, and a reduction would also require no significant changes important lessons have been learned in the in the distribution of income/consumption or, stated implementation of development programs. differently, a pattern of growth that does not leave behind some parts of the country, or some sectors of The poverty assessment makes use of information the economy. In particular, growth that is not from a variety of sources, but is based primarily on centered on agriculture and does not bring significant the results of the 1995/96 Nepal Living Standards benefits to rural areas is bound to increase inequality. Survey (NLSS), the first nation-wide multipurpose household survey in more than a decade. The survey The centrality of agriculture as a source of livelihood permits a quantitative analysis of poverty, and appears clearly in an analysis of employment and establishes a baseline against which the impact of income sources. The data highlight how the poor policies and public expenditures on the poor can be have lower agricultural productivity because they assessed in the future. Information from other farm marginal land, have limited access to modern sources complement and enrich the picture that inputs and technology, and are illiterate. Those emerges from the NLSS. households that cannot survive on the product of their land often send a family member away to work, Precise estimates of the incidence of poverty vary if they can, or work as agricultural laborers on other depending on the methodology used, but are close to people's land. Off-farm work is important both to fifty percent. Not only is poverty measured in provide needed cash for agricultural inputs and to economic terms widespread, but social indicators provide security if crops fail, but employment remain low for the vast majority of the people, and opportunities off-farm are not easily available to the are especially low for the poor. Literacy, life poor. expectancy, access to safe water and sanitation are all below the levels in neighboring countries; infant Access to infrastructure has increased substantially mortality is the highest in the region, and over the last decade, but remains limited for most malnutrition and immunization rates are among the Nepalis, and especially so for the poor. In particular, worst. The survey reveals that there are wide the lack of transport infrastructure, especially rural disparities across geographic areas and roads, greatly constrains the potential for agriculture, socioeconomic groups. Poverty is higher and deeper, as it increases the cost of inputs and reduces the value and social indicators worse, in rural than in urban of marketable output. Even the simple access areas, in more remote than in more accessible rural provided by passable dirt roads has a positive impact areas, for women, and for people belonging to certain on agricultural production and on incomes. social groups, such as occupational castes. As one might expect, the poor have worse Assessing what happened over the past two decades educational outcomes than the average and attend is not possible with certainty because of the lack of schools less. They also use health services less. The comparability between successive surveys, but a bright side of the picture is that primary education careful analysis of evidence from available surveys and basic health services are expanding, and public indicates that there is no evidence of substantial expenditures on primary education do reach the poor. improvements over the last twenty years. There is, On the other hand, more can be done to improve the however, some evidence of improvement in rural targeting of public spending in education and health. consumption levels between 1991/92 and 1995/96. Among public safety nets, income transfers do not Looking ahead, projections show that significant appear to play a significant role in providing income gains in poverty reduction-of the order of a 20 security; virtually no one receives pensions. Public 88 Annex A works schemes could potentially have an impact, as the poor, live in rural areas, and agriculture accounts they are larger in scope and more effective in for 50 percent of income and 80 percent of targeting the poor, but international experience employment. Any increase in production would have indicates that implementation problems, including direct and indirect effects on a large segment of the corruption, need to be addressed. The main private Nepali population. Over the past decade, agricultural safety net mechanism is remittances from family output has barely kept up with population growth; members who have migrated for work. not surprisingly, living conditions have not improved much. Faster agricultural growth is a necessary Women continue to live a hard life in Nepal. condition to begin to attack the pervasive poverty Education indicators are lower, and there is evidence problem of rural areas. Hydropower, tourism, of lower expenditures for health if women or girls are specialized exports to the growing Indian market all sick, partly a reflection of the fact that sons continue have potential, but will take time to develop, and to be preferred to daughters. But women are active their role in alleviating poverty in the near future is in many areas - they work the fields, raise livestock, likely to be limited. take out credit, and sometimes run family enterprises. Thus, programs should be designed with female, as Faster agricultural growth-and future growth in the well as male, clients in mind. rural non-farm sector-requires a strengthening of the infrastructure and human resource base of the The information collected in two participatory country, which in turn requires that scarce public poverty assessments draws a fuller picture of coping resources be used more effectively, especially in the mechanisms adopted by households, and of the provision of inputs to the agricultural process and of reasons why services do not reach the poor. The role rural roads. The 1998 Country Economic of institutional constraints-distance to services, Memorandum discusses the steps necessary to inability to tackle the bureaucracy, lack of voice in improve the efficiency with which public resources local decisions-emerges clearly from interviews and are used, so as to increase the growth impact of focus groups. public investment, and to promote private initiative through policy and regulatory reforms. Better In a country as poor as Nepal, the main focus of a management of public expenditures in agriculture poverty alleviation strategy has to be growth: broad- and better targeting of subsidies are the key elements based, equitable, sustainable growth. With a low per of a poverty alleviation strategy. Similarly, much capita income and almost no surplus to redistribute, can be done to improve the targeting of spending in there is little scope for targeted poverty alleviation the social sectors, particularly education and health. efforts on any scale large enough to make a difference at the national level; therefore, poverty While a redistribution of expenditures would alleviation will require faster per capita income certainly be desirable, it would not be sufficient to growth and, in turn, faster output growth and slower ensure that expenditures reach the poor, if it is not population growth. accompanied by changes in the institutional mechanisms whereby programs are implemented. In Efforts to slow population growth through the recent years, community involvement, coupled with provision of girls' education and of maternal and decentralization, has emerged as the most promising child health services should complement efforts to mechanism to implement projects and programs in spur GDP growth, as population increases translate to ways that reach the poor, and with lower levels of lower per capita gains with a given overall growth corruption than experienced otherwise. A basic rate. model has emerged. While questions remain on the effectiveness, replicability, and sustainability of this To be equitable and include the poor, growth has to approach, it is certain that any successful poverty be centered in rural areas and based on agriculture. alleviation strategy for Nepal has to be based on In the short-to-medium term, agriculture presents the decentralized, participatory project design and highest potential for growth and poverty alleviation, implementation. as the vast majority of the people, and especially of 89 Annex A Panama The Problems of Poverty, Malnutrition and percent or over 232,000 poor urban residents). Inequality... Close to 40 percent of the urban poor (over 90,000 people) live in the Panama City - San Despite Panama's relatively high-income per Miguelito area. Moreover, a significant share of capita (US$3,080 in 1997), poverty remains city-dwellers live just above the poverty line and pervasive. Over one million people (37 percent of could be considered vulnerable. the population) live below the poverty line. Of these, over half a million (19 percent) live in extreme Poverty is a national problem, with several key poverty. One-half of all Panamanian children are regional pressure points. Panama's poor are spread poor. The distribution and magnitude of poverty in across the country. Although poverty rates are Panama varies significantly by geographic area: significantly higher further away from the capital area, some 315,000 poor residents are concentrated in * Rural poverty bias. Poverty and extreme the Provinces of Panama and Col6n. The new poverty are concentrated in the countryside. Poverty Map recently constructed by MIPPE/MEF Rural poverty is higher in both relative terms using data from the LSMS and the Population Census (with 65 percent of the rural population living in confirms this tendency: poverty rates are highest in poverty and 39 percent living in extreme San Bias, Darien, Bocas del Toro, Cocle, and poverty) and absolute terms, with over 788,000 Chiriqui, and lowest in the Provinces of Panama and rural residents living in poverty (close to three- Col6n. Nonetheless, these latter two provinces quarters of the nation's poor population). account for roughly one-third of Panama's poor. Within each region, poverty rates are highest in the * Destitution among the indigenous. Poverty in rural, indigenous, and remote areas and lowest in the indigenous areas can only be described as central urban districts. abysmal. Over 95 percent of residents of indigenous areas (197,003 people) fall below the There is a strong correlation between poverty and poverty line and 86 percent live in extreme child malnutrition in Panama. Over 16 percent of poverty. Although indigenous residents all children under five (close to 50,000) suffer from represent only 8 percent of the total population, some form of malnutrition. About 85 percent of they account for 19 percent of the poor and 35 these are poor. Close to one quarter of poor children percent of the extreme poor. With higher rates and one-third of the extreme poor under five are of fertility, indigenous areas are the most rapidly malnourished, compared with 4 percent among the growing segments of the population. As such, non-poor. The incidence of malnutrition mirrors the Panama's poverty rate will increase in the geographic and ethnic patterns of poverty, with one- absence of an aggressive poverty reduction half of all children in indigenous areas suffering from strategy. Poverty and extreme poverty are malnutrition and the highest incidence among the highest among the Ngobe-Bugle, Panama's Ngobe-Bugle. largest ethnic indigenous group, followed by the Embera-Wounan. Poverty is lower among the Panama is one of the more unequal countries in Kuna overall, although it is still quite high the world. With a consumption Gini of 49 and an among those living in indigenous areas. income Gini of 60, Panama's inequality ranks among Geography appears to be a more powerful the highest-on par with Brazil and just below South determinant of poverty than ethnicity, with a Africa, two of the most unequal countries in the higher incidence among ethnic indigenous world. Panama's poorest are very poor and the people living within indigenous areas than those richest are very rich. Although inequality is higher in living outside these areas. rural areas, it is more obvious in urban areas, such as the city of Col6n, where the close physical * Urban vulnerability. Although poverty is not juxtaposition of the modern, dynamic, wealthy sector as widespread or as deep in urban areas (15 with poor city slums accentuates the perceived gap percent of the urban population), Panama's cities between rich and poor. account for an important share of the poor (23 90 Annex A ... Reflect Underlying Disparities in Assets. differences in salaries received by indigenous and non-indigenous workers cannot be explained by factors such as education, experience, type of The problems of poverty, malnutrition, and work et. In adiin nieoswreshv inequality in Panama largely reflect disparities in work, etc. In addition, mplogenous workers have opportunity. The distribution of key productive few opportunities for employment in the formal assets-labor, human capital, physical assets, sector. financial assets, and social capital-is highly Human capital-education and health-is an unequal. These disparities are most prevalent important complement to labor, boosting its between the poor and non-poor, but also manifest productivity and potential for income generation. themselves differently by geographic area. The LSMS reveals that schooling pays off in terms of higher incomes: each year of schooling yields about a Labor, the poor's most abundant asset, accounts 5 percent increase in hourly earnings. These returns for 77 percent of their total income (69 percent for vary significantly by education level, with primary the non-poor). Nonetheless, the poor are constrained school (which has fairly equitable coverage) in their use of this key asset in a number of ways: generating much lower returns than secondary or higher education (to which the poor have much less * High rates of unemployment for the urban access). Access to health care also generates poor. Though poverty and unemployment are productivity gains and contributes directly to well- not correlated for the nation as a whole, the poor being. The distribution of human capital assets, are twice as likely to be unemployed as the non- however, is highly unequal. poor in Panama's cities. The difference is even higher when taking into account seasonal and Disparities in education are key causes of poverty, discouraged job seekers. Unemployment is malnutrition, and inequality in Panama. particularly high for poor urban women and Education is a crucial elevator for the poor to lift youths. themselves out of poverty. Higher educational attainment for a household head or his/her * Potential underemployment among the poor companion significantly reduces the probability of in all areas. The poor work fewer total hours being poor. Mothers' education significantly affects than the non-poor in all areas-likely, a sign of child nutritional status. Disparities in education underemployment and low productivity. constitute the single most important determinant of inequality, accounting for about 40 percent of * A strong correlation between informal sector Panama's consumption inequality. Inequities are employment and poverty. Close to three- apparent for achievement, coverage, internal quarters of the poor work in the informal sector efficiency and the quality of education: (40 percent of the non-poor). Low levels of household consumption are significantly * Although progress has been made in expanding correlated with informal sector employment even literacy and increasing educational attainment after other factors (such as human capital) are over time, gaps remain for the poor and the taken into account. Earnings in the informal indigenous (particularly indigenous women). sector are significantly lower than those in the formal sector: informal workers earn 60 percent * The main gaps in access include the indigenous and 43 percent of what those in the private and at all levels, and the rural and urban poor at the public formal sectors earn, respectively. These pre-primary and secondary levels. Moreover, differences are not explained by differences in very few students of higher education are poor (5 human capital, area of residence, or job percent). Key obstacles to higher enrollment for characteristics. the poor include: (i) the direct costs of schooling (fees, books, etc.) at the primary and secondary * Indigenous workers face probable wage levels; (ii) a lack of "interest" among some poor discrimination. The LSMS23 shows that children (particularly poor urban boys) at the secondary level, which could reflect social 23 The analysis is based on salary regressions that do not include income from self-employment. 91 Annex A pressures as well as quality issues in the Housing. The poor tend to live in much lower educational system; and (iii) a lack of programs quality housing than the non-poor. Moreover, at the pre-primary level. while the majority of the population lacks proof of ownership (registered or unregistered titles) * Internal efficiency is also lower among the poor for their homes, the gap in titling of housing and indigenous, who tend to repeat grades and assets is much worse for the poor. Not owning a drop out more frequently than the non-poor. house increases a household's probability of being poor, as does the lack of a registered title. * Lower quality education for the poor is evident from the higher share of poor students without * Land. The distribution of land is highly unequal textbooks, a lack of bilingual materials and in Panama. The poor, who account for two- instruction for indigenous primary students, the thirds of the rural population, own one-third of high share of the poor in communities reporting land. Among those who own any land, the Gini insufficient teachers, and dilapidated school coefficient for total land owned is 77. facilities in communities with higher Disparities in land ownership account for 11 concentrations of the poor. percent of total consumption inequality in Panama. The poor have even less access to titled Inequities in health status and health care also land: only one third of all owned agricultural abound. Relatively strong health indicators for the land is fully titled, and the non-poor own 84 nation as a whole mask large disparities and poor percent of it. health status among those living in poorer areas. The poor (particularly the indigenous) have a lower life * Titling and Income Generation. The lack of expectancy, higher rates of infant mortality and property titles reduces the ability of the poor to malnutrition, and continue to die from infectious and obtain credit (since titles are often required as communicable diseases despite Panama's collateral). The lack of guarantees (property epidemiological transitioning. The poor and titles or other assets) was the main reason poor indigenous have less access to health care, and are households were refused credit. Without formal less likely to seek medical treatment in case of illness claim, the poor also lack the option of selling or than the non-poor. Low access to health services borrowing against these assets for emergency bears a significant link to child malnutrition in income. Panama. Basic infrastructure services contribute to higher Physical assets such as housing and land also welfare and productivity. Some services, such as contribute to income-generating potential and potable water and sanitation, contribute directly to help households avert risk. The poor commonly overall welfare and health status. Others, such as use housing and land as a base for productive electricity and telephones, help households use their activities and enterprises. Property also generates homes productively for income generation. The rent through earnings charged to renters or via the LSMS reveals that access to basic services is highly savings from "imputed" rent. Households can also correlated with a lower probability of being poor. use property as collateral for leveraging credit. Inequities in access to such services abound in Emergency income can likewise be generated Panama, both between the poor and non-poor and by through sales of property or borrowing against it geographic area (especially among dispersed (equity loans). Finally, housing can be used as a tool populations in rural and indigenous areas). Key gaps for extending personal relationships, building trust, in coverage include: the indigenous, for all services, and generating social capital. and the rural poor, for energy and sanitation services and, to a lesser extent, potable water. While the The ability of households to use property as an urban poor have much greater access to all types asset largely depends on the security of tenure and of services than their rural counterparts, a lack of the flexibility of land and housing markets. In sanitation services for an important share of poor Panama, the distribution of housing and land is city-dwellers raises public health concerns. highly unequal, as is access to the titling of available property. Financial assets-savings and credit-allow households to smooth their consumption and 92 Annex A invest for future earnings potential. The poor are the Col6n Free Zone, and the International Banking much less likely to save than the non-poor; when Center. While these enclaves generate large shares they do, they tend to put their savings in public of GDP, they create little employment (3 percent of institutions (whereas the non-poor are more likely to the labor force) or fiscal revenue. Moreover, they use private banks). The overall volume of lending to inject negative spillovers into the economy due to the the poor is much smaller than their contribution to huge differentials between wages paid in the the economy. Whereas poor households receive 3 enclaves, particularly the Canal Zone (which is percent of total credit, they account for 10 percent of subject to the U.S. labor code) and the rest of the total consumption and income in the economy. economy. Information constraints, physical distance, lack of formal guarantees, and high costs-per-dollar Indeed, factor markets have been segmented by borrowed present obstacles to lending to the poor. policies that drive up the cost of labor relative to capital. Panama's labor market is characterized by a Social capital24 is one of the assets of the poor. The multiplicity of policy regimes, with separate regimes poor and extreme poor account for a disproportionate for the private sector, the public sector, the Panama share of those living in communities with high social Canal Commission, and the Export Processing capital. The LSMS reveals that the poor tend to Zones. These regimes have created large wage associate for "public goods" purposes (e.g., in differentials between workers in the Panama Canal community associations), whereas the non-poor join Commission, public sector employees, and those associations that yield higher private gains (e.g., employed in the rest of the economy. cooperatives). These patterns suggest that the poor rely on community action (social capital) to Labor-market interventions not only hamper compensate for a lack of other assets created by growth, but also have a direct link to poverty. By public services. Social capital also helps increasing the relative price of labor-thus, reducing communities leverage assistance. Communities with demand for the poor's most abundant asset-these high social capital report a higher frequency of distortions have swelled the ranks of the unemployed assistance from the government and NGOs. This and encouraged informality. Moreover, while they correlation is observed in all three geographic areas, benefit those who work in formal sector jobs, the and is particularly strong in rural and indigenous resulting segmentation of the labor market can put a areas. Interventions should work with communities heavy toll on informal sector workers by reducing to build on this important avenue for public action. their wages, making it difficult for the working poor to grow out of poverty through their own labor. Such Disparities Largely Reflect a Legacy of Indeed, the LSMS reveals that the poor in Panama do Distortions in Panama's Economy ... not benefit from such distortions, but may be hurt by them: (i) the majority of the working poor receive The disparities in the distribution of assets and wages that are below the official minimum wage; (ii) economic opportunity reflect Panama's uniquely they do not receive the "mandated" fringe benefits; dualistic pattern of development. Panama's (iii) the majority are employed in the informal sector, privileged geographic location and its monetary where wages are lower and employment terms less regime anchored in the use of the US dollar as legal favorable; and (iv) the urban poor are hurt by high tender have fostered its comparative advantage in rates of open unemployment and the rural working services, which contribute over three quarters of GDP poor appear to be underemployed. and generate two-thirds of employment in Panama. These strategic factors have also spurred the rapid The modern services sector is juxtaposed with a development of internationally-oriented, modem, traditional sector (primarily agriculture and dynamic service enclaves, including the Canal Zone, industry), that has been constrained by policy- induced rigidities and low productivity for decades. Until recently, a highly distorted trade 24 Social capital-defined as norms, trust and regime (one of the most protectionist in Latin reciprocity networks that facilitate mutually America) combined with a complex web of price beneficial cooperation in a community-is an controls had the result of protecting inefficient important asset that can reduce vulnerability and sectors, distorting resource allocation, generating increase opportunities. rents for certain groups, and raising the cost of basic staples. Simulations using the LSMS suggest that the 93 Annex A net redistributive effects of such protection was regressive, effectively taxing the poor and increasing * Inequities in public spending on health care poverty and inequality. also abound. The poorest quintile of the population benefits the least from public The government has undertaken a number of spending on health care due to low levels of use fundamental reforms since 1994 in an attempt to and access to these services. Inefficiencies in the stimulate higher and more inclusive growth and health sector including the fragmentation of the reduce poverty and inequality. It has dismantled sector by three major providers (the Ministry of the labyrinth of trade barriers and price controls, Health, the Social Security Institute, and the launched a far-reaching privatization program, issued private sector), few incentives for efficiency and anti-trust legislation, unified fiscal incentives for performance, and weak policymaking, financing, manufacturing firms, and adopted modest but and regulation capabilities in the Ministry of important reforms in the Labor Code. After several Health have also prevented improved health years of little growth, the economy began to respond outcomes among the poor. in 1997, with strong growth and some decline in unemployment for the first time in years. Even more * Since the early 1990s, the government has important for the long term, employment has attempted to compensate for some of these apparently become more responsive to changes in biases by developing a number of social growth. Despite these reforms, an important policy assistance programs. While several programs agenda remains, with several key additional reforms appear to be quite effective at reaching the poor, needed to reduce poverty. lack of targeting of some of the larger programs, inefficiencies in program delivery, and possible ... And Biases and Inefficiencies in Public duplication of functions reduces the Spending. effectiveness of these transfers. Disparities in key assets-notably human The Main Principles of the Government's New capital-also reflect a lack of targeting of social Poverty Strategy policy and public spending. Despite high spending on the social sectors (21 percent of GDP overall, 6 The government's Poverty Strategy and Action Plan25 percent for education, and 7 percent for health in is a direct outcome of the joint analysis of the LSMS 1997), inefficiencies and inequities have prevented and several inter-institutional poverty seminars. This improved outcomes for the poor: strategy complements the government's economic reform program and is designed to strengthen the key * Total public spending on education is assets of the poor, taking into account geographic regressive, with the non-poor benefiting more differences in the poverty situation and priorities. than the poor. This inequity largely reflects the The main underlying principles for this strategy large share of public spending allocated to include: higher education (close to one-third of the public education budget), virtually all (95 percent) of * Coherence with, and implementation of, the which benefits the non-poor. It also reflects the economic reform program for sustained broad- gaps in coverage of the poor at the pre-primary based economic growth; and secondary levels. Geographic inequities in * Improved efficiency in social spending; public spending on education are also apparent, * Targeting of resources to the poor; with biases in favor of urban areas and against * Decentralization of services for improved rural (indigenous and non-indigenous) areas. efficiency and quality of interventions; Furthermore, the poor quality of public * Increased community participation for improved education stems from functional inefficiencies in effectiveness; the delivery of education, including over- * A multi-dimensional approach with strong centralized decision-making, weak policymaking intersectoral coordination; and and planning capacity in the Ministry of Education, lack of management information tools, and a disconnect between teacher salaries and performance. 25 Nuevo Enfoque Estrategico Frente a la Pobreza, Cabinet Resolution No. 134, September 17, 1998. 94 Annex A * Monitoring of the poverty situation and (i) enforcing higher cost recovery for curative implementation of the strategy itself. and hospital care (disproportionately benefiting the non-poor) and (ii) shifting resources to cost- effective primary interventions in poor areas. The strategy also includes in planifor Spending on social insurance and assistance intervntion inkyaes'nldn:euain should also be streamlined to ensure a health, social assistance and nutrition, urban poverty,sol asob stemidto nur a halt soal asstac a comprehensive, efficient, well-targeted safety and rural poverty, net. An inventory of service coverage should be overlaid with the new Poverty Map to guide Translating these Principles into Priorities and spending allocations on basic services so as to Action target key gaps among the poor. In broad terms, transportation, electricity, telephones and potable To translate these principles into action, the water have been identified by rural communities Government should: as priority; potable water is top priority in indigenous communities; and transportation and * Prioritize among poverty groups. Given the sanitation are key for urban communities. distribution of poverty, first priority should be given to: the rural poor, the indigenous * Decentralize and promote community (particularly the Ngobe-Bugle), poor children participation in service delivery to improve the and youths, undernourished children, and effectiveness and efficiency of poverty pregnant and lactating women. Second priority interventions. Examples include: (i) should be assigned to combating urban poverty. decentralizing personnel decisions to regional Third priority should be given to programs that education boards and expanding innovative target the elderly poor, poor child laborers, poor participatory pre-school programs; (ii) informal-sector workers and the unemployed decentralizing food purchases in remote areas poor. under school feeding programs; (iii) expanding use of NGOs and communities as intermediaries * Reallocate public expenditures. The top in social programs; and (iv) responding to priority for effective action to reduce poverty community preferences for service delivery. should involve reallocating public expenditures. Given the high level of social spending, it is * Implement key policy reforms to reduce unlikely that a large amount of additional disparities in assets. While maintaining resources will be forthcoming. As such, the existing reforms is critical, the agenda for the government needs to reallocate existing spending second-generation of economic reforms designed toward areas that benefit the poor, boost cost to promote growth is large. Special efforts recovery for services used by the non-poor, and should be made to ensure that key reforms to improve efficiency in service delivery. A reduce disparities in assets and, hence, poverty thorough review of public spending should be are undertaken, including: (i) deepening reforms conducted in 1999 to guide such reallocations. to the labor code; (ii) expanding property titling The review should emphasize both the functional (both of housing and land), which will also help aspects of the budget (including the improve the poor's access to credit; (iii) distributional incidence of spending in key continuing trade reforms; and (iv) reducing sectors) as well as the management of public distortions in public and freight transport. expenditures. Clear candidates for reallocation of education spending include: (i) enforcing higher * Improve targeting mechanisms. The cost recovery for higher education and shifting government should apply the new poverty map freed resources toward basic education; (ii) (combining data from the LSMS and the census) focusing spending on demand-side education to the allocation of expenditures as soon as schemes to reduce economic barriers faced by possible. It should also seek to develop poor households to increase enrollment by the additional mechanisms for targeting, including poor. Although a thorough analysis of the means-testing and self-targeting. incidence of health spending remains to be * Allocate sufficient resources to monitor done, some candidates for reallocation include: poverty and to implement the strategy. The 95 Annex A government is developing a poverty monitoring institutional process for reporting on indicators system to track living conditions and provide and implementation. Funds from the on-going data for impact evaluation of interventions. This IDF grant could be used to contract technical system includes LSMS-type surveys that will be assistance to help MEF staff developing and conducted every three years. The government monitoring such indicators; should also seek to develop a key set of indicators for monitoring the implementation of * Applying the new Poverty Map as a tool for the poverty strategy in 1999 and subsequent targeting and resource allocation; and years. Program-specific questions should also be included in the next LSMS for additional impact * Disseminating the Poverty Assessment and the and implementation analysis. government's Poverty Strategy in government circles and public forums. Some key steps for immediate implementation during the remainder of 1999 should include: Areas for further research include: analyzing public expenditure (incidence and management), the links * Conducting a thorough review of public between poverty and the environment, the impact of expenditure allocations and developing existing legislation on labor markets including the proposals for reallocating expenditures so that informal sector, the distributional incidence of social they better reach the poor starting with the 2000 security, impact evaluations of social assistance budget; programs, participatory research on the obstacles to increased school enrollment among indigenous * Developing a set of indicators to monitor children, and participatory research on poverty, crime implementation of the strategy (including key and violence. budget categories) and agreeing on an inter- 96 Annex A Peru Poverty and Social Developments, 1994-1997 everybody. First, regional disparities have grown, with some regions showing enormous progress, The poverty assessment evaluates social progress in especially Lima, and other regions falling relatively Peru from 1994 to 1997. It carries mainly good news behind, especially the rural areas in the highlands. In but also reports several worrisome developments. the rural Sierra, overall poverty remains stagnant The good news is that social welfare improved over while its severity has declined. Of the total reduction the three years-and this is true when looked at from in poverty, almost 80 percent stemmed from two a variety of angles. The poverty rate, the percentage regions alone: Lima and the urban Sierra. In of the population not able to finance a basic basket of international comparisons, Peru remains one of the goods, has declined by several percentage points and countries with an extremely high variation of now stands at 49 percent-roughly 12 million regional income. Peruvians are, therefore, considered poor. Severe consumption poverty-an extremely austere Second, with regional disparities increasing we also measure-has also declined, from about 19 percent find some evidence that inequality has risen in the to 15 percent. This does, nevertheless, leave three three years under study-a small increase in and a half million Peruvians in the immediate danger inequality can be observed when using several of hunger and deprivation. In line with consumption measurement methods and when looking at the poverty rates, school attendance has risen slightly, distribution of income or wealth alike. This increase literacy rates increased from 87 percent to 90 percent, in inequality comes after a decrease over a long time and the population is healthier. Most important period-from 1985 to 1994. And although it is not at among the latter, the rate of malnutrition for children all certain that inequality will continue to rise, below the age of five has further declined. About policymakers should closely watch it. Evidence now 600,000 children younger than five, or one in every exists that more unequal societies tend to be more four, were malnourished in 1997. violent societies. Economic progress also depends on equality, with more unequal societies showing a These improvements are without doubt due to the worse growth record. And, clearly, inequality and favorable overall economic environment, with per poverty are also directly linked: for any given capita real growth rates from 1994 to 1997 at about national income, the more unequal the society, the 3.5 percent. Contrary to public belief, this growth did higher the poverty rate. We find two factors behind create jobs. About 1.3 million additional jobs were these inequality increases in Peru. The more created in the economy, absorbing both a population educated Peruvians profited more from the current increase and a higher participation rate in the labor upswing than the less educated. Obviously, this force. Many of these new jobs are informal jobs, means that improving the quality of primary and however, so workers are without formal contracts, secondary education would decrease inequality. pension insurance, or health insurance. Informality Additionally, regional development varied strongly in Peru remains at a constant rate of about 45 percent and contributed to the small rise in inequality. This of urban employment, even higher in rural areas. different regional development is also mirrored in the The positive social welfare trends are also due to distribution of major public investments: While the substantial government efforts: from 1994 to 1997, government has made an effort to reach out more to more than half a million households received water, the marginal rural population, this effort has only electricity, and sanitation connections; the public partially translated into measurable benefits. Of the health sector attended more than one million large achievements in education, health and additional ambulatory patients per month; and infrastructure, about 70 percent have been in cities. 200,000 more children were in school in 1997 compared to 1994. Third, Peru's development in the past years has been inclusive for many but exclusive for others. While But there are also some worrisome developments to we find gender differences narrowing and vulnerable report, and most of them are closely knit together. groups such as migrants and the landless sharing the Economic growth and go ernment programs have benefits of development, certain groups appear to not been spread equally and have not benefited have fallen further behind or remain highly at risk of 97 Annex A deprivation. One group is clearly the indigenous matters. Larger families have done worse than population. Their social and political integration is smaller ones-this relationship can work through still far from achieved. And we now find that, even higher dependency ratios that can limit the ability of economically, the native population has fallen further households to save. Third, more education means behind: while in 1994 an indigenous family was 40 faster advancement. Finally, savings and access to percent more likely to be poor than a non-native basic services like water, electricity or sanitation not family, in 1997 they were almost 50 percent more only immediately supports households but helps likely to be poor. Additionally, observing hundreds them advance faster in ways not just directly of the same families from 1994 to 1997, the connected to services access. We also find that indigenous families have clearly done worse, even if bundling of such services matters: providing two we control for their lower educational training, lower services jointly has a more positive effect than the access to services, and lower land or housing sum of providing each one separately. ownership compared to the non-native population. The poverty assessment also includes some findings The social situation of children remains bleak. The about the incidence and impact of urban violence on youngest in Peruvian society continue to have far the families of the poor. While we cannot link higher poverty and severe poverty rates than any insecurity directly to welfare developments, violence other age group. And although poverty rates is one of the main preoccupations of the urban poor. decreased, the drop was slight and much less than for The incidence of various types of violence differs by other groups. Also, the survey data tell a sad story poverty group, the poor being about twice as likely to about child labor as more and more youngsters be exposed to physical aggression as the better-off in between the ages of 6 and 14 work. In addition to society. Consequently, their feeling of insecurity is children, many young adolescents are not faring well higher. in Peruvian society. Youth unemployment is very high, 18 percent for females and 14 percent for males Prospects for Poverty Reduction-Growth and in Lima in 1996, and shows a rising trend. In Employment Links international comparison, while Peru reduced infant mortality from 54 (1990) to 42 deaths per 1,000 live One of the biggest concerns in the Peruvian public births in 1996, it is still lagging behind the regional debate on poverty is whether growth has created achievements for countries of its income level and it employment and whether this has led to poverty places Peru among the worst in the Latin American reduction. We find that growth has indeed created region. employment; about 1.3 million more people have been in remunerated employment in 1997 compared The poverty assessment does not aim to describe the with 1994. The majority of jobs were created in the situation of the poor in Peruvian society-to sketch a informal sector but they were not necessarily low- "poverty profile". Many other studies have done paying jobs. A worrisome trend is that urban this. Rather, it assesses what determines whether productivity does not seem to be rising and, families get ahead or fall behind over time. This is of consequently, real wages are flat at best. special relevance to policymakers. For example, a static view might tell us that informal employment is On face value, Peru's growth path in past years was a strong correlate of poverty. But a view over time pro-poor because the sectors where workers and their will show whether the depth of poverty increases if a dependents are most likely to be poor (construction, household is linked predominantly to the informal commerce and agriculture) grew fastest. This market. appears to have helped the poor in construction and commerce. In agriculture, however, poverty What Helps Households Advance? reduction was slower than could have been hoped for. Employment creation as a corollary to A number of factors have influenced household agricultural growth was not strong. This could be welfare over time, in both positive and negative due to a productivity backlog stemming from the ways. First, surprisingly, households were more recession at the beginning of the 1990s, implying that likely to advance if their income stemmed from the agricultural growth first led to more intensive work, informal sector than from the formal sector. This is i.e., longer hours per employed person. true in urban areas as well as in informal off-farm employment in rural areas. Second, household size 98 Annex A A number of simulations show how important growth distribution of social expenditures. While strategies remains for poverty reduction in Peru. The to reduce poverty are necessary and important, they simulations are very simple and, for example, do not do carry the risk of oversimplifying a very complex take into account that workers will move between and difficult task. In Peru, with about half of the areas and sectors or that the employment effect of population in poverty, poverty eradication will take a growth will differ between sectors. The simulations long time and require the coordinated efforts of all do show, however, that the type of growth and its parts of society-the public, private, and voluntary regional distribution will matter-the mpre growth is sectors-and the international community. based in agriculture, construction and commerce, and the more its impacts filter through to the rural The report also does not recommend the creation of highlands and lowlands, the more poverty will be new programs, nor does it make a statement about reduced in the short run. While the growth pattern the appropriate size and mix of programs. In broad should not be artificially tilted towards such sectors, lines, we find that the Peruvian anti-poverty investment in these sectors will depend on a programs with their mix of emergency help, continuation of non-discrimination policies. nutritional focus, and infrastructure emphasize the right areas. However, we believe that a much bigger Social Expenditure impact could be achieved with available funds. The distribution of social and anti-poverty First, economic and social policymaking would need expenditures has been disappointing. The to be more closely integrated, informed by sound distribution of 7.6 billion soles (about 40 percent of technical analyses and advice. Today, the many the total public budget in 1996) is mildly tilted social policy programs operate independently; they towards the better-off in Peruvian society; i.e., the try to reach their beneficiaries with different means poorest obtain less of these expenditures than their and lack stringent evaluation. The Ministry of the population share. In large part this is due to the anti- Presidency alone has six programs in the education poor distribution of higher education and hospital sector-outside and in addition to those of the expenditures. Ministry of Education. Nutrition programs are plenty and administered by the ministries of Finance (Vaso Several specialized government programs reach only de Leche), Women and Human Development a small proportion of the poor and direct public (PRONAA), Health (Basic Health Program, transfers play a significantly smaller role than private PACFO), and Education as well as the Ministry of transfers do. The nutrition program PRONAA and the Presidency (FONCODES). Expenditures of the social fund FONCODES have the highest many of these programs, although well intended, do coverage and lowest leakage rates, but the housing not reach the poorest in society and are often isolated credit programs as well as the infrastructure in nature. Many different poverty maps and targeting programs of COOPOP, FONAVI and INFES reached mechanisms are currently employed, and these need only few of the poor. Food aid has the largest to be harmonized. We find that poverty is reduced positive effect in rural Peru, where the severe poverty most effectively when interventions are integrated, rate would have been 3 percent higher had these that is provided jointly and in a coordinated way. In programs not existed in 1997. However, private Peru, conflicting decrees empowering the Ministry of transfers generally play a significantly more the Presidency and the Social Coordination Council important role than public transfers in the rural and (CIAS) currently exist-but neither institution has urban areas alike. true power or manpower. Without integrating social ministries into the much more powerful council for From Individual Sector Strategies to a Consistent economic policymaking, weak coordination of social and Broad-based Anti-poverty Focus programs is likely to continue. The report does not aim to provide detailed Second, and closely linked to the above, pro-poor recommendations as to how poverty can be policy formulation needs to be accompanied by eradicated in Peru. Rather, it presents a quick thorough and good evaluation. This goes beyond the feedback about social developments and poverty need for targeting and prioritization. It includes, for based on the new Living Standard Measurement data policymakers, the ability to assess whether certain from the Instituto CuAnto released in June 1998, and interventions did indeed help or not. It also implies on policy-relevant analysis of growth patterns and the that policymakers and technicians are able to assess 99 Annex A how changes in program nature and how changes in brings its comparative advantage to the table: central expenditures are distributed and what effect these government brings finance and organization; changes have. municipal government brings local knowledge; and non-governmental organizations (NGOs) often bring Third, central coordination promises to be effective if a good and direct understanding of the problems of it goes hand-in-hand with decentralized execution, the poor. For this latter point the report has some involving other partners in the fight against poverty. evidence: In 1996, NGO-administered programs had Examples from other Latin American countries show a significantly better targeting record than most that private-voluntary-public partnerships in poverty public programs and matched the good targeting reduction at the local level can be extremely results of FONCODES and PRONAA. successful. One reason is that each organization 100 Annex A Russia Targeting and The Longer-Term Poor in Russia Like the RLMS, several Russian academic sources also found that poverty did not decline. VTsIOM, a Poverty and Profile prominent public opinion polling organization, has rotated a module on poverty in its general opinion Poverty in Russia presents serious challenges to the surveys at least twice (Kovaleva and Zubova 1997 macroeconomic policy and political stability of the and VTsIOM bulletin, various issues, 1995-97), and government. Poverty has characterized the transition found no appreciable decline in poverty rates. The years since 1991, and - depending on the source of Institute of Socio-Economic Studies of the data used -- the trend is one of either worsening or Population (ISEPN) has studied poverty for more improving only slightly. than 20 years in a representative longitudinal panel in the city of Taganrog (Rimashevskaya and Yakovleva This study examines poverty in Russia during 1994- 1998, Rimashevskaya et. al. 1991), and found that 96, relying primarily on the Russian Longitudinal poverty increased sharply after 1991. Monitoring Survey (RLMS) data set -- the World Bank version of a data set created and assembled by Ninety-seven percent of the longer-term poor live in the University of North Carolina Chapel Hill, and the rural areas (33 percent) or urban areas other than Institute of Sociology in Moscow-- although other Moscow and St. Petersburg (64 percent) Overall, 27 sources, primarily official data, are also used. percent of the Russian population lives in rural areas, This study is particularly important because in 13 percent being longer-term poor. In urban areas addition to cross-sectional data used for the 1992-94 other than Moscow and St. Petersburg, the study World Bank study, this study uses panel data tracking revealed 12 percent to be longer-term poor. And just households in three years (1994, 1995, and 1996) - as the poor are concentrated outside of Moscow and data that are now publicly available. The existence of St. Petersburg, so are the non-poor concentrated panel data makes it possible to explore the dynamics inside; a startling 72 percent of all households in of poverty; in particular, these data allow exploration Moscow or St. Petersburg were never poor during the of whether a hard-core group of households has three-year study. And of the never-poor households emerged that became poor at the beginning of the in the study -- 45 percent of the sample -- 17 percent transition and then stayed poor throughout 1996. were located in these two cities, although the two cities accounted for just 11 percent of total The RLMS data set demonstrates clearly the households surveyed. emergence of the longer-term poor; in each year of the panel 13 percent of the households surveyed - Like the 1992 and 1994 study, this study found a constituting 17 percent of the population -- were higher poverty rate and a higher longer-term poverty poor. For the purpose of this study, members of rate among larger households than among smaller these households are termed "longer-term poor" since households Only 6 percent of single-person the panel lasted just three years This study examines households were among the longer-term poor during the correlates for longer-term poverty and attempts to 1994-96, while 24 percent of households with five or associate factors with poverty transitions -- either more members were among the longer-term poor. rising out of poverty or falling into poverty. Fifty-six percent of single-person households were never poor, but only 23 percent of households with Poverty levels as captured in the RLMS are much five or more members were never poor. higher than official statistics. The main reason is the 1994 change in how official statistics are calculated; On average, households that were always poor had since 1994 raw income distributions from family approximately 4 members and households that were budget surveys have been "corrected" to account for never poor had 3.0 members. The larger poor the presence of consumer durables in the family families also have, on average, more dependents, as (Rimashevskaya and Yakovleva 1998, p. 192). This shown by their higher dependency ratios. "correction" has caused a decline in the official Most other aspects of the poverty profile have not poverty headcount from around 30-33 percent in the changed substantially since 1992-93. As before, early 1990s to 20 percent in the late 1990s. children are more likely to be poor, while the elderly are unlikely to be poor. The older a person is, the 101 Annex A smaller the chance that he or she is poor, and the poverty rate of any group reviewed in the cross- older a household head is, the smaller the chance that sectional analysis. person's household is poor. Although the rate of poverty among the elderly has increased along with Social Assistance Pilots the general trend, they remain at a lower-than- average risk of poverty. Men over the retirement age New targeting methods have been developed that of 60 have the lowest rate of poverty in every round improve on the method of fully documenting every of the RLMS (early rounds as well as the later rounds household's income or expenditure. Three social reproduced here) and women past the retirement age assistance pilots introduced in the Komi Republic of 55 have the second-lowest rate of poverty. and in Volgograd and Voronezh oblasts in 1997-98 Conversely, poverty rates are extremely high for focus on the difference between what households children and households with many children. Gender actually consume and what income they report -- has no significant effect on poverty status. either to survey interviewers or social workers. Each pilot tries to estimate the additional amount of While these findings do not differ from previous consumption that a hypothetical household could analysis, the panel aspect of the data sheds more light achieve over its reported income and uses this on what is happening with age- and gender-specific estimated household consumption to determine poverty rates in Russia. The panel data show program eligibility. strikingly that it is whether an individual is always poor or never poor, not gender, that is critical in In each pilot household per capita income and determining an individual's poverty status. estimated per capita income or consumption were compared with the official regional subsistence In the RLMS, open unemployment is strongly minimum poverty line (developed by the Ministry of correlated with poverty particularly longer-term Labor in 1992 using local prices). To be eligible for poverty. Forty-four percent of the longer-term poor these programs, a household's estimated reported at least one unemployed household member. consumption had to be less than a cut-off percentage In contrast, just 20 percent of never-poor households of this poverty line -- 50 percent in Volgograd and reported one or more unemployed household Voronezh and 35 percent in Komi. members. The findings of the three new poverty targeting pilots Overall, pensioners in Russia -- whether old-age or have clear policy implications for Russia. The new disability -- do not face an elevated risk of poverty, methodologies they used - such as the proxy means and most of the longer-term poor are neither elderly test -- demonstrate that at a low administrative cost, nor receiving pensions. Almost 20 percent of with minimum capital investment and training, it is households with one or more elderly member were possible to target the poor more efficiently and to longer-term poor, but only 6 percent of households screen out more of the non-poor. The pilots have with two or more elderly members were longer-term also found distinct differences between the longer- poor. The figures are quite similar for pensioners -- term poor and the temporarily poor, suggesting a about half of households with two or more members need for separate interventions for these two groups. who are receiving a pension were never poor. Proxy Means Test Targeting Only single mothers with children face an elevated risk of longer-term poverty. However, this increased In countries such as Russia and Chile, with a large risk is relatively small; the share of single mothers in informal sector, it can be difficult and costly to verify longer-term poverty is 19 percent while the overall household monetary income. Furthermore, in Russia longer-term poverty rate is 17 percent. And the and other countries a significant share of household longer-term poverty rate for other families with food consumption comes from food grown on private children - 24 percent -- is even higher than the rate garden plots. The true value of home-produced for single-mother families. goods, can be very difficult to estimate because they are typically, produced with "costless" family labor, Single elderly are much less likely than most to be and their quality may be poorer than food items longer-term poor; nearly 80 percent of such men and produced for sale. 55 percent of such women were never poor during 1994-96. Elderly men living alone had the lowest 102 Annex A A proxy means test is a way to estimate household consumption or welfare without extremely detailed Why does it seem so difficult to identify the poor? information about household income. In proxy Not because of ineffective methodologies, but rather means testing, information is collected about because generally it is extremely difficult to characteristics of a household that are much easier to distinguish the poor from the non-poor in Russia and measure and verify than total income -- such as the in other countries of the former Soviet Union. The number of children in a family. The household lack of sharp poverty correlates unfortunately characteristics should be known to correlate with translates into less than ideal results and high rates of poverty, and - ideally -- should be easy to measure, exclusion. and requiring little administrative cost to verify. The proxy means test results show that existing The simulated proxy means test for Russia correctly benefits could be targeted much better. A roadblock identified 57 percent of the poor and 77 percent of for means testing is that means testing (determining the non-poor. The pilots effectively identified the household income and wealth) is quite expensive non-poor but were less effective at identifying the even in countries with advanced tax reporting poor The proxy means tests were usually slightly systems, and prohibitively expensive in Russia, better at identifying the poor than the actual where income disclosure is such a problem. methodologies, but not strikingly so except in the case of Komi. 103 ANNEXB. POVERTYASSESSMENTS, COMPLETED AND SCHEDULED, FISCAL 1989-2000 Completed Scheduled FY89-98 FY99 FY2000 Total East Asia and the Pacific 12 0 4 16 Europe and Central Asia 12 6 6 24 Latin America and the Caribbean 25 3 1 29 Middle East and North Africa 5 1 2 8 South Asia 9 1 1 11 Sub-Saharan Africa 38 1 2 41 Total Iola 12b 16C 129d a. Includes 86 first-round poverty assessments and 15 updates. b. Includes 7 first-round poverty assessments and 5 updates. c. Includes 7 first-round poverty assessments and 9 updates. d. Includes 100 first-round poverty assessments and 29 updates. Note: Poverty notes are not considered full-fledged poverty assessments because they do not provide complete coverage of the topics specified in the World Bank's Operational Directive on Poverty. Some country teams have chosen to prepare a poverty note instead of a full poverty assessment for reasons that include political constraints and data or resource limitations. While poverty notes do not contain the same level of comprehensive analysis as a full poverty assessment, they serve as a springboard for action and further analysis. Poverty notes have been completed for the following countries: Burkina Faso (fiscal 1997) and Central African Republic (fiscal 1998). 104 ANNEX C. POVERTYASSESSMENTS, COMPLETED AND SCHEDULED (BY COUNTRY), FISCAL 1989-2000 East Asia and the Pacfirc Latin America and the Caribbean South Asia, contd. Completed (12) Completed (28) Pakistan (update)- 1996 Philippines' 1989 Bolivia- 1990 India (update)' 1997 Indonesia 1991 Chile 1990 Bangladesh (update)' 1998 Malaysia 1991 Costa Rica 1991 India (update)- 1998 China* 1992 Ecuador 1991 Nepal (update), 1999 Philippines (update) 1993 Mexico 1991 Indonesia (update) 1994 Venezuela 1991 Scheduled Updates (1) Fiji 1995 Paraguay 1992 India* 2000 Vietnam* 1995 Peru 1993 Lao PDR- 1996 Uruguay 1993 Sub-Saharan Afriea Mongolia' 1996 El Salvador 1994 Philippines (update) 1996 Guyana- 1994 Conpieted (39) Thailand 1997 Jamaica 1994 Malawi' 1990 Paraguay (update) 1994 Mozambique- 1991 Scheduled (1) Argentina 1995 Ethiopia* 1993 Cambodia' 2000 Brazil 1995 Ghana* 1993 Colombia 1995 The Gambia* 1993 Scheduled Updates (3) Dominican Republic 1995 Mali* 1993 China* 2000 Guatemala 1995 Namibia 1993 Philippines 2000 Honduras' 1995 Sierra Leone' 1993 Vietnam' 2000 Nicaragua' 1995 Uganda* 1993 Bolivia (update)' 1996 Benin* 1994 Europe and Central Asia Ecuador (update) 1996 Cape Verde' 1994 Trinidad & Tobago 1996 Guinea-Bissau- 1994 Conpleted (18) Costa Rica (update) 1997 Rwanda- 1994 Kyrgyz Republic* 1995 Chile (update) 1998 Seychelles 1994 Poland 1995 Haiti' 1999 Cameroon- 1995 Russia 1995 Panama 1999 Comnoros' 1995 Armenial 1996 Peru (update) 1999 Ghana (update)- 1995 Belarus 1996 Kenya' 1995 Estonia 1996 Scheduled Updates (I) Mauritania' 1995 Hungary 1996 Argentina 2000 Mauritius 1995 Ukraine 1996 Senegal' 1995 Albania' 1997 Middle East and North Africa Zambia' 1995 Azerbaijan' 1997 Zimbabwe- 1995 Romania 1997 Conpleted (6) Eritrea* 1996 Kazakhstan 1998 Egypt, Arab Republic of' 1992 Lesotho' 1996 Arnenia (update)' 1999 Morocco 1994 Madagascar- 1996 Bulgaria 1999 Jordan 1995 Malawi (update)' 1996 Georgia' 1999 Tunisia 1996 Niger' 1996 Kyrgyz Republic (update)' 1999 Yemen, Republic of' 1996 Nigeria' 1996 FYR Macedonia- 1999 Algeria 1999 Tanzania* 1996 Russia (update) 1999 Togo. 1996 Schedulted Updates (2) Congo' 1997 Scheduled (5) Morocco 2000 C6tc dIlvoire* 1997 Croatia 2000 Yemen, Republic of' 2000 Gabon 1997 Latvia 2000 Guinea' 1997 Moldova 2000 South Asia Chad* 1998 Tajikistan 2000 Djibouti' 1998 Turkey 2000 Completed (10) Rwanda (update)' 1998 Bangladesh' 1990 Burunsdi' 1999 Scheduled Updates (1) India' 1990 Russia 2000 Nepal' 1991 Scheduled (1) Pakistan' 1991 Swaziland 2000 Sri Lanka' 1995 Scheduled Updates (1) Ethiopia' 2000 Total Number of Assessments: Completed -- 113 Scheduled -- 7 Scheduled Updates -- 9 Grand Total -- 129 Notes: Assessments classified as completed are in gray or red cover, except for three assessments that were completed before Operational Directive 4.15. Poverty Reduction was issued. Schedule as of March 28, 2000. * IDA borrower. In East Asia and the Pacific, poverty assessments are not scheduled for Myanmar, due to its inactive status, and the Pacific Island States, because of limited Bank support. In Korea, poverty is being monitored in the contest of the structural adjustment loans, and no poverty assessment is formally scheduled because the Bank's support for Korea is in response to the crisis and is expected to be short-teem. A poverty study for Papua New Guinea was completed in FY00. Poverty assessment updates ace scheduled for Indonesia, Lao PDR, and Thailand in FY01. In Europe and Central Asia, povery assessments are not swheduled for the Czech Republic, Slovak Republic, and Slovenia, due to limited Bank suppon. An update for Hungary is scheduled for FY01. Poverty assessments are scheduled for Bosnia and Herzegovina, Lithuania, Turkmenistan, and Uzbekistan in FY02. In Latin America and the Caribbean, poverty assessments are not scheduled for Suriname, due to its inactive status, and for the Organization of Eastern Caribbean States (OECS), due to limited Bank support. A poverty assessment update for Mexico is in green cover. Poverty assessment updates are scheduled for Colombia, Honduras, Nicaragua, and Uruguay in FY01. In the Middle East and North Africa, poverty assessments are not scheduled for Iran and the Syrian Arab Republic due to limited Bank support. An update is being prepared for Jordan, which maybe completed in FY00 or FY01. In South Asia, poverty assessments are not scheduled for Afghanistan, due to its inactive status, and for Bhutan and Maldives, due to limited Bank support. An update for Sri Lanka is scheduled for FY01. In Sub-Saharan Africa, poverty assessmeuts are not scheduled for Botswana, Democratic Republic of Congo, Liberia, Somalia, and Sudan, due to their inactive status, and to Equatorial Guinea and San Tome and Principe, due to limited Bank support. A poverty assessment for South Africa, entited 'Poverty and Inequality." was completed in FY98 by the government. Poverty notes have been completed for Burkinm Faso (FY97) and Cenural African Republic (FY98). Additional poverty notes/studies are under preparation for Burkina Faso, Cameroon, Ghana, Kenya, Madagascar., and Uganda. 105 ANNEXD. POVERTYASSESSMENTS COMPLETED, FISCAL 1989-1999 Country Report Title Report No. EAST ASIA AND THE PACIFIC China Strategies for Reducing Poverty in the 1990s 10409-CHA Fiji Restoring Growth in a Changing Global Environment 13862-FIJ Indonesia Poverty Assessment and Strategy Report 8034-IND Indonesia (update) Public Expenditures, Prices and the Poor 11293-IND Lao PDR Social Development Assessment and Strategy 13992-LA Malaysia Growth, Poverty Alleviation and Improved Income Distribution in 8667-MA Malaysia Mongolia Poverty in a Transition Economy 15723-MOG Philippines The Philippines: The Challenge of Poverty 7144-PH Philippines (update) An Opening for Sustained Growth 11061-PH Philippines (update) A Strategy to Fight Poverty 14933-PH Thailand Growth, Poverty, and Income Distribution: An Economic Report 15689-TH Vietnam Poverty Assessment and Strategy 13442-VN EUROPE AND CENTRAL ASIA Albania Growing Out of Poverty 15698-ALB Armenia Confronting Poverty Issues 15693-AM Armenia (update) Assistance in Armenia 19385-AM Azerbaijan Poverty Assessment 15601 -AZ Belarus An Assessment of Poverty and Prospects for Improved Living 15380-BY Standards Bulgaria Poverty during the Transition 18411 Estonia Living Standards During the Transition 15647-EE Georgia Poverty and Income Distribution (2 volumes) 19348-GE Hungary Poverty and Social Transfers 14658-HU Kazakhstan Living Standards During the Transition 17520-KZ Kyrgyz Republic Poverty Assessment and Strategy 14380-KG Kyrgyz Republic (update) Update on Poverty in the Kyrgyz Republic 19425-KG Macedonia, FYR Focusing on the Poor (2 volumes) 19411 -MK Poland Poverty in Poland 13051-POL Romania Poverty and Social Policy 16462-RO Russia Poverty in Russia: An Assessment 14110-RU Russia (update) Targeting and the Longer-Term Poor (2 volumes) 19377-RU Ukraine Poverty in Ukraine 15602-UA LATIN AMERICA AND THE CARIBBEAN Argentina Argentina's Poor: A Profile 13318-AR Bolivia Poverty Report 8643-BO Bolivia (update) Poverty Equity & Income: Selected Policies for Expanding Earning 15272-BO Oppor. for the Poor (2 vol.) Brazil Brazil: A Poverty Assessment (2 volumes) 14323-BR Chile Social Development Progress in Chile: Achievement and 8550-CH Challenges Chile (update) Poverty and Income Distribution in a High-Growth Economy: 1987- 16377-CH 1995 (2 volumes) Colombia Poverty Assessment Report (2 volumes) 12673-CO Costa Rica Public Sector Social Spending 8519-CR Costa Rica (update) Identifying the Social Needs of the Poor: An Update 15449-CR 106 Annex D Country Report Title Report No. Dominican Republic Growth with Equity: An Agenda for Reform 13619-DO Ecuador A Social Sector Strategy for the Nineties 8935-EC Ecuador (update) Poverty Report 14533-EC El Salvador The Challenge of Poverty Alleviation 12315-ES Guatemala An Assessment of Poverty 12313-GU Guyana Strategies for Reducing Poverty 12861-GUA Haiti The Challenges of Poverty Reduction (2 volumes) 17242-HA Honduras Country Economic Memorandum/Poverty Assessment 13317-HO Jamaica A Strategy for Growth and Poverty Reduction 12702-JM Mexico Mexico in Transition: Towards a New Role for the Public Sector 8770-ME Nicaragua Poverty Assessment 14038-NI Panama Poverty Assessment: Priorities and Strategies for Poverty Reduction 18801 (2 volumes) Paraguay Public Expenditure Review -- the Social Sectors 10193-PA Paraguay (update) Poverty and the Social Sectors in Paraguay: A Poverty Assessment 12293-PA Peru Poverty Assessment & Social Sector Policies & Programs for the 11191-PE Poor Peru (update) Poverty and Social Developments in Peru, 1994-1997 ISSN: 0253-2123 Trinidad and Tobago Poverty and Unemployment in an Oil Based Economy 14382-TR Uruguay Poverty Assessment: Public Social Expenditures and Their Impact 9663-UR on the Income Distribution Venezuela From Generalized Subsidies to Targeted Programs 9114-VE MIDDLE EAST AND NORTH AFRICA Algeria Growth, Employment and Poverty Reduction (2 volumes) 18564 Egypt, Arab Republic of Alleviating Poverty During Structural Adjustment 9838-EGT Jordan Poverty Assessment 12675-JO Morocco Poverty, Adjustment, and Growth 11918-MOR Tunisia Poverty Alleviation: Preserving Progress while Preparing for the 13993-TUN Future (2 volumes) Yemen, Republic of Poverty Assessment 15158-YEM SOUTH ASIA Bangladesh Bangladesh Poverty and Public Expenditures: An Evaluation of the 7946-BD Impact of Selected Government Progs. Bangladesh From Counting the Poor to Making the Poor Count 17534-BD India Poverty, Employment and Social Services 7617-IN India (update) Achievements and Challenges in Reducing Poverty 16483-IN India (update) Reducing Poverty in India 17881-IN Nepal Relieving Poverty in a Resource-Scarce Economy 8635-NEP Nepal (update) Poverty in Nepal: At the Turn of the Twenty-First Century 18639-NEP Pakistan A Profile of Poverty 8848-PAK Pakistan (update) Poverty Assessment 14397-PAK Sri Lanka Poverty Assessment 13431-CE SUB-SAHARAN AFRICA Benin Toward a Poverty Alleviation Strategy for Benin 12706-BEN Burundi Poverty Note: Prospects for Social Protection in a Crisis Economy 17909-BU Cameroon Diversity, Growth, and Poverty Reduction 13167-CM Cape Verde Poverty in Cape Verde: A Summary Assessment and a Strategy for 13126-CV its Alleviation Chad Poverty Assessment: Constraints to Rural Development 16567-CD 107 Annex D Country Report Title Report No. Comoros PovertN and Gro%%th in a Traditional Small Island Economv 1340 1-COM Congo Poverty Assessment 16043-COB Cote d'lvoire Poverty in C6te d'lvoire: A Framework for Action 15640-IVC Djibouti Crossroads of the Horn of Africa Poverty Assessment 16543-DJI Eritrea Poverty Assessment 15595-ER Ethiopia Toward Poverty Alleviation and a Social Action Program 11306-ET Gabon Poverty in a Rent-Based Economy 16333-GA The Gambia An Assessment of Poverty 11941-GM Ghana 2000 and Beyond: Setting the Stage for Accelerated Growth and 11486-GH Poverty Reduction Ghana (update) Ghana: Poverty Past, Present and Future 14504-GH Guinea A Socioeconomic Assessment of Well-Being and Poverty 16465-GUI Guinea-Bissau Poverty Assessment and Social Sector Strategy Review 13155-GUB Kenya Poverty Assessment 13152-KE Lesotho Poverty Assessment 13171-LSO Madagascar Poverty Assessment 14044-MAG Malawi Growth Through Poverty Reduction 8140-MAI Malawi (update) Human Resources and Poverty: Profile and Priorities for Action 15437-MAI Mali Assessment of Living Conditions 11842-MLI Mauritania Poverty Assessment 12182-MAU Mauritius CEM: Sharpening the Competitive Edge 13215-MAS Mozambique Poverty Reduction Framework Paper* None Namibia Poverty Alleviation with Sustainable Growth 951 0-NAM Niger A Resilient People in a Harsh Environment: Niger Poverty 15344-NIR Assessment Nigeria Poverty in the Midst of Plenty: The Challenge of Growth with 14733-UNI Inclusion Rwanda Poverty Reduction and Sustainable Growth 12465-RW Rwanda (update) Poverty Note: Rebuilding an Equitable Society-Poverty and 17792-RW Poverty Reduction After the Genocide Senegal An Assessment of Living Conditions (2 volumes) 12517-SE Seychelles Poverty in Paradise 12423-SEY Sierra Leone Policies for Sustained Economic Growth and Poverty Alleviation 11371-SL Tanzania The Challenge of Reforms: Growth, Incomes and Welfare 14982-TA Togo Overcoming the Crisis, Overcoming Poverty: A World Bank 15526-TO Poverty Assessment Uganda Growing Out of Poverty 11380-UG Zambia Poverty Assessment 12985-ZA Zimbabwe Achieving Shared Growth: Country Economic Memorandum (2 13540-ZIM volumes) * Document was prepared for consultative group meeting. 108 ANNEX E. PROGRAM OF TARGETED INTER VENTIONS, FISCAL 1999 Objectives of Projects in the Program of Targeted Interventions (PTI), Fiscal 1999 Lending to projects in the Program of Targeted and impact), targets, baseline surveys, and control Interventions (PTI) represent one of the many ways groups. the Bank channels its resources to help reduce poverty and improve the living conditions of the poor Approximately US$6.2 billion or about 49 percent of in client countries. The Bank developed and began World Bank investment lending was channeled for tracking PTI projects in FY92 to provide a measure direct poverty-targeted projects, compared with of Bank resources that are targeted directly to the US$6.7 billion or about 40 percent in FY98. Of the poor, or to areas with relatively higher incidence of 216 Bank-approved investment projects in FY99, poverty. While PTI data give only an indication of 111 were PTI operations. Table E- I presents the inputs that go to the poor, it can be used to Bank's funding for PTI projects over the last eight complement other information on the processes and years. Between 92-99, the amount and share of outcomes of Bank interventions on the lives of the IBRD and IDA lending to projects in the PTI have poor. A project is included in the PTI if it has a practically doubled. One noticeable exception in the specific mechanism for targeting the poor and/or if trend was in FY97 when there was a decline in both the proportion of poor people among its beneficiaries the amount of overall Bank lending and the share of is significantly larger than the proportion of the poor funds for PTI projects. In contrast, the big jump in in the total population. the share of World Bank PTI lending in the past two consecutive fiscal years was due to the fact that there Targeted projects are intended to reach specific were relatively more PTI projects and relatively groups of poor people, including those in less larger amounts of PTI lending for projects in the developed or low-income rural and urban areas, those education, social protection, environment, and urban lacking access to basic social services, landless development sectors as compared with the previous farmers, migrants, refugees, unskilled workers, two years. Over the same period, the amount of PTI orphans, the disabled and other vulnerable groups, lending also increased for all regions, with Sub- certain ethnic minorities, and groups with certain Saharan Africa and South Asia witnessing a slightly demographic characteristics such as gender, age higher increase compared to the other regions. (children under five), or health risks (diseases However, annual data for changes between FY98 and correlated with poverty such as stunting, cholera or FY99 only show that the amount lent for PTI projects AIDS). Some PTI projects are pioneering work in increased in the financial, transportation and urban areas such as drug prevention, youth development, development sectors relative to others, and that the biodiversity conservation, cultural heritage, and increase was also relatively more evident for the East community-based development initiatives, which are Asia and Pacific region. For IDA countries, PTI consistent with the renewed focus on human and lending was 62 percent of FY99 investment lending social capital and people-oriented approaches to which represents a significant increase over the level sustainable development. The emphasis of the of the past several years (53 percent in FY97 and 54 Learning and Innovation Loans (LILs) is on percent in FY98). experimentation, learning, and piloting in search of possible solutions, prior to larger-scale operations. A The majority of PTI projects in FY99 was broadly LIL also presents greater opportunities for intensive targeted, as has been the case in the previous years. monitoring and evaluation in assessing progress so Broad targeting generally expands the provision of that modifications in implementation can be made services, such as basic education and primary health along the way, and outcomes of project activities on care, to provide access to as many people as possible. the poor can be assessed upon completion. In However, it is the poor who benefit most from the addition, a review of a sample of FY99 projects show extension of basic services since the better-off that PTI projects tend to be more comprehensive in incorporating elements for good project monitoring 83 See Rubio, G. and K. Subbarao. 1999. "Impact and evaluation including indicators (input, output, Evaluation in Bank Projects: A Comparison of Fiscal 1998 and 1999." Washington D.C.: World Bank (forthcoming). 109 Annex E generally already have access to these services. A capacity to implement targeted programs. Many PTI much smaller number of PTI projects were narrowly operations combined broad and narrow targeting and targeted. Narrow targeting is used where poverty is were mostly concerned with agriculture, education, relatively isolated, geographically concentrated, population, health, and nutrition (PHN), and social where the incidence and location of poverty is well protection. understood, and where the government has the Table E-1. Program of Targeted Interventions (PTIs),fiscal 1992-99 World Bank (IBRD and IDA) PTI lending Millions of dollars 3,836.4 4,673.8 4,440.5 5,436.7 5,408.1 4,090.0 6,733.3 6165.2 Percentage of investment lendingb 25 27 25 32 32 29 40 49 Total number of projects in the PTI 57 72 63 75 79 77 101 111 Total number of projects 187 214 197 208 223 203 240 216 IDA PTI Millions of dollars 1,812.3 2,136.7 1,853.0 2,423.2 3,246.0 1,873.5 3,266.8 3032.6 Percentage of IDA investment lendingb 44 41 43 54 63 53 54 62 Total number of IDA-funded projects in the PTIC 34 44 35 46 50 36 55 69 Note: A project is included in the PTI if it has a specific mechanism for targeting the poor and/or if the proportion of poor people among its beneficiaries is significantly larger than the proportion of the poor in the total population. a. Fiscal 1992 figures differ from those in Implementing the World Bank's Strategy to Reduce Poverty (World Bank, 1993a) because they include seven projects that were added to the PTI after the earlier report went to press. b. Investment lending includes all lending except for adjustment, debt and debt-service reduction operations, and emergency recovery loans, which are distinct from regular investment operations (see Annex G). c. The number of IDA-funded projects in the PTI excludes joint IBRD/IDA projects, which are counted only once, as IBRD projects. There was one such PTI project in fiscal 1992, two in fiscal 1995, one in fiscal 1996, one in fiscal 1997, four in fiscal 1998, and eight in fiscal 1999. Source: World Bank. The following are the main issues addressed by terrace irrigation and rural infrastructure will reduce projects in the Program of Targeted Interventions in soil erosion, improve water conservation and increase FY99: access to markets. Credit will also be available to household-based rural enterprises for construction of Raising agricultural productivity. Twenty-two food and fiber processing facilities. A social projects in FY99 aim to increase agricultural assessment including a participatory poverty productivity. The focus of these projects was on assessment which was done prior to project building and rehabilitating irrigation and rural roads, implementation will help to promote stakeholder supporting on- and off-farm income generation, participation and better understand the needs and increasing access to rural finance, promoting agro- priorities of the beneficiary population. In processing and farm product marketing, providing Azerbaijan, to overcome the lack of capital to finance agricultural support services, managing the necessary inputs to new private farms which is one of environment, securing land tenure rights, and the most important impediments to growth in the strengthening agricultural institutions. agricultural sector, a bold and novel approach to rural finance will be supported by the Agricultural The projects funded in FY99 illustrate the different Development and Credit Project (IDA). Local methods used to increase productivity. The China institutions consisting of approximately 80 credit Western Poverty Reduction Project (IBRD/IDA) will cooperatives and 200 groups of jointly liable provide improved agricultural and livestock borrowers will be created to intermediate credit and technology packages including seeds, fertilizer, savings services to the rural sector. The project will breeding and fattening stock to farmers in remote and help organize these groups of owner-clients and help inaccessible villages where poor soil quality, harsh individuals within these groups obtain sub-loans on agro-ecological conditions, and lack of productivity- the basis of their joint liability. A land registration enhancing farm inputs have perpetuated food and system will also be developed to facilitate the income insecurity. Complementary improvements in distribution of land titles in the farm privatization 110 Annex E process. The Agricultural Productivity Improvement the rural, hard to reach areas as well as mothers and Project in Mexico (IBRD) will target its activities to children, by focusing on the expansion of health groups of eligible beneficiaries including indigenous facilities at the community level. The construction people, women and rural youth living in areas with of over 200 new primary health care units will the largest concentration of small and poor farmers. expand coverage of modem health services to about Productive investments in demand-driven sub- 5 million people. Key interventions including projects, small irrigation development, improved immunization, treatment and control of basic pasture establishment, other agricultural support infectious diseases, and programs addressing services as well as assistance in technology transfer common nutritional disorders, environmental health and extension are expected to increase productivity and hygiene and reproductive health care are by 25 percent in target farming systems. The expected to increase life expectancy and decrease Agricultural Extension and Research Programs infant and maternal mortality rates, which are being Support Project (IDA) in Cameroon will help build monitored throughout the project cycle. The Second the capacity of institutions involved in agricultural National HIV/AIDs Control Project (IDA) in India extension services and research to promote the will target groups at high risk of infection such as productivity and incomes of small resource-poor commercial sex workers, drug users, migrant farmers and food crop producers, eighty percent of workers, and sexually transmitted clinic attendees for whom are women. This project will help strengthen treatment, as well as increase awareness and farmers' associations and develop their commercial preventive interventions for the general public. A linkages with agricultural merchants and suppliers. Learning and Innovation Loan in Argentina, the Women farmers will be targeted by special efforts to Integrated Drug Prevention Pilot Project (IBRD), will identify technology relevant to their needs during on- target youth groups from the poorest households in farm diagnosis, by increasing their participation in educational campaigns and will support local extension contact groups (from 35 percent to 50 solutions to drug use and train community leaders in percent over four years), and by increasing the drug prevention and communication. In China, The recruitment of female extension staff. A village- Health Nine Project (IBRD/IDA) will establish a based participatory community development pilot poverty relief fund to develop and implement a will test an approach that provides villagers with a program of medical financial assistance which will platform to determine their own development defray the costs of health care for the very poor. A priorities and actions. basic mother and child health package will include systematic prenatal care, obstetric care, effective Developing human capital. Thirty-three PTI management of childhood illness and malnutrition, operations in FY99 will develop human capital, and improved well-child and newborn care. including increasing access to or improving the quality of primary and preventive health care, In recognizing the inequities of access to and quality nutrition, and basic education. Health and population of educational services, The Lesotho Second projects will provide packages of basic health and Education Sector Development Project (IDA) will family planning services, and support disease adopt a targeted approach to reach the poorest groups prevention, including epidemic diseases like malaria living in isolated and impoverished regions, and and sexually transmitted diseases especially support the government's program to achieve HIV/AIDs, and immunization programs. The universal primary education and at least 40 percent education projects will expand the access to secondary net enrollment by 2011. Priority will be schooling for girls and indigenous groups, improve given to building approximately 80 classrooms at 33 female literacy, implement early childhood inaccessible schools and initiating an innovative pilot development programs, support training of primary program (to be designed and implemented based on a and secondary school teachers, provide school participatory needs survey) which will target poor materials, construct educational facilities, and children, including herd boys, to enable them to gain develop skills in the informal sector. access to secondary schools. In Nepal, the Basic and Primary Education Project (IDA) will strengthen In supporting the government's goal to provide institutional capacity at national, district and school access to basic health care services to all Ethiopians levels to deliver education services more efficiently by 2017, the Health Sector Development Program and equitably. To improve teaching and learning Project (IDA) will increase health care coverage, processes, the project will review curriculum content, equity and efficiency, particularly for people living in increase textbook availability through a new voucher 111 Annex E system, develop materials in local languages, and In addition to their contribution in cash or kind to the provide recurrent training for all teachers. Incentives costs of subprojects, community participation will be will be targeted at the most disadvantaged families, mandatory for developing subprojects, including including scholarships to needy girls, free textbooks prioritization, preparation, design and to all girls in grades 4 and 5 (while only boys living implementation. Approximately 95,000 person- in 18 remote districts will be eligible), hostel months of employment will be created, and more accommodation for secondary school girls from areas than half of the new jobs will be for unskilled with serious shortages of female teachers, and an workers. The Venezuela Caracas Slum-Upgrading innovation fund for activities that promote girls' project (IBRD) will improve the quality of life for participation in primary schools. Two Learning and about 184,000 inhabitants living in informal Innovation Loans, one in Colombia, the Youth settlements by developing and implementing a Development Project (IBRD) will test and evaluate community-driven infrastructure improvement alternative approaches to developing and delivering program. Priorities including safer neighborhoods, services and providing activities for low-income improved water distribution and sewerage systems youth aged 10-15 affected by rising levels of were identified in a social assessment conducted violence and drug addition; and the Social Protection during project preparation. The project will also pilot Initiatives Project (IDA) in Egypt will support a housing improvement loan fund for low-income nursery-based services and outreach services for individuals and provide inhabitants with formal disabled children and their families, and assistance property titles. programs for youth at risk and street children to help in their re-integration into school or the formal labor Social Protection. Twenty operations in FY99 market. support measures to protect the poor and vulnerable groups through social funds or some type of safety Urban development, water supply and sanitation. In net measure (e.g. nutrition and immunization the urban development and the water supply and programs, unemployment benefits, retraining sanitation sectors, 14 projects in FY99 will improve schemes, and reform of the social protection system). living conditions of poor people by increasing access Social action funds generally support community- to basic infrastructure. These projects will develop level microprojects aimed at increasing access to urban communities, construct and rehabilitate water, basic education and health, safe water, irrigation sewerage, flood control, and drainage systems. The facilities, and rural roads. Safety net measures are Urban Poverty Project (IDA) in Indonesia will fund typically short-term measures designed to protect sustainable income-generating activities and provide vulnerable groups during periods of economic grants for basic infrastructure works and related adjustment or to provide assistance to those unable to employment in poor urban communities to help them work. The Social Fund II Project (IDA) in Cambodia overcome poverty and to improve the capability of will provide financing for small-scale, community- local agencies to assist them. The project aims to based social and economic infrastructure sub-projects help the poorest neighborhoods in urban areas by (e.g. health clinics, schools, water supply, rural relying on self-targeting mechanisms (e.g. setting bridges, small irrigation works), using an improved wages at the local minimum for public works, and poverty targeting map to target the poor. Through payment per output not input), community group increased community control over sub-project review and selection of sub-projects, and restricting resources and implementation, community self help credit eligibility to only households with incomes of and local management capacities will be less than Rp 250,000 per month. Possible activities strengthened. Sub-project eligibility rules requiring include urban agriculture, community-based housing, high labor content in project design will help create and programs for children and youth. In Yemen, the short-term employment opportunities for the Second Public Works Project (IDA) will finance unemployed and returning soldiers and refugees. In about 900 community infrastructure subprojects in Ghana, the Community-Based Poverty Reduction areas with above-average unemployment rates, for Project (IDA) will improve the health and nutrition the construction and rehabilitation of rural and urban of poor pre-school children as well as pregnant and water supply and sanitation systems, rural roads, lactating mothers. New nutrition centers will be schools and health centers. About half of the funding built, and equipment (weighing and measurement) for subprojects will be specifically targeted to poor will be provided in order to strengthen nutrition and remote governorates based on poverty measures, practices and improve food security. The project will including those from the latest poverty assessment. also develop and test packages of support measures 112 Annex E and delivery mechanisms to help street children in in mechanisms (including eligibility criteria) that will urban areas obtain employable skills, places in extend loans to partner organizations for on-lending schools, and health education. The Regional to the poor, women, people living in disadvantaged Initiatives Fund Project (IBRD) in Bulgaria will communities, and communities with high finance about 100 microprojects identified by unemployment/underemployment. The funds will municipalities, generating an estimated 280,000 primarily be used for agricultural inputs, livestock, employee days of labor. A minimum of 20 of these trade, and setting up small shops so as to establish a projects will be designed to create labor demand permanent income base. specifically for women and disadvantaged ethnic minority groups. In Macedonia, FYR, a Social Community Participation and Decentralization. Support Project (IDA) will provide temporary Many PTI projects in FY99 involved local income support (e.g. severance, unemployment organizations and communities in their preparation benefits, and social assistance) and labor and implementation, as well as invested in building redeployment services for workers displaced by capacity. Local participation not only ensures that enterprise bankruptcy and labor restructuring of priorities and concerns of beneficiaries are taken into Majority State Owned Enterprises, and the economic account, but also fosters ownership of activities and disruption caused by the Kosovo conflict. It will develops capacity for self-management. Community also evaluate alternative means for targeting social participatory processes were used in the design and protection to the most vulnerable groups and implementation of many projects cited above, strengthen the government's Poverty Monitoring particularly in the selection of subprojects within the Group by improving the capacity to update poverty context of social funds, village or area development, lines and conduct distributional analysis. rural finance, or public works initiatives. Other examples include a Social Investment Fund Project Other PTI areas. The PTI also includes projects in (IDA) in Moldova where the focus will be on other areas such as transport, environment, public building local community capacity (by strengthening sector management, and finance. their capacities to make decisions, organize, and manage) and empowerment while improving rural The Second Transport Sector Project (IDA) in social and economic services, especially for the poor. Senegal will employ about 13,000 unskilled workers The program will target community groups, local annually on various project works (roads, railways, NGOs, local contractors and local government, with civil aviation, and ports). The rural roads component the objective to build skills and relationships, and is expected to increase the poor's access to markets foster new community-government partnerships in and social services, and reduce travel time and the management of social and economic transport costs. Infrastructure rehabilitation and infrastructure. In Guinea, a Village Communities network expansion will improve safety and Support Program (IDA) will rationalize and employment opportunities for low-income groups. operationalize the regulatory and institutional In Peru, an Urban Property Rights Project (IBRD) environment for local development, including will strengthen organizations responsible for streamlining the legal framework and establishing implementing a national program for formalizing effective fiscal and financial decentralization. rights to real property (issuing and registering titles) Training will be provided to strengthen the capacity in selected, predominantly poor urban settlements. of key ministries, governmental institutions and This will be accomplished through legal and regional authorities to support the decentralization institutional improvements, training, and the process. To improve local governance and the development of long-term strategies. The Sichuan capacity of local elected officials and communities to Urban Environment Project (IBRD/IDA) in China promote a participatory and equitable local will foster a cleaner environment by reducing development, outreach, training, exchange and pollution from urban wastewater and industry, networking activities will be undertaken to strengthen thereby improving ambient water quality. In their capacity to conceive, plan, prepare and safeguarding the environment and public health, and implement subprojects. Emphasis will be on a expanding basic urban services, the project will broader representation of previously under- provide a sustainable and equitable basis for represented groups such as women, youth, migrants underpinning economic development of the lower and the poor, to give them a voice in local affairs. income and underserved target groups. The Poverty Alleviation Fund Project (IDA) in Pakistan has built- 113 Annex E Monitoring and Evaluation. years. Three-year averages have been calculated to Effective monitoring and evaluation in project design smooth out year-to-year fluctuations, which are and implementation which systematically document normal occurrences. project lessons can help assess progress, inform remedial actions during implementation, and As indicated in Table E-2, a large majority of both determnine the project's impact on beneficiaries upon IDA and IBRD projects in the PHN and social completion. Both quantitative and participatory protection sectors (and to a lesser degree, the methods are needed to monitor changes and assess education and urban development sectors) belongs in the impact of Bank projects on poverty. Some FY99 the PTI. For total World Bank lending the average PTI projects have included elements for good project share of PTI lending in the education and water monitoring and evaluation including indicators supply and sanitation sectors has declined over the (input, output, and impact), targets, baseline surveys, period FY92-99. The share of PTI lending in the and control groups. The Reconstruction and Local PHN has remained steady, and PTI lending in the Development Project (IBRD) in Guatemala sets out a social protection, agriculture, and urban development detailed project monitoring and evaluation system sectors has increased (see Table E-2). Over the that includes process and outcome indicators, as well period FY92-99, the average share of IDA PTI as poverty impact indicators with an established lending in total investment lending has increase in baseline and control group. A random sample survey agriculture, social protection and urban development; of representative subproject types will be conducted and to a lesser degree, in the education and PHN to measure the impact of investments on key socio- sectors. It has fluctuated in the water supply and economic indicators such as income generation, sanitation sector, with a noticeable decline in the last health, education, and migration. A participatory four years. social assessment, including problem diagnosis and needs assessment will be conducted at the beginning, Table E-3 shows the regional variation in the Bank's and an ex-post evaluation based on subproject funding for PTI projects. Table E-4 briefly describes samples and beneficiary assessments will be why specific FY99 projects were included in the PTI. undertaken annually. A Learning and Innovation Loan (LIL) in Azerbaijan, the Education Reform Although projects in the PTI obviously seek to Pioject (IDA), includes a set of key performance benefit the poor, non-PTI investment projects may indicators and a strong but flexible monitoring and also contain provisions to help reduce poverty. For evaluation system that will help the project example, the Jordan Amman Water Supply and management develop additional indicators as deemed Sanitation Project (IBRD), though not poverty- appropriate during implementation as well as targeted, will extend access to reliable piped water determine project impact on beneficiaries. A social supply and wastewater collection services to low- assessment combining household surveys, key income households at prices lower than the present informant interviews and focus groups will provide prices charged by vendors. By increasing the baseline information. In Malawi, another LIL, the capacity and improving operating conditions of Population and Family Planning Project (IDA) will major road corridors in Hanoi, the Vietnam Urban evaluate the success of project activities based on a Transport Improvement Project (IDA) will benefit set of key input, output, and outcome indicators and the poor (over 50 percent of the low-income targets. Baseline values for some indicators will be population in Hanoi live in the project areas), as well determined through the project baseline survey. as cyclists, often from the low-income group, who use the project corridors. Table E-2 shows the share of PTI lending to total investment lending by sectors over the last eight 114 Annex E Table E-2. Program of Targeted Interventions (PTIs) by sector, fiscal 1992-1999 Sector FY92-94 FY93-95 FY94-96 FY95-97 FY96-98 FY97-99 PTI lending as percentage of total investment lendinga (IDA and IBRD) Agriculture 28 32 42 49 47 50 Education 72 67 63 56 62 60 Population, health, and nutrition (PHN) 79 84 76 78 78 81 Social protection 84 96 87 89 90 97 Urban development 37 37 27 28 38 62 Water supply and sanitation 44 38 31 24 35 33 Other sectors 6 6 8 10 10 15 IDA PTI lending as percentage of IDA investment lendinga Agriculture 46 44 54 61 61 58 Education 76 84 92 89 88 78 Population, health, and nutrition (PHN) 87 89 94 94 95 95 Social protection 72 88 93 95 98 94 Urban development 29 25 34 47 64 78 Water supply and sanitation 57 48 59 45 27 26 Other sectors 12 11 12 17 16 26 Note: Figures differ from those in earlier reports because of recent sector reclassification of operations. a. Investment lending includes all lending except for adjustment, debt and debt-service reduction operations, and emergency recovery loans, which are distinct from regular investment operations in objective and format. Source: World Bank. Table E-3. Program of Targeted Interventions (PTIs) lending by region,fiscal 1999 Lending Sub- East Asia Europe Latin Middle South Asia Total Saharan and the and America East and Africa Pacific Central and the North Asia Caribbean Africa Total PTI lending Millions of dollars 846.6 1,589.5 255.0 1,809.8 268.0 1,396.3 6,165.2 Percentage of investment lending 65 40 17 63 30 69 49 Total number of PTI projects 33 19 18 22 7 12 ill IDA PTI lending Millions of dollars 841.6 574.9 147.5 132.3 130.0 1,206.3 3,032.6 Percentage of all PTI lending 99 36 58 7 49 86 49 Percentage of IDA investment lending 65 60 42 45 39 75 62 Total number of IDA-funded projects in the PTIa 32 7 11 5 4 10 69 Note: a. The number of IDA-funded projects in the PTI excludes joint IBRD/IDA projects, which are counted only once, as IBRD projects. There was one such PTI project in fiscal 1992, two in fiscal 1995, one in fiscal 1996, one in fiscal 1997, four in fiscal 1998, and eight in fiscal 1999. Source: World Bank. 115 Annex E Table E-4. Program of Targeted Interventions, fiscal 1999 Country and Project Reason(s)for inclusion East Asia and the Pacific Cambodia To increase agricultural production and, thus, boost the level of income of Northeast Village Development about 10,000 poor rural households, irrigation systems will be rehabilitated Project and technical advice and information will be provided in crop, tree crops, and (IDA: US$5 m.) livestock development, and in fish farming. Community participatory processes will be used in the selection of subprojects to receive grants for dikes for irrigation, bridges, and tracks that will ease transport constraints. [b] Road Rehabilitation Project The project will reopen a large agricultural area north of Tonle Sap, where (IDA: US$45.3 m.) insurgency and severe road deterioration have constrained production. Roads, including urban roads in Phnom Penh and Sihanoukville will be rehabilitated, and bridges, including historical bridges, will be restored. Small farmers and the rural poor will benefit from improved access to major domestic and international markets and to agricultural supplies. The delivery of social services will also be facilitated. [b] Social Fund II Project Building on the first Social Fund Project, this credit will allocate subproject (IDA: US$25 m.) resources based on an improved poverty targeting map, using more recent poverty analysis than was available for the first project to target the poor who live overwhelmingly in rural areas. Demand-driven subprojects in health (e.g., clinics and district hospitals), education (e.g., schools and training centers) and agricultural development (e.g., small-scale irrigation works) will help strengthen communities and local governments. Subproject eligibility rules require high labor content, which will generate short-term employment opportunities to help absorb the unemployed and returning soldiers and refugees. [b] China The project will give access to safe, conveniently located water supply to 3.1 Fourth Rural Water and Sanitation million rural poor people in Anhui, Fujian, Guizhou, and Hainan provinces, Project and improve water and sanitation practices. Hand pumps and rain catchment (IBRD: US$16 m., IDA: US$30 m.) systems will be provided in poor villages, and water system managers and operators will receive training. Demonstration programs and health education messages aimed at expanding the adoption of improved sanitation and hygiene practices will be prepared and disseminated. [b] Ninth Health Project Health care in the poorest areas of China will be improved, and the prevention (IBRD: US$10 m., IDA: US$50 m.) and control of communicable diseases, including AIDS, will be reinforced. Health facilities will be rehabilitated, clinical protocols will be developed and disseminated, equipment will be provided, and culturally appropriate health education materials will be produced. Financial assistance will also cover part of the costs of health services for poor women and children. The project will directly benefit about one million mothers and their newborns in 113 of China's poorest counties. The implementation of innovative and cost-effective programs designed to prevent and control HIV/AIDS/STDs will benefit about 94 million people in four provinces. The project will also finance mass media campaigns, study tours, and behavior change interventions. [a,b] Second Loess Plateau Watershed To increase agricultural production of poor villagers, about 89,000 ha of the Rehabilitation Project Loess Plateau slopelands will be converted to wide, level terraces. The (IBRD: US$100 m., IDA: US$50 m.) construction or rehabilitation of dams will improve soil and water regime, giving farmers the opportunity to plant a wider range of crops with much higher yields. Trees and grass will be planted on about 340,000 ha, increasing 116 Annex E Country and Project Reason(s) for inclusion vegetation cover and erosion control capacity, and providing farmers with an important cash alternative to raising sheep and goats. Fruit and nut-bearing trees will also be planted and the marketing of fruit will be enhanced through investments in fruit storage. [b] Sichuan Urban Environment The renovation and construction of new wastewater treatment facilities and (IBRD: US$150 m., IDA: US$2 m.) water provision systems along the Tuo and Min River basins will reduce the prevalence of pollution-related diseases and illnesses, and diminish the negative effects of pollution on agricultural productivity downstream. The urban poor in Sichuan province, which is one of the poorest in China, will benefit from the increased availability of basic water and wastewater services, which will be priced to ensure their affordability to the lowest 10 percent of the income distribution. [b] Western Poverty Reduction This project will help reduce the incidence of absolute poverty in remote (IBRD: US$60 m., IDA: US$ 100 m.) villages of Gansu, Qinghai Provinces and Inner Mongolia Autonomous Region where poor soil quality, harsh agro-ecological conditions, and the lack of productivity-enhancing farm inputs perpetuate food and income insecurity among the poor. The provision of improved agricultural and livestock packages-including seeds, fertilizer, and fattening stock-to farmers will enable them to achieve greater food security while maximizing their cash incomes. Complementary improvements in terrace irrigation and rural infrastructure will reduce soil erosion, and enable farmers to increase crop yields and market their products with lower transport costs. The project will stimulate rural labor demand by providing credit to household-based food and fiber processing enterprises, and by financing various labor mobility programs in high unemployment areas. [b] Indonesia Food supplements (rehydration tablets, iron, iodine and vitamin A) and Early Child Development Project immunization against diseases (tetanus, tuberculosis, typhoid, diphtheria, (IBRD: US$21.5 m.) polio, and measles) will be provided for infants 6-24 months old in 12 poor districts of West Java, South Sulawesi and Bali. The project will also address the development needs of children between the ages of 0 and 6 in poor provinces by training mothers on how to facilitate intellectual and social development. Pre-school education for children aged 4 to 6 will be improved through the provision of educational materials, toys, and the rehabilitation of about 110 kindergarten classrooms. [a,b] Fifth Health Project The health status of the rural populations as well as low-income residents of (IBRD: US$44.7 m.) urban areas in the districts of Central Kalimantan, Central Java, and Southern Sulawesi, with a combined population of 39 million will be improved through better service delivery. The poor will especially benefit from a more equitable geographical distribution of health professionals, and from higher quality of care, resulting from improved training of doctors, nurses, and midwives. [b] Sulawesi and Eastern Islands Basic The project aims to mitigate the impact of the economic crisis by ensuring Education Project that children remain in schools, and preventing the quality of the educational (IBRD: US$47.9 m., IDA: US$15.9 system from deteriorating. Because higher food and transport prices and m.) increased unemployment have put a large additional burden on poor households, the project will implement a school fee relief program and provide scholarships to 600,000 poor primary and 140,000 poor junior secondary school children. Approximately half of the recipients of the junior secondary school scholarships will be girls. Grants will help rehabilitate 4,000 117 Annex E Country and Project Reason(s) for inclusion primary and 700 junior secondary schools. Mechanisms will be in place to ensure that schools can meet essential operational and maintenance costs, and realize efficiency gains wherever possible. [b] Sumatera Basic Education Project In supporting the national scholarship and special assistance fund program, (IBRD: US$54.5 m., IDA: US$20.1 the project will fund scholarships for some of the poorest primary and junior m.) secondary school students. Grants for rehabilitation and maintenance will be provided to the primary junior secondary schools serving the poorest communities, and teachers will be trained. [b] Urban Poverty Project About 12 million poor people will benefit from demand-driven improvements (IDA: US$100 m.) in basic infrastructure and support for income-generating activities. Group proposals will be solicited from community groups for projects in urban agriculture, equipment purchases (such as sewing machines and computers), programs for children and youth, community-based housing, and family planning education. [b] Lao People's Democratic Republic The project will encourage the adoption of more intensified agricultural District Upland Development and practices as a means to improve the livelihood of poor indigenous Conservation Project communities while conserving biodiversity. Demonstration trials in three pilot (IDA: US$2 m.) villages will focus on the development of stable, permanent, and more productive farming systems including improved wet rice cultivation, improved home gardens, and planting of perennial crops. To raise the awareness and support for biodiversity conservation and sustainable use of natural resources, National Biodiversity Conservation Area (NBCA) staff and community awareness volunteers will be trained, and conservation education and extension materials will be disseminated. [b] Provincial Infrastructure Project By rehabilitating and upgrading basic infrastructure in the remote northern (IDA: US$27.8 m.) Provinces of Oudomxay and Phongsaly, the project will help reduce poverty and improve the socioeconomic potential of the poor. The rehabilitation of roads and the construction of river crossings will improve physical access, and the provision of safe water in townships and rural areas will help meet basic health and hygiene needs and reduce time spent seeking water. Community user groups will be formed to manage and maintain the facilities. [b] Malaysia In response to the adverse impact of the economic crisis on the rural poor in Social Sector Support Project Malaysia, this project will support (a) financing to about 60 villages with the (IBRD: US$60 m.) highest incidence of hardcore poverty for infrastructure investments and social services, (b) investments in early childhood education targeted at pre- school children in 66 poverty districts by building new centers and facilities (c) social assistance for disadvantaged groups including orphans, the elderly and abused women by providing shelters, counseling, and training of care takers, and (d) conducting household income surveys, participatory, beneficiary, and impact assessments of selected anti-poverty programs. [a,b] Philippines Increased lending to small and medium enterprises in rural areas will Third Rural Finance Project stimulate job creation and labor demand, helping to insulate the rural (IBRD: US$150 m.) economy from the effects of the financial crisis. A Countryside Loan Fund will be created, which will provide loans to over 700 rural enterprises and be targeted to businesses that are too small to receive regular commercial 118 Annex E Country and Project Reason(s) for inclusion finance. A Micro-Finance Loan Fund, which will operate through rural banks and financial cooperatives, will provide working capital and small capital investment finance to micro-enterprises in rural areas involved in small-scale activities including animal rearing, handicrafts, and manufacturing of garments. Women are expected to benefit disproportionately from increased availability of funds. [b] Thailand In order to help the poor cope with the recent economic crisis, existing Social Investment Project govemment programs aimed at providing jobs and priority basic social (IBRD: US$300 m.) services to the poor and unemployed will be expanded. These programs include a low-income health care scheme, which will enable unemployed persons to gain access to health services; a vocational training program for 10,000 disadvantaged women and disabled persons; and the construction of small village roads in 75 provinces. A Social Investment Fund will finance small-scale development projects in various sectors, which will improve the access of the poor and unemployed to basic social and economic infrastructure, and promote community-based social service delivery. In order to ensure that the poor benefit disproportionately from financed projects, two targeting mechanisms will be used: (a) geographic targeting based on population numbers, the incidence of poverty and the unemployment rate; and (b) self-targeting mechanisms through the support for services that are utilized by the poor. [a,b] Vietnam Improvements in water resource infrastructure in five subproject areas Mekong Delta Water Resources covering 535,000 ha in the Mekong Delta in Vietnam will help boost Project cropping intensity and farm incomes, and create off-farm employment (IDA: US$101.8 m.) opportunities in rural areas. The project will finance the expansion of existing main canals and the construction of additional secondary canals to increase water delivery capacity for irrigation and drainage. Sluice gates will be inserted into canals serving agricultural areas in order to prevent salinity intrusions on farms. Improvements in water irrigation infrastructure will enable farmers to increase the proportion of triple- and double-cropped land area, and to grow an additional crop during the dry season. Agricultural intensification will not only benefit smallholder farmers, but will help landless laborers and tenants by increasing on-farm labor demand and off-farm employment opportunities in food marketing, processing, and distribution. [b] Europeand Cintrul Asia Albania The project will finance an estimated 260 infrastructure subprojects. Based on Community Works Project the priorities of the communities, the list of subprojects is likely to include the (IDA: US$9 m.) rehabilitation of roads, water supply schemes, markets, and construction of health centers, schools, and daycare facilities. The poor will benefit from increased employment opportunities and better quality of life from increased access to clean water and basic services. [b] Microcredit Project The provision of financial services to small farmers, micro-entrepreneurs, and (IDA: US$12 m.) the unemployed will be improved, thereby enabling productive investments that will generate income and employment. In rural areas, the project will support the establishment of a network of private Savings and Credit Associations (SCAS), with provisions for staff training, lines of credit, and investment options for surplus savings. In urban areas, private micro-credit institutions will be set up, and a line of credit will be funded. [b] 119 Annex E Country and Project Reason(s) for inclusion Azerbaijan To meet the capital needs of farmers and small rural entrepreneurs, many of Agricultural Development and Credit whom are poor, this credit will support the creation of rural financial (IDA: US$30 m.) intermediary institutions, including 80 credit cooperatives and 200 groups of borrowers, who will be jointly liable. Smallholder farmers will benefit from a new land registration program with increased land tenure security and possible use of land as collateral. The introduction of training programs for agricultural extension specialists and smallholders on farm technologies and management practices will help boost crop yields and farm incomes. [b] Education Reform Project The credit will support curriculum development and improve teacher training. (IDA: US$5 m.) In some of the poorest regions, 20 pilot schools will receive teaching materials, including textbooks and supplies, equipment, and training will be provided to both teachers and administrators. [b] Pilot Reconstruction Project The project will finance the first phase of a program designed to facilitate the (IDA: US$20 m.) repatriation, through voluntary resettlement, of about 20,000 individuals who have been "internally displaced" (IDPs) as a result of the conflict over Nagomo-Karabakh, and who are among the poorest. Assistance to privatization of agriculture will create employment for an estimated 7,000 people and increase the incomes of about 3,600 farm families. An additional 13,400 farm families will benefit from improved water supply, land registration and other support services. In addition, a micro-credit and small grants program will foster the development of small businesses. [a] Bosnia and Herzegovina To improve public health and disease control, the project will support Basic Health Project institution building and the planning and implementation of interventions for (IDA: US$10 m.) the prevention and control of diseases. The project will focus on the delivery of primary health care to the most economically and epidemiologicaly vulnerable by introducing rigorous standards and professionalism into the management of the health system, and by fostering a coordinated approach to investments in the most essential health services. [b] Bulgaria In financing 100 micro-projects identified by municipalities, the project will Regional Initiatives Fund Project improve the living conditions of the poor and generate an estimated 280,000 (IBRD: US$5 m.) employee days of labor. A minimum of 20 micro-projects will be targeted specifically to create labor market demand for women and disadvantaged ethnic minority groups. Civil works will rehabilitate and expand essential municipal services such as water supply and sanitation and solid waste management. Productive micro-projects such as irrigation works, agro- processing activities, collective industries, handicrafts, soil recovery, renewable forestry production, and post-production activities will be financed through grants. [b] Georgia It has been found that one of the major causes of families slipping into Structural Reform Support Project. poverty is that their level of out-of-pocket spending on health care has (IDA: US$16.5 m.) reached unprecedented levels (87 percent of total health spending comes from patients themselves). This project will support ongoing reforms by improving tax collection systems to raise additional resources and restructuring hospitals to improve efficiency. To reduce leakage in the social benefits delivery, support will be provided to the ongoing Survey of Georgian Households, which provides a tool for monitoring living standards, poverty, and inequality. Greater dissemination of poverty monitoring results and a beneficiary assessment will also be undertaken. [b] 120 Annex E Country and Project Reason(s) for inclusion Kyrgyz Republic Following the first rural finance project, this project will continue to Second Rural Finance Project strengthen the rural financial system and expand the agricultural lending base (IDA: US$15 m.) and clientele, who make up 75 percent of the poor in the country. A credit line will be provided to commercial banks to on-lend for working capital and investment. Funding will be provided for subprojects to develop agricultural production, processing, storage, packing, marketing facilities, and other rural income-generating activities. [b] Latvia The dramatic rise in the price of energy following the collapse of the Soviet Education Improvement Project Union has driven up the operational cost of school facilities. Heating and (IBRD: US$31.1 m.) lighting systems will be renovated, and essential repairs will be financed in about 120 schools in disadvantaged rural and urban areas. The project will also revise curriculum and standards, and develop criterion-tests to monitor the achievements of students. [b] Rural Development Project This project will provide a credit line at prevailing market interest rates and (IBRD: US$10.5 m.) commercial terms to finance commercially viable and bankable projects in rural areas, where poverty and living standards are worsening. Subprojects will help develop agricultural production, processing, storage, packing, marketing, and other related agricultural and forestry service, as well as rural commercial activities such as small cafes, kiosks, and hair salons. Rural enterprises located in "depressed areas" will get priority, and criteria for eligible beneficiaries include small farmers with less than 10 ha or 10 heads of cattle. [a,b] Macedonia, FYR The project aims to mitigate the negative social and economic impact of Social Support Project bankruptcy and labor restructuring of Majority State Owned Enterprises (IDA: US$10 Im.) (MSOES) and the emergency economic disruption caused by the conflict in Kosovo. Temporary income support including severance, unemployment benefits, social assistance and social welfare will be provided to poor workers. Labor Redeployment Services will benefit displaced workers, including the long-term unemployed and first-time job entrants. Social monitoring surveys will identify vulnerable workers and families to ensure that social assistance is adequately targeted. [a] Moldova The social investment fund will provide communities with grants and Social Investment Fund technical assistance for projects designed to improve the delivery of basic (IDA: US$15 m.) services. The rehabilitation of school, health posts, and the development of water supply and sanitation systems will be coupled with programs to improve services in early childhood development, primary health care, and public health and hygiene education. Reforestation, soil erosion control, and landslide rehabilitation will also be financed. Communities will be the key decision-makers in how best to organize, manage finances, and ensure sustainability. Poor residents in rural areas, as well as vulnerable groups such as women and children, will be the major beneficiaries. [b] Poland The project will construct a commercially self-sustained urban wholesale Wholesale Markets Project I (IDA: market for the greater Gdansk area. Improved market facilities and US$15.9 m.) infrastructure will benefit 1.5 million consumers in the Gdansk-Gdynia-Sopot metropolitan area, mostly rural people affected by unemployment and poverty. [b] 121 Annex E Country and Project Reason(s) for inclusion Romania To preserve priority cultural heritage sites and assets in serious disrepair due Cultural Heritage Project to lack of public financing and years of neglect, the project will help renovate (IBRD: US$5 m.) and restore the internationally acclaimed Brancusi Sculptural Ensemble, and the 18th century Brancovan Palace in Mogosoaia. The project will also support infrastructure improvements, handicraft and related activities in four historic Saxon villages. The very poor population in surrounding regions, including ethnic groups, will be hired to landscape and reconstruct the sites. [b] Social Development Fund Program Financing will be provided for about 1,000 demand-driven subprojects (IBRD: US$10 Im.) prepared by recipients in poor rural communities and disadvantaged groups. They will include small rural infrastructure, community-based social services, and income-generating activities. Mechanisms for targeting poor rural communities and disadvantaged groups (street children, orphans, poor single women, pregnant teens, poor and physically dependent elderly) will include poverty maps, community ranking, eligibility criteria based on poverty considerations, and self-targeting of beneficiaries belonging to disadvantaged groups. [b] Tajikistan Twenty pilot schools, half of which were selected because they were located Education Reform Project in the poorest areas and were in urgent need of repairs, will be rehabilitated (IDA: US$5 m.) and furnished. Teacher training and support for the publishing and printing of primary textbooks will also be financed. A Revolving Textbook Fund will be implemented to make the best possible use of resources and enable further textbook purchases. [b] Uzbekistan Primary health care services will improve for about 4 million people, Health Project particularly women and children. A network of modem, better-staffed, and (IBRD: US$30 m.) better-equipped rural medical centers in the three pilot oblasts of Ferghana, Navoi, and Syr Darya will be established. Basic diagnostic, therapeutic and laboratory equipment will be provided, and general practitioners and universal nurses will be trained. [b] Latin America & the Caribbean Argentina This project aims to build capacities in poor communities to better manage the Fourth Social Protection Project process to improve their welfare. Approximately 500,000 poor and (IBRD: US$90.8 m.) indigenous people will benefit from grants for beneficiary-identified small- scale subprojects that would meet their specific needs. Poverty maps derived from population census and living standards surveys will be used to identify communities with unsatisfied basic needs. Support will be provided to enhance the type, timeliness and availability of information to improve the targeting, design, monitoring and evaluation of social programs targeted to the poor. [b] Integrated Drug Prevention Pilot The project will support local solutions to drug use and train community Project leaders in drug prevention and communication in five provinces with per (IBRD: US$4.8 m.) capita incomes below the national average. Information systems on drug addiction and a municipal plan for drug prevention will be financed. Educational campaigns encouraging dialogue and special initiatives will be promoted, particularly among youth groups where many come from the poorest households. [b] Renewable Energy in the Rural By providing efficient energy sources, the quality of life of about 70,000 low- 122 Annex E Country and Project Reason(s) for inclusion Market Project income households located in the rural dispersed areas of eight Argentinean (IBRD: US$30 m.) provinces will improve. Solar home systems, small wind turbines, mini-hydro plants, and diesel off-grid electricity generating units will be installed. About 1,100 Renewable Energy Systems will provide electricity to provincial public institutions including schools, medical centers, and police stations. [b] Water Sector Reform Project The project will improve and expand water and sanitation services, especially (IBRD: US$30 m.) in poor areas, by replacing pipes, improving water treatment plants and intake facilities, and upgrading substandard connections. To reach the urban poor, technical assistance and training will be provided to private concessionaires to help them develop projects with low-cost technologies and community mobilization. The program is expected to benefit 1.7 million people, including about 200,000 urban poor. [b] Bolivia Financing for demand-driven local subprojects will be provided to strengthen Health Sector Reform Project the quality of maternal and child services, develop social communication (IDA: US$25 m.) activities to strengthen information, voice, and empowerment of beneficiaries. The project will support the implementation of the Integrated Management of Childhood Illness (IMCI) and of a Mother-Baby Package (MEBP), help improve immunization coverage, and introduce new vaccines, thus reducing infant mortality rates. [b] Brazil While everyone will benefit from an improved national disease surveillance Disease Surveillance and Control and control system, indigenous groups nationwide will be targeted for the first Project (VIGISUS) time. The laboratory network will be rehabilitated, equipped, and expanded, (IBRD: US$ 100 m.) and training will be provided to health agents in indigenous communities. Health posts and health centers will be rehabilitated and will receive new equipment. An upgraded surveillance system will make it possible to identify high-risk groups, as well as to target disease control interventions to the most vulnerable. [a,b] Second School Improvement Project. The second in a series of projects designed to improve the performance of FUNDESCOLA II public primary education in selected underserved areas, FUNDESCOLA II (IBRD: US$202 m.) will provide inputs and services to enable schools to meet minimum operational standards. Textbooks, reading books, furniture, and equipment will be provided, a teachers certification program will be implemented, and financing and engineering support will be provided to renovate or construct schools. The project will directly benefit 16.5 million children currently enrolled or just entering primary schools. [b] Colombia This Learning and Innovation Loan, which represents pioneering work for the Youth Development Project Bank, will test and evaluate alternative approaches to developing and (IBRD: US$5 m.) delivering services and providing activities for low-income youth aged 10-15 affected by rising levels of violence and drug addiction. A decentralized and community-based approach, using a highly participatory process, will be adopted. A baseline survey will gather information on the situation of youth as well as the type, cost, and availability of services. Follow-up studies, client satisfaction surveys, and impact analysis on youth will also be conducted. Service integration schemes include health prevention and promotion, vocational training, community service and support for youth with academic or personal difficulties. [a,b] 123 Annex E Country and Project Reason(s) for inclusion Guatemala This second loan to the Fondo de Inversion Social (FIS) will finance Second Social Investment Fund community-based, demand-driven subprojects in poor rural municipalities, as Project identified based on a poverty map developed during the first project. (IBRD: US$50 m.) Following results of the initial project, the FIS targeting strategy has been modified to earmark more of its resources to the poorest communities. Greater assistance will also be provided to the poorest micro-regions in order to compensate for the relatively low capacity to organize and present project proposals to FIS. Subprojects will include small scale infrastructure and services (e.g., schools, health posts, sanitation and access roads). [b] Land Administration Project Land tenure security for about 210,000 farmers living in extreme poverty will (IBRD: US$31 m.) improve through titling and clarifying property rights. The project will map the Peten area, open a registry office, design an integrated cadastral and registry system, and measure and demarcate each solicitant's plot of land. Community stakeholders, including indigenous communities, will be involved in each step of the process to maximize transparency and use of local knowledge. [b] Land Fund Project In supporting the Peace Accord commitments, this project will provide grants (IBRD: US$23 m.) for pre- and post- land purchase services. Legal assistance will help beneficiaries establish legal status and register for land ownership. In addition, the project will provide grants for financing social and productive complementary infrastructure investments related to the land purchased, such as small water systems and access roads. Indigenous people, who constitute the overwhelming majority of the 7,500 poor rural families, will especially benefit. [b] Reconstruction and Local An estimated 500,000 people, mostly indigenous and living in extreme Development Project poverty, will benefit from financial and technical assistance and resource (IBRD: US$30 m.) management know-how. Community-based, social and economic infrastructure, and cultural heritage subprojects defined and implemented by the beneficiaries themselves will be financed. Processes and outcomes will be monitored and evaluated on an ongoing basis. A baseline and control group will be established to assess the poverty impact of subproject investments on important socioeconomic indicators such as income generation, health and education, differentiated by gender and ethnicity. [b] Honduras The project will provide financing for priority social and economic Fourth Social Investment Fund infrastructure subprojects in which resource allocation and eligibility criteria Project favor the poor. Indigenous communities will be targeted to improve their (IDA: US$45 m.) ability to plan and implement development strategies and to secure better access to the Fondo Hondureno de Inversion Social (FHIS) resources. A study on gender issues in the FHIS was conducted to ensure adequate participation of women thorough the project cycle. [b] Interactive Environmental Learning To improve the management of key protected areas along the Mesoamerican and Science Promotion Project - Biological Corridor, the project will construct an Interactive Learning Center PROFUTURO (ILC) that will provide a non-traditional tool for learning about sustainable (IDA: US$8.3 m.) development. Indigenous communities and poor residents living near the archeological parks will benefit from potential opportunities opened by tourism, jobs in the parks, and construction and operation of the ILC. [b] Mexico Technical and financial assistance will be provided to an estimated 1 million 124 Annex E Country and Project Reason(s) for inclusion Agricultural Productivity small farmers and rural poor households, including women farmers, young Improvement Project producers and indigenous people. Grants will finance demand-driven (IBRD: US$444.4 m.) investment subprojects in small irrigation development, dairy technology improvement, improved pasture establishment, and support services for small farmers. Project activities will be targeted to areas with the largest concentration of small and poor farmers, and eligibility of households will be based on size of holdings and/or livestock assets. [b] FOVI Reconstructing Project The project will expand the availability and reduce the cost of mortgage loans (IBRD: US$505.5 m.) for urban and working poor households by supporting and restructuring the Fondo de Operacion y Financiamiento Bancario a la Vivienda (FOVI), the country's low-income housing trust fund. A more transparent subsidy policy will be implemented, and mortgage insurance will be strengthened. About 490,000 mortgages will be funded during the project period, benefiting 2.5 million people, half of whom will be from the lowest income groups. [b] Nicaragua The project will continue IDA's support to the Government in its poverty Third Social Investment Fund Project alleviation efforts, as well as its immediate emergency and reconstruction (IDA: US$45 m.) needs in the wake of Hurricane Mitch, by providing essential small-scale infrastructure and improved services in education, health, and water supply and sanitation, focusing on the poorest communities based on a poverty map. Over half of the population currently living below the poverty line will likely benefit, including indigenous people and women who will be targeted through investment strategies. [b] Sustainable Forestry Investment Based on the government's Indigenous Peoples Action Plan, indigenous Promotion groups and other smallholders will benefit from improved forestry (IDA: US$9 m.) management and investments in sustainable forestry activities. The project will finance a matching grants pilot program for private and communal forestry enterprises to test and develop innovative models for reforestation and land rehabilitation. Financing for the Sustainable Forestry Investment Promotion Office will make operational training programs on sustainable forest management practices, as well as extension, marketing and commercialization outreach programs for smallholders interested in developing their land. Women and indigenous communities will be targeted to receive training and technical assistance. [a] Panama The project will pilot improvements in the provision, organization, and Health Sector Reform Pilot Project financing of health services, particularly for the poor, and rehabilitate and (IBRD: US$4.3 m.) equip health facilities in the San Miguelito region. In order to increase access to and facilitate utilization of health services by patients, a user identification card system will be implemented. [b] Peru Approximately 4 million people living close to or below the poverty line will Urban Property Rights Project benefit from the creation of a new system that will provide land titles and (IBRD: US$38 m.) secure property rights to residents in eight urban "human settlements," where property rights are largely informal. Financing will support the collection, analysis and verification of property ownership-related data from government agencies and individual occupiers, and will cover the administrative costs of registering 960,000 informally owned properties and 805,500 titles in the eight designated project areas. Greater security of property ownership will increase access to credit among the poor, encourage property investment, and help increase property values. Formalizing property ownership will also 125 Annex E Country and Project Reason(s) for inclusion increase the share of female property owners and women's access to credit. [b] Uruguay This project will expand the coverage of preschool education to 10,700 Second Basic Education Quality children aged 4-5 in urban areas and 1,600 children living in isolated rural Improvement Project areas. About 280 classrooms for children aged 4-11 will be constructed, and (IBRD: US$28 m.) staff and equipment will be provided. [a,b] Venezuela The quality of life of about 184,000 inhabitants living in informal settlements Caracas Slum-Upgrading Project in metropolitan Caracas will be improved by developing and implementing a (IBRD: US$60.7 m.) community-driven, sustainable and replicable infrastructure improvement program. The project will also pilot a housing improvement loan fund for low-income individuals and provide inhabitants with formal property titles. [b] Middle East and North Africa Egypt Disabled children and youth at risk of becoming street children, who are Social Protection Initiatives among the poorest in urban areas, will benefit from improvements in and (IDA: US$5 m.) increased access to social services. This pilot project will finance qualitative social assessments to identify the specific needs and socioeconomic characteristics of disabled and at-risk children and their families so that more responsive social service mechanisms could be created to meet their needs. A separate component will provide identification cards to poor women without birth certificates so that they can access social entitlements and financial capital. [a] Third Pumping Stations This project supports the third phase of the Government of Egypt's long-term Rehabilitation Project rehabilitation of the major pumping stations located on main canals and drains (IBRD: US$120 m.) of the Nile water management system. By improving 77 pumping stations in the Nile Delta and Middle and Upper Egypt and financing 32 new pumping stations, improved water management will benefit about 700,000 poor farm households, mostly smallholders. [b] Third Social Fund for Development The Credit will finance public works and community development projects (IDA: US$50 m.) targeted to poor districts using poverty and unemployment indices. Labor- intensive public works aim to create approximately 20,000 temporary and 2,500 permanent jobs and improve community infrastructure. The construction and rehabilitation of irrigation and drainage canals, water supply and sewerage systems, and rural roads in low-income areas will help raise farm incomes and promote improvements in public health. Community development programs in the areas of health, education and micro-enterprise development will rely on the active participation of primary beneficiaries and local NGOs. [a,b] Sohag Rural Development Project The project will help raise the level of income and improve the quality of life (IDA: US$25 m.) for about 3 million inhabitants of the Sohag governorate, which is one of the poorest in Egypt. It will provide grant financing for demand-driven community-based social and economic infrastructure subprojects, provide equitable access to credit for the rural poor, especially poor women, and enhance the capacity of local communities and local governments at the village level to program, appraise, co-finance, implement and manage rural infrastructure projects and services. Women's issues will be addressed throughout the entire project. [a,b] 126 Annex E Country and Project Reason(s) for inclusion Morocco While helping to conserve and rehabilitate the Fes-Medina UNESCO World Fes-Medina Rehabilitation Project Heritage site, which is surrounded by poverty and substandard living (IBRD: US$14 m.) conditions, the project will generate some 10,000 jobs over the next fifteen years, which will in part be targeted to the poor under a specific poverty alleviation component. Labor-intensive methods will be used to clear derelict sites, repair houses, and rehabilitate community facilities. [a,b] Lakhdar Watershed Management The living conditions and incomes of approximately 13,000 inhabitants in 40 Pilot Project villages in the Lakhdar watershed area will improve through the (IBRD: US$4 m.) intensification of irrigated and rainfed crop production and the plantation of fruit trees. Soil and water conservation and erosion control measures, seeding, fertilization, and progressive re-vegetalization will be carried out with community participation. Some 500 ha of small-scale irrigation systems will be rehabilitated and the management of forests will be improved. The project will also finance the construction of 80 km of access roads, the implementation of 40 water supply schemes, and the provision of technical assistance. [b] Yemen This project will finance about 900 community infrastructure subprojects in Second Public Works Project areas with above-average unemployment rates, for the construction and (IDA: US$50 m.) rehabilitation of rural and urban water supply and sanitation systems, storm water drainage systems, rural roads, schools and health centers. About half of the funding for subprojects will be targeted specifically to poor and remote govemorates based on poverty measures, including those from the latest poverty assessment. In addition to their contribution in cash or kind to the costs of subprojects, community participation will be mandatory for developing subprojects including prioritization, preparation, design and implementation. About 95,000 person-months of employment will be created, and more than half of the new jobs will be for unskilled workers. [b] South Asia Bangladesh This project aims to protect the population against high arsenic levels that is Arsenic Mitigation Water Supply naturally occurring in thousands of wells across more than half of Project Bangladesh. Access to safe water and delivery of health service will be (IDA: US$32.4 m.) improved, especially for the poor. Deep tubewells, hardware for rainwater harvesting, sanitation treatment plants, and ponds with filters will be installed. To improve the understanding of the arsenic problem, a National Arsenic Mitigation Information Center (NAMIC) will be set up. [b] Municipal Services Project In response to growing urban poverty and environmental degradation, critical (IDA: US$138.6 m.) urban infrastructures and services, including water supply, drainage, solid waste management, and slum improvements will be financed. Improvements in the coverage and quality of municipal services will have a disproportionately positive impact on the municipality's lower income groups. [b] Third Road Rehabilitation and By using labor-intensive methods for the construction and rehabilitation of Maintenance Project roads, this project will provide employment opportunities for the poor. Roads (IDA: US$273 m.) will be constructed in one of the poorest regions of the country, and improvements to 500 km of feeder roads will reduce bottlenecks to economic development and improve access to health and education services for local communities. [b] 127 Annex E Country and Project Reason(s) for inclusion India Groups with high risk of infection such as commercial sex workers, drug Second National HIV/AIDS Control users, migrant workers, and clinic attendees with sexually transmitted diseases Project will receive treatment, information, and condoms. The general public will (IDA: US$191 m.) gain from locally appropriate Information, Education, and Communication (IEC) and awareness campaigns, voluntary testing and counseling, and a strengthened infrastructure for blood safety. [a,b] Maharashtra Health Systems To increase the efficiency of health services, 25 district hospitals will be Development Project renovated or extended, and health services will be promoted in tribal areas. (IDA: US$134 m.) The project will commission studies, workshops and seminars designed to review and develop a health policy, evaluate the burden of disease and the cost-effectiveness of public heath interventions, and improve the targeting of beneficiaries, especially the neediest, women and tribal populations. [b] Rajasthan District Primary Education The credit will finance the construction of about 1,000 new primary schools Project in isolated and tribal areas, alternative schools in remote inaccessible areas, (IDA: US$85.7 m.) and schools for dropouts or working children without primary education. Female students will benefit from free escort services to and from schools. About 600,000 children aged 6-10, two-thirds of whom are girls and one-third being from scheduled castes or scheduled tribes, will gain access to primary education. In addition, about 3,000 early childhood education centers will be established. [a,b] Second Tamil Nadu Urban The project is expected to bring economic, health and environmental benefits Development Project to Tamil Nadu's urban population, including its low-income segment (IBRD: US$105 m.) representing more than 25 percent of the state's total urban population, by improving the quality, quantity and sustainability of basic urban infrastructure. An Integrated Sanitation Program will specifically target the urban poor, providing them with water supply, electricity, baths, waste disposals, and access roads. [b] Uttar Pradesh Sodic Lands This project aims to reverse the process of declining foodgrain production due Reclamation II Project to water-induced land degradation and loss of soil fertility associated with (IDA: US$194.1 m.) intensive cropping and the use of heavily subsidized nitrogenous fertilizers. Land leveling, rehabilitation of 5,750 kms of drains and 700 kms of farm-to- market roads will be financed. About 375,000 small farm families, the majority of whom live below subsistence level, will benefit from increased incomes resulting from the reclamation program. Included among the key performance indicators are increased household incomes (up to Rs 12,000) of marginal farmers and increased community participation. The formation of water user groups and women self-help groups will empower the most vulnerable population. [b] Integrated Watershed Development By supporting terrace repair and introducing sustainable and more productive (HILLS-II) cropping systems, this project will help low-income farmers who are farming (IBRD: US$75 m., IDA: US$60 m.) on degraded land in 1,920 Indian villages. Complementary investments in rural roads and marketing infrastructure will increase market access among smallholders and facilitate crop and income diversification. The project will ensure that benefit streams reach marginalized groups by financing income- generating activities for rural women and involving tribal and nomadic communities and women in project planning and implementation activities. [b] 128 Annex E Country and Project Reason(s) for inclusion Nepal In order to improve access to and quality of schooling, this project includes Basic and Primary Education Project (a) strengthening institutional capacity and management of schools (b) teacher (IDA: US$12.5 m.) training (c) curriculum reviews and (d) early childhood development programs. Specifically, the textbook distribution system will be improved, and textbooks will be provided free to all children in grades I to 3, and to children in grades 4 and 5 in the poorest districts. Needy girls will be targeted through scholarships, and children with special needs will benefit from inclusive schooling programs. The project aims to achieve a 10 percent increase in net enrollment over the project period. [a,b] Rural Infrastructure Project With the active participation of project beneficiaries, this project will improve (IDA: US$5 m.) the quality, efficiency and sustainability of rural roads in selected districts. District roads, trails and other rural infrastructure such as community marketing structures will be rehabilitated or improved. The project will provide technical assistance for management support and monitoring and evaluation at the local level. New job opportunities created by labor-based technology for project works will benefit the poor and women. [b] Pakistan The project will provide loans for micro-credit, as well as grants to finance on Poverty Alleviation Fund Project a cost-sharing basis small-scale community infrastructure subprojects for the (IDA: US$90 m.) poor based on established poverty criteria. Micro-credit loans will fund seeds and fertilizers, livestock development, small infrastructure, and working capital for micro-enterprise. Community infrastructure projects are expected to include irrigation, roads and bridges, and drinking water supply. Poor people living in disadvantaged rural and urban communities, women, and the unemployed will benefit from increased access to physical infrastructure and income-generating opportunities. [b] Sub-Sabaran Africa Benin The project will use labor-intensive methods to rehabilitate urban First Decentralized City Management infrastructure in Benin's three main cities, generating employment Project opportunities for unskilled and semi-skilled workers. Activities will include (IDA: US$25.5 m.) the rehabilitation of urban roads, construction of primary drainage networks in underserved neighborhoods, assistance to public works Small and Medium Enterprises (SMEs) to improve their management capacity, and initiatives to increase community participation and integration. Urban residents, especially the poor, will benefit from improved living conditions, greater mobility and access to services, and improved urban roads. [b] Burkina Faso Aiming to develop an efficient and sustainable small-scale irrigation Pilot Private Irrigation Development subsector, support will be given to the Association of Producers and Traders Project. of Irrigated Products (APIPAC) to deliver demand-driven support services to (IDA: US$5.2 m.) small farmers and private operators (mostly women) involved in marketing and processing of irrigation products. Project activities will facilitate: a) access to financial services for on- and off-farm investments and short-term credit for product marketing and farm inputs; b) dissemination of information and direct support for obtaining land tenure and other property rights; and c) capacity building for grassroots associations involved in preparing contractual arrangements with marketing and processing enterprises, supplies of farm inputs and services, and financial intermediaries. [b] Cameroon To foster agricultural development and increase the productivity and incomes Agricultural Extension and Research of small resource-poor farmers and food crop producers (over 80 percent 129 Annex E Country and Project Reason(s)for inclusion Programs Support Project women), this project will strengthen farmers associations, develop their (IDA: US$15.1 I m.) commercial linkages with agricultural merchants and suppliers, and transfer environmentally sustainable technologies. The project will also help identify specific production problems, develop a grant scheme to finance agricultural research activities, and support the rehabilitation of two agricultural colleges. Women farmers will be targeted through efforts in identifying technology relevant to their needs during on-farm diagnosis, by increasing their participation in extension contact groups (from 35 percent to 50 percent over four years), and by recruiting more female extension staff. [a,b] Cape Verde Sixty additional primary school classrooms will be constructed and equipped. Education and Training Approximately 510,000 copies of the main primary school textbooks and Consolidation and Modernization 55,000 teacher guides will be reprinted. A comprehensive education sector Project review and an evaluation of employment and training policies and programs (IDA: US$6 m.) will be carried out. [b] Social Sector Development Project Project-funded activities will target the poorest communities in 17 (IDA: US$16.1 m.) municipalities according to economic strata, as identified by each municipality. Demand-driven, labor-intensive community subprojects will improve small-scale social infrastructures (e.g., water, sanitation, schools and health facilities) and generate employment opportunities. [b] C6te d'Ivoire Support for the national agriculture research and extension system will help Second National Agriculture Service smallholders, particularly those engaged in food or subsistence crop Support Project production, as well as young farmers and women, who are generally among (IDA: US$50 m.) the poorest. Extension services will target 200,000 farm household heads, 35 percent of whom are women. The project will also support the establishment of efficient, autonomous farmers organizations. [b] Djibouti To improve the physical environment in poor neighborhoods of Djibouti City, Social Development and Public the project will fund small basic infrastructure works (health posts, primary Works Project and secondary schools, street works and drainage, markets, and public (IDA: US$14.8 m.) buildings forming part of the city's cultural heritage). The impact of civil works on employment generation will be maximized through the use of labor- intensive techniques and of local small- and medium-size contractors, benefiting up to 156,000 inhabitants. Financial support for a national survey of household living standards and for the elaboration, execution, and evaluation of poverty reduction policies and programs will be provided. [b] Ethiopia To support the govemment's goal of providing primary health care to all Health Sector Ethiopians within 20 years, the Health Sector Development Program will (IDA: US$100 m.) implement a nationwide health system. The system will focus on communicable diseases, immunization control of epidemic diseases like malaria, and the treatment and control of basic infectious diseases like upper respiratory tract infections. To promote reproductive health care and the prevention of sexually transmitted diseases, especially HIV/AIDS, information, education, and communication campaigns will be funded. Health services will be reorganized into a more practical, decentralized system involving the participation of staff and communities. More than 400 health centers and hospitals will be constructed or rehabilitated, and training will be provided to health professionals. These improvements will reduce mortality, especially infant, child, and maternal mortality, and expand coverage of modern health services to an additional 5 million people. [b] 130 Annex E Country and Project Reason(s) for inclusion Gabon The project will finance small-scale urban infrastructure in four poor, high- Pilot Community Infrastructure and density, and underserved neighborhoods in Libreville, Port-Gentil, and Capacity Building Project Franceville. Community-based subprojects designed to employ unskilled (IBRD: US$5 m.) workers will include paved roads, footpaths, small bridges, sanitation, waste management facilities, and community halls for local associations. To strengthen the beneficiaries' ability to implement and maintain infrastructure micro-projects, technical assistance will be provided through on-site training sessions. Monitoring and evaluation, which will take place at each step of the project, will encompass an impact assessment. [b] Gambia The living conditions of the urban poor will improve through provision or Poverty Alleviation and Capacity rehabilitation of essential public infrastructure and services. About 250 small- Building Project to medium-size subprojects will benefit about 250,000 people and create some (IDA: US$15 m.) 25,000 temporary jobs (average duration of 5-6 months), thus benefiting at least 3,000 workers and up to I out of every 5 currently unemployed urban laborer. [b] Third Education Sector Project Supporting the first phase of the third Education Sector Program, the project (IDA: US$20 m.) will extend double-shift and multi-grade teaching in 85 schools and construct 1,800 classrooms and associated facilities. About 100 English teachers will be deployed, and general teacher training will be improved. The UNICEF program supporting disabled children will be funded, and a scholarship scheme will target girls. In addition, flexible fee payment schedules designed to increase girls' enrollment and retention in grades 1-12, a curriculum review aimed at reducing gender bias, a study on sexual harassment, and the implementation of teacher training modules to reduce gender bias will help reduce the gender gap. Other project components include improvements in vocational and technical education as well as adult education aimed at reducing adult illiteracy, particularly among women aged 15-35. [a,b] Ghana The project will increase the awareness of communities concerning Community-Based Poverty malnutrition and strengthen their capacity to follow good nutrition practices Reduction Project and improve their food security. Local village authorities will be sensitized, (IDA: US$5 m.) and resources for new nutrition centers as well as basic weighing and measurement equipment will be provided, particularly benefiting children under the age of five and pregnant and lactating mothers. The project will provide grants to improve and expand the activities of service providers including NGOs, which provide street children with employable skills, places in schools, and health education. Poverty measurement and monitoring will be supported in three districts, incorporating a set of core poverty indicators common to all districts. [a,b] National Functional Literacy Program To increase literacy and improve functional skills among adults, particularly (IDA: US$32 m.) women and the rural poor, the project will fund classes in basic literacy, numeracy and functional skills in 15 Ghanaian languages. Advertising, theater for development, radio and television spots will sensitize communities and encourage their active participation in literacy advisory committees. The project will benefit an estimated one million learners, 60 percent of whom will be women living in areas with high illiteracy rates and poverty. [b] Guinea To increase awareness in reproductive health and reduce the occurrence of Population and Reproductive Health illnesses, the project will promote safe behavior and adequate health practices, 131 Annex E Country and Project Reason(s) for inclusion Project including culturally acceptable and medically safe contraceptive practices (IDA: US$11.3 m.) through mass media information campaigns. Health facilities will be renovated and equipped. About 290,000 children under five years of age will benefit from child health services. In addition, the project will support NGO and action committees to ban genital mutilations, and provide support to a center for legal assistance to women. The project will cover approximately 30 percent of the population, including 2 million youth nationwide and the majority of Guinean population of reproductive age. [b] Pre-Service Teacher Education In support of the government's decision to provide primary education to all Project children, this project will seek to reduce inequities and increase access to (IDA: US$4.1 m.) school for poor children and girls in rural areas. Teacher recruitment and training will be improved, and the percentage of women in the teaching corps will be maintained. Girls will particularly benefit, as parents are often more willing to send them to schools with female teachers. [b] Third Urban Development Project Waste management will be improved, and approximately 800,000 inhabitants (IDA: US$18 m.) will benefit from better garbage collection services and reduced exposure to sanitation-related diseases. Secondary roads will be rehabilitated, and drains and deteriorated roads will be repaired. The project will also support the ongoing decentralization process by helping mayors of 10 secondary cities plan for the needs of their communes and carry out a Priority Investment Program (PIP) based on wide consultations. [b] Village Community Support Program A matching grant system will be used to finance basic infrastructure (IDA: US$22 m.) subprojects in education, health, drinking water and sanitation in about seventy Communautes Rurales de Developpement (CRDs). To improve access of isolated rural communities to the national road network, a strategy for rural road maintenance will be implemented, and village maintenance committees will be established to manage intra-village tracks and dirt roads. The project will especially benefit women, youth and marginalized groups, and increase the well-being, productivity, and employment opportunities of about 30 percent of the rural population, which is predominantly poor. [b] Kenya Approximately 8.1 million people will benefit from the restoration of water, Emergency Infrastructure health and road infrastructure damaged by El Niffo-induced floods in 23 poor Rehabilitation rural districts. This credit will support labor-intensive works to clean wells, (IDA: US$40 m.) reseal boreholes, and repair rural roads, bridges and health facilities. Most of the work will be done by local contractors employing local labor. [b] Lesotho Approximately 80 classrooms will be built in 33 schools in remote districts, Second Education Sector and a Distance Teacher Education Program will allow teachers to improve Development Project their skills without leaving their classrooms. A national policy framework for (IDA: US$21 I m.) Early Childhood Development (ECD) for children aged 3-5 will be established. School curricula will include IUV/AIDS education. Approximately 440,000 pupils currently enrolled in primary and secondary schools will benefit from lower pupil-teacher and pupil-classroom ratios, and more and better-trained teachers. The project will focus on the needs of approximately 10,000 school-age children in isolated, poverty-stricken areas who are currently out of school or are learning under very difficult conditions. [a,b] Madagascar The credit will enable approximately 362,500 low income people engaged in 132 Annex E Country and Project Reason(s) for inclusion MicroFinance Project farming, fishing and rural commerce to gain access to financial services by (IDA: US$16.4 m.) financing the expansion of two existing micro-finance networks, and creating new savings and loan associations in two provinces. Socially vulnerable groups who are considered "unbankable," including women and the poor in isolated areas, will benefit from a pilot micro-finance scheme that will provide loans to targeted populations in high poverty areas and enable the poor to gain experience making financial transactions and managing small businesses. [b] Third Social Fund Project The project will use participatory approaches to increase the access of poor (IDA: US$15 m.) rural households to social and economic infrastructure. Grants will finance a total of 350 communal infrastructure subprojects, including 130 schools, 30 community water supply, 40 health centers, 35 micro-irrigated perimeters, 40 markets, 50 feeder roads, and 25 bridges-all identified and prepared by the beneficiaries themselves. The poor will gain from employment opportunities generated by the project, from greater access to basic services, and from an increase in their capacity to identify, organize, manage funds and implement subprojects that are responsive to community needs. [b] Malawi The project will create temporary employment for the very poor and enhance Second Social Action Fund Project in-country capacity to identify, prioritize, and implement projects by training (IDA: US$66 m.) stakeholders at the national, regional, district and community levels. Subprojects identified by communities will include schools, health clinics, roads, tree forest planting, and small irrigation works. Subprojects will also provide services including transportation and care for orphans, street children, persons with disabilities, the aged, and those affected by the Acquired Immune Deficiency Syndrome. [b] Population and Family Planning The project will test a Community-Based Distribution (CBD) approach to Project population and family planning services in three pilot districts where the (IDA: US$5 m.) selection criteria includes high population density and low literacy. The project, which aims to double the contraceptive prevalence rate, will target populations living in rural and underserved areas, and will distribute contraceptives as well as information materials in local languages on family planning and STDs/AIDS. Standard training protocols will be developed for agents and their supervisors in counseling, commodity distribution, and dissemination of information. In order to assess on-the-ground achievements of the pilot CBD program, a baseline survey and repeat evaluation sample surveys will be undertaken. [b] Mali Expanded access to affordable quality preventive and curative services will be Health Sector Development Program supported, including the construction of about 300 community health centers (IDA: US$40 m.) and the training of nurses. Sustainable financing schemes for health sector development, which includes a matching grants program for the poor, will be financed. The program is expected to reduce infections such as malaria and tuberculosis, slow down and control the spread of HIV-AIDS, and improve private and public partnerships in the provision of health services. Key indicators such as infant and under-five mortality rates and fertility rates will be monitored to assess the development impact of the project. [b] Mauritania Women cooperatives and associations will initiate activities such as Nutrition, Food Security and Social monitoring the growth of children under five years of age, reducing parasite Mobilization Project infestation through better hygiene, providing mosquito nets and deworming, (IDA: US$4.9 m.) reducing iron deficiency, and providing vitamin A supplements. The project 133 Annex E Country and Project Reason(s) for inclusion will provide grants or equipment for demand-driven income-generating micro-projects. Children 0 to 3 years old, pregnant women, and lactating mothers living in rural districts exposed to drought and food shortages will be targeted by women's cooperatives, associations or Community Nutrition Centers. [a,b] Telecommunications and Postal A legal and regulatory framework for the telecommunications sector will be Sectors Reform Project established, and a national strategy to improve access to communication and (IDA: US$10.8 m.) information services will be developed for low-income, rural and other disadvantaged populations. Small-scale pilot projects for specific rural applications of communications and information technologies in health or education will be funded, and postal services will be developed. [b] Mozambique Financing for PROAGRI will support a process that brings coherence and a Agricultural Sector Public policy focus to government and donor expenditure in support of sustainable Expenditure Program agriculture development and natural resource management. Focusing on (IDA: US$30 m.) overcoming failures in markets and regulations that hold back the development of 3 million smallholder subsistence farmers, the program will include generating practical technologies for smallholders farming systems, integrating gender considerations into the extension program, and improving the security of land tenure for the smallholder sector. [b] Education Sector Strategic Program The comprehensive ESSP program will provide increased and equitable (ESSP) access to better quality education by decentralizing the management of (IDA: US$71 m.) education and providing direct support for teachers and schools. Activities will focus on the needs of poorer regions and households. Most of the 12,000 classrooms and related school facilities will be built or rehabilitated in underserved areas. The poorest population will be targeted to receive textbooks and other educational materials, and the curriculum will be revised to better reflect rural needs and realities. Gender initiatives will aim to increase girls' enrollment at all levels and reduce repetition rates, which are significantly higher for girls. In addition, 22,000 scholarships will be given to girls to defray educational costs. [b] Senegal This credit will help raise agricultural production and rural incomes by Agricultural Services and Producer financing improvements in agricultural extension and research services for Organizations Project smallholders. Agricultural extension services will be restructured to function (IDA: US$27.4 m.) on a contractual basis, and a decentralized agricultural research system will be established in order to improve smallholders' access to agricultural technologies and seeds and to ensure greater accountability of research and extension services to smallholders. Financing for producer organizations will improve smallholders' access to credit and inputs, and will enhance their ability to negotiate access to marketing and extension services. [b] Second Transport Sector Project The project will employ about 13,000 unskilled workers each year throughout (IDA: US$90 m.) its five-and-a-half year duration on various project works (roads, railways, civil aviation, and ports). The rural roads component is expected to increase the poor's access to markets and to social services, including education and health centers, as well as reduce travel time and transport costs. Infrastructure rehabilitation and network expansion will also improve safety and employment opportunities for the low-income population. [b] Togo The project will finance small infrastructure at the community level including 134 Annex E Country and Project Reason(s) for inclusion Social Fund Project the rehabilitation or construction of primary schools, health centers, (IDA: US$5 m.) dispensaries, feeder roads, small bridges and other basic transport infrastructure. Water points, reservoirs and sanitation services will also be set up. Income-generating activities including animal husbandry, agriculture and small-scale trade will be supported. Local communities and grassroots associations, especially women's associations, will be empowered by learning how to organize and analyze their needs, identify and evaluate feasible solutions, design micro-projects, and manage project implementation. [b] Uganda The poor, who face a disproportionately high risk of losing their deposits due Financial Markets Assistance to insolvency and fraud, will benefit from stronger regulation and supervision (IDA: US$13 m.) of deposit-taking institutions, including merchant banks, large micro-finance institutions and the Post Office Savings Bank. The project will support a training program for commercial bank and non-bank examiners on loan evaluation and provision, liquidity risk assessment, and contingent risk management, and the drafting of legislation to better define the roles and responsibilities of the Bank of Uganda in regulating non-bank deposit-taking institutions. The poor will also benefit from the drafting of legislation for an oversight authority for the private pension sector, which will introduce minimum standards of performance and accountability in the sector, and avenues for public recourse. [b] Second Agricultural Research and To improve production systems and develop labor-saving technologies, Training Project (ARTP 11) particularly for women farmers, the project will finance adaptive research (IDA: US$26 m.) activities and establish a Development Fund that will support a competitive research grant system. The National Agriculture and Research Organization will be transformed into a research and development institution giving greater attention to the adoption of superior technologies. New technologies will be introduced and adopted by farmers, improving production practices and resulting in higher incomes for most of the 2.5 million very poor crop and livestock farmers in the country. [b] 135 ANNEX F. POVERTY-FOCUSED SALSAND SECALs, FISCAL 1999 Adjustment operations support packages of In terms of numbers, the share of operations macroeconomic, sectoral and institutional reforms classified as poverty-focused increased significantly that aim to improve the efficiency of resource from 43 percent in fiscal 1998 to 75 percent in fiscal allocation and promote economic growth and poverty 1999-the highest it has been between 1992-1999. reduction. Those adjustment operations which Similarly the total amount of bank lending for support specific reforms that will benefit the poor are poverty-focused operations increased during the classified as "poverty-focused adjustment same period: funds going to poverty-focused operations." operations jumped from US$7.24 billion in fiscal 1998 to US$10.69 billion in fiscal 1999, owing in An adjustment operation has a poverty-focus if it part to three very large loans to Indonesia, Korea, and supports government efforts that meet at least one of Argentina totaling US$5.5 billion; the share of three criteria: (i) reallocate public expenditures in adjustment lending classified as poverty-focused favor of the poor; (ii) eliminate distortions and correspondingly increased from 64 percent in fiscal regulations that disadvantage the poor and limit their 1998 to 70 percent in fiscal 1999. For IDA countries income-generating opportunities; and/or (iii) support alone, the volume of poverty-focused adjustment safety nets that protect the most vulnerable members lending nearly doubled, increasing from US$630 of the population."4 million in fiscal 1998 to US$1.2 billion in fiscal 1999, and the share of poverty-focused lending in The Bank approved 48 adjustment operations in total IDA adjustment lending jumped dramatically fiscal 1999, 36 of which were classified as poverty- from 47 percent to 89 percent, more than offsetting focused operations. Table F-I shows the number and the previous fiscal year's decline. The increase in the amount of lending for Structural Adjustment Loans amount and share of IBRD and IDA lending going to (SALs) and Sector Adjustment Loans (SECALs). poverty-focused operations in fiscal 1999 reflects, in Table F-3 presents the number and amount of lending part, increased attention to poverty reduction and the for poverty-focused adjustment operations for fiscal strengthening of social safety nets in the East Asia 1992-1999. Table F-4 briefly describes the poverty- and Pacific Region after the macroeconomic shocks focused adjustment operations for fiscal 1999. associated with the Asia crisis stressed the region's social and economic fabric, and support to Latin Table F-1. Poverty-focused adjustment American countries in reinforcing their social operations, fiscal 1999 assistance programs, as well as putting in place FY99 preventive measures to mitigate adverse effects on Total IDA IBRD vulnerable groups in the wake of recent international SAL lending ($mil.) 8,593.3 927.0 7,666.3 financial instability. Number of SALs 25 16 9 The distribution of poverty-focused adjustment SECAL lending ($mil.) 2,096.0 311.7 1,784.3 operations across countries depends on regional Number of SECALs 11 4 7 priorities, recent macroeconomic events and the demand for financing from governments. Poverty- Total SAL/SECAL: focused lending in fiscal 1999 was concentrated in the East Asia and Pacific Region (as was the case last Lending ($mil.) 10,689.3 1,238.7 9,450.6 fiscal year), where the lingering effects of the Asia Number of loans 36 20 16 crisis has left many governments unable to meet their Source: World Bank. external financing needs. The East Asia and Pacific region received more poverty-focused adjustment 84 In the past, support to poverty or the financing than any other region, totaling US$4.7 In he as, spprt o ovetymonmtoring orte billion-44 percent of total poverty-focused development of poverty policies were also included as criteria. These have been dropped. This does not affect adjustment lending in fiscal 1999. The reforms comparability with past figures, however, because no supported under these operations included the operation was ever classified as poverty focused on either strengthening of social safety nets, macroeconomic of these two criteria alone. 136 Annex F stabilization, and banking and corporate sector poor, especially agricultural producers; and restructuring. enhancing the poverty impact of public expenditures. Expenditure switching measures that were expected The Latin America and Caribbean region was the to benefit the poor were supported by 7 of the 8 second largest regional recipient of poverty-focused poverty-focused adjustment operations in the region. adjustment financing (US$3.6 billion), accounting for In the Middle East and North Africa region, all three approximately 34 percent of total poverty-focused poverty-focused adjustment operations supported adjustment lending. This region's poverty-focused measures to reorient public expenditures towards the adjustment operations helped to reduce countries' poor. external vulnerability to financial and liquidity shocks, and mitigated the adverse impact of Eighteen out of 36 poverty-focused loans included macroeconomic policies on the poor. Two countries measures to reorient expenditures toward the poor; in Latin America-Argentina and Brazil-received 15 included instruments that would eliminate Special Structural Adjustment Loans that provide distortions and regulations that adversely affect the exceptional support for structural and social sector poor; and a large majority (25 out of 36) included reforms, or safety net expenditures, to counties at risk safety net measures. The following sections discuss of, or already experiencing, crises.85 these three main objectives in turn (see Table F-2, which indicates the poverty-focused objectives of In the Europe and Central Asia region, about half of each operation). the poverty-focused adjustment operations supported measures to remove distortions in the labor market Reorienting Public Expenditures to Benefit the that raise labor costs and prevent employment Poor growth.86 The strengthening of social safety nets was a priority in 12 of the 14 poverty-focused adjustment Measures to reorient public expenditures toward the operations in the ECA region, with measures to raise poor were supported by 18 of the 36 poverty-focused the poverty or pension benefit for the elderly in order adjustment operations in fiscal 1999. Operations in to bring their expenditures to the poverty line and Madagascar, Brazil, and the Solomon Islands offer provide unemployment benefits to workers laid off interesting examples. due to enterprise restructuring. Under the Second Structural Adjustment Credit Structural and institutional reforms that were (IDA) to Madagascar, public expenditures will be implemented in Africa with support from poverty- reoriented toward the priority social sectors by focused adjustment loans fall into four major themes: increasing recurrent non-salary expenditures for promoting private sector development through primary education and health from 80 percent and 84 privatization; improving governance through civil percent of the respective sectoral budgets in 1997, to service and regulatory reform; reducing distortionary a minimum of 90 percent in 1999 and 98 percent in trade and tariff measures that adversely affect the 2000 for both sectors. Approximately 75 community schools in mainly rural areas will receive government 85 Special Structural Adjustment Loans provide support for non-wage recurrent expenditures in 1999, 85 Spcial tructral Ajustmnt Lons prvide and an additional 150 schools will receive financial exceptional financing for client countries "approaching a spo in fiscal 20 Moreoverecgovernmnt possible crisis, or already in crisis. with exceptional support In fiscal 2000. Moreover, the govemment financing needs." By taking advantage of windows of will enact legal and institutional reforms that aim to opportunity for such reforms that might otherwise have reduce discretion in administrative procedures and remained closed, they help countries prevent a crisis or, if improve public governance. A recent world-wide one occurs, mitigate its adverse economic and social study suggests that corruption has disproportionately impact. Thus, the main justification for exceptional Bank negative effects on the poor, as side-payments support through a SSAL is the structural origin of a crisis demanded by corrupt officials to access basic social and its major social/poverty consequences. As SSALs are services and infrastructure puts downward pressure exceptional, their use must be justified in each individual on the living standards of the poor and limit their case, and must meet SSAL eligibility criteria (as specified access. 87 in the operational guidelines). 86 Although supported labor market reforms may have negative impacts on retrenched workers, they generally have the effect of increasing equity by making it 87 Poverty Trends and Voices of the Poor (World Bank, financially possible for firms to hire additional workers. 1999e). 137 Annex F Under the Social Protection Special Sector for broad-based economic growth and poverty Adjustment Loan (IBRD), the Brazilian government reduction. The government will adopt a land law that will place a floor on funding of basic education and will increase land tenure security among smallholders health services in order to reduce inequality in inter- and will implement a market-based distribution state and inter-municipality expenditures. In order to system for fertilizers, high-yielding seed varieties, improve the quality and effectiveness of basic and other inputs thus increasing their availability in education in low income municipalities, the remote areas. Amendments to the labor code will government will increase non-salary expenditures on reduce labor costs by eliminating restrictions on books, school lunches and health programs. firing and consolidating sectoral minimum wages into one national minimum wage, and removing Low-income groups in the Solomon Islands will provisions that discriminate against women. As a benefit from a reorientation of public expenditures condition for the third tranche release, the toward the basic health and education sectors under government agreed to amend the civil code to give the Structural Adjustment Credit (IDA). For women equal inheritance and property rights, thereby example, the credit will support improvements in protecting them from structural poverty. primary health services for the poor by increasing the budget allocation for preventive health services In the Structural Adjustment Credit (IDA) to Chad, (including health education, malaria control, price distortions in the agricultural sector that hurt provincial health services and environmental health) small producers will be reduced. The government by 10 percent in fiscal 2000 relative to 1999, and aims to increase farmers' share of world cotton prices capping budgetary allocations for the National from 49.5 percent in 1998 to 54 percent in 1999. Referral Hospital at 40 percent of the 2000 health Producer prices will receive a further boost after the budget. A Poverty Assessment will be carried out to government lifts COTONCHAD's monopsony identify the needs of the poor and to guide the design purchasing power in the primary marketing of seed of social policies and programs that will contribute to cotton, ginning and export marketing. poverty reduction. Institutional reforms supported by the Social Sector Removing Distortions that Harm the Poor Adjustment Credit to Macedonia (IDA) will help to reduce institutional rigidities in the labor market that Reforms that aim to reduce distortions that harm the limit labor demand and contribute to stagnant poor by reducing their job opportunities or real economic growth, as well as strengthen social safety incomes were supported in 15 out of 36 adjustment nets for the poor. The priority labor market reforms operations in fiscal 1999. Interesting examples come include easing labor market restrictions on hiring and from Bulgaria, Rwanda, Chad, and Macedonia. termination, reducing mandatory minimum benefits that curtail labor demand in small and medium-size The Agriculture Sector Adjustment Loan in Bulgaria enterprises, and reforming the labor code to increase (IBRD) supports agricultural policy reforms that aim flexibility in wage setting and employment contracts. to eliminate tax, trade and pricing policies that discriminate against producers. In order to increase Strengthening of Social Safety Nets and Targeted producer prices, the government will eliminate export Programs controls and taxes on grains and oilseeds, remove price controls on agricultural products, and Measures to strengthen social safety nets, or target discontinue tariff exemptions for all agricultural disadvantaged groups within the population, were products by liberalizing the import tariff regime. The supported in 25 of the 36 poverty-focused adjustment rural poor will indirectly benefit from the creation of operations. Operations in Korea, Georgia, Peru, and off-farm job opportunities in food marketing and Morocco provide interesting examples. processing as a result of the elimination of registration, licensing and contract approval Policy agreements secured under the Second requirements for exports and imports of agricultural Structural Adjustment Loan (IBRD) in Korea aim to productions, and the reduction of the state's role in benefit approximately 2.5 million workers by grain marketing. extending unemployment insurance coverage to firms with fewer than five workers and to temporary and The Economic Recovery Credit (IDA) in Rwanda part-time workers. Existing public workfare will support legal and institutional reforms necessary programs will be expanded to absorb an additional 138 Annex F 125,000 workers, and reformed to maximize self- rate shocks from dramatically reducing labor demand targeting by setting the wage rate below market rates and eroding real wages. In order to better insulate the for unskilled labor. The government will nearly real incomes of the poor from sharp economic double coverage of the new means-tested downturns, the government will protect spending on unemployment allowance to 600,000 beneficiaries, well-targeted social programs from budget cuts that and will take steps to ensure that benefit levels are set might occur in the event of a crisis in 1999 or 2000. to avoid adverse work incentives. Reforms in the The protected programs cover 14 percent of the health insurance sector will protect poor beneficiaries government's total budget in fiscal 1999. A from major health-related financial risks by contingency plan for providing social protection extending coverage for non-covered health services, during crises has also been developed. Financing for reallocating health insurance coverage from minor to labor intensive public works (in select geographic major risks within the national Medical Insurance areas and at low wage levels) will be triggered by a System, and reducing out-of-pocket co-payments. 18 percent quarterly decline in the terms of trade, a 12 percent drop in 3 consecutive months in collected In order to mitigate the negative impacts of sector revenues, or an increase of 3 percentage points in the reforms under the Energy Sector Adjustment Credit quarterly poverty rate relative to the same period one (IDA) in Georgia, the authorities will monitor the year earlier. impact of increased cost-recovery in the energy sector on poor families using the continuous In Morocco, the Policy Reform Support Loan Georgian Household Income and Expenditures (IBRD) will provide targeted food subsidies to low- Survey. Poor single pensioners, who are among the income groups while reducing untargeted food largest identifiable group of poor in the country, will subsidies and food import tariffs. The government receive higher poverty benefits to deal with higher will restructure Promotion Nationale, a public works housing costs. A beneficiary assessment will monitor program that finances temporary jobs for whether the poverty benefit actually reaches the poor unemployed skilled workers at below market wages, and address situations where it may be diverted. by increasing the proportion of programs in low- income areas, and increasing the share of labor costs The Second Financial Sector Adjustment Loan to to over 60 percent of project financing. Peru (IBRD) will help prevent liquidity and interest 139 Annex F Table F-2. Poverty-focused components of adjustment operations,fiscal 1999 Objectives' Reforming Addressing Safety nets/ Tranche public distortions' Targeted release expendituresb programsd conditions' Fiscal 1999 Poverty-focused adjustment operations Structural Adjustment Loans Albania: Public Expenditure Support Credit* '4 Albania: Structural Adjustment Credit* '4 4 Argentina: Special Structural Adjustment Loan i ' AI Armenia: Third Structural Adjustment Credit* i l Bulgaria: Social Protection Adjustment Loan AI v '4 Burkina Faso: Economic Management Reform Credit* i 4 Chad: Third Structural Adjustment Credit* '4 ' Georgia: Third Structural Adjustment Credit* 4 '4 4 Indonesia: Policy Reform Support Loan 4 J Indonesia: Second Policy Reform Support Loan AI '4 Indonesia: Social Safety Net Adjustment Loan 4 4 Korea: Second Structural Adjustment Loan '4 ' Macedonia, FYR: Social Sector Adjustment Credit* '4 4 Madagascar: Second Structural Adjustment Credit* 4 4 Malawi: Second Fiscal Restructuring and Deregulation Program* 4 ' ' Moldova: Social Sector Adjustment Credit* 4 4 '4 Niger: Public Finance Reform Credit* A4 ' Panama: Public Policy Reform Adjustment Loan 4 4 4 Romania: Private Sector Adjustment Loan '4 4 ' Rwanda: Economic Recovery Credit* 4 4 ' ' Solomon Islands: Structural Adjustment Credit* '4 '4 Tajikistan: Structural Adjustment Credit* '4 ' ' Thailand: Second Economic and Financial Adjustment Loan 4 Yemen: Public Sector Adjustment Credit* 4 Zambia: Public Sector Reform and Export Promotion Credit* '4 ' ' Sectoral Adjustment Loans Argentina: Special Repurchase Facility Support Loan ' Bosnia and Herzegovina: Second Public Finance Structural '4 4 Adjustment Credit* Brazil: Social Protection Special Sector Adjustment Loan 4 ' Bulgaria: Agriculture Sector Adjustment Loan '4 Georgia: Energy Sector Adjustment Credit* ' 4 Ghana: Second Economic Reform Support Operation* 4 4 Kyrgyz Republic: Social Sector Adjustment Credit* 4 ' 4 Morocco: Policy Reform Support Loan 4 ' Morocco: Telecommunications, Post and Information Technology ' Sector Adjustment Loan Peru: Second Financial Sector Adjustment Loan '4 ' Poland: Hard Coal Sector Adjustment Loan ' Total 18 15 25 20 Note: * IDA credit a. Thirteen operations in fiscal 1999 also support the collection of data on poverty and the monitoring of the impact of adjustment on the poor: the Brazil Social Protection Special Sector Adjustment Loan, the Bulgaria Agriculture Sector Adjustment Loan, the Georgia Energy Sector Adjustment Credit, the Indonesia Policy Reform Support Loan, the Korea: Second Structural Adjustment Loan, the Kyrgyz Republic Social Sector Adjustment Credit, the FYR Macedonia Social Sector Adjustment Credit, the Madagascar Second Structural Adjustment Credit, the Panama Public Policy Reform Adjustment Loan, the Peru Second Financial Sector Adjustment Loan, the Poland Hard Coal Sector Adjustment Loan, the Thailand Second Economic and Financial Adjustment Loan, and the Zambia Public Sector Reform and Export Promotion Credit. b. Supports the reallocation of public expenditures towards physical infrastructure and basic social services for the poor. c. Focuses specifically on reducing distortions that especially disadvantage the poor. d. Supports programs that provide safety nets or that target specific groups. e. Contains tranche release conditions related to poverty-focused measures. Source: World Bank 140 Annex F Table F-3. Poverty-focused adjustment Iending,fiscal 1992-1999 Lending FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 Poverty-focused adjustment lending (US$ millions) 2,838.1 1,165.0 1,665.0 1,648.0 2,227.0 2,649.0 7,235.0 10,689.3 Total adjustment lending (US$ millions) 5,847.3 5,252.6 2,867.5 5,324.3 4,509.4 5,085.7 11,289.2 15,449.0 Percentage of adjustment lending 49 22 58 31 49 52 64 69 Total number of poverty-focused adjustment operations 18 6 20 14 17 18 16 36 Total number of adjustment operations 32 23 28 30 30 30 37 48 Percentage of poverty-focused adjustment operations 56 26 71 47 57 60 43 75 IDA Poverty-focused adjustment lending (US$ millions) 1,168.1 645.0 875.0 598.0 1,027.0 689.0 630.0 1,238.7 IDA adjustment lending (US$ millions) 2,152.3 1,422.6 1,997.5 1,069.3 1,679.4 947.7 1,354.2 1,511.8 Percentage of IDA adjustment lending 54 45 44 56 61 73 47 82 Total number of IDA poverty-focused adjustment 10 3 11 9 13 9 9 20 operations Total number of IDA adjustment operations 16 8 18 15 19 11 17 22 Percentage of IDA poverty-focused adjustment operations 63 38 61 60 68 82 53 91 Note: Adjustment operations include SALs, SECALs, RILs, and DRLs. For joint IBRD/IDA operations, the amount of lending is split between IBRD and IDA as stipulated in the loan/credit document, but it is counted only once, as an IBRD operation. Source: World Bank. 141 Annex F Table F-4. Poverty-focused SALs and SECALs, fiscal 1!99 Loan or credit Poverty-related objectives East Asia and thePacific Indonesia This is the first of two policy reform loans that will help to restore confidence and Policy Reform Support Loan macroeconomic stability in the Indonesian economy, while protecting the poor. (IBRD: US$ 1000 m.) Regulatory reforms, including the reduction of tariffs on food items and the relaxation of food import and marketing monopolies, will contain upward pressure on food prices and benefit farmers and informal sector workers by increasing producer prices and job opportunities in food marketing. The government will support the expansion of labor intensive public works in urban and rural areas, and will provide subsidies on basic commodities consumed by the poor (including low quality rice, soybeans and kerosene) and food grants in drought-affected areas. In order to mitigate the negative impact of macroeconomic fluctuations on the health status of the poor, the loan will finance the purchase of essential drugs, hospital equipment and contraceptives to ensure their availability and affordability. The Indonesian government will finance scholarships for three million needy primary school students, and half a million needy high school students, in order to encourage human capital accumulation among the poor. Second Policy Reform Support As a complement to the Social Safety Net Adjustment Loan described below, this Loan loan will support corporate restructuring and banking sector reforms, consolidate (IBRD: US$500 m.) macroeconomic stabilization and build a foundation for renewed economic growth by reducing corruption and increasing the transparency and efficiency of public and private sector activities. The 1999/2000 budget contains development expenditure levels, sectoral allocations and social safety net expenditure allocations (by program and by region) that switch public expenditures toward the priority social sectors. Some of the shifts are directed at mitigating the immediate effects of the crisis through strengthening social safety nets. Others represent a reallocation toward longer term priorities, such as improving quality and access to health and education services, especially for the poor. Social Safety Net Adjustment Social safety net programs crucial to the poor have been protected from Loan expenditure cuts under the Second Policy Reform Support Loan, but have suffered (IBRD: US$600 m.) from implementation delays, fund leakage and inadequate and inappropriate design. This operation will support improvements in the monitoring of social sector programs and the strengthening of social safety nets. An innovative monitoring system involving line ministries and civil society institutions will protect against the misuse of program funds, and ensure effective social service delivery to the poor. Budget support for key social safety net programs- including rice subsidies targeted to poor households, price subsidies on generic drugs, and financing for employment generation programs-will help to increase the food, health and income security of the poor. The government will protect school enrollment rates among low-income groups by financing scholarships for the poorest primary and secondary school students, and providing block grants to the poorest 60 percent of primary and secondary schools. The first and second tranche releases are conditioned on, among other things, creating a mechanism to implement and monitor social safety net programs. Korea Financial and corporate sector restructuring, and the strengthening of social safety Second Structural Adjustment nets, will build on the work initiated under prior Bank support. Approximately 2.5 Loan million workers will benefit from an extension of coverage of the Unemployment (IBRD: US$2000 m.) Insurance Scheme to firms with fewer than 5 workers and to temporary and part- time workers. Existing public workfare programs will be expanded to absorb an 142 Annex F Loan or credit Poverty-related objectives additional 125,000 workers, and reformed to maximize self-targeting to the poor by setting the wage rate below market rates for unskilled labor. The government will nearly double coverage of the new means-tested unemployment allowance to 600,000 beneficiaries, and will take steps to ensure that benefit levels are set to avoid adverse work incentives. Pension reforms will benefit the elderly poor, and reforms in the health insurance sector will protect poor beneficiaries from major health-related financial risks. Prior to the release of the second tranche, the government will allocate sufficient budgetary resources in fiscal 1999 budget to expand workfare coverage for unemployed workers, expand the provision of means-tested non-contributory income support for the poor, and complete a feasibility report for introducing a national household survey to monitor poverty on a regular basis. Solomon Islands The poor will benefit from a reorientation of public expenditures toward the basic Structural Adjustment Credit health and education sectors. In order to improve the quality and effectiveness of (IDA: US$12 in.) basic education services, the government will prepare a 10 year education sector plan that will prioritize investments and reforms, and implement a unit-cost formula for the allocation of public funds to primary and secondary education by fiscal 2000 to ensure schools have adequate financing. The credit will also support improvements in primary health services for the poor by increasing the nominal value of the recurrent budget allocation for preventive health services (including health education, malaria control, provincial health services and environmental health) by 10 percent in fiscal 2000 relative to 1999, and capping budgetary allocations for the National Referral Hospital at 40 percent of the fiscal 2000 health budget. A poverty assessment will be carried out to identify the needs of the poor and to guide the design of social policies and programs that will contribute to poverty reduction. Prior to the release of the second tranche, the government must have completed the reforms in the education and health sectors, and begun work on the poverty assessment. Thailand Financing for public expenditures and antipoverty programs will provide a fiscal Economic and Financial stimulus to boost aggregate demand and help to restore economic growth. Public Adjustment II workfare programs will be expanded to generate employment opportunities, (IBRD: US$600 m.) especially for the rural poor in northeast Thailand. In order to ensure low income groups benefit disproportionately from funded programs, the government will increase the unskilled labor intensity of projects to 30 percent, and will set the wage level close to applicable market rates. The incidence of poverty will be a key criterion for determining the distribution of workfare programs across regions. The government will also increase coverage of means-tested and in-kind transfer programs for needy families and the elderly poor. Unemployed workers, whose previous employers are unable to meet severance payment obligations, will benefit from a new employee welfare fund that will partially finance unpaid severance claims. Europe and Central Asia Albania The increased demand for health care and education services by refugees from the Public Expenditure Support Kosovo crisis has outstripped the government's ability to finance and implement Credit these services without compromising fiscal discipline. This credit will enable the (IDA: US$30 m.) Albanian government to increase expenditures in the primary health and education sectors in order to meet the urgent needs of Kosovar refugees and the Albanian 143 Annex F Loan or credit Poverty-related objectives poor while maintaining macroeconomic stability. Priority will be given to the maintenance of water, sanitation, school and health infrastructure, which will be stressed as a result of refugee inflows. Structural Adjustment Credit Reforming the public pension program will enable the government to reduce (IDA: US$45 m.) payroll taxes-and thus stimulate labor demand-and to protect the incomes of the elderly without compromising fiscal discipline. The government will improve the sustainability of the pay-as-you-go public pension program in the short and medium term by carrying out actuarial evaluation of the system and implementing appropriate reforms, and increasing equity by reducing unfunded pension entitlements. Over the long term, the government will support income diversification among the elderly by introducing a mandatory, funded pension scheme and private pension insurance. Prior to the release of the second tranche, the government must cease to accumulate unfunded pension liabilities to farmers, which will improve the equity of public pension outlays. Armenia In order to minimize the adverse impact of the Russian crisis on the economy, this Third Structural Adjustment loan supports a package of reforms aimed at increasing domestic savings through Credit fiscal discipline, and promoting private sector development. The targeting of (IDA: US$65 m.) benefits to the poor will be improved by introducing proxy means testing and tightening the benefit eligibility criteria. The government will strengthen the existing pension system by improving enforcement mechanisms for the collection of pension contributions, as well as introducing private pension accounts over the medium run. Pension reforms will enhance social protection for the elderly by increasing the average old age pension benefit by 30 percent in 1999. In order ensure equitable access to health and educational services, the government will increase the 1999 budgetary shares going to the health and education sectors to 11 percent of total public expenditures. Bosnia and Herzegovina A package of public finance reforms will facilitate the adoption of consistent Second Public Finance Structural monetary and fiscal policies across the two Entities. The government will enhance Adjustment Credit the fiscal sustainability and poverty impact of the public pension program by (IDA: US$72 m.) redefining pension benefit rules to align promised benefits with the projected resources, and increasing the lowest pensions more generously until they reach reasonable subsistence levels. The veteran's benefit programs will be enhanced by tying benefit adjustments to the availability of fiscal resources, and lowering administrative costs by reducing the number of benefit categories and improving the targeting of resources to the poorest. As a condition for the second tranche release, the governments of both Entities will submit comprehensive analyses of beneficiaries of veteran's entitlement programs, and will adopt amendments to pension legislation which alter the benefit formula and eligibility criteria. Bulgaria Policy reforms in the agricultural sector will eliminate tax, trade and pricing Agriculture Sector Adjustment policies which discriminate against producers, and will thus help to raise rural Loan incomes. In order to increase producer prices, the government will eliminate (IBRD: US$75.8 m.) export controls and taxes on grains and oilseeds, remove price controls on agricultural products, and discontinue tariff exemptions for all agricultural products by liberalizing the import tariff regime. The government will likely foster a positive supply response in the agricultural sector by eliminating registration, licensing, and contract approval requirements for exports and imports of agricultural products, and by reducing the state's role in grain marketing activities. The rural poor will indirectly benefit from the creation of off-farm job 144 Annex F Loan or credit Poverty-related objectives opportunities in food marketing and processing as a result of the planned reforms. Bulgaria The government will adopt measures to reduce labor costs and increase Social Protection Adjustment employment growth, as well as improve the targeting mechanisms of social Loan protection programs. Pension reforms--including a gradual increase in the (IBRD: US$80 m.) retirement age, and the introduction of individually funded pension accounts--will enable the government to lower payroll taxes used to finance the pay-as-you-go pension system, thereby removing a major obstacle to job creation in the formal sector. Labor market reforms will likely lower employment costs and help to shorten unemployment spells by: improving the targeting of active labor market programs; increasing access to job services and information; and reducing mandatory pay for education leave. The government will also reduce duplicative in-kind benefits and untargeted, universal cash benefits, thereby containing the diversion of resources away from the poor. In order to increase gender equity and protect vulnerable groups, the government will equalize minimum retirement ages for men and women, and allow pension inheritance rights to widowed pensioners and minor children. Children under 16 years old, pensioners over 70 living alone, and the disabled will benefit from improved, means-tested targeting mechanisms in income support programs and increased benefit payments. Prior to the second tranche release, the government must meet specific performance targets in the implementation of labor and social sector reforms. Georgia Privatization and the implementation of cost recovery measures in the energy Energy Sector Adjustment Credit sector will increase the reliability of electricity supply and underpin the country's (IDA: US$25 m.) macroeconomic recovery by reducing quasi-fiscal deficits generated by state- owned energy enterprises. In order to mitigate the negative impacts of sector reforms on poor single pensioners, who are among the largest identifiable group of poor in the economy, the government will increase their poverty benefit to reflect the additional 14.3 million lari budgetary allocation to the program. The authorities will monitor the impact of increased cost-recovery in the energy sector on poor families using the continuous Georgian Household Income and Expenditures Survey. A beneficiary assessment will monitor the actual receipt of the poverty benefit in order to ensure resources are not being diverted from the poor. Increasing expenditures on the poverty benefit program is a condition for the release of the second tranche of the loan, and will underpin measures to strengthen social safety nets under the parallel Third Structural Adjustment Credit. Third Structural Adjustment The government will help to mitigate the impact of the regional economic crisis on Credit the poor by increasing the poverty benefit for 55,000 single pensioners to a level (IDA: US$60 m.) sufficient to bring their monthly expenditures to the minimum poverty line. Budgetary allocations in fiscal 2000 will keep the poverty benefit at least constant in real terms. The government will prioritize spending on health, education and the poverty benefit program as core expenditures in the fiscal 1999 and 2000 budgets, and will allocate 7.3 percent and 13 percent of the overall consolidated budget each year to the health and education sectors respectively. Prior to the release of the second tranche, the government must make adequate budgetary allocations to the education and health sectors, and prior to the third tranche release, the government must successfully execute the fiscal 2000 budget and pay all outstanding arrears in the social sectors. This credit shares in common with the Energy Sector Adjustment Credit the second tranche release condition which will increase expenditures on the poverty benefit program for poor single pensioners. 145 Annex F Loan or credit Poverty-related objectives Kyrgyz Republic Policy reforms will reduce excessively high payroll taxes needed to finance Social Sector Adjustment Credit pension outlays and spur job growth in the economy. The government will move (IDA: US$36.5 m.) away from the current pay-as-you-go public pension system, and will adopt a partially funded system which will rely on mandatory contributions to private accounts. Reforms will increase equity in, and the fiscal sustainability of, the public pension system by increasing the retirement age and eliminating non- contributory earnings periods for pensions and early retirement privileges. Based on a comprehensive analysis of household consumption patterns of residential utilities, the government will provide targeted partial compensation to poor households while phasing in tariff increases for residential utilities (including electricity, gas, heating and water). Prior to the release of the second tranche of the loan, the government will approve a permanent system of poverty monitoring, and approve a 1999 budget which includes the necessary funding to carry out a household survey with a minimum of 2,030 households. Macedonia Supported reforms will help to reduce institutional rigidities in the labor market Social Sector Adjustment Credit which stifle labor demand and contribute to stagnant economic growth, as well as (IDA: US$29 m.) strengthen social safety nets for the poor. The priority labor market reforms include easing labor market restrictions on hiring and termination, reducing mandatory minimum benefits which curtail labor demand in small and medium- size enterprises, and reforming the labor code to increase flexibility in wage setting and employment contracts. The credit will also support the restructuring of the national pension, health and unemployment systems to ensure their financial sustainability, and to improve the equity and targeting of social assistance benefits. The latter will be accomplished by equalizing rural and urban benefit levels based on the national poverty line, improving screening and monitoring of social assistance beneficiaries, instituting random audits on the verification and monitoring of claims, and removing work disincentives by capping the benefit duration to four years. Moldova The government will maintain its track record of non-interference in the grain Social Adjustment Credit market, and will continue to move away from distortionary subsidies to (IDA: US$40 m.) agricultural producers under its taxation and subsidy program. In order to promote land tenure security and on-farm investment, and foster a positive supply response in the agricultural sector, the government will privatize approximately 600 former collective and state farms into private plots and issue land titles for approximately 40 percent of total agricultural land. Private farmers, who are among the poorest groups in Moldova, will specifically benefit from the provision of one-time cash grants, allocated on a per hectare basis, to be used in time for the 1999 Spring planting season. Grants will be capped so that smaller farmers-who have the least access to credit-will benefit proportionately more. Prior to the release of the second tranche, the government must have made satisfactory progress in privatizing state farms and issuing land titles. Poland Poland's hard coal sector has suffered very large and increasing losses in recent Hard Coal Sector Adjustment years. In order to reduce the drain of state-owned hard coal enterprises on the Loan government's budget and improve the profitability of the hard coal sector, this (IBRD: US$300 m.) operation will support employment restructuring and the privatization of 17 loss- making state owned enterprises, and the closing of low-productivity mines. In order to cushion the impact of sectoral restructuring on miners and their families, the government will offer a Miner's Social Package to an expected 55,000 146 Annex F Loan or credit Poverty-related objectives underground workers who voluntarily leave their jobs. Miners will choose between a Leave Package that will provide a financial bridge to retirement, a Social Allowance Package that will provide a two-year allowance to miners interested in re-employment outside of the mining sector, or a Lump Sum Package to be used at their convenience. In addition, all unemployed workers from affected companies will have access to job counseling services, active labor market services (including retraining and small business assistance), and means-tested income support. The second tranche release is condition on the implementation of monitoring systems for social assistance programs and the timely payment of benefits to miners. Romania Banking sector restructuring will avert the immediate threat of a financial and Private Sector Adjustment Loan macroeconomic crisis, while social sector reforms will strengthen safety nets for (IBRD: US$300 m.) workers displaced during the privatization of state-owned enterprises. The govemment will reduce inter-sectoral inequity in severance payments by canceling special privileges to industries with relatively high benefit ratios, and making severance payments to individual workers based on the worker's prior earnings rather than the average industry wage. Participation in pre-lay-off services will be made a requisite for the receipt of severance pay in order to encourage higher utilization ofjob placement services among laid off workers, and facilitate their re- entry into the labor market. The government will increase credit access among displaced workers by establishing a legal framework for non-bank, micro-credit agencies to provide loans to small-borrowers who lack sufficient collateral to borrow from established banks. Second tranche release conditions include a report on the progress of social assistance programs. Tajikistan The government will reduce income uncertainty among the poor by preventing the Structural Adjustment Credit accumulation of arrears in the state budgets in the social sectors during the second (IDA: US$50 m.) half of fiscal 1998; ensuring the timely payment of salaries, pensions and social safety net payments; and submitting legislation to restructure the social protection system based on a national living standard survey. Privatizing the cotton marketing agency into private ginneries will increase competition among ginneries for cotton, reduce ginning tariffs and increase producer prices, thus helping to raise farm incomes and reduce rural poverty, as well as increase foreign exchange earnings. Prior to the second tranche release, the government will undertake a review of the expenditure composition for the social sectors in the 1999 state budget, and adopt a plan to restructure the social protection system. Latin America and the Caribbean Argentina The Repurchase Facility will enable the Central Bank of Argentina to engage in Special Repurchase Facility discount lending to domestic banks without expanding the money supply by Support Loan selling dollar-denominated government bonds to commercial banks with an option (IBRD: US$505 m.) to buy them back within 2 to 5 years. If a bank run occurs, the Central Bank will activate the Repurchase Facility and provide domestic banks with funds to pay deposit withdrawals and prevent a contraction in lending to private sector institutions, especially to small and medium enterprises which are the engines of job growth in the economy. The Special Repurchase Facility will prevent liquidity shocks from causing dramatic declines in investment and labor demand in the economy, and will therefore help to insulate the real incomes of the poor from macroeconomic shocks. Special Structural Adjustment Preventing liquidity crises is imperative to reducing poverty given that such crises 147 Annex F Loan or credit Poverty-related objectives Loan cause economic contractions which disproportionately hurt the poor through (IBRD: US$2,525.3 m.) reducing labor demand in small and medium enterprises and government expenditures on social services and safety nets. Key social service programs, including maternal and child health care and basic education, will be protected from budget cutbacks relative to fiscal 1998 allocations. The loan will also enable the government to continue providing temporary employment through public works projects in high poverty areas under the TRABAJAR program, and to improve the targeting of social service programs to the poor by developing a national poverty line standard and poverty mapping system. Merit-based scholarships will be provided to students from low-income families in order to encourage human capital development among the poor. The second and third tranche release conditions include the successful implementation of the social sector reforms outlined above. Brazil The loan will finance income support programs which target vulnerable groups, Social Protection Special Sector including the Bolsa Escola program which provides an income subsidy to poor Adjustment Loan parents who keep all their children in school; an income support program for the (IBRD: US$252.5 m.) working poor who do not qualify for unemployment insurance and are vulnerable to unemployment spells; and an income support program targeted to households with elderly and disabled members. The loan will also help to maintain the budgets of 22 core social safety net programs in the health, education and labor sectors at fiscal 1998 levels, despite deep cuts in the federal budget. The Brazilian government will encourage human capital development among the poor by placing a floor on funding of basic education and health services in order to reduce inequality in inter-state and inter-municipality expenditures, and enhancing the quality and effectiveness of basic education in low income municipalities by increasing non-salary expenditures on books, school lunches and health programs. Panama Using a new poverty map, the government will target social sector spending to Public Policy Reform vulnerable groups under its Poverty Reduction Strategy program. The government Adjustment Loan (PPRAL) will increase access to education among the poor by providing 5,099 new targeted (IBRD: US$61 m.) scholarships for primary and secondary education to poor children, and preparing 246 school centers in 185 of the poorest towns. Reforms will also remove key institutional constraints which suppress income growth among the poor by registering 39,000 lots which will enable the poor to use their land as collateral; financing road rehabilitation and the construction of 220 rural aqueducts and 10,600 latrines in low-income areas; and building 20 mini-irrigation works to benefit poor farmers. In order to reduce food and commodity prices, the government will reduce all import tariffs to a maximum of 15 percent ad valorem with the exception of tariffs on automobiles, milk and dairy productions. Reductions in tariffs will reduce food prices and benefit the poor, for whom food expenditures account for 68 percent of total consumption expenditures. The government will monitor changes in poverty and living conditions during the implementation of its Poverty Reduction Strategy program by preparing the Living Standards Measurement Survey of 2000, and by requiring each public institution responsible for social service delivery to identify target groups for each activity and to define quantitative result indicators each fiscal year. Peru In order to better insulate the incomes of the poor from sharp economic downturns, Second Financial Sector the government will protect spending on well-targeted social programs from Adjustment Loan budget cuts that would occur in the event of a crisis in 1999 or 2000. The (IBRD: US$300 m.) protected programs cover 14 percent of the government's total budget in fiscal 148 Annex F Loan or credit Poverty-related objectives 1999. A contingency plan for providing social protection during crises has also been developed. Financing for labor intensive public works (in select geographic areas and at low wage levels) will be triggered by a 18 percent quarterly decline in the terms of trade, a 12 percent drop in 3 consecutive months in collected revenues, or an increase of 3 percentage points in the quarterly poverty rate relative to the same period one year earlier. Middle-East and North Africa Morocco The adoption of pro-competitive measures in the telecom sector will put Telecommunications, Post, and downward pressure on the price of basic and advanced telephony services, foster Information Technology Sector innovation and network development, and increase the quality of Adjustment Loan telecommunications services to households and businesses. An explicit goal of the (IBRD: US$101 m.) loan will be to extend telecommunications services to poor areas by: implementing a pilot program in poor or remote areas of the Northern Provinces which will select the providers of telecom services based on competitive tenders; facilitating at least one new entrant in wireless telecommunications market; and awarding a second GSM license using various criteria, one of which is an agreement to provide cellular services in rural areas. Higher penetration of telecommunications, postal and informal technology services will facilitate business development in low income areas, and improve the quality of education and health services in remote parts of the country. Policy Reform Support Loan The government will provide targeted food subsidies to low-income groups while (IBRD: US$ 250 m.) reducing untargeted food subsidies and food import tariffs in order to free up budgetary resources for social expenditures. The government will restructure Promotion Nationale, a public works program that finances temporary jobs for unemployed skilled workers at below market wages, by increasing the proportion of programs in low income areas, and increasing the share of labor costs to over 60 percent of project financing. The government will promote social equity gains in the primary education and health sectors by constructing 4,500 rural classrooms, reducing gender and rural-urban disparities in primary school enrollment rates, extending health insurance coverage to low-income groups, and initiating a pilot redeployment of healthcare personnel to Morocco's poorest provinces. Yemen This is the first in a series of public sector management operations which aim to Public Sector Management increase economic growth and strengthen the quality and delivery of social Adjustment Credit services to the poor by reducing administrative discretion and enhancing budgetary (IDA: US$50 m.) planning. A package of institutional reforms--including streamlining public administration, reforming budget and financial management planning to operate within a medium-term expenditure framework, and implementing measures to increase tax revenues and tax compliance-will complement the government's efforts to improve the operation of key health and education facilities that provide services to the poor. The government will increase budgetary funds allocated for the operation and maintenance of health and education facilities in poor areas, thereby removing the main constraint to improving the quality of basic education and health services. Improved coordination between ministries during budget preparation will also ensure that social expenditures which benefit the poor will be prioritized. Sub-Saharan Africa Burkina Faso The government will implement critical tax, trade and budget reforms which will Economic Management Reform boost economic competitiveness and regional market access to agricultural 149 Annex F Loan or credit Poverty-related objectives Credit producers, and improve the programming and management of public expenditures (IDA: US$15 m.) in the health and primary education sectors. The government will shift its tax base away from distortionary tariff revenues by phasing in the West African Economic and Monetary Union (WAEMU) common external tariff, which will lower the maximum tariff rate from 31 percent to 20 percent and boost export growth in the mining and agricultural sectors-the latter of which has direct linkages with the incomes of the poor. Without increasing total expenditures as a share of GDP, the government will continue to reallocate fiscal resources to the health and primary education sectors until they have budget shares of 13 percent and 12 percent respectively. The credit will also support improvements in public expenditure planning at the sector and central levels to ensure adequate financing for the priority health and education sectors. Chad As the last of three policy-based lending operations envisaged in the 1996 country Third Structural Adjustment assistance strategy for Chad, this operation will implement a package of reforms Credit which will foster private sector development in key sectors, and likely increase the (IDA: US$30 m.) poverty impact of public expenditures. The government will make significant progress in expenditure switching in the 1998 and 1999 budgets in which it will increase appropriations for non-wage current expenditures in the education, health and social sectors by at least 20 percent in real terms, and will recruit 400 primary school teachers, 120 secondary school teachers, and 90 health service personnel while maintaining a freeze on recruitment in other ministries. Agricultural sector reforms will reduce price distortions which hurt small producers by increasing farmers' share of world cotton prices to 54 percent in 1998/99 from 49.5 percent in 1997/98 and lifting COTONTCHAD's monopsony purchasing power in the primary marketing of seed cotton, ginning and export marketing, which is expected to lead to an increase in producer prices and thus farm incomes. Ghana A balance of payments shortfall will be financed to support the government's Second Economic Reform efforts to maintain macroeconomic stability and implement a multi-sector reform Support Operation Credit strategy to enhance private sector and rural development. As a condition for the (IDA: US$178.2 m.) second tranche release, the government will increase cocoa farmers' share in the fob price to 65 percent in the 1999/2000 crop season and will allow licensed companies to export 30 percent of cocoa purchases. The cocoa sector reforms will raise the incomes and market access of smallholder producers and lift an estimated one million cocoa-producing household members out of poverty by the year 2005. Madagascar Reforms will foster private sector development and economic growth by reducing Second Structural Adjustment the state's role in key sectors through privatization, improving governance, Credit strengthening public finances by increasing revenues, and enhancing the poverty (IDA: US$ 100 m.) impact of expenditures. Actual recurrent non-salary expenditures for primary education and health will increase from 80 percent and 84 percent of the respective sectoral budgets in 1997, to a minimum of 90 percent in 1999 and 98 percent in 2000 for both sectors. In order to ensure that budget allocations in the primary health and education sectors are being properly executed and targeted to the poor, the government will adopt procedural changes which will reduce delays in budget disbursements from line ministries to the districts, and will monitor of the availability of books, general supplies and medicines in schools and clinics on a quarterly basis. The conditions for the second and third tranche releases include the creation of an expenditure monitoring system in the health and basic education sectors. 150 Annex F Loan or credit Poverty-related objectives Malawi Inequities in actual budget executions which have disfavored the poor in the past Second Fiscal Restructuring and will be reduced through expenditure and civil service reform, and improved Deregulation Program targeting of public expenditures to the poor. The government will adopt poverty- (IDA: US$92 m.) focused expenditure switching measures which include: holding fiscal 1998 expenditures constant in real terms at 1997 levels; implementing expenditure cuts in non-priority areas; and introducing a system to monitor wage and current expenditure targets on a monthly basis. In order to reduce consumer prices and increase economic competitiveness, the government will reduce tariffs on final consumption goods from 35 percent to 30 percent in fiscal 1999. The government will help to boost farm incomes and improve income distribution in the economy by widening the price band at which the government purchases maize from smallholders, and retrenching from maize marketing activities to allow for private sector entry. Conditions attached to the second tranche include meeting agreed upon public expenditure targets in the first two quarters of fiscal 1998. Niger Supported reforms aim to increase the equity and efficiency of public spending, Public Finance Reform Credit and include measures to increase tax revenues and streamline budget and public (IDA: US$64 m.) service management. The government will remedy the acute shortage of operating supplies in the education and health sectors, and improve the quality of physical facilities and equipment, in attempt to increase the quality and utilization of public health and education services in rural areas. Specific actions supported by this operation include the recruitment of additional primary school teachers, an increase in non-wage expenditures for the health sector by 5 percent in real terms, and an increase in the budgetary allocation for educational materials. Prior to the release of the second tranche, the government must present a 1999 budget which is consistent with promised social sector spending levels. Prior to the third tranche release, the government will take steps to ensure that expenditure management is transparent by presenting to Parliament the results of an expenditure audit. Rwanda Legal and institutional changes in the agricultural sector and labor market will Economic Recovery Credit foster economic growth and help to reduce rural poverty. The government will (IDA: US$75 m.) help to boost agricultural productivity in the smallholder sector by adopting a land law that will increase land tenure security among smallholders; implementing a market-based distribution system for fertilizers, high-yielding seed varieties, and other inputs (thus increasing their availability in remote areas); and privatizing parastatal tea estates and factories into smallholder plots and private holdings. Amendments to the labor code will reduce labor costs by eliminating restrictions on firing and consolidating sectoral minimum wages into one national minimum wage, and will remove provisions that discriminate against women. As a condition for the third tranche release, the government will amend the civil code to give women equal inheritance and property rights-thereby protecting them from structural poverty-and will sensitize the population to these legal changes through a public awareness campaign. The poor will benefit from an increase in the share of social sector spending in recurrent budget allocations to 37 percent in 1999 and 40 percent in 2000. Prior to the release of the second tranche of the loan, the government must demonstrate that actual spending on basic health and education in 1999 match budgetary allocations. Zambia The Zambian government will foster private sector development and reduce Public Sector Reform and Export widespread poverty by implementing civil service pay reform, privatizing state Promotion Credit owned enterprises, and improving social service delivery to the poor. While (IDA: US$170 m.) overall public spending is reduced, the government will maintain budgetary 151 Annex F Loan or credit Poverty-related objectives allocations to the key social sectors at 36 percent of the discretionary budget, and spending on seven specific budget categories of non-personnel spending in the areas of health, education and social welfare. In order to ensure the effective delivery of services to the poor, actual expenditures in the social sectors will be monitored by line ministries. Based on the findings of the National Food and Nutrition Commission supported by the ESAC II operation, the government will put into place new arrangements for implementing child nutrition programs. The Public Welfare Assistance Scheme (PWAS), the main safety net for the poor, will be improved to better target the poor by revamping the program's eligibility criteria and operational guidelines. Prior to the second tranche release, actual spending on social services must be consistent with prior expenditure agreements at the time of the 1999 program review. 152 ANNEX G. POVERTY-FOCuSED ERLs, FISCAL 1999 Emergency Recovery Loans (ERLs) are designed to Hurricane reconstruction ERLs to Honduras and provide immediate assistance after major calamities flood relief support to Turkey and Bangladesh such as wars, civil disturbances or natural disasters. totaling US$769 million, which financed the quick They are usually identified, prepared, and approved import of key goods associated with rebuilding quickly, and completed within a short period of time, infrastructure assets and reestablishing production normally three years. Although considered to be levels but did not meet the specific criteria of a projects and, by convention, included in the Bank's poverty-focused operation. Though not targeted at investment lending total, ERLs are different from the poor, measures supported by these operations regular investment operations in objective and would help curb inflation, ensure adequate supply of format. Some ERLs provide critical balance of key inputs and food grain stocks, facilitate the payments support and help to lay the foundation for resumption of agricultural activities, and restore basic implementing economic reforms while others support infrastructure-all of which will minimize the programs to reform social sector expenditures and to adverse effects of these disasters on the living strengthen safety nets. By their very design, it is not conditions of the poor. The ERLs which did meet the feasible to apply the poverty criteria for investment poverty-focused criteria will finance post-flood lending to ERLs. ERLs by nature resemble repairs to basic water, sanitation and road adjustment operations more than investment projects; infrastructure in rural areas of Tajikistan, and finance thus, the poverty criteria established for adjustment critically needed commodities, including medicine operations also apply to ERLs. The Bank approved and basic foodstuffs, after the devastating hurricane 12 Emergency Recovery Loans in fiscal 1999, 4 of Georges in the Dominican Republic. Table G-l which were poverty-focused. The decline in the presents the number and amount of lending for percent of ERLs with a poverty focus from 89 poverty-focused ERLs for fiscal 1992-1999. Table percent to 33 percent between fiscal 1998-1999 is G-2 describes the poverty-focused ERLs for fiscal largely explained by the nature of large post- 1999. Table G-1. Poverty-focused ERL lending, fscal 1992-1999 Lending FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 Poverty-focused ERL lending (US$ millions) 16.0 285.0 13.1 - 100.0 97.5 316.0 144.7 Total ERL lending (US$ millions) 316.0 840.2 387.1 240.0 110.0 170.6 516.0 1,118.7 Percentage of ERL lending 5 34 3 - 91 57 61 13 Total number of poverty-focused ERLs I I I - 1 5 8 4 Total number of ERL operations 3 8 3 4 3 8 9 12 Percentage of poverty-focused ERLs 33 13 33 - 33 63 89 33 IDA Poverty-focused ERL lending (US$ millions) 16.0 - 13.1 - - 97.5 101.0 19.5 IDA ERL lending (US$ millions) 316.0 142.1 259.1 90.0 10.0 170.6 101.0 569.5 Percentage of IDA ERL lending 5 - 5 - - 57 100 3 Total number of IDA poverty-focused ERLs I - I - - 5 5 2 Total number of IDA ERL operations 3 3 2 2 2 8 5 7 Percentage of IDA poverty-focused ERLs 33 - 50 - - 63 100 29 Source: World Bank. 153 Annex G Table G-2. Poverty-focused ERLs, fiscal 1999 Loan or credit Poverty-related objectives Europe and Central Asia Tajikistan Following the severe floods in April-May 1998, the repair and reconstruction of Emergency Flood Assistance transport infrastructure (roads, bridges, embankment protections), as well as other Project infrastructure (dikes, irrigation systems, small rural hydropower plants, water supply (IDA: US$5 m.) systems) will be supported using labor-intensive methods. This will help restore the livelihood of rural communities, the majority of whom are poor. Latin America and the Caribbean Dominican Republic Multi-sector investments will help to restore agricultural production and economic Hurricane Georges Emergency activity in hurricane affected areas. The quick disbursing component of this loan Recovery Project will finance the imports of a short list of critically needed commodities and inputs, (IBRD: US$ 111.1 I m.) including: medicines, basic foodstuffs (wheat, cooking oil and powdered milk), chemical products and housing construction materials. Investment financing will also support the reconstruction of bridges, highway sections, and irrigation and electricity infrastructure damaged by hurricane Georges. Although the loan will benefit the population in general, lowest income groups will benefit in particular as they live in the marginal areas which were hardest hit by the storm, and in which the reconstruction efforts will be concentrated. Guyana Approximately 63,000 people will benefit from increased access to potable water as El Nino emergency Assistance a result of the restoration and construction of water infrastructure in marginal urban Project and remote hinterland and riverine communities. Consumers in low-income areas of (IDA: US$9 m.) the North Ruimveldt, who are at the extreme end of the distribution system and normally do not receive water during droughts and low flow periods, will be the primary beneficiaries of the water restoration works. A separate component will help to protect against water insecurity and the loss of potable water access in drought vulnerable and affected areas by financing the drilling of wells and the installation of water pumps and storage tanks. The rehabilitation of damaged irrigation trench walls, sluice doors and control devices will ensure farmers have a reliable source of water for irrigation and drainage necessary to grow rice, sugar- cane and other cash crops. Organization of Eastern OECS countries suffered major damage when hit by Hurricane Georges in 1998. The Caribbean States program will reconstruct and rehabilitate infrastructure including hospitals, shelters, Emergency Recovery and and water supply systems. An emergency operations center for disaster mitigation Disaster Management Program will be constructed, emergency preparedness and response systems, including Early (IBRD: US$14.1 m., IDA: Warning Systems, will be strengthened, and community-level disaster committees US$5.5 m.) will be organized, trained and equipped. The program will benefit many lower income groups, as it will finance the protection of dwellings and commercial properties in the most risk-prone areas, which are often inhabited by poorer sections of the population. In St. Kitts, housing reconstruction will be targeted to lower income people. Components: Dominica, St Kitts and Nevis, and St. Lucia: 41 percent; St. Vincent: 22 percent; Contingency Funding: 37 percent. 154 ANNEX H. ANNUAL LENDING TO SELECTED SECTORS, FISCAL 1999 While all World Bank lending is intended to help Within the human capital development sector, while reduce poverty, lending to certain sectors supports there has been a steady increase in the volume of the efforts of governments to reduce poverty more lending allocated to population, health and nutrition directly. The human capital development, agriculture, (PHN) programs and social protection since the early water supply and sanitation sectors contain a higher eighties, lending to the PHN sectors have leveled off percentage of projects with elements that directly while lending to social protection has increased benefit and target the poor. As shown in Figure H-l, dramatically in more recent years. Although the average lending for human capital development volume of lending to the education sector has increased almost seven-fold in dollar terms between fluctuated slightly, the overall trend shows about a the early 1980s and fiscal 1999. The share of total threefold increase between fiscal 1982 and 1999. Bank lending to these sectors increased from an average of 5 percent during fiscal 1982-1984 to an Between fiscal 1994-1996 and fiscal 1997-1999, the average of 19 percent during fiscal 1997-1999 (for average share of lending to the agricultural and rural IDA, the share increased from 8 percent to 28 development sector was constant at 12 percent, and percent) (see Table H-1). In recent years, the share for the water and sanitation sector there was a slight of lending to the human capital development sectors decline from 4 percent to 3 percent. Table H-2 has remained steady at 19 percent between fiscal provides data from these selected sectors on an 1994-1996 and fiscal 1997-1999. annual basis for the last eight fiscal years. Figure H-l. Trends in lending for human capital development,fiscal 1982-1999 6,000 '. E Hu000 "- aita1 . I e P.' i`- Educt1ori * . 1he0' . . .e 5,000 -*s; 4972&. -' ecUo' t 400 0 2,000 2,000 -k FY82-84 FY85-87 FY88-90 FY91-93 FY94-96 FY97-99 Fiscal Year Source: World Bank. 155 Annex H Table H-i. Average lending to selected sectors,fiscal 1982-1999 FY82-84 FY85-87 FY88-90 FY91-93 FY94-96 FY97-99 World Bank (IBRD and IDA) lending (US$ millions) Human capital development 732.5 963.6 1,680.8 3,466.9 4,166.2 4,972.4 Education 600.1 738.7 1,064.4 1,866.5 1,959.0 1,830.3 Population, health & nutrition 132.5 221.5 569.9 1,148.8 1,446.8 1,339.4 Social protection - 3.3 46.5 451.6 760.4 1,802.8 Agriculture 3,436.7 3,759.4 3,761.2 3,090.2 2,612.0 3,020.7 Water supply & sanitation 631.0 795.7 730.2 1,098.6 855.5 662.8 Total Bank lending 14,338.4 16,125.7 20,429.7 22,695.7 21,570.0 25,578.3 As share of total Bank lending (percent) Human capital development 5 6 8 15 19 19 Agriculture 24 23 18 14 12 12 Water supply & sanitation 4 5 4 5 4 3 IDA lending (US$ millions) Human capital development 271.9 421.3 834.6 1,715.5 1,757.0 1,759.2 Education 186.7 316.7 538.2 752.8 725.3 665.5 Population, health & nutrition 85.1 101.3 267.1 598.6 675.9 782.2 Social protection - 3.3 29.3 364.1 355.8 311.6 Agriculture 1,222.0 1,141.0 1,514.5 1,317.0 1,325.7 1,003.0 Water supply & sanitation 104.0 166.3 171.4 370.7 164.4 219.9 Total IDA lending 3,200.7 3,218.0 4,971.4 6,531.5 6,375.1 6,313.8 As share of total IDA lending (percent) Human capital development 8 13 17 26 28 28 Agriculture 38 35 30 20 21 16 Water supply & sanitation 3 5 3 6 3 3 Note: The data are for average annual lending during the three-year period indicated. The World Bank's fiscal year runs from July I of the previous year to June 30 of the year indicated. Three-year moving averages have been reported since the first Progress Report on Poverty in fiscal 1992 to smooth out year-to-year fluctuations. Because of a recent sector reclassification of projects, some numbers may differ from those reported in earlier tables. Note that these sectors do not account for all poverty-focused lending; projects in such sectors as urban development and transport also have components designed to help reduce poverty. a. Social protection lending includes employment, social assistance, social insurance, and social investment funds. Source: World Bank. 156 Annex H Table H-2. Annual lending to selected sectors,fiscal 1992-1999 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 World Bank (IBRD and IDA) lending (US$ millions) Human capital development 2,715.4 3,884.3 3,241.0 4,204.1 5,053.6 3,327.5 6,460.2 5,129.6 Education 1,666.5 1,871.2 2,119.2 2,052.2 1,705.7 1,017.4 3,129.3 1,344.2 Population, health and nutrition 922.1 1,228.6 885.7 1,101.2 2,353.4 920.4 1,990.9 1,106.8 Social protectiona 126.8 784.5 236.1 1,050.7 994.5 1,389.7 1,340.0 2,678.6 Agriculture 3,209.9 2,902.8 3,551.8 2,205.3 2,078.9 3,562.5 2,691.9 2,807.8 Water supply and sanitation 786.4 1,283.9 975.2 981.5 609.8 682.8 552.9 752.7 Total Bank lending 21,705.7 23,695.9 20,836.0 22,521.8 21,352.2 19,146.7 28,594.0 28,994.1 As share of total Bank lending (percent) Human capital development 13 16 16 19 24 17 23 18 Agriculture 15 12 17 10 10 19 9 10 Water supply and sanitation 4 5 5 4 3 4 2 3 IDA lending (US$ millions) Human capital development 1,297.8 2,139.5 1,245.1 1,828.2 2,197.6 1,015.7 2,687.0 1,575.0 Education 561.3 970.2 619.3 771.6 784.9 255.1 1,201.5 539.8 Population, health and nutrition 615.1 541.8 519.7 649.9 858.2 674.6 1,079.4 592.5 Social protectiona 121.4 627.5 106.1 406.7 554.5 86.0 406.1 442.7 Agriculture 1,219.2 1,084.0 1,520.0 1,352.0 1,105.1 751.9 1,236.9 1,020.1 Water supply and sanitation 297.4 395.4 103.2 309.2 80.7 302.4 114.3 242.9 Total IDA lending 6,549.7 6,751.4 6,592.1 5,669.2 6,864.1 4,621.8 7,507.8 6,811.8 As share of total IDA lending (percent) Human capital development 20 32 19 32 32 22 36 23 Agriculture 19 16 23 24 16 16 16 15 Water supply and sanitation 5 6 2 5 1 7 2 4 Note: The World Bank's fiscal year runs from July I of the previous year to June 30 of the year indicated. These sectors do not account for all poverty-focused lending; projects in such sectors as urban development and transport also have components designed to help reduce poverty. See World Bank Annual Report 1999 for further details on sector lending. Because of a recent sector reclassification of projects, some numbers may differ from those reported in earlier tables. a. Social protection lending includes employment, social assistance, social insurance, and social investment funds. Source: World Bank. 157 ANNEXI. HOUSEHOLD SURVEYA VAIL4BILITYBYREGION AFRICA Country Population No. of Any No. of openly Year of most Fiscal Year of last Years of (in mills)' budget comparable accessible recent Poverty Demographic and surveys2 surveys?2 surveys' survey2 Assessment' Health Surveys4 Angola 12 2 No 0 1995 - - Benin 6 3 - 0 1996 1994 1996 Botswana 2 1 - 1985-86 - 1988 Burkina Faso 11 3 No 0 1998 - 1993 Burundi 6 2 No - 1998 1999 1987 Cameroon 14 1 - - 1996 1995 1991, 1998 Central African R. 3 2 No 0 1995-96 - 1994 Chad 7 2 No - 1995-96 1998 1996 Congo 3 1 - - 1989 1997 - Congo, DR 47 2 - 1990-91 - - C6te D' Ivoire 14 7 Yes 0 1996 1997 1994 Eritrea 4 - - - 1996 1995 Ethiopia 60 2 Yes 1997 1993 - Gabon I I - - 1994 1997 Gambia, The 1 4 Yes 0 1993-94 1993 - Ghana 18 5 Yes 4 1999 1995 1988, 1993 Guinea 7 2 - 2 1994-95 1997 - Guinea-Bissau 1 2 - 1 1993-94 1994 - Kenya 29 3 Yes 0 1997 1995 1993, 1998 Lesotho 2 3 Yes - 1995 1996 - Liberia 3 - - - - - 1986 Madagascar 14 2 No 0 1997 1996 1992, 1997 Malawi 10 2 No 0 1992-93 1996 1992, 1996 Mali 10 3 No - 1996 1993 1995 Mauritania 3 5 - 0 1995-96 1995 - Mauritius 1 2 - - 1991-92 1995 - Mozambique 17 1 - - 1991-92 1991 1997 Namibia 2 1 - - 1993-94 1993 1992 Niger 10 4 - 0 1996 1996 1992, 1998 Nigeria 118 6 Yes - 1996-97 1996 1990 Rwanda 8 1 - - 1993-94 1998 1992 Senegal 9 4 No 0 1996 1995 1986, 1992, 1997 Sierra Leone 5 2 - - 1989-90 1993 - South Africa 41 1 No 1 1993-94 - - Sudan 28 - - - - - 1989 Tanzania 31 2 - 2 1993-94 1996 1991, 1994, 1996 Togo 4 2 - - 1996 1996 1988, 1998 Uganda 20 6 Yes 3 1996 1993 1988, 1995 Zambia 9 6 Yes 5 1998 1995 1992, 1996 Zimbabwe 1 2 1 - 1990-91 1995 1994 Source of information: World Development Indicators 1999, World Bank. 2 Includes income and expenditure surveys, integrated household surveys and any other survey collecting income/ consumption data. Source of information: 1998 Census of Household Surveys, World Bank and Africa Household Surveys Databank, World Bank. 3 Source of information: Annex C. 4 Source of information: Demographic and Health Surveys web site (www.macroint.com/dhs/). Comments: 1. This listing of household surveys is not exhaustive, as many surveys are implemented without intervention from the Bank. Moreover, the 1998 Census of Household Surveys was not able to collect any information on Eritrea, Liberia and Sudan. 2. For another six countries (Congo, Democratic Republic of Congo, Gabon, Mauritius, Mozambique, Namibia), we have no information on whether the household surveys that were conducted collected any information on income and consumption. 3. For eight countries, the last survey recorded in the Poverty Monitoring database was conducted more than five years ago, before 1994. 4. Comparable surveys over time appear to be available for only nine countries. 5. Only seven countries appear to have openly accessible data. 158 Annex I EAST ASIA AND PACIFIC Country Population No. of Any No. of Year of most Fiscal Year Years of (in mills)l budget comparable openly recent of last Demographic surveys2 surveys?2 accessible survey2 Poverty and Health surveys2 Assessment3 Surveys4 Cambodia I1 2 Yes 2 1997 - - China 1,227 Series Yes 0 1998 1992 Hong Kong 7 1 Yes 0 1994 - - Indonesia 200 10 Yes 10 1999 1994 1987, 1991, 1994, 1997 Korea DR 23 - - - - - Korea Rep 46 1 Yes 1 1995 Laos 5 2 No 0 1997-98 1996 Malaysia 22 6 Yes 0 1999 1991 Mongolia 3 5 Yes 0 1996 1996 Myanmar 44 1 - 1997 - Papua New Guinea 5 2 No 1 1996 - - Philippines 74 5 Yes 5 1997 1996 1993, 1998 Singapore 3 1 Yes 0 1992-93 Thailand 61 8 Yes 3 1998 1997 1987 Vietnam 77 2 Yes 2 1998 1995 1997 I Source of information: World Development Indicators 1999, World Bank.. 2 Includes income and expenditure surveys, integrated household surveys and any other survey collecting income/ consumption data. Source of information: 1998 Census of Household Surveys, World Bank and Poverty Monitoring Database, World Bank. 3 Source of information: Annex C. 4 Source of information: Demographic and Health Surveys web site (www.macroint.com/dhs/). Comments: 1. Except for the Democratic Republic of Korea (North Korea) some survey data with information on income and/or consumption exist for all other countries in the region, covering 99% of the population. 2. Comparable surveys exist for at least II of the 15 countries (including China), covering 96% of the region's population. Excluding China from the count, comparable surveys exist for 87% of the population. 3. Open access to survey data is problematic as elsewhere. There appears to be open access to survey data only for 7 countries- Cambodia, Indonesia, Papua New Guinea, the Philippines, South Korea, Thailand and Vietnam, accounting for 26% of the region's population. 159 Annex I EUROPE AND CENTRAL ASIA Country Population No. of Any No. of openly Year of Fiscal Year Years of (in mills)l budget comparable accessible most recent of last Demographic surveys2 surveys?2 surveys2 survey2 Poverty and Health Assessment3 Surveys4 Albania 3 1 No 0 1996 1997 4 4 - 3 1996 1999 Azerbaijan 8 1 No 1 1995 1997 Belarus 10 4 Yes - 1998 1996 Bosnia & Herzegovina 2 1 Yes 1 1997 - Bulgaria 8 2 Yes 1 1997 1999 Croatia 5 1 No 1 1998 - Czech Republic 10 I Yes - 1993 - Estonia 2 2 Yes 0 1995 1996 Georgia 5 1 No 1 1997 1999 Hungary 10 I Yes 0 1993 1996 Kazakhstan 16 1 No 0 1996 1998 1995 Kyrgyz Republic 5 4 Yes 1 1997 1999 1997 Latvia 3 1 No 0 1995-96 - Lithuania 4 1 Yes 1 1996 Macedonia 2 11 Yes 7 1997 1999 Moldova 4 1 No 1 1996 - Poland 39 1 Yes 0 1995 1995 Romania 23 2 Yes - 1997 1997 Russia 147 2 Yes 2 1994-98 1999 Slovak Republic 5 1 Yes - 1993 - Slovenia 2 1 Yes - 1993 - Tajikistan 6 1 No - 1999 - Turkey 64 2 Yes - 1998 - 1993 Turkmenistan 5 2 Yes 1998 - Ukraine 51 2 Yes 2 1996 1996 Uzbekistan 24 - - - - - 1996 Yugoslavia 11 - - - - - Source of information: World Development Indicators 1999, World Bank. 2 Includes income and expenditure surveys, integrated household surveys and any other survey collecting income/ consumption data. Source of information: 1998 Census of Household Surveys, World Bank and Poverty Monitoring Database, World Bank. 3 Source of information: Annex C. 4 Source of information: Demographic and Health Surveys web site (www.macroint.com/dhs/). Comments: 1. The 1998 Census of Household Surveys was not able to collect any information on surveys in the Czech Republic, Slovak Republic, Slovenia, and Yugoslavia. 2. Comparability between surveys is a matter of concern. 3. As in other regions, open access to survey data is rather problematic. Some data is openly accessible for less than half of the countries in the region (12 out of 28). 160 Annex I LATIN AMERICA AND CARIBBEAN Country Population No. of Any No. of Year of most Fiscal Year Years of (in mills)l budget comparable openly recent survey2 of last Demographic surveys2 surveys? 2 accessible Poverty and Health surveys2 Assessment3 Surveys4 Argentina 36 30 Yes - 1998 1995 - 8 8 Yes 6 1996-97 1996 1989, 1994, 1997 Brazil 164 13 Yes - 1997 1995 1986, 1991, 1996 Chile 15 10 Yes - 1996 1998 - Colombia 40 7 Yes - 1996 1995 1986, 1990, 1995 Costa Rica 4 11 Yes 1 1996 1997 - Cuba 11 - - - - - Dominican Rep. 8 2 Yes - 1997-98 1995 1986, 1991, 1996 Ecuador 12 13 Yes - 1998 1996 1987 El Salvador 6 8 Yes - 1997 1994 1985 Guatemala 11 2 Yes - 1989 1995 1987, 1997 Haiti 8 1 No 0 1995 1999 1995 Honduras 6 8 Yes 1 1996 1995 - Jamaica 3 12 Yes - 1997 1994 - Mexico 94 6 Yes - 1996 1991 1987 Nicaragua 5 4 Yes 2 1998 1995 1998 Panama 3 6 Yes 1 1997 1999 - Paraguay 5 15 Yes 0 1997-98 1994 1990 Peru 24 8 Yes 6 1997 1999 1986, 1992, 1996 Trinidad &Tobago 1 2 Yes 0 1998 1996 1987 Uruguay 3 5 - - 1996 1993 - Venezuela 23 16 Yes 0 1996 1991 Source of information: World Development Indicators 1999, World Bank. 2 Includes income and expenditure surveys, integrated household surveys and any other survey collecting income/ consumption data. Source of information: 1998 Census of Household Surveys, World Bank and Latin America and the Caribbean Inventory of Household Surveys, World Bank. 3 Source of information: Annex C. 4 Source of information: Demographic and Health Surveys web site (www.macrointcom/dhs/). Comments: 1. For only one country in the region (Cuba), the Census has no information. 2. Open access to survey data is very infrequent. Data is openly accessible for less than one-third of the countries in the region (6 out of 22). 161 Annex I MIDDLE EAST AND NORTH AFRICA Country Population No. of budget Any No. of Year of Fiscal Year Years of (in mills)l surveys2 comparable openly most recent of last Demographic surveys?2 accessible survey2 Poverty and Health surveys2 Assessment3 Surveys4 Algeria 29 2 No 0 1995 1999 Egypt 60 6 Yes 1 1997 1992 1988, 1992, 1995, 1997 Iran 61 1 - 0 1994-95 - Iraq 22 - - - - -- Jordan 4 3 Yes 0 1997 1995 1990, 1997 Kuwait 2 2 Yes 1 1999 - - Lebanon 4 2 Yes 0 1997 Libya 5 - - - - - Morocco 27 3 Yes 1 1998 1994 1987, 1992, 1995 Oman 2 - - - - - Saudi Arabia 20 Syrian Arab Rep 15 - - - - - Tunisia 9 2 Yes 0 1995-96 1996 1988 West Bank & Gaza 3 3 Yes 2 1997 - - Yemen 16 2 Yes 1 1998 1996 1991 Source of information: World Development Indicators 1999, World Bank. 2 Includes income and expenditure surveys, integrated household surveys and any other survey collecting income/ consumption data. Source of information: 1998 Census of Household Surveys, World Bank and Poverty Monitoring Database, World Bank. 3 Source of information: Annex C. 4 Source of information: Demographic and Health Surveys web site (www.macroint.com/dhs/). Comments: 1. For five countries (Iraq, Libya, Oman, Saudi Arabia, Syria) the Census has no information at all in the database. 2. While none of the Egyptian data from the official statistical agency, CAPMAS, are available, there is one data set from an IFPRI survey in Egypt that is openly available. 162 Annex I SOUTH ASIA Country Population No. of Any No. of openly Year of Fiscal Year of Years of (in mills)l budget comparable accessible most recent last Poverty Demographic and surveys2 surveys?2 surveys2 survey2 Assessment3 Health Surveys4 Bangladesh 124 2 Yes 0 1995-96 1998 1993, 1996 India 962 series Yes All 1997 1998 1992 Nepal 22 4 No 1 1995-96 1999 1987, 1996 Pakistan 129 7 Yes 3 1996-97 1996 1991 Sri Lanka 19 3 Yes 0 1996-97 1995 1987 Source of information: World Development Indicators 1999, World Bank. 2 Includes income and expenditure surveys, integrated household surveys and any other survey collecting income/ consumption data. 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