41350 IDA15 IDA'SRole inEnhancingCountry-Level Effectiveness: StrengtheningHarmonization andAlignment InternationalDevelopment Association Operations Policy and Country Services (OPCS) October 2007 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy CPIA Country Policy and InstitutionalAssessment DAC Development Assistance Committee EC European Commission ESW Economic and Sector work DFID Department for InternationalDevelopment GDP Gross domestic product HLF High-Level Forum IDA InternationalDevelopment Association IMF InternationalMonetary Fund KPI Key Performance Indicator MDB Multilateral development bank MDGs Millennium Development Goals MEFF MultilateralEffectiveness Framework MOU Memorandumof Understanding MTEF Medium-ternexpenditureframework OECD Organizationfor Economic Co-operation and Development PBA Program-based approach PEFA Public Expenditureand Financial Accountability PFM Public financial management PIU Project implementation unit PRS Poverty reduction strategy PRSC Poverty reduction support credit PRSP Poverty Reduction Strategy Paper QAG Quality Assurance Group UN UnitedNations IDA'SROLEINENHANCING COUNTRY-LEVEL EFFECTIVENESS: STRENGTHENINGHARMONIZATION ALIGNMENT AND CONTENTS ExecutiveSummary.......................................................................................................................... i I. Introduction.............................................................................................................................. 1 I1. MonitoringAid Effectiveness Actions .................................................................................... 2 I11. Progressand Challenges inImplementingAid Effectiveness Actions ................................... 5 IV. IDA as a Platform-Initiatives and ImplementationChallenges.......................................... 22 V. IDA Corporate Actions to Strengthen HarmonizationandAlignment ................................. 29 Annex A An Analysis o f Performance on Alignment and Harmonization................................ . 35 Annex B. Harmonizationand Alignment Plan(IDA14 mid-term review) ................................. 41 Tables Table 1 Table 2.. Paris Declarationindicators: IDA performance compared to the donor average.........3 11 Volume o f total IDA program-based lending............................................................. Proportiono f PRSCs undertaken incoordination with other donors ......................... Table 3. 19 Table 4. ESW prepared incoordination with country and/or donors....................................... 20 Figures Figure2. Figure 1. Aggregate harmonizationand alignment performance. IDA vs. other donors ............4 Progresstoward operational development strategies: 2007 compared to 2005 ............6 Figure 3. 8 Figure4. Client Survey Feedback on Ownership......................................................................... U s e of country financial management systems in four categories .............................. 12 Figure 5. Amount o f financial support per parallel PIU............................................................. 13 Figure 6. 14 Figure 7. Client Survey Feedback on Alignment ....................................................................... Share of staff located incountry offices ..................................................................... 15 Figure 8. DFIDMEFFassessmentofIDA's performance inalignment.................................... 16 Figure 9. Client Survey Feedback on Collaboration with Other Development Partners ...........21 Figure 10. DFIDMEFFassessmentof IDA's performance inharmonization............................ 21 Text Boxes Box 1. Supporting the preparation o fpoverty reduction strategies inMozambique and Senegal.8 Box 2. Supporting financial management inGhana..................................................................... 10 Box 3. Partnership for budget support inNicaragua .................................................................... 11 Box 4. Examples of impact of decentralization on alignment and harmonization....................... 14 Box 5 Supporting harmonizationinYemen................................................................................ . 16 Box 6. Tanzania's Joint Assistance Strategy................................................................................ 19 Box 7. Examples of country-level harmonization with regional development banks..................23 Box 8. Partnership with the Export-Import Bank o f China.......................................................... 25 IDA'SROLEINENHANCING COUNTRY-LEVEL EFFECTIVENESS: STRENGTHENINGHARMONIZATION ALIGNMENT AND EXECUTIVE SUMMARY i. This paper responds to IDA Deputies'request for an analysis ofprogress in harmonization and alignment, as part o f the discussion o f the effectiveness o f IDA's assistance at the country level. It builds on the paper Harmonization and Alignmentfor Greater Aid Effectiveness: An Update on Global Implementation and the Bank's Commitments, which was discussed inNovember 2006 with the Executive Directors and with IDA Deputies during the IDA14 Mid-TermReview. That paper showed that the Bank and IDA have been part of the leadership in promoting the international aid effectiveness agenda and are making substantive contributions to progress in harmonization and alignment at the country level. It also identified areas in which the Bank and IDA could further improve their aid effectiveness and actions to address them. Since then, implementation and monitoring o f those actions have continued. This paper analyzes the new developments; assesses their implications at the country, institutional, and global levels; and identifies additional actions IDA i s taking to strengthen its role in and contribution to aid effectiveness. Progress in managing for development results, which is also part of the Paris Declaration agenda, the status o f IDA's two-tier results measurement system, and the lessons o f implementing results management in IDA are discussed ina companionIDA paper.2 Implementationof Aid EffectivenessActions is BetterMonitored .. 11. In recent years an international consensus-supported by active IDA engagementand leadership-has emergedto strengthen the quality of development assistance. This consensus is framed by the international commitments made under the Monterrey Consensus (2002) and the Rome (2003) and Paris Declarations (2005), and reinforced by the International Roundtables on Results at Marrakech (2004) and Hanoi (2007). Following up on these commitments, partner countries and donors are drawing on a diverse menuo f actions to improve aid effectiveness. A number o f these actions are being captured through surveys and evaluations. ... 111. One key survey is part of the internationallyagreed monitoringframework to measureprogressin implementinggood practice principlesfor aid effectivenessand development impact embodied in the Paris Declaration. The results of the 2006 baseline monitoring survey o f the 12 indicators inthe Paris Declaration, published earlier this year by the OECD-DAC,3 show that alignment and harmonization actions are being undertaken in a growing number o f countries. However, in half o f the surveyed countries, progress i s limited and countries and development partners still have many 1 See Harmonization andAlignmentfor Greater Aid Effectiveness: An Update on Global Implementation and the Bank's Commitments(R2006-0193),November2,2006. Focus on Results: TheIDA14 ResultsMeasurementSystem and Directionsfor IDA15, October 2001. See 2006 Survey on Monitoring theParis Declaration - Overview of the Results, OECD-DAC, 2007. - 11 - opportunities to improve country-level effectiveness. These results, along with those o f the forthcoming World Bank report Results-BasedNational Development Strategies and other reviews, make it clear that continued attention to aid effectiveness work i s needed at the country, institutional, and international levels. IDA PerformsWell, Thoughwith Areas for Improvement iv. The core of IDA's strategy for fostering ownership, alignment, and harmonizationat the country levelis to establish a supportive policy, incentive, and proceduralframework at the institutionallevel, augmented by corporate oversight through internal review and monitoring. In recent years the Bank has made substantial changes in its operational policies and procedures, described in detail in the November 2006 report and in other previous reports. The Bank has also undertaken substantial efforts with other multilateral development banks (MDBs), the UN system, the European Commission, and other donors to enhance collaboration, reduce transaction costs for clients, and thus increase effectiveness. v. Harmonization and alignment actions at the country level bring benefits to clients. Key aspects o f implementing the Bank's commitments on alignment are basing IDA assistance programs on countries' poverty reduction strategies and using IDA programs to help countries strengthen the policies, plans, and institutions needed for development. IDA Results-based Country Assistance Strategies emphasize defining realistic results chains, aligning with the country's long-term vision and priorities, and coordinatingwith other donor partners on major elements o f strategy. vi. IDA's country-levelharmonizationactions are many and growing, reflecting country and sector strategies and priorities identified with clients and partners. Contributions include providing analytic leadership in developing common performance assessment frameworks, coordinated budget support, and sector-wide approaches; participating in division o f labor exercises and common arrangements for project and program management; sharing information on IDA programs; performingjoint diagnostic work and working closely with other donors on joint or collaborative assistance strategies; respecting governments' mission-free periods, and co-chairing donor meetings. Disseminating goodpractice from one country team to another is also a crucial part o f IDA'Simplementation strategy. vii. IDA supports division of labor at the country level through country-led selectivity, includingtaking more frequently a supporting rather than leading role among developmentpartners. Improved division of labor is an important objective of the harmonizationagenda. There i s a large potential to reduce transaction costs for both partner governments and development agencies from actions inthis area. IDA's current approach to an effective division o f labor i s grounded in efforts for enhanced selectivity in country assistance strategies. Areas and forms of support are determined based on partner countries' views on IDA's comparative advantage and value added in a specific country context. While IDA remains the lead donor for many projects and programs, it i s taking, with more frequency, a supporting role with other development partners being in the lead. Notable examples include the education sector in Burkina Faso, where the Netherlands is the lead donor for basic education, while IDA leads on secondary and - 111 ... - higher education; Bangladesh where the Asian Development Bank leads support to the education sector by a donor group including IDA; the education sector program in Mali, led by the Agence Frangaise de DCveloppement; and the multi-donor budget support group inTanzania, chaired on a rotating basis by a bilateral donor. viii. Quantitative and qualitative evidence indicates that IDA's effectiveness in providing assistance is improving. The Bank's Key Performance Indicators on harmonization, adopted at the beginning o f IDA14 and discussed at the IDA14 Mid-Term Review, show continuing increases inthe level of commitments through program-based approaches and injoint analytic work. This internal monitoring by the Bank/IDA can now be complemented by client surveys and other sources and by the Paris monitoring survey,4 which reports that IDA performs better thanthe average of all donors on eight o f the nine Paris indicators and sub indicators for which cross-donor comparisons are possible. According to the Paris survey, IDA performs particularly strongly on one of the "alignment" indicators: virtually all its disbursements were reflected in governments' budget estimates (97 percent for IDA compared to 91 percent for all donors). I t also performs well on a key harmonization indicator: in the surveyed countries 58 percent o f IDA disbursements were for program-based approaches (compared with 42 percent for all donors). The survey also reports that IDA is performing well in coordinating technical cooperation with other donors (58 percent for IDA, 46 percent for all donors), in using country financial management systems, and in untying aid. In addition to the areas covered by the Paris indicators, IDA has made significant progress in decentralization: Bank-wide, 55 percent o f Regional staff are located in the field, up from 45 percent in FYOO. O f the 40 country director positions at present (which have substantial decision making authority), 30 are in the field (including 9 of the 11 country directors in Africa), and the share o f internationally recruited staff located in country offices has increased from 15 percent in FYOO to 23 percent in FY07. Significant progress has also been made with respect to the decentralization o f financial management and procurement staff, improving support to clients for implementing projects and strengtheningcountry systems. ix. Despite implementation progress, there is scope for continued improvement. Reports by partner countries and development partners and quantitative data indicate areas in which the Bank and IDA can clearly continue to improve. For instance, according to the Paris monitoring survey, 51 percent o f IDA's analytic work was done jointly with other partners. This represents a substantial effort-over 90 pieces o f country analytic work in 30 countries prepared with other donors or with the countries concerned-and i s greater than the average for all donors; however, Bankwide data highlight opportunities for further improvement. Another area needing attention is project implementation units (PIUs): in the surveyed countries, there were 207 parallel PIUs for projects using IDA financing, with one o f every two investmentlendingprojects in these countries relying on a parallel structure for project implementation. The third key area is decentralization: IDA'Sclients and development partners are asking for a greater presence o f Bank staff on the ground. The Paris Declaration Baseline Survey covered 34 self selected countries, 30 of which are IDA- eligible. - iv - IDA as a Platform: Initiatives and Implementation Challenges x. IDA is not only working with countries to apply aid effectiveness good practice principles to the operations it funds, but is also assisting partner countries and development partners to make greater collective progress on aid effectiveness. Donors and partner countries alike recognize IDA as a core element o f the development assistance architecture in the world's poorest countries. IDA'Srole in this architecture is twofold: (a) directly providing finance and knowledge services to countries insupport of their priorities and needs; and (b) supporting a platform for dialogue and the delivery of aid in which others may collaborate as partners. As a credible multilateral institution whose financial and analytic presence in most low-income countries i s strong and spans the macro framework and key sectors, IDA has both the expertise and the convening power to work with governments and development partners to strengthen the country- based development model-either leading the effort or actively following others, depending on the country and sector circumstances. Thus IDA is uniquely placed to foster the broader and deeper work on the harmonization and alignment agenda so that international development assistance i s more effective. xi. IDA recognizes the practical difficulties of this role and is taking steps to address them; however, achieving broad and deep progress requires collective effort. Early experience with collaborative country assistance strategies indicates that they can promote wider harmonization and alignment and foster better donor division of labor at country and sector levels. However, they can also be costly in time and resources. Similarly, division of labor exercises can offer large benefits in terms of reduced transaction costs for both partner countries and donors, but they require clear direction and strong guidance from managers with decision making authority. Broadened use o f programmatic modes o f aid delivery that include common arrangements concretely supports alignment and harmonization, but brings additional transaction costs to donors. To help meet these challenges, IDA is carrying out or planning efforts to identify the strengths o f these approaches, address the weaknesses, and communicate to staff the good practices identified. Nonetheless, it is clear that the need for harmonization and alignment reflects a number o f deep-seated problems that face all donors, not just---or even mainly-IDA. It will take a collective effort by the international community to address these issues. xii. IDA has a history of strong cooperation-at the international, regional, and country levels-with other actors in the global aid effort. For example, the Bank collaborates with the other multilateral development banks on a broad range of work on harmonization of operational policies, procedures, and approaches. At the country level it works closely with each regional development bank, the European Commission, and the UN to improve the effectiveness o f aid delivery. It is strengthening collaboration with the UNsystem, working with the UNDP onthe scaling-up agendaand indeveloping a coordinated approach to support in fragile states. Infragile and conflict-affected states, inparticular, IDAandthe UNare working toward apartnership agreementthat will guide and support collaboration between them in post-crisis situations. In addition, the BankADA will be collaborating more closely with the IMF under a Joint Management Action Plan. - v - xiii. The development community is adapting to the increasingcomplexity of the global aid architecture. Recent years have seen a proliferation of donor channels-the growth o f global/vertical funds and trust funds that focus on specific issues with earmarked funds, and an increasing role o f non-DAC donors (a number of which are signatories to the Paris Declaration) and o f the private sector and non government actors. All these actors bring needed additional resources to partner countries, but the fragmentation of assistance generates inefficiencies and imposes transaction costs on both partner countries and donors. It is both a challenge and an opportunity of the aid effectiveness agenda to ensure that all aid modalities support national processes and priorities, and that all development partners are engaged in supporting country-led development strategies. IDA is working with a number of the non-DAC bilateral development partners to promote the country-based model-for instance, it i s in dialogue with China, Russia, and other non-DAC partners on their plans and programs, and is providing technical assistance to the Czech government on monitoring and evaluating its donor program. IDA has also initiated work with the OECD-DAC and other partners to understand how partner countries are managing and coordinating aid from vertical funds and the private sector, and particularly how they are linking this aid with the priorities they established intheir national strategies and assistance programs. xiv. IDA is closelyinvolvedin supportingthe preparationof the Accra High-Level Forum (HLF). Planning has begun for the Accra HLF, to be held on September 2-4, 2008, at which over 100 partner and donor country ministers, heads o f bilateral, regional and multilateral development institutions, and representatives o f non-governmental organizations are expected to participate. With the OECD-DAC and the Government of Ghana, the World Bank is playing a key role inthe substantive and logistic preparation of the HLF through its active participation in the many relevant international working groups. IDA is undertaking a major share of the preparatory work: developing concept notes, defining issues, developing a communications strategy, and so on. IDA is emphasizing consultation with all stakeholders to ensure broad ownership o f the agenda, including substantive roles and responsibilities in Accra, and to broaden the number o f countries where discussions and actions are takingplace. ConclusionsandActions Planned xv. IDA senior management is committed to improve IDA's capacity and performancein linewith the Bank's strategy for harmonizationand alignment, and with the international framework embodied in the Paris Declaration principles. Recent surveys provide important feedback for sharpening IDA's efforts to further improve its performance inharmonization and alignment to achieve greater effectiveness at the country level. Harmonization and alignment actions planned and implemented in line with priorities identified at the country level can promote improvements in country effectiveness. IDA's senior management will also continue to promote and support the harmonizationand alignment agenda at the international level. xvi. IDA is implementing the harmonization and alignment actions that were presented at the time of the IDA14 Mid-Term Review and is planning additional measures. IDA's management is on track to achieve the internal and external objectives that it set out at the time o f the IDA14 Mid-Term Review with respect to harmonization - vi - and alignment. In particular, it understands that incentives-including recognition by managers-play a crucial role inwhether or not programs are developed inways that are consistent with aid effectiveness good practice principles. Thus it i s communicating its commitment to these principles, and is working to ensure that IDA'Sguidance to staff on processes conveys the importance of this effort and strengthens skills in collaborative behavior. In addition, with the benefit o f more time and experience and feedback from surveys and reviews, IDA has identified further measures that it will undertake in the IDA15 periodto accelerate progress: To encourage country capacity development by decreasing reliance on parallel PIUs, the revised investment lendingguidelines will require that integration o f PIUs into government structures become the default option for IDA projects; any proposal to establish a new parallel PIU would be considered an exception and would need to be clearly justified. This approach should lead task team leaders to pay more attention to capacity building measures in financial management, procurement, and monitoring and evaluation. 0 To assist IDA's and the Regions' consideration of decentralization, management is currently analyzing different models of staff location and developing an approach to measure cost-effectiveness. For different client groups and types o f services, the analysis aims at laying out options to better calibrate and target expertise needed and the scale and scope o f decentralization. It will also help to better define cost-effectiveness in light o f budget implications. In Dublin, management will discuss this ongoing analysis andthe next steps foreseen. In implementing its action plan, the Africa Region is pursuing an ambitious decentralization of internationally recruited staff to country offices. A net increase o f 50 internationally recruited staff in the field compared to FY06 is planned by end FY08, and all new and vacant internationally recruited positions are currently plannedto be field-based. The Region will continue to progressively move sector leaders to the field, and it aims to have most task team leaders working on two or three countries, and based inone o fthem. 0 Management will review IDA's performance with respect to the predictability o f disbursementsat the country level and will report on findings and planned actions at the IDA15 Mid-Term Review. 0 Regional management will support and monitor IDA's actions at the country level to assist in the preparation and implementation of country-led plans for harmonization andalignment. 0 IDA will update the good practice guidance on CASs to recognize jointlcollaborative CAS preparation, provide guidance on how best to manage this work, and encourage considering such collaborative work when it makes sense from a country perspective. 0 To reduce the transaction costs o f reaching agreement on legal documentation in operations involving multiple donors, IDA will lead an effort to gain agreements with other lenderddonors on common (harmonized) legal - vii - requirements for MOUs injoint financing operations. Such agreements will, for example, facilitate the efficient operation o f multidonor trust funds and the use of harmonizedsafeguard and fiduciary systems injoint operations. IDA will step up efforts to upgrade country procurement policies and procedures and support their efficient implementation. These efforts, which will build on the experience in procurement-related harmonization among MDBs, will be closely coordinated with other donors, and will encourage countries to adopt standardized procurement documents. Helping countries strengthen their procurement systems will facilitate donors' progressive reliance on those systems. 0 IDA will facilitate and support partner countries' efforts to incorporate nontraditional partners-vertical funds, non-DAC donors, and the private sector-in harmonization and alignment actions. To broaden this engagement and contribute to the collective effort to address aid effectiveness issues, IDA also plans to undertake further analytic work on the changing aid architecture. Joint financing arrangements are one tangible outcome of harmonization efforts. IDA will carry out-jointly with other interested donors-a survey o f selected IDA country programs and the total amounts o f co-knancing, pooled and parallel financing they leverage through IDA'Sbudgetary support and investment lending. The survey should contribute to a better understanding o f country-level behaviors and incentives that affect the overalljoint financing o f government-owned programs and projects. IDA'sROLEINENHANCING COUNTRY-LEVELEFFECTIVENESS: STRENGTHENING HARMONIZATIONALIGNMENT AND I.INTRODUCTION 1. This paper responds to IDA Deputies' request for an analysis of progress in harmonization and alignment, as part of the discussion of the effectivenessof IDA's assistance at the country level. During the IDA14 Mid-term Review in November 2006, IDA presented an update on harmonization and alignment actions taken globally and by the Bank and IDA.' Since the Mid-Term Review, the OECD/DAC 2006 Survey on Monitoring the Paris Declarationhas been completed and the results published.2 This survey provides a basis for comparing performance across partner countries and donors. Together with the Bank's report on Results-Based National Development Strategies, client survey reports, and other reviews and analysesY3it provides a good basis for framing IDA's performance in fostering alignment and harmonization in the context o f global efforts, and for identifyingpriority areas for action. 2. As the reviewsindicate,there is broad internationalsupport-by both partner countries and development partners-for the framework that has emerged to address aid effectiveness issues at the country level. Harmonization, alignment, and managing for results at the country level are being guided by the commitments made under the Monterrey Consensus (2002) and the Rome (2003) and Paris Declarations (2005)' and reinforced by the international Roundtables on Results at Marrakech (2004) and Hanoi (2007). Following up on these commitments and understandings, governments and development partners are undertaking a diverse set of actions-some o f which are captured in surveys and others in country-level reporting. All the evidence shows that, while there has beenprogress, more remains to be done. 3. This paper is organized as follows: Section I1presents the results of the Paris Declaration Monitoring survey and compares IDA's performance with that o f the other donors. Section I11 summarizes collective progress and remaining challenges in enhancing aid effectiveness at the country level and outlines IDA's role in promoting ownership, harmonization, and alignment, including infragile states. Section IV focuses on how IDA provides a meaningful platform for work by client countries and donors to enhance aid effectiveness. Section V details IDA's proposed corporate actions to strengthen its contribution to aid effectiveness. Harmonization and Alignment for Greater Aid Effectiveness: An Update on Global Implementation and the Bank's Commitments (October 2006). Paper presented at IDA14 Mid-Term Review, Washington, DC, November 2006. 2 See 2006 Survey on Monitoring the Paris Declaration - Overview of the Results, OECD-DAC, 2007. See Results-Based National Development Strategies: assessment and challenges ahead (World Bank, forthcoming); see also MOPAN Survey 2005 - Perceptions of Multilateral Partnerships at Country Level, Synthesis Report, November 21, 2005; D F I D s Assessment of Multilateral Organizational Effectiveness: an Overview of Results, Alison Scott, DFID, June 2005; 2005 Review of Progress in Implementing the PRS Approach (IDASecM2005-0069), February 22, 2005; and Good Practice Principles for the Application of Conditionality: A Progress Report (R2006-0201 IDAIR2006-02lo), November 13,2006. 11.MONITORINGEFFECTIVENESS AID ACTIONS 4. The Paris Declaration reflects the broad consensus of the international development community on a set of far-reaching commitments to increase aid effectiveness: 0 Partner countries will exercise effective leadership over their policies, strategies, and in-country aid management (ownership); 0 Donor countries will align their overall support with countries' national development strategies, institutions, systems, and procedures (alignment); Donor partners will work to make aid delivery more harmonized, transparent, and collectively effective (harmonization); 0 Donors and partner countries will manage resources and improve decisionmaking for results (results orientation); Donors and partner countries will be mutually accountable for development results (mutual accountability). 5. The ParisDeclarationis underpinnedby an internationallyagreed monitoring framework, with implementation progress monitored through a variety of instruments. The results of the OECD-DAC 2006 baseline monitoring survey of the 12 indicators inthe Paris Declaration4show that actions on harmonizationand alignment are being undertaken in a growing number o f countries. However, in half of the surveyed countries, progress is not yet substantive: governments and development partners still have many opportunities to improve country level effectiveness. These results, along with those o f the World Bank report on Results-BasedNational Development Strategies, country consultation^,^ and other analyses, make it clear that more remains to be done at the country, institutional, and international levels to broaden and deepen the implementation process. 6. The World Bank, in monitoringits own implementationof the aid effectiveness consensus, relies on both quantitative and qualitative assessments of progress. As described inthe Bank's November 2006 paper on harmonization and alignment, which was discussed during IDA14 Mid-TermReview,6 the quantitative assessment relies inlarge part on the Paris Declaration framework. In addition, the Bank is tracking (a) internal Key Performance Indicators (KPIs) that measure Bankwide data for joint analytic work and disbursements using program-based approaches, and (b) the proportion of poverty reduction support credits (PRSCs) that are undertaken collaboratively with other donors. The qualitative aspect of the Bank's monitoring framework for harmonization and alignment aims at tracking actions and measuring progress that the 12 Paris indicators were The baseline survey was carried out in 34 self-selected countries (of which 30 are IDA-eligible), covering about 37 percent of aid programmed across the world in 2005. During the survey, several methodological issues arose, and hence some caution needs to be exercised in interpreting the data. Nonetheless, the data provide some o f the first quantitative insights into implementation o f the Paris Declaration. The OECD-DAC group responsible for the survey is planning improvements to the next round o f monitoring. Over the past two years regional consultations have been carried out in Africa (Ghana, Mali, Mauritius, Uganda), Asia (two meetings inthe Philippines), and Latin America (Bolivia, Honduras). Harmonization andAlignment for Greater Aid Eflectiveness: An Update on Global Implementation and the Bank's Commitments, op. cit. - 3 - not designed to track-for example, Bank involvement in and support to collaborative assistance strategies and country-level harmonization action plans. 7. This monitoring framework indicates that IDA's performance on harmonization and alignment is strong. The data show that IDA performs better than the all-donor averages for eight o f the nine Paris indicators and subindicators dealing with donor behavior for which cross-donor comparisons are feasible (see Table 1). IDA performs especially well in the use o f program-based approaches, coordinating its technical assistance with country programs, and undertakingits analytic work jointly with other donors. A particular effort will be required in reducing IDA'Suse o f parallel project implementation units (PIUs) (see Section 111). IDA performs marginally below average on the indicator for predictability o f aid; however, this indicator has methodological flaws and does not provide a complete picture o f aid predictability. The DAC working group for monitoring the Paris Declaration i s addressing these and other shortcomings inthe indicators. Table 1. Paris Declaration indicators: IDA performance compared to the donor average Indicators Definitions 2005 baseline ratio IDA PDA All Aid for government sector in USD4,957 m 97% 91yo 3 Aid flows are aligned budget USD5,133 m on national priorities Aid disbursed for government ................................................................................................................................................................................................................................................................Z sector 4 Strengthen capacity Coordinated technical cooperation USD223 m 58% 46% by coordinated support Technicalcooperation USD383 m 5a Use o f country public Use of PFMsystems USD2,236 m 44% 40% financial management Aid disbursed for government USD5,133 m ............................................ systems sector " . " ..... ................................................................................................................................................................. .." . . . . ............................................ ~ 5b Use of country Use of procurement systems USD 2,131 m 4 39% procurement systems Aid disbursed for government USD 5,133 m ..................................................................................... ........................................................................................................................ 6 Avoid parallel 207 implementation Number of countries 30 structures .............................................. 7 Aid is more ' Aid recorded as disbursed USD4,150 m 72Oh 75% predictable Aid scheduled for disbursement USD5,796 m 9 Use of common Program-based approaches USD2,997 m 58% 42yo arrangements or Total aid disbursed USD5,133 m ...................................................................................... procedures ^ ......................................................................................................................................................................................................................... ........................................ 10a Joint missions Number ofjoint missions 393 20% 18% Total number of missions 1,924 10b Joint country Number ofjoint analyses 91 51% 42% analytical work Total number of country analyses 179 Source: 2006Survey on Monitoring the Paris Declaration - Overview of the Results, OECD-DAC, 2007. 8. At the country level, the Paris Monitoring Survey results indicate that IDA's performance on harmonization and alignment is stronger than that of other donors and is positively correlated with country performance. IDA's performance was above the average for other donors in 25 countries that participated in the Paris Monitoring - 4 - Survey, was the same in 2 countries, and was worse in only 5 countries (see Figure 1). There is a correlation between how IDA performs and how other donors perform in a given country: IDA does better where the country/donor community is more advanced in harmonization and alignment. This underlines both the importance o f strong country leadership in advancing the implementationo f the Paris Declaration and the need for all development partners-governments, IDA, and other donor agencies-to work together to make substantial progress. (Further analysis of the Paris Declaration monitoring survey is presented inAnnex A). Figure 1. Aggregate harmonization and alignment performance, IDA vs. other donors 3.00 2.50 2.00 IDA 1.50 1.00 0.50 0.00 0.00 0.50 1.00 1.50 2.00 2.50 3.00 Non-IDA Non-IDA donors' and IDA'Sperformance are an average o f the scores in the Paris Declaration indicators directly related to donors' actions (see Annex A for details). Each dot is one o f the countries that participated in the Paris Declaration monitoring survey. Source: 2006 Survey on Monitoringthe Paris Declaration and World Bank's calculation as explained inAnnex A. 9. The survey also shows that IDA performs relatively well in fragile state^.^ Although fragile states often lack the characteristics that are considered necessary for effective harmonization and alignment, the international consensus is that harmonized and aligned approaches are not only possible but critical to success in these most challenging circumstances. In these countries, therefore, it is particularly important to tailor harmonization to support capacity building and lower transaction costs. The five Fragile states is the term usually used to refer to countries that face particularly severe development challenges such as weak institutional capacity, poor governance, political instability, and, frequently, ongoing violence or legacy effects o f past violence. Different organizations have defined fragility using varying methodologies, most o f which are based on a measure of the Country's Policy and Institutional Assessment (CPIA) ranking. The World Bank defines fragile states as those countries that have a CPIA rating of 3.2 or below or that are low income and do not have a CPIA score. Since fragility is determined for each year, it is a status, not a permanent classification; thus countries may be intermittently fragile. - 5 - fragile states that participated in the Paris Monitoring survey' demonstrated that it is possible for fragile states to effectively participate in international efforts to implement and monitor the Paris De~laration.~For example, IDA does 63 percent of its analytic work in Afghanistan jointly, 82 percent in Cambodia, and 100 percent in Republic o f Congo and Mauritania; and it disburses 100 percent of its aid through program-based approaches in Afghanistan and Republic of Congo, and 71 percent in Mauritania (about doublethe average of all donors inthose countries). However, inCambodia (where there are governance concerns), it disburses only 16 percent o f its aid through program-based approaches. The overall positive results cannot be generalized to the larger set of fragile states. Nevertheless, they do underline that even in the difficult circumstances that are prevalent in these countries, joint analytic work, use o f country systems, and programmatic approaches can be used in line with good practice principles for aid effectiveness. 10 111.PROGRESSAND CHALLENGESINIMPLEMENTING AID EFFECTIVENESS ACTIONS 10. This section outlines progress on three key principles of the Paris Declaration-ownership, harmonization, and alignment-and discusses IDA'S role in that progress. Progress in managing for development results, another important principle o f the Paris Declaration, the status o f IDA's two-tier results measurement system, and the lessons of implementing results management in IDA are discussed in a companion IDA paper.l1 A. Ownership 11. Ownership and country leadership are central to making progress on harmonization and alignment at the country level. Donors cannot drive the process, but they need to support it by delivering aid based on good practice principles. Operational development strategies are an important indicator o f country ownership. This is important for IDA, as IDA CASs start from the country's own vision of its development goals and its strategy for achieving them, as set out in the country's Poverty Reduction Strategy Paper. 1.GlobalProgress and Challenges 12. Many partner countries have improved the quality of their poverty reduction and national development policies. O f 62 IDA countries covered in the World Bank report Results-bused National Development Strategies, two-thirds have taken action toward an operational development strategy, and 8 (13 percent) have achieved the threshold established by the Paris Declarationfor operational development strategies (see 8 Afghanistan, Burundi, Democratic Republic o f Congo, and Mauritania, as well as Cambodia, which comes from a legacy o f conflict and is now further along a path to stability. Mauritania, a fragile state at the time o fthe survey, is no longer considered to be inthat category. Separate data are not available for IDA's activities in Burundi. lo For a more comprehensive treatment o f IDA's strategy for fragile states, see Operational Approaches and Financing in Fragile States (IDA-SecM 2007-0449), June 14,2007. " Focus on Results: TheIDA14 ResultsMeasurement System and Directionsfor IDA15, October 2007. - 6 - Figure 2). Increasingly, these strategies are well prioritized and are linked with sector strategies, and civil society i s consulted on the fiameworks for measuring progress. In several countries making advances in this area-for example, Burkina Faso, Ghana, Mozambique, Tanzania, Uganda, and Vietnam-the governments use their national plans and strategies as a key input to their medium-term expenditure framework (MTEF), budgetplanning, and aid discussions with donors. 13. Creatingoperational development strategiesis a complex and time-consuming task. It requires political commitment by governments and mobilization o f substantial technical resources, and it has direct implications for budget allocations. Countries need to develop their long-term vision, derive a single national development strategy from it, establish priorities, carefully estimate the costs o f priority programs, and use the cost estimates to prepare MTEFs. Preparing an MTEF itself is technically demanding: it usually requires prior progress on the public financial management (PFM) system, and progress i s likely to proceed sector by sector on the basis o f detailed sectoral strategies. External partners need to provide coordinated technical assistance to such efforts, and to provide reliable and timely informationabout their own project financing. Figure 2. Progresstoward operational development strategies: 2007 compared to 2005 (Distributionofscores) 100% 13% 90% 80% 40% 70% 60% Sustainable 50% 67% Developed 40% Action taken 30% 60% Elements exist 20% Little action 10% 18% 0% 2% I 2005 2007 2005 2007 2005 2007 All Countries Stronger Policy and Institutions Fragile States Source: Results-BasedNational DevelopmentStrategies:Assessment and ChallengesAhead, forthcoming. 14. Country leadership is hampered by weak aid management capacity and systems and by weak domestic accountability processes. Improving aid management capacity requires countries to give attention to public finance and the budgetprocess, and to clarifying and rationalizing administrative responsibilities among government ministries, especially the Ministry of Finance, sector ministries, and the President/Prime Minister's Office; it also requires more transparency and discipline from donors in providing reliable information on aid flows. Many countries are implementing aid effectiveness action plans to improve their capacity to better manage aid (for example Benin, Burkina Faso, Cambodia, Ghana, Honduras, Kyrgyz Republic, Lao, Mali, Papua New Guinea, and Senegal). Other countries are working to strengthen domestic - 7 - accountability by opening up the relationship between donors and the executive to a wider range o f stakeholders-parliaments and national assemblies, civil society, and the private sector-and by giving greater attention to such domestic accountability structures as thejudicial system and audit institutions. 2. IDA's Performance 15. IDA promotes ownership by supporting country leadership in formulating their development strategies, and by supporting efforts to strengthen country systems, build institutional capacity, and reinforce domestic accountability. As countries gain experience with the development of poverty reduction strategies, IDA has been supporting the integration and adaptation o f these strategies into countries' core policy processes.l2 In cases where countries have introduced "silent periods," IDA limits missions and interactions with senior government officials to provide space for authorities to focus on their own budget process. The reform o f IDA'Sapproach to conditionality in development policy operations has also put a heavy emphasis on supporting country-owned reforms. 16. IDA provides a wide range of analytic support to help inform country-led development strategies and programs. Some key examples include: general analyses o f poverty and growth, work on the linkages betweenthe macroeconomic framework and structural reforms and sector programs, assessments of institutional structures and incentives and o f the quality of PFM systems, and development o f indicator-based diagnostic tools to measure country performance. Between 2003 and 2007, IDA has supported the preparation o f more than 150 Poverty and Social Impact Assessments-in collaboration with partner countries and often also with other development partners. This has contributed to a better understanding o f reform options and implications. IDA i s supporting governments in improving their aid management systems, strengthening institutional capacity, and launching reforms. In formulating recommendations and advice, it takes into account capacity, human and financial resource, and political constraints.l3 (Box 1 presents examples o f IDA'S analytic contributions to country development strategies). IDA also provides financing: between 2000 and 2005 financing for PFM reform doubled to US$1.5 billion and the number o f countries helpedrose from 10 to 25. As a result, countries such as Ghana, Mali, Rwanda, Senegal, Uganda, and Vietnam have made rapid progress in improving their public financial management systems. 12 2005 Review of the PRS Approach: Balancing Accountabilities and Scaling Up Results, World Bank and InternationalMonetaryFund, September 2005. 13 Following the piloting in 12 countries of the Rodrik, Hausman, and Velasco approach to the identification of binding constraints to growth, IDA country teams are increasingly using that experience in their analytic work and policy dialogue (see Hausman, R., D. Rodrik, and A. Velasco, 2005, Growth Diagnostic, Cambridge:HarvardUniversity). - 8 - Box 1. Supporting the preparation of poverty reductionstrategies in Mozambique and Senegal Mozambique. The analytic products IDA prepared with the Government helped define the policy priorities and institutional systems that underpin the national poverty reduction strategy (PRS). The Poverty Assessment provided the analytic basis for the overall identification o f priorities. The Country Economic Memorandum (prepared with the review o f the donors o f the G17 coordination group) helped to focus the strategy on the links between key sectors and the overall growth strategy, analyzing how Mozambique's natural resources-land, forests, fisheries, mines, and water--could be better managed to contribute more to overall growth. Reviews o f the financial sector, investment climate, and legal and judicial sector contributed to improving the country's institutional foundations for shared growth and helped to form the basis for the strategy's structural reforms. Finally, reviews o f public expenditures, financial accountability, and procurement helped form the basis for improving P F M and the links between the strategy and national systems. Senegal. Some 20 pieces o f IDA analytic work helped to build the knowledge base for sectoral and cross- sectoral policies and programs and strengthen national systems to support strategy execution: a County Economic Memorandum (jointly prepared with the IMF), Country Framework Report, Integrated Framework, Public Expenditure Reviews, Poverty Assessment, Investment Climate Assessment, fiduciary reviews (the Country Financial Accountability Assessment involved a multidonor task team, and the Country Procurement Assessment Report was done jointly with the African Development Bank), and various sector reviews. For example, the 2005 Public Expenditure Review (executed in collaboration with the IMF) led to the adoption o f a 2006 budget proposal on a programmatic basis for at least four ministries, and o f a uniform nomenclature for current and investment expenditures as the basis for budget preparation. In addition, IDA's consistent message about the importance of attaining the MDGs related to the social sectors i s believed to have contributed to a significant increase inbudget allocations to the social sectors. Its large-scale involvement in infrastructure, rural development, and social services promoted the identification o f intersectoral linkages-for example, between ineastructure and agricultural growth, and between access to clean water and public health outcomes. 17. Recent surveys show that IDA is seen as effectively supporting I Figure 3. Client Survey Feedbackon Ownership country ownership. The World Bank promotes country client surveys indicate an improved ownership of developmentstrategies perception o f IDA's effectiveness in fostering country ownership (see 2006 I Figure 3). According to the Multilat- I eral Organizations Performance 2005 I Assessment Network (MOPAN) ~urvey,'~ stakeholders tend to agree 2004 that IDA promotes country ownership o f development strategies through the 1 3 5 7 9 Mean level of agreement way it supports PRSs; and about 70 percent of respondents see the World Scale of 1- 10, 1 being strongly disagree and 10 being strongly Bank as actively supporting national agree. andlocalparticipatory approaches. Source: World Bank client surveys. 14 The MOPAN Survey 2005: Perceptions of Multilateral Partnerships at Countly Level, November 21, 2005, p. 11. MOPAN i s a network o f nine donor countries that jointly conduct an annual in-house survey o f multilateral partnership behavior in developing countries. The survey i s based on the perceptions o f MOPAN member embassies or country offices, arising from their day-to-day contacts with multilateral organizations. The 2005 edition o f the MOPAN survey is the most recent to cover the World Bank. - 9 - B. Alignment 18. Alignment is the practice of basing donor support on partner countries' developmentstrategies,institutions,systems, andprocedures. 1. GlobalProgressand Challenges 19. In the past few years, alignment has improved significantly. Today almost all bilateral and multilateral donors base their support in large measure on established country policy frameworks such as PRSs, national development strategies, or sector strategies. This requires that institutional country assistance strategies be structured as business plans in support o f broadly owned country strategies. Inturn, country strategies need to be clear in terms o f setting out priorities, translated into operational terms; and the institutions and systems responsible for implementation must be reliable. Alignment i s facilitated when national authorities use their budget as a central resource allocation instrumentthat credibly supports agreed policy priorities and MTEFs. Helpingcountries improve these supportive elements of alignment, as well as avoiding parallel implementation structures, providing more predictable aid, and untying aid, are among the key challenges donors face inadvancing alignment. 2. IDA's Performance 20. IDA works to align its aid with the priorities and policies each country articulates in its PRS. IDA prepares its strategies in consultation with partner governments and other stakeholders, and tailors its program to country needs and priorities defined in the PRS. Results-based Country Assistance Strategies emphasize defining realistic results chains, aligning IDA'Ssupport with the country's long-term vision and priorities, and coordinating with other donor partners on major elements of strategy. In the Africa Region alone, 15 country teams15 have prepared or retrofitted country CAS and Interim Strategy Note results frameworks to strengthen outcome orientationand alignment with country priorities. 21. IDA is committed to helping countries enhance their capacities in financial management, procurement, monitoring and evaluation, and environmental and social safeguards. IDA, given its comparative advantage in these areas, can help facilitate progressive donor use o f strengthened country systems. For instance, to harmonize the diagnosis and monitoring o f country public financial management systems, IDA collaborated with other donors to develop the Public Expenditure and Financial Accountability (PEFA) framework, which tracks indicators on public expenditure, procurement, and financial accountability. The PEFA framework has been applied in 34 countries, with a further 50 (mostly IDA) countries planned to be covered by end-2007 (see Box 2 for an example). Paris Declaration monitoring data confirm that IDA uses its enabling policy framework to allow the use of countries' PFM systems and institutions when they are assessed as adequate. As regards the use of countries' environmental and social safeguards systems, the Bank has launched a series of 12 l5 Burkina Faso, Central African Republic, Democratic Republic of Congo, Gambia, Ethiopia, Kenya, Malawi, Mali, Mauritania, Mozambique, Nigeria, Senegal, Sierra Leone, Uganda, and Zambia. - 10- project-level pilots (5 o f which are in IDA countries), many o f which involve multiple donors. Before launching a broader pilot program, the Bank is holding wide consultations (including in three IDA countries) on the methodology for assessing countries' capabilities in procurement, PFM, and safeguards, and for selecting pilot countries. l6Where such assessments find weaknesses, IDA will coordinate with other donors to help countries build capacity. Box 2. Supporting financial management in Ghana With a wide range o f support from IDA, Ghana applied the PEFA framework and achieved rapid improvements in its PFM system. Itmet sevenbenchmarks in2004, compared to one in2002. It improved its budget classification system and the identification o f pro-poor spending in the budget to enable better management and tracking of expenditures. In budget execution, Ghana initiated regular reconciliation o f accounting and banking data to ensure the integrity of budget expenditure reporting, and also took steps to reduce expenditure payment arrears. In budget reporting, Ghana improved the budget classification of in- year expenditure reports to match the budget and enable closer management and tracking o f spending, and reduced the end-of-year complementary period to improve accounting accuracy.a Key factors that came together to produce progress were country commitment, galvanized by joint IDA-IMF agreement with the Government on a reform strategy basedon a fiduciary assessment carried out jointly with other donors; and active donor coordination to reach a harmonized reform program that IDA supported with technical assistance and aPRSC. I a I I Other countries that made substantial progress in PFM and benefited from significant IDA support include Afghanistan, Albania, Armenia, Azerbaijan, Georgia, Guyana, Kyrgyz Republic, Mali, Moldova, Niger, Senegal, Tanzania, Uganda, and Vietnam. 22. IDA recognizesthe importanceof general budget support as a key instrument to support alignment with country strategies. IDA provides general budget support in 21 countries through PRSCs, most of which it prepares incollaborationwith other donors (see Table 2 and Box 3). IDA works to ensure that its conditionality is appropriately aligned with the country's strategies, according to the Bank's good practice principles.l7 IDA'Srole in multi-donor budget support arrangements varies according to the country context. While inmany countries IDA plays a lead role among development partners in the interaction with recipient countries, in other countries-usually those with more advanced budget support arrangements-IDA provides primarily technical inputs to the dialogue. For example, inTanzania the multi-donor budget support group i s chaired on a rotating basis by one o f the bi-lateral donors. Similarly, only one o f the five technical working groups i s chaired by IDA, while IDA contributes its technical expertise and operational experience to all these groups. l6 See Use of Country Systems in Bank-Supported Operations: Status Report (R2007-0079/3), June 12, `' 2007. See Good Practice Principles for the Application of Conditionality: A Progress Report (R2006-0201), November 6,2006. - 11- Table 2. Proportion of PRSCs undertaken in coordination with other donors Total volumeof PRSClending PRSCs undertakenjointly Total number of Year ($ million) PRSCs No. % FY05 1400 17 10 59 FY06 1403 16 10 63 FY07 1368 19 12 63 Total FY05-07 4178 52 32 62 Box 3. Partnership for budget support in Nicaragua With IDA support, Nicaragua's Government actively worked toward greater harmonization and alignment through its sectoral roundtables. These roundtables provided the policy input for sectoral budget support through several sectonvide approaches, and they paved the way for financing through general budget support. In2004 the Government and the donors organized a Budget Support Group (BSG) to deliver this aid more effectively. Since then, IDA has been working with the donor community to better coordinate and ultimately harmonize budget support instruments and free up government resources. In 2005 IDA and the nine other donors from the BSG signed a Joint Financing Arrangement covering the disbursement o f budget support until 2009. The agreement, which incorporated IDA'SPRSC, the EC's budget support program, and some bilaterals' programs, established mechanisms for dialogue, review, disbursement, and reporting and put into place a comprehensive performance assessment matrix. This matrix put the performance expectations o f various donors into a common format-something that had not been done before. IDA has used the BSG to review progress on its budget support operations. 23. Enhancing the predictability of aid and ensuring that aid is integrated into recipient countries' budgets is a key element of greater aid effectiveness. Analysis presented at the first and second IDA replenishment meetings suggests that "the use o f the Performance Based Allocation system backed up by stable IDA resources improves the stability and predictability o f resource flows where this is most needed-to those countries maintaining stable performance."" In particular, IDA resources flow to recipient countries with less than half the volatility o f other multilateral resource flows, and only about one-third o f the average volatility o f all official aid flows.lg In addition, resource flows provided through PRSCs and other development policy operations have become more stable as the design o f operations has given greater attention to predictability and the use o f multi-tranche operations with ex post conditionality has declined. For most countries, PRSC disbursements have been well aligned with the recipient government's budget cycle, as i s shown by the 13-month average time between PRSCs. In addition, volumes have been reduced in less than a handful o f cases and the change was typically communicated to the country authorities well before the start o f their fiscal year. l8 Selectivity and Performance: IDA'S Country Assessment and Development Effectiveness, February 2007, p.25. ` 9 The Role ofIDA in the Global Aid Architecture: Supporting the Country-Based Development Model, June 2007, p. 18. - 12- 24. The definitionof the ParisDeclarationindicatoron aid predictabilitymakes it difficult to interpretits findings2' According to the 2006 survey, 72 percent ofplanned IDA disbursement was recorded in governments' accounts as actually disbursed, against a donor average o f 75 percent. However, the recent update on IDA commitments and disbursements shows a marked increase in IDA's disbursement ratios in recent years,*' attributed in part to proactive management o f the IDA investment portfolio. These data suggest that IDA's performance on predictability is stronger than that captured by the 2006 Paris Declaration survey. To understand better the determinants o f this score and IDA's performance with respect to predictability, IDA will use data from the 2006 and the 2008 Paris Declaration monitoring surveys and other analyses and will report its findings and actions needed at the IDA15 Mid-TermReview. 25. IDA is performing well with regard to the integration of its assistance into countries' budgetand financialmanagementsystems. Partner countries need accurate annual disbursement projections at the project/program level so that they can plan their budgets accurately; and these projections should be reflectedinthe government budget to strengthen domestic accountability as parliaments review and approve the budget. Data from the Paris Declaration baseline survey suggest that 97 percent o f IDA's disbursed aid was reflected incountries' budgets. Inaddition, IDA does better than the donor average on using country financial management systems (see Figure 4). IDA will continue to support countries' efforts to strengthen budget, financial management, and procurement systems as the basis for progress inthe use of country systems by development partners. Figure 4. Use of country financial managementsystems in four categories 50% 40% donor score 30% 20% 10% 0% Budget Financial Auditing Procurement execution reporting Source: 2006 Survey on Monitoringthe Paris Declaration. 20 Deviations from 100 percent on this indicator can be the result of inaccurate recording of flows by the recipient, deviations between donor commitments and donor disbursements, or a mix of these two reasons. IDA will propose ways to improve the clarity of this indicator. 2' IDA Commitments and Disbursements, FY9.5-07, TechnicalNote, document for the thirdIDA15 meeting. - 13 - use o f embedded structures. While recognizing that - - in some " " " " x x - x circumstances the trade-offs --__- involved innot using such PIUs may be unacceptably costly, in terms of fiduciary and implementation risks, ~ the Bank will need to place greater emphasis on providing technical assistance to strengthen fiduciary systems and implementation of reforms and build country capacity, IDA Other donors 27. IDA recognizes the importance of field-based staff, including at the decision making level, to facilitate alignment and harmonization. While it is crucial for IDA to continue sending technically skilled task teams on mission to countries to support the preparation and implementation o f projects and programs in line with country needs and priorities and with the Bank's policies, experience indicates that field-based country directors, managers and staff are often better placed to support progress on country-led alignment and harmonization. Country-based staff are usually in the best position to build relationships with partner governments and other donors, undertake joint work (project preparationand supervision, sector coordination, etc.), or animate the overall aid effectiveness agenda (supporting governments in preparing and reviewing progress on harmonization action plans, setting up resources and results Consultative Groups, etc.). When country offices have committed staff and management support, the results have been apparent (see Box 4). 28. The World Bank has a significant field presence in all Regions. BetweenFYOO and FY07 the overall number of staff in the Regional Vice Presidencies declined by 3.7 percent, the number o f staff located in country offices increased by 17 percent, and the number located at headquarters declined by 21 percent; thus the share of Regional staff located in country offices increased from 45 percent in FYOO to 55 percent in FY07 - 14- (Figure 6). Over the same period, the share of internationally recruited staff located in country offices increased from 15 percent to 23 percent. Significant efforts have been made to decentralize fiduciary staff-for instance, 23 of the 33 financial management specialists in the Africa Region are located in the field, and 32 o f the 37 procurement specialists in the East Asia and Pacific Region are in country offices. Each Region deciding on the basis of its needs has also increased the share o f country directors-who have substantial decision making power-located in country offices from 53 percent in FYOOto 75 percent in FY07. As a result, today 30 of the 40 country directors are based incountryoffices. Box 4. Examples of impact of decentralization on alignment and harmonization The country offices in Bangladesh, Burkina Faso, Cambodia, Cameroon, Ethiopia, Ghana, Kyrgyz Republic, Mali, Mauritania, Tanzania, and Uganda show how important the commitment and skills o f country office staff and management are to the successful implementation o f the harmonization and alignment agenda. In all o f these offices, country management has pursued this agenda-internally, in discussions with project staff, and externally, in contacts with other development partners and the government. Inmost o f these country offices, senior operations officers with specific responsibility for the implementation and monitoring o f the agenda have boosted practice and served as useful advisers for all actors involved inthe aid arena. Examples o f results: Mali: the CAS defines concrete harmonization and alignment objectives, and work has started on ajoint assistance strategy. Ghana and Tanzania: joint assistance strategies are being implemented. rn Cambodia, Mauritania, Uganda, and Zambia: the development partners try to improve their division o f labor. rn Cameroon: the development partners and the government are working to restore trust in their relationship and to establish a new consultation mechanism. rn Kyrgyz Republic: donors develop joint arrangements and completed a joint assistance strategy prepared with four other development partners. Bangladesh: harmonization has progressed at the country level through ajoint assistance strategy with three other development partners, and at the project level through the use o f sectorwide approaches, including a noteworthy second primary education project in which IDA and 11 other development partners participate with the Asian Development Bank as the lead donor. Figure 6. Share of staff located in country offices Sub Saharan Total Sub Saharan Total Africa Africa Internationally recruited Regional staff Regional staff Source: World Bank. - 15- 29. With the largest number of IDA eligible countries and some of the most difficult development challenges, the Africa Region has been a particular focus of IDA's recent decentralizationefforts. Nine of the Region's 11 country directors are now based in country offices. The 11 country management units have been grouped in "collaborating country clusters" so as to share scarce decentralized staff resources more productively. Between FYOO and FY07, the number of country-based staff increased by 35 percent, while the number o f Washington-based staff dropped by 16 percent. A net increase of 50 internationally recruited staff inthe field compared to FY06 i s expected by end FY08, andthe Region currently plans for all new and vacant internationally recruited positionsto be field-based. The Region envisages progressively moving sector leaders to the field, and it aims to have most task team leaders working on two or three countries, and based in one o f them. These approaches will also help address the need to improve the quality o f the sector dialogue with clients. 30. Stakeholder feedback suggests that IDA's work is increasingly aligned with country development priorities and that its conditionality is reasonable (see Figure 7), although there is clearly room for improvement. The MOPAN survey22 concludes that IDA actively supports alignment to national strategies and procedures in principle, but shows slow progress with its implementation, particularly when developin new operations. DFID's Assessment of Multilateral Organizational Effectiveness29 assesses country-level results focus-which is closely linked to the alignment of country programs with national PRSs-and rates the World Bank fairly highly in comparison to other multilateral organizations (see Figure 8). IDA'Shighly concessional, predictable, on-budget aid in support o f government priority sectors, in particular, was favorably noted. Figure 7. Client Survey Feedbackon Alignment I The Bank's work is aligned with what The World Bank imposes Iconsiderthe developmental reasonable conditions on its lending priorities for this country 2006 2006 2005 2005 2004 2004 1 3 5 7 9 1 3 5 7 9 Mean level of agreement Mean level of agreement IScale of 1 - IO, 1 being strongly disagree and 10 being strongly agree. Source: World Bank client surveys. 22 See MOPAN Survey 2005, op. cit. 23 DFID's Assessment of Multilateral Organizational Effectiveness: An Overview of Results, Alison Scott, DFID, June 2005. - 16- Figure 8. DFIDMEFFassessment of IDA'S performance in alignment Country Level Results Focus - _ _ I _ I World Bank Other Multilateral Organizations Source: DFIDs Assessment of Multilateral Organizational Effectiveness, op. cit. C.Harmonization 31. Donor harmonization has been a central concern of the aid effectiveness agenda. Donors have been working to reform and harmonize their procedures and policies to encourage collaborative work, eliminate duplicative tasks, and reduce the administrative burden on partner governments. After several years o f collective country experience, the international donor community widely agrees that harmonization and alignment actions drawn from good practice principles are necessary for aid effectiveness. (Box 5 illustrates recent achievements inharmonization inYemen.) Box 5. Supporting harmonization in Yemen At the country strategy level, approximately 39 donors, both DAC and non-DAC members met in2006 to support the Third Five Year Socio-Economic Plan for Poverty Reduction and the Public Investment Program. The meeting was hosted by the UK Department for International Development and sponsoredby the Gulf Cooperation Council while the discussion was co-chaired by the Government of Yemen and the World Bank. It was an unprecedentedeffort at collaboration across international and regional development partners which commended the Government of Yemen's progress in a number of areas including governance and agreedto meet regularly to review progress on the ongoing reform program. At the sectoral level, there has been ongoing donor collaboration and alignment through a Partnership Declaration signed by 12 donors working with the Government on Basic Education and this collaboration has involved, among others, multidonor financing of two major projects. Donors participate in missions together and meet monthly to review progress on donor harmonization. Collaboration has also been effective inthe areas of public expenditure managementthrough joint work on the Country Financial Accountability Assessment (CFAA) carried out with DFID and the Netherlands. Activities included, among others, ajoint workshop with the following objectives: (a) developing common language for and common understanding of the issues and challenges facing public financial management (PFM) reform, and (b) agreeing on a set of priority areas and actions to develop a detailed plan for PFM reform. DIFD is providing financing for follow-up work. The Aid Harmonization Assistance unit in the country's Ministry of Planning and International Cooperation is an important step towards promoting greater harmonization and alignment. At the same time, there are efforts underway to track progress on reform efforts as well as improve development effectivenessoverall. A program for the improvement of country systems has been developed (a Statistical Master Plan), and IDA will provide technical assistance to ensure that the financing arrangements are in place and to assist the Government in supervising the implementation of this plan. Simultaneously, sector and thematic monitoring systems are being established inthe context of IDA (or other donor) projects. - 17- 1.GlobalProgressand Challenges 32. Progress in harmonizing programs and strategies has been notable. For example, program-based approaches, under which donors use common arrangements for fiduciary controls, monitoring, and evaluation, have become increasingly common. These approaches reduce reliance on parallel PIUs and provide a good basis for building capacity in government agencies. In addition, donors are responding to good-quality development strategies by increasingly coordinating and harmonizing their support inthe planning stages. Ina number of countries-for example, Bangladesh, Cambodia, Ghana, Kyrgyz Republic, Tanzania, and Uganda4onors have completed joint or coordinated assistance strategies. These strategies commonly feature a shared analysis o f the development challenges facing the country, on which assistance programs are developed and agreed with government. In some cases harmonization then extends to joint programming. Inother countries-such as Vietnam, where the donor agencies' different programming cycles could not be synchronized with the Government's development strategy and a fully joint assistance strategy was not feasible-IDA has collaborated with donors on critical and selective areas. These new developments are facilitating division o f labor, which helps address the issue o f "orphan" and "darling" sectors and can also promote delegated cooperation measures. 33. Notwithstanding progress in a number of areas, harmonization processes are not easy, and they involve transaction costs. In-country harmonizationprocesses need to have clear and agreed objectives, and they need support and authority from headquarters for follow-through. CASs produced in collaboration with other donors are central to the harmonizationagenda, but they pose challenges o f timing and coordination for review by Bank management and the Bank's Board; they require committing jointly to outcomes while reserving clearly defined accountability for each donor partner. Disconnects between headquarters and field offices and incentives that often work to maintain the status quo have slowed progress. The transaction costs of negotiating Memoranda of Understanding (MOUs) on sector wide approaches, budget support operations, and even general donor coordination, are high, entailing multiple drafts and considerable back-and-forth between country offices and headquarters. Indeed, some o f these transaction costs may not be temporary-donor agencies may need to absorb them as permanent costs o f delivering aid more effectively, and reflect them in administrative budget allocation^.^^ In addition, to accelerate the pace of harmonization, continued attention and leadership by senior management in addressing incentive issues and facilitating early involvement of legal staff inharmonization initiatives will be important. 34. Coordinated budget support has facilitated not only alignment, but also harmonization among donors. In a number o f countries, the government and donors agree on an M O U that frames the coordination, with such provisions as alignment o f disbursements with the country's budget cycle, common evaluation framework for country performance, and joint preparation and review processes. This process helps 24 Our analysis o f the Paris Declaration data (Annex A) suggests a strong relationship between the absolute amount of IDA support and net aid inflows on the one hand and performance with respect to the implementation ofthe Paris Declaration on the other. Further analysis of the cost of implementing the Paris Declaration will be needed to better understandthe budgetary implications of implementing the Paris Declaration incountries with small IDA allocations. - 18- strengthen and structure the policy dialogue between the government and development partners and can (as in Burkina Faso and Mozambique) promote mutual accountability through external reviews o f progress on agreed commitments. However, two issues commonly arise with budget support: 0 Aid disbursements often deviate from commitment^.^^ If disbursements fall short o f commitments, government program implementation may be disrupted; and if they exceed commitments, governments may not have appropriate plans for using the excess aid efficiently. Therefore partner countries often cite lack of aid predictability as a key issue to address in aid effectiveness. Donors use conditionality and earmarking to ensure that recipient country accountability and preferences are aligned with their own. The growing understanding that conditionality i s effective only if there i s strong domestic ownership o f the reform agenda has led donors to change their practices significantly, giving increased attention to selectivity, assessment of ownership, domestic accountability, and the strength and quality o f the country's processes for managing its development agenda. However, donors have also increased their use o f earmarked aid-that is, determining ahead of time how the aid will be used. Such aid may not be targeted to the recipient country's highest priorities or may provoke costly adaptive behavior by recipients. 2. IDA's Performance 35. IDA initiates and supports increased donor harmonization in many countries. Contributions include participating in joint or collaborative assistance strategies;26 providing analytic leadership in common performance assessment frameworks, coordinated budget support, and sectonvide approaches; participating indivision o f labor exercises and common arrangements for project and program management; helping partner countries to improve their aid management capacities; performing joint diagnostic work; agreeing on mission-free periods with governments; and cochairing donor meetings. (Box 6 describes IDA's involvement in Tanzania's Joint Assistance Strategy). 25See "Predictability and procyclicality o f aid: D o fickle donors undermine economic development?", draft working paper by Oya Celasun and Jan Walliser. The paper shows that the absolute deviation in percent o f GDP o f committed and disbursed aid declining but is still large. During 1990-97, annual aid disbursements deviated by an average of 4.4 percent of GDP from aid commitments in Sub-Saharan Africa. This figure declined to a still-large 2.8 percent of GDP during 1998-2005. Although Sub-Saharan Africa had the highest degree o f unpredictability, other regions also showed deviations o f disbursements and commitments exceeding 1percent ofGDP on average over the two time periods. 26In addition to thejoint or collaborative CASs already completed (Bangladesh, Cambodia, Ghana, Kyrgyz Republic, Tanzania, and Uganda), efforts are ongoing or have been agreed to in Kenya, Malawi, Mozambique, Nicaragua, and Vietnam; and preparation of such documents is being discussed in Burkina Faso, Cameroon, Honduras, Jamaica, Mali, Mauritania, Philippines, Rwanda, Senegal, and Yemen. Similar achievements have also been obtained in fragile states, as this paper discusses below. - 1 9 - Box 6. Tanzania's Joint Assistance Strategy Under strong Government leadership, 34 development partners in Tanzania were involved in the development o f the Joint Assistance Strategy (JAS). Inaction since December 2006, this common strategy encapsulates the spirit o f ownership, mutual accountability, and the commitment to harmonization and alignment that has grown in Tanzania since the 1990s. The JAS consists of two parts: the Joint Assistance Strategy for Tanzania (JAST), and the Joint Programming Document. The JAST, prepared by the Government, lays out the principles to which development partners should adhere to ensure effective support to the implementation o f Tanzania's PRS: use o f Government systems, increased aid predictability, and a greater focus on division o f labor. The Joint Programming Document was developed by the donors to put the JAST into practice. It lays out the development partners' analysis o f Tanzania's key development issues and donors' planned program o f support, following the principles laid out by the Government and linked to its MTEF. The document shows a strong commitment to greater use o f general budget support, program-based approaches, and division o f labor, and includes a clear results framework drawn from the Government's PRS monitoring process. In addition, the development partners supplementedthis document with agency-specific texts that project how they would meet their individual obligations. 36. Internal monitoring provides additional insight on IDA performance on harmonization and is an essential aspect of the Bank's strategy for implementing harmonization and alignment. The Bank's KPIs capture information across the entire set of IDA countries (rather thanjust the 34 countries surveyed for the Paris Declaration monitoring). IDA is monitoring its participation in program-based approaches (PBAs) through an internalKPI that measures commitments in sectonvide approaches, development policy operations, and other forms o f PBAs. This KPI shows a regular increase in commitments over the last three fiscal years (Table 3) and confirms IDA'S good performance on this indicator (57 percent of total commitments in the 30 surveyed countries, and 38 percent last year JDA- wide)-a high level o f commitments that should lead to sustained IDA performance on the Paris Declaration indicator. (At the same time, IDA recognizes that strategic considerations will continue to justify self-standing operations inmany instances.) Table 3. Volume of total IDA program-based lending $ millions FY05 FY06 FY07 DPLcommitments 2,161 .OO 2,424.60 2,645.00 Other program-based commitmentsa 693.80 1,082.95 1,827.00 Total commitments through program-based approaches as 32% 37% 38% a share o ftotal IDA lending a "Other program-based approaches" are investment projects that are supporting a sectorwide or similar approach, and projects financedjointly with other donors. According to the Paris Declaration survey, among the largest providers o f joint country analytic studies; only the UN and the United Kingdom show a significantly higher share of joint work than IDA (69 percent each). The Bank's KPI onjoint ESWhas recently been alignedwith the Paris Declaration - 20 - definition to emphasize joint work with either donors or g~vernment.~~ Recent data show that the Africa Region performs better than the IDA average, but suggest that IDA staff do not seize all opportunities for joint work (see Table 4); progress will require increased management attention.28 As the IDA15 paper on results discusses, IDA is also planning to analyze several issues regarding analytic work inmore detail.29 Table 4. ESW prepared in coordination with country and/or donors Category All Regions Africa Region FY05 FY06 FY07 FY07 Total number of ESW 204 203 186 67 Joint ESW 54 75 80 40 Proportion 26% 37% 43% 60% Note: This KPI measures major ESW that i s prepared (a) jointly or with significant coordination with a least one other donor, and/or (b) with significant country involvement. According to the Paris Declaration monitoring survey, in 2005 20 percent o f IDA missions were undertaken jointly with another development partner, compared to an average o f 18 percent for all donors. Considering the number o f missions inrelationto the amount of financial support provided, on average there is one IDA mission for every US$2.6 million o f support, compared to one donor mission for every US$l.8 million o f support by other donors. Still, IDA undertook nearly 2000 missions per year inthe 30 countries, the second- largest number among the donors participating inthe survey. To facilitate the monitoring and management o f joint missions, IDA i s adding to the Country Analytic Work website a feature to facilitate mission tracking and c~ordination.~' 37. Improved division of labor is an important objective of the harmonization agenda. There is a large potential to reduce transaction costs for both partner governments and development agencies from actions in this area. IDA's current approach to an effective division o f labor is grounded in efforts for enhanced selectivity in country assistance strategies. Areas and forms of support are determined based on partner countries' views on IDA's comparative advantage and value added. While IDA IDA will also continue to maintain the Country Analytic Work Website (CAW), a central repository through which development partners can share their work. The CAW website carries over 4,700 reports contributed by more than 30 bilateral and multilateral donors, and it had more than 55,000 visitors in August 2007. IDA is the only donor to post its planned ESW on this website to facilitate up-front coordination with donors and partner countries; IDA also shares plans for country ESW by publishing CASs. An additional insight on IDA's analytic work is provided by QAG's series of country assessments of analytic and advisory activities (AAA) during the periods FY02-04 and FY06-07. These two assessments found that 85 percent of country AAA programs were moderately satisfactory or better with respect to the quality of partnership arrangements with other donors; 99 percent were moderately satisfactory or better for the quality of the mechanisms and opportunities for donor consultation; and 86 percent were moderately satisfactory or better for the consideration of other donors' comparative advantages, requirements, and needs. See Quality of AAA, A QAG Assessment, November 22, 2005, QAG, World Bank. Focus on Results: TheIDA14 Results Measurement System and Directionsfor IDAI.5,op. cit. This capacity is being developed at the suggestion ofthe Ghana country office. -21 - remains the lead donor for many projects and programs it supports, with more frequency it is taking a supporting role with other development partners being in the lead. Examples include the education sector inBurkina Faso where the Netherlands is the lead donor for basic education while IDA leads on secondary and higher education; Bangladesh where the Asian DevelopmentBank leads support to the education sector by a donor group including IDA; the education sector program in Mali, led by the Agence Franqaise de DCveloppement; and the multi-donor budget support group in Tanzania, chaired on a rotatingbasis by a bilateral donor. 38. Perceptions of IDA's collaboration with other development partners are generally positive. The MOPAN assessment characterizes the World Bank's performance with respect to harmonizationand alignment as follows: 0 forthcoming with general information, but less proactive with other types o f information; 0 positive performance in the area o f interagency coordination, but sometimes seen as too dominant; 0 cooperation with UNagencies should be enhanced; 0 actively supports harmonization at a strategic level, but slow progress in applying itto its own procedures; and 0 improvements incountry responsiveness and decentralization are needed. Respondents to the client survey also indicate a relatively highdegree o f satisfaction with IDA's collaboration with other donors (see Figure 9). The Assessment of Multilateral Organizational Effectiveness (MEFFQ' carried out by the Department for International Development (DFID) assesses the World Bank's partnership focus (which reflects interagency coordination and efforts to deliver on the harmonization agenda) and rates the Bank fairly highly incomparison to other development banks(see Figure 10). Figure 9. Client Survey Feedback on Figure 10. DFIDMEFFassessmentof IDA's Collaboration with Other Development performance in harmonization Partners The World Bank collaborates with Partnership Focus other donors here 7 I --"I--- - I - I I ~ 2006 2005 2004 f-- I I , 1 3 5 7 9 World Bank Other Multilateral Organizations Mean level of agreement Scale of 1 - 10, 1 being strongly disagree and 10 being strongly agree Source: DFID 's Assessment of Multilateral Organizational Effectiveness, op. cit. Source: World Bank Client Surveys. '' See DFIDs Assessment ofMultilatera1 Organizational Effectiveness: an Overview of Results, op. cit. - 22 - IV.IDAAS A PLATFORM-INITIATIVESANDIMPLEMENTATION CHALLENGES 39. IDA is well suited as a platform for greater aid effectiveness at the internationaland country levels. IDA'Score strengths are its financial resources, its technical skills, and the quality o f its knowledge products and policy advice.32 IDA is valued also for its global knowledge and reach; its adaptability to country priorities and ownership, rather than narrower interests; and its multisectoral perspective, which brings greater strategic coherence to development assistanceprograms. A. InternationalPlatform 40. CooperationbetweenIDA and the multilateraldevelopmentbanks(MDBs) has increased. Inrecent years the MDBs have moved beyond merely acting as each others' main cofinancing partners to play a greater role in promoting and implementing the country-based approach to development cooperation (see Box 7). Operational cooperation at the country and regional levels providesjoint analytic and advisory work and helps secure financing o f US$35-40 billion annually to client countries. To provide coherent support to governments, the MDBs agreed with the IMF on a protocol on collaboration in the preparation o f PRSs. To reduce transaction costs for clients and increase effectiveness, the MDBs collaborate on a broad range o f work on harmonization of operational policies, procedures, and approaches: for example, some 15 technical working groups have prepared common documents or good practice references on financial management, procurement, environmental assessments, managing for results, evaluation, and fragile states. An MDB Roundtable o f policy officials meets each year to share information on policy development and assess progress on issues of harmonization and alignment. As chair o f the MDB forum on financial management, IDA also played the leading role inthe MDBs' adopting the use o f country financial management systems as the default option when those systems meet an agreed set o f performance criteria. 41. IDA is increasing its partnership and cooperation with the European Commission (EC). Inthe Middle East and North Africa Region, collaboration is based on an M O U and is enhanced by a high-levelpolicy dialogue known as the "Luxembourg Process." In Africa, the "Limelette process" partnership focuses on a range o f policy disc~ssions~~ and seeks complementarity between the Africa Action Plan and the EU's Strategy for Africa. The EU has recently adopted a voluntary Code of Conduct on Complementarity and Division of Labor in Development Policy, and the Bank is exploring collaborative efforts to pilot this code in a number o f African countries. With regard to trust fund and cofinancing arrangements, the relationship between the two institutions i s governed by a Framework Agreement concluded in2001. The World Bank and the EC are also considering the idea o f a comprehensive institutional framework that would formalize a wide range o f operational, policy, and financing cooperation. The European InvestmentBank is a partner inthese processes. 32 See The Role of IDA in the Global Aid Architecture: Supporting the Country-BasedDevelopment Model, World Bank, ResourceMobilization Department, June 2007. 33 The annual topics of the Limelette process have included PRSPs (2003); budget support and public finance management (2004); infrastructure, public finance management, and trade and regional integration (2005); and infrastructure and division of labor (2007). - 23 - Box 7. Examplesof country-level harmonization with regional development banks Asian Development Bank. In Tajikistan, IDA and the Asian Development Bank have held several joint retreats to strengthen harmonization efforts, generally including other donors as well. Most recently, in July 2007, staff o fboth institutions agreed tojoin efforts inthe following fields: 0 Joint technical assistance to set up a monitoring system for the Paris Declaration; 0 Joint country economic and poverty reduction work; 0 Joint education sector portfolio review; 0 Joint analytic and sector work in the health sector, and joint support to the health sector Management Information System; 0 Upgrading the multifunctional role o f thejoint Development Information Center; 0 Adding a common public information window to joint portfolio reviews; and Joint databases and daily subsistence allowance rates. African Development Bank. IDA and the Afiican Development Bank are involved in cooperation on several levels: 0 Using a common financial management platform (e.g., in Nigeria), common PIUs, joint supervision missions, and joint reviews o f sector and budget support (e.g., in Rwanda), and preparing joint assistance strategies. 0 The joint assistance strategy under way in Gambia which provides a recent example o f close collaboration in a country that i s relatively less advanced in harmonization and alignment. Gambia's strategy will allow the two institutions to avoid duplication o f efforts and combine their technical expertise. Under this joint strategy, they have developed shared objectives and a common platform for lending and nonlending services, which will include joint contribution to budget support, joint investments ingrowth and competitiveness, andjoint analytic work inthe areas o f public finance, civil service reform, and governance. Inter-American Development Bank. The World Bank and the Inter-American Development Bank have been collaborating actively on: 0 Preparing ESW and using common procurement bidding documents and common thresholds for national competitive bidding. 0 In both middle-income and IDA countries (such as Bolivia and Nicaragua), jointly undertaking Country Financial Accountability Assessments and Country Procurement Assessment Reports and usingthem as aplatform for PFMreform. Cross-regionalcooperation. In February 2006, the heads of the major MDBs set up ajoint task force to develop a consistent and harmonized approach to anticorruption work. On the basis o f the task force's recommendations, the heads o f these seven MDBs agreed to a common framework for fighting fraud and corruption in the activities and operations their institutions fund. Thejoint actions include standardizing the definitions the institutions use in sanctioning firms involved in corrupt activities, improving the consistency o f investigative rules and procedures, and strengthening information sharing. The major MDBs will continue to work together to assist countries in strengthening governance and combating corruption incooperation with civil society, the private sector, the media andjudiciary. MDBshave also focused increasing attention on the special challenges posedby fragile states and are working on identifyingopportunities for increased harmonization amongst their approaches to fragile situations. One o f the key recommendations is a proposal for MDBs to adopt a common approach for identifying fiagility, recognizing that it exists at both national and subnational levels, and to partner with the UN and other development partners in shared post-conflict and post-disaster recovery planning. 42. The World Bank will strengthen collaboration with the UN system and is collaborating with the UNDP on the scaling-up agenda and in developing a coordinated approach to support in fragile states. InJune 2006 the World Bank and the UNDP jointly presented a paper on scaling up and the country-based development - 24 - model at an OECD/DAC-World Bank meeting on scaling up assistance in well- performing African countries. Under its 2006 differentiated assistance strategy framework for work infragile states,34IDA tailors its role to the country context: it may take a larger role in a state o f transition or gradual reform, or follow the lead o f the UNor other donors ifthere is limited or no government capacity. To ensure a more coordinated approach to engagement in fragile states, the Bank and UN are working toward a partnership agreement that will guide and support collaboration between them in post- crisis situations. The agreement will build on the existing productive relationship between the two organizations, which includes a common approach for post-conflict needs assessments and transitional results frameworks, coordination with peace-keeping and humanitarian planning processes, joint operations at the country level, transfers o f funds between the organizations, and joint commitment to strengthening national institutions. It i s intended to ensure the timely delivery o f financing from the Multi- donor Trust Fund while providing appropriate safeguards. The Global Facility for Disaster Reduction and Recovery helps developing countries mitigate their risks from natural hazards. This global initiative, financed by the Bank's Development Grants Facility and multi-donor trust funds, is a collaboration among UN agencies, the World Bank Group, and other development partners. Various interventions in disaster risk mitigationand preparedness at the global, regional, and country levels help disaster-prone countries integrate risk factors intheir development policies, reduce their vulnerabilities, and harmonize the disaster risk management approaches of such partners as UNagencies, donor countries, internationalfinancial institutions, and other stakeholders. 43. World Bank collaboration with the IMF has developed further. A recent report35on collaboration between the IMF and the World Bank identifies examples of good cooperation between the two institutions while highlighting the scope for improvements in a number o f areas. It called for the strengthening of the culture o f collaboration and made proposals for improving Bank-Fund collaboration in the two institutions' country and thematic work. In response, the World Bank and the IMF developed a Joint Management Action Plan, which was presented to the Boards o f the two institutions on October 9, 2007.36 The action plan aims to achieve the following objectives: Improved coordination on country issues-through new procedures for country team coordination, including regular meetings on work programs, agreement on instruments and division of labor, and new systems for requesting andtracking inputs from the other institution. 0 Enhanced communications between the staff of the two institutions working on common thematic issues-through new electronic platforms for sharing o f focal point names, documents, mission schedules, and other information among staff in the two institutions working on country teams and/or the financial sector, fiscal issues, and technical cooperation. 34 OperationalApproaches andFinancing in Fragile States,op. cit. 35 Report of the External Review Committeeon IMF-WorldBank Collaboration, February 23, 2007. 36 Enhancing Collaboration: Joint Management Action Plan (Follow-Up to the Report of the External Review Committeeon WorldBank-IMF Collaboration), SecM2007-0117, September 2007. - 25 - 0 Improved incentives and central support for collaboration on policies, reviews, and other institutional issues-through new procedures for reflecting collaboration in staff and managerial performance reviews, and the replacement o f the Joint Implementation Committee by an information and monitoring clearinghouse function anchored in the Poverty Reduction and Economic Management Network in the World Bank and the Policy Development and Review Department in the Fund, which also will manage the institutional systems for cross-support. 44. IDA is engaging with non-DAC donors. IDA recognizes that in many developing countries, emerging and transition economies and other non-DAC donors are becoming increasingly important as sources o f development finance. It has held workshops or consultations with such donors as China, the Czech Republic, and Russia as a way to strengthen working relations and discuss specific topics on a range o f fiduciary and operational matters. It has signed an MOU with the Export Import Bank o f China, an increasingly important provider o f development financing, especially inAfrica (see Box 8). An MOU with the China Development Bank i s under discussion. At the country level, IDA has been working with a diverse group of donors and has (a) encouraged non-DAC and new donors to become part o f the country-based local donor groups, (b) welcomed these donors into collaborative work and strategies, and (c) encouraged their participation in the Resources, Results, and Partnership (see next section) and other Consultative Group processes. Box 8. Partnership with the Export-Import Bank of China In May 2007, the Export-Import Bank of China and the World Bank signed an MOU aimed at building collaboration on development, particularly in Afkica. Established in 1994, Eximbank is China's state policy bank for international economic development and cooperation. It serves as a key channel of financing for exports, overseas construction contracts, andoverseas investment projects and i s the only arm for concessionary lending. The World Bank has established a strong working partnership with Eximbank through workshops, seminars, and training events on such topics as fiduciary and financial management, procurement, environmental safeguard analysis, social impact analysis, and monitoring and evaluation. The MOU, which represents an important step forward in the institutions' cooperation, draws on the complementary strengths of each organization: China's own development experience and the World Bank's expertise inanalysis and capacity building. 45. Aligning with vertical funds is an emerging challenge. In recent years the growing practice o f earmarking aid resources for s ecific purposes-including global programs, trust funds, or vertical hnds -has % through expanded the sources o f development assistance but has also posed challenges to effective aid delivery and management within a country-based development model. The governing bodies o f some o f these programs have signed the Paris Declaration, and there i s a growing recognition that their development impact will depend upon alignment with national systems and strategies. IDA helps to support the country-based model by providing the analytic and operational framework within which these donors can align their programs with country priorities and participating in common arrangements for aid delivery and management. 37 These trends are discussedmore fully inAid Architecture: An Overview ofthe Main Trends in Oflcial DevelopmentAssistanceFlows, February 2007, a paperprepared for the IDA15 negotiations. - 26 - In particular, IDA's public expenditure work in many partner countries provides an important entry point to identify untapped complementarities and synergies among various sources of finance. The Global funds are increasingly addressing issues o f alignment and are usingjoint instruments. InMozambique, for instance, the Global Fund has joined a sectonvide approach involving IDA, and the Education for All Fast-Track Initiative i s pooling funds with IDA to provide education sector support. 46. IDA will work with global programs to support the country-based model of development. Together with WHO and the OECD, IDA is working on aid effectiveness inthe health sector, which-with its inherent complexity and its number o f active donors (including vertical funds and private foundations)-poses particularly acute challenges. IDA is also partneringwiththe OECD and others to explore goodpractices for the use in global programs at the country level in a few representative partner countries. Both o f these work streams are meant to lead to evidence-based concrete actions that the international community could consider inthe 2008 High-Level Forum. To contribute to broadened engagement with all donors, including nontraditional ones, and to the collective effort that is required to meet aid effectiveness challenges, IDA will also continue its analysis o f the global aid architecture. In this context, partner countries' leadership in aid management and donors' demand for operationalizing good practice principles of aid delivery remaincritical. 47. IDA's platform role is also relevant in addressing regional and global issues that ultimately need to be tackled at the country level. IDA can assist in addressing cross-border dimensions of certain problems, such as climate change, through its analytical capacity, ability to deliver complex regional projects and build consensus among countries involved. IDA also can also play a part in leveraging and managing funds from other donors, e.g., for the Avian FluInitiative. B. Country-Level Platform 48. As surveys and evaluations of IDA point out, IDA is valued at the local level for its technical expertise and relationship with governments. IDA-supported projects and programs often serve as anchors for financial support by other donors. While previously such support was often through formal co-financing, in recent years many development partners have usedparallel, pooled, or basket funding arrangements to provide financial support. Where harmonization is relatively strong, this results in a strong partnership between IDA and other development partners. At present, however, there i s no systematic information that would allow quantifying IDA's contribution to such parallel financing arrangements or the overall level o f finance leveraged. 49. Joint financing arrangements are one tangible outcome of harmonization efforts. IDA will discussjoining with other donors to carry out a survey o f selected IDA country programs and the total amount o f co-financing and o f pooled and parallel financing they leverage through budgetary support and investment lending. The survey would also contribute to a better understandingo f country-level behaviors and incentives that affect increasing overall joint financing o f government-owned programs and projects. - 27 - 50. IDA'S convening power supports the broadening and deepening of aid effectiveness approaches. Recent concrete examples of use o f IDA'Sconvening and catalytic capacities at the country level include the following: With the Netherlands, Sweden, UK, EU, and UNDP, IDA is promoting the Results, Resources, and Partnership (RRP) process to support PRS implementation and country-driven devel~pment.~~ The RRP process aims at enhancing the results-orientation of national strategies, increasing the transparency and predictability o f resources, and strengthening mechanisms o f mutual accountability for achieving results. Depending on countries' needs, this may entail costing the PRS, enhancing monitoring and evaluation, or developing mechanisms to improve the predictability o f external resources. By enhancing the country-driven development process, RRP aims to enable a more effective scaling-up of resources and results. IDA i s initially promoting thisapproach inGhana, Madagascar, and Tanzania. IDA has been closely involved in several division of labor exercises- processes through which donors coordinate in limitingthe number of sectors in which each is active. The goal is to reduce the transaction costs of intra- sector coordination for the country government, ensuringa better allocation o f resources across sectors and improving overall aid effectiveness. o Zambia undertook its first division of labor exercise as part of the preparation o f a joint CAS, to decongest "over-supported" areas and ensure adequate support to "orphan" sectors. After intense discussions, IDA, bilateral donors, and the Government reached agreement on a definition and repartition o f roles (with lead, active, and background partners in each sector). Annual reviews are envisaged at the sector level and more broadly, to assess donors' performance in sector management, reduction of transaction costs, and improvement o fpolicy dialogue. o Ina Joint Assistance Strategy inUganda, donors committedto achieve a better division of labor among themselves. This triggered an extensive discussion process that is still ongoing, but i s already delivering benefits in terms o f improved sector dialogue and mapping of aid flows. With IDA'Sactive involvement, this process i s being facilitated by independent consultants and involves donors' peer reviewsoftheir comparative advantagesinvarious sectors. o In Mauritania, IDA prepared its CAS in a highly participatory way, sharing and discussing with the Government and all donors its analysis of the country context and challenges, drawing up an updated status of donors' flows and sector needs, and building a common view on the country's PRS. To help define its future sectors o f operation, IDA engaged with the Government to assess the strengths and weaknesses 38 See Country-Based Scaling Up: Assessment of Progress and Agendafor Action, September 26, 2007. Paperpreparedfor the October 21,2007 Development Committee meeting. -28- of its teams in all PRS sectors. The choice o f the sectors where IDA would intervene was then based on (a) the Bank's comparative advantage as reflected in these discussions, (b) the sector financing gap, and (c) the existing support from other donors. Building on this experience, the Government plans to ask all donors to undertake the same analysis. In Madagascar, IDA is the nodal agency in a consortium to support the Government's health sector strategy through a sector-wide approach. An M O U between the Government and development partners outlines the organizational, institutional, and coordination arrangements o f each partner in the implementation o f the project. Cooperation with development partners and supervision will be coordinated by means o f biannual Health Summits. The project's fiduciary dimensions and focus on strengthening public budgeting, financial management, and procurement i s integrated with the country's broader development plans and assistance programs (e.g., the PRSC). Similar arrangements have been or are being developed in Bangladesh, Cameroon, the Kyrgyz Republic, and Malawi. 0 In Haiti, IDA'S support for education has been designed in close coordination with the Caribbean Development Bank. Project implementation will be undertaken by the ministry, without reliance on a parallel PIU, and both donors will use the same project management team and project implementation procedures, harmonized fiduciary arrangements, project reporting procedures, and audits, and will conduct joint supervision missions. It is anticipated that this programwill be implemented inpartnership with the EducationFor All-Fast Track Initiative. InGeorgia, the U.S. MillenniumChallenge Corporation (MCC) and IDA have forged a strong partnership for regional development. Given IDA'Slong experience with both municipal development and irrigation in Georgia, it was agreed that, for a fee, IDA would assist insupervisingMCC funds. 0 In Timor-Leste, AusAID and IDA have agreed on common technical and financial procedures and common project performance indicators for the Education Sector Support Project. The Government will handle coordination, implementation, procurement, disbursement, and financial management; capacity needs assessments will be completed in coordination withNZAID. There i s a growing demand for IDA support for regional activities, especially in Africa, where IDA cofinances many of its regional operations with the African Development Bank. Responding to this demand, IDA has used its convening power to advance several regional integration programs among development partners. It intends to step up its efforts to improve harmonization and alignment for these programs, which present particular challenges becauseof the many countries involved. 51. IDA will encourage harmonization of legal documentation and provisions in multidonor financing arrangements and facilitate a community of practice. The - 29 - development institutions face common legal challenges in a variety o f policy matters relevant to the activities they finance: for example, challenging legal agreements may be required for the procurement and financial management procedures under pooled hnding arrangements, delegated cooperation arrangements, and governance and anticorruption measures. Sharing knowledge and experience in these areas can help in developing solutions on matters o f common interest. More importantly, developingjoint solutions to these issues can facilitate harmonization o f approaches, and thereby joint operations. Building on the consultations donor agencies have undertaken inrecent years, early next year IDA will host a roundtable o f legal, operational, and policy advisers from the bilateral and multilateral agencies to discuss ways to reduce the transaction costs o f reaching agreement on the legal aspects of MOUs and other legal documentation involving multiple donors. 52. IDA will step up efforts to upgrade countries procurement policies and proceduresand ensure their efficient implementation. These efforts, which will build on the experience in procurement-related harmonization among MDBs, will be closely coordinated with other donors and will encourage countries to adopt standardized procurement documents. Helping countries strengthen their procurement systems will facilitate donors' progressive reliance on those systems, as called for in the Paris Declaration. 53. IDA's governance and anticorruption strategy aims to strengthen IDA's bilateralandmultilateralpartnershipsin accordancewith the Paris Declaration. To help countries strengthen the accountability and transparency of their state institutions, IDA will provide more consistent, continuous, and systematic assistance to government programs in governance and anticorruption, in accordance with the Bank's recently adopted governance and anticorruption ~trategy.~'Support for strengthening domestic accountability will be complemented by increased attention to the use o f local institutions and processes and a continued focus on participationby a wide spectrum of stakeholders. IDA will support harmonized approaches with other actors, division of labor to address the limitations of IDA's legal framework, work to make investigative rules and procedures more consistent across MDBs, information sharing, and establishment o f mechanisms by which donors recognize each other's sanctions. v.IDACORPORATEACTIONSTO STRENGTHENHARMONIZATION AND ALIGNMENT 54. At the November 2006 IDA14 Mid-Term Review, management discussed IDA's plans to strengthen its implementation of harmonization and alignment. These actions are being implemented (Annex B reports on progress). This section describes the Bank's strategic approach to aid effectiveness and the progress being made inimplementingthe actionplan, and proposes complementary measuresto betaken over the course o f IDA15 to meet the challenges o f the aid effectiveness agenda. 55. The World Bank has been among key donors implementingthe international aid effectivenessagenda over the past five years. With its focus on implementation at 39 Report of the ExecutiveDirectors: Strengthening WorldBank Group Engagement on Governanceand Anticorruption (DC2007-0005), March28,2007. - 3 0 - the country level, the Bank'dIDA's strategy for guiding internal actions has three elements: providing a supportive policy and procedural framework at the institutional level, exercising corporate oversight through internal review and monitoring processes, and providing internationalleadership on the harmonization and alignment agenda. A. A SupportivePolicy and ProceduralEnvironment 56. Over the past few years, IDA has implementedpolicy and proceduralchanges to support harmonization and alignment work. Among other things, the Bank has updated Country Assistance Strategy (CAS) guidelines to improve alignment with PRSPs, adopted a new policy on development policy lending that substantially reformed the use o f conditionality, simplified operating processes, facilitated pooling of funds, widened procurement eligibility, and facilitated joint analytic work. Moreover, recent Board guidance on the use o f country systems and the good practice principles for the application o f conditionality, as well as the governance and anticorruption strategy, will broaden the Bank's policy framework andprovide clearer direction to assist staff engaged in harmonization and alignment efforts. In the November 2006 discussions, the Executive Directors and the IDA Deputies welcomed progress achieved under this enabling environment but also emphasized the needto continue seeking ways to improve performance, particularly with respect to addressing staff and institutional incentives and capacity to implement at the country level. 57. IDA is working to strengthen staff incentivesand capacity. Aid effectiveness efforts involve trade-offs for both management and staff. IDA recognizes the role o f incentive systems, including management leadership, in supporting or hindering them.40 Inparticular, operations staff often cite budget allocations, pressure to deliver, or lack of recognition from management as factors limiting their ability to engage more on aid effectiveness efforts. Shortly after the IDA14 Mid-Term Review, a corporate message was sent to all operational vice presidents and communicated to all staff, setting out the expectations for greater engagement and asking Regions to support harmonization and alignment work. To promote more systematic attention to harmonization and alignment issues, inJuly 2005 work on harmonizationwas added as a parameter to be considered in senior technical and managerial promotions (levels GH and GI). Following on this, guidance will be prepared to help managers evaluate staffs contribution to harmonization and alignment at the country and sector levels. In addition, to emphasize concrete accountabilities on harmonization and alignment, good practice terms o f reference for country managers, country directors, sector managers, and sector directors are being put forward. Recently posted internal vacancy listings for country director and country manager positions contain explicit reference to the Paris Declaration, implementing harmonization and alignment, and donor coordination as duties and accountabilities for these positions. Also, in the context of the OECD-DAC Joint Venture on Managing for Development Results, IDA i s working with DFID on a draft guidance note on incentives for implementing goodpractice principles inaid effectiveness indonor aid agencies. 40 With DFIDand the Swiss Cooperation, IDA undertook a first study on incentives for harmonization in 2004 (see Paul0 de Renzio et al., Incentives for Harmonization and Alignment in Aid Agencies, Overseas Development InstituteWP 248, June 2005). In 2006, IDA commissioned a follow-up study (Overseas Development Institute, 2006). - 3 1 - 58. Changing aid delivery and management practices requires investment in skills development. IDA continually seeks ways to provide guidance to staff on aid effectiveness principles, IDA commitments, and implementation good practices: for example, information i s being provided in the new "Fundamentals o f Bank Operations'' course and sector network meetings; a skills development pilot for operational staff i s being prepared inthe Africa region; and harmonizationunit staff are participating as core team members o f several CAS and PRSC task teams to facilitate harmonization and alignment action. 59. Investment lending guidelines will address reliance on PIUs. IDA recognizes that heavy reliance on parallel PIUs drains capacity from country systems and undermines the incentives for institutional capacity development. Paris monitoring data indicate that while IDA accounted for 27 percent o f the disbursements in 2005, it accounted only for 13 percent o f parallel PIUs. Nonetheless, as IDA i s one of the largest donors, its leadership i s important to makeprogress inthis important area To encourage country capacity development by decreasing reliance on parallel PIUs, the revised investmentlendingguidelines will require that integrationof PIUs into government structures become the default option for IDA projects; any proposal to establish a new parallel PIUwould be considered an exception and would need to be clearly justified. This approach should lead task team leaders to pay more attention to capacity-building measures in financial management, procurement, and monitoring and evaluation. 60. IDA will continue to explore options for further decentralization. Although, as Section I1 described, the Bank has achieved significant decentralization, this has entailed budgetary as well as other trade-offs. Career reasons, family issues, security concerns, language constraints, or alternative Washington-based opportunities have often made it difficult to fill a rapidly increasing number o f field-based positions, and recruiting local staff with the right skills mix also presents challenges. It i s clear that decentralization cannot be considered as cost-neutral. Besides the budgetary framework, many other considerations also affect decisions about staff location-for example, IDA'S human resource management policy, strategic interests and operational planning, and the need to maintain staffs cross-country knowledge and technical excellence. The Bank i s working to enhance its HR policies with the aim o f increasing flexibility and mobility; it i s preparing additional proposals including on the compensation framework, overseas assignment benefits, and rotationpolicy, with special attentionto fragile states. To assist IDA'S and the Regions' consideration o f decentralization, management i s currently analyzing different models o f staff location and developing an approach to measure cost-effectiveness. For different client groups and types o f services, the analysis aims at laying out options to better calibrate and target expertise needed and the scale and scope o f decentralization. It will also help to better define cost-effectiveness in light of budget implications. In Dublin, management will discuss this ongoing analysis and the next steps foreseen. In implementing its action plan, the Africa Region is pursuing an ambitious decentralization o f internationally recruited staff to country offices. A net - 32 - increase of 50 internationally recruited staff inthe field compared to FY06 is planned by end FY08, and all new and vacant internationally recruited positions are currently plannedto be field-based. The Region will continue to progressively move sector leaders to the field, and it aims to have most task team leaders working on two or three countries, and based inone o f them. B. Corporate Review and Oversight 61. Upstream and downstream reviews of CASs and Quality Assurance Group (QAG) assessments are being used to reflect the corporate priority on improving the effectiveness of IDA program delivery. CAS reviews are now being used more systematically to advise operations staff on aid effectiveness and on harmonization and alignment elements: promoting partnership arrangements using collaborative country assistance strategies, division of labor exercises, and coordinated technical cooperation; relying more on programmatic approaches and using common arrangements; increasing use o f country systems where conditions are inplace; and moving away from stand-alone projects where there are better alternatives. QAG, which assesses random samples o f the Bank's work to identify systemic issues and track overall trends, has included donor harmonization and alignment inthe Country Analytic and Advisory Activities assessment since FY04 and i s now updating its assessment questionnaires to ensure that harmonization and alignment are addressed. The first set o f modifications-to the QAG questionnaires on the quality at entry o f investment and development policy lending- was incorporated in February 2007, and other questionnaires will be updated in the coming months. 0 IDA will update the good practice guidance on CASs to recognize joint/collaborative CAS preparation, provide advice on how best to manage this work, and encourage considering such collaborative work when it makes sense from a country perspective. 62. Country and Regional management will encourage country teams to increase their attention to harmonization and alignment. Ultimately, it i s country teams that must take advantage of the Bank's enabling policy environment to implement programs in a manner consistent with aid effectiveness principles. Country units and Regions are best placed to identify the most efficient avenues and set appropriate targets for progress that would truly reflect each country's needs, challenges, and opportunities. They can allocate the necessary resources o f staff, administrative budget, and training support (for instance, establishing harmonization and alignment focal persons in country offices can help IDA, other donors, and governments deal with such issues as improved flows o f information, timely provision of disbursement projections, or sharing of concept notes for analytic work and project preparation). Building on recent experience in the East Asia and Pacific and Africa Regions, IDA i s working to improve country-level review processes to help country teams and Regional management discuss progress in CAS outcomes and aid effectiveness (including harmonizationand alignment). Monitoring o f the Bank wide KPIs and of the each Region's country action plans for harmonization and alignment will promote accountability and allow senior management to reviewprogress. - 33 - 0 Regional management will support and monitor IDA's actions at the country level to assist in the preparation and implementation o f country-led plans for harmonizationand alignment. 0 Inaddition, management will review IDA's performance with respect to the predictability of disbursements at the country level and will report on findings and plannedactions at the IDA15 Mid-TermReview. C. Supporting and Leading the International Aid EffectivenessAgenda 63. IDA is actively engaged in the international aid effectiveness agenda and providing substantive support to the preparation of the Accra High-Level Forum (HLF). The World Bank is playing a key role inthe substantive preparationofthe HLF through its role as co-chair o f the DAC Working Party on Aid Effectiveness, and its active role in its subsidiary Joint Ventures (for instance, the World Bank currently co- chairs the Joint Ventures on public financial management, Fragile States, and on procurement). Planning has begun for the Accra HLF, to be held on September 2-4, 2008, inwhich over 100 partner and donor country ministers, heads of bilateral, regional, and multilateral development institutions, and representatives o f non-governmental organizations are expected to participate. The World Bank i s the Executive Director and Vice Chair o f the HLF Steering Committee; with the Government o f Ghana it co-chairs the Core Group for planning and organization; and with the Development Directorate of the OECD-DAC it serves as the joint secretariat for the HLF. Since January 2007, the Steering Committee has been discussing the HLF agenda, the outcome document, potential invitees, budgethnding needs, and related preparatory events. Inall this, IDA i s undertaking a substantial amount o f the preparatory work: developing concept notes, defining issues, developing a communications strategy, and so on. IDA is emphasizing consultation with all stakeholders to ensure broad ownership o f the agenda, including substantive roles and responsibilities in Accra, and to broaden the number o f countries where discussions andactions are taking place. 64. Consistent with its role at the international and country levels, IDA will strengthen its efforts in key areas for greater progress in harmonization and alignment: 0 To reduce the transaction costs o f reaching agreement on legal documentation in operations involving multiple donors, IDA will lead an effort to gain agreements with other lenderddonors on common (harmonized) legal requirements for MOUs injoint financing operations. Such agreements will, for example, facilitate the efficient operation of multi-donor trust funds and the useof harmonizedsafeguard and fiduciary systems injoint operations. 0 IDA will step up efforts to upgrade country procurement policies and procedures and support their efficient implementation. This effort, which will build on the experience in procurement-related harmonization among MDBs, will be closely coordinated with other donors, and will encourage countries to adopt standardized procurement documents. Helping countries strengthen their procurement systems will facilitate donors' progressive reliance on those systems. - 34 - 0 IDA will facilitate and support recipient countries in efforts to incorporate nontraditional partners-vertical funds, non-DAC donors, and the private sector-in harmonizationand alignment actions, To broaden this engagement and contribute to the collective effort to address aid effectiveness issues, IDA also plansto undertakefurther analytic work on the changing aid architecture. Joint financing arrangements are one tangible outcome o f harmonization efforts. IDA will carry out-jointly with other interested donors-a survey o f selected IDA country programs and the total amount o f co-financing, pooled and parallel financing they leverage through IDA'Sbudgetary support and investment lending. The survey should contribute to a better understanding o f country-level behaviors and incentives that affect the overalljoint financing o f government-owned programs and projects. D. Conclusion 65. Using the country-based development model, IDA is performing strongly in delivering and managing aid in collaboration with partner countries and a wide range of development partners and is working to further improve its performance. IDA's senior management i s committed to improve IDA's capacity to deliver and manage its resources, guided by aid effectiveness principles. With the support o f the Board, it has put in place a strong policy and procedural base to support and facilitate harmonization and alignment actions at the country level, and it i s usingcorporate review and oversight measures to encourage operational staff to adopt aligned and harmonized actions as a normal way o f doing development business at the country level. To accelerate progress in improving the management and delivery o f aid, it is taking the measures that were detailed in its management action plan during the IDA14 Mid-Term Review, and it will undertake additional measures to strengthen its contribution and support to aid effectiveness. 66. Donors and partner countries alike recognize IDA as a core element of the development assistance architecture in the world's poorest countries. Meeting the challenges of improving aid effectiveness clearly requires a collective effort by all parts o f the international aid community; it cannot be done by IDA alone. Still, IDA i s uniquely placed to foster the broader and deeper work on harmonization and alignment that is required to achieve the objectives o f aid effectiveness which are embodied in the Paris Declaration. IDA is also providing the critical analytic, diagnostic, capacity- building, and financial support countries need to achieve their own aid effectiveness goals. As indicated by the recent OECD-DAC survey, it is leading by example, influencing both countries and donors as it continues to improve its own overall effectiveness and results orientation. And its role in the international aid architecture gives it the perspective and respect it will need to engage with new players in the country-based development model. - 35 - ANNEXA. ANANALYSISOFPERFORMANCEONALIGNMENT ANDHARMONIZATION To facilitate the analysis of the Paris Declaration monitoring data, an aggregate indicator of country-level performance has been developed. It is based on the 12 Paris Declaration indicators and on two additional measures for the 30 IDA countries which took part inthe monitoring survey. The key element of this ranking is comparing across countries the scores of each Paris Declaration indicator. For each indicator, the top third, middle third, and bottom third performers were identified. Countries in the top third are assigned three points, those inthe middle third one point, and those inthe bottom third zero points. Table A1 provides the resulting cut-off values for the various indicators. In addition, two other indicators were used to give a broader view o f harmonization and alignment efforts at the country level: the existence o f an aid effectiveness action plan (or similar country document) and o f a collaborative Country Assistance Strategy. In the case o f these two indicators, three points were given to countries were such documents existed, one to countries were work was inprogress towards such documents, and zero to countries were no work had started. The average o f all indicators, minus indicator 8 (for which there are no score to be ranked), provides the overall ranking o f country-level performance on aid effectiveness shown inTable A2, and on which the analysis o f this annex i s based.45 For the analysis of IDA vs. non-IDA donors' performance in Figure 1 of Section I1o f this document, a similar method was used, but the calculation was restricted to the 7 indicators that apply to the donors: indicators 3, 4, 5, 6, 7, 9, and 10. Inany country, the performance o f IDA on these 7 indicators was translated into a score between 0 and 3 using the cut-off ratios given by table Al, and these scores were then averaged. The same method was used to translate the value o f the indicators for the non-IDA donors (usingthe average ofthe individual donor values ofthe indicators) into a single score. 45We also experimented with other aggregation schemes, such as calculating an average rating for each country based on the cardinal ranking for each indicator, or normalizing the indicators on a range between 0 to 100 percent. Using these alternative indicators yields broadly similar results to those presented inthis paper. The indicator used was chosen because o f its simplicity as well as because o f the potentially large measurement errors for individual indicators, which makes the clustering o f countries into broader groups preferable to aggregation schemes that use the values o f the variables more directly. - 36 - Table Al. Cut-offvalues for scoringthe ParisDeclaration indicators Paris Indicator Cut-off values Explanation Country Assistance Strategy? developmentstrategies (Indicator 1) ".................................................................... .............................................. .................. ......,..,.................................. ......... ................................. ........................ ............................................. .......,..,.............,..... 2010 Target: CountriesscoringB or higher s whose score moves MonitoringSurvey. programmes? (Indicator 4) Paris Monitoring Survey. (Indicator 5a) on ParisMonitoring Survey. Aid not usingcountry PFM based on ParisMonitoring I 2010 Target: I Reduce by 213 I Number of PIUs - 37 - Paris Indicator Cut-off values Explanation (Indicator 7)- donors and by government- based on Paris Monitoring Survey. I 2010 Target: 1 Halve the gap I Survey. 20io Target: frameworks? (Indicator 11) I I 2010 Target: 1 Reduce bv 1/3 I Countriesscoringlower than B accountability? (Indicator 12) 2010 Target:I All I Countrieshave review inplace 2 0 +I .-mu W E Y - 3 9 - This ranking methodology allows a number of interesting quantitative analyses o f the Paris Declaration monitoring data which support the discussion inthe main text: The correlation between harmonization and alignment performance and the quality of policies and institutionsis weak?6 As Figure A1 shows, the countries that have made the most progress with respect to harmonization and alignment also rate fairly high interms o f the quality of their policies and institutions. However, for other countries there i s only a very weak relationship between the quality o f the policy and institutional environment and o f aid delivery and management: countries with similar ratings on the World Bank's Country Policy and Institutional Assessment (CPIA) show large differences in harmonization and alignment. This suggests that while a strong institutional and policy environment certainly facilitates the implementation o f the Paris Declaration principles, targeted efforts by all development partners can also yield good harmonization and alignment performance in relatively weak institutional and policy environments. Figure Al. Weak correlation between harmonization and alignment performance and the quality of policies and institutions 2.5 3.0 3.5 4.0 CplA rating Source: Paris DeclarationMonitoring Survey and World Bank data. Harmonization and alignment are stronger in countries with large absolute net aid inflows and large IDA allocations47(see Figure A2). This finding may reflect the facts that alignment and harmonization are costly and that a significant effort i s required to build an appropriate knowledge base, strengthen country systems, and create social capital as the foundation for improved alignment and harmonization. The effort and resources required to build these foundations are to a large extent fixed and similar for all countries, independent o f their size or income. Donor and IDA resources allocated for such investments are typically in proportion to 46As the countries that participated inthe survey were self-selected, countries with weaker CPIA ratings and fragile states are underrepresented. 47 The coefficient of correlation between the aggregate harmonization and alignment indicator and the IDA allocation is 0.71. Multivariate regression analysis also confirms that the IDA allocation and net official resource flows are statistically significantly related to harmonization and alignment performance. A similar result i s obtained when in the regression analysis the main determinants of IDA country allocations-population, income, and quality o f policy and institutions-are used as explanatory variables. - 40 - the aid volume, which would explain the close relationship between aid volumes and performance on harmonizationand alignment. Figure A2. Countries with large aid inflows show stroi er harmonization and alignment performance 17 17.5 18 18.5 19 19.5 20 20.5 21 3 4 5 6 7 0 official net resourceflows (in) IDA allocation (in) Note: Official net resource flows are measuredas the averageof data for 2004 and 2005. Source: WB development data platform and Paris Declaration Monitoring Survey. The implication of these findings is that to fully capitalize on recent changes in IDA'Spolicies and procedures that are aimed at fostering harmonization and alignment, IDA and the donor community will need to make continued investments in building the country level foundations for harmonization and alignment. In particular, this finding raises the issue o f how countries with smaller aid inflows-where improved aid effectiveness is especially important-can make progress. Progress among the weaker performers could be accelerated if resources for harmonization and alignment were delinked from the overall level o f assistance provided to a specific country. This delinking has already taken place for fragile states and i s reflected in stronger harmonization and alignment performance than would be expected on the basis of aid inflows. d z a /B B CA 0 I 24 2 m I h VI .5 %3 I m e3 I c.l d I Y 8 r a m 8blm v) G 8 .I Y 4zQ 0 a, e s m g 0 I 3 bl eu E .I Y M L n 0 .5 8 n 0 0 2; 0 , a 5! E m bl I E .I m 2 Y d E I E .I + e I m 0 E .I U m e a, U E .I a2 I 2 2E v1 d8 9 bl 8 Y L v1 ii + .I Y .-$ 0 a,