78695 IDA17 IDA17 OVERARCHING THEME: MAXIMIZING DEVELOPMENT IMPACT IDA Resource Mobilization Department Concessional Finance and Global Partnerships June 2013 Fiscal Year (FY) July 1 — June 30 Acronyms and Abbreviations AAA Analytical and Advisory Activities ADM Accountability and Decision Making AMC Asset Management Company BAPS Busan Action Plan for Statistics CAS Country Assistance Strategy CPIA Country Policy and Institutional Assessment CPPR Country Portfolio Performance Review FCS Fragile and Conflict-affected State FDI Foreign Direct Investment FPD Finance and Private Sector Development GDP Gross Domestic Product IBRD International Bank for Reconstruction and Development ICT Information and Communications Technology IDA International Development Association IEG Independent Evaluation Group IFC International Finance Corporation IFI International Financial Institutions IL Investment Lending ISR Implementation Status and Results Report JBP Joint Business Plan LIC Low-Income Country M&E Monitoring and Evaluation MDB Multilateral Development Bank MDG Millennium Development Goal MIC Middle Income Country MIGA Multilateral Investment Guarantee Agency NSDS National Strategy for the Development of Statistics OBA Output Based Aid ODTA Open Development Technology Alliance PARIS21 Partnership for Statistics Development in the 21st Century PBA Performance-Based Allocation PBG Policy Based Guarantees PCG Partial Credit Guarantees PEFA Public Expenditure and Financial Accountability PFM Public Financial Management PPP Public Private Partnership PRG Partial Risk Guarantee PRSC Poverty Reduction Support Credits PSD Private Sector Development PSM Public Sector Management RMS Results Meaurement System SABER Systems Approach for Better Education Results SPL Social Protection and Labor Strategy SWAp Sector-wide Approach WBG World Bank Group TABLE OF CONTENTS I. Executive Summary ........................................................................................................................ i I. Introduction .................................................................................................................................... 1 II. IDA17 Overarching Theme in Context ........................................................................................ 1 Maximizing Development Impact in IDA17 ..................................................................................... 4 III. Leveraging Private Resources ...................................................................................................... 6 A. Optimizing “Three for One:� Integrated Support for Private Sector Development in IDA Countries ........................................................................................................................................ 10 B. Unlocking Private Resources: Expanding the Range of IDA Guarantee Instruments and Transformative Approaches ........................................................................................................... 11 IV. Leveraging Public Resources ...................................................................................................... 12 A. Support for Public Financial Management .................................................................................... 16 B. Support for Evidence-based Policymaking in IDA Countries ....................................................... 17 Statistical Capacity Building for Informed Decision-Making ....................................................... 17 Building Beneficiary Feedback Loops ........................................................................................... 18 V. Leveraging Knowledge ................................................................................................................ 19 Advancing the Science of Delivery in IDA Countries .................................................................... 21 Leveraging the Bank as a Global Connector of Knowledge .......................................................... 21 VI. Enhancing Development Results and Cost Effectiveness and Efficiency for Maximum Development Impact .................................................................................................................... 24 Development Impact and Results ................................................................................................... 24 IDA Cost Effectiveness and Efficiency ........................................................................................... 28 IDA17 Results Measurement System ............................................................................................. 32 Tier 1. IDA Countries’ Progress................................................................................................... 33 Tier 2. IDA-Supported Results ...................................................................................................... 35 Tier 3. IDA Operational Effectiveness .......................................................................................... 36 Tier 4. IDA Organizational Effectiveness ...................................................................................... 37 Next Steps in the Results Agenda ................................................................................................... 38 VII. Issues for Discussion .................................................................................................................... 38 References .................................................................................................................................................. 40 List of Boxes Box 1: Examples of WBG Collaboration on Private Sector Development in IDA Countries ...................... 9 Box 2: Public Sector Results Achieved with IDA Support......................................................................... 14 Box 3: Strengthening Delivery Systems to Create Growth Poles and Jobs in Sierra Leone ..................... 15 Box 4: Statistical Capacity Building for Informed Decision-Making in Tanzania ..................................... 17 Box 5: Using Beneficiary Feedback to Improve Accountability and Service Delivery – Emerging Lessons from E-ISR+ ............................................................................................................................................... 18 Box 6: South-South Knowledge Exchange Results Achieved with World Bank Support ........................ 23 Box 7: Supporting Openness and Transparency through the Open Data Initiative .................................... 26 List of Figures Figure 1: WBG Strategic Framework ........................................................................................................... 4 Figure 2: IDA17 Overarching Theme ........................................................................................................... 4 Figure 3: Continuum of WBG Support for Private Sector Development ..................................................... 6 Figure 4: IDA Value for Money Framework .............................................................................................. 25 Figure 5: Sustaining, Support, Institutional and Indirect Costs per US$100m of IDA Portfolio ............... 29 Figure 6: Average Costs of Fiduciary, Procurement, Portfolio Management, Loan Accounting and Disbursement Services per US$100m of IDA Portfolio ............................................................................. 29 Figure 7: IFI Concessional Spending per US$100m of Concessional Lending Commitments .................. 30 Figure 8: Average Accumulated Preparation (Completion) Cost ............................................................... 31 Figure 9: Average Cost of Supervision per US$100m of IDA Portfolio (US$’000) .................................. 31 List of Tables Table 1: Proposed Changes to Tier 1 .......................................................................................................... 34 Table 2: Proposed Changes to Tier 2 .......................................................................................................... 35 Table 3: Proposed Changes to Tier 3 .......................................................................................................... 36 Table 4: Proposed Changes to Tier 4 .......................................................................................................... 37 List of Annexes Annex 1: Strategic Convergence Across IDA, IFC and MIGA .................................................................. 39 I. EXECUTIVE SUMMARY i. The IDA17 overarching theme, “Maximizing Development Impact,� encapsulates IDA’s enhanced value proposition towards ending extreme poverty and boosting shared prosperity in IDA countries. The IDA17 overarching theme was agreed at the first meeting of the IDA17 Replenishment negotiations held in Paris on March 20-21, 2013. This paper discusses the key dimensions of the overarching theme and the proposed strategic approach to helping IDA countries maximize development impact in IDA17. ii. In the context of a rapidly changing global economic landscape, many IDA countries have made progress in reducing poverty and achieving other Millennium Development Goals (MDGs). Increased trade and investment to and among developing countries have created further opportunities to leverage finance and knowledge for development, including in IDA countries. As part of these broader trends and improved policy performance, many IDA countries have been able to accelerate economic growth over the past decade and significantly reduce poverty. Nonetheless, progress has been uneven. Roughly one billion people still live on less than US$1.25 per day in IDA countries, which account for about 80 percent of the world’s poor. In addition, the poverty headcount increased in sub-Saharan Africa and in Fragile and Conflict-affected States (FCSs), many of which are lagging behind on most MDGs. iii. This is a moment of unique opportunity for concerted and accelerated action to support IDA countries’ efforts to secure the gains achieved, seize emerging opportunities and confront evolving challenges. The global goal of ending extreme poverty within a generation is possible but will require deliberate action to confront evolving risks and challenges. Ending poverty will require maintaining the growth momentum of the last decade while tackling rising inequality through more focused interventions that ensure that growth expands opportunities for the poor. In addition, it means addressing fragility and cross-border challenges at the global and regional levels. Meeting these opportunities and challenges calls for helping IDA countries to better leverage financing and knowledge for development which will also place them on a path out of aid dependency. iv. Against the rapidly changing global context and evolving client needs, the World Bank Group (WBG) has embarked on a strategy and change process. As per the discussion with the Development Committee at the April Spring Meetings, a key objective of the WBG’s strategy is to tighten the Group’s focus on its core mission – a world free of poverty – and rally the international community around this. To aid this effort, WBG activities will be aligned toward the achievement of two goals: reducing extreme poverty to 3 percent by 2030 and fostering income growth of the bottom 40 percent of the population. IDA is the main instrument to achieve the WBG goals in the poorest countries, with the additional leverage brought by the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA). At the same time, the WBG strategy will reinforce IDA’s ability to provide increasingly effective, customized and integrated solutions for clients for the goals of ending extreme poverty and promoting shared prosperity. v. Consistent with the WBG strategic directions, IDA will focus on “Maximizing Development Impact� during IDA17. The theme points to IDA’s commitment to continuous improvement, adaptation and innovation as a global platform for development. Building on IDA16’s focus on “delivering development results,� and recognizing the need to respond to a -ii- changing economic landscape, IDA will strive to better leverage: (i) private investment, including by tapping synergies of the WBG, particularly of IFC and MIGA; (ii) public resources, by further strengthening public sector institutions and service delivery systems; and (iii) knowledge, by optimizing the use of WBG and external knowledge, implementation lessons and capacity, including facilitating South-South learning. IDA’s leveraging of resources encompasses catalyzing other funds for development as well as supporting more effective use of existing resources at the country level. In addition, IDA will enhance: (iv) cost-effectiveness of IDA operations and organizational cost-efficiency; and (v) IDA’s results measurement and communication. These five dimensions, discussed in detail in the paper, are summarized below, with proposed IDA17 commitments for the overarching theme presented in the table below (proposed commitments for the special themes are discussed in the companion “IDA17 Special Themes Paper�). • Leveraging Private Resources. Private investment is the main driver of growth and job creation which are needed for continued progress in poverty reduction. In IDA17, the WBG will step up its support for IDA countries to catalyze private resources and to promote foreign and domestic private investment for development priorities such as infrastructure, particularly regional transformational projects. To further leverage private resources, IDA will focus on optimizing the “Three for One� value proposition by enhancing synergies and developing joint approaches across IDA, IFC and MIGA for potentially transformative impact in IDA-only countries, including a special focus on FCSs. These synergies will also be fundamental for strengthening WBG support in IDA17 for transformative projects. • Leveraging Public Resources. The quality of public institutions and policies is a key determinant of inclusive and productive societies. In IDA17, IDA will intensify efforts to leverage public resources by strengthening public sector institutions and systems, thus multiplying the influence of IDA’s financing beyond projects and activities towards enhanced national expenditures and programs. To further leverage public resources, IDA will focus on (i) promoting system-wide improvement in public financial management, including enhanced domestic resource mobilization and public expenditure use to promote inclusive growth and reduce dependency on external aid resources; and (ii) supporting evidence-based policymaking in IDA countries through statistical capacity building and strengthening beneficiary feedback. These areas of emphasis are mutually reinforcing: transparent use of domestic resources, for example, stimulates dialogue and accountability for results while improved data and beneficiary feedback support enhances decision-making and service delivery. • Leveraging Knowledge. Together with long-term financing and strong convening power, knowledge is a core aspect of the unique value IDA brings to clients. IDA’s client engagement integrates generating knowledge with partners; facilitating knowledge exchange across countries, including between IDA countries and Middle Income Countries (MICs); and learning from project implementation lessons, impact evaluation and beneficiary feedback to strengthen project design and execution. In IDA17, efforts to maximize leveraging of knowledge will include advancing “the science of delivery� in IDA countries and scaling up the Bank’s role as a knowledge connector, including for South-South exchanges. More specifically, advancing the science of delivery in IDA countries will include more systematic use of evidence-based methods during project implementation to strengthen delivery of results. -iii- vi. IDA has developed a strong and effective business model that delivers value for money. Throughout its operational cycle, from the allocation of its resources, through project preparation and implementation, to completion and impact assessment, IDA uses a robust framework to maximize the development impact of the programs and activities it supports. This framework includes: allocation of IDA resources based on performance and results; strong quality assurance and fiduciary and risk management processes; a robust evaluation and accountability framework to ensure evidence-based decision making; a strong system of internal controls; and commitment to transparency and accountability. IDA’s focus on delivering development impact and results for clients also involves making sure that it has the tools to monitor and report on results as well as deliver effectively in a cost efficient manner. The paper focuses on these two aspects by describing the current status and proposed actions to help IDA countries deliver stronger results and take results measurement and monitoring to a new level and further enhance cost effectiveness in IDA17. • Cost effectiveness and efficiency. IDA relies on WBG systems and processes that have a constant focus on delivering effectively in a cost efficient manner. This includes emphasis on low cost solutions, ensuring efficient administration systems and benchmarking costs. As a result, indicators of cost effectiveness and efficiency confirm the high value for money generated by IDA. These indicators show improvement over the last several years even while the scope of work and range of complexity has increased, to the point that additional spending may now be needed in selected cases to ensure minimum quality standards. Efforts to further enhance cost effectiveness and efficiency will build on ongoing cost-saving initiatives as well as forthcoming plans to further simplify and enhance business planning and performance measurement, in alignment with the forthcoming WBG strategy and financial sustainability. Furthermore, IDA will regularly publicly disclose IDA project preparation costs and implementation costs and will pilot the calculation of unit costs in at least one sector. • Enhancing IDA’s results measurement and communication. In IDA17, IDA will take results measurement and monitoring to a new level and further enhance operational effectiveness and organizational efficiency. For IDA17, IDA will enhance the strategic relevance and coverage of the IDA Results Measurement System (RMS) to further strengthen accountability to its shareholders and clients. In this regard, Management proposes a number of changes in the RMS, including the introduction of new indicators to measure progress towards the WBG strategic goals and better capture progress on the IDA17 special themes. Also, the IDA RMS will include indicators to track IDA project preparation and implementation costs. Following the discussion of this proposed revised RMS in the second meeting of the IDA17 Replenishment negotiations, specific baselines and performance standards will be presented for those indicators that will be retained for discussion at the third meeting in October. In addition to enhancing the RMS, IDA will step up efforts to track its performance and its contribution to countries’ results. These include exploring and implementing innovative approaches to capture beneficiary and client feedback; continuing efforts to better measure IDA’s contribution to institution strengthening and capacity building; use of the Program for Results instrument and documenting lessons from preparation and implementation of the initial operations; and supporting client countries to develop their capacity to manage for development results. -iv- vii. Over time, IDA will continue to adapt to changing circumstances, opportunities and client needs. Increasingly, IDA’s role as a provider of catalytic finance and knowledge services to country clients will be enhanced through more deliberate leveraging of private and public resources as well as global knowledge to maximize impact and development results. IDA will continue to evolve to adapt to changing client needs where global issues, such as climate change, are likely to gain further ground. IDA’s platform as part of the WBG will be essential in responding to this evolving agenda. Proposed Policy Commitments for IDA17 (FY15-17) OBJECTIVE PROPOSED POLICY COMMITMENTS FOR IDA17 (FY15-17) Leveraging private • Enhancing synergies through IDA-IFC-MIGA joint business plans in at least 20 resources IDA countries (of which at least 10 are FCSs), including joint frameworks to measure results. • Expand IDA guarantee products to increase IDA countries’ access to market funding by including Partial Credit Guarantees (PCGs) and Policy Based Guarantees (PBGs) beyond existing Partial Risk Guarantees (PRGs) and to align guarantee policies with lending policies. Leveraging public • Step up efforts to support country statistical capacity via lending, technical resources assistance, the Statistics for Results Facility and South-South networks, and report on progress. • Deepen use of country Public Financial Management (PFM) and procurement systems as systems and capacity are strengthened, and monitor IDA’s performance as part of the RMS. • Expand use of citizen feedback tools and report on impact. Leveraging knowledge and • Use evidence-based methods more systematically throughout the implementation building feedback loops of Bank projects. This will include continuing the use of impact evaluations and the development and mainstreaming of a wider variety of evidence-based tools and approaches to develop scaled-up and robust Monitoring and Evaluation (M&E) components providing real-time data to support project mid-course corrections. • A system for tracking and reporting (South-South) knowledge exchange activities embedded in operations, with dissemination of lessons for frontline teams. Support for countries to build institutional capacity for capturing, packaging and sharing their development experiences through South-South knowledge exchanges. Strengthening the IDA17 • The IDA17 RMS will include new indicators to measure and monitor progress in Results Measurement key areas including cost effectiveness and efficiency. System Ensuring cost efficiency • Corporate planning and budget will be aligned with the WBG goals and strategy and effectiveness from FY15. • Revision of procurement policies. • Implementation of Investment Lending (IL) policy and procedures and of improved accountability and decision making framework to strengthen quality and ensure faster processing. • Publicly disclose IDA project preparation and implementation costs. • Pilot calculation of unit costs in at least one sector. I. INTRODUCTION 1. Significant changes are reshaping the landscape for development support, creating unique opportunities and challenges for IDA countries. Increasing and diversified sources of finance, knowledge and partnership are building momentum for accelerated investment and growth for IDA countries, while advances in information technology are expanding access to new ideas and promoting greater efficiency. At the same time, the range of development challenges is also increasing – from growing inequality to fragility, climate change and cross- border vulnerabilities. 2. The IDA17 overarching theme of “Maximizing Development Impact,� selected by the IDA Deputies and Country Representatives at the first meeting of the IDA17 Replenishment negotiations, encapsulates IDA’s enhanced value proposition to help countries seize emerging opportunities and confront complex and interrelated challenges to transform the lives of the poor in IDA countries.1 The IDA17 overarching theme integrates a sharpened focus on IDA’s capacity to leverage public resources, private resources and knowledge while further enhancing IDA’s results, cost effectiveness and efficiency. The theme is anchored in the broader WBG strategy and change agenda to accelerate ending extreme poverty and boosting shared prosperity. 3. This paper outlines IDA’s proposed strategic approach to help IDA countries maximize development impact in IDA17. Section II recaps the key factors shaping the global development agenda in relation to the IDA17 overarching theme. Sections III through V discuss IDA’s efforts to leverage private resources, public resources and knowledge, respectively, for greater impact in IDA countries in IDA17 and set out the proposed policy commitments for IDA17 in these areas. Section VI discusses IDA’s approach to further enhance operational effectiveness and organizational cost efficiency (value for money) and outlines proposals for enhancing IDA’s Results Measurement System during IDA17. II. IDA17 OVERARCHING THEME IN CONTEXT 4. Emerging patterns of trade and investment are creating new opportunities to leverage finance and global knowledge for economic growth in IDA countries. On average, savings and investment rates have risen significantly among developing countries, including many IDA countries. Furthermore, the share of global investment and savings to developing countries currently stands at the highest level since the mid-1960s.2 The composition of net flows to many IDA countries is also changing, with private flows – including private philanthropy – accounting for an increasing share. Greater integration into global markets and productivity catch-up are helping to speed up growth and create significant investment opportunities in IDA countries, spurring a shift in their relative global economic weight.3 Private enterprises in these countries have also become increasingly important sources of global growth 1 The first meeting of the IDA17 Replenishment negotiations was held in Paris on March 20-21, 2013. For additional information, see paper “Setting the Agenda for IDA17.� 2 Developing countries accounted for 46 percent of global investment in 2012, more than twice the level of the mid-1960s; domestic savings in developing countries have also grown, now equaling roughly 33 percent of developing countries’ GDP (up from 21 percent in 1970). See Global Development Horizons (2013). Capital for the Future: Saving and Investment in an Interdependent World. 3 See Global Development Horizons (2013). Capital for the Future: Saving and Investment in an Interdependent World. -2- and trade. At the same time, official development assistance is shifting with an increasing number of actors, delivery channels and interventions. New partnerships have emerged, and today roughly a third of foreign direct investment (FDI) in developing countries originates in other developing countries.4 On the knowledge front, research and development experience originates from multiple sources, including the academic community, regional development banks, bilateral development agencies, and developing countries themselves. An information and technological revolution is creating the potential for vastly improved information sharing, data collection and measurement of impact. These developments have been accompanied by important improvements in the policy environment in many IDA countries. 5. In the context of these broader trends, many IDA countries have been able to accelerate their economic growth over the past decade and significantly reduce poverty. As a result, IDA countries achieved a significant reduction in absolute poverty ratio from 58 percent of the population in 1981 to 38 percent in 2008.5 Notwithstanding this progress, performance across and within countries has been uneven and roughly one billion people still live on less than US$1.25 per day in IDA countries – equivalent to one out of every seven people on earth. Due to higher population growth and a lower rate of poverty reduction compared to other developing countries, IDA countries account for an increased share of the world’s poor –78 percent in 2008 compared to 53 percent in 1990. Furthermore, vulnerability is on the increase in IDA countries: the number of people with incomes under US$2 per day increased from 1.5 billion to 1.8 billion between 2005 and 2008. The MDGs related to human development and health are lagging, with more than half of IDA countries being currently off track for achieving the health-related MDGs.6 In addition, the poverty headcount increased in sub-Saharan Africa and in Fragile and Conflict-affected States, many of which are lagging behind on most MDGs with serious implications on their citizens and potential effects on neighboring countries. Also, capital flows have been concentrated in resource-rich countries and natural resource rents have tended to favor the better-off, fueling inequality and further marginalizing disadvantaged groups. In many countries, domestic resource mobilization has also remained constrained. 6. The changing global economic landscape presents unprecedented opportunities as well as complex and interrelated challenges for IDA countries. On the one hand, it has brought within reach the global goal to end extreme poverty. On the other, it has brought unprecedented new development challenges. This is a moment of unique opportunity for deliberate action to support IDA countries’ efforts to secure the gains achieved, seize emerging opportunities and confront new challenges with transformative approaches. It will require maintaining the growth momentum achieved by many IDA countries in the last decade, while tackling rising inequality through more focused policy interventions to ensure that growth expands opportunities for marginalized groups. In addition, it means confronting cross-border challenges at the regional and global level and increasing IDA countries’ resilience and adaptability to evolving global conditions and shocks. In particular, adaptation actions are needed to make climate resilient development a reality in IDA countries; also, regional transformational initiatives have the potential to catalyze large-scale benefits to improve access 4 The Global Economic Prospects 2013 notes that FDI flows to low-income countries are projected to increase, reflecting rising South-South FDI and resource-related investment 2013 Global Economic Prospects: Assuring Growth over the Medium Term (World Bank: Washington, DC. 2013). 5 See IDA16 Mid-Term Review Implementation and Results Progress Report (World Bank: Washington, DC 2012) and Managing Crisis and Building Resilience: A Retrospective Review of IDA15 (World Bank: Washington, DC 2012). 6 Specifically, over 80 percent of IDA countries are off track to achieve the MDG on reducing the under-5 mortality by two- thirds by 2015, while more than 70 percent are also off target to reduce maternal mortality by three quarters. -3- to infrastructure services beyond country borders and promote joint action to tackle common challenges. 7. Realizing these opportunities and managing evolving challenges calls for better leveraging of public and private resources as well as global knowledge for development which will also place them on a path out of aid dependency. Boosting the ability of IDA countries to harness these opportunities and address new development challenges calls for increasing the synergies between public and private investments, building functioning institutions, strengthening policy making capacity and enhanced domestic revenue mobilization and public expenditure use, and leveraging financing and global knowledge for country-tailored, integrated development solutions. Failure to support the efforts of IDA countries to secure the gains already made and accelerate the pace of progress would be a missed opportunity with repercussions for the poorest countries and for the prospects of attaining shared global goals. 8. IDA is uniquely positioned to help countries maximize the impact of knowledge, financing, and partnerships for development results. First, IDA’s country-driven and non- earmarked approach provides the flexibility to meet the demands, opportunities and risks facing its diverse client base – from small island states and fragile countries to fast-growing economies on their way to achieving MIC status. Second, through the combined strengths of the WBG, IDA provides catalytic financing and technical assistance to leverage and complement private sector development. Third, IDA’s focus on building country institutions and capacity is supporting stronger management of both public and private investments and the sustainable expansion of infrastructure and services in IDA countries. Fourth, by combining flexible financing with evidence-based knowledge, IDA plays a catalytic role in scaling-up public resources where they can be most effective for poverty reduction and in providing integrated development solutions, including innovative approaches. Fifth, IDA’s convening power, coupled with its global reach and knowledge, helps to broker knowledge exchanges across countries and facilitate global efforts to boost regional cooperation and address cross-border risks, from the global economic crisis and disruptive climate-related events, to food price spikes, and communicable diseases. Sixth, IDA provides a platform for governments and development partners to effectively manage aid resources, helping reduce the burden of aid fragmentation. Recent external assessments of international aid agencies affirm IDA’s business model as among the most effective and efficient development assistance delivery mechanisms.7 9. The change agenda of the World Bank Group (WBG) will reinforce and accelerate IDA’s drive to maximize development impact. The ongoing reform process in the WBG under the leadership of President Jim Yong Kim will position IDA to provide increasingly customized, integrated solutions for clients. The WBG has established the two goals of ending extreme poverty (the percentage of people living with less than US$1.25 a day to fall to 3 percent by 2030) and promoting shared prosperity (fostering income growth of the bottom 40 percent of the population).8 Preserving the welfare of future generations also requires promoting environmental and social sustainability at the country and global level and pursuing a fiscally 7 For example, IDA showed strong performance in the 2010 Quality of Official Development Assessment by the Brookings Institution and the Center for Global Development that reviewed and ranked 30 bilateral and multilateral aid agencies. IDA was the only multilateral to score in the top ten in all dimensions of aid quality, scoring second in the dimensions of fostering institutions and reducing the administrative burden on recipients. 8 See “A Common Vision for the World Bank Group�, Development Committee Paper, Spring 2013. Projections suggest that when the developing world as a whole reaches an aggregated poverty incidence of 3 percent, the corresponding poverty incidence for IDA countries – which include the world’s 82 poorest countries – would be 6 percent. (World Bank staff estimates, 2013). -4- responsible development path. The WBG strategy, which is currently under formulation and will be presented at the Annual Meetings in October 2013, will be based on five building blocks: serve poor and vulnerable people in a sustainable manner everywhere; recognition of the diversity of clients; work as one WBG; focus on development solutions; and exercising dynamic selectivity. Figure 1: WBG Strategic Framework WBG Goals End Extreme Poverty Promote Shared Prosperity the percentage of people living faster income growth of with less than US$1.25 / day bottom 40% population to fall to 3% by 2030 Achieving the goals must be sustainable in the long term – environmentally, socially and fiscally Serve Poor and Work as One World Vulnerable People Bank Group Everywhere Focus on Recognize the Exercise Dynamic Development Diversity of Clients Selectivity Solutions Building Blocks 10. Over time, IDA has continuously evolved to adapt to its changing environment and respond to new challenges—extending the range of its clients and products, engaging with more stakeholders, and taking on new roles as partner and convener. Innovations introduced through the replenishment process have meant that IDA is often a driver of change in the World Bank and the broader development community. The ongoing WBG strategy and reform agenda will strengthen IDA’s ability to adapt to the changing context and evolving client needs and provide increasingly effective, customized and integrated solutions, by ensuring greater selectivity, increased WBG synergies and an even closer focus on results. Figure 2: IDA17 Overarching Theme Maximizing Development Impact in IDA17 11. The IDA17 overarching theme, ‘Maximizing Development Impact’, reflects the commitment to enhance IDA’s value proposition towards ending extreme poverty and boosting shared prosperity in IDA countries. The theme points to IDA’s commitment to continuous improvement, adaptation and innovation as a global platform for development. The IDA17 period will cover the target date for achievement of the MDGs and the launch of the post-2015 development -5- agenda.9 Building on IDA16’s focus on “delivering development results,� in IDA17 IDA will strive to better leverage: (i) private investment, including by tapping synergies of the WBG, particularly of IFC and MIGA; (ii) public resources, by further strengthening public sector institutions and service delivery systems; and (iii) knowledge, by harnessing knowledge across the WBG, including facilitating South-South learning. In addition, IDA will continue to: (iv) enhance IDA’s results measurement and communication; and (v) ensure cost-effectiveness of IDA operations and organizational cost-efficiency. As reflected in Figure 2, the overarching theme represents an integrated approach to catalyzing development results in IDA17. 12. IDA leveraging of resources encompasses catalyzing other resources for development as well as supporting more effective use of existing resources, particularly at the country level. It is estimated that US$1 of IDA funding leverages up to US$9, depending on the type of IDA instruments, sectors and countries. For instance, over the past decade, IDA's partial risk guarantees leveraged almost US$6 of private capital per each US$1 commitment of IDA, and US$9 of total project financing. In transport, each US$1 commitment of IDA from FY00 through FY12 leveraged US$6 in private capital in the sector. IDA's regional projects have pooled resources from various multilateral and bilateral sources. For instance, each US$1 of IDA committed to the Niger Basin Water Resource project in FY13 leveraged US$2 of bilateral and multilateral financing. IDA leverage is also strong in regular investment projects, and the sector-wide approach (SWAp) is an effective vehicle in leveraging IDA resources. In Malawi and Tanzania, for instance, health sector SWAps have leveraged increased funding from bilateral and multilateral sources, up to US$7 in FY12 for each US$1 commitment of IDA. The six Program for Results IDA operations approved to date have leveraged twice the amount committed. Furthermore, IDA has leveraged its knowledge and comparative advantage to help improve the quality of public service provision and increase the efficiency of public sector spending. For instance, in the Second Education Program for India each US$1 commitment of IDA positively affected the efficiency of US$25 of government financing. Moreover, IDA's convening power helps leverage other donor resources. In Vietnam, for example, IDA adopts a multi-year multi-donor approach for budget support for poverty reduction and, under that, IDA pooled nearly US$1 contribution from other donors for each US$1 commitment over the past nine Poverty Reduction Support Credit (PRSC) series. Similarly, IDA leverages about twice the funds its commits in the energy sector. 13. In IDA17, IDA will further strengthen its focus on results, cost-effectiveness and cost-efficiency as a means of maximizing development impact, including in areas related to the special themes of inclusive growth, gender, fragile and conflict-affected states, and climate change. IDA has developed a strong and effective business model that delivers value for money. Throughout its operational cycle, from the allocation of its resources, through project preparation and implementation, to completion and impact assessment, IDA uses a robust framework to maximize the development impact of the programs and activities it supports. Also, IDA relies on WBG systems and processes that have a constant focus on driving efficiencies in a way that does not compromise effectiveness. Building on this base, IDA will continue to strengthen these areas to enhance its value proposition. 9 See “A New Global Partnership: Eradicate Poverty and Transform Economies through Sustainable Development.� The Report of the High-Level Panel of Eminent Persons on the Post-2015 Development Agenda. -6- III. LEVERAGING PRIVATE RESOURCES 14. The private sector is the main driver of economic growth, productivity, job creation and technology transfer. The private sector accounts for up to 90 percent of formal and informal jobs on average in developing countries and provides critical inputs, such as credit, infrastructure and social services. Private sector investment has become more important as governments face financing needs that far exceed available public funding and look for more efficient ways to deliver services, including through Public-Private Partnership (PPP) models. The Kingdom of Lesotho, for example, is implementing a PPP in health that aims to increase quality and access to services, boost the value of public spending on health, and upgrade operations equipment by leveraging private sector expertise.10 Similarly, IDA countries such as Honduras, Bangladesh and Rwanda are using varied PPP arrangements in rural water services, contributing to a growing body of lessons from experience on PPPs in low-income countries.11 Finally, the private sector is the provider of most of the taxes that support government operations. Positive synergy between the public and private sectors is critical for the future development of IDA countries, as the private sector depends on appropriate regulations, rule of law, institutions, public investment and security provided by the public sector to generate jobs, income and tax revenues. Figure 3: Continuum of WBG Support for Private Sector Development • Sectoral Policies (IDA) • Energy, transport, ICT, • Equity (IFC) • Fiscal and Regulatory agriculture (IDA, IFC) • Debt (IFC) Frameworks (IDA, IFC, MIGA) • Access to Finance (IDA, IFC) • Guarantees and Political Risk • Investment Policy Promotion • Skills and Job Training (IDA, Insurance (IDA, MIGA) (IDA, IFC) IFC) • Enclave Financing (IBRD) • Capacity building and advisory • Firm-level advisory services (IFC) support (IDA, IFC) • Output based subsidies (IDA) • PPP Frameworks (IDA, IFC) • Long-term Finance Facilities (IDA) 15. Strengthening the momentum for poverty reduction and shared prosperity in IDA countries will necessitate capturing the benefits of private investment for development. Notably, IDA and other MDBs play an important role as catalysts for increasing the flow of domestic and foreign private capital into investments, including by supporting projects in high- risk countries and sectors in which private investors would be reluctant to invest without the presence of official lenders.12 WBG support for Private Sector Development (PSD) in IDA 10 IDA provided technical assistance to the design and management of the Lesotho Health PPP in the context of the Lesotho Health Sector Reform Program. IFC acted as lead advisor to the government throughout the planning, structuring, tendering and implementation phases of the PPP agreement. For additional information, see http:// www.gpoba.org/node/228. 11 Public-Private Partnerships for Rural Water Services. Briefing Note No. 12 (IRC International Water and Sanitation Centre, 2012). 12 See Long-Term Investment Financing for Growth and Development: Umbrella Paper. (February 2013.) Also, IEG evaluations of projects in the portfolios of the World Bank and IFC point to a higher risk profile for development projects in -7- countries includes accessing IDA’s expertise to strengthen the enabling environment for investment (including the regulatory and institutional infrastructure) along with IFC’s expertise in financing and advising private enterprises, and MIGA’s expertise in mobilizing private sector participation by issuing political risk guarantees (see Figure 3). As discussed below, IDA works with IFC and MIGA in the context of the distinct competencies and expertise of each institution, bringing the unique value represented by the WBG to bear for clients. 16. IDA’s support for PSD focuses on strengthening the enabling environment for private investment, including the regulatory framework and institutions, thus helping catalyze private sector investment and growth. IDA’s direct support for private sector growth, including financial and private sector development, trade and integration, and economic management,13 has accounted for roughly one-quarter of IDA commitments in recent years, a share that has grown over time. IDA direct support has targeted core challenges and barriers facing its diverse client base, including (i) developing a regulatory environment and investment policy promotion that fosters opportunities for entrepreneurship and job creation; (ii) facilitating access to a broad range of financial services for firms and households, including developing PPP frameworks; (iii) mobilizing the private sector to offer better services, such as housing finance and insurance, to the poor as consumers; (iv) supporting developing countries to build robust financial and trade systems that support private sector development and are resilient to shocks; and (v) provision of Partial Risk Guarantees (PRGs), including US$448 million in guarantees to Cameroon, Kenya and Nigeria respectively in FY12, as well as IBRD Enclave PRGs to support private sector projects.14 IDA’s indirect support for private sector development is also significant, including financing for critical infrastructure, including power, roads and telecommunications; efforts to strengthen the financial sector and labor force skills; and policy support for macroeconomic management, including taxation and trade and integration. IDA financing for the infrastructure sector, particularly energy, mining, water and sanitation, accounted for an increasing proportion of total commitments over time, averaging 38 percent of commitments for new project in recent years. 17. IFC offers development solutions through firm-level interventions; promotion of global collective action, governance and standard-setting; and business enabling environment work. Firm-level interventions include direct investments, Advisory Services, and the IFC Asset Management Company (AMC). The AMC builds on IFC’s equity investment expertise by mobilizing and managing funds on behalf of a wide variety of institutional investors, including sovereign funds, pension funds and development finance institutions. Among multilateral development banks, IFC has the only global trade finance program, active in the largest number of countries, with the highest commitment volume. It is also a leading mobilizer of third-party resources for its projects through several mechanisms. IFC advisory services help government clients create an effective enabling environment for private investment, and strengthen the capacity, standards and know-how of private sector clients. 18. MIGA’s support focuses on mobilizing private sector participation by issuing political risk guarantees. MIGA provides political risk insurance (guarantees) for projects in a broad range of sectors. As an honest broker, MIGA intervenes at the first sign of trouble to LICs (particularly market and sponsor risks) compared to higher-income developing countries. 13 Private sector development commitments accounted for 25 percent of total commitments in IDA15, up from 22 percent in IDA14. 14 Recent IDA guarantees include the Kribi Gas Power project (US$82 million), approved in November 2011; the Kenya Private Sector Power Generation and Support ($166 million), approved in February 2012; and Nigeria Electricity and Gas Improvement Project Additional Financing (US$200 million), approved in June 2012. -8- resolve potential investment disputes before they reach claim status, helping to maintain investments and keep revenues flowing. MIGA guarantees can help investors obtain project finance from banks and equity partners. The agency can provide insurance coverage for up to 15 years (in some cases 20), which may increase the tenor of loans available to investors. Providing extensive country knowledge, MIGA applies decades of experience, global reach, and knowledge of developing countries to each transaction. IFC and MIGA help investors and lenders ensure that projects comply with what are considered to be the world’s best social and environmental safeguards. 19. Collaboration across IDA, IFC and MIGA has grown over time and spans a range of activities at the regional, country, sector and thematic levels. The main area of strategic collaboration is the preparation of joint Country Assistance Strategies, CASs (with 11 joint CASs in IDA countries in FY12 out of 23), and joint investment projects (with 11 joint projects in 9 IDA countries in FY12 out of 12 joint projects in 10 countries – excluding regional projects), notably for infrastructure and the financial sector. Collaboration on advisory services is also significant. In FY12, there were 67 joint projects in 32 IDA countries (out of 87 joint activities in 40 countries – excluding regional joint activities). Another area of collaboration is work on the investment climate, jointly led by the Finance and Private Sector Development (FPD) Network and IFC. As a result of joint efforts, transformative results are taking place in several IDA countries (see Box 1). For example, longstanding WBG engagement in PSD in Rwanda has played a role in supporting strong country commitment to improving the investment climate. Rwanda has become one of the fastest reforming countries in the world – rising from 158 of 175 countries in the Doing Business survey in 2007 to the rank of 52 of 185 countries in 2013. -9- Box 1: Examples of WBG Collaboration on Private Sector Development in IDA Countries IDA and IFC provided technical assistance to Burundi to reduce the compliance time and costs of paying business taxes by 10 percent; simplify the SME tax regime; expand the tax base; and align the tax-incentives regime with East African Community standards. The reforms included the establishment of a One-Stop-Shop for facilitating business in 2012, and reduction in the time required for business registration from 14 to 8 days. Costs dropped from 117 to 18 percent of GDP per capita and the annual number of registered companies more than doubled from 700 in 2010 to 1,500 in 2012. Burundi was ranked among the 10 economies worldwide that improved the most in the “Doing Business 2013� report. The WBG has become the leader of the Private Sector Development group in Burundi bringing the government and donors together. In Afghanistan, IDA, IFC and MIGA together helped turn around a barely functioning telecom sector following decades of conflict. In 2002, the entire country of Afghanistan had only 57,000 functioning phone lines, and there was virtually no internet access. All business, including basic government operations, was severely hampered. By 2012, 18 million people had access to a phone. The WBG came together to do what it does well—first helping to create an environment where change can flourish and then encouraging the private sector to jumpstart investment. IDA financed the digital transmission network, IDA/IFC helped the government reform the policies and regulations needed to attract private investment, and MIGA provided a guarantee to support the mobile operator, Areeba Afghanistan, against non-commercial risks. Launched in 2012, the privately sponsored Bujagali hydropower project has helped transform Uganda’s power sector. The project is already meeting almost 50 percent of the country’s electricity needs, selling power for about a third of the previous cost. Sponsored by a consortium of Sithe Global Power of the US and the Aga Khan Development Network, the 250 MW plant on the White Nile received US$130 million in IFC loans, a US$115 million IDA guarantee, and US$115 million in MIGA insurance. The WBG supported the work that laid the foundation for the project through challenging conditions for nearly 10 years before bringing the financial arrangements to a close, beginning its efforts at a time when less than 10 percent of Uganda’s population had access to power. In Kenya, the WBG supported the private sector and the Kenyan government to work together on ways to increase much- needed access to electricity in the country. The Kenya Private Sector Power Generation Support Project will help bring a reliable power supply to Kenyans in their day-to-day lives, as well as to manufacturing and service companies that help the economy grow and create jobs, through support from a unique package of IDA-supported partial risk guarantees, paired with long-term debt and political risk guarantees from the IFC and MIGA. Active in Kenya’s power sector since 1971, IDA has provided extensive support to all aspects of the country’s power sector, laying the groundwork for successful implementation of the power generation project. In Cote d'Ivoire, the WBG is working together to support the government's efforts to boost electricity output by around 80 percent over the next six years. The Azito thermal power plant provides the state power utility with more than a third of its electricity. With financing from IFC, an IDA partial risk guarantee and a MIGA political risk guarantee, the company is converting its existing simple-cycle plant to combined-cycle, enabling the company to increase its output without using any additional gas. Earlier support from IDA helped Cote d’Ivoire lay the foundation for enhanced private investment. IDA began working with the country in 1989 on putting in place a regulatory framework to encourage a competitive energy sector with private investment. 20. Much more needs to be done to enhance IDA, IFC and MIGA synergies and collaboration. The WBG can have the biggest impact when the strengths and comparative advantages of each of its entities can be leveraged in a synergistic manner. The recent report on Results and Performance of the World Bank in 2012 highlights that synergies between the World Bank’s public sector focus and support for private sector development along with the private sector focus of IFC and MIGA are becoming more valuable as public-private roles in development are becoming more complementary over time.15 The WBG’s global reach is a core comparative advantage whereby the Group leverages lessons of experience across regions and diversifies risks, while providing client solutions drawing from a diverse range of instruments from IDA, IFC and MIGA. By leveraging the combined strengths and comparative advantages of each WBG entity, IDA countries will have better access to a comprehensive package of financing; state of the art innovation for private firms; support to improve critical infrastructure 15 Report on World Bank Results and Performance 2012 (IEG: Washington, DC. 2013). -10- and skills; and global advisory assistance related to the planning of public investments, procurement, and incentive and regulatory frameworks for key industries. 21. IDA will be an integral part of the WBG strategy which includes a focus on working as one WBG. In this context, IDA will strengthen its ability to catalyze private resources, promote foreign and domestic private investment and maximize the positive spillovers of private investment for IDA countries. Achieving the results that are important to IDA countries – from filling large infrastructure gaps, to expanding access to basic services and creating productive jobs – demands effective, complementary action across the public and private sectors.16 IDA’s efforts during IDA17 will focus on optimizing the “Three for One� value proposition by enhancing synergies and developing joint approaches across IDA, IFC and MIGA for transformative impact, including a special focus on FCSs. These efforts will build on the emerging WBG strategic framework, which will increase shared accountabilities for the achievement of the WBG goals, as well as ongoing activities aimed at facilitating WBG information sharing and cross-team collaboration for more integrated client support, including: (i) the 2011 launch of the joint WB-IFC Global Practices pilot, which has changed the delivery model for financial and private sector development across regions; and (ii) the 2013 WB-IFC- MIGA back-office mergers for human resources and information systems to facilitate information sharing and cross-team collaboration. The World Bank has also recently adopted IFC’s Performance Standards for all private sector projects – an important advance towards greater policy coherence. Looking ahead, the WBG strategy framework will also increase shared accountability across IDA, IFC and MIGA for achievement of the institution-wide goals, thus improving staff incentive frameworks. A. Optimizing “Three for One:� Integrated Support for Private Sector Development in IDA Countries 22. Consistent with the WBG strategic directions and on-going efforts, IFC and MIGA will scale up support to IDA countries (see Annex 1). IFC and MIGA are looking to prioritize scaled-up support for IDA-only countries – and for FCSs in particular. The recently endorsed IFC strategy for FY14-16 targets a significant increase in operations in FCSs and low-income IDA countries focused on access to infrastructure (especially power), finance and markets. MIGA’s FY12-14 strategy focused on “Value-Driven Volume� has similarly targeted increased support for complex projects (predominately related to infrastructure) that are transformative in nature and require strong public-private engagement. Shared accountability for achieving the institution-wide goals will improve staff incentives while streamlined back-office systems will facilitate information sharing and cross-team collaboration. Furthermore, enhanced WBG support for private investment in IDA countries will emphasize principles of development impact, financial sustainability, leverage and additionality.17 16 The 2013 Global Monitoring Report on rural-urban dynamics argues, for example, that three core dimensions of a coordinated approach to maximizing the process of urbanization are planning, connecting, and financing; across the three, the report holds that planning – particularly related to establishing policies and institutions for land use – is the most important. 17 Note on Developing a World Bank Group Strategy (April 5, 2013). Recent research points to three dimensions of additionality of support from the WBG and other International Financial Institutions (IFI) for long-term investment in infrastructure. These include (i) financial additionality, based on leveraging non-IFI financing; (ii) design and policy additionality, related to underpinning growth, benefiting broad-based population groups and promoting the interests of poor people; and (iii) demonstration effect, improving private sector perceptions of risk/rewards trade-offs of key projects. See Spratt and Collins, “Development Finance Institutions and Infrastructure: A Systematic Review of Evidence for Development Additionality (2012). -11- 23. In IDA17, WBG management will work to maximize enhanced IDA-IFC-MIGA synergy for clients through: (a) use of Joint Business Plans (JBPs) in IDA countries, with a particular focus on FCSs, to promote frontier markets, emphasizing results, innovation and demonstration effects; and (b) enhanced focus on PSD in FCSs. 24. Joint Business Plans in IDA Countries. Joint (IDA-IFC-MIGA) Business Plans will focus on tackling constraints and catalyzing private sector financing for key sectors and industries in individual countries. JBPs will support IDA countries in maximizing the spillover benefits of private investment, including knowledge transfer, job creation, revenue generation and market stimulus. Importantly, JBPs will be customized to reflect country priorities, opportunities and constraints and will bring together the policy support, advisory work and financing of the WBG. With a strong private sector focus, JBPs will bring together the range of IDA-IFC-MIGA instruments and approaches and will focus on single sectors or multi-sector approaches depending on individual country characteristics. Management plans to develop JBPs in about 20 IDA countries during the IDA17 period. While the sectoral focus of each JBP will vary, JBPs can include a wide range of sector priorities including: (a) support for sustainable cities/green buildings and climate change adaptation, including the planned expansion of the WB-IFC “Lighting Africa Program� across the African continent and into India; (b) focus on promoting partnerships for sustainable use of natural resources; (c) support for agribusiness and the food supply chain; and (d) private sector engagement in the delivery of education and health care. Across sectors, support for women’s economic empowerment will be integral. In addition, JBPs will facilitate IDA-IFC-MIGA collaboration in performance monitoring and mutual accountability for results. For example, to further enhance the focus on delivering results during IDA17, WBG Management will enhance the use of Output Based Aid (OBA) and joint Results Measurement Frameworks in the context of JBPs. 25. Enhanced Focus for Private Sector Development in FCSs. Management expects to develop JBPs in about 10 fragile and conflict-affected states, accounting for half of the planned JBPs in IDA countries during the IDA17 implementation period. JBPs in FCSs will emphasize reducing barriers to business growth related to access to power, finance and markets, promoting an enabling environment for business along with transparency and the rule of law, and using risk tools to facilitate increased private investment.18 Public-private collaboration will be critical for unlocking these barriers, highlighting the relevance of strong IDA-IFC-MIGA collaboration in FCSs. JBPs are currently in preparation for several FCSs, including Nepal, where IDA-IFC- MIGA are working together in support of the energy sector along with critical banking sector reforms to increase business activity. The capacity to enhance synergies across IDA, IFC and MIGA in FCSs will call for strong collaboration at the country level and with the World Bank Global Center for Conflict, Security and Development. This will support more seamless engagement with private sector representatives and government, a key strength of the WBG. B. Unlocking Private Resources: Expanding the Range of IDA Guarantee Instruments and Transformative Approaches 26. Expanding the Range of IDA Guarantee Instruments to Attract and Leverage Private Resources. Credit enhancements and guarantees play an important role in facilitating the participation of private investors in long-term financing, particularly related to infrastructure.19 18 IFC, 2013. 19 See “Long-Term Investment Financing for Growth and Development: Umbrella Paper (February 2012)� prepared for the meeting of the G-20 Ministers of Finance and Central Bank Governors. -12- During IDA17, the range of instruments available to IDA countries will be expanded through the introduction of Partial Credit Guarantees (PCGs) and Policy Based Guarantees (PBGs), in addition to the existing Partial Risk Guarantees (PRGs).20 Implementation of the new instruments will benefit from ongoing efforts to improve alignment between guarantee policies and lending policies, to facilitate the use of guarantees and encourage further leveraging of IDA's resources by mobilizing private and other resources. Also, alignment of environmental and social safeguards for private sector projects among WBG institutions was approved by the Board on June 26, 2012 to facilitate WBG collaboration, including for guarantees. The Bank continues to provide a series of training sessions to increase awareness for the guarantee instruments internally and externally. In addition, the WBG will step up support for PPPs to fill critical gaps that cannot be fully met through public finances alone, including for infrastructure. This will incorporate progress in implementing the IFC Special Initiative on Infrastructure in Africa, launched in 2011, with medium-term PPP pipeline-building activities focused on Ghana, Kenya, Mozambique, Nigeria, Senegal, Tanzania and Uganda.21 27. Catalyzing Transformative Engagement for Inclusive and Sustainable Growth. Expanding access and addressing bottlenecks to sustainable growth is integral to ending extreme poverty and promoting shared prosperity in the context of sustainable development. There is strong strategic convergence across IDA, IFC and MIGA related to addressing client demands for support for complex projects with transformational potential. To this end, enhanced IDA- IFC-MIGA synergies in IDA17 will include (i) scaling up support for project preparation to promote the viability and bankability of projects with transformational potential; (ii) sharpened focus on support for regional solutions, integrating support from the IDA Regional Program;22and (iii) integrating transparent economic governance and environmental sustainability in support of transformational projects, including through the use of World Bank Performance Standards.23 In particular, WBG engagement will help to integrate sound environmental management into the agenda for transformational projects.24 IV. Leveraging Public Resources 28. Developing effective public policies, institutions and systems to end extreme poverty and boost shared prosperity is at the core of IDA’s partnerships with clients. IDA’s performance-based approach recognizes the critical importance of institutions, systems and public financial management for achieving lasting development results for the poor.25 Importantly, the quality of institutions and policies is also a key determinant of productivity and 20 In light of market developments and new opportunities to mobilize development financing, and as part of the modernization of the World Bank’s Operational Policy on guarantees, a proposal is being developed to extend IDA’s guarantee products to include Partial Credit Guarantees and Policy Based Guarantees in addition to the existing Partial Risk Guarantee. Following a discussion of an Approach Paper on this proposal by the Board’s Committee on Development Effectiveness (CODE) in October 2011 and external consultations, a final paper will be put forward to CODE and the Board in 2013. 21 See IFC Road Map FY14-16, Washington, DC. 2013. 22 As agreed in the IDA17 Replenishment meeting in March, IDA Management is exploring options for facilitating the preparation and completion of regional transformational projects with financing needs that exceed the scope of the current IDA regional program (see paper “The Demand for IDA17 Resources and the Strategy for Their Effective Use�). 23 On June 26, 2012, the Board of Executive Directors approved adoption and application of World Bank Performance Standards to be used for Bank financing or support (e.g., Partial Risk Guarantees) which is destined to projects, or components thereof, that are owned, constructed, and/or operated by the private sector, in place of the World Bank environmental and social Safeguard Policies (R2012-0130; IDA/R2012-0161). 24 See “An Action Plan for Improved Natural Resource and Environmental Management� (World Bank: Washington, DC 2012). 25 Additions to IDA Resources: The Sixteenth Replenishment (The World Bank: Washington, DC. 2011). -13- competitiveness across countries.26 A core function of the public sector is the provision of systems and processes for ensuring the effective and equitable mobilization and efficient use of domestic resources. IDA’s focus on strengthening the capacity of public institutions is wide- ranging, including enhancing tax mobilization and administration and building efficient, transparent and accountable public expenditure systems; planning and implementing appropriate sectoral strategies and policies; enhancing national and local capacity to deliver sustainable projects; and helping strengthen civil society capacity to engage governments. 29. IDA has helped to expand implementation capacity in key sectors and improve service delivery. For example, IDA’s work on health, nutrition and population focuses on expanding the implementation capacity of health systems and improving the quality, efficiency and reach of health services, including for the difficult to reach maternal and child health MDGs that depend on well-functioning health systems and their abilities to reach the poor. In education, IDA is focusing on improving learning outcomes and the quality of service provision through better policies and stronger institutions. As part of this work, the Bank introduced the Systems Approach for Better Education Results (SABER), a tool to collect and analyze policy data on education systems, using evidence-based frameworks to highlight the policies and institutions that matter most to promote learning for all. To date, SABER has been applied to inform work in 54 IDA countries. In the energy, transport and telecommunications sectors, IDA is helping to address the underlying policy and institutional issues and leverage both public and private investments. IDA has also helped design and implement new efficiency programs in infrastructure, including through efforts to improve the financial sustainability of public utilities and the introduction of more efficient technologies (such as for instance energy efficient Compact Fluorescent Lights in Bangladesh which has significantly reduced energy demand). Furthermore, IDA has worked with countries to identify innovative approaches such as the use of results-based financing, which uses financial incentives to reward the delivery of verified outcomes; this approach holds promise for enhancing public service utilization, quality, efficiency and equity. 26 The Global Competitiveness Report 2012–2013 (World Economic Forum: Geneva, 2012). -14- Box 2: Public Sector Results Achieved with IDA Support Domestic resource mobilization: In Afghanistan, customs revenues increased significantly from US$50 million in 2003 to over US$1 billion in 2011. In Cameroon, individual performance contracts signed by staff in the two largest custom offices led to a sharp decrease of port clearance time, with a 17 percent increase in level of activity and a 2 percent increase in revenues in Q1 of 2011 over Q1 2010. In Ethiopia, the tax base was broadened through a computerized Tax Identification Number (TIN) system, with the number of businesses issued with a TIN certificate increasing from 15,611 in 2005 to 885,927. In Timor-Leste, domestic tax collection increased from US$53 million in 2005 to US$111 million in 2011. In Tanzania, the percentage of VAT refunds made within one month increased from 62 percent in 2006 to 80 percent in 2011. In Georgia, the tax payment system was streamlined and personal interaction between taxpayers and tax officials were reduced through the introduction of e-filing in 2009 and issuance of standardized procedural guidelines for tax offices. In Kenya, through automation of business processes, the Revenue Authority increase revenue collection by 131 percent. In Liberia, revenue increased from US$85 million in FY05/06 to US$275 million in FY09/10. In Rwanda, between 2007 and 2011, revenue collection increased by 94 percent and registered taxpayers increased by 213 percent. In Pakistan, over 2 million new taxpayers were registered, bringing the total tax base to over 3.7 million. In Nigeria, the number of registered taxpayers increased from 7,000 to 125,000 between 2008 and 2011 in Bauchi state, and from 30,000 to 100,000 in Kaduna state. The number of federal registered tax payers – corporate, SMEs and individuals – increased from 475,725 to 941,901 between 2009 and 2011. Public expenditure management: In India, the Fiscal Responsibility legislation introduced in Karnataka, Andhra Pradesh and Tamil Nadu states during 2001-2004 is now nationally mandated for all states and the federal government. In Vietnam, the computerized Financial Management Information System now operates nationwide and is used for budget execution, accounting and fiscal reporting for the central government and all 63 provinces and 700 districts; also, a transparent, progressive and stable mechanism was adopted for allocation of investment equalization transfers from the central government to the provinces. In Yemen, an accounts and financial management information system was implemented in 2010 and rolled out to 17 ministries and 3 departments, leading to improved budget preparation and execution by 2012; also, a loans and grants management information system implemented in 2010 reduced the lead time for line ministries disbursements from 40 days to 8.5 days between 2010 and 2012. The government budget is now published on the Web at the time of its submission to the Parliament to obtain citizen's feedback. This has led to a 15-point increase (5th largest in the world) in the Open Budget Index (OBI) between 2008 and 2010. In Honduras, there are now operational Internal Audit Units under regulations established by the Supreme Audit Institution covering the entire central government. One hundred percent of central government expenditure is now included in the single treasury account. In Liberia, the percentage of value of non-competitive procurement was reduced from around 80 percent in 2008 to less than 30 percent in 2009. Investment climate: In Grenada, a National Investment Strategy adopted by Cabinet contributed to reducing the number of days to process investment applications from 90 to 30 between 2008 and 2012. In Niger, the time to process payments to government suppliers was reduced from 33 days in 2004 to 7 days in 2012. Natural resource management: In Ghana, through capacity building and dialogue with multiple stakeholders, including Government, Parliament, the private sector, civil society and local communities, the Extractive Industries Transparency Initiative (EITI) principles have been extended to the oil and gas sector, with mandatory disclosure of oil and gas contracts by extractive companies as well as an independent oversight committee to oversee implementation of Ghana’s Petroleum Revenue Management Act of 2011. Liberia became the first African country to achieve compliance status with the EITI and expanded it to the forestry sector. Access to justice: In Honduras, access to the courts has increased, with some 40 percent of the population having had contact with justices of peace courts in the “poverty corridor.� In Tanzania, the percentage of court cases outstanding for 2 years or longer fell from 70 percent in 2005 to 14 percent in 2011. Civil service: In Armenia, an Electronic Document Management System (EDMS) has been rolled-out to the entire civil service system, allowing real time communication between central and regional governments and the automation of work planning and performance management process in civil service. In Tajikistan, a new Civil Service Wage Grid was extended to the entire Civil Service, including local governments, removing all non-transparent bonuses, linking pay to outside market compensation, and reconciling pay for similar jobs across the government. Competitive recruitment in the civil service became the norm and a civil service register was automated and is now accessible by 47 government bodies. In Kenya, an integrated payroll and personnel database has been rolled out to all government ministries and nine semi-autonomous government agencies, improving accuracy in payroll management. In Malawi, payroll control was strengthened, reducing discrepancies in the wage bill from 5 percent to 0.2 percent (2004/05-2010/11), including the removal of 4,878 ghost workers in 2011 alone from the payroll. Source: IDA At Work: Building Strong Institutions for Sustained Results. -15- 30. In addition, IDA has supported broader governance and public sector reform. Financing for Public Administration and Law accounted for 24 percent of IDA commitments in FY12 (see Box 2 for examples of results in IDA countries).27 The frequency of public sector reform lending to IDA countries is higher than comparable lending to IBRD countries, reflecting the relatively greater capacity constraints faced by IDA countries.28 IDA support for governance and public sector management focuses on strengthening public expenditure management systems within the executive branch and the broader governance environment, including institutions for public accountability. Both areas of focus incorporate efforts to reduce the risk of corruption in the context of IDA’s Governance and Anti-Corruption work. The World Bank approach to Public Sector Management (PSM) for 2011-2020, entitled “Better Results from Public Sector Institutions,� reflects the continuous evolution of Bank support for PSM and increased emphasis on understanding the context, incentives and interests related to pursuing reform. It also acknowledges that such changes require sustained high-level commitment, contextual knowledge, and extensive support and assistance. Key trends in client demand include growing calls for flexible problem-solving in both lending and analytical work; a shifting frontier of PSM in many settings as clients tackle newly emerging problems; and the impact of technology on citizen demands and opportunities for feedback and engagement. 31. Looking ahead, IDA’s support for building public sector capacity will play a key role in positioning IDA countries to meet emerging opportunities and manage wide-ranging risks. IDA support for enhanced domestic resource mobilization and expenditure management, for example, is integral to the promotion of public accountability, economic growth and poverty reduction. As trade and investment partnerships grow and diversify, the payoff of managing public finances and investment flows towards the achievement of national priorities and development goals in IDA countries will also multiply. By extension, the opportunity costs of weak management will also increase. In particular, natural resource discoveries in several IDA countries present expanded opportunities to harness natural resource wealth for poverty reduction and inclusive growth (one of the IDA17 special themes) and the development of new growth poles and resource corridors – thus amplifying demands for improved public sector capacity, public financial management and accountable delivery systems (see Box 3). Box 3: Strengthening Delivery Systems to Create Growth Poles and Jobs in Sierra Leone Sierra Leone achieved GDP growth of 21.3 percent in 2012, faster than any other economy in Sub-Saharan Africa for the year. Mining of Sierra Leone’s Tonkolili deposits, with estimated 10.5 billion tons of iron ore, has contributed to the significant increase in the country’s output and exports. The rapid recent growth of Sierra Leone’s economy has posed new demands and strains for coordination and capacity across the public sector. In this context, the Government is looking for practical solutions to address key challenges in the context of the mining boom. Specifically, Sierra Leone is aiming to stimulate development of growth poles to generate positive spillovers from private investment. Importantly, a combination of “hard infrastructure� and “soft infrastructure� will be needed to maximize benefits among stakeholders and address opportunities and challenges, including the need to build strong and resilient public delivery systems, institutional arrangements and implementation modalities. IDA and IFC are working together on analytical and advisory work with the Government and investors to define and address challenges and opportunities for job creation and stimulation of local markets. Close WBG partnership with France, the European Union and the African Growth Initiative is contributing to the diagnostic phase of this growth poles approach. Source: Sierra Leone Growth Poles Diagnostic. 32. In IDA17, IDA will continue its efforts to leverage public resources by supporting the strengthening of public sector institutions and systems, including through evidence- 27 IDA16 Mid-Term Review Implementation and Results Report (World Bank: Washington, DC. 2012). 28 IEG “Public Sector Reform: What Works and Why?� (IEG/World Bank: Washington, DC. 2008). -16- based engagement. A particular area of focus will be on (i) system-wide public financial management (PFM) systems and (ii) evidence-based policymaking in IDA countries. These areas of emphasis are mutually reinforcing: transparent use of public finances, for example, stimulates dialogue and accountability for results while improved data and beneficiary feedback support enhanced decision-making and service delivery. Equally, they are strongly aligned with the IDA17 special themes, with particular relevance for inclusive growth. A. Support for Public Financial Management 33. Strengthening public financial management is a core IDA objective and an essential input into improving the efficiency and effectiveness of public resources. At the project level, IDA provides assessment, design, and implementation support services to ensure that partner countries have appropriate PFM arrangements in place to promote achievement of project objectives, to maintain financial integrity, and to support the development of sustainable PFM capacity. IDA actively seeks to use country PFM systems where such systems are assessed to be adequate, in line with the Paris Declaration principles. At the country level, IDA provides information on the overall fiduciary environment and risks, and promotes and supports the strengthening of PFM capacity based on each country’s development priorities and institutional environment (see Box 2 for examples). More specifically, IDA provides PFM diagnostics, policy and technical advice, advisory services, and technical and project assistance to partner countries along with facilitating PFM learning, knowledge exchanges and access to relevant global expertise. Also, in close partnership with international accounting and auditing bodies, IDA is a key actor at the global level – supporting setting international standards and codes, promoting responsiveness to developing country needs and building regional practices. IDA also works with other development partners, including bilateral donors, multilateral development banks, and United Nations agencies, to harmonize PFM requirements and practices for improving aid effectiveness and country PFM capacity. 34. Substantial analytical and advisory work in PFM is helping to build capacity and increase ownership of the reform agenda. Together with the European Union, the World Bank has led in the multi-donor Public Expenditure and Financial Accountability (PEFA) joint assessments,29 with over 250 PEFA assessments completed. At the country level, 71 percent of IDA/IBRD operations currently use country systems for financial management. The Independent Evaluation Group (IEG) review of Public Sector Reform credited good diagnostic work in PFM as having contributed to successful outcomes in Bank operations. In particular, it cites Public Expenditure Reviews and public expenditure and financial accountability indicators as useful in this regard.30 Between 2000 and 2010, 272 analytical products supporting PFM were provided to IDA countries. IDA commitments for projects with public expenditure, financial management or procurement components increased from US$1,280 million in the period 1991– 2000 to US$6,410 million in the period 2001–2010, with an increase in every region. 35. Strengthening Support for Public Financial Management and Procurement during IDA17. Enhanced efforts to strengthen PFM capacity will incorporate continued client support to deepen the use of country PFM and procurement systems along with internal reforms to the Bank’s own procurement policies. Customized support for improved PFM and competitive procurement practices in IDA countries will span the entire range of IDA engagement, including 29 The PEFA assessment has become an international standard for country level dialogue to inform PFM reform programs. 30 IEG, 2008. -17- direct lending and analytical support; monitoring key PFM indicators in implementation support missions; and in-depth reviews of projects with control weaknesses. IDA is also undertaking a comprehensive review of its operational procurement policies to adapt to the emerging needs of a diverse client base, the rapidly evolving operating environment, and the Bank’s own instruments. This process is being informed by stakeholder consultations, expert advice, and benchmarking with other international organizations. Recommended adjustments to policies and procedures are forthcoming and will be considered by the Board in 2014. B. Support for Evidence-based Policymaking in IDA Countries Statistical Capacity Building for Informed Decision-Making 36. Informed policy-making requires Box 4: Statistical Capacity Building for Informed accurate and accessible statistics. To Decision-Making in Tanzania monitor and accelerate progress towards ending extreme poverty and boosting shared IDA is supporting Tanzania’s efforts to deliver reliable prosperity, the WBG is deepening its efforts and timely statistics in accordance with international to promote the availability of critical data standards and best practices. The US$30 million Development of a National Statistical System for across countries, including through the Open Tanzania project, approved in 2011, incorporates Data Initiative (see Box 7). Tracking activities to improve the use of statistical data by policy- progress will entail ramping up support for makers and other key users, and to develop and country-level efforts to fill existing gaps in implement a data access and dissemination policy, statistical capacity and results monitoring, consistent with relevant legislation and international best practice. With the first full year of implementation now and leveraging improvements in data complete, good progress is underway. Notably, the collection and analysis for the benefit of Tanzanian Cabinet of Ministers has endorsed a proposal national planning and policy-making. The to transform the National Bureau of Statistics (NBS) from World Bank Social Protection and Labor an executive government agency to an independent (SPL) Strategy for 2012-2022, for example, authority governed by a board of directors, with full autonomy over its own policies and procedures – an involves addressing gaps around the important milestone in efforts to reform the legal and availability of data on existing social institutional framework for statistics in Tanzania. In protection and labor programs and systems addition, the NBS is in an advanced stage of reforming that are particularly acute in low-income the organizational structure of the bureau and the human countries and FCSs; capacity building to resource management regime. improve the evidence base is consequently Source: Implementation Status Report (P107722) integrated into the Strategy. Importantly, efforts to strengthen statistical capacity building in IDA countries will build on progress that has already been achieved at the country level (see Box 4). The World Bank’s statistical capacity indicator, for example, shows important progress in the quality of statistics in IDA countries over time – improving from the benchmark level of 49 in 1999 to 62 in 2011.31 And in 2012, 96 percent of IDA countries had a national strategy for the development of statistics (NSDS). The global push to monitor achievement of the MDGs also stimulated improvements: while only four developing countries had two data points for 16 or more of 22 principal MDG indicators in 2003, the number of countries with two data points had increased to 118 by 2009.32 37. Innovative approaches to generate real-time statistics point the way for accelerating progress in the collection and analysis of poverty data in IDA countries during IDA17. For 31 IDA16 Mid-Term Review Implementation and Results Report (World Bank: Washington, DC, 2012). 32 PARIS21 at Ten: Improvements in statistical capacity since 1999, OECD, October 2009 (see http://www.paris21.org/sites/default/files/P21-at-10.pdf ). -18- example, client requests for rapid feedback on the impacts of the global financial crisis at the household level in 2009 prompted IDA staff to experiment with the use of high-frequency surveys, an innovative type of income and consumption survey that uses economic modeling and/or wireless technology to capture poverty data in real time. Since 2010, IDA has supported country counterparts in using mobile phones to facilitate the collection of household data in Honduras, Nicaragua, Tanzania and South Sudan. 38. IDA will reinforce efforts in IDA17 to tailor support for statistical capacity building in line with national priorities across its diverse client base. Going forward, IDA will deepen its support for statistical capacity building and improved quality of results frameworks. Implementation of the five-point Busan Action Plan for Statistics (BAPS), launched by the World Bank and the Partnership for Statistics Development in the 21st Century (PARIS21) in December 2011, will step up efforts to support national statistics strategies and innovations in data collection, availability, accessibility and dissemination for evidence-based decision-making and accountability. The core objectives of BAPS are to (i) fully integrate statistics into decision- making; (ii) promote open access to statistics; and (iii) increase resources for statistics.33 For some countries, next generation issues will emphasize improving the frequency and coverage of national surveys and improving the use of statistical data in project monitoring and evaluation. Steps are also underway to help a number of IDA countries improve their gender statistics in two areas: women’s economic opportunities and women’s voice and agency. In addition, support will incorporate increased collection and use of beneficiary feedback and efforts to improve the cross-country comparability of national surveys to better identify poverty trends. Box 5: Using Beneficiary Feedback to Improve Building Beneficiary Feedback Loops Accountability and Service Delivery – Emerging Lessons from E-ISR+ 39. Enhanced use of client and The External Implementation Status Report (E-ISR+) is a beneficiary feedback to inform project platform for systematically informing citizens of a country implementation takes the WBG results about project goals, also providing a mechanism for agenda to the next level. Collecting and soliciting citizen reactions on the pace and value-added of using beneficiary feedback has potential to project implementation. Piloted in the Africa Region in increase accountability for results, fostering FY10, the initiative was launched in Burkina Faso, Zambia, and Ghana and is now being implemented in Nigeria, DRC, greater responsiveness and efficiency. Congo-Brazzaville, Kenya, Sierra Leone and Liberia. Reflecting an institution-wide effort to listen Emerging lessons include the following: to the feedback of clients and beneficiaries, • Third-party feedback leads to increased trust between the Bank currently tracks investment civil society organizations and government in project lending operations that provide support to implementation and a better environment for good governance, transparency and accountability. develop or use community-based • If third-party feedback brings problems to the attention monitoring systems/processes, community of relevant people early on, actions taken can deliver scorecards, or citizen scorecards to improve better results on the ground. social accountability. Ongoing efforts to • Participating CSOs increased their ability to access better integrate beneficiary feedback in information, with positive spillover effects for IDA-financed activities reflect considerable accountability and good governance. Monitoring and innovation and learning by doing (see Box Evaluation (M&E) capacity of CSOs also improved. 5). Furthermore, the Bank is expanding • Identifying CSOs with capacity to conduct the E-ISR+ exercise proved difficult, reducing the pool of potential efforts to connect directly with beneficiaries monitors. of IDA-financed development projects Source: Enhancing Transparency and Accountability through across a range of feedback mechanisms. Citizen Feedback – Lessons from the E-ISR+ Pilot (2013). 33 Busan Action Plan for Statistics: Special Consultative Session, April 9, 2013 (Powerpoint Presentation). -19- Some 51 percent of IDA projects currently include beneficiary feedback, up from 27 percent just last year. World Bank collaboration with the Open Development Technology Alliance (ODTA) has been a key driver for building beneficiary feedback, which is generally obtained via SMS or the internet. Working with the global community of computer programmers, the Bank has also been involved in hosting competitions and “hackathons� to apply innovative Information and Communications Technology (ICT) skills and approaches to persistent development challenges. The Bank’s ability to connect such communities, coordinate their efforts and leverage their knowledge globally is adding a new and welcome dimension to development efforts. 40. In IDA17, IDA will enhance approaches to strengthen beneficiary feedback to inform project implementation and leverage broader improvements in service delivery in IDA countries. IDA will integrate support for beneficiary engagement in IDA projects, leveraging broader improvements for service delivery at the country level. For example, in the context of the US$141.8 million Karnataka Health System Development and Reform Project in India, project feedback mechanisms and use of mobile technology enabled local public health officials to better monitor service delivery, evaluate beneficiary experiences, identify service delivery gaps, and respond quickly to key bottlenecks such as supply shortages and the need for further training.34 In 2012, IDA approved a US$70 million additional credit to the Karnataka Health project to further support development of the state’s health system, particularly in underserved areas and among vulnerable groups. During the IDA17 period, IDA will expand use of citizen feedback tools and report on impact at the IDA17 Mid-Term Review. Learning from beneficiary feedback happens not only in the context of Bank operations, but within client broader programs as well, allowing for mid-course corrections based on implementation data to promote effective delivery towards envisaged project results. V. Leveraging Knowledge 41. Knowledge is a key ingredient of development effectiveness and progress towards the WBG goals. Building on the substantial progress made by the WBG to provide a customized mix of finance and knowledge services to country clients, the emphasis going forward will be to further the “science of delivery� through more evidence-based policy making and project design. This approach will further strengthen IDA’s client engagement, which already integrates knowledge generation with partners; knowledge exchange, including among LICs countries and MICs; and learning from project implementation, impact evaluation, and beneficiary feedback to strengthen project design and execution. IDA’s support to countries facing natural hazards and related emergencies, for instance, includes strategic and rapid advice that reflects lessons learned from past experience and access to global practices. IDA’s response to the 2010 floods in Pakistan, for example, was informed by lessons drawn from the World Bank’s experience with relevant interventions in Sri Lanka, Bangladesh, Haiti, Indonesia, China and Mexico among other countries35 – a reflection of the global purview and the breadth of practical experience of the WBG. 42. Development knowledge is multiplying across the public and private sectors, while new technologies are boosting availability and lowering the cost of access. Increased access to email, the Internet and social media present affordable paths for disseminating knowledge, 34 IDA Results Story, “Beneficiary Verification and Feedback Empowers Access to Health Services in Karnataka.� 35 Response to Pakistan’s Floods: Evaluative Lessons and Opportunity (World Bank/IEG: Washington, DC, 2010). -20- effectively democratizing knowledge and energizing a movement for transparency and accountability.36 Vastly expanded access to information and knowledge has potential to be of particular benefit for IDA countries, as citizens become increasingly active in accessing knowledge related to development. For example, 60 percent of the top countries that access the World Bank Open Knowledge Repository are developing countries, and half of these are IDA countries, including Vietnam, Pakistan, Nigeria, Kenya and Ethiopia.37 A crucial emerging issue is the need to maximize the increased supply of knowledge and access to information to stimulate dialogue and engagement that matter for development and to influence development policy decisions. In the context of the WBG change process, the Bank is committed to sharpening itself as a cutting-edge knowledge organization to support policymakers, practitioners and partners across sectors to benefit from all the WBG has to offer. Through its experience and partnerships, for example, the WBG is able to support local leaders and professionals in designing evidence-based and multi-sectoral solutions. Better mobilization and use of knowledge resources will allow IDA to further facilitate decision-making and promote the achievement of more sustainable results faster and more efficiently. The Bank is also able to leverage resources across the Group, drawing on public, private, and civil society experience to help clients deliver local solutions through a combination of the most relevant global knowledge customized to the local context. 43. Client feedback points to the strong value-added of the Bank's knowledge services. Client ratings on the value of the Bank’s knowledge services averaged nearly 5 on a 6 point scale. Notably, higher ratings were associated with clients who felt they were appropriately engaged in the knowledge generation process. About 80 percent of respondents affirmed that they had applied the Bank’s knowledge to their work. The Bank has a diverse portfolio of knowledge and advisory services, including client-facing knowledge services that respond directly to specific demands; knowledge as a public good, including data and research; and internal knowledge products to strengthen the capacity of Bank staff.38 For IDA countries, the number of Analytical and Advisory Activities (AAA) averaged around 240 products per year in recent years, roughly two-thirds of which were in IDA-only countries.39 Recent trends in expenditure reflect increasing client demand for “how-to� advice, with technical assistance accounting for nearly 40 percent of the total expenditure on knowledge. Importantly, the Bank leverages its wide range of client-facing knowledge to produce global public goods, including widely used flagship reports such as the World Development Report. Internal knowledge products account for 16 percent of the Bank’s total knowledge expenditure, including policy notes, practice guides, and toolkits. Although these products aim to strengthen the knowledge base and cross-country expertise of staff, they also leverage broader influence. The Safety Nets Toolkit, for example, has been widely used to strengthen client capacity for building social safety nets in the post-crisis environment. 44. In IDA17, efforts to maximize leveraging of knowledge will include advancing “the science of delivery� in IDA countries and scaling up the Bank’s role as a knowledge connector, including for South-South exchanges. More specifically, advancing the science of delivery in IDA countries will include more systematic use of evidence-based methods during project implementation to strengthen delivery of results. In addition, grounded in IDA’s unique 36 Knowledge for Development 2011 (World Bank: Washington, DC, 2011). 37 Top 25 countries for OKR downloads, 2013. 38 In FY12, the Bank spent an estimated US$690 million for IDA and IBRD countries on core knowledge services, an increase of 14 percent over the previous two year. Of this total, client-facing knowledge and advisory services accounted for roughly US$510 million, including US$438 million for just-in-time technical assistance and in-depth economic and sector work. 39 IDA, 2012b. -21- role as a global knowledge connector, IDA will also develop a system for tracking and reporting knowledge exchange activities in operations, disseminating lessons to project teams. This will also involve supporting countries to build institutional capacity for capturing and sharing their development experiences along with engaging with knowledge hubs in MICs to harness the practical knowledge and experience across countries, including IDA graduates. Advancing the Science of Delivery in IDA Countries 45. Over the last decade, the development community has made significant progress in focusing on results and advancing evidence-based policy-making, with the WBG at the forefront of these efforts. Major advances include new methods for measuring outcomes, rigorous evaluations of program impacts, and instruments such as programs for results. Yet much more needs to be done to refine these learning tools, enhance their operational relevance, adapt them to the practical constraints of policy implementation and generalize their effective use. In particular, knowledge generated during project implementation can deliver valuable insights to improve the quality of operations, promote mid-course adjustments, and foster the adaptation of useful models in other settings.40 The ongoing WBG change agenda promises to take the understanding of delivery success and failure to the next level. The science of delivery will put greater emphasis on understanding the local and national contexts and approaches, providing practitioners with real-time support. IDA will also work to further expand the availability of evidence for better implementation practices; to help clients apply adaptive approaches in real time; and to support enhanced focus on impact rather than transactions. 46. During IDA17, IDA will scale up efforts to systematically learn from the implementation of development programs to strengthen delivery of results. First, IDA will use evidence-based methods more systematically throughout the implementation of its projects. Specifically, IDA will support continued strong use of impact evaluations along with development and mainstreaming of a wider variety of evidence-based tools (including beneficiary feedback mechanisms) for real-time data that can inform implementation and promote mid-course adjustments. This will support increased attention to documenting baseline conditions and monitoring changes and developments during implementation. Second, IDA will strengthen efforts to systematically capture the knowledge, experience and learning collected by project teams and country partners during implementation. This will also include the systematic development and use of case studies that will help gain more in-depth understanding of the nature of tough delivery challenges and promote deliberate learning during implementation. Leveraging the Bank as a Global Connector of Knowledge 47. Developing countries are increasingly sharing experiences with one another to support better policies and strengthen reforms. This “knowledge exchange� opens opportunities for countries to learn from what has worked and what has failed in other countries. Knowledge exchange supports a paradigm shift from traditional one-way knowledge transfer (mostly North-South) to multi-directional knowledge sharing and learning from development experiences in peer countries. A 2010 learning exchange brought together Tanzania and Uganda to learn from India’s dairy revolution – a process that has made India one of the world’s largest milk producers. Both Tanzania and Uganda wanted to increase incomes and access to food, particularly for children. Tanzanian and Ugandan officials and dairy industrialists learned 40 Transforming the Bank’s Knowledge Agenda: A Framework for Action (World Bank: Washington, DC. 2010). -22- practical steps from India to improve dairy production, which they have since implemented. This has stimulated an increase in private sector investment, new reforms, and a network of experts that is moving dairy production forward in these countries. 48. By catalyzing sustainable, country tailored solutions, and doing so at relatively low cost, knowledge exchange offers value for money in strengthening and accelerating development effectiveness. Building the Bank’s knowledge connector role strengthens the effectiveness of IDA operations. For example, in an effort to rebuild after the devastating earthquake in Haiti in 2010, a number of Haitian government officials visited Indonesia to learn from the experience it had accumulated since 2004 when it was devastated by an unprecedented tsunami. Haitian officials learned how Aceh rebuilt its housing stock using community-based approaches. This knowledge helped shape how Haiti spent US$500 million in IDA reconstruction financing, setting up housing agencies, cutting through bureaucracy and getting things moving. Deliberate, results-oriented design of knowledge exchange interventions as part of programmatic development approaches helps to realize these positive outcomes. 49. The World Bank is uniquely placed to connect development practitioners and institutions across the globe for effective knowledge exchange benefiting IDA countries. Because of the scale and coverage of its reach, and through its country programs and global sector networks, IDA can identify opportunities, match clients in need of knowledge with those who have relevant development experiences, finance exchanges, support results-oriented design, document lessons and results, and facilitate the integration of lessons in project design and implementation. Through the South-South Experience Exchange Facility set up in 2008 as a multi-donor trust fund, the Bank has successfully piloted this global connector role complementary to its more traditional financing and knowledge creation roles; these experiences show how countries can work together to break through capacity constraints to development, inspire leaders about what is possible and equip them with practical know-how to build coalitions and strategies for change (see Box 6). Knowledge exchange is also increasingly part of Country Assistance Strategies and lending projects (both IDA and IBRD), including for MICs in support of their emerging role as global knowledge providers. Sector Networks have started to capture the incidence and lessons of knowledge exchange among their operations teams, and have been looking into ways to develop their capacity as global knowledge brokers. And tools have been developed to support frontline teams, including the deployment of the Art of Knowledge Exchange, a training module and systematic approach to knowledge exchange. 50. During IDA17, IDA will scale up its knowledge connector role through more systematic integration in its client operations and strengthening in-country capacity. First, IDA will develop a system for tracking and reporting knowledge exchange activities embedded in its operations, with dissemination of lessons for frontline teams. Second, in order to facilitate country-led approaches to Knowledge Exchange, IDA will support countries to build institutional capacity for capturing, packaging and sharing their development experiences, including through South-South knowledge exchanges. -23- Box 6: South-South Knowledge Exchange Results Achieved with World Bank Support Since 2008, the South-South Knowledge Exchange Facility has enabled the sharing of development experience and knowledge among WB client countries. These knowledge exchanges are funded based on demand expressed by the recipient countries and designed with a focus on results, and financed by an eclectic mix of partner countries from the South and the North. The Facility provides important insights into what works well and what does not – and the Bank is using this knowledge to fine tune offerings for Bank clients and Banks staff on the “how to� of results-driven knowledge sharing. The results are captured in an interactive online knowledge library. Below are excerpts from some of the 119 exchanges approved thus far. They document the power of peer learning and the effect it can have on accelerating development processes. Africa-Brazil Agricultural Innovation Marketplace. Developing sustainable productive agriculture is critical to reducing poverty in Africa. Thus, African countries are keen to learn from Brazil, which 30 years ago began achieving significant agricultural growth, including in dry lands. Brazil’s agricultural research institution, Embrapa, and the Forum for Agricultural Research created the Africa-Brazil Agricultural Innovation Marketplace, a platform where African scientists can submit their proposals for financing and match them to peers in Brazil. The 20 new projects selected for financing in 2012 include drought-tolerant and virus-resistant crops, innovative pumps for small-scale irrigation, and sustainable poultry breeding. The success of the initiative has drawn funding from private foundations, such as the Bill and Melinda Gates Foundation. Increasing Access to Clean Water in the Central African Republic. Seventy-five percent of the urban population in the CAR relies on shallow wells and poor-quality water for its daily needs. While the Government was working to transform its water utility (SODECA), reforms stalled due to poor operational management, chronic financial deficits and lack of internal capacity. Meanwhile, Burkina Faso’s water utility (ONEA) has overcome numerous challenges to transform itself into one of the best-performing water institutions in SSA. SODECA learned about procurement, financial management and communication in the water sector, including ONEA’s experience in designing and implementing social connections policies in a similar institutional and socio-economic environment. Based on Burkina’s experience, SODECA is opening customer service offices to improve bill collection and services and adapting a new management system to support the expanded social connection program. The lessons learned from the knowledge exchange contributed to a 20 percent increase in access to clean water in the capital. Modernizing India’s Railways. Each day India’s railways transport around 30 million passengers and 2.8 million tons of freight. Recognizing its importance for economic growth and for reducing environmental impacts, India wanted to develop a long-term strategy to finance, expand and modernize its railways. Knowledge exchanges with China, who had already implemented significant modernization programs, including high-speed rail lines, provided Indian officials develop with new organizational ideas to implement in India, including unifying the Indian transportation department, developing flatter organizational structures, deployment labor more efficiently and cost effectively, adjusting passenger service pricing, improving freight container handling, implementing an incentive system for managers, and outsourcing noncore businesses, such as manufacturing and information technology. Reviving Haiti’s Garment Industry. This industry, responsible for 88 percent of Haiti’s exports, received a serious blow from the 2010 earthquake. The World Bank Institute arranged a study tour for Haitian policymakers and key garment industry stakeholders to visit potential investors, apparel buyers, manufacturers and government officials in Brazil and Korea. This enabled Haitian participants to learn about policies and strategies to strengthen competitiveness, international supply chains and techniques to increase garment exports, and helped promote Haiti as an investment destination (soon after the exchange, five Korean firms invested in Haitian garment production facilities, multiplying job creation prospects). Source: South-South Knowledge Exchange Library @wbi.worldbank.org/sske -24- VI. Enhancing Development Results and Cost Effectiveness and Efficiency for Maximum Development Impact 51. The IDA17 overarching theme, “Maximizing Development Impact,� reaffirms IDA’s strong commitment to delivering development impact and results while ensuring the cost-effectiveness of its operations as well as its organizational cost efficiency. IDA will build on its achievements during IDA16 to: (1) help IDA countries deliver stronger results and take results measurement and monitoring to a new level; and (2) further enhance operational effectiveness and organizational cost efficiency through reforms across the WBG aimed at modernizing products and services, processes and systems, and ensuring strong alignment between strategic priorities and budget allocations. This combined focus strengthens accountability to shareholders, partners and citizens that IDA funds are being used with the maximum possible effectiveness, efficiency and economy. Development Impact and Results 52. IDA has developed a strong and effective business model that delivers value for money. Throughout its operational cycle, from the allocation of its resources, through project preparation and implementation, to completion and impact assessment, IDA uses a robust framework to maximize the development impact of the programs and activities it supports (see Figure 4). This framework includes: allocation of IDA resources based on performance and results; strong quality assurance and fiduciary and risk management processes; a robust evaluation and accountability framework to ensure evidence-based decision making; a strong system of internal controls; commitment to transparency and accountability; IDA’s Results Measurement System; and systems and processes driving efficiencies in a way that does not compromise effectiveness. 53. IDA allocates its resources through a Performance-Based Allocation (PBA) system thus ensures that scarce concessional financing goes where it is most effective to deliver measurable results. Under this rules-based system, the main factor determining a country’s IDA allocation is its performance in implementing policies that promote economic growth and poverty reduction. IDA’s reliance on the PBA system is grounded on evidence that good policies and institutions matter for aid effectiveness and that countries with higher Country Policy and Institutional Assessment (CPIA) scores are those that achieve the fastest development progress. Over the years, the PBA has undergone changes and adjustments, reflecting both new analytical insights and implementation experience. These changes have helped increase the transparency and predictability in IDA’s allocation decisions. Considering its merits, the PBA system has been adopted over time by several other multilateral and bilateral aid providers. -25- 54. IDA ensures value through quality assurance as well as fiduciary and risk management throughout the project cycle of each operation. A solid analytical basis, including use of cost-benefit or cost effectiveness analysis where warranted, defines development objectives for each operation and AAA. Quality assurance mechanisms through Bank-wide and peer reviews provide input for project and AAA design. Arrangements are in place to support project implementation, and progress and results are monitored and made publicly available in project Implementation Status and Results Reports (ISRs). Staff undertake portfolio reviews (at the country, region and global level) to regularly assess the progress of projects/programs towards their expected milestones, and reallocate resources through project restructurings and cancellations or through risk-based resource allocations as needed to continue maximizing impact. Implementation Completion Reports (ICRs) and CAS Progress Reports and Completion Reports are prepared for each project and for each country’s assistance strategy, respectively, with inputs from IDA clients, to take stock of impact achieved and lessons learnt. More in-depth impact evaluations, including the ones under IDA16, are conducted strategically so that lessons from project implementation can inform future operations or for mid-course corrections. IDA also systematically uses lessons from independent evaluations. Fiduciary (environmental, financial and social) and risk arrangements ensure that IDA operations are held to high standards. Figure 4: IDA Value for Money Framework 55. IDA has a robust evaluation and accountability framework which includes: the Board of Executive Directors, the Independent Evaluation Group and an Inspection Panel. In addition, within the WBG there is a comprehensive internal accountability framework, which (in addition to the self-evaluation of every activity mentioned above) includes development results monitoring systems (at the project, AAA and CAS level, and through IDA’s RMS and the Corporate Scorecard) and other fiduciary accountability mechanisms (including the Institutional -26- Integrity and Internal Audit Departments). In addition, IDA’s strong support for stakeholder consultation and citizen accountability for reporting on service delivery and quality will continue to play an important role to identify existing gaps as well as opportunities for improvement. 56. IDA has a strong system of internal controls. IDA holds itself to strict fiduciary standards and has been ranked among the top performers in the multilateral system. A Management assessment of IDA’s internal controls, reviewed by the Bank’s internal auditors and independently evaluated by the Independent Evaluation Group (IEG), confirmed that IDA has a high level of effectiveness compared to similar organizations. An integrated risk management framework has also been established to facilitate annual reporting of risk management in the Bank (IBRD/IDA) and work is ongoing as part of the development of the new WBG strategy to more specifically define the organization’s risk appetites and tolerances, allowing a more informed linkage between risks and development results. This work is expected to be completed by end June 2013 with the adoption of a set of key risk indicators measuring implementation of the agreed targets and tolerances, maximizing value for money at the project level. 57. IDA continues to lead in Box 7: Supporting Openness and Transparency through openness and transparency. A strong the Open Data Initiative commitment to transparency is evident across the Bank’s policy framework and The World Bank provides free and open access to a activities, from the Open Data Initiative comprehensive set of over 1,200 development indicators (see Box 7) and the Access to Information and over 18,000 other indicators in a data catalog spanning Policy, to the Open Knowledge Repository topics such as education, health, environment, financial system and the web-based Corporate inclusion, social protection and the private sector, all accessible at data.worldbank.org. Data used to monitor Scorecard System that tracks IBRD and development results in IDA countries are now available; IDA performance separately at the Tier 1 of the IDA16 RMS is in the data catalogue and can corporate and regional/country levels. be used to create and download tables or visualize the data Beginning on July 1, 2013, the Bank in charts and maps. Alongside development data, the Bank Group will also disclose information about publishes transaction level financial information and details of the Bank’s projects and operations. Recently, eight data corporate procurement contract awards sets from IFC were added, allowing users to access detailed valued at US$250,000 and above. These information on IFC’s financial commitments and projects. systems provide public access to Since the launch in 2010, over 11 million visitors from all information on Bank-financed operations over the world have used World Bank data. In addition, the and results as well as development data. . World Bank supports countries’ Open Data initiatives. Kenya, Moldova, Tanzania, Rwanda, Antigua and Barbuda IDA has also led in geo-coding and and others are working on their own national open data and mapping of all IDA-financed operations open government initiatives with support from the Bank. for results. In addition, beneficiary This support also extends to sub-national governments, feedback is increasingly captured in IDA- such as the Chhattisgarh State in India. For more financed operations. Complementing the information on the Bank’s support for Open Data, see the “Open Data Toolkit� at data.worldbank.org/ogd. quantitative results, over 1,000 country and sector briefs along with project results stories provide insight into IDA results and integrate beneficiary assessments of the difference IDA is making. Through these initiatives, the Bank has continued to make information on its projects, programs and development data publicly available and more accessible than ever before. -27- 58. Improvements in the Bank’s operational policies and information management technology strengthen responsiveness and more customized engagement with clients. The five elements of the 2009 investment lending (IL) reform package, namely a risk-based approach, enhanced implementation support, rationalization of financing options, a better enabling environment and reform of the IL policy framework, have been delivered and implementation is underway. The last element of this package, reform of the IL policy framework, was approved by the Board in October 2012. In addition, a new instrument, the Program-for-Results instrument, was approved in January 2012 and is operational (with six IDA operations already approved). By financing a portion of the Government’s program, the Bank strengthens partnerships with governments and development partners and country systems and enhances its results-based financing focus. In April 2013, a package of reforms was launched to increase flexibility for investment lending operations, reduce inefficiencies in operational processes, and clarify accountabilities. They included a new Accountability and Decision Making Framework to improve decision making and execution for greater effectiveness and speed. As indicated in paragraph 35, IDA is also undertaking a comprehensive review of its operational procurement policies to adapt to the emerging needs of a diverse client base, the rapidly evolving operating environment, and the Bank’s own instruments. Recommended adjustments to policies and procedures are forthcoming and will be considered by the Board in 2014. 59. IDA is at the forefront of results monitoring and measurement. All Country Assistance Strategies, operations, and sector strategies include results frameworks. In addition, strategies and operations are monitored during implementation and evaluated at completion, and finally validated by IEG. IDA was the first multilateral development bank to adopt a results measurement framework in 2002. Since then, the RMS, an important part of the WBG accountability framework, has continued to contribute to development of the Bank’s results agenda including by laying a foundation for the Bank Corporate Scorecard. The World Bank is also a key contributor to efforts to advance the results agenda at the global level through participation in: (i) the Africa Community of Practice for results which now exceeds 2,000 members from 43 Sub-Saharan African countries; (ii) the MDBs working group on results to help harmonize results measurements; (iii) the Accelerated Data Program which provides technical and financial support to country survey data documentation and dissemination and survey method improvements; and (iv) the five-point Busan Action Plan for Statistics. 60. Moving forward, IDA will build on its achievements during IDA16. Specifically, IDA will (i) help countries deliver stronger results and take results measurement and monitoring to a new level; and (ii) further enhance operational effectiveness and organizational cost efficiency. This will incorporate reforms that are currently being implemented across the WBG that aim to modernize products and services, processes and systems (measures described in the paper) as well as possible reforms that are being explored as part of the WBG change process to ensure selectivity at the country and global levels and strong alignment between strategic priorities and budget allocations. Prominent among these are process simplification, enhanced focus on project implementation, further support for staff operating on the front lines, proactive optimization of spend on key inputs such as travel and external consultants, and a new framework for active risk management. Management also aims to better align the budget processes to the forthcoming new WBG Strategy to enhance its contribution to development results. As part of the “Science of Delivery�, clients will have increased access to implementation best practices. To ensure the quality of operations and development outcomes, Management will also continue to implement new quality assurance measures recently -28- introduced to address identified challenges.41 Reforms will also ensure that the right people, skills and knowledge are in the right place at the right time to ensure greater impact and better use of scarce resources. In this respect, the WBG will optimize its global footprint by defining a business model that leverages proximity to clients to become more responsive to their needs, while maintaining its leadership in development, and as a global institution. 61. IDA’s focus on delivering development impact and results for clients also involves making sure that it has the tools to monitor and report on results as well as deliver effectively in a cost efficient manner. The two sections below focus on these two areas: (i) IDA cost effectiveness and efficiency; and (ii) the IDA Results Measurement System. They describe the current status and proposed actions to help IDA countries deliver stronger results and take results measurement and monitoring to a new level and further enhance operational effectiveness and organizational cost efficiency in IDA17. IDA Cost Effectiveness and Efficiency 62. IDA relies on WBG systems and processes that have a constant focus on delivering effectively in a cost efficient manner. This includes emphasis on low-cost solutions, ensuring efficient administration systems and benchmarking costs. As a result, indicators of cost effectiveness and efficiency confirm the high value for money generated by IDA. These have been declining over the last several years while the scope of work and range of complexity has increased, to the point where additional spending may now be needed in selected cases to ensure minimum quality standards. In addition, comparable data available for other IFIs show that overall IDA is doing better than its peers. 63. Supported by systems and processes that have a constant focus on driving efficiencies, the cost of sustaining, support, institutional, and indirect services per US$100 million of portfolio42 for IDA has been decreasing since FY08. It increased slightly in FY10 (due mainly to temporary crisis response funding) but has gone down further since (Figure 5). This means that IDA is spending fewer resources on its administrative and overhead costs and doing more with fewer resources towards delivering on IDA operations and programs, thus maximizing its costs effectiveness. Further reduction of supervision costs could jeopardize IDA’s support for the effective implementation by borrowers of IDA projects and achievement of development objectives. 41 They include: (i) quality oversight and portfolio performance actions (monthly review meeting by the Managing Director for regions, closer coordination between networks and regions, quality improvements of ISRs and Country Portfolio Performance Reviews (CPPRs), increased staff at country level, strengthening capacity of borrowers, especially in fiduciary management, and addressing bottlenecks to improve disbursements; (ii) improvements in institutional capacity (introduction of: the Operational Risk Assessment Framework and the Program for Results instrument, modernization and consolidation of investment lending policies, procedures and processes and staff training with the launch of the Bank Operational Core Curriculum); and (iii) clarifying accountabilities and harmonizing quality assurance processes across regions through project mid-term reviews, CPPRs, peer reviews, quality enhancement reviews, span of control of managers and allocation of additional resources in FY13 to operations that need quality improvements (including 137 IDA operations). A review and realignment of the quality assurance function and incentives is ongoing. 42 The portfolio is defined as the sum of the undisbursed IDA commitment balance at the end of the period and IDA disbursements during the period. -29- Figure 5: Sustaining, Support, Institutional and Indirect Costs per US$100m of IDA Portfolio Nominal $m $0.95 $0.93 Total $0.91 sustaining/support/institutional/indirect services cost per $100m of IDA portfolio $0.90 $0.88 $0.86 $0.85 $0.85 $0.80 FY08 FY09 FY10 FY11 FY12 64. It should be noted that a significant share of Bank costs are for fiduciary requirements which provide high value for money to IDA clients and fiduciary oversight to IDA contributors. Supervision costs (SPN)43 and supervision costs including costs of fiduciary, procurement, portfolio management, and loan accounting and disbursement services (SPV)44 have been declining steadily since FY07 (Figure 6). Overall these costs have decreased by a total of 20 and 11 percent for SPN and SPV respectively between FY07 and FY12. The gap between these two types of costs is mainly the cost of safeguards and fiduciary requirements, with the latter in fact growing overall since FY07. Figure 6: Average Costs of Fiduciary, Procurement, Portfolio Management, Loan Accounting and Disbursement Services per US$100m of IDA Portfolio Nominal $'000 $340 $320 $305 $308 $299 $302 $300 $280 $283 $272 $277 $260 $267 Fiduciary, safeguards, $260 $260 procurement and $240 others $226 $220 $220 $200 FY07 FY08 FY09 FY10 FY11 FY12 SPN cost per $100m of IDA portfolio (for IDA-eligible countries) SPV cost per $100m of IDA portfolio (for IDA-eligible countries) 43 Supervision costs or SPN costs are utilized to ensure effective implementation of projects and programs by the borrower and the achievement of development objectives. Activities include monitoring and assessment of project performance including project launch, implementation support, and disbursement seminars. 44 SPV costs refer to supervision costs to which fiduciary costs (financial management services and procurement services for project implementation), safeguard services, activities related to (i) both upstream and downstream disbursement, (ii) billing and verifying statements, accounting, loan accounting, reporting, information dissemination, and (iii) review of the annual portfolio performance are added. -30- 65. Although IDA conducts considerably more knowledge work than comparator IFIs, total administrative expenses of IDA per US$100m of lending is relatively low (see Figure 7). The ratio declined significantly in FY09 and has been steady since then. While the increase in the size of IDA commitments and disbursements in recent years may have played a role in this decline, there is also evidence that efficiency of delivery keeps increasing, not only in areas such as travel management as noted earlier, but also in areas such as average project size, which has increased over the last few years as a result of conscious efforts of regional units to deliver more value for money (in terms of commitments and disbursements) with the same amount of resources in real terms. Figure 7: IFI Concessional Spending per US$100m of Concessional Lending Commitments $m $30.00 $25.00 IDA $20.00 IFI 1 $15.00 IFI 2 IFI 3 $10.00 IFI 4 $5.00 $- FY08 FY09 FY10 FY11 66. There are significant country variations in average preparation and supervision costs per US$100 million of commitments (see Figures 8 and 9). Preparing a project in an FCS is much more costly than preparing it in a non-FCS IDA country. Furthermore, preparing a project in blend countries is less costly than preparing a project in IDA-only countries. But average accumulated cost of project preparation (completion) per US$100 million of commitments has declined for all country groups since FY10. The average cost of project supervision also varies by country groups. Average supervision costs per US$100 million of portfolio in FCSs are nearly twice the cost in non-FCS IDA-eligible countries. -31- Figure 8: Average Accumulated Preparation (Completion) Cost $1,200 $1,000 $800 $600 $400 $200 $0 FY07 FY08 FY09 FY10 FY11 FY12 for all IDA-eligible countries for IDA-only countries for blend-countries for FCS IDA-eligible countries for non-FCS IDA eligible countries Figure 9: Average Cost of Supervision per US$100m of IDA Portfolio (US$’000) $600 $500 $400 $300 $200 $100 $0 FY07 FY08 FY09 FY10 FY11 FY12 for all IDA-eligible countries for IDA-only countries for blend-countries for FCS IDA-eligible countries for non-FCS IDA eligible countries 67. A number of cost savings initiatives are being implemented or are forthcoming including: move to managed print services; renegotiated mobile telecoms services; improved “buy versus lease� real estate decision framework; the launch of the eDisbursement which standardizes and simplifies payment processing and significantly reduces the required documentation for loan processing; a new payment system for short term (ST) consultants and temporaries launched in FY12 in all Bank Group offices to automate requests for ST payments and reduce turnaround time and transaction costs.45 45 See FY14 World Bank Budget, May 2013. -32- 68. In addition, as part of the WBG change process, a Budget, Strategic Planning and Performance Review working group is developing recommendations to further simplify and enhance business planning and business performance measurement and management, in alignment with the WBG strategy and financial sustainability. The scope of work aims to: • coordinate the budgeting process across the WBG within a corporate approach, as much as feasible; • translate new strategic directions into business plans and the resource allocation process; • define a new decision making framework that takes all sources of revenues and expenses into account (fostering improved cost efficiency and cost control); • articulate the process through which strategic objectives will be translated into business plans explicitly linking results and resources; • articulate accountability and decision making (ADM) authority at all levels of the organization for revenue generation and resource allocation; • foster improved cost control and efficiency, undertaking a systematic expense and business process review to establish a framework for long term savings; • establish a stronger link between performance management and funding decisions, and identify relevant WBG metrics that could be aggregated; and • enhance corporate systems solutions and tools to operationalize all of the above. It is expected that the recommendations emerging from this work will drive the preparation of the FY15 budget. 69. It is proposed that the IDA17 RMS include two additional cost indicators in Tier 4, namely cost of sustaining, support, institutional and indirect services per US$100 million of portfolio for IDA and average expenditure for fiduciary and safeguard aspects, as well as more disaggregated cost figures for project implementation support for FCSs. Furthermore, IDA will regularly publicly disclose IDA project preparation costs and implementation costs and will pilot the calculation of unit costs in at least one sector. IDA17 Results Measurement System 70. The IDA RMS remains at the core of IDA’s measurement and monitoring of results, operational effectiveness and organizational efficiency. The RMS has significantly helped to foster the results culture in the Bank and among client countries. Management has enhanced its results focus and continued to refine its results measurement systems through the Bank-wide modernization reforms.46 During IDA16, the RMS was strengthened and expanded, including through the addition of the third and fourth tiers to measure IDA’s operational and organizational effectiveness. Management strengthened staff incentives and accountability for results through Memoranda of Understandings with senior Management and staff Results Agreements. 71. For IDA17, Management is committed to enhance the strategic relevance and coverage of the IDA RMS to further strengthen accountability to its shareholders and clients. Management proposes to strengthen the RMS’s strategic alignment with: (i) the strategic focus of IDA17 overarching theme, “Maximizing Development Impact�, on leveraging public 46 See Annual Report 2012 at http://siteresources.worldbank.org/EXTANNREP2012/Resources/8784408- 1346247445238/AnnualReport2012_En.pdf -33- and private resources and knowledge, and continued focus on cost efficiency and effectiveness; (ii) the special themes of inclusive growth, gender, FCSs and climate change; (iii) the WBG’s goals and strategic priorities, and (iv) the Corporate Scorecard. In addition, efforts have been made to ensure that indicators included in the RMS are monitorable and achievable and the overall size of the RMS remains sufficiently focused to provide a clear strategic vision of IDA’s priorities and its progress towards them, as well as to take account of data availability for IDA countries. 72. A number of changes are proposed in the IDA17 RMS as detailed below. In general, new indicators are proposed which aim at better measuring progress towards IDA17 strategic goals; some indicators are proposed to be dropped in areas where progress has already been streamlined or where better indicators have become available. Following the discussion of this proposed revised RMS in the second meeting of the IDA17 Replenishment negotiations, specific baselines and performance standards will be presented for those indicators that will be retained for discussion at the third meeting in October. Below are proposed changes in each of the tiers of the RMS to enhance measurement and monitoring. Tier 1. IDA Countries’ Progress 73. Proposed changes in Tier 1 indicators for IDA17 aim to ensure its consistency with the two WBG goals and to better incorporate the focus on the IDA17 special themes. These include the addition of new indicators on inclusive growth, private sector, governance related to natural resources, gender and climate change and environment. A new indicator is also proposed to measure statistical capacity of IDA countries. Changes agreed by the IDA Deputies at the IDA16 Mid-Term Review on two IDA16 RMS indicators (for telephones and road coverage) are incorporated to reflect the availability of data. -34- Table 1: Proposed Changes to Tier 1 (italics=new indicator; italics and *= changed indicator) Tier 1: IDA Countries Progress Poverty Eradication and Shared Prosperity Goals Percent of population below US$1.25 a day - in FCSs [Shared Prosperity goal: indicator under development] Inclusive Growth and Private Sector Development GDP per capita (constant 2000 US$) Employment to population ratio (15+) - Women - Men Bank Accounts per 1000 adults - Women - Men Trade Logistics Performance Index (average rating: 1=low to 5=high for IDA countries) Gross capital formation (% of GDP) - Public - Private Mobile cellular telephone subscriptions (per 100 people)* Time required for business start up (average number of days) Governance and Institutional Development* Number of EITI Compliant Countries Quality of budgetary and financial management (average rating: 1=low to 6=high for IDA countries) Level of Statistical Capacity Infrastructure Access to an improved water source (% of population) Access to improved sanitation (% of population) Access to an all season (% of rural population) Household electrification rate (% of households) Gender and Human Development Under 5 mortality rate (per 1,000 live births) Malnutrition prevalence, weight for age (% of children under 5) Births attended by skilled health staff (% of total births) Primary completion rate (% of children of primary school age) - Girls - Boys Secondary enrollment rate Ratio of girls to boys in secondary education Prevalence of HIV/AIDS (% of population aged 15-49) Maternal mortality ratio (modeled estimate, per 100,000 live births) Adolescent fertility rate (births per 1,000 women ages 15-19) Contraceptive Prevalence (% of women ages 15-49) Ratio of female to male labor force participation Climate Change and Environment* Deforestation rate CO2 emissions, metric tons per capita -35- Tier 2. IDA-Supported Results 74. Changes proposed to Tier 2 for IDA17 include expanding reporting on sectoral outputs as well as on client feedback. A new indicator would measure client feedback on IDA’s effectiveness overall as well as specifically for ESW/TA and financing (lending). To reflect the IDA17 overarching and special themes, new sub-categories and indicators are included under sectoral outputs on institutions and governance, private sector development, and agriculture productivity and food security (see Table 2 ). Three of these indicators (number of people in urban areas with access to improved urban services, and transmission and distribution lines constructed or rehabilitated, and area provided with irrigation and drainage services) were agreed by the IDA Deputies at the IDA16 Mid-Term Review. Table 2: Proposed Changes to Tier 2 (italics=new indicator; italics and *= changed indicator) Tier 2: IDA-Supported Development Results A. Satisfactory Achievement of Development Outcomes (percentage) Country Assistance Strategies Completion Reports (IEG ratings) Operations in all IDA countries (IEG ratings) - in FCSs Analytical and Advisory Activities (ESW and non-lending TA) Client feedback on Bank effectiveness (overall) (four year average FY09-FY12) - ESW/TA (FY12 only) - Financing (FY12 only) B. Sectoral Outputs Support to Institutions and Governance Countries supported on strengthening national statistical systems Countries with strengthened Public Management Systems in tax policy and administration Educating children Teachers recruited and/or trained Protecting and saving lives Children immunized Pregnant women receiving antenatal care during a visit to a health provider People with access to a basic package of health, nutrition or population services Building and accessing vital infrastructure Roads constructed or rehabilitated (km) People with access to improved water sources People with access to improved sanitation facilities People in urban areas provided with access to improved urban services* Transmission and distribution lines constructed or rehabilitated (km)* Access to electricity Agriculture Productivity and Food Security Area provided with irrigation and drainage services (hectares)* Private Sector Development Private capital mobilized by IDA operations ($) -36- Tier 3. IDA Operational Effectiveness 75. For IDA17, under the category “Implementation of Special Themes� new indicators are proposed to reflect the new theme of inclusive growth while changes are made to indicators for themes carried over from IDA16 reflecting deepening treatment of gender, climate change and FCSs. Two new indicators are also included on the proportion of IDA operations addressing gender inequality and with climate change co-benefits. A few indicators on portfolio performance as well as monitoring and evaluation are deleted to reflect agreements reached during the high level forum in Busan (aid predictability). Also, an indicator on the proportion of IDA projects with beneficiary feedback has been added. Table 3: Proposed Changes to Tier 3 (italics=new indicator; italics and *= changed indicator) Tier 3: IDA Operational Effectiveness Portfolio Performance Quality of design (%) Disbursement ratio for investment lending projects (%) - in FCSs Aid predictability (%) Monitoring and Evaluation Impact evaluations (#) (three year rolling annual average) Investment lending projects that have appropriate results frameworks (%) First Implementation Status and Results Reports with adequate baselines for at least one key outcome indicator (%) IDA Implementation Completion and Results Reports (ICRs) that report on key results (%) Proportion of projects with beneficiary feedback1 Use of Country Systems Use of country Monitoring and Evaluation systems (%) Use of country systems for Financial Management (%) Use of country systems for Procurement (%) Collaborative Analytical and Advisory Activities (%) Implementation of IDA Special Themes* Proportion of IDA CASs that are aligned with the goals of ending poverty and promoting shared prosperity (with a focus on the income of the bottom 40% of the population) Proportion of IDA CASs that draw on and discuss the findings of a gender assessment; proportion of IDA CASs that incorporate gender considerations into the analysis, content of the program and the results framework* Proportion of IDA operations that will have gender informed analysis and follow up Proportion of IDA FCS CASs that are informed by analysis of drivers of fragility and conflict Proportion of IDA CASs that discuss climate change vulnerabilities and disaster risk management* Proportion of IDA operations with climate change co-benefits (as % of IDA commitments) -37- Tier 4. IDA Organizational Effectiveness 76. Changes proposed in Tier 4 for IDA17 include the introduction of new indicators on: (i) speed and cost of IDA operations, and (ii) World Bank Group collaboration. Under the former, indicators are proposed for administrative costs for lending overall and for fiduciary and safeguard aspects.47 These, together with the commitment to publish project preparation and implementation costs (see paragraph 69) and pilot the calculation of unit costs in at least one sector, will enhanced transparency and strengthen IDA’s focus on cost effectiveness and efficiency. Under WBG collaboration, an indicator is proposed to monitor the number of joint IDA-IFC projects which together with the proposed policy commitment to increase joint business plans in IDA countries and for FCSs (see paragraph 24 and 25) will enhance monitoring of increased WBG synergies. Indicators on decentralization are replaced by a proposed facetime index for IDA FCSs. Table 4: Proposed Changes to Tier 4 (italics=new indicator; italics and *= changed indicator) Tier 4: IDA Organizational Effectiveness Speed and Cost Time from project concept note to approval for investment lending (months) Time from project concept note to approval for investment lending in FCCs (months) Problem projects restored to “satisfactory� status within 12 months (%) Satisfactory implementation of active IDA operations (self evaluation) - in FCSs Average project preparation costs ($000) Average project implementation support costs ($000) - in FCSs Cost of sustaining, support, institutional and indirect services per US$100 million of portfolio of IDA - in FCSs Average expenditure for fiduciary and safeguard aspects ($000) Facetime index for IDA FCSs Decentralization Decentralization of higher level staff to the field (%) Decentralization of task management to staff in the field working on (%) Fragile situations Non-fragile situations Mapping for Results Percentage of IDA projects that are geo-coded (%) World Bank Group Collaboration Number of IDA countries with IDA/IFC/MIGA joint business plans - in FCSs Number of joint IDA/IFC projects 47 This cost includes the cost of AAA which IDA does in much greater amounts than other IFIs. -38- Next Steps in the Results Agenda 77. IDA priorities for stepping up efforts to track its performance and contribution to countries’ results include: (i) using the Program for Results instrument and documenting lessons from the first operations that used the instrument; (ii) exploring innovative approaches to capture beneficiary and client feedback; (iii) continuing to improve metrics and measurement through the development of new indicators, including for measuring IDA’s contribution to institution strengthening and capacity building; (iv) better linking of results to geographical location; (v) enhancing initiatives for reporting and communicating results; and (vi) supporting client countries to develop their capacity to manage for development results, including through strengthening of statistical capacity. VII. Issues for Discussion 78. The IDA17 overarching theme of Maximizing Development Impact aims to capture IDA’s enhanced value proposition towards ending extreme poverty and boosting shared prosperity in IDA countries. Proposed commitments related to operationalizing the overarching theme are detailed in the text and summarized in the Executive Summary while Section VI of this paper presents related proposed changes in the IDA17 RMS. • Do Deputies agree that the proposed approach to enhance leveraging of private resources, public resources and knowledge are appropriate for operationalizing the IDA17 overarching theme? • Do Deputies agree with the proposed policy commitments for the IDA17 overarching theme, the revisions to the RMS and the increased focus on cost effectiveness and efficiency? -39- Annex 1: STRATEGIC CONVERGENCE ACROSS IDA, IFC AND MIGA IDA17: IFC ROAD MAP (FY14-FY16): MIGA FY12-14 STRATEGY: Maximizing Development Impact Leveraging the Private Sector to Achieving Value-Driven Volume Eradicate Extreme Poverty and Pursue Shared Prosperity IDA’s multi-sector engagement Long-Term Strategic Focus Four Priority Areas: supports PSD, including IDA’s Areas: direct support for financial and • Focus on Frontier Markets • IDA Countries: Providing non- private sector development, trade (IDA Countries, FCS, Frontier commercial risk mitigation in and integration, and economic regions in non-IDA countries) resource-constrained IDA countries management, and IDA guarantees; • Addressing Climate Change to promote PSD, job creation, and IDA’s indirect support, and ensuring environmental adoption of new technologies and including financing for critical and social sustainability knowledge, generate tax revenue infrastructure, efforts to strengthen • Addressing constraints to and build linkages with local firms. the financial sector and labor force private-sector growth in • South-South Investment: skills; and policy support for infrastructure Promoting investments that support macroeconomic management, • Developing local financial economic integration between including taxation and trade and markets countries and promote regional integration. • Building and Maintaining economic integration. long-term relationships with • Conflict-Affected Countries: FPD Global Practice Strategies firms in developing countries supporting investor confidence to promote economic stability, jobs and boost private investment in high- inclusion along three tracks: Near/Medium-Term Areas of risk environments. • Strengthening the Investment Emphasis: • Complex Projects: such projects Climate: Enhancing the • Fragile and Conflict Situations tend to be highly capital intensive, environment for business to thrive • South Asia involve multiple participants and and markets to operate efficiently. high direct government • Agribusiness and Food Supply • Leading program design in high- Chain engagement but have priority industries: Support for transformational development • Infrastructure, especially in IDA countries includes growth impact when implemented Sub-Saharan Africa poles, industrial zones and resource properly. corridors. • Spurring Innovation for Inclusive Growth: Providing strategic advice to foster innovation, early-stage financing and new firm creation. 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