Latest Findings on Development Effectiveness: Lessons Learned

Presentation by Ajay Chhibber, Director and Patrick G. Grasso, Adviser, Independent Evaluation Group, World Bank DCF-Vienna High Level Symposium April 19-20, 2007 Vienna, Austria

I.

Three Core Questions on Development Effectiveness and Poverty Reduction

How effectively has economic growth translated into poverty reduction? What factors have affected these results?

II.

What factors have led to high-quality results in sectors that deliver services to the poor? What measures have helped raise the accountability of public institutions responsible for delivering and sustaining results? What is happening to Aid Flows and Aid Coordination?

III.

IV.
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Convergence: Narrowing gap between OECD and developing countries

Average annual per capita income growth

2 2 2 2
OECD average 1980-2006 2

1960s

1970s

2 2

-2 -2
Middle-income
Source: World Bank
3

1980s 1990s

2001/6
Low-income

Sub-Saharan Africa

But There Is Strong Crosscountry Variability In Growth Performance

Growth has improved in most Bank borrowing countries over the past five years, but achieving sustained growth remains a challenge.
Average annual growth rate of GDP per capita more than % 2 2 2 %- % 2- % .2 2 2 .2 - % 2 2 to2 % % less than % 2 2 2 2 2 2 2 2 2 2

Number of Countries 22 22 22-22 22 22 22-22

Source: ARDE 2006

Growth is a Major Factor in Poverty Reduction

2 2 Poverty (% of Population) 2 2 2 2 2 2 2 2 2 2 -22 -22 Population Living on Less Than $2a Day (2222 ) Population Living on Less Than $2a Day (2222 ) Real Per Capita GDP Growth (2222 ) -2222 2
E. Asia & Pacific S. Asia M. East & N. Africa

2 Growth (% Per Annum) 2 2

Latin Am erica & Europe & C. Asia -2 the Caribbean

-2

There Are Still Over 1 Billion People Living In Extreme Poverty

Number of People Living on Less Than $ /Day
22 22

22 22 22 22 22 22

22 2

22 2

2 East Asia and Pacific China Europe Latin Middle and America East and Central and North Asia Caribbean Africa South Asia SubSaharan Africa World World Excluding China

Poverty Reduction Remains A Significant Challenge Even In Countries With Positive Growth Rates
Positive Per Capita Income Growth between the mid-1990s and early-2000s did not always lead to Poverty Reduction in 25 countries reviewed by IEG
2 2 Number of countries 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2

H hg w ig ro th

M d ra g w o e te ro th P v rty sta n te o in a d oe g a d r cre se

L wg w o ro th P v rty re u d oe d ce

Note: High growth=average annual per capita GDP growth rate of >2.5%, moderate growth=average annual per capita GDP growth of 0%-2.5%, low growth= average annual per capita GDP growth <0% between household survey years in the mid-1990s and 2001-05. Country group includes all countries for which IEG carried out a CAE or CASCRR in FY03-06 and for which comparable poverty data is available in DECRGs Povcal database for mid-1990s and 2001-05 Source: ARDE 2006 7

Income Distribution Has Affected Poverty Reduction (1)

Growth was an important driver of poverty reduction, but even small changes in income distribution either dampened or reinforced growths effects on poverty in 25 countries reviewed by IEG. Negative growth effect reinforced by Positive growth effect reinforced by improvements
in distribution worsening distribution
change in poverty headcount

Cameroon

Moldova

Armenia

2 2 2 2 2 2 2 2 2 2 2 2 2

Ukraine

Burkina Faso

2 change in poverty headcount -2 -2 -2 -2

-22 -22 -22 -22 -22 -22

Nigeria

change in poverty due to change in household income/consumption

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change in poverty due to change in distribution

Madagascar

Honduras

Georgia

Bolivia

Income Distribution Has Affected Poverty Reduction (2)

Positive growth effect dampened by worsening distribution
change in poverty headcount 2 2 2 2 2 2 2 2 2 -2 -2 -2 -2 -22

Negative growth effect mitigated by improvements in distribution

2 2 change in poverty headcount 2 2 2 2 2

Lithuania

Senegal

China-Urban

Albania

China-Rural

Romania

Dominican Republic

Sri Lanka

Turkey

Jordan

Peru

-2 -2 -2

Brazil

Zambia

Uruguay

change in poverty due to change in household income/consumption

change in poverty due to change in household income/consumption

change in poverty due to change in distribution

Pakistan

Poverty reduction requires attention to both growth and opportunities for the poor

Growth is necessary but not sufficient for poverty reduction. Extent to which the poor participate in growth depends upon literacy infrastructure, job creation health access to environment initial income inequality credit Burkina Faso: Modest annual growth delivered impressive poverty reduction based mainly on increases in farm production where the poor live and how they earn their income what constrains growth in those areas and sectors constraints to inter-sectoral mobility such as low skills or lack of access to capital, infrastructure or markets

Strategies need to take account of:

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Rural Poverty Reduction Requires More Attention

Rural poverty remains more pervasive than urban poverty in many countries.
Ratio of Rural to Urban Poverty
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2. 2 2 2 2. 2 2 2 22 .2 22 .2 22 .2 22 .2 22 .2

II.

What factors have led to better service delivery to the poor

1. Improve the policy environment 2. Integrate complementary actions from different sectors 3. Adapt to political and capacity realities 4. Combine short- and long-term objectives

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1. Good policies and successful projects go together

Percent satisfactory outcome 2222 - 2222 2% 2 2% 2 2% 2 2% 2 2% 2 2% 2 2% 2 2% 2 2% 2 2 %

2 IDA countries 2 2 IDA countries 2

2 IDA countries 2

Above 22 . 2 2 CPIA Rating 22

Between 2& 22 .

Below 2

The 18 countries with the best overall policies had 82% of projects rated satisfactory Sector policies matter, as well as the overall policy framework. Individual projects have more impact if anchored in an appropriate and country-owned sector strategy.
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2. Integrate complementary actions

Achieving the MDGs requires multiple actions aimed at the targeted outcomes Improvements in one sector often require removing constraints in another sector
Bangladesh: girls secondary schooling and rural electrification contributed to reductions in child mortality Vietnam: trade liberalization and infrastructure investments helped fuel agricultural growth that reduced rural poverty

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Poverty Reduction Strategies are designed to integrate actions for both physical and human capital. As implemented they need to put more emphasis on infrastructure and rural development.

3. Adapt to political and capacity realities

Reforming public sector institutions requires broad political support.
Bolivia and Yemen: Technocratic civil service reforms couldnt overcome traditions of political patronage

If broad support is lacking, an incremental approach can get results.

Senegal: Successful reforms in telecoms and water built on politically acceptable intermediate solutions. But planned reforms in power and urban transport were too all-encompassing, and failed

Modernization and reform efforts must match implementation capacity.

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Malawi: a health service pilot operation with modest objectives has achieved more than an ambitious public sector overhaul program

Making global programs More Effective

Most have been donor-driven; the voice of developing countries in their establishment and governance has so far been limited Most are advocacy/technical assistance programs supporting national public goods although global public goods programs still command the major share of expenditures Global-country linkages have been weak; incentives to foster such linkages are insufficient

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Donors need to develop a stronger approach to support of regional programs

Regional programs are few in numberyet equally successful (above 80%) in meeting their objectives as single-country programs
A regional hydropower project in the Senegal River Basin has succeeded in providing efficiently produced electricity for Mali, Mauritania, and Senegal

Donors and countries have overlooked opportunities for regional cooperation in country development strategies
They need greater peripheral vision to address such issues as water management, power, transport, and disease control.

Successful support of regional programs requires attention to three key issues

The achievement of equitably apportioned costs and benefits among all countries Reliance for program coordination on broad regional institutions vs customized arrangements for specific topics Accommodation of the need for performance-based aid

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4. Combine short- and longterm objectives

Need long term engagement to get results
Cambodia: IDA projects helped build the Health Ministry from weak bystander to effective implementer of AIDS control programs.

Reform requires consensus-building. Combining short-term outputs with a long-term reform program helps deliver results
Ghana: IDA Support for education combined policy reforms with funding for school buildings and teaching materials over 15 years. Physical improvements helped build support for difficult systemic reforms.

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III. Strengthening Public Sector Accountability

Efforts to strengthen the accountability of public sector institutions have led to better government processes in some countries, but they have not yet resulted in improvements in the perceived quality of governance.
35 Countries with Bank Assistance for Public Sector Reform Government Process Quality Governance 2 2 2 2 2 2 Perception 2 2 2 2
2 2
2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2

2 2 2 2 2 2 2

2 2

Number of Countries

2 2 2 2

2 Q u a lity o f B u d g e ta r y a n d Fin a n c ia l Q u a lity o f Pu b lic A d min s tr a tio n Ma n a g e me n t

Number of Countries

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G o ve rn m e n t E ffe c tive n e s s

C o n tro l o f C o rru p tio n

R e g u la to ry Q u a lity R u le o f la w

Notes: Quality of Government Process Indicators: CPIA for budget and financial management, and for public administration 1999-2005. Governance Indicators are Kaufmann, Kraay, Mastruzzi Indicators for 1996-2004. Sample includes all countries for which IEG carried out a CAE or CASCRR in FY03-06, where the Bank provided support for public sector and governance reforms and for which CPIA and KKM indicators were available.r io r a t io n De t e Im p r o v e m e n t No C h a n g e De t e r io r a t io n Im p r o v e m e n t No C h an g e Source: ARDE 2006

Governance Reforms Need Political Backing To Deliver Results

Three factors attenuated the effectiveness of governance reforms through large-scale administrative reforms: 1. Reform initiatives have not always been aligned with political realities: Civil service reform in Bulgaria delivered results because it had strong political backing (prospects of EU accession), but civil service reforms in Yemen and Bolivia

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Three Factors Attenuated Effectiveness Of Governance Reforms

2. The focus has been on adoption of legislation and establishment of institutions, but enforcement capacity has received insufficient attention. Anticorruption agencies, for example, have only limited impact when they and their staff are not fully independent of those whose behavior they monitor.
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Three Factors Attenuated Effectiveness Of Governance Reforms

3. Governance reforms have tended to insufficiently address the intersection between the public sector and private sector, even though regulatory reforms have often been effective against corruption. Establishment of an independent regulator for electricity in Turkey enabled direct contracting between buyers and sellers of electricity and sharply limited opportunities for kick-

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There Is Improvement In The Transparency Of Government Processes

Budget transparency:
Turkey brought extra-budgetary funds that undermined fiscal discipline into the budget, subjecting them to budget and parliamentary scrutiny. Public expenditure tracking surveys in Uganda drastically increased the share of spending that actually reaches schools.

Public procurement:
Civil society representatives observe public tendering in the Philippines. Uganda posts results of procurement audits, contract awards etc. on the web.
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Customs administration:
The South East European Trade and Transport

Implications: Basing Governance Reforms On A Realistic Assessment Of The Political Economy Reforms to improve the accountability of public sector institutions require broad-based political support. When such support is absent, an incremental approach that allows momentum for reforms to build can help achieve results.

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Governance Reforms Need A Realistic Assessment Of The Political Economy

Thorough exploitation of sector-specific opportunities to improve governance brings results, even when anticorruption is not the primary objective. Reforms can be enhanced with efforts to foster local demand for accountability through increased transparency of government processes and resource utilization.

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IV. Aid flows are not reaching scaling up commitments

Real ODA,
22 2

2222 - 2222
22 .2 22 .2 22 .2

(A djusted for inflation and exchange rate changes)

Billion US$ (Constant 2222 )

22 2

2 2

2 2

22 .2 22 .2 22 .2

2 2

2 2

22 .2 22 .2 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 * 22

Africa, exc. debt relief

Other regions, exc. debt relief

Debt relief

ODA / GN I

Source: OECD/DAC Database on Aid Activities

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Note: * Regional breakdown not yet available for 2006.

% of GNI

22 .2

Aid flows are not reaching scaling up commitments

Number of Donors per Recipient Country
22 2% % of Recipient Countries 2% 2 2% 2 2% 2 2% 2 2 % 22s 22 22s 22 22s 22 Decade
Source: OECD/DAC Database on Aid Activities Source: OECD/DAC Database on Aid Activities
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Over 22 2 to 2 2 2 Less than 22

22s 22

22s 22

Summing up
Independent Evaluation finds that development effectiveness improves when it:
Focuses on the nature of growth Integrates activities across sectors and sustains them over time Supports and fosters a good policy framework in each country Recognizes each countrys political and capacity realities and builds on deep country knowledge Aid volumes and fragmentation: source of

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ARDE 2006 Website

http://www.worldbank.org/ieg/arde 2006

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