Fin4Dev: Learning from the Past for a New Future
What can Financing for Development learn from evaluation?
As the world gathers in Addis Ababa to raise billions or trillions for new sustainable and equitable development goals, letâs take a look at lessons from evaluation that can increase the effectiveness of monies generated and ensure they are spent wisely. Otherwise, even trillions might not be enough to create a sustainable and equitable world for generations to come.
Raising domestic public finance is largely dependent on the tax base, and programs to help countries improve their tax administration have successfully led to increased revenues; however evidence is less compelling about what makes the domestic private sector, a core contributor to the tax base, grow. Investment climate reforms are one part of the answer, targeted efforts to promote the growth of small- and medium-sized enterprises (SMEs) another. But, as our evaluations have shown, reforming the investment climate does not always lead to increased investments, and measures to grow the SME sector have not always been clear about targeting, or about which market failures they aim to fix. In the future, we plan to evaluate how the Bank Group helped countries address informality or grow the non-farm rural sector to help deepen our understanding of these issues.
In many World Bank Group (WBG) client countries, extractive industries form a large part of the economy. Insights from our evaluations suggest the global community needs to raise the bar to ensure extractive industries contribute fairly to the revenue streams of host countries. The Extractive Industries Transparency Initiative has set out helpful standards, but success will depend on complementary actions, and working to ensure governments administer these revenues transparently and invest them to promote broad-based economic growth.
Service delivery sectors are experimenting with new ways to raise and pool funds from users to incentivize the right behaviors and make the most efficient use of resources. Evaluation insights show how different options for financing services in the health sector can impact service quality and equity. We plan to evaluate how WBG delivery and financing models helps build sustained service delivery for the poor (one of our Strategic Engagement Areas).
A corollary to raising funds is more effective and efficient management for results - whether through procurement processes, service delivery, or maintenance of infrastructure. Increasingly, effective public financial managers need to understand and make deliberate choices about how to incentivize the behavior of consumers, suppliers, and enforcers of regulation, to ensure consumption is âright-sizedâ and efficient, emphasizing the need for greater experimentation in and understanding of the effectiveness of service delivery models that achieve the difficult balance of sustainability, equity, and efficiency.
Invariably evaluations found ownership to be a key driver of success, whether in public sector reforms, revenue generation and administration, expenditure management, or private sector development. Success often hinged on understanding the underlying political economy, and the ability to forge alliances that secured broad-based support for difficult reforms over time and were adaptable to changing contexts. This sensitivity to a dynamic country-context is even more necessary in fragile and conflict-affected states, where institutions are rebuilding, alliances are being formed and reformed, and change is a constant factor.
In pursuing reforms, programs needed to balance a systemic approach with a clear focus and appropriately sequenced interventions. Being systemic required understanding policies and process as part of a much larger system. Trying to do it all at once often led to over-ambitious programs. Priorities, sequencing, and constant adaptation seemed to produce greater success than blue-printed plans for change. The new development agenda, with its ambitious and complex goals, will require even more of this adaptive learning as it challenges development institutions to overcome institutional constraints (culture and incentives) to continuous learning and course-correction when needed.
With partnership as the new mantra, it is important not to confuse a commercial public-private partnership (PPP) for a specific service delivery with a partnership for global public goods.
PPPs are often seen as a panacea to help with public service delivery. They can be effective if sector reforms have been delivered (e.g., strong public sector capacity to engage with and manage PPPs). Without reforms and strong capacity on all sides, these partnerships are less likely to deliver on their promise.
Many global partnerships responded to the Millennium Development Goals and were able to channel resources to specific causes. But, our evaluations found they did not increase total resources for development assistance. Instead, they complicated the aid architecture and required setting up institutions - taking time, negotiations, and resources - before they could start investing in the causes they were meant to support. Expected outcomes for these partnerships were often not clearly defined and had limited or no system to track whether they were succeeding. These evaluation insights caution against further fragmentation of development finance and flag ways in which partnerships can be more successful from the start.
The ultimate aim of the summit in Addis is to raise monies for programs to eradicate poverty and boost shared prosperity. Studies show increasing inequality in some parts of the world and this is not helping economies grow or increasing the prosperity of people.
Many of our evaluations showed examples where more can be done to understand whether and what kind of impact interventions will have on the poor or shared prosperity.
As for instance, when we reform investment regulations, can we shift the focus from creating a business friendly environment to one that is also good for broader-based growth and the community? Or, when aiming to promote economic empowerment of women, can we build program designs on a deeper understanding of factors that lead to inclusive growth where greater gender equality leads to greater results?
Look for more insights from our evaluations by visiting a new resource we created focused exclusively on the Financing for Development Agenda.