Many MICs have unfinished development agendas and risk being “trapped” in middle-income status if they do not further accelerate their own economic, social, and structural transformation through a set of “second-generation” reforms, that address the challenges that reflect the more advanced stage of their development. These “second-generation” challenges are much more evident and vividly reflected in UMICs, the upper-tier subset of MICs, as measured by income. UMICs—currently 56 countries with gross national income per capita ranging from $4,036 to $12,475—are extremely diverse and have differing development needs. The World Bank Group can have a valuable role in responding to UMICs’ demand to address these second-generation challenges.
IEG’s Synthesis Review
With this in mind, the Independent Evaluation Group (IEG) undertook a synthesis review of existing evaluative evidence on the outcomes and lessons learned from the World Bank Group’s partnership with UMICs. This review covered mainly IEG evaluations and reports produced in 2007-16 (including relevant thematic, corporate, and country evaluations), along with select project evaluations. The report is organized along the World Bank Group’s “three ways” approach to achieving its twin goals: working to accelerate inclusive and sustainable economic growth; helping countries invest more effectively in people; and fostering resilience to global shocks and threats. The report is not comprehensive in its coverage, inasmuch as it does not cover all areas of World Bank Group engagement in UMICs, but only those where sufficient and relevant evaluative information is available.
Findings
Overall, this review concludes that the World Bank Group engagement with UMICs and its support to them remains highly relevant from two perspectives: helping these countries address their specific developmental challenges, and potentially having a valuable demonstration effect for other lower-income groups of World Bank Group clients. Regarding inclusive and sustainable growth, the World Bank Group had a positive role in helping UMICs cope with various crises, such as financial, economic, and humanitarian. It also helped address large remaining gaps in the quality of UMICs’ public sector institutions, accelerate growth in private sector productivity and innovation, and increase private financing of infrastructure. Similarly, in support for investments in people, the World Bank Group focused on supporting UMICs’ increasing shift from focusing primarily on access to ensuring improved quality of basic health, education, and urban services. The World Bank was also instrumental in building safety net systems, including the highly successful experience with conditional cash transfers. Its support for enhanced resilience to environmental and security shocks was highly relevant because UMICs have an increasingly important role in addressing global threats in these areas.
Despite the high relevance of the World Bank Group’s engagements in UMICs, important challenges remain in fully addressing some of the structural issues that underlie UMIC’s vulnerability to various shocks and in making progress that is more significant and sustained in several important development areas. Although the World Bank Group provided effective support to UMICs after various crises, in many cases external shocks only exacerbated already existing and well-known fundamental problems, such as unsustainable public sector expenditures or high youth unemployment. Furthermore, individual interventions to improve public sector institutions and private sector competitiveness had positive results, but broad systemic improvements were less common, and UMICs still exhibit very large gaps in those areas compared with their higher-income peers. Similarly, despite noticeable individual project and country achievements, significant challenges persist for achieving large and sustained improvements in the quality of basic public services and for strengthening national natural resource management institutions.
The volume of World Bank Group financing does not often carry critical mass for most UMICs (except during crises). However, it has proven to be important for sending positive signals to markets during crisis, providing credible incentives to private investors in relatively underdeveloped markets, helping launch innovative and catalytic public and private sector initiatives, and fine-tuning existing national programs to enhance their effectiveness. The World Bank Group significantly increased lending commitments to the UMICs during the period under review, mainly during the global financial crisis and because of it. However, the trend reversed after 2010, and lending is currently close to pre-crisis levels. Many IEG evaluations have highlighted lending’s importance for leveraging the impact of the World Bank Group’s contributions through other instruments, notably analytical work, policy dialogue, and partnerships. IEG also recognized the importance of safeguarding lending space at the country level to allow for credible responses to future crises. Going forward, continuing to expand the set of financial instruments available to UMICs will be important to increasing the World Bank Group’s ability to respond flexibly to this client country group’s evolving financing needs and using World Bank Group financing to complement and enhance the effectiveness of other types of World Bank Group services.
A high potential for South-South knowledge transfer between UMICs and lower income countries has often been underused, including in limited scaling up and replication of successful projects across countries. This suggests the World Bank Group needs to explore new mechanisms to facilitate knowledge transfer and exchange to fully reap the learning benefits of its UMICs engagements.
World Bank Group portfolio performance in UMICs at the country and project levels during the review period exceeded that of other income groups. However, effectiveness across various sectors (Global Practices) showed significant variation, even within the same countries. Recent IEG Results and Performance Reports show mixed results at the same time as the performance gap between UMICs and other groups is becoming less evident.
Areas of Engagements
Considering the broad nature of the “three ways” and the World Bank Group’s ongoing efforts to identify priority areas and instruments for engaging with UMICs, this report focuses on a selected set of second-generation developmental challenges facing most UMICs. The report does not attempt to cover all possible areas of World Bank Group engagement in UMICs across the three ways, but rather concentrates on selected development challenges for which evaluative evidence is available and on which the World Bank Group has significant scope for contributions and learning in UMICs. For each of the three ways and the cross-cutting knowledge agenda, the report summarizes available evidence on the World Bank Group’s performance in facing development challenges in the following specific areas: