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The World Bank Group in Madagascar

Chapter 6 | Findings and Lessons

Bank Group strategies in Madagascar between FY07 and FY21 were increasingly aligned with the country’s most pressing development constraints. The three strategies were consistent with the evolving country context, aligned with the government’s extant strategies, and adapted to Madagascar’s political instability and weak governance. That said, insufficient support to the country’s anticorruption agencies and agricultural interventions that did not sufficiently target Madagascar’s rural poor people undermined the achievement of expected results.

Strategies and interventions adapted to changes in the country context. This was particularly important after the 2009 political crisis and the subsequent triggering of OP 7.30. The Bank Group responded by increasing analytical work on elite capture and rule of law. This helped improve understanding of how these constraints affected the portfolio and how to improve design accordingly. The World Bank’s engagement was recalibrated to more directly confront rent capture and the need to strengthen checks and balances. This was most evident in the latest strategy—the CPF (FY17–21)—which recognized the need for the Bank Group to directly address key drivers of fragility in Madagascar.

This evolution allowed the country to benefit from significantly greater IDA financing. As a fragile state, Madagascar was eligible for IDA fragility, conflict, and violence allocations including through the TAA. This extended the World Bank’s leverage by tying financial incentives to progress on measurable reforms and actions that would help the country transition out of fragility. It helped increase the commitment of the government to much needed policy reforms, while providing a platform for dialogue with development partners. At the project level, interventions were designed and implemented to promote greater transparency in resource management and citizen involvement in budget preparation and oversight.

Gradual recognition of political economy constraints (and the pervasiveness of elite capture in particular) led the Bank Group to partially pivot its approach in favor of more direct engagement at the local level in investment project lending. Drawing on local government and nonstate actors underpinned continued engagement and allowed the Bank Group to work around political instability and elite capture. Indeed, despite the challenges associated with working in Madagascar during the political crisis, many projects were successfully implemented, including, critically, a series of emergency projects. It also positioned the World Bank to better support the government in advancing the stalled decentralization agenda. At the same time, budget support sometimes included prior actions targeting national level reforms whose political economy risks were not always fully thought through. This can be seen in the mixed record of DPO-supported reforms being sustained (particularly those related to reforming JIRAMA).

The World Bank succeeded in contributing to limited improvements in domestic revenue mobilization, expenditure management, decentralization, and transparency, accountability, and participation of civil society in decision-making. World Bank support to strengthen citizen participation in public finance has yielded results, including through the NGO SAHA and its partner CSOs. World Bank support for domestic resource mobilization contributed to improved tax and customs revenue collection, and increased local revenues, even though it was not able to achieve reductions in the country’s high and regressive tax expenditures. World Bank support for expenditure management led to some reductions in transfers and subsidies to nonpriority expenditures; however, JIRAMA continues to receive sizeable fiscal transfers. With respect to decentralization, World Bank support helped improve the targeting of the country’s intergovernmental fiscal transfer system and boosted subnational public financial management.

The World Bank’s engagement in natural resource management and the environment evolved over time, shifting from a conservation focus to a more integrated approach. This helped address the complex relationship between agriculture and the environment, and coordination between the World Bank’s environment and rural development projects has grown significantly over the past several years.

However, the Bank Group’s results were tempered by an inability to adequately mitigate political economy risks. Although the Bank Group improved its ability to understand the root causes of Madagascar’s weak governance and fragility, the associated risks were inadequately mitigated. Evidence of this can be seen, for example, in the reversal of DPO prior actions, the continued high level of tax expenditures, and the power of vested interests (for example, within senior JIRAMA leadership) to derail needed reforms.

Bank Group interventions to foster sustainable development in rural areas contributed to some improvements but failed to fully adapt to local conditions. The Bank Group’s support for agriculture was unable to address barriers facing rural smallholders because interventions were not designed to be relevant to their specific challenges. The World Bank supported the development of value chains, but many smallholder farmers and smaller producers did not have the requisite capacity to benefit from these by undertaking contract farming. Many Malagasy smallholders were unable to adopt the new technologies supported by the World Bank due to inadequate educational attainment and insufficient resources to invest in said technologies (as well as infrastructure constraints, to be sure). As such, the overall impact on poverty was limited.

The following lessons are offered for consideration regarding future World Bank engagement in Madagascar and may be of relevance to countries facing similar challenges:

  1. The World Bank had some success in identifying and analyzing political and governance risks, but less in operationalizing its findings. Although the World Bank was able to tackle some political economy constraints through disbursement-linked indicators and recalibration of the CPF to directly address fragility drivers, project design sometimes fell short with respect to political risk mitigation. In some cases, this undermined results and may have helped contribute to unintended consequences, such as weakening the authority of the independent anticorruption court (Pôles Anti-Corruption) by supporting the establishment of a separate court dedicated to trying high-profile politicians.
  2. Given significant reversal of reforms supported by DPOs in the face of elite capture in Madagascar, the World Bank may want to (i) strengthen how it assesses whether the conditions for budget support operations are adequate, (ii) more clearly identify the risks to sustainability, and (iii) better articulate risk mitigation strategies. Vested interests in Madagascar were often successful at undermining reform efforts, particularly as they related to increasing the transparency of tax expenditures and improving governance in the energy sector, suggesting the need to better tailor project design to the challenging context.
  3. Strengthening the World Bank’s engagement with CSOs to a more collaborative one could help achieve a greater level of accountability in a context such as that of Madagascar with weak checks and balances. The results of the World Bank’s sustained but limited support to CSOs (coordinated through the NGO SAHA) to improve social accountability mechanisms demonstrate the potential value added of supporting civil society on a larger scale. Increased collaboration could also make the World Bank more aware of unintended consequences for homegrown anticorruption initiatives.
  4. Addressing longer-term development in rural areas requires adapting support to the needs of Malagasy smallholders and smallholder production systems. The World Bank–supported strategy to improve agricultural productivity largely focused on yield per hectare, which did not fully consider the high vulnerability and low investment capacity of Malagasy smallholders or their preference for diversification over specialization. For example, World Bank support that introduced new technologies insufficiently considered that most smallholders are constrained by poverty and are not able to adopt new techniques that require additional investments. Indeed, the Bank Group’s agribusiness interventions supporting value chains largely benefited medium- to large-scale clients, as smallholders did not have the capacity to take advantage of new markets. This reflects a more general finding that poverty traps are not conducive to risk taking or delayed benefits, which are often necessary when adopting new technologies.
  5. The World Bank worked best in Madagascar’s rural areas when it coordinated across sectors—a lesson adopted and reflected in the current portfolio. Addressing natural resource management in Madagascar required complementary support across sectors. As an example, the World Bank’s decision not to deliver some forms of complementary assistance to support local community livelihoods had a negative impact on its forest management activities. Although there are often impediments and disincentives to coordination within both government and the World Bank, sectoral coordination, when it occurred (from the ministerial to the community level), fostered more sustainable gains in rural areas.