Update the Bank's approach to institutional strengthening by: - Leveraging innovations in financial instruments and building on lessons learned to strengthen business lines that warrant more immediate attentioncivil service pay reform (particularly in fragile states); public management support for basic service delivery and the investment climate; public financial management of natural resource rents; and civil society capacity building; - Strengthening Bank-country dialogue primarily through better integration of political economy analysis into standard Bank economic and sector work (and less through the creation of confidential, free-standing political economy analysis products); and - Adapt actionable governance indicators more systematically to project results frameworks.
Original Response: Partially Agreed. Management is developing a new results-based lending instrument that will finance the delivery of results in many of the critical areas listed by IEG. Management also endorses the call for strengthening country dialogue through the more widespread use of political economy analysis at country, sector and project level. However, Management believes that country context is critical, and whether or not to 'integrate' political economy analysis into economic and sector work is a decision that should be taken at the country level. Management agrees that actionable governance indicators should be used more systematically in results frameworks.
Seek Board approval for new results-based lending instrument
(the ï¾Program for Resultsï¾) in FY 2012.
Building on guidelines contained in ï¾Problem Driven Governance and Political Economy Analysis,ï¾ published in September 2009, Management will develop further tools as necessary but will leave the decision on whether or how to use the tools and guidance to Regional staff, who have the relevant country knowledge. The guidance on using political economy analysis in fragile and conflict-affected states will be issued in the first half of GACII.
Develop and disseminate guidance on using actionable governance indicators in project results frameworks, and monitor their usefulness and modify as necessary in the context of regular GAC reporting. Management will disseminate guidance in the first half of GACII.
Actions agreed on this recommendation were to (i) seek board approval for the results-based lending instrument; (ii) develop further tools for institutional strengthening, and (iii) develop and disseminate guidance on using actionable governance indicators in project results frameworks. The latest progress on these agreed set of actions is as follows.
(i) The Performance-for-Results (PforR) lending instrument was introduced as per Board Paper on December 29, 2011 and has become an integral part of Bank operations now. World Bank Management conducted a review of the first two years of its operation and presented its findings in a document dated March 17, 2015. The management has assessed the early experience with the design and implementation of PforR operations and the challenges faced by borrowers, development partners, and Bank staff. The two-year review concluded that the PforR instrument has been successfully rolled out across a broad range of countries and sectors, policy requirements have been met, with implementation broadly on track for all but one of the approved operations. As of mid-May 2015, the Board had approved 25 PforR operations, providing $4.6 billion of Bank financing to support a total of $11.7 billion in government programs.
(ii) Building on guidelines contained in Problem Driven Governance and Political Economy Analysis published in September 2009, the management had agreed to develop further tools as necessary and issue guidance on using political economy analysis in fragile and conflict-affected states. Substantial research on institution building, with a particular attention to fragile states, was done, including Institutions Taking Root: Building State Capacity in Challenging Contexts (2014); Trust, Voice, and Incentives: Learning from Local Success Stories in Service Delivery in the Middle East and North Africa (2015); and Opening the Black Box: The Contextual Drivers of Social Accountability (2015). Decision on whether and how to use guidance contained in these research work rests upon the Regional staff, who have the relevant country knowledge. Apart from these research works, a revised PEFA assessment has been rolled out and a revised Methodology for Assessing Procurement Assessment (MAPS II) tool containing core indicators has been developed and made available for consultations in the OECD website. The consultation process is on and it is expected to be finalized within FY17.
(iii) In reference to the agreed action on developing and disseminating guidance on using actionable governance indicators in project results frameworks, no specific progress has been reported.
As per the 2015 response, Management views this recommendation to be completed. The PforR instrument has become an integral part of Bank operations. The Bank continues to develop new tools and approaches to changing priorities in the area of institutional strengthening - including substantial investments in area such as tax administration, management of revenues from natural resources, and the prevention of money laundering. This work comes on top of continuing work in such core areas as civil service reform, procurement, and public financial management. Specific attention has been placed on research and guidance on institution building in fragile states, including Institutions Taking Root: Building State Capacity in Challenging Contexts (2014), Trust, Voice, and Incentives: Learning from Local Success Stories in Service Delivery in the Middle East and North Africa (2015), and Opening the Black Box: The Contextual Drivers of Social Accountability (2015). Continued attention has been placed on creating and using actionable governance indicators, including the roll-out of a revised PEFA assessment and the initiation of a revised Procurement Assessment (MAPS II). While work on improving the effectiveness of the Bank's work on institutional strengthening will be a constant feature of our work going forward, Management views the specific recommendation from IEG to have been completed.
There were 27 PforR operations approved by the end of FY15, and the OPCS 2 year review was completed. Concerning the the develop of new tools and guidance, IEG has looked for evidence of the work cited above by Management. IEG reviewed: Building Public Services in Postconflict Countries, June 2015, draft executive summary and chapter 1 (the rest is not available), and finds it a very promising beginning. The EITI work was published in FY13. The book: Problem-Driven Political Economy Analysis: The World Bank's Experience was published in FY14. IEG could not find any of the other work cited.
As per the 2014 update, Management views this action to have been completed and that this action should be retired. The Bank continues to focus on many of the priorities for institutional strengthening referenced in the document below. They include work on institutional reform in FCS contexts, where two initiatives have moved forward during the past year: (1) an analysis of civil service reform challenges in FCS contexts; and (2) a joint institutional core diagnostic in the immediate post-conflict period taken forward jointly by the Bank and UNDP. A major publication on problem driven political economy analysis was rolled out in FY14, and a strategy note is under preparation about how to best take forward the Bank's approach within the new global practice environment, including the CPF and SCD process. Work on transparency and extractive industries is moving forward along multiple dimensions, ranging from EITI to activities supported through the GPF trust fund in individual country contexts (such as Mongolia and Ghana), to cooperation with the Fund on incorporating natural resource rents into the Fund's GFS manual. Work is also moving forward on developing Indicators of the Strength of Public Management Systems (ISPMS), which will seek to create a more robust empirical basis for evaluating public sector systems. The joint institutional core diagnostic has been taken forward with the incorporation of monitorable indicators of progress in public sector reforms within the Corporate Scorecard and the development of public sector Core Sector indicators.
Based on draft Program-for-Results Two-Year Review, the Bank has successfully rolled out the instrument across a broad range of countries and sectors. The Bank has met policy requirements, and implementation is broadly on track. The main contributions are in two areas: its role in increasing attention to results and to the systems and institutional capacities required to achieve them. Formulating disbursement-linked indicators is seen as difficult by most clients and staff surveyed, signaling that such indicators are reasonably ambitious and taken seriously as the basis for disbursements. Independent measurement and verification is also important, and presents an opportunity to strengthen national statistics agencies by creating demand for measurement and data. There are also opportunities to encourage citizen engagement. GGP is carrying out its own assessment of four public sector management PforRs in Brazil, Bangladesh, Pakistan and Mozambique.
In the GAC portal, there are 41 GAC areas (e.g. access to information), most with tools listed such as how-to notes, relevant projects and AAA. But only two documents (mobile technology, audit) are from 2014, most are 2011 or earlier. There are reportedly two main reasons for this: 1) GPF funds weren't sufficient; and 2) The initial planning on the Governance Global Practice did not focus on the knowledge agenda. The extent to which existing tools are being used by regional staff is unknown. The portal includes, inter alia, guidance on using political economy analysis in fragile and conflict-affected states. There are additional tools like the governance filter being used in a couple of instances, e.g. Nigeria country program, roads pilot in Kazakhstan and Armenia.
In June 2014, the Public Sector Board discussed and approved core sector indicators for the areas of public administration and civil service, tax administration, and public financial management, and prepared an information sheet listing them. However, the timetable for distributing guidance on actionable governance indicators in results frameworks is unknown.
The Bank continues to focus on many of the priorities for institutional strengthening referenced in the document below. They include work on institutional reform in FCS contexts, where two initiatives have moved forward during the past year: (1) an analysis of civil service reform challenges in FCS contexts; and (2) a joint institutional core diagnostic in the immediate post-conflict period taken forward jointly by the Bank and UNDP. A major publication on problem driven political economy analysis was rolled out in FY14, and a strategy note is under preparation about how to best take forward the Bank's approach within the new global practice environment, including the CPF and SCD process. Work on transparency and extractive industries is moving forward along multiple dimensions, ranging from EITI to activities supported through the GPF trust fund in individual country contexts (such as Mongolia and Ghana), to cooperation with the Fund on incorporating natural resource rents into the Fund's GFS manual. Work is also moving forward on developing Indicators of the Strength of Public Management Systems (ISPMS), which will seek to create a more robust empirical basis for evaluating public sector systems.
Action 86-02 has been taken forward with the incorporation of monitorable indicators of progress in public sector reforms within the Corporate Scorecard and the development of public sector Core Sector indicators.
Action 86-01 has been accomplished and should be retired.
The Bank deserves credit for the development of PforR asan additional mechanism to support institutional change in client countries.Yet itwill needto go farther byelaboratingan array of instruments and design approaches to support longer term GAC objectives. The full range of cash and risk management instruments (e.g., guarantees)should be considered as part of the Bank's GAC operational toolkit.It will also be necessary to offer evidence-basedguidance on how different instruments and approaches can be used to promote specific objectives. For instance, as the GAC evaluation found, the use of subprojects and report-based disbursements in investment operations with clear rules of access are associated with formal rules based governance and accountability (for instance, intergovernmental transfers, matching grants, bank restructuring, etc.). Similarly, IEG found that the use of DPLs were positively associated with achievement PSM objectives but not with demand side and social accountability goals.
ThisIEGrecommendation was intended to promote the development not only of new financial instruments but a menu of GAC-related product lines such as PSM for PSD, the demand side of governance, GAC in sectors, etc. While some GAC business lines are emerging (such as support for civil society throughthe Global Partnership for Social Accountability, operational innovation in other areas is still lagging. Priority areas not mentioned in the Bank's response include civil service reform, PSM for PSD, and the panoply of public management and governance needs in the infrastructure and social sectors (that is, GAC in sectors).It is important to note that evidence based operational work in these areas would converge with the President's interest in developing a "science of delivery."
The work on political economy analysis (PEA)and the use of actionable indicators should move from guidance toactual application in projects and ESW. The 2011 GAC evaluation found the guidance papers and notes -- while initially necessary -- where at times not sufficiently user-friendly, especially for staff in country offices. Successes such as the expanded use of PEA in projects should serve as a model for similar efforts in ESW. Indeed, the Bank's Change Managementfocus on knowledge only provides an added incentive to identify technically and politically feasible solutions for clients. It also compels Bank teams to use PEA in economic sector work and projects in order to better "learn from failure."
The actionable governance indicator agenda has been under development for five years. GAC areas where there has been some discernible progress is PFM, institutions for education, and to a lesser extent, the investment climate. There is need to redouble efforts to develop standard indicators in other areas such as GAC-in-sectors (including infrastructure, health, social protection),financial sector, the demand side of governance, revenue administration, etc. Also important are standard "GAC in projects" indicatorsrelating tofraud andcorruption safeguards,demand side and third party monitoring. It is essential that Management report back on whether these indicators are systematically used in project results frameworks. They should also make their way into the Corporate Scorecard and other future corporate results measurement systems.
Update on Action 0086-01: The PforR instrument, approved by the Board in January, 2012, aims at helping governments improving the efficiency of their own development programs, with a primary focus on capacity building, Program systems performance and results.[LOA:high]
Update on Action 0086-02:A book is currently under preparation regarding Political Economy Analysis (PEA) in FCS, which should be finalized by September 2013. A guidance note was finalized on PEA for PFM in autumn 2012. A recent note has been completed on PEA in the water sector in September 2012, and a series of how to notes regarding PEA assessments at sector and project levels was completed in March 2011. Two on-line learning modules, including both a general introduction to PEA as well as a specific module for country teams, will be finalized in June 2013. [LOA:substantial]
Update on Action 0086-03: Major ongoing effort to develop Actionable Governance Indicators (AGIs) addressing the broader governance environment, as well as Indicators of the Strength of Public Management Systems (ISPMS) addressing the executive branch, is currently underway. Its estimated completion date is June 2014. [LOA medium]