The Bank Group should develop a more suitable and accurate mechanism to define FCS status. This would involve, at a minimum, integration of indicators of conflict, violence and political risks within the current system that serves as the basis for FCS classification.abc
With the evolution in the nature of fragility and conflict drivers over the last few years, the reliance on Country Policy and Institutional Assessment (CPIA) ratings to determine FCS status results in considerable errors of exclusion and inclusion in FCS classification. The Bank applies a set of Post-Conflict Performance Indicators (PCPI) to determine the size of exceptional allocations to countries deemed eligible for this support. However, the PCPI indicators are applied ex-post, after countries have been deemed eligible for exceptional allocations, rather than to determine if countries should be eligible for them. Indicators of conflict, violence and political instability are not currently used to identify fragile and conflict status.
WBG: Agree. WBG Management agrees that the present mechanism to define FCS status and to determine eligibility for IDA Exceptional Allocations presents challenges.
Rigorous conflict indicators are important for robust decisions. In this regard, Management is continuing to invest in indicator development and statistical systems that support monitoring and evaluation of relevant indicators, including through the PCPI process, and continued support to the g7+ in developing peace and state-building indicators.
In order to capture aspects related to conflict and violence that might otherwise be excluded from the selection of FCS, Management currently complements harmonized average CPIA country rating of 3.2 or less with the presence of a UN and/or regional peace-keeping or peace-building mission during the past three years. It is to be noted that the list excludes IBRD only countries for which the CPIA scores are not currently disclosed.
WBG Management commits to review the criteria for classification of FCS and work to develop improved methods for FCS classification that are relevant to the Group. Such a review would need to engage with a wider range of actors, including the UN, other MDBs, OECD/INCAF, and the g7+.
Action 1: Work with MDBs, the UN, INCAF, the g7+, and other stakeholders to review the definition of FCS status to better integrate indicators of fragility, conflict and violence (FCV) to improve operational relevance and facilitate resource allocation for WBG.
Indicators: (a) Preparation of an approach paper for review (b) completion of consultations with external partners and g7+ (c) development of a common framework for the definition of fragility, conflict, and violence.
Baseline: The definition based on CPIA rating and UN and/or regional peace-keeping or peace-building mission is not comprehensive in reflecting conflict, violence and instability and does not adequately serve WBG operational purposes.
Target: New FCS definition that incorporates indicators of conflict, violence and instability thereby increasing relevance to WBG operations, resource allocation and target setting.
Timeline: FY17.
Activity completed during the last fiscal year. No update for this fiscal year.
The report prepared by the FCV CCSA in FY16 on an improved metric of fragility based on outcomes and risk factors is an important document that has been well received and has gone a considerable way to concentrating the discussion around the prescient issues for 'at risk' countries. Management has confirmed that in FY17 this will inform the harmonized list, and will include a quantitative assessment based on lead flags for policy and institutional exposure. Likewise, there is evidence that the new model has informed discussion at IDA18 with regards to the adoption of criteria for eligibility to the risk mitigation window for countries beyond the FCS list. Thus against the commitment in the evaluation action plan, this commitment can now be considered complete. While IEG acknowledges and supports the importance of this achievement, there is some concern that the risks associated with implementation have not been entirely placated. While the Board has shown support for the preliminary steps, there is still some way to go before the operational parameters are instituted and it will be interesting to see whether other donors remain committed should there be changes to the harmonized approach. This work is sensitive and likely to be somewhat controversial, thus IEG will remain engaged in the detail on the political economy of these reforms in the future.
A note for an improved metric of fragility based on outcomes and risk factors has been prepared. A report was issued in FY16. Starting FY17, the process of updating the harmonized list rests on a FCV risks scan covering all countries, including MICs and IBRD eligible countries. This risk scan will include (a) Quantitative Assessment, based on lead flags of policy and institutional exposure to risk of FCV outcomes (CPIA flags). Countries will also be rated against 4 out of 43 sub-indicators of the CPIA that are most commonly associated with instability and lack of overall resilience. The cross-country risk scan will be followed up with (b) in-depth country-level qualitative assessments to provide a deeper and nuanced understanding of drivers and institutional strengths to inform the approach to manage and mitigate identified risks, tailored to country contexts ('differentiated approach'). The work provides the following recommendations regarding WBG engagement in FCV situations: (i) provide attention to relevant fragile situations beyond those in the FCS harmonized list (ii) focus on mitigation in addition to responding to harmful outcomes, through identification of and action to address long-term drivers of FCV risks and (iii) pay greater attention to supranational dynamics and regional spillovers induced by migratory and demographic pressures, illicit flows of drugs and arms, and climatic and environmental stresses.
A global multidimensional risk framework with OECD: At the same time the Bank has continued collaboration with OECD toward a global multidimensional risk framework for fragility. The global multidimensional framework will include risks factors covering key dimensions associated with fragility: state and institutions, society, security, economy, and environmental stresses. The corresponding OECD report will be published in November 2016.
Following the 2014-201 work-streams on Reviewing and Rethinking Fragility, under IDA 18 negotiations, the Bank has committed to the adoption to a risk based approach to identifying fragility beyond the IDA FCS and to identify countries that present FCV risks. While detailed implementation of a 'differentiated approach' to tackling the marked heterogeneity of fragility situations across the FCV spectrum is still under design, the notion of a differentiated/ risk-based approach itself was endorsed by IDA Deputies during the IDA 18 discussions.
At the October 2016 IDA18 Deputies meetings, IDA deputies endorsed the following:
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While reassuring that progress has been made in much of the background work on the mechanism to define FCS status, it is somewhat concerning that there is only a cursory reference to a Concept Note at this stage given the urgency of the FY17 timeline. Having said that, IEG is aware that considerable work has already taken place with regards to mechanisms highlighting and tracking outcomes and risk factors and we look forward to more detail on where this is going in the coming months. With regards to engaging with partners, IEGâs understanding is that the current WB group position is that the OECD approach does not reflect the WB position, and yet this is referenced in the update. Additional information covering the means of engaging with other development partners would give IEG greater confidence that a cohesive and agreed outcome is possible by the deadline in FY17. Given the emphasis on the considerable issues in countries that currently fall outside the FCS category (in particular the issue with Nepal graduating given current governance issues and the evident needs relating to the recent earthquake) it is of some concern that there is not more detail on how the analytical work fits together and how the Concept Note might outline the path forwards.
In FY15, FCV has carried out substantial background work and consultations to develop improved mechanisms for identifying fragility. Work included a review of the recent literature on fragility, a review of existing framework of indicators of state fragility (SIPRI 2014), a review of the shortcomings of the CPIA threshold for defining fragile and conflict affected situations (Woolcock 2014), a review of the criteria underpinning the Harmonized List (FCV 2014). In collaboration with OECD and key international partners FCV supported a broader review of list-based definitions of fragility as part of the preparation of the OECD's 2015 Fragile States Report. A concept note for an improved metric of fragility based on outcomes and risk factors has been prepared. Work will involve intensive consultations, including g7+ countries, AfDb and ADB. A report will be issued in FY16.