Latest Findings on Development Effectiveness: Lessons Learned

Presentation by Ajay Chhibber, Director andPatrick G. Grasso, Adviser, Independent Evaluation Group, World BankDCF-Vienna High Level SymposiumApril 19-20, 2007Vienna, Austria

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Three Core Questions on Development Effectiveness and Poverty ReductionI. How effectively has economic growth

translated into poverty reduction? What factors have affected these results?

II. What factors have led to high-quality results in sectors that deliver services to the poor?

III. What measures have helped raise the accountability of public institutions responsible for delivering and sustaining results?

IV. What is happening to Aid Flows and Aid Coordination?

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Convergence: Narrowing gap between OECD and developing countries

-2

-1

0

1

2

3

4

5

6

Middle-income Low-income Sub-Saharan Africa

Average annual per capita income growth

1960

s

1970

s

1980

s

1990

s

2001

/6

Source: World Bank

OECD average 1980-2006

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But There Is Strong Cross-country Variability In Growth Performance Growth has improved in most Bank

borrowing countries over the past five years, but achieving sustained growth remains a challenge.

Source: ARDE 2006

0 10 20 30 40

more than 6%

4%-6%

2.5-4%

1-2.5%

0% to 1%

less than 0%Avera

ge a

nn

ual

gro

wth

rate

of

GD

P p

er

cap

ita

Number of Countries

1995-2000 2000-2005

5

Growth is a Major Factor in Poverty Reduction

-20

-10

0

10

20

30

40

50

E. Asia & Pacific S. Asia M. East & N.Africa

Latin America &the Caribbean

Europe & C. Asia

Po

vert

y (%

of

Po

pu

lati

on

)

-3

-1

1

3

5

7

9

Gro

wth

(%

Per

An

nu

m)

Population Living on Less Than $1 a Day (1990)Population Living on Less Than $1 a Day (2003)Real Per Capita GDP Growth (1990-2003)

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There Are Still Over 1 Billion People Living In Extreme Poverty

Number of People Living on Less Than $1/Day

0

400

800

1200

1600

East Asiaand

Pacific

China Europeand

CentralAsia

LatinAmerica

andCaribbean

MiddleEast and

NorthAfrica

SouthAsia

Sub-Saharan

Africa

World WorldExcluding

China

1990

2003

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Poverty Reduction Remains A Significant Challenge Even In Countries With Positive Growth RatesPositive Per Capita Income Growth between the mid-1990s and early-2000s did not always lead to Poverty Reduction in 25 countries reviewed by IEG

Note: High growth=average annual per capita GDP growth rate of >2.5%, moderate growth=average annual per capita GDP growth of 0%-2.5%, low growth= average annual per capita GDP growth <0% between household survey years in the mid-1990s and 2001-05.Country group includes all countries for which IEG carried out a CAE or CASCRR in FY03-06 and for which comparable poverty data is available in DECRG’s Povcal database for mid-1990s and 2001-05Source: ARDE 2006

4

9

1

7

4

0

1

2

3

4

5

6

7

8

9

10

High growth Moderate growth Low growth

Nu

mb

er

of

co

un

trie

s

Poverty stagnated or increased Poverty reduced

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Income Distribution Has Affected Poverty Reduction (1)

Growth was an important driver of poverty reduction, but even small changes in income distribution either dampened or reinforced growth’s effects on poverty in 25 countries reviewed by IEG.

change in poverty due to change in household income/consumption change in poverty due to change in distribution

Positive growth effect reinforced by improvements in distribution

-20

-18

-16

-14

-12

-10

-8

-6

-4

-2

0

Mo

ldo

va

Ca

me

roo

n

Bu

rkin

aF

aso

Ukr

ain

e

Arm

en

ia

Nig

eria

ch

an

ge i

n p

overt

y h

ead

co

un

t

Negative growth effect reinforced by worsening distribution

0

2

4

6

8

10

12

14

16

Ho

nd

ura

s

Bo

livia

Ge

org

ia

Ma

da

ga

sca

r

ch

an

ge i

n p

overt

y h

ead

co

un

t

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Income Distribution Has Affected Poverty Reduction (2)

change in poverty due to change in household income/consumption

change in poverty due to change in household income/consumption change in poverty due to change in distribution

Positive growth effect dampened by worsening distribution

-10-8-6-4-202468

1012

Sen

egal

Chi

na-U

rban

Chi

na-R

ural

Alb

ania

Per

u

Sri

Lank

a

Lith

uani

a

Jord

an

Rom

ania

Dom

inic

an R

epub

lic

Tur

key

chan

ge

in p

ove

rty

hea

dco

un

t

Negative growth effect mitigated by improvements in distribution

-6

-4

-2

0

2

4

6

8

10

Bra

zil

Zam

bia

Uru

guay

Pak

ista

n

chan

ge

in p

ove

rty

hea

dco

un

t

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Poverty reduction requires attention to both growth and opportunities for the poor

• literacy• health

• infrastructure, environment

• initial income inequality

► Growth is necessary but not sufficient for poverty reduction. Extent to which the poor participate in growth depends upon

•Burkina Faso: Modest annual growth delivered impressive poverty reduction based mainly on increases in farm production

► Strategies need to take account of:

•where the poor live and how they earn their income •what constrains growth in those areas and sectors •constraints to inter-sectoral mobility such as low skills or

lack of access to capital, infrastructure or markets

• job creation• access to

credit

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Rural Poverty Reduction Requires More Attention

Rural poverty remains more pervasive than urban poverty in many countries.

0.00

2.00

4.00

6.00

8.00

10.00

12.00

Rati

o o

f R

ura

l to

Urb

an

Po

vert

y

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II. What factors have led to better service delivery to the poor

1. Improve the policy environment

2. Integrate complementary actions from different sectors

3. Adapt to political and capacity realities

4. Combine short- and long-term objectives

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1. Good policies and successful projects go together

► The 18 countries with the best overall policies had 82% of projects rated satisfactory

► Sector policies matter, as well as the overall policy framework. Individual projects have more impact if anchored in an appropriate and country-owned sector strategy.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Above 3.5 Between 3 & 3.5 Below 3

2000 CPIA Rating

Per

cen

t sa

tisf

acto

ry o

utc

om

e 20

00-2

005

34 IDA countries

23 IDA countries

18 IDA countries

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2. Integrate complementary actions

► Achieving the MDGs requires multiple actions aimed at the targeted outcomes

► Improvements in one sector often require removing constraints in another sector

• Bangladesh: girls’ secondary schooling and rural electrification contributed to reductions in child mortality

• Vietnam: trade liberalization and infrastructure investments helped fuel agricultural growth that reduced rural poverty

► Poverty Reduction Strategies are designed to integrate actions for both physical and human capital. As implemented they need to put more emphasis on infrastructure and rural development.

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3. Adapt to political and capacity realities

► Reforming public sector institutions requires broad political support.

• Bolivia and Yemen: ‘Technocratic’ civil service reforms couldn’t overcome traditions of political patronage

► If broad support is lacking, an incremental approach can get results.

• Senegal: Successful reforms in telecoms and water built on politically acceptable intermediate solutions. But planned reforms in power and urban transport were too all-encompassing, and failed

► Modernization and reform efforts must match implementation capacity.

• Malawi: a health service pilot operation with modest objectives has achieved more than an ambitious public sector overhaul program

► Some countries’ health systems have been overstretched by the demands of global disease control programs.

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Making global programs More Effective

► Most have been donor-driven; the voice of developing countries in their establishment and governance has so far been limited

► Most are advocacy/technical assistance programs supporting national public goods – although global public goods programs still command the major share of expenditures

► Global-country linkages have been weak; incentives to foster such linkages are insufficient

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Donors need to develop a stronger approach to support of regional programs Regional programs are few in number…yet equally successful

(above 80%) in meeting their objectives as single-country programs• A regional hydropower project in the Senegal River Basin has

succeeded in providing efficiently produced electricity for Mali, Mauritania, and Senegal

Donors and countries have overlooked opportunities for regional cooperation in country development strategies • They need greater peripheral vision to address such issues as water

management, power, transport, and disease control. Successful support of regional programs requires attention to

three key issues• The achievement of equitably apportioned costs and benefits among

all countries• Reliance for program coordination on broad regional institutions vs

customized arrangements for specific topics• Accommodation of the need for performance-based aid allocations

and financial incentives for countries to participate

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4. Combine short- and long-term objectives

► Need long term engagement to get results

• Cambodia: IDA projects helped build the Health Ministry from ‘weak bystander’ to effective implementer of AIDS control programs.

► Reform requires consensus-building. Combining short-term outputs with a long-term reform program helps deliver results

• Ghana: IDA Support for education combined policy reforms with funding for school buildings and teaching materials over 15 years. Physical improvements helped build support for difficult systemic reforms.

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III. Strengthening Public Sector Accountability

Efforts to strengthen the accountability of public sector institutions have led to better government processes in some countries, but they have not yet resulted in improvements in the perceived quality of governance.

35 Countries with Bank Assistance for Public Sector Reform Government Process Quality Governance Perception

Notes: Quality of Government Process Indicators: CPIA for budget and financial management, and for public administration 1999-2005.Governance Indicators are Kaufmann, Kraay, Mastruzzi Indicators for 1996-2004. Sample includes all countries for which IEG carried out a CAE or CASCRR in FY03-06, where the Bank provided support for public sector and governance reforms and for which CPIA and KKM indicators were available.Source: ARDE 2006

1 2 3 21 2 1

3229 30 31

1

0

5

10

15

20

25

30

35

GovernmentEffectiveness

Control ofCorruption

Regulatory Quality Rule of law

Num

ber o

f Cou

ntrie

s

Deterioration Improvement No Change

32

19

13

6

8

0

5

10

15

20

Quality of Budgetary and FinancialManagement

Quality of Public Adminstration

Num

ber o

f Cou

ntrie

s

Deterioration Improvement No Change

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Governance Reforms Need Political Backing To Deliver Results

Three factors attenuated the effectiveness of governance reforms through large-scale administrative reforms:

1. Reform initiatives have not always been aligned with political realities:

– Civil service reform in Bulgaria delivered results because it had strong political backing (prospects of EU accession), but civil service reforms in Yemen and Bolivia achieved limited results, because political support to end a system of patronage appointments was absent.

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Three Factors Attenuated Effectiveness Of Governance Reforms

2. The focus has been on adoption of legislation and establishment of institutions, but enforcement capacity has received insufficient attention.– Anticorruption agencies, for

example, have only limited impact when they and their staff are not fully independent of those whose behavior they monitor.

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Three Factors Attenuated Effectiveness Of Governance Reforms

3. Governance reforms have tended to insufficiently address the intersection between the public sector and private sector, even though regulatory reforms have often been effective against corruption.

–Establishment of an independent regulator for electricity in Turkey enabled direct contracting between buyers and sellers of electricity and sharply limited opportunities for kick-backs to officials.

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There Is Improvement In The Transparency Of Government Processes

• Budget transparency: – Turkey brought extra-budgetary funds that undermined

fiscal discipline into the budget, subjecting them to budget and parliamentary scrutiny.

– Public expenditure tracking surveys in Uganda drastically increased the share of spending that actually reaches schools.

• Public procurement:– Civil society representatives observe public tendering in the

Philippines.– Uganda posts results of procurement audits, contract

awards etc. on the web.

•Customs administration:– The South East European Trade and Transport Facilitation

Project introduced standard electronic forms showing duties due, thus helping to reduced room for corruption.

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Implications: Basing Governance Reforms On A Realistic Assessment Of The Political Economy

► Reforms to improve the accountability of public sector institutions require broad-based political support.

► When such support is absent, an incremental approach that allows momentum for reforms to build can help achieve results.

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Governance Reforms Need A Realistic Assessment Of The Political Economy

► Thorough exploitation of sector-specific opportunities to improve governance brings results, even when anti-corruption is not the primary objective.

► Reforms can be enhanced with efforts to foster local demand for accountability through increased transparency of government processes and resource utilization.

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IV. Aid flows are not reaching scaling up commitments

Source: OECD/DAC – Database on Aid Activities

Real ODA, 1990-2006(Adjusted for inflation and exchange rate changes)

0

20

40

60

80

100

120

1990 1992 1994 1996 1998 2000 2002 2004 2006*

Bil

lio

n U

S$

(C

on

sta

nt

20

05

)

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

% o

f G

NI

Africa, exc. debt relief Other regions, exc. debt relief Debt relief ODA / GNI

Note: * Regional breakdown not yet available for 2006.

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Aid flows are not reaching scaling up commitments

Source: OECD/DAC – Database on Aid Activities

Number of Donors per Recipient Country

0%

20%

40%

60%

80%

100%

1960s 1970s 1980s 1990s 2000s

Decade

% o

f R

ec

ipie

nt

Co

un

trie

s

Over 20

10 to 20

Less than 10

Source: OECD/DAC – Database on Aid Activities

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Summing up

► Independent Evaluation finds that development effectiveness improves when it:• Focuses on the nature of growth• Integrates activities across sectors and sustains

them over time• Supports and fosters a good policy framework

in each country• Recognizes each country’s political and capacity

realities and builds on deep country knowledge• Aid volumes and fragmentation: source of

concern

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ARDE 2006 Website

http://www.worldbank.org/ieg/arde2006