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AN EVALUATION OF THE 2007 STRATEGY AND IMPLEMENTATION PLAN

World Bank Country-Level Engagement onGovernance and Anticorruption


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An EvAluAtion o thE 2007 StrAtEgy And implEmEntAtion plAn

W Bak C -lee Eaee

geace a Ac

ovErviEW


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ii | World Bank Country-Level Engagement on Governance and Anticorruption

2011 Te Independent Evaluation Group

Te World Bank Group

1818 H Street NW

Washington DC 20433

elephone: 202-458-4497

Internet: http://ieg.worldbankgroup.org

E-mail: [email protected]

All rights reserved

1 2 3 4 5 14 13 12 11

Tis volume, except or the Management Response, Statement o the External Expert Panel, and Te Chairpersons

Summary, is a product o the sta o the Independent Evaluation Group (IEG) o the World Bank Group. Te ndings, in-

terpretations, and conclusions expressed in this volume do not necessarily reect the views o the Executive Directors o Te

World Bank or the governments they represent. Tis volume does not support any general inerences beyond the scope o

the evaluation, including any inerences about the World Bank Groups past, current, or prospective overall perormance.

IEG does not guarantee the accuracy o the data included in this work. Te boundaries, colors, denominations, and other

inormation shown on any map in this work do not imply any judgment on the part o Te World Bank Group or IEG con-

cerning the legal status o any territory or the endorsement or acceptance o such boundaries.

Rights and Permissions

Te material in this publication is copyrighted. IEG encourages dissemination o its work and permits this document to be

copied or otherwise transmitted, with appropriate credit given to IEG as the authoring body.

How to cite this report:

IEG (Independent Evaluation Group). 2011. World Bank Country-Level Engagement on Governance and Anticorruption:

An Evaluation o the 2007 Strategy and Implementation Plan. Washington, DC: Independent Evaluation Group, Te World

Bank Group.

Cover: World ags at the Opening Plenary Session o the World Bank/International Monetary Fund Annual Meetings 2009.

Photo courtesy o Simone D. McCourtie /Te World Bank.

ISBN 13: 978-1-60244-195-8

ISBN 10: 1-60244-195-2

Independent Evaluation Group

Strategy, Communication, and Learning

E-mail: [email protected]

elephone: 202-458-4497

Facsimile: 202-522-3125

Printed on Recycled Paper


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Contents | ii

Ces

Abbeas Ackwees

ew

Exece Sa 1

maaee resse 11

Caess Sa: Cee deee Eeceess (CodE) 18

Saee e Exea As pae 19

Ces e Cee ve 21

pas 24

te cee eaa s aaabe a ://e.wbak.


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iv | World Bank Country-Level Engagement on Governance and Anticorruption

CAS Country Assistance Strategy

CODE Committee on Development Eectiveness

FY Fiscal year

GAC Governance and anticorruption

GPF Governance Partnership Facility

IBRD International Bank or Reconstruction and Development

IDA International Development Association

IEG Independent Evaluation Group

ORAF Operational Risk Assessment Framework

PREM Poverty Reduction and Economic Management (World Bank)

VPU Vice presidential unit

Abbeas


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Foreword | v

Tis evaluation o the World Banks work in governance

and anticorruption (GAC) was prepared by an IndependentEvaluation Group (IEG) team led by Navin Girishankar.

Te evaluation was conducted under the direct guidance

o Cheryl Gray (ormer Director) and Ali Khadr (Senior

Manager), and the overall guidance o Vinod Tomas (Di-

rector General).

Team members included Mary Breeding, Barun

Chatterjee, Maria Mendez Cintron, David DeGroot, Raj

Desai, William Hurlbut, Gathoni Macharia, Steano

Migliorisi, Aime Niane, Anwesha Prabhu, Bahar Salimova,

Susan Stout, Antti alvitie, Cheryl oksoz, Utkir Umarov,

and Clay Wescott. Peer reviewers were Homi Kharas, Mike

Stevens, Jean Jacques Raoul, and Steven Webb.

Te report also benetted rom the advice and review o an

external panel composed o Ashra Ghani (Chairman o the

Institute o State Eectiveness), Monica Macovei (Member

o the European Parliament and ormer Minister o Justice

o Romania) and Andrew Natsios (Proessor in the Prac-tice o Diplomacy, Georgetown University, Walsh School o

Foreign Service).

IEG is grateul to World Bank senior management and sta

or providing valuable time, inormation, and eedback re-

quired to conduct this evaluation. In particular, IEG thanks

the GAC Council as well as sta in the GAC and Gover-

nance Partnership Facility (GPF) Secretariats, the Poverty

Reduction and Economic Management (PREM) Public

Sector Governance Anchor, and Country Oces visited

during eld missions. Te participation o donor ocials

(including those nancing the GPF) and civil society rep-resentatives in consultations was invaluable. Finally, the

team is grateul to the Norwegian Agency or Development

Cooperation (NORAD) or providing additional resources

to support eld visits in the preparation o thematic and

country studies.

Ackwees


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vi | World Bank Country-Level Engagement on Governance and Anticorruption

Diverse country experiences and the literature show how

well-governed countries are better able to oster economic

opportunities, deliver services to the poor, regulate mar-

kets, and ght corruption. Evaluation and research indi-

cate that programs and projects perorm more eectively

where public sector management (as by the Country Policy

and Institutional Assessment or instance) and adherence

to rule o law are stronger. Te appeal o good governance

resonates across socio-economic groups, as seen in recent

events in the Middle East and North Arica.

Yet the agenda to improve governance and the ability o ex-

ternal agencies to boost its eectiveness are complex, tough,

and enormously challenging. Evaluations nd greater eec-

tiveness resulting rom eorts in home-grown institutional

building and raising risk-awarenessincluding through

actions in the social and inrastructure areasthat go be-

yond some o the direct measures to ght corruption.

Te World Bank has sought to support country eorts to

develop accountable and eective states in several areas

or example, nancial management, service delivery, in-

vestment climate, and accountability systems. In 2007, the

Banks governance and anticorruption (GAC) strategy rea-

rmed the commitment to this agenda. Entering its ourth

year o implementation, the strategy seeks to increase the

number o programs and projects addressing GAC issues

systematically. Tis eort links to a larger reorm agenda,

including the strengthening o the Integrity Vice Presiden-

cy, an institutionwide transparency initiative, and modern-

ization o investment lending.

Tis evaluation is concerned with the relevance and eec-

tiveness o the GAC strategy and its early implementation

eorts with regard to country operations. Interestingly, it

benchmarks the Banks country level engagement on GAC

issues beore and afer the 2007 strategy. It also reviews

the change management aspects such as the inherent op-

erational motivations to support the GAC agenda. By con-

tributing to a Bank-wide learning process, this evaluation

o an ongoing, multi-year eort seeks to inorm a planned

second phase o GAC implementation.

Te evaluation indicates some o the improvements and

suggests actions that are needed to get stronger results on

the ground. It calls on the second phase to combine the in-

ternal orientation with greater stress on operational solu-

tions to help build governance capacities in countries. Tis

emphasis will require an updated approach to institutional

strengtheningone that requires more innovative nancial

instruments; more systematic, harmonized, and consistent

risk management across countries; and improved metrics

or implementation and ollow up.

Dicult as governance reorms are, they remain a crucial

part o the development agenda. Drawing on the lessons o

experience to strengthen eectiveness, the World Bank can

help countries make progress in addressing deep-seated

governance challenges.

ew

Vinod Tomas

Director-General, Evaluation


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Exece Sa

Executive Summary | 1

Wd Bak Cy-leeEaee geace ad

Ac: A Eaa he

2007 Saey ad ieea pa

Well-governed countries are better able to ormulate

growth-enhancing policies, deliver essential services to

the poor, and regulate nancial and product markets. Te

appeal o governance reorm and the ght against corrup-

tion can resonate widely across diverse countries and social

groups, as demonstrated by recent events in the Middle

East and North Arica. Building on more than two decades

o experience, the World Banks 2007 governance and anti-

corruption (GAC) strategy rearmed its continuing com-

mitment to the crucial and challenging agenda o helping

countries develop accountable and eective states.

Focusing on the country operational aspects o the over-

all GAC agenda, the Independent Evaluation Group

(IEG) assessed the relevance and eectiveness o the

strategy and its frst phase o implementation eorts over

fscal years 200810. A key eature o the evaluation is its

benchmarking o the content and quality o the Banks

country-level engagement on GAC issues, beore and a-

ter the 2007 strategy. Itdid not review the organizationalrestructuring o the Integrity Vice Presidency and related

reorms to strengthen the Banks corporate investigations

and sanctions regimes, ollowing the Volcker Panel re-

port. It also did not cover the organizational renewal o

the World Bank Institute or individual global partner-

ship programs with GAC themes (such as the Stolen As-

sets Recovery Program).

Te ndings o this evaluation are, by design, intended to in-

orm a planned second phase o the GAC implementation

a learning process that signals one o the Banks strengths.

Tey can be viewed in the context o an ongoing change

management and internal reorms agenda, which includes

the strengthening o the Integrity Vice Presidency, a new

World Bank Institute strategy, an institutionwide transpar-

ency initiative, and eorts to modernize investment lending.

aken together, these reorms have sought to create an en-

abling environment or the Bank to pursue the GAC agenda

on multiple rontsincluding its operational engagement in

partner countries, the subject o this review.

As it did in the years preceding the strategy, the World Bank

has continued to support good governance objectives in

virtually every country where it has operations. In many

countries, it has sustained a medium-term GAC dialogue

on issues such as public nancial management, service de-

livery, and the investment climate. Borrowers, development

partners, and civil society organizations continue to value

the Banks analytical capacity and its long-term experi-

ence in this area. Tere have been signs o progress sincethe strategy was launched. Notably, the Bank made plans to

support institutional strengthening in three times as many

countries in the scal 200810 period as it did in the scal

200407 period. Its use o governance and political analysis

in project design has increased signicantly, as has its use o

some country systems in projects in Arica and in countries

with weaker institutions.

At the same time, important opportunities have yet to be

seized. Project-level solutions to the challenge o institu-

tion-building need to keep pace with increased commit-

ments in country strategies. Te quality and coverage opolitical economy analysis in policy dialogue needs to show

the systematic improvement evident in projects. Tere is

still room or country programs and projects to improve

measurement o governance results, to expand overall use

o measures to oster the demand or good governance, and

to deploymore systematicallyenhanced GAC measures

to manage duciary and governance-related risks. Also,

the Banks operational response in countries experiencing

governance downturns needs to be more consistent. Many


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2 | World Bank Country-Level Engagement on Governance and Anticorruption

stakeholders inside and outside the Bank hold the view that

lending goals conict with pursuing GAC objectives.

Key design elements o the 2007 strategy and the imple-

mentation plan are to be addressed i the Bank is to more

eectively help countries overcome deep-seated gover-

nance challenges such as civil service dysunction, cap-

ture o natural resource rents, and political-institutional

barriers to market entry and improved service delivery.

o date, GAC operational eorts have ocused more on

the Banks own capacities, resources, and reputation as a

development partner, than on strategic issues acing part-

ner countries. Guidance to operational teams emphasized

managing transaction-level duciary risks in investment

projects rather than updating the Banks approach to man-

aging systems-level risks, including in policy-based lend-

ing. Implementation arrangements within the Bank were

ragmented and needed to be more oriented to ront-line

concerns and results. And internal and donor resources

needed to be more strategically deployed to meet assessed

GAC needs.Drawing on these lessons, the planned second phase o

GAC can more ully deliver on its potential by ocusing on

operational solutions that help build country governance ca-

pacities. In particular, the Bank needs to update its approach

to institutional strengthening in the core public sector, the

social and inrastructure areas, the investment climate, and

the demand side o governance. Such an approach would

take advantage o innovations in nancial instruments,

improved analytics, and more systematic measurement o

results. Te Bank can also encourage innovation in these

areas by clariying its zero tolerance stance on corruption

and, in particular, by ocusing more on systems-level risks

across all operations rather than only transaction-level risks

in investment projects. In parallel, internal budget and trust

und resources can be more strategically deployed in ways

that empower sector and eld-based units.

Eaa Back

Te Bank is currently implementing its 2007 strategy

Strengthening World Bank Group Engagement on Gover-

nance and Anticorruption. Te strategy and its implemen-

tation plan sought to increase signicantly the number o

countries and projects in which the Bank helped system-atically address GAC issues, although it did not indicate

targets or a timerame within which this objective would

be achieved. Bank teams were provided guidance, toolkits,

and operational support as part o initiatives to enhance

country engagement (GAC-in-countries) and to strength-

en incentive and risk management rameworks in sector

dialogue and project management (GAC-in-sectors and

GAC-in-projects). Global GAC eorts tried to increase Bank

involvement in international peer learning networks and

collaborative governance initiatives. Tis evaluation as-

sessed the relevance and eectiveness o the strategy and

FY0810 or Phase 1 implementation eorts in enhancing

the Banks country-level response to GAC issues. Trough

this evaluation, IEG aims to help strengthen the Banks

overall support to countries in developing eective and ac-

countable states, and to ulll the institutions commitment

to independent evaluation o large corporate strategies and

initiatives.

Te evaluation developed and applied a ramework or as-

sessing how Bank country programs and projects address

GAC issuestheir GAC responsiveness. Te ramework de-

ned GAC responsiveness as the Banks selectivity in identiy-

ing entry points and instruments; its support or institutional

strengthening; its identication, signaling, and mitigation o

risks; and its use osmarter project design (or example, im-

proved t to country contexts, demand-side and preven-

tive measures against raud and corruption, use o country

systems, and results orientation). It did not seek to quantiy

the actual levels o raud and corruption in projects. Teevaluation also reviewed GAC-in-sectors issues in the roads

andprimary education sectors, as well as accountability insti-

tutions. Te evaluation looked at support provided to coun-

try-level GAC eorts, or example, the preventive services

work o the Integrity Vice Presidency, key multi-stakeholder

engagements by the World Bank Institute, and some global

eorts. It did not review the organizational restructuring

o the Integrity Vice Presidency and related reorms to

strengthen the Banks corporate investigations and sanc-

tions regimes, the organizational renewal o the World Bank

Institute, or individual global partnership programs (such as

the Stolen Asset Recovery Program).

Evaluation evidence comes rom reviews o the GAC re-

sponsiveness o 50 country programs, 200 lending and trust-

unded operations, and relevant economic and sector work

over the FY0407 or pre-GAC period and the FY0810 or

post-GAC period. Its ndings are also based on economet-

ric analysis, detailed case studies o six country programs,

and reviews o relevant Bank budgets, trust unds, stang,

and institutional arrangements. In undertaking this empir-

ical work, the evaluation recognized that new metrics and

data on GAC issues are under continuous development.

Tese methods were complemented by structured eedbackrom stakeholders inside the Bank and those outside such

as government, donor, and civil society representatives.

Beore nalizing the report, IEG presented the ndings to

the Banks GAC Council, shared the ull country- and proj-

ect-level data set or review, and held meetings with Bank

management to solicit written and verbal eedback. Tis

engagement will be amplied by dissemination o the nal

report. Trough this process, the evaluation aims to inorm

a planned second phase o GAC implementation.


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is e Bak me gAC resse?

Building on two decades o engagement on governance is-

sues, the 2007 GAC strategy acknowledged that it implied

a change in the way the Bank does business. Strategic com-

munications and engagement by Bank senior management

externally and internally signaled this goal. Te implemen-

tation plan and annual progress reports viewed successul

implementation as systematic improvement in the GAC re-sponsiveness o country operations, although they did not

set targets or a timerame or the achievement o this goal.

Over the FY0810 period, the Banks response to GAC is-

sues in its country programs and projects has demonstrated

continuity without systematic improvement as yet.

GAC in Cunty Pgams and Pjects. Te Bank has

continued to support GAC-related objectives in its strategies

in every country where it has operations. Pre- and post-GAC

country assistance strategies (CASs) were similarly selective

in identiying entry points or a GAC dialogue. In many

countries, the Bank has sustained a medium-term dialogue

on GAC issues and provided a program o support in areas

such as public nancial management, sector service deliv-

ery, and the investment climate. Sustained engagement on

these issues, even in challenging settings, remains one o the

Banks strengths.

Since the launch o the strategy, there have been signs o prog-

ress. Figure A shows the percentage o country programs and

projects that incorporated GAC elements to a great extent.

Notably, the Bank committed to support institutional strength-

ening in three times as many countries in FY0810 as it did

in FY0407. Te number o Bank projects that relied on gov-

ernance and political economic analysis upstream o design

increased signicantly. In countries with weaker institutional

capacities (as measured by Country Policy and Institutional

Assessment governance scores lower than 3.5), 41 percent o

post-GAC projects used at least some country systemsthat

is, public nancial management, procurement, or personnel

systemscompared to a quarter o pre-GAC projects. In A-rica, projects using at least some country systems increased

rom 11 percent pre-GAC to 40 percent post-GAC. In prin-

ciple, the Banks increased use o these systems in weaker set-

tings allowed countries to more eciently deploy limited ca-

pacities on pressing domestic priorities rather than sui generis

donor project management and reporting requirements.

At the same time, important opportunities have yet to be

seized. CAS commitments to signicantly scale up institu-

tional strengthening eorts post-GAC have yet to be matched

by an expansion in institutional strengthening components

in projects. In both country programs and projects, thereis still a need or systematic deployment o enhanced GAC

measures to manage duciary and governance-related risks.

Even with some improvements, less than a third o CASs

and projects scored highly or quality o enhanced duciary

aspects in either the pre- or post-GAC periods. A minority

o pre- and post-GAC country programs aimed to use port-

olio processes to identiy, signal, and mitigate GAC-related

risks. Tese measures could have been better tailored to the

risk prole o projects and programs.

ge 2.1

Ct Pgams ad Pjects Addessig GAC Isses t a Geat Etet

Source: IEG desk review. Arrows indicate statistically signicant changes.

FIGurE A

Portfoliowide fiduciary risk mitigation

Results orientation

Quality of institutional strengthening

Use of country systems

Demand-side of governance

Quality of enhanced fiduciary aspects

Quality of governance and PEA

0 10 20 30 40 50

Selectivity

Signaling

Country institutional strengthening

Percent

0 10 20 30 40 50

GAC-in-countries

GAC-in-projects

Pre GAC

Post GAC


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Additionally, the Banks operations would have benetted

rom a clearer denition and more consistent application

o risk tolerances across countries. o date, operational

responses varied considerably in countries experiencing

governance downturns (or example, incidence o grand

corruption, periods o political instability, outbreaks o

civil conict)a nding that raises concerns about consis-

tency o treatment, a key GAC principle. Te modest per-

ormance o projects in the measurement o country GACresults continued post-GAC without statistically signicant

improvements. While some orm o beneciary involve-

ment in Bank operations was prevalent, less than a third

o pre- and post-GAC projects scored highly or the overall

use o demand-side measures.

Pitica Ecnmy Anaysis. Eorts to strengthen the

Banks approach on political economy analysis have re-

ceived greater attention and support post-GAC. But the

quality and coverage o political economy issues in the

Banks economic sector work did not show the systematic

improvements evident in projects. Te operational benetso ree-standing political economy analysis reports were

ofen limited by an overly academic orientation, uneven

methodological rigor, and a lack o consistency between

recommended actions and prevailing interpretations o the

Banks Articles o Agreement.

The Banks Standing n GAC Issues. Te implementa-

tion plans goal o improving the Banks reputation on GAC

issues was achieved partially. Government and donor o-

cials consulted during the evaluation were appreciative o

the Banks capacity to advise on governance issues and to

provide operational support or institutional development.

Some elt that the wider development community would

benet rom the Banks eorts to develop political economy

analytics. Others recognized the Banks high duciary stan-

dards relative to other development agencies.

At the same time, stakeholders inside and outside the Bank

observed a potential conict between its lending goals and

its pursuit o GAC objectives, particularly in poorly gov-

erned settings. Opinion leaders polled in a 2008 Gallup

Survey recommended that the Bank not lend to countries

unless they took serious actions to ght corruption. Civil so-

ciety organizations consulted or this evaluation agreed that,

in such settings, the Bank should reduce lending, imposestricter GAC-related loan conditions, and channel unds

outside o government. Nearly hal o Bank operational sta

surveyed also believed that the Banks lending imperative

conicts with its ability to implement the GAC strategy.

Ea oces a lesss

In many countries, the Bank has supported eorts to ad-

dress deep-seated governance challenges such as civil ser-

vice dysunction, capture o natural resource rents, and

political-institutional barriers to market entry and im-

proved service delivery. As part o this evaluation, detailed

case studies were conducted in six countries (Azerbaijan,

Bangladesh, Cambodia, Guatemala, Liberia, and Moldova)

where the Bank sustained a medium-term dialogue on

these GAC issues over the FY0410 period.

Te evaluations desk reviews and case studies showed that

the Banks record in helping to achieve countrywide gov-

ernance improvements was limited. Where its support was

eective, the Bank was usually ocused on specic GAC

entry points and realistic in its aims. Further, it balanced

commitments to support long-term institutional develop-

ment with accountability or interim results. Also impor-

tant was the choice o nancial instruments (or instance,

development policy loans or investment loans), which was

associated with the achievement o certain GAC objectives.

Tese operational design issues were not new and ofen

pre-datedalthough did not adequately inormthe 2007

GAC strategy and implementation plan.

Pubic Sect rem. Progress in supporting public -nancial management reorms was uneven. Standardization

o assessments and operational support or public nancial

management systems improved, but ront-line service de-

livery concerns were not adequately prioritized. Greater

engagement with citizens and better coordination with sec-

tor initiatives enhanced the credibility o reorms in some

cases (Azerbaijan and Moldova). Low civil service pay was

a pervasive problem and imposed major constraints on de-

velopment eorts. Given the complex political economy o

civil service reorm, the Bank adopted opportunistic and

selective approaches that produced modest results (Cam-

bodia and Liberia). Te achievement o public sector re-

orm objectives was positively associated with the use o

development policy loans.

Accuntabiity and the Demand Side. Bank support o-

cused primarily on supreme audit institutions and anticorrup-

tion bodies (Azerbaijan). Achievement o objectives was heav-

ily dependent on the independence and political composition

o legislatures. Te Bank primarily supported the demand

side through community-driven and local governance initia-

tives in a number o countries (Bangladesh, Cambodia, and

Guatemala among them, see Box A). Direct nancing o non-

state actorsas opposed to contracting nongovernmental or-ganizations on Bank projectswas rare and, in some cases,

stretched the limits o the Banks role as a multilateral devel-

opment agency. Importantly, the use o development policy

lending was positively associated with the achievement o ac-

countability and rules-based governance objectives, but it was

negatively associated with the achievement o demand-side

objectivesa nding conrmed by the Banks own reviews.

GAC in Sects.A central concern in the social and inra-

structure sectors was the alleviation o public management


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constraints on service delivery. More could be done by the

Bank and countries to ensure that eorts to strengthen

cross-cutting systems (or example, public nancial man-

agement and personnel systems) are better coordinated with

sector initiatives to improve service delivery (or example,

the development o sector workorces). Regression analysis

showed that projects that included public sector capacity

building and public disclosure measures were more likely to

achieve sector objectives. Yet, the emphasis o GAC eortsin FY0810 was on mitigating project duciary risks rather

than on promoting service perormance more broadly.

Investment Cimate. Te investment climate in several case

study countries was constrained by public sector bottle-

necks, which the Bank sought to help remove. Support to

improve the operations and management o these public

agencies included customs modernization in Cambodia, and

streamlining o licensing and registration procedures and

strengthening supreme audit agencies in Moldova. Given the

importance o transparency or market entrants, the Banks

advocacy o greater inormation disclosure proved impor-tant to the private sector. However, support or consultative

mechanisms between the private sector and the government

needed to be better calibrated to risks o capture.

Pject Fiduciay Measues.During GAC implementa-

tion, the ring-encing o duciary controls on Bank proj-

ects was given particular attention. Tese methods sought

to limit exposure to raud and corruption risks and also

manage reputational risks to the Bank and borrower gov-

ernments. Te ocus on ring-encing methods in some

countries (such as the use o an independent procurement

agent in Cambodia) but not in others reected the Banks

lack o consistency in setting risk tolerances. Generally,

initiatives designed to manage the Banks reputational

risks relating to GAC were not necessarily the same asthose that would help countries take on calculated devel-

opment risks.

Wa deece s pase 1 mak a W?

GAC implementation has involved considerable eorts

by Bank operational sta, who reported almost universal

commitment to the strategys objectives. While some proj-

ects and country programs benetted directly rom Phase

1 support (or example, through country governance and

anticorruption or CGAC processes and Governance Part-

nership Facility nancing), many did not. Bank teams

continue to ace operational hurdles in helping countries

systematically address the types o deep-seated governance

challenges noted above. o help overcome these hurdles,

the Bank needs to revisit key elements o the 2007 strategy

and implementation plan.

Box A CoMBInInG ThE DEMAnD SIDE AnD SuPPly SIDE In loCAl GovErnAnCE InITIATIvES

Es sehe he dead ad sy sde eace, acay a he ca ee, ca be ayec. Bd esss eae cy-de deee ad deceaza es, ca

eace aes seea ces hae cbed sca ad caacy-bd s ca exec-

es ad he cses wh aca asaecy eases. these wee eded dee ca s-s ha ca eecey ad accaby ee ca sece deey eeds.

Bangladeshs Local Government Support Program has sh ewe s wes e eehh a awde a dsc-based s. the a des dsceay ases ad

caacy-bd s 4,500 Union Parishads. i eys a accaby aewk based dsc-ee ess e ad , asaecy eases, ad ads. t dae, has heed cee

e 12,000 aa ads, a eay 50,000 ese, ad s 500 ca-ee ee ea sesss.

Cambodias Rural Inrastructure and Local Governance Project sed deceazed ad aca-y cesses, as we as ac y bc ds a he ce sangkatee. the jec ses

a as eh aaee ebse he css ce-ee eses, ad heeby aws heBak chae ds hh Cabdas basc eeea syse whe shed d-cay sks. t dae, has cbed he deee 1,800 a schees, a ew a ads ad

bdes, ad se sca seces. AspartofGuatemalas public fnancial management reorms, a ew aewk ca aca

aaee (SiAmuni) was eeed e ha 200 caes e bh ececyad asaecy. i aae, a cze-eed a, Consulta Ciudadana, was esabshed e se-edy acas acae access ad eea cex aca es. take ehe, hese

eases hae eabed czes access a ab ca ee aca ad ceecesses. Adda dead-sde a es hae bee ached ewe czes, se wh

exessed dsc wh he qay, accessby, ceheseess, accacy, ad cssecy scaa.

Source: iEg esk eew a c case ses.


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reeace a Aaeess des

Te 2007 GAC strategy represented an important step in

rearming the Banks longstanding commitment to helping

develop eective and accountable states. Te strategys objec-

tives were highly relevant to the needs and goals o countries,

and it benetted rom sustained support rom the Banks top

management. Even so, the strategy could have addressed the

mixed record o the Banks public sector reorm and relatedbusiness lines, which needed strengthening. Also, while it

promoted GAC as everybodys business, the strategy de-

ned the agenda too loosely to allow or priority-setting.

Te Phase 1 implementation plan was ocused on the Banks

own capacities and resources, its reputation as a development

partner, and its duciary risks (in investment projects). It was

based on the premise that a lack o commitment and capacity

o Bank sta posed binding constraints on the achievement

o GAC objectives. Te plan lacked a results chain and clearly

communicated implementation targets. As a result, by the

end o its third year, its original goal o making systematic

and time-boundimprovements in the GAC responsiveness o

operations was no longer widely recognized by key sta.

Phase 1 eorts needed to more concretely ocus on pressing

strategic and substantive issues acing GAC reormers in coun-

tries. For instance, what lessons could countries draw rom the

200809 global nancial crisis or corporate governance and

the integrity o their nancial systems? How could public sec-

tor reorms be tailored to meet the particular needs o conict-

aected states? How could development partners help reorm-

ers address deep-seated problems o systemic corruption? Te

GAC One-Year and Second-Year Progress Reports acknowl-

edged that the Bank had intended to ocus on such issues.

ieea

GAC implementation involved the provision o guidance

and the delivery o support to Bank teams as well as the im-

plementation o risk management measures and controls.

GAC Guidance. Guidance materials issued over the FY08

10 period concentrated on GAC-in-projects issues. More

emphasis was given to managing duciary risks on trans-

actions on investment projects than to proposing practical

solutions or deepening the use o country systems. GAC

guidance in the roads sector ocused on managing pro-

curement risks rather than strengthening sector institu-

tions overall. GAC-in-education eorts appropriately high-

lighted the importance o measuring sector incentives, butwere less concerned with operational solutions. Consider-

able attention was given to multistakeholder engagement,

although more clarity was needed on the trade-os or the

Bank between helping to create space or non-state actors

(or example, through transparency measures) and actively

motivating demand-side pressures. Te Banks ramework

or political economy analysis appropriately emphasized

ormal and inormal institutions. Yet, the guidance in this

area would have been more relevant had it more clearly

dened what constitutes good institutional t to country

realities, addressed the political economy o aid, and rec-

ommended rules or disclosure o sensitive analyses.

Deivey Suppt. Emphasis on internal communica-

tions and training workshops paid o: 63 percent o re-

spondents to IEGs sta survey were amiliar with the 2007

GAC strategy. While learning activities ocused on GAC-

in-projects and country accountability institutions, GAC-

in-sectors was not given adequate attention. Te gener-

ally low sta ratings on the relevance o specic guidance

materials and tools were also reected in low utilization

rates. Te GAC implementation plan could have been bet-

ter exploited as an opportunity to prioritize and coordinate

learning activities.

Beyond access to guidance inormation, relatively ew sta

reported receiving tangible support. For those that did,

Phase 1 support varied in terms o its value added to GAC

responsiveness o operations. Sta elt that Bank manage-

ment could have done more to help them address imple-

mentation challenges, and sought more clarity on risk tol-

erances or Bank engagement in dierent settings as well as

streamlining o risk reviews on investment projects. For ex-

ample, the perceived risk o complaints to the Integrity Vice

Presidency and ensuing investigations discouraged the use

o country systemsa key GAC principleand encouragedthe ring-encing o investment projects.

Bank Cnts n Aid Acatin and opeatina risks.

Te Banks aid allocation procedures represented a critical

element o its controls ramework. Since the launch o the

GAC strategy, the Bank has continued to use governance

perormance as a key criterion or allocating concessional re-

sources across countries, and it has remained the most selec-

tive development agency. Over the entire period o review,

improvements in governance scores on the Country Policy


14/32


and Institutional Assessment were associated with increases

in International Development Association (IDA) commit-

ments and disbursements. Yet, Bank ows to International

Bank or Reconstruction and Development (IBRD)-eligible

countries were relatively less selective in terms o country

governance perormance. Also, the relationship between

governance perormance and IDA disbursements was aect-

edsometimes negativelyby the mix o nancial instru-

ments in country portolios, including the use o develop-ment policy lending. Tis ndingtaken together with the

above-mentioned strengths o development policy lending

points to the need or clear guidance on instrument choice.

Tis point is urther amplied by the evaluations nding

that the risk management intensity o Bank operations was

associated more with the choice o instrument than the risk

prole o an individual operation. Relevant risk manage-

ment measures used in a given project included links to

economic and sector work, governance and anticorruption

plans, supplemental supervision, grievance mechanisms,

and disclosure measures. Regression analysis ound that riskmanagement intensitydened as the total number o rel-

evant risk management measures used in a single project

diered signicantly by the type o lending instrument used

(Figure B). When controlling or other actors, the level o

nancial management and procurement risk was not sig-

nicantly associated with risk management intensity.

Te result was in part explained by the distinct operational

controls used or investment loans and development policy

loans, even though distinctions between the two instru-

ments have become less pronounced. Reinorced by the

transaction-level emphasis o GAC-in-projects guidance,

the layers and complexity o risk reviews or investment

lending continued to dier markedly rom those or devel-

opment policy lending. Tese eorts strengthened controls

on raud and corruption risks in Bank investment projects,

but did not emphasize systems-levelrisks that aect all in-

struments (including development policy loans). Te re-

cently introduced Operational Risk Assessment Framework

(ORAF) does not address this issue. Looking orward, an

updated methodology or review osystems-levelrisks could

be useully applied across nancial instruments (including

the anticipated Program or Results instrument) and would

ensure a more consistent risk management approach.

icees

An important aspect o GAC implementation was its incen-

tive ramework or change management. Tree actors that a-

ected incentives during Phase 1 warrant continued attention:

Financing GAC Impementatin. Te 2007 strategy did

not speciy what it was adding to the Banks considerable

body o work on governance. Instead, the Phase 1 imple-

mentation plan identied a set o GAC change initiatives

or which it sought additional unding. It did not seek to

rst align the Banks existing and already growing base

budget unding or governance work with new GAC priori-

ties. Rather, rom scal 2008 onward, the GAC strategy was

resourced at the margin through incremental Bank budget

and donor unds.

Te Phase 1 plan earmarked a total o $119 million or GAC

implementation, consisting o $54 million in Bank budget

increments allocated or the FY0811 period and $65 mil-

lion in donor unds allocated or the FY0912 period under

the largely Bank-executed Governance Partnership Facility

trust und. Incremental budget allocations gave priority to

the Integrity Vice Presidency and Regional vice presidential

units (VPUs), in particular Arica. Designed to jump-start

innovation within the Bank and promote GAC as every-

bodys business, the Governance Partnership Facility had

approved 94 grants, totaling $65 million as o December

2010. Te overwhelming majority o these grants was ad-

ministered through public sector management units in the

Banks Poverty Reduction and Economic Management Net-work (PREM), and largely supported country-level eorts,

mostly in Arica (Figure C).

At a time when Bank spending on governance work was al-

ready large and growing (increasing 21 percent rom $140

million in FY04 to $169 million in FY10), these parallel

arrangements did not achieve their incentive objectives.

First, the intended eect o Bank budget incrementsto

increase Regional VPU spending on governance work

was muted. Due to the ungibility o resources, Regional

VPU spending on governance work over FY0810 in-

creased by $9.6 million less than anticipated. Te remain-

der o these increments was deployed away rom the gov-

ge 2.1

Facts Assciated wit risk

Maagemet Itesit f Bak

opeatis

Source: IEG desk review. Figure shows marginal efects

(Appendix E, Table E.16b).

FIGurE B

Eastern and Central Asia Region

South Asia Region

Analysis of Formal Institutions

Analysis of Informal Institutions

Risk Exposure

PREM Network

FPD Network

Development Policy Loan

3.02.01.0

0.7

2.0

2.2

2.4

2.6

01.02.0

2.0

1.3

1.6

3.0


15/32


ernance priorities identied in the implementation plan.

Second, the distinct Governance Partnership Facility al-

location procedurescompetitive selection by a Bank-do-

nor committeewere outside the Banks budget process

and did not systematically identiy innovative eorts. Tis

caused rustration or some operational units due to theperceived ailure to clearly justiy Governance Partner-

ship Facility decisions and to consider the priorities o the

country and the VPU. Tird, incremental nancing was

not systematically linked to incremental GAC activities.

Even though Governance Partnership Facility reporting

on the use o unds was systematic, overall reporting on

GAC results lacked inormation on activities nanced

through incremental Bank budget resources. Generally,

corporate reporting on GAC implementation ocused

more on Bank inputs than on the quality o operations and

country governance perormance.Dedicated GAC Stang. Phase 1 nancing enabled the

recruitment o about 64 new and redeployed positions,

including several dedicated GAC personnel. Eorts to

ormally establish competencies or this GAC stream risk

creating overlaps with well-established competencies or

public sector specialists and, in some cases, duciary and

social development sta. A separate GAC cadre is not likely

to be sustainable without a realignment o some network

and central units.

Cdinatin and Accuntabiity. Te GAC Council

served more as an inormation-sharing orum than a de-

cision-making body. Council meetings, which were regu-

larly attended by a large number o nonmembers, usually

involved presentations by Bank units showcasing their e-

orts. Tese presentations would have beneted rom criti-cal review o what was working and what was not. Other

specialized GAC arrangements, such as program secretari-

ats housed in the PREM Anchor and GAC ocal points in

Regions and networks, also ensured that GAC received con-

tinuous management attention. However, operational sta

reported that these arrangements could have been more rel-

evant to their work.

receas

Te planned second phase o GAC can more ully deliver

on its potential by ocusing on developing operational solu-

tions to meet the challenge o helping build country gov-

ernance capacities. Te ndings o this evaluation point to

ve sets o actions:

Focus on helping countries make tangible and time-

bound governance improvements, while acknowledging

and seeking to resolve trade-os between:

CommittingBanksupportforinstitutionbuildingover

the long term andensuring accountability or results

ge 2.1Acati f Geace Patesip Faciit Gats b Wd Bak Sect uits

Sources: Operations Portal; Governance Partnership Facility Secretariat, as o December 2010.

FIGurE C

Public Sector

$8.1 (N = 7)

$28.6 (N = 40)

$6.9 (N = 11)

$3.4 (N = 7)

$3.1 (N = 3)

$2.4 (N = 4)

$2.0 (N = 3)$1.8 (N = 3)

$1.8 (N = 3)

$1.0 (N = 2)

$0.9 (N = 3)

$0.9 (N = 2)

$0.8 (N = 1)

$0.6 (N = 2)

$0.5 (N = 1)

$0.5 (N = 1)

$0.5 (N = 1)

$0.5 (N = 1)

$0.5 (N = 1)

$0.4 (N = 1)

$0.2 (N = 1)

0 5 10 15 20 25 30

Country Services Panel

Social Development

Social Protection

Others

Operational ServicesWater

Financial Management

Private Sector Development

Economic Policy

Agriculture & Rural Dev.

Procurement

Poverty Reduction

Urban Development

Human Development

Education

Communications

Health, Nutrition & Population

Econ Policy & Poverty Reduction

Infrastructure

Econ Policy & Public Sector

Amount in $ million (no. of grants)


16/32


(or example, in service delivery) in the short term.

Supportingsystem-widepublicsectorreformsandsup-

porting selective public management improvements in

priority service delivery sectors.

Helping governments respond to demand-side pres-

sures anddirectly engaging non-state actors in order to

motivate demand-side pressures.

Upgradingofcountrysystemsthroughtheirdeliberate

use andsaeguarding Bank unds rom abuse.

Update the Banks approach to institutional strengthen-

ing by:

Leveraging innovations innancial instruments and

building on lessons learned to strengthen business

lines that warrant more immediate attentioncivil

service pay reorm (particularly in ragile states); pub-

lic management support or basic service delivery and

the investment climate; public nancial management

o natural resource rents; and civil society capacitybuilding.

StrengtheningBank-countrydialogue,primarilythrough

better integration o political economy analysis into stan-

dard Bank economic and sector work (and less through

the creation o condential, ree-standing political econ-

omy analysis products).

Adapting actionable governance indicatorsmore sys-

tematically to project results rameworks.

Clariy the Banks zero tolerance stance on corruption

and improve operational controls by:

Developing a harmonized approach to reviewing and

managing systems-level duciary and GAC risks across

instrumentsand not simply transaction-level risks in in-

vestment projects. Te approach should provide or addi-

tional due diligence on operations with specializedrisks.

Providingguidancetooperationalteamsontheappro-

priate use o dierent Bank nancial instruments in di-

erent governance settings, consistent with the institu-

tions overall risk appetite.

Consistentlydeningrisktolerancesforthelevelsand

composition o lending as well as the use o country sys-

tems in dierent settings (or example, through lending

scenarios) so that expectations o governance peror-

mance are clearly understood by country stakeholders

and the Banks shareholders.

Clariy roles and accountabilities or setting GAC stra-

tegic priorities:

At the country level, Bank country strategies should

continue to serve as the primary mechanisms or re-ecting the priorities and needs o clients on GAC is-

sues. Donor-unded initiatives need to be appropriately

aligned.

AttheVPUlevel,GACworkplansshouldbeinformed

by demand in partner countries and should set priori-

ties or overall resources useboth Bank budgets and

trust unds. In keeping with Bank policies on the inte-

gration o trust und allocations with the budget pro-

cess, decisions on allocations o trust unds to GAC

activities should involve line management in VPUs.

Atthecorporatelevel,theGACCouncilshouldfocuson institutionwide issues and risks, and on benchmark-

ing the GAC responsiveness o Bank operations.

Align GAC implementation arrangements with Bank ad-

ministrative and operational processes by:

Consolidating current fragmented nancing ar-

rangements (that is, separate Bank budget and trust

fund allocations) while improving monitoring of

GAC activities.

Rather than creating a separate cadre ofGAC spe-

cialists, applying GAC competencies across existing

Bank networks and career streams, and allow trans-

erability o GAC-competent sta across networks.

Streamlining specializedGAC institutionalarrange-

ments with a view to empowering line managers in

VPUs to achieve GAC objectives.

Supportingincreasedappliedresearchonwhatworksin

various GAC areas.

Developingaresultsframeworkthatincludesbaseline

indicators o Bank and country-level perormance, sets

targets, and integrates monitoring o GAC responsive-

ness into standard portolio monitoring.


17/32


18/32

Management Response | 1

Putting the rept in Cntext.Helping countries in theireorts to make governance improvements and strengthen

institutions is an important element o the Banks gover-

nance and anticorruption (GAC) strategy, and Management

welcomes the opportunity to comment on the Independent

Evaluation Group (IEG) evaluation o this work. Te re-

ports endorsement o the high, and continuing, strategic

relevance o GAC goals and objectives, and its recognition

o strong top-level management support, resonate, as do

early ndings such as that the Bank is supporting country

systems strengthening in three times as many countries in

FY 0810 as it did in FY 0407. Management also agrees

with the evaluation that while the World Bank continuesto support good governance objectives in virtually every

country where it has operations, there are still important

opportunities that can be seized.

However it is also important to underscore that these country

actions are only part o a broader GAC strategy that the IEG

report does not cover. Tis broader GAC work includes key

institutionwide and partnership initiatives, such as strength-

ening the Banks corporate investigations and sanctions re-

gimes, revitalizing the World Bank Institute (WBI), support-

ing global programs such as that on Stolen Assets Recovery

(StAR), and undertaking path breaking reorms to make theWorld Banks operations and research more open, transpar-

ent and accountable. In reading the IEG report on country

work it is important not to lose sight o this larger gover-

nance and anticorruption work program, or to sell short the

very real progress the World Bank has made on this broader

agenda. It is particularly important, as the IEG Report ac-

knowledges, to emphasize that the World Bank has taken

great strides, including implementing all recommendations

o the Volcker Report, reorming sanctions and debarment

proceedings, strengthening prevention work and scaling up

the activities o the Integrity Vice Presidency, to secure its

own investment unding rom raud and corruption.

The Fcus the rept: The Cunty Cmpnent

GAC. Te ocused topic o the IEG evaluationhow theBank engages with countries to assist them in addressing

their own governance issuesis perhaps the most complex

and challenging sphere o development and one with which

bilateral agencies and international institutions are all com-

ing to grips. Tere are ew quick xes in this work and many

competing pressures. As the 2011 World Development Re-

portpoints out, institution building requires a 20 year time

horizon, but citizens have needs or government servicesnow. Tis evaluation covers the rst three years o GAC

implementation (the average operation or country strategy

examined in the evaluation is less than two years in), and

there is much still to do in GAC and much to build on rom

the evaluation. Tere are also obvious limits to what can be

achieved in such a short time in what amounts to a major

institutional culture change. Tat said, Management agrees

with many o the IEG ndings. While it does have areas o

disagreement, set out below, it will use the IEG evaluation,

along with other lessons o experience, to help update the

GAC strategy. In particular, Management will implement

IEGs recommendations in three areas: stronger supportor country institutional strengthening; an improved risk

ramework; and a stronger results ramework, where IEGs

work provides valuable baseline data.

Stuctue the Management respnse. Te Manage-

ment Response rst reviews signicant progress in GAC

strategy areas not covered in the IEG evaluation. Next it sets

out the outlines o where we want to go with the next phase

o the GAC strategy, taking on board the learning to date,

including rom IEG. It then sets out some important areas

o agreement with the evaluation beore discussing areas

or clarication and issues on which Management does notagree. It ends with comments on IEGs recommendations,

the overall thrust o which Management supports. Te ull

draf Management Action Record is attached as an annex.

te Baks Bae Saec Eaee

geace a Ac

In addition to the Banks country level engagementthe

subject o this evaluation, Management would like to high-

light notable achievements in the Banks broader strategic

engagement on GAC that the evaluation does not address

and that are highly relevant not only to the role the Bankhas played on the global stage to drive initiatives on gov-

ernance and anticorruption, but to its own duciary due

diligence. It is ironic that the Report nds ault with the

Bank or spending too much time ocusing on ring-encing

and protecting its own projects rom corruption. Tis is not

something we should apologize or.

Broader GAC eorts not covered by the IEG Report have

ranged rom a strengthening o the Banks corporate in-

vestigations and sanctions regimes, ollowing the Volcker

maaee resse


19/32


panel report; renewal o the WBI; support to global pro-

grams such as that on StAR; to groundbreaking work to

make the World Banks operations and research more open,

transparent and accountable. Tese eorts have brought

real achievements such as:

Mobilizing collective action on global governance

issuesincluding supportingthe Extractive Industries

ransparency Initiative (EII), the Medicines rans-

parency Alliance (MeA), the Construction Sector

ransparency Initiative (CoS), the Program on For-

ests and the Forest Law Enorcement and Governance

partnership (PROFOR-FLEG), the Global Program on

Fisheries (PROFISH), and the Global Roads Integrity

Initiative.

Bringing together new partners to tackle global

threats to good governance and inuencing the global

policy agendaincluding launching the International

Corruption Hunters Alliance (ICHA); partnering with

INERPOL, the United Nations Oce on Drugs and

Crime (UNODC), the World Customs Organization,and the Secretariat o the Convention on Internation-

al rade in Endangered Species (CIES), to establish

the International Consortium or Combating Wildlie

Crime (ICCWC); and launching the Stolen Assets Re-

covery (StAR) initiative, endorsed by the G-20 and the

United States Senate Permanent Subcommittee on In-

vestigations in its report, Keeping Foreign Corruption

Out o the United States.

Developing and implementing policies to apply the

transparency principle to its own activities and make

the World Bank Group a global transparency leaderincluding through a new Access to Inormation policy;an Open Data initiative enabling ree access to develop-

ment data or researchers, students, development practi-

tioners and others across the globe; and the publication

o Implementation Status and Results (ISR) reports, a

key tool or reporting on the implementation peror-

mance and results in all Bank-supported operations.

Enabling concerted anticorruption eforts across in-

ternational institutionsincluding signing with other

leading multilateral development banks (MDBs) an

agreement to cross-debar rms and individuals ound

to have engaged in wrongdoing in MDB-nanced de-

velopment projects.

Expanding investigations and sanctions activity

concluding 553 external and internal investigations

since 2008; generating close to 200 combined sanctions

applications and debarments, and making over 150 re-

errals to national authorities.

Implementing the Volcker recommendations and

scaling up the Integrity Vice Presidencys preven-

tative workincluding building precautions into 75

high-risk operations at the design and implementation

phases during FY1011 through direct work with task

teams; inputting Integrity Vice Presidencyinormation

on country-level risks into Country Assistance Strategy

(CAS) discussions; undertaking thematic assessments

o risks and lessons learned on preventive measures

at the country, instrument or sector level such as the

Global Roads Review; and building country capacityon the ground by providing hands-on practical applica-

tion training to over 2700 ocials representing PIUs,

national audit institutions, anticorruption authorities,

and Bank sta. By largely excluding Integrity Vice Pres-

idencys preventive work rom its evaluation, IEG has

missed an important aspect o GAC implementation.

m wa gAC S

ua e gAC Sae

Te GAC strategy and implementation plan (IP) were de-

signed to be rened over time on the basis o experience.Indeed given the disappointing trends in governance over

the decade leading up to the strategy and the need or new

approaches, the IP was deliberately set out as a change

management strategy, requiring continuous adaptation and

learning by doing. Te IEG evaluation is useul in that re-

gard and in the next phase o the Banks GAC eorts, Man-

agement will place particular emphasis on several areas

highlighted by IEG. Tese include: rening how the Bank

engages with countries to strengthen institutions, while

simultaneously ensuring that International Bank or Re-

construction and Development (IBRD) and International

Development Association (IDA) resources are adequatelyprotected, including through strong duciary support;

urther developing a ramework or assessing risks and re-

wards to help guide operational decisions; and setting out

an overall results ramework so that over the next ve years,

Management and the Board will have a clear idea o what

has and has not been achieved.

Management will remain ambitious in its support to coun-

tries. It must also, however, be realistic about its capabil-

ity to inuence in this challenging reorm arena, given the

long-term nature o institutional change in the GAC con-

text and the centrality o country ownership.

Aeas Aeee

Te evaluations endorsement o the high (and continuing)

strategic relevance o GAC goals and objectives, and its

recognition o strong top level management support, is en-

couraging. Experience has shown that strong and continu-

ing senior management support is essential to any change

management eort. Management is pleased that the evalu-

ation nds that the Bank is supporting country systems


20/32


strengthening in three times as many countries in FY 0810

as it did in FY 0407. Tis nding is important, as the GAC

strategy and IP stress that stronger country systems are

central to helping countries develop into ully accountable

states. Management also welcomes the nding that country

teams have sustained country dialogue on governance and

anticorruption issues. It is this combination o sustained

dialogue and support or country systems that is likely to

result in long-term gains in governance and anticorrup-tion. Management also notes that important improvements

were recorded, too, in countries with weaker institutional

capacities: the proportion using country systems (nancial

management, procurement, personnel) increased rom 27

percent pre-GAC to 41 percent post-GAC.

Management agrees with IEG that GAC progress has allen

short in sectors, relative to overall GAC in projects or in

country strategies. Management also agrees that, rather

than promoting a signicant separate cadre o GAC spe-

cialists, there is a need or more general GAC competency

across sectors and is now working in that direction. Man-agement also agrees that more work is needed on demand-

side measures, but would have appreciated more analysis by

IEG on what works, where, and why. As noted above, Man-

agement agrees on the need to introduce a stronger results

ramework or GAC and to work more comprehensively on

risk issues.

Se Aeas maaee Cce

While there are some broad areas o agreement, Manage-

ment notes its concerns about the methodological approach

and the quality o some o the analysis. Tree o these areas

o concern include: (i) the raming o the goals Manage-

ment set out in the GAC IP; (ii) empirical methods; and

(iii) and the possible interpretation o ndings related to

Development Policy Lending (DPLs).

Managements Intentins.IEG evaluates the IP against anobjective o systematic improvement in the way the Bank

engaged on governance in all countries and all projects

over a three-year period. But this premise is aulty. Man-

agements goals were much more modest. IP implementa-

tion was designed as a change management strategy that

sought to strengthen sta awareness and capacity, build

tools, and generate good practice in selected areaslearnwhat works, iterate, and scale up over time. Management

has been explicit and consistent over time in describing

GAC implementation as a learning-oriented, participatory,

change management process. Tus in 2007 the GAC Imple-

mentation Plan noted: Te implementation o the GAC

agenda will be a long-term eort. As the [initial] year-long

learning-by-doing process unolds, the medium-term chal-

lenges and actions will become clearerand will be detailed

in implementation progress report[(s) to the Board.]

Given this approach, Management believes that, the eval-

uation missed an opportunity or learning about how

Management could strengthen its change management

approachBox 1 provides select details on one aspect o

this concernnamely the missed opportunity to evaluate

the Banks agship GAC in country-program eorts. It is

Managements continued view that when there are substan-

tial disagreements between IEG and Management at the

stage o the approach paper, more eort should be made toresolve those dierences prior to embarking on the evalu-

ation.

Empiica methds. Besides the sampling issue above,

Management believes some o the evaluations ndings

are based on limitations to the analytical ramework and

econometric work that are not suciently acknowledged in

the evaluation. One concern worth noting is that while a

theme o the report is the lack o systematic progress on

GAC-related inputs and outputs, in comparing pre-GAC

to post-GAC CASs and projects, in general, the post-

GAC sample seems to be o too early a vintage (on av-erage in operation only a year and a hal afer the IP was

nalized) to make a signicant determination as to GAC

responsiveness. Indeed, much o the guidance developed in

the IP years is just now being rolled out and tested in opera-

tions. Furthermore, due to the short implementation time-

period covered, data capturing the extent to which projects

and CASs are implementing GAC measures are much more

requently censored (statistically, data lef out because the

results are not yet known) in the post-GAC period, which

could potentially bias results. Finally, Management is con-

cerned that various passages in the evaluation discuss spe-

cic empirical ndings in terms that imply causality (orexample, Te use o ast-disbursing DPLs increased the

likelihood that countrieseven when they had poorer gov-

ernancewould receive a ow o IDA unds paragraph

5.4). o avoid possibly misinterpretation, Management

welcomes IEGs disclaimer that [t]his evaluation does not

assert causality between variables; hence, it is not the pur-

pose to analyze the impact o any specic variables on

GAC responsiveness.

Caifcatins n DPls. First, Management would notethat IDA ows are signicantly and positively related to

governance perormance including in countries with DPLs.Tis point does not come out clearly in the evaluation. Sec-

ond, Management strongly believes that the evidence o

experience shows that DPLs (or Development Policy Oper-

ationsDPOsincluding credits and grants to IDA coun-

tries) have proven their useulness in weaker governance

environments. Te DPO process includes the relevant tests

o country commitment, institutional capacity, and du-

ciary environment. Policy changes supported by DPOs are

ofen important elements in improving governance. Tird,


21/32

Management notes that the number o risk reviews is not

a good indication o the quality o risk review. All DPOs

have a high level o Management review and control mech-

anisms are robust. In June 2010, the Internal Audit Depart-

ment completed an audit o Bank processes or managing

DPOs and gave those processes their highest rating (Sat-

isactory). Te audit states: Our overall opinion is that

governance, risk management and control processes overthe Banks management o DPOs were satisactory. Tese

processes were adequate and eective to provide reasonable

assurance regarding the operation o key controls.

receas

While Management has some concerns about the evaluations

ramework and the interpretation o some ndings, Manage-

ment welcomes the Reports recommendations, which ocus

on developing operational solutions to meet the challenge

o helping countries build country governance capabilities.

While noting that achievements to date represent a substan-tial strengthening in the Banks GAC eorts, Management

recognizes that there is scope or continued improvement,

including in the way the Bank engages with countries on

GAC issues. As noted above, Management will draw on IEGs

recommendations in its update o the GAC strategy.

In broad terms, Management endorses the recommenda-

tions, and they will useully inorm Management as it renes

and adapts its strategic approach to supporting countries

on governance and anticorruption. Specically, the updat-

ed strategy will draw on IEG recommendations with regard

to supporting countries in strengthening country systems

and institutions, guidance to sta on risks, and a more ro-

bust results ramework consistent with the next phase o

GAC support. As noted in the attached Management Ac-

tion Record (MAR), though, there are some dierences in

view on specic issues and approaches. Management also

highlights that some areas or improvement are within the

Banks direct control (e.g., stronger results rameworks in

projects), whereas others are more complex (e.g., attempt-

ing to inuence a range o critical and contested variables atthe country level to eect governance reorms).


Box 1 MISSED oPPorTunITy To EvAluATE GAC In CounTry-ProGrAM FlAGShIP EFForTS

maaees chae aaee aach sehe gAC cy as has bee dey

ad ewe eas s ced gAC asea. ths e ceeded a hese ses:

In2007,evenpriortotheIP,Managementsoughttocreateaninnovationfundforcommittedcountryteamsha wad qay as gAC asea. the es -d geace pae-

sh acy (gp)sed by he ued Kd, he neheads ad nwaycae sea Seebe 2008.

Inearly2008,toprimethepumpinadvanceoftheGPF,ManagementinvitedRegionalVicePresidencies

(rvps) dey cy as he scaed- gAC e; 27 as wee deed, ad each wasded wh des seed ey (a bde cs $2.7 , a aeae $100,000).

WhentheGPFcameonstream,itwasopenedtoallcountryteams(notonlythe27initiallyidentiedbyrvps). the gp acaed esces ceey, wh s decss ade he bass he qay -sas ad he desaed ce he aca cy eas.

Eighteenteamswereselectedtoreceivetrulysignicantsupport,anaverageof$2million,forimplementa- he cy as. Csse wh s b- aach, maaee ews he ehee

eas seeced by he gp be he fashs s gAC--cy as e (a bde cs $36).

uaey, ess ha e-hd iEgs eae sae was daw he fash ehee. oe w-

hds was daw he a se as ha eceed ey des seed ey, b sbseqey dd ee he gps ess qay ad ce, ad hs dd hae access scay scaed-esces.


22/32


Management Action Record

Focus on helping countries make tangible and time-bound

governance improvements, we ackwe a seek

ese ae-s bewee:

CommittingBanksupportforinstitutionbuildingoverthelong

e andes accab ess ( exae, se-

ce ee, bc aca aaee, ea) e

s e;

Supporting systemwidepublicsectorreforms and s

seece bc aaee ees sece

ee secs;

Helpinggovernments respond todemand-side pressuresand

ec ea -sae acs e ae ea-

se esses;

Upgradingofcountrysystemsthroughtheirdeliberateuseand

saea Bak s abse.

Update the Banks approach to institutional strengthening by: Leveraginginnovationsinnancialinstrumentsandbuildingon

esss eae see bsess es a waa e

eae aec sece a e (aca

ae saes); bc aaee s basc sece e-

e a e ese cae; bc aca aaee

aa esce es; a c sce caac b;

StrengtheningBank-countrydialogueprimarilythroughbetter

ea ca ec aass saa Bak ec-

c a sec wk (a ess e cea c-

ea, ee-sa ca ec aass cs); a

Adaptactionablegovernanceindicatorsmoresystematicallyto

jec ess aewks.

Agreed: maaee es a e s ecea s a-

ea cae; e 2011 Wdr sesses a 20 ea e z

s b, we ecz a czes ae e-

ae ees. decss ea ae-s ca be ae a c-

ee a ce w Bak caae aaae. te a

ee eceas a ea ae-s; e aeaes

eac case a be ceea.

maaee eee cs :

Articulateitsapproachtoupstreampublicsectorreforms(those

cse ce ee cs a sses) a w-

sea es (wc cs sece ee) e cex

gACii, be scsse w Exece decs e sec

Qae y 2012.

Astrengthenedapproachtosupportingdemand-sidemeasures

w be se a aex e gACii sae.

Continue and deepen work on supporting strengthening of

c sses a ce a e eca

Exece decs ess se c sses

cee, aca aaee, a jec aaee

eea.

maaee ca c e-b acs b ces.

maaee es c s ces a ae c-

we e-b saees e eace a w e-

a s as a gAC .

Partially Agreed. maaee s ee a ew ess-basee se a w ace e ee ess a

e cca aeas se b iEg. maaee as eses e ca

see c ae e e wesea

se ca ec aass a c, sec a jec ee.

hwee, maaee beees a c cex s cca, a

whetherornottointegratepoliticaleconomyanalysisintoeconom-

c a sec wk s a ecs a s be ake a e c

ee. maaee aees a acabe eace cas

s be se e sseaca ess aewks.

maaee cs :

Seek Boardapprovalfornew results-basedlending instrument

(theProgramforResults)inFY2012.

BuildingonguidelinescontainedinProblemDrivenGovernance

a pca Ec Aass, bse Seebe 2009,

maaee w ee e s as ecessa b w

eae e ecs wee w se e s a -

ace rea sa, w ae e eea c kwee.

te ace s ca ec aass ae a

cfc-aece saes w be sse e s a gACii.

Developanddisseminateguidanceonusingactionablegovernance

dcas jec ess aewks, ad he se-


Maj Mitabe IEG recmmedatireqiig a respse

Maagemet respse


23/32



Management Action Record (continued)


IEG recmmedatis

Clarify the Banks zero tolerance stance on corruption and im-prove operational controls by:

Developingaharmonized aac eewa aa

sses-ee ca a gAC sks acss sesa

s asac-ee sks ese jecs. te a-

ac s e e ece eas w spe-

cializedsks.

Providingguidancetooperationalteamsontheappropriateuse

ee Bak aca ses ee eace

ses, csse w e ss ea sk aee.

Consistentlydeningrisktolerancesforthelevelsandcomposi-

e as we as e se c sses ee

ses ( exae, e sceas) s a exec-

as eace eace ae cea es b

c sakees a e Baks saees.

ess ad dy as ecessay he cex ea gAC e-

. maaee w dsseae dace he s ha gACii.

Partially agreed. Managementhas aclearposition visa viszeroeace a w ake es ese s we es. i

sa, maaees s s a we we ae aee

c, we ae a ex-ae eace sk ( a s ec-

ze a sc es ee ces ae e ke

ece sc caees wc e Bak seeks aae as

cse ze as ssbe), cbe w a ex-s ze eace

we s sw a a, c e aeasace as c-

ce. i sc ccsaces e Bak w awas a eewee

ake ac aess e be.

maaee as aees a e ae ssec sk be -

creasedwhilecontinuingtopayattentiontotransactionsrisk.How -

ever,Managementnotesthataharmonizedapproachtoassessing

a aa sk s ea a esses s awas a

eewee be e sae. C cex aes aea

a exc ecss s be base e seccs c c-

csaces.

Wa s ss iEgs ecea s e cce ewa

ess sk. maaee aazes sk aas exece eaa

eee ces a as aea eeae acss c-

cexs s ea b se a ae 70 ece maa

Sasac (mS) bee aeae iEg as eas

ae Saes (wee sks ae, cse, b e es sc-

cess eas e be eseca ), 75 ece bee

e idA ces, a 80 ece idA ces.

maaee cs :

Clarifyitspositiononzerotolerance, explainingagaintosta

a eee s s a sk bsess a ee s wa,

e a e a a, aaee e absece a

a c Bak-se eas; e Bak ss

bwes easabe assace a s ae se

as ee; b e Bak as ze eace ce a c-

s . maaee w se s ea c-

cas a, e W Bak gs Ce rsk oce,

e cex e gACii scsss.

ReviewtheexperiencewithORAFaftertwoyears(notablyitsuse

as ee eea e aaee eas b

sk) a ake ajses as eee.

Continuetodevelopitscomprehensiveapproachtoriskmanage-

e eae eaa s ce ces, e

ess ea e Ba, a e A Cee, e

es ee sk aees a e eaces a


24/32

Management Action RecordManagement Action Record (continued)


IEG recmmedatis


Clarify roles and accountabilities for setting GAC strategic pri-

orities:

Atthecountrylevel,Bankcountrystrategiesshouldcontinueto

see as e a ecass efec e es a

ees ces gAC sses. d-e aes ee

be aae ae.

AttheVPUlevel,GACworkplansshouldbeinformedbydemand

ae ces a s se es ea esces

seb Bak bes a s s. i kee w Bak

ces e ea s acas w e b-

e cess, ecss acas s s gAC ac-

es s e e aaee vce pesec us

(vpus).

Atthe corporatelevel,theGACCouncilshould focusoninsti-

-we sses a sks, a becak e gAC e-

sseess Bak eas.

Align GAC implementation arrangements with Bank adminis-

trative and operational processes by:

Consolidatingcurrentfragmentednancingarrangements(that

s, seaae Bak be a s acas) we -

gAC aces.

RatherthancreatingaseparatecadreofGACspecialists,apply-

gAC ceeces acss exs Bak ewks a caee

seas, a aw aseab gAC-cee sa acss

ewks.

StreamliningspecializedGACinstitutionalarrangementswitha

ew ewe e aaes vpus acee gAC b-

jeces.

Supportingincreasedappliedresearchonwhatworksinvarious

gAC aeas.

Developingaresultsframeworkthatincludesbaselineindicators

Bak a c-ee eace, ses aes, a e-

aes GAC responsiveness saa

.

wc maaee ses ese a sk s ke w e-

e ees, a e aa ieae rsk m

re e W Bak gs Ce rsk oce.

Partially agreed. maaee ccs w e ew a CASs a

iSns be e a eas b wc ce eace sses ae

ase a aesse. te Bak s ce e pas a Acca

aeas ae. maaee aees a e gAC Cc

s cs saec a swe sses.

maaee s cce e ee ceae aa gAC

wk as a e vpu ee. tee s a ae a ese w ce-

ae a aa ask a w be e aa ae.

maaee cs esce e gAC Cc, w a -

e cease cs saec a swe sses, e

cex gACii a w e e cex a -e gAC

ae.

Partially agreed. maaee aees a aca a cea e-

ss aewk gACii s cca. gAC pase ii aca w a

a cea Bak-we ess aewk, w easc e sec-

aes wc w ce basee cas, a a c

sse. maaee as aees e ace

a gAC ceeces acss secs, a e ace

ae eseac s ea a kwee aae-

e.

hwee, maaee s e ew a e aaes ae aea

ewee acee gAC bjeces, a a e cee

cess aca gAC ts es was eece a a-

ae.

maaee cs se :

SetoutasnotedaboveaGACresultsframeworkandmonitoring

sse e cex gACii.

FinishongoingworkonGACcompetenciesandanassociated

a a a e se b y13.

Asnotedabove,theoversightandmanagementarrangements

gACii w be ese.

SetoutprioritiesforresearchinthecontextofGACIIandmonitor

ess e cex ea gAC e.


25/32


Caess Sa:

Cee deee Eeceess (CodE)

Te Committee on Development Eectiveness (CODE)

considered the report entitled World Bank Country-

Level Engagement on Governance and Anticorruption: An

Evaluation o the 2007 Strategy and Implementation Plan

(CODE2011-0044), prepared by the Independent Evalua-

tion Group (IEG), together with the Draf Management Re-

sponse (CODE2011-0046). Te Statement by the External

Advisory Panel (CODE2011-0047/1) on the IEG report was

distributed as a background document.

Te Committee welcomed the timely discussion o the

IEG evaluation assessing the 2007 Governance and Anti-

corruption (GAC) strategy and the rst phase o its imple-

mentation (FY0810). It appreciated Managements draf

response and commitment to consider IEGs ndings and

recommendations as inputs to the development o GAC

Phase II, including in the areas o country institutional

strengthening, risk management, and results measurement.

Te Committee noted the complexity o GAC issues and

the relevance o this evaluation in connection with ongo-

ing work on the design o the new nancial instrumentProgram-or-Results; the need to look at implementation o

the GAC strategy within the Bank and in partner countries;

and the alignment o the GAC agenda with the Banks mod-

ernization and internal reorm agendas.

Members agreed that the evaluation provides a compre-

hensive review o the Banks operational responsiveness to

GAC issues in country operational aspects, sector programs

and projects beore and afer the 2007 strategy. Notably,

they were pleased with IEGs ndings that the Bank sup-

ported institutional strengthening in three times as many

countries in the scal 200810 period as it did in the s-

cal 200407 period. But they also agreed with IEG that the

Bank has to signicantly strengthen its eorts to work withclients to improve their governance systems going orward.

As the Bank prepares or the next GAC phase, members

encouraged Management to do more to urther support

country-owned reorms, innovate approaches to institu-

tional capacity building, and oster the demand or good

governance while strengthening country dialogue. Tere

were also comments on the importance o ocusing more

on strengthening country systems, monitoring GAC re-

sults, harmonizing risk management, and strengthening the

understanding o the political economy context taking into

account the Banks own analytical work as well as analysis

prepared by others. With regard to resources to implementthe GAC strategy, comments were raised on integrating the

allocation o trust unds to the Banks budget process, and

to strengthen sta skills building internal GAC expertise

across the institution.


26/32

Statement o the External Advisory Panel | 19

Saee e Exea As pae

Governance is a dening challenge o our era. Te Inde-

pendent Evaluation Groups report, ocusing on the na-

tional dimensions o the World Bank 2007 Governance and

Anticorruption (GAC) strategy, is thereore o global im-

portance. We welcome the serious and detailed comments

o management in response to the draf

world bank country-level engagement on governance and anticorruption: an evaluation of the 2007...

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