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OED slates Bank development effectiveness

21 November 2005

In October, the Operations Evaluation Department (OED) published a report summarising lessons from recent evaluations; Bank management, in unusually strong language, has expressed “concerns about both the methodology OED used to reach its conclusions, and the conclusions themselves”. The evaluation, entitled Improving the World Bank’s development effectiveness: What does evaluation show? went through fractious internal discussion before its release. The report will be seen by many as a final assessment of the Wolfensohn era.

Bloated or just overstretched?

The evaluation highlights the Bank’s rising costs of doing business. For every dollar of its administrative budget “the Bank disbursed $13 in fiscal year 1995, but only $9 in fiscal 2005”. In the past, Bank management has used this same observation to decry the costs of environmental and social safeguards. However, rather than blaming safeguards for skyrocketing costs, the OED points to a general lack of focus in the Bank’s work, especially in knowledge activities and global programmes: “Internal incentives – including the matrix structure – have led to a proliferation of activities”. Countries have expressed a desire for the Bank to provide “less generic knowledge and more help in finding solutions to their specific problems”, while the “Bank’s strategy for global programmes is poorly defined” (see Update 44).

Management’s response seethes: “It is unusual, to say the least, for an evaluation unit to imply that the Bank should measure effectiveness in this way [administrative costs per dollar of loans disbursed]”, arguing that rising costs are attributable to increased involvement in post-conflict countries and expanded leadership in global programmes. In their discussion of the cost issue, members of the board committee on development effectiveness (CODE) drew attention to the duplication of activities resulting from staff decentralisation and the ensuing high cost of staff travel.

leverage produces lip service, not country ownership

One third of programmes “unsatisfactory”

The evaluation shines a light on the disconnect between project performance and country outcomes, noting that while there has been a “steady improvement over the past decade in the ratings of the outcomes of Bank projects”, this “does not necessarily indicate improved development impact at the country level”. With one-third of country programmes rated unsatisfactory, “there is substantial room for improvement in the Bank’s development effectiveness”. The evaluation recommends that, in order to improve its outcomes, the Bank should “carry out more robust risk analysis”, “set clear and meaningful triggers for its assistance” and “lend more prudently in turnaround situations”. CODE members suggested a review of the efficacy of the Bank’s entire development model rather than just outcomes of individual programmes and projects.

Particular emphasis is placed on the need for the Bank to improve its strategy for working in middle income countries and so-called low-income countries under stress. In post-conflict settings, project lending “regularly failed for two reasons: overly ambitious design and inadequate supervision”. The OED encouraged more effective coordination and partnerships with the UN and other donors.

Management fired back that they do not agree with OED on its country programme rating methodology, saying that it “has never been clear to management which objectives OED rated”. Revealingly, management insisted that the Bank’s assistance could be “fully satisfactory” when both a country’s economy is deteriorating and the OED rates the country outcome as unsatisfactory.

“Leverage produces lip service, not ownership”

On the content of Bank-led reforms the OED notes that a “rush to privatise without adequate regulatory, prudential and incentive systems is a recipe for failure and for serious political and social consequences”. Privatisation and structural adjustment have been “plagued by over-optimism about political commitment and institutional capacity”. In its response, Bank management only went as far as to admit that by the late 1990s it realised that “privatisation needed to respond to local conditions”.

“Privatisation”, say the evaluation’s authors, “is a good example of an area where processes and procedures were often not adapted to the local context”. PRSPs are “supposed to be designed by countries”, yet “Washington has to sign off on these, which means clients see them as ways of accessing cash”. Bank documents still include the assumption that the Bank has high leverage in aid-dependent countries: “This is an illusion: leverage produces lip service, not country ownership”. Experience shows that the timing, sequencing and selection of reforms are crucial and these may be “better determined by a country’s political dynamics than by outside advice”.