Thomas O Brien Lead Economist

Transcription

1 An Evaluation on the World Bank s Support Thomas O Brien Lead Economist A lot has been written about the Bank and Middle-Income Countries. Some has come from a policy viewpoint; some has been polemic. Our contribution is practical. For the first time, the evidence on the Bank s support to MICs has been gathered together from field assessments, country evaluations, project evaluations, and the voice of partner countries themselves. This combination of analysis provides the platform to judge whether and how the Bank can engage with MICs in the years ahead.

2 From the peaks of South Africa to the skyscrapers of Shanghai, there is great diversity among the 86 nation states which currently make-up the Middle- Income Country Group. That distinctiveness brings with it very different conditions and development problems across the group.

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6 Antigua and Barbuda 10,000 Brazil Mexico GNI per Capita - Atlas Method 8,000 6,000 4,000 Azerbaijan Egypt, Arab Rep. of Philippines China Morocco Colombia Jordan Kazakhstan Peru Jamaica Bulgaria Thailand Russian Federation South Africa Argentina Turkey Upper MICs Lower MICs 2,000 0 MICs They cover a wide income range with countries towards the top of the list, such as Hungary, having a per capita income ten times that of countries towards the lower end, such as Bolivia. The Bank has been attuned to this diversity and responded appropriately with a country-by-country approach. Most Bank country strategies have focused on the right items, and brought together a mix of support finance, knowledge, and convening power not readily available from other sources. What has been the progress on major themes running through the MIC group as a whole?

7 Let s start with the growth agenda. Take the case of Bulgaria as you can see, sunny Bulgaria, a land of cathedrals and cranes. That s a country whose per capita income has grown by 6 percent per annum since the turn of the decade, and a country which celebrated becoming a full member of the European Union at the turn of this year. Bulgarian policymakers have led the way, and sure the pull of the EU and favorable market conditions have been a big plus in their growth prospects. But the Bank s support has also made a contribution, and is appreciated by Bulgarian stakeholders whom we consulted during our work. Bank policy advice combined with financial support, in a series of development policy loans, helped the Government free-up the economy, encourage the expansion of home-grown business, and create a climate more conducive for foreign investment.

8 Colombia provides a similar experience, where policy advice and lending has been appreciated in helping the country rebound from its financial crisis eight years ago. It also highlights how Bank support for infrastructure such as the Trans Millenio urban transport project which is keeping people on the move in the expanding Bogota metropolis has also made a difference for the good. Indeed with around 90 percent of Bank investments in MIC infrastructure proving successful, it may be an area for continued demand in the future.

9 Growth Greater than 6.0 Growth rate of GDP per capita in MICs (percent) Less than Number of MICs Of course the Bank s contribution is only one of many factors supporting the strong growth performance of the lion s share of the MIC group. It s simply not possible to quantify and precisely attribute the Bank s overall influence on growth, but these examples I ve described are more of a rule rather than an exception in the experience of the MIC Group as a whole. In fact nearly 70 percent of clients themselves rate the Bank s help in fostering growth as moderately effective or better.

10 This strong growth has been the key factor in MICs considerable progress in reducing poverty. Over the last decade, some 400 million people have been lifted out of poverty. The majority of these have been in China, but even beyond China, the MICs have reduced $2-a-day poverty rates by 20 percent over the last decade. Several aspects of the Bank s support have helped countries in this effort such as good analytical work on poverty monitoring in China, and attention to rural development in Tunisia.

11 But a particularly noteworthy contribution has been made by the Bank s careful focus on the stability and effectiveness of social assistance programs. Bank investments have been successful, and the work on Conditional Cash Transfer programs shows another useful feature of the Bank s role working to share experiences across Middle-Income Countries, from Mexico to Brazil to Colombia to Turkey, and in the last couple of years to low-income countries too.

12 Inequality Ukraine Turkey Inequality stable, 19% Colombia Peru Mexico Thailand Inequality decreased, 26% Inequality increased, 55% China Bolivia Brazil Much less progress has been made by clients and the Bank in dealing with inequality. Indeed, income inequality is a pronounced and worsening problem in many MICs. In over half of the group, inequality has widened over the last decade. In China, as an example, the Bank s programs in the mid-to-late 1990s did not do enough to address inequality, and equally the Bank was slow in shifting its attention and portfolio to the interior regions. In Turkey and the Ukraine, some regions face a growing prosperity gap with better-performing areas. Despite the Bank s support, Governments these have not yet engineered a reduction in inequality, and outcomes of Bank work have been unsatisfactory. Yes, this is an entrenched problem but no, it is not intractable. The Bank s work in Brazil, for example, has deliberately made a push in the most lagging of regions, in the North East, and supported Government efforts to help turn the tide to create more equal opportunities for citizens across the country at large. But in the MIC group as a whole, with 56 percent of clients reporting the Bank s work in addressing inequality as ineffective, much needs to be done.

13 64% The prominence which the Bank has accorded governance and corruption is relevant for many MICs. ⅔ have control of corruption indicators below the global change, including 9 of 10 of the largest MIC borrowers. Take the power sector in Turkey. There, as part of a wider effort for better and more transparent public procurement, the Bank s support is showing some results. And in Ukraine, for example, well-targeted support for civil society projects has helped monitor corruption at the local level. In this instance, however, these experiences are the exception rather than the rule. In many other cases the Bank s efforts do not yet appear to have found traction. And nearly ⅔ of clients rate the Bank s contribution to reducing corruption as moderately ineffective or worse the most negative of all the responses collected.

14 Environmental challenges in middle-income countries are formidable. Four in ten are experiencing deforestation, including Brazil, Indonesia, Mexico and the Philippines with some of the world s most precious biodiversity. Carbon emissions from this country group now total a quarter of the world total. And in threequarters of the countries, this has grown in the last decade (including China, now the world s second largest emitter). Moreover rising air and water pollution in rapidly developing megacities, as well as land and watershed management in rural areas has emerged as an obstacle to equitable development. Too often the Bank has been unable to encourage a systematic approach to environmental concerns, paying too little attention to linkages between specific sectors and the environment. Indeed, projects mapped to the Environment Sector Board were the worst-performing group of projects Bank-wide. Where the Bank s work has been more successful with Brazil providing an interesting case it has helped clients to position the environment as integral to the sustainable growth agenda, rather than put forward as stand-alone objectives. It s also often helped build domestic capacity in an environmental agency. New global responses, such as the Carbon Funds, also look promising given their active takeup in Middle-Income Countries.

15 In carrying out the institution's core missions boosting economic growth and reducing poverty the bank's work in the MICs has been moderately successful, the new evaluation finds. Isn't that good enough? In an earnest quest for relevance, the report's authors name three areas where the bank could do better: corruption, inequality and the environment. Nobody calls these issues trivial but they are also among the hardest to deal with. The findings of our evaluation have been endorsed by the Bank s board, Bank management in client feedback and by media commentators. But The Economist for one believes our suggestions are too earnest that the challenges we pinpoint are unrealistic and too aspirational for the Bank to remain in business. On this one, that newspaper has made the wrong call. The challenges are though, but that is no reason for the Bank and its partners to follow the ostrich with its head in the sand. The fact is that MIC stakeholders and clients want and need to go beyond the growth and poverty agenda, and want support in tackling issues of equity and sustainability.

16 Departing from business as usual MICs Capacity Bank Group Cooperation Best Practice Agility Our evaluation continues several detailed recommendations for the Bank but here I will concentrate on the broad directions which the Bank can adopt and which hold promise for it to enhance its impact in MICs.

17 Departing from business as usual MICs Capacity Drawing on MIC capacity: Bank support needs to move systematically draw on and develop each country s own expertise. This is the way to have a real relationship of equals, of peer-to-peer collaboration. In policy analysis, research, project design a genuine combination of national expertise with the Bank s experience will produce advice and action which is truly valuable (and deals with the oft-heard complaint that much Bank advice is good on the diagnostics but weaker on the how to ). And the Bank can go beyond t his. It can build on its early efforts to act as a conduit or network to promote South-South exchange. Equally importantly, it can do more to get MICs into the governance of global programs. This will help shape the agenda of international responses, and so more firmly embrace these important countries as part of global solutions to problems which transcend borders.

18 Departing from business as usual Best Practice Demonstrating Best Practice: The pressure is on for the Bank to raise its game, and clearly demonstrate how its support adds to best practice development in respective country settings. These are several channels to achieve this, and two are worth emphasizing: Ensuring that projects and programs clearly show whether, when, and in what way they are expected to play a catalytic role, being scaled-up using resources beyond those initially provided by the Bank. Without this, the Bank s input risks being a drop in the pond. Move actively sharing best practice and encouraging arrangements for knowledge transfer across regions and sectors.

19 Departing from business as usual Agility Enhance the Bank s agility Just a couple of weeks ago, the Bank announced a reduction and simplification of its loan pricing for MICs. This is a welcome step. But, as the Bank itself acknowledges, it needs to be accompanied by vigorous efforts to reduce the hassle costs of dealing with the Bank, and to continue offering new services, such as the innovative and successful support developed for clients by the Bank s Treasury in recent years. There s a long list which can be set out here including a rapid and decisive move to use country systems for procurement in Bank projects. The trick is that such changes must not be one-off, but rather part of an ongoing process whereby management and Board can make such adjustments more smoothly and quickly as demands dictate.

20 Departing from business as usual Bank Group Cooperation And in making the most of the Bank Group s combined resources, the lesson is to develop a more pragmatic and tightly drawn approach to cooperation across the Bank and the IFC.

21 Let me conclude on a personal note. When I was 7 years old, I m sure I had something common with the boy you see on the screen. Both of us dreamed of being like Pele, the world s greatest footballer. Both of us wanted to be the prefect 10. As it turned out, I ended up as an economist here at the World Bank. Dreams don t always come true. But I think just a little bit of that aspiration stays with you wanting to do the best job you can. I hope we ve made a decent fist of this evaluation. I hope our findings and suggestions will help you all in your work improving the prospects of those in the Middle Income Countries. Thank you.