Drivers of Change Team. Information Note. World Bank Institutional & Governance Reviews (IGRs)

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1 Drivers of Change Team Information Note World Bank Institutional & Governance Reviews (IGRs) Introduction 1. The purpose of the Policy Division Drivers of Change Team is to enhance DFID and other donors capacity to understand how change occurs, and the relationship between change and poverty reduction, and to provide guidance and support to use that understanding to improve the effectiveness of our bilateral and multilateral programmes. The Drivers of Change approach is a way of understanding the political economy of poverty reduction in developing countries. It directs attention to the underlying and longer-term factors that affect the enabling environment for reform in different countries, as well as factors that more directly affect the incentives and capacity for propoor change. 2. Part of the Team s work is to understand how other bilateral and multilateral donors have approached the understanding of change in their work, and what tools or frameworks they have developed to carry out political analysis. 3. The purpose of the Note is to provide DFID country and regional offices with information about this potential significant but relatively little-know analytical tool. The Note will review experience to date of World Bank in carrying out Institutional and Governance Reviews (IGRs), and compare this work to the emerging Drivers of Change approach in DFID. 4. A number of Drivers studies have been undertaken in DFID. A Review of this work, and a more detailed Approach Paper, are available from the Drivers of Change Team webpage on Insight. 1 Drivers of Change work has largely been motivated by CAP processes. Of particular note is the desire amongst country offices commissioning such studies to put political economy on the agenda. The work of Sue Unsworth and the original Bangladesh big picture study have been influential in shaping DFID s thinking on understanding Drivers of Change 2 The Drivers of Change approach has also emerged in the context of wider international thinking on aid effectiveness and performance-based aid allocations, and the trend toward moving governance issues toward the heart of the policy agenda. The World Bank WDR 2004, 1 Drivers of Change: A selected review of country experience, forthcoming. 2 In particular Better Government for Poverty Reduction: What More Could Donors Do? 1

2 and World Bank academic work on corruption and growth, have also been important. 5. Information on IGRs has been obtained through a simple review of existing literature from the World Bank s website. This is complemented with views and experience from DFID staff 3 in countries where IGRs have been undertaken. This Note is necessarily brief and lacks widespread discussion, particularly the views from the Bank itself. It is meant to provide a quick briefing on IGRs rather than to be a comprehensive review. Background to IGRs 6. IGRs were introduced as core economic and sector work (ESW) in the Bank in 1999 as an attempt to incorporate lessons from academic work that emphasised the importance of governance into country strategies. IGRs are seen as tools to inform the [country strategy] and operationalise priorities by identifying institutional weaknesses by helping to improve the design of projects and by providing a basis for rigorously prioritising reforms according to institutional or political feasibility. 4 The relevance of IGRs to DoC is emphasised by the explicit reference to political feasibility as indicated in the italicised quotation. 7. Although descriptions of IGRs do exist, detailed guidance on what to include in an IGR is yet to be made publicly available. Available material provides looks promising. For instance, IGRs are claimed to: accept the primacy of politics ; 5 and analyse the feasibility of reform recommendations by considering political realities and potential constraints ; 6. They aim to do this by: offering a cogent analysis of the political and institutional characteristics [and] developing informed approaches to policy and institutional reforms IGRs are also seen as helping to change the nature of donor-country relationships. The Bank believes that to make comparisons among institutional arrangements and to monitor officials behaviour are signs of increased openness and candour within the Bank and in an increasing number of client countries 8. Moreover, by presenting trade-offs and alternatives for discussion with stakeholders, IGRs can help the Bank deflect 3 Primarily economists and governance advisers. 4 Institutional Governance Reviews, Manning and Bures; italics added. 5 Institutional Governance Reviews, Manning and Bures 6 www1.worldbank.org/prem/premnotes/premnote75.pdf 7 IGR for Bolivia 8 2

3 accusations of always prescribing blueprint solutions to development challenges enforced with conditionalities. Outcome and Impact of IGRs 9. To what extent have IGRs really delivered a political analysis? The Bank claims that a major benefit of IGRs is their comparability across countries (and, presumably, over time). This is because IGRs: use surveys and quantitative measures, including an analysis of political economy issues; and encourage standardised tools. This is beneficial in that they encourage the development of a standardised toolkits and other modular approaches that help maintain quality at reasonable cost In practice, however, this has not been the case. Since their inception, 13 IGRs have been produced (see Box One). 10 Each IGR differs reflecting asymmetries in the environments in which they have been undertaken. Box Two summarises the range of applications. Box One: Countries with IGR Armenia Argentina Bangladesh Bolivia Burkina Faso Cameroon Eastern Caribbean Indonesia Morocco Nigeria Peru Southeast Europe 11. IGRs are seen as important pieces of analytical and advisory activities (AAA) alongside existing tools such as public expenditure reviews (PERs) and country financial accountability assessments (CFAAs). There is evidence that Box Two. Applications of IGRs Social sector IGRs have examined health and education provision (Armenia for health sector only; both in Argentina); in Burkina Faso an IGR highlighted the constraints on front-line service providers of over-restrictive central government controls; Sub-national IGR identified better performing states (Nigeria); Regional IGRs to look at scope for political and economic co-operation (Eastern Caribbean; South-East Europe); IGRs can input in HIPC programmes (Cameroon) More comprehensive IGRs are undertaken in countries with severe governance issues. For instance: in Bangladesh, surveys and sociological assessments show how bottomup accountability can support local government reform. In Bolivia, an IGR illustrated emphasised the need for a political consensus among political parties. Source: World Bank (2002a; 2002b; 2000c) IGRs are informing Bank analysis: it helps Bank staff ask why things are the way they are, rather than limiting analysis to a description of what is wrong. This should help address the failure identified in the Bangladesh IGR, that past institution building had failed because the motivations of key stakeholders had been ignored. 9 World Bank (2002) www1.worldbank.org/prem/premnotes/premnote75.pdf 10 As of November

4 12. Like DFID, the Bank is attaching increasing importance to understanding local political conditions within countries. There is clearly an internal management function for IGRs within the Bank s operations, and it is now mandatory for Country Assistance Strategies (CAS s) to address institutional weaknesses that result in poor governance. IGRs should be undertaken sufficiently in advance to provide background to CASs. 13. However, there is concern about the Bank is extending beyond its remit. The Bank itself recognises that IGRs risk going beyond the remit permitted by the Bank Articles of Agreement, and that in some instances political diagnostics may need to be done as informal inputs into [a CAS] with the principle goal of informing staff of key contextual constraints, rather than as self-standing products in their own right 11. It would seem from experience to date that Box Three: IGRs in Latin America I am a fan and think this is some of the best work done by the Bank, beginning to tackle the real issues [and] to get into the world of politics but from a practical angle. In both Bolivia and Peru, the reports have been lost/ ignored. Why? Combination of factors (1) Not very palatable (2) Often deal with longer term problems, governments mainly dealing with the short term (3) Bad timing (4) The Bank has never loved or pushed them: too difficult, bad for lending. Reports were motivated in Bolivia by a genuine Bank wish to understand why the Washington Consensus had not worked after 15 years, and in Peru by deep failings in local governance. Has the Bank Changed? Sad, but perhaps not that much. It is still a Bank, and need to lend against practical problems that governments are focused on. Source: personal. Communication. variable political sensitivities has led to a set of IGRs that vary considerably in the degree to which they are explicit in their political analysis. 14. Even where IGRs are done, there impact in the field remains limited. In a survey of DFID economists working in countries in which an IGR had been done, few had heard of them. A notable exception was the response from Latin American country office; see Box Three. 15. The Bank are already reviewing experience with IGRs and a number of early lessons on the applications of IGRs are emerging: 12 The need for depth not breadth by focusing on a narrow set of problems and tracing their political and institutional origins; Apply empirical approaches to quantitative performance measures; Adopt standard approaches through the application of modules drawing from existing analytical work; Provide a political analysis of the reasons for poor performance; and Provide details of practical trade-offs between alternatives rather than an individual prescribed solution

5 16. IGRs help progress beyond narrow technical analysis to a deeper understanding of constraints to development, by asking why things as they are. A presentation to PREM Week in June 2002 posed four questions regarding IGRs: 13 How does the Bank respond to growing demand for political analysis? Does the IGR fit the bill? Or does the instrument need reshaping? How will results of governance analysis inform Bank operations and is it sufficient by itself? It would seem that these remain, as yet, unanswered. Conclusions and Recommendations 17. The above review of the literature suggests a number of important conclusions: IGRs are yet to live up to the rhetoric. Substantive differences exist between the Bank s IGRs and the approach envisaged by the DoC work in DFID. Although the Bank s literature claims that IGRs will facilitate political discussion, experience to date suggests that in practice this is yet to materialise at least in public. The question remains whether we think the Bank should be encouraged to extend its work into political analysis. The draft Vision Paper on the international development architecture recommends The World Bank Group should limit its work on global public goods and should not increase its involvement in technical assistance or knowledge issues outside its direct competence. Should DFID corporately be pushing the Bank to do deeper political analysis? This will require efforts to enhance the legitimacy of IGRs. This would best be achieved by IGRs being presented as high-quality pieces of analysis de-linked from lending volumes. This is the status of PERs, and is the direction in which CFAAs are heading. Transparency in analysis and in disseminating the results would help. Moreover, initiating IGRs in response to a consensus among donors and Government would help broaden the support base and move away from a narrower Bank agenda. On the demand side, DFID s own country operations could enhance the value of IGRs. For instance DFID country offices could generate demand among a wider group of donors. DFID could also help to make IGRs more political by emphasising this 13 Presentation by Helen Sutch, PRMPS, to the IGR Roundtable, June 2002, available at www1.worldbank.org/publicsector/premweek/whyigrs.ppt 5

6 particular feature. At the Board, for instance, we might pay particular attention to the political analysis underpinning CASs. Significant scope for joint working exists. DFID is piloting joint CAS/CAP processes in some countries (i.e. Tanzania), although this is proving to be more chalklenging than originally expected.this provides an avenue to ensure comprehensive and politically astute IGRs are undertaken as background work. More generally, as part of the harmonisation agenda and the need to avoid creating overlapping conditionality frameworks, there is a strong argument for working together with the World Bank and other donors to explore whether the IGR can be an effective mechanism for developing a shared view of the most important institutional and governance constraints facing progress in implementation of national poverty reduction strategies. Take forward IGRs in the context of poor performance. The World Bank s task force on those countries facing particular development challenges (Low-Income Countries Under Stress LICUS) notes that IGRs are particularly useful diagnostic tools. DFID s work on Poverty Reduction in Difficult Environments (PRDE) could take this forward. Consider IGRs in relation to Regional Development Banks Acomplementary approach might be to encourage regional development banks (RDBs) to adopt IGR-type tools. The same Vision Paper notes: We do not advocate giving the RDBs political mandates but we do advocate building on the RDBs ownership structures to allow them a stronger role in tackling economic governance issues and in contributing to much deeper political analysis than IDA is willing to do or is capable of. Chris Jackson Economist Drivers of Change Team, Policy Division 6

7 References: 1. World Bank (2002a) Institutional and Governance Reviews An Evolving Type of Economic and Sector Work, note prepared for PREM Week, June 2002, available at 2. World Bank (2002b) PREM Note 75; November; available at 3. World Bank (2002b) PREM Note 76; December; available at 4. World Bank (2003a), Indicators by World bank Research Called Best Measure of Quality of Governance Worldwide ; Press Release 2004/12 7