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World Bank Results Initiative: The U.S. Should Support It – But with Independent Verification Please
November 1, 2011
For more than two years, the staff of the World Bank have been developing a new lending instrument that would link financing to measurable results within countries. If approved, it would be the third instrument at the World Bank; the two that exist now are “investment loans” under which inputs, not results, are financed; and policy based loans, under which policy changes are financed.
Lending for measured results (after the fact) would have huge benefits – as I with colleagues have pointed out in our proposal for Cash on Delivery Aid (COD Aid). Among those are “ownership” – that borrowing countries would have the responsibility and bear the risks of getting results; and support for better governance as governments would become accountable to their own citizens for results, instead of accountable to donors – mostly for reporting on how they spend donor money whether there are results or not.
The current proposal under consideration by the Board of the World Bank is not perfect. In this critique of an earlier draft of the proposed new instrument my colleagues Bill Savedoff and Alan Gelb explain why.
Still the proposal is a big step in the right direction. That’s why I am concerned that it appears the U.S. is the only board member so far withholding support for this initiative. At the U.S. Treasury (from which the U.S. Board member gets his cues) and in the Congress, there is concern fed by a small number of influential NGOs that World Bank staff would not need to be concerned with social and environmental safeguards when using this instrument. I disagree. As I point out in a recent letter to Senator Patrick Leahy safeguards receive heavy emphasis in the proposed guidelines. Individual loans will still need case by case approval, and can be suspended or cancelled in the event that there are serious violations of agreements. The approach can be seen as a tradeoff between enforcing specific safeguards on the funding provided by a donor and long-run development effectiveness including wider application of safeguards to an overall program. As with any new approach it will be essential to ensure open and timely data and transparent monitoring.
I also point to what is missing from the proposed guidelines: independent verification of the results – as in not by the World Bank and not by the country, but by a third party agreed by the lender and the borrower. Independent verification is a key feature of COD Aid – you can read all about why that matters in my book with Bill Savedoff.
Possibly Related Posts
- Program-for-Results: A New Direction for the World Bank?
- Can the World Bank Pay for Results or Will Critics Make It Impose Conditions?
- The World Bank as a Foundation? Why I’m Scratching My Head Over the World Bank’s New Vision
4 Responses to “World Bank Results Initiative: The U.S. Should Support It – But with Independent Verification Please”
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November 9th, 2011 at 1:33 am
Hi Nancy,
As an Indonesian, I can say that your statement shows that you are far from the realities about P4R and about countries targeted for the P4R.
The first page of the short (six-page) draft P4R Operational Policy 9.00 consists of a list of 25 existing Bank safeguards and policies which will not apply to any P4R activities. The Bank states that the vague language of their new draft six-page policy will replace the detailed language of twenty five entire policies, including those on supervision, appraisal, monitoring and evaluation, implementation completion reporting, financial intermediary lending and investment lending, among others. The safeguard policies which — according to the first page of the Bank’s draft P4R O.P. 9.00 — do not apply to P4R operations, include crucial policies designed to protect the environment and the welfare of Indigenous Peoples and poor and marginalized communities which will bear the brunt of forced resettlement and environmental destruction, such as existing Bank policies on environmental assessment, involuntary resettlement, Indigenous Peoples, forests, dam safety, physical cultural resources, natural habitats, pest management, etc.
In Indonesia, “country ownership” under the vague language and lack of oversight evident in the six-page draft O.P. 9.00, means more opportunities for corruption by government officials: they will think that the fund is, indeed, their own and will put it in their own pockets. In September, a highly-placed Indonesian sitting at the World Bank stated that “… that there is no development without corruption…”, so according to this person, corruption in Indonesia is a reality, cannot be avoided and is therefore accepted. P4R excludes the policies on supervision and reporting, and features excessively weak anti-corruption rules and hence has the significant potential to markedly increase corruption.
Moreover, in Indonesia, there is a lack of government’s accountability to its people. On the contrary, the country is governed by corrupt people and features a corrupt court system; there are military operations against people who defend their rights and lands. (Have you not read the news about increasing house demolitions, shootings and killings in Papua, Sumatra, and Sulawesi at least in the recent 3 months?). P4R will potentially strengthen oppressive governments with no accountability at all to their own people.
I don’t believe that you mean to support corruption and oppressive governments, though your statement supporting P4R gives that impression.
Titi Soentoro
November 10th, 2011 at 3:46 pm
Titi Soentoro: Thanks for your good comment. It is true that I spend too much time far from the realities in countries like Indonesia. I do try to keep in mind the frustration of citizens like yourself in developing countries who see outsiders with \easy money\ undermining instead of supporting their efforts to reduce corruption in their own governments.
But here is the problem. The WOrld Bank and other outside funders provide over $1 billion a year to Indonesia for development programs — but that is a drop in the bucket compared to what your own government spends itself — probably about $70 billion. Safeguards in World Bank-funded programs could be foolproof and make little difference now or in the long run to the prevalence and costs of corruption in Indonesia. The objective with the World Bank’s new instrument and other results-based aid programs like Cash on Delivery (on this website) is the size of any tradeoff between specific safeguards on a limited range of financing vs. wider agreements on safeguards across government programs. In the absence of strong evidence that the specific safeguards have made any dent in reducing corruption more generally, it seems to me worth trying the results approach. At the least it will provide citizens assurance that money will not be transferred if results don’t happen — including if results don’t happen because the money went into a pocket instead of a program. As my CGD colleague Alan Gelb put it:
\How this works out in practice only time will tell. It will be important to have . . . an open monitoring system to enable violations of agreements to be flagged, and to enforce remedies. . . .(I would say including the remedy of non-payment for a non-results). The NGO community should continue to play an important role in this area, but a different one than in the past.\
I hope if the WOrld Bank has a P4R program in Indonesia you and others will monitor it, insist on transparency, and lobby against Bank disbursements in the absence of measured and verified results.
November 17th, 2011 at 11:57 pm
Dear Nancy,
You have me completely hooked on Cash On Delivery Aid! I work for a USAID contractor, specifically in the management of USAID-funded project grants programs. One of the primary grant vehicles utilized by projects is the The Fixed Obligation Grant (FOG). Similar to the two World Bank loan instruments you discuss in the blog post, the FOG mechanism seems, at least to me, to be aligned with some of the broad elements of COD Aid.
Briefly, a FOG is a grant type in which a grantee is paid upon upon the completion of agreed-upon deliverables or milestones. FOGs are distinct from other grant and assistance types in that they are focused on outputs and results, do not require monitoring of actual costs incurred, carry limited risk for the both the donor and grantee, and do not require particularly sophisticated financial and management capacity on the part of the grantee. There are significant divergences between COD Aid and FOGs, but to me, the fact that FOGs are meant to foster ownership of inputs by the recipient and that they make payments contingent upon transparent and measureable results leaves them with at least something in common with COD Aid.
Do you think I’m completely off base in my understanding? I wanted to ask you if you thought that data on the efficacy and outcomes achieved through FOGs could be informative in the application of Cash On Delivery Aid approaches, and offer any lessons learned?
I really enjoy the word of the CGD, and I’m closely following the developments with COD Aid.
Cheers,
Ben
April 28th, 2012 at 4:58 am
Hi Nancy,
Im getting confused. What is the difference between Output-Based Aid, Cash on Delivery Aid and Programs for Results?
Are they different types of Result-Based Financing?
Please help
Joe