Photo: Wasted development aid in the DRC. (Julien Harnels CC BY-SA 2.0)
By Vince McElhinny, Senior Policy Advisor
The credibility of President Kim’s Corporate Strategy is clearly designed to restore the World Bank’s financial relevance, and reversing a downward trend in project quality is one strategy for achieving that goal. Currently, over one third of Bank approved projects are not delivering effective development outcomes – approaching the levels observed in the 1992 Wapenhans Report. Despite the time honored devotions to delivering the highest quality results, accountability for ensuring higher value for money has faltered.
President Kim’s reorganization of the World Bank, the eighth such reform in the Bank’s 70 year history, echoes common themes that allegedly distinguished previous efforts. The Corporate Strategy approved in October 2013 rededicates the Bank to eliminating poverty and promoting a more equal distribution of development benefits. Similarly, the new Bank Strategy recommits itself to more efficient operations, to reign in spiraling administrative costs, to increase responsiveness to client needs, to demonstrate leadership in delivery of high quality development solutions, and to hold itself more accountable to evidence-based results.
Sound familiar? In fact, a quick check can find similar commitments as rationales for any of the most recent World Bank reorganizations. The parallels to the past Bank reorganizations reforms are clear — sharpened development focus, boosting IBRD revenue, rebuilding knowledge transfer and upgrading and incentivizing enhanced institutional capacity.
One additional common feature has been that World Bank Management’s reluctance to tackle head on the structural impediments to declining project quality. For the current institutional shake-up, a major hurdle in the proposed reforms is that the independently assessed quality of World Bank project outcomes has been falling for nearly a decade. Bank Management has openly acknowledged the decline in project quality and has launched dozens of reforms in recent years to reverse this trend. Even a cursory review of available documentation about recent project performance and the aims of the current reorganization allows for informed scrutiny of the World Bank’s commitment to high quality, evidence-based results.
For the Bank’s critics, a constant pressure to lend even greater amounts has always been at the root of the high number of failed or flawed projects and the modus operandi of any internal reform. Annual lending amounts threaten to return to the pre-crisis levels that led to questions about the World Bank’s status as a leader in development finance, as well as the sustainability of its business model. The announced target of achieving $100 billion in additional lending over the coming years certainly adds fuel to this critique.
Within a maze of competing reform priorities, accountability for project quality is subordinated to a budget allocation process that has not historically rewarded such efforts. Moreover, these reforms seek to reverse years of accumulated risk adversity by uprooting the “paralysis through analysis” culture that is blamed for forcing the Bank out of many high risk sectors.
Based on recent Independent Evaluation Group (IEG) and Operations and Country Services (OPCS) assessments of World Bank organizational effectiveness, this update explores the status of operational quality and the options for reversing the decline. Although transparency at the World Bank is unparalleled compared to any other public development institution, which provides external stakeholders access to a great deal of information about every aspect of the Bank’s performance, this analysis is based on a number of undisclosed Bank documents, some drafts and others approved by Management, that chronicle the reorganization process.
A comparison of recommendations to strengthen World Bank quality assurance by IEG with the measures prioritized first in the OPCS Business Modernization strategy and then in the 2013 Corporate Strategy points to a common agenda for change, but underscores several important differences in the direction charted by IEG and Bank Management. Genuine commitment to balance lending quality with quantity will involve how the World Bank 1) ensures creation of the Global Practices will possess the decision making power to transform knowledge silos and exercise greater Bank accountability for quality; 2) how administrative budget is allocated to the Global Practices, 3) how staff incentives are revised and 4) how more independent quality assurance checks are restored.
Finally, the rush to radically simplify, streamline and in many ways – dilute World Bank operational policy for the three principal lending instruments could thwart any efforts to shore up project quality and exacerbate the risks associated with poorly monitored and inadequately mitigated project impacts. Despite the lofty rhetoric of the World Bank’s Corporate reorganization, the destination of this road much traveled by previous Bank reformers remains in doubt.
The update has four sections. First, I trace the origins of the current trend in declining project quality, mapping the parallels between past World Bank reorganizations and the current one. Second, I unpack the primary objectives of the 2013 Corporate Strategy and the reform initiatives in the ongoing reorganization. The third section assesses OPCS measures to address the decline in project portfolio quality. The final section draws the commonalities and differences between the recommendations of IEG and the actions taken by Management over recent years to address project quality.
Download the full update