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INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
INTERNATIONAL DEVELOPMENT ASSOCIATION
Thursday, September 9, 1999 Washington, D.C. The meeting of the Committee of the Whole was convened at 12:32 p.m., in the Board Room, 700 Eighteenth Street, N.W., Washington, D.C., Mr. Sven Sandstrom, presiding.
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C O N T E N T S
ITEM PAGE 1 Enhancing the Poverty Focus of the Bank's Work 3 A. Building Poverty Reduction Strategies in Developing Countries [SecM99-604] B. Heavily Indebted Poor Countries [HIPC] Initiative: Strengthening the Link Between Debt Relief and Poverty Reduction [IDA/SecM99-545] C. Social and Structural Reviews - Progress and Lessons [SecM99-556] Opening Remarks by Mr. Masood Ahmed 4 Opening Remarks by Mr. Michael Walton 6 Opening Remarks by Mr. Peter Fallon 12 Mr. Al-Saad 17 Mr. Bachmayer 21 Mr. Schaeffer 27 Mr. Ako-Adjei 35 Mr. Ghattas 39 Mr. Alvarez 43 Mr. Sinclair 49 Mr. Hyden 56 Mr. Pesme 61 Mr. Kamitomai 70 Ms. Cordeiro 74 Mr. Bogaard 84 Mr. Pandian 89 Mr. Binkert 94 Mr. Garcia 98 Ms. Zou 101 Ms. Piercy 106 Chairman's Summary 140
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P R O C E E D I N G S
MR. SANDSTROM: I think we should at least start
before we break for lunch so let's get moving. We, as Jim
said, we will be discussing three papers. First, Building
Poverty Reduction Strategies in Developing Countries;
secondly, the HIPC Initiative: Strengthening the Link
between Debt Relief and Poverty Reduction. That paper, as
you know, was prepared jointly by the IDA and Fund staff.
And thirdly, Social and Structural Reviews - Progress and
Lessons.
You've also received for information a parallel
IMF paper on the "Review of Social Issues and Policies in
IMF-Supported Programs," and this paper together with a
joint HIPC linked paper will be discussed by the Fund
board on September 13.
And I believe we have colleagues from the IMF
here, Russell Kincaid, David Andrews and Christian
Schiller. They are here. Great. Welcome. And we have a
number of statements from Anna Brandt, Godfrey Gaoseb,
Stephen Pickford, Mr. Toure and Mr. Wan Abdullah. And
Masood will give a brief introduction first providing the
connections between the three papers and then Mike Walton
will give the introduction on the poverty reduction
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strategy paper and then Peter Fallon on the HIPC link
paper. So Masood, please.
MR. AHMED: Thank you very much, Sven. Just
very briefly, to pick up on the point that we left off at
the end of July when we briefed you on the overall board
program leading up to the poverty action plan or the
different elements of it. You'll recall that we had
talked about one set of papers that we would be working on
which would be trying to strengthen the link between the
poverty focus of country specific work, and that's where
we were going to talk about the work that we were going to
do to build greater links between our own country programs
and country strategies and their impact on poverty, and
how we wanted to ensure that the same approach was also
consistent with what was being done in the HIPC
enhancements. And that's why those two papers in some
sense are very much dovetailed because the underlying
approach that we want to apply in the HIPC cases is really
a way of moving forward rapidly with the same approach
that we want to generalize and apply more broadly to all
of our country assistance strategies.
The Social and Structural Reviews came up at
that time and we mentioned that we saw these as a key
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building block in terms of identifying the main obstacles
that impeded the poverty reduction and development
objectives in each country and so we wanted to circulate
that status report on the early social and structural
reviews as background for today's discussion because again
that's one of the building blocks that leads into it.
I just want to say one more word that in
addition to the paper that Sven referred to that is the,
if you like, the corollary paper in the Fund in some ways
that's being done on social aspects of the Fund's
programs, which we circulated to you for background
information, our paper on building poverty reduction
strategies at the country level is also being circulated
for background to the Fund board's discussion because
again we do see all of these three pieces as being very
much an integrated and joined up approach to moving
forward on making poverty more central to our collective
efforts.
And a final point I want to make is that on
Tuesday, we talked about the social aspects of crisis,
financial crisis, and a number of executive directors
raised the question of how that particular effort fitted
into this overall framework for enhancing the poverty
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focus of our work, and when Mike talks about the approach
here, we will try and pick up on making that connection
clearer because we see that as being again one of the how-
to efforts dealing with one specific source of
vulnerability that affects poverty outcomes in certain set
of countries. So again the connection there is one that
we would like to make explicitly. So that's just to try
and put it in terms of context, but the next thing would
be to get more introduction on the specific papers
themselves.
MR. SANDSTROM: Thanks, Masood. Mike, please.
MR. WALTON: Thank you very much. The proposed
approach to incorporating poverty into country strategies
is very much a follow-up to a number of discussions that
we've had with the board in the past. It is a central
element of our corporate strategy to develop practical
actions to systematically link all of our work to poverty
and it is, of course, a key aspect of the
operationalization of the Comprehensive Development
Framework. Our interactions with executive directors have
been most useful to this process and we specifically
appreciate the comments we have received on these papers.
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The approach laid out in these papers is
fundamentally about how we integrate poverty into country
strategy. This is based, of course, on a body of
substantive work on the determinants of poverty reduction
and, as Masood noted, it is complementary to the work on
good practices in managing social dimensions of crises.
That work that we reported on the progress on Tuesday, we
see as the material on good practice for advising on one
important aspect of the relationship between country
strategy and poverty which would constitute the
ingredients to be incorporated into the framework laid out
here.
I'd also emphasize that in terms of substance,
the framework draws on the initial thinking in the World
Development Report for the coming year. In particular, it
emphasizes the importance of security and of empowerment
within any country based poverty reduction strategy. We
see action in these two areas as necessary complements to
measures that enhance the material opportunities of the
poor, and this is something that needs to be made
explicit.
The board will be having an opportunity for
further discussion of these, the substantive thinking for
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the WDR, in the discussion of the WDR outline on the 17th
of September.
And in this introduction, I would just like to
emphasize four points, largely in response to some of the
comments received. First point is that participatory
processes and country ownerships are central features of
the process, as has been emphasized in the comments by Ms.
Brandt, Mr. Gaoseb and Mr. Pickford. This applies at the
level of the definition of country goals, to the
monitoring of delivery of services, and also to the
analysis of an interpretation of progress. And we see
this very much again as an application of the principles
that underpin the Comprehensive Development Framework.
I'd just like to take note of one issue, an
issue raised by Mr. Wan Abdul Aziz, and this is that the
structure of civil society engagement has to be worked out
at a country level and it is in particular important in
designing this that we work out mechanisms or the country
works out mechanisms that assure the involvement of civil
society institutions that genuinely represent the poor and
indeed work out mechanisms for strengthening and involving
organizations of the poor themselves. This we see as one
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important element of the emerging WDR strategy that we'll
be discussing in the future.
Second, the approach has important implications
for the diagnostic and information basis for country
strategy formulation and implementation. As the progress
report on social and structural reviews lays out, we are
moving towards a more systematic approach to linking the
macroeconomic social and structural agenda to poverty
outcomes.
A couple of issues I'd like to respond to that
were raised in comments. First is that the diagnostic
work has to be within a comprehensive frame. This doesn't
mean diluting sectoral analysis, as a point made by Mr.
Wan Abdul Aziz, but it does mean systematically linking
sectoral work to poverty outcomes and recognizing the
intersectoral linkages that are both often powerful and
have largely or significantly been neglected in both our
work and those of other institutions.
In this context, we would very much agree with a
point made by Mr. Pickford that this should include
explicit assessment of the distributional consequences of
macroeconomic choices, and not just an analysis of the
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effects of what have been traditionally labeled as social
policies.
We'd also take note of Ms. Brandt's point that
if we go ahead and introduce poverty notes, that we must
ensure that these strengthen and not weaken what is the
central endeavor, and that is to put poverty at the center
of country strategies. We've not reached closure on this.
We are actually now working through how best to reshape
our poverty assessment process in a fashion that will
underpin the enhanced poverty focus and we'll be coming
back to you on that with specific recommendations for
discussion in the context of the poverty progress report
in the next couple of months.
Second general point is undertaking this
diagnosis and shifting to a genuinely outcome-based
process of monitoring and implementation has significant
implications for the production and availability of
information. Many countries will not initially have an
optimal information base. We don't think that this means
you have to delay moving towards an outcome-oriented
approach. We don't need to a have perfection in order to
start on this process, but it does mean in these cases
that it will be important to have a clear approach to
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developing the information system as an integral component
of a country strategy.
This leads to our third point, that in many
countries moving in the direction advocated will need to
be complemented by quite major efforts in capacity
building, a point noted by both Mr. Gaoseb and Mr.
Pickford. This will certainly apply to statistical
systems, but is also very much broader. It implies
developing the capacity in governments, in think tanks,
and in civil society to analyze and interpret progress and
participate in informed country level dialogue. This
will, of course, often require support from the
international donor community.
Fourth, and perhaps most important, that while
the approach very much builds on ongoing country
experiences, it will involve over time a really quite
substantial shift in the way in which we work. And this
does imply quite a major challenge in implementation, both
for the country teams that will be supporting countries
and framing outcome oriented programs and for the networks
in providing the technical support and the international
experience on the links between public action and
outcomes. We see this as an effort that will need to be
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phased over time, as emphasized by Mr. Gaoseb, with a very
important role for systematically sharing experience as we
go along. So we look forward to reactions to the proposed
approaches. Thank you.
MR. SANDSTROM: Thank you very much, Mike.
Peter.
MR. FALLON: Thank you very much. The paper I'm
discussing looks at some of the implications of applying
the poverty reduction strategy framework laid out in the
paper discussed by Michael to the HIPC Initiative
countries. We believe that the conclusions apply to a
rather wider set of countries than the HIPCs and have
similar implications for other IDA countries and even
perhaps for IBRD countries. The paper as noted is jointly
written by Bank and IMF staff. It's worth pointing out it
draws on extensive consultation with civil society
undertaken as part of Phase II of the review of the HIPC
Initiative. A compendium of views received under this
consultation has been circulated to the executive
directors.
In applying the framework to the HIPC
Initiative, the paper suggests I think two main
principles. First, as a poverty reduction strategy is a
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long-term effort spanning say 15 years or more, HIPC
programs should be seen as applying only to the first few
years of this long effort.
Second, the best way of ensuring a strong link
between debt relief and poverty reduction is to deploy all
resources including domestic revenue and debt relief
towards the goal of poverty reduction. HIPC decisions
would then be integrated into a comprehensive effort to
reduce poverty. Debt relief would be seen as only one
element in the financing of the long-term poverty
reduction strategy.
The need for closer cooperation between the
coauthors, that's the Bank and the Fund, will be
accentuated under the new framework. The main elements of
the strategy it's proposed would be published in a
tripartite document, which we're calling for now "The
Poverty Reduction Strategy Paper," or PRSP, for short.
This would be endorsed by the government, the Bank and the
Fund. It would show how Bank and Fund lending supports
the strategy and it would require approval by the boards
of both institutions.
The IMF paper that Sven referred to on the
"Review of Social Issues and Policies in IMF-Supported
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Programs" clearly sees the PRSP as a stimulus to improved
collaboration by, for example, better integrating
macroeconomic and social objectives, policy measures and
related work agendas. The Bank CAS would fully reflect
the strategy and use performance under this framework as
the basis for setting the various lending envelopes.
As Ms. Brandt noted very aptly in her statement,
overall consistency of IDA and ESAF-supported programs is
a key to successful strengthening of the poverty focus in
all work and specifically in the enhanced HIPC.
For the Fund, the ESAF would continue to play
its present role but would now be seen as supporting the
poverty reduction strategy as a whole and not just the
macroeconomic and structural components. This may affect
IMF time-tabling as processes of developing strategies are
likely to be lengthy and it's likely that achieving
overall consistency will require some iteration between
the macroeconomic targets and other components of this
strategy.
For the Bank, I won't say much. My colleague
went into this. This means deepening and extending work
using outcome-based criteria and participatory processes.
This is a major task that will take time. Nevertheless,
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we propose as a first step establishing poverty reduction
strategies along the lines suggested.
We are very grateful for responses received thus
far from the executive directors and we're encouraged by
the rather strong sense of support that their comments
convey. Let me expand briefly on some of the points.
We share the concerns raised by Ms. Brandt and
by Messrs. Pickford and Kelmanson that there should be no
undue delay in the provision of additional debt relief in
countries already having a well-defined poverty strategy.
The suggestion in the paper is that while it is desirable
that an appropriate poverty reduction strategy be in place
at the decision point, it has to be recognized that this
will not always be possible as building a strategy takes
time. For retroactive countries, the paper suggest that
each country be treated on a case-by-case basis.
We agree fully with Mr. Toure's comment that we
should be careful not to believe that investing in the
social sectors is the only key that warrants the success
of poverty alleviation strategies. A related concern was
expressed by Mr. Gaoseb. The need for sound macroeconomic
policies, better governance and better structural policies
is as great as ever. Without these, growth will falter
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and strategies will fail. It also may sometimes by the
case that social sector investment is not actually the top
priority for poverty alleviation. As one example, better
access to safe drinking water is likely to be a priority
in many countries. Achieving this actually requires in
general better infrastructure.
We note the concerns expressed by Mr. Gaoseb and
Mr. Wan Abdul Aziz regarding the proposed PRSP. Our view
is that the PRSP would be a stronger document than the
existing PFP as it would tighten the focus on poverty
alleviation by laying out the strategy and the targets in
detail. Our view is that retaining both is likely to
result in needless duplication, however. The CAS would
remain the Bank's business document as at present, but
would draw on the government's strategy as laid out in the
PRSP.
Finally, we note Mr. Toure's point that there is
now a lot of experience on how to improve development
effectiveness and we take his point that we are saying
nothing really very new in the paper. We do hope,
however, that by moving further along the lines suggested
in the paper will make a contribution to worldwide poverty
alleviation. Thank you.
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MR. SANDSTROM: Thank you very much, Peter.
Later on in the afternoon, we may want to ask Fund staff
also to come in and comment on this from their side, but I
would first like to hear from some of you. I have seven
names on my list so far. It's almost one o'clock. Should
we at least get started? And Mr. Al-Saad will have the
honor, please.
MR. AL-SAAD: Thank you. It's always good to
start before lunch. Well, I will restrict my remarks to
the first paper and I see this paper as a first step in a
process of taking a hard look at the Bank's poverty
reduction strategy. The record in the past decade has
been disappointing, to say the least, with poverty
increasing by a lot instead of decreasing. In looking at
the proposed enhanced framework, I wish we had had enough
time to look at it carefully. I didn't even have enough
time to digest the outline of the new poverty WDR which I
received yesterday, though I noted it's a new and
interesting vision based on empowerment, security and
opportunity.
I understand, however, the urgent need to
consider the new framework in the view of its relevance to
the HIPC discussion and since it seems to have
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incorporated the main thrust of the forthcoming WDR.
Basically I am in broad agreement with the framework focus
on poverty outcome and the link between policy and
outcomes. The three elements of the enhanced framework
seem fairly logical starting with understanding of poverty
and its determinants, choosing the policy actions that
have the highest poverty impact, then monitoring outcome
on the basis of indicators widely endorsed. My concern is
that actual implementation of such enhanced framework will
burden the capacity of many poor developing countries,
especially the HIPC countries who are expected to be the
first target of the new approach.
On this, I wish to hear more from my colleagues.
I welcome the framework commitment to work for the
achievement of the international development goals of
cutting poverty in half by the year 2015 and other
targets. I wonder, however, if this is still realistic
given the setbacks in the past two years. I certainly
hope it still is. One aspect that I wish the document
brought to light is how much the poverty policy in the
bulk of the countries was donor driven, whether by
international and regional institutions or bilaterals?
This clearly means that all major participants, not only
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the Bank and the Fund, should be adequately committed to
the new concept and its operational requirements.
Coming to the question addressed to us on the
operational implication, I can only give my preliminary
reaction. On the first question, I do agree that outcome
based approach would provide a good basis for further
improvement of CASs. Support for countries, however,
should not be mechanically based on achievement of these
outcomes. As paragraph 35 points out, this might depend
on factors beyond the control of the country.
On the second question, I have no problem
working with governments to promote transparency and broad
participation of civil society in this selection and
monitoring of outcomes. This should improve realism and
relevance of outcomes targeted and enhance ownership.
On the third question, I think there should
still be a balance between program-based lending and the
project lending. Some countries may already have very
large program lending and others much less. Outcome-based
strategies should not mean across the board increase in
the share of program lending.
Finally, on the last question, I am not sure it
is appropriate to apply the new framework when there is
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inadequate knowledge about the link between determinants
of poverty and policy action.
MR. SANDSTROM: Thank you very much. With that,
I suggest we break for lunch and I have not six more names
on my list, I have 12 more names now. And we'll start at
2:30 with Ruth and then Helmut and we'll take it from
there. Thank you.
[Whereupon, at 1:00 p.m., the board recessed to
reconvene at 2:30 p.m., this same day.]
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AFTERNOON SESSION
[2:34 p.m.]
MR. SANDSTROM: All right. Welcome back. I
think we have to start if we are going to finish. So,
let's get going again.
Ruth, please. It is your turn.
MS. BACHMAYER: Thank you.
I want, first of all, to commend management and
staff for the excellent documents which reflect the Bank's
long and rich theoretical and practical experience in
struggling to reduce poverty. The building of poverty
reduction strategies paper provides a very comprehensive
and at the same time concise strategic framework for the
operational work, and the two other documents complement
it by perhaps the most important links to the operational
work done by the Bank.
The papers implicitly make clear how
underestimated and inadequately developed is the area of
diagnostics and monitoring of social developments compared
to purely economic development, including, in particular,
the financial sector. Any social targeting has for this
reason been somewhat blind-shooting with the high risk
outcomes in terms of efficiency.
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For this reason, we much welcome the progress
that has been made in the attempts to root social and
social policies in a more solid and well-defined round.
We believe that the ultimate goal of the
policies is the effect in preventing or reducing poverty,
not the speed of action alone. I particularly welcome the
outcome-based approach and I support the suggestion that
the poverty reduction framework should provide an umbrella
for the Bank's work in developing and it should also, of
course, be the basis for CASs.
In this respect, I welcome the social and
structural reviews as a systematic and structured way to
approach the CAS process. We were very satisfied with the
report on the progress in and lessons from the SSRs and
consider them as an excellent diagnostic and efficient
tool.
Nevertheless, even the excellent documents
cannot hide the fact that some challenges and difficult
questions remain ahead of us. I see, in particular, three
issues.
First, we would appreciate to learn more about
the management's views on the concept of the client in the
driver's seat in the context of the SSRs. The SSRs will
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provide a single perspective or a single scenario, which
may not necessarily be the only one, or even not the most
relevant one. There is nothing like a single set of
generally-accepted paradigms in the area of social and
structural policies.
We hope that management prepares a framework
which is really conducive for substantive inputs and
feedbacks from the governments and from civil society and,
of course, also for public discussion of the SSRs. It
would be very disappointing if the implementation of the
desired social and structural policies took a form or were
felt as imposing ultimate prescriptions and give the
feeling of too much power by international institutions or
the donor community.
Second, we consider it important to keep enough
realism in the strategy and in the intentions. The
requirements that the social and structural strategy for
many countries would impose may be far too ambitious given
their capacity. I will come back to this observation in
the context of the HIPC paper.
We should not forget that building of the
proposed institutional arrangements, for instance,
information systems, has been a major challenge for
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development economies too and it took us tens of years to
come to the point where we are now, we as industrial
countries.
The third point related to the relationship with
the IMF. The Bank's cooperation with the IMF in the area
of social and structural policies remains an important
open issue. The Bank has done most of its work in this
area, and has core competence and a competitive advantage
in it. But parts of the Article IV consultations by the
Fund deal with social and structural issues at least with
their fiscal aspects.
For this reason, the areas of overlap seem to be
a natural field for shared responsibilities between the
two institutions. We would welcome management's thoughts
on the future cooperation and sharing responsibility with
the Fund on the very operational level, in particular with
respect to the SSRs, with the structural part of the SSRs,
in particular.
I commend management for the inspiring thoughts
that were put to the operationalizing of the poverty
reduction programs on each stage of the Bank's work. Many
elements of the proposed approach have not yet been
tested, and we know little on how they would work. It
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refers to all stages of the operational work from the
better coordination and communication between the regions
and sectors within the Bank to the use of different
instruments.
I have to say also as a footnote, I find it a
bit premature to include budget support lending in the set
of instruments. It may have a big rationale in the
context of poverty-focused work of the Bank, but I think
it is really premature to include it in a proposal right
now. We have not finished our discussion. We have not
come to a conclusion on this proposal.
Before turning to the implications for HIPC, I
would like to conclude my remarks on the poverty reduction
strategy by saying that I believe that the next logical
step is to pilot the approach and carefully review the
experiences.
We also support that it would be appropriate for
the Board to return to the review of experience from the
implementation of the poverty reduction strategy and the
outcome-based approach in more than a year from now.
Turning now to "Strengthening the Link Between
Debt Relief and Poverty Reduction" in the context of an
enhanced HIPC framework, it is indeed desirable that
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resources freed up by debt relief should lead to an
increase in social investment. But it could be
counterproductive if a mechanistic linkage between both
were to be established.
Debt relief is not the only source of external
finance in support of poverty reduction efforts, as you
said and as we all know.
While it is important for HIPC countries to have
a viable and comprehensive poverty reduction strategy in
place as soon as possible, preferably before the decision
point, speed should not be the over-arching objective but
rather sufficient attention should be given that the
strategy is well-balanced, that it takes into account the
country-specific resources and implementation constraints,
and that it is fully shared by all relevant stakeholders.
I see some merit in tying the relevant length of
the second stage of HIPC to progress achieved in the areas
of structural and social reform and poverty reduction,
provided the actions to be undertaken by the country can
be monitored and not formulated in such a way that it
would over-burden the reform agenda.
This could result in a delay instead of faster
delivery of debt relief. Given the fact that many HIPCs
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are highly vulnerable to external shocks, which might lead
to setbacks in that implementation of the reform agenda, I
believe that some form of judgment should be retained as
to whether a critical mass of reforms and improvements in
the delivery of social services to the poor had been met.
Thank you, Mr. Chairman.
MR. SANDSTROM: Thank you very much, Ruth.
Helmut Schaffer, please.
MR. SCHAFFER: Thank you, Sven.
In my view, these papers are milestones in the
poverty orientation of the Bank, and in the realization of
the Bank's own mission. Especially the joint Bank-Fund
paper is a big step in the right direction and a success
for the enhanced debt relief initiative per se.
This paper also is very close to the thinking
expressed at the Utstein [phonetic] declaration of the
four Development Ministers of Great Britain, the
Netherlands, Norway and Germany from August this year.
Consequently, I would like to express my sincere
thanks to the management of both institutions for this
tremendous job to give a new spirit of the poverty focus
of the World Bank's work.
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Let me make some comments and start with the
first paper, "Building Poverty Reduction Strategies in
Developing Countries", as it has been a key input to the
second paper on the HIPC Initiative.
This is a good and very useful paper and I agree
with all its key issues and recommendations. It is
absolutely correct that the paper's underlying assumption
is based on a multi-dimensional definition of poverty and
its causes, paragraph 7. Hence, as poverty is not only
seen in its economic context, the paper proposes a multi-
sectoral approach and comes to a varied set of strategies.
I also fully agree with paragraph 20 that it is
significant to analyze the multiplicity of causal factors
of poverty. The paper does not explicitly mention the
vast differences in power and interest which lead to
poverty or conserve it and the consequence of strong
political will is a significant precondition to alleviate
poverty.
Paragraph 16 strengthens the importance of a
detailed analysis of poverty. I quote, "Policy
formulation should start from a disaggregated
understanding of who the poor are, where they live and
their source of livelihood". I want to add that this
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analysis should be also carried out with a specific gender
focus.
Coming to a more strategic consideration, I
support the idea that poverty alleviation has to be based
on the specific situation of each country. We could even
go further and speak of an area-specific approach, as, for
example, homogeneous-looking countries, like my own
Germany, can actually be quite diverse in nature. There
is no blueprint for poverty alleviation. I really
appreciate that the World Bank integrates this aspect into
its new focus on poverty.
It also makes sense to focus on the question of
distribution, participation and empowerment of the poor,
as stated in paragraphs 11 and 26, but we should not
forget that any empowerment of one group leads
simultaneously to diminishing the power of others and said
power structures might change to the now powerful, a
typical scenario of conflict. The paper does not reflect
whether the World Bank should play a role in this
empowerment process for the poor.
I was also delighted to notice that the World
Bank is now more careful about the role of economic
growth. Economic growth is still necessary, but it is not
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seen as a guarantee for poverty alleviation anymore. Past
experiences have shown that the trickle-down effect did
not work out the way it was expected.
Paragraph 23 mentions ways to go about poverty
alleviation, even in times of less economic growth, but
obviously do not exist in addition to economic growth, as
stated in the paper. Each way has its value in itself.
In paragraph 11, the paper raises the important
topic of broadly-based growth, which is directly linked to
the equality of income distribution, as the paper later on
rightly points out by stating poverty payoff to growth
will be high but only if the distribution of income and
the quality of governance are improved. This has my full
sympathy and the facts that this aspect will even form
part of the forthcoming WDR shows the great importance it
also has for the World Bank.
Only one question remains: How can the World
Bank support these activities, for example, the
distribution of land, as mentioned in paragraph 23?
The role of indicators is another important
subject the paper deals with. How difficult it is to find
right or useful indicators shows, as the example given in
paragraph 32, where the rising rate of primary enrollment
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does not necessarily say something about a better quality
of learning. In addition, it would also be important to
look at the rate of dropouts after several months or even
years. Otherwise, the wrong evaluation about the success
of the undertaken measures would be made.
Table 1 gives a good starting point for the
development of adequate indicators but again, as pointed
out earlier already, the design of indicators and their
quantification has to be country-specific.
To conclude my remarks on this paper, I would
like to give some brief answers to the issues for
discussion outlined in paragraph 73 at the end of the
paper.
The first point, I agree that outcome-based
approaches would provide a good basis for further
improvements in the CAS selectivity and the articulation
of more comprehensive and robust links between poverty
outcomes and Bank activities. Developing countries should
design their own national plans and strategies for poverty
alleviation and to develop an appropriate indicator system
for monitoring and evaluation of the different proposed
measures.
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Secondly, I also support the second aspect to
promote transparency and broad participation of civil
society. Let me just give one suggestion. The close
relationship of poverty and gender aspects should be
worked out in more detail. In the Committee of the Whole
paper on Tuesday we discussed the same problem for the
social policy already.
The third point concerning the third question,
lending support type, lending instruments appear as a
logical consequence of better national policies and
strategies for poverty alleviation, but an uncertainty
remains how the majority of bilateral and multilateral
donors are ready for it.
In regard to the fourth question, a gradual and
slow process on a case-by-case basis seems to be adequate.
The immediate start for a widespread introduction of the
PRSPs is not realistic.
Let me now come to the second paper,
"Strengthening the Link Between Debt Relief and Poverty
Reduction". The paper is a clear statement by the World
Bank and the IMF that the debt relief initiative should
form a part of a comprehensive poverty alleviation
strategy. Consequently, all available resources and not
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only those from the HIPC Initiative should be used for
this purpose.
Both organizations underline the necessity to
integrate sector and macroeconomic policies and, in doing
so, good governance becomes significant and important to
this broad-based concept.
I fully agree that poverty alleviation should be
seen as a long-term and multi-sectoral approach, as, for
example, pointed out in Box 7 on page 24. But the paper
gives so far no answer to relevance and priority of the
various parameters for each individual country.
Furthermore, there is an inherent danger once we
try to include all the different parameters of poverty and
its alleviation in a cross-sectoral manner that the design
of strategies becomes too complex and, accordingly, rather
difficult for the country to efficiently implement them.
On the other hand, ownership and the inclusion
of the HIPC funds into the country's general policies for
poverty alleviation remains crucial. Consequently, with
respect to HIPC, the outlined strategy might be somehow
too ambitious and on a case-by-case basis a more pragmatic
approach should be also taken into consideration.
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The role of ownership and poverty reduction
strategy papers are also interlinked. As pointed out in
the papers, these PRSPs are agreed upon jointly by the
three players -- the partner countries, the World Bank and
the IMF. Hence, a lack of ownership is a prevalent danger
to this concept in a similar way as to the former
structural adjustment programs.
The paper further stresses on poverty funds as
an important instrument, as positive examples of the
Poverty Action Fund of Uganda is mentioned; also on a more
rather general basis, positive criteria for the
establishment for these kind of funds are transparency in
the allocation of resources, their fast disbursement and
their immediate disposal.
But the paper also rightly points out a
significant danger in relation to the experiences with
social funds. These funds can become separated from the
general national policy and the national budget which
could be very detrimental to an overall approach to
poverty reduction.
Therefore, more information and detailed
analysis of their usefulness are needed. But let me
conclude by stating that in my view this paper is a very
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good basis for further discussions of a very complicated
but very important matter, but, of course, much remains to
be clarified and much remains to be reflection upon.
Thank you.
MR. SANDSTROM: Thank you very much.
Mr. Ako-Adjei, please.
MR. AKO-ADJEI: Thank you, Mr. Chairman.
First of all, I would like to take the three
papers together. I will begin by saying I endorse the
outline and the policies set out in the papers, and others
have devoted some time to that. So, I am not going to
devote any more time to that. I would want to take what
Ms. Bachmayer has called challenges that are ahead of us.
And the first challenge I see is the
relationship with the Fund, because this new arrangement
is going to raise the level of our relationship and our
cooperation with the Fund to another level. I would want
to sincerely request that the burden relationship that is
being built up here at headquarters should be extended to
the field, where in most of our countries the two
institutions are seen to be working at cross purposes most
of the time.
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If this attitude continues or this perception
continues, it would completely derail the very good
intentions that we plan to put in place here.
The second point is the role of the government
itself. I see more of a role at the regional and the
district levels where a lot of the studies are going to be
done, where a lot of implementation is going to be done,
where a lot of the operationalization of the whole poverty
program is going to be done. But this is where the
difficulties are.
The central governments are weak; the districts
are weaker. And I would prefer that we strengthen
capacity at the regions and at the districts before we
start throwing in money at these programs, because
otherwise we would end up throwing a lot of money at these
programs, but without institutional setup to create
accountability, to create transparency, to create the
mobilization, you need a mobilization not only of
resources but you need a mobilization of the people
involved, the poor themselves to really get into the whole
program. And I think the success depends upon that
mobilization and what the papers call the empowerment and
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participation. So, I urge that we pay special attention
to that.
Then, the next challenge I see really is the
issue of the poor themselves. We need to build a whole
program around the poor themselves, around their own
responses, around their own interests. We need to make
sure that the key resources of the poor, which is their
labor, is going to be utilized. We need to create equal
opportunities and avenues for the poor to participate and
have access to all the institutional prerogatives that the
state creates.
We need to be able to create access to the
resources that have been channeled. We need to create
access for them to generate their own incomes, to be able
to grow out of poverty. I think they have to grow out of
poverty; we don't have to get them out of poverty. But if
we provide the opportunities, the access and the
resources, they themselves could take the opportunities
and create and participate seriously for the success of
the program. That is the way I see it.
Then the next challenge I see is with the NGOs.
And this is also where you are going to have to play a lot
at the level of the regional and the districts. And let's
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accept it; I think the NGOs are better situated than both
the Bank and the Fund in most of the developing countries.
And I don't think we are going to be able to duplicate or
excel in a lot of areas to what the NGOs are doing.
So, I would urge that wherever possible, we get
them involved to the utmost and to the maximum. There are
some of that we can work with. There are some of them
that we can all work with. Those we can all work with, we
leave them aside. Those we can work with, we go along
with them and use the expertise.
Finally, taking a look at donors, the role of
donors, that is also going to be crucial. But the need
also for donors is also to strengthen coordination both at
the regional level, the district and at the center in our
countries. And this is going to involve a bit of a spread
in the countries. And if donors are going to pick and
choose their own pet projects and so on and there is not
going to be any coordination from the center, we are going
to have a lot of a mess.
And I would urge that the Bank plays a key role
in coordination and the donors would also see themselves
as an integral part of the whole program and coordinate
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both with the Bank and the Fund and the other donors to
make sure that we succeed.
This is a worthwhile effort, and I am sure that
if can galvanize the people, we can galvanize the
institutions, the government, the donors and the NGOs, the
poor themselves will grow out of poverty.
Thank you, Mr. Chairman.
MR. SANDSTROM: Thank you very much.
Mr. Ghattas, please.
MR. GHATTAS: Thank you, Mr. Chairman.
Before we convened, Mr. Page asked me to be
briefed. As one of my former bosses, I better listen to
him.
I will, therefore, discuss the two papers,
"Building Poverty Reduction Strategies in Developing
Countries" and "Social and Structural Reviews", focusing
mainly on the former. But I will refer to the IMF paper
as well.
We have had a very useful and informative
bilateral discussion with staff. I can, therefore, be
selective in my comments.
We can support the comprehensive framework for
reducing poverty as underpinned by the three elements -- a
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thorough understanding of poverty and its determinants;
choosing public actions that have the highest poverty
impact; and participatory setting of targets and
monitoring outcome indicators.
This framework seems to build on the experience
with the approach outlined in the 1993 Poverty Reduction
Handbook by utilizing new knowledge and lending
instruments. The international development goals for 2015
that the proposed framework is designed to achieve are
very ambitious. The Bank, as well as other donors, needs
to be modest and realistic in applying the framework.
Nonetheless, it is perhaps better to sets one
sight in fighting poverty too high than too low. The
framework needs to be applied flexibly and be tailored to
the country circumstances. How we proceed in an
individual country will depend on the initial conditions.
Where we want to end by 2015 will also depend on
government ownership, resource availability and
institutional capacities.
In this regard, the paper broadly states that
there is a potential tradeoff between external assistance
to expedite the process and ultimate ownership. This
seems to be a fact that is often ignored when we announced
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that the government should always be in the driver's seat.
This tradeoff or tension could slow down progress towards
achieving the international development goals.
Implementation of the proposed framework puts
pressure on the Bank to deliver. It also has operational
and perhaps organizational implications to the Bank that
the paper does not adequately discuss. I can think of two
aspects related to this.
First, the challenge of making units and staff
move from sectoral-based analysis and interventions to an
overall framework centered on poverty outcomes. Staff may
want to explain how we can make this change across the
Bank.
The second is Bank collaboration with the IMF.
The proposed poverty strategy paper that could replace the
PFP will put additional pressure on the Bank to deliver.
The IMF paper states in a number of places that the Bank
is sometimes unable to provide social policy analysis on a
timely basis because of either staff resource constraints
or mismatched Bank-Fund work cycles. The paper goes on to
pose the question to the IMF Directors whether they think
that the IMF should increase staff resources and hire new
specialized staff to meet the needs. In fact, some units
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may have already started hiring specialized staff. Of
course, poverty reduction, if it is not already, should be
the bread and butter of the bank. Inability to deliver
should be a major concern for management.
I have two more technical points on the poverty
reduction paper. First, the paper seems to put too much
emphasis on slow growth as a major cause of poverty. My
understanding is that growth policies are very effective
when the income distribution is fairly egalitarian. But
when the income distribution is highly skewed,
redistribution policies are more effective. This
highlights the importance of understanding and starting
with the initial conditions in the country.
My second technical point concerns the use of
poverty lines. It is always preferable to use a range of
poverty lines and measures that capture the depth and
severity of poverty as opposed to using a single poverty
line. These will indicate how many households or
individuals hover around the poverty line and whether the
profile of poverty changes with different lines. This is
extremely important for policy and for the design of
projects.
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It is possible that with this kind of approach,
we would not have been, quote, "unprepared for the
dimensions of the social crisis in Asia".
Mr. Chairman, I have the following final comment
on the social and structural reviews. If delivered, as
indicated in Annex Table 1, we would have made good
progress on completing these papers for the pilot
countries. By then, we would have acquired sufficient
experience to evaluate whether we should move forward from
the pilot phase to broader implementation.
This is not specifically discussed in the paper,
and we should return to the subject at an opportune time.
Thank you.
MR. SANDSTROM: Thank you very much.
Jaime Alvarez, please.
MR. ALVAREZ: Thank you, Mr. Chairman.
Let me first acknowledge staff for very
comprehensive papers, especially the HIPC one. Without
diminishing the importance of the earlier two papers, we
would like to concentrate our comments on the HIPC one,
given that it is a very good analysis of the different
approaches being used to tackle poverty to targeted
programs.
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In general, we found that the paper is well-
balanced, making use of good policy analysis, while
blending the views of many interested parties. Trying to
accommodate different, often conflicting, views is a
difficult task and staff of both institutions should be
commended for their efforts.
The first point that caught our attention in the
paper is the recognition by staff that increasing budget
spending along may not have effect in poverty programmed
outcomes. This recognition is important for at least two
reasons, both of which we have mentioned in different HIPC
discussions.
The first one has to do with efficiency and
public expenditure. Increases in budget expenditure alone
should not be taken as a measure for commitment to poverty
reduction, much less as an indicator of poverty
alleviation. It is important to remember that in some
cases HIPC assistance will provide just for breathing
space to pay external commitment; thus, the effect on
spending should not be expected.
Furthermore, in a country with a weak delivery
system of social services, an increasing expenditure for
social services would create wasteful programs. One can
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always argue, as several commentators did, an
institutional capacity needs to be strengthened. But
capacity building for service delivery does not guarantee
efficient outcomes.
Educational outcomes in areas with among the
best teacher training, salaries, infrastructure and
equipment in the world are comparable with those countries
that spend much less.
A second reason why budget expenditure alone is
misleading has to do with individual's spending patterns,
patterns that could greatly affect the efficiency of
providing social services. If a country, due to debt
relief scheme, allows their citizens to use more
disposable income to purchase social services that affect
poverty indicators, then poverty alleviation could take
place.
Regardless of spending levels, one might find
outcomes of providing service more efficient in some
societies more than in others. Outcome could be closer
linked to the competitive environment under which services
are provided. One suggestion to staff, while another is
in poverty, is to consider social services being financed
and provided by both the public and private sectors.
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Staff could expand on the role of private sector
provision of social services, especially in light of the
part that delivery capacity in HIPC countries could be
weak.
To follow up on the point Mr. Fallon made this
morning about the impact of poverty and poverty that
access to water may have, we could only add that recent
research by Bank staff points out the desirability of
deregulated private provision of services in that sector.
We are of the opinion that, at this point in
time, no option should be disregarded.
The Bank presented results of poverty funds,
Section 47, being used to target poverty. The paper
identifies several shortcoming of such funds in reaching
the poor. While mentioning the shortcomings of poverty
funds in some developing countries, the paper disappoints
us for not revealing similar problems with poverty funds
in industrialized countries.
By extending the analysis to identify
shortcomings of poverty programs, two experiences in
industrialized countries, one could get generalization for
such type of programs, thus avoiding the perception that
if we correct this or by improving in some areas, like,
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for example, capacity building, one may get efficient
outcomes.
Competition in the provision of public services,
as well as consumer empowerment in the selection of
providers, could have a great impact in poverty service
outputs. Staff should be mindful of the proposals that
limit competition for the provision of social services,
and in that respect we are glad that, although many
commentators brought up such approaches, they were
somewhat disregarded.
Another point worth mentioning again has to do
with representation in the policy formulation process.
Like increases in budget expenditure, increases in the
number of entities that participate in the political
dialogue do not guarantee ownership or the desired
reforms. Representation is something that has to be
defined within the political process of each individual
HIPC country. Like in all areas, an appropriate measure
should be identified for each desired outcome.
To the extent that the desired outcome is a wide
participatory process, the matrix to evaluate performance
has to be chosen according to it. If we are monitoring
process, let us measure it.
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The proposal for improving debt management in
HIPC countries is a good. Recommendation along the lines
of improving accountability and transparency should be
properly assessed. The World Bank started technical
assistance work recently in this area. This work, along
with the work being performed by other institutions, would
enhance management capability in borrowing countries.
The literature is reaching and analyzing the
role of different actors in the budget process, including
parliaments and interest groups. The Bank and the Fund
should be mindful of such analysis and should weigh the
pros and cons the proposals that could work against the
aim for economic reforms that could bring sustainable
growth to HIPC countries.
Finally, going back to the other two papers, in
our opinion they focus on the traditional poor. Recent
research of the Bank has presented a clear link between
poverty and lack of access to employment. This lack of
access to employment is limited to the traditional poor or
limits access to the traditional poor and to the new poor.
We think the Bank in a revision paper should properly
reflect the analysis that the Bank has performed.
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In summing up, we can go along with most of the
questions posed by staff, but in echoing Mr. Schaffer we
think that each country deserves case-by-case attention,
taking into consideration the points that were mentioned.
Thank you.
MR. SANDSTROM: Thank you very much.
John Sinclair, please.
MR. SINCLAIR: Thank you, Mr. Chairman.
I think we found these papers very
comprehensive, thoughtful and sensitive. In fact, I think
together they serve as a key set of stepping stones
towards a very different sense of priority for the poor in
all of our work. They represent a critical coming
together of the Bretton Woods institutions, and I know
that is happening all the time. But I think, most
importantly, they demand a sustained operational level of
collaboration between those institutions.
And picking up my Ghanaian colleague's
challenge, I think that is going to be a very, very
difficult and very important dimension of this work,
especially bringing the client government to the center of
that process.
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We agree that any new poverty reduction
framework needs to be rooted in the four elements that are
mentioned -- broad-based participatory process; improved
transparency and accountability for government -- and I
think in that dimension I would mention the desirability
of greater efforts of monitoring and analyzing some of the
extra budgetary spending elements that sometimes confuse
our interpretations of that level -- most fundamentally,
the understanding that poverty is indeed a multi-
dimensional phenomenon, that it is not just something
about income; and finally, that there is a reminder that
sustained poverty reduction is impossible for sure without
quality economic growth, but also that trickle-down is
rarely enough.
Implicitly, I think we are reconfirming that
poverty reduction should be the new underpinning, not of a
few but, of all of our interventions. Under the enhanced
HIPC paper in front of us, we are adding debt relief to
that list of supportive instruments. I think in the
vocabulary CDF, we are again seeing the interplay between
the social and the economic in an organic whole.
I think the Bank paper sees these new poverty
goals being mobilized around an instrument called the
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poverty reduction strategy paper. And in that light, I
would add some words my Director reminded me to mention
that her sincere hope is that this will be one paper that
we know by its title rather than by an acronym, especially
since the acronym is hard to pronounce.
I think we support that poverty strategy and its
proposed role as the core instrument for assessing
eligibility under the enhanced HIPC. I already mentioned
some of the key elements we saw as important to the
poverty strategy. I would add that, as drafted, it is
rather thin on implicit concerns for gender and the
environment.
I think we agree very strongly that the
insistence that ownership is crucial is a correct one.
Any meaningful poverty strategy has to be home-grown.
As others have mentioned, the preparation of
these strategies are going to be complex and demanding
and, in that context, I think we will need to finesse the
situation where the addition of this focus for HIPC could
be seen, especially in its early days, not as a new burden
of conditionality for the countries concerns, a new set of
goal posts which have moved. We would rather like to see
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poverty reduction as replacing, not adding to, some
conditionalities.
In that sense, especially for the existing
HIPCs, we may need process-type targets, are they putting
place an effective poverty strategy.
Realistically, key to the longer term, we don't
expect poverty outcome indicators to be available
meaningfully in the first two or three years of new HIPC
decisions. I think we would be intrigued to understand
how staff see these early cases being handled. I think we
had a little bit of an impression of that at the beginning
but it may be useful to reconfirm that.
Most importantly, whether within a HIPC or just
as a new normal IDA activity, the existence of a poverty
reduction strategy should radically change the rules of
the game. For sure, they will crucially become central
elements within a CDF scenario. Their thinking should be
a central influence on a CAS. Indeed, one would hope and
assume that their consultative processes would largely
overlap and flow into the CG process.
We assume that the poverty strategy will become
a central feature of the new guidance to CAS authors, that
we heard being mentioned a couple of days ago before. And
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I suppose in the context of Question 3, we certainly would
support a steady expansion of the range of countries being
covered.
I must also assume that the same strategies will
significantly condition the framework of an ESAF. And I
think this is clearly the challenge for our colleagues
across the street in recognizing that future fiscal
framework recommendations should proactively seek to leave
space for pro-poor for social expenditures.
The Trican [phonetic] surveys used in Uganda
would seem to be an important and useful monitoring
mechanism. And, as my Irish colleagues have suggested,
there could be much merit in protecting core social
expenditures via the concept of ring-fencing in budgetary
frameworks.
Conceptually, we favor the outcome focus
thinking of the poverty strategy. However, I think we
would have to caution against false expectations. We were
only discussing yesterday the realities in the Strategic
Compact that output targets are very hard to define and,
at best, have been now embodied in the CAS frameworks
themselves. I think we will have to rely more on
intermediates and encourage governments and countries to
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align their national goals around the framework of the key
international development goals.
In that spirit, the Bank and other donors will
need to stand ready to support capacity building in those
areas, in data collection, enhanced budgetary design, in
many dimensions, as others have mentioned.
I think on the positive side of an outcomes
discussion, we would hope that the strategy is intimately
linked and quickly linked in the CAS or the CDF or
whatever to an action plan. I think we need very clear to
see this as something related to the whole programmatic
process.
A word of caution: We see all this process as
part of a master plan, a well-conceived master plan,
hopefully to take poverty reduction to the heart of the
development process. And in that spirit, just as our
Nordic colleagues alluded to, I think we are a little
worried that the idea of a stand-alone poverty note, even
if it is a CAS annex, will have the spirit of an
independent perspective.
I think we would rather see the mind set goal
being one of making the CAS into a totally holistic
document and, in that sense, at least for poverty
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mainstreaming, it should be mandatory, rather than an
annex poverty note.
We were talking briefly yesterday about a
version of question of proliferation, which I thought was
supposed to end with the Cold War. However, I think we
are seeing it still today, not in the military sense. We
are seeing it in terms of the numbers of documentations,
the different sort of approaches we have to these agendas.
We have SSRs, rightly complaining that some ESW
building blocks were missing. We have encouraged a new
generation of participatory PERs. I was at a presentation
in which I learned a great deal about NIRs, and they
seemed very, very important also. And just a few weeks
ago, we were in a room and we were talking about PSLs and
PAPs, though I understand PAPs was considered to be a
little offensive as an acronym.
All in all, I think these could be worthy
elements in an evolution of a sound poverty reduction
strategy, but I think they also risk the potentiality of
being like those mysterious disconnected files we get
warned about as cluttering our hard drives. And I suppose
we would put in a small quiet plea for some consolidation.
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I think we are moving the pieces together, but
let's not, in a sense, have too much dispersal of that
energy.
Finally, to conclude then, I think we would have
to say we very strongly welcome these efforts to add flesh
and bones to the commitment of poverty reduction that is
at the heart of this institution's mandate. It is, in a
sense, very, very appropriate that the chosen instrument,
the poverty strategy, will also be a critical bridge to
strengthen in the work on the HIPC and our relationship
with the Fund across the way.
Thank you.
MR. SANDSTROM: Thank you very much, John.
Neil Hyden, please.
MR. HYDEN: Thank you, Mr. Chairman.
I join with other Directors in welcoming these
papers and the framework that they present. This is a
marked advance, perhaps even an historic one, and we very
warmly support it, and support the broad elements that are
in it.
I wanted really just to take up two points or
two issues at this stage. One links to the point that Mr.
Sinclair was just making about the burdens that are placed
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on countries in trying to meet all of our requirements,
and the variety of forms and reports and whatever they
have to fill in.
Many of our countries don't have capacity to put
huge resources into these sorts of exercises, and that
applies certainly to some of my constituents. So,
consolidation will clearly help.
But even so, the requirements we are putting on
them is formidable. My advice to them in those
circumstances, when they ask, well, if we cannot do the
whole job, which bit is most important, I think the most
important bit is the framework; that is, the broad
elements that are set out here of identifying the national
objectives, of the country itself having ownership of
that, of identifying the means and options for pursuing
those objectives, having some measurement of outcome,
coordination of the efforts between the various supporters
and donors.
So, the key elements of this framework are
really the most important elements. The detail of how it
is implemented I think can be done flexibly and tailored
to the circumstances of individual countries.
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If they get the questions right, then it is much
easier to get the answers right, even if you don't have
such sophisticated analyses and report writing as we would
like.
The second question I would like to refer to is
the treatment of governance and empowerment in the papers.
Governance is very important. We discussed this with the
President last night at our dinner, and he made the point
that governance was central to almost all things that
countries were trying to do. If you don't have good
governance, then it is pretty hard to have good economic
performance, if the budget doesn't operate, if monetary
policy doesn't operate, if the court systems don't
operate.
Yet, in the frameworks we are presented with,
governance is not seen as something which affects
everything. It is put into a category of its own. In the
paper on "Building Poverty Reduction Strategies", in Table
1 on page 9, we see that good governance is linked to the
objective of empowerment and participation in decision-
making. But it is really much more than that. It relates
also to economic opportunities; it relates to the heading
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of capabilities, of literacy, education, health; it
relates to security.
One example: In one of the countries I
represent, teachers have not been paid for six months. It
is because of a breakdown in governance in the central
government. It is not an isolated example.
Infrastructure programs, capital works programs,
also completely chaotic because of inadequate governance.
So, unless governance is dealt with as a central concern,
most of these other objectives are so much more difficult
to achieve.
If, as in this table, we link good governance to
empowerment, we risk downgrading it to something,
something which is less important than economic growth,
less important than education and health, less important
than security.
In many countries, empowerment I think is
something which is not so readily endorsed as an objective
as some of the other objectives of this strategy --
economic growth, education, social objectives. That is
because empowerment takes countries into difficult
questions of representative arrangements, parliamentary
processes, public dialogue, and one can understand why
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many countries need to tailor what they do to their
capacities and circumstances.
I, therefore, am concerned that if we link
governance to an empowerment objective, we are in danger
of seeing it given inadequate attention because of the
reservations that some countries will inevitably attach to
empowerment as an objective as such. And if we are giving
countries ownership and we believe in that, then we have
to follow their preferences.
In the paper on HIPC and "Strengthening the Link
Between Debt Relief and Poverty Reduction", the comparable
table, which is Box 7 on page 27, treats the issues
differently. There is no reference there to empowerment
as such. The heading becomes transparency, accountability
and budget management, which is clearly a subsector of
good governance but it is not all of good governance.
So, this area I think needs some closer
attention. I would like to see good governance made as a
separate heading, probably a chapeau across the top that
applies to all. One can keep the section on empowerment
and perhaps attach to that the issues relating to
participation, participatory processes, information and
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public dialogue. So, it is still there, but it doesn't
compete with good governance.
Thank you.
MR. SANDSTROM: Thank you very much, Neil.
Jean Pesme, please.
MR. PESME: Thank you, Mr. Chairman.
I would also like to commend the IMF and Bank
staff for these very impressive pieces of paper. I must
say it is sometimes difficult to comment on them because
they are very comprehensive and well reflect the
complexity of the issue, which also means that when we
come to make them operational, it may be quite tricky
because we will have to lose part of this complexity to
make sure that we are doing something. But I will come
back on that later.
On the substance, we are in global agreement
with the main thrust of all the papers and we welcome the
opportunity taken to somehow scale up the commitment of
the two institutions to fight against poverty at the
occasion of this momentum linked to the HIPC Initiative.
I agree with Bassary Toure that nothing is
really new, but we understand the proposal of the
framework as a way to try to rationalize and be more
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systematic in our approach for poverty alleviation. And
we very much appreciate this proposal from this
standpoint.
Now some features of the proposal we would like
to particularly welcome. The first one is the strong
interlinkage between growth and social progress and the
emphasis on distribution of growth. And we think it is a
very important part of the proposal.
The second one is that placing poverty reduction
at the center of our involvement must be a criteria for
selectivity. And the fact that we have been able to try
to tackle with all the issues why putting selectivity at
the forefront is very important.
The proposal to add a long-term and multi-
sectoral approach is also very welcomed, as well as the
efforts not to remain only in the HIPC context but to
broaden the approach.
This being said, there are three points on which
we will pay attention. The first one is that this
approach should not undermine the macroeconomic
conditionality of IMF programs, in particular in the HIPC
context, which means that sometimes we will have make some
balance and make more explicit some of the social
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consequences of this macroeconomic program, which is very
welcome, but not at the expense of the core issues of the
IMF program.
The second point is that strong political will
from the authorities of the beneficiary countries will be
very important in the implementation. And this approach
should not only be Bank and IMF approach but really have a
sense of ownership, not in the country in general -- I
will come back on the participatory process -- but at
really the political level in these countries.
The third issue relates to what has just been
mentioned by Mr. Hyden on governance. I would just add to
that, that the more we are going towards a multi-
dimensional approach, assessment of outcomes, et cetera,
the more necessary it will be to make sure that we know
exactly what is the use of the resources we are providing,
that accountability and transparency is there. So, we
must pay great attention to that, so that we know at each
stage what is going on.
Second, on the methodology which is proposed, we
agree with what we see as three key elements -- the
emphasis on determinants of poverty; selectivity in the
choice of public action; and the focus on outcome
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indicators, both in the context of the international
development targets and having some short and medium-term
intermediate objectives.
Once more, it is not fully revolutionary and it
has proved in the past to be a robust approach, but what
we very much appreciate is the fact that it is now
systematic and we expect this to be put in place very
quickly.
But, as mentioned by several other speakers, it
should not become a straitjacket, and we will have to have
the right balance between a country-by-country approach
and also, which will be very important in the HIPC
context, I think appropriate fairness between the
countries, which sometimes might be very difficult.
But we think case-by-case, yes, but making sure
that across-the-board we will treat every country the same
way. That is something I will come back on a bit later on
Nicaragua.
The second point in this process is being
careful -- it has been mentioned by other speakers -- on
the participatory process. Each country has somehow its
own political economy, and we must make sure that the way
that we will be discussing with the country will be fully
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taken into account. And there are some representative
bodies. There are now processes of legitimacy in each
country, to which we will have to pay attention and in
which we would have to fit our approach.
We must remain very careful not to convey a kind
of across-the-board participatory process. This will be,
in our view, a very important condition for ownership but
also for this very strong political involvement at the
highest level, so that everybody in each country will be
committed to the poverty reduction strategies.
On implementation, there are three levels of
challenges on implementation, and somehow at this stage we
are still with a very general framework and we will need
to know more on what it means operationally.
At the country level, I want to come back on
what has been said the capacity building, the difficulty
with statistical issues when defining the intermediary
outcomes, and just to take the table which is in the annex
of the paper, there are some figures which show that we
may have big holes in our assessment of what is going on
in many of the HIPC countries, in particular.
But it also means that we will have
implementation challenges at the Bank level. I won't come
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back on the discussion we have had some months ago on the
poverty progress report, which has shown that, yes, we
have made progress but, on the other hand, doing it on a
day-by-day basis and making sure that each country team is
fully involved in that process and really puts that at the
forefront, at the center of the relationship with the
country is not always very easy.
I am not sure that we currently have all the
skills to put in place the proposed framework and, in
particular, this attention to political economy in each
country, that we have the skills to assess poverty in all
its dimensions. We had a discussion some time ago on the
urban strategy which shows that we were weak on that side.
So, the question of also scaling up our
mobilization of internal skills and resources will be very
important in the way we implement the proposed framework.
But another important issue of implementation
would be the way we present it towards outside
stakeholders. We fully concur with staff that the impact
of our involvement in poverty reduction will have to be
assessed on the long-term, but there are very strong
expectations, in particular in the HIPC context, in the
shorter term. So, the way we balance that will be very
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important, and we must be very clear on how actually our
involvement in the HIPC context will demonstrate that we
are focused on poverty reduction.
On implementation, John Sinclair was very
eloquent in coming back to all the acronyms. Making sure
that somehow we aggregate all of our assessments, papers,
et cetera will be very important in clarifying what is
center to our dialogue with the countries. And so far the
way the link would be made between these poverty programs
and the CASs or the CDF, where the CDF is tested, is not
very clear, in our view. And maybe this will be part of
the upcoming discussion for the Annual Meetings on
implementation.
One point more specific to the HIPC context. We
believe that these poverty reduction programs must be
linked with the decision point. And somehow we will have
to balance the willingness to accelerate the process and
the fact that we must make sure that in the new context we
can demonstrate that there is strengthening of the link
between debt relief and poverty alleviation. So, we will
have to make some tradeoffs, and we are not clear at this
stage on how we should make these tradeoffs, in particular
in the context of retroactive countries.
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This was part of the discussion we had in early
August and, frankly, we are not very clear on how both the
IMF and the Bank staff intend to handle this issue of
balancing between the need to demonstrate and the need to
be quite quick in the process.
This will have also consequences in terms of
fairness of the process between the various countries and,
in particular, the way we treat the retroactive country.
So, once more, yes, for case-by-case approach, but we must
make sure that all of this is consistent.
One point on the link with the IMF. Several
speakers mentioned that operational collaboration between
the two institutions will be crucial in achieving the
objectives we are setting to ourselves. We believe that
in this sector the Bank should have the leadership and
that the expertise on the social sector must be on the
Bank side, and that the two institutions should be in the
position to complement each other from this standpoint.
The British chair has invented the notion of
intelligent customer, which is very interesting, and it is
a very good way of presenting it. But we have to be very
clear from the Bank side on what it means. It means that
we must have the capacity to deliver. And there are some
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tough sentences in the IMF paper on the Bank from this
standpoint. But we will be able to justify that we have
the expertise and we should contribute to the ESAF program
only if we are able to deliver, which means that, first,
we may have to modify some of our way of doing business,
but also adapt our timetables to the IMF ones sometimes.
And really, there is an issue there. We have
been able to solve it after some difficulties in the
financial sector. We must be able to do it in the social
sectors also now.
One final word on the social and structural
reviews. I don't want to open the discussion with Masood
we had in July on that. I share the view expressed
earlier that we are not really in a position to evaluate
what has been done, but we agree with the fact that these
two will be very important in implementing this framework.
On the other hand, we must not lose sight of
what was the initial purpose of this instrument. Yes, it
was created in post-crisis situation and we must expand it
to more normal business. But we must really maintain the
focus on the structure on the identification of structural
weaknesses and somehow not just focus on social and losing
sight of that.
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And the link between the two will be very
important. In the initial paper, as far as I remember,
the poverty dimension was only one part, what I understand
as somehow trying to have a chapeau, but only if the other
building blocks are still there. And maybe some
additional comments on that could be useful.
Thank you.
MR. SANDSTROM: Thank you very much, Jean.
Akira Kamitomai, please.
MR. KAMITOMAI: Thank you, Mr. Chairman.
I would like to join other colleagues to commend
the staff for their excellent work. It comprehensively
presents a strategy for this important challenge.
We consider the HIPC Initiative as one of the
important mechanisms to address poverty, and we welcome
the opportunity to discuss ways to enhance such
mechanisms.
Links between debt reduction and poverty
alleviation must be owned by the HIPC countries
themselves. And in this regard, we think it is extremely
appropriate that the HIPC poverty paper is discussed
together with the poverty reduction strategy paper that
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will be useful for HIPC countries in designing such
strategy.
Many of the efforts to strengthen debt relief
and poverty alleviation is relevant to the Bank's overall
effort to address poverty. But I will focus my
intervention on the HIPC paper, which touches on the two
related papers as well.
First of all, as proposed by the management, we
support the integration of the HIPC Initiative into the
comprehensive effort to enhance the poverty impact of
Bank-Fund supported framework. In implementing the
comprehensive strategy, we believe that a country-based
approach is appropriate since each HIPC country is unique
in its social and economic condition, level of poverty
reduction effort, government capacity and in resources
freed up from debt relief.
We believe that the CAS will be the most
important vehicle in the implementation and, hence,
improving the quality of the CAS would be essential.
As we have learned from the last poverty
progress report, we still have a lot of room to improve
the quality of poverty assessment and to strengthen the
link between the assessment and the CAS. We hope that the
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Bank will redouble their efforts in these areas, since
they are important in successful implementation of this
strategy.
Secondly, on outcome-oriented approach, we
believe that this is extremely appropriate since the Bank
is focusing more on outcomes rather than inputs to assess
performance of its operations. We also believe that
participation of the civil society is important to the
effectiveness of the strategy, since it enhances
ownership, transparency and accountability.
However, up until now, the civil society that
has made a contribution to the discussion on the debt
relief and poverty was mainly international advocacy NGOs.
We hope that as we move towards implementation of this
strategy, the broader civil society in the field should
participate in this effort.
Third, on replacing PFP to PRSP, we are still
unclear of the added value of this exercise. We would
imagine that addressing poverty reduction strategy more
comprehensively in the CAS, while maintaining full
consistency with PFP, could be also effective in
addressing poverty. We would appreciate staff's comments
on this point.
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We also notice that there are similar ESWs
lately and think it would be useful to streamline some of
them. For example, in relation to poverty, there are ESWs
such as poverty assessment, social assessment and social
and structural review and the role of these documents are
not always so clear.
Other donors are also actively engaged in doing
similar assessments, and we hope that the Bank will
coordinate with other donors in order to avoid duplication
and enhance efficiency.
Lastly, we can support the idea of having a
poverty reduction strategy in place by the decision point,
but in order for this strategy to be sustainable, even
after the completion point, it is important that the
strategy is fully owned by the government.
In designing such a poverty alleviation
strategy, we believe that closer collaboration between the
Bank and the Fund is critical, since the strategy has to
be fully consistent with the ESAF program. Therefore, we
urge strengthened collaboration between these two
institutions in the operations and for the Bank, as the
French chair mention, strengthening of the capacity to
deliver timely is an urgent task.
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In addition, strategic benchmarks up to the
completion points should be the ones that are central to
the development of the country, and should not be
compromised for early completion point.
We believe an early completion point should be
warranted only in the case of strong performance, and we
hope such a mechanism will serve as an incentive for HIPC
countries to achieve the goal.
Thank you.
MR. SANDSTROM: Thank you very much, Akira.
Helena Cordeiro, please.
MS. CORDEIRO: Thank you, Mr. Chairman.
At this stage of the debate, I will try to be
very brief, because a lot of what has been said is
definitely shared by us and I will try to move it forward,
if possible.
I would like to stress immediately that a lot
what Jean Pesme has said is very much in the same line of
our thinking, and the need to balance the different
dimensions of all of this.
Very briefly, I would like, as many others, to
welcome these papers, while recognizing that they are
different; they are different in scope, in quality and in
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stage of preparation. And I think a word comes out
immediately from my side on the concerns that the social
structural reviews still pose to us -- again, Jean just
mentioned, and we had a discussion with Masood before -- I
still want to come back at the right time because I think
they are one important piece, and a poverty chapeau is
needed. But we cannot eliminate or dilute the importance
of key blocks that have to be there. And they were the
core nature of those studies.
So, I see the paper as a progress report with
some important lessons, I think the integration, the
building blocks that have to come up. But, in my view,
it has to remain with a very clear focus.
The other two papers definitely come as nothing
new but very important value-added of the World Bank
agenda. And I hope it will be beyond the World Bank, and
I think it will be a tripartite effort, although it raises
certainly a lot of issues.
So, we see from this approach a consolidation of
a lot of aspects, of tools, of instruments. And we attach
a lot of important to what now is called -- and I agree
the title may need to be rethought -- the poverty
reduction strategy paper. And we would view it as the key
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long-term framework for Bank intervention, and I hope it
will be Bank-Fund intervention.
The fact that it came out in the context of the
HIPC Initiative does not diminish its importance. It is
the opposite; it gives it more meaning, and I think it is
relevant for the HIPC. We agree with those that said that
as much as possible it has to be part of the HIPC process
of decision, which means that on the decision point we
want to have as much as we can towards a strategy owned by
the country, produced on a participatory approach. But we
know that reality will not allow us the ideal situation
when we may have to compromise. But the compromise cannot
be by losing the focus on poverty. And I think that is
definitely an important aspect that we see at this stage.
We see the PRSP will become crucial but common
for all IDA countries. We would see it as being the real
base framework, and it is a long-term approach.
Certainly, it will have to be updated, it will have to be
improved, but it should be the underpinning document, the
underpinning process more than document, of the
relationship between the Bank, the Fund, the country and
within the country. So, we see it that it will be the key
departing point for the CAS.
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The CAS may need to be adjusted. It should
remain; it should allow us to focus much more on how are
we going to deliver and assist the country objectives
spelled out in the strategy, what are the risks, what are
the tradeoffs, what is our business strategy to deliver,
what are the costs, what are the outcomes. And I think
the accountability will be part of that.
So, I envisage adjustments in the CAS but not
change in the importance of the CAS, but I believe the CAS
would certainly benefit from the introduction from this
new framework.
I think one aspect that somehow has been
referred to but I think that has to be brought out is the
issue of resources. So, the public finance framework in
the medium-term at least -- because I think there it is
more difficult to go on a long-term -- has to be part of
the exercise.
The experience that the Bank had with the public
expenditure review has been mixed because of different
things, but I think we have to move beyond the public
expenditure review with a broad approach including
resources. And I think the resources have to be there,
and I agree with those that make the emphasis that we are
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looking to the overall resources, external and domestic
generated, towards improving the situation.
So, I think there another area of cooperation
with the Fund will be necessary in terms of developing
appropriate medium-term fiscal framework if one can use
that simple word.
One aspect that also has been mentioned by Jean
Pesme lately is in fact the centrality of macro stability
which comes up as a key aspect of the ESAF program, but it
is also an aspect for us. And so, we have to make sure
that the consistency between the macro objectives and the
social and poverty strategy emphasis have to be taken into
account. And I assume that the ESAF process and approach
has to suffer some adjustment too, because the consistency
will have to start from that point.
I haven't read the IMF paper. I only looked at
the issues for discussion, because I only got the paper
today. And I agree with the comment made that it is a
very different way of looking to the issue than what we
are doing. It is very tough on the Bank. I don't know if
it is totally warranted, but it puts a challenge on us.
And I agree with the line of action that Jean just
mentioned. We should do our best to maintain our
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expertise and responsibility on the social policies and
cooperate with the Fund, adjusting the timetable, if
possible. But basically, we cannot deliver, we should not
engage ourselves.
But I hope that we will be able to do it. And I
think if we take, in fact, the proposal that this new
framework is, in fact, a tripartite government, Fund and
Bank, it should be possible to eliminate a lot of
difficulties that have been mentioned.
At least, I think there are underlying issues in
the Fund paper that we may have to come back on among
ourselves.
Another aspect that we very much support but are
cautious about how ambitious we can be on the delivery is
on the results outcome-based programs. Definitely we all
agree with the importance but we all know the
difficulties. It should not prevent us to move ahead, but
I think it makes us conscious of the limitations.
And I think one particular aspect that we have
to keep in mind, that it is not only the design, the
measurement and the monitoring, but it is the time factor
that really is so important in assessing poverty impact.
That sometimes is inconsistent with our own cycles. Of
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course, in the case of the HIPC Initiative, there is a
very, very conflicting message because we want debt relief
quicker, but we want it in a very strong linkage with
poverty reduction.
I think that we are going to deal with this
aspect in the near future, particularly when we start
implementing the enhanced initiative. But it is a reality
and it is going to raise the issues of fairness and
consistency across countries that certainly should be on
our minds.
Many people have spoken and I fully agree with
the ownership by countries and the participatory process.
But it is very difficult. And I think it is not only
difficult because of the capacity, but it is difficult
because of motivation. And I think Neil and Jean have
referred to precisely the political commitment that is
necessary, and it goes beyond the technical limitation.
And I think we should avoid to fall in the trap
that in my mind the PFP is an example, that really does
not help in building ownership and commitment from
authorities.
But after saying all of this, I would like
basically to ask management with the strong support that
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has been given in this Board on the enhanced framework and
the several elements, I think definitely we have to move
towards a strategy or master plan, as I think Jean
mentioned, how to operationalize it. And definitely at
least three levels will be very crucial.
One is the cooperation and collaboration with
the IMF. And there again, I think we will hear about the
how the IMF Board addressed the questions that are on the
table. I don't know even if this Board fully agrees with
all the questions and analysis, but definitely we have to
be very firm about how we are going to address this issue.
We know that what is being proposed -- and I
think this morning it was clearly emphasized by both Mike
and Peter, I guess -- this approach is a dramatic shift in
the way we work, inside the Bank but the way we work with
other partners. And I think the Fund here is critical.
I think flexibility can exist in exercising the
complementarity between the two institutions, but I think
we have to have a very clear line where the management and
the Board see this process to go forward in order to
position us as an equal -- in this case maybe more than
equal, because the Bank has the expertise and has the
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experience, and I hope that we will be able to have the
necessary skills on time to deliver this.
The second level for personalizing all this plan
is, in fact, the internal apparatus of the Bank that has
to be adjusted. I mean, the word "consolidation" comes to
mind immediately, but before consolidation I think we
really have to look at the wide array of instruments that
we are using. The ESW is the best umbrella but it doesn't
tell us anything. When we go down and disintegrate the
ESW, we have a multiplicity and also in terms of what that
means in our relationship with the country. I will come
to that issue under the umbrella of the countries.
But the references that have been made on the
country teams, networks and skills are very important, but
I think they have to go beyond that in terms of the
strategic documents, strategic papers. For us, I believe
the Board still attaches the maximum importance to the
CAS, but recognizes that there are underpinnings of the
CAS that have to remain.
So, consolidation, yes, eventually elimination
of separate pieces but not undermining what we are
accomplishing by enlarging and broadening our approach.
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And the third level for the road map is, in
fact, in countries and our relationship with countries.
And I think again we have to go beyond the words of
partnership, ownership, political commitment, but in
reality how we are going to assist the countries in taking
the lead of that potential.
I fully agree with the dimension that Neil Hyden
gave to the governance issue. And I think that is very,
very important, precisely in our relationship with the
countries. I think he is absolutely right that it is part
of empowerment but it is higher than empowerment, and I
think we have to bring it across the higher level.
One final comment on the retroactive application
of the new framework for the HIPC countries. I think we
have to be cautious about bringing additional requirements
at this stage without ignoring the emphasis on poverty
reduction. But I think timing, fairness has to be part of
the way we look on specifics.
I think the issue is simplified. If we look at
the poverty reduction strategies as permanent frameworks
for action, it will be possible, as we move along, to
refine its elaboration on each country and IDA will remain
the key player in these countries. Unfortunately, we are
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not in a position of imagining that it will be out of the
playing field. So, we have an opportunity to bring back
all these countries in a more, I would say, deeper and
broader approach that now may be possible in other
countries.
So, we are really pleased with what we are
seeing. We are cautious about how we go about
implementation, and we encourage management to move ahead
and start spelling out precisely in these two or three
dimensions how we will move ahead.
Thank you, Mr. Chairman.
MR. SANDSTROM: Thank you, Helena.
Hein Bogaard, please.
MR. BOGAARD: Thank you.
I am in a bit of trouble at this time, because I
would like to be short; I don't like to repeat people and
I also want to give a comprehensive view on these very
good papers. So, I have to find some balance here.
I think it is clear that paragraph 15 of the
paper on poverty strategy more or less defines the basic
outlines of the approach -- good analysis, prioritization
of policies and participation. We are very much in
support of that.
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In the past year, we have focused on pro-poor
growth, moving beyond a single focus on social protection
and increasing social expenditure. And in this document,
staff rightly stresses the importance of taking a broad
view on poverty, including empowerment and in general
reducing barriers throughout the economic and social
system to poverty reduction.
I think in view also of disturbing trends in
poverty, our CAS documents and everything basically we do
should focus on the issue of poverty.
We also appreciate the attention paid to gender
in the document. It is both morally right I think to take
this into account and economically sound. It also comes
out of recent research on the link between poverty
reduction and gender in the Africa Region.
In practical terms, the suggested approach
implies that we need to take a holistic view I think on
both the inputs to debt relief, tax revenues, also human
capital as an input and, at the same time, a holistic view
on policy outputs and outcomes more specifically.
In this regard, if we look at public policies,
countries should try and develop a medium-term expenditure
framework, and they would also greatly benefit if they
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could complement such a framework with medium-term
commitments from donors, not only in the CAS of the World
Bank or in a three-year ESAF program but also from other
donors.
In relation to the medium-term framework, I
would also like to draw attention to the work that is
ongoing on the Special Program for Africa, where they try
to work from a balance of payments approach to a budgetary
gap approach, which facilitates the connection between aid
and policies and between inputs and results. This might
also be a way to refocus our discussions with the IMF on a
macroeconomic framework.
It is obvious -- almost everybody has said this
so far -- that the biggest challenge, if we agree on the
framework, is implementation and in order to make the
approach work, we need to foster partnerships outside the
Bank, and this goes broader I think than only the IMF and
the country. We have been talking about a tripartite
effort. I think it should be even broader, including
other donors, other regional development banks.
I think the poverty reduction strategy papers
could be a very useful element of these partnerships. And
we hope to begin with, they are more than a joint effort
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than the almost Fund-only policy framework papers that we
currently have. So, we fully support the replacement of
the PFPs with the PRSPs, as proposed.
What I also felt compelling about the proposal
was the idea to make the PRSP process an iterative process
during which all policy targets, including the IMF targets
are up for discussion, in which all structural,
macroeconomic policies are being related to poverty.
In this respect, if one compares the Bank paper,
which is very comprehensive in its approach to poverty,
with the IMF paper, I found it a bit disappointing that
the Fund presents the PRSP in a paper with a title which
refers to social policies only and not to the broader set
of poverty reduction policies.
We also need to foster partnerships inside the
Bank, especially within the matrix management. I think
that the responsibilities of networks need to be
clarified, and they should be allocated resources to match
their roles and possibly regions should try to communicate
with each other more to learn from each other.
Finally, one small point on instruments: I
think that we should not presume that countries with PRSP
receive more program-based support. I can imagine a
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situation in which a country has a PRSP and still not has
the implementation capacity to work with program-based
instruments.
Quickly, on the relation to HIPC, I think for
countries that have qualified for debt relief already and
are expected to qualify for debt relief in the short-term,
we should take a somewhat flexible approach. But
hopefully, they could have as much of a poverty strategy
in place as possible by the time they reach their decision
point and certainly when they reach the completion point.
This requirement should also be applied flexibly
to retroactive countries, but good policies to reduce
poverty I think should be a requirement to qualify for
additional debt relief.
With regard to the structural policy reviews, we
several times stressed the need for better selectivity
management, a systemization of economic and sector work,
and I think John Sinclair made it clear that also we not
only have the acronym ESW, but we also have a huge number
of acronyms which fall under the umbrella of ESW, and we
hope that some streamlining can be done.
Those are all my points. Thank you.
MR. SANDSTROM: Thank you very much, Hein.
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Mr. Pandian, please.
MR. PANDIAN: Thank you, Mr. Chairman.
Like others, we also welcome the papers, which
really put their heart and soul on poverty reduction,
which is the main mandate of this Bank.
To begin with regarding paper one, "HIPC:
Strengthening the Link Between Debt Relief and Poverty
Reduction", we welcome the suggestion that all resources
should be put in position to fight poverty, not only debt
relief but also domestic resources.
But our question is whether there will be enough
domestic resources available to achieve a desired result.
So, we may go beyond that and to generate additional
resources, the government may have to invest in new
infrastructure. How are we going to balance this
question?
Number two, we also welcome to build on the
existing framework to build a new strategy. But at the
same time, we have certain reservations about involving
the civil society in the formulation, selection and
monitoring of output indicators. It is a problem in
selecting civil society when the country and government is
infested with a number of civil society organizations.
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How are we going to discriminate between a good civil
society group and a bad civil society group? Everybody
has a vested interest.
In this connection, again ownership should be
given to the country. If the government is comfortable
with the civil group, it can go ahead. If it is not
comfortable, then the democratically-elected process
should not be undermined, because a number of countries do
have local authorities, local elected governments and we
should make use of those institutions. In fact, if they
do not have the capacity to plan, to monitor, that
capacity should be built, and the World Bank Institute in
association with other local and regional organizations
can arrange a number of programs to build the capacity at
the grassroots level.
We also welcome the poverty reduction strategy
paper. In fact, we very much appreciate the participatory
approach being adopted in preparing this.
But one thing we would like to point out that in
a number of countries, at least particularly in the
constituencies we represent, there are planning
ministries, democratically-elected representatives, that
do prepare the local plan, regional plan and the country
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plan. I think that these things also cannot be
undermined. They should be given proper importance and
proper role.
What is needed is how civil society can be
involved in these processes. Perhaps in collaboration
with the poor people, in collaboration with the local
people, they should see whether these projects are
properly implemented at the implementation stage. As my
colleagues pointed out, the question of governance, the
question of commitment, the question of delivery comes
into the picture; it is here the civil society can
associate to see that the desired results are achieved and
it is being distributed.
As far as questions number four and five are
concerned, already the HIPC activity is delayed very much.
So, we would like to agree with the staff that instead of
waiting for the completion point we can go ahead with the
relief; probably the government is committed for a poverty
reduction strategy.
Now coming to the second paper, Mr. Chairman,
the poverty reduction strategy, we also welcome the
outcome-based approach. Definitely, this will give a
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clear-cut improvement in the CAS process. We welcome
that.
But again, this cannot be a straitjacket
approach; it varies from country to country, because, as
the paper itself has pointed out, the countries which have
massive poverty like India and Bangladesh, we had growth.
We concentrated on growth in the 1990s, in the early 1990s
but still poverty was stagnant. We concentrated on the
income redistribution in the late 1970s and 1980s but the
growth was stagnant. What we need is both. We need
growth as well as fairly distributed income.
If you take India, Pakistan, Bangladesh, nearly
40 percent of the people are living below the poverty
line. And these countries face a different unique
problem. In fact, rather than concentrating on growth or
huge investment in infrastructure, if you spend a small
amount in improving our tax collection system, that will
create more wealth, and the distribution definitely should
be given importance.
So, the strategy may vary from country to
country, particularly if you want to bring down the
poverty in a massive level and these countries where the
poverty is massive should be given due importance. We
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feel that this paper seems to be a little more Africa-
based. No doubt, a number of poor countries are in the
Africa Region, but, at the same time, there are few
countries in other regions where a number of people are
poor.
Again, we find it a little discouraging to note
that there is no mention of technology, taking technology
to fight poverty. Like the Industrial Revolution, today
is the Technological Revolution, and to what extent we can
use the technology to fight poverty. It may be disease or
it may be quality education or it may be building economic
assets which can be easily accessible by the poor people.
So, I think the Bank should do some research how
effectively technology can be used to fight poverty and to
do global common good.
Thank you very much.
MR. SANDSTROM: Thank you very much.
Mr. Binkert, please.
MR. BINKERT: Thank you very much.
Like all the other speakers, I would also like
to commend staff, and I guess I have decided that I will
not do justice with those papers but try to be brief
instead.
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I have a few points and the main message from
all the following points is that on a conceptual level, we
like very much the proposals for the enhanced framework,
but we are very concerned that this may contradict the
objective of speedy debt relief, that we are just
overloading the initiative. But I will go in step-by-
step.
First, we fully agree that actually the overall
framework is important for poverty reduction, not just for
HIPC. So, whatever criteria we use for quick-disbursing
funds, it will be the same ones for HIPC. It is the same
thing. And, therefore, all the necessary measures, in
particular on improving the quality of budget management
and accounting, all of those things have to be applied to
HIPC as well, and that will take time. We will not be
able to do that in twelve to eighteen months.
The second point, of course, conceptually we
like very much the move towards outcome-oriented
objectives and impact indicators. Our experience from the
field is very clear that this is the key thing that we
ought to be monitoring rather than traditional policy
measures. At the same time, we have learned very much in
the SPA, the Special Program for Africa exercise, of how
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complicated it is to define, measure and monitor such
outcome indicators.
So, we think this is going to be a very big
challenge, even though conceptually it is the right thing.
Similarly, with the poverty reduction strategy
paper, again this sounds like an excellent exercise. It
is very consistent with our objective, with what we would
like to achieve, but it may be a very complex exercise to
do, particularly if we want to have a highly participatory
process to develop -- as John said, it cannot be reduced.
So we always have to say poverty reduction strategy paper.
It doesn't go by the acronym.
It is going to be very complicated. We are not
quite sure when we will be ready to use this framework
paper or strategy paper and substitute that for the PFP.
And also, we are not quite clear whether it makes sense to
require countries to do this every three years in a fully
participatory way. This may be asking too much; it may
not be the proper thing to do. And this, of course, is a
comment that goes beyond HIPC.
Similarly, some of the innovations in the new
framework are the floating completion points and the
frontloading. And we attach great importance to this. We
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are strong supporters of those two features and,
therefore, urge really that we be very careful in how much
we load the enhanced framework with conditions that may
slow us down.
The last point is with regard to the countries
that have already reached the decision point under the
current framework or the completion point even. It is
very important that they be treated equally and that we
don't really introduce sort of a third stage to the HIPC
implicitly with retroactive conditions. So, we really
have to strike a balance here.
As I said, to sum up, the main concern is that
we continue with a speedy program, a speedy HIPC program.
We fully agree with the overall framework to enhance
poverty reduction as the key objective, but this should be
the objective for all of our activities. And we have to
find a balance.
I would just like to make one last comment on
the other paper, on the paper for the building poverty
reduction strategies. On the outcome table on page 9, it
mentions here that private consumption, poverty incidence
and inequality should be sort of key indicators for
economic opportunities. If one could not include also an
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indicator for employment conditions, this would be a proxy
for many other things that go on in the poverty field or
in the vulnerability of people. Maybe by including
employment indicators, that might be a very useful thing
to monitor as well, of course, in the various instruments
that the Bank has, such as CASs or whatever reviews we
get.
Thank you very much.
MR. SANDSTROM: Thank you very much.
Mr. Garcia, please.
MR. GARCIA: Thank you, Mr. Chairman.
I would also like to commend Mr. John Page, Mr.
Walton and their team for an excellent paper. I am
talking about "Building Poverty Reduction Strategies in
Developing Countries".
I have a couple of suggestions. I think the
paper will gain or it may be worthwhile looking at
different strategies to fight absolute poverty and
relative poverty. I think they bring up two complete sets
of issues, and the strategy may well be totally different.
Economic growth probably will reduce absolute
poverty and will increase relative poverty. Now, to fight
relative poverty is very, very difficult because it is in
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the nature of our policies that we carry to our countries
deregulation, competitive policy, change. And things
change today in one year more than they used to change
before in 50 years. So, it is in the nature of the
business that people are going to get more poor on
relative terms. Even though their income may have
doubled, if the income of the whole society has tripled,
they are poorer. So, that is an issue I would suggest to
look at because I think it is very important.
Also, there is an issue of picking up
priorities. And the difficulty of this issue is clearly
in Table 1 on page 9, because there is a large inventory
of issues, but we have to be always aware that there is a
tradeoff. And when we tell a country or a country decides
that it is going to invest more on microfinance, it really
invests less in education, it is investing less in health.
So, the whole budgetary process is crucial.
In that sense, I am very skeptical about this
participatory process, of empowering people in order to
reach a list of items, because the thing gets very
political instead of getting more technical, with the
economic rate of return and with good data to help the
budgetary process in the countries. So, my position would
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be that we should not look so much at all of this
participatory process but we should look a little bit more
on the internal rate of return, on how the budgetary
process plays in these countries.
Just to finish, let me say that I think that in
these priorities trade and education are real crucial. If
we look, for example, at Africa, the participation of
total world exports in Africa 1980 it was 6 percent, and
today it is less than 2 percent. So, that is a question:
Why is that? And I think that is an important question to
which we should try to give some answers.
The other issue is I think we should be more of
an education bank, because education is the only tool that
we have that, at the same time, growth is improved, it
diminishes relative poverty; it gives more equity, more
opportunity, and I think we should focus more on that.
Thank you.
MR. SANDSTROM: Thank you very much.
A two-handed. Jan.
MS. PIERCY: I was just going to ask when you
anticipated having staff come back, because I have heard a
number of questions that, rather than repeat them, we
might at some point want to have an intervening comment
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round which might shorten the comments of some of us who
have not yet spoken.
MR. SANDSTROM: We had planned to listen. We
have only two speakers left, at least right now on the
list, Ms. Zou and yourself. I didn't want to lose too
many of you before you had heard each other and then have
staff to come back with a very full response.
Ms. Zou, please.
MS. ZOU: Thank you, Mr. Chairman.
I think it is difficult to be a late speaker,
but I will still try to be brief and to minimize the
repetitions.
We too would like to commend the staff for
preparing these three interrelated papers, and each
contains very useful thinking. Let me start with the
poverty reduction strategies. Basically, we appreciate
the outcome-based approach. We find it is appropriate for
this approach to serve as a policy base for the enhanced
HIPC framework.
However, we feel that this framework needs to be
further refined before it could be widely adapted to all
the borrowers.
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Regarding the overall approach, we find that
Table 1 is very interesting. All the elements listed in
Table 1 are relevant to poverty reduction. However, if
these elements need to be operationalized by the Bank, I
would again call for the selectivity, because if we look
at Table 1, there are four categories listed here.
My feeling is that probably the first two
categories gear mostly to the Bank's comparative advantage
and capacity, while the last two categories, some of the
items listed in the last two categories are obviously
beyond the Bank's mandate and internal capacity. For
example, actions to reduce violence, the community
policing and something like this, obviously it must be
done by the government instead of the Bank. So, I think
the Bank has to be selective in those areas.
Regarding the issue of governance, I fully agree
on the points made by Mr. Hyden that governance should be
more related to the way the government manages the
economy, instead of to link solely to the gray area of
empowerment, where we are not sure whether the Bank can
really make a difference.
Regarding the participation, we are in favor of
the idea that the Bank should work directly with the poor
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and to reflect the interest of those final stakeholders.
Probably we feel that this might be a more effective way
of participation than going through NGOs as an
intermediary.
NGOs, however, could be helpful if the
participation of NGOs could be managed in a pragmatic way
and avoid potential political conflicts. I would echo
those points made by Mr. Garcia in this regard.
And we also feel that the Bank needs to develop
certain guidelines and criteria for the NGO participation
so as to ensure accountability. The Bank should choose
those NGOs with a good track record to work on the
development business as its partners.
Regarding the monitoring indicators, we feel
that indicators should be technically mature and avoid
using subjective judgment, particularly when involving the
qualitative indicators in social-related aspects.
Regarding the analytical tools on poverty
reduction, we feel that those tools need to be simple and
straight-forward. My feeling is that the poverty notes
probably could be one section of the CAS, when necessary,
instead of being a new and independent tool.
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Now let me turn to the paper of HIPC. We feel
that poverty reduction is the ultimate goal of the HIPC
Initiative. Therefore, we support to strengthen the
linkage between debt relief and poverty reduction. We
have three brief observations here.
We feel that strengthening the linkage to
poverty should not delay the debt relief process. Our
desire is that the qualified HIPC countries should get as
soon as possible all the potential benefits from the HIPC
Initiative. In this regard, we have no problem with the
transitional approach that the decision-making point could
take place even before the completion of the poverty
reduction strategy.
Number two, we believe that poverty reduction
cannot be delinked with financial resources. Therefore,
we feel that we need to have a detailed country-specific
calculation on how much financial resources are actually
released by the enhanced framework on a cash flow basis.
And the performance target for the poverty alleviation
should be commensurate with the cash flow impact and
should not be over-ambitious.
In this regard, we also are worried a little bit
about the possible imbalanced way of processing this
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enhanced framework, because we find that, on the one hand,
there are proactive, dynamic discussions on the poverty
linkage to this HIPC enhanced framework. However, on the
other hand, the financial resources are still pending in
the air. So, we would like to caution our colleagues on
this potential three-fold approach will definitely not
work.
Certainly, on the tripartite poverty strategy
paper, PRSP, we find this is a useful tool for HIPC
countries. However, we are not yet convinced whether this
should be introduced to as wide a range of countries as
possible, because, like many other speakers mentioned,
this again evolved into a division of labor issue of the
Bank's and Fund's respective role in poverty reduction.
We need to avoid the risk of further blurring the division
of labor between the two institutions.
Finally, let me come to the paper of "Social and
Structural Reviews". We appreciate the progress made and
the lessons learned over the one year's pilot for six
countries. However, we are skeptical on the expansionary
way suggested in this paper. We still remember that one
year ago, when we discussed to introduce the new tool of
SPR, at the time there were a lot of concerns and
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hesitation from many chairs due to the complexity of the
issues the SPR is going to address.
And now, we have already expanded into the
social policy areas. Although we have already had one
year's experience for the pilot, I believe we are still at
the beginning of the learning curve. So, as the paper
also mentions, if we are going to expand into an effective
and useful one, we need more building blocks and
intellectual support from the ESW in different sector
issues.
However, obviously, we find the quality of the
ESW itself is still in question today. So, given the
limited internal capacity of the Bank, as well as the
complexity and demanding nature of these structural and
social policy issues, we would be in favor of the idea
that the SSR will continue the pilot and still concentrate
on the structural issues and the social policies, when
necessary, and we make it better focused and do it better.
Thank you.
MR. SANDSTROM: Thank you very much.
And now Jan.
MS. PIERCY: Thank you.
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I will try at this stage to be down right
elliptical and simply signal support because I think all
of the issues have been well elaborated. I have great
sympathy at this stage with the team and look forward to
answers to some of the questions. But I think some of the
questions we have posed are real conundrums; they are not
ones you are going to be able to settle today but simply
kind of take into account in weighing as we go forward.
Let me start by simply saying that we can
support the broad thrust of the papers all taken together,
and especially single out a few areas for underscoring --
one, the emphasis on the comprehensive PRSP as a common
framework for Bank-Fund programs replacing the PFP.
I also agree with statements others have made on
the need for an emphasis on gender, particular focus on
gender in poverty analyses and strategies. I think our
work over the years has documented very dramatically the
impact of our failure to understand gender differentiated
impacts, and we have a long way to go in that area, but we
must really integrate it in very carefully.
Also, the emphasis on outcomes is quite
important to us, on monitoring, on performance linkages,
including governance and anti-corruption in triggers, and
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better and more participatory analysis of the incidence
and causes of poverty, although I certainly take the point
about how difficult it is to design effective
participatory approaches. I think those complications
have been well elaborated in the interventions around this
table today. Also, transparency and accountability are
likewise very critical.
I would make just four particular points on
these papers. First, the need for Bank-Fund cooperation:
I think our lengthy discussion in the Steering Committee
yesterday of how trying to set up a single meeting to talk
about the HIPC framework because of the overlap in the
Bank and the Fund and getting it right, should be evidence
to us that this is easy to call for but will require of us
a great deal of work going forward. And indeed, the
Fund's paper -- I didn't entirely appreciate the reference
to the Bank speed -- I think that may reflect perhaps a
bit of a lack of understanding of how complex it is when
you move into the social parameter design. So, I just
underscore that and the need for cooperation.
I think the recently started joint committee is
helpful to at least begin to create greater symmetry in
what a common set of shareholders is signalling in the
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Fund and the Bank, because I recall Stan Fischer saying
that he often finds it hard to believe that, in fact, it
is a virtually identical set of shareholders, as he
follows the discussion of the same issues on both sides of
the street. So, that is critical and we have a role to
play in that.
Second, I would like to caution that we not too
quickly dismiss, as the Bank's papers appear to do, the
possibility of directing HIPC savings and special stand-
alone poverty reduction or human development funds or
windows as some have called for. I think properly
implemented in the context of transparent overall budget
procedures that are built on public expenditure reviews
and medium-term expenditure frameworks and that include
safeguards to ensure true additionality, such forums can
provide an important and a rational entry point for civil
society into decision-making that overcomes some of the
problems which have been cited in terms of when you open
it up to participation what structures that participation
and who are the legitimate participants.
So, I would just caution that we not too quickly
dismiss those vehicles, which in at least a couple of
instances have proven viable. So, I think it would be
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inappropriate for us to dismiss them too arbitrarily,
which links I think directly to another point, that the
success of this framework requires tremendous leadership
from Bank management. I think we have got to be
forthright in saying that the incentives are not in place
yet fully in the Bank. And in our examination of the
balance in the matrix structure between the networks and
over-arching corporate priorities -- and I would say
poverty reduction in that sense is an over-arching, cross-
cutting corporate priority -- vis-a-vis the immediate
priorities of a Country Director at a given point in time,
we have all acknowledged that we don't have that balance
yet entirely well calibrated or honed.
That becomes especially critical as a constraint
when we talk about strengthening our poverty reduction. I
think we simply have to keep it on the list as something
that, if we are going to do this, we are going to have to
accelerate the effort to do some pragmatic problem solving
on how to assure that this kind of a commitment translates
into direct incentives and performance evaluation measures
for staff in country units as well as in the networks.
This chair would explicitly want to say that we
think it is too soon to agree on budget support lending
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instruments and, since the paper anticipates that, we want
to make it clear that we don't think the case has yet
effectively been made.
I also want to recognize that the development
and implementation of PRSPs will take time. This is going
to require capacity building in governments and in the
Bank. This shouldn't be though an excuse for delays. We
need to begin this urgently, and I thought the paper
perhaps overstressed a bit the complexity at the cost of
recognizing the essentiality of really moving with
dispatch to do this, because we have all committed to HIPC
relief based on performance, not promises.
And unless we can identify at least some
proxies, recognizing that results will take time and there
is an inherent tension between the desire for upfront debt
relief, on the one hand, and the time required to realize
results, on the other, in a results-based approach, I
think part of the way around that is country-specific
input-based measures as a kind of interim proxy. And I
think we really have got to struggle further to find those
imperfect but workable measures.
In this regard, I would urge that we all
integrate into the discussion the tremendous work that OED
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has done. And I think in some of their evaluations that
we sometimes insufficiently integrate into our operational
design, there is a lot of material which is directly
relevant to what selections we make on indicators going
forward. So, I would commend that to all of our
attention.
Thank you.
MR. SANDSTROM: Thank you very much, Jan.
Does anyone else want to come in at this stage
or should we first hear from staff?
[No response.]
MR. SANDSTROM: So, why don't we hear from staff
and then you can come back with any further comments or
statements.
Masood will organize the answers, organize the
questions and answers and lead off. We will also call on
IMF staff to react and respond to the questions that have
been raised and to give their perspective.
So, Masood.
MR. AHMED: Thank you very much, Mr. Chairman.
Thank you all for those comments. And what I
might do is really pick up on one general point which I
think comes through in a lot of interventions. And then,
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I thought that what I would do is ask our colleagues from
the Fund, particularly Russell Kincaid, to come and talk
specifically about a couple of issues that were raised,
the balancing of macro and the social objectives and how
we can do that while preserving the macro stability
objective, and also the issue of collaboration, and in
terms from their perspective, how do see that. A number
of people have raised that.
I think it was Helena who said that this would
imply a sort of dramatic change in the way in which the
Bank works. I think certainly from my interactions in
talking to my colleagues in the Fund, they will come and
tell you that in some ways it also implies pretty dramatic
difference in the way in which the Fund will be working.
It will be useful to get that perspective.
And I thought I would ask Peter to pick up on
some of the specific HIPC-related issues, in particular
whether or not the points that have been raised about
whether this new approach will be too burdensome for some
the HIPC countries to apply, and how do we balance the
speed, the desire that is coming through that you don't
delay debt relief and yet begin to phase in this new
approach in a pragmatic way, and also the link between the
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PFP, the PRSP and the CAS and how these things fit
together, it would be good to get that.
Then, I think I will ask John to pick up on the
questions related to the SSRs which a number of you have
raised, what their focus is, how poverty overlays the core
content and how they relate to other building blocks, as
well as to this issue of the proliferation of various
products and how we try and consolidate them. And I will
ask him to be brief in response to Mr. Ghattas because
that is what John asked him to do and then Mike to pick up
on the other issues that relate to it.
The general point I wanted to make though is
really the following. What you have before you is an
approach that has conceptually I think now been laid out.
Maybe I shouldn't be saying this, but in my own mind, if I
look back six months and look at what we have today, I
think this conceptual approach represents a significant
advance not only in terms of pulling together our own
material but also in terms of pulling together the way in
which the Bank and the Fund and other partners can support
countries in moving towards a common objective in a much
more concerted, coherent framework.
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So, I think on the conceptual level the elements
of it have been thought through and are laid out for you,
and I think we have had broad endorsement of it. But it
is still very much at the conceptual level in many places.
And, as we move forward over the next couple of
years, I think you will find that it is in at least three
different ways going to have to be fleshed out. First,
the analytics of it, as we operationalize, this whole idea
of what constitute the relevant set of indicators, how do
you use outcome indicators and what kind of proxy
indicators work or don't work well; how do you actually
try and look at the content, the points that were raised
by Mr. Hyden and others about how do play certain
elements, you know, is governance one part of it or is it
over-arching.
All of these things we are going to have to work
through and some of those rough edges are not only there
now, but my sense is that this is a new frontier for a lot
of people, trying to work through those relationships.
Secondly, in terms as we move forward to apply
it, it is going to be a function of capacity, the capacity
in countries to be able to develop this kind of
participative process and the content and the dialogue on
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it, the capacity in civil society to play the role that
many of you are saying it ought to be playing and that we
I think are suggesting it plays in the design of this, the
capacity inside the Bank and in our partners who work with
it to try and follow through in supporting countries in
these areas. We don't have that kind of range of
expertise yet onboard and we will be building and training
capacity there.
The third dimension is behavior, culture. But
in some ways this is about a different way of relating and
doing business. And there is a set of behavioral changes
implied in this in the way in which different parties
interact in the design of country strategies within the
country, in the way in which we, the Bank and the Fund,
not only work with each other but, much more importantly,
actually make our processes and our products in some sense
in timetables contingent upon the pace at which countries
are able to move forward.
I think much of the discussion about whether we
have been timely in responding to the Fund, you know, we
can talk about it, I am happy to come back to that. But I
think a much more interesting question is going to be:
How will we both be timely in responding to the pace at
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which countries move? And that timely means not only
being too slow but being too fast. Because I think the
real behavioral change that we will have to work through
is recognizing that in some cases pushing for speed at our
timetable will undermine the very process of ownership
that we are trying to foster through this.
So, I think there is a whole set of behavioral
issues there and internal behavioral issues which are
going to be partly related to the respective roles of
center and Country Directors, incentives that reinforce
those behavioral changes.
I don't have today any kind of simple rules of
thumb or options that I can say this is how we are going
to really ensure that those behavioral changes take place
within the Bank except to say the things that you have
pointed out, that you can work on a number of levers to
push on those. The are incentives, the way in which we do
evaluations, it is the management attention, it is the
celebration of those who are moving forward more quickly
than others.
I think what you will see over the next year or
two is a messy, patchy, uneven process coming to you.
Some of the country strategies that will come to you will
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be much stronger in terms of being grounded in this
framework than others. I say that now because I think it
is very important that, while we adhere firmly to the
objectives of where we are trying to go with this
framework, if you endorse it, we recognize that the
process of getting there for these very reasons is going
to be an uneven and sort of phasing-in process. And we
will have two systems in some ways running in parallel for
a period.
I mean, in some countries you may see a PFP and
in others a PRSP, and you might legitimately ask why do
you have these two still coexisting. And I think the
answer will be that one was just ready to go and the other
wasn't.
So, I say this as a prelude to getting specific
answers because in some ways some of the answers you will
get will still show the same rough edges that the papers
themselves show in terms of where we are and how we begin
to phase in this approach over the next year and eighteen
months.
So, with that, I thought I might ask Russell to
sort of say from his perspective, from the Fund, how
things look on those issues.
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MR. KINCAID: Thank you.
Let me say at the outset that the Fund staff
that has been working on both the HIPC Initiative but also
the social sector questions and ESAF arrangements and
policies more generally work quite closely with their Bank
counterparts in commenting on the Bank's papers that are
before you today, but also in reacting and accommodating
the Bank's comments on their own papers. And this has
been I think a very fruitful collaboration.
We have come a long way in the last six months.
And there, I very much share Masood's remarks on that.
I would also like to say that several Directors
here have commented that the poverty reduction strategy
papers imply a shift in the way the Bank works, a very
fundamental shift. And I think that is right. They also
imply a very fundamental shift in the way the Fund works
and works not only internally but with the Bank. And that
I think is recognized at all levels within the two
institutions.
I don't think we have answers to all the
questions about how the processes need to change, but I
think there is a very clear means of communication going
on at this stage.
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In that context, let me share with you something
which our management, the Managing Director has said to
our Board, which will be part of the dialogue and the
discussion the Fund's Executive Board will have on Monday.
That is that it is recognized that the ambitious proposals
that are put forward for the HIPC countries have
implications for how the Fund supports all low-income
developing countries; that is, how the Fund's ESAF
programs work, in general.
And therefore, the management of the Fund has
talked about the need to adapt ESAF arrangements. In
fact, it was even proposed that the whole facility be
renamed to reflect the fact that this will be a reformed
ESAF that is going to come out of this process.
We are in the opening stages of that discussion
within the Fund. So, it is really not possible for me to
go into great detail. But I think it is clear from our
perspective and I think from the Bank's that the PFP
process has not worked well. There are weaknesses there
and it needs to be replaced. And the poverty reduction
strategy paper I think is the instrument that we think
would be a useful replacement. And I will leave my Bank
colleagues to expand about that.
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But that is the perspective that certainly is
shared on the Fund side, and we are looking very much
forward to seeing more input from the Bank in this
process, not only in terms of what I would say would be
the medium-term budgetary strategies of these countries
but in the annual budgetary processes and in terms of the
priorities, the quality of spending. This is where the
Fund staff sees the greatest need at the moment for Bank
staff input, because that is really the nitty-gritty
choices that a country faces each year. And particularly
if there is an external shock and there is a need for
budgetary adjustments, different than had been expected in
the medium-term plan, well, what is going to give?
And here, I think the authorities and the Fund
staff in a participatory process want to have greater
input at a technical level as well as in a social,
political context.
It is both of these aspects that we want to see
strengthened -- the expertise coming from the Bank but
also a more open and consultative process. This is very
much I think in line with what you are talking about here
at the Bank.
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From our own side, we recognize that the setting
of macroeconomic objectives, fiscal targets needs to be an
iterative process, a process that takes onboard what the
objectives are for poverty reduction in the social area,
but more broadly development objectives. But what the
Fund needs and what the authorities need I think are a
clearer idea of what the costs are, the resource costs,
the budgetary costs of all of these programs are, and also
the priorities that need to be assigned.
And that is a very important part of this
process. And there, there is scope in the fiscal envelope
and in the macro framework to make adjustments. Now how
much, that will have to be decided in each individual
case. But what we see as going on is an iterative process
-- Bank, Fund and the authorities trying to work out what
is optimal for this country, recognizing that macro
stability and low inflation have positive effects on
poverty reduction and on growth.
Many of these countries, particularly HIPC
countries, became highly indebted because they had
unsustainable fiscal policies. So, we want to make sure
that fiscal policies are sustainable. And that is I think
a common framework.
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I guess in responding to the two questions that
were put to me, we see a need for these changes at the
Fund. We are going to work very hard in the days ahead to
come up with some of the -- I won't call them answers --
but come up with some of the processes, some of the
approaches that allow some the ragged edges that we now
have before us to become smooth.
Thank you.
MR. AHMED: Peter.
MR. FALLON: Okay. Thank you very much. And
let me say again how much we very much appreciate the
comments from the Executive Directors on our papers. This
is really very encouraging and a very nice position to be
in.
I am just going to talk about two things. One,
I think was -- and this came out from several speakers --
about the burdensome nature or will all of this business
over-burden poor countries and perhaps the HIPC countries
which tend to be particularly poor.
And I think in a way the answer has partly
actually come out of the comments of various Executive
Directors. I mean, in a way, at the very end this is
going to be a tradeoff situation. On the one hand, yes,
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we don't want to delay getting relief and helping these
countries. On the other hand, to put it rather crudely
and in a rather English way, we don't want to give
something away totally for nothing. We do want to see
this as integrated into a poverty reduction strategy which
is long-term and going to have long-term benefits.
Now quite clearly, when you are dealing with a
situation like this, you are looking for some form of
compromise, though I suspect the nature of the compromise
will probably change as we move through.
Let me just make two or three comments on being
burdensome, over-burdening I find easier to pronounce.
First of all, in fact, it relates to another question and
that is, in some sense, will HIPC be enough? Will there
be enough resources? Well, the answer is even with HIPC,
with domestic resources, these remain very poor countries
and the amount of investments that can be placed on
various poverty reduction actions are obviously limited.
That forces the pragmatism in one way. With
limited resources, this tends to mean, of course, that you
tend to seek a few really key priorities and to
concentrate on those. That is one kind of constraint that
comes across.
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A second one I think is the participatory
process. We have reflected in the documents, and I
reflected this this morning, we expect this actually to
help. One of the problems we have, particularly in the
poorer countries, we often don't know what NGOs or what
various donor agencies are actually doing. One thing this
might do is actually put this information basis together
to design the process and then later easier to implement
the process as it unfolds.
Thirdly, this point was made very well I think
by the Dutch chair, the World Bank and the IMF probably
just cannot do all of this on their own. We are hoping,
in fact, that the design and the monitoring and all of
these things will be shared between the Bank, the Fund and
other relevant agencies. In that sense, the burden we see
as being shared and spread rather more perhaps than at the
present time.
The compromise, as I said, will shift over time.
It is definitely then going to be a transitional process,
and John Sinclair said, well, he would like to know
staff's view on how the new HIPCs will be handled. I
don't think staff really have a clear view right at this
point on a case-by-case kind of basis.
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Initially, the compromise will have to be -- if
we think of it -- on a scale a bit towards the idea of,
look, we don't want to create unnecessary delay; we
recognize that a good strategy will take time to
formulate; it will take time to put into place. And we
don't want to hold people up.
As we move along the scale over time, I suspect
that we will begin to tighten. I suspect that, as we have
said, today that, while it is desirable basically that a
strategy be in place at the decision point but it is not
really absolutely essential, I predict -- it is just a
personal prediction -- that a few years down the road it
will be the case that it will have to be in place at the
decision point. In other words, I anticipate that this
will tighten gradually over time in what we hope is a
demonstrated success of what we are trying to do.
The point about transition and moving over time
I think also applies to the question of the PRSP and the
PFP. We do recognize that the PFP is not going to die
tomorrow. There will be countries that will have PFPs and
gradually bringing PRSPs in.
But let me just address perhaps briefly the
question of why trying to do it. Remember, we are trying
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to introduce a new enhanced framework, which is going to
be participatory, it is going to have a consistency for
the first time we believe between the macro, the
structural and what sometimes is called the social -- I
would rather say other poverty reduction components.
The idea of the PRSP is this is going to be, if
you like, a flagship document, which is going to be
published, it is going to be a tripartite document, owned
by the government. It is going to basically contain all
of the indicators that are used, largely perhaps
intermediate indicators. As we stressed and some speakers
have stressed, we are looking at initially short time
frames and we, of course, have to work with intermediates
rather than outcomes for purely practical reasons.
A big point about this is we expect -- and this
is the linkage to the CAS -- the CAS would take the
strategy and basically would judge progress under the
strategy for its lending instruments. We also hope -- it
may not happen -- that other institutions would start to
use this document in much the same way.
Our comparators with the PFP, I have written
three PFPs -- I won't say for which country -- some time
ago at the World Bank, and I regarded it then as
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fundamentally a shadow document to what was then the SAF
and later the ESAF. The PFP was a document really without
any particular kind of teeth.
I understand over time it has become an even
paler shadow. It is taken not terribly seriously by Bank
staff. There have been surveys of this. We suspect there
is not much ownership on the part of governments.
Now, we could do all the things in the PRSP and
still call it a PFP and just make this change. We
suggested this idea. There was a feeling though that,
since we are making a real discrete change at the present
time, we really need a change in the title to signal this,
much the same way as my colleague from the Fund said they
may change the title of the ESAF, because that is changing
its particular nature.
Thank you very much.
MR. PAGE: Well, I have been given the task of
trying to be brief in addressing the relationship between
our diagnostic instruments in country strategies --
unfortunately, Marcos is not here to grade me on my
performance; so I hope you will report back to him later.
The first set of issues really have to do with
the role of the SSR and how we see this fitting into these
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poverty-focused country assistance strategies. Put very
simply, we see these as the tools by which Country
Directors and country teams can achieve a more systematic
analysis of the issues in their countries and a better
strategic focus.
In a way, it is answering the first question of
good strategic planning, which is where do we want to go.
It is a help for that particular purpose. We do not see
these instruments really in a sense as ends in themselves.
And I want to assure Directors that we don't see a poverty
note substituting for a poverty-focused CAS, nor do we see
a social and structural review as in any way undermining
the need to have then a well-focused country strategy and,
within that, a well-focused Bank country assistance
strategy. These are tools to do the job.
The second question, of course, in strategic
planning is: How do we get there? And that question is
really the one in which we have to bring the array of
matrix services that we have discussed today, the role of
the networks in really supporting the regions and Country
Directors in setting strategic priorities within the
broader country assistance framework.
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That brings us, of course, to the question of
the role of instruments. Which instruments do we deploy?
Those are I think very much a country-based set of
decisions that have to be made. We note some Directors'
concerns with respect to budgetary support instruments,
but please note that there is nothing in this strategy
that presupposes any selection of instruments. The tools
have to befit the task.
It also speaks to the issue of capacity building
in our own analytical and advisory services. And here,
let me take a slight exception with our colleague from the
Fund. One of the things that I think we have tried to
demonstrate to you in the past two years is that,
particularly in the critical area of public expenditure,
which in some ways is one of the key links between public
actions and poverty outcomes, the Bank is moving well
beyond the mere certification of public expenditure
programs, if you like, the old traditional shooting of
white elephants.
To answer the question that I always got when I
was a Chief Economist: How do we keep from making the
same bad decisions the next time? The issue is really to
create the capacity within countries to have better
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selectivity and better prioritization of the public
expenditure programs. Certification is a part of that but
it is not the end of that. And I wouldn't like to leave
an impression with Directors that we are simply going to
be engaged in a process of certifying public expenditure
programs. That is not the objective of our work in public
sector development and public expenditure.
To come to the role of the SSR, the fundamental
concept of the SSR is systematic coverage of a set of
questions dealing with the underpinnings of the market
economy -- social and structural -- but within an
integrating framework, the integrating framework being the
objective of poverty reduction.
So, it is not that we are trying to create a
poverty instrument or a poverty reduction instrument in
the SSR, but to actually provide an over-arching framework
within which we can understand structural and social
issues and be more selective in the process of answering
the question of where do we want to go.
It is a very interesting case that in the six
pilot studies the question of ownership has evolved. It
is no secret to many of you that some countries were
deeply concerned about how social and structural reviews
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would be used. What we have found is that, as these
social and structural reviews have been undertaken, as
governments have been engaged in the process of design, as
we would do with any process of economic and sector work,
we have had substantially greater buy-in over the course
of the pilot period than in the initiation of the social
and structural review process. That is seen by the fact
that we now have I think received clearance from all
governments to bring those documents to the Board. They
are now formally parts of ESW.
When we began, we said to them you can choose,
and many of them said let's wait and see. The answer has
been we are quite satisfied with this process and believe
it has taken onboard our concerns about balance and about
perspective, many of those concerns expressed by the
Chinese chair today.
Given that evolving relationship, it is also
interesting to ask what have they been used for? And here
I would like to call your attention to the Dominican
Republic SSR which is a particularly interesting example
of an SSR in a CDF country. The current proposal on the
table from government is to actually use that as one of
the fundamental underpinnings of a set of dialogues to be
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undertaken among all the parties within the Dominican
Republic -- political and civil society organizations --
on forming a vision, but a national vision of where the DR
wants to go. So, this has become a document which is not
only in some sense owned by government and the Bank but is
going to be used to try to build a new level of consensus
at the level of the society in terms of a country strategy
focused on poverty reduction, incorporating the
underpinnings of the market economy.
I think that is where we would like to go with
SSRs, a tool which can help in this process of forming a
vision of where countries wish to go.
Where will we go in practice? We have eight to
ten country teams who have asked for further work on SSRs
in the coming year. We will begin by supporting those.
As we learn more from that process and as we learn from
this process of developing poverty-focused country
strategies, we will come back to you with further
recommendations as to whether management wishes to move
further in the implementation of this particular tool.
Finally, let me very briefly address the
alphabet soup of analytical acronyms. You are right,
there are too many of them; they are too confusing; they
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change all the time. Even I cannot keep track of them.
It makes me feel like I am back in the U.S. Navy.
We will try in the course of the coming year to
do what Joanne Salop calls "business-ify" our ESW program.
In doing that, what we will do is reduce the number of
standard ESW products which we offer both to country teams
and to client countries, to develop a set of network
support services to those to ensure greater coherence and
comparability among them and greater quality assurance
from the network side.
At the same time, let me point out that, as we
do that, and reduce the range of these products, which
would be in a sense the building blocks identified by the
SSR type product of critical areas that are constraints to
poverty reduction, we will also have to maintain a
balance.
Because, as many of you know, much of our
analytical and advisory work today is not done in the form
of formal ESW products but just in-time policy notes and
other responses to emerging needs. And while we move
toward greater standardization, on the one hand, I think
we also have to maintain a balance to be sure that we are
responsive to the client, on the other.
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Nevertheless, I hope that within a year's time
we can come back to you and assure you that we have
reduced the number of alphabetical combinations, and that
you can also have greater confidence that when you look at
one of these particular acronyms, you know more or less
what it is going to contain and you have a better sense of
what its quality will be and what its content will be.
So, I think in that sense we hear you, we share
the same concern and we are trying to respond.
MR. WALTON: Thank you very much. I will be
really quick. People get nervous when you say that.
First, to reaffirm we have got two processes
going on. What we are really talking about today is a
very practical process of how you do business in countries
and in sectors. I would like to reaffirm that what we are
building on today is a lot of what is beginning in
different countries, different sectors in the Bank but it
needs to be extended and that, of course, will take time.
I want to pick up one issue within that, and
that was raised by a number of Directors, and that is
goals, how they are set, and just to reaffirm that we see
a strong complementarity between participative processes
at the societal level to set goals and use indicators that
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are relevant to that society, and a technical process
which will define the tradeoffs and define what works and
does not work from international experience. Often that
will involve, and we take note, issues of employment,
issues of poverty lines, but that will have to be defined
on a country-by-country basis.
The next point, we certainly take note of a lot
of substantive issues that were raised about how we can
continue to learn about what is important and what matters
in poverty reduction strategies. Just to cite a few,
there is a lot of resonance with the central issue of
distribution, questions of how you confront issues of
asset inequality, what is really meant by empowerment, how
that may relate to issues of conflict, the fact that
governance is certainly not just about empowerment but it
cuts across everything, and that there is a powerful
interrelation about issues that gender is central both in
terms of the dimensions of poverty and its process.
The only thing I will say about this is this
will be a central part of the debate over the coming year.
And this forum will start next Friday -- or the next phase
will be next Friday in the discussion of the WDR. So, I
am going to postpone any discussion of that till then.
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The only thing I would underline which is part
of that process is the difficult question of understanding
the types of institutions and the types of processes that
genuinely represent the interests of poor people. That is
something we are only beginning to work with. It is what
the poor communities themselves are saying is a major
missing link, and that governments are failing them, even
when there are formal structures of voting. But that is a
central challenge which we will again be discussing in the
future.
The final thing, we take note of the concerns of
the poverty notes and the need to link them with the CAS.
And, as I said before, we will get back to you to discuss
how to achieve the common end I think that we all mutually
understand and avoid the risks.
Thank you.
MR. SANDSTROM: Thank you very much.
Good answers to good questions. Now are there
any further comments? Jan.
MS. PIERCY: I risk the wrath of my colleagues
at this hour. One point, going back to Masood Ahmed's
opening -- this is a point I make through the lens of the
Ad Hoc Committee on Board Policies and Procedures -- when
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Masood made the point that if we endorse this framework,
then, of course, we have to see that it is consistently
applied across CASs and how countries are held to it.
The point I want to make is that the Board has a
role to play here. Part of our role -- and that is part
of why it is important that we debate this and that we do
fully elaborate the points of agreement and the points of
difference -- because it should mean something if we in
the end endorse the framework, and that then should mean
that we consistently apply it across the CASs. And we are
a part of how you begin to achieve that consistency.
And I want to say that management can hold the
Board accountable, just like the Board holds management
accounts. This is part of what we had begun discussing in
this Ad Hoc Committee. So, I think we shouldn't shy away
from envisioning the role of the Board when management has
its conversations going up to the Strategic Forum, where
this will be discussed, because I think that is really
critical. And that also translates into how we orient in-
coming members of the Board, so they know there is a
framework, and it was adopted and this are its
implications, so that we over time become an active
partner in this process.
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Thank you.
MR. SANDSTROM: Thank you, Jan. You are right;
it is very helpful. We all need to focus on this and be
disciplined and just work together and get it done.
And we need also to disseminate this to staff,
and that is the next challenge now also, to work with
them. We have a number of teams who are actually doing
it, and they are cross-fertilizing within and across
regions. But we need at the corporate level to do much
more.
Part of that is to develop an operational plan
to implement this. So, that is the next challenge.
Are there any further comments, any further
statements?
[No response.]
MR. SANDSTROM: You know what we need to do now.
This is the Board discussion in the Bank. The Fund will
be discussing the same sets of issues on the HIPC link
paper on Monday. So, as usual, what we would like to do
is to transmit the formal summary to the Fund Board of
this discussion.
So, if you have some more patience with us, I
will read out the draft of a summary of this discussion,
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which will try to highlight the major themes of what came
out. I will do that and then, if you have any further
comments or changes, additions to this, if you could give
it to us now and then we will work on it, clean it up and
get it out quickly. So, let me try this.
Directors strongly welcomed the thrust of both
documents and the effort they reflect to enhance the
impact of Bank and Fund activities and the role of
external assistance, more generally, including debt relief
in poverty reduction.
Directors endorsed the emphasis on outcome-based
indicators, the international development goals,
participatory process and country ownership of a poverty-
oriented development strategy.
Directors supported the joint proposal by Bank
and Fund staffs to move to tripartite poverty reduction
strategy papers as a basis for integrating policies and
programs.
On the paper, "Building Poverty Reduction
Strategies in Developing Countries", Directors welcomed
the comprehensive approach to poverty reduction. They
stressed that sustained poverty reduction is not possible
without economic growth. Consequently, macroeconomic
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stability and structural reforms that allow sustained
growth are an essential part of any poverty reduction
strategy.
But to maximize the poverty-reducing impact of
growth requires a determined focus on the determinance of
poverty and related public action. As poverty is multi-
dimensional, the poverty response would also need to be
multi-dimensional, relating not only to more spending in
social sectors but also to other reforms that improve the
access of the poor to the benefits of economic growth.
Directors emphasized the need to be pragmatic in
the application of this approach, taking into account the
circumstances of each country. They also cautioned that
poverty reduction is a long-term process and we should
avoid creating unrealistic expectations which do not take
into account capacity constraints, including those related
to statistical information and poverty monitoring.
Directors agreed that broad-based participation
is needed at the design, implementation and monitoring
stages of a successful poverty reduction strategy.
Directors also supported the use of a clear set of
outcome-oriented goals and intermediate indicators to
ensure that poverty reduction strategies are well-designed
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and provide a feedback mechanism to ensure that they are
implemented effectively.
The selection and monitoring of such indicators
would be a good vehicle for broad participation of civil
society. Directors agreed that in the context of the HIPC
Initiative and given the irrevocable nature of debt
relief, transparency and accountability were important
features of any poverty reduction strategy and would help
ensure effective use of debt relief after the completion
point.
In this context, they suggested that governance
be given higher priority among the levers for public
action in the poverty reduction strategies.
Finally, Directors urged management to move
quickly to operationalize the approach and to ensure
effective implementation.
On the paper, "Strengthening the Link Between
Debt Relief and Poverty Reduction", Directors endorsed the
broad and open consultative process undertaken to solicit
the views of interested parties in the second stage of the
review of the HIPC Initiative. They welcomed the wide
range of comments and proposals received from NGOs,
religious groups, international organizations and others.
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These extensive contributions, which have been conveyed in
full to the Executive Boards of the World Bank and IMF and
summarized in the HIPC link paper, provide valuable inputs
into strengthening the link between debt relief and
poverty reduction.
Directors fully endorsed the integration of HIPC
debt relief into comprehensive efforts to reduce poverty
and the introduction of the poverty reduction strategy
paper to this effect. Directors noted that poverty funds
could provide a vehicle to foster the link between debt
relief and poverty reduction. However, they stressed the
need to ensure that all resources, including amounts
released by debt relief and new inflows of external
assistance, were integrated in a transparent, well-managed
and accountable resource allocation process.
Directors noted that resources other than debt
relief would continue to provide the bulk of resources
available to finance spending on poverty reduction and
cautioned against poverty funds that were not integrated
into the wider budgetary process.
Directors agreed that the poverty reduction
strategy paper as a tripartite document of the
authorities, the World Bank and the IMF could be a very
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effective vehicle to ensure the poverty impact of Bank and
Fund assistance, to link debt relief and poverty reduction
and to ensure ownership, transparency and broad-based
participation.
They noted that moving to the PRSP would take
time and should be phased in, depending part on the pace
at which countries can build the relevant capacity.
Directors also supported the proposal that the
PRSP should be discussed by the Executive Boards of the
World Bank and the IMF.
Directors stressed the importance of the early
provision of debt relief under the enhanced HIPC
framework. They agreed in principle that the poverty
reduction strategy should be in place when a country
reached its decision point under the HIPC Initiative, but
supported the need for flexibility so that the decision
point could take place while the poverty reduction
strategy is being formulated, provided the government is
committed to a firm timetable for the formulation and
implementation of the strategy which should be in place
well before the completion point.
Directors agreed that in HIPCs that have already
reached their decision or completion points under the
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current framework, the timing of the proposed additional
debt relief should be determined, inter alia, on an
assessment of their progress in the signing and
implementing their poverty reduction strategies.
And finally, Directors supported broad
dissemination of the two papers.
Is there anything you want to add, delete or
change?
[No response.]
MR. SANDSTROM: If not, we will go through this
and clean it up and make sure that it is clear, not too
repetitive, and that we have really captured the main
points. But I think this is a fair summary.
We have gone through the written statements as
well as listened carefully today.
So, thank you very much. These have been four
good hours. Thank you. Thanks to the team also.
[Whereupon, at 5:35 p.m., the meeting was
adjourned.]
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