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AN EVALUATION OF THE 2007 STRATEGY AND IMPLEMENTATION PLAN
World Bank Country-Level Engagement onGovernance and Anticorruption
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An EvAluAtion o thE 2007 StrAtEgy And implEmEntAtion plAn
W Bak C -lee Eaee
geace a Ac
ovErviEW
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ii | World Bank Country-Level Engagement on Governance and Anticorruption
2011 Te Independent Evaluation Group
Te World Bank Group
1818 H Street NW
Washington DC 20433
elephone: 202-458-4497
Internet: http://ieg.worldbankgroup.org
E-mail: [email protected]
All rights reserved
1 2 3 4 5 14 13 12 11
Tis volume, except or the Management Response, Statement o the External Expert Panel, and Te Chairpersons
Summary, is a product o the sta o the Independent Evaluation Group (IEG) o the World Bank Group. Te ndings, in-
terpretations, and conclusions expressed in this volume do not necessarily reect the views o the Executive Directors o Te
World Bank or the governments they represent. Tis volume does not support any general inerences beyond the scope o
the evaluation, including any inerences about the World Bank Groups past, current, or prospective overall perormance.
IEG does not guarantee the accuracy o the data included in this work. Te boundaries, colors, denominations, and other
inormation shown on any map in this work do not imply any judgment on the part o Te World Bank Group or IEG con-
cerning the legal status o any territory or the endorsement or acceptance o such boundaries.
Rights and Permissions
Te material in this publication is copyrighted. IEG encourages dissemination o its work and permits this document to be
copied or otherwise transmitted, with appropriate credit given to IEG as the authoring body.
How to cite this report:
IEG (Independent Evaluation Group). 2011. World Bank Country-Level Engagement on Governance and Anticorruption:
An Evaluation o the 2007 Strategy and Implementation Plan. Washington, DC: Independent Evaluation Group, Te World
Bank Group.
Cover: World ags at the Opening Plenary Session o the World Bank/International Monetary Fund Annual Meetings 2009.
Photo courtesy o Simone D. McCourtie /Te World Bank.
ISBN 13: 978-1-60244-195-8
ISBN 10: 1-60244-195-2
Independent Evaluation Group
Strategy, Communication, and Learning
E-mail: [email protected]
elephone: 202-458-4497
Facsimile: 202-522-3125
Printed on Recycled Paper
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Contents | ii
Ces
Abbeas Ackwees
ew
Exece Sa 1
maaee resse 11
Caess Sa: Cee deee Eeceess (CodE) 18
Saee e Exea As pae 19
Ces e Cee ve 21
pas 24
te cee eaa s aaabe a ://e.wbak.
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iv | World Bank Country-Level Engagement on Governance and Anticorruption
CAS Country Assistance Strategy
CODE Committee on Development Eectiveness
FY Fiscal year
GAC Governance and anticorruption
GPF Governance Partnership Facility
IBRD International Bank or Reconstruction and Development
IDA International Development Association
IEG Independent Evaluation Group
ORAF Operational Risk Assessment Framework
PREM Poverty Reduction and Economic Management (World Bank)
VPU Vice presidential unit
Abbeas
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Foreword | v
Tis evaluation o the World Banks work in governance
and anticorruption (GAC) was prepared by an IndependentEvaluation Group (IEG) team led by Navin Girishankar.
Te evaluation was conducted under the direct guidance
o Cheryl Gray (ormer Director) and Ali Khadr (Senior
Manager), and the overall guidance o Vinod Tomas (Di-
rector General).
Team members included Mary Breeding, Barun
Chatterjee, Maria Mendez Cintron, David DeGroot, Raj
Desai, William Hurlbut, Gathoni Macharia, Steano
Migliorisi, Aime Niane, Anwesha Prabhu, Bahar Salimova,
Susan Stout, Antti alvitie, Cheryl oksoz, Utkir Umarov,
and Clay Wescott. Peer reviewers were Homi Kharas, Mike
Stevens, Jean Jacques Raoul, and Steven Webb.
Te report also benetted rom the advice and review o an
external panel composed o Ashra Ghani (Chairman o the
Institute o State Eectiveness), Monica Macovei (Member
o the European Parliament and ormer Minister o Justice
o Romania) and Andrew Natsios (Proessor in the Prac-tice o Diplomacy, Georgetown University, Walsh School o
Foreign Service).
IEG is grateul to World Bank senior management and sta
or providing valuable time, inormation, and eedback re-
quired to conduct this evaluation. In particular, IEG thanks
the GAC Council as well as sta in the GAC and Gover-
nance Partnership Facility (GPF) Secretariats, the Poverty
Reduction and Economic Management (PREM) Public
Sector Governance Anchor, and Country Oces visited
during eld missions. Te participation o donor ocials
(including those nancing the GPF) and civil society rep-resentatives in consultations was invaluable. Finally, the
team is grateul to the Norwegian Agency or Development
Cooperation (NORAD) or providing additional resources
to support eld visits in the preparation o thematic and
country studies.
Ackwees
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vi | World Bank Country-Level Engagement on Governance and Anticorruption
Diverse country experiences and the literature show how
well-governed countries are better able to oster economic
opportunities, deliver services to the poor, regulate mar-
kets, and ght corruption. Evaluation and research indi-
cate that programs and projects perorm more eectively
where public sector management (as by the Country Policy
and Institutional Assessment or instance) and adherence
to rule o law are stronger. Te appeal o good governance
resonates across socio-economic groups, as seen in recent
events in the Middle East and North Arica.
Yet the agenda to improve governance and the ability o ex-
ternal agencies to boost its eectiveness are complex, tough,
and enormously challenging. Evaluations nd greater eec-
tiveness resulting rom eorts in home-grown institutional
building and raising risk-awarenessincluding through
actions in the social and inrastructure areasthat go be-
yond some o the direct measures to ght corruption.
Te World Bank has sought to support country eorts to
develop accountable and eective states in several areas
or example, nancial management, service delivery, in-
vestment climate, and accountability systems. In 2007, the
Banks governance and anticorruption (GAC) strategy rea-
rmed the commitment to this agenda. Entering its ourth
year o implementation, the strategy seeks to increase the
number o programs and projects addressing GAC issues
systematically. Tis eort links to a larger reorm agenda,
including the strengthening o the Integrity Vice Presiden-
cy, an institutionwide transparency initiative, and modern-
ization o investment lending.
Tis evaluation is concerned with the relevance and eec-
tiveness o the GAC strategy and its early implementation
eorts with regard to country operations. Interestingly, it
benchmarks the Banks country level engagement on GAC
issues beore and afer the 2007 strategy. It also reviews
the change management aspects such as the inherent op-
erational motivations to support the GAC agenda. By con-
tributing to a Bank-wide learning process, this evaluation
o an ongoing, multi-year eort seeks to inorm a planned
second phase o GAC implementation.
Te evaluation indicates some o the improvements and
suggests actions that are needed to get stronger results on
the ground. It calls on the second phase to combine the in-
ternal orientation with greater stress on operational solu-
tions to help build governance capacities in countries. Tis
emphasis will require an updated approach to institutional
strengtheningone that requires more innovative nancial
instruments; more systematic, harmonized, and consistent
risk management across countries; and improved metrics
or implementation and ollow up.
Dicult as governance reorms are, they remain a crucial
part o the development agenda. Drawing on the lessons o
experience to strengthen eectiveness, the World Bank can
help countries make progress in addressing deep-seated
governance challenges.
ew
Vinod Tomas
Director-General, Evaluation
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Exece Sa
Executive Summary | 1
Wd Bak Cy-leeEaee geace ad
Ac: A Eaa he
2007 Saey ad ieea pa
Well-governed countries are better able to ormulate
growth-enhancing policies, deliver essential services to
the poor, and regulate nancial and product markets. Te
appeal o governance reorm and the ght against corrup-
tion can resonate widely across diverse countries and social
groups, as demonstrated by recent events in the Middle
East and North Arica. Building on more than two decades
o experience, the World Banks 2007 governance and anti-
corruption (GAC) strategy rearmed its continuing com-
mitment to the crucial and challenging agenda o helping
countries develop accountable and eective states.
Focusing on the country operational aspects o the over-
all GAC agenda, the Independent Evaluation Group
(IEG) assessed the relevance and eectiveness o the
strategy and its frst phase o implementation eorts over
fscal years 200810. A key eature o the evaluation is its
benchmarking o the content and quality o the Banks
country-level engagement on GAC issues, beore and a-
ter the 2007 strategy. Itdid not review the organizationalrestructuring o the Integrity Vice Presidency and related
reorms to strengthen the Banks corporate investigations
and sanctions regimes, ollowing the Volcker Panel re-
port. It also did not cover the organizational renewal o
the World Bank Institute or individual global partner-
ship programs with GAC themes (such as the Stolen As-
sets Recovery Program).
Te ndings o this evaluation are, by design, intended to in-
orm a planned second phase o the GAC implementation
a learning process that signals one o the Banks strengths.
Tey can be viewed in the context o an ongoing change
management and internal reorms agenda, which includes
the strengthening o the Integrity Vice Presidency, a new
World Bank Institute strategy, an institutionwide transpar-
ency initiative, and eorts to modernize investment lending.
aken together, these reorms have sought to create an en-
abling environment or the Bank to pursue the GAC agenda
on multiple rontsincluding its operational engagement in
partner countries, the subject o this review.
As it did in the years preceding the strategy, the World Bank
has continued to support good governance objectives in
virtually every country where it has operations. In many
countries, it has sustained a medium-term GAC dialogue
on issues such as public nancial management, service de-
livery, and the investment climate. Borrowers, development
partners, and civil society organizations continue to value
the Banks analytical capacity and its long-term experi-
ence in this area. Tere have been signs o progress sincethe strategy was launched. Notably, the Bank made plans to
support institutional strengthening in three times as many
countries in the scal 200810 period as it did in the scal
200407 period. Its use o governance and political analysis
in project design has increased signicantly, as has its use o
some country systems in projects in Arica and in countries
with weaker institutions.
At the same time, important opportunities have yet to be
seized. Project-level solutions to the challenge o institu-
tion-building need to keep pace with increased commit-
ments in country strategies. Te quality and coverage opolitical economy analysis in policy dialogue needs to show
the systematic improvement evident in projects. Tere is
still room or country programs and projects to improve
measurement o governance results, to expand overall use
o measures to oster the demand or good governance, and
to deploymore systematicallyenhanced GAC measures
to manage duciary and governance-related risks. Also,
the Banks operational response in countries experiencing
governance downturns needs to be more consistent. Many
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2 | World Bank Country-Level Engagement on Governance and Anticorruption
stakeholders inside and outside the Bank hold the view that
lending goals conict with pursuing GAC objectives.
Key design elements o the 2007 strategy and the imple-
mentation plan are to be addressed i the Bank is to more
eectively help countries overcome deep-seated gover-
nance challenges such as civil service dysunction, cap-
ture o natural resource rents, and political-institutional
barriers to market entry and improved service delivery.
o date, GAC operational eorts have ocused more on
the Banks own capacities, resources, and reputation as a
development partner, than on strategic issues acing part-
ner countries. Guidance to operational teams emphasized
managing transaction-level duciary risks in investment
projects rather than updating the Banks approach to man-
aging systems-level risks, including in policy-based lend-
ing. Implementation arrangements within the Bank were
ragmented and needed to be more oriented to ront-line
concerns and results. And internal and donor resources
needed to be more strategically deployed to meet assessed
GAC needs.Drawing on these lessons, the planned second phase o
GAC can more ully deliver on its potential by ocusing on
operational solutions that help build country governance ca-
pacities. In particular, the Bank needs to update its approach
to institutional strengthening in the core public sector, the
social and inrastructure areas, the investment climate, and
the demand side o governance. Such an approach would
take advantage o innovations in nancial instruments,
improved analytics, and more systematic measurement o
results. Te Bank can also encourage innovation in these
areas by clariying its zero tolerance stance on corruption
and, in particular, by ocusing more on systems-level risks
across all operations rather than only transaction-level risks
in investment projects. In parallel, internal budget and trust
und resources can be more strategically deployed in ways
that empower sector and eld-based units.
Eaa Back
Te Bank is currently implementing its 2007 strategy
Strengthening World Bank Group Engagement on Gover-
nance and Anticorruption. Te strategy and its implemen-
tation plan sought to increase signicantly the number o
countries and projects in which the Bank helped system-atically address GAC issues, although it did not indicate
targets or a timerame within which this objective would
be achieved. Bank teams were provided guidance, toolkits,
and operational support as part o initiatives to enhance
country engagement (GAC-in-countries) and to strength-
en incentive and risk management rameworks in sector
dialogue and project management (GAC-in-sectors and
GAC-in-projects). Global GAC eorts tried to increase Bank
involvement in international peer learning networks and
collaborative governance initiatives. Tis evaluation as-
sessed the relevance and eectiveness o the strategy and
FY0810 or Phase 1 implementation eorts in enhancing
the Banks country-level response to GAC issues. Trough
this evaluation, IEG aims to help strengthen the Banks
overall support to countries in developing eective and ac-
countable states, and to ulll the institutions commitment
to independent evaluation o large corporate strategies and
initiatives.
Te evaluation developed and applied a ramework or as-
sessing how Bank country programs and projects address
GAC issuestheir GAC responsiveness. Te ramework de-
ned GAC responsiveness as the Banks selectivity in identiy-
ing entry points and instruments; its support or institutional
strengthening; its identication, signaling, and mitigation o
risks; and its use osmarter project design (or example, im-
proved t to country contexts, demand-side and preven-
tive measures against raud and corruption, use o country
systems, and results orientation). It did not seek to quantiy
the actual levels o raud and corruption in projects. Teevaluation also reviewed GAC-in-sectors issues in the roads
andprimary education sectors, as well as accountability insti-
tutions. Te evaluation looked at support provided to coun-
try-level GAC eorts, or example, the preventive services
work o the Integrity Vice Presidency, key multi-stakeholder
engagements by the World Bank Institute, and some global
eorts. It did not review the organizational restructuring
o the Integrity Vice Presidency and related reorms to
strengthen the Banks corporate investigations and sanc-
tions regimes, the organizational renewal o the World Bank
Institute, or individual global partnership programs (such as
the Stolen Asset Recovery Program).
Evaluation evidence comes rom reviews o the GAC re-
sponsiveness o 50 country programs, 200 lending and trust-
unded operations, and relevant economic and sector work
over the FY0407 or pre-GAC period and the FY0810 or
post-GAC period. Its ndings are also based on economet-
ric analysis, detailed case studies o six country programs,
and reviews o relevant Bank budgets, trust unds, stang,
and institutional arrangements. In undertaking this empir-
ical work, the evaluation recognized that new metrics and
data on GAC issues are under continuous development.
Tese methods were complemented by structured eedbackrom stakeholders inside the Bank and those outside such
as government, donor, and civil society representatives.
Beore nalizing the report, IEG presented the ndings to
the Banks GAC Council, shared the ull country- and proj-
ect-level data set or review, and held meetings with Bank
management to solicit written and verbal eedback. Tis
engagement will be amplied by dissemination o the nal
report. Trough this process, the evaluation aims to inorm
a planned second phase o GAC implementation.
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Executive Summary | 3
is e Bak me gAC resse?
Building on two decades o engagement on governance is-
sues, the 2007 GAC strategy acknowledged that it implied
a change in the way the Bank does business. Strategic com-
munications and engagement by Bank senior management
externally and internally signaled this goal. Te implemen-
tation plan and annual progress reports viewed successul
implementation as systematic improvement in the GAC re-sponsiveness o country operations, although they did not
set targets or a timerame or the achievement o this goal.
Over the FY0810 period, the Banks response to GAC is-
sues in its country programs and projects has demonstrated
continuity without systematic improvement as yet.
GAC in Cunty Pgams and Pjects. Te Bank has
continued to support GAC-related objectives in its strategies
in every country where it has operations. Pre- and post-GAC
country assistance strategies (CASs) were similarly selective
in identiying entry points or a GAC dialogue. In many
countries, the Bank has sustained a medium-term dialogue
on GAC issues and provided a program o support in areas
such as public nancial management, sector service deliv-
ery, and the investment climate. Sustained engagement on
these issues, even in challenging settings, remains one o the
Banks strengths.
Since the launch o the strategy, there have been signs o prog-
ress. Figure A shows the percentage o country programs and
projects that incorporated GAC elements to a great extent.
Notably, the Bank committed to support institutional strength-
ening in three times as many countries in FY0810 as it did
in FY0407. Te number o Bank projects that relied on gov-
ernance and political economic analysis upstream o design
increased signicantly. In countries with weaker institutional
capacities (as measured by Country Policy and Institutional
Assessment governance scores lower than 3.5), 41 percent o
post-GAC projects used at least some country systemsthat
is, public nancial management, procurement, or personnel
systemscompared to a quarter o pre-GAC projects. In A-rica, projects using at least some country systems increased
rom 11 percent pre-GAC to 40 percent post-GAC. In prin-
ciple, the Banks increased use o these systems in weaker set-
tings allowed countries to more eciently deploy limited ca-
pacities on pressing domestic priorities rather than sui generis
donor project management and reporting requirements.
At the same time, important opportunities have yet to be
seized. CAS commitments to signicantly scale up institu-
tional strengthening eorts post-GAC have yet to be matched
by an expansion in institutional strengthening components
in projects. In both country programs and projects, thereis still a need or systematic deployment o enhanced GAC
measures to manage duciary and governance-related risks.
Even with some improvements, less than a third o CASs
and projects scored highly or quality o enhanced duciary
aspects in either the pre- or post-GAC periods. A minority
o pre- and post-GAC country programs aimed to use port-
olio processes to identiy, signal, and mitigate GAC-related
risks. Tese measures could have been better tailored to the
risk prole o projects and programs.
ge 2.1
Ct Pgams ad Pjects Addessig GAC Isses t a Geat Etet
Source: IEG desk review. Arrows indicate statistically signicant changes.
FIGurE A
Portfoliowide fiduciary risk mitigation
Results orientation
Quality of institutional strengthening
Use of country systems
Demand-side of governance
Quality of enhanced fiduciary aspects
Quality of governance and PEA
0 10 20 30 40 50
Selectivity
Signaling
Country institutional strengthening
Percent
0 10 20 30 40 50
GAC-in-countries
GAC-in-projects
Pre GAC
Post GAC
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4 | World Bank Country-Level Engagement on Governance and Anticorruption
Additionally, the Banks operations would have benetted
rom a clearer denition and more consistent application
o risk tolerances across countries. o date, operational
responses varied considerably in countries experiencing
governance downturns (or example, incidence o grand
corruption, periods o political instability, outbreaks o
civil conict)a nding that raises concerns about consis-
tency o treatment, a key GAC principle. Te modest per-
ormance o projects in the measurement o country GACresults continued post-GAC without statistically signicant
improvements. While some orm o beneciary involve-
ment in Bank operations was prevalent, less than a third
o pre- and post-GAC projects scored highly or the overall
use o demand-side measures.
Pitica Ecnmy Anaysis. Eorts to strengthen the
Banks approach on political economy analysis have re-
ceived greater attention and support post-GAC. But the
quality and coverage o political economy issues in the
Banks economic sector work did not show the systematic
improvements evident in projects. Te operational benetso ree-standing political economy analysis reports were
ofen limited by an overly academic orientation, uneven
methodological rigor, and a lack o consistency between
recommended actions and prevailing interpretations o the
Banks Articles o Agreement.
The Banks Standing n GAC Issues. Te implementa-
tion plans goal o improving the Banks reputation on GAC
issues was achieved partially. Government and donor o-
cials consulted during the evaluation were appreciative o
the Banks capacity to advise on governance issues and to
provide operational support or institutional development.
Some elt that the wider development community would
benet rom the Banks eorts to develop political economy
analytics. Others recognized the Banks high duciary stan-
dards relative to other development agencies.
At the same time, stakeholders inside and outside the Bank
observed a potential conict between its lending goals and
its pursuit o GAC objectives, particularly in poorly gov-
erned settings. Opinion leaders polled in a 2008 Gallup
Survey recommended that the Bank not lend to countries
unless they took serious actions to ght corruption. Civil so-
ciety organizations consulted or this evaluation agreed that,
in such settings, the Bank should reduce lending, imposestricter GAC-related loan conditions, and channel unds
outside o government. Nearly hal o Bank operational sta
surveyed also believed that the Banks lending imperative
conicts with its ability to implement the GAC strategy.
Ea oces a lesss
In many countries, the Bank has supported eorts to ad-
dress deep-seated governance challenges such as civil ser-
vice dysunction, capture o natural resource rents, and
political-institutional barriers to market entry and im-
proved service delivery. As part o this evaluation, detailed
case studies were conducted in six countries (Azerbaijan,
Bangladesh, Cambodia, Guatemala, Liberia, and Moldova)
where the Bank sustained a medium-term dialogue on
these GAC issues over the FY0410 period.
Te evaluations desk reviews and case studies showed that
the Banks record in helping to achieve countrywide gov-
ernance improvements was limited. Where its support was
eective, the Bank was usually ocused on specic GAC
entry points and realistic in its aims. Further, it balanced
commitments to support long-term institutional develop-
ment with accountability or interim results. Also impor-
tant was the choice o nancial instruments (or instance,
development policy loans or investment loans), which was
associated with the achievement o certain GAC objectives.
Tese operational design issues were not new and ofen
pre-datedalthough did not adequately inormthe 2007
GAC strategy and implementation plan.
Pubic Sect rem. Progress in supporting public -nancial management reorms was uneven. Standardization
o assessments and operational support or public nancial
management systems improved, but ront-line service de-
livery concerns were not adequately prioritized. Greater
engagement with citizens and better coordination with sec-
tor initiatives enhanced the credibility o reorms in some
cases (Azerbaijan and Moldova). Low civil service pay was
a pervasive problem and imposed major constraints on de-
velopment eorts. Given the complex political economy o
civil service reorm, the Bank adopted opportunistic and
selective approaches that produced modest results (Cam-
bodia and Liberia). Te achievement o public sector re-
orm objectives was positively associated with the use o
development policy loans.
Accuntabiity and the Demand Side. Bank support o-
cused primarily on supreme audit institutions and anticorrup-
tion bodies (Azerbaijan). Achievement o objectives was heav-
ily dependent on the independence and political composition
o legislatures. Te Bank primarily supported the demand
side through community-driven and local governance initia-
tives in a number o countries (Bangladesh, Cambodia, and
Guatemala among them, see Box A). Direct nancing o non-
state actorsas opposed to contracting nongovernmental or-ganizations on Bank projectswas rare and, in some cases,
stretched the limits o the Banks role as a multilateral devel-
opment agency. Importantly, the use o development policy
lending was positively associated with the achievement o ac-
countability and rules-based governance objectives, but it was
negatively associated with the achievement o demand-side
objectivesa nding conrmed by the Banks own reviews.
GAC in Sects.A central concern in the social and inra-
structure sectors was the alleviation o public management
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Executive Summary | 5
constraints on service delivery. More could be done by the
Bank and countries to ensure that eorts to strengthen
cross-cutting systems (or example, public nancial man-
agement and personnel systems) are better coordinated with
sector initiatives to improve service delivery (or example,
the development o sector workorces). Regression analysis
showed that projects that included public sector capacity
building and public disclosure measures were more likely to
achieve sector objectives. Yet, the emphasis o GAC eortsin FY0810 was on mitigating project duciary risks rather
than on promoting service perormance more broadly.
Investment Cimate. Te investment climate in several case
study countries was constrained by public sector bottle-
necks, which the Bank sought to help remove. Support to
improve the operations and management o these public
agencies included customs modernization in Cambodia, and
streamlining o licensing and registration procedures and
strengthening supreme audit agencies in Moldova. Given the
importance o transparency or market entrants, the Banks
advocacy o greater inormation disclosure proved impor-tant to the private sector. However, support or consultative
mechanisms between the private sector and the government
needed to be better calibrated to risks o capture.
Pject Fiduciay Measues.During GAC implementa-
tion, the ring-encing o duciary controls on Bank proj-
ects was given particular attention. Tese methods sought
to limit exposure to raud and corruption risks and also
manage reputational risks to the Bank and borrower gov-
ernments. Te ocus on ring-encing methods in some
countries (such as the use o an independent procurement
agent in Cambodia) but not in others reected the Banks
lack o consistency in setting risk tolerances. Generally,
initiatives designed to manage the Banks reputational
risks relating to GAC were not necessarily the same asthose that would help countries take on calculated devel-
opment risks.
Wa deece s pase 1 mak a W?
GAC implementation has involved considerable eorts
by Bank operational sta, who reported almost universal
commitment to the strategys objectives. While some proj-
ects and country programs benetted directly rom Phase
1 support (or example, through country governance and
anticorruption or CGAC processes and Governance Part-
nership Facility nancing), many did not. Bank teams
continue to ace operational hurdles in helping countries
systematically address the types o deep-seated governance
challenges noted above. o help overcome these hurdles,
the Bank needs to revisit key elements o the 2007 strategy
and implementation plan.
Box A CoMBInInG ThE DEMAnD SIDE AnD SuPPly SIDE In loCAl GovErnAnCE InITIATIvES
Es sehe he dead ad sy sde eace, acay a he ca ee, ca be ayec. Bd esss eae cy-de deee ad deceaza es, ca
eace aes seea ces hae cbed sca ad caacy-bd s ca exec-
es ad he cses wh aca asaecy eases. these wee eded dee ca s-s ha ca eecey ad accaby ee ca sece deey eeds.
Bangladeshs Local Government Support Program has sh ewe s wes e eehh a awde a dsc-based s. the a des dsceay ases ad
caacy-bd s 4,500 Union Parishads. i eys a accaby aewk based dsc-ee ess e ad , asaecy eases, ad ads. t dae, has heed cee
e 12,000 aa ads, a eay 50,000 ese, ad s 500 ca-ee ee ea sesss.
Cambodias Rural Inrastructure and Local Governance Project sed deceazed ad aca-y cesses, as we as ac y bc ds a he ce sangkatee. the jec ses
a as eh aaee ebse he css ce-ee eses, ad heeby aws heBak chae ds hh Cabdas basc eeea syse whe shed d-cay sks. t dae, has cbed he deee 1,800 a schees, a ew a ads ad
bdes, ad se sca seces. AspartofGuatemalas public fnancial management reorms, a ew aewk ca aca
aaee (SiAmuni) was eeed e ha 200 caes e bh ececyad asaecy. i aae, a cze-eed a, Consulta Ciudadana, was esabshed e se-edy acas acae access ad eea cex aca es. take ehe, hese
eases hae eabed czes access a ab ca ee aca ad ceecesses. Adda dead-sde a es hae bee ached ewe czes, se wh
exessed dsc wh he qay, accessby, ceheseess, accacy, ad cssecy scaa.
Source: iEg esk eew a c case ses.
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6 | World Bank Country-Level Engagement on Governance and Anticorruption
reeace a Aaeess des
Te 2007 GAC strategy represented an important step in
rearming the Banks longstanding commitment to helping
develop eective and accountable states. Te strategys objec-
tives were highly relevant to the needs and goals o countries,
and it benetted rom sustained support rom the Banks top
management. Even so, the strategy could have addressed the
mixed record o the Banks public sector reorm and relatedbusiness lines, which needed strengthening. Also, while it
promoted GAC as everybodys business, the strategy de-
ned the agenda too loosely to allow or priority-setting.
Te Phase 1 implementation plan was ocused on the Banks
own capacities and resources, its reputation as a development
partner, and its duciary risks (in investment projects). It was
based on the premise that a lack o commitment and capacity
o Bank sta posed binding constraints on the achievement
o GAC objectives. Te plan lacked a results chain and clearly
communicated implementation targets. As a result, by the
end o its third year, its original goal o making systematic
and time-boundimprovements in the GAC responsiveness o
operations was no longer widely recognized by key sta.
Phase 1 eorts needed to more concretely ocus on pressing
strategic and substantive issues acing GAC reormers in coun-
tries. For instance, what lessons could countries draw rom the
200809 global nancial crisis or corporate governance and
the integrity o their nancial systems? How could public sec-
tor reorms be tailored to meet the particular needs o conict-
aected states? How could development partners help reorm-
ers address deep-seated problems o systemic corruption? Te
GAC One-Year and Second-Year Progress Reports acknowl-
edged that the Bank had intended to ocus on such issues.
ieea
GAC implementation involved the provision o guidance
and the delivery o support to Bank teams as well as the im-
plementation o risk management measures and controls.
GAC Guidance. Guidance materials issued over the FY08
10 period concentrated on GAC-in-projects issues. More
emphasis was given to managing duciary risks on trans-
actions on investment projects than to proposing practical
solutions or deepening the use o country systems. GAC
guidance in the roads sector ocused on managing pro-
curement risks rather than strengthening sector institu-
tions overall. GAC-in-education eorts appropriately high-
lighted the importance o measuring sector incentives, butwere less concerned with operational solutions. Consider-
able attention was given to multistakeholder engagement,
although more clarity was needed on the trade-os or the
Bank between helping to create space or non-state actors
(or example, through transparency measures) and actively
motivating demand-side pressures. Te Banks ramework
or political economy analysis appropriately emphasized
ormal and inormal institutions. Yet, the guidance in this
area would have been more relevant had it more clearly
dened what constitutes good institutional t to country
realities, addressed the political economy o aid, and rec-
ommended rules or disclosure o sensitive analyses.
Deivey Suppt. Emphasis on internal communica-
tions and training workshops paid o: 63 percent o re-
spondents to IEGs sta survey were amiliar with the 2007
GAC strategy. While learning activities ocused on GAC-
in-projects and country accountability institutions, GAC-
in-sectors was not given adequate attention. Te gener-
ally low sta ratings on the relevance o specic guidance
materials and tools were also reected in low utilization
rates. Te GAC implementation plan could have been bet-
ter exploited as an opportunity to prioritize and coordinate
learning activities.
Beyond access to guidance inormation, relatively ew sta
reported receiving tangible support. For those that did,
Phase 1 support varied in terms o its value added to GAC
responsiveness o operations. Sta elt that Bank manage-
ment could have done more to help them address imple-
mentation challenges, and sought more clarity on risk tol-
erances or Bank engagement in dierent settings as well as
streamlining o risk reviews on investment projects. For ex-
ample, the perceived risk o complaints to the Integrity Vice
Presidency and ensuing investigations discouraged the use
o country systemsa key GAC principleand encouragedthe ring-encing o investment projects.
Bank Cnts n Aid Acatin and opeatina risks.
Te Banks aid allocation procedures represented a critical
element o its controls ramework. Since the launch o the
GAC strategy, the Bank has continued to use governance
perormance as a key criterion or allocating concessional re-
sources across countries, and it has remained the most selec-
tive development agency. Over the entire period o review,
improvements in governance scores on the Country Policy
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Executive Summary | 7
and Institutional Assessment were associated with increases
in International Development Association (IDA) commit-
ments and disbursements. Yet, Bank ows to International
Bank or Reconstruction and Development (IBRD)-eligible
countries were relatively less selective in terms o country
governance perormance. Also, the relationship between
governance perormance and IDA disbursements was aect-
edsometimes negativelyby the mix o nancial instru-
ments in country portolios, including the use o develop-ment policy lending. Tis ndingtaken together with the
above-mentioned strengths o development policy lending
points to the need or clear guidance on instrument choice.
Tis point is urther amplied by the evaluations nding
that the risk management intensity o Bank operations was
associated more with the choice o instrument than the risk
prole o an individual operation. Relevant risk manage-
ment measures used in a given project included links to
economic and sector work, governance and anticorruption
plans, supplemental supervision, grievance mechanisms,
and disclosure measures. Regression analysis ound that riskmanagement intensitydened as the total number o rel-
evant risk management measures used in a single project
diered signicantly by the type o lending instrument used
(Figure B). When controlling or other actors, the level o
nancial management and procurement risk was not sig-
nicantly associated with risk management intensity.
Te result was in part explained by the distinct operational
controls used or investment loans and development policy
loans, even though distinctions between the two instru-
ments have become less pronounced. Reinorced by the
transaction-level emphasis o GAC-in-projects guidance,
the layers and complexity o risk reviews or investment
lending continued to dier markedly rom those or devel-
opment policy lending. Tese eorts strengthened controls
on raud and corruption risks in Bank investment projects,
but did not emphasize systems-levelrisks that aect all in-
struments (including development policy loans). Te re-
cently introduced Operational Risk Assessment Framework
(ORAF) does not address this issue. Looking orward, an
updated methodology or review osystems-levelrisks could
be useully applied across nancial instruments (including
the anticipated Program or Results instrument) and would
ensure a more consistent risk management approach.
icees
An important aspect o GAC implementation was its incen-
tive ramework or change management. Tree actors that a-
ected incentives during Phase 1 warrant continued attention:
Financing GAC Impementatin. Te 2007 strategy did
not speciy what it was adding to the Banks considerable
body o work on governance. Instead, the Phase 1 imple-
mentation plan identied a set o GAC change initiatives
or which it sought additional unding. It did not seek to
rst align the Banks existing and already growing base
budget unding or governance work with new GAC priori-
ties. Rather, rom scal 2008 onward, the GAC strategy was
resourced at the margin through incremental Bank budget
and donor unds.
Te Phase 1 plan earmarked a total o $119 million or GAC
implementation, consisting o $54 million in Bank budget
increments allocated or the FY0811 period and $65 mil-
lion in donor unds allocated or the FY0912 period under
the largely Bank-executed Governance Partnership Facility
trust und. Incremental budget allocations gave priority to
the Integrity Vice Presidency and Regional vice presidential
units (VPUs), in particular Arica. Designed to jump-start
innovation within the Bank and promote GAC as every-
bodys business, the Governance Partnership Facility had
approved 94 grants, totaling $65 million as o December
2010. Te overwhelming majority o these grants was ad-
ministered through public sector management units in the
Banks Poverty Reduction and Economic Management Net-work (PREM), and largely supported country-level eorts,
mostly in Arica (Figure C).
At a time when Bank spending on governance work was al-
ready large and growing (increasing 21 percent rom $140
million in FY04 to $169 million in FY10), these parallel
arrangements did not achieve their incentive objectives.
First, the intended eect o Bank budget incrementsto
increase Regional VPU spending on governance work
was muted. Due to the ungibility o resources, Regional
VPU spending on governance work over FY0810 in-
creased by $9.6 million less than anticipated. Te remain-
der o these increments was deployed away rom the gov-
ge 2.1
Facts Assciated wit risk
Maagemet Itesit f Bak
opeatis
Source: IEG desk review. Figure shows marginal efects
(Appendix E, Table E.16b).
FIGurE B
Eastern and Central Asia Region
South Asia Region
Analysis of Formal Institutions
Analysis of Informal Institutions
Risk Exposure
PREM Network
FPD Network
Development Policy Loan
3.02.01.0
0.7
2.0
2.2
2.4
2.6
01.02.0
2.0
1.3
1.6
3.0
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8 | World Bank Country-Level Engagement on Governance and Anticorruption
ernance priorities identied in the implementation plan.
Second, the distinct Governance Partnership Facility al-
location procedurescompetitive selection by a Bank-do-
nor committeewere outside the Banks budget process
and did not systematically identiy innovative eorts. Tis
caused rustration or some operational units due to theperceived ailure to clearly justiy Governance Partner-
ship Facility decisions and to consider the priorities o the
country and the VPU. Tird, incremental nancing was
not systematically linked to incremental GAC activities.
Even though Governance Partnership Facility reporting
on the use o unds was systematic, overall reporting on
GAC results lacked inormation on activities nanced
through incremental Bank budget resources. Generally,
corporate reporting on GAC implementation ocused
more on Bank inputs than on the quality o operations and
country governance perormance.Dedicated GAC Stang. Phase 1 nancing enabled the
recruitment o about 64 new and redeployed positions,
including several dedicated GAC personnel. Eorts to
ormally establish competencies or this GAC stream risk
creating overlaps with well-established competencies or
public sector specialists and, in some cases, duciary and
social development sta. A separate GAC cadre is not likely
to be sustainable without a realignment o some network
and central units.
Cdinatin and Accuntabiity. Te GAC Council
served more as an inormation-sharing orum than a de-
cision-making body. Council meetings, which were regu-
larly attended by a large number o nonmembers, usually
involved presentations by Bank units showcasing their e-
orts. Tese presentations would have beneted rom criti-cal review o what was working and what was not. Other
specialized GAC arrangements, such as program secretari-
ats housed in the PREM Anchor and GAC ocal points in
Regions and networks, also ensured that GAC received con-
tinuous management attention. However, operational sta
reported that these arrangements could have been more rel-
evant to their work.
receas
Te planned second phase o GAC can more ully deliver
on its potential by ocusing on developing operational solu-
tions to meet the challenge o helping build country gov-
ernance capacities. Te ndings o this evaluation point to
ve sets o actions:
Focus on helping countries make tangible and time-
bound governance improvements, while acknowledging
and seeking to resolve trade-os between:
CommittingBanksupportforinstitutionbuildingover
the long term andensuring accountability or results
ge 2.1Acati f Geace Patesip Faciit Gats b Wd Bak Sect uits
Sources: Operations Portal; Governance Partnership Facility Secretariat, as o December 2010.
FIGurE C
Public Sector
$8.1 (N = 7)
$28.6 (N = 40)
$6.9 (N = 11)
$3.4 (N = 7)
$3.1 (N = 3)
$2.4 (N = 4)
$2.0 (N = 3)$1.8 (N = 3)
$1.8 (N = 3)
$1.0 (N = 2)
$0.9 (N = 3)
$0.9 (N = 2)
$0.8 (N = 1)
$0.6 (N = 2)
$0.5 (N = 1)
$0.5 (N = 1)
$0.5 (N = 1)
$0.5 (N = 1)
$0.5 (N = 1)
$0.4 (N = 1)
$0.2 (N = 1)
0 5 10 15 20 25 30
Country Services Panel
Social Development
Social Protection
Others
Operational ServicesWater
Financial Management
Private Sector Development
Economic Policy
Agriculture & Rural Dev.
Procurement
Poverty Reduction
Urban Development
Human Development
Education
Communications
Health, Nutrition & Population
Econ Policy & Poverty Reduction
Infrastructure
Econ Policy & Public Sector
Amount in $ million (no. of grants)
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Executive Summary | 9
(or example, in service delivery) in the short term.
Supportingsystem-widepublicsectorreformsandsup-
porting selective public management improvements in
priority service delivery sectors.
Helping governments respond to demand-side pres-
sures anddirectly engaging non-state actors in order to
motivate demand-side pressures.
Upgradingofcountrysystemsthroughtheirdeliberate
use andsaeguarding Bank unds rom abuse.
Update the Banks approach to institutional strengthen-
ing by:
Leveraging innovations innancial instruments and
building on lessons learned to strengthen business
lines that warrant more immediate attentioncivil
service pay reorm (particularly in ragile states); pub-
lic management support or basic service delivery and
the investment climate; public nancial management
o natural resource rents; and civil society capacitybuilding.
StrengtheningBank-countrydialogue,primarilythrough
better integration o political economy analysis into stan-
dard Bank economic and sector work (and less through
the creation o condential, ree-standing political econ-
omy analysis products).
Adapting actionable governance indicatorsmore sys-
tematically to project results rameworks.
Clariy the Banks zero tolerance stance on corruption
and improve operational controls by:
Developing a harmonized approach to reviewing and
managing systems-level duciary and GAC risks across
instrumentsand not simply transaction-level risks in in-
vestment projects. Te approach should provide or addi-
tional due diligence on operations with specializedrisks.
Providingguidancetooperationalteamsontheappro-
priate use o dierent Bank nancial instruments in di-
erent governance settings, consistent with the institu-
tions overall risk appetite.
Consistentlydeningrisktolerancesforthelevelsand
composition o lending as well as the use o country sys-
tems in dierent settings (or example, through lending
scenarios) so that expectations o governance peror-
mance are clearly understood by country stakeholders
and the Banks shareholders.
Clariy roles and accountabilities or setting GAC stra-
tegic priorities:
At the country level, Bank country strategies should
continue to serve as the primary mechanisms or re-ecting the priorities and needs o clients on GAC is-
sues. Donor-unded initiatives need to be appropriately
aligned.
AttheVPUlevel,GACworkplansshouldbeinformed
by demand in partner countries and should set priori-
ties or overall resources useboth Bank budgets and
trust unds. In keeping with Bank policies on the inte-
gration o trust und allocations with the budget pro-
cess, decisions on allocations o trust unds to GAC
activities should involve line management in VPUs.
Atthecorporatelevel,theGACCouncilshouldfocuson institutionwide issues and risks, and on benchmark-
ing the GAC responsiveness o Bank operations.
Align GAC implementation arrangements with Bank ad-
ministrative and operational processes by:
Consolidating current fragmented nancing ar-
rangements (that is, separate Bank budget and trust
fund allocations) while improving monitoring of
GAC activities.
Rather than creating a separate cadre ofGAC spe-
cialists, applying GAC competencies across existing
Bank networks and career streams, and allow trans-
erability o GAC-competent sta across networks.
Streamlining specializedGAC institutionalarrange-
ments with a view to empowering line managers in
VPUs to achieve GAC objectives.
Supportingincreasedappliedresearchonwhatworksin
various GAC areas.
Developingaresultsframeworkthatincludesbaseline
indicators o Bank and country-level perormance, sets
targets, and integrates monitoring o GAC responsive-
ness into standard portolio monitoring.
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Management Response | 1
Putting the rept in Cntext.Helping countries in theireorts to make governance improvements and strengthen
institutions is an important element o the Banks gover-
nance and anticorruption (GAC) strategy, and Management
welcomes the opportunity to comment on the Independent
Evaluation Group (IEG) evaluation o this work. Te re-
ports endorsement o the high, and continuing, strategic
relevance o GAC goals and objectives, and its recognition
o strong top-level management support, resonate, as do
early ndings such as that the Bank is supporting country
systems strengthening in three times as many countries in
FY 0810 as it did in FY 0407. Management also agrees
with the evaluation that while the World Bank continuesto support good governance objectives in virtually every
country where it has operations, there are still important
opportunities that can be seized.
However it is also important to underscore that these country
actions are only part o a broader GAC strategy that the IEG
report does not cover. Tis broader GAC work includes key
institutionwide and partnership initiatives, such as strength-
ening the Banks corporate investigations and sanctions re-
gimes, revitalizing the World Bank Institute (WBI), support-
ing global programs such as that on Stolen Assets Recovery
(StAR), and undertaking path breaking reorms to make theWorld Banks operations and research more open, transpar-
ent and accountable. In reading the IEG report on country
work it is important not to lose sight o this larger gover-
nance and anticorruption work program, or to sell short the
very real progress the World Bank has made on this broader
agenda. It is particularly important, as the IEG Report ac-
knowledges, to emphasize that the World Bank has taken
great strides, including implementing all recommendations
o the Volcker Report, reorming sanctions and debarment
proceedings, strengthening prevention work and scaling up
the activities o the Integrity Vice Presidency, to secure its
own investment unding rom raud and corruption.
The Fcus the rept: The Cunty Cmpnent
GAC. Te ocused topic o the IEG evaluationhow theBank engages with countries to assist them in addressing
their own governance issuesis perhaps the most complex
and challenging sphere o development and one with which
bilateral agencies and international institutions are all com-
ing to grips. Tere are ew quick xes in this work and many
competing pressures. As the 2011 World Development Re-
portpoints out, institution building requires a 20 year time
horizon, but citizens have needs or government servicesnow. Tis evaluation covers the rst three years o GAC
implementation (the average operation or country strategy
examined in the evaluation is less than two years in), and
there is much still to do in GAC and much to build on rom
the evaluation. Tere are also obvious limits to what can be
achieved in such a short time in what amounts to a major
institutional culture change. Tat said, Management agrees
with many o the IEG ndings. While it does have areas o
disagreement, set out below, it will use the IEG evaluation,
along with other lessons o experience, to help update the
GAC strategy. In particular, Management will implement
IEGs recommendations in three areas: stronger supportor country institutional strengthening; an improved risk
ramework; and a stronger results ramework, where IEGs
work provides valuable baseline data.
Stuctue the Management respnse. Te Manage-
ment Response rst reviews signicant progress in GAC
strategy areas not covered in the IEG evaluation. Next it sets
out the outlines o where we want to go with the next phase
o the GAC strategy, taking on board the learning to date,
including rom IEG. It then sets out some important areas
o agreement with the evaluation beore discussing areas
or clarication and issues on which Management does notagree. It ends with comments on IEGs recommendations,
the overall thrust o which Management supports. Te ull
draf Management Action Record is attached as an annex.
te Baks Bae Saec Eaee
geace a Ac
In addition to the Banks country level engagementthe
subject o this evaluation, Management would like to high-
light notable achievements in the Banks broader strategic
engagement on GAC that the evaluation does not address
and that are highly relevant not only to the role the Bankhas played on the global stage to drive initiatives on gov-
ernance and anticorruption, but to its own duciary due
diligence. It is ironic that the Report nds ault with the
Bank or spending too much time ocusing on ring-encing
and protecting its own projects rom corruption. Tis is not
something we should apologize or.
Broader GAC eorts not covered by the IEG Report have
ranged rom a strengthening o the Banks corporate in-
vestigations and sanctions regimes, ollowing the Volcker
maaee resse
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12 | World Bank Country-Level Engagement on Governance and Anticorruption
panel report; renewal o the WBI; support to global pro-
grams such as that on StAR; to groundbreaking work to
make the World Banks operations and research more open,
transparent and accountable. Tese eorts have brought
real achievements such as:
Mobilizing collective action on global governance
issuesincluding supportingthe Extractive Industries
ransparency Initiative (EII), the Medicines rans-
parency Alliance (MeA), the Construction Sector
ransparency Initiative (CoS), the Program on For-
ests and the Forest Law Enorcement and Governance
partnership (PROFOR-FLEG), the Global Program on
Fisheries (PROFISH), and the Global Roads Integrity
Initiative.
Bringing together new partners to tackle global
threats to good governance and inuencing the global
policy agendaincluding launching the International
Corruption Hunters Alliance (ICHA); partnering with
INERPOL, the United Nations Oce on Drugs and
Crime (UNODC), the World Customs Organization,and the Secretariat o the Convention on Internation-
al rade in Endangered Species (CIES), to establish
the International Consortium or Combating Wildlie
Crime (ICCWC); and launching the Stolen Assets Re-
covery (StAR) initiative, endorsed by the G-20 and the
United States Senate Permanent Subcommittee on In-
vestigations in its report, Keeping Foreign Corruption
Out o the United States.
Developing and implementing policies to apply the
transparency principle to its own activities and make
the World Bank Group a global transparency leaderincluding through a new Access to Inormation policy;an Open Data initiative enabling ree access to develop-
ment data or researchers, students, development practi-
tioners and others across the globe; and the publication
o Implementation Status and Results (ISR) reports, a
key tool or reporting on the implementation peror-
mance and results in all Bank-supported operations.
Enabling concerted anticorruption eforts across in-
ternational institutionsincluding signing with other
leading multilateral development banks (MDBs) an
agreement to cross-debar rms and individuals ound
to have engaged in wrongdoing in MDB-nanced de-
velopment projects.
Expanding investigations and sanctions activity
concluding 553 external and internal investigations
since 2008; generating close to 200 combined sanctions
applications and debarments, and making over 150 re-
errals to national authorities.
Implementing the Volcker recommendations and
scaling up the Integrity Vice Presidencys preven-
tative workincluding building precautions into 75
high-risk operations at the design and implementation
phases during FY1011 through direct work with task
teams; inputting Integrity Vice Presidencyinormation
on country-level risks into Country Assistance Strategy
(CAS) discussions; undertaking thematic assessments
o risks and lessons learned on preventive measures
at the country, instrument or sector level such as the
Global Roads Review; and building country capacityon the ground by providing hands-on practical applica-
tion training to over 2700 ocials representing PIUs,
national audit institutions, anticorruption authorities,
and Bank sta. By largely excluding Integrity Vice Pres-
idencys preventive work rom its evaluation, IEG has
missed an important aspect o GAC implementation.
m wa gAC S
ua e gAC Sae
Te GAC strategy and implementation plan (IP) were de-
signed to be rened over time on the basis o experience.Indeed given the disappointing trends in governance over
the decade leading up to the strategy and the need or new
approaches, the IP was deliberately set out as a change
management strategy, requiring continuous adaptation and
learning by doing. Te IEG evaluation is useul in that re-
gard and in the next phase o the Banks GAC eorts, Man-
agement will place particular emphasis on several areas
highlighted by IEG. Tese include: rening how the Bank
engages with countries to strengthen institutions, while
simultaneously ensuring that International Bank or Re-
construction and Development (IBRD) and International
Development Association (IDA) resources are adequatelyprotected, including through strong duciary support;
urther developing a ramework or assessing risks and re-
wards to help guide operational decisions; and setting out
an overall results ramework so that over the next ve years,
Management and the Board will have a clear idea o what
has and has not been achieved.
Management will remain ambitious in its support to coun-
tries. It must also, however, be realistic about its capabil-
ity to inuence in this challenging reorm arena, given the
long-term nature o institutional change in the GAC con-
text and the centrality o country ownership.
Aeas Aeee
Te evaluations endorsement o the high (and continuing)
strategic relevance o GAC goals and objectives, and its
recognition o strong top level management support, is en-
couraging. Experience has shown that strong and continu-
ing senior management support is essential to any change
management eort. Management is pleased that the evalu-
ation nds that the Bank is supporting country systems
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Management Response | 13
strengthening in three times as many countries in FY 0810
as it did in FY 0407. Tis nding is important, as the GAC
strategy and IP stress that stronger country systems are
central to helping countries develop into ully accountable
states. Management also welcomes the nding that country
teams have sustained country dialogue on governance and
anticorruption issues. It is this combination o sustained
dialogue and support or country systems that is likely to
result in long-term gains in governance and anticorrup-tion. Management also notes that important improvements
were recorded, too, in countries with weaker institutional
capacities: the proportion using country systems (nancial
management, procurement, personnel) increased rom 27
percent pre-GAC to 41 percent post-GAC.
Management agrees with IEG that GAC progress has allen
short in sectors, relative to overall GAC in projects or in
country strategies. Management also agrees that, rather
than promoting a signicant separate cadre o GAC spe-
cialists, there is a need or more general GAC competency
across sectors and is now working in that direction. Man-agement also agrees that more work is needed on demand-
side measures, but would have appreciated more analysis by
IEG on what works, where, and why. As noted above, Man-
agement agrees on the need to introduce a stronger results
ramework or GAC and to work more comprehensively on
risk issues.
Se Aeas maaee Cce
While there are some broad areas o agreement, Manage-
ment notes its concerns about the methodological approach
and the quality o some o the analysis. Tree o these areas
o concern include: (i) the raming o the goals Manage-
ment set out in the GAC IP; (ii) empirical methods; and
(iii) and the possible interpretation o ndings related to
Development Policy Lending (DPLs).
Managements Intentins.IEG evaluates the IP against anobjective o systematic improvement in the way the Bank
engaged on governance in all countries and all projects
over a three-year period. But this premise is aulty. Man-
agements goals were much more modest. IP implementa-
tion was designed as a change management strategy that
sought to strengthen sta awareness and capacity, build
tools, and generate good practice in selected areaslearnwhat works, iterate, and scale up over time. Management
has been explicit and consistent over time in describing
GAC implementation as a learning-oriented, participatory,
change management process. Tus in 2007 the GAC Imple-
mentation Plan noted: Te implementation o the GAC
agenda will be a long-term eort. As the [initial] year-long
learning-by-doing process unolds, the medium-term chal-
lenges and actions will become clearerand will be detailed
in implementation progress report[(s) to the Board.]
Given this approach, Management believes that, the eval-
uation missed an opportunity or learning about how
Management could strengthen its change management
approachBox 1 provides select details on one aspect o
this concernnamely the missed opportunity to evaluate
the Banks agship GAC in country-program eorts. It is
Managements continued view that when there are substan-
tial disagreements between IEG and Management at the
stage o the approach paper, more eort should be made toresolve those dierences prior to embarking on the evalu-
ation.
Empiica methds. Besides the sampling issue above,
Management believes some o the evaluations ndings
are based on limitations to the analytical ramework and
econometric work that are not suciently acknowledged in
the evaluation. One concern worth noting is that while a
theme o the report is the lack o systematic progress on
GAC-related inputs and outputs, in comparing pre-GAC
to post-GAC CASs and projects, in general, the post-
GAC sample seems to be o too early a vintage (on av-erage in operation only a year and a hal afer the IP was
nalized) to make a signicant determination as to GAC
responsiveness. Indeed, much o the guidance developed in
the IP years is just now being rolled out and tested in opera-
tions. Furthermore, due to the short implementation time-
period covered, data capturing the extent to which projects
and CASs are implementing GAC measures are much more
requently censored (statistically, data lef out because the
results are not yet known) in the post-GAC period, which
could potentially bias results. Finally, Management is con-
cerned that various passages in the evaluation discuss spe-
cic empirical ndings in terms that imply causality (orexample, Te use o ast-disbursing DPLs increased the
likelihood that countrieseven when they had poorer gov-
ernancewould receive a ow o IDA unds paragraph
5.4). o avoid possibly misinterpretation, Management
welcomes IEGs disclaimer that [t]his evaluation does not
assert causality between variables; hence, it is not the pur-
pose to analyze the impact o any specic variables on
GAC responsiveness.
Caifcatins n DPls. First, Management would notethat IDA ows are signicantly and positively related to
governance perormance including in countries with DPLs.Tis point does not come out clearly in the evaluation. Sec-
ond, Management strongly believes that the evidence o
experience shows that DPLs (or Development Policy Oper-
ationsDPOsincluding credits and grants to IDA coun-
tries) have proven their useulness in weaker governance
environments. Te DPO process includes the relevant tests
o country commitment, institutional capacity, and du-
ciary environment. Policy changes supported by DPOs are
ofen important elements in improving governance. Tird,
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Management notes that the number o risk reviews is not
a good indication o the quality o risk review. All DPOs
have a high level o Management review and control mech-
anisms are robust. In June 2010, the Internal Audit Depart-
ment completed an audit o Bank processes or managing
DPOs and gave those processes their highest rating (Sat-
isactory). Te audit states: Our overall opinion is that
governance, risk management and control processes overthe Banks management o DPOs were satisactory. Tese
processes were adequate and eective to provide reasonable
assurance regarding the operation o key controls.
receas
While Management has some concerns about the evaluations
ramework and the interpretation o some ndings, Manage-
ment welcomes the Reports recommendations, which ocus
on developing operational solutions to meet the challenge
o helping countries build country governance capabilities.
While noting that achievements to date represent a substan-tial strengthening in the Banks GAC eorts, Management
recognizes that there is scope or continued improvement,
including in the way the Bank engages with countries on
GAC issues. As noted above, Management will draw on IEGs
recommendations in its update o the GAC strategy.
In broad terms, Management endorses the recommenda-
tions, and they will useully inorm Management as it renes
and adapts its strategic approach to supporting countries
on governance and anticorruption. Specically, the updat-
ed strategy will draw on IEG recommendations with regard
to supporting countries in strengthening country systems
and institutions, guidance to sta on risks, and a more ro-
bust results ramework consistent with the next phase o
GAC support. As noted in the attached Management Ac-
tion Record (MAR), though, there are some dierences in
view on specic issues and approaches. Management also
highlights that some areas or improvement are within the
Banks direct control (e.g., stronger results rameworks in
projects), whereas others are more complex (e.g., attempt-
ing to inuence a range o critical and contested variables atthe country level to eect governance reorms).
14 | World Bank Country-Level Engagement on Governance and Anticorruption
Box 1 MISSED oPPorTunITy To EvAluATE GAC In CounTry-ProGrAM FlAGShIP EFForTS
maaees chae aaee aach sehe gAC cy as has bee dey
ad ewe eas s ced gAC asea. ths e ceeded a hese ses:
In2007,evenpriortotheIP,Managementsoughttocreateaninnovationfundforcommittedcountryteamsha wad qay as gAC asea. the es -d geace pae-
sh acy (gp)sed by he ued Kd, he neheads ad nwaycae sea Seebe 2008.
Inearly2008,toprimethepumpinadvanceoftheGPF,ManagementinvitedRegionalVicePresidencies
(rvps) dey cy as he scaed- gAC e; 27 as wee deed, ad each wasded wh des seed ey (a bde cs $2.7 , a aeae $100,000).
WhentheGPFcameonstream,itwasopenedtoallcountryteams(notonlythe27initiallyidentiedbyrvps). the gp acaed esces ceey, wh s decss ade he bass he qay -sas ad he desaed ce he aca cy eas.
Eighteenteamswereselectedtoreceivetrulysignicantsupport,anaverageof$2million,forimplementa- he cy as. Csse wh s b- aach, maaee ews he ehee
eas seeced by he gp be he fashs s gAC--cy as e (a bde cs $36).
uaey, ess ha e-hd iEgs eae sae was daw he fash ehee. oe w-
hds was daw he a se as ha eceed ey des seed ey, b sbseqey dd ee he gps ess qay ad ce, ad hs dd hae access scay scaed-esces.
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Management Response | 15
Management Action Record
Focus on helping countries make tangible and time-bound
governance improvements, we ackwe a seek
ese ae-s bewee:
CommittingBanksupportforinstitutionbuildingoverthelong
e andes accab ess ( exae, se-
ce ee, bc aca aaee, ea) e
s e;
Supporting systemwidepublicsectorreforms and s
seece bc aaee ees sece
ee secs;
Helpinggovernments respond todemand-side pressuresand
ec ea -sae acs e ae ea-
se esses;
Upgradingofcountrysystemsthroughtheirdeliberateuseand
saea Bak s abse.
Update the Banks approach to institutional strengthening by: Leveraginginnovationsinnancialinstrumentsandbuildingon
esss eae see bsess es a waa e
eae aec sece a e (aca
ae saes); bc aaee s basc sece e-
e a e ese cae; bc aca aaee
aa esce es; a c sce caac b;
StrengtheningBank-countrydialogueprimarilythroughbetter
ea ca ec aass saa Bak ec-
c a sec wk (a ess e cea c-
ea, ee-sa ca ec aass cs); a
Adaptactionablegovernanceindicatorsmoresystematicallyto
jec ess aewks.
Agreed: maaee es a e s ecea s a-
ea cae; e 2011 Wdr sesses a 20 ea e z
s b, we ecz a czes ae e-
ae ees. decss ea ae-s ca be ae a c-
ee a ce w Bak caae aaae. te a
ee eceas a ea ae-s; e aeaes
eac case a be ceea.
maaee eee cs :
Articulateitsapproachtoupstreampublicsectorreforms(those
cse ce ee cs a sses) a w-
sea es (wc cs sece ee) e cex
gACii, be scsse w Exece decs e sec
Qae y 2012.
Astrengthenedapproachtosupportingdemand-sidemeasures
w be se a aex e gACii sae.
Continue and deepen work on supporting strengthening of
c sses a ce a e eca
Exece decs ess se c sses
cee, aca aaee, a jec aaee
eea.
maaee ca c e-b acs b ces.
maaee es c s ces a ae c-
we e-b saees e eace a w e-
a s as a gAC .
Partially Agreed. maaee s ee a ew ess-basee se a w ace e ee ess a
e cca aeas se b iEg. maaee as eses e ca
see c ae e e wesea
se ca ec aass a c, sec a jec ee.
hwee, maaee beees a c cex s cca, a
whetherornottointegratepoliticaleconomyanalysisintoeconom-
c a sec wk s a ecs a s be ake a e c
ee. maaee aees a acabe eace cas
s be se e sseaca ess aewks.
maaee cs :
Seek Boardapprovalfornew results-basedlending instrument
(theProgramforResults)inFY2012.
BuildingonguidelinescontainedinProblemDrivenGovernance
a pca Ec Aass, bse Seebe 2009,
maaee w ee e s as ecessa b w
eae e ecs wee w se e s a -
ace rea sa, w ae e eea c kwee.
te ace s ca ec aass ae a
cfc-aece saes w be sse e s a gACii.
Developanddisseminateguidanceonusingactionablegovernance
dcas jec ess aewks, ad he se-
Management Action Record
Maj Mitabe IEG recmmedatireqiig a respse
Maagemet respse
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Management Action Record
16 | World Bank Country-Level Engagement on Governance and Anticorruption
Management Action Record (continued)
Maj Mitabe IEG recmmedatireqiig a respse
IEG recmmedatis
Clarify the Banks zero tolerance stance on corruption and im-prove operational controls by:
Developingaharmonized aac eewa aa
sses-ee ca a gAC sks acss sesa
s asac-ee sks ese jecs. te a-
ac s e e ece eas w spe-
cializedsks.
Providingguidancetooperationalteamsontheappropriateuse
ee Bak aca ses ee eace
ses, csse w e ss ea sk aee.
Consistentlydeningrisktolerancesforthelevelsandcomposi-
e as we as e se c sses ee
ses ( exae, e sceas) s a exec-
as eace eace ae cea es b
c sakees a e Baks saees.
ess ad dy as ecessay he cex ea gAC e-
. maaee w dsseae dace he s ha gACii.
Partially agreed. Managementhas aclearposition visa viszeroeace a w ake es ese s we es. i
sa, maaees s s a we we ae aee
c, we ae a ex-ae eace sk ( a s ec-
ze a sc es ee ces ae e ke
ece sc caees wc e Bak seeks aae as
cse ze as ssbe), cbe w a ex-s ze eace
we s sw a a, c e aeasace as c-
ce. i sc ccsaces e Bak w awas a eewee
ake ac aess e be.
maaee as aees a e ae ssec sk be -
creasedwhilecontinuingtopayattentiontotransactionsrisk.How -
ever,Managementnotesthataharmonizedapproachtoassessing
a aa sk s ea a esses s awas a
eewee be e sae. C cex aes aea
a exc ecss s be base e seccs c c-
csaces.
Wa s ss iEgs ecea s e cce ewa
ess sk. maaee aazes sk aas exece eaa
eee ces a as aea eeae acss c-
cexs s ea b se a ae 70 ece maa
Sasac (mS) bee aeae iEg as eas
ae Saes (wee sks ae, cse, b e es sc-
cess eas e be eseca ), 75 ece bee
e idA ces, a 80 ece idA ces.
maaee cs :
Clarifyitspositiononzerotolerance, explainingagaintosta
a eee s s a sk bsess a ee s wa,
e a e a a, aaee e absece a
a c Bak-se eas; e Bak ss
bwes easabe assace a s ae se
as ee; b e Bak as ze eace ce a c-
s . maaee w se s ea c-
cas a, e W Bak gs Ce rsk oce,
e cex e gACii scsss.
ReviewtheexperiencewithORAFaftertwoyears(notablyitsuse
as ee eea e aaee eas b
sk) a ake ajses as eee.
Continuetodevelopitscomprehensiveapproachtoriskmanage-
e eae eaa s ce ces, e
ess ea e Ba, a e A Cee, e
es ee sk aees a e eaces a
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Management Action RecordManagement Action Record (continued)
Maj Mitabe IEG recmmedatireqiig a respse
IEG recmmedatis
Management Response | 17
Clarify roles and accountabilities for setting GAC strategic pri-
orities:
Atthecountrylevel,Bankcountrystrategiesshouldcontinueto
see as e a ecass efec e es a
ees ces gAC sses. d-e aes ee
be aae ae.
AttheVPUlevel,GACworkplansshouldbeinformedbydemand
ae ces a s se es ea esces
seb Bak bes a s s. i kee w Bak
ces e ea s acas w e b-
e cess, ecss acas s s gAC ac-
es s e e aaee vce pesec us
(vpus).
Atthe corporatelevel,theGACCouncilshould focusoninsti-
-we sses a sks, a becak e gAC e-
sseess Bak eas.
Align GAC implementation arrangements with Bank adminis-
trative and operational processes by:
Consolidatingcurrentfragmentednancingarrangements(that
s, seaae Bak be a s acas) we -
gAC aces.
RatherthancreatingaseparatecadreofGACspecialists,apply-
gAC ceeces acss exs Bak ewks a caee
seas, a aw aseab gAC-cee sa acss
ewks.
StreamliningspecializedGACinstitutionalarrangementswitha
ew ewe e aaes vpus acee gAC b-
jeces.
Supportingincreasedappliedresearchonwhatworksinvarious
gAC aeas.
Developingaresultsframeworkthatincludesbaselineindicators
Bak a c-ee eace, ses aes, a e-
aes GAC responsiveness saa
.
wc maaee ses ese a sk s ke w e-
e ees, a e aa ieae rsk m
re e W Bak gs Ce rsk oce.
Partially agreed. maaee ccs w e ew a CASs a
iSns be e a eas b wc ce eace sses ae
ase a aesse. te Bak s ce e pas a Acca
aeas ae. maaee aees a e gAC Cc
s cs saec a swe sses.
maaee s cce e ee ceae aa gAC
wk as a e vpu ee. tee s a ae a ese w ce-
ae a aa ask a w be e aa ae.
maaee cs esce e gAC Cc, w a -
e cease cs saec a swe sses, e
cex gACii a w e e cex a -e gAC
ae.
Partially agreed. maaee aees a aca a cea e-
ss aewk gACii s cca. gAC pase ii aca w a
a cea Bak-we ess aewk, w easc e sec-
aes wc w ce basee cas, a a c
sse. maaee as aees e ace
a gAC ceeces acss secs, a e ace
ae eseac s ea a kwee aae-
e.
hwee, maaee s e ew a e aaes ae aea
ewee acee gAC bjeces, a a e cee
cess aca gAC ts es was eece a a-
ae.
maaee cs se :
SetoutasnotedaboveaGACresultsframeworkandmonitoring
sse e cex gACii.
FinishongoingworkonGACcompetenciesandanassociated
a a a e se b y13.
Asnotedabove,theoversightandmanagementarrangements
gACii w be ese.
SetoutprioritiesforresearchinthecontextofGACIIandmonitor
ess e cex ea gAC e.
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18 | World Bank Country-Level Engagement on Governance and Anticorruption
Caess Sa:
Cee deee Eeceess (CodE)
Te Committee on Development Eectiveness (CODE)
considered the report entitled World Bank Country-
Level Engagement on Governance and Anticorruption: An
Evaluation o the 2007 Strategy and Implementation Plan
(CODE2011-0044), prepared by the Independent Evalua-
tion Group (IEG), together with the Draf Management Re-
sponse (CODE2011-0046). Te Statement by the External
Advisory Panel (CODE2011-0047/1) on the IEG report was
distributed as a background document.
Te Committee welcomed the timely discussion o the
IEG evaluation assessing the 2007 Governance and Anti-
corruption (GAC) strategy and the rst phase o its imple-
mentation (FY0810). It appreciated Managements draf
response and commitment to consider IEGs ndings and
recommendations as inputs to the development o GAC
Phase II, including in the areas o country institutional
strengthening, risk management, and results measurement.
Te Committee noted the complexity o GAC issues and
the relevance o this evaluation in connection with ongo-
ing work on the design o the new nancial instrumentProgram-or-Results; the need to look at implementation o
the GAC strategy within the Bank and in partner countries;
and the alignment o the GAC agenda with the Banks mod-
ernization and internal reorm agendas.
Members agreed that the evaluation provides a compre-
hensive review o the Banks operational responsiveness to
GAC issues in country operational aspects, sector programs
and projects beore and afer the 2007 strategy. Notably,
they were pleased with IEGs ndings that the Bank sup-
ported institutional strengthening in three times as many
countries in the scal 200810 period as it did in the s-
cal 200407 period. But they also agreed with IEG that the
Bank has to signicantly strengthen its eorts to work withclients to improve their governance systems going orward.
As the Bank prepares or the next GAC phase, members
encouraged Management to do more to urther support
country-owned reorms, innovate approaches to institu-
tional capacity building, and oster the demand or good
governance while strengthening country dialogue. Tere
were also comments on the importance o ocusing more
on strengthening country systems, monitoring GAC re-
sults, harmonizing risk management, and strengthening the
understanding o the political economy context taking into
account the Banks own analytical work as well as analysis
prepared by others. With regard to resources to implementthe GAC strategy, comments were raised on integrating the
allocation o trust unds to the Banks budget process, and
to strengthen sta skills building internal GAC expertise
across the institution.
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Statement o the External Advisory Panel | 19
Saee e Exea As pae
Governance is a dening challenge o our era. Te Inde-
pendent Evaluation Groups report, ocusing on the na-
tional dimensions o the World Bank 2007 Governance and
Anticorruption (GAC) strategy, is thereore o global im-
portance. We welcome the serious and detailed comments
o management in response to the draf