documents.worldbank.orgdocuments.worldbank.org/curated/en/...abbreviations and acronyms aaa analytic...

SECTOR STRATEGY IMPLEMENTATION UPDATE: THIRD REVIEW

Operations Policy and Country Services Delivery Management Unit (OPCDM)

December 20, 2007

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ABBREVIATIONS AND ACRONYMS

AAA Analytic and Advisory Activities ACS Activity Completion Summary AfDB African Development Bank AFR Africa Region ALMP Active labor market program AMCOW African Minister’s Council on Water APEX Accrued Pension Entitlements Cross Country APL Adaptable program loan AS Advisory Services BioCF BioCarbon Fund BNPP Bank-Netherlands Partnership Program CAS Country Assistance Strategy CDD Community-driven development CEA Country economic analyses CIFOR Center for International Forestry Research CO2e Carbon dioxide CODE Committee on Development Effectiveness DGF Development Grant Facility DPL Development policy lending (loan) DPO Development policy operation DR Democratic Republic EAP East Asia and Pacific Region ECA Europe and Central Asia Region EFA Education-For-All ENA-FLEG

Europe and North Asia Forest Law Enforcement and Governance

ENRM Environment and natural resources management ESSD Environmentally and Socially Sustainable

Development ESW Economic and sector work EU European Union FAO Food and Agriculture Organization FCAG Forest Certification Assessment Guide FCPF Forest Carbon Partnership Facility FIAS Foreign Investment Advisory Service FLEG Forest Law Enforcement and Governance Program FPD Financial and Private Sector Development FS Financial Sector FTI Fast Track Initiative GAP Gender Action Plan GE+ Grade E+ GEF Global Environment Facility GFA Global Forest Alliance GFATM Global Fund for AIDS, Tuberculosis, and Malaria GFP Global Forest Partnership GFPTT Global Forest Partnership Transportation and Trade GMI Guaranteed minimum income GOY Government of Yemen GPP Global partnership program GRSF Global Road Safety Net Facility HIPC Heavily Indebted Poor Countries’ Debt Initiative

Trust Fund HIV/AIDS Human Immunodeficiency Virus/Acquired Immune

Deficiency Syndrome HNP Health, nutrition and population IBNET International Benchmarking Network IBRD International Bank for Reconstruction and

Development ICR Implementation Completion Reports ICT Information and communication technology IDA International Development Association IEG Independent Evaluation Group ILO International Labour Organisation INF Infrastructure ISDS Integrated Safeguards Data Sheet

ISIC International Standard Industrial Classification ISR Implementation Status and Results Report IUCN World Conservation Union JMP Joint Monitoring Program LCR Latin America and the Caribbean M&E Monitoring and evaluation MDG Millennium Development Goal MFE Mainstreaming Fund for Environment MFI-WB Multilateral Financial Institutions Working Group

on Environment MNA Middle East and North Africa MSME Micro, small, and medium enterprise NGO Nongovernmental organization NRM Natural resources management OBA Output-based aid ODP Ozone-depleting potential OECS Organization of Eastern Caribbean States OED Operations Evaluation Department PCPI Post-Conflict Performance Indicator PEFA Public Expenditure and Financial Accountability PEN Poverty-Environment Nexus POP Persistent organic pollutants PROFOR Alliance, the Program on Forests PROST Pension Reform Options Simulation Toolkit PRSC Poverty reduction support credit PRSP Poverty reduction strategy paper PS6 IF performance standard (social and environmental

sustainability) PSD Private Sector Development PSFE Forest and Environment Sector Program PSG Public sector governance PSIA Poverty and social impact analysis QACU Quality Assurance and Compliance Unit QAG Quality Assurance Group QEA Quality at entry QSA Quality of supervision RAI Rural Access Index RBI Results-Based Initiative RF Result Framework RVA Risk and vulnerability assessments SAR South Asia Region SDN Sustainable Development Network SEA Strategic environmental assessments SEPA System for Environmental Priority Assessment SMART Safeguards Management and Review Team SME Small and medium-sized enterprise SP Social protection SPC Strategy and performance contract SSATP Sub-Saharan African Transport Partnership SSIU Sector Strategy Implementation Update SSP Sector strategy paper SWAP Sectorwide approach TA Technical assistance (nonlending) TAAS Technical assistance and advisory service TFD Forest Dialogue TFESSD Trust Fund for Environmentally and Socially

Sustainable Development UMI Urban Mobility Index UNFCCC United Nations Framework Convention on Climate

Change WBCSD World Business Council on Sustainable

Development WBG World Bank Group WHO World Health Organization WWF World Bank/World Wide Fund


CONTENTS

Executive Summary.......................................................................................................................v

Part One: Overview .......................................................................................................................1

I. Introduction .........................................................................................................................1

II. Bank Resources ..................................................................................................................3

III. Delivery of the Work Program .......................................................................................7 A. Analytic and Advisory Services......................................................................................7 B. Lending..........................................................................................................................12 C. Partnerships ...................................................................................................................17

1. Bank-IFC Coordination ...........................................................................................17 2. Global Programs and Partnerships...........................................................................19

IV. Strategic Priorities of the Institution and Results in FY06-07 ...................................21

V. Focus on the Implementation of Four Sector Strategies ..............................................24

Part Two: Implementation Update for Selected Sector Strategies ........................................31

I. Transport Strategy.............................................................................................................31 A. Overview of Sector Strategy and Results Framework ..................................................31

1. Priorities and Programs............................................................................................31 2. Results Framework ..................................................................................................33

B. Development Context....................................................................................................34 C. Stocktaking and Evaluation...........................................................................................37

1. Progress in Intermediate/Final Outcomes................................................................37 2. Bank Instruments.....................................................................................................39 3. Progress in Output Quality.......................................................................................43

D. Bank’s Comparative Advantage and Partnerships........................................................44 1. Comparative Advantage...........................................................................................44 2. Partnerships..............................................................................................................45

E. Strategic Directions for FY07-09 ..................................................................................46

II. Environment......................................................................................................................50 A. Overview of the Sector Strategy and Results Framework ............................................50



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1. Progress in Intermediate/Final Outcomes................................................................59 2. Bank Instruments .....................................................................................................60 3. Progress in Output Quality.......................................................................................68

D. Bank’s Comparative Advantage and Partnerships........................................................69 E. Strategic Directions for FY07-09 ..................................................................................72

III. Forestry ............................................................................................................................73 A. Overview of Sector Strategy and Results Framework ..................................................73



1. Progress in Intermediate/ Final Outcomes...............................................................80 2. Bank Instruments .....................................................................................................83 3. Progress in Output Quality.......................................................................................88 4. Key Achievements during the Review Period .........................................................88

D. Bank’s Comparative Advantage ...................................................................................91 E. Strategic Directions for FY07-09 ..................................................................................93

IV. Social Protection ..............................................................................................................95 A. Overview of Sector Strategy and Results Framework ..................................................95


B. Development Context .................................................................................................100 C. Stocktaking and Evaluation ........................................................................................102

1. Progress in Intermediate/Final Outcomes .............................................................102 2. Bank Instruments ...................................................................................................104 3. Progress in Output Quality.....................................................................................110 4. Key Achievements during the Review Period .......................................................111

C. Partnerships and the Bank’s Comparative Advantage ................................................115 D. Strategic Directions for FY07-09................................................................................116

Annexes

Annex A. List of Sector Strategy Papers, Updates, Progress Reports and Action/Business Plans............................................................................................................................118

Annex B. Standard Coding Classification – Sector and Thematic Codes ...................................122 Annex C. Results Sheets for Selected Sector Strategies..............................................................125

Water Supply and Sanitation Sector Strategy Monitoring Results Sheet for FY06....... 125 Rural Development Strategy Monitoring Results Sheet for FY06............................ 128 Public Sector Governance Strategy Monitoring Results Sheet for FY06.................. 130 Social Development Sector Strategy Monitoring Results Sheet for FY06 ............... 132 Education Sector Strategy Monitoring Results Sheet for FY06................................ 134

Annex D. Deliverables and Other Results ...................................................................................137

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Boxes

Box 1. Reporting on the Implementation of Sector Strategies Using Sector and Theme Codes Classification ...................................................................................................................... 3

Box 2. ESW-Fisheries Note for Yemen......................................................................................... 9 Box 3. FY06 Achievements in Global Programs and Partnerships Management ....................... 21 Box 4. Selected Results and Outcomes of Global Programs and Partnerships ........................... 21 Box 5. Rural Access Index........................................................................................................... 34 Box 6. Impact of Rural Access Roads in Yemen......................................................................... 42 Box 7. System for Environmental Priority Assessment (SEPA) ................................................. 58 Box 8. Russia Forest Policy Dialogue Technical Assistance Program........................................ 84 Box 9. Strengthening Forest Management and Governance in Indonesia................................... 90 Box 10. Perceptions Regarding the Implementation of the Bank’s Forest Strategy ................... 92 Box 11. Core Diagnostics: Risk and Vulnerability Assessments ........................................... 101

Figures

Figure 1. Average Unit Completion Costs of ESW, FY02-06 ....................................................11 Figure 2. Development Outcomes of Completed Projects for Selected Sector Boards,

FY03-06........................................................................................................................15 Figure 3. Environment Lending, FY02-06 ...................................................................................63 Figure 4. Average Unit Completion Costs of IBRD/IDA Lending ..............................................67 Figure 5. World Bank Group-Global Environment Facility Program, 2002-06...........................70 Figure 6. Forest Commitments in the World Bank Group, FY02-06 ...........................................79

Tables

Table 1. Sector and Theme Codes Mapping of Sector Strategy Papers .........................................2 Table 2. Total Administrative Expenditures, FY04-07 ..................................................................5 Table 3. Total Administrative Costs by Sector and Theme, FY04-07............................................5 Table 4. Total Trust Funds Disbursements by Sector and Theme, FY05-07 ................................5 Table 5. ESW and TA Products by Sector and Theme, FY03-07 ..................................................8 Table 6. Results of Completed ESW for Selected Sectors Boards, FY04 -06................................8 Table 7. Lending Commitments by Sector and Theme, FY02-07................................................13 Table 8. Lending Commitments by Instruments, Sectors, and Themes, FY02-07.......................14 Table 9. Implementation of Selected Sector Strategies – Bank Actions and Results...................26 Table 10. Results Framework—Transport....................................................................................35 Table 11. Bank Performance Indicators—Transport ....................................................................38 Table 12. Rural Access Index: Regional Values, 2006 ................................................................39 Table 13. Results Framework—Environment and Natural Resources Management ...................56 Table 14. Overall Performance Indicators for Environment ........................................................60 Table 15. Bank Performance Indicators—Environment...............................................................65 Table 16. Quality Indicators in Environment ...............................................................................68 Table 17. Results Framework—Forestry......................................................................................77 Table 18. Final and Intermediate Indicators of Forest Outcomes in 17 Priority Countries,

1990-2006.....................................................................................................................80

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Table 19. Indicators of Forest Production and Growing Stock, 1990-2005 .................................82 Table 20. Bank Performance Indicators—Forestry ......................................................................85 Table 21. Results Framework—Social Protection and Labor ......................................................98 Table 22. Bank Performance Indicators—Social Protection and Labor Themes .......................103 Table 23. Coverage of SP in Country Assistance Strategies for 18 Priority Countries..............104 Table 24. Distribution of the Social Protection Portfolio, FY02-06...........................................106 Table 25. Summary of Outcomes from Projects Completed in FY02-06, as Reported in

Their ICRs ..................................................................................................................113

This report was prepared by a team led by Nancy Vandycke, including Aiza Aslam, Rubama Ahmed, Ana Besarabic Bennett, Henry Chase, Pauline Chin-Mori, Jong-a-Choi, Dae-in Chong, Hye Yoon Chung, Elif Kiratli, Ariel Fiszbein, Vinh Le-Si (OPCS); Jamal Saghir, Maryvonne Plessis-Fraissard, Marisela Montoliu Munoz, Marc Juhel, Peter Roberts, Paul Amos, Madhu Raghunath (ETWTR); Warren Evans, Laura Tlaiye, Rita Kless, Anjali Acharya, Eri Tsutsui (ENV); Gerard Dieterle, Nalin Kishor, Diji Chandrasekharan Behr, Maria Ana de Rijk, Laura Ivers (ARD); Robert Holzmann, Sandor Sipos, Margaret Grosh, Richard Hinz, Valerie Kozel, Randa El-Rashidi, Surat Nsour, Ravindra Cherukupalli (HDNSP). The paper benefited from contributions by the Sector Boards and their Secretariats charged with monitoring the implementation of individual sector strategies. It also benefited from comments from Jim Adams, Rui Couthino (OPCS); Glenn Miles, Rosalie d’Souza-Mc Gee, John Haber (CSR); and Greg Toulmin (TFO). The report was prepared under the guidance of Kyle Peters and Jeffrey Gutman.


EXECUTIVE SUMMARY 1. The World Bank’s development interventions are guided by a country-based approach reflecting country-owned and –articulated development strategies. Nevertheless, Bank activities in a given sector should be undertaken within a consistent framework guided by international best practice. Sector strategies, prepared by the Networks, are designed to provide the frameworks for sector-level activities within Bank country programs.

2. The Bank’s sectoral activities are guided by 17 sector strategy papers (SSP), reflective of virtually all the sector and thematic areas in which the Bank is engaged. SSPs have four primary purposes: (a) set priority areas for engagement in the sectors; (b) define best practice and technical advice on ways to address sectoral issues; (c) develop results frameworks for the sectors; and (d) lay out how the strategy will be implemented.

3. The Sector Strategy Implementation Update (SSIU) is a monitoring tool that was launched in FY04 to streamline and unify reporting on the implementation of SSPs. It describes and assesses progress in implementing SSPs. However, it does not evaluate the effectiveness of these SSPs (such assessments are undertaken by the Independent Evaluation Group).

4. As noted in previous SSIUs, most of the Bank’s efforts on results reporting have concentrated on the country program level (with the mainstreaming of results-based Country Assistance Strategies in FY04) and at the project level. Assessments of the impact and effectiveness of SSPs have lagged, as neither their results frameworks nor their linkages with the Bank’s country-based model were well defined. Ideally, each SSP would have included a sector “results framework” linking interventions at the sector/thematic level with sector outcomes, which would be used to guide country-specific results frameworks. In the past few years, the SSIU has expanded its function beyond reporting on sector-level implementation progress to include developing and retrofitting results frameworks into original SSPs.

5. The absence of an examination of sectoral results at the country and project levels leaves a gap in the reporting framework: sectoral results on a Bankwide basis. To address this situation Management proposes in FY08 to prepare a Results Report, which would replace the SSIU. The Results Report will report comprehensively on results Bankwide, integrating progress in country programs with the implementation of sector strategies.

6. This SSIU is divided into two parts—the first provides an overview of the Bank’s strategic focus and the delivery of the work program, while the second part examines the strategies in four sectors: Transport, Environment, Forestry, and Social Protection. Part One highlights progress in implementing SSPs during FY06 across the following four dimensions:

• Strengthening analytic and advisory services. The Bank continued to consolidate its reputation as a knowledge provider with the delivery of 531 economic and sector work (ESW) products and 430 nonlending technical assistance (TA) activities in

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FY07, compared to 601 and 307, respectively, in FY06. These primarily addressed public sector governance, private sector development, and financial sector development issues. Information on the Bank’s analytic and advisory activities (AAA) from internal reviews and external feedback indicates that the quality of AAA remains high, but that there is a need for wider dissemination of the products to maximize their impact. The ongoing efforts to strengthen and reform AAA warrant an assessment of the AAA governance framework and of the measurement of outputs and impacts; Management intends to initiate this in FY08.

• Addressing sector/thematic priorities through project design. FY07 lending (including guarantees, Global Environmental Facility operations, and special financing) was about $25 billion—about one billion above the FY06 level. The portfolio continued to be led by lending for infrastructure (water supply and sanitation, energy, information and communications technology, and transport), in line with the Bank’s Infrastructure Action Plan. FY07 lending in sectors related to the Millennium Development Goals—water supply and sanitation, health, and education—rose to $6.2 billion, about 30 percent higher than FY06 levels. In particular, lending to the health sector in the Bank’s portfolio grew strongly. Performance ratings by the Internal Evaluation Group of projects completed in FY03-06 show that 78 percent, on average, achieved their major relevant objectives, with projects in transport, education, social protection, and water supply and sanitation showing the best performance. Projects with public sector governance, environment, and health, nutrition, and population sectors/themes show lower achievements of development objectives than the Bank average. In all three of these sectors, the Bank revisited its strategy in FY06-07, proposing new strategic directions and strengthening the focus on results and a results framework.

• Leveraging Bank-IFC-MIGA synergies. Only a few SSPs have been designed as joint Bank-IFC strategies. In those sectors (such as Forestry, Private Sector, and Financial sectors) some steps have been taken to strengthen cooperation between the two organizations at the operational level (for example, alignment of policies on social and environmental sustainability). In other sectors/thematic areas, the Bank and IFC are working toward leveraging synergies, with some good collaboration cases emerging in infrastructure. A review by Management of technical assistance across the Bank Group noted that the need to deepen coordination between the Bank and the IFC to ensure that the clients benefit fully from the full range of services provided by the Bank Group.

• Developing and/or strengthening external partnerships. Global programs and partnerships have leveraged Bank administrative resources, playing a key role in helping the Bank to meet institutional global commitments, such as environment sustainability. However, efforts are under way to foster selectivity in Bank’s engagement and better align with the institutional commitment for results.

7. Part Two of this SSIU focuses on four SSPs—Transport, Environment, Forestry, and Social Protection—that were endorsed between 1996 and 2002, reporting on progress in implementation. To briefly summarize: on strengthening AAA services, substantial progress has

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been made in Forestry and some progress has been achieved in Environment, Transport, and Social Protection. Similarly in addressing sectoral priorities through country programs, this report notes that considerable progress has been achieved in transport, consistent with the renewed emphasis on infrastructure lending. On external partnerships, the review of sectoral strategies in Environment, Forestry and Social Protection shows that progress has been made in the past few years. Finally, as noted in the review, more still needs to be done in all four sectors to leverage Bank-IFC-MIGA synergies. (Table 11 in Part One summarizes what the Bank has achieved in these four areas during the SSP implementation period, how far it stands in terms of achieving its output objectives, and summarizes proposed strategic directions for the near term.)

8. Based on the analysis of sector/thematic outcomes and the current status of SSPs, Management proposes that next year’s Results Report include detailed implementation reports on urban development, gender, and private sector development. (An update on energy is planned as part of reporting on the Infrastructure Action Plan.)


PART ONE: OVERVIEW

I. INTRODUCTION

1. The Bank’s sector activities are guided by 17 sector strategy papers (SSPs),1 reflective of virtually all the sector and thematic areas in which the Bank is engaged. The annual Sector Strategy Implementation Update (SSIU) was introduced in FY04 to streamline the reporting on progress in implementing sector strategies in the Bank.2 It presents an integrated and coherent picture of progress in implementing the Bank’s sector strategies, allowing an assessment of how sectoral priorities are integrated in country programs, analytic work, and lending projects.3

2. In the past, Management reported on the implementation of each SSP to the Committee on Development Effectiveness (CODE) on an annual or biannual basis, often through overly comprehensive and unintegrated reports, prepared on different schedules,4 making it difficult to draw attention to trade-offs in resource allocations across sectors and themes. In line with Bank efforts to modernize and simplify its policies and procedures, the SSIU was developed to replace sector-specific progress reports on individual SSPs, consolidate reporting, and strengthen monitoring of SSP implementation. Since SSPs (and full-fledged updates) are costly products, the Bank envisioned that any sector strategy refinements that might be needed would be addressed in the SSIU, and that new SSPs would be produced only when the Bank needed to redefine its role in a sector substantially or the Bank planned a major engagement in an area of work currently not covered by a sector strategy.5

3. This SSIU has four main objectives:

• It provides a brief, comprehensive picture of the Bank’s activities under all 17 SSPs and the new strategic initiatives undertaken during FY06 and FY07.

• It updates progress and follows-up on commitments made by three sectors of the FY05 SSIU (water supply and sanitation, public sector governance, and rural development) and by those sectors that updated or developed a new SSP in FY05 (education and social development). Results sheets for these sectors are shown in Annex C.

• In Part Two, it presents detailed implementation updates in four sectors (Transport, Environment, Forestry, and Social Protection) that were identified in the FY05 SSIU as needing further strategy refinement.

1 Annex A lists the SSPs, while Annex B provides the standard coding classification for sectors and themes. 2 See Sector Strategy Implementation Update (SecM2005-0045), February 8, 2005; and Sector Strategy

Implementation Update FY05 (SecM2006-0125), March 21, 2006. 3 The SSIU does not intend to assess the effectiveness of SSPs. Evaluations of SSPs’ effectiveness are generally

conducted by the Independent Evaluation Group (IEG), as an input to the preparation of updates of SSPs. 4 See Sector Strategy Papers: Stocktaking and Future Directions (CODE2003-0067), October 17, 2003. 5 See Sector Strategy Papers: Stocktaking and Future Directions (CODE2003-0067), ibid.

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• Finally, it initiates a transition to a full-fledged results report through a more in-depth focus on sector results than in previous SSIUs. This will set the stage for the Bank’s first comprehensive Results Report in FY08.

4. As shown in Table 1, the Bank has completed 17 SSPs. During FY07, sector strategies have been substantially updated in Health, Nutrition, and Population (HNP), and in Financial Sector Development. This SSIU updates Environment, Forestry, Transportation, and Social Protection. These SSPs and updates provide a comprehensive coverage of virtually all the sector and thematic areas in which the Bank is engaged. This report also reflects major organizational changes that took place in FY07: the consolidation of the former Infrastructure (INF) and the Environmentally and Socially

Table 1. Sector and Theme Codes Mapping of Sector Strategy Papers Sector Strategy Paper b

Sector and Theme Codes classification a Endorsement Update c Sector codes

Water, sanitation and flood protection o/w: water and sanitation Water supply and sanitation SSP 2003 2006

Energy and mining Energy SSP 1999 2004 Information and communications Information communications and technology SSP 2001 - Transportation Transport SSP 1996 2007 Finance Finance SSP 2001 2007 Agriculture, fishing and forestry (see Rural Development SSP) (2002) (2006)

o/w: Forestry Sustaining forestry SSP 2002 2007 Education Education SSP 2005 - Health and other social services

o/w: Health Health, nutrition, and population SSP 1997 2007 Public administration, law and justice

o/w: Compulsory health finance Health, nutrition, and population SSP 1997 2007 Finance

o/w: Non-compulsory health finance Health, nutrition, and population SSP 1997 2007 Others:

Industry and trade n.a. - - Public administration, law and justice (see Public Sector Governance SSP) (2000) (2006) Unallocated sector codes n.a. - -

Theme codes Urban development Urban development SSP 1999 - Rural development Rural development SSP 2002 2006 Public sector governance Public sector governance SSP 2000 2006 Rule of the law Public sector governance SSP 2000 2006 Financial and private sector development

o/w: Private sector Private sector development SSP 2002 2003 Environment and natural resource management

o/w: Environment Environment SSP 2001 2007 Water resource management Water resource management SSP 2003 - Social protection and risk management

o/w: Social protection and labor Social protection SSP 2000 2007 Social development, gender and inclusion

o/w: Social development Social development SSP 2005 - Gender Gender SSP 2001 2004 Others:

Human development (see Education and HNP SSP) (2005, 1997) (2007 for HNP) Economic management n.a. - - Trade and integration n.a. - - Unallocated theme codes n.a. - -

Source: OPCS. a All operational activities that the Bank undertakes directly for external clients, and administrative resources that the Bank utilizes, are coded

to reflect the economic sectors the activities support (sector codes) and the objectives they intend to achieve (theme codes). See Annex B for sector and theme codes.

b See Annex A for full reference of sector strategy papers. c A stand-alone update or through the SSIU.

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Sustainable Development (ESSD) Networks into the new Sustainable Development Network (SDN); and the consolidation of the Financial Sector (FS) and the Private Sector Development (PSD) Networks into the new Financial and Private Sector Development (FPD) Network.

5. SSIU Outline. Part One of this report presents an overview of implementation progress across the 17 sectors and thematic areas in which the Bank is engaged. Following this introduction, Section II of Part One highlights progress in meeting the strategic priorities of the institution in FY06. Section III reports on sector/thematic outcomes achieved at the country level and sets the basis for analyzing the Bank’s contribution to these outcomes (see Box 1). Section IV reports on progress made to leverage Bank resources through partnerships both within the World Bank Group and with global partners. Section V discusses the agenda going forward. Part Two of the SSIU reviews the implementation progress and the directions of Bank support for FY07-09 in transport, environment, forestry, and social protection.

Box 1. Reporting on the Implementation of Sector Strategies Using Sector and Theme Codes Classification All operational activities that the Bank undertakes directly for external clients—for example, lending, economic and sector work (ESW), technical assistance (TA)—and administrative resources that the Bank utilizes for that purpose, are mapped along two dimensions: sector codes, to reflect the economic sectors the activities support, and thematic codes, to reflect the objectives they intend to achieve. This bi-modal classification is consistent with the UN International Standard Industrial Classification (ISIC), with some adjustments to the list of sectors to better fit the Bank’s business and circumstances (see Annex B). In the same vein, sector or thematic codes are mapped to each SSP to reflect the sector or thematic nature of the SSP (see Table 1). The SSP provides the overarching framework under which all operational activities (themselves mapped by sector and theme) occur. It is then inferred that the implementation of the SSP can be measured by measurable outputs or operational activities, such as lending and ESW, that are coded along the same sectoral or thematic dimension as the SSP. For example, lending that is mapped with the transport sector codes will be used to measure implementation progress of the Bank’s transport sector strategy. It is important to note that operational activities are mapped along both a sector and a thematic dimension, while SSPs are mapped to a sector or a theme. As a result, tables on operational activities below (see Table 4 and 6, for instance) should be carefully interpreted, especially the line items “other sectors” and “other themes.” More specifically, operational activities in the “other sectors” line item include (i) activities that are reported under a thematic SSP—meaning activities that are captured somewhere else in the Table (for example, activities under the “industry and trade” sector codes are reported under the thematic private sector SSP; activities under “law and justice” and “public administration” sector codes are reported under the thematic public sector governance SSP; activities under the agriculture sector codes are reported under the thematic rural development SSP), or (ii) activities that are not monitored under a stand-alone SSP (for example, fishing). Also, activities under “other themes” codes include (i) activities that are reported under a sector SSP (for example, activities under the “human development” thematic codes are reported under the education sector SSP and health sector SSP; activities under the “standards and financial reporting” thematic codes are reported under the financial sector development SSP), or (ii) activities that are not monitored by stand-alone SSPs, such as economic management, trade and integration, poverty strategy, analysis and monitoring. Source: OPCS.

II. BANK RESOURCES

6. The Bank manages its administrative expenditures tightly to remain within the agreed overall budget envelope and at the same time retain some flexibility to manage evolving priorities in the course of the fiscal year (see Table 2). This allows resources to be redeployed toward front-line client services, with a limited amount held back to provide for priority programs such as the

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Africa Action Plan and its progress report,6 efforts to reduce fraud and corruption in the Bank’s lending programs, a response to Avian Flu, and expanded programs on climate change and debt relief. In the period under review, the Bank was able to continue leveraging its administrative budget through raising resources from trust funds, even though the bulk of these funds did not directly support the Bank’s operational program. The Bank also introduced strategy and performance contracts (SPCs) to better link its resources to deliverables and outcomes.

7. Direct Client Services. The redeployment of resources to front-line client services was in line with the medium-term strategic priorities established at the corporate level in the FY06 budget document.7 Allocations to Regions have increased and those to the Network anchors have remained virtually constant in nominal terms (see Table 2). This allocation was reflected down to the sector and thematic levels. The costs of activities mapped by sector and theme in the Regions increased by more than those in the Network anchors. For example, costs on activities mapped to the energy and mining sector increased by 8.5 percent in the Regions, but remained flat in the Network anchor.

8. Trust Funds. At the end of FY06, total funds held by the Bank in trust amounted to $10.2 billion (up 11 percent compared to FY05), with disbursements rising to $5.8 billion in FY07 (see Table 4). A report reviewing Bank trust fund activities, A Management Framework for World Bank-Administered Trust Funds, was discussed by Executive Directors in October 2007.8 They approved a set of policy principles governing trust fund administration and a new fee structure to increase cost-sharing with trust fund donors.

9. For some 94 percent of the funds that it holds in trust, the Bank plays the role of fiscal agent or administrator, with the majority supporting recipient activities (including debt relief). The largest trust fund programs include the Global Fund to Fight AIDS, Tuberculosis, and Malaria (GFATM), the Global Environment Facility (GEF), and the Heavily Indebted Poor Countries’ Debt Initiative Trust Fund (HIPC), which together accounted for 56 percent of total trust fund disbursements in FY06. None of these directly supports the Bank’s operational program.

10. Trust fund disbursements that directly complemented the Bank’s administrative budget in FY06 amounted to $257 million. These helped to support the Bank’s operational program with analytic and advisory services (AAA), knowledge-sharing, lending development, capacity building, or research—all of which play a key role in building up the basis for Bank engagement in client countries. In the forestry sector, the administrative Bank budget supports the delivery of four to seven ESW and TA products per year, while another four to seven pieces per year have been funded through partnerships such as the World Bank/World Wide Fund (WWF) Alliance, the Program on Forests (PROFOR), and the Forest Law Enforcement and Governance (FLEG) 6 See Strengthening the Development Partnership and Financing for Achieving the MDGs: An Africa Action Plan

(DC2005-0021), September 16, 2005; and Accelerating Development Outcomes in Africa: Progress and Change in the Africa Action Plan (DC2007-0008), April 6, 2007.

7 See The World Bank’s Budget: Trends and Recommendations for FY06 (SecM2006-0139), April 5, 2006 and Report to the Board from the Budget Committee–The World Bank’s Budget: Trends and Recommendations for FY07; and FY07-09 Strategy and Performance Contracts: A Synthesis (BC2006-0013), June 23, 2006.

8 See A Management Framework for World Bank-Administered Trust Funds (R2007-0198/IDAR2007-0247), October 9, 2007.

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Table 2. Total Administrative Expenditures, FY04-07

(US$ million) FY04 FY05 FY06 FY07

Total costs 2,056 2,226 2,307 2,308 (reimbursement and fee income)

(196) (215) (231) (255)

Total administrative expenditures

1,861 2,011 2,075 2,053

Regions 895 940 976 1,001 Network Anchor 173 178 180 180 Other Units a 793 893 919 872 (Others) b (429) (509) (561) (506) Net Administrative Expenditures

nominal 1,627 1,502 1,514 1,547 real terms (BY= 05) … 1,502 1,464 1,427 Source: Business Warehouse RM report and Quarterly

Report to the Board. a Includes all other BB expenditures such as those for

operational units (QAG, OPCS), DEG, WBI, Treasury, Controller’s, HR, ISG, GSF, and other corporate units.

b Include expenditures related to SRP, PSBP and related management fee, DGF, Corporate Secretariat, and IEG.

Table 4. Total Trust Funds Disbursements

by Sector and Theme, FY05-07 (Bank-executed, client-executed and others)

(US$ million) FY05 FY06 FY07

Sectors Water Supply and Sanitation

15 18

Energy and Mining 5 5 Information and Communications Technology

5 6

Transport 14 17 Financial Sector Development

22 26

Health 950 1,145 Themes

Rural Development 123 102 Private Sector Development

117 145

Environment 526 641 Social Development a 637 523

Others b 2,569 1,746 Total c 4,128 4,374 5,808 Source: Trust Funds Financial Information Summary Year

Ended June 30, 2006. a Social Development Trust Funds related to conflict

prevention and post-conflict reconstruction. b Including, among others, Heavily Indebted Poor Countries,

Multidonor Trust Funds for Aceh, Consultant Trust Funds, etc.

c Cash contributions are reported in the program that first receives the funds and the disbursements are reported when paid.

Table 3. Total Administrative Costs by Sector and Theme, FY04-07

(US$ million) FY04 FY05 FY06 FY07

Sectors Water Supply and Sanitation Regions 31 31 34 35 Anchor 2 2 1 2 Energy and Mining Regions 33 35 38 40 Anchor 2 2 2 1

Regions 5 5 6 5 Information and Communications Technology Anchor 5 6 6 6 Transport Regions 33 35 40 41 Anchor 3 2 2 3 Finance Regions 32 29 31 31 Anchor 19 21 21 21 Forestry Regions 6 5 6 5 Anchor n/a n/a n/a n/a Education Regions 37 37 37 37 Anchor 6 6 5 5 Health Regions 35 34 35 34 Anchor 6 6 6 6

Themes Urban Development Regions 28 30 32 33 Anchor 2 2 3 1 Rural Development Regions 44 47 49 48 Anchor 9 9 9 7 Public Sector Governance Regions 70 70 72 71 Anchor 4 4 4 4 Private Sector Development Regions 50 51 52 52 Anchor 8 8 8 8 Environment Regions 47 49 53 53 Anchor 6 6 7 6 Water Resource Management Regions 10 10 12 11 Anchor n/a n/a n/a n/a Social Protection Regions 17 19 20 19 Anchor 7 6 6 6 Social Development Regions 28 27 30 27 Anchor 6 6 6 6 Gender Regions 7 6 6 5 Anchor 2 2 3 3

Other a Regions 618 660 681 711 Anchor 137 138 141 142

Total Costs 2,056 2,226 2,307 2,308 Regions 919 968 1,006 1,030 Anchor 223 225 230 228 Other b 914 1,032 1,071 1,050 Source: Business Warehouse. Note: Represent the portion of direct costs by the Regions that are mapped to

sectors and themes in SAP, and residual costs not mapped to sectors and themes. Because lending preparation/supervision is coded along two dimensions, sectors and themes, the same dollar spent on a project is presented two times--once in a sector and once in a theme. The same applies to ESW and TA.

Allocation based on a mapping of Anchor units into sectors and themes. Since each unit is mapped to a sector or a theme, a dollar spent by the Anchors is presented only once, and includes sustaining costs.

a “Other” by the Regions represents the total Regional costs minus the sum of regional costs mapped to themes. “Other” by the Network Anchor represents the total Anchor costs minus the sum of Anchor costs mapped to both sectors and themes. The following Anchors are included: PREM, HDN, FPD, SDN.

b Costs for other operational units (QAG, OPCS, DEC, WBI), Treasury, Controller’s, HR, GSD, and other corporate units.

6

program. For work on the environment, the Trust Fund for Environmental and Socially Sustainable Development (TFESSD) played an important role in integrating environmental reforms and institutional policies and project design, and the Bank-Netherlands Partnership Program (BNPP) has supported environmental reforms and institutional development at all levels of client country environmental systems. In the social protection area, trust fund resources have helped to produce policy-relevant research and global awareness, pushing the Bank’s agenda in previously neglected but critical areas such as addressing disabled people and child laborers, with notable results. For example, resources from the Development Grant Facility (DGF), International Labour Organisation (ILO)-International Programme for the Elimination of Child Labour, and the United Nations Children’s Fund, and UNICEF (through the Understanding Children’s Work partnership) supported research and ESW that led the Education-For-All Initiative to establish a task force on child labor.

11. Link from Resources to Outcomes. FY06 marks the first full year in which the Bank’s vice presidential units have managed under strategy and performance contracts, whereby they identify their strategic objectives and key performance indicators to improve the strategic content of the budget and planning processes.9 Although the link to country outcomes is more immediately apparent for the Regions than for the Network anchors, every part of the Bank has been involved in more clearly defining the results that it is trying to achieve. For example, in the environment theme, administrative Bank budget and trust fund resources were identified against the “ecosystems” objective: that is, promoting upstream analytic work especially related to environmental aspects for development policy loans, supporting the enhancement of the portfolio and analytic and advisory services for the Africa Region, and leading the mainstreaming of carbon finance and GEF products to the Regions. Progress toward this objective will be measured using indicators such as the number of ESW products, performance ratings by the Quality Assurance Group (QAG), and cross-support budget to the Regions.

12. Staffing. At the end of FY07, there were 8,561 IBRD staff, compared to 8,692 at the end of FY05.10 Net staffing continued to decline from FY06 levels because of continued business uncertainties, budget pressures, and the availability of extended-term consultants and temporaries to fill short-term gaps. In line with the strategic priorities set at the corporate level, the number of staff in the Regions has grown slightly as a result of redistribution from Network anchors and other units. Further, Network anchors have given first priority to operational support to the Regions through a target allocation of their staff-time that varies between 30 and 50 percent. In some sectors and thematic areas (for example, social protection and transport), operational deliveries increased much more rapidly than staff resources. In social protection, this result was achieved by increasing the rotation of social protection staff among the Regions, in-and-out from the anchor, and requiring each staff member in the anchor to allocate one-third of his/her time to the Regions.

9 See The World Bank’s Budget: Trends and Recommendations for FY07 (R2006-0092, IDA/R2006-0099), May

30, 2006; and the Strategy and Performance Contracts. A Synthesis (SecM2006-0258, IDA/SecM2006-0309), May 24, 2006.

10 See Strategic Staffing Update Paper (PC2007-0013), May 31, 2007.

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III. DELIVERY OF THE WORK PROGRAM

13. The Bank implements its sector strategies through a range of instruments at the country, regional, and global levels: AAA, lending, and internal and external partnerships. For example, in the social protection area, the Bank assisted Ethiopia to transform its social safety net from a series of short-term relief efforts into a long-term social protection program; it did so by providing better-targeted and timely support through ESW, technical assistance, training, lending, and donor coordination. The forestry sector has been using external partnerships intensively to regain leadership in advocating for forestry concerns at the global level, while the transport sector has mainly been using lending instruments to reengage the Bank in the provision of infrastructure.

A. Analytic and Advisory Services

14. Strengthening the Bank’s knowledge basis has been a central means to achieve priorities embodied in sector strategies. The Bank continues to be an important conveyor of knowledge to low- and middle-income countries, delivering 531 ESW and 430 TA products in FY07 across sectors and thematic areas (see Table 5), compared to 601 and 307, respectively, in FY06. While the administrative Bank budget financed the bulk of ESW and TA work ($141 million in FY07), trust funds provided another critical source ($88 million), effectively helping to build knowledge.

15. Informing Government Policy. Among the ESW products that were completed in FY04-06, the most commonly sought development objective—using the menu of preidentified development objectives and results indicators for ESW in SAP—was to inform government policy (featured in about three-quarters of these products—see Table 6).11 In Yemen, for example, ESW on fisheries recommended that the exploitation of fish stocks should be reduced to a sustainable level, and this led to the cessation of licenses for large, foreign industrial fishing vessels—with an immediate impact on fish stocks (see Box 2). In Mauritius, Bank-supported ESW helped to develop the transport action plan, which included a financial tool that the government used to phase and sequence all investments in the transport sector.12 In Colombia, Iran, Morocco, Nigeria, and Peru, ESW helped the governments to assess the magnitude of environmental problems. In Bosnia-Herzegovina, the Bank delivered analytic work on forestry law enforcement that led to the development of a national action plan to combat illegal logging. The Country Economic Memorandum for Macedonia13 informed the debate for the revision of the labor code that took place in the subsequent year.

11 Since over 60 percent of ESW products are delivered each year in the fourth quarter, most FY07 activities are still

not considered completed (i.e., most activities are missing the Activity Completion Summary, which is typically filed within six months of the delivery to client). Thus FY07 deliveries are excluded from this analysis.

12 See Mauritius–Country Partnership Strategy–CPS Completion Report–IEG Review (R2006-0182/1), October 24, 2006.

13 See Macedonia Country Economic Memorandum: Tackling Unemployment (Report No. 26681-MK), 2003.

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Table 5. ESW and TA Products by Sector and Theme, FY03-07 (activities funded out of the Bank’s administrative budget and Bank-executed trust funds)

Economic and sector work Technical assistance Sectors FY03 FY04 FY05 FY06 FY07 FY03 FY04 FY05 FY06 FY07

Water Supply and Sanitation 22 21 26 27 18 23 16 31 13 14 Energy 43 40 36 26 41 38 33 16 23 45 Information and Communication Technology

18 11 9 11 8 26 21 10 15 28

Transport 36 18 35 26 28 18 18 17 13 20 Finance 150 155 132 98 78 57 54 44 49 51 Forestry 3 2 4 2 3 4 2 3 3 2 Education 47 59 44 47 43 13 16 32 21 25 Health 34 50 56 36 36 10 8 25 21 23 Other Sectors a 373 377 352 327 275 151 135 173 149 223 Total 726 734 694 601 531 339 303 351 307 430

Themes Urban Development 33 15 20 20 28 13 17 21 14 27 Rural Development 39 42 43 40 30 14 5 13 11 30 Public Sector Governance 160 152 132 118 113 43 46 51 57 72 Private Sector Development 78 85 88 82 55 97 74 40 44 49 Environment 29 37 30 34 32 32 32 44 14 44 Water Resource Management 10 5 9 7 5 3 3 13 5 6 Social Protection 27 36 33 25 25 13 11 13 16 11 Social Development 14 16 17 13 18 18 15 17 16 31 Gender 11 20 16 13 13 3 5 11 5 4 Other Themes b 326 327 305 249 212 104 96 128 124 157 Total 726 734 694 601 531 339 303 351 307 430

Source: Business Warehouse Note: Sector and thematic codes are assigned to each ESW (and TA) task for reporting purposes. Sector (or thematic) codes

are mapped to each SSP. a Other sectors include industry and trade, flood protection, solid waste management, law and justice, public administration,

and agriculture and fishing. See Box 1. b Other themes include economic management, trade and integration, natural disaster management, poverty strategy, analysis

and monitoring, standards and financial reporting, and human development. See Box 1.

Table 6. Results of Completed ESW for Selected Sectors Boards, FY04 -06 (percent of activities containing a given development objective)

Inform lending

Inform government

policy

Build client analytical capacity

Inform/ stimulate

public debate

Influence development community

Overall average rating a

FY04 FY06 FY04 FY06 FY04 FY06 FY04 FY06 FY04 FY06 FY04 FY06Environment 50 67 90 73 50 67 50 87 70 60 0.79 0.79 Transport 60 43 100 100 40 57 60 86 60 71 0.74 0.85 Social Protection 15 57 54 90 46 19 46 52 54 29 0.76 0.80 Aggregate results 48 50 70 78 35 37 47 59 35 41 0.81 0.77 Source: Activity Completion Summary (ACS) for ESW tasks, Business Warehouse as of August 23, 2007. Note: FY04 data may be incomplete as prior to FY05, ACS processing was calibrated by cost, exempting tasks under $50,000

unless mandated by country units. a Rating refers to the extent to which a development objective was achieved (self evaluation by task leader).

Rating scale: 1 = Fully; 0.75 = Largely; 0.50 = Partially, and 0 = Not Achieved.

9

Box 2. ESW-Fisheries Note for Yemen The Bank prepared a Fishery Strategy Note that pointed out that since 1994 the Government of Yemen (GOY) had allowed licensing of 113 large foreign industrial vessels. These, along with other vessels, were leading to the unsustainable exploitation of fish stocks. The Note pointed out that the expansion had several undesirable effects: official exports at about US$13 million were well below their potential, while the growth of poverty alleviation-oriented small-scale artisanal fisheries was being constrained. The ESW recommended the reduction of such excessive effort to sustainable levels, to allow fish stocks to recover. Initially the Government of Yemen was reluctant to make the recommended change in policy. As the policy framework did not support further investments in artisanal fisheries, the Bank decided to discontinue lending for fisheries until an appropriate policy framework had been put in place. Following internal discussions and a change of the minister in charge of the Ministry of Fish Wealth, the Government decided to discontinue giving licenses to large, foreign industrial fishing vessels in 2002, and by 2003 most old licenses were phased out. This had an immediate and favorable impact on fish stocks. Fish production from small-scale fisheries, fish exports, and sector employment all started growing at double digit rates, and by 2004 fish exports reached a level of about US$210 million. In view of the more favorable policy framework, the Bank restarted fisheries sector lending in Yemen with an IDA credit about US$25 million in 2005. Source: CAS Completion Report, in the Yemen Country Assistance Strategy (Board approval date: June 15, 2006).

16. Informing Lending. Another important objective, featured in about half of the ESW products, has been to inform lending. For example, various analytic pieces have helped to support the preparation of lending operations in Serbia and Montenegro, by identifying the conditions to enhance the flexibility of the labor market, and thus directly influencing the reform of the labor code. In the forestry sector, high-quality ESW and analytic initiatives such as the forestry transparency analysis for Indonesia, the post-conflict forestry sector review in the Democratic Republic of Congo, and institutional reforms research for Russia have been used to integrate forestry concerns into Country Assistance Strategies (CASs), as well as to develop an active forestry portfolio. Strategic environmental assessments (SEAs) and country economic analyses (CEAs) for Ghana, Honduras, Indonesia, Kenya, and Laos have provided the analytic basis to mainstream forestry concerns in the Bank’s financial assistance to those countries. In Peru, findings from the CEA helped to support discussions on environmental priorities among political parties, nongovernmental organizations (NGOs), and governmental agencies, and led to a request from the government for a lending operation to reduce the country’s vulnerability to natural disasters.

17. Development Policy Operations. Core diagnostic reports and sector work underpin the preparation of practically all development policy operations, and the breadth and wealth of analytic work undertaken is documented in related program documents.14 However, as the 2006 Development Policy Lending (DPL) Retrospective notes, the direct link between the detailed policy recommendations made in ESW and the policy actions supported by development policy operations (DPOs) are not always spelled out in detail in loan documents.15 Typically, the underpinning ESW is being referred to by name but its recommendations are not described at a level of detail that would allow one to make the link to the concrete policy actions of the operation. In areas where sector work underpins an assessment on distributional or environmental effects in DPOs, the link between existing knowledge and conclusions by the task team are also not always fully spelled out. For example, although about 70 percent of DPOs covered in this review refer to the distributional impacts of the proposed reform programs they support, and summarize the existing poverty and 14 See Development Policy Lending Retrospective (SecM2006-0319), July 13, 2006, Annex D. 15 See Development Policy Lending Retrospective, ibid.

10

social impact analysis, few of them make a direct link between existing analytic work and the anticipated distributional impacts of specific policy reforms. Although such description would be informative, it is neither expected nor required by policy unless poverty and social impacts are likely and significant, which was not the case for most operations. Also, the preparation of a larger number of SEAs and CEAs would broaden the analytic base for the assessment of the likelihood and significance of effects on the environment, forestry, and other natural resources.

18. Building Clients’ Analytic Capacity. Over one-third of ESW products have the goal of building the client’s analytic capacity. Though arguably this goal has not received enough attention, some sectors report that it is increasingly being achieved through ESW. In transport, for example, ESW has helped Pakistan develop a national trade corridor improvement program, including the establishment of the planning commission to support intersectoral coordination, performance assessment, and impact evaluations. In El Salvador, the Bank’s country environmental analysis has increased the capacity of regional institutions to analyze environmental and health links and use this information for policymaking. Increasing, ESW is conducted jointly with partner countries and other donors (60 percent in Africa in FY07), helping to build client capacity while improving the understanding of country conditions. This can take more time, but it improves the output.

19. Influencing the Development Community. Some of the Bank’s ESW is designed to influence the development community. For example, in the environment theme, the Bank has delivered a comprehensive snapshot of wealth, including produced capital, natural resources, and the value of human skills and capabilities, for 120 countries, showing that many of the poorest countries are not on a sustainable path of development.16 In the social protection theme, the Bank has been working with ILO and UNICEF to develop innovative tools to measure, monitor, and analyze child labor, and has produced a database that is now the preeminent source of data and methodologies on child labor in the world. The Bank has also made progress on measuring governance, with the development of a core list of 14 monitorable indicators that can effectively measure public financial management, procurement practices, and institutions that provide checks and balances (such as audit departments and judicial systems),17 and it has updated the worldwide governance indicators database.18

20. Sustained and Shared Economic Growth. Among other areas of emphasis in the Bank’s analytic work in FY06 is sustained and shared economic growth. Work in this area has included the development of an innovative growth-diagnostic framework; the delivery of a number of growth diagnostics and broad ESW products, such as public expenditure reviews and flagship reports emphasizing the virtuous link between poverty reduction and growth; and the establishment of a global, high-level Commission on Growth and Development that will look at factors that influence growth prospects. Results from 12 country-level growth diagnostics were presented at a Growth Diagnostics Conference in FY06.

16 See Where is the Wealth of Nations?, World Bank, 2006. 17 See Global Monitoring Report 2006: Strengthening Mutual Accountability–Aid, Trade and Governance

(DC2006-0004), April 7, 2006 and Global Monitoring Report 2006: Strengthening Mutual Accountability–Aid, Trade and Governance Background document (DC2006-0004/1), April 22, 2006.

18 See Governance Matters 2006: Worldwide Governance Indicators, World Bank, 2006.

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21. Strengthening Institutions and Assisting in Policy/Program Implementation. TA has proved a useful instrument for the Bank to support the dialogue with client countries and foster long-term institutional development (see Annex D, Table D2). For example, in the Democratic Republic of Congo, the Bank’s dialogue on forestry resulted in the country’s decision to suspend the allocation of all new logging concessions and to undertake a legal review of all existing concessions with the assistance of an internationally recruited observer; these decisions were widely praised by local and international NGOs, as well as the donor community. About three-quarters of technical assistance activities have sought to support institutional development, and over 60 percent of all TA delivered in FY06 assisted clients in the implementation of their policies/programs.

22. Enhancing Skills and Sharing Knowledge. In FY07, the Bank delivered 686 client training events to client countries, mainly in public sector governance, private sector development, urban development, and health. These activities reached about 75,000 participants in 212 client countries. There were five major audience groups that represented 95 percent of total participants—government officials (43 percent), educators/trainers (20 percent), private sector representation (17 percent), NGOs (13 percent), and other international organizations (2 percent).

23. Quality. Overall, the quality of ESW and TA products remained high in the period under review, with closer alignment with CAS objectives.19 At the sector/thematic level, a review of FY02-05 ESW and TA tasks at the county program level showed continuing strong performance in terms of analytic quality. All ESW in the infrastructure sectors rated satisfactory or better. The largest share of ESW products in all the other sectors/thematic areas rated satisfactory or better. For example, 71 percent of ESW in the health sector rated satisfactory or better, with 29 percent rated “moderately unsatisfactory.” ESW in the environment and public sector governance themes showed a similar pattern, although with a somewhat lower percentage of ESW rated “moderately satisfactory.” An IEG evaluation of ESW and TA is expected to provide more information on the Bank’s analytic work, and recommendations to improve its impact.

24. Preparation Time. Overall, the average preparation time for ESW continued to increase, from 12.5 months in FY04 to 14.9 months in FY07 across sectors and thematic areas (with a few exceptions), reflecting the increased emphasis on comprehensive reports prepared in a participatory manner with clients and other donors and disseminated widely. TA activities have shown a similar trend, with average preparation time increasing from 15.5 months in FY04 to 17.0 months in FY07.

25. Unit Completion Costs. Overall, average unit completion costs for ESW continued to rise in FY06 across sectors and thematic areas (see Figure 1). This trend can be explained by the increasingly complex requirements for delivering high-quality and, where possible, joint ESW products, and by the movement to consolidate ESW tasks.

19 See Annual Report on Portfolio Performance FY06 (R2007-0025, IDA/R2007-0027), February 20, 2007.

Figure 1. Average Unit Completion Costs of ESW, FY02-06 (thousand US$ per ESW)

50

75

100

125

150

175

200

FY02 FY03 FY04 FY05 FY06

Transport ForestryEnvironment Social Protection

Source: Business Warehouse as of July 27, 2006.

12

26. AAA Processing Reforms. In FY05, the Bank initiated reforms to streamline the Regional and Network processing guidelines for ESW and TA. Efforts are ongoing to further simplify the preparation process for task managers, notably with the launch of an operations portal for ESW and TA, which standardizes and automates the processing steps in all sectors and thematic areas. Trends in unit completion costs and preparation time, and the evolution of AAA products such as programmatic ESW, all suggest that the current system of monitoring and measuring the outcome of AAA should be reassessed and revised. The FY06 Annual Report on Portfolio Performance20 and the forthcoming IEG report, have led to a Management decision to examine, in FY08-09, the governance structure, the measurement of AAA outputs, and the impact of AAA.

B. Lending

27. Lending continues to remain the Bank’s primary instrument for helping client countries achieve results, and this is reflected in the share of the Bank’s administrative budget devoted to lending preparation and supervision ($293 million in FY07). Sectors and thematic areas continued to use assistance to countries in project design as the primary vehicle to pursue the goals of sector strategies. Lending commitments (including IDA/IBRD lending, guarantees, grants, GEF funding, and special financing) slightly exceeded $25 billion in FY07 (see Table 7), up from the FY05 level of $22.6 billion, itself a five-year high. Additional financing21 continues to grow, from more than $0.7 billion in FY06 to $1.8 billion in FY07—representing an increase from 3 percent of the total new lending commitments in FY06 to 7 percent in FY07. The portfolio composition by sector and theme changed little between FY02 and FY07, with the exception of an increase in transport and a decline in financial sector development.

28. Infrastructure. The portfolio continued to be dominated by lending for infrastructure (water supply and sanitation, energy, information and communications technology, and transport), in line with the Bank’s Infrastructure Action Plan,22 with new commitments of $10.1 billion, representing 41 percent of the Bank’s portfolio—up from 26 percent in FY02 (see Table 8). About half of FY07 additional financing ($910 million) was committed to infrastructure.

29. Millennium Development Goals. New lending in the Millennium Development Goals (MDGs)-related sectors—water supply and sanitation, health, and education—increased by 30 percent from $4.8 billion in FY06 to $6.2 billion in FY07, and represented about 25 percent of FY07 commitments. In particular, the health sector’s contribution to total commitments grew from $1.3 billion in FY06 to $1.8 billion in FY07 with the FY07 issuance of the Bank’s updated strategy in Health, Nutrition, and Population. The Bank acted as a primary convener of bilateral and multilateral donor funding to address emergency needs across regions in the health sector. Having put forward the Malaria Action Plan23 in FY05, the Bank followed up on its commitments with the delivery of six malaria projects in Africa in FY06, and continued work in 20 See Annual Report on Portfolio Performance FY06, ibid. 21 As part of the modernization and simplification efforts for investment lending, the Bank updated its Operational

Policy/Bank Procedures on Supplemental Financing in FY05 to allow the use of additional financing not only to complete a project’s original activities, but also to support modified or additional activities which broaden project impact and development effectiveness. See From Supplemental Financing to Additional Financing: Responding to the Needs (R2005-0005/3), July 13, 2005.

22 See Infrastructure Action Plan–Overview & Matrix of Management Actions (SecM2003-302), June 23, 2003. 23 See Global Strategy and Booster Program on Malaria, World Bank, April 2005.

13

an additional nine countries, for a total IDA commitment of $405 million. To address the Avian Flu crisis, in FY06 the Bank quickly mobilized donors, taking a leading role in gathering resources, assessing needs, and preparing and implementing projects across regions.24

Table 7. Lending Commitments by Sector and Theme, FY02-07 Million US$ Number FY02 FY03 FY04 FY05 FY06 FY07 FY02 FY03 FY04 FY05 FY06 FY07

Total 19,904 18,804 20,453 22,589 23,962 25,034 253 259 266 305 308 325 Sectors

Water Supply and Sanitation 503 1,295 1,493 1,781 1,530 2,344 12 18 22 24 19 33 Energy and Mining 2,128 1,205 1,042 1,879 3,064 1,904 20 22 19 29 31 28 Information and Communication Technology 156 115 97 191 82 149 7 5 4 4 2 1 Transport 2,392 2,731 3,819 3,138 3,221 4,977 25 20 31 22 28 45 Finance 2,716 1,422 1,824 1,678 2,308 1,604 20 14 14 17 15 10 Forestry 163 172 46 75 159 161 4 4 1 2 4 2 Education 1,405 2,360 1,690 1,973 1,991 2,023 21 29 25 32 25 28 Health 1,387 1,683 1,692 1,267 1,257 1,835 22 29 19 21 24 19 Other sectors a 9,056 7,822 8,750 10,607 10,351 10,038 124 118 132 153 160 159

Themes Urban Development 1,492 1,594 1,369 1,872 1,911 2,652 14 19 17 21 22 31 Rural Development 1,682 1,929 1,529 2,829 2,247 3,192 24 26 28 34 38 43 Public Sector Governance 4,536 2,998 3,901 2,952 4,401 3,679 43 41 47 53 55 55 Private Sector Development b 3,292 2,157 3,415 2,894 4,350 3,317 40 26 30 37 38 38 Environment 876 1,015 1,090 1,920 1,355 1,406 18 25 27 33 38 30 Water Resource Management 175 205 379 744 260 776 4 5 7 8 5 8 Social Protection 811 1,913 1,174 1,430 1,357 1,127 14 17 15 12 13 16 Social Development 1,251 933 1,196 1,209 977 1,115 27 16 20 20 17 18 Gender 177 85 369 94 137 160 4 3 4 2 3 3 Other themes c 5,612 5,976 6,031 6,644 6,967 7,611 66 81 72 86 79 85

Memorandum item: Infrastructure sectors d 5,232 5,439 6,589 7,416 8,113 10,141 66 66 79 85 85 116

Source: Business Warehouse. Note: Table includes IBRD loans, IDA credits and grants, guarantees, GEF and Special Financing. Each lending operation is mapped along two

dimensions, sector and theme. See Box 1 on interpretation of “other sectors” and “other themes.” a Other sectors include industry and trade, flood protection, solid waste management, law and justice, public administration, agriculture and

fishing, and other social services. See Box 1. b Includes sub-theme, Infrastructure Services for Private Sector Development, which covers activities and services beyond the core PSD

business. c Other themes include economic management, trade and integration, natural disaster management, poverty strategy, analysis and monitoring,

standards and financial reporting, and human development. See Box 1. d Comprises water supply and sanitation, energy and mining, information and communication technology, transport, including solid waste

management and flood protection.

24 See Responses to Avian and Human Influenza Threats: Progress Report: January-June 2006 (SecM2006-

0351), August 1, 2006.

14

Table 8. Lending Commitments by Instruments, Sectors, and Themes, FY02-07 (percent)

Instrument a FY02 FY03 FY04 FY05 FY06 FY07 c Development Policy Lending 50 33 31 30 31 26 Investment 50 67 69 70 69 74

Sectors b Water Supply and Sanitation 3 7 7 8 6 9 Energy and Mining 11 6 5 8 13 8 Information and Communication Technology

1 1 0 1 0 1

Transport 12 15 19 14 13 20 Finance 14 8 9 7 10 6 Forestry 1 1 0 0 1 1 Education 7 13 8 9 8 8 Health 7 9 8 6 5 7 Other Sectors 45 42 43 47 43 40

Themes b Urban Development 7 8 7 8 8 11 Rural Development 8 10 7 13 9 13 Public Sector Governance 23 16 19 13 18 15 Private Sector Development 17 11 17 13 18 13 Environment 4 5 5 9 6 6 Water Resource Management 1 1 2 3 1 3 Social Protection 4 10 6 6 6 5 Social Development 6 5 6 5 4 4 Gender 1 0 2 0 1 1 Other Themes 28 32 29 29 29 30

Memorandum Item: Infrastructure sectors c 26 29 32 33 34 41

Source: Business Warehouse. a Includes IBRD/IDA only. b Includes IBRD/IDA, GEF, SF, GU. c Comprises water supply and sanitation, energy and mining, information and communication technology, and

transport, including solid waste management and flood protection.

30. Public Sector Reform. In FY07, lending for public sector reform continued to represent a significant share (15 percent) of the Bank’s total commitments, even though the total amount committed for public sector governance declined from $4.4 billion in FY06 to $3.7 billion in FY07. Lending in this sector currently focuses on Africa and South Asia, where the FY07 total lending amounts for public sector reform are $0.87 billion and $0.93 billion, respectively. Other sectors, such as education, health, transport, and energy have renewed their efforts to strengthen institution building and thwart corruption in their lending projects. In education, for example, 60 percent of new projects in FY07 mapped to the Education Sector Board pursued one or more public sector governance themes, compared to 40 percent in FY02. This means that education projects not only sought to raise enrollment and the quality of education, but also sought to ensure that governments’ responsibilities were aligned with their resources. The number of new lending operations mapped to the Transport Sector Board with one or more public sector governance themes also rose from 42 percent in FY02 to 56 percent in FY07. For example, the Second Phase (APL2) of the National Highway Asset Management Project25 in Argentina not

25 See Argentina–National Highway Asset Management Project (R2007-0120/1), June 11, 2007, Board approved

on June 28, 2007.

15

only sought to improve the road networks through rehabilitation of roads and bridges, but also supported the capacity building of the National Highway Directorate.

31. Quality. The proportion of Bank projects judged by QAG to be satisfactory, or better, at entry to the portfolio improved to 92 percent in FY04-05,26 from 86 percent in FY03.27 The quality of new projects in rural development and in health, nutrition, and population dropped slightly (from 94 percent and 93 percent rated satisfactory or better, respectively, in FY03, to 87 percent and 89 percent, respectively, in FY04-05). Meanwhile, the quality of new education projects rose significantly (from 62 percent rated satisfactory or better in FY03 to 83 percent in FY04-05).

32. Project Performance. Outcome ratings by IEG of projects completed in the period FY03-06 show that 78 percent, on average, achieved their major relevant objectives (see Figure 2), with projects in transport, education, social protection, rural development, and water supply and sanitation showing the best performance. Projects in public sector governance, environment, and health, nutrition, and population show lower achievements of development objectives than the Bank average. As a result of this, the Bank revisited these strategies in FY06-07 and proposed new strategic directions.

Figure 2. Development Outcomes of Completed Projects for Selected Sector Boards, FY03-06 (percent rated moderately satisfactory or better)

91

84 83 82 81

6865

72

50

60

70

80

90

100

Perc

ent s

atisf

acto

ry

Bank-wide (78%)

Transport Water supply Education Rural Social Environment Health, Public & sanitation development protection nutrition, & sector population Source: Business Warehouse. Note: Measures the extent to which the operation’s major relevant objectives, including institutional development and policy reform, were achieved or are expected to be achieved efficiently (using a symmetric six-point rating scale). 33. Transport. On average, projects in the transport sector were the most successful in achieving their expected outcomes. An example of such a project is the South East Europe Trade and Transport Facilitation Project,28 which in three years helped to achieve an average 63 percent reduction in customs clearance times, combined with a 60 percent increase in customs revenue collected, plus a 65 percent reduction in border crossing times. In Argentina’s Provincial Road

26 See Quality at Entry in FY04-FY05 (QEA7) (CODE2006-0011) February 9, 2006. 27 See Sixth Quality at Entry Assessment, QAG, January 21, 2004. 28 See Implementation Completion Report-Macedonia-Trade & Transport Facilitation in South East Europe

(Report No. 35869), May 25, 2006. Board approved Bulgaria on May 25, 2000; Board approved Macedonia on July 25, 2000; and Board approved Bosnia-Herzegovina on February 22, 2001.

16

Infrastructure Project,29 performance-based road maintenance contracts achieved notable benefits: the share of roads in poor condition fell 41 percent to 6 percent, unit costs were 12-18 percent lower than under traditional contracting, and the achieved economic rate of return was estimated to be 60 percent because of the savings in vehicle operating costs. The demonstration of such results has led to a much wider application of performance-based road maintenance to both national and provincial roads in Argentina.

34. Social Protection. In social protection, projects with satisfactory outcomes include the China’s Pension Reform Project,30 which resulted in a rise in pension coverage and contribution compliance rates in a number of districts, and Colombia’s Labor Reform project,31 which led to an increase in the government budget for labor market training, helped create jobs and apprenticeships, and played a major role in the decline in the unemployment rate from 15.7 percent to 12.1 percent between 2003 and 2004. Projects with unsatisfactory outcomes were usually those without a high degree of client government ownership, such as a pension reform project in Nicaragua.32

35. Environment. In the environment, satisfactory outcomes were achieved, for example, in the Honduras Sustainable Coastal Tourism Project,33 which established six municipal tourism units and financed several programs to enhance tourism—ranging from hotel recycling to the conservation of coral reefs—and Algeria’s Industrial Pollution Control Project,34 which helped drive down average emissions by more than 80 percent in one city and asthma mortality by 78 percent in another. But in the Ukraine, Bank projects did not manage to mainstream biodiversity conservation into regional development plans as anticipated; the experience shows the importance of building local capacity and awareness of biodiversity conservation into the development policy process at an early stage of decision making and project design.35

36. Other Good-Practice. Other good-practice examples include Cambodia’s Phnom Penh Power Rehabilitation Project.36 Largely thanks to suitable design choices, this project enabled the expansion of energy access to over 47,000 new customers in Phnom Penh, exceeding the initial appraisal targets of 40,000. At the same time, the utility’s existing customers saw dramatic increases in service quality and reliability. The project supported legal and regulatory reform as well as major sector restructuring, and its total costs were $3 million less than anticipated.

29 See Argentina–Provincial Road Infrastructure (R2005-0123/1), May 19, 2005. 30 The China–Pension Reform Project–Implementation Completion Report (Report No. 36024), July 24, 2006,

Board approved on June 4, 1999. 31 See Columbia: Second Programmatic Labor Reform and Social Structural Adjustment Loan (R2004-0197/1),

October 14, 2007, Board approved on November 4, 2004. 32 The Nicaragua–Pension and Financial Market Reform Technical Assistance Credit–Implementation

Completion Report (Report No. 34715-NI), December 22, 2005, Board approved on May 11, 2000. 33 See Honduras–Sustainable Coastal Tourism Project–Implementation Completion Report (Report No. 35651),

June 23, 2006, Board approved on November 26, 1996. 34 See Algeria–Industrial Pollution Control Project–Implementation Completion Report (Report No. 34512),

January 19, 2006, Board approved on June 11, 1996. 35 See Ukraine Country Assistance Strategies Completion Report (R2005-156), June 13, 2005, Board approved on

July 5, 2005. 36 See Cambodia–Phnom Penh Power Rehabilitation Project–Project Performance Assessment Report (31663),

February 16, 2005, Board approved on September 28, 1995.

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Yemen’s Second Public Works Project37 also achieved highly satisfactory outcomes: it achieved its goal of delivering cost-effective infrastructure services through 800-900 subprojects, and also achieved a labor content in each project that was 5 percent higher than expected at appraisal. The project succeeded largely because of effective management at all levels, clearly defined roles of all participants, and guidance from key government officials.

37. Preparation Time. Responding to the institutional reform efforts for modernizing and simplifying lending operations, the average preparation time for new IBRD/IDA lending operations decreased to 14 months in FY07 from 17 months in FY01, although it remained above the target of 12 months.38 The reduction occurred primarily in investment lending, where the average preparation time fell to 16 months in FY06 from 19 months in FY01.

38. Infrastructure Preparation. The decline in preparation time was remarkable in infrastructure, which had suffered more than other sectors from long preparation times because of project complexity.39 While the number of infrastructure projects grew substantially, the average preparation time shrank to 17 months in FY07, from 27 months in FY01. The dramatic reduction was led by energy (29 months in FY01 to 13 months in FY07) followed by water supply and sanitation, and transport. In part, the change reflects a shift in the type of infrastructure projects being prepared. For example, in transport, the Bank has rebuilt its portfolio primarily in supporting road projects, which tend to be more straightforward and thus faster and less resource-intensive to prepare than other transport projects. Additional finance projects, about half of which were in infrastructure, also helped speed the Bank’s ability to support badly-need infrastructure projects more quickly.

39. Unit Completion Costs. As a result of the drop in preparation times, the average unit completion cost for preparing IDA/IBRD lending operations continued to decline in FY07 from FY05. Social Protection declined by roughly 15 percent in the past two years. Looking at unit completion costs for selected sectors and thematic areas shows progress in most areas.

C. Partnerships

1. Bank-IFC Coordination

40. Though reporting on SSP implementation generally covers IBRD/IDA activities only, a few sector strategies have been formally designed as joint Bank-IFC strategies. One of these is the forestry strategy that is examined in Part Two.40 In this sector, the challenge for the Bank and IFC has been to ensure that investments in resource supply (sustainable forest management), in which the Bank has a comparative advantage, are synchronized with investments in resource demand (sawmilling and pulp and paper mills), which have been IFC’s core business. Concrete steps have been taken since FY02 to strengthen cooperation between the two entities at the 37 See Yemen–Second Public Works Project–Implementation Completion Report (Report No. 27440), January 06,

2004. Board approved on January 28, 1999. 38 See Modernization and Simplification of World Bank Lending FY06 Update Report (SecM2006-0480,

IDA/SecM2006-0589), December 5, 2006. 39 See Infrastructure: Lessons from the Last Two Decades of World Bank Engagement (SecM2006-0046), February

6, 2006. 40 Others are the private sector SSP and the new financial sector SSP.

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operational level in the forestry sector. These include the alignment of the Bank’s OP 4.36 on Forests with the IFC’s policy and performance standards (PS6) on social and environmental sustainability, to ensure a complementary and mutually consistent approach to clients, and the use of catalytic funding provided by PROFOR and World Bank-WWF/Alliance to assist IFC’s Regional Development Facilities in support of forest and wood-based small and medium-sized enterprises (SMEs).

41. Transport Sector. IFC activities have also synergistically complemented those of the Bank in the transport sector by financing private transport services (such as port and stevedoring operations, freight railways, airlines, shipping companies, and transport support services), while Bank lending has focused on providing basic public infrastructure. MIGA guarantees for transport projects represent just over 1 percent of the MIGA portfolio.

42. Private Sector and Financial Market Development. The potential for increased collaboration is high in private sector and financial market development. The World Bank Group Financial Sector Strategy that was endorsed by the Board in FY07 focused on the benefits of coordination between the Bank and IFC to meet client needs across the spectrum, from diagnostics and policy dialogue to detailed reform implementation—noting that the infeasibility of a clear division of labor between the two institutions reinforces the importance of good communication and coordination.41 Throughout FY07 IFC, the Foreign Investment Advisory Service (FIAS), and MIGA coordinated to support the design of a new multidonor private sector development program for Bangladesh. In Africa, an IDA-IFC pilot program in support of micro, small, and medium enterprises (MSMEs), launched in FY04, is proving successful in developing joint financial products that are new for the Bank Group, and is pushing the boundaries in facilitating MSME development.42 IFC and the Bank are partnering with the Swedish Central Bank and the Nordic Stock Exchange to launch an Efficient Securities Markets Institutional Development initiative, which is designed to enhance capacity in securities markets and facilitate securities markets transactions in developing countries, beginning in Africa.

43. Advisory Services. IFC has expanded its advisory work through the Advisory Services (AS) program, not only to the private sector but also to governments (35 percent of AS work), making coordination within the Bank Group even more important to ensure consistent advice to clients, avoid duplication of efforts and resources, and support an optimal development impact for the Group as a whole. Under this model, the Bank is engaged in upstream analytic and advisory work, IFC provides advice on transaction structuring (to the government or private sector), IFC, IBRD/IDA, and MIGA may work jointly on financing, and IFC may provide additional technical assistance support on links and community development (to the government or private sector). This model worked in the case of the privatization by concession of a combined Kenya-Uganda railway network: IFC provided technical advice to the government on the tender and bidding process, and the Bank supported staff retrenchment and social mitigation,

41 See Financial Sector Strategy for the World Bank Group (SecM2007-0142, IDA/SecM2007-0190,

IFC/SecM2007-0017, MIGA/SecM2007-0011), April 2, 2007. 42 See A Review of the Joint IDA-IFC Micro, Small and Medium Enterprise Pilot Program for Africa

(IDA/SecM2006-0560), November 3, 2006.

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establishment of a Pension Fund, and support for the concession process through the provision of partial risk guarantees to backstop government contractual undertakings.43

44. Coordination. Although coordination in the delivery of technical assistance44 across the World Bank Group has improved in recent years, the overall coordination process is inherently complex because of different institutional business models. IBRD/IDA has a complex Regional and Network matrix, with staff working on a range at activities that are primarily funded out of its administrative budgets. IFC has a dedicated delivery model, which is heavily decentralized with a strong field presence. The funding mechanism for the AS program—which sets aside a certain proportion of IFC’s annual retained earnings to fund advisory services in future years—provides IFC with dedicated resources that can be rapidly deployed in response to client demands. To realize the full potential for improving client impact through leveraging World Bank Group synergies, the World Bank Group reviewed technical assistance across the group. This resulted in a merger of MIGA’s TA functions into FIAS, and joint World Bank Group Regional strategy/work plan reviews for FPD as an ongoing exploration of ways to build a more formal coordination framework, including through pilots to improve coordination.45 The IFC has also moved to improve coordination with the Bank in its AS work through opening its information systems to relevant Bank staff, requiring consultation with Bank staff prior to work with government clients, and encouraging inclusion of Bank staff as peer reviewers and/or mission participants.

45. Mainstreaming. More efforts have also been devoted to mainstreaming a number of IBRD/IDA priorities into IFC projects. For example, IFC requires antifraud and anticorruption representations, warranties, and covenants in its documentation. IFC has also strengthened the focus on due diligence by sponsors in its projects at an early stage, including the use of investigative firms when appropriate, and this process continues during project appraisal. IFC has made advances in the measurement of results, through the roll-out of the Development Outcome Tracking System for projects, and a monitoring and evaluation system for technical assistance and advisory services.

2. Global Programs and Partnerships

46. Global programs and partnerships (GPPs) supported by the Bank are making critical contributions to development and poverty reduction. Overall, the Bank is involved in about 110 global programs and 40 regional programs, which together spent approximately $2 billion in FY06 (comprising administrative Bank budget, DGF, and client- and Bank-executed trust funds). GPPs enable the Bank and the donor community to address specific development issues collaboratively through special policy and program initiatives; they seek to achieve common 43 See East Africa Trade and Transport Facilitation Project (IDA/R2006-0003/1), January 4, 2006. Board

approved on January 24, 2006. 44 Technical assistance is understood in broad terms here. It is defined as the provision of services, skills,

knowledge and technology to external clients, which can be used to implement a lending project; and/or improve the long-term development of client countries through building: (a) policy capacity; (b) institutional capacity (improvement of country’s rules, enforcement mechanisms); or (c) human capacity (sharing and disseminating knowledge, and transferring and enhancing skills). For IBRD/IDA, it includes ESW, TA, training, research, technical assistance loans. For IFC, it includes the AS program.

45 See IFC FY07-09 Business Plan and Budget (IFC/R2006-0129), May 31, 2006.

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objectives that the Bank would not or could not accomplish alone; and they often cut across more than one region. For example, a strong collaboration between the Bank and GEF and Carbon Finance enables the Bank to address global issues such as deforestation and to expand its activities that impact on climate change and land degradation. In the transport sector, the Bank led work to establish the Global Road Safety Net Facility (GRSF) and the Air Transport Safety Partnership, and is currently discussing with international groups the creation of an urban transport partnership that will have a development focus.

47. GPP Thematic Shares. Of all the resources managed by the Bank for global programs and regional partnerships, 34 percent support urban and rural development themes; 11 percent support public sector governance; 6 percent support environment, forestry, and water management issues; 4.5 percent support health; and 3.5 percent support education.

48. Technical Leverage and Financial Resources. For a number of sectors and thematic areas, these partnerships provide additional technical leverage and financial resources to achieve the goals established in SSPs. For example, the Sanitation, Hygiene, and Wastewater Support Service—a donor partnership—funded 32 technical support activities in 25 countries, contributing to the preparation of projects with sewerage and sanitation investments valued at more than $800 million and to the implementation of projects valued at more than $50 million (see Annex C). In the environment sector, the Mainstreaming Fund for the Environment (MFE) plays a catalytic role in business development and regional activities.

49. Forestry Sector. In the forestry sector, strategic programs and partnerships such as the World Bank/WWF, PROFOR, and FLEG initiatives help to leverage the administrative Bank budget, align stakeholder interests, enable innovation, improve outreach, and scale up impact. With a Bank budget of about $15 million, the World Bank/WWF Alliance has successfully leveraged about $300 million, with associated multiplier impacts and influence in its operations. The PROFOR program has raised more than $8.5 million over the last four years. In addition, the Bank has raised more than $6 million to support the FLEG program, which has been instrumental in putting the Bank in a leadership position on issues of forestry governance and has strongly facilitated the mainstreaming of forestry governance in the dialogue. A Global Forest Partnership (GFP) is being developed to make the most of synergies among forestry programs and partnerships, and scale up the availability of grants for the development of the sector.

50. Operations Evaluation Department. Following the 2004 Operations Evaluation Department (OED) review of global programs,46 the Bank developed a strategic framework that determined priorities for Bank participation in global issues.47 Overall, GPP portfolio management has been improved in a number of ways on the initiative of Bank Management as well as in response to the recommendations of OED/IEG (see Box 3). More selective criteria for engagement and eligibility have been introduced, including five guiding principles endorsed by Executive

46 OED was the precursor to IEG. OED’s Phase 1 report focused on the Bank’s overall portfolio of 70 global

programs in 2002 and Phase 2 was based on 26 case studies that accounted for 90 percent of expenditures in 2002. See Addressing the Challenges of Globalization: An Independent Evaluation of the World Bank’s Approach to Global Programs, OED, World Bank, 2004.

47 See A Strategic Framework for the World Bank’s Global Programs and Partnerships (SecM2005-0250), May 4, 2005.

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Directors in 2005: (a) international consensus that global action is required; (b) consistency with the Bank’s development objectives; (c) Bank ability to catalyze other resources and partners; (d) benefits for country clients and likelihood of country-level results; and (e) quality of partnerships.48

Box 3. FY06 Achievements in Global Programs and Partnerships Management • Enhanced efforts from the Bank to address insufficient integration of GPPs into client countries’ broader

development agendas, internally and with partner organizations. • Introduction of new business processes to enhance selectivity on a program-by-program basis. • Initiation of work on a monitoring framework and indicators to assist global program task managers in

improving oversight. • Enhanced quality reviews through QAG reviews of new GPP programs, particularly those funded by DGF.

Source: GPP. Note: See “2006 Management Action Record, Status of Implementation, Management and IEG Response,” 2006. 51. Selectivity and Results Management. Progress in selectivity and results management have helped GPPs to link their objectives more clearly to Bank goals of poverty alleviation and sustainable development, while also contributing to the delivery of global public goods. GPPs are showing important results and outcomes across sector and thematic areas, such as environment, rural development, health, infrastructure, and private sector development (see Box 4).

Box 4. Selected Results and Outcomes of Global Programs and Partnerships • Ten percent of the world’s land area under protection, and sponsoring protected area investments that

constitute 17 percent of the total land area protected globally (Global Environment Facility). • In Southern Africa drought-resistant maize varieties are planted on more than 250,000 hectares with 30 percent

higher yields (Consultative Group on International Agricultural Research). • Evidence gathered in China, Kenya, and Malawi indicates that programs have contributed to the introduction

of new and improved vaccines, such as for Hepatitis B (Global Alliance for Vaccines and Immunization). • Trained or re-trained 242,826 community-directed distributors and 19,659 health workers in 2004, thus

strengthening capacity building (African Program for Onchocerciasis Control). • World Bank commitments to HIV/AIDS grew at an annual rate of 17.9 percent, while commitments to

communicable diseases have increased by more than 8 percent annually (Joint United Nations Program on HIV/AIDS).

• Shared knowledge in public-private partnerships via publications on electricity supply in Armenia, telecoms in Afghanistan, and water needs in Vietnam (PPIAF).

• Dissemination of knowledge by participating in more than 140 city development strategies now completed or under way in 34 countries (Cities Alliance).

IV. STRATEGIC PRIORITIES OF THE INSTITUTION AND RESULTS IN FY06-07

52. FY06 and FY07 were marked by several accomplishments in line with the strategic priorities established at the corporate level. The Bank scaled up the implementation of the Infrastructure Action Plan,49 delivering on its commitments in infrastructure (water supply and sanitation, energy and

48 See Appraising Global Partnerships, A Methodology for Improved Selectivity, Global Programs and Partnership

Group, World Bank (forthcoming). 49 See Infrastructure Action Plan–Overview & Matrix of Management Actions (SecM2003-302), op. cit.

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mining, information communications and technology, and transport), with lending up to $8.1 billion in FY06 and $10.1 billion in FY07, compared to $7.4 billion in FY05. In the Africa Region (AFR), progress was made toward closing the infrastructure gap—a goal that was set in the Africa Action Plan50—with lending commitments of about $1.5 billion in FY06 and $2.5 billion in FY07, compared to $0.5 billion in FY00. The Bank continued to strengthen its efforts to support the Regions that have the largest numbers of rural poor people, with agriculture lending to AFR reaching $394 million in FY07 and $685 million in FY06—which was itself the highest level since FY90 (see Annex C).

53. Governance and Anticorruption. Building on the previous SSIU progress report on the implementation of the public sector governance strategy, the Bank has strengthened its approach to engaging client countries in governance and anticorruption efforts. A governance and anticorruption strategy, supported by worldwide consultations, was endorsed by the Board in FY07 (see Annex C).51 An implementation action plan was also prepared at the end of FY07.

54. Gender Action Plan. The World Bank Group’s Gender Action Plan (GAP), was launched in September 2006.52 The four-year Plan (FY07-FY10) promotes women’s economic empowerment in Bank client countries by focusing on women’s participation in land, labor, financial, and product markets; the ultimate goal is to accelerate shared growth and the implementation of Millennium Development Goal 3 on gender equality. The plan commits the World Bank Group to intensify and scale up gender mainstreaming in the economic sectors,53 in partnership with client countries, donors, and other development agencies. The full implementation of the GAP over the four-year period is expected to cost $24.5 million. The Bank Group and its partners are increasing resources devoted to gender issues in operations and technical assistance, in results-based initiatives (RBIs), and in policy-relevant research and statistics.

55. Social Sectors. In the social sectors, the Bank has begun implementing the recently endorsed sector strategies on social development and education.54 The Bank also revised its strategy for health, nutrition, and population (HNP) and updated its social protection strategy (see Part Two). Two years into the implementation of the new strategies on education and social development, significant advances have been made in the measurement of outcomes. For example, 19 of the 26 education projects approved in FY06 included an objective to increase enrollments and/or attain completion of various levels of schooling; with 17 of them establishing quantifiable targets for enrollment and/or completion, as well as quantifiable baselines against which progress will be measured (see Annex C). In the health sector, the Board endorsed in FY07 the new

50 See Strengthening the Development Partnership and Financing for Achieving the MDGs: An Africa Action Plan

(2005), op. cit. 51 See Raising the Bar on Anti-corruption: Improving Governance and Accountability, Fostering Development,

(SecM2006-0161), April 17, 2006; and Strengthening Bank Group Work in Governance and Anticorruption (DC2006-0017), September 8, 2006. See also Governance and Anticorruption. Ways to Enhance the Bank’s Impact (CODE2006-0065), July 6, 2006.

52 See Gender Equality as Smart Economics: A World Bank Gender Action Plan (Fiscal Years 2007-10) (SecM 2006-0370/1), September 28, 2006.

53 Economic sectors include agriculture, private sector development, finance and infrastructure (energy, transport, mining, information communications technology, and water and sanitation).

54 See Empowering People by Transforming Institutions: Social Development in World Bank Operations (R2005-0017), February 3, 2005; and Education Sector Strategy Update: Achieving Education for All, Broadening our Perspective, Maximizing our Effectiveness (SecM2005-0655), December 22, 2005.

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directions proposed in the updated HNP SSP, especially the focus on results, on strengthening health systems, and on emphasizing an intersectoral approach.55 In social protection, the Bank took stock of what it had achieved since FY01 and is proposing new strategic directions for FY07-09 (see Part Two). An example of FY06 achievement in the social protection area is a concerted effort to bundle social protection and labor interventions together for higher impact, with the piloting of conditional cash transfers in the Latin America and Caribbean Region (LCR).

56. Energy and Forestry. Another important strategic effort that took place in FY06 was the launch of the Bank Group’s flagship report Clean Energy for Development: Toward an Investment Framework, to support: (a) energy for growth, with a particular emphasis on improving access to energy in Sub-Saharan Africa; (b) the transition to a low-carbon development trajectory; and (c) adaptation to the impacts of climate changes.56 The Bank made proposals to use existing instruments more effectively and, where there are gaps, to introduce new strategies and financing vehicles.57 In the forestry sector, under the Europe and North Asia regional FLEG process, the Bank helped catalyze serious civil society, governmental, and the private sector attention to illegal logging and its related trade, and inspired several countries to develop national action plans to combat illegal logging. Furthermore, the Bank has been developing an appropriate architecture for a Global Forest Partnership (GFP), and an associated Forest Carbon Partnership Facility (FCPF), which aim to reverse forest loss in developing countries, contribute to poverty reduction, help mitigate climate change by reducing greenhouse gas emissions from forests, and secure the provision of other environmental services.

57. Financial Sector Strategy. Another effort to strengthen approaches between the Bank and IFC is the new Financial Sector Strategy endorsed by the Board in FY07, which includes a focus on improving access to financial services and upgrading risk-management capacity, while underscoring the importance of the sector as a core Bank business.58

58. Sustainable Development Network. Strategic initiatives in sustainable development and in finance and private sector development were complemented in FY07 by organizational changes to strengthen the Bank’s impact in these crucial areas. As noted earlier, the former Infrastructure (INF) and the Environmentally and Socially Sustainable Development (ESSD) Networks were consolidated into the new Sustainable Development Network (SDN). By bringing together the infrastructure sectors with environment, social development, and agriculture sectors and thematic areas, the new Network has presented opportunities to (a) strengthen the focus on sustainability of Bank interventions in client countries for the benefit of present and future generations, (b) mainstream environmental and social considerations into

55 See World Bank Strategy for Health, Nutrition, and Population Results–Final Text (SecM2007-0150/4), April

25, 2007 and World Bank Strategy for Health, Nutrition, and Population Results–Additional Documents (SecM2007-0150/5), April 26, 2007.

56 See Clean Energy and Development: Toward an Investment Framework (DC2006-0002), April 6, 2006. 57 See An Investment Framework for Clean Energy and Development: A Progress Report (DC2006-0012),

September 5, 2006. 58 See Financial Sector Strategy Update: Building Sound, Efficient and Inclusive Financial Systems–Concept Note

(CODE2006-0032), March 29, 2006; Report to the Board from the Committee on Development Effectiveness: Concept Note on the Financial Sector Strategy Update–Building Sound, Efficient, and Inclusive Financial Systems (CODE2006-0050), May 8, 2006; and Financial Sector Strategy for the World Bank Group (SecM2007-0142, IDA/SecM2007-0190, IFC/SecM2007-0017, MIGA/SecM2007-0011), April 2, 2007.

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infrastructure projects, (c) advance the synergies among sectors across the World Bank Group, and (d) respond to emerging global challenges, such as climate change. For example, the social development strategic focus on social inclusion will now be systematically applied to urban transport projects. Similarly, projects on rural infrastructure will benefit from a more enabling organizational environment.

59. Finance and Private Sector Development Network. Also as noted earlier, the former Financial Sector (FS) Network and the Private Sector Development (PSD) Network were consolidated into the Finance and Private Sector Development (FPD) Network. This new Network, which will be headed by a joint World Bank-IFC Vice Presidency, will allow a sharpening of the Bank’s focus on three core areas: (a) creating the institutional foundations for effective markets (examples: property rights, collateral systems, corporate governance, financial market infrastructure); (b) promoting open and competitive markets (examples: opening up entry, access to finance for promising firms, deeper and more liquid financial markets, and exit for failing firms); and (c) supporting social safety nets with market-based instruments (examples: financial market-based instruments and risk management for pensions and insurance systems as well as low-income housing).

60. Next Steps. As noted, in FY07 the Bank finalized two new sector strategy revisions—in health, nutrition, and population and in financial sector development—and pursued the implementation of the 15 other SSPs. A Results Report, which will replace the SSIU, will be initiated in FY08; the Bank intends to report next on the implementation of the following SSPs: urban development, gender, and private sector development.

V. FOCUS ON THE IMPLEMENTATION OF FOUR SECTOR STRATEGIES

61. Part Two of this year’s SSIU focuses on four sector strategies that were endorsed between 1996 and 2002: transport, environment, forestry, and social protection. Although for some sectors/thematic areas, the external environment has changed since their strategy was endorsed by the Board, the principles, priorities, and objectives articulated in the original SSPs remain broadly valid today.

62. Examples of Results. Over the SSP implementation period, the Bank can show evidence that results have been achieved at the country level against broad operational priorities identified in the SSPs. For example, in the transport sector, Bank projects and AAA helped bring Pakistan’s traditional trade and transport practices in line with international best practices.59 The Bank supported improved disaster risk management in Honduras through ESW, TA, and lending, with the preparation of disaster mitigation plans with municipalities, regulations to control land use in high-risk areas, and strengthening of the local disaster management response capacity—all

59 See Pakistan–Country Assistance Strategy–CAS Completion Report–IEG Review (R2006-0062/1, IDA/R2006-

0075/1, IFC/R2006-0104/1), May 17, 2006 Board approved on June 1, 2006.

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of which reduced people’s vulnerability to an environmental hazard (hurricanes), an operational priority of the environment SSP.60

63. Other Examples. Several Bank projects in Georgia helped to increase the forest area under protection from 2 percent to more than 7 percent (the second operational priority of the forestry SSP).61 However, in Uganda, the Bank’s strategy for institutional strengthening of environmental resource management did not stop the environmental degradation that derived from increasing population pressure and resource extraction.62 In Argentina, the Bank supported the “heads of households” program soon after the crisis, which helped to target the lowest quintiles of the income distribution—an estimated 10 percent of the participants in the program would have fallen below the poverty line if they had not benefited from this program.63 In Bulgaria, the Bank supported the reform of the pension system, resulting in stronger fiscal sustainability of the pension system and greater predictability for beneficiaries, contributors, and investors.64

64. Lessons from Implementation. Lessons learned during implementation of these SSPs provide a basis for the strategic directions for FY08-09. For example, the original transport SSP envisioned that the private sector would play a greater role in financing basic transport infrastructure, and the Bank scaled back lending to the public sector for transport in the late 1990s. In practice, the private sector did not meet these expectations. It is clear now that the Bank has a key role to play in public-financed infrastructure, and that IFC has a complementary role in financing private transport services. In the environment sector, five years of implementing the SSP have clearly shown the importance for the Bank and client countries of long-term commitment to policy reform and institutional development to solve environmental problems, which calls for greater attention from the Bank to sustaining quality engagement with the government, upstream and during implementation of projects. Also, the Bank learned that engagement in global environmental issues can have useful results, but should take place within a tighter management framework and be strongly anchored in country programs.

65. Better Balance. In the forestry sector, the Bank is using its convening power at the global level to influence the international policy dialogue on issues such as climate change, biodiversity conservation, and international trade in legally harvested timber and non-timber products. Yet, at the country level, a cautious approach with selective Bank re-engagement in key priority countries is still warranted to balance the due diligence required for full compliance with the Bank’s safeguard policies and the poverty focus regarding forest use in the 2002 strategy. In the social protection theme, progress to integrate various policy areas (labor market, pension, safety net, social funds) under a single conceptual framework (social risk management) has helped the

60 See Honduras–Country Assistance Strategy–CAS Completion Report–IEG Review (IDA/R2006-0196/1),

October 20, 2006 Board approved on November 7, 2006. 61 See Georgia–Country Partnership Strategy–CAS Completion Report–OED Review (IDA/R2005-0191/1,

IFC/R2005-0215/1), September 2, 2005. Board approved on September 15, 2005. 62 See Uganda–Joint Assistance Strategy–CAS Completion Report–IEG Review (IDA/R2005-0250/1, IFC/R2005-

0301/1, MIGA/R2005-0064/1), January 11, 2006. Board approved on January 17, 2006. 63 See Argentina–Country Assistance Strategy Completion Report–IEG Review (R2006-0068/1, IFC/R2006-

0118/1), June 1, 2006. Board approved on June 6, 2006. 64 See Bulgaria–Country Partnership Strategy–CAS Completion Report–IEG Review (R2006-0083/1, IFC/R2006-

0131/1), May 30, 2006. Board approved on June 13, 2006.

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Bank to provide more coherent support for social protection within client countries, although much progress is still to be made to better balance its involvement across countries.

66. Assessing Sector and Thematic Implementation Progress. Original SSPs were largely designed as advocacy documents. This orientation meant that SSPs did not set out measurable sectorwide goals, indicators, and targets for the Bank’s own activities in those sectors and thematic areas. Balancing the importance of progressing on the results measurement agenda against the cost of revisiting all the SSPs to incorporate a results focus, the Bank opted for a middle-ground solution, which consisted of retrofitting into the original SSPs sector results frameworks (RFs) that link country development goals with specific Bank interventions. This effort is well under way, with the SSIU being used as the primary vehicle to engage sectors in developing these RFs. However, the Bank has still some way to go before these RFs could be effectively used to monitor the implementation of SSPs. Ten out of the 17 sector and thematic areas articulated a results framework for their SSPs, of which seven were developed/strengthened through the SSIU (water supply and sanitation, rural development, public sector governance in the FY05 SSIU, and transport, environment, forestry, and social protection in the FY06 SSIU); and three through self-standing updates of SSPs (education, social development, health). A major challenge will be to adapt these generic frameworks to country circumstances.

67. Summary Performance Assessment. In the meantime, Table 9 assesses the performance of the four SSPs discussed in Part Two against a set of common (intermediate) objectives. It also reports on what the Bank has achieved in these four areas during the SSP implementation period, and summarizes the proposed strategic directions for FY08-09 (which are detailed in Part Two).

Table 9. Implementation of Selected Sector Strategies – Bank Actions and Results

What has the Bank achieved? a

How far was the objective achieved? b What remains to be done?

1. Strengthening analytic and advisory services Transport (1996 SSP)

• AAA on best practice approaches on regulatory and concession designs, and user charges in FY00-03.

• Increased attention to transport-related public health problems.

• Better understanding of link transport-poverty.

Moderately • Strengthen AAA delivery (with increased BB and TF funding).

• Increase delivery of global and regional AAA on cross-sectoral linkages between transport, and trade, energy, environment (vehicle emissions), road safety.

• Increase country-level analysis of the strategic role of transport and of policies, institutions, regulations on road freight, with benchmarking to support lending.

Environment (2001 SSP)

• Increase in upstream country-level environmental AAA (e.g.,, CEA, SEA).

• Improved understanding poverty-environmental linkages.

Moderately • Improve timing and coverage of upstream analytical work, policy dialogue and capacity reform.

Forestry (2002 SSP)

• Reinstated as a leading global player in policy dialogue (forest governance and control of illegal logging and forest certification) and analysis for the sector.

• Delivered AAA on forest certification (Forest Certification assessment Guide), management standards (including SEA) in priority countries.

• Delivered the forest sector sourcebook. • Better understanding of linkages between

forests and poverty. • Leveraged global public goods and

partnerships (e.g., WWF/Alliance, PROFOR, FLEG).

Substantially • Better integrate governance in policy dialogue with client countries.

• Continue efforts to support inclusion of avoided tropical deforestation issues in Kyoto Protocol.

• Disseminated widely sourcebook. • Develop forest sector outreach efforts. • Support global financing mechanism under UNFF.

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Social protection (2001 SSP)

• Integrated social risk management and social protection approach into poverty assessments and global AAA.

• Delivered AAA covering more social protection areas (e.g., labor market, safety nets, disability, youth, child labor).

• Increased delivery of ESW/TA in labor market area.

• Developed overall pension policy framework (multi-pillar) and projection tools (e.g., PROST, APEX).

• Developed knowledge and policy advice products for core competences (labor, pension, social safety nets).

Substantially • Better integrate poverty and social impact analysis into DPOs.

• Implement multi-sectoral job creation agenda MILES.

• Deepening policy advice on social protection programs, including coverage extension.

• Improve understanding of cross-sectoral linkages (education, labor market interventions, pension, health financing, public-private sector)

2. Addressing sector/thematic priorities through country programs and project design Transport (1996 SSP)

• Rebuilt engagement with public sector on transport from low point in FY00.

• Lending concentration on roads (and less into rail freight, air and maritime facilities); focus on rural areas (and less on urban areas).

• Encouraged private involvement in transport service delivery through IFC; lesser use of Bank guarantees.

• Integration of policy and institutional reforms in project, although room for improvement.

• Integrated environmental and health concerns in projects.

Substantially • Increase lending in transport, with a focus on diversification (e.g., urban transport, transport for trade)

• Use of sub-national financing instruments. • Mainstream institutional strengthening in transport

projects, particularly for PPPs and improved transport delivery.

• Strengthen the mainstreaming of social and environmental concerns in transport investment projects and DPLs.

• Embed issues arising from the contribution of greenhouse gas emissions from transport to global warming into transport sector analyses, policy dialogue and relevant project design.


• Increase in environment content in CAS, although room for improvement remains.

• Increase in environmental mainstreaming in selected sectors.

• Improved QAG/IEG ratings. • Strengthened corporate oversight on safeguard

system, including consistency in policy application, safeguard performance at entry and supervision, and policy compliance tracking. Improved donor harmonization of policies.

• Piloting of country systems launched.

Moderately • Better track and monitor environmental mainstreaming in sectors.

• Improve the quality of operations. • Regularly disseminate “best practice” projects and

programs with good environmental performance.

Forestry (2002 SSP)

• Increase the forestry content in CAS and PRSP, although room for improvement remains.

• Improved balance between necessary level of due diligence required for compliance with safeguard policies and need to provide quick support, although room for improvement remains.

• Built the knowledge base and methodology to address global public goods concerns in projects.

• Developed innovative financing products (carbon trading, forest carbon partnership facility).

• More projects incorporating decentralization.

Moderately • Better mainstream forestry in CAS, PRSCs, and project design.

• Strengthen application of safeguard policies (especially on the social side) in forestry projects and due diligence in DPLs. Undertake a review of application of the policies in forestry projects.

• Systematically incorporate global public goods concerns in Bank operations.

• Increase use of innovative financing tools in complement with traditional Bank operations in forests.

• Better integrate forest governance in projects. • Further develop large-scale application of innovative

financing tools.

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• Better incorporated social protection into CAS, although room for improvement remains.

• Integrated ALMPs in lending. • Integrated multi-pillar pension approach into

lending. • Integrated social safety into net lending,

including scaled up CCT programs and SF. • Piloted innovative risk management approach

in APLs..

Moderately • Better integrate systematic M&E and impact evaluations into project design.

• Developing new instruments to advance MILES. • Refine cross-sector support for pension reform. • Continue to use CCT, SF and other innovative

approaches to advance equity.

3. Leveraging Bank-IFC-MIGA synergies Transport (1996 SSP)

• Improved clarity on division of labor between the Bank (basic public infrastructure) and IFC (private transport services), with recent examples of cooperation. Transport = 7 percent of IFC’s total net commitments. MIGA’s involvement remains low.

Moderately • Joint Bank-IFC piloting of the sub-national development program in the infrastructure sector, including transport.

• Increase the role of IFC in private financed infrastructure.

• Stronger involvement of WB in sector governance and regulation in relation to service delivery.


• Provided inputs into establishment of new standards for IFC projects in terms of social and environmental sustainability.

• Scaled up model with GEF funding IFC private sector projects.

Moderately

Forestry (2002 SSP)

• Developed better understanding of need for appropriate institutions and legal framework to enable private sector engagement.

• Sharing of sector knowledge.

Moderately • Better exploit synergies between IFC’s TAAS program and Bank’s instruments, in the area of SME development.

• Development of good practice guidance to support the Bank’s OP4.36 and IFC’s PS6.


• Bank support for multi-pillar pension system reform, with private sector tier.

Negligible • Initial collaboration with IFC/MIGA limited due to the need to avoid appearance of conflicts of interest. Nevertheless, there was potential secondary impact on financial sector deepening.

4. Developing and/or strengthening external partnerships Transport (1996 SSP)

• Formed and led three GPPs on transportation and trade (GFPTT), road safety (GRSF) and air transport safety.

• Used trust funds for AAA.

Moderately • Develop a new urban transport partnership, addressing multi-modal approaches and integrating the needs of pedestrians and intermediate means of transport when appropriate.


• Maintained and expanded engagement with partners on a broad rage of global issues.

• Increased leveraging of financial resources for global environment.

• Facilitated phase-out of ozone depleting substances.

• Enhanced effectiveness of country operations through GPPs.

• Provided leadership in catalyzing global carbon market.

• Developed quantifiable indicators for global issues.

Substantially • Sharpen the Bank’s role in global issues management, including evaluation of the current business model, rigorous selection of new GPPs and focus on implementation of existing programs.

• Mainstream Bank’s global priorities into global funds/partnerships.

Forestry (2002 SSP)

• Continued global leadership of WWF/ Alliance in promoting sustainable use and conservation of forests.

• Mainstreamed conservation in productive landscapes through HCVF network (GFA).

• Developed framework for expanded and inclusive partnerships.

Fully • Continue leadership in international policy dialogue on issues of climate change, biodiversity conservation, international trade in legal timber and non-timber products.

• Implement GFA partnership.

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• Involved into new areas, such as disability, child labor through new partnerships.

• Leveraged external resources to fund new research and ESWs.

• Created stronger and more productive external dialogue and cooperation with UNICEF, UNFPA, ETF and ILO, including labor movement.

Substantially • Better integrate partnership activities to deliver focused efforts.

• Continue the dialogue with international agencies and work towards a clearer division of labor and productive partnerships.

Source: OPCS, SDN network, HD network. a This table assumes that the four SSPs had a similar set of (intermediate) objectives, and report on progress achieved by each SSP in

meeting these objectives since the strategy was endorsed. b Rating scale (fully implemented, substantially implemented, moderately implemented, and negligible) to measure progress in

achieving a given (intermediate) objective as of FY06.


PART TWO: IMPLEMENTATION UPDATE FOR SELECTED SECTOR STRATEGIES

I. TRANSPORT STRATEGY

A. Overview of Sector Strategy and Results Framework

68. The World Bank’s Transport Sector Strategy, issued in 1996, advocates economic, financial, environmental, and social sustainability in transport policies and systems.65 The strategy document is essentially targeted to partner countries, and given its advisory orientation, it does not set out measurable sector-wide goals, indicators, and targets for the Bank’s own activities. The strategy promotes the integration of sustainability principles into national transport policies. It argues that sustainability will be promoted by sound institutional and regulatory frameworks; greater private involvement in providing transport services; competitive or contestable markets; economic pricing of transport infrastructure; and attention to transport-related public health problems. The Bank’s own role is seen as one of support, designed to contribute to higher quality domestic, regional, and international transport infrastructure and services that support access to markets, growth, and economic development.

69. Four years after the strategy paper was endorsed, the international community approved the Millennium Development Goals (MDGs). The Bank has since attempted to promote the application of the transport strategy principles in a way that achieves development impact and contributes to meeting the MDGs. The Bank’s Infrastructure Action Plan (2003)66 to revitalize infrastructure engagement recognizes that the transport sector can do more to help achieve the MDGs, by working on five fronts: facilitating economic growth through international trade; making cities function better for their citizens; creating economic opportunity and growth in rural areas; providing access to facilities for health and education; and becoming safer and cleaner for users and the community.

70. This update reviews progress in implementing the transport strategy over the period 1996-2006.

1. Priorities and Programs

71. Priorities in the Bank’s support for transport since 1996 can be summarized by (a) regions, (b) modes of transport, and (c) key cross-cutting policy issues.

• Regions. The Bank has given increasing attention to engagement in Africa and South Asia. In the first five years (FY96-00) since the strategy paper was endorsed, these two regions accounted for only 25 percent of lending commitments, but over the second five years (FY01-05), their proportion doubled to nearly 50 percent.

65 See Sustainable Transport: Priorities for Policy Reform, World Bank, May 1996. 66 See Infrastructure Action Plan–Overview & Matrix of Management Actions (SecM2003-302), June 23, 2003.

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Meanwhile, commitments in the Middle East and North Africa, the smallest region for transport lending, increased from 3 to 5 percent, and corresponding declines occurred in Latin America and the Caribbean (from 24 to 16 percent), East Asia and Pacific (from 32 to 24 percent), and Europe and Central Asia (from 16 to 7 percent).

• Transport modes. The Bank’s main priority in the transport sector has been road construction, rehabilitation, and maintenance, representing nearly 80 percent of IDA/IBRD lending commitments over the ten-year period.67 A number of factors contribute to this dominance: the prevalence of road transport in many client countries; the expertise that the Bank has built up in this area; and the fact that roads projects tend to be more straightforward, and thus quicker and less resource-intensive to prepare, than projects in urban transport, railways, or ports. The main policy objectives associated with Bank projects for roads are improved asset management, sustained road maintenance funding, increased private sector participation in road maintenance, and performance-based contracting. In 2002-06, the Bank contributed to the construction of nearly 118,700 km of new roads, and to the rehabilitation of 116,400 km, through routine maintenance and reconstruction. Some 44 operations supported road safety improvement on a total of 543,200 km of road network, while 32 projects helped construct 5,059 bridges including viaducts, foot bridges, and overpasses for a total length of 11,600 meters. Three operations involved the maintenance of 148,600 meters of bridges and culverts. In addition, 31 projects included the digging of tunnels and underpasses to improve pedestrian mobility.

72. Railway transport has been the second largest area of interest, representing around 7 percent of commitments. Ten operations involved the construction and rehabilitation of 4,450 km of track, while two involved the maintenance of 17,200 km of railway network. Rail projects have usually been associated with the objectives of commercialization and/or privatization.

73. Support for all other sub-sectors, including bus and other transit systems, ports and maritime transport, inland waterways, aviation, and airports together constituted less than 15 percent of commitments over the ten-year period.

• Cross-cutting issues. The major programs have involved transport and trade facilitation, transport safety (road safety, and more recently aviation safety) and the roles of the public and private sector in transport infrastructure (including production of toolkits and other guidance for increasing private sector participation in ports, railways, and road construction and maintenance). More than 1.6 million jobs are estimated to have been created during the past three years, as a result of Bank projects, and more than 19,000 managerial and technical staff have been trained through specialized local sessions or international programs.

67 Including both projects coded directly to the roads category, and road components of other projects.

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2. Results Framework

74. The Transport Strategy of 1996 highlights the key importance of improved rural access and reduced transport costs in combating poverty and stimulating growth. The results framework has been concentrating on these aspects and will continue to do so. The mobility of the urban poor will receive increasing attention over the next few years, both in sector interventions and in the development of the results framework.

75. It was recognized that the adoption of the MDGs would require giving more attention to measuring impact and the performance of Bank activity in the sector as a whole. This challenge is sharpened by the fact that the MDGs themselves do not contain specific goals or targets for the transport sector. As is widely acknowledged, transport is an essential ingredient in production, trade, education, health, civil administration, social interaction, and social services, all of which are crucial to meeting the MDGs. Equally, transport is not sufficient to achieve these results, rendering development-outcome targets for transport alone invalid.

76. Nevertheless, some (albeit slow) progress is being made in developing frameworks that trace the paths by which Bank transport work affects development and in designing associated indicators of transport performance. Examples of the high-level outcomes and goals to which transport interventions contribute are shown in the matrices in Table 12, which illustrate the impacts of rural access improvements and of reductions in freight transport cost. The matrices also show that these key outcomes can often be achieved through a number of different outputs, such as better infrastructure management, direct improvements in transport services, or aspects of sector reform such as encouragement of competition in supply. Such different interventions need to be considered as a package and to be set in the context of the sector as a whole. However, since this context varies a great deal from one region to another and even among countries within a region, the form of the matrix will be specific to each country.

77. The matrices in Table 12 show transport outcomes contributing to each of the MDGs. Transport also provides necessary contributions to key outcomes, such as faster economic growth, that are not directly reflected in the MDGs.

78. Several of the MDGs entail overcoming transport constraints, such as the paucity or lack of transport services available to many rural people, or the lack of mobility of the urban population, or high national transport costs—and thereby improving the opportunities available to people as well as facilitating trade by reducing the cost of reaching markets.

79. Improving rural accessibility helps to reduce poverty by facilitating access to basic education, health, and other essential services as well as to jobs and other productive opportunities (see Table 12). The Rural Access Index (RAI) established by the Bank reflects the scale of this challenge at a subnational or national level (see Box 5). The index is particularly relevant to most of the lowest-income countries and thus has been included in the IDA 14 Results Measurement System. This breakthrough is leading, with Bank support, to wider application of the index in Sub-Saharan Africa and other regions.

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Box 5. Rural Access Index The Rural Access Index shows the proportion of the rural population that has adequate access to the transport system. Thus it is similar to other indices of access to services, such as sustainable access to clean water or the rate of household electrification. The RAI is derived from representative multi-purpose household surveys that include an appropriate question about the distance from, or time to walk to, an all-season road,a relating the service to the user. Threshold values for this indicator, of one kilometer or 25 minutes, have been adopted for international comparison. Such broad comparison provides an important initial diagnosis, though much more detailed complementary information is required to guide specific action to improve the level of rural access in any particular country or region. In establishing this indicator, priority was given to the countries with the largest populations, so that more than 88 percent of the total rural population of IDA countries has been covered. Priority was also given to those countries with the larger land areas, for which rural access is likely to be particularly relevant. The index has been calculated for a critical mass of IDA countries. It provides, for the first time, statistical support for the views of poor people in rural areas that isolation is a major reason for their continuing poverty. Source: SDN network. a An “all-season road” is passable at all times (with only occasional interruptions of up to a day or so) by the type of motor vehicle

that is in prevailing use (often a pick-up truck or mini-bus) for local transport.

80. The Bank is also developing an equivalent Urban Mobility Index (UMI) that can be used to measure performance and progress in urban transport development. Base values are currently being determined for this and for an index of transport costs. Lowering transport costs is important for the specific MDG targets of promoting trade and meeting the needs of landlocked countries. It also has significant implications for the MDGs concerned with containing the spread of disease and with environmental sustainability, both of which can be enhanced through appropriate interventions (see Table 10). Other diagnostic and impact measures are being strengthened in many countries.

B. Development Context

81. In a few years, half the developing world’s population will live in cities that largely lack transport institutions and systems that can cope physically, economically, or environmentally. At the same time, in rural areas nearly one billion of the world’s poorest people remain isolated and marginalized with no basic access to an all-weather road. Even those middle-income countries that already have enjoyed strong trade-driven economic growth in recent years now face capacity constraints in their transport systems.

82. The context in which transport contributes to development varies greatly by region and country. In the poorest countries, the main challenge is usually to meet the basic transport needs of the poor (both physical and for appropriate policies), and to facilitate the working of markets in support of economic growth. By contrast, most middle-income countries have moved beyond these thresholds and aspire to the levels of personal mobility, transport systems, and freight logistics infrastructure that are typical of more developed countries. In these countries, transport advice and products are structured to help sustain the economic successes already achieved while addressing the considerable pockets of poverty that remain.

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Table 10. Results Framework—Transport

Rural Access linked to MDGs (Goals 1, 2, 3, 4 and 5)

What results on the ground are important? How do we know if implementation is on track?

Country Outcomes Process Indicators

Goal Final Outcomes How do we measure

Final Indicators? Intermediate Outcomes How do we measure

Intermediate Indicators? Bank Strategy or

Contribution Country Bank

MDG 1 Eradicate extreme poverty and hunger

• Increased access to assets, services and markets

• More effective food marketing and distribution

• Rural Access Index (proportion of rural population with adequate access) IDA-14 Result Framework

• Target communities have improved, affordable transport services to markets

• Survey transport services and fares to target communities

• Record pedestrian and non-motorized activity

• Transport interventions contribute to National priorities in food security, education, health and rural development

• Encourage sector data coordination with National Statistics Office

• Priorities reflected in National Plan, PRSP etc

• Regular conduct and analysis of national living standards survey with rural access index

Rural Access Indices and other key access data updated at least every three years

Inter-sectoral awareness of rural access indicators at country level

MDG 2 Achieve universal primary education

• Improved school attendance and completion

• More reliable staffing and equipping of rural schools

• School attendance and performance records

• Reports of staff attendance and equipment availability

• Improved access leaves children more time to attend school

• Children have quicker, safer routes to school

• Better staff access and equipment supply for rural schools

• Household surveys and other reports on pupils’ access to school

• Accident records • Cost of rural transport

services

• Rural transport or infrastructure interventions are based on locally owned plans

• Local pedestrian and non-motorized activity must not be constrained by motor traffic

• Transport sector policy/ program integrating rural mobility/access improvement

• Local Government sets priority for rural access

• Local coordination between Education and Transport Agencies

Output Based Aid provides incentives for new rural transport services

Loans agreed for sustainable road improvement programs

MDG 3 Promote gender equity and empower woman

• Access needs of women and men are met effectively and equitably

• Gender analysis of access in household and other surveys

• Transport services designed for the needs of women and girls

• Disaggregated measurement of gender needs in household and other surveys

• Promote interventions in line with national strategies for gender equity

• Transport sector plans consistent with national commitments/strategy for gender equity

Disaggregated travel needs assessments are in common use

MDG 4 Reduce child mortality

• Improved access for mothers and children to primary health care and emergency services

• Reduced incidence of RAI in children under 5 due to improved access to cleaner fuels

• Records of formal health service uptake

• Records of emergency services response

• DHS data on RAI incidence

• Rural families can have better transport to healthcare for babies and infants

• Rural families have better access to cleaner fuels and improved stoves

• DHS and other reports on mother and infant access to health services

• Household surveys on fuel choice, use of improved stoves

• Promote transport services to support improved preventive and curative health outcomes

• Local coordination between Health Sector and Transport Agencies

Integrated Rural Accessibility Planning principles applied to local investment decisions

MDG 5 Improve maternal health

• More reliable staffing and equipping of rural health facilities

• Better access for women to primary health care and emergency services

• Reports of medical staffing and resources

• Reports of emergency response times for maternal and infant health crises

• More effective support of rural health facilities

• Effective transport for women in peri-natal crisis

• Lower cost of rural transport services

• Community reports of emergency transport availability and cost

• Promote effective transport and communication for emergencies

• Establish clear policy on public responsibility for emergency transport

• Strengthened capacity for baseline and monitoring surveys

Promote coordination between communities and transport providers for emergency services

Support baseline and monitoring surveys

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Transport Sector—Results Framework

Freight Transport Cost linked to MDGs (Goals 1, 6, 7 and 8)

What results on the ground are important? How do we know if implementation is on track?

Country Outcomes Process Indicators

Goal Final Outcomes How do we measure

Final Indicators? Intermediate Outcomes How do we measure

Intermediate Indicators? Bank Strategy or

Contribution Country Bank

MDG 1 Eradicate extreme poverty and hunger

• National and local economy more active

• More employment opportunities more widely available

• Wider access to affordable basic goods and services

• More reliable access to essential food supplies

• Growth in national and local GDP

• Statistics of formal employment and income levels

• Consumer prices • Basic food prices

• Domestic transport more reliable and affordable

• International transport more competitive

• Production, marketing and distribution of food more effective

• Surveys of domestic transport haulage rates and service levels by key modes (road, rail, water)

• Surveys of international transit costs

• Sector governance promotes effective competition between freight services

• Promote effective use of transport capacity through charging

• Facilitate international transit

• Increase equity

• Haulage services are operated on commercial terms and marketed by transport agents

• Incentives are explicit and set to reflect poverty reduction and other objectives

• Statistics of haulage by mode share

• Freight haulage contributes more positively to the investment climate

• Assist development and application of toolkits for management of transport services and reduction of accidents

MDG 6 Reverse the spread of HIV/AIDS and other diseases

• Reduced spread of disease along main transport corridors

• Reduced risk of disease from construction sites

• Medical records • Surveys of disease

prevalence

• Workplace policies • Greater awareness and

less risky behavior by vulnerable transport employees and those associated with them

• Reduced delays at borders

• Surveys of employee awareness and behavior

• Liaise with ILO and other UN agencies in-country

• Support integrated national strategies for combating diseases

• Transport integrated in national strategies for AIDS and other diseases

• Employer and employee associations cooperate on effective workplace policies

• Transport sector capacity and institutions strengthened to engage with AIDS strategies

MDG 7 Ensure environmental sustainability

• Land use and transport patterns evolve in line with long-term strategic considerations including environmental sustainability

• Transport energy use per unit GDP (energy balances, IEA)

• Samples of greenhouse gases and other pollution

• Surveys of land use, transport demand and freight traffic

• Transport investments reflect full environmental costs

• Transport strategy incorporates environmental and other long-term considerations

• Fuel consumption for freight haulage

• Global and local emissions of air pollutants

• Strategic Environmental Assessment at planning stage

• Promote instruments which encourage strategic environmental assessments

• Overall impacts equitable in short, medium and long term

• Long-term environmental sustainability included in sector dialogue with clients.

• Strategic environmental plan reflects international and national commitments

• Transport investment program consistent with strategic plan

• Strategic environmental assessment process is in active use

• Distributional analysis including ‘external’ impacts

MDG 8 Build global partnership for a development (open trading; landlocked countries)

• Open, predictable, non-discriminatory trading system established

• Needs of landlocked countries and small island developing States met

• Transit constraints on international trade

• Domestic transport constraints on trade

• Competitive transport arrangements for land-locked countries

• Practical, equitable systems established for security of and from transit shipments

• Administrative costs of import / export minimized

• Transport contribution to trade is optimized

• Finance and time costs imposed by security systems and by import / export formalities

• Insurance and other costs for cargo safety

• Freight cost as a proportion of annual retail expenditure

• Promote practical, equitable systems for security of and from transit cargos

• Expedite import / export procedures, particularly for landlocked countries

• Optimize transport component of trade

• Engagement with security processes and other procedures for international transport

• Bilateral agreements for landlocked countries

• Encourage competitive transport services through transport agents etc.

• Extension of globally accepted systems for checking and sealing cargos

• Transport enterprise awareness of shipping procedures

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83. Despite the differences among countries, governments in all regions confront three broad trends of significance for the transport sector. The most challenging of these is urbanization. Urban population growth has been rapid since 1996, yet more than 600 million more people are expected to move into cities in developing countries in the next ten years.68 This implies a need for new transport capacity to serve the equivalent of 75 cities the size of London or Moscow! And in many cities of the developing world, the rapidly growing use of private motor vehicles is overwhelming the road network, worsening congestion, reducing mobility, causing unsafe conditions for road users, and harming health by polluting the air.

84. A second trend concerns the emerging role of transport as a constraint on international trade. Adequate freight services at affordable prices are increasingly important to integrate developing economies into longer, more complex, and more demanding supply chains. As tariff barriers have diminished, transport inefficiency and cost have, for many countries, emerged as the most important constraint on trade. High transport costs magnify the impact of distance and are particularly challenging to landlocked countries. Aviation services are becoming more important to some regions, to support high-value trade, international tourism, and inward investment.

85. Third, it is now acknowledged that for the foreseeable future the great bulk of investment in transport infrastructure will come from the public sector. While the private provision of transport services is widespread and beneficial, the private sector’s role in financing basic transport infrastructure has been limited to very few countries, and peaked in the 1990s. Finance from private sources currently meets only a small fraction of overall needs (mainly for airports and ports). Though the Bank’s 1996 Transport Sector Strategy had argued correctly that “the public sector will continue to bear the primary responsibility for provision of transport infrastructure,” the Bank’s lending for transport fell to a low point in FY00. Today, in accordance with the Infrastructure Action Plan of 2003,69 the Bank is rebuilding its engagement in publicly financed transport infrastructure. Complementary measures are required to ensure that this brings sustained benefits to the poor.

C. Stocktaking and Evaluation

86. Table 11 summarizes output and outcome performance of the transport sector over the FY02-06 period.

1. Progress in Intermediate/Final Outcomes

87. Initial values of the Rural Access Index show that in Sub-Saharan African countries, nearly two thirds of rural dwellers do not have even basic access to the formal transport system. Conditions are a little better in South Asia, where the comparable figure is about 40 percent (see Table 12). In a sample of IBRD borrower countries, suffering much less extensive rural poverty, fewer than 10 percent of rural dwellers are as seriously isolated.

68 See World Urbanization Prospects, United Nations, 2003. 69 See Infrastructure Action Plan–Overview & Matrix of Management Actions (SecM2003-302), op. cit.

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Table 11. Bank Performance Indicators—Transport FY02 FY03 FY04 FY05 FY06

1. Bank Output Trends IBRD lending commitments ($m) a 1,526 1,696 2,539 2,072 2,121 IDA lending commitments ($m) a 865 1,031 1,239 1,066 1,094 IBRD disbursements ($m) 1,738 1,655 1,745 1,813 2,094 IDA disbursements ($m) 626 753 945 991 1,048 GEF, guarantees, SF commitments ($m) a 1 3 41 0 7 IBRD ESW products (number of) b 5 7 7 9 10 IDA ESW products (number of) b 9 12 8 15 10 Other ESW products (number of) b 2 17 3 11 6 IBRD TA products (number of) b 7 7 5 6 6 IDA TA products (number of) b 4 5 5 2 3 Other TA products (number of) b 5 6 8 9 4

2. Bank Output Quality Quality at entry (percent satisfactory or better) c 100 100 100 100 n.a. Quality of supervision (percent satisfactory or better) c 88 88 91 n.a. n.a. IBRD/IDA projects at risk (percent) 15 15 16 14 10 IEG exit rating (percent satisfactory or better) c 96 85 96 83 100

3. Bank Input Staffing (number of GE+ level staff) 122 107 116 121 120 Regional expenditure ($m) 29 28 33 35 39 Network anchor expenditure ($m) d 2 2 3 2 2

4. Bank Output Cost e Average unit completion costs of IBRD/IDA lending (thousand US$ per operation) 338 353 369 318 391 Average unit completion costs of ESW (thousands US$ per product) 114 97 102 146 145 Average unit completion costs of TA (thousands US$ per product) 129 113 137 87 100

5. Client Responsiveness c Preparation time for IBRD/IDA lending (months) 23.1 19.5 15.6 17.9 15.5 Preparation time for ESW (months) 11.1 15.1 11.5 14.0 10.8 Implementation time for IBRD/IDA lending (years) 7.3 7.8 7.2 6.7 6.6

6. Results Management Implementation completion reports with project outputs data (percent) f 95.0 77.0 85.0 90.0 95.0 Completed projects rated satisfactory or better in policy reform (percent) n.a. 63.0 71.0 17.0 100.0 Completed projects rated satisfactory or better in institutional development (percent)

n.a. 79.0 79.0 72.0 71.0

Implementation status and results reports with satisfactory outcome baseline data (percent) g

n.a. n.a. n.a. 53.0 65.0

7. Development Outcomes Rural access (IDA countries only) h n.a. n.a. 55 56 56

Urban mobility h,i n.a. n.a. n.a. 59 59

Freight transport cost j n.a.j n.a.j n.a.j n.a.j n.a.j Road network condition k n.a. n.a. 40 43 43

Source: Business Warehouse, Human Resources, and Bank staff estimates. Notes: Table includes sector codes: TA—Roads and Highways, TP—Ports, Waterways and Shipping, TV—Aviation, TW—Railways,

and TZ—General Transportation. n.a. = not available. a Starting in FY05, IBRD/IDA lending figures include guarantees. b Aggregated portion of individual products allocated to the transport sector. c Based on operations mapped to Transport Sector Board. d Direct expenses from the Bank's administrative budget per Network Anchor Unit. e Output costs refer to Bank's administrative budget only. f Based on analysis of 225 ICRs of projects with transport components distributed over the five-year period. Some 99 percent of those

projects supervised by the Transport Sector Board contained project output data. g Based on 89 analyzed ISRs from FY05 and FY06 approved projects. These include all projects that have a transport component. In

cases where transport is a major sector the results are better: 57 percent satisfactory in FY05 and 73 percent satisfactory in FY06. h Rural Access and Urban Mobility indices are calculated from household survey data, which are updated after 4-5 years on average. i Values of Urban Mobility Index are being calculated—the expected number of values is based on the data sets known to be available. j Transport cost data are available for a number of countries; a study is required to increase the coverage and to ensure that values are

nationally representative and established on a consistent basis. k This is the proportion of the road network that is in maintainable condition.

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Table 12. Rural Access Index: Regional Values, 2006 (IDA and non-IDA countries)

Region AFR EAP a ECA LCR MNA SAR Total Countries covered (number of) 30 9 18 10 5 5 77 Rural population covered (%) b 80 91 72 51 31 96 86 Rural Access Index (%) 36 95 75 51 34 57 69 Source: Household surveys; Bank staff calculations. a Figures for EAP include RAI value of 97 percent for China, as provided by the Government of China. b This shows the percentage of the whole IDA rural population for each region.

88. The RAI is designed to capture changes in rural access that result from development in the transport sector. Thus far, only limited time-series data exist for a few countries. These show that where governments have adopted a clear strategy of improving rural access (as in Ghana and Vietnam) and have received the well-targeted support of the Bank and other agencies, the RAI has improved by as much as 3 percentage points annually. In most other countries, the annual change in the RAI has been less than one percent.

2. Bank Instruments

89. Country Assistance Strategies (CASs). In most of the Bank’s client countries, transport is considered one of the more important sectors contributing to development. More than 90 percent of the Bank’s country assistance strategies and transitional support strategies prepared over the period FY02-06 covered transport issues to a greater or lesser extent.70 All CASs for AFR, EAP, and SAR mentioned transport issues, as did more than 80 percent of the CASs in other regions.

90. Comparison of sector coverage in CASs between FY02 and FY06 indicates a high level of alignment with the transport sector strategy in both fiscal years, as well as a resurgence in proposed lending for transport. Whereas in FY02 only 24 percent of CASs proposed a transport lending program, by FY06 60 percent did so (the increase for IBRD countries was from 13 percent to 69 percent and that for IDA countries was from 33 percent to 50 percent). Over this period as a whole, nearly 40 percent of all CASs had specific plans for IBRD/IDA lending in transport, and 11 percent proposed involvement by IFC or MIGA. There was also a small increase in expressions of intent to undertake non-lending activities (from 35 percent of CASs in FY02 to 39 percent in FY06).

91. On the whole, it appears that recent country assistance strategies are paying attention to a wider variety of, and more nuanced, transport issues. The greatest attention has gone to constructing and rehabilitating roads and highways (49 percent of CASs), followed by rural roads (28 percent), railways (18 percent), ports (15 percent), aviation/airports (4 percent), and inland waterways (4 percent). Trade and transit facilitation, high transport costs, institutional/restructuring issues, urban transport, infrastructure maintenance, and rural transport services have each featured in 10-15 percent of CASs.

70 Based on a sample of 75 CASs.

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92. Analytical and Advisory Services. During the last five years the Bank has delivered, on average, about 26 economic and sector work products (ESW) and 16 technical assistance (TA) operations in transport each year. About one third of these activities have been for specific IDA countries, one third have been for IBRD countries, and most of the others have been regional in nature, covering both IDA and IBRD countries. Sub-Saharan Africa has accounted for around a quarter of all products. As would be expected, the scope of products has varied enormously: based on a sample analysis, around 30 percent related to the management or operation of individual modes of transport, 32 percent to wider sector transport strategies or policies, and 18 percent to transport and trade topics (often treated on a regional basis).

93. ESW/TA in the transport sector is important because of the scale and importance of transport to economic development, its contribution to national income, and its leading position in Bank sector lending. The transport sector accounts for around 5 percent of the total number of ESW and TA products. Although the number of ESW and TA is small in proportion to the contribution of transport to Bank lending (around 15 percent), a substantial amount of policy, institutional, and other TA activity is funded through the preparation of lending operations. Other knowledge pieces are carried out by Bank-sponsored agencies such as the Sub-Saharan African Transport Partnership (SSATP), and other donors.71

94. Though the Bank offers no dedicated training program in transport, it has offered a number of general training courses on competition and regulation that are relevant to transport administration. It has cooperated with many external organizations offering training related to specific modes of transport, such as with the International Roads Union (vehicle driver training), the University of Birmingham (roads management), and the International Civil Aviation Organization (civil aviation safety and administration).

95. In FY05, the Bank launched a program of enhanced action against corruption by sponsoring a workshop in Washington, DC that focused on how to improve transparency and reduce the opportunities for corruption in the allocation of contracts for toll-road schemes delivered through public private-partnerships. The program was enhanced later that year with the implementation of specific risk-mitigation measures for procurement in the transport sector in East Asia and Pacific.

96. Lending. In accordance with the Infrastructure Action Plan (2003),72 the Bank has rebuilt its engagement in the transport sector from the low point of $1.7 million in FY00 to an average annual commitment of $3.1 billion in FY02-06. Transport projects tend to be large and “lumpy,” so the amount of Bank transport lending varies widely from year to year. The portfolio is being rebuilt in both low- and middle-income countries, with the proportion of lending on IDA terms fluctuating around 35 percent over the last five years. During FY02-06, the implementation time for transport operations fell from 7-8 years to 6-7 years, while their

71 Over the last five years, 30 small knowledge-sharing products (on average costing $30,000) have been produced

using funds donated by the UK Department for International Development under its Transport and Rural Infrastructure Services Partnership with the Bank (TRISP). A total of 45 products is expected over the life of the Partnership.

72 See Infrastructure Action Plan–Overview & Matrix of Management Actions (SecM2003-302), op. cit.

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preparation time declined, reaching a low of 16 months in FY06. Their average completion cost fluctuated around $353,000 per operation, with no clear trend.

97. Over FY01-05, the largest individual borrowers for transport were India (28 percent) and China (14 percent), while a further eight countries (Argentina, Brazil, Colombia, Congo DR, Egypt, Indonesia, Mexico, and Vietnam) together accounted for 22 percent. In some of these countries, the borrowing for transport reflected high-level political perceptions of the importance of transport infrastructure investment for trade, economic growth, and poverty reduction.

98. Rural roads projects financed by the Bank have provided significant cross-sectoral benefits, as in Bangladesh, Bhutan, Uganda, and Yemen, and promoted institutional strengthening, as in Georgia, Lesotho, Mauritius, and Pakistan. In Bangladesh, rural roads increased the marketing of agricultural products and the revenues of farmers with improved access, while also diversifying the non-agricultural employment opportunities of land-poor households and generating employment for destitute women.73 In Bhutan, rural roads helped achieve a transition from portaging and animal transport to motorized transport, significantly reducing travel time and transport costs.74 Evidence on one key road shows that travel time decreased from two days to two hours and that transport cost for key commodities was reduced by 40 to 60 percent after the road was open. Other results from this road were: diversification of agricultural products; improved access to better health care; an increase in roadside shops; and promotion of new income-generating opportunities. IDA also promoted environmentally friendly road construction techniques that are now applied to all feeder roads in Bhutan. In Georgia, the Bank introduced competitive bidding and privatization of road maintenance and construction activities, and the reorganization of the Ministry of Transport created a model of reform that was subsequently used in other public sector reforms.75 In Mauritius, in addition to supporting the National Strategy, the Bank developed a Transport Action Plan which included a financial tool for government to determine the phasing and sequencing of all investments in the transport sector. In Pakistan, the Bank contributed toward bringing traditional trade and transport practices in line with international best practices.76 In Lesotho, road construction was used to promote training of local contractors and in Yemen, rural access roads assisted not only increased access to facilities but also access to markets for village agricultural outputs as well as for incoming essential commodities (see Box 6).77

73 See Bangladesh–Country Assistance Strategy–CAS Completion Review–OED Review (IDA/R2006-0017/1,

IFC/R2006-0024/1), March 8, 2006. Board approved on March 29, 2006. 74 See Bhutan–Country Assistance Strategies–CAS Completion Review–OED Review (IDA/R2005-0201/1,

IFC/R2005-0230/1), October 11, 2005. Board approved on November 1, 2005. 75 See Georgia–Country Partnership Strategy–CAS Completion Report–OED Review (IDA/R2005-0191/1,

IFC/R2005-0215/1), op. cit. 76 See Mauritius-Country Partnership Strategy–CPS Completion Report-IEG Review (R2006-0182/1), op. cit. 77 See Lesotho–Country Assistance Strategies Completion Report–IEG Review (IDA/R2006-0050/1), April 14,

2006. Board approved on April 27, 2006.

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Box 6. Impact of Rural Access Roads in Yemen The first phase of the Bank’s Rural Access Adaptable Program Credit, begun in 2001 and implemented throughout the CAS period, is achieving its outcome indicators of piloting rural access roads in four poverty-affected areas and developing low-cost standards for rural roads construction. The roads have provided access to primary and secondary schools and health clinics. As a result of the project, travel time and costs were reported to be reduced by 40 percent on average. More than 16 percent of Yemen’s population, or about 5,000 communities, are now benefiting from the infrastructure improvements. The impact on infrastructure services is not only highly satisfactory but also sustainable. Assurances that future maintenance of sub-projects will be provided were obtained before project approval. In addition, 92,000 person months of work were provided which promoted labor intensive activities, generating about 2.4 million person-days in temporary employment and about 11,000 additional permanent jobs. There were significant cross-sectoral impacts on community development, and gender roles. Source: CAS completion report, in the Yemen Country Assistance Strategy, Board approval date: June 15, 2006.

99. Progress in Results Management. Nearly all the implementation completion reports for transport projects provide data on project output; the proportion of ICRS that did so was 95 percent at both the beginning and the end of the review period, and the average over the five-year period was 86 percent. The Bank is trying to improve the specificity of project development objectives and verifiable indicators by which project performance can be monitored.

100. Such monitoring of performance has clear benefits for assessing the value of alternative approaches. In Argentina,78 for example, effective long-term monitoring of the impacts of performance-based road maintenance contracts that were let in 1996-97 showed that the share of roads in poor condition fell 41 percent to 6 percent; that unit costs were 12-18 percent lower than in traditional contracting; and that the activities achieved an economic rate of return of 60 percent, because of the savings in vehicle operating costs. These results have led to a much wider application of performance-based road maintenance in both national and provincial roads in Argentina. The South East Europe Trade and Transport Facilitation project79 provides another example of the power of good results measurement. This project addressed in a comprehensive manner (including transport, customs, health, and immigration functions), and on a regional basis, the long delays that were occurring at road border crossings throughout South East Europe, impeding trade and development in the region. Results monitoring was an integral part of the project design and directly contributed to its effectiveness. Over its first three years, the project recorded an average reduction of 63 percent in customs clearance times, combined with a 60 percent increase in customs revenue collected and a 65 percent reduction in border-crossing times. Results were measured specifically by country and border crossing so that immediate benchmarking was available to all participants. Based on the demonstrated success of this project, a second project is being prepared to cover railway and river transport in the region, and the approach to measuring corridor performance is being adapted for use in new corridor trade and transport facilitation projects in Europe and Central Asia.

101. Selected projects are now being designed to incorporate the collection of baseline economic and social data, so that in coming years a more rigorous “before and after” analysis can be made. For example, the Bangladesh Second Rural Roads and Market Improvement and

78 See The Argentina: Provincial Road Infrastructure Project (Report No. 32019-AR), World Bank, 2005. 79 See Trade and Transport Facilitation Project in South East Europe Program [TTFSE]: Progress Report 2004,

Working Paper (34884), 2004.

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Maintenance project 80 introduced a continuous monitoring and evaluation system to monitor not only the output of the project, but also its direct and indirect socio-economic effects through a Socio-Economic Monitoring and Evaluation study and a short- and longer-term socio-economic impact study encompassing three phases: benchmark household as well as market, community, and facility and transport surveys; short-term impacts; and longer-term impacts. The impact analysis on Poverty (changes in poverty level, physical assets, growth in consumption expenditure, incidence of “hungry poor”) and on Rural Employment and Agriculture Diversification (migration, labor force growth and participation, incidence of female employment, non-agricultural employment, diversification to non-crop agriculture) not only clearly demonstrated the satisfactory project results, but also provided basis for a following lending operation.81 Subsequent operations in Bhutan and India have expanded and scaled up this approach.

102. As noted earlier, the Bank has worked with participating countries to establish baseline indicators of transport services, including the Rural Access Index, that will enable international comparisons, as well as gauging progress within countries.

103. Bank Resources. The Bank’s budget for work in transport has increased by around 32 percent over the last five years. Part of the budget has been reallocated from the Anchor to the regions, and Anchor staff have given first priority to operational support of the regions through a time-allocation target of 50 percent.

104. The Bank had 122 transport staff on board in FY02 and 120 in FY06, with an average of 117 over the period. With a greater focus on operational delivery, Bank transport staff have substantially raised their productivity, more than doubling the amount of lending per transport staff member since a low point in FY00; average lending per transport staff member in FY06 reached around $27 million. This productivity gain has partly been accomplished by reducing project preparation time.

3. Progress in Output Quality

105. All transport projects reviewed by the Quality Assurance Group in the review period were rated satisfactory or better in terms of quality at entry. Projects rated satisfactory or better at exit averaged 92 percent over the period, and reached 100 percent in FY06. The proportion of projects at risk, previously in the range of 14-16 percent, fell to 10 percent in FY06. Of projects completed in FY03-06, around 10 percent had policy reform components and half of these components were rated satisfactory or better in policy reform terms. The annual numbers of projects with policy reform components are too small to yield a reliable trend. Over the ten-year period, institutional development objectives were incorporated into 91 percent of the projects and of these, 76 percent were rated as satisfactory or better in institutional development terms. A small decline in this performance in the latter half of the period will be addressed through more realistic project design and rigorous supervision.

80 See Implementation Competition–Report-Bangladesh-2nd Rural Roads & Markets Improvement &

Maintenance Project (25229-BD), January 10, 2003, Board approved on December 19, 1996; and May 11, 1999 for the supplemental credit.

81 For example, the impact study showed that poverty reduction was 2 percent “faster” in project areas versus control areas; labor force increased by nearly 13.3 percent in project areas versus only 9.1 percent in control areas.

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D. Bank’s Comparative Advantage and Partnerships

1. Comparative Advantage

106. The Bank’s comparative advantage in the transport sector stems from (a) global reach and experience; (b) the synergies among Bank Group organizations and disciplines; and (c) the multi-modal scope of Bank transport skills.

107. Global Reach and Experience. Though circumstances vary among regions and countries, policy and institutional challenges are similar internationally, as are many physical transport problems such as urban road congestion, road traffic accidents, and vehicle emissions. The Bank is the only international financial institution that has such well developed global reach in the transport sector that it can draw lessons from the wide variety of circumstances worldwide and adapt them for use by other jurisdictions.

108. The Bank’s transport professionals have a particular responsibility to deploy the breadth of their knowledge through global programs and partnerships. Three of the most important partnerships, in which the Bank has played a formative and leading role, are the Global Facilitation Partnership for Transportation and Trade, the Global Road Safety Facility, and the Air Transport Safety Partnership. The Bank is currently in discussion with international groups involved in urban public transport with a view to creating an urban transport partnership or program that will have a development focus.

109. Bank Group Synergies. Around 94 percent of the Bank Group’s support for the transport sector in the last five years has been channeled through IBRD/IDA.

110. In IFC, transport has accounted for around 7 percent of total net commitments over the last ten years. The Corporation has financed private port and stevedoring operations, freight railways, airlines, shipping companies, and transport support services. Cooperation between the Bank and IFC is illustrated by the East Africa Trade and Transport Facilitation Project, which requires close working relationships between the two agencies. This regional project involves five countries and funding from four different organizations.82 One of its components is the privatization by concession of a combined Kenya-Uganda Railway network; this has required combined Bank and IFC technical advice to the asset-holding company, support for staff retrenchment and social mitigation, establishment of a pension fund, and support for the concession process through the provision of partial risk guarantees to backstop the government’s contractual undertakings.

111. The volume of MIGA guarantees for transport projects has traditionally been very small; it currently represents just over one percent of the MIGA portfolio, after peaking in FY01-03.

112. Multi-modal Skills. Solutions to transport needs are increasingly multi-modal. In international trade, for example, multi-modal freight logistics services are increasingly important to the integration of partner country economies into international supply chains. These services may use road haulage companies, train operating companies, barge and shipping companies, 82 See East Africa Trade and Transport Facilitation Project (IDA/R2006-0003/1), op. cit.

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stevedores, airlines, and air freight companies. Those companies in turn depend on infrastructure: roads, railways, waterways, ports, airports, and various kinds of inter-modal transfer, storage, and terminal facilities. International transport costs depend partly on the quality and capacity of the infrastructure used, and partly on the effectiveness of the governance structures (policies, markets, regulations) within which the freight logistics companies operate. Similarly, solutions to worsening urban transport problems will depend on integrated multi-modal public transport systems that may involve non-motorized access, buses, trams, metros, suburban railways, and road traffic management all managed within a coherent policy and operational framework. The synergy among Bank professionals with different modal skills, and between those with modal skills and those with policy skills, provides a powerful basis for engaging in policy dialogue about transport policies as a whole.

2. Partnerships

113. Although the transport sector has a long history of coordination and collaboration with external agencies, the emergence of more cross-sectoral and co- financed projects has increased the imperative for the Bank to cooperate with other agencies. In the review period, this has been most evident in relation to approaches to road safety, urban air quality, and the transport-related transmission of HIV/AIDS.

114. Road Safety. Jointly with the World Health Organization (WHO) and other core partners, the Bank prepared a report on global road safety issues with particular reference to the growing burden of road deaths and injuries in low and middle-income countries; the findings and recommendations were presented to the UN General Assembly in 2004.83 The Global Road Safety Facility, launched by the Bank in November 2005, provides funding support to partner organizations undertaking global road safety programs, including the World Health Organization and the Global Road Safety Partnership.

115. Urban Air Quality. Mobile sources, particularly road transport vehicles, are now recognized as a major source of urban air pollution and greenhouse gases. The Insurgentes Bus Rapid Transit System Project in Mexico is an innovative project in which the transport, environment, and energy sectors jointly contribute to improving air quality in metropolitan Mexico City.84 This project will help reduce local airborne pollutants and greenhouse gas emissions generated by vehicles.

116. HIV/AIDS. New transport routes help spread communicable diseases such as HIV/AIDS.85 The Abidjan-Lagos Transport Corridor HIV/AIDS Project,86 which spans five participating countries and numerous public agencies and NGOs, is designed to increase access in the corridor to HIV/AIDS prevention and basic treatment; and to support and care services for

83 See The World Report on Road Traffic Injury Prevention, M. Peden and others, eds., World Health

Organization, Geneva, 2004. 84 See Mexico: Insurgentes Bus Rapid Transit System Carbon Finance Project (Report No. 34048-MX), World

Bank, 2005. 85 See AIDS and Transport in Africa. A Framework for Meeting the Challenge World Bank, Africa Technical

Transport Sector Unit, 2003. 86 See HIV/AIDS Project for the Abidjan-Lagos Corridor (Report No. 26939-BN), World Bank, 2003.

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underserved vulnerable groups—specifically transport sector workers, migrant populations, and commercial sex workers—and the populations living along the corridor, particularly in border towns.

E. Strategic Directions for FY07-09

117. Key Challenges and Implementation Risks. Work began in FY06 on updating the Bank’s transport sector strategy for the SSIU. An extensive consultation exercise with other international financial institutions, donor organizations, eminent transport professionals, and representatives of partner countries was undertaken to understand the key policy issues in transport today and to help identify relevant trends and issues for the period ahead. Subsequently, the Independent Evaluation Group issued a review of recent World Bank transport assistance.87 Its main recommendations stress that the Bank should ensure that the focus of the Bank's transport operations goes beyond intercity highways and gives more attention to issues of growing urgency including environmental damages, energy efficiency and climate change, traffic congestion, safety, affordability and trade.

118. The strategy update and the evaluation show that the main principles and policy positions endorsed in the Bank’s 1996 Transport Sector Strategy remain appropriate but that these need to be complemented in important ways. Enduring areas of Bank attention will include the financial sustainability of transport infrastructure, the environmental sustainability of all transport interventions, and the importance to poverty reduction of improving both rural and urban access and mobility. This must be complemented by recognition of the particularly important contribution which transport makes to economic activity and growth and by engaging more effectively with the private sector at all levels to ensure harmony with development policies. Also, it will be critical to achieve greater synergies across relevant sectors building on the integration of the SDN network, and to enhance knowledge sharing and analytical and advisory services, and their contribution to country strategies.

119. In six areas, the Bank proposes to adjust its future transport lending to help transport play more of a facilitating role in development and to align it better with the full range of MDGs.88 These areas reflect the expressed concerns about the necessity to broaden the range of transport operations to more effectively cover the various issues and linkages triggered by transport activities across sectors:

• Urban transport. The Bank will increase its engagement in urban transport services, particularly urban public transport, to reflect global demographic trends and the escalating development challenge of urban transport in all regions. Use will be made of a range of instruments, including for sub-national financing. Particular policy attention will be given to: building capacity in urban transport administration and regulation; enhancing the role and quality of affordable public transport; financing

87 See A Decade of Action in Transport–An Evaluation of World Bank Assistance to the Transport Sector, 1995-

2005 (CODE2007-0004), February 2, 2007. 88 Following the Board’s comments on the Transport SSIU, the Bank intends to publish a transport paper, Safe,

Clean, and Affordable: Transport for Development, Transport Paper No. TP-14, dealing with key issues of transport in development. This will describe the strategy adjustments proposed above and the reasons for them.

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mechanisms; use of the private sector to deliver public services; managing the demand for private car travel; and recognizing the importance and needs of pedestrians and non-motorized forms of transport.

• Transport for trade. The Bank will provide increasing support for public and private infrastructure investment to overcome transport bottlenecks to regional and international trade in goods and services. More attention will be given to transport modes other than roads; to navigation and safety infrastructure in all modes; to inter-modal and multi-modal transport; and to the emerging challenges of meeting stricter international security standards for freight movement. The Bank will help partner countries build institutional capacity so that they can develop transport logistics strategies to address non-physical barriers as well as infrastructure deficiencies, improve the management of public infrastructure, and encourage successful private sector participation in competitive markets for transport and logistics services. To diagnose needs and design strategies for improvement, the Bank will use multi-modal, corridor, and regional approaches where appropriate.

• Road transport services. To reap the full benefits of investment in road infrastructure, a country’s markets for road use must work well. While continuing to stress the importance of good road networks and their management and maintenance, the Bank will give more attention to the performance and affordability of road transport services. When distortions and constraints are apparent, analysis will be needed of the policies, institutions, and regulations that govern road freight and passenger services markets, benchmarking these against successful international practice, and pinpointing policy options that will help to ensure that good service follows good infrastructure.

• Safety of transport operations. The cost, in both economic and social terms, of unsafe transport is now recognized and increasingly seen as an unacceptable burden incompatible with broad sustainable development objectives. Road safety has become a major global public health issue, that requires a consistent and comprehensive approach across countries and regions, based on a set of universally accepted principles as laid out in the 2004 World Report on Road Injuries Prevention,89 and the Bank has set up in 2005 the Global Road Safety Facility to scale up its activities in close cooperation with all interested donor organizations. Insufficient air transport safety, on the other hand, is becoming a major hindrance for economic growth and foreign direct investments in large developing regions, and the Bank is also gearing up to be able to assist more effectively its partner countries in this area.

• Social and environmental principles. The Bank will deepen the application of key social and environmental principles in Bank transport interventions to address both direct and indirect impacts and to ensure that the overall benefits are inclusive and equitable. Specific enhancements to sector activities are already planned to promote

89 See The World Report on Road Traffic Injury Prevention, M. Peden and others, Eds., World Health

Organization, Geneva, 2004. op. cit.

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(a) better road safety, as mentioned above, through a full range of measures affecting policies, institutions, infrastructure, vehicles, drivers, and enforcement; (b) appropriate policy responses to the physical and economic links between transport energy efficiency, vehicle emissions, short-term impacts on public health, and long-term consequences for climate change; and to do so embed issues arising from the contribution of greenhouse gas emissions from transport to global warming into transport sector analyses, policy dialogue and relevant project design (see next bullet); and (c) policies to reduce the transport-related transmission of HIV/AIDS, particularly in infrastructure construction and long distance transport.

• Transport, energy and climate change. Activities in the transport sector in the years ahead will cover the issue of greenhouse gas emissions from transport as a priority for Bank action in the sector. At an operational level this will involve greater attention to urban transport, including provision of urban public transport and management of demand by private vehicles; and greater engagement in non-road based transport modes including railway and waterway transport. A number of GEF projects have been initiated and the number of these is expected to increase. Guidance notes are also planned to sensitize transport staff to transport and carbon relationships, to provide tools that will enable the incorporation of energy efficiency and emissions into project appraisals, and advice on policy implications and options for transport policy makers in partner countries.

120. The Bank’s effectiveness in supporting these priorities will depend on several factors, the first of which is the quality of sector governance in partner countries. Governance issues are especially important in the transport sector, because of its scale and complexity, the strong public interest in its performance, and the heavy involvement of both public and private players in its operations. Sound governance includes, inter alia: competent state institutions to make and implement transport policy; complementary roles played by the public and private sectors; development of transport markets and the regulations that influence them; and the fight against corruption.90

121. Another precondition for the Bank’s effectiveness is that national governments should support the activity at the municipal level that is needed to address urban transport needs. Success will partly depend on what progress the Bank can make in developing modes of direct engagement with urban authorities, using sub-national lending instruments.

122. It is also possible that client countries will not wish the Bank to diversify significantly away from roads projects, or will not wish the Bank to focus significant financial resources in areas such as road safety or vehicle emission reduction strategies.

123. Finally, greater engagement in lending for urban transport, freight logistics infrastructure, or support for road transport services, road safety, vehicle emissions, and measures against HIV/AIDS will often require more resource-intensive interventions than the Bank has been

90 In some countries, extortion of payments from transport companies and drivers forms a significant informal tax

on transport and trade.

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accustomed to. A risk here is that that the Bank will be unable to acquire the skills needed to expand its work in these areas, or that the longer and more costly preparation and monitoring times that such activities require will not be supportable from the available budgets. It will be important to engage with other development agencies and specialist organizations to contribute to harmonized policies through both financial and technical assistance.

124. Improve Measurement of Transport Performance and Results. The Bank will continue to work with partner countries to establish baseline indicators of the performance of transport infrastructure. At project level, operational management will continue to seek more concrete and verifiable indicators of project impact. At policy level, the Bank will continue to encourage review and dissemination of international best practice policy experience. The expected impacts of this more comprehensive sector strategy will be sought on several fronts, from (a) increased trade competitiveness and job creation, when lower transport costs increase market areas and allow the exploitation of increasing returns to scale, leading to a diversification of production, to (b) better urban/rural integration, since recent thinking in geographical economics sees the main impact from reducing rural transport costs in the impetus on urban development, specifically in the strengthening of agglomeration benefits resulting from increasing returns to scale of the producers in urban areas, noting that these agglomeration effects can only materialize if governments help avoiding a suburban segregation and an exclusion of poor households from the labor market thanks to well-designed urban transport systems; and (c) more energy-efficient transport services, with systematic assessment of the carbon footprint of transport activities, and projects being designed to enhance the clean and safe operation of transport assets, and maximizing benefits for underprivileged segments of the population.

125. Projected Lending and Nonlending Activities. The Bank expects to increase its annual transport lending over the period to FY07-09 to about $3.5 billion—a 15 percent increase from the last five-year annual average. Resources for ESW/TA activities are likely to rise in proportion to lending commitments.

126. The Bank also expects to produce higher-profile and more authoritative knowledge-sharing products in transport, supported by donor funds as in the past. The key topics expected to be addressed in FY07-09 include transport for trade; transport, energy, and vehicle emissions; transport and urban structure, and aspects of social responsibility.

127. Priority Countries and Regions. The overall balance of activity among countries and regions is not expected to change markedly in the next few years and the key cross-cutting challenges described above are relevant to all regions.

128. However, some specific issues bear most heavily in particular regions:

• In Africa, the Bank’s main attention will be on the two thirds of rural people who lack reliable access to an all-weather road and on reducing exceptionally high costs of transport.

• In East Asia and Pacific, where in many countries transport has facilitated impressive trade-driven economic growth and poverty reduction, the Bank is now

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looking at ways in which transport capacity can help both to sustain that growth and to extend the benefits to people in remoter areas.

• In East Europe and Central Asia, infrastructure modernization and policy reform remain the key goals; following an investment hiatus, nearly all countries face quality and technology deficiencies in transport, and big maintenance backlogs in their transport infrastructure.

• In Latin America and the Caribbean, the Bank is working on measures to increase the sources, quality, and productivity of investment to mitigate the massive reduction in transport investment that has taken place since the 1980s.

• In the Middle East and North Africa, the Bank will continue to offer support for capacity building in transport, including frameworks for successful participation by the private sector, which has so far contributed little to solving the region’s transport needs.

• In South Asia, investment climate surveys have pinpointed transport as a particular problem for regional and international trade, while, at the micro level, many rural households lack access to all-season roads; the Bank will give attention to both challenges.

129. Resource Implications. The needed increase in the volume and diversity of transport sector activity planned for FY07-09 is unlikely to be achieved without some increase in Bank staff time. Staff planning and utilization will therefore require close attention, particularly because more than one in five of the Bank’s transport staff members is expected to retire in the next five years. A batch-hiring approach has been adopted to ensure that the transport staff network maintains its size but diversifies its skills. The creation of the Sustainable Development Network is expected to yield operational synergies and flexibility in resource allocation that will provide the additional staff time necessary to implement a bigger and more diverse lending program in FY07-09.

II. ENVIRONMENT

A. Overview of the Sector Strategy and Results Framework

130. The Bank’s Environment Strategy, issued in 2001, recognizes that the livelihoods of poor people and their nations’ prospects for sustained economic growth are intimately linked to the state of the environment.91 It emphasizes that for the Bank to be a partner in promoting sustained growth and poverty reduction, a commitment to improved environmental management is essential. The strategy has three interrelated goals:

• To improve the quality of life, by enhancing incomes that are dependent on natural resources; preventing and reducing environmental health risks; and reducing people’s vulnerability to environmental hazards.

91 See Environment Sector Strategy, Making Sustainable Commitments (R2001-0121), September 9, 2001.

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• To improve the quality of economic growth by supporting policies, regulations, and institutions for sustainable environmental management.

• To protect the quality of the regional and global commons, and help to find equitable solutions to global challenges.

131. These objectives are closely linked to the Millennium Development Goals (MDGs). They contribute to efforts to eradicate poverty and hunger (MDG 1) and to reduce child mortality (MDG 4). In particular, they relate to MDG 7, which aims to ensure environmental sustainability and calls on countries to reverse the loss of environmental resources, to halve the number of people who lack access to safe drinking water, and to improve the lives of at least 100 million slum dwellers by 2015.

132. The sector strategy establishes a framework for implementation that stresses three priority areas for action: improving the analytical basis for establishing how welfare is affected by environmental conditions; sustaining the effort to integrate environmental objectives into sector investments, sector policies, and institutions—including strengthening the Bank’s safeguards system; and building synergies between local and global issues management.

133. This update takes stock of strategy implementation over the past five years and provides an interim outline of strategic directions for FY07-09.92


134. Many stakeholders, including donors and middle-income countries, are turning to the Bank for its knowledge, strategic advice, convening role, and financial capacity to address issues of global and regional concerns, and to operationalize these initiatives. Environment-related global programs and partnerships cover a diverse set of environmental themes: climate change and carbon finance; biodiversity-conservation and sustainable use; forest protection and management; fisheries management; sustainable land management; and controlling urban air pollution. They focus on one of four broad types of activities: country-level investments in global public goods; adoption of good environment and natural resource management practice at the country level; advocacy related to global mechanisms or reporting and communications on sustainable development; and strengthening of national capacity for integrating environmental management with poverty reduction programs. The Bank is addressing these global issues through projects funded with resources from the Global Environment Facility (GEF), the Montreal Protocol, and Carbon Finance programs, as well as a range of other environmental partnerships (see below).

135. For example, the Bank has deepened its engagement with climate change. Since the Kyoto Protocol became effective in February 2005, the Bank has taken a lead role in ensuring that poor countries can benefit from international responses to climate change, including the emerging market for reductions in greenhouse gas emission. The carbon market now comprises 92 This update is being prepared at a time of transition for the environment practice at the World Bank, with the

creation of the SDN network. The directions will be internally validated for the period ahead, with external consultations planned as well.

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nine carbon funds and facilities with a capitalization of about $1.9 billion. The Umbrella Carbon Facility93 was fully funded in August 2006 with capital of $1 billion.94 The Bank is helping its client countries to adopt renewable-energy and energy-efficient technologies within the broader context of their energy development strategies. In FY06 the Bank worked with some of its most vulnerable client countries to assess adaptation options in the context of their development plans; current work in this area focuses on incorporation of climate-change impact concerns in sectors such as water, agriculture, forests, and coastal-zone management.

136. Within the overall objectives of the Environment Strategy, the thematic emphasis varies across regions:

• Africa (AFR) prioritizes improved environmental management and governance of natural resources, focusing on local community involvement and increased attention to environmental health. A number of community-driven development projects are strengthening local governance by supporting decentralized sector structures and local government and civil society organization, for example in Burundi, Cameroon, Ghana, Kenya, Nigeria, and Niger. Community-based natural resource management projects, such as in Burkina Faso, Kenya, and Namibia, are reinforcing common property management systems, strengthening land tenure, and empowering communities to manage forests and other natural resources in a sustainable manner. In Ghana, for example, the region is working across sectors on environmental health-related programs to raise awareness of malaria and to promote hand-washing for diarrhea prevention.

• In East Asia and Pacific (EAP), the priorities include managing water and air pollution caused by increasing industrial and urban activity, and protecting key natural resources.95 Pollution-management projects, primarily for urban sanitation, are the largest part of the portfolio. EAP has shown its commitment to integrating environmental concerns into infrastructure projects such as the Lao PDR Nam Theun II Hydroelectric Project,96 and to supporting participatory natural resource management. The region has also pioneered new projects, including the first demonstration project to phase out persistent organic pollutants (POPs)97 and the largest-ever emission reductions project. The latter is in China: two Chinese companies signed emission-reductions purchase agreements for $930 million in FY06 with the World Bank’s Umbrella Carbon Facility. Through this contract the companies are expected to reduce emissions by the equivalent of about 19 million tons of carbon dioxide (CO2e) annually, thus assisting China to invest in sustainable development activities.

93 See The Role of the World Bank in Carbon Finance and the Proposed Umbrella Carbon Facility (R2005-0230),

November 10, 2005, Board approved on January 12, 2006. 94 See An Investment Framework for Clean Energy and Development: A Progress Report (DC2006-0012), op. cit. 95 See Environment Strategy for East Asia and the Pacific, World Bank, March 2005. 96 See Lao: PDR Nam Theun 2 Hydroelectric Project (IDA/R2005-0043/1, MIGA/R2005-0012/1), March 15,

2005. Board approved on March 31, 2005. 97 See China: Demonstration of PCB Management and Disposal Project (GEF/R2005-0028/1), November 30,

2005, Board approved on December 15, 2005.

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• Europe and Central Asia (ECA)’s environmental issues vary widely. Water management is a major environmental challenge in Central Asia. Former Soviet Union countries face legacies of large-scale industrial pollution; and new European Union (EU) member and accession countries are challenged by EU directives related to the environment as well as by regional and international environment-related commitments and conventions. Project objectives include drainage and irrigation (Azerbaijan); reversing and reducing industrial pollution (Albania); promoting efficient wastewater systems (Croatia, Hungary, and Poland); improving solid waste management (Bosnia-Herzegovina and Uzbekistan); allocating and managing valuable natural resources (Russia); managing landscapes and coastal zones (Albania and Ukraine), conserving sensitive ecosystems and biodiversity (Central Asia, Croatia, Romania); and addressing environmental management and clean-up issues related to a variety of industries (Albania, Azerbaijan, Kosovo, Moldova, and Romania). Several projects are working to reduce the vulnerability of populations to natural disasters. The region also supports multi-country trans-boundary environmental and water resource management projects (Macedonia, Albania).

• The portfolio in Latin America and the Caribbean (LCR), supported by the Global Environment Facility (GEF) and Carbon Finance, remains the largest in the Bank. The key environmental issues are urban and industrial pollution; mismanagement of natural resources in areas of both existing and new settlement and the consequent loss of both terrestrial and marine biodiversity; and the vulnerability of urban and rural populations to natural disasters. Several projects, including the Brasilia Environmental Sustainability Project, address key urban environmental issues while strengthening governance capability. The regional office has directly promoted effective environmental policies, instruments, and institutions in client countries through policy dialogue and environmental development policy loans, as in Brazil, Colombia, and Mexico. Projects support the conservation of ecosystems critical for biodiversity, help countries mitigate greenhouse gas emissions, participate in international carbon markets, prepare responses to climate change, and promote the sustainable management of indigenous lands.

• Middle East and North Africa (MNA). MNA’s environmental priorities are water scarcity, land degradation, rising incidence of pollution-related illness in urban areas, and solid waste management. To help address increasing water scarcity, water strategies and/or policy notes have been developed for Iran, Morocco, and Yemen. Iran’s Integrated Land and Water Management Project is improving irrigation and drainage, reducing soil erosion and sediment yields, and protecting the aquatic environment downstream. The region’s environment strategy also focuses on achieving better public sector efficiency and environmental governance, a more efficient safeguard system, and lower environmental health risks. Egypt’s Second Pollution Abatement Project demonstrates how market-based approaches can be used to reduce industrial pollution in selected hot spots (in some of them, it has reduced pollution by 75 percent). An innovative Carbon Finance sub-program will set up a sustainable pollution abatement program with the revenues from the sale of emission reductions.

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• South Asia (SAR)’s environmental priorities are pollution management, water resource management, and environmental health. The region is also threatened by climate variability and climate change, which are predicted to increase the frequency and severity of droughts, floods, and cyclones. Lending and ESW helped to strengthen risk management frameworks across the Region: they provided knowledge to support Governments in managing environmental issues and institutional capacity building (e.g., the India Capacity Building Pollution Management Project); identified environmental health risks (e.g., Air Quality Management Program in Bangladesh); analyzed indoor air pollution (e.g., India, Bangladesh, and Nepal); tackled the environment impact of urban growth (e.g., the Dhaka Environment Management Project); improved the sustainability of natural resource management (e.g., Sustainable Land Management Country Partnership Program in India); and improved energy efficiency. There has been considerable effort to mainstream environment management through DPLs (e.g., Orissa DPL, Bangladesh DPL, Bangladesh Railways DPL, Pakistan PRSC II), resulting into a more cost effective and efficient way to leverage support for environment policies and institutions by mainstreaming environmental concerns into macro- and sectoral policy dialogue. Analytic work, including Country Environment Analysis (CEA) (e.g., Bangladesh, India, Pakistan, Nepal) and costs of degradation studies (Pakistan SCEA) has helped to identify environmental priorities, estimate costs of degradation, and raise the profile of environmental issues in country programs. For example, a study in India98 conducted an innovative long-term assessment of drought risks and strategies to reduce their impact, under several economic, drought management and climate change scenarios, with a view to identifying and recommending an effective adaptation strategy. Technical assistance for environmental capacity building in India and Sri Lanka has focused on strengthening the policymaking process and enhancing inter-ministerial coordination.


137. In planning for the 2007-09 environment strategy implementation period, a results framework has been established that maintains the objectives spelled out in the 2001 strategy paper but has a sharper focus on institutions and governance and gives more attention to outcomes (see Table 13).

138. Some evidence is available on the results of Bank contributions in the sector. As regards the first goal of the sector strategy—enhancing livelihoods dependent on natural resources, preventing and reducing environmental health risks, and reducing people’s vulnerability to environmental hazards—the completion report on the country assistance strategy for Yemen notes that with Bank support the loss of life due to flooding has been halved over the last three years in a flood-prone region of that country. In Bangladesh, the Arsenic Project has provided arsenic safe drinking water to over 2-2.5 million people in 1800 villages. In Honduras, where the Bank supported local authorities’ disaster mitigation activities, early warning forecasts are now

98 See Overcoming Drought: Adaptation Strategies for Andhra Pradesh, India (ISBN 0-8213-6664-5), World

Bank, 2006.

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available in 60 percent of the national territory, participating municipalities have prepared disaster mitigation plans and regulations that include measures to control land use in high-risk areas, and local disaster response capacity has been strengthened. These municipal arrangements proved successful in reducing the impact of hurricanes during the 2005 season. With Bank support Bulgaria has successfully cleaned up an environmentally hazardous industrial site, reducing discharge of heavy metals and other pollutants.

139. The second goal of the strategy is to support policies, regulations, and institutions for sustainable environmental management. In Mauritius, Bank support has helped to ensure that the liquid waste, solid waste, and transport sectors are financially, institutionally, and legally sustainable, and are operating in full compliance with environmental standards. The Bank’s advice on the financial sustainability of that country’s sewerage sector resulted in water and sanitation reforms and investment and the introduction of a joint billing system for clean water and sewerage; the Bank also aided in reforming the Wastewater Management Authority, implementing the household connection system, and it supported biodiversity conservation through GEF. In Organization of Eastern Caribbean States (OECS), environmental management objectives of consolidating legal, institutional, and regulatory frameworks were not achieved, as they were refocused as a study on environmentally sustainable tourism. However, with this region’s reliance on tourism as an income source, the findings of that study are likely to inform future support for environmental management. In Uganda, the Bank helped to establish the Natural Environmental Management Authority and build the capacity of the Uganda Wildlife Association. It supported the issuance of Environmental Impact Assessment guidelines and regulations, preparation of draft standards on water quality, effluent discharge, air quality and noise pollution, and the development of national environmental education plans. In China, Bank projects have helped reduce erosion and land degradation in six natural forests of 206,000 hectares and 13 nature reserves consisting of 1.09 million hectares, and through Bank assistance for reforestation, by 2005 over 736,000 hectares of forest had been planted.

140. The third goal of the strategy is to protect the quality of the regional and global commons and help find equitable solutions to global challenges. China’s 2004 ratification of the Stockholm Convention for the phase-out of persistent organic pollutants was supported by the Bank. Bulgaria has undertaken a number of Bank-supported initiatives to reduce the energy intensiveness of its economy and meet its obligations under the UN Framework Convention on Climate Change, and has made substantial progress in harmonizing with EU environmental requirements.

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Table 13. Results Framework—Environment and Natural Resources Management What results on the ground are important?

Country Outcomes How do we know if implementation is on track?

Process Indicators Strategic Objectives

Final Outcome

How do we measure Final Indicators? Intermediate Outcomes

How do we measure Intermediate Indicators?

Bank Strategy or Contribution Country Bank

1. Improved management of natural resources (NRM) and reduced vulnerability to natural disasters Reduced degradation and restoration of natural resources Increased community involvement in NR Reduced loss of life and livelihoods due to natural disasters Strengthened institutional capacity for NRM

Value of natural wealth per capita Forest and woodland area (% of land area) Restored natural hydrology (% wetlands) Energy depletion (% of GDI) Mineral depletion (% of GDI) Support to community natural resources management (NRM) Number of lives lost, injuries due to natural disasters, and loss of property Efficient NRM institutions, policies, and regulations in place and enforced

Improved land management Improved land tenure systems and property rights Improved water management Improved forest management Strengthened institutions/ systems for weather forecasting, disaster preparedness and emergency warning

Number of people living on severely degraded land % of country titled Internal freshwater resources per capita # of countries with forest certification systems in place Increased number of forecasted events; modern forecasting systems in place

2. Improved human health and environmental quality through responsible growth Reduced mortality and morbidity due to environmental risks

Under five mortality rate (total and by cause of death, advanced respiratory infection, diarrhea)

Access to safe drinking water and sanitation Improved indoor air quality

% of households with access to improved drinking water and sanitation % of households using solid fuels, improved cooking/heating systems

• • Through the Bank’s

Environment Strategy and Update we are :

• Enhancing livelihoods by protecting long-term productivity of natural ecosystems

• Preventing and reducing environmental health risks

• Reducing people’s vulnerability to environmental hazards

• Helping improve the policy, regulatory, and institutional frameworks for sustainable environmental management

• Focusing on the positive linkages between poverty reduction and environmental protection

• Supporting environmentally and socially sustainable private sector development

National strategies, sectoral strategies and PRSPs reflect increased attention to environment and natural resource management issues Sectoral strategies (such as transport, water supply and sanitation, energy and agriculture) that incorporate environmental objectives Strengthened environmental institutions Enhanced EA capacity

Strengthen environmental AAA aligned with Strategy objectives, through targeted CEAs and SEAs Monitor ENRM content and performance in key sectoral lending Enhance environmental outcomes of DPLs Improve application of the coding system to better reflect ENRM content (through TTL training) Regularly disseminate “best practices” drawn from projects and programs with good environmental performance Regularly assess country environment institutional capacity (CPIA ratings) Improve environmental content in country programs (% of CASs that score more than 2.5 out of 4 on environmental issues) Improve outcomes relating to environment operations (% outcome satisfactory, IEG ratings) Enhance quality of environment operations (QAG ratings) Improve safeguards aspects in Bank operations (QAG review)

57What results on the ground are important?

Country Outcomes How do we know if implementation is on track?

Process Indicators Strategic Objectives

Final Outcome

How do we measure Final Indicators? Intermediate Outcomes

How do we measure Intermediate Indicators?

Bank Strategy or Contribution Country Bank

Cleaner urban environment Resilient and functioning ecosystems providing environmental goods and services

Air quality: Urban/population-weighted PM10 (micrograms per m3) Water quality: % of population served by improved sanitation coverage Annual freshwater withdrawals (% of internal resources) Food production Change in area of primary forest (ha/yr) Catch (demersal fish) per unit effort

Improved industrial pollution management Key terrestrial and aquatic habitats and associated biodiversity protected and maintained (see Objective #3 below) Increased national and local capacity to adopt and implement environmental regulations and EA systems

Industry’s share of emissions of organic pollutants # of cities with concentration of selected air pollutants above national standards Nationally protected areas (% of total land) Marine protected areas (% of surface area) Budget for protected area management EA regulations established and in use

Undertake targeted staff training on environmental and cross- sectoral issues to enhance and adjust staffing skills mix Provide safeguard training to all category A and B project TTLs Track and enhance delivery of systematic training in client countries aimed at building capacity on ENRM issues and environmental assessments

3. Protect the quality of the regional and global environmental commons Strengthen conservation of globally significant habitats and biodiversity

Improve mitigation of, and adaptation to climate change

Improved management of protected areas

GEF benefits index for biodiversity Annual mean temperature

Annual/monthly precipitation

Mean annual sea level

Improved coverage of protected areas and better management Reduced reliance on non-renewable resources for fuel and energy

Improved energy efficiency

Increased use of renewable energy

Change in status of threatened species: Living Planet(WWF)/Red List Index (IUCN)

Key sectoral legislation harmonized with national and international biodiversity commitments Net energy imports

Reduced greenhouse gas emissions

GEF benefits index - climate change

Energy consumed using combustible renewables and waste

• Addressing the vulnerability and adaptation needs of client countries

• Facilitating the transfer of financial resources to client countries to help them meet costs of generating global environmental benefits

• Stimulating markets for global environmental public goods.

Countries adhering to commitments under various ratified environmental conventions (e.g., Kyoto Protocol)

Monitor and improve leverage ratios (Bank: partner) in global programs and partnerships Develop selectivity criteria for new partnerships Increase % of blended GEF projects Improve biodiversity content and components in lending projects Track number of ERPAs signed for carbon credits in client countries, and expand carbon Finance operations

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141. To complement the results framework, and help the regions to focus their efforts on countries with the greatest challenges, the Bank has developed a System for Environmental Priority Assessment (SEPA). SEPA ranks environment problems by country, adjusts for the country’s capacity to act on the problems, and compares its needs with the current Bank lending and analytic and advisory services (see Box 7).

Box 7. System for Environmental Priority Assessment (SEPA) SEPA provides initial priority assessments for lending and AAA for countries in each region for three themes: pollution management and environmental health, land management, and biodiversity conservation. Country scores that are based on assessments for lending and AAA are developed, and incorporate detailed information about the Bank’s engagement with the countries. Where available, the scores include information about the relative importance of environmental problems in the local context. This information provides a rank ordering of countries that can then be used to identify the best prospects for engagement in a thematic area. Discussions are underway to validate the SEPA methodology and define its use in the regional action plans for the next three years. It is expected that the SEPA results will be used to: (a) inform the selection of priority countries by highlighting countries with large potential gaps between potential benefits and current Bank engagement levels and (b) provide useful information for preparing country assistance strategies and environmental assessments, program discussions with the networks and regions, and policy dialogue in client countries.


142. With a world population expected to reach 9 billion by the year 2050, of which 65 percent is expected to be in urban areas, increased consumption of energy, water, food, manufactured goods, and services will pose tremendous challenges to the natural systems that support human development.

143. Since the Environment Strategy was endorsed in 2001, the context for Bank engagement has changed. Several contrasting trends are at work. Client needs have evolved to reflect a more competitive economic context and changes in social and political conditions including, in many countries, a more active civil society. Both mature and rapidly growing economies consume oil, timber, minerals, and water without fully recognizing the externalities and limits to future growth. Public opinion increasingly recognizes the enormous pressures that a globalized economy places on natural resources and the environment. And a 2005-06 survey of public opinion from 30 countries around the world finds that a large majority of people in all polled countries believes that climate change or global warming is a serious problem.99 Yet a globalized economy also provides incentives for modernization with cleaner, more efficient technologies that, coupled with sound policies, could harness a movement towards responsible growth.

99 See 30-Country Poll Finds Worldwide Consensus That Climate Change is a Serious Problem, April 24, 2006,

http://www.globescan.com/news_archives/csr_climatechange.html.

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144. The Millennium Ecosystem Assessment100 reported that about 60 percent of the ecosystem services that support life on Earth—such as fresh water, capture fisheries, air and water regulation, and the regulation of regional climate, natural hazards, and pests—is being degraded or used unsustainably. Scientists warn that the harmful consequences of this degradation could worsen significantly in the next 50 years. The MDG 7 Task Force on Environmental Sustainability, using an ecosystems-based approach, recommends direct investments in integrated environmental management in six key elements of the environment: agricultural production systems, forests, freshwater resources and ecosystems, fisheries and marine ecosystems, air and water pollution, and global climate change.

145. Governments face daunting challenges in addressing environmental problems, for several reasons. First, with notable exceptions, public institutions including environmental ministries remain weak, and public accountability systems ineffective. Combined with distorted public policies—such as water pricing, fuel subsidies, and tenure systems that discourage the conservation of natural resources—such weaknesses lead to critical environmental problems. For example, inadequate policies, regulatory gaps, and weaknesses in local institutions cause aquifer overdraft and pollution, degrading water resources, notably groundwater. Second, mechanisms for the public disclosure of environmental decisions and actions remain only incipient in most countries. Third, there is a growing gap between developing countries’ expectations—for differentiated responsibilities and associated resource transfers—and developed countries’ expectations—for an effective international institutional architecture for global environmental management. The arduous process for the recent fourth replenishment of the GEF (although successful in its final outcome), together with the ongoing discussions about the future role of UNEP and other bodies, illustrates the level of debate in this area.



146. Environmental outcomes are complex and take effect in a much longer timeframe than that of Bank sector strategies. Air-quality deterioration, for instance, takes 20 years to be reversed even after suitable interventions in energy and transport are implemented. And activities designed to address long-term ecological processes in protected areas take considerable time to have effects.

147. Therefore, rather than attempting to measure environmental outcomes per se, the sector uses an implementation and monitoring framework structured around four objectives (see Table 14).

100 See Millennium Ecosystem Assessment, March 30, 2005; http://www.unfoundation.org/files/pdf/2005/press_

release_MA_33005.pdf.

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Table 14. Overall Performance Indicators for Environment

Objective Stocktaking

(What have we done?) Evaluation

(What remains and can be improved?) Strengthening analytical and advisory activities

• Increase in upstream country-level environmental analysis and advisory activities such as CEAs and SEAs

• Improved understanding of poverty-environment linkages; and better incorporation of environment into PRSPs

Substantially achieved • Improve timing and coverage of upstream

analytical work, policy dialogue and capacity building to influence the reform agenda

• Consistent and sustained increase in environmental content in PRSPs

Addressing environmental priorities through project and program design

• Increase in ENRM content in priority CASs, although room for improvement remains

• Increase in environmental mainstreaming over current levels in selected sectors

• Improved performance and development effectiveness (QAG/IEG ratings) of projects with ENRM content

Moderately achieved • Better track and monitor environmental

mainstreaming in sectors, and improve quality of operations.

• Regularly disseminate “best practice” projects and programs with good environmental performance

Improving the safeguard system

• Strengthened corporate oversight, including attention to high risk and complex projects

• Better consistency in policy application, introduction of integrated safeguard policy compliance tracking system

• Piloting of country systems launched • Improved donor harmonization of safeguard

policies • Steady improvement in safeguard performance

during quality at entry and supervision

Moderately achieved • Scale-up client training on environmental

assessments and safeguards • Strengthen supervision of projects for safeguards

compliance

Support institutional realignment

• Mainstreaming Fund found to be useful for incorporating environmental issues into country programs and AAA.

• Use of trust funds supplements Bank budget, and is aligned with strategic priorities

• Continued support to partnerships on key environmental issues

• Training on environmental and safeguards issues carried out for staff, to adjust skills mix

Substantially achieved • Regions to earmark MFE funds to facilitate

environmental mainstreaming • Continue to use trust funds to leverage Bank

resources • Assess leverage potential of existing

partnerships, and design criteria for selectivity in partnerships

• Develop targeted staff training programs on environmental issues for other sector staff

2. Bank Instruments

148. Country assistance strategies and poverty reduction strategy papers. Environmental issues are increasingly being incorporated into country assistance strategies and there is a growing body of good-practice cases.101 While variation exists, CAS reviews over time have shown that natural resource management has been recognized as an important factor that influences growth and productivity. Several of the CASs issued in FY05 qualify environmental concerns as triggers for their proposed assistance programs. For this implementation update, a review was conducted of the

101 See An Environmental Review of 1999 Country Assistance Strategies–Best Practice and Lessons Learned,

Environment Department Paper No. 74, World Bank, 2000; Country Assistance Strategies and the Environment–Taking Stock, Environment Strategy Note 2, World Bank, 2002; and “Environment in 2005 Country Assistance Strategies,” World Bank, forthcoming.

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FY05 CASs for five priority countries for environment: Bangladesh, China, Egypt, Nigeria, and Pakistan. All five of these CASs contain diagnostic reviews and environmental content in the lending and non-lending they propose. Among them, the China CAS highlights plans for improving the management of resource scarcity and environmental challenges by reducing air pollution, conserving water resources and optimizing energy use, improving land administration and management, and observing international environmental conventions,102 while the Pakistan CAS focuses on emergency relief related to the recent earthquake.103 CAS reviews show, however, that poverty-environment linkages continue to be a challenge in CASs, affirming the need to sustain ongoing analytical efforts. Nine of 16 completion reports on country assistance strategies discuss Bank contributions to the environment.

149. The mainstreaming of environmental factors in poverty reduction strategy papers (PRSPs) has also improved.104 These papers increasingly address issues of natural resource management (as in Sri Lanka). Some give attention to environmental health issues such as indoor air pollution (Mongolia), water supply and sanitation (Chad), and toxic chemicals (Cambodia). The incorporation of environmental content into PRSPs is translating into results on the ground, as in Djibouti, where the scarcity, and lack of management, of water resources is addressed both in the PRSP and in the government’s investment program. Yemen’s PRSP addressed the diversion of scarce water to the cultivation of qat, leading to the design of the Sana’a Water Basin Project which seeks to improve the management of water resources and irrigation efficiency. The PRSP review findings suggest a need to promote more effective use of internationally available statistics and local research in PRSPs.

150. Analytic and Advisory Activities. In FY06 the Bank prepared 33 economic and sector work (ESW) products with environmental themes, and 14 technical assistance (TA) products.

151. The sector strategy paper identifies country environmental assessments (CEA) as one of the main analytical tools to integrate environmental concerns into country assistance strategies, poverty reduction strategies, development policy loans, and country-level policy dialogue.105 CEAs focus on systematically identifying environmental priorities and on assessing policies and institutions linked with those priority concerns. In FY06, six CEAs have been completed (in Belarus, Colombia, Dominican Republic, Egypt, Serbia and Montenegro, and Tunisia), fourteen are ongoing with nine nearing completion, and about seven are in the pipeline. Findings from the Peru CEA provided material for discussions on environmental priorities among political parties, NGOs, and governmental agencies, and contributed to a government request for a loan to reduce vulnerability to natural disasters. In El Salvador, CEAs have increased the capacity of regional institutions to 102 See China–Country Partnership Strategy–CAS Completion Report–IEG Review (R2006-0057/1, IFC/R2006-

0097/1, MIGA/R2006-0017/1), May 16, 2006. 103 See Pakistan–Country Assistance Strategy–CAS Completion Report–IEG Review (R2006-0062/1, IDA/R2006-

0075/1, IFC/R2006-0104/1), op. cit. 104 See Environment in Poverty Reduction Strategies and Poverty Reduction Support Credits, Environment

Department Paper No. 102, World Bank 2004; and A Review of Environmental Health Issues in Poverty Reduction Strategies, World Bank, forthcoming.

105 A recent review of DPLs confirmed the usefulness of tools such as CEAs and strategic environment assessments (SEAs) during the first wave of development policy lending and recommended more systematic integration of environmental analytical work in CASs for countries with strong DPL programs. See Development Policy Lending Retrospective (SecM2006-0319), July 13, 2006.

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analyze environment and health linkages, and to use this information in policymaking. The Bangladesh CEA has strengthened policy dialogue with the government on the environmental dimensions of development issues, including areas for investment and technical assistance. Results of the Pakistan Strategic CEA have been used to begin an action planning process with the provinces and to identify areas needing technical assistance. The Orissa CEA informed the country dialogue, and helped design the Orissa DPL, on sustainability within the mining sector.

152. Sector environmental assessments (SEAs) mainstream and upstream environmental considerations in policies, plans, and programs. Like CEAs, these have increased in number and influenced decision making and implementation processes at the strategic level. Examples include an SEA of the mining sector in Peru106 and an energy-environment review for Iran.107 Refining knowledge and practice of SEAs is a major objective for the next strategy implementation period.

153. In the review period, AAA significantly expanded the knowledge base related to poverty and environment in three areas: poverty-environment linkages, livelihoods and natural resources, and the economic valuation of environmental resources and their degradation.

154. Several studies, for example in Madagascar and Tanzania, have analyzed the poverty and distributional impacts of environmental degradation. Analysis of links between degradation of natural resources and household income has shown that soils, land, and forests play a larger role in the incomes and livelihoods of the poor than previously understood,108 and that preventing further degradation of commonly-held natural resources is important for keeping households out of poverty.109 Results of the Poverty-Environment Nexus (PEN) study in Lao PDR and Vietnam, through which the Bank has been exploring demand-driven environmentally sustainable approaches to poverty reduction, found a strong correlation between poverty and access to clean water and sanitation.110

155. Several studies seek to understand the links between environmental degradation and human health, both in Latin America111,112 and in China, where the Environmental Cost Model and Valuation of Environmental Health Risk Study provides approaches for valuing the effects of air and water pollution on health.113 Studies in ECA include economic evaluations of the health impacts from air and water pollution (Kosovo and Kazakhstan).

106 See Wealth and Sustainability: The Environmental and Social Dimensions of the Mining Sector in Peru, World

Bank, forthcoming. 107 See Islamic Republic of Iran––Energy-Environment Review Policy Note (Report No. 29062-IR), Water, Environment,

Social and Rural Development Department/Middle East and North Africa Region, World Bank, May 2004. 108 See Counting on the Environment: Forest Incomes and the Rural Poor. Vedeld, et. al., Environmental

Economics Series Paper No. 98. 2004. 109 See Nigeria–Poverty-Environment Linkages in the Natural Resource Sector: Empirical Evidence from Nigerian

Case Studies with Policy Implications and Recommendations, Africa Environment and Social Development Unit and World Bank Institute, World Bank, 2003.

110 See The Poverty and Environment Nexus, World Bank, 2005. 111 These studies are part of the Colombia Country Environment Analysis (2006) and Peru Country Environment

Analysis (2006). 112 See Environmental Health and Traditional Fuel Use in Guatemala ESMAP Paper (ESM284), World Bank, 2004. 113 In draft. This study is part of the China Valuation of Environmental Health Risk (VEHR) and Poverty Environment

Linkages Project and the China Industrial Pollution Prevention and Environmental Priority Setting Project.

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156. In studies in Algeria, Egypt, Jordan, Lebanon, Morocco, Syria, and Tunisia, the Bank’s Middle East and North Africa region has pioneered the costing of environmental degradation, to help governments understand the magnitude of environmental problems and help policymakers integrate the environment into economic development decisions. Other such studies have been carried out in Colombia, Iran, Nigeria, and Peru. Studies related to economic values of the environment, including climate change, natural resources, and environmental degradation, have helped to increase understanding of the impact of environmental changes on poverty. For example, economic valuation of environmental and natural resources was carried out to assess losses in tourism revenues from the degradation of coastal resources, including wetlands (Albania and Georgia), and delta degradation (Aral Sea and Kazakhstan); in both cases, the results supported new lending operations. Other studies have assessed the links between economic growth and environment in key natural resource sectors including forests, wildlife, fisheries, tourism (Tanzania),114 and mining (Kazakhstan).115 Results have been used to develop methods to mitigate environmental degradation caused by industrial growth and to integrate these methods into policy tools.

157. A recent innovative study in India116 conducted a long-term assessment of drought and strategies to reduce its impact.

158. In Where is the Wealth of Nations?, published in 2006, the Bank presented a new analytical approach to estimating a country’s total wealth, including produced capital, natural resources, and the value of human skills and capabilities.117 The book provides a comprehensive snapshot of wealth for 120 countries, showing that many of the poorest countries in the world are not on a sustainable path and that better management of natural resources and ecosystems will be crucial to sustainable development.

159. Lending. The Bank’s environmental investment lending (IDA/IBRD) has shown a generally increasing trend, from $0.6 billion in FY02 to $0.9 billion in FY06 (see Figure 3). (The lending volume in FY05 was unusually high, due to two large development policy loans, both in LAC: the Programmatic Development Policy Loan for Sustainable Development in Colombia and the Programmatic Reform Loan for Environmental Sustainability in Brazil.) In FY06, the Bank approved 63 projects with environment and natural resources management (ENRM) content in 41 countries, amounting to $1.140 billion of loans. This represents about 4.8 percent of the Bank’s total new lending. Disbursements in FY06 were $1.3 billion, down marginally from $1.4 billion in FY05.

114 See Tanzania––Harnessing Natural Resources for Sustainable and Shared Growth, World Bank, forthcoming. 115 See Preventing Environmental Impacts of Industrial Growth: Case study of petrochemical industry in

Kazakhstan (decision draft), World Bank, January, 2006. 116 See Overcoming Drought: Adaptation Strategies for Andhra Pradesh, India (ISBN 0-8213-6664-5), op. cit. 117 See Where is the Wealth of Nations?, World Bank, 2006. op. cit.

Figure 3. Environment Lending, FY02-06 (US$ million)

604 729 887 1071 929186

174

690

21259

0

300

600

900

1,200

1,500

1,800


DPLIBRD/ IDA (exc. DPL)

Source: Business Warehouse.

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160. The environment portfolio comprises projects coded with ENRM thematic content: environment projects plus projects that are in other sectors but include environmental objectives. Environment projects support water resources management118 and forestry,119 along with environment sector policy and institutional reform, law enforcement, regulation, and environmental monitoring. Increasingly, however, environmental lending takes place via the integration of environmental considerations into key growth sectors including water supply and sanitation, energy, mining, and transport. For example, China’s Henan Towns Water Supply and Sanitation Project (2006) includes a component on improving wastewater collection and treatment, and Armenia’s Renewable Energy Project (2006) aims to reduce greenhouse gas emissions by overcoming barriers to the development of renewable energy sources. A technical assistance component of China’s Fuzhou Nantai Island Peri-Urban Development Project (2005) aims to encourage development patterns that promote the use of public transport while integrating environmental concerns upstream in the planning process.

161. During the review period the Bank began to support environmental policy and institutional reforms through development policy lending (DPL) and poverty reduction support credits (PRSCs). Environment and sustainable development DPLs provide targeted support for sustainable development, while broader DPLs and PRSCs provide indirect support through the integration of environmental actions in compliance with OP/BP 8.60: Development Policy Lending. For example, Colombia’s First Programmatic DPL for Sustainable Development120 supports the government’s pursuit of the MDGs; it aims to improve the effectiveness and efficiency of the Sistema Nacional Ambiental and to integrate principles of sustainable development into key sectors. Brazil’s Programmatic Reform Loan for Environmental Sustainability121 supports the country’s goals of balancing economic growth with social development and maintaining and improving environmental quality. These projects elevated the environmental sustainability agenda by bringing it into discussions with ministries of Planning and Finance.

162. Recent poverty reduction support credits in Armenia, Madagascar, Tanzania, and Vietnam have focused on environmental institutions and policy issues. Tanzania’s PRSC122 supported the government’s efforts to incorporate environmental concerns into the Poverty Reduction Strategy, the budget process, and sector policies. It also assisted the government’s efforts to understand poverty-environment links and options for reducing the vulnerability of the poor, and strengthened institutional capacity to integrate environmental assessment procedures into sector strategies and policies and specific activities at the district and local levels. A recent review of 21 PRSCs emphasizes that the integration of environmental considerations in these credits is generally limited but highly variable, and needs improvement in the next implementation period. 118 See Argentina–Urban Flood Prevention and Drainage Project (R2006-0056/1), May 16, 2006. Board approved

on April 5, 2005, and Argentina’s Urban Flood Prevention and Drainage APL2 (SecM2005-0617), December 6, 2005. Board approved on June 6, 2006.

119 See Cameroon: Forest and Environmental Policy Development Program (GEF/R2006-0001/11, IDA/R2006-0015-1), February 6, 2006. Board approved on February 28, 2006.

120 See Colombia–Programmatic Development Policy Loan for Sustainable Development (R2005-0146), June 2, 2005. Board approved on June 21, 2005.

121 See Brazil–First Programmatic Reform Loan for Environmental Sustainability (R2004-166/1), August 3, 2004. Board approved on August 24, 2004.

122 See Tanzania–Fourth Poverty Reduction Support Credit (PRSC-4), (IDA/R2006-0060/1). Board approved on May 9, 2006.

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Table 15. Bank Performance Indicators—Environment FY02 FY03 FY04 FY05 FY06 1. Bank Output Trends IBRD lending commitments ($ m) a 427 498 586 1,367 870 IDA lending commitments ($ m) a 363 405 359 394 270 IBRD disbursements ($ m) 1,013 898 757 1,046 934 IDA disbursements ($ m) 348 317 330 378 345 GEF, guarantees, SF commitments ($ m) a 86 112 144 159 215 IBRD ESW products (number of) b 5 11 11 7 12 IDA ESW products (number of) b 7 4 17 15 12 Other ESW products (number of) b 3 14 9 8 9 IBRD TA products (number of) b 10 9 8 17 7 IDA TA products (number of) b 3 18 11 16 4 Other TA products (number of) b 9 5 13 11 3 2. Bank Output Quality Quality at entry (percent satisfactory or better) c 50 100 100 100 n.a. Quality at supervision (percent satisfactory or better) c 87 76 76 n.a. n.a. IBRD projects at risk (percent) 18 13 15 15 14 IEG exit rating (percent satisfactory or better) c 86 60 56 88 100 3. Bank Input Staffing (number of GE+ level staff) d 140 134 194 191 174 Regional expenditure ($ m) 39 41 47 49 53 Network anchor expenditure ($ m) e 4 6 6 6 7 4. Bank Output Cost f

Average unit completion costs of IBRD/IDA lending (thousand $ per

operation) 383 444 408 439 323

Average unit completion costs of ESW (thousands $ per product) 101 87 88 128 166 Average unit completion costs of TA (thousands $ per product) 113 90 107 82 51

5. Client Responsiveness c Preparation time for IBRD/IDA Lending (months) 10 22 24 19 19 Preparation time for ESW (months) 12 12 15 13 16 Implementation time for IBRD/IDA Lending (years) 7 8 7 6 7 6. Results Management Implementation completion reports with project outputs data (percent) g n.a. 81 100 85 88 Completed projects rated satisfactory or better in policy reform (percent) n.a. 44 50 88 100

Completed projects rated satisfactory or better in institutional development

(percent) n.a. 55 40 97 100

Implementation status and results reports with satisfactory outcome baseline

data (percent) h n.a. n.a. n.a. 64 67

7. Development Outcomes Adjusted net saving (percent of priority countries with improvement) 62% 59% 48% n.a. n.a.

Use of traditional fuels as percent of total energy use (percent of priority

countries with improvement) 80% 75% n.a. n.a. n.a.

CPIA—environment component (percent of priority countries with

improvements) 17% 38% 29% 17% n.a.

Nationally protected area (percent of priority countries) n.a. 7.8% 7.8% n.a. n.a.

Carbon dioxide per unit of GDP (percent of priority countries with

improvements) 47% 37% n.a. n.a. n.a.

Source: Business Warehouse, HR, and Bank staff estimates. Note: Table includes thematic codes: 80-Biodiversity, 81-Climate change, 82-Environmental policies and institutions, 83-Land

administration and management, 84- Pollution management and environment health, and 86-Other environment and natural resources management. Water resource management activities are monitored under a separate SSP. n.a. = not available.

a Starting in FY05, IBRD/IDA lending figures include guarantees. b Aggregated portion of individual products allocated to the selected Environment and Natural Resource Management theme. c Based on operations mapped to Environment Sector Board. d Excludes staff in Forestry, except in FY04 and FY05. Includes co-terminus staff financed by Carbon Finance trust funds. e Direct expenses from the Bank's administrative budget per Network Anchor Unit. f Output costs refer to the Bank's administrative budget only. g Based on 71 analyzed ICRs: 11 from FY02, 5 from FY04, 339 from FY05, and 16 from FY06. h Based on 102 analyzed ISRs from FY05/FY06 approved projects.

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163. New lending in FY06 shows an expansion in the range of environmental problems addressed and in the number of tools being used to address them. For example, industrial pollution abatement projects approved during the year included clean-up of hot spots and related land-reclamation in Egypt and Kosovo. LCR continued to pioneer urban environment management projects that address city-level issues in Brazil and solid waste management in Argentina. In FY06, the Africa region introduced development policy loans for natural resource management issues in Cameroon and Gabon.123 The lending program increasingly emphasizes environmental governance, and in new FY06 lending the environmental institutions and policy issues theme, at 29 percent, has surpassed the pollution management and environmental health theme (26 percent). This shift is set to continue in the next implementation period.

164. Safeguards. When it was issued in 2001, one of the key objectives of the environment sector strategy was to strengthen the implementation of safeguard policies.124 Much progress has been made in this area in the review period. Safeguard performance has improved, as demonstrated in QAG reviews of quality at entry and supervision, and so has corporate oversight. To ensure more consistent policy application the Bank constituted the Safeguards Management and Review Team (SMART); issued several policy-specific source books and guidance notes; introduced a new Integrated Safeguards Data Sheet (ISDS) format; and established an integrated safeguard policy compliance tracking system and a safeguards help desk.

165. Safeguards staff have supported a range of high-risk and complex projects, providing advisory support and undertaking field missions. They have also provided support for controversial tasks such as the management of Lake Victoria, and reviews of non-Bank financed activities that had a potential for broad reputational risk to the Bank, due to their connection with Bank-supported programs or projects (such as the proposed Lom Pangar Dam, which would impact the Bank-supported Chad-Cameroon Pipeline). The Quality Assurance and Compliance Unit (QACU) has continued to coordinate the work programs of the International Advisory Groups for the Chad-Cameroon Pipeline and for Lao PDR’s Nam Theun 2 Hydropower Project, in coordination with the AFR Region and IFC for the former, and the EAP Region and MIGA for the latter.

166. Several recent safeguards initiatives reflect changing approaches to development assistance, and the application of safeguard policies to new lending instruments. They include the conversion of existing Bank operational policies and directives (on Involuntary Resettlement, Indigenous Peoples, and Physical Cultural Resources) and the adoption in 2005 of OP/BP 4.0: Piloting the Use of Borrower Systems to Address Environmental and Social Issues in Bank-supported Projects. Under this new policy a two-year program has been launched to pilot the use of borrower environmental and social safeguard systems in operations funded by the Bank in twelve countries. In March 2006, the Board approved the first two of these country-systems pilot

123 See Cameroon: Forest and Environmental Policy Development Program (GEF/R2006-0001/1, IDA/R2006-

0015/1), op. cit., and Gabon–Natural Resources Management Development Policy Loan (R2005-0225/1), October 24, 2005. Board approved on November 15, 2005.

124 See the 2002 discussion note, Safeguard Policies: Framework for Improving Development Effectiveness.

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projects, in Egypt (Second Pollution Abatement Project)125 and Jamaica (Inner Cities Basic Services for the Poor).126

167. QACU and regional safeguards units have offered training courses at headquarters and in the field for more than 1,500 Bank staff, clients, and development partners such as the African Development Bank and the Development Bank of Southern Africa. Safeguards staff also collaborate and coordinate with the UN and other international agencies dealing with indigenous peoples, dam safety, pest management, and environmental assessment-related issues, and play an active role in the Multilateral Financial Institutions Working Group on Environment (MFI-WG).

168. Progress in Results Management. Progress has been made over the review period in results-based monitoring and evaluation. A review of the implementation completion reports on environment projects for FY03-06 shows that the proportion making use of output data rose from 81 percent in FY03 to 88 percent in FY06. Among the institutional development components of these projects, ICRs judged 85 percent to have achieved satisfactory performance, on average, over the period. Although the small number of projects completed in FY03-04 accounts for some of the measured change, an overall improvement in attention to the institutional development and policy reform components of projects is apparent.

169. The use of baseline data for results management in environment projects is much less satisfactory, although consistent with the Bank average, and has shown little improvement since FY05. An analysis of the implementation supervision reports for all projects with environment themes in FY05 and FY06 shows a slight improvement in FY06 (67 percent) over FY05 (64 percent).

170. Bank Resources. Environment lending had the lowest average unit completion costs, compared with other relevant sectors, in FY06 (see Figure 4), and its costs have steadily declined over the past five years. For environmental analytic and advisory work, the average cost increased in FY06, reflecting a trend towards more comprehensive and multi-year upstream analyses.

171. In FY06, the Bank’s administrative expenditures on environment activities increased by 9.1 percent over FY05. About 88 percent of these expenditures were incurred by the regions.

172. The Bank’s budget for the environment is supplemented by trust funds totaling more than $30 million,127 including the Trust Fund for Environmentally and Socially Sustainable Development (TFESSD) supported by Finland and Norway, and the Bank-Netherlands

125 See Egypt–Second Pollution Abatement Project (R2006-0029), February 22, 2006. Board approved on March

23, 2006. 126 See Jamaica––Inner Cities Basic Services for the Poor Project (R2006-40-1), March 13, 2006. Board approved

on March 29, 2006. 127 The TFESSD allocation started in 1999 and the BNPP and MFE allocations started in 2002.

Figure 4. Average Unit Completion Costs of IBRD/IDA Lending

(thousand US$)

0

200

400

600

800


Transport ForestryEnvironment Social Protection


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Partnerships Program (BNPP), which together contribute about $8 million towards analytical work and non-lending services. TFESSD has played an important role in integrating environmental concerns into government planning, institutional policies, and project design, while BNPP has supported environmental reforms and institutional development at all levels of client country environmental systems.

173. The Mainstreaming Fund for Environment (MFE), established in 2002, has played a key role in supporting innovative analytical work and facilitating cross-sectoral coordination, for example with the energy, urban development, and infrastructure sectors. Besides financial resources, human resources had to be mobilized to implement the sector strategy. Focus has been placed on skill development and staffing. A comprehensive and cross-cutting learning program for staff has been implemented, and with attrition, the Bank’s staff in targeted skill areas has been increased.


174. The quality of projects at entry to the portfolio is higher among environmental projects (94 percent rated satisfactory) than among Bank projects on average (89 percent), but the quality of supervision that environmental projects receive (77 percent satisfactory) is lower than the Bank average (81 percent) (see Table 16). There remains a concern that while the percentage of environmental projects at risk is smaller than the Bank average, the percentage of unsatisfactory outcomes is larger. This finding contradicts the view that fewer projects at risk should result in fewer unsatisfactory outcomes.

Table 16. Quality Indicators in Environment (percent)

Environment Bank Unsatisfactory outcomes (FY02-06 exits) 22 20 Projects at risk (as of 06/30/06) 9 14

Development effectiveness

Disbursement ratio (FY02-06) 14 22 Realism (as of 06/30/06) 67 80 Proactivity (as of 06/30/06) 91 81

Portfolio management

Net disconnect (FY02-06 exits) 5 9 Quality at entry (QEA 1-7) 94 89 Quality of supervision (QSA 1-6, QSR 1) 77 81

Operational quality (% satisfactory) Quality of analytic and advisory services 88 90 Source: Business Warehouse.

175. Only one project with environmental themes was evaluated by the Independent Evaluation Group (IEG) in FY06, and its outcome was rated satisfactory; in FY04, nine such projects were evaluated, of which five were rated satisfactory. The net disconnect between ICR and IEG ratings remained low at five percent, reflecting the relatively realistic self-evaluation being done in recent implementation completion reports. Implementation completion reports over the review period rated a high proportion of completed environmental projects “satisfactory” or “better” for their policy reform and institutional development components. Even for projects with a relatively low percentage of environmental content, the ICRs rated the performance of environmental components/content highly.

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176. In FY06, the Bank’s Independent Evaluation Group commissioned an evaluation of the Bank Group’s assistance to environmental concerns over the past decade and a half, focusing on key client countries; the results will be published during 2007.128

D. Bank’s Comparative Advantage and Partnerships

177. The Bank’s comparative advantage in the environment field lies in its ability to leverage policy dialogue, as well as its comprehensive sectoral coverage, extensive project development skills, and convening power and global presence.129

178. Bank Group Synergies. In FY06, the Board adopted the new IFC Policy and Performance Standards on Social and Environmental Sustainability, as well as the Policy on Disclosure of Information.130 The new standards are a major step forward in strengthening all aspects of IFC’s social and environmental policies. The Sustainability Policy clarifies IFC roles and responsibilities, and the Performance Standards clarify the environmental and social outcomes that projects should achieve, thus increasing accountability.131

179. IFC has been active in implementing GEF private sector projects through the Bank as GEF’s implementing agency. GEF funding allows IFC to invest in projects that may be non-commercial, due to low expected rates of return or high risk factors or commercially unproven technologies.132 IFC currently supports 19 GEF active projects with $160.6 million. Examples include the China Utility-based Energy Efficiency Finance Program133 which finances equipment to accelerate the adoption of energy efficiency and material process changes in the industrial, commercial, and government, and multi-residential sectors; and the Fuel Cell Financing for Distributive Generation Application Project,134 which supports stationary fuel cell development. MIGA plans to support its first carbon finance project in FY08. This will provide guarantee insurance to a landfill in El Salvador which will convert methane gases to less harmful carbon dioxide.

180. In keeping with its institutional commitment to environmental sustainability, the World Bank Group has made a corporate commitment to reduce its own environmental footprint. Since 2002, the Environment Department has supported IFC and GSD in implementing the Bank’s Greening Program which includes improved waste management and recycling, and water 128 See Assessing the Effectiveness of World Bank Group Assistance for the Environment, Independent Evaluation

Group (IEG), World Bank, forthcoming 2007. 129 See Environment Strategy Paper–Making Sustainable Commitments (R2001-0121), June 20, 2001. 130 The new standards came into place on April 30, 2006. See International Finance Corporation’s Policy on

Social and Environmental Sustainability, IFC, April 30, 2006; International Finance Corporation’s Performance Standards on Social and Environmental Sustainability, IFC, April 30, 2006; and International Finance Corporation’s Policy on Disclosure of Information, IFC, April 30, 2006.

131 The Bank is collaborating with IFC on updating the Pollution Prevention and Abatement Handbook: Toward Cleaner Production (SecM97-418), May 21, 1997.

132 See FY06 Report on IFC’s GEF Activities, and Proposed FY07 Work Program, International Finance Corporation (IFC), World Bank, June 2006.

133 See China–Utility-Based Energy Efficiency Finance Program (IFC/R2006-0094), April 24, 2006. Board approved on April 20, 2006.

134 See Fuel Cell Financing for Distributive Generation Application, Board approved on December 14, 2005. See FY06 Report on IFC’s GEF Activities and Proposed FY07 Work Program (IFC/R2006-0195).

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conservation. In FY05-06, the Bank “offset” 100 percent of the carbon it released into the atmosphere from operating its buildings and from traveling and commuting by its staff. This was accomplished through energy conservation, the purchase of wind energy in the form of renewable energy certificates, and carbon-offset projects in developing countries.

181. Global Programs and Partnerships. The Bank is addressing global environmental issues through projects funded with resources from the Global Environment Facility, the Montreal Protocol, and Carbon Finance programs, as well as about thirty other environmental partnerships.

182. The integration of Global Environment Facility GEF resources into project and program lending has doubled, from 25 percent in FY03 to 51 percent in FY06. Between 2002 and 2006, the Bank and other funders invested four dollars for every dollar invested by the GEF (see Figure 5). Commitments by the GEF towards global environmental issues of biodiversity conservation, climate change, ozone depletion, and international waters continue to grow, reaching an all-time high of $335 million in FY06, and projects were approved in the two new focal areas: persistent organic pollutants and land degradation. GEF resources are also supporting project work in new operational programs. In FY06 four projects related to the management of persistent organic pollutants were approved, along with a new GEF operational program. The GEF-supported land degradation projects include the Kazakhstan Forest Protection and Reforestation Project,135 which develops cost-effective and sustainable environmental rehabilitation and management of forest lands and associated rangelands; and the Bhutan Sustainable Land Management Project,136 which strengthens institutional and community capacity for anticipating and managing land degradation.

183. The Bank’s Montreal Protocol program, now active for 15 years, facilitates the phase-out of ozone-depleting substances. More than 500 investment and technical assistance projects, amounting to roughly $610 million, reached completion by the end of 2005; and 166,000 metric tons (mt) of ozone-depleting potential (ODP) had been phased out through completed investment projects by the end of 2005. In the first six months of 2006, the Bank received approval of eight more investment projects and two institutional strengthening projects, totaling almost $50 million, to phase out more than 18,700 mt of ODP.

184. Climate change has become an increasingly visible part of the Bank’s environment agenda since July, 2005, when the G8, in its Gleneagles communiqué on Climate Change, Clean Energy and Sustainable Development, called on the Bank to lead the preparation of an 135 See Kazakhstan–Forest Protection and Reforestation Project (R2005-0234/1, GEF/R2005-0025/1), November

3, 2005. Board approved on November 29, 2005. 136 See Bhutan–Sustainable Land Management Project (GEF/R2005-0030/1), December 27, 2005. Board approved

on January 17, 2006.

Figure 5. World Bank Group-Global Environment Facility Program, 2002-06

GEFGEF$1.38 billion$1.38 billion

IBRD/IDA IBRD/IDA $2.03 billion$2.03 billion

Other CoOther Co--financingfinancing$3.47 billion$3.47 billion

Note: Includes only the GEF projects approved by the Bank.

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Investment Framework for Clean Energy and Development.137 Three papers prepared in succession for the subsequent Spring and Annual Meetings of the World Bank and IMF presented key elements of such a framework, and a three-year Action Plan. In addition to laying out a program for improving access to energy in the low income countries, particularly Sub-Saharan Africa, the Action Plan focuses on two other issues: mitigation and adaptation.

185. On mitigation, the Action Plan initially focuses on the “Plus 5” countries. In response, the carbon finance business is seeing rapid growth at the Bank with a carbon market comprised of ten carbon funds and facilities with a total capitalization of about $2 billion. This includes development of two new carbon facilities to scale up the use of carbon finance for long term mitigation and to pilot emission reduction through avoided deforestation. In FY06, the carbon finance business signed 27 contracts with a total value of $1.1 billion, representing over 50% of the total new ENRM lending. These contracts include the $930 million emission reductions project in China, mentioned earlier in this update. Also initiated in FY06, Poland’s Standard Geothermal Project138 aims to reduce carbon dioxide emissions through replacing coal-fired district heating with heat produced by renewable geothermal energy, with the purchase of about 240,000 tons of CO2e in emission reductions. Under the BioCarbon Fund, Nicaragua’s Precious Woods Project139 will establish a commercial plantation on the degraded pastureland of two former cattle ranches to grow teak and valuable native wood species, and will conserve existing secondary forest consisting of ornamental and fruit-bearing native species in the project area. The project is expected to sequester around 0.18 mt CO2e by 2012 and around 0.28 mt CO2e by 2017.

186. Increased awareness of the impacts of climate variability has led to the growth in demand from client countries to support adaptation to climate variability and change. While serving in a leadership role in the climate change agenda, the Bank has maintained a close relationship with key stakeholders, including the secretariat of the United Nations Framework Convention of Climate Change, the G8, and the European Union, and contributed inputs to the international dialogue on climate change.

187. Aside from GEF, the Montreal Protocol, and Carbon Finance, the Bank has engaged in about 30 environmental partnerships with bilateral and multilateral development agencies and civil society and private sector organizations. Examples include the Critical Ecosystem Partnership Fund, which supports local communities and NGOs to protect biodiversity hotspots, and the World Bank/World Wildlife Fund WWF) Alliance for Forest Conservation and Sustainable Use, which aims to create and secure highly threatened protected areas and to certify relevant production forestry as sustainable; and regional partnerships designed to scale up and intensify efforts to improve governance such as TerrAfrica, launched in 2005, which aims to mainstream and finance effective and efficient country-driven sustainable land management.

137 See An Investment Framework for Clean Energy and Development: A Progress Report (DC2006-0012), op. cit. 138 See Poland–Podhale Geothermal District Heating and Environment Project–Implementation Completion

Report (Report No. 32186), October 17, 2005. Board approved on December 9, 2005. 139 See Nicaragua–Precious Woods Project (Report No. 35617-NI), March 24, 2006. Board approved on April 12,

2006.

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188. Pilot evaluations of the quality at entry of global programs and partnerships are being carried out by QAG and include an evaluation of TerrAfrica. Recommendations from these assessments will contribute towards selectivity in participation in global environmental partnerships.


189. Considering lessons learned from strategy implementation over the past five years and the changing development context, the broad strategic directions for FY07-09 are proposed below. They will be revised as needed upon completion of the Social Development Network reorganization.

• Better treatment of the environment in Bank activities. The Bank will improve the targeting and definition of environmental objectives in sectoral interventions and poverty work, aiming at assessing and tracking specific desirable outcomes in operations and reform processes. The creation of the new SDN Network (from the consolidation of the INF and ESSD Networks) has provided greater opportunities to mainstream environmental concerns into Bank operations. This new organizational model has also helped addressing complex environmental challenges, by using cross-sectoral and holistic approaches into project design. Infrastructure investments in key sectors that provide significant opportunities for environmental outcomes will be targeted, including in transport, water supply and sanitation, and energy. We will continue to improve treatment of environmental aspects in projects and programs while building on ongoing analytical work. Additional efforts will be directed towards implementation, portfolio management, and monitoring to further environmental mainstreaming. This will involve working closely with other sectors, QAG, and IEG to enhance the practice and learning that takes place in both analytical and project work. The regions will aim to work collaboratively across units on priority countries.

• Scaling up work on institutions and governance. The Bank will continue to scale up work on institutions and governance, it will need to systematically assessing these issues at the project level. In addition, sector-specific guidance on assessing governance and corruption needs to be developed, to inform analysis and help shape policy dialogue on environmental and natural resources management, as well as lending operations. Building on the lessons from institutional development projects and AAA, the Bank will increase its attention to the timing and positioning of dialogue on institutional reform for improved environmental policy implementation. The Bank will seek to improve the treatment of environmental issues in PRSPs and PRSCs. This will facilitate better management of natural capital (land, forestry, water, coastal resources, and ecosystem services) to support livelihoods and sustain future productive capacity.

• Sharpening the Bank’s role in global issues management. The World Bank is well placed to leverage further its already strong collaboration with GEF and to position Carbon Finance to tackle emerging issues, including averting deforestation and expanding adaptation strategies to climate change and land degradation. GEF and

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Carbon Finance projects will increasingly employ programmatic approaches to reduce transaction costs and improve co-financing from other sources. New global partnerships will be subjected to a more rigorous selection process, while the implementation of existing programs will be strengthened. To do this the Bank is evaluating the current business model for engagement in global environmental programs.

• Regional priorities. Actions will be tailored to the specific needs and capacities of partner countries. The Bank’s regions will focus their future lending and AAA on priority problems and countries based on ongoing programs, CAS priorities, and the results of the System for Environmental Priority Assessment (see Box 7).

190. Challenges. The Bank’s merger of infrastructure units with environmental, social, and rural development practices provides a new organizational model that offers opportunities and challenges for further integrating environmental goals into Bank activities. The challenges include pursuing this integration in AAA and project work, knowledge management, and skills development. Equally important will be to maintain support for environmental institutional development and capacity building, which may not always be linked to significant lending volumes.

191. Implications for Staff and Skills… The number of staff mapped to the environment family (174), has generally been stable, with growth in areas funded by dedicated programs, including Carbon Finance and other trust funds. Recruitment efforts have targeted economists and policy analysts, combined with specialists in selected areas of high client demand (such as pollution management). Investment in staff skills needs to remain a priority area if the Bank is to continue to improve the integration of environmental concerns into its activities.

192. …and for budgets. Regional budgets have remained relatively stable while the Anchor budget has been reduced by 5 percent each year in FY06 and FY07. The regions are currently reviewing the resources that support various business lines in light of the new organizational configuration. In the Anchor, a realignment of resources is expected to support AFR, key corporate functions (quality enhancement), and priority programs (such as adaptation to climate change, avoided deforestation). Trust funds for environment will continue to play an important role in facilitating innovation, knowledge sharing, and institutional development.

III. FORESTRY


193. The overarching goal of the World Bank Group’s Forest Sector Strategy (2002)140 is to help achieve the poverty reduction and environmental sustainability targets of the Millennium Development Goals (MDGs) by harnessing the potential of forestry for sustainable development and by reducing deforestation and forest degradation. 140 See Revised Forest Strategy for the World Bank Group (R2002-0195/3), December 6, 2002.

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194. The current forest strategy replaces the forestry policy issued in 1991. It incorporates the recommendations of the OED/IEG forestry policy review,141 which had concluded that the previous policy had limited the flexibility of Bank operations in priority countries and produced a chilling effect on Bank engagement in the sector. The previous policy was seen as constraining by virtue of its overwhelming conservation orientation and limited focus on poverty, as well as its poor attention to cross-sectoral influences and inadequate treatment of partnerships. The current strategy tries to break these constraints by incorporating both production and conservation aspects of forestry into Bank engagement, changing the emphasis from “forestry” to “forests” (to enable a consideration of forces that originate in other sectors but have the potential to influence the forest sector), expanding the scope to cover temperate as well as tropical forests, and highlighting poverty reduction as a key objective of sector reforms. The strategy identifies the development of strategic partnerships and programs as central to achieving its objectives.

195. The strategy is founded on three equally important interdependent pillars: (a) harnessing the potential of forests to reduce poverty, (b) integrating forests in sustainable economic development, and (c) protecting vital local and global environmental services and values. The Bank’s Operational Policy 4.36 (OP 4.36) recognizes that the forestry sector has shifted from an almost exclusive focus on protection to one of balancing production with protection. By contrast with the previous policy, which prevented the Bank from financing logging activities in tropical moist forests, the current OP allows Bank- financed commercial harvesting provided that “….the areas affected by the harvesting are not critical forests or related critical natural habitats.”

196. This update reports on implementation of the forestry strategy in FY02-06.


197. The operational priorities highlighted in the current sector strategy are to:

• Reduce poverty by improving the livelihoods of poor people who depend on forest and tree resources, especially by increasing their access to markets and through company-community partnerships. Through its projects, the Bank has been supporting decentralization of resources to local communities and helping the global move towards handing over responsibility for forestry management to local stakeholders, so that benefits directly reach the poor.

• Strengthen forestry governance by enhancing institutional capacity to reduce losses from illegal logging. As well as pursuing this goal directly with client countries, the Bank has sought to create a political climate for high-level regional and global discussions on improvements in governance and increased transparency and accountability in the sector.

• Protect global and local ecosystem services by improving the management of existing protected areas and bringing more areas under protection. Much of the

141 See The World Bank Forest Strategy: Striking the Right Balance, Operations Evaluation

Department/Independent Evaluation Group, World Bank, 2002.

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Bank’s work in forest certification has been carried out under the World Bank/World Wildlife Fund (WWF) Alliance, especially through standard setting (in Bosnia-Herzegovina, Bulgaria, China, Colombia, Croatia, Romania, Russia, and the Ukraine) and the certification of community forestry (in Bolivia, Laos, and Nicaragua). Some lending projects have included specific support for certification (as in China, Lao PDR, Mexico, and Russia). Grants from the Global Environment Facility (GEF), totaling about $100 million since FY02, have been associated or blended with IDA/IBRD capacity building to support biodiversity/protected areas components of sector-wide programs, for example in Cameroon, Gabon, Georgia, and Kazakhstan.

• Enable sustainable forestry management through greater use of market mechanisms and responsible corporate investments. The Bank is working closely with governments in China, India, Kenya, Russia, and South Africa in collaboration with IFC, and making use of the World Bank/World Wildlife Fund (WWF) Alliance and the Program on Forests (PROFOR), to attract responsible domestic and foreign private-sector investments that improve the investment climate, develop small and medium enterprises, and foster company-community partnerships to achieve effective conservation and sustainable management of forestry resources.

• Take full advantage of the potential to mitigate global climate change. A new product line, the BioCarbon Fund (BioCF), with a start-up capital of $53 million, supports carbon sequestration in forests and grasslands to mitigate global climate change. In support of ongoing negotiations in UNFCCC, on a post-Kyoto climate change regime, the Bank is preparing a new Forest Carbon Partnership Facility (FCPF), with the aim of testing performance/contract-based compensation mechanisms for reduced deforestation in selected pilot countries.

• Build strategic partnerships. Through strategic partnerships and programs such as the World Bank/WWF Alliance, PROFOR, and the Forest Law Enforcement and Governance (FLEG) initiative,142 the Bank has been leveraging resources, aligning stakeholder interests, enabling innovation, improving outreach, and scaling up impacts. It has actively supported strategic partnerships at the regional (Congo Basin Forest Partnership) and national levels. It is developing a Global Forest Alliance (GFA) as a means to influence the international forest policy dialog, raise innovative concessional financing and grants for the sector, and leverage partnerships to their maximum potential to achieve the goals of the forest strategy.

198. Key areas of focus in the Bank’s regional programs are:

• Africa. The Bank has supported forest policy reforms and capacity building focusing on better governance, sustainable management, community empowerment, and biodiversity conservation, through a range of instruments including development

142 FLEG has been instrumental in putting the Bank in a global leadership position on issues of forest governance

and has strongly facilitated the mainstreaming of forest governance in country dialogue. See Strengthening Bank Group Engagement on Governance and Anticorruption (DC2006-0017), September 8, 2006.

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policy credits. In countries such as Congo DR and Liberia, the Bank has enabled the sustainable use of forests for post-conflict recovery, through governance and other sector reforms.

• East Asia and Pacific. The Bank has brought forest governance issues to the forefront of the political agenda of several client countries in this region, including Cambodia, Indonesia, and Lao PDR. The Bank is addressing the growing demand for raw material in the region by investing in the development of sustainable plantations, involving local communities in tree-planting schemes in China.

• East Europe and Central Asia. The Bank has invested in reforming forest institutions in this region, strengthening institutional capacity and physical infrastructure to mitigate illegal logging and safeguard forest quality, in Bosnia-Herzegovina and Russia. In Albania and Armenia, it has assisted restoring state-owned forest land to private owners. With IFC and MIGA collaboration, it has helped revive the productive use of forests for economic growth and poverty alleviation, relying increasingly on voluntary certification that forests are sustainably managed, and on company-community partnerships.

• Latin America and Caribbean. The Bank has emphasized the conservation of globally valuable forest resources in the region and piloted innovative financing mechanisms for these efforts, with a focus on the co-management of protected areas by indigenous people, including in Brazil, Honduras, and Nicaragua.

• Middle East and North Africa. Efforts have focused on increasing the contribution of forests to rural incomes, including through improved forest management and through fostering the greater involvement of local communities in decision making, as in Iran and Morocco.

• South Asia. The Bank has conducted analytical work to guide new lending programs to enhance the contribution of forests to the livelihoods of the rural poor, including community forest management in India. The focus has been on improving access to markets, strengthening local institutions, increasing forest rights and responsibilities, and developing partnerships with the private sector.


199. The results framework draws on the final outcomes identified in the forest sector strategy paper: (a) increased rural income from forests (for MDG1: “eradicate extreme poverty and hunger”), (b) reduced deforestation, and (c) increased conservation of forest ecosystems (for MDG7: “ensure environmental sustainability”) (see Table 17).

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Table 17. Results Framework—Forestry Global Dimensions Bank Contribution

What results on the ground are important? How do we know if implementation is on track? Country outcomes Process Indicators

Bank

Outcomes

How do we measure these results?

Outcome Indicators Priority Interventionsa


Indicatorsb

How does the Bank contribute to these

results? Bank strategy Country Process indicator

Base- line/update

MDG#1: Eradicate extreme poverty and hunger Implication for forest sector: (i) Increased rural income from forests MDG#7: Ensure environmental sustainability Implications for forest sector: (i) Reduction in deforestation; (ii) Increased conservation of forest ecosystems

Annual income from forests (in real terms) Deforestation (Change in area under forest cover in ha./yr.) Protected areas (Forest area designated under IUCN categories I-VI in ha.) Carbon dioxide emissions from deforestation(tons/yr)

• An increase in forest-based activities (marketed and non-marketed)

• Expansion of private and community-based management of forestry and agroforestry systems

• Increased economiccontribution of forests

• Augmentation of forest resources and productivity

• Strengthened forest governance

• A reduction in forest crimes

• Increased forest areas sustainably managed

• Expansion and improvements in management of protected areas

• Markets for forest ecosystem services created

• Contribution to rural employment and income (increase in man-days/yr and $ per capita)

• Forest area under private and communal control (increase in ha./yr.)

• Revenue and income contribution (forest contribution to GDP in %; changes in taxes and royalties in $/yr.)

• Increase in area and productivity (Change in forest plantations in ha./yr., and in forest productivity in tons/ha.)

• Improved governance (Forest sector governance indicators)

• Reduction in illegal logging (change as % of annual allowable cut)

• Area under sustainable management (Certified forest area in ha.)

• Protected areas under improved management practices (using approaches such as the management Effectiveness Tracking Tool)

• Total value of transactions for forest ecosystem services ($/yr.)

Promoting management plans for production forests, including independent verification. Plantation development and support to community forestry and agroforestry Improving forest law enforcement and governance through regional and country level processes Promoting integrated natural resource management and landscape approaches Mainstreaming considerations of cross-sectoral linkages to strengthen SFM Conservation of global forest values through development of markets for environmental services and avoided deforestation. Strengthening capacity for monitoring and evaluation at the country level

National development strategies and PRSPs reflect the needs and opportunities for sustainable development based on forests Consultative stakeholder forums on forests established National forest programs and related initiatives developed and implemented Policy and institutional reforms implemented Improved monitoring, assessment and reporting systems developed

IEG rating of project outcomes (satisfactory or better) Project sustainability (% likely) IBRD/IDA projects at risk CASs inclusion of forests’ role in sustainable development No. of strategic partnerships Private sector partnerships (# investment forums) # of forest ESWs and other analytical work (financed through BB, partnerships and trust funds) % of new operations that use outcome or output based disbursements Percentage of operations which incorporate relevant results indicators (i.e. adequate results frameworks)

FY02: 60% FY05: 100% FY02: 58%; FY05: 100%. FY02: 10%; FY06: 15%. FY02: 75% (3/4) FY06: 66% (2/3) FY02: 3 FY06: 4 FY02:5; FY06:7 FY02: 0; between FY03 and FY06: 3 FY02:8; between FY03 and FY06:42

a The first four interventions are linked to the final forest sector outcome associated with MDG1; the fifth and sixth interventions are relevant for both the final outcomes; and the remaining interventions facilitate the final forest sector outcome associated with MDG7. b Indicators in: (i) Bold type- relatively complete data are available; (ii) Regular type-some data available; (iii) Italics-data unavailable currently, but efforts are underway to build up a database.

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200. At the country level, it is proposed to measure these outcomes in terms of, for example, changes in overall forest cover143 and protected area, area of certified and sustainably managed forests, and per capita income derived from forest activities. Some data are available for these indicators, but efforts are underway to build up a more reliable database that includes other relevant indicators such as the carbon dioxide emissions from deforestation.

201. At the Bank level, it is proposed to measure the implementation of the sector strategy in terms of key process indicators, such as the quality of Bank projects (including projects at risk) as rated by the Quality Assurance Group (QAG); the number of partnerships and their activities and output; the volume of economic and sector work and other analytical work; collaboration and outreach with the private sector; innovative and concessional financing opportunities exploited; and collaboration within the Bank Group.


202. At present, less than 5 percent of the world’s natural tropical forest is being managed sustainably. To effectively enhance sustainable forest management, global forestry dialogue, national sectoral planning, and technical analysis must be sensitive to the following elements of the development context affecting the sector:

• A stronger global focus than before on forest sector governance, accountability, and transparency, including greater recognition of the rights of local and indigenous communities, and enhancement of community engagement in decision making, management, and conservation, with a view to enabling more equitable distribution of benefits.

• A shift in the role of government from that of owner-manager of the forest resource to that of facilitator and service provider. This shift has taken the form of fiscal, administrative, and legislative decentralization; divestiture of functions that other institutions or the market can perform better than government; and a more democratic system of decision making.

• Significant cross-sector impacts on forests of subsidies and incentive policies (as, for example, where agricultural subsidies encourage conversion of forests to unsustainable farmland), and emerging opportunities and challenges created by the increasing economic and environmental attractiveness of bio-fuels.

• Need for greater investments in forest plantations and in promoting environmentally and socially responsible global trade in legally harvested timber and non-timber forest products.

143 The Bank will explore with FAO the possibility that future assessments of forest cover might attempt to

distinguish between acceptable conversion of some forest lands to alternative forms of land use (such as high-value agroforestry systems) and ecologically damaging conversion that will negatively affect forest-dependent communities and forest-associated environmental services. This will lead to better targeting of interventions by the Bank and other agencies in achieving sustainable land-use.

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• Increased private sector engagement in forest production and processing, and a need to develop appropriate institutions and incentives to enable sustainable forest practices and encourage better corporate social responsibility.

• Broader acknowledgement of the potential of forests to mitigate global climate change. Innovative financing methods are emerging to support the global public goods that forests provide, and thus to attempt to balance the growing pressure for forest conversion; examples include payments for environmental services (i.e. carbon sequestration through avoided deforestation).


203. From being marginalized and irrelevant in the forest sector in many countries in the late 1990s, the Bank has now reinstated itself as a global leader in sustainable forest development, and a dominant player especially in policy dialogue and analysis for the sector. Strategic partnerships with NGOs, the private sector, and international agencies have helped achieve this transformation. Progress in implementing the sector strategy has been mixed. In a few countries, achievements have exceeded expectations, while in others significant challenges remain and require further work to further create an enabling environment.

204. Total IDA, IBRD, IFC, and GEF funds committed in the forest sector rose from $274 million in FY02 to $302 million in FY06 (see Figure 6).144

Figure 6. Forest Commitments in the World Bank Group, FY02-06 (US$ million)

128166

2963

131

356 17 12 28

111

45

162

443

143

274

217 208

518

302

0

100

200

300

400

500

600


US

$ m

illio

n

IBRD/IDA GEF IFC IBRD/IDA, GEF, IFC


144 From FY03-05, GEF provided $186.1 million for 38 forest-related projects implemented by the Bank. The total

value of these projects was $951.8 million. The number of Bank-implemented GEF projects has averaged 13 per year since FY00. The average size of these projects has doubled during the same period, from $16.1 million to $ 34.4 million.

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1. Progress in Intermediate/ Final Outcomes

205. Table 18 shows available data on three indicators—deforestation, area under forest plantations, and area under certification—for a sample of 17 forest priority countries, where the Bank’s engagement has likely made a significant contribution to poverty reduction, economic growth, and environmental services and values. The list of priority countries was developed using the three pillars of the Forest Strategy: harnessing the potential of forests to reduce poverty, integrating forests into sustainable economic development, and protecting vital local and global services and values.

206. Global deforestation accounts for as much as 20 percent of the greenhouse gases responsible for global climate change. In addition, it threatens biodiversity, the provision of forest-related ecological services, and rural livelihoods. Containing the rate of deforestation—a key to protecting vital global and local environmental services and values—is a major challenge in the sector (see Table 18). Thus it is encouraging that globally, the annual deforestation rate has fallen from 0.22 percent in the 1990s to 0.18 percent in the 2000s (see Table 20).145 The extent of areas being deforested annually fell in countries such as Honduras, Indonesia (marginally), Madagascar, and Nicaragua. However, it has risen in Brazil, Cambodia, and Russia (in Russia this is largely due to increased forest fires). Forest cover has increased in Bulgaria, China, India, and Vietnam.

Table 18. Final and Intermediate Indicators of Forest Outcomes in 17 Priority Countries, 1990-2006 Change in area under

forest cover Annual change in area

under forest plantations Certified forest area (thousands ha/yr) (thousands ha/yr) (thousands ha)

Country 1990-2000 2000-05 2000-05 2002 2006 Bolivia -270 -270 0 93 2,000 Bosnia-Herzegovina -2 0 0 0 0 Brazil -2,681 -3,103 21 1,183 3,530 Bulgaria 5 50 n.a. 0 0 Cambodia -140 -219 -3 0 0 Cameroon -220 -220 n.a. 0 40 China 1,986 4,058 1,489 0 400 Congo, Rep. -17 -17 n.a. 0 296 Congo, Dem. Rep. -532 -319 n.a. 0 0 Honduras -196 -156 800 14 50 India 362 29 84 0 0 Indonesia -1,872 -1,871 79 152 300 Madagascar -67 -37 0 0 0 Nicaragua -100 -70 1 0 20 Papua New Guinea -139 -139 2 4 20 Russia 32 -96 320 216 9,530 Vietnam 236 241 129 0 10 Source: FAO Global Forest Resource Assessment, 2005 (based on self-reporting by countries). Negative numbers reflect a decrease in

forest cover. Notes: n.a. = Not available. This table uses quantitative data associated with the indicators and, when necessary, qualitative information from experts.

145 This variable measures the net changes in natural forests and plantations. Deforestation in the developing

countries continues at a fast pace. Plantations and regeneration offset part of the loss but they mostly take place in the industrialized countries and in Brazil, China, India, Indonesia, and Thailand. See Global Forest Resource Assessment, 2006, Food and Agriculture Organization (FAO), 2006.

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207. In Uganda, not shown in Table 19, the Bank’s strategy has been to strengthen the institutional capacity for environmental resource management, but increasing population pressure and resource extraction are still contributing to growing environmental degradation. Deforestation continues at around 2 percent a year and data for tracking the loss of wildlife is not available.

208. The Bank has been engaged, along with other donors, in countries where the forest cover has increased and/or the deforestation rate has come down.146 A good example of the Bank’s contribution in this regard is the China Sustainable Forestry Development project,147 which supports the expansion of forest cover through plantations and the protection of natural forests by addressing risks from pests, forest fires, and other sources.

209. Between FY02 and FY06, Bank projects have helped to bring more than 3.5 million hectares under protection and established more than 500,000 hectares of newly planted, reforested and restored forest areas. In countries where the deforestation rate has increased, the Bank is proactively working on critical issues such as forest-related governance and cross-sector impacts, to identify suitable entry points for minimizing unsustainable forest loss.

210. Certification is a good proxy for forest areas being brought under sustainable management and for improvements in forest governance and transparency. Since 2002, the area of forests certified as sustainably managed increased from 30 million to 180 million hectares worldwide.148 Among the sample of countries shown in Table 18, Brazil, China, Honduras, Indonesia, and Russia have seen the most progress.

211. The Bank has positively influenced the development of sustainable forest management standards and of independent certification schemes. Recently, a rapid increase in natural forest areas under certification occurred in Central Africa, where Bank dialogue led to increased political commitment to producing and purchasing timber from sustainably managed forests and advanced the discussion of forest certification standards in producer and consumer countries. Development of plantations contributes to economic growth and poverty reduction. By reducing pressures on natural forests, plantations can also help protect ecosystem services. The area under plantations has increased in most countries (except in Cambodia) (see Table 19). China’s massive strides in plantation development are especially noteworthy, as the country’s demands for forest products are unlikely to be met through its own natural forest resources in the medium term. Bank activities such as the Guangxi Integrated Forestry Development and Conservation project149 improve the sustainable management and environmental condition of forest resources

146 Strict cause and effect between interventions supported by the Bank (or any other agency) and progress in

intermediate indicators is difficult to establish. However, data do indicate a correlation between Bank inputs and outcomes as measured by these indicators.

147 See China–Sustainable Forestry Development Project (R2002-50/1), March 29, 2002. Board approved on April 16, 2002.

148 Only the area under Forest Stewardship Council (FSC) certification is reported in Table 19, largely in reflection of data availability. Other international schemes exist and several countries have developed national schemes (e.g., Brazil, Chile, Gabon, Ghana, Indonesia, Malaysia, Russia) or are in the process of doing so. Most of these schemes already do, or will soon, satisfy internationally acceptable standards of certification. Thus, in this report, the FSC certification numbers may be taken to represent the low end of progress in certification.

149 See China–Guangxi Integrated Forestry Development and Conservation Project (R2006-0211/1, GEF/R2006-0030/1) October 27, 2006. Board approved on December 14, 2006.

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by supporting, inter alia, the establishment of intensively managed timber plantations and the development of better links between timber production, marketing, and processing.

212. In Georgia, the Bank’s support has strengthened the capacity of the Department of Protected Areas to mainstream biodiversity conservation in production landscapes.150 Under Bank projects, the area under Protected Area status increased from 2 percent to more than 7 percent of these landscapes. In Honduras, the Bank supported forest fire prevention and suppression activities in municipalities constituting the “center of mass” of the country’s economically important coniferous forests.151 A decentralized approach was undertaken with activities implemented by municipal authorities and local communities, generating employment for community and women’s groups, but thus far the measured impact has been too modest and dispersed to contribute to changes in national-level outcomes.

Table 19. Indicators of Forest Production and Growing Stock, 1990-2005 (thousands m3/year)

Removal of Wood Products Annual Change in Growing Stock Country 2000 2005 1990-2000 2000-2005

Bolivia 609 620 -20,100 -20,000 Bosnia and Herzegovina 4,326 4,139 6,700 6,600 Brazil 293,219 290,476 -376,499 -698,892 Bulgaria 3,778 4,200 12,100 8,400 Cambodia 3,192 - -14,900 -22,000 Cameroon 17,989 19,772 -13,600 -13,600 China 144,775 135,435 186,560 181,400 Congo, Rep. 2,424 2,767 -3,500 -3,400 Congo, DR 78,791 82,994 -122,800 -73,800 Honduras 14,022 15,576 -16,800 -12,800 India 5,735 4,724 29,900 7,200 Indonesia 24,409 11,257 -542,000 -561,200 Madagascar 9,973 7,031 -11,400 -6,400 Nicaragua 1,454 1,846 -11400 -8,000 Papua New Guinea 8,347 8,364 -5,050 -5,060 Russia 152,316 180,000 23,075 41,732 Vietnam 27,219 23,735 13,570 11,183

213. Table 19 reports on two indicators of the economic contribution of forests: removal of wood products and annual changes in growing stock. Removal of wood products denotes the volume of roundwood removed to produce goods (other than wood fuel) or energy (whether industrial, commercial, or domestic). This statistic gives an indication of the biophysical contribution of forest outputs to the economy, on an annual flow basis. It is influenced by a multitude of factors, including the overall economic climate as well as temporary and long-term policy changes in the sector such as export bans, transport restrictions, or increased royalties. Although it is unwise to infer too much from data for only two points in time, Table 19 indicates that the contribution of forest outputs to the economy has risen in Bulgaria, Cameroon, Congo DR, Honduras, India, Nicaragua, and Russia—

150 See Georgia–Country Partnership Strategy–Final Text for Disclosure (IDA/R2005-0191/3, IFC/R2005-

0215/3), October 25, 2005. 151 See Honduras–Country Assistance Strategy–CAS Completion Report–IEG Review (IDA/R2006-0196/1), op. cit.

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where it now ranges between 10 and 27 percent—and has fallen in China, Indonesia, Madagascar, and Vietnam—where it ranges from minus 7 to minus 54 percent (in Indonesia).

214. The growing stock measures the volume of all living trees (of more than a pre-specified diameter at breast height), and is a proxy for the productive potential of a country’s forests for providing timber, timber products, and fuelwood. Table 19 clearly indicates that most countries show a significant decline in growing stock, corroborating the evidence on deforestation and degradation. However, in Bosnia-Herzegovina, Bulgaria, India, and Vietnam, and particularly in China and Russia, the growing stock is increasing. In these countries, appropriate management strategies have the potential to increase significantly the timber and fuelwood contribution from forests. (At the same time it should be recognized that the value of a forest is not only measured in terms of traditional consumption benefits such as timber and fuel wood, but also in terms of biodiversity conservation, carbon sequestration and support to eco-tourism.)

2. Bank Instruments

215. Poverty Reduction Strategy Papers and Country Assistance Strategies. Forest sector issues have been well integrated into PRSPs in countries such as Bosnia-Herzegovina, Cambodia, Cameroon, Congo DR, Honduras, Madagascar, and Nepal, and in country assistance strategies for countries such as Albania, Brazil, Bulgaria, China, Gabon, Ghana, India, and Russia. However, recent reviews of PRSPs and CASs indicate a need to further strengthen the treatment of forest sector issues, especially in countries where forests contribute significantly to economic growth, livelihoods, and poverty reduction.152

216. Analytical and Advisory Services. The Bank has been broadening its knowledge base and analytical capacity to better quantify the contribution of forests to poverty reduction and environmental services and values. The Forests-Poverty Linkages Toolkit supported by PROFOR is an important means to incorporate forest sector issues into national strategies for poverty reduction and economic growth, as well as into CASs; it will be used extensively after the initial phase of field-testing is completed. In both IDA and IBRD countries where forests are considered a priority, high-quality ESW—such as forest sector transparency analysis for Indonesia, a post-conflict forest sector review in Congo DR, and institutional reforms research for Russia—is being used to support the country dialogue, feed into CASs, as well as to develop an active forest portfolio.153 The Bank also completed a “Forests Sourcebook: Practical Guidance for Sustaining Forests in Development Cooperation” for Bank clients and staff.

217. Bank forestry staff have actively harnessed trust funds and donor contributions to support needed analytical work. Some 40 analytical reports have been produced as a result of this support, especially via key partnerships such as with the World Bank/WWF Alliance, PROFOR, and FLEG, and the use of trust funds such as the Bank Netherlands Partnership Program [BNPP]

152 The forest sector was covered in CASs in three out of four forest priority countries in FY02 and two out of three

such countries in FY06. This small sample size makes it difficult to generalize how well the Bank is incorporating forestry concerns into CASs.

153 In addition, strategic environmental assessments and country economic analysis for Ghana, Honduras, Indonesia, Kenya, and Lao PDR, among others, are providing the analytical base to mainstream forests into Bank assistance to these countries.

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and the Trust Fund for Environmentally and Socially Sustainable Development [TFESSD] since FY02. These trust funds have significantly augmented the Bank’s knowledge base in the sector, and supported the implementation of the Bank’s forest strategy.154

218. Many of the Bank’s analyses and technical assistance programs, including those for Congo DR, India, and Russia, have influenced the Bank’s policy dialogue as well as lending, and provided inputs into country assistance strategies and poverty reduction strategy papers (see Box 8).

Box 8. Russia Forest Policy Dialogue Technical Assistance Program

In early 2003, a strong reform climate in Russia created a window of opportunity for deep policy, legal, and institutional change. Building on previous sector work, the Russia Forest Policy Dialogue Technical Assistance Program (FY03-06) was launched with the goal of instituting more sustainable forest management and creating a favorable investment climate for responsible forest industry operations. The program supported studies, regional workshops, and training on a range of related topics, including forest certification (in collaboration with the WWF), forest auctions/leases and information management systems, and management of forests with high conservation value. It promoted participation by stakeholders such as NGOs, academic institutions, and the private sector. For example, the new Russian Forest Code, incorporates many inputs from public discussions supported by the program. The new code is expected to greatly increase the efficiency and transparency of forest auctions and allocation of forest leases, including providing greater security, which should attract more responsible long-term investment. The technical assistance program also helped introduce the Russian forestry community to international best practices. It created an environment of trust and political commitment in the country, resulting in Russia taking the lead in launching the Europe and North Asia Forest and Governance ministerial process in 2005. President Putin’s endorsement of the concept of the National Action Plan against Illegal Logging and Associated Trade (in April 2006) is expected to have a profound impact on Russia’s forest sector policies.

219. In Bosnia-Herzegovina, analytical work on forest law enforcement has led to the development of a national action plan to combat illegal logging. In India, “Unlocking Opportunities for Forest-dependent People”155 is key piece of economic and sector work. It comprises a policy report, policy dialogue, and comprehensive dissemination that will guide future Bank lending in forestry, and is the basis for discussions with GOI on possible reforms at the national and state level. An important outcome has been the formation of a forestry donors’ forum, and high-level policy meetings with the Prime Minister’s Office and the National Planning Commission.

154 An indicative list includes: “Strengthening Forest Law Enforcement and Governance: Addressing a Systemic

Constraint to Sustainable Development” (Report #36638–GLB), World Bank, June 2006; “India: Unlocking Opportunities for Forest Dependent People,” World Bank, 2006; “Reporting Progress in Protected Areas: A Site-level Management Effectiveness Tracking Tool,” World Bank, 2003; “Development Policy Lending and Forest Outcomes: Influences, Interactions, and Due Diligence” (Report No. 33537-GLB), World Bank, May 2005; “Forest and Post-conflict Recovery in the Democratic Republic of Congo: Analysis of a Priority Agenda,” Draft, WWF/World Bank Alliance/the Center for International Forestry Research (CIFOR)/Centre de Coopération Internationale en Recherche Agronomique pour le Développement (CIRAD) and other co-authors, 2006; Forest Certification Assessment Guide: A Framework for Assessing Credible Forest Certification Systems/Schemes, World Bank, 2006; and Institutional Change in Forest Management: Experiences of Countries with Transition Economies: Problems and Solutions. A Multi-stakeholder Plan to Curb Illegal Logging in Indonesia, PROFOR/World Bank, 2004. A detailed list of publications is available upon request.

155 See India–Unlocking Opportunities for Forest-Dependent People in India (Report no. 34481-IN), January 23, 2006.

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220. Lending. The Bank’s IBRD and IDA lending commitments for “traditional” investment projects in the forest sector were $128 million in FY02 and $131 million in FY06. Though they fluctuated in the intervening years, the conclusion is that aggregate lending has remained fairly static over the review period (see Table 20, and Figure 6 above).

Table 20. Bank Performance Indicators—Forestry FY02 FY03 FY04 FY05 FY06 1. Bank Output Trends IBRD lending commitments ($ m) a 101 69 14 15 107 IDA lending commitments ($ m) a 27 97 15 48 24 IBRD disbursements ($ m) 52 66 52 52 51 IDA disbursements ($ m) 51 47 45 35 46 GEF, guarantees, SF commitments ($ m) a 35 6 17 12 28 IBRD ESW products (number of) b 0 1 1 0 1 IDA ESW products (number of) b 1 0 1 3 0 Other ESW products (number of) b 1 2 0 1 1 IBRD TA products (number of) b 2 2 1 1 2 IDA TA products (number of) b 0 2 0 2 1 Other TA products (number of) b 1 0 1 0 0 2. Bank Output Quality Quality at entry (percent satisfactory or better) c 60 60 71 100 n.a. Quality of supervision (percent satisfactory or better) c 67 80 79 100 n.a. IBRD/IDA projects at risk (percent) 10 15 12 22 15 IEG exit rating (percentage satisfactory or better) c 60 100 93 100 n.a. 3. Bank Input Staffing (number of GE+ level staff) d 42 42 n.a. n.a. 46 Regional expenditure ($ m) 4 5 6 6 6 Network anchor expenditure ($ m) e 0.4 0.4 0.1 0.2 0.3 4. Bank Output Cost f

Average unit completion costs of IBRD/IDA lending

(thousand $ per operation) 577 402 279 500 472


5. Client Responsiveness c Preparation time for IBRD/IDA Lending (months) 10.6 7.9 3.2 5.9 11.1 Preparation time for ESW (months) 8.5 9.3 4.7 8.2 7.9 Implementation time for IBRD/IDA Lending (years) 3.7 1.1 2.0 1.9 1.9 6. Results Management Implementation completion reports with project outputs data (percent) g 92 80 77 80 n.a. Completed projects rated satisfactory or better in policy reform (percent) n.a. 100 100 50 n.a.

Completed projects rated satisfactory or better in institutional development

(percent) n.a. 100 91 75 n.a.

Implementation status and results reports with satisfactory outcome baseline

data (percent) h n.a. n.a. n.a. 36 50

7. Development Outcomes

Deforestation (annual percent rate) -0.22

(1990-2000)n.a. n.a. n.a. -0.18

(2000-2005)

Area under forest plantations (million ha. per year) 1.6

(1990-2000)n.a. n.a. n.a. 2.4

(2000-2005) Area under FSC certification (million hectares) 9.2 n.a. n.a. n.a. 36.6 Source: Business Warehouse, HR, and Bank staff estimates. Note: Table includes only projects that have a sector code AT (Forestry). n.a. = not available. a Starting in FY05, IBRD/IDA lending commitments include guarantees. b Aggregated total of individual products allocated to the forestry sector. c Various output quality indicators used for project evaluation. d Estimates (no sector board). For FY02-03, estimates of Bank staff working in units or programs whose names clearly indicate a relationship to forestry. For FY06 the estimate is for Bank staff working on forest projects.

e Direct expenses from the Bank's administrative budget per Network Anchor Unit. f Output costs refer to the Bank's administrative budget only. g Based on 37 analyzed ICRs: 12 from FY02, 5 from FY03, 13 from FY04, and 5 from FY05. h Based on 44 analyzed ISRs from FY05 and FY06 approved projects.

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221. Forest lending has varied according to regional characteristics:

• Africa. Lending commitments were relatively small for AFR until FY05, but figures for FY06 and projections for FY07 suggest an upward trend. Bank activity in the three Congo Basin countries—Cameroon, Congo DR, and Gabon—continues to be significant, especially in relation to the support of good governance activities.

• East Asia and Pacific. Commitments in this region are relatively high but fluctuating. The Bank’s engagement has concentrated on plantation development in countries such as China, which is a major consumer of forest raw materials.156 In addition, resources have been allocated to policy dialogue including for the development of certification schemes to facilitate lending. Successful operations in progress in Vietnam and Lao PDR address forest-related governance and policy reforms.

• Europe and Central Asia. In an environment of significant decline in lending to middle-income countries of the region, the Bank is responding to an increasing demand for policy dialogue and advisory technical assistance. As well as strengthening fire management, reforestation, and establishment of protected areas in Armenia, Bosnia-Herzegovina, Georgia, Kazakhstan, Romania, and Russia, the Bank is supporting institutional reforms and capacity building; improving forest information and its use in landscape-level management planning and monitoring; increasing the role of the private sector in responsible forest management and utilization; and supporting effective devolution of forest management rights and responsibilities to sub-national and local levels.

• Latin America and Caribbean. With relatively constant lending commitments, the Bank has sought to improve the well-being of poor rural populations in Bolivia, Colombia, Guatemala, Honduras, Mexico, Nicaragua, Paraguay, and Peru through community forestry, reforestation, restoration of forest land, forest certification and concessions schemes, and policy and legal reforms. In Belize, Brazil, Colombia, Costa Rica, Ecuador, El Salvador, Honduras, Nicaragua, and Peru, Bank operations are creating new protected areas as well as involving indigenous communities in the co-management of protected areas.

• Middle East and North Africa. The Bank’s engagement has been limited in this region, partly because many of the countries have little forest cover. In Iran, it is supporting the Alborz Integrated Land and Water Management Project, one of whose components will target participatory community-based forest management.

• South Asia. Lending commitments for forests in South Asia declined since FY03. In India (which accounts for the bulk of these commitments), with the exception of the lending project in Andhra Pradesh, a generation of projects came to a close while a major ESW was completed to support a broader policy dialogue with the government.

156 See East Asia Region Forest Strategy, World Bank, 2006.

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Currently discussions are underway with the government on possible new generation of lending, focusing on forest livelihoods.

222. Lending for Forest Policy. Of 114 policy-related loans (development policy loans, poverty reduction support credits, and structural adjustment loans) that were made in the two years FY05 and FY06, 15 had forest components. The loans (IBRD/IDA) totaled $341 million, with $51 million allocated to the forestry components—for better transparency, monitoring of concessions, decreased illegal logging, and job creation in rural areas. The forestry components ranged from 4 to 60 percent of the respective policy loans.

223. IFC Investments. Between FY03 and FY06, IFC financed 25 forest-related projects in 13 countries, with a total project cost of almost $4 billion. IFC investment in these projects amounted to $793 million. The projects range in size from $3 million for a packaging project in Kyrgyz Republic to $600 million for a pulp mill project in Brazil. Of IFC’s total investment in forest industries, about 54 percent has been in pulp paper and paper packaging, 34 percent in larger sized wood-based panel manufacturing, and about 11 percent in commercial-scale plantation development. IFC’s small and medium enterprises projects have had significant positive impacts on the incomes of poor rural farmers in countries including China, India, and Indonesia.

224. Safeguard Policies. The Bank’s environmental and social safeguard policies seek to minimize the risk of Bank activities from causing undue harm to people and their environment. They provide guidelines for Bank and borrower staff in the identification, preparation, and implementation of programs and projects. In spite of careful attention to the application of these policies, a recent forestry project in Cambodia triggered an Inspection Panel case due to issues in sector governance and management of concessions, and concerns raised by civil society regarding the implementation of safeguard policies, leading the Bank to develop a plan for addressing these issues. In another post-conflict country, Congo DR, the Inspection Panel is investigating the implementation of safeguards in two projects that include forestry issues. An issue highlighted by these Inspection Panel cases is the challenge of balancing the due diligence required for compliance with Bank safeguard policies while implementing forest sector activities in countries, with the need for economic recovery in rural areas.

225. In response to a request from the Board to more fully address this challenge, the Bank is reviewing the application of its safeguard policies in forest projects undertaken since the endorsement of the Forest Strategy. Lessons learned from the review will be shared with management, staff, and the Board and applied through clarifications to procedures, improved guidance, and training.

226. In addition, the Bank also committed to undertake strategic environmental assessments (SEAs) in key countries to expand its knowledge of the cross-sector impacts of developments affecting forests and to identify opportunities to increase poverty alleviation through forest and forest-related development initiatives. One example is the Bank-supported SEA for Kenya, which will examine the forest sector in light of the implementation of Kenya’s New Forest Act of 2005.

227. Progress in Results Management. Over the period FY02-FY06, on average about 85 percent of the implementation completion reports on forest projects supplied output data, and all

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of those issued in FY06 did so. Among implementation status and results reports (ISRs) on new projects, 36 percent of those issued in FY05 supplied outcome baseline data, and 50 percent of those issued in FY06 did so, suggesting that greater attention is being paid to quantifying impacts in forest projects. Six of 16 CAS completion reports discussed country-level outcomes or Bank contributions in the forest sector; two of the five were reports for the sector’s priority countries.

228. Bank Resources. Bank resources to support the forestry strategy show an increase from $4 million in FY02 to $6 million in FY06 in the regions, and an estimated $0.3 million in FY06 in the network anchor. Numbers of staff identified as working in the sector appear to have been constant at best, and the numbers of skilled forest specialists have significantly declined.

229. The Bank has actively sought to raise funds to support its work program in the forests sector, with good results. For example, with a budget of about $15 million, the World Bank/WWF Alliance has successfully leveraged about $300 million, with associated multiplier impacts and influence. Over the last four years, PROFOR has raised more than $8.5 million for its operations. In addition, the Bank has raised more than $6 million to support the FLEG initiative.


230. The quality of Bank forest projects at entry to the portfolio has been improving. The proportion rated satisfactory or better by the Bank’s Quality Assurance Group (QAG) rose from 83 percent in FY02 to 100 percent in FY05 (in the latter year, two projects were rated highly satisfactory). In FY02, the quality of supervision was rated satisfactory or better in only half the projects, but this rating went up to 100 percent in subsequent years. In overall terms, this improvement reflects favorably on Bank projects both in terms of efforts invested in their design and in their management and oversight during implementation. Going forward, it will be important to ensure that adequate resources continue to be allocated for project design and supervision.

231. The percentage of IBRD/IDA projects at risk fluctuated between 10 percent in FY02 and 22 percent in FY05, and was 15 percent in FY06. This record compares favorably with the Bank average of 14 percent for all projects

4. Key Achievements during the Review Period

• Improving the livelihoods of poor people. The Bank has supported the establishment of forest owner associations in 184 of the 214 regions in Mexico,157 the creation of employment for over 70,000 forest-dependent poor in Honduras,158 2.75 million in China159 and 100,000 in Lao PDR,160 and the equitable sharing of benefits in Albania, by facilitating the transfer of management and use rights to about 280 out of 345

157 See Mexico–Community Forestry II PROCYMAF II Project (R2003-200-1), November 18, 2003. Board

approved on December 9, 2003. 158 See Honduras–Forests and Rural Productivity Project (IDA-R2004-154-1), June 7, 2004. Board approved on

June 24, 2004. 159 See China–Sustainable Forestry Development Project (R2002-50/1 GEF-R2002-3/1), op cit. 160 See Lao PDR–Sustainable Forestry for Rural Development (IDA-R2003-140/1), June 5, 2003. Board approved

on May 28, 2003.

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communities with about 400,000 people involved.161 In this context, the Forest-Poverty toolkit, which was developed in FY06 using field data from 7 countries, shows the user how to gather, analyze and present essential information to key decision makers and planners. The toolkit can be used by forestry and local government staff to collect information that can then be delivered in an appropriate format to those responsible for updating/revising PRSPs, and monitoring attainment of the MDGs. In FY07/08, the approach will undergo field testing and calibration in at least 6 countries in Africa.

• Strengthening forest sector governance and transparency. The Bank has had significant success in initiating policy dialog to help countries improve forest governance and combat illegal logging and other forest crimes.162 Forest sector governance and institutional reforms have become a central focus of Bank assistance in countries including Albania, Bosnia-Herzegovina, Cambodia, Cameroon, Congo Democratic Republic (DR), Gabon, Georgia, Honduras, Indonesia, Madagascar, Romania, Russia, and Tanzania. The Bank collaborated with Russia to organize the Europe and North Asia Forest Law Enforcement and Governance(ENA-FLEG) regional ministerial process, which concluded in the St. Petersburg Declaration of November 2005.163 The process brought together more than 40 producer and consumer countries committed to fighting illegal logging and improving forest sector governance. The initiation and launch of the regional FLEG process has catalyzed serious attention to illegal logging and related trade from parliaments, governments, and the private sector. As a result, Armenia, Bosnia, and Russia have started developing national action plans to combat illegal logging. In Indonesia, the East Asia FLEG process has helped identify opportunities for a program of activities related to the development of a forest sector transparency plan and an action plan to combat illegal logging, and there are reasonable prospects for Bank lending to start (see Box 9). In Congo DR, the government’s dialogue with the Bank resulted in President Kabila’s decision in 2005 to suspend the allocation of all new logging concessions and to undertake a legal review of all existing concessions with the assistance of an internationally recruited observer. These decisions were widely praised by local and international NGOs as well as the donor community. In the Latin America and the Caribbean region, the Bank is collaborating with governments and regional partners to help catalyze high-level processes for improved compliance of forest legislation.

161 See Albania–Natural Resources Development Project (GEF/R2005-0013/1, IDA/R2005-0104/1), May 19,

2005. Board approved on June 9, 2005. 162 To assess progress, indicators are being developed to measure forest sector governance. These will include

measures for aspects such as the quality of the concessions and auctions system, simplicity of the forest royalty payments, credibility of log-tracking and certification systems, extent of public participation in decision-making, etc.

163 Regional Ministerial FLEG initiatives seek to create the political “space” (through a ministerial declaration) for governments to address illegal logging, in partnership with major stakeholders from civil society and the private sector, of both, producer and consumer countries.

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Box 9. Strengthening Forest Management and Governance in Indonesia

Poor governance, corruption, and weak law enforcement have hampered the Indonesian government’s ability to effectively manage forests, collect revenue, attract forest investment, and promote timber products in the international market. The government has now made firm progress in forest sector governance and transparency and the establishment of a new forest law. The good forest governance initiative is built on two pillars: transparency and rule of law. Through consultations with stakeholders, the Ministry of Forestry and other institutions, with Bank support, have developed two parallel, complementary initiatives: • Promoting transparency – with the goal to have clear and up-to-date forest sector information

available for decision makers. This includes: improving the information management process, establishing a comprehensive disclosure policy, developing effective disclosure mechanisms, and encouraging a better decision-making process.

• Promoting law enforcement – through a comprehensive framework of measures, designed in extensive multi-stakeholder consultations, to prevent, detect, and suppress forest crimes and improve law enforcement. The framework includes support for establishing a forest crime case-tracking system, anti-money laundering legislation relating to forest crimes, continued support for an interagency strike force to enforce forest law, and support for participation by the government in the Asia Forest Law Enforcement and Governance process.

• Enabling sustainable forest management by facilitating responsible private investments.

The Bank achieved significant success in facilitating environmentally and socially responsible private investments in the forest sector. Three international and regional forest investment forums, held in collaboration with IFC and supported by PROFOR and the Bank/WWF Alliance, identified opportunities for responsible private investment targeted at economic development, poverty reduction, sustainable forest resource management, and biodiversity conservation. The Bank has also supported the development of small and medium enterprises and community-company partnerships to increase the contribution of forests to rural employment and to rural poverty reduction. Promising initiatives in these areas are being finalized in India, Kenya, and Madagascar. The Bank supported sustainable protection, management of forest resources through strengthening institutions in Bhutan, more effective government regulatory oversight in Argentina, forest fire management and better forest management and improved certification in Russia. In Bhutan the overall impact was modest; Bank analysis and advice on forestry pricing and marketing, although sound, had little impact on government policy. The completion of the Forest Certification Assessment Guide (FCAG) represents an important step forward in implementing the Bank's forest strategy by providing a tool to assess the comprehensiveness of independent forest certification systems/schemes against Alliance criteria. FCAG will serve as a major guideline for identifying credible certification systems and schemes, and encouraging private investments into the sector.

• Protecting vital local and global environmental services and values. In the Amazon region, a Bank project established 15.8 million ha of new conservation areas, and 22 new conservation units, to create a total of 24 million hectares of protected areas.164 In Colombia, Costa Rica, and Nicaragua, a Bank project has been effective in

164 See Brazil–Amazon Region Protected Areas Project (GEF-R2002-18-1), July 22, 2002. Board approved on

August 8, 2002.

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protecting local ecosystem services while enhancing farmers’ incomes.165 The World Bank/WWF Alliance has established a High Conservation Value Forests Network of international NGOs, large forest industry corporations, international forest products buyers, and other stakeholders; within this network, tools are being developed to integrate high conservation values into the management of production forests, and to pilot these in the East Europe and Central Asia region. The Bank continues to consolidate its role in setting international standards for the sector by developing a Protected Areas Management Assessment Guide. The BioCarbon Fund (BioCF), which commenced operations in FY04, targets projects that sequester or conserve greenhouse gases in forests and agro-ecosystems to mitigate climate change. Currently its portfolio consists of 23 projects totaling more than $50 million and covering about 120,000 hectares. A third of these projects are in Sub-Saharan Africa, for countries including Benin, Madagascar, and Mali. Finally, the Bank is now a pivotal agency for the United Nations Forum on Forests (UNFF); it has supported submissions to the United Nations Framework Convention on Climate Change (UNFCCC) for further considering whether and how incentives to reduce tropical deforestation could be included under the Kyoto Protocol. "The Bank is supporting the mainstreaming process at the political level—by facilitating efforts by a coalition of rainforest nations to voice their position more effectively, and, at the technical level—by establishing a Forest Carbon Partnership Facility (FCPF).

D. Bank’s Comparative Advantage

232. Technical Expertise and Convening Power. The Bank has a comparative advantage in influencing both international and country level policy dialog and facilitate public debate in the forest sector. Policy reforms at the country level are critical to improving the overall climate for sustainable forest management including aid and private direct investments. The Bank’s convening power and technical expertise may be important attributes that it can use to help shape the future of this sector.

233. Synergies with IFC. A key reason to strengthen Bank-IFC collaboration arises from the need to synchronize investments in resource supply (sustainable forest management), in which the Bank has a comparative advantage, with investments in resource demand (for example in sawmilling and pulp and paper mills), which have been IFC’s core business in the sector. Collaboration between the Bank and IFC can play a useful role in creating an enabling climate for expanding trade in forest industries and in ensuring that companies that manufacture and trade in forest products adopt pro-poor approaches, enhance employment, and apply appropriate social and environmental safeguards.

234. Since FY02, concrete actions have been taken to strengthen cooperation between the Bank and IFC at the operational level.166 The two agencies have collaborated to align OP 4.36

165 See Integrated Silvopastoral Approaches to Ecosystem Management Project (GEF-R2002-4/1), April 15, 2002.

Board approved on May 2, 2002. 166 These include: (a) Bank-supported ESW and FLEG initiatives (including Forest Investment Forums),

(b) participation of Bank forestry staff in IFC appraisal missions and vice versa, (c) using catalytic funding provided by PROFOR and by WWF, to facilitate IFC’s Regional Development Facilities in supporting forest and wood-based small and medium enterprises to contribute to poverty alleviation, and (d) involvement of the Global Forest and Trade Network of the WB/WWF Alliance to assist IFC in mitigating the risks of its investments.

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and IFC’s policy and performance standards, PS6, on social and environmental sustainability. Additional areas for alignment include sharing of sector knowledge and the development of good-practice guidance to promote complementary and mutually consistent approaches.

235. Under IFC’s technical assistance and advisory service (TAAS) program, encouraging results are being obtained through joint IFC/WWF Global Forest and Trade Network activities that are assisting small-scale lumber and furniture producers to access environmentally sensitive markets, by committing to the adoption of independent certification processes. The Bank is seeking ways to help IFC increase its investment in such small producers which, especially in AFR, SAR, EAP, and LCR, play a significant role in creating off-farm jobs and sustainable livelihoods for poor rural communities.

236. Global Programs and Partnerships, and Donor Coordination. Partnerships such as the World Bank/WWF Alliance, FLEG, and PROFOR facilitate analytical studies and policy reforms, help to mobilize stakeholders, and foster donor coordination and political will. The Bank has substantially raised the profile of the forest sector in international forums through active participation in the interagency Collaborative Partnership on Forests to support the UNFF.

237. In Cameroon, the Bank helped promote coordination among donors, centered on the government’s Forest and Environment Sector Program (PSFE) as the country’s single framework for engagement in the sector; 14 donors have signed a Code of Conduct in support of the PSFE. Similar approaches are underway in Gabon and in Congo DR.

238. The Bank has also expanded its collaboration with non-governmental organizations such as the World Conservation Union (IUCN), the World Business Council on Sustainable Development (WBCSD), the Forest Dialogue (TFD), Forest Trends, the Center for International Forestry Research (CIFOR), and others, to encourage wider stakeholder participation and develop informed consensus on contentious sector issues (see Box 10).

Box 10. Perceptions Regarding the Implementation of the Bank’s Forest Strategy

The Bank interviewed representatives of 14 key organizations who had participated in the consultations for the elaboration of the sector strategy, including social and environmental NGOs, the private sector, and international organizations. In addition, 300 individuals were invited to send written comments. The recommendations they made are in concordance with the strategic directions and challenges described in this update: • Partnerships are vital in strategy implementation and the Bank should work more through partnerships,

including partnerships at country level; • The Bank’s work in improving governance and supporting legal and institutional reforms is generally

commendable; • The Bank needs to establish better interactions with IFC; • Poverty alleviation needs more emphasis—it is the weakest pillar in implementing the strategy; • Further work is needed on safeguards during the planning and implementation of lending projects; • Development policy lending to sectors other than forestry represents potential risks, due to possible impacts on

forests, and these should be addressed during the entire project cycle; • Small-scale enterprises and landowners, and forest communities, represent a major opportunity for making

progress towards sustainable forest management in future lending operations.

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239. The global public goods aspect of forests confers great importance on the Bank’s role in international policy dialog on issues of climate change, biodiversity conservation, and international trade in timber and other forest products. To further increase its influence at the international level, including expanded leverage over resources, the Bank is working on the appropriate architecture for a Global Forest Partnership, which would align its existing and anticipated global partnerships under one umbrella. The partnership would support Bank operations through promoting innovative approaches in forest management and conservation as well as through piloting market-based mechanisms for securing the global carbon, biodiversity, and watershed functions of forests. Specific program activities under the partnership would be identified and endorsed by a consultative group advised by a technical advisory body of internationally renowned specialists.


240. The Bank will:

• Address poverty and forest governance by promoting greater recognition of the rights of local and indigenous groups and greater attention to land tenure, ownership, and issues of rights of access to resources. It will emphasize and enable stakeholder participation in the formulation and implementation of policies, strategies, and programs to foster community ownership and long-term sustainability of forest resources.

• Enhance the role of forests as an engine of economic growth and development. Increase investments in plantations (especially in tropical countries), expand forest certification and overall forest management, and encourage responsible private sector investments.

• Streamline and rationalize partnerships. To strengthen the Bank’s role in the international forest policy dialogue, explore promising sources of funding such as payments for environmental services, seize the potentially enormous financing opportunities emerging in the context of global climate change and leverage partnerships to their maximum potential, the Bank is working on the appropriate structure for a Global Forest Partnership (GFP). Simultaneously, the Forest Carbon Partnership Facility (FCPF) is a framework for piloting activities that reduce emissions from deforestation and degradation using a system of policy-based approaches and financial incentives.

• Assist countries to integrate the global forest agenda and associated development opportunities into their own national strategies and policies. Take advantage of emerging economic and environmental opportunities to foster sustainable forest management. Integrate forest interdependencies into the design of agriculture, rural development, and natural resource management projects to ensure sustainable economic growth and rural poverty alleviation.

• Strengthen the attention to Forest in the Bank’s agenda, through greater inclusion of forest sector issues into PRSPs and CASs and better alignment of PRSCs and GEF

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and IFC resources with the IDA/IBRD lending program, to address poverty and livelihood issues. Efforts to improve corporate communications on the Bank’s forest work, especially high-profile and controversial projects will be made.

• Ensure efficacious application of the Bank’s safeguard policies (especially on the social side) in traditional forest lending projects, and strengthen due diligence for forest concerns in development policy lending, through strengthened participation, better knowledge management and communication, and focused staff training. The recently completed Forest Sourcebook provides an important resource in this context.

• Strengthen Bank staff and resources by increasing the mobility of staff between the Anchor and the regions and between regions to facilitate cross-fertilization and knowledge sharing.

241. The Bank’s regional focus includes:

• Africa. Continue promoting fundamental sector reforms and capacity building around the challenges of governance, environmental protection, and forest livelihoods. Expand market mechanisms to secure environmental services, and improve the management of dry forests.

• East Asia and Pacific. Invest in the expansion of plantations, find new instrument for natural forest management and biodiversity conservation, support initiatives for forest law enforcement and governance, and maintain well-managed environmental and social safeguard reviews.

• East Europe and Central Asia. Support the transformation of forest management organizations into efficient service-delivery institutions that can meet the challenges of multi-functional, landscape-level forest management; and support decentralization of management to subnational entities, through adequate public financing mechanisms and increased responsibilities for the private sector and local communities.

• Latin America and Caribbean. Continue to support improved law enforcement and forest governance activities, sustainable harvesting and forest management, forest landscape restoration, and development of industrial plantations.

• Middle East and North Africa. Enhance policy and institutional reforms to position the management of forests in a wider context of sustainable natural resource management.

• South Asia. Support the rural poor through greater access to forest resources and stronger property rights, and foster greater participation of the private sector in productive enterprises in rural areas, for local value-addition and employment.

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IV. SOCIAL PROTECTION


242. Social protection and labor (SP) policies are important for sustainable and equitable economic growth. They contribute in fundamental ways to human development and are essential for poverty reduction. Across countries, international institutions, and the wider development community there is broad agreement that social protection is critical to achieving the international development goals, including the Millennium Development Goals (MDGs).167

243. The World Bank has been engaged in SP activities for more than two decades, but until the mid-1990s the work in these areas was not organized under a coherent framework. To rectify this, and in recognition of the importance of the issues for development, various strands of social protection and labor work were brought together in FY96.

244. The current SP sector strategy was formally endorsed in 2001.168 It is driven by three broad policy objectives: (a) improve earning opportunities and the quality of jobs; (b) improve security for households and communities through better management of risks; and (c) provide better assistance for vulnerable groups, in order to improve equity and reduce extreme poverty. These strategic objectives underpin the SP results framework; they are instrumental in identifying key sectoral outcomes and the actions and policies necessary to achieve these outcomes.

245. This update assesses progress in implementing the SP strategy between FY02 and FY06.


246. Within the three broad policy objectives, the Bank’s programmatic priorities in SP are:

• Labor markets and job creation, including promoting active labor market policies to match skills with demand; facilitating reforms of labor regulations to better combine worker protection with incentives for firms to create more and better jobs; designing unemployment benefit schemes that emphasize job search and placement; understanding the effects of institutional arrangements, including the role of unions and social partners, on labor market outcomes; and designing comprehensive social protection programs to address large-scale economic and industrial restructuring. Child labor and youth employment are new and important areas of work for SP.

• To promote human security, the Bank continues to expand its assistance for pensions and old-age income support. Analytic tools have been developed and are widely used to evaluate the long-term fiscal implications of existing and reformed pension systems. Efforts are underway to support civil service pension reforms, advance innovations in design, and provide analytical and lending support for pension reforms

167 See The Contribution of Social Protection to the Millennium Development Goals, Social Protection, World

Bank, September 2003. The Secretary-General of the UN has proposed adding a new target under MDG1 on “full and productive employment and decent work for all.”

168 See Social Protection Strategy: From Safety Net to Springboard (R2000-1060), August 16, 2000.

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that more effectively manage risks and contain costs. Expanding coverage to informal sector workers and other underserved populations continues to be a challenge, as does the development of protection programs to deal with sickness, job loss, and disability.

• Social safety nets contribute to both security and equity. The priorities here include better diagnostics to assess the current state of safety nets, along with unmet needs and possibilities for reform; development of implementation know-how and a better understanding of program impacts; lending and technical assistance to facilitate the replacement of untargeted price subsidies with targeted transfer systems; and the development of new cash transfer and public works programs.

• Social funds/community-driven development work also has both security and equity objectives. Social funds are community-based mechanisms that promote better access to services for the poor and other vulnerable groups. Emphasis is being placed on developing demand-driven and community-based risk management mechanisms that match the needs of underserved groups, particularly in post-conflict countries and low-income countries under stress.

• Disability and development is a new but important and growing area of emphasis for SP. Initial efforts have focused on advocacy, awareness-raising, and capacity development through training and learning. As the program matures, it is pursuing strategy and policy dialogue at the country level, developing evidence-based methods for measurement, monitoring, and evaluation, and providing selective support for high-impact lending.

247. SP activities in support of these priorities vary widely across countries and Regions:

• Latin America and the Caribbean accounts for the largest share (43 percent) of SP lending. The region was home to much of the early work on social protection in the 1980s and 1990s, in response to huge economic instability, high inequality, and a truncated welfare state. The Bank’s portfolio in the region initially focused on improving risk management and reducing vulnerability and structural poverty, but is now more comprehensive. Current programs seek to respond to economic shocks and natural disasters, and support conditional cash transfer programs. Support for social insurance systems has shifted its emphasis to coverage and equity issues and non-contributory social assistance programs.

• East Europe and Central Asia accounts for 32 percent of SP lending. Efforts have focused on reforming the extensive inherited programs for social insurance and social assistance—through aligning benefits with dedicated financing, improving targeting mechanisms, and developing more efficient business processes in conjunction with modern administrative systems. Demand for the development of community-based social services through social funds has been high, particularly in the early years of

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transition. In labor markets the Bank’s engagement has been mainly through analytical work and a regional flagship study.169

• Africa accounts for 12 percent of SP lending. Today’s lending portfolio includes support for productive safety nets, community risk management, demand-driven poverty reduction projects, social funds, and assistance for at-risk groups, particularly orphans and children made vulnerable by the HIV/AIDS pandemic. Social funds have played a key role in the Bank’s assistance for poverty reduction in the region since the early 1990s, and now account for 50 percent of the social protection portfolio in the region.

• SP work in South Asia, which accounts for 9 percent of the SP portfolio, was lagging until recently. A strong team is now in place, and the region has adopted an action plan to increase the knowledge base. The regional team supports SP components in lending projects, as well as providing innovative technical assistance on pension reform, conditional cash transfer programs, welfare reform, and the development of social welfare and care services for the disabled.

• East Asia and Pacific now accounts for only 4 percent of the SP lending portfolio (SP programs in the region were much larger in the aftermath of the 1997 financial crisis than they are today). Current efforts focus on youth employment, job creation, and skill acquisition through the labor market and on the reform of social assistance, including through the introduction of innovative community-based approaches to reach poor households. Regional and sub-regional studies are addressing issues of vulnerability, labor market skills and productivity, and labor migration.

• The Middle East and North Africa’s social protection strategy, launched in FY02, focuses broadly on knowledge transfer, technical assistance, and capacity building. The relatively small lending portfolio includes assistance for pension reform and social funds, and work on safety nets, children and youth, migration, and disabilities is increasing.


248. The SP results matrix (see Table 21) identifies a priority list of final outcomes and outcome indicators, and the policies and intermediate actions necessary to achieve them.

169 See Enhancing Job Opportunities in Eastern Europe and Former Soviet Union, World Bank, 2005.

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Table 21. Results Framework—Social Protection and Labor

Global Dimensions What results on the ground are important?

Country Outcomes

How does the Bank contribute to these results?

Bank Strategy

Bank Contribution How do we know if implementation is on track?

Process Indicators

Strategic Policy

Objectives


Final Outcomes, Outcome Indicators

What intermediate actions/policies are needed to achieve these results? Intermediate Outcomes

How do we measure progress in intermediate

actions/policies? Intermediate Outcome

Indicators Country Process

Indicators Bank Process Indicators Baseline/ Updates

Improve earnings opportunities and the quality of jobs

• (1) Good Jobs • Percent of working

age population employed/unemployed/underemployed (by gender/age)

• Percent employed earning more than$1/day and $2/day

• Percent of children (aged below 15) who are working

• Ratio of unemployment rate youth/adults

• Per capita workplace injuries/fatalities.

Non-distortionary labor market regulations Active LMP to promote adaptability Compliance with core labor standards Policies and programs to promote equal access to education and training services.

• Rigidity of hours and difficulty of firing indices (Doing Business)

• Incidence of long term unemployment.

• Job placements following participation in ALMP (or net job creation/earnings if available).

• No. of countries ratifying international core labor conventions and incorporating into national law.

• Percent unemployed youth covered by ALMPs.

Improve security through better management of risks

• (2) Greater Security • Percent of

population who are food insecure (LIC)

• Percent of population with access to sustainable, formal protection programs to deal with major life events, specifically (1) sickness, (2) job loss, (3) disability, and (4) old age.

Develop multiple protection instruments to promote income protection, risk diversification Ensure formal protection programs are fiscally sustainable Address protection overage gaps for both formal and informal sector workers Adequate safety net systems in place to provide support to at-risk populations in times of crisis (e.g., drought, death

• Number of countries using multiple financial instruments for financial protection

• Number of countries making progress towards sustainability (measured in terms of PV of net future flows and PV of accrued liabilities)

• Coverage (general population, people living below the poverty line) of (1) health insurance, (2) unemployment insurance, (3) disability insurance, and (4) old-age pensions

• Number of countries

(1) Undertake diagnostic and analytic work to support evidence based policy development, also to inform and support domestic and global policy debates (2) Building on this, use lending to support the implementation of good SP policies and programs (3) Provide technical assistance and support through other forms of capacity building, with the aim of strengthening institutions within countries and promoting good governance (4) Build strategic partnerships with donor agencies and other actors – within countries as well as through global for a – with the aim of promoting harmonization and aid effectiveness.

(5) Organize the delivery of client services within the SP sector to create stronger incentives for results, also to strengthen collaboration and

• Number of national strategies/PRSPs that include SP strategies, and/or address issues relating to SP subsectors (e.g., LM regulations and policies; coverage and sustainability of the pension system; coverage and targeting of social safety nets)

• Number of active borrowers with funds allocated to SP programs consistent with agreed strategy/PRSP

• Number of active borrowers with sound results monitoring systems: adequate coverage of SP intermediate and final outcomes, spending, M&E systems

• Number of countries/active borrowers with adequate coverage of SP in new CASs (adequate determined with respect to needs and country circumstances)

• Number of countries/active borrowers for which the strategic diagnostic work is conducted in the area of social protection viz. (1) LM and informal sector; (2) risk and vulnerability analyses; (3) safety net assessments/SP PERs

• QAG ratings: percent of SP operations with (1) MS or better quality at entry ratings (2) MS or better quality of supervision ratings

• Percentage of SP

operations which incorporate relevant results indicators

• Percent of SP operations for which robust evidence of impact is available (or underway)

FY02/4: 52%

FY06: 92%a

FY02: tbd

FY06: tbd

Quality Enhancement reviews

FY03: 79%

FY05: 97%

QSR:

FY02: 90%

FY04: 100%

TBD

TBD

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Table 21. Results Framework—Social Protection and Labor

Global Dimensions What results on the ground are important?

Country Outcomes

How does the Bank contribute to these results?

Bank Strategy

Bank Contribution How do we know if implementation is on track?

Process Indicators

Strategic Policy

Objectives


Final Outcomes, Outcome Indicators

What intermediate actions/policies are needed to achieve these results? Intermediate Outcomes

How do we measure progress in intermediate

actions/policies? Intermediate Outcome

Indicators Country Process

Indicators Bank Process Indicators Baseline/ Updates

of a breadwinner) Micro-insurance, micro-

finance policies and programs available to support market-based and informal risk management

having countercyclical safety nets

• Percent population (general, living below the poverty line) with access to microfinance programs.

Improve equity and reduce extreme poverty through better assistance programs for vulnerable groups.

(3) Enhanced Equity

• Poverty headcount, poverty gap for $1/day and $2/day international poverty lines

• Gini index; no. of high Gini countries (.40 or greater) that reduce inequality

• % of children who are not malnourished (measured in terms of low height-for-age, stunting)

• In LIC: % of children of relevant age attending primary school

In MIC: % of children of relevant age attending secondary school

Effective (adequately funded, fiscally sustainable, and well targeted) safety nets

Interventions to increase effective demand for nutrition, education and health-care services among the poorest children

Community-based Interventions to improve access to basic services in low-income areas, and for low-income and underserved populations

• No. of countries with adequate SSN spending levels

• Percent of the poor covered by social protection programs (poorest 20% of population)

• Percent of SSN beneficiaries among the poorest 20% of population

• Percent of children in the poorest 20% who receive scholarships/ income support for schooling

• Percent communities involved in CDD programs, local planning processes, with better access to services.

•

consistency across sectors and promote development effectiveness

• Percentage of new CASs that have plans for building and/or improving data base on SP outcomesb

• Percent of new SP operations that use outcome or output-based disbursement mechanisms;

• Percent of new SP operations that are aligned with country systems

TBD

TBD

TBD

a Aim is to develop an improved data base on final and intermediate results indicators, with particular focus on indicators tailored to country circumstance. Also to pilot derivation of important SP outcome indicators currently not available in countries with a substantial SP focus. b Based on study of 18 countries with at least two CASs.

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249. The Bank contributes to achieving these outcomes by (a) undertaking strategic diagnostic and analytic work to facilitate informed policy debate and evidence-based policy design; (b) providing financial support to client countries; (c) undertaking policy dialogue, technical assistance, and capacity building, including institutional strengthening and support for public sector reforms and good governance; (d) partnering with other international agencies, including international non-governmental organizations (NGOs) and research organizations, as well as a range of actors at the country level; (e) maintaining internal accountability, with stronger incentives for staff for results.

250. The SP results framework is still under development. More remains to be done to operationalize the framework, including how the sector measures and monitors results. Since accountability for delivering the SP program ultimately rests with the Bank’s country teams and regional sector management, it is likely that each region will, with support and oversight by the network Anchor, refine the results framework and accountability systems to reflect its own circumstances and priorities.


251. Jobs and Labor Markets. Efforts to improve earnings opportunities and the quality of jobs lie at the heart of the Bank’s SP strategy. Labor market policies have improved worldwide: for example, all eight core conventions of the International Labor Organization (ILO) have now been ratified by 124 countries; and the convention on the worst forms of child labor has been ratified by 163. In FY06, the Bank developed a multi-sectoral framework to guide the Bank’s work and policy dialogue, represented by the acronym MILES.170

252. Despite these improvements, major challenges remain. ILO estimates that 6.3 percent of the world’s labor force lacks jobs. More than half the unemployed are young people between 15 and 24 years old, whose unemployment rate is more than double that of older workers. And, of the world’s 2.85 billion people who do have jobs, nearly half earn too little to lift themselves above the US $2/day international poverty line. Although the number of children engaged in hazardous work has fallen by 27 percent between 2000 and 2004, 218 million children are working. Child labor is particularly widespread and persistent in Africa, where an estimated 26 percent of all children age 15 years and younger are working. Employment of people with disabilities remains problematic even in industrialized countries, and in qualitative research, disabled people mention barriers to the labor market as one of their greatest areas of difficulty.

253. Improve Security through Better Management of Risk. When social risk management was introduced, the Bank’s sector strategy was innovative in placing particular emphasis on

170 The MILES framework encompasses all key aspects of the economic, political, and institutional context for job-

creation: M as in macroeconomics; I as in investment climate and infrastructure; L as in labor market regulations and institutions; E as in education and skill development; and S as in social protection. Use of this framework encourages collaboration among different ministries and connects human development goals with the growth agenda.

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risk and risk management, complementing the more traditional emphasis of this sector on equity and basic needs (see Box 11).

Box 11. Core Diagnostics: Risk and Vulnerability Assessments

Directly following the endorsement of the SSP, the Bank engaged in an explicit strategy to conduct country risk and vulnerability assessments (RVAs) to aid in the diagnosis of appropriate social protection strategies for countries and points of engagement for the Bank with countries. Forty RVAs were done across all regions in the years initially following the launch of the SSP. They provided a basis for a richer dialogue with country stakeholders and identified important new areas of lending. The studies highlighted the importance of risk and the impact of exogenous shocks (for example natural disasters such as drought, hurricanes, earthquakes and mudslides; health shocks including HIV/AIDS; and price shocks) on poverty levels, particularly in low-income countries. Risk and vulnerability analysis is now increasingly mainstreamed into poverty assessments.

254. The social risk management framework embedded in the strategy adds the concept of vulnerability to traditional poverty analysis, highlighting the importance of having multiple approaches for dealing with risk (prevention, mitigation, and coping) as well as multiple arrangements (traditional/informal systems, market-based systems, and public sector policies and programs) to carry out these approaches. The framework is particularly relevant for low-income countries, where risk is often an important cause of poverty. Poor people are more vulnerable to systemic risks, such as from drought, as well as to idiosyncratic risk, such as from illness, and they generally lack access to good instruments to effectively manage these risks. While risk and risk management were relatively new organizing concepts at the time the SRM framework was developed, they have now been taken up more broadly, becoming a major focus in the Bank’s financial and infrastructure sector work.

255. One indicator of social risks is “food security” as measured by the Food and Agriculture Organization; food security statistics show that mixed progress has occurred in the poorest regions throughout the 1990s and early 2000s, including in Sub-Saharan Africa. To mitigate risks, insurance-based income support for the unemployed has been introduced or reinforced in some countries in LCR and EAP, but few countries outside ECA have such schemes. Most developing countries rely on severance-pay as the primary form of income support for the unemployed. Some 70 countries have used countercyclical safety nets of one form or another; in virtually all of ECA these are permanent programs (unemployment insurance, an entitlement social assistance program, or both) that scale up and down automatically, but in most of the other countries they are temporary programs, usually for public works, that start afresh with a new crisis and consequently have little institutional capacity and probably lower-than-ideal impact.

256. Equity. The proportion of the world’s population living on less than $1/day has fallen from 28 percent in 1990 to 21 percent in 2002 and is projected to fall to 10 percent by 2015. This forecast is consistent with progress made in social indicators. Between 1992 and 2004, the proportion of children stunted by malnutrition fell from 32 to 22 percent in East Asia and from 62 to 43 percent in South Asia. Net primary school enrollments have increased and the gender gap in schools has narrowed. In low-income countries, enrollments rose from 75.1 percent of

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the eligible age group in 2001 to 80.3 percent in 2004 and the ratio of girls to boys enrolled in primary schools increased from 82.4 percent in 2001 to 89.6 percent in 2004.

257. In recent years the understanding that safety nets are an important component of social policy everywhere has greatly increased, in part because they are now seen to have a role in improving efficiency and growth as well as in promoting equity. The range and sophistication of safety nets has grown commensurately. The most dramatic change here is the advent of conditional cash transfer programs. These programs transfer cash to poor families on condition that the families ensure that their children regularly attend school and follow prescribed standards for preventive health care. Early CCT programs had “gold-standard” experimental design evaluations, which revealed that the programs had very good targeting, impacts on poverty and inequality commensurate with the (varied) transfer size; largely positive impacts on school enrollment and use of health services; and more muted but often positive impacts on educational and health status.171 Only three countries used CCT programs a decade ago, but 20 now have full-blown programs or pilots, and as many more are considering them. Another area of significant advance in the last decade is the know-how for—and implementation of—better targeting and administrative systems for safety nets, as described later in this update.



258. Table 22 presents annual performance indicators for the SP sector during FY02-06, and an assessment of quality and costs, Bank inputs, and results management.

259. Much work remains to improve the data base on SP outcomes, as well as to improve monitoring and evaluation systems at all levels. Actual numbers on outcomes at the country level are not included in Table 22 (except for the consumer price index averages). This is, first, because few of the necessary global statistics are available for the period under review (for example, estimates of the global poverty headcount and poverty gap are only available through 2001), and second, because measuring changes in indicators at the global level rarely tells us much about progress in SP activities in specific countries and regions. The following description of Bank instruments provides illustrative information on outcomes at the operational and portfolio level.

171 See Conditional Cash Transfer Programs: Review of the Evidence, Presentation at 3rd International CCT

Conference, Norbert Shady, Istanbul, June 2006.

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Table 22. Bank Performance Indicators—Social Protection and Labor Themes

FY02 FY03 FY04 FY05 FY06 1. Bank Output Trends IBRD lending commitments ($ m) a 566 1,308 800 1,049 869 IDA lending commitments ($ m) a 228 594 364 381 488 IBRD disbursements ($ m) 538 974 820 975 1,028 IDA disbursements ($ m) 295 493 371 489 496 GEF, guarantees, SF commitments ($ m) a 18 11 10 0 0 IBRD ESW products (number of) b 13 10 9 9 7 IDA ESW products (number of) b 10 7 11 9 12 Other ESW products (number of) b 8 10 16 14 5 IBRD TA products (number of) b 4 8 6 9 7 IDA TA products (number of) b 3 2 5 3 5 Other TA products (number of) b 4 3 0 1 4 2. Bank Output Quality Quality at entry (percent satisfactory or better) c 100 100 98 98 na Quality of supervision (percent satisfactory or better) c 100 100 100 na na IBRD/IDA projects at risk (percent) 21 13 18 14 11 IEG exit rating (percentage satisfactory or better) c 81 76 83 100 100 3. Bank Input Staffing (number of GE+ level staff) d 112 122 132 135 126 Regional expenditure ($ m) 16.3 17.3 16.9 18.0 18.7 Network anchor expenditure ($ m) e 4 6 7 6 6 4. Bank Output Cost f

Average unit completion costs of IBRD/IDA lending

(thousand $ per operation) 322 335 340 336 400


5. Client Responsiveness c Preparation time for IBRD/IDA Lending (months) 13.2 11.6 9.1 8.4 11.0 Preparation time for ESW (months) 15.3 12.6 11.5 15.6 17.2 Implementation time for IBRD/IDA Lending (years) 4.6 5.1 4.5 4.0 5.5 6. Results Management Implementation completion reports with project outputs data (percent) g n.a. n.a. 57.9 58.2 57.8 Completed projects rated satisfactory or better in policy reform (percent) n.a. n.a. 92.5 93.7 75

Completed projects rated satisfactory or better in institutional

development (percent) n.a. n.a. 87.7 86.4 100

Implementation status and results reports with satisfactory outcome

baseline data (percent) h n.a. n.a. n.a. 41.6 61.9

7. Development Outcomes Social Protection and Labor (CPIA) 3.3 3.4 3.3 3.36 n.a. Percent earning less than $2/day (working poor) n.a. n.a. n.a. n.a. n.a. Youth unemployment (15-24yrs) n.a. n.a. n.a. n.a. n.a. Percent of population who are food insecure (FAO) n.a. n.a. n.a. n.a. n.a. Percent of population below the international poverty line ($1/per/day) n.a. n.a. n.a. n.a. n.a. Poverty gap (based $1/per/day) n.a. n.a. n.a. n.a. n.a. Source: Business Warehouse, HR, and Bank staff estimates. Notes: Table includes the thematic codes 51-Improving Labor Markets, 54-Social Safety Nets, 55-Vulnerability Assessment and Monitoring, 56-Other

Social Protection and Risk Management, and 87-Social Risk Mitigation. n.a.=not available. a Starting in FY05 and FY06, lending commitments include guarantees. b Aggregated portion of individual products allocated to the Social Protection thematic codes. c Based on operations mapped to Social Protection Sector Board. d Staff mapped to Social Protection,Sector Board. e Direct expenses from the Bank’s administrative budget per Network Anchor Unit. f Output costs refer to the Bank's administrative budget only. g Based on 198 analyzed ICRs: 88 from FY04 and FY05, and 19 from FY06 (partial FY). h Based on 57 analyzed ISRs from FY05 and FY06 approved projects.

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2. Bank Instruments

260. Country assistance strategies. Significant progress has been made in incorporating SP into country assistance strategies (CASs). A review of CASs for 18 priority countries shows that SP coverage has nearly doubled and is now included in 92 percent of the most recent CASs (see Table 23). Moreover, coverage for IDA client countries is now equal to that for IBRD countries, whereas in the earlier CASs it was about half that level.

Table 23. Coverage of SP in Country Assistance Strategies for 18 Priority Countries Diagnostic Lending Non-Lending Average

FY00-03 FY05-06 FY00-03 FY05-06 FY00-03 FY05-06 FY00-03 FY05-06All Priority Countries 56 100 61 83 39 94 52 92 IBRD 63 100 88 75 63 100 71 92 IDA 50 100 40 90 20 90 37 93 Note: The sample of 18 countries was selected on the basis of: (a) the importance of the country’s risk management issues from a global perspective; (b) the comparative advantage of the World Bank relative to other development partners in the country; and (c) the opportunity for World Bank involvement. The review assessed the extent to which CAS documents cover SP core competencies in terms of three indicators: (a) diagnostic review, (b) planned lending, and (c) non-lending programs. SP core competencies include: disability, labor market, pensions, safety nets, social funds, and SRM. 73 percent of the documents reviewed were full CASs, 12 percent Interim Strategy Note [ISN]-type reports, and 16 percent were CAS progress reports.

261. Analytic and Advisory Services (AAA) and Training. During the review period, the Bank completed 161 ESW and TA products. The Bank provided more than 19,000 participant days per year of training on SP, to build client countries’ capacity and facilitate consensus in policy dialogue, mostly in a format of client-staff teams attending events together, timed to a stage of active policy dialogue.

262. Substantial analytic work has been done on labor market issues to provide a basis for policy action. Between FY03 and FY05, the Bank completed 54 analytical studies of labor markets, including regional flagship studies in East Europe and Central Asia and in Sub-Saharan Africa, and multi-sector endeavors such as country economic memorandums, poverty assessments, CASs, support to poverty reduction strategy papers and poverty reduction strategy credits, and country studies in China, Ethiopia, India, and Russia.

263. Child labor and youth employment are two areas where the Bank has taken the initiative to develop better data and analysis and, increasingly, policy advice and project experience. On child labor, the Understanding Children’s Work project with ILO and UNICEF has developed innovative tools to measure, monitor, and analyze child labor and is now the world’s preeminent source for data and data collection methodologies on child labor.

264. A tool for evaluating unemployment benefit systems, the Unemployment Insurance Simulation Model, has been developed and piloted in Bosnia-Herzegovina, China, Slovenia, and Turkey. In FY06, the SP sector developed a multisectoral framework, MILES,172 to guide the

172 The MILES framework encompasses all key aspects of the economic, political, and institutional context for job-

creation: M as in macroeconomics; I as in investment climate and infrastructure; L as in labor market regulations and institutions; E as in education and skill development; and S as in social protection. Use of this framework encourages collaboration among different ministries and connects human development goals with the growth agenda.

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Bank’s work and policy dialogue on job-creation issues. Still in its pilot phase, MILES is helping to coordinate work across sectors at the Bank and within governments in designing employment strategies.

265. To promote better household and individual security, since 1984 the Bank has been involved in pension reforms in more than 80 countries. To underpin the policy dialogue and support the Bank’s framework for pensions and income support to the elderly, the Bank has developed and disseminated the Pension Reform Options Simulation Toolkit (PROST)—a computer model that can project and compare the fiscal implications of a variety of pension system parameters and reform options. Developed in July 1997, PROST has now been used in more than 90 countries. To complement the macro-fiscal analysis done using PROST, the Bank has collaborated with OECD to develop a micro-level tool, the Accrued Pension Entitlements Cross Country (APEX) that can evaluate system outcomes for specific groups of individuals. In Jordan the Bank provided advisory services through analytic work that analyzed challenges in the pension system, and provided technical assistance to assist the government with the implementation of reforms, and capacity building activities. In China, Bank assistance led to the establishment of an actuarial unit in the Minister of Finance and helped the Ministry of Labor and Social Security adopt an analytical tool for assessing pension reform options at the central, provincial, and municipal levels across the country.

266. The Bank is also exploring some unconventional approaches, including market-based strategies, for managing household risks. An African regional study on weather-based insurance examines the scope for providing insurance to small producers and input suppliers and explores ways to use weather data to provide countercyclical financing for safety nets. Ethiopia’s second adaptable program loan for Productive Safety Nets173 incorporates such a mechanism to scale up safety nets in time of drought, and similar work is being done for herder insurance in Mongolia174 and weather-based crop insurance in India.175 The Bank issued a concept paper in 2006 on social protection and natural disasters,176 and an overview of social protection policies and programs that have (ex ante) insurance elements. A strategy and action plan for South Asia was discussed in FY06, focusing on protecting the poor from aggregate shocks such as natural disasters.

267. To promote equity, the Bank has contributed actively to improve understanding of the potential of conditional cash transfer programs. It has carried out country-specific AAA, study tours, evaluations, and other activities for at least a dozen countries in addition to those to which it has lent for such programs. It has also convened three biennial international conferences on conditional cash transfer schemes for program officials and their counterparts. The most recent, in Istanbul in June 2006, drew together about 375 delegates from 40 countries and a dozen donor agencies, and still more via a webcast. The Latin America and Caribbean Region has reviewed

173 See Ethiopia–Productive Safety Net APL II Project (IDA/R2006-0241/1), December 19, 2006. Board approved

on January 9, 2007. 174 See Mongolia–Index-Based Livestock Insurance Project (IDA/R2005-0089/1), May 9, 2005. Board approved

on May 26, 2005. 175 See Innovative Financial Services for India: Monsoon-Indexed Lending and Insurance for Smallholders,

Agriculture and Rural Development Working Paper 9, (Report No.27096), July 2003. 176 See Complementing Natural Disasters Management: The Role of Social Protection, Social Protection

Discussion Paper No. 0543. R. Vakis. World Bank, 2006.

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control and accountability mechanisms in Bank-Financed CCT programs, to identify areas for institutional strengthening, and the Region has established a community of practice about CCTs using the GDLN to keep an on going dialogue with managers of the five programs.

268. While disability has long been an issue in ECA, it is becoming an acute concern in developing countries that have experienced conflict, natural or man-made disasters, and population aging. The development of community-based social care is an important challenge in all countries. The Bank has partnered with UNICEF to develop guidelines for how to do this on a system-wide basis, and is partnering with civil society organizations through the Global Partnership on Disability and Development to help disabled people in developing countries integrate into their societies.

269. Lending. The increased uptake of SP themes during the review period can be seen in the growth of the lending portfolio. The cumulative SP portfolio has grown more than fivefold over the review period, from $794 million in FY02 to $4.5 billion in FY06, with annual peaks in years of financial crises. The active SP portfolio now corresponds to commitments of nearly 6 percent of the Bank’s portfolio in dollar terms, and the 218 projects represent 14 percent of the Bank’s projects under supervision. Annual (IDA and IBRD) lending in FY05 and FY06 was about $1.4 billion. A further $325 million a year of lending for pensions took place during FY02-06, but does not appear under the thematic codes that are used for the rest of this analysis.

270. Efforts to improve jobs and labor markets account for about 20 percent of the lending portfolio, while projects for better household and individual security account for about 40 percent, as do projects for enhanced equity (see Table 24).

271. Nearly 11 percent of the Bank projects during FY00-05 supported projects with an explicit objective of improving labor market outcomes.177 Twenty-five policy-based loans specified conditions related to the labor market, most often calling for enhancing the flexibility of the labor market, changing wage-determination mechanisms, and enacting active labor market programs (ALMPs). Among the 164 labor-related investment projects that the Bank has undertaken since FY00, the most common are projects that seek to boost employment through development of micro-enterprises (26 percent) and to improve labor market outcomes by training or retraining workers (20 percent).

177 See Labor Markets and the World Bank: Recent Lending and Analytical Work, draft working paper. Amy N.

Luinstra and Antoneta Monova Stavreska, World Bank, 2006.

Table 24. Distribution of the Social Protection Portfolio, FY02-06

Good JobsMore

Security Enhanced

Equity) Total (million $) (million $) (million $) ($m)

Percentage Share

AFR 199 358 430 986 12 EAP 30 91 226 347 4 ECA 616 1,453 532 2,601 31 LCR 683 1,174 1,659 3,515 43 MNA 78 24 60 161 2 SAR 131 240 333 703 8 Total 1,736 3,300 3,239 8,313 100 Source: Business Warehouse (as of November 11, 2006). Note: Include 51 (LM), 54 (SSN), 55 (vulnerability assessment and monitoring), 56 (other social protection and risk management), and 87 (social risk mitigation). In addition to theme 87, the portfolio numbers for pensions are represented by sector code BE (compulsory pensions and unemployment insurance). A review of FY02-06 projects found that 4 percent of projects and 5 percent of lending by volume at least mentioned disability in some way.

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272. ALMPs account for more than 90 percent of the Bank’s labor market lending. They are designed to improve the employment and earnings of participants by enhancing labor supply and increasing demand. They target the long-term unemployed, workers in poor families, and groups with labor market disadvantages and thereby contribute to social inclusion, cohesion, and accountability by increasing productive employment. Particular interventions include job-search assistance, training and retraining, public works, wage and employment subsidies, and self-employment assistance. In Bosnia-Herzegovina, a pilot project has successfully trained ex-soldiers in small business management and vocational skills; on average, 95.5 percent of the trainees were found to have jobs one year after having received assistance. Colombia’s Second Programmatic Labor Reform and Social Structural Adjustment Loan allowed an increase in the government budget for labor market training and job and apprenticeship creation, which played a major part in the drop in the Colombia’s unemployment rate from 15.7 to 12.1 percent between 2003 and 2004.178

273. For pensions, the Bank’s annual lending is on the order of $575 million. Thirty three pension projects have been completed during the last five years in 22 countries. Twelve of these countries indicate improvement in their implicit pension debt; thirteen have increased their financial sustainability through improvements in the ratio of the net present value of financing flows; seven have added pillars to their public pension systems, and eighteen have enhanced their pension administration systems.

274. To improve equity and reduce extreme poverty and vulnerability, the Bank has engaged with 116 countries on safety net issues over the five years under review, providing training in 85, ESW in 84, lending in 62, and a combined package of all three services in 35. The social safety net lending portfolio is diverse. By dollar value it is nearly evenly divided among public works, technical assistance, various types of in-kind programs, and a range of cash programs.179 About 70 percent of the portfolio is in investment loans, with the remainder in policy-based operations.

275. Almost all safety net projects contain elements to strengthen targeting and administrative systems. In ECA, for example, the Bank has lent specifically to strengthen administrative capacity for social protection in countries including Armenia, Croatia, Georgia, Serbia, and Ukraine. In client countries such as Brazil and Romania that have worked with the Bank on safety nets, the best targeting systems have achieved levels of targeting efficiency similar to those in the US and UK. This shows the potential for improvement in other client countries, where a fifth of programs with targeting instruments that could yield good results were still producing regressive outcomes as recently as FY04.

276. An area of substantially increased focus and scale of efforts is safety nets for low-income countries, especially in sub-Saharan Africa. Ethiopia, for example, with Bank support through ESW, lending, training, and donor coordination has transformed its safety net from a series of short-term relief efforts into a long-run program, seeking to improve the targeting and timeliness of income support, the value of the public works constructed as part of the program, and their 178 See Colombia: Second Programmatic Labor Reform and Social Structural Adjustment Loan (R2004-0197/1),

October 14, 2004. Board approved on November 4, 2004. 179 Only half of projects with safety net components are mapped to the Social Protection Sector Board, though

these account for 58 percent of the dollar value. The rest of the projects are scattered through a large number of other sectors.

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eventual influence on households’ base incomes. In FY06, the Ethiopian Productive Safety Net provided benefits to 7 million individuals, 80 percent of whom worked on public works, providing 172 million labor days, undertaking 250,000 kilometers of stone bund construction, and planting 17 million seedlings.180 The transfers they received were 175 birr (about US$20) or 83 kilos of grain per worker participating. A prospective impact evaluation study is underway, but an early qualitative assessment shows that the beneficiary households report improved food security, fewer distress sales of assets, and greater use of health services.

277. The Bank’s social fund portfolio of 24 projects and about $1 billion has been an important means of improving access to basic services for the poor—in primary health and education, water and sanitation, and transport—particularly in rural areas and in poor or institutionally weak countries. Forty eight percent of the Bank’s social fund operations in FY00-06 targeted vulnerable or disadvantaged groups as a development objective.

278. Cross-country evaluation indicates that progressive targeting of social infrastructure investments, executed in a cost-effective manner,181 results in improvements in education statistics (school enrollment/attendance, dropout, age for grade) and health outcomes (child mortality, incidence of diarrhea).182 Social funds have recently been experimenting with innovative community-based approaches to deliver safety net services in low-income countries. For example, Nigeria, Sierra Leone, Tanzania, and Uganda are piloting the use of community institutions for implementing cash transfers, and Malawi, Uganda, and Tanzania are piloting the use of community targeting and participatory methods in public works programs. Tanzania’s Social Action Fund is strengthening local institutions and promoting savings and income-generating activities at the community level, in addition to more standard activities to increase access to service and to provide income via public works.

279. Flexibly designed social funds have been playing an important role in the social protection strategies of many middle-income countries, by promoting innovations in services for the poor that are scaled up into national programs (as in Chile Solidario), or through support for local partnerships that facilitate access by vulnerable and disadvantaged groups to the labor market and social assistance programs—as has been the case for marginalized Roma communities in Bulgaria and Slovakia.

280. Progress in Results Management. The use of results framework indicators in SP lending increased in FY05-06. In FY06, nearly two thirds (62 percent) of operations with social protection themes had implementation status and results reports that included outcome indicators with baseline data—up from 42 percent in FY05. More than half (52 percent) of the 198

180 See Ethiopia–Productive Safety Net Project (IDA-R2004-260/1), November 9, 2004. Board approved on

November 30, 2004. 181 For instance, water systems produced by social funds and community-driven development approaches were

much cheaper than similar government investments: they cost 71 percent less in the Philippines, 36 percent less in Indonesia, and 22 percent less in Cambodia (Chase, Robert. “Community Driven Development and Social Capital: Designing a Baseline Survey in the Philippines, Social Development Department, May 2005, World Bank, Washington, DC).

182 Rawlings, Laura, Sherburne-Benz, Lynne, and Van Domelen, Julia. “A Cross-Country Analysis of Community Investments, World Bank, Washington, DC 2005); Chase, Robert. May 2005.

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implementation completion reports (ICRs) prepared between FY04 and FY06 include at least one output indicator. Output indicators were most commonly used in single-sector projects focusing on the delivery of community-driven operations, improvements in labor markets, and social sector reform.

281. Strong monitoring and evaluation (M&E) underpins the quality of the SP portfolio. Social funds, public works, and conditional cash transfer programs have played a leading role in improving M&E, setting proper baselines, incorporating credible counterfactuals, and introducing innovative methods. The Bank has often funded evaluations and provided advice.183 Of the eleven countries in which the Bank is lending for CCT programs, credible evaluations are available or planned for ten and the results thus far are largely positive.

282. In addition, new approaches are being developed that link financing to results. Loans for Brazil’s Bolsa Familia and Ecuador’s Bono de Desarrollo Humano programs184 increase their disbursement percentages as outcome benchmarks are achieved. The loans for Argentina’s Jefes program disburse against certified enrollment in a cash-transfer program.185 In the Ethiopia Productive Safety Net program, disbursement is determined by performance against benchmarks including the implementation of adequate capacity building, the establishment of an M&E system, and evaluation of program targeting.186

283. To support these efforts to strengthen monitoring systems and provide guidance to operational partners and Bank staff, the SP Anchor plans to set up a new thematic group on social risk management strategies, results monitoring, and impact evaluation. One of the mandates of the proposed group is to improve the quality, timeliness, and coverage of SP indicators at all levels: global, regional, country, and individual intervention/project. The group will also support regional results initiatives, with particular focus on improving project-level results frameworks and assessing project impacts, as well as helping to improve the data needed to underpin new sectoral initiatives such as for disaster management and disability.

284. Bank Resources. The 126 SP staff comprised 1.6 percent of Bank staff in FY06 and managed 6 percent of total lending by volume (14 percent by number of operations). A high proportion of SP staff are economists with integrative skills who are able to support multi-sector tasks such as programmatic lending, public expenditure reviews, and poverty assessments. Limited resources have constrained the expansion of work in the sector Anchor, and this has led to efforts to facilitate staff mobility to regions whose programs are expanding, especially AFR, where 11 countries have sought assistance in developing conditional cash-transfer programs. 183 See Evaluating Social Funds: A Cross-country Analysis of Community Investments in 2004, and Evaluating

Social Fund Impact: A Toolkit for Task Teams and Social Fund Managers, by S. Adam, SP (Discussion Paper No. 0611), October 2006.

184 See Brazil: Bolsa Familia Project (R2004-0097/1), May 28, 2004. Board approve on June 2004 and Ecuador–Support To Reform of the Bono de Desarrollo Humano Project (R2006-0067/1), May 12, 2006. Board approved on June 2006.

185 See Argentina: Jefes De Hogar (Heads of Household) Project (R2002-0199/1), October 31, 2002. Board approved on January 28, 2003.

186 See Ethiopia–Productive Safety Net’s Project (Report No. 29767-ET), November 3, 2004. Board approved on November 30, 2004, and Ethiopia–Second Productive Safety Net APL Project (IDA/R2006-024/1), December 19, 2006. Board approved on January 9, 2007.

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285. Average unit completion costs for SP lending, economic and sector work, and technical assistance are in line with Bank averages, as are indicators of responsiveness to clients (see Table 18 above). But some deterioration in these measures that occurred in FY06 will need to be closely monitored.


286. Portfolio performance in SPL has been good or improving, and reflects the proactive approach and strong involvement of the sector board in quality issues.

• Quality Assurance Group (QAG) assessments. Overall, QAG has rated 98 percent of SP projects moderately satisfactory or better, and has documented improvements in quality at entry187 and in supervision.188 An FY06 QAG review of 90 social funds/CDD operations found satisfactory outcomes and quality of supervision despite challenging country circumstances.189

• Independent Evaluation Group (IEG) assessments. Of SP operations that closed between FY00-05, IEG assessed 83.8 percent to have had a satisfactory outcome, above the Bank average of 74.5 percent. Comparing SP operations that closed in FY00-05 with those that closed in FY95-99, IEG found a 34 percent improvement in the share of operations judged likely to be sustainable. Of the 23 social fund projects closed at the end of FY00, 96 percent were assessed to have had a satisfactory outcome. In a review of Bank support for pensions, IEG concluded that 87 percent of the pension projects and 75 percent of the pension components completed between 1985 and 2004 were successful and that the Bank’s analytical work provided an extensive technical foundation for policy dialogue, operations, and the overall approach on pensions.190 To strengthen pension reform work in response to that review, the Bank is leading an effort to develop guidelines for funded pension systems, improve coordination across sectors and regions, and provide a note for the Board that will articulate Bank policy principles for supporting pension funds.

• Assessments in implementation completion reports (ICRs). According to their ICRs, all the SP operations completed in FY06 achieved a satisfactory institutional development impact, compared with 88 percent for operations completed in FY04. A review of policy reforms in a sample of SP operations that were completed in FY04 and FY05 found that 90 percent of them achieved satisfactory results.

187 Quality at entry assessment for projects with a SP and risk theme indicated a steady improvement in the last

three fiscal years (FY03-05), from a success rate of 79 to 97 percent. See “Quality at Entry Assessment in FY04-05 (QEA7),” Quality Assurance Group, World Bank, February 1, 2006, p. 52.

188 Quality of supervision ratings for SP projects increased from 90 to 100 percent between FY02 and FY04. Quality of Supervision in FY03-04 (QSA6), A QAG Assessment: Annexes, Quality Assurance Group, World Bank, March 15, 2005, p. 15.

189 See Operational Quality of SF/CDD Operations: Some Trends and Issues, presentation by Prem Garg, Director, QAG, March 15, 2006.

190 See Bank Assistance to Pension Reform and the Development of Pension Systems, Independent Evaluation Group, World Bank, January 2006.

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• Projects at risk. The proportion of SP projects at risk increased from 14 percent in FY05 to 17 percent in FY06, though commitments at risk were reduced from 10 percent in FY05 to 9 percent in FY06. AFR had the largest number of projects at risk, mostly in post-conflict countries.

4. Key Achievements during the Review Period

287. Bank lending for SP completed during the review period has reached a large number of beneficiaries: 23 million persons have benefited from lending for social safety nets, and the SP sector social fund portfolio has reached more than 76 million beneficiaries. For the key objectives of the SP sector—good jobs, improved security, and enhanced equity via safety nets and social funds—Table 25 shows numbers of beneficiaries, along with physical outputs, capacity building and institutional strengthening, and policy reforms and improvements in the legal framework. The table also reflects how the results chain works: lending for SP typically includes substantial strengthening of policies and programs, which then results in better service to beneficiaries and better outcomes. Some examples of achievements follow.

288. Labor Markets and Job Creation. In China, the Bank has helped to improve active labor market programs and develop a labor market information system that has now been widely adopted across the country that provides expanded access to information and services to people seeking to acquire new skills and search for new jobs.191 Bank assistance helped to improve the capacity of employment services, improved labor market information, and identified options to strengthen the unemployment insurance program. Government programs and women’s organizations helped establish demand-driven retraining courses and provide skills development and entrepreneurial training for unemployed and laid-off workers, especially women. In Pakistan, the Bank supported the government in implementing measures to improve the incentive and regulatory environment, including reforms of laws concerning industrial relations and labor protection.192 Reforms have halved the time needed to register a new business, from 53 to 22 days, and provincial authorities in Sindh and North West Frontier Province have reformed factory and business inspections to reduce harassment.

289. Pensions and Old-Age Income Support. In Peru, Bank assistance helped with the passage of a constitutional amendment to close the much abused Cedula Viva and eliminate the indexing of benefits to the salaries of active workers; contribution rates to the pension system were increased, an effective internal tax on the highest pensions was introduced, and rules were tightened for determining, adjusting, and capping benefits.193 In Bulgaria, where the Bank supported reform measures for a multi-pillar pension system, legislation was enacted to establish a benefits indexation formula, including maximum and minimum benefits, as well as contribution rates with a timetable for changing the ratio of employer to employee contributions from 70:30 in 2005 to

191 See China–Country Partnership Strategy–CAS Completion Report–IEG Review (R2006-0057/1, IFC/R2006-

0097/1, MIGA/R2006-0017/1), op. cit. 192 See Pakistan–Country Assistance Strategy–CAS Completion Report–IEG Review (R2006-0062/1, IDA/R2006-

0075/1, IFC/R2006-0104/1), op. cit. 193 See Peru–Country Partnership Strategy–CAS Completion Report: IEG Review (R2006-0220/1, IFC/R2006-

0296/1), op. cit.

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50:50 in 2009.194 As a result, the fiscal sustainability of the pension system has been strengthened, and there is greater predictability for beneficiaries, contributors, and investors.

290. Social Safety Nets. In Argentina, Bank support helped to improve the management of the Jefes program.195 An estimated 10 percent of the participants would have fallen below the food poverty line without the program. Targeting was good: about 40 percent of participants came from the lowest quintile of the income distribution, while about 80 percent came from the lowest two quintiles. In Pakistan, the Poverty Alleviation Fund operation supported by the Bank has been highly successful in supporting NGO-implemented infrastructure and micro-credit schemes.196 To date, PPAF has surpassed most project targets and its poverty reduction programs have helped more than 2 million poor in all four provinces, extending loans to 122,000 clients with an estimated average recovery rate of around 95 percent. In Bulgaria, Bank support helped improve the targeting of subsidies: from 2001 to 2003, while the coverage of guaranteed minimum income (GMI) and energy subsidies increased 2.7 and 2.5 times, respectively, the share of funds channeled to the poorest quintile increased from 60 percent to 75 percent for GMI, and from 47 percent to 54 percent for energy subsidies, and the share of child allowances going to the poorest quintile also increased.197 In Romania, the introduction of the Minimum Income Guarantee Scheme improved targeting and coverage and was a factor in the reduction of extreme poverty.198

291. Community Risk Management through Social Funds. The Northern Uganda Reconstruction Program empowers communities by enhancing their capacity to systematically identify, prioritize, and plan for their needs, and to implement sustainable development initiatives that improve socioeconomic services and opportunities.199 Currently, 45,000 households are utilizing sub-project facilities, more than 9,000 vulnerable persons are receiving assistance, and 51 communities are benefiting from reconciliation efforts.

292. Disability and Development. In Bulgaria, actions to improve targeting of disability benefits and promote social integration of the disabled were successfully implemented under the programmatic adjustment loan program.200 Legislation was enacted to disallow disability benefits to persons eligible to receive pensions, and to establish a framework for improved disability needs-assessments to facilitate integration into the labor force and society, as well as for fraud detection and accountability of medical practitioners.

194 See Bulgaria–Country Partnership Strategy–CAS Completion Report–IEG Review (R2006-0083/1, IFC/R2006-

0131/1), op. cit. 195 See Argentina–Country Assistance Strategy Completion Report–IEG Review (R2006-0068/1, IFC/R2006-

0118/1), op. cit. 196 See Pakistan–Country Assistance Strategy–CAS Completion Report–IEG Review (R2006-0062/1, IDA/R2006-

0075/1, IFC/R2006-0104/1), op cit. 197 See Bulgaria–Country Partnership Strategy–CAS Completion Report–IEG Review (R2006-0083/1, IFC/R2006-

0131/1), op. cit. 198 See Romania–Country Partnership Strategy–CAS Completion Report–IEG Review (R2006-0082/1, IFC/R2006-

0130/1), May 30, 2006. Board approved on June 13, 2006. 199 See Uganda–Joint Assistance Strategy–CAS Completion Report–IEG Review (IDA/R2005-0250/1, IFC/R2005-

0301/1, MIGA/R2005-0064/1), op.cit. 200 See Bulgaria–Country Partnership Strategy–CAS Completion Report–IEG Review (R2006-0083/1, IFC/R2006-

0131/1), op. cit.

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Table 25. Summary of Outcomes from Projects Completed in FY02-06, as Reported in Their ICRs

Good Jobs (88 operations with theme 51)

Improved Security via Pensions (57 operations theme 87 and/or sector

Compulsory pension and unemployment insurance [BE])

Enhanced Equity, Safety nets

(53 operations with theme 54)

Enhanced Equity, Social Funds

(20 operations with theme 56)a Beneficiaries Beneficiaries Beneficiaries Beneficiaries

67 operations directly benefited targeted beneficiaries through different labor market measures. • 5.3 million people were trained; • 3,540 enterprises were trained; • 11 million were employed, or placed (including

apprenticeships); • 30,000 beneficiaries received job search assistance or

counseling; • 150,000 beneficiaries received severance; • 1,305 enterprises were created or assisted; and • 300,617 beneficiaries benefited from micro enterprise

development.

Nearly all of the operations in this period are directed to reform of existing pension systems through parametric adjustments to improve fiscal sustainability, administrative enhancements or reforms that provided additional pillars to the system. These left the number of beneficiaries unchanged or in many cases prospectively reduced the number of beneficiaries across a transition period, by raising the retirement age to better align system parameters to increased life expectancy.

27 projects directly benefited 23 million beneficiaries mostly through: • CCT ( 4.3 million beneficiaries); • other cash interventions (1.9 million); • public works (2.8 million); • school feeding (1.6 million), • and health subsidy (9 million). Other interventions were the provision of: • training (3 million); • social care services (922,129) • agricultural inputs (195,650) • documentation (52,883) • disability devices (2,453).

• 20 projects financed • 90,098 multisectoral, demand-driven subprojects

which increased access to local infrastructure and services for about

• 76 million direct and indirect beneficiaries.

Institutional strengthening Institutional strengthening Institutional strengthening Institutional strengthening 42 operations contained elements of capacity building and institutional strengthening through one or several interventions. For example • 17 projects included hiring and training of agents and

trainers, • 10 projects implemented a Labor Market Information

System [LMIS] to monitor evaluate and control labor market initiatives by identifying the characteristics of the labor market.

• 3 projects established or enhanced a M&E system for example to evaluate and protect poor and vulnerable against consequences of unemployment and generally for progress reporting and impact assessment.

• 17 projects focused on institutional strengthening

through establishment of new institutions or capacity building in existing ones.

• 12 of these operations supported the establishment, restructuring, or modernization of institutions responsible for social security and pensions to complement ongoing reform efforts, increase operational efficiency or improve governance and supervision.

• 8 projects provided training programs to staff from various ministries and institutions through seminars and workshops.

• 3 of these operations focused on training related to pension system development/modeling and information management related issues.

33 projects supported institutional strengthening through (one or multiple) interventions. For example, • 27 projects contributed to improve the monitoring

and evaluation systems; • 15 projects supported the improvement of the

targeting system; • 11 projects supported training of staff from various

ministries, officials, implementers, and contractors; • 10 projects supported the establishment or

improvement of the management information system

• 8 projects supported the development of operational manuals;

• 4 projects supported provision of staff for implementation;

• 4 projects organized 139 seminars and workshops;

• • 12 projects provided direct and on the job

training to about 400,000 poor and vulnerable people in identification, formulation, management of resources, monitoring and evaluation of small scale investments.

• 12 projects implemented MIS/M&E systems, and • 5 had impact evaluations conducted.

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Good Jobs (88 operations with theme 51)

Improved Security via Pensions (57 operations theme 87 and/or sector

Compulsory pension and unemployment insurance [BE])

Enhanced Equity, Safety nets

(53 operations with theme 54)

Enhanced Equity, Social Funds

(20 operations with theme 56)a Legal framework/policy reform Legal framework/policy reform Legal framework/policy reform Legal framework/policy reform

20 projects affected the legal framework or helped develop a strategy or policy. For example • 16 projects supported new legislation or decrees,

such as in introducing a new labor law or amending a social assistance decree.

• Eight projects helped develop a new strategy including advancement of a national employment strategy, a comprehensive training strategy, and a national strategy for childhood and youth.

• 19 projects supported changes in the legal framework through new legislation or a decree. Approval of new legislation as well as amendments to existing legal framework mainly aimed to reform/consolidate existing pension systems, regulate the additional pillars, and/or establish transparent and financially viable indexation rules to contribute to fiscal sustainability.

• 5 projects financed technical assistance that entailed advisory services on proposed pension reforms and outlined reform implementation steps. Some included design of processes for the restructuring of the pension system or preparation of the draft legal framework for the introduction of new pillars.

• 7 other projects produced studies, strategic planning materials as well as statistical/ actuarial reports reviewing various aspects of pension reform.

13 projects supported changes in the legal framework through new legislation or decrees.

• Five operations mainstreamed community-driven development (CDD) approaches into decentralization policy framework — introducing more transparency and accountability.

• Four operations piloted innovations in decentralized service delivery.

• Two operations supported dialogue around social protection policies.

• One operation in particular piloted a CDD approach in land reform – this increased government political support for land reform.

• one operation piloted social inclusion of marginalized ethnic groups.

Physical outputs Physical outputs Physical outputs Physical outputs 14 projects contributed to build or rehabilitate training centers to be used for training and upgrading of workers for the labor market.

• 10 projects enhanced the centralized record keeping merger of decentralized pension funds into a national system, installation of new MIS, compilation of databases and/or upgrading IT systems.

• 5 operations contributed to increasing timeliness or accuracy of benefit determinations by developing single registry systems for pension funds, and establishment of mechanisms to incorporate information about beneficiaries.

• 5 projects supported design and implementation of an automated administrative system.

• 10 operations contributed to build or rehabilitate (one or multiple) physical infrastructures. For example,

• 7 projects contributed to contruct or improve 8363.6 km of roads, and 46 rural roads;

• 5 projects contributed to construction of 422 classrooms and 57 education facilities and rehabilitation of 903 schools;

• 8 projects supported construction or rehabilitation of other infrastructures (1,028 facilities for disabled, dams, water pipeline etc.)

Of the 90,098 subprojects delivered: • 29% water and sanitation, • 25% were for roads, • 21% microfinance. • 9% social assistance, • 9% schools, • 4% other sub-projects and • 3% for health.

a 17 projects that were coded theme 56 and closed in the period were not included in this analysis because they did not use social funds mechanisms (multi-sectoral, demand-driven, financing of local infrastructure and services).

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D. Partnerships and the Bank’s Comparative Advantage

293. SP objectives can only be achieved when business climates favor growth, when governance enables pro-poor redistribution to achieve social objectives without creating disincentives that could slow growth or divert gains to the privileged, and when investment in physical and human capital is sufficient. The Bank is uniquely positioned to articulate strategies and support policies that are consistent with these requirements—and with the realities of public Finance, which are a critical consideration, given the counter-cyclical nature of many SP policies and expenditures.

294. Partnerships allow the Bank to make the best use of its comparative advantage and to leverage funds, political capital, and expertise. In SP, partnership activities have become wider in scope and better coordinated over the review period as they have garnered more funding from the Development Grant Facility and from bilateral and multilateral donor trust funds. Many of the partnerships are established to accomplish specific tasks, such as providing immediate research and raising awareness on emerging policy issues that is then mainstreamed into operations.

295. The Partnership on Job Creation, Core Labor Standards, and Poverty Reduction in Africa has produced policy-relevant new research and raised awareness of its results across sectors. A partnership with the Institute for Labor is helping to mobilize the international research community to fill remaining gaps in knowledge about labor markets in low- and middle-income countries, including on the mobility of workers into and out of informal employment, on how workers develop skills to match enterprise demand, and on how workers are affected by globalization and restructuring.

296. Partnerships such as the Private Pension Research Partnership help to develop knowledge on privately managed pension funds. Other partnerships have succeeded in advancing the Bank’s agenda in previously neglected but critical areas such as the needs of disabled people and child laborers. The Middle East and North Africa Child Protection Initiative has contributed to projects at the municipal level to support vulnerable children.201 The Understanding Children’s Work partnership provided research and analysis that led the Education for All initiative to establish a taskforce on child labor. The World Bank played a key role in establishing the Global Partnership on Disability and Development—a coalition of NGOs and other international and civil society organizations.

297. In addition to formal partnership activities, the Bank maintains a dialogue on social protection and labor-related issues with the international trade union movement and international organizations such as ILO, the World Food Program, and the International Social Security Association.

201 The Middle East and North Africa Child Protection Initiative (P092427), a Global Programs and Partnerships

product, was approved on August 11, 2003.

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298. During FY07-09, the priority policy areas in the sector will include:

• Good jobs: work with the Regions to implement the multisectoral job creation agenda MILES and fill closely related knowledge gaps. These include following up on World Development Report 2007 on youth, with a focus on school-to-work transitions and employment, and deepening the work on the impact of migration on the labor market and on the access of immigrants to social services.

• Greater security: work to enhance understanding and improve policy advice on how to close the persistent coverage gaps in most types of social protection programs; to expand the assessment of income replacement rates under multi-pillar pension systems to all regions; and to evaluate the fiscal consequences and financing requirements of health and unemployment systems using new adaptations of the PROST model. Work will continue on countercyclical safety nets, and to improve the capacity of SP programs to respond to natural disasters.

• Enhanced equity: (a) Work to improve or expand safety net programs, especially CCT programs. In low-income countries, safety net programs need to be tailored to the limited administrative capacity, and in middle-income countries, they need to address issues of labor disincentives and service integration. (b) Use social funds in a broader range of safety net programs including conditional cash transfer and public works schemes. Support inclusive disability policies and introduce associated new product lines into Bank operations.

299. To pursue the SP policy agenda, the Bank will use several means, including:

• Strengthening cross-sectoral activities, including the links between education and labor market interventions, pension and health financing issues, and the public and private sectors, and between CCTs and education and health.

• Better integrating knowledge management activities with the work of the Bank’s regional offices, including stronger participation of regional staff in delivering Bank-wide knowledge products and region-to-region cross support, in order to make better use of available knowledge.

• Dynamic learning from systematic M&E, including more operational definitions and estimates of the vulnerability of groups, regions, and countries and the impact of instruments for managing strategic risks.

• Better incorporating poverty and social impact analysis into policy development and utilizing strategic risk management to reach poor and vulnerable groups.

• Increased focus on establishing evidence on cost-effective interventions and advancing M&E, so as to improve the governance of policies and programs, and more

117

use of information and communications technology to improve program implementation.

300. The Bank’s regional offices expect to pursue the following emphases in SP support in FY07-09:

• Sub-Saharan Africa will focus on youth jobs, programs that help fight HIV/AIDS, and initiatives to mitigate weather-related risks in drought-prone countries, including the use of productive safety nets that develop capacity for public works as well as facilitate a shift from food aid to cash transfers. The region will also explore introducing conditional cash transfers into low-capacity environments to improve health and education services and outcomes.

• East Asia and Pacific will support youth employment and skill acquisition; help reform segmented social assistance programs and extend social insurance coverage; and pilot and evaluate CCT programs and innovative community-based approaches to reach poor areas and households.

• East Europe and Central Asia will advance its job creation agenda; adapt to the European Union social inclusion agenda (including on disability); revisit pension reform issues; and prepare poverty assessments and updates to improve social safety nets.

• Latin American and the Caribbean will focus on reforming the truncated welfare state, in which access to insurance and to basic social services is linked to participation in the small formal sector, and addressing the large gaps in coverage as well as distributional inequities. It will also focus on supporting social safety nets that are better integrated and incentive-compatible with social security (pensions and health insurance).

• Middle East and North Africa will seek to replace pervasive commodity subsidies with targeted programs and address high unemployment, especially among young people; deep poverty in certain countries; the social consequences of conflicts; and migration.

• South Asia will complete due diligence on safety nets, improving their targeting and administration, and continue analytic and advisory services for pensions and social security, in order to improve the financial sustainability and administration of these systems.

ANNEX A. LIST OF SECTOR STRATEGY PAPERS, UPDATES, PROGRESS REPORTS AND ACTION/BUSINESS PLANS

Infrastructure

• Infrastructure Action Plan (SecM2003-302), June 23, 2003.

• Infrastructure and the World Bank: A Progress Report (SecM2005-0441), August 15, 2005.

• Infrastructure and the World Bank (DC2005-0015), September 12, 2005.

Water Supply and Sanitation

• Implementing the World Bank Infrastructure Action Plan (with Special emphasis on the Follow-up on the Recommendations of the World Panel on Financing Water Infrastructure (DC2003-0015), September 13, 2003.

• The World Bank Group’s Program in Water Supply and Sanitation, World Bank, January 2004 (external publication).

• Sector Strategy Implementation Update FY05 (Part Two—Implementation Update for the Water Supply and Sanitation Sector) (SecM2006-0125), March 21, 2006.

Energy

• Fuel for Thought: Environmental Strategy for the Energy Sector (R99-131), July 20, 1999.

• The World Bank Group’s Energy Program: Poverty Reduction Sustainability and Selectivity, Topical Briefing, (OM2001-0056), May 2001.

• Renewing our Energy Business. World Bank Group Energy Program. Implementation Progress Report 2001-03, World Bank, February 2004 (external publication).

Information Communications and Technology

• Sector Strategy Paper, Information and Communication Technologies (R2001-0154) August 10, 2001.

Transport

• Sustainable Transport. Sector Review and Lessons of Experience (SecM96-0147), February 8, 1996.

Financial Sector

• Strategy for the Financial Sector (R2000-169), March 2001.

• Financial Sector Strategy for the World Bank Group (SecM2007-0142, IDA/SecM2007-0190, IFC/SecM2007-0017, MIGA/SecM2007-0011), April 2, 2007.

Forest Management

• A Revised Forest Sector Strategy (R2002-0195), October, 11, 2002.

119 ANNEX A

Education

• Education Sector Strategy Paper (R99-68). World Bank, April 28, 1999.

• Education Sector Strategy Update. Achieving Education for All, Broadening our Perspective, Maximizing our Effectiveness (SecM2005-0655), December 2005.

Health, Nutrition and Population

• Health, Nutrition and Population Sector Strategy Paper (R97-0168), July 3, 1997.

• Population and the World Bank: Adapting to Change (SecM2000-154), March 24, 2000.

• Topical Briefing on Health and Investing on Private Health Care: Strategies for IFC (SecM2002-0111), February 22, 2002.

• Booster Program for Malaria Control (OM2005-0010), Technical Briefing, February 9, 2005.

• World Bank’s Global HIV/AIDS Program of Action (OM2005-0052),December 2005

• Implementation Plan.

• Healthy development: The World Bank Strategy for Health, Nutrition and Population Results (CODE2007-0016), February 28, 2007.

Urban Development

• Sector Strategy Paper: A Strategic View of Urban and Local Government Issues: Implications for the Bank (R99-191), October 8, 1999.

Rural Development

• Reaching the Rural Poor: A Updated Strategy for Rural Development (R2002-0043/2), August 2002

• Implementing Reaching the Rural Poor—A Progress Report (SecM2004-0270), May 25, 2004.

• Sector Strategy Implementation Update FY05 (Part Two—Implementation Update for Rural Development) (SecM2006-0125), March 21, 2006.

Public Sector Governance

• Reforming Public Institutions and Strengthening Governance: A World Bank Strategy (R2000-91), November 2000.

• Reforming Public Institutions and Strengthening Governance: A World Bank Strategy—Implementation Update (SecM2002-167), March 28, 2002.

• Sector Strategy Implementation Update FY05 (Part Two—Implementation Update for Public Sector Governance) (SecM2006-0125), March 21, 2006.

120 ANNEX A

Private Sector Development

• Private Sector Development Strategy—Directions for the World Bank Group (SecM2002-47/1, IDA/SecM2002-27/1, IFC/SecM2002-10/1, MIGA/SecM2002-11/1), April 16, 2002.

• The World Bank Group Private Sector Development Strategy—Implementation Progress Report (R2003-75/2, IFC/R2003-73/2, MIGA/R2003-20/2), June 2003.

• Elements of the Growth Agenda: Investment Climate and Infrastructure, and Infrastructure Development: Update on the Implementation of the Infrastructure Action Plan (SecM2004-0400/1), September 7, 2004.

Environment

• Environment Sector Strategy, Making Sustainable Commitments (R2001-0121), September 9, 2001.

• Environment Strategy Implementation Progress Report. Putting our Commitments to Work (R2003-0046/1), May 19, 2003.

Water Resource Management

• Water Resources Sector Strategy: Strategic Directions for World Bank Engagement (R2003-0006), February 3, 2003.

Social Protection

• Social Protection Sector Strategy: From Safety Net to Springboard (R2000-0160), August 16, 2000.

Social Development

• Empowering People by Transforming Institutions: Social Development in World Bank Operations (R2005-0017), February 2, 2005.

Gender

• Integrating Gender into the World Bank’s Work: A Strategy for Action (CODE 2001-0043), April 30, 2001.

• Implementation of the Gender Mainstreaming Strategy, World Bank, First Annual Monitoring Report, FY02, (SecM2003-0092), March 4, 2003.

• Implementation of the Gender Mainstreaming Strategy, World Bank, Second Annual Monitoring Report, FY03, (SecM2004-0026), February 5, 2004.

• Gender Equality as Smart Economics: A World Bank Gender Action Plan (Fiscal Years 2007-10), (SecM 2006-0370), August 2006

ANNEX B. STANDARD CODING CLASSIFICATION – SECTOR AND THEMATIC CODES

SECTOR CODES

Agriculture, Fishing, and Forestry AB Agricultural extension and research AJ Animal production AH Crops AT Forestry AI Irrigation and drainage AZ General agriculture, fishing, and forestry Law and Justice and Public Administration BC Central government administration BE Compulsory pension and unemployment

insurance BG Law and justice BH Sub-national government administration BK Compulsory Health Finance BZ General public administration Information and Communications CA Information technology CB Media CD Postal services CT Telecommunications CZ General information and communications Education EL Adult literacy/non-formal education EC Pre-primary education EP Primary education ES Secondary education ET Tertiary education EV Vocational training EZ General education Finance FA Banking FK Capital markets FB Non-compulsory health finance FC Housing finance and real estate markets FD Non-compulsory pensions, insurance, and

contractual savings FE Micro and SME finance FG Payment systems, securities clearance, and

settlement FZ General finance

Health and Other Social Services JA Health JB Other social services Industry and Trade YA Agricultural marketing and trade YB Agro-industry YC Housing construction YY Other domestic and international trade YW Other industry YD Petrochemicals and fertilizers YZ General industry and trade Energy and Mining LA District heating and energy efficiency services LB Mining and other extractive LC Oil and gas LD Power LE Renewable energy LZ General energy Transportation TV Aviation TP Ports, waterways, and shipping TW Railways TA Roads and highways TZ General transportation Water, Sanitation, and Flood Protection WD Flood protection WA Sanitation WS Sewerage WB Solid waste management WC Water supply WZ General water, sanitation and flood protection

123 ANNEX B

THEMATIC CODES

Economic Management 20 Analysis of economic growth 21 Debt management and fiscal sustainability 22 Economic statistics, modeling, and forecasting 23 Macroeconomic management 24 Other economic management Public Sector Governance 25 Administrative and civil service reform 26 Decentralization 27 Public expenditure, financial management, and

procurement 28 Tax policy and administration 29 Other accountability/anti-corruption 30 Other public sector governance 90 Managing for Development Results Rule of Law 31 Access to law and justice 32 Judicial and other dispute resolution mechanisms 33 Law reform 34 Legal institutions for a market economy 35 Legal services 36 Personal and property rights 37 Other rule of law Financial and Private Sector Development 38 Corporate governance 39 Infrastructure services for private sector

development 40 Regulation and competition policy 41 Small and medium enterprise support 42 Standards and financial reporting 43 State enterprise/bank restructuring and

privatization 44 Other financial and private sector development Trade and Integration 45 Export development and competitiveness 46 International financial architecture 47 Regional integration 48 Technology diffusion 49 Trade facilitation and market access 50 Other trade and integration Social Protection and Risk Management 52 Natural disaster management 53 Poverty strategy, analysis, and monitoring 54 Social safety nets 87 Social risk mitigation 51 Improving labor markets 55 Vulnerability assessment and monitoring 56 Other social protection and risk management

Social Development, Gender, and Inclusion 57 Participation and civic engagement 58 Conflict prevention and post-conflict

reconstruction 59 Gender 60 Indigenous peoples 61 Social analysis and monitoring 62 Other social development Human Development 63 Child health 64 Other communicable diseases 65 Education for all 66 Education for the knowledge economy 67 Health system performance 68 Nutrition and food security 69 Population and reproductive health 70 Other human development 88 HIV/AIDS 89 Non-communicable diseases and injury Urban Development 71 Access to urban services and housing 72 Municipal finance 73 Municipal governance and institution building 74 Other urban development Rural Development 75 Rural markets 76 Rural non-farm income generation 77 Rural policies and institutions 78 Rural services and infrastructure 79 Other rural development Environment and Natural Res. Management 80 Biodiversity 81 Climate change 82 Environmental policies and institutions 83 Land administration and management 84 Pollution management and environmental health 85 Water resources management 86 Other environment and natural resources

management

ANNEX C. RESULTS SHEETS FOR SELECTED SECTOR STRATEGIES

WATER SUPPLY AND SANITATION 1 SECTOR STRATEGY MONITORING RESULTS SHEET FOR FY06

A. Progress in Intermediate/Final Outcomes (country level)

Table B1. Water & Sanitation Access, FY02-04 (population)

population (thousands) a

with access to water (in percent)

with access to sanitation (in percent)

Regions FY02 FY04 FY02 FY04 FY02 FY04 AFR 684,768 734,841 58 56 36 37 LCR 535,626 553,725 89 91 75 77 EAP 918,889 1,945,289 78 79 50 51 SAR 1,480,287 1,528,108 84 85 37 38 MNA 331,280 346,255 89 91 76 81 Source: Meeting the MDG Drinking Water and Sanitation Target from the Joint Monitoring Programme, 2006. a All figures are approximate for the World Bank regions. Some UN regions have been combined where appropriate: AFR:

Sub-Saharan Africa; LCR: LCR; EAP: Eastern Asia, South-eastern Asia, Oceania; MNA: Northern Africa, Western Asia.

B. Progress in Results Orientation (project level)

Table B2. Results Measurement Indicators, Water Supply and Sanitation, FY04-06 (in percent)

FY04 FY05 FY06 Target Implementation Status and Results Reports with outcome baseline data

- 31.7 42.4 100

Projects with plans for impact evaluation 12.5 13.6 18.1 - Projects that use country M&E system and/or focus on building country systems

31.2 22.7 45.4 -

Implementation Completion Reports with project outputs data

85.2 92.3¹/ 90.9 b -

Source: Bank staff estimates. a Based on 26 analyzed ICRs from FY05 (partial FY). b Based on a review of a random sample (25%) of WSS projects closed in FY06 (11 ICRs).

1 See The World Bank Group’s Program in Water Supply and Sanitation, World Bank, January 2004 (external

publication); and the Water Supply and Sanitation Business Strategy: Fiscal 2003-07, September 2003 (internal publication). See also Operational Guidance for World Bank Group Staff: Public and Private Sector Roles in Water Supply and Sanitation Services, April 2004; Progress Report and Critical Next Steps in Scaling Up: Education for All, Health, HIV/AIDS, Water and Sanitation, Addendum 3, March 2003; and the Infrastructure Action Plan (SecM2003-302), June 2003; See Sector Strategy Implementation Update FY05 (SecM2006-0125), March 21, 2006.

126 ANNEX C WATER SUPPLY AND SANITATION

C. Progress on the Development of the Results Framework

1. The Bank continued to monitor progress in the inclusion of access (to water and sanitation facilities) indicators and baseline data in water supply and sanitation projects. In FY06, the level of inclusion of access indicators remained constant at about 60 percent of projects. However there was a marked improvement in the number of projects that had incorporated a target (from 30-80 percent) and baseline (from 10-40 percent).

2. As the WHO/UNICEF Joint Monitoring Programme (JMP) only compiles global data on progress in meeting water supply and sanitation “access” targets on a periodic basis (latest data available FY04), the Bank has continued its efforts to support the monitoring of progress in achieving access goals at the country level. For example, in AFR, the Bank, African Development Bank (AfDB) and the Water and Sanitation program have supported a country led effort to prepare Water Supply and Sanitation MDG country status reports. These reports were prepared under the umbrella of the African Minister’s Council on Water (AMCOW) and form part of the strategic partnership on Africa agreed between the Bank and AfDB. Sixteen countries submitted country status reports in the first round. Each was prepared through a process of consultation with stakeholders, and endorsed by lead government agencies. In addition to tracking progress, they assess the capacity to meet projected needs and sector preparedness.

D. Key FY06 Achievements in the Implementation of Strategic Directions for FY06-08.

3. Continued Support for Development of the Utility Performance Benchmarking Database Managed by the International Benchmarking Network (IBNET). The database currently includes information from 1,900 utilities from 74 countries. In several countries, this data is being used by governments as a means of introducing performance based financing mechanisms, and assessing improvements in the quality of services over time.

4. Extending Services to Unserved Households, Particularly Poor People through the OBA Program. The OBA mechanism aims to develop and test mechanisms for targeting subsidies of the poor or underserved households that can be scaled up by government over time. In FY07, the Bank’s Output Based Aid (OBA) program is scheduled to receive a significant funding boost (US$28 million) to assist borrowers extend services to unserved households, particularly poor people.

5. Ensuring that WSS Components of Multisectoral Investments are Better Planned and Implemented. Based on the findings of FY05 SSIU, the Bank strengthened its efforts to improve the quality of water supply and sanitation components in multisectoral investment projects. The Bank also began the preparation of a support program for multisectoral projects. In addition to providing training and disseminating information, technical assistance has been provided to task managers to strengthen the quality of WSS components. This program benefited from the results review of 29 WSS projects in multisectoral projects conducted by the Quality Assurance Group

127 ANNEX C WATER SUPPLY AND SANITATION

(QAG),2 which aimed to identify issues and propose actions for treatment of WSS quality in multisectoral projects.

6. Intensifying Assistance for Sanitation and Hygiene. By the end of FY06, after 18 months of operation, the Sanitation, Hygiene and Wastewater Support Service (SWAT) had undertaken 32 technical support activities in 25 countries, at a cost of approximately $1 million of trust funds and BB. This support contributed to the preparation of projects with sewerage and sanitation investments valued at more than $800 million and to the implementation of projects with sewerage and sanitation investments valued at over $50 million. The focus of the program was on supporting access to sanitation for those with none, rather than improving wastewater treatment. The SWAT provided a combination of upstream project preparation work (where there was no project), and TA for ongoing operations. Based on the initial success of the concept, the BNWP has renewed its commitment to SWAT, at a level of approximately $500,000 per year over the next 30 months.

2 See Quality of Water Supply and Sanitation (WSS) Components in Non-dedicated Projects, A QAG

Assessment, June 29, 2006.

128 ANNEX C

RURAL DEVELOPMENT STRATEGY 1 MONITORING RESULTS SHEET FOR FY06


Table B1. Intermediate Outcomes of Rural Development for Selected Countries

Agriculture, value added (average annual % growth)

Agricultural Productivity (agriculture value added

per worker 2000$) Agricultural Output-Cereal Yield (kg/ha) Countries*

/Regions 1980-90 1990-2000 2000-04 2004 1989-91 1992-94 2002-04 1992-94 1993-95 2003-05Albania 1.9 4.3 5.1 3.5 1,801 916 1,469 2,465 2,662 3,491 Bangladesh 2.1 2.9 2.4 4.1 239 251 309 2,583 2,572 3,533 Cambodia .. 3.9 2.8 -2.0 .. 276 289 1,366 1,520 2,062 China 5.9 4.1 3.4 6.3 242 273 373 4,481 4,581 5,057 Egypt, Arab Rep. 2.7 3.1 3.7 1.9 1,497 1,575 2,007 5,918 5,920 7,528 Ethiopia 0.6 1.9 0.9 18.9 .. 123 118 1,143 1,106 1,261 Ghana 1.0 3.4 5.0 7.5 315 301 341 1,237 1,341 1,437 India 3.1 3.0 2.0 1.1 341 362 391 2,075 2,104 2,391 Nigeria 3.3 3.4 5.3 6.5 576 610 863 1,150 1,165 1,057 Pakistan 4.0 4.4 1.3 2.2 563 603 688 1,893 1,946 2,438 Peru 3.0 5.5 2.6 2.0 1,196 1,169 1,764 2,697 2,745 3,399 Uganda 2.1 3.7 3.9 5.2 187 192 231 2,697 1,536 1,667 Vietnam 2.8 4.3 3.6 3.5 212 225 294 3,344 3,463 4,651 Yemen, Rep. .. 5.6 5.3 4.7 361 383 511 1,104 1,102 772 AFR 1.7 3.3 3.6 5.3 314 294 341 1,000 1,034 1,087 EAP 4.9 3.4 3.4 5.3 .. .. .. 3,965 4,031 4,466 ECA .. -1.7 3.3 6.7 1,791 1,602 1,914 1,936 1,902 2,331 LCR 2.7 1.8 3.1 3.3 2,166 2,234 2,812 2,456 2,493 3,159 MNA 3.2 2.9 5.1 2.5 1,825 1,589 1,975 1,898 1,877 2,439 SAR 5.4 3.1 1.9 1.5 344 364 401 2,069 2,128 2,505 Source: WDIs. Note: The Bank supported national rural development strategies for all of the countries on this list, except for China and Ghana.

B. Progress in Results Orientation

Table B2. Results Measurement Indicators, Rural Development, FY04-06 (in percent)

FY04 FY05 FY06 Target Implementation Status and Results Reports with outcome baseline data - 51.8 52.1 100 Projects with plans for impact evaluation 34.1 16.7 48.4 - Projects that use country M&E system and/or focus on building country systems 38.6 40.5 45.3 - Implementation Completion Reports with project outputs data 73.7 74.5 a 92.8 b - Source: Bank staff estimates. a Based on 49 analyzed ICRs from FY05 (partial FY). b Based on a review of a random sample (25%) of RDV projects closed in FY06 (28 ICRs).

1 See Reaching the Rural Poor: A Updated Strategy for Rural Development (R2002-0043/2), August 2002;

Implementing Reaching the Rural Poor–A Progress Report (SecM2004-0270), May 25, 2004; and Sector Strategy Implementation Update FY05 (SecM2006-0125), March 21, 2006.

129 ANNEX C RURAL


1. In FY06, the Bank began the preparation of a toolkit for staff2 that compiles a set of core intermediate indicators in the rural development area. These indicators will be used to monitor agricultural and rural development at global, country and project levels. The usefulness of these indicators in practice will be validated at the country level through workshops in selected client countries.

2. Also, the Bank set up and delivered a monitoring and evaluation toolkit on food and agricultural research and extension3 for client countries, and began the preparation of other sub-sector related Monitoring and Evaluation toolkits on irrigation and drainage (water for food), and governance indicators on fisheries.


3. Continued Efforts to Measure Agricultural and Rural Development Outcomes at Global, Country and Project Level. At the Global Donor Platform for Rural Development in FY06, the Bank agreed with other donors on the importance of measuring country-level intermediate indicators in the rural development area, developing a common set of indicators and preparing a toolkit for client country use.

4. Increased Support to the Regions with the Largest Number of Rural Poor, specifically AFR. For example, agriculture sector lending reached $394 million in FY07 and some $685 million in YF06in AFR—which was the highest lending since FY90 ($760 million). The Bank also strengthened the role of agriculture and rural development in the Bank’s agenda, with a CAS coverage of the rural development theme increasing from 73 percent in FY05 to 78 percent in FY06.

5. Strengthened Analytic Work in Areas of Emphasis for the Rural Development SSP—i.e., (a) rural institutions, off-farm employment and income generation,4 (b) empowering rural people, including farmers, through supporting capacity building for local groups and farmer organizations,5 (c) improved nutrition and household food security,6 and (d) pressing for results on trade liberalization and removing distorted agricultural policy regimes.7

6. Provided DGF Grant to the Global Donor Platform for Rural Development, for a pilot on harmonization of donors activities in four pilot countries (Nicaragua, Cambodia, Burkina Faso and Tanzania).

2 See How to select a set of core indicators for monitoring outcomes of agricultural and rural development

programs (draft), forthcoming. 3 See Monitoring and Evaluation for World Bank Agricultural Research and Extension Projects: A Good

Practice Note, IBRD/the World Bank, 2005. 4 For example, The Rural Investment Climate: It Differs and It Matters, Agriculture and Rural Development

Sector Report (36543-GLB), the World Bank, 2006. 5 For example, China, Farmers Professional Associations, 2006. 6 For example, Intellectual Property Rights: Designing Regimes to Support Plant Breeding in Developing

Countries, Agriculture and Rural Development Sector Report (35517-GLB), the World Bank, 2006. 7 For example, India, Agricultural Marketing, 2006.

130 ANNEX C

PUBLIC SECTOR GOVERNANCE STRATEGY

MONITORING RESULTS SHEET FOR FY061


Figure B1. CPIA, Core Public Sector Management Practices, FY00-FY04-FY05

1.0

2.0

3.0

4.0

Allclients

IDA IBRD AFR EAP ECA LCR MNA SAR

2000 2004 2005

Note: CPIA average for quality of budget and public administration

Figure B2. CPIA, Broader Governance Practices, FY00-FY04-FY05

1.0

2.0

3.0

4.0

Allclients

IDA IBRD AFR EAP ECA LCR MNA SAR

2000 2004 2005

Note: CPIA average for property rights and transparency, accountability and corruption in public sector

B. Progress in Results Orientation (project level)

Table B2. Results Measurement Indicators, Public Sector Governance, FY04-06 (in percent)

FY04 FY05 FY06 TargetImplementation Status and Results Reports with outcome baseline data - 50.0 52.9 100 Projects with plans for impact evaluation 13.8 13.6 14.8 - Projects that use country M&E system and/or focus on building country systems 44.8 45.5 48.1 - Implementation Completion Reports with project outputs data 69.2 68.8 a 68.3 b - Source: Bank staff estimates. a Based on 48 analyzed ICRs from FY05 (partial FY). b Based on a review of a random sample (25%) of PSG projects closed in FY06 (60 ICRs).


1. The multidimensionality of governance makes precise monitoring difficult. In FY06, the Bank laid out a framework2 that identifies governance indicators for tracking progress, improving transparency and accountability, and generating greater demand for good governance outcomes. This framework included a core list of 14 monitorable indicators, including both broad measures of governance, as well as more specific, actionable indicators (control of corruption, policy outcome, aggregate public institutions, business transaction costs, budget/financial management, public administration, voice and accountability, justice and rule of

1 See Reforming Public Institutions and Strengthening Governance: A World Bank Strategy (R2000-91); and see

Sector Strategy Implementation Update FY05 (SecM2006-0125), March 21, 2006. 2 See Global Monitoring Report 2006. Millennium Development Goals. Strengthening Mutual Accountability,

Aid, Trade, and Governance, World Bank, 2006.

131 ANNEX C PUBLIC SECTOR

law, executive constraints, PEFA indicators). Additionally, the Bank launched a database of worldwide governance indicators, based on responses from over 120,000 citizens, enterprises and experts worldwide, provided by 25 different organizations, using a state-of-the-art methodology.3 Other indicators on which the Bank is working include the PEFA indicators to track public financial management, procurement indicators, and business climate indicators.


2. In FY06, the Bank prepared a strengthened approach to engage client countries in governance and anticorruption.4 The strategy takes a comprehensive approach that involves working at the country, operational, and global levels to enhance and integrate governance and anticorruption measures, deploying the full range of Bank Group activities to assist partner countries in achieving demonstrable results for sustained poverty reduction. As the core of the Bank’s support to countries is expected to remain in the sectors, the strategy envisages better integration of governance and anticorruption concerns into the Bank’s sectoral programs, including for the private and financial sectors.

3 See Governance Matters 2006: Worldwide Governance Indicators, World Bank, 2006, op.cit. 4 See Strengthening Bank Group Engagement on Governance and Anticorruption (DC2006-0017), September 8, 2006.

132 ANNEX C SOCIAL DEVELOPMENT

SOCIAL DEVELOPMENT SECTOR STRATEGY



Table B1. Intermediate Outcomes of Social Development for Selected Indicators

Social development No. of active

borrowers Active borrowers with at least two data points

Active borrowers with improvements

Gini index of inequality a 100 85% Urban population living in slum conditions b 118 76% Level of democracy and political competition c 110 70% 86%

(66 of 77 countries) Political instability and violence d 138 70% 85%

(82 of 96 countries) Civil liberties d 138 70% 80%

(77 of 96 countries) Source: Bank staff estimates. a WDR 2006 Table A2. b UN-HABITAT 2003 Slums of the World: The Face of Urban Poverty in the New Millennium. c Polity IV (2005; baseline=2000). d Freedom House (2005; baseline=2000).


Table B2. Results Measurement Indicators, Social Development, FY04-06 (in percent)

FY04 FY05 FY06 Target Implementation Status and Results Reports with outcome baseline data - 35 32 100 Projects with plans for impact evaluation - 12 6 - Projects that use country M&E system and/or focus on building country systems - 42 20 - Implementation Completion Reports with project outputs data - 67 65 - Source: Bank social development staff estimates.


1. Progress in implementing the Social Development Strategy is measured at the operational (site and sector specific) and country (global) levels. The integration of social development dimensions of inclusion, cohesion, and social accountability is difficult to track on-the-ground, as these dimensions are embedded within sectoral work. The Bank maintains a database of social development monitoring indicators covering 345 projects under QAG’s quality of entry review (FY00-05) and 206 projects under quality of supervision (FY00-04).

2. At the country level, selection of indicators is done at two levels. One is at the level of global indicators and the other is at the project level. For example, changes in urban population 1 See Empowering People by Transforming Institutions: Social Development in World Bank Operations (R2005-

0017), op. cit.

133 ANNEX C SOCIAL DEVELOPMENT

living in slum conditions, which are tracked globally by UN Habitat, are also measured in Bank-funded urban sector projects. Country and societal measures of income distribution are collectively assessed through the Gini Inequality Index. Political stability and security indicators are compiled through the Post-Conflict Performance Indicators (PCPIs) and the Governance Indicators on Political Instability and Violence. Civil Liberties and Level of Democracy and Political Competition global indices measure social accountability at the country level. These are updated annually and reflect progress of the country in promoting social accountability.

3. In FY05-06, the Bank made progress in results management, with the preparation of an assessment of the poverty and social impact analysis (PSIA) and stakeholder participation in DPLs, a FY05-06 CAS Retrospective Review for coverage and quality of social development, a joint review with QAG on the quality of integration of social development issues in operational quality at entry and supervision. Training on monitoring and evaluation of community driven development (CDD) projects in AFR was also completed in FY06.

134 ANNEX C

EDUCATION SECTOR STRATEGY



1. The Bank has been very successful in the past several years in establishing benchmarks and monitoring our progress in terms of increasing educational access and increasing government financial effort for education. For example, in Mauritania, Burkina Faso, and Ghana, one million children a year have been added to primary school enrollments since 2002, and in Yemen 14,000 teachers have been trained. AFR alone has seen gross enrollments increase from 79 percent to at least 95 percent. The Bank and the Fast Track Initiative2 (FTI) support has also led to increases in domestic financing such as in Mauritania where the share of domestic resources to education increased from 13.9 percent to 16.7 percent between 2001 and 2005. New initiatives such as the wave of new teachers brought in to achieve Education-For-All (EFA), the abolition of user fees, the increasing harmonization of donors, and the FTI experiment are working and bearing results.


Table B1: Results Measurement Indicators, Education, FY04-06 Percentage of projects

FY04 FY05 FY06 Target 1. Implementation Status and Results Reports with outcome

baseline data (percent) 100

Improving quality of education 50 0 29 Enhancing access to education 100 84 89 Improving equity of access to education 60 67 76 Improving efficiency of resource allocation 71 67 56 Improving institutional and management capacity 11 4 13

2. Projects with plans for impact evaluation (percent) 38 52 64 Project that describe impact evaluation targets and methodologies 5 15 8

3. Projects that use country M&E system and/or focus on building country systems (percent)

88.5 80.8

4. Implementation Completion Reports with project outputs data (percent)

80 89.4 100

Source: Bank education staff estimates.


2. However, the Bank has not been as successful in the area of measuring progress in terms of learning outcomes. While over 80 percent of Bank-funded projects provide support for increasing the quality of programs, only about 20 percent of projects commit governments to systematically monitor learning achievement. This is explained at least partially by inadequate

1 See Education Sector Strategy Update: Achieving Education For All, Broadening Our Perspective, Maximizing

Our Effectiveness (SecM2005-0655, IDA/SecM2005-0662), December 22, 2005. 2 See Progress Report for the Education for All–Fast-Track Initiative (DC2006-0015), September 7, 2006.

135 ANNEX C EDUCATION SECTOR

technical and funding capacity to establish standards and undertake assessment exams. Measuring the progress being made in terms of improving learning outcomes, including variations in outcomes related to poverty and gender, will be a priority for the Bank and its partners in the coming years. At the project level, the Bank made some advances in the quality of information to assess results of projects:

3. Expanding Access to Education. Of the 26 education projects approved in FY06, 19 included an objective to increase enrollments and/or attain completion of various levels of schooling. 17 of these 19 projects established quantifiable targets for enrollment and/or completion, as well as quantifiable baselines against which progress will be measured.

4. Improving Quality and Relevance. Twenty-one projects had an objective to improve the quality or relevance of education programs. Nearly all these projects included indicators for monitoring the provision of inputs or the achievement of project related outputs such as provision of textbooks or numbers of teachers trained. But only 6 projects cited baseline student achievement results and quantifiable targets for improving performance on these measures over the project time frame. Several additional projects cited a commitment to establish baselines for learning outcomes during the early years of project implementation. Because there are initiatives aimed at building capacity for measuring student performance in nearly all countries where the Bank supports education, it is expected that measuring learning outcomes will increase rapidly in the future. Other quantitative indicators of educational quality, such as measures of teacher qualifications or performance, should be used in the future to complement student achievement data.

4. Improving Equity. Seventeen projects aimed to improve the equitable distribution of resources for education,3 13 of which included baselines and targets for improving the share of resources to be received by disadvantaged groups or for increasing enrollments of disadvantaged groups and/or girls.

5. Building Institutional Capacity. While nearly all education projects—24 of the 26—aimed to improve the governing and management capacity of governments and education stakeholders, only 3 contained quantifiable measures of capacity improvement. The lack of quantifiable indicators in this area is not unique to the education sector and may not reflect the true attention that is given to this issue in Bank projects. More accurately, it is often difficult to design indicators of progress in this area. Most projects did cite the accomplishment of actions or achievement of stages–such as undertaking a successful pilot of an assessment exam–as a valid indicator of success, even if it is not a quantifiable indicator. However, it does point to need for improvement in defining measures of increased institutional capacity in education projects.

• Improving efficiency. Nine projects included an objective to use resources for education more efficiently, five of which outlined specific baselines and quantifiable targets for improving efficiency. In most cases, improving internal efficiency entails the reduction of repetition and dropout rates and/or a decrease in student/teacher ratios.

3 Learning assessment instruments commonly control for factors such as gender and geographic location, and

some include proxy indicators for household income. Increasing attention in the future should be given to measures of equity in educational outcomes, as well as on distribution of public resources.

ANNEX D. DELIVERABLES AND OTHER RESULTS

Table D1. Results of Completed ESW By Sector Boards, FY04-06 (percent of activities containing a given development objective)

Inform lending

Inform government

policy


Inform/ stimulate

public debate



Sector Boards FY04 FY06 FY04 FY06 FY04 FY06 FY04 FY06 FY04 FY06 FY04 FY06 Education 71 59 57 78 50 41 29 44 39 26 0.84 0.75 Energy and Mining 42 56 67 67 42 33 25 11 8 22 0.79 0.78 Environment 50 67 90 73 50 67 50 87 70 60 0.79 0.79 Economic Policy 43 30 80 77 30 34 64 70 36 39 0.81 0.76 Financial Management 24 44 90 100 24 33 19 67 14 56 0.74 0.79 Financial Sector 17 17 75 96 33 43 58 22 33 4 0.83 0.73 Gender and Development 33 100 67 100 0 100 0 0 0 0 0.92 0.67 Global Information/ Communications Technology

43 33 43 67 29 17 57 67 14 17 0.89 0.75


42 40 50 73 8 33 50 60 25 53 0.83 0.65

Poverty Reduction 50 32 71 76 50 52 64 68 50 44 0.89 0.83 Procurement 33 100 83 100 17 67 50 67 33 33 0.86 0.55 Public Sector Governance 48 75 76 79 38 25 43 54 33 46 0.77 0.77 Private Sector Development 43 38 60 70 27 33 37 63 23 38 0.85 0.79 Rural Sector 72 70 69 91 31 40 47 58 34 56 0.81 0.77 Social Development 58 64 58 45 42 18 58 64 50 64 0.80 0.73 Social Protection 15 57 54 90 46 19 46 52 54 29 0.76 0.80 Transport 60 43 100 100 40 57 60 86 60 71 0.74 0.85 Urban Development 100 92 67 54 33 38 33 77 33 46 0.89 0.74 Water Supply and Sanitation

75 67 75 67 50 0 100 67 50 67 0.72 1.00

Aggregated results 48 50 70 78 35 37 47 59 35 41 0.81 0.77 Source: Activity Completion Summary (ACS) for completed tasks, Business Warehouse as of August 23, 2007. Note: FY04 data may be incomplete as prior to FY05, ACS processing was calibrated by cost, exempting tasks under $50,000 unless

mandated by country units. a Rating refers to the extent to which the development objective was achieved (self-evaluation by task manager). Rating scale:

1 = fully; 0.75 = largely; 0.50 = partially; 0 = not achieved.

138 ANNEX D

Table D2. Results of Completed TA By Sector Boards, FY04-06

(percent of activities containing a given development objective) Assist in clients policy /program implementation

Develop/ strengthen institutions

Facility knowledge exchange


Sector Boards FY04 FY06 FY04 FY06 FY04 FY06 FY04 FY06 Education 40 50 100 92 40 58 0.78 0.85 Energy and Mining 80 78 80 78 20 33 0.82 0.78 Environment 20 50 60 38 60 63 0.94 0.92 Economic Policy 100 77 50 77 0 46 0.67 0.87 Financial Management 0 33 0 67 100 67 1.00 0.83 Financial Sector 0 59 50 81 100 41 1.00 0.76 Gender and Development 100 100 33 0.86 Global Information/ Communications Technology

50 50 100 75 25 25 0.75 0.81

Health, Nutrition and Population 0 64 100 82 0 64 0.75 0.73 Operational Services 100 100 0 0.92 Poverty Reduction 50 50 100 75 33 25 0.83 0.65 Public Sector Governance 0 60 100 80 0 60 0.50 0.69 Private Sector Development 80 78 60 67 60 72 0.76 0.70 Rural Sector 50 56 100 81 50 44 0.63 0.84 Social Development 0 60 60 90 40 30 0.82 0.80 Social Protection 100 75 100 83 0 42 0.63 0.76 Transport 50 50 100 100 100 63 0.78 0.73 Urban Development 50 38 100 63 50 50 1.00 0.80 Water Supply and Sanitation 50 50 100 0.97 Aggregated results 47 62 78 78 44 51 0.79 0.78 Source: Activity Completion Summary (ACS) for completed tasks, Business Warehouse as of August 23, 2007. Note: FY04 data may be incomplete as prior to FY05, ACS processing was calibrated by cost, exempting tasks under $50,000

unless mandated by country units. a Rating refers to the extent to which the development objective was achieved (self-evaluation by task manager).

Rating scale: 1 = fully; 0.75 = largely; 0.50 = partially; 0 = not achieved.

139 ANNEX D

Table D3. Average rating of Completed ESW by Sector Boards, FY04-06

(rating for a given development objective on a scale from 0 to 1)a

Inform lending

Inform government

policy


Inform/ stimulate

public debate


Number of activities

Sector Boards FY04 FY06 FY04 FY06 FY04 FY06 FY04 FY06 FY04 FY06 FY04 FY06Education 0.89 0.67 0.88 0.77 0.76 0.83 0.87 0.82 0.79 0.64 28 27 Energy and Mining 0.85 0.86 0.85 0.71 0.70 0.83 0.92 0.75 0.56 0.63 12 9 Environment 0.65 0.68 0.77 0.80 0.79 0.88 0.88 0.85 0.82 0.71 10 15 Economic Policy 0.88 0.76 0.79 0.77 0.77 0.66 0.84 0.81 0.75 0.73 44 56 Financial Management 0.71 0.90 0.67 0.77 0.82 0.81 0.92 0.78 0.80 0.75 21 9 Financial Sector 1.00 0.67 0.79 0.75 0.75 0.63 0.93 0.88 0.80 0.75 12 23 Gender and Development 1.00 0.50 0.88 0.75 0.75 3 1 Global Information/ Communications Technology

1.00 0.63 0.92 0.69 1.00 0.75 0.75 0.85 1.00 0.75 7 6


0.82 0.83 0.79 0.52 0.75 0.50 0.88 0.73 0.81 0.61 12 15

Poverty Reduction 0.93 0.81 0.83 0.81 0.93 0.89 0.91 0.88 0.88 0.73 14 25 Procurement 0.83 0.50 0.84 0.50 0.75 0.38 0.95 0.88 0.83 0.50 6 3 Public Sector Governance 0.88 0.77 0.68 0.72 0.85 0.88 0.81 0.81 0.71 0.73 21 24 Private Sector Development 0.87 0.80 0.83 0.68 0.83 0.77 0.85 0.87 0.89 0.78 30 40 Rural Sector 0.87 0.79 0.81 0.68 0.82 0.84 0.73 0.85 0.82 0.77 32 43 Social Development 0.84 0.66 0.78 0.80 0.85 0.50 0.85 0.89 0.70 0.65 12 11 Social Protection 0.88 0.83 0.71 0.74 0.58 0.75 0.92 0.86 0.71 0.82 13 21 Transport 0.69 0.92 0.80 0.81 1.00 0.88 0.75 0.89 0.56 0.80 5 7 Urban Development 0.94 0.69 0.88 0.78 1.00 0.63 1.00 0.85 0.63 0.69 3 13 Water Supply and Sanitation 0.70 1.00 0.50 0.88 0.80 0.75 4 3 Aggregated results 0.85 0.76 0.78 0.73 0.80 0.76 0.85 0.84 0.78 0.73 294 352 Source: Activity Completion Summary (ACS) for completed tasks, Business Warehouse as of August 23, 2007. Note: FY04 data may be incomplete as prior to FY05, ACS processing was calibrated by cost, exempting tasks under $50,000 unless

mandated by country units. a Rating refers to the extent to which the development objective was achieved (self-evaluation by task manager).


140 ANNEX D

Table D4. Results of Completed TA By Sector Boards, FY04-06 (rating for a given development objective on a scale from 0 to 1) a

Assist in clients policy /program implementation

Develop /strengthen institutions

Facility knowledge exchange

Number of activities

Sector Boards FY04 FY06 FY04 FY06 FY04 FY06 FY04 FY06 Education 0.88 0.88 0.65 0.85 1.00 0.82 5 12 Energy and Mining 0.89 0.80 0.75 0.78 0.75 0.75 5 9 Environment 1.00 0.94 0.94 0.88 0.92 0.92 5 8 Economic Policy 0.63 0.83 0.75 0.88 0.92 2 13 Financial Management 1.00 0.75 1.00 0.88 1 3 Financial Sector 0.75 1.00 0.75 1.00 0.79 2 27 Gender and Development 1.00 0.88 0.50 3 Global Information/ Communications Technology

0.58 0.88 0.75 0.80 1.00 0.75 4 4

Health, Nutrition and Population 0.71 0.75 0.72 0.78 1 11 Poverty Reduction 0.75 0.50 0.85 0.71 0.83 0.75 1 Public Sector Governance 0.75 0.50 0.56 0.83 1 15 Private Sector Development 0.64 0.71 0.75 0.63 0.88 0.77 10 18 Rural Sector 0.50 0.81 0.63 0.82 0.75 0.92 2 16 Social Development 0.89 0.81 0.75 0.83 0.80 5 10 Social Protection 0.50 0.81 0.75 0.70 0.84 1 12 Transport 0.75 0.70 0.75 0.70 0.83 0.80 2 8 Urban Development 1.00 0.75 1.00 0.75 1.00 0.85 2 8 Water Supply and Sanitation 0.50 0.88 1.00 4 Aggregated results 0.73 0.79 0.78 0.74 0.89 0.83 55 186 Source: Activity Completion Summary (ACS) for completed tasks, Business Warehouse as of August 23, 2007. Note: FY04 data may be incomplete as prior to FY05, ACS processing was calibrated by cost, exempting tasks under $50,000 unless

mandated by country units. a Rating refers to the extent to which the development objective was achieved (self-evaluation by task manager).


141 ANNEX D

Table D5. IBRD/IDA Disbursements, FY02-06

(in million of US$) FY02 FY03 FY04 FY05 a FY06

Sectors Water Supply and Sanitation 975 805 891 981 1,190 Energy and Mining 1,868 2,015 1,284 1,389 1,126 ICT 138 108 237 109 101 Transport 2,365 2,409 2,690 2,804 3,142 Finance 1,409 2,107 1,229 2,119 2,464 Forest Management 103 113 97 87 96 Education 1,537 1,926 1,718 1,718 2,072 Health 1,461 1,609 1,873 1,465 1,475 Other Sectors b 8,001 8,083 7,027 8,002 9,078 Total 17,857 19,174 17,046 18,672 20,743 Themes Urban Development 1,439 1,338 1,368 1,526 1,698 Rural Development 1,926 1,881 1,864 1,906 1,997 Public Sector Governance 3,067 3,556 2,841 3,072 3,270 Private Sector Development 2,637 2,749 2,558 2,489 2,471 Environment 1,362 1,215 1,087 1,424 1,279 Water Resource Management 407 333 293 358 426 Social Protection 833 1,467 1,191 1,464 1,524 Social Development 762 855 1,147 1,150 1,321 Gender 206 191 250 310 333 Other Themes c 5,218 5,590 4,446 4,973 6,424 Total 17,857 19,174 17,046 18,672 20,743 Memorandum item: Infrastructure sectors 5,346 5,336 5,103 5,282 5,559 Source: Business Warehouse. a Starting FY05, IBRD/IDA includes Guarantees. b Other sectors include industry and trade, flood protection, solid waste management, law and

justice, public administration, and agriculture and fishing. c Other themes include economic management, trade and integration, natural disaster

management, poverty strategy, analysis and monitoring, standards and financial reporting, and human development.

142 ANNEX D

Table D6. GE+-Level Staff, FY02-06 FY02 FY03 FY04 FY05 FY06

Sectors Water Supply and Sanitation 86 75 85 89 80 Energy and Mining a 156 155 128 125 121 Information and Communications Technology a

… … 27 30 n.a.

Transport 122 107 116 121 120 Finance 140 141 148 136 136 Forest Management 42 42 n.a. n.a. n.a. Education 174 180 182 182 171 Health 171 179 184 183 183 Themes Urban Development 97 92 107 100 97 Rural Development 286 275 296 298 288 Public Sector Governance 98 102 109 101 97 Private Sector Development 135 145 130 126 108 Environment b 140 134 194 191 174 Water Resource Management n.a. n.a. n.a. n.a. n.a. Social Protection 112 122 132 135 126 Social Development 133 136 151 137 136 Gender 16 16 14 8 11 Others 1,638 1,885 1,923 1,972 1,494 Total 3,546 3,786 3,926 3,934 3,749 Memorandum Items: Infrastructure 364 337 356 365 321 Net staff total 8,213 8,530 8,795 8,692 8,582 Source: HR. Note: Each staff is mapped either to a sector or a theme. a Staff allocated jointly to energy and ICT, except in FY04 and FY05. b Excluded staff in Forestry, except in FY04 and FY05.