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ABBREVIATIONS AND ACRONYMS

AMS AFR ASEAN BP CAR CDD CRRC EAP ECA ERL EC FPA FY GET GFDRR GFRP GSD HR IBRD IDA ISR LCR LEGOP LICUS MD MDTF MNA NATO NGO OP OPCFC OPCPR OPCS P A 0 RRC RVP SAR S IL SOPAC UN UNDG UNDP UNICEF WFP

Administrative Manual Statement Africa Region Association of Southeast Asian Nations Bank Procedure Central African Republic Community-driven development Corporate Rapid Response Committee East Asia and Pacific Region Europe and Central Asia Region Emergency Recovery Loan European Commission Fiduciary Principles Accord Fiscal Year Global Expert Team Global Facility for Disaster Reduction and Recovery Global Food Response Program General Services Department Human Resources International Bank for Reconstruction and Development International Development Association Implementation Status Report Latin America and the Caribbean Region Legal Operations Policy Low Income Countries Under Stress Managing Director Multi-donor Trust Fund Middle East and North Africa Region North Atlantic Treaty Organization Non Governmental Organizations Operational Policies Fragile and Conflict-Affected Countries Group Operational Policy and Country Procurement Services Operations Policy and Country Services Poverty Alleviation Office Rapid Response Committee Regional Vice President South Asia Region Specific Investment Loan South Pacific Islands Applied Geosciences Con~mission United Nations United Nations Development Group United Nations Development Program United Nations International Children's Education Fund World Food Promam

RAPID RESPONSE TO CRISES AND EMERGENCIES (OP 8.00) PROGRESS REPORT

I . Introduction ........................................................................................................ 1 I1 . Background ........................................................................................................ 2 I11 . Policy Implementation ....................................................................................... 3

A . Portfolio Profile - Regional Distribution and Typology ............................... 3 B . Speed of Response ...................... ... ................................................ .. ..... 6

. .................................................................................... C Portfolio Performance 9 D . Implenlentation Constraints ......................................................................... 11

..................................... E . Institutional Support and Oversight Arrangements 15 F . Commitment to Partnerships and Integrated Approaches ........................... 18

IV . Main Findings And Recommendations .......................................................... 20 V . Next Steps .......................................................................................................... 23 Annexes Annex A: Data Analysis ............................................................................................... 26 Annex B: List of Operations Approved Under OP 8.00 (03107-1 2/08) ....................... 30

List of Tables Table 1 . Emergency Lending Portfolio by Type and Funding Source (FY05-FY09Q2) .. 3 Table 2 . Operations Approved under OP 8.00 by Region and Type ................................. 4 Table 3 . Average Preparation and Supervision Costs ...................................................... 14 Table 4 . ERLs vs . SILs - Bankwide Average Preparation and Supervision Cost (000s) 14

List of Boxes Box 1 . Bangladesh Portfolio Restructuring ....................................................................... 7 Box 2 . China's Wenchuan Earthquake Recovery Project ................................................. 9 Box 3 . South Sudan Portfolio Support Mission ............. .. ........................................ 15

List of Figures Figure 1 . Operations Approved under OP 8.00 . by Region and Type ........................... 4 Figure 2 . Processing and Delivery Times (in months) ...................... .. ...................... 6 Figure 3 . Portfolio Effectiveness and Slow Disbursement Flags ...................................... 8 Figure 4 . Processing and Delivery Times (in months) .................................................... 10 Figure 5 . Proportion of Portfolio with Risk Flags ......................................................... 11

RAPID RESPONSE TO CRISES AND EMERGENCIES (OP 8.00) PROGRESS REPORT

1. The Bank's new Framework for Rapid Response to Crises and Emergencies, approved in February 2007, transformed the Bank's approach to dealing with crises, disasters, and conflict situations.' The framework provided for greater speed and flexibility in delivering Bank assistance, recognized the challenges of operating in weak- capacity environments, and underlined the value of closer partnerships with development partners in delivering integrated recovery programs that appropriately link recovery, security, and development. Today, the framework's key principles have been further developed and reinforced through President Zoellick's speech "Securing ~eve lo~men t , " ' which sets out an agenda for engagement in fragile and conflict situations.

2. Implementation Experience. Two years into implementation, it is evident that the new policy (set out in OP 8.00, Rapid Response to Crises and Emergencies) has allowed for faster processing of emergency lending across a wide range of crisis situations. The policy was also critical for supporting a corporate-wide response to emerging global crises. The adoption of a comprehensive framework for rapid response also paved the way for important partnerships with development partners working in crisis and emergency settings; resulted in a much higher level of management attention to the Bank's engagement in disaster-prone, fragile, and conflict situations; and triggered a Bankwide effort to enhance institutional support to country teams working in these situations.

3 . Remaining Challenges. Despite substantial shortening of project approval times, this new policy has not yet yielded comparable improvements in the implementation of emergency programs. While a more enabling eiivironnlent for improved Bank performance in crisis and emergency situations is now in place, the flexibility introduced to address the constraints associated with weak-capacity environments has been challenged by a number of internal and external factors. Amongst the challenges facing Bank teams is the need to strike an appropriate balance between providing emergency assistance while preserving the legitimacy of the state and helping govenments develop their own accountability and service delivery capacity vis-a-vis their citizens, which is critical for sustaining long-term peace and stability. Although it is premature to assess the effect of the new policy on the quality and longer-term performance of the emergency portfolio, evidence suggests that more needs to be done to ensure that the organizational shift to ex- post risk mitigation and control is supported with a higher level of technical and financial resources. Management has taken note of these findings and a number of actions are underway to address them.

1 See Toward a Nenj Franzenjorkfor Rapid Bank Respo~~se to Crises and Enzergencies (R2007-001012). April 10, 2007. "Securing Development", Robert B. Zoellick, delivered at the "Passing the Baton" Conference, United States Institute of Peace, Washington, D.C., January 8, 2009.

4. Report Outline and Structure. This progress report examines quantitative and qualitative aspects of the Bank's experience with the new rapid response policy. It is based on a desk review of emergency lending operations approved over 22 months, up to December 31, 2008; on focus group discussions; and on interviews with Regional management and users of the emergency lending instrument. Following this introduction, Section I1 of the paper reviews the main features of the new rapid response policy. Section I11 provides an account of implementation progress, Section IV sets out key findings and recomn~endations based on that experience, and Section V presents proposed follow-up actions. Annexes provide additional information.

5 . On February 28, 2007, Executive Directors approved a new policy on emergency lending (set out in OPIBP 8.00, replacing the previous policy set out in OPIBP 8.50, Emergency Recovery Assistance). The new policy was intended to align the Bank's emergency policy with its evolving role in responding to crises and emergencies and improve the speed, effectiveness, and impact of the Bank's support to emergency recovery efforts.

6. Key Features. The key policy features introduced through OP 8.00 were (a) a broader definition of emergency that allowed the Bank to address the economic and social impacts resulting from an actual, or imminent, natural or man-made crisis or disaster; (b) the applicability of the new policy instrument to a broader set of objectives, including support for the preservation of human, institutional, and social capital and facilitation of peace building; (c) an emphasis on coordination with development partners in the delivery of integrated response efforts; and (d) a more strategic approach to disaster management and crisis prevention. The policy's provisions were premised on a set of key principles: the need to focus the Bank's assistance on the Bank's core development and economic con~petencies while remaining within its mandate; the establishment of appropriate partnership arrangements with other development partners, including the UN; and the adoption of adequate oversight arrangements.

7. A Shifi to Ex-Post Risk Mitigation. In a clear recognition of the inherent risks associated with operating in emergency and crisis situations and of the reputational risk associated with delays in the delivery of Bank assistance, the new policy provided for a different balance between ex-ante and ex-post risk mitigation and control measures. This shift was embodied in a series of streamlined and accelerated procedures for approving and implementing Bank emergency operations; increased financing flexibility through higher limits on advance and retroactive financing; and provision for the use of alternative implementation arrangements in low-capacity environments.

8. Institutional Support. To help achieve the operational and behavioral changes needed to make a substantive difference in the Bank's rapid response capacity and function, the Bank supported the new policy through several key institutional measures:

the establishment and maintenance of oversight arrangements to ensure the appropriate scope, design, speed, and supervision of rapid response operations; an initiative to strengthen the Bank's organizational support of country teams operating in crisis situations; the issuance of comprehensive guidance and toolkits; and monitoring and reporting on the new policy.

A. Portfolio Profile - Regional Distribution and Typology

9. OP 8.00 was used extensively to respond to a wide range of crises and emergencies with no signs of "mission creep". Between 2000 and 2007, the Bank approved between 10 to 39 emergency operations each year, with an average annual commitment level of USD 1,088 million. The value of emergency lending during FY08 and the first half of FY09 was USD 989 million and USD 554 million, respectively3 (see Table 1). Thus the total volumes of emergency lending since the adoption of the new policy are consistent with those in previous years. This indicates that the policy supported an active Bank response to crises and emergencies with no signs of an attempt to circumvent the Bank's regular lending procedures.

(42) 1 Total 707 57.101 1 82 4.055 52 1.203 1 73 1.471 759 58.304 1 155 1 5.526

Table 1. Emergency Lending Portfolio by Type and Funding Source (FY05-FY09Q2)

S O I ~ K P BW Report (2b2).

IDMBRD

10. Over half of commitments approved under the new policy responded to post- conflict situations, with the largest share going to countries in Africa. Of a total commitment level of USD 1,674 million, USD 1,017 million (60 percent) benefited Africa (AFR); of that amount, USD 648 million financed post-conflict stabilization programs, and USD 359 million addressed the impact of the food crisis. South Asia (SAR) and Middle East and North Africa (MNA) accounted for the second- and third-largest emergency funding processed under OP 8.00. In MNA, the majority of emergency lending addressed

3 Total commitments reported for FY07 and FY08 include emergency operations approved under both the old and new emergency policies (OP 8.50 and OP 8.00). FY09 figures go up to December 31, 2008, and, therefore, exclude commitments approved since then (conmitments approved between January and March 2099 amount to an additional USD 907 million, including a USD 710 million loan for the China Wenchuan Earthquake Recovery Program).

Trust Funds Total

post-conflict reconstruction and stabilization programs in Iraq, Lebanon, and the West Bank (see Table 2 and Figure 1).

11. Post-conflict operations were predominantly aimed at the restoration of social and human capacity. These programs financed social service delivery programs, the reintegration of ex-combatants, and support to vulnerable communities. A smaller number had as their objective to rehabilitate physical assets, build or restore state capacity, and support productive assets. Three operations (in C8te d71voire, Nepal, and Uganda) had explicitly stated as their development objective to support peace building following the conclusion of peace agreements between conflicting parties.

Table 2. Operations Approved under OP 8.00 by Region and Type (March 2007-December 2008)

1 Post-conflict halural disaster 1 GFRP 1 Avian flu 1 Total

Figure 1. Operations Approved under OP 8.00 by Region and Type (March 2007-December 2008)

Nat l~ra l disaster

Post-conflict

Source: BW and OPCS.

12. OP 8.00 proved to be critical for fast-tracking the Bank's response to the global food crisis. Of the USD 866 million approved under the Bank's Global Food Response Program (GFRP),~ more than USD 400 million was provided through rapid response operations processed under the new policy.5 Commitments for food crisis rapid response operations accounted for 25 percent of total emergency lending over the review period. Funds approved under this category were mostly aimed at financing school feeding and nutrition programs, social protection programs for poor and vulnerable groups, cash-for- work programs, and the additional expenses of food imports and agricultural inputs. Six of the 24 operations funded under this program were partly implemented through UN agencies (Food Aid Organization, United Nations Development Program and The World Food Program) building on existing programs they were implementing. To date, GFRP operations account for almost half of all disbursements under OP 8.00 operations.

13. Emergency operations responding to natural disasters accounted for 17 percent of new emergency lending approved over the review period. Half of these operations benefited countries in the Latin America and Caribbean Region (LCR), reflecting the high incidence of natural disasters there. Although OP 8.00 provided for the use of contingency financing, as a component of regular investment lending which could be rapidly drawn upon to provide immediate response to natural disasters, none of the IDA countries have drawn on this facility. This may reflect the high opportunity cost related to "locking up" IDA funds within a fixed multi-year financing envelope. With respect to IBRD countries, contingency financing was provided through the Catastrophe Deferred Drawdown Option (CAT-DDO), which was introduced in 2008 as a new innovative financial product.6 Additional fast track lending to IBRD countries for disaster recovery was also provided through suppleniental development policy loans.' Both, the CAT-DDO and supplemental development policy lending allowed the Bank to strengthen its support of country-owned disaster prevention and risk management programs, a key component of the Bank's overall approach to addressing natural disasters.

14. More than 76 percent of the emergency lending processed under OP 8.00 was financed by IDA. Trust funds and IBRD accounted for the remaining 18 and 6 percent, respectively. This distribution is consistent with the Bank's focus on responding more swiftly to the needs of fragile and conflict-affected countries, many of which fall in the low-income category. It also reflects the Bank's increasing effort to augment its limited financing for fragile and conflict-affected situations through IBRD income/surplus (for example for Kosovo, Lebanon, Liberia, and West Bank and Gaza) and through

4 This reflects total amounts approved under the Global Food Response Program (GFRP) through mid- February 2009. As of that date, more than half such funds had already been disbursed to clients.

5 The Bank's fast response to the global food crisis was also facilitated through the fast-tracking of supplemental development policy loans, of which five were approved during FY08 and FY09.

6 The CAT-DDO is provided on IBRD terms and it allows for the rapid draw down on funds in the immediate aftermath of a disaster. Countries that sign up for the CAT-DDO must have an adequate hazard risk management program in place that is monitored by the World Bank Group.

7 To date, CAT-DDOs have been approved for two countries - Columbia and Cost Rica (USD 150 million and USD 65 million, respectively).

partnerships with donors in the form of country-specific multi-donor trust funds (for example for Afghanistan, Liberia and West Bank and Gaza).

B. Speed of Response

1 5. Under OP 8.00, streamlined ex-ante review procedures allowed for a much faster approval of rapid response operations. On average, the average time between the decision to move ahead with a rapid response operation and its approval by the Board was reduced to 4.3 months, down from the 5.9 average reported for emergency operations in FY01-06 (see Figure 2). The average processing time for food crisis response operations-1.7 months-was much shorter than that for all OP 8.00 operations.8 Collapsing review requirements to a single decision meeting, committing staff to shorter turnaround times, shifting to ex-post risk mitigation measures, including the deferral of safeguards assessments, and reducing Board circulation times were the most critical elements in speeding up the processing of rapid response operations.

Figure 2. Processing and Delivery Times (in months)

ERL (2001-2006) OP8.0 new (a l l ) OP8.0 (GFRP new)

In~ t ia t~on-approva l .Approval-effect~veness Effect~veness-D~sbursement

Source: OPCS.

16. While Regions and task teams have expressed satisfaction with the streamlined procedures, some pointed to the potential usefulness of additional quality reviews. Although feedback on the one-stop review meeting was overwhelmingly positive, some Regions recommended that task teams have the flexibility to undertake additional quality reviews, based on a case-by-case consideration of the appropriate balance between speed, complexity, and risks. This approach was followed by task teams working on Afghanistan

8 After the first four operations, all succeeding GFRP operations were approved "in-principle" by management (Regional Vice Presidents) followed by a five-day circulation to the Board, after which approval became effective.

and Iraq, both of which have had protracted emergency situations. Feedback on OP 8.00 streamlined procedures also referred to the difficulties overstretched staff had in meeting shorter turnaround standards. As with any new policy, there were also some "teething" problems that resulted from staff not being fully conversant with the new procedural requirements. More generally, the responsiveness of task teams was constrained by insufficient guidance on some of .the policy's new provisions, including for example on the financing of a positive list of goods, which was only recently used as a component of a grant approved to respond to the impact of the financial crisis in the Democratic Republic of ong go.^

17. Country teams particularly appreciated the policy's flexibility on choice of operational instruments (new emergency loan/grant, project restructuring, and additionalfinancing). This flexibility was critical, for example, for enabling a quick and comprehensive response to the severe floods that affected 13 million people in Bangladesh. Through a single Board submission, the country team obtained approval of a package of restructuring and additional financing to nine ongoing projects (see Box 1). A similar package of restructuring and new funding was approved to facilitate a broad-based response to the food crisis in Ethiopia. On the other hand, task teams reported difficulties with restructuring ongoing emergency operations to adapt to the rapidly changing needs in crisis and disaster situations because of the heavy requirements of the related policy, OPIBP 13.25, Use of Project Cost Savings.

Box 1. Bangladesh Portfolio Restructuring Following the 2007 floods, the Bank responded to a request from the Government of Bangladesh with assistance in two parts.'0 The first part consisted of a quick-disbursing USD 75 million budget support operation to reduce fiscal pressure on the country's foreign exchange reserve. The second part consisted of financing flood-related restoration and rehabilitation activities through a portfolio restructuring that involved nine projects, moving a total of USD 70 million from ongoing operations to three operations that could be scaled up to provide immediate emergency assistance.

1 Before OP 8.00, reallocation of funds was provided through the creation of "z" components, which allowed for an emergency component to be introduced to an existing project, even if its objective was not consistent with the overall development objective of the ongoing operation. For the Bangladesh restructuring, the team sought exemptions from the IDA Resource Mobilization Unit to allow for cancelled funds to be reallocated to other projects in the portfolio, instead of going back to the IDA pool. The justification for the exemption was provided in paragraph 2 of OP 8.00, which allows country teams to choose the optimal mix of financing instruments.

The Bangladesh restructuring package was part of a larger IDA support package of USD 122.2 nillion which also provided additional financing of USD 52.2 million under the framework of the 2007 Flood Restoration and Recovery Assistance Program for Bangladesh. The Board's approval of the program was based on a single Emergency Project Paper that detailed all cancellations, reallocations, and additional financing.

See DRC Emergency Project to Mitigate the Impact of the Financial Crisis, (IDA Cr. H4530), 2008. 10 See Bangladesh Emergency 2007 Flood Restoration and Recovery Assistance Program Proposed

Amendments and Additional Financing Project Paper (IDA R2007-0300/1), December 27, 2007.

18. The fast approval of emergency operations was partially offset by delays in effectiveness. As of December 3 1, 2008, 44 of the 55 new operations processed under OP 8.00 had become effective. For those projects, the average time lag between approval and effectiveness was 2.1 months, compared to an average of 3.3 months for operations processed under OP 8.50. Although modest, the reduction in effectiveness delays reflects a deliberate movement away from using effectiveiiess conditions in favor of legal covenants and disbursement conditions, including those linked to specific project components.l This allowed projects to deliver on urgent needs while critical conditions related to the project as a whole were being addressed. Despite this improvement, however, 31 percent of OP 8.00 operations reported an effectiveness delay flag, which means that three months after approval, these projects had not yet been declared effective (see Figure 3).

Figure 3. Portfolio Effectiveness and Slow Disbursement Flags

40% 7

~ Effectiveness Delays Slow Cisbursemnts FYO+FYO6 SlLs H FYO+FYO6 ERLs Operat~ons UnderOPIBP 8.00 ~

I I

Source: BW. Note: For emergency operations, a slow disbursement flag is set for disbursement delays of six months or more and is calculated on the basis of the initial or formally revised disbursement schedule for the project.

19. Post-Disaster operations suffered from longest effectiveness delays. On average, post-disaster operations took 5.4 months to become effective, compared to 1.9 months and 0.8 months for post-conflict and food crisis response operations, respectively (see Figure 4). While in the case of LCR, effectiveness delays largely resulted from lengthy government approval and ratification procedures, in ECA effectiveness delays were caused

1 1 Most operations that have been processed under OP 8.00 did not have effectiveness conditions. In those that did, the conditions were generally linked to the government or parliament's ratification of the new loadgrant (e.g., Iraq's Emergency Water Supply Project), finalization of a an operational manual (e.g., Timor-Leste's Youth Development Project and Democratic Republic of Congo's Emergency Urban and Social Rehabilitation project), or the establishment of a technical secretariat or recruitment of key personnel (e.g., Central African Republic's Emergency Urban Infrastructure Rehabilitation and Maintenance project, C6te d'Ivoire's Emergency Multi-Sector HIVIAIDS project, and Togo's Community Development Project). Most operations that included effectiveness conditions suffered from effectiveness delays that went above the three-month limit for triggering the effectiveness delay flag.

by project-specific issues." Aniong the Regions, AFR showed the lowest proportion of effectiveness flags against its OP 8.00 portfolio (24 percent), followed by MNA (33 percent): countries in these Regions have simpler legal ratification requirements. As the experience with the China Earthquake Recovery Project shows, however, there may be opportunities for the Bank to support governments in streamlining their own procedures to ensure faster approval and delivery procedures (see Box 2).

Box 2. China's Wenchuan Earthquake Recovery Project

On February 12, 2009, the Board approved an IBRD loan of USD 710 nlillion for the Wenchuan Earthquake Recovery Project, processed under OP 8.00, to support the reconstruction of urban infrastructure, health, and education facilities in Sichuan and Gansu provinces. The project was approved in five months from initiation, compared to the 18 months that it normally takes to approve lending projects for China.

Before this project, the Government of China (GoC) did not have emergency procedures for lending by international financial institutions, but the quick project preparation schedule was facilitated by several key innovations in the GoC's domestic procedures that mirrored the procedures under OP 8.00:

Strong emphasis on high-level coordination. The GoC established a strong coordination mechanism with the Bank through which it was able to coordinate Bank and government processing steps and resolve issues in a timely manner.

Flexibleproject design. The project was designed using a framework approach that defined eligibility for individual subprojects to be financed without requiring such projects to be identified and approved by the GoC. The GoC agreed that domestic approval would be a condition of disbursement for each subproject, rather than a condition of negotiation for the project as a whole.

Simplifed project documentation requirements and streamlined approval. Under normal procedures, the GoC would require submissions for internal approval to be supported by detailed engineering documents such as project proposals, feasibility studies, safeguards instruments, and a foreign capital utilization plan. For this project, the GoC required only a single-level approval by the State Council, based on two relatively brief written submissions that were in turn based on the GoC's Reconstruction Master Plan and the Bank's Emergency Project Paper (EPP).

Streamlined implementation. Further streamlining is planned for the implementation phase in accordance with the special regulations issued by the GoC for the earthquake reconstruction program. For example, while engineering documents must still be prepared by project proponents, the detailed subproject proposal stage will be skipped, with project proponents immediately commencing preparation of the feasibility studies and safeguards instruments based on initial subproject screening. Review and approval of these documents have been fully delegated to the provincial governments, and standards for shorter review and approval times have been set.

C. Portfolio Performance

20. As of mid-March 2009, USD 498 million of USD 1,674 million approved under OP 8.00 had been disbursed. Although the OP 8.00 portfolio showed a considerable improvement over OP 8.50 projects, disbursement levels across the portfolio were still low, reflecting delays in the actual delivery of Bank emergency assistance. Of the 45 new operations that had been declared effective as of December 31, 2008, 37 had started disbursing. The average time lag between approval and first disbursement for these

12 Slow counterpart ratification approval procedures in LCR were partially offset by the policy's additional flexibility on the use of project preparatory advances, for example, in Bolivia and Nicaragua.

operations was 4.2 months." Among rapid response operations, post-disaster operations showed the longest time lag (6.2 months), while post-conflict and food crisis response operations reported lags of 5.0 months and 2.0 months, respectively (see Figure 4). Delays in first disbursements for post-conflict operations, all of which were implemented in fragile and/or conflict countries, were largely due to delays in establishing adequate implementation arrangements to support delivery (as is discussed further in the following paragraphs). The faster disbursement of food crisis response operations can be attributed to several factors: simpler project designs that focused on providing assistance to well defined, and in most cases, existing programs some of which were being implemented by UN agencies; counterpart agencies' desire to demonstrate to their public rapid action against a surge in commodity prices; and a higher level of management attention to this global program.

Figure 4. Processing and Delivery Times (in months)

I All New OP 8.00 Ftst-Conflict Natural Disaster GFRP ERLs WOI-WO6

Initiation-Approval Approval-Effectiveness Effectiveness-Disbursemnt

Source: OPCS.

2 1. Because the OP 8.00 portfolio is so young, it is too early to draw conclusions on the policy's effect on the quality of the Bank's emergency lending portfolio. As of December 3 1, 2008, only 27 of the 55 new rapid response operations have completed more than one Inlplementation Status Report (ISR). In these reports, only 6 percent of projects have been identified as problem projects,13 and the reported proportion of projects with financial management, procurement, or monitoring and evaluation flags is generally lower than the rest of the Bank's portfolio (see Figure 5). Feedback from Regions, however, points to some concern that rapid response operations are still overly ambitious and, in some cases, lacking simplicity and focus.

'' The average time lag between approval and first disbursement (which includes the reported 2.1 month lag betueen approval and effectiveness) includes three outlier projects that had a disbursement lag of 8-9 months. Without these outliers, the average time lag between approval and first disbursement would be 3.5 months.

I 4 Projects for uhich Implementation Progress is rated unsatisfactory and/or the Development Objectives are not likely to be achieved.

Figure 5. Proportion of Portfolio with Risk Flags

35 ,-a -- - - - - * - - - -- - - -- - -- -- - - - *- - -- - - - -- -- -- 1

Roblem Effectiveness FM Legal Roject Mgt M\&E Rocu remn t Safeguards Slow Rojects Delay Covenants Disbursing

1 OP8.00 Operations Portfolio Source: BW Report Supervision December 2008 and Annual Report on Portfolio Performance ( A W P ) FY08 Statistical Annex.

22. Reports from Regions indicate inadequate monitoring of safeguards compliance. OP 8.00 allows additional flexibility on the timing of safeguards assessments, consultations, and disclosure. It provides for delayed disclosure of safeguards-related information to allow Bank and borrower staff to focus on critical actions in the immediate aftermath of a crisis or an emergency. This added flexibility, however, is premised on the active involvement of qualified environmental and social safeguard specialists as active members of rapid response operations, and, therefore, on the availability of an adequate supervision budget for ex-post monitoring. The policy also assumes an active monitoring role for sector managers, task teams, and Regional safeguards coordinators, to ensure due diligence in managing environmental and social safeguard issues. Reports from Regions indicate inadequate compliaiice with requirements on the disclosure of safeguards-related documentation and delayed actions on safeguards commitments. This seems to result from inadequate supervision attention and insufficient capacity among counterpart agencies on safeguards implementation aspects.

D. Implementation Constraints

1. Operating in Weak-Capacity Environments

23. OP 8.00 (paras. 9-1 0) explicitly provide for the use of alternative implementation arrangements in weak-capacity environments. These arrangements could include, as appropriate, implementing through direct grants to any public or private entity, as well as to UN agencies and Non Governmental Organizations (NGOs); contracting fiduciary agents and consultants, and, on an exceptional basis, using limited Bank execution of early start-up emergency activities. Although Bank teams tried to use these alternative implementation arrangements to augment the weak capacity of counterpart agencies, these efforts were often unsuccessful in getting rapid response projects quickly off the ground.

24. Partnership with UN agencies for the delivery of emergency assistance was GFRP, whose provisions included a Bankwide waiver under which the UN agencies could use their own procedures and requirements. The December 2008 signing of the UN-World Bank Fiduciary Principles Accord (FPA), which essentially addresses past issues related to the lack of interoperability between UN and Bank systems, is expected to contribute to a more frequent use of UN agencies where government capacity is very weak. The FPA will have more immediate implications for operations financed through Multi-donor Trust Funds (MDTFs) or from special funds whose provisions allow for its use (for example, the State and Peace Building Fund). In addition, efforts to broaden the scope of an agreement with UNICEF to facilitate the procurement of emergency supplies through other UN agencies may have broader implications in terms of supporting UN-World Bank partnerships in crisis situations.

25. Bank execution, on behalf of governments, of early start-up activities proved to have its limitations. Only two projects used Bank execution for the procurement of limited goods and technical assistance. For one of them-the Lebanon Emergency Social Protection Implementation Support Grant-which was implemented successfully (leading to a follow-on project that maintained the same implementation arrangements), the task team reported several difficulties associated with Bank execution. An OPCS review concluded that the delays encountered in using Bank execution were related primarily to the requirement to use corporate procurement rules Administrative Manual Statement 15 (AMS 15) and the Bank's internal General Service Department (GSD) systems. Among the challenges highlighted: the requirement for the registration of local vendors, which has proven problematic in low-capacity countries where supply is limited and vendors are not always registered; the lack of guidance on the disposition of assets; complications related to intellectual property rights, and the requirement for the establishment of child trust f~lnds for sub-grants of very small amounts. Apart from these procedural challenges, frictions generally arose because of the blurring of ownership over the funds and disagreements between the Bank and recipient governments over the use of Bank salary scales, which are generally higher than those paid by governments. Despite these constraints, however, Bank staff still maintained that having the option of procuring technical assistance services on behalf of governments was critical for supporting well- defined rapid assistance in post-disaster and post-conflict situations. Some Regions also recommended that the Bank establish a Bank-financed and -executed trust fund that could be tapped to rapidly deploy expertise to support post-disaster and post-conflict assessments and to help with complex procurement in weak-capacity environments.

26. Efforts to address capacity constraints usingfiduciary agents or setting up ring- fenced project units also faced considerable delays. OP 8.00 underlined the need to simplify procurement arrangements for rapid response operations using the flexibility provided in the Bank's procurement guidelines: the use of single sourcing, shopping, reduced bid times, and the elimination of bid securities. Although a nunlber projects used these simplifications, both task teams and clients consistently reported difficulties related to procurement. In several operations, implementation delays resulted from complications related to the government's selection and hiring of fiduciary or procurement agents to augment the lack of procurement capacity among counterpart agencies. Although the

Bank established a long list of consulting firnls and companies whose services could be rapidly employed in fragile and conflict-affected countries, Bank teams have not been adequately informed of this new arrangement and have made only limited use of this list.I5 The use of project implementation units continued to be tlie most common way of addressing capacity issues. However, setting up these units was often delayed by the limited supply of expertise and the need to train hired consultants in Bank procedures. Other exogenous factors, including the reluctance of private sector companies to bid on small contracts and to operate in insecure environments and the surge in prices of inputs for reconstruction works, have also offset the Bank's deliberate efforts to adapt its procurement arrangements to better suit the circumstances in these countries.

27. In the context of the Bank's emphasis on governance and anticorruption and the recent experiences with fraud and corruption cases, many Bank staff are highly risk averse. While some task teams have been able to introduce considerable flexibility in fiduciary management, including procurement, others have been understandably concerned with risks of fraud and corruption. Thus, among the feedback received was a request for more guidance and training to task teams on balancing between the Governance and Anti- corruption Agenda and managing risks in typically high-risk environments, and a call for more support for closer ex-post monitoring of operations in these countries.

2. Supervision Issues

28. Shifting budgetary resources from preparation to supervision has not materialized. OP 8.00 stressed that moving from ex-ante to ex-post controls and risk mitigation measures would entail intensified supervision support to address risks, including fraud and corruption. Reducing requirements for ex-ante reviews was also expected to result in a shift of budget resources from preparation to supervision. Aggregate data on preparation and supervision costs over the past few years generally show a marked drop across the whole Bank portfolio compared to FY01-06 (see Tables 3 and 4). At USD 193,000, the average preparation cost reported for FY08 emergency lending operations is much lower than the USD 344,000 average for other specific investment loans (SILs) over the same period. It is also lower than the USD 235,000 average preparation budget for emergency recovery loans (ERLs) during FYO1-FY06. Between FY05-FY08, the average supervision cost for ERLs was only marginally higher than it was for SILs. A thorough analysis of supervision costs for OP 8.00 operations is not possible due to the very limited number of operations that have had more than one full year of implementation (those approved before December 2007). Nevertheless, feedback from staff and anecdotal evidence both suggest that, in general, the Regions have not budgeted sufficiently to enable the level and intensity of supervision needed for rapid response operations.

IS The long list of procurement agents is posted on the Procurement Policy and Services Group (OPCPR) uebsite.

Table 3. Average Preparation and Supervision Costs (FYO 1-FY06)

Table 4. ERLs vs. SILs - Bankwide Average Preparation and Supervision Cost (000s) (FY05-FY09)

$450 1

Type

ERL* SIL Total

-+ERL -- - Prep 1 $253 $167 1 -- $193 - S ERLSPN $ 9 8 $102 1 :::: - 1 $105 $ 6 4 - - ppp-- - - pp --

SIL Prep $406 $379 $353 $344 - - - I - -- $309 0 SlL SPN $ 8 8 $ 9 3 $ 9 7 $103 $ 7 1

Source: BW Reports 7.1, Lending Unit Conlpletion and Counts, and 8.00, Supervision Effort.

11 Data for FY09 is only until 312612009.

Source: OPCS. *Note: ERL onlv includes Natural Disaster and Post-Conflict ~roiects.

No. of projects

58 792 850

29. Limited budgeting for supervision raises concerns about task teams' ability to adequately monitor fiduciary risks and compliance. It also undermines the primary principle of the rapid response policy, which shifts the balance from ex-ante to ex-post risk mitigation and control. Limited budgets also undermine the ability of task teams to address the constraints that are characteristic of the low-capacity situations in which many rapid response operations are implemented. Although teams include in their Project Papers supervision budgets that have been endorsed by senior management through the decision meeting, these budgets have often remained unfunded. For post-disaster operations, the problem of inadequate budgeting is accentuated by the unpredictability of these events, which require Regions to shift resources from ongoing operations.

30. Despite recent efforts to address staffing constraints in fragile and conflict- affected countries, in many of these countries Bank operational capacity remains weak. Although limited staffing capacity is correlated with the Bank's volume of lending in these countries, it is accentuated by difficulties related to attracting experienced staff to work in

Average preparation cost ('000)

$235 $374 $365

Total preparation cost ('000)

$13,636 $296,390 $310,026

No. of projects

54 747 801

Average supervision cost ('000)

$344 $256 $262

Total supervision cost ('000) $18,564

$191,091 $209,656

these countries, a generally high rate of turnover, and lack of close monitoring and guidance of junior staff operating in these country offices. The Bank's efforts to strengthen its institutional support of Bank engagement in these countries are further discussed in the following paragraphs.

E. Institutional Support and Oversight Arrangements

3 1 . Task teams have expressed satisfaction with the level and quality of management attention to Bank performance in responding to crises and emergencies. The requirement (set out in BP 8.00, para. 1) to report to Regional Vice Presidents, the Managing Directors (MD), and the Vice President of Operations Policy and Country Services (OPCS) on emerging crises and emergencies and on the teams' plans for addressing them contributed to raising the level of management attention to Bank engagement in these critical situations. During 2007, MD-chaired Corporate Rapid Response Committees (CRRCs) were convened to address specific aspects of the crisis situations in C6te d'Ivoire, the Democratic Republic of Congo, Somalia and Sudan that seemed to pose a reputational risk to the Bank. These meetings resulted in commitments that involved follow-up actions from the Regions and other corporate units. For Sudan, the CRRC requested OPCS to field an implementation support mission to address delays in the delivery of assistance through the Bank-administered multi-do no^ tmst fund. The positive outcome of the Sudan mission (see Box 3) prompted a similar support mission to the Central African Republic in 2008. Senior management support to the Region's efforts to respond promptly to the global food crisis was also instrumental in ensuring the rapid delivery of Bank assistance to help countries address the impact of the crisis.

Box 3. South Sudan Portfolio Support Mission

In March 2007, at the request o f the country management unit, the CRRC asked OPCS to field a portfolio support mission to South Sudan. The mission, consisting o f representatives o f Bank corporate units, went to South Sudan in May 2007 to help resolve some o f the bottlenecks that were delaying implementation progress under the Bank-administered multi-donor trust fund. The nission was also to explore ways to help build the implementation capacity o f the Government o f South Sudan, assess the role o f the monitoring agent, clarify the UN-World Bank partnership in the field, and agree on streamlined reporting requirements. Highlights o f the mission's primary achievements:

Projects were "retrofitted to incorporate flexibility allowed under OPIBP 8.00, and legal agreements were revised accordingly.

Inmediate and long-term procurement issues were addressed by resolving outstanding no- objection letters, and agreements were reached on an immediate increase in the number o f procurement staff and on back-up arrangements.

Outstanding government cash flows were addressed through agreement on front-loading options.

Two outstanding legal agreements with U N agencies were revised and cleared for implementation, and broader agreement on reporting requirements was reached.

A draft communications strategy was developed to improve communication on the trust find's performance and delivery.

An environmental and social framework, which would apply to the Bank's portfolio in the country, was drafted.

32. At the Regional level, Rapid Response Committees (RRCs) are convened to ensure timely decisions on and support to the Bank's strategy and response to country- specific emergencies. Chaired at the level of the RVP, the RRCs are also convened to review and authorize negotiations of rapid response operations. In accordance with the policy's procedures, they provide the adequate level of oversight of rapid response operations. Decision meetings convened by RRCs (with OPCS participation) have also provided management a means of closely monitoring the implementation of rapid response operations and providing policy advice to country teams. Over the course of the review period, the Regions also advanced in setting up their own organizational arrangements to support country teams in managing and implementing rapid response operations. These arrangements are being reinforced with mechanisms for monitoring and reporting on results. The Bank now has two years of experience in implementing the new policy, and OPCS is discussing ways to partially delegate its policy monitoring of OP 8.00 operations to the Regions, on the basis of an agreed set of risk-based criteria.

33. The Managing Directors' quarterly meetings on fragile and conflict-affected countries continue to provide an important forum for addressing country-specific and corporate issues. These meetings provide an opportunity for engaging with country directors on country-specific as well as system-wide issues, including, for example, the Bank's partnerships with development partners, staffing constraints in fragile countries, and other aspects of the Bank's fragility and conflict agenda.

34. Task teams have positively assessed organizational support received through the GFDRR. The GFDRR funds 25 percent of the time of Regional Coordinators who act as focal points in each of the Bank's Regions, allowing for proactive identification of and engagement in ex-ante disaster risk management priorities and for immediate assistance in responding to major events. The Regional Coordinators maintain contact and coordinate closely with specialized agencies around the world, which provide early warning on emergency situations, particularly hurricanes and earthquakes. EAP, ECA and LCR have built on the institutional support provided through the GFDRR to establish Regional Rapid Response Teams, including financial management and procurement staff, that provide strategic and implementation support to task teams following an emergency or crisis.

35. The Bank has recently set up Global Expert Teams (GETs), rein forcing efforts started by the GFDRR and the Fragile and Conflict-Affected Group (OPCFC) to mobilize and deploy expertise rapidly in crisis situations. Since 2008, the GFDRR unit and OPCFC have set up callable rosters to facilitate the rapid deployment of technical and operational expertise. However, the launch of the Disaster Risk Management and the Fragility and Conflict GETs is expected to provide additional momentum to the Bank's efforts in ensuring that the best expertise, whether internal or external, is available and is deployed quickly and flexibly to respond to crises around the world. Both the disaster and fragility GETs are supported with additional budget resources to alleviate the financing constraints country teams often face in under-resourced fragile and conflict-affected countries.

36. Both OPCS and the Regions have provided signiJicant resources and operational guidance to staff. OPCS, GFDRR, and the Legal Operations Policy (LEGOP) have issued a number of guidance notes and provided staff training on various aspects of the new policy, including on financial management, safeguards, procurement, and legal issues. OPCS and GFDRR also maintain websites that offer information on the new policy and include important documentation, such as guidance notes, templates, and procedural updates. The Regions have provided Region-specific guidance on processing steps and procurement, in addition to offering regular training to their staff. In addition, OPCS maintains a rapid response core group and hotline that responds to queries from task teams. A Rapid Response Task Force comprising the Regional operations directors and staff from corporate units has also been occasionally convened to discuss the implementation of OP 8.00 and to clear additional guidance on key components of the new policy. Efforts are underway to finalize a comprehensive good practice handbook on the policy's key policy provisions and to document best practices from the Regions.

37. The Bank's strategy to strengthen its engagement in fragile and conflict- affected situations has resulted in good progress in addressing critical s taf f ig constraints in these countries. The Bank's framework for rapid response to crises and emergencies was presented to Board in connection with a strategy paper that committed to undertaking a number of steps to strengthen the Bank's engagement in fragile and conflict affected situations.I6 Among the key components of that strategy was a commitment to increase field presence and to improve incentives and career development for staff working in such countries. As the September 2008 technical briefing to the Board on this confirmed, there has been good progress against both these commitment^.'^

As of February 28, 2009, there has been a 68 percent increase in the number of World Bank Group international staff above the GE level in fragile and conflict-affected countries compared to FY06. This increase translates into 36 additional staff members (from 53 staff in FY06 to 89 in February 2009), of which 25 staff (+I25 percent) have been posted in Africa (Angola, Democratic Republic of Congo and Sudan), 5 (+50 percent) in EAP (Laos and Timor- Leste), 2 (+200 percent) in LCR (Haiti), and 1 (+lo percent) in South Asia (Afghanistan). More recently, a new Bank office was opened in the Solomon Islands.

The Bank's new overseas assignment package, approved by the Board in May 2008, now differentiates between locations to further support assignments in fragile states and includes a Fragile States Premium. A broad range of non- financial incentives has also been introduced and implemented to encourage, reward and support staff in fragile countries. These include proactive rotation management for staff returning fi-om field-based assignments, flexibility for

16 See Strengthening the Bank's Rapid Response and Long-Term Engagement in Fragile States (SecM2007-0018), January 19, 2007.

17 Technical Briefing on Strengthening the Bank's Rapid Response and Long-Term Engagement in Fragile States (OM2008-0067), September 23,2008.

shorter assignment periods, and consistent grading for Country Managers at the GH level.

F. Commitment to Partnerships and Integrated Approaches

I . Partnerships with UN Agencies and Development Partners

38. 2008 saw a number of important milestones in support of closer partnerships with developmentpartners and the UN agencies working in crisis situations. In line with the emphasis placed by the Rapid Response Framework on closer partnerships with the United Nations, a number of important agreements have been signed. In October 2008, the World Bank signed three important agreements with the United Nations:

The World Bank President and the UN Secretary General signed the UN- World Bank Partnership Framework for Crisis and Post-Crisis Situations, underscoring the Bank's attention to collaborating closely with agencies across the whole of the UN system, including the Department of Peace Building Operations, the Department of Political Affairs, and the Peace Building Support Office.

A UNDG-World Bank Operational Annex was signed with UN operational agencies-Food Aid Organization, the United Nations Children's Fund, and the United Nations Development Program, and others-providing a common platform for coordinated post-crisis responses through a set of principles and common methodologies and tools to inform decision-making on the ground. The Operational Annex also provides guidance to country teams in considering alternative models of donor-financed pooled funding that takes into account the specific country situation.

In addition, a Fiduciary Principles Accord (FPA)-expected to pave the way for resolving implementation delays in UN-World Bank operational partnerships-was signed. The FPA allows both UN agencies and the Bank to use their own fiduciary procedures for funds received from other agencies under donor-financed multi-donor trust funds. It also provides for remedial actions to address lack of performance or issues of fraud and corruption. Thus the FPA is critical for facilitating closer partnerships with the agencies and programs of the UN in crisis situations. As of March 2009, 10 of the 12 agencies of the UN Development Group had signed their representation letters under the FPA. The FPA has not yet been applied to any multi-donor trust funds, although its provisions have been incorporated in donor agreements recently signed for the State and Peace Building Fund.

39. In September 2008, the World Bank, the European Commission (EC), and the UN signed a Joint Declaration on Post-Crisis Assessments and Recovery Planning. The Joint Declaration seeks to harmonize and improve coordination among the signatories in their provision of collective assistance; and it calls on their staffs to plan together and develop common tools, training, and evaluation mechanisms in post-conflict and disaster

situations. It also provides a platform for other donors and partners to join and contribute to speedy and coherent operational recovery responses. The FPA and the UN-World Bank-EC Declaration have already supported closer World Bank collaboration with the UN and the EC in undertaking post-disaster damage and conflict assessments in Georgia, Haiti, the West Bank and Gaza, and Yemen. They have also paved the way for constructive consultations between the World Bank and the Peace Building Support Office and other UN agencies and bilateral partners on early recovery planning.

2. Trust Funds

40. Harmonization with donors in responding to crises and emergencies has been further supported through global trust funds, such as the GFDRR, the State and Peace Building Fund, and the Global Food Crisis Program. The GFDRR facility has been used extensively to provide immediate assistance following disasters. For instance, in May 2008, it provided a grant to China in the immediate aftermath of the Wenchuan earthquake to help provide shelter to victims. It also financed large grants to finance damage assessments in the LCR Region and Yemen. Similarly, the State and Peace Building Fund, and before it the Low Income Countries Under Stress (LICUS) and Post Conflict Funds, provided financing to support critical engagements by the Bank in countries that were in arrears or whose IDA allocations were too small to support a significant role for the Bank.

41. Grant and technical support through the GFDRR was also critical to supporting OP 8.00's commitment to a more proactive Bank approach to risk prevention and management. The GFDRR provided grant support to 38 disaster-prone developing countries (19 of which are in the category "least developed"), for ex-ante disaster risk reduction measures through legislation, strategy formulation, risk assessnients, and financing. GFDRR had an ex-post recovery instrument, the Standby Recovery Financing Facility, through which it also supported post-disaster damage and needs assessments, recovery, and risk reduction planning in 11 countries. Funding provided through the GFDRR for rapid post-disaster damage and loss assessments proved critical for supporting Bank efforts to offer technical assistance to government-led assessment and recovery activities and for supporting Bank's efforts towards improved coordination with regional and multi-lateral partners. The Bank's coordination with the Association of Southeast Asian Nations (ASEAN), South Pacific Islands Applied Geoscience Commission (SOPAC), and the United Nations in responding to Cyclone Nargis in Myanmar, in 2008, exemplifies such coordination.

42. The Bank continued to successfully collaborate with donors through country- specific multi-donor trust funds. New MDTFs established over the review period include one for infrastructure developnlent in Liberia, which is expected to mobilize around USD 120 million; the Post-Recovery Development and the Emergency Services Support Programs in West Bank and Gaza, which mobilized USD 297 million and 81 million, respectively; and an MDTF for a Demobilization and Reintegration Program in Uganda, which mobilized USD 8 million. All Bank-administered MDTFs in crisis countries apply the Bank's rapid response policy and, therefore, are subject to streamlined processing and approval of funds.

3. Integrated Approaches

43. The Bank has advanced considerably in mainstreaming conflict in its strategic approaches and in working closely with regional and bilateral donors across the development-security spectrum. Over the review period, the Bank has placed increased emphasis on integrated planning frameworks, preparing an increasing number of Country Assistance Strategies and Interim Strategy Notes in partnership with other development partners. The Bank's work on access to justice, crime and violence, and judicial reform is also strengthening its role in supporting the rule of law and security in fragile countries. In Afghanistan and the Central African Republic, the Bank has drawn on its expertise to extend its public financial management work to include the security sector. In Haiti and Liberia, it partnered closely with the UN Department of Peace Keeping Operations to rehabilitate roads. The Bank is also increasing its engagement in international fora that discuss and promote "whole of government" approaches; it continues to foster its partnerships with North Atlantic Treaty Organization (NATO) and other regional organizations, such as the African Union and the ASEAN. The Bank has developed a work program for contributing to knowledge, research, and learning on various aspects of fragility and conflict.

IV. MAIN FINDINGS AND RECOMMENDATIONS

44. The new OP 8.00 policy has allowed the Bank to respond to a wide range of crisis situations, without the need for the exceptional waivers that had become a standard feature of the Bank's old emergency recovery lending policy. The portfolio review confirmed that the Bank remained engaged within its broader mandate while drawing on the additional expertise of UN agencies and others, as needed. OP 8.00 helped foster greater corporate urgency and expediency in the way the Bank prioritizes and manages its response to crises and emergencies, and it demonstrated the Bank's ability to move faster. It also reinforced a view-increasingly shared among staff and management, and confirnled in recent portfolio reviews-that lengthy ex-ante reviews and assessments may not always correlate with better outcomes and performance.

45. At the same time, the experience of the last two years has shown the limitations of policy and procedural reforms in overcoming the challenges of working and delivering assistance in insecure, high-risk, low-capacity environments. While rapid response operations were processed more quickly, the similar acceleration did not occur in actual delivery of Bank emergency assistance. The added flexibility on the use of alternative implementation arrangements in weak-capacity environments was still hindered by the lengthy process to finalize the UN-World Bank fiduciary agreements and difficulties associated with contracting out fiduciary arrangements, or in establishing program implementation units in partner ministries. In some cases, the Bank's delivery was delayed by governments' inability to adapt to a faster pace; thus the findings underlined the need for recovery efforts to be anchored in a commitment on part of the Bank's primary counterparts-partner governments-to overcome some of their own internal constraints and of a potential role for the Bank to assist in this process.

46. The findings also revealed the limitations of the Bank (and international community) to control for exogenous factors in countries where rapid response operations are implemented: insecurity, rapid turnover in the public service, constrained private sector capacity, restricted access to project sites, and a limited supply of goods and technical staff. While the policy allows use of alternative arrangements in immediate post- conflict situations, such an approach should be carefully calibrated to ensure against undermining state-building, creating long-term aid dependency, and reducing the legitimacy of the state in the eyes of its citizens. Thus, there is a need for frank engagement with governments and development partners, particularly at the country level, to design early interventions that support the legitimacy of the state, rather than undermine it.

47. While it is too early to ascertain the impact of the shift to ex-post reviews on the actual quality and perforniance of the Bank's portfolio, the review did identify the need for greater resources-both technical and financial-and management attention to implementation support and monitoring. This issue will be addressed in this year's upcoming budget discussions and, more broadly, as part of the ongoing work on investment lending reforms, a con~ponent of which is dedicated to a review of the Bank's supervision policy and requirements.

48. Despite the slow progress on resolving some of the operational issues that hindered Bank collaboration with the UN, the requisite agreements are now in place and are expected to prove beneficial in the near future. At the strategic level, the Bank has continued to play a proactive role in supporting global dialogue on integrated approaches and its own engagement in fragile and conflict-affected countries is increasingly calibrated with this approach.

49 . Recommendations. The following recommendations could inforn~ Bank management's continued efforts to enhance the effectiveness of its engagement in crises and conflict situations and more broadly, to reform its lending operations.

Continue close monitoring of the rapid response portfolio to identijSI systematic issues that could be addressed to contribute to improved performance. As data from longer implen~entation periods become available, OPCS should continue to conduct further analysis on the role and nature of external and internal factors affecting the implementation and performance of Bank's rapid response portfolio. Such analysis will help (a) identify binding constraints to improved perfomlance; (b) provide best practice examples; and, (c) inform necessary adjustments in the Bank's approach to engagement in crises and conflict situations.

Broaden the focus of management attention and organizational support to implementation. Management attention to and support of task teams' efforts to move faster with rapid response operations has been essential for facilitating faster approvals of emergency lending. To achieve better outcomes, however, this attention has to be matched with stronger upstream and downstream management accountability for implementation performance and an increased

attention to resolving implementation issues. This is an area where, depending on the specific situation and the extent of the reputational risk to the Bank, corporate or Regional Rapid Response Committees could play a larger role. In addition, OPCS should collaborate closely with the Regions in establishing new models for tighter monitoring and supervision of ex-post risk mitigation and control measures. This effort should be supported with adequate budget allocations and an appropriate incentive system that empowers staff to better manage risks and aligns the Bank's organizational culture with ongoing reforms. It should also be complemented with better monitoring and reporting on results.

Provide more targeted training and skills development opportunities for operational, fiduciary, legal, and safeguards staff involved in supporting and managing operations in emergency and crisis situations. OPCS, Regions, and Networks should continue to collaborate in adapting their training and learning programs to address the exceptional conditions of working in crises and emergency situations. Such opportunities should provide teams with the skills needed to respond to different types of emergencies and use the flexibility offered through existing procedures while applying informed judgment in balancing between risks and speed.

Intensij'y efforts to support task teams with "just-in-time" learning through increased guidance, on-line resources, improved management systems and dissemination of best practice. These efforts should be linked to the Bank's new knowledge strategy and the recently launched GET initiative. They should also be supported with measures to strengthen the role of Regional rapid response teams and Regional designated (Financial Management, Procurement, and Legal) staff and to address constraints on cross-Regional deployments.

IntensiD efforts to strengthen in-country operational expertise in fragile and conflict countries. The Bank should advance further decentralize fiduciary, loan administration, and safeguards staff, as well senior operations staff, and further empower those staff to take decisions, advise governments, and mentor more junior staff in the field. The Bank should also support its nonfinancial incentive package with more proactive career development and management of staff rotation to and from fragile and conflict countries.

Support increased flexibility on choice of instruments through revisions of policy requirements for project and portfolio restructuring. The Bank should broaden its ongoing reforms to simplify the review and legal requirements for project restructuring and to relax existing conditions on the reallocation of IDA resources within a country's portfolio. This would provide the flexibility needed to shift resources, at project and portfolio levels, to meet the rapidly changing needs that are characteristic of volatile crisis situations. Such efforts, however, should also ensure that the Bank's response to crises is aligned with its country-specific strategies and does not undermine the achievement of portfolio objectives.

Sustain its efforts to collaborate closely with bilateral, regional, and international development partners working in conflict and crisis situations. Improved coordination with the development community will ensure coherence and, thus, contribute to a more effective response to crises. It will also allow the Bank to continue to focus on its comparative advantage while drawing on the expertise and capacity of others to engage in areas outside its mandate and to support engagement in low-capacity environments. In this context, the Bank should also closely monitor and support the operationalization of its recent agreements with the United Nations on joint assessments and recovery planning and the FPA.

50. The findings of this review do not suggest the need for adjustments to any of the provisions of OPIBP 8.00. However, the findings will be used to revise the procedural guidelines, issued as part of the OP 8.00 Board package in February 2007, to offer more clarity on specific aspects of the policy and its procedures. OPCS will engage with the Regions in this effort and will incorporate their experiences and innovations to provide improved institutional support to task teams in implementing the new policy. The revision will be completed by the end of FY09, and thereafter the guidelines will be periodically updated to ensure their consistency with additional policy reforms in the broader area of investment lending.

5 1. Follow-up Actions. Following is a list of additional actions to support the review's findings and recommendations.

Monitoring of policy compliance, portfolio performance, and implementation constraints

o OPCS will agree with the Regions on criteria for delegating to them the monitoring of OP 8.00 compliance and implementation and will clarify requirements for high-risk corporate reviews (by June 30, 2009).

o The Regions will closely monitor OP 8.00 portfolio performance with special emphasis on fiduciary and safeguards issues, including the need to establish systems for facilitating the timely disclosure of safeguard-related information. They will also periodically report to OPCS on systematic issues that may require corporate attention or amendment of the new policy (ongoing).

o As part of its work on investment lending reform, OPCS will finalize a proposal for enhanced ex-post monitoring, including revised parameters for intensified supervision and a new template for reporting on project results and implementation progress (December 3 1, 2009).

o OPCS and the Independent Evaluation Group will propose new criteria for measuring satisfactory performance under OP 8.00 (December 3 1, 2009).

o OPCS will finalize its ongoing work on peace- and state-building indicators in fragile and conflict situations for the IDA Mid-Term Review (September 2009).

Increased organizational support to Rapid Response Teams

o The Regions will review their existing models for providing institutional support to task teams working on rapid response operations to ensure that they obtain adequate upstream and implementation support from Regional emergency designated staff. Depending on Region-specific demands, Regions will designate additional experienced staff for fiduciary and safeguards support (by September, 2009).

o OPCS and the Regions will activate the role of Corporate and Regional Rapid Response Committees to provide upstream and downstream guidance and support to addressing potential and existing implementation constraints and reputational risks (ongoing).

o OPCS will finalize and submit to the Regions and Sector Boards (Financial Management, Procurement, Legal, Social Development Network, Legal and the Country Services Panel) the results and recommendations of an ongoing analysis of staffing and budgetary gaps in priority fragile and conflict countries (by September 2009).

Increased budget allocations to support intensified supervision of OP 8.00 operations

o The Regions will identify in their upcoming budget subniissions specific actions to ensure minimum financial allocations to the supervision budgets of OP 8.00 operations (by June 30,2009).

Increased organizational attention to staffing needs in fragile and conflict countries

o With the assistance of Human Resources (HR), Sector and Network Boards will facilitate strategic staff rotations to fragile and conflict countries (ongoing).

o HR will monitor and report on progress resulting from the introduction of the lionfinancial incentives for service in fragile and conflict-affected countries (bi-annually).

Provision of additional staff guidance and training

o OPCS will finalize and issue additional guidance on (a) intensified supervision, contingent loans, and financing against a list of goods; (b) procurement support, including sample terms of reference for hiring procurement agents, the conduct of simplified capacity assessments, and simplified sample quotation requests; (c) incorporating rapid monitoring tools into these operations design (December 31, 2009); and (d) addressing different types of emergencies, including on the appropriateness of different Bank instruments (by June 30, 2009).

o OPCS will finalize and issue a Rapid Response Good Practice Handbook (by August 2009).

o OPCS and LEG will finalize and implement a roll-out package for the application of the UNFPA (by June 30, 2009).

o Regions and Networks will incorporate into their training programs a module on rapid response and engagement in crisis and conflict situations (ongoing).

o OPCS will work with the Regions to implement a targeted training program for social safeguards specialists working on rapid response operations (by August 3 1, 2009).

Supporting flexibility on project and portfolio restructuring with a consideration of revisions of existing policies and IDA requirements

o OPCS will consider options for simplifying review and approval requirements for project restructuring of rapid response operations through amendments to OPIBP 13.25, Use of Project Cost Savings (by December 3 1,2009).

o As part of its ongoing work on investment lending reform, OPCS will consider flexibilities for IDA reallocations with within a specific country when associated with a rapid response to emergencies and crises (by December, 2009).

Review of Bank execution procedures for OP 8.00 operations

o GSD, Legal, and OPCS will establish a working group to review options for streamlining the procedures for the Bank to execute OP 8.00 operations on behalf of recipient governments.

Al .

1999 1 1 1,099 2000 10 1,183 2001 14 824 2002 23 954 2003 13 1,165 2004 10 595 2005 26 1,478 2006 33 1,558 2007 39 946 2008 36 989 2009q2 21 554 Total 289 14,705 .So11rr~ RW

The Portfolio

Emergency Recovery Loans (ERLs) - FY89-FY09Q2

45 T T I8O0

A2. OP 8.00 Operations by Response Type A3. OP 8.00 Operations (New and Additional Financing) (03107-12/08) (03107-1 2/08)

Post Confl~ct Natural Disaster Global Food Avian Flu New Operations Additional Financing I

I

Soztrce: BW. OPCS data.

.I Nunber of E?Ls + $ M. II Number -t US$M

Source: BW, OPCS data.

A4. OP 8.00 Operation (New and Additional A5. Number of OP8.00 new operations Financing) Commitment Amount by Response Type approved by sector boards

A6. OP 8.00 Operation (New and Additional Financing) - Source of Financing by Region

Avian Flu

A7. OP 8.00 Operations (New and Additional Financing) - Regional Distribution

I ,-,. 1

AFR EAP ECA LCR M K A SAR I 1

Source: BW, OPCS data.

Speed of Response

A8. Processing time for new OP 8.00 Operations: A9. Processing time for new OP 8.0 Operations: Approval-Initiation Approval-Effectiveness

I

A10. Processing Time: Approval to First Disbursement (months)

4.2

6 months

O P 8.00 (new. w ith O P 8.00 (new, w ithout OP 8.00 (GFRP All) outliers) outliers)

3 months

Source: BW, OPCS data.

Source BW, OPCS data.

Preparation and Supervision Costs

A1 1. Average Preparation Cost (000s) - ERLs vs. SILs

Source: BW Report 7.1, Lending Unit Completion Costs and Counts.

11 Data for FY09 are only until 3/26/2009.

A12. ERLs vs. SILs: FY05-09 Average Supervision Cost (000s)

Region

AFR / $119 $120 / $128 $117 / $110 $115 / $119 $127 / $61 $78 1 EAP 1 $60 $57 1 $70 $68 1 $66 $73 / $71 $71 / $49 $49 /

LCR 1 $65 $83 1 $88 $87 / $136 $98 1 $75 $97 1 $65 $72 j

SAR / $104 $106 1 135 $106 1 154 $112 1 116 $132 1 80 $92 / Bankwide $98 $88 $102 $93 $97 $97 $105 $103 $64 $71

# project 53 888 52 873 62 871 97 1030 121 980

Source: BW Report 7.1, Lending Unit Completion Costs and Counts.

l / Data for FY09 are only until 3/26/2009.

30

RAPID RESPONSE OPERATIONS APPROVED UNDER OP 8.00 (03107-12/08)

FY

2007

2007

2007

2007

2007

2007

2007

2007

2008

2008

2008

2008

2008

2008

2008

2008

2008

Country

Congo, 1)emocratic Republic of

Sudan

Sudan

Central African Republic

Liberia

Liberia

Sudan

Timor-Leste

Cote 81voire

Liberia

1,ebanon

Tiberia

Sudan

Sudan

Sudan

West Bank AndGaza

Afghanistan

Response type

Post Conflict

Post Conflict

Post Conflict

Post- Conflict

Post- Conflict Post- Conflict Post- Conflict Post- Conflict Post- Conflict Post- Conflict Post- Conflict

Post- Conflict

Post- Conflict

Post- Conflict

Eiiict Post- Conflict Post- Conflict

Region

AFR

AFR

AFR

AFR

AFK

AFR

AFR

EAP

AFR

AFR

MNA

AFR

AFR

AFR

AFK

MNA

SAR

Project ID

04497

P 105282

PI 05683

PI 01 388

PO95593

04716

P109195

04786

P 106927

PI 07256

P108373

Project name

Emergency Urban And Social Rehabilitation Project

Sudan Microfinance Development FacilityProject

Sudan New Unified National Currency Project

Emergency Urban Infrastructure Rehabilitation & Maintenance

Health Systems Reconstruction

Community Empowerment 11

South Kordofan State Emergency Project

Energy Services Delivery Project

Emergency Post-Conflict Assistance Project Agriculture & Infrastructure Development Project Emergency Social Protection ~mplementation support

Emergency Senior Executive Service Project (ESSP)

Support To Agriculture & Forestry ~~eve lopment

South Sudan MDTF HIV/Aids

Blue Nile Start-up Emergency Project

Third Emergency Services Support Project (ESSP 111) Second Education Quality Improvement Program

Initiation

212 1 107

8122106

4/4/07

31 1 4/07

3/26/07

3127107

411 9/07

5/25/07

2/21\07

3/18/07

511 8/07

9/13/07

1/22/07

7/12/07

7/3/07

7/23/07

10/10/07

Approval

3/29/07

5/22/07

5/22/07

5/24/07

61 14/07

611 4/07

6/25/07

6\28/07

711 7/07

7/31/07

9/7/07

10112107

1 1/6/07

1 1/6/07

1 1/6/07

1211 3/07

113 1/08

Effective -ness

7/6/07

5/22/07

5/22/07

91 1 8/07

7/9/07

812107

7/25/07

811 3/07

8/7/07

9/11/07

9/7/07

10/12/07

1211 8/07

3/1/08

1/24/08

3124108

3120108

First disburse-

ment

8122107

1211 8/08

715107

1 01 1 0107

81 1 3/07

1 111 4/07

1211 307

1211 5/08

313 1/08

10/17/07

Bank-Exec

2/18/08

7/24/08

81 1108

411 8/08

4/9/08

6125108

Committ- ed ($m)

180

10

4 1

18

9

5

8

3

120

3 7

1

2

10

16

7

10

3 0

Disburs -ed ($m)

72

0

4 1

5

I

1

6

0

20

3

1

0

3

2

4

6

5

Fund- ing

IDA

TF

TF

IDA

IDA

IDA

TF

IDA

IDA

IDA

SF

SF

TF

TF

TF

SF

IDA

FY

2008

2008

2008

2008

2008

2008

2008

2008

2008

2009

2009

2009

2008

2008

2008

2008

2008

2008

Response type

Post- Conflict Post- Conflict Post- Conflict Post- Conflict Post- Conflict Post- Conflict Post- Conflict

Post- Conflict

Post- Conflict Post- Conflict Post- Conflict Post- Conflict

Post- Conflict

Post- Conflict

Post- Conflict

Post- Conflict

Post- Conflict Post- Conflict

Region

AFR

SAR

AFR

MNA

AFR

AFR

AFR

MNA

AFR

EAP

AFR

MNA

AFR

MNA

MNA

MNA

SAR

SAR

Country

Guinea- Bissau

Nepal

Liberia

Iraq

Cote a~vo i r e 1 Cote a~vo i r e Cote alvoire

Iraq

Togo

Timor-Leste

Uganda

Lebanon

Congo, Democratic Republic of

Iraq

West Bank And Gaza

West Bank And Gaza

Afghanistan

Afghanistan

Project ID

PI 09722

PI 10762

P 107248

PO94650

P071631

PI 07355

P110020

07698

PI10943

PI06220

1849

P109296

72

P1 10658

PI1 1825

Project name

Emergency Public Service Delivery

Nepal Peace Support Project*

Economic Governance & Institutional

Emergency Water Supply Project*

Emergency Multi-Sector HIVIAIDS Project

Governance And Institutional Dev.

Emergency Urban Infrastructure

Strengthening Emergency Health Response In Northern Iraq

Community Development Project

Timor Leste - Youth Development Pro.ect** Emergency Demobilization And Reintegration Project Second Emergency Social Protection Implementation support Project

Emergency Rehabilitation & Recovery Second Additional Financing

Emergency Community Infrastructure Rehab Additional Financing

North Gaza Sewerage Treatment Plant Additional Financing

Gaza I1 Emergency Water Add. Financing

Afghanistan Health (AF 11)

ARTF-Kabul Urban Reconstruction Project

Initiation

111 0108

111 6/08

7130107

1 1/8/05

1211 8/07

2/3/08

1/22/08

10/3/07

2\27/08

3/25\08

10/4/07

6/13/08

6/28/07

1 1 18/07

10125107

111 7/08

12/6/07

4/7/08

Approval

4/29/08

5/6/08

511 3/08

611 0108

611 2/08

6/12/08

611 2/08

611 8/08

6/26/08

711 108

7/28/08

9/5/08

1211 8/07

4/ 1 0108

4/22/08

4/22/08

511 5/08

611 3/08

Effective -ness

5/14/08

911 9/08

6/23/08

N/Y

10/1/08

10122108

9/9/08

6/30/08

911 0108

NIY

811 5/08

Bank Exec

AF

AF

A F

AF

AF

AF

First disburse-

ment

5\29/08

7/7/2008

10/24/08

12/8/08

10/23/08

713 1/08

10128108

1 1/3/08

Bank-Exec

AF

AF

AF

A F

AF

AF

Committ- ed ($m)

10

50

11

110

20

13

94

8

17

2

8

6

12

26

12

5

20

6

Disburs -ed ($m)

6

0

2

0

2

1

7

0

2

0

1

0

5

0

1

1

16

0

Fund- ing

IDA

IDA

IDA

IDA

IDA

IDA

IDA

TF

IDA

IDA

TF

SF

IDA

TF

TF

SF

IDA

TF

FY

2009

Response type

Post- Conflict

Region

MNA

Post-Conflict

2008

2008

2008

2008

2008

2008

2009

2009

2009

2009

2008

2008

Natural

2008

2008

2009

2009

Country

Iraq

IDA

IBRD

IBRD

IDA

IBRD

IDA

TF

IDA

IDA

IDA

IDA

IDA

SF

SF

SF

SF

946

13

10

13

17

80

7

1

109

20

11

7

4

292

4

5

8

7

1211 1/08

5/28/08

512 1/08

1013 1/08

NIY

1 1/26/08

711 6108

12/24/08

NIY

N/Y

AF

A F

7/24/08

711 7/08

911 1/08

911 0108

211

0

0

12

0

0

0

0

0

0

0

0

0

12

2

0

5

3

Sub-Total

Disaster Natural Disaster Natural Disaster Natural Disaster Natural Disaster Natural Disaster Natural Disaster Natural Disaster Natural Disaster Natural Disaster Natural Disaster Natural Disaster Disaster

GFRP

GFRP

GFRP

GFRP

7/8/08

7122108

6/26/08

811 2/08

12/2/08

A F

AF

811 2/08

1 1/27/08

1 0/24/08

Project ID

PI 12064

LCR

LCR

EAP

LCR

LCR

ECA

EAP

SAK

LCR

ECA

LCR

LCR