37896 I HARMONIZATION AND ALIGNMENT FORGREATER AID EFFECTIVENESS: ANUPDATEONGLOBAL IMPLEMENTATIONAND THE BANK'SCOMMITMENTS I HARMONIZATION UNIT OPERATIONS POLICY AND COUNTRY SERVICES October 30,2006 ABBREVIATIONSAND ACRONYMS AsDB AsianDevelopmentBank AFR Africa Region CAS Country Assistance Strategy CFAA Country Financial Accountability Assessment CG Consultative Group CPAR Country Procurement Assessment Report CPIA Country Policy andInstitutional Assessment DPO Development policy operation ECA Europe and Central Asia Region EFA-FTI Education for All -Fast Track Initiative ESW Economic and sector work FM Financial management FY Fiscalyear H&A Harmonization andalignment HLF High-Level Forum IBRD InternationalBank for Reconstruction and Development IDA InternationalDevelopment Association IMF InternationalMonetary Fund JBIC Japan Bank for International Cooperation KPI Key performance indicator LCR LatinAmerica and Caribbean Region M&E Monitoring and evaluation MDB Multilateral development bank MDG Millennium Development Goal M I C Middle-income country MOU Memorandum o f understanding OECDDAC Development Assistance Committee o f the Organisation for Economic Co-operation andDevelopment OPCS Operations Policy and Country Services PEFA Public Expenditure and FinancialAccountability Program PFM Public financial management P I U Project implementation unit PRS Povertyreduction strategy PRSC Poverty reduction support credit PRSP Poverty Reduction Strategy Paper QAG Quality Assurance Group UK United Kingdom UN UnitedNations UNDP UnitedNations Development Programme WP-EFF Working Party on Aid Effectiveness HARMONIZATION AND ALIGNMENTFORGREATER EFFECTIVENESS: AID AN UPDATEON GLOBAL IMPLEMENTATIONAND THEBANK'S COMMITMENTS CONTENTS ... Executive Summary ................................................................................................................ u1 I Introduction . ......................................................................................................................... 1 I1 InternationalEfforts at Harmonization andAlignment . ................................................ A Country-LevelHarmonizationActions..................................................................... 3 3 B Harmonizationand Alignment inFragile States....................................................... .. 7 C. Harmonizationand Alignment inMiddle-Income Countries ................................... 7 I11 MonitoringImplementationofthe Paris Declaration . .................................................. A InternationalMonitoring........................................................................................... . 8 9 B.The WorldBank'sMonitoringFramework andImplementation............................ C Harmonized Evaluation.......................................................................................... . 10 -15 IV Institutional Actions inHarmonizationand Alignment . ............................................. 15 V LookingAhead: Meetingthe Paris PeclarationCommitments . .................................. 21 VI Conclusion and Recommendation . ................................................................................. 27 Annex Annex A Paris Indicatorso f ImplementationProgress........................................................... . 32 Boxes 14 Box 2.HarmonizedArrangements inthe Philippines ............................................................. Box 1.ChangingWorld BankPractice on ProjectManagement............................................. 17 Box 3.Results andResources Consultative Groups............................................................... 19 Box 4.HarmonizationandAlignment inthe Educationfor All-Fast Track Initiative..........20 Box 5.Addressing the Issue of Selectivity.............................................................................. 25 Box 6.Africa Action Plan........................................................................................................ 26 Table 1 Country ImplementationProgress on Harmonization andAlignment ........................ Tables 4 Table 2 Status of World BankActions onthe Paris Indicators .............................................. Table 3 Disbursements o fWorld BankProgram-Based Operations ...................................... 11 12 Table 4 Economic and Sector Work Prepared Jointly with Donors....................................... .... 12 Table 5. Cost andTime o f Project Preparation. FY06............................................................. 26 Table 6.Harmonization and Alignment Plan .......................................................................... 30 HARMONIZATION AND ALIGNMENT FORGREATER EFFECTIVENESS: AID AN UPDATEONGLOBALIMPLEMENTATIONAND THEBANK'SCOMMITMENTS EXECUTIVE SUMMARY 1. Since the time o f the 2002 Monterrey meetings on financing for development, the World Bankhasparticipated inandhelpedto leadinternational efforts to improve the management and delivery o f aid. From the 2003 Rome High-Level Forum (HLF), which as a first response to Monterrey identifiedthe general framework for harmonization, through the Paris HLF in 2005, until now, the World Bank has been working with other development partners to align support with partner countries' own priorities and strategies; harmonize donor policies and procedures to reduce transaction costs; and manage aid resources to achieve greater development results. This paper provides an update on the implementation o fharmonization and alignment actions globally and by the World Bank inlight of commitments it made inthe Rome and Paris Declarations to improve aid effectiveness.' It also sets out Management's plan o f actions to scale up the Bank's harmonizationand alignment work inits own operations. 2. Review of Actions Required for Release of Contingent Contributions to IDA. This paper also responds to the stipulations inthe IDA14 Report with respect to additional contingent contributions to IDA.2Under the IDA14 replenishment arrangements, donors were able to make contingent contributions to IDA14 tied to the fulfillment o f certain agreed sets o f actions. Actions to be taken by the IDA14 Mid-TermReview include review and adoption by IDA o f a harmonization monitoring framework (see paras. 13-22 o f the main text) and determination by IDA'SExecutive Directors that the Bank has made satisfactory progress against the baselines established for the indicators in the monitoring framework (see Table ES1 and Table 2 in the main text). This paper therefore seeks adoption o f the monitoring framework, review o f the baselines, and a determination bythe Executive Directors o f satisfactory progress. A. InternationalEfforts 3. The international aid community recognized in the Rome and Paris Declarations that harmonizationand alignment are important tools for improving development results. The paper reports that partner countries, donors, and the Bank are taking substantial actions toward meeting the Paris commitments on ownership, alignment, harmonization, managing for development results, and mutual accountability: some actions are being taken in at least 60 countries, with broad and substantial implementation in 5-8 countries and good (but less extensive) implementation in 10-15 others. Joint analytic work, collaborative or joint programming and assistance strategies, multidonor financing o f program-based approaches, common financial management andprocurement arrangements, harmonizedproject implementationprocedures, use For the Rome HLF, see High-Level Forum on Harmonization (SecM2003-0088), February 28, 2003; for the Paris HLF, see Paris Declaration on Aid Effectiveness: Ownership, Harmonization, Alignment, Results and Mutual Accountability (R2005-0058), March 7,2005. Additions to IDA Resources: Fourteenth Replenishment (IDAl2005-0113), approved by the Executive Directors of IDA on March 10,2005; see Attachment 1, ScheduleB. iv o f country systems in some areas, joint or independent assessments o f aid, "quiet periods" when field missions do not take place, partnership arrangements such as delegated cooperation, and aid delivery through the use of harmonizedbudget support are increasingly being undertaken across these countries. These initial efforts are yielding evidence of good results: a number o f partner country officials have reported their sense that aid transaction costs are declining for them and that alignment o f aid with country development strategies and priorities i s improving. Nevertheless, it is equally clear, as partner countries and others also point out, that more efforts are needed to broaden and deepen these actions and address issues such as aid predictability, donor selectivity, and assistance in strengthening and using country systems to a greater extent. Countries and donors, including the Bank, will needto continue focusing onthis agenda and will need to make further changes within their respective institutions o f practices, processes, and procedures ifthe intendeddevelopment impact i s to be achieved. 4. Monitoring. The international community has developed a framework for monitoring implementation of the Paris commitments that involves reviewing progress in 2006, updating information on progress during 2008 in time for the Third High-Level Forum on Aid Effectiveness, and monitoring in 2010 to report on implementation against the 2010 targets. Initial information from the 2006 round of monitoring i s available, and additional data are being collected through surveys and analytic work; preliminary results from the international survey work will bereportedby December 2006, and a final report will be prepared by March2007. B. BankImplementation 5. The Bank has been a leader in the international work on harmonization, alignment, and managing for development results, spearheading in key areas and joining in and supporting efforts among multilateral development banks (MDBs), bilateral donors, and country partners. For example, the Bank has completed four collaborative country assistance strategies, i s planning or working on collaborative assistance strategies with seven other countries, and has initiated discussions in 11 more countries. In FY06, 43 percent o f all Bank disbursements (IDA and IBRD) were for operations using the program-based approaches called for in the Paris Declaration (a concept that includes sectonvide approaches, development policy lending, and other collaborative operations), and 20 percent o f analytic work in IDA countries was prepared jointly with others (withthe highestpercentage o fjoint analytic work being inthe Africa Region, at 29 percent). The Bank has also taken the lead in putting in place an internal policy and procedural environment for implementing its harmonization and alignment commitments. For example, it has changed its operational policies with respect to aligning Country Assistance Strategies (CASs) to Poverty Reduction Strategy Papers and has updated its policies and guidance concerning development policy operations, auditing requirements, pooling o f funds in multidonor projects, harmonizationo f procurement and financial management arrangements, and joint analytic work. Further Bank work is ongoing in a range o f areas, including financial management, procurement, legal issues, environment, and governance and anticorruption, as well as inhealth, education, agriculture, and other sectors. 6. Monitoring Bank Implementation. The system for monitoring implementation o f the Paris commitments within the Bank uses quantitative and qualitative assessments o f harmonization and alignment actions and progress. The quantitative assessment i s harmonized V with the international monitoringprocess, using its agreeddefinitions. Two indicators-those on joint analytic work and lending through program-based approaches-are operationally most strategic from the Bank's perspective as progress inthem will drive results inseveral o f the other indicators. For this reason these two are also key performance indicators (KPIs) monitored as part of the Bank's Strategy and Performance Management process. Table ES1 shows the World Bank's quantitative monitoring framework and the status o f implementation against the Paris indicators for which donors have primary re~ponsibility.~ Table ES1. Status of World Bank Actions on the Paris Indicators Comparativedata Currentstatus Paris 1 2010 ~ Indicator" Unit % Unit % %Datayear target (%) 1 ~ Disbursements using program- Bank j 38 i!Datayear FY05 Bank 43 FY06 66 ~ Technical cooperation Bank 48 I 2005 50 coordinated with other donors iii 7. UnfinishedBusiness. While substantial implementation of harmonizationand alignment has taken place, the paper recognizes that, for better development results, all participants in the process need to do more to increase and deepen country-level harmonization and alignment. Available Bank data from a survey of 35 country programs and from Bank key performance indicators reflect that the Bank i s on its way to meetingthe Paris targets for aid predictabilityand coordinationo f technical cooperation and has made good progress on increasing lending through program-based approaches and using strengthened national systems for financial management. Continued attention i s requiredto ensure that this progress remains on track. However, a larger degree o f effort i s required in three other aspects o f Bank work-joint economic and sector work, joint missions, and, particularly, shifting away from reliance on parallel project Some of the data in this report are based on information coming from the 2006 Paris monitoring survey undertaken by the Working Party on Aid Effectiveness (see paras. 15-16 of the main text), for which 35 Bank country programs inthe six Bank Regions participated at the country level. The indicators for lending through program-based approachesandjoint analytic work are based on the Bank's KPIs for these areas. vi implementation units (P1Us)-where progress will need to be ramped up if the Bank is to meet the agreedParis targets inthese areas. 8. Addressing Obstacles. The Bank's present policy framework and internal processes are generally supportive o f Bank actions to support harmonization and alignment. Nonetheless there are obstacles to scaling up this work. For example, although staff are clearly committed to strengthening aid effectiveness, some are not fully conversant with the details of, or the institution's commitment to, harmonization and alignment or its leadership role. Against budget pressures and allocation choices, country teams face increasing demands to work on harmonization and alignment. At the same time, staff who work on these issues sometimes feel their contribution is not sufficiently valued by managers focused on projectlprogram delivery, and they find little reward interms of career advancement from it. Budgets themselves are also an issue: while reducing the transaction costs to borrowers, some forms of program-based lending-for example, sectonvide approaches-can be more expensive to prepare in the Bank than the "average" project. Lastly, while the focus of this paper has beenat the international and country levels, there remain important issues to address in respect to how vertical funds can be integrated into national development strategies, and how to ensure that key sector programs reflect Paris Declaration principles. 9. Plan of Action. The paper indicates that Management will continue to give close attention to the Bank's internal processes, staff capacity, and incentives for furthering implementation of the Paris Declaration. It sets out a range o f actions around the following pillars by which Management intends to sustain and build on past progress to further the implementationof harmonizationand alignment: 0 Continuing strong, visible, and repeatedmessages about the importance of improving Bank performance in the areas of harmonization and alignment and managing for results as key elements o f the Bank's aid and development effectiveness agenda. 0 Continuing attention to modernization o f internal processes, including updating guidance on CAS preparation involving other partners, investment lending, and analytic and advisory activities, to put in place structured support for improved harmonization practices; adopting harmonization and alignment as criteria in the assessment methodologies o f the Quality Assurance Group; and disseminating good practices for work on and discussion o f selectivity in the preparation and review of country strategies. 0 Attention to skills and staffing issues, including the extent o f decentralization; the dissemination o f good practices in staffing country offices and budgeting for harmonization work; addition o f criteria on harmonization and alignment expectations in terms o f reference for country directors and managers, and sector directors and managers; and the development o f sectoral criteria for evaluations of staff contributions to harmonizationand alignment. 0 Continued engagement with external partners on operational matters, to maximize the benefits that can be delivered to the country. vii C. Conclusionand Recommendation 10. On the basis o f this review, Management recommends that, for the purposes o f additional contingent contributions to IDA14, the Executive Directors make a determination that the Bank has fulfilled the measures specified to be taken by the IDA14 Mid-Term Review inthe area of harmonization and alignment. Section VI o f the paper sets out the conclusion and recommendation of this paper in more detail. As Executive Directors consider this report, Management would value their views on what more the Bank should be doing to make further progress toward implementingthe Paris Declarationcommitments. HARMONIZATION ANDALIGNMENT FORGREATER EFFECTIVENESS: AID AN UPDATE ON GLOBAL IMPLEMENTATION AND THE BANK'S COMMITMENTS I.INTRODUCTION 1. Today, as the international community works with greater determination to help developing countries achieve their povertyreductionand growth goals, aid effectiveness-using aid resources for the greatest impact-has become more important than ever. The international community's work on h s has been gaining momentum--from the 2003 Rome High-Level Forum (HLF),which identified a general framework for increased harmonization, through the Paris High-Level Forum on Aid Effectiveness in 2005, where over 100 partner and donor countries and international agencies endorsed the Paris Declaration's detailed framework o f commitments and operational targets inownershp, alignment, harmonization, managing for results, and mutual accountability.' Throughout this time, the World Bank has taken a leading role and has coordinated with other donors and institutions such as the regional development banks, the Development Assistance Committee o f the Organisation for Economic Co-operation and Development (OECDDAC) and bilateral donors, and agencies o f the United Nations, in defining, promoting, and supporting the international efforts at harmonization andalignment. 2. Implementation. Much has been achieved in implementing this agenda-at the international level in the OECD/DAC, within donor institutions, and most importantly at the country level, where harmonization and alignment activities have engaged all development partners. The Working Party on Aid Effectiveness (WP-EFF), a partnership o f donors (including the World Bank) and partner countries hostedby the OECD/DAC, is undertaking a major effort to monitor and report on the implementation o f the Paris Declaration. Over time this monitoring process, with its associatedreporting and analyses, will provide a picture o f and a consistent data set on implementation progress across countries. It i s clear at this stage that real progress has been made, but more remains to be done by all participants in the process, including by the World Bank. 3. Purpose of Paper. This paper provides an update on the implementation o f the harmonization and alignment agenda and the World Bank's involvement in it. The Bank has already undertaken a range o f refoms in order to be a key partner in the global push for harmonizationand alignment. However, a number o f challenges remainto be tackled-not least the need for strong, visible, and continual communications that this agenda i s a priority for the Bank and its key elements should beintegrated into all operational decisions. Given the Bank's visibility and its unique role inthe international community, this paper argues that the Bank can best exercise leadership by continuing to use its convening powers at the international and country levels to support this agenda, and to set an example by implementing harmonization and alignment good practice principles inits operational work. ` For the Rome HLF, see High-Level Forum on Harmonization (SecM2003-0088), February 28, 2003; for the Paris HLF, see Paris Declaration on Aid Effectiveness: Ownership, Harmonization, Alignment, Results and Mutual Accountability (R2005-0058), March 7,2005. 2 4. Review of Actions Required for Release of Contingent Contributions to IDA. In providing this update, the paper also provides an opportunity for Executive Directbrs to review the harmonization monitoring framework with related baselines and make the determinations required under the IDA14replenishment arrangements (see paras. 13-22). The IDA14 Report2 specifies that additional contingent contributions to IDA14 can be tied to IDA's fulfillment of certain actions. The actions in the area o f harmonization and alignment, to be taken by the IDA14 Mid-TermReview, are as follows: Review by the Executive Directors o f the Association o f (a) a monitoring framework for harmonization including a series o f key indicators drawing on the results o f the [Paris] High Level Forum (HLF-2) and (b) baselines established by the Association for such indicators; and adoption o f such monitoring framework. Determinationby the Executive Directors o fthe Association that satisfactory progress hasbeenmade against the baselines established for such harmonizationindicators. This paper thus provides Executive Directors an opportunity to review the harmonization and alignment monitoring framework, and recommends that the framework be adopted. This paper also reports on the progress made against the baselines for the harmonization indicators and recommends that, for the purposes o f meeting the requirements for the additional contingent contributions to IDA14, IDA's Executive Directors determine that the Bank has made satisfactory progress toward meeting its commitments with respect to harmonization and alignment and against the Paris indicators. 5. Structure of the Paper. Section I1 documents country-level progress toward harmonization and alignment, drawing from the Bank's quantitative input into country-level surveys as well as a range o f qualitative information, desk studies, and other data. Section I11 lays out both the international framework for monitoring the Paris Declaration and the World Bank's monitoring plans. Section IV discusses actions the Bank is taking both internally and internationally to implement harmonization and alignment. Section V discusses the challenges the World Bank faces inimplementingthis agenda, including the role o f incentives. Section VI lays out actions Management i s planning to take to move the Bank toward greater implementation o f this agenda and seeks the Executive Directors' determination on the actions in the area o fharmonization and alignment that are to be taken by the IDA14 Mid-Term Review. Additions to IDA Resources: Fourteenth Replenishment (IDAl2005-0 113), approved by Executive Directors of IDAonMarch 10,2005; see Attachment 1, Schedule B. 3 11. INTERNATIONAL EFFORTSHARMONIZATIONALIGNMENT AT AND 6. A review of the harmonization and alignment activities taking place in countries across the world yields a picture o f broad and growing attention to, and action and progress on, these issues. The breadth and depth o f actions differ among countries as they and donors adapt a set o f actions drawn from the Paris Declaration fiamework to the country context and circumstances. This section describes some ofthe key activities, discusses the implicationso fharmonizationand alignment in countries o f different levels o f income and development, and outlines how these activities canbe expected to improve aid effectiveness and development outcomes. A. Country-LevelHarmonizationActions 7. At least 60 countries around the world are collaboratingwith their development partners, including the World Bank, on country-level harmonization and alignment actions. Table 1 illustrates the degree o f country-level implementation o f a set o f key actions by two groups o f countries-those taking actions and makingsubstantive progress on a relatively broad front, and those where good progress i s being made but i s not as widespread as in the first group. Many countries not listed inthe table are also taking action on harmonization and alignment; but most o f these are inthe initial stages o f implementing the agenda or are focusing on a limited set o f actions. In many countries, country ownership, including in some cases the presence o f a "champion" o f harmonization and alignment in the administration, i s a key element of country progress. The subparagraphs that follow explain the critical components o f harmonization and alignment work highlightedinthe table. 0 Harmonization road map. A road map, or country action plan, for harmonization and alignment is a menu o f time-bound actions-ranging from linking medium-term expenditure frameworks to the Poverty Reduction Strategy Paper (PRSP), through adopting or enhancing the quality o f sectonvide approaches, to establishing common arrangements for procurement, financial management (FM), and shared analytic work. These plans articulate the agenda shared between the government and donors to make progress toward localized Paris indicators and targets, establish mutual accountability, and facilitate managing for results. Six countries-Cambodia, Ethiopia, Ghana, Nicaragua, Vietnam, and Zambia-have well-developed action plans, and those of Cambodia, Ghana, and Vietnam are notable for both integrating the Paris Declaration indicators explicitly and making a close linkage to the Consultative Group (CG) proces~.~ Insome countries, Tanzania for example, the CG process has been replaced by other country-led and home- grown processes that focus on resources andresults and on strengthening partnerships. 4 Table 1. Country ImplementationProgresson Harmonizationand Alignment aCountries showing substantive progress (at least four areas of substantial action). Countries where actions are being taken but not across as broad afront as in the first category. 0 =substantial or sustained action; =moderateaction; o = actionbeinginitiatedand at early stage; blank= littleor no action. Note: This table depicts some ofthe most strategic actions/measuresthat governments and donors are taking in selectedcountries to implement harmonization andalignment. The countries selectedshow arange and depth of implementation. This presentation does not imply that such activities are taking place only inthe countries listed; rather, actions inone form or another aretak!%L?kEin Over 6o.!Z!S@!!.! __.____I_-__-__ _ _ _ ___-___ ~ -. -J __I_ __l_l__ I Collaborative Country Assistance Strategy. A collaborative or joint Country Assistance Strategy (CAS) may involve a spectrum of approaches-from engaging in common analysis and diagnosis o f country issues and priorities to adopting a single document that covers joint diagnosis, joint programming, harmonized results frameworks and monitoring systems, andjoint implementation of a common program. Such collaborative frameworks help identify the comparative advantages among donors working in the country and contribute to donor selectivity, rationalization of donor involvement in sectors, and joint programming-all assisting to improve harmonized delivery of donor assistance. Since the Paris HLF the Bank has been a leader in partneringwith other donor agencies on such strategies. Collaborative CASs havebeen completed in Bangladesh, Cambodia, Nigeria, and Uganda; similar efforts are almost completed in Tanzania and are under preparation or have been agreed to in Ghana, Kyrgyz Republic, Malawi, Mozambique, Nicaragua, and Vietnam; and preparation of such documents i s being discussed in Burkma Faso, Cameroon, Honduras, Jamaica, Kenya, Mali, Mauritania, Philippines, Rwanda, Senegal, andYemen. Other donors are also collaborating on programming; for instance, the European Commission and the UnitedKingdom are working together on an assistance strategy inSierra Leone. 0 Common performance assessment framework Common performance assessment frameworks that use country-level monitoring and evaluation (M&E) systems to assess progress toward expected results (which have usually been identified in a 5 comprehensive national development strategy) include a manageable set o f indicators to measure inputs, outputs, outcomes, and impacts. Coordinated budget support, sectonvide approaches, and other collaborative projects are increasingly incorporating such assessment frameworks. These frameworks depend on statistical capacity to provide the valid, verifiable, and widely available information they need; and they include a mechanism to provide regular feedback to government institutions, including parliaments, and stakeholders outside government. These frameworks help strengthen country ownershp by streamlining donors' conditionality. Moreover, where they draw heavily on country's own M&E systems and procedures, they can strengthen country capacity and contribute to greater transparency and accountability o f development results. Burkina Faso, Ghana, Mozambique, and Uganda, in particular, show progress toward establishing a national M&E system that i s linkedto information systemswithin line ministries, produces data tailored to the needs o f national policymakers, and ' informs stakeholders on progress instrategy implementation and corresponding budget decisions, andcontributes to countries' ability to manage for development results. Coordinated budget support For many countries, budget support4has become an increasingly important aid delivery mechanism: it has contributed to improving the overall quality o f policymaking by strengthening government ownership and leadership while also supporting national poverty reduction strategies (PRSs) and promoting improved allocation and operational efficiency o f public expenditures o f aid. This form o f aid delivery can improve alignment with government budgetary cycles and calendars, provide predictability o f disbursement, increase priority expenditures, promote the internal and external accountability o f government, lower transaction costs for the government, harmonize performance assessment and donor requirements, and strengthen public financial management (PFM), including planning and budgeting5 Donors now coordinate their budget support at the country level through budget support working groups to improve alignment with the government's PRS or national development priorities, and to harmonize their policy, procedural, and accountability requirements.6 The Bank i s fully engaged inthis effort, providing development policy lending in a total o f 63 countries in the past three years and committing funding to poverty reduction support credits (PRSCs) in 21 countries. Two-thirds o f the PRSCs were prepared incollaboration with other donors, and many o f the others were undertaken with a fair degree o f coordination. The Bank i s a budget support partner ineach o f the countries showing substantial action inTable 1. Sectorwide approaches. The sectonvide or programmatic approach (dealing with sectors, subsectors, thematic areas, and so forth) i s based on an agreed strategy and has aspects of, or tends to support and promote (a) leadership by the host country or 4 For the Bank, "budget support" is provided through development policy lending. In this type o f lending the Bank and the borrower agree on a standard and limited set o f items for which the resources may not be used (the negative list); otherwise Bank resources are made available for financing a country's budgetary expenditure. Evaluation of General Budget Support: SynthesisReport, International DevelopmentDepartment, University of Birmingham, UK, May 2006. Development Policy Retrospective (SecM2006-03 19), July 7, 2006, assesses the strengths and drawbacks of these coordinated efforts. 6 organization; (b) a single comprehensive program and budget fiamework; (c) a formalized process for donor coordinationandharmonization o f donor procedures for reporting, budgeting, FM, and procurement; and (d) efforts to increase the use o f local systems for program design and implementation, FM, and M&E. Such approaches stress cooperation and coordination between government and donors and can be supported by a single donor or multiple donors, including by those that cannot provide budget support, and can be supported also through different project instruments. A review o f project documentation indicates that inthe past three years the Bank has committed finding to 46 operations using these approaches in 28 countries; and in Bangladesh, Brazil, Malawi, Morocco, Nepal, Nicaragua, Philippines, Poland, and Tanzania, the Bank has supported more than one sectonvide approach duringFY04-06. Joint diagnostic/anaZytic work. Joint or coordinated country analytic work helps strengthencountry ownership and improve alignment with country priorities, reduce transaction costs for the government, reduce duplication o f donor efforts, and promote greater understanding among donors o f issues and o f common strategies to help deal with them. In Asia, Africa, and Latin America, the World Bank and the regional development banks already prepare most Country Procurement Assessment Reports (CPARs) and Country Financial Accountability Assessments (CFAAs) jointly with other donors. In addition, to facilitate knowledge sharing and promote collaboration on analytic work, the Bank hosts the Country Analytic Work website (www.countryanalyticwork.net). It carries over 3,000 reports, has more than 30 multilateral and bilateral donor agencies actively participating, and received over 500,000 hits in the first six months o f 2006. A country analytic work e-newsletter developed bythe Bank i s now disseminated to some 1,300 subscribers. Use of common arrangements for project and program management Country- specific efforts to streamline and harmonize arrangements for FM, procurement, portfolio management, and M&E can be key components o f country harmonization action plans: donors and governments agree to use a common set o f rules for procurement and FMeither throughout the portfolio or for discrete projects. The aim i s to streamline procedures and thus reduce transaction costs due to multiple arrangements, but the longer-run objective i s to align increasingly with strengthened country systems. The Bank and others are involved in such arrangements in a number of countries. For example, inVietnam five development banks includingthe World Bank have been working with the government on standards for feasibility studies, appraisal documents, and monitoring studies. The World Bank and the African Development Bank are using a common FMplatform for projects inNigeria, and the World Bank and the Inter-American Development Bank have harmonized reportingrequirements inChile. Independent monitoring process. A credible process to assess donors' and partner governments' implementation o f their commitments-such as one effected through an independent monitoring mechanism-can contribute to strengthening country ownership, help identify areas where both the partner government and the donors need to improve their aid delivery and management performance, and promote a 7 shared agenda inimproving aid effectiveness. Inthis regard, the process undertaken by the Independent Monitoring Group in Tanzania i s seen as best ~ractice.~ Experience i s also emerging in other countries-for example, Mozambique has established an independent review o f its budget support, and Cameroon has undertaken an independent review o fthe whole o f its aid. B. HarmonizationandAlignmentin FragileStates 8. The Paris HLF was preceded in January 2005 by the Senior Level Forum on Fragile States.8 This Forum gave rise to The Principlesfor International Engagement in Fragile States, which were integrated into the Paris Declaration. These principles reflect the understandings that harmonized and aligned approaches applied in a deliberate manner are at the center o f effective engagement in fragile states, and that international engagement in fragile states i s not limited to development actors but should also include other international actors-such as the diplomatic and security sector communities-that play a critical role inthese states. 9. Bank Portfolio in Fragile States. The Bank has a growing portfolio of harmonized approaches infragile states: The Bank participates in collaborative CASs (e.g., inCambodia); joint analytic work (e.g., in Papua New Guinea); shared donor office space (e.g., in South Sudan); and mission-free times (e.g., for the Timor-Leste Ministry of Finance and several A h c a n countries). Even when government capacity i s very weak, Bank work with harmonized mechanisms can enable policy alignment. For example, in the Central African Republic, Haiti, Liberia, and Timor-Leste, the Transitional Results Matrix has allowed donors to harmonize around a country-owned and -prioritized action plan. Alignment with country systems i s sometimes possible inhigh-riskfiduciary settings: for example, tailored risk-mitigating approaches are used in the Afghanistan Emergency National Solidarity Project, more robust oversight mechanisms are applied inthe Liberian Governance and Economic Management Assistance Program, andan Emergency Economic Management Planis inplace inGuinea Bissau. Pooling o f funds has been facilitated through donors' participationinmultidonor trust funds (e.g., inAfghanistan and Timor-Leste). C. HarmonizationandAlignment in Middle-IncomeCountries 10. The Paris aid effectiveness agenda i s generally viewed as most relevant to low-income developing countries, which have a larger proportion o f aid to GDP, a larger number o f donors involved, and weaker capacity than other countries. However, wherever significant amounts o f aid are being provided and managed, aid effectiveness i s an important issue. Indeed, o f the almost 70 7 See Enhancing Aid Relationships in Tanzania: IMG Report 2005, Economic and Social ResearchFoundation, September 22,2005. See Low-Income Countries UnderStress: Update (IDA/R2005-0251), December22,2005. 8 developing countries that have endorsed the Paris Declaration, 30 are middle-income countries (MICs). The Bank's involvement with harmonization and alignment in these countries has been basedonthe Paris principles andi s consistent with its new strategy for engagingwith 11. Approach in MICs. Experience indicates that MICs' aid effectiveness concerns are not identical to those o f low-income countries. Wider use o f strengthened country systems, programmatic approaches, and a strong emphasis on management for results play a larger role in MICs' aid effectiveness efforts. In Brazil, Mexico, and Poland, key aspects o f sectonvide approaches, such as pooled financing and use o f country systems, have been used. In Bolivia, Brazil, Jamaica, and Mexico, the World Bank and the Inter-AmericanDevelopment Bank have been collaborating actively on preparing economic and sector work (ESW) and using common procurement bidding documents and common thresholds for national competitive bidding. Countries such as Indonesia and the Philippines have focused their attention in such areas as harmonization and alignment o f FM, harmonization o f procurement, multidonor financing, and joint donor portfolio assessments, and Morocco and Tunisia have focused on strengthening country institutions and systems. The Bank permits the use of borrowers' systems for FMwhere these are assessed by the Bank as being adequate, taking into account country context and capacity strengthening measures that may be needed." Recognizing that greater use o f borrowers' procurement systems remains to be achieved, extensive consultations have taken place on a draft proposal in that regard. A new proposal for discussion with the Board i s being developed on a pilot approach that ensures adoption o f mutually agreed and verifiable standards.l1 12. MZCs as Donors. At the same time, a number of Paris signatory MICs-China, the RussianFederation, South Korea, and Thailand-as well as a number o f the new members o f the European Union (Czech Republic, Slovak Republic) have been aid donors for some time or are emerging as donors. These countries have important experiences to share, and they can also leam from the mistakes o f the past in effective aid delivery and management. Efforts are being made to bring newly emerging donors into discussion on aid effectiveness, through discussions organized by the Bank or the OECD/DAC, and through invitations to regional workshops on follow-up to the Paris agenda (for instance, in the Bolivia and the Philippines Regional Workshops on Aid Effectiveness inOctober 2006). 111. MONITORING IMPLEMENTATION OFTHE PARIS DECLARATION 13. As a primary achievement o f the Paris HLF, the Paris Declarationprovides a framework o f 56 discrete commitments to improve aid effectiveness, including a commitment by partner countries and donors to monitor the implementationo f the Declaration at the country level. The Declaration includes a set o f 12 indicators that will measure implementation status against global targets that were set for 2010-targets that point inthe direction o f the changes being sought and See Strengthening the World Bank's Engagement with IBRD Partner Countries (DC2006-0014), September 7, 2006. 10 See paragraph 9, Financial Management Practices in WorldBank-Financed Investment Operations (manual for staff on financial management), Financial Management Sector Board, November 3, 2005. 11 See paragraph 46, Strengthening the WorldBank's Engagement with IBRD Partner Countries, op. cit. 9 reflect the aspirations o f what implementingthis agenda will meaninpractice.'2 (Annex A sets out the 12 Paris indicators and their associated targets.) Since the Paris HLF, the international community has given considerable effort to defining an operational monitoring framework for assessingandlearning from implementation experience.l3 A. InternationalMonitoring 14. As the Paris Declaration envisioned, the WP-EFF developed arrangements for reviewing the status o f implementation and establishing medium-term monitoring o f the Declaration. Monitoring over the medium term will involve three stages: undertaking a quantitative and qualitative review o f implementation in 2006; updating implementation progress in2008 intime for the Third High-Level Forum on Aid Effectiveness; and monitoring in 2010 to report on implementation progress against the 2010 global targets. The WP-EFF (with World Bank participation) i s preparing a report on the status of international implementation o f the Paris Declaration; a preliminaryreport will be issued by end-2006. 15. Survey. The first stage o f this process i s under way. A subgroup o f the WP-EFF, the Joint Venture on Monitoring, developed and organized country-level survey instruments, a methodology for collecting and reporting data, and technical guidance on the instruments and process to measure the status o f implementation for 9 o f the 12 key indi~at0rs.l~The survey covers those indicators that can be tracked through a quantitative assessment: Paris indicators 3 through 10, and indicator 12 (shown inAnnex A). The survey was field-tested in five countries andlaunched inthe Paris Declaration countries inMay 2006.15 As o f mid-October 2006, survey work i s continuing ina number o f countries. Ineach country the survey process i s being guided andmanagedby the country government with participationby local donor representatives, and is being used to both collect data and provide a mechanism for country-level discussions o f harmonization. Looking ahead, giventhe transaction cost o f collecting data through surveys and the need for better data to support the implementation process, countries and donors will need to acceleratetheir efforts instatistical capacity buildingand aid delivery andmanagement systems. 16. Analytic Work The survey is being coordinated with and complemented by analytic work led by the World Bank to review the status o f implementation for the indicators that are to be tracked through qualitative assessments (Paris indicators 1,2, and 11, shown inAnnex A). At the Paris HLF, targets were tentatively identified and adopted for six o f the indicators. The international partnership o f donors and partner countries hosted by the OECDDAC was directed to recommend the full set o f targets for the indcators inthe months thereafter. Subject to further work on the methodology for measuring the qualityo fnational public financial management reformprograms and of national procurement systems, t h s group (the WP-EFF) agreed ontargets by September 2005 andreported them to the September 2005 UNWorld Summit. While the 12 indicators have been adopted by the international community, several countries have developed their own tracking mechanisms against these indicators. For example, Vietnam developed a localized version, the Hanoi Core Statement, which establishes joint local commitments and targets to be achieved by 2010 in terms o f ownership, donor alignment, harmonization, and simplification. Other countries that have developed country-basedplans include Cambodia, Ghana, andUganda. The World Bankis one o f 20 participants on the Joint Venture onMonitoring the Paris Declaration, a group that during 2005 and 2006 was cochaired by representatives o f the Governments o f the United Kingdom and Vietnam. Inthe fall of 2006, a representative o f the United States has taken over as cochair from the UK. The survey was field-tested in Ghana, Nicaragua, Senegal, South Africa, and Uganda. As o f early October 2006,37 countries had indicated to the O E C D D A C that they planto participate inthe 2006 Monitoring Survey (see httD://www.oecd.org/dac/effectiveness for information on the process and survey). 10 The assessment of the indicators for operational development strategies and results- oriented frameworks relies on the 2005 Comprehensive Development Framework Progress Report16andthe forthcoming Aid Effectiveness Review 2006 by the Bank.17 The indicator on the quality o f country PFM systemsrelies on the relevant component of the 2005 Country Policy and Institutional Assessment (CPIA) ratings to measure improvements over time incountries' PFMsystems." 0 The indicator on the quality o f country procurement systems will build on an assessment of the quality o f national procurement systems, criteria for which are being developed by the Joint Venture on Procurement-a subgroup of the WP-EFF involving multilateral development banks, bilateral donors, and partner countries- which the World Bank cochairs. B.The WorldBank's MonitoringFramework andImplementation 17. The World Bank's monitoring framework uses quantitative and qualitative assessments o f harmonization and alignment actions and progress. The quantitative assessment i s harmonized with the international framework described aboveusing its agreed definitions to review implementation and to track implementation over time, rather than setting up a separate or parallel exercise. For most indicators the Bankwill use the reporting for the Paris monitoring survey as the basis for its own reporting on institutionwide implementation. By aggregating the country-level data,lg the Bank can monitor its implementation against the relevant Paris indicators and targets." Inthis round of monitoring, the Bank is focusing on gaining experience and collecting data ina sample o f 35 countries;21in later monitoring rounds, data will be collected for all IDA countries 16 Enabling Country Capacity to Achieve Results, 2005 CDF Progress Report, Operations Policy and Country Services, 2005. 17 The Aid Effectiveness Review broadens the monitoring framework to treat more fully the 56 partnership commitments included in the Paris Declaration. This work is based on country profiles designed to capture actions toward acheving the Paris Declaration goals beyond the 12 quantitative targets. It provides a comprehensive analysis o f in-country action to strengthen alignment, harmonization, results management, and mutual accountability and serves as a repository o f good practice experience. To broaden country ownership of this tool and help build capacity for eventual self-assessment, governments and other donors have been invited to comment on the draft country profiles, which are posted on an Aid Effectiveness Review website: www.worldbank.orglaer. 18 Progress on the quality o f the countries' P F M system will be measured by changes in the CPIA score for financial management; it is envisaged that PEFA indicators could serve this function over time. 19 Using general guidance and definitions provided by the Joint Venture on Monitoring, the Paris Declaration foresaw that governments and local donors would meet o n a country basis to ensure that data are consistent. Because some cross-country differences intreatment o f data will arise, the aggregation o f data across countries andat the donor levelneeds to be approached withcaution. 20 For the Paris indicators that fall primarilyunder the responsibility o f the partner countries-those on developing operational development strategies, improving the reliability o f fiduciary systems, reporting on-budget aid, building results-oriented frameworks, and establishing a mechanism for mutual assessments o f the use o f aid- the Bank will not track these indicators separately, but rather will rely on the agreed international monitoring (some o f which i s based on qualitative assessmentsby Bank-led studies). 21 IDA-eligible countries surveyed are Afghanistan, Albania, Bolivia, Burluna Faso, Cambodia, Cameroon, DR Congo, Ghana, Honduras, Indonesia, Kenya, Kyrgyz Republic, Liberia, Mali, Mauritania, Moldova, Mongolia, Mozambique, Nepal, Nicaragua, Niger, Pakistan, PDR Lao, Senegal, Sri Lanka, Sudan, Tajrkistan, Tanzania, Vietnam, andUganda. Other countries inthe survey include Egypt,Jordan, Morocco, Philippines, andRomania. 11 and an increasing number of IBRD-only countries whose governments express interest. In addition, for the Paris indicators for which Bankwide data are systematically available-for joint analytic work anddisbursements usingprogram-based approaches-the Bank will rely on centrally collected data that will bevetted by countrymanagement units. 18. Qualitative Assessments. As the Paris Declaration's commitments are much broader thanthe 12indicators, the Bankwill also use qualitativemeans-including the Aid Effectiveness Review-to track its performance. Internally, in line with the CAS guidelines, for each individual country the CAS will assess donor relations, measures to increase harmonization, and Bank support for buildingthe country's capacity to leadand improve aidmanagement. Also, the Bank will prepare periodic reports to the Executive Directors timed to coincide with the major international reportingbypartner countries and other donors. Its nextreport updatingprogress in implementationwill be on the 2008 international monitoring round, as preparation for the 2008 HLF. Operations Policy and Country Services (OPCS) will function as the institutional secretariat to aggregatethe Bankwidedata and report onthe informationgathered. 19. Status of World Bank Implementation. This section reviews the Paris indicators that quantitatively measure the Bank's implementation o f the harmonization and alignment agenda. Two of these indicators are operationally most strategic from the Bank's perspective-those on joint analytic work and lending through program-based approaches-as progress in these will drive results in several o f the other indicators. For this reason they are also Key Performance Indicators (KPIs) monitored as part o f the Bank's Strategy and Performance Management Table 2. Status of World Bank Actions on the Paris Indicators Comparative data Current status Paris 2010 Indicator Unit % Datayear Unit % Data year target (%) Disbursements using program- Bank 38 FY05 Bank 43 FY06 66 ~ Joint country analytic work" Bank 9 FY05 Bank 12 FY06 66 Parallelproject implementation ECA I 62 2001 Bank 45 2005 1Sb ~ Units(PIUs) LCR 65 2001 Disbursements releasedon Bank 88 2005 94 schedule Aid usingcountry procurement Rating scale under development' systems Aid usingcountry financial Bank 64' FY02 Bank 59e I 2005 73e ~ ~ ~ .................................................................................................................................................... management systems .............................................. I : "'""""""""""..................................................................................... .............................................. Of which investmentlending Bank j..........................31 FY02 Bank j 37 . 2005 using country FM systems Joint missions Bank 21 2005 40 AFR 31f FY04 AFR 34 2005 Technical cooperation coordinated Bank I 48 I 2005 50 with other donors Bankdatafor program-basedapproaches andjoint analytic work arebasedonWorld Bankkeyperformanceindicators. Exceptas noted, otherdatafor 2005 are basedonBankinputinto the Pansmonitoringsurvey. The target for 2010 i s to reduce the numberof parallelPIUs by two-thirds. The rating scalefor countryprocurementsystems remainsunderdevelopment by the JointVenture on Procurement. The indicator will measureuse ofcountry systems incountries withhigh-qualitysystems. Datafor FY02reflectpercent of FY02commitmentvalueusingcountryfinancialmanagementsystems; ifmeasuredby number of projects,the corresponding figures would be 37 percentfor alloperations and20 percent o f investmentprojectsonly. Estimatefor usingcountry financial managementsystemsappliesto countrieswith CPIA/PFM ratings of 3.5-4.5(thereare 25 such countriesinthe 35 countries surveyed). The 2010 target is to reduceby one-thirdthe gap inthe percentageof aidthat is notusingthe country's PFMsystems. Africa Regiondata. 12 process. Table 2 shows the status of Bank implementation. On several indicators for which data on implementation from additional years are available to illustrate how implementation is evolving, these are presented also and discussed in the remainder o f this section. As Bank information systems evolve to capture the additional data the Paris Declaration monitoring requires, f h r e reporting will be able to document implementationprogress more clearly. Program-based approaches. One o f the main commitments inthe Paris Declaration i s to increase the use o f common arrangements and procedures inthe provision o f aid and to provide aid through program-based approaches; for the Bank this implies lendingthrough sectonvide approaches, development policy operations (DPOs), and IBRD/IDA projects with joint financing. The Bank committed $1.8 billion to 14 sectonvide approaches in FY04; $795 million to 11 such projects in FY05; and $2.2 billion to 22 such projects in FY06. Bank disbursements of program-based approaches have increased fiom 37 percent o f total IBRD/IDA disbursements in FY04, 38 percent in FY05, and 43 percent in FY06 (see Table 3), reflecting accelerating disbursements o f sectonvide approaches and o f PRSCs. Table 3. Disbursementsof World BankProgram-BasedOperations Sectorwide Development policy operations Program-based approachesas approachesa All PRSCs % of IBRDHDA FY ($ billions) ($ billions) ($ billions) disbursements FY04 0.4 6.0 0.7 37 FY05 0.7 6.3 1.5 38 FY06 1.1 7.8 2.1 43 a Not including sectonvideapproachesinwhich the lending instrumentwas a DPO. Program-basedapproachpercentagesalso include the small amounts of IBRD/IDA disbursements ofprojects withjoint financing. Joint analytic work The Paris Declaration encourages greater reliance on country analytic work undertaken with donors and with the countries concerned. From the Bank's perspective, this is also one ofthe more strategic ofthe Paris commitments, as mutual understanding of country problems and possible solutions may provide a better basis for future collaboration on programs to address the issues studied. According to Bankwide KPI data, 9 percent o f the Bank's diagnostic and advisory ESW was prepared jointly with at least one other donor in FY05; and in FY06 12 percent of ESW work was undertaken jointly.22 Data for IDA countries and for countries in the Africa and East Asia Regions indicate that collaboration on analytic work i s more likely to take place in these countries (see Table 4). In addition, the Europe and Central Asia Region has good examples o f increasingly working with governments inthe preparation o f ESW. Table4. Economic and Sector Work PreparedJointly withDonors ("3 o f total) FY Bankwide IDA countries Africa Region East Asia Region FY05 9 14 19 15 FY06 12 20 29 15 22 Banksystems do not yet capturejoint work with the government, whtch is estimatedto increase these figures by a few percentage points. 13 Joint missions. The Paris Declaration supportsjoint missions-for project preparation, supervision, analytic work, or joint programming-as a means o f reducingtransaction costs to governments. In the surveyed countries 21 percent of missions were undertakenjointly with at least one other donor during2005. Joint missions in Afiica Region (AFR) countries are already approaching the Paris target o f 40percent: 34 percent o f missions were undertakenjointly in2005 inAFR, up from 31percent in FY04. Reducingparallel project implementation units. Helpingto build country institutional capacity is one of the core concerns o f the Paris Declaration. Greater integration o f project management in a country's existing institutions i s important to this goal, and hence the Declaration identifiedreduction inthe number o fparallelPIUs as a key action to be taken. In2001, World Bank Regional surveys showed that 62 percent (inEurope and Central Asia) and 65 percent (in Latin America and the Caribbean) of project implementation units (PIUs) were located outside responsible government entitiesz3 The 2005 Paris indicators survey o f 35 countries identifies 45 percent o f PIUs as parallel. While definitions will thus be different, these data indicate that World Bank- financed projects continue to rely heavily on parallel PIUs. There are a number o f instances o f integrating project management more with existing institutional structures (recent examples are a transport sector project in Lao PDR and an institutionalreform program in Kenya), and several country programs are studyinghow to shift away from this practice, but the Bank's practice o frelying on parallel PIUs does not appear to have changed sufficientlyto demonstratethat reliance on themi s beingphasedout (see Box 1 andSectionV). Use of country financial management systems. The Paris Declaration encourages wider use of country systems by donors when the country's PFM systems adhere to broadly accepted good practices or the country has in place a reform program to achieve this goal. Bank input into the Paris survey indicates that, in the countries surveyedthat have a CPIA rating of 3.5-4.5 on financial management (question 13 in the 2005 CPIA assessment), Bank projects used PFM country systems for 59 percent o f disbursements during 2005. The 2010 Paris target for this indicator i s to reduce by one-third the gap in the percentage o f aid not using the country's PFM systems; for the Bank this would mean moving to 73 percent o f disbursements by 2010. A review o f FY02 commitments for the same countries indicates that 64 percent o f Bank operations inthose countries already used country PFM systems; this highpercentage i s due to the fact that DPOs are defined as using national financial management systems and DPOs were 50 percent o f the Bank's total commitments inthat year (the high volume of policy-based lending helped several IBRD countries deal with financial crises). To compare only investment lending in the surveyed countries, 31 percent o f projects used country FM systems in FY02, compared with 37 percent in 2005. Further analysis will berequiredto track this indicator over time. 23 Implementation of WorldBank-Financed Projects, A Note on the ECA Experience With Project Implementation Units, Part I, PREM Unit, ECA Region, March 2001; and Thematic Review on Project Implementation Units, An Analysis of Ongoing and Completed Projects in Latin America and the Caribbean, LCR Quality Enhancement Team, March2001. 14 0 Other indicators. Comparable Bankwide data are not available to provide a historical time series for the other indicators, butwill bebuiltover time usingBanksystems and surveys. The indicators for aid predictability (which measures Bank estimates o f future disbursements shared with governments as a proportion o f governments' expectations as reflected, for example, in budgets) and coordinated capacity development assistance show relatively good Bank performance compared to the international target set in the Paris Declaration, though in each o f these cases additional focus will be needed to reach the goals. Box 1. ChangingWorld Bank Practice on ProjectManagement Recognizing that project implementation and management need to be better integrated inexisting country structures, rather than carried out mainly through parallel PIUs, the Bank is undertaking a number o f initiatives to promote this change. RegionaYCountry-Level Work 0 The LatinAmerica andCaribbean Region has mainstreamedreview o fPIUs as part o f it quality assuranceprocess. AFRistaking stock ofthe use ofPIUs ina sample of 13 countries andaims to reduce byone-third the number of parallel PIUsregionwide. It will review each operation at the concept note stage, and will accept parallelPIUs only inexceptionalcasesandwithinthe contextofthe government's strategy for capacity development. 0 Country units for Argentina, Colombia, Mozambique, Senegal, Tajlkistan, andthe Caribbean countries are reviewing allproject implementation set-ups to develop recommendations for better integrating PIUs in government structures and increasing institutional development impact. Bankwide Guidance 0 InOctober 2005 OPCS issueda GuidanceNote onProjectManagement to encourage staffto balance project implementation performance with sustainable capacity development. This note states that existing country institutions should be the "default" mode, andthat PIUs, especially "parallel" PIUs, should be used selectively andphased out ina manner andpace appropriate to country-specific situations. 0 MI'S DevelopmentResourceCenterhasorganizedlearningeventsonPIUsandcapacity Capacity development, designedto disseminate good practice examples o f projects that put implementation inthe hands o f government; WE31is also working on a studyon capacity development inproject design. a Capacity Developmentin Africa: ManagementAction Plan FY06-FY08, Africa Region, July 12,2006. 20. Sources of World Bank Data. For the indicators other than those on lending through program-based approaches andjoint analytic work, country unit staff inthe reporting countries- generally in country offices-have estimated the country-level data, working with governments and other local donor representatives to achieve consistent definitions and data. Analytic work data and information on disbursements are available through the Bank's existing database infrastructure-Business Warehouse, SAP, and the Operations Portal; however, most o f the data reflect new ways o f looking at information, are not readily available, and are based on manual tabulation. Further work will be needed within the Bank to explore the possibility o f systematizing this effort. Operations staff will be encouraged to track progress on country-level harmonization and alignment activities as part o f their own accountability frameworks. Several country teams have begun this process: for example, in Cameroon and Mauritania Bank teams are developing country-specific frameworks-based on the Paris Declaration indicators-for monitoring harmonization and alignment at the portfolio level; similar efforts are being undertaken inSri Lanka andVietnam. AFR has beguncollecting andreporting data on the status o f implementation o f the Paris Declaration, which it will use to anchor an accountability framework for monitoring progress. OPCS will make the Bankwide and country-level data 15 available to all country teams to assist with future tracking and with developing country-level plansfor promotingimplementation. 21. Global Monitoring Report. Besides preparing periodic papers on the Bank's implementation o f the Paris agenda, the Bank will also continue to make use o f the Global Monitoring Report to integrate reporting on the harmonization, alignment, and aid effectiveness agenda into other analysis. %s annual report, prepared in collaboration with the IMF, attracts attention inthe international development community for its comprehensive andin-depthtreatment o f issues, drawing not only on original analysis and staff experience but also on the work o f other development institutions such as the OECDDAC and regional development banks. The 2006 report focused on the theme of strengthening mutual accountability, aid, trade, and governance; it highlighted the need for donor countries to improve the quality and alignment o f the aid they provide, and for developingcountries to implementtheir development strategieseffectively. C. HarmonizedEvaluation 22. While the current focus i s on implementing and monitoring commitments, the Paris Declaration also highlightsthe importance o f exploring an independent cross-country evaluation process. The OECD/DAC Evaluation Network, with the participation o f the World Bank, i s therefore developing an evaluation framework for the Paris Declaration, with a view to developing a synthesis report o f initial formative joint evaluations by the time o f the 2008 HLF andmore summative evaluations thereafter. Iv. INSTITUTIONAL ACTIONS INHARMONIZATION ALIGNMENT AND 23. The earlier sections of this report show that the Bank's country programs are involved in a substantial range o f harmonization and alignment actions. In addition, the Bank i s working at the institutional level-both internally and internationally-to promote, support, andmainstream harmonization and alignment. This section o f the paper summarizes some o f these institutional efforts.24 24. Internal and International Work. Over the past few years, the Bank has made substantial changes in its operational policies to facilitate and support harmonization-changes involving alignment o f CASs to PRSPs, policy for DPOs, auditing requirements, modernization and simplification of the Bank's operating procedures and processes, pooling o f funds, procurement eligibility, and joint analytic work.25 It has also introduced organizational and procedural reforms inthe management o f trust funds to improve selectivity and help align donor partners' efforts more closely through multidonor andprogrammatic instruments.26Although the policy framework to support harmonization i s substantially in place, the Bank will continue to 24 For a discussion o f issues related to the results agenda (which is part o f the Paris Declaration on Aid Effectiveness), refer to Accelerating theResultsAgenda, Progress and Next Steps, OPCS, June 2006. 25 These policy changes were discussed in Note on World Bank Activities in Harmonization and Alignment (R2005-0025), February 4,2005. 26 The trust fund reforms were undertaken over the last five years and were discussed most recently inReform of World Bank-Administered Trust Funds: The Way Forward (R2004-0 144), July 2, 2004. Recent experience suggests that reviewing arrangements for trust fund management might be desirable to facilitate further flexibility inpooling arrangements for sectorwide approaches. 16 look at specific policy areas that still need to be adjusted to facilitate more effective implementationo fthe Paris commitments. 25. Financial Management. FM is a key element of the Bank's harmonization and alignment agenda. The Bank has undertaken a number o f reforms in this area to facilitate alignment with partner countries' systemsz7and harmonization with other donors, and has worked hard to forge sustainable partnerships, both to encourage similar policy reforms in partner donor institutions and to achieve operational results on the ground. In this context, the Bank was instrumental in promoting the establishment of the MDB Financial Management Harmonization Technical Working Group; the Joint Venture on Public Financial Management under the auspices of the OECD/DAC (among bilateral and multilateral donors and partner countries); and the Public Expenditure Financial Accountability (PEFA) partnership. Results in the F M area have included (a) the issuance o f a series o f good practice papers on collaboration and harmonization in the areas of FM diagnostics, financial reporting, and auditing;28 (b) the issuance o f the PEFA Public Financial Management Performance Measurement Framework; (c) the emergence o f country-led and donor-coordinated support for country PFM reform programs, based on jointly undertaken PFM diagnostics; (d) the conclusion o f a Bank/United Nations FM Framework Agreement; and (e) agreement on FM-related harmonization indicators. Inaddition, it is now thenormfor the Bankto conduct PFMdiagnosticsjointlywith other donors (inFY06, over 75 percent ofPFMdiagnostics were undertakenjointly, up from about 50 percent in FY02); and since 2002, multidonor sectonvide approaches routinely adopt common FM arrangements, usually aligned around partner country FM systems. Country-specific FM harmonizationi s also takingplace ina number o f countries (see Box 2 for one example). 26. Procurement. Work to harmonize procurement dates back to at least 1998. As part o f the MDBs' Heads o f Procurement process, the Bank has participated in harmonizing policies, guidelines, and master biddingdocuments, agreeing on the use o f the CPAR as the primary tool for assessing partner country procurement systems, creating joint working groups to address emerging topics, creating basic guidance to help partner countries with national competitive bidding, and creating modular electronic bidding documents that allow users to select appropriate clauses and customize documents for particular applications. As part o f the Joint Venture for Procurement under the WP-EFF, the Bank has participated in producing internationally agreed good practice papers on procurement and creating a set o f internationally agreed benchmarking standards and performance measurement indicators, and it i s joining in work on a common tool that countries and their donor partners can use to assess procurement 2' SeeNote on WorldBankActivities in Harmonization andAlignment andHarmonization,Alignment,Results: Report on Progress, Challenges, and Opportunities (R2005-0025), February 4, 2005, and Expanding the Use of Country Systems in Bank-SupportedOperations: Issues andProposals-Final Text (R2005-0018/21, March8,2005. 28 See Framework for Collaboration Among Participating Multilateral Development Banks on Financial Management Diagnostic Work (February 18, 2003), and Framework for Collaboration among Participating Multilateral Development Banks on Financial Reporting and Auditing (February 18, 2003); and"Good Practice Paper on Measuring FM Performance" and "Good Practice Paper on Financial Reporting and Auditing," Chapter 3 and Chapter 5, respectively, inDAC Guidelines and Reference Series Harmonizing Donor Practices for Effective Aid Delivery, 2003. 17 systems and develop coordinated reform strategies for building capacity in pro~urement.~~ In addition, the Bank's work with private sector organizations, UNorganizations, and civil society organizations has contributed to improvements indocuments andprocedures for procurement. Box 2. HarmonizedArrangementsinthe Philippines The Philippines Government i s working with donors to reduce transaction costs and improve aid effectiveness through a number of actions on financial management andprocurement. Financial Management. Once the Government of the Philippines implemented a new accounting system that complies with international standards, ajoint World Bank/Asian Development Bank (AsDB) mission agreed with the Government on the harmonization o fproject audits. A technical worlung group o f representatives from AsDB, Japan Bank for International Cooperation (JBIC), and the World Bankprepared draft standards for terms o f reference for auditors, for financial management reports, for assessmento f private sector auditors, andfor assessment o f the financial capacity o fborrowers, to be discussed with the government. Procurement. The three agencies andthe Government are working to aligntheir procurement rules more closely. Use o fthe standardPhilippine BiddingDocuments for goods and works and for services, harmonized with the rules o f AsDB, JBIC, and the World Bank, was made mandatory from July 2005. Generic procurement manuals have been elaborated and are being rolled out. An online monitoring system has beendeveloped, andbenchmarking against the OECD-World Bank baseline indicator system was completed inNovember 2004. The 2006 CPAR is under way, withthe Government Procurement Policy Board chairing the worlung group and all members o f the Philippine Development Forumrepresented, together with civil society representatives. 1Source: Capacity Development in Af~ca:ManagementAction Plan FY06-FYOB, Africa Region, July 12,2006. 27. LegaL Harmonization initiatives by definition imply a degree o f joint work among donors with different mandates, which means that legal aspects are a crucial part o f the process. To facilitate harmonizedwork, in 2005 the Bank approved modernized legal documentation for . IBRD loans and IDA credits that makes agreements shorter to draft; easier to understand, negotiate, and interpret; and less likely to need amendments over time.30 The Bank i s also planning to launch a Legal Harmonization Initiative to support the Paris Declarationby creating a forum in which lawyers o f multilateral and bilateral development financing institutions can collaborate on harmonizing policies and practices, and on identifying and addressing issues before they become obstacles to further harmonization progress. Specific areas o f focus will likely include common legal challenges in such areas as fighting corruption, using country systems, and partneringinoperations. 28. Memoranda of Understanding. A particularly challenging aspect o f harmonization i s the memoranda o f understanding (MOUs) in which donors and beneficiary governments define the framework for their cooperation in financing operations. Issues often arise when articulating the various participants' responsibilities, which do not always adequately take into account their different mandates, or the processes each donor requires to mobilize its own funds. Divergent approaches to addressing fiduciary considerations and differing expectations regarding the legal 29 The Joint Venture's tools will be integrated into the CPAR process and will help countries manage procurement reform initiatives and monitor their systems' progress toward achieving the objectives o f their reform strategy. Regional meetings are planned inFY07 inthe Africa, Latin America, and East Asia Regions to further the use o f these tools and to share experiences on the management o f procurement reform. 30 Simplijkation and Modernization of IBRD and IDA Model Legal Agreements (SecM2005-0208), April 18, 2005. 18 nature of MOUs create challenges. Furthermore, lack o f timely consultation and incomplete knowledge by staff o f good practices and options can create tensions and delay. In addition to disseminating good practices, such as the good practice note OPCS prepared on DPOs, budget support groups andjoint financing3' the Bank i s also working on mechanisms to facilitate donor coordinationin sectonvide approaches, and other forms of financial cooperation, and on solving legal andpracticalissues indeveloping andnegotiatingMOUs on these operations. 29. Environment. In July 2005, following the approval o f a new operational policy,32the World Bank began supporting selected pilot projects in which lending operations use the borrowing country's systems for environmental assessment and other applicable environmental and social safeguards. To yield robust lessons for policy, assessment methodology, implementation, accountability, and costs, the portfolio o f pilot activities includes a diverse range o f countries and sectors. Pilot projects have been approved for Egypt and Jamaica, and are under preparation for Ghana, India (at the state level), Romania, South Africa, and Tunisia. The sectors include industrialpollution abatement, energy, solid waste management, municipal services, road rehabilitation, basic urban services, natural resources (protected areas) management, and health care management. The early experiences confirm that there are significant opportunities for harmonizing environmental assessment provisions with countries and other donors. These pilots also serve to support borrowing countries' ownershp of safeguards: for example, the Government o f Egypt has now prepared draft revised Environmental Impact Assessment Guidelines applicable to all sectors, meeting one o f the requirements to achieve equivalence with Bank practices. In Mexico, following a detailed assessment o f local legal and institutional capacities, the Decentralized Infrastructure Reform and Development Project i s pioneering the use o f country safeguard frameworks while building capacity, with satisfactory results to date (four project implementing agencies have systems and trained staff in place for social and environmental management). 30. Governance and Anticorruption. As the international community increasingly recognizes the importance o f addressing the issue o f poor governance and corruption as an integral part o f development work, it also recognizes the need to harmonize approaches to the issue. InNovember 2005, the integrity units o f all the MDBs met for the first time to discuss common issues, challenges, and experiences. In a February 2006 meeting, the heads o f the major MDBs~~ set up a Joint International Financial Institution Anticorruption Task Force to develop a consistent and harmonized approach. On the basis o f the task force's recommendations, in September 2006 in Singapore the heads o f these seven MDBs agreed to a common framework for fighting fraud and corruption in the activities and operations funded by their institutions. The joint actions include standardizing the definitions the institutions use in sanctioning firms involved in corrupt activities, improving the consistency o f investigative rules and procedures, strengthening information sharing, and ensuring that each institution's compliance and enforcement activities are supported by others. The agreement i s to be ratified 31 See Good Practice Note for Development Policy Lending, Budget Support Groups and Joint Financing Arrangements, OPCS, June 2005. 32 OPIBP 4.00, Piloting the Use of Borrower Systems to Address Environmental and Social Safeguard Issues in Bank-Supported Projects, March 2005. 33 These are the AfXcan Development Bank,the Asian Development Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the Inter-American Development Bank, the IMF, and the World Bank. 19 by the boards of these MDBs; the boards of the Afiican DevelopmentBank, the Inter-American Development Bank, and the World Bankhave already done so. The major MDBs will continue to work together to assist member countries in strengthening governance and combating corruptionincooperation with civil society, the private sector, and other stakeholders such as the media andjudiciary. 31. Harmonization Unit. In OPCS, the HarmonizationUnit serves as the Bank's secretariat onharmonization issues, interactingwith other units inOPCS, the Networks, andthe Regions on policy and country-level implementation matters. It supports project and country teams in designing and implementing collaborative and programmatic activities, and it provides operational guidance and technical support for mainstreaming good practices in harmonization and alignment. Ithas supplemented these activities with learning events, goodpracticebriefs on a number o f harmonization and alignment topics, a brochure on the Paris Declaration with an illustrative "menu o f harmonization" inthree languages, and a website on harm~nization.~~The HarmonizationUnitrepresents the Bank inthe international fora dealing with these agendas, and a staff member o f the unit serves as deputy chair o f the WP-EFF. Recognizing that harmonization and alignment are means to an end-greater aid effectiveness-the Harmonization Unit works closely with the Results Secretariat and with other units in OPCS dealing with harmonization matters. These units collaborate on strategy and approaches within the Bank, and on the international level they work together to support implementation o f the Paris Declaration through the OECD/DAC processes and innumerous international conferences andother fora. 32. Resources and Results Processes. It was widely acknowledged at both the G-8 Gleneagles Summit in July 2005 and the UN Millennium Summit in September 2005 that significant scaling up o f development assistance i s necessary to accelerate progress toward the Millennium Development Goals (MDGs). Discussions on operationalizingthis shared objective have focused on encouraging ambitious, country-driven plans that are results-oriented and linked to country budget processes, and on strengthening the Consultative Group and Roundtable processes to focus on the results to be targeted, the resources needed, and the actions to be taken bythe country andthe donor community to address key constraints to scaling up (Box 3 gives an example o f a strengthened Consultative Group process). These processes and coordination meetings can be used as well to ensure a focus on and progress toward the Paris harmonization, alignment, and aid effectiveness goals. Box 3. ResultsandResourcesConsultativeGroups The Ghana Consultative Group Partnership Meeting held inJune 2006 reflected the modem partnership approach o f "resources andresults" based on Paris principles. Following from substantial in-country preparatory work among government and donors, the Ghana CG is an example o f linking development results and finance. The discussions were underpinned by a mutual accountability framework consisting o f (a) a common results matrix, (b) a development partners contribution matrix, and (c) a harmonization and aid effectiveness actionplan. The partners agreed to continue t h ~ dialogue, including with all relevant stakeholders. s 34 Designed for an audience o f government officials, donors, Bank staff, and the general public interested in harmonization topics, the www.aidhannonization.org website provides a library o f documents and reviews o f harmonization implementation at the country level; it received over 330,000 hits during a seven-week period in March-April2006. 20 33. Global Programs. The development architecture has long included mandate-specific programs that fulfill a need to address specific global concerns and production o f global public goods, and recent years have seen a remarkable growth inthese global programs.35 Ideally, global programs and country-based development activities should come together seamlessly at the country level, talung advantage o f complementarities between the approaches. Inpractice this has not always been the case, and there i s a general view that global programs could bebetter aligned withthe country-basedbusiness modelof development assistanceonwhichthe Paris Declarationis based. The Paris Declaration called for a common approach to when and how globalhegional initiatives and programs are introduced into country work (including through poverty reduction strategies, budget frameworks, and assistance strategies) and included in country-based coordination initiatives and country operations. The Heads o f MDBs have supported the same message.36 (Box 4 describes one global program that has promoted donor harmonization and alignment.) With World Bank leadership and support the international community i s now working to lay a basis for better alignment between global and country-based programs, and to link global programs to country-owned operational development strategies and country-based coordination andharmonization. Inlate 2005, the OECDDAC, MDBs, and the United Nations Development Programme proposed work on a set o f good practice principles for aligning global and country- based programs with country strategies, priorities, and implementation processes. Analytic work, including looking at six or more country experiences, has begun.37The aim i s to complete initial work by the end o f 2006 and to hold an international workshop on draft good practice principles for the engagement o f global programs at the countrylevel. Box 4. Harmonizationand Alignment inthe Educationfor All-Fast Track Initiative Educationfor All-Fast Track Initiative (EFA-FTI),a global compact among major donors andpartner countries, has evolvedinto a country-based andcountry-ledprocess o f program development andresource mobilization. Participation is open to all IDA countries with a poverty reduction strategy and an education sector planprioritizing universal primary completion and endorsedby the in-country donors. The program provides financing to fully endorsed countries and technical support and capacity development to prospective FTIcountries, including fragile states. Early assessments o fthe FTIhave found that it has had a significant positive impact on donor harmonization andalignment at the country level: donors and government coordinate their efforts, with one donor serving as the coordinating agency, and they specify the details o f the partnership, including accountabilities, common arrangements, and measures for monitoring progress. The partnership between EFA-FTIand the UNESCO Global Monitoring: Report will also aid inmonitoring the Paris DeclarationIndicators for the education sector. 34. Support to Country Implementation. Incollaborationwith other institutions, the Banki s supporting regional workshops to help countries develop and strengthen their implementation plans for the Paris commitments and put inplace the follow-up and monitoring mechanisms for 35 Examples include the Global Fundto Fight AIDS, Tuberculosis, and Malaria; Global Alliance for Vaccines and Immunization; Education for All-Fast Track Initiative; Global Environmental Facility; Consultative Group on International Agricultural Research; International Finance Facility; an Infrastructure Fund; a Global Migration Facility; a Climate Change Fund; an Avian Flu Facility; and enlargement o f the Integrated Framework for Trade-Related Technical Assistance and o f the Catalytic Fundfor Educationfor All-Fast Track Initiative. 36 See Update on Cooperation among Multilateral Development Bank-Memorandum from the Heads of Institutions (SecM2005-0197), April 14,2005. 37 This work will focus initially onBangladesh, Brazil, Ghana, Nicaragua, Niger, and Tunisia, on the experiences o f the Education for All-Fast Track Initiative and the Consultative Group for International Agricultural Research, andon the coordination experiences inhealth and HIV/AIDS. 21 trackingprogress.38Representatives from 14 Eastern and Southern Afiican countries participated inEntebbe, Uganda (November 2005), and from 28 North, Central, and West Afhcan countries in Bamako, Mali (March 2006). The Bank was closely involved in planning and supporting similar workshops inthe Philippines for the Asia Region and in Bolivia for the Latin America Region, both o f which were held in mid-October 2006. As an additional effort to broaden implementation, the Bank's Harmonization Unit will actively work with selected country and project teams, country governments, and other donors to accelerate progress on the aid effectiveness agenda, and will report specially on these efforts. Starting with four countries where an initial basis has been laid-Mali, Nicaragua, Rwanda, and Senegal-work in these "focus countries" will involve identifylng data, process, and policy bottlenecks; setting an example by testingthe limits o f what the Bank itself can do to support country leadership and the implementation process; documenting the country experience for broader learning and sharing; and, as needed, providing facilitation and other support. Later this work may be expanded to other countries where there i s interest. v. LOOKINGAHEAD:MEETING PARISDECLARATION THE COMMITMENTS 35. As the earlier sections o f this paper reflect, the Bank has undertaken considerable efforts to implement the harmonization and alignment agenda at the country level, internally, and internationally, and has made substantial progress. However, the quantitative indicators and qualitative analysis also show that the Bank needs to continue and evenbroadenits efforts if it i s to fulfill its part inmeetingthe international commitments inthe Paris Declaration and thus lead byexample the internationaldevelopment community's pushtoward greater aid effectiveness. 36. Areas of Good Progress. Of the seven categories o f World Bank actions measured by the Paris indicators, the survey results point to two areas-disbursements released according to schedule and technical cooperation coordinated with other donors-in which the Bank's implementationi s inline with the aspirations o f the Paris Declaration, andthe Banki s well on its way to meet the Paris targets. Upstreamreviews o f DPOs are already giving greater attention to better aligning planned disbursements with government budget cycles, and this should further improvethe aid predictability indicator. 37. Areas of Progress but NeedingAttention. Intwo additional areas there i s generally good progress, but greater attention i s required. To meet the target on program-based lending, the Bank will need to become more active in supporting sectonvide approaches. In addition, in appropriate circumstances Bank-financedprojects have the flexibility to use country systems for financial management; with good implementationo f financial management reforms and attention to taking advantage o f opportunities, the Bank should be able to go a long way toward meeting the international target in this area, particularly if lending through program-based approaches also increases. 38. Areas that are Lagging. However, in three areas Bank implementation is far from the targets agreed as part o f the Paris Declaration, and Bank practices will need to change if further 38 The Bank cosponsored the Africa workshops with the AfXcan Development Bank and UNDP, in collaboration withthe OECDDAC andsome of its members; France cosponsored the Bamako workshop. 22 progress toward those targets is to be made. A decade ago virtually no ESW products were undertaken jointly with other donors; while recently the World Bank has taken a lead in involving others, reaching the 66 percent target by 2010 will require a substantial change inhow this work is managed. Similarly, while joint missions should increase as a consequence o f progress on other indicators, doubling the proportiono fjoint missions will take attentionby both Management and staff. Finally, making progress toward the Paris target o f reducing parallel PIUs by two-thirds by 2010 means that for most future operations, project management would need to be integrated into government structures. This has always been a difficult practice to change, and hrther guidance i s beingprovided to help ensure progress. 39. Incentives and Obstacles to Change. Many factors constrain further harmonization and alignment progress. Some-weak country ownership and leadership, low-quality national development strategies, poor country capacities, and the need for all donors to work in concert with others-will require long-term collective solutions. But other factors are within the Bank's ability to address. There i s sometimes a tendency for World Bank operations staff and managers to view harmonization efforts-which are time-consuming, have less tangible results inthe near term, sometimes involve tedious negotiation and give-and-take with others, and limit the scope for independent action-as getting in the way o f efforts to achieve specific development outcomes. Interviews with Bank staff indicate that while they are firmly committed to the objectives o f increased aid effectiveness that the Paris Declaration embodies, they need clearer guidance on how to deal with competing priorities and to manage risks; many also wish for a clearer acknowledgement o f the difficulties o f harmonization and alignment, and better recognition o f their efforts in the area, which may not be very visible or concrete, and o f the resource dimensions o f this work. This suggests that it will be important to address incentives in this changemanagement process.39 0 Obstaclesto change. Several factors that limitprogress are unlikely to change inthe near term. At the corporate level, there are pressures to deliver new lending operations within tight administrative budgets. In addition, budget allocations are made for discrete products, such as appraisals or analytic work, and rarely for efforts to develop country-level relationships and partnership activities. Similarly, at the individual level, staff see their career prospects as linked to "deliverab1es"-lending operations and analytic work-rather thanto developingpartnerships or working on joint operations. Another mitigating factor i s the frequent staff turnover, especially among task team leaders, who may "move on" soon after an operation i s approved, leaving to new or less experienced staff the task o f developing and engaging in the relationship- and trust-buildingthat are essential to joint activities with other partners. 39 A study on incentives for harmonization was jointly undertaken by the United Kingdom's Department for International Development (DFID), Swiss Cooperation, and the World Bank in2004 (see Paolo de Renzio et al., Incentivesfor Harmonisation and Alignment in Aid Agencies, Overseas Development Institute Working Paper 248, June 2005). Inmid-2006 the World Bank commissioned a follow-up study to focus more specifically on how country and project teams are affected by the incentive structure, including specific case studies o f two country offices and programs-Cambodia and Ghana (see Erin Coyle, Andrew Lawson, et al., "World Bank Incentives for Harmbnisation and Alignment," draft, August 2006). Findings from thts study have been incorporated into this section. 23 0 Drivers for change. At the same time, there are factors working toward wider harmonization and alignment. A significant incentive is Senior Managers' commitment to development effectiveness and to the harmonization and alignment agenda as a tool to help achieve it, and their willingness to communicate this commitment to staff. Staff, too, want to promote effective development, and many staff fully recognize the relevance o f harmonization and alignment. The Bank's commitment has been expressedinmany ways-for example, the reorientationof the CAS to focus on partnership arrangements and emphasize harmonization and alignment activities in its programming; development o f common FM approaches with other donor agencies, with a clear emphasis on the use o f country systems as the default option; and the selection o f country directors and managers who are committed to harmonization and alignment, along with decentralization o f staff and responsibilities to the country level. 0 Areasfor action. There i s a range o f areas in which the Bank can do more to generate traction. A key driver for makingprogress inmany areas o f harmonization and alignment will be to emphasize joint analytic work and greater reliance on collaborative program-based approaches, making changes in processes and expectations to promote this. The Bank and other donors need to clarify their operational policies to minimize conflicting expectations and reduce the areas subject to back-and-forth consultation with headquarters that leads to delays in coordination; and they need to agree on good practice approaches to the legal aspects o f coordinated arrangements. Corporate messages on harmonization and alignment should stress more this agenda's complementarity with the Bank's work on governance and anticorruption, because strengthening governance capacity, including through use o f country systems, and fighting corruption are part o f the drive for aid effectiveness. And within the Bank, training needs to focus not only on understanding the principles o f harmonization and alignment, but even more on developing such "soft" skills as relationship-building. Within each country, there needs to bemore emphasis on buildingknowledge o f local systems and languages. The remainder ofthis chapter elaborates onthese obstacles and opportunities. 40. The Role of Leadership. At the corporate level, the single most influential source o f incentives i s leadership-consistent and repeated messages that this agenda is a key priority. Senior Management has been clear on the critical need to improve aid effectiveness and on its expectation that the Bank will continue to provide leadership in this important agenda. Within country teams, having country directors or country managers who show personal interest and are thoroughly engaged in managing country-level harmonization work has been crucial to the Bank's taking active steps to harmonize and align better-especially when these managers are based inthe field and foster a culture o f working collaboratively with other donors and aligning with government priorities and improved systems. Representing country management at headquarters, the country program coordinator can guide country team members to undertake partnership approaches in project design and country analytic work in line with the pace o f harmonization activities in the country. Sector management can play a crucial role by encouraging task team leaders to incorporate harmonization interventions inproject design or to undertake joint country analytic work with other donors (e.g., CFAAs and CPARs inmost Bank 24 Regions). For these reasons, continuing emphasis on promoting managers who have a clear commitment to and capacity inharmonizationand alignment i s an important way for the Bankto facilitatemore progress at the country level. 41. Motivated Staff and Decentralization. In addition to effective managers, skilled and motivated staff can oftenbe an important factor inharmonization efforts. 0 In several countries, dedicated staff are working hard on donor coordination and harmonization issues, so that their country offices are able to set up the supporting infrastructure to maintain continuous dialogue with government and donors on these matters. A number of country offices have relatively senior international staff whose terms of reference include harmonizationtasks. InGhana, for instance, the strong team in the country office has been supplemented by recruitment o f a senior operations officer who i s responsible for portfolio quality in general, focusing also on the development o f effective harmonization and alignment practices-reflecting the awareness o f the linkbetweenharmonizationissues andoverallportfolio quality. Similar international andlocal staffteams are also inplace inthe Tanzania, Uganda, andVietnam offices. Inother countries, such as Cambodia, the build-upof locally recruited staff to work on project teams has been important in this respect; and in Burkina Faso and Cameroon, country managers have relied on staff on developmental or other short- term assignments to undertake donor coordination work. The staff who are working on harmonization issues are funded in various ways-from Bank administrative budget resources, through trust funds, or under secondments from interested bilateral donors. However, not all country offices have staff with these responsibilities. Unless managers use existing resources in this manner, such efforts would imply adding resources that either could be integrated into existing budgets at the country or sector level, or could be accommodated by new resources earmarked for country-level work on harmonization and alignment. Decentralization o f task team leaders also greatly helps maintain the continuity necessary to build knowledge and contacts and invest in relationship-building with government and other donors. The FY06 Annual Review on Portfolio Performance will review experience with decentralization and its implications on portfolio quality. Further consideration of different business models for Bank decentralization will then be able to take account o f their impact on implementing harmonization and alignment. 42. Internal Processes. Two Bank factors have a particular role inpromotingharmonization andalignment: CAS guidelines andthe QualityAssurance Group (QAG). 0 The new CAS guidelines, which require CASs to focus on harmonization, alignment andresults orientation, serve to promote staff attention to the area. Further emphasis on selectivity inBankinterventions could bringadditional benefits (see Box 5). 0 QAG has proven to be a powerful tool in focusing Bank efforts on improving quality at entry and quality o f supervision: Bank teams are aware that QAG may review all 25 projects and analytic and advisory work. QAG could increase its influence in this area by raising the profile o f work on sectonvide and program-based approaches and joint work as part o f its reviews, and by giving more emphasis to harmonization and alignment as part of its countrywide assessments. Box 5. Addressing the Issue of Selectivity Governments and doriors deal with selectivity invarious ways; the experiences o f Uganda, Cambodia, andZambia provide distinctive examples. 0 The Government o fUganda and its development partners have agreed to focus attention and effort on significantly increasing donor selectivity, launching a formal division-of-labor exercise inJuly 2006. Donors have beenasked to provide comprehensive information ontheir current and future activities, their plans for takmg leadership or withdrawing, and their views on the different roles each could take ina given sector. 0 InCambodia, AsDB andthe WorldBank, as partners inthe collaborative assistance strategy, assessedtheir comparative advantages. AsDB then agreed to disengage gradually from the health sector, while the World Bankagreed to play a supporting role to AsDB ineducation. 0 InZambia, where aJoint Assistance Strategy isbeingpreparedaspartoftheWider HarmonizationinPractice initiative, the donors and Government have gone through a formal division-of-labor process inwhich the Government asked donors to critically consider their comparative advantages indelivering support to the various sectors. The mainobjective was to decongest "oversupported" areas to ensure adequate support to all sectors identified inthe national developmentplan. Donors, including the World Bank,have proposedhow to position themselves insectors, indicating which sectors they wishedto lead in,remainactive in,or become background partners in. The Zambian government is making the final decision on w h c h donors should leadinwhich sectors. 43. ChaZZenge-Resources. Bank staff consider the pressure to get a lending operation prepared, agreed with the borrower, andpresented to the Board at the agreed time within a fixed budget as amajor disincentive to harmonizationand alignment work. The combined stress ontime andbudget can makeit difficult for staffto engage inthe partnershipand capacity-buildingefforts required to foster harmonization and alignment (such as the design of a sectonvide approach), leadingthem to manage their work predominantly as a Bank process, with PW-like arrangements under their control and limited reliance on government structures. Experience in recent years confirms that working on harmonization requires significant resources interms o f both staff time and financing. For example, multidonor projects, or single-donor sectonvide approaches that rely more on country systems, take no longer to prepare interms o f time between the Project Concept Note and date o f approval, yet they are more staff- and budget-intensive than stand-alone projects, requiring 15-20 percent more resources for preparation (see Table 5). In general, Bank administrative budgets are allocated on the basis o f numbers o f projects and products to be prepared and delivered, not on the compositiono fthe programor its degree o fharmonization. The incentive is thus to planprojects that conform more to the norm; to the extent that preparation o f any given project exceeds norms, the funding available for other activities inthe country program will be less. Reflectingt h s challenge, more flexibility on budget and time constraints, and more attention to and resources for harmonization and alignment issues, could be obtained by shaping country work around multiple-task programs focused on client results.40 At the Regional level, harmonization and alignment have been recognized as part of the Strategy and Performance Contracts inthe Bank's annualbudget process, through two KPIs (program-based approaches and 40 The impact o f such a business model o n quality of client engagement was noted by the Organizational Effectiveness Task Force; see Organizational Effectiveness Task Force: Final Report (SecM2005-0064), February 25,2005. 26 joint analytic work). Going even further, AFR has recognized aid effectiveness as one o f its strategic objectives and added a Region-specific indicator (Box 6 describes other ways AFR has mainstreamed harmonization work). OPCS will continue monitoring harmonization-related KPIs and will explore the possibility of including similar indicators for Networks as a way to raise incentives at the sector level for increasedharmonization and alignment inoperations. Table 5. Cost and Time ofProjectPreparation,FY06 Average Average preparation preparation Project type cost ($000) time (months) Sectonvide approaches 428 14.6 DPOs 8.9 ~~ 351 IDNIBRDprojects 360 14.4 All Bank projects (incl. above, GEF and Special Financing) 375 15.9 Source: BusinessWarehouse. Note: The data for sectorwide approachesreflect preparationcostsfor 21 suchprojects approvedinFY06. Box 6. AfricaAction Plan Partnershipandresults are two central themes inthe Bank's planfor scaling up the impact o f aid inthe Africa Region. Efforts for scaling up aid and aligning resources to country-based results include innovative vehicles such as the "menu o f options" to make Bank Group analytical, operational, and country knowledge available to development partners as a public good, andthe Africa Catalytic Growth Fundto support the scaling-up o fregional investments and turnaround situations. The Africa Action Planincludes a number o f actions related to implementingthe Paris Declaration. One o f the four pillars o f the Afhca Action Planis leveraging the IDA14 partnershp to accelerate the implementation of the Paris Declaration agenda inAfrica. Insupport o f this pillar, the Bank is worlung with five countries to revamp the Consultative Group mechanism into Resources and Results CGs that will strengthen the partnership on the MDG and harmonizationagenda; it will also support an independent evaluation of country-donor relations infive African countries; prepare collaborative assistance strategies in seven countries by end-FY08; work inselected countries to harmonize donors' procurement and financial management practices; andreview the role o fPIUs with a view to sharply reducing their number. Actions related to the Paris Declaration inthe other pillars include developing sectonvide approaches inhealth inat least 10 countries, assisting 20 countries instrengtheningthe core elements o ftheir public expenditure management and financial accountability system, increasing the share o f Bank-provided technical assistance that is pooled withother partners' technical assistance, and working inall 29 countries undertaking new PRSPs to support strengthened results-oriented national strategies andto develop and implement monitoring and evaluation plans that include strengthened statistical systems. Progress o n all these fronts will be evaluated using the Paris Declarationindicators, andthe World Bankwill report separately o n the implementationo f the Africa Action Plan. 44. Challenge4taffing and Staff Evaluation. The implications for skill mix, the level o f decentralization, and budgets in staffing strategy are also key factors that affect progress in implementing the Paris commitment^.^^ To work effectively on cooperation at the country level, staff needto be alert to the opportunities, adaptable to take advantage o f them, and knowledgeable about buildinginharmonizationapproaches as appropriate interventions duringtheir dialogue with the partner government and donors on strategy and programming-and the Bank needs to openly value these skills. There is continuingneed for training onharmonizationand alignment principles and approaches, on sharing practical experience across sectors and regions, and on developing 41 Strengthening the Organizational Response to Fragile States,OPCS, June 2006, addresses a range o fHR issues needed to improve the Bank's engagement-including harmonized and aligned approaches-in fragile states. 27 "soft" skills such as relationship-building. Further efforts to document the growing body of experiences and good practices and share them among staff from all Regions and Networks would contribute. At the individuallevel, staff continue to see their career prospects as linkedto numbers o f "de1iverables'-for example, lending operations and analytic work-not necessarily to relationship building or working on joint operations with other donors. In July 2005, work on harmonization was added as a parameter to be considered in senior technical and managerial promotions (Levels GH and GI), but the impact o f this will take time to work its way through the system, including at sector boards. Generally, staff are evaluated for their work on these issues only if they or their managers raise this as a criterion inperformance evaluations, but this i s not systematically done. 45. Challenge-Strengthening Accountable Institutions and Improving Governance. Recognizing the importance o f strong accountable institutions in partner countries to underpin quality g~vernance,~~ the Bank has been making major efforts to direct its capacity-building support to help partner countries develop and strengthen accountable institutions. Inparticular it has been integrating diagnostic assessments o f institutional capacity in areas key to improving fiduciary management quality, such as PFM and procurement, with targeted capacity-building measures. Aid can be very effectively delivered in ways that help strengthen country systems through capacity-building support and that use these systems as they become reliable (see para. 11). The Paris Declaration, which recognized and promoted this approach as one o f its central tenets, challenges the staff and management o f all donor institutions, including the Bank, to work on operationalizing it. In this respect, a key challenge for staff when working in environments of low institutional capacity i s to ensure that fiduciary concerns are addressed while continuing to pursue the development benefits o f strengthening institutions including throughthe use o f country systems. VI. CONCLUSIONANDRECOMMENDATION 46. Eighteenmonths after the Paris HLF, a number of countries, such as Ghana, Tanzania, Uganda, and Vietnam, show that government willingness and capacity to lead the internal alignment and harmonization process i s a key ingredient for progress in changing the aid relationship and related business practices with donors at the country level. There can also be little doubt that the World Bank and most other bilateral and multilateral agencies have made major efforts insupport o f the harmonization and alignment agenda. Inan expanding number o f countries-low-income and middle-inc.ome countries, and even fragile states-governments and donors are taking a range o f harmonization and alignment actions. There i s growing interest in collaborative country assistance strategies; harmonized and aligned programmatic approaches to aid delivery are no longer a novelty; donors are increasingly applying harmonization and alignment principles under a common framework at the sector level; consideration i s being given to how best to integrate vertical programs into country strategies and budgetary and fiscal frameworks; and mutual assessment frameworks are beginning to be instituted. The combined effect o f this activity i s substantial implementation o f harmonization and alignment actions in a 42 See StrengtheningBank Group Engagement on Governanceand Anticorruption (SecM2006-0372), August 18, 2006. 28 handful o f countries and implementationo f a good number o f actions ina larger number o f other countries. This still reflects in many ways the starting points o f many countries: the countries out in front now are generally the ones that started first (e.g., Tanzania, Uganda, and Vietnam). However, other countries havemade-and are continuingto make-substantial progress. 47. Partner Country Feedback Partner country officials report that many o f these harmonization actions reap benefits for them in terms of reducing transaction costs and improving alignment. Joint analytic work, collaborative or joint programming and assistance strategies, multidonor financing o f program-based approaches, pooling o f financing among donors, use o f country systems where they are reliable, joint or independent assessments o f aid at the country level, delegated cooperation, and "quiet periods" when donors do not field missions have all been favorably mentioned in this regard, along with the better coordination and management o f expectations that can come from formal partnership arrangements such as those reflected in general or project-specific MOUs. Many partner countries also welcome aid delivery through the use o f harmonizedbudget support, which they see as a critical step toward strengthening government ownership, capacities, and accountability while also supporting national PRSs and promoting improved allocation and operational efficiency o f public aid funds. Nevertheless, there i s also a need to recognize that donor harmonization goes beyond just undertakingsimilar tasks to reduce transaction costs for governments-rather, it is about doing things differently or doing different tasks together, some of which may demand a different designor an alternative approach. 48. Continued Efforts. This paper also stressesthat continued efforts are needed to maintain and strengthen the Bank's implementation o f its Paris Declaration commitments. What some country programs implement as good practice i s not always systematically implemented inother country programs. This may well reflect different country capacities and priorities-for instance, some countries do not have inplace the essential fiduciary and policy reform basis for budget support or development policy operations more broadly, or the sector strategies or institutionalbasis for sectonvide approaches or other forms o fprogram-based lending. However, it is also evident that the World Bank, along with other donors, can undertake more. Table 6 summarizes the set o f actions the Bank will take to address the constraints described in this paper. Given progress to date, the commitment Management and staff demonstrate, and the continuing support o f the Board, with these actions the Bank will be able to maintain its internationalleadership role and strengthen staff incentives and capacity to improve development impact and achieve the results that the Bank committedto inthe Paris Declaration 49. Recommendation. This paper has set out the Bank's framework for monitoring its Paris Declaration commitments, which i s harmonized with the international framework for monitoring the Paris Declaration. This paper has also described progress in the Bank's implementation o f harmonization and alignment-both broadly and against the actions required under the IDA14 replenishment arrangements. While, as the paper describes, much remains to be done by the Bankandby others to achieve the objectives of greater aid effectiveness represented inthe Paris Declaration, Management i s o f the view that satisfactory progress has been made. On the basis o f this review, Management recommends that, for the purposes o f additional contingent contributions to IDA14, the Executive Directors o f the Association 29 (a) Review (i) monitoring framework for harmonization including a series o f key a indicators drawing on the results o f the [Paris] High Level Forum (HLF-2) and (ii) baselines established by the Association for such indicators; and adopt that monitoring framework (see paragraphs 13-22 and Table 2 o f this paper); and (b) Determine that satisfactory progress has been made against the baselines established for such harmonization indicators for the purposes o f the IDA14 Report (see Table 2 o f this paper). 30 Challenges Actions Expected result(@ I Timing IResponsibility Internal management Declaration on Aid Effectiveness systems and Continue to communicate Senior Increased awareness, recognition, Continual Senior informal Management commitment to andacceptance bystaff o f Management incentivesare harmonization and alignment as key operational requirement to aligned with Bankpriorities andits fmsupport integrate H&A strategies and the for implementingthe agenda inall approaches inthe formulation o f harmonization lendingand nonlending activities. all lending and nonlending work. and alignment. Assist Senior Management in 43 FY07 OPCS agenda. developing and disseminating additional communication on H&A. Objective: To improve staff incenti 's to support harmonization and a gnment ag da Engage withHRto review Review completed with HR, and 44FY07 OPCS andHR application o f H&A promotion agreement on timingandprocess criteria for levels GH and GIto date. to discuss proposals with sector boards andmanagers to more fmly establish H&A principles inpromotionprocess. Work withHRto develop guidance Completedguidance to better 44 FY07 OPCS andHR for managers to evaluate contribution recognize andevaluate staff work o f staff to harmonization and on H&A. Continual alignment at country and sector levels Work with HRto include interms o f CompletedTORSwith H&A 44FY07 OPCS andHR reference for country directors, criteria integrated andready for country managers, sector directors, implementation. andsector managers, the expectation that they promote and support H&A principles. Objective: To integrate H&A into n chanisms for oversight and qualil control. Adopt aid effectiveness based on Increased attention by staffto aid 43 FY07 QAG harmonization and alignment quality inthe design and principles as explicit criteria in implementationo f operations. QAG's assessmentmethodology for lending andnonlending programs andfor its assessmentof country programs. strategies inlending and AAA operi ions. Incorporate into relevant good Wider use o f good practice notes Q4 FY07 OPCS practice notes and inother andcommon templates (for operational guidance the need to example, MOUs) to minimize ensure direct and early involvement time spent on reinventing new o f legal staff to address formats and reduce time-lags in harmonization issues (e.g., in reaching agreement on developing MOUs and other harmonization. coordination instruments). All lending Update guidance on CAS Regional processing guidelines End-FY07 OPCS working operations and preparation, investment lending (as for ESW incorporate withRegions AAA are part o f simplificatiodmodemization harmonization objectives. 31 Challenges Actions Expected result(s) Timing Responsibility framed within program), and ESW to encourage up- Bankwide CAS guidelines reflect broader H&A front consideration and managerial emerging experiences with strategy, and review o f harmonization issues, e.g., collaborative assistance operational partnershp arrangements, reducing strategies. Investment lending staffpossess parallelPIUs, use o f strengthened guidelines recommend structured skills and country systems. up-front Management competenceto consideration o f harmonization implement these strategies. Continue to prepare anddisseminate Broader menuo f good practice IEnd-FY07 OPCS working operational guidance on good information made-available in with Regions practices inharmonization to help line with expanding needs at as needed staff. country offices. Enlarge database o f staff with Greater recognitionof staff Ongoing OPCS and experience inH&A and publicize experiences withH&A and Regions their availability as resource persons availability o f those staff as and "champions" who can mentor mentors to others. staff. Objective: To strengthen Bank's role internationally inpromoting and supporting global aid effectiveness agenda Bank leads in Engage proactively with donor and International momentum and Ongoing OPCS working 3. promoting and country partners andprovide accelerated progress in other supporting aid leadership and support inestablished implementing the Paris agenda at development efectiveness international harmonizationfora- the country level. partners issues including chairing and cochairing internationally these groups as appropriate-in and at the order to advance the Paris agenda, country level. including onjoint arrangements (e.g., MOUs), coordinated budget support, Ongoing aid reporting (resources and results), to 2008 common thresholds for international competitive bidding,and other procurement and fiduciary arrangements inall countries, and facilitating progress at country level. 0 Play a substantive leadership role inthe preparationofthe next HLF inGhanain2008. Promote establishment o f a new A forum for MBDsandbilateral 2ndhalfo f LEG grouping with multilateral and donor institutions to identify legal FY07 bilateral donor institutions to discuss aspects o f harmonized financing good practices anddevelop instruments and arrangements, harmonized approaches to legal discuss and document good aspects o f coordinated arrangements. practices, and facilitate progress inimplementation Document and analyze experiences Wider applications o f selectivity Q4 FY07 OPCS indonor divisionoflaborandinitiate inthemenuofharmonization bilateral andinternational actions at the country level. discussions to promote selectivity as an instrument o f aid effectiveness. 32 ANNEX A. PARISINDICATORSOFIMPLEMENTATION PROGRESS (FROM THE PARISDECLARATION) ~- To be measurednationallyand monitored internationally -". I n e . . O W N E R S H I P, ,--/_lx ..- - ' - 1 ., ~ =I_ _liii-.*mF,,----*.. ~ x =* \* vi r *e = I Parnetshaveornrationalokveloments&twies Number of countries with national developm&t strategies 1 (including PRSs) that haveclear strategic prioritieslinked At least75% of partnercountrieshave operational to a medium-term exoenditure framework and reflected in 1 development strategies. _yl.~. ALIGNMENT* - I TARGET IIJyx_^I II I . ,_. (a) Publicfinancial manag &#&/e muntrysystms- Number of pafiner countrie countriesmove up at least one measure (i.e., 0.5 points) on the PFM/ CPIA (Country Policy and Institut~onalAssessment) scale of 2 systems that either (a) adhere to broadly accepted go practicesor (b) have a reform programme in place to achieve these. 1 at least one measure (i.e., from D to C, C to .,~._(. "., .. ... ,--. Aid flowsare algnedon nationalpt7orities- Percent of Y -L I o( * - - Hal 3 aid flows to the government sector that is reported on partners' national budgets. __ .. ~ Streng#en wpacityby co-orainated 4 donor capaciQ-development ordinated programmes consistent with partners' nati development st * ,, I- LDS -" .' P E R C E N T O F D O N O R S - - I_ _-.- - Score' Target 5+ -All donors use partner countries' PFM systems. Useofcountrypublcfinancialmanagementsystems- 3.5 to 4.5 90% of donorsuse partner countries' PFM systems. Percent of donors and of aid flows that use public financial 5a management systems in partner countries, which either P E R C E N T O F A I D F L O W S (a) adhere to broadly accepted good practices or (b) have I_ a reform programme in place to achieve these. Score' Target ___- I_ _I__ 5+ A two-thirds reduction in the % ofaidto the public sector not using partner countries' PFM systems. A one-third reduction in the % ofaidto the public ",.. ." " - - + 3.5 to 4.5 sector not using partner countries' PFM systems. 1- _I ~ -*- *** -* 5b Use ofcwntrypmement$ystems- Percent of donors E and of aid flows that use partner country procurement P E R C . N T O F D O N O R S _ - i l__l" systems which either (a) adhere to broadly accepted good Score* -(- . Target { ~ practices or (b) have a reform programme in place to 1 All donors use partner countries' procurement achieve these. * A i"systems. 1 900/0of donors use partner countries' procurement _- ! systems. - ~ -I -___ P E R C E N T O F A I D F L O W S ._ _ - - _ _ _ I Score' Target . I A two-thirds reduction in the % ofaidto the public A sector not using partner countries' procurement d-:Y systems. -x c 1 I 33 - - - - . -.- I- I_. 1 II ,c* *-* ~ ALIGNMENT _..--- ~-..- TARGETS FOR 2 0 1 0 -- 1 - i -..a"jys.y_ .. .'_ " ".- -*- m v I * I A one-third reduction in the % ofaidto the public ' 6 sector not using partner countries' procurement i . . a -..-.-". .systems. ,. I 'I 1, * * " m_) - I * "*- LI W" * _ _ _ " *" I Sh?ngihencapaciitybyavoidingparallelimpiementation 6 simciures- Numberof parallelprojectimplementation Reduceby two-thirds the stock of parallel project units (PIUs) per country. implementationunits (PIUs). ' Aid ismorepredictabie-Percent of aid disbursements 7 released according to agreed schedules in annual or multi- Halvethe gap -halve the proportion of aid not disbursed within the fiscal year for which it was scheduled. -"*- - '." ramme- 4 ,courage shar&anaij&- Percentof (a) field missions ons to the field are joint. 10 2 and/or (b) countryanalyticwork, includingdiagnostic "- .*". - /- u * . -.- - I"I -x -._-_.I -__. " a=* ..* = , , - _ _ e ._ -. ..- ~ ~ c_I ~ --,-m-a-".-~"....-r- i 1 Resui&m'entedframewotks- Number of countrieswith ijl1transparentandassessprogressagainst(a)thenational Reducethe gap by one-third -Reducethe proportionof ! frameworksto monitorableperformance assessment countrieswithout transparentand monitorableperformance assessmentframeworks by one-third. -_- ?development strategies and (b) sector programmes. - - """xc* .r 11 *" FOR 2 0 1 0 All partnercountries have mutual assessmentreviewsin place. * Important Note: I n accordancewith paragraph9 of the Declaration, the partnership of donors and partner countries hosted by the DAC (Working Party on Aid Effectiveness) comprising OECD/DAC members, partner countries and multilateral institutions, met twice, on 30-31 May 2005 and on 7-8 July 2005 to adopt, and review where appropriate, the targets for the twelve Indicators of Progress. At these meetings an agreement was reached on the targets presented under Section I11of the present Declaration. This agreement is subject to reservations by one donor on (a) the methodology for assessing the quality of locally- managed procurement systems (relating to targets 2b and 5b) and (b) the acceptable quality of public financial management reform programmes (relating to target 5a.ii). Further discussions are underway to address these issues. The targets, including the reservation, have been notified to the Chairs of the High-level Plenary Meeting of the 59th General Assembly of the United Nations in a letter of 9 September 2005 by Mr. Richard Manning, Chair of the OECD DevelopmentAssistanceCommittee (DAC). "Note on Indicator 5: Scores for Indicator 5 [will be] determined by the methodology used to measure quality of procurement and public financial management systems under Indicator 2 above. [That methodology is under development.]