POLICY RESEARCH WORKING PAPER 3 099 Creating Partnerships for Capacity Building in Developing Countries The Experience of the World Bank F. Desmond McCarthy William Bader Boris Pleskovic The World Bank Development Economics Partnerships, Capacity Building, and Outreach July 2003 POLIcy RESEARCH WORKING PAPER 3099 Abstract McCarthy, Bader, and Pleskovic discuss a variety of World Bank on the supply side. Much of the success was experiences in a number of transition and developing due to adopting each effort to the individual country countries to build institutional capacity for economics situation. The authors also provide a brief summary of education. A flexible approach met with some success. five academic institutions and four research networks in The approach uses partnerships that combine the often Europe, Africa, Asia, and Latin America. different needs of a number of private donors with the This paper-a product of Partnerships, Capacity Building, and Outreach, Development Economics-is part of a larger effort in the Bank to build capacity for economic education. Copies of the paper are available free from the World Bank, 1818 H StreetNW, Washington, DC 20433. Please contact Deena Philage, room MC4-402, telephone 202-473-6971, fax 202-522-0304, email address dphilage@worldbank.org. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The authors may be contacted at dmccarthy@worldbank.org, wbader@worldbank.org, or bpleskovic@worldbank.org. July 2003. (22 pages) The Policy Research Working Paper Seoes disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of tbe series is to get the findings out qluickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent. Produced by the Research Support Team Creating Partnerships for Capacity Building in Developing Countries The Experience of the World Bank F. Desmond McCarthy Fmccarthy@worldbank.org William Bader wbader@worldbank.org Boris Pleskovic Bpleskovic@worldbank.org World Bank Policy Research Working Paper 3099, July 2003 The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent. Policy Research Working Papers are available online at http://econ.worldbank.org. The authors thank Dorota Nowak, Stephen Yeo, Richard Hirschler, Ulrich Hewer and Deena Philage for useful comments. Hedy Sladovich provided editorial advice and assistance. Contents 1. Introduction ....................................................... 1 2. Education Capacity ........................................................1 Economics Education ........................................................1 3. Earlier Work in this Area ........................................................2 Other Initiatives .......................................................2 4. Flexible Partnership Model for Capacity Building ............................................3 Supply Side ........................................................4 Demand Side ........................................................4 5. Nine World Bank-Supported Institutions ........................................................4 Accomplishments ........................................................4 6. Future Needs and Challenges ................. .......................................4 Moving Forward .......................................................4 Challenges and Suggested Responses ........................................................4 Sustainability ........................................................4 Facilitating Intellectual Interaction ........................................................4 7. Conclusion .......................................................4 Annex A: Partnerships for Capacity Building ..4 Academic Institutions ..4 1. New Economic School ........................................................4 2. The Economics Department at the Central European University ...........................4 3. Center for Economic Research and Graduate Education-Economic Institute .......4 4. Economic Education and Research Consortium-Kyiv ...........................................4 5. China Center for Economic Research ........................................................4 Research Centers and Networks ..4 1. African Economic Research Consortium .4 2. Latin American and Caribbean Economic Association .4 3. Economic Research Forum for Arab Countries, Iran and Turkey .4 4. Economic Education and Research Consortium-Moscow .4 References .23 Boxes Box 1. Flexible Partnership Model .4 Box 2. Other Forms of Support .4 Tables Table 1. Alumni Employment Statistics (percent) .4 1. Introduction The general consensus is that many developing countries lag their developed country counterparts at mastering a combination of economic, social, and political forces in a wide variety of areas. If countries are to achieve their full potential a variety of institutional areas must continue to evolve. The record to date has been a decidedly mixed one. While there have been a number of successes a significant share of capacity building efforts started with the best intentions and made very encouraging starts, only to falter over the longer term. Many explanations are offered ranging from inappropriate design, lack of donor support, and poor local support. What accounts for the mixed record and what can be done better? 2. Education Capacity Education is essential for building democratic societies and dynamic, globally competitive economies. The challenges of improving educational capacity are complex and long term. They involve understanding the receiving sociocultural environment and its ability to absorb international models. The need to balance these sociocultural values with the desire or ability to emulate more developed countries is different in each situation. For many countries education institutions evolve slowly over time and are often heavily influenced by cultural issues and even ongoing debates on the appropriate role for education. In other countries, notably transition countries, a traditional education system may be viewed as having serious shortcomings and being in need of important modifications. How one should go about addressing the situation? Do you supplant the domestic with a foreign version? Many attempts to introduce external educational systems in a number of countries have met with indifferent results. Although it is unlikely we will find a unique solution on how best one should go about addressing this problem, much can be gained from actively paying attention to the process of change such that things will self- organize. In this situation it seems advisable to take a careful look at what the record tells us in a number of practical situations. Economics Education This paper focuses on one branch of education-economics. Again economics education faces many of its own particular problems. This paper discuses the experience of a number of countries that introduced Western-style programs. Many of these efforts were directed to transition countries, but not exclusively so. The World Bank sought to play a flexible role, sometimes significant, but other times relatively minor, to facilitate this process. This report first describes this flexible model and then outlines a variety of these experiences. Most of these efforts have been quite successful and continue to provide additional insights. Because the situation differs significantly from one country or region to the next it is very important to get away from the "one-size-fits-all" mind-set. The report discuses a number of different situations and hopefully will afford some guidelines for similar efforts in these countries and other regions where there is significant need. 3. Earlier Work in this Area An earlier report (World Bank, 2002) includes a description of regional initiatives, such as the African Economic Research Consortium (AERC), the newly established Economic Research Forni (ERF) for Arab Countries, Iran, and Turkey, and a new initiative for East-Central Europe and countries of the former Soviet Union, the Economic Education and Research Consortium (EERC) in Kyiv and Moscow. The institutions discussed in the report are still in operation and have largely met their expected goals. A recent survey conducted for the report, assessed this progress in terms of students, faculty, and the quantity and quality of research output. Specific details by institution are given in Annex A. The report offered lessons and identified four important themes for future directions: (1) transition from central planning to market, (2) economic growth, (3). the role of public and private sectors, and (4) the international economy. Other Initiatives There have been a variety of initiatives to address the education capacity-building objective where the World Bank has been involved only in a limited extent. These include * The European Union has adopted a somewhat different approach. They have allocated resources across a wide range. The key elements are research networks based on collaboration among research centers and universities, with a view to encouraging mobility of researchers across countries. It is difficult to assess the European Union contributions, as these are region specific. * A number of private donors have also sought to address the issue-again with somewhat mixed results. A notable exception has been George Soros and his experience in going solo to set up the Central European University in Budapest. He concluded that if he were to do it again he would move ahead only with the benefit of partners. * Several countries have an American University. Although the founders and sponsors vary, the name indicates an ambition to set up a U.S.-model university. The American universities tend to be small institutions of high quality. Promising American universities exist in Bulgaria, Armenia, and the Kyrgyz Republic, and they seem to have a good chance of becoming the best institution in their country. (Pleskovic et al. 2000) 2 The participation of the World Bank together with private foundations has been quite important in building "centers of excellent" in many developing countries. On the one hand the presence of the World Bank is often perceived as a widely recognized seal of approval.' On the other hand the presence of private institutions is also seen positively by many as it brings a wider level of experience and is not seen as a strictly Bank affair. It also helps to mollify the perception in some parts that the Bank may be unduly arrogant. Client countries and a number of donor partners have indicated that they tend to view the Bank as relatively objective especially when they operate in full partnership with other donors. This contrasts with some World Bank operations, particularly structural adjustment lending which were often not considered favorably. In countries with a tradition of think tanks, it seems reasonable to assume that similar academic and research institutions would have developed without the World Bank's intervention, but more likely with considerable delay. For other countries, that is questionable. One may surmise that the Bank, at the very least, substantially accelerated the process of developing regional institutions capable of providing high-quality training and producing economic research that meets international standards.2 In the last few years, attention to capacity building has grown tremendously, and new priorities have evolved. The present report first describes the flexible model. The next section reviews a number of capacity-building activities, most of them supported at some stage by the World Bank and in particular by Research Committee funding. It draws on in-depth information about nine research and training institutions in a variety of countries. It seeks to explore the progress made since the Bank's early adventures in this field, noting the particular advances in capacity-building partnerships evolving in both regional and international networks. The final section seeks to draw on the experience of the past decade, highlights some of the lessons learned, and suggests some directions for future work in this area. 4. Flexible Partnership Model for Capacity Building The ultimate objective of the Bank's support of economic research capacity building is not research itself (although that is important), but to help create and reinforce appropriate sustainable, institutions within developing countries to foster the emergence of well-trained professionals ready to contribute to policymaking and teaching at home and to compensate for the "brain drain" of professionals from developing countries. 'The Bank provides some comfort to donors. If one were to extend the comparison then recent reviews of structural adjustment lending indicated that substantial institutional development was only achieved in less than 40 percent of operations-a much lower figure than achieved in this approach. See Adjustment Lending Retrospective-OPS, World Bank, June 2001. 2 It is notable, for example, that even after a number of years of operation, the ability of the AERC to attract funds from other African nations is quite limited. 3 Many approaches have been taken to-meet this objective, with their degree of success depending on the particular country circumstances and needs.3 In recent years the Bank has found some success with a flexible partnership approach (see Box 1 for more details). This kind of broad flexible partnership requires a strong catalyst, a role the Bank has successfully filled. This flexibility is important on both the supply and demand side. On the supply side one must be able to adopt to the particular needs of other donors. While on the demand side one must be aware of a particular country features; the sociocultural dimension and the degree to which a new/modified institution fits into overall country needs. Box 1. Flexible Partnership Model The flexible partnership model seeks to adapt to varying country needs through collaborative problem-solving and implementation. It is flexible on the supply side as it seeks to work with a variety of donors while it is also flexible on the demand side by having full participation of all the relevant recipients. Above all it seeks to avoid the one-size-fits-all approach. The model has four steps: generation of an idea, assessment of needs, feasibility study, and implementation. The Bank collaborates with all partners at each stage, from idea generation through joint discussion, assessment studies, and implementation. Partners on the donor side include multilateral and bilateral institutions, foundations, and corporations, and on the recipient side they include countries or regions with a wide variety of needs. The Bank plays a flexible, catalytic role in partnerships for capacity building, participating financially, intellectually, and through its convening power. In some instances the partnerships take the form of a structured consortium with a board of directors and an intermediary advisory board; in others a loose association of donors may suffice. The capacity building itself has also taken several different forms: strengthening research, training economists in Western economics at home and abroad, supporting conferences and dissemination activities, and supporting networks among indigenous and foreign research institutes. Capacity building in economics education and research is a long-term process. Domestic efforts need to be nurtured on a sustained basis. Some of these institutions have grown, some have consolidated. But none has closed. Their quality has improved. Most still need further financial and intellectual support. The Bank and foundations have benefited enormously from their interaction with each other. Recipient countries have benefited from an efficient, low- cost approach to producing institutions that can turn out an ongoing stream of well-trained economists and domestic policy analysts who can produce research that meets high international standards of quality and peer review. These partnerships have supported capacity building in academic institutions, research -centers and networks, fellowship programs, and conferences. Sometimes these are new 3These include (i) direct building of capacity through collaborative research projects, visiting fellows, and Bank staff serving as resource persons in the various regional networks, (ii) World Bank Institute and (iii) Bank support for Global Development Network (GDN), see B. Pleskovic, A. Aslund, W. Bader, R. Campbell. 2002. "Capacity Building in Economics: Education and Research in Transition Economies." Policy Research Working Paper 2763. World Bank, Washington, D.C. 4 activities, but often they are ongoing activities that need to be supported and reinforced in various ways. For donors that seek to contribute to the overall development effort, this partnership model offers a way. And as their priorities change, this model also affords them an exit strategy that does not put the entire endeavor at risk.. Supply Side Some activities are advanced through small (one-on-one) meetings, some through large meetings of current and potential donors.4 These donors often have strong preferences about the activities they are willing or able to support. Many prefer, or are restricted by their mandate, to work in specific geographic regions or countries. For many the potential financing horizon rarely extends beyond three years, but some stay for ten years or more. Some are willing to fund infrastructure, some to provide financing for faculty or research, and some to support foreign students in their country of choice.5 This requires a pragmatic level of flexibility on the supply side. Demand Side The Bank has conducted several studies to assess overall needs for capacity building in economics higher education and research.6 In all instances every effort is made to avoid "aid dependence." The Bank seeks to reinforce the needs of education and research institutions. It seeks to take a realistic view on what may be feasible given the country's sociocultural milieu and the actual level of institutional development. In particular the Bank actively seeks a modus vivendi with donors that have strong preferences about what "they are willing to support" by choosing activities in education and research institutions suitable for their preferences 4 A May 22, 2001 meeting at World Bank co-chaired by James D. Wolfensohn and George Soros, brought together approximately 50 representatives from foundations, government agencies, and corporations that pledged contributions or matching funds (for a detailed description see "Investment with a High Return: Supporting Economics Education and Research in Transition Countries. Minutes from a High Powered Meeting on Building Private-Public Alliances for Economics Education and Research in Countries of the Former Soviet Union and East-Central Europe." Transition, Richard Hirschler, editor, Vol. 12, No. 2, April-May-June 2001, p.1, 3-7 ). http://www.worldbank.org/transitionnewsletter/ 5 For example, the Swedish government financed students from Belarus at the EERC in Kyiv. 6 For example, in 1995, the Eurasia Foundation and the World Bank sponsored an assessment study of economics education and research in Russia and Ukraine (see G. Ingram, B. Pleskovic, K. Wittenben. 1995. "Critical Economics Education and Research Needs in Russia and Ukraine". Washington D.C.: World Bank). Later in 1999, the Open Society Institute, Eurasia Foundation, Starr Foundation, and the World Bank sponsored a comprehensive survey assessing the state of economics education and research in twenty transition countries of East-Central Europe and the former Soviet Union (for more information see B. Pleskovic, A. Aslund, W. Bader, and R. Campbell. 1999. "Proposed Strategy to Address Critical Economics Education and Research Needs in Transition Economies." Washington D.C.: World Bank. Processed). The whole enterprise seeks to strike a balance between demand and supply. In most instances the partnership starts with the research institutions themselves and helps them develop a strong program rather than starting at the other end by helping donors find activities they can support. This has led to the adoption of the flexible partnership model. The evolution of this program is highlighted by descriptions below of nine capacity-building activities, five involved primarily with graduate economics education and four with research networks or centers.7 5. Nine World Bank-Supported Institutions The Bank has participated to a varying degree in a number of institutions. This report focuses on nine of these which provides a wide degree of heterogeneity. These nine institutions include five institutions of higher education, offering economics training at the graduate or postgraduate level, and four research networks or centers, funding research projects and building linkages between individual researchers and research institutions, primarily in their respective regions. The training institutions include the following: * Economics Department at the Central European University (CEU) in Budapest * Center for Economic Education and Graduate Research-Economic Institute (CERGE-EI) in Prague * China Center for Economic Research (CCER) in Beijing * Economic Education and Research Consortium's M.A. program at the Mohyla Academy (EERC) in Kyiv * New Economic School (NES) in Moscow. The four research networks and centers are as follows: * African Economic Research Consortium (AERC) in Nairobi * Economic Education and Research Consortium (EERC) in Moscow * Economic Research Forum (ERF) for Arab Countries, Iran and Turkey in Cairo * Latin American and Caribbean Economic Association (LACEA). East Asian and Southeast Asia are covered by research networks created in 1998 by the Global Development Network.8 As experience with this approach increases, it is expected that these programs can be extended to address needs in other countries. A recent review of higher education has 7 CEU is discussed in this report but it was not included in the survey as it had a secure funding base from George Soros. 7 These are the Southeast Asian Network of Economic Institutions (SANEI) based in New Delhi and the East Asian Development Network located in Singapore. 6 suggested a number of areas that could benefit from similar programs. (Salmi, 2002) While these capacity-building programs share the same long-term objective- strengthening indigenous capacity to conduct sound economic policy research-the activities designed to fulfill this objective vary, reflecting differing needs in the recipient countries and the availability of donor support. A brief overview summarizes progress over the last five years in faculty development, student body, placement of graduates, research activity, and research output. (World Bank, 2002). Further details are given in Annex A. Accomplishments Both the academic institutions and the research centers and networks supported through partnerships for capacity building are thriving. The results to date show that the overall program has been extremely effective, with high returns. Ironically these programs have a very low cost both to the Bank and recipient countries. Education and Training The five academic institutions highlighted in this report are progressing well. They are expanding and consolidating. The number of faculty has doubled (from 71 to 143), and the number of students has more than tripled (from 663 to 2,324). Institutions that focus predominantly on training future policymakers, educators, and researchers have introduced new programs: a double-major B.A. program and a new MBA program at CCER in Beijing, a new Ph.D. program in economics at the AERC in Nairobi and CEU in Budapest, and an economic policy research program at EERC in Kyiv. NES in Moscow also plans to introduce a Ph.D. program soon. Data on graduates of these institutions provide a good indicator of program quality. Many M.A. graduates continue their studies at top universities in the West-40 percent from both EERC-Kyiv and NES in Moscow. Others have found employment in large domestic corporations, think tanks, and research institutions. Still others have chosen to influence policymaking by working in the public sector-about 40 percent of AERC graduates and 19 percent of CCER's M.A. graduates (Table 1). It is notable that fewer graduates have entered public service in the transition economies of East-Central Europe and the former Soviet Union. This appears to be mainly a transition phase and is expected to improve as the incentives, especially salaries in the public sector, become more attractive. Graduates hold high-level positions in the public sector. Many AERC alumni, for example, are now prominent in the administrations of their countries: the Deputy Governor, Bank of Uganda; Senior Economist, the Treasury in South Africa; and Director of Research, Bank of Mozambique, to name a few. Regional coverage of students and faculty remains unequal, but is improving. NES has entered into a partnership with a number of regional universities (Voronezh State University and Urals State University in Yekaterinburg, among others) to upgrade 7 Table 1. Alumni Employment Statistics 2000 (percent) AERC CCER CERGE-EI EERC-Kyiv NES' MA PhD BA MA PhD MA MA Government agencies/ministries 40 .. 8.0 19.0 3.9 3.0 6.3 Finance 7.50 . 6.0 70.0 15.4 20.0 16.0 Corporations .. .. 32.0 9.0 7.7 14.0 10.5 Academic institutions 10 87 4.0 1.0 26.9 3.0 40.0 Policy think tanks/research centers 3 . .. 1.0 23.1 34.0 26.0 Regional development banks (i.e. EBRD, ADB) . .. .. 11.5 2.0 International financial institutions (i.e. WB, IMF) .. 2 .. .. 7.7 6.0 5.2 Otherb 39 11 50.0 .. 3.9 18.0 18.0 'Alumni record since inception of the institution. bOther includes NGOs, business owners, consultancies, and the like: 'The data sum to more than 100 percent because many graduates are employed in more than one sector. and modernize economics teaching and research. Through a series of intensive workshops, the partnership has already helped to provide training in modern economics and econometrics to 200 economists, mostly from outside Moscow. Research Both the amount of research and its quality have improved at academic institutions and research centers and networks. For example, in five years, the number of completed research projects has increased from about 45 to 200 and the number of in- house publications has more than doubled, from about 108 to 265. There are some notable differences between institutes. For instance, both the EERC in Kyiv and NES in Moscow focus on training, so their research output is primarily students' theses. AERC's research output in number of projects completed may seem small relative to the institution's budget, but AERC works on a number of large collaborative projects. Thus far, four large projects have been carried out on growth, trade policy (Africa in the world trading system), poverty, and aid effectiveness. Standards have improved as well, with rigorous peer review and methodology workshops. The number of articles published in intemational, refereed joumals has increased from 85 to 317-a good indication of the high quality of the research being produced. Researchers and faculty are attending more intemational conferences and presenting papers. Institutions are also producing policy-relevant research, related to each country's needs and this research is reaching domestic economic policymakers. For instance: * Since its establishment in 1994, the CCER has been a key participant in almost all policy dialogue in China. It was invited to submit an independent version of the 1 Qth Five-Year Plan, which was used as a reference during the drafting of the 8 official five-year plan. Much of CCER's research, such as on the Yellow River Irrigation Project and the Rural Poverty Alleviation Project, has contributed to Chinese policy.9 * In 1994, the Prague Center for Economic Research and Graduate Education- Economic Institute (CERGE-EI) was chosen over six other institutions to become the official advisory body to the Czech government on entry into the European Union. Over the years, CERGE-EI has provided advisory and consultation services to government officials and members of parliament. * The Economic Education and Research Consortium in Moscow and the Economic Research Forum for Arab Countries, Iran, and Turkey (ERF) in Cairo organize and fund periodic country-level meetings with policymakers on specific topics. * Researchers affiliated with the research centers and networks also hold prominent government positions. ERF members, for example, have become ministers of economy, finance, economic development, economic planning, and education and higher education in their countries. * As part of its outreach to policymakers, the AERC has held five Senior Policy Seminars. The latest, held in Dar in February 2002, brought together approximately 80 policymakers from 19 countries (8 Francophone), including several ministers. This provided an opportunity for African policymakers (many involved in the Poverty Reduction Strategy Paper process) to interact with their own research and analytic communities. One of the five days of the seminar was devoted to reviewing the study Can Africa Claim the 21st Century (Gelb, Alan. 2000) produced jointly by the Bank (including DEC as a partner) and a number of African institutions, including the AERC. Aid and Reform in Africa (Shantayanan Devarajan, David Dollar, and Torgny Holmgren, eds. 2001) was also presented. Regional coverage of researchers and network membership remains unequal. Some countries continue to lag in developing indigenous capacity for economic research. Among them are Djibouti, Mauritania, Somalia, and Yemen, and in the Middle East and North Africa Region and Kyrgyz Republic, Tajikistan, and Turkmenistan in the Europe and Central Asia Region. Coverage remains particularly uneven in Europe and Central Asia, where three subregions (the Caucasus, Central Asia, and Southeast Europe) are not adequately served by existing academic institutions and research networks.'0 EERC in Moscow continues to progress as it strengthens the research skills of less experienced researchers. Quarterly methodology seminars provide intensive training in specific 9 Other CCER research that contributes to policy in China includes: China's Future in the Internet, New Village Movement, Food Security Project, Telecommunications Reform, and Experiment for Private Banking System in China. 10 The report identified these three regions as being under-served and underfunded and recommended the establishment of a three regional "centers of excellence" (see B. Pleskovic, A. Aslund, W. Bader, and R. Campbell. 1999. "Proposed Strategy to Address Critical Economics Education and Research Needs in Transition Economies." World Bank, Washington D.C. processed)) 9 research techniques. Both the summer school and seminars aim to strengthen the research resources available to network rmembers and aspiring research applicants. To date, approximately 400 Russian economists have been trained. In 2000, EERC began to provide participants with modest research development grants and to put them through an annual cycle of intensive training in research methodology, internships at leading research and higher education institutions, and specifically designed research development workshops. With the support of the Global Development Network, EERC also created the Transition Economics Research Network, which is gradually drawing scholars from other countries in the region into EERC's research and training activities. Networking and Dissemination During the last five years membership in the networks has grown prodigiously, with individual memberships rising from 550 to 2,770 and institutional memberships from 127 to 280. Networks have introduced new information technology to help reach out to an ever-increasing number of economists, educators, students and policymakers in each region. Funding Faced with ongoing financial constraints, institutions have begun to diversify funding and revenue sources in innovative ways. Funding for the nine academic institutions and research centers and networks comes from a large number of sources, with private foundations contributing the largest amounts, followed by extraregional government agencies. Institutions are preparing business plans to achieve a sustainable balance between overall aims and resource availability. Some are setting up endowments (CERGE-EI, CEU, ERF, and NES) or implementing tuition and loan schemes (CCER, NES, EERC and others), and a few have increased their fundraising capacity by creating U.S.-based tax-exempt private foundations. A recent report by the EERC (Hewer, 2003) provides information on financial management of the Kyiv-Mohyla Academy. The M.A. program introduced tuition fees in 2002-2003 academic year. Their contribution represents about 20 percent of the full cost of tuition. It is expected to create a financial aid system similar to that in North America. Further support comes from a variety of foundations. In order. to ensure sustainable financial support over the medium to longer term it would also help if they could obtain a significant endowment. As the economy develops some domestic entrepreneurs may be encouraged to do this, probably in return for having their name appropriately enshrined. Survey responses indicate that when institutions mature, there is an increased focus on raising money locally. Several institutions have been particularly successful in securing revenue from an ever-increasing number of sources. CCER, for example, raised 78 percent of its revenue from four sources: tuition (US$156,000), evening courses (US$51,000), research contracts (US$116,000), and an individual donation of US$2 million. CERGE-El has financed regular increases in its operational budget through support from the Czech government (40 percent of its annual budget), 10 foundations, and corporations. It is one of the few institutions that has successfully raised money from the private sector at home and abroad-23 percent of revenue in 2000. 6. Future Needs and Challenges The Bank has done much to shape this partnership model for building capacity in economics higher education and research, a model that has proven very effective, at low cost to the Bank and recipient countries. Additional challenges lie ahead. Moving Forward A key feature of this model is collaboration between partners at all stages while at the same time being flexible enough to accommodate most constraints that each faces. The Research Committee's role in the process is that of incubator and review board for grant renewals. Typically, the early stages of the process are funded by the Chief Economist's Office, and results are reviewed by the Research Committee. Formal proposals have been co-funded through the Research Committee's budget (Research Support Budget), which allocates up to 10 percent of its annual budget for capacity building activities. Combined, institutions like AERC, EERC, ERF, and CCER have received Research Support Budget funding of around $500,000 a year. 1 l Some institutions may need ongoing help, but the main role of the Research Committee is to get these institutions up and running by conducting studies, organizing meetings of potential donors, and rigorously reviewing funding proposals (three year cycle) and recommendations for implementation. As the institutions mature, financing may be transferred to the Global Development Facility (GDF), as has been the case with AERC and CERGE in recent years. In addition to financing, the Bank provides ongoing intellectual support, through collaborative research, internship programs, and lecture series (see Box 2). " EERC, co-founded by the World Bank and the Eurasia Foundation, has raised over US$25 million since its establishment in 1996. The World Bank contribution has been less than ten percent. 11 Box 2. Other Forms of Support In addition to the partnership model highlighted in this report, the Bank uses many other approaches to strengthen research capacity in its client countries. It administers several research fellowship programs, designed to bring promising researchers from developing countries to the Bank. The World Bank Institute offers short-term training for policymakers, and the Development Economics Research Group increasingly conducts collaborative research projects with researchers and research institutions in client countries. Fellowship Programs Several Bank-sponsored fellowship programs also contribute to the Bank's support of research capacity building. The Visiting Research Fellows Program (VRFP) and the Robert S. MacNamara Fellowship Program (RMFP) attract the best scholars from around the world. VRFP brings research fellows from developing and industrial countries to the Bank's headquarters to conduct their own research, while contributing to the Bank's ongoing research and enhancing its lending operations. The RMFP is an in-country research program, with strong policy applications, open to developing country nationals only. The program's social networks, local contacts, and institutional support enable research fellows to carry out high-value empirical studies directly relevant to the needs of their countries. Whether in Washington, D.C. or in-country, research fellows receive technical and logistical support from World Bank staff and specialists and benefit from the Bank's substantial policy experience and rich data sets. Challenges and Suggested Responses The academic institutions and research centers and networks reviewed in this report are at different stages of development-some have a decade of experience, while others are just starting out. They also face different political, economic, and social conditions, so future needs and challenges differ. The two key challenges in moving forward are ensuring sustainability for these institutions and helping them maintain a strong intellectual relationship with the Bank-a desire expressed by all of them. Sustainability Securing long-term financial sustainability is crucial for the survival and growth of the institutions and networks discussed in this report. Private U.S. foundations-the major source of funding for this type of activity-tend to change their funding priorities over time. They also tend to have a three-year horizon in their budgeting cycle. Survey responses indicate that institutions and networks are concerned about the growing tendency to attach strict conditions to relatively small grants and the declining number of grants that can be used for core activities. While institutions are responding in creative 12 ways-setting up endowments, increasing cost-recovery activities, increasing domestic fundraising efforts-the need for external assistance remains in most cases.'2 The Bank's convening power within the donor community and its catalytic role in capacity building are widely acknowledged. It has helped to raise a large portion of the total revenue needed to run the institutions described in this report-US$24 million in 2000 (see Figure 1). The Bank's contribution to this total was about US$1.5 million, or 6.25 percent. Much creative leverage has come from this small amount of Bank funds. And much capacity building has taken place in so many regions for so little. Figure 1. Total Revenues Needed for Academic and Research Institutions Revenue/Funding Sources (Year 2000)* 100%- - 70% - S