The World Bank’s Chief Economist and Senior Vice-President, Francois Bourguignon, was in London yesterday, for informal consultations on the future strategy of the World Bank.  This contributes to the Long Term Strategic Exercise (LTSE), described on the World Bank website, on a page which also provides opportunities for electronic comment.

Bourguignon introduced the overview paper.  The paper looks forward 20-30 years and sets its purpose as follows:

‘This exercise lays the groundwork for selecting a strategy that will enhance the developmental value of the World Bank Group over the next decade and beyond. It identifies the dominant trends in the global economy, the risks of various types of shocks and departures from trend, the emerging challenges for the international development community, and the needed policy responses. It also reflects on the Group's engagement, experience, operating environment, and action in accelerating poverty reduction, promoting sustainable growth, and managing risks. Placing special emphasis on knowledge and learning, it identifies the building blocks for formulating a long-term strategy for the World Bank Group, including possible focus areas and modes of intervention.’

The paper is only 13 pages long and people should probably read it for themselves (!).  However, the main points include:

• ‘Looking ahead, the next development challenge will be to make globalization inclusive and sustainable: ensure that Sub-Saharan Africa and other slow-growing low-income countries fully participate in-and benefit from-the globalization process . . . do more to address the challenges facing fragile states . . . help middle-income countries share equitably the benefits of growth . . . monitor and control global and regional externalities.’
• Development cooperation will be shaped by an increasingly complex aid architecture, but also by the likely continuation of historically low borrowing costs (though many cannot access global financial markets).
• We are close to an understanding of how development works, but there is a big gap on governance and institutions: ‘this area stands out as a priority for research’.
• The services of the five branches of the World Bank Group fall in three categories: finance, knowledge, and coordination.
• Some interesting points on finance, e.g. that trust funds now amount to about half the value of IDA disbursements and that World Bank disbursements have fallen, such that its equity-loan ratio has risen to 30% and capital is under-utilised.
• Four focus areas are proposed for the Bank in the future: SSA; fragile states; social inclusiveness in middle income countries; and global public goods.
• In practical terms, this means going beyond the status quo:
  • Strengthening IDA and leveraging IDA’s funds and capacities;
  • Making IBRD services more flexible and attractive (reducing the ‘hassle factor’, estimated to cost 0.5-1.0% of all loans) in order to retain a presence in middle income countries, including via sub-sovereign lending to regions or cities);
  • Moving towards a ‘global public good bank’, capitalizing on the Bank’s coordination and knowledge management skills;
  • Enhancing research, data analysis and knowledge management; and
  • Strengthening evaluation.
    

In thinking about the paper, a point of departure is the debate about the renewal of IDA, currently the subject of many meetings and presumably to be discussed at the Annual Meetings in October.  Details of the IDA-15 negotiation can be found here.  There are three key issues on the table: the role of IDA in the global aid architecture; the effectiveness of IDA at the country level; and IDA’s role in fragile states.  The timescale, of course, is somewhat shorter: IDA-15 will run from 2008-2011.

More generally, my own thoughts on the paper were as follows:

1. The sequence seems absolutely right: start with the development challenges the world will face, think about the likely demand for the Bank Group’s main services, assess the extent to which the Group can meet demand, and plan change accordingly. Our own Strategic Review at ODI is following much the same logic.
2. The analysis of development challenges is pretty good, and matches our thinking, for example in our work on What’s Next in International Development’, reported in the Annual Report.  The emphasis on global public goods is important (and there are more that can be added to the list, for example security).  It is interesting that Francois Bourguignon and his team lay such stress on the need for more research on politics and insitutions, as it happens a major research theme at ODI, with a big new programme on ‘Power, Politics and the State’.
3. What is missing, I think, is an analysis of where the Bank Group sits in terms of its market, and what competition it might face.  This links up to the discussion on aid architecture.  The key issue is that, if donors meet their pledges, then aid will increase rapidly in the coming years.  Donors will be making important choices about how to allocate the extra money, and in that connection will be looking at a range of options.  Bilateral or multilateral?  Within multilateral, the Bank, the Regional Development Banks, other Development Finance Institutions, the UN, the vertical funds (like the Global Fund) or the EU?  A strategy needs to ask what are the strengths and weaknesses of the Bank Group, not just in general, but in comparison with all those other organisations.
4. In that context, there are various topics that tend to recur in discussions about the Bank, that are not really reflected in the paper. For example:
   • The grants versus loans issue. Should the World Bank be providing grants? (See the Opinion piece on this by Andrew Rogerson)
   • Mission creep, especially the move of the World Bank into technical cooperation.
   • The difficulty the World Bank has traditionally had with political conditionality and human rights.
   • The historic inability of the Bank to provide emergency assistance.
   • The difficulties the Bank has in war, and sometimes in immediate post-conflict.
   • Of course, the governance issue.
   • The relative ‘hassle factor’ of different donors, especially when compared with new donors and with the private sector.
5. There is work at ODI on some of these questions, and especially on the overarching question of aid architecture.  See, for example, the Working Paper by Simon Burall and me, with Alina Rocha Menocal.  In that paper, we reported on focus group discussions we had held with senior policy-makers and civil society representatives from 27 developing countries, in a project carried out jointly with the Commonwealth Secretariat.  We have other more recent work, led by Simon Burall, which is about to be published.  What we find is that developing countries have a strong preference for a one-stop shop, providing grants, with minimal bureaucracy, and in a system which is well-governed, highly accountable and very familiar with the region or country.  The Regional Development Banks score quite highly on some of these criteria; the World Bank is known to be competent, but loses a lot of marks on governance, as well as on the weight of its procedures.
6. By the way, improving the aid architecture does not mean consolidation into only one funding and service delivery institution, whether the World Bank, the UN, the Regional Development Banks or the EU.  Some consolidation would be desirable, perhaps especially of the vertical funds, but contestability is a virtue.
7. On another issue, it is interesting that the Bourguignon paper has very little to say about the IFC and MIGA, and overall the Bank Group’s engagement with the private sector.  Our earlier work on Asia 2015, led by John Farrington, concluded that public-private partnerships and co-funding arrangements were likely to predominate in the medium-term.  See a special issue of Development Policy Review, or refer to the work of our business and poverty reduction team.
8. None of this precisely defines a future mandate for the World Bank, but it does make me think that the current version of the strategy is a good start, but can be described as evolutionary whereas what we may need is revolutionary.  If I were the new President of the World Bank, I think I would be challenging my staff to reconfigure or re-engineer in order to deliver a very different development organisation for the next decade: a strong vision of social justice and social inclusion, better governed and more accountable, for sure, better integrated across its various organisations, rich in knowledge, more diverse in its outputs and services (including grants and emergency aid), able to be present wherever it was needed (including in conflict areas), and committed to working globally on the institutions and programmes we need to meet future challenges.