public disclosure authorized 65772 - world bank...2011/11/30 · opening remarks by mr. masood...

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INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

Thursday, September 9, 1999 Washington, D.C. The meeting of the Committee of the Whole was convened at 12:32 p.m., in the Board Room, 700 Eighteenth Street, N.W., Washington, D.C., Mr. Sven Sandstrom, presiding.

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C O N T E N T S

ITEM PAGE 1 Enhancing the Poverty Focus of the Bank's Work 3 A. Building Poverty Reduction Strategies in Developing Countries [SecM99-604] B. Heavily Indebted Poor Countries [HIPC] Initiative: Strengthening the Link Between Debt Relief and Poverty Reduction [IDA/SecM99-545] C. Social and Structural Reviews - Progress and Lessons [SecM99-556] Opening Remarks by Mr. Masood Ahmed 4 Opening Remarks by Mr. Michael Walton 6 Opening Remarks by Mr. Peter Fallon 12 Mr. Al-Saad 17 Mr. Bachmayer 21 Mr. Schaeffer 27 Mr. Ako-Adjei 35 Mr. Ghattas 39 Mr. Alvarez 43 Mr. Sinclair 49 Mr. Hyden 56 Mr. Pesme 61 Mr. Kamitomai 70 Ms. Cordeiro 74 Mr. Bogaard 84 Mr. Pandian 89 Mr. Binkert 94 Mr. Garcia 98 Ms. Zou 101 Ms. Piercy 106 Chairman's Summary 140



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P R O C E E D I N G S

MR. SANDSTROM: I think we should at least start

before we break for lunch so let's get moving. We, as Jim

said, we will be discussing three papers. First, Building

Poverty Reduction Strategies in Developing Countries;

secondly, the HIPC Initiative: Strengthening the Link

between Debt Relief and Poverty Reduction. That paper, as

you know, was prepared jointly by the IDA and Fund staff.

And thirdly, Social and Structural Reviews - Progress and

Lessons.

You've also received for information a parallel

IMF paper on the "Review of Social Issues and Policies in

IMF-Supported Programs," and this paper together with a

joint HIPC linked paper will be discussed by the Fund

board on September 13.

And I believe we have colleagues from the IMF

here, Russell Kincaid, David Andrews and Christian

Schiller. They are here. Great. Welcome. And we have a

number of statements from Anna Brandt, Godfrey Gaoseb,

Stephen Pickford, Mr. Toure and Mr. Wan Abdullah. And

Masood will give a brief introduction first providing the

connections between the three papers and then Mike Walton

will give the introduction on the poverty reduction



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strategy paper and then Peter Fallon on the HIPC link

paper. So Masood, please.

MR. AHMED: Thank you very much, Sven. Just

very briefly, to pick up on the point that we left off at

the end of July when we briefed you on the overall board

program leading up to the poverty action plan or the

different elements of it. You'll recall that we had

talked about one set of papers that we would be working on

which would be trying to strengthen the link between the

poverty focus of country specific work, and that's where

we were going to talk about the work that we were going to

do to build greater links between our own country programs

and country strategies and their impact on poverty, and

how we wanted to ensure that the same approach was also

consistent with what was being done in the HIPC

enhancements. And that's why those two papers in some

sense are very much dovetailed because the underlying

approach that we want to apply in the HIPC cases is really

a way of moving forward rapidly with the same approach

that we want to generalize and apply more broadly to all

of our country assistance strategies.

The Social and Structural Reviews came up at

that time and we mentioned that we saw these as a key



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building block in terms of identifying the main obstacles

that impeded the poverty reduction and development

objectives in each country and so we wanted to circulate

that status report on the early social and structural

reviews as background for today's discussion because again

that's one of the building blocks that leads into it.

I just want to say one more word that in

addition to the paper that Sven referred to that is the,

if you like, the corollary paper in the Fund in some ways

that's being done on social aspects of the Fund's

programs, which we circulated to you for background

information, our paper on building poverty reduction

strategies at the country level is also being circulated

for background to the Fund board's discussion because

again we do see all of these three pieces as being very

much an integrated and joined up approach to moving

forward on making poverty more central to our collective

efforts.

And a final point I want to make is that on

Tuesday, we talked about the social aspects of crisis,

financial crisis, and a number of executive directors

raised the question of how that particular effort fitted

into this overall framework for enhancing the poverty



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focus of our work, and when Mike talks about the approach

here, we will try and pick up on making that connection

clearer because we see that as being again one of the how-

to efforts dealing with one specific source of

vulnerability that affects poverty outcomes in certain set

of countries. So again the connection there is one that

we would like to make explicitly. So that's just to try

and put it in terms of context, but the next thing would

be to get more introduction on the specific papers

themselves.

MR. SANDSTROM: Thanks, Masood. Mike, please.

MR. WALTON: Thank you very much. The proposed

approach to incorporating poverty into country strategies

is very much a follow-up to a number of discussions that

we've had with the board in the past. It is a central

element of our corporate strategy to develop practical

actions to systematically link all of our work to poverty

and it is, of course, a key aspect of the

operationalization of the Comprehensive Development

Framework. Our interactions with executive directors have

been most useful to this process and we specifically

appreciate the comments we have received on these papers.



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The approach laid out in these papers is

fundamentally about how we integrate poverty into country

strategy. This is based, of course, on a body of

substantive work on the determinants of poverty reduction

and, as Masood noted, it is complementary to the work on

good practices in managing social dimensions of crises.

That work that we reported on the progress on Tuesday, we

see as the material on good practice for advising on one

important aspect of the relationship between country

strategy and poverty which would constitute the

ingredients to be incorporated into the framework laid out

here.

I'd also emphasize that in terms of substance,

the framework draws on the initial thinking in the World

Development Report for the coming year. In particular, it

emphasizes the importance of security and of empowerment

within any country based poverty reduction strategy. We

see action in these two areas as necessary complements to

measures that enhance the material opportunities of the

poor, and this is something that needs to be made

explicit.

The board will be having an opportunity for

further discussion of these, the substantive thinking for



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the WDR, in the discussion of the WDR outline on the 17th

of September.

And in this introduction, I would just like to

emphasize four points, largely in response to some of the

comments received. First point is that participatory

processes and country ownerships are central features of

the process, as has been emphasized in the comments by Ms.

Brandt, Mr. Gaoseb and Mr. Pickford. This applies at the

level of the definition of country goals, to the

monitoring of delivery of services, and also to the

analysis of an interpretation of progress. And we see

this very much again as an application of the principles

that underpin the Comprehensive Development Framework.

I'd just like to take note of one issue, an

issue raised by Mr. Wan Abdul Aziz, and this is that the

structure of civil society engagement has to be worked out

at a country level and it is in particular important in

designing this that we work out mechanisms or the country

works out mechanisms that assure the involvement of civil

society institutions that genuinely represent the poor and

indeed work out mechanisms for strengthening and involving

organizations of the poor themselves. This we see as one



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important element of the emerging WDR strategy that we'll

be discussing in the future.

Second, the approach has important implications

for the diagnostic and information basis for country

strategy formulation and implementation. As the progress

report on social and structural reviews lays out, we are

moving towards a more systematic approach to linking the

macroeconomic social and structural agenda to poverty

outcomes.

A couple of issues I'd like to respond to that

were raised in comments. First is that the diagnostic

work has to be within a comprehensive frame. This doesn't

mean diluting sectoral analysis, as a point made by Mr.

Wan Abdul Aziz, but it does mean systematically linking

sectoral work to poverty outcomes and recognizing the

intersectoral linkages that are both often powerful and

have largely or significantly been neglected in both our

work and those of other institutions.

In this context, we would very much agree with a

point made by Mr. Pickford that this should include

explicit assessment of the distributional consequences of

macroeconomic choices, and not just an analysis of the



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effects of what have been traditionally labeled as social

policies.

We'd also take note of Ms. Brandt's point that

if we go ahead and introduce poverty notes, that we must

ensure that these strengthen and not weaken what is the

central endeavor, and that is to put poverty at the center

of country strategies. We've not reached closure on this.

We are actually now working through how best to reshape

our poverty assessment process in a fashion that will

underpin the enhanced poverty focus and we'll be coming

back to you on that with specific recommendations for

discussion in the context of the poverty progress report

in the next couple of months.

Second general point is undertaking this

diagnosis and shifting to a genuinely outcome-based

process of monitoring and implementation has significant

implications for the production and availability of

information. Many countries will not initially have an

optimal information base. We don't think that this means

you have to delay moving towards an outcome-oriented

approach. We don't need to a have perfection in order to

start on this process, but it does mean in these cases

that it will be important to have a clear approach to



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developing the information system as an integral component

of a country strategy.

This leads to our third point, that in many

countries moving in the direction advocated will need to

be complemented by quite major efforts in capacity

building, a point noted by both Mr. Gaoseb and Mr.

Pickford. This will certainly apply to statistical

systems, but is also very much broader. It implies

developing the capacity in governments, in think tanks,

and in civil society to analyze and interpret progress and

participate in informed country level dialogue. This

will, of course, often require support from the

international donor community.

Fourth, and perhaps most important, that while

the approach very much builds on ongoing country

experiences, it will involve over time a really quite

substantial shift in the way in which we work. And this

does imply quite a major challenge in implementation, both

for the country teams that will be supporting countries

and framing outcome oriented programs and for the networks

in providing the technical support and the international

experience on the links between public action and

outcomes. We see this as an effort that will need to be



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phased over time, as emphasized by Mr. Gaoseb, with a very

important role for systematically sharing experience as we

go along. So we look forward to reactions to the proposed

approaches. Thank you.

MR. SANDSTROM: Thank you very much, Mike.

Peter.

MR. FALLON: Thank you very much. The paper I'm

discussing looks at some of the implications of applying

the poverty reduction strategy framework laid out in the

paper discussed by Michael to the HIPC Initiative

countries. We believe that the conclusions apply to a

rather wider set of countries than the HIPCs and have

similar implications for other IDA countries and even

perhaps for IBRD countries. The paper as noted is jointly

written by Bank and IMF staff. It's worth pointing out it

draws on extensive consultation with civil society

undertaken as part of Phase II of the review of the HIPC

Initiative. A compendium of views received under this

consultation has been circulated to the executive

directors.

In applying the framework to the HIPC

Initiative, the paper suggests I think two main

principles. First, as a poverty reduction strategy is a



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long-term effort spanning say 15 years or more, HIPC

programs should be seen as applying only to the first few

years of this long effort.

Second, the best way of ensuring a strong link

between debt relief and poverty reduction is to deploy all

resources including domestic revenue and debt relief

towards the goal of poverty reduction. HIPC decisions

would then be integrated into a comprehensive effort to

reduce poverty. Debt relief would be seen as only one

element in the financing of the long-term poverty

reduction strategy.

The need for closer cooperation between the

coauthors, that's the Bank and the Fund, will be

accentuated under the new framework. The main elements of

the strategy it's proposed would be published in a

tripartite document, which we're calling for now "The

Poverty Reduction Strategy Paper," or PRSP, for short.

This would be endorsed by the government, the Bank and the

Fund. It would show how Bank and Fund lending supports

the strategy and it would require approval by the boards

of both institutions.

The IMF paper that Sven referred to on the

"Review of Social Issues and Policies in IMF-Supported



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Programs" clearly sees the PRSP as a stimulus to improved

collaboration by, for example, better integrating

macroeconomic and social objectives, policy measures and

related work agendas. The Bank CAS would fully reflect

the strategy and use performance under this framework as

the basis for setting the various lending envelopes.

As Ms. Brandt noted very aptly in her statement,

overall consistency of IDA and ESAF-supported programs is

a key to successful strengthening of the poverty focus in

all work and specifically in the enhanced HIPC.

For the Fund, the ESAF would continue to play

its present role but would now be seen as supporting the

poverty reduction strategy as a whole and not just the

macroeconomic and structural components. This may affect

IMF time-tabling as processes of developing strategies are

likely to be lengthy and it's likely that achieving

overall consistency will require some iteration between

the macroeconomic targets and other components of this

strategy.

For the Bank, I won't say much. My colleague

went into this. This means deepening and extending work

using outcome-based criteria and participatory processes.

This is a major task that will take time. Nevertheless,



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we propose as a first step establishing poverty reduction

strategies along the lines suggested.

We are very grateful for responses received thus

far from the executive directors and we're encouraged by

the rather strong sense of support that their comments

convey. Let me expand briefly on some of the points.

We share the concerns raised by Ms. Brandt and

by Messrs. Pickford and Kelmanson that there should be no

undue delay in the provision of additional debt relief in

countries already having a well-defined poverty strategy.

The suggestion in the paper is that while it is desirable

that an appropriate poverty reduction strategy be in place

at the decision point, it has to be recognized that this

will not always be possible as building a strategy takes

time. For retroactive countries, the paper suggest that

each country be treated on a case-by-case basis.

We agree fully with Mr. Toure's comment that we

should be careful not to believe that investing in the

social sectors is the only key that warrants the success

of poverty alleviation strategies. A related concern was

expressed by Mr. Gaoseb. The need for sound macroeconomic

policies, better governance and better structural policies

is as great as ever. Without these, growth will falter



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and strategies will fail. It also may sometimes by the

case that social sector investment is not actually the top

priority for poverty alleviation. As one example, better

access to safe drinking water is likely to be a priority

in many countries. Achieving this actually requires in

general better infrastructure.

We note the concerns expressed by Mr. Gaoseb and

Mr. Wan Abdul Aziz regarding the proposed PRSP. Our view

is that the PRSP would be a stronger document than the

existing PFP as it would tighten the focus on poverty

alleviation by laying out the strategy and the targets in

detail. Our view is that retaining both is likely to

result in needless duplication, however. The CAS would

remain the Bank's business document as at present, but

would draw on the government's strategy as laid out in the

PRSP.

Finally, we note Mr. Toure's point that there is

now a lot of experience on how to improve development

effectiveness and we take his point that we are saying

nothing really very new in the paper. We do hope,

however, that by moving further along the lines suggested

in the paper will make a contribution to worldwide poverty

alleviation. Thank you.



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MR. SANDSTROM: Thank you very much, Peter.

Later on in the afternoon, we may want to ask Fund staff

also to come in and comment on this from their side, but I

would first like to hear from some of you. I have seven

names on my list so far. It's almost one o'clock. Should

we at least get started? And Mr. Al-Saad will have the

honor, please.

MR. AL-SAAD: Thank you. It's always good to

start before lunch. Well, I will restrict my remarks to

the first paper and I see this paper as a first step in a

process of taking a hard look at the Bank's poverty

reduction strategy. The record in the past decade has

been disappointing, to say the least, with poverty

increasing by a lot instead of decreasing. In looking at

the proposed enhanced framework, I wish we had had enough

time to look at it carefully. I didn't even have enough

time to digest the outline of the new poverty WDR which I

received yesterday, though I noted it's a new and

interesting vision based on empowerment, security and

opportunity.

I understand, however, the urgent need to

consider the new framework in the view of its relevance to

the HIPC discussion and since it seems to have



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incorporated the main thrust of the forthcoming WDR.

Basically I am in broad agreement with the framework focus

on poverty outcome and the link between policy and

outcomes. The three elements of the enhanced framework

seem fairly logical starting with understanding of poverty

and its determinants, choosing the policy actions that

have the highest poverty impact, then monitoring outcome

on the basis of indicators widely endorsed. My concern is

that actual implementation of such enhanced framework will

burden the capacity of many poor developing countries,

especially the HIPC countries who are expected to be the

first target of the new approach.

On this, I wish to hear more from my colleagues.

I welcome the framework commitment to work for the

achievement of the international development goals of

cutting poverty in half by the year 2015 and other

targets. I wonder, however, if this is still realistic

given the setbacks in the past two years. I certainly

hope it still is. One aspect that I wish the document

brought to light is how much the poverty policy in the

bulk of the countries was donor driven, whether by

international and regional institutions or bilaterals?

This clearly means that all major participants, not only



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the Bank and the Fund, should be adequately committed to

the new concept and its operational requirements.

Coming to the question addressed to us on the

operational implication, I can only give my preliminary

reaction. On the first question, I do agree that outcome

based approach would provide a good basis for further

improvement of CASs. Support for countries, however,

should not be mechanically based on achievement of these

outcomes. As paragraph 35 points out, this might depend

on factors beyond the control of the country.

On the second question, I have no problem

working with governments to promote transparency and broad

participation of civil society in this selection and

monitoring of outcomes. This should improve realism and

relevance of outcomes targeted and enhance ownership.

On the third question, I think there should

still be a balance between program-based lending and the

project lending. Some countries may already have very

large program lending and others much less. Outcome-based

strategies should not mean across the board increase in

the share of program lending.

Finally, on the last question, I am not sure it

is appropriate to apply the new framework when there is



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inadequate knowledge about the link between determinants

of poverty and policy action.

MR. SANDSTROM: Thank you very much. With that,

I suggest we break for lunch and I have not six more names

on my list, I have 12 more names now. And we'll start at

2:30 with Ruth and then Helmut and we'll take it from

there. Thank you.

[Whereupon, at 1:00 p.m., the board recessed to

reconvene at 2:30 p.m., this same day.]



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AFTERNOON SESSION

[2:34 p.m.]

MR. SANDSTROM: All right. Welcome back. I

think we have to start if we are going to finish. So,

let's get going again.

Ruth, please. It is your turn.

MS. BACHMAYER: Thank you.

I want, first of all, to commend management and

staff for the excellent documents which reflect the Bank's

long and rich theoretical and practical experience in

struggling to reduce poverty. The building of poverty

reduction strategies paper provides a very comprehensive

and at the same time concise strategic framework for the

operational work, and the two other documents complement

it by perhaps the most important links to the operational

work done by the Bank.

The papers implicitly make clear how

underestimated and inadequately developed is the area of

diagnostics and monitoring of social developments compared

to purely economic development, including, in particular,

the financial sector. Any social targeting has for this

reason been somewhat blind-shooting with the high risk

outcomes in terms of efficiency.



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For this reason, we much welcome the progress

that has been made in the attempts to root social and

social policies in a more solid and well-defined round.

We believe that the ultimate goal of the

policies is the effect in preventing or reducing poverty,

not the speed of action alone. I particularly welcome the

outcome-based approach and I support the suggestion that

the poverty reduction framework should provide an umbrella

for the Bank's work in developing and it should also, of

course, be the basis for CASs.

In this respect, I welcome the social and

structural reviews as a systematic and structured way to

approach the CAS process. We were very satisfied with the

report on the progress in and lessons from the SSRs and

consider them as an excellent diagnostic and efficient

tool.

Nevertheless, even the excellent documents

cannot hide the fact that some challenges and difficult

questions remain ahead of us. I see, in particular, three

issues.

First, we would appreciate to learn more about

the management's views on the concept of the client in the

driver's seat in the context of the SSRs. The SSRs will



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provide a single perspective or a single scenario, which

may not necessarily be the only one, or even not the most

relevant one. There is nothing like a single set of

generally-accepted paradigms in the area of social and

structural policies.

We hope that management prepares a framework

which is really conducive for substantive inputs and

feedbacks from the governments and from civil society and,

of course, also for public discussion of the SSRs. It

would be very disappointing if the implementation of the

desired social and structural policies took a form or were

felt as imposing ultimate prescriptions and give the

feeling of too much power by international institutions or

the donor community.

Second, we consider it important to keep enough

realism in the strategy and in the intentions. The

requirements that the social and structural strategy for

many countries would impose may be far too ambitious given

their capacity. I will come back to this observation in

the context of the HIPC paper.

We should not forget that building of the

proposed institutional arrangements, for instance,

information systems, has been a major challenge for



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development economies too and it took us tens of years to

come to the point where we are now, we as industrial

countries.

The third point related to the relationship with

the IMF. The Bank's cooperation with the IMF in the area

of social and structural policies remains an important

open issue. The Bank has done most of its work in this

area, and has core competence and a competitive advantage

in it. But parts of the Article IV consultations by the

Fund deal with social and structural issues at least with

their fiscal aspects.

For this reason, the areas of overlap seem to be

a natural field for shared responsibilities between the

two institutions. We would welcome management's thoughts

on the future cooperation and sharing responsibility with

the Fund on the very operational level, in particular with

respect to the SSRs, with the structural part of the SSRs,

in particular.

I commend management for the inspiring thoughts

that were put to the operationalizing of the poverty

reduction programs on each stage of the Bank's work. Many

elements of the proposed approach have not yet been

tested, and we know little on how they would work. It



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refers to all stages of the operational work from the

better coordination and communication between the regions

and sectors within the Bank to the use of different

instruments.

I have to say also as a footnote, I find it a

bit premature to include budget support lending in the set

of instruments. It may have a big rationale in the

context of poverty-focused work of the Bank, but I think

it is really premature to include it in a proposal right

now. We have not finished our discussion. We have not

come to a conclusion on this proposal.

Before turning to the implications for HIPC, I

would like to conclude my remarks on the poverty reduction

strategy by saying that I believe that the next logical

step is to pilot the approach and carefully review the

experiences.

We also support that it would be appropriate for

the Board to return to the review of experience from the

implementation of the poverty reduction strategy and the

outcome-based approach in more than a year from now.

Turning now to "Strengthening the Link Between

Debt Relief and Poverty Reduction" in the context of an

enhanced HIPC framework, it is indeed desirable that



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resources freed up by debt relief should lead to an

increase in social investment. But it could be

counterproductive if a mechanistic linkage between both

were to be established.

Debt relief is not the only source of external

finance in support of poverty reduction efforts, as you

said and as we all know.

While it is important for HIPC countries to have

a viable and comprehensive poverty reduction strategy in

place as soon as possible, preferably before the decision

point, speed should not be the over-arching objective but

rather sufficient attention should be given that the

strategy is well-balanced, that it takes into account the

country-specific resources and implementation constraints,

and that it is fully shared by all relevant stakeholders.

I see some merit in tying the relevant length of

the second stage of HIPC to progress achieved in the areas

of structural and social reform and poverty reduction,

provided the actions to be undertaken by the country can

be monitored and not formulated in such a way that it

would over-burden the reform agenda.

This could result in a delay instead of faster

delivery of debt relief. Given the fact that many HIPCs



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are highly vulnerable to external shocks, which might lead

to setbacks in that implementation of the reform agenda, I

believe that some form of judgment should be retained as

to whether a critical mass of reforms and improvements in

the delivery of social services to the poor had been met.

Thank you, Mr. Chairman.

MR. SANDSTROM: Thank you very much, Ruth.

Helmut Schaffer, please.

MR. SCHAFFER: Thank you, Sven.

In my view, these papers are milestones in the

poverty orientation of the Bank, and in the realization of

the Bank's own mission. Especially the joint Bank-Fund

paper is a big step in the right direction and a success

for the enhanced debt relief initiative per se.

This paper also is very close to the thinking

expressed at the Utstein [phonetic] declaration of the

four Development Ministers of Great Britain, the

Netherlands, Norway and Germany from August this year.

Consequently, I would like to express my sincere

thanks to the management of both institutions for this

tremendous job to give a new spirit of the poverty focus

of the World Bank's work.



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Let me make some comments and start with the

first paper, "Building Poverty Reduction Strategies in

Developing Countries", as it has been a key input to the

second paper on the HIPC Initiative.

This is a good and very useful paper and I agree

with all its key issues and recommendations. It is

absolutely correct that the paper's underlying assumption

is based on a multi-dimensional definition of poverty and

its causes, paragraph 7. Hence, as poverty is not only

seen in its economic context, the paper proposes a multi-

sectoral approach and comes to a varied set of strategies.

I also fully agree with paragraph 20 that it is

significant to analyze the multiplicity of causal factors

of poverty. The paper does not explicitly mention the

vast differences in power and interest which lead to

poverty or conserve it and the consequence of strong

political will is a significant precondition to alleviate

poverty.

Paragraph 16 strengthens the importance of a

detailed analysis of poverty. I quote, "Policy

formulation should start from a disaggregated

understanding of who the poor are, where they live and

their source of livelihood". I want to add that this



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analysis should be also carried out with a specific gender

focus.

Coming to a more strategic consideration, I

support the idea that poverty alleviation has to be based

on the specific situation of each country. We could even

go further and speak of an area-specific approach, as, for

example, homogeneous-looking countries, like my own

Germany, can actually be quite diverse in nature. There

is no blueprint for poverty alleviation. I really

appreciate that the World Bank integrates this aspect into

its new focus on poverty.

It also makes sense to focus on the question of

distribution, participation and empowerment of the poor,

as stated in paragraphs 11 and 26, but we should not

forget that any empowerment of one group leads

simultaneously to diminishing the power of others and said

power structures might change to the now powerful, a

typical scenario of conflict. The paper does not reflect

whether the World Bank should play a role in this

empowerment process for the poor.

I was also delighted to notice that the World

Bank is now more careful about the role of economic

growth. Economic growth is still necessary, but it is not



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seen as a guarantee for poverty alleviation anymore. Past

experiences have shown that the trickle-down effect did

not work out the way it was expected.

Paragraph 23 mentions ways to go about poverty

alleviation, even in times of less economic growth, but

obviously do not exist in addition to economic growth, as

stated in the paper. Each way has its value in itself.

In paragraph 11, the paper raises the important

topic of broadly-based growth, which is directly linked to

the equality of income distribution, as the paper later on

rightly points out by stating poverty payoff to growth

will be high but only if the distribution of income and

the quality of governance are improved. This has my full

sympathy and the facts that this aspect will even form

part of the forthcoming WDR shows the great importance it

also has for the World Bank.

Only one question remains: How can the World

Bank support these activities, for example, the

distribution of land, as mentioned in paragraph 23?

The role of indicators is another important

subject the paper deals with. How difficult it is to find

right or useful indicators shows, as the example given in

paragraph 32, where the rising rate of primary enrollment



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does not necessarily say something about a better quality

of learning. In addition, it would also be important to

look at the rate of dropouts after several months or even

years. Otherwise, the wrong evaluation about the success

of the undertaken measures would be made.

Table 1 gives a good starting point for the

development of adequate indicators but again, as pointed

out earlier already, the design of indicators and their

quantification has to be country-specific.

To conclude my remarks on this paper, I would

like to give some brief answers to the issues for

discussion outlined in paragraph 73 at the end of the

paper.

The first point, I agree that outcome-based

approaches would provide a good basis for further

improvements in the CAS selectivity and the articulation

of more comprehensive and robust links between poverty

outcomes and Bank activities. Developing countries should

design their own national plans and strategies for poverty

alleviation and to develop an appropriate indicator system

for monitoring and evaluation of the different proposed

measures.



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Secondly, I also support the second aspect to

promote transparency and broad participation of civil

society. Let me just give one suggestion. The close

relationship of poverty and gender aspects should be

worked out in more detail. In the Committee of the Whole

paper on Tuesday we discussed the same problem for the

social policy already.

The third point concerning the third question,

lending support type, lending instruments appear as a

logical consequence of better national policies and

strategies for poverty alleviation, but an uncertainty

remains how the majority of bilateral and multilateral

donors are ready for it.

In regard to the fourth question, a gradual and

slow process on a case-by-case basis seems to be adequate.

The immediate start for a widespread introduction of the

PRSPs is not realistic.

Let me now come to the second paper,

"Strengthening the Link Between Debt Relief and Poverty

Reduction". The paper is a clear statement by the World

Bank and the IMF that the debt relief initiative should

form a part of a comprehensive poverty alleviation

strategy. Consequently, all available resources and not



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only those from the HIPC Initiative should be used for

this purpose.

Both organizations underline the necessity to

integrate sector and macroeconomic policies and, in doing

so, good governance becomes significant and important to

this broad-based concept.

I fully agree that poverty alleviation should be

seen as a long-term and multi-sectoral approach, as, for

example, pointed out in Box 7 on page 24. But the paper

gives so far no answer to relevance and priority of the

various parameters for each individual country.

Furthermore, there is an inherent danger once we

try to include all the different parameters of poverty and

its alleviation in a cross-sectoral manner that the design

of strategies becomes too complex and, accordingly, rather

difficult for the country to efficiently implement them.

On the other hand, ownership and the inclusion

of the HIPC funds into the country's general policies for

poverty alleviation remains crucial. Consequently, with

respect to HIPC, the outlined strategy might be somehow

too ambitious and on a case-by-case basis a more pragmatic

approach should be also taken into consideration.



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The role of ownership and poverty reduction

strategy papers are also interlinked. As pointed out in

the papers, these PRSPs are agreed upon jointly by the

three players -- the partner countries, the World Bank and

the IMF. Hence, a lack of ownership is a prevalent danger

to this concept in a similar way as to the former

structural adjustment programs.

The paper further stresses on poverty funds as

an important instrument, as positive examples of the

Poverty Action Fund of Uganda is mentioned; also on a more

rather general basis, positive criteria for the

establishment for these kind of funds are transparency in

the allocation of resources, their fast disbursement and

their immediate disposal.

But the paper also rightly points out a

significant danger in relation to the experiences with

social funds. These funds can become separated from the

general national policy and the national budget which

could be very detrimental to an overall approach to

poverty reduction.

Therefore, more information and detailed

analysis of their usefulness are needed. But let me

conclude by stating that in my view this paper is a very



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good basis for further discussions of a very complicated

but very important matter, but, of course, much remains to

be clarified and much remains to be reflection upon.

Thank you.

MR. SANDSTROM: Thank you very much.

Mr. Ako-Adjei, please.

MR. AKO-ADJEI: Thank you, Mr. Chairman.

First of all, I would like to take the three

papers together. I will begin by saying I endorse the

outline and the policies set out in the papers, and others

have devoted some time to that. So, I am not going to

devote any more time to that. I would want to take what

Ms. Bachmayer has called challenges that are ahead of us.

And the first challenge I see is the

relationship with the Fund, because this new arrangement

is going to raise the level of our relationship and our

cooperation with the Fund to another level. I would want

to sincerely request that the burden relationship that is

being built up here at headquarters should be extended to

the field, where in most of our countries the two

institutions are seen to be working at cross purposes most

of the time.



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If this attitude continues or this perception

continues, it would completely derail the very good

intentions that we plan to put in place here.

The second point is the role of the government

itself. I see more of a role at the regional and the

district levels where a lot of the studies are going to be

done, where a lot of implementation is going to be done,

where a lot of the operationalization of the whole poverty

program is going to be done. But this is where the

difficulties are.

The central governments are weak; the districts

are weaker. And I would prefer that we strengthen

capacity at the regions and at the districts before we

start throwing in money at these programs, because

otherwise we would end up throwing a lot of money at these

programs, but without institutional setup to create

accountability, to create transparency, to create the

mobilization, you need a mobilization not only of

resources but you need a mobilization of the people

involved, the poor themselves to really get into the whole

program. And I think the success depends upon that

mobilization and what the papers call the empowerment and



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participation. So, I urge that we pay special attention

to that.

Then, the next challenge I see really is the

issue of the poor themselves. We need to build a whole

program around the poor themselves, around their own

responses, around their own interests. We need to make

sure that the key resources of the poor, which is their

labor, is going to be utilized. We need to create equal

opportunities and avenues for the poor to participate and

have access to all the institutional prerogatives that the

state creates.

We need to be able to create access to the

resources that have been channeled. We need to create

access for them to generate their own incomes, to be able

to grow out of poverty. I think they have to grow out of

poverty; we don't have to get them out of poverty. But if

we provide the opportunities, the access and the

resources, they themselves could take the opportunities

and create and participate seriously for the success of

the program. That is the way I see it.

Then the next challenge I see is with the NGOs.

And this is also where you are going to have to play a lot

at the level of the regional and the districts. And let's



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accept it; I think the NGOs are better situated than both

the Bank and the Fund in most of the developing countries.

And I don't think we are going to be able to duplicate or

excel in a lot of areas to what the NGOs are doing.

So, I would urge that wherever possible, we get

them involved to the utmost and to the maximum. There are

some of that we can work with. There are some of them

that we can all work with. Those we can all work with, we

leave them aside. Those we can work with, we go along

with them and use the expertise.

Finally, taking a look at donors, the role of

donors, that is also going to be crucial. But the need

also for donors is also to strengthen coordination both at

the regional level, the district and at the center in our

countries. And this is going to involve a bit of a spread

in the countries. And if donors are going to pick and

choose their own pet projects and so on and there is not

going to be any coordination from the center, we are going

to have a lot of a mess.

And I would urge that the Bank plays a key role

in coordination and the donors would also see themselves

as an integral part of the whole program and coordinate



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both with the Bank and the Fund and the other donors to

make sure that we succeed.

This is a worthwhile effort, and I am sure that

if can galvanize the people, we can galvanize the

institutions, the government, the donors and the NGOs, the

poor themselves will grow out of poverty.



Mr. Ghattas, please.

MR. GHATTAS: Thank you, Mr. Chairman.

Before we convened, Mr. Page asked me to be

briefed. As one of my former bosses, I better listen to

him.

I will, therefore, discuss the two papers,

"Building Poverty Reduction Strategies in Developing

Countries" and "Social and Structural Reviews", focusing

mainly on the former. But I will refer to the IMF paper

as well.

We have had a very useful and informative

bilateral discussion with staff. I can, therefore, be

selective in my comments.

We can support the comprehensive framework for

reducing poverty as underpinned by the three elements -- a



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thorough understanding of poverty and its determinants;

choosing public actions that have the highest poverty

impact; and participatory setting of targets and

monitoring outcome indicators.

This framework seems to build on the experience

with the approach outlined in the 1993 Poverty Reduction

Handbook by utilizing new knowledge and lending

instruments. The international development goals for 2015

that the proposed framework is designed to achieve are

very ambitious. The Bank, as well as other donors, needs

to be modest and realistic in applying the framework.

Nonetheless, it is perhaps better to sets one

sight in fighting poverty too high than too low. The

framework needs to be applied flexibly and be tailored to

the country circumstances. How we proceed in an

individual country will depend on the initial conditions.

Where we want to end by 2015 will also depend on

government ownership, resource availability and

institutional capacities.

In this regard, the paper broadly states that

there is a potential tradeoff between external assistance

to expedite the process and ultimate ownership. This

seems to be a fact that is often ignored when we announced



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that the government should always be in the driver's seat.

This tradeoff or tension could slow down progress towards

achieving the international development goals.

Implementation of the proposed framework puts

pressure on the Bank to deliver. It also has operational

and perhaps organizational implications to the Bank that

the paper does not adequately discuss. I can think of two

aspects related to this.

First, the challenge of making units and staff

move from sectoral-based analysis and interventions to an

overall framework centered on poverty outcomes. Staff may

want to explain how we can make this change across the

Bank.

The second is Bank collaboration with the IMF.

The proposed poverty strategy paper that could replace the

PFP will put additional pressure on the Bank to deliver.

The IMF paper states in a number of places that the Bank

is sometimes unable to provide social policy analysis on a

timely basis because of either staff resource constraints

or mismatched Bank-Fund work cycles. The paper goes on to

pose the question to the IMF Directors whether they think

that the IMF should increase staff resources and hire new

specialized staff to meet the needs. In fact, some units



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may have already started hiring specialized staff. Of

course, poverty reduction, if it is not already, should be

the bread and butter of the bank. Inability to deliver

should be a major concern for management.

I have two more technical points on the poverty

reduction paper. First, the paper seems to put too much

emphasis on slow growth as a major cause of poverty. My

understanding is that growth policies are very effective

when the income distribution is fairly egalitarian. But

when the income distribution is highly skewed,

redistribution policies are more effective. This

highlights the importance of understanding and starting

with the initial conditions in the country.

My second technical point concerns the use of

poverty lines. It is always preferable to use a range of

poverty lines and measures that capture the depth and

severity of poverty as opposed to using a single poverty

line. These will indicate how many households or

individuals hover around the poverty line and whether the

profile of poverty changes with different lines. This is

extremely important for policy and for the design of

projects.



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It is possible that with this kind of approach,

we would not have been, quote, "unprepared for the

dimensions of the social crisis in Asia".

Mr. Chairman, I have the following final comment

on the social and structural reviews. If delivered, as

indicated in Annex Table 1, we would have made good

progress on completing these papers for the pilot

countries. By then, we would have acquired sufficient

experience to evaluate whether we should move forward from

the pilot phase to broader implementation.

This is not specifically discussed in the paper,

and we should return to the subject at an opportune time.

Thank you.


Jaime Alvarez, please.

MR. ALVAREZ: Thank you, Mr. Chairman.

Let me first acknowledge staff for very

comprehensive papers, especially the HIPC one. Without

diminishing the importance of the earlier two papers, we

would like to concentrate our comments on the HIPC one,

given that it is a very good analysis of the different

approaches being used to tackle poverty to targeted

programs.



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In general, we found that the paper is well-

balanced, making use of good policy analysis, while

blending the views of many interested parties. Trying to

accommodate different, often conflicting, views is a

difficult task and staff of both institutions should be

commended for their efforts.

The first point that caught our attention in the

paper is the recognition by staff that increasing budget

spending along may not have effect in poverty programmed

outcomes. This recognition is important for at least two

reasons, both of which we have mentioned in different HIPC

discussions.

The first one has to do with efficiency and

public expenditure. Increases in budget expenditure alone

should not be taken as a measure for commitment to poverty

reduction, much less as an indicator of poverty

alleviation. It is important to remember that in some

cases HIPC assistance will provide just for breathing

space to pay external commitment; thus, the effect on

spending should not be expected.

Furthermore, in a country with a weak delivery

system of social services, an increasing expenditure for

social services would create wasteful programs. One can



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always argue, as several commentators did, an

institutional capacity needs to be strengthened. But

capacity building for service delivery does not guarantee

efficient outcomes.

Educational outcomes in areas with among the

best teacher training, salaries, infrastructure and

equipment in the world are comparable with those countries

that spend much less.

A second reason why budget expenditure alone is

misleading has to do with individual's spending patterns,

patterns that could greatly affect the efficiency of

providing social services. If a country, due to debt

relief scheme, allows their citizens to use more

disposable income to purchase social services that affect

poverty indicators, then poverty alleviation could take

place.

Regardless of spending levels, one might find

outcomes of providing service more efficient in some

societies more than in others. Outcome could be closer

linked to the competitive environment under which services

are provided. One suggestion to staff, while another is

in poverty, is to consider social services being financed

and provided by both the public and private sectors.



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Staff could expand on the role of private sector

provision of social services, especially in light of the

part that delivery capacity in HIPC countries could be

weak.

To follow up on the point Mr. Fallon made this

morning about the impact of poverty and poverty that

access to water may have, we could only add that recent

research by Bank staff points out the desirability of

deregulated private provision of services in that sector.

We are of the opinion that, at this point in

time, no option should be disregarded.

The Bank presented results of poverty funds,

Section 47, being used to target poverty. The paper

identifies several shortcoming of such funds in reaching

the poor. While mentioning the shortcomings of poverty

funds in some developing countries, the paper disappoints

us for not revealing similar problems with poverty funds

in industrialized countries.

By extending the analysis to identify

shortcomings of poverty programs, two experiences in

industrialized countries, one could get generalization for

such type of programs, thus avoiding the perception that

if we correct this or by improving in some areas, like,



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for example, capacity building, one may get efficient

outcomes.

Competition in the provision of public services,

as well as consumer empowerment in the selection of

providers, could have a great impact in poverty service

outputs. Staff should be mindful of the proposals that

limit competition for the provision of social services,

and in that respect we are glad that, although many

commentators brought up such approaches, they were

somewhat disregarded.

Another point worth mentioning again has to do

with representation in the policy formulation process.

Like increases in budget expenditure, increases in the

number of entities that participate in the political

dialogue do not guarantee ownership or the desired

reforms. Representation is something that has to be

defined within the political process of each individual

HIPC country. Like in all areas, an appropriate measure

should be identified for each desired outcome.

To the extent that the desired outcome is a wide

participatory process, the matrix to evaluate performance

has to be chosen according to it. If we are monitoring

process, let us measure it.



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The proposal for improving debt management in

HIPC countries is a good. Recommendation along the lines

of improving accountability and transparency should be

properly assessed. The World Bank started technical

assistance work recently in this area. This work, along

with the work being performed by other institutions, would

enhance management capability in borrowing countries.

The literature is reaching and analyzing the

role of different actors in the budget process, including

parliaments and interest groups. The Bank and the Fund

should be mindful of such analysis and should weigh the

pros and cons the proposals that could work against the

aim for economic reforms that could bring sustainable

growth to HIPC countries.

Finally, going back to the other two papers, in

our opinion they focus on the traditional poor. Recent

research of the Bank has presented a clear link between

poverty and lack of access to employment. This lack of

access to employment is limited to the traditional poor or

limits access to the traditional poor and to the new poor.

We think the Bank in a revision paper should properly

reflect the analysis that the Bank has performed.



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In summing up, we can go along with most of the

questions posed by staff, but in echoing Mr. Schaffer we

think that each country deserves case-by-case attention,

taking into consideration the points that were mentioned.

Thank you.


John Sinclair, please.

MR. SINCLAIR: Thank you, Mr. Chairman.

I think we found these papers very

comprehensive, thoughtful and sensitive. In fact, I think

together they serve as a key set of stepping stones

towards a very different sense of priority for the poor in

all of our work. They represent a critical coming

together of the Bretton Woods institutions, and I know

that is happening all the time. But I think, most

importantly, they demand a sustained operational level of

collaboration between those institutions.

And picking up my Ghanaian colleague's

challenge, I think that is going to be a very, very

difficult and very important dimension of this work,

especially bringing the client government to the center of

that process.



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We agree that any new poverty reduction

framework needs to be rooted in the four elements that are

mentioned -- broad-based participatory process; improved

transparency and accountability for government -- and I

think in that dimension I would mention the desirability

of greater efforts of monitoring and analyzing some of the

extra budgetary spending elements that sometimes confuse

our interpretations of that level -- most fundamentally,

the understanding that poverty is indeed a multi-

dimensional phenomenon, that it is not just something

about income; and finally, that there is a reminder that

sustained poverty reduction is impossible for sure without

quality economic growth, but also that trickle-down is

rarely enough.

Implicitly, I think we are reconfirming that

poverty reduction should be the new underpinning, not of a

few but, of all of our interventions. Under the enhanced

HIPC paper in front of us, we are adding debt relief to

that list of supportive instruments. I think in the

vocabulary CDF, we are again seeing the interplay between

the social and the economic in an organic whole.

I think the Bank paper sees these new poverty

goals being mobilized around an instrument called the



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poverty reduction strategy paper. And in that light, I

would add some words my Director reminded me to mention

that her sincere hope is that this will be one paper that

we know by its title rather than by an acronym, especially

since the acronym is hard to pronounce.

I think we support that poverty strategy and its

proposed role as the core instrument for assessing

eligibility under the enhanced HIPC. I already mentioned

some of the key elements we saw as important to the

poverty strategy. I would add that, as drafted, it is

rather thin on implicit concerns for gender and the

environment.

I think we agree very strongly that the

insistence that ownership is crucial is a correct one.

Any meaningful poverty strategy has to be home-grown.

As others have mentioned, the preparation of

these strategies are going to be complex and demanding

and, in that context, I think we will need to finesse the

situation where the addition of this focus for HIPC could

be seen, especially in its early days, not as a new burden

of conditionality for the countries concerns, a new set of

goal posts which have moved. We would rather like to see



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poverty reduction as replacing, not adding to, some

conditionalities.

In that sense, especially for the existing

HIPCs, we may need process-type targets, are they putting

place an effective poverty strategy.

Realistically, key to the longer term, we don't

expect poverty outcome indicators to be available

meaningfully in the first two or three years of new HIPC

decisions. I think we would be intrigued to understand

how staff see these early cases being handled. I think we

had a little bit of an impression of that at the beginning

but it may be useful to reconfirm that.

Most importantly, whether within a HIPC or just

as a new normal IDA activity, the existence of a poverty

reduction strategy should radically change the rules of

the game. For sure, they will crucially become central

elements within a CDF scenario. Their thinking should be

a central influence on a CAS. Indeed, one would hope and

assume that their consultative processes would largely

overlap and flow into the CG process.

We assume that the poverty strategy will become

a central feature of the new guidance to CAS authors, that

we heard being mentioned a couple of days ago before. And



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I suppose in the context of Question 3, we certainly would

support a steady expansion of the range of countries being

covered.

I must also assume that the same strategies will

significantly condition the framework of an ESAF. And I

think this is clearly the challenge for our colleagues

across the street in recognizing that future fiscal

framework recommendations should proactively seek to leave

space for pro-poor for social expenditures.

The Trican [phonetic] surveys used in Uganda

would seem to be an important and useful monitoring

mechanism. And, as my Irish colleagues have suggested,

there could be much merit in protecting core social

expenditures via the concept of ring-fencing in budgetary

frameworks.

Conceptually, we favor the outcome focus

thinking of the poverty strategy. However, I think we

would have to caution against false expectations. We were

only discussing yesterday the realities in the Strategic

Compact that output targets are very hard to define and,

at best, have been now embodied in the CAS frameworks

themselves. I think we will have to rely more on

intermediates and encourage governments and countries to



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align their national goals around the framework of the key

international development goals.

In that spirit, the Bank and other donors will

need to stand ready to support capacity building in those

areas, in data collection, enhanced budgetary design, in

many dimensions, as others have mentioned.

I think on the positive side of an outcomes

discussion, we would hope that the strategy is intimately

linked and quickly linked in the CAS or the CDF or

whatever to an action plan. I think we need very clear to

see this as something related to the whole programmatic

process.

A word of caution: We see all this process as

part of a master plan, a well-conceived master plan,

hopefully to take poverty reduction to the heart of the

development process. And in that spirit, just as our

Nordic colleagues alluded to, I think we are a little

worried that the idea of a stand-alone poverty note, even

if it is a CAS annex, will have the spirit of an

independent perspective.

I think we would rather see the mind set goal

being one of making the CAS into a totally holistic

document and, in that sense, at least for poverty



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mainstreaming, it should be mandatory, rather than an

annex poverty note.

We were talking briefly yesterday about a

version of question of proliferation, which I thought was

supposed to end with the Cold War. However, I think we

are seeing it still today, not in the military sense. We

are seeing it in terms of the numbers of documentations,

the different sort of approaches we have to these agendas.

We have SSRs, rightly complaining that some ESW

building blocks were missing. We have encouraged a new

generation of participatory PERs. I was at a presentation

in which I learned a great deal about NIRs, and they

seemed very, very important also. And just a few weeks

ago, we were in a room and we were talking about PSLs and

PAPs, though I understand PAPs was considered to be a

little offensive as an acronym.

All in all, I think these could be worthy

elements in an evolution of a sound poverty reduction

strategy, but I think they also risk the potentiality of

being like those mysterious disconnected files we get

warned about as cluttering our hard drives. And I suppose

we would put in a small quiet plea for some consolidation.



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I think we are moving the pieces together, but

let's not, in a sense, have too much dispersal of that

energy.

Finally, to conclude then, I think we would have

to say we very strongly welcome these efforts to add flesh

and bones to the commitment of poverty reduction that is

at the heart of this institution's mandate. It is, in a

sense, very, very appropriate that the chosen instrument,

the poverty strategy, will also be a critical bridge to

strengthen in the work on the HIPC and our relationship

with the Fund across the way.

Thank you.

MR. SANDSTROM: Thank you very much, John.

Neil Hyden, please.

MR. HYDEN: Thank you, Mr. Chairman.

I join with other Directors in welcoming these

papers and the framework that they present. This is a

marked advance, perhaps even an historic one, and we very

warmly support it, and support the broad elements that are

in it.

I wanted really just to take up two points or

two issues at this stage. One links to the point that Mr.

Sinclair was just making about the burdens that are placed



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on countries in trying to meet all of our requirements,

and the variety of forms and reports and whatever they

have to fill in.

Many of our countries don't have capacity to put

huge resources into these sorts of exercises, and that

applies certainly to some of my constituents. So,

consolidation will clearly help.

But even so, the requirements we are putting on

them is formidable. My advice to them in those

circumstances, when they ask, well, if we cannot do the

whole job, which bit is most important, I think the most

important bit is the framework; that is, the broad

elements that are set out here of identifying the national

objectives, of the country itself having ownership of

that, of identifying the means and options for pursuing

those objectives, having some measurement of outcome,

coordination of the efforts between the various supporters

and donors.

So, the key elements of this framework are

really the most important elements. The detail of how it

is implemented I think can be done flexibly and tailored

to the circumstances of individual countries.



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If they get the questions right, then it is much

easier to get the answers right, even if you don't have

such sophisticated analyses and report writing as we would

like.

The second question I would like to refer to is

the treatment of governance and empowerment in the papers.

Governance is very important. We discussed this with the

President last night at our dinner, and he made the point

that governance was central to almost all things that

countries were trying to do. If you don't have good

governance, then it is pretty hard to have good economic

performance, if the budget doesn't operate, if monetary

policy doesn't operate, if the court systems don't

operate.

Yet, in the frameworks we are presented with,

governance is not seen as something which affects

everything. It is put into a category of its own. In the

paper on "Building Poverty Reduction Strategies", in Table

1 on page 9, we see that good governance is linked to the

objective of empowerment and participation in decision-

making. But it is really much more than that. It relates

also to economic opportunities; it relates to the heading



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of capabilities, of literacy, education, health; it

relates to security.

One example: In one of the countries I

represent, teachers have not been paid for six months. It

is because of a breakdown in governance in the central

government. It is not an isolated example.

Infrastructure programs, capital works programs,

also completely chaotic because of inadequate governance.

So, unless governance is dealt with as a central concern,

most of these other objectives are so much more difficult

to achieve.

If, as in this table, we link good governance to

empowerment, we risk downgrading it to something,

something which is less important than economic growth,

less important than education and health, less important

than security.

In many countries, empowerment I think is

something which is not so readily endorsed as an objective

as some of the other objectives of this strategy --

economic growth, education, social objectives. That is

because empowerment takes countries into difficult

questions of representative arrangements, parliamentary

processes, public dialogue, and one can understand why



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many countries need to tailor what they do to their

capacities and circumstances.

I, therefore, am concerned that if we link

governance to an empowerment objective, we are in danger

of seeing it given inadequate attention because of the

reservations that some countries will inevitably attach to

empowerment as an objective as such. And if we are giving

countries ownership and we believe in that, then we have

to follow their preferences.

In the paper on HIPC and "Strengthening the Link

Between Debt Relief and Poverty Reduction", the comparable

table, which is Box 7 on page 27, treats the issues

differently. There is no reference there to empowerment

as such. The heading becomes transparency, accountability

and budget management, which is clearly a subsector of

good governance but it is not all of good governance.

So, this area I think needs some closer

attention. I would like to see good governance made as a

separate heading, probably a chapeau across the top that

applies to all. One can keep the section on empowerment

and perhaps attach to that the issues relating to

participation, participatory processes, information and



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public dialogue. So, it is still there, but it doesn't

compete with good governance.

Thank you.

MR. SANDSTROM: Thank you very much, Neil.

Jean Pesme, please.

MR. PESME: Thank you, Mr. Chairman.

I would also like to commend the IMF and Bank

staff for these very impressive pieces of paper. I must

say it is sometimes difficult to comment on them because

they are very comprehensive and well reflect the

complexity of the issue, which also means that when we

come to make them operational, it may be quite tricky

because we will have to lose part of this complexity to

make sure that we are doing something. But I will come

back on that later.

On the substance, we are in global agreement

with the main thrust of all the papers and we welcome the

opportunity taken to somehow scale up the commitment of

the two institutions to fight against poverty at the

occasion of this momentum linked to the HIPC Initiative.

I agree with Bassary Toure that nothing is

really new, but we understand the proposal of the

framework as a way to try to rationalize and be more



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systematic in our approach for poverty alleviation. And

we very much appreciate this proposal from this

standpoint.

Now some features of the proposal we would like

to particularly welcome. The first one is the strong

interlinkage between growth and social progress and the

emphasis on distribution of growth. And we think it is a

very important part of the proposal.

The second one is that placing poverty reduction

at the center of our involvement must be a criteria for

selectivity. And the fact that we have been able to try

to tackle with all the issues why putting selectivity at

the forefront is very important.

The proposal to add a long-term and multi-

sectoral approach is also very welcomed, as well as the

efforts not to remain only in the HIPC context but to

broaden the approach.

This being said, there are three points on which

we will pay attention. The first one is that this

approach should not undermine the macroeconomic

conditionality of IMF programs, in particular in the HIPC

context, which means that sometimes we will have make some

balance and make more explicit some of the social



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consequences of this macroeconomic program, which is very

welcome, but not at the expense of the core issues of the

IMF program.

The second point is that strong political will

from the authorities of the beneficiary countries will be

very important in the implementation. And this approach

should not only be Bank and IMF approach but really have a

sense of ownership, not in the country in general -- I

will come back on the participatory process -- but at

really the political level in these countries.

The third issue relates to what has just been

mentioned by Mr. Hyden on governance. I would just add to

that, that the more we are going towards a multi-

dimensional approach, assessment of outcomes, et cetera,

the more necessary it will be to make sure that we know

exactly what is the use of the resources we are providing,

that accountability and transparency is there. So, we

must pay great attention to that, so that we know at each

stage what is going on.

Second, on the methodology which is proposed, we

agree with what we see as three key elements -- the

emphasis on determinants of poverty; selectivity in the

choice of public action; and the focus on outcome



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indicators, both in the context of the international

development targets and having some short and medium-term

intermediate objectives.

Once more, it is not fully revolutionary and it

has proved in the past to be a robust approach, but what

we very much appreciate is the fact that it is now

systematic and we expect this to be put in place very

quickly.

But, as mentioned by several other speakers, it

should not become a straitjacket, and we will have to have

the right balance between a country-by-country approach

and also, which will be very important in the HIPC

context, I think appropriate fairness between the

countries, which sometimes might be very difficult.

But we think case-by-case, yes, but making sure

that across-the-board we will treat every country the same

way. That is something I will come back on a bit later on

Nicaragua.

The second point in this process is being

careful -- it has been mentioned by other speakers -- on

the participatory process. Each country has somehow its

own political economy, and we must make sure that the way

that we will be discussing with the country will be fully



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taken into account. And there are some representative

bodies. There are now processes of legitimacy in each

country, to which we will have to pay attention and in

which we would have to fit our approach.

We must remain very careful not to convey a kind

of across-the-board participatory process. This will be,

in our view, a very important condition for ownership but

also for this very strong political involvement at the

highest level, so that everybody in each country will be

committed to the poverty reduction strategies.

On implementation, there are three levels of

challenges on implementation, and somehow at this stage we

are still with a very general framework and we will need

to know more on what it means operationally.

At the country level, I want to come back on

what has been said the capacity building, the difficulty

with statistical issues when defining the intermediary

outcomes, and just to take the table which is in the annex

of the paper, there are some figures which show that we

may have big holes in our assessment of what is going on

in many of the HIPC countries, in particular.

But it also means that we will have

implementation challenges at the Bank level. I won't come



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back on the discussion we have had some months ago on the

poverty progress report, which has shown that, yes, we

have made progress but, on the other hand, doing it on a

day-by-day basis and making sure that each country team is

fully involved in that process and really puts that at the

forefront, at the center of the relationship with the

country is not always very easy.

I am not sure that we currently have all the

skills to put in place the proposed framework and, in

particular, this attention to political economy in each

country, that we have the skills to assess poverty in all

its dimensions. We had a discussion some time ago on the

urban strategy which shows that we were weak on that side.

So, the question of also scaling up our

mobilization of internal skills and resources will be very

important in the way we implement the proposed framework.

But another important issue of implementation

would be the way we present it towards outside

stakeholders. We fully concur with staff that the impact

of our involvement in poverty reduction will have to be

assessed on the long-term, but there are very strong

expectations, in particular in the HIPC context, in the

shorter term. So, the way we balance that will be very



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important, and we must be very clear on how actually our

involvement in the HIPC context will demonstrate that we

are focused on poverty reduction.

On implementation, John Sinclair was very

eloquent in coming back to all the acronyms. Making sure

that somehow we aggregate all of our assessments, papers,

et cetera will be very important in clarifying what is

center to our dialogue with the countries. And so far the

way the link would be made between these poverty programs

and the CASs or the CDF, where the CDF is tested, is not

very clear, in our view. And maybe this will be part of

the upcoming discussion for the Annual Meetings on

implementation.

One point more specific to the HIPC context. We

believe that these poverty reduction programs must be

linked with the decision point. And somehow we will have

to balance the willingness to accelerate the process and

the fact that we must make sure that in the new context we

can demonstrate that there is strengthening of the link

between debt relief and poverty alleviation. So, we will

have to make some tradeoffs, and we are not clear at this

stage on how we should make these tradeoffs, in particular

in the context of retroactive countries.



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This was part of the discussion we had in early

August and, frankly, we are not very clear on how both the

IMF and the Bank staff intend to handle this issue of

balancing between the need to demonstrate and the need to

be quite quick in the process.

This will have also consequences in terms of

fairness of the process between the various countries and,

in particular, the way we treat the retroactive country.

So, once more, yes, for case-by-case approach, but we must

make sure that all of this is consistent.

One point on the link with the IMF. Several

speakers mentioned that operational collaboration between

the two institutions will be crucial in achieving the

objectives we are setting to ourselves. We believe that

in this sector the Bank should have the leadership and

that the expertise on the social sector must be on the

Bank side, and that the two institutions should be in the

position to complement each other from this standpoint.

The British chair has invented the notion of

intelligent customer, which is very interesting, and it is

a very good way of presenting it. But we have to be very

clear from the Bank side on what it means. It means that

we must have the capacity to deliver. And there are some



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tough sentences in the IMF paper on the Bank from this

standpoint. But we will be able to justify that we have

the expertise and we should contribute to the ESAF program

only if we are able to deliver, which means that, first,

we may have to modify some of our way of doing business,

but also adapt our timetables to the IMF ones sometimes.

And really, there is an issue there. We have

been able to solve it after some difficulties in the

financial sector. We must be able to do it in the social

sectors also now.

One final word on the social and structural

reviews. I don't want to open the discussion with Masood

we had in July on that. I share the view expressed

earlier that we are not really in a position to evaluate

what has been done, but we agree with the fact that these

two will be very important in implementing this framework.

On the other hand, we must not lose sight of

what was the initial purpose of this instrument. Yes, it

was created in post-crisis situation and we must expand it

to more normal business. But we must really maintain the

focus on the structure on the identification of structural

weaknesses and somehow not just focus on social and losing

sight of that.



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And the link between the two will be very

important. In the initial paper, as far as I remember,

the poverty dimension was only one part, what I understand

as somehow trying to have a chapeau, but only if the other

building blocks are still there. And maybe some

additional comments on that could be useful.

Thank you.

MR. SANDSTROM: Thank you very much, Jean.

Akira Kamitomai, please.

MR. KAMITOMAI: Thank you, Mr. Chairman.

I would like to join other colleagues to commend

the staff for their excellent work. It comprehensively

presents a strategy for this important challenge.

We consider the HIPC Initiative as one of the

important mechanisms to address poverty, and we welcome

the opportunity to discuss ways to enhance such

mechanisms.

Links between debt reduction and poverty

alleviation must be owned by the HIPC countries

themselves. And in this regard, we think it is extremely

appropriate that the HIPC poverty paper is discussed

together with the poverty reduction strategy paper that



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will be useful for HIPC countries in designing such

strategy.

Many of the efforts to strengthen debt relief

and poverty alleviation is relevant to the Bank's overall

effort to address poverty. But I will focus my

intervention on the HIPC paper, which touches on the two

related papers as well.

First of all, as proposed by the management, we

support the integration of the HIPC Initiative into the

comprehensive effort to enhance the poverty impact of

Bank-Fund supported framework. In implementing the

comprehensive strategy, we believe that a country-based

approach is appropriate since each HIPC country is unique

in its social and economic condition, level of poverty

reduction effort, government capacity and in resources

freed up from debt relief.

We believe that the CAS will be the most

important vehicle in the implementation and, hence,

improving the quality of the CAS would be essential.

As we have learned from the last poverty

progress report, we still have a lot of room to improve

the quality of poverty assessment and to strengthen the

link between the assessment and the CAS. We hope that the



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Bank will redouble their efforts in these areas, since

they are important in successful implementation of this

strategy.

Secondly, on outcome-oriented approach, we

believe that this is extremely appropriate since the Bank

is focusing more on outcomes rather than inputs to assess

performance of its operations. We also believe that

participation of the civil society is important to the

effectiveness of the strategy, since it enhances

ownership, transparency and accountability.

However, up until now, the civil society that

has made a contribution to the discussion on the debt

relief and poverty was mainly international advocacy NGOs.

We hope that as we move towards implementation of this

strategy, the broader civil society in the field should

participate in this effort.

Third, on replacing PFP to PRSP, we are still

unclear of the added value of this exercise. We would

imagine that addressing poverty reduction strategy more

comprehensively in the CAS, while maintaining full

consistency with PFP, could be also effective in

addressing poverty. We would appreciate staff's comments

on this point.



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We also notice that there are similar ESWs

lately and think it would be useful to streamline some of

them. For example, in relation to poverty, there are ESWs

such as poverty assessment, social assessment and social

and structural review and the role of these documents are

not always so clear.

Other donors are also actively engaged in doing

similar assessments, and we hope that the Bank will

coordinate with other donors in order to avoid duplication

and enhance efficiency.

Lastly, we can support the idea of having a

poverty reduction strategy in place by the decision point,

but in order for this strategy to be sustainable, even

after the completion point, it is important that the

strategy is fully owned by the government.

In designing such a poverty alleviation

strategy, we believe that closer collaboration between the

Bank and the Fund is critical, since the strategy has to

be fully consistent with the ESAF program. Therefore, we

urge strengthened collaboration between these two

institutions in the operations and for the Bank, as the

French chair mention, strengthening of the capacity to

deliver timely is an urgent task.



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In addition, strategic benchmarks up to the

completion points should be the ones that are central to

the development of the country, and should not be

compromised for early completion point.

We believe an early completion point should be

warranted only in the case of strong performance, and we

hope such a mechanism will serve as an incentive for HIPC

countries to achieve the goal.

Thank you.

MR. SANDSTROM: Thank you very much, Akira.

Helena Cordeiro, please.

MS. CORDEIRO: Thank you, Mr. Chairman.

At this stage of the debate, I will try to be

very brief, because a lot of what has been said is

definitely shared by us and I will try to move it forward,

if possible.

I would like to stress immediately that a lot

what Jean Pesme has said is very much in the same line of

our thinking, and the need to balance the different

dimensions of all of this.

Very briefly, I would like, as many others, to

welcome these papers, while recognizing that they are

different; they are different in scope, in quality and in



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stage of preparation. And I think a word comes out

immediately from my side on the concerns that the social

structural reviews still pose to us -- again, Jean just

mentioned, and we had a discussion with Masood before -- I

still want to come back at the right time because I think

they are one important piece, and a poverty chapeau is

needed. But we cannot eliminate or dilute the importance

of key blocks that have to be there. And they were the

core nature of those studies.

So, I see the paper as a progress report with

some important lessons, I think the integration, the

building blocks that have to come up. But, in my view,

it has to remain with a very clear focus.

The other two papers definitely come as nothing

new but very important value-added of the World Bank

agenda. And I hope it will be beyond the World Bank, and

I think it will be a tripartite effort, although it raises

certainly a lot of issues.

So, we see from this approach a consolidation of

a lot of aspects, of tools, of instruments. And we attach

a lot of important to what now is called -- and I agree

the title may need to be rethought -- the poverty

reduction strategy paper. And we would view it as the key



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long-term framework for Bank intervention, and I hope it

will be Bank-Fund intervention.

The fact that it came out in the context of the

HIPC Initiative does not diminish its importance. It is

the opposite; it gives it more meaning, and I think it is

relevant for the HIPC. We agree with those that said that

as much as possible it has to be part of the HIPC process

of decision, which means that on the decision point we

want to have as much as we can towards a strategy owned by

the country, produced on a participatory approach. But we

know that reality will not allow us the ideal situation

when we may have to compromise. But the compromise cannot

be by losing the focus on poverty. And I think that is

definitely an important aspect that we see at this stage.

We see the PRSP will become crucial but common

for all IDA countries. We would see it as being the real

base framework, and it is a long-term approach.

Certainly, it will have to be updated, it will have to be

improved, but it should be the underpinning document, the

underpinning process more than document, of the

relationship between the Bank, the Fund, the country and

within the country. So, we see it that it will be the key

departing point for the CAS.



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The CAS may need to be adjusted. It should

remain; it should allow us to focus much more on how are

we going to deliver and assist the country objectives

spelled out in the strategy, what are the risks, what are

the tradeoffs, what is our business strategy to deliver,

what are the costs, what are the outcomes. And I think

the accountability will be part of that.

So, I envisage adjustments in the CAS but not

change in the importance of the CAS, but I believe the CAS

would certainly benefit from the introduction from this

new framework.

I think one aspect that somehow has been

referred to but I think that has to be brought out is the

issue of resources. So, the public finance framework in

the medium-term at least -- because I think there it is

more difficult to go on a long-term -- has to be part of

the exercise.

The experience that the Bank had with the public

expenditure review has been mixed because of different

things, but I think we have to move beyond the public

expenditure review with a broad approach including

resources. And I think the resources have to be there,

and I agree with those that make the emphasis that we are



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looking to the overall resources, external and domestic

generated, towards improving the situation.

So, I think there another area of cooperation

with the Fund will be necessary in terms of developing

appropriate medium-term fiscal framework if one can use

that simple word.

One aspect that also has been mentioned by Jean

Pesme lately is in fact the centrality of macro stability

which comes up as a key aspect of the ESAF program, but it

is also an aspect for us. And so, we have to make sure

that the consistency between the macro objectives and the

social and poverty strategy emphasis have to be taken into

account. And I assume that the ESAF process and approach

has to suffer some adjustment too, because the consistency

will have to start from that point.

I haven't read the IMF paper. I only looked at

the issues for discussion, because I only got the paper

today. And I agree with the comment made that it is a

very different way of looking to the issue than what we

are doing. It is very tough on the Bank. I don't know if

it is totally warranted, but it puts a challenge on us.

And I agree with the line of action that Jean just

mentioned. We should do our best to maintain our



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expertise and responsibility on the social policies and

cooperate with the Fund, adjusting the timetable, if

possible. But basically, we cannot deliver, we should not

engage ourselves.

But I hope that we will be able to do it. And I

think if we take, in fact, the proposal that this new

framework is, in fact, a tripartite government, Fund and

Bank, it should be possible to eliminate a lot of

difficulties that have been mentioned.

At least, I think there are underlying issues in

the Fund paper that we may have to come back on among

ourselves.

Another aspect that we very much support but are

cautious about how ambitious we can be on the delivery is

on the results outcome-based programs. Definitely we all

agree with the importance but we all know the

difficulties. It should not prevent us to move ahead, but

I think it makes us conscious of the limitations.

And I think one particular aspect that we have

to keep in mind, that it is not only the design, the

measurement and the monitoring, but it is the time factor

that really is so important in assessing poverty impact.

That sometimes is inconsistent with our own cycles. Of



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course, in the case of the HIPC Initiative, there is a

very, very conflicting message because we want debt relief

quicker, but we want it in a very strong linkage with

poverty reduction.

I think that we are going to deal with this

aspect in the near future, particularly when we start

implementing the enhanced initiative. But it is a reality

and it is going to raise the issues of fairness and

consistency across countries that certainly should be on

our minds.

Many people have spoken and I fully agree with

the ownership by countries and the participatory process.

But it is very difficult. And I think it is not only

difficult because of the capacity, but it is difficult

because of motivation. And I think Neil and Jean have

referred to precisely the political commitment that is

necessary, and it goes beyond the technical limitation.

And I think we should avoid to fall in the trap

that in my mind the PFP is an example, that really does

not help in building ownership and commitment from

authorities.

But after saying all of this, I would like

basically to ask management with the strong support that



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has been given in this Board on the enhanced framework and

the several elements, I think definitely we have to move

towards a strategy or master plan, as I think Jean

mentioned, how to operationalize it. And definitely at

least three levels will be very crucial.

One is the cooperation and collaboration with

the IMF. And there again, I think we will hear about the

how the IMF Board addressed the questions that are on the

table. I don't know even if this Board fully agrees with

all the questions and analysis, but definitely we have to

be very firm about how we are going to address this issue.

We know that what is being proposed -- and I

think this morning it was clearly emphasized by both Mike

and Peter, I guess -- this approach is a dramatic shift in

the way we work, inside the Bank but the way we work with

other partners. And I think the Fund here is critical.

I think flexibility can exist in exercising the

complementarity between the two institutions, but I think

we have to have a very clear line where the management and

the Board see this process to go forward in order to

position us as an equal -- in this case maybe more than

equal, because the Bank has the expertise and has the



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experience, and I hope that we will be able to have the

necessary skills on time to deliver this.

The second level for personalizing all this plan

is, in fact, the internal apparatus of the Bank that has

to be adjusted. I mean, the word "consolidation" comes to

mind immediately, but before consolidation I think we

really have to look at the wide array of instruments that

we are using. The ESW is the best umbrella but it doesn't

tell us anything. When we go down and disintegrate the

ESW, we have a multiplicity and also in terms of what that

means in our relationship with the country. I will come

to that issue under the umbrella of the countries.

But the references that have been made on the

country teams, networks and skills are very important, but

I think they have to go beyond that in terms of the

strategic documents, strategic papers. For us, I believe

the Board still attaches the maximum importance to the

CAS, but recognizes that there are underpinnings of the

CAS that have to remain.

So, consolidation, yes, eventually elimination

of separate pieces but not undermining what we are

accomplishing by enlarging and broadening our approach.



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And the third level for the road map is, in

fact, in countries and our relationship with countries.

And I think again we have to go beyond the words of

partnership, ownership, political commitment, but in

reality how we are going to assist the countries in taking

the lead of that potential.

I fully agree with the dimension that Neil Hyden

gave to the governance issue. And I think that is very,

very important, precisely in our relationship with the

countries. I think he is absolutely right that it is part

of empowerment but it is higher than empowerment, and I

think we have to bring it across the higher level.

One final comment on the retroactive application

of the new framework for the HIPC countries. I think we

have to be cautious about bringing additional requirements

at this stage without ignoring the emphasis on poverty

reduction. But I think timing, fairness has to be part of

the way we look on specifics.

I think the issue is simplified. If we look at

the poverty reduction strategies as permanent frameworks

for action, it will be possible, as we move along, to

refine its elaboration on each country and IDA will remain

the key player in these countries. Unfortunately, we are



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not in a position of imagining that it will be out of the

playing field. So, we have an opportunity to bring back

all these countries in a more, I would say, deeper and

broader approach that now may be possible in other

countries.

So, we are really pleased with what we are

seeing. We are cautious about how we go about

implementation, and we encourage management to move ahead

and start spelling out precisely in these two or three

dimensions how we will move ahead.


MR. SANDSTROM: Thank you, Helena.

Hein Bogaard, please.

MR. BOGAARD: Thank you.

I am in a bit of trouble at this time, because I

would like to be short; I don't like to repeat people and

I also want to give a comprehensive view on these very

good papers. So, I have to find some balance here.

I think it is clear that paragraph 15 of the

paper on poverty strategy more or less defines the basic

outlines of the approach -- good analysis, prioritization

of policies and participation. We are very much in

support of that.



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In the past year, we have focused on pro-poor

growth, moving beyond a single focus on social protection

and increasing social expenditure. And in this document,

staff rightly stresses the importance of taking a broad

view on poverty, including empowerment and in general

reducing barriers throughout the economic and social

system to poverty reduction.

I think in view also of disturbing trends in

poverty, our CAS documents and everything basically we do

should focus on the issue of poverty.

We also appreciate the attention paid to gender

in the document. It is both morally right I think to take

this into account and economically sound. It also comes

out of recent research on the link between poverty

reduction and gender in the Africa Region.

In practical terms, the suggested approach

implies that we need to take a holistic view I think on

both the inputs to debt relief, tax revenues, also human

capital as an input and, at the same time, a holistic view

on policy outputs and outcomes more specifically.

In this regard, if we look at public policies,

countries should try and develop a medium-term expenditure

framework, and they would also greatly benefit if they



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could complement such a framework with medium-term

commitments from donors, not only in the CAS of the World

Bank or in a three-year ESAF program but also from other

donors.

In relation to the medium-term framework, I

would also like to draw attention to the work that is

ongoing on the Special Program for Africa, where they try

to work from a balance of payments approach to a budgetary

gap approach, which facilitates the connection between aid

and policies and between inputs and results. This might

also be a way to refocus our discussions with the IMF on a

macroeconomic framework.

It is obvious -- almost everybody has said this

so far -- that the biggest challenge, if we agree on the

framework, is implementation and in order to make the

approach work, we need to foster partnerships outside the

Bank, and this goes broader I think than only the IMF and

the country. We have been talking about a tripartite

effort. I think it should be even broader, including

other donors, other regional development banks.

I think the poverty reduction strategy papers

could be a very useful element of these partnerships. And

we hope to begin with, they are more than a joint effort



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than the almost Fund-only policy framework papers that we

currently have. So, we fully support the replacement of

the PFPs with the PRSPs, as proposed.

What I also felt compelling about the proposal

was the idea to make the PRSP process an iterative process

during which all policy targets, including the IMF targets

are up for discussion, in which all structural,

macroeconomic policies are being related to poverty.

In this respect, if one compares the Bank paper,

which is very comprehensive in its approach to poverty,

with the IMF paper, I found it a bit disappointing that

the Fund presents the PRSP in a paper with a title which

refers to social policies only and not to the broader set

of poverty reduction policies.

We also need to foster partnerships inside the

Bank, especially within the matrix management. I think

that the responsibilities of networks need to be

clarified, and they should be allocated resources to match

their roles and possibly regions should try to communicate

with each other more to learn from each other.

Finally, one small point on instruments: I

think that we should not presume that countries with PRSP

receive more program-based support. I can imagine a



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situation in which a country has a PRSP and still not has

the implementation capacity to work with program-based

instruments.

Quickly, on the relation to HIPC, I think for

countries that have qualified for debt relief already and

are expected to qualify for debt relief in the short-term,

we should take a somewhat flexible approach. But

hopefully, they could have as much of a poverty strategy

in place as possible by the time they reach their decision

point and certainly when they reach the completion point.

This requirement should also be applied flexibly

to retroactive countries, but good policies to reduce

poverty I think should be a requirement to qualify for

additional debt relief.

With regard to the structural policy reviews, we

several times stressed the need for better selectivity

management, a systemization of economic and sector work,

and I think John Sinclair made it clear that also we not

only have the acronym ESW, but we also have a huge number

of acronyms which fall under the umbrella of ESW, and we

hope that some streamlining can be done.

Those are all my points. Thank you.

MR. SANDSTROM: Thank you very much, Hein.



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Mr. Pandian, please.

MR. PANDIAN: Thank you, Mr. Chairman.

Like others, we also welcome the papers, which

really put their heart and soul on poverty reduction,

which is the main mandate of this Bank.

To begin with regarding paper one, "HIPC:

Strengthening the Link Between Debt Relief and Poverty

Reduction", we welcome the suggestion that all resources

should be put in position to fight poverty, not only debt

relief but also domestic resources.

But our question is whether there will be enough

domestic resources available to achieve a desired result.

So, we may go beyond that and to generate additional

resources, the government may have to invest in new

infrastructure. How are we going to balance this

question?

Number two, we also welcome to build on the

existing framework to build a new strategy. But at the

same time, we have certain reservations about involving

the civil society in the formulation, selection and

monitoring of output indicators. It is a problem in

selecting civil society when the country and government is

infested with a number of civil society organizations.



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How are we going to discriminate between a good civil

society group and a bad civil society group? Everybody

has a vested interest.

In this connection, again ownership should be

given to the country. If the government is comfortable

with the civil group, it can go ahead. If it is not

comfortable, then the democratically-elected process

should not be undermined, because a number of countries do

have local authorities, local elected governments and we

should make use of those institutions. In fact, if they

do not have the capacity to plan, to monitor, that

capacity should be built, and the World Bank Institute in

association with other local and regional organizations

can arrange a number of programs to build the capacity at

the grassroots level.

We also welcome the poverty reduction strategy

paper. In fact, we very much appreciate the participatory

approach being adopted in preparing this.

But one thing we would like to point out that in

a number of countries, at least particularly in the

constituencies we represent, there are planning

ministries, democratically-elected representatives, that

do prepare the local plan, regional plan and the country



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plan. I think that these things also cannot be

undermined. They should be given proper importance and

proper role.

What is needed is how civil society can be

involved in these processes. Perhaps in collaboration

with the poor people, in collaboration with the local

people, they should see whether these projects are

properly implemented at the implementation stage. As my

colleagues pointed out, the question of governance, the

question of commitment, the question of delivery comes

into the picture; it is here the civil society can

associate to see that the desired results are achieved and

it is being distributed.

As far as questions number four and five are

concerned, already the HIPC activity is delayed very much.

So, we would like to agree with the staff that instead of

waiting for the completion point we can go ahead with the

relief; probably the government is committed for a poverty

reduction strategy.

Now coming to the second paper, Mr. Chairman,

the poverty reduction strategy, we also welcome the

outcome-based approach. Definitely, this will give a



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clear-cut improvement in the CAS process. We welcome

that.

But again, this cannot be a straitjacket

approach; it varies from country to country, because, as

the paper itself has pointed out, the countries which have

massive poverty like India and Bangladesh, we had growth.

We concentrated on growth in the 1990s, in the early 1990s

but still poverty was stagnant. We concentrated on the

income redistribution in the late 1970s and 1980s but the

growth was stagnant. What we need is both. We need

growth as well as fairly distributed income.

If you take India, Pakistan, Bangladesh, nearly

40 percent of the people are living below the poverty

line. And these countries face a different unique

problem. In fact, rather than concentrating on growth or

huge investment in infrastructure, if you spend a small

amount in improving our tax collection system, that will

create more wealth, and the distribution definitely should

be given importance.

So, the strategy may vary from country to

country, particularly if you want to bring down the

poverty in a massive level and these countries where the

poverty is massive should be given due importance. We



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feel that this paper seems to be a little more Africa-

based. No doubt, a number of poor countries are in the

Africa Region, but, at the same time, there are few

countries in other regions where a number of people are

poor.

Again, we find it a little discouraging to note

that there is no mention of technology, taking technology

to fight poverty. Like the Industrial Revolution, today

is the Technological Revolution, and to what extent we can

use the technology to fight poverty. It may be disease or

it may be quality education or it may be building economic

assets which can be easily accessible by the poor people.

So, I think the Bank should do some research how

effectively technology can be used to fight poverty and to

do global common good.

Thank you very much.


Mr. Binkert, please.

MR. BINKERT: Thank you very much.

Like all the other speakers, I would also like

to commend staff, and I guess I have decided that I will

not do justice with those papers but try to be brief

instead.



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I have a few points and the main message from

all the following points is that on a conceptual level, we

like very much the proposals for the enhanced framework,

but we are very concerned that this may contradict the

objective of speedy debt relief, that we are just

overloading the initiative. But I will go in step-by-

step.

First, we fully agree that actually the overall

framework is important for poverty reduction, not just for

HIPC. So, whatever criteria we use for quick-disbursing

funds, it will be the same ones for HIPC. It is the same

thing. And, therefore, all the necessary measures, in

particular on improving the quality of budget management

and accounting, all of those things have to be applied to

HIPC as well, and that will take time. We will not be

able to do that in twelve to eighteen months.

The second point, of course, conceptually we

like very much the move towards outcome-oriented

objectives and impact indicators. Our experience from the

field is very clear that this is the key thing that we

ought to be monitoring rather than traditional policy

measures. At the same time, we have learned very much in

the SPA, the Special Program for Africa exercise, of how



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complicated it is to define, measure and monitor such

outcome indicators.

So, we think this is going to be a very big

challenge, even though conceptually it is the right thing.

Similarly, with the poverty reduction strategy

paper, again this sounds like an excellent exercise. It

is very consistent with our objective, with what we would

like to achieve, but it may be a very complex exercise to

do, particularly if we want to have a highly participatory

process to develop -- as John said, it cannot be reduced.

So we always have to say poverty reduction strategy paper.

It doesn't go by the acronym.

It is going to be very complicated. We are not

quite sure when we will be ready to use this framework

paper or strategy paper and substitute that for the PFP.

And also, we are not quite clear whether it makes sense to

require countries to do this every three years in a fully

participatory way. This may be asking too much; it may

not be the proper thing to do. And this, of course, is a

comment that goes beyond HIPC.

Similarly, some of the innovations in the new

framework are the floating completion points and the

frontloading. And we attach great importance to this. We



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are strong supporters of those two features and,

therefore, urge really that we be very careful in how much

we load the enhanced framework with conditions that may

slow us down.

The last point is with regard to the countries

that have already reached the decision point under the

current framework or the completion point even. It is

very important that they be treated equally and that we

don't really introduce sort of a third stage to the HIPC

implicitly with retroactive conditions. So, we really

have to strike a balance here.

As I said, to sum up, the main concern is that

we continue with a speedy program, a speedy HIPC program.

We fully agree with the overall framework to enhance

poverty reduction as the key objective, but this should be

the objective for all of our activities. And we have to

find a balance.

I would just like to make one last comment on

the other paper, on the paper for the building poverty

reduction strategies. On the outcome table on page 9, it

mentions here that private consumption, poverty incidence

and inequality should be sort of key indicators for

economic opportunities. If one could not include also an



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indicator for employment conditions, this would be a proxy

for many other things that go on in the poverty field or

in the vulnerability of people. Maybe by including

employment indicators, that might be a very useful thing

to monitor as well, of course, in the various instruments

that the Bank has, such as CASs or whatever reviews we

get.



Mr. Garcia, please.

MR. GARCIA: Thank you, Mr. Chairman.

I would also like to commend Mr. John Page, Mr.

Walton and their team for an excellent paper. I am

talking about "Building Poverty Reduction Strategies in

Developing Countries".

I have a couple of suggestions. I think the

paper will gain or it may be worthwhile looking at

different strategies to fight absolute poverty and

relative poverty. I think they bring up two complete sets

of issues, and the strategy may well be totally different.

Economic growth probably will reduce absolute

poverty and will increase relative poverty. Now, to fight

relative poverty is very, very difficult because it is in



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the nature of our policies that we carry to our countries

deregulation, competitive policy, change. And things

change today in one year more than they used to change

before in 50 years. So, it is in the nature of the

business that people are going to get more poor on

relative terms. Even though their income may have

doubled, if the income of the whole society has tripled,

they are poorer. So, that is an issue I would suggest to

look at because I think it is very important.

Also, there is an issue of picking up

priorities. And the difficulty of this issue is clearly

in Table 1 on page 9, because there is a large inventory

of issues, but we have to be always aware that there is a

tradeoff. And when we tell a country or a country decides

that it is going to invest more on microfinance, it really

invests less in education, it is investing less in health.

So, the whole budgetary process is crucial.

In that sense, I am very skeptical about this

participatory process, of empowering people in order to

reach a list of items, because the thing gets very

political instead of getting more technical, with the

economic rate of return and with good data to help the

budgetary process in the countries. So, my position would



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be that we should not look so much at all of this

participatory process but we should look a little bit more

on the internal rate of return, on how the budgetary

process plays in these countries.

Just to finish, let me say that I think that in

these priorities trade and education are real crucial. If

we look, for example, at Africa, the participation of

total world exports in Africa 1980 it was 6 percent, and

today it is less than 2 percent. So, that is a question:

Why is that? And I think that is an important question to

which we should try to give some answers.

The other issue is I think we should be more of

an education bank, because education is the only tool that

we have that, at the same time, growth is improved, it

diminishes relative poverty; it gives more equity, more

opportunity, and I think we should focus more on that.

Thank you.


A two-handed. Jan.

MS. PIERCY: I was just going to ask when you

anticipated having staff come back, because I have heard a

number of questions that, rather than repeat them, we

might at some point want to have an intervening comment



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round which might shorten the comments of some of us who

have not yet spoken.

MR. SANDSTROM: We had planned to listen. We

have only two speakers left, at least right now on the

list, Ms. Zou and yourself. I didn't want to lose too

many of you before you had heard each other and then have

staff to come back with a very full response.

Ms. Zou, please.

MS. ZOU: Thank you, Mr. Chairman.

I think it is difficult to be a late speaker,

but I will still try to be brief and to minimize the

repetitions.

We too would like to commend the staff for

preparing these three interrelated papers, and each

contains very useful thinking. Let me start with the

poverty reduction strategies. Basically, we appreciate

the outcome-based approach. We find it is appropriate for

this approach to serve as a policy base for the enhanced

HIPC framework.

However, we feel that this framework needs to be

further refined before it could be widely adapted to all

the borrowers.



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Regarding the overall approach, we find that

Table 1 is very interesting. All the elements listed in

Table 1 are relevant to poverty reduction. However, if

these elements need to be operationalized by the Bank, I

would again call for the selectivity, because if we look

at Table 1, there are four categories listed here.

My feeling is that probably the first two

categories gear mostly to the Bank's comparative advantage

and capacity, while the last two categories, some of the

items listed in the last two categories are obviously

beyond the Bank's mandate and internal capacity. For

example, actions to reduce violence, the community

policing and something like this, obviously it must be

done by the government instead of the Bank. So, I think

the Bank has to be selective in those areas.

Regarding the issue of governance, I fully agree

on the points made by Mr. Hyden that governance should be

more related to the way the government manages the

economy, instead of to link solely to the gray area of

empowerment, where we are not sure whether the Bank can

really make a difference.

Regarding the participation, we are in favor of

the idea that the Bank should work directly with the poor



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and to reflect the interest of those final stakeholders.

Probably we feel that this might be a more effective way

of participation than going through NGOs as an

intermediary.

NGOs, however, could be helpful if the

participation of NGOs could be managed in a pragmatic way

and avoid potential political conflicts. I would echo

those points made by Mr. Garcia in this regard.

And we also feel that the Bank needs to develop

certain guidelines and criteria for the NGO participation

so as to ensure accountability. The Bank should choose

those NGOs with a good track record to work on the

development business as its partners.

Regarding the monitoring indicators, we feel

that indicators should be technically mature and avoid

using subjective judgment, particularly when involving the

qualitative indicators in social-related aspects.

Regarding the analytical tools on poverty

reduction, we feel that those tools need to be simple and

straight-forward. My feeling is that the poverty notes

probably could be one section of the CAS, when necessary,

instead of being a new and independent tool.



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Now let me turn to the paper of HIPC. We feel

that poverty reduction is the ultimate goal of the HIPC

Initiative. Therefore, we support to strengthen the

linkage between debt relief and poverty reduction. We

have three brief observations here.

We feel that strengthening the linkage to

poverty should not delay the debt relief process. Our

desire is that the qualified HIPC countries should get as

soon as possible all the potential benefits from the HIPC

Initiative. In this regard, we have no problem with the

transitional approach that the decision-making point could

take place even before the completion of the poverty

reduction strategy.

Number two, we believe that poverty reduction

cannot be delinked with financial resources. Therefore,

we feel that we need to have a detailed country-specific

calculation on how much financial resources are actually

released by the enhanced framework on a cash flow basis.

And the performance target for the poverty alleviation

should be commensurate with the cash flow impact and

should not be over-ambitious.

In this regard, we also are worried a little bit

about the possible imbalanced way of processing this



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enhanced framework, because we find that, on the one hand,

there are proactive, dynamic discussions on the poverty

linkage to this HIPC enhanced framework. However, on the

other hand, the financial resources are still pending in

the air. So, we would like to caution our colleagues on

this potential three-fold approach will definitely not

work.

Certainly, on the tripartite poverty strategy

paper, PRSP, we find this is a useful tool for HIPC

countries. However, we are not yet convinced whether this

should be introduced to as wide a range of countries as

possible, because, like many other speakers mentioned,

this again evolved into a division of labor issue of the

Bank's and Fund's respective role in poverty reduction.

We need to avoid the risk of further blurring the division

of labor between the two institutions.

Finally, let me come to the paper of "Social and

Structural Reviews". We appreciate the progress made and

the lessons learned over the one year's pilot for six

countries. However, we are skeptical on the expansionary

way suggested in this paper. We still remember that one

year ago, when we discussed to introduce the new tool of

SPR, at the time there were a lot of concerns and



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hesitation from many chairs due to the complexity of the

issues the SPR is going to address.

And now, we have already expanded into the

social policy areas. Although we have already had one

year's experience for the pilot, I believe we are still at

the beginning of the learning curve. So, as the paper

also mentions, if we are going to expand into an effective

and useful one, we need more building blocks and

intellectual support from the ESW in different sector

issues.

However, obviously, we find the quality of the

ESW itself is still in question today. So, given the

limited internal capacity of the Bank, as well as the

complexity and demanding nature of these structural and

social policy issues, we would be in favor of the idea

that the SSR will continue the pilot and still concentrate

on the structural issues and the social policies, when

necessary, and we make it better focused and do it better.

Thank you.


And now Jan.

MS. PIERCY: Thank you.



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I will try at this stage to be down right

elliptical and simply signal support because I think all

of the issues have been well elaborated. I have great

sympathy at this stage with the team and look forward to

answers to some of the questions. But I think some of the

questions we have posed are real conundrums; they are not

ones you are going to be able to settle today but simply

kind of take into account in weighing as we go forward.

Let me start by simply saying that we can

support the broad thrust of the papers all taken together,

and especially single out a few areas for underscoring --

one, the emphasis on the comprehensive PRSP as a common

framework for Bank-Fund programs replacing the PFP.

I also agree with statements others have made on

the need for an emphasis on gender, particular focus on

gender in poverty analyses and strategies. I think our

work over the years has documented very dramatically the

impact of our failure to understand gender differentiated

impacts, and we have a long way to go in that area, but we

must really integrate it in very carefully.

Also, the emphasis on outcomes is quite

important to us, on monitoring, on performance linkages,

including governance and anti-corruption in triggers, and



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better and more participatory analysis of the incidence

and causes of poverty, although I certainly take the point

about how difficult it is to design effective

participatory approaches. I think those complications

have been well elaborated in the interventions around this

table today. Also, transparency and accountability are

likewise very critical.

I would make just four particular points on

these papers. First, the need for Bank-Fund cooperation:

I think our lengthy discussion in the Steering Committee

yesterday of how trying to set up a single meeting to talk

about the HIPC framework because of the overlap in the

Bank and the Fund and getting it right, should be evidence

to us that this is easy to call for but will require of us

a great deal of work going forward. And indeed, the

Fund's paper -- I didn't entirely appreciate the reference

to the Bank speed -- I think that may reflect perhaps a

bit of a lack of understanding of how complex it is when

you move into the social parameter design. So, I just

underscore that and the need for cooperation.

I think the recently started joint committee is

helpful to at least begin to create greater symmetry in

what a common set of shareholders is signalling in the



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Fund and the Bank, because I recall Stan Fischer saying

that he often finds it hard to believe that, in fact, it

is a virtually identical set of shareholders, as he

follows the discussion of the same issues on both sides of

the street. So, that is critical and we have a role to

play in that.

Second, I would like to caution that we not too

quickly dismiss, as the Bank's papers appear to do, the

possibility of directing HIPC savings and special stand-

alone poverty reduction or human development funds or

windows as some have called for. I think properly

implemented in the context of transparent overall budget

procedures that are built on public expenditure reviews

and medium-term expenditure frameworks and that include

safeguards to ensure true additionality, such forums can

provide an important and a rational entry point for civil

society into decision-making that overcomes some of the

problems which have been cited in terms of when you open

it up to participation what structures that participation

and who are the legitimate participants.

So, I would just caution that we not too quickly

dismiss those vehicles, which in at least a couple of

instances have proven viable. So, I think it would be



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inappropriate for us to dismiss them too arbitrarily,

which links I think directly to another point, that the

success of this framework requires tremendous leadership

from Bank management. I think we have got to be

forthright in saying that the incentives are not in place

yet fully in the Bank. And in our examination of the

balance in the matrix structure between the networks and

over-arching corporate priorities -- and I would say

poverty reduction in that sense is an over-arching, cross-

cutting corporate priority -- vis-a-vis the immediate

priorities of a Country Director at a given point in time,

we have all acknowledged that we don't have that balance

yet entirely well calibrated or honed.

That becomes especially critical as a constraint

when we talk about strengthening our poverty reduction. I

think we simply have to keep it on the list as something

that, if we are going to do this, we are going to have to

accelerate the effort to do some pragmatic problem solving

on how to assure that this kind of a commitment translates

into direct incentives and performance evaluation measures

for staff in country units as well as in the networks.

This chair would explicitly want to say that we

think it is too soon to agree on budget support lending



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instruments and, since the paper anticipates that, we want

to make it clear that we don't think the case has yet

effectively been made.

I also want to recognize that the development

and implementation of PRSPs will take time. This is going

to require capacity building in governments and in the

Bank. This shouldn't be though an excuse for delays. We

need to begin this urgently, and I thought the paper

perhaps overstressed a bit the complexity at the cost of

recognizing the essentiality of really moving with

dispatch to do this, because we have all committed to HIPC

relief based on performance, not promises.

And unless we can identify at least some

proxies, recognizing that results will take time and there

is an inherent tension between the desire for upfront debt

relief, on the one hand, and the time required to realize

results, on the other, in a results-based approach, I

think part of the way around that is country-specific

input-based measures as a kind of interim proxy. And I

think we really have got to struggle further to find those

imperfect but workable measures.

In this regard, I would urge that we all

integrate into the discussion the tremendous work that OED



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has done. And I think in some of their evaluations that

we sometimes insufficiently integrate into our operational

design, there is a lot of material which is directly

relevant to what selections we make on indicators going

forward. So, I would commend that to all of our

attention.

Thank you.

MR. SANDSTROM: Thank you very much, Jan.

Does anyone else want to come in at this stage

or should we first hear from staff?

[No response.]

MR. SANDSTROM: So, why don't we hear from staff

and then you can come back with any further comments or

statements.

Masood will organize the answers, organize the

questions and answers and lead off. We will also call on

IMF staff to react and respond to the questions that have

been raised and to give their perspective.

So, Masood.

MR. AHMED: Thank you very much, Mr. Chairman.

Thank you all for those comments. And what I

might do is really pick up on one general point which I

think comes through in a lot of interventions. And then,



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I thought that what I would do is ask our colleagues from

the Fund, particularly Russell Kincaid, to come and talk

specifically about a couple of issues that were raised,

the balancing of macro and the social objectives and how

we can do that while preserving the macro stability

objective, and also the issue of collaboration, and in

terms from their perspective, how do see that. A number

of people have raised that.

I think it was Helena who said that this would

imply a sort of dramatic change in the way in which the

Bank works. I think certainly from my interactions in

talking to my colleagues in the Fund, they will come and

tell you that in some ways it also implies pretty dramatic

difference in the way in which the Fund will be working.

It will be useful to get that perspective.

And I thought I would ask Peter to pick up on

some of the specific HIPC-related issues, in particular

whether or not the points that have been raised about

whether this new approach will be too burdensome for some

the HIPC countries to apply, and how do we balance the

speed, the desire that is coming through that you don't

delay debt relief and yet begin to phase in this new

approach in a pragmatic way, and also the link between the



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PFP, the PRSP and the CAS and how these things fit

together, it would be good to get that.

Then, I think I will ask John to pick up on the

questions related to the SSRs which a number of you have

raised, what their focus is, how poverty overlays the core

content and how they relate to other building blocks, as

well as to this issue of the proliferation of various

products and how we try and consolidate them. And I will

ask him to be brief in response to Mr. Ghattas because

that is what John asked him to do and then Mike to pick up

on the other issues that relate to it.

The general point I wanted to make though is

really the following. What you have before you is an

approach that has conceptually I think now been laid out.

Maybe I shouldn't be saying this, but in my own mind, if I

look back six months and look at what we have today, I

think this conceptual approach represents a significant

advance not only in terms of pulling together our own

material but also in terms of pulling together the way in

which the Bank and the Fund and other partners can support

countries in moving towards a common objective in a much

more concerted, coherent framework.



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So, I think on the conceptual level the elements

of it have been thought through and are laid out for you,

and I think we have had broad endorsement of it. But it

is still very much at the conceptual level in many places.

And, as we move forward over the next couple of

years, I think you will find that it is in at least three

different ways going to have to be fleshed out. First,

the analytics of it, as we operationalize, this whole idea

of what constitute the relevant set of indicators, how do

you use outcome indicators and what kind of proxy

indicators work or don't work well; how do you actually

try and look at the content, the points that were raised

by Mr. Hyden and others about how do play certain

elements, you know, is governance one part of it or is it

over-arching.

All of these things we are going to have to work

through and some of those rough edges are not only there

now, but my sense is that this is a new frontier for a lot

of people, trying to work through those relationships.

Secondly, in terms as we move forward to apply

it, it is going to be a function of capacity, the capacity

in countries to be able to develop this kind of

participative process and the content and the dialogue on



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it, the capacity in civil society to play the role that

many of you are saying it ought to be playing and that we

I think are suggesting it plays in the design of this, the

capacity inside the Bank and in our partners who work with

it to try and follow through in supporting countries in

these areas. We don't have that kind of range of

expertise yet onboard and we will be building and training

capacity there.

The third dimension is behavior, culture. But

in some ways this is about a different way of relating and

doing business. And there is a set of behavioral changes

implied in this in the way in which different parties

interact in the design of country strategies within the

country, in the way in which we, the Bank and the Fund,

not only work with each other but, much more importantly,

actually make our processes and our products in some sense

in timetables contingent upon the pace at which countries

are able to move forward.

I think much of the discussion about whether we

have been timely in responding to the Fund, you know, we

can talk about it, I am happy to come back to that. But I

think a much more interesting question is going to be:

How will we both be timely in responding to the pace at



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which countries move? And that timely means not only

being too slow but being too fast. Because I think the

real behavioral change that we will have to work through

is recognizing that in some cases pushing for speed at our

timetable will undermine the very process of ownership

that we are trying to foster through this.

So, I think there is a whole set of behavioral

issues there and internal behavioral issues which are

going to be partly related to the respective roles of

center and Country Directors, incentives that reinforce

those behavioral changes.

I don't have today any kind of simple rules of

thumb or options that I can say this is how we are going

to really ensure that those behavioral changes take place

within the Bank except to say the things that you have

pointed out, that you can work on a number of levers to

push on those. The are incentives, the way in which we do

evaluations, it is the management attention, it is the

celebration of those who are moving forward more quickly

than others.

I think what you will see over the next year or

two is a messy, patchy, uneven process coming to you.

Some of the country strategies that will come to you will



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be much stronger in terms of being grounded in this

framework than others. I say that now because I think it

is very important that, while we adhere firmly to the

objectives of where we are trying to go with this

framework, if you endorse it, we recognize that the

process of getting there for these very reasons is going

to be an uneven and sort of phasing-in process. And we

will have two systems in some ways running in parallel for

a period.

I mean, in some countries you may see a PFP and

in others a PRSP, and you might legitimately ask why do

you have these two still coexisting. And I think the

answer will be that one was just ready to go and the other

wasn't.

So, I say this as a prelude to getting specific

answers because in some ways some of the answers you will

get will still show the same rough edges that the papers

themselves show in terms of where we are and how we begin

to phase in this approach over the next year and eighteen

months.

So, with that, I thought I might ask Russell to

sort of say from his perspective, from the Fund, how

things look on those issues.



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MR. KINCAID: Thank you.

Let me say at the outset that the Fund staff

that has been working on both the HIPC Initiative but also

the social sector questions and ESAF arrangements and

policies more generally work quite closely with their Bank

counterparts in commenting on the Bank's papers that are

before you today, but also in reacting and accommodating

the Bank's comments on their own papers. And this has

been I think a very fruitful collaboration.

We have come a long way in the last six months.

And there, I very much share Masood's remarks on that.

I would also like to say that several Directors

here have commented that the poverty reduction strategy

papers imply a shift in the way the Bank works, a very

fundamental shift. And I think that is right. They also

imply a very fundamental shift in the way the Fund works

and works not only internally but with the Bank. And that

I think is recognized at all levels within the two

institutions.

I don't think we have answers to all the

questions about how the processes need to change, but I

think there is a very clear means of communication going

on at this stage.



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In that context, let me share with you something

which our management, the Managing Director has said to

our Board, which will be part of the dialogue and the

discussion the Fund's Executive Board will have on Monday.

That is that it is recognized that the ambitious proposals

that are put forward for the HIPC countries have

implications for how the Fund supports all low-income

developing countries; that is, how the Fund's ESAF

programs work, in general.

And therefore, the management of the Fund has

talked about the need to adapt ESAF arrangements. In

fact, it was even proposed that the whole facility be

renamed to reflect the fact that this will be a reformed

ESAF that is going to come out of this process.

We are in the opening stages of that discussion

within the Fund. So, it is really not possible for me to

go into great detail. But I think it is clear from our

perspective and I think from the Bank's that the PFP

process has not worked well. There are weaknesses there

and it needs to be replaced. And the poverty reduction

strategy paper I think is the instrument that we think

would be a useful replacement. And I will leave my Bank

colleagues to expand about that.



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But that is the perspective that certainly is

shared on the Fund side, and we are looking very much

forward to seeing more input from the Bank in this

process, not only in terms of what I would say would be

the medium-term budgetary strategies of these countries

but in the annual budgetary processes and in terms of the

priorities, the quality of spending. This is where the

Fund staff sees the greatest need at the moment for Bank

staff input, because that is really the nitty-gritty

choices that a country faces each year. And particularly

if there is an external shock and there is a need for

budgetary adjustments, different than had been expected in

the medium-term plan, well, what is going to give?

And here, I think the authorities and the Fund

staff in a participatory process want to have greater

input at a technical level as well as in a social,

political context.

It is both of these aspects that we want to see

strengthened -- the expertise coming from the Bank but

also a more open and consultative process. This is very

much I think in line with what you are talking about here

at the Bank.



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From our own side, we recognize that the setting

of macroeconomic objectives, fiscal targets needs to be an

iterative process, a process that takes onboard what the

objectives are for poverty reduction in the social area,

but more broadly development objectives. But what the

Fund needs and what the authorities need I think are a

clearer idea of what the costs are, the resource costs,

the budgetary costs of all of these programs are, and also

the priorities that need to be assigned.

And that is a very important part of this

process. And there, there is scope in the fiscal envelope

and in the macro framework to make adjustments. Now how

much, that will have to be decided in each individual

case. But what we see as going on is an iterative process

-- Bank, Fund and the authorities trying to work out what

is optimal for this country, recognizing that macro

stability and low inflation have positive effects on

poverty reduction and on growth.

Many of these countries, particularly HIPC

countries, became highly indebted because they had

unsustainable fiscal policies. So, we want to make sure

that fiscal policies are sustainable. And that is I think

a common framework.



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I guess in responding to the two questions that

were put to me, we see a need for these changes at the

Fund. We are going to work very hard in the days ahead to

come up with some of the -- I won't call them answers --

but come up with some of the processes, some of the

approaches that allow some the ragged edges that we now

have before us to become smooth.

Thank you.

MR. AHMED: Peter.

MR. FALLON: Okay. Thank you very much. And

let me say again how much we very much appreciate the

comments from the Executive Directors on our papers. This

is really very encouraging and a very nice position to be

in.

I am just going to talk about two things. One,

I think was -- and this came out from several speakers --

about the burdensome nature or will all of this business

over-burden poor countries and perhaps the HIPC countries

which tend to be particularly poor.

And I think in a way the answer has partly

actually come out of the comments of various Executive

Directors. I mean, in a way, at the very end this is

going to be a tradeoff situation. On the one hand, yes,



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we don't want to delay getting relief and helping these

countries. On the other hand, to put it rather crudely

and in a rather English way, we don't want to give

something away totally for nothing. We do want to see

this as integrated into a poverty reduction strategy which

is long-term and going to have long-term benefits.

Now quite clearly, when you are dealing with a

situation like this, you are looking for some form of

compromise, though I suspect the nature of the compromise

will probably change as we move through.

Let me just make two or three comments on being

burdensome, over-burdening I find easier to pronounce.

First of all, in fact, it relates to another question and

that is, in some sense, will HIPC be enough? Will there

be enough resources? Well, the answer is even with HIPC,

with domestic resources, these remain very poor countries

and the amount of investments that can be placed on

various poverty reduction actions are obviously limited.

That forces the pragmatism in one way. With

limited resources, this tends to mean, of course, that you

tend to seek a few really key priorities and to

concentrate on those. That is one kind of constraint that

comes across.



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A second one I think is the participatory

process. We have reflected in the documents, and I

reflected this this morning, we expect this actually to

help. One of the problems we have, particularly in the

poorer countries, we often don't know what NGOs or what

various donor agencies are actually doing. One thing this

might do is actually put this information basis together

to design the process and then later easier to implement

the process as it unfolds.

Thirdly, this point was made very well I think

by the Dutch chair, the World Bank and the IMF probably

just cannot do all of this on their own. We are hoping,

in fact, that the design and the monitoring and all of

these things will be shared between the Bank, the Fund and

other relevant agencies. In that sense, the burden we see

as being shared and spread rather more perhaps than at the

present time.

The compromise, as I said, will shift over time.

It is definitely then going to be a transitional process,

and John Sinclair said, well, he would like to know

staff's view on how the new HIPCs will be handled. I

don't think staff really have a clear view right at this

point on a case-by-case kind of basis.



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Initially, the compromise will have to be -- if

we think of it -- on a scale a bit towards the idea of,

look, we don't want to create unnecessary delay; we

recognize that a good strategy will take time to

formulate; it will take time to put into place. And we

don't want to hold people up.

As we move along the scale over time, I suspect

that we will begin to tighten. I suspect that, as we have

said, today that, while it is desirable basically that a

strategy be in place at the decision point but it is not

really absolutely essential, I predict -- it is just a

personal prediction -- that a few years down the road it

will be the case that it will have to be in place at the

decision point. In other words, I anticipate that this

will tighten gradually over time in what we hope is a

demonstrated success of what we are trying to do.

The point about transition and moving over time

I think also applies to the question of the PRSP and the

PFP. We do recognize that the PFP is not going to die

tomorrow. There will be countries that will have PFPs and

gradually bringing PRSPs in.

But let me just address perhaps briefly the

question of why trying to do it. Remember, we are trying



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to introduce a new enhanced framework, which is going to

be participatory, it is going to have a consistency for

the first time we believe between the macro, the

structural and what sometimes is called the social -- I

would rather say other poverty reduction components.

The idea of the PRSP is this is going to be, if

you like, a flagship document, which is going to be

published, it is going to be a tripartite document, owned

by the government. It is going to basically contain all

of the indicators that are used, largely perhaps

intermediate indicators. As we stressed and some speakers

have stressed, we are looking at initially short time

frames and we, of course, have to work with intermediates

rather than outcomes for purely practical reasons.

A big point about this is we expect -- and this

is the linkage to the CAS -- the CAS would take the

strategy and basically would judge progress under the

strategy for its lending instruments. We also hope -- it

may not happen -- that other institutions would start to

use this document in much the same way.

Our comparators with the PFP, I have written

three PFPs -- I won't say for which country -- some time

ago at the World Bank, and I regarded it then as



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fundamentally a shadow document to what was then the SAF

and later the ESAF. The PFP was a document really without

any particular kind of teeth.

I understand over time it has become an even

paler shadow. It is taken not terribly seriously by Bank

staff. There have been surveys of this. We suspect there

is not much ownership on the part of governments.

Now, we could do all the things in the PRSP and

still call it a PFP and just make this change. We

suggested this idea. There was a feeling though that,

since we are making a real discrete change at the present

time, we really need a change in the title to signal this,

much the same way as my colleague from the Fund said they

may change the title of the ESAF, because that is changing

its particular nature.


MR. PAGE: Well, I have been given the task of

trying to be brief in addressing the relationship between

our diagnostic instruments in country strategies --

unfortunately, Marcos is not here to grade me on my

performance; so I hope you will report back to him later.

The first set of issues really have to do with

the role of the SSR and how we see this fitting into these



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poverty-focused country assistance strategies. Put very

simply, we see these as the tools by which Country

Directors and country teams can achieve a more systematic

analysis of the issues in their countries and a better

strategic focus.

In a way, it is answering the first question of

good strategic planning, which is where do we want to go.

It is a help for that particular purpose. We do not see

these instruments really in a sense as ends in themselves.

And I want to assure Directors that we don't see a poverty

note substituting for a poverty-focused CAS, nor do we see

a social and structural review as in any way undermining

the need to have then a well-focused country strategy and,

within that, a well-focused Bank country assistance

strategy. These are tools to do the job.

The second question, of course, in strategic

planning is: How do we get there? And that question is

really the one in which we have to bring the array of

matrix services that we have discussed today, the role of

the networks in really supporting the regions and Country

Directors in setting strategic priorities within the

broader country assistance framework.



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That brings us, of course, to the question of

the role of instruments. Which instruments do we deploy?

Those are I think very much a country-based set of

decisions that have to be made. We note some Directors'

concerns with respect to budgetary support instruments,

but please note that there is nothing in this strategy

that presupposes any selection of instruments. The tools

have to befit the task.

It also speaks to the issue of capacity building

in our own analytical and advisory services. And here,

let me take a slight exception with our colleague from the

Fund. One of the things that I think we have tried to

demonstrate to you in the past two years is that,

particularly in the critical area of public expenditure,

which in some ways is one of the key links between public

actions and poverty outcomes, the Bank is moving well

beyond the mere certification of public expenditure

programs, if you like, the old traditional shooting of

white elephants.

To answer the question that I always got when I

was a Chief Economist: How do we keep from making the

same bad decisions the next time? The issue is really to

create the capacity within countries to have better



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selectivity and better prioritization of the public

expenditure programs. Certification is a part of that but

it is not the end of that. And I wouldn't like to leave

an impression with Directors that we are simply going to

be engaged in a process of certifying public expenditure

programs. That is not the objective of our work in public

sector development and public expenditure.

To come to the role of the SSR, the fundamental

concept of the SSR is systematic coverage of a set of

questions dealing with the underpinnings of the market

economy -- social and structural -- but within an

integrating framework, the integrating framework being the

objective of poverty reduction.

So, it is not that we are trying to create a

poverty instrument or a poverty reduction instrument in

the SSR, but to actually provide an over-arching framework

within which we can understand structural and social

issues and be more selective in the process of answering

the question of where do we want to go.

It is a very interesting case that in the six

pilot studies the question of ownership has evolved. It

is no secret to many of you that some countries were

deeply concerned about how social and structural reviews



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would be used. What we have found is that, as these

social and structural reviews have been undertaken, as

governments have been engaged in the process of design, as

we would do with any process of economic and sector work,

we have had substantially greater buy-in over the course

of the pilot period than in the initiation of the social

and structural review process. That is seen by the fact

that we now have I think received clearance from all

governments to bring those documents to the Board. They

are now formally parts of ESW.

When we began, we said to them you can choose,

and many of them said let's wait and see. The answer has

been we are quite satisfied with this process and believe

it has taken onboard our concerns about balance and about

perspective, many of those concerns expressed by the

Chinese chair today.

Given that evolving relationship, it is also

interesting to ask what have they been used for? And here

I would like to call your attention to the Dominican

Republic SSR which is a particularly interesting example

of an SSR in a CDF country. The current proposal on the

table from government is to actually use that as one of

the fundamental underpinnings of a set of dialogues to be



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undertaken among all the parties within the Dominican

Republic -- political and civil society organizations --

on forming a vision, but a national vision of where the DR

wants to go. So, this has become a document which is not

only in some sense owned by government and the Bank but is

going to be used to try to build a new level of consensus

at the level of the society in terms of a country strategy

focused on poverty reduction, incorporating the

underpinnings of the market economy.

I think that is where we would like to go with

SSRs, a tool which can help in this process of forming a

vision of where countries wish to go.

Where will we go in practice? We have eight to

ten country teams who have asked for further work on SSRs

in the coming year. We will begin by supporting those.

As we learn more from that process and as we learn from

this process of developing poverty-focused country

strategies, we will come back to you with further

recommendations as to whether management wishes to move

further in the implementation of this particular tool.

Finally, let me very briefly address the

alphabet soup of analytical acronyms. You are right,

there are too many of them; they are too confusing; they



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change all the time. Even I cannot keep track of them.

It makes me feel like I am back in the U.S. Navy.

We will try in the course of the coming year to

do what Joanne Salop calls "business-ify" our ESW program.

In doing that, what we will do is reduce the number of

standard ESW products which we offer both to country teams

and to client countries, to develop a set of network

support services to those to ensure greater coherence and

comparability among them and greater quality assurance

from the network side.

At the same time, let me point out that, as we

do that, and reduce the range of these products, which

would be in a sense the building blocks identified by the

SSR type product of critical areas that are constraints to

poverty reduction, we will also have to maintain a

balance.

Because, as many of you know, much of our

analytical and advisory work today is not done in the form

of formal ESW products but just in-time policy notes and

other responses to emerging needs. And while we move

toward greater standardization, on the one hand, I think

we also have to maintain a balance to be sure that we are

responsive to the client, on the other.



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Nevertheless, I hope that within a year's time

we can come back to you and assure you that we have

reduced the number of alphabetical combinations, and that

you can also have greater confidence that when you look at

one of these particular acronyms, you know more or less

what it is going to contain and you have a better sense of

what its quality will be and what its content will be.

So, I think in that sense we hear you, we share

the same concern and we are trying to respond.

MR. WALTON: Thank you very much. I will be

really quick. People get nervous when you say that.

First, to reaffirm we have got two processes

going on. What we are really talking about today is a

very practical process of how you do business in countries

and in sectors. I would like to reaffirm that what we are

building on today is a lot of what is beginning in

different countries, different sectors in the Bank but it

needs to be extended and that, of course, will take time.

I want to pick up one issue within that, and

that was raised by a number of Directors, and that is

goals, how they are set, and just to reaffirm that we see

a strong complementarity between participative processes

at the societal level to set goals and use indicators that



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are relevant to that society, and a technical process

which will define the tradeoffs and define what works and

does not work from international experience. Often that

will involve, and we take note, issues of employment,

issues of poverty lines, but that will have to be defined

on a country-by-country basis.

The next point, we certainly take note of a lot

of substantive issues that were raised about how we can

continue to learn about what is important and what matters

in poverty reduction strategies. Just to cite a few,

there is a lot of resonance with the central issue of

distribution, questions of how you confront issues of

asset inequality, what is really meant by empowerment, how

that may relate to issues of conflict, the fact that

governance is certainly not just about empowerment but it

cuts across everything, and that there is a powerful

interrelation about issues that gender is central both in

terms of the dimensions of poverty and its process.

The only thing I will say about this is this

will be a central part of the debate over the coming year.

And this forum will start next Friday -- or the next phase

will be next Friday in the discussion of the WDR. So, I

am going to postpone any discussion of that till then.



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The only thing I would underline which is part

of that process is the difficult question of understanding

the types of institutions and the types of processes that

genuinely represent the interests of poor people. That is

something we are only beginning to work with. It is what

the poor communities themselves are saying is a major

missing link, and that governments are failing them, even

when there are formal structures of voting. But that is a

central challenge which we will again be discussing in the

future.

The final thing, we take note of the concerns of

the poverty notes and the need to link them with the CAS.

And, as I said before, we will get back to you to discuss

how to achieve the common end I think that we all mutually

understand and avoid the risks.

Thank you.


Good answers to good questions. Now are there

any further comments? Jan.

MS. PIERCY: I risk the wrath of my colleagues

at this hour. One point, going back to Masood Ahmed's

opening -- this is a point I make through the lens of the

Ad Hoc Committee on Board Policies and Procedures -- when



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Masood made the point that if we endorse this framework,

then, of course, we have to see that it is consistently

applied across CASs and how countries are held to it.

The point I want to make is that the Board has a

role to play here. Part of our role -- and that is part

of why it is important that we debate this and that we do

fully elaborate the points of agreement and the points of

difference -- because it should mean something if we in

the end endorse the framework, and that then should mean

that we consistently apply it across the CASs. And we are

a part of how you begin to achieve that consistency.

And I want to say that management can hold the

Board accountable, just like the Board holds management

accounts. This is part of what we had begun discussing in

this Ad Hoc Committee. So, I think we shouldn't shy away

from envisioning the role of the Board when management has

its conversations going up to the Strategic Forum, where

this will be discussed, because I think that is really

critical. And that also translates into how we orient in-

coming members of the Board, so they know there is a

framework, and it was adopted and this are its

implications, so that we over time become an active

partner in this process.



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Thank you.

MR. SANDSTROM: Thank you, Jan. You are right;

it is very helpful. We all need to focus on this and be

disciplined and just work together and get it done.

And we need also to disseminate this to staff,

and that is the next challenge now also, to work with

them. We have a number of teams who are actually doing

it, and they are cross-fertilizing within and across

regions. But we need at the corporate level to do much

more.

Part of that is to develop an operational plan

to implement this. So, that is the next challenge.

Are there any further comments, any further

statements?

[No response.]

MR. SANDSTROM: You know what we need to do now.

This is the Board discussion in the Bank. The Fund will

be discussing the same sets of issues on the HIPC link

paper on Monday. So, as usual, what we would like to do

is to transmit the formal summary to the Fund Board of

this discussion.

So, if you have some more patience with us, I

will read out the draft of a summary of this discussion,



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which will try to highlight the major themes of what came

out. I will do that and then, if you have any further

comments or changes, additions to this, if you could give

it to us now and then we will work on it, clean it up and

get it out quickly. So, let me try this.

Directors strongly welcomed the thrust of both

documents and the effort they reflect to enhance the

impact of Bank and Fund activities and the role of

external assistance, more generally, including debt relief

in poverty reduction.

Directors endorsed the emphasis on outcome-based

indicators, the international development goals,

participatory process and country ownership of a poverty-

oriented development strategy.

Directors supported the joint proposal by Bank

and Fund staffs to move to tripartite poverty reduction

strategy papers as a basis for integrating policies and

programs.

On the paper, "Building Poverty Reduction

Strategies in Developing Countries", Directors welcomed

the comprehensive approach to poverty reduction. They

stressed that sustained poverty reduction is not possible

without economic growth. Consequently, macroeconomic



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stability and structural reforms that allow sustained

growth are an essential part of any poverty reduction

strategy.

But to maximize the poverty-reducing impact of

growth requires a determined focus on the determinance of

poverty and related public action. As poverty is multi-

dimensional, the poverty response would also need to be

multi-dimensional, relating not only to more spending in

social sectors but also to other reforms that improve the

access of the poor to the benefits of economic growth.

Directors emphasized the need to be pragmatic in

the application of this approach, taking into account the

circumstances of each country. They also cautioned that

poverty reduction is a long-term process and we should

avoid creating unrealistic expectations which do not take

into account capacity constraints, including those related

to statistical information and poverty monitoring.

Directors agreed that broad-based participation

is needed at the design, implementation and monitoring

stages of a successful poverty reduction strategy.

Directors also supported the use of a clear set of

outcome-oriented goals and intermediate indicators to

ensure that poverty reduction strategies are well-designed



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and provide a feedback mechanism to ensure that they are

implemented effectively.

The selection and monitoring of such indicators

would be a good vehicle for broad participation of civil

society. Directors agreed that in the context of the HIPC

Initiative and given the irrevocable nature of debt

relief, transparency and accountability were important

features of any poverty reduction strategy and would help

ensure effective use of debt relief after the completion

point.

In this context, they suggested that governance

be given higher priority among the levers for public

action in the poverty reduction strategies.

Finally, Directors urged management to move

quickly to operationalize the approach and to ensure

effective implementation.

On the paper, "Strengthening the Link Between

Debt Relief and Poverty Reduction", Directors endorsed the

broad and open consultative process undertaken to solicit

the views of interested parties in the second stage of the

review of the HIPC Initiative. They welcomed the wide

range of comments and proposals received from NGOs,

religious groups, international organizations and others.



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These extensive contributions, which have been conveyed in

full to the Executive Boards of the World Bank and IMF and

summarized in the HIPC link paper, provide valuable inputs

into strengthening the link between debt relief and

poverty reduction.

Directors fully endorsed the integration of HIPC

debt relief into comprehensive efforts to reduce poverty

and the introduction of the poverty reduction strategy

paper to this effect. Directors noted that poverty funds

could provide a vehicle to foster the link between debt

relief and poverty reduction. However, they stressed the

need to ensure that all resources, including amounts

released by debt relief and new inflows of external

assistance, were integrated in a transparent, well-managed

and accountable resource allocation process.

Directors noted that resources other than debt

relief would continue to provide the bulk of resources

available to finance spending on poverty reduction and

cautioned against poverty funds that were not integrated

into the wider budgetary process.

Directors agreed that the poverty reduction

strategy paper as a tripartite document of the

authorities, the World Bank and the IMF could be a very



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effective vehicle to ensure the poverty impact of Bank and

Fund assistance, to link debt relief and poverty reduction

and to ensure ownership, transparency and broad-based

participation.

They noted that moving to the PRSP would take

time and should be phased in, depending part on the pace

at which countries can build the relevant capacity.

Directors also supported the proposal that the

PRSP should be discussed by the Executive Boards of the

World Bank and the IMF.

Directors stressed the importance of the early

provision of debt relief under the enhanced HIPC

framework. They agreed in principle that the poverty

reduction strategy should be in place when a country

reached its decision point under the HIPC Initiative, but

supported the need for flexibility so that the decision

point could take place while the poverty reduction

strategy is being formulated, provided the government is

committed to a firm timetable for the formulation and

implementation of the strategy which should be in place

well before the completion point.

Directors agreed that in HIPCs that have already

reached their decision or completion points under the



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current framework, the timing of the proposed additional

debt relief should be determined, inter alia, on an

assessment of their progress in the signing and

implementing their poverty reduction strategies.

And finally, Directors supported broad

dissemination of the two papers.

Is there anything you want to add, delete or

change?

[No response.]

MR. SANDSTROM: If not, we will go through this

and clean it up and make sure that it is clear, not too

repetitive, and that we have really captured the main

points. But I think this is a fair summary.

We have gone through the written statements as

well as listened carefully today.

So, thank you very much. These have been four

good hours. Thank you. Thanks to the team also.

[Whereupon, at 5:35 p.m., the meeting was

adjourned.]

public disclosure authorized 65772 - world bank...2011/11/30 · opening remarks by mr. masood...

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