IDA14 Indicators on Aid Harmonization and Alignment InternationalDevelopmentAssociation November 2004 Abbreviationsand Acronyms CAS Country Assistance Strategy D A C Development Assistance Committee HLF-2 Second High Level Forum IDA International Development Association h4DB MultilateralDevelopment Bank PRSP Poverty Reduction Strategy Paper Table of Contents I. Introduction.............................................................................................................................Page 1 I1. Background ............................................................................................................................. 1 I11.The World Bank and the InternationalHarmonizationAgenda ............................................. 1 IV. The Bank'sPositiononTrackingProgress onHarmonizationand Alignment .................................. 3 V. Conclusion........................................................................................................................................... 4 Indicators on Aid Harmonizationand Alignment I. Introduction 1. This note responds to arequest made at the IDA14DeputiesMeeting inWashington, October 4-6,2004, for IDA to outline the Bank's position vis-&vis the ongoing program on tracking progress on harmonization. It describes how the Bank i s contributing to this program, what its current thinking i s on the results that have been obtained so far, and how it intends to proceed in this area inthe future. 11. Background 2, A Working Party on Aid Effectiveness andDonor Practices was set up in 2003, after the Rome Forum on Harmonization, to support and monitor implementation of the agreed measures to improve aid effectiveness. It operates under the auspices of OECDDAC and includes all the major bilateral and multilateral donors as well as participants from 14 developing countries. The Working Party divides its tasks under five working sub-groups, one of which deals with harmonization and alignment." One of the main activities of this group has been to develop a survey of the current state of harmonizationat the country level. This instrument has been carried out in 14 countries2' and the results are to be discussed at the OECD's 2ndHigh Level Forum on Harmonization and Alignment of Aid Effectiveness in March 2005. 3. The survey asks questions under three headings: ownership, alignment and harmonization. Ineach case the indicators are further divided into three categories: those relatingto donor actions, those relating to government actions andthose relatingto common actions. Inall, data are collectedon 13 indicators.3/ While preliminary results are encouraging inproviding usefulbaseline information inthe three areas, the exercise was designed as apilot and changes inthe format are expected based on issues encountered and lessons learned. 111. The World Bankand the InternationalHarmonizationAgenda 4. From a broad internationalperspective there has been progress in the past 2-3 years toward making aid more disciplined and better aligned with development priorities and country strategies. Evidence indicates that almost all of the 17 partner countries (for the most part, IDA The other groups deal with public financial management, management for results, aid untying and procurement, These are Bangladesh, Bolivia, Cambodia, Ethiopia, Fiji, Kyrgyz Republic, Morocco, Mozambique, Nicaragua, Niger, Senegal, Tanzania, Vietnam and Zambia. 3 Under `Ownership' indicators measure the extent to which countries set their agenda on harmonization and alignment and lead the national coordination process, and the extent to which donors support country capacity to coordinate aid. Indicators for `Alignment' track how far donors align on partner strategies, how far budget support i s aligned and how much project support is delivered through country systems. The indicators on `Harmonization' measure the degree to which conditionality is streamlined, how far donors support sector approaches, how far they rely on delegated cooperation, how effective they are at streamlining diagnostic reviews, the extent to which they disclose information on their aid flows and the extent to which they share analytical work. - 2 - countries) that were at the forefront in Rome4' have sustained their efforts to turn commitments into concrete harmonization actions. These countries have beenjoined by an even larger group of low-and middle-income countries that have adopted selected aspects of the harmonizationand alignment agenda relevant to them. At this point, about 60 partner countries and 40 bilateral aid agencies and multilateral institutions are engaged in these efforts. 5. The discussions on indicators for harmonization are very much work in progress and much remains to be done. Progress to date i s only beginningto improve decades of practices that have made attention to harmonizationand alignment necessary. Further progress will require recognition that (a) harmonizationand alignment require intensive work -by donors and partner countries - that typically i s costly and unfundedin the short run, with potential benefits and rewards only coming later, (b) few institutions have put inplace effective mechanisms, resources or incentives to encourage staff to pursue such activities, and (c) many policies and procedures still discourage, often unintentionally, the approaches and behaviors necessary for harmonization. The Rome meetingin2003 took place given the recognition that senior level attention to these matters was essential. The March 2005 2ndHighLevel Forum (HLF-2) in Paris i s plannedto ensure that momentumcontinues for this global change agenda. 6. The World Bank's Executive Directors and Senior Management are firmly committed to harmonization and alignment as a priority, and see the Bank as a participant, facilitator and leader in these efforts. The Bank i s providing staff and financial resources to support the Working Party including the development of the indicators. More broadly the Bank has undergone and i s continuing a major internal reform and modernizationof its operational policy framework for which one key objective is easier harmonization and alignment. The reforms include provisions for pooling resources under SWAps (2002); aligning CASs with PRSPs (2002); adapting the Bank audit policy to international auditing standards andincreasingly relying on country audit processes (2003); updating the Bank's procurement guidelines in line with good practice recommendations prepared by the MDB Heads of Procurement Working Group (2003); modernizingeligible expenditure requirements to better align our assistance around country objectives (2004); and replacing structural adjustment lending by development policy lending that takes account inter alia of country ownership and i s coordinated with other development partners. In September 2004 the Bank's ExecutiveDirectors endorsed in principle a greater reliance on country systems inprojects supported by the Bank, including the possibility of country pilots to test the implications of the approach inenvironmental and social safeguards and international competitive bidding. 7. Bank staff are working with partner countries along with other bilateral and multilateral donors inthe many different aspects of this agenda including, inter alia, aligning the strategy better with country priorities, undertalung joint work, working on common fiduciary arrangements, and using harmonizedfinancing modalities and approaches. The World Bank i s chairing the widely representative group of donors and partner countries that i s planning and organizing HLF-2. ~~ ~ Countries mentioned in the Rome Declaration: Bangladesh. Bolivia, Cambodia, Ethiopia, I-Ionduras.Jamaica, Kenya. Kyrgyz Republic. Morocco, Nicaragua, Niger. Pacific Islands. Philippines, Senegal, Tanzania, Vietnam and Zambia. - 3 - 8. The challenge going forward, which will be addressedas part of the HLF-2, will be to direct the momentumfor change toward a few selective "high value" operational goals that impact aid effectiveness and development outcomes broadly and which respect the needfor ownership and accountability, motivate development agency staff, and lend themselves to measurement and monitoring. While planning for HLF-2i s ongoing, it i s expected that these could include: (i) reinforcement of the needto align strategies andfinancing with PRS priorities; (ii)committing to work toward use of country systems; (iii) streamliningthe delivery of aid through more delegated cooperation and silent partnerships;and (iv) developing indicators. The World Bank will continue its work to support these goals. IV. The Bank's Position on Tracking Progress on Harmonization and Alignment 9. The World Bank has been centrally involvedin this exercise and indeedin all the Working Party's activities. It chairs three of the five working groups referredto above (including co-chairing the harmonization and alignment task team which i s managingthe indicator work) and provides key staff and financial resources to the Working Party. As such it will participate actively inthe continuing development of the indicator framework. Some of the issues that need to be addressedin doing this are: a. The present list of indicators i s too long. Each of the 13 indicators inturn requires information on sub-questions, so that the full list of items of information that feed into the process add up to 118. A much shorter, focused list of key indicators i s needed-perhaps with a core group of five or six. b. Some of the `indicators' inthe current set are not that useful in tracking harmonization. For example, measuring the `number of missions undertaken to a particular country' does not necessarily point to poor donor harmonization. If a program i s growing, missions may well increase, even when the donor is doing everythingit can interms of harmonization and alignment. What could be relevant are the number ofjoint missions c. The focus of the current exercise on harmonization at the country level i s entirely appropriate, as what i s of interest i s to track progress inharmonization for each country. To provide a `scorecard' on the performance of individual donors, however, it would require substantial modification. From IDA'Sperspective, the following are possible indicators of how far a particular donor i s contributing to the harmonization agenda as outlined in the Rome Declaration: i.Whatpercentageofthedonor's supportislinkedtoexplicitprioritiesinthe PRSP?(alignment) .. 11.What percentage of funds that the donor disburses i s untied ? (alignment) ... 111. What percentage of the donor's projected commitments and disbursements i s recorded in the government's budget as of the beginning of the year, and what percentageof these projected amounts were realized?(aid predictability) - 4 - iv. What percentage of the donor's operational products and processes-e.g., analytic work, portfolio reviews-is donejointly with other donors who are active inthat sector or thematic area? It is important to note that at this point the above are only suggestions of possible indicators. They needto be discussedinside the Bank and with other donors within the DAC Working Party and honed further. A final agreed position on donor focused indicators i s unlikely before the start of the IDA14period. V. Conclusion 10. The development of a culture of "collective self-discipline" among development assistance providers i s clearly a critical aspect of moving harmonization forward. Broadly agreed indicators are one useful component to monitor and enhance that effort, and the Bank and IDA should be preparedto play aproactiverole in their development and adoption. Moving from the pilot survey to a more useable and widely applicable system will take considerable negotiation and, probably, time, to bringparticipants on board. 11. As soon as such as system i s inplace, IDA will prepare amonitoring framework and submitit to the Board andDeputies. Once agreement has beenreached on the framework, IDA will monitor the relevant indicatorsfor its operations and will brief Deputies periodicallyon their status for IDA countries.