Capacity building input

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Capacity Enhancement, Governance, and
Evidence-Based Diagnostics and Assessments
www.worldbank.org/wbi/governance
Background handout for discussion at the EILT—
WBI’s Leadership Team
DK -- WBIGG
WBI, February 4th, 2004
1
Institutions &Governance Matters
•
•
•
•
•
Missing Link in Washington Consensus
First Summers’ Lesson from Experience
Governance as the weak link in CB/CE
‘Data Power’: governance key for development
Yet 5 main challenges about institutions:
i)
which ones? (prioritizing among institutions &
vulnerabilities
Diagnostics);
ii) how to? (Implementation
Expertise);
iii) where to? (Sectoral Mainstreaming)
iv) measure, monitor, research
Lessons v)
Localize Know-how and Action Programs 2
Governance World Map :
Control of Corruption, 2002
Source for data: http://www.worldbank.org/wbi/governance/govdata2002 ; Map downloaded from : http://info.worldbank.org/governance/kkz2002/govmap.asp
3
Colors are assigned according to the following criteria: Red, 25% or less rank worse ( bottom 10% in darker red); Orange, between 25% and 50%; Yellow,
between 50% and 75%; Light Green between 75% and 90% ; Dark Green above 90%
Where is Financial Aid Well Used, Where Wasted?
Global Poll (% firms rating satisfactory [6-10])
% firms rating satisfactory
75
Government Respondents
Non Government Respondents
50
25
0
High Corruption
Medium
Low Corruption
Extent of Corruption in Country (KK 2002 Indicator)
4
Listening to Stakeholders: Analysis of Responses on
Donor Aid and Anti-Corruption
Figure 9d : Most Important Role for Donors in Helping Country on Anti-Corruption (A-C)
Pre-Conditionality
Work w/ Country A-C
Awareness/Education
Control corruption in
Donor projects
Collaborate w/ NGOs
Donors out of A-C
0%
10%
20%
30%
Percentage of Responses selected as Most Important Role for Donors
Source: World Bank Institute Governance WebSurvey, http://www.wbigf.org/hague/hague_survey.php3.
5
Based on 2,427 responses.
Anti-Corruption Focus and Quality Assessment by the World Bank
Global Poll Respondents, by extent of Corruption in Country (% firms rating satisfactory [6-10])
% firms rating satisfactory
100
World Bank priority to Corruption in Country Work
75
Quality job on anti-corruption by World Bank in country
50
25
0
High Corruption
Medium
Low Corruption
Extent of Corruption in Country (KK 2002 Indicator)
6
Sources: Global Poll 2003 and KK02. Gl obal Poll questions: How much of a priority does the WB gi ve to hel ping your country re duce
corruption (1 =none, 10=top) ; How good of a job does the WB do in hel ping your c ountr y re duce corr uption (1=bad, 10=e xcellent)
Figure 8a: Firms evaluate World Bank’s effectiveness in PSD:
Governance does matter (Survey, Emerging Economy sample)
Net WB Effectiveness
30 as Rated by Firms (%)
Poor Governance
Good Governance
0
Good
Poor
-30
Quality of
Parliament
Protection
Financial
Assets
Quality of
Capture (Grand
Corrupt
Financial Audit Corruption)
Procurement
Corporate
Ethics
Labor Market
Flexibility
Note: The vertical axis depicts the firms’ net effectiveness evaluation of World Bank’s performance in supporting private-sector development
(PSD) in their country. Net effectiveness is calculated as the difference between the percent of respondents reporting the institution to be
effective minus the percent of respondents reporting it to be ineffective. Each set of two columns displays the net effectiveness ratings
provided by countries with a good record in given constraint (in blue) versus those provided by countries with a poor performance in such
constraint (in black). Calculations are based on country averages.
7
Source: Executive Opinion Survey (GCR) 2002.
Corporate Governance and Corporate Ethics
% firms rate satisfactory
100
75
2002
2003
Corporate Governance
Corporate Ethics
50
25
0
NON OECD
NON OECD
8
Source: EOS 2002-03.
Soundness of Banks vs. Control of Corruption
Sound
6.5
Soundness of Banks
Simple average
OLS 'controlled' estimate
4.5
2.5
Relatively Poor Control of Corruption
Unsound
Average Control of
Corruption
Good Control of Corruption
Source: Executive Opinon Survey 2002; KKZ 2000/01Governance Indicators, http://www.worldbank.org/wbi/governance/govdata2001.htm
The Sample of 80 countries has been divided into 3 sub-samples according to their rating in Control of Corruption. The 3 columns
therefore represent the average ratings for Soundness of Banks within each sub-sample. The fitted line instead represents the predicted
value of Bank Soundness controlling for the effects of GDP per capita and Regulatory Quality through an OLS regression. Each fitted
value is computed as the sum of the estimated constant plus the value of Control of Corruption within each group times the estimated9
coefficient plus the mean values of Regulatory Quality and GDP per capita times their respective estimated coefficients.
Transparency, Parliaments, Corporate Ethics, and GDP Growth
Annual GDP Growth (%)
5
Transparent Information by Government
Effective Parliamentary Oversight
Corporate Ethics
3
1
Low
Middle
High
Extent of Transparency
10
Source: Annual GDP growth over 1999-2001 WDI 2002; GDP is computed in PPP terms. The various transparency / governance
variables drawn from Executive Opinion Survey, 2002.
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Te aci
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T a no
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V
U
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Ac cial
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Percentile Rank (0-100)
Kenya – the ‘Mezzo’ Level of CE Assessment – 22 clusters
100
50
0
11
Source: EOS 2003 WEF, preliminary. Percentile ranks based on comparative performance
among the 103 countries in the sample. All variables rated from 0 (very bad) to 100
Health Gap vs. ‘Active’ Capture (High
Level Corruption)
Large Gap
7
ZWE
Rich-Poor Health Gap
CHL
JOR
BRA CM R
M AR
PER
TZA
ETH
COL
LTU
LKA
VNM
CHN
PRY
M LI
HTI
ARG
ROM
LVA
4
TUN
HKG
AUS
SGP
FRA
SVK
CZE
SWE
NOR
DNK
ISL
Small
r = 0.83
1
1
Low
Source: EOS 2003
4
Bribery to Affect Laws, Regulations..
High Bribery
12
7
Romania: Disproportionally Negative Impact on the Poor
% Dissuaded from
Medical Services
% of Income in bribes
15%
50%
40%
10%
30%
20%
5%
10%
0%
low
income
medium
income
high
income
0%
low
income
medium
income
high
income
Institutional Capacity: From revisiting ‘Capacity Building’
to Measuring and Diagnosing Capacity Enhancement
Institutional Capacity (IC) unbundling into 3 dimensions:
1. Physical capital and hardware (physical
infrastructure, computers, etc.) (K);
2. Human and knowledge capital (including
organizational & administrative capital, i.e. the
‘institutional software’) (HK),
and,
3. Governance and political capital (GPK).
IC = f (K, HK, GPK)
Capacity Enhancement = Changed capacity over time14
Empirical Approach to Institutional and
Governance Assessments and Diagnostics
1.
2.
3.
‘Macro’: Worldwide Aggregate Governance Indicators:
200 countries, 6 components, periodic – it permits broad
proxy of governance and capacity enhancement
‘Mezzo’ (Middle): Cross-Country Surveys of Enterprises
‘Micro’: Specialized, in-depth, in-country Governance
and Institutional Capacity Diagnostics: Includes surveys
of: i) user of public services (citizens); ii) firms, and iii)
public officials
Item #1 above is central for comparative monitoring
worldwide and to ‘flag’ a country’s institutional
vulnerabilities. On other extreme, item #3 is in-depth input to
concrete capacity enhancement strategy at country level. Due
to improvements in cross-country enterprise surveys, item #2
provides a relatively detailed quantitative sense of
institutional vulnerabilities, complementary to the other 2.
15
Overall Evidence is Sobering:
Progress on Governance is modest at best, so far
• Evidence points to slow, if any, average
progress worldwide on key dimensions of
governance
• This contrasts with some other
developmental dimensions (e.g. quality of
infrastructure; quality of math/science
education; effective absorption of new
technologies), where progress is apparent
• At the same time, substantial variation 16
cross-country, even within a region. Some
Capacity Enhancement Assessment, Level I:
The ‘Macro’ or Aggregate Governance Indicators+
• Some Illustrations from updated
Governance Indicators database: 200
countries, 1996-2002, to be continued
17
Governance: A working definition – which
contains much of what is relevant for CE
• Governance is the process and institutions by
which authority in a country is exercised:
(1) S -- the process by which governments are selected,
held accountable, monitored, and replaced;
(2) E -- the capacity of gov’t to manage resources and
provide services efficiently, and to formulate and
implement sound policies and regulations; and,
(3) R -- the respect for the institutions that govern
economic and social interactions among them
18
Operationalizing Governance:
Unbundling its Definition into Components that
can be measured, analyzed, and worked on
Each of the 3 main components of Governance
Definition is unbundled into 2 subcomponents:
• Voice and External Accountability
• Political Stability and lack of Violence&Terror
• Quality Regulatory Framework
• Government Effectiveness
• Control of Corruption
• Rule of Law
We measure these six
governance components…
19
Inputs for Governance Indicators 2002
Publisher
Publication
Source
Country Coverage
•Wefa’s DRI/McGraw-Hill
Country Risk Review
Poll
117 developed and developing
•Business Env. Risk Intelligence
BERI
Survey
50/115 developed and developing
•Columbia University
Columbia U. State Failure
Poll
84 developed and developing
•World Bank
Country Policy & Institution Assmnt Poll
136 developing
•Gallup International
Voice of the People
Survey
47 developed and developing
•Business Env. Risk Intelligence
BERI
Survey
50/115 developed and developing
•EBRD
Transition Report
Poll
27 transition economies
•Economist Intelligence Unit
Country Indicators
Poll
115 developed and developing
•Freedom House
Freedom in the World
Poll
192 developed and developing
•Freedom House
Nations in Transit
Poll
27 transition economies
•World Economic Forum/CID
Global Competitiveness
Survey
80 developed and developing
•Heritage Foundation
Economic Freedom Index
Poll
156 developed and developing
•Latino-barometro
LBO
Survey
17 developing
•Political Risk Services
International Country Risk Guide
Poll
140 developed and developing
•Reporters Without Borders
Reporters sans frontieres (RSF)
Survey
138 developed and developing
•World Bank/EBRD
BEEPS
Survey
27 transition economies
•IMD, Lausanne
World Competitiveness Yearbook
Survey
49 developed and developing
21
•Binghamton Univ.
Human Rights Violations Research
Survey
140 developed and developing
-2.5
POOR
Source: KKZ 2000/01
NEW ZEALAND
CHILE
NAMIBIA
CYPRUS
BOTSWANA
COSTA RICA
TUNISIA
URUGUAY
MALAYSIA
MOZAMBIQUE
CROATIA
Corruption
Level
BULGARIA
MEXICO
CHINA
INDIA
ALBANIA
BANGLADESH
IVORY COAST
VIETNAM
ARMENIA
MOLDOVA
HAITI
KOREA, NORTH
TANZANIA
INDONESIA
ZIMBABWE
Good
2.5
Corruption
Control
KENYA
Congo, Dem. Rep. (Zaire)
Control of Corruption: one Aggregate Indicator
(selected countries, for illustration, based on 2000/01 research data)
Margin of
Error
0
22 GOOD
Governance World Map :
Voice and Accountability, 2002
Source for data: http://www.worldbank.org/wbi/governance/govdata2002 ; Map downloaded from : http://info.worldbank.org/governance/kkz2002/govmap.asp
23
Colors are assigned according to the following criteria: Red, 25% or less rank worse ( bottom 10% in darker red); Orange, between 25% and 50%; Yellow,
between 50% and 75%; Light Green between 75% and 90% ; Dark Green above 90%
Governance World Map :
Government Effectiveness, 2002
Source for data: http://www.worldbank.org/wbi/governance/govdata2002 ; Map downloaded from : http://info.worldbank.org/governance/kkz2002/govmap.asp
24
Colors are assigned according to the following criteria: Red, 25% or less rank worse ( bottom 10% in darker red); Orange, between 25% and 50%; Yellow,
between 50% and 75%; Light Green between 75% and 90% ; Dark Green above 90%
Governance World Map:
Regulatory Quality, 2002
Source for data: http://www.worldbank.org/wbi/governance/govdata2002 ; Map downloaded from : http://info.worldbank.org/governance/kkz2002/govmap.asp
25
Colors are assigned according to the following criteria: Red, 25% or less rank worse ( bottom 10% in darker red); Orange, between 25% and 50%; Yellow,
between 50% and 75%; Light Green between 75% and 90% ; Dark Green above 90%
Governance World Map :
Rule of Law, 2002
Source for data: http://www.worldbank.org/wbi/governance/govdata2002 ; Map downloaded from : http://info.worldbank.org/governance/kkz2002/govmap.asp
26
Colors are assigned according to the following criteria: Red, 25% or less rank worse ( bottom 10% in darker red); Orange, between 25% and 50%; Yellow,
between 50% and 75%; Light Green between 75% and 90% ; Dark Green above 90%
Governance Indicators: Chile 1998 vs. 2002
Source for data: http://www.worldbank.org/wbi/governance/govdata2002 ; Colors are assigned according to the following criteria: Dark Red, bottom 10th
27
percentile rank; Light Red between 10th and 25th ; Orange, between 25th and 50th ; Yellow, between 50th and 75th ; Light Green between 75th and 90th ;
Dark Green above 90th.
Governance Indicators: Kenya, 1996-2002
Source for data: http://www.worldbank.org/wbi/governance/govdata2002 ; Colors are assigned according to the following criteria: Dark Red, bottom 10th
28
percentile rank; Light Red between 10th and 25th ; Orange, between 25th and 50th ; Yellow, between 50th and 75th ; Light Green between 75th and 90th ;
Dark Green above 90th.
Another ‘Macro’ Evidence-Based approach at WBI—KAM
Kenya : Knowledge Economy Indexes and Pillars
Source: KAM website (www.worldbank.org/kam) – Basic Scorecard mode
29
Knowledge Economy Index and pillar contribution
Souce: KAM website (www.worldbank.org/kam) – Cross country comparison mode
30
2nd Level: The ‘Mezzo’ Empirical Assessment
• More detailed institutional vulnerability
assessment possible
• Comparative across over 100 countries
• Annually
• Cluster Comparative Analysis permits
identification of (relative) vulnerabilities
• Illustrating Kenya and Chile
31
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Percentile Rank (0-100)
Kenya – the ‘Mezzo’ Level of CE Assessment – 22 clusters
100
50
0
32
Source: EOS 2003 WEF, preliminary. Percentile ranks based on comparative performance
among the 103 countries in the sample. All variables rated from 0 (very bad) to 100
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Percentile Rank (0-100)
Chile – the ‘Mezzo’ Level of CE Assessment; 22 clusters
100
50
0
33 in the
Source: EOS 2003 WEF, preliminary. Percentile ranks based on comparative performance among the 103 countries
sample. All variables rated from 0 (very bad) to 100 (excellent).
Politics Can be Measured as Well, and it Matters
Inequality of Influence: a major governance challenge
% of Firms that
report extent of:
Illegal Political Financing
(Legal) Political Financing Influences Policy
100
Firms' Capture of laws/Policy/Regulation
Pervasive
55
Not a
problem
10
OECD
East Asia Industrialized
East Asia Developing
Former Soviet Union
Eastern Europe
Latin America
34
3rd Level: Country Diagnostics
• Key to Localize Know-how
• Key Input to Action program, Monitoring
• One country at the time; staff and resource
intensive
37
Key Features of 3-survey Governance,
Anticorruption and Institutional Diagnostics
• Three surveys: households, firms, and public
officials [‘triangulation’]
• Questions can be chosen to focus on experience
and/or perceptions
• Specially designed and tested closed questions,
thoroughly piloted and adapted to local realities
• Rigorous technical requirements in implementation
• Local institution implements, with World Bank
guidance
• Recognizes multidimensionality of governance
Type of information elicited (1)
• Households
– Experience on interactions with state bodies for
health care, education, driver’s licence, police,
courts, social benefits, and other agencies
– Payments solicited, where, how much and how
frequently
– Clarification of what people consider to be
corruption, perceptions of levels, their sources of
information on corruption, extent of knowledge of
their rights, duties, and possible recourse
39
Type of information elicited (2)
• Enterprises
– Experience with customs, tax, procurement, courts,
inspections, licences and permits
– Payments solicited, where, how frequently, how
much paid
– Quality of govt. services, level of red tape
– Ways in which firms make their views known (e.g.
through business associations)
– Private sector perspectives on state initiatives
40
Type of information elicited (3)
• Public officials
– How hiring and firing decisions are made
– How “mission-oriented” the body is
– What complaint mechanisms or public
consultations exist
– What types of problem and risks officials
perceive as the worst affecting their
organizations
41
Implementation steps (1)
• Define objectives, scope, terms of
reference
• Issue tender for work by local
firm/institution
• Review existing standard questionnaires
and adapt to local objectives and
conditions, commission review by local
experts before questionnaire finalized
• Determine size of sample relative to
degree of stratification desired: e.g. by
region, sector, size/type of firm, income
level; for public officials, level of govt.,
42
Implementation steps (2)
• Sample size: usually a minimum of 1000
households, 400 enterprises, 400 officials
• Pilot in variety of situations (e.g.
urban/rural, high income/low income) and
review results, discuss quality of results
with focus groups
• Be prepared to revise radically or abandon
if data quality too poor
• Launch surveys (face-to-face more
effective than mail or telephone)
• Respondents must feel confident of
43
anonymity if results are to be reliable
Implementation steps (3)
• Code data, produce statistical
transformations, graphs
• Analyze and write up for draft report
• Usually discuss with focus groups to
bring out underlying issues
• Resources needed ? Depends on
local costs, size of survey (was
$60,000 in several ECA countries)
• Time taken: 6-9 months
44
The power of diagnostic data and
key dimensions for analysis
•
•
Unbundle corruption by type – administrative
level corruption, capture of the state, bidding,
theft of goods and public resources, purchase
of licenses and regulations
Identify both weak institutions (in need of
reform) and strong institutions (example of
good governance)
The power of diagnostic data and key
dimensions for analysis (con’t)
•
•
•
Assess the cost of each type of corruption on
different social and economic groups
Identify key determinants of good governance
Help to develop policy recommendations
The reality of institutional vulnerabilities
vary greatly from country to country…
some illustrations from diagnostics...
The “Bribe Fee List”
Unofficial Payments by Enterprises
for Official Licenses and Services, Ukraine and Russia
1996
Average "unofficial" fee
required for “favor”
Russia
Ukraine
"Unofficial fee": type of license/"favor"
Enterprise registration
Each visit by fire/health inspector
Tax inspector (each regular visit)
Each phone line installation
Lease in state space
(sq. meter per month)
Each export
registration/consignment
Each import
registration/consignment
Domestic currency loan from bank
(preferential terms)
Hard currency loan (preferential terms)
$ 288
$ 67
$ 176
$ 42
$ 250
$ 1,071
$ 87
$ 894
$
$
26
7
$ 643
$ 123
$ 133
$ 278
8%
4%
23%
4%
Romania: Disproportionally Negative Impact on the Poor
% Dissuaded from
Medical Services
% of Income in bribes
15%
50%
40%
10%
30%
20%
5%
10%
0%
low
income
medium
income
high
income
0%
low
income
medium
income
high
income
Misgoverned vs. well Governed Agencies in Ecuador
(as ranked by public officials, 2000 diagnostic)
The Transit Commission of Guayas
Congress
Transit Council
Customs
Police
Petroecuador
The President of the Republic
Ombudsman
NGOs
Army
The Church
Professional Oranizations
0
10
20
30
40
50
60
% reporting that the agency is very corrupt
70
80
Understanding Causal Factors in CE and
Governance Underperformance
• Illustrating the extent to which political
determinants, meritocracy, transparency,
and voice and accountability matters
51
New Diagnostic Tools permit measuring important dimensions
of capacity – illustration #1 from Bolivia diagnostics:
How Politicized Agencies exhibit Budgetary Leakages
Yellow columns depict the unconditional average for each category. Blue line depicts the controlled causal effect
52 from
X to Y variables. Dotted red lines depict the confidence ranges around the causal effect depicted by the blue line.
Illustration of empirical analysis based on diagnostic:
Users’ Feedback to Public Agencies Helps Control Bribery
50
Bribery
40
30
20
10
Low
Moderate_Low
Moderate_High
High
Voice / External Accountability
Simple Average Association
Control Causal Link
Margin of Error
Based on 90 national, departmental, and municipal agencies
covered in the Bolivia Public Officials Survey.
Citizen Voice Improves Accessibility of Public
Services to the Poor
Accessibility to the Poor
100
r = 0.54
80
60
Controlled
Causal
Link
40
20
0
10
20
30
40
50
60
70
80
90
Voice / External Accountability
Based on Public Officials Survey. The sample of institutions includes 44 national, departmental,
and municipal agencies which are a prior anticipated to be accessible to the poor
54
Transparency within Government Agencies
Prevents Purchase of Public Positions
18
Job Purchase
15
12
9
6
3
Low
Moderately Low
Moderately High
High
Internal Transparency
Simple Average Association
Control Causal Link
Margin of Error
Based on 90 national, departmental, and municipal agencies covered in the Public Officials Survey.
55
Evidence-Based: it has contributed some
1. Institutions Matter Enormously – but major
challenge to identify the how, which, where…
2. Debunked Myths and popular misconceptions
3. Suggested new approaches and strategic focus
4. Donor rethinking on aid effectiveness; aid
allocation; capacity enhancement
5. De-emotionalize/De-personalize/De-verbosize
6. Dialogue with state leaders
7. New field of rigorous empirical research
-- But still tough ‘tradeoffs’ within the Bank…
56
The ‘Dividend’ of Good Governance
Infant Mortality and Corruption
Per Capita Income and
Regulatory Burden
90
80
12,000
70
10,000
60
8,000
50
40
6,000
30
20
4,000
10
2,000
0
0
Weak
Development
Dividend
x
Average
Good
Control of Corruption
Weak
x
Average
Regulatory Burden
Development
Dividend
Literacy and Rule of Law
Good
Per Capita Income and
Voice and Accountability
100
10000
9000
75
8000
7000
6000
50
5000
4000
25
3000
2000
1000
0
0
Weak
x
Development
Dividend
Average
Rule of Law
Good
Weak
x
Development
Dividend
Average
Strong
Voice and Accountability
Note: The bars depict the simple correlation between good governance and development outcomes. The line depicts the
predicted value when taking into account the causality effects (“Development Dividend”) from improved governance to better
development outcomes. For data and methodological details visit http://www.worldbank.org/wbi/governance.
57
Transparency, Parliaments, Corporate Ethics, and GDP Growth
Annual GDP Growth (%)
5
Transparent Information by Government
Effective Parliamentary Oversight
Corporate Ethics
3
1
Low
Middle
High
Extent of Transparency
58
Source: Annual GDP growth over 1999-2001 WDI 2002; GDP is computed in PPP terms. The various transparency / governance
variables drawn from Executive Opinion Survey, 2002.
No Evidence to support some ‘popular’ notions
1. Constant drafting of new A-C laws/regulations
2. Creating many new Commissions & Agencies
3. Blaming Globalization
4. Blaming (or stopping) Privatization
5. Cultural Relativism (Corruption is ‘culturally-determined’)
6. Blaming History or Regional Characteristics…
by contrast, what may be particularly important (cont…)
59
In sum, strategies that can work
1. Transparency Mechanisms (e*governance, data)
2. Democratic Accountability & Collective Action
(Judcry, Legislative, Exec, Private, CS)
3. Judicial Independence (& good rule of law institutions)
4. Budgetary Reforms & Meritocracy in Public Sector
5. Addressing the challenge of State Capture
6. Decrease Regulatory Burden on Firms
7. Focus on Prevention & Incentives
8. Political Finance Reform
9. Private Firms, Multinationals, Corporate Ethics
10. IFI, G-7, OECD Responsibility (Global Compact)
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Challenges for us at WBI
Scaling up in some key dimensions, across all activities:
1. Evidence-based activities: from 4% to 25% in a
year, then to 50% in 2 years? [& lessening PCC…]
2. Action Program/Action Plan content: from 9% to
20% in a year, then to one-third in 2 years?
3. Substantive Institution-Building Content: …%…%
4. Mainstreaming Governance in thematic learning
5. Evidence-based input to ROC/OC/CASes [++]
6. The Web as central tool
7. Substantive/tough input to Bank policy formulation
8. OECD, G-7, UN, NATO, WEF – [non-governance..]
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