Can the World Bank Pay for Results or Will Critics Make It Impose Conditions?

Recently my colleague Alan Gelb and I attended a consultation at the World Bank’s annual meeting of its proposed “Program-for-Results” (P4R) policy. This is a remarkable step for the World Bank – the first time in 30 years that it is proposing a significantly new lending instrument. For now, the Bank can disburse funds to clients for expenditures on inputs (investment loans) or when those clients have enacted policies (policy loans). The new proposal would allow the Bank to disburse against “results” – which they suggest could include such things as reductions in under-five mortality, time required to start a business, or implementation of improved procurement systems. They are seeking feedback on this proposal, so if you have an opinion, this is your chance to weigh in.The proposal is a way to implement calls for development assistance to be more clearly focused on achievements. All too often, programs finish disbursing without clearly contributing to development – either because the activities and policy changes did not have the expected effect or because no one accurately measured the intervention’s impact. Paying for results (as Nancy Birdsall and I have argued in the context of the COD Aid proposal) has the benefit of focusing attention on measuring what you’re trying to achieve and only disbursing in proportion to the amount of success. It also has the benefit of giving countries greater latitude to choose their own strategies and learn by assuming full responsibility for their development programs.At the World Bank meeting, I expected to hear many of the same criticisms that have been raised against COD Aid (and to which we have responded in COD Aid FAQs). Most of these critiques can be addressed in the way the program is structured and by choosing the right indicator. But many critiques actually have little to do with paying for results and are equally (if not more) problematic for investment and policy loans.However, these were not the problems raised by participants in the consultation meeting, who came from many different regions and who were affiliated with a range of civil society groups, NGOs, research centers, private foundations and public agencies. Instead, most of the comments ignored what I see as the primary question – whether paying for results might be a better (or worse) way of promoting development – and focused instead on how the new instrument could undermine the Bank’s ability to enforce environmental, social, and managerial conditions. The Bank’s own concept paper spends more time explaining how it will assure that all Bank policies are addressed than it does on critical aspects of paying for results, such as the criteria for indicators and acceptable verification methods.What I saw emerge in the discussion was a tension between programs that encourage greater country ownership by disbursing against results and those that impose external conditions by disbursing against expenditures. The advantage of real country ownership is that countries go through their own unique processes of institutional development, find the social and political mechanisms most suited to improving domestic accountability, and experiment with indigenous approaches to solving their problems (rather than just mimicking institutions adopted in rich countries).Most of the comments at the consultation seemed to ignore this side of the proposal. They focused, instead, on the risks of real country ownership: that governments or elites will abuse human rights, exploit the environment, and strengthen their exclusive hold on power. I know that these risks are real, but I think they are less likely for results approaches (as long as they require independent verification). In contrast to policy and investment loans, programs that disburse against results only disburse to governments that fulfill their commitments to provide services and accomplish things. Existing instruments, with all their safeguards and conditions, have proven quite agreeable to many abusive governments. Let’s try something different.