World Bank Engagement at the State Level The Cases of Brazil, India, Nigeria, and Russia http://www.worldbank.org/ieg 2010 http://www.ifc.org/ieg The World Bank http://www.miga.org/ieg Washington, D.C. ©2010 The International Bank for Reconstruction and Development / the World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: [email protected] All rights reserved 1 2 3 4 5 10 09 08 07 This volume, except for the “Chairperson’s Comments,” is a product of the staff of the Independent Evaluation Group of the World Bank Group. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. This volume does not support any general inferences beyond the scope of this evaluation, including any references about the World Bank Group’s past, cur- rent, or prospective overall performance. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: [email protected]. Cover: Illustration by Nip Rogers, ©Images.com/Corbis, reproduced by permission. ISBN-13: 978-0-8213-8224-0 e-ISBN: 978-0-8213-8225 DOI: 10.1596/978-0-8213-8224-0 Library of Congress Cataloging-in-Publication data have been applied for. World Bank InfoShop Independent Evaluation Group E-mail: [email protected] Communication, Learning, and Strategy (IEGCS) Telephone: 202-458-5454 e-mail: [email protected] Facsimile: 202-522-1500 Telephone: 202-458-4497 Facsimile: 202-522-3125 Printed on Recycled Paper Contents v Abbreviations vii Acknowledgments ix Foreword xi Executive Summary xvii Chairperson’s Comments: Informal Subcommittee of the Committee on Development Effectiveness (CODE) 1 1 Introduction 4 Scope and Objective of the Evaluation 5 Structure 9 2 Which States? Evolution of the Bank Strategy 11 Brazil 13 India 16 Nigeria 18 Russia 20 Conclusions 23 3 The Scope of Bank Engagement 25 Fiscal Reform 34 Multisector Engagement at the State Level 37 4 Modalities of State-Level Engagement 39 Evolution of Instruments 46 Partnership 47 5 Summary of Findings 49 Future Research Agenda 50 Findings 107 Endnotes 113 Bibliography iii WORLD BANK ENGAGEMENT AT THE STATE LEVEL Boxes 26 3.1 Increasing Use of Earmarked Transfers in India and Russia 27 3.2 The Fiscal Adjustment Program in Brazil 28 3.3 Analytic Work on Fiscal Federalism in Russia 33 3.4 Improved Governance in the Fiscal Area in Orissa 35 3.5 The Bank Program in Andhra Pradesh 40 4.1 Multisector SWAp 41 4.2 Minas Gerais—From Management Shock to Results-Oriented State 45 4.3 Bank Engagement in Bihar: An Example of Effective Partnership 50 5.1 Client Views Figure 11 2.1 Distribution of Projects by State Tables 4 1.1 Bank Lending to State/Provincial Governments (1998–2008) 10 2.1 Comparative Data on Population and Gross Domestic Product per Capita in States/Regions 12 2.2 Evolution of Bank Engagement in Brazil, Fiscal 1998–2008 15 2.3 Evolution of Bank Engagement in India, Fiscal 1998–2009 17 2.4 Evolution of Bank Engagement in Nigeria, Fiscal 1998–2008 19 2.5 Evolution of Bank Engagement in Russia, Fiscal 1998–2008 44 4.1 Average Preparation and Supervision Costs of State- and Federal-Level Projects, Fiscal 1998–2008 Appendixes 53 A Portfolio Performance 55 B Key Fiscal Indicators and Legal Framework at the State Level 57 C The Global Financial Crisis and State-Level Lending 59 D Countries at a Glance 69 E Key State Social and Economic Indicators 75 F Distribution of Projects by States 95 G Fiscal Responsibility Law—Brazil 97 H Partnerships with Other Development Agencies 101 I People Met iv Abbreviations AAA Analytic and advisory activities ADB Asian Development Bank AfDB African Development Bank AusAID Australian Agency for International Development CAE Country Assistance Evaluation CAF Andean Development Corporation CAS Country Assistance Strategy CASPR Country Assistance Strategy Progress Report CIDA Canadian International Development Agency CMSIDP Ceará Multisector Social Inclusion Development Project CODE Committee on Development Effectiveness CPS Country Partnership Strategy DFID Department for International Development (U.K.) DPL Development policy lending/loan EBRD European Bank for Reconstruction and Development EC European Commission ESW Economic and sector work FFRFRP/L Fiscal Federalism and Regional Fiscal Reform Project/Loan FRL Fiscal Responsibility Law GDP Gross domestic product GSDP Gross state domestic product IBRD International Bank for Reconstruction and Development IDA International Development Association IDB Inter-American Development Bank IEG Independent Evaluation Group (World Bank Group) IFC International Finance Corporation ILO International Labor Organization IMF International Monetary Fund JBIC Japan Bank for International Cooperation MDGs Millennium Development Goals MGDPL Minas Gerais Development Policy Loan NGO Nongovernmental organization PAF Fiscal adjustment program PBL Policy-based lending PER Public Expenditure Review RFRF Regional Fiscal Reform Fund RFTAP Regional Fiscal Technical Assistance Project SAL State-level adjustment loan SEEDS State Economic Empowerment and Development Strategy SIDA Swedish International Development Agency SWAp Sectorwide approach UN United Nations USAID U.S. Agency for International Development WHO World Health Organization All dollar ($) amounts are in U.S. dollars. v View down central boulevard with high-rise construction in the background, Russian Federation. Photo by Yuri Kozyrev, courtesy of the World Bank Photo Library. Acknowledgments This report was prepared by the Independent Tapas Sen (India), Olufemi Taiwo (Nigeria), and Evaluation Group Country Evaluation and Regional Galina Kurlyandskaya (Russia). Relations evaluation team: Konstantin Atanesyan (Task Team Leader, Senior Evaluation Officer), Ravi Kanbur (Cornell University), Steven Webb Basil Kavalsky (consultant), and Sarwat Jahan (con- (Adviser, LCSPS), and Thomas O’Brien (Manager, sultant). It is based on the results of field visits to SARDE) were the peer reviewers. Sarwat Jahan and all four countries and interviews with key local Tim De Vaan provided data and research assis- (federal and state) counterparts and Bank teams. tance. Cecilia Tan and Corky de Asis provided administrative support and William Hurlbut pro- The study draws extensively on four country back- vided editorial support. Caroline McEuen edited ground papers prepared by Joao Oliveira (Brazil), the report for publication. Director, Independent Evaluation Group-World Bank: Cheryl Gray Senior Manager, IEG, Country Evaluation and Regional Relations: Ali Khadr Task Manager: Konstantin Atanesyan Note: Vinod Thomas, Director-General, Evaluation, The World Bank Group, was recused from management oversight of the evaluation owing to his prior association with the Brazilian program as country director. vii The Women in Movement Project sponsors an AIDS prevention clinic, Brazil. Photo by Alejandro Lipszyc, courtesy of the World Bank Photo Library. Foreword This report summarizes the past 10 years lending, the aim being to derive synergies from (1998–2008) of World Bank engagement at the the mix. The instruments deployed by the Bank state level in four selected large federal coun- evolved over the review period and included tries: Brazil, India, Nigeria, and Russia. This pilot state-level development policy loans, multisector cross-country study combines elements of a coun- results-based investment lending, and reim- try assistance evaluation and a thematic review, bursable technical assistance. There was consid- looking at the evolution of four country strategies erable successful innovation in the development as well as the Bank’s state-level operations. The of the instruments used, yet little knowledge evaluation limited its review to selected cases of sharing among countries. lending and analytic work where the state gov- ernments were the principal partners of the Bank The report identifies lessons and good practice ex- and the primary party responsible for develop- amples that warrant further examination and ment outcomes. wider dissemination. First, the study confirms the desirability of continued selective lending in Evaluating state-level engagement posed several a few focus states. The Bank’s engagement with strategic and operational questions, among them progressive, reformist states has added value and the selection of states,