The Role of the World Bank in Fragile and Conflict-Affected States Alastair McKechnie Director Fragile and Conflict-

1.  The Role of the World Bank in Fragile and Conflict-Affected States Alastair McKechnie Director Fragile and Conflict-affected States Group http://www.worldbank.org/fragilityandconflict

2. One of the Strategic Themes: �We need to address the special problems of states coming out of conflict or seeking to avoid the breakdown of the state. When the visionaries at Bretton Woods conceived of the IBRD over 60 years ago, the �R� stood for the reconstruction of Europe and Japan. Today, the �R� points us toward the challenge of reconstruction in states harmed by modern conflicts. � Robert Zoellick October, 2007

3. Conflict: Development Dimension Paul Collier�s research on the economics of civil war: 73% of people in the bottom billion have recently been through a civil war or are still in one A typical low-income country face a risk of civil war of about 14% in any five-year period . Each percentage point added to the growth rate knocks off a percentage point from this risk Risk of renewed conflict in post conflict countries is high�50 % of post-conflict countries relapse into conflict within 10 years. High rate of unemployed youth has a significant correlation with conflict onset Feasible actions could be taken to substantially reduce the global incidence of civil conflicts. The direct cost of a conflict in a typical developing country is about $60billion More than four-fifths of fragile IDA countries are or have been subject to conflict. For stronger performers, sharing a border with a fragile state is estimated to cause a loss of approximately 1.6 % of GDP per annum.

4. The World Bank�s role The World Bank was established with a specific mandate for post-conflict reconstruction � the �R� in IBRD, the International Bank for Reconstruction and Development Concessional financing and grant window channels resources to poorest countries � International Development Association, IDA Wide range of countries around the world, facing different challenges of fragility and conflict Activities financed have included economic governance and public finance systems; civil service reform and capacity-building; infrastructure rehabilitation; private sector recovery; service delivery; DDR; and safety nets for vulnerable groups Joint coordination of post-conflict recovery planning with the UN and key bilaterals

5. Understanding �fragile states�? Historically, the Bank�s post-conflict unit provided a semi-annual monitoring report on conflict-affected situations to the Board of Executive Directors, using information reported by the country teams. Based on the 2002 Task Force on Low Income Countries under Stress, the Bank began to focus analytical and operational attention on �fragile states�, the low-income countries with the weakest policies and institutions. We use the same multi-variable index, the Country Policy and Institutional Assessment (CPIA), that we use to monitor all low-income countries. The CPIA rankings are published each year, and are the backbone of the IDA performance-based allocation system, or PBA

6. A more refined understanding . . . Bank monitoring has always noted that there are middle-income countries with weak or no CPIA ratings, where aspects of fragility and conflict were clearly in evidence 2007 Working Group of Multilateral Development Banks anchored a consensus on broader definition that takes due account of the range of conflict-affected situations Thus, the Bank�s monitoring of �fragile and conflict-affected states and situations� includes countries with international peacekeeping or peace mediation missions We also support country teams in monitoring and responding to development challenges poised by sub-national conflicts or crises

7. The Challenge � and the Response challenge: fragile states are significantly more prone to large-scale violence and civil conflict than other low income countries; middle-income countries plagued by conflict are not able to reap the benefits of growth and development manifest in their more stable neighbors response: need for range of institutional changes � on country strategies, partnerships, human resources, and operational policies and procedures definition: low country performance and institutional assessment (CPIA) rating (threshold is a CPIA of 3.2), and/or the presence of an international peacekeeping or peace mediation mission

8. Key themes in global thinking OECD-DAC Principles of Good International Engagement in Fragile States and �Guidelines to Preventing Violent Conflict� Recognition of key linkages between development, peace and security; hence, of peace-building and state-building Recognition of the need for strengthening the speed of aid response and field presence

9. Situations of Fragility and Conflict: Towards a Differentiated Approach

10. Low-income countries emerging from conflict, or re-engaging with the international community, are eligible for exceptional IDA allocations, providing resources in addition to their �normal� performance-based allocation Special grants from IBRD surplus have been provided to West Bank and Gaza, Kosovo, Liberia, and Timor-Leste, which were either non-member territories or in arrears to the Bank Grants from surplus have also allowed the Bank to contribute to multi-donor trust funds, as in Sudan Debt-distressed countries now receive 100% grants The LICUS Trust Fund and Post Conflict Fund provide limited bridging finance until IDA or surplus funds can be engaged Pre-arrears-clearance grants from a country�s IDA allocation are also available in specific exceptional circumstances Post-conflict financing

11. Recent Bank reforms New Policy Framework Accelerated and Streamlined Procedures Strengthened Organizational and Institutional Support for country teams

12. Emerging Issues Fragility amongst middle/high income countries (Iraq, Lebanon) Sub-national fragile situations (Aceh, Mindanao, Jharkhand) Need for improved harmonization and coordination between national and international actors all along the spectrum of fragility and conflict Coordination is especially challenging in situations of deteriorating governance, where no one is sure they �have the answer�

13. Peace-building, partnerships and the Bank�s role Peacebuilding goals involve a different range of international actors, but political-security-development areas have historically been managed in stovepipes (nationally and internationally). Work is ongoing to improve coherence through closer collaboration between diplomatic, security and development actors (IFIs, bilaterals, OECD-DAC, Peacebuilding Commission, regional organizations) Country examples of partnerships to address peace-building linkages include: Support to recovery and development planning which covers political governance and security sectors (Timor, Afghanistan, Liberia, Sudan, Haiti) Ground-breaking collaboration on Common Assistance Framework in DRC Public finance capacity-building across government, including security and political governance institutions (Afghanistan, Haiti, possibly DRC, Burundi) Joint approaches on economic governance and critical infrastructure with PKOs (Liberia, Haiti)

14. Multilateral Efforts to Improve Coherence: the Post Conflict Needs Assessment (PCNA) and Transitional Results Framework (TRF) Goal: identify, prioritize and finance recovery/ reconstruction needs by defining a joint plan that national and international actors can align around Historically focused on mobilizing resources to transition from relief to reconstruction (and towards development) Emerging focus is on: Supporting the fragile peace through selective near-term actions; basing recovery plan on strong conflict analysis Building capacity in communities and institutions Supporting economic stabilization and recovery Joint national-international exercise PCNA-TRF process involves national authorities, UN, WB, bilateral and multilateral donors, regional institutions and civil society organizations

15. Democratic Republic of Congo: Bank provides support through trust funds and investment operations; there are currently no budget support operations. Funds currently made available on 100% grant basis in view of country�s debt burden, terms will be reviewed when country reaches HIPC completion point (expected as early as end-2008). Total IDA commitments amount to about US$ 1.9 billion, and support dialogue with the authorities in the areas of social sector reforms, governance, decentralization, demobilization and disarmament, infrastructure rehabilitation, natural resource management, and private sector development. Current projects include infrastructure rehabilitation, including power and roads; demobilization and reintegration; emergency support to living conditions and urban, economic and social reunification, private sector development; and social development, including multi-sectoral HIV/AIDS program and a recently approved education project. DRC�s Country Assistance Framework (CAF) brought together 17 international partners, including Bank, United Nations, and key bilaterals including USAID, in a common strategic approach for economic assistance in the post-elections period. The CAF is expected to be the framework for over 95% of ODA to DRC over the next three years, and is viewed as a ground-breaking step in donor harmonization and coordination.

16. Afghanistan: As of January 9, 2008 the World Bank had committed US$1.6 billion in IDA assistance to Afghanistan, financing 30+ projects in public administration, infrastructure, education, health, customs, transport, and rural development. Rural and transport sectors are two largest shares largely due to the successful implementation of the two nation-wide programs: National Solidarity Program (NSP) supports development of community demand-driven rural infrastructure and community level governance, National Emergency Employment Program (NEEP) provides short-term employment opportunities to the vulnerable segments of rural population through rural roads rehabilitation and reconstruction. Bank also administers Afghanistan Reconstruction Trust Fund (ARTF), on behalf of 27 donors (including USA), effective May 2002. ARTF provides coordinated funding support to Afghanistan�s recurrent budget, as well as investments in line with agreed budget priorities. The National Solidarity Program II and the Microfinance Project are the two fast-disbursing programs in the ARTF. Bank also actively engaged in analytical and advisory services; Gender Assessment released January 2006; analytical work on Fighting Corruption is underway

17. Liberia: World Bank�s program in Liberia supports Government�s post-conflict transitional program: Economic Revitalization, including: rebuilding basic public financial management and procurement systems; and support for reform in the forestry sector Governance and Rule of Law, including: civil service and legal and judicial reform Infrastructure and Basic Services, including: emergency road rehabilitation; urban works; community development; and emergency support to the health sector. Since reengagement in 2004, Bank has made available more than US$ 140 million in grant funding both from trust funds and IDA grants. IDA special post-conflict funding (both pre-and post-arrears clearance) is on 100 % grant financing terms and annual commitment totals around $35 million. Liberia�s first post-war Development Policy Operation approved Dec 2007, cleared the country�s arrears totaling $400 million. High female illiteracy and low female enrolment in secondary education; sizeable group of adult women and adolescent girls unprepared for social and economic opportunities World Bank partnering with Nike Foundation on $3m project to provide adolescent girls and young women with skills training for wage employment and entrepreneurship.

18. Liberia (2): Bank program in Liberia seen as �good practice� example of collaboration and coordination in four specific ways: post-conflict needs assessment and recovery planning in 2003 covered critical spectrum of economic, social, security, and political challenges with close involvement of bilaterals incl USA aggressive response to deteriorating governance and corrupt public finance under transitional government before 2006 elections was a tight collaboration between USA, EC, Bank, Fund, with political cover from UN and ECOWAS Bank country office in constant strategic and operational contact with USA (State, Treasury, USAID) & other key bilaterals (EC) pioneering collaboration between Bank, UN Department of Peacekeeping Operations, UNDP, and Government to undertake critical road repairs using assets from peacekeeping and development actors together

19. Kosovo The Bank began operations soon after the conflict in 1999. The Bank has provided IDA grants amounting to $132 million under UNSC Resolution 1244 (1999), and IFC has invested $51 million in the private sector in a range of small and medium enterprises, among other sectors. The Bank's current active portfolio of grants amount to $51 million and include projects in education, energy, environment, public expenditure management, and business and cadastre development. The Bank strategy in Kosovo is implemented in partnership with a host of partners, including the EC, USAID, DFID, SIDA, the Dutch Office, etc, and with the Kosovo authorities (The Kosovo Government and UNMIK), to support programs primarily focused on strengthening the macroeconomic stability through sound fiscal policy and public finance management, and develop sources of economic growth in the short to medium terms. The Bank�s current strategy focuses on the demonstration of gradual but steady improvements in the capacity of institutions, client ownership and effective donor partnerships. The Bank, along with the European Commission (EC), is currently involved in the preparation of a Kosovo's Donors Conference slated for July 11, 2008.

20. Sudan: Darfur In July 2006, the World Bank, African Development Bank and UN, with support from many donors, embarked on a Joint Assessment Mission ( DJAM), which was suspended in September 2006 because of the increased conflict and insecurity in Darfur: The Bank report on �Dimensions of Challenge for Development: Background Volume� in June 2007, contains the diagnosis of the six sector teams on the issues facing reconstruction and development in Darfur. The DJAM has been supported by a core coordinating group (CCG), including the Government of National Unity, the UN, the World Bank, AfDB, the African Union and selected donors, chaired by Netherlands. A LICUS grant for the African Union supports the Darfur-Darfur Dialogue and Consultations, as well as other peace-building activities, and provides for possible technical assistance for the Darfur peace negotiations. A Post-Conflict Fund (PCF) grant supports research and knowledge dissemination on institutions and key aspects of the socio-economy of Darfur. The grant is also intended to build the capacity of local partners in Darfur, particularly NGOs and CBOs, to prepare development programs Additional work to fill knowledge gaps is currently under way to enable operational readiness to quickly start reconstruction and development activity when peave and security are restored in Darfur.