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Millennium Development Goals MDGs Goals and Targets from the

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									      TARGET 1           Halve, between 1990 and 2015, the proportion of people whose income is less than $1 a day
      TARGET 2           Halve, between 1990 and 2015, the proportion of people who suffer from hunger


      TARGET 3           Ensure that by 2015, children everywhere, boys and girls alike, will be able to complete a full
                         course of primary schooling


      TARGET 4           Eliminate gender disparity in primary and secondary education, preferably by 2005, and at all
                         levels of education no later than 2015


      TARGET 5           Reduce by two-thirds, between 1990 and 2015, the under-five mortality rate


      TARGET 6           Reduce by three-quarters, between 1990 and 2015, the maternal mortality ratio


      TARGET 7           Have halted by 2015 and begun to reverse the spread of HIV/AIDS
      TARGET 8           Have halted by 2015 and begun to reverse the incidence of malaria and other major diseases


      TARGET 9           Integrate the principles of sustainable development into country policies and programs and
                         reverse the loss of environmental resources
      TARGET 10          Halve by 2015 the proportion of people without sustainable access to safe drinking water and
                         basic sanitation
      TARGET 11          Have achieved a significant improvement by 2020 in the lives of at least 100 million slum dwellers


      TARGET 12          Develop further an open, rule-based, predictable, nondiscriminatory trading and financial system
                         (including a commitment to good governance, development, and poverty reduction, nationally
                         and internationally)
      TARGET 13          Address the special needs of the least developed countries (including tariff- and quota-free access
                         for exports of the least developed countries; enhanced debt relief for heavily indebted poor
                         countries and cancellation of official bilateral debt; and more generous official development
                         assistance for countries committed to reducing poverty)
      TARGET 14          Address the special needs of landlocked countries and small island developing states (through the
                         Programme of Action for the Sustainable Development of Small Island Developing States and the
                         outcome of the 22nd special session of the General Assembly)
      TARGET 15          Deal comprehensively with the debt problems of developing countries through national and
                         international measures to make debt sustainable in the long term
      TARGET 16          In cooperation with developing countries, develop and implement strategies for decent and
                         productive work for youth
      TARGET 17          In cooperation with pharmaceutical companies, provide access to affordable, essential drugs in
                         developing countries
      TARGET 18          In cooperation with the private sector, make available the benefits of new technologies, especially
                         information and communication


Source: United Nations. 2000 (September 18). Millennium Declaration. A/RES/55/2. New York.
United Nations. 2001 (September 6). Road Map towards the Implementation of the United Nations Millennium Declaration. Report of the Secretary
General. New York.
Note: The Millennium Development Goals and targets come from the Millennium Declaration signed by 189 countries, including 147 heads of
state, in September 2000. The goals and targets are related and should be seen as a whole. They represent a partnership of countries determined,
as the Declaration states, “to create an environment—at the national and global levels alike—which is conducive to development and the elimi-
nation of poverty.”
                                                   Report Overview



                                                      Yet in spite of this optimistic outlook, the
Broad-based global economic growth in              international community faces a much more
2006, and more generally since 2000, pro-          demanding agenda in advancing the MDGs as
vides grounds for optimism about progress          2015 draws nearer. Despite progress, nearly 1
in advancing the Millennium Development            billion people remain in extreme poverty. All
Goals (MDGs). For low-income countries,            regions are off track to meet the target for
real per capita income growth in Sub-Saha-         reducing child mortality; nutrition is a major
ran Africa and South Asia has been stronger        challenge, with one-third of all children in
in the period since 2000 than at any time          developing countries underweight or stunted;
since the 1960s, and stronger than at any time     half the people in developing countries lack
since transition in Europe and Central Asian       access to improved sanitation.
countries. Based on this strong growth per-           Action to scale up development efforts
formance, the estimated number of extremely        needs to accelerate, but steps forward still
poor people (living on $1 per day) fell by 135     appear tentative. Nearly seven years after
million between 1999 and 2004.                     the Millennium Summit and five years after
   Although still uneven, progress with pov-       the Monterrey summit, there has yet to be a
erty reduction is evident across all regions.      country case where aid is being significantly
Sub-Saharan Africa reduced the share of peo-       scaled up to support a medium-term pro-
ple living in extreme poverty by 4.7 percentage    gram to reach the MDGs. While there has
points over five years to 41 percent, although      been modest progress in Paris or Brussels or
high population growth left the same absolute      London to address the well-recognized prob-
number of poor, at nearly 300 million. South       lems in designing and delivering international
Asia, Latin America, and East Asia all appear      aid—proliferation of aid channels, weak
to be roughly on track to halve extreme pov-       coordination, lack of resource predictability,
erty by 2015 from 1990 levels. Europe, Central     misalignment with country strategies, and so
Asia, and the Middle East and North Africa         on—viewed from the capitals of Ethiopia,
have largely eliminated extreme poverty. There     Madagascar, or Bolivia, this progress appears
are also hopeful signs that international devel-   to be slow.
opment efforts may be gaining momentum,               This Global Monitoring Report (GMR)
and new innovations in resource mobilization       highlights two areas that require greater inter-
for development are taking shape.                  national attention if higher global growth
trends are to translate into sustainable devel-   about environmental policies that are beyond
opment outcomes and if the gains are to be        the scope of this report but may be tackled in
shared more evenly:                               future GMRs.
                                                     Risks from failure to advance multilateral
  Gender equality. The first of these arises       trade liberalization and expand market access
  from gender inequality and lost opportu-        are also highlighted in this year’s report. The
  nities for all people to help generate and      Doha Round of trade negotiations was effec-
  participate in the gains from economic          tively suspended in July 2006, but early in
  growth. The choice to focus the 2007            2007 there was an informal agreement to
  report on the third MDG—the promotion           resume talks. Failure to make progress means
  of gender equality and empowerment of           depriving many countries of vital opportuni-
  women—reflects a recognition by the inter-       ties for accelerating their growth through
  national community that more is needed          trade.
  to support equality for the half of human-         To address these risks and advance the
  ity disadvantaged through less access than      MDG agenda there is a pressing need for bet-
  men to rights (equality under the law), to      ter aid coordination to strengthen aid quality
  resources (equality of opportunity), and to     and scale-up assistance. This requires efforts
  voice (political equality).                     by all parties—donors, international financial
  Fragile states. The second risk arises          institutions (IFIs), and developing countries.
  from the especially difficult development        Agreement needs to be forged at the global
  challenges and greater needs facing frag-       level on practical mechanisms and instruments
  ile states. Fragile states—countries with       to scale up aid and on measures to reduce the
  particularly weak governance, institu-          costs of aid fragmentation. Progress with
  tions, and capacity—comprise 9 percent          scaling-up will require more and better aid
  of the developing world’s population but        resources (donors); sound, sequenced devel-
  over one-fourth of the extreme poor. They       opment strategies (developing partners); bet-
  represent an enormous challenge: how            ter technical support for strong strategies (the
  can the international community provide         IFIs); and a more coherent “aid architecture”
  resources to support efficient service deliv-    to reduce the costs of fragmentation.
  ery, postconflict recovery, and reform?
  Without addressing these development
  challenges the fragile states pose risks that
  can cross borders—through civil conflicts,
                                                  Growth and Poverty Reduction
  risks to public health, and humanitarian
  crises.                                         The world economy is growing at a pace last
                                                  seen at the beginning of the 1970s. This is
   Two additional risks pertain to environ-       welcome news for developing countries in
mental sustainability and securing the gains      view of its implications for trade, aid, private
from trade liberalization. Natural resource       financial flows, and remittances. Both low-
depletion and environmental degradation           and middle-income countries have benefited
pose risks to both the quality of growth, and     from the trend. Performance varies widely
the potential for sustaining future growth.       across regions, but there is a favorable trend
Growth based on the depletion of natural          evident in East Asia, South Asia, Eastern
wealth, rather than through increasing wealth     Europe, and Central Asia, and particularly
for current and future generations, is unsus-     Sub-Saharan Africa, where the sustained
tainable. The “adjusted net savings rate”         and rising growth performance since the late
measures national savings after accounting        1990s is in sharp contrast to the weak per-
for resource depletion and damage to the          formance evident over the last three decades.
environment, raising broad policy questions       Average per capita income growth in Sub-
      Growth is reducing poverty, but not everywhere or always sustainably. Continued strong growth
  is generating significant progress in poverty reduction globally. But many countries are failing to
  benefit, especially fragile states, and for some others the sources and quality of growth (unsustain-
  able resource extraction; accumulating pollutants) undermine environmental sustainability and
  future growth potential.
      Investing in gender equality and empowerment of women is smart economics. Greater gender
  equality helps to create a fair society, raises economic productivity, and helps advance other devel-
  opment goals. Major gains have been achieved, particularly in education, while in other areas
  progress is lagging. Better monitoring and mainstreaming of women’s empowerment and equality
  into policy formulation and programs of international assistance are therefore vital to the develop-
  ment agenda.
      Fragile states are failing to keep up—speed and staffing by development agencies are critical. The
  largest “MDG deficit” is in states with weak institutions and governance, and often in conflict—the
  “fragile states.” With 9 percent of the developing world’s population, they account for over one-
  fourth of the extreme poor and nearly one-third of child deaths and 12-year olds who do not com-
  plete primary school. Efforts to support their transition from fragility must be deepened through
  improving response time to crises and opportunities, increasing field presence, better interagency
  collaboration, and building on lessons from successful state-building transitions.
      Quality lags quantity—children enroll in school but don’t always learn. Advancement in pri-
  mary school completion has been rapid and encouraging in many countries. Yet cross-country
  evaluations suggest improvement in cognitive skills has often not kept pace. Quantity and quality
  in education and health need to proceed in tandem. More effort is needed to monitor outcomes
  (especially student learning). This provides an essential platform for tracking over time whether
  policies and incentives are truly producing more effective service delivery.
      Scaling up “quality” aid requires greater coherence among donors, developing countries, and
  international agencies. Donor commitments to scaling up aid have so far been unrealized as real
  aid flows have faltered and a more complex aid architecture—proliferation of donor channels,
  fragmentation of aid, ear-marking of funds—undermines aid quality and effectiveness. Scaling-up
  aid to meet the MDGs requires more and better aid resources (donors); sound, sequenced develop-
  ment strategies (developing partners); better technical support for strong strategies (the IFIs); and
  a more coherent “aid architecture” to reduce the costs of fragmentation.



Saharan Africa has recently been at about              along with marked improvements since the
3 percent and is forecast to continue at this          late 1990s. The share of people in poverty fell
level in 2007. By contrast, growth among               by nearly 7 percentage points between 1996
low- and middle-income countries in Latin              and 2004, although the absolute number of
America, and the Middle East and North                 poor has stagnated.
Africa, continues to be more modest.                      Preliminary estimates suggest that, on
   Evidence suggests that better growth is             average, growth (in GDP) during the late
translating into declining poverty levels. The         1990s through 2003/04 resulted in lower
most recent data show that all regions except          poverty incidence: for a sample of 19 low-
for Sub-Saharan Africa are on track to reach           income countries, 1 percent of GDP growth
the MDG1 poverty target. In Sub-Saharan                was associated with a 1.3 percent fall in
Africa the share of people living in extreme           the rate of extreme poverty and a 0.9 per-
poverty has declined little from its 1980 level,       cent fall in the $2-a-day poverty rate. For
but this masks the protracted deterioration            middle-income countries the impact of GDP
during the 1980s and first half of the 1990s,           per capita growth on poverty was much less,
and average poverty has not declined with         MDGs. The two regions that lag the most
recent growth. Moreover, changes in income        are South Asia and Sub-Saharan Africa. As
distribution have not, on average, reduced        regions they remain off track on all the goals;
the impact of income growth on poverty            however, there is considerable variation
reduction in low-income countries, whereas        within regions. MDG trends in fragile states
income inequality widened on average in           are also examined; while there is variance
middle-income countries.                          within the group, fragile states have lower
   One factor behind this favorable perfor-       absolute performance and slower improve-
mance has been the continuing strength of         ment than nonfragile ones.
macroeconomic policies, as evident through           It must also be recognized that there have
continued moderate inflation rates and aver-       been some significant successes. Since 2000,
age fiscal balances that shifted from deficit       over 34 million additional children in devel-
into balance in low-income countries during       oping countries have gained the opportunity
2006. The quality of macroeconomic poli-          to attend and complete primary school—one
cies, particularly fiscal policy, in low-income    of the most massive expansions of schooling
countries shows considerable improvement          access in history. Over 550 million children
over recent years.                                have been vaccinated against measles, reduc-
   The stronger growth performance in low-        ing death from measles in Sub-Saharan Africa
income countries is encouraging, particu-         by 75 percent. By mid-2006 the number of
larly in Sub-Saharan Africa where the higher      AIDS (acquired immunodeficiency syndrome)
growth may mark a potential turnaround            patients with access to antiretroviral treat-
from the region’s protracted stagnation.          ment had increased nearly sevenfold to over
However, this has to be interpreted with cau-     1.6 million from 2001 levels. There is little
tion. Concerns persist over the potential for a   question that the MDG targets have helped
growth slowdown resulting from a disorderly       stimulate more rapid expansion of basic
unwinding of global imbalances, protection-       health and education services.
ism, the future behavior of world oil prices,        Nutrition (MDG1). Nearly one-third of
or a possible global pandemic triggered by        all children in developing countries are esti-
avian influenza.                                   mated to be underweight or stunted, and
   Optimism over the prospects for improved       an estimated 30 percent of the total popu-
growth and poverty reduction, however, does       lation in the developing world suffers from
not apply to the many fragile states. Extreme     micronutrient deficiencies. Undernutrition
poverty is increasingly concentrated in these     is not only a threat to progress with poverty
states: by 2015 it is estimated that given pro-   reduction; it is the underlying cause of over
jected growth performance, extreme poverty        55 percent of all child deaths, linking nutri-
levels in nonfragile states will decline to 17    tion directly to reduction of child mortality
percent, more than achieving the MDG1 tar-        (MDG4). In striking contrast to the region’s
get, while levels of extreme poverty in fragile   strong growth performance, the highest rates
states will remain at over 50 percent, higher     of malnutrition are found in South Asia:
than the level in 1990.                           underweight prevalence is estimated between
                                                  38 and 51 percent in the large countries, none
                                                  of which appears on track to meet the nutri-
Progress with the Human Development
                                                  tion goal. Sub-Saharan Africa is estimated to
MDGs
                                                  have a 26 percent prevalence of child mal-
Broad MDG trends do not change appre-             nutrition, and in some countries— Burkina
ciably year to year, and remain much as           Faso, Cameroon, Zambia—trends are wors-
described last year: all regions are off track    ening. East Asia, Latin America, and Eastern
on the child mortality goal, and some regions     Europe show better performance although all
are off track on at least some of the other       have some countries that are off track.
   Universal primary completion (MDG2).             2005. This success appears in large measure
Globally the primary school completion rate         attributable to implementation of the inte-
rose between 2000 and 2005 from 78 to 83            grated management of childhood illness and
percent and the pace of progress in many            points to the serious need to strengthen policy
countries has accelerated. Gains are especially     coherence and improve donor coordination
strong in North Africa, Sub-Saharan Africa,         in the health sector.
and South Asia. But 38 percent of developing            Maternal health (MDG5). Ninety-nine
countries are unlikely to reach 100 percent         percent of maternal deaths, about 500,000
primary completion by 2015 and another              annually, occur in developing countries. Lack
22 percent of countries, which lack adequate        of direct data on maternal mortality requires
data to track progress, are also likely to be off   the use of “skilled attendance at delivery” as a
track. The most intractable groups to reach         proxy measure. Survey evidence shows prog-
with primary education are those that are           ress in 27 of 32 countries but also suggests
“doubly disadvantaged”: girls from ethnic,          that this is highly concentrated among richer
religious, or caste minorities. About 75 per-       households—equity gaps in access to skilled
cent of the 55 million girls who remain out of      attendance are larger than for any other health
school are in this group. But recent data also      or education service. Evidence on the main
reveal countries that have made remarkable          constraints to reducing maternal mortality
progress in recent years; six of the seven top      in three low-income countries reaffirms the
countries in expanding primary completion           importance of early recognition of the need for
rates (all by over 10 percent per year between      emergency medical attention, access to ade-
2000 and 2005) were in Sub-Saharan Africa           quate medical facilities, and receiving appro-
(Benin, Guinea, Madagascar, Mozambique,             priate treatment. But it also underscores the
Niger, and Rwanda). The weakest performers          essential need for skilled attendance at birth.
were also primarily in Africa, however, show-           AIDS, malaria, and tuberculosis (MDG6).
ing the sharp contrasts across countries in         By end-2006 an estimated 39.5 million peo-
the region. And in Asia, Cambodia has made          ple were living with the human immuno-
exceptional progress.                               deficiency virus (HIV), up 2.6 million since
   Child mortality (MDG4). Progress on              2004. An estimated 3 million people died
child mortality lags other MDGs, despite the        from AIDS in 2006. While the spread of this
availability of simple, low-cost interventions      disease has slowed in Sub-Saharan Africa,
that could prevent millions of deaths each          it is a rapidly growing epidemic in Eastern
year. Oral rehydration therapy, insecticide-        Europe and Central Asia. Recent experience
treated bednets, breastfeeding, and common          in combating the spread of AIDS has demon-
antibiotics for respiratory diseases could pre-     strated some important messages: reversing
vent an estimated 63 percent of child deaths.       its spread is possible, treatment is effective in
Yet in 2005 only 32 of 147 countries were           the developing world, but prevention efforts
on track to achieve the child mortality MDG.        need to be intensified.
Moreover, 23 countries reveal stagnant or               Annually there are an estimated 300 to
worsening mortality rates. Problems in fragile      500 million cases of malaria, and 1.2 million
states are particularly severe: nearly one-third    deaths, mainly among children and mostly in
(31 percent) of all child deaths in developing      Sub-Saharan Africa. Several new initiatives
countries are in fragile states, and only two       hold promise for making inroads against
of the 35 states currently considered fragile       malaria: with support from the Dutch and
are on track to meet MDG4. The experience           the “Roll Back Malaria” initiative, the World
of countries that have achieved rapid gains is      Bank is leading efforts to implement a global
also noteworthy, including in Eritrea which,        subsidy for artemisinin-based combination
despite per capita income of only $190, cut         therapy, the most promising new treatment
child mortality in half between 1990 and            available because resistance to traditional
drugs has grown. The Malaria Booster Pro-          it rebounded somewhat after 2003, it still has
gram, which supports country-led efforts to        not returned to the 2000 level. Recent efforts
deliver concrete and measurable results, such      to ramp up financing for WSS, especially for
as delivery of insecticide-treated bed nets and    Africa, through such initiatives as the Africa
malaria treatment for young children and           Infrastructure Consortium and the Rural
pregnant women, is currently operating in 10       Water Supply and Sanitation Initiative—even
countries and aims to expand to 20 over the        if successful—will take some time to have clear
next five years.                                    impact on the WSS target, given the long lead
    Tuberculosis (TB) is estimated to have led     time for investments.
to 2 million deaths in 2004, and 9 million new         A continuing concern for all these aggre-
cases. While incidence of TB is falling in five     gate data is whether poor households partici-
of six regions, global growth of 0.6 percent       pate in the progress made. Demographic and
annually is attributed to rapid increases in       Health Survey data allow comparison across
infections in Sub-Saharan Africa, linked to        income quintiles on relative progress. While
the greater likelihood of TB appearing from        gaps in access between rich and poor house-
latent infections in HIV carriers. The Directly    holds remain significant, they are narrowing;
Observed Treatment, Short-course (DOTS)            the poor have had equal or faster rates of
is the main strategy to combat TB, and has         progress in child mortality reduction, immu-
expanded rapidly, with high-burden countries       nization coverage, and primary completion
showing large decreases in TB incidence due        in most countries.
to DOTS (for instance, Cambodia and Indone-
sia). In 2006 a new strain of TB—extensively
                                                   Financing Trends and Alignment in
drug-resistant TB—was discovered in South
                                                   Health and Education MDGs
Africa. International efforts to stop its spread
are being led by the World Health Organiza-        External financing for health and education
tion (WHO) and the Stop TB Partnership.            has nearly doubled in real terms since the
    Water supply and sanitation (MDG7).            MDGs were adopted. Aid for health con-
There has been significant progress on water        tinued to rise from 2004 to 2005, whereas
supply; globally access has increased from 73      education ODA commitments showed their
percent in 1990 to 80 percent in 2004, but only    first decline, reflecting lower commitments to
Latin America and South Asia are considered        China and India. Aid commitments for educa-
on track to meet this part of the goal (although   tion are expected to have increased again in
more than one-quarter of developing countries      2006 and beyond, owing in part to a major
lack data). However, within Africa there are       initiative announced by the United Kingdom.
some promising trends: 5 of the 10 countries          Funding for health has grown even more
making fastest progress are in Africa, and 17      strongly, from private sources such as the
of the 36 countries for which data are available   Gates Foundation; from global partnerships
are on or almost on track. By contrast, global     such as the Global Fund for AIDS, TB, and
progress on sanitation has lagged, increasing      Malaria; and from bilateral donors: France,
only from 35 percent in 1990 to 50 percent         Norway, Spain, and the United States have
in 2004 and only three regions (East Asia and      increased health funding between two- and
the Pacific, Latin America, and the Middle East     fourfold since 2000. Innovative financing
and Northern Africa) are on track. Only 2 of       mechanisms targeting the health sector are
the 32 African countries for which data are        also getting off the ground: the international
available are on track. Despite its importance     finance facility for immunization ($1 billion
for achievement of multiple MDGs, official          in 2006), advance market commitments for
development assistance (ODA) for water sup-        vaccines ($1.5 billion expected in 2007),
ply and sanitation (WSS) declined significantly     and the airline ticket tax implemented by 21
from the mid-1990s through 2002. Although          countries ($300 million expected in 2007) are
all mobilizing new funds for health interven-                                    Figure 1 illustrates weak learning out-
tions. Despite this influx of funds for health,                               comes and the gap across countries between
there remains a large shortfall relative to                                  education level and cognitive skills. By age
financing needs to reach the health MDGs,                                     nine reading skills in developing countries
conservatively estimated at between $25 bil-                                 can significantly lag those in developed coun-
lion and $50 billion annually.                                               tries. While over 96 percent of children in
    While increased external funding is crucial                              Sweden, Latvia, and the Netherlands can
for progress on the health MDGs, there are                                   read above the lowest—threshold—level of
growing concerns about policy coherence,                                     literacy on OECD-benchmarked tests by age
aid alignment, and transactions costs in the                                 nine, less than half the children in Argentina,
sector, given the number of players and the                                  Colombia, and Morocco can read at this
absence of effective coordination mecha-                                     level. Results from a regionally benchmarked
nisms—a topic taken up below.                                                assessment for Southern African countries
                                                                             are similarly distressing: in several countries,
                                                                             less than 50 percent of children are able to
The Role of Quality in MDG Progress
                                                                             read by age 12.
Evidence is emerging that in many countries                                      It does not follow from this that there
rapid progress in improving schooling enroll-                                exists an inherent trade-off between quantity
ment and completion is not translating into                                  and quality in education. In fact, cross-coun-
better cognitive skills. New research suggests                               try data show a strong positive correlation
that this may have a high cost for countries:                                between schooling coverage and cognitive
returns to investment in education appear to                                 skills, at least over the long term. There are
accrue to the skills of the population and not                               also numerous countries that have increased
to the quantity of schooling attained.                                       learning outcomes at the same time as they

               Learning levels of primary school–aged children




Source: Fourth-grade test: International Association for the Evaluation of Educational Achievement (IEA), Progress in International Reading Literacy
(PIRLS) 2001, Sixth-grade test: Southern African Consortium for Monitoring Educational Quality (SACMEQ). Enrollment data: Demographic and
Health Surveys.
have expanded access. While this is not easy     and create incentives to accelerate progress,
to do, and there are many cases where qual-      alongside efforts to expand school comple-
ity has been strained as countries rapidly       tion rates.
scale up access, it is important to focus on         The same concerns over quality arise in
the strategies for managing expansion better.    health care—and data are even harder to
Many poor countries are far from achiev-         collect. Creative efforts have been made to
ing universal primary completion and must        measure the quality of health care provid-
accelerate service delivery to reach the MDG     ers across countries and measure the overall
by 2015. Slowing expansion would harm the        quality of care. The extent of misdiagnosed
poorest and most marginalized groups most.       ailments, failure to complete basic check-
The challenge must be to expand access while     lists for major diseases, and mal-adherence
enhancing learning outcomes.                     to recommended protocols is alarming. The
   Progress on this challenge requires stron-    implication is that there are gaps between
ger efforts to monitor student learning in the   what health providers know is right and what
developing world; most countries today lack      they do. It suggests that greater attention to
national assessment systems and extremely        work incentives and institutional settings is
few have engaged in any internationally          needed rather than reliance on input-based
benchmarked tests. Regular tracking of stu-      approaches, such as raising training require-
dent learning is essential for accountability    ments or expanding medical schools. Perfor-
in education—for equipping teachers to man-      mance contracting is one promising approach
age their class time better, for empowering      for effectively improving health coverage and
parents to hold schools accountable, and for     quality. Greater attention is also needed to
allowing administrators to evaluate the effec-   bring greater coherence and donor coordina-
tiveness of education spending.                  tion to health sector strategies, as discussed
   There is a strong case for donor support      below.
in developing benchmarked standards of
competency linked to critical thinking skills
                                                 Governance Indicators: An Update
expected by the end of primary school—in
other words, basic learning goals for primary    Recently released aggregated governance
education to complement the quantitative         indicators (Kaufman-Kraay) suggest patterns
goal of universal primary completion. An         of performance that reinforce key messages
internationally benchmarked test to mea-         from the 2006 GMR. Governance is mul-
sure end-of-primary learning levels could be     tidimensional, and there is no unique path
expensive and technically difficult to produce,   from poor to good governance. Actionable
but there is a clear public goods argument for   indicators to track performance are being
such an investment. Precisely at a time when     developed in several areas, including contri-
the global community is scaling up aid for       butions from independent civil society orga-
the education MDG, a globally benchmarked        nizations: Global Integrity released 43 new
assessment covering large numbers of devel-      country reports, the Afrobarometer network
oping countries would provide the strongest      released the results for 18 African countries
platform yet for generating knowledge on         of its third round of surveys, and a new index
“what works” to promote learning in differ-      that monitors transparency in public bud-
ent country contexts.                            gets—the Open Budget Index—was released
   Moving a proposal for basic learning          after four years of development. The World
goals for primary education forward will         Bank Group also released publicly for the
involve costs and face political and technical   first time its Country Policy and Institutional
obstacles. But an internationally supported      Assessment (CPIA) scores—an important
effort in this area could help countries build   step in strengthening transparency and dis-
national capacity to track learning outcomes     closure of these scores, which play an impor-
tant role in allocating concessional financing.             women, families, and society. The disadvan-
By contrast, Public Expenditure and Finan-                 tage of women in rights (equality under the
cial Accountability (PEFA) assessments made                law), resources (equality of opportunity), and
less encouraging progress. While the use of                voice (political equality) restricts basic free-
PEFA indicators has greatly expanded and                   dom to choose and is unfair. This inequal-
many new country assessments are planned,                  ity is reflected in the poorer performance by
so far only 4 of 33 country reports have been              women and girls across many of the MDGs.
made public, limiting the potential benefits                   “Improving gender equality and empow-
from this valuable tool for analysis.                      ering women” (MDG3) thus stands on its
                                                           own merits as a development objective. In
                                                           addition to this intrinsic importance, gender
                                                           equality and women’s empowerment are also
                                                           important channels to attain other MDGs.
                                                           Gender equality and women’s empower-
                                                           ment promote universal primary educa-
The Importance of Promoting Gender
                                                           tion (MDG2), reduce under-five mortality
Equality
                                                           (MDG4), improve maternal health (MDG5),
The 2006 World Development Report                          and reduce the likelihood of contracting HIV/
on equity and development refers to gen-                   AIDS (MDG6).
der inequality as the “archetypal inequal-                    Improving gender equality also influ-
ity trap,” pointing to the sharp differences               ences poverty reduction and growth directly
between men and women in access to assets                  through women’s greater labor force partici-
and opportunities in many countries, and the               pation, productivity, and earnings as well as
negative consequences for the well-being of                indirectly through the beneficial effects of


                Pathways from increased gender equality to poverty reduction and growth




Source: World Bank staff.
women’s empowerment on child well-being.          Rwanda, and South Africa). Of the 14 fragile
Figure 2 identifies the main pathways lead-        states for which data are available, 9 are not
ing from gender equality to both current          expected to achieve the primary and second-
and future growth and poverty reduction.          ary enrollment targets.
One path is through increasing the produc-           The female tertiary enrollment rate lagged
tive opportunities and higher incomes that        behind the male rate in 63 countries (of 130
women have, raising consumption and sav-          countries with data) and exceeded the male
ings that help to raise investment rates.         rate in 65 countries. The female disadvantage
Another is through improving women’s              was evident mainly in Sub-Saharan Africa,
control over decision making in the house-        South Asia, and in fragile states.
hold. Several studies have shown that the            Progress in basic literacy skills and school
greater the mothers’ control over resources,      enrollments over the years has resulted
the more resources households allocate to         in higher literacy rates among youth (age
children’s health, nutrition, and education.      15–24), but gender gaps remain: the United
Better maternal education also benefits chil-      Nations Educational, Scientific and Cultural
dren through improved hygiene practices,          Organization (UNESCO) estimates that of
better nutrition, lower fertility rates, and      the nearly 137 million illiterate youths in the
hence higher per child expenditures. Taken        world, 63 percent are female. The female-to-
together, these contribute to future growth       male literacy ratio is lowest in Sub-Saharan
and poverty reduction.                            Africa, Middle East and North Africa, and
                                                  South Asia—regions that also have female
                                                  disadvantages in primary and secondary
Progress toward Meeting MDG3
                                                  enrollment.
The four official MDG3 indicators—measur-             Progress is also evident in women’s share
ing gender equality in enrollments, literacy,     of nonagricultural wage employment, which
and the share of women in nonagricultural         increased modestly in all regions during
employment and national parliaments—pro-          1990–2005, and with significant variation
vide an important, albeit incomplete, snap-       across regions and countries (figure 3). In
shot of progress toward gender equality.          2005 the share of women in nonagricultural
    Thanks to efforts to achieve universal pri-   employment was highest in Europe and Cen-
mary education (MDG2), girls’ enrollments in      tral Asia (47 percent), lowest in the Middle
all levels of schooling have risen significantly   East and North Africa (20 percent), and in-
(figure 3). Most low-income countries made         between in Latin America and the Caribbean
substantial progress between 1990 and 2005.       and East Asia and the Pacific (over 40 per-
By 2005, 83 developing countries (of 106          cent). Trends and patterns in this indicator
with data) had met the intermediate MDG3          are difficult to interpret without accounting
target of parity in primary and secondary         for country circumstances, such as the share
enrollment rates. Most of these countries         of nonagricultural employment as a percent-
are in regions where enrollment has histori-      age of total employment. A favorable score
cally been high—East Asia and the Pacific,         on this indicator might on the surface seem
Eastern Europe and Central Asia, and Latin        to indicate equitable conditions for women in
America and the Caribbean. In the Middle          labor markets, but it may capture conditions
East and North Africa, most countries met         for only a very small proportion of the total
the target by 2005, but some still have a sig-    labor force.
nificant female disadvantage in enrollments.          The fourth official MDG3 indicator is
In Sub-Saharan Africa performance has been        the proportion of seats held by women in
varied; less than one-quarter of countries met    national parliaments (with no set target).
the enrollment targets for 2005, but some         Between 1990 and 2005, all regions except
have attained parity (for example, Botswana,      Europe and Central Asia increased women’s
               Progress in official indicators of gender equality and women’s empowerment, by region,
               1990–2005




Source: World Bank Indicators. The regional averages are calculated using the earliest value between 1990 and 1995 and the latest value between
2000 and 2005. The averages are weighted by the country population size in 2005.



proportion of the seats in national parlia-                                and amenability to policy intervention. Indi-
ment, but starting from a very low level (fig-                              cators that met all the three criteria but were
ure 3). However, in no region did the average                              highly correlated with other indicators were
proportion exceed 25 percent, at either the                                dropped from the list.
beginning of the period or the end.                                            This proposed list draws on the recommen-
                                                                           dations of the UN Millennium Project Task
                                                                           Force, but is more parsimonious. It takes into
Strengthening Official Indicators
                                                                           account data availability, additionality (does
The shortcomings of the official indicators                                 it add new information), and the high costs
for monitoring progress in attaining MDG3                                  associated with imposing additional moni-
are widely recognized (see, for example, the                               toring burdens on already taxed national sta-
report of the UN Millennium Project Task                                   tistical offices. It also draws on a proposal to
Force on Education and Gender Equality,                                    refine the existing MDG indicators that was
UN Millennium Project 2005). Five supple-                                  put before the UN Secretary General’s office
mental indicators to better measure gender                                 for consideration in March 2007.
equality are proposed to address this (table                                   Four of the five indicators monitor gen-
1). These indicators, complementary to the                                 der equality in the household; the remain-
official MDG3 indicators, meet three crite-                                 ing indicator monitors gender equality in
ria: data availability (wide country coverage),                            the economy. No additional indicators are
strong link to poverty reduction and growth,                               recommended to monitor gender equality in
             Recommended additional indicators for MDG3


                                         Household                                                 Economy and markets

      Modifications of official MDG indicators         Additional indicators                    Additional indicators

      Primary completion rate                        Percentage of 15- to 19-year-old girls   Labor force participation rates
      of girls and boys (MDG2)a                      who are mothers or pregnant              among women and men aged
                                                     with their first childb                   20–24 and 25–49b
      Under five mortality rate for
      girls and boys (MDG4)
      Percentage of reproductive-age
      women, and their sexual partners,
      using modern contraceptives (MDG6)


Source: World Bank staff.
a. Recommended by the UN Millennium Project Task Force on Education and Gender Equality.
b. Under consideration by the Inter-Agency and Expert Group for MDGs.




the domain of society, because none of the                                However, in spite of strong donor policy
indicators considered for inclusion met the                            commitments to gender equality objectives,
criteria of data availability. Three of the rec-                       implementation has been disappointing.
ommended indicators are modifications of                                Self-evaluations of nine donor agencies’ per-
official indicators already being monitored as                          formance reflect a gap between words and
part of the MDGs, while two are indicators                             deeds. One of the reasons for this gap is the
not currently part of the official set.                                 diffusion of responsibility that resulted from
                                                                       the shared responsibility gender mainstream-
                                                                       ing called for: all staff were responsible for
Strengthening International Support
                                                                       promoting it, yet no one group in particular
for Gender Equality
                                                                       was held accountable for results.
The success in increasing girls’ enrollments                              These self-assessments have helped reen-
in schooling shows that progress in gender                             ergize donors’ commitments. Donors are
equality is possible. This progress, however,                          revamping their approaches and setting
requires political will (high-level leadership)                        more realistic targets to both strengthen
and concerted effort from countries and inter-                         mainstreaming and introduce specific actions
national development agencies. Donors and                              to advance gender equality. There is wide
the multilateral development banks (MDBs)                              agreement that high-level leadership, techni-
need to significantly improve the support                               cal expertise, and financial resources remain
and coordination for gender equality issues                            key to implementing donor agencies’ gender
to accelerate progress toward MDG3; these                              policies.
issues should become central in their dialogue                            The MDBs have made similar progress in
with partner countries. Since the 1995 Beijing                         advancing their support for gender equal-
Women’s conference, which marked a mile-                               ity and women’s empowerment. Systems to
stone in international commitment to gen-                              monitor progress with mainstreaming gender
der equality issues, donor support improved                            equality policies have been introduced, and
somewhat, and more resources are devoted                               suggest there has been modest but steady
to gender equality targets, particularly in the                        progress. Most MDBs have recently adopted
social sectors. Overall, a quarter of bilateral                        Gender Action Plans to make their gender
aid by sector—around $5 billion annually—                              mainstreaming policies more strategic and
is now focused on gender equality.                                     operationally effective.
   Nonetheless, significant gaps remain.                          der equality and women’s empowerment in
Progress has been greater in the social sec-                     the results agenda, in leading international
tors (especially health and education) than                      efforts to strengthen MDG3 monitoring, and
in productive sectors (agriculture, infrastruc-                  in better assisting client countries in scaling
ture, private sector development, and the                        up MDG3 interventions. The business case
like). There is also evidence that attention to                  for MDBs’ investments in MDG3 is strong—
gender issues is greater in project design than                  it is nothing more than smart economics.
in implementation, and there has been little
effort to monitor or evaluate outcomes. Insti-
tutions have generally been slow to develop
and adopt measurable indicators of progress
in gender equality, and the rating systems                       Fragile states are generally characterized by
primarily measure good intentions rather                         weak institutional capacities and governance,
than results. Nor can the resources spent on                     and by political instability. These countries are
gender mainstreaming be measured. Clearly                        the least likely to achieve the MDGs and they
much more is needed to strategically realize                     contribute significantly to the MDG deficit.
the comparative advantage that the MDBs                          They account for 9 percent of the population
have in knowledge generation and analysis,                       of developing countries, but 27 percent of the
in their convening and coordinating roles, in                    extreme poor (living on US$1 per day, see
leading high-level dialogue, and in helping                      table 2), nearly one-third of all child deaths,
formulate development policy strategies. The                     and 29 percent of 12-year olds who did not
MDBs should utilize their comparative advan-                     complete primary school in 2005. Of all low-
tage and take up a visible leadership role in                    income countries that are unlikely to achieve
investing dedicated resources to include gen-                    gender parity in primary and secondary enroll-

              Fragile states face the largest deficit in most MDGs


                                                                    Total in developing      Total in fragile states
      Indicator                                                     countries (millions)   (in millions and % share)




      Extreme poverty                                                      985                   261 (27%)
      Malnourished children                                                143                   22.7 (16%)


      Children of relevant age that did not complete
      primary school in 2005                                               13.8                    4 (29%)


      Children born in 2005 not expected to survive to age five             10.5                   3.3 (31%)


      Unattended births                                                    48.7                   8.9 (18%)


      TB deaths                                                             1.7                  0.34 (20%)
      HIV+                                                                 29.8                   7.2 (24%)


      Lack of access to improved water                                    1,083                   209 (19%)
      Lack of access to improved sanitation                               2,626                   286 (11%)


Source: World Bank staff estimates; for notes see table 2.9.
ments, half are fragile states. Their weak per-     from conflict, the sequencing and coherence
formance is clearly linked to chronically weak      of support for security, electoral efforts, and
institutional capacity and governance and to        aid-financing to boost growth and employ-
internal conflict, all of which undermine the        ment are critical for minimizing the risk of
capacity of the state to deliver basic social and   reversion to conflict. Donors need to con-
infrastructure services and offer security to       sider whether current instruments provide
citizens.                                           adequate continuity of support to minimize
    Conflicts are a major reason why coun-           risks of renewed conflict.
tries slide into fragility; they extract high          Second, engaging in fragile states requires
costs in terms of lives and physical damage,        the IFIs and other donors to review their busi-
they reduce growth and increase poverty.            ness practices and procedures, to ensure that
While there are fewer conflicts in low-income        these are adapted to low-capacity and some-
countries than before, conflicts have become         times volatile environments. Taking advantage
shorter and more intense, with an enormous          of new peace-building or governance reform
negative impact on GDP growth averaging             opportunities, or adjusting programs in the
about 12 percent decline per year of conflict.       event of a crisis, requires a rapid response from
    Despite the enormous challenges of poverty      all international partners engaged in these
in fragile states, progress against the MDGs        countries. Supporting reforms in low capacity
is possible. A number of countries (Mozam-          states also requires increased field presence.
bique, Uganda) have made a successful transi-          Third, fragile states are especially vulner-
tion from weak institutions and/or the legacy       able to donor fragmentation and its potential
of conflict to sustained gains in growth and         burden on government capacity. This makes
poverty reduction. In countries that remain         implementation of the Principles for Good
fragile, successful progress against the MDGs       International Engagement in Fragile States
has been achieved: Timor-Leste, Eritrea, and        and advancing principles of the Paris Declara-
the Comoros, for example, decreased child           tion on Aid Effectiveness particularly impor-
mortality by 7.1 percent, 4.2 percent, and 3.5      tant. The IFIs need to work both between
percent, respectively, between 2000 and 2005.       themselves and with other international
    Aid is particularly important in fragile        partners to develop common approaches and
states because it constitutes the main source of    operating principles in fragile states, in par-
development finance. However, IFIs account           ticular through efforts to improve coordina-
for only about 8 percent of total Development       tion and division of labor with organizations
Assistance Committee (DAC) ODA flows to              leading peace-building efforts, such as the
fragile states, with the rest coming from bilat-    United Nations and regional institutions.
eral sources. The IFIs, nevertheless, have an
important role to play in financing postcon-
flict reconstruction, in aid coordination, and
in policy dialogue and technical assistance.
The MDBs have recently started to converge
around four areas of specialized response to        The expansion in global aid has stalled, and
the development challenge in fragile states:        two years after the Gleneagles summit the
(1) strategy, policy, and procedural frame-         trends in real aid flows suggest that DAC
works; (2) exceptional financial instruments;        donors’ promises of higher aid to Sub-Saha-
(3) customized organizational and staffing           ran Africa appear increasingly unlikely to
approaches; and (4) partnership work.               materialize. Seven years after the Millennium
    Accelerating progress toward the MDGs           Summit at which the MDGs were adopted,
in fragile states requires attention to sev-        there is yet to be a single country case where
eral issues and lessons of recent experience.       aid is being scaled up to support achieving
First, since many fragile states are emerging       the MDG agenda. Most “low hanging fruit”
identified in the Millennium Report of 2005         that DAC donors have moved out of.
have yet to be harvested. Progress with mul-           Progress with scaling up aid to Africa has
tilateral debt relief was rapid after the Gle-     been disappointing. Five years after the Mon-
neagles meetings in 2005, demonstrating how        terrey Conference and two years since the G-8
quickly initiatives can advance when there is a    pledges at Gleneagles, country examples of
strong international commitment. The lack of       programs to scale-up aid to support the MDG
progress with multilateral trade reforms in the    agenda are lacking. Beyond debt relief (impor-
Doha Round similarly demonstrates just how         tant to improving future growth opportunities),
weak international commitment and consen-          most countries in Sub-Saharan Africa are see-
sus stymies change. Forging an international       ing stagnant or declining aid inflows. Exclud-
consensus beyond rhetoric is needed to accel-      ing Nigeria (a recipient of exceptional debt
erate progress.                                    relief) real bilateral ODA from DAC members
                                                   to the region fell in 2005 and was unchanged
                                                   in 2006.
Aid Volumes Trends: Bringing Actions
                                                       There is evidence that aid allocation is
in Line with Commitments
                                                   becoming increasingly selective on the basis
Although aid was on an upward trend through        of need (poverty) and the quality of policies
2005 as DAC members, non-DAC donors, and           (governance). Selectivity varies across differ-
nontraditional donors expanded assistance to       ent aid instruments. Flexible ODA—aid that
developing countries, in 2006 the level of real    can be used toward regular project and pro-
aid from DAC members fell. After reaching a        gram support as opposed to special-purpose
record level in 2005, total DAC member aid         grants such as technical or emergency assis-
fell by about 5 percent to about just below        tance—has been the most responsive to coun-
$104 billion in 2006. These trends suggest that    try improvements in governance and greater
real aid delivery is falling well short of donor   need. Technical assistance (much of which is
commitments. Doubling of aid to Africa by          for consultants and never leaves donor coun-
2010 looks increasingly unlikely.                  tries) is the least responsive.
    There has also been a continuing concen-           Attention by donors to the needs of fragile
tration of aid in a small number of coun-          states is beginning to translate into increased
tries, leaving the majority of countries with      assistance. Overall aid to fragile states rose
little or no real increase. Between 2001 and       by more than two-thirds in 2005 to nearly
2005, real aid volumes grew by more than           $20 billion (in 2004 dollars), of which about
50 percent, but nearly 60 percent of Inter-        half was in debt relief and humanitarian assis-
national Development Association (IDA)             tance. Fragile states are seeing an improving
countries saw a decline or little change in        trend in aid received per capita, although
aid over this period. Such heavy concentra-        they receive somewhat less aid (excluding
tion is not consistent with efforts to broadly     humanitarian assistance and debt relief) than
accelerate progress toward the MDGs. Even          other low-income countries. Aggregate trends
as assistance from DAC donors has declined         mask the wide variation across different types
in 2006, aid from nontraditional donors is on      of fragile states: those emerging from violent
an upward trend: Non-DAC OECD donors               conflict typically receive much more aid than
are expected to double their assistance to         other fragile states, and more than other low-
over $2 billion by 2010; Saudi Arabia and          income countries.
other Middle East countries provided nearly
$2.5 billion in assistance in 2005; and other
                                                   Progress with Harmonization
emerging donors, China in particular, are
                                                   and Aid Effectiveness
also rapidly expanding aid and becoming
significant foreign creditors. Much of this aid     A critical agenda for improving aid effec-
targets infrastructure and productive sectors      tiveness is progress with harmonization and
alignment of aid with country strategies, both   aid for the health sector in Rwanda illustrates
by donors and the international aid agencies.    some key problems on the ground. First, the
There is evidence of some progress in these      government’s ability to achieve policy coher-
efforts. Two-thirds of donors place strategic    ence is undermined by donors channeling the
priority on implementation of the Paris Dec-     majority (86 percent) of total reported aid for
laration on aid effectiveness, and efforts to    health outside the Ministry of Health through
monitor its implementation are gaining trac-     direct transfers to local NGOs, local govern-
tion. However, translating this good intent to   ments, and other providers. Second, most
outcomes on the ground remains extremely         on-budget donor funding is earmarked for
challenging: the greatest need for better aid    HIV/AIDS and malaria (85 percent in 2005),
harmonization is often in countries least        to the relative neglect of capacity building,
capable of leading donor coordination them-      human resource development, and other sec-
selves.                                          torwide needs. Only 1 percent was allocated
   A baseline survey for monitoring the Paris    to child health. Third, aid is volatile as much
Declaration was undertaken in mid-2006,          is committed for only 1 to 2 years, constrain-
yielding benchmarking data on the con-           ing ability to scale up health services which
straints facing donors and partner countries.    require mainly stable recurrent expenditures
On ownership by partnership countries it         for salaries and facility maintenance. Finally,
finds the story is mixed: while comprehen-        there is a sharp disparity between donor fund-
sive national strategies are being developed,    ing for health, which has increased sharply,
they lack well-specified prioritization and       and infrastructure and agriculture, which
sequencing of objectives and actions, leav-      have been neglected. These factors point to
ing them operationally weak. Less than one-      the need for coordination among donors,
fifth of countries had developed operational      agencies, global programs, and developing
strategies at the time of data collection. The   countries, to develop an adequate coordinat-
survey also finds that overall public financial    ing mechanism and more coherent approach.
management systems are weak in over one-             Harmonization in the health sector is par-
third of countries, and moderately strong or     ticularly difficult: the number of donors is
better in less than a third.                     large and includes numerous vertical pro-
   Regarding donor actions, it finds that         grams; there is usually no critical mass of
about 40 percent of aid is disbursed using a     health financiers “on the ground” who can
partner’s public financial and procurement        meet regularly to coordinate and harmonize.
systems; about two-thirds of aid is disbursed    There is also an inherent tension between
on time; nearly half of technical cooperation    the goals of harmonized aid through coun-
is already coordinated—which is the 2010         try systems and the explicit mandates of ver-
target, although different interpretations of    tical funds—whose successful advocacy for
“coordination” require caution. The survey       specific global health issues depends criti-
finds that donors are trying to harmonize.        cally on their ability to show direct results.
Forty-two percent of aid is provided through     A viable harmonization strategy may be to
program-based approaches such as direct          move toward a country-led arrangement
budget support or sectorwide approaches.         whereby (1) all donor support is “on plan”
One-third of missions and one-fifth of coun-      and aligned with government priorities and
try analytic work is joint. However, strategic   initiatives; (2) funding is primarily through
partnership “satisfaction” surveys in Africa     the government budget, and where this is not
suggest increased dissatisfaction over donor     possible a share is specified for support to
reporting requirements and coordination of       system capacity building; and (3) reporting
donor support.                                   to donors is less frequent and done through
   Pledges of harmonization remain abstract      multipurpose reports that meet multiple
unless tested in the field. A recent review of    donor needs.
   The Rwanda health sector example points         completion point under the Heavily Indebted
more broadly to challenges posed by the            Poor Countries (HIPC) Initiative. Twenty-
evolving and more complex aid architecture.        two postcompletion-point HIPCs (and two
The proliferation of new aid sources—donors,       non-HIPCs) have benefited from the MDRI
private foundations, global funds—increases        to date, providing $38 billion, in nominal
total resources, but also the difficulty of coor-   terms, in debt relief. The ongoing HIPC ini-
dination and coherence, and the costs posed        tiative also saw substantial progress, and 30
by fragmentation and resource earmark-             HIPCs had reached the decision point and
ing. The average number of official donors          were receiving debt relief as of end-2006.
has tripled since the 1960s, and since 1990
the number of countries with over 40 active
                                                   Developments in Global Trade
bilateral and multilateral donors increased
from zero to over 30. Emerging donors are          World trade in 2006 continued the strong
also expanding their presence rapidly, along       growth trends of recent years. Merchandise
with global funds, although these are dif-         exports expanded by 16 percent in value,
ficult to track due to insufficient data. The        well above the average of 8 percent experi-
problem of a large number of aid channels is       enced during 1995–2004. Developing-coun-
compounded by the trend towards small size         try export growth continued to outpace the
of funded activities, which declined on aver-      global average, growing by 22 percent. In
age from $1.5 million to $1 million between        addition to cyclical factors, trade perfor-
1997 and 2004, while their number surged           mance reflects continuing unilateral trade
from 20,000 to 60,000.                             reforms. Average tariffs in developing coun-
   This places particular stress on countries      tries have fallen from 16 percent in 1997 to
with weak capacity. Countries with lower           around 11 percent in 2006. As the pace of
institutional capacity are found to have higher    global integration accelerates, harnessing the
aid fragmentation, with negative implications      new opportunities and managing the risks
for aid quality through higher transaction         places a premium on a strategy of greater
costs and a smaller donor stake in country         openness, coupled with behind-the-border
outcomes. Clearly excessive fragmentation is       reforms.
a serious problem and measures to address it,         Owing to the steady reduction of tariffs,
possibly through donors limiting their focus       overall trade restrictiveness has declined in
countries, providing larger funds, or adopt-       recent years. With the exception of a num-
ing more efficient vehicles (including through      ber of African countries, most economies
multilateral channels), and donors commit-         are now less trade restrictive than they were
ting to delegate authority to lead donors,         in 2000. Much of this observed liberaliza-
could help reduce transactions costs and           tion pertains to manufacturing. Much less
improve aid effectiveness.                         has been done in agriculture. For a number
                                                   of countries (such as India) the agricultural
                                                   sector is now more restrictive than six years
Developments in Debt Relief
                                                   ago; in the European Union there has been
The past year saw important progress in            no change, while Canada and the United
deepening debt relief to the poorest countries.    States have registered a small decline since
The African Development Fund (AfDF), IDA,          2000.
and the International Monetary Fund (IMF)             Progress with the Doha Round. Despite
all implemented the Multilateral Debt Relief       intensive efforts to conclude the Doha nego-
Initiative (MDRI), described in the 2006           tiations in 2006, they were effectively sus-
GMR. This initiative provides 100 percent          pended in July amid disagreement on the level
debt relief on eligible claims to countries that   of ambition in agricultural market access and
have reached, or will eventually reach, the        over reductions in domestic support. However,
in early 2007 there was an informal agree-         Evolving Roles
ment by World Trade Organization members
                                                   A number of commissioned reports or initia-
to restart talks, providing a narrow window
                                                   tives were completed in the last 12 months
of opportunity to reach agreement in the first
                                                   with implications for the changing demands
half of 2007 on the key elements of a deal.
                                                   on IFI resources and responsibilities. Discus-
    Failure to conclude the Doha Round
                                                   sions have highlighted five key challenges:
would send a strong negative signal to the
                                                   support to the poorest countries; strength-
world economy about the ability of coun-
                                                   ened engagement in middle-income countries;
tries to pursue multilateral solutions. It
                                                   responding on critical global public goods;
could weaken the multilateral trading sys-
                                                   promoting coherence and collaboration; and
tem, which provides developing countries
                                                   strengthening the voice and representation
with guaranteed nondiscriminatory market
                                                   of developing countries. Reports released in
access; the rules-based settlement of disputes;
                                                   September 2006 included the IMF’s Medium-
and the transparency of trade regimes. But
                                                   Term Strategy and the Report of the Interna-
the biggest risk of failure is to countries’ own
                                                   tional Task Force on Global Public Goods; in
economic growth, as trade reform is funda-
                                                   the same month the Middle Income Country
mentally about self-interest.
                                                   Strategy Report was reviewed by the World
    Aid for trade. Progress was made on aid
                                                   Bank’s Board. The Review Committee on
for trade in 2006. Donors indicated that they
                                                   IMF–World Bank Collaboration released
are prepared to offer large increases in aid
                                                   its report in early 2007. In addition, initial
for trade to help developing countries address
                                                   measures were taken to address the need for
the supply-side constraints to their increased
                                                   changing voice and participation in the IMF
participation in global markets and any tran-
                                                   and the World Bank.
sitional adjustment costs from liberaliza-
                                                       These reports conclude that there is sig-
tion. How much of this would be additional
                                                   nificant progress in assisting poor countries
to existing aid remains unclear. Also, more
                                                   toward achieving the MDGs and in working
remains to be done to operationalize this
                                                   to promote country-led efforts in partner-
agenda.
                                                   ship with other donors. Connecting results
                                                   and resources remains a major challenge,
                                                   however. There is broad recognition of the
                                                   importance of continuing to engage with
Enhancing IFIs’ effectiveness in advancing the     middle-income countries, which are home to
MDG agenda requires adapting their strate-         some 70 percent of the world’s poor, but also
gies and developing capacity to be responsive      of the need to improve the responsiveness of
to (1) changing demands, including those           the IFIs and tailor support to specific coun-
related to globalization and global public         try conditions. Critical public goods include
goods; (2) growing differentiation among cli-      international financial stability, a strong
ents; (3) the availability of alternative finan-    international trading system, preventing the
cial resources; and (4) the growing number of      emergence of infectious diseases, generating
actors on the development landscape. Several       knowledge, and tackling climate change.
commissioned reports and events in 2006                Cooperation among MDBs is underpinned
reflect on the evolving responsibilities of the     by Memoranda of Understanding between
IFIs and the need to strengthen performance        them, and in 2006 the managing director of
and collaboration. More coherent efforts           the IMF and the president of the World Bank
may be needed to strengthen the results man-       commissioned an external review of collab-
agement capacity of the IFIs, both to support      oration between the two institutions. The
capacity building in partner countries and to      report noted many examples of good collabo-
reflect on their own performance.                   ration, but also identified scope for improve-
ment, including clarifying the role of the IMF       These trends suggest that while demand
in low-income countries. Concerning voice         for MDB lending from middle-income coun-
and representation, a program of revisiting       tries has increased, the supply of concessional
quotas and governance reforms in the IMF          funds to low-income countries is now stag-
was launched in 2006 to be completed by the       nant. This has implications for the role of
2008. The first step was to revise quotas for      MDBs in the future, particularly their ability
a group of the most underrepresented coun-        to respond to demands for scaling up multi-
tries: China, the Republic of Korea, Mexico,      lateral assistance. Viewed from the perspec-
and Turkey. The changes approved in 2006          tive of overall ODA flows, the share of MDB
increased these countries’ total IMF quotas       financing has fallen significantly since 1998;
by 1.8 percent, raising their share to 7 per-     if disbursements continue to stagnate while
cent of total voting shares. Further steps are    donors scale up bilateral ODA, the MDBs
under way to develop a new formula for a          will represent only about 6 percent of total
second-round quota adjustment, and prepa-         ODA flows by 2010. This poses important
ration of a proposal to increase basic votes      questions for the international community
in order to enhance the voice of low-income       over the implications of declining multilat-
countries. Consultations on voice and rep-        eralism, or of the shifting multilateralism to
resentation are also under way in the World       other agencies, primarily the UN system and
Bank.                                             the European Union.
                                                     Debt relief under the MDRI has further
                                                  potential repercussions for IFI financing, in
Assessing Effectiveness: Financial Flows,
                                                  particular for AfDF and IDA, which have
Results, Harmonization, and Alignment
                                                  provided debt relief extending out to 40
Assessing the effectiveness of the IFIs poses     years. The MDRI commits donors to provid-
difficult challenges. Development results          ing additional resources, on a “dollar-for-dol-
often lag policies and programs, and are          lar” basis over four decades, to ensure that the
hard to measure, but the bigger problem is        cost of debt forgiveness does not undermine
that of attribution of results. Each IFI has an   these institutions’ overall financial integrity
independent evaluation agency that plays an       or ability to provide future financing. Firm
important evaluative role, but it remains dif-    financing commitments cover 10 percent of
ficult to address the results and attribution      the total cost, and qualified commitments
problems. Three aspects of international          another 56 percent, leaving a gap of 34 per-
financial institutions’ performance—finan-          cent between total costs and commitments for
cial support, results-based management, and       the MDRI. IDA 15 will be an important test
progress toward harmonizing and aligning          of donors’ intentions regarding the MDRI
aid through the Paris Declaration—are high-       and future role of the MDBs.
lighted.                                             Results management. The Third Round-
    Financial flows. Despite the rapid growth      table on Managing for Development, held
in private capital flows to developing coun-       in Hanoi in February 2007, provided a
tries, the financing role of the IFIs remains an   venue for many country delegations to com-
important one. In 2006, the five MDBs dis-         pare experiences and learn from them. The
bursed $43 billion, up 20 percent over 2005       Roundtable included a meeting of the Asian
levels. It is premature to assess whether this    Community of Practice, and the launching
increase is a temporary trend. Nonconces-         of a similar Community of Practice in the
sional gross disbursements increased by 29        Africa region. Five factors were highlighted
percent to $32 billion. After strong growth in    as important in building country capacity
concessional gross disbursements since 2000,      to manage for development results: leader-
peaking at just over $11 billion in 2004, flows    ship and political will, strong links between
slightly declined in 2005 and 2006.               results and planning practices, evaluation
and monitoring tools to generate feedback         tors, limiting performance comparisons over
on programs, mutual accountability between        the two years. A number of findings emerged,
donors and country partners, and statistical      including the need to better communicate the
capacity (both to supply, and help generate       results of COMPAS within each MDB.
greater demand for, managing for results).           IFIs and the Paris Declaration. Results of
The need to scale up both financial and tech-      the country-level monitoring of the imple-
nical support for statistical capacity-build-     mentation of the Paris Declaration’s mutual
ing was underscored as an essential element       commitments, which took place for the first
of the agenda—particularly as the financial        time in 2006, will serve as a baseline to review
costs of strengthening systems are relatively     progress in 2008 and against the 2010 tar-
modest.                                           gets. They suggest that substantial actions are
   The Common Performance Assessment              being taken by the MDBs in many areas of
System (COMPAS) is an interagency effort to       harmonization and alignment, including the
develop a common system across the MDBs           use of joint or collaborative country assis-
for monitoring their results orientation, par-    tance strategies, but that continued efforts
ticularly with regard to their internal prac-     will be needed to achieve the 2010 targets.
tices. Its three-pillar structure was described   Over half the country analytic work of the
in detail in the 2006 GMR. A report for           MDBs is joint with other donors and/or part-
2006, prepared under the leadership of the        ner governments, relative to the target of 66
Inter-American Development Bank (COM-             percent, but only 21 percent of MDB mis-
PAS’ chairmanship rotates), examines the          sions are joint with other donors, relative to
seven performance categories that were devel-     a target of 40 percent, and there is an urgent
oped for the 2005 report. In 2006, however,       need to reduce the large number of parallel
changes were made to improve the indica-          implementation units.

								
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