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p. 3 of 30 BACK | NEXT Executive Summary I. The Setting A. Introduction B. Quality of the Bank’s Portfolio of Projects C. Critical Attributes of Project Quality II. Key Variables Affecting Project Quality III. Assessment of Current Bank Practices and Areas for Improvement IV. Findings, Recommendations and Action Plan V. Implications and Monitoring Arrangements

Report of the Task Force on Improving Project Quality : I. The Setting

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A. Introduction

1. The Bank is at a crossroads as a development institution in a region that is experiencing high economic growth along with rising social demands, continuing poverty and extensive environmental degradation. The challenges facing the Bank's developing member countries (DMCs) are enormous, complex and urgent. Populations are growing, and with increasing exposure to international developments, are demanding expanded and improved services as well as opportunities for employment and income growth. The problem of poverty persists, as the gap between poverty groups and the mainstream population widens. The effects of years of environmental neglect are being felt, with serious impacts on both urban and rural areas. In the face of such pressures, government budgets continue to be constrained, and in many cases, the public sector is simply unable to respond to increasing and more complex development priorities. Developed country budgets are also under pressure, with corresponding constraints on official development assistance.

2. On the other hand, the region is alive with innovation, enterprise and investment on the part of the private sector, as governments liberalize trade and investment regulations. Consumer demand is expanding and is supporting strong economic growth. In many countries, a multiplicity of nongovernment organizations (NGOs) has also surfaced, and they are playing a distinct and constructive role in the development process. Local communities are also assuming shared accountability for their development, recognizing the continuing constraints on government resources and capacities.

3. It is in this context that the Bank's Management and shareholders have taken a hard and reflective look at the Bank's role and the need for it to be even more effective as a regional development institution. On the one hand the record is impressive: DMC membership has grown by 19 per cent over the last decade; annual lending increased from $1.7 billion in 1981 to $5.3 billion in 1993. The additional co-financing investment catalyzed by this lending rose from $0.6 billion to $3.5 billion over the same period. Disbursements amounted to about $2.9 billion in 1993. The Bank offers over $100 million a year in technical assistance (T A) grants for capacity building, and plays an important role in fostering regional cooperation. Despite these achievements, some concerns have arisen with regard to both the health of the Bank's portfolio and its effective utilization of scarce TA funds. The quality of some of the Bank's completed projects has been below expectations, and some of its existing loans have problems, as evidenced by the feedback received from the Bank's Post-Evaluation Office (PEO) and from the monitoring of ongoing projects. The Bank's current capacity (in terms of structure, policy and systems of operations) to respond to the new and urgent challenges of the region appears to need reorienting and strengthening. For the Bank to respond more effectively to the needs of its DMCs, further improvement of its performance and delivery of higher quality projects are needed.

4. In the light of these considerations the Bank has recently undertaken a series of initiatives to enhance the effectiveness of its operations. These include (i) the adoption of a Medium-Term Strategy, which gives as much emphasis to poverty, human resource development, women's status in development and environmental objectives as to economic growth; (ii) the creation and strengthening of specialist offices and units to support its new strategic foci; thus the Strategic Planning Unit (PRSP), the Social Dimensions Unit (AGSD) and the Private Sector Support Unit (PSSU) were established, and the Office of the Environment (GENV) was expanded; (iii) the strengthening of the policy basis of its operations by the enunciation of a series of sectoral and thematic policies; and most recently (iv) the appointment of the Task Force on Improving Project Quality in April 1993. The Task Force was mandated to review critically the Bank's portfolio of projects, assess factors within and outside the Bank influencing the quality of Bank operations, and recommend ways to enhance project quality. The Task Force, which comprised selected Bank staff (approximately 8Q staff from various levels were involved through four Working Groups), was chaired by Vice President G. Schulz and was assisted by two external advisers, Messrs. H. Buhler and C. Chanmugam, both former Executive Directors of the Bank.¹ It was also supported in its work by feedback from consultations with DMCs, developed member countries and NGOs in its member countries.

5. The Task Force Working Groups submitted their findings and recommendations in four separate reports: (i) Quality at Entry; (ii) Project Quality in Implementation; (iii) Feedback Mechanism; and (iv) Organization, Staffing and Budget Implications. The comprehensive Working Group reports contain a wealth of information and analysis, which will be valuable reference material during the implementation of the Task Force's recommendations. This report focuses on the key recommendations emerging from the Working Groups. The goal of the report is to improve quality; it is thus generally silent on aspects of operations that are proceeding well. The Task Force has not distinguished between public and private sector activities, since it has viewed project quality issues as being generic in nature.

6. To stress the scope for improverr1ent, the Task Force has made generalizations based on the Bank's experience in problematic areas. The assessments expressed may not be applicable to all areas or sectors within the Bank, although they are considered to be true in a sufficient number of cases to merit the Bank's attention. This approach is comparable to that adopted by other multilateral institutions, namely the World Bank and the Inter-American Development Bank, on the subject of project quality. The Task Force wishes to emphasize that the effort to improve project quality is a continuous process. As circumstances change, the Bank's concept of project quality also has to undergo change. In this dynamic process, standards that were acceptable in the past may no longer be adequate in the present. The Task Force's findings and recommendations should be viewed in the context of these caveats.

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