Rethinking Development: Hurdles and chances

The following article is based on an address by World Bank President James D. Wolfensohn at the 10th ministerial meeting of the United Nations Conference on Trade and Development in Bangkok on Feb. 16, 2000. This is the first of two articles.

BANGKOK: There are at least three main messages that I would like to discuss around the theme of Poverty and the Development Agenda.

1. Slow and uneven progress on poverty reduction: While some progress has been made in reducing poverty, this inching forward has been painfully slow and uneven.

Much remains to be done and future prospects do not look bright. These figures call into question the way we have been doing development and forces us to rethink.

Here are some facts and figures on the crisis of poverty still facing the world as we enter the 21st century. With respect to income poverty, we can see two trends over the past decade. In percentage terms, the picture looks positive.

The proportion of the population of developing and transition economies living on less than US$1 a day fell from 28 percent in 1987 to 24 percent in 1998. Excluding China, the reduction is rather less from 29 percent to 26 percent in those same years. But a growing world population has delivered a stark challenge.

The actual number of people living in dire poverty has remained roughly constant, at about 1.2 billion. Excluding China, the number has actually risen, from just under 880 million to over 980 million. In addition, the total number of people living on under $2 a day is now estimated at nearly 3 billion, approaching half the world's population.

Regional differences: And these figures mask substantial regional differences. The East Asia and Pacific region has seen a dramatic decline in both percentage and absolute terms. Including China, the number of people living on under $1 a day fell from 418 million (or nearly 27 percent) to 278 million (or 15 percent) between 1987 and 1998.

Excluding China, on this same indicator, the number of people living on under $1 per day fell from 114 million (or 24 percent) to 65 million (or 11 percent) from 1987 to 1998. This despite a jump of 10 million between 1996 and 1998, reflecting the East Asia financial crisis.

But virtually all other regions have seen absolute increases. In Sub-Saharan Africa the number of people living below the $1 a day level has grown over the 1987-98 period from under 220 million to over 290 million -- more than 70 million additional individuals. The increase has also been large in South Asia (48 million) and in the transition economies of Eastern Europe and Central Asia (23 million). Latin America and the Caribbean have seen an absolute increase of 14 million.

And the prospects for future reduction in the numbers of those living in poverty do not look bright. Recent World Bank estimates, based on a business as usual scenario of continuing slow growth and recurring crises, show that by 2008 the same number of people, about 1.2 billion world-wide, may still be living on under $1 a day.

These figures call into question the ways in which the world has been doing development, making all the more urgent the rethinking that this Conference has challenged us to undertake. Poverty remains intractable despite economic growth in many countries. This partly reflects the problem of income inequality within countries.

Income inequality in turn reflects inequality of opportunity. What is the cause? At least in part, the still tragically unmet need for equitable and inclusive investment in human capital -- investment in people through better education and heath care -- and for wider access to the infrastructure and capital needed to broaden the basis of opportunity.

And finally, there is a two-way relationship between poverty and growth. Rapid growth is a necessary (but not a sufficient) condition for poverty reduction, but persistent poverty and inequality can reduce growth rates.

2. Broadening and integrating the mandate: As the previous poverty numbers suggest, the way external agencies, including my own, have historically conceived and supported the development process has been inadequately coordinated. Instead, I believe that successful development requires a steadily broadening and properly integrated development mandate.

This reflects a parallel broadening of our understanding of what it takes to achieve successful development.

Initially, the focus was mainly on supporting investment in physical infrastructure to promote the growth of industry and agriculture. Later, an expanded vision of the nature of the development process led to the inclusion of support for human capital development in the strategic mix.

New concerns arose about the consequences for human wellbeing of untrammeled population growth accompanied by slow economic growth, and of environmental degradation. More recently, the importance of an appropriate policy and institutional environment, and of the role of gender, participation and inclusion for sustainable and humane development, have came to the fore.

So the picture is one of an expanding mandate, both for countries and their development partners. This has been a positive trend. It has increasingly recognized the multifaceted nature of the development process.

But the overall development impact of new efforts across a widening spectrum of activities has too often been less than the sum of the parts. Conflicts have sometimes emerged between different elements of the mandate.

3. Capacity building and country ownership: We have learned the critical importance of the capacity of developing countries to help themselves -- to own, frame, and implement development strategies and to get appropriate support from external partners. I truly believe that those who are closest to the problem are those best able to frame the solutions.

Against this background, we in the Bank have been rethinking development in order to establish a more effective development effort in terms of real results on the ground. Our aim is to support our member countries in bringing the various elements of their development strategies into a coherent whole that would enhance their combined impact.

There are at least two main messages that I would like to put forth around this theme of Rethinking the Approach.

1. A comprehensive vision and framework: Our new framework is a holistic and integrated approach to development strategies and programs that highlights the interdependence of all aspects of development strategy-- social, structural, human, institutional, environmental, economic and financial. I call this new approach the Comprehensive Development Framework (CDF). This is hardly a new concept in principle.

What the CDF is intended to do is to make explicit these kinds of linkages within a coherent overall strategic framework.

Key features of the CDF: The CDF has a number of other important features -- it is holistic, country-owned, partner- based, results-oriented and long-term based. Most critically, the CDF is country-owned.

Development goals and the timing and sequencing of programs to realize them are determined by the country, in line with its unique needs and capabilities. It is partnership-based. Goals, programs and implementation plans are built up on the basis of consultations among government, civil society, the private sector and other stakeholders, along with external development partners. And it is based on a long-term vision of the development process, over a ten to twenty year time horizon.

This vision is focused on results. It sets out the links between overall aims and practical action to make progress towards them. It takes account of the international development goals. But it also specifies time-bound country goals by which to assess progress. And finally, the CDF treats social and structural issues equally with macroeconomic and financial issues, so that the former are not overshadowed by the latter, as has sometimes been the case in the past.

All these features are intended to build sustained, consensual national support for a comprehensive national development effort. They also provide a framework for a more effective, because better coordinated, role for external partners based on what each can do best to support the country's goals.

Piloting the CDF: There are currently 13 pilots for the CDF. The pilot program is a process of learning-by-doing with respect to CDF principles and practice. Each country's experience is unique. Some already have a clearly articulated long term vision and a medium term policy framework. Others have developed or are still developing them. Country ownership and consensus require capacity- and partnership-building in some cases. Partnerships with external supporters require cooperation among those external supporters.

Here we have been working with our colleagues in the International Monetary Fund (IMF), the United Nations system, the multilateral development banks, bilateral donors and non- government organizations. Working to support the CDF process. Working to lay the foundations for an appropriate division of labor that will support different elements of country strategies and programs.

2. A sharper poverty focus: Our process of rethinking development has also led the Bank, in partnership with the IMF, to begin intensive work on a new, sharply focused approach to supporting our member countries' poverty reduction strategies. A sharper more concerted attack on poverty is needed more urgently then ever. These strategies are the operational expression of CDF principles.

We have started to work with selected countries on what we have called Poverty Reduction Strategy Papers (PRSPs). The PRSP is a specific, operational expression of the comprehensive development framework. It emphasizes country ownership, participatory strategy design based on in-country partnerships and engaging external partners, both in the strategic dialogue and in support for strategy implementation.

It includes a costed set of poverty reduction actions consistent with an appropriate macroeconomic framework, an implementation timeframe of at least three years, and a set of concrete outcome indicators for monitoring progress.

It recognizes that income poverty is a critical, but far from the only, handicap afflicting the poor, and that fighting poverty requires a long-term and multidimensional approach, in which gross domestic product growth is a necessary but not a sufficient condition for sustained poverty reduction.