A developing country is one in which the majority lives on far less money—with far fewer basic public services—than the population in highly industrialized countries. Five million of the world's 6 billion people live in developing countries where incomes are usually under $2 per day and a significant portion of the population lives in extreme poverty (under $1.25 per day).
A developing country may be one:
That is largely rural or with a population that is migrating to poorly equipped cities, with a low-performing economy that is based primarily on agriculture and where non-agricultural jobs are scarce and low-paying;
Where the populace is often hungry and sorely lacks education, where there is a large knowledge gap and technological innovation is scarce;
Where health and education systems are poor and/or lacking and where transportation, potable water, power and communications infrastructure is also scarce;
Where the amount of government debt is unsustainable;
Where the land mass, population, and domestic markets are small and far disbursed, often on remote islands or in island groups, susceptible to natural disasters, with limited institutional capacity, limited economic diversification; and/or
Where government has collapsed and armed conflict has left a fragile state with weak institutions and policies, either unwilling or unable to provide basic social services, especially for the poor. It is estimated that a third of people living in absolute poverty around the world live in fragile states in a vicious cycle of poverty and conflict.
Middle-income countries, have made great strides in successfully entering the world economy and are creating better-paying jobs, better and more equitably available education and health services, and are investing in infrastructure improvements. However, middle-income countries continue to face substantial development challenges: achieving sustained growth that provides productive employment; reducing poverty and inequality; reducing volatility, particularly in their access to private financial markets; and strengthening the institutional and governance structures that underpin viable market-based economies.
From the World Bank's experience, what are the most effective ways to deliver aid to developing countries?
We base our assistance to poor countries first on a commitment to achieving the Millennium Development Goals, which are United Nations (UN) goals that were universally agreed by the Development Community in 2000. The goals provide countries donors with a development framework and with targets and yardsticks for measuring development results, including: eradicating extreme poverty and hunger; achieving universal primary education; promoting gender equality and empowering women; reducing child mortality; improving maternal health; combating HIV/AIDS, malaria, and other diseases; ensuring environmental sustainability; and developing a global partnership for development.
The World Bank has adopted a comprehensive approach to poverty reduction and development that includes several key concepts that we believe are effective in delivering aid to developing countries:
Encouraging countries to lead development projects so that they are transparent collaborations built on trust, power-sharing, and consultation;
Taking a long-term approach to aid across the range of programs in a particular country;
Measuring success by actual results rather than the amount of inputs; and
Encouraging recipient countries to take ownership of the reform process.
Recognizing this, our development strategy for reducing poverty has two pillars. The first is to create a good investment climate to encourage entrepreneurship and increase private investment that, in turn, can create jobs and increase the number of opportunities for poor people. The second is to expand the opportunities for poor people by investing in their health and education and by encouraging their participation in decisions that affect their lives and the lives of their families.
To encourage low-income developing countries to take ownership of their reform agenda, we engage them in the creation of a Poverty Reduction Strategy (PRS), which involves widespread consultation and consensus building on how to boost development. Under this process, the country prepares a national poverty reduction strategy that creates a framework for donors to use to better coordinate and align their programs behind national priorities. The government consults a wide cross-section of local groups and combines this with an extensive analysis of poverty in the country's society and its economic situation. The government determines its own priorities from this process and produces targets for reducing poverty during a three-to-five-year period. These are outlined in a Poverty Reduction Strategy Paper (PRSP). The PSRP describes a country's macroeconomic, structural, and social policies and programs to promote growth and reduce poverty, as well as associated external financing needs. PRSPs are prepared through a participatory process involving civil society and development partners, including the Bank and the IMF. The Bank and other aid agencies then align their assistance efforts with the country's own strategy—a proven way of improving development effectiveness.
Next, we develop our own plan for assistance, which is the Country Assistance Strategy (CAS). The CAS takes as its starting point the country's own vision for its development, as defined in the PRSP or other country-owned process. Oriented toward results, it is developed in consultation with country authorities, civil society organizations, development partners, and other stakeholders. The purpose of the CAS is to set out a selective program of Bank support linked to the country's development strategy and based on the Bank's comparative advantage in the context of other donor activities. The strategy is designed to promote collaboration and coordination among development partners operating in a country.
The CAS includes a comprehensive diagnosis, drawing on analytic work by the Bank, the government, and/or other partners-of the development challenges facing the country, including the incidence, trends, and causes of poverty. It identifies the key areas where the Bank's assistance can have the biggest impact on poverty reduction. In its diagnosis, the CAS takes into account the performance of the Bank's portfolio in the country, the country's creditworthiness, state of institutional development, implementation capacity, governance, and other sector and cross-cutting issues. From this assessment, the level and composition of the Bank's financial, advisory, and/or technical support to the country is determined.
What common factors are associated with successful development?
In our six decades of experience in development policy, investment, and finance, we've noted several common factors associated with overall progress in development:
Economic Growth: Countries that have reduced poverty substantially and in sustained manner are those that have grown the fastest. Successful development requires sustained periods of high per capita income growth.
Vibrant Private Sector: Private firms, including small and medium-sized businesses in rural nonfarm areas, play a critical role in generating employment, particularly for youth and poor people.
Empowerment: All people should have the ability to invest in their health and education and to shape their own lives by being able to participate in the opportunities provided by economic growth and have their voices heard about decisions that affect their lives. Access to essential public services, such as health, education, and safe water, is critical and should be provided equitably.
Good Governance: An active state with good governance in both the public and private sectors fosters an environment where contracts are enforced and markets can operate efficiently. It also ensures that basic infrastructure functions, adequate health and education services, and social protections exist, and people can participate in decisions that affect their lives.
Ownership: Countries need to own their development agenda. This helps ensure that there is widespread support for development programs and the reform measures that underpin them.
The UN defines sustainable development as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs." Some important factors that must be taken into account when discussing sustainable development are the rational use of natural resources and energy, pollution, and climate change. In development terms, sustainability means responsible growth—when social and environmental concerns are aligned with people's economic needs. For information about the Bank and this topic, visit our Sustainable Development web page.
Why is empowerment of women in developing countries important, and what effect does their empowerment have on development?
Evidence shows that expanding opportunities for girls and women not only improves their positions in society, but it also has a major impact on the overall effectiveness of development. Evidence also shows that when women and men are relatively equal, economies tend to grow faster, the poor move more quickly out of poverty, and the well-being of men, women, and children is enhanced. Studies show that the education of mothers improves the health of their children and lowers the fertility rate. Studies also show that when women have more control over the family's income or productive assets, the family's overall situation improves:
In Brazil, income in the hands of mothers has four times the impact on children's height-for-age as income in the hands of fathers.
In Sub-Saharan Africa, a large proportion of women are farmers. If women could participate in agriculture on an equal basis with men, total agricultural output could increase by up to 20 percent.
We have developed an increasingly rigorous system of evaluation and checks and balances to gauge the effectiveness of our work in development, which is difficult to measure and must be considered within the context of each country. Our Independent Evaluation Group (IEG), formerly the Operations Evaluation Department, assesses the relevance, efficacy, and efficiency of the World Bank Group’s (WBG) operational programs and activities. It aims to influence the decisions and directions of the WBG, clients, and partners to help improve development outcomes in the world. Independently derived evaluative findings provide the basis for pursuing this mission. The IEG is independent of Bank management and reports directly to the Board of Executive Directors.
Based on evaluations of completed projects, programs, themes, corporate activities, and global programs of the WBG, IEG provides critical evaluations of the current directions and recommendations on how to improve results on the ground. The evaluations usually have constructive, even if critical, dimensions. For example, in a recently published evaluation of trade, IEG noted the striking progress in achieving greater trade openness, but finds lacking complementary actions to get payoffs from this liberalization. Or in the Bank’s support to primary education, IEG highlighted the progress made in expanding access, but equally, recommends that countries, the Bank, and development partners give the same emphasis to learning outcomes as to access, so that the increasing investments in schools can have a far greater impact on development. To learn more about the Independent Evaluation Group, please visit www.worldbank.org/ieg.