At a Glance - The LICUS Initiative is a new way of supporting a high-risk country group. It is based on three pillars – encouraging country teams to innovate and drawing lessons back into institutional practice; implementing institutional reforms to support country-level work; and strengthening two-way linkages between outside research and policy debates and country operations.
- LICUS are fragile states characterized by a debilitating combination of weak governance, policies and institutions, indicated by ranking among the lowest (< 3.0) on the Country Policies and Institutional Performance Assessment (CPIA). This involves around thirty countries. Three out of four LICUS are affected by on-going armed conflicts.
- LICUS share bleak socio-economic indicators -- from GDP per capita levels typically half that of low-income countries; child mortality rates twice as high as other low income-countries; mortality rates plummeting by up to 30 years as HIV afflicts over 42 million in LICUS; and over 200 million lacking access to improved water and sanitation.
- Neglecting these countries risks locking 500 million people into poverty, endangers efforts to achieve the Millennium Development Goals and perpetuates regional and global instability by failing to prevent cross-border spillovers with adverse consequences – such as conflict, organized crime and epidemic diseases. it is critical that the international community find ways to stay engaged more consistently – for the long haul.
Background
Recent research has stressed the importance of strong policy environments, institutions, and governance for aid effectiveness. Countries with strong performance can absorb higher levels of aid and are likely to be more effective in converting aid into economic growth and poverty reduction. But concern that deteriorating development outcomes among “poor performers” produce adverse spill-over effects for neighboring countries and hinder a more balanced achievement of the MDGs, has led to a new interest in systematically addressing the problems of low-income countries under stress (LICUS). The World Bank set up a special Task Force on Low-Income Countries Under Stress in 2001/02, co-chaired by Professor Paul Collier and Dr. Ngozi Okonjo-Iweala, to recommend on ways to help these countries get back on a path of sustained growth and poverty reduction. The LICUS Unit was established at the end of 2002 to help coordinate this Bank-wide effort. The Task Force laid out a set of general principles for LICUS engagement. These include maintaining consistent engagement and country knowledge, developing shared approaches with other partners rather than unilateral Bank approaches, anchoring strategies in stronger socio-political analysis, mobilizing and building domestic capacity for change, achieving feasible, entry-level reforms, and exploring innovative mechanisms to improve governance and social service delivery. The LICUS team works to refine and operationalize these principles, by encouraging country teams to innovate, providing input into global policy debates, and extrapolating good practice to feed into staff guidance. The Task Force work also reflected a growing interest amongst other donors in this group of countries (over the last year, donors have converged on the term “fragile states”). New thinking on fragile states has been reflected in strategies adopted by the US and UK, in the background to the Secretary General’s High Level Panel report and the Africa Commission report, and in new Principles for good international engagement in fragile states endorsed by the OECD. The Bank has been participating in debates around these initiatives and refining the LICUS approach to take account of thinking amongst our partners. What has been done under the LICUS Initiative?
The LICUS unit has worked with country teams to support strategy development in 12 focus countries in since FY03 (Angola, CAR, Comoros, Guinea Bissau, Haiti, Liberia, Papua New Guinea, Somalia, Sudan, Tajikistan, Togo, and Zimbabwe). Eleven strategies incorporating LICUS principles have been discussed by the Board (Angola, CAR, Comoros, Haiti, Liberia, Somalia, Sudan, Togo, Zimbabwe and Tajikistan) and strategies for Guinea Bissau, Cambodia, Nigeria, and Papua New Guinea are expected in FY05. Of the LICUS where the Bank had disengaged in the past (Haiti, Somalia, Sudan, Liberia, Central African Republic, Togo, Zimbabwe, Myanmar), all have conducted in-country missions and analytic work to regain basic country knowledge. These early re-engagement activities have proved critical in positioning the World Bank to move quickly when an opportunity for transition occurs, as in Haiti, Liberia, and Sudan. In addition to the core focus countries, the unit is working closely with other borderline
fragile states, such as Nigeria and Cambodia, where concerted efforts are underway to improve policies, institutions, and donor harmonization and facilitate their exit from the LICUS group. It also maintains close links with other LICUS, such as Afghanistan, Democratic Republic of Congo, and Timor-Leste to facilitate an exchange of experience between these countries and those in more recent political or post-conflict transition. While all LICUS are characterized by weak policies and institutions, country context varies considerably and operational approaches must be carefully calibrated to take this into account. Emerging experience with country strategy implementation shows that LICUS are clustered in four main business models for engagement: (a) deteriorating; (b) prolonged political crisis; (c) fragile transition; and (d) gradual improvers. For each country type, different approaches and operational tools are needed. The LICUS Team has developed an early typology of LICUS and possible menu of tools. Successful country innovations have been summarized into staff guidance – for example, the Transitional Results Matrix (a simple planning tool to integrate political, security, economic and social actions) and the MDTF-financed budget support programs in Timor and Afghanistan. The Bank has increased the political sensitivity of Bank strategies to support reform processes and our understanding of political-security-development linkages. In particular, the Bank has worked jointly with the UN Development Group on the Transitional Results Matrix (TRM), a tool for planning and monitoring implementation in fragile states undergoing a political or post-conflict transition. The TRM integrates actions across the political, security, economic and social spheres into a simple calendar format. At the country level, teams are working closely on developing joint strategies and pooled funding mechanisms with other donors. (See Research and Partnerships) Financing for LICUS
The majority of LICUS have active IDA programs under the regular performance-based allocation system. IDA has also maintained its special post-conflict window, which had committed over $3 billion by the end of 2004. The framework for IDA financing will be amended under IDA 14 to cover the exceptional needs of failed states such as Haiti which require frontloaded assistance to restart state services but do not qualify for the regular IDA post-conflict allocation. In 2004, the Institutional Development Fund committee agreed to add LICUS as a focus area for IDF support for capacity-building. Lack of financing to support early reforms in LICUS in non-accrual (not paying debt service to the Bank) was a barrier highlighted by the task force. In 2004, the Bank established the LICUS Implementation Trust Fund with an initial allocation of $25 million, to support governance improvements and social service capacity-building, primarily for countries in non-accrual and unable to obtain regular IDA financing. The LICUS Trust Fund has already committed support to a number of integrated engagement strategies in fragile states, including programs in CAR, Haiti, Liberia, Sudan, Somalia and Comoros totaling over $20 million. Activities on the ground are now underway in these countries, and the LICUS Trust Fund secretariat is working closely with country teams to facilitate effective implementation of the grant programs. With more than four-fifths of the trust fund fully committed, the LICUS team and FRM are beginning discussions on possible replenishment of the trust fund and future modalities of financial support for the most severe LICUS. The Importance of Institutional Reform
An important part of the LICUS Initiative is ensuring that the Bank can deploy sufficient staff and resources to bridge the knowledge and dialogue gap in these countries. Much of the institutional work identified by the LICUS Task Force Report has now been implemented. In addressing the needs of the LICUS country group, management is ensuring that LICUS country strategies are regularly reviewed at a senior level and appropriately resourced, and that policy and procedural responses are appropriate to the constraints of low capacity in LICUS. Budget allocations for analytical work have been de-linked from lending volumes, increasing support for analytical work for countries with little or no lending. CPIA and PCPI criteria have been revised to take account of improvements at the lower end of the performance spectrum. HR is putting in place a strategic staffing plan to help attract the best staff to LICUS. Emergency recovery policies are being modernized to allow more rapid support in transition situations. Finally, WBI is targeting part of its capacity-building efforts to improving aid effectiveness in LICUS through a series of leadership workshops. These efforts continue to be refined as key areas for improvement are identified. Research and Partnerships
Through the LICUS Initiative, the Bank has developed partnerships with OECD/DAC, UN system and bilateral donors to share ideas, research, and lessons learned on fragile states. In January 2005, the Bank co-sponsored the Senior Level Forum on Development Effectiveness in Fragile States with the OECD-DAC, the European Commission, and the UNDP, hosted by DFID. The two-day SLF brought together senior officials, leading development practitioners, government reformers in fragile states, and academics, to examine aid allocation to fragile states, donor coordination, donor policy coherence, effective service delivery and improved aid instruments. One outcome was the agreement on a list of principles on good international engagement in fragile states that was adopted by the OECD/DAC Learning and Advisory Group (LAP) and the Paris Declaration on Aid Effectiveness. The Principles reflect a broad consensus that state-building is the central objective is fragile states, and that effective donor programs require integrated approaches across the political-security-development nexus, fast and flexible reponses and long-term engagement. There was broad-based agreement by donors to pilot test these principles in their own operations in several fragile states over the next year. Bank research on aid allocations, the PRS Process in LICUS, and LICUS turnarounds has played an important role in better understanding these difficult environments and has helped to inform the global policy dialogue on achieving results in fragile states. David Dollar’s and Victoria Levin’s work on aid allocations indicates that lack of coordination on aid allocations between donors may have resulted in too high a variability in aid to fragile states, and to the marginalization of a group of “aid orphans” who are systematically underaided. At the country level, teams are working closely with partners on joint approaches, joint assessment missions and preparing joint strategies with other donors, including donor coordination models, where the Bank is helping to pilot (in close consultation with bilateral donors and the UN system), an integrated approach to peace-building and social and economic reconstruction. With the UN, the Bank has worked on a number of joint strategies (e.g Somalia, Togo, CAR) and joint coordination of needs assessment and recovery planning exercises (Liberia, Haiti, Sudan). The “UNDG-Bank Operational Note on Transitional Results Matrices” (a companion piece to the CPR’s joint “Guide to Post Conflict Needs Assessment”) helps provide a standard approach shared between the Bank, the UN family and other bilateral and multilateral donors. Updated March 2005 Media Contact:
Nicole Kekeh (202) 473-1782, Email: Nkekeh@worldbank.org |
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