Increased efficiency and accountability is what development assistance needs

So far, development assistance led mainly by the World Bank has not had the expected impact on promoting economic and social development.

The response to this lack of results has been twofold. First, during the last decade, the World Bank, along with regional multilateral banks and bilateral donors, has broadened its areas of expertise. They currently range from dam building to human rights' protection and from financial advisory services toempoweringt of local communities. Second, developed countries have renewed efforts to increase aid budgets. Both are wrong policy options. Priority should be given to increasing the efficiency of development assistance.


In the private sector, successful firms have discovered that a key to success is to focus on what they do best. Why cannot the World Bank do the same?
One possible explanation is that the World Bank has been incapable of determining what its core competencies are. In the private sector, it is healthy competition and the search for profits what ensures that this process occurs. In the case of development, very limited competition and lack of profit-seeking undermines this process.

Therefore, the need for mechanisms within the organization that detect its core competencies is an urgent one. If the World Bank is, for instance, particularly effective at institution building, efforts and budget should be directed towards this area.

However, this is not a sufficient condition. Another key factor to achieve efficiency is accountability. The argument often used is that the responsibility for the project'’s outcome is of the country, as borrower and implementer. Therefore, the World Bank has no incentive to make its work more efficient. For this to happen, any commitment regarding lending would come with a similar commitment with regards to implementation. The World Bank should be accountable for the outcomes of its development assistance.

Two policy options are suggested. In order to focus development assistance on key areas, the organization should carry out an independent review of its lending operations. A high-level experts' panel should evaluate World Bank's performance and determine the key areas in which it should concentrate its activities according to past success. This review should be performed periodically, with five years as a tentative period.

At the same time, new mechanisms to promote accountability should be established. The success or failure of World Bank projects should be thoroughly and permanently reviewed and evaluated by formal independent panels and, most importantly, have budget consequences. The World Bank's budget should be driven by results.
Efficiency is only achieved by focusing on what an organization does best and ensuring the highest levels of accountability. Currently, the World Bank and the international development community are failing in both dimensions. Broadening the scope of development assistance and increasing aid budgets are not the answers.

However, major changes are needed to achieve the expected outcomes. And the challenges are too important to delay any response.