The short answer to that question is: not very well. How do we know? Because the World Bank itself says so. Its rather impressive Independent Evaluation Group has just produced a report based on an extensive and extended enquiry into the issue: World Bank Group Assistance to Low-Income Fragile and Conflict-Affected States: An Independent Evaluation
The World Bank's country classification: criteria and impact
It makes a real difference in World Bank operations whether or not a country is classified as a 'fragile and conflict-affected state' (FCS). In particular, Bank offices in FCSs have more staff and managerial resources, and are able to short-cut some of the Bank's standard field operating procedures by working from what are called Interim Strategy Notes rather than from the standard Country Assistance Strategy documents. One would then expect that the Bank would pay attention to the criteria for deciding whether or not countries are to be classified as FCS. My greatest surprise in reading the Report was that this is not the case.
In fact, the classification criteria are based neither on an assessment of the prevalence of conflict nor on any estimates of political fragility i.e. the likelihood of serious collapse of political order. All that is needed for a country to enter the FCS list is that it should score low on the Bank's Country Policy and Institutional Assessment (CPIA) indicators. These indicators are drawn up internally within the Bank. They are essentially tools for a lender to rate the creditworthiness of its potential borrowers. Countries are scored on 16 criteria grouped in four clusters: (a) economic management; (b) structural policies; (c) policies for social inclusion and equity; and (d) public sector management and institutions.
It seems nonsensical to use a set of indicators developed for one purpose as the basis for classifying countries for another purpose. Indeed, it leads to some nonsense. Nepal was never classified as FCS during the 10 years of intense civil war (1996-2006), but was classified FCS soon after the 2006 peace agreement was signed there. However, I learned from a discussion with a senior member of the evaluation team in London last week that there is a coherent historical explanation for this use of the CPIA indicators. In 2003, when the FCS classification was introduced, there was a large overlap between countries that were conflicted-affected and those that scored low on CPIA indicators. That is no longer the case. This is partly because, following the Arab Spring, there are now more middle income countries affected by serious conflict. The relevant part of the Bank is apparently still thinking about measures of actual conflict and fragility that might be used to classify countries as FCS.
The organisational interests behind the Bank's approach to FCS
It is a little disappointing that such an important issue as the process through which countries get the label 'fragile and conflict-affected' should be so much influenced by what is organisationally convenient for the World Bank. Reading and discussing the Report suggests that there a number of other ways in which the organisational interests of the Bank and its staff have shaped its approach to FCS. Because the FCS classification brings Bank Country Managers more resources and a licence to short-cut standard field operating procedures, they become very attached it. While intended only to substitute for Country Assistance Strategies in the short term, the much more flexible Interim Strategy Notes are sometimes renewed year after year with little change. In particular, they are used to justify the continual extension of funding for Community-Driven Development programmes (CDD), which feature too prominently in the portfolio of Bank operations in FCS.
CDD programmes are basically a mechanism for transferring money directly to local administrations ('communities') to provide flexible funding for what are termed 'community needs'. CDDs have been a Bank favourite for around two decades, and have been much criticized by researchers and evaluators on a range of grounds. The Independent Evaluation Group finds that they make little contribution to increasing state capacity, and are often perpetuated beyond the point when considerations of capacity building should become paramount. The reason is that CDDs shift a lot of money, and so are much liked by those Bank administrators for whom loan volume is a major objective.
In contrast to CDD programmes, the World Bank has spent little money in the justice sector in FCS - despite a commitment to do more work in this sector. The Evaluation Report states that they "did not find any evidence of demand for a more proactive role by the Bank in the justice sector, nor did stakeholders feel the Bank had a comparative advantage in the justice sector" (Overview p.XIX). It is interesting to note that, while CDD programmes are typically justified in terms of being demand-led, the Bank is not willing to back off from the justice sector in FCS just because there is little demand for its involvement from its borrowers. While the Bank management have accepted many of the recommendations in the Report, they reject the suggestion that they are not the right people to work on justice (Overview p.XXXVI).
I could cite other material suggesting that the Bank's approach to FCS is significantly shaped by its own organisational interests. But few people who are experienced in the aid business would be surprised. We know that aid agencies often have a wide scope to define the problems they set out to solve and the way that they work on them. Populated by human beings, they naturally tend to align their understandings and approaches to development problems to fit their own organisational interests. They just need watching like hawks. And in this case the Independent Evaluation Group has done a rather good watching job. But it too is part of the system, and is a little coy in this report about the limits to the kinds of operations that the World Bank could feasibly undertake in FCS.
What is needed for the Bank to improve operations in FCS?
Surely one of the priorities for aid agencies working in fragile and conflict-affected states is to do everything they can to provide the systems and the incentives for their staff to be innovative and work super-smartly? They need people who are highly street-wise, willing to commit long term to one country, and to find ways of working around the problems of the weakness of formal government organisations.
There is almost nothing of this in the Report. That is perhaps no surprise. Unlike many bilateral aid agencies, the Bank channels its funding exclusively through governments. That makes it hard to be very innovative. The member of the evaluation team to whom I spoke said that the entrepreneurship of Bank staff in FCS tends to be focused on finding ways of by-passing the bureaucratic constraints embedded in the procedures of both the Bank itself and recipient governments. That is probably to be encouraged.
The Report concludes that the Bank has got a little better at working in FCS. That is encouraging. But this Report gives us few grounds for expecting that the Bank is going to get much better, very quickly.