As the World Bank tries to move toward more results-oriented and less risk-averse lending strategies, the board of directors is debating how to adjust its oversight role to focus more on project effectiveness.
Every project that the bank funds — from road construction Laos to maternal health initiatives in Lesotho — must be approved by the board, made up of 25 “executive directors” who represent the Washington, D.C-based institution’s 187 shareholders.
This unusually involved role for upper management goes back to the bank’s founding documents, and board review is still seen as an important step in ensuring bank safeguards are met and country priorities — and concerns — are voiced. But some say that as the process has evolved over time, it has accrued layers of bureaucracy that require staff to “bullet-proof” their projects before these even make it to the approval stage.
That front-loading in the project review process creates some of the wrong incentives, and it may be to the detriment of rigorous project review, Sara Aviel, U.S. alternate executive director at the World Bank and member of the board, pointed out during a recent panel discussion at the Center for Strategic and International Studies.
“We spend, and I think the management team does as well, much more time on the projects at the approval stage than we do looking at mid-term reviews or results at the end,” she said, adding that the board was looking at ways to change that dynamic, which makes project approval perhaps a more important milestone than it should be.
More focus on project review
The current process needs to be reformed, according to Alan Gelb, a senior fellow at the Center for Global Development.
“It’s a very high point in the project cycle, and it really shouldn’t be quite like that,” he told Devex. Gelb suggested the board focus more on policies and “helping to make sure that the operations do what they are supposed to do, rather than trying to dot the i’s and cross the t’s of every operation that comes to them.”
That kind of review would be a major change for the board — but Aviel noted there had been a general agreement during recent, informal meetings of the board’s governance committee that there was a need to focus more on project review.
One policy change up for discussion is to have a random sampling of projects brought before the board for a deep dive into project results. That would likely require the board to shift its time and resources away from the pre-approval process, or at least reduce its workload.
“Doing that sort of thing properly is expensive, and unless the costs of the board are going to skyrocket, they need a lighter role in some other areas,” Gelb said.
Shift in strategy?
The board has made some efforts to streamline the project approval phase.
For example, it has considered pushing for more projects to be approved through an “absence of objection” process, whereby all proposals are reviewed by the executive directors’ offices, but discussion by the board is limited to those projects that are more complex, high-risk, or pose other potential issues for countries.
Although there have been proposals in the past for a more radical change or decentralization of the board’s role, the current plans will likely involve a shift in strategy rather than a more fundamental change in structure — but any such shift could have broad implications for bank operations and could encourage a more robust focus on project effectiveness.
Much of the board’s time and resources have, no doubt, been occupied lately by President Jim Kim’s ambitious reform agenda over the past year. The board may have more time to address other issues in the months ahead, but whether its appetite for change can be shifted to the governance body itself at the World Bank remains to be seen.
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