Management Response. OPEV is in fact an integral part of the Bank s Roadmap. As part of Action Area 4 of the Roadmap, it has reviewed

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1 A F R I C A N D E V E L O P M E N T B A N K G R O U P Management Response T GROUPE DE LA BANQUE AFRICAINE DE DEVELOPPEMENT he African Development Bank welcomes this independent evaluation of its implementation of the Paris Declaration on Aid Effectiveness. The evaluation concludes that the Bank has performed well on important dimensions of the Paris Declaration, particularly as regards supporting the ownership of regional member countries (RMCs) and engaging with stakeholders at the country level (harmonisation). The evaluation rightly points out the need for the Bank to continue internalising and operationalising the Paris principles as an integral part of the Bank s policies and operations. The evaluation is useful in helping the Bank adjust its reform agenda and better meet its commitments under the Paris Declaration (March 2005) and the Accra Agenda for Action (September 2008). Management agrees with the main findings of the evaluation and notes with interest important areas of progress flagged by the report: As its field presence grows, the Bank is increasingly playing a leading role in aid effectiveness at the country level. The Bank is better aligning its Country Strategy Papers with RMCs development priorities and strategies. At the country level, the Bank is consulting effectively with important stakeholders in developing country strategies. The Bank s support of RMCs on economic governance and public financial management is yielding fruit. Several aspects of the evaluation deserve further consideration. These are discussed briefly in the context of the Bank s Roadmap on Aid Effectiveness. The Roadmap on Aid Effectiveness In February 2011, the Board adopted a Roadmap on Aid Effectiveness a framework (not a policy or a strategy) for sequencing, guiding and coordinating Bank efforts on aid effectiveness. The evaluation and the Roadmap 1 agree in their diag- 1 OPEV is in fact an integral part of the Bank s Roadmap. As part of Action Area 4 of the Roadmap, it has reviewed nosis and signal several areas as in need of special attention: Making the case for aid/development effectiveness within the organisation Establishing the Paris principles as an integral part of the Bank s priorities and ensuring that corporate communications and organisational arrangements help the Bank meet its Paris Declaration commitments Aligning the Bank s policies, practices and incentive structure with key principles of the Paris Declaration Developing specific, practical guidance that helps staff across the organisation apply aid effectiveness principles Regularly monitoring and reporting on progress in implementing the Paris Declaration In all of these areas, the Roadmap has set out a clear and detailed course of action grounded in extensive Bank-wide consultations. The principles and the approach adopted in the Bank s Roadmap guide Management s responses as detailed in the Management Action Record table, below. Decentralisation and field-level engagement Management agrees with the findings of the evaluation that decentralisation [is] the single most important factor affecting the Bank s perforthe Bank s policies and practices with a view to identifying key institutional dimensions that drive change: leadership, commitment, capacity and incentives.

2 mance on aid effectiveness ( 3.4.1) and that decentralisation must be accelerated and rolled out across the Bank. In an effort to strengthen the quality of its frontline support to regional member countries, the Board of Directors approved in April 2011 a roadmap for decentralisation of its operations over the next five years. The exercise revolves around three key pillars: strengthening the Bank s existing field offices, expanding its presence in fragile states, and consolidating regional capacity. In this connection, Management is stepping up efforts to implement its decentralisation strategy. A Permanent Committee for Decentralisation (PECOD) has been formed to ensure that all Bank components take action in a coordinated and timely manner. As part of this initiative, two pilot regional resource centres will be established and Field Office staffing will be reinforced to strengthen existing Field Offices and provide critical mass in new Offices and in the pilot centres. As part of this initiative, all Bank Complexes have been asked to finalise plans to move staff to the field in Management also agrees with the evaluation that the skills mix should be adjusted so that the Bank can better engage in policy dialogue and coordination at the country level. The staff plans now being prepared by the Complexes will provide an early opportunity to review and adjust the skills mix of existing Field Offices and new regional pilot centres. Mainstreaming the Paris principles Management agrees that the Bank should mainstream the full range of Paris principles within Bank policies and practices. To help prioritise the Bank s actions across an extensive corpus of prescriptions 2, Management advocates focussing on those commitments and principles most likely to yield high development benefits for RMCs. The Roadmap proposes to achieve this by concentrating the Bank s attention on three areas: Strengthening transparency and accountability for development results Expanding the use of country systems as a means of reinforcing country ownership 2 Taken together, the first three High-Level Forums on Aid Effectiveness (Rome, Paris and Accra) create more than 100 commitments for development agencies, not all of which are relevant to the Bank s mandate. And the forthcoming Busan High-Level Forum (November 2011) will doubtless swell this number. Enhancing field-level engagement by increasing decentralisation Progress on the broader range of Paris Declaration commitments will continue to be monitored through the Bank s internal monitoring survey (see below). Operationalising guidance on procedures and practices Management agrees with the evaluation on the need to establish key Paris principles as an integral part of the Bank s normal policies and practices. As noted in the Bank s Roadmap on Aid Effectiveness, giving staff clear directions and guidance on why, when and how to engage in aid effectiveness efforts is fundamental to translating political commitment into behavioural change, especially where competing priorities or incentives require trade-offs. In this regard, the update of the Bank s Operations Manual is providing a unique and timely opportunity to mainstream the Paris principles into the Bank s operations, policies and practices (See Management Action Record table, below, for details). In addition, and drawing on the findings of the Bank s internal monitoring survey on the Paris Declaration, the Department for Quality Assurance and Results (ORQR) will work with PE- COD to ensure that the Field Office Handbook currently under review provides operational guidance to Field Office staff on implementing key Paris Declaration principles and improving the Bank s overall performance. At a more technical level, the Bank s Procurement and Fiduciary Services Department (ORPF) and the Bank s Governance, Economic and Financial Reforms Department (OSGE) are currently developing operational guidance for the use and strengthening of country systems. Looking further ahead, aid effectiveness principles will also be addressed in the Bank s Long-Term Development Strategy. Finally, the Busan High-Level Forum on Aid Effectiveness in November 2011 will provide a timely opportunity to adjust the Bank s strategies and further reflect on the significance of the development effectiveness agenda currently being fleshed out by the international community. Against this background, Management questions the evaluation s suggestion that the Bank prepare a central document that provides guidance on how aid effectiveness principles will be addressed through the Bank s support. 2

3 Managing strategic decisions across the organisation In order to improve strategic decision-making and coordinate actions across the organisation, Management has been guided by the Roadmap on Aid Effectiveness, which sets out time-bound actions for all departments directly responsible for implementing the Paris Declaration principles. Complexes discussed the responsibilities for implementing the tasks assigned by the Roadmap in detail during a Senior Management seminar facilitated by the office of the Chief Operating Officer (COO) in February The COO s office (including the Programming and Budget Department (COBS) and ORQR) now acts as a central locus for facilitating and coordinating important decisions related to the implementation of the Paris agenda a role suggested by the evaluation. Management recognises that as a constitutive part of the COO s office, ORQR has special responsibilities for advising the COO and monitoring the implementation of the Paris agenda across the Bank. As part of these responsibilities, ORQR has just completed an extensive internal monitoring survey on implementing the Paris Declaration indicators. The findings of this survey will be presented to Committee on Operations and Development Effectiveness (CODE) in October

4 M A N A G E M E N T A C T I O N R E C O R D Recommendation Management s Response Recommendation 1: Establish the case for aid effectiveness within the organisation. 1.1 Based on the policy documents review undertaken with this evaluation, ORPC should examine the strategic fit between [aid] 3 effectiveness principles and corporate strategies. ORPC should clarify the Bank s policy stance on issues where there are gaps (e.g. conditionalities, funding instruments). 1.2 The Chief Economist should prepare a background paper as part of the examination of critical issues of the relevance of [aid] effectiveness principles for the Banks strategy. This paper should be prepared in a similar manner as when preparing a new mid-term strategy. It needs to take into account the outcomes of the discussions around development effectiveness to be held during that process. In the background paper the Chief Economist in cooperation with the Strategy Office (STRG) should also clarify the Bank s comparative advantage based on [aid] effectiveness principles. Agreed in part. Management believes that rather than examining the strategic fit between [aid] effectiveness principles and corporate strategies, the priority is to increase the Bank s practice of the principles in question. With this in mind, ORPC is currently reviewing the Bank s Operations Manual. As part of this exercise, the Paris principles will be mainstreamed in standing operations, policies and practices (see Management s response to Recommendation 2.2 for details). ORPC is also mainstreaming the Paris principles in all policies now being drafted or revised. Agreed in part. In the short term, the Bank s Roadmap on Aid Effectiveness is acting as a framework for guiding, sequencing and coordinating Bank actions on aid effectiveness and development effectiveness. These actions will be captured in the Bank s three-year rolling Programme and Budget Document. In the longer term, STRG will address aid effectiveness principles in the Bank s Long-Term Development Strategy (LDS). The LDS will integrate the principles and commitments that will have been endorsed at the Busan High-Level Meeting in November Against this background, Management considers that additional central strategy papers may be unnecessary and could even work against the objective of mainstreaming aid effectiveness principles. 3 The evaluation uses development effectiveness and aid effectiveness interchangeably to refer to the Paris Declaration principles. For Management, however, the terms refer to distinct concepts and agendas: as stated on Page 1 of the Roadmap for Improving Performance on Aid Effectiveness and Promoting Effective Development, effective aid is an important building block in the pursuit of a greater goal: effective development. In the interest of clarity, therefore, we have consistently taken development effectiveness to mean aid effectiveness and have signalled substitutions with square brackets. 4

5 1.3 The Chief Operating Officer s (COO s) office and ORVP should lead the Bank-wide debate around critical issues that seem to create tensions between aid effectiveness and elements of its strategy. A priority issue for debate is the use of country systems. The Procurement and Fiduciary Services Department should present a strategy to strengthen use of country system for a wider debate in the Bank that includes field offices. ORVP s seminars on operational knowledge could provide the platform for these discussions. Within the COO s office, ORQR acts as a central locus for facilitating and coordinating important decisions related to aid effectiveness and for monitoring the implementation of the Paris principles across the organisation. In February 2011, for example, ORQR facilitated a Senior Management seminar on the challenges of implementing aid effectiveness principles across the Bank s Complexes. ORVP also plays an important role in aid effectiveness. In May 2011, it facilitated an informal Board meeting on the use of country systems and gave ORPF the opportunity to presents its strategy to expand the use of country systems. ORVP and the COO s office also ran staff seminars and workshops on the use of project implementation units (October 2010) and the use of country systems (June 2011). Further events will be organised in the lead-up to the Busan High-Level Forum. Recommendation 2: Mainstream development effectiveness principles. 2.1 ORPC should prepare a central document that provides guidance on how aid effectiveness principles will be addressed through the Bank s support. The document does not have to replace existing policy documents, but it should provide clear reference on how aid effectiveness principles are addressed in the various policy documents. Agreed in part. Management questions the value of preparing another central document. The Bank s Roadmap on Aid Effectiveness constitutes a sound basis for guiding, sequencing and coordinating Bank actions. Furthermore, as noted under Recommendation 2.2, the revised Operations Manual will provide operational guidance. 5

6 2.2 ORPC should also provide detailed guidelines for task managers on how aid effectiveness principles should be taken into account at the operational level. The on-going work on the Bank Group Operational Manual should embed aid effectiveness principles in the Bank operations. 2.3 The Bank should appoint [aid] effectiveness champions in all three operational complexes who would lead on the preparation and implementation of development action plans to implement aid effectiveness principles at operational levels. 2.4 The Performance Management System should require the inclusion of [aid] effectiveness related objectives where relevant. By December 2011, ORPC will mainstream the Paris principles in the Bank s Operations Manual: The Compendium of Policies (Vol. 1) will enshrine the general principles of aid effectiveness as an integral part of the Bank s mission and will set out the Bank s commitments under the Paris Declaration and the Accra Agenda for Action. Special Operational Guidance (Vol. 2) will provide staff and managers specific guidance on good practice as regards conditionality, funding instruments, joint missions, pooled funding, etc. ORPF is producing more specific operational guidance on using and strengthening country systems: A strategy paper on the use of country public financial management systems and a guide on the assessment of supreme audit institutions will be prepared in Q A proposal for the use of country procurement systems will be finalised and presented to the Board by end ORQR will work with PECOD to prepare a Field Office Handbook that provides operational guidance on key items of the Bank s aid effectiveness commitments (see further). Not agreed. Management is not convinced that the appointment of three aid effectiveness champions would achieve the desired results and believes it would be an unnecessary distraction from establishing the Paris principles as an integral part of the Bank s priorities. Agreed in part. ORQR will work with PECOD to ensure that the Field Office Handbook currently under review provides specific operational guidance to Field Office staff on implementing key Paris Declaration principles and improving the Bank s overall performance, especially in terms of transparency, predictability, the use of country systems, and the use of parallel project implementation units. As part of this exercise, ORQR will finalise a checklist of actions by December In doing so, it will work with PECOD and the Human Resources Management Department (CHRM) to suggest incentive mechanisms, including Key Performance Indicators (KPIs). 6

7 2.4 Country Strategy Papers need to include consistent strategies on [aid] effectiveness related issues (e.g. choice of funding modalities, use of country systems). Country portfolio performance reviews must report on [aid] effectiveness indicators as part of a more standardised format. 2.5 The Bank (Policy Department, Procurement and Fiduciary Risk Department, Governance Department, Chief Economist, and operational departments) needs to review its approach to fiduciary risk management. Work in progress (Fiduciary Risk assessment instrument to monitor budget support has been developed) needs to cover all aid instruments including investment lending. 2.6 ORQR will monitor aid effectiveness targets on an annual base. We recommend focus on the few SMART targets that are critical to achieve if the Bank is going to fulfil its commitment to AE principles. Country Strategy Papers already address aid effectiveness principles. These will be further strengthened through the Readiness Review standards for Country Strategy Papers that are being piloted. By Q1 2012, ORQR will review the standards to verify that their coverage of the issues is complete. Country-level progress on aid effectiveness will be recorded and discussed through normal Bank monitoring mechanisms (see response to Recommendation 2.6). ORPF and OSGE elaborated a Fiduciary Risk Management Framework for Policy-Based Operations and presented it to the Board in May ORPF is now extending the framework to other instruments. ORQR already monitors the Paris Declaration indicators across the organisation, and will present the findings of an internal monitoring survey to CODE in October In addition, SMART 4 targets have been adopted as part of the Bank s Results Measurement Framework. The Bank already reports annually on progress in four areas: transparency, predictability, the use of country systems and the use of parallel project implementation units. Recommendation 3: Manage strategic decisions. 3.1 Change management can be purposefully linked to the on-going decentralisation reform. In line with the Decentralisation Roadmap we propose that the office of the COO should be responsible for monitoring the transition to new ways of working. The COO will be reporting to the board on the change initiatives. PECOD was established to ensure the optimal, timely, efficient and proper implementation of the Bank s Decentralisation Strategy. As part of its mandate, PECOD prepares monthly progress reports for the President and periodic status reports on decentralisation for the Boards. In addition, ORQR reports on progress on decentralisation and aid effectiveness yearly in the Annual Development Effectiveness Review (ADER). 4 SMART: Specific, measurable, achievable, realistic and timely. 7

8 3.2 The Decentralisation Roadmap has a strong focus on strengthening existing field offices. It should explicitly address the need for technical capacity to lead country dialogue and stronger selectivity and focus on comparative advantages within the new aid architecture. 3.3 The Bank s HR strategy has to address the need for soft skills required for effective management of development cooperation in an era of H&A. This includes training for existing staff and deployment of additional staff to provide strong capacities on the ground. Training should include soft skills (negotiation, dialogue etc.) as well as technical issues (risk management, funding modalities, analysis of governance related issues etc.). 3.4 The Bank needs to make sure that activities in relation to aid effectiveness (training, workshops, and studies) are sufficiently resourced. The reform of trust fund management is a step into the right direction to mobilise additional funding for capacity building and dialogue. As part of the Bank s decentralisation initiative, two pilot regional resource centres will be established and Field Office staffing will be reinforced to strengthen existing Field Offices and provide critical mass in new Offices and in the pilot centres. All Complexes have been asked to finalise plans to move staff to the field in This includes a review of the skills mix required to lead country dialogue. Management agrees with the evaluation that the skills mix should be adjusted so that the Bank can better engage in policy dialogue and coordination at the country level. PECOD is piloting a new recruitment process for Resident Representatives that includes psychometric testing. CHRM partners with line managers yearly to identify training and development needs, and provides practical interventions. Soft skills training such as the Leadership and Management Development Programme has already allowed managers and supervisors to improve their interpersonal skills and better lead and develop their staff. Management is currently reviewing the Bank s resource mobilisation strategy with a view to better aligning the strategy with Bank priorities by Q As part of this exercise, consideration will be given to using trust funds to better support Field Office activities and normalising trust fund management as part of the Bank s administrative budget. 8