World Bank Iraq Trust Fund External Review Prepared by Development Alternatives, Inc.

1
World Bank Iraq Trust Fund External
ReviewPrepared by Development Alternatives, Inc.

• March 31, 2006

2
International Reconstruction Fund Facility for
Iraq (IRFFI) Model

• IRFFI was created in response to donor requests
  for a multi-donor, coordinated approach to
  financing rehabilitation and reconstruction
  projects in Iraq.

3
World Bank Strategy for Iraq

• The World Banks core objective is to help Iraq
  develop institutional frameworks and systems to
  promote the effective and transparent use of
  resources to promote stability, good
  governance, and economic growth.
• The ITF allowed the Bank to participate in Iraqs
  reconstruction, combining rehabilitation with
  medium- and long-term institution building, even
  before IDA loans could be provided to Iraq.

4
IRFFIs Multi-Donor Trust Fund Model

• The IRFFI model was designed to
• Mobilize resources rapidly
• Create common governance structures
• Coordinate rehabilitation activities
• Reduce transaction costs
• Promote information-sharing.

5
Rapid Resource Mobilization Response

• Donors deposited funds promptly into the Iraq
  Trust Fund (ITF)
• Within the first 6 months, US371 million (93 of
  donor pledges) were deposited into the ITF.
• Within the first year, US392 million (99 of
  donor pledges) were deposited into the ITF.
• The speed of resource mobilization exceeded
  typical multi-donor trust fund experiences.

6
Rapid Resource Mobilization Response

• ITF projects were designated for fast-track
  processing according to Bank procedures for
  emergency operations.
• Bank projects normally take 15 months to approve.
• Within 9 months of the trust fund activation, 9
  emergency operations were approved, legally
  obligating about 93 of ITF resources to Iraq.
• ITF grant funding was provided to Iraq promptly.

7
Rapid Resource Mobilization Response

• Pace of disbursements payments made for goods,
  services, works delivered has been affected by
• Banks lack of recent involvement in Iraq
• Iraqs inexperience with international
  organizations
• Iraqi-implementation of competitive bidding
  procedures
• Portfolio characteristics (e.g. the majority of
  ITF grants finance civil works and goods for
  large reconstruction projects)
• Frequent changes in government and turnover of
  ministry staff
• Volatile security situation.

8
Rapid Resource Mobilization Response

• Overall, the pace of project implementation and
  disbursement has been expeditious under difficult
  circumstances.

9
Governance Structure Coordination

• IRFFI created common governances structure to
  promote a coordinated response, including
• Secretariat function, to be located in Baghdad,
  and serve as the single focal point for
  information.
• Donor Committee, to meet every 6 months, to
  endorse overall priorities and provide strategic
  guidance.
• Facility Coordination Committee, to meet monthly
  in Baghdad and review activities of the two trust
  funds.
• Iraqi Strategic Review Board (ISRB) is charged
  with reviewing project proposals to ensure
  projects are responsive to Iraqs priorities and
  to avoid duplication of activities.

10
Governance Structure Coordination

• Due to the continued volatile situation, the
  innovative organizational arrangements have not
  been adequately tested.

11
Governance Structure Coordination

• Despite missed opportunities of joint governance
  structures,
• Joint UN/World Bank website provides
  comprehensive source of information
• Effective coordination exists at the working
  level among project teams of World Bank and UN
• While several donors may work in same areas,
  projects are complementary, varying in scope,
  geographical coverage, or implementation method.

12
Governance Structure Coordination

• World Bank methods of operation are distinctly
  different from other donors.
• The World Bank preference for Iraqi project
  execution
• Puts Iraqis in the drivers seat and
• Inherently builds capacity by providing hands-on
  experience managing resources and development
  projects.
• Thus, even when donors work in same areas,
  different implementation methods have generated
  different results.

13
Governance Structure Coordination

• Although IRFFI may not have clarified roles of UN
  and WB along lines of comparative advantage
• Perhaps in situations of vast needs the
  potential of all organizations should be
  exploited (and not constrained by comparative
  advantage).

14
Governance Structure Coordination

• With political progress and improved security,
  the governance structures created for IRFFI could
  yet promote substantive cooperation and realize
  significant benefits.

15
Transaction Costs

• The multi-donor trust fund approach
• Creates one window to access funding provided by
  many donors
• Allows smaller donors and those without bilateral
  programs to participate in rebuilding efforts in
  Iraq
• Provides one platform and set of procedures for
  project execution
• Minimizes security costs, allowing a larger share
  of donor contributions to be directed to Iraq.
• The ITF reduces transaction costs for Iraq and
  for donors.

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ITF Due Diligence Measures

• ITF portfolio is subject to risks, including
• Frequent staff changes in ministries
• Difficult security conditions, preventing on-site
  supervision visits
• Capacity limitations of ministries and
  inexperience with modern project management
  procedures.

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ITF Due Diligence Measures

• To mitigate risks, the World Bank
• Employs local staff to support ministries and
  monitor project implementation
• Trains PMTs intensely
• Interacts daily with PMT staff
• Undertakes full range of Bank project review and
  quality control procedures.
• The employment of the Fiduciary Monitoring Agent
  is crucial to determine the effectiveness of due
  diligence efforts.

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Summary of Conclusions

• Although several aspects of the model could not
  be fully implemented, Iraq has benefited from
  the
• Rapid mobilization of donor funds
• Participation of donors unable to mount bilateral
  programs
• Involvement of the World Bank early in the
  reconstruction program, and the creation of
  ministry platforms for effective resource
  management
• Comprehensive website to provide information to
  donors, vendors, and the general public
• Creation of a unified channel for Bank
  interaction with UN agencies.

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Thank You