Managing IBRD/IDA Trust Funds. Recent Progress and Roadmap. Junhui Wu. Alfred Nickesen Director Central Operational Services East Asia and the Pacific

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1 Managing IBRD/IDA Trust Funds Recent Progress and Roadmap Junhui Wu Director Global Partnership and Trust Fund Operations Alfred Nickesen Director Central Operational Services East Asia and the Pacific

2 Overview Portfolio Trends : Slides 3-6 The Evolution of the Reform Process : Slides 8-10 Reform Roadmap : Slides A Regional Perspective: Trust Funds in the EAP Region : Slides

3 US$ billion Portfolio Trends IBRD/IDA Trust Funds Cash Contributions and Disbursements FY06-FY IDA/IBRD TFs complement Bank operations through Bank Executed Trust Funds (BETFs) and Recipient Executed Trust Funds (RETFs)* At end-fy10, funds held in trust in IBRD/IDA Trust Funds amounted to US$9.8 billion FY06 FY07 FY08 FY09 FY10 Cash Contributions Disbursements Contributions and disbursements remain strong at around US$4 billion per year each *1 The reporting framework on TFs adopted since June 2010 distinguishes among IBRD/IDA TFs, Financial Intermediary Funds and IFC TFs. This is reflected in the FY10 TF Annual Report ( 3

4 US$ billions Portfolio Trends Recipient-Executed Trust Funds (RETFs) Annual Disbursements from IBRD and IDA lending and RETFs - FY06-FY FY06 FY07 FY08 FY09 FY10 7.0% 10.2% 12.7% 10.2% 7.2% RETF disbursements as percentage of total IBRD, IDA, and RETF disbursements RETFs IDA IBRD Annual RETF Disbursement in Fragile States FY06-FY10 RETF disbursements represent less than 10 percent of IBRD, IDA and RETF disbursements RETF flows to fragile states have increased from just over US$630 million in FY05 to US$1.2 billion in FY10. RETFs have provided significant support in Afghanistan, Iraq, Kosovo, Southern Sudan, Timor Leste, and West Bank and Gaza, among others 4

5 Portfolio Trends Recipient-Executed Trust Funds (RETFs) Where Does the Money Go? - $3.1 billion in FY10 Among the Bank s Regions, the Sub-Saharan Africa Region continued to be the largest beneficiary of RETFs in FY10 Three sectors dominated the use of RETFs: public administration and law, education, and health and social services Regional Share of RETF Disbursements for FY10 Sector Allocation of RETF Disbursements for FY10 5

6 US$ billions US$ billions US$ billions Portfolio Trends Bank-Executed Trust Funds (BETFs) BETFs share of Bank expenditures represent 18% of BB plus BETFs in FY10 BETFs provide resources for: Knowledge-related activities, primarily through Non-lending technical assistance to client countries. External partnerships, outreach and program 3,500 3,000 secretariats. 2,500 2,000 Preparation and supervision of 1,500 operations funded by RETFs 1, (e.g. for fragile states) - 3,500 3,000 2,500 2,000 1,500 1,000 - Bank Expenditures Funded from BB and BETFs, FY06-FY10 (in US$ million) 3,500 3,000 2,500 2,000 1,500 1, FY FY07 FY08 FY09 FY10 - FY06 FY07 FY08 FY09 FY10 BB BB BETF BBFY06BETF FY07 FY08 FY09 FY10 BETF 6 BB BETF

7 Overview Portfolio Trends : Slides 3-6 The Evolution of the Reform Process : Slides 8-10 Reform Roadmap : Slides A Regional Perspective: Trust Funds in the EAP Region : Slides

8 Recent Evolution of TF Management, Board and Donor Consultations Trust Fund Management Framework (TFMF) Approved by the Board in 2007 Aimed at enhancing the strategic alignment, risk management and costefficiency of the Bank s growing TF portfolio Managing Trust Funds: An Update and the Way Forward presented to the Board in June 2010 Reported on significant progress made in implementing the 2007 TFMF and laid out the future direction of reforms The Donor Forum has provided an important annual engagement point with leading donors for discussion of the Trust Fund Management Framework. Annual Meetings 2010 Board Discussion and Management Response to IEG Report - Trust Fund Support for Development: An Evaluation of the World Bank s Trust Fund Portfolio March Spring Meetings 2011 Managing Trust Funds: Status of Implementation and Road Map Presented progress since June 2010 and roadmap of reforms May Donor Forum

9 Recent Developments in the TF Environment: The Need to Go Further Donors Tighter fiscal conditions reinforces need for results, efficiency, transparency, reprioritization and consolidation IEG Need for a more structured approach to the mobilization and deployment of TFs (e.g., umbrella facility, FIF selectivity) Management Stepping up reforms in close consultation with stakeholders Board Holistic approach to TF reforms including greater accountability and oversight Recipients Faster, simpler, and less fragmented consistent with aid effectiveness principles Bank Modernization of Business Program: results-focused; open and accountable ; efficient and flexible 9

10 The TFMF: Snapshot of Status of Implementation start completed I. Strategic Alignment Ensure TF activities support achievement of overall Bank strategies Alignment of IBRD/IDA TFs with CAS and Sector Strategies Fundraising coordination, consolidation Senior Management Review for large TFs II. Systems and Process Integration Mainstream TF activities into overall Bank operational and business processes Integration of BETFs into budgeting and planning Alignment of IBRD/IDA TFs with operations reform (IL, AAA) and results agenda III. Portfolio Sustainability Manage the TF portfolio efficiently and sustainably Cost recovery Simplification of IBRD/IDA TF processes IV. Risk Management and Oversight Financial risk management Enhanced Data Reporting 10

11 Overview Portfolio Trends : Slides 3-6 The Evolution of the Reform Process : Slides 8-10 Reform Roadmap : Slides A Regional Perspective: Trust Funds in the EAP Region: Slides

12 Reform Roadmap While substantial progress has been made on the TFMF, the Board has recommended a more holistic approach that places TFs firmly within the broader strategy (PCD), planning and management processes of the Bank, with improved oversight and accountability. Oversight by Senior Management and Board (comprehensive reporting) Strategic Alignment (with PCD) Holistic Approach Integration with Budget and Business Processes Cost Recovery and Efficiency 12

13 Reform Roadmap: Stronger Strategic Alignment, Results and Oversight Oversight by Senior Management and Board Strategic Alignment (with PCD) Integration with Budget and Business Processes Cost Recovery and Efficiency Define process to strengthen senior management and Board oversight of TFs TF financial risks in Bank Risk Reports Integrated, webbased TF data reporting systems Comprehensive, regular reporting to Board Fundraising coordination Integration with Consolidation- Budget and umbrella facility Business Processes Improve TFs links with PCD, CASs, and sector strategies Strengthen selectivity and management of FIFs Inclusion of BETFs in corporate budget and work programs Integrate TFs in operational reforms and results agenda Simplify processes based on size, risk (e.g. small grants) Automation of TF approval processes Review of cost recovery approach and methodology for IBRD/IDA trust funds Review fee income allocation methodology Simplify processes and fee structure New policy on recovery of noncore units' costs related to FIFs IBRD/IDA TF and FIFs IBRD/IDA TF FIFs 13

14 Reform Roadmap: Continued Engagement with Multiple Stakeholders Umbrella Facility Brainstorm Q4 FY11 Informal Board TF Update Q4 FY11 Board discussion of FIF Framework Q2 FY12 Donor Forum Q4 FY11 Donors Regular consultations with traditional Donors and stepped-up engagement with emerging Donors Stakeholder Engagement Board Seminars, Technical Briefings, Informal and Regular Board meetings Board discussion of Partnership Framework Q4 FY12 Annual Reporting to the Board on TFs Consultations with recipients as part of regular country dialogue Recipients Bank Staff TF Community of Practice 14 OS Panel Knowledge and Learning Products

15 A Regional Perspective - East Asia and the Pacific Region Alfred Nickesen Director Central Operational Services East Asia and the Pacific 15

16 Portfolio East Asia and the Pacific Region US$ 4.6 billion under management Timor-Leste, PNG & PI 3% Vietnam 7% (US$b) BETF Grants RETF Grants Carbon Southeast Asia 8% Philippines 4% Indonesia 26% Regional 13% China/Mongolia 39% (of which $1.2 billion is Carbon & GEF) Total Disbursement US$0.5 billion (12-15% of IBRD, IDA, & TFs) $3b TFs at country level focus mainly on global issues, disaster, & other crises response 16 $2b $0.5b $0.2b IBRD IDA RETFs FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 $0.8b $0.5b Climate change (mainly GEF, Carbon): 53% Natural disaster response: 26% Trade, governance, financial management systems: 6% Post conflict: 6% Food & flu: 4% Remaining: other priority sectors

17 TF Management in EAP: A Regional Oversight Structure Region has established a permanent Regional Working Group to oversee TF reforms, co-managed in Washington and Country Office. Three Building Blocks Work Program (FY12) Strategic alignment: TFs support country (national) & regional priorities (all our CPSs/CASs include TFs) Integration: RETFs treated the same way as IBRD/IDA operations (>US$5m fully integrated) in QA terms; TFs included in MOUs & work program agreements with RVP Efficiency: Streamline processes, irrespective of financing source (e.g., single reviews CD chaired) Further streamline country director-led review of new partnership concepts (focus on selectivity) Consolidation of portfolio: portfolio reviews at country level Risk-based approach for TF operations with greater delegation of approval authority to field for low risk TF operations 17

18 Feedback from World Bank Country Directors and Clients (FY11) Overall EAP Countries are Satisfied with TFs TFs are aligned with country priorities o But approach is more opportunistic than strategic Country-level TFs work (don t substitute with other instruments) o Large global programs (GEF, CTF) work well Monitoring results is important o Results of all operations (including TF-financed) should be monitored by CPS/CAS objectives (and not by funding source) Decentralization has changed the development paradigm o Strengthened partnerships with donors & country True cost of TF management needs to be captured 18

19 Challenges Many TF models need more standardization Donors want to see results from their funds Weak capacity environments and small grants Not always easy to ensure donor visibility (increasingly we have communication strategies for TF programs) 19

20 To Summarize EAP is highly decentralized: action in our country offices for all operations, with Washington in a support/oversight role Trust Funds are fully integrated into our operational work Senior level attention, with a permanent body overseeing the TF Management Plan, which focuses on reforms in three areas (alignment, integration & efficiency) Positive feedback from clients, especially on TF support at country level But there are challenges: standardization, results monitoring, donor visibility 20