THE AFRICA CATALYTIC GROWTH FUND

Transcription

1 Public Disclosur Authorizd Public Disclosur Authorizd Public Disclosur Authorizd Public Disclosur Authorizd THE AFRICA CATALYTIC GROWTH FUND Rqust to Establish a Trust Fund AFRICA REGION Th World Bank January 30,

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3 AFRICA CATALYTIC GROWTH FUND I. Introduction and Contxt 1. This not outlins a proposal to crat an Africa Catalytic Growth Fund (ACGF), which would provid financing in support of particular country-spcific dvlopmnt opportunitis byond thos supportd by IDA. Th Fund, to b financd by contributions from dvlopmnt partnrs and managd by th Africa Rgion (AFR), would complmnt and augmnt th impact of IDA assistanc in thr spcific situations: (a) to rinforc high-prforming countris to nabl thm to achiv highr growth; (b) to support transforming countris-prviously low prforming countris that hav rcntly dmonstratd markd and sustaind improvmnts in policis; and (c) to fund initiativs to facilitat rgional intgration. 2. Background. On Sptmbr 25, 2005 th Dvlopmnt Committ discussd a papr ntitld Strngthning th Dvlopmnt Partnrship for Achiving th MDGs: An Africa Action Plan. That papr st out a program of action to support an nhancd partnrship for Africa s dvlopmnt. Th intrnational community has mad a numbr of commitmnts, particularly at th G8 mting in Glnagls, Scotland in July, 2005 to substantially scal up its assistanc to Africa by A major thrust of th Africa Action Plan (AAP) is an nhancd partnrship with dvlopmnt partnrs to coordinat th dlivry and nhanc th ffctivnss of th incrasd assistanc to Africa currntly bing plannd. Among th actions proposd in that papr was th cration of an ACGF, which would provid a nw mchanism to complmnt IDA rsourcs whil maintaining country ownrship and th intgratd xpnditur managmnt systms supportd by IDA. 3. Rational. As th additional funding promisd to Africa bcoms availabl, thr will b nw opportunitis and challngs that nd to b managd carfully by th Bank Group and its dvlopmnt partnrs. A critical focus will b on using nw flows ffctivly, taking advantag of th strngths of th xisting systm but also flxibly allocating funds whr thr will b prospctiv larg payoffs. On possibl approach would b to chang th IDA allocation ruls to incorporat such opportunitis. This would, howvr, b inappropriat. It would complicat and dislocat what is currntly a clar and complling systm of rsourc allocation basd on dmonstratd, actual prformanc. Furthr, as discussd blow, providing financing to xploit high rturn opportunitis may also ntail gratr x ant risk. To nsur that such financing is subjctd to ffctiv accountability would rquir a ring-fncd idntifiabl fund that can b valuatd as an ntity. Thus, th prfrrd approach is to maintain th intgrity of IDA S currnt Prformanc Basd Allocation (PBA) systm whil providing a distinct but qually accountabl systm to dal with particular opportunitis in which aid can b both highly ffctiv and achiv larg rturns, for xampl through substantial positiv spillovr ffcts or xtrnalitis. An xampl of a larg positiv xtrnality would b nighborhood ffcts, in which aid flows ngndr significant bnficial impacts on countris that ar non-rcipints. 1

4 4. Both conomic growth and conomic dclin gnrat xtrnalitis. A country s nighbors, for xampl, ar impactd not only through th dirct transmission of incrasd (or dcrasd) trad, but also through incrasd (or dcrasd) political stability. By th sam tokn, dmonstration ffcts ngndr spillovr impacts; for xampl, whn countris s and attmpt to mulat th xprincs of othr countris whr improvd conomic govrnanc has ld to incrasd growth and povrty rduction. Africa nds to incras th numbr of succssful xprincs that can srv as rform rol modls. Th continnt would sm a vry diffrnt plac if a handful of conomis wr abl to sustain annual growth rats in xcss of 8 prcnt. 5. Elswhr in th world, growth xtrnalitis from fast-growing nighbors hav bn a substantial hlp to landlockd, rsourc-scarc countris. (Convrsly, socioconomic collaps handicaps nighbors, for xampl through th burdn of rfugs.) In ths contxts, dmonstration ffcts hav bn important in East Asia. In Africa, thr ar alrady a fw good rol modls. For xampl, th ability of Mozambiqu to mov from thirty yars of war to stability, rapid growth and substantial povrty radication has dmonstratd to othr African stats that a dramatic transformation is possibl-with strong ladrship coupld with substantial intrnational support (s Box 1). Howvr, Africa nds othr ffctiv rol modls for othr ky growth stratgis. Although Botswana has managd rsourc walth succssfully and Mauritius has divrsifid its xports, vn so, thr is a nd for mor succss storis in Africa. Wr say Ghana to rpat th succss of Mauritius, it would both dirctly bnfit nighboring countris with fwr opportunitis, such as Burkina Faso, and provid a convincing modl for othr coastal countris to follow. Similarly, wr, say, th DRC to achiv a sustaind transformation, it would likly hav larg bnficial ffcts for its nighbors. Box 1: Mozambiqu: A High Prformr At indpndnc in 1975, Mozambiqu was on of th world s poorst countris. Economic mismanagmnt and a brutal civil war from xacrbatd th situation. Sustaind macroconomic rforms combind with donor assistanc and political stability sinc th multi-party lctions in 1994, hav ld to dramatic improvmnts: spctacular growth of 8 prcnt annually btwn 1996 and 2003; singl-digit inflation; povrty rduction from 69 to 54 prcnt btwn 1997 and Incrasd ducation spnding raisd th (gross) nrolmnt rat in lowr primary schooling fiom 56 prcnt in 1995 to 110 prcnt by Th infant mortality rat fll fiom 149 pr 10,000 in 1995 to 101 in 2003, on of th fastst rductions obsrvd in Africa; roads in good or fair condition ros from 10 prcnt to 70 prcnt of th ntwork. Larg aid inflows (varying btwn 10 to 15 prcnt of GDP) hlpd financ xpandd public invstmnts in ducation, halth and roads-xactly at th tim thy wr ndd. Thy also playd a critical rol in th immdiat post-civil war priod in th form of food aid that mad it possibl to sustain th rconciliation. Mozambiqu has just had its third gnral and prsidntial lctions. Th country has also bn abl to attract larg forign invstmnts in titanium xtraction and procssing and garmnt manufacturing but will continu to rly on forign assistanc for th massiv invstmnts in infrastructur to promot growth and furthr rduc povrty. I 2

5 ~ 6. Th rational for stablishing th ACGF is to crat a pilot financing vhicl that would targt support to a fw country-spcific, high rward dvlopmnt opportunitis capabl of gnrating significant, positiv spillovr ffcts, byond thos that can b supportd by IDA. In ssnc, th Fund is intndd to augmnt th impact of IDA assistanc, and to do so in a way that, whil complmntary to IDA s PBA systm, allows for flxibility to targt support in a slctiv-albit systmatic-mannr. Whras an xpansion of financ for IDA offrs th prospct of incrmnta2 improvmnts in many countris basd on dmonstratd prformanc, th ACGF is intndd to facilitat incipint transformational chang in a fw countris at a tim. Th purpos of th ACGF is not to crat such opportunitis but rathr to rinforc thm whn, from tim-to-tim, thy aris. To b sur, givn th small siz of th proposd Fund in rlation to th IDA 14 rsourcs (s Para. 9), xpctations for ACGF nd to b placd at a ralistic lvl. 7. Objctivs. Th objctivs of th ACGF ar to addrss thr typs of situations. (a) Opportunitis to support programs in high prforming countris to nabl thm to brak growth constraints, for xampl, by ntry into nw xport activitis. In th prsnc of such constraints, th rturns on invstmnt may wll incras with a larg but tmporary incras in aid. Ths rturns would not b achivd with aid at a smallr, sustaind lvl. (b) Support for transformation countris, whr thr is rcnt dmonstrabl, sustaind commitmnt to dcisiv rform basd in part on strong political ladrship, but critical limitations in th capacity and availabl rsourcs to implmnt it. In such situations, timly financial and/or tchnical assistanc can hav vry high payoffs. (c) Supporting rgional intgration initiativs that rprsnt a clar opportunity to supply multi-country public goods. Th fact that Africa is dividd into far mor countris than othr rgions in th world maks th undr-provision of rgional public goods uniquly svr. 8. Each of ths uss of aid is xpctd to gnrat high payoffs. But thy also rquir a rapid and concntratd injction of dvlopmnt financ byond that providd by IDA s PBA systm. Th ACGF would addrss such opportunitis, whil maintaining country ownrship. In short, th ACGF would b a complmnt to and not a substitut for IDA. 9. It is difficult to dfin th idal siz of th ACGF. But, sinc th purpos of th Fund is to rinforc dcisiv chang, th scal of assistanc to individual countris would nd to b larg. Howvr, at any on tim fw countris ar likly to furnish highcrdibility opportunitis. In viw of th natur of th proposd Fund, US$ 1 billion would not b an unrasonabl targt for th priod (roughly 3 prcnt of th ovrall IDA 14 nvlop). At prsnt, th Unitd Kingdom has pldgd E200 million for this By dfinition, th ACGF would not apply to Middl Incom Countris (MICs) or blnd countris. 3

6 priod. Othr dvlopmnt partnrs hav xprssd intrst, and AFR is discussing ways to scur contributions with thm. 11. Eligibility Critria for Us of Funds 10. At th Board mting hld on Sptmbr 6, 2005 to discuss th Africa Action Plan (AAP), th Excutiv Dirctors rqustd clarification of th rlationship btwn th Africa Catalytic Growth Fund and IDA S PBA systm in trms of how rsourcs ar to b allocatd by th formr as compard to th lattr. Th critria and procdurs for rsourc allocation undr th ACGF ar outlind blow. Whil thy ar transparnt and sound, it is important that thr b som flxibility at th margin in implmnting thm in ordr to accommodat th spcial circumstancs of particular country cass which might aris. Th critria will b rvisitd aftr xprinc has bn accumulatd ovr th first twlv months of th ACGF s opration, and thn thraftr if dmd ncssary. Using th critria, th dcisions for th allocation of ACGF rsourcs would b mad by a World Bank Group-wid String Committ, chaird by AFRVP (s Para. 17). 11. Critria for Allocation of ACGF Support. Th ACGF will provid financial support in th following cass: (a) high-prforming countris with crdibl stratgis for incrasd growth that rquir ovrcoming rsourc constraints; (b) transforming countris that ar in nd of additional support for urgntly ndd and rapidly dployabl financial and tchnical assistanc and capacity dvlopmnt to support th implmntation of policy rform and whos PBA allocations, basd on past prformanc, do not adquatly rflct rcnt sustainabl shifts; and (c) rgional intgration initiativs, including componnts of plannd or ongoing multi-country projcts to b implmntd by non-sovrign rgional institutions. (Ths ntitis cannot rciv grants dirctly undr IDA14 and hnc ar difficult to financ undr th IDA14 rgional projcts program). 12. Supporting high-prforming countris. With rapid growth, ths countris will both gnrat dvlopmntal gains for thir own citizns (raising prospcts of mting most or all of th MDGs spcially thos that ar th hardst to rach) as wll as positiv xtrnalitis to nighbors and dmonstrat that sustaind succss is possibl. Raising th rat of growth from around 5 prcnt to, say, 8 prcnt will rquir highr invstmnts in diffrnt sctors (roads, powr, ports tc.) ndd to allow potntial high-prformrs to rach comptitiv indirct cost lvls and brak into highr valud xports. In addition, ths invstmnts can b complmntary: ports nd roads, and both nd powr, and th rturns to ach invstmnt individually ar lowr than to th coordinatd packag. In ths situations invstmnts typically hav high rats of rturn. To support this invstmnt ffort a tmporary larg scal public invstmnt ffort is ndd. Focusing a rlativly larg aid ffort on a limitd numbr of countris could maximiz growth and progrss toward thos countris mting th MDGs, spcially thos that ar hardst to rach. 4

7 Critria for High Prformrs A country will b ligibl undr this catgory whn all th following critria ar mt. Evidnc of a sound policy framwork in plac, as rflctd in th country's CPIA rating (typically at or abov 3. S). Evidnc of a crdibl national stratgy for shard growth, as rjlctd in th JSAN of th country's PRSP. Evidnc of a constraint to growth, th allviation of which will yild a sharp incras in growth. Evidnc that aid is bing wll-utilizd in th country, as rflctd in th judgmnt of th donor community in th country. On indicator would b IDA projcts at risk of lss than I5 prcnt of th portfolio, and lss than 25 prcnt for smallr countris with 8 or fwr activ projcts. 13. Countris undrgoing transformation. Ths ar countris making a dramaticand sustainabl-transformation in conomic govrnanc. This would typically b th rsult of a nw commitmnt to an ambitious but sound conomic rform program that is challngd by wak institutions ndd to nsur fficint and rapid implmntation of rforms. Such a commitmnt can aris for xampl from ladrship opportunitis arising as govrnmnts mak a succssful transition from post-conflict rconstruction and social consolidation to longr trm conomic managmnt. In gnral w would not xpct countris ligibl for th IDA post-conflict allocations or LICUS trust fimd rsourcs to qualify for transformational assistanc undr th ACGF (s Para. 28), but thr could b xcptional cass of such countris aftr a dmonstratd priod of improving prformanc that satisfj th critria for transforming countris. As th PBA systm has a tim lag in translating a chang in conomic govrnanc into rsourc allocations, thr would b a cas to support countris undrgoing rcnt markd and sustaind improvmnts in policis. In ths cass thr would nd to b complling vidnc of both th dpth and durability of th rform program for accss to th ACGF. Whil vidnc such as invstmnt climat assssmnts, xtrnal country assssmnts and in som cass valuations by rating agncis can b usd to inform judgmnt on ths cass, it will also ncssarily rly to a larg dgr on th judgmnt of th donor community. Critria for Transforming Countris A country will bcom ligibl undr this catgory whn all th following critria ar mt. 0 Evidnc of govrnmnt commitmnt and dmonstratd improvmnt in conomic govrnanc, supportd by political ladrship to follow-through with th transformation. 0 Evidnc of implmntation of a crdibl and sound stratgy for a sustaind rform program for shard growth as masurd by improvmnts in th CPIA, (using th most currnt data availabl,). 0 Evidnc of a wll-dfind opportunity to achiv a sharp incras in growth. 5

8 Evidnc that aid is bing wll-utilizd in th country, as rflctd in th judgmnt of th donor community in th country. On indicator would b IDA problm projcts of lss than 15 prcnt of th portfolio, and lss than 25 prcnt for smallr countris with a portfolio of 8 or fwr projcts. 14. Rgional intgration initiativs. Rgional invstmnts can hav vry high payoffs in Africa, whr markts ar small and fragmntd and many countris ar land-lockd. Th piplin of rgional intgration projcts in Africa has bn growing rapidly and currntly stands at mor than $2 billion ovr th nxt 3 yars, mor than twic th amount that can b financd from IDA14 undr its rgional pilot program. Rgional programs fundd by th ACGF, including grants to non-sovrign rgional institutions, will b programs that cannot prsntly b fundd by IDA. Thy would aim to rliv a transbordr bottlnck affcting at last thr countris, th radication of which would induc an incras of shard growth. 15.) Rgional public goods suffr from th classic fr-ridr problm in which individual countris lack th incntiv to us thir rsourcs, whthr from tax rvnu or from aid allocatd to th country, to pay for thm. Th ACGF will complmnt IDA14 financing of rgional projcts whn thr is a financial shortfall. In addition, currntly unfundd activitis could b supportd by th ACGF. Undr IDA14 th dcision to allocat grants instad of rgular IDA crdits is basd on th risk of dbt distrss of th sovrign ntity rciving th funds. This has mant that grants cannot b allocatd dirctly by IDA to non-sovrign rgional institutions, vn whn ths institutions hav an important rol to play in a rgional projct. Whil in principl grants can b passd on to th non-sovrign rgional institutions out of th individual country allocations of participating countris, doing so has not bn asy in practic. Th ACGF can b usd to complmnt th IDA14 rgional pilot program. For xampl, th ACGF can b usd to nhanc th dvlopmnt impact of stratgically important IDA Rgional Pilot Program projcts by dirctly financing th coordination and ovrsight rol of a rlvant rgional institution. Such an allocation can b providd in addition to th on-third from country allocations (rquird to nsur country ownrship) and th two-thirds of additional funding from th IDA14 rgional pilot program (s Box 2). Critria for Rgional Initiativs For th countris involvd, vidnc of sound policy framworks in plac, as rflctd in th countris CPIA ratings for th countris as a group. Evidnc of crdibl national stratgis for growth, as rflctd in th JSAN of th countris PRSPs, which diagnos th rol that gratr rgional intgration can play in nhancing shard growth. Evidnc of a wll-dfind and tangibl multi-country constraint to growth, th allviation of which at th rgional lvl will yild an incras in growth of th involvd countris. 6

9 Whr funds ar to b allocatd to a rgional institution, vidnc that, wit accompanying tchnical assistanc, it can ffctivly manag th program and b hld accountabl for its outcoms. Evidnc that aid is bing wll-utilizd in th countris, as rflctd in th judgmnt of th donor community in th country, and as indicatd by IDA portfolio indicators. 1 Box 2: Southrn Africa Powr Markt Program (SAPP) This is a tn-yar program aimd at assisting th SADC countris to incras availability and rliability of powr supplis to improv comptitivnss and growth in th rgion. Th first phas of SAPP is supportd by an IDA crdit of US$178.5 million to financ upgrading of transmission lins to nabl DRC to xport mor powr to othr SADC countris. Effctiv managmnt of th powr markt also rquirs nhancing th capacity of rgional institutions to promot and manag trad, rgulat accss to rgional transmission systms; and advis on cross-bordr transit pricing of powr flows and on quality of srvics. Whil IDA is providing financing for physical invstmnts to intrconnct powr systms, it lacks th appropriat instrumnts to facilitat ncssary strngthning on nascnt rgional bodis, for xampl th SAPP Coordination Cntr rsponsibl for managing th powr pool. Thus far support from bilatral sourcs has not matrializd to th xtnt rquird. This lack of complmntary financing is rstricting bnfits abl to b drivd from th intrconnctd powr systms. Additional grant financing can improv opration of th powr pool, (through additional powr trading) and nabl countris to raliz additional bnfits from th invstmnts bing mad Ky Faturs, Govrnanc, Implmntation and Managmnt 16. Structur of th ACGF. Th ACGF will b a multi-donor poold trust fund with all th standard trms and conditions of World Bank-managd trust funds. It will hav th following faturs: All funds will b providd as grants. Rcipints can b both govrnmnts and non-govrnmnt institutions such as Rgional Economic Communitis (RECs), such as ECOWAS. Projcts and programs to b financd may involv scaling up of xisting or plannd IDA oprations as wll as nw stand-alon oprations. All projcts and programs, whthr co-financd or stand-alon, will b subjct to IDA oprational policis and procdurs for dsign, administration and ovrsight thus obviating th nd for a nw structur or procdurs. Prformanc of th Fund will b rportd to Board on a rgular basis in th contxt of th implmntation of th Africa Action Plan. At th nd of thr yars th Bank Group and th participating donors will conduct an valuation of th ACGF to dtrmin whthr, in light of th scal and scop of th IDA program and ACGF s prformanc, th Fund should b xtndd. An xtrnal audit will b conductd thr yars aftr th ACGF s prformanc has bn formally launchd, as wll as at closing. 7

10 17. Govrnanc and Implmntation Arrangmnts. A Bank Group-Wid String Committ will b stablishd which will b chaird by th AFR VP, and includ, among othrs, th VPs for CFP, DEC and PREM. Th Committ will b supportd by a small Program Managmnt tam. Th String Committ will: Approv th programs/projcts that will b includd in th ACGF annual work program, guidd by th prioritis idntifid in th AAP, country and rgional stratgis, and slctd according to th critria dscribd abov. Prioritiz and approv grant allocations for funding undr ACGF s work program. Dcid on amndmnts in th activitis or allocations of ongoing grants. Rviw progrss of th ACGF work program; nsur th prformanc and quality of th ACGF portfolio, and th fficint and ffctiv us of th ACGF rsourcs. Rviw issus rfrrd by ACGF Program Managr Rviw and approv changs to ACGF guidlins and procdurs, taking into account th viws of donors, as wll as Bank oprational policis and procdurs. Guid th prparation of ACGF program rports, annual portfolio prformanc rviws, and lssons larnd with th ACGF program. 18. Program Managmnt. A Program Managr will manag th ACGF on a day-today basis aid togthr with a support tam will b rsponsibl for: Rviwing projct proposals undr a du dilignc procss and ndorsing thm to th String Committ for inclusion in th ACGF Work Program. Drafting th annual ACGF Work Program for approval by th String Committ Administring grants or allocations in accordanc with th trms and conditions st forth in th multi-donor agrmnt; Ensuring that grants agrmnts ntrd into btwn IDA and th rcipint ar mad ffctiv and closd on a timly basis, and rsidual funds disposd of in accordanc with donor agrmnts; Ensuring that thr ar appropriat controls in plac on fund usag, and that task tam ladrs assignd to manag individual programs or projcts undrstand th trms and conditions of thir usag; Monitoring status of ACGF program implmntation, TF commitmnts and balancs; and Prparing consolidatd implmntation status rports to donors as pr ACGF multi-donor agrmnt. Prparing annual rqusts for ACGF funding. Organizing annual mtings with donors to prsnt status rport findings and scur donor pldgs. Ensuring consistnt application of ACGF policis and guidlins, and crosscountry xchang of good practic. Liaising with oprational units in th AFR rgion and administrativ units in th Bank - ACTTF, LEG, TFO. Coordinating rviws and valuations, including complianc audits. 8

11 Ensuring knowldg sharing-in particular, lssons of xprinc-within AFR and with othr parts of th Bank. 19. Consultations. It is nvisagd that thr will b a rgular sris of consultations with subscribrs to th Fund and with African govrnmnts and rgional institutions. 0 Th purpos of ths consultations will b to nsur that ACGF activitis ar informd by th concrns and prioritis of th Fund s clints and its financirs. Ths consultations will tak plac annually, in th contxt of th African Partnrship Forum, th Forum of African Financ Ministrs, and in othr fora. Country and rgional allocations will b dtrmind by clar ligibility critria agrd to by th donors to th ACGF and duly rflctd in th Fund s lgal agrmnt. Rsourcs will b allocatd to spcific projcts and programs on th basis of ths agrd critria. Ths allocations will b guidd by African prioritis idntifid in country and rgional stratgis and informd by th stratgis and prioritis of th Africa Action Plan (AAP), in ordr to nsur that Africa s prioritis ar rflctd in th allocation procss. Th String Committ will rport annually to donors on which projcts and programs, within th stratgic dirction dscribd abov, will rciv support from ACGF. 20. Work Program Dvlopmnt. Th procdurs for allocation of ACGF rsourcs will b closly coordinatd with th rgular IDA allocations to nsur complmntarity btwn th two. In particular, ACGF allocations will b mad ach yar, in paralll with th annual procss of IDA rsourc allocations carrid out through th Lnding Stratgy Rviw xrcis. To th xtnt possibl, allocations will b mad in tandm with WPA planning of IDA oprations. 21. It is th intntion of Fund managmnt to strngthn, not substitut for th xisting World Bank stratgic procsss. Thrfor, ACGF programs will b mbddd in a country stratgy (CAS) that is itslf a rflction of th clint country s own Povrty Rduction Stratgy. On an annual basis, IDA staff will propos country programs or rgional projcts for funding from th ACGF, ithr stand-alon activitis or co-financing of xisting or plannd IDA programs or projcts. Each of ths proposals will b consistnt with country or rgional stratgis and will rflct prioritis nunciatd in national povrty rduction stratgis. Th Program Managr will rviw th proposals in trms of th ACGF ligibility critria and will ndors ligibl proposals to th String Committ for considration. Th Committ will thn dtrmin which programs/projcts ar to b fundd and th funding lvls, sking to maximiz th impact of ths invstmnts. 22. Th Program Managr, in clos consultation with th String Committ, prpars th annual work program and submits it to th String Committ mmbrs 9

12 whr it is considrd and approvd. Th work program includs proposals for allocating rsourcs from th ACGF. Th work program clarly dlinats th catgoris of activitis supportd by th ACGF. Th annual work program is basd on a multi-yar businss planning documnt and includs, intr alia: a dscription of on-going activitis and a dscription and justification of proposd nw activitis, thir rspctiv costs, projctd outputs and xpctd sourcs of funding; an annual budgt to implmnt th work program. Rcognizing th nd for flxibility du to changing circumstancs, whn ncssary, th Program Managr will propos modifications to th work program, to b considrd and approvd by th String Committ. 23. All programs/projcts proposd for funding would b subjct to appraisal and rviw. Stand-alon projcts and programs would b xpctd to follow normal IDA procdurs and to b consistnt with th country or rgional stratgy. Whthr projcts and programs ar co-financing xisting IDA oprations or ar stand-alons, projct prparation, appraisal and suprvision will b th rsponsibility of country tams and task tams. 24. Rpurting. Th Program Managr prpars th following for submission to th donors: a smi-annual status rport on on-going activitis financd by ACGF, and progrss toward implmnting th work plan; an annual substantiv and financial rport with an assssmnt of rsults of ACGF activitis spcial rports to donors, as rquird by administrativ agrmnts on th status of thir contributions, notably rgarding th ACGF; and on-lin and othr rports to inform partnrs and shar knowldg. 25. Monitoring Rsults. Whil individual projcts that ar financd by th fund can b valuatd in th normal way, th ssnc of th approach is that valuation nds to b distinctiv in two rspcts. First, managmnt is to b hld accountabl for th prformanc of th fund as a whol, rathr than for ach componnt individually. Failurs in som countris ar to b xpctd, but must b countrbalancd by succsss in othrs. Scond, prformanc at th country lvl will b assssd as a packag rathr than simply projct-by-projct. Th packag will b judgd by ky national outcoms that ar intndd by th country stratgy. For xampl, a high prformanc growth stratgy may b judgd by th growth rat of non-traditional xports, or in th shortr trm by rductions in th cost of producing such xports. An incipint transformation stratgy may b judgd by th momntum of improvmnt in policis, as indicatd by th CPIA and othr masurs. For rgional public goods th Fund can b monitord mor dirctly by th prformanc of th projcts, takn as a whol, which th ACGF has fundd. IO

13 Prformanc of th Fund will also b rportd to th Board on a rgular basis in th contxt of th implmntation of th Africa Action Plan. 26. Cost Rcovry. IDA will rcovr its full incrmntal costs from th prparation and suprvision of projcts as wll as th administration of th fund. Th total cost rcovry amount is currntly stimatd at 3.5 prcnt of th total fund, of which roughly 3.0% will covr projct prparation and suprvision costs and 0.5 prcnt th administration of th Fund. In consultation with donors, IDA will xamin whthr th cost rcovry should b modifid. as mor xprinc is gaind ovr tim, including th costs of supporting on-going projcts vrsus dvloping nw start-ups. 27. Risks. Th fund will b accpting two typs of risks. Th risks associatd with supporting a high prformanc stratgy ar primarily that it is not possibl to b crtain in advanc that a potntial growth stratgy will work. For xampl, whthr fasibl improvmnts in infrastructur and policy will triggr a nw xport sctor is intrinsically hardr to dtrmin than say th bnfits from an additional primary school. Th risks associatd with an incipint transformation ar that it collapss, or that it would hav succdd vn without support. By pooling ths nw opportunitis, th ovrall risk of scald up support can b mitigatd; individual risks should largly offst ach othr. Pooling individual risks into a fund, th prformanc of which can b valuatd as a whol, also rducs th usual bias against taking individual risks at th country lvl. Th ky to risk taking undr this framwork is that snior managmnt -- rathr than individual country or projct managrs -- will itslf b accountabl for th prformanc of th fund as a whol. 28. Linkags to Othr Financing Facilitis. Th ACGF has bn dsignd to b complmntary to othr financing sourcs within th Bank. In particular, it has bn dsignd to avoid duplicating activitis financd by th LICUS Trust Fund, which focuss on support to policy rform, institution-building, and small dmonstration projcts to galvaniz a multi-donor rspons in th most fragil stats, mostly in nonaccrual status. Th group of countris which ACGF aims to srv is almost ntirly sparat from th group srvd by th LICUS Trust Fund grants. In som cass, th transforming countris could b countris whr th LICUS TF has alrady prpard th groundwork, but which ar now rady to graduat, shifting from post-conflict or LICUS status to a mor substantial scal of funding basd on clarr vidnc of govrnmnt rforms. (s Para. 13) IV. Conclusion 29. Substantial progrss has bn mad in th continnt along a numbr of dimnsions - bttr govrnanc, rducd conflict, improvd conomic growth and povrty outcoms. Africa s xtrnal partnrs hav rcognizd ths changs by promising to substantially incras aid lvls and by intnsifying work to mak aid mor harmonizd and mor ffctiv. Th Africa Rgion of th World Bank is mting th 11

14 challngs and opportunitis that ths changs provid through a stratgy of strngthnd partnrship, on lmnt of which is th Africa Catalytic Growth Fund. Whras th xpansion of IDA will achiv incrmntal growth for many countris, th ACGF is xpctd to focus on a fw countris at a tim. Th ky mdium-trm objctiv is that th rgion should hav som star prformrs whos growth stratgis could inspir othrs to rach for highr prformanc. 12