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This Technical Note evaluates state bank corporate governance practices in Bosnia and Herzegovina. The analysis was completed during October 27-November 18, 2014. This TN is not a formal assessment against the Basel Committee’s Principles for Enhancing Governance; rather, it assesses key issues and provides a set of recommendations to the authorities with the view to strengthen state bank governance and the State’s ownership structures in Bosnia and Herzegovina. The governments of the Federation of Bosnia and Herzegovina (FBiH) and the Republic of Srpska (RS) are involved in their domestic banking systems through equity stakes and subordinated debt investments in certain banking institutions. Banks’ supervisory boards are not performing their intended leadership role.

Azerbaijan is a secular, majority-Shiite, oil and gas-rich country whose per-capita income quadrupled in real terms during the period 2004-10. While rising incomes have reduced poverty, steps towards a more secure, diversified economy are held back by a public sector that rests on vested interests, patronage-based incentive structures, and ingrained patterns of behavior that include significant rent extraction, particularly from the non-oil economy, with minimal checks and balances from Parliament, the private sector, and civil society. Bank engagement in Azerbaijan at the country level focused on areas which had government support. Some modest results have been achieved, even though in many cases modern laws and practices were adopted without adequate plans for implementation. At the project level, the Bank has supported the strengthening of project implementation units (PIUs) and tools for monitoring, and governance and institutional filters have signaled that Governance and Anticorruption (GAC) processes need to be embedded in the Bank projects. At the sector level, the Bank's work was highly relevant in supporting oil revenue transparency, primary education, roads, and the development of safeguards. It was substantially relevant in public financial management, and private sector development and procurement. Bank engagement was moderately relevant in decentralization, civil service reform, and accountability institutions.

Bangladesh is one of the world's poorest and most densely populated countries, and subject to annual cyclones and flooding. Despite these challenges, it benefits from strong economic growth, good performance on health and education, and poverty reduction, alongside weak governance and pervasive corruption. The reasons include strong macroeconomic policy, pro-poor spending, credible elections, export growth and remittances, improved capacity for managing natural disasters, and a stronger civil society than comparable countries. After over a decade of intense engagement with the Bank on governance, Bangladesh adopted in 2006 a governance-oriented Country Assistance Strategy (CAS) with four main objectives: to improve implementation capacity; to 'tackle corruption' by fully operationalizing the Anti-Corruption Commission; to lay the foundation for comprehensive legal and judicial reform; and to strengthen 'voice, empowerment and participation.' The choice of a wide range of instruments and areas of intervention was appropriate, given the political instability at the time of 2006 CAS preparation. The Bank signaled it was ready to engage in all areas, and could scale up or pull back depending on emerging political and bureaucratic commitment. The 2006 CAS yielded mixed results, and the subsequent Country Partnership Strategy (CPS) has been more selective on GAC issues. At the project level, governance has been a key priority, in line with the South Asia region's heavy emphasis on GAC-in-Projects. Investments in GAC-in-primary education, a local government project, anti-corruption efforts in the power sector, and projects strengthening the investment climate have yielded positive results. Investments in GAC-in-roads projects have had mixed results in terms of effectiveness. GAC activities were mainly adopted prior to the 2007 GAC strategy. Although Bangladesh was a Country Governance and Anticorruption (CGAC) country, the country team chose not to use CGAC funds because the country had already been intensively using GAC approaches well before the GAC strategy was adopted.

The focus of this paper is on the institutions outside the executive branch that include supreme audit institutions, legislative oversight bodies (such as parliamentary public accounts and budget committees, and ombudsmen), related independent bodies, and civil society organizations. Through their support for accountability, donor countries and international financial institutions seek to help countries: promote voice and accountability as an intrinsic human right, and improve development outcomes in terms of poverty reduction, sustainable development. The report is organized as: first, provide a brief literature review of research on accountability, and how donors and other actors can work to improve it, including a review of the experience of other bilateral and multilateral donors in supporting domestic accountability through their policies, strategies, and behaviors as well as through direct support to accountability actors and systems. Second, briefly review the guidance prepared for Bank staff toward enhancing accountability. Third, review some examples of the Bank's experience in supporting domestic accountability. Finally, we present some conclusions and accountability-related questions for further analysis.

Moldova has suffered over the last two decades from rising poverty, territorial secession, armed conflict, and the spillover effects of a regional financial crisis, with declining population size and life expectancy, and an economy approximately one-half of what it was in 1990. The return of the Moldovan Communist Party (PCRM), which won two major elections after 2001, contributed to increasing centralization of governmental authority along with a reform agenda that emphasized greater state control over the economy, fiscal support to state enterprises and collective farms, land consolidation, economic protectionism, and the tolerance of monopolies in industry and energy. At the same time, the government has increased social expenditures, and taken major steps to improve public financial management. Bank engagement was moderately effective at the country and project levels, and substantially effective at the sector level. There was progress in several aspects of public financial management (PFM). Regulatory streamlining has reduced costs to business, although resistance to civil service reform has left much work to be done. The Bank has also helped achieve progress on Governance and Anticorruption (GAC) issues in primary education, roads, and private sector development. Education progress is highly uneven across regions, for example, overweight trucks continue to tear up roads, and private investment is not enough to make a dent in high unemployment. A graduated approach to country systems and road sector technical audits help address GAC issues at the project level. The overall impact of GAC strategy implementation was moderate. The GAC committees set up at the regional and sectoral Bank department levels are particularly useful mechanisms for disseminating practices from the GAC Council. Staff has been proactive in using Country Governance and Anticorruption (CGAC) resources. However, three applications for window one funding were not approved, reducing the ability of this small program to seize opportunities.

This case study summarizes the findings of desk reviews and a field visit carried out in January 2011 as part of IEG's evaluation of the 2007 Governance and Anticorruption (GAC) strategy. The case study sought to evaluate the relevance and effectiveness of Bank support for GAC efforts over the FY2004-10 period, to assess the contributions of 2007 strategy implementation, and to identify early outcomes and lessons. This Background Paper is based on findings of the mission that visited Liberia in January 2011. The team is particularly grateful for informative meetings with officials from the Government of Liberia, Bank staff, and members of civil society. The evaluation aims to help enhance the Bank's approach to governance and anticorruption and to improve its effectiveness in helping countries develop capable and accountable states that create opportunities for the poor. Pursuant to this objective, the evaluation assessed the relevance of the 2007 GAC strategy and implementation plan, as well as the efficiency and effectiveness of implementation efforts in making Bank engagement with countries and other development partners more responsive to GAC concerns. It also sought to identify early lessons about what works and what does not in helping to promote good governance and reduce corruption. The Liberia case study is based on an extensive desk review as well as a field visit to Monrovia from January 17-22, 2011. It evaluates the relevance and effectiveness of Bank support for governance and anticorruption efforts since the launch of the Bank's GAC strategy in 2007. It elaborates on a desk review of the GAC responsiveness of the Bank's Liberia program and reviews the following GAC entry points: core public sector reform (public financial management and decentralization); demand for good governance (including social accountability issues); GAC in the road sector; and the investment climate. The case study also examines the extent to which the Bank's GAC Strategy has made a difference in staff attitudes toward addressing GAC issues in their operational work. The mission interviewed government, Bank, donor, and nongovernmental organization (NGO) staff based in Washington and in Monrovia.

The purpose of this issues note is to review the experience in and outside the World Bank of using different diagnostic tools in fragile state situations. It will identify trends in the use of such tools, lessons learnt, and arrive at suggestions for the future. Because governance has continued to be a major concern in the international community, over the years this has led to a growing diversity in the application of the concept. With this diversification the types of assessment in use have also increased, a process that reflects two things. First, each agency tends to design an assessment to meet its own program needs. Second, diagnostic tools have often fallen short of expectations leading agencies to develop new ones, including more recently political economy studies that go beyond what was at least until recently mainstream types of assessing governance. Accepting the diversity of definitions and assessments, this note does not intend to review the whole field. A diagnostic tool here refers to the approach and methodology used in assessing governance. Choice of tool has a direct bearing on how an activity is designed and carried out. Making the right choice, therefore, is important. A tool may become 'main stream' and the original rationale for its use disappears. It is applied because everyone else is using it or there is pressure to use the same tool as others. A shift to other tools, however, may become necessary because existing tools do not deliver. Such a shift is occurring in the governance field where a focus on institutions is being increasingly complemented, if not replaced, by a studies of underlying political economy factors. This Note tries to trace this process by highlighting both specific and more general experiences with tools used to assess governance. Fragile states or situations are not typical but they give rise to governance challenges that more than other contexts test the limits of particular tools. This becomes an especially important issue given that what works in countries that are not fragile seems to fall short of the same achievement in fragile situations.

A key driver of Liberia's re-emergence from utter destruction, between 2004 and 2008, was the willingness of international actors to accept the responsibility and risks associated with stabilization. This was accomplished by confronting these risks directly, even at the cost of temporarily filling institutional voids and sharing sovereignty with the Liberian transitional authorities. The main international diplomatic representations and aid agencies on the ground came to accept from their varying perspectives that peace in Liberia was fragile and that the Accra Comprehensive Peace Agreement (ACPA) of September 2003 was only the beginning of a protracted stabilization effort. The domestic market for consultants and goods did not exist, requiring the World Bank to innovate with new modes of delivering assistance. Thus, peace consolidation compelled international partners to simultaneously (i) prevent full state capture by corrupt elites in advance of elections and (ii) secure a peace dividend to vulnerable groups which could most directly threaten peace (young ex-combatants and refugees). Building on a solid UN-World Bank partnership, the international community found the internal consensus to address each of the two complementary peace consolidation challenges, adopting two highly innovative instruments: (i) an anti-corruption scheme labeled Governance and Economic Management Assistance Program (GEMAP), involving such robust measures as expatriate co-signing authority, and (ii) a short-term employment-generation scheme now known as roads-with- United Nations Mission in Liberia (UNMIL), centered on a rare direct collaboration between the Bank and the engineering units of the UN's military peacekeeping force on the ground. This paper examines these two instruments more closely, in their successes and failures as well as from the perspective of temporary shared sovereignty and co-production.

What happens when the state's vision and expanding reach bring it into contact with traditional value systems and governance structures? In what circumstances can the distribution of resources in a fragile society prevent-or exacerbate-conflict within and between communities? How do state expansion and public spending impact upon societal expectations of the state and state legitimacy? This report examines these questions through the lens of access, claiming, and decision making in government-sponsored community development programs. The findings illustrate the hurdles faced by government and development actors operating in pluralistic societies, and provide input on how local governance and decision making might be incorporated to enrich programming. This report aims to provide the government of Timor-Leste, particularly those responsible for decentralization, community development, and local governance planning, with information to inform their determination of an appropriate mix of models for local development. The relative priority the government will ultimately give to these different models, partly a trade-off between speed and depth, will impact on the way in which development and local governance are understood and taken on board by rural communities. This report finds that the achievement of the dual goals of state legitimacy and sustainable, effective local development hinges in large part on the willingness of state officials (and the donors that support them) to engage productively with communities and locally legitimate customary systems of authority.

This paper examines the relationship between narcotics trafficking and violence in Central America. The first part of the paper addresses particular questions posed for the 2011 World Development Report and examines several competing hypothesis on the drivers of crime in Central America. A key finding is that areas exposed to intense narcotics trafficking in Central America suffer from higher homicide rates. Drug trafficking has corrupted state institutions, which have been overwhelmed by the resources deployed by trafficking organizations. The second part of the paper reviews the reasons drug trafficking and anti trafficking enforcement are associated with violence in general and consider policy options.

The Horn of Africa (HOA) is one of the most underdeveloped regions on earth. It is also one of the most conflict-ridden, insecure regions in the world. While Africa as a whole has enjoyed a trend in recent years toward reduction and termination of many of its civil wars, the HOA is the exception to the rule. Indeed, the region's prolonged armed conflicts have spread, engulfing several neighboring states in warfare and partial state collapse. While aspects of the HOA case are obviously unique, and sensitivity to context and complexity must be privileged in both analysis of and policy toward the Horn, the region's crises are not so distinct that they preclude useful comparative analysis. This paper considers conflict dynamics across the entire Horn of Africa, but devotes special attention to the case of Somalia which, because of the depth, length, and significance of its crisis, is a source of particular international concern. Because Somalia's crisis has been so protracted and has gone through several very distinct phases, it provides an opportunity to compare conflict dynamics in a single country over time.

Strengthening the rule of law is widely regarded among traditional donors, multilateral institutions, and a growing number of middle income and fragile states as a necessary precondition for sustainable peace, poverty alleviation, and development. Crime and violence deter investment and lower employment, undermine social institutions, and divert resources through direct and indirect costs, all of which hinder development. It is likely to disproportionately affect poor and marginalized populations by limiting access to basic services. The formal criminal justice system is seen in many environments as failing to deliver justice. Most states experiencing fragility do not have the capacity to effectively prevent crime, enforce laws, or peacefully resolve disputes across the whole of their territories. There is another powerful deterrent for communities to seek redress through state criminal justice institutions: they are frequently a primary instrument for the government and elites to maintain power and control through the perpetration of injustice. The informal system, however, is alone insufficient to handle the pressing justice requirements of fragile states, not least for preventing and responding to inter-communal conflict, to serious organized and cross-border crime, and to public corruption and other 'white collar' crime.

There is broad recognition, across the political spectrum and in both 'northern' and 'southern' countries, that justice reform, and more generally the promotion of the 'rule of law', are central to development policy, particularly in conflict-affected, fragile and violent contexts. More recently an increased focus on global security and the interaction between security and development as put a renewed emphasis on such efforts. However, while legal, regulatory and 'justice' institutions are now seen as key part of the 'solution' to problems of conflict, fragility and development, this recognition is not matched by a correspondingly clear sense of what should be done, how it should be done, by whom, in what order, or how 'success' may be determined. There often tends to be a clear misunderstanding of both the nature of the problem and (thus) of the solution. In this paper, the author seek to provide some insight into these questions and sketch out a practical conception of effective justice reform in situations of conflict and fragility that may provide the basis for effective programming.

Violent conflict is the multifaceted and cyclical problem that the international community is trying to grapple with. To date, there has been a clear hierarchy concerning what forms of violence are seen to matter most, with political violence that threatens the state taking pole position. In examining this argument, this paper sets out a number of issues relating to security and justice definitions. It will then examine some of the problems associated with placing conflict into a box-set typology: mass violence associated with war and genocide carries unique features but also spawns new challenges which are often being ignored. The paper will then examine in brief some of the measures used by communities, governmental actors and international partners in contending with violence before outlining some key conclusions and recommendations. In reading this paper two further points need be borne in mind: 1) this does not provide a comprehensive overview of violence and security - that is the role of the World Development Report (WDR) itself, and 2) this paper does not present fresh research, but more an overview, along with the other papers in the security-justice series, of some of the key issues confronting policy makers in the domain of security and development.

This report seeks to inform the development of a framework for addressing governance reform in fragile and conflict affected environments through are view of international experiences. The report analyzes the experience both of countries that sustained a transition to peace and those that fell back into conflict. Pertinent lessons will be drawn selectively from a range of fragile and conflict affected countries, including Haiti, Cambodia, Bosnia and Herzegovina, Mozambique, Liberia, Timor-Leste, Afghanistan, Rwanda, Indonesia, Sierra Leone, and Angola. No specific typologies have been adopted or formed in order to assess these lessons, because typologies can be limiting and experiences can be better assessed based on the specificity of each country's context. The first section of the report sets out broadly accepted definitions of key terms such as governance, state building, and fragility. The second section reviews experiences with diverse governance dimensions and explores the objectives, opportunities, and constraints associated with each.

This report examines the theoretical and practical synergies between three intervention models that are currently being employed to improve local governance in developing countries: 1) democratic decentralization or devolution; 2) community participatory approaches, and; 3) rights-based approaches. The aim is to identify the possibilities and challenges of an 'integrative approach' to local governance that combines the strengths of each of the three intervention models. It is assumed that an integrative approach can help enhance efforts to improve the downward accountability of local governments, enhance equity in the distribution of services and in various citizens' access to influence, and increase citizen participation in local governance processes. This is supported by a number of empirical cases from Africa, Latin America, Asia and Bosnia-Herzegovina, which are presented in the report. Each case also highlights a number of context-specific challenges to using an integrative approach, such as available financial resources, national policy environments and local conflicts. The report fills this gap by both identifying theoretical synergies and by drawing on the few empirical cases that exist.

The devolution of procurement responsibilities to local levels of government is increasingly occurring across South Asia. This trend is significant because increasingly localized decision-making better enables communities to hold government authorities accountable for the effectiveness of public spending, which can lead to various improved development outcomes, such as improvements in quality of service delivery; greater empowerment and understanding by end-users services supplied through public procurement processes; and improved oversight and accountability of service delivery agencies. The objective of this report is to set out an overview of the strategic approach developed by World Bank Institute (WBI) as a component of the Norwegian governance trust fund (NTF) program `procurement and service delivery: establishing effective collaboration between government and beneficiaries on monitoring procurement outcomes`. WBI received funds under the NTF to facilitate the development of context and audience-specific knowledge products by recognized practitioners and civil society organizations in South Asia as part of a broader effort to create a practical curriculum on social accountability in procurement.

The aim of this study is to convince national and multilateral policy makers of the importance of the public sphere concept for democratic governance and strategic post-conflict assistance planning with the objective of positive and sustainable change in current post-conflict assistance policy and practice. The study introduces the conceptual thinking underlying the public sphere framework and, citing evidence from different countries, highlights its relevance and calls for its application in post-conflict environments. For practitioners the study provides a public sphere assessment toolkit and a toolbox for interventions. It also offers concrete examples and recommendations on how to address the specific governance challenges identified through a public sphere analysis in three countries: Timor-Leste, Liberia and Burundi.