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Summary
MDG Prospects-Need to Scale Up Action, Significantly and Swiftly
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On current trends, most MDGs will not be met by most countries. The income poverty
goal is likely to be achieved at the global level, but Africa will fall well short. For the human
development goals, the risks are much more pervasive across the regions. Likely shortfalls are
especially serious with respect to the health and related environmental goals-child and maternal
mortality, access to safe drinking water and basic sanitation. Few, if any, regions will achieve the
mortality goals.
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The implication is clear. Achievement of the MDGs requires rising above current trends
and substantially accelerating progress toward the goals. There is an urgent need to scale up
action, on the part of all parties. The agenda has three essential elements:
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Accelerating reforms to achieve stronger economic growth-Africa will need to double
its growth rate.
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Empowering and investing in poor people-scaling up and improving the delivery of
human development and related key services.
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Speeding up the implementation of the Monterrey partnership, matching stronger reform
efforts by developing countries with stronger support from developed countries and
international agencies.
Priorities for Developing Countries
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Policies in developing countries have improved, enhancing their capacity to make
effective use of resources for development, domestic and external. Performance varies widely,
however, and reform needs to be accelerated and deepened in many countries, especially in Sub-
Saharan Africa. The analysis suggests four areas for particular attention:
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Improving the enabling climate for private sector activity, by solidifying progress on
macroeconomic stability, further reducing barriers to trade, and shifting emphasis from
regulating business operations to strengthening market institutions. In macroeconomic
policy, the main area for improvement is fiscal management. Strengthening property
rights and the rule of law are the key areas for attention with respect to the institutional
environment. An improved enabling economic climate is essential both for mobilizing
domestic investment and attracting more foreign investment.
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Strengthening capacity in the public sector and improving the quality of governance-
the biggest challenge for many countries. The most serious shortcomings are in
transparency, accountability, and control of corruption. Performance is better in general
in public financial management-expenditure and revenue management-but needs to
improve further. On average, low-income countries can increase tax revenue by at least
1-2 percent of GDP by eliminating tax exemptions and improving tax administration. The
bulk of the financing needed to achieve the MDGs, however, will have to come from
improving the efficiency of existing spending, economic growth, and external resources.
In Africa, which has the weakest governance indicators, the New Partnership for Africa's
Development (NEPAD) initiative provides a very promising foundation for reform to
build on.
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Scaling up investment in infrastructure and ensuring its effectiveness, according
priority to infrastructure services closely linked to the human development goals-water
and sanitation, transport. Compared to the levels of the 1990s, infrastructure spending
(investment plus operation and maintenance) will need to rise by 3.5 to 5 percent of GDP
in low-income countries and 2.5 to 4 percent of GDP in lower-middle-income countries,
with the pace of the increase depending upon institutional capacity and macroeconomic
conditions in the country concerned.
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Enhancing the effectiveness of service delivery in human development, by better
targeting education, health, and social assistance services toward poor people, addressing
governance-related impediments to service quality and effectiveness, increasing
community participation, and scaling up on the basis of successful programs (for
example, the Female Secondary School Assistance Program in Bangladesh, the Education
with the Participation of Communities (EDUCO) program in El Salvador, and the
Education, Health, and Nutrition (Progresa) Program in Mexico). Implementation needs
to be expedited on two key donor-supported programs-the Education for All-Fast Track
Initiative (EFA-FTI) and the Global Fund for HIV/AIDS, Tuberculosis, and Malaria
(GFATM). As of January 2004, only $6 million had been disbursed under the former
against initial commitments of $170 million (total external financing needs for primary
education in low-income countries are estimated to rise to at least $3.7 billion by 2005-06
compared with actual assistance of about $1 billion in 2002) and $230 million under the
latter against $3.4 billion in pledges and $1.5 billion in commitments. Swifter action is
needed on the part of both donors in providing funds and recipients in addressing
implementation constraints.
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Cutting across the policy agenda is the empowerment of women, by removing barriers to
their fuller participation in the development process, and the need to ensure environmental
sustainability. These cross-cutting concerns should be fully integrated into policymaking.
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Within the foregoing agenda, specific priorities and sequencing of actions of course vary
across countries and must be determined at the country level in the context of coherent, countryowned
development strategies, as reflected in the Poverty Reduction Strategy Papers (PRSPs) in
the case of low-income countries and respective national strategy frameworks in middle-income
countries.
Priorities for Developed Countries
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Overall, developed country actions to date have fallen well short of the Monterrey vision.
Progress seriously lags commitments in most areas. This must change, and change quickly, to
help accelerate progress toward the development goals. The vision of Monterrey needs to be
translated rapidly into concrete actions. Priorities for developed countries relate to trade and aid
policies. But also important are the broad conduct of macroeconomic and financial policies
conducive to robust growth in the world economy and increased attention to key global public
goods, including environmental sustainability.
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Sustaining stable and strong growth in the global economy. A key issue is the orderly
resolution of fiscal and external imbalances, especially the large U.S. external current
account deficit. An abrupt adjustment in the large economies could retard growth and
leave global economic conditions vulnerable to shocks. Further work by developed
countries-working with emerging market countries and the IFIs-is needed to improve
the international financial architecture to enhance prospects for stronger and more stable
capital flows to developing countries and to reduce the likelihood and severity of
financial crises. Rapid progress is being made in the use of collective action clauses, but
substantial work remains to improve practices in sovereign debt restructuring.
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Ensuring a successful, pro-development, and timely outcome to the Doha Round.
High-income countries, given their weight in the system, must lead by example. They
should aim for reform targets that are sufficiently ambitious. These could include:
complete elimination of tariffs on manufactured products; complete elimination of
agricultural export subsidies and complete decoupling of domestic agricultural subsidies
from production, and reduction of agricultural tariffs to, say, no more than 10 percent;
and commitments to ensure free cross-border trade in services delivered over
telecommunications links, complemented by actions to liberalize the temporary
movement of workers. Developing countries also must seize the opportunity provided by
the Round to further their own trade liberalization. In order for developing countries to
take full advantage of improved market access, they (especially the low-income ones)
will need support in dealing with the "behind-the-border" agenda. Some countries will
also need assistance with adjustment costs associated with trade liberalization.
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Providing more and better aid. Aid flows need to rise well above current levels.
Although donors have made post-Monterrey additional commitments of about $18.5
billion p.a. by 2006, estimates show that an initial increment of at least $30 billion
annually can be effectively utilized by developing countries. As countries improve their
policies and governance, the amount of additional aid that can be used effectively will
rise into the range of $50 billion plus p.a. that estimates suggest will be needed to support
adequate progress toward the MDGs. ODA rose by $6 billion in nominal amount ($4
billion in real terms) in 2002, but the increase was almost wholly accounted for by
special-purpose allocations-technical cooperation, debt relief, emergency and disaster
relief. More aid will need to be provided in forms that can flexibly meet the incremental
costs of achieving the MDGs, including providing a higher proportion directly to
countries in the form of cash, supporting good policy performance with predictable and
longer-term aid commitments, and allowing for the financing of recurrent costs where
country circumstances warrant. There is also substantial scope for increasing the
effectiveness of aid by improving the allocation of aid across countries, aligning aid with
national development strategy and priorities (as expressed through PRSPs in the case of
low-income countries), and harmonizing donor policies and practices around the recipient
country's own systems. To ensure debt sustainability in heavily indebted poor countries
that are pursuing good policies, a larger proportion of additional aid should be provided
in the form of grants. Timely and adequate assistance in the event of adverse exogenous
shocks is especially important for these countries.
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Improving policy coherence for development. Increased aid and other actions need to be
part of a coherent overall approach to supporting development. In many cases, there are
contradictions in policies, with support provided in one area undercut by actions in
another. Putting in place processes that enable an integrated assessment of the coherence
of policies that affect development-trade, aid, foreign investment and other capital
flows, migration, knowledge and technology transfer, environment-would help avoid
such outcomes. Recent actions by Sweden to institute an "integrated global development
policy," and by Denmark and other countries to prepare regular assessments of their
contribution to the goal of establishing a global partnership for development, go in the
right direction.
Priorities for International Financial Institutions
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Review of how the international financial institutions are playing their role in
contributing to the achievement of the MDGs and related outcomes shows that they have made
progress in enhancing their development effectiveness. This is reflected in progress in country
focus and ownership, results orientation of operations, transparency and accountability, and
partnership. But there is much more to do. There are three key areas for action to deepen and
build on the progress made:
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Refining and strengthening institutional roles in low-income countries, including by
deepening the PRSP process, harmonizing operational programs and practices around
national strategies and systems, while also continuing to adapt approaches and
instruments to the evolving needs of middle-income countries.
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Furthering progress on the results agenda, including implementation of the action plan
endorsed by the sponsoring agencies at the Marrakech Roundtable on Managing for
Development Results held in February 2004.
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Improving selectivity and coordination of agency programs in line with comparative
advantage and mandate to achieve greater systemic coherence and effectiveness.
Priorities for Strengthening the Monitoring Exercise
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To carry this agenda forward, the Bank and the Fund plan to focus future Global
Monitoring Reports on specific challenges-at the country, agency, and global levels-for
meeting these priorities. This will require further work, especially in the following areas:
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Strengthening the underlying development statistics, including timely implementation of
the action plan agreed among international statistical agencies at the Marrakech Roundtable.
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Conducting research on the determinants of the MDGs, on critical issues such as
effectiveness of aid, and on development of more robust metrics for key policy areas such
as governance and for the impact on developing countries of rich country policies.
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Deepening collaboration with partner agencies in this work, building on respective
agency comparative advantage and ensuring that the approach to monitoring and
evaluation is coherent across agencies.
Issues for Discussion
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The following issues are proposed for Ministerial consideration at the Development
Committee meeting on April 25, 2004:
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Do Ministers agree with the priorities for action and the associated accountabilities-for
developing countries, developed countries, and international financial institutions-as
summarized above? What specific actions would they propose to scale up and speed up action?
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What guidance would Ministers offer as to how the monitoring exercise should evolve so
as to support most effectively the Development Committee's strategic oversight of the policy agenda?
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