Why does Political Economy of reform work matter for Operations ? Sanjay Pradhan, Vice President,...
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Transcript of Why does Political Economy of reform work matter for Operations ? Sanjay Pradhan, Vice President,...
Why does Political Economy of reform work matter for Operations ?
Sanjay Pradhan, Vice President, World Bank InstituteMarch 6, 2009
Political economy (PE) approach enhances development effectiveness
Country teams often lack systematic approach to PE This often results in over-estimating support for reforms,
stalled/problem projects, failed implementation The process of change is central to development but is
not well reflected in the conceptual or operational work of most development organizations
Yet there are good examples of quick and practical Bank PE work with promising results
For better results on the ground, systematically integrate PE in work of country teams
The Foundation: Three layers of problem-driven analysis
Political economy
Vulnerabilities& concerns
Institutional arrangements & capacities
What is the evidence of poor outcomes?
Growth diagnostics, poverty assessments, CAS completion reports, project evaluations, etc.
What institutional arrangements & capabilities contribute to poor outcomes?
Why are things this way, and how to bring about change?
Mapping of institutions, Public Expenditure Tracking Surveys (PETS), corruption assessments/governance diagnostic surveys
Analysis of stakeholders (using various tools), incentives, rents/rent-distribution, etc.
Zambia: Country governance and political economy diagnosis
Problem/ Concern Stalled implementation
Political economy drivers Centralized authority Significant space for citizen voice Elite economic nationalism Extreme tilt to status quo
Implications for sectors/CAS platforms No electricity & water price rebalancing (strong voice of urban consumer) => no unbundling or international concessions in electricity (economic nationalism) No telecom gateway liberalization (economic nationalism)
Zambia (cont.): Tailored sector engagement
Target elite incentives Electricity generation: Mining company
incentives to accept full cost of new generation capacity
Telecoms: Focus on domestic cellphone pricing which impacts urban consumers rather than international gateway which impacts influential Zamtel
Build local coalitions for specific interventions Urban water and electricity distribution:
Build support from urban coalitions with incentive to protect system from decay
Impact Approach being mainstreamed in CAS
implementation
Sequencing reforms given existing reform space
Seeking to expand
reform space pro-actively
Philippines public procurement reform – pro-active coalition building to combat entrenched corruption networks
Zambia telecoms: focus on domestic pricing impacting urban than international impacting influential Zamtel
Mongolia Mining: TA with local think tank for public debateParaguay & Bangladesh roads: external monitoring by stakeholders
Ethiopia PBS to mitigate reputational risk: support subnational service delivery with participation
India power: reform sequencing
Making Reforms HappenManaging & Overcoming Political Obstacles
Media Private
SectorMunicipal Government Military
State (Bureaucracy)Political Parties
Civil Society
International Legislative Branch
Judiciary
1
Source: “Robust Web of Corruption: Peru’s Intelligence Chief Vladimiro Montesinos,” Kennedy School of Government Case Program, Case C14-04-1722.0, based on research by Professor Luis Moreno Ocampo; Peru: Resource Dependency Network, 2000
Vladimiro Montesinos
Alberto Fujimori
Entrenched corruption networks: Montesinos’ corruption network in Peru
Transparency and Accountability Network (20+ member groups)
Walang Ku-Corrupt Movement (Youth)
PAGBA &AGAP(w/in Gov’t)
CBCP(Church)
Philippine Contractors Association(private sector – main stakeholder)
Local chambers of Commerce (Private sector)
Procurement Watch:Procurement Watch:Drew other civil society groups into the advocacy efforts and
coordinated the activities
Forging coalitions for reform: Philippines procurement reform
Some emerging lessonsOperational value of PE work for better results
Help unveil underlying drivers of poor development outcomes
Enhance likelihood of success through better design
Propose where and how to engage: selectivity within existing space vs. proactive expansion of existing space
Tangible results require Action-oriented PE rather than academic analysis Managerial attention to translate findings into action Shifting the focus from what needs to happen, to
how to make it happen, for moving from a poor equilibrium to a better one
A WBI Perspective
“Safe-space” engagement with the multiplicity of stakeholders needed to make reforms sustainable
Helping to turn analytical frameworks into action through dialogue with government, civil society and other stakeholders
Helping Bank operations and country stakeholders identify entry points and priorities for reform with higher ownership and likelihood of success
A focus on capacity development Programs to help enhance leadership, dialogue, coalitions,
change management and innovation Participatory diagnostics to help reformers de-politicize policy
debates to focus on specific weaknesses with wider buy-in and understanding of problems
Linking into local, regional and global networks of practitioners and countries that have faced similar challenges
Discussion
Selected further examples
Bangladesh roads sector: DiagnosisProblem
Corruption in road construction and maintenance
Set up Poor planning with weak links to budgeting
Weak procurement system and internal controls
Political economy drivers Highly partisan road agency Roads a major source of campaign finance
Bangladesh roads: Bank Engagement
Difference in Approach Extensive operational sector risk analysis
Result Diagnosis : Internal market for public
office Recommendation: Engage external
stakeholders in monitoring roads construction and maintenance
P-E Approach Combined an economist and an
anthropologist Explaining persistence of
dysfunctionalities; exploring ways of addressing them
Philippine procurement reform (1998-08)Problem
Corruption perceived as a very serious problem with public procurement and tax collection as major sources
“Great Wall” phenomenon – corruption pervasiveSet up
Legal foundation a mess Over 100 laws, regulations, executive orders
(promulgated over a thirty year period) governing public procurement, creating inconsistencies and loopholes
Public procurement consistently perceived to be highly corrupt in annual surveys
Political economy drivers Vested interests Procurement of infrastructure and key goods, e.g.
drugs/textbooks, source of campaign funds for incumbent politicians
Philippine procurement reform (cont.)Difference in approach
Break up into two phases; focus first on getting an omnibus procurement law passed instead of launching a broad anti-corruption program
Anchor effort on building a support coalition within and outside, fueled in part by a well thought out and cleverly implemented communications strategy
Result Despite vested interests and political pressures, law
passed in 2003 (it took 3 years, 3 presidents, 11th and 12th Congress)
New challenges emerge in implementing law. WB Global Polls (Nov 08) and Client Survey (Sept 08) show strong demand for WB assistance with anti-corruption work. Public opinion survey (Nov 06) showed public support for procurement reform.
PE Approach Focus on the “how” – moving from a bad equilibrium to a
better one
Philippines tax administration reformProblem/concern
Previous Bank reform effort unsuccessfulDiagnosis
Country-level political economy drivers … Culture of corruption and patronage Elite capture of politics Weak legal enforcement Low revenue mobilization
… and implications for sectors/project Low capacity, obsolete tax administration system Low tax compliance; Discontinuity of political leadership at agency level Weak staff commitment/resistance to reform
Philippines tax administration reform (cont.)Implications
Adjusted project strategy : Limited goals, small investment loan Focus on demonstrating modest early
successes Resources to change management strategy
within agency
Impact to date Revenue collection up Incipient system-wide improvements Ongoing monitoring envisioned
Governance and political economy diagnostics framework
GPE can be applied to country, sector, or specific operationsMacro: country level
Analysis of overall country context. Also as a background note for meso and micro level work
Meso: thematic and sector level Thematic problem-driven GPE analysis, e.g. on natural
resource management, linking governance and growth Sector-focused problem-driven GPE to inform CAS
pillars, sector strategies & Development Policy Loans, complementing technical sector analysis
Micro: specific operations or policies Such analysis is focused on generating direct advice to
a single operation or for the dialogue on a specific policy issue (e.g. Prior Action)
Complementary analysis Vulnerability/ problemconstraints to growth/poverty
reduction, challenges to achieve results in
sectors; unsatisfactory operations
Technical diagnostic What can be done?
(setting out options) – e.g. of infrastructure
needs, social protection systems, etc.
Problem driven governance
and political economy diagnostics
1) Identification of governance arrangements and underlying
political economy drivers2) Assessment of feasibility of
policy options
dialogue
Approach to reformsWBG policy advice to
government/engagement with local
stakeholders
Country-level GPEfeatures & situation
Structural
Constitutional set up, electoral rules; policy and budget processes, Set-up of government; ministries and their roles and mandates
Informal: rules of patronage networks Political leaders; political parties, (organized) interest groups; heads of SOEs; external stakeholders
Examples
Economic base and level of development, commodity prices; population dynamics;
Institutions
Variables
Actors/ stakeholders In
fluen
ce p
olit
ical
and
pub
lic s
ecto
r ac
tion
and
pol
icie
s an
d th
eir
impl
emen
tati
on
Out
com
es
(gro
wth
, pov
erty
red
ucti
on, h
uman
de
velo
pmen
t, d
ealin
g w
ith
deve
lopm
ent
chal
leng
es –
pol
luti
on,
(soc
ial)
con
flict
, etc
.)
Three groups of factors for political economy analysis
Thank you.