A Political Economy Approach to the PRSP Process. Constraints and Opportunities

1
A Political Economy Approach to the PRSP Process.
Constraints and Opportunities

• Rosa Alonso I Terme
• The World Bank Institute
• Joint Donor Staff Training on Partnership for
  Poverty-Reduction
• June 17-19, 2002

2
Overview of Presentation

• Introduction
• The Origins of the PRSP process. How did we get
  here?
• A Political Economy Approach to
• Data Production and Data Usage
• Participation and Civil Society
• Pro-Poor Policies
• Donor Coordination

3
The PRSP process Overview

• World Bank/IMF Annual Meetings, 1996 ? approves
  the HIPC initiative for comprehensive debt
  relief.
• Cologne Summit, 1999 ? G-8 declares support for
  deeper debt relief within a framework of poverty
  reduction
• World Bank/IMF Annual Meetings, 1999 ? agreement
  to link debt relief to the establishment of
  nationally-owned participatory poverty reduction
  strategies that will provide the basis of all
  their concessional lending and for debt relief
  under the HIPC Initiative.

4
The PRSP process Overview II

• Core Principles of the PRSP based on the
  Comprehensive Development Framework
• Country-driven
• Results-oriented
• Comprehensive in scope
• Partnership-oriented
• Long-term in perspective
• Participatory

5
The PRSP process Overview III

• In April 2002
• 60 PRSP countries (34 Africa, 7 East Asia, 10
  ECA, 2 MENA, 3 South Asia, 4 LAC)
• 42 I-PRSPs completed
• 9 PRSPs completed
• 3 PRSP Progress Report
• A PRSP, I-PRSP, or PRSP progress report supported
  by both the Bank and Fund Board within the
  preceding 12 months is a condition for
• HIPCs to reach a decision or completion point
• Approval of the IMFs PRGF arrangements or
  reviews
• IDA (World Bank) concessional lending.

6
Introduction

• From a political economy and a historical
  perspective, the PRSP process is a radical
  endeavor
• The only dramatic shifts in economic
  policy-making have historically come through
• Revolution from below
• External forces

7
Introduction (continues)

• The PRSP process tries to combine both
• Can that work and how long will it take?
• Key to combine ambition with realism
• Taking account of political economy constraints
  and a sense of history is helpful

8
How did we get here?

• Intellectual Origins
• Experiences on the Ground (in the South)
• Experiences in the Street (in the North)
• Institutional Dynamics (in the donor community)

9
Intellectual Origins

• Increasingly-broad conception of welfare and what
  constitutes developmentA. Sen
• Neo-positivist quantification
• Anti-government neo-liberalism of the 1980s and
  1990s
• Post-Modern psychological approaches to social
  sciences

10
Experiences on the Ground (in the South)

• Governments that were neither representative of
  the population and, in particular, the poor,
  implementing policies that were neither good for
  growth nor for poverty-reduction
• The traditional approach to development aid did
  not seem to be workingneed to look for a new
  approach

11
Experiences in the Street (in the North)

• Pressure for debt-relief--HIPC
• Criticism of conditionality
• Criticism that structural adjustment policies are
  not pro-poor
• Criticism of lack of effectiveness of foreign aid

12
Institutional Dynamics

• HIPCEnsuring that resources freed by debt relief
  are used to benefit the poor
• Mission creepincreasingly broad functions of
  development aid institutions
• Learning Processfungibility of aid
• Institutional alliesthe initiative could find
  ready allies within the development community

13
The Political Economy of Data Gathering and Data
Usage

• The quantity, quality, and coverage of the data a
  country collects says a lot about its priorities
• Key to look at
• Decision-making process on what data to collect
  and track
• Actual data production
• Publicity, and
• Usage (feed-back into policy-making)

14
Participation and the Role of Civil Society

• Participation and good governance are not purely
  instrumental
• political liberty and civil freedoms are
  directly important on their own and do not have
  to be justified indirectly in terms of their
  effects on the economy.
• (Amartya Sen, Development as Freedom)

15
Participation and Civil Society(Continued)

• But.We should not expect civil society to be
  necessarily any more representative or
  representative of the interests of the poor than
  governments

16
Participation and Civil Society

• M. Olson, The Logic of Collective Action
• The smaller and more homogeneous the group, the
  more likely it is to organize
• The larger the group and the greater the barriers
  to communication among its members, the less
  likely it is to organize

17
Participation and Civil Society

• If the poor are geographically disperse, with bad
  roads and other communications, speak a variety
  of languages with no common language and
  constitute the largest group
• And the non-poor are geographically-concentrated,
  with better communications and a common language

18
Participation and Civil Society

• The best organized among civil society will be
  civil servants, unions, the business sector, and
  other non-poor groups
• And civil society (just like the government) will
  be heavily biased toward representing the non-poor

19
Participation and Civil Society

• Thus, an unfettered aggregation of existing
  social interest groups will almost certainly not
  automatically yield a pro-poor coalitiontherefore
  
• Debatable Issues. How do we ensure that
  participatory processes provide equal access to
  poor groups? How representative have PRSP
  participatory processes really been?
• How can one foster the formation of pro-poor
  coalitions?

20
Participatory Processes and Representative
Democracy

• The relationship of participatory processes with
  representative democratic institutions (or
  simply, with the State) is difficult to
  articulate because
• Civil society is not uniform and thus does not
  have one voice, but severalVoices of the Poor,
  plus other voices in societythus, aggregation
  problem

21
Participatory Processes and Representative
Democracy

• Debatable Issues
• How does one deal with the aggregation of voices
  in civil society?
• And
• Once aggregated, how are they integrated with
  government views?

22
Sustainability of PRSPs

• Importance of involving not just governments and
  civil society but also Parliaments in the PRSP
  process
• If Parliaments are not involved, PRSPs are viewed
  as government and not state documents and
  thus subject to change with changes in government

23
PRSPs as Economic Constitutions

• PRSPs can be viewed as Economic Constitutions,
  setting a countrys basic development values,
  objectives, strategies, and operational rules of
  the game about which there is a societal
  consensus

24
But, What Type of Constitutions?

• Three types of Constitutions
• State constitutions--lasting (US)
• Government constitutionschanging (19th century
  Spain)
• Semantic constitutionsunchanging because
  irrelevant (Latin America in earlier part of 20th
  century)

25
ParticipationPro-Poor Policies and Pro-Growth
Policies

• ParticipationPro-Poor PoliciesPro-Growth
  Policies triad. We assume/hope they go
  togetherbut what if
• Debatable Issue
• A country implements growth-enhancing, pro-poor
  policies designed without adequate participation?
  (East Asia model)
• A country implements, following the PRSP process,
  policies that are pro-poor but not pro-growth
  (policies a la Kerala, Cuba)?

26
Pro-Poor Policies

• With increased attention to data and
  participation, less attention being paid to
  policies
• But, ultimately, the key to poverty-reduction are
  improved, more pro-poor policies
• And we know quite a bit about what policies are
  pro-poor

27
Debatable Issue

• So far, there has been more progress on the data
  and participation fronts than on changing
  policiesWhy?
• More and better data is collected that sits on
  shelves and more voices are being heard and then
  ignored
• There is a lag. It takes less time to start
  improving data and to initiate consultative
  processes than it does to change policy-making
• Until there are substantial changes on the
  governance side, policies will not improve

28
Donor CoordinationThe Historical Background

• Long history of
• Colonial ties
• Cold War priorities
• Bureaucratic dynamics leading to competing
  projects and programs and weak coordination
• (Often) lack of poverty focus

29
The role of the donor community

• Old approach
• Donor-driven
• Project-dominated
• Non-coordinated
• Often politically-motivated
• Weak accountability

• New approach
• Country-driven
• Program-dominated
• Coordinated
• Overriding motivationpoverty reduction
• Enhanced accountability

30
Incentives for Donors to Stick to Project
Financing--Projects

• Appear to be easy to plan, design, control and
  supervise
• Have clear visibility
• Accountability is easier to establish
• Can easily tie to procurement from donor goods
  and services
• Allow by-passing national authorities and pursuit
  of donor objectives
• (A. Birgsten, S. Wangwe et al.)

31
Incentives for Recipient Countries to Prefer
Projects

• Those employed in project implementation units
  benefit
• Projects allow bidding one donor against another
• A full move to budget support
• Can lose sectoral/institutional development
  richness
• Is risky--Makes the whole budget dependent on
  donor financing

32
Incentives for Donors and Recipient Countries to
Move to Program and Budget Financing

• Build-up of national institutions
• Increased ownership of government policies
• Allows focusing on overall quality and pro-poor
  character of recipient country policies
• Increased effectiveness of aid

33
How can donor coordination under PRSPs make
foreign aid more efficient and pro-poor?

• Alignment of donor practices
• Complementarity of donor action
• Lightening of burden on recipient country
• Joint financing mechanisms helping to overcome
• Pressure from the local development industry
  and
• Bureaucratic impediments to budget support within
  donor agency

34
How can donor coordination under PRSPs make aid
more efficient and pro-poor?

• Focus on recipient country priorities--joint
  donor action makes it easier to focus on
  recipient rather than donor country goals
• Joint donor approaches encourage collective
  risk-taking
• AND coordination among some donors may have
  spill-over effects onto others through peer
  pressure

35
The donor community and the PRSP process what is
expected?

• Debatable issues
• Who assesses and how do we assess whether
  policies are pro-poor?
• What are the down sides and risks of country
  ownership of PRSs for the donor community?
• How do we weigh the quality of policies versus
  institutional/political considerations in
  evaluating poverty-reduction strategies?

36
Making donor coordination happen

• Debatable issues
• Focus on progressive donors committed to the PRSP
  processforget about others?
• How does one ensure coordination on the side of
  the IFIs?
• What role can governments in PRSP countries play
  to push along donor coordination?