Approaches to political economy analysis for development effectiveness: some nuts and bolts

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Approaches to political economy analysis for
development effectiveness some nuts and bolts
emerging practice
Verena Fritz Governance Specialist Brian
Levy Adviser Kai Kaiser Senior Economist (PRMPS)

• SDV BBL series on Political Economy of Reform
• March 18, 2009

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What is political economy analysis?

• Political economy analysis is concerned with the
  interaction of political and economic processes
  in a society the distribution of power and
  wealth between different groups and individuals,
  and the processes that create, sustain and
  transform these relationships over time.
• (OECD/DAC)
• Cross-cutting and complementary to technical
  analysis, and analysis aimed at identifying
  priorities
• PE analysis can promote development effectiveness
  by helping to develop approaches that take
  contextual factors (systematically) into account

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Business rationale why PE diagnostics?

• Bank strategies and operations based purely on
  technical analysis and best-practice approaches
  have often proven un-implementable
• Bank teams are often surprisingly surprised by
  policy decisions (or non-decisions) in client
  countries
• Monitoring and managing the risk of reputational
  damage requires monitoring political trends
  rather than ignoring them
• We need to stretch ourselves beyond a pure
  common sense approach to political economy
• To understand the complex motivations of
  stakeholders rather than relying strongly on
  individual reform champions
• To understand the interplay between formal and
  informal institutions, and the motivations of
  stakeholders

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Three layers of problem-driven GPE analysis
E.g. repeated failure to develop solutions to
lack of results in sectors. Infrastructure is
constraint to growth but is not being improved
Vulnerabilities concerns

Evidence of poor outcomes to which GPE issues
appear to contribute
Problem driven
What are the institutional arrangements are
they capable, effective efficient?
Mapping of institutions laws, regulations
responsible public bodies formal and de facto
rules of the game analysis of integrity/corruptio
n challenges
Institutional/ governance arrangements
capacities
Why are things this way? Why are policies or
inst. arrangements not being improved?
Analysis of stakeholders, incentives,
rents/rent-distribution, historical legacies
earlier reform experiences social trends
forces and how they shape stakeholder actions
Political economy
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GPE can be applied to country, sector, or
specific operations

• Macro 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)

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Operational value Defining how to proceed to
make reforms happen
Seeking to expand reform space pro-actively
Selecting operations given existing reform space
Zambia telecoms focus on local winners
Philippines public procurement reform
pro-active coalition building to combat
entrenched corruption networks
Mongolia Mining TA with local think tank for
public debate
India power reform sequencing
Paraguay Bangladesh roads external monitoring
by stakeholders
Ethiopia PBS to mitigate reputational risk
support subnational service delivery with
participation
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Existing frameworks

• Multiple frameworks developed within the WB and
  by other donors are available for use
• World Bank
• PRMPS Good Practice Framework on PGPE (building
  on C S GAC efforts/experiences) summarizing
  menu of options and approaches
• SDV TIPS handbook and Report on PE of policy
  reforms for policy dialogue and development
  operations (building on PSIA experiences)
• DfID DoC, Dutch SGACA, SIDA power analysis, EC
  draft framework for sector governance analysis,
• PE diagnostic frameworks can be combined with
  conflict diagnostic frameworks for fragile
  environments
• PRMPS is currently working on a sharepoint
  intranet-site which will make existing frameworks
  and experiences easier to locate for TTLs/staff
• Emerging Community of Practice across Bank
  units

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A basic structure for GPE analysis 3 sets of
variables, interactions effects on policies
outcomes
Examples
Variables
Influence political and public sector action and
policies and their implementation
Outcomes (growth, poverty reduction, human
development, dealing with development challenges
pollution, (social) conflict, etc.)
Historical legacies, economic base and level of
development, commodity prices population
dynamics  
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
Institutions
Political leaders political parties, (organized)
interest groups heads of SOEs  external
stakeholders
Actors/ stakeholders
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Some key lessons

• GPE diagnostics should be focused on particular
  challenges/questions/puzzles
• Expectations (of country teams, management, etc.)
  and actual approach to PE diagnostic need to be
  well matched
• Integrate PE diagnostics as closely as possible
  with other work with country/sector teams
• Pay attention to processes as much as to products
• (i) the process of producing the analytic output
  including quality management
• (ii) the follow-up process of using PE
  diagnostics for decisions strategy or
  operational design, whether to adjust these,
  whether and how to engage in coalition-building
  for reforms, etc.

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A variety of approaches tools

• General approaches/perspectives
• Analyzing historical legacies and their impact on
  current configurations
• Analysis of rents, rent distribution dynamics
• Particular perspectives, structuring slicing
• Analysis of policy processes and electoral
  incentives and their impact on policy
  volatility, adaptability/on public investment
  planning, public-orientedness of policies
  resource allocation
• Value-chain approach for structuring sector
  focused analysis
• General tools
• Analysis of structural factors and their impact
• Institutional mapping at different levels from
  constitutional systems to detailed processes at
  sub-sector level capturing formal and informal
  institutions
• Stakeholder mapping analysis (-- using
  different degrees of formalization)
• Specific tools
• Surveys of public opinion or of well-informed
  people
• Quantitive analysis e.g. using data from
  surveys, policy outputs, etc.

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Evidencing political economy analysis

• Political economy analysis needs to be well
  evidenced to be credible
• .. without falling into the trap of duplicating
  technical analysis
• Structuring/summarizing/focusing existing
  analysis
• Identifying data and sources often outside the
  box surveys, electoral results, records of
  voting and debates in parliament, pricing,
  records of ownership, etc.
• Interviews with systematic approach
• Triangulation!

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Moving from analysis to follow-up

• Moving from analysis to follow up is crucial to
  achieve impact
• Timely initiation of follow up this does not
  need to wait until the diagnostic output is
  completely polished
• Dual process once the diagnostic ouptut is
  drafted
• Review of the quality of the product
• Discussions on implications and follow-up with
  relevant teams and management
• Follow-up can take a variety of forms
• Designing more feasible operations
• Including innovative components into operations
  and pushing for increasing reform space (e.g.
  intensifying/broadening policy dialogue, support
  to think tanks, coalition-building,
  communications strategies, working with CSOs for
  procurement watch, etc.)
• Informing the decision-making process with
  management about challenges and how to react
• Communicating with other stakeholders (INGOs,
  media) about the strategic choices of the Bank in
  light of country context/context of operations

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Recent examples of GPE diagnostics

• Mongolia CGAC
• Focused on managing the natural resource boom
  (building on earlier PE diagnostic work)
• Zambia CGAC
• Focused on stalled implementation in
  infrastructure reforms
• India Lebanon power sector reforms
• Ongoing work on GPE of NRM in 8 countries (AFR
  and EAP)
• Bangladesh roads sector
• Various country level diagnostics in fragile
  states

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RELEVANCE FOR ZAMBIA II A DIFFERENT APPROACH TO
WBG ENGAGEMENT

• FROM. should (prescription)
• TO . .. why? .(seek to understand)
• TO feasible next steps ..... (for poverty
  reduction)
• ..an approach, NOT a prescription(more humility)

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Resources

• PRMPS http//connect.worldbank.org/units/prem/PD
  -GPEA/pdgpe/default.aspx
• Good Practice Framework for Problem-Driven
  Governance and Political Economy Analysis
• Repository for existing examples of political
  economy analysis (evolving)
• Thematic applications
• Growth diagnostics
• Resource rich countries comprehensive engagement
  (EITI)
• Core Governance (esp. Public Sector Management)
  in Fragile Settings)
• SDV www.worldbank.org/socialanalysis -gt
  political economy of reforms
• The Political Economy of Policy Reform Issues
  and Implications for Policy Dialogue and
  Development Operations
• TIPS handbook (Tools for Institutional,
  Political, and Social Analysis of Policy Reform)
• CommGAP www.worldbank.org/commgap
• Communications strategies for PE analysis
  follow-up
• WBI Watch this space
• DEC Macroeconomics and Growth program

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Operationalizing GPE

• Demonstrating Value Added
• Upside Downside
• Constructive, Risk Mitigation
• Sector/Country Team Dialogue
• Dissemination
• Grey Covers
• Community of Practice
• Resourcing
• BB, Governance Partnership Facility, PSIA
• Skills base (staff, consultants, quality control)