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Development Effectiveness: New Ideas, New Challenges
Tony Addison Miguel Niño‐Zarazúa Danielle Resnick
Ministry for Foreign Affairs
Helsinki, Finland January 19, 2012
Overview of Presentation
• Tony – Economic Growth & Aid • Miguel – Social Protection & Poverty • Danielle – Democracy & Human Rights • Tony – Conclusions: the Value of Knowledge • Snapshot of some (but not all) UNU‐WIDER research • Presentation is intended to open a conversation, not to provide ready‐made answers
2
Opportunities
• We live at a time of real progress – economic growth, poverty reduction, technological breakthrough
• Violent conflict has fallen • Africa is not the Africa of 30 or even 10 years ago • Growth delivers more public revenue – if tax institutions built
• That public revenue is available for investment in human development & infrastructure
• Resource‐rich countries are especially well‐placed – if they use the revenue well
• We know more about what works in development than at any time previously
3
What Works
• Economic Growth – to deliver sustained poverty reduction (e.g. Bangladesh, Uganda – poverty down)
• BUT: chronic poverty can remain resilient even when growth is high (e.g. India) – discrimination by ethnicity, gender etc.
• Growth can reduce the poverty of a healthy young man able to work, but not a sick mother in subsistence farming
• AND: growth’s environmental impact must be managed • AND: growth does not necessarily reduce conflict (Pakistan) • Foreign Aid has a robust impact on growth (but not at all times
& in all places) • Aid has helped Ethiopia, Ghana, Rwanda, Mozambique,
Uganda, Tanzania pull themselves out of crisis 4
2025
3035
Expo
rt to
GD
P (%
)
1960 1970 1980 1990 2000 2010Year
Exports of goods and services (% of GDP) Fitted values
1960-2009Export Performance of SSA (Percentage of GDP)
Trend in SSA Export Performance
6
Child Malnutrition
Figure 2: Malnutrition and growth in cross-country evidence
0
10
20
30
40
50
60
70
0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000
GNI per capita, PPP
Und
er-5
mal
nutri
tion
prev
alen
ce
Redrawing the World
Aid Policy ‐ Macro to Development Links
• Help countries to tighten the link between the macro‐economic framework & the longer‐term development strategy e.g via National Plan (Botswana good example)
• Think harder about structure – growth but not enough structural change (new industrial policy, or ‘learning to compete’).
• Role for aid in encouraging more private capital flow (e.g. via reducing risk)
• In principle, plenty of high return projects that could pay back the funding – but be careful about excessive borrowing
• High‐return public investments still on the shelf – investments often financed by high‐cost domestic borrowing rather than concessional aid
• So what is optimal blend of grant aid, concessional borrowing, commercial borrowing, FDI? Very country specific
05
1015
2025
OD
A an
d N
atur
al R
esou
rce
Ren
t (%
of G
DP
)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
(Percentage of GDP from 2000-2009)ODA and Natural Resource Rents in Sub Saharan Africa
ODA (% of GDP) Total Natural Resource Rent (% of GDP)
ODA v Natural Resource Rent
Aid Policy – Managing Resource Revenues
• Distorting impact of resource rents – much to worry about – often associated with institutional weakening (oil especially) whereas aid tries to improve institutions
• Strengthen technical assistance & policy dialogue to help countries use growing resource revenues in transparent & effective way
• For example enhance policy toolkit for investing resource rents in social protection & high‐value infrastructure & link to industrial policy (‘learning to compete’)
• Retain budget support to countries receiving larger resource revenues when it provides entry‐point for dialogue on overall fiscal framework (taxing & spending) 10
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OD
A (%
GD
P)
0 10 20 30 40 5050 Quantile of ODA (% GDP)
ODA % of GDP, (1990-2009) Average
SSA CountriesODA as Percentage of GDP
Aid dependence across SSA countries
Aid Policy ‐ Two Fragilities
• Fragile countries where risk is high & stubborn & macro‐framework weakest. Will aid become concentrated on these? – Country Fragility
• (ii) International Monetary System – weakness – countries build large forex reserves to provide shock‐insurance – reason why central banks like to use aid to add to reserves – Global Fragility
• Aid‐Growth impact can’t be maximized without action on: (i) Conflict ‐ ‘peace‐building is good economics (ii)Reform of the international monetary system to raise stability & provide more global shock insurance (& movement on trade agreements)
12
13
Poverty and Social Protection
14
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• Social protection as a new paradigm in the fight against extreme poverty
– Moving from conventional approaches to food aid, and subsidies to regular, reliable and predictable forms of assistance
– It reflects an emerging consensus that eradicating poverty requires economic growth, basic service provision and social protection
– It reflects a shift in the conventional wisdom on the nature and causes of poverty, from poverty as a lack of income to poverty as multidimensional phenomenon.
• We focus on Social Transfers (ST): tax‐financed (and/or aid‐supported) policy
instruments designed to address poverty and vulnerability
– Over 30 developing countries now with large scale social transfer programmes – Pilot schemes being introduced in several countries in SSA (Kenya, Malawi, Ghana
and Zambia; and at implementation in Nigeria, Liberia, Uganda, and Tanzania) – More than 860 million people currently receiving income support in developing
countries –the most important policy instrument against extreme deprivation at present time
Social Protection: a policy approach against poverty
Social Protection: policy approaches against poverty
16
Programme title Country Type Number of households (in
millions)
Number of beneficiaries (in
millions)
Country classification 1/
Poverty focus 2/
National Rural Employment Guarantee Scheme India Income
transfer plus 48.0 240.0 Lower middle income High
Urban DiBao China Integrated antipoverty 22.0 110.0 Lower middle
income High
Program Bantuan Tunai, Bantuan Tunai Langsung Indonesia Pure income 19.1 95.5 Lower middle
income High
Bolsa Familia Brazil Income transfer plus 12.5 52.3 Upper middle
income High
Rural Dibao China Pure income 10.5 42.0 Lower middle income High
Prêvidencia Social Rural Brazil Pure income 7.5 37.5 Upper middle income Categorical
Indira Gandhi National Old Age Pension Scheme India Pure income 15.7 31.4 Lower middle
income High
Progresa‐Oportunidades Mexico Income transfer plus 5.5 27.5 Upper middle
income High
‘100 Days Employment Generation Scheme’ (EGP) Bangladesh Income
transfer plus 3.0 15.0 Low income High
Tekun (transfer in less developed regions for destitute households) China Pure income 6.6 10.7 Lower middle
income High
Beneficio de Prestaçao Continuada Brazil Pure income 2.4 10.0 Upper middle income High
Expanded Senior Citizens Act of 2010 Philippines Pure Income 2.0 10.0 Lower middle income Categorical
National Family Benefit Scheme India Pure income 2.0 10.0 Lower middle income High
Old Age Pension South Africa Pure income 2.4 10.0 Upper middle income High
Child Support Grant South Africa Pure income 1.9 9.5 Upper middle income High
Subtotal for 15 largest programmes 161.0 711.4 Other 79 programmes 30.4 151.9 TOTAL Developing world 3/ 191.4 863.3
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What makes Social Transfers so innovative? • Distinctive features of Social Transfers • Adopt a multidimensional approach to poverty. They link income transfers with
simultaneous interventions in health, education and nutrition (supply‐demand connection)
• Focus on the poorest (principles of Social Justice). This is in clear contrast to
generalised and targeted food and input subsidies that dominated past antipoverty agendas
• Designed to address gender inequalities –Income transfers are given to mothers
under the recognition that women are effective agents of social change. • Follow a complex and statistically‐based system of identification and selection of
beneficiaries. This aimed at improving policy efficacy and preventing discretionary political manipulation
• Have included independent impact evaluations. That has helped improve the
programme’s effectiveness, and strengthen their legitimacy across different political factions and constituencies.
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What works in Social Transfers?
What do we know? What we don’t know?
Education: •Strong correlation with various educational outcomes. •In MICs, impacts more significant on secondary education •Important to support budget to increase supply‐side capacity ‐quality of education
• Whether more schooling and better health and nutrition for children will translate into higher economic development and social mobility in the longer term
• Whether enforcing conditionalities can
actually increase impact in LIC –not fully known their marginal costs and benefits either
• The optimal size of transfers to maximise
impact, given decreasing marginal social returns
• Unknown optimal length, regularity and
duration of interventions, given population, socio economic and political economy considerations at individual country level
Health •Improvements in health care utilisation •Positive change in parental behaviour towards children’s preventative health care •Intra‐household spillover effects I health status beyond the direct beneficiaries
Nutrition • Strong improvements in nutritional status across
countries and throughout different types of programmes
Poverty •Effective in reducing extreme deprivation (larger impacts on poverty gap and squared poverty gap than headcount index) •Effective insurance properties to protect the poor against aggregate shocks (examples Brazil, South Africa, Mexico)
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Main Challenges: Affordability
a) Universal pension/ GDP
b) Child benefit/ GDP
c) Employ ment scheme/ GDP
Transfer package/ GDP (a+b+c) %
Revenue excl grants/ GDP
Transfer package/ Revenue excl. grants
Net ODA/ GDP
Transfer package/ net ODA
Guinea 0,6 1,5 0,3 2,8 15,6 17,7 7,5 36,9
Burkina F. 1,1 2,8 0,6 5,2 13,1 39,5 12,5 41,3
Ethiopia 1,0 2,8 0,6 5,1 12,0 42,2 12,6 40,3
Tanzania 1,1 3,1 0,6 5,5 17,3 31,9 11,4 48,5
Senegal 1,1 2,0 0,5 4,1 19,6 21,1 8,0 51,7
Kenya 0,9 3,0 0,6 5,2 20,8 24,9 3,9 131,3
Cameroon 0,8 1,8 0,4 3,5 20,0 17,3 2,2 154,0
MIC spend less than 1% of GDP on social transfers For Low‐Income, aid‐dependant African countries:
– Child grant + pension + employment scheme (=UN social floor transfers): 3‐5% GDP 40 % net ODA
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Financing options?
• Revenues from Natural resources in resource rich countries –but with governance problems
• Renegotiation of contracts with companies involved in the exploitation of
natural resources (e.g. Bolivia) • Medium‐term fiscal policy objectives
– Rises in VAT earmarked for expenditures on Social Protection (?) – Anti tax‐evasion policies –Chile reduced VAT evasion rate from 20% in the
1990s to less than 10% in 2009
• Room for redistribution? What marginal tax rate on the ‘rich’ would be necessary to eliminate the normalised aggregate poverty gap?
– MTR: proportion of tax paid for each additional income unit earned at the highest
income threshold
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MTR needed to eliminate the poverty gap
22
Main Challenges: institutional capacity
• In MICs institutional capacity has facilitated the expansion of SP to scale – Centralised approaches (e.g. Mexico) –recent linkages with non‐banking financial
Institutions. – State and private sector linkages (e.g. South Africa, Brazil)
• Limitations in capacity to formulate, deliver, and evaluate transfer programs are a key constraint in most LICs.
• Strong reliance on community management and a mix of providers
– public, NGOs and for profit organisations (e.g. Malawi, Ethiopia and Zambia – Advantages: Local elites and resources are engaged in poverty reduction. – Disadvantages: Community involvement tends to reproduce and/or reinforce
social disparities and power relations.
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What can donors do?
• Stay aligned, build on countries’ own efforts • Stay harmonized, joint financing mechanisms • Commit long‐term financing
Two key questions: • Which aid modality? Time‐bound aid for permanent costs...
• What if not enough ownership to build on?
24
Promotion of democracy and good governance
Democracy Assistance
25 Sources: OECD Creditor Reporting Database
• Small share of total development assistance (about 7%) • SSA receives most democracy assistance (3.5 billion USD in 2009) • Does not offer governments “carrots” and “sticks” • Little harmonization, often driven by different normative perspectives
Disaggregated Democracy Assistance in Sub‐Saharan Africa (Millions of 2009 USD Commitments)
Electoral Assistance Context
– 17 African countries holding elections in 2012, including Madagascar, Zimbabwe, and Guinea‐Bissau
What works?
– “Electoral cycle approach” – Joint donor trust funds managed by UNDP – Exit polls – Training of local/regional electoral monitors
Knowledge Gaps
– How to reduce likelihood of electoral violence? – How to increase independence of electoral commissions? 26
Party and Legislative Strengthening Context
– Parties and parliaments remain extremely weak in Africa What Works? Knowledge Gaps
– How to evaluate the impact of party and parliamentary assistance?
– How to involve senior politicians in training programs and workshops? 27
Party Assistance Legislative Strengthening Political Resource Centers “Issue‐based” technical assistance Pro‐rated grants to parties Parliamentary scorecards Inter‐party dialogue Parliamentary budget units Media diffusion of party/candidate views
Parliamentary donor groups/coordination offices
Human Rights Context
– Progress but also backtracking and harassment of certain groups
What works? – Well‐designed human rights commissions and ombudsperson offices – Commodity/technical assistance to media, including community radio
– Gender‐based violence desks – Representational quotas for excluded groups – HIV/AIDS as entry point for LGBT rights; Support to LGBT CSOs – Incorporate human rights safeguards into aid projects
Knowledge Gaps
– How to improve freedom of expression in adverse political conditions?
– Do institutions and laws ultimately change the attitudes of governments and their citizens?
28
Broader Questions to Consider
• Does the growing presence of non‐democratic donors impact the effectiveness of democracy assistance? • How can we better harness the democracy and human rights achievements of non‐traditional donors?
• How can we better integrate development and democracy assistance?
29
The Importance of Knowledge
• Research that delivers knowledge on what works builds a foundation for good policy (& good aid)
• But we need more knowledge on what could work: ‐ especially what is scalable & transferrable
• Can small projects become big projects? • Could what works in country X work in country Y? • Can our knowledge keep pace with the escalating threats? The complexity of global finance Climate change & environment • Research delivers knowledge about what works but also what could work – makes for better policy & better aid
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Conclusions
• We have provided a taste of our thinking • More at: www.wider.unu.edu • Do check out ReCom at: • www.wider.unu.edu/recom • Do sign up for our WIDER Angle newsletter • Now we would like to hear your thinking • Thanks!
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