Partnership for Poverty Reduction

8/14/2019 Partnership for Poverty Reduction

1/40


2/40


3/40

Committee for Development Policy

Policy Note

Strengthening the International Partnershipfor Effective Poverty Reduction

United Nations

October 2007


4/40

DESA

Te Department o Economic and Social Aairs o the United Nations Secretariat is a vital interace between global

policies in the economic, social and environmental spheres and national action. Te Department works in three main

interlinked areas: (i) it compiles, generates and analyses a wide range o economic, social and environmental data and

inormation on which States Members o the United Nations draw to review common problems and to take stock o

policy options; (ii) it acilitates the negotiations o Member States in many intergovernmental bodies on joint courseso action to address ongoing or emerging global challenges; and (iii) it advises interested Governments on the ways and

means o translating policy rameworks developed in United Nations conerences and summits into programmes at the

country level and, through technical assistance, helps build national capacities.

Note

Te designations employed and the presentation o the material in this publication do not imply the

expression o any opinion whatsoever on the part o the Secretariat o the United Nations concerning the

legal status o any country, territory, city or area or o its authorities, or concerning the delimitation o its

rontiers or boundaries.

Te term country as used in the text also reers, as appropriate, to territories or areas.

Te designations o country groups are intended solely or statistical or analytical convenience and do not

necessarily express a judgment about the stage o development reached by a particular country or area in the

development process.

Te views expressed in this publication are those o the Committee or Development Policy and do notnecessarily refect the opinions and policies o the United Nations.

United Nations publication

Sales No. E.07.II.A.8

ISBN 978-92-1-104573-4

Copyright United Nations, 2007

All rights reserved

Printed by the United Nations

Publishing Section, New York


5/40

Strengthening the International Partnership for Effective Poverty Reduction iii

Foreword Worldwide, the number o people living in extreme poverty has declined since 1990.

Tere is also evidence o important progress on other dimensions o human development,

such as access to education and reductions in child mortality. Te progress has been rather

uneven, however, with many countries, in particular Arican countries, lagging behind.

Even in countries that have made substantial improvements, there are still certain groups

that remain trapped in extreme poverty.

Te international community, through the United Nations, is committed

to an agenda o internationally agreed development goals, including the Millennium

Development Goals. Te strategies in ulllment o this agenda seem to be working, but

not on the scale required. Tereore, the global partnership in support o the development

goals must be improved and strengthened. Te present Policy Note by the Committee orDevelopment Policy critically assesses the existing ramework or this global partnership

and identies some important shortcomings in the present approach, particularly those

that relate to the Poverty Reduction Strategy Papers. Te report gives useul advice on

how to enhance the eectiveness o the international partnership or poverty reduction.

I am condent this report will enrich the development dialogue, and I urge that careul

consideration be given to its recommendations.

Tis publication represents the collective view o the CDP members. I would

like to thank all members or their work. I would like to express special gratitude to

Proessors Frances Stewart and Jos Antonio Alonso, who prepared background notes

which served as important inputs to the deliberations o the CDP and the present Policy

Note.

Sha Zukang

Under-Secretary-General or Economic and Social Afairs

United Nations

September 2007


6/40


7/40

Strengthening the International Partnership for Effective Poverty Reduction v

SummaryImportant progress has been made towards developing a global partnership in support o

national poverty reduction strategies. Nonetheless, the existing ramework o the global

partnership, which uses the Poverty Reduction Strategy Papers as its main instrument,

appears to be neither adequate nor eective. Te Committee or Development Policy

stresses the importance o the donor communitys allowing aid recipient countries to gain

more ownership o the poverty reduction strategies. Te Committee urther recommends

that aid modalities and other international support should be provided under conditions

which enhance, rather than restrict, Governments room or manoeuvre in conducting

national policies or eective growth and poverty reduction, in accordance with their

economic, social and cultural conditions. At the same time, the international community

at large needs to ensure that negotiations on the Doha Round o the World radeOrganization are consistent with poverty reduction objectives and national trade policies

in developed and developing countries and do not conict with development assistance

priorities pledged by Governments around the world in the 2002 Monterrey Consensus o

the International Conerence on Financing or Development. Te Committee recommends

that improved international partnership or poverty eradication be sought under the aegis

o the Economic and Social Council o the United Nations.


8/40


9/40

Strengthening the International Partnership for Effective Poverty Reduction vii

ContentsForeword iii

Summary v

Contents vii

Explanatory Notes ix

Introduction 1

Efcacy o PRSPs and their impact on poverty reduction 2

Supporting debt relie 3

PRSPs and poverty reduction 5Ofcial development assistance: improving harmonization

and alignment o aid practices 7

National policies: broader participation and consultation 9

Te global partnership 10

National policy space 11

Financing development 13

Te multilateral trading environment and poverty reduction 14

Developing new partnerships 17

Recommendations 17

Strategies or poverty reduction: modalities and policies 18

New partnerships and sources o nance 19

A air trading environment 19

Enhancing the role o the Economic and Social Council 20

Annex: Countries under the HIPC initiative 21

Reerences 22

Boxes

1. A snapshot o the HIPC initiative 3

2. Macroeconomic stability: the one and only priority? 123. Te Aid or rade Initiative and the Enhanced Integrated Framework

or rade-Related echnical Assistance to Least Developed Countries 14


10/40

Strengthening the International Partnership for Effective Poverty Reductionviii

Figures1. Debt service-to-export ratio o the countries that reached the

decision or completion point o the HIPC Initiative

by June 2006, 1998-2009 5

2. Number and percentage o population below the international

poverty line: sub-Sahara and the rest o the developing world

and economies in transition, 1990-2004 6

3. Progress towards selected MDGs in sub-Saharan Arica, 1990-2015 7

4. Developed countries average taris on imports o

key products rom developing countries, 1996-2005 15

5. Agricultural support estimate or OECD countries as a

percentage o their gross domestic product, 1993 and 2003 16

Table

1. Debt indicators o Heavily Indebted Poor Countries (HIPCs)

beore and ater reaching the decision point 4


11/40

Strengthening the International Partnership for Effective Poverty Reduction ix

Explanatory Notes

Te ollowing abbreviations have been used:

CDP Committee or Development Policy

DAC Development Assistance Committee (o the OECD)

ECA Economic Commission or Arica

GDP gross domestic product

HIPC Highly Indebted Poor Country

IDA International Development Association (o the World Bank)

IEO Independent Evaluation Ofce (o the IMF)

IF Integrated Framework or rade-Related echnical Assistance to LDCs

IMF International Monetary Fund

LDCs least developed countries

MDGs Millennium Development Goals

MDRI Multilateral Debt Relie Initiative

NEPAD New Partnership or Aricas Development

NGO non-governmental organization

NPVnet present value

ODA ofcial development assistance

OECD Organization or Economic Cooperation and Development

PRGF Poverty Reduction and Growth Facility

PRSP Poverty Reduction Strategy Papers

SAPs structural adjustment programmes

TRIPS trade-related aspects o intellectual property rights

UNCTAD United Nations Conerence on rade and Development

WHO World Health Organization

WIPO World Intellectual Property Organization

WTO World rade Organization


12/40


13/40

Strengthening theinternational partnership orefective poverty reduction

Introduction

Many o the least developed countries (LDCs),

1

especially those in Arica, arestruggling to meet the objective o reducing poverty and hunger as outlined in

the rst o the Millennium Development Goals (MDGs).2 Despite the inter-

national commitment to poverty reduction, the present ramework or global partnerships

towards this goalthe use o Poverty Reduction Strategy Papers (PRSPs) as the main

instrumentappears to be neither adequate nor eective. o halve poverty by 2015, the

international community needs to improve both the strategic ramework and the working

partnerships that dene the current approach to poverty reduction.

PRSPs were introduced by the World Bank and the International Monetary

Fund (IMF) at the end o 1999 as a new approach to poverty reduction that would provide

concessional nancing to low-income countries and debt relie under the Highly Indebted

Poor Country (HIPC) Initiative (World Bank and IMF, 2005). PRSPs aim at achieving the

reduction o poverty and hunger and other MDGs through adopting nationally owned,country-driven strategies prepared with the broad-based participation o civil society and

by providing the operational basis or the release o debt relie under HIPC, concessional

unds by the IMF and the Bank and other nancial support by bilateral donors.

Eective national strategies are essential or poverty reduction. Tese strate-

gies need to be initiated by countries themselves and should be comprehensive in scope

and long term in orientation. A major requirement o any eective ramework or global

partnership is to increase the space or national ownership in designing and implementing

development strategies.

As the principles underlying the preparation o PRSPs have been rened

over time, eorts have also been directed towards improving the eectiveness o actions

1 For the current list o countries classiied as least developed, see http://www.un.org/esa/policy/devplan/ldc03list.pd.

2 See http://unstats.un.org/unsd/mdg/Resources/Static/Products/GAResolutions/

55_2/ a_res55_2e.pd.


14/40

Strengthening the International Partnership or Eective Poverty Reduction2

by the donor community, which has provided, among other things, valuable support orthe implementation o PRSPs. In March 2005, international development partners ad-

opted the Paris Declaration on Aid Eectiveness. Te Paris Declaration subscribes to the

basic operational principles employed in the PRSPs (country-driven, comprehensive,

long-term perspective) and denes the principles o harmonization and alignment o aid

delivery as the basis or a new ramework o mutual accountability. Te Declaration was

endorsed by Governments o developed and developing countries and by international

agencies. Signatories to the Declaration also adopted a set o monitorable actions and

indicators intended to provide a ramework o mutual accountability.3

While a step in the right direction, the above actions do not appear to be su-

cient or arriving at a more eective international partnership or poverty reduction. Te

Committee or Development Policy (CDP) stresses the importance o increased country

ownership in designing poverty reduction strategies and the need to establish aid modali-ties and other orms o international cooperation to enhance, rather than restrict, gov-

ernments room or manoeuvre in conducting national policies in accordance with local

conditions and priorities.

Efcacy o PRSPs and theirimpact on poverty reduction

PRSPs are based on ve core principles. Tey should be

Country-driven and -owned, and involve the broad-based participation

o civil society and the private sector in the ormulation and implemen-

tation o the strategy and in the monitoring o progress towards agreed

goals.

Results-oriented, ocusing on outcomes that would benet the poor.

Comprehensive in diagnosing o poverty and in recognizing the multi-

dimensional causes o poverty and measures to ght it.

Partnership-oriented, involving coordinated participation o develop-

ment partners, such as bilateral and multilateral donors and non-govern-

mental organizations.

Medium- to long-term in their perspective or reducing poverty and ad-

dressing capacity, institutional and governance constraints to develop-

ment.4

3 The statement is available at http://www1.worldbank.org/harmonization/Paris/FINAL

PARISDECLARATION.pd.

4 For details, visit http://www.im.org/external/np/exr/acts/prsp.htm.


15/40

Strengthening the International Partnership or Eective Poverty Reduction 3

Tis approach has been widely adopted and, by mid-2007, 65 countries hadprepared PRSPs, 35 o which were in Arica.5 PRSPs have thus become the main instru-

ment or developing policies and programmes around which development partners organize

themselves. However, so ar, the PRSP record in achieving its multiple objectives (debt-relie

support, poverty reduction, improving aid eectiveness, promotion o country ownership)

indicates that success has been mixed on most o these ronts, as elucidated upon below.

Supporting debt relie

Debt relie or poverty reduction was provided to countries that had reached, or would

reach eventually, the completion point o the HIPC Initiative (see box 1): By July 2007, 31

countries were receiving debt relie under the Initiative, with 22 countries having reached

the completion point and 9 others the decision point. Another 10 countries had beenassessed as having met the income and indebtedness criteria or inclusion, but still had

pre-decision status (see annex or the list o HIPCs).

5 O the other countries, 1 2 were in Asia, 7 in Latin America and the Caribbean and 11

in countries with economies in transition.

A snapshot o the HIPC Initiativea

The HIPC Initiative was launched in 1996 to provide debt relie or poor countries holding an

unsustainable external debt position. It was urther rened in 1999 in order to provide aster

and deeper debt relie and to strengthen the links between debt relie and poverty reduction.

In 2005, the HIPC Initiative was supplemented by the Multilateral Debt Relie Initiative (MDRI),

which allows or 100 per cent orgiveness on eligible debt owed to the IMF, the International

Development Association (IDA) and the Arican Development Bank or countries completing

the HIPC process.

A country is eligible or debt relie under the HIPC Initiative i (a) its annual incomeper capita is below a certain threshold or concessional borrowingb and (b) its external public

debt burden indicators are above HIPC thresholds ater application o traditional debt-relie

mechanisms. These thresholds are (a) 150 per cent o the ratio o the net present value (NPV)

o debt to the exports o goods and services or (b) 250 per cent o the ratio o NPV to scal rev-

enues. To qualiy under the latter criterion, however, a country must also have a ratio o exports

o goods and services to gross domestic product (GDP) above 30 per cent and a ratio o scal

revenue to GDP above 15 per cent.

The decision point is the rst step or eligible countries to qualiy or debt relie.

At this point, the country must have a track record o satisactory perormance under an IMF

program, a Poverty Reduction Strategy and an agreed plan to clear any arrears to oreign credi-

tors. At the decision point, countries start receiving debt relie, but creditors maintain the right

to revoke such agreement i policy perormance is not considered adequate. At the completion

point, debt relie becomes irrevocable. Countries reach the completion point when they meet

the perormance goals dened by the IMF programme to which they have subscribed andwhen they have successully implemented their PRSP or at least one year.

a Additional inormation onthe HIPC Initiative can beound at http://www.world-bank.org/debt (accessed on17 August 2007).

b The income threshold usedby the International Devel-opment Association (IDA) isthe gross national Incomeper capita, which is updat-ed each year. In 2007, it wasUS$ 1,025.

Box 1:


16/40


Te process seems to have been an eective vehicle or debt relie. Potentialdebt relie has been estimated at over US$ 63 billion in 2005 in net present value (NPV)

terms i all creditors participate. Debt burden indicators o the 31 countries already receiv-

ing debt relie under the initiative have improved: the ratio o the NPV o debt to GDP

has moved closer to the corresponding ratio o other non-HIPC low-income countries,

while the ratio o the NPV o debt to exports o goods and services was cut by more than

hal between 1999 and 2005 (see table 1). In addition, the average debt service-to-export

ratio has also declined (see gure 1). While debt relie contributed to lowering the indica-

tors o debt burden, the improved international economic environment o recent years,

allowing or increased demand or commodities and higher prices, also played a role.

Moreover, it should be noted that because actual debt-service payments have increased

since 2003 and are projected to rise during the second hal o the present decade owing to,

among other actors, new borrowing, the export perormance o these countries needs tobe robust to maintain the service ratio at the levels projected in gure 1.

Some countries, with their multiplicity o chronic problemsbe they conict,

the early stage o post-conict recovery or simply poor governancehave not yet received

any debt relie. Te donor community, instead, has tended to ocus its external assistance

on physical reconstruction and the development or strengthening o governance and over-

all capacity to engage in general economic activities. In these countries, it is believed,

Governments do not yet possess enough capacity to undertake the analytical work neces-

sary to start the debt-relie process under the HIPC Initiative, where they are required to

create or strengthen public institutions, undertake civil service reorm and enhance the use

o local capacity, with the assistance o the donor community (World Bank, Independent

Evaluation Group, 2006).

Table 1:

Debt indicators o Heavily Indebted Poor Countries (HIPCs)

beore and ater reaching the decision pointa

Percentage

30 decision-

point HIPCs

Non-HIPC low-

income countriesb

1999 2005 2005

Net present value of debt-to-exports 317 143 81

Net present value of debt-to-gross domestic product 72 33 29

Source: World Bank (2007). HIPCs MIDRI, act sheet prepared or the Spring Meetings in 2007. Available rom

http://siteresources.worldbank.org/INDEBTDEPT/Resources/Debt_PocketBroch_Spring07.pd.

a Weighted averages.

b Low-income countries as dened by the World Bank excluding pre-decision-point HIPCs and low-income

countries or which data were not available.


17/40


18/40


not expected to meet the target o achieving universal primary education by 2015 (see

gure 3).6

Te greatest improvements in poverty reduction have been achieved in coun-

tries with well-dened national development strategies. Investment-driven and labour-

intensive economic growth has been responsible or substantial poverty reduction in coun-

tries such as China, India, Malaysia, Viet Nam and other countries in the Asian region.Based on these experiences, it is possible to argue that an international partnership to sup-

port poverty reduction needs to promote national strategies such as those adopted in those

countries and which were developed by the countries themselves, taking into account local

conditions and national priorities. A new international partnership to support poverty re-

duction needs to abandon restrictive conditionality (associated with the macropolicy con-

ditions o existing PRSPs) and expand the scope or policy choice. Tis involves a reorm

o the process to secure true national ownership, as agreed in the Paris Declaration.

6 United Nations (2007a) documents progress reports by region or each MDG

indicator and is available rom http://www.un.org/millenniumgoals/pd/

mdg2007.pd.

Figure 2.Number and percentage of population below the internationalpoverty line: sub-Sahara and the rest of the developing worldand economies in transition, 1990-2004

Millions Percentage

0

200

400

600

800

1000

1200

1990 1993 1996 1999 2002 2004

0

10

20

30

40

50

60Sub-Saharan Arica

(let scale)

Rest o the developing world

and economies in transition

(let scale)

Sub-Saharan Arica

(right scale)

Rest o the developing world

and economies in transition

(right scale)

Source: UN/DESA, based on

Chen and Ravallion (2007).


19/40


Ocial development assistance: improvingharmonization and alignment o aid practices

Country experiences reveal that the eectiveness o aid depends critically on the degree

to which programmes nanced with external assistance are in line with the development

objectives o receiving countries. A growing number o donor countries are already col-laborating on the harmonization and alignment o aid actions to implement policies and

interventions specied in the PRSPs in several recipient countries. Burkina Faso, Ghana,

Mozambique, Uganda and the United Republic o anzania are cases in point (World

Bank, 2007). In these countries, donors and recipient Governments are taking actions in

areas such as the collaborative assistance strategy, the common perormance assessment

ramework and coordinated budget support. Some progress in aid harmonization and

alignment has been reported in other HIPCs, but it has not been as broad as in the case o

the ve countries mentioned above.

Although it may be still too early to pass judgement, preliminary ndings on

the harmonization and alignment o aid practices have shown that there are a number o

challenges that donors still need to address. Te prolieration o channels through which

donors provide ofcial development assistance (ODA) to a recipient country and the rag-mentation o donor-unded activities are still a problem, while the average dollar value o

projects has decreased (World Bank, International Development Association, 2007).

Figure 3.Progress towards selected MDGs in sub-Saharan Africa, 1990-2015

47

54

185

32

41

70

166

37

23

100

62

66

0 20 40 60 80 100 120 140 160 180 200

Extreme poverty(percentage living on

less than $1 a day)

Primary education

(net enrolment rate)

Child mortality

(under five deathsper 1,000 live births)

People using

improved sanitation(percentage of total)

off track

off track

off track

off track

Target 2015

2005

1990

Source: UN/DESA.

Notes:

O track indicates that the MDG

target will not be met

i the linear trend projectedrom 1990 continues.

For primary education, the 1990

rate reers to 1991.

For extreme poverty, the

2005 rate reers to 2004.


20/40


Reducing transaction costsTe prolieration o donors has added pressure on the scarce institutional and managerial

resources o recipient countries and increased the administrative and nancial costs associ-

ated with aid transers. Improved aid harmonization and alignment among donor country

policies are thereore required in order to reduce these transaction costs.

According to the Organization or Economic Cooperation and Development

(OECD), there are about 200 bilateral and multilateral organizations providing ODA.

Some countries have reported dealing with more than 40 ofcial donors assisting in over

600 projects a year (OECD, 2007). Te PRSP ramework has provided incentives to do-

nors to improve coordination both among themselves, and between them and the receiv-

ing countries. It is not clear, however, i the PRSP process has eectively reduced the trans-

action costs o international aid. In many cases, the development o PRSPs has led to the

creation o airly complex negotiating and monitoring structures which are oten beyond

the technical and personnel resources available in recipient countries.

As mentioned above, the Paris Declaration adopted a set o targets to keep

track o progress towards the principles o ownership, alignment, harmonization, manag-

ing or results and mutual accountability.7 Te rst monitoring report conducted by the

OECD in 2006 was based on surveys in 34 countries representing 37 per cent o the value

o programmed aid in 2005. It indicates that the donor community still has consider-

able room to improve aid harmonization and alignment. On average, less than 40 per

cent o aid ows is channelled through the budget management and procurement systems

o the receiving country. Te remainder comes with administrative procedures dened

by donors, thus contributing to high transaction costs o aid management. Developing

countries are required to use administrative procedures dened by a large array o dierentdonors and to coordinate a large number o project implementation units. In addition,

only 5 out o the 34 countries (17 per cent o the sample) were ound to have national

development strategies that clearly speciy the domestic and external sources o nance

available or their implementation. In the majority o countries, a common problem was

the missing link between policy priorities and budgeting (OECD, 2007).

Volatility o ODA fows

In many instances, the eectiveness o international aid is severely constrained by the

unpredictability and large variability o disbursements. Countries cannot plan or under-

take longer-term investments (such as those in inrastructure development and other pro-

7 OECD/DAC members, partner countries and multilateral institutions met twice, in May

and July 2005, to adopt targets or the twelve Indicators o Progress that are part o the

Paris Declaration. Additional inormation may be ound at http://www.oecd.org/departm

ent/0,3355,en_2649_15577209_1_1_1_1_1,00.html.


21/40


grammes and projects o longer maturity) i aid ows are not predictable. Similarly, mac-roeconomic stability can be compromised i aid ows are delivered with large uctuations.

Te unpredictability o aid ows is still a problem and there is no indication that the PRSP

process has helped to incorporate external aid into multi-annual budget projections.

Improving absorptive capacity o recipient countries

Another issue that requires attention is the absorptive capacity o the recipient country.

Ater a certain point, the impact o external aid is reduced i countries lack the institu-

tional capacity to absorb additional resources. While there is no consensus on the level

o the threshold, it is widely accepted that, beyond a certain point, external aid needs to

be accompanied by additional assistance to increase the absorptive capacity o recipient

countries (OConnell and Soludo, 2001).

National policies: broaderparticipation and consultation

Another PRSP objective, building country-driven development strategies to reduce pov-

erty and hunger, with appropriate consultation o local agents, does not appear to have

been eectively achieved either. Te strong inuence o donors over the programme is

evidenced by the content o the PRSPs. Various studies on completed PRSPs showed

no undamental departure rom the kind o economic policy advice provided under the

structural adjustment programmes (SAP) o the past (Stewart and Wang, 2005). Despite

showing a greater orientation towards designing and implementing social policies, the

PRSPs have retained many o the elements o the earlier SAPs, such as nancial and trade

liberalization, privatization, public sector reorm and sectoral policies, as well as the main-

tenance o current account and scal balances consistent with lower debt levels (Ames and

others, 2002; Vos and Cabezas, 2005).

Te lack o visible progress towards developing country-driven strategies is large-

ly due to three aspects o the PRSP process: (a) the international donor community tends to

be too heavily involved in preparing documents and organizing consultation processes; (b)

donor unds are released with implicit conditionalities and, consequently, recipient countries

tend to anticipate these conditionalities and mould proposals to what the donors want to

hear; and, (c) the IMF contribution to PRSP nancing (via the Poverty Reduction and

Growth Facility (PRGF)) involves strict macroeconomic policy conditions similar to those o

earlier structural adjustment programmesthat is to say, there is a heavy emphasis on scalbalance and ination, oten leading to or accentuating other macroeconomic disequilibria

through higher interest rates, an overvalued exchange rate and depressed demand. (For criti-

cal views on the impact o conditionality, see, or example, International Monetary Fund,

Independent Evaluation Ofce (2007) and Center or Global Development (2007).)


22/40


Te programming exercise involved in the PRSP is a demanding technicalundertaking, led by donors, oten elaborated upon by external consultants and involv-

ing the creation o ad hoc structures unded by donors. In many countries, the PRSP is

not part o the regular practices o public policy programming and decision-making. Te

technical level at which the PRSP is dened is requently dissociated rom the political

decision-making process. In act, there is oten a considerable gap between the techni-

cal characteristics o the reorm plans that are designed to improve development results

and the political and institutional context in which these reorms must be implemented.

Moreover, consultations associated with the PRSP process oten exclude the participation

o representative institutionsparliaments and labour unionsthereby undermining

their strength. Te excessive donor presence does not help reduce aid dependency and, in

the end, the accountability o the recipient Government seems to be geared towards the

donors, rather than towards its citizens (Munwa, 2006). Finally, the PRSPs appear to beoverly ambitious, oten trying to address too many issues at once. Pressure on recipient

countries has compromised their capacity to design policies and initiate reorms according

to their own political and managerial procedures, with national Governments assuming

the leading role.

On the whole, the dominant modality or an international partnership or

poverty reduction has not been eective in ensuring that countries remain on track to

meet the goal o poverty and hunger reduction as outlined in the Millennium Declaration.

rue national ownership has not been secured in many instances, and strategies have not

been tailored to the unique circumstances o the particular country. In some cases, coun-

tries have not exercised the reedom they do possess over policy-making, while in many

other instances, restrictive conditionalities on macroeconomic policies have limited the

scope or policy choice. As a result, the range o adopted policies aimed at poverty reduc-tion has been rather limited.

The global partnership

Te CDP recognizes that an eective global partnership should be the organizing prin-

ciple or development assistance or achieving the MDGs and other internationally agreed

goals. Fullling these goals requires increased space or policy choices through (a) a reduc-

tion and transormation in the policy conditionality associated with external nancial sup-

port, making it pro-growth and development, (b) assisting recipient countries to make the

most eective use o the policy choices they have, and (c) diversiying sources o nance.

Additionally, the trading system needs to be made more conducive to sustained growthand poverty reduction.


23/40


24/40


regard, poverty reduction strategies need to approach social expenditures as investments in

the improved productivity o the poor. Tus, there is also a need to establish and build the

necessary institutional links between social sector expenditures and productive activities.

Poverty reduction is not only about improving the incomes o the poor but also

about building human capabilities or sustained improvement in welare, human dignity and

empowerment. Long-term investment in institutional development should be an impor-

tant part o poverty-reducing strategies. Tis would include legislation or transparency, im-

proved conditions or all to exert their rights and duties as citizens, along with actions aimed

at empowering the poor through support or the ormation o associations and organizations

aimed at their increased participation in cultural and political lie. Finally, in view o the criti-

cal threat o global warming, policies geared towards poverty reduction should systematically

take this actor into account as well, in order to design eective and sustainable strategies.

Tis is a new area in which more research is needed to assist countries in designing appropri-

ate strategies, instruments, technologies and global partnerships (United Nations, 2007b).

Macroeconomic stability: the one and only priority?

The Independent Evaluation Oce (IEO) o the IMF has recently completed an evaluation o IMF

programmes in sub-Saharan Arica to address the criticisms raised with respect to the use o an

overly conservative position on macroeconomic stability that is blocking the use o available

aid to the region. Critics claim that such a narrow perspective has constrained the space o scal

policy to invest in programmes that would contribute to the reduction o poverty.

The evaluation, which covered IMF programmes in 29 sub-Saharan Arican coun-

tries during the period 1999-2005, lends support to the criticism raised. The evaluations em-

pirical analysis nds that country conditions, as proxied by the level o international reserves,

are the main determinants o whether and to what extent the Poverty Reduction and Growth

Facilities (PRGFs) permit the absorption o incremental aid (International Monetary Fund, Inde-

pendent Evaluation Oce, 2007, p. 7). Around 37 per cent o ODA to sub-Saharan Arica was,

on average, used to build up international reserves. In countries where the level o reserves was

below 2.5 months o imports, however, virtually all ODA was used to build up reserves.

Furthermore, the empirical analysis nds that country macroeconomic condi-

tions, as proxied by the ination rate, are the main determinant o whether and to what extent

PRGFs permit the spending o incremental aid (International Monetary Fund, Independent

Evaluation Oce, 2007, p. 9). Countries with sucient international reserves but annual ina-

tion rates above 5 per cent did not use their anticipated increase in aid to raise government

expenditures. In countries where ination was more than 5 per cent a year, only 15 per cent o

additional anticipated aid translated into net scal expansion, the remaining 85 per cent being

programmed to reduce domestic public debt. Countries with a high level o international re-

serves and an ination rate below 5 per cent were able to programme spending o as much as

79 per cent o anticipated aid. On average, countries with high levels o international reserves

in 1999-2005 were able to programme 28 per cent o anticipated aid into higher government

expenditures and keep the remaining 72 per cent or domestic public debt reduction.

Box 2:

Source: International Monetary

Fund, Independent

Evaluation Oce, 2007.


25/40


Financing developmentWhile a large part o the eorts to reduce poverty and meet internationally agreed goals lies

in domestic policies, complementary processes and mechanisms at the international level

are necessary to support developing countries in their eorts to meet such targets. Both

development assistance and private investment must increase i countries are to achieve

the internationally agreed development goals. For instance, the Economic Commission

or Arica (ECA) has indicated that Arican countries need to sustain economic growth o

at least 7 per cent to achieve the MDGs (ECA, 1999), the same growth target adopted by

the New Partnership or Aricas Development (NEPAD).While higher commodity prices

and increased international demand have contributed to a better growth perormance

by Arican countries in recent years, sustaining aster rates o growth will require sig-

nicant increases in domestic investment, based both on enhanced external nancing andstrengthened domestic resource mobilization, as envisaged in the Monterrey Consensus o

the International Conerence on Financing or Development.

Diversication o external nancing sources is likely to enhance a countrys

policy reedom. Such diversication is developing with the emergence o new aid donors,

such as Brazil, China, India, urkey and the Republic o Korea, as well as larger resource

inows rom regional development banks and private investment, and with the eective

use o remittances, all o which can provide substantial additional resources. Additionally,

new international partnerships among developed and developing countries and multi-

lateral organizations could be urther explored. Te Action against Hunger and Poverty,

initiated by Algeria, Brazil, Chile, France, Germany, South Arica, Spain and the United

Nations to identiy innovative mechanisms to acilitate the implementation o the MDGs,

is a case in point.8

Increased participation o developing countries in international trade could

also provide them with additional resources or nancing development. Nonetheless, the

rapid trade liberalization by developing countries has led to a signicant loss o scal reve-

nues, while existing supply constraints have prevented many o them rom beneting more

ully rom global trade. In this regard, the Aid or rade Initiative and the Enhanced Inte-

grated Framework or rade-Related echnical Assistance to LDCs (see box 3), i properly

unded and not imposing additional conditionalities, have an important role to play in as-

sisting low-income countries and LDCs in removing supply constraints and building their

export capacity. Te donor community should provide the necessary unding to start up

the process to assist recipient countries in beneting rom trade (United Nations, 2007c).

8 One o the groups proposals was the introduction o a solidarity levy on international airfights whose proceeds are used to nance an international drug purchase acility located

within the WHO. A total o 35 countries have committed their support to this pilot

project, while Chile and France have already introduced the new boarding tax earmarked

or this initiative.


26/40


The multilateral trading environmentand poverty reduction

Millennium Development Goal 8 recognizes the importance o achieving an open and air

multilateral trading system or eliminating poverty and achieving other MDGs. Te inter-

national community needs to ensure that negotiations o the Doha Round o the World

rade Organization (WO) are consistent with poverty reduction objectivesresulting

in a true development roundand that the international trading regime does not conict

with development objectives and development cooperation priorities. Reorms in several

trade areas are required to reduce the existing asymmetries in the rules o the system

(UNCAD, 2006).

Among the most signicant problems are the distortions in global agricultural

trade and production, owing to the act that developed countries maintain high tari and

The Aid or Trade Initiative and the Enhanced IntegratedFramework or Trade-Related Technical Assistance toLeast Developed Countries

Without additional resources to build their export sectors, many developing countries are not

in a position to benet rom international trade. During the United Nations 2005 World Sum-

mit, Governments around the world recognized the need to provide additional resources to

help poor countries strengthen their productive capacity, inrastructure, technology and skills

to build their export sectors.

Since the adoption o the Aid or Trade Initiative by the World Trade Organization

(WTO) in February 2006, Japan, the United States and the European Union, among others, have

committed resources or trade-related development. Six categories o trade-related develop-

ment priorities have been identied or consideration under the Initiative: (a) trade policy and

regulation, (b) trade development, (c) trade-related inrastructure, (d) building o productivecapacity, (e) trade-related adjustment, and () other trade-related needs.

The Aid or Trade Initiative may be an important instrument in extending the ben-

ets o trade to developing countries, provided that resources committed to this Initiative are

an addition to (rather than a substitute or) currently available ODA and other development

assistance. Its efectiveness will also depend on the successul completion o the Doha Round

o multilateral trade negotiations and the extent to which project development and implemen-

tation respects the principle o countr y ownership in order to give countries the policy space to

use the additional resources according to their own national priorities.

The Integrated Framework or Trade-Related Technical Assistance to LDCs (IF) has

been in existence since 1997 and was enhanced in July 2006. Among the new eatures o the

IF enhancement are: (a) additional unding amounting to $400 million or a period o 5 years;

(b) country ownership; and (c) the establishment o an independent IF executive secretariat,

administratively housed in WTO.

Box 3:

Source:United Nations, 2007c.


27/40


non-tari barriers on selected agricultural products. Average taris applied to clothing andtextiles have declined somewhat in recent years (see gure 4), but average taris mask the

problems o tari peaks and tari dispersion that still aect developing countries exports.

In addition, existing tari schedulesin both developing and developed countriestend

to penalize products containing higher value added, thus constraining the emergence o

those economic activities that oer aster growth potential.

At the same time, developed countries maintain high export subsidies and

domestic support or their own domestic producers (see gure 5). Agricultural subsidies in

developed countries lower arm income in developing countries and contribute to increas-

ing the incidence o poverty in several ways: (a) by reducing the prospects o developing

country producers gaining access to developed country markets; (b) by preventing devel-

oping country producers rom selling their products in third markets; and (c) by adversely

aecting developing country producers in their own domestic markets as they ace com-

petition rom subsidized imports rom developed countries. Cotton producers in many

countries in Arica, or example, have been unable to obtain their air share o the global

cotton market, largely because subsidies in developed countries enable their domestic pro-

ducers to sell cotton at lower prices. Te ability o cotton producers in Arica to increase

their incomes has thus been hindered. Te displacement o poultry armers in West Arica

and in the Caribbean by cheaper poultry imports rom Western Europe and the United

States is another case in point.

Figure 4.

Developed countries' average tariffs on imports ofkey products from developing countries, 1996-2005

Percentage

0

2

4

6

8

10

12

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Agricultural productsClothing

Textiles

Source: International Trade

Centre, UNCTAD and WTO.


28/40


At the Sixth Ministerial Conerence o the WO in Hong Kong Special Ad-

ministrative Region (SAR) o China in December 2005, Ministers agreed to eliminate

agricultural export subsidies by the end o 2013a positive and welcome development. It

is also important, however, that domestic agricultural support in developed countries be

eectively and signicantly reduced, with the adoption o a road map towards its elimina-

tion. In the past, WO agreements on agriculture had loopholes in that countries were

obliged to reduce certain types o subsidies, whilst there were no decisions on other cat-egories. In addition, the use o peak years as the benchmarks or the reduction o agricul-

tural support eectively limited the extent o commitments made by developed countries

during previous rounds o multilateral trade liberalization. A successul completion o the

Doha Round thus requires a real reduction or elimination o domestic support, without

any exceptions and with credible and eective benchmarks.

Te implementation o the trade-related aspects o intellectual property rights

(RIPS) rules o the WO as well as intellectual property rights provisions have also

adversely aected developing countries in some cases. Moreover, the provisions o intel-

lectual property rights in some bilateral agreements between developed and developing

countries go well beyond commitments agreed at the multilateral level, urther constrain-

ing the policy space o developing countries (United Nations, 2006). RIPS has implied

potentially higher prices and reduced access to some goods. Medicines are a case in point,presenting a source o signicant difculties or countries conronting acute health crises.

Although some exibility has been introduced with the adoption o the 2005 decision on

Figure 5.Agricultural support estimate for OECD countries as apercentage of their gross domestic product, 1993 and 2003

0

1

2

3

4

5

6

7

Australia

Canada

CzechRepublic

European

Uniona

Hungary

Iceland

Japan

Republic

ofKorea

Mexico

New

Zealand

Norway

Poland

Slovakiab

Switzerland

Turkey

UnitedStates

2003

1993

Source: United Nations

Statistics Division.

a Reers to EU-12 or 1993

and EU-15 or 2003. EU-12

comprises Belguim, Denmark,

France, Germany, Greece,

Ireland, Italy, Luxembourg,

Netherlands, Portugal, Spainand the United Kingdom o

Great Britain and Northern

Ireland. EU-15 comprises the

EU-12 plus Austria, Finland

and Sweden.b 1993 data is average

o1991-1993.


29/40


the amendment to the RIPS Agreement, the eligibility process remains complex.9

In ad-dition, RIPS does not provide enough protection to traditional knowledge and olklore,

thereby ailing to mitigate the increasingly recognized problem o bio-piracy, that is to

say, the misappropriation o legal rights over indigenous biological resources and the tra-

ditional knowledge associated with these resources in developing countries. Tus, reorms

need to be introduced into the current trade-related intellectual property rights regime to

correct these problems and render it more development riendly.

Developing new partnerships

Alongside reshaping international partnerships, within-country partnerships are also

important. Countries have a responsibility to build more eective internal partnerships

between Government and civil society, thereby strengthening the legitimacy o national

policy and empowering their dealings with international partners. Migrant workers rom

developing countries may also prove to be eective partners in the development process,

not only in terms o providing remittances, but also as a source o investment and tech-

nical and management expertise. In many cases, they also have established civil society

organizations that contribute to improving social and economic welare.

Another orm o new partnership that may need to be explored is that be-

tween Governments o developing countries and civil society groups in developed coun-

tries. Such a strategically orged partnership could come into play in a range o contexts,

such as monitoring the dumping o toxic wastes or locating more pollution-prone actories

in developing countries.

Recommendations

Progress has been made towards developing a global partnership in support o national

strategies or poverty reduction. PRSPs have made some contribution to improving aid

eectiveness by uniying donors in support o poverty eradication and by accelerating the

release o HIPC unds. At the same time, the process has shown limitations, especially in

two areas. First, it has not helped the recipients in strengthening national ownership in

the design and implementation o development strategies. Second, the conditionalities

associated with the process have restricted the range o policies designed to enhance pro-

9 As o August 2007, only one country (Rwanda) had notied WTO that it would be making

use o the decision, which allows countries without pharmaceutical manuacturingcapacity and acing public health problems to import cheaper generic drugs made under

compulsory licensing elsewhere.


30/40


poor and sustainable growth. Hence, urther improvements are needed i the global com-mitment to poverty reduction is to produce more tangible and sustained results. Areas in

which action is thereore recommended are outlined below.

Strategies or poverty reduction: modalities and policies

An improved ramework or international partnership or poverty reduction needs to be

developed, as the present one has not been eective in meeting Goal 1 o MDGs in poor

countries. In this regard, the international community needs to increase the space given to

national decision-makers in Government or designing and implementing development

programmes. At the same time, in order to promote truly national strategies, countries

should put orward their own proposals or policies and present them to the international

community. In designing these policies, countries may seek assistance, as needed, rom avariety o experts, including those in other developing countries.

It is also important that recipient and donor countries agree on strategic com-

mitmentswhich should be broadly denedwhile leaving ull control over the policy

instruments to the recipient. In this regard, exchanges o experiences among developing

countries in terms o lessons learnt and identication o eective practices and approaches

would be useul or improving the capacity o countries to engage development partners

more productively.

Developing countries should also consider the adoption o a package o poli-

cies or poverty reduction that could include, among other things, growth and employment

promotion, the acilitation o increased access to productive assets, and the extension o

basic services and inrastructure, with a ocus on improving the productivity and incomes

o the poor. Additionally, emphasis should be placed on promoting greater diversication

o a countrys productive structure away rom dependency on commodity production,

increasing the level o value-added processing and promoting dynamic linkages across

the various economic sectors. Te international community, in turn, needs to ensure that

domestic eorts are not undermined by a constraining international policy environment

or trade barriers.

Given its critical threat, policies towards poverty reduction should systemati-

cally take global warming into account. Tus, eorts are required to identiy and imple-

ment climate-riendly pro-poor policies. Tere is also a need to develop and nance adap-

tive policies in vulnerable low-income economies.


31/40


New partnerships and sources o nanceIt is recommended that countries seek a greater diversity o sources o nancial resourc-

es and develop partnerships with new donors, the private sector and NGOs. Innovative

sources o nancing could be developed through partnerships between developed and

developing countries. Also important is renewed international cooperation or combating

tax evasion and capital ight. Moreover, new partnerships with overseas residents could

also be orged to turn the brain drain into a gain through the use o remittances and

skills in a way that would increase investments and improve public services in the source

country. For example, the transer o remittances through ormal mechanisms such as the

banking system should be acilitated, thereby increasing the sources o capital available or

investment and working capital.

Additional eorts are needed to urther improve the eectiveness o aidthrough better alignment with country-driven strategies, enhanced coordination and,

above all, greater predictability o aid ows through multi-year commitments.

A air trading environment

As part o a global partnership or development, considerably stronger eorts must be

made by all concerned to reorm the rules and workings o the trading system and the

institutions whose policies have a bearing on trade. In particular:

In agriculture, there must be a rapid reduction and eventual elimination

o export subsidies and domestic support (with disciplines placed on all

orms o support that in reality distort production and trade in developed

countries).

Further trade liberalization needs to be planned in such a way that it does not

result in over-rapid or wrongly phased import liberalization which would

threaten the viability o local arms and rms and reduce employment.

Developed countries should do more to provide market access to de-

veloping countries in sectors and products that are o export interest or

comparative advantage to the latter.

Intellectual property rules at the WO, the World Intellectual Property

Organization (WIPO) and other agencies should be reviewed and im-

proved to make them more pro-development and, in particular, to ensure

exibilities that enable access to aordable medicines; to promote tech-

nology transer and upgrading in developing countries; and to discour-

age or prevent misappropriations o biological resources and associated

traditional knowledge.


32/40


Bilateral and regional trade agreements and economic partnership agree-

ments should be pro-development and enhance benets to developing

countries, whilst neither restricting their policy space nor eroding the

development exibilities available in the multilateral trading system.

Enhancing the role o the Economic and Social Council

Te Economic and Social Council can play a leading role in ostering the development o

nationally owned poverty-reduction strategies and in providing more policy space to that

end. In this regard, the Economic and Social Council could urther acilitate dialogue

among its Member States, and between them and the IMF and World Bank, on the best

ways o improving the existing PRSPs or poverty reduction strategies in general.

Te special high-level meetings that the Economic and Social Council con-

ducts annually with the international nancial and trade institutions, as well as its recently

established Development Cooperation Forum, should provide additional opportunity to

promote an exchange o ideas on how best to improve the existing international partner-

ship or poverty reduction. On these occasions, participants should also examine the pos-

sibilities o initiating alternative processes that strengthen national initiatives or building

and implementing eective poverty reduction strategies and enhance true ownership o

such strategies by recipient countries.

Te dialogue should include not only low-income countries but also mid-

dle-income countries, including those which have been successul in reducing poverty.

Trough this process, the Council would encourage the strengthening o recipient country

capacity to undertake its own poverty reduction policies. Furthermore, the DevelopmentCooperation Forum could closely monitor the ullment o the commitments endorsed

by the Paris Declaration on Aid Eectiveness as a means to improve the ramework or in-

ternational partnership, while leaving greater policy space or developing countries within

a ramework o mutual accountability.


33/40


Annex

Countries under the HIPC Initiative

Countries that have

reached completion point

Countries that have

reached decision point

Countries that have

reached pre-decision point

Benin Afghanistan Central African Republic

Bolivia Burundi Comoros

Burkina Faso Chad Cte dIvoire

Cameroon Congo Eritrea

Ethiopia Democratic Republic of the Congo Kyrgyzstan

Ghana Gambia Liberia

Guyana Guinea Nepal

Honduras Guinea-Bissau Somalia

Madagascar Haiti Sudan

Malawi Togo

Mali

Mauritania

Mozambique

Nicaragua

Niger

Rwanda

Sao Tome and Principe

Senegal

Sierra Leone

Uganda

United Republic of Tanzania

Zambia

Source: World Bank, available rom http://go.worldbank.org/KNZR2IIQG0 (accessed 10 September 2007).


34/40


Reerences Acharya, Arnab, Ana Fuzzo de Lima and Mick Moore (2004). Aid prolieration: how

responsible are the donors? IDS Working Paper, No. 214. January. Sussex,

England: Institute o Development Studies.

Ames, Brian, and others (2002). Macroeconomic issues. InA Sourcebook for Poverty Reduc-

tion Strategies, vol. 2, Jeni Klugman, ed. Washington, D.C.: World Bank. Also

available rom http://povlibrary.worldbank.org/les/3360_chap12.pd.

Center or Global Development (2007). Does the IMF constrain health spending in

poor countries? Evidence and an agenda or action.Report o the Working

Group on IMF Programs and Health Spending. Washington, D.C.: Center

or Global Development.

Chen, Shaohua, and Martin Ravallion (2007). Absolute poverty measures or the develop-

ing world, 19812004. World Bank Policy Research Working Paper, No.

4211. April. Available rom http://www-wds.worldbank.org/external/deault/

WDSContentServer/IW3P/IB/2007/04/16/000016406_20070416104010/

Rendered/PDF/wps4211.pd.

Economic Commission or Arica (1999). Economic Report on Africa 1999: Te Challenges

of Poverty Reduction and Sustainability. Sales No. E.99.II.K.4.

International Monetary Fund, Independent Evaluation Ofce (2007). Te IMF and aid

to Sub-Saharan Arica: evaluation report. Washington, D.C.: International

Monetary Fund. March.

Munwa, Mzwanele G. (2006). Strengthening internal accountability in the context o

programme-based approaches in sub-Saharan Arica. Discussion Paper, No.

4/2006. March. Bonn, Germany: German Development Institute.

OConnell, Stephen A., and Charles C. Soludo (2001). Aid intensity in Arica. World

Development, vol. 29, issue 9, pp. 1527-1552.

Organization or Economic Co-operation and Development (2007). 2006 Survey on

monitoring the Paris Declaration: Overview of the results. Paris: Organization

or Economic Co-operation and Development.

Stewart, Frances, and Michael Wang (2005). Poverty reduction strategy papers within

the human rights perspective. In Human Rights and Development: owards

Mutual Reinforcement, Philip Alston and Mary Robinson, eds. New York:

Oxord University Press.

United Nations (2005). Te Millennium Development Goals Report 2005. Sales No.

E.05.I.16. New York: United Nations.


35/40


_________ (2006). World Economic and Social Survey 2006: Diverging Growth andDevelopment. Sales No. E.06.II.C.1. New York: United Nations.

_________ (2007a). Te Millennium Development Goals Report 2007. Sales No. E.07.I.15.

New York: United Nations.

_________ (2007b). Te International Development Agenda and the Climate Change

Challenge. Committee or Development Policy. Policy Note. Sales No. E.07.

II.A.7. New York: United Nations.

_________ (2007c). World Economic Situation and Prospects 2007. Sales No. E.07.II.C.2.

New York: United Nations.

United Nations Conerence on rade and Development (2006). rade and Development

Report 2006: Global partnership and national policies for development. Sales No.

E.06.II.D.6.Vos, Rob, and Maritza Cabezas (2005). Illusions and disillusions with pro-poor growth:

Poverty reduction strategies in Bolivia, Honduras and Nicaragua. SIDA

Studies, No. 17. Stockholm: Swedish International Development Cooperation

Agency.

World Bank (2007). Global Monitoring Report 2007: Confronting the Challenges of Gender

Equality and Fragile States. Washington, D.C.: World Bank.

__________, International Development Association (2007). Aid architecture: an overview

o the main trends in ofcial development assistance ows. Washington, D.C.:

World Bank. February.

_________ and International Monetary Fund (2006). Heavily Indebted Poor Countries

(HIPC) Initiative and Multilateral Debt Relie InitiativeStatus oImplementation. August.

_________, Independent Evaluation Group (2006). Engaging with Fragile States: An

IEG Review of World Bank Support to Low-Income Countries Under Stress.

Washington, D.C.: World Bank.

__________ and International Monetary Fund (2005). 2005 review o the poverty

reduction strategy approach: balancing accountabilities and scaling up results.

Available rom http://siteresources.worldbank.org/INPRS1/Resources/

PRSP-Review/2005_Review_Final.pd.


36/40


37/40


38/40

Litho in United Nations, New York United Nations publication07-48854October 20072,655 Sales No. E.07.II.A.8ISBN 978-92-1-104573-4 Copyright United Nations, 2007


39/40


40/40

Documents

Partnership for Poverty Reduction