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It’s governance, stupid!

04-05-2012

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While “good governance” has been on donors’ agendas for some time now, development practitioners realise more and more that all reforms require an understanding of governance contexts. As a result, they increasingly consider governance as a cross-cutting element of all development policy with a subsequent rising interest and demand in political economy analyses. In this context – and with its mandate expiring in December this year –  the OECD-DAC’s Governance Network (GOVNET) , a donor platform, met last week to discuss a “new focus and strategy” with ECDPM in attendance as an observer.

Participants discussed a wide range of issues, not least the need to put some of the language on “development partnership” into practice by widening the scope of the GOVNET group, and potentially teaming up with other international networks such as the Building Block on Effective Institutions and Policies. Overall, there were two main points of note from the day and a half of discussions:

Finding room for maneuver

The first rests on having a better understanding of public sector procedures and systems for policy reform. While the number of available political economy analyses and tools continues to rise (and another political economy analysis framework for looking at international drivers of corruption was presented to the group), donor representatives once again called for help in operationalizing these. One participant asked “apart from helping with risk management, we need to know what to do with them”.

But the reality of political economy analyses is that while they are very useful for understanding why things have gone wrong in the past, and can guide you as to why things are as they are at present, they do not necessarily give policy prescriptions for the future (and for future donor support). Indeed, in some cases, the conclusion from a political economy analysis may be that there is no useful role for external support, and that it might contribute to the problem more than resolve it.

Nonetheless, there was also a lot of discussion in the meeting around public sector management and the need to use country systems in delivering aid, particularly following a presentation on the topic by Nick Manning from the World Bank (see the World Bank public sector management strategy).  This perhaps represents an opportunity for applying political economy analysis with more concrete policy outcomes. If we can fully understand each of the stages of a policy formulation and implementation process, and if we can identify the relevant actors, interests and incentives at play at each of them, it may then be possible to identify the “room for maneuver” — and therefore a role for external assistance. These insights about the possible roles for donors within narrower areas of the policy process might then be usefully linked to efforts to improve indicators on the quality of public sector management, providing clearer insights into the dynamics at play and potential impacts of donor support. Indeed, without such a focused approach on the factors influencing each of the policy process stages, a political economy analysis risks being an interesting contextual overview and little more.

What about private sector and governance?

A second point from the meeting, notable by its absence, was discussion of the governance implications of increasing the role of the private sector in development. This is surprising given the prominence this area gets in the Busan High Level Forum on Aid Effectiveness’ outcome document, in the European Commissions’ new development policy document “Agenda for Change”, as well as in other donor strategies. Whether it is private sector finance, foreign investment or promoting the local private sector in developing countries (all three of which are mentioned in the EC’s Agenda for Change), there is a host of issues relating to politics, power and accountability that must be understood by donors and recipients alike to minimise and avoid undesirable outcomes. How a firm engages in a developing country has important implications for local incentives through (i) its ownership structure and particularly any local participation by private, state or political interests, (ii) its level of engagement with the public sector notably through taxation, (iii) its degree of reliance on the local population as employees, (iv) its need for local services and infrastructures, and (v) its degree of mobility. As an example, an investment in the extractive sector clearly creates different incentives and has different features than investment in a manufacturing plant serving local markets.

Overall, the GOVNET meeting finished with the consideration that it will need to focus or perish as a network. A focus on understanding the politics of government systems and the mechanisms through which the private sector impacts on governance might help maintain relevance and ensure that indeed governance is stays a fundamental part of the on-going international development policy dialogue.


This blog post features the author’s personal views and does not represent the view of ECDPM.

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Cross-cutting TopicsEconomic Transformation and TradeBusiness and DevelopmentAgenda for Change