asian approach to prsp
TRANSCRIPT
Asian Approach to PRSP: Diversity for
Strategic Alternatives, Institutions and Aid
Modalities (Feb2003)
1
Asian Approach to PRSPDiversity for Strategic Alternatives,
Institutions and Aid Modalities
February 17, 2003
Izumi Ohno
&ational Graduate Institute for Policy Studies
(GRIPS Development Forum)
Poverty Reduction Strategy Paper
(PRSP)
• PRSP: Introduced by WB/IMF in late 1999.
• Centerpiece of global poverty reduction
partnership
– Country-owned development strategy (with
participatory approach, result-orientation).
– Regarded as tool for achieving MDGs.
– Conditional on eligibility to IMF/IDA
concessional finance.
– Aid coordination tool for donors.
Asian Approach to PRSP: Diversity for
Strategic Alternatives, Institutions and Aid
Modalities (Feb2003)
2
PRSP Status
• Early experiences: concentrated in Africa and Latin America.
• Asia: Vietnam is the first country with Full-PRSP under implementation (completed May 2002).
• Recently, Cambodia (Full-PRSP completed January 2003), and Indonesia, Laos, Mongolia, Nepal, Pakistan, and Central Asian countries are following.
• China and India, PRSP not applied.
PRSP Status
Source: IMF/World Bank [2002], Poverty Reduction Strategy Papers(PRSP)-Progress in Implementation,
DC2002-0016,
World Bank[2003], “Completed PRSPs and I-PRSPs,”
http://www.worldbank.org/poverty/strategies/boardlist.pdf.
4
1
2
1
13
1
7
1
3
15
2
2
3
2
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Latin America & Caribbean (6)
Middle East & &orth Africa (2)
Europe & Central Asia (11)
South Asia (4)
East Asia (6)
Africa (35)
Full-PRSP
Interim-PRSP
before Interim-PRSP
Countries under PRSP Process
(as of February 2003)
Asian Approach to PRSP: Diversity for
Strategic Alternatives, Institutions and Aid
Modalities (Feb2003)
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Lessons from Early Experiences
Views of Japanese development professionals
• Strategic contents: narrow focus on direct pro-
poor measures--in favor of social sectors.
• Institutional aspects: limited consideration to the
relationship with the existing planning system
• Choice of aid modality: uniform aid
harmonization--in favor of non-project aid (e.g.,
SWAp, common basket fund, budget support), in
parallel with PRSP.
Question
Can and should we apply “universally”
the above early practices to all
developing countries (i.e., IDA-eligible
countries)?
⇒In Africa: ? (we need to discuss…)
⇒In Asia: definitely no!
Asian Approach to PRSP: Diversity for
Strategic Alternatives, Institutions and Aid
Modalities (Feb2003)
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Today’s Outline
1. Diversity in Asia
2. PRSP: Key Issues
(1) Strategic Alternatives
(2) Institutional Application
(3) Aid Harmonization
3. Vietnam’s PRSP Experience (example)
4. “Best Mix” Approach
1. Diversity in Asia
• HIPC Status
• Aid dependency
• Donor composition
• Grants vs. loans
• Causes of poverty
• Relationship with the existing national
development plans
• Institutional capacity, etc.
Asian Approach to PRSP: Diversity for
Strategic Alternatives, Institutions and Aid
Modalities (Feb2003)
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Burkina Faso
Ghana
Mauritania
Mozambique
Uganda BoliviaHonduras
Mongolia
Nepal
Kenya
Tanzania
Zambia
Nicaragua
Bangladesh
Cambodia
Indonesia
Laos
Pakistan
Sri Lanka
Vietnam
0
5
10
15
20
25
30
0 20 40 60 80 100 120 140
ODA/GDP
%
Aid Dependency
(US$ per capita and % of GDP, 1998)
Donor CompositionVietnam: Major Donors
1998-2000 Average
IDA
13.5%
ADB
12.0%
Germany
3.6%Japan
46.3%
Denmark
2.8%
France
4.6%
Others
17.2%
Note: 1) Net base
2) In the case of Cambodia, the total does not include non-DAC bilateral aid.
Source: OECD[2002], Geographical Distribution of Financial Flows to Aid Recipients 1996-
2000, except for Cambodia, which is based on MOFA[2001], ODA Country Data Book.
Cambodia: Major Donors
Year 1999
Australia
6.0%
Japan
18.3%
EU 9.9%
IDA 9.6%
ADB
9.4%France
7.9%
Germany
7.7%
Others
31.2%
Asian Approach to PRSP: Diversity for
Strategic Alternatives, Institutions and Aid
Modalities (Feb2003)
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Donor Composition
Uganda: Major Donors
1998-2000 AverageUK
20.3%
IDA
14.1%
Denmark
9.2%EU
7.4%
USA
6.9%
Nether
land
5.0%
Others
38.0%
Tanzania: Major Donors
1998-2000 Average
UK
13.2%
Japan
12.4%
Denmark
7.2%
Germany
7.0%
Others
41.0%
IDA
12.2%
Nether
land
8.0%
ODA Composition:
Grants vs. Loans
0% 20% 40% 60% 80% 100%
Tanzania
Uganda
Bolivia
Vietnam
Grants
Loans
Asian Approach to PRSP: Diversity for
Strategic Alternatives, Institutions and Aid
Modalities (Feb2003)
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Child Mortality Rate (2000)(under five-mortality rate per 1000 live births)
Vietnam(34)
0
20
40
60
80
100
120
140
160
Botswana
South Africa
Turkey
Brazil
Mexico
Venezuela
Argentina
Mauritius
Chile
Hungary
Malaysia
Namibia
Bolivia
Morocco
Turkmenistan
Peru
Philippines
China
Thailand
Jordan
Sri Lanka
Cuba
Uganda
Tanzania
Senegal
Myanmar
Cambodia
Pakistan
Nepal
Yemen, Rep
India
Bangladesh
Indonesia
Nicaragua
Kyrgyz Rep
Vietnam
Uzbekistan
Azerbaijan
Upper-Middle
Lower-Middle
Low
Source: World Bank, World Development Indicators 2002 .
Average of Upper-Mid
Income Countries
Average of Lower-Mid
Income Countries
Average of Low
Income Countries
35
41
115
Adult Illiteracy Rate (2000)
Vietnam
(7)
0
10
20
30
40
50
60
70
Botswana
Mauritius
Brazil
Turkey
South Africa
Malaysia
Mexico
Venezuela
Chile
Argentina
Hungary
Morocco
Namibia
China
Albania
Bolivia
Jordan
Peru
Sri Lanka
Philippines
Thailand
Cuba
Senegal
Bangladesh
Nepal
Pakistan
Yemen, Rep
Lao PDR
India
Nicaragua
Uganda
Cambodia
Tanzania
Myanmar
Indonesia
Vietnam
Uzbekistan
(% ages 15 and over)
Upper-Middle
Lower-Middle
Low
Average of Upper-Mid
Income Countries
Average of Lower-Mid
Income Countries
Average of Low
Income Countries
Source: World Bank, World Development Indicators 2002 .
10
15
38
Asian Approach to PRSP: Diversity for
Strategic Alternatives, Institutions and Aid
Modalities (Feb2003)
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2-(1) PRSP: Strategic Contents
• Causes of poverty matter--for strategic
alternatives and priority actions.
• Need for correct matching between
diagnosis and prescription in each
country
– How poverty is created?
– How can growth reduce poverty?
[Ishikawa 2002]
Causes of Poverty
• Case 1: a poor country equipped with policies & programs to promote social equity and social service delivery system
– A good growth strategy is needed to improve the purchasing power of the general population.
– Example: Vietnam
Asian Approach to PRSP: Diversity for
Strategic Alternatives, Institutions and Aid
Modalities (Feb2003)
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Causes of Poverty (contd.)
• Case 2: a poor country constrained with uneven opportunities due to social discrimination (e.g., gender, racial and ethnic discrimination)
– Formulation and implementation of efficient & effective pro-poor targeting measures are needed—in addition to a growth strategy.
More Recently, Emerging
Recognition
• Growth is needed for sustained poverty reduction.
• Now, attention turns to:
– Ensuring “pro-poor growth”
– Sources of growth
– Contents of growth strategy
⇒ e.g., IDA・IMF Joint Review (at Annual Meetings, Sept. 2002)
Asian Approach to PRSP: Diversity for
Strategic Alternatives, Institutions and Aid
Modalities (Feb2003)
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IDA/IMF Joint Review
Early PRSPs often contained overly optimistic
macroeconomic assumptions that were not
supported by analysis of the likely sources of
growth and the policies required to achieve such
growth.
Moreover, much remains to be done to improve
understanding of the policies that support pro-
poor growth.
-- From IDA/IMF, PRSP Papers: Progress in Implementation
(Sept.11, 2002),p.17.
Pro-Poor Growth
• Definition?, Desirability?
– The poor benefit disproportionately
from economic growth (Klasen, 2002).
• Channels and linkages
–Many ways to cut poverty, directly and
indirect. Strategy should be geared to
each country.
Asian Approach to PRSP: Diversity for
Strategic Alternatives, Institutions and Aid
Modalities (Feb2003)
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Pro-Poor Growth:
Alternative Views
Two-tier approach
1. Primary: create source of growth
2. Supplementary but very important: deal with
problems caused by growth—income gap,
regional imbalance, environment, congestion,
drug, crime, social change, etc.
Prof. S. Ishikawa (2000):
“Pro-poor targeting” vs. “broad-based growth”
promotion measures
Pro-Poor Growth:
Three Channels
(1) Direct channel (impacting the poor directly)
(2) Market channel (growth helps the poor via economic linkages)
(3) Policy channel (supplementing the market channel)
⇒So far, disproportionate attention on the direct channel
– The question of sustainability and the risk of permanent aid dependency.
– The need to broaden the scope!!
Asian Approach to PRSP: Diversity for
Strategic Alternatives, Institutions and Aid
Modalities (Feb2003)
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Economic Growth and Poverty
Reduction
Initial ConditionsInitial ConditionsInitial ConditionsInitial Conditions•Factor endowment (human, physical, natural), economic & institutFactor endowment (human, physical, natural), economic & institutFactor endowment (human, physical, natural), economic & institutFactor endowment (human, physical, natural), economic & institutional framework & ional framework & ional framework & ional framework & conditions (macro stability, governance, international trade envconditions (macro stability, governance, international trade envconditions (macro stability, governance, international trade envconditions (macro stability, governance, international trade environmentironmentironmentironment)))), agricultural , agricultural , agricultural , agricultural productivity etc.productivity etc.productivity etc.productivity etc.•Social structure, inequality (gender, land ownership, ethnic minSocial structure, inequality (gender, land ownership, ethnic minSocial structure, inequality (gender, land ownership, ethnic minSocial structure, inequality (gender, land ownership, ethnic minorities) etc.orities) etc.orities) etc.orities) etc.
Economic GrowthEconomic GrowthEconomic GrowthEconomic Growth①①①①Narrow: health, education, gender, rural Narrow: health, education, gender, rural Narrow: health, education, gender, rural Narrow: health, education, gender, rural jobs & developmentjobs & developmentjobs & developmentjobs & development②②②②Broad: InterBroad: InterBroad: InterBroad: Inter----sectoralsectoralsectoralsectoral & Inter& Inter& Inter& Inter----regional regional regional regional labor migration, increasing demand, labor migration, increasing demand, labor migration, increasing demand, labor migration, increasing demand, reinvestmentreinvestmentreinvestmentreinvestment
①①①① Direct: proDirect: proDirect: proDirect: pro----poorpoorpoorpoortargetingtargetingtargetingtargeting
②②②② Indirect: throughIndirect: throughIndirect: throughIndirect: througheconomic linkages,economic linkages,economic linkages,economic linkages,labor mobility, marketlabor mobility, marketlabor mobility, marketlabor mobility, marketchannels)channels)channels)channels)③③③③Policy: social safety net,Policy: social safety net,Policy: social safety net,Policy: social safety net,
fiscal transfer, publicfiscal transfer, publicfiscal transfer, publicfiscal transfer, publicinvestment, microinvestment, microinvestment, microinvestment, micro----credit,credit,credit,credit,proper design of trade &proper design of trade &proper design of trade &proper design of trade &investment policies, proinvestment policies, proinvestment policies, proinvestment policies, pro----poor legal framework etc.poor legal framework etc.poor legal framework etc.poor legal framework etc.
③③③③ Indirect: throughIndirect: throughIndirect: throughIndirect: throughredistribution policy/redistribution policy/redistribution policy/redistribution policy/measuresmeasuresmeasuresmeasures
Poverty ReductionPoverty ReductionPoverty ReductionPoverty Reduction
2-(2) PRSP: Institutional Application
• Relationship with the existing national development plans
• How is PRSP—imported from without—treated domestically?
• 2 prototypes:
– PRSP as a supplementary document
– PRSP as a primary document
Asian Approach to PRSP: Diversity for
Strategic Alternatives, Institutions and Aid
Modalities (Feb2003)
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PRSP as a Supplementary
Document
• Existing national development plans guide budget, sector plans and PRSP.
• PRSP supplement, with special attention
to poverty reduction
– Cross-cutting perspective
– Participatory process
– Result-orientation, etc.
• Example: Vietnam
PRSP as a Supplementary
Document
Existing dev. plan
PRSP Sector plans
Budget
govern
supplement
Asian Approach to PRSP: Diversity for
Strategic Alternatives, Institutions and Aid
Modalities (Feb2003)
14
PRSP as a Primary Document
• PRSP co-exists with the national
development plans
• Newly introduced PRSP exerts a
stronger influence over budget and
sector plans.
• Examples: Tanzania, Uganda
PRSP as a Primary Document
Existing dev. plan
PRSP
Sector plans,budget, MTEF,aid procedures
symbolic
govern
Asian Approach to PRSP: Diversity for
Strategic Alternatives, Institutions and Aid
Modalities (Feb2003)
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Institutional Options
based on the Existing System
• PRSP-supplementary: donors should respect and support the existing policy framework (rather than replacing it with PRSP).
• PRSP-primary: donors can utilize PRSP & related systems and support local capacity building around PRSP.
⇒In Asia, historically, many countries have medium-and long-term development plans.
2-(3) PRSP: Aid Harmonization
• Background
– Increased concern about value for money, & capacity building for recipient countries.
• Argument: To improve development effectiveness,
– Donors should reduce “transaction costs”(T/C), arising from proliferation of different aid practices.
– Donors should harmonize their aid practices.
Asian Approach to PRSP: Diversity for
Strategic Alternatives, Institutions and Aid
Modalities (Feb2003)
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Aid Harmonization (contd.)
• Pros:
– Coordinated activities under common strategic framework (⇒policy consistency)
– On-budgeting of aid money (⇒transparency)
– Simplification of donor practices (e.g., reporting formats, joint missions)
• Cons:
– Uniform application of a particular aid modality (i.e., non-project aid) ?
– Different comparative advantages among aid modalities—in light of aid effectiveness?
Burden of Transaction Costs
High
Transaction
Costs((((T/C))))
Low
But, non-project aid works--only where recipient countries
have certain level of institutional capacity (WB 98, Harrold 95)
• Aid
dependency
(+)
• Donor/project
number (+)
• Institutional
capacity(-)
• &on-project
aid (-)
→→→→Sustainabledevelopment,
to reduce aid
dependency
→→→→Strategic coordination
→→→→Capacitybuilding
Asian Approach to PRSP: Diversity for
Strategic Alternatives, Institutions and Aid
Modalities (Feb2003)
17
Issues (#1): Dilemma
So, how should (and can) we do for the
countries with high aid dependency,
donor proliferation, and weak
institutional capacity?
⇒ Realistic approach: Greater focus on development
effectiveness
⇒ Basics: Sustainable development to reduce aid
dependency!
⇒ Strategic coordination and capacity building.
Issues (#2): Emerging Consensus(Recent Regional Workshops)
• Harmonization is not an end in itself--a means to achieve greater aid effectiveness.
– Not synonymous with “unification”.
– T/C reduction is only one factor affecting effectiveness.
– Other key factors: sound policies & institutions (WB 98)
• The local context is important.
– Sector conditions, type of interventions (which depends on strategic priority), aid menu by donors (loan-giving, grant-giving, size etc.)
Asian Approach to PRSP: Diversity for
Strategic Alternatives, Institutions and Aid
Modalities (Feb2003)
18
Comparative Advantages (?)
Skill
transfer
Physical
infrastructure
Pilot innovation
Policy reformType of
actions
N.A.Investment-exp.
intensive
Recurrent-exp.
intensive
Sector
conditions
TAProject aid&on-project
aid
The above classification should be interpreted in relative terms.
The cited items are not mutually exclusive.
3. Vietnam’s PRSP Experience
• Strong country ownership
• Strategic contents
– PRSP renamed by GoV to “Comprehensive Poverty Reduction &Growth (CPRGS) Strategy,” embracing, growth-oriented national vision.
– More recently, agreed to expand CPRGS to include large-scale infrastructure as a key pillar of poverty reduction (CG, Dec. 2002)
Asian Approach to PRSP: Diversity for
Strategic Alternatives, Institutions and Aid
Modalities (Feb2003)
19
Vietnam (contd.)
• Institutional aspects:
– PRSP as a supplementary document:
Highest national documents are Five-
Year Plan and Ten-Year Strategy.
– National goal: “Industrialization and
Modernization” by 2020; doubling of
income by 2010 (East Asian aspiration
for catch-up)
Vietnam (contd.)
• Aid harmonization: progress on diverse fronts
– Loan-giving donors: 3 Banks (JBIC, WB, ADB)
– Grant-giving donors, particularly Like-minded Donor Group (UK, Nordic donors)
– JICA : study on T/C underway to identify specific bottlenecks
Asian Approach to PRSP: Diversity for
Strategic Alternatives, Institutions and Aid
Modalities (Feb2003)
20
Vietnam (contd.)
• Aid harmonization, applied in the local context:
– Sector: transport (30%), power (30 %), health & education (15%)…
– GoV wants to receive both project and non-project aid.
– SWAp means a common strategic framework (not linked with non-project aid).
4. Implications:“Best Mix” Approach
Country-tailored approach: Agree on general principles, but apply them locally!!
Best mix for what?
1. Strategic alternatives: pro-poor targeting & broad-based growth promotion
2. Institutional application: relationship with the existing system, institutional capacity
3. Choice of aid modality: non-project aid & project-aid, TA ⇒ depending on strategic contents & institutions.
Asian Approach to PRSP: Diversity for
Strategic Alternatives, Institutions and Aid
Modalities (Feb2003)
21
How Best Mix Approach Works?
Existing systems
Institutions
Newly-introduced
systems
AidIdeas & Money
Broad-based growth
promotion
Strategies
Pro-poor
targeting
Development
EffectivenessResults on
the ground !!
&on-projects
Projects, TA etc.
through
Thank You Very Much!
GRIPS Development Forum:
http//www.grips.ac.jp/forum-e/
http//www.gripc.ac.jp/forum/