DEVELOPING POVERTY REDUCTION STRATEGIES IN LOW...

DEVELOPING POVERTY REDUCTION STRATEGIES IN LOW-INCOME COUNTRIES UNDER STRESS (LICUS)

FINAL REPORT

Nigel Thornton & Marcus Cox

6 January 2005

Agulhas Development Consultants Ltd. 137 Offord Road, Islington,

London, N1 1LRUnited Kingdom

www.agulhas.co.uk

AgulhasApplied Knowledge

AgulhasApplied Knowledge

EXECUTIVE SUMMARY

This study is a rapid assessment of the experience so far of conducting Poverty Reduction Strategies (PRSs) in Low-Income Countries Under Stress (LICUS). LICUS are countries with chronically weak or unstable institutions, and include many of the world’s most difficult contexts for development assistance. The PRS approach remains relatively untested in this environment: of the 34 LICUS in 2004, 8 have an IPRSP, and 7 have approved PRSPs. Our conclusion is that PRS principles and practices are directly applicable to LICUS, and should be introduced as soon as feasible. The undertaking is of course more difficult in a LICUS, and the results more modest and harder to sustain. Nonetheless, the PRS is the right tool for addressing the deep-seated problems with domestic institutions and policy processes found in LICUS, and for structuring the donor-government relationship into a more effective development partnership. Without progress in these areas, there is little prospect of lasting poverty reduction in LICUS. Nonetheless, given the starting point, the Development Partners (DPs) need to be realistic about the challenges and flexible in how they go about meeting them. The focus should be on the progressive introduction of PRS practices into government and donor behaviour, as and when country conditions allow. This will occur at a slower rate than in non-LICUS contexts, and therefore needs to be sustained over a longer period of time. In countries where the government is unwilling to embark on a PRSP, or where domestic institutions are too unstable, PRS practices can be introduced gradually through Transitional Results Matrices (to support political transitions and post-conflict reconstruction) or through individual, ‘zero-generation’ reforms (for the most difficult political environments). However, preparing a PRSP should remain the preferred option, wherever there is a government willing and able to lead the process. There need be no other institutional prerequisites, as the PRS approach itself is the best means of developing the required institutional capacity. So far, achievements during the first PRS cycle have been modest. In the cases examined for this study, the PRSPs are not well costed or prioritised, are not linked to the budget, and lack operational detail. They have brought certain immediate benefits, such as improving the policy dialogue between the government and DPs, and initiating early moves towards better coordination among DPs. However, the process has had a marked tendency to stall following approval of the strategy, and the record on implementation is very limited. DPs should therefore not place excessive expectations on the first PRSP. At present, formal conditionality on debt relief and International Development Association (IDA) assistance tends to focus all attention on the completion of the document. However, in the LICUS context, completing a first PRSP is only the first step in what must be a longer process. The PRS approach needs to be robust enough to sustain a process of change beyond approval of the first strategy. The study outlines a number of lessons for how to achieve this.

• Ownership of the process needs to be built up gradually over time. LICUS governments typically initiate a PRS in order to access debt relief or IDA assistance, and the process begins as a limited and rather artificial exercise. The PRS will compete for political space with other agendas and policy priorities. The challenge is to mainstream the PRS approach into government practices. Lessons emerging from the case studies include:

• devote staff time to building relationships and communicating the benefits

and principles of the PRS to government officials in person; • be sensitive to national political processes, allowing time for a consensus to

emerge around the PRS; avoid excessive use of external deadlines and foreign consultants;

• however, remain closely engaged with the process to keep it moving forward; • work with existing national planning processes as far as possible.

• Participatory processes need to be sustained beyond the completion of the

strategy. While some form of participation has been possible even in closed political environments, it has tended to be a once-off exercise with little lasting impact on the policy process. LICUS governments should be encouraged to develop permanent structures for dialogue with social partners.

• PRSs in LICUS should focus more on governance reforms and the

institutional requirements for poverty reduction. At present, the governance sections of PRSPs are poorly focused, and have not helped DPs to provide more effective capacity-building assistance. LICUS governments should be encouraged to identify a few, key governance reforms required to kick-start PRS implementation, and base their monitoring and reporting in the first PRSP cycle around institutional change. The DPs should encourage LICUS governments to be more proactive in identifying their own technical assistance needs.

• Despite the difficult environment, the DPs should press forward with

harmonisation and alignment around the PRS. DP involvement in LICUS tends to be unpredictable and poorly coordinated, and without strong, national counterparts may fall short of international best practice. A PRSP offers a key opportunity to improve DP practices. For this to occur, DPs need to take the initiative to align their assistance around the PRSP. Greater use of pooled funding would facilitate this.

A key implication for the DPs is that they need to allocate enough staff resources in-country to supporting the PRS process. They need to be closely engaged with the process, and sustain their involvement beyond the completion of the strategy. This cannot be done from a distance. Contrary to the present tendency of the DPs to reduce their local presence as harmonisation and alignment improve, the commencement of a PRS in a LICUS should be a trigger for a more intensive engagement by the DPs. This might require new compacts at headquarters level in order to coordinate involvement and share the burden.

LIST OF ACRONYMS

CAS Country Assistance Strategy CIS Commonwealth of Independent States CPIA Country Policy and Institutional Assessment CSO civil society organisation DFID United Kingdom’s Department for International Development DPs Development Partners HIPC Highly Indebted Poor Country IDA International Development Association IFI International Financial Institution IMF International Monetary Fund IPRSP Interim Poverty Reduction Strategy Paper LICUS Low-Income Country Under Stress MDGs Millennium Development Goals MTEF Medium-Term Expenditure Framework NGO non-government organisation OED World Bank’s Operations Evaluation Department PEM public-expenditure management PPA participatory poverty assessment PRGF Poverty Reduction and Growth Facility PRS Poverty Reduction Strategy PRSC Poverty Reduction Support Credit PRSP Poverty Reduction Strategy Paper TRM Transitional Results Matrix TSS Transitional Support Strategy WB World Bank

TABLE OF CONTENTS I. INTRODUCTION.........................................................................................................................1 II. METHODOLOGY...................................................................................................................2 III. PROGRESS TO DATE ...........................................................................................................2 IV. SYNTHESIS OF FINDINGS ..................................................................................................4

A. The relevance of the PRS approach in LICUS ......................................................................4 1. Why attempt a PRS in a LICUS?...........................................................................................4 2. Progressive introduction of PRS practices............................................................................6 3. Different instruments for introducing PRS practices ............................................................8

B. Lessons for conducting a PRS in LICUS................................................................................9 1. Building ownership................................................................................................................9 2. Participation in a difficult environment ..............................................................................10 3. Promoting institutional change ...........................................................................................11 4. Real alignment around the PRS...........................................................................................13

C. Conclusions for the Development Partners..........................................................................14

ANNEX A PRS IN LICUS: PROGRESS & STATUS..................................................................17 ANNEX B SUMMARY OF THE LITERATURE REVIEW ......................................................24

A. Organisation of a PRS initiative............................................................................................24 B. Adequacy of the information base ........................................................................................24 C. Participatory processes ..........................................................................................................24 D. Prioritisation and resource mobilisation ..............................................................................26 E. Capacity building ...................................................................................................................26 F. Donor alignment and harmonisation....................................................................................26 G. Political issues and factors of conflict ...................................................................................27 H. Bibliography of sources .........................................................................................................27

ANNEX C CASE STUDIES ...........................................................................................................30 I. Lao PDR..................................................................................................................................30 II. Yemen......................................................................................................................................41 III. Eritrea .....................................................................................................................................54 IV. Liberia .....................................................................................................................................63 V. Timor Leste.............................................................................................................................70 VI. Sudan.......................................................................................................................................75

I. INTRODUCTION The Poverty Reduction Strategy (PRS) approach has proved its value in developing countries with more effective administrations and a clear government commitment to poverty reduction. It remains relatively untested in the most difficult environments, where political life is unruly, institutional capacity low and political incentives not always aligned with poverty reduction. This study is a rapid assessment of the experience to date of conducting PRSs in Low-Income Countries Under Stress (LICUS). LICUS is a designation given by the World Bank on an annual basis to the countries that rank lowest in their Country Policy and Institutional Assessment (CPIA) scores. The ranking is based upon 20 criteria grouped into four clusters: economic management; structural policies; policies for social inclusion and equity; and public-sector management and institutions.1 At present, 34 countries are designated as LICUS. While LICUS by definition have very weak governance capacity, the underlying reasons may vary considerably in different cases. The World Bank’s LICUS Taskforce identified a number of different conditions which may lead to a LICUS designation, including armed conflict, internal repression, heavily patronage-based political systems, international sanctions, major political transitions, and chronically weak or unstable institutions.2 Developing and implementing an effective Poverty Reduction Strategy Paper (PRSP) in the LICUS environment is very difficult. This has led practitioners to ask – are there are political or institutional conditions that need to be satisfied before it is appropriate to undertake a PRSP? Or is beginning a PRSP, even in a difficult environment, the best approach to building those capacities? Should there be a simpler form of PRS for LICUS? What strategies and techniques have emerged for dealing with the many challenges posed by LICUS? This study assesses whether answers to these questions emerge from the existing body of experience. It concludes that PRS principles and practices are as relevant to LICUS as they are to other developing countries. Without the PRS approach to discipline both government and donor behaviour, development assistance in LICUS is unlikely to achieve sustained poverty reduction. However, given the difficult starting position, some flexibility is needed as to how to introduce PRS practices into LICUS. In countries which are unwilling or unable to attempt a full PRSP, PRS practices can be gradually introduced in other ways – for example, via post-conflict assistance programmes or through ‘zero-generation’ reforms. Where a LICUS government is willing to embark on a PRSP, it is likely that the concrete results from the first cycle will be very modest, and the donors need to find ways to sustain a process of change beyond the completion of the document. 1 IDA, “Allocating IDA Funds Based on Performance: Fourth Annual Report on ISA’s

Country Assessment and Allocation Process”, March 2003. Territories without CPIA scores, such as Kosovo, may also be designated LICUS.

2 World Bank, “World Bank Group Work in Low-Income Countries Under Stress: A Task Force Report”, September 2002.

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II. METHODOLOGY This study was prepared for the LICUS Team in the World Bank, with financial support from the United Kingdom’s Department for International Development (DFID). It was commissioned in order to feed into the January 2005 Senior Level Forum on Development Effectiveness in Fragile States and wider current debates. It consisted of two phases. The first was a literature review, desk appraisal and interviews with a range of World Bank and DFID staff. A Phase I report was published in August 2004 (the main points from the literature review are summarised in Annex B). The second phase involved a series of six case studies of individual LICUS selected by the World Bank and DFID. Short, country visits were conducted for three cases: Lao PDR, Yemen3 and Eritrea, and brief desk studies were carried out for Liberia, Sudan and Timor Leste. Only the first group of three have direct experience of a PRS. The focus of the case studies is not the content of the PRS, but the processes and institutional developments which accompanied it. The cases studies are prepared with a view to showing some of the institutional dynamics at work in LICUS, and focus on the following areas:

i) context; ii) relations with the donor community; iii) overview of progress in the PRS; iv) organisation, integration and ownership; v) participation; vi) partnership and donor coordination; vii) prioritising, costing and links to the budget; viii) governance and capacity building.

The case studies are intended as a useful resource for practitioners preparing for PRSs in LICUS. It should be noted that this is a ‘light’ study. It does not capture the full range of experience of PRSs in LICUS to date, and does not necessarily support conclusions of a general nature. We have simply presented the results from the case studies as a source of lessons and experience for practitioners. A separate study is underway for the World Bank’s Conflict Prevention and Reconstruction Unit on PRSPs in conflict-affected countries, which assesses the extent to which PRSPs are addressing factors of conflict. Our study therefore does not look at conflict-related issues. III. PROGRESS TO DATE The LICUS designation applies not to a fixed group of countries, but to a set of conditions which low-income countries may display from time to time. The Bank designates LICUS on an annual basis by reference to Country Policy and Institutional Assessment (CPIA) scores. The CPIA covers 20 equally weighted criteria grouped in four clusters: economic management; structural policies; policies for social inclusion and 3 Yemen is not formally designated as a LICUS, but displays a number of similar institutional

characteristics.

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equity; and public sector management and institutions.4 Territories without CPIA scores (such as Afghanistan, Timor Leste, Liberia, Somalia and Myanmar) may also be designated LICUS. At present, 34 countries are designated as LICUS. LICUS represent the most difficult environment for achieving poverty reduction. The LICUS list includes:

• collapsed or failing states (Afghanistan; Liberia), • countries in armed conflict or the early stages of a peace process (Sudan; Sierra

Leone; Somalia), • countries with a history of political instability and military coups (Guinea Bissau;

Central African Republic; Haiti), • new or emerging states (Timor Leste; Kosovo), • countries under international sanctions (Myanmar; Zimbabwe), and • countries with closed political systems (Lao PDR; Eritrea).

Across this diverse group of countries, DPs at present have very different types and levels of engagement, and international involvement may change rapidly in response to volatile political conditions. In some cases, donor engagement is limited to humanitarian assistance. In others, donors focus on ‘zero-generation’ measures – a limited number of programmes judged to be achievable in a difficult environment. Following a peace settlement, there may be a very large, but typically short-term, mobilisation of international assistance, in which humanitarian, state-building and poverty-reduction objectives are combined. The political space to engage in a PRS may be small, and may emerge (or disappear) quickly. Against this starting point, it is not surprising to find that LICUS as a group have been slow to undertake PRSs. Of the 34 countries designated as LICUS in 2004, only 15 have completed an IPRSP, and 7 have gone on to receive World Bank and International Monetary Fund (IMF) approval of a full PRSP. In several cases, IPRSPs have gone ‘off-track’ since approval, due to conflict or political instability, and the country has not proceeded with preparing a full PRSP. Annex A sets out in detail the progress made in each of the 34 LICUS towards a PRS, together with their PRGF and HIPC status. There appears to be no consensus on whether and in what circumstances to attempt PRSs in LICUS. In some cases (e.g., Sudan, Angola), a PRS has been initiated at an early stage of a peace process, despite major practical and political obstacles, in the hope it would serve as a confidence-building measure. In other cases (Timor Leste; Liberia), donors have tried to introduce basic PRS principles (participation; government ownership) into the programming of international assistance through a Transitional Results Matrix (TRM). In Sudan, a PRS and a TRM are under preparation simultaneously, while in other cases neither approach has yet been attempted. There are 10 LICUS with active IMF Poverty Reduction and Growth Facilities (PRGFs) and 20 which are eligible for Highly Indebted Poor Country (HIPC) debt relief. Of the 15 cases which have completed an IPRSP, all either have PRGFs or are HIPC-eligible, suggesting that conditionality has been an important motive for those LICUS governments which have attempted a PRS. 4 IDA, “Allocating IDA Funds Based on Performance: Fourth Annual Report on ISA’s

Country Assessment and Allocation Process”, March 2003.

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Table 1: Overview of PRSs in LICUS5

Category6 Number No

IPRSIPRSP

only PRSPCurrent PRGF 7

HIPC eligible

Reached Dec. Point 8

Severe 11 10 1 0 1 6 1Core 15 8 5 2 5 8 3Marginal 8 1 2 5 4 6 5Total 34 19 8 7 10 20 9

IV. SYNTHESIS OF FINDINGS This section summarises the findings and lessons which emerge from the case studies, including feedback from LICUS governments, and from our discussions with informants in the World Bank, DFID and other Development Partners. A. The relevance of the PRS approach in LICUS 1. Why attempt a PRS in a LICUS? There is a high degree of consensus among LICUS governments, DPs and civil society that the PRS approach is relevant and useful in LICUS. The process is more difficult to organise in LICUS, and the outcomes in terms of policy and institutional change are more modest and harder to sustain. Nonetheless, the objectives underlying the PRS approach are precisely those required to tackle the obstacles to poverty reduction in LICUS. The most immediate benefits of a PRS are to open a dialogue on the nature and causes of poverty, and to secure a public commitment from the government to a set of poverty-reduction policies and objectives. Even in countries where had been little progress in implementing the PRS, informants agreed that the PRS process itself had initiated a more inclusive dialogue on the nature and causes of poverty – in some cases, the first of its kind. Civil society informants believed that the process had helped to demonstrate to government the benefits of broader inputs into the policy process, and placed new issues (such as gender and the environment) onto the policy agenda. The process also helped civil society to organise into more representative networks, and to build the capacity among civil society organisations to participate in a formal policy exercise. Much of the dialogue around the PRS is government-to-government – among different agencies and levels of government. Given the fragmented nature of most LICUS administrations, this was an important step forward. In some cases, the PRS had also helped to initiate a more open policy dialogue between DPs and government – often from a very low base. In closed political environments, where establishing an effective development partnership is very difficult, having an explicit government commitment to 5 Compiled from information supplied by the World Bank. 6 LICUS countries are designated as ‘severe’, ‘core’ or ‘marginal’, based upon their CPIA ranking

across four clusters. This designation is for internal purposes only, and is not published. 7 Excludes 6 LICUS with off-track PRGFs. 8 No LICUS has yet reached HIPC Completion Point.

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a set of poverty-reduction objectives and policies is extremely important for the DPs. In the words of one informant: “It is critical to have the government’s own words to quote back to them.” The second benefit is the opportunity to improve the government’s policy-making processes. LICUS governments begin from a very low capacity to develop policies and mobilise resources and public institutions for poverty reduction. They may have no tradition of development planning, or else begin from planning processes which are not pro-poor in orientation or which have little effect on how government actually operates. The PRS approach encourages LICUS governments to introduce new practices into the policy process, including:

• basing policy decisions on a dialogue with the communities they affect; • building up a core of information on the nature, causes and distribution of

poverty, in order to improve the targeting of government actions; • initiating cross-sectoral policies, which link macroeconomic policies, sectoral

programmes and thematic issues; • making government policy commitments and spending decisions explicit and

transparent; • mobilising domestic resources for poverty-reduction through objective-based

budgeting; • developing targets, indicators and monitoring systems in order to provide

feedback and continuous improvement. In most LICUS, these represent profound changes in the way government operates, which would in all likelihood take several PRS cycles to implement. Yet there is no real prospect of sustained poverty reduction in LICUS without these changes, irrespective of the volume of international assistance. Introducing these changes may be slow and painstaking work, but the sooner it is initiated, the better. The PRS provides the best framework for doing so. The third benefit of the PRS process is to change the nature of the development partnership. Effective development partnerships in LICUS are very difficult to establish, for two reasons: first, because of the complex political and institutional problems at the national level; and second, because DPs as a group behave in a less cohesive fashion, often falling well short of best-practice. The two problems are mutually reinforcing. A government which takes an active role in the development partnership has a disciplining effect on the donor community, and as a result receives more effective assistance. In LICUS, governments may be passive, regard outsiders with suspicion or see short-term incentives in keeping the donors divided. The problem is exacerbated by:

• high volatility in aid flows to LICUS; • low donor capacity in-country; • a complex mix of humanitarian, development and sometimes peace-building

agendas; • the need to minimise fiduciary risk by bypassing weak government systems.

Against this background, it clearly falls to the DPs to take the initiative in improving their coordination and aligning their assistance with government policies. There are signs that

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PRSs in LICUS have improved the policy dialogue and begun to convince governments of the value of more coordinated assistance. However, there has been little or no real change in either the nature or processes of international assistance. This benefit of the PRS therefore remains aspirational, but is a critical area for future efforts by the DPs. The challenges of tackling poverty in LICUS are not fundamentally different from those facing other developing countries; they are simply more difficult to achieve. The PRS approach remains the most effective instrument for tackling these challenges, and should be used wherever feasible. Realism about short-term problems should not deflect the DPs from focusing on the longer-term objectives. 2. Progressive introduction of PRS practices The PRS approach is a complex package of government and donor practices, which need to be introduced gradually into LICUS. The evidence suggests that the transformative effect of a first-round PRSP is likely to be lower than in non-LICUS contexts. The early PRSPs have been narrow and somewhat artificial exercises, with limited ownership across government. They have lacked operational detail, with poor costing and prioritisation and no link to the budget. Although they have helped to broaden the policy dialogue, they have not brought about major changes in either government or donor behaviour. In the face of widespread capacity constraints, the PRS process has had a marked tendency to stall following approval of the strategy. Within complex, LICUS political systems, the PRS usually competes for time and attention with other agendas and political priorities. In countries where poverty is not high on the domestic political agenda, the PRS may have little political weight at the outset. The core of the problem is not that LICUS governments lack the technical capacity to produce a quality strategy, although this may indeed be an issue. The danger is more that, whatever the technical merits of the strategy itself, it will fail to have any substantial impact on government or donor behaviour, or to change policy choices in favour of poverty reduction. In some cases, LICUS governments have begun work on a second PRSP before there was any concrete progress on implementation of the first strategy. There is a genuine risk that the limited policy capacity of LICUS governments will be entirely absorbed in the production of documents, with few concrete results to show for it. This is in part a problem in the incentives generated by IFI conditionality, which focuses attention on the completion of the strategy itself. The real objective of PRSs in LICUS is not the production of documents, but the progressive introduction of PRS practices into government and donor behaviour. The challenge is to make the PRS process robust enough to sustain momentum for the much longer period of time required to achieve change in LICUS. Table 2 offers a simple schematic of PRS practices, which may be useful in planning the PRS exercise in a more strategic manner. The list is not specific to LICUS. Nor is it intended to imply any particular sequence. Rather, it is intended to assist practitioners to

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identify the challenges facing them in individual LICUS, and plan a more strategic approach to introducing PRS practices over time. In the case-study countries, the first-round PRSP achieved progress in only the first three or at best four of these areas. Other objectives, such as detailed costing and prioritisation of PRS programmes, were sometimes explicitly deferred until later rounds. The first PRSPs were nonetheless approved. This was a strategic choice by the DPs, who considered it important to recognise and lock in the progress which had been achieved, and to support the efforts of reformers within government. Most informants agreed that there should be no minimum standard for a first PRSP in a LICUS.

Table 2: A schematic of PRS practices

1. Establish dialogue across government and between government, development partners and society on poverty and measures to alleviate it;

2. Build an information base on the nature and causes of poverty;

3. Define the government’s poverty reduction objectives and policies within a broad, strategic framework;

4. Develop sectoral and thematic policies and programmes which are consistent with the strategic framework;

5. Align international assistance around a nationally owned poverty-reduction strategy;

6. Cost programmes and compare to resource envelope in order to identify priorities, trade-offs and cross-sectoral synergies;

7. Increase the domestic resources available for poverty reduction (macroeconomic policies; MTEF; objective-based budgeting; PEM reforms);

8. Identify the institutional prerequisites for implementing the strategy, and develop a programme of governance reforms;

9. Create mechanisms for monitoring, feedback and continuous improvement;

10. Create permanent structures for the participation of social partners in the policy process, and strengthen democratic accountability for development outcomes;

11. Introduce joint programming of international assistance and national resources, through pooled funding, SWAps and ultimately budgetary support.

However, if the PRS approach is to make a real difference in LICUS, the objective must be to move forward over time with the full range of PRS practices. The point is not to lower the bar for LICUS, but to think strategically about how to help them over it.

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3. Different instruments for introducing PRS practices It is not always feasible to move straight to the development of a PRSP in LICUS. However, by thinking of the PRS approach as a set of practices, rather than a strategy document, it is possible to move gradually towards a PRS via other instruments. Two main options have emerged. First, in countries where a peace settlement or political transition has triggered a large mobilisation of international support, the donors have begun to use Transitional Results Matrices (TRMs) to programme their assistance around a common strategic framework. In a number of recent cases (Timor Leste, Central African Republic, Haiti, Liberia), the donors have conducted joint needs assessments and then set out their common goals in the form of time-bound objectives, typically in six-month cycles, with measurable indicators for each. The problems of coordinating large reconstruction programmes in the face of weak or absent national institutions are notoriously difficult to solve, and we have not tried to evaluate how effective the TRM approach has been. Its relevance to this study is that a TRM approach allows the DPs to introduce gradually certain basic PRS practices, as far as circumstances allow. For example, in Liberia and Timor Leste, the donors have used participatory processes to conduct the needs assessment and prepare the TRM. As national institutions stabilised and developed capacity, they became progressively more involved in monitoring and reporting against the TRM. The Timor Leste example was notably more successful because a significant portion of international assistance was pooled through a multi-donor trust fund, which facilitated coordination. The TRM is therefore an alternative means of introducing PRS practices into a post-conflict environment, where a PRSP is not immediately possible. A second option, used in closed political environments where there is little donor engagement, is to pursue zero-generation reforms, along the lines first proposed by the World Bank’s LICUS Task Force. Where the government is unwilling to embark on a PRSP, the donors have pursued the strategy of supporting individual reform initiatives which are acceptable to the government and which are achievable in the circumstances. Within these individual programmes, the donors can encourage the introduction of participatory approaches, and begin to develop a policy dialogue with government. For example, this is beginning to occur around an HIV-AIDS programme in Myanmar. While flexibility is obviously necessary in the most difficult cases, preparing a full PRSP remains the preferred option, wherever there is a government willing and able to lead the process. Beyond the government’s agreement, there is no need for other political or institutional prerequisites. Because the PRS approach is the most effective way of bringing about institutional change, there is no value in deferring the exercise until the institutional environment improves. For example, the Eritrean government has prepared a draft IPRSP, but refuses to publish its budget. While the IFIs are intensely concerned about the lack of a budget, they may nonetheless be willing to approve the IPRSP, in the hope that the PRS process, as it progresses, will demonstrate to the government the value of greater transparency.

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B. Lessons for conducting a PRS in LICUS 1. Building ownership A PRS in a LICUS is typically undertaken in order to access debt relief or IDA assistance, and often begins as a narrow and rather artificial exercise. The task is usually assigned to a small unit of government responsible for dealing with donors, with no connection to the budget or other policy processes. Even where the PRSP is based upon a consultative process, it is common to find that understanding and ownership of the process across government is very limited. This is probably inevitable. One of the characteristics of LICUS is a high degree of institutional fragmentation, with different agencies operating in isolation from each other. LICUS often lack a strong cabinet function, and do not use the annual budget as an instrument of policy. This makes it difficult to develop and implement complex, cross-sectoral strategies. A number of informants commented that a PRS in a LICUS begins as a simulation of a normal policy process. The challenge is to build ownership over time by introduce PRS practices into mainstream government processes. A number of lessons have emerged as to how to go about this. First, face-to-face communication between DP staff and government officials about the purpose and principles of the PRS plays an extremely important role. A number of informants noted that understanding of the PRS initiative is developed almost entirely through interpersonal contacts. Documents such as the World Bank’s PRSP Source Book do not tend to circulate. This method of building knowledge and ownership of the process is very time-consuming for the DPs, but represents a key capacity-building exercise in its own right. It also helps the DPs to identify and support champions of the process, who will push it forward from within government. DPs need to be allocating more staff time in-country to supporting the PRS through relationship-building. Second, DPs need to be sensitive to the way national decision-making processes work. The political environment, even in a repressive state, is likely to be brittle and complex. Consensus-building in a LICUS environment is often a slow process, and a number of informants noted the importance of giving it time to work. Artificial deadlines can reduce national ownership and result in a more artificial exercise. Donors also need to resist the temptation to take over the process through excessive use of consultants. Experience suggests that ensuring government has full control over the process is more important during the early phase of a PRS than the technical quality of the productive. Third, PRS processes in LICUS are nonetheless inclined to stall if the donors are not actively engaged in the process. In the case study countries, lengthy delays were often attributable to lapses in energy from the donor side. The challenge is to find ways to keep the process moving, without compromising national ownership. Donors need to make time to sit on committees and participate in working groups, as their presence may increase the seriousness of the process. They need to provide meaningful feedback on drafts and interim products, and retain a close and visible interest in the process as it unfolds.

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Finally, the donors should with national planning processes as far as possible. In both Lao and Yemen, the PRS began as a parallel exercise to the national five-year development planning cycle. In the case of Yemen, this was done on the insistence of the Bank, out of concern that the existing process was not sufficiently pro-poor oriented. Merging the two processes then became a key objective for the second PRSP. Experience suggests that parallel processes generate confusion, especially where different targets and macroeconomic projections are used, and are wasteful of limited national policy-making capacity. Duplication should be avoided wherever possible. 2. Participation in a difficult environment The case studies confirmed the findings from the literature that consultation around PRSs in LICUS has been valuable, if limited. Much of the consultation has been government-government – among different agencies and with sub-national authorities – which, given the fragmented nature of LICUS administrations, is valuable. CSO informants considered that the consultations had helped to broaden the government’s understanding of poverty, and to place new issues on the national policy agenda, particularly gender. They had helped to build the legitimacy of civil society in the eyes of government, raised its capacity to participate in formal policy exercises, and promoted the development of more effective and representative networks. International NGOs played a valuable role in teaching national CSOs about the technical requirements of a PRS, and helped them to develop common positions. International NGO informants noted that Bank and other DP staff were in general very supportive of their involvement in the process, and aided their access to government. Parliaments have played a very marginal role, although in Lao PDR parliamentarians have expressed an interest in becoming involved in PRSP monitoring. Governments in LICUS have carried out once-off consultations during the preparation of a PRS, typically in a single, intensive phase lasting 4-8 weeks. In each case, the participation phase was then brought to an end in order to press on with finalising the strategy, and there is little sign of lasting changes in the way policy is made. As part of their PRSP, LICUS governments should be encouraged to develop permanent structures for consultation and dialogue with social partners. A number of lessons emerged concerning participation in closed political environments. In Eritrea and Lao PDR, where national NGOs are not permitted or operate under restrictions, international NGOs have played the role of proxy, representing the views of their local partner organisations. Official mass organisations, representing women, workers or youth, have also played an important role. Although they are quasi-governmental organisations, they can represent an alternative voice within the regime. In Lao, the government understood the participation requirement in terms of giving its national planning process a more bottom-up orientation, beginning at the local community level. Despite the formal restrictions on civil society, the donors regarded this as a positive development, which they were able to support through the use of participatory techniques in their own programming. National CSOs have supported PRS implementation through public awareness-raising campaigns and training of local government officials. They have tended to avoid taking on formal monitoring responsibilities, which they consider adversarial in nature. Instead, they see their role as facilitative – tracking the implementation process at local level, and

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helping to resolve practical challenges (e.g., mobilising local counterpart funding for projects, organising community contributions) as they arise. 3. Promoting institutional change LICUS suffer from acute institutional problems which pose an immediate constraint on effective poverty reduction. Though the underlying reasons may vary considerably, LICUS typically suffer from low policy capacity, fragmented administrations and poor revenue mobilisation, hampering their ability to formulate and implement pro-poor policy (see Table 3). LICUS governments also tend to systematically under-invest in developing institutional capacity, and have a low capacity for institutional change. Institutional problems may be integral to the nature of the regime. For example, systems which depend on patronage as a source of political authority may be unable to accomplish a shift of resources towards pro-poor spending, or to introduce meritocracy into civil-service hiring practices. In extreme cases, systemic reforms may pose a direct threat to the survival of the regime. However, no regime is monolithic in nature, and there are always groups and individuals pushing for reform. The challenge in LICUS is often more political than technical: how to generate the momentum to overcome the vested interests which support the status quo. The literature suggests that, in the LICUS environment, donors need a better understanding of national political dynamics, in order to identify and respond to opportunities as they arise. They also need to make more effort to convince LICUS governments of the benefits of reform. At present, there is little evidence from the case studies that the PRS has generated fresh impetus for governance reforms. The governance section is often the weakest part of a PRSP, mentioning the need for generic, horizontal reforms and making (selective) reference to on-going activities in civil-service reorganisation, PEM reforms and decentralisation. There is little attempt to link these issues analytically to poverty reduction, to cost or sequence activities, or to specify targets for the first PRSP cycle. Lack of focus in this key area contributes to the tendency for PRSPs in LICUS to stall, hampering the achievement of all other poverty-reduction objectives. In the case study countries, the PRS has not helped the DPs to provide more effective capacity-building assistance. DPs typically do their own assessments of reform needs and technical assistance requirements, and offer assistance programmes to government. Experience shows that capacity building is rarely effective where the government remains a passive recipient of supply-driven programmes. Institutional change should therefore be a key focus of attention during the first PRS round. In their strategies, LICUS governments should be encouraged to draw closer links between institutional change and the achievement of poverty-reduction objectives. They should be encouraged to identify a number of critical constraints on PRSP implementation (such as leakage of revenue, non-implementation of budgets, staff absenteeism), and set explicit targets for addressing these problems during the first PRS round. They should also be encouraged to identify their own technical assistance needs. For their part, the DPs should make more effort to engage LICUS governments on the institutional changes needed for development, to ensure that their PRSPs are credible in this area. They should try to identify and support champions of change within the

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government. They should be prepared to focus their capacity-building assistance on the areas identified by the government as critical, and try to introduce a more results-oriented approach to achieving institutional change.

Table 3: Common institutional obstacles to PRSs in LICUS

Weak policy process Planning processes which are not focused on poverty reduction; planning which emphasises targets but is weak on input mobilisation; a tradition of unimplemented strategies.

Low policy capacity A small pool of people within the administration operating at the policy level; limited capacity easily overwhelmed by a major strategy exercise.

Fragmented administration - horizontal

A fragmented administration, in which inter-agency dialogue and action are difficult to organise; cabinet lacks capacity for cross-sectoral bargaining and for disciplining line ministries; unclear and overlapping institutional responsibilities.

- vertical Weak supervision of spending and service delivery by sub-national governments; imbalances in revenue and spending responsibilities; lack of mechanisms for fiscal redistribution to poorer areas.

Weak budgetary process

No tradition of using the budget as a policy instrument; no capacity for objective-based budgeting.

Low revenue mobilisation

Weak domestic resource mobilisation; tendency to see funding of development activities as a donor responsibility.

Revenue leakage Weak public-expenditure management resulting in leakage of resources; vested interests against PEM reform.

Lack of information & transparency

Inadequate data for effective policy making; information does not circulate across government; lack of transparency over government spending and activities.

Low administrative capacity

Weak public-service management; poor motivation and training of staff; inadequate public-sector salaries.

Low participation & accountability

Closed political environment; lack of an enabling legal environment for civil society; civil society lacks capacity for participating in the policy process; weak parliamentary processes; lack of accountability for poor governance outcomes.

Weak development partnership

Weak or strained policy dialogue between government and donors; complex and/or contradictory political agendas; poor coordination among donors; limited government interest in donor coordination; unpredictable aid flows; mixture of humanitarian and development programmes and methods; tendency to deliver aid outside weak domestic institutions.

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Joint analytical exercises between the DPs and the government are a useful tool. At present, there is not much evidence that the Bank’s analytical work is influencing the behaviour of LICUS governments. Conducting these exercises jointly with the government may involve compromising on the technical quality of the analysis, but should help to build government awareness of the need for reform. Monitoring and progress reporting during the first PRSP cycle should focus on institutional change. Reporting against formal poverty indicators and targets is unlikely to be very revealing, given that monitoring systems and databases may take the entire first cycle to establish, and poverty statistics are unlikely to change much in the short term. If monitoring and reporting focuses on the institutional changes required for PRSP implementation, it may help to overcome the tendency for the process to stall following approval of the strategy. 4. Real alignment around the PRS In the case-study countries, the process of preparing a PRS has provided some impetus to improving coordination among a core group of PRS-minded donors. However, it has not substantially changed either the content or the processes of their assistance programmes. Some donors have formally aligned their programmes to the PRS, in the sense that each element of the programme is linked to the achievement of a PRS objective. However, because the PRS itself is drafted in very broad terms, this form of alignment is more nominal than real. A disturbing dynamic is apparent among the case study countries, which may prove to be common in LICUS. All of the PRSPs reviewed are weak on prioritisation and costing. This appears to be less a technical issue, than a structural problem with the aid relationship works in LICUS. LICUS governments tend to see the PRS exercise as a way of bidding for more aid. They include a broad selection of programmes in their PRSP, and identify a large resource gap in order to make the case for more assistance. So long as LICUS governments are not seeking to maximise the effectiveness of limited resources, they have no incentive to base their PRSP on a rigorous costing or prioritisation. Because the resulting PRSP far exceeds available resources, the donors are able to pick and choose from among PRSP programme areas according to their pre-existing preferences. Prioritisation is therefore carried out de facto by the donors, robbing the PRS exercise of its strategic value. This in turn lowers the stakes for both donors and the government. If both sides are aware that actual programming choices are not made within the PRS framework, they will be less demanding as to the quality of the strategy. This dynamic may be inadvertently reinforced when preparing MDG-based PRSPs. In Yemen, which is a pilot country under the UN Millennium Project, the government has been directed to prepare a needs assessment and investment programme for achieving the MDGs over the next decade, and to draw up a medium-term PRSP on this basis. Yemen is a long way from achieving any of its MDGs, and its investment requirements exceed current aid flows many times over. The risk is that donors will not agree to scale up their assistance, and that the PRSP will remain marginal to the way programming decisions are actually made. The DPs can take a number of steps to overcome this dynamic.

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First, they should encourage LICUS governments to programme their PRSPs around a realistic resource envelope, based on projected aid flows and reasonable assessments of absorption capacity. A PRSP drawn up according to a projection of the total investment needs for achieving the MDGs will not be a useful strategic tool, if the resources do not eventuate. It is also likely to damage the development partnership, leading the government to blame the DPs for reneging on their commitment to achieving the MDGs. The case for more assistance should not be made via a PRSP. Rather, the DPs should be as transparent and predictable as possible in their levels of assistance, and encourage LICUS governments to prepare their PRSPS around a realistic resource envelope. Second, DPs should encourage LICUS governments to mobilise domestic resources towards PRSP implementation. LICUS governments must have a real, financial stake in the process, if they are to take the PRSP seriously as a programming instrument. DPs may consider adopting the principle of ‘additionality’, where the volume of international support for PRSP implementation increases in proportion to the mobilisation of domestic revenues. Third, DPs should ensure that, through their PRSPs, LICUS governments are given a real say in the programming of international assistance. The most effective way of moving towards real alignment around the PRSP is through the use of pooled funds. Simple basket or pooled funding9 mechanisms are possible even where government systems are too weak to support sector-wide approaches or budgetary support. They promote more consistent and predictable flows of funds and programming choices (requiring time, negotiation and compromise by DPs), and facilitate a balance of programmes across different PRS priority areas. They enable a group of donors to speak with a single voice and engage in a more effective policy dialogue. Real alignment of international assistance around the PRS would raise the stakes in the process for both sides, creating incentives for both sides to take the process much more seriously. C. Conclusions for the Development Partners While this analysis does not suggest any single roadmap or set of techniques for the PRS initiative in LICUS, it does carry a number of important implications for how the DPs should approach the challenge. The PRS initiative is highly relevant to LICUS, and should be attempted wherever there is a government willing and able to lead the process. Though the undertaking may be more difficult in LICUS, and the results more modest and difficult to sustain, the PRS approach is essential for addressing the obstacles to poverty reduction in LICUS, and should be undertaken as soon as feasible. Where a PRS is not immediately possible, DPs should aim to introduce PRS practices via other instruments, preparing the ground for a full PRS at the appropriate moment.

9 For instance, funds administered by one donor on behalf of many, or jointly through a common

basket.

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However, starting point clearly matters, and the DPs need to be realistic about the scale of the challenges facing LICUS. They may need to adapt the PRS approach to the LICUS environment – not by changing the objectives or lowering their ambitions, but by planning for a process of change lasting over several PRS cycles. In the first PRS cycle, it may be appropriate to concentrate on the introduction of a few, basic PRS practices (say, building up an information base, conducting a dialogue on poverty, and achieving government commitment to set of general objectives and policies) while leaving more advanced practices (detailed costing and prioritisation, alignment with the budget) to second or subsequent rounds. This is a legitimate approach, provided that the PRS process is robust enough to sustain the momentum beyond the completion of the first strategy document. The Bank and DFID should be encouraging LICUS governments and their partner agencies to see the PRS as a long-term process of introducing the full range of PRS practices. Following approval of the first PRSP, the Bank should focus its conditionality not just on the documentary requirements (progress reports; subsequent strategies), but on the successful integration of PRS practices into mainstream government processes. To engage effectively with a PRS in a difficult environment, the DPs as a group need to allocate more staff resources in-country to the process, to ensure that the process retains its momentum. This cannot be done from a distance. The weaker the domestic institutional environment, the greater the need for close engagement from the international side. DPs need to spend more time understanding the political and institutional environment, and planning strategically for meeting the challenges it presents. They need to build up relationships, identify and support champions of change within LICUS governments, and communicate the principles and benefits of the PRS in person across a wide range of government agencies and officials. This runs counter to the present trend, where increased harmonisation and alignment is taken as an opportunity to reduce local presence. The commencement of a PRS in a LICUS should be a trigger for a more intensive engagement from the DPs. The DPs may need to cooperate in sharing the burden and making sure that, as a group, they have allocated sufficient staff time at an appropriate level. However, this engagement needs to be done in a sensitive manner. Process in LICUS is extremely important, and DPs must avoid compromising the development of country ownership. It is important to allow space for a domestic consensus to form around the PRS, and DPs should avoid the temptation to impose artificial deadlines, or to take over the process with excessive use of external consultants. However, regular contact with government officials, training and information events, robust dialogue on policy choices, and timely feedback on PRS outputs all serve to keep the process moving forward. The DPs particularly need to redouble their efforts at sustaining momentum into the implementation phase, to overcome the tendency of LICUS PRSs to stall following approval of the strategy. For example, in Lao PDR, the Bank is conducting a series of seminars on prioritisation designed to feed into the second PRS (see Lao case study). Focusing monitoring and reporting requirements during the first cycle on resolving immediate institutional obstacles to PRSP implementation would also help. A key issue to be resolved at headquarters level is pushing forward with donor coordinating and the alignment of international assistance with the PRS. At present, DP

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coordination in LICUS is weak and alignment with the PRS is more nominal than real. Supporting PRSP implementation through pooled funding mechanisms would help to improve the predictability of assistance, increase donor discipline and give governments a more genuine say, through their PRSP, in how assistance is programmed. This is the quid pro quo which should underlie an effective development partnership in a LICUS: the DPs should permit the government to exercise more influence over assistance, provided that the DPs are satisfied that the funds are going towards a credible poverty-reduction strategy.

ANNEX A PRS IN LICUS: PROGRESS & STATUS

LICUS POVERTY REDUCTION STRATEGY PRGF HIPC

Country LICUS

category IPRSP PRSP

Time IPRSP

to PRSP (mths) Note on PRS progress

PRGF status

Start date

HIPC eligible

Decn Point

Exp. Compl. Point

Afghanistan Severe

Bank and Fund re-engaged 02 post-conflict. TSS finalised March 2003; blend of credits and grants, including Post Conflict Trust Fund; reconstruction focus. Also multilateral Reconstruction Trust Fund. Moves underway towards PRS (with difference of opinion within donors on realism of this).

Angola Severe

Ceasefire Apr-02; dual transition to peace and market economy. WB TSS focuses on PEM; public services to war-affected groups & pro-poor growth. Govt has produced 5 drafts of IPRSP; under revision; aim to finalise by end 2004. Variety of views among donors on quality of draft, and whether to accept limited participatory process.

PS

Burundi Core 22-Jan-04

PRS launched Jul-00, 6 mths after Arusha Accords. Finalised by government Nov 03. IPRSP prepared under difficult circumstances, parallel to continuing conflict & negotiations with rebel factions. Current Bank programme under LICUS principles. New TSS to be prepared autumn 04.

Jan-04

Cambodia Core 18-Jan-01 20-Feb-03 25

WB engagement from 1998. PRS moved in parallel to national planning processes, and heavily criticised. OED notes lack of ownership in line ministries, weak PFM, serious capacity constraints.

Oct-99

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Country LICUS

category IPRSP PRSP

Time IPRSP


PRGF status

Start date

HIPC eligible

Decn Point

Exp. Compl. Point

Central African Republic

Severe 18-Jan-01

May 01 coup threw IPRS & PRGF off-track. Non-accrual status. July ’04: US$8.2 million in emergency post-conflict assistance to stabilize macroeconomic situation, support reforms and catalyse external assistance. Attempts to move back to PRGF.

Jul-98

Chad Marginal 25-Jul-00 13-Nov-03 39

Peace agreements 2002/3. PRSP based on innovative management of oil revenues, available since 03, to achieve MDGs. Strong focus on governance and security. PRS linked to state-building with strong local leadership, but difference of view among donors concerning the process.

Jan-00 May-01 Q4 04

Comoros Core

History of coups & inst. instability. WB TSS based on LICUS principles, incl. social service delivery through non-govt mechanisms; supporting key public institutions via Multi Donor Trust Fund.

Congo, Republic

Core

Oil rich country. 1996 ESAF loan; civil war 1997 & 98; 1999 ceasefire. Gradual reestablishment of stability and democratic institutions since then. Final Peace Accord 2003, recent demobilisation. Repayments on IMF loan resumed 2002. Discussions on PRS in Paris in July 2003; IPRSP underway.

Congo, DR Core 11-Jun-02 Impl. of IPRSP underway, against background of fragile security and political instability. Timetable for producing full PRSP off-track. TSS in place.

Jun-02 Jul-03 Q3 06

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Country LICUS

category IPRSP PRSP

Time IPRSP


PRGF status

Start date

HIPC eligible

Decn Point

Exp. Compl. Point

Cote D’Ivoire Marginal 28-Mar-02 Default on WB debt in 2000 following a coup corresponded with serious political crisis. PRS launched early 2001.

off-track Mar-02

Equatorial Guinea

Severe Benefits from WB Regional Integration Strategy, but no current CAS. No current Bank projects.

Eritrea Marginal

Indep. 93, following long civil war; early growth disrupted by border war with Ethiopia since 98. WB provides emergency conflict-related assistance. IPRSP under preparation.

Gambia Marginal 14-Dec-00 16-Jul-02 19

Coup 94; poverty up 92-98, some disturbances 99. Free and fair elections 2000-01. Good progress on HIPC. PRSP process judged successful with “exemplary participation” (IMF), building on mid-90’s “Strategy for Poverty Elimination”, but overestimated growth, budget links poor. JSA noted various risks, including shortage of external financing. IMF reported 04 that donor assistance “fell considerably short of substantial pledges made in support of PRSP” in ‘02.

off-track Jul-02 Dec-00 Q4 05

Georgia Marginal 11-Jan-01 06-Nov-03 22

Nov 03 ‘Rose Revolution’ coincided with approval of PRS (Economic Development and Poverty Reduction Program); areas of country remain outside govt control. Impl of PRSP threatened by political instability; institutional fragmentation and low revenue collection.

Jun-04

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Country LICUS

category IPRSP PRSP

Time IPRSP


PRGF status

Start date

HIPC eligible

Decn Point

Exp. Compl. Point

Guinea Marginal 22-Dec-00 25-Jul-02 19

PRS adopted by govt Jan 02. Dec 02, went off-track, so limited assistance in 03-4. IEO: initial expectations of PRS achievement too high, given context. Institutional capacity weak; arrangements required for monitoring and updating of PRS. CAS builds on PRS.

off-track May-01 Dec-00 Q3 05

Guinea Bissau Core 14-Dec-00

Civil war June 98-May 99. After 2 elections, peaceful transition in Feb 2000. Dec 00 PRGF approved & HIPC Decn Point reached. Off-track in 2001, Bank programme halted. Coup in Sep ‘03. No CAS; covered by Regional Integration Assistance Strategy for West Africa. NPRSP not updated following 2003 coup.

off-track Dec-00 Dec-00 Q3 05

Haiti Severe

Long history of civil strife; govt collapse in 04 and international intervention. Prelim tech. support for IPRSP began in mid-00, but soon abandoned due to deteriorating security. Non-accrual status since 01.

Dec-00 Q3 05

Kosovo Core Under international admin; final status undetermined. No PRS attempted.

Lao PDR Core 24-Apr-01 Preparation of full PRSP well advanced, including additional PPA. Alignment to MTEF underway. Apr-01

Liberia Severe

Peace Agreement Aug-03, after protracted conflict and state collapse. Provision of finance through donor conf. for humanitarian progs; demobilisation; resettlement of RDPs; reconstruction; state-building. TRM used as basis for disbursement.

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Country LICUS

category IPRSP PRSP

Time IPRSP


PRGF status

Start date

HIPC eligible

Decn Point

Exp. Compl. Point

Myanmar Severe No PRS has been attempted. A closed & repressive political environment has led to int. isolation.

Niger Marginal 20-Dec-00 07-Feb-02 13

Democratic transition late 1999. WB aligning its program to PRSP via PRSCs; extensive ESW underway to remedy weaknesses identified by JSAs. Govt is conducting an ‘internalisation campaign’ at reg. & local levels to increase ownership. IMF PRS implementation 02-3 “satisfactory”, and sees internalisation as good. Positive donor forum June 03, delays noted in inst & human resource strengthening.

Dec-00 Dec-00 Q2 04

Nigeria Core

PRS not yet presented due to “a difficult political and economic transition after 30 years of military rule”. Only interim CAS until PRS finalised. PRSP Committee active since 2001; public consultations during 2002. Prospects for PRS presentation unclear.

PNG Core CAS from 1999 focuses on technical support. No PRS under preparation.

Sao Tome & Principe

Core 27-Apr-00 IPRSP not followed by development of full PRSP. Failed coup attempt 2003 and continued political instability inhibiting further development.

off-track Apr-00 Dec-00 Q4 05

Sierra Leone Marginal 25-Sep-01

Peace agreement May-01. IPRSP based on extensive consultations. Continuing security problems, inc. delayed demobilisation, have delayed full PRSP. Survey work underway; security sector reform with DFID support.

Sep-01 Feb-02 Q2 05

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Country LICUS

category IPRSP PRSP

Time IPRSP


PRGF status

Start date

HIPC eligible

Decn Point

Exp. Compl. Point

Solomon Islands

Severe June 2003 “reestablishment of law and order” by international force. No Bank programme. No PRS process underway.

Somalia Severe

State barely functional following protracted conflict. WB re-engaging (Joint WB-UN Note April 03) via LICUS principles: non-govt social service delivery; knowledge generation; quick pay-off income generation projects.

Sudan Severe

Acute humanitarian & political crisis underway, following 20 yrs civil conflict. Peace talks 2002-3. Stabilization & Reconstruction - Country Economic Memorandum, published June 2003. Govt preparing IPRSP since 02, but geographical scope limited. Debates continue on whether this will be acceptable. .

Tajikistan Core 31-Oct-00 05-Dec-02 25

Peace Agreement mid-97. JSA: PRSP targets exceed available fin. & inst. resources. CAS (2003) to encourage greater selectivity a “good fit” to PRS. Expanded ESW underway. OED: PRSP relevant, strong reg. participation. Policy-making opened to some extent, but interaction with NGOs “petered out” post approval. Prioritisation poor, not results orientated enough, weak donor realignment. MTEF needs strengthening.

Dec-02

23


Country LICUS

category IPRSP PRSP

Time IPRSP


PRGF status

Start date

HIPC eligible

Decn Point

Exp. Compl. Point

Timor Leste Core

Violence and international intervention 1999-01. Nov 2000 TSS. New state recognised May 2002, Timor Trust Fund for oil revenues. PRSP draft linked to National Development Plan issued by Planning Commission May ‘02. Second WB Transition Support Program 03. PRS now seenas overambitious; TRM used to simplify.

Togo Core IPRSP preparation initiated 2001. Non-accrual status since May 02. No formal PRS activity.

Uzbekistan Core Gov “undertaken to formulate approach in a PRSP”. Participation in CIS 7 PRS process. CAS 02-04.

Zimbabwe Severe

Highly destructive political dynamics. Non-accrual status from Oct ’00; IMF membership suspended; Bank programme limited. No formal PRS process underway.

ANNEX B SUMMARY OF THE LITERATURE REVIEW There is a distinct lack of detailed accounts in the literature of PRS processes at the country level, and even less discussion of the specific problems found in LICUS. The literature review, set out in full in the Phase I report, therefore drew extensively on commentary on the non-LICUS context. The detailed references to the literature are summarised in the Phase I report. In this Annex, we summarise some of the main themes. A. Organisation of a PRS initiative The location of responsibility for a PRS within government is often seen as a sign of government ownership. Having a separate unit that is isolated from ordinary government decision-making processes can be an obstacle to mainstreaming PRS practices. On the other hand, placing the PRS too close to the centre of government may leave it vulnerable to changes in government. Involving the Ministry of Finance is important for linking the PRS with the budget. A key challenge facing a PRS is to overcome institutional fragmentation and role confusion within government. A key dimension of institutional development around the PRS is to build intra-governmental mechanisms for cross-sectoral policy-making and action. Aligning the PRS with existing national planning processes has emerged as an important objective. In the first instance, a PRS has often been treated as the operational strategy for a more general national plan. Where PRSs have been prepared in parallel to existing planning processes, it has caused confusion and been judged wasteful of limited institutional capacity. B. Adequacy of the information base A PRS in a LICUS is likely to start from a low base of data concerning poverty. This has not been judged a reason for delaying the PRS, as the development the strategy is in itself the best way of building up the information base. Qualitative Participatory Poverty Assessments have proved a good starting point for an IPRSP when detailed surveys are not available. Most observers report that the PRS has been useful for promoting a better understanding of nature and determinants of poverty among government and civil society. However, the approach has been less effective at identifying linkages and trade-ofs between poverty, growth and macroeconomic policy choices. Supporting the PRS with quality analysis to support policy choices is therefore as important as assembling data. C. Participatory processes Most of the available literature focuses on the participation requirement. In the LICUS environment, there tend to be varying expectations between different stakeholders, which can be a source of misunderstanding. Common criticisms of participatory process in PRSPs in general include:

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• National civil society organisations (CSOs) often experienced the process as

consultation or information gathering, rather than true participation, and questioned whether governments really understood or were committed to participation. Some felt that their views were not reflected in the strategy, and or that they had not been able to participate in debates on prioritisation.

• The macroeconomic policy framework is generally excluded from the participatory process, and some CSOs consider that this key element of the strategy is still directed by the international financial institutions (IFIs).

• In countries where there is little established practice of civil society participation in the policy process, CSOs face capacity constraints in contributing to the PRS, and have stressed the need for sufficient time, training and information to prepare informed contributions.

• It is often unclear which CSOs are representative of society in general and the poor in particular. The PRS may lead to a bifurcation of civil society, benefiting a small group of elite, foreign-funded NGOs capable of providing input at a technical level, while excluding CSOs which are more representative of the poor.

• The processes and institutional frameworks created for preparing a PRSP are often once-off, and either do not survive the completion of the document or else suffer a rapid loss of momentum. Preserving the participatory process through monitoring and implementation phase need more attention.

• Joint Staff Assessments (JSAs)10 of PRSPs do not assess the quality of the participatory process.

• There is often a difference in view among the PRSPs as to what degree of external involvement or direction is appropriate in the process.

The following additional problems are likely to occur in LICUS:

• In severe cases, participatory processes are constrained by violence and insecurity, or

by political divisions which leave the government unable to operate in parts of its territory.

• Some LICUS have such severe constraints on freedom of expression and political participation that meaningful participation is impossible. Participation may be limited to approved CSOs or mass organisations.

Nonetheless, there is a remarkable degree of consensus that, even in the most difficult cases, the PRS has been the most participatory policy exercise yet undertaken, and that the benefits for opening up the policy process have been important, if modest. CSOs see it as valuable that governments have begun to explain their policy choices to the public. CSOs also consider that the process has increased their legitimacy, developed their capacity and helped them to new issues (especially gender and the environment) onto the national policy agenda. Nonetheless, starting point clearly matters a great deal. Preparing a PRSP does not in itself bring about major changes in a closed political system. The following lessons have commonly been drawn:

10 These have recently been renamed Joint Staff Assessment Notes and changed slightly in format.

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• Participatory processes need time if they are to be done properly. Artificial deadlines tend to narrow the process.

• Participation needs to continue beyond the completion of the strategy. • Participation needs to be institutionalised, and as far as possible linked to the normal

policy-making process, including the parliament. D. Prioritisation and resource mobilisation The literature notes widespread problems with prioritisation and resource mobilisation, although detailed analysis is lacking. Common problems include exaggerated growth projections in the macroeconomic framework, unrealistic targets, over-ambitious schedules, and a failure to relate the strategy to institutional capacity constraints. First-round PRSPs invariably contain too many targets and objectives. Prioritisation is often done at the level of entire sectors, rather than particular actions, and is not linked to available resources. PRSPs often contain only new spending initiatives, and do not review existing programmes. The literature notes that DPs may inadvertently favour breadth over focus, by pushing for the inclusion of all of their programme areas into the PRSP. For all these reasons, a first-round PRSP often fails to provide an effective strategic framework for pro-poor actions. Building institutional links between a new PRS, the annual budgetary process and a Medium Term Expenditure Framework (MTEF) has proved a difficult challenge in all cases. The literature indicates that inconsistencies between PRSs and actual resource mobilisation is widespread in both LICUS and non-LICUS contexts. Many PRSs contain uncosted programmes, which in total may exceed the available resources many times over. In such a case, actual prioritisation takes place during the implementation phase on an ad hoc basis, and the opportunity for a more strategic approach to poverty reduction is lost. E. Capacity building One of the original purposes of the PRS initiative was to allow donors to target their capacity-building assistance in a strategic manner to support country poverty-reduction goals. Most PRSs contain only broad references to governance issues and the need for horizontal reforms, without detailed capacity-building plans. There is little evidence in the literature that PRSs have led to a significant shift in donor capacity-building activities, or promoted a more strategic focus. The use of Project Implementation Units and the provision of ad hoc top-up salaries continues to come in for criticism as unsustainable. Public finance and policy development emerge as key capacity-building priorities in LICUS. PRSs are most effective in countries where these reforms are already underway. Where the starting point is low, it is likely to take a long time to achieve real progress, particularly in the budgetary and PFM areas. F. Donor alignment and harmonisation Recent OED evaluations conclude that the Bank and other donors have yet to realign their programmes to reflect PRSs. Programmes are often formally aligned to the PRS, in the sense that each DP programmes reflect priorities in the PRS. However, as the PRSs themselves are poorly prioritised, this has been a largely nominal process which has not triggered any significant change in donor practices or programmes.

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G. Political issues and factors of conflict There is broad agreement that PRSs in conflict-affected countries should address the factors that make these societies prone to conflict, including ethnicity and other lines of division. However, while some PRSs contain conflict-relevant measures, these tend to be incidental rather than explicit. Some PRSs describe on-going efforts in the areas of security, demobilisation and restructuring of the security sector. However, there is little direct reference to ethnic division or associated distribution questions. The DPs do not appear to view a PRS as an opportunity to raise politically sensitive issues. H. Bibliography of sources External literature ActionAid (USA & Uganda), “Rethinking Participation: Questions for Civil Society about

the Limits of Participation in PRSPs”, April 2004

BFDW, “PRSP Beyond the Theory: Practical Experiences and Positions of Involved Civil Society Organisations”, May 2002

Bird, Graham & Thomas Willet, “IMF Conditionality, Implementation and the Political Economy of Ownership,” Surrey Centre for International Economic Studies (Surrey: University of Surrey, 2003)

Booth, David, “Introduction and Overview”, Development Policy Review 21(2), March 2003, p. 131

Booth, David, “PRSP Processes in 8 African Countries: Initial Impacts and Potential for Institutionalisation”, WIDER Development Conference on Debt Relief, August 2001

Booth, David & Henry Lucas (ODI), “Good Practice in the Development of PRSP Indicators and Monitoring Systems,” Working Paper 172, July 2002

Casson, Kathryn (DFID), “Governance and the PRSP Process: A Review of 23 IPRPS/PRSPs”, June 2001

CIDSE/Caritas International, “Input to the IEO/OED Evaluation of Poverty Reduction Strategies”, August 2003

Craig, David and Doug Porter, 2003, “Poverty Reduction Strategy Papers: A New Convergence,” World Development, Vol. 31, No. 1, pp. 53-69

Eberlei, Walter, 2002, “Institutionalisation of Participation in PRS processes.” (http://www.uneca/prsp/docs/Eberlei_paper.htm)

Foster, Mick, Adrian Fozzard, Felix Naschold, and Tim Conway (ODI), “How, When and Why Does Poverty Get Budget Priority: Poverty Reduction Strategy and Public Expenditure Reform in Five African Countries,” Working Paper 168, 2002.

Fox, James, “Poverty Reduction Strategy Papers: Review of Private Sector Participation”, USAID, October 2003

Grindle, Merilee, “The PRSP Process: What Next?” in DFID, Governance and Poverty Strategy Papers, 2001

http://www.uneca/prsp/docs/Eberlei_paper.htm

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Hamilton, Kate (ODI), “Politics and the PRSP Approach: Georgia Case Study”, May 2004

IMF/World Bank, “External Comments and Contributions on the Joint Bank/Fund Staff Review of the PRSP Approach”, Vol. II, Civil Society Organisations and Individual Contributions, February 2002

Institute of Development Studies, “Participation in Poverty Reduction Strategies: A Synthesis of Experience with Participatory Approaches to Policy Design, Implementation and Monitoring”, IDS Working Paper 109, 2000

Klugman, Jeni & Rob Talierco, “Cambodia: PRSP and Budget Linkages”, October 2003

Levinsohn, Jim, “The World Bank’s Poverty Reduction Strategy Paper Approach: Good Marketing or Good Policy?” G-24 Discussion Paper Series No. 21, UNCTAD, 2003

Malaluan, Jenina & Shalmali Guttal, “Structural Adjustment in the Name of the Poor: The PRSP Experience in the Lao PDR, Cambodia and Vietnam”, January 2002

Marcus, Rachel & John Wilkinson (Childhood Poverty Research Centre), “Whose Poverty Matters? Vulnerability, Social Protection & PRSPs”, 2002

Moon, Allister, “PEM Capacity and PRSPs in ECA PRSP Countries” (summary), undated

OECD DAC Secretariat, “Development Co-operation in Difficult Partnerships”, May 2002

Overseas Development Institute, “Assessing Participation in PRSPs in sub-Saharan Africa”, Synthesis Note 3, February 2002

Overseas Development Institute, “Experience of PRSs in Asia”, Synthesis Note 8, July 2003

Overseas Development Institute, “National Poverty Reduction Strategies (PRSPs) in Conflict-Affected Countries in Africa”, Synthesis Note 6, March 2003

Overseas Development Institute, “PRS Monitoring in Africa”, Synthesis Note 7, June 2003

Oxfam, “From ‘Donorship’ to Ownership? Moving Toward PRSP Round Two”, January 2004

Piron, Laure-Helene (ODI), “Politics and the PRSP Approach: Synthesis Paper”, March 2004

Sanchez, Diana & Katherine Cash, “Reducing Poverty or Repeating Mistakes?: A Civil Society Critique of Poverty Reduction Strategy Papers”, December 2003

SGTS & Associates, “Civil Society Participation in Poverty Reduction Strategy Papers (PRSPs)”, Report to DFID, 2001

UNDP, “Evaluation of UNDP’s role in the PRSP process”, Vol. I, September 2003

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Bank/Fund evaluations & studies IDA/IMF, “Review of the Poverty Reduction Strategy Paper (PRSP) Approach: Main

Findings”, March 2002

IMF IEO “Report on the evaluation of Poverty Reduction Strategies (PRSPs) and the Poverty Reduction Growth Facility (PRGF)”, May 2004

IMF IEO & World Bank OED, “Republic of Mozambique: Evaluation of the PRSP Process and Arrangements under the Poverty Reduction and Growth Facility (PRGF)”, (draft, undated)

IMF IEO & World Bank OED, “Republic of Tajikistan: Evaluation of the PRSP Process and Arrangements under the PRGF” (draft, undated)

IMF IEO, “Republic of Guinea: Evaluation of the PRSP Process and Arrangements Under the Poverty Reduction and Growth Facility (PRGF)” (draft, July 2004)

IMF/IDA, “Heavily Indebted Poor Countries (HIPC)—Statistical Update”, March 2004

IMF/IDA, “Poverty Reduction Strategy Papers—Detailed Analysis of Progress in Implementation”, September 2003

IMF/IDA, “Poverty Reduction Strategy Papers—Progress in Implementation”, September 2003

IMF/IDA, “A Sourcebook for Poverty Reduction Strategies, Vol. I, Core Techniques & Cross-Cutting Issues”, 2002

IMF/IDA, “A Sourcebook for Poverty Reduction Strategies, Vol. II, Macroeconomic and Sectoral Approaches”, 2002

Operations Policy & Country Services (World Bank), “Low-Income Countries Under Stress: Implementation Overview”, December 2003

World Bank OED, “2003 Annual Review of Development Effectiveness: The Effectiveness of Bank Support for Policy Reform”, 2004

World Bank OED, “OED Review of the Poverty Reduction Strategy (PRS) Process: Cambodia Case Study”, (draft, undated)

World Bank OED, “OED Review of the Poverty Reduction Strategy (PRS) Process”, June 2004

World Bank OED, “OED Review of the Poverty Reduction Strategy Paper (PRSP) Process: Approach Paper”, February 2003

World Bank, “World Bank Group Work in Low-Income Countries Under Stress: A Task Force Report”, September 2002

World Bank/IMF, “Summaries of Ten Country Case Studies undertaken as part of the IEO Evaluation of the PRSP/PRGF and OED Review of the Poverty Reduction Strategy (PRS) Process”, July 2004

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ANNEX C CASE STUDIES I. Lao PDR A. Context The People’s Democratic Republic of Lao is a one-party state which is still ruled by the leaders of the revolution which brought the country to independence in 1975. It has a closed and highly opaque political system, in which the Lao People’s Revolutionary Party exercises tight control over all branches of government and no form of political pluralism is tolerated. Despite some formal recognition of civil rights, there are strict limits on expression and political participation. Associational life is limited to four official ‘mass organisations’ and some religious, sporting and charitable bodies; independent NGOs are not permitted. Since 1986, Lao has been moving from a centrally planned to a market economy, although its reform programme lags behind its neighbours, Vietnam and China. In the words of one commentator, “Laos is now best seen as a one-party state, in which the Party presides over a relatively free market economy.”11 Major political reform is not at present on the agenda. Nonetheless, some observers see signs of a cautious opening in Lao society. The chief driver of change is integration with the vibrant regional economy (Lao is an ASEAN member). The government is seeking to end Lao’s traditional isolation and position the country as a land bridge within the region. It has been courting foreign investors, especially from China and Thailand. In 1996, the Party Congress committed the country to graduating from Lesser Developed Country status by 2020, and the government appears genuinely committed to a growth and poverty-reduction agenda. Some observers see a gradual emergence of more space for discussion of policy choices, together with a reduction of suspicion towards outside influences. Lao has a tradition of constitutionally mandated, five-year Socio-Economic Development Plans. This has proved a useful starting point for a poverty-reduction strategy, enabling both DPs and reformers within the government to present it as an elaboration of existing plans and practices. However, effective action on poverty reduction is constrained by the structure of political power. The political economy is based on a complex system of competing patronage networks, which permeates all public institutions, SOEs and the most important, Lao-owned private businesses. Within this system, politics is transacted through reciprocal relations among individuals, rather than through formal institutions.12 This creates a fragmented public administration, which is difficult to mobilise around complex policy initiatives. Over the past decade, the government has neglected the development of its administration, which as a result tends to be poorly trained, unmeritocratic and rigidly hierarchical, which discourages innovation. The government has limited authority over its powerful regional authorities, where an important share of revenues and spending responsibilities are located.13 The system is poor at mobilising

11 Martin Stuart-Fox, “Politics and Reform in the Lao People’s Democratic Republic”, College of

William & Mary Political Economy of Development Working Paper No. 1, May 2004, p. 8. 12 “Lao political culture rests on acquiring resources for patronage…, and a quid pro quo for the

exercise of political influence is expected.” Ibid., p. 27. 13 Within the Party hierarchy, the provincial governors are senior to government ministers. The 18

provinces collect most of the taxes, and are supposed to remit them to the centre for redistribution. However, because fiscal equalisation applies only to revenues collected over and above budgetary targets, the wealthier provinces have little incentive to declare the full extent of

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revenues, both because of a lack of effective control over revenue collection at regional level, and because of its inability to enforce revenue laws against prominent business interests.14 Against this background, there has been little progress in public administration or public finance reform over the past decade, and the government continues to resist external scrutiny of its operations. Overall, most observers concur that change is possible in Lao, but only slowly, through complex negotiations inside the regime. With a generational change in leadership in the wind, Lao’s path in the coming years is likely to be determined by an internal struggle between “cautious reformers and stubborn conservatives”.15 B. Relations with the donor community Despite the difficult political environment, Lao enjoys broadly positive relations with the international donor community, which is keen to support its transition to a market economy. The World Bank, the IMF and the Asian Development Bank (ADB) each have active programmes, and there are a range of bilateral donors, including Japan and China. Altogether, Lao receives around $350 million in ODA per annum, amounting to 20% of GDP and 70% of public investment. The Government has set itself the goal of reducing its reliance on ODA, and to that end is seeking international support for mining projects and a major hydro-electric facility (Nam Theun 2), which it hopes will generate substantial revenues in the future. Despite the high level of assistance, the Government of Lao is protective of its independence, and on more than one occasion has declined offers of aid rather than submit to conditions it saw as unwelcome. As a result, the policy influence of the donor community has traditionally been limited. At present, however, the PRS process has received some additional impetus from the Nam Theun 2 project (requiring an investment of $1.1 billion, for which the Government has requested a partial risk guarantee from IBRD). Preparation of a satisfactory PRS is one of the conditions for a positive response from the Bank. It remains to be seen whether the Bank’s influence will wane following its decision on the project. The World Bank has 12 active projects in Lao, including a Financial Management Adjustment Credit (FMAC) focusing on public-expenditure reforms, the banking sector and SOEs. Depending on the performance of current projects, the Bank anticipates providing a Poverty Reduction Support Credit (PRSC) in 2005. Lao also has an IMF PRGF programme from April 2001. The programme has encountered recent difficulties on a number of points, including audit of the Central Bank, but these are expected to be resolved. According to the IMF Staff Report, the main risks to successful completion of the PRGF are at the level of implementation, including “the weak fiscal system, limited implementation capacity, vested interests, and some policymakers’ caution about the reliance on market mechanisms”.16

their revenues. As a result, the central government lacks control of, or even information on, an important part of public expenditure.

14 Public revenues in 2003/4 are only 12.2 percent of GDP: IMF Staff Report 2003, p. 12. 15 Stuart-Fox, op. cit., p. 27. 16 IMF Staff Report 2003, p. 6.

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C. Overview of progress in the PRS Lao first embarked on an IPRSP in early 2000, as part of a year-long process of preparing for the PRGF. The main actors were the Committee for Planning and Cooperation (CPC) on development policy and the Central Bank and the Ministry of Finance on the macroeconomic framework. The IPRSP was clearly a response to IFI conditionality, and was fairly limited in scope, described by the government as a summary of the National Socio-Economic Development Plan 2001-2005, which was being prepared concurrently.17 A first draft of the document prepared by a UNDP consultant was rejected by the CPC as not consistent with the national plan, and a second consultant was given the task of aligning it with existing priorities and targets. The IPRSP was not formally adopted by the government, and it is likely that few people beyond those directly involved in the process were aware of its existence. However, observers from the international side note that progress was made in persuading key reformers within the CPC of the benefits of the PRS approach, which was to prove important in later stages. After the approval of the IPRSP, there was a loss of momentum for 12-18 months, until international pressure for a full PRSP led to a resumption of activity in September 2002. The main consultations were carried out in between March and May 2003, including meetings with local communities and international NGOs. The DPs were given a first draft of the document, entitled the National Poverty Eradication Plan (NPEP), in May 2003. The Bank and the Fund submitted joint comments in August, and the complete NPEP was officially presented to the international community at a Roundtable in September. The document was approved by the parliament in October. Once again, the conclusion of the document was followed by a loss of momentum. There appears to have been debates within the government on the status of the document. In January 2004, it was officially upgraded from a ‘plan’ to a ‘strategy’, and renamed the National Growth and Poverty Eradication Strategy (NGPES). These steps were understood by the DPs as signs of increasing ownership at higher levels in the government. The strategy went through a number of revisions and updates, before being officially presented to the Bank and the Fund on 1 April 2004. Since then, the delays in the approval of the strategy have been on the international side. The Fund has delayed presentation to its Board in the hope of resolving the outstanding issues with its PRGF programme, while the World Bank country office was caught out by changes to the format of the Joint Staff Assessment (now called Joint Staff Assessment Note). It is expected that the strategy will be approved in November 2004. In the meantime, the government has begun implementation of the strategy in seven districts on a pilot basis. In total, it will have taken four and a half years from the beginning of the PRS initiative to Board approval of a full PRSP. Most of this time, however, the process was not moving forward. The intensive phase of PRSP preparation lasted approximately 12 months.

17 Lao PDR, “Interim Poverty Reduction Strategy Paper”, March 2001, p. 3.

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PRSP Preparation Timetable

March/April 2000 Works begins on an IPRSP, concurrently with national 5-year plan.

March 2001 IPRSP finalised and forward to Bank/IMF. Timetable for full PRSP by Aug 2002.

April 2001 PRGF approved Sep 2002 Preparation of full PRSP begins. Feb-April 2003 Various consultations. May 2003 First draft given to DPs at mini-Roundtable. June-August 2003 IMF, Bank, other DPs submit comments; further

consultations. Prep. Status Report submitted.. Sep 2003 Second draft presented to DPs at Roundtable. Oct 2003 Document approved by parliament. Jan 2004 Name changed; upgraded from ‘plan’ to ‘strategy’. April 2004 Strategy formally present to Bank/IMF. 2004? PRSP approved by Bank/IMF Boards.

The PRSP was endorsed by the DPs at the September 2003 Roundtable as a credible, broad framework for poverty reduction. However, it does not at this stage have any detailed prioritisation or costing, and requires further elaboration into sectoral plans and programmes. Cross-cutting themes such as gender and the environment are not yet well integrated into the strategy. While DPs are generally positive about the process, they acknowledge that implementation capacity at this stage remains limited. D. Organisation, integration and ownership The agency with leadership of the PRS is the Committee for Planning and Investment (CPI), the agency responsible for the national planning process. The process is under the supervision of a Steering Committee, comprising all of the major ministries and key agencies such as the National Statistics Centre. The CPI also chairs a Technical Committee, which includes the Director of Budget and the Director of Planning of each line ministry. This structure is to be retained for the implementation phase. The CPI is the only agency below Cabinet-level with a genuine, cross-government policy capacity, and also houses the National Statistics Institute. As well as preparing the five-year plans, it sets the guidelines by which individual ministries prepare their annual workplans. It also has the authority to require ministries to report back on progress in implementing the plan. In the Lao tradition, this planning function is more central to policy formulation than the budget, which is considered an executive or book-keeping function. The national planning process offers a useful starting point for the PRS. In 1996, the 7th Party Congress declared that Lao should graduate from Lesser Developed Country status by 2020. The government also signed the Millennium Declaration. Both the DPs and CPI officials were able to present the PRS as an operational plan for achieving poverty-reduction targets to which the government was already committed.

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However, the PRS and the national planning process are not yet integrated. While the CPI is responsible for both documents, they are prepared separately by different teams. The CPI has stated that the National Growth and Poverty Eradication Strategy (NGPES) will be fully integrated into the next five-year plan (2006-2010). However, DP informants note there has been no public commitment to this at higher levels of government. They also note that, in his speech to the opening session of the National Assembly in October 2004, the Prime Minister failed to mention the Strategy. If the two process are merged during 2005, this will be considered strong evidence of ownership at the higher levels. While the PRS in Lao began as a response to IFI conditionality, with little ownership from the government, it has in the meantime gradually gained a higher profile. This is attributed primarily to the time spent by World Bank, IMF and UNDP staff in explaining the principles and benefits of the PRS to key individuals within CPI, who gradually became advocates of the initiative within the government. In particular, the director of the CPI, an influential and highly-regarded individual who later became a vice-president of the Asian Development Bank, came to play a critical role as a champion of the initiative. This process of communication occurred primarily through face-to-face contacts. Documents such as the World Bank’s PRSP Sourcebook did not circulate. Building ownership via these personal relationships is an extremely time-consuming process for the DPs, but represents a critical capacity-building activity in its own right. The messages which the DPs convey to their counterparts do appear to filter up to higher levels, and help to strengthen the position of reformers within government. One of the lessons offered by DP informants is the importance of devoting enough staff time to this process. DP informants also stress the importance of allowing enough time for the government’s rather slow, internal decision-making processes to take place. Too much external pressure or tight deadlines only inhibits the proc3ess of building ownership and produces artificial and unsustainable results. E. Participation According to World Bank and UNDP informants, it took some time to persuade the CPI of the value of a broad consultative process, and to develop a concept for how to conduct it. Formal public consultations were a new concept for Lao, having been introduced only recently for the Nam Theun 2 dam project. The earlier workshops were variable in quality, with problems such as late invitations, materials not distributed in advance and poor quality reporting. However, the process improved as it went along. Most of the consultations took place between March and May 2003, and included the four official mass organisations (Federation of Lao Trade Unions, Lao Women’s Union, Revolutionary Youth Movement and Lao Front for National Construction), provincial governments, the university, the private sector, the media, international NGOs and the DPs. The World Bank and other DPs made efforts to involve international NGOs, who report that their standing with the government increased as a result of the process. The CPI states that it found the consultations time-consuming but valuable, and that many of the suggestions were taken into account in preparing the NGPES.

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Consultative process for the Lao PRSP

Date Event Dec. 15, 2002 Gender workshop Jan. 30, 2003 Workshop with university Jan. 31 Mass Organisations workshop March 5 Workshop on agriculture and Forestry March 7 Workshop on health March 17-19 Meeting on poverty eradication with provincial Governors Mid April Roundtable on governance issues April 24 Workshop on education April 30 Workshop with Mass Organizations and NGOs May 2 Workshop on transport May 5-7 Regional Consultations for northern region (in Xayabouly) May 6-8 Regional Consultations for northern region (in

Oudomxay/Louang Namtha) May 12-13 Regional Consultations for central region (in Vientiane

province) May 15-16 Regional Consultations for southern region (in Savannakhet) May 19 First draft of NPEP distributed in Lao language May 22 Consultations on rural and microfinance May 30 Mini Roundtable Meeting with DPs June Key sectors worked with local governments in 47 poor districts

to design poverty eradication projects and estimate budget Briefings for media Workshops with private sector August Workshop on final draft with provincial authorities September 4-5 The Eight Round Table Meeting with DPs September Workshop with members of the National Assembly End September National workshop on final draft October Final Draft of NPEP submitted to National Assembly December Regional workshops to disseminate the NPEP

The process of preparing the NGPES did not originally include parliamentarians. However, when the document was submitted to the National Assembly in October 2003, there was considerable interest in the strategy. On the initiative of the Assembly, the government organised a four-day workshop for parliamentarians, who subsequently expressed an interest in being involved in monitoring. Public participation in the PRS in Lao is obviously restricted by the closed political environment. The government announced plans to liberalise the legal framework for ‘non-profit associations’ (a term it prefers to ‘NGOs’). However, it remains hostile to public criticism and is unlikely to accept their involvement in the policy process. However, the government’s own documents make frequent reference to a ‘Lao way’ of participation. According to the CPI, their traditional planning process includes a strong element of participation, with comprehensive, grass-roots consultation exercises carried out every few years. They understand the participatory aspect of the PRS in terms of replacing top-down with bottom-up planning methods, beginning from the household and village level. There is a prime ministerial decree on how consultative planning should be done, and the CPI has conducted studies of how to strengthen the process. Some DP informants are sceptical that lower levels of government have the capacity at present to participate actively in the planning process. There are also doubts as to

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whether capacity building at this level is effective. Nonetheless, in a closed political system, working with politically acceptable, indigenous forms of participation seems to offer the most promising strategy. Commentators have noted:

“In the Lao PDR, Cambodia and Vietnam, social and political life are dominated by diverse networks, structures and processes through which social and political consent are generated. Plenty of examples can be found in rural and urban communities in these countries of collective decision making bodies based on informal dialogue and flexibility.”18

The DPs are introducing participatory approaches into their own projects, with some degree of success, and report that genuine debate on policy choices is possible at the local level. In this way, the PRS process does have the potential to broaden inputs into the policy-making process, provided that it does not challenge the Party’s monopoly on political power. F. Partnership and donor coordination According to DP informants, in the past the Lao government has not supported donor coordination, preferring to keep the DPs divided in order to minimise their influence on the policy process. However, they note that, as a result of the more intensive dialogue which surrounded the PRS, the quality of the partnership has improved, and the government has become more supportive of donor coordination. Coordination in Lao works through a Roundtable mechanism, under the chair of a UN Resident Coordinator. There are quarterly informal donors’ meetings, together with monthly Country Team meetings at which, unusually, the Asian Development Bank participates along with the UN agencies and the BWIs. There are 9 sector and thematic working groups, which have evolved over the course of the PRS process. The PRS has certainly helped the DPs to coalesce as a group. Reportedly, it has also facilitated greater cooperation among the international NGOs. The government has begun to attend some of these meetings, and is becoming gradually more open to discussing policy issues with the DPs. The flow of information has improved considerably. One of the constraints is the intensely hierarchical nature of the regime, where individual representatives, even at the ministerial level, are reluctant to speak on behalf of the government. The DPs are gradually aligning their programmes to the NGPES, but there has been no major shift in approach. The World Bank is in the process of preparing a new Country Assistance Strategy, which will change to reflect the strategy, but only at the margins. In Lao, the Bank is not one of the larger donors, and focuses on its comparative advantage – public finance, banking reform, SOEs – which are not major planks of the poverty reduction strategy. The Asian Development Bank’s programme will become fully aligned with the national strategy from 2006, through a three-year rolling workplan with annual updates, which is designed to be flexible and accommodate national policy choices. CPI informants concurred that the development partnership had been strengthened by the PRS process. They noted that the government’s negotiating position with the DPs

18 Malaluan, Jenina & Shalmali Guttal, “Structural Adjustment in the Name of the Poor: The PRSP

Experience in the Lao PDR, Cambodia and Vietnam”, January 2002, p. 8.

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had been strengthened. The government now has a much better understanding of the nature of poverty in Lao, and can therefore make a more convincing case to the DPs about its policy choices. However, they noted that they still find donor conditionalities too prescriptive, and would prefer more flexibility to adapt their policies over time. In recent months, responsibility for international economic cooperation has been shifted from the CPI to the Ministry of Foreign Affairs (MoFA), without official explanation or prior notice to the DPs. This has caused some discontinuity in the development partnership, leaving the DPs unsure of their interlocutor as MoFA builds up its knowledge of the area. G. Prioritising, costing and links to the budget The weakness of the budgetary process is likely to pose a major constraint on the implementation of the NGPES. The budget is not traditionally a policy instrument in Lao. The budgetary and planning processes are artificially separated, and the Ministry of Finance is not a strong institution. According to a Public Expenditure Review prepared jointly by the World Bank and the ADB, Lao has a consistent pattern of overestimating revenues, leading to ad hoc expenditure cuts which fall disproportionately on recurrent expenditure in the social sectors. Lao also has a poor record of making the recurrent expenditures required to support donor-financed investments. This problem has been particularly acute in the education sector. While the fiscal system is formally centralised, the centre exercises weak control over revenue collection and expenditure at the provincial level, and the fiscal equalisation system between wealthier and poorer provinces functions poorly. Unless there is progress on resolving these issues, it is difficult to see how the NGPES will result in a significant shift in domestic resources towards pro-poor activities. The NGPES does not contain any detailed costing and prioritisation of programmes. According to the CPI, the government has just started preparing revenue projections to create a budgetary envelope, which will then inform a prioritisation exercise. Despite this, at the September 2003 Roundtable, the government was quite aggressive in seeking donor commitments to the NGPES. This caused concern among some DPs that the government saw the PRS chiefly as a means of accessing additional donor assistance, and was not serious about mobilising its own resources. The World Bank is attempting to link implementation of the NGPES to its ongoing support for PFM reforms, by introducing objective-based budgeting. Nonetheless, Bank informants predict that it will take several years for the planning and budget processes to converge, because both are path dependent with heavy vested interests. In the meantime, however, there is of course some correspondence between them, which makes it possible to begin implementing the NGPES. The Bank is now organising a series of three seminars with representatives from the ministries and provincial governments, in order to begin the prioritisation process. The first event took place in October, and the others will be at six-month intervals. 1. The first is designed to convey the need for prioritisation, and to transfer some

general knowledge about relevant techniques. Each of the sectors will then be tasked to work on its own priorities and costing, with the help of consultants.

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2. At the second seminar, the sectors will present their own priorities and costing for discussion. At the seminar, they will add up the different sector programmes, and begin to relate it to an overall budgetary envelope. This will initiate a process of bargaining over trade-offs, as well as identifying synergies and cross-cutting issues which can help to reduce costs.

3. The third seminar will be about meeting the country resource envelope. The plan

is that an embryonic MTEF will emerge out of this process. It will result in what is effectively an update to the PRS, containing costings and prioritisation.

This exercise is designed to introduce a process of bargaining and trade-offs among different sectors and priorities, which should ultimately take place at Cabinet level. It is notable that the process of costing and prioritisation is being treated explicitly as a second phase of the PRS, after approval of the strategy itself. This suggests that expectations for implementation during the first three-year PRS cycle are fairly modest. The seminar series may prove to be a useful innovation to start the process moving, but should probably have been done much earlier in the cycle. H. Governance and capacity building According to the World Bank’s Operations Evaluation Department, there was very little progress on governance reforms in Lao over the past decade.

“The articulation of functional responsibilities of government organisations, the implementation of job descriptions, and merit-based promotion in the civil service are not much further ahead than 10 years ago.”19

The ADB recently conducted an evaluation of its past programmes, and concluded that there had been more capacity-substitution than capacity-building, because of the imperative of getting projects implemented in a weak institutional environment. DP informants note that, while horizontal reforms have not been a priority for the government, technical assistance has worked best when matched to a specific government policy objective. The Swedish International Development Authority, for example, has had some success in twinning programmes with the taxation and statistics agencies. In March 2003, the government produced a detailed policy paper on governance issues, for presentation at a roundtable meeting with DPs. The policy paper is incorporated by reference into the NGPES. It sets out four priority areas for governance reform:

• Public service improvement: reorganising government institutions, creating a Department of Inspection for anti-corruption in each ministry; increasing public-sector salaries; building professionalism through training and job descriptions;

• People’s participation: strengthening the National Assembly; developing the capacity and autonomy of sub-national governments;

• Rule of law: legislative reform to create a more coherent legal framework; improving mechanisms for dispute resolution;

19 World Bank OED, “Lao PDR Second Structural Adjustment Credit Project Performance Re-

Assessment Report”, 24 June 2004, p. 12.

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• Sound financial management: improving efficiency and accountability in revenue collection; improving budgetary management; modernising the public accounting system; strengthening the banking sector; improving management of ODA; improving public audit; strengthening land management and administration; improving the regulatory environment for the private sector.

Some DP informants noted that the document goes quite far in the reforms that it is willing to contemplate. Others noted that there had been more involvement of foreign consultants in drafting this strategy than other parts of the NGPES, and that government ownership seemed limited. In any case, having a public statement of government objectives in this area gives the DPs a usual hook on which to hang their policy dialogue, and is also useful to NGOs in their advocacy efforts. Bank informants noted that more could be done with knowledge instruments. Conducting assessments of governance issues jointly with the government is a useful exercise, even if it means compromising on the substance of the analysis, because it pushes the government to diagnose its own problems. Generally, the government is more open to reform where it persuaded that it is necessary in order to achieve an existing policy objective. A useful tactic in the future would be to encourage the government to identify the linkages between governance reforms and the achievement of its NGPES objectives. The DPs are in general wary about the current process of decentralisation. Lao has had unsuccessful experiments with decentralisation in the past. The current initiative may represent more a shift of power within the regime, than a genuine desire to bring government closer to the people, and may have the effect of decreasing financial accountability and transparency. I. Conclusions There is a strong consensus among the informants consulted for this study that the PRS process in Lao has been a relevant and useful exercise, which is helping to operationalise a genuine commitment on the part of the government to growth and poverty reduction. The process started in response to IFI conditionality, with initially little ownership from the government, as demonstrated by the lengthy delays in 2001 and 2002. However, over time, ownership has developed and the process has gained momentum. How far this will go is still an open question, depending on the outcome of debates inside the regime to which the DPs are not party. If the PRS becomes fully integrated with the national planning cycle, it will be sign of high-level ownership. The PRS process in Lao has been slow by any standards, stretching over 4½ years. The DPs – in particular the informal coalition of the World Bank, UNDP and the Asian Development Bank – appear to have operated under the consensus that too much external pressure or artificial deadlines would have been counterproductive, and that time was needed for the lengthy processes of debate and consensus-forming within the government to play out. Most of the informants interviewed for this study agreed that the DPs had approached the process with appropriate sensitivity to the political environment. Nonetheless, some of the delays have come from the international side, and the process tended to stall when the DPs did not give it sufficient time and attention.

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The time spent by the DPs in explaining the purposes and principles of the PRS to individual government officials has been a key ingredient in the process. The messages delivered in this way do appear to filter up to higher levels, and ultimately influence the policy process. A lesson from the Lao experience is that, at the outset of a PRS, DPs should be more systematic in conveying the principles to key individuals across a wider range of government agencies, in order to help the methodology to become embedded. While the process is moving in a positive direction, the achievements to date have been modest: the articulation of a strategy at a fairly high level of generality, without detailed programming, costing or prioritisation. There are significant institutional problems standing in the way of implementation, particularly the fragmented nature of the administration and the weak relations between the central and provincial governments. Turning the budget into an instrument of policy is a longer-term objective, and it may be several years before the planning and budgetary processes are aligned. For all these reasons, informants do not expect to see major results in implementation during the first PRS cycle. This means that the follow-up phase to the PRS is critical. Here, the DPs have been remiss in letting the momentum lapse after the strategy was finalised, achieving little over the past 12 months. The seminars now being organised by the World Bank on prioritisation and costing are a useful innovation, and more activities of this type are needed. The major challenge for the future is mobilising domestic revenues for poverty reduction. The Lao government has a tendency to see the PRS as a tool of attracting donor assistance, rather than for programming its own resources. So long as the funding is coming from donors, it has little incentive to perform rigorous costing and prioritisation. The political obstacles to effective revenue mobilisation remain substantial. As the DPs begin to align their programmes to the PRS, they need to create positive incentives for the government to increase its contribution to the resource envelope.

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II. Yemen A. Context Yemen occupies an unusual position in the developing world: an oil-producing, Middle Eastern state, yet with poverty indicators on a par with the African continent. Its institutional legacies from before unification in 1991 include both communism and traditional tribal structures. With multi-party elections and few restrictions on independent media or civil society, it is one of the more democratic states in the region, but the real structures of power are hidden and the country is yet to experience a change of central government.20 After a decade of international isolation following the 1991 Gulf War, the government is now an ally in the war against terror, but exercises only tenuous control over parts of its territory. The few Development Partners operating in Yemen, many with a recent and limited engagement, are grappling with a unique and complex operating environment. Yemen has very serious governance problems, which the World Bank’s CAS identifies as the most important constraint on its development. According to the available literature, the regime is a loose coalition of tribal structures (whose exact nature is fluid and poorly understood), the military and a small number of influential commercial families, forming an opaque structure which operates in parallel to the state institutions. The regime maintains a balance among these groups through the redistribution of oil revenues and public-sector employment. So long as these resources are available, the regime is judged to be fairly stable (President Saleh has held office for the past 27 years). However, the system generates a high degree of inertia, with powerful vested interests working against complex reform initiatives or the redistribution of oil revenues towards development. Change in Yemen requires a slow process of compromise and consensus building among these vested interests. While patronage is a major constraint on the effectiveness of the state, it is also the primary mechanism for resolving conflict in a highly fragmented society, ensuring a complex political dimension to any reform initiative. After a peak in oil production in 2003, Yemen faces declining reserves, and is project to lose as much as 70 percent of its oil revenue over the next decade. It also faces a growing water crisis. Ninety percent of the population does not have access to adequate drinking water. With the water table dropping at alarming rates due to unregulated irrigation, a number of agricultural communities have already become unviable, causing social tensions. Under these twin pressures, Yemen faces a high risk of social and political instability over the next decade. The public administration in Yemen provides around 25 percent of all employment. A number of studies describe the administration as underpaid (the average salary is $53 without allowances, compared to the national poverty line of $65), poorly trained, unmeritocratic and largely unmotivated.21 Problems of ghost workers and double-dipping of salaries is rife, leading some observers to describe the public payroll as a form of social safety net. Reform of the civil service would therefore have important, short-term welfare implications. The administration is highly fragmented, and joint action and

20 There is little democracy at the highest political levels. President Saleh was re-elected in 1999

with 96% of the vote, in an election where the opposition was forbidden to field a candidate. However, changes of government do occur at local and regional level.

21 UNDP, “Yemen Country Profile”, http://www.undp.org.ye/y-profile.htm.; World Bank, “Country Assistance Strategy for the Republic of Yemen”, 6 August 2002..

http://www.undp.org.ye/y-profile.htm

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effective communication across different agencies and levels of government is very difficult. Yemen has no real tradition of programming domestic resources for development purposes, and poverty is not a prominent topic in political discourse. Despite the relatively open democratic process, there seems to be little popular pressure to use oil revenues for poverty reduction. While there is a strong tradition of private charitable activity, there is little involvement of civil society in the policy arena. Yemen prepares constitutionally mandated, five-year National Development Plans, but in the past these have not been pro-poor in orientation, and the Yemeni government seems to have viewed poverty reduction as mainly the province of donors. A PRS is therefore a highly appropriate initiative for Yemen, but one which involves a steep learning curve. B. Relations with the donor community In recent decades, Yemen has received only 20 percent of the levels of the per capita aid offered to other low-income countries (at present, it receives $14 per capita). The literature points to a number of reasons for this: the complex political history, the legacy of the Gulf War, and poor external relations on the part of the government. In recent times, however, a number of donors have re-engaged or increased their levels of assistance, in recognition both of the extent of poverty and of the strategic importance of the country. However, the DPs are finding it difficult to scale up their commitment. Many of their programmes are fairly recent, and still in the establishment phase. The DPs operate under security constraints, and have a limited presence in country. They have few resources available for policy and analytical work. This also affects the level of coordination among the DPs, which remains in its infancy. The DPs interviewed for this study all expressed doubts that Yemen has the absorption capacity for higher levels of assistance in the short-term. They cited the weak policy dialogue, the postponement of economic reforms, stalled civil service and PEM reforms, weak government service-delivery mechanisms, high levels of corruption, and the difficulty of finding qualified staff to administer their own programmes. In recent years, disbursement rates have been at 20-25 percent of commitments.22 The DPs do not have a united approach for engaging in Yemen. USAID is concentrating its assistance in five regions judged to present a high risk of terrorism, and has limited involvement at a national or sectoral level. Loans from Arab sources make up 75 percent of total ODA. The Arab agencies do not have a presence in Yemen, and do not coordinate with other donors. Among the other DPs, the development of sector-wide approaches remains at an early stage. There are also differences of approach towards the PRS process between the bilateral donors and the UN agencies. The DPs rate their level of influence with the Yemen government as fairly low. They have reasonably good access to senior policy makers, and issues raised by the World Bank are regularly discussed at Cabinet level. The government has generally followed advice on macroeconomic measures, and in recent years has been quite successful at containing the budget deficit. However, reform commitments made by the government often go unfulfilled. Part of the reason may be Yemen’s oil revenues, which at around 22 Government of Yemen, “Poverty Reduction Strategy: Annual Progress Report for 2003” (draft),

July 2004, p. 40.

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$1.5 billion per annum constitute 60-70 percent of the national budget (fluctuating substantially due to oil price volatility). Compared to this, annual ODA flows are much less – of the order of $300 million.23 The absence of a hard budget constraint makes it easier for the government to postpone politically unpalatable reforms. The World Bank is operating under a Country Assistance Strategy from August 2002, with 20 active investment projects. Yemen is currently in the base-case scenario, with some risk of slipping back to the low case due to the slow pace of governance reforms. The IMF has no current programme. DFID has been present in Yemen only since 2002, with current commitments of £10 million per annum, scheduled to increase over the next five years. C. Overview of PRS progress Yemen was one of the first countries to embark on the PRS process, and is now in the process of preparing a second-generation PRSP. It is clear from the government’s own documents that it was motivated initially by the need to access IDA funds.24 The preparation of the PRS proceeded in parallel to two other planning instruments: a Strategic Vision 2025, setting out the government’s long-term development goals, and the constitutionally mandated Second Five-Year Plan (SFYP) 2001-2005. The government’s preference had been to retain a single planning process by incorporating PRS principles in the SFYP. However, the World Bank insisted on a separate exercise, due to concerns that the existing planning process was not sufficiently poverty focused. We were not able to determine the Bank’s original rationale for this decision. However, integrating the two planning processes is now a common objective of all of the DPs. An IPRSP was prepared by a team of national experts under the supervision of a Ministerial Committee. It was adopted by Cabinet in draft form in April 2000, finalised in December 2000 following a series of public consultations, and approved by the Bank and IMF Boards in February 2001. It was a fairly quick affair, based on limited poverty data from a Household Budget Survey in 1998. It set down a number of broad poverty-reduction objectives and macroeconomic targets, and established a timetable for preparing a full PRS by September 2001. Preparation of the full PRSP was launched with a regional workshop in July 2001, and took place over the following twelve months. Additional public consultations were held between 20 December 2001 and 21 January 2002, and there was additional survey work, thematic and regional conferences and workshops, and consultation with DPs. The full PRSP was adopted by Cabinet on 31 May 2002 and received Board approval in July 2002. The DPs rated the content of the PRSP as fairly basic, with few new programmes, weak prioritisation and costing, and limited ownership across government. Nonetheless, given the potential volatility of Yemen, the DPs thought it important to support the effort and press ahead with the process. A Consultative Group meeting was held in Paris in October 2002, in which the donors made combined pledges of $2.3 billion over the three-year period of the PRSP.

23 World Bank, “Country Assistance Strategy”, 2002, p. 25. 24 Republic of Yemen, “Poverty Reduction Strategy Paper (PRSP) 2003-2005”, 31 May 2002, p. 23.

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There was a notable loss of momentum once the PRSP was approved. The policy dialogue with DPs tapered off, partly because of a lack of follow-up from the DP side. In mid-2004, two years after the approval of the PRS, the government produced a draft of its first annual progress report (yet to be formally submitted to the World Bank), which indicated that implementation remained at a very early stage. The Progress Report is a 48-page document, to which all of the relevant ministries and agencies provided input. It offers a broad presentation of the government’s poverty-related activities, but without relating them specifically to targets or indicators in the PRSP. It describes some awareness-raising and training activities, early preparations for a centralised database to support PRS monitoring, and the commissioning of additional studies. It notes that the PRSP objectives were not incorporated into the 2004 budget preparation process,25 and that spending on social protection, education and health remains below PRSP targets. Governance reforms are mostly at the preparatory or pilot stage. At the project level, civil society informants noted that many of the achievements listed in the Progress Report in fact pre-date the PRSP. Consultants providing technical assistance to the Ministry of Planning and International Cooperation confirm that, two years after the approval of the PRSP, there are few concrete results to point to. Nonetheless, there has been a gradual development of the institutional mechanisms required for PRS implementation, including the development of interagency working groups, sectoral plans, monitoring systems and databases, and training of staff in the skills and techniques required. Most observers agreed that, given the starting point in Yemen, it would be unrealistic to expect much progress in implementation during the first PRS cycle, but that the exercise was nonetheless both necessary and useful in building policy making and implementation capacity for the future. Preparations have now begun for a second PRSP, which will be combined with the Third Five-Year Plan for the period 2006-2010. The process is being undertaken jointly with an MDG planning exercise, in order to create an MDG-oriented PRS. In summer 2004, the government nominated Yemen as a pilot country for the UN Millennium Project (UNMP). The next PRS will therefore be prepared according to the UNMP methodology. With UNDP, the UNMP is now helping the government to undertake a comprehensive MDG needs assessment and costing (to be completed in November 2004), followed by a long-term (10 year) MDG plan and a medium-term (5 year) combined PRSP and National Development Plan.26 These documents are all to be completed by June 2005, in time for presentation at the Beijing MDG Conference in September 2005. The government appears to believe that its participation in the UNMP process will secure a substantial increase in international assistance. Informants note that the ‘big push’ approach of the UNMP has helped to re-energise the PRS process in Yemen, and has led to a more intensive engagement with the process across government. The merger of the two planning instruments is widely welcomed. The new process also offers an opportunity to strengthen donor coordination mechanisms.

25 GoY, “Draft Progress Report”, p. 3. It cites “problems of timing” as the explanation. 26 Costing is being done according to modules provided by the UNMP, with short-term technical

assistance also provided by UNMP. In theory, this methodology should be adapted to country conditions and the availability of data. In practice, however, informants have noted that the short deadlines for this exercise means that government barely have time to input their existing (inadequate) data into the UNMP models.

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On the other hand, there has been a sharp break between the original PRS process and the new initiative, with a transfer of responsibilities to different actors within the Ministry of Planning and International Cooperation, causing concerns that lessons and process gains from the first round have been lost. There are concerns that the deadlines set by the UNMP are artificial and unrealistic, and will lead to a narrowing of the participatory process. The Ministry has announced that implementation of the existing PRS has been discontinued, while the new strategies are prepared. Thus, implementation has been suspended at the mid-point, before it had really got underway. A common criticism of the PRS in Yemen, from both DPs and civil society, is that the constant preparation of new strategies consumes all of the government’s limited policy capacity, leaving no time to focus on implementation. D. Organisation, integration and ownership One of the main obstacles to a successful PRS in Yemen is the difficulty of organising joint initiatives across a fragmented administration. The ministries and agencies tend to operate as silos, and while substantive policy discussions do occur at Cabinet level, in the past the Cabinet has not provided effective strategic direction to the ministries. Coordination between the two most powerful ministries, the Ministry of Planning and International Cooperation (MoPIC)27 and the Ministry of Finance, was identified early in the PRS process as a problem.28 Coordination across the 20 Governorates and 326 Districts is an even greater challenge. One of the key measures of progress in the PRS is whether it promotes the institutional capacity for joint policy making and action. According to government informants, MoPIC was initially unconvinced of the need to adopt a new planning instrument, and saw it as an imposition by the IFIs. The Ministry lacked the capacity to manage two parallel processes, and wanted to avoid assigning the work to foreign consultants. The first sentence of the PRSP reads:

“Many might question the timeliness of adopting a Poverty Reduction Strategy at the same time the government is in the process of implementing its development plans according to the Second Five-Year Plan (2001-2005).”

While the two planning processes were housed in the same Ministry, the PRS was entrusted to the Unit for International Cooperation, and kept institutionally separate from the national planning process. In theory, the PRS was said to be an elaboration of the poverty-related elements of the SFYP and an integral part of the planning framework. In practice, the two documents contained different macroeconomic frameworks and development targets, and the operational links between them were never clear. Because it is constitutionally mandated and requires parliamentary approval, the SFYP is the more prominent document, and also deals with other policy objectives such as national defence. However, although the SFYP contains an indicative public investment plan, neither instrument is integrated with the budgetary process. It is an open question whether the duplication of planning processes could have been avoided. Combining the two from the outset would have resulted in greater ownership, but possibly at the cost of a loss of focus on poverty reduction. Integration of the two now poses additional burdens on an overstretched administration. 27 Formerly called the Ministry of Planning and Development. 28 PRSP, p. 24.

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Because of its separation from the national planning process, the DPs saw the first PRSP as weakly owned even within MoPIC, and noted that few officials outside the Ministry were aware of the process. They acknowledge that the original motivation of the government was purely to access IDA assistance. However, they consider it inevitable that the PRS started out as a somewhat artificial exercise. The challenge, as they see it, is to build ownership over time, gradually moving the PRS towards the centre of the policy process. The institutional mechanism for the PRS has been through several changes, and is currently as follows. There is a Ministerial Committee comprising the ministers of planning and development, finance, and social affairs and labour. It provides overall policy guidance, seeks Cabinet approval for different PRS components, and in theory ensures integration with the budget. Managerial responsibility lies with a Technical Committee of 26, comprising deputy ministers, the directors of other agencies such as the Central Statistical Authority, and delegates from the private sector and civil society. The Technical Committee oversees the development and implementation of sectoral strategies, and oversees the working groups. There is a Central Unit within MoPIC which acts as a technical secretariat. For the implementation phase, 27 Subunits were established inside ministries and other agencies, attached to the departments of planning and statistics, to promote awareness of the PRS and report on implementation. Finally, there are eight Thematic Groups dealing with areas identified in the strategy as priorities: education, health, gender, civil society, decentralisation and local government, environment and water, infrastructure, and food security. These are co-chaired by national officials and DP representatives, and include representatives of civil society. Participants note that it has taken several years for this structure to be put in place, and that it is has not yet settled into a functioning system. Of the Thematic Groups, only two – gender and civil society – began operating during the first two years.29 The roles and membership of the Thematic Groups are still being defined. DP participants note that composition varies at every meeting, and that line ministries often send inappropriate representatives who are not informed of the ministry’s activities. There are no established practices on sharing information or preparing progress reports. Preparation of sectoral strategies is in most cases at an early stage (except for education, which predates the PRS). The development of a monitoring system has just got underway. MoPIC notes that, while data is available, it is scattered across different agencies, and the Central Statistical Authority is weak. The PRS has highlighted the importance of organising the data and making it systematically available across government. Overall, the participants describe the institutional development around the PRS as at an early stage, but that it represents important preparatory work for inter-agency policy making and implementation capacity.

29 Progress Report, p. 3.

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E. Participation According to MoPIC, involving NGOs and the private sector in the policy process was a new undertaking for them, and at the outset they struggled to find a concept for how it should be done. There are large numbers of NGOs in Yemen (2,786 in 2000, and growing rapidly), and the government was unsure which were representative. The government regards civil society capacity to contribute to the policy process as weak, but slowly improving. The PRSP notes that NGOs often duplicate unhelpful activities:

“For example, most of the organizations that are active in the development of women carry out training in sewing, embroidery and needlework, although such programs have for a long time proven not to significantly improve the conditions of poor women. Similarly, all organizations that work to encourage enrollment in schools amongst the poor families confine their activities to distributing school bags, although studies have shown the low enrollment rates of children in education goes back to more important reasons than not having school bags.”30

MoPIC describes the participatory process for the first PRSP as only ‘sufficient’, but that the process had to be brought to an end eventually in order to finalise the document. National civil society informants state that the time was too short for broad consultation. The main consultations for the PRSP were held over a 4-week period in December 2001 and January 2002. It began with a consultation meeting with DPs and international NGOs, during which the methodology was discussed. A series of four conferences were held at governorate level with regional and local government and regional universities, each of which involved 3-4 workgroups. At the conferences, MoPIC presented a series of background documents prepared by consultants, leading to discussions of the social and economic context and sectoral issues. The PRSP notes a wide diversity of views emerging from these events.31 There were in addition several seminars and working group on different aspects of poverty, involving different government agencies and NGOs. UNDP and Oxfam contributed to the preparation of a Voices of the Poor study in 20 districts, which formed the primary mechanism for incorporating the concerns of the poor into the process. Oxfam played an important role in the process, helping to organise its partner local NGOs into a network so they could be represented at meetings and comment jointly on the substance. It also conducted training on issues such as how the budgetary process works. The World Bank and other DPs supported their efforts. Oxfam considers that the PRS gave civil society a chance to engage with the government on a number of issues of concern to them, helping to broaden the understanding of poverty beyond the government’s initial narrow focus on income and food. Their impact on the final strategy was modest, but the process helped to organise and build capacity within civil society and to promote dialogue with government. The Women National Committee, a quasi-governmental body for representing women’s interest, played a key role in promoting discussion of gender issues. It co-chairs the Thematic Group on gender. The organisation is not entirely satisfied with its level of influence over the process, but notes that, as a result of the PRS, gender has become for

30 PRSP, p. 72. 31 PRSP, p. 26.

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the first time a legitimate topic within the policy process in Yemen. They would like to see more time for participation at the local level, and are concerned that the tight deadlines set for the next PRSP round will preclude this. Various national NGOs are involved in tracking implementation of the PRS. They see their role as monitoring the process, in particular at local level, and intervening to help resolve problems when they arise (e.g., local government budgetary issues, land tenure problems, local community contributions to projects). They see it as more useful to play a facilitative, rather than an adversarial role. A growing number of national NGOs are conducting awareness-raising programmes on poverty issues and the PRS, in the belief that the more people know about the process, the more they will begin to assert their rights. They note that the government is enthusiastic about awareness raising, but less supportive of civil society involvement in monitoring and training of government officials. In general, the message from civil society informants was that too much time and energy was being spent on preparing strategies, and too little on implementation, and that civil society interest the process may wane if it is not seen to lead to more concrete results. There was no involvement of parliament in the first PRSP. The second PRSP will require parliamentary approval, but there are no plans yet for how to involve parliament in its preparation. MoPIC notes that, when policy issues are debated in parliament, it usually leads to compromise on reform measures agreed with the IFIs. The DPs often underestimate the complexity of the political dynamics, and do not accept the compromises as legitimate. They attribute compromises to a lack of political will, when in fact they are an outcome of the democratic process at work. F. Prioritising, costing and links to the budget This area emerges as a key weakness of the PRS in Yemen. The first PRSP contains only a very basic prioritisation and costing of pro-poor actions. The JSA notes that “identification and costing of programs for poverty reduction” and “prioritization of government actions and budgetary allocations” are both areas requiring further work. The government’s Progress Report notes that PRSP priorities were not incorporated into the 2004 budget preparation process, and that spending targets in the social sectors were not met (although there has been a shift within the education budget towards primary education as a result of the PRS). The government acknowledges problems in budget execution, including in mobilising counterpart funding for agreed projects. Despite various programmes by the World Bank and other DPs, PEM reform remains at an early stage. The World Bank reports that the areas of concern include a weak management environment and poor internal controls, complex and opaque financial approval processes that facilitate rent-seeking, poorly documented financial procedures, weak internal audit mechanisms, and a lack of penalties for non-compliance. These concerns should be seen against the background of Yemen’s poor performance in mobilising domestic resources for poverty reduction, even though oil revenues are four to five times greater than ODA flows.32 Some of the more sceptical voices among the 32 Each year, the government budgets for a very conservative oil price, and then has to readjust

midyear for a large budgetary surplus. Its stated reason for doing this is to ensure that the adjustment is upwards, rather than downwards, and is therefore less disruptive to government operations. A large share of these additional resources are absorbed in a diesel subsidy, which is

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DPs went so far as to describe the PRS as an extravagant bid for more aid, rather than as a serious attempt to programme domestic expenditure. In practice, if PRS programmes exceed available resources by a large margin, prioritisation ends up being done de facto by the DPs, through their choice of which programmes to fund, and the PRS loses its strategic value. According to MoPIC, the government initially understood the PRS initiative as a means of attracting more donor support for pro-poor activities. Their first draft of the PRSP therefore focused on additional poverty-related actions, over and above existing resources. The document indicated a large resource gap, in order to make the case for more assistance. The government was then told by the World Bank and other DPs to base the PRSP on a more realistic assessment of the resource envelope. The programme was revised downwards, with the result that the targets in the PRSP ended up less ambitious than those in the national planning process, which struck the government as a strange result. The Yemen PRS was therefore marked from the outset by misunderstanding as to which resources were being programmed. The UNMP process has now triggered another change in approach. The goal of the UNMP is to make the case for a dramatic increase in international assistance.

“Ambitious and target-driven 10-year investment plans can and should actually be put into operation in low-income settings, backed by greatly increased donor financing. The UN Millennium Project is calling for an enormous rise in investment relative to GNP during the next decade, with much of that increase to be funded by donor grants.”33

The UNMP methodology begins with a needs assessment and costing exercise, in order to estimate the total investments required to achieve the MDGs by 2015.34 The government will then present these figures to the DPs, negotiate over ODA levels, and prepare the MDG plan and PRSP accordingly. At the moment, achievement of the MDGs in Yemen is rated as ‘Unlikely’ in all but two cases, universal primary education and under-five mortality, where the rating is ‘Potentially’.35 The investments required would therefore be very large; UNDP estimates that an increase of ODA to many times its current level would be needed. However, none of the DPs interviewed for this study considered that there was a case for increasing their aid substantially, or that it could be spent effectively if they did.36 It is therefore likely that, having devoted considerable resources to preparing a very large investment programme, the government will once again be directed to revise its expectations downwards and produce a much more modest PRSP.

not pro-poor in effect and which feeds lucrative black-market trade in fuel. Informants suspect that a substantial share of oil revenues is never reflected in the government’s budget.

33 The UN Millennium Project, “A global plan to achieve the Millennium Development Goals” (draft, 23 September 2004), p. 93.

34 The costing is being done according to detailed modules supplied by the UNMP, which represent international best practice. In theory, these modules should be adapted to country circumstances. In practice, the exercise is being done with such haste that Yemeni barely have time to plug their existing (incomplete) data sets.

35 Government of Yemen & UNDP, “Millennium Development Goals: Progress Report for Yemen 2003”.

36 The draft report of the UNMP states: “Many donors view capacity constraints as barriers to scaling up. This is an incorrect view. Capacity constraints are areas that require investments in order to achieve scaling up.” Executive summary, p. 20.

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The UNMP approach is therefore very high risk. It appears likely that the ‘energy’ generated by the UNMP process is related to the government’s expectation that it will lead to a substantial increase in aid. In its PRSP Progress Report 2003, the government states:

“The absorptive capacity of the national economy is admittedly modest, so is the administrative and technical know-how as regards the best utilization of available funds. But that does not constitute valid grounds for holding back on additional support that could help Yemen achieve its millennium goals. To the contrary, the argument for further assistance gets much stronger as it becomes clear that gaps do exist and they need to be addressed. Rather, the question becomes how we can tackle them in tandem with other reforms aimed at administrative, organizational, and human development.”37

If this dramatic increase in assistance does not eventuate, it may damage the relationship with DPs, leaving the government blaming the international community for failing to meet its MDG commitments. It may also result in a second PRSP based on unrealistic resource assumptions. The DPs’ inability to manage expectations in this key area is a critical failing. So long as the government sees the PRS as a means of bidding for more assistance, it has no incentive to carry out a strict costing or prioritizing of PRS programmes. It would be more appropriate to begin the next PRSP from a realistic estimate of the resource envelope, based upon negotiations with DPs and a systematic plan for increasing absorption capacity. It would also be helpful if donor commitments were linked to the government’s progress in mobilizing its own resources for poverty reduction (i.e., according to the principle of ‘additionality’), in order to create positive incentives. G. Partnership and donor coordination The World Bank’s Country Assistance Strategy for 2003-2005 states that it is “firmly grounded” in the PRSP, with a stronger focus on analytical and advisory services to address policy and institutional weaknesses. Several other DPs also state that their programmes have been formulated by reference to the PRSP. However, this leaves around two-thirds of total ODA to Yemen which is not formally linked to the PRS. Because the PRSP is poorly prioritised, most of the ODA supports some PRSP objective or other, but it would be difficult to claim at this stage that the PRS had had much influence on its coordination or strategic orientation. Some DP informants commented that the 3-year PRSP cycle is too short for major changes in DP programmes, and that they would expect more realignment around the PRS in the future as the process gains more credibility with the DPs. The development of sector-wide approaches has been limited, in part because the DPs have limited resources to spend on developing coordination mechanisms. Progress is furthest advanced in education, where the development of a pooled funding mechanism predates the PRS. The government has traditionally had little interest in aid coordination, preferring to assign donors responsibility for different geographical areas.


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UNDP is now supporting the government to build the capacity to manage donor programmes, and a database of aid projects is under construction. H. Governance and capacity building According to the World Bank,

“Poor quality of governance… is the most important constraint on development. Its main characteristics are weak government capacity to design and implement programs, poor service delivery associated with lack of incentives and skills in the civil service, widespread corruption, and absence until recently of accountable local governments.”38

A UNDP Human Development Report states:

“Public administration suffers from poor institutional capabilities, inefficient personnel, under-paid and unmotivated civil servants, inadequate training, and cumbersome procedures and management systems. The problems of public administration have been identified as overlapping jurisdictions between government agencies, over-regulation and discretionary application of laws and regulations. Furthermore there is a lack of protection for property or enforcement of contracts, and, a general weakness of the State in many rural areas.”39

The PRSP does not contain any detailed analysis of governance problems. It specifies the following reform objectives:

• civil service modernisation (restructuring institutions, establishing job descriptions, incremental increases in civil-service wages)

• enhancing democracy (supporting the Electoral Commission) • rule of law (legislative reform, strengthening the judiciary, improving the courts

and prosecutors) • decentralisation and strengthening local authorities (building local government

capacity; financial decentralisation) • pro-poor government (supporting local community capacity to participate in

development). Some of the current World Bank governance programmes, particularly those in public-expenditure management and budget classification, are not mentioned in the PRS, and are reportedly proceeding slowly in the face of a lack of political support. Informants both in government and among the DPs noted that effective technical assistance is difficult to provide in Yemen. There is a real of shortage of qualified Arabic speakers, and frequent problems of communication with consultants who do not speak Arabic. According to Ministry of Finance informants, donors typically make their own assessment of what kinds of assistance are needed, and make offers which the government invariably accepts, without assessing its own needs. Informants agreed that the government to become more active in determining its own technical assistance needs and in managing the process.

38 “Country Assistance Strategy”, 2002, p. 2. 39 UNDP, “Yemen Country Profile”, http://www.undp.org.ye/y-profile.htm.

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I. Conclusions Yemen offers a number of useful lessons on PRSs in difficult environments. The goals and methods of the PRS approach are highly relevant to Yemen, even though they are difficult to achieve. The government needs to develop the capacity to prepare and implement complex policy initiatives. DP programmes need to be aligned around a government-led poverty-reduction strategy if they are to increase their impact. Governance reforms need to be linked to poverty-reduction goals, in order to overcome political barriers to reform. However, against a background of very low government capacity, the concrete achievements in the first PRS cycle were very limited. The government produced a strategy which contained a solid situational analysis and reasonable poverty reduction targets, but which lacked detail on programming, prioritisation and costing. Since then, there has been very little progress on implementation. The most tangible results have been some slow development in institutional mechanisms for intra-governmental coordination, and some opening of the policy process to civil-society participation. Given the slow pace at which change has occurred, the Yemen case shows the importance of sustaining momentum after the strategy has been approved into the implementation phase. There are some good examples of follow-up training and awareness raising at central and governorate level, with technical assistance from GTZ. Generally, however, there has been a lack of follow-up on implementation issues from the DP side, in part because of their limited capacity in-country. The implementation structures for the PRS would in all likelihood have been put in place much earlier, had the DPs engaged more energetically in the process. This is a time-consuming task for the DPs, but represents a key capacity-building exercise in its own right. It would be useful if donors such as DFID could schedule more adviser time to engage with the government on the continuing development of the PRS. Given the limited number of people in the government engaged at the policy level, preparing a complex strategy absorbs most of the available capacity for a lengthy period. The obvious danger in Yemen is that the government moves from one externally promoted initiative to another, without enough time to work on implementation in between. While expectations for a first-round PRSP should be modest, it does seem extraordinary to find that implementation has been suspended midway through the process, in order to begin the next PRS. In such a situation, DPs face a difficult judgment call about whether to push the process faster, at the risk of decreasing government ownership of the process, or allow it move at an incremental pace and become more embedded. Tight deadlines can galvanize efforts, but inevitably involve compromising on process. The challenge is provide the incentives and encouragement to move the process forward, while ensuring that leadership remains with the government. Finally, given that oil revenues exceed ODA by four to five times, mobilising domestic revenues for poverty reduction is critical to the success of the strategy. The government has a tendency to see poverty reduction as the responsibility of donors, and the PRS as a way of bidding for more assistance. So long as it approaches the PRS in this way, it has

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little incentive to carry out rigorous costing and prioritisation. The UNMP approach of working backwards from an MDG costing exercise may exacerbate this tendency. The DPs need to give a consistent message to the government as to how much ODA is realistic to expect under different reform scenarios, and about the importance of prioritising around the available resource envelope. DPs should also explore ways of providing their aid in ways which create incentives for the government to devote more of its own resources for development purposes.

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III. Eritrea

A. Context Since the end of its border war with Ethiopia four years ago, Eritrea has remained in a high state of mobilisation, subordinating all other policy objectives to the requirements of national defence. The armistice agreement war signed in Algiers on 8 December 2000 provided for the deployment of a UN mission (UNMEE) at the border and the creation of a neutral Boundary Commission to make a final and binding demarcation of the border. On 13 April 2002, the Boundary Commission issued a ruling substantially in favour of Eritrea. Ethiopia subsequently rejected the ruling, and continues to occupy territory awarded to Eritrea. United Nations forces remain deployed at the border, preserving a precarious “no war/no peace” status quo which many observers fear is unlikely to last. On 25 November 2004, the Ethiopian government issued a package of new proposals which was rejected by the Eritrean government. The social and economic costs of continuing mobilisation are extremely high. Eritrea has around 250,000 men and women in its armed forces (including compulsory national service), constituting ten percent of the labour force. This is causing acute hardship for many households40 and a severe shortage of labour in agriculture, the private sector and the administration. Around 60,000 people displaced during the conflict have been unable to return to their homes. Labour shortages have been compounded since 2002 by the most severe drought in Eritrea’s history. Food production in 2004 is likely to cover only 17 percent of domestic demand, leaving 1.7 million (around half of the population) dependent on food aid. With an annual per capita GDP of only $180, 37 percent of the population (1.31 million) is living below the food poverty line and malnutrition rates across the country are severe. The United Nations has launched a Consolidated Inter-Agency Appeal for $147 million in humanitarian aid for 2004, of which $81.5 million has been pledged.41 The potential for a humanitarian catastrophe in the event of renewed conflict remains very real. Eritrea is ruled by the same regime that led the country through its three-decade war of liberation to independence in 1993. No form of political opposition is tolerated. The implementation of a new, democratic constitution drafted in May 1997 was suspended as a result of the war, and has not resumed. There were some cautious signs of a political opening in 2002, following the decision of the Boundary Commission, when the PRS process was launched. However, over the past 18 months, when it appeared that a solution to the border problem was not imminent, the political environment in Eritrea became increasingly repressive. The government has detained journalists and political opponents without trial, banned the private press and further restricted civil and political rights.42 It has deferred implementation of a Demobilisation and Reintegration Program agreed in 2001,43 and the period of national service (formally 18 months) has been

40 As a result of war and continued mobilisation, 30% of household are headed by women. 41 UN CAP 2004 Summary: http://www.un.org/depts/ocha/cap/eritrea.html. 42 See, for example, Amnesty International, “’You have no right to ask’: government resists scrutiny

on human rights”, 19 May 2004; US State Department, “International Religious Freedom Report for 2004”, 15 September 2004.

43 While around 67,000 soldiers have been demobilised, these are mainly women, invalids, older people and essential government staff, and this has been offset by the indefinite extension of the period of national service.

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prolonged indefinitely.44 Military wages alone consume a third of government revenues, resulting in large structural deficits and spiralling domestic and external debts (equivalent to 167% of GDP).45 Central Bank financing of the budget deficit has resulted in high (suppressed) inflation. Eritrea’s exports have collapsed, and the country’s foreign exchange reserves are estimated to cover only 2 weeks of imports. The government operates a dual exchange rate with heavily distortionary effects. Amid shortages of fuel and basic foodstuffs, the government has implemented administrative controls over prices and the movement of goods and restricts private economic activity. The government has terminated the licenses of a number of foreign investors, and requires domestic businesses to re-register annually and seek government approval of investment plans. Through its Red Sea Corporation, a party-owned conglomerate of some 30 companies, the government controls a large share of economic activity, and is using military and national service personnel as labour for infrastructure development and to operate state-controlled businesses (e.g., in agriculture and fisheries). According to government informants, the closing of the political and economic environment in Eritrea over the past 18 months dates from the government’s realisation that the international community was not prepared to compel Ethiopia to comply with the arbitration decision, forcing the country to turn inwards and marshal its resources by any means available. The government describes these as emergency measures, which will be discontinued once the country’s external relations are normalised. However, Eritrea has a history of belligerent relations with all of its neighbours, and some observers fear that the government is using the external conflicts as cover for a repressive political agenda. In either case, the government has signalled its intention to return to conflict if the boundary decision is not implemented. Despite the intensely difficult political environment, there are still grounds for optimism about Eritrea’s potential for successful, long-term development. During the 1990s, the government attracted considerable praise for its pursuit of balanced development, and achieved average growth rates of 7 percent. Despite its limited human resources, the Eritrean administration has a reputation for integrity and commitment, and international NGOs report that the country still demonstrates high rates of social solidarity. There is a large diaspora willing to invest in the country. If its external relations were normalised, and if the Eritrean government responded with a reversal of its current policies, effective poverty reduction would become a real possibility. At present, however, the Development Partners can do little but offer humanitarian assistance. B. Relations with the donor community Eritrea presents an exceptionally difficult environment in which to establish an effective development partnership. The regime has a very strong ideology of self-reliance, said to be a legacy of its long independence struggle, and is intensely resistant to anything it perceives as external pressure. It has a history of refusing assistance that is subject to policy conditions. Even during the 1990s, when the international community was very supportive of the Eritrean government, the relationship with donors was characterised by suspicion. In 2003, the DPs welcomed the government’s initiative to undertake an IPRSP as an attempt to re-establish a policy dialogue with the international community. However, the relationship subsequently deteriorated, with the government intensely 44 Large numbers of young people are leaving the country as refugees in order to avoid national

service. 45 Figures provided by the IMF following their 2004 Article IV consultation.

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resentful of the international community’s failure to enforce the boundary award. While the DPs recognise a need to engage the government in a more critical dialogue, their options are limited, with the government reacting negatively to any public criticism One of the factors inhibiting dialogue is the pervasive lack of transparency. The government does not publish a budget. When it prepared a Living Standards Measurement Survey in 2003, it refused to share the source data with DPs. The lack of information makes it difficult to engage on government policy choices, and creates an environment of suspicion. Of course, few governments preserve transparency over military expenditures in time of conflict.

Total humanitarian assistance for Eritrea 2004

Country Pledge (US$) % of total

United States 29,536,684 36.26% European Commission 13,237,064 16.25% ECHO (European Commission) 6,613,567 8.12% Sweden 5,592,436 6.87% Norway 4,851,296 5.96% Netherlands 3,508,338 4.31% United Kingdom 3,239,753 3.98% Canada 2,928,125 3.60% Japan 1,871,608 2.30% Switzerland 1,617,912 1.99% Allocations of unearmarked funds by UN agencies

1,453,479 1.78%

Denmark 1,314,630 1.61% Finland 1,265,152 1.55% Germany 1,048,265 1.29% Ireland 1,017,695 1.25% Others 2,352,920 2.89% Grand total: 81,448,924 100%

The World Bank is the largest of the donors, with commitments totalling $400 million under a Transitional Support Strategy from 2000, mostly connected to post-war reconstruction. Its largest programme, an Emergency Demobilisation and Reintegration Programme, has been delayed by the government’s refusal to demobilise, and its rate of disbursement has declined from a high of $75 million in 2001 to a projected $12 million in 2005. Preparation of a new TSS is underway, but there is no immediate prospects of moving out of the low-case scenario or increasing the rate of disbursement. The IMF has no active programme. The EU remains engaged, but withdrew balance of payments support in 2001 following disagreements over political governance. Eritrea had no external debt at independence in 1993, and is not presently a HIPC country. However, its rate of indebtedness has grown so rapidly as a result of the conflict that it may become a candidate for HIPC. C. Overview and status of the PRS process In September 2001, the government presented a Transitional Economic Growth and Poverty Reduction Strategy (2001-2) to an international donor conference in Paris, and

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announced its intention to expand the strategy into an IPRSP, together with a Medium Term Development Plan and an MTEF. Over the next 18 months, the government carried out a Living Standards Measurement Survey (LSMS) and a Participatory Poverty Assessment (PPA). These formed the basis for a draft IPRSP and Food Security Strategy, prepared concurrently. These documents were shared in draft form with the DPs in July/August 2003 for comment. Reactions to the two strategies were positive, with both the World Bank and the IMF commenting that the draft IPRSP was close to the standard required for a full PRSP. Though the government undertook to finalise the documents by the end of 2003, it was not until the IMF Article IV consultations in July 2004 that the DPs received new drafts of the documents. Since then, however, the government has informed DPs that it does not intend to proceed with the adoption or publication of either document at this stage. The government stated that the unresolved border situation made it impossible to proceed with demobilisation and that, as a result, publication of the IPRSP would be inappropriate and misleading, raising expectations that the government would be unable to satisfy. Plans to prepare an MTEF and Medium-Term Development Plan have also been put on hold. For the time being, the process has come to a halt. Drafts of both the IPRSP and the Food Security Survey are in circulation, and do provide a basis for some policy dialogue. International NGOs in particular find them useful as a statement of the government’s policy intentions. According to one informant, “it is vital to have the government’s own words to quote back at them.” However, as far as the World Bank is concerned, it has not been officially presented with an IPRSP, and cannot either approve the draft nor base its own programmes upon it. In the meantime, the government is following a policy course which is directly contrary to the draft IPRSP, causing widespread concern as to the government’s commitment to the strategy. D. Organisation, integration and ownership This section is based upon interviews with officials of the Ministry for National Planning, and represents the government’s own perspective on the PRS process. The Ministry for National Planning is a very small but influential ministry, containing only seven or eight professional staff, several of them former World Bank employees. When the possibility of conducting a PRS was first raised, it triggered an extensive debate within the government as to whether the exercise was necessary or appropriate for Eritrea, at a time when it was engaged in emergency reconstruction and a massive humanitarian programme. Some in the cabinet regarded the immediate priorities as self-evident, and questioned the value of committing limited policy-making resources to a longer-term exercise. Eventually, the government was persuaded that the PRS would be a valuable exercise which would help to establish future priorities in anticipation of a peace settlement, enabling the government to move forward rapidly and purposefully at the appropriate time. The PRS was intended as a plan which would apply in the event of a settlement, when resources would be diverted from military to development purposes. The draft IPRSP itself presents these as two options:

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“Security is an essential pre-requisite for development including poverty reduction. This allows for a rationale on the continued focus on ensuring heightened mobilization, or implementation of the decision of the Border Commission on boundary demarcation.”

Once the initiative had been accepted by the government, the cabinet made a substantial commitment of its own time to the initiative. The process was entrusted to the principal economic adviser to the President (who later became Minister for National Development). It was overseen by a National Steering Committee, which included five cabinet ministers. This Commitment met at least once a month, giving overall guidance and policy direction and ensuring that the necessary resources were made available. The government stresses that, through this high-level commitment, it ensured that the PRS was not a mere technical exercise, but a genuine ‘vision of the collective’. Operational responsibility was given to a Technical Committee, led by a senior adviser within the Ministry for National Development. It included representation of the four line ministries most directly concerned – education, health, agriculture, and labour and social welfare – together with the Eritrean Relief and Refugee Commission, the National Statistics and Evaluation Office, and the three official mass organisations (women, workers and youth). The Technical Committee managed the process, carried out the research and coordinated the preparation of the strategy itself. The Technical Committee began by producing a Concept Paper for the PRS process, which was shared with DPs and others, and which included a roadmap, the division of responsibilities, the methodology and the concept for the consultation process. The Committee also asked each of the line ministries, the Chamber of Commerce and the Employers’ Association to prepare a 15-page document addressing three questions:

• what has been achieved in your sector over the past 15 years? • what constraints do you face? • what would be your priorities for the future?

This exercise was designed to build understanding of the context, technical capacity and limitations facing each sector, and was used as input into the first draft of the IPRSP. The Ministry for National Development reports that it was difficult to convince the government of the need for an LSMS, in the midst of the worst drought in Eritrean history. The exercise was not seen as a priority, given the desperate, short-term needs of the population. The drought also rendered conditions in the country extreme, and therefore arguably not a meaningful baseline. Drought recurs in Eritrea on average every decade, but not at the current level of severity. As a compromise, the team decided to introduce a sensitivity analysis into the LSMS, comparing the current situation to a ‘normal drought’ to provide a more appropriate baseline. Procurement of appropriate technical input was done with considerable care. After an extensive search around the world, the Technical Committee selected a Pakistani institute, the Social Policy and Development Center (SPDC), which had extensive practical experience and the appropriate range of technical expertise, including in survey methods and econometrics. They assisted with the preparation of the LSMS, and were then retained over the life of the process, providing valuable continuity. The government entered into a global contract with SPDC, which enabled them to draw on

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the right experts at different stages of the process in a flexible manner, without excessive bureaucracy or the need to revise individual TORs. The government also engaged a team of national consultants to carry out the PPA, which could only be done by people with detailed knowledge of local conditions and languages. The Technical Committee found the feedback from DPs on the draft IPRSP to be useful, analytical input, in particular the World Bank’s contribution. The comments were organised into a matrix according to four different categories – process, substance, constraints and next steps – and were taken into consideration in subsequent drafts. Within the government’s small circle of senior policy advisers, the PRS always competed with other priorities, and its champions needed constantly to justify the high level of resources that were required. Though the process had strong government support in 2003, it slipped down the agenda as it became clear to the government that a resolution to the border crisis was not imminent. By 2004, resources were redirected away from the PRS to other pressing needs. According to the Ministry for National Development, the government could complete a full PRSP within a short period of time, but does not consider it appropriate at present. The only way that the PRSP could be implemented is through a large-scale demobilisation that would bring the budget deficit under control and allow for the transfer of domestic resources from military to development purposes. It was never the government’s intention to demobilise unilaterally, in the absence of a peace settlement. The government now considers that its hands are tied. It cannot proceed with the PRS until Ethiopia complies with the arbitration award. Despite constant pressure from the DPs, the government refuses to adopt the IPRSP as a mere pro forma step, to meet donor requirements. As the government sees it, this is in fact a sign of its ownership of the process. It is irritated that the international community remains fixated on the production of the document as an end in itself, while refusing to acknowledge the larger political problem and the binding constraint it imposes on the government’s policy choices. Nonetheless, the Ministry still expects that, if there is a resolution to the “no war/no peace” stalemate, it will be able to proceed with the finalisation and implementation of the PRS. It dismisses concerns that the government has turned its back on the policy agenda as baseless, given the high level of effort within the government that was devoted to its preparation. E. Participation While an IPRSP is not usually expected to be fully participatory, the government carried out consultations on the draft during 2003. Key partners were invited to review four products: the PRS concept paper; the methodology for the LSMS and PPS; the summary poverty assessment; and the draft IPRSP. A series of consultations were held with different government entities, the three official mass organisations, academia, the Chamber of Commerce, local and international NGOs, and local communities. In addition, the draft was based on a Participatory Poverty Assessment. The draft IPRSP does not contain a plan for the additional consultations for a full PRSP, nor does it mention any public participation in the monitoring arrangements.

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Public consultations on the IPRSP were organised via regional government in all six provinces, including in two minority languages. The presentations were led by the two senior economic advisers within the Ministry for National Development, due to the lack of other individuals capable of explaining the strategy, and represented a major commitment of time. There were no international observers of the process. There are only a handful of national NGOs in Eritrea, mostly engaged in relief. They do not participate in the policy arena, and the government does not permit the creation of a formal NGO network. The Ministry for National Development conducted two rounds of consultations with NGOs. The first included both international and local NGOs together. However, as the government was concerned that this would be dominated by foreign and English-speaking organisations, the second forum was just for local NGOs. A number of international and national NGOs collaborated informally to submit comments on the draft IPRSP. They described the consultations for the IPRSP as “hurried”, and expressed the hope that both the preparation of the full PRSP and the institutional structure for implementation would be more inclusive. International NGOs consulted for this study described the participatory process as one-sided in nature, and expressed doubts that true participation is possible in the political climate of Eritrea. Nonetheless, they found it a positive first step that the government had made the effort to present its strategy to the public. According to informants in the Ministry for National Development, the government was initially sceptical about the value of consultations. In normal circumstances, the government recognises their value as a means of identifying priorities. However, in the current security environment, with so many people still mobilised, consultation simply reflects popular frustration. The main feedback from the consultations was that mobilisation and the resulting division of families was the most pressing cause of poverty. However, according the Ministry, people agreed that demobilisation could only take place consistently with the dignity and national sovereignty of Eritrea. As a result, the government is not at present in a position to offer any solutions, and sees little value in further consultation just as a pro forma requirement. The Ministry considers that the DPs’ expectations were not sufficiently sensitive to the difficult political climate. F. Partnership and donor coordination At present, there is little effective donor coordination in Eritrea, and limited policy dialogue between the government and international donors. The government seems to have little interest in facilitating donor coordination, and although it agreed to chair a bi-monthly Development Partners Coordination Forum, this has not been convened in some time and may have lapsed. Some informants thought that the preparation of the draft IPRSP had improved the policy dialogue in a few sectors, such as education. The international NGOs considered that the draft Food Security Strategy had helped them to situate their own programmes within the government’s policy framework, making it easier for them to find a space for working in the difficult political environment. However, there is obviously fundamental disagreement between the DPs and the government on basic policy questions, and little chance of the PRS process helping to bridge that gap while the security situation remains unresolved.

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G. Prioritising, costing and links to the budget With no published budget, MTEF or costing of PRS actions, there is obviously no link as yet between the PRS and the budget. The draft IPRPS is seen as a quality statement of the government’s broad policy framework, and being only an IPRSP it is not expected at this stage to contain detailed programming or costings. If the government decides to proceed with a full PRSP, it is unlikely that the World Bank would be willing to approve the document in the absence of a published budget. In the draft IPRSP, the sectoral strategies are not fully developed, and more detail on sectoral priorities and programming would be required for a full PRSP. In some cases, it is not clear how the strategy relates to existing sectoral plans. The document contains only limited reference to cross-sectoral issues. H. Governance and capacity building UNDP provided around $2 million in technical assistance to support the preparation of the IPRSP and Food Security Strategy. The government reports that, after initially seeking a grant from the World Bank’s PRSP Trust Fund, it found the approval process to be too slow and the administrative requirements inflexible. After some negotiation, UNDP agreed to allow the Ministry for National Development itself to act as implementing agency for the grant, subject to periodic release of tranches. This was a useful model to follow, which allowed the government enough flexibility in procuring technical assistance. The draft IPRSP contains no assessment of capacity constraints, and only brief mention of proposed governance reforms. It refers to the need for:

• improved public expenditure and financial management; • civil service reform, including staff training, downsizing, salary increases and

improved public-sector management; • reform of public enterprises; • decentralisation to regional governments, including revenue sharing and localised

service delivery. There is no mention of critical governance issues such as implementation of the democratic constitution, the need for financial transparency, or economic management issues such as the role of the party and the military in the economy. I. Conclusions The government of Eritrea has produced a draft strategy which is well above the standard normally expected for IPRSPs in post-conflict countries, which has been welcomed by the DPs as a credible policy framework for poverty reduction. The exercise was initiated unilaterally by the government, and was allocated a large share of Eritrea’s limited policy-making capacity. It is certainly highly owned within the Ministry for Development Planning, and a considerable amount of cabinet-level time was devoted to its preparation. Though not formally required for an IPRSP, it was prepared with some degree of public consultation, within the limits set by the Eritrean political environment.

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Paradoxically, it is the high degree of government ownership which has now brought the process to a standstill. The government initiated the PRS in the expectation that it would apply after a resolution of the boundary dispute. It was, in effect, an instrument for reprogramming resources from military expenditure to poverty reduction and development. With no resolution to the dispute yet in sight, the government believes that it is unable to proceed with demobilisation, and therefore does not consider finalising the strategy to be a priority. In the current circumstances, there seems little point in pressing for the adoption of the draft IPRSP in its current form, when the government has made clear that it cannot proceed with implementation. The DPs would like the government to specify those elements of the strategy which it could pursue even during the current ‘no peace/no war’ stalemate. However, the government is clearly impatient with this suggestion, which it sees as a refusal by the international community to recognise the root of the problem. The government is now embarked on a policy course which is diametrically opposed to that set out in the draft IPRSP, and has effectively terminated its policy dialogue with the international community. This leaves the DPs in a position where they can do little except continue to provide humanitarian assistance. If there is no resolution to the boundary dispute, there is likely to be a further deterioration in the relationship between the government and the DPs. On the Eritrean side, as the social and economic costs of mobilisation continue to grow, the government is likely to become increasingly resentful of what it sees as a betrayal by the international community over the boundary issue. On the international side, the DPs may be forced to withdraw from sectors such as education, where they disagree profoundly with the government’s current policy course. The situation in Eritrea is highly volatile, and could go in either of two directions. One alternative is that Ethiopia accepts the arbitration award, and the government and international agencies are able to proceed with the planned demobilisation programmes. Even in that best case scenario, Eritrea will continue to face severe humanitarian and economic problems for the next few years. However, the government may then choose to proceed with the IPRSP and the Food Security Strategy. If there is no resolution to the border dispute, the welfare of ordinary Eritreans will continue to deteriorate, as the economy contracts and there are increasing shortages of staples. Faced with a deteriorating position, the government would face short-term incentives to initiate armed conflict, in order to preserve national unity and force a more robust international intervention on terms more favourable to Eritrea. Its policy choices over the past two years have been consistent with preparing for renewed conflict. This scenario would carry dreadful consequences for a country already in desperate circumstances, and the international community should do all it can at the diplomatic level to make sure it does not eventuate.

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IV. Liberia Liberia is in transition from a long civil war and substantial state collapse. An international peacekeeping mission is working with a transitional government to rebuild state institutions and deal with a pressing humanitarian crisis. Political conditions remain uncertain, and the temporary government has limited authority and policy-making capacity. The conditions are clearly not in place to initiate a poverty reduction strategy. However, the international community has used a Transitional Results Matrix to introduce some basic elements of the PRS approach into the reconstruction programme – namely, coordinating international assistance and government actions around a results-oriented strategy, under the joint leadership of national and international actors. This case study looks at the extent to which it has proved possible to introduce PRS principles at such an early phase of post-conflict reconstruction. A. Context Ever since Samuel K. Doe’s 1980 coup d’état, Liberia’s development has been dominated by civil war, externally brokered peace agreements, and short-lived elected governments. Charles Taylor won the national vote in July 1997 after a brutal civil war lasting for seven years. He became president of a state that had lost much of its infrastructure and ceased to provide basic services. The public payroll had collapsed, leaving public employees to fund themselves however they could. The Taylor government did not focus on rebuilding public institutions or the economy, but on “fomenting unrest and brutal excesses in the region”,46 principally through incursions into Sierra Leone. As a result, infrastructure, basic services, education and health care all remained derelict. ECOWAS brokered another ceasefire in Ghana on 4 June 2003, enabling peace talks between government and rebel groups to begin. On the same date, Sierra Leone indicted Taylor for war crimes, resulting in his resignation and exile to Nigeria. A Comprehensive Peace Agreement (CPA) was concluded in August 2003,47 leading to a UN/ECOWAS peacekeeping mission. A National Transitional Government of Liberia (NTGL) has been formed, consisting of representatives of the warring factions, civil society and members of the Liberian diaspora returned from the United States. Inaugurated on October 14th, the NTGL has a two-year mandate to: (i) ensure enduring peace and guarantee security; (ii) rebuild essential state institutions and organize democratic elections in October 2005; and (iii) lay the foundations for economic revival. The costs of the two decades of war are vast. By the end of 1996, real GDP was at 10 percent of its pre-war level, and the contribution of non-agricultural production to GNI had fallen from 70% to 30%. With a per capita GNI of $130, Liberia is one of poorest countries in the world (the average for Sub-Saharan Africa is $490). Liberia’s social indicators are equally bleak; life expectancy is 47.7 years and infant mortality rates are over 50% worse than the regional average. Half the population, some 1.7 million Liberians, are dependent on food aid, with displaced persons particularly vulnerable.

46 Bureau of African Affairs, US State Department. Liberia Background Note

(http://www.state.gov/r/pa/ei/bgn/6618.htm), Nov 2004 47 Comprehensive Peace Agreement Between the Government of Liberia and the Liberians United

for Reconciliation and Democracy (LURD) and the Movement for Democracy in Liberia (MODEL) and Political Parties, Accra, 18 August 2003

http://www.state.gov/r/pa/ei/bgn/6618.htm

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It remains an open question whether the political conditions are in place for successful state-building, let alone poverty reduction. After decades of warlordism, many Liberians have come to see the state as a hostile or predatory form, and there is scepticism as to whether the signatories to the CPA are committed to changing this.48 The NTGL is a loose coalition of formerly hostile groups, under the leadership of a non-partisan chairman, Charles Gyude Bryant, and does not appear to have a collective decision-making capacity. The NTGL remains preoccupied with the immediate legacies of weak or non-existent state institutions, collapsed domestic revenue collection,49 war-torn infrastructure and the humanitarian crisis. With a limited life-span and no democratic mandate, the government does not have either the authority or the capacity for longer-term policy making. B. Relations with the donor community During the civil war, no development assistance was possible. Both the US and the EU continued to provide humanitarian aid, but largely outside government channels. Some democratisation and capacity-building activities were attempted, but there was little opportunity for a coordinated approach. Since the peace settlement, a number of DPs (in particular the World Bank, UNDP, USAID and the EU) have begun implementing state-building programmes, assisting the NTGL to restore basic functions. Programmes have focused on DDRR, basic service delivery and the rule of law. In the present environment, DPs face a constant dilemma between delivering their assistance outside government channels (usually the more efficient option in the short-term) or working to build up new and fragile domestic institutions. Liberia’s debt situation is a barrier to a more intensive engagement. Liberia has an external debt of $2.9 billion (including $416m to the World Bank and $717m to the IMF), which it has not serviced in many years. All further lending has been suspended until the arrears are cleared. Liberia received the first LICUS Trust Fund grant in January 2004 of $4 million, as part of total World Bank commitments of $25 million. Pledges of $552 million were made at a donors’ conference in February 2004, with the US and the EU remaining the largest contributors. C. The Results-Focused Transitional Framework In December 2003, the World Bank and the UN conducted a joint assessment of Liberia’s priority reconstruction needs, with participation from NTGL officials. On the basis of this assessment, the World Bank led the process of preparing a Results-Focused Transitional Framework (RFTF), in order to provide a strategic orientation to the reconstruction effort. The RFTF is one of a number of recent experiments (together with East Timor & Haiti; Sudan is under preparation) with Transitional Results Matrices (TRM) – a new planning and coordination tool designed to allow donors and national governments to manage a complex transition in a fragile environment. The TRM is a “pre-PRS tool” designed for countries which do not have the capacity to initiate a PRS, yet nonetheless need a 48 IRIN, “Where are the Weapons? Is Disarmament Really Working?”, 28 July 2004. 49 Most of the government’s $71.9m revenues are from forestry and maritime sources (Liberia is a

major ‘flag of convenience’ state).

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strategic framework with clear priorities, sequencing and time-bound objectives. The preparation of a TRM is typically led by the donor community, but incorporates as much participation from the government and national stakeholders as the circumstances allow.50 According to the World Bank, the goals of the RFTF in Liberia are as follows:

• “The specific, time bound results defined in the RFTF enable government and donors alike to prioritise and sequence actions. This is important in post-conflict environments, where needs are urgent and widespread and capacity low.

• The RFTF provides a management tool for NTGL and constitutes the NTGL’s program for the transitional period.

• The RFTF is a means of communicating with the public, promotes dialogue and can be used to manage expectations as well as to foster accountability.”51

The RFTF sets out objectives for the two-year mandate of the NTGL, organised into ten ‘clusters’ and subsidiary sectors. Under each sector, it defines a desired objective, and intermediate results arranged in six-month periods. The RFTF is designed to capture the entire range of transition activities, from the deployment of international peacekeeping forces to the promulgation of new regulations on civil service recruitment. The RFTF itself does not specify which actor is responsible for each objective. Most of the activities take place outside the framework of government, by DPs and international organizations acting through their own implementing agencies. As the World Bank puts it:

“Balancing these competing priorities indicates the need for transitional delivery mechanisms while state capacity is being strengthened. This can be done through community driven or NGO-supported approaches, or through autonomous agencies, using financing mechanisms that are ring-fenced from weak government systems. In some cases these might form the shell of government institutions that continue beyond the transition; in other cases they may be interim arrangements that give way to government bodies once these are reconstituted with sufficient capacity to obviate the need for transitional mechanisms.”52

Nonetheless, the RFTF serves as an initial partnership agreement between DPs and the NTGL, which might ultimately lead towards a PRS once an elected government is in place. “It provides the nucleus of the government’s national development framework and could lead into the PRSP framework as stronger analysis and consultation processes are instituted to inform a medium term poverty reduction strategy.”

50 World Bank LICUS Team, “Guidance Note on Transitional Results Matrices – a ‘pre-PRSP’ tool

for LICUS in transition: Concept Paper”, April 2004. 51 World Bank, Country Re-engagement Note For Liberia, March 2004 52 ibid

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Results-Focused Transitional Framework

CLUSTER SECTOR

1. Security 1. UNMIL Deployment 2. Armed Forces Restructuring

2. Disarmament, Demobilisation, Rehabilitation And Reintegration Of Ex-Combatants (DDRR)

3. Refugees, Returnees And Internally Displaced Persons (IDPs)

4. Governance, Democratic Development And Rule Of Law

1. Public Sector Capacity, 2. Local Government, 3 The Judiciary, 4. Police Service, 5. Corrections System, 6. Development Of Civil Society, 7. Human Rights, 8. Media

5. Elections

6. Basic Services 1. Health And Nutrition, 2. Education, 3. Community Water And Sanitation

7. Restoration Of Productive Capacity And Livelihoods:

1. Agriculture 2. Fisheries , 3. Community Development, 4. Social Safety Nets 5.Groups With Specific Needs

8. Infrastructure 1. Power 2. Communications 3. Transport 4. Urban Water And Sanitation

9. Economic Policy And Development Strategy 1. Financial Management And Audit, 2. Development Strategy, Budget And Statistical System, 3. Public Sector Procurement, 4. Financial Sector, 5. Public Enterprises, 6. Forestry, Extractive Industries And Natural Resources Management

10. Co-ordinated Implementation of the Transition Framework

Managing, Monitoring And Evaluating The Implementation Of The Transition Framework

D. Ownership and leadership of the RFTF The RFTF emerged from a UN proposal for a Post-Conflict Needs Assessment, which was refined in discussions with the World Bank, USAID, EU, DFID and international NGOs. The needs assessment was carried out over two weeks in December 2003, according to Annotated Guidelines prepared by the World Bank, using sectoral teams made up of UN staff and international consultants, a World Bank mission (7-14 December 2003) and an IMF visit. The sectoral teams produced reports on priority areas by 22 December, which were then consolidated into the RFTF by 6 January 2004 and finalised in time for presentation to the February donors’ conference. An institutional structure has been established to implement the RFTF, under Liberian leadership but with substantial international involvement. The policy making and steering body is the RFTF Implementation and Monitoring Committee (RIMCO), chaired by the Chairman of the transitional government, with the UN Deputy SRSG and World Bank Country Director acting as vice chairs. There are ten Technical Working Committees supporting each of the clusters of the RFTF, which coordinate, monitor and report on activities in each area. They are chaired by the relevant NTGL minister and include representatives of DPs, UN agencies and NGOs. Some clusters have also established sector-level working groups and teams. The Ministry of Planning and Economic Affairs provides a technical secretariat, known as the RIMCO Support

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Office (RSO), with three Liberian staff and two international experts (yet to be seconded). At the time the RFTF was prepared, the NTGL had barely begun to operate. The government had been inaugurated for only a few weeks, and key ministers had only just returned to Liberia from the diaspora. The potential for meaningful government involvement at that stage was therefore limited. Some consultations were held with Liberians outside the government. National Stakeholder Consultations and a High Level Summit took place from 5-8 January 2004, involving more than 200 Liberians (including parliamentarians, individuals from the former warring factions, heads of parastatals, leaders of political parties and civil society representatives). Consultations were confined to Monrovia, as no travel outside the capital was possible for security reasons. The drafting of the RFTF itself was therefore done by the DPs. Nonetheless, the expectation was that, as more Liberians returned from abroad and government capacity increased, the NTGL would begin to lead the process. Nine months later, the NTGL remains publicly committed to implementing the RFTF as its own strategy. According to the first semi-annual Progress Report released in September 2004, there has been important progress in a number of the clusters, although problems of under-funding and lack of capacity remain acute. On the extent of government leadership of the process, both the Progress Report and informants interviewed for this study expressed a number of reservations. First and most importantly, it is not clear that the NTGL itself is coherent enough to provide effective leadership. The nature of the interim peace settlement is that ministries have been divided among rival factions.53 While the Chairman is non-partisan and well-regarded by the DPs, there is no real cabinet structure in place, and he has little ability to give strategic direction to the line ministries. The Progress Report notes:

“Otherwise innocuous decisions and efforts have been hampered by partisan interpretations that ultimately compromise performance and results. The widely reported lack of collaboration and partnership has partly been blamed on this factional distrust.”

This in turn means that the leadership of the Technical Working Committees is uneven, and there is no real accountability back to the centre of government. As a result, the principle that RIMCO should act as a “single team” appears unrealistic. Second, there have been problems with establishing and staffing the RIMCO structure. The secretariat has only just begun to operate, producing its first monthly report in October 2004, and is still waiting for international secondments. The Technical

53 At the time of the CPA, ministries were allocated to different factions as follows: GOL (Ministry

of Posts and Telecommunications; Ministry of Health and Social Welfare; Ministry of National Defence; Ministry of Planning and Economic Affairs; Ministry of Internal Affairs), LURD (Ministry of Finance; Ministry of Justice; Ministry of Labour; Ministry of Transport; Ministry of State); MODEL (Ministry of Agriculture; Ministry of Commerce; Ministry of Lands, Mines and Energy; Ministry of Public Works; Ministry of Foreign Affairs); Other Political Parties & Civil Society (Ministry of National Security; Ministry of Education; Ministry of Gender and Development; Ministry of Information; Ministry of Rural Development; Ministry of Youth and Sports).

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Committees lack the financial or human resources to undertake the monitoring and coordinating role envisaged in the RFTF, and much of their work is in practice performed by World Bank and UN staff. The line ministries have difficulty supporting the process. According to the Progress Report, “NTGL ministries and departments can barely absorb additional transition-related RFTF transaction costs.”54 The ministries do not have the skills to prepare project documentation to meet donor standards. The ministries’ capacity to establish a presence around the country is also limited.

“Since its assumption of office on 14 October 2003, the Government has not been able to organize the delivery of public services. Government officials being deployed to the counties lack adequate office facilities, equipment and other logistical support. The transitional government has insufficient funds at its disposal for the proper functioning of ministries or for restoring its presence throughout the country.”55

For these reasons, government informants state that the RFTF tends to operate in practice as a “parallel structure” to the government. Third, there seems to be a consensus that the RFTF contains too many objectives for the structure to manage, and is not sufficiently prioritised. A number of informants have described it as over-ambitious and over-elaborate. A joint submission to the first review made by 33 international NGOs describes it as “an overwhelming laundry list of ‘things to do’.”56 Fourth, it is not clear that international donors are actually willing to be coordinated under the RFTF structure. Donors have retained their pre-existing preferences for certain sectors over others (particularly health and education over infrastructure). The Minister of Planning and Economic Affairs has noted the “apparent inflexibility of donors, in some cases, to accept the re-allocation of funding from well-funded sectors to others in dire need of support.”57 The Progress Report states:

“Gaps between donor partners and the NTGL line ministries are particularly pronounced, and are made manifest in many ways. For instance, several donors fund projects without coordinating with relevant NTGL ministries… The mechanism is designed to facilitate partnership, but - in practice - RWC chairs are having difficulties getting all stakeholders to the table. The zeal and urgency for delivering projects has meant that many implementing partners spend more time pursuing the imperatives of their own agencies than coordinating with local counterparts, including the leadership of their clusters.”58

Donors are failing to provide sufficient information on disbursement and project implementation to the Working Committees to allow them to play an effective monitoring, coordination and reporting role. The RIMCO Secretary has noted that the Ministry of Agriculture has no information on projects in its sector. The consortium of international NGOs noted that the Progress Report itself was not always accurate.

54 Progress Report, p. 28. 55 Progress Report, p. 6. 56 Monitoring & Steering Group, “Concerns of the International NGO Community Working in

Liberia”, 24 September 2004. 57 “Liberia: Planning for Results in Fragile States: The Results-Focused Transitional Framework”,

Address to the World Bank, October 2004, http://www.humanitarianinfo.org/liberia. 58 Progress Report, pp. 26-7.

http://www.humanitarianinfo.org/liberia

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Finally, the RFTF as a whole is under-funded by some $269 million, from the total of $676 requested (around 40 percent). Such a large funding gap undermines the ability of the RFTF to play a strategic function. The Progress Report also notes problems in timing of disbursements. It is of course much too early to evaluate the functioning of the RFTF as an aid coordination mechanism. The institutional barriers to effective coordination in complex, multi-agency reconstruction efforts are notoriously difficult to overcome, and most observers think it is unlikely that the larger problems could be solved at the country level. The transitional nature of the government and the extremely weak institutional environment makes it difficult to establish genuine national leadership of the process. However, some observers identified a slow but steady transfer of ownership to Liberians since the assessment mission. Overall, informers in both the NTGL and the DPs continue to believe that the objectives of the RFTF are valid, and that further efforts should be made to improve the implementation structure. The Framework is to be revised in December 2004. E. Conclusions Most observers agree that the RFTF is a good concept which is pursuing an appropriate set of objectives, but rate its achievements to date as limited and fragile. The appropriate conclusion may simply be that Liberia represents the most difficult of environments in which to introduce PRS principles. The RFTF is not a programming instrument for domestic resources. The government has a short-term, cash-based mini-budget (approximately $25m for February-June 2004). The budget covers only basic operating costs of public institutions, without provision for reconstruction or humanitarian assistance. According to the Progress Report, the national budget is “infinitesimally low in relation to the urgent humanitarian and development needs.”59 Donors are reluctant to channel their assistance via the national budget, due to a weak budgetary process, weak or non-existent financial controls, lack of transparency and a history of grand corruption. It is doubtful whether the RFTF can really be described as a national policy instrument until such time as the government is a financial contributor to it. Nonetheless, under the RIMCO structure, the government is gradually acquiring the capacity to monitor and report on the progress of assistance against the objectives set out in the RFTF. This is an essential capacity for the government to develop in order to become an active partner in the reconstruction and development process. For all of the practical problems which the RFTF has inevitably encountered, it is certainly preferable to the alternative of bypassing the domestic institutions altogether.


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V. Timor Leste A. Context Timor Leste was the first country born into the new Millennium. Though it suffered extensive physical destruction and the complete collapse of state institutions in 1999, peace was restored rapidly through a major international intervention. However, the new country faces very difficult development challenges. The population of 800,000 is one of the youngest in the world (half under the age of 15), and has high rates of poverty (20% living on less than a dollar a day). Almost half of the population has never attended school. Under the United Nations Transitional Administration (UNTAET) from October 1999 to May 2002, security was maintained by “what must surely be seen as an exemplary peacekeeping operation”.60 UNTAET set about simultaneously providing basic services and building the machinery of government from an extremely low base. After setting out an initially very ambitious National Development Plan, the government has subsequently refocused their efforts on basic institutions such as the police and judiciary. While commentators have noted that early planning and fund mobilisation enabled a “smooth transition”61 from reconstruction to development, a complex aid financing model (based on six funding streams62) made co-ordination and synchronisation initially difficult. As the first phase of assistance draws to a close and the international presence is scaled down, Timor Leste is likely to face negative growth and serious shortages in own revenues. B. Relations with the donor community Donors were midwives to the birth of Timor Leste, and a high degree of aid dependence is likely to remain for the foreseeable future. The country has received substantial assistance from a coordinated group of external funding partners – the Timor Leste Development Partners (TLDP) – who have met twice a year since 1999 to manage funding and monitor progress. The TLDP conference of December 1999 in Tokyo pledged US$366 million for reconstruction and US$157 million in humanitarian aid for the period 2000-2002. Funds released were even higher, with US$518 million disbursed by June 2002.63 In addition, the United Nations assessed contribution budget was US$1,280 million in the period up to independence. Aid per capita in this initial period (US$209) was one of the highest in the world, exceeded in recent times only by Bosnia and Herzegovina (US$247) and the West Bank and Gaza (US$ 213). There are two trust fund arrangements. The Consolidated Fund for Timor Leste (CFET) managed funds equivalent to 14.3% of GDP in 2002, half financed from domestic oil revenues and the rest from donors, representing one third of all 60 Kalus Rohland & Sarah Cliffe, “The Timor Leste Reconstruction Program: Successes, Problems,

Tradeoffs”, Paper 2, Conflict Prevention and Reconstruction Unit, World Bank, 2002. 61 Ibid. 62 The Humanitarian Consolidated Appeal, the assessed contribution budget of UNTAET, two

Trust Funds (CFET and TFET, administered by the UN and the World Bank), UN Agency Reconstruction Programs, and bilateral support through NGOs and contractors.

63 “The larges aid donors in Timor Leste are Portugal, Japan, the European Commission, the United States and Australia. A number of other countries including Norway, Sweden and Finland, the United Kingdom, Ireland, Canada, Germany and New Zealand, give relatively high per capita amounts. This is outside the assesses contributions made to the budget of the UN Mission”. Ibid.

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expenditures. A further 20 percent was channelled through the World Bank-administered Trust Fund for Timor Leste (TFET), and the remainder through bilateral projects and the United Nations budget. Timor Leste’s ability to generate revenue of its own is weak, with only oil concessions likely to generate significant income in the future. External funds amounted to 70% of GDP in 2000 and 2001.64 In 2002-3, the Government had a Combined Sources Budget of $236 million (equivalent to two-thirds of GDP). This is projected to decline rapidly to $136 million, as a result of the winding down of the TFET, the reduction of the UN presence and the decline in bilateral donor support. Funding deficits are likely, unless the government is able to reduce projected costs through prioritisation and reducing the size of government. During the first and second Transitional Governments, many of the core activities of the state were provided by UN and expatriate staff. The World Bank and IMF oversaw the Central Fiscal Authority (precursor to the Ministry of Planning and Finance) and were involved in the creation of a multi-year budgeting tool. The Australian Government noted in 2001 that “functions being undertaken by UNTAET need to be absorbed into the Public Administration. Corporate systems independent of the UNTAET need to be developed.”65 It also noted the need for accelerated recruitment of Timor Lesteese civil servants. By late 2002, a joint mission reiterated that the issue of building sustainable local capacity remained and that internationals were filling line functions; they were “often too busy or ill-equipped to provide training for counterparts.”66 The most recent reports indicate that reliance on external capacity remains high.67 C. Overview of planning instruments In May 2002, the Planning Commission within the nascent Ministry for Finance and Planning launched a National Development Plan (NDP). Prepared with contribution from 120 civil servants and public meetings involve 38,000 Timor Lesteese, it presents a comprehensive, medium-term development strategy. It has four main elements:

• promoting opportunities for the poor; • improving their access to basic services; • enhancing human security (including reducing vulnerability to shocks); • empowering the poor.

The document is described as a poverty-reduction strategy, and formed the basis for a Vision 2020 document, which was widely distributed in the form of a booklet.

The NDP was a very ambitious exercise to undertake so early in a state-building process. However, it appears to have been too broad in scope to provide a useful tool for planning. While it continues to define the government’s broad vision, it has been

64 World Bank, “Program Document for the Second Transition Support Program”, June 2003. 65 TLDP Presentation, 2001, Australian Government. 66 Aide Memoire, Transition Support Program Assessment Mission, November 2002. 67 For instance, David Webber, “Ministry of Planning and Finance; Assessment of Institutional

Effectiveness, Technical Assistance and Capacity Building Issues” for the World Bank, 29 February 2004.

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followed by a series of more focused plans which provide the practical guidance for government and donor actions.

After a series of civil disturbances in December 2002 and January 2003, the government sought to concentrate its efforts by producing a Road Map for the Implementation of the NDP (including a Stability Program), as well as a series of agency-level action plans. The TLDP partners from the start used results matrices to prioritise their assistance. The main instrument since independence (under the TFET) has been annual Transitional Support Programs (TSPs). Each element of the TSP is formally linked to a section of the NDP, but in practice focus on only a small subset of the issues identified in the NDP. An Appraisal Mission reported that:

“The TSP represents a sub-set of the highest priorities presented in the Road Map and the agencies’ Annual Action Plans. Government agencies have identified their TSP priorities, working in collaboration with the Ministry of Planning and Finance focal points and the TSP Appraisal Mission. The Appraisal Mission…critically assessed the full range of planned actions, seeking to focus attention on a limited number of actions and targets. Much of the discussion…focussed on implementation requirements and definition of realistic targets and milestones for TSP II (FY2004).”68

The TSP is supported by an Action Matrix, which sets out the immediate priorities for action each six months.

“The Action Matrix of the Timor-Leste Transition Support Program (TSP) is a second-generation Transitional Results Matrix, one in which the initial gains made in the immediate post-conflict period are being consolidated through a more comprehensive and more sophisticated results matrix which is linked to a multi-donor budget support program. The original TSP matrix was a set of priority actions identified in early 2002 and judged key to the transition out of UN-administration and into Independence, based on Timor-Leste’s broadly consultative National Development Plan.”69

The structure of the second TSP for the year 2004 is set out in the Table. It is supported by eight Sector Investment Programs (SIPS). Donors have been focusing their capacity-building activities around the TSP priority areas, and the level of government involvement in the management of the process has been progressively expanded.

“For each program objective, the Matrix identifies the ministry/agency responsible and the donor(s) who will provide technical assistance to support that agency; it also articulates the outcomes expected, and the targets to be achieved for each quarter during the year. As the Matrix has evolved, the indicators in it have also grown more specific and more useful. After TSP-I, the Prime Minister began using the Quarterly Progress Report as a management tool with Cabinet, and this highlighted its value to line agency staff. This high-profile use of the tool inside Government also resulted in both resources and technical efforts to build the capacity of operational staff in Government to monitor and track the full range of Matrix actions. As TSP evolved through the first three years after Independence, the breadth of consultation and technical

68 World Bank, “Program Document for the Second Transition Support Program”, June 2003. 69 World Bank, TRM “Operational Note on Transitional Results Matrices (TRM) – a “pre-PRSP”

tool for LICUS in transition” (forthcoming).

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inputs grew, the process of assessing progress and adjusting the matrix during the year became more consultative within Government, and the indicators used became more specific and refined.”70

Transition Support Program II (2004)

A.1. Governance; Strengthening Oversight Institutions A.2 Governance: Public Sector Management A.3. Governance: Strengthening the Justice Sector A.4. Governance: Strengthening the Police Services A.5. Governance: Planning and Public Expenditure Management B1. Service Delivery for Poverty Reduction: Health B2. Service Delivery for Poverty Reduction: Education B.3 Service Delivery for Poverty Reduction – Vulnerable Groups (Veterans

Issues) C.1 Job Creation – Private Sector Development C.2 Job Creation – Agriculture

D. Conclusion During the state-building process, the environment in Timor Leste provided limited opportunities for normal processes of governance. As the World Bank notes, “legislation was put in place by fiat, without the benefit of an embedded policy or consultative process.”71 As a result, the policy agenda and operational priorities were inevitably driven by the donors in the first instance. An early attempt at a full PRS process, including extensive public consultation, may have been a useful capacity-building exercise for the new administration, but produced a document which was far beyond the capacity of the new national institutions to implement. As a result, prioritisation within the NDP framework has been accomplished through periodic results matrices, to provide a strategic focus to the assistance programme. The initiative was led by the Development Partners (particularly the World Bank). However, the matrix approach allowed for progressively greater participation of national institutions over time, and the government is now increasingly using it as a tool of management for its own operations. A key element in this approach was the establishment of a Trust Fund arrangement administered by the World Bank, which facilitated the coordination of international assistance – notoriously difficult to achieve in a post-conflict environment. The Timor case was state-building at its earliest phase. Against the background of a near-vacuum of domestic institutions, it demonstrates the importance of clear prioritisation of actions around a set of ‘zero generation’ reforms, combined with the

70 Ibid. 71 World Bank, Report 21184, Memorandum of the President of the IDA to the Executive

Directors on a Transition Strategy for Timor Leste, November 2000.

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gradual integration of PRS principles (including national leadership) into the process as the new state developed its capacity.

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VI. Sudan

A. Context Modern Sudan has been at war for almost its entire existence. The thirty-year history of conflict, sparked by southern mutinies against the central government and sustained through a succession of military coups, has generated a long succession of humanitarian crises. The latest round of civil war began in 1983 after the failure of the 1972 Addis Ababa accords to unite the Islamic North (under the Khartoum government) and Animist/Christian South (under the Sudan People’s Liberation Movement - SPLM) into a single, quasi-federal structure. It has resulted in the deaths of over two million people, the largest internally displaced population in the world (some four million), and over half a million people living abroad as refugees. It has also devastated Sudan’s infrastructure and social services. Successive attempts to broker a peace deal made little headway until July 2002, when the Machakos Protocol established religious freedom and guaranteed the right of the South to self-determination. Since then, peace talks have been based on the principle of the unity of Sudan under a democratic state, with equitable sharing of oil revenues, and appear to be moving towards an agreement. However, even as a peace settlement between the North and South appears to be within reach, the Darfur conflict in Western Sudan has triggered a horrendous humanitarian crisis. Over a million people have been displaced, leading to allegations of genocide (US State Department) against the Janjaweed rebels. There are also conflicts underway in other parts of Sudan, notably in the Greater Upper Nile, which are causing mass displacement but have received less international attention. Sudan has never enjoyed a prolonged period of civilian government. Its longest-serving rulers, Presidents Nimeiri (1969-1985) and Omar Hassan al-Bashir (1989-present), were both military officers who came to power through coups. It faces severe development obstacles, including limited infrastructure and an enormous external debt (equivalent to 134% of GDP). Nonetheless, Sudan has experienced economic growth rates of over 5 percent in recent years, with expansion both in the oil sector (which generates 73% of exports) and in industrial and agricultural production. The government has pursued macroeconomic stability, reducing inflation from 100% in 1996 to single digit levels by 2000 through major budget cuts. In December 2003, the IMF “commended the Sudanese authorities for the recent progress achieved in macroeconomic stabilization and economic reforms, which has contributed to reasonably strong, broad-based growth while containing inflation.”72 However, Sudan’s expenditure on social services is extremely low, representing only 1.5% of GDP. Despite its natural resource wealth, Sudan ranks 139th on UNDP’s Human Development Index. The World Bank estimates Sudan’s Gross National Income (GNI) per capita in 2001 at US$340 (the median for Sub-Saharan Africa). B. Relations with the donor community Sudan is one of the largest recipients of humanitarian aid in Africa, receiving $500m from the US alone in 2004. Most of this aid is channelled outside the government. At present, very little development assistance is offered.

72 IMF, Article IV Consultation, December 2003.

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Sudan’s external debt of $24 billion ($20 billion of which is arrears), owed both to commercial (Paris Club and Arab) debtors and to the BWIs, is a major issue to be resolved in order to normalise relations with donors. Sudan is yet to reach its HIPC decision point. Resolution of the debt question is linked to ongoing peace negotiations, with the South refusing to share responsibility for war-related debt. Until this is resolved, resources for poverty reduction would need to come from bilateral, EU and UN sources. Donors have been developing coordination mechanisms for Sudan, in anticipation of a large increase in aid flows following a peace settlement. The UK government has noted that scaling-up assistance will pose significant practical challenges, with the donors unfamiliar with the country and the government unfamiliar with donor procedures.

“In these circumstances, transaction costs are likely to be high on both sides. High priority should therefore be placed on donors working together sharing their knowledge and building common approaches and joint mechanisms for their relationships with government; and on helping government systems to evolve in ways which will make good use of aid.”73

A number of bodies have evolved for coordination among donors and dialogue with government. The IGAD Partners Forum for Peace (IPF) has been working with Sudanese stakeholders on achieving a peace settlement, with an ever-increasing multilateral and bilateral membership (including NGOs). The World Bank and UNDP are leading a Joint Assessment Mission (JAM) to assess Sudan’s rehabilitation needs, and develop a framework for reconstruction and transition through to 2010. The JAM is managed by a Core Coordinating Group (CCG) comprising representatives of the government and the SPLM, as well as representatives of the UN system, the World Bank, the IPF and IGAD. Its most recent meeting in Oslo on 27-29 September 2004 was attended by representatives of 21 donor countries. Italy and Norway are leading an initiative to develop an MoU with the government and the SPLM on aid modalities, with the goal of moving out of crisis mode as soon as possible. For the time being, however, aid delivery mechanisms are still duplicated in the North and South of the country. Working in the South, which at present has very few institutional structures, is likely to pose a challenge for some time to come. The World Bank is at present channelling its assistance in the South via UNICEF. It is preparing a LICUS Trust Fund grant to develop capacity in budget and aid management in the South. C. Twin tracks: an IPRSP and a Transitional Results Matrix There are two strategic frameworks currently under development in Sudan. The parties have been discussing the preparation of an IPRSP. At the same time, there is an initiative around the JAM to produce a Transitional Results Matrix, of the type that has been used to coordinate post-conflict assistance in East Timor and Liberia. The relationship between the two exercises is not yet entirely clear, but both aim to introduce poverty-reduction objectives into the peace settlement at an early stage. The government began preparing an IPRSP on its own initiative during 2003, in the hope of accessing debt relief. An initial draft was prepared by a consultant in the last quarter 73 British Embassy, Khartoum.

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of 2003. The government establish a PRSP unit within the Ministry of Finance, under the supervision of a Minister of State, and issued a draft in early 2004, although its political status is unclear. While Bank informants have described the document as technically adequate for the purposes of an IPRSP, it is not clear whether it in fact represents government policy. There was no public consultation of any kind. Although there has been no census in Sudan since 1956 and no general social survey since 1978, some data on poverty is available. A 1989/90 Demographic Health Survey was conducted by the Ministry of Economics and National Planning, covering 80% of the total population, but excluding the three conflict-affected regions in the South and the nomadic population of northern Sudan. UNICEF’s 2000 Multiple Indicator Cluster Surveys (MICS) are also available for the whole of the North and some of the South. World Bank informants report that these would be sufficient for an IPRSP. The draft IPRSP was prepared only for the North, with no involvement of the SPLM. Over the past six months, however, there has been an attempt to draw the SPLM into the PRS as part of the peace settlement. The process is supported by a number of international actors, who see it as a valuable confidence-building measure. The parties have agreed a Poverty Eradication Strategy Concept Note, setting out how a PRS initiative could be undertaken for the country as a whole. The issues were discussed at a workshop in Nairobi in September, sponsored by the CCG as part of the peace negotiations. There is as yet no institutional framework for preparing a joint PRS, but both parties now appear to support the initiative on principle. At the same time, the JAM process is developing a Transitional Results Matrix (TRM), which will provide a strategic framework for the reconstruction and transition programme. The matrix is provisionally divided into eight clusters (see table), each with objectives and time-bound targets, and will represent a joint programme of the donors and the Sudanese authorities (the principles behind the TRM approach are described in the Liberia case study). The TRM is also seen as a way of introducing PRS principles into the government’s programme at an early stage, as preparation for an eventual PRSP. It is likely that it will take some years before Sudan is in a position to produce a credible, national PRSP. In the meantime, the TRM will provide a useful strategic framework for coordinating international assistance around a programme agreed jointly between the Sudanese authorities and the donors. Some observers also hope that, by introducing these instruments at such an early stage of the peace process, it will make poverty-reduction goals an integral part of the settlement, helping to reduce factors that might contribute to a renewal of conflict. In particular, if the pending agreement on the sharing of oil revenues could be based on an agreed poverty-reduction programme, rather than a crude percentage, it would represent a major innovation in the field of peace-building.

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Provisional structure for the Transitional Results Matrix

CLUSTER SECTORS

1. Institutional development & capacity building

Institutional assessments, civil service reforms, decentralisation.

2. Governance & rule of law Judiciary, police, security, human rights, anti-corruption, media and transparency, peace-building, democratisation.

3. Economic policy & management Macro-economic policy, fiscal policy, public expenditure management, central banking.

4. Productive sectors Agriculture, livestock, fisheries, forestry, irrigation, private-sector development.

5. Basic social services Health (HIV/AIDS), education. 6. Infrastructure Transport and civil works, communications, water and

sanitation, energy. 7. Livelihoods and social protection DDR, IDPs and refugees, community-driven development,

employment generation, mine action. 8. Information

Data collection & analysis, monitoring & evaluation.

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