Transcript Sector Programs and Issues

Sector Programs: Update and Issues
Oscar F. Picazo
USAID SOTA Course
Windsor Hotel, Nairobi
June 12, 2002
Sector Programs Overview
• Four key SWAp principles
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Sector program & policy framework
Sector expenditure framework (budget)
Partnership based on transparency & gov’t leadership
Increasing use of gov’t systems to disburse
• Key clarifications
– Participation in “pooled” funds desirable but not required
– SWAp is not necessarily HSR, e.g. Bangladesh
– Are sub-sectoral SWAps & mini-SWAps “SWAps”?
• SWAps as of 2001: 90 programs in all sectors
– 85% in Africa, 9% in Asia
– 25% in health, 28% in education, 13% in agriculture
Major SWAp Advocates
• World Bank
– New instrument - Adaptable Program Lending, 10 years
– 10 HNP SWAps in Africa, 2 in South Asia; new SWAp
requests from Nicaragua, Cambodia, PNG, and Nepal;
operations in Bolivia, India, Indonesia have SWAp features
– SWAp as “gold standard” in new AFR HD Strategy
• Europeans, e.g., DfID, Dutch, NORAD, SDC, EU
– Beyond SWAp: endorsement of macro budget support
programs
• UN Agencies support SWAp “in spirit”
– Endorsed by UNDP, WHO, Unicef, UNFPA
– But still struggling with institutional earmarking arrangements
Financing Modalities
StandAlone
Projects
Trad’l
Project
Sector Reform Program
ProjectType Aid
Earmarked
Pooled
Funds
Sector
(Unpooled) Financing,
e.g.,
or Budget
WB,
Support a
UNDP
la Secal
Macro
Reform
Program
Budget
Support
e.g.,
SAL,
NPA
Pooling of Funds
• Advantages
– “Unties” aid
– Financiers become
“investment partners”
– Reduces transactions
costs?
– Focuses on
strengthening gov’t
systems
– Improves financing
transparency &
predictability
– Focuses on performance
rather than inputs
• Disadvantages
– OK if you can trust the
gov’t + its systems, but
what if you can’t?
– Fungibility of funds
– Requires harmonization
of donor procedures
– Donors lose attribution
(activities, outcomes,
impact)
Countries’ “Teething” Problems
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Conceptual confusion & “language barriers”
Recipient countries’ inadequate institutional capacity
Initial “kitchen sink” approach to sector programming
Initial mistaken notion that SWAp is a “silver bullet” to
recurrent expenditure problem
• Confusing the “direction” with the “detail”
• It gets more challenging as the number of SWAp
donors increase, bringing own “institutional” baggage
• “Learning-by-doing” and “paving the road while
getting there” approaches
Donors’ Bones of Contention
• Some parties’ obsession with financing modality
(basket funding) rather than policy framework and
sector program
• SWAp financial arrangements greatly diminish donor
control and monitoring of how money is spent
• Impossibility of attributing outcomes for each donor,
especially those operating on legislative “earmarking”
• Daunting challenge of harmonizing procedures,
especially with a country perceived to have “loose”
systems
• Challenge of meeting needs of each donor’s
“domestic constituencies” (e.g., USAID, CIDA)
Update: “One common sectorwide
program, fully costed”
• Clear attempts to cost SWAp programs, but in
some cases only the development program is
fully integrated
– Some projects continue to be outside the program
• Initial difficulties of reconciling SWAp program
with macro budget program (MTEF)
– MTEFs are increasingly being used in Ghana, Uganda,
Tanzania and Mozambique
– Can SWAp PoW be eventually the MTEF?
• Confusion on the meaning of “sectorwide”
– The place of the private sector
– Are initial, “sub-sectoral” programs allowable?
Update: “Resources will be increasingly
channeled through gov’t systems”
• SPA pilot survey of 16 SWAps:
– More than 80% of aid continues to be given in the form of
projects within the SWAp program
– Only 17% is given as pooled funds
• Common disbursement through government
system is being used (e.g., education) in some
difficult environments
– Mozambique, Tanzania, Uganda, Ghana
• World Bank procedures constrain participation in
‘pooling’
– WB budget support limited to SAL and Secal
– However, all WB projects are “government earmarks”
Update: “Openness, transparency,
consultation, dialogue”
• SWAp vulnerability to politics, e.g., Zambia 1997-99
• Interruption due to governance issues & change in
priorities, e.g., Ethiopia, Pakistan
• Ghana “out-of-SWAp” hospital funding fiasco, 1995-96
• MOUs, SOIs, & Codes of Conduct:
– MOUs bet. Gov’t and donors signed in Uganda, Zambia, Ghana &
Mozambique, but not in Ethiopia
– Bangladesh conditionalities are in the Govt-WB credit agreement
• Uganda Poverty Action Fund & education SWAp as
models of transparency
• Annual SWAp reviews have been generally
disappointing
Update: SWAp and the Private Sector
• Uganda health SWAp as “good practice” for NGO involvement
• Tanzania, Uganda, Ghana & Bangladesh SWAps have specific
strategies devoted to private sector role, but such activities continue
to be weakly integrated
• Donors continue to earmark funds for NGOs as “transitional
arrangement”; mixed views on whether NGO financing should be
harmonized under SWAp, & whether there should be an “NGO
basket”
• SWAp resources seen almost exclusively as public funds, continued
government skepticism of civil society
• Government NGO regulation, accreditation, & contracting still leave
much to be desired in all low-income countries
• Are NGOs at risk of dying without direct donor support?
Update: SWAp and Procurement
• Procurement of TA
– Existing donor procurement rules generally not responsive to
“low-value, high volume” transactions required in the social
sectors
– Good examples of pooled TA funds in Bangladesh health;
Ethiopia health; Pakistan SAP; and Zambia SWAps
– Issue of international competitive procurement of TA
– Some success in standardizing local consultant rates and
per diems
• Procurement of commodities
– Too many parallel procurements continue
– Scarcity of good models of donor ‘funds-pooling’ for drugs
– Contentious issue of ‘drug procurement agent’ (e.g.,
Tanzania, Zambia, Kenya): seen as “donor imposition”
Update: SWAp and Transactions Costs
• Assumption: SWAp reduces transactions costs to
government and donors (streamlined meetings,
harmonized procedures)
• But developing SWAp is process- & time-intensive
• Supervision costs for donors larger than normal projects:
World Bank Zambia SWAp (50% higher), Mozambique
education (100% higher)
• Donor staffing implications have been larger than
expected: DfID, NORAD
• Conclusion: Transactions costs increase with SWAp until
the new arrangements replace the old, but indications
from Mozambique, Uganda and Tanzania show falling
transactions costs
SWAp and Global Health Initiatives
• Risk that targeted measures (AIDS, TB, malaria, etc.) will side-step
the process of building national capacity, creating local demand, and
informing rather than driving national priorities
• Risk that Global Initiatives are viewed as relief rather than
development support, with serious implications on sustainability
• Risk that Global Initiatives are not “additional” resources and displace
existing resource commitments from donors
• Challenge of coordinating expanding number of private sector
partners, which pose risk of undermining rather than strengthening the
role of government in sector stewardship
• Potential tensions between Global Initiatives & other forms of
development assistance at the country level
From Sectorwide to Cross-Sectoral
Approaches: Impelling Factors
• Aid fungibility within & across sectors
• Cross-cutting nature of problems & needed
interventions
– Civil service reforms & the HR crisis
– Decentralization & local participation
– AIDS epidemic & multisectoral approaches
• Public expenditure management revolution that led to
Medium Term Expenditure Frameworks (MTEFs)
• Re-emergence of “poverty reduction” as a global goal
• Era of debt relief, HIPC, PRSPs, and CDFs
OECD Assessment of Donors’
Involvement in Poverty Reduction
Poverty
Poverty
Poverty
Reduction is
Reduction is One Reduction is Not
Sole Overarching
of a Few
an Overarching
Goal
Overarching
Goal
Goals
Australia, Canada,
Denmark, Ireland,
Luxembourg,
Netherlands,
Norway, Spain,
Sweden, UK, UNDP,
World Bank
Austria,
Belgium,
EU, Finland,
Germany,
Italy, Japan,
New Zealand,
Switzerland
France,
IMF,
Portugal,
USAID
Debt Relief Programs
• Highly Indebted Poor Countries (HIPC) Initiative - 41
countries, mostly in Africa
• Financial impact of HIPC
– Reduces stock of external debt
– Reduces debt servicing relative to gov’t revenue
– Large magnitude of debt servicing relative to public spending on
health and education
• Uses of debt relief
African Commitments to Increase Coverage
of Essential Interventions Under HIPC
• To increase coverage of essential health interventions
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Raise child immunization rates (12 countries)
Address HIV/AIDS (9 countries)
Address malaria (3 countries)
Address reproductive health (5 countries)
• To deal with specific health systems issues
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Address health personnel issues (7 countries)
Address drug procurement and availability (6 countries)
Increase public spending on health (5 countries)
Reallocate spending to essential services and/or rural areas (5
countries)
Human Resource Crisis in Health
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Extremely poor population: health worker ratios
Too many workers leaving for other jobs and for abroad
Countries not training enough workers; not training the right kind
Unintended consequences of SAPs, civil service reforms,
liberalization of health services, and AIDS epidemic
Program management cadre being “decimated”
Poor working environment and dire employee prospects
Few established mechanisms for contracting and other flexible labor
arrangements
Little donor interest in providing “recurrent costs” despite huge inservice training investments
Current “unfashionability” of user fees that at least provided a
modicum of health-worker incentives
Health Expenditures: NHA Findings
• Are health financing standards outdated?
– WHO: 5% of GNP should be devoted to health
– BHA: US$12 per capita required for basic health
• Larger than expected private health expenditures
• Smaller than expected government health expenditures, in the midst
of “expanding” health mandates
• Smaller than expected NGO expenditures: are data valid?
• Wide variability in countries’ donor “reliance”; donors still wedded to
“political considerations” rather than health needs
• Risk pools and prepayments remain minor sources of financing
• Per capita health spending weakly related to health outcomes
Constraints to USAID Participation
in Sectorwide and Cross-Sectoral Approaches
• Unnecessarily high priority given to short-term outcomes; underappreciation of necessity of “systems” change
• Too much focus on project management leading to the
disappearing art of policy dialogue
• Low ‘comfort level’ with economics and health systems jargon
• Mistaken notion that SWAp, MTEF and PRSP are ‘fait accompli’
• Different loci of strategic responsibility (PHN officers) and
technical knowledge (CA’s, projects)
• USAID comparative advantage is on technical aspects of
service delivery, rather than on systems, organizational and
financial policy directions that SWAps require
• ‘Narrowly focused’ Congressional earmarks; prohibition of funds
commingling
Opportunities for USAID Participation in
Sectorwide and Cross-Sectoral Programs
• USAID remains the largest bilateral PHN funder globally; need to
translate ‘size’ into ‘influence’
• USAID has good tracking systems, e.g., DHS, increasing use of
NHA, extensive work on PHN indicators
• USAID good practices can be ‘redeployed’ for other uses: NGO
contracting, civil society initiatives, disbursement systems
• Institutional experience with policy-based programs
• Other USAID instruments, e.g., Limited Scope Grant Agreement
that provides resources directly to government agencies
• USAID resources: mission economists, procurement officers, PHR
Plus, POLICY, MEASURE, USAID/Global, etc.
• Woody Allen: “All it takes to succeed is to show up.”