Brookings: Experts - David de Ferranti

How to Improve Governance : A New Framework for Analysis and Action

David de Ferranti, Anthony J. Ody and with Justin Jacinto and Graeme Ramshaw — Sun, 01 Mar 2009 00:00:00 -0500

Brookings Institution Press 2009 240pp.

In recent years, the developing world has seen a burst of efforts to reduce corruption, increase transparency and accountability, and improve governance. Needless to say, this is an important and encouraging development. However, the lack of a reliable compass to describe where a country is at a given moment—and where it could be heading in the absence or acceptance of proposed reforms—can result in disastrous missteps. The unfortunate absence of such a guide has helped lead to innumerable failed governments or ineffective regimes. This important book aims to fill that void.

How to Improve Governance emphasizes the need for an overall analytical framework that can be applied to different countries to help analyze their current situations, identify potential areas for improvement, and assess their relative feasibility and the steps needed to promote them. A country-specific analysis needs to be comprehensive, in the sense that it includes the four concepts of transparency, accountability, governance, and anticorruption throughout the calculus. Without such an analytic framework, any reform attempt is likely to flounder for lack of a shared understanding of the underlying problems and of the feasible reforms. The book gives special emphasis to the potential for civil society groups to play a stronger role in holding governments accountable for their use of public resources, and to the importance of developing politically feasible, prioritized country strategies for reform.

“Whether one looks at how to increase domestic demand for good governance, how to make government more accountable to the public, or how to build democratic processes that deliver results, the underlying issues are essentially the same. . . . As development actors of various types . . . seek to help, more and more of them are calling for a clearer conceptual framework to guide their efforts.” From the Introduction

ABOUT THE AUTHORS

David de Ferranti

Anthony J. Ody

Anthony J. Ody, formerly a Senior Advisor at the World Bank, is a consultant on economic development and an Affiliated Professor at Georgetown University.

with Justin Jacinto and Graeme Ramshaw

Justin Jacinto and Graeme Ramshaw all have conducted research for the Brookings Institution.

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{9ABF977A-E4A6-41C8-B030-0FD655E07DBF}, 978-0-8157-0283-2, $28.95 Order

Reform of How Health Care Is Paid for in China: Challenges and Opportunities

Sat, 22 Nov 2008 12:00:00 -0500

Editor's Note: China's current strategy to improve how health services are paid for is headed in the right direction, but much more remains to be done. In a recent article in The Lancet, Brookings scholars David de Ferranti and Maria-Luisa Escobar, along with Shanlian Hu, Shenglan Tang, Yuanli Liu, and Yuxin Zhao, examine key challenges that need to be met and explore lessons from other countries. This article is the sixth in a series of seven papers on health system reform in China.

Introduction

To implement the ambitious strategy that China is now rolling out to improve its health system, several key challenges need to be met. One challenge is already being resolved: the central government’s spending on health, after languishing for many years at exceptionally low levels compared with that in other countries, is now being increased substantially.3 Other financial and systemic issues include reversal of the upward spiral in the out-of-pocket payments that households pay to get health services; achievement of adequate financial protection for the entire population through insurance or other prepaid coverage; control of the rapid escalation of health-care costs; curtailment of inefficiencies and reducing waste; improvement of the quality of care; and enhancement of equity, including addressing disparities among China’s diverse regions.

These challenges affect global health, not only because China’s 1·3 billion people comprise a fifth of the world population, but also because its innovations and experiences will be helpful and influential for other countries. China’s renewed quest to modernise its health system is part of a larger process worldwide. If the 20th century was transformed by two great health-related transitions (the demographic revolution that increased longevity and reduced fertility and the epidemiological revolution that reduced the incidence of many infectious diseases), the 21st century may be fundamentally changed by a third great transition in how health care is financed, provided, and organised. Some countries are well advanced in this third transition, having already replaced arrangements in which the cost of health care is borne mainly by the few who get sick, with policies by which cost is shared by all, equitable access to services is assured, and protection against financial ruin because of illness is widespread. But many countries still have a long journey ahead, and their citizens are impatient for faster advances.

In China major steps toward this third transition were made in the four decades after 1949 and the formation of the People’s Republic, but advances then stalled and were partly reversed in subsequent years.4–9 Now China is trying to recover lost ground and finish the job, helped by a strong economic base and a new development policy centred on people rather than economic growth alone.

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David de Ferranti
Maria-Luisa Escobar
Shanlian Hu
Shenglan Tang
Yuanli Liu
Yuxin Zhao

Publication: The Lancet Vol 372, Issue 9652

Innovative Financing for Global Health: Tools for Analyzing the Options

Sun, 31 Aug 2008 12:00:00 -0400

Introduction

Improving global health — and, in particular, achieving better health outcomes for the world’s poor people, including the more than 3 billion (half the planet’s total population) who live on less than US$2 a day — has become a prominent priority in development agendas. Heightened search for more effective ways to accelerate progress has spawned intense interest in exploring innovative ways of financing health services and products.

“Innovative financing for global health” (IFH) covers a multitude of things. New initiatives associated with new, or newly re-cast, financial instruments are the core of it. Examples of such initiatives include the International Finance Facility for Immunization (IFF-Im), the Airline Solidarity Contribution (ASC, or simply, “the airline tax”), and the Advanced Market Commitment (AMC). In addition, a wider array of other options — see Box 1.1 for a partial list — come up as well in public discussion of IFH ideas, including some that are not new (e.g., tax relief for donating key medicines) and others that have broader relevance than health alone (e.g., debt relief). Further, the new institutions in global health — such as The Global Fund for AIDS, Tuberculosis, and Malaria (GF), The Global Alliance for Vaccines and Immunization (GAVI), and UNITAID (the entity that receives and deploys the proceeds of the airline tax) — are also sometimes considered to be IFH initiatives.

With so many new concepts and proposals pouring forth, so many problems still to solve, and so many questions arising about how everything fits together (e.g., which options are right for which issues, and whether there are promising new ideas deserving of attention), the interested parties — in donor and recipient governments, foundations, the research community, etc. — have sought more conceptual clarity and analytical tools to help them find their way through the complexities as they are confronted with policy choices. The Bill and Melinda Gates Foundation has been at the forefront of this quest, conscious of the need for some sort of framework and guide that can aid all concerned to understand the options and make informed decisions about them. The study that led to this report was funded by them.

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Tools to Improve the Quality of Public Expenditures and the Role of Civil Society Organizations (CSOs) in the Process

Thu, 19 Jun 2008 09:00:00 -0400

Event Information

June 19, 2008
9:00 AM - 1:00 PM EDT

Stein Room
The Brookings Institution
1775 Massachusetts Avenue, N.W.
Washington, DC 20036

Over the past 30 years, the World Bank and IMF have developed a variety of tools to analyze public spending policies. With the development in low- and middle-income countries of democratic institutions and civil society organizations like think tanks and advocacy groups, we may soon be at a tipping point at which use of these tools along with domestic advocacy pushes countries to stronger reform agendas.

On June 19, the Transparency and Accountability Project (TAP) hosted a forum that brings these elements together. The forum begin with an overview of public expenditure issues and tools; with presentations by organizations of new work TAP has supported; and concluded with lessons and observations on how governments, donors and CSOs could work together to improve the quality of public spending. The forum included five panel discussions led by experts in this field. Thirteen civil society organizations doing this kind of analytical and advocacy work were be represented on the program and in the audience.

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Event Materials

Participants

ModeratorPanelists

David de Ferranti

Senior Fellow, Global Economy and Development
Co-Drector, Transparency & Accountability Project

Anil Deolalikar

Professor of Economics, University of California, Riverside

Maureen Lewis

Adviser, Human Development Vice Presidency, World Bank

Bill Savedoff

Economist, Social Insight

Amanda Glassman

Nonresident Fellow, Global Economy and Development
Senior Social Sector Specialist, Inter-American Development Bank

Vivek Ramkumar

Program Manager, International Budget Project

Anand Rajaram

Sector Manager, Africa Public Sector Reform and Capacity, World Bank

Bill Dorotinsky

Lead Public Sector Specialist, Eastern Europe and Central Asia, World Bank

Ritva S. Reinikka

Director Social & Economic Development Group, Middle East and Northern Africa Regional Office, World Bank

Mario Cuevas

Director of Research in Finance and Social Development, National Center for Economic Research, Guatemala

Joseph Asunka

Research and Program Officer, Center for Democratic Development, Ghana

Courtney Tolmie

Program Associate, Results for Development

Betty Alvarado

Research Associate, Research Center at the University of the Pacific, Peru

Fatmir Memaj

President, Albanian Socio-Economic Think Tank

Chinyere Bun

Research Associate, Results for Development

The Impact of Health Insurance in Developing Countries: Experiences from China and Colombia

Tue, 15 Apr 2008 10:00:00 -0400

Event Information

April 15, 2008
10:00 AM - 12:45 PM EDT

Room 1026/1028
SEIU
1800 Massachusetts Avenue, NW
Washington, DC 20036

Many health systems in the developing world are plagued by unequal access to health care, low utilization of services and high user fees. While health insurance is needed to protect families from catastrophic expenditures and a further spiral into poverty, questions remain about the best way to implement health insurance and how to make insurance more effective for some of the world’s poorest people.

On April 15, Global Economy and Development at Brookings hosted presentations from leading authorities on the impact of health insurance in developing countries. Professors William Hsiao and Winnie Yip discussed their impact evaluation work on the Rural Mutual Health Care Scheme (RMHC) in two Chinese provinces. Ursula Giedion presented her work on impact evaluation of health insurance for both the poor and non-poor in Colombia. Presentations were followed by comments from Paul Gertler, University of California, Berkeley; Philip Musgrove, deputy editor of Health Affairs and Mead Over, Center for Global Development. David de Ferranti, Brookings senior fellow and executive director of the Global Health Initiative, provided introductory remarks. Dr. Cheryl Scott, a senior advisor with The Bill & Melinda Gates Foundation, moderated the discussion.

After the program, panelists took audience questions.

Event Materials

Participants

Moderator

Cheryl Scott

Senior Advisor, Global Health, The Bill & Melinda Gates Foundation

Panelists

William Hsiao

K.T. Li Professor of Economics, Harvard School of Public Health

Winnie Yip

Associate Professor, Harvard School of Public Health

Ursula Giedion

Health Economist , International Consultant on Health Systems

Paul Gertler

Professor of Economic Analysis & Policy, Haas School of Business, University of California at Berkeley

Philip Musgrove

Deputy Editor, Health Affairs

Mead Over

Senior Fellow, Center for Global Development

Planning and Costing Human Resources for Health

Amanda Glassman, David de Ferranti, Loren Becker and Marty Makinen — Sat, 23 Feb 2008 12:00:00 -0500

Human resources are crucial for the provision of health care and represent the largest single use of public spending on health in developing countries.¹ Yet countries face an ongoing challenge when it comes to financing human resources for health (HRH) sufficiently to sustain an adequate supply of health workers and stimulate greater productivity and more effective health care.

Several papers prepared for the 2006 World Health Report and the Global Health Workforce Alliance describe the HRH financing gap^2–4 and the variables such as economic growth, government revenues, aid, fiscal sustainability targets, and priority-setting practices that affect the ability of governments and donors to increase spending on this input.³
Inspired by the global HRH movement, some countries, mostly in Africa, have undertaken strategic planning exercises to estimate their HRH needs.⁵ But these plans rarely include a reliable analysis of the financing needs or structures required to achieve the desired levels of care. When they do address costs, they typically use provider-population ratios to estimate the number of additional staff needed in each cadre, then multiply those numbers by current public-sector salaries and allowances (or some assumed salary increment). Shortfalls are determined by comparing this figure with current and projected health-sector budgets. Resource mobilisation options via aid and public-sector priority-setting are then discussed.

Although these efforts represent an important first step, country policy makers and international agencies need to give greater attention to the economics governing HRH labour markets and the implications for the financing of HRH plans. Otherwise, estimates of HRH shortages, productivity, quality, skill mismatches, and distribution problems can be misleading. These issues are not new,^6,7 but deserve greater prominence.

What does this mean, in practice? First, because the market for HRH, like any other labour market, involves the interaction between demand for and supply of workers, effective solutions to HRH problems need to consider the many factors affecting both sides of the market. This approach will take planning exercises beyond the ratio-based and service-target-based models on which current efforts seem to place most emphasis.⁸

On the demand side, HRH plans should distinguish between population health needs and institutional demands for HRH hiring. Public and private institutions that pay for HRH, such as ministries of health, ministries of defence, social security agencies, non-governmental organisations, private insurers, and community-based insurance funds, among others, each have their own wage rates, budget envelopes, provider payment practices, civil service or labour regulations, and other rules that govern hiring and wage decisions. These might include retirement policies, growth of alternative employment opportunities in the private sector, and capacity and cost of scaling up preservice training. The presence of professional unions and practices related to the negotiation of labour contracts with the different institutional actors also affects the characteristics of the demand for HRH, as well as other political, economic, and social variables. Understanding and analysing the demand function for HRH will help to build more realistic and effective HRH-strengthening schemes. For example, country planners ignoring demand and institutional factors might try to retain more health workers by simply raising wages across the board. The results might be that competition with private employment opportunities cause private wages to rise, eroding the expected retention effect and having little effect on productivity unless the wage increases were related to performance. Similar disappointments could result from disregard of other demand and institutional factors.

On the supply side, instead of norms of provider–population ratios and provider stocks extrapolated on the basis of the pool of graduates from professional programmes, important factors such as migration and other provider behaviours must be taken into account. Although well deserved attention has been directed at the role of the education sector in the production of HRH supply, increasing the emphasis on labour market dynamics that affect the choices that qualified professionals make to work in general and the choice to work in the health-care labour force in particular will improve the relevance and feasibility of plans.⁶ Decisions on labour force participation are in turn governed by prevailing wages in the public and private sectors, working conditions, age, gender, household structure, and presence of other income earners, among others, that should also be analysed and taken into account to estimate the effect that a given policy or scale-up will have on productivity, quality, hours worked, public–private mix, and geographical distribution.

Planners should also move beyond the assumption that existing health-care delivery systems are efficient. A study of time use in Zanzibar, Tanzania, found that on average only 61% of providers' time was spent productively;⁹ other studies find substantially lower productivity rates. The task mix itself—generated by a de facto poor skills mix at different levels of the health system¹⁰—generates inefficiency. The use and targeting of payments, subsidies, and tax breaks, in combination with greater attention to non-financing incentives and investment in supervision and capacity building, can potentially help to increase worker productivity. To implement such strategies, trends in provider productivity must be measured and managed. The substantial variations in provider quality must also be addressed head-on to reduce the potential for inappropriate care and ineffective use of resources.^11–13

There are good examples of more careful planning of HRH scale-up that can make a difference to the effectiveness of these investments and the success of policy makers in attracting additional resources. Malawi's government, backed by the UK Department for International Development, is in the midst of a 6-year plan to increase salaries in the health sector by 50% on average. This policy, which is part of an emergency human resources plan, was developed only after a careful analysis of the health labour market found a mismatch between high government demand for HRH and a large available pool of skilled workers in the private sector who were unwilling to work for the public-sector salaries offered. The analyses undertaken in support of the plan looked at vacancy rates in the public sector and within a major non-governmental provider, reasons for health workforce outflow, an examination of wage rates in the public and private sectors in Malawi and in neighbouring countries, the number of health professionals employed in other sectors, and out-migration patterns, as well as budget envelopes and other variables related to fiscal effort and priority given to the sector.⁶ Although the quality of the data and rigour of the analysis is not optimal given data limitations, the effort made to consider the entire HRH labour market, from both the demand and supply sides, makes a convincing case that increasing wages will result in better attraction and retention of HRH in both sectors.

Thailand's experience over the past 40 years provides an example of how several types of financial incentive can be used to influence the performance and distribution of health workers. The government provides special allowances to public-sector doctors and other health workers on the basis of the remoteness of the district in which they work. Another special allowance provides a financial incentive for doctors to refrain from practising privately during off-duty hours. In addition, Thailand provides very low-cost education and training for medical students in exchange for a requirement that the students work in the public sector for 3 years. Students who breach their compulsory service contracts are required to pay a fine, although the value of this penalty has gone down in recent years owing to inflation, which has led to shorter public-sector stays.¹⁴ However, it should be recognised that part of the success of this scheme is related to the overall economic situation in Thailand after the Asian financial crisis that led to a marked reduction in private-sector health care, particularly in Bangkok, and a resulting excess supply of HRH that was amenable to the terms offered for public-sector service.¹⁵

Although there are many challenges associated with poor quality data on labour markets and limited capacity in HRH planning departments, these examples suggest that effective HRH policymaking is possible when countries have the tools—or the technical support—needed to ensure technically sound planning activities.

To improve the effectiveness of HRH financing policies in developing countries, the Global Health Workforce Alliance is convening a Task Force on HRH Financing that will develop and test approaches to strengthening the analysis of HRH financing and labour market issues. Besides helping clarify the core concerns broadly, this Task Force will examine options for practical assessment tools that could be used at the country level and in the preparation of national HRH strategic plans. The Task Force will draw on work already under development by the World Bank, WHO, and USAID, and will seek to raise awareness of the issues internationally. Illustrative analyses in HRH crisis countries are being considered, as well as consultations with various stakeholders. The goal is to help facilitate more accurate costing, financing, and impact estimates for participating countries.

Acknowledgments

This work was financed by a grant from the Bill & Melinda Gates Foundation to the Brookings Institution and by a grant from the University of Toronto to the Health Financing Task Force. The opinions expressed in this article are those of the authors and do not represent the policies or views of any of the institutions to which the authors are affiliated.

References

^1. WHO. World health report 2006: working together for health. Geneva: World Health Organization, 2006.

^2. Verboom P, Edejer T Tan-Torres, Evans DB. The costs of eliminating critical shortages in human resources for health
http://www.who.int/choice/publications/d_human_resource...
(accessed Jan 28, 2008).

^3. Vujicic M. Macroeconomic and fiscal issues in scaling up human resources for health in low-income countries: background paper prepared for the World Health Report 2006
http://www.who.int/entity/hrh/documents/macroeconomic_f...
(accessed Jan 28, 2008).

^4. Preker AS, Vujicic M, Dukhan Y, Ly C, Beciu H, Materu PN. Scaling up health education: opportunities and challenges for Africa. Geneva: Global Health Workforce Alliance Task Force on Scaling Up Health Education, 2007.

^5. Adano U. Collection and analysis of human resources for health (HRH) strategic plans. Chapel Hill: Capacity Project, 2006:
http://www.capacityproject.org/images/stories/files/res...
(accessed Jan 28, 2008).

^6. Vujicic M, Zurn P. The dynamics of the health labour market. Int J Health Planning Management 2006; 21: 101-115.

^7. Bloor K, Maynard A. Planning human resources in health care: towards an economic approach. Ottawa: Canadian Health Services Research Foundation, 2003:
http://www.chsrf.ca/final_research/commissioned_researc...
(accessed Jan 28, 2008).

^8. Dreesch N, Dolea C, Dal Poz MR, et al. An approach to estimating human resource requirements to achieve the Millennium Development Goals. Health Policy Plan 2005; 20: 267-276. MEDLINE | CrossRef

^9. Ruwoldt P, Hassett P. Zanzibar health care worker productivity study: preliminary findings. Chapel Hill: Capacity Project, 2007:
http://www.capacityproject.org/images/stories/files/zan...
(accessed Jan 28, 2008).

^10. Daviaud E, Chopra M. How much is not enough? Human resources requirements for primary health care: a case study from South Africa. Bull World Health Organ 2008; 86: 46-51. CrossRef

^11. Wennberg JE. Practice variations and health care reform: connecting the dots. Health Aff 2004;
published online Oct 7. DOI: 10.1377/hlthaff.var.140.

^12. Gulliford MC, Mahabir D, Ukoumunne OC. Evaluating variations in medical practice between government primary care health centres. J Clin Epidemiol 2001; 54: 511. Abstract | Full Text | Full-Text PDF (59 KB) | MEDLINE | CrossRef

^13. Tangcharoensathien V, Prakongsai P, Limwattananon S, Limwattananon C, Patcharanarumol W. Determinants of clinical practice variations and influence of provider payment methods: a case study from Thailand
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=9957...
(accessed Jan 28, 2008).

^14. Wibulpolprasert S, Pengpaibon P. Integrated strategies to tackle the inequitable distribution of doctors in Thailand: four decades of experience. Hum Res Health 2003; 1: 12.

^15. Wibulpolprasert S, Pachanee CA, Pitayarangsarit S, Hempisut P. International service trade and its implications for human resources for health: a case study of Thailand. Hum Resources Health 2004; 2: 10.

Authors

Amanda Glassman
David de Ferranti
Loren Becker
Marty Makinen

Publication: The Lancet 2008; 371:693-695

Donor Perspectives on Innovative Financing for Global Health

Mon, 22 Oct 2007 09:00:00 -0400

Event Information

October 22, 2007
9:00 AM - 10:30 AM EDT

Somers Room
The Brookings Institution
1775 Massachusetts Ave., NW
Washington, DC

Donor assistance for health-related activities in developing countries has grown rapidly in the last several years. Unfortunately, the levels of aid still fall far short of what is needed to achieve the Millennium Development Goals. Additionally, shifting policy priorities and fluctuations in aid funding create ongoing challenges for donor agencies and aid recipients as they try to project and plan for global health needs. To help address these issues, policymakers and the private sector have developed a number of new, innovative financing tools to generate health aid more efficiently and effectively.

On October 22, Brookings hosted a discussion of key issues in innovative financing for global health from the donors’ perspective with a distinguished panel of international government officials. Panelists included Caroline Kayonga, Rwanda; Owen Barder, United Kingdom; Carlo Monticelli, Italy; Jean-Michel Severino, France; and, Ruud Treffers, The Netherlands. Brookings’s David de Ferranti introduced and moderated the discussion.

Transcript

Transcript (.pdf)

Event Materials

1022globalhealth

Participants

Moderator

Panelists

Owen Barder

Director of Global Development Effectiveness, Department for International Development, United Kingdom

Jurgen Zattler

Head of Division, Federal Ministry for Economic Cooperation and Development, Germany

Pierre Jacquet

Executive Director for Strategy, Agence Française de Développement, France

Ruud Treffers

Director-General of International Cooperation, Ministry of Foreign Affairs, The Netherlands

Carlo Monticelli

Director, International Financial Relations Department, Ministry of Economics and Finance, Italy

Caroline Kayonga

Permanent Secretary of Health, Rwanda

Krankenkassen fur die Armsten

David de Ferranti and Julio Frenk — Wed, 30 May 2007 00:00:00 -0400

Wenn sich die Führer der G8-Staaten Anfang Juni in Heiligendamm zu ihrem jährlichen Gipfel treffen, bietet sich ihnen die einzigartige Gelegenheit, den armen Ländern bei der Lösung eines ebenso riesigen und drängenden Problems unter die Arme zu greifen: Die Gesundheitsversorgung der dreieinhalb Millionen Menschen in den armen Regionen dieser Welt zu bezahlen, die mit weniger als zwei US-Dollar pro Tag auskommen müssen. Sie haben kaum eine Wahl: Entweder sie zahlen direkt für die medizinische Behandlung, geben sich mit schlechter Versorgung zufrieden oder verzichten ganz darauf.

Krankheit und die damit verbundenen Kosten stellen riesige Hindernisse dar, der Armut zu entfliehen oder ihr nicht zu verfallen, und zwar sowohl für einzelne Familien wie für ganze Länder. Mehr als drei Fünftel der gesamten Gesundheitsausgaben in den Ärmsten Ländern der Welt bringen die Menschen aus der eigenen Tasche auf. Die Weltgesundheitsorganisation (WHO) geht davon aus, dass diese Direktzahlungen Jahr für Jahr mehr als 104 Millionen Haushalte in die Armut treiben oder noch tiefer hineinstoßen. In den G8-Staaten und anderen reichen Ländern bringen die Menschen hingegen weniger als ein Fünftel der Gesundheitsausgaben aus der eigenen Tasche auf.

Direkte Bezahlung bei Inanspruchnahme medizinischer Versorgung ist die ungerechteste und ineffizienteste Form der Gesundheitsfinanzierung. Sie sind ungerecht, weil die am schwersten Kranken am meisten bezahlen müssen. Und sie sind ineffizient, weil sie die Unvorhersehbarheit von Gesundheitsproblemen unberücksichtigt lassen. Fällt die Bezahlung medizinischer Leistungen mit dem akuten Bedarf zusammen, führt das oft zum finanziellen Ruin von gut situierten Haushalten und zwingt vor allem arme Familien, die medizinischen Behandlungskosten von anderen wesentlichen Ausgaben wie Nahrung oder Schulgeld der Kinder abzuknapsen oder sich zu verschulden.

Die Welt steht förmlich auf dem Kopf: Die Ärmsten Bewohner dieses Planeten, denen katastrophale Konsequenzen drohen, tragen die größte Krankheitslast, während die Menschen in den reichsten Ländern durch staatliche Gesundheitssysteme, Sozialversicherungen oder auch private Krankenkassen abgesichert sind.

Das hat teilweise fatale Folgen: So berichtet Human Rights Watch, dass Regierungskrankenhäuser im afrikanischen Burundi routinemäßig Patienten, die ihre Rechnungen nicht bezahlen können, einsperren und monatelang unter miserablen Bedingungen festhalten. In anderen Ländern verweigern Ärzte und Krankenhäusern Millionen Menschen die Behandlung oder kümmern sich nicht um Hilfesuchende.

Während sich ein Großteil der internationalen Hilfe auf Krankheiten wie HIV/AIDS und gefürchtete Bedrohungen der weltweiten Gesundheit und Sicherheit durch Pandemien konzentriert, fordert der unsichtbare Verarmungseffekt durch Direktzahlungen im Krankheitsfall einen hohen Tribut an Leben und Entwicklungschancen. Ebenso besorgniserregend ist die Tatsache, dass die erheblich stärker beachteten Bemühungen im Kampf gegen tödliche Krankheiten wie Malaria zu kurz greifen und an Gesundheitssystemen sowie an Geldmangel scheitern.

Dieses Problem ist keineswegs neu, aber es gibt innovative Ansätze, die neue Hoffnung wecken. Dafür aber müssen die G8-Staaten und andere wohlhabende Länder alle Bemühungen unterstützen, diese Erfahrungen in größerem Umfang umzusetzen.

Fortschritte beim Aufbau landesweiter Krankenkassen in Kolumbien, Mexiko, Thailand und etlichen anderen Ländern belegen das große Potenzial der Einbeziehung breiter Bevölkerungsanteile in Versicherungsstrukturen. Wie die G8-Staaten aus eigener Erfahrungen nur allzu gut wissen, kann dies die Lage der Armen maßgeblich verbessern. In Indien, wo die Privathaushalte vier Fünftel der Gesundheitsausgaben selber aufbringen, hat eine Nicht-Regierungs-Organisation genossenschaftliche Krankenkassen aufgebaut, bei denen mittlerweile mehr als zwei Millionen Menschen versichert sind.

Neue Initiativen überwinden auch herkömmliche Beschränkungen in den Ärmsten Ländern Afrikas. So sind in Ruanda immerhin 70 Prozent der Bevölkerung in Gemeindeversicherungen erfasst, die mit Regierungsmitteln und internationalen Hilfsgeldern gewachsen sind und den Ärmsten der Armen vollständig subventionierte, kostenlose Gesundheitsversorgung bieten. Eine neue, von der niederländischen Regierung unterstützte Krankenversicherung in Nigeria bietet Arbeitern im informellen Sektor finanzielle Absicherung gegen Krankheitsfolgen.

Solche erfolgreichen Ansätze zeigen einerseits, wie wichtig eine behutsame Anpassung an lokale Gegebenheiten ist; aber sie sind auch frustrierenden Zielkonflikten und Kompromissen zwischen der Ausweitung auf weitere Bevölkerungsgruppen und der finanziellen Lebensfähigkeit ausgesetzt. Die Lösung liegt auf der Hand: Ohne Unterstützung des Staates geht es nicht. Die G8-Staaten haben diesen Weg historisch gebahnt, indem sie dafür sorgten, dass die finanzielle Krankheitslast von den Kranken alleine auf Gesunde und Kranke verteilt ist. Entwicklungsländer verspüren denselben Wunsch, und es sollte vorrangiges Ziel der G8 sein, ihnen dabei zu helfen.

Was müssen die G8-Staaten dafür tun? Erstens sollte das Abschlusskommuniqué in Heiligendamm das Prinzip deutlich unterstützen, dass die finanzielle Absicherung der Armen gewährleistet wird, und zwar als eine entscheidende Maßnahme zur Verbesserung der Gesundheitssituation und zur Verringerung der Armut.

Zweitens sollte die G8 dringend eine verantwortliche Planung vorantreiben, um die Abhängigkeit von gesundheitsbezogener internationaler Hilfe in einheimische Finanzierung umzuwandeln, die eine weitere und fairere Verteilung der finanziellen Krankheitslast erforderlich macht. Die internationale Hilfe für Gesundheit stieg allein zwischen 2002 und 2005 um 70 Prozent und damit schneller als jedes andere Feld der Entwicklungshilfe. Diese beispiellose Ausweitung ist zwar ein großer Ansporn, aber weder ausreichend noch nachhaltig.

Drittens sollte die G8 darauf drängen, dass globale Initiativen unmittelbar in die Stärkung nationaler Gesundheitsfinanzierungssysteme investieren und dabei Vergleichswerte festlegen müssen, welchen Ausgabenanteil die Menschen aus der eigenen Tasche zu zahlen haben und wie viel auf Finanzierungsformen mit besserer Verteilung der Lasten entfällt. Die G8 sollten außerdem die Notwendigkeit unterstreichen, weltweit und auf lokaler Ebene die Fähigkeit zu entwickeln, praktikable langfristige Finanzierungsstrategien in den Gesundheits- und Entwicklungsplänen der Länder zu verankern.

Viertens sollten die G8-Staaten genügend Geld bereitstellen, um dieses Programm voranzubringen. Mit einer halben Milliarde US-Dollar - einem Almosen im Vergleich zu den jährlichen Militärausgaben - ließen sich solche geistreichen Ansätze bestärken, die pro Dollar erheblich größere Wirkung haben und die Stärken öffentlicher und privater Initiativen nutzbar machen würden. Doch es braucht weitaus mehr. Aber wenn die G8-Führer im laufenden Jahr nur dies umsetzen, können sie vielleicht eines Tages zurückblicken und eine gerechtere Welt sehen, in der Milliarden armer Menschen ihren Weg zu einem besseren Leben und besseren Lebensumständen finden.

Authors

David de Ferranti
Julio Frenk

Publication: Frankfurter Rundschau

Civil Society and Improved Governance in Developing Countries

Tue, 20 Mar 2007 10:00:00 -0400

Event Information

March 20, 2007
10:00 AM - 5:30 PM EDT

Falk Auditorium
The Brookings Institution
1775 Massachusetts Ave., NW
Washington, DC

In recent years, a consensus has developed that institutional development is key to both faster economic development and policies that contribute to improved conditions for the poorest members of society. A result has been an increased emphasis by donors and development specialists on democratic processes, governance, transparency of public institutions, and anti-corruption policies. These efforts increase the "supply" of accountability mechanisms. More recently, there has been a realization that the domestic "demand" for accountability by voters and civil society entities (such as community groups, research institutes and independent media organizations) is at least as important.

On March 20, Brookings, the Johns Hopkins University Paul H. Nitze School of Advanced International Studies (SAIS), and The International Budget Project sponsored a conference on improved governance with a focus on the role civil society organizations can play in analyzing and advocating for better policies, especially in the area of public expenditures. Francis Fukuyama, the Bernard L. Schwartz Professor of International Political Economy and director of the international development program at SAIS, gave a keynote address before the second panel in the afternoon.

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Beyond Microfinance: Getting Capital to Small and Medium Enterprises to Fuel Faster Development

Anthony J. Ody and David de Ferranti — Sat, 10 Mar 2007 00:00:00 -0500

Small and medium-sized enterprises (SMEs), typically employing between 10 and 250 workers, form the backbone of modern economies and can be crucial engines of development through their role as seedbeds of innovation. In much of the developing world, though, SMEs are under-represented, stifled by perverse regulatory climates and poor access to inputs. A critical missing ingredient is often capital.

Tinier firms-micro-enterprises-frequently get more attention, as donors seek to help the very poor: the recent Nobel Peace Prize awarded to Muhammad Yunus of the Grameen Bank visibly demonstrates the emphasis given to this approach. But the type of support inherent to microfinance lending is generally ill-adapted to serving their slightly larger, and arguably more dynamic, cousins, the SMEs.

New options are emerging for meeting SMEs' financial needs, including commercial banks moving "down-market," micro-credit institutions moving "up," and creative application of venture capital investing ideas.

Governments can help by removing artificial policy and regulatory obstacles to SME lending-importantly, policies that promote greater competition within the financial sector as a whole are generally likely to be especially good news for smaller borrowers like SMEs. External actors can help too-for example by promoting development of credit information systems and reform of collateral regulations. They can also usefully play a selective pump-priming role; for example, they can partially guarantee commercial lenders' moves into SME lending.

Private investors-sometimes with collaboration from and in partnership with the public sector-have a key role, too. For example, in the case of firms facing high-risk, high-return scenarios, home-grown "angel investors" can step in.

Donor support for traditional microfinance models has helped provide basic financial services to millions of poor people. But in order to help build dynamic competitive economies in developing countries, the time has come to pay greater attention to the potential of small and medium-sized commercial firms to promote economic growth.

Policy Brief #159

Why Care about Small and Medium Firms?

Small and medium-sized firms matter-everywhere.

Advanced economies are paying new attention to small and medium enterprises (SMEs). One reason is their sheer quantitative importance. The OECD reports that SMEs account for more than 95 percent of manufacturing enterprises and an even higher share of many service industries in OECD countries; in most OECD countries, SMEs generate two-thirds of private sector employment and are the principal creator of new jobs. Additional interest in SMEs has been sparked by dynamic firms like Microsoft, which developed from tiny start-ups.

What are SMEs? Analysts use varying definitions of SMEs. Many advanced countries define SMEs as firms employing between 10 and 250 workers (or, in some countries, 500). SMEs are generally viewed as occupying the middle of the firm size distribution -- larger (and typically more formalized) than "micro-enterprises," which are usually informal units employing at most a handful of people. In many small and less-developed countries, it should be noted, firms employing 250 or 500 people could well be among the larger firms in the country.

Not every SME is a budding Microsoft. A three-way typology is useful:

The "start-up" phenomenon has highlighted the contribution of flexible equity financing to innovation. Professional venture capitalists, who manage pools of risk capital, famously helped build Silicon Valley. More recently, many have ratcheted up the minimum size of their deals. The resulting gap for early-stage funding is increasingly being filled by angel investors, affluent individuals who back nascent entrepreneurs with their own money and intensive mentoring, in return for equity stakes.

SMEs in developing countries face a harder time.

The SME picture in developing countries varies greatly. Some more dynamic emerging market economies, notably in East Asia, present thriving SME sectors, including significant numbers of skill-intensive subcontractors. Many more developing countries, though, suffer from a "missing middle". They typically have very large numbers of informal micro-enterprises. They may also have a handful of larger firms-possibly ventures created by foreign investment (in large-scale activities like mining, for example), or family-controlled conglomerates built up over generations. But there are typically few SMEs in-between.

The World Bank estimates that SMEs contribute an average 51.5 percent of GDP in high income countries-but only 15.6 percent in low income countries. By contrast, the "informal" micro-enterprise sector accounts for an average 47.2 percent of GDP in low income countries, but just 13 percent in high income countries.

Does it matter whether SMEs in developing countries thrive? Yes. In contrast to healthy SMEs, most micro-enterprises show very low productivity, with little capacity to master improved technology or grow beyond the smallest scale. In developing countries with a "missing middle," competition is often squelched by dominant conglomerates.

The organic growth of small firms in developing countries may be held back by numerous obstacles, including government red tape and corruption, as well as infrastructure deficiencies, and difficulties in accessing technology, skills, or markets (surveys like the World Bank's annual Doing Business series have helped to highlight inter-country differences in the regulatory climate for aspiring entrepreneurs, and the hurdles that perverse government regulations can create for enterprise development). Regulatory reform may be a critical priority at national level, and technical assistance a crucial need for aspiring entrepreneurs. But finance also ranks high among their concerns.

In the World Bank's "World Business Environment Survey" (WBES) of more than 10,000 firms in 80 countries, SMEs worldwide on average named financing constraints as the second most severe obstacle to their growth, while large firms on average placed finance only fourth. Firms in Central and Eastern Europe, the former Soviet Union, and Africa were most likely to cite finance as their most severe constraint, followed by those in South Asia and Latin America. World Bank researchers Beck, Demirguc-Kunt, and Maksimovic concur that SMEs are far more likely than larger firms to be held back by financial constraints.

Empirically, World Bank researchers find a positive correlation between the size of a country's SME sector and the rate of economic growth. This does not necessarily prove causation runs from SMEs to growth. More plausibly, policies that are good for SMEs are generally good for growth, too. Among these policies, the promotion of vibrant, competitive financial systems has proven to be especially important.

Challenges to Financial Systems

How well countries' financial systems provide SMEs with access to finance depends on a range of factors, from the overall financial sector framework to the ingenuity of individual intermediaries.

Policymakers need to get financial sector incentives right-competition is fundamental.

Rajan and Zingales argue convincingly that, when misguided government policies stifle financial sector competition, banks feel little pressure to seek new customers and broaden financial access. By contrast, financial intermediaries exposed to vigorous competition are motivated to pursue non-traditional customers, including SMEs. Empirical studies confirm, for example, that when foreign banks are allowed to enter previously closed national markets, financial access improves for smaller clients. Eliminating barriers to competition in the provision of financial services in general may be the single most important task for governments and regulators in helping small firms.

Financial intermediaries face particularly challenging environments.

Every financial intermediary must overcome certain basic challenges to remain viable. First and foremost remains managing the risks raised by asymmetric information:

Adverse selection: How can lenders screen out high risk borrowers in advance?
Moral hazard: How can lenders protect their repayment prospects once borrowers have the money in their hands?

Lenders in many developing countries must handle these challenges in the face of special obstacles: weak accounting standards, limited third-party credit information services, and restrictions on the use of physical collateral.

Very likely the most important longer-term contribution that development partners can make will be to address the underlying weaknesses in financial infrastructure-e.g., by helping countries establish credit bureaus and reform collateral laws.

The second major challenge for intermediaries is to keep costs low (and revenues sufficiently high). Cost management is especially challenging when average loan size is small, since transaction costs do not automatically fall as loan size declines. Successful micro-finance institutions (MFIs) employ creative procedures to hold down their costs, while setting interest rates at cost-covering levels.

Finally, each intermediary must mobilize a continuing supply of funds. Banks can pursue increased deposits; they may also sell securities. Some non-bank MFIs are licensed to take deposits, others are not. Many MFIs have relied at least in part on external funding-often from non-commercial sources such as public sector aid or philanthropies.

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Authors

Anthony J. Ody
David de Ferranti

Publication: Brookings Institution

Global Agenda Forum

Tue, 20 Feb 2007 10:00:00 -0500

Event Information

February 20, 2007
10:00 AM - 5:00 PM EST

Falk Auditorium
The Brookings Institution
1775 Massachusetts Ave., NW
Washington, DC

As the forces of globalization gain strength and speed, the challenges and opportunities presented to policymakers, corporate heads and civil society leaders have grown more complex. The Brookings Global Agenda Forum, hosted for the first time on February 20, 2007, spotlighted the top international challenges for the year and offered in-depth, exclusive analysis.

As part of the forum, Brookings Global released the 2007 Top 10 Global Economic Challenges report, which ranks the most pressing global economic issues as viewed by Brookings experts and offers policy recommendations.

View the Global Agenda Forum program
Read the bios of forum participants
Read the 2007 Top 10 Global Economic Challenges report

Transcript

Event Materials

Now Hiring for Global Health

David de Ferranti — Fri, 03 Nov 2006 00:00:00 -0500

Next week, 34 international government officials will fill what is potentially the most important position in global health. The individual they pick will crucially influence—for good or ill—the effectiveness with which the world tackles its most crucial health challenges.

Yet unless things change unexpectedly, that choice will be made in a closed politicized process that would shame a papal conclave.

It may be hard to get excited about how the next director general of the World Health Organization is picked, or who gets the job. Yet we should care, because the state of our health—like so much else today—truly has become a globalized concern.

Thirty years ago, who would have guessed that an unknown disease among Central African monkeys would develop into the global scourge of AIDS? Or that human health and prosperity in the world's most affluent countries would be under threat from an infectious disease among East Asian ducks and chickens?

The WHO is the one agency that has a truly comprehensive global mandate in the public health field. It alone has the responsibility to help the world's national health systems work together to tackle all the toughest cross-border challenges.

Of special importance, the WHO is charged with helping the world's poorest and least-prepared countries bring state-of-the-art, evidence-based approaches to bear on their desperate health challenges.

Since its establishment in 1948, the agency has racked up important triumphs, including the successful program that eradicated smallpox worldwide in 1979; campaigns between the '50s and '70s against crippling tropical diseases like river-blindness and yaws.

Yet many informed observers worry that in recent decades, for a variety of internal and external reasons, the agency has not been firing on all cylinders.

Gro Harlem Brundtland, a former prime minister of Norway who was director general of the WHO from 1998 to 2003, is widely credited with raising the organization's public profile. But overdue internal reforms made less headway. Brundtland's successor, Lee Jong Wook, was tragically struck down by illness in May of this year, barely three years into his term.

The WHO has a critical leadership role to play in global health. Its next director general will set the agency's direction for years to come.

Yet the hiring process as it stands does virtually nothing to ensure that the job goes to the best-qualified candidate. Instead it is dominated by behind- the-scenes political horse trading among member governments, described in the respected British Medical Journal as "a secretive game of political favors that excludes the general public."

It is too late for fundamental reforms to the electoral process this time. Such reforms - half- heartedly considered by the WHO in 2003 but then apparently forgotten—should be taken up in earnest after this year's election.

Here are four measures, all feasible under the present rules, that would help open up the process next time around, and have relevance this time, too:

First, have an open campaign. There should be public debates to allow the candidates to present and defend their platforms and to exchange views on issues and priorities.

Second, the WHO itself should as a minimum take basic steps to promote improved transparency. The agency's Web site currently lists only the names of the 13 proposed candidates and the countries that nominated them. This is inadequate. The agency should publish the candidates' qualifications and statement from each on how they would address the challenges facing the WHO.

Third, organizations working in health at all levels need to demand information and contribute to the debate. The names of the government representatives who will do the voting should be published to allow interested parties to contact them.

Finally, country representatives should be encouraged to vote on election day for the candidate who offers the most convincing proposals to make the WHO a stronger, more effective agency. This may sound naïve—most electors will no doubt be mandated to vote a certain way—but the fact that the ballot is secret gives the electors a practical opportunity to vote their conscience.

Progress on global health matters to us all—more than most of us realize. Let's all do everything we can to ensure that the world's leading health organization gets the vigorous, forward-looking leadership it so urgently needs.

Authors

David de Ferranti

Publication: International Herald Tribune

Enhancing Development through Better Use of Public Resources: How Independent Watchdog Groups Can Help

Fri, 01 Sep 2006 00:00:00 -0400

The struggle against global poverty may be about to get an important boost from an unexpected quarter. All too often, well-intentioned development programs have been undermined in the past by inefficiency, wrong-headed priorities, and outright graft. It is crucial to enhance the effectiveness of developing countries' public spending on social goals. The public sector, however, cannot, in general, be relied upon to reform itself in isolation. The pressure of informed domestic public opinion is a crucial stimulus.

A key missing ingredient is a strengthened role for independent watchdog groups, home-grown within developing countries, and ferociously committed to opening up government budgets and policies for public review and discussion. Part think tank and part advocacy war-room, an emerging new breed of non-governmental organizations, free from special interests, has the potential in the years ahead to promote (and take advantage of) greater transparency and accountability in how developing countries operate, share information, and interact with their citizenry.

The impact of these groups, together with parallel efforts by governments and development assistance channels to clean up their own acts, could lead to better performing governments - and better informed citizens who are more able to use their voice and vote to bring to light, and cut short, public sector missteps.

Making this happen, though, will require support - financial and other - from key actors in the international community, spurred by leaders among the donors and foundations, to help watchdog groups build up their capacity from the fragile state that most of them, starved for funding, are in now. Promising pilots have shown that rapid "scaling up" is the right next priority. The groups' needs include not just more core support to build and sustain stronger teams, but also requirements like training and technical assistance, and cross-country networking so they can learn from each other.

Policy Brief #157

Background

Five years after their adoption, the Millennium Development Goals (MDGs) have brought new attention to the challenge of extreme poverty and ill-health in the world's less-developed countries. However, a third of the way to the MDGs' target date of 2015, studies of progress reveal a mixed picture. While global poverty rates have fallen, especially in Asia, millions in sub-Saharan Africa are getting poorer, and in many other areas poverty rates are hardly budging. Education and health pose enormous challenges in most of sub-Saharan Africa and much of South Asia.

Narrowing these gaps requires intensified efforts. The UN and the World Bank have called for additional aid resources (studies have suggested an additional $60-150 billion might be needed ). However, few expect imminent boosts to official development aid -- currently estimated at $78.6 billion (2004) -- on this scale.

Beyond the quantity of development spending, increasing focus is now being given to issues of quality. At recent international meetings, development leaders have recognized the critical importance of effective resource use. These leaders have pledged themselves to reform the delivery and management of development resources.

In many developed countries, public accountability is much enhanced by independent work on public spending conducted by think tanks and similar groups. By contrast, developing countries are largely missing local capacity, independent of governments, to review public expenditures in a serious way. If credible domestic groups can be aided to develop this capability, they can promote greater transparency and foster informed public pressure for more effective and equitable public programs. This, in turn, can contribute to achieving fundamental social goals like the MDGs.

Bilateral donors, multilateral organizations, and external NGOs have begun to support greater fiscal accountability in developing countries. Promising pilot schemes now need to be scaled up, with additional resources to build the capacity of credible Civil Society Organizations (CSOs), and develop cross-country networks to share lessons of experience.

The Importance of Efficient Use of Public Resources

Effective utilization of public resources is critical to meeting development goals. Key programs in education and health are overwhelmingly conducted within the public sector. And although private provision of infrastructure has expanded in areas like telecommunications and energy, private investors remain wary of socially-oriented sectors such as water and sanitation, and also show little willingness to invest in the poorest countries.

At present, though, research indicates that increases in public spending are only weakly correlated with the achievement of development outcomes in most developing countries. Government ineffectiveness -- in the form of waste, inefficiency and corruption -- is largely responsible.

Poor resource usage is due in part to the fact that public spending is a complex, multifaceted process, which is not naturally transparent to the general public. Budgets typically pass through a sequence of stages, including formulation by ministries, scrutiny by legislative committees, approval by the legislature, distribution of funds to ministries, further distribution to state and local authorities, and end-point delivery. Accountability is hampered by deficiencies that include closed-door discussions, limited documentation, and poor data reliability.

Weakly-performing public institutions, in turn, can seldom be expected to reform themselves in the absence of external pressure. Unlike private companies, public bodies face no direct competitive pressures, and political systems - especially in developing countries - are often inadequate at mobilizing public pressure for specific institutional reform.

Weaknesses in public finance management can contribute to ineffective resource use through a number of channels. Corruption can often take a significant toll, but even in countries where government personnel are mostly honest, they can be hobbled by poor systems, inadequate training, or other deficiencies. Wherever allocation decisions are taken outside informed independent scrutiny, society's more powerful and articulate groups tend to sway those decisions - to favor urban areas over rural, middle-class subsidies over pro-poor programs, and certain ethnic/cultural groups over others.

Case studies illustrate additional ways that poor governance hinders effective resource use:

The quantitative impact from significant improvements in public budget performance could be significant. Government consumption expenditures in low- and middle-income countries reached some $1,017 billion in 2003 (typically ranging from 15 to 45 percent of GDP). While quantitative estimates of overall waste, inefficiency, and corruption are speculative, even if as little as 5 percent of public funds constituted a recoverable loss, the ensuing $50 billion savings could substantially boost resources in areas like education, health and infrastructure.

Assessing Fiscal Transparency

Studies confirm that the public availability of accurate, timely information on public sector spending varies enormously across countries. Recent work at the IMF has developed operational measures of fiscal transparency, drawing on data from country-level studies known as Reports on Observation of Standards and Codes (ROSCs). An index of fiscal transparency has been prepared based on assessments of country adherence to best-practice in four areas:

Data assurance: i.e., safeguards to ensure credible and reliable published data;
Medium-term budgeting framework: efforts to place annual data in a multi-year context;
Budget execution: e.g., the quality of accounting and auditing safeguards; and,
The public disclosure of fiscal risks.

As shown in Figure 1, fiscal transparency based on this index is correlated with the level of overall development - in general, advanced countries do a better job of sharing accurate budget information with their citizens than less-developed countries.

Source: Hameed Farhan "Fiscal Transparency and Economic Outcomes," IMF Working Paper 05-225 (December 2005)

Far from supporting the argument sometimes made that countries should just wait passively for economic development to bring improvements in public financial transparency in its wake, however, the research reinforces the importance of national efforts to improve levels of fiscal transparency:

After controlling for the level of development, countries with higher fiscal transparency ratings have better credit ratings, better fiscal discipline, and less corruption than comparable countries with lower fiscal transparency.

Putting accountability to work

Micro-level case studies reinforce understanding of the benefits that accrue when citizens have the chance to hold the public sector accountable:

Public expenditure tracking

Community control of program implementation

Citizen report cards

Benchmarking

What is Missing, What is Needed

There is much that developing country governments and legislatures must do to enhance the transparency and accountability of public spending, including: publishing detailed budgets, sharing information on actual financial flows (as in Uganda), strengthening the transparency of public procurement, and improving auditing.

But political leaders and civil servants do not operate in a vacuum, and even the strongest and most public-spirited leadership requires the political reinforcement that comes from broader public involvement in the development of national priorities.

In countries where transparency and accountability are well developed, citizens typically exercise their role in public policy-making not by immersing themselves in raw data, but by drawing - directly and indirectly - on the outputs of "interpreters," such as think tanks and academics, whose own detailed work in turn gets filtered to the public via intermediaries in the media, politics, and elsewhere.

An obvious example is the Brookings Institution itself, which first published its "Setting National Priorities" series, an independent evaluation of key U.S. national budget choices, some 35 years ago.

By contrast, the interpreters of policy information to the public in low- and middle-income countries are generally too few and too weak. There is a need in most developing countries for stronger domestic non-government groups (possibly including think tanks, university bodies, media, and consumer organizations), to monitor, analyze, and disseminate findings on public spending, and help press governments for greater transparency and accountability.

On the substantive side, serious independent work on public spending will require developing CSOs' capacity to address at least four areas of concern:

Aggregate fiscal discipline;
Allocative efficiency of budget funds;
Transparent distribution of budget spending; and,
Efficient service delivery.

In terms of staffing profile, CSOs will need to mobilize several key capabilities:

Dedicated policy professionals to conduct the necessary underlying analysis;
Capable, respected interpreters and communicators; and,
Access to international network resources that can provide benchmarking data and best practice standards.

Some of these are specialized functions, which do not easily develop organically. However, the efforts of pioneering organizations suggest that it is possible to build capacity relatively rapidly with the help of well-targeted interventions.

Building on Existing Efforts

Several existing international efforts seek to help improve budgetary quality and transparency. The incentives established by the EU accession process have, according to independent evaluations, encouraged states in Central and Eastern Europe to develop and implement anti-corruption strategies and improve transparency in the use of public resources. Multilateral agencies, including the IMF and World Bank, undertake periodic analytical work on national budget issues within member countries. Several international organizations actively promote work on general governance issues, including CSOs like Transparency International, though to date the main international CSOs have undertaken only limited work specifically on improving transparency and accountability in public expenditure.

Pioneering efforts by a few actors demonstrate the potential of focused externally-assisted interventions. Two programs are of particular relevance:

The International Budget Project has worked since 1997 to assist CSOs in new democracies and low- and middle-income countries to conduct analytical and advocacy work on promoting budget transparency and accountability. The project has provided training, diagnostic tools, and small grants (up to $40,000 each) to groups in more than 60 countries.
The Open Society Institute's Revenue Watch Initiative has worked since 2002 to improve accountability in natural resource-rich countries by strengthening the capacity of citizens, governments and other interested parties. Active in more than 20 resource-rich countries, Revenue Watch conducts and disseminates research, advocates for transparency and accountability, and supports civil society capacity building, including working with the media, local NGOs, and the public through workshops and small grants.

Despite these groundbreaking programs, clear limitations remain to current efforts on fiscal transparency in developing countries. First, gaps remain in country coverage. Second, coverage within countries needs greater depth, and more budget components need assessment. More fundamentally, analysis by outside agencies like the World Bank and IMF, however technically sophisticated, cannot fully substitute in a political sense for homegrown, domestically "owned" capacity.

How to Get It Done

With possible exceptions, most national governments will likely not attach high priority to financing local institutions inherently geared to holding their own actions up to critical public scrutiny. As such, the strengthening of independent capacity to evaluate public spending will require assistance from sympathetic sources of funding other than domestic national governments. This may include private foundations, multilateral organizations, and/or bilateral government programs.

Support should include grants that fund the preparation and implementation of institutional development plans to address critical CSO functions, including the capacity for research, analysis, communications, advocacy, and networking, as well as essential administrative functions such as personnel and financial management.

Learning-by-doing exercises, which involve commissioning specific analytical work, should also be funded. This approach, which has been followed (in other contexts) by the World Bank Institute, United Nations Development Program and the Consultative Group on International Agricultural Research, allows more effective integration of external experts, delivery of technical assistance better-targeted to an organization's actual needs, and an opportunity to monitor the impact of the intervention.

Additionally, support should be given for a range of networking and knowledge-sharing activities, including: workshops (some cross-country) to share lessons learned and best practices, and collaborate on new strategies; competitive scholarships for individual researchers to do advanced studies; development of publications to disseminate work to a broader audience; a network internship program; "twinning" arrangements that match-up individuals or teams working on similar subjects in different countries, and dissemination of benchmarking data and best practice public sector standards.

Summing up

To improve developing countries' effectiveness in utilizing scarce public funds, efforts to achieve greater transparency and accountability in budget processes must be strengthened. This brief argues specifically for expanded initiatives to strengthen domestic civil society capacity - independent of governments - to provide substantive analysis of budget choices and the distribution and effectiveness of public spending, and to make the results accessible to the general population both directly and via intermediaries such as the media.

The proposal works from the premise that domestic civic and non-governmental organizations already possess relevant resources, including local knowledge and credibility, that can potentially play a key role in helping to improve the transparency and quality of public spending.

Building on promising pilot programs already underway, the proposal advocates scaling up international efforts to support relevant local actors with training, technical assistance, and facilitated access to the stock of international knowledge on public expenditure review.

Improving the process of setting budgetary priorities, making sure public funds are spent as planned, and raising the effectiveness of publicly financed services, will require sustained efforts by dedicated personnel with local credibility. Successfully managed, such efforts hold the potential to improve current development efforts in a major way, and thus contribute to improved progress in meeting development objectives, including the internationally-agreed Millennium Development Goals.

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Authors

Anthony J. Ody
Charles C. Griffin
David de Ferranti
Justin Jacinto
Nick Warren