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Political Economy Analysis:

Approaches and Challenges

EuropeAidScope

•What is political economy analysis (PEA)?

•Why PEA? Why now?

•Domestic and international PEA Findings

• Issue-focused versus problem-focused PEA approaches

•Challenges for PEA

EuropeAidWhat is PEA?

• According to OECD/DAC (also used by DFID), PEA is

‘analysis concerned with the interaction of political and economic processes in a society: the distribution of power and wealth between different groups and individuals, and the processes that create, sustain and transform these relationships over time’ (OECD 2009, cited in Unsworth 2009)

PEA helps us get to context, but not just about context!

EuropeAidWhy Political Economy Analysis (PEA)?

• Too much focus on input, spending and technicalities and less on results;

• Aid and the cost of corruption

• Critical importance of political economy analysis in new aid modalities (fiduciary and development risks)

• Governance is crucial for sector development and outcomes and thus for efficient service delivery.

• Challenge lies now with implementation …

EuropeAidMAKING THE ICEBERG VISIBLE

EuropeAidWhy PEA? Why now?

• ‘Despite decades of technical and prescriptive efforts, a lack of concrete achievements have been recognised by donors, partner countries and academics alike’ (Chabal, 2009).

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The ‘primacy of politics’?

• ‘The central and dominant variable determining not only the conception and shape of development, but developmental success or failure in societies, is their politics’(Leftwich, 2000).

EuropeAid‘Bankruptcy of best practice’ in the field

• Donors are increasingly recognising the failure of primarily technocratic solutions lacking in country/specific context and also the importance of politics.

• The World Bank, for example now recognises the importance of PEA, despite its non-political mandate:

‘A political economy lens broadens operational considerations beyond technical solutions to include an emphasis on stakeholders, institutions and processes by which policy reform is negotiated and played out in the policy arena’ (World Bank 2008).

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Domestic PEA findings

• Early DFID findings have revealed: corruption, elite capture of power and resources, the role of civil society (both positive and negative) and relationships with external actors (DFID, 2005)

• Further donor findings centre upon the critical nature of relationships between formal and informal institutions

• Despite the presence of formal state structures, informal actors and institutions found to supersede these structures

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Formal

Photo: Heather Marquette

Informal

Photo: Kevin Tunoi/Standard

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International PEA findings

• PEA has recognised the role of ‘international drivers’ upon elite behaviour, patterns of corruption and overall levels of development:

‘bad governance is often caused or exacerbated by the ways in which poor countries interact with global economic and

political forces, powerful and richer countries and large transnational private enterprises’

(DFID White Paper, citing Moore and Unsworth,2006).

EuropeAidIssue-focused versus problem-focused approaches

• ‘Meta-level’ in the form of country level, e.g. Drivers of Change

o Well received, but not easy to operationalise; how many PEA studies are there gathering dust on shelves?

• Recent variation in the form of problem-driven PEAs- focus upon specific problem/sector (e.g., EC Sector Governance Analysis Framework)

o Easier to operationalise, but may miss structural impediments only evident through wider analysis

EuropeAidChallenges

• Minimal sharing of PEA findings, within donor community and with the host nation

o However, not always easy or practical to make public

• PEA findings not reflected in donor activity and practice, despite growing recognition of the importance of politics

o In spite of PEA findings, the incentives remain for donors to continue to pursue primarily technocratic

• Donors continue to employ technical experts rather than political specialists

• Agencies remain fundamentally political (Unsworth, 2008)

• PEA not just about anti-corruption workstreams but getting at indirect and direct strategies; PEA is for

everyone, but likely to find easier audience in governance circles; i.e., why spend limited funds on PEA?

EuropeAidWhat’s the added value of such analyses?What can you not expect….?

• Helps identify domestic drivers, understand incentives and target obstacles to change• Cannot push through externally driven political agendas

• Assess feasibility of reforms and levels of ambition (good enough governance, next best institutions, etc.)• Cannot generate quick fixes or short cuts

• Analyse risks in a more comprehensive way, including the risks of doing business as usual, or stopping aid• Cannot take away these risks

EuropeAidSOME QUESTIONS FOR DISCUSSION

• HAVE YOU WORKED WITH POLITICAL ECONOMY ANALYSIS TOOLS? IF SO, DID THEY MAKE A DIFFERENCE?

• WHAT ARE THE MAIN CHALLENGES/LIMITATIONS ENCOUNTERED IN APPLYING THIS APPROACH, PARTICULARLY WITH PARTNER GOVERNMENTS?

• OPERATIONAL TOOLS? WHAT SUPPORT DO YOU NEED, IN WHICH FIELDS ?