The World Bank

Approaches to political economy Approaches to political economy analysis for development analysis for development

effectiveness: effectiveness: some nuts and bolts & emerging some nuts and bolts & emerging

practicepractice

SDV BBL series SDV BBL series on Political on Political Economy of Economy of

ReformReformMarch 18, March 18,

20092009

Verena FritzGovernance Specialist

Brian LevyAdviser

Kai KaiserSenior Economist

(PRMPS)

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What isWhat is political economy political economy analysis?analysis?

Political economy analysisPolitical economy analysis is concerned with the is concerned with the interaction of political and economic processes in a interaction of political and economic processes in a society: the distribution of power and wealth society: the distribution of power and wealth between different groups and individuals, and the between different groups and individuals, and the processes that create, sustain and transform these processes that create, sustain and transform these relationships over time.relationships over time.

(OECD/DAC)(OECD/DAC)Cross-cutting and complementaryCross-cutting and complementary to technical to technical

analysis, and analysis aimed at identifying prioritiesanalysis, and analysis aimed at identifying prioritiesPE analysis can promote development PE analysis can promote development

effectivenesseffectiveness by helping to develop approaches by helping to develop approaches that take contextual factors (systematically) into that take contextual factors (systematically) into accountaccount

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Business rationale: why PE Business rationale: why PE diagnostics?diagnostics?

Bank strategies and operations based purely on technical analysis and best-practice approaches have often proven un-implementable

Bank teams are often ‘surprisingly’ surprised by policy decisions (or non-decisions) in client countries

Monitoring and managing the risk of reputational damage requires monitoring political trends – rather than ignoring them

We need to stretch ourselves beyond a pure ‘common sense’ approach to political economy– To understand the complex motivations of stakeholders

rather than relying strongly on individual ‘reform champions’

– To understand the interplay between formal and informal institutions, and the motivations of stakeholders

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Three layers of Three layers of problem-drivenproblem-driven GPE analysisGPE analysis

Political economy

Vulnerabilities& concerns

Institutional/ governance arrangements & capacities

Evidence of poor outcomes to which GPE issues appear to contribute

E.g. repeated failure to develop solutions to lack of results in sectors. Infrastructure is constraint to growth but is not being improved

What are the institutional arrangements & are they capable, effective & efficient?Why are things this way? Why are policies or inst. arrangements not being improved?

Mapping of institutions: laws, regulations; responsible public bodies; formal and de facto rules of the game; analysis of integrity/corruption challengesAnalysis of stakeholders, incentives, rents/rent-distribution, historical legacies & earlier reform experiences; social trends & forces and how they shape stakeholder actions

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GPE can be GPE can be applied toapplied to country, sector, or specific country, sector, or specific

operationsoperationsMacro: country levelMacro: country level

Analysis of overall country context. Also as a background Analysis of overall country context. Also as a background note for meso and micro level worknote for meso and micro level work

Meso: thematic and sector levelMeso: thematic and sector level Thematic problem-driven GPE analysis, e.g. on natural Thematic problem-driven GPE analysis, e.g. on natural

resource management, linking governance and growth resource management, linking governance and growth Sector-focused problem-driven GPE to inform CAS pillars, Sector-focused problem-driven GPE to inform CAS pillars,

sector strategies & Development Policy Loans, sector strategies & Development Policy Loans, complementing technical sector analysiscomplementing technical sector analysis

Micro: specific operations or policiesMicro: specific operations or policies Such analysis is focused on generating direct advice to a Such analysis is focused on generating direct advice to a

single operation or for the dialogue on a specific policy single operation or for the dialogue on a specific policy issue (e.g. Prior Action)issue (e.g. Prior Action)

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Selecting operations given existing reform space

Seeking to expand

reform space pro-actively

Philippines public procurement reform – pro-active coalition building to combat entrenched corruption networks

Zambia telecoms: focus on local winners

Mongolia Mining: TA with local think tank for public debateParaguay & Bangladesh roads: external monitoring by stakeholders

Ethiopia PBS to mitigate reputational risk: support subnational service delivery with participation

India power: reform sequencing

Operational Operational valuevalue: : Defining how to proceed to make reforms Defining how to proceed to make reforms

happenhappen

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Existing frameworksExisting frameworks Multiple frameworks developed within the WB and

by other donors are available for use– World Bank:

PRMPS: Good Practice Framework on PGPE (building on C & S GAC efforts/experiences) & summarizing menu of options and approaches

SDV: TIPS handbook and Report on PE of policy reforms for policy dialogue and development operations (building on PSIA experiences)

– DfID DoC, Dutch SGACA, SIDA power analysis, EC draft framework for sector governance analysis, …

PE diagnostic frameworks can be combined with conflict diagnostic frameworks for fragile environments

PRMPS is currently working on a sharepoint intranet-site which will make existing frameworks and experiences easier to locate for TTLs/staff

Emerging ‘Community of Practice’ across Bank units

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Structural

Constitutional set up, electoral rules; policy and budget processes,  Set-up of government; ministries and their roles and mandates  

Informal: rules of patronage networks Political leaders; political parties, (organized) interest groups; heads of SOEs;  external stakeholders

Examples

Historical legacies, economic base and level of development, commodity prices; population dynamics;  

Institutions

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A basic structure for GPE analysis: 3 sets of variables, interactions & effects on

policies & outcomes

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Some key lessonsSome key lessons GPE diagnostics should be focused on

particular challenges/questions/puzzles Expectations (of country teams,

management, etc.) and actual approach to PE diagnostic need to be well matched

Integrate PE diagnostics as closely as possible with other work & with country/sector teams

Pay attention to processes as much as to products– (i) the process of producing the analytic output –

including quality management– (ii) the follow-up process of using PE diagnostics

for decisions – strategy or operational design, whether to adjust these, whether and how to engage in coalition-building for reforms, etc.

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A variety of approaches & tools …A variety of approaches & tools …General approaches/perspectives:General approaches/perspectives: Analyzing historical legacies and their impact on current configurationsAnalyzing historical legacies and their impact on current configurations Analysis of rents, rent distribution & dynamicsAnalysis of rents, rent distribution & dynamics

Particular perspectives, structuring & slicing:Particular perspectives, structuring & slicing: Analysis of policy processes and electoral incentives – and their impact on Analysis of policy processes and electoral incentives – and their impact on

policy volatility, adaptability/on public investment planning, public-policy volatility, adaptability/on public investment planning, public-orientedness of policies & resource allocationorientedness of policies & resource allocation

Value-chain approach for structuring sector focused analysisValue-chain approach for structuring sector focused analysis

General tools:General tools: Analysis of structural factors and their impactAnalysis of structural factors and their impact Institutional mapping at different levels – from constitutional systems to Institutional mapping at different levels – from constitutional systems to

detailed processes at sub-sector level; capturing formal and informal detailed processes at sub-sector level; capturing formal and informal institutionsinstitutions

Stakeholder mapping & analysis (-- using different degrees of Stakeholder mapping & analysis (-- using different degrees of formalization)formalization)

Specific tools:Specific tools: Surveys of public opinion or of well-informed peopleSurveys of public opinion or of well-informed people Quantitive analysis – e.g. using data from surveys, policy outputs, etc.Quantitive analysis – e.g. using data from surveys, policy outputs, etc.

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EvidencingEvidencing political economy political economy analysisanalysis

Political economy analysis needs to be well Political economy analysis needs to be well evidenced to be credible …evidenced to be credible …

.. without falling into the trap of duplicating .. without falling into the trap of duplicating technical analysistechnical analysis

Structuring/summarizing/focusing existing Structuring/summarizing/focusing existing analysisanalysis

Identifying data and sources – often Identifying data and sources – often ‘outside the box’ – surveys, electoral ‘outside the box’ – surveys, electoral results, records of voting and debates in results, records of voting and debates in parliament, pricing, records of ownership, parliament, pricing, records of ownership, etc.etc.

Interviews – with systematic approachInterviews – with systematic approach Triangulation! Triangulation!

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Moving from analysis to Moving from analysis to follow-upfollow-up Moving from analysis to follow up is crucial to

achieve impact– Timely initiation of follow up – this does not need to wait

until the diagnostic output is completely polished– Dual process once the diagnostic ouptut is drafted

Review of the quality of the product Discussions on implications and follow-up with relevant

teams and management Follow-up can take a variety of forms

– Designing more feasible operations– Including innovative components into operations and

pushing for increasing reform space (e.g. intensifying/broadening policy dialogue, support to think tanks, coalition-building, communications strategies, working with CSOs for procurement watch, etc.)

– Informing the decision-making process with management about challenges and how to react

– Communicating with other stakeholders (INGOs, media) about the strategic choices of the Bank in light of country context/context of operations

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Recent examples of GPE Recent examples of GPE diagnosticsdiagnostics

Mongolia CGAC – Focused on managing the natural resource boom

(building on earlier PE diagnostic work) Zambia CGAC

– Focused on stalled implementation in infrastructure reforms

India & Lebanon power sector reforms Ongoing work on GPE of NRM in 8 countries (AFR

and EAP) Bangladesh roads sector Various country level diagnostics in fragile states

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RELEVANCE FOR ZAMBIA II: A DIFFERENT APPROACH TO WBG

ENGAGEMENT

FROM…. …… ”should” ………… (prescription)

TO ……. ….. ”why?” ………….(seek to understand)

TO… “feasible next steps” ..... (for poverty reduction)

..an approach, NOT a prescription…(more humility)

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ResourcesResources PRMPS – PRMPS –

http://connect.worldbank.org/units/prem/PD-GPEA/pdgpe/default.aspx– Good Practice Framework for Problem-Driven Governance and Good Practice Framework for Problem-Driven Governance and

Political Economy AnalysisPolitical Economy Analysis– Repository for existing examples of political economy analysis Repository for existing examples of political economy analysis

(evolving)(evolving)– Thematic applicationsThematic applications

Growth diagnosticsGrowth diagnostics Resource rich countries comprehensive engagement (EITI++) Resource rich countries comprehensive engagement (EITI++) Core Governance (esp. Public Sector Management) in Fragile Settings)Core Governance (esp. Public Sector Management) in Fragile Settings)

SDV – SDV – www.worldbank.org/socialanalysis -> political -> political economy of reformseconomy of reforms– The Political Economy of Policy Reform – Issues and The Political Economy of Policy Reform – Issues and

Implications for Policy Dialogue and Development Operations Implications for Policy Dialogue and Development Operations – TIPS handbook (Tools for Institutional, Political, and Social TIPS handbook (Tools for Institutional, Political, and Social

Analysis of Policy Reform)Analysis of Policy Reform) CommGAP – CommGAP – www.worldbank.org/commgap

– Communications strategies for PE analysis follow-upCommunications strategies for PE analysis follow-up WBI – Watch this spaceWBI – Watch this space DEC – Macroeconomics and Growth programDEC – Macroeconomics and Growth program

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Operationalizing GPEOperationalizing GPE Demonstrating Value AddedDemonstrating Value Added

– Upside & DownsideUpside & Downside Constructive, Risk MitigationConstructive, Risk Mitigation

– Sector/Country Team DialogueSector/Country Team Dialogue– DisseminationDissemination

Grey Covers…Grey Covers…

– Community of PracticeCommunity of Practice ResourcingResourcing

– BB, Governance Partnership Facility, PSIA…BB, Governance Partnership Facility, PSIA…– Skills base (staff, consultants, quality control)Skills base (staff, consultants, quality control)