MDG-Based National Plans in Middle Income Countries Roddy Rivas-Llosa Head of Policies and Programs Peruvian Agency of International Cooperation July 2005 From Needs to Policies to Actions: The Peruvian experience

2 From Needs to Policies to Actions: The Peruvian experience Contents of the presentation MDGs on Perú – Progress and Pending Issues The role of the Peruvian Government The role of the International Cooperation Challenges and Priorities Current Design and Lessons Learned

3 From Needs to Policies to Actions: The Peruvian experience According to the UNDAF (Feb/2005) UNDAF looks to put Perú on the track of sustainable human development, based on poverty reduction, inclusion and prevalence of basic human rights. Perús potential (physical, human, social and environmental) is constrained by structural limitations (social exclusion, institutional fragility) that can be solved with the help of international cooperation.

4 From Needs to Policies to Actions: The Peruvian experience Perú after the Macroeconomic Adjustments Source: Central Bank of Perú

5 From Needs to Policies to Actions: The Peruvian experience Middle Income Country Per Capita GDP – Atlas Method Source: World Bank

6 From Needs to Policies to Actions: The Peruvian experience Peruvian Debt Burden Source: Peruvian Government

7 From Needs to Policies to Actions: The Peruvian experience Map of Inequalities (HDI 2004) Source: UNDP 30% of the population live in Lima QUICK FACTS Poverty in the Costa 17.2% Poverty in the Sierra 29.4% Poverty in the Selva 50.0% Urban extreme poverty 9.7% Rural extreme poverty 50.3% More than 60 languages spoken over the national territory No Planification Ministry PRSs Aligned to MDGs

8 From Needs to Policies to Actions: The Peruvian experience Human Development and Inequality Source: UNDP Worse Better 177 Countries

9 From Needs to Policies to Actions: The Peruvian experience HDI versus Per Capita GDP Source: UNDP

10 From Needs to Policies to Actions: The Peruvian experience MDGs on Perú – Progress and Pending Issues (2004) Source: UNDP, ENNAHO, ENNIV Starting point Target

11 From Needs to Policies to Actions: The Peruvian experience First Goal: To Reduce Poverty POVERTY Percentage of the population that live with less than a USDollar a day. Current Trend South Asia Sub- Saharian Africa Goal 2015 East Asia and The Pacific Latin America And the Caribbean Central and Eastern Europe Arab States Descend = Improvement Goal 2015 Source: UNDP

12 From Needs to Policies to Actions: The Peruvian experience The role of the Peruvian Government Source: Peruvian Government Total budget (2003) US$ 10 Billions Basic social expenditure Education and Health US$ 4.5 Billions Poverty reduction programs US$ 0.8 Billions In Figures

13 From Needs to Policies to Actions: The Peruvian experience Composition of public spending The public sector has been showing strong progress, although it still has major problems. The current expenditure has been increasing whereas the capital expenditure has not. The peruvian administration has been seeking fiscal stability as well as trust and access to credits. Source: Peruvian Government

14 From Needs to Policies to Actions: The Peruvian experience Public Sector Challenges Around 90% of the budget is current spending Around 90% of the budget is current spending Technical problems to formulate and execute consistent Investment Projects Technical problems to formulate and execute consistent Investment Projects High administrative costs reduce the effectiveness of the Projects effectiveness of the Projects High administrative costs reduce the effectiveness of the Projects effectiveness of the Projects Budget Administrative Solution: Build Capabilities at the public sector Solution: Build Capabilities at the public sector Other problems attached

15 From Needs to Policies to Actions: The Peruvian experience The role of the International Cooperation (US$)

16 From Needs to Policies to Actions: The Peruvian experience The role of the International Cooperation (US$) Source: World Bank

17 From Needs to Policies to Actions: The Peruvian experience The role of the International Cooperation (US$)

18 From Needs to Policies to Actions: The Peruvian experience UNDP Quantitative Study It is not possible to isolate the cost to achieve one individual goal It is not possible to isolate the cost to achieve one individual goal The attention to water and sanitation has the greatest multiplying effects The attention to water and sanitation has the greatest multiplying effects Additional Social Expenditure to Achieve MDGs Additional Social Expenditure to Achieve MDGs US$ 3.0 Billion (At 3% Annual Growth) –> 4.1% of GNP US$ 3.0 Billion (At 3% Annual Growth) –> 4.1% of GNP US$ 1.1 Billion (At 5% Annual Growth) –> 1.4% of GNP US$ 1.1 Billion (At 5% Annual Growth) –> 1.4% of GNP

19 From Needs to Policies to Actions: The Peruvian experience What are we doing at the present? Introducing the MDGs into the political discussion Next elections: 2006 Looking for a non-politician Composing a Strategic Framework document for the Donors Forum Composing a Strategic Framework document for the Donors Forum Three chapters Country characterization, Identification of priorities, Guide of Good Practices Building a System of Indicators to follow Public Interventions Responsible Ministry of Finance Extending the analysis of policies effects Background From academic research to political subject of interest Developing Long-run Planning Capabilities Some tools CEPLAN, Macroregions, Reinforcing information requirements and transparency

20 From Needs to Policies to Actions: The Peruvian experience Politics and Strategy Strategy Instability Political instability 3 governments to go until governments to go until 2015 Lack of strong long term goals Lack of strong long term goals National Agreement Donors Forum Long term stability Long term stability

21 From Needs to Policies to Actions: The Peruvian experience Supply and Demand of International Cooperation Sectors: Demand side Sources: Supply side Normative priorities matrix Normative priorities matrix Positive priorities matrix Positive priorities matrix E.U.W.B. APCI Sectorial matrix Regional matrix Local matrix MDGs Demand matrix National matrix of priorities - Cooperation

22 From Needs to Policies to Actions: The Peruvian experience Potentialities of the Country What has to be done? Develop conditions of access to their markets Develop conditions of access to their markets Favour implementation of social projects in their region Favour implementation of social projects in their region Create conditions to consolidate emergent markets Create conditions to consolidate emergent markets Empower intermediate cities to promote economic growth Empower intermediate cities to promote economic growth Regional Governments National Government

23 From Needs to Policies to Actions: The Peruvian experience MDGs in a Middle Income Country Give Direction to Development Efforts Priorities, indicators, policy instruments, policy interactions MDGs in Middle Income Countries Quantity versus Quality Universal Education versus Quality Education Ex-ante versus expost assignment Promote the use on the formulation phase MDGs: Not exhaustive Add other areas of interest for national development

24 From Needs to Policies to Actions: The Peruvian experience Multiple Guidelines National Agreement National Plan to Reduce Poverty Descentralization Plan Paris Declaration Millenium Declaration Regional Plans Rural Development Plan Rural Development Plan Multi Annual Macro Economic Framework Sector Policies

25 From Needs to Policies to Actions: The Peruvian experience From Needs to Policies to Actions: The Peruvian experience Development Priorities – Looking for an Integrated Matrix

26 From Needs to Policies to Actions: The Peruvian experience The Current Design CapacitybuildingCapacitybuilding Improve quality of Projects Results follow-up follow-upResults Use of Development Assistance Articulation of the projects Project generation guides Study the marginal benefits of actions, according to the place and type of the investment Study the marginal benefits of actions, according to the place and type of the investment Build follow up indicators and methods Build follow up indicators and methods SIAF SNIP Criteria of project classification on MDGs Criteria of project classification on MDGs Alignment of the projects to the MDGs Measurement of results (National System of Public Investment) (Integrated System of Financial Management) What is the projected impact?

27 From Needs to Policies to Actions: The Peruvian experience The role of the International Cooperation (US$) Chronological advance Financial advance

28 From Needs to Policies to Actions: The Peruvian experience Pending Challenges Political Cultural Ideological Heterogeneity In levels of education, distribution of wealth, access to health, civil rights Sustainability of policies in the long term Cultural integration Finding consensus Challenges

29 From Needs to Policies to Actions: The Peruvian experience Lessons Learned Increasing Average Income is not Enough Economic growth may tend to generate more inequality On the way of development, the avoidance of social, economic and political exclusion must be a priority Risks: reversion (vulnerability), internal complexity (lack of governance, weak institutional framework) International Cooperation will not last forever Maintaining a solid and comprehensive statistical database is a profitable investment Producing an integrated matrix of priorities is just the first step: consider programs, intervention mechanisms, target indicators and its interrelations The enhancement of public sector capabilities is not sustainable unless the Government is understood as a technical and political organization

30 From Needs to Policies to Actions: The Peruvian experience Open Questions Is it necessary to distinguish and regulate the use of refundable and non- refundable funds? What criteria should be used to decide between reinforcing budgetary support versus a project based approach? Is it convenient to negotiate an agreement in which each source of cooperation focuses on a reduced number of thematic or geographical goals? (e.g. 50% of alignment) Should a blending scheme be adopted progressively to motivate the persistence of non refundable assistance? Do all MDGs weight the same? Is it possible to build a Utility Function depending on the relative progress to select an optimum cost efficient policy combination?

End of the presentation