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Finnish Aid in a PRSP context Helsinki workshop 19 th – 21 st May 2003 Day 3: Consultants & Researchers

Plan for today Introduce OPM Look at changes in demand for services Highlight new skills that are needed Look at what skills are already in Finland Examine changed environment in relation to business plans and strategies

What is OPM? Small consultancy based in Oxford Privatised department of the university 25 consulting staff mainly economists Works mainly for DFID, WB, EC, ADB and other bi-lateral donors Worked in over 80 countries Main focus in SSA, South Asia, the Caribbean

What sectors do we work in? Economic policy Social policy Public sector finance and management

Changes in aid context: Shift in objective from stabilisation & adjustment to growth and poverty reduction Change in instrument from project to sectoral/budget support Shift in framework to PRSP aligned to budget Possible change in volume of aid (aid flows may increase to support achievement of MDGs)

Changes in aid management: More untied aid Greater use of local technical assistance More decentralisation by donors to local offices Larger projects More recipient government management/co-ordination

At the same time as PRSP/GBS, donors adopting new themes, including: Pro-poor growth/sources of growth Private sector development Business environment Trade Governance

What does this mean for consultancy companies? With GBS/sectoral support, aid flows directly to recipient governments, not through companies We wont be implementing projects any more All that is left is technical assistance to support PRSP process and implementation of GBS

Its not the end of the world… Many countries not ready for GBS and wont be for a long time ( 2001/02, £290m of budget support was provided to 17 countries, equivalent to 18% of the DFID bilateral programme) Cynics waiting for sectoral support/GBS to fail Unless PRSP and GBS completely aligned then plenty of room for projects within PRSPs

But, fewer projects when: Conditions are good for GBS Projects could also work but would create distortions; transactions costs Reduce projects and focus on TA and non- Gov. projects Conditions for GBS mixed but moving in the right direction Projects will undermine government budget and accounting systems May be greater need for piloting and TA to strengthen systems Conditions unsuitable for GBS Projects equally unlikely to be effective in changing overall performance Focus projects on non- government sector

And projects outside GBS when: TA projects which pilot new or risky approaches Government not well placed to source TA; cannot afford the cost of failure Legitimate donor input, if policy is moving in direction of the innovation Environmental or global public goods Government resource constraints too sharp to justify Legitimate donor investment, if Gov. provides policy framework Investments where donors have a comparative advantage Transactions costs and management risks too high for Government Legitimate donor investment, if recurrent costs can be covered in the future

Technical assistance in a PRSP/GBS world

Reminder Policy formulation Communication Policy implementation Monitoring and evaluation Poverty analysis Financing PRSP process: Results oriented, evidence based policy making?

Poverty Analysis Policy formulation Communication Policy implementation Monitoring Poverty analysis PRSP process: the theory Financing Quantitative and qualitative data on poverty Analysis of growth and poverty linkages Goal setting Facilitation of participatory process Research eg impact of macro policies on poverty (PSIA) Strengthening statistical agencies Monitoring and evaluation

Policy formulation Policy formulation Communication Policy implementation Monitoring Poverty analysis PRSP process: the theory Financing Examining performance of existing programmes (though service delivery surveys etc) Identifying policies and programmes that can contribute to poverty reduction goals Costing policies and programmes

Financing Policy formulation Communication Policy implementation Monitoring Poverty analysis PRSP process: the theory Financing Aligning PRSP with budget process Strengthening PFM Supporting specific diagnostic tools (see below) Supporting transition from projects to sector/GBS Identification of fiduciary safeguards for donors Training donors in PFM

Communication Policy formulation Communication Policy implementation Monitoring Poverty analysis PRSP process: the theory Financing Developing communications strategies for recipient governments Participatory process with civil society

Policy implementation Policy formulation Communication Policy implementation Monitoring Poverty analysis PRSP process: the theory Financing Supporting improved implementation Continuing to provide services but within PRS framework Running pilot projects within PRS framework Implementation of (new) poverty programmes within PRS

Monitoring and Evaluation Policy formulation Communication Policy implementation Monitoring Poverty analysis PRSP process: the theory Financing Supporting the design of m&e frameworks: i. Aid flows/donor behaviour ii. PRSP process iii. Policy commitments iv. Budget processes v. Inputs/outputs vi. Poverty outcomes Nb monitoring of GBS and PRSP should be linked Monitoring and evaluation

Policy formulation process Policy formulation Communication Policy implementation Poverty analysis Financing Monitoring and evaluation PRSP process: Results oriented, evidence based policy making?

What skills are required? Process skills High level policy advice Research on outcomes and impacts (like PSIA, LSMS, SDSs, PPAs) Statistical/monitoring support PEM and PFA

Diagnostic instruments (2) Example:GBS requires new diagnostic tools Three requirements are necessary to build capacity for PFA: (1) An effective, transparent and publicly accountable system for revenue, expenditure and cash management (2) External audit that is independent and open to scrutiny (3) Information on operational efficiency and results Knowledge of formal systems for PFA has developed since the late 1990s. It remains in many case incomplete.

Diagnostic instruments (3) Change in type of work required: Until the late 1990s, diagnostic work focussed on one aspect of PFA – namely budget processes through public expenditure review work. The emphasis has now shifted from management to the governance of public resources (involves issues of internal control, reliable and timely public accounts, performance reports, external audit. More attention is now given to the effectiveness of legislative and corporate oversight functions (ie: budget and audit committees), access to information, and the freedom of the media. Good accounting and audit in the private sector are necessary

Diagnostic instruments (5) Changing diagnostic instruments: Public Expenditure Reviews (PER) focus on the policy-budget link, budget processes and expenditure control Key new PFA diagnostic instruments are the CFAA and CPAR to support the exercise of fiduciary responsibilities, by helping to identify the risks to the use of donor funds and development objectives The Country Financial Accountability Assessment (CFAA) designed to gather detailed data on accounting, auditing and internal control systems. Country Procurement Assessment Review (CPAR) on the public procurement system.

Diagnostic instruments (7) Other new instruments: Other instruments include Public Expenditure Tracking Surveys (including payroll), Service Delivery Surveys, which provide a mix of qualitative and quantitative impact data. IMF Report on Standards and Codes, which looks at fiscal transparency practices (quality, timeliness, availability, completeness and use of fiscal data). Highlights problems with internal control and recording systems The Institutional Governance Review, attempts to assess capacity and constraints (social, economic, cultural) to improvement.

Where do they all fit? The budget process Policy Review StrategyBudget Form. Budget Exec. Acc. & Mon. Rep. & Audit Public Expenditure ReviewCountry Fin. Acc. AssessmentCPAR Diagnostic tools