PRSPs – relevance, progress & private sector participation. EBRD/DFID Learning Event 9/9/03

2 Origins of the PRSP Idea Mixed record on poverty reduction in 1980s & 1990s (SSA, Transition Economies, post-1997 Asia) Findings on aid effectiveness Pro-poor policy reforms failing because of lack of real country commitment Donors often part of the problem Multilateral funding for debt relief E-HIPC needed a vehicle to link debt relief, poverty reduction & delivery of MDGs

3 Key Elements Country leadership of the policy process Opening-up to new forms of participation Comprehensive national development strategy linked to macro & fiscal framework Making links between policy commitments & results New incentives for monitoring & evaluation New partnership possibilities & new forms of aid delivery

4 Wheres the value added? Increased Government accountability for progress towards pro-poor goals (this includes growth & PSD) Less focus on external accountability towards donors & more focus on building robust national systems for policy formulation, execution, monitoring & evaluation By permitting stakeholders to see and think through the implications of a set of policies, there is the prospect of a more informed national dialogue on trade-offs and policy choices for both growth & poverty reduction

5 Facts & Figures PRSP initiative now three & half years old 65 low income countries are engaged Vast majority of PRSP countries are in SSA; 12 are in former Soviet Union/Eastern bloc 28 have produced full PRSPs (with JSAs endorsed by WB-IMF Boards) 37 are in the process of producing a full PRSP or in a few cases an i-PRSP

6 Experience to date Poverty analysis informing PRS priorities Improved prioritisation of key public actions Links with other reform processes beginning e.g. PEM/MTEF/CSR New donor arrangements are emerging Policy detail still has limited pro-poor focus Prioritisation & costing still work in progress Rhetoric still ahead of reality in many cases Integration of PRSPs into MTEFs & annual budget has a way to go Participation is leading to greater openness Participation tends to be broad rather than deep

7 Consultative Processes Latest WB progress report notes increased participation of private sector in PRSP formulation – but quality highly uneven & coordination of inputs freq. absent. Formal private sector organisations & associations more likely to be engaged than informal sector groups Participation varies from informal engagement in consultation meetings to formal mechanisms such as regular sector or thematic working groups & public- private dialogue groups A key criticism from stakeholders has been that some policy areas are not sufficiently open to public debate – the macroeconomic framework in particular.

8 Content of Policy Frameworks Growth/PSD All PRSPs emphasise primacy of accelerating growth for poverty reduction, most stress PSD Treatment of trade symptomatic of weak links between strategic goals & priority public actions Increased number draw attention to sources of growth, microeconomic constraints & risks But choice of priority actions still not derived from identified growth sources & risks Key Public Actions Improving the investment climate – regulatory environment, financial sector & infrastructure Increasing the assets of the poor – productivity, service delivery, legal fws & anti-corruption

9 Improving the Investment Climate Improving macro stability91 Supporting SMEs76 Infrastructure76 Governance & Corruption71 Regulatory environment67 FDI67 Trade Policy67 Finance62 Legal System62 Percentage of PRSPs identifying as a priority area

10 Increasing Assets of the Poor Agricultural research & extension Rural infrastructure /irrigation/electrification Land tenure reforms in rural & urban areas Financial services – micro-finance etc. Judicial reforms But, bulk of policy measures still emphasise improved social services as key route to increasing the assets of the poor

11 PEM & Monitoring Issues PEM Connections between spending priorities & annual budget/MTEF process still evolving Weaknesses in costing public actions have repercussions for prioritisation Recent study by WB in ECA found significant weaknesses in PEM systems, especially in budget formulation Indicators Coverage of indicators & baseline data is improving, selectivity now critical Range of PSD indicators, although good practice less evident in this area All PRSPs identify PEM reforms as critical

12 What are Donors Doing? Increased evidence that PRSPs are a key point of departure for many donor strategies Much talk of alignment of donor instruments & processes with PRSP cycle & related national budget cycle (SPA, OECD/DAC, WB & Fund ) Tangible shift towards general budget support amongst some donors in SSA – although still a relatively small % of total ODA. Much emphasis on lining up capacity building/TA support, diagnostic & analytical work with PRSP agenda (CFAAs, CPARs, PSIA, etc)

13 Building more effective public-private dialogue – why? Improved decision-making grounded in better understanding of real business needs & appropriate scope of public action Increased transparency – provides a boost to Govt. credibility with domestic & foreign investors Context for promoting public-private partnerships in priority areas – infrastructure (economic & social), agriculture etc. Shared ownership of reform strategies – better prospects for effective implementation Increased private sector awareness of policy context, poverty issues & corporate social responsibility?

14 Getting the Conditions Right Important to reach a common understanding of the appropriate role of the public & private sectors Ensure realistic objectives from the start given the economic & political context – be clear about expectations Encourage private sector bodies to consider the wider policy context Build on existing consultative frameworks, BUT ensure participants represent all sizes of enterprise, including entrepreneurs from disadvantaged areas or groups

15 Areas for Dev. Partner Support Sector wide analyses of constraints to PSD through seminars & workshops timed to feed into national strategy formulation Studies of investment climate, firm-level surveys, micro- finance sector strategies to support the work of sector or thematic working groups Support for public-private consultation bodies, incl. strengthening analytical capacity. Support private sector participation in PRSP Technical Committees/Working Groups/PER processes e.g. Kenya