1. Enzo Caputo economic analysis and policy – PhD WORKSHOP TC/CD – Brussels 4-5 July 2011 05/07/2011 1 Improving Capacity Development in Aid programmes: challenges and approachs

2. New focus on Capacity Development in the EC development approach SOME KEY REFERENCES TO TAKE INTO ACCOUNT: The Backbone strategy and the related reform The EC sectoral evaluation on Technical Cooperation and Capacity Development The large thinking process on the aid effectiveness and in particular Budgetary Support 05/07/2011 2

3. Two key issues for a shared approach 1. Which are the enabling factors (namely external) of Capacity Development, and aid effectiveness [if we consider CD as an essential component of AE]? and 2. How do we identify and assess CD outcomes, per se and in relation with aid results. 05/07/2011 3

4. Issue 1 : the opportunity framework Internal capacities grow interacting with external opportunities Aid quality policies and criteria have emphasised internal capacity dynamics in systems and institutions and therefore have focused on improving ownership. The external opportunities with which internal dynamics interact are considered too far to be reached through aid. Indeed, internal capacities may only adopt strategies that correspond to the opportunities and risks of the existing contexts. How, such opportunities and risks may be considered while supporting and evaluating Capacity Development? 05/07/2011 4

5. Literature references on the opportunity framework The development literature on CD is almost silent on the opportunity framework and the interactions between internal capacities and external opportunities. The broader literature on development*, instead, has produced the concepts of empowerment, which is a strong synonymous of capacity (including capacity development), agency and opportunity framework. And the specific literature on private enterprise and entrepreneurship development has produced a wide thinking on the interaction between capacity space and opportunity space** 05/07/2011 5 *See: S. Ibrahim and S. Alkire (2007) and A. K. Sen (1985 and 1989) **See: G. B. Dagnino (2003). The issue of the opportunities for entrepreneurs was first raised by J.A. Schumpeter, (1934).

6. The Opportunity Framework as a mix of a country/ region historical momentum and its international partnerships The OF is partly given and unchangeable, as far as it is determined by the historical momentum of the partner country/region. It needs to be well understood through an adequate political economy assessment. Partly, the OF is affected by the existing and/or future international partnerships between the country/region and the same countries (or groups of countries) which provide the aid. As far as such partnerships are able to provide new development opportunities that fit the historical momentum, the OF for Capacity Development is high and the objectives of CD support programmes may be ambitious. 05/07/2011 6

7. Historical examples and new cases of partnerships that contributed and may contribute to the establishment of OFs highly conducive for CD The case of the post 2 nd world war reconstruction and the US supported partnership (including the role of the World Bank). The case of EU enlargement (especially the first round of CECs candidates). The recent cases of the Euro-Med integration especially in Tunisia and Morocco. The EPA process in the ACP countries The new G8 commitment for the southern Mediterranean countries. 05/07/2011 7

8. The consideration of the OF in an evaluation of the EC budgetary support in Tunisia The EU partnership in 1995 had established a framework of opportunities for Tunisia, based on a strong integration in the EU market and a comprehensive association to the EU, through: Dismantling trade barriers; Restructuring and upgrading the financial and industrial systems; Increasing domestic market competition; Modernising and opening the education and training systems. Such opportunities corresponded to the momentum of the country (10 years of stabilisation, vocation to export, propension to international partnerships and innovation, need to expand the economy to tackle access of poor and youth). And provided the government with the necessary guarantees (access to large markets, standards and rules, know-how, technical and financial support) to embark in change (risk reduction). 05/07/2011 8

9. How the aid worked in Tunisia: CD support interacted with the OF Aid was deeply owned, because it was requested and negotiated as a tool for the implementation of the opportunities established by the EU-Tunisia partnership. It was highly effective, since it provided a practical dimension to and enhanced the credibility of the partnership. The revolution in Tunisia is a consequence of the dramatic change of the Tunisian society in the last fifteen years, the international integration and modernisation (growth of a large middle class) that took place mostly thank to that partnership. Many say that aid to Tunisia should have included more distributional and governance-related objectives. This may be a mistaken perspective, charging aid with a disproportioned responsibility. When aid included such objectives (e.g. Grain Market liberalisation and most Governance projects), it just failed. The problem is that such objectives were weak in the partnership, for lack of economic guarantees (Grain Market and agricultural products) and, in the case of governance, for the compliance of many EU MS with the regime. 05/07/2011 9