De­liv­ery OR Delu­sion

The re­sult-based fi­nan­cial aid mech­a­nisms used by the World Bank Group fo­cus more on out­put and en­cour­age trans­parency and ac­count­abil­ity to achieve re­sults.

Southasia - - CONTENTS - By Tahira Sa­jid

The In­ter­na­tional Mon­e­tary Fund and the World Bank have not evolved to the ex­tent that is

war­ranted.

Ac­cess to re­li­able pub­lic ser­vices is cru­cial for any so­ci­ety to flour­ish but even more so for de­vel­op­ing coun­tries where the lack of ba­sic ne­ces­si­ties has re­sulted in every­day chal­lenges that stunt in­tel­lec­tual growth and dis­course. Th­ese pub­lic ser­vices have a di­rect ef­fect on eco­nomic up­lift­ing of low-in­come com­mu­ni­ties and in­clude qual­ity ed­u­ca­tion, ac­ces­si­ble health­care, safe drink­ing wa­ter, es­sen­tial san­i­ta­tion, elec­tric­ity and re­li­able com­mu­ni­ca­tion sys­tems.

De­vel­op­ing coun­tries have long uti­lized for­eign aid from in­ter­na­tional gov­ern­ments and agen­cies to sup­ple­ment their own ef­forts for de­vel­op­ment spend­ing. How­ever, of­ten deal­ing with cor­rupt regimes or pri­vate sec­tor cor­rup­tion, the donors are faced with a con­stant chal­lenge of pre­vent­ing the mis­use of their funds. In this re­gard, re­sult-based aid ap­proaches have shown a con­sid­er­able pos­i­tive im­pact on the ac­com­plish­ment of agreedupon ob­jec­tives. Var­i­ous mea­sures uti­lized so far in­clude out­come-based aid (OBA), con­di­tional cash trans­fers (CCTs), cash-on-de­liv­ery (COD) and per­for­mance-based con­tract­ing. The COD model is in­creas­ingly popular and some­times con­sid­ered the most ef­fec­tive ap­proach among all re­sults­based mech­a­nisms. It fo­cuses on de­mand rather than sup­ply and of­fers more flex­i­bil­ity to re­cip­i­ents in how the out­comes will be ac­com­plished. It also has the added ad­van­tage of elim­i­nat­ing per­for­mance risk for donors. The COD mod­els are usu­ally built into ex­ist­ing gov­ern­ment or pri­vate pro­grams.

The OBA is an im­por­tant part of the World Bank Group’s range of re­sult-based so­lu­tions for de­vel­op­ment fi­nance. It can be de­fined as a re­sult-based fi­nanc­ing mech­a­nism that pro­motes “the pro­vi­sion of ba­sic pub­lic ser­vices by del­e­gat­ing the de­liv­ery of out­puts, such as work­ing wa­ter con­nec­tions, to a third party (typ­i­cally a pri­vate op­er­a­tor) in ex­change for the pay­ment of a sub­sidy upon de­liv­ery of spe­cific out­puts.” This is not an en­tirely new con­cept and goes back to the 1960s when South Korea was the re­cip­i­ent of re­pro­duc­tive health­care ser­vices through OBA schemes. How­ever, its in­creas­ing use is a wel­come step to­wards bal­anc­ing ac­count­abil­ity with the suc­cess of a project.

This ap­proach has been shown to work well in many sec­tors, in­clud­ing ed­u­ca­tion and health­care but is not ap­pli­ca­ble in the fund­ing of large in­vest­ments in power, min­ing, rail­ways and ports. Some­times the use of the OBA el­e­ment is done only as part of a tra­di­tional project. Due to its suc­cess, the use of OBA has grown con­sid­er­ably in the last decade. It en­cour­ages in­no­va­tion, de­creases costs and pro­motes ac­count­abil­ity.

The use of the OBA strat­egy was launched for 22 projects by the WBG in its 2002 Pri­vate Sec­tor De­vel­op­ment Strat­egy 3, with an es­ti­mated value of about US$100 mil­lion. By 2009, the num­ber of projects in­creased to 127, reach­ing 59.5 mil­lion ben­e­fi­cia­ries world­wide. The WB also helps pi­lot

OBA projects through the Global Part­ner­ship on Out­put-Based Aid (GPOBA) launched in 2003, which is a multi donor-funded part­ner­ship pro­gram sup­ported by the Depart­ment for In­ter­na­tional De­vel­op­ment UK, the Nether­lands, Swe­den, Aus­tralia and the In­ter­na­tional Fi­nance Cor­po­ra­tion (IFC).

The fo­cus of the GPOBA is pub­lic ser­vice de­liv­ery sys­tems of health­care, en­ergy, wa­ter and ed­u­ca­tion in de­vel­op­ing coun­tries for the most af­fected marginal­ized sec­tions. GPOBA’s ded­i­ca­tion and com­mit­ment to re­spon­si­ble de­vel­op­ment spend­ing is clear from its an­nual re­port for 2013: “To date, the GPOBA has pro­vided nearly 5.9 mil­lion poor ben­e­fi­cia­ries with ac­cess to en­ergy, wa­ter, san­i­ta­tion, telecom­mu­ni­ca­tions, health and ed­u­ca­tion. With to­tal fund­ing com­mit­ments equal­ing $161.3 mil­lion, GPOBA’s port­fo­lio of projects is ex­pected to reach over 9.7 mil­lion peo­ple.” In 2013 alone, the GPOBA “dis­bursed a record $25 mil­lion in sub­sidy fund­ing, ben­e­fit­ting more than 2.3 mil­lion poor peo­ple… As a re­sult of this ex­cel­lent per­for­mance, it re­ceived the World Bank ex­cel­lence awards for two projects. The Le­sotho Hos­pi­tal Pub­lic-Pri­vate Part­ner­ship (PPP) project was rec­og­nized by the Sus­tain­able De­vel­op­ment Net­work Vice Pres­i­dency Unit (SDN VPU) for its strength in lever­ag­ing part­ner­ships across the World Bank Group.”

OBA schemes, which are uti­lized for projects in ed­u­ca­tion, bridge the gap be­tween the cost of pro­vid­ing qual­ity ed­u­ca­tion and the funds avail­able. The chal­lenge, how­ever, lies in be­ing able to mea­sure the suc­cess of the project in terms of achieve­ment and learn­ing as op­posed to just en­roll­ment or attendance. While both as­pects are equally im­por­tant, they are gov­erned by fac­tors not nec­es­sar­ily in con­trol of ser­vice providers or donors. Hence, a com­bi­na­tion of re­sult-based mech­a­nisms may be em­ployed, such as OBA and COD to­gether, so that other than per­for­mance mon­i­tor­ing and ver­i­fi­ca­tion done be­fore sub­sidy dis­burse­ment, a cer­tain amount of money may also be al­lo­cated for each ex­tra child en­rolled or for each child that suc­cess­fully com­pletes a cer­tain level of achieve­ment in an in­de­pen­dent stan­dard­ized test­ing. Such an ap­proach gives the project a bet­ter chance of mea­sur­able suc­cess.

Four suc­cess­ful OBA ed­u­ca­tional schemes funded by the World Bank Group in the GPOBA re­port are worth a men­tion. Th­ese schemes aimed at achiev­ing im­prove­ment in en­roll­ment, attendance and qual­ity of ed­u­ca­tion for school chil­dren, as well as learn­ing op­por­tu­ni­ties for adults. The projects in­cluded the Fe­male Sec­ondary As­sis­tance Pro­grams in Bangladesh Phase I and II ( FSSAP) with sub­sidy dis­burse­ment at $130 mil­lion, the Life­long Learn­ing and Train­ing Project in Chile with over $100 mil­lion dis­burse­ment, the Pun­jab Ed­u­ca­tion Support Project in Pak­istan with sub­sidy dis­burse­ment value of $77.5 mil­lion, and the Balochis­tan Ed­u­ca­tion Support Project (ESP) worth $2.1 mil­lion. The fund­ing sources for th­ese pro­grams were mainly the World Bank Group’s IDA and IBRD along with some host gov­ern­ments and pri­vate sec­tor support.

The suc­cess of th­ese projects rested on var­i­ous mea­sures and in­cen­tives pro­vided to the tar­geted groups of marginal­ized or low-in­come com­mu­ni­ties, in­clud­ing vouch­ers and free tu­ition to stu­dents, bonuses for teach­ers and com­pet­i­tive grants for in­sti­tu­tions, a step-by-step per­for­mance eval­u­a­tion through in­de­pen­dent test­ing and clear con­trac­tual guide­lines on ad­her­ence to pre-es­tab­lished tar­gets for an agreed-upon pe­riod of time. This com­mit­ment of stake­hold­ers to shared goals and mea­sur­able out­comes was cru­cial to a suc­cess­ful com­ple­tion of the projects.

Two en­ergy projects in Nepal and Bangladesh sup­ported by the WBG have also been sim­i­larly iden­ti­fied for their suc­cess. The Nepal Bio­gas Project 2003 sup­ported the in­stal­la­tion of 26,363 bio­gas plants on an OBA scheme with a strong mon­i­tor­ing sys­tem. A 2013 survey by Moth­er­land En­ergy Group Pvt. Ltd. showed that 90 per­cent of the plants have re­mained func­tional since in­stal­la­tion and re­tain high sat­is­fac­tion among users while pro­vid­ing ef­fi­cient and cost-ef­fec­tive en­ergy so­lu­tions. Sim­i­larly, the 2002, So­lar Home Sys­tems (SHS) for the Ru­ral Elec­tri­fi­ca­tion and Re­new­able En­ergy De­vel­op­ment project in Bangladesh was launched to man­age power sup­ply chal­lenges in ru­ral ar­eas. It em­ployed an out­put-based ap­proach with a three year mi­cro­cre­dit sys­tem. The World Bank Group con­trib­uted $13.95 mil­lion. The project has ben­e­fit­ted 2.4 mil­lion peo­ple with 480,000 SHS since.

In health­care, a sim­i­lar va­ri­ety of re­sults-based schemes have also been em­ployed by the World Bank Group through its Health Re­sults In­no­va­tion Trust Fund. As re­ported by the Or­ga­ni­za­tion for Eco­nomic Co­op­er­a­tion and De­vel­op­ment (OECD), two po­lio erad­i­ca­tion pro­grams in Nige­ria and Pak­istan were suc­cess­fully com­pleted, us­ing what is termed as a “buy-back made pos­si­ble as a di­rect re­sult of con­fir­ma­tion of im­mu­niza­tion re­sults, or con­ver­sion into grants of con­ces­sional loans.”

A 2009 IDA re­view of RBA ap­proaches de­tails a num­ber of other suc­cesses in the realm of re­sults-based aid, ev­i­dent of the suc­cess of the strat­egy of RBF. Th­ese in­clude “32 on­go­ing or closed OBA projects for which in­for­ma­tion on ben­e­fi­cia­ries reached is avail­able.” They have reached 17.3 mil­lion peo­ple – in­creas­ing ac­cess to en­ergy for 5.7 mil­lion ben­e­fi­cia­ries, pro­vid­ing ed­u­ca­tion to 2.7 mil­lion poor chil­dren, im­prov­ing health­care cov­er­age for nearly one mil­lion peo­ple and im­prov­ing ac­cess to clean wa­ter for over 900,000 poor peo­ple. A to­tal of 87,591 km of roads were or are be­ing re­ha­bil­i­tated and main­tained un­der projects that are cur­rently ac­tive or closed. The 14 closed projects for which in­for­ma­tion is avail­able have ben­e­fit­ted 12.5 mil­lion peo­ple. As per ex­pec­ta­tion, “Out of the 22 closed OBA projects with their rat­ings for Im­ple­men­ta­tion Com­ple­tion and Re­sult Re­port avail­able, 90 per­cent of de­vel­op­ment out­comes were rated ei­ther ‘sat­is­fac­tory‘ or ‘highly sat­is­fac­tory‘.”

The case against tra­di­tional in­put­based aid pro­cesses is grow­ing as they are found lack­ing in many ways, caus­ing loss of funds and missed op­por­tu­nity for de­vel­op­ment. At the same time, the ad­van­tages of a re­sult­based ap­proach be­come clearer through project com­ple­tion re­ports. A World Bank study quoted by the Cen­ter for Global de­vel­op­ment (CGDEV) found cor­rup­tion to be a lead­ing chal­lenge to the ef­fec­tive­ness of tra­di­tional for­eign aid for de­vel­op­ment spend­ing. The CGDEV re­port de­tails the heavy cost of tra­di­tional aid mon­i­tor­ing and trans­parency mea­sures re­quired for ef­fec­tive man­age­ment: “The World Bank an­nu­ally spends at least $30 mil­lion on in­ter­nal au­dit and in­sti­tu­tional in­tegrity de­part­ments

and sus­pen­sion and sanc­tions boards. This does not in­clude the cost of 417 full-time pro­cure­ment and fi­nan­cial staff mem­bers and 200 pro­cure­ment-ac­cred­ited staff mem­bers who mon­i­tor com­pli­ance with fi­nan­cial­man­age­ment and pro­cure­ment stan­dards. Nor, of course, does it ac­count for the staff in re­cip­i­ent-coun­try gov­ern­ments who ac­tu­ally im­ple­ment the pro­cure­ment and fi­nan­cial pro­ce­dures.” It also noted that while tra­di­tional in­put-track­ing pro­grams try to con­trol cor­rup­tion by spec­i­fy­ing what can and can­not be pur­chased with funds and then mon­i­tor­ing how money is used, “re­sults-based pro­grams man­age cor­rup­tion by only pay­ing when re­sults are achieved. As a re­sult of this fun­da­men­tal dif­fer­ence in de­sign, re­sults-based pro­grams do not have di­rect costs as­so­ci­ated with mon­i­tor­ing and con­trol­ling cor­rup­tion.”

Though the OBA is also not with­out its chal­lenges, and a com­bi­na­tion of fac­tors are re­quired for it to be suc­cess­ful, the ad­van­tages still out­weigh dis­ad­van­tages. No case of fraud has yet been proven in a re­sult-based pro­gram so far by any agency, though over-re­port­ing or un­der­re­port­ing some­times present some­what of a chal­lenge, as does the chal­lenge of en­sur­ing pre-fi­nanc­ing of out­puts, es­pe­cially in the pri­vate sec­tor be­fore re­im­burse­ments can be made based on per­for­mance. When faced with cor­rupt regimes, the ab­sence of trans­parency in le­gal or reg­u­la­tory ar­range­ments is a dis­cour­ag­ing fac­tor for sus­tained de­vel­op­ment but timely in­ter­ven­tion can save the day. An ex­am­ple of this was seen in an OBA project be­tween the World Bank and a South­east Asian coun­try men­tioned in the re­port by the CGDEV. The said project was cut short as soon as al­le­ga­tions of cor­rup­tion sur­faced, just in time to check any ma­jor or in­cur­ring loss.

De­vel­op­ment plan­ners and prac­ti­tion­ers mostly see cor­rup­tion as the amount of money di­verted from a pro­gram. How­ever, the ac­tual ex­tent of the cost, when mea­sured in a fail­ure to de­liver es­sen­tial ser­vices, is much greater not only for the donor but more for the re­cip­i­ent com­mu­nity that would have ben­e­fited from its suc­cess­ful im­ple­men­ta­tion. It is no sur­prise then that the World Bank Group has in­creased the use of OBA ap­proaches, and in­cluded them in the “2008 Sus­tain­able In­fra­struc­ture Ac­tion Plan (World Bank 2008), the 2009 Pri­vate Sec­tor De­vel­op­ment (PSD) Strat­egy Up­date ( World Bank 2009), and the 2007 World Bank Strat­egy for Health, Nu­tri­tion and Pop­u­la­tion ( World Bank 2007). The sec­tors in­volved are trans­port, ICT, health, wa­ter & san­i­ta­tion, en­ergy, and ed­u­ca­tion sec­tors.”

For­eign aid pro­vides coun­tries with limited re­sources the op­por­tu­nity to tackle chal­lenges of sus­tain­able eco­nomic growth. Un­less the growth ben­e­fits trickle down to those most in need, sus­tain­able progress is not pos­si­ble. How­ever, with­out checks and bal­ances es­tab­lished at ev­ery step of the process, many well-in­tended funds end up in the form of per­sonal spend­ing al­lowances stashed away in off-shore ac­counts or are lost to some other form of cor­rupt prac­tices, such as bribes, at a heavy cost to the re­cip­i­ent com­mu­nity and donor. In or­der to en­sure that aid is uti­lized to max­i­mum ben­e­fit, early or in­ter­me­di­ate eval­u­a­tion along with RBA ap­proaches ap­pear to be the best way to go. Sim­ply put, RBA is a de­vel­op­ment op­por­tu­nity with ac­count­abil­ity. The writer is a free­lance colum­nist based in Mas­sachusetts, U.S.A. Her writ­ings and vol­un­teer work fo­cus ex­ten­sively on so­cioe­co­nomic is­sues, in­ter­faith di­a­logue and U.S.-Mus­lim re­la­tions post-9/11.

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