Economic Development 13.5.10

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Economic Development <Lecture Note 6> 13.5.10

ED: Development Assistance and Capacity Development

* Some parts of this note are borrowed from the references for teaching purpose only.

Semester: Spring 2013

Time: Friday 9:00~12:00 am

Class Room: No. 322

Professor: Yoo Soo Hong

Office Hour: By appointment

Mobile: 010-4001-8060

E-mail: [email protected]

Home P.: //yoosoohong.weebly.com

mailto:[email protected]

- Development assistance would include multilateral governmental (or “ODA”), NGO, and private grants plus highly concessional loans (grant component)

- “Official Development Assistance”: Net disbursements of loans (on concessional terms) or grants by governmental agencies for development purposes

- All aimed at transferring resources in currency or In kind

- All “ pro-developmental” or emergency relief, not “welfare” oriented

- Non-commercial from donor perspective

Development Assistance

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History of Development Assistance

Marshall Plan

Cold war impetus

Gradual expansion to the1990s, decline then renewal

Citizen, “Faith-based” and NGO Initiatives

UN and the Millennium Development Goals

Reflection and Redirection of aid effectiveness

3

4

Basic needs

Household savings

(Negative)

Populationgrowth anddepreciation

ZERO taxpayments

ZEROImpoverished

household

Decline in

capital per person

Negative

economic

growth

ZERO public

investment

budget

The Poverty Trap

5

Household savings

(Negative)

Populationgrowth anddepreciation

Budgetsupport

Humanitarianrelief

Mic

rofin

ance

Publicinvestment

Basic needs

The Role of ODA in Breaking the Poverty Trap

Impoverished

household

Economic

growthEconomic

growth

Official development assistance

Public budget

6

Development Assistance (ODA) may be: - bilateral: given from one country directly to another; - multilateral: given by the donor to an international organisation or EU

The proportion is about 70% bilateral and 30% multilateral.

About 80-85% of total developmental aid comes from government sources as official development assistance (ODA). Germany and the European Union are major DC players.

The remaining 15-20% comes from private organisations such as NGOs, foundations and other development charities.

Forms of ODA

Considerations for Considerations for Development Assistance

7

Donor Motives for Providing ODA

Political - e.g. Commonwealth connections - Win friend countries and influence people

Strategic/military

Commercial

Humanitarian

Ethical - Ethical Justification: Should high income countries provide aid to low-

income countries?

8

ODA (Official Development Assistance)

□ ODAs are official flows of resources to or for developing countries that are provided:

• for developmental purposes

• by the official sector (government, public funds)

• as grants or

• as “soft loans”

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Examples of ODA Activities

• Development projects – schools, clinics, water supply systems, etc.

• Emergency aid for natural or mkan-made disasters

• Contributions to multilateral development agencies

• Food aid, emergency and developmental

• Aid to refugees

• Debt relief outlined by Paris Club Agreement

• Officially financed Ssholarships for students in developing countries

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Non-Eligible ODA Activities

• Military or security assistance

• Cultural programmes for the donor’s nationals resident in other countries

• Aid from NGOs financed from private sources

• Foreign direct investment

• Official export credits or other commercially motivated transactions

• Guarantees on private export credits or investments

• Reduced tariffs or other concessions on imports from developing countries

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What is the DAC?

• Development Assistance Committee (DAC) of the OECD

• 23 Bilateral Donors, plus European Commission (EC)

• Objective: improve development assistance through coordination and collaboration with major stakeholder.

• Collect and synthesize data on aid and foreign assistance and deliver the data to the public

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DAC Subsidiary Bodies

• Working Party on Statistics

• Working Party on Aid Effectiveness

• Network on Development Evaluation

• Network on Gender Equality (GENDERNET)

• Network on Environment and Development Co-operation (ENVIRONET)

• Network on Poverty Reduction (POVNET)

• Network on Governance (GOVNET)

• Network on Conflict, Peace and Development Co-operation

• Fragile States Group

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Current DAC Members

Australia France Luxembourg Sweden

Austria Germany Netherlands Switzerland

Belgium Greece New Zealand United Kingdom

Canada Ireland Norway United States

Denmark Italy Portugal European Commission (Multilateral)

Finland Japan Spain Korea

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OECD DAC and BRICs

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Development financing provided by BRICs can help LIC(low income country)s alleviate some key bottlenecks to domestic economic activity. Despite its still relatively small volumes compared to financing by OECD DAC members, BRIC financing is highly significant in some areas and in some countries.

In the area of infrastructure financing—a key BRIC focus—it is now comparable to that from OECD DAC donors, and is expected to contribute significantly to electricity generation capacity and the construction of roads and railways in many LICs.

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From a Receiver to a Donner of ODA

Korea’s Received Aid

-- Korea was an aid recipient up until the late 1990s. Since entering the new millennium, Korea has become a donor. According to the OECD, Korea’s official development assistance (ODA) was $264 million in 2001. It increased to $672 million in 2007, 0.07 percent of its GNI, but is still far below major donors, whose average donations in 2007 accounted for 0.3 percent of GNI.

– Korea, which received $33.1 billion in assistance from advanced countries and international organizations since liberalization from Japan in 1945, is an example of the miracle that outside help can create when combined with good development strategies.

– It only took about a half century for Korea to become the world’s 15th largest economy. In the process, Korea had a lot of help from the United Nations.

– The money was spent on building highways and factories, turning the $70 per capita income country into an industrial powerhouse.

ODA Strategies of Korea, Japan, and China

– On top of humanitarian needs, developed countries around the world are using ODA to strengthen ties with recipient countries to build up their influence and reputation, considering it a form of long-term investment. ODA helps Korean firms find business opportunities in the recipient country.

– Japan is the third largest donor in the world after the United States and the United Kingdom, but was one of the top two for a long time before the weaker yen pulled it down in the rankings.

– It is also the second largest contributor to the regular U.N. budget after the United States, as it continues its bid for a permanent seat on the U.N. Security Council.

– Japan's ODA strategies are serving to promote national interests on top of fulfilling humanitarian needs.

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– Japan is spending around 25 times more than Korea, and is concentrating on Asia and reaping the benefits. From Southeast Asia to Central Asia, Japanese firms are outrivaling others in getting major infra projects and gaining strong footholds in local markets.

– If Japan was a traditional big hand in ODA, China has lately risen as a guru in the field ― securing resources is its basic motif.

– As the demand for resources rises with global economic expansion, keeping close ties with the government has become crucial to secure resources. Now donor countries are vying to provide ODA to resource rich countries.

– China, rapidly industrializing, has been the most aggressive player in the energy war. Though it never officially announces how much it spends on ODA, it is estimated to spend billions of dollars each year on such projects.

– Korea’s efforts to become an active donor are in line with its plan to raise its international status commensurate with its economic power.

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– China pledged to double its aid to Africa, and to provide $3 billion in preferential loans at the Forum on China-Africa Cooperation held in 2008, to which leaders from 48 African countries were invited.

– It imports over a quarter of its oil from African countries such as Angola and Sudan. While China provided $3 billion in loans to Angola, Korea's ODA totaled only $30 million. Though China is also criticized for giving ODA to undemocratic governments, its strenuous search for energy sources and new markets draws the attention of rivals.

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20

Official Development Assistance, 1998-2008

(Net Disbursements, in billions of US Dollars)

21

By All Donors

Source: OECD Database

ODA, Net Disbursements, 1980-2008 (billions of US dollars)

22Source: OECD-DAC Data base.

ODA by Recipient (from All Donors)

(Mill US Dollars)

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Official Development Assistance by Recipient

24

25

Contributions of Assistance

Gap-Filling Role: Foreign exchange, tax revenues, technological, managerial or entrepreneurial gap, etc.

Direct Basic Human Needs or MDG Filling Role

Emergency Relief: Regional flood, famine, military, and political crisis relief

Reconstruction Role: Promote re-construction of war-torn lands

An Investment in Shared Security as well as Prosperity

Capacity-Building Role

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Negative Impacts of ODA

May permit recipients to pursue counter-productive or foolish policies- May support an ineffective, counter-developmental and corrupt

government - May support dictatorial regimes that violate human rights

May Promote a “Dependency Welfare Syndrome”- Leadership and responsibility may be abdicated.

May deform domestic policies to accommodate priorities of donors

May permit donor to exercise inappropriate influence on recipient

May permit recipient country to shift resources to other undesirable areas

Volatility of aid flows may be hurtful to recipient

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Criticism on Development Assistance

Aid to developing countries is strongly criticized.

- Scholars and policymakers increasingly express doubt that development aid will

• Increase economic growth

• Alleviate poverty

• Promote social development

• Foster democratic regimes

• Have a positive sustainable impact

On Balance

- Aid alone can not achieve sustainable development

- A useful support for domestic or national effort

- Responsibility may more rest with developing countries themselves, not aid donors.

- Perhaps neither “sufficient” nor “necessary” but “useful”

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Desirable Factors

Governmental commitment to development objectives

Reasonably incorrupt government

Equity orientation of public policy

Sound economic policies to strengthen and sustain an indigenous economic foundation

An “enabling environment” so that people can improve their own situations for themselves

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Africa’s Aid Dependency

– World aid per capita has increased over the years – from about US$1.4 to in 1960 to about US$12.3 in 2003

– The level of aid per capita to SSA has increased even more – from about US$2.6 to about $34.3 over the same period

– The result is that by 2003, almost one-third of all aid comes to SSA, compared to about 15% in 1960

Aid Per Capita

05

10152025303540

US

$

World SSA

Proportion of Total World Aid to SSA

0%

5%

10%

15%

20%

25%

30%

35%

40%

%

US$9.2b US$77.5b

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Trends of ODA, Non-aid Official Flows and Private Flows to Africa, 1993 - 2003

-5

0

5

10

15

20

25

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

US$ billion

-5

0

5

10

15

20

25 Emergencyaid

Bilateraldebtforgiveness

other ODA

Privateflows

Non-aidofficial flows

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The Tale of Two SSA Countries-Foreign Aid

- Aid to Ghana has been consistently and significantly higher than that to Botswana.

• Aid to Botswana averaged about US$ 66 million annually compared to US$ 303 million for Ghana.

Foreign Aid Flows

0100200300400500600700800900

1000US$ M

illion

Ghana Botswana

Highest aid to Botswana in 1989 was about $160m compared to $717 for Ghana

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The Tale of Two SSA Countries–Per Capita GDP

- It is not too difficult to see which country has performed better in terms of growth.

GDP Per Capita (Constant 2000 prices)

0500

1000150020002500300035004000

US$

Ghana Botswana

Ghana’s GDP of $280 is marginally higher than that of Botswana of $253

Botswana’s GDPPC of over $3500 is about 13 times that of Ghana which is about $276

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The Evidence

• SSA countries have received almost a third of total world aid.

• SSA’s growth and development have been anything but impressive.

• Ghana has been significantly more reliant on aid compared to Botswana.

• Botswana has performed significantly better than Ghana.

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Fundamental Questions

Can More Aid be “Absorbed” or Used Effectively?

– Would high levels of aid institutionalize dependence?

– Would it lead to a collapse of domestic effort (e.g. taxation,foreign exchange earnings, etc.)?

– Would it promote “Dutch Disease”

– Would it sap indigenous efforts and initiatives

– Could it be used effectively?

– Would donor priorities take over?

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Improvement of Development Assistance

Increase the Quantity of Development Assistance

- More grants and fewer loans

- Link aid more directly to need

- Further debt service reductions?

Recipients:

- Pursue wise, equitable and effective development strategies

- Make a major domestic effort

- “Take Charge” and “Own” the Program

- Improve budget management and accountability; combat corruption;

- Ensure effective management;

- Avoid currency appreciation due to aid inflows (“Dutch Disease”)

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Donors: Improve the “Quality” of Aid

- A “Partnership” philosophy and approach

- Orchestrate programs to avoid chaos; Use a “consortium” approach

- Reduce administrative burdens placed on recipient governments

- Minimize aid volatility and unpredictability

- Reduce the tying of aid to donor suppliers

- Increase untied budget support? Increased “Program Aid not Project Aid”

- Emphasize capacity building

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The Paris Declaration “Pyramid”

• 56 Action-Oriented Commitments

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12 Indicators to Monitor Progress

INDICATORS SURVEY REVIEWS

Ownership 1 National development strategies

Alignment 2 Quality of country systems

3 Alignment: aid is on budget

Harmonisation

4 Coordinated support for capacity development

5 Use of country systems

6 Parallel PIUs

7 In-year predictability of aid

8 Aid is untied

9 Programme-based approaches

10 Joint missions & analytic work

Managing for Results

11 Results-oriented frameworks

Mutual Accountabilit

y

12 Reviews of mutual performance

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The Number of Donors Per Country

Quartile distribution of number of DAC and major multilateral donors by country

Donor programmes cover many countries (EC, France & Germany: over 100 countries each).

37 countries host more than 24 donors.

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Capacity Development

What is capacity?

- Capacity is the ability of a human system to perform, sustain itself and self-renew.

• Capacity development is: • the activities, approaches, strategies, and methodologies the activities, approaches, strategies, and methodologies which which

help help organizations, groups and individuals to improve their organizations, groups and individuals to improve their performance, generate development benefits and achieve their performance, generate development benefits and achieve their objectivesobjectives

This definition makes clear that capacity is not a static state or quality. It is about:

• Creating some form of added value for members and the outside world (perform);

• Staying alive and active (sustain);

• Adjusting and developing over time (self-renew) on the basis of external pressures and internal drivers.

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Which capacities need to be developed?-The capacity to engage with stakeholders and create consensus around a policy, a bill or a plan

-The capacity to articulate the mandate of the institution or to vision the trajectory of an organization or even a society

-The capacity to develop a strategy, translate it into a plan and prepare a budget

-The capacity to implement a program or a policy and the capacity to monitor its implementation and evaluate results

These are all fundamental capacities that organizations, institutions and societies need in order to be effective and function well.

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Capacity Development Process

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• Concept to put emphasis on holistic approach to capacity building and technical assistance

• Four drivers of change to yield significant and lasting gains on capacity – Institutional – creating capable institutions– Leadership – building smart leadership– Knowledge – increasing technical knowledge– Performance – tools for measurable improvement

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Capacity building: • process that supports only the initial stages of building or creating capacities; • is based on an assumption that there are no existing capacities to start from; • less comprehensive than capacity development;• can be relevant to crisis or immediate post‐conflict situations OECD/DAC

– ‘suggests a process starting with a plain surface and involving the step‐by‐step erection of a new structure, based on a preconceived design.

– Experience suggests that capacity is not successfully enhanced in this way.’

(UNDP Capacity Development – June 2009)

Capacity development • process of creating and building capacities and their (subsequent) use,

management and retention;• driven from the inside and starts from existing capacity assets;• living process, multi-dimensional, relational, adaptive.

Capacity Development vs. Capacity Building

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Evolution of Development Assistance

• Technical Assistance– 1970s and 1980s

• Capacity Building– 1990s – early 2000s

• Capacity Development– Current approach

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Capacity Development - Analogy

Lao Tzu - "Give a Man a Fish, Feed Him For a Day. Teach a Man

to Fish, Feed Him For a Lifetime.“


Assistance

Capacity Building

Give a Man a Fish

Teach a Man to Fish

Sustainable fishing industry meeting societal needs

A Case of Manila

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Growing consensus on aid effectiveness and capacity

The 2005 Paris Declaration on Aid Effectiveness

Calls for capacity development to be an explicit objective of national development & poverty reduction strategies

The 2005 Paris Declaration on Aid Effectiveness

Calls for capacity development to be an explicit objective of national development & poverty reduction strategies

The UN Millennium Project and the Commission for Africa

Challenges the world to treat capacity development with greater urgency

The UN Millennium Project and the Commission for Africa

Challenges the world to treat capacity development with greater urgency

The New Partnership for Africa’s Development (NEPAD)

Identified capacity constraints as a major obstacle to sustainable development

The New Partnership for Africa’s Development (NEPAD)

Identified capacity constraints as a major obstacle to sustainable development

Capacity Development: One of the

most important

elements of

aid effectiveness

Capacity Development: One of the

most important

elements of

aid effectiveness

Without sufficient capacity, development efforts will not succeedWithout sufficient capacity, development efforts will not succeed49

Importance of Capacity Development

Two

connected observations

Country

capacity

is the key

to

Development

Performance

Country

capacity

is the key

to

Development

Performance

Country

Ownership

is the cornerstone

of aid and

development

effectiveness

Country

Ownership

is the cornerstone

of aid and

development

effectiveness

50

Challenge

• In recent years more than US$15 billion (1/4th of donor aid) went to “Technical Cooperation”, most of which dealt with capacity development

• Despite these investments, development of sustainable capacity development remains one of the most difficult areas of international development practice

• Capacity Development one of the least responsive targets of donor assistance

• 2004 Global Monitoring Report for MDGs reveals that public sector capacity lagged behind all other MDG benchmarks

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Basic Understandings

• Capacity – the ability of people, organizations and society as a whole to manage their affairs successfully

• Generic capacities – the ability to plan & manage organizational changes & service improvements

• Specific capacities – for e.g., public financial management or trade negotiations


• The process whereby people, organizations and society as a whole unleash, strengthens, creates, adapts and maintain capacity over time

• Not the same as capacity “building” which suggests a process starting with a plain surface and involving the step-by-step erection of a new structure, based on preconceived designed

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• The process whereby people, organizations and society as a whole unleash, strengthens, creates, adapts and maintain capacity over time

• Not the same as capacity “building” which suggests a process starting with a plain surface and involving the step-by-step erection of a new structure, based on preconceived designed

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Capacities by Entity

• Recipient government– Capacity to own, manage and implement.

• Donor agencies– Human and institutional capacity to deliver assistance in an

effective manner.

• Other key stakeholders (e.g. civil society, private sector)– Capacity to complement government; advocate for effective

use of aid, and exert ownership over development processes.

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Relationship between Technical Assistance and Capacity Development

Facilitating access to knowledge


TechnicalAssistance

Brokering multi-stake-holder agreements

Participating in policy dialogue & advocacy

Providing incremental resources

Creating space for learning by doing

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Level of Analysis

Individual level

(experience, knowledge & technical skills)

Individual level

(experience, knowledge & technical skills)

Enabling environment

(institutional framework, power structure & influence)

Organizational level

(systems, procedures & rules)

Systemic

factors, i.e., relationships between the enabling environment, organizations and individuals

Influences by means of incentives it creates

- Successful capacity development requires not only skills and

organizational procedures, but also incentives and good governance 56

History

• Capacity and capacity development issues on the development agenda for ages, starting in the early 1950s

• Seen primarily as a technical process, involving transfer of knowledge from the North to the South

• Overestimated the ability of development cooperation to build capacity in the absence of national commitment

• LESSON LEARNED: To be effective capacity development must be part of an endogenous process of change, with national ownership and leadership as the critical factors

• One of the most important element of the new consensus: Capacity Development is primarily the responsibility of partner countries with donors playing a supportive role

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Agreement on DAC

Principles for

Effective Aid

(1992)

Agreement on DAC

Principles for

Effective Aid

(1992)

“Shaping the 21st Century”

OECD DAC paper

outlining a new paradigm

(1996)

“Shaping the 21st Century”

OECD DAC paper

outlining a new paradigm

(1996)

Comprehensive Development

Framework (CDF)

(1998)

Comprehensive Development

Framework (CDF)

(1998)

Poverty Reduction

Strategy Paper (PRSP)

Initiative

(1998)

Poverty Reduction

Strategy Paper (PRSP)

Initiative

(1998)

Rome Declaration

(2003)Rome Declaration

(2003)

Paris Declaration

(2005)

The New Consensus

Capacity development

is the prime responsibility of

partner countries,

with donors playing

a supporting role

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Role of Partner Countries and Donors in Capacity Development

Partner Countries

• Lead the process• Set specific

objectives in

national

development

plans• Implementation

through country-led

strategies

Partner Countries

• Lead the process• Set specific

objectives in

national

development

plans• Implementation

through country-led

strategies

Donor Countries

• Mobilize financial &

analytical support around

partner country’s objectives,

plans & strategies• Make full use of

existing capacities• Harmonize support

for capacity development

Donor Countries

• Mobilize financial &

analytical support around

partner country’s objectives,

plans & strategies• Make full use of

existing capacities• Harmonize support

for capacity development

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Forces Influencing Capacity Development

FACTORS FAVOURING - POSITIVE FORCES

BLOCKING FACTORS - NEGATIVE FORCES

Systemic

factors, i.e., relationships between the enabling environment, organizations and individuals

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Conditions that Make Public Sector Capacity Difficult to Develop

Lack of a broadly enabling environment

• Lack of human security & presence of armed conflict

• Poor economic policies discouraging pro-poor growth

• Weak scrutiny of the legislative branch on the executive branch

• Lack of effective voice of the intended beneficiaries

• Entrenched corruption

• Entrenched and widespread clientelism or partimonialism

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Aspects of government ineffectiveness environment

• Fragmented government with poor overall capacity

• Absent, non-credible and/or rapidly changing policies

• Unpredictable, unbalanced or inflexible funding and staffing

• Poor public service conditions

• Segmented & compartmentalized organizations

• Only a formal commitment to performance-oriented culture

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Conditions Favoring Capacity Development in Organizations

• Strong pressures from outside• Top management provides visible leadership for change, promotes a clear

sense of mission, encourages participation, established explicit expectations about performance & rewards

• Change management is approached in an integrated manner• A critical mass of staff is involved• Organizational innovations are tried, tested & adapted• Quick wins are celebrated• Change process is strategically & proactively managed

63

Lessons

• Capacity development involves three levels - individuals, organizational and enabling environment - which are interdependent.

• Capacity development goes well beyond technical cooperation and training approaches.

• Incentives generated by organizations and the overall environment is critical for using skilled personnel.

• Capacity development is necessarily an endogenous process of change.

• Focusing on capacity building of organizations make success more likely.

64

Understanding the International and Country Contexts

• A good understanding of context is fundamental.

• Country political economy studies provide a valuable first step.

• Important to get beneath the surface of the organization, looking for both forma land informal, hidden aspects

• Identify the relevant stakeholders.

• Donors should consider whether their own government’s policies are part o the problem.

• Consider the role of the diasporas.

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Identifying and Supporting Sources of Country-owned Change

• Country ownership needs to be treated as a process.

• The interaction between donors and domestic actors can generate either vicious or virtuous circles of change.

• Donors should encourage the “effective demand” for public sector capacity.

• Modalities of donor support should encourage and strengthen initiatives benefiting from country commitment.

• Capacity needs assessment a useful entry point.

• Choosing the right organizational cope is as important as selecting the right organization.

• Some organizations are more crucial than others.66

Delivering Support

• The enabling environment is still relevant when specific design issues are considered.

• Technical cooperation is effective when pooled and coordinated.

• Donor-instigated Project Implementation Units (PIUs) should be avoided whenever possible.

• Agreeing the desired outcomes of capacity development is crucial.

• South-South learning should be encouraged.

• Large new investments in training capacity may be justified.

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Lessons Learned about Capacity Development through Long-term Training

• Better to aim at institutional changes in key organizations than focus on improving the capacity of individuals

• The gains in long-term training includes work attitudes, critical thinking, self-confidence, etc.

• Having a critical mass of staff in the same organization trained abroad in the same country make changes more possible

• Costs and benefits of different training options must be determined

• Follow up support in organizations essential

• Long-term commitment by donors is critical

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Learning from Experience and Sharing Lessons

• Capacity development initiatives should maximize learning.

• Further lessons must be extracted about what works and what does not in terms of changing the enabling environment.

• Monitoring should also look into whether donor support is delivered in a way that assist country ownership.

• An independent form of monitoring, capable of generating objective judgments is required.

• Select and apply measures of achievement.

• Collect the views of intended clients or end-users.

• Individual assessment is not just about skill enhancement.

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Fragile States

• Most difficult aid environments that are being neglected by the international community.

• Countries recovering from conflict

• Regimes that are chronically weak or in decline.

• Capacity development must prioritize on reducing fragility.

70

General Principles for Working in Fragile Development Environments

• Development partners need to be highly selective in the instruments they use for capacity development.

• Must understand the country context and focus on an approach suitable in the specific circumstances.

• Must be realistic about their expectations.

• Donors need to identify likely partners and work with them consistently over the short, medium and longer term.s

71

Lessons Learned from Working on Capacity Development in Fragile States

• Capacity development efforts must selectively focus on core state functions, so that they can effectively provide for their people.

• Planning tools developed for post-conflict environments may be useful.

• Respect the principle of endogenous change and foster country leadership.

• New capacity development initiatives must not erode or duplicate existing capacities in individual, organizational or enabling environment terms.

• Sectoral selectivity or “partial alignment” can deliver strategic pay-offs.

• Modest capacity development can be achieved even in states with acute governance challenges.

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Experiences of the Past Five Decades

• Donors must align with and support country-driven approaches and systems for capacity development.

• Significant efforts are required.

• More creative thinking is needed.

• Moving from “right answers” to a “best fit” implies a better understanding of country contexts, identifying sources of country-owned change, designing appropriate forms of support and sharing lessons learned.

73

Unfinished Business of Capacity Development

• Consolidating consensus on capacity development as an endogenous process of unleashing, strengthening, creating and maintaining capacity over time.

• Identifying and addressing the systemic factors that discourage country-owned efforts

• Donors provide support which encourages, strengthens and do not replace initiatives by leaders and managers in partner countries

• Integrating human capital formation and technical cooperation with institutional changes and organizational reforms

• Developing policy-relevant disaggregated technical cooperation statistics

74

Vicious Cycle of Empowerment

DONORS …

RECIPIENTS …

… see bad results as confirming weak capacity and commitment

… suspicious; establish evaluation standards, emphasize quantity

… perceive standards as unrealistic, irrelevant

… fail to claim ownership; refuse responsibility; entitlement attitude

… fill leadership gap, set boundaries and logic

… lack of control; perceive inequities, friction & mistrust

… the get-most-out-of-the-system attitude

… control implementation, staff & procurement

… inability to question or refuse logic

… perceives disconnect with needs and preferences

… advocate and set priorities

… conceive, write and present plan

Source: UNDP, “Ownership, Leadership and Transformation”, New York (2003), p.42/4375

Virtuous Cycle of Empowerment

DONORS …

RECIPIENTS …

… perceive growing assertiveness & capacity development

… help improve evaluation standards

… perceive agreed standards as relevant & draw lessons

… claim ownership; assume responsibility

… exercise respect, restraint & listen

… develop evaluation standards; growing partnership & trust

… Reform system that works for development

… take some risk & provide support on demand

… control implementation, staff & procurement

… conceive, write & present plan

… support national efforts, priorities, systems & processes

… constructive critique and long-term commitment based on agreed conditions

Source: UNDP, “Ownership, Leadership and Transformation”, New York (2003), p.42/43 76

Capacities for Utilizing AID

InstitutionalCapacitiesPolicies, strategies andimplementing tools are inplace to ensure efficientcoordination andmanagement of aid.

Human CapacitiesSkilled, trained personnelare in place to implementpolicies and strategies,and to maintain thegovernment-donorinterface.

Structural / Economic CapacitiesCapacity of the recipient country’s economyto absorb additional aid with minimaldistortion (“Dutch disease”) etc.

“Capacities”

77

Capacity Building Dimensions

National policy institutions

S&T organizations - universities, public and private R&D institutes/technology diffusion institutions

Enterprises - both users of knowledge and creators of new knowledge

Labor Force

78

Technological Capability

Definition of TC:

– Technological progress is often (misleadingly) identified with major breakthroughs and movement of the frontier in the conventional neo-classical literature. This highly restrictive view has come under serious attack on grounds that it ignores that minor (as opposed to major) innovations are more likely to occur and act as a vital and continuous source of productivity gains in practically all industries.

– Define technological capability in developing (TC) countries as their capacity to select, assimilate, adapt and improve given technologies.

79

S&T Capacity Building: Strategic Policy Options

Creation of new knowledge vs. import adaptation, diffusion, and adoption of knowledge created elsewhere

Enhance supply of knowledge vs. stimulate demand for knowledge

Hardware vs. software

Horizontal policies vs. vertical policies

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Levels of Innovation

Frontier Innovation

Technology

Improvement

and Monitoring

Significant Adaptation

Basic Production–use technology

81

R&D

Design &

Engineering

Technician & Craft

Skills & Capabilities

Basic Operators

Skills and Capabilities

Science

Development

and Creation

Science

Use, Operation

and Maintenance

-These all need human capacity.

82

Levels of S&T Capacity Building

Five Dimensions of STI Capacity

National (and local)government capacity to formulate and implement coherentS&T programs and policies

Enterprise capacity toutilize knowledge to innovate and producehigher value added,globally competitivegoods and services

Technologically andscientifically skilledworkforce trained to equipment andproduction processes

Production of newknowledge via R&D

Import, adapt, andadopt knowledgeproduced outside thecountry

Source: Ansu, Yaw, 2007 83

84

Dimensions of STI Capacity

National (and local) government capacity to

formulate and implement coherent S&T programs

and policies

Enterprise capacity to utilize knowledge to

innovate and produce higher value added, globally competitive goods and services

Education, vocational training, and R&D

institutes

Technologically and scientifically skilled workforce trained to work with modern equipment and production processes

National (and local) government capacity to

formulate and implement coherent S&T programs

and policies

Enterprise capacity to utilize knowledge to

innovate and produce higher value added, globally competitive goods and services

Education, vocational training, and R&D

institutes

Technologically and scientifically skilled workforce trained to work with modern equipment and production processes

Import, adapt, and adopt knowledge produced

outside the country

Produce and use new knowledge via R&D

85

Acquisition

Assimilation

Improvement

Creation

STI Capacity Development Stages

Developing

Country

Newly-Industrializing

Country

Advanced

Country

Imitation internalization generationSTI Capacity

Focus

Development

Stages

86

Korea Patent Trends (1965-2006)

0

1000

2000

3000

4000

5000

6000

7000

Source: United States Patent and Trademark Office (USPTO), 2007

87

Removing Barriers is Necessary But Does Not Automatically Build STI Capacity

Barriers to technology absorption and diffusion

Cap

acity

for

tec

hnol

ogy

abso

rptio

n an

d di

ffus

ion

High Barriers

Low Capacity

High Barriers

High Capacity

Low Barriers

High Capacity

Low Barriers

Low Capacity

Sub Saharan Africa

88

High Tech Does Not Always Equal High Income

Philippines

India

Fiji Colombia

Chile

Argentina

Brazil

Indonesia

China

Pakistan

Malaysia

Thailand

Sri Lanka

Costa Rica

Vietnam

CambodiaB'desh

Mexico

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

0 10 20 30 40 50 60 70

Hi Tech (% of Manufacturing Exports)

GD

P P

er

Ca

pit

a (

Co

nta

nt

US

D)

Source: World Development Indicators, 2007

89

Enterprise-based model of STI Capacity Building: PPP Options

Entrepreneur(Diaspora, FDI, Expat, Local, NGO)

Market(Local, Regional, Global)

Uses and invests in well-

trained manpower through•On-the-job-training•Vocation schools•Universities

Strives for product and

process innovation through•Technology Searching•Technology Acquisition•Technology Adaptation

Meets Standards and

Quality through •Engineering•Production techniques •Field and lab testing

Produces Saleable products and servicesInformation from market research and from buyers

Farmers and

Outgrowers

Farmers and

Outgrowers

90

Network ObjectivesNetwork Objectives

Training Africans (In Africa? In network partner institutions?)

Technology Diffusion

Building Faculty Capacity at African Universities

Joint R&D Programs

91

ODA Principles, Suggested

ODA should contribute to a sustainable, human development conducive to the improvement of people‘s living conditions

ODA should contribute to a national and international enabling environment (capacity building and (women’s) empowerment, good governance, fair trade)

ODA should „do no harm“* (Latin: primum non nocere)

ODA should be an incentive for „good performers“ (performance-based allocation)

Sometimes it is better to „stay engaged“ instead of “let them fail”**

* Mary B. Anderson (1999): Do No Harm: How Aid Can Support Peace - or War, Boulder/London

** Tobias Debiel et al. (2007): „Stay Engaged“ statt „Let Them Fail“ (INEF-Report 90/2007 - http://inef.uni-due.de/cms/files/report90.pdf

References

Holtz, Uwe. 2011. “Official Development Assistance-Development Coopreation by Germany and EU” in MBA Modul: International politics (Google, PPT).

Sawada, Yasyuki. 2010.”Official Development Assistance” Views from Japan and East Asia”

Spire Research and Consulting. 2007.“The Rising Tide of Asian

Investment in Asia”. (Google)

Todo, Yasuyuki. 2010. “Is Foreign Aid a Vanguard of FDI?” The

University of Tokyo and RIETI.

Watkins, Alfred. 2008. “Building STI Capacity for Sustainable Development and Poverty Reduction” (Google, PPT).

WMO. “Capacity Development Strategy and Preparation of Guidance Document” (Google, PPT).

Zimmermann, Felix. 2008. “The Paris Declaration on Aid Effectiveness…” (Google, PPT).

92

Appendix. Emerging Consensus to Better Practice

for CD

UNDP

93

A framework for capacity development

STEPS LEVELS

Individual Organizational Enabling environment

Understanding the international and country contexts

Identifying & supporting sources of country-owned change

Delivering support

Learning from experiences and sharing lessons

Not a single, once-only sequence

Not a single, once-only sequence

A flexible, “best fit” search for supporting capacity development

94

Individual level

STEPS


• How is the availability of skilled & committed individuals shaped by global & local push & pull factors?• Under what conditions could diasporas contribute more strongly to capacity development at home?


• Are individual professionals able to be mobilize?• Are donor sufficiently responsive to restoring salary levels in key posts?

Delivering support • Do training components take full advantage of the potential of ICT?• Are the training components linked to increasing organizational effectiveness and putting new skills to use?


• Does the follow u goes beyond knowledge & livelihood benefits?• Is it tracking the effects on organizational capacity & performance?

95

Organizational level

STEPS


• How are capacities currently shaped by the informal & “political” aspects of organizations?• Are these features generalized or variable across organizations or organizational spheres?• Are there private-sector pressures & resources that can be mobilized?


• Is capacity development an explicit objective of a plan or policy benefiting from country ownership?• Is there effective ownership initiatives within particular organizations or organizational spheres?

Delivering support • Have the objectives been clearly defined in terms of desired capacity development outcomes?• Have the inputs & service providers selected with the view to cost & effectiveness or the decisions been supply-driven?


• Is the achievement of outcomes effectively monitored & fed back into the process?• Do the monitoring arrangements include proxy measures with appropriate involvement of clients or service users?

96

Enabling environment

STEPS


• What are the historical & contemporary factors underlying weak “political will”?• How are power structures & formal & informal institutions changing and with what effects on politicians’ incentives?


• Does the interaction between donors and country actors form a “virtuous circle” or a “vicious” circle?• Are there ways donors can encourage effective demand within the country for capacity development?

Delivering support • Are the donors promoting changes in the institutional environment for capacity development?• Is support being delivered in ways that enhance, or undermine, the possibility of organizations’ learning y doing?


• Is there monitoring of changes in institutional rules & how it has come about?• Is there independent, objective monitoring pf the mode of delivery?

97

Documents

Economic Development 13.5.10