Systems Approaches to Policy for Poverty Alleviation Warren - System...Systems Approaches to Policy for Poverty Alleviation: Example of System Dynamics Modeling in Aid for Trade

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Systems Approaches to Policy for Poverty Alleviation: Example of System Dynamics Modeling in Aid for Trade

ESPA Complexity Workshop: London, July 2014

Kim Warren

http://www.strategydynamics.com/

OUTLINE

Project background and purpose

System dynamics’ contribution to challenging issues

The export-trade “system”

Generic structure of a trade border (+ working models)

Issues, challenges and limitations

Background: A DFID-funded research project on complex systems tools

Seek new ways to understand the problems and issues DFID works on

Clarify the limitations of existing tools

Exploring the potential of new tools suited to complex, dynamic realities (focusing on wealth creation)

Examining implications for DFID’s current business models

… led by Ben Ramalingam, ODI and author of Aid on the edge of Chaos, http://aidontheedge.info/ )

http://aidontheedge.info/

http://aidontheedge.info/

The 4 pilot projects on complex systems tools …

System dynamics of Aid for Trade (AfT) in Nigeria … for the analysis, design, planning, managing, monitoring and evaluation of AfT initiatives (specifically for smaller-scale export activity of direct benefit to those in poverty)

Network analysis techniques with the Girl Hub project in N. Nigeria … for informing stakeholder-based theories of change and strategies for the empowerment of girls

‘Complexity-informed theory of change’ for private sector development (PSD) in the Democratic Republic of Congo (subsequently, a system dynamics analysis has been performed for PSD in 4 large sectors of the Nepal economy)

Systems thinking and mapping of DFID’s End-to-End Programme Management

Conclusions from the pilot complex-systems projects …

Legitimise the trial of new approaches to understand the complex Aid problems

Establish a rich picture of problems from the start … a view of the systems, the network, the behaviours and the dynamics around a given issue

Recognise the whole ‘aid chain’ and ensure that ex-ante design and analysis joins up with downstream implementation and evaluation

Network with others – scientists, private sector and the wider public sector where the necessary capabilities are established

Encourage ‘experiment and adapt’ in addition to ‘plan and control’

The “logical framework” for evaluation and monitoring*

Inputs

Financial, human and material

resources

Activities

Task undertaken to transform inputs into

outputs

Outputs

Products/services produced or

delivered

Outcomes

Behavioural changes: intended + unintended

positive + negative

Impacts

Long-term, widespread

improvement in society

* DFID Working Paper 26, Feb-2011, “Sharing the Benefits of Trade: DFID’s Aid for Trade Portfolio - Monitoring and Evaluation Framework”, SAANA Consulting

Problems: Cause-effect relationships are unclear

… due to the system-nature of export trading

Outcomes reflect how the system responds to the Outputs arising from Inputs + Activities

The Trade system Inputs Activities Outputs

Access to border [starting to trade

is easier]

Build roads

Outcomes

more people trade

Impacts

less poverty

Feedback within the trade system and from Outcomes

people trade

delays at borders

people start trading and

others stop

Impacts Outcomes The Trade system Inputs Activities Outputs

people trade

visible trade opportunities

people start trading

For example:

Critical factors accumulate over very long periods … big delays from action to results, and consequences continue for many years

There is interdependence in the system … multiple choices need to be right, on multiple issues

Many feedback mechanisms exist … changes accelerate (good + bad changes) – or improvements stall or back-fire

Numerous thresholds exist … good changes seem to do nothing until a tipping point is reached – or we get bad surprises!

Problematic “system” features and consequences

System dynamics* deals explicitly and quantitatively with all these mechanisms (also agent-based and discrete-event modelling, suited to certain problem-types)

* This style of system dynamics modelling is highly evidence-based and quantitative, not to be confused with other styles of system dynamics work, such as qualitative feedback mapping.

Inter-related features of real-world cases …

Careful not to “over-complexify” the challenges

we face – simple systems explain observed behaviour

System dynamics contribution

SD trades off detailed insight for simplicity, speed and scope

visible benefits to traders

System dynamics (1) “causal-loop diagramming” of feedback

time

now

Trade volume

number of people trading R

“Reinforcing” feedback drives self-sustaining growth … (or decline)

B

“Balancing” feedback stifles growth … (or slows decline)

border delays

Capacity of border crossing

Km. of roads to the border

This style of work offers insight and shared understanding, but not adequate for designing and managing situations

Outcomes

years

volume of trade now

‘000

tons

/day

Outputs

years

delays at ports and borders now

hour

s

Impacts

years

mill

ions

numbers in poverty

now

bad

bad bad good

good good

There is a history … the situation could get worse

… and will take time to fix

The start-point: time-charts of system performance

These are our overall aims, but trade occurs through each individual border crossing and port.

Other factors affect impacts, so isolating this system’s contribution is tough

Over-land trade Sea-borne trade Air-borne trade Total trade = sum of all trade through each mode

Disaggregating the trade system

The trade system Inputs Activities Outputs Outcomes Impacts

… and total trade through each mode = sum of trade

through all crossings

Large land borders Large land

borders Small land borders

Small ports

Large land borders

Large ports Large airports

Large land borders

Large ports Large airports

Each land border

Each port Each airport

System dynamics (2) … building a working model of reality. Example: Export trading through a land-border

years

now bad

good

trading volume

A desired Outcome

traders using the crossing

years

A Resource causing the Outcome

trading frequency

Another factor causing the Outcome “If we know A and B

we can estimate C”

The behaviour of Resources (“accumulating stocks”)

$50 250

people starting to trade per month

“Flow-rates” drive the resources … and therefore how performance changes over time

… so flow-rates are the items we need to control

A “flow-rate” – how fast the stock is

increasing or being lost


3,000 last month

3,100 this month

trading volume and value

$50 150

people ceasing trading per month

A “resource” or “stock”

“If we know A (traders) we can work out B (trade volume)”

$50 250

people starting to trade per month

1. new people must start trading faster …

Accumulation (and depletion) continue over time


years

now

bad

good

To grow the number of people engaged in trade

faster …

$50 150

people stop trading per month

… and/or 2. people must cease trading more slowly.

If both flows change slowly, little progress results. (If both flows change slowly, little progress is made).

Growing trade participation

$50

net increase in traders per month

… so this must be higher

years

now bad

good

traders using the crossing trading volume

trading frequency

years

If this is to grow

… then this must grow

… so why do people make this choice?

… and why do people make this choice?

This is the critical item – another desired Outcome (and is the net of gains minus losses)

What causes traders to start or stop?

$50


years

now bad

good


trading frequency

years

income per trader

“I start trading if I see others make money”

border delays: hours

“I stop trading if I can’t cross the border”

corruption tariffs

dela

y

“I trade less if tariffs and corruption take my money,

or delays cut my income”

attempted crossings per day

maximum crossings per day

Border delays happen if more people want to cross

than can be handled

$50

road capacity and reach

More roads enable more traders to reach

the crossing

Interdependence on other existing resources

$50


years

now bad

good


trading frequency

years

income per trader


corruption tariffs

dela

y



$50

permitted products

More permitted products make opportunities for

more traders

Interdependence causes feedback

$50


years

now bad

good


trading frequency

years

income per trader


corruption tariffs

dela

y



$50

permitted products

$50


“Reinforcing” feedback drives self-sustaining growth ... more people trading

more start trading … (or decline)

R

B

“Balancing” feedback stifles growth ... more people trading more

delays people stop trading

Supply-side resources grow capacity

$50


years

now bad

good


trading frequency

years

income per trader




$50

permitted products

corruption tariffs

$50


dela

y

process efficiency

staff skills

$50

$50

capacity also needs more intangible resources

$50

$50

border buildings & equipment

border staff

capacity needs more physical and human resources

Supply-side resources grow capacity

$50


years

now bad

good


trading frequency

years

income per trader




$50

permitted products

corruption tariffs

$50


dela

y

process efficiency

staff skills

$50

$50

$50

$50


border staff

A generic theory of how export trading actually works

The same in London, Shanghai or anywhere else … an “engineering” theory of the system (incorporating economics)

Action options to grow the system and Outcomes

build roads

process efficiency

years

now bad

good trading volume

trading frequency

years

income per trader




$50

permitted products

corruption tariffs

$50



dela

y

staff skills

$50

$50

$50

$50


border staff

$50

road capacity and reach km./month of

new roads

permit more products

add and develop crossings

hire officials

train officials

streamline documents & processes

officials’ pay and discipline

set best tariff rates

educate traders

BUT which, when, how much … ?

Part of a working model on attracting traders …

More permitted products make opportunities for more traders

More roads enable more traders to reach

the crossing

The working model is at www.sdl.re/DFIDtradeM1 (latest-version browser required)

http://www.sdl.re/DFIDtradeM1

How to use dynamic mapping/modeling? … 3 options:

1. Manual model only ‘sketch’ estimated scale and time-path of Inputs, Outputs and Outcomes implicitly estimating the interdependencies plot actual results against Plan manually each period adjust projects and spend+effort in light of progress

2. Manual model, in software enter numerical estimates for Inputs, Outputs and Outcomes include simple calculations to save effort enter actual results to compare with Plan adjust projects and spend+effort in light of progress

3. Functioning software model enter numerical estimates for Inputs, Outputs and Outcomes … and compute expected relationships enter actual results to compare with Plan adjust the model to evaluate changes to projects and spend+effort

Issues, challenges, and limitations

Lack of data: start with well-informed estimates - use experienced people - design simple data-collection and adjust the model as we learn

How to specify relationships in the models: most are arithmetical - involve experienced parties - check performance against reality

External factors: trading also reflects market conditions, enterprise-development and producer-trader relationships

Where to stop (model boundaries)? … when enough confidence has been gained (recognising the additional factors above)

Other relevant system dynamics work …

Water resources and usage

Spread and containment of disease

Risk and resilience of infrastructure

Private sector development

…

Example from another domain: the animalhuman infection system (“zoonosis”)

… a working model of this system is at http://sdl.re/OneHealthDiseaseModel

Susceptible people '000s

weeks

newly infected by people '000s/week

Infected/uninfected between humans

contacts/week

1. The disease is initially unknown among humans

Infected people '000s

weeks

recovery rate '000s/week

Resistant people '000s

time

5. One mutation makes the disease infectious to humans

6. Increasing humananimal contact leads the disease to jump to humans

7. The disease can now circulate among humans

2. So contact with animals initially causes no infection

Animalhuman contacts/week

people newly infected by animals'000s/week

Susceptible animals '000s

weeks

newly infected '000s/week

Infected/uninfected between animals

contacts/week

Infected animals '000s

weeks

recovery rate '000s/week

Resistant animals '000s

time

3. … but the disease spreads among animals

Mutations of the disease among animals

4. … and at some time the disease mutates

7. Further mutations make animals and humans repeatedly Susceptible to new variants

http://sdl.re/OneHealthDiseaseModel

Critical … building shared understanding

Engaging games Joint planning

Training Just do it!

See www.simudyne.com/nigeria

Learn the value of the approach

Questions? Comments to [email protected]

What is the best trade value you can build, when you can only focus on limited initiatives

What is the best trade value you can build, when you can only focus on limited initiatives

http://www.simudyne.com/nigeria

mailto:[email protected]

The bigger challenge: many projects: many agencies (Nigeria change projects only, policy studies + institutional support are additional)

Government Implement systems for “single widow” facility Bill to update existing Customs Management Act Implement 48-hour clearance policy Implement 24/7 operation at the port Strengthen NCS manpower to achieve items above Reduce agencies at the port from 16 to 6 Increase professionalism of NCS Increase focus on enabling trade v. collecting revenue

US AID Customs modernisation Agricultural growth along Lagos-Kano-Jibiya corridor Cut hold time at Lagos ports and Seme Border post Implement the ECOWAS Common External Tariff Business service provision to exporting enterprises

European Union Joint Nigeria : Benin border post (Seme-Krake)

DFID Okerete joint border post trial – bridge, roads, market Advice on professionalising Customs (Crown Agents)

GIZ Increase NCS training capacity Joint cross-border controls with neighbour countries Training for Ministry of Trade & Investment

Regional Facilitation initiatives Transport facilitation (joint crossings, corridors, single windows, border procedures …) Trade facilitation initiatives (various) Abidjan-Lagos Trade and Transport facilitation project Authorised economic operator program ECOWAS Regional Transit System Borderless Initiative

Source: Nigeria Trade Facilitation Review, SAANA Consulting.

How to understand the interactions and consequences of all these? How to coordinate for best overall impact?

Initiatives’ impact, by mode, by location (illustrative)

All land borders

Crossing 1

Crossing 2

Crossing 3

Crossing … N All ports Port 1 Port 2 Port 3 Port

… N All airports Airport 1

Airport … N

Enablers Add crossings/ports X X X X X X X X

X no impact : some impact : big impact

Create a crossing or port at specific locations Create a crossing or port at specific locations

All land borders

Crossing 1

Crossing 2

Crossing 3



Airport … N



All land borders

Crossing 1

Crossing 2

Crossing 3



Airport … N


Build roads X X X X

Train staff

Create markets X X X X X X X X

Grow access to finance

Train staff for all locations Train staff for all locations


All land borders

Crossing 1

Crossing 2

Crossing 3



Airport … N


Build roads X X X X

Train staff



Disablers Cut banned products X X X X X

Cut check-points X X X X X X

Reduce agencies X X

Fewer documents

Cut corruption X X

All land borders

Crossing 1

Crossing 2

Crossing 3



Airport … N


Build roads X X X X

Train staff



Same approach for trade Disablers

Some initiatives have broad impact

All land borders

Crossing 1

Crossing 2

Crossing 3

Crossing … All ports Port 1 Port 2 Port 3 Port … All airports Airport

1 Airport

…


Build roads X X X X

Train staff





Reduce agencies X X

Fewer documents

Cut corruption X X

Some initiatives have broad impact

Some initiatives have differential local impact

All land borders

Crossing 1

Crossing 2

Crossing 3


1 Airport

…


Build roads X X X X

Train staff





Reduce agencies X X

Fewer documents

Cut corruption X X

Some initiatives have different local impacts

Some project are local, and need multiple initiatives

All land borders

Crossing 1

Crossing 2

Crossing 3


1 Airport

…


Build roads X X X X

Train staff





Reduce agencies X X

Fewer documents

Cut corruption X X

Some projects are location-specific (e.g. Okarete)

Documents

Systems Approaches to Policy for Poverty Alleviation Warren - System...Systems Approaches to Policy for Poverty Alleviation: Example of System Dynamics Modeling in Aid for Trade