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Strengthening Institutions

Strengthening Institutions. David Nguyen-Thanh GIZ, Sector Program Public Finance, Division Good Governance and Human Rights Presentation held at the Annual Meeting of the Practitioners Network of European Development Cooperation Luxembourg, April 20, 2012.

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Strengthening Institutions

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  1. StrengtheningInstitutions David Nguyen-Thanh GIZ, Sector Program Public Finance, Division Good Governance and Human Rights Presentation held at the Annual Meeting of the Practitioners Network of European Development Cooperation Luxembourg, April 20, 2012

  2. I. Institutions, Ownership andtheroleofAid

  3. Whycareaboutinstitutions? • Institutions: different concepts • Narrow: publicorganisation (e.g. ministryofeducation) • Broad: rules, norms (North, Williamson) • Institutionsarebelievedtoplay an importantrole in promotingdevelopmentoutcomes • Plausible assumption • helpfultouseimpactchaintoassessroleofinstitutions in specificcontexts

  4. Reduced poverty Sustainable growth Example: Complex Theory of Change for Resource Governance Strengthened regulatory & policy environment Increased FDI Risks + Activities New policies and regulations Reduced corruption Assumption Ex.: New lawsareeffectivelyimplementedandadhered to Assumption Risks + Activities better natural resource governance Greater public awareness Recovery of financial discrepancies Assumption Ex.: Reports areunderstoodbybroadpublic Risks + Activities Risks + Activities Risks + Activities Assumption Assumption More inclusiveandbetterinformeddebate & dialogue Publication and disemination of EITI reports Timely and regular information on revenue flows Identification of financial discrepancies Risks + Activities Assumption EITI complianceachieved EITI Validation reports produced Government, companies and civil society engage in EITI process Risks + Activities EITI reconciliationreportsproduced Assumption Ex.: Trainings reach relevant actors Risks + Activities Assumption Strengthenedstakeholdercapacity to engage in EITI process, egbytrainings EITI activities managed and coordinated … so far so good!

  5. …wheredoesaidcome in? • Ifthereissufficientownership, then countries may ‚build‘ institutionsandeventuallyachievedesiredoutcomes … … so thedev‘tchallengeofstrengtheninginstitutionsboils down to a financingproblem. Really? • Evidencesuggeststhat lack ofownershipmaybetheproblem • Why? • Political economy: vestedinterests, neo-patrimonial state • collectiveactionproblems – Booth (2011)

  6. Can developmentpartnerscontributetoownership? • Booth (2011): thirdparty (e.g. developmentpartners) maybebest fit tounlock ‚badequilbria‘ (not conducivetolong-terminterest) whichinvolvedstakeholdersmay not overcome due to lack oftrust, awarenessormechnismsofcooperation

  7. …whichsuggestfortheroleofdevelopmentpartners: • Identifythenatureofproblems incl. collectiveactionproblem (political-economyanalysis; capacityassessments) • Stand readyto • engageas honest broker (multi-stakeholderdialogue) • initiatetrust-buildingactivities, and • suggestwaysofestablishingformsofcooperationthat will bemutuallybeneficial in thelong-term

  8. II. BusanandtheBuilding Block ‚EffectiveInstitutions‘

  9. BusanandtheBuilding Block ‚EffectiveInstitutions‘ • A newconsensuson supportingandstrengtheninginstitutionsandpoliciestoensuretheyareeffective in deliveringorenablingthedeliveryofpublicservices was endorsed. • Effectivepublicinstitutionsarepivotaland indispensable fordevelopment in Partner Countries.

  10. Whatismeantbyeffectiveinstitutions? EffectiveInstitutions: • Enableeffectivelythedeliveryofpublicservices. • Catalyzetheleveragingoffinancialandotherresourcesforsustainabledevelopment. • Capitalize on theopportunitiescreatedbythechanging global landscape. • Improveaccountabilityandfightcorruptionthrougheffectiveinternalandexternaloversight. • Are based on solutionsspecificallytailoredtothecountrycontextandlocalprocesses.

  11. Busan: A newapproach to supporting and strengthening institutions and policies • A focus on factors that make reforms and capacity development happen: e.g. PFM, political economy, dom resource mobilization, parliaments • Partner-led joint assessments of country institutions • Country-based partner-led evidence-gathering on institutional performance and capacity development to inform decision making, accountability, transparency and accessibility. • Systematic regional and global knowledge-sharing, including south-south, international and regional organizations to facilitate learning

  12. III. Strengtheninginstitutionsandthe GIZ approach: thecaseof Ghana

  13. The GIZ approachtoCapacity Development „Strengtheningpartners – developing potential“ • Political andsocialframeworksare essential foreffectiveandsustainablereforms • Anycountry must beabletoorganizecomplexprocesses on theirowntohelpitself in thelongrun Thereforethe GIZ: • Supports peopletoobtainexpertise • Advisesgovernmentalagenciestomaketheirmanagement/productionstructuresmoreefficient • Advisesgovernmentstoanchorgoalsandchangeprocesses in lawsandimplementthem

  14. Ghana: ProcessLandscape Financial Governance Steeringprocesses GRA Reform Implementation Committee PFM Sector Working Group MDBS Core Group MDBS Core Group Steering Committee on Audits of Selected Flows Steering Committee on GIFMIS and GRA Reform HOM/HOC meeting REVENUE Tax Policy DomesticTax Rev. Customs Non-Tax Revenue Grants and Loans Divestiture of Public Assets Improving Public Financial Mangament to implement GSGDA Improving Public Financial Mangament to implement GSGDA EXPENDITURE Budget Regulations MTEF Budget Planning Budget Implementation Budget Monitoring Public Procurement DomesticAccountability Parliamentary Debate of Budget External Audition Parlamentary Oversight (Audits) EITI Public Debate on Budget Support processes MacroeconomicForecast German Embassy KfW GIZ Automatisation of GRA GIFMIS Training

  15. II. Budget Pillar • Revenue Pillar III. Domestic Accountability Pillar DonorCoordination Tax Policy Tax Administration Budget planning& execution Parliament EITI & Oil and Gas Ghana: GIZ support (GFG Programme) Good Financial Governance Programme Tax Policy Unit MOFEP Ghana Revenue Authority Public Accounts Committee GHEITI, GIMPA, Parl. Centre MOFEP, different Divisions PFM Sector Working Group

  16. Ghana: GIZ/SECO supportto tax administrationreform (1/2) Challenge: • Low tax ratio due to out-dated / inefficient tax administration procedures Objective: • Ghana Revenue Authority (GRA) is established and the integration of the former Internal Revenue Service and the former Value Added Tax Service into a domestic tax department is successful • Increasedtransparency • Responsivenessofpublicadministration • Effectiveservicedelivery

  17. Ghana: GIZ/SECO supportto tax administrationreform (2/2) Approach: • GRA support embedded in comprehensive support programme => good financial governance • Technical support (short/long-term experts) • Long-term commitment and presence on the ground • Sound mix of technical expertise, change management and facilitation of multi-stakeholder dialogue • Close cooperation with other partners, e.g. IMF, Crown Agents • Delegated cooperation with Switzerland (SECO)

  18. impacts Outcomes/outputs inputs processes,activities Reduceddependence on externalfunding GRA Impact Chain Increasedself-financingcapabilityandeconomicgrowth Relievedburden on citizensandenterprises More transparent andefficienttaxation More efficientrevenuemanagement Transparencyoftaxpayerobligationsandliabilitiesincreaseto B LTO contributes 60% of total tax revenue Improvement in Doing Business PayingTaxes Information aboutongoingandstatusofreformprocess Adoption of LTU evaluationreport Develop an effective Infrastructure Sensitizationof GRA staff Segmentation oftaxpayers Organizationofworkshoptosensitizecivilsociety Development of HR and IT strategy Facilitateinteractivemediaprogrammes Assistance toOiland Gas Taxation Issues Run human resourcesmanagementcampaigns Improveofcustomerservicedelivery Run revenueintegrationandmodernisationcampaigns Technical andfinancialinputfrompartners Technical andfinancialsupportto GRA

  19. Ghana: Preliminaryresults • Increase in domesticrevenue • Enhanced efficiencyof tax collection (e.g. Large Taxpayer Office) Source: MoF, IMF

  20. LessonsLearnt • Long-termcommitmentof German governmenttosupportcountry-ledeffortstowardsgoodfinancialgovernance • …Buildstrustandenhancesunderstandingofreformneeds / bottlenecksandpoliticallyfeasibleapproaches • Support centresaroundcomprehensivefinancialgovernanceprogramme (avoidsilosolutions, exploitlinkages) • Reform progressandresultsare not primarilydeterminedbyfunding; but: certaindegreeoffundsfor TA/TC necessary

  21. Conclusion (1/2) • GIZ/SECO support in Ghana suggeststhatitispossibletosupportcountryownershipofstrenghteninginstitutions • Support mostlikelytobemeaningfulifdirectedtowardscapacitydevelopmenteffortsofpartnercountry (usewindowofopportunity) • While quick winsarepossible: reformstake time • Much moretobeunderstoodaboutpoliticaleconomyofreform design / implementation („capacityassessments“)

  22. Conclusion (2/2) • Strenghteninginstitutions: twodimensions: • Contents-wise: supporttokeyinstitutions, such as PFM, procurement, revenueadministration, anti-corruptionagenciesetc • Mode-of-delivery: TA/TC supporttohelpstakeholdersovercomeobstacles (lack oftrust, experiencetoengage in forward-lookingprocesses) • supportnecessarilyispolitical in natureand not technocratic • requiresre-thinkingofsomedonorsupportpractices • Busanfocus on institutionsexcellentopportunity!

  23. Thankyouverymuch!contact: david.nguyen-thanh@giz.de

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