Achieving Turnaround in Fragile States

1. Achieving Turnaround in Fragile States Andrew Rosser Institute of Development Studies

2. Purpose and Nature of the Study • Purpose: • To improve our understanding of the factors that enable fragile states to achieve turnaround. • To improve our understanding of how donors can contribute to processes of turnaround.

3. Country Cases: Vietnam, Laos, Indonesia, Mozambique, Uganda, Cambodia and Burundi. • Among country cases, five strong performers, two poor performers. • Seven country papers, one ‘synthesis’ paper.

4. Concepts and Definitions • ‘Fragile states’ are low-income countries that • are performing poorly in terms of economic growth; • are failing to significantly reduce poverty; or • are experiencing severe violent conflict or have done so in the recent past

5. ‘Turnaround’ is defined in terms of: • a durable cessation to severe violent conflict; • sustained high levels of economic growth; and • sustained significant reductions in poverty.

6. Research Questions • How were countries’ respective performances vis-à-vis turnaround influenced by: • the content of reform programs, specifically whether or not they included measures aimed at placating loser groups?

7. the sequencing of reform programs, specifically whether or not they included ‘zero-generation’ reforms? • other political and social variables such as geo-political context, domestic class and institutional alignments, the nature of policy elites’ calculations and beliefs, etc.?

8. How was donor effectiveness in contributing to turnaround shaped by: • the volume of aid • the degree of donor engagement • the nature of the broader political economy

9. Findings I: Explaining Performance vis-à-vis Turnaround • Turnaround is likely to be achieved when: • Changes in geo-political conditions remove incentives for parties to a violent conflict to continue fighting (e.g. Mozambique, Cambodia, Laos, Vietnam) or one side to a violent conflict achieves military victory (e.g. Uganda) -comparison with Burundi

10. changes in external or internal political conditions enable the introduction of a substantial (although not radical) program of market-based economic reforms.

11. - Key changes include: -the emergence of reform champions (e.g. Uganda); -changes in geo-political conditions (e.g. Laos, Cambodia); -the onset of economic crisis (e.g. Indonesia); -longer-term changes in the structure of power and interest (e.g. Vietnam, Indonesia).

12. Reforms programs include measures aimed at placating loser groups and zero-generation reforms - Cambodia vs. turnaround cases

13. Findings II: Donors • Effectiveness of donors was mixed. • Effectiveness of donors depended on: • the degree on donor engagement; • how well they used their leverage; • the broader character of the political economy, especially the political context for economic reform.

14. It did not depend on the volume of aid. Large volumes of aid were not necessary for good outcomes vis-à-vis turnaround (e.g. Vietnam, Indonesia), nor did they guarantee a good outcome in this respect (e.g. Cambodia). However they were a feature of turnaround in resource poor countries such as Mozambique and Uganda.

15. Implications for Donor Strategies for Engaging in LICUS The World Bank’s proposed strategy for engaging in fragile states/LICUS consists of four elements:

16. improve policies, institutions and governance in LICUS through the promotion of ‘zero-generation’ reforms. • Our study suggests that this will help but that donor strategies also need to include measures aimed at placating loser groups and that donors need to have realistic expectations concerning the prospects for reform.

17. improve the provision of basic social services through ‘supplement[ing] weak central government delivery by strengthening multiple alternative channels’ (Task Force on LICUS 2002). • Our study does not really address this issue.

18. Donors should focus on the use of knowledge-based instruments in engaging in LICUS rather than finance-based ones. • Our findings suggest that in some cases (e.g. resource poor countries) it is appropriate to use finance as well as knowledge-based instruments

19. Donors should remain engaged in LICUS, notwithstanding the difficulties associated with operating in these countries and, in particular, the relative ineffectiveness of aid. • Our findings suggest that this is right.