Political Economy Analysis in Governance Related Projects

1. Political Economy Analysis in Governance Related Projects Experience from the Demand for Good Governance Project in Cambodia BBL Series on Political Economy of Reform Sladjana Cosic, February 17, 2009

2. Presentation Outline • What is the DFGG Project in Cambodia attempting to achieve? • What were the challenges during project preparation? • How did the political economy analysis help? • What were the crucial findings of the analysis? • What are the lessons learned?

3. What is the DFGG Project about? • PDO: To strengthen the demand for good governance in certain priority reform areas in Cambodia by supporting promising state and non state institutions, encouraging partnerships, and sharing lessons • Three components: 1. Support to State Institutions 2. Support to Non-State Institutions 3. Coordination and Learning • Total project envelope $20 million (IDA Grant)

4. Support to Non-State Institutions 2C. Capacity Building & Learning PECSA Component-2 2B. Thematic Grants 2A. Partnership Grants For work with 4 State Institutions For work on 4 priority reform areas or themes Private Sector Development 1A. AC Component-1 Natural Resource Management 1B. MONASRI Support to State Institutions Priority Reform Areas (from CAS Governance Pillar) 1C. OWSO-DO Decentralization and Citizens’ Partnerships for Better Governance 1D. RNK Public Financial Management Component-3 Coordination and Learning 3A. Coordinating ProjectImplementation 3B. Learning Ripple Effect

5. Country Context • Democracy after decades of conflict and autarky • Economic growth impressive – 7.1% avg from 1994-2004; 10.2% in 2007 • Poverty Reduction – 47% in `94 to 35% in 2004 • Yet suffering from weak governance: • Corruption Perception Index ranking 162/179 • CPIA rating 2.5 • TI (2006): Most institutions in the national governance and integrity system are still weak if not dysfunctional

6. Challenges • Contending with the poor record of cooperation between state institutions and civil society • Introducing the concept of DFGG and of downward accountability culture within state institutions • Surmounting weak capacity of state institutions - with regard to human resources, administrative tools, and experiences • Overcoming a deteriorated relationship between the Government and the World Bank

7. Political economy analysis • … is a process of identifying the power relations and sociopolitical constraints to the project’s objectives and considering how these constraints can be mitigated • The main objective is to map and maximize the overlapping space between politically feasible and technically desirable actions in order to help ensure the best possible project design and implementation • In the DFGG Project, it was done by a local political economy adviser  outside-in vs. inside-out

8. The process of political economy analysis and the role of the adviser • Anticipation  Analysis  Action • Using informal approaches • Mapping stakeholders and identifying winners & losers • Undertaking extensive multistakeholder consultations • Understanding ‘rules of the game’ • Building ‘bridges’ between key stakeholders • Interpreting Bank’s policies for local counterparts

9. Crucial findings of the analysis • DFGG is feasible in Cambodia • The Government’s buy-in would come through champions of reform • Main constraints and how to mitigate them • The DFGG Project should target existing, promising institutions • Modular design helps to diversify risk • Support to state institutions is crucial for project feasibility and sustainability

10. Lessons learned • Listen, listen, listen,… and adapt to local context • Focus on the ‘good’ rather than the ‘bad’ • View everything through a political lens • Support both state and non-state sectors • Promote constructive engagement between state and non-state actors • If you decide to appoint a local political economy adviser, make sure you make the right choice • When preparing a governance-related project, conduct a comprehensive political economy analysis!

11. THANK YOU!