Operationalizing Political Analysis in the East Asia Pacific Region

1. Operationalizing Political Analysis in the East Asia Pacific Region An Agent Based Stakeholder Model Please select a topic Agenda Approach Process Example ABSM Value Advice FOUO

2. agenda • Background on Operationalizing Political Analysis • ABSM Approach & Process • A (Thinly) Disguised Example & Demo • Really Early Lessons FOUO

3. Political Analysis Tools FOUO

4. EAP’S Political Analysis Quest: A Search for Relevance and Rigor • (Amazing) Emerging Consensus that Politics Matter to Developmental Outcomes • Growing Body of Analytic Work on Political Economy Issues • Soft Tools for Incorporating Stakeholder Views in Program Design • Interesting but Not Used • Accessible but Not Rigorous • Challenge: How to develop operationally relevant and methodologically robust analytic tools that will change decisions on the ground in real time FOUO

5. From Early Pilot to New & Improved Senturion • Early Pilot with Agent-Based Model in 2 EAP Countries • Consultants Performed Analysis • Outside of Operational Cycle • Little Operational Impact • New Modeling Tool (Senturion) • Desktop Software for In-House Use • Modeling Built-in to Program • Training for Bank Staff • Feeds into Operational Decision Making FOUO

6. What is the ABSM Approach? • Agent Based Stakeholder Model (ABSM) draws upon leading-edge work to analyze the preferences & behaviors of relevant decision makers on politically driven issues. • Provides (much) more systematic, dynamic modeling of complex interactions than traditional stakeholder analysis • Employs microeconomics & political (rational choice) theory algorithms to simulate bargaining dynamics & coalition formation over time on specific issues. • Accurate analysis can be generated using subject matter experts (not primary sources) • Gauges in advance whether proposed policies are politically feasible as designed. • Allows reform packages to be tailored to domestic political conditions. FOUO

7. How Does the ABSM Process Work? • SENTURION defines problems as issues on which stakeholders compete to influence. • With Subject Matter Experts (SMEs), SENTURION maps the current political landscape of stakeholders & coalitions on issues. • Power or Potential to Influence • Position • Importance or Salience • The SENTURION ABSM then: • Tracks the complex interactions of all stakeholders using microeconomic & political theory. • Anticipates bargaining dynamics & coalition formation over time. • Identifies tactics to achieve desired outcomes. • Allows comparison of alternative starting assumptions, hypotheses & scenarios. FOUO

8. Risk Median Voter High High Perceptions Low Low Decision Making Landscape Dynamics Proposals Decisions ABSM Process • Framing • Definition of Problem • Structuring of Issues Model Algorithms Issue n Knowledge OutcomeMatrix Issue 2 Issue1 Results Continuum Stakeholders Issue Outcomes Output • Influence • Position • Importance Paths Data Collection Consensus Action Plan Analysis FOUO

9. Initial Data Creating a snapshot of the current political landscape with experts, not to predict outcomes but to render the context. • Issue continuum • List of stakeholders • Position they adopt • Potential to influence • Salience of the issue Where are politically powerful groups? Where is compromise possible? Where are stable coalitions? FOUO Issue Continuum

10. Data Collection and Framing Process • Interview of Experts • Pair-wise Comparisons to Check Validity • Data Refined in Framing Process (Issue continuum, Relative Positions, Power, Salience for Individual Actors and Groups -- with relative weights) are Checked, Re-checked, and Revised as Needed. FOUO

11. Conceptual Underpinnings of ABSM • Median Voter Theory • Game Theory FOUO

12. Median The Median position for each party wins the most votes Number of American Voters Republican Winner Democratic Winner R3 R2 R1 D3 D2 D1 FOUO Left Center Right Political Orientation

13. Median General Election “The Race to the Center”` The Median Position is the winning position in a pairwise comparison of all alternatives (Duncan Black 1958). R2 D2 Number of American Voters FOUO Left Center Right Political Orientation

14. Risk & the Median • Risk Acceptantstakeholders are further from median or preferred outcome • Risk Averse stakeholders are close to median or preferred outcome. Deal makers Freedom Fighters Terrorists FOUO Extreme Median Extreme

15. Risk & Maximization Every stakeholder wants to achieve their specific goal, subject to risk tradeoffs Less likely to reach a deal given more of what you want A • Risk Acceptant: Overvalue benefits of what stakeholder wants, undervalue costs of action. • Risk Averse: Overvalue costs of action, undervalue benefits of what stakeholder wants. • Risk Neutral: Similar evaluation of costs & benefits. B Winning Personally C Get less of what you want for reaching a deal FOUO Winning Politically

16. Game theory wins A does C not intervene Maps all potential interactions and decision calculations among all stakeholders based on how risk colors perceptions wins B & A C 3 rd Party win Intervention C assists A & A C lose resists B enters C Challenge dispute Stakeholder B & B C win C gives B assists in Stakeholder wins A B & B C Decision? A Bilateral lose v B A wins B Status Quo Do Not Challenge D Positive D In FOUO Status Quo D Negative

17. Game theoretic interactions • The exact same process is repeated for all pairs of stakeholders • This creates a social network of political relationships A v. B = + value for action B v. A = + value for action ? B A FOUO

18. Perceptual mapping • Combining both A’s perceptions & B’s perceptions about each other, we can derive their anticipated interaction • Here A & B’s anticipated interaction is conflictual + B - Conflict B Advantage A v. B = + value for action + Conflict A Advantage - A + A B v. A = + value for action FOUO - B

19. Perceptual mapping + B • Any potential combination of vectors is possible for any pairing • The angle of the vector determines the relationship • The length of the vector determines the intensity - Bargain - Conflict B Advantage Negotiate Compromise A v B B To - Impose + Conflict B Yield to A Advantage - A + A + Bargain Negotiate Compromise - Status Quo A To Advantage A v B A v B +Status Quo + Impose B A gives in to FOUO - B

20. Network of proposals A’s offer to B A B B’s offer to A • What are anticipated interactions? • Offers • Pressure • Moves • Leverage A’s offer to C A’s offer to D B’s offer to C C D FOUO

21. 2. Agent Based Rules & Modeling Elements 1. Initial Stakeholder Data • What is winning coalition or Median position? • Given the winning coalition position, which groups are risk taking? • How does each stakeholder view every other stakeholder on assisting or opposing the issue? • Which stakeholders will make what proposals to other stakeholders, strengthening or weakening coalitions? • Which stakeholders will revise their position on the issue allowing us to anticipate the political dynamics? 4. Modeling Iterations 3. Intermediate Dynamics • How did Median position change? • How did risk profiles change given the change in the median position? • How do stakeholder perceptions change? • Which stakeholders will make what proposals to other stakeholders given these changes? • Which stakeholders will revise their position on the reform issue showing how the political dynamics might be modified? 5. Anticipated Outcome 6. Interpreting Outcomes High • Iterations stop when stakeholders see no further gains in discussions. • Where key stakeholders end up on the issue determines the anticipated issue outcome. • If a majority of stakeholders coalesce around a position, there is a large degree of consensus. If not, conflict will occur. (Influence*Importance) Effective Power FOUO Low

22. Early Experience in EAP Country X • Very Problematic Governance Context • High Risk Adjustment Operation (PRSO) Over a One-Year Period • Which Reforms (nature, level, and extent) Should be Included as Prior Actions? • How Likely are Key Stakeholders to Support Reforms (Both Initial Agreement and Implementation) FOUO

23. Country-Specific Problems • Highly Sensitive Environment –Premium on Confidentiality • Limited Interviews – “Super-friendlies” and Bank Staff • Shifting Political Environment – Adjustment in Data Inputs • Changing Bank-Country Relationship More Broadly – Possible Need to Consider New Issue (HR?) FOUO

24. Data Sourcing • Process begins with Bank sources to minimize footprint • IDs gaps in information and then go out to next sphere where necessary Bank Donors NGOs Civil Society FOUO Stakeholders

25. Suggested PRSO Reform Areas NRM State Land Mapping Disclosure Centralized v. Localized Forestry PSD Single Window Risk Management Strategy PFM Treasury Customs Civil Service Pay PRSO-1 Risks FOUO

26. Public Finance Management Treasury Cash 100% cash – 0 % checks s and transfers 0% cash – 100% checks and transfers 0 100 Customs: Check payments 0% Check payments100% 0 100 FOUO

27. Public Finance Management Civil Service Pay No more increase across the board- All increase thru MBPI 10-15% increase across the board 0 100 Donor Plan 100 % Donor supplements pooled to support wage bill 100 % Donor project-based separate salary supplements 0 100 FOUO

28. PFM: Treasury: Treasury Cash – Basecase – Initial Positions FOUO

29. PFM: Treasury Cash – Mitigation Strategy – Good cop/ Bad cop FOUO

30. PFM: Treasury: Treasury Cash – Basecase – Endgame FOUO

31. FOUO

32. Operational Steps in ABSM Application • Train Staff in ABSM Techniques • Through Training and Pre-Mission Discussion, Begin Framing Issues • Assure Comfort Level of CMU (Agree Protocol for mitigating potential security risks while collecting high quality data) • Data Collection & Interview Strategies • PRSO Areas Defined • Mission Work and Analysis • Refinement of Prior Actions • Brainstorming Discussion of Findings – Working Through Tactics and Strategy • Decision on PRSO • Evaluation FOUO

33. Early Lessons • Training is Intensive – Profile of Required Staff Skills? • Training Continues in Field – Consultant Hand-Holding Needed • Agree on Rules of Game w/ CMU (Client) • Framing and Diligence Actually Changes Bank View/Understanding of Reform Definition and Requirements FOUO

34. Early Lessons (2) • Relevance to Operational Needs Essential • Availability to CMU for Ongoing Analysis (1 year license) • To Mainstream, Business Model Has to Work • Cost to CMU • # and Location of Trained Staff and Software FOUO

35. How to Evaluate Utility of ABSM? User Views – (Mini-Survey) Degree of Use Change in Understanding of Issue Change in Approach Results on the Ground Disaster Averted Support for Reform Maximized FOUO

36. End Game? • ABSM Mainstreamed (as one of Various Political Analysis Tools) in Bank for Routine and Special Tasks • CAS Upstream • Lending Operations • Blue Sky • Crisis Knowledge FOUO