WPS3898 Strengthening Governance through Engaged Societies Lessons from the Implementation of Poverty Reduction Strategies Luca Barbone and Katrina Sharkey1 Paper prepared for Workshop on "Participatory Governance: A New Regulatory Framework?" Geneva, December 2005 World Bank Policy Research Working Paper 3898, April 2006 The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent. Policy Research Working Papers are available online at http://econ.worldbank.org. 1World Bank. The authors would like to express their appreciation to the participants and discussants in the Workshop on "Participatory Governance: A New Regulatory Framework?" organized by the International Labor Institute in Geneva in December 2005, as well as to the following World Bank colleagues for their thoughtful comments on the paper: Nora Dudwick, Lead Social Scientist, Europe and Central Asia Region; John Garrison, Senior Communications Officer, External Affairs Department; and Gary McMahon, Advisor, Poverty Reduction Group. Abstract In December 1999, the Boards of the World Bank and the International Monetary Fund approved a new approach to their relations with low-income countries. The approach was centered around the development and implementation of Poverty Reduction Strategies (PRS), which are intended to be country-driven, and medium- to long-term in perspective, comprehensive and results-oriented partnership-oriented, and built on broad-based participation. Against this tall order of business, experience to date has been varied, and much debate is ongoing on whether the approach can be considered more than "old wine in new bottles". This paper--based on the results of a thorough review of the five-year implementation experience--examines the implementation of the PRS approach from the point of view of participation and accountability. For some 50 countries adopting the approach since 1999, it discusses the factors which can facilitate the development of accountability and participatory governance mechanisms. Lessons learned from distinct country circumstances are analyzed, arguing that ownership of the PRS depends on the way countries and their external donor partners handle real tensions in the relationship between country ownership on the one hand, and perceptions of internationally-driven prescriptions on the other. The central message of the paper is that in several countries the PRS initiative has helped open up societies to forms of dialogue and contestability not previously experienced in-country or observed by external partners. This positive outcome, however, has been largely influenced by the extent to which the PRS process has reinforced existing trends and strengthened institutions already prone to open discussion of policy choices. The paper also shows that even in the best cases change has, to date, been largely in the area of process and that impact of participatory governance on policy-making, while emerging, is still a work in progress. The paper concludes with recommendations for how developing country societies might sustain real achievements in participatory governance/domestic accountability going forward, with external partners playing a key supportive role through harmonization and alignment. 2 Table of Contents Introduction..................................................................................................................................... 4 I - Poverty Reduction Strategies and Participation: Background and Critiques............................. 5 I.A Background........................................................................................................................... 5 1.B Recent reviews of the PRS experience................................................................................. 6 II ­ Participation, Governance and Political Systems in the PRS Countries.................................. 9 II A - A Snapshot of Political Systems Realities in PRS Countries. ........................................ 10 II B. Overview of the Participatory Experiences in PRS Countries ......................................... 11 II C. Country Cases: Framework and Experiences................................................................... 12 III. Early Results ­ Is There Evidence of Impact?........................................................................ 24 IV. Conclusions and Future Steps................................................................................................. 27 3 Strengthening Governance through Engaged Societies Lessons from the Implementation of Poverty Reduction Strategies "Transparency and information are not enough. Opening up the dark chambers of the state to the eyes of the public is a major move forward, but it is only a first step. Governments cannot expect information provision to single handedly and spontaneously generate positive feedback loops between state and society. Governments need to be encouraged to directly stimulate the participation of society and to institutionalize mechanisms of state-society relations." Ackerman. 2 Introduction In December 1999, the Boards of the World Bank and the International Monetary Fund approved a new approach to their relations with low-income countries. The approach was to be centered around the development and implementation of poverty reduction strategies (PRSs), intended to be country-driven and medium- to long-term in perspective, comprehensive and results-oriented, partnership-oriented, and built on broad-based participation. The successful preparation of a nationally owned poverty reduction strategy became a precondition for access to debt relief and concessional financing from both institutions. Strategies were also expected to serve as a framework for better coordination of development assistance among other development partners. The adoption of the PRS approach is best seen in the context of the decade-long change in the approach to development lending by the World Bank and other international finance institutions IFIs, stimulated by a large body of research on development effectiveness3, and by associated changes in the "authorizing environment" surrounding the Bank and the IMF. All these factors have increasingly emphasized the role of good governance and institutions for effective development, and of "ownership" by governments (and societies) as a precondition for successful reforms. The increased emphasis on country ownership led to changes in several aspects of Bank operations, from project design to strategic approaches. It finally resulted in the changes to the architecture of the relationship between IFIs and client countries, with the stated objective of "putting the country in the driver seat". As of the end of the year 2005, about 50 countries have subscribed to different extents to the PRS approach, and some 20 more are at different stages in the process of elaboration of a strategy. Thus, it is fair to say that the PRS has now become a world-wide feature of the way in which policies are elaborated and discussed in low-income countries, particularly in Africa. Given the emphasis on participatory approaches in elaboration, execution and monitoring of the poverty strategy emphasized by the international community, a question comes naturally to mind, namely, is there evidence that the adoption of the PRS has led to changes in the ways in 2Ackerman, John M. , Social Accountability in the Public Sector ­ A Conceptual Discussion, Social Development Paper no. 82, March 2005. Ch.5. p. 38. 3A few of the most influential Bank reports include: The State in a Changing World (World Development Report 1997), Helping Countries Combat Corruption: The Role of the World Bank (the Bank's anticorruption strategy, 1997); Assessing Aid: What Works What Doesn't and Why (Policy Research Report 1999); Attacking Poverty (World Development Report 2001, and finally, Building Institutions for Markets (World Development Report 2002). All of these reports stressed the critical importance of well-functioning and accountable public institutions to economic growth and poverty reduction. 4 which societies in the relevant countries interact with each other, and in particular, whether the systems of accountability have been strengthened by the adoption of the process? This paper aims to provide some elements that are necessary to come to a judgment on this important question, with the obvious caveat that the relatively short time span of the implementation of the PRS process makes it very difficult to assess the magnitude and sustainability of changes in power relations that may require decades, if not generations, to take hold. In the first section of this paper, we briefly review experience with the PRS process, and provide a summary of several recent assessments of its effectiveness. Section II provides a broad- spectrum background of the features of the system of governance of the countries that have undertaken the PRS process, and reviews the evidence of participation and its effects, adopting a framework to categorize the different country experiences. Section III discusses the evolution of several indicators of the quality of governance that can be helpful in assessing the effects of the participation experience in PRS countries. Finally, section IV provides a few suggestions on how to move forward. I - Poverty Reduction Strategies and Participation: Background and Critiques I.A Background In 1996, the World Bank and the International Monetary Fund (IMF) launched the Debt Initiative for Heavily Indebted Poor Countries (HIPC), which created a framework for all creditors, including multilateral creditors, to provide debt relief to the world's poorest and most heavily indebted countries, and thereby reduce the constraint on economic growth and poverty reduction imposed by the debt build-up in these countries. Early implementation experience then prompted the Bank and IMF to (i) enhance the HIPC Initiative in order to provide deeper, broader and faster relief, and (ii) strengthen the links between debt relief and poverty reduction. To articulate the second of these goals, the Bank and IMF formally launched a new approach in December 1999 which was centered on the development and implementation of poverty reduction strategies (PRSs). PRSs marked a new departure in the Bank and IMF relationships with low-income countries, because the successful preparation of a nationally-owned poverty reduction strategy became a precondition for access to debt relief and concessional financing from both institutions. PRSs were expected to be poverty-focused, country-driven, results- oriented, and comprehensive, and were designed to serve as a framework for better coordination of development assistance among other development partners. As of end-2005, 49 countries have prepared PRSs. Just over half of these are in sub-Saharan Africa; and a similar proportion are HIPC countries. Thirty of these countries have also produced at least one annual progress report. Countries have been implementing their strategies, on average, for just under three years. Several countries are in the process of revising their original strategies, and Burkina Faso, Tanzania, and Uganda have already done so. Eleven more countries have produced interim strategies, and ten have initiated processes that could result in a PRS. 5 As we will discuss later, it is fair to say that after five full years of implementation, the PRS approach has helped put poverty reduction at the center of the public policy debate, highlighted the need to identify and address country-specific constraints to more effective development, heightened awareness of the need for sound analysis to underpin policy choices, and reinforced the incentives to monitor the results of public actions. For most countries, however, the experience of the last five years shows that the implementation of a PRS requires a sustained, long-term commitment and the purposive management of expectations. Besides managing a complex policy dialogue with a wide range of stakeholders, low-income country governments have to put together an integrated medium-term development and poverty reduction strategy, complete with short- and long-term goals and monitoring systems. Few industrial countries could systematically do this well. Moreover, these tasks must be managed with limited technical and institutional capacity and in ways that reinforce--rather than undermine-- national institutions, processes, and governance systems. 1.B Recent reviews of the PRS experience Given its growing importance, the PRS process has been extensively reviewed by a number of stakeholders as well as by IFIs themselves.4 Three relatively recent reports offer interesting insights on the workings of the PRS process and on participation in particular. In 2004 the Operations Evaluation Department of the World Bank and the Office of the Independent Evaluator of the IMF undertook independent reviews of the IFI's support to the PRS initiative through the end of 2003, reaching similar conclusions.5 The major thesis of the OED study, for instance, is that: "The Initiative's contribution so far has varied widely across countries, depending mainly on the initial conditions in each country's public sector capacity, government-partner relationships, and relations among donors. The Initiative has added the most value in countries where government leadership and aid management processes were already strong. It has had less effect in countries with weak public sector capacity or with donor-dominated aid relationships. Because the Initiative includes a uniform requirement--completion of an acceptable document--it has not been sufficiently tailored to match the full range of capabilities and public policy priorities found in low-income countries." It is important to note, however, that at the time of the evaluation, the PRS of none of the ten countries included in the case studies had been under implementation for more than 2.6 years and the average was 1.4 years. While this allowed for an analysis of the process, it meant that for the most part the effects could not be analyzed in a meaningful way. Given this limitation it is not surprising that the most value was added "in countries where government leadership and aid management processes were already strong." 4A comprehensive bibliographical reference can be found at www.worldbank.org/prspreview. 5World Bank Operations Evaluation Department (2004), "The Poverty Reduction Strategy Initiative: An Independent Evaluation of the World Bank's Support Through 2003," World Bank, Washington, D.C; and International Monetary Fund ­ Independent Evaluation Office (2004): "Report on the Evaluation of Poverty Reduction Strategy Papers and the Poverty Reduction and Growth Facility", IMF, Washington, D.C. 6 A more telling criticism is that most PRSPs, the papers that support the PRSs, "deal primarily with the composition of public expenditure and give inadequate treatment to growth and other poverty-reducing actions." However, given that a country had to produce a PRSP in order to obtain debt relief and/or concessional financing, this reality is not surprising because it is much easier for a government to outline how it will spend its money than devise a full-blown growth strategy, including policy and institutional reforms, the results of which will depend a great deal on how other actors react to them. A common complaint against PRSPs--also noted in the OED Report--is that they include just about everything desirable in a developmental plan without much prioritization. In particular, as stressed in the Bank-Fund 2004 Progress in Implementation report, where PRSs are not tightly linked to strong budget processes--the situation in most countries--prioritization is largely absent. Finally, both the OED Report and the World Bank and IMF 2004 Progress Report have stressed the need for better data and analytic capacities to evaluate the effects of policies and programs on poverty reduction. These reports also point to several positive developments arising from the PRS initiative, namely that it has led to a greater focus on poverty in the countries and the Bank. In exposing the need for better data and analysis, it has led to important advances in many countries with respect to data collection and the increasing use of new analytic tools - especially poverty and social impact assessments (PSIA). The PRS process has also opened up new spaces for dialogue between different sectors and stakeholders. The effectiveness of participation is perhaps the area of least consensus in the evaluations, a situation mirrored in the external critiques discussed below. The 2004 Progress in Implementation report sums up the situation: "While the PRS approach has opened space for a broader range of stakeholders to engage in discussions related to poverty reduction and development decisions, experience across countries has been mixed. Participatory processes have been most successful when national ownership and commitment to accountability is strong. The underlying processes have prompted greater awareness of the value of civil society contributions to the policy dialogue." WB/IMF (2004, 18) A comprehensive review of the PRS approach was conducted for the Annual Meetings of the World Bank and IMF in September 2005, and its findings with respect to participatory governance and domestic accountability form the basis for this paper.6 The review examines the PRS process under the lens of "balancing of mutual accountabilities", namely the extent to which the process has (or has not) helped, on the one hand, establish a more balanced relationship between donors and countries, and on the other, within the countries, increase the accountability of governments to their constituents, and to the poor in particular. The review finds that the core PRS principles provide a useful framework for translating mutual accountability into concrete terms, and for targeting the achievement of development results at the country level. Putting the country at the center of the development process has focused attention more squarely on poverty reduction and on the need to address country-specific constraints to development. A recurrent feature is the need to address pressing development 62005 PRS Review: Balancing Accountabilities and Scaling Up Results. The World Bank and International Monetary Fund. September 2005. 7 issues in an environment of weak institutions, imprecise rules of the game, and limited opportunity for contestability. In many countries, the PRS approach has helped strengthen policy processes and systems, particularly those which focus on: setting goals and targets that are linked to public action; improving budget and monitoring systems; opening the space for discussing national priorities and policies for poverty reduction and growth; filling country- specific analytic gaps; and aligning and harmonizing donor assistance with national priorities. The Review, however, also concludes that the PRS approach cannot compensate for generalized policy failures, poor governance, or underdeveloped systems for civil society engagement. Nor can it ensure harmonized donor responses to development priorities established by client countries. External Critiques of PRS Processes. There have also been numerous external studies of PRSs in general and at the country level. While they echo the critiques of the reviews undertaken by the IFIs--lack of prioritization, not enough focus on growth, limited results in weaker countries, lack of data--much more emphasis is devoted to participation and ownership issues.7 The spectrum of views is broad, ranging from a very negative assessment of the impact of the PRS process on the power relations between IFIs and borrowing countries (for instance, CIDSE, 20048), to more positive appraisals of country experiences (for instance Bwalya et al.(2004)) are largely positive on participation in Malawi and Zambia, as is Booth (2002) in an earlier 8 country study). Concerns in this area tend to relate more to the need to institutionalize participatory processes (Tembo 2005, 32) and strengthen the analytic capabilities of civil society and Parliaments (Tembo 2005, 45) (Levinsohn 2003, 9). Oxfam notes that "In response to the question whether the PRSP represented the most open policy dialogue in their country to date, the uniform response from Oxfam offices and civil-society partners in virtually every country was a clear yes." (Oxfam, 2004: 6). The main weaknesses of PRS processes, according to external assessments, lie in their dissonance with countries' political systems and realities. While some see PRSPs as not very different from SAPs or national development plans (Hermele 2005, 9) (Craig 2003, 55) (Vos and Cabezas 2005, 5), others are concerned with the lack of priority setting (Levinsohn 2003, 10), and in almost all evaluations there are serious questions about the underlying politics. Much of what is recommended in PRSPs, for example, is not new but it was ineffective or not properly implemented in the past. What is new about PRS processes that will help overcome the political economy issues? As Piron and Evans (2004, 5) note: "The PRSP principles demand that government legitimacy be redirected towards poverty reduction, greater responsiveness to the poor and building a more effective state--goals which may not have short-term political appeal." In fact, it is important that PRS processes do not bypass existing political systems, but help to change how they function. In this regard, Piron and Evans (2004, 1) state: 7In addition to the numerous analyses of the PRSP carried out by civil society organizations (CSOs) and reflected in Bank reviews, the Bank organized two large policy conferences in January 2002 and April 2005 to enable thirty and one hundred CSOs respectively to share perspectives and suggestions for strengthening the PRS process. 8CIDSE (Sept. 2004) "PRSP as Theater ­ Backstage Policy Making and the Future of the PRSP Approach". 8 "The PRSP approach will either engender new relationships and dynamic processes within countries, which will result in poverty policies being handled in new and more effective ways, or it will not." Others have highlighted the intrinsically political context of the PRS approach. Norton (2002) remarks that success of the PRS approach rests on several crucial `gambles' including: (i) that it will be easier to hold governments to account if they are obliged to discuss poverty and what they are going to do about it with their citizens; and (ii) that if donors and countries take the PRS process seriously, this will change the emphasis towards (political) accountability to citizens over (technocratic) accountability to donors. BMZ (2002: 2) observes that "PRSPs have a profound effect on political processes." Booth (2003: 137) notes that PRS approach "will work through the political systems...of countries concerned, or it will not work at all." II ­ Participation, Governance and Political Systems in the PRS Countries Country ownership and participation are central to the PRS approach. The first core principle of the PRS approach was that it be country-driven and owned, based on broad-based participatory processes.9 Yet, as noted above, these concepts have often remained open to interpretation. While there are rich definitions and a robust literature underpinning these concepts, their use as short hand notation at times obscures the complexity of the concepts and can lead to a range of problems and unrealistic expectations by different stakeholders.10 While the Bank and the Fund have spoken largely in the language of country ownership and participation, some early observers highlighted the fact that strengthening ownership and participation are intimately linked to supporting domestic accountability.11 Participation12 is defined by the Bank as the process through which stakeholders (those affected by the outcome of reform or capable of affecting the reform) influence or share control over setting priorities, making policy, allocating resources, and ensuring access to public goods and services. Stakeholders are generally thought to include, not only the NGO community, but also parliaments, unions, religious organizations, and representatives of vulnerable groups. The Bank acknowledges that complex policy and institutional reforms can only be adopted and 9IMF/World Bank (1999b). 10OED (2004) emphasized the disparate perceptions of different stakeholders. Some have argued that the Bank, and Fund need to establish standards for a participatory process in a country, for example Herz and Embrahim (2005: 43), although the Boards have provided explicit instructions to the contrary. Others indicate that a participatory process can only be successful if CSO views are reflected in the final document, CIDSE-CARITAS (2004: 45) or if a rights-based approach is used, World Vision (2005: 10). 11See, for example, Whaites (2000). Links between participation and domestic accountability have also been raised in various recent World Development Reports including the 1997 WDR, The State in a Changing World and the WDR 2003, Sustainable Development in a Dynamic World. The 2004 WDR, Making Services Work for Poor People, developed an analytical framework built around the notion that improving service delivery requires strengthening the relationships of accountability between policymakers. However, within the context of reporting on progress in PRS implementation, the link to accountability has been largely implicit rather than explicit. 12Operations Policy 8.60 ­ Good Practice Note. See also World Bank (2002) Ä Sourcebook for Poverty Reduction Strategies". 9 implemented if they have sufficient political support within the country. A well-implemented stakeholder participation strategy can develop this support and improve the quality of reform programs in a variety of ways including building: (i) coalitions for change; (ii) ownership; (iii) sustainability; (iv) effectiveness; and (v) accountability. There are three levels at which countries can institutionalize participatory mechanisms. First, according to Ackerman , they can be built into the strategic plans of government agencies 13 reinforced by rules and procedures which mandate front-line bureaucrats (those to interface directly with citizens) to consult or otherwise engage with societal groups. Second, specific government agencies can be created with the mandate to assure societal participation in governmental activities or to act as a liaison with societal actors. Third, participatory mechanisms can be inscribed in law, requiring individual agencies or the government as a whole to involve societal actors at specific junctures in the public policy process. Keeping these considerations in mind, in this section we review existing evidence of the features of participatory approaches as they have developed in PRS countries. We begin with a brief recapitulation of the existing political and governance realities in PRS countries (section II A). We then offer a brief macro overview of participation across countries (II B), and finally move to a detailed examination of country experiences through a simple framework of analysis (section II C). II. A - A Snapshot of Political System Realities in PRS Countries. Before discussing PRS participation experiences in detail, it is useful to recall a few facts regarding the existing systems of governance and political participation in these countries in order to put recent experience in perspective. As discussed above, the PRS can best help focus policies on poverty if it is consonant with domestic political systems. Fundamental to facilitating participation are the state policy and practice on governance, rule of law, respect for human rights, freedom of expression and association, corruption, defense expenditure, and conflict. The prevailing governance environment in most PRS countries suggests that implementation of the approach presents both opportunities and challenges. Figure 1 presents a scatter diagram of two often-quoted indicators of governance, namely the "control of corruption" from the Governance Matters Scores, and the index of political rights from the Freedom House. Quite vividly--and not surprisingly, perhaps--the chart shows that the universe of countries that have engaged in the PRS process is overwhelmingly characterized by high levels of corruption and restricted freedoms for their citizens. There are of course exceptions (the two countries in the "blessed" quadrant being Cape Verde and Madagascar), but overall the participatory processes induced by the PRS initiative have evolved in very difficult environments. Consequently, expectations with regard to their potential results have to be kept in perspective. 13Ackerman. Idem. p.17. 10 Figure 1 PRSP Countries: Governance Indicators 8 7 6 More Freedom 5 4 3 Less 2 Freedom 1 0 -1.5 -1 -0.5 0 0.5 1 1.5 More Less Corruption Corruption II. B - Overview of the Participatory Experiences in PRS Countries Against this difficult backdrop, we now take a look at the workings of the participation approach in PRS countries. We begin with a macro look, displayed in Figure 2, at 49 countries that have begun such a process. The chart shows six different indicators of a participatory approach which were used for the 2005 CDF Progress Report: Civil Society Involvement; Private Sector Involvement; Parliamentary Involvement; Stakeholder Access to Development Information; Coordinated Country Level Monitoring and Evaluation; and Sustainable Structure for Stakeholder Involvement.14 The data is based on desk reviews of PRSP documents, as well as a series of in-country interviews with stakeholders. For each indicator, the authors of the progress report formed a judgment as to the adequacy of the PRS process in each country, according to a 5-point scale ranging from "Substantial" to "Absent". The data are then presented graphically for all the PRSP countries. 14The Figure is based on data collected for the study "2005 CDF Progress Report: Enabling Country Capacity to Achieve Results" (The World Bank, July 2005). 11 Indicators of Participation in PRS Countries 100% 2% 7% 3% 90% 27% 25% 80% 47% 34% 51% 70% 53% Absent 60% Ephemeral 50% Present 29% 40% 61% 64% Adequate Substantial 30% 51% 46% 39% 20% 27% 10% 12% 10% 0% 3% 3% 5% Sustainable Civil society Private sector Parliamentary Stakeholder Coordinated structure for involvement involvement involvement access to country level stakeholder development monitoring and involvement information evaluation The figure reveals a rather mixed picture. Only in 10 percent of the cases is civil society involvement considered adequate (where NGOs provide systematic input and feedback to government on strategy formulation and implementation), but nowhere is it substantial. Private sector involvement appears light and most likely confined to consultations during preparatory meetings. Interestingly enough, however, some modest form of parliamentary involvement appears to be present in a majority of the countries (despite often-heard criticism to the contrary), and in over two-thirds of the cases permanent structures for stakeholder involvement have been put in place and are functioning to some degree. While the figure provides a broad picture of the "intensity" of participatory experiences, only an analysis of the modalities in individual countries may help us gauge the effects on the workings of national systems and on policy decision-making engendered by the PSR initiative. We thus turn to a more detailed look of country experiences. II. C - Country Cases: Framework and Experiences In order to better conceptualize the features and effects of participatory activities at different stages of the PRS process we adopt a simple framework (illustrated in figure 3), inspired by an 12 earlier framework proposed by Eberlei.15 Participation is assessed as it affects three conceptually distinct phases, namely formulation, implementation and monitoring of policies, and the policy impact that results. In addition, the building blocks for successful impact of participation in all three phases are assumed to include an appropriate enabling environment, the existence and usability of appropriate tools, and the degree to which participatory processes are institutionalized. Country experiences which exemplify interesting practice at different points in the rolling PRS formulation and implementation process are used for illustrative purposes. Figure 3: Participatory Governance: Selected Country Experience Enabling Environment¹ Tools² Institutionalization³ Influence Formulation Bosnia Herzegovina Benin, Malawi, Mongolia Armenia, Mozambique The Gambia, Sierra Leone Nepal, Rwanda, Zambia Senegal Implementation and Monitoring Montenegro, Vietnam Albania, Cameroon, Uganda B'desh, Honduras, Nicaragua Armenia, Mozambique Ghana, Mozambique Policy Impact Senegal DRC, Ghana Tanzania, Uganda, Zambia 1 Reflected through political openness, strategic communications, rules of the game, access to information, and adequate capacity. 2 These include poverty and social impact analysis, public expenditure tracking surveys, citizens report cards, and service scorecards. 3 Embedding of the PRS in domestic institutional arrangements, including poverty observatories, and in the national budget process. The stylized facts are that where participatory processes are less well developed, countries involve a small number of national actors at the PRS formulation stage, and that participation tends to mean the one-time involvement of national actors in the formulation of a strategy paper, with little regard for the management of expectations or processes over time. Where participation is embedded in the political process to a greater degree, countries use the PRS process purposively to broaden stakeholder engagement through participatory monitoring instruments and by fostering public debate around PRS priorities. And finally, where participation is fully developed, stakeholder engagement is institutionalized in an ongoing cycle of strategy implementation and adjustment designed to maximize stakeholder input in the consideration of policy choices. Using the above framework to assess experience, encouraging evidence from participatory approaches to PRS formulation contrasts with uneven momentum of participation in strategy implementation and monitoring and, as yet, meager evidence of participation impacting policy decisions -where civil society dialogue with policy makers is perhaps most needed. 15Walter Eberlei (2000) "Institutionalizing Participation in the PRSP Implementation, Monitoring and Review Process". 13 Participation in Formulation of Poverty Strategies Enabling Environment All PRSP countries have engaged in some form of participatory discussions in PRS formulation. Country experience with PRS formulation has thus reflected, in the best cases, genuine efforts on the part of country authorities to establish a conducive environment for the engagement of stakeholders, in many cases for the first time, in a national dialogue on economic policy and poverty reduction. In several cases, the process has been less than ideal. In early formulation phases, the degree and quality of stakeholder participation responded to a conjunction of circumstances determined by political structure, stability, traditions and institutional capacity. Bolivia, Central African Republic, Guinea, Guinea-Bissau, Mauritania, Niger and Uganda, for example, built their participatory processes on poverty reduction initiatives which pre-existed the PRSP. Countries which were experiencing profound structural and political change at the time of PRS preparation integrated civil society engagement in PRS formulation in order to connect citizen feedback directly to the policy level. For the leadership of Bosnia and Herzegovina and Rwanda, the PRS presented an opportunity to institutionalize dialogue with civil society as part of a broader nation-building effort. Authorities in the Gambia used the PRS to create space ­ for the long term - for the consideration of civil society's priorities by the Cabinet and the National Assembly. Involvement, and reactions of different stakeholders, have varied greatly. In a number of countries civil society organizations (CSOs) have made it abundantly clear that they are dissatisfied when asked to react to existing programs rather than contribute to an overall rethinking of the government's poverty reduction agenda. Others complain that certain policies underpinning the PRSP, particularly the macroeconomic framework, are not sufficiently open to public debate. And after PRSPs are finalized and translated into action, it has not always been clear how participatory processes should be institutionalized.16 A distinct argument is also made on the need to deepen participation both within the executive and across branches of government.17 Others have focused on the special challenges related to integration of the poorest people and other excluded groups into participatory processes.18 Observations of PRS formulation have led to concerns about the lack of involvement of critical political decision-making and representative bodies such as parliaments and local governments. They note that early focus on civil society engagement in PRS formulation may have drawn attention away from the involvement of representative bodies.19 There is concern that bypassing existing processes of deliberation and creating parallel structures may undermine formal channels of representation. However, it is important to acknowledge that legislatures in many PRS countries lack the human and institutional capacities needed for effective engagement. At this point, PRSPs have been formally presented to parliament in about one third of the countries with full PRSPs. 16See CIDSE/CARITAS (2004: 2). 17See, for example, Piron and Evans (2004: 5). 18Venro (2005: 1). Save the Children (2004: 1). 19See, for example, Oxfam (2004: 7) and GTZ (2003: 27). 14 The overall trend for involvement of the business community in PRS formulation is uneven, reflecting government's predominant influence over private sector development and the limited involvement in policy dialogue of small-scale and informal actors. 20 There is evidence, however, that the momentum of private sector engagement ­ including small, micro and informal sector actors - in PRS formulation and monitoring is growing. In Burkina Faso, the private sector is pressing government for greater PRS attention to economic growth and business development. In Malawi, a coalition of private sector and civil society organizations is conducting budget analysis to ensure government compliance with budgetary allocations. Tanzania's Public-Private Partnership for Growth and Poverty Reduction strengthens the legal, regulatory and judicial frameworks for private sector development through an Export Credit Guarantee Scheme. The partnership focuses on improving the provisions of existing micro-credit schemes and the Land Act. The views of poor people and other marginalized groups have not been adequately reflected in PRSs. This is in part because direct engagement of poor people takes more time than existing planning cycles allow, and empowerment of the most vulnerable members of society is fundamentally difficult to do. Vulnerable, marginalized, and disempowered populations generally have less voice, fewer assets, weaker networks, and suffer more from the effects of non-income poverty than the average poor person.21 This form of powerlessness results in a systematic failure to include poor people in the generation of information and adjustment of policies and actions which affect them.22 This, in turn, prevents policymakers' accountability to citizens through the "long route" of accountability. The use of participatory poverty assessments for raising the visibility of poor people's views in PRS design, such as those in The Gambia, Rwanda, and Uganda, go some way in addressing this issue. From a more recent full PRS, Sierra Leonean authorities established Focus Groups to create the conditions for long term empowerment and involvement of women, youth and marginalized communities in the PRS process, in an explicit effort to strengthen democracy and human rights. The relative importance of different vulnerable groups will vary depending on country circumstances, and efforts need to be made to identify these groups and put mechanisms in place to capture their views and concerns.23 However, ensuring balanced representation of poor people and marginalized groups remains a problem, as their concerns may not be directly addressed by CSOs focused on specific issues. Creating an enabling environment for participation in conflict-affected and fragile states presents special challenges, as transparent policymaking and attention to inequality tend to be 20www.prsp-watch.de as of 7/12/2005). Online database by the Association of German development non- governmental organizations (VENRO), maintained by the Institute of Development and Peace (INEF); case studies on Albania, Bolivia, Guyana, Honduras, Yugoslavia, Cambodia, Nepal, Nicaragua, Pakistan, Vietnam (as of 7/12/2005). 21"Civil society must increasingly invest in grassroots-based and national-level policy monitoring and analysis, in order to ensure that evidence-based advocacy can be carried out and to enable the marginalized to fulfill their right to participate in the decisions that affect their lives." CIDSE-Caritas International (2004: 3). 22 Venro (2005: 1) points out that significant improvements in the PRS approach can only occur if there is empowerment amongst the poorest sections of the population. 23Kindernothilfe (2005: 4) and others stress that the views of children and youth need to be taken into account. 15 limited during and immediately following periods of violence. While core PRS principles are clearly relevant in such circumstances, expectations of what can be achieved need to be tempered with realism, while conflicting parties build trust and a mutual desire for poverty reduction across the country or region. ODI observes that "[...] peaceful conflict resolution and political settlements remain preconditions for greater prosperity in both countries and for the state regaining control over the full national territory"24 An encouraging example of conflict-sensitive participation in Bosnia Herzegovina is found in Box 1. Box 1: Conflict-Sensitive Participation--Bosnia and Herzegovina The PRS participatory process in Bosnia and Herzegovina included all regions and ethnicities, and the strategy was reviewed and approved by the parliament. Genuine efforts were made to incorporate conflict-affected voices early in the process, including refugees and internally displaced persons, women, and single-headed households. Thematic consultations considered the rights of war veterans, the families of fallen soldiers, missing persons and military personnel disabled in the war, refugee return, corruption, human rights, unemployment, and rural poverty. Consequently, NGOs rated the process as highly participatory, and one which they committed to remain engaged with over time through monitoring. The PRSP Coordinator's office stated: "The Government was able to learn more about the problems faced by the most vulnerable categories of the population, while on the other hand, civil society representatives were able to mobilize and establish dialogue with government representatives." Again, a crucial component of participation was the extent to which communications were used strategically to engage conflict-affected populations in the PRS process. The strategies of some countries helped to manage expectations, promote stability, and mitigate a recurrence of violence. The Bosnia-Herzegovina, Georgia, and Rwanda strategies, for example, approached the PRS as a vehicle for social cohesion. In Bosnia-Herzegovina, Rwanda, and Sierra Leone, the authorities promoted participation of marginalized and war-affected groups through print and radio media. Experience from other conflict-affected and fragile states, however, reflects limited effort to provide PRS documentation in languages other than English,25 including ethnic minority languages, or in formats accessible to illiterate audiences. Tools Participatory mechanisms, including participatory poverty assessments, poverty and social impact analysis (PSIA), and participatory budgeting tools, have been developed to promote the inclusion of citizen input into initial PRS formulation andpoverty diagnostics, as well as periodic feedback into PRS assessments. Examples from early PRSs include Malawi's Qualitative Impact Monitoring of the Poverty Alleviation Policies and Programmes (QUIM) instrument, the participatory tools developed for Tanzania's Coalition on Debt and Development, and the instruments under development in Bolivia, Honduras and Nicaragua. Examples from more recent strategies include the multi-stakeholder impact monitoring systems designed to support PRS implementation in Benin, Ethiopia and Kenya. In Nepal, quarterly work programs of Village and District Development Committees are posted in hard copy for public review, whilst 24ODI: Politics and the PRSP Approach: Synthesis Paper (2004: 3). 25Some PRSPs were presented in French, Spanish, or Portuguese. 16 expenditure information is also posted on the internet to encourage citizen feedback on service delivery. More generally, a lesson emerging from several country experiences is that the effective engagement of stakeholders in the PRS is also heavily dependent on the availability of and access to information (Box 2). Box 2: Strategic Communications in the PRS A good example of the importance of strategic communications is provided by Cambodia. Communication processes in the Cambodia PRS were problematic during the formulation phase, but have experienced a marked improvement during implementation and revisions to the PRS. Government explicitly requested direct feedback from CSOs on the implementation phase, and consultations have resulted in regular dialogue with the general population. A strategic approach to communication has also been instrumental in building coalitions across CSOs which collaborate on PRS issues. In Tanzania, simplified booklets in Kiswahili and English entitled "Tanzania without Poverty" were serialized in local newspapers generated lively popular interest in PRS goals and its relevance for the lives of individual citizens. In Rwanda, soap operas are used to ensure the ongoing engagement of the general public in the latest developments in PRS implementation. Whilst only accessible to 32 percent of the population, the soap operas have been reinforced by additional coverage in local newspapers and monthly PRS update sheets published by NGOs. Simplified or local language versions of the PRSP were produced in Ghana and Vietnam and Yemen for stakeholders with limited knowledge of the country's poverty reduction plans, and efforts are ongoing to sustain feedback from these groups. The PRS formulation process has provided an impetus for improving poverty information and knowledge bases through direct input from poor populations. Technical and capacity challenges remain, however, in linking diagnostic results about who is poor and why they are poor with the determination of priority public actions.26 In West and Central Africa, the Bank has supported poverty assessments in 20 out of 26 countries. In many of these cases, these reports were prepared jointly with national statistical offices or PRS units, and include the perceptions of poverty and priorities of poor people. In Europe and Central Asia, the Bank has adopted a programmatic approach to poverty assessments, in order to enhance the policy relevance of poverty analysis and monitoring.27 The use of ex-ante PSIA has become more common to help inform and foster national policy debate on reform options and support evidence-based, transparent policy making. This approach works best when applied to well-defined reforms rather than to broad strategies where distributional outcomes are difficult to assess. Data limitations, methodological issues, and national capacity constraints also necessitate gradual progress.28 While there is room for improvement with the integration of PSIA analysis into the PRS, the approach is being used to inform the design of PRS-related policies. The Mongolia Utility PSIA results, for example, were 26IMF/World Bank (2002b: 29-33). 27This approach, being applied in Armenia, Azerbaijan, Bosnia and Herzegovina, Georgia, Kyrgyz Republic, Serbia and Montenegro, Tajikistan, and Uzbekistan, involves tailoring the poverty work to country-specific needs, developing a three-year program of poverty work, integrating capacity building and use of local consultants. The approach recognizes that effective poverty analysis needs to be anchored in local institutions with input from citizens, and that this is best facilitated through an approach that builds local capacity and feeds into the policymaking process in the country. 28IMF/World Bank (2003a:12-13), IMF/World Bank (2004: 25-28). 17 presented on national television, and citizen feedback directly influenced the design of tariff reforms. In Zambia, a proposal by the Ministry of Land to convert the country's 94 percent of land under customary tenure into state-owned land was analyzed, leading to a decision to cancel the proposed reform. In Rwanda, a broad-based team working on the PSIA in the tea sector advised the Ministry of Agriculture to introduce a differentiated tea pricing policy, which would increase productivity and returns to laborers. Once the proposal was adopted, they also advised on its design. Institutionalization There is little doubt that greater coherence between government-led consultations and independent participatory methods can enhance the relevance of policy making and related responses. However, institutionalizing a system of regular exchange between stakeholders and the policy level remains one of the more challenging features of the PRS. Based on longer experience, some countries have merged top-down and bottom-up mechanisms underpinning PRS formulation and adjustment. In Armenia, for example, a Public Partnership Agreement reflecting co-ownership of the PRS was signed by Government and representatives of the National Assembly, Armenian Apostolic Church, trade unions, local self-governance bodies, employers and entrepreneurs and NGOs. The agreement builds upon commitment to implementation of PRS priorities for the coming three years. The Armenian Government further created a PRS Steering Committee, Working Group and Open Forum, each with designated responsibilities for PRS re-formulation, monitoring and implementation. The Open Forum is specifically charged with ensuring public awareness of PRS adjustment and results. It is also designated as stakeholders' feedback mechanism to the policy level. Other examples of institutionalization include Mozambique and Senegal, where Poverty Observatories have been established to encourage joint official and independent design and oversight of their PRSs. Stakeholders in these countries ­ including government officials, civil society groups, religious bodies, business leaders, trade unions, NGOs and external partners - conduct a comprehensive review of PRS progress which Government to assess poverty outcomes. Participation in Implementation and Monitoring of Poverty Strategies. Enabling Environment Integration of participatory processes in PRS implementation and monitoring presents a mixed picture.29 The PRS has generally prompted governments to become become more aware that their policy choices and expenditure allocations are subject to increasing scrutiny from citizens, parliament, community organizations, social partners, media organizations and external partners. They also recognize that inclusion is an important pillar of good governance, and that citizens are eager to monitor whether the leadership is listening to their concerns. At the same time, limited progress can be seen with respect to the rooting of ownership, coalition building and 29A major review of monitoring systems in PRSP countries is provided in Tara Bedi et. al. "Monitoring Systems for Poverty Reduction Strategies: An Analysis of Institutional Arrangements" World Bank, forthcoming, December 2005. 18 accountability mechanisms between governments and civil society to ensure sustainability and the effective monitoring of results. The Government of Vietnam introduced a PRS Roll-Out Program to promote pro-poor participation at commune and village levels by using a bottom-up planning and budgeting system. The Roll-Out is designed to target rural poverty and to meet local governance objectives of the Grassroots Democracy Decree. Donors also use the model in an effort to harmonize their respective programs. The Ministry of Labor, War Invalids, and Social Affairs is integrating its funds as block grants into the Commune Development Funds. Preliminary feedback from poor people in rural areas indicates improvements in satisfaction levels with the prioritization of their needs in local planning. Box 3 provides another example of how the authorities in Montenegro successfully sought out and enabled vulnerable communities to engage with the PRS process. Box 3: Reaching Vulnerable Communities in Montenegro Analytical work conducted by Montenegro's Center for Enterprise and Economic Development provides a good example of how poverty analysis and tracking indicators addressed the concerns of the Roma community. The work also focused on other vulnerable groups: internally-displaced populations (IDPs) and refugees from the wars in Bosnia and Kosovo. As a result, several important decisions were made. First, a national action plan for Roma inclusion was developed and supported by the parliament in early 2005. With the support of UNDP, a strong advocacy network was mobilized that was instrumental in securing broad support. Second, the authorities established a commission headed by the Minister of Labor and Social Welfare to develop and implement a national strategy for resolving the problems of refugees and internally displaced persons. This strategy, which includes concrete steps (such as amendments to the labor law and changes to social programs) was adopted in early 2005, and its implementation has started with active involvement of local NGOs. Both strategies are integrated in the PRS framework and their implementation is monitored as part of the PRS implementation. In Cameroon, Kenya, Mauritania and Senegal, the PRS process included the preparation of a legal framework to guarantee rights and design targeted programs for disabled, elderly, refugees, and displaced populations. The Senegalese monitoring system places special emphasis on assessing the ability of community organizations to target poverty reduction measures on vulnerable groups. Tools PRS implementation experience shows a wide array of participatory monitoring tools, including public expenditure tracking surveys (PETS), scorecards and report cards, which have been developed to include citizen feedback into periodic PRS assessments. Stakeholder feedback on these instruments conveys civil society's increased ownership of poverty reduction goals, which will need to be supported and improved over time (Box 4). Questions with regard to the legitimacy of civil society organization's representation of citizens can be addressed by building the economic literacy of these organizations, and by supporting their efforts to build coalitions with like-minded institutions and research bodies on issues of common concern. 19 Box 4: Participatory Monitoring Mechanisms at Work Albania's 2003 education sector budget allocation, for example, was increased as a result of dialogue between CSOs and parliament, which was followed by successful lobbying by parliament with the executive branch. CSOs action in Albania has also resulted in the institutionalization of participatory methodologies in the budget guidelines of communes and municipalities, and the development of a citizen's budget manual and toolkits for local governments. Armenia's PRSP Social Monitoring and Analysis System contains measures for collaboration in PRS implementation and monitoring, which explicitly involve central and local government, as well as community councils, NGOs, unions, business associations, religious organizations, vulnerable groups, television and written media. Cameroon's Integrated Monitoring and Evaluation of PRS Implementation. This special mechanism for the management and the monitoring of the use of HIPC funds by CSOs results in an unprecedented level of access to information by civil society. On-the-job capacity building has had a direct impact on the quality of CSO feedback on the process; and their ability to use independent analysis tools for monitoring national budget execution. CSOs are also empowered to conduct dialogue with government officials and donors on programming, budgeting and monitoring of poverty oriented developments. Malawi's Qualitative Impact Monitoring system using participatory methods was established in partnership between the government and other stakeholders to keep policymakers informed about progress in implementing and assessing PRS impact. In the formulation phase, the following benchmarks were identified: PRSP was examined to assess poverty content based on previously identified priorities of the poor and on Vision 2020. Various macroeconomic policies were analyzed to determine their consistency with these poverty priorities. Key outcome indicators of the PRS were identified, and progress towards achieving them is measured in consultation with the poor. The information generated is fed back into the policy process in the form of recommendations on improving the poverty focus of selected policies. Uganda's emphasis on M&E has resulted in the mobilization of government departments and civil society stakeholders and the arrangements have produced tangible results. The Budget Directorate of the Ministry of Finance provides regular information on budget disbursements to CSOs for review. CSOs and parent associations collaborate at the district level, using PETs tools, to track budget implementation. CSOs provide independent reports which validate the work of local government. Value for money audits are conducted and CSO verify the quality of work. Institutionalization Benin's National Commission for Development and Fight against Poverty, Cameroon's National Poverty Reduction Network, Kenya's National Economic and Social Council, Tanzania's Consultation Guidelines for the PRSP Review (Box 5) are examples of arrangements established to institutionalize partnership, information exchange and joint monitoring of progress with PRS implementation. Despite the mixed record from 1999 to 2005, there has been an upward trend in the institutionalization of parliaments' oversight of PRS implementation. Several PRSs highlight parliament's role, either through a PRS standing committee (e.g., Azerbaijan, Ghana), other standing committees (e.g., budget committees), or through membership of PRS Steering Committees managed by the executive branch (e.g., Chad and Georgia). The parliaments of Bosnia and Herzegovina and Ethiopia are implementing changes to make legislative oversight of the PRS a permanent activity. Many governments report to parliaments on budget and PRS progress (e.g., Benin, Kyrgyz Republic, Mozambique, and Tajikistan). Parliaments are also 20 increasing their ability to contribute to PRS prioritization, costing, policy coordination, and monitoring of poverty outcomes.30 Capacity building efforts that support PRS monitoring, including the link to the MTEF and budget, have resulted in more targeted policy recommendations on the PRS to the executive branch (e.g., Burkina Faso and Cameroon). Regular engagement with constituents through outreach activities and public hearings can also improve the quality of feedback to policymakers (e.g., Rwanda and Tanzania). Other observers have noted that strengthening links between active civil society groups and parliaments could help create a common platform to support pro-poor priorities.31 With support from parliamentary associations worldwide, including the Parliamentary Network of the World Bank (PNoWB), informal networks have been formed in East Africa, the Middle East, and Latin American to strengthen parliaments' abilities to engage in country-level PRS processes. Box 5: Participation in PRS Implementation and Review--Tanzania The most recent PRSP Annual Progress Report establishes "Consultation Guidelines for the PRSP Review" which stipulate that ongoing adjustment of PRS documents should provide for: Ample timeline for consultations Transparent planning of participation processes Expanded consultations across government agencies Leadership of consultations to be shared between government and domestic stakeholders Stakeholder participation to explicitly include business associations and the labor movement Expanded methods for engagement with civil society, including townhall meetings, radio programs, popular drama presentations, and television broadcasts Systematic analysis of civil society feedback and integration of key issues into the next PRS. Decentralization policies designed to harness citizens' attention on transparency in local expenditures and reinforce pro-poor service delivery are slowly helping to institutionalize PRS ownership across populations and local governments in implementation and monitoring phases. Such initiatives are leading to the development of social capital in communities, in addition to greater efficiency and impact in the use of resources at the local level. The Bangladesh Government, for example, allocates matching grants to local governments to enhance prospects for quality and accountability in public service delivery. In Ghana, a framework has been developed to enable District Assemblies to prepare their own Medium-Term Development Plans, using the PRS format and principles, and the determination of poverty reduction priorities by local communities. There is evidence of stronger local community participation in the monitoring and ongoing adjustment of PRS goals. In Honduras, the Local Development and Decentralization Program (PRODEL) uses mechanisms for ensuring municipal, local consortia, NGO and community organization inputs in the design and implementation of Strategic Plans for Municipal Development (PEDMs) in the country's 298 municipalities. Nicaragua's PASE System for the Coordination, Implementation, Monitoring and Assessment of the Economic Growth and Poverty Reduction Strategy (ERCERP) and the National Development Plan supports the de- 30Draman and Langdon (2005: 16). 31 Parliamentary Centre (2005: 2, 6). This type of approach is beginningg to emerge, for example, in Malawi and Ghana. 21 concentration of resource management and investment decisions to regional and departmental levels, where associations of municipalities, development councils, NGOs, private entrepreneurs, and civil society groups identify and design locally-driven programs and projects. Space has been opened for social accountability audits by civil society, and a pre-investment fund for project identification and design. Preliminary outcomes include the building of public-private coalitions for negotiating local resource allocation with central government, and more efficient use of the Fund for Social and Productive Investments. Rwanda's Ubudehe process32 informs district level planning decisions and is reflected in aggregate plans at the national level. Participation ­ Impact on Policy Decisions Enabling Environment It is generally accepted that the ultimate test of participatory governance is whether a national policy dialogue leads to more flexibility in carrying out national development policies, making them more inclusive and tailored to country circumstances. Calls for an expansion of policy space, particularly with regard to macroeconomic policy, as well as the use of Poverty and Social Impact Analysis (PSIA) to help inform decisions, has become an important element in the policy dialogue among governments, civil society and external partners. In the Sub-Saharan Africa context in particular, initiatives such as the New Partnership for Africa's Development (NEPAD) attribute increasing importance to good governance and transparency, which reinforces the rationale for more open and accountable societies. Tools PSIA has helped to support informed policy debate by creating opportunities for exploring conflicting hypotheses and being transparent about assumptions. While it is not a panacea, there are cases where the PSIA process has created space where stakeholders can raise concerns. For example, in Ghana, an energy sector PSIA resulted in a process that helped to dispel common misperceptions about utility reforms by examining the impact on the poor and taking those impacts and stakeholder views into account. In the Democratic Republic of Congo, a mining sector PSIA raised awareness about the likely negative impacts of mine closure due to reductions in social services that the mines supplied. The PSIA identified vulnerable groups who would suffer most from reform that would entail shutting down schools and health stations. The PSIA resulted in 40,000 children being kept in school by putting in place a short-term assistance program to keep schools open providing more time to develop a sustainable, long-term solution. The need to pursue the opening of more macroeconomic policy space in the participatory process figures prominently in the views of civil society stakeholders. Many observers believe that open debate on what macroeconomic framework is most suited to reduce poverty is still lacking as a systematic part of the PRS process.33 Some civil society groups believe that the opportunity to participate in their government's economic policy making carries no weight because the policy space enjoyed by governments is so limited as to prevent any effective policy debate among 32A grassroots approach used to identify and prioritize local development initiatives. 33Cordaid, Novib and Wemos (2005: 2). 22 different groups.34 Past implementation progress reports by Band and IMF staff, and the 2004 IEO evaluation of the PRS approach also concluded that the PRS process has had a limited impact in generating discussions of alternative policy options with respect to the macroeconomic framework and related structural reforms.35 There may be several reasons why macroeconomic policy options have not been discussed more broadly in the PRS process. In some instances, macroeconomic policy decisions, (e.g., on the level of exchange rates or interest rates) are by their nature sensitive and cannot be made in a process of broad public debate. This is the case even in OECD countries. In other cases, governments are reluctant to discuss macroeconomic policy options in a broader public forum, as they consider this may slow decision-making and complicate relations with donors. The institutional framework may also not be conducive to such discussions, 36 and the necessary information may not be available on a timely basis and in accessible form. Many potential participants in such discussions also lack the technical and institutional capacity to evaluate macroeconomic trade-offs and elaborate feasible alternative policy options.37 Institutionalization Despite the many challenges, there are some indications that the PRS is helping make headway towards greater participation and domestic accountability. In Zambia, for example, a network of civil society groups, formed in 2000 for coordinating civil society input into the PRS process, has collaborated with the government to develop a participatory framework into the Civil Society for Poverty Reduction (CSPR) network. The network includes over sixty NGOs, trade unions, and church groups, many of which also campaigned on the "third term issue," from which they gained added legitimacy and voice. As Besinati Mpepo, a coordinator for the network, explains: "If civil society is effectively organized and mobilized on national issues, government can take it seriously. This has been the case with the debt campaign, the campaigns against the third term of Zambia's second republican president...and civil society input to the PRSP..."38 Since the completion of the PRS consultation process, CSPR has also played an active role in monitoring implementation--particularly in conducting participatory poverty 34CIDSE-Caritas Internationalis (2005a: 6, 38). Some recognize, however, that this opportunity itself depends on the PRS process pursued by the government, which may be deficient and is often exacerbated by lack of transparency, institutional fragmentation, and widespread off-budget funding. See Water Aid (2005: 10). 35IMF/World Bank (2004: 19), and IEO (2004: 72, 111). The IEO report expressed doubts that PRGF program design had been guided by the PRSPs--in fact, the opposite influence has been more common. By contrast, Timor Leste provides an example where government encouraged broad-based consultations before adopting its petroleum savings policy which sets aside the bulk of petroleum revenues for future generations. Since effective implementation depends critically on its continued implementation by successive governments, the government considered it important to build popular consensus for the policy. 36The Fund's outreach and public activities in-country must take place within this framework. Fund staff should encourage a government to open up the debate on macroeconomic policy issues, as this will promote better understanding and acceptance of the policies ultimately decided, and enhance the chances for their successful implementation. However, the Fund cannot organize a public debate of policies against the government's wishes. See IMF (2003b). 37There is some debate on whether the IFI staffs should themselves propose alternative policy options, or merely be willing to discuss the proposals of others on their merits. Alternative proposals by the staffs of the Fund and the Bank could run the risk of filling, at least partially, the policy space that should be left to the country authorities. 38Mpepo (2003). 23 monitoring and expenditure tracking--although capacity remains a constraint. The robustness of civil society participation is a promising aspect of Zambia's PRS process. As a next step, to solidify domestic ownership and keep poverty reduction firmly on the national agenda, there is a need for civil society to build bridges to civil servants, political parties, and the parliament as a whole. This is a case where a process that was viewed initially as externally imposed has gained domestic currency. It shows how effective participation can help rebalance an external focus towards a domestic one. It also shows the importance of understanding the political economy factors that determine how a PRS process unfolds. In Mozambique, evidence suggests that efforts to institutionalize stakeholder participation have also taken root. The Second Poverty Observatory in April 2004 (first mentioned in section II. C above), including representatives from the private sector, civil society, and a broad spectrum of public entities, assessed PRS implementation progress in key sectors. Civil society also participated actively in the preparation of a second PRS. As part of the consultation process, Government involved the private sector in consultations on procurement reform and, ensured the participation of the private sector and trade unions in revisions to labor laws. With respect to stakeholder dialogue on macroeconomic issues, there are some recent examples of more flexible discussions between government officials and IMF staff on key issues during the development and implementation of the PRS. In some countries with more advanced PRS processes (e.g., Mozambique, Nicaragua, and Tanzania), there have been discussions around setting alternative targets for real growth, inflation, current account, and revenue and expenditure that are consistent with the objectives of macroeconomic stability and poverty reduction. There have also been discussions of the trade-offs between the possibly adverse macroeconomic effects of higher-than-projected externally financed spending and its poverty-reducing impact in Burkina Faso, Mauritania, Mozambique, Tanzania, and Uganda. However, these debates on policy options continue to be largely limited to a narrow circle of officials directly involved in macroeconomic programming and the negotiations with development partners, with relatively little direct involvement of the public. III. Early Results ­ Is There Evidence of Impact? In the previous section we have reviewed several country examples of participation in the PRS cycle at different stages that are likely to have an effect on the way in which the citizenry, in its various organizational forms, can affect the conduct of policies. But assessing the overall effect of the several country experiences is extremely difficult in the absence of counterfactuals, as well as given the short time which has elapsed in most countries undergoing a PRS process. In this section we therefore present aggregate evidence with respect to the evolution of a number of indicators of good governance, which are presumably likely to be affected by successful participatory processes. The discussion is only heuristic, as there are obviously several concurrent factors that can affect governance outcomes. But we think it is still interesting to see how trends have evolved in this group of countries. We have discussed in section 2 the poor governance environment prevailing in a majority of PRS countries. This is confirmed by figure 4, which displays the World Bank's Country Policy and Institutional Assessment (CPIA) scores, policy performance in all groups of low-income 24 countries--those that are not heavily indebted (LIC non-Heavily Indebted Poor Countries [HIPC]), those that are heavily indebted and had reached decision or completion point by June 2005 (HIPC-1) and those that had not reached decision point by that time (HIPC-0). As the figure shows, all of these groups scored below that of middle-income countries. The good news is that over the past five years of PRS implementation, gains in policy performance by those low-income countries that had reached the decision or completion point under the HIPC Initiative substantially outpaced that in middle-income and other low-income countries (figure 5). By 2004, the institutional and policy environment in heavily-indebted poor countries that had reached decision or completion points matched (or was slightly stronger than) that in low-income countries that were not heavily-indebted (figure 6). The heightened attention which the Heavily Indebted Poor Countries (HIPC) Initiative placed on improved institutions and policies may be responsible in part for these developments. Figure 4: CPIA scores (1999) 6 5 MIC 4 LIC nonHIPC 3 HIPC-1 2 HIPC-0 1 0 Economic Structural Policies Policies for Social Public Sector Total management Inclusion Mgt/Institutions Figure 5: Changes in CPIA scores (1999 to 2004) 0.6 0.5 MIC 0.4 LIC nonHIPC 0.3 HIPC-1 0.2 HIPC-0 0.1 0 Economic Structural Policies Policies for Social Public Sector Total management Inclusion Mgt/Institutions Source for Figures 4-5: World Bank staff calculations. 25 Figure 6: CPIA scores (2004) 6 5 MIC 4 LIC nonHIPC 3 HIPC-1 2 HIPC-0 1 0 Economic Structural Policies Policies for Social Public Sector Total management Inclusion Mgt/Institutions Of particular note are the strong performance gains by HIPCs on two key indicators of particular relevance to participatory governance: (i) the quality of budget and financial management; and (ii) transparency, accountability, and corruption in the public sector (figure 7). By 2004, performance on these variables by HIPCs that had reached decision or completion points had surpassed that of low-income countries that were not heavily-indebted. Figure 7: Changes to key public sector management CPIA scores (1999-2004) 0.8 0.6 MIC 0.4 LIC nonHIPC 0.2 HIPC-1 0 HIPC-0 -0.2 Quality of budget and financial Transparency, accountability & management corruption in public sector Source for figures 6-7: World Bank staff calculations. The above trends are encouraging, particularly when one considers that PRSs are designed and implemented against a backdrop of national politics. In some contexts, the PRS has engendered better intra-governmental policymaking processes, thereby improving the political environment on the ground. In other cases, PRS preparation and implementation processes are rendered more complex because of the tradition of splitting planning and finance functions. In relatively stable environments, including Bosnia Herzegovina, Rwanda, Vietnam and Uganda, for example, PRS consultation and participation processes have contributed to the building of national unity. The nature of the political system has therefore influenced the breadth and depth of stakeholder participation in the PRS to date. Across government too, variables include relationships and power structures between the executive and legislative branches of government, and whether the public service is meritocracy-, politically-, and/or ethnically-based. 26 Against the backdrop of such widely varying country circumstances, one can observe an opening of social, economic and, in some cases, political, space through the PRS process which has enabled more public discussion and stakeholder involvement in decision-making. There is also evidence of progress in the use of mechanisms and tools designed to strengthen the rights-based, structurally-integrated, legitimacy- and capacity-building components of PRS formulation, implementation and monitoring. What is also clear, however, is that for participation to become institutionalized, PRS processes need to be further integrated into state-wide systems, and become compatible with existing political structures. IV. Conclusions: How to Move Forward? The first five years of PRS formulation and implementation reveal that strengthening participatory governance is possible but is likely to require more commitment, capacity, and time than civil society and donor partners are willing to accept. The viability of participation depends on the severity of a number of constraining factors: · Weak governance, transparency and accountability. · Participation interpreted as consultation and information exchange between authorities and stakeholders, with no guarantee that priorities expressed by stakeholders will be heeded or incorporated into policy decision-making. · Exclusion of certain stakeholders from PRS processes ­ whether they are vulnerable groups, ethnic minorities, indigenous populations, women, disabled, displaced persons, parliament, or labor unions. · Inadequate and poor quality information, coupled with weak communications strategies for reaching the broader public. · Low level of economic literacy and management capacity across civil society organizations. The many advances with respect to participation in PRS countries should be recognized, while acknowledging that it is too early to attribute causality for improved governance environments in low-income countries directly to the PRS initiative. Judged against the prevailing governance environment in most of these countries, it is evident that a PRS process cannot immediately offset the shortcomings of weak institutions, political structures, or constraints on freedom of expression and association. Country efforts to reinforce progress and institutionalize participation in PRS formulation, implementation, and monitoring therefore need to be scaled- up. This often calls for closer integration with existing participatory processes and representative bodies. An informed policy debate can be supported by exploring conflicting hypotheses and making assumptions transparent, although building in-country capacity to conduct such debates is a process that requires time and more attention. Similarly, not all decisions can or should be made in public fora, but there is still considerable scope to open up space for a public discussion on some of the policy choices that underpin the poverty reduction strategy. Helping countries and donors to balance their respective accountabilities will likely contribute to improvements in participatory governance processes. For countries, good practices include communicating the goals of participation process upfront and providing relevant information in 27 accessible forms. Efforts should be made to embed participation within existing mechanisms, with due consideration to representative bodies, and strengthen these where necessary. Participatory monitoring tools can be helpful in institutionalizing citizen feedback into periodic PRSP assessments. During implementation, there is also an opportunity to broaden the engagement of stakeholders, such as the business community and labor movements. Development partners need to be aware of (and not bypass) participatory and representative processes and institutions that already exist. When such processes are weak, consideration needs to be given as to whether and how external assistance can contribute to improving them. Development partners should also encourage the country authorities to establish a conducive framework for open public debate on policy choices, including on macroeconomic policies. 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