Comments

The eradication of polio is necessary for other communicable diseases to be tackled in such a way as to provide any real long term benefit- these countries need to strengthen their economies in order to provide sanitation and healthcare- they cannot do this with rampaging infectious disease. Due to the prevalence of other diseases in polio stricken areas I don't know how it is possible to predict such economic benefits directly from the eradication of polio, as these individuals are at high risk of other more common infections. However it seems shortsighted to argue to shift funding elsewhere as Henderson does, because these epidemics are huge and $1 billion annually would easily be swallowed. In my opinion tackling one thing at a time and unlocking international funding is the only way to begin to solve such problems- ruthless though it may seem when so many are dying of other ailments, it is how the world, and politics, work.

Thanks for this well argued and well written blog Jonathan. Just want to point out that the funding gap is now actually $665M -- see http://www.polioeradication.org/Financing.aspx. There are a couple of further points I'll post about later on. In the meantime, your readers might want to check out the campaign the Global Poverty Project are currently running on polio eradication. We recently met with the Prime Minister to discuss the oppourtunity we have to eradicate polio forever. See how the meeting went at: http://globalpovertyproject.org/blogs/view/355

Thanks to Russell Hangatt and Clara Momoi for their helpful introduction to the PNGDSP (‘the Plan’). My interest is in the prominence the document gives to the ‘informal sector’ as a source of livelihood in PNG. The informal economy is a much misunderstood component of the PNG economic system and I applaud its explicit inclusion in the Plan. It’s good also to see the informal ‘sector’ acknowledged as a functional element of the private sector, and to have planners accepting that informal enterprises are different and quite distinct from SMEs (instead of treating them as inconvenient and embarrassing appendages of the SME sector). The Plan implies, correctly, that the policy framework for informal enterprises should differ from that applied for SMEs. I have some difficulty with the Plan’s demarcation of the border line between the two categories, but we’ll get to that later. Other positive aspects of the treatment of informal enterprises in the Plan include its recognition of their role in lowering the cost base for the formal economy, its recommendations for the provision of public goods and services of particular value to informal economic activities, and its emphasis on microeconomic reforms likely to be at least as helpful to the informal as to the formal economy. The Plan gives welcome emphasis to the need for operators in the informal economy to have access to financial services and points to the particular inadequacy of such access in rural areas. It does well to suggest that financial regulators should pay attention to the unmet financial service needs of the poor and the isolated, and to remind us of the need for financial institutions to diversify their products to meet their needs. Having said that, I need also to point to some difficulties in the Plan’s treatment of the informal economy, which it classifies as a ‘sector’, alongside agriculture and manufacturing, and other sectors as conventionally understood. But the informal sector is not a ‘sector’ in that sense. The informal ‘sector’ is actually ‘cross-sectoral’. Almost every structural sector of the PNG economy has an informal component, in which informal labour and enterprise are engaged in the production of goods and/or services of economic value. This informal contribution occurs, to varying degrees, in agriculture, fisheries, mining, forestry, manufacturing, construction, financial services, retailing, and tourism. Telecommunications, thanks to the rapid spread of mobile phone technology, is the sector most recently opened up for informal economic activity. Since the ‘informal sector’ is not a sector in the conventional sense, why don’t we just agree to call it the ‘informal economy’? This usage has been adopted in the international literature for some time now, and has a number of additional advantages. Among these is that it focuses attention on the positive economic contribution of informal economic activities rather than on stigmatizing the people in it as a social problem. This is one reason why the policy brought to the NEC by Dame Carol Kidu last year, and approved by it, was titled ‘A National Policy for the Informal Economy’. It is perhaps unfortunate that this occurred too late to influence the language and content of the Plan, but if the Department of Community Development can drop the term, ‘informal sector’, why can’t National Planning and Monitoring do the same? The old name carries a lot of bad-news baggage and we’d be better off without it. My principal problem with the Plan concerns its treatment of financial services. In considering the financial service needs of people in the informal economy, it has failed to adopt a ‘financial inclusion’ approach, which would emphasize the need to bring the ‘unbanked’ under the umbrella of financial services in general. Emphasis in modern microfinance has switched to the need to provide a portfolio of services for the poor, principally deposit accounts, but also remittance and payments services, aside from credit. Instead the Plan proposes ‘a specific credit line with the National Development Bank to enable growth and development of indigenous micro-enterprises’. This would tie the fortunes of the informal economy to an institution not even licensed to accept deposits. The Plan appears almost to equate ‘finance’ with credit; this at a time when the beneficial impact of micro-credit on the well-being of the poor is under empirical challenge. Further, although it has correctly identified a financial services gap, the Plan appears to place too much reliance on ‘informal’ microfinance institutions to bridge that gap. It gives insufficient attention to the capacity of regulated financial institutions (including new small regulated banks with authority to mobilize deposits) and new technologies to do the job. For example, despite giving much attention to ICT issues, it fails to mention the potential of mobile phone banking to serve isolated and poor clients. As mentioned above, informal microenterprises and SMEs are discussed separately and different policy recommendations are presented for each. A clear statement of how planners understand the differences between the two categories is lacking, and it would be helpful if the Plan could spell this out. (Example: genuine SMEs need access to credit, but for microenterprises credit is a secondary consideration). The SME ‘sector’ in PNG is said to be small, weak and undiversified by international standards. Even so, the Plan appears to exaggerate SME numbers. ‘Tucker shops’, most of which are surely informal entities in terms of culture and capitalization, are said to comprise almost half of all SMEs. This characterization seems to reflect bureaucratic claims on turf, more than any concrete reality. A related disconnect between aspiration and reality is seen in the ‘rags-to-riches’ scenario depicted in a chart (5H: ‘the entrepreneurial career: from unemployment to a formal business’). Alas, while some fortunate and gifted individuals may make the transition described, better policy would focus realistically on facilitating the participation of larger numbers of households in a thriving informal economy. There are many more opportunities for informal income generation than appear in the Plan. For example, ambitious targets are proposed for home building without any role envisaged for informal and self-help contractors, while the possibilities for provision of a wide range of services, both urban and rural, are not explored. In fact, the Plan’s ambitions for informal economy job creation are rather modest, especially when compared with the numbers of formal jobs expected to flow from the PNGDSP, as modeled. Chart 1H and the accompanying table suggest that only some 49,000 new informal sector jobs will be created by 2030, compared with more than a million formal, non-agricultural, jobs. But perhaps this number is an artifact of the modeling process. If informal ‘sector’ employment is regarded as a residual, unemployment is held at 5%, and some 1.7 million ‘formal’ jobs are created, there aren’t really many able-bodied people left to work in the informal economy. <em>John Conroy, Visiting Fellow, Crawford School</em>

Thanks Chris - great post, and I definitely agree that we need to move beyond making the case in these areas and starting to actually examine why the changes we'd like to see aren't taking place. Your point that - 'The first, and perhaps most obvious, reason is that staff in aid agencies – and senior staff in particular – listen to powerful stakeholders who can strongly sanction their behavior i.e. Ministers, the media, Treasury offices, National Audit Offices, etc.' - is a good one. To that I'd add that in many way's this is understandable. Despite the power of the chequebook, aid agencies aren't omnipotent (in fact they are often surprisingly impotent when push comes to shove in recipient countries) and they do need local interlocutors, so in a sense it makes sense to work with powerful ones. This is, of course, problematic though. And I don't think it fully excuses things such as agencies' failure to divulge information on what they've donated to the citizens of aid recipient countries. I also think that another reason why too little real transparency work happens is simply that most donor agency staff are flat-out busy most of the time, and don't have enough time to consider new initiatives or undertake activities that might be quite time consuming at least in their set up. This is another example of the negative impacts of what I call the 'fallacy of low overheads' (i.e. the mistaken idea that having overheads which are as low as possible is actually a good thing). cheers Terence

I think it's important to be wary of processes that result in the more wealthy amongst "developing" countries having the most say. We will have to be very careful that these reach everyone, especially those suffering the most, to an equal extent, and that won't be simple.

Thanks Satish, your excellent 2007 paper, which can be found <a href="http://peb.anu.edu.au/pdf/PEB22-1chand.pdf" rel="nofollow">here</a>, is a must read on the importance of governance, including combating corruption and government effectiveness, for growth. <blockquote>This paper argues for improved policy choices for growth of incomes as the priority for a reform-minded Papua New Guinea government due to take office following the elections in mid 2007. Amongst the policy initiatives are a committment to improved governance including a campaign to clean up corruption; greater investments in public infrastructure to deepen the trade and cultural bonds between the disparate parts of the nation; concerted efforts at reducing the costs of doing business to raise the level of investment and employment generation; and placement of an arms-length, results-based, evaluations and monitoring framework to track progress on each of the above-mentioned. Some thoughts on the role an active donor community could play are also provided</blockquote> I agree with you that the rate of growth has picked up in recent years, but this does not appear to be correlated with improved governance (at least not positively--see chart.) <img src="http://dl.dropbox.com/u/6190378/Screen%20shot%202011-04-19%20at%204.51.13%20PM.png" alt="" /> I agree with you that the link between growth and governance should hold for longer-term growth. However, this short-term upturn in growth can largely be explained by the upturn in commodity prices and investment in the LNG project. For welfare and longer-term growth, the important link is between governance and the delivery of basic services and investments in infrastructure.

PNG has never been short of excellent plans and superb policy recommendations. For Matt's information, I had created the Botswana, Malaysia, and Nigeria scenarios for PNG that was published in the PEB in 2007 (volume 22 (1); pages 70-82). The billion Kina question is if these excellent plans in the form of the PNGDSP and MTDS will ever be fully implemented. The past does not provide reasons for hope, but things may have changed in PNG. The rate of economic growth has!

Here is the powerpoint presentation on the PNGDSP from last year's Executive Update. http://peb.anu.edu.au/pdf/2010/PNG/policy_seminar_ppp/joe_kapa.pdf  

Thanks Peter - great comment.

Clara and Russell, Thank you for producing a summary of Papua New Guinea's Development Strategic Plan (DSP) and Medium Term Development Plan 2011-2015. There is a lot of interest in both of these development policy documents and your article will encourage people to read further and continue the discussion. The PNGDSP and MTDP set out ambitious targets for development in PNG. Meanwhile large revenues from the LNG sector open up a range of possibilities. One scenario is that the PNG government invests revenues well: allocating resources to services and programs with high economic and social returns, and implementing these both efficiently and effectively. As you point out, this could also be called the Malaysia scenario. Another scenario is business as usual. Misallocations of resources continue, implementation remains weak and fragmented, and services suffer. (My blog on the <a href="https://devpolicy.org/spending-wisely/" rel="nofollow">2011 budget</a> is along these lines.) In a worst case scenario, Papua New Guinea could experience a full blown resource curse, characterised by rising corruption and waste, loss of competitiveness, and possibly conflict. We could also call this the Nigeria scenario. While the PNGDSP and MTDP present a case for the first of these scenarios, the second two are possible, and some would argue more probable. In discussing the PNG government's new development policies, there are several questions that we might want to consider: 1) Are the policies set out in the DSP and MTDP likely to lead to the results envisaged? Do they represent good value for money? 2) Does the government have the capacity to delivery the DSP and MTDP? If not, what can it do to create an enabling environment for other partners (NGOs, churches, companies, donors) as part of a broader service delivery system? What is the role of aid? 3) Given that so much depends on implementation, what can be done to strengthen the accountability of service providers (and MPs?), especially to the people who are supposed to be receiving services? And what can be done to strengthen feedback from recipients to Planning, service providers and MPs on the availability and quality of services? (Also see <a href="https://devpolicy.org/feedback-on-png-development-plan/" rel="nofollow">Paul Barker's blog</a> on this.) These are just a few questions, to get a discussion going. Once again thank you for producing the summary of the DSP and MTDP and the documents themselves can be found <a href="http://dl.dropbox.com/u/6190378/PNGDSP%202010%202030.pdf" rel="nofollow">here</a> and <a href="http://dl.dropbox.com/u/6190378/MTDP%20final.docx" rel="nofollow">here</a>. Will PNG follow a similar path to Malaysia or Nigeria, or muddle through? I hope it is the former, and that's why we need a full discussion of policies, implementation and accountability.

Terence's piece gets right to the heart of a serious issue that confronts all donors, including NGOs. The DAC has created a beauty parade by publishing data on the proportion of each donor's ODA that is spent on management; donors respond either by cutting their management costs or, as Matt has pointed out, by massaging the figures to hide some of their management costs. And some NGOs try to attract more contributions by touting their relatively low spending on management. Yes - every cent spent on management means one less cent spent directly on the poor. And some bureaucracies are bloated. But let's get this in perspective. If I'm told that an airline can charge low fares because its overheads are low, I'm immediately prompted to wonder whether the low overheads include cutting corners on aircraft maintenance. The same applies to aid. Some forms of aid can proceed with very low overheads - AusAID could, for example, cut their management costs to virtually nothing: one person to sign cheques to be sent off to recipients. End result - budget spent, overheads virtually zero. That is why budget support is often attractive to donors. But, of course, the overheads have simply been transferred to the recipient government (unless the cheque simply goes into a Minister's Swiss Bank account). So let's get the business of "small is good" in proportion.

At the opening of the Regional Development Forum in Lae last Thursday the former Treasurer and local Member, Bart Philemon, highlighted the great skepticism with plans in PNG, listing a long series and their serious lack of application and complete lack of subsequent evaluation, to provide feedback to subsequent planning. I was able to point out that there had been a review of the MTDS 2005-2010 (a strategy which had provided some useful focus but could have been markedly more effective if applied more seriously notably with tangible resources); however, the review (undertaken by ANU's Ron May) never saw the light of day, with it's presentation being cancelled on the morning it was meant to be held! once again a valuable opportunity for consultation wasted, but again an apparent fear of constructive criticism, or perhaps feeling that the process was irrelevant, as a newer model of plan was now being launched....which all smacks of a serious discord not only between some central planning agencies with the wider public, but also with the other Government agencies, which needs to be addressed if resources are to be planned and managed more effectively in future.