Comments

Dear Laurence, Thanks for this post. Unfortunately I cannot attend today's lecture, which I am sure will be great. I support your call for stronger social safety nets. However, there is a methodological concern with your paper which is not addressed in the text. The paper presupposes that the International Poverty Line of USD 1.25 2005 PPP is a) morally plausible and b) current data collected to populate this poverty measure are reliable, comparable across context and over time, etc. But the Bank's methods are deeply suspect. First, the method of setting the IPL simply averages the national poverty lines of a 'representative' set of poor countries. There is no underlying conception of basic needs or human capabilities that justifies setting the poverty line at that level. It is therefore theortetically possible and in fact empirically quite likely that one can receive USD 1.25 2005 PPP and not be able to satisfy even her most basic food needs. This can be seen most clearly simply by thinking about what one could purchase with USD 1.25 in the United States--certainly not enough to meet basic needs. Even more problematically, the Bank's method requires calculation of purchasing power parity between currencies. This requires a PPP conversion between currencies, and CPI conversion within a currency to a given base year. Because both the CPI and the PPP calculations take account of all goods consumed in a society, rather than simply those goods that are most relevant to poor people, the Bank's figures do not represent the true purchasing power of poor people. If the price of big screen televisions goes down and the price of rice goes up, both affect the Bank's estimation of poverty levels, even though one piece of information is clearly irrelevant to the consumption of poor people. A useful recent volume, Debates on the Measurement of Global Poverty, covers these issues in depth. See also www.socialanalysis.org. Your projections of rapid poverty reduction during the period 2005-2010 will thus inherit the flaws of the Bank's approach. One reason to be skeptical of your claims of rapid poverty reduction in the period 2005-2010 is the impact of the food crisis. The rapid rise in the price of cereals and other basic foodstuffs during 2007-2008 certainly weakened the purchasing power of poor people and increased hunger. The FAO estimates between 2005 and 2010 there was an increase in the number of undernourished people worldwide, with no significant change in the proportion of undernourished people. Conceptually, it just cannot be the case that poverty is rapidly reducing at historically unprecedented levels and hunger is unchanged, or even getting worse. Thanks.

Dear Skip, You make a good point--the SWF will only be as good as it's administration. Funds have been raided in the past and the risk of this happening again is high. That's why the NRI wants constitutional protection for the SWF. My view is that SWF is not panacea and will be vulnerable, and that the bigger question, that the SWF doesn't answer, is how will mineral revenues ultimately be spent? Here are a few ideas to think about. - If services aren't reaching rural areas, how about using mobile phones to make cash payments instead and/or crowdsource feedback on service delivery? - If government is unaccountable for how it collects and spends mineral revenues, how about direct distribution to PNGeans, along the lines that CGD's Todd Moss is proposing in Africa? What else can be done to improve accountability? - If discretionary funds are more vulnerable to being raided, how about locking in spending that will make a difference (l.t contracts for maintain roads, manage health facilities etc.)? SWF is a good idea, but it is not sufficient and has a high risk of failing to achieve its objectives. We need more discussion on what else is needed.

I'd underline a point implied. "PNG Government expects to ... deliver a balanced budget this year, excluding trust fund drawdowns... in 2010 much of the windfall revenues from high commodity prices were spent on discretionary capital spending" Yes, good to see PNG establish a sovereign wealth fund. But the effectiveness of such a measure lies in its administration. There is a real question whether the discipline will be there to avoid raiding the fund at inappropriate times.

Thanks Robert, That's a very interesting comment. I'm travelling at present and struggling to get on the internet. I'll aim to reply at length next week.

‘Missing the Big Picture on Corruption?’ is an excellent title for the really good analysis that Matt has written, above. I want to suggest, however, that we urgently need to ask questions in a rather different way to highlight the answers we need on aid policy, good practice in aid and aid effectiveness. A major obstacle to understanding aid effectiveness is that much of the discussion, analysis and reporting is, indeed, ‘big picture’. I suggest the picture is both too big and uses only one lens. We urgently need to narrow our focus and ask ‘smaller picture’ questions that look at specific sectors, in specific countries, and at a particular time and stage in their development. To put this proposition another way in the form of two questions: ‘1. Can we really generalise from the experience of (say, for example) agricultural development in Kenya, to security in Pakistan, to health in Laos, law reform or education in Indonesia? 2. Who is doing the generalising?’ In answer to 1, I think some ‘big picture’ approaches can be helpful in broad strategic issues, as some of the references cited above by Matt demonstrate. The important works by former World Bank economists Steve Berkman in ‘The World Bank and the Gods of Lending’ (Kumarian Press, 2008) and William Easterly in ‘The White Man’s Burden’ (Penguin, 2006), clearly demonstrate this big picture approach as well. To answer 2, these big picture approaches are often, possibly usually, written by development professionals with a major background in economics. Because of this, they can miss the important conceptual and technical details that underpin aid outcomes in different disciplines and in different contexts. The debates around aid need more balance and more inputs from discipline-based professionals such as agriculturalists, security specialists, doctors, nurses and health professionals, and so on. What we hear, I believe, is ‘the sound of one hand clapping’. And that is the hand of the development specialists with expertise in economics. These specialists undeniably bring their own unique and important sets of skills and approaches. But we need more of ‘the other hand’, the discipline-based development specialists in agriculture, health and education, with specific country experience, if we are to hear a fuller message. I suggest that we also need to add the important contributions that anthropologists can bring. A significant contribution from this discipline in Indonesian education was a study by Christopher Bjork, ‘Indonesian Education: Teachers, Schools and Central Bureaucracy. New York: Routledge, 2005. What Bjork discovered was very significant for educational development, and it was this: Teachers' conception of their responsibility, at the time of the study in the late 1990’s was to the state: to the process of nation building and establishing government authority rather than to parents or to students for educational and learning outcomes. Duty as a civil servant to develop a culture of obedience was considered to be of far greater importance than responsibility as an educator. In other words, schools were seen by teachers mainly as institutions to develop patriotic citizens rather than educated citizens. The study also picks up an issue I identified above about particular times and stages in development. Since the late 1990’s, Indonesia has changed fundamentally from an authoritarian dictatorship to a robust democracy. Has this changed teachers’ conceptions? I do not believe we have clear empirical evidence to answer this question although field experience suggests that much has changed and especially among younger teachers. In a subsequent blog, I intend to address some of the educational development issues in Indonesian education. <em>Robert Cannon is an education development specialist who has worked in this field in universities and in the aid sector, particularly in Indonesia, since 1974.</em>

Thank you for this post. A world free of poverty seems so idealistic, and yet, as you say, we are getting closer to the day when it is reality. It will be a grand day, and I hope a day I live to see. Please continue writing about the global social safety net!

Yesterday's stories about fraud in AusAID projects were 'shock-horror' stories and certainly brought out a lot of negative comments that are potentially very damaging to public support for foreign aid. The stories, I agree, do illustrate Terence's point about negative stories in the media. I also agree that they diminish AusAID's achievements in fraud detection and management. For those who worked hard to achieve that result, it must be very galling indeed. On the other hand, I am sure that if they had a voice, the poor and other intended beneficiaries would be happy to see such exposure of corruption. In answer to Terence, yes, I do recall Adelaide's Sunday Mail running a good news story about the AusAID project in Flores, Indonesia, but that was back in 2002. Since then, I have not been a regular consumer of Australian newspapers having been in Indonesia almost continuously. So, I would agree that the balance appears to be on the negative side. Yet, I still feel very uncomfortable about the issue. There are two reasons for this. First, it does not seem entirely reasonable "that the media should be focusing on the overall effectiveness of Australian aid – how it makes a difference to the lives of people in poor countries and what can be done better" when, at the same time, the donors have not vigorously promoted their own successes in the press, and worse, neglected them in their own subsequent projects. To cite some cases of this neglect: the successful AusAID projects in NTT, the NTT-Primary Education Partnership (NTT-PEP) and in East Java, the Indonesia-Australia Partnership in Basic Education (IAPBE) were not scaled up in either the now concluding Australia Indonesia Basic Education Program nor in the new Education Sector Support Program (ESSP). This is despite the fact that they built on an earlier sequence of very successful projects, in the case of IAPBE this was USAID's Managing Basic Education Project. IAPBE, in turn, contributed to later projects including the EU project implemented by UNICEF, the Mainstreaming Good Practices in Basic Education Project (MGPBE). Having funded MGPBE, which was largely intended to verify and disseminate good practices developed and implemented in Indonesia by Indonesians -- at Government of Indonesia request -- the EU, which is a partner of Australia in the new ESSP has, along with AusAID, turned its back on the success and future-oriented lessons learned from MGPBE (and earlier & current projects) and embarked on a new project that seeks to implement, yet again, developmentally weak and problematic strategies from the past. This use of weak and problematic strategies leads to my second point: it is these weak strategies -- particularly, the top-down approach, school construction, and large scale training -- that provide just the opportunities for corruption that are far less likely to occur, if at all, in the good practice projects named previously here. To reiterate my point from yesterday's comment: "The potential to really damage the generosity of taxpayers and donors is not media negativity, but the incompetence and corruption of both ‘givers’ and ‘receivers’ in the wider aid industry." Why create unnecessary opportunities for corruption and fraud at all? Is it because these 'big' strategies of construction and large scale training are an effective way to move huge sums of donor dollars quickly and to 'look good'? If such weak strategies are to be used, then don't shoot the messenger when things go wrong!

Hi Robert and Matt, Sorry for my delayed and brief reply - I'm havin internet issues. To clarify my position: 1. Yes the media should report bad news stories about aid. but 2. If the public is ever going to have a full understanding of aid it needs to also hear of the slow and qualified, but real, achievements too. This clearly doesn't happen enough. and 3. The media needs to be responsible in it's reporting. As Matt mentions the latest round of stories sounds like a beat up. This will hardly be the first time. Robert, I have a question for you: your article on schools was published in the Australian, while your more positive article was published in the JP. Can you ever recall the Australian running a positive story on aid? Or any of the Australian Murdoch owned papers for that matter?

Robert, Thank you for sharing an interesting perspective on the role of the media in ensuring greater accountability of aid programs and in partner countries. The media beat up today on aid fraud highlights the point that Terence makes about the media having a scandal and pessimism bias, rather than objective critics of the aid program. AusAID has an excellent track record on controlling corruption in aid and doesn't deserve shock headlines such as 'Millions lost in AusAID foreign aid scam' or 'Foreign aid program stifled by corruption'. The numbers in their own stories don't even back up the headlines! http://www.news.com.au/national/millions-lost-in-foreign-aid-scam/story-e6frfkvr-1226027078871#ixzz1HUrtUcAg http://news.ninemsn.com.au/national/8228294/foreign-aid-program-stifled-by-corruption That AusAID is transparent about the 175 cases of fraud and keeps levels of malfeasance to such low levels--0.017 of 1 per cent of the $20 billion that was spent between 2003 and 2010--are very much to the credit of the aid program. Rather than beat up non-stories, the issue that the media should be focusing on the overall effectiveness of Australian aid--how it makes a different to the lives of people in poor countries and what can be done better. It's a shame that today's stories suggest that some of Australia's press isn't yet willing to provide 'high quality evidence' for this kind of analysis, and that's bad news for both the aid program and our democracy.

Terence Wood laments that he does not know what the solution is to ensuring that good news stories about aid get more media coverage than those reporting the failures and the problems. I share this concern. It was mainly because of this concern that I wrote, with a colleague, a really ‘good news’ story in 2007 about successes in an Indonesian education project supported by USAID, the Managing Basic Education project, (http://www.thejakartapost.com/news/2007/04/07/cherishing-wonder-indonesian-schools.html). That story attracted no comment whatsoever! In contrast, the critique I wrote about Australia’s planned aid to Indonesian education and the potential for waste in The Australian on 10 January this year (http://www.theaustralian.com.au/news/opinion/thats-no-way-to-aid-indonesia/story-e6frg6zo-1225984624088 ) continues to attract comment and citation, including in the blog by Terence Wood. Negative newspaper reporting reflects the way the media world operates. To take Indonesian education as an example, day-by-day millions of children attend schools supported by development partners, they receive enhanced tuition in better-managed schools, and countless small miracles are performed in classrooms by dedicated teachers that are never recognised, never reported. Why? Because it is expected that these kinds of outcomes will be achieved and so they are not newsworthy. However, when there is evidence of malpractice, incompetence, corruption, and evidence that plans are not achieved the media takes a much greater interest. This media interest is essential in a democratic system, especially in a young democracy like Indonesia. The Indonesian press is currently doing a very good job of this kind of reporting and casting light into the dark corners of malfeasance that have been under-reported for far too long, thus allowing the corrupt and the incompetent to lead very comfortable lives at the expense of the poor in their own communities. Corruption is also discussed in the international media, for example, in the recent edition of The Economist (http://www.economist.com/node/18399113?story_id=18399113). Terence rightly notes this important watchdog role for the media. Currently, the Indonesian press is highlighting the failure of the majority of Indonesia's District governments to distribute funds to schools (http://bectrustfund.wordpress.com/2011/03/19/sanctions-await-regions-over-delayed-bos/) and has reported that the Ministry of Education has now been referred to the National Ombudsman by Indonesia Corruption Watch over this matter (http://bectrustfund.wordpress.com/2011/03/22/govt-mismanages-bos-fund/ ). Yet it is these same districts and central government agencies that are meant to be organising themselves to manage and participate in the big, new Australian project. Why should we have any confidence that Australia's Indonesian partners will be able to do this when this current matter, and other field experience, suggests that it is unlikely? Does this kind of ‘negative’ reporting not tell us something important about Indonesian government administrative competence that can feed into Australian plans and strategies? My hunch is, and I have no empirical evidence for this at all, that media reporting of aid is now also much greater in Australia than at any time in the past. This kind of reporting is almost certainly the case in Indonesia since the overthrow of Suharto. Whether this hunch is correct or not, I do believe that a much earlier public awareness of the issues around aid may have prevented some of the worst of aid failure of the kind documented by Steve Berkman in The World Bank and the Gods of Lending (Kumarian Press, 2008) and by William Easterly in The White Man’s Burden (Penguin, 2006), and provided a better chance for millions more to graduate from poverty – and very much sooner – than has been demonstrably achieved to date. Yes, I agree with Terence that a lot of aid has worked. What I am saying here is that greater exposure and public discussion of the failures and successes might have led to better outcomes in developing countries a lot sooner. I suggest that the evidence supporting this position is illustrated by the fact that donors are still providing development funds to countries like Indonesia more than 60 years after aid began! Australia’s support for development in Indonesia has continued and dates back to at least the inception of the Colombo Plan in 1950 (see: Auletta, A. [2000]. A retrospective view of the Colombo Plan: Government policy, departmental administration and overseas students. Journal of Higher Education Policy and Management, 22, 48-58.) I do not see the issue of aid-induced pessimism in quite the same way as Terence. If such pessimism leads to the kinds of extreme reaction we have seen by some to stop aid, then I do have concerns with it. If it causes aid to be ‘more prone to being withdrawn in times of fiscal stress’ – and if that aid is poorly conceived and implemented – perhaps it should be withdrawn. How do we justify spending money on aid because it feels good or is seen as ‘the decent thing to do’? But if the pessimism causes the aid industry and political leaders to be more professional in the way they use the available evidence to support and carry out high quality, high impact programs, then newspaper pessimism is a potential force for good. The potential to really damage the generosity of taxpayers and donors is not media negativity, but the incompetence and corruption of both 'givers' and 'receivers' in the wider aid industry. The media can play a major watchdog role in demanding more robust and evidence-based strategies for development than some strategies we have seen proposed for Indonesia in the recent past. But herein lies another fundamental difficulty – where is the high quality evidence of what works or otherwise in specific sectors? Why have donors generally been loath to undertake and publish rigorous, independent and continuing research and evaluation of how aid works in specific sectors such as in Indonesian education? Why is independent project evaluation usually such a last-minute, rushed affair without time for more representative data gathering and deeper analysis? And this is not the only challenge. We also need to ask why donors ignore the existing available evidence on what does work. Specifically, in the case of the new Australian education program, both Australia and its partner, the European Union (EU), have ignored the accumulating evidence over the past decade of what works, including from the EU’s own recently concluded and successful project, implemented by UNICEF, the Mainstreaming Good Practices in Basic Education Project. <em>Robert Cannon is an education development specialist who has worked in this field in universities and in the aid sector since 1974.</em>

Thanks Matt - great comment I know blog comment sections are meant to be the domain of feisty debate, but I agree with most everything you say. There is a definite transparency issue here. Saundra, the blogger at good intentions are not enough covers this problem excellently re the NGO sector in a post you can read here: http://tinyurl.com/4hs2fkm And the same is true in the case of government agencies. The irony being in the New Zealand case that NZAID was very diligent about honest reporting of overheads. This, I think, was probably a product of relatively strict public finance rules in NZ and definitely a product of the agency existing in an environment where overheads were monitored but weren't used as a tool for political point scoring. Those were the good old days. Now they're getting whacked as a byproduct of following best practice. If ever these was a good example of a bad incentive structure being set up... Your suggestion about more timely access to aid data is good too. I'm forever frustrated by the fact that here we are in 2011 and the most recent aid data I can get from CRS is provisional 2009 information. The most recent finalised data is from 2008. Of course generating quality aid data requires staff, and software, which need to be funded from -- wait for it -- overheads. And I agree with you that there should always be contestability. In the same way that less isn't always more when it comes to overheads; more isn't inevitably more either. But let's decide on the basis of the best available advice, not a priori beliefs about what the optimal level of overheads should be.

Terence, Thanks for another thought provoking blog. The issue of overheads and the operating efficiency of aid agencies deserves more attention and you highlight some important issues on the costs and benefits of cost-cutting. I have a few additional points. First, how do we know how much donors spend on overheads? Your article quotes 12% of total budget for New Zealand, 4% for the UK. The recent QuODA report, using DAC data on reported donor administrative costs in 2008 as a percentage of country programable aid: New Zealand (14%), UK (8%) and Australia (5%)--making Australia the third best performing DAC donor. A problem with these headline numbers is that they may not be an accurate reflection of the administrative costs of a donors. Australia's reported administrative costs for 2008 (US$101m committed) did not include the cost of a large number of staff funded directly from the aid budget (see <a href="http://www.anao.gov.au/director/publications/auditreports/2009-2010.cfm?item_id=1DE4FFFE1560A6E8AAB11534130FF623#2E6681AB1560A6E8AA8D00A3B5DBB821" rel="nofollow">ANAO report</a> summary para 41) and a lot of country operating costs that are also buried in aid spending. For example, <a href="http://www.aiddata.org/search/results;jsessionid=90B6FAC680472EB48F0781D599275168?recipients=232&keywordSearch=&donors=5" rel="nofollow">aid data for PNG</a> reveals that <a href="http://dl.dropbox.com/u/6190378/%27Multisector%27%20aid%20to%20PNG.xlsx" rel="nofollow">US$43 million</a> was committed in 2008, under the heading of 'multisector aid' for a range of overheads (leasing, residential maintenance, security, local staff)--none of these are reflected in the 5% headline number, perhaps that is the correct accounting approach, but it does need discussion. Second, and related to the first point, donors need to improve aid transparency. Australia is to be commended for the detail of the data that is reported to DAC on it's aid spending, without which the previous observation would not have been possible. But there are a couple of areas where Australia could further improve. 1) It could make the DAC data available to the Australia public in AUD and in line with the Australia financial year. 2) It could make this data much more up to date and publish disbursements. The UK, for example, now publishes it's expenditure data monthly. Thirdly, who is scrutinizing overhead costs? If accounting and transparency are improved, we also need to have an effective way to scrutinize overhead costs--e.g to minimize waste, ensure there is a good business case, identify savings from streamlining processes etc. Some improvements might be: 1) Australia's budget process focuses mainly on new spending initiatives, so perhaps it also needs to look at base spending, including overheads, a bit more. 2) If clear and up to date data is accessible, then it would make it easier for the Australian public and parliamentarians to ask questions about how taxpayers money is being used. Fourthly, I agree with your point that there can be strong business case for increasing some overheads (e.g in fragile states). I'd just add that aid agencies need to clear about the business case for doing this and there needs to be contestability (of ideas and in terms of the opportunity costs). In conclusion, I agree with your main points, and would add that: 1) we don't really know whether donor overhead costs are too high, because we don't really know how big they are; 2) I see aid transparency as an important pre-requisite for better analysis of overhead costs; 3) There needs to be greater scrutiny of all aid spending and overheads; and 4) aid agencies need to be clear about the business case for varying overheads in different operating environments.