Comments

Terence, Thanks for sharing a thoughtful post on 'comparative advantage' in aid. I must admit that the use of the term is a pet hate of mine, but not for the reasons in your blog--it's because it gets used incorrectly. Having a comparative advantage is not the same as being the best at something. In fact, a country can be absurdly inefficient at doing something, but so long as it is relatively more efficient at doing that than something else, then it has comparative advantage. This is quite a tricky concept, and one which Samuelson described as one of the few in economics that is both surprising and true. (A much better explanation of comparative advantage can be found <a href="http://www.econlib.org/library/Topics/Details/comparativeadvantage.html)" rel="nofollow">here</a>.) Given that comparative advantage is about opportunity costs rather than 'best', identify specific examples is fraught with difficulties when we move from theory to practice. (I'd argue that planners should avoid trying to do this altogether). In Andrew's examples, it might be possible to assess whether Australia is good at mining and agriculture in aid, but virtually impossible to assess the opportunity cost of that focus. However while I think that identifying ex ante where a country's comparative advantage lies is problematic, you're conclusion 'find out what is needed, and what aid can realistically achieve, and then source the solution from wherever in the world it can be obtained reliably at the best price' is much closer how trade theory predicts that comparative advantage arises in practice. In this regard, I'd agree with Andrew that there does 'need' to be more attention on managing mineral booms, for example by considering the Natural Resource Charter. Conclusion: comparative advantage is important for aid, but if a country wants to find it, then let the market lead it there.

The question of who will be the next Prime Minister in PNG politics is critical for the people of PNG as we approach the 2012 general elections. The only person in parliament today that is capable of taking over the highest post is Sir Mekere Morauta. To be PM, it requires a lot to consider in a person. Ordinary politicians cannot be appointed to that highest post. I believe with Sir Mekere’s credentials, he can take over easily from Sir Michael Somare with much consideration of PNG’s economic growth achieved by the National Alliance Party led Government. Sir Mekere Morauta was PM previously, he was former Governer to Bank of PNG, he has a good track record in politics and he is more mature in a political sense. PNG has a good number of potential future PM’s being groomed today such as Don Polye, current Acting Prime Minister Sam Abal and Sir Puka Temu to name a few. However the time is just not yet right for these young leaders. With due consideration to Sir Julius Chan as being an alternative for the PM post, Sir Mekere Morauta should be the next PM to take over from the Grand Chief. Thankyou. Nigel

Reading this from Jakarta -- working in the early stages of implementing a policy advisory project for the Indonesian Government -- the suggestions outlined here seem clear and (as Jane Thomason says) music to the ears. Perhaps the key point that seems striking from the field is that the IMPLEMENTATION of an activity in the aid game is often much harder than the initial THINKING about the program. To put this another way: IDEAS are the easy bit; it's the IMPLEMENTION that is hard. Pritchett and de Wiejer talk of "isomorphic mimicry" and "premature load bearing". A simpler term sometime used in the aid literature is the "implementation gap". This is the the gap between the resources needed to implement an aid activity and the resources that are really available. Advisers in the international aid community often don't seem to think clearly (or even measure) the implementation gap. As just one example of this gap in capacity, consider the resources available to the Australian and Indonesian governments. Julia Gillard is able to spend, each year out of the annual Australian budget, around $15,000 per person across Australia in implementing the Australian Government's programs. In contrast, President Susilo Bambang Yudhoyono has around $500 to spend per person in Indonesia. The difference in capacity is huge. The ratio of 30:1 (15,000:500) is one measure of the implementation gap in Indonesia. It's a very real gap. Let's hope Sandy Hollway's Aid Advisory Committee discusses it.

Dear Professor Leigh, Thank you very much for your excellent thoughtful piece. One of the most cohesive contributions I have read in a while. I agree with virtually all that you write but do want to add a couple caveats for discussion. Firstly, I definitely agree about Australia's niche in mining and the obligation of the Australian government and extractive companies to support mining governance in developing countries. There is much that Australia can do in that area. At the recent Africa Forum at the University of Sydney, all the senior African visitors (ministers and other officials) cautioned against Australia seeing Africa solely as a mining bonanza but called for a more varied engagement. McKinsey and others have called African economies "Lions on the Move" with a middle class larger than that of India. We wouldn't want African economies to be as dependent on mining as the Australian economy - that's not a great model to follow with a view to long term sustainable development! Secondly, as a researcher myself, I am very supportive of randomised trials. The trials for new medical products or for cash transfers have been excellent. But not all aid interventions are easily evaluated through randomised trials and we should not ignore all evidence that is not evaluated such. Trials are good for new interventions or one-sector endeavours but complex multi-sectoral interventions or policy interactions such as sector-wide approaches are not easily examined through randomised trials. There is an increasing trend to rely on randomised trials but I caution about going too far and trying to shoehorn all evidence into one expensive evaluation method.

Great article Matt, and in identifying governance as the core issue you really nail the challenge. This is so often the nub of the matters raised by PNGean contributors to <a href="asopa.typepad.com/" rel="nofollow">PNG Attitude</a>.

Excellent, finally somebody with the guts to say that we need to move away from the "dutch disease" argument that seems to pre-occupy so many minds in the donor community and get to the core of the issue - how will the plans be implemented. Every country has the right to determine its own plans, whether we agree with them or not, the issue is whether the systems are in place to implement those plans or not. Sadly, I fear the debate will continue to be crowded out by "wannabee" leaders from the academic and donor communities who will come up with ever more ingenious ways to spend the money “if they were only put in charge” and very little attention will go helping the local administration to effect the policies of the leaders.

Hi Alec, Thanks for your comment, and good to hear from you. Could you post a link to the ODI paper? I would be very interested in reading it, as the findings sound quite different from those in most the studies of economic growth and poverty reduction. The chart from the Kraay paper, which I discussed last week, provides a bunch of examples of growth episodes being associated with poverty reduction (all those dots in the bottom right quadrant). The chart is here: https://devpolicy.org/should-aid-focus-on-economic-development/poverty-growth/ It's not just neoliberal's who are pro-growth, it's almost everyone from the neo-liberals to their critics like Stiglitz, Rodrik and Wade. And this is for good reason, in very poor countries, economic development really does seem to be associated with improved welfare. As I wrote last week, it's not everything and it's not the only thing but, on average, it helps. Poverty and inequality are not the same thing. There are some good reasons to be opposed to high levels of inequality but it's still possible for unequal countries to reduce poverty through growth.

It looks like you are considering both developed and developing countries. However, it is still worth asking (as this is what really matters here) is 'Where in the developing world has economic growth led to poverty reduction?' The most industrialised country in Africa, South Africa, has the highest inequality rates, globally (Gini co-efficient... seemingly exchanging this unfortunate 'top-slot' with Brazil every time these figures are released). In any case, what you are suggesting is essentially the history of so-called 'development' in the post-war era (eg US Pres. Truman's address). It is modernisation theory...industrialism for growth and poverty reduction. But as you seem to indicate in your paper, many economists are firm believers in neo-liberal models to lift countries out of poverty, despite a lack of evidence linking economic growth to poverty reduction, as pointed out in a recent ODI paper.

oh and a couple of papers for those interested in quantitative analysis of aid effectiveness. "Aid and Growth: What Meta-Analysis Reveals," Tseday Jemaneh Mekasha and Finn Tarp: http://www.wider.unu.edu/publications/working-papers/2011/en_GB/wp2011-022/ I think meta-analysis does little more than aggregate the problems of individual aid/growth regressions, but, nevertheless it's interesting to see the much touted Doucouliagos and Paldam findings being challenged. Also, "The Politics of Public Health Aid: Why Corrupt Governments Have Incentives to Implement Aid Effectively" Simone Dietrich, World Development Vol. 39, No. 1, pp. 55–63, 2011, Gated link here: http://www.sciencedirect.com/science/article/pii/S0305750X10001166 Which looks to be a very interesting example of certain types of aid working well in environments when others struggle.

Thanks Owen - I definitely agree, the interesting question is "'which' aid works and for what"? And - consistent with what I've said above - I think it's the height of folly to focus an aid programme on economic development when we don't really know which aid does work for what. Far better to keep our options open at a mandate level, I think, and then let context, experience, research and M&E drive what we do.

I'm not a great fan of cross country growth regressions, whether they are used to 'prove' or 'disprove' the effectiveness of aid. But if I had to summarise the literature, I would say this: almost every time somebody reports looking for a linear relationship between aid and growth, they haven't found one. Almost every time somebody reports looking for a non-linear relationship, they find a small but statistically significant relationship. The interesting question is not 'whether' aid works but 'which' aid works and for what.

Thanks for this post Jon, really interesting. I'd argue that if there is even to be the prospect of democratic elections, media censorship must be addressed initially - obviously any election within such a heavily censored media landscape cannot be considered democratic at all. As it is increasingly clear that current international responses such as sanctions and other measures are not working, can you think of any other strategies to address this (specifically the freedom of the media)? Should the APF look at re-admitting the Fiji Human Rights Commission (contingent upon measures to ensure its impartiality) and increase its capacity to address this and other human rights violations? What else might the Aus govt or other governments / organisations do to remove media censorship in particular?