Planning for Sustainable Development VCC/CGSD EXTRACTIVE INDUSTRIES AND SUSTAINABLE DEVELOPMENT EXECUTIVE TRAINING PROGRAM JUNE 16, 2014 PROF. GORDON MCCORD CENTER ON GLOBALIZATION AND SUSTAINABLE DEVELOPMENT GM2101@COLUMBIA.EDU Today’s Plan 2 9:00am – 11:00am: Using a Differential Diagnosis to Inform Sustainable Economic Policy 11:00am – 11:15am: Coffee Break 11:15am – 1:00pm: Designing and implementing a public investment program Suggested Further Reading 3 Why a Differential Diagnosis 4 Like the human body, society is a complex system Interconnected subsystems Implies that many things can go wrong More importantly, possibility of cascading failures Problems require a differential diagnosis One symptom can have multiple causes Not every fever requires budget cuts Need to identify underlying cause Checklist starting with most likely causes Context and setting is important Monitoring and evaluation crucial Basic Idea of a Differential Diagnosis 5 Audience Ministries of Development, Planning, Education, Public Works, Health, Finance Questions to Answer What is holding back sustained reduction in poverty? Which national programs work? Which don’t? What is missing? Specificity Empirically-based analysis What are the typologies of poverty in the country? Typology of Poverty 6 Who are the poor? Where are they? Urban or rural? Widespread or pockets? Geographic isolation? Social exclusion? Access to services in education, health, transportation? Endogenous cultural barriers? Labor force participation Fertility behavior Sources of income? Targeting of existing national programs Missing national programs Role of NGOs, development partners, private sector? Differential Diagnosis Checklist (see Jeffrey Sachs’ End of Poverty Chapter 3) 7 Where are the Poor? Rates vs. Counts 8 9 Targeting is enormously important for policy direction… how do Jordan’s poverty pockets match the poverty rate & count maps? 10 Where is the Infrastructure? 11 12 Differential Diagnosis for Jordan 13 What are the primary risk factors for poverty? What do the data say? DHS & HEIS household surveys Unemployed women (1.34x) > 5 children (RR: 4.25x) < secondary education (4.82x) Non-Jordanian (1.82x) Amman (0.49x) Mafraq (1.54x) Rural? Differential Diagnosis Checklist 14 Differential Diagnosis Checklist 15 Differential Diagnosis Checklist 16 Differential Diagnosis Checklist 17 -5 0 2 10 C hi le Es to ni a M D C om ro hi i na c n El Pe cico Sa ru an R lv ep B ad ub el or lic aru Jo s rd an Ec ua V do Et iet h r io na pi m a 5 ba ija Az er 15 n But Governance Doesn’t Explain Everything… 18 Corruption and Economic Growth 4 6 8 Corruption Perceptions Index (2003) 10 On Governance Failures 19 Corruption can be frustrating, but is it a cause or a symptom of poverty? Petty corruption (e.g. traffic police) Corruption that hinders private sector growth Permits, ports, customs Remember good management costs money, so good governance might be a chicken-and-egg problem Include in your differential diagnosis only governance failures that are truly pernicious, as opposed to symptoms of poverty Differential Diagnosis Checklist 20 21 22 23 Differential Diagnosis Checklist 24 Synergy of Integrated Interventions 25 Agriculture Water Economic Growth Poverty Reduction Health Education Gender Equity Core Interventions 26 Agriculture and Environment (staple yields, diversification, commercialization, landscape management) Primary Health System (CHWs, clinical care, receiving hospital, safe childbirth, integrated management of childhood disease, homebased malaria control, control of NTDs, HIV, TB, etc.) Education (access, school meals, de-worming, hygiene, curriculum) Infrastructure (water and sanitation, roads, connectivity, electricity, cook stoves, other) Business Development Gender empowerment 27 Empirical Regularities in Development Review some theory on poverty traps Millennium Development Goals Making International Development System Coherent 28 Diffusion of Industrial Revolution 29 30 31 Structural Features within Countries 32 Conclusion: both geography and institutions affect distribution of poverty, across and within countries Basic Mechanics of Capital Accumulation 33 Poverty Trap 34 The Role of ODA in Breaking the Poverty Trap 35 Private & Public Investments in Capital 36 Private sector requires all these forms of capital, which requires public investment! 37 Table 1: Comparative Indicators GDP per capita PPP (2001) Tropical Sub-Saharan Africa South Asia Latin America East Asia and the Pacific Middle East and North Africa 1095 2597 7358 5915 5281 Per capita growth Life expectancy at birth (1980-2000) (2001) -1.1% 3.3% 0.5% 6.4% 0.9% Note: "Tropical Sub-Saharan Africa" refers to 33-country sample defined in text Source: World Bank. 2003a. World Development Indicators 2003. World Bank, Washington D.C. 46.0 62.6 70.6 70.2 68.4 Under 5 mortality rate, per 1000 live births (2001) Population Growth (annual %) (2001) 172.5 95.3 32.7 38.3 49.8 2.3 1.7 1.4 0.8 2.0 Table 3: Governance Indicators Analysis Dependent variable: Independent variables Tropical Sub-Saharan Africa dummy Corruption Perception Index 2003, Transparency International 1980-2000 Growth of GDP per capita -3.27 -3.06 -2.67 -3.40 -3.37 (-6.46) (-6.43) (-6.02) (-6.93) (-6.35) 0.83 (5.19) 38 -0.96 2001 Index of Economic Freedom (-2.72) 2000 Average Kaufman, Kraay, ZoidoLobaton indicators 1.89 (5.87) 1.57 1982-1997 Average ICRG Indicators (5.28) 0.41 1982 Average ICRG Indicators log( GDP pc PPP in 1980) R-squared N (3.84) -2.06 -1.65 -1.74 -1.97 -1.77 (-6.73) (-5.84) (-6.80) (-6.72) (-5.53) 0.58 59 0.45 70 0.58 77 0.59 64 0.54 51 Notes: "Tropical Sub-Saharan Africa" refers to 33-country sample defined in text t-statistics are indicated in parentheses, all coefficients are significant All regressions are ordinary least-squares and include a constant term (not reported) Unreported regressions using more restrictive constant-dollar (PPP) GDP data from Maddison (2001) provided similar results Regressions do not include high-income and ex-soviet countries The Corruption Perception Index relates to perceptions of the degree of corruption as seen by business people, academics and risk analysts, and ranges between 10 (highly clean) and 0 (highly corrupt); the Index of Economic Freedom ranges from 1 to 5, where 5 indicates greatest level of government interference in the economy and least economic freedom; the Kaufmann, Kraay, Zoido-Lobaton indicators are six governance indicators measured in units ranging from about -2.5 to 2.5, with higher values corresponding to better governance outcomes; the ICRG indicators include the average of six governance indicators from 1992-1997, where higher scores reflect better governance (ranging from 1 to 6). Sources: Corruption Perception Index from Transparency International. 2004. Global Corruption Report 2004. Pluto Press, London; Index of Economic Freedom from Miles, Marc, E. Feulner, M.A. O'Grady, "2004 Index of Economic Freedom," Heritage Foundation and the Wall Street Journal; Average Kaufmann, Kraay, Zoido-Lobaton from Kaufmann, D., A. Kraay, and P. Zoido-Lobaton, "Governance Matters II--Updated Indicators for 2000/01," World Bank Policy Research Department Working Paper No. 2722, Washington D.C., 2002; Average ICRG indicators from ICRG (International Country Risk Guide). 2004. available at http://www.prsgroup.com/icrg/icrg.html, GDP data from World Bank. 2003a. World Development Indicators 2003. World Bank, Washington D.C. Table 4: Structural Features of Sub-Saharan Africa Geography % Population within 100 km of coast % Population in tropical ecozones % Population in sub-humid and arid ecozones % Percent population living at low density Health Malaria ecology Infant mortality rate Under-5 mortality rate Total fertility rate Agriculture Irrigated land (% of agricultural land) Cereal yield (kg per hectare) Fertilizer consumption (100 grams per hectare of arable land) Infrastructure Paved Roads (km per 1000 people) Traditional Fuel Use (% of total energy use) Tropical Sub-Saharan Africa Rest of developing world average Statistical Significance 24.9 62.0 81.9 45.2 66.3 34.9 38.7 26.5 *** *** *** *** 13.0 107.6 176.9 5.4 2.5 43.7 58.1 3.4 *** ** *** ** 0.5 1102.0 10.6 2364.6 *** *** 95.0 1606.2 *** <0.1 76.3 4.2 29.2 *** 39 Notes: "Tropical Sub-Saharan Africa" refers to 33-country sample defined in text Averages are not weighted by population For Geography variables, third column refers to statistical significance of the difference in the two averages For other variables, third column refers to statistical significance of 33-country sample dummy in the following regression: structural variable = a + b1(log GDP per capita PPP) + b2(dummy for 33-country sample) Tobit regression used when structural variable is a percentage, otherwise OLS used taking the log of the dependent variable *** 1% significance, ** 5% significance, * 10% significance High-income and ex-soviet countries excluded throughout Sources: Calculated from World Bank. 2003a. World Development Indicators 2003. World Bank, Washington D.C.; Center for International Earth Science Information Network (CIESIN), Columbia University, 2002. National Aggregates of Geospatial Data: Population, Landscape and Climate Estimates (PLACE), Palisades, NY: CIESIN, Columbia University. Available at: http://sedac.ciesin.columbia.edu/plue/nagd/place.; Kiszewski, Anthony, Andrew Mellinger, Pia Malaney, Andrew Spielman, Sonia Ehrlich, Jeffrey D. Sachs. (forthcoming) "A Global Index of the Stability of Malaria Transmission Based on the Intrinsic Properties of Anopheline Mosquito Vectors." American Journal of Tropical Medicine and Hygiene, forthcoming. 40 Table 5: Agricultural Technology and Productivity Modern Variety (MV) diffusion (% of area planted to modern varieties) Sub-Saharan Africa Asia Latin America Middle East and North Africa 1970 1 13 8 4 1980 4 43 23 13 1990 13 63 39 29 1998 27 82 52 58 CGI contribution to Cereal yield (kg per yield growth hectare) % annual growth in % annual growth in cereal yield (kg per food production per hectare) capita 1960-1998 2000 1980-2000 1980-2000 0.280 0.884 0.658 0.688 1111.6 3662.4 2809.2 2659.9 0.7 2.3 1.9 1.2 0.0 2.3 0.9 1.0 Note: "Sub-Saharan Africa" refers to all countries in columns 1-5 and in columns 6-8 refers to 33-country sample defined in text. Sources: Columns 1-5 from Evenson, R.E. and D. Gollin. 2003. Crop Variety Improvement and its Effect on Productivity . FAO. Columns 6-7 from World Bank. 2003a. World Development Indicators 2003. World Bank, Washington D.C. Column 8 from FAOSTAT, available at http://apps.fao.org/default.jsp Table 8: Savings rates Gross national saving 1980- Adjusted gross saving 19802001 (% of GNI) 2001 (% of GNI) Tropical Sub-Saharan Africa South Asia Latin America East Asia and the Pacific Middle East and North Africa 41 11.1 20.0 18.7 35.1 23.5 3.0 (1.0*) 18.7 15.7 29.3 9.1 Notes: Adjusted net savings are equal to net national savings plus education expenditure and minus energy depletion, mineral depletion, and net forest depletion. "Tropical Sub-Saharan Africa" refers to 33-country sample defined in text. * We used nutrient depletion indicators and fertilizer prices to calculate Tropical Sub-Saharan Africa's soil depletion to be around 2% of GDP, which would reduce adjusted gross saving to 1.5% Sources: World Bank. 2003a. World Development Indicators 2003. World Bank, Washington D.C.; Soil nutrient depletion calculated with 1999 Sub-Saharan Africa nutrient balance midpoint of 60-100 NPK kg/ha from (Henao, J. & Baanante, C. 1999. Nutrient depletion in the agricultural soils of Africa. 2020 Brief 62, October 1999. Washington, DC, IFPRI. (http://www.cgiar.org/ifpri/2020/briefs)) using 1982-1984 SubSaharan Africa N-P-K depletion ratio of 22-2.5-15 from (Stoorvogel, J. J., E. M. A. Smaling, and B. H. Janssen. 1993. Calculating soil nutrient balances in Africa at different scales. Fertilizer Research. No. 35: 227-335). GDP figures taken from World Bank. 2003a. World Development Indicators 2003. World Bank, Washington D.C.; prices taken from African Agricultural Market Information Network accessed at http://www.afamin.net/regionalenglish/reg_mis_en.asp on 8 March 2004. Inter-Sectorial Problems & Solutions 42 43 Synergy of Integrated Interventions 44 Agriculture Water Economic Growth Poverty Reduction Health Education Gender Equity 45 Break! Implementing Goal-Oriented Development 46 Motivation Poverty traps require capital and technological push (where governance is adequate!) Agreed-upon international financing framework Measure indicators and trend at baseline Identify “on-track” and “off-track” indicators Conduct needs assessment and costing Households Model increased domestic resource mobilization Foreign assistance Calculate foreign assistance gap Is it within means/obligations of donors? Monterrey Consensus (2002) 47 Table 13: Progress towards achieving the MDGs in Ghana, Tanzania and Uganda Ghana Indicator Earliest Most recent MDG Status Earliest Tanzania Most recent MDG Status Earliest Uganda Most recent MDG Status Proportion below national poverty line 31.4% (1992) Prevalence of Child Malnutrition (weight for age) 27.3% (1994) 24.9% (1999) Off track 28.9% (1992) 29.4% (1999) Off track 25.5% (1995) 23.0% (2000) On track Primary net enrollment rate 56.8% (1998) 58.3% (2000) Off track 51.4% (1990) 46.7% (2000) Off track 87.3% (1997) 109.5% (2000) On track Ratio girls/boys in primary and secondary education 85.8% (1998) 88.2% (2000) Off track 96,8% (1990) 98.9% (2000) Off track 88.3% (1998) 88.9% (2000) Off track Under-five mortality rate (per 1000) 126 (1990) 100 (2001) Off track 163 (1990) 165 (2001) Off track 165 (1990) 124 (2001) Off track % with access to improved water supply 53% (1990) 73% (2000) On track 38% (1990) 68% (2000) On track 45% (1990) 52% (2000) Off track % with access to improved sanitation 61% (1990) 72% (2000) On track 84% (1990) 90% (2000) On track 51.1% (1991) Source: World Bank. 2003a. World Development Indicators 2003. World Bank, Washington D.C. 55.0% (1993) 79% (2000) Graphically… 48 Needs Assessments 49 50 Issues to Consider 51 Capital vs. Recurring Costs Total vs. Incremental Resources Marginal vs. Average Costs Disaggregate target populations if possible Synergies Especially in the health sector Financing Appropriate fees (e.g. lifeline tarrifs) Int’l Consensus: no fees for basic healthcare and primary education Absorptive Capacity Constraints Investment opportunities Distinct from bad governance 52 Estimating Financing Gaps 53 Table 15: Estimated ODA Requirements for Ghana, Tanzania and Uganda to Achieve the MDGs Country ODA p.c. in 2001 ($) Estimated % of Implied MP estimate of Implied total Implied Average current ODA current p.c. ODA p.c. ODA current estimated Minimum estimated as ODA going required to required shortfall in GDP p.c. over estimated ODA going to MDGs to MDGs ($) meet MDGs ($) p.c. ($) ODA p.c. ($) 2004 - 2015 as % GDP (a) (b) (c)=(a)*(b) (d) (e)=(c)+(d) (f)=(e)-(a) (g) (h)=(e)/(g) Ghana 29 50 14.5 50.0 64.5 35.5 313 0.21 Tanzania 41 50 20.5 62.0 82.5 41.5 362 0.23 Uganda 43 50 21.5 48.0 69.5 26.5 340 0.20 Sources: Simon, David. 2003. "Official Development Assistance and the Millennium Development Goals." A report prepared for the Millennium Project Secretariat. (Authors' calculations) 54 55 56 Table 16: Estimated Budget Support to Sub-Saharan Africa From Bilaterals ODA Disbursements to Sub-Saharan Africa, 2002 Grants Gross Loans Gross ODA Subtract: Technical Cooperation Development Food Aid Emergency Aid Debt Forgiveness Grants Support to NGOs Sub-total Gross ODA paid into gov't budgets Principal Repayments actually made Interest Payments Estimated Budget Support Budget Support as % of Total Support Source: Brian Hammond, DAC, OECD, personal correspondence Note: Supports to NGOs based on DAC estimates "Sub-Saharan Africa" refers to all Sub-Saharan African countries. From Multilaterals Total ODA 11,532.51 779.15 12,311.66 3,241.36 5,418.75 8,660.11 14,773.87 6,197.90 20,971.77 -3,344.13 -362.85 -1,272.15 -2,961.45 -437.11 3,933.97 -541.23 -96.87 3,295.87 27% -487.17 -108.39 -652.47 -286.86 -3,831.30 -471.24 -1,924.62 -3,248.31 -437.11 11,059.19 -2,094.58 -579.83 8,384.78 40% 7,125.22 -1,553.35 -482.96 5,088.91 59% Incoherence in International System 57 Bilateral Donors USAID, GTZ (Germany), JICA (Japan), DfID (UK) Global Multilaterals World Bank, Global Fund to Fight AIDS, TB and Malaria Regional Multilaterals Asian Development Bank, Inter-American Development Bank Foundations Gates UN System (not big donors, but they house sector knowledge) FAO, IFAD, WFP, WHO, UNICEF, UNFPA, UNDP, UNEP, UN-HABITAT IMF & Finance Ministries Set Macroeconomic Framework & Budgets! Are they oriented to meet the MDGs? Goal-oriented planning vs. “do the best you can with what you have” Cutting Ghana down from $75 to $6 MDG-Based PRS 58 Every country has a national poverty reduction strategy “PRSP” serves as basis for World Bank & IMF programs Country-driven, results-oriented, comprehensive, partnershiporiented, and based on longer-term perspective Macro framework, ODA, budgetary ceilings set independent of needs Make them goal-oriented & work backwards from goals Helps transparency & accountability Makes planning practical and clarifies tradeoffs 3-5 year MDG-based PRSs should be within a 10-year framework for action Public investment & budgetary frameworks Especially for public sector management strategies which take time to implement Local communities & NGOs involved in service delivery & oversight MDG-Based Poverty Reduction Strategy 59 Transparent, Integrated & Consultative Process 60 MDG-based PRSs developed in an open process Domestic & foreign stakeholders MDG strategy group chaired by national government Bilateral & multilateral donors UN agencies Provincial & local authorities Domestic civil society leaders (including women’s orgs) Thematic working groups Designate MDG coordinator (in MoP or MoE) integrates work MDG-Based System 61 Differential Diagnosis Investment Plan Financial Plan Donor Plan Magnitude Timing Predictability Harmonization Public Management Plan Decentralization Training Information Technologies Measurable Benchmarks Audits Monitoring & Evaluation Quick Wins 62 High visibility & high impact to catalyze change, e.g.: Agroforestry techniques to triple yields in nitrogen-depleted soil Fertilizer distribution programs Anti-retroviral drugs for HIV+ population Long-lasting insecticide treated bednets to fight malaria Eliminate user fees for uniforms, schools, clinics Free locally-sourced school meals programs Free annual deworming campaigns Example: Malaria & CHW Program 63 Health Burden 64 Chronic vs. Infectious Disease Example: Malaria 65 Cerebral Malaria 66 Malaria’s Burden on Society 67 > 1 million deaths, up to 1 billion cases Children School absenteeism, cognitive detriment of parasitaemia Reduced education attainment, literacy (Barreca 2007, Lucas 2009) Reduced adult productivity (Bleakley 2010) Adults Reduced productivity due to anemia Labor absenteeism Cost of child replacement Within-country displacement Demography Child mortality delays demographic transition (McCord, 2011) Macro Effects via FDI, Tourism Cross country evidence on income levels (Cartsensen and Gundlach) and growth (Sachs) Malaria & Economic Growth 68 Malaria Control 69 Components of a Fully-Deployed Program Mass distribution of bed nets Mass availability of ACTs Mass training of community health workers Improved rapid diagnostics Indoor Residual Spraying Coordination with other “neglected diseases” such as eukaryotic infections (LF, oncho, ascaris, hookworm . . .) Calculating Costs… 70 African Population Distribution 71 Year 15 20 14 20 13 20 12 20 11 20 10 20 09 20 08 20 07 20 06 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 20 2005 US$ (millions) 72 Costs (all Africa) Malaria Intervention LLINs IRS Microscopy RDT CHW Human Resources ACTs Other drugs Severe Malaria IEC Monitoring & Evaluation Global Overhead Costs 73 Table 2: Cost Estimates: Totals (millions of US$) LLINs IRS CHW Microscopy Human Resources RDT ACTs Other drugs Severe Malaria IEC Monitoring & Evaluation Global Overhead Costs Total Total per total population (dollars) Total per person at risk (dollars) 2006 700 223 645 28 677 40 139 26 54 7 178 272 2,989 $3.28 $4.45 2007 770 187 660 28 693 33 214 13 45 7 186 284 3,119 $3.35 $4.54 2008 854 191 676 29 709 25 270 0 34 7 196 299 3,290 $3.46 $4.67 2009 58 195 692 30 726 26 276 0 35 8 143 219 2,407 $2.48 $3.34 2010 199 200 708 30 743 26 283 0 36 8 156 239 2,628 $2.65 $3.56 2011 760 204 724 31 760 27 289 0 36 8 199 304 3,343 $3.30 $4.43 2012 831 209 741 32 778 27 296 0 37 8 207 317 3,483 $3.37 $4.51 2013 916 213 758 33 796 28 303 0 38 8 216 331 3,640 $3.45 $4.61 2014 121 218 776 33 814 29 310 0 39 9 164 251 2,762 $2.56 $3.42 2015 Average 263 547 222 206 793 717 34 31 832 753 29 29 317 270 0 4 40 39 9 8 178 182 272 279 2,987 3,065 $2.72 $3.06 $3.62 $4.11 Basic Arithmetic of Extreme Poverty 74 Per capita income of $300 (or less) Government revenues of 15% of GNP or less Therefore, Government Revenues of $45 per capita per year, to cover: President and parliament, public administration, military, police, roads, power, rail, ports, water and sanitation, primary and secondary education, higher education, environmental management, climate change adaptation, courts and judicial system, and HEALTH. In the high-income countries, per capita income is $40,000 and government revenues are around 40% of GNP, meaning $16,000 per capita per year. 75 Intervention Strategies 76 • Deploying Scalable, Replicable Proven Interventions • Combining Health Sector and Non-Health Sector Interventions • Combining Prevention and Treatment • Empowering Households 77 Commission on Macroeconomics & Health found that 87% of the world’s poor do not live the most highly constrained institutional settings (p. 71) Success of Vertical Programs 78 Useful when systems are weak Effective for Malaria (national campaigns, specialized knowledge) TB (DOTS) HIV/AIDS Human Resource Challenge 79 Training Coverage in Rural Areas Salaries and Brain Drain Community Health Worker Strategy 80 81 82 Reasons for Optimism 83 Aid for Health and Population 10 9 8 7 6 5 ODA (2006 USD billions) 4 3 2 1 0 Concluding Thoughts 84 Development planning & financing is a little incoherent Goal-oriented planning built on solid interdisciplinary science, followed by needs assessments, financial frameworks and gap analysis ensures coherence Concluding Thoughts 85 During the diagnosis, look for the deep answers - Beware of the “easy” explanations - Corruption Cultural Problem (e.g. laziness) Talk to everyone - Community members NGOs Other implementing bodies (e.g. microlenders) Government (education, health, infrastructure, tax policy, subsidies) UN Agencies (expertise, implementation) Concluding Thoughts 86 The span of relevant knowledge is vast! - - - Economics Epidemiology Public Health Public Health Business Political Sci. - Agronomy - Education - Law - Finance - Engineering - History Few people (if any) have all the skills Form good teams to inform your diagnosis and your work! Concluding Thoughts 87 Partner with academics in your country & abroad - Analytical capacity Fresh, impartial viewpoint New methods