Millions of dollars are invested in poverty alleviation programs. Yet experience has shown that successful outcomes depend on more than the best intentions of policymakers or the relative amount of investment. Caring about the political feasibility of reforms is a key variable in the equation as well, according to a recently published IDB study.
Wolfgang Munar and Alejandra González, co-authors of The Political Economy of Social Sector Reforms, assess a series of policy reforms in the Dominican Republic between December 2000 and November 2003. They report that tailoring the reform program to local political and institutional constraints significantly increased national ownership, improved program executability and increased the chances of long-term sustainability and development effectiveness. Assessing and monitoring the political and institutional feasibility of reforms during the design and implementation stages of a set of Bank-financed projects had significant positive effects in this Caribbean island country.
Because reform choices in the social sectors revolve around such complex issues as who is entitled to services, what ought to be the priorities, who will provide the services, and how money will be allocated, the authors say “it is politics that will determine a reform’s final outcome and its impact on society’s general welfare and on poverty alleviation.”
By explicitly assessing the political and institutional threats and opportunities for reforms, the Dominican government and IDB teams agreed early in 2001 on a roadmap for reforms in the social sectors. This approach, plus the combination of the Bank’s current offering of lending and non-lending instruments, has already generated significant results.
The first stage of policy reforms was financed through a US $200 million policy-based loan in combination with non-reimbursable technical cooperation programs and the Bank’s portfolio in the country. During the design and execution stages of the program, the Bank developed a policy toolkit that was helpful to its staff and reformers in borrowing countries in explicitly assessing the feasibility of proposed reforms, and pivotal in their successful execution. Applications of this experience are expected to include using the toolkit in other countries and the design of other projects.
This approach to social sector modernization is an innovative response to the challenges of developing and implementing politically complex reforms. And it is part of an emerging trend: policymakers and donors, who until recently had been mostly concerned with the technical soundness of projects, are now conducting research on the ways in which politics pervades the reform process, its goals and means, and the resulting impact on poverty alleviation.
This has translated into a higher level of engagement in state reform initiatives, authors agree. As a result, donors are seeking to adapt their policies, lending instruments and policy dialogue strategies in order to better support governments in their efforts to improve the equity, quality and efficiency of their social services.
The performance of social sector reform projects will improve if the political and institutional aspects are more prominent when assessing policy options for reform, and if analytical tools can help incorporate this analysis in project design and implementation in a practical way.
This would contribute to embed projects into the political context in which they will be immersed, promoting ownership at the local level. And, according to the study, it would also make the IDB a more effective partner in poverty alleviation.