DEPARTMENT OF ECONOMICS

UNIVERSITY OF DAR ER SALAAM

Lecture Note One General Policy Environment

By Semboja Haji Hatibu Haji
Unedited Training Notes Presented at the EC-664 Policy Analysis Date Monday, October-31-11

1.1.

General policy environment

Tanzania has put in place several national development policies. However, there are some social economic development sectors with no written policies. This should not necessarily be seen as a weakness but rather a challenge to establish a system that will guide public plans, strategies and interventions. The core national development policy aspirations are located within the overall Tanzania Development Vision 2025, Zanzibar Vision 2020, National Strategy for Growth and Reduction of Poverty (MKUKUTA), Zanzibar Strategy for Growth and Reduction of Poverty (MKUZA), the Public Sector, Local Government and Legal Sector Reforms, Business Environment Strengthening Tanzania (BEST), other government reforms and major national development policies and efforts as well as the commitment that Tanzania has made in the regional and international fora on peoples development. For example, Tanzanias commitment to NEPAD Peer Review Mechanism requires it to ensure sustainable sectoral development at home and thereby contribute to the promotion of regional economic, social, political governances. In order to meet the expectations of the public and government long term development perspective, there is need to develop a comprehensive policy that will guide activities of all actors. There is indeed need for a clear direction, evidence led strategies, and monitoring and coordination mechanisms. The roles of actors including the community need to be very well defined. The policy should therefore aim at spelling out the following: a. b. c. d. a clear vision; a clear mission statement; clear definition of goals and strategies including the guiding values and business philosophy; adequate identification of actors and definition of their roles, including a mechanism for people and community involvement in ensuring public safety and security; effective reporting and coordination mechanism; and effective monitoring and evaluation mechanism.

e. f.

The development policies must facilitate proactive and total approach in enhancing public safety and security in the country. Further, public safety and security require constant vigilance. While it can take a few years for small problem to translate into actual crime statistics, keeping an eye on things and intervening early can help maintain public safety and security. Peoples instincts about possible threats to their community are often harbingers of things to come. The development policy should enable public safety and securitys institutions to track safetyrelated problems that people see in their neighborhoods, as well as residents perceived vulnerability to specific crimes, in order to prepare for what may lie ahead. 2

These series of lectures will focus on national development policies, planning and budgeting systems and processes in Tanzania. This first module will focus on the national development policy environment. 2.0. 2.1. First Generation Policy Reforms Major policy objectives and processes

Since the mid 1980s, Tanzania has introduced a series of development policy reforms intended to restore macroeconomic balance, stimulate economic growth and facilitate social and political development. Experience with the first generation reforms in 1986 - 1996 suggests that individual initiative and market-oriented economic systems propel higher growth rates than centrally planned economic systems. These broad based measures included the fiscal, liberalization of internal and external trade, the removal of restrictive tendencies, the liberalization of the foreign exchange market and the institution of a general policy environment, which is more favourable to private sector expansion. Fiscal policy reforms had several dimensions. The government has established the Tanzania Revenue Authority (TRA), which has contributed to increased revenue collections. The government has increased control and cut expenditure using the cash budget system. Civil service and parastatal reform has curbed expenditure and raised revenue. Monetary policy has been strengthened by reorienting the objectives of the BoT to the achievement of low inflation, deregulating interest rates and by raising the reserve requirement ratio. Together the tightening of the fiscal and monetary stance has greatly improved macroeconomic stability. The result should be increased investment and economic growth in the long run. Both national development policy measures have had immediate and short-term negative consequences for investment, employment and poverty. Fiscal restraints have reduced the governments ability to undertake high priority investments in the social sectors, such as education, health, water and in infrastructure. The cash budgeting system has reduced the ability of the government to effectively manage its long term development programs and especially its public investments. And tight monetary policy has resulted in high real interest rates and credit squeeze reducing private sector investment opportunities. Exchange rate adjustment and trade liberalization have increased the supply of foreign exchange and needed (imported) inputs into production. Exchange rate devaluation has increased the incentive to export and invest in exporting activities. The impact of these policies in the short- to medium-run has been mixed. The real exchange rate has appreciated since 1994 again raising the possibility that interest rates are too high. In terms of exports, the greatest changes affected agriculture. Up until 1993, agricultural marketing boards and co-operative unions held a monopoly on marketing and processing major agricultural exports such as coffee, cotton and tobacco. The Crops Boards (Amendment) Act of 1993 paved the way for the entry of the private sector. Their role, however, continues to be constrained by the fact that some residual licensing and regulatory functions remain with the marketing boards. This has prevented the agricultural sector taking full advantage of the exchange rate adjustment.

More generally, while some firms have been able to exploit the opportunities arising from trade liberalization, others have suffered (sometimes fatally) from increased competition. Civil service and parastatal reform improved the efficiency of the public and private sectors in Tanzania. Yet it is clear that both policies have had adverse short-term effects on employment. The increased price (from near zero) of utilities and staple foods had negative effects on the poor. Privatization may be good for private investment but it can be costly for the poor in terms of job losses and increased prices of food and utilities at least in the short run before efficiency benefits are realized. The overall impact of a privatization depended on some extent on the method used and on the post-privatization policy actions. For instance, providing support to displaced workers is politically and socially desirable although it is fiscally costly. In Tanzania, in general little has been done to design programs for supporting displaced workers. Proposals regarding social safety nets, treatment of displaced workers and broadening of share ownership have been made by PSRC. Action on share ownership has taken the form of establishing the Capital Markets and Securities Authority in 1994 leading to the establishment of the Dar es Salaam Stock Exchange in 1998 and adopting the Privatization Trust Fund Act in 1997. The DSE is still narrow with only 4 companies listed while the Privatization Trust Fund is not yet operational. The country shifted from its previous reliance on control mechanisms to a predominantly marketoriented environment and private enterprise development. Significant progress has been made with the development of a more market-oriented financial system with the liberalization of interest rates. A substantial number of both local and foreign banks and non-banking institutions have been established to provide short, medium and long-term loans to the private sector. 2.2. Positive macro-economic performances

There are many people who argue that the overall impact of these reforms on the development has been significantly positive. Tanzania has recorded significant improvement in overall macroeconomic performance since the mid 1980s largely on account of sustained policy actions on stabilization and structural adjustment. Monetary policy has continued to focus on maintaining low and stable inflation, to ensure macroeconomic stability in support of the broader macroeconomic objectives of Government, by maintaining an appropriate level of liquidity in the economy, through a combination of open market and foreign exchange market operations, (URT, 2005b). The annual inflation rate is low at single digit. During the 1985/6 and 1995/6 fiscal policy remained geared towards growth stimulation. On the revenue side, government tax reform efforts continued to produce positive results. The revenue effort increased. The strong revenue performance has mainly been attributed to increase efficiency and effectiveness of the tax systems and administration. 2.3. Poverty on increase

However, critiques argue that these reforms have not been pro-poor and majority of Tanzanians have not been taken onboard, (Semboja, 2002). There are many who argue that the overall impact of past deliberate government efforts have been minimal and recently some poverty indicators show signs of deterioration and increasing income inequality. According to the national data and statistics, the proportion of the population below

the national food poverty line and that below the national basic needs poverty line are high. Poverty remains overwhelmingly in rural areas where 80 percent of the poor population live, and is highest among households who depend on agriculture. There is also a big disparity between urban and rural poverty for both food and basic needs poverty, (Semboja, 2002). Urban poverty is grave especially for households with low and unreliable incomes, the unemployed, urban vulnerable groups and those in the informal sector. Urban poverty has brought to the spotlight stress on urban public facilities and services. Urban poor live in congested, mainly un-surveyed areas, overcrowded residences and on streets (especially street children). The areas lack safe and reliable water and have poor waste management and lighting, (Semboja, 2002 and URT, 2005b). There are few economic opportunities in rural areas, reflected rather as underemployment than unemployment. Official unemployment rate stands at 2.3 million (1.3 million women and 1.0 million men) equivalent to 12.9 percent of the labour force. Employment-to-population ratio (the proportion of the target population that is employed) is 76 percent nationally. The ratio is lower in urban areas (58 percent) than in rural areas (81 percent). Unemployment is worse among the youth, including the educated youth. Employment opportunities for people with disabilities are limited and special support for them in the work place is frequently lacking, (URT, 2005b). Many unemployed are illiterate, unskilled and have limited working experience. Illiteracy remains high. About 28.6 percent of Tanzanians cannot read and write in any language. There is more illiteracy among women (36 percent) than men (20.4 percent). Many poor people, children and women in particular, die without ever accessing a health facility. There exists a huge burden of disease across all age groups. About 90 percent of all child deaths are due to preventable causes - malaria, pneumonia, diarrhoea, malnutrition and complications of low birth weight; and to HIV and AIDS. Above suggests that first generation reforms were incomplete and in such Tanzania was at crossroad. While there were significant improvements in the formulation of national development policies, implementation has not been satisfactory, effective, consistent and acceptable by most key stakeholders, (Semboja, 2002 and 2005). The gains of macro-economic reforms have not been translated to reduction of poverty levels. 3.0. 3.1. Second Generation Reforms Major policy objectives and processes

Based on the experiences of implementation of first generation macro-reforms, the government has been conscious of the need for long term perspective development plans and has made a more comprehensive review of its micro-economic and sector policies to resolve social economic problems, which are still inherent in the sector and to also ensure that the current interest by investors in the economy is enhanced and sustained. These second generation reforms occurred between 1996/7 and 2004/5, when many of these sub-Saharan economies were facing huge debt problems making poverty an important policy issue. Hence, these second-generation reforms are still focusing on macro-micro linkages subject to intensification of first generation reforms in terms of continuation of fiscal, monetary, legal, regulatory and institutional reforms. The second-generation reform policies aim at facilitating pro-poor economic growth as the basis for poverty reduction by putting in place appropriate policies and strategies. These policy strategies promote the creation of enabling environment for good governance, effective co-

ordination and peoples participation; capacity building for enhancing economic growth and equity through a conducive macroeconomic, sectoral (agriculture, industry and mining) and infrastructure (financial, transport, communication, energy (electricity) and marketing) policies and strategies; education, health, water supply and sanitation, employment opportunities, protection and preservation of the environment and housing and settlement. Ideally, a nation's development should be people-centred, based on sustainable and shared growth and be free from abject poverty. For Tanzania, this development means that the creation of wealth and its distribution in society must be equitable and free from inequalities and all forms of social and political relations which inhibit empowerment and effective democratic and popular participation of all social groups (men and women, boys and girls, the young and old and the able-bodied and disabled persons) in society. In particular, by the year 2025, racial and gender imbalances will have been redressed such that economic activities will not be identifiable by gender or race. All social relations and processes, which manifest and breed inequality, in all aspects of the society (i.e., law, politics, employment, education, culture), will have been reformed. 3.2. Broad based national development policies and strategies

The formulation and implementation of the series of sector specific, macro-economic and other broad based national development policies mark the second-generation reforms. These broadbased policies include; National Development Vision 2025 (URT, 1999b National Poverty Eradication Strategy, (URT, 1998b); Tanzania Assistance Strategy, (URT, 1999a);) and Poverty Reduction Strategy Paper, (URT, 2000). 3.2.1. National Poverty Eradication Strategy, 1998, (NPES)

In 1998, the GoT formulated the National Poverty Eradication Strategy, (NPES) providing a long-term framework to guide poverty eradication initiatives in order to reduce absolute poverty by 50% by year 2010 and eradicate it by year 2025. The NPES aims at facilitating pro-poor economic growth as the basis for poverty reduction by putting in place appropriate policies and strategies. These policy strategies promote the creation of enabling environment for good governance, effective co-ordination and peoples participation; capacity building for enhancing economic growth and equity through a conducive macroeconomic, sectoral (agriculture, industry and mining) and infrastructure (financial, transport, communication, energy (electricity) and marketing) policies and strategies; education, health, water supply and sanitation, employment opportunities, protection and preservation of the environment and housing and settlement. The NPES defines poverty as a multidimensional concept to include both income and human development attributes. Thus, it extends beyond income or consumption to include the spread of malnutrition, diseases and ignorance, high mortality, isolation and vulnerability, powerlessness and hopelessness. Since a large proportion of the poor in the country is affected by several attributes of poverty, efforts to reduce absolute poverty have to focus on income, human development, vulnerability and good governance. 3.2.2. The Tanzania Vision (1999)

Tanzania envisioned is that the society by 2025 will be a substantially developed one with a high quality livelihood. Abject poverty will be a thing of the past. In other words, it is envisioned that

Tanzanians will have graduated from a least developed country to a middle income country by the year 2025 with a high level of human development. The economy will have been transformed from a low productivity agricultural economy to a semi-industrialized one led by modernized and highly productive agricultural activities, which are effectively integrated and buttressed by supportive industrial and service activities in the rural and urban areas. A solid foundation for a competitive and dynamic economy with high productivity will have been laid. Consistent with this vision, Tanzania of 2025 should be a nation imbued with five main attributes: 1 2 3 4 5 high quality livelihood. peace, stability and unity. good governance. a well educated and learning society; and a competitive economy capable of producing sustainable growth and shared benefits.

High priority must be given to education and continuous learning. Equally, the effective transformation of the mindset and culture to promote attitudes of self development, community development, confidence and commitment to face development challenges and exploit every opportunity for the improvement of the quality of livelihood is of prime importance. A progressive and development-oriented culture needs to be evolved to link the people's way of life to the attainment of the goals of the development vision with particular regard to cultivating and nurturing a culture of entrepreneurship and self-development through creative and innovative hard work, responsibility, discipline, respect for life, education, saving and investment and fostering self confidence and self esteem among individuals. 3.2.3. The Tanzania Assistance Strategy, (TAS), (1999)

The GOT prepared the Tanzania Assistance Strategy, (TAS) in 1999, aimed at restoring local ownership, as well as promoting partnership in designing and executing development programmes. It is also about good governance, transparency, accountability and capacity building and effectiveness of aid. TAS is not a program or a project; it is about a process for change. The TAS initiatives date back to the mid 1990s when Tanzania/donor relations were stained mainly due to serious slippage in revenue collection and rising corruption. The formulation of TAS took cognizance of appropriate ongoing and pipeline initiatives. TAS provides a five-year strategic national framework articulating: Policy Framework; National Development Agenda; Priority Actions; Basic elements for promoting local ownership and leadership; and building partnership. The framework will be reviewed every five years. The preparation of TAS took place with that of PRSP thereby sharing a number of common themes. However, whereas the TAS provides a broad strategic national framework within which PRSP operates, the PRSP details out the characteristics of poverty and monitorable benchmarks and actions for poverty reduction in the medium and long term. 3.2.4. Poverty Reduction Strategy Paper, 2000, (PRSP)

The Government of Tanzania, GoT, had in 2000 prepared, endorsed and started implementing the First Poverty Reduction Strategy Paper (PRSP-1) after being declared eligible for debt relief under the enhanced HIPC initiative and as a condition to reach Decision Point before the end of FY 2000/2001. Preparation process of the PRSP-1 involved intensive consultations and participation of many stakeholders included civil society, high learning and research institutions and development partners that identified key areas of concern on poverty reduction in Tanzania. The implementation plan of PRSP-1 was well integrated into the MTEF and annual budgets. In

specific, PRSP focused on specific goals for poverty reduction, improvement of social indicators, specific public policies and institutional changes, to reach the poverty reduction objectives. Ideally, a nation's development has been people-centred, based on sustainable and shared growth and be free from abject poverty. For Tanzania, this development means that the creation of wealth and its distribution in society must be equitable and free from inequalities and all forms of social and political relations which inhibit empowerment and effective democratic and popular participation of all social groups (men and women, boys and girls, the young and old and the able-bodied and disabled persons) in society. In particular, by the year 2025, racial and gender imbalances will have been redressed such that economic activities will not be identifiable by gender or race. All social relations and processes, which manifest and breed inequality, in all aspects of the society (i.e., law, politics, employment, education, culture), will have been reformed. 4.1. Sector specific national development policies

In addition to above broad based long term development frameworks and medium term strategies, Tanzania had put in place several sector specific policies. These included agriculture, investment, industry and trade policies. The country had put in place the policies and has been undertaking the investments necessary to exploit global trade opportunities. 4.1.1 Agricultural, and Livestock Policy of 1997

The Policy direction for agricultural and livestock development was stipulated in the Agricultural, and Livestock Policy of 1997. The policy was based on economic reforms to direct the economic system towards the free market economy with increased role for private sector participation, and the relinquishing by the Government of the major sectors of the economy including disengagement from commercial activities and direct production functions. The ultimate goal of the policy was the improvement of the well-being of the people whose principal occupation and ways of life is based on agriculture, most of whom are smallholder and livestock keepers who do not produce surplus. The policy sets national food security as the primary object and aim to improve national standards of nutrition by increasing output, food quality and availability. To achieve the stated goals and objectives, the policy instruments have been employed to enable the agricultural sector to move towards the stated goals and objectives. These include the following strategies: Improve the agricultural extension and advisory services Raise the efficiency and reduce the cost of production through use of appropriate technology Regulate and control quality and standards of agricultural outputs and inputs Coordinate agriculture and livestock research to generate appropriate technology Improve supervision and inspection of cooperatives (unions and societies) Institute cost sharing in research and training activities Facilitate cooperative movement through intensive and extensive member education on obligations and rights Train required manpower for their efficient and effective delivery of agricultural support services

Consultations revealed that implementation of the agriculture policy has not been smooth, satisfactory and effective. Poor implementation has been due to lack of strategy, weak institutional arrangement, and lack of government and political commitment. This has not been consistent with the general expectations with the tenets of social economic reforms trade liberalization and globalization strategic policy sign posts. The policy, for example, contains restrictions on food intra-trade and imposes barriers on cross-border trade. The policy lacks focus and prioritization in terms of objectives and strategies (exceeding 235). It is also not consistent with other major agriculture-related policies (e.g., trade, cooperative, and land policies) that were subsequently designed. 4.1.2. The National Trade Policy 2003

The government of Tanzania articulated the National Trade Policy in 2003 in consultative manner with aim of complementing implementation of other national development policies and medium term strategies. In accordance with the National Development Vision 2025, the goal of trade policy is that of raising efficiency and widening linkages in domestic production and building a diversified competitive export sector as the means of stimulating higher rates of growth and development. Five specific objectives emanate from and reflect this goal. The first specific objective is to stimulate a process of trade development as the means of triggering higher performance and capacity to withstand intensifying competition within the domestic market. This includes the establishment of improved physical market-place infrastructure and stimulating dissemination of market information and increasing access to the market. The second objective involves economic transformation towards an integrated, diversified and competitive entity capable of participating effectively in the MTS. The third objective entails the stimulation and encouragement of value-adding activities on primary exports as a means of increasing national earnings and income flows even on the basis of existing output levels. Fourth is the stimulation of investment flows into exportoriented areas in which Tanzania has comparative advantages as a strategy for inducing the introduction of technology and innovation into production systems as the basis for economic competitiveness. The fifth objective is the attainment and maintenance of long-term current account balance and balance of payments through effective utilisation of complementarities in regional and international trading arrangements as a means of increasing exports combined with initiatives for higher efficiency in the utilisation of imports. The ultimate target of the NTP-203 is to enhance income generation and the peoples earning power at the grass-roots level as the key to poverty reduction in fulfillment of the fundamental human right of equal opportunity for all citizens as enshrined in the constitution of the United Republic of Tanzania. National Trade Policy Instruments The articulated national trade policy has a number of instruments or measures to influence the facilitation, direction and pattern of trade development. The application of these policy instruments in Tanzania is guided by the need to stimulate domestic production, promote exports,

safeguard domestic industry against dumping practices and protect consumers. Tanzania aimed at exercising trade policy options in line with its international obligations. The Non tariff Based Measures The Non tariff Based Measures are specific policy instruments related with trade facilitation. NTBs work through a variety of administrative or regulatory measures such as quantitative restrictions, administrative arrangements and stringent standards and quality requirements. The NTBs applicable in Tanzania include import licensing and registration; customs valuation; Trade Related Investment Measures (TRIMs) such as local content requirements; standards; state trading enterprises; government procurement procedures; and administrative procedures. The Government acknowledges that the obligation emerging from participation in the WTO is the gradual elimination of NTBs and their replacement with tariffs as the instrument of protection, where necessary. The ultimate objective is to phase out NTBs through tariffication. Tanzania is already implementing a strategy for the tariffication of NTBs in line with WTO obligations. Import licensing Import licensing can serve as a trade barrier, with adverse effects on the flow of trade. The WTO agreement on import licensing seeks to ensure transparency and non-discrimination in the use of import licences. There are two types of import licenses: automatic licensing where the authorities issue licenses automatically without discretionary powers; and non-automatic licensing used for administration of quota restrictions and other measures based on discretionary powers. Tanzania has adopted automatic granting of import licenses, for trade facilitation, data collection and monitoring purposes. The objective of the instrument of registration of importers is to keep track of imports for tariff and tax administration purposes. Pre-shipment Inspection Pre-Shipment Inspection, (PSI), is a set of activities aimed at the verification of quality, quantity, price, exchange rates, financial terms and customs classification of goods undertaken in the exporting country at the request of the importing country. WTO recognizes that developing countries need PSI with the objective of preventing capital flight through over-invoicing and the loss of customs revenue through under invoicing by traders. The WTO PSI agreement aims to strike a balance between the concerns of exporters and the need to safeguard the essential interests of importers in developing countries. Customs Valuation Although Tanzania has in the past treated customs valuation as part of PSI, the WTO agreements treat the two as separate instruments. The main objective of the WTO in the area of customs valuation is to provide procedures for greater uniformity and certainty in the undertaking of customs valuation on a fair, uniform and neutral system. Currently the responsibility for mandatory PSI and customs valuation in Tanzania is contracted to private firms. In January 2001, Tanzania switched from using the BDV definition for customs valuation to WTO-compatible customs value definition precluding the need for PSI. The interim objective of the reviews of customs valuation and PSI has been to shorten the turn-around time required for customs clearance to internationally competitive levels. The Government expedites measures to restore the function of customs valuation under the Tanzania Revenue Authority (TRA) taking into consideration ongoing measures to build the requisite capacity. The success of

10

these measures will facilitate the de-linking of the customs valuation function from PSI and facilitate improvements in customs valuation as an independent instrument. Development Instruments This group comprises of instruments that are used in stimulating the development of export trade by focusing on measures at all levels of production, such as crop/animal husbandry practices and product transformation processes through the various aspects of marketing and actual delivery. They target supply side constraints that remain the major impediment to trade facilitation and expansion in Tanzania. Trade development instruments include EPZs, Investment Code and Rules, export development/ promotion and export facilitation. Export Facilitation Export facilitation works through the simplification of trade procedures and reduction of the high costs involved through measures such as provision of export credit financing, insurance and credit guarantee schemes, and access to better storage facilities. In-spite of major financial reforms undertaken during the 1990s, Tanzania has few conventional export facilitation instruments: Likewise there are no institutions undertaking the export facilitation function subsequent to the withdrawal of the Bank of Tanzania (BOT) and the Board of External Trade (BET) from this area of operations during the 1990s. Recent Government accession to the African Trade Insurance (ATI) encourages the development and provision of support for insurance, co-insurance, reinsurance, guarantees and other financial instruments and services for trade facilitation and investments stimulation (URT, 2003c and 2000). Generic articulated policy issues The Government has been designing, planning, arranging and implementing several measures to promote better regulation and enhance efficient commercial justice delivery as a means of addressing the problems underlying the withdrawal of BOT and BET from the delivery of export facilitation services. The objective has been to stimulate the entry of private sector service providers, especially banks and insurance companies, in the provision of export facilitation services. The government works with other African countries to enable ATI facilitate access to commercial and political risk insurance and many of above policy reforms are consistent with on-going main proposals and protocols of EAC, SADC and WTO. The appropriate trade policy issues include: Consolidating consensus on trade development measures that will entrench the continuing policy shift from a protected and controlled economy (inward looking), towards a competitive market economy, (outward looking); Highlighting the central role and contribution of the trade function and aligning it with the national development goals as stipulated in Development Vision 2025; Aligning the national development agenda with regional and international trade obligations and maximizing the benefits of participation through value adding activities in regional and international trade arrangements; Adopting an appropriate framework of measures for the interim to provisionally safeguard those areas of domestic industry and economic activity that might be threatened by liberalization and identifying the sectors to be protected, the rationale and costs of protection, and the maximum duration for protection; and

11

Addressing the supply-side constraints that inhibit trade expansion and competitiveness as a prerequisite for rapid economic growth, and exploring ODA options in the trade sector.

As usual, trade sector targets relate to final goods or services produced over a given period of time in order to achieve the objective(s) at hand. In the formulation of trade policy process, trade targets are set with aim at removing causes or drivers of problems mainly clustered under tariffbased instruments (tariff, taxation, and duty draw-back schemes); non-tariff measures (quotas, import licensing and registration pre-shipment inspection (PSI), custom valuation, local content requirements; standards; state trading operations, government procurement, and administrative barriers); trade defense mechanisms (subsidies, safeguards, anti-dumping and RoOs); trade development policy instruments (investment code and rules; EPZ, export promotion measures, and export facilitation measures) and international trade policy instruments (bilateral cooperation initiatives, RTAs, and WTO agreements) ( Wangwe, 2007). Yet, Tanzania Governments trade promotion (export promotion and development) efforts/strategies aim at removing such causes/divers of trade problems. Establishment of a strong institutional framework for exports development in Tanzania through refocusing the role of the Board of External Trade (BET), and supporting the involvement of Private Sector in Export Development amounts to deliberate efforts to promote export trade. With regard to refocusing the role of BET, the Government has prepared a draft Bill to repeal the BET Act No. 5, of 1978 to establish the Tanzania Trade Authority (TanTrade Authority) that provides a good environment for export development in Tanzania compared to the BET Act of 1978. Also, establishment of the Economic Processing Zones to promote exports through ensuring easy access to infrastructure, incentives (taxes) and other services to Tanzanias export manufacturers reflects the government efforts to promoting and developing trade/exports. Programme for Business Environment Strengthening for Tanzania (BEST) that covers reforms in areas of business registration and licensing; land registration; commercial dispute resolution; labour law reforms and strengthening the Tanzania Investment Centre (TIC) altogether reflect promotion of trade in terms of removing unnecessary administrative barriers, reducing the cost doing business, etc. The recent reform of Tanzania's customs duties has resulted in a simplified five-tier structure with tariff rates of 0 percent, 5 percent, 10 percent, 20 percent, and 25 percent. This tariff structure is somewhat escalatory with many processed products facing a higher effective rate of protection (ERP) along the processing chain. Regarding integration of the economy into the MTS, Tanzania has been and is still participating in different trade agreements ranging from unilateral, bilateral, trilateral and multilateral ones. Some of them include EAC, COMESA, SADC, ACP-EU/EPA, AGOA, and WTO. This has to some extent reduced the tariff and non-tariff barriers to Tanzania exports in the regional and global markets that Tanzania subscribes to as a member.

12

4.1.2.

The Sustainable Industrial Development Policy of 1996-2020, (SIDP)

The government in collaboration with private sector stakeholders came up with the Sustainable Industrial Development Policy of 1996-2020, (SIDP). The main objective of the SIDP policy was to recognize the shift from a centrally planned economy a more market oriented one whereby the private sector, as an engine of economic growth will play a dominant role. SIDP has taken into account the implications of the implications of recent changes and major developments in internal and global socio-economic situations. According to the SIDP, the overall mission of industrial development in Tanzania over the coming two decades is to contribute towards the achievement of the overall national long-term development goals as enshrined in the overall national vision, and to enhance sustainable development of the industrial sector. The Tanzanias goals towards industrial sector development are; human development and creation of the employment opportunities, economic transformation for achieving sustainable economic growth, external balance of payments, environmental sustainability and equitable development. The major economic indicators for the industrial sector for which targets will be specified are; rate of growth, value added, contribution to GDP, exports and employment. The SIDP had short, medium and long term industry policy objectives and strategies Quantification of economic indicators targets as well as the identification of priority activities will be given on a phased time span within short-term (1-5 years), medium (5-15) and long term (15 years and above) perspectives. Short-term Priority The short-term priority of the Industrial Sector of Tanzania is based on implementing objectives of phase I of the policy. The following activities shall be implemented during this phase: Consolidation of rehabilitation of the existing Industrial capacities through financial, capital and management restructuring. Reactivating commercial efficiency and optimum utilization of existing industrial capacities. Place top priority on resource based industries in which Tanzania has potential to develop competitive advantage particularly agro-allied industries. Finalization of privatisation of public firms, which are in the top priority areas and ironing out of bottlenecks, which impede full utilization of installed and potential production. Provide fiscal and monetary incentives to facilitate development of the sector.

Medium-Term Priority During the medium term, the following strategies have been identified for implementation. Creation of new capacities.

13

Promotion of intermediate goods industries and light capital goods and machinery industries as well as techno-economic preparations for exploitation of the countrys iron ore deposits will also be undertaken taking into account emerging technologies innovations.

Long-term Priority The following tasks shall be implemented during the Long-term implementation of the Tanzanias Industrial development strategy; Use the domestic capital and capability earned over the first two phases to go into full fledged investments in the basic capital goods industries. National Strategy for Growth and Reduction of Poverty (I and II)

5.0.

5.1.

The National Strategy for Growth and Reduction of Poverty (NSGRP I)

The National Strategy for Growth and Reduction of Poverty (NSGRP I) was a second national PRSP-2 organizing framework for putting the focus on poverty reduction high on the countrys development agenda. The NSGRP kept in focus the aspirations of Tanzanias Development Vision (Vision 2025) for high and shared growth, high quality livelihood, peace, stability and unity, good governance, high quality education and international competitiveness. It is committed to the Millennium Development Goals (MDGs), as internationally agreed targets for reducing poverty, hunger, diseases, illiteracy, environmental degradation and discrimination against women by 2015. It will strive to widen the space for country ownership and effective participation of civil society, private sector development and fruitful local and external partnerships in development and commitment to regional and other international initiatives for social and economic development. The NSGRP builds on the First Poverty Reduction Strategy Paper (PRSP-1) (2000/01-02/03), the one-year PRS Review and the Medium Term Plan for Growth and Poverty Reduction and the Tanzania Mini-Tiger Plan 2020 (TMTP2020) which emphasize the growth momentum to fasttrack the targets of Vision 2025. The NSGRP is expected to last 5 years, i.e. from 2005/06 to 2009/10. The end point of the strategy coincides with the National Poverty Eradication Strategy (NPES)s 2010 poverty reduction targets; it is two thirds of the way towards the MDGs (2015) and 15 years towards the targets of Vision 2025. The longer term perspective (5 years) is considered to be a better time frame that will allow for a more sustained effort of resource mobilisation, implementation and evaluation of the poverty reduction impact compared to three years. 5.2. The General Strategy of NSGRP (I)

The general strategy of NSGRP I requires increased commitment and resources from domestic stakeholders and increased assistance from the development partners in the medium term. To increase the effectiveness of aid Tanzania will pursue the principles laid down by Tanzania Assistance Strategy (TAS) for harmonisation of aid modalities for growth and reduction of poverty. NSGRP has a well articulated general strategic framework. The strategic framework constitutes of three major building blocks including the principles and on-going reforms. The major

14

clusters of desired outcomes for poverty reduction are (i) growth and reduction of income poverty; (ii) improved quality of life and social well-being; and (iii) good governance and accountability. It is recognised that while growth is essential for poverty reduction, it is not sufficient; equity and conditions that foster it are quite as vital. 5.3. The National Strategy for Growth and Reduction of Poverty (NSGRP II)

The National Strategy for Growth and Reduction of Poverty (NSGRP II or MKUKUTA II) is an organizing framework to rally national efforts in accelerating poverty-reducing growth. It is a second in series of results based national strategy. Like its predecessor MKUKUTA I, the strategy puts emphasis on role of governance and growth for poverty reduction high on the countrys development agenda. It will also continue to put emphasis on mainstreaming cross cutting issues in sector strategies and LGAs development plans. MKUKUTA II will be implemented for five years (2010/11 2014/15). MKUKUTA II is informed by the aspirations of Tanzanias Development Vision (Vision 2025) for high and shared growth, high quality livelihood, peace, stability and unity, good governance, high quality education and international competitiveness. The government is in the process of preparing the Long Term Growth and Development Plan, which is the Government implementation framework for the remaining 15 years of the Tanzanias Development Vision 2025. MKUKUTA II therefore implements the first 5-years of the Long Term Growth and Development Plan. MKUKUTA II builds on and broadens the space for country's ownership of the development agenda by fostering effective participation of civil society, private sector, and other stakeholders while also forging fruitful local and external partnerships and boosting its commitment to regional and other international initiatives for social and economic development, such the Millennium Development Goals. 5.4. National Development Policy Context

MKUKUTA II is a continuation of the long standing national commitments to fighting poverty initiated at independence in 19961. This commitment has been consistently implemented through a series of strategies and plans ranging from sector specific strategies to multi-sectoral strategies starting with the National Poverty Eradication Strategy (NPES) formulated in 1998 which was operationalized by the Poverty Reduction Strategy Paper (PRSP) towards the end of 1990s and early 2000s After three years (2001/02 2004/05) of successful implementation of PRSP the government adopted a results and MDG-based strategy commonly known as (National Strategy for Growth and Reduction of Poverty NSGRP)or popularly known in Kiswahili MKUKUTA. NSGRP was adopted to sustain and scale up achievements as well as addressing the challenges to growth and poverty reduction agenda. The adoption of results-based strategy brought forward a number of prerequisites in its implementation. These included:-(i) Recognition of cross-sectoral contribution to outcomes and inter-sectoral linkages and synergies; (ii) emphasis on mainstreaming cross cutting issues; (iii) integration of MDGs policy actions into cluster strategies; (iv) adopt a five-year implementation period to give ample time for the implementation and monitoring; (v) greater emphasis on role of economic growth and good governance in poverty reduction; and (vi) recognition of the need to address vulnerability, human rights and social protection issues. Thus MKUKUTA broadened the

15

content given the enlarged view of poverty which better informs the policy mix and it spells out a clear framework for effective stakeholder participation/engagement. In this regard, the design of MKUKUTA II has been informed by this paradigm change. 5.5. External economic context Recent development in the global economic conditions, such as increases in oil and food prices, and global financial and economic crisis, will continue to have ramification to Tanzania's economy. Such shocks impact Tanzania's economy through several channels, with trade (especially exports) and financial flows (especially foreign direct investment) being the main transmission channels. Slowdown of growth, reduction in financial and capital flows, were the results of the first round effects of the crisis. The second round effects take place with a lag, especially in the real sector. Effects of increase in food and oil prices are reflected in surge for large scale land acquisitions for bio-fuel and food production. Much as such shocks threaten Tanzania's economy, they also open several opportunities, e.g. in terms of increased demand for bio-fuel and food production. Besides the shocks, policy developments at the global and regional levels have continued to shape the way Tanzania interact with other economies. There are opportunities, and sometimes, constraints associated with WTO, EPA, policies related to global climate change, etc. Development in regionalism, e.g. the East African Common Market, SADC, etc also among the forces that will continue to have significant impact Tanzania's economy. Their effects on trade, movement of labor and capital will be important factor in the national development. All these developments have provided lessons that informed the strategic positioning of MKUKUTA II. 5.6. Fundamentals of NSGRP

The Strategy is built on four key fundamentals to ensure forward looking interventions to achieving targets set out in the Vision 2025 and other long term policy initiatives. The four key fundamentals are: Efficient use and development of factors of production, including human capital/resources The basic factors that are essential for production are land (including water recourse, minerals deposits, and other natural resources such as wildlife, fishery, and forestry), labor, capital and technology. The strategy aims at the enhancing efficient use of these factors of production for enhanced productivity gains and value addition. It also aims at developing these factors by investing in them, e.g. land development in terms of surveying, zoning, exploration and extraction of minerals, etc; expansion of capital stock such as plants and machinery; technology advances though R&D, and labor in terms of education, training, and health provisioning. As with regards to human capital, this strategy aims at going beyond basic education to improving quality of education and skills development and ensuring that education and training systems produce skills demanded by the markets. (ii) Strengthening and establishing well functioning institutions and markets The Strategy asserts that institutions are central to the way a country is governed. Well functioning institutions are key to efficient functioning of markets, policy implementation, service delivery and governance. The strategy recognizes that institutional changes are required in for an evolving and dynamic economy, for policies pursued are to have the desired consequences. Thus, the Strategy ensures that such an institutional change takes place and the institutions and market function efficiently. (i)

16

(iii) Provision of infrastructure The Strategy reaffirms that infrastructure development is at the center stage of economic development process. Functioning infrastructure reduces of cost of doing business, attracts private investment, enables production and service delivery, links markets, and helps sustain improvement of the quality of life through redistribution of wealth. Infrastructure augments factors of production in (ii) in enchasing economic growth by increasing the productivity of labour and capital thereby raising profitability, production, income and employment. Thus, critical infrastructures such as energy, roads, and ports, will continue to be priority areas for rapid economic growth and development. . (iv) Ensuring good economic governance It is the objective of the Strategy to facilitate the development process by ensuring economic governance. Economic governance encompasses policies and institutions for economic management, market regulation and governance of public goods. Thus, the Strategy calls for a stronger role for the state in ensuring policies are designed in a participatory manner, implemented efficiently, and that critical decisions are made in a transparent manner and plays a critical role in basic services delivery. To make that happen, the Strategy directs efforts to building capability for implementing such policies and initiatives effectively. 6.0. Major Policy Issues for Discussion Despite of the national, cross sectional and sector policies achievements made, there are new emerging development market challenges. It is general acknowledged that the current government efforts and status of the review of some sector policies. The review of these has been necessitated by the need to address the emerging development challenges social, economic and political changes and in specific in the education sector, and also the gaps in the policy that had significant limited impact on the implementation of some of these national policies. The following are some of policy gaps, which were noted: a) There is a missing link between the sector policy objectives and key macro policies including the National Development Vision 2025, and the National Poverty Eradication Strategy (1998), Poverty Reduction Strategy Paper, (2001) and MKUKUTA (2004). b) There is a mismatch or and inconsistencies between the sector policies and the new macro and other sectoral policies, strategies and legislations. c) There is an inadequate exposition of the institutional framework for implementation of many the policies. Definition and responsibilities of stakeholders were not clearly stipulated. d) There is a weak linkage between the policy and major legislation. For example, some of the local legislations and international standards were not adequately observed. e) The scope of the policy is limited in terms of national and regional coverage and challenges of globalization, and ICT, issues. f) There is no implementation plan, time table and monitoring and evaluation systems of some of the national policies. Therefore the major conclusion of this module is the need to review some of key policies in order to address these gaps and accordingly respond to and build upon the current national economic and structural reforms and efforts.

17

DEPARTMENT OF ECONOMICS
UNIVERSITY OF DAR ER SALAAM

Lecture Note Two Policy Formulation Processes

By Semboja Haji Hatibu Haji
Unedited Training Notes To be presented at the Policy Analysis EC664 Date Monday, October-31-11

2.1. The Concept of Policy

Policy is typically described as a principle or rule to guide decisions and achieve rational outcome(s). The term is not normally used to denote what is actually done; this is normally referred to as either procedure or protocol. Policies are generally adopted by the board of or senior governance body within an organization where as procedures or protocols would be developed and adopted by senior executive officers. Policies can assist in both subjective and objective decision making. Policies to assist in subjective decision making would usually assist senior management with decisions that must consider the relative merits of a number of factors before making decisions and as a result are often hard to objectively test e.g. work-life balance policy. In contrast policies to assist in objective decision making are usually operational in nature and can be objectively tested e.g. password policy. A Policy can be considered as a "Statement of Intent" or a "Commitment". For that reason at least, the decision-makers can be held accountable for their "Policy". The term may apply to government, private sector organizations and groups, president and individuals, and parliamentary rules of order are all examples of policy. Policy differs from rules or law. While law can compel or prohibit behaviors (e.g. a law requiring the payment of taxes on income), policy merely guides actions toward those that are most likely to achieve a desired outcome. Policy or may also refer to the process of making important organizational decisions, including the identification of different alternatives such as programs or spending priorities, and choosing among them on the basis of the impact they will have. Policies can be understood as political, management, financial, and administrative mechanisms arranged to reach explicit goals. 2.1.1. Impact Intended effects The intended effects of a policy vary widely according to the organization and the context in which they are made. Broadly, policies are typically instituted to avoid some negative effect that has been noticed in the organization, or to seek some positive benefit. Corporate purchasing policies provide an example of how organizations attempt to avoid negative effects. Many large companies have policies that all purchases above a certain value must be performed through a purchasing process. By requiring this standard purchasing process through policy, the organization can limit waste and standardize the way purchasing is done

Unintended effects Policies frequently have side effects or unintended consequences. Because the environments that policies seek to influence or manipulate are typically complex adaptive systems (e.g. governments, societies, large companies), making a policy change can have counterintuitive results. For example, a government may make a policy decision to raise taxes, in hopes of increasing overall tax revenue. Depending on the size of the tax increase, this may have the overall effect of reducing tax revenue by causing capital flight or by creating a rate so high that citizens are deterred from earning the money that is taxed. We will note that the policy formulation process typically includes an attempt to assess as many areas of potential policy impact as possible, to lessen the chances that a given policy will have unexpected or unintended consequences. Because of the nature of some complex adaptive systems such as societies and governments, it may not be possible to assess all possible impacts of a given policy. 2.1.2. Policy cycle In social political science the policy cycle is a tool used for the analyzing of the development of a policy item. It can also be referred to as a "stagist approach". One standardized version includes the following stages: 1. Agenda setting (Problem identification) 2. Policy Formulation 3. Adoption 4. Implementation 5. Evaluation 2.1.3. Content Policies are typically promulgated through official written documents. Policy documents often come with the endorsement or signature of the executive powers within an organization to legitimize the policy and demonstrate that it is considered in force. Such documents often have standard formats that are particular to the organization issuing the policy. While such formats differ in form, policy documents usually contain certain standard components including;: A purpose statement, outlining why the organization is issuing the policy, and what its desired effect or outcome of the policy should be. An applicability and scope statement, describing who the policy affects and which actions are impacted by the policy. The applicability and scope may expressly exclude certain people, organizations, or actions from the policy requirements. Applicability and scope is used to focus the policy on only the desired targets, and avoid unintended consequences where possible. An effective date which indicates when the policy comes into force. Retroactive policies are rare, but can be found.

A responsibilities section, indicating which parties and organizations are responsible for carrying out individual policy statements. Many policies may require the establishment of some ongoing function or action. For example, a purchasing policy might specify that a purchasing office be created to process purchase requests, and that this office would be responsible for ongoing actions. Responsibilities often include identification of any relevant oversight and/or governance structures. Policy statements indicating the specific regulations, requirements, or modifications to organizational behavior that the policy is creating. Policy statements are extremely diverse depending on the organization and intent, and may take almost any form.

Some policies may contain additional sections, including: Background, indicating any reasons, history, and intent that led to the creation of the policy, which may be listed as motivating factors. This information is often quite valuable when policies must be evaluated or used in ambiguous situations, just as the intent of a law can be useful to a court when deciding a case that involves that law. Definitions, providing clear and unambiguous definitions for terms and concepts found in the policy document. 2.1.4. Typologies Policy addresses the intent of the organization, whether government, business, professional, or voluntary. Policy is intended to affect the 'real' world, by guiding the decisions that are made. Whether they are formally written or not, most organizations have identified policies. Policies may be classified in many different ways. The following is a sample of several different types of policies broken down by their effect on members of the organization. 2.1.5. Distributive policies Distributive policies extend goods and services to members of an organization, as well as distributing the costs of the goods/services amongst the members of the organization. Examples include government policies that impact spending for welfare and public safety, or a professional organization's benefits plan. 2.1.6. Regulatory policies Regulatory policies, or mandates, limit the discretion of individuals and agencies, or otherwise compel certain types of behavior. These policies are generally thought to be best applied when good behavior can be easily defined and bad behavior can be easily regulated and punished through fines or sanctions. An example of a fairly successful public regulatory policy is that of a speed limit.

2.1.7. Constituent policies Constituent policies create executive power entities, or deal with laws. Constituent policies also deal with Fiscal Policy in some circumstances. 2.1.8. Miscellaneous policies Policies are dynamic; they are not just static lists of goals or laws. Policy blueprints have to be implemented, often with unexpected results. Social policies are what happens 'on the ground' when they are implemented, as well as what happens at the decision making or legislative stage. When the term policy is used, it may also refer to: Official government policy (legislation or guidelines that govern how laws should be put into operation) Broad ideas and goals in political manifestos and pamphlets A company or organization's policy on a particular topic. For example, the equal opportunity policy of a company shows that the company aims to treat all its staff equally. The actions the organization actually takes may often vary significantly from stated policy. This difference is sometimes caused by political compromise over policy, while in other situations it is caused by lack of policy implementation and enforcement. Implementing policy may have unexpected results, stemming from a policy whose reach extends further than the problem it was originally crafted to address. Additionally, unpredictable results may arise from selective or idiosyncratic enforcement of policy. Types of policy analysis include: Causal (resp. non-causal) Deterministic (resp. stochastic, randomized and sometimes non-deterministic) Index Memoryless (e.g. non-stationary) Opportunistic (resp. non-opportunistic) Stationary (resp. non-stationary) These qualifiers can be combined, so for example you could have a stationarymemoryless-index policy.
2.2. The Policy Formulation Processes and Analysis 2.2.1. The Policy formulation

Policy formulation processes and analysis refers to the sequential process of identifying problems, analyzing them, searching for appropriate policies, strategies and actions to options to solve them, articulating the options clearly, deciding upon which of the options to take, implementing the strategic policy options and finally evaluating the implementation process.

2.2.2.

Identification of the Problem or Policy Issues

First, is to single-out or identify the problem (e.g., low education transition rate. This means establishing the nature, causal relations and factors of the problem which may be systemic (i.e., inherent within the system) individualistic (i.e., within actors in the system) or exogenous, that is, caused by the external shocks. 2.2.3. Analysis of the Problem

Second, in so doing diagnosis, i.e., assessing and understanding the problem in terms of its nature, magnitude, mechanism, causal factors, complexities and effects. This will facilitate the formulation of appropriate policy objectives and establishing a good order and priority in which to solve them. 2.2.4. Formulation of the rational policy objectives and strategies

Third, this involves searching and selecting for policy issues, (e.g., number, type, quality, characteristics, distribution of employment in the economy), solutions, rational policy objectives and strategies. The idea of rationality in economic science implies, among other things, that a policy maker tries to find the best alternative out of those available to him/her 1. In other words, the policy maker2 tries to optimize. All optimization problems consist of three elements. There are choice variables, the objective function and the feasible set. The Choice Variables These are variables whose optimal values have to be determined. The amount of any choice variable is usually to be measurable as a real number. There may be any finite number of choice variables in a particular problem. The Objective Function This gives a policy specification of a relationship between the choice variables on the one hand and some variables whose values we wish to optimize (e.g., maximize social economic wealth or minimize poverty in the economy) on the other. The feasible policy set

Gravelle H. Ray Rees, (1981), Microeconomics, Longma Group Limited, Longman House Burnt Mill. Harlow, Essex, UK. 2 Here we assume that all stakeholders are involved or and their interests are taken into account 6

The available set of possible policies or alternatives is called the feasible policy set. This involves identifying various policy options and proposals, assessing trade-off, and weighing alternatives for solving problems, which are more often than not, complex. It is a complex process, which is done under conditions of uncertainty competing and sometimes with conflicting resources, social and economic interests and within a constrained period. There is need to make clear strategic choices (e.g., on the one hand this may include policies on open or closed economy, the balance between state and markets, etc. and on the other hand optimize quality employment opportunities); 2.2.5. Policy Strategies

These are set of possible policy instruments (e.g., fees, taxes, rate of interest, wages, price, natural resources) derived from a solution of the optimization problem. A solution to an optimization problem is that vector of values of choice variables which is in the feasible set and which yields a maximum or minimum of the objective function over the feasible set. There is always a need to set criteria for choosing between policy instruments (i.e., magnitude of response, speed, and probability of effect, acting directly on the problem, their resource costs and flexibility). Also there is the likely public reaction and hence credibility, and the width and depth of impact on societal groups (the gainers and losers); and the need for consistency in the system of instruments used and the appropriate sequencing. The above is a crucial stage of policy formation culminating in policy choices or / and programmes. The question at this stage of the policy process is whether decision-makers and analysts are responsive to the different needs of stakeholders and to the changing, conditions of the economy, whereby sensitivity with respect to the implementation conditions is an essential element of high responsiveness.

2.3. Drafting of a Policy Implementation Program (PIP) For sustainable and effective implementation, there are conditions, which need to be satisfied if the intention of the measures is not to be thwarted by. Having formulated the policy options, these have to be analyzed by policy makers in way which is clear and which will persuade policy implementers to carry them out.

Strengths and weaknesses of these various options need to be clearly spelled out, and specific courses of action which are relevant and applicable given the prevailing social economic and the political situation should be recommended. After policy solution and instruments have been found satisfactory, policy has to be put into operation and action. 2.3.1. Operational Measures and Lines of Actions

The next stage of policy implementation concerns the transformation of policy choices or programmes into operational measures and lines of actions. At this stage, the issue is organisational efficiency, in other words programme implementation that is professionally competent, well co-ordinated with the key actors at the all levels, cost-effective, political, social and legally stable, thus enabling, the development of a long-term perspective (the Vision)., mutual trust relationships between implementers and targeted persons as well as cost-efficient routines. Policies have to be carefully implemented by stakeholders. It is important to plan and sequence lines of actions or operative measures that need to be carried out. We have to decide on which institutional arrangements to make, which instruments to use, how to use them, timing and sequencing of action programs. When the most desirable solution is thus determined, the implementation problem is to find a constellation of instruments, which produce the desirable results. Finally, plans are optimally executed and managed by the stakeholders.

POLICY ANALYSIS MATRIX LEVELS I GENERAL Problems P1 SPECIFIC P11 , P12,. P1n P21, P22,. P2n : : : : : : : : : Pm1, Pm2, Pmn C11 , C12,. C1n C21, C22,. C2n : : : : : : : : : Cm1, Cm2, Cmn O11 , O12,. O1n O21, O22,. O2n : : : : : : : : : Om1, Om2, Omn S11 , S12,. S1n S21, S22,. S2n : : : : : : : : : Sm1, Sm2, Smn LA11 , LA12,. LA1n LA21, LA22,. LA2n : : : : : : : : : LAm1, LAm2, LAmn

P1 P2 : : : Pm C1 C2 : : : Cm O1 O2 : : : Om S1 S2 : : : Sm LA1 LA2 : : : LAm

II

Challenges, Needs, Desires C1

III

Policy Objectives O1

IV

Policy Strategies S1

Lines of Action LA1

Pi PROBLEMS

Pi Macroeconomic policy

P2 HRD

P3 Infrastructure &Equipment

P4 L&R

P5 Institutional

P6 Others

Ci CHALLENGE

Ci Macro policy

C2 HRD

C3 Infrastructure & Equipment

C4 L&R

C5 Institutional

C6 Others

10

Oi OBJECTIVE

Oi Macro-policy

O2 HRD

O3 Infrastructure & Equipment

O4 L&R

O5 Institutional

O6 Others

Si STRATEGIES

Si Macro policy

S2 HRD

S3 Infrastructure & Equipment

S4 L&R

S5 Institutional

S6 Others

One to one mapping to ensure consistency

11

DEFINITIONS 1. 2. 3. 4. Policy Statement may contain general Pi, Ci and Oi and Si. A policy document may contain general and specific Pi, Ci, Oi and Si. A policy strategy document may contain general and specific P i, Ci, Oi , Si and LAi. A plan is a comprehensive policy strategy which must : Have detail information on institutional framework for implementation, monitoring and evaluation. Indicate source and use of financial resources. Indicate lead time and duration. A strategic plan is comprehensive and focused development plan derived from general specific development policies and plans e.g., Vision, Sector Policy and MKUKUTA. A program or programme can be a plan of how to do something. It tells the steps that we think we need to do to make something happen. For example, a government might make a program to improve the health of the people in part of a country by giving the people better food, by helping to kill insects that carry diseases, and by bringing more doctors

5.

6.

RULES OF THE GAME There is a need for: 1. 2. 3. 4. 5. 6. Use of baseline studies, scientific and professional research studies, is necessary component in the policy formulation. Use of SWOT analysis at levels I and II is necessary. Use of One-to-one Mapping Matrix and Logical Framework to ensure consistency, effectiveness and efficiency. Formulation of policy document must be preceded with Policy Strategy and Implementation Plan documents. SMART and Risk Analysis are important in the designing the Implementation Plan, Project and Programme Documents PA and other participatory processes, mechanisms and initiatives are crucial to ensure sense of ownership, effective implementation and success.

2.4. Drafting Policy Document The drafting a national / public policy is a complex process which, besides requiring time, financial and human resources, the following policy analytical methodologies and skills are important; 2.4.1. Revisiting previous policy documents

Existing sector policy documents, research consultancies and studies must be reviewed. There is a need for revisiting all development policies. These are policies related to key sectors, investment, import, environment, human resource development, science and technology and others. These must be revisited to ensure that the national development policy is in harmony with the other policies in the country. 2.4.2. Revisiting major sector issues

These issues include the need for the sector's large potential to attract investment; the acquisition of science and technology; creation of employment and income opportunities and the linkages with other sectors of the economy. All these are important policy issues for sectoral growth and sustainable economic development. 2.4.3. Balanced sectoral development issues

The need to have balance development with regard to regional, international, institutional, and regulatory aspects and in the distribution and provision of goods and services. The sector policy has to be contrasted with that of other neighboring countries by comparing these countries' policy objectives and strategies. There is a need to give greater attention, in the effort to build a strong and resilient national economy, to promotion a viable regional economic integration schemes and strategic alliances. 2.4.4. Interest of all stakeholders must be considered

It is envisaged that Tanzania enjoys the political stability. This is so vital for the development of the any sector. An integral approach and strategic alliance among the stakeholders are essential for the formulation of a consistent policy document. One way is to involve some of them in drafting policy documents. Another way is to promote and stimulate dialogue among all stakeholders at all levels in the policy formulation. This dialogue may take place in seminars, workshops, conferences, round tables and informal discussions. The aim is to promote the exchange of views by the different actors, facilitating discussions on topical policy issues and enhancing awareness on policy issues.

13

2.4.5.

Gender Consideration

A complete understanding and consideration of gender dimension will significantly contribute to efficient, and effectively implementation of policy objectives and strategies. Many experiences suggest that gender sensitive development strategies contribute significantly to economic growth, efficiently and equity objectives by ensuring that all sectors of the poor share in programmes benefit. 2.5. Institutions Affecting Policy Formulation We distinguish the following main influences on the formation of national policy. 2.5.1. The Government

Responsibility for deciding on national policies and securing their implementation rests with government. Typically, policy formulation requires effective action by the head of state, the executive or cabinet of ministers, and by the administration/civil service. In parliamentary democracies, it requires capacity for independent scrutiny by the legislature or parliament and subsequent impartial enforcement by the judiciary. These parts of government all need adequate capacity for the work to be done well. But, as known, there are capacity needs also among the other stakeholders in the policy formulation process. 2.5.2. The State

The executive, including the role of the political leadership, the bureaucracy and its relations with the political rulers, and other predisposing influences on state elites, such as ideology. The main question is how far national policy is determined autonomously by the state, what features of the state apparatus or regime explains the character of policy choice and what constraints have operated on state action. 2.5.3. Politicians

The initiative for a policy change may come from politicians, for example, resulting from an election manifesto, from officials in response to new information about changing situations or difficulties in implementing present policies, or from organs of civil society.. 2.5.4. The legislature and party systems

The role and influence of the legislature, individual, members of parliament, single party and multi-party influence where it exists or has existed. What role has the separation of powers and

14

checks and balances through party and legislature played in influencing or constraining policy action by the state executive? 2.5.5. Civil society

Organized domestic interest groups and the scope for them to influence policy and policy change. From within civil society, interest groups may raise issues and win media attention for initiatives that a government will wish to adopt. The group identified elements of civil society which it regarded as having especially significant roles in the governance environment with regard to policy management. These are sometimes referred to as non-state actors or non-governmental organizations (NGO). Either designation can comprehend a wide range of organization. Organisations in the private commercial sector (trade unions, chambers of commerce, professional associations, and the like concerned primarily with their members' interests), organisations focused more on the needs of others (organisations concerned with human rights, development, the environment, and many religious organisations), and local community groups could all be included. Each of these several types may interact in different ways with the government in relation to policy management. 2.5.6. External agencies

The initiative for a policy change may come from external agencies. This may also come from the requirements of international and supranational organizations, such as the Organization of African Unity (OAU), the Economic Commission for Africa (ECA), the Southern Africa Development Community (SADC), East African Community, (EAC), the Economic Commission of West African States (ECOWAS) and the African Commission on Human and Peoples Rights. The global environment, which provides the context in which much national policy is now formulated, adds World Bank, IMF, the United Nations and its various sub groups, international financial institutions, the European Union and the World Trade Organization. 2.5.7. The media

The media has an important role in developing a capacity for critical appraisal of policy proposals among the general public. Through the various channels, information and views can be promulgated. The media can also alert government to emerging needs and changing circumstances and provide platforms on which different groups can voice their opinions.

15

2.6. Roles and Relationships of Actors in the Policy Process In a democracy, decisions on national / public policy are taken by the government, which in turn is accountable to the electorate. In a modern democracy, the electorate is generally not satisfied with being consulted once every five years (or whatever the agreed period between elections is). People in all countries are becoming more educated, knowledgeable and much better informed. Increasingly, they are better able to articulate their needs and have the confidence to put them forward. 2.6.1. Consultations

In this environment, governments need to consult the people at large as well as relevant interest groups if they are to produce the most effective policies. Consultation does not mean only that governments will ask people their views on the government's proposals but also that government will listen to proposals that come from their citizens. It does not reduce the responsibility of governments to govern but it does mean that in determining policies to be pursued, the governments need to take into account the views of those who may affect or are affected by any of these policies. Trade, investment and economic policies, for example, need to take into account the views of trade unions, employers, investors and consumers. 2.6.2. The changing role of the state

We noted that the changing role of the state is another factor, which affects the roles of the several actors. In most countries, central government is devolving responsibilities to other levels of government and/or to non-governmental organisations of one kind or another. The need to take account of the views of the governed lends impetus to current trends towards more decentralization in its various guises. In terms of levels of government, decentralization finds expression in the development of local levels of government with responsibility for the provision of certain services at a local level - bringing responsibility for provision of services closer to the users of the services. In terms of economic activity, it focuses on privatization reducing or eliminating direct state involvement in commercial and industrial activity. It was considered that while governments may find it hard to "let go" of some responsibilities (and with them, some power and direct influence), the increasing complexity of the government function in to-days world, and increasing demands on its management capacity, coupled with shortage of resources at the national level to meet the growing expectations of the electorate as well as the current vogue in political thought is persuading governments to do so. Devolution of management responsibility has potential benefit in terms of increasing the possible opportunities for greater participation in policy formulation. Decentralized systems can provide
16

quicker information on practical experiences with policy implementation and can also alert the national government to emerging needs and changes in circumstances. But they require commensurate standards of capacity. The "withdrawal of the state" has implications not only for the state but also for various organisations in civil society outside of government. 2.6.3. Relationship with various organisations in civil society outside of government

It is important to consider the actual situation with regard to the roles played by these bodies rather than simply to accept the popular perception of these roles. For example, it was noted that NGOs are often thought better than government bodies in helping promote rural development. There is a general view that they are more effective in representing and giving a voice to the poor and the underprivileged and are more accepted by the people more disinterested than politicians or bureaucrats. However, it is now recognized that NGOs may change in character with the passing from visionary founders to second-generation leadership. In African countries, there is the added issue of the extent of influence wielded through them by northern groups. The issue of accountability of these bodies if and as they assume greater roles in the development of policy proposals needs careful attention. 2.6.4. Key Policy Makers: Ministers and Members of the National Parliament.

The main consideration of roles in the policy formulation process is centered on ministers and members of the national parliament who may be involved at several levels. The need of ministers to have impartial advice about policy options and about possible implications of their implementation was emphasized. For this they rely on their civil servants, and need to be able to trust their loyalty. Different countries have found different ways of meeting these requirements. In Britain and Japan, for example, senior civil servants are required to maintain strict political neutrality with a commitment to loyal service to ministers from any political party. In the United States, top posts in the administration are held by political appointees who change office with a change of government. Below these, there is a neutral permanent service. In other countries, (Germany and France for example) senior serving officials are appointed to high level advisory posts on a political basis. With a change in government, officials thus appointed return to the normal civil service. The civil service is a source of information and expertise, providing forward (strategic) thinking and insights into practical and ethical considerations. The view of the group was that civil servants, whatever criteria are used for their appointment, tend to be more cautious and to take more of a long-term view than taken by politicians. A good working relationship between ministers and civil servants requires all to understand their roles and to use agreed and properly enforced procedures for reaching decisions at cabinet, ministerial and official levels. The paramount need for mutual trust and respect was stressed.

17

2.6.5.

Policy Transparency

Failures in policy implementation have been discussed and now we emphasize problems related with lack of transparency, knowledge and information. In closed political system, fear leads to reluctance to have open communications within and between ministries. Knowledge represented power and, in an uncertain situation, this has been a treasured resource. It suggested that fear and misunderstandings could be reduced by having more clearly defined roles for the different stakeholders in a democratic and open society . Under multi-party system, members of parliament - those from opposition as well as governing parties - are seen to have a lead role in providing checks and balances on policy proposals from the executive. They play an important role as a consultative link with the electorate. The need for transparency means that the traditional culture of secrecy in public administration must be overcome. This is a dimension in almost all administrations but was thought to be especially important during a transition from autocratic rule to democratic government. Transparency requires a well-developed system for communication not just within the administration but between it and the public at large as well as the several organisations and groups within the civil society. Citizens charters which seek to spell out levels and standards of service to the public can help by showing where responsibilities lie for provision of specific services and what can be considered legitimate expectations of the public. It has been found helpful for each ministry to have an information officer who can not only deal with the communications media but also be a point of contact with the public, handling enquiries from individuals and interest groups. Such an officer would be able to judge the context in which different contacts are made. S/he could provide the context within which views of these stakeholders have to be interpreted. It is important, above all, to have recognized procedures for making public statements on policy. Ministers will normally wish to announce major new policies themselves, but progress reports may often be the responsibility of officials. 2.7. Policy Formulation Processes The Ministers responsible for the sector development are the key initiators of the policy formulation processes. The Tanzania Development Vision 2025 and National Strategy for Growth and Reduction of Poverty, and other national policies provide a detailed background on the rationale, justification and foundation of the proposed national development policy. This module suggests that the preparation of National Development Policy starts with the recognition of secondary and primary problems, which need to be solved under current economic, social and institutional reforms in the country. It has to be noted that various stakeholders may attempt to influence the drafting process and policy decision-making. The following are main steps to be followed when drafting and developing the National Development Policy

18

2.7.1.

Step One: Planning and Preparation

The planning and preparation of a National Development Policy document require setting an institutional framework, a comprehensive implementation plan and the need to consider interests and need for participation of key stakeholders. Institutional Framework responsible for National Development Policy Formulation of a National Development Policy is a multi-layered and complex process in that it involves contributions from a number of interdependent sources and or institutions. The multilevel institutional approach is useful in order to illuminate the different levels at which National Development Policy is formulated and to ensure ownership. The Ministry responsible for the sector development is mandated as leading government institution and has coordination and management roles in drafting the National Development Policy document. However, other central and local government ministries will have to be involved. At the planning stage, Minister, Permanent Secretary, and other senior government officers in the Ministry have to be consulted and or informed in initiating, organizing and managing National Development Policy formulation process. The Minister, in collaboration with the Permanent Secretary, (PS), has to endorsee an organization framework responsible for drafting of the National Development Policy. This framework may constitute the Commissioners / or Directors, the Management Committee, Team of Consultants and a Secretariat. (a) Policy Advisory Committee (PAC)

There is a need to have a high level Policy Advisory Committee (PAC) or a policy advisory committee, which is identified to guide or provide supervision role to the drafting of a National Development Policy. It will have overall responsibility of evolving formulation of the National Development Policy. This may be composed of 6 7 members identified and selected by the Minister. (b) Technical Management Committee (PMC)

There is a need to have a high level Technical Management Committee (TMC), which is identified to coordinate and manage the drafting process of a National Development Policy. It will have overall technical responsibility of evolving formulation of the National Development Policy. This may be composed of PS (as the Chair) and all commissioners/directors in the ministry / department or agency.

19

(c)

The Team of Consultants (TOC)

The Team of Consultant will be composed of internal (within) and external (others identified local) experts with multi-displinary background. These are well trained, experienced government officers and professional lawyers, social-economists and policy analysts. Team Leader(s) will head it with extensive background as policy, strategic planning and economist, social scientist or lawyer. There may be two Team Leaders or Lead Consultants to be the overall coordinator(s) of the policy process in collaboration with senior government officers with good background on sector operational matters. The Team of Consultants has the following main tasks or specific functions: 1. To review all relevant operations, institutional, legal problems and other issues and sector literature. 2. To provide appropriate guidance in the preparation of the National Development Policy 3. Submission and articulation of the National Development Policy during consultation processes with PAC, stakeholders, interviews, seminars, workshops and national symposia. 4. To submit the drafts of the National Development Policy to the government. (d) Secretariat

The Team of Consultants is to be assisted by a secretariat composed of two policy research assistants, senior government officers from the respective department, ministry and a research secretary. The secretariat will perform the following specific functions. 1. To participate in developing the National Development Policy on the basis of discussions and consultations; 2. To organize consultative meetings seminars/workshops/symposia; and 3. To provide technical, administrative and other support in the process of developing the National Development Policy Comprehensive Implementation Plan It is important to have a comprehensive implementation plan that includes: The Contract/Agreement/Memorandum for preparation of the National Development Policy with clear Terms of Reference and Mandate for the activity; Identification of specific steps and lines of activities needed in drafting a National Development Policy;

20

 Identification and engagement of internal and external consultants responsible for managing drafting process; Clarified roles, responsibilities and lines of communications of different institutions, individuals and stakeholders; Setting lead time and timetable (start, duration, end time for each activity); The budget that identifies financial resource requirements and ascertain availability; The basic data and information on the sector. Interests of all stakeholders must be considered An integral approach and strategic alliance among the government stakeholders are essential for the formulation of a consistent National Development Policy. One way is to involve some of them in drafting the National Development Policy. Another way is to allow and stimulate dialogue among all stakeholders at all levels in the preparation of the National Development Policy. This dialogue may take place in internal meetings, seminars, workshops, conferences, round tables and informal discussions with private sector, lawyers, NGOs, CSOs academic and research institutions, top and senior government officials. The aim is to promote the exchange of views by the different actors, facilitating discussions on future modern government ministry and policy issues. 2.7.2. Step Two: Literature Review

The Team of Consultants will conduct literature review on the government operations, modernization, development policies, crosscutting, regional, and international policy issues. Reviewing all sector performance and issues The review should focus on all sector and development policies related to specific policy issues. These must be reviewed to ensure that the National Development Policy is in harmony with the other national security policies, plans and programs. Reviewing major crosscutting, regional and international sector Issues There is a need to ensure sustainable sector development with regard to cross-cutting, regional, international, institutional, and regulatory aspects. The Team has to review the on-going sectoral reforms in both Zanzibar and Tanzania Mainland. The National Development Policy has to be contrasted with that of other internal security policies in the neighboring SADC, EAC and other developing countries.

21

Proposing Report Format and Outline of the National Development Policy There is a need to have two main types of report formats and/or outputs. The first type is a main Technical Research Report and the second type is an intended National Development Policy Document. The MC in collaboration with TOC has to prepare an initial outline of the National Development Policy. A standard outline may include the following chapters; 1. An Introduction, 2. Sectoral constituents and Stakeholders 3. A Situation Analysis of the Government ministry(Background, Current Operational Matters and Status, Performance, Limitations, Challenges) 4. Sectoral Reform Vision Statements, General Objectives and Strategies, 5. Specific Sectoral Reform Objectives and Strategies, 6. Special Sectoral Reform Issues, Objectives and Strategies, (e.g., HRD, and Infrastructure) 7. Financial Resource Requirements, 8. An Institutional Framework for Implementation of the National Development Policy 9. Monitoring and Evaluation. [Objectives, Strategies, Systems, Lines of Action] 10. Conclusion. 2.7.3. Step Three: Field Research Interviews and Consultations

First Round Field Research Survey and Consultations In step 3, the TOC may use different methodologies to obtain necessary baseline data and information on the sector. They may use secondary or existing government research reports, findings, results and or design and conduct specific mini field research surveys. The specific research may be in the form of classical or rapid appraisal methods involving interviewing stakeholders at every levels and time. Both structured or non-questionnaires may be used to collect more quantifiable data and information. It is important to interview and consult all important stakeholders, representatives, leaders and key individuals on key issues in formulating the National Development Policy 2.7.4. Step Four: Initial Writing of Research Report and National Development Policy

The TOC and secretariat under the guidance of the MC have to prepare background papers, and chapters and relevant inputs. The TOC is responsible for writing draft reports and formulating National Development Policy. This has to be: Based on the major research findings and analysis on the sector, Consultations with all government ministries and key stakeholders,

22

 Very professional, technical and consistent national policies and strategies, and Clear and use of common/simple policy and strategic planning language. 2.7.5. Step Five: Second Round Consultations, Circulation of Drafts and Internal and External Reviews of the National Development Policy

Internal Consultations To prepare an acceptable National Development Policy document, there is a need for considerable consultations and seek views of many stakeholders in government offices, the private sector, political parties, NGOs and civil society and development partners, - which may offer valuable contributions and suggestions. All major political parties in the country need to be consulted and their views have to be incorporated in the considerations of the National Development Policy document. Also NGOs and private sector stakeholders have to be consulted and several supporting and development organizations need to be consulted. Regional and Global Field Visits At one point, there may be a need to consult regional and global collaborating institutions. This may add value to the process, but not very necessary. This depends on time and resources. TPF in collaboration with other government ministries may arrange these foreign visits. There is a need for consultations with stakeholders and strategic partners in both in Africa (EAC and SADC) and outside Africa (e.g., USA, China, Asia and Europe). The purpose of all these wide consultations is to get more views, comments and contributions of all stakeholders on the restructuring of the Tanzania Sector Force. 2.7.6. Step Six: External Reviews, Wide Consultations, National Workshops and Editing

The wide consultations, external reviews and workshops aim at soliciting views, comments and contributions from many different stakeholders. It is important that many stakeholders are given opportunity to contribute in one form or another. The TMC, TOC and Secretariat ensure effective participation of private sector and civil societies in drafting National Development Policy. Associations, NGOs, private firms, scholars and individuals in their own capacities may represent the civil societies. The TOC and secretariat continuously review and edit the Zero Drafts on the basis of discussions, consultations and guidance from the TMC. After the planned consultative workshops, a TMC in collaboration with the Team of Consultants will do consolidation, refinement and editing of chapters of the National Development Policy.
23

2.7.7.

Step Seven: Submission and Approval of the National Development Policy

Submission The final National Development Policy has to be submitted to the Minister by the PAC for acceptance and approval system. Approval System The following is an approval, launching and dissemination system for the National Development Policy; 1. Draft National Development Policy to be presented, discussed and approved by the InterMinisterial Technical Committee 2. Draft National Development Policy to be presented, discussed and approved by the Cabinet 3. Draft National Development Policy to be presented, discussed and approved by the National Assembly. 4. The National Development Policy to be launched by the President of URT 5. Organize and Implement series of Dissemination Workshops and Publicity Campaigns on the National Development Policy.

Reference: 1. Francis S. Idachaba (2000), Agriculture Policies, Process in Africa. The Role of Policy Analyst, ECAPAPA, Entebbe Uganda. Fancis Idachaba (1997) Policy Research in Agriculture: The view of a Policy Analysis Workshop Paper Bonn, Eschborn Wageningen, German. Friedmann M (1953) Essay) in Positive Economic Chicago, University of Chicago Press. Gunther Schnud, Jacquiline OReally and Khaus Schomann, 1996) International Handbook of labour market Policy and Evaluation.

2.

3. 4.

24

DEPARTMENT OF ECONOMICS
UNIVERSITY OF DAR ER SALAAM

Lecture Three
Major Implementation Planning, Dimensions Framework and Institutions
By Semboja Haji Hatibu Haji
Unedited Training Notes To be presented at the EC664 Policy Analysis MA Course Date Monday, October-31-11

3.1. Policy implementation processes, planning, dimension, framework and institutions. 3.1.1. Background

Many African countries have put in place a number of national development policies, plans and reform program documents. Many of these documents are in the book shelves in government offices. Few are under ad hoc implementations. There are very few successful policy implementation stories. Majority of those policies / reforms implemented or and under implementation have failed or and not produced desired outcome. Failures in policy, plans and reform implementation may arise from several angles: the policy/ plan/ reform itself may be the wrong premise, assumptions about the nature of the problems and instrument to addressing the problem; the policy may have been appropriate for a previous problem under previous conditions which may be different from new conditions; the implementation of the policies may have been given rise to further problems which had not been anticipated; or the supervision and preparation at the implementation stage may be inadequate, (Gurther, 1996, Semboja, 2004). Disagreements may arise because of the failure to trace the full consequences of a particular policy/plan/reform. There may be indirect or general equilibrium effect. These may reinforce the direct effect. Alternatively, they may work in the opposite direction and undermine the intended consequences. 3.1.2. Objective of this lecture note

The objective of this lecture is to review policy / reform implementation processes, planning, dimension, framework, institutions and other policy process issues. Other policy processes1 include the need for harmonization and rationalization of national policy processes / reforms and efficient communication strategies, general and specific roles of key implementing agencies, monitoring, evaluation and revision, implementation assessment and the need for optimal policy design.The ultimate goal is to determine the optimal design of implementation systems and procedures. Where there is little chance of changing actual processes, then process evaluation can at least provide information as to how programmes should be adjusted to make them function more efficiently. This involves taking stock of the relative success and failure of the policies pursued in terms of achieving the aim for which they were designed. For either outcome, it is useful to analyze on one hand the extent to which the success /failure of the policy is attributed to limitations in the policy itself, reflecting some weakness in the process above, and on the other hand the extent to which the implementation of the policies itself has contributed to the outcome.

We noted that policy processes refers to the sequential process of identifying problems, analyzing them, searching for appropriate policies, strategies and actions to options to solve them, articulating the options clearly, deciding upon which of the options to take, implementing the strategic policy options and finally evaluating the implementation process.

3.2. Implementation Processes and Planning This section reviews some of the steps/processes required before implementation of policy / reform can begin. The centre piece is the preparation of an Implementation Action Plan2 which describes when activities will take place and who is responsible for implementing them (Smith 1973, Gurther, 1996 and URT, 2005b. The implementation action plan has to be supported and complemented by a procurement plan, and a detailed operational and disbursement schedules. 3.2.1. Approval System

Following the approval of the national policy / reform program by the government, a number of steps should be planned and be undertaken by the institution prior to implementation, (Smith, 1973). These focus on the planned implementation time and include the preparation of: 3.2.2. Implementation Action Plan

An Implementation Action Plan is a schedule of lines of activities in given specific time period. This describes when each activity is planned to start and finish. Action plans are sometimes termed work or operational plans. (Smith, 1973 and URT, 2005a and 2005b) Typically action plans assign responsibility for who will initiate and manage each activity. Action plans incorporates procurement plans, since an activity can be considered to have two broad stages: a procurement stage and an implementation stage. 3.2.3. Procurement plan

A procurement plan describes when procurement steps are expected to start and finish. It links the cost of an activity to the procurement process to be undertaken, (URT, 2005b). Procurement processes (for example, National Competitive Bidding) are determined by the size and type of expenditure, and are guided by the Public Procurement Act (2004). 3.2.4. Preparing an Action Plan

An action plan covers specific period of time (e.g., one year), and describes: When activities will be done Who will do them

Module Four and Five will focus on the Critical Path Methods / Analysis a tools for preparing Implementation Action Plans

Organizing activities ahead of time can help manage potential conflicts and can result in a better coordinated work schedule. It can help identify critical tasks or dependencies so that these can receive extra attention. To schedule activities, adhere to the following key steps, (URT, 2005b): 1. For each activity, estimate how long the activity is likely to take (its duration). To do this, divide the activity into two hypothetical parts: its planning or procurement stage, and its implementation stage. 2. Initially schedule individual activities. Do this by working backwards. Select the date you aim to finish the activity. This is called the planned completion date. Given its duration (including procurement), work backwards to determine its planned start date. 3. Take account of dependencies between activities to fine-tune your initial schedule. Some activities can be completed at any time while others depend on the completion or initiation of others. The most typical type of dependency is Start to Finish: Remember that activities in your operational plan are not in chronological order: they are listed in prioritized order or strategic arrangement, (URT, 2005a and 2005b). Milestones Milestones are activities used to identify significant events in a schedule, such as the completion of a major phase or event. They are selected because they are representative of overall progresses or because they track progress towards key strategic reforms. Oftentimes they mark the completion of a series of key events; they can be considered a very high-level to do list. A plan should only identify a few milestones (perhaps 10-15). Institutions should identify milestones and monitor them in quarterly and annual reports. Aggregation Though the basis of scheduling is activities, these can (in theory) be aggregated to the target or objective level (Atkison, and Stiglitz, 1980). Briefly, the planned start date for a target is the earliest planned start date of all activities under it; the planned completion date for a target is the latest planned completion date of all activities under it. Presentation and Gantt Charts There are many ways to present schedules of activities in a given specific time, the most sophisticated of which is a Gantt chart. Gantt charts are difficult to draw, unless planners use specific software (such as Microsoft Project) to do so. The content is the same: 1. A list of activities (and perhaps their core operational / strategic objectives and targets,

2. The planned start and completion dates for activities 3. Responsibility for the activities and 4. A graphical presentation. This should only cover the specific period of time, e.g., current year. Lines of Specific Activity Disbursement Schedules Based on the action plan (and procurement plan), institutions can then establish the timing of their lines of specific activities such as resource requirements. Capacity Building There is always a need to plan for capacity building of senior and junior officers and staff who will coordinate, manage and implement policy / reforms, (Smith 1973 and Semboja, 2004). As a result of the implementation planning process, some institutions will undertake intensive capacity building efforts. In other cases, the institution may be providing training to a large number of clients, including other government institutions. When training will be intensive, initiatives will have to be coordinated across resources and steps will have to be taken to identify suitable training providers and courses. To manage training (or HR development), institutions may need to develop a detailed training plan, providing information for each activity level. Specific Assignments All employees, senior officers, and key stakeholders want to know what is expected of them, (roles) how well they are doing, and how they can improve their work, (responsibilities). Open Performance Review and Appraisals Open Performance Review and Appraisals, (OPRAs), system is recommended to be adopted at this point. OPRAs are a process which helps meet these needs, by improving communication between superiors and sub-ordinates, (URT, 2005b). The process has time limitations (usually, annually), and consists of three main steps: Performance Agreement entails the need for the: supervisors and subordinates to agree on what the sub-ordinate will do, what his or her objectives are, how performance will be assessed, and what resources will be available. In general, OPRAs serve several the following purposes: 1. To improve institutional performance, by aligning the institutional plan to individual responsibilities. 2. To establish an environment of feedback, exchange and communication between supervisors and sub-ordinates. 3. To help identify the sub-ordinates strengths and areas for development

4. To link performance and compensation. 3.3. Policy Implementation Dimensions (PID) There are five critical policy/ reform implementation dimensions (Guther 1996 and Semboja, 2005). 3.3.1. Political structure

The first and foremost dimension is the political structure. Three elements of political structure or and environment lead to badly formulated or poorly implemented policies, plans and reforms: unstable, inadequate or delayed political support. Frequent changes in regimes or in key actors within the same regime deny policy varieties the continuity or stability of political support political nutrients. In adequate political support results in withering and stunted growth of the policy varieties. Unstable or and inconsistent political support for policies results in frequent policy replacements - analogous to the seed variety of a crop that is abandoned when a farmer encounters serious labor problems or a crop variety left to atrophy from lack of moisture. Delayed political support that causes delayed funding and administrative support for a policy / reform variety means delayed political nutrients, resulting in poor policy implementation. Inadequate, unstable and delayed political support results to badly formulated or poorly implemented policy varieties. 3.3.2. Competence structure

The second dimension concerns the competence structure (knowledge, skills, and attitudes) that governs the behaviour of the actors responsible for the implementation of policy. The number of implementers and their level of qualification and competence are of primary importance. 3.3.3. Decision-making and responsibility structure

The third dimension is characterised by the decision-making and responsibility structure. The policy issue is whether decision-making on the use of resources and the transformation of the programmes into operative measures is autonomous-decentralised or hierarchical-centralized; cooperative decision-making structures would constitute an intermediate form, (Semboja, 2004). Another policy / reform issue is whether the area of responsibility covers specific functions or is multifunctional. Accordingly, four subtypes of implementation structure can be distinguished in this dimension: structures that are fragmented and decentralized or integrative and decentralized, and those that are fragmented and centralized or integrative and centralized.

3.3.4.

Financial structure and the production structure

The fourth dimension is related to the financial structure and the production structure of the service provided. For instance, further training/medical care/ can be both financed and carried out either by private or public bodies or cost sharing schemes. Contributions to collective funds are an interesting intermediate form of financing whereby individuals acquire entitlement to benefits through payment of contributions. Intermediate forms of production structure are public delivery of services against fees that cover a part of the costs, or private delivery of services with subsidized prices. 3.3.5. Legal form and the content of programmes

The fifth dimension of implementation concerns the legal form and the content of programmes. Legally, action lines can be designed for a specific purpose or they may have a conditional form. In the first case, only the goals are predetermined, whereas the means to achieve these are left to organisations implementing the policy / reforms. In the second case, the conditions under which certain legal entitlements must be satisfied are precisely formulated. Furthermore, targets and conditional action lines may be more or less complex (regulatory depth) and, accordingly, can allow room for manoeuvre when it comes to implementation. This lecture note focuses on the second and third policy implementation dimensions. These are institutional dimensions 3.4. The General Institutional Framework There has always been a need for an effective national framework and institution for policy / reform implementation. Many countries have had multi-institutional frameworks in implementing many of its core policies / reforms. These have to adjust to the importance of greater transparency, accountability, good governance and the rule of law. Many of these are well established, effective and coordinated organizational institutional framework. This is one of the important factors that determine the scope and mode of operation of key institutions indicated in the many core policies. Major sector ministries take the responsibilities of coordinating implementation of their own national development policies. For the sector policies to be an implementing strategy for the long term development vision, the nation has to operationalize a comprehensive institutional framework for implementation, management, and coordination of the strategy. In general the operational objectives include the need to have;

3.4.1.

An comprehensive multi-institutional framework

Most countries have been enhancing comprehensive multi-institutional frameworks in implementing the sector policies, which has to adjust to the importance of greater transparency, accountability, good governance and the rule of law. This demand; First and foremost sound management as well as efficiency, responsiveness and integrity in public sector management and administration. Moreover, this has to put people (senior officers) at the centre of development (reforms), i.e., ownership and empower them to influence the structure, performance and conduct of the strategy. Secondly, this has to ensure the division and clarity of responsibilities among the national policy centres (e.g., Presidents Office), of decision taking, planning, implementation, monitoring and evaluation of NATIONAL SECTOR POLICIES, the aim being to stimulate and foster optimum economic participation and democracy, to enhance active mobilization of resources and to promote efficient delivery of core outputs, (Eugene, 1998 and URT, 2005a). Thirdly, this requires establishment of sufficient number of policy coordination and implementing institutions, departments, agencies and units. Many of the government ministries have now established fully fledged departments responsible for policy and planning. It is the intention of the government that these core implementing departments need to have an adequate number of welleducated, thoroughly-trained and skilled legal staff, and should be highly motivated with easy access to the basic social and economic services. These policy and planning departments need to have improved infrastructural facilities such as office accommodation, latest office ICT equipment, transport, communication and other office working facilities. 3.4.2. An effective institutional linkages and coordination

It is acknowledged that the effective and well coordinated organizational institutional framework is one of the important factors that determine the scope and mode of operation of key institutions indicated in the sector policies. There are several institutions in Tanzania, which are important in enhancing and maintaining institutional linkages, close collaboration and therefore promoting the growth of sustainable service delivery, (URT, 2005a). The outcome-based approach adopted in NATIONAL SECTOR POLICIES brings to the fore issues of cross-sector collaboration, inter-linkages and synergies in achieving priority outcomes. The key local actors that will implement the strategy include central government ministries and Local Government Authorities, (LGAs), independent ministries, departments and agencies (MDAs), private sector, Civil Society Organizations (CSO) and Communities. Parliament will play an M and E role over the government in the implementation process. Likewise, the Development Partners (DP) will play technical, financial and supportive roles in the implementation of NATIONAL SECTOR POLICIES.

3.4.3.

The need for efficient leading implementing institution

Since many of sector policies are founded on the national development vision, it is natural that the government ministries and institutions build a facilitative internal capacity, environment and forge international institutional collaboration and partnership. The leadership and close collaboration with all stakeholders entails the need for concerted and coordinated efforts among a number of constitutional and or statutorily autonomous sector institutions. All institutions are challenged to collaborate in the implementation of the lines of action, project and programs. This has to take into consideration strict maintenance of independency of individual institutions. The responsibilities and accountability for implementation management of the sector policies are to be fully decentralized to specific sectors basing on policy guidance, objectives, functions and roles, (URT, 2005a and Semboja, 2005).. The cross-cutting issues have been mainstreamed into the broad sectors namely: the macro sectors; productive sectors; social service sectors; economic service sectors; and public administration sectors. 3.4.4. New and innovative institutional framework

We have argued that putting the sector policy/ reforms on stream naturally requires new way of doing things, innovative and far reaching dynamic adjustments to institutional and administrative set up and procedures of the central government ministries and public institutions in order to promote efficiency and rational use of resources, (Eugene, 1998, (URT, 2005a). ). Securing system-wide policy / reform coherence in the economy and reinforcing the co-ordination and direction functions of the KIA in sector policies. In the implementation arrangement, the emphasis is to put a well elaborative, flexible and an innovative dynamic institutional system. This includes the need for central government ministries responsible for macro-economic (financial, fiscal and investment) policies to collaborate with the key institutions. A tripartite government may be desirable institutional setting where sector ministry provides a leading implementation role in collaboration with central government ministries This lecture note emphasize need to optimize institutional capacities of the established Directorates of Policy and Planning, (DPP) in all sector ministries. 3.5. The Specific Institutional Framework The following are the specific roles and responsibilities of other key institutions in the implementation of sector policies, (URT, 2005a).

3.5.1.

Ministries, departments and agencies

All government ministries, departments and public institutions have important functions, roles and responsibilities in the implementation of the national sector policies. The functions and responsibilities of these government ministries and public institutions are stipulated in different pierces of policies, legislations and documents, (URT, 2005a). All the government ministries, departments and agencies will have the following responsibilities: Coordinating the national sector policies and respective Monitoring and Evaluation Systems and work closely with other actors to ensure that progress in achieving poverty reduction outcomes is monitored and evaluated. Facilitating the interface between the national poverty monitoring system and local government authorities on different aspects of monitoring and ensure cross-cutting issues are adequately coordinated and mainstreamed during the implementation of the national sector policies. Establishing and incorporating NATIONAL SECTOR POLICIES priorities in the guidelines for the preparation of Medium-Term and Annual Plan and Budget. Mobilizing, allocating and monitoring of financial resources made available to NATIONAL SECTOR POLICIES actors. The Ministry responsible for public service management in collaboration with other actors within the government will coordinate capacity building and skills development programmes. The sectoral ministries will be responsible for policy guidance, supervision, coordination, implementation and monitoring activities, which are contributing towards achievement of particular poverty reduction outcomes in their sectors and across sectors. They will also be responsible for identifying detailed priority activities (sectoral and cross-cutting) that will be taken up during the implementation of the national sector policies. Ministry responsible for local government will coordinate implementation of programmes at regional and district level. It will also be responsible for capacity building measures at the local government levels. On the other hand, the ministry will lead in collection and dissemination of data from grassroots level to the national level. At the district level, LGAs (district/town/municipal/city councils, village) will plan and implement programmes within their areas of jurisdiction, in collaboration with other actors, including communities and households through participatory process. 3.5.2. Non-government organizations

The government has given the challenge for sustainable development to the non-government actors in collaboration with all other stakeholders. The non-government organizations include communities, households, private sector, civil society organizations increasingly strengthening its participation in the provision of legal services. The following are strategic non-government

organizations in implementing NATIONAL SECTOR POLICIES and achieving desired outcome of desired policy / reforms, (Semboja, 2005 and URT, 2005a). Households The households are the first and foremost social-economic entities, target groups, implementing actors, stakeholders and beneficiaries of the national sector policies. This is composed of individuals, families and friends in the rural and urban areas engaged in one form or other income generating and social-economic activities. These are suppliers of labour power in the labour market or / and some are owners of capital assets and managers of social-economic and productive sectors, (Atkison, and Stiglitz, 1980). The involvement of different levels of key personnel (not only upper management) in their individual capacities or and collectively as friends, families and groups in all stages of the process is crucial for policy sustainability . Communities Communities are the first forms of household organizations. These will participate in planning, implementation and monitoring community activities supported by government and other actors. Communities will also monitor quantity and quality of services delivered to households. Mechanism will be developed to enable communities to make leaders, local authorities and central government accountable to the people they serve. Private sector The private sector has an important role to play in desired policy / reform outcomes because of its central role as the engine for economic growth. The government is reducing its role to core functions of policy formulation, economic management, provision of economic and social infrastructure, and legal and regulatory framework, maintenance of law and order as well as selected areas of public-private sector partnership. The factors that hinder the active private sector participation in the economy will be addressed through friendly savings, investment, and production and trade policies. Civil Society Organizations The civil society organizations are key actors in the poverty reduction processes and activities, (Semboja, 2004). It is acknowledged that civil society engagements are regarded as both means and target, as well as seen as pivotal to the national sector policies performances. Increasingly, the point is made that not only economic growth must be accompanied by, social economic equity and pro-poor policies and civil society engagement to ensure a more egalitarian outcome, but rather that without the latter, that is without deep involvement of civil society, growth and poverty reduction efforts, these are at risk, (Semboja, 2005).

10

Their roles and responsibility will be to build local capacity and empowering households and communities, participate in monitoring and evaluation at national and community level, mobilizing and enhancing community participation as well as community resources for poverty reduction. The Tanzanian CSOs will advocate for accountability of its members and government to the people. CSOs will work closely with the government ministries and local authorities to ensure that cross-cutting issues are included and implemented in the sectoral and district plans. The current legal, institutional and operational facilitate formation and operation of the civil societies. However, many of these civil societies have limited capacities to participate in collegial policy dialoguing, planning, implementation, monitoring and evaluation of national development policies, (URT, 2005a). The central and local government authorities have started collaborating with the civil society. In order to improve the effectiveness of civil society organizations there is a need to review and strengthen the organizational and management frameworks at national, regional, district and community levels. Development Partners The role of international actors is to support and facilitate the reform process but not to lead or / and dominate it. Development partners will have to continue to work closely with key local actors to address key policy / reform outcomes. According to the thrust of the Rome Declaration and Tanzania Assistance Strategy, Development Partners will use the existing agreed national system and processes to provide additional financial, technical and other support in the implementation of the poverty reduction strategy. Development Partners may also facilitate capacity building initiatives within the policy implementation framework as well as participating in monitoring and evaluation. There must be a common understanding between international agencies involved in policy / reforms and the national government. 3.6. The need for harmonization and rationalization of national policy processes

In the policy / reform efforts, the country has put in place a number of complementary policy processes (initiatives, programs and activities) with different institutional settings. There are several key national level processes, namely: These include Public Expenditure Review (PER) and Medium Term Expenditure Framework (MTEF There is a need to ensure that all these key policy processes and institutional settings are appropriately mainstreamed, integrated, sequenced and properly timed in order to provide adequate linkages and synergies among them. The challenge is to design and provide institutional framework on how national development policies and reforms should be delivered to ensure that they do not undermine government machinery and systems, they are mainstreamed, consistent, sustainable and efficient.

11

Mainstreaming of policy implementation has advantage of promoting a coherent policy and planning processes, consolidating resource envelope and strengthening national ownership. The national sector policies and budget processes are at the centre of all processes and linkages between main sector ministry and all other sector ministries. The national sector policies outputs will feed into the MTEF and PER processes, which again informs the preparations of annual plans and budget guidelines. The budget guidelines inform sector budgets and MTEF preparations. TAS/JAS processes will also inform the PER processes on external resources assistance. These processes need to have a well centralized, efficient and accountable institutional framework for effective management and coordination. (URT, 2005a). There are, among Development Partners, efforts to harmonise and rationalise processes by encouraging joint missions and reviews. Bilateral partners and multilateral organisations that are directly supporting the Government budget through the PRBS/PRSC facilities have streamlined required actions by applying the same Performance Assessment Framework and carrying out joint reviews under the PAF. (Semboja, 2005 and URT, 2005a). Development Partners themselves have reorganised themselves so as to provide internal coherence amongst themselves in the context of TAS and the Rome Declaration. That way they will be seeking to harmonise or reduce institutional costs and reporting frameworks and making it possible for the Government to have spare time to concentrate on core activities. With regard to PRGF, the IMF will continue with its efforts to align their review missions with the budget cycle and coordinate with other development partners. The harmonized calendar will be reviewed and shared widely (URT, 2005a). One of the preconditions for harmonization and rationalization is the establishment of strong national systems and sector reviews as well as sustained reforms of core programmes. Support by development partners in these reforms has been substantial. However, there is need for increased efforts in building and strengthening local capacities in the MDAs responsible for taking the reforms forward, (URT, 2005a). 3.7. The need for an efficient Monitoring Communication Strategy The government is committed to opening up and maintaining channels of efficient communication with key stakeholders including MDAs, private, sector civil society organizations and vulnerable groups, communities and Development Partners, to create a sense of national ownership and enlist broad participation. The Monitoring Communication, (MC), Strategy will be a tool for reaching stakeholders as well as an effective feedback mechanism. It will facilitate opportunities for debate, dialogue and sharing of knowledge to strengthen the development and implementation of poverty reduction strategy. The MC strategy will complement existing communication interventions.

12

3.8. The general and specific roles of Key Implementing Agency The vision of any KIA is to become a center of excellence and chief advisor to government on core policy matters relating to economic management, as well as medium and long term socioeconomic development plans, (Semboja, 2005). The mission of the KIA is to promote sustainable and equitable economic growth and improved welfare through proper management and guidance of the national economy. Some of core functions of the KIA include; formulation and analyzing of economic policies; issuing guidelines for the management of the economy; identification and undertaking development planning.; coordination of development planning and issuing budget guidelines for utilization of national resources and articulation of policies and strategies for sectoral development. The achievement of successful NATIONAL SECTOR POLICIES implementation requires an understanding and acceptance by all stakeholders on the above vision, mission, objectives, and strategic position and functions of the KIA. It must be acknowledged that KIA has to be the chief implementer of the Development Vision 2025 and main policy advisor of both PRSPs and NATIONAL SECTOR POLICIES. The implementation of NATIONAL SECTOR POLICIES requires dynamic institutional capacity, leadership and a political commitment to change. This thinking is particularly important where there are so many potentially differing institutional interests, and where there is extreme complexity together with uncertain outcomes . The KIA has to encourage earlier and more effective planning for implementation of NATIONAL SECTOR POLICIES strategies delivered through government plans, programmes, activities and services. By working closely with all ministries, departments and agencies, the KIA will be endeavoring to encourage greater utilization of good policy management principles and practices. In partnership with other institutions, KIA must seek systematic reform to the way government policies are implemented and assist in ensuring the committed and effective delivery of key national development decisions (URT, 2005a).. To achieve the national sector policies implementation objectives and contribute to the broader mission of the national sector policies institutional framework, KIA must aim to: Support all identified institutions in identifying the need for, and value of, developing implementation plans for specific NATIONAL SECTOR POLICIES initiatives Encourage institutions to consider implementation of own sector specific policy strategies so that KIA has the benefit of an early assessment of implementation risks to assist their decisions Assist institutions in proactively identifying and resolving emerging problems in NATIONAL SECTOR POLICIES policy implementation Assist institutions in adopting a consistent approach to policy planning and programme and project implementation Facilitate the development of better practice in policy, programme and project management processes.

13

 Cultivate a community of practice in programme and project management as well as a culture of valuing good implementation practice Establish an accessible resource base of accumulated knowledge and experience in public sector implementation Work with institutions to review NATIONAL SECTOR POLICIES experiencing implementation problems. 3.9. Policy Monitoring, Evaluation and Revision It is important to monitor and evaluate the outcome of the implementation process. The object of process evaluation is to examine the formation and implementation of policies and to elicit the systematic relationships that exist between policies and their effects. Variations in the implementation process are assumed to be an important determinant for the success or failure of policies, (Gurther, 1996 and David, 2005). The policy evaluation or take-up, shows to what extent programmes and measures are appropriate to the motivations, interests and capacities of targeted people or groups. At this stage, the direct outcome performance of implementation can be measured, such as number of participants, structural composition of participants, quality indicators of measures and compliance with the rules. Lessons from policy monitoring and evaluation should be used to make the necessary modifications and improvements in the processing of policy analysis and economic management. In occasions of success, concerted efforts should be directed at sustaining the situation and duplicating these efforts in other areas where it may be relevant, (Gurther, 1996, David, 2005 and URT, 2005a).. As for the event of failure, an evaluation of the limitations which may have occurred in any of the above mentioned areas and processes are needed, strategies need to be reviewed and where necessary, the policies should be revisited. 3.10. Implementation Assessment, (IA).

We have noted that NATIONAL SECTOR POLICIES are extended national frameworks addressing major complex issues; involve extensive cross-portfolio developments; involve crossjurisdictional developments; are political sensitive; and / or require urgent implementation. This suggests the need for leading policy implementing institution (KIA) to conduct implementation assessment of the relevant national sector policy, (Gurther, 1996 and David, 2005). This Implementation Assessment, (IA), is intended as an aid to decision making at an early stage in policy development. By encouraging explicit and early exploration of the scope, risks, targets, outcomes, and budgeting, the Implementation Assessment exposes both the benefits and challenges that can be expected as the policy is implemented. The implementation assessment

14

assists agencies in shaping their approach to policy delivery. At the same time it provides an additional tool to enable political leaders to evaluate new policy submissions brought before. The Implementation Assessment provides a clear and concise summary of potential implementation issues including; a succinct statement of the national sector policies policy objectives; indicators to assess whether the objectives have been achieved; risks to successful delivery and how those risks will be managed; human and financial resources required; a clear indication of who is responsible for delivering the policy and its component parts and a timetable identifying major delivery dates and financial milestones. 3.11. Conclusion : Optimal policy design

Policy implementation processes and reforms have been often determined without simultaneous consultations and considerations of how they would be implemented. This has been due to lack of transparency and co-ordination by agreeing policy changes and not always checking compliance. The dominant concern has been with low system productivity / efficiency combined with a style of management, which was averse to risk and responsibility. Social and economic policies and their intentions have been often changed, modified or evaded during the process of implementation and that the outcome was different from what would have been optimal for all. The optimal policy design and success of national policy implementation is vital to policy makers and all stakeholders but satisfactory delivery is in no way guaranteed or put right through development of an appropriate strategy, (Atkison, and Stiglitz, 1980). The greatest risk is the belief that implementation issues are not worth bothering about, (Smith, 1973 and Eugene, 1998). Implementation issues tend to arise at the end of an implementation process, often disturbing outcome reached on more basic issues. To minimize the risks of an ineffective implementation, this lecture note suggest the need to determine all implementation considerations from the earliest planning and preparation stages of NATIONAL SECTOR POLICIES. The government has to take corrective institutional measures to ensure the importance of implementation issues for policy decision makers and all implementing entities are recognized and incorporated in appropriate procedures, settings, resources and timings.

15

Reference list Atkison A.B. and J. E. Stiglitz, (1980), Lectures on Public Economics, McGraw-Hill Book Company (UK), Limited Maidenheld, Berkshire, England David Booth. (2005). Poverty Monitoring Systems: An Analysis of Institutional Arrangements in Tanzania. Working Lecture note 247, March 2005. Overseas Development Institute; 111, Westminster Bridge Road London SE1 7JD, UK Eugene Bardach. (1998). Getting Agencies to Work Together: The Practice and Theory of Managerial Craftsmanship. Brookings Institution Press, Washington, DC. Guther Schmid (1996), Process Evaluation: Policy Formation and Implementation. Chapter 7 in a book edited by Guther Schmid , Jacueline O Reilly and Klaus Schomann, (1996), International Handbook of Labour Market Policy and Evaluation, Edward Elgar, Chelten, UK Smith, T.B. (1973). The policy implementation process, Policy Sciences 4(2), pp 197-209. Semboja Haji Hatibu Haji, (2004), A policy Analysis of The Tanzania Mining Sector. Tanzania Economic Trend. A Biannual Review of the Economy. Vol. 17 No 1 June 2004. Published by the Economic Research Bureau, University of Dar er Salaam, Tanzania Semboja Haji Hatibu. (2005). Implementing Development Vision 2025 through NSGRP Lecture note presented at the Planners Conference held in Bagamoyo, Paradise Holiday Resort, May 7-8, 2005. The Conference was organized by the Presidents Office Planning and Privatization, United Republic of Tanzania. United Republic of Tanzania. (URT, (2000). Composite Development Goal For the Tanzania Development Vision 2025: Office of the President Planning and Privatization, Government of Tanzania, Dar es Salaam, Tanzania United Republic of Tanzania, (URT) (2001), Poverty Reduction Strategy Lecture note (PRSP) Draft Progress Report, May 2001, Vice Presidents Office, Dar er Salaam. United Republic of Tanzania. (URT) (2005a). National Strategy for Growth and Reduction of Poverty (NSGRP) Draft Progress Report, May April 2005, Vice Presidents Office, Dar er Salaam. United Republic of Tanzania. (URT, (2005b). Guidelines for the Preparation of Medium Term Plan and Budget Framework 2005/6. Ministry of Finance, (MOF), and Office of the President Planning and Privatization, Government of Tanzania, Tanzania.

16

DEPARTMENT OF ECONOMICS
UNIVERSITY OF DAR ER SALAAM

Structural Adjustment Policies and Issues

By Semboja Haji Hatibu Haji
Unedited Training Notes To be presented at the EC664 Policy Analysis MA Course Date Monday, October-31-11

Lecture Four

4.1.

Introduction

Lecture Note Four focuses on Structural Adjustment Policies and Issues. Structural adjustments are the policy changes implemented by the IMF (IMF) and the WB (the Breton Woods Institutions) in developing countries. These policy changes are conditions conditionalities) for getting new loans from the Breton Woods Institutions or for obtaining lower interest rates on existing loans. Conditionalities are implemented to ensure that the money lent will be spent in accordance with the overall goals of the loan. 4.1. Conditionality Conditionality is a concept in international social sciences and describes the use of conditions attached to a loan, debt relief, bilateral foreign aid or membership of international organizations, typically by the international financial institution, regional organizations or donor countries.

4.1.1.

International financial institutions

Conditionality is typically employed by the IMF, the WB or a donor country with respect to loans, debt relief and financial aid. Conditionalities may involve relatively uncontroversial requirements to enhance aid effectiveness, such as anti-corruption measures, but they may involve highly controversial ones, such as austerity or the privatization of key public services, which may provoke strong political opposition in the recipient country. These conditionalities are often grouped under the label structural adjustment as they were prominent in the structural adjustment programs following the debt crisis of the 1980s. 4.1.2. Ex-ante vs. ex-post

Much debate in types of conditionality centers around ex-ante vs. ex-post conditionality. In ex-ante conditionality, the country receiving aid agrees to conditions set by the donor country that they will carry out after they receive the aid. Later follow-ups determine whether they might receive more aid. Ex-post conditionality requires a country to meet certain conditions and prove it can maintain them before it will receive any aid. 4.1.3. Tied' aid

Other types of conditionality that often occur are aid which is tied to be used in a specific way. For example, many countries tie aid to the purchasing of domestic products, although this practice has drastically decreased over the past 15 years. It is estimated that only about 5 per cent of bilateral aid is 'tied' in year 2010, down from 30 per cent in 1990. This however varies from country to country with the United Kingdom, Ireland and Norway giving 100 per cent of their aid untied, and Canada, Austria and Spain giving less than 60 per cent. . 4.2. Fiscal imbalance The Structural Adjustment Programs (SAPs) are created with the goal of reducing the borrowing country's fiscal imbalances. Fiscal imbalance is the term used by governments to describe monetary imbalances between the national government and smaller, subordinate governments, such as those of states or provinces.

A vertical fiscal imbalance occurs when the revenues of different levels of government do not match their expenditure responsibilities. This will necessitate transfer payments from the over endowed party to the under endowed party (vertical fiscal equalization). A horizontal fiscal imbalance occurs when different regions of a country have different abilities to provide services due to different abilities to raise funds. This can occur if regions are able to raise more funds through their tax bases than other regions and/or the cost of provision of services is higher in some regions than in others. This is usually rectified by weighting transfer payments toward the needier regions (horizontal fiscal equalization). The bank from which a borrowing country receives its loan depends upon the type of necessity. The SAPs are supposed to allow the economies of the developing countries to become more market oriented. This then forces them to concentrate more on trade and production so it can boost their economy. 4.3. Structural Adjustment Programmes Through conditionalities, Structural Adjustment Programs generally implement "free market" programs and policy. These programs include internal changes (notably privatization and deregulation) as well as external ones, especially the reduction of trade barriers. Countries which fail to enact these programs may be subject to severe fiscal discipline. Critics argue that financial threats to poor countries amount to blackmail; that poor nations have no choice but to comply. 4.3.1. Internal SAP

Privatization Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector (the state or government) to the private sector (businesses that operate for a private profit) or to private non-profit organizations. In a broader sense, privatization refers to transfer of any government function to the private sector - including governmental functions like revenue collection and law enforcement. The term "privatization" also has been used to describe two unrelated transactions. The first is a buyout, by the majority owner, of all shares of a public corporation or holding company's stock, privatizing a publicly traded stock, and often described as private equity. The second is a demutualization of a mutual organization or cooperatives to form a joint stock company.

A long history of privatization dates from Ancient Greece, when governments contracted out almost everything to the private sector. In the roman republic private individuals and companies performed the majority of services including tax collection), army supplies, religious sacrifices and construction. However, the Roman Empire also created state owned enterprises for example, much of the grain was eventually produced on estates owned by the Emperor. Some scholars suggest that the cost of bureaucracy was one of the reasons for the fall of the roman empire. In Britain, the privatization of common lands is referred to as enclosure (Significant privatizations of this nature occurred from 1760 to 1820, coincident with the industrial revolution in that country. In more recent times, Winston Churchill 's government privatized the British steel industry in the 1950s, However, it was in the 1980s under the leaderships of Margaret Thatcher in the UK and Ronald Regan in the USA, 3

that privatization gained worldwide momentum. In the UK this culminated in the 1993 privatization of British Rail under Thatcher's successor, John Major; British Rail having been formed by prior nationalization of private rail companies. Significant privatization of state owned enterprises in Eastern and Central Europe and the former Soviet Union was undertaken in the 1990s with assistance from the World Bank, 4.3.2. Types

There are four main methods] of privatization: 1. Share issue privatization (SIP) - selling shares on the stock market 2. Asset sale privatization - selling an entire organization (or part of it) to a strategic investor, usually by auction 3. Voucher privatization - distributing shares of ownership to all citizens, usually for free or at a very low price. 4. Privatization from below - Start-up of new private businesses in formerly socialist countries. Choice of sale method is influenced by the capital marker, political and firm-specific factors. SIPs are more likely to be used when capital markets are less developed and there is lower income inequality. Share issues can broaden and deepen domestic capital markets, boosting liquidity and (potentially) economic growth, but if the capital markets are insufficiently developed it may be difficult to find enough buyers, and transaction costs (e.g. under pricing required) may be higher. For this reason, many governments elect for listings in the more developed and liquid markets, As a result of higher political and currency risk deterring foreign investors, asset sales occur more commonly in developing countries. Voucher privatization has mainly occurred in the transitional economies of Central and Eastern Europe. Additionally, Privatization from below is/has been an important type of economic growth in transition economies. A substantial benefit of share or asset-sale privatizations is that bidders compete to offer the highest price, creating income for the state in addition to tax revenues. Voucher privatizations, on the other hand, could be a genuine transfer of assets to the general population, creating a real sense of participation and inclusion. If the transfer of vouchers is permitted, a market in vouchers could be created, with companies offering to pay money for them. 4.3.3. Differing views

Supporting Proponents of privatization believe that private market factors can more efficiently deliver many goods or service than governments due to free market competition. In general, it is argued that over time this will lead to lower prices, improved quality, more choices, less corruption, less red tape, and quicker delivery. Many proponents do not argue that everything should be privatized. According to them, market failures and natural monopolies could be problematic. However, some economists would prefer that every function of the state be privatized, including defence and dispute resolution. The basic economic argument given for privatization states that governments have few incentives to ensure that the enterprises they own are well run. One problem is the lack of comparison in state monopolies. It is difficult to know if an enterprise is efficient or not without competitors to compare against. Another is that the central government administration, and the voters who elect them, have 4

difficulty evaluating the efficiency of numerous and very different enterprises. A private owner, often specializing and gaining great knowledge about a certain industrial sector, can evaluate and then reward or punish the management in much fewer enterprises much more efficiently. Also, governments can raise money by taxation or simply printing money should revenues be insufficient, unlike a private owner. If private and state-owned enterprises compete against each other, then the state owned may borrow money more cheaply from the debt markets than private enterprises, since the state owned enterprises are ultimately backed by the taxation and printing press power of the state, gaining an unfair advantage. Privatizing a non-profitable state-owned company may force the company to raise prices in order to become profitable. However, this would remove the need for the state to provide tax money in order to cover the losses. Proponents of privatization make the following arguments: Performance. State-run industries tend to be bureaucratic. A political government may only be motivated to improve a function when its poor performance becomes politically sensitive, and such an improvement can be reversed easily by another regime. Increased efficiency. Private companies and firms have a greater incentive to produce more goods and services for the sake of reaching a customer base and hence increasing profits. A public organization would not be as productive due to the lack of financing allocated by the entire government's budget that must consider other areas of the economy. (Note: However according to the Samuelson Condition, public organizations tend to produce more of a public good or service. Also, since private firms provide goods and services according to the marginal private benefit curve, private firms have an incentive to produce less.) Specialization. A private business has the ability to focus all relevant human and financial resources onto specific functions. A state-owned firm does not have the necessary resources to specialize its goods and services as a result of the general products provided to the greatest number of people in the population. Improvements. Conversely, the government may put off improvements due to political sensitivity and special interests even in cases of companies that are run well and better serve their customers' needs. Corruption. A state-monopolized function is prone to corruption; decisions are made primarily for political reasons, personal gain of the decision-maker (i.e. "graft"), rather than economic ones. Corruption in a state-run corporation affects the ongoing asset stream and company performance, whereas any corruption that may occur during the privatization process is a one-time event and does not affect ongoing cash flow or performance of the company. Accountability. Managers of privately owned companies are accountable to their owners/shareholders and to the consumer, and can only exist and thrive where needs are met. Managers of publicly owned companies are required to be more accountable to the broader community and to political "stakeholders". This can reduce their ability to directly and specifically serve the needs of their customers, and can bias investment decisions away from otherwise profitable areas. Civil-liberty concerns. A company controlled by the state may have access to information or assets which may be used against dissidents or any individuals who disagree with their policies. Goals. A political government tends to run an industry or company for political goals rather than economic ones. Capital. Privately held companies can sometimes more easily raise investment capital in the financial markets when such local markets exist and are suitably liquid. While interest rates for private companies are often higher than for government debt, this can serve as a useful constraint to promote efficient investments by private companies, instead of cross-subsidizing them with the overall credit-risk of the country. Investment decisions are then governed by market interest rates. 5

State-owned industries have to compete with demands from other government departments and special interests. In either case, for smaller markets, political risks may add substantially to the cost of capital. Security. Governments have had the tendency to "bail out" poorly run businesses, often due to the sensitivity of job losses, when economically, it may be better to let the business fold. Lack of market discipline. Poorly managed state companies are insulated from the same discipline as private companies, which could go bankrupt, have their management removed, or be taken over by competitors. Private companies are also able to take greater risks and then seek bankruptcy protection against creditors if those risks turn sour. Natural monopolies. The existence of natural monopolies does not mean that these sectors must be state owned. Governments can enact or are armed with anti trust legislation and bodies to deal with anti-competitive behavior of all companies public or private. Concentration of wealth. Ownership of and profits from successful enterprises tend to be dispersed and diversified -particularly in voucher privatization. The availability of more investment vehicles stimulates capital markets and promotes liquidity and job creation. Political influence. Nationalized industries are prone to interference from politicians for political reasons. Examples include making an industry buy supplies from local producers (when that may be more expensive than buying from abroad), forcing an industry to freeze its prices/fares to satisfy the electorate or control inflation, increasing its staffing to reduce unemployment, or moving its operations to marginal constituencies. Profits. Corporations exist to generate profits for their shareholders. Private companies make a profit by enticing consumers to buy their products in preference to their competitors' (or by increasing primary demand for their products, or by reducing costs). Private corporations typically profit more if they serve the needs of their clients well. Corporations of different sizes may target different market niches in order to focus on marginal groups and satisfy their demand. A company with good corporate governance will therefore be incentivized to meet the needs of its customers efficiently. Job gains. As the economy becomes more efficient, more profits are obtained and no government subsidies and less taxes are needed, there will be more private money available for investments and consumption and more profitable and better-paid jobs will be created than in the case of a more regulated economy.

Opposing Opponents of privatization dispute the claims concerning the alleged lack of incentive for governments to ensure that their public services are well run, on the basis of the idea that governments are proxy owners answerable to the people. It is argued] that a government which runs nationalized enterprises poorly will lose public support and votes, while a government which runs those enterprises well will gain public support and votes. Thus, democratic governments do have an incentive to maximize efficiency in nationalized companies, due to the pressure of future elections. Opponents of certain privatizations believe that certain public goods and services should remain primarily in the hands of government in order to ensure that everyone in society has access to them (such as law enforcement, basic health care, and basic education). Likewise, private goods and services should remain in the hands of the private sector. There is a positive externality when the government provides public goods and services to society at large, such as defence and disease control. As for natural monopolies they are by their nature not subject to fair competition and better administrated by the state. The controlling ethical issue in the anti-privatization perspective is the need for responsible stewardship of social-support missions. Market interactions are all guided by self-interest, and successful actors in a healthy market must be committed to charging the maximum price that the market will bear. Privatization 6

opponents believe that this model is not compatible with government missions for social support, whose primary aim is delivering affordability and quality of service to society. Many privatization opponents also warn against the practice's inherent tendency toward corruption. As many areas which the government could provide are essentially profitless, the only way private companies could, to any degree, operate them would be through contracts or block payments. In these cases, the private firm's performance in a particular project would be removed from their performance, and embezzlement and dangerous cost-cutting measures might be taken to maximize profits. Furthermore, large corporations may pay public relations professionals to convince decision-makers that privatization is a sensible idea. Corporations typically have far more resources for expert testimony, advertisements, conferences and other propaganda efforts than anti-privatization advocates. Some would also point out that privatizing certain functions of government might hamper coordination, and charge firms with specialized and limited capabilities to perform functions which they are not suited for. In rebuilding a war torn nation's infrastructure, for example, a private firm would, in order to provide security, either have to hire security, which would be both necessarily limited and complicate their functions, or coordinate with government, which, due to a lack of command structure shared between firm and government, might be difficult. A government agency, on the other hand, would have the entire military of a nation to draw upon for security, whose chain of command is clearly defined. Opponents would say that this is a false assertion: numerous books refer to poor organization between government departments (for example the Hurricane Katrina incident). Although private companies will provide a similar good or service alongside the government, opponents of privatization are careful about completely transferring the provision of public goods, services and assets into private hands for the following reasons: Performance. A democratically elected government is accountable to the people through a legislature and is motivated to safeguarding the assets of the nation. The profit motive may be subordinated to social objectives. Increased Market Efficiency for public goods and services. A public organization tends to produce more of a public good or service according to the Samuelson and Marginal Social Benefit curve. This results in a better positive externality for society. On the other hand, a private firm does not provide sufficient public goods and services, because it provides them on the marginal private benefit curve or private demand curve. A private firm provides less in order to make more profit. Therefore the public goods and services are provided more efficiently for society as a whole by a public organization. (Any market is more efficient for society when marginal social benefits equals marginal social costs, MSB=MSC.) Improvements. the government is motivated to performance improvements as well run businesses contribute to the State's revenues. Corruption. Government ministers and civil servants are bound to uphold the highest ethical standards, and standards of probity are guaranteed through codes of conduct and declarations of interest. However, the selling process could lack transparency, allowing the purchaser and civil servants controlling the sale to gain personally. Accountability. The public does not have any control or oversight of private companies. Civil-liberty concerns. A democratically elected government is accountable to the people through a parliament, and can intervene when civil liberties are threatened. Goals. The government may seek to use state companies as instruments to further social goals for the benefit of the nation as a whole. Capital. Governments can raise money in the financial markets most cheaply to re-lend to stateowned enterprises. 7

Strategic and Sensitive areas. Governments have chosen to keep certain companies/industries under public control because of their strategic importance or sensitive nature. Cuts in essential services. If a government-owned company providing an essential service (such as the water supply) to all citizens is privatized, its new owner(s) could lead to the abandoning of the social obligation to those who are less able to pay, or to regions where this service is unprofitable. Natural monopolies. Privatization will not result in true competition if a natutal monopoly exists. Concentration of wealth. Profits from successful enterprises end up in private, often foreign, hands instead of being available for the common good. Political influence. Governments may more easily exert pressure on state-owned firms to help implementing government policy. Downsizing. Private companies often face a conflict between profitability and service levels, and could over-react to short-term events. A state-owned company might have a longer-term view, and thus be less likely to cut back on maintenance or staff costs, training etc., to stem short term losses. Many private companies have downsized while making record profits. Profit. Private companies do not have any goal other than to maximize profits. A private company will serve the needs of those who are most willing (and able) to pay, as opposed to the needs of the majority, and are thus anti-democratic. The more necessary a good is, the lower the price elasticity of demand, as people will attempt to buy it no matter the price. In the case of price elasticity of demand is zero (perfectly inelastic good), demand part of supply and demand theories does not work. Privatization and Poverty. It is acknowledged by many studies that there are winners and losers with privatization. The number of losers which may add up to the size and severity of povertycan be unexpectedly large if the method and process of privatization and how it is implemented are seriously flawed (e.g. lack of transparency leading to state-owned assets being appropriated at minuscule amounts by those with political connections, absence of regulatory institutions leading to transfer of monopoly rents from public to private sector, improper design and inadequate control of the privatization process leading to asset stripping. Job Loss. Due to the additional financial burden placed on privatized companies to succeed without any government help, unlike the public companies, jobs could be lost to keep more money in the company. Intermediate views

4.3.4.

Others don't dispute that well-run for-profit entities with sound corporate governance may be considerably more efficient than an inefficient governmental bureaucracy or NGO, however many implementations of privatization can - in practice - lead to the fire sale of public assets, and/or to inefficient or corrupt - for profit management. Developed or minimally corrupt economies A top executive can readily reduce the perceived value of an asset due to information asymmetry. The executive can accelerate accounting of expected expenses, delay accounting of expected revenue, engage in off balance sheet transactions to make the company's profitability appear temporarily poorer, or simply promote and report severely conservative (e.g. pessimistic) estimates of future earnings. Such seemingly adverse earnings news will be likely to (at least temporarily) reduce sale price. There are typically very few legal risks to being 'too conservative' in one's accounting and earnings estimates. When the entity gets taken private - at a dramatically lower price - the new private owner gains a windfall from the former top executive's actions to (surreptitiously) reduce the sales price. This can represent 10s of billions of dollars (questionably) transferred from previous owners (the public) to the takeover artist. 8

The former top executive is then rewarded with a golden handshake for presiding over the fire sale that can sometimes be in the 10s or 100s of millions of dollars for one or two years of work. (This is nevertheless an excellent bargain for the takeover artist, who will tend to benefit from developing a reputation of being very generous to parting top executives). When a publicly held asset, mutual or Non-profit organization undergoes privatization, top executives often reap tremendous monetary benefits. The executives can facilitate the process by making the entity appear to be in financial crisis - this reduces the sale price (to the profit of the purchaser), and makes nonprofits and governments more likely to sell. Ironically, it can also contribute to a public perception that private entities are more efficiently run reinforcing the political will to sell of public assets. Again, due to asymmetric information, policy makers and the general public see a government owned firm that was a financial 'disaster' - miraculously turned around by the private sector (and typically resold) within a few years. Underdeveloped or highly corrupt economies In a society with substantial corruption, privatization allows the government currently in power and its backers to siphon a large portion of the entire net present value of state assets away from the public and into the accounts of their favored power brokers. Without privatization, corrupt officials would have to slowly harvest their corrupt earnings over time. As such, efficient privatization depends on their being a very low of current corruption among the current government officials since it allows for far more 'efficient' extraction of corrupt rents. Of course, corrupt governments can also extract corrupt rents quite efficiently in other ways - particularly by borrowing extensively to engage in spending on overly favorable contracts with their backers (or on tax shelters, subsidies or other giveaways). Generations of subsequent taxpayers are then left with paying back the debt incurred for corrupt transfers made decades previously. Naturally, this may lead to the sale of public assets.... In the end, the public is left with a government that taxes them heavily, and gives them nothing in return. Debt repayment is enforced by international agreements and agencies such as the IMF. Infrastructure and upkeep is sacrificed - leading to a further decay in the economic efficiency of the country over time. Literature reviews [ find that in competitive industries with well-informed consumers, privatization consistently improves efficiency. Such efficiency gains mean a one-off increase in GDP, but through improved incentives to innovate and reduce costs also tend to raise the rate of economic growth. The type of industries to which this generally applies include manufacturing and trade. Although typically there are social costs associated with these efficiency gains, many economists argue that these can be dealt with by appropriate government support through trade In sectors that are natural monopolies s, say, passenger rail in the Tanzania, the results of privatization are much more mixed, as a private monopoly behaves much the same as a public one in liberal economic theory. The government is actually seen as a more natural provider of public goods and services. However, the efficiency of an existing public sector operation can be put into question requiring changes to be made. Changes may include, inter lia, the imposition of related reforms such as greater transparency and accountability of management, an improved cost benefit analysis, improved internal controls, regulatory systems, and better financing, rather than privatization itself. Regarding political corruption, it is a controversial issue whether the size of the public sector per se results in corruption. The Nordic countries have low corruption but large public sectors.. One should also notice the successful, corruption-free privatizations and restructuring of government enterprises in the 9

Nordic countries. For example, dismantling telecommunications monopolies has resulted in several new players entering the market and intense competition with price and service. Also regarding corruption, the sales themselves give a large opportunity for grand corruption. Privatizations in Russia and Latin America were accompanied by large-scale corruption during the sale of the state-owned companies. Those with political connections unfairly gained large wealth, which has discredited privatization in these regions. While media have reported widely the grand corruption that accompanied the sales, studies have argued that in addition to increased operating efficiency, daily petty corruption is, or would be, larger without privatization, and that corruption is more prevalent in nonprivatized sectors. Furthermore, there is evidence to suggest that extralegal and unofficial activities are more prevalent in countries that privatized less. 4.3.5. Alternatives

Public utility The enterprise can remain as a public utility. Non-profit A private non-profit organization could manage the enterprise. Municipalization Transferring control to municipal government Outsourcing or sub-contracting National services may sub-contract or out-source functions to private enterprises. A notable examples are where many local government authorities have contracted out their garbage collection or administration of parking fines to private companies. In addition, some governments have involved the private sector more in the workings of the national health systems principally through outsourcing the construction and operation of new hospitals to private companies. There are also moves to refer patients to private surgeries to ease the load on existing human resources, and covering the cost of this. Partial ownership An enterprise may be privatized, but with the state retaining a number of shares in the resultant company. This is a particularly notable phenomenon in France, where the state often retains a "blocking stake" in private industries. Whilst partial privatization could be an alternative, it is more often a stepping stone to full privatization. It can offer the business a smoother transition period during which it can gradually adjust to market competition. Some state-owned companies are so large that there is the risk of sucking liquidity from the rest of the market, even in the most liquid marketplaces: this may favor gradual privatization. The first tranche of a multi-step privatization would also in the first instance establish a valuation for the enterprise to mitigate complaints of under-pricing. In some instances of partial privatization of contracted services, some portion(s) of the state-owned service are provided by private-sector contractors, but the government retains the capacity to self-operate at contract intervals, if it so chooses. An example of partial privatization would be some forms of school bus service contracting, such as arrangements where equipment and other resources purchased with government capital funds and/o those already owned by a governmental entity are used by the contractor for a period of time in providing services, but ownership is retained by the governmental unit. This form 10

of partial privatization eases concerns that once an operation is contracted, the government may be unable to obtain sufficient competitive bids, and be subjected to terms less desirable than the prior operation under state-ownership. Under that scenario, a reverse privatization would be more feasible for the government. 4.3.6. Negative responses

Privatization proposals in key public services sectors such as water and electricity in many cases meet with strong resistance from opposition political parties and from civil society groups, many of which regard them as natural monopolies. Campaigns typically involve demonstrations and democratic political activities; sometimes the authorities attempt to suppress opposition using violence 4.3.7. Reversion

A reversion from contracted ownership of an enterprise or services to governmental ownership and/or provision is called reverse privatization or nationalization. Such a situation most often occurs when a privatization contractor fails financially and/or the governmental unit has failed to purchase satisfactory service at prices it regards as less than with state-ownership or self-operation of services. Another circumstance may occur when greater control than viable under privatization is determined to be in the governmental unit's best interest. National-security concerns may be the source of reverse privatization actions when the most likely providers are non-domestic or international corporations or entities. . 4.4. Deregulation Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces. Deregulation does not mean elimination of laws against fraud, but eliminating or reducing government control of how business is done, thereby moving toward a more laissez-faire free market. It is different from liberalization, where more players enter in the market, but continues the regulation and guarantee of consumer rights and maximum and minimum prices. The stated rationale for deregulation is often that fewer and simpler regulations will lead to a raised level of competitiveness, therefore higher productivity, more efficiency and lower prices overall. Deregulation is different from liberalization because a liberalized market, while often having fewer and simpler regulations, can also have regulations to increase efficiency and protect consumer rights, one example being anti-monopoly. However, the terms are often used interchangeably within deregulated/liberalized industries. A parallel development with deregulation has been organized, ongoing programs to review regulatory initiatives with a view to minimizing, simplifying, and making more cost effective regulations. Cost benefit analysis is frequently used in such reviews. In addition, there have been regulatory innovations, usually suggested by economists, such as emission trading. Academic research on wedding economic theory with regulatory activity continues. One can distinguish between deregulation and privatization. Privatization can be seen as taking stateowned service providers into the private sector. This can result in making the privatized enterprise more 11

subject to market forces than was the state-owned entity. But the degree to which there is freedom to operate in the market and the extent of competitiveness in the market for the goods and services of the privatized entity or entities may depend on other measures taken in addition to privatization. 4.4.1. Controversy

The deregulation movement of the late 20th century had substantial economic effects and engendered substantial controversy. As preceding sections of this article indicate, the movement was based on intellectual perspectives which prescribed substantial scope for market forces, and opposing perspectives have been in play in national and international discourse. The movement toward greater reliance on market forces has been closely related to the growth of economic and institutional globalization between about 1950 and 2010. There are a significant number of risks associated with economic liberalization and deregulation, which many see the need to secure against with regulation that does not distort markets and allows them to continue to be competitive, or perhaps even more so. Much as the state plays an important role through issues such as property rights, appropriate regulation is argued by some to be "crucial to realise the benefits of service liberalisation". Regulation can play an important role in, but not exclusive to, the following situations: creating a level playing field and ensuring competition (e.g. ensuring new energy providers have competitive access to the national grid); maintaining quality standards for services (e.g. by specifying qualification requirements for service providers); protecting consumers (e.g. from fraud); ensuring sufficient provision of information (e.g. about the features of competing services); preventing environmental degradation (e.g. arising from high levels of tourist development); guaranteeing wide access to services (e.g. ensuring poorer areas where profit margins are lower are also provided with electricity and health services); and, preventing financial instability and protecting consumer savings from excessive risk-taking by financial institutions. These issues can cause high levels of market distortations and barriers to entry. For instance, regulation ensuring that specific qualifications are needed to provide a service can be problematic for foreign firms wishing to invest, when those qualifications are provided only by domestic institutions. Thus, regulation must be carefully implemented and respond to any issues that develop to ensure that liberalisation delivers the expected benefits, for instance by creating mutual recognition agreements (MRAs) of qualifications or cross-border harmonization of rules. Regulation often involves a complex balancing act between market and social objectives and it is argued policy space is required to ensure regulation can constantly be adjusted and adapted to changing market and social realities. For deregulation It is argued that the first step toward creating a free market in electricity is to repeal the federal statutes and regulations that hinder electricity competition and consumer choice."

12

Against deregulation "Electricity deregulation was supposed to bring cheaper electricity prices and more choice of suppliers to householders. Instead it has brought wildly volatile wholesale prices and undermined the reliability of the electricity supply." 4.5. Conditions Some of the conditions for structural adjustment can include: Cutting expenditures, also known as austerity. Focusing economic output on direct export and resource extraction, Devaluation of currencies, Trade liberalization, or lifting import and export restrictions, Increasing the stability of investment (by supplementing foreign direct investment with the opening of domestic stock markets), Balancing budgets and not overspending, Removing price controls and state subsidies, Privatization, or divestiture of all or part of state-owned enterprises, Enhancing the rights of foreign investors vis-a-vis national laws, Improving governance and fighting corruption. These conditions have also been sometimes labeled as the Washington Consensus. 4.5.1. History

Structural adjustment policies emerged from two of the IMF and the World Bank. They emerged from conditionalities that IMF and World Bank have been attaching to their loans since the early 1950s. In the beginning, these conditionalities mainly focused upon a country's macroeconomic policy. Structural Adjustment Policies, as they are known today, originated due to a series of global economic disasters during the late 1970s; the oil crisis, debt crisis, multiple economic depressions, and stagflation. These fiscal disasters led policy members to decide that deeper intervention was necessary to improve a country's overall well being. In 2002 SAPs underwent another transition, the introduction of PRSPs. PRSPs were introduced as a result of the bank's beliefs that, "successful economic policy programs must be founded on strong country ownership". In addition, SAPS with their emphasis on poverty reduction have attempted to further align themselves with the Millennium Development Goal (MDG). As a result of PRSP, a more flexible and creative approach to policy creation has been implemented at the IMF and World Bank. While the main focus of SAPs has continued to be the balancing of external debts and trade deficits, the reasons for those debts have undergone a transition. Today, SAPs and their lending institutions have increased their sphere of influence by providing relief to countries experiencing economic problems due to natural disasters, as well as economic mis-management. Since their inception SAPs have been adopted by a number of other IFIs. 4.5.2. Criticisms

There are multiple criticisms that focus on different elements of SAPs. National sovereignty 13

Critics claim that SAPs threaten the sovereignty of national economies because an outside organization is dictating a nation's economic policy. Critics argue that the creation of good policy is in a sovereign nation's own best interest. Thus, SAPs are unnecessary given the state is acting in its best interest. However, it is important to consider that in many developing countries the government will favor political gain over national economic interests, that is it will engage in rent-seeking practices to consolidate political power rather than address crucial economic issues. In many countries in sub-Saharan Africa, political stability has gone hand in hand with gross economic decline. While public debt in developing and developed countries is a nearly universal fact, low-income countries face a much more vulnerable position to maintain an equilibrated balance of payments, with some of the world's 47 poorest nations have already $488 billion in debt in 2003. Due to this near universality of debt, a popular criticism is that the structural adjustment's terms have become a template for the governance of much of humanity. Hence, some argue that the democratic policy process of countless countries has been undermined by decisions formulated miles away by western economic bureaucratic and that the implementation of such policy has solely benefited the largest donor countries (the U.S., UK, Canada, and Japan). For example, the opening of countries to outside investment allows U.S. corporations to build factories in impoverished areas. The corporations are able to exploit the surplus of inexpensive labor, and usual lack of environmental regulations to create goods at a lower price. As a result, corporate profits rise and trade flows increase for that particular country. While this increases the GDP the majority of the profit actually benefits the corporation and the country in which the corporation is based. Conversely, many argue that the people employed by the corporations are desperately in need of any work at all. It is argued that the alternative forms of employment or life styles available to them are much worse. Structural adjustment became a major tool for global development of a system of nongovernmental organizations allowing for bypassing local administrations in poor countries in the realization of welfare policies. Critics (often from the left) accuse such policies to be "not-so-thinly-disguised wedge[s] for capitalist interests." Privatization A common policy required in structural adjustment is the privatization of state-owned industries and resources. Ostensibly, this policy aims to increase efficiency and investment, and decrease state spending. State-owned resources are to be sold whether they generate a fiscal profit or not. Critics, however, have condemned privatization requirements. When resources are transferred to foreign corporations and/or national elites, the goal of public prosperity is replaced with the goal of private accumulation. Furthermore, state-owned firms may show fiscal losses because they fulfill a wider social role, such as providing low-cost utilities and jobs. Many scholars have argued that SAPs and Neoliberal policies have negatively affected many developing countries; the privatization of water in Bolivia and the privatization of the health system in Sub-Saharan Africa are few examples of such negative implications. Privatization makes essential needs such as water and health care a commodity, and those who are poor are unable to access such basic necessities because they are unable to pay for these commodities. Therefore, many scholars have argued that SAPs are not in the interest of the borrowing country, but rather caters to the elites of the developing and undeveloped worlds.[9] In other words, SAPs are extremely detrimental for poor countries who have structural adjustment programs in place, as many people cannot afford to pay for health care or education, leaving populations sicker and more 14

uneducated.[10] This causes negative consequences, as sick people are not productive and cannot work to bring themselves out of debt; therefore, the privatization of a previously social service such as health care is actually counter-intuitive to the purpose of structural adjustment programs. Agriculture The agriculture, anti-land reform and food trade policies associated with SAPs have been pointed to as a major engine in the urbanization of the global South, the ballooning of megacities, worldwide migration towards the global North, and the growth in urban poverty and slums. In the irrigation sub-sector the trend has been towards disengagement of governments from irrigation development and management. This has led to a process of delegation of maintenance and operation activities of irrigation schemes to the organized users with mixed results. Indeed, the loans from the World Bank, the major lender for irrigation development, have fallen sharply from the mid 1970's showing some recovery only since 2003. They are also a source of contention for environmental activists. A large portion of SAPs policy on agriculture focuses on the increased use of fertilizers and pesticides which harm the health of local bodies of water and therefore fish populations. The runoff caused by the over use of fertilizers increases the amount of algae in local water bodies, causing different scales of dead zones (areas where oxygen is completely consumed by decomposing algae and fish, making it impossible for life forms needing oxygen to survive in the dead zones). Dead zones affect both local and international bodies of water. Structural adjustment programs do little to help the agricultural sector of developing nations. Due to the conditions of SAPs, one of which is to devalue a nations currency, a developing nations agricultural exports become more competitive due to their devalued currency. Essentially a country is able to export more goods out due to other countrys ability and demand to purchase the previous countrys agricultural good. However, the nation also loses purchasing power which may not be able to be compensated by the increase in demand for its export goods. Ultimately, the agricultural sector of a developing nation will suffer and decline. An example of this degradation is, as Tiemen and Koeing reveal, Western Mali during the 1980s. Firstly, the privatization of the agricultural sector increased the inequality of food distribution and inequality wealth in general as some farmers adapted to privatization and flourished and others fell behind. Secondly, instead of "mining" (using a plot of land until it was depleted of nutrients then moving to a different plot of land allowing the first to replenish), the land like farmers did before structural adjustment, farmers were introduced to fertilizers that left the land nutrient barren and unusable. Despite the growth in the GDP, structural adjustment does not appear of much help to the agricultural sector. In theory, devaluation, by lowering the relative price of farm commodities on the international market, should make a countrys agricultural exports more competitive. However, it is by no means certain that increased exports compensate for the loss of purchasing power of a cheaper currency. Environment Local environments can easily become casualties of pro-trade policies. Pro-trade policy promotes an increase of industry geared toward Western needs. As a result of the new policy, local industries begin to focus on producing inexpensive goods to sell on the international market. The focus on creating the least expensive product often leads to environmentally exploitative industry. As these new industries are often unregulated there are no laws prohibiting this exploitation. 15

For example, emissions from factories are much less regulated in developing nations. As a result, the environmental cost (the harm done to the ozone layer for example) of producing a product like steel in China is much greater, than it would be in the U.S. Another example would be the run off of chemicals or pharmaceuticals into local rivers and other bodies of water. In developing nations the pollution of rivers has become a cause for international intervention. This pollution not only affects local populations who sometimes bathe and drink the polluted waters but is also damaging the oceans on a large scale. It is possible for SAPs to include clauses that require industry regulations. However, for the most part, regulatory clauses have not been included in SAPs. The majority of the policy creators view these regulations as a hindrance to trade and therefore to economic development. In addition, many argue that it is unfair for developed nations (and IFIs) to demand that their environmental policies be followed. All developed nations have gone through a period of industrialization wherein local environments were damaged. While these periods of industrialization led to increased environmental problems, they also greatly contributed to the development, prosperity, and increased standard of living for the country's citizens. They argue that developed countries essentially have had a head start in economic development, and that less developed countries deserve their own head start. Critics debate whether the world can handle this head start or not. It has been argued that developing countries would benefit more from debt cancellation than an industrial "head start." Perhaps it is due to the ineffectiveness of Structural-Adjustment Policies that rural farmers must resort to measures that harm the environment. Extensive cultivation or the draining of resources has resulted from the industrialization implemented by the policies of SAPs. The objectives of SAPs may be to reform the economical structure of impoverished or developing nations. However, their lack of consideration and research completed for their influences on the household level can cause the global issue of environmental degradation as farmers may result to unsustainable measures. Potential deforestation and desertification are only a few of the negative results of extensive cultivation. Austerity Critics hold SAPs responsible for much of the economic stagnation that has occurred in borrowing countries. SAPs emphasize maintaining a balanced budget which forces austerity programs. The casualties of balancing a budget are often social programs. The programs most often cut are education, public health, and other miscellaneous social safety nets. Commonly, these are programs that are already underfunded and desperately need monetary investment for improvement. For example, if a government cuts education funding, universality is impaired, and therefore long term economic growth. Similarly, cuts to health programs have allowed ] diseases such as AIDS to devastate some areas' economies by destroying the workforce. Recent studies have shown strong connections between SAPs with Tuberculosis rates in developing nations. Gendered effects Poverty is a gendered issue. That is, various differences in circumstances between males and females cause variances in the way poverty affects each. With that said, structural adjustment programs fail to address poverty as a gendered issue. Thus, the implementation of SAPs caused many problems which are discussed hereafter. With the adoption of SAPs comes a withdrawal from social spending. With less 16

money going towards education, health, welfare, and local infrastructures, local peoples are burdened with increasing responsibility to provide for their villages/towns/cities. Local health, welfare, and infrastructure (especially water and sanitation) are usually considered "women's work" and fall directly to them. Withdrawing government support directly affects the amount of work women are required to do, resulting in lessened health and well-being for women and indeed the entire family. In addition, opening markets causes an upsurge of jobs in cities. As rural men leave to go to these jobs, women and children are left behind, with increased responsibility for wives and mothers to singlehandedly run the household. Involuntary resettlement The introduction of a SAP may cause someone to be forced to involuntary resettle in order to work on the project at hand. Involuntary resettlement is important because it can make many people worse off than they were before. For example when someone is forced to move to a new location they could leave a larger plot of land or their farms behind. The involuntary resettlement could also move the person to a location with fewer resources or less arid land. The work created by the project they were forced to resettle for is also short-lived. In conclusion, involuntary resettlement can make people worse off and force them to have lowered their standard of living. 4.5.3. Praise

Many claim that borrowing countries are running on borrowed time, and will eventually have to make such changes to balance their budgets or control inflation. If these conditionalities are not implemented, the countries can expect even bigger problems in the future. In principle, conditionality is a tactic used not only to make sure loans are paid back, but also to ensure that they are used effectively. If there are no conditions on the loan, the country might not use the money to reduce poverty. This argument however, logically misses the counter-argument that there are many other conditionalities which could be imposed which would not necessarily create the burden of payment (and therefore, the subsequent lack of ongoing governmental investment) which is seen by many critics as creating a vicious circle. A corollary of this problem is that, should such a vicious circle indeed exist, its only overriding tendency is to allow for outside multinational investment to provide the service and food needs to the society, which can no longer function in a productive, cost effective manner. Empirical evidence There is some evidence that IMF stabilization programs do have a positive impact on the balance of payments and the current account. However, evidence for reductions in inflation, and encouragement of growth, is rather limited and questionable. However, there are some serious problems in measuring the empirical success of Fund programs. It is extremely difficult to calculate the counterfactual; that is, what would have happened had the Fund not intervened. Indeed, the 'before and after' evidence of success in the balance of payments is weaker than calculations of success relative to the counterfactual.

17

DEPARTMENT OF ECONOMICS
UNIVERSITY OF DAR ER SALAAM

Sustainable Economic Development Issues

By Semboja Haji Hatibu Haji
Unedited Training Notes To be presented at the EC664 Policy Analysis MA Course Date Tuesday, November 01 2011

Lecture Five

5.1.

The Meaning

Sustainable development means different things to different people, but the most frequently quoted definition is from the report Our Common Future also known as the Brundtland Report. "Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs." Sustainable development focuses on improving the quality of life for all of the Earth's citizens without increasing the use of natural resources beyond the capacity of the environment to supply them indefinitely. It requires an understanding that inaction has consequences and that we must find innovative ways to change institutional structures and influence individual behaviour. It is about taking action, changing policy and practice at all levels, from the individual to the international. Sustainable development is not a new idea. Many cultures over the course of human history have recognized the need for harmony between the environment, society and economy. What is new is an articulation of these ideas in the context of a global industrial and information society. Progress on developing the concepts of sustainable development has been rapid since the 1980s. In 1992 leaders at the Earth Summit built upon the framework of Brundtland Report to create agreements and conventions on critical issues such as climate change, desertification and deforestation. They also drafted a broad action strategyAgenda 21as the work plan for environment and development issues for the coming decades. Throughout the rest of the 1990s, regional and sectoral sustainability plans have been developed. A wide variety of groupsranging from businesses to municipal governments to international organizations such as the World Bankhave adopted the concept and given it their own particular interpretations. These initiatives have increased our understanding of what sustainable development means within many different contexts. Unfortunately, as the Earth Summit +5 review process demonstrated in 1997, progress on implementing sustainable development plans has been slow.

5.2. Critical Actions Around the world we see signs of severe stress on our interlocked global economic, environmental and social systems. As the United Nations Environmental Programme GEO-2000 report points out, the "time for a rational, well-planned transition to a sustainable system is running out fast." And yet we continue to adopt a business-as-usual approach to decision-making, which increases the chance that our global systems will crack and begin to crumble. Already we are faced with full-scale emergencies through freshwater shortages, tropical forest destruction, species extinction, urban air pollution, and climate change. How do we quickly reverse these trends? In 1987 the World Commission on Environment and Development recommended seven critical actions needed to ensure a good quality of life for people around the world: 1. Revive growth 2. Change the quality of growth 3. Meet essential needs and aspirations for jobs, food, energy, water and sanitation 4. Ensure a sustainable level of population 5. Conserve and enhance the resource base 6. Reorient technology and manage risk 7. Include and combine environment and economics considerations in decisionmaking These recommendations are as valid today as they were when first written. They are a call to change our actions and to do things differently. In particular, they underscore a need to: I. Produce differently - apply concepts of eco-efficiency and sustainable livelihoods II. Consume differently III. Organize ourselves differently - increase public participation while reducing corruption and perverse subsidies IV. When taken together, these actions can help orient us on a path toward sustainable development.

5.3.

Produce Differently

Increasing efficiency and reusing materials will play important roles in achieving sustainable development. Eco-efficient companies and industries must deliver competitively priced goods and services that improve peoples' quality of life, while reducing ecological impacts and resource-use intensity to a level within the Earth's carrying capacity. How much more efficient do we need to become? Globally, the goal is to quadruple resource productivity so that wealth is doubled, and resource use is halved (this concept is known as Factor Four). However, because OECD countries are responsible for material flows five times as high as developing countries, and world population continues to rise, it will be necessary for OECD countries to reduce their per capita material use by a factor of ten. Implementing Factor Four and Factor Ten strategies will require us to think about the cradle-to-grave impact of all goods and services to make wise choices. It will also require a reorientation of industrial economies - reducing the scale of polluting activities and creating new opportunities for entrepreneurs. The new generation of small, medium and micro-enterprises that operate within a sustainable development framework will expand our understanding of appropriate technologies and their contribution to creating sustainable livelihoods. In developing countries, achieving sustainable development will require overall national income growth of around 5 to 6 per cent a year. For this to occur, however, without further degrading the environment and society, growth must be qualitatively different than in the past. Capitalintensive production systems may be unattainable and undesirable in many situations. Creating 12 million old-style industrial jobs in India, for example, would require an investment of four to six times that of its GNP. Alternative types of systems must be found that provide for high levels of productivity and meaningful work.

5.4.

Consume Differently

World consumption has expanded at an unprecedented rate in the 20th century, with private and public consumption expenditures reaching $24 trillion in 1998, twice the level of 1975 and six times that of 1950. Consumption in and of itself is not badall living things must consume to maintain their biological existence. The real issue is the levels, patterns and effects of consumption. For many in the developed world present consumption levels and patterns are unsustainable. The environmental and social impacts of consumption are being felt at both local and global levels. Locally, we see increases in pollution and a growing sense of alienation within our communities. Globally, climate change and the depletion of the ozone layer are but two stark reminders of the impact of our consumption levels. One useful tool for measuring the extent of our consumption is the ecological footprint. It shows how much productive land and water we need to produce all the resources we consume and to absorb all the waste we make. Already, humanity's ecological footprint may be over 30 percent larger than the ecological space the world has to offer. The ranking of ecological footprints shows which countries are ecologically most sustainable and which are running an ecological deficit. The average American has an ecological footprint 1.7 times larger than a person in Sweden, 3.8 times that of someone in Hungary or Costa Rica, and more than 9 times that of an individual in India. It is important, however, to realize that these averages hide inequalities within countries. More than 100 million people in rich nations suffer from poverty. 3 And a culture of material consumption is gaining ground among the emerging middle classes of such countries as India, Malaysia and Brazil. Policies must be developed that promote consumption patterns which reduce our ecological footprint while meeting the needs of all people to enjoy a good quality of life. These policies must also raise the consumption of the world's more than a billion poor who are unable to meet their basic food, shelter and clothing needs. Meanwhile, we need to shift how we make decisionsas consumersfrom thinking about means to thinking about ends. For example, governments and businesses may collaborate to meet people's transportation needs by investing in improved public transit rather than building new roads. 5

Even better, they may work together with communities to pass new zoning laws that allow people to live, work, and shop within the same neighborhood. This would minimize people's needs for transportation while improving the accessibility of what they really wantgoods and services. 5.5. Organize Ourselves Differently

How we organize ourselves and establish rules to govern our actions will play a major role in determining whether we move toward more sustainable paths. Good governance will require reforming decision-making processes to increase opportunities for public participation, including a wide variety of activities ranging from consultation hearings as part of an environmental impact assessment, to co-management of natural resources. In its deepest form, public participation seeks to involve civil society in all steps of planning, implementation and evaluation of policies and actions. Public participation can: A. Help to establish good pathways for sustainable development B. Enhance understanding and relationships C. Increase eagerness to participate, leading to better implementation of decisions D. Enrich the community and build social capital Reducing corruption, the misuse of power for private benefit or advantage, is also necessary to achieve sustainable development. It has proven to be highly destructive since corruption leads to the disregard of public interest and warps competitive markets. It leads governments to intervene where they need not, and it undermines their ability to enact and implement policies in areas in which intervention is clearly neededwhether environmental regulation, health and safety regulation, social safety nets, macroeconomic stabilization, or contract enforcement. We govern our economies through a complex array of regulations, laws and market incentives. Unfortunately, tax structures, payments to producers, prices supports and the like function as perverse subsidies that have detrimental effects on both the economy and the environment. They are also often distributionally regressive, benefiting mostly the wealthyoften political interest groupswhile draining the public budget. As recent studies from the Earth Council and the International Institute for Sustainable Development have noted, the world is spending nearly $1.5 trillion annually to subsidize its own destruction. That is twice as much as global military spending a year, and almost 6

twice as large as the annual growth in the world's economy. Removing even a portion of these perverse subsidies would provide a large stimulus for sustainable development. 5.6. Characteristics

Sustainable development is a fluid concept that will continue to evolve over time but common characteristics underlie the many streams of thought. Sustainable development emphasizes the need for: a) Concern for equity and fairness - ensuring the rights of the poor and of future generations b) Long-term view - applying the precautionary principle c) Systems thinking - understanding the interconnections between the environment, economy and society In addition, sustainable development strategies usually highlight the interplay between the local and global, the developing and the developed, and the need for cooperation within and between sectors. Sustainable development is not a detailed plan of action, a formula that we can all blindly follow. There is no one solution. Solutions will differ between places and times and depend on the mix of values and resources. Approaching decision-making from a sustainable development perspective requires undertaking a careful assessment of the strengths of your household, community, company or organization to determine priority actions. 5.7. Equity and Fairness

Sustainable development is concerned with meeting the needs of the poor and marginalized portions of our population. The concepts of equity and fairness are prominent in definitions of sustainable development. Sustainable development acknowledges that if we ignore our effects on others in an interdependent world, we do so at our own peril.

Since a dangerous disparity in access to resources has been established through our economic and public-policy systems, those systems must change. Fairness implies that each nation should have the opportunity to develop itself according to its own cultural and social values without denying other nations the same right to development. One of the greatest challenges in decision-making is how to protect the rights of the voiceless. Future generations have no ability to speak on their own behalf or to protect their interests in decision-making processes. If development is to be sustainable, it must consider their interests. 5.8. Long-term View

How long is long term? In Western society during the past generation, most official longterm planning has been at most three to five years. Many international stock and currency traders now think of a few weeks as long term. Traditional Native American governance, however, focused on planning for "the seventh generation today." Goals and activities are designed with consideration for their impact on seven generations into the future, 1 leading to a planning horizon of roughly 150 years. A planning horizon somewhere in the middle may be both necessary and realistic. Some experts have suggested that as long as each generation looks after the nextroughly 50 yearseach succeeding generation will be taken care of. Of course, if an effect in the yet further future is foreseen, then it too can be taken into account. No generation can be expected to guarantee results it cannot foresee; but equally, none should be allowed to ignore those it can. People from around the world are looking ahead and building scenarios about what the future may be like. The scenarios they envision range from a world of resource scarcity and violence to one of increased sharing and technological innovation. Which scenario is most likely to occur? No one is certain. In an interdependent world, complex interactions are leading to a startlingly high rate of innovation and change. In times of rapid change, the precautionary principle can provide some guidance. It states that when an activity raises threats of harm to the environment or human health, precautionary measures should be taken even if some cause-and-effect relationships are not fully established scientifically.

5.9. Systems Thinking For some two centuries we have known that the Earth is a closed system with finite resources. As planetary explorers completed the task of mapping the lands and waters, people slowly grew to understand that there are no "new" resources. We have only one Earth. All of our activities are but a small part of this larger system. Viewing our human systems as operating within the larger ecosystem is crucial for achieving a sustainable relationship with the environment, and assuring our own species' continued survival on the planet. Each natural resource used by human beingsfood, water, wood, iron, phosphorous, oil and hundreds of othersis limited by both its sources and its sinks. Resources should not be removed faster than they can be renewed nor disposed of more quickly than they can be absorbed. Although environmentalists used to be concerned primarily about running out of sources, today more people are concerned about running out of sinks. Global warming, the ozone hole, and conflicts over the international shipment of hazardous waste are all problems that have arisen from our attempts to dispose of resources faster than the environment can absorb them. Systems thinking require us to understand that while there is only one Earth, it is composed of a multitude of subsystems all interacting with each other. A variety of models have been developed to explain the Earth's subsystems. When measuring our progress toward sustainable development, these models provide useful frameworks for choosing indicators. The differences between the models show the specific perspectives which groups bring to sustainable development and embody their differing values. These subsystems are connected together by intricate feedback loops. The science of complexity suggests that in some systems a very small occurrence can produce unpredictable and sometimes drastic results by triggering a series of increasingly significant events. We have seen that emissions in the North have thinned the protective ozone layer over Antarctica, increasing rates of skin cancer in the South. Financial crises in Asia have threatened the economies of other countries around the world. And ethnic violence in Central Africa has led to refugee migrations that are overwhelming the support systems of nearby regions, triggering further crises and migrations. We have learned that the consequences of decisions made in one part of the world quickly affect us all. 9

DEPARTMENT OF ECONOMICS
UNIVERSITY OF DAR ER SALAAM

Lecture Six
Policy Analysis: An Overview
By Semboja Haji Hatibu Haji
Unedited Training Notes To be presented at the EC664 Policy Analysis MA Course Date Tuesday, November 01 2011

6.0.

Introduction

Lecture Note Six focuses on Policy Analysis. The lecture combines issues related with public and research policy analysis. In public policy, policy analysis is "determining which of various alternative policies will most achieve a given set of goals in light of the relations between the policies and the goals". However, policy analysis can be divided into two major fields. Analysis of policy is analytical and descriptivei.e., it attempts to explain policies and their development. Analysis for policy is prescriptivei.e., it is involved with formulating policies and proposals (e.g., to improve social welfare). The area of interest and the purpose of analysis determine what type of analysis is conducted. A combination of policy analysis together with program evaluation would be defined as policy studies Policy Analysis is frequently deployed in the public sector, but is equally applicable to other kinds of organizations. Policy analysis has its roots in system analysis. Systems analysis is the study of sets of interacting entities including intelligence or computer systems analysis. This field is closely related to policy and operational researches. It is also "an explicit formal inquiry carried out to help someone (referred to as the decision maker) identify a better course of action and make a better decision than he might otherwise have made." The terms analysis and synthesis come from Greek where they mean respectively "to take apart" and "to put together". These terms are in scientific disciplines from mathematics and logic to economy and psychology to denote similar investigative procedures. Analysis is defined as the procedure by which we break down an intellectual or substantial whole into parts or synthesis is defined as the: to basant combine separate elements or components in order to form a coherent whole. Systems analysis researchers apply methodology to the analysis of systems involved to form an overall picture. 6.1. Policy Analysis Approaches

Although various approaches to policy analysis exist, three general approaches can be distinguished: [1] the analycentric, {economic policy analysis} [2] the policy process, and [3] the meta-policy approach. 6.1.1. The analycentric approach The analycentric approach focuses on individual problems and its solutions; its scope is the micro-scale and its problem interpretation is usually of a technical nature. The primary aim is to
2

identify the most effective and efficient solution in technical and economic terms (e.g. the most efficient allocation of resources for a given firm). 6.1.2. The policy process approach The policy process approach puts its focal point onto political processes and involved stakeholders; its scope is the meso-scale and its problem interpretation is usually of a political nature. It aims at determining what processes and means are used and tries to explain the role and influence of stakeholders within the policy process. By changing the relative power and influence of certain groups (e.g., enhancing public participation and consultation), solutions to problems may be identified. 6.1.3. The meta-policy approach The meta-policy approach is a system and context approach; i.e., its scope is the macro-scale and its problem interpretation is usually of a structural nature. It aims at explaining the contextual factors of the policy process; i.e., what are the political, economic and socio-cultural factors influencing it. As problems may result because of structural factors (e.g., a certain economic system or political institution), solutions may entail changing the structure itself. 6.2. Policy Analysis Methodologies

Policy analysis is methodologically diverse using both qualitative methods and quantitative methods, including case studies, survey research, statistical analysis and model building among others. One common methodology is to define the problem and evaluation criteria; identify all alternatives; evaluate them; and recommend the best policy agenda per favor. 6.3. Policy Analysis Models

We will note that, many policy models exist to analyze the creation and application of public policy. Analysts use these social economic and political models to identify important aspects of policy, as well as explain and predict policy and its consequences. Some generic public policy models are:

6.3.1. Institutional model Public policy is determined by political institutions, which give policy legitimacy. Government universally applies policy to all citizens of society and monopolizes the use of force in applying policy. 6.3.2. Process model Policy creation is a process following these steps: Identification of a problem and demand for government action. Formulation of policy proposals by various parties (e.g., congressional committees, think tanks, interest groups). Selection and enactment of policy; this is known as Policy Legitimating. Implementation of the chosen policy. Evaluation of policy. This model, however, has been criticized for being overly linear and simplistic. In reality, stages of the policy process may overlap or never happen. Also, this model fails to take the multiple actors attempting the process itself as well as each other, and the complexity this entails. 6.3.3. Rational model The rational model of decision-making is a process for making logically sound decisions in policy making in the public sector, although the model is also widely used in private corporations. Herbert Simon, the father of rational models, describes rationality as a style of behavior that is appropriate to the achievement of given goals, within the limits imposed by given conditions and constraints. It is important to note the model makes a series of assumptions in order for it to work, such as: The model must be applied in a system that is stable, The government is a rational and unitary actor and that its actions are perceived as rational choices, The policy problem is unambiguous, There are no limitations of time or cost.

6.4.

The Nature of Public Policy Problems

We will note that, in the public sector, problems in many developing nations;: Are fuzzy and ill-defined; Have political as well as purely technical aspects; Often lack a good cause-effect knowledge base; May be solved only by producing new problems; Often involve tradeoffs between cost and effectiveness; May be hard to measure adequacy of results; And may be hard to measure fairness of results 6.4.1. Classical Rational Problem Solving Model In normative theory problems can be approached using a rational, comprehensive problem solving model. The demands of this model are: 1) Define the problem 2) Determine important social values 3) Identify all alternatives 4) Assess all alternatives 5) Select optimal alternative 6) Implement optimal alternative 6.4.2. Limitations in the Public Sector Theoretical Model 1) Define the problem 2) Determine important social values 3) Identify all alternatives 4) Assess all alternatives on all values 5) Select optimal alternative 6) Implement optimal alternative Public Sector Limitations 1) Problems are interlined 2) No agreement on social values 3) Limited time, knowledge 4) Limited resources, lack of predictability 5) Pressure to select the first good solution 6) Short time horizon to produce results

With these limitations, there is a need for the development of a model of policy analysis that can address public sector problems. But policy analysis differs from traditional research as well.
5

Basic (normative /traditional) research is concerned with broad, theoretical, complex questions. It uses explicit scientific steps and invariant procedures. Policy analysis, on the other hand, is practical, situational and flexible. It addresses local problems and focuses on making decisions. It is more craft or art than science.

Basic Research Seeks "truth" Explicit steps and procedures Addresses broad questions Focus on complexity Science

Policy Analysis Is practical Flexible, situational Addresses local problems Focus on decision-making Craft

6.4.3. Case Studies in Policy Analysis Problems in the public sector are multi-faceted and difficult to pin down. As if that was not bad enough, the knowledge domain of public policy is ill-structured. This means that there is no "one best way" to solve all problems. Giving policy analysis only one methodology is like giving a home owner only a hammer to solve all household problems. A new approach is needed to learning in this area. This approach is offered by case studies. Case studies link problems to a reality; they offer the opportunity for the application of policy analysis techniques in a concrete context. The way information is remembered and use is linked to the way it is learned. Case studies provide clues to the types of techniques that are needed to approach a solution to the problem. These cues help policy analysts learn multiple approaches to learning and to problem solving. Use of case studies will help to: 1) Recognize situations where analysis is appropriate and productive; 2) become competent in the application of different approaches and methods; 3) Learn how to communicate the results of policy analysis.

6.4.4. Tips for Practical Policy Analysis 1) Quickly identify the central decision criterion of the problem (What is the most important factor in buying a car? Taking a new job?) 2) Identify what types of public sector actions can be taken (Taxing, spending, sanctions, incentives, moral suasion, education?) 3) Avoid the "one best way" approach (Have many tools in the tool box, not just one) 4) Learn how to deal with uncertainty (Admit it, estimate its possible effects) 5) Say it with numbers (Charts, graphs, tables, maps, etc.) 6) Make the analysis simple and transparent (Provide details in a technical appendix) 7) Check and re-check the facts (Use multiple sources of facts, triangulation) 8) Learn to anticipate the objections of opponents (Improves the ultimate product) 9) Give analysis, not decisions (Distinguish between analysis and advocacy) 10) Push the boundaries of the envelope (Expand the problem definition; introduce novel solutions) 11) Policy analysis is never 100% complete, rational, and correct (How much time, money, and personnel is available to do the job?)

6.5.

The Policy Analysis Process

6.5.1. Alternative Policy Analysis Models The following are sample of public policy analysis models; 1) Model 1 a. Policy formulation b. Search for alternatives c. Forecast the future d. Model the impacts of the alternative e. Evaluate, compare, and rank the alternatives 2) Model 2 a. Define the problem b. Determine criteria c. Generate alternatives d. Choose course of action e. Evaluate policy after implementation 3) Model 3 a. Determine the underlying problem b. Determine the objectives c. Generate alternatives d. Predict consequences of each alternative e. Determine criteria for measuring achievements f. Choose course of action 6.5.2. Six Step Policy Analysis 1) Verify, define and detail the problem 2) Establish evaluation criteria 3) Identify alternative policies 4) Assess alternative policies 5) Display and distinguish among alternatives
8

6) Implement, monitor, and evaluate the policy 1) Verify, Define and Detail the Problem State the problem meaningfully: Determine the magnitude and extent of the problem Continually re-define the problem in light of what is possible Eliminate irrelevant material Question the accepted thinking about the problem Question initial formulations of the problem Say it with data Locate similar policy analyses Locate relevant sources of data Eliminate ambiguity Clarify objectives Resolve conflicting goals Focus on the central, critical factors Is it important? Is it unusual? Can it be solved? Identify who is concerned, and why? What power do concerned parties have? Make a quick estimate of resources required to deal with the problem 2) Establish Evaluation Criteria What are the important policy goals, and how will they be measured? Identify criteria central to the problem and relevant to the stakeholders Clarify goals, values and objectives Identify desirable and undesirable outcomes Is there a rank order of importance among the criteria? What will be the rules for comparing alternatives? Administrative Ease Costs and benefits Effectiveness Equity Legality Political acceptability

3) Identify Alternative Policies Consider a wide range of options Consider the status quo, or no-action alternative Consult with experts Brainstorming, Delphi, Scenario writing Redefine the problem if necessary 4) Assess Alternative Policies Select appropriate methods and apply them correctly Estimate expected outcomes, effects, and impacts of each policy alternative Do the predicted outcomes meet the desired goals? Can some alternatives be quickly discarded Continue in-depth analysis of alternatives that make the first cut 5) Display and Distinguish Among Alternatives Choose a format for display Show strengths and weaknesses of each alternative Describe the best and worst case scenario for each alternative Use matrices, reports, lists, charts, scenarios, arguments 6) Implement, Monitor and Evaluate the Policy Draw up a plan for implementation Design monitoring system Suggest design for policy evaluation Was the policy properly implemented? Did the policy have the intended effect(s)? 6.5.3. Role of the Policy Analyst

10

Policy analysis is a systematic evaluation of the technical and political implications of alternatives proposed to solve public problems. Policy analysis refers to both the process of assessing policies or programs, and the product of that analysis. A policy analyst: Uses qualitative and quantitative data; Uses a variety of approaches to the problem; Applies appropriate methods correctly. Who does policy analysis? Is public policy analysis a calling? A vocation? A service? A guild? A cult? the role of the policy analyst is to: Produce arguments for debates about public policy Produce evidence for decisions about public policy Act as internal organizational consultants Act as external policy consultants Handle both technical and people aspects of policy analysis All policy represents the distribution of power and resources. These policies are an expression of values. Values and beliefs are often used as short-cuts to decision-making. What code of ethics should the policy analyst adopt? What about the professional values of obligation, responsibility, discretion, and citizenship? What about published professional codes of ethics? The policy analyst has responsibilities, to the client, the customer, the self, the profession, the public interest, fairness, equity, law, justice, efficiency, effectiveness, and the practice itself. Who is to define what is good? Whose values or goals should be pursued? What is the right thing to do? Who or what is ultimately to be served? Should the analyst try first and foremost to do good, or to do no harm? Should the analyst give neutral advice, or normative advocacy? Should the analyst be supportive or adversarial? Bias is inevitable in policy analysis. To mitigate the effects of bias, the analyst can: identify all underlying assumptions keep accurate records use multiple sources of information use replicable methods and models identify the client's goals and values identify the formal and informal actors and institutions address relevant professional and ethical considerations

11

6.6. 6.6.1.

Cross-Cutting Methods Selecting Techniques

Selecting the appropriate techniques to use in policy analysis depends on a variety of factors: what the client wants to know the time available knowledge of the decision criteria complexity of the issue available data Some techniques commonly used in various stages of policy analysis include: 1. Verifying, Defining, and Detailing the Problem Back-of-the-envelope calculations Quick decision analysis Creation of valid operational definitions Political analysis Issue paper/first cut analysis 2. Establishing Evaluation Criteria Technical feasibility studies Economic and financial feasibility studies Political viability studies Administrative operability studies 3. Identifying Alternatives Researched analysis No-action analysis Quick surveys Literature reviews Comparison of real-world experiences Passive collection and classification Development of typologies Analogy, metaphor, and synectics Brainstorming
12

Comparison with an ideal Feasible manipulations Modifying existing solutions 4. Assessing Alternative Policies Extrapolation Theoretical forecasting Intuitive forecasting Discounting Cost/Benefit analysis Sensitivity analysis Allocation formulas Quick decision analysis Political feasibility analysis Implementation analysis Scenario writing 5. Displaying Alternatives and Distinguishing Among Them Paired comparisons Satisfying Lexicographic ordering Non-dominated alternatives method Equivalent alternatives method Standard-alternative method Matrix display systems Scenario writing 6. Implementing, Monitoring, and Evaluating Policies Before-and-after comparisons With-and-without comparisons Actual-versus-planned performance Experimental models Quasi-experimental models Cost-oriented approaches 7. Cross-Cutting Methods Identifying and gathering data
13

Library search methods Interviewing for policy data Quick surveys Basic data analysis Assessing information quality Communicating the analysis 6.6.2. Cross-Cutting Methods Cross-cutting methods are techniques of policy analysis that can be used at nearly any stage in the analysis. They are useful tools for the policy analyst to know how to use. They include: Identifying and gathering data Library search methods Interviewing for policy data Quick surveys Assessing information quality Basic data analysis Communicating the analysis 6.6.3. Identifying and Gathering Data Policy analysts need to know how to search for existing information, such as Academic Journal Articles Archives Census Records Hearings Legislative History News Media Reports Past Policy Analyses Public Agency Reports Public Records People are also good sources of information, including Advocacy Groups Experts Issue Networks Personal Contacts
14

Professional colleagues Even personal observation can be a source of data. Personal observation can furnish data on usage patterns, compliance patterns, insights into the problem, anecdotes, and innovative suggestions. However, observation is time consuming and may suffer from problems with accuracy, bias, limited samples, and difficult to quantify data. Observational methods include "sidewalk surveys," mechanical counting devices, measures of erosion, satellite images, etc. Other sources of information include: Public Agencies Libraries Local Agencies Non-Profit Agencies Private Organizations Research Institutes State Agencies Think Tanks Universities Policy analysts should seek information from multiple sources ("triangulation"), especially on controversial data. Problems with sources of data include: outdated statistics irrelevant data misleading data poor quality data biased data Looking for documents that may be helpful in doing the policy analysis is important. But three questions that must be asked are: 1) do such documents exist? 2) can they be obtained in a reasonable time? 3) when is additional searching no longer worthwhile? 6.6.4. Library Search Methods Libraries are excellent sources of policy-related information. To make the most of library resources, follow these strategies:

15

1) look up basic policy-related terms and definitions in encyclopedias, dictionaries, or a subject-related thesaurus; each policy issue area has its own terms and jargon 2) develop a list of search terms for searching computerized bibliographic data bases, electronic guides to library holdings, and Internet access; 3) identify key journals in the field and skim their table of contents for the past 1-2 years; 4) check guides to current periodicals, newspapers, news magazines, trade journals, and guides to the literature 5) check annual reviews in the policy subject area; conference proceedings on the subject; government hearings on the subject, etc. 6.6.5. Interviewing for policy data Interviewing is typically conducted with either mass, elite, intensive, or focus group methodologies. Interviewing is typically used: To gather historical background, context, and evolution of the policy To gather basic facts about the problem To assess political attitudes and resources of major players To gather ideas about the future, trends, and forecasts To generate additional contacts and materials (snowball technique) Elite (specialist) interviewing is most typically used when: It is a short-term policy project It is on a new topic There is a lack of existing literature Informants are reluctant to put information into writing No quantitative data are available It is not feasible to use hired interviewers To set up interviews, the policy analyst usually: arranges appointments in advance makes formal or informal requests (letterhead, telephone) sends a reminder letter and follows up with a phone call gives the name of a mutual friend or influential person as a reference
16

collects background information prior to the interview will conduct a telephone interview if a face-to-face interview is not possible When conducting the actual interview, it is usually accepted behavior to: ask before using any recording device promise anonymity and/or confidentiality of information take notes during the interview keep to the allotted time thank the person for the interview send a follow-up letter 6.6.6. Quick surveys Surveys can be conducted by mail, in person, or by telephone. Survey methodology is described in many standard research texts. Cross-sectional interviews are conducted at one point in time across a wide sample of the population. Longitudinal interviews are conducted repeatedly over many time intervals (months, years, decades) with the same individuals. A comparison of the advantages and disadvantages of the most typical surveys is displayed below. Type of Response Survey Rate
Mail 15%

Sample Concerns

Staffing

Other concerns

May not be representative Least staff time required Response rate improves with gifts Limited to those with Moderate telephones required staff time Short and questions most Can cover issues simple complex

Telephone 50% In-Person 75%

May be needed for less- Most intensive; educated supervisors

6.6.7. Assessing Information Quality When collecting information and data for policy analysis, the analyst must assess the quality of the information and data collected. Document Analysis: When was the document generated? What was the original purpose of the document?
17

Is there an obvious bias in the document? What is the pattern of word usage? Does the document omit important information? Are there errors in the document? Assessing Interviews: Was the information plausible? Was the information consistent? Does the information diverge from accepted facts? Did the respondent report direct experience? Did the respondent have ulterior motives? Did the respondent operate under some constraints? Was the respondent candid? Did the respondent acknowledge areas of ignorance? Was the respondent self-critical? Data quality: Are multiple sources of information consistent? Were data collected independently, from separate sources? Is the data original or re-organized? Do the data pertain to a particular geographic locale? Were the data collection methods systematic? For what purpose were the data originally collected? How old are the data? Were they affected by timing? Was there bias or special motivation in the collection of the data? 6.7. Basic Data Analysis Data are not generally useful in their raw form. Instead, they must be analyzed. Data are most often analyzed using descriptive and/or inferential statistics. Descriptive statistics search for patterns in the data and look for relationships to gain insight into the problem. Inferential statistics attempt to estimate a characteristic of a population from data gathered from a sample. Descriptive univariate statistics look for patterns in the data. They are best presented in graphical form, using frequency distributions, cumulative distributions, bar charts, histograms, pie charts, and frequency polygons. Statistics include the mean, median, and mode, as well as the range, standard deviation, and variance.
18

Descriptive bivariate statistics look for relationships in the data. They are best presented in tables, plots, scatter-grams, and time series graphs. Measures of association include Lambda, Gamma, and Pearson's r. Inferential statistics make probabilistic statements (or inferences) about a whole population based on the results obtained from a partial sample. Measures of statistical significance are used to estimate whether two groups differ from one another, or whether there is a chance that a relationship observed in a sample also exists in a population. These measures include Chi Square, Z-scores, t-tests, and F-tests. 6.8. Communicating the analysis Written Communication: Work from an outline--keep separate folders for each section of the analysis Work from goals and deadlines--generate a complete draft and then fill in the holes Get help--with editing of rough drafts; revise for clarity; incorporate new ideas Include a Table of Contents--sections include Executive Summary; Problem Definition; Decision Criteria; Alternatives; Comparison of Alternatives; Conclusions and Recommendations; Use graphics--charts, graphs, flow charts, tables, maps, pictures, diagrams, drawings, etc. Use geographic information systems (GIS)--to generate maps of data distributions Simplicity--use the active voice for verbs Accuracy--verify facts; triangulate; check all calculations Documentation--note all formulas used and assumptions made Fairness--use references and give credit to your sources of data Neatness--use good grammar, spelling, punctuation, syntax, etc. Oral Presentations Know your audience Keep it short and simple Use visual aids and handouts Allow time for questions, comments and criticisms

19

DEPARTMENT OF ECONOMICS
UNIVERSITY OF DAR ER SALAAM

Lecture Seven Policy Problem Solution Methods

By Semboja Haji Hatibu Haji
Unedited Training Notes To be presented at the EC664 Policy Analysis MA Course Date Tuesday, November 01 2011

7.1.

Indentifying, Verifying, Defining, and Detailing The Problem

This lecture note provides a detail analysis on Indentifying, Verifying, Defining, and Detailing Policy Problems. The first stage of policy formulation process discussed in Lecture Note 1. 7.1.1. Problem identification and definition The first thing the policy analyst must ask: 1) Does a problem exist? 2) Can anything be done about it? 3) Does the client have the power? If the answers are no, then there is no point in doing a policy analysis. Pitfalls in public policy problem definition: 1) Accepting the client's definition of the problem 2) Looking only for the simple and obvious 3) Thinking that any and all problems need a public solution 4) Confusing the need for short- versus long-term solutions 5) Confusing the values of individuals versus collectivities Don't Need Public Policies Individual problems Widespread problems Relative problems 7.1.2. Developing problem statements In developing problem statement: 1) Think about the problem 2) Delineate the boundaries of the problem 3) Develop a fact base 4) List goals and objectives for policy solutions 5) Identify the policy envelope (key players) 6) Develop preliminary costs and benefits 7) Review the problem statement
2

Do Need Public Policies Social problems Serious problems Absolute problems

7.1.3.

Back-of-the-envelope calculations

One of the first things a policy analyst will do is to try to get a handle on the possible dimensions of the problem and potential solutions. The analyst may ask, 1) How many people are we talking about? 2) What is the likely cost per unit of service? 3) How much of the target population can we serve? 4) How much do we have available to spend? 5) Will more staff be needed? 6) Will this impact the budget/tax rate? 7) What are the trends in this area? 8) What will happen if we do nothing? For example, try to estimate these parameters if half the children in the nation are not receiving the required immunizations before beginning school. Start with the number of children in the nation up to age 5. Which immunizations are required? How much does each one cost? How many children could realistically be reached? How much do we have available to spend? Could we get more from the Central government? Will more nation staff be needed, or can this be handled by the private/non-profit sector? Will this impact the budget/tax rate? What are the trends in this area--is the problem increasing or decreasing over time? What will happen if we do nothing? The information for doing back-of-the-envelope calculations can come from 1) Reference works 2) Experts 3) Past studies or quick research 4) Informed guesses, extrapolation, rules of thumb, estimation, parallel reasoning, triangulation, etc. 7.1.5. Quick decision analysis Quick decision analysis is a variation on the technique of making decision trees. Decision trees are ways of diagramming a problem, when the problem has more than one solution. It is a tool to help policy analysts see the logical alternatives to a problem.

7.1.6. Political analysis / Political Party Manifestos? Policy analysts recognize that politics is important at all stages of the policy process, including policy analysis. There are a number of ways to communicate about potential political influences or factors that may impinge on the policy analysis. These techniques attempt to allow political factors to be treated like any other important considerations in policy analysis. The analyst may draw up a list of issues involved in defining the problem, and identify a number of potential political actors who have taken positions on those issues. A table can display the likely support or opposition of each group to each issue. For example, what are the issues involved in raising the age at which teens can get a driver's licence to 18? Which groups are likely to support (+) or oppose (-) problem definitions that focus on these issues? Groups Lower teen auto accident, Hardship for teens who work Lower insurance rates death & injury rates or commute to school for family cars ? ? + +

Community + Parents Government + 7.1.7. First cut policy analysis

An issue paper is a study that is conducted in preparation of making a decision on whether or not to do a policy analysis. It describes the problem, the attendant issues, the political groups involved, and concludes whether or not a policy analysis will be feasible. A first cut policy analysis concentrates on identifying preliminary recommendations. It is a mini-policy analysis, conducted in a short period of time, using simple techniques. It forms the basis for a much more in-depth, complex, and thorough full-fledged policy analysis. Researched policy analysis refers to a more traditional research project, perhaps conducting a pilot study of several policy alternatives to generate concrete data on which to base recommendations. However, policy analysts rarely have the luxury of the time and resources needed, nor do they often work for someone who is far enough removed from the problem to resist pressures for a quick solution.
4

7.5. Establishing Analysis Criteria 7.5.1. What Are Criteria / Side Constraints Every time a policy problem is identified, some statement of goals is adopted. The goals are what the adopted policy alternative should accomplish. Goals/General Objectives are broad, formal, long-term problem-solving achievements that are desired. An example might be to make sure that all rivers are safe, clean, and usable. General Objectives/Goals are translated into specific objectives. Specific Objectives are more concrete statements about desired end nations, with time tables, target populations, and resource limits. An objective might be to make the Rufiji River safe for swimming and fishing. Criteria are the measurable dimensions of objectives. Criteria are used to compare how close different proposed policy alternatives will come to meeting the goals of solving the problem. Criteria set the rules to follow in analyzing and comparing different proposed policy alternatives (solutions). Sample criteria for improving river water quality might be: Effectiveness--how much of an improvement in water quality will this alternative produce? Cost--how much will it cost to improve the quality of the river using this alternative? Technical--do we have the equipment and know-how to use this alternative? Political--is this alternative politically acceptable? Measures are the actual measurements that will be taken of each proposed policy alternative. For example, measures such as the following might be employed: Effectiveness--how many milligrams of pollutants per liter of water will this alternative clean up? Cost--how many dollars will be required to implement this alternative? Technical--is the necessary equipment for this alternative available and are people trained to use it? Political--what percentage of the voting-age population will favor this alternative in a nationwide poll?

One difficulty in specifying criteria and measures is that many problem statements have vague, fuzzy, or even conflicting goals. This is often necessary in order to get consensus on taking some action about the problem. But this complicates the selection of criteria. If dirty rivers are a problem, and the goal is to have clean rivers, what are the most important considerations in choosing between different ways of cleaning up the rivers? Is it cost? Is it effectiveness? Is it equity? What do we mean by "clean"? It is impossible to get rivers 100% clean. Do we use national, regional or district standards on admissible levels of toxicity? How will we measure the level of cleanliness that different policy alternatives are likely to produce? 7.5.2. Reliability and Validity The criteria and their measures must be unambiguous. They should be relatively straightforward and simple to measure. Their application should produce uniform results, no matter who does the measuring of different alternatives. And repeated measurements of the same alternative should produce the same results, again, no matter who does the measuring. Criteria and measures should be appropriate to the unit of analysis. That is, if the goal of a proposed policy alternative is to change the investment strategies of cities, the unit of measurement is cities, not individuals. Be sure to specify whether the unit of measurement is households or families, census tracts or neighborhoods, school children or school districts, etc. 7.5.3. Economic Criteria Most policy analysis involves at least one economic criterion. These include impacts on the economy, on expected public sector revenues, on government spending, etc. The most common economic criteria are costs. These may include: Borrowing costs--the costs of borrowing funds Decreases in net worth--decreases in assets and/or liabilities Direct costs--directly attributable to the policy alternative Indirect costs--additional impacts not included in the goals Intangible costs--costs that cannot be counted or quantified Monetarizable costs--can be expressed in dollars One-time fixed costs--new capital expenditures, equipment, training, etc. Operations and maintenance costs--ongoing costs of the alternative
6

Opportunity costs--other things that could have been done with the same resources instead Tangible costs--can be counted and quantified Costs need to be counted. One cannot assume that the money was going to be spent anyway. Costs should be identified as completely as possible, eliminating unpleasant surprises down the road. Another type of cost criterion that is often employed is marginal cost. That is, if some good or service is already being produced, how much more will it cost to produce one additional unit of output? The types of costs that are considered in marginal analysis are: Fixed costs--these do not vary in the short run, no matter how many units are produced Variable costs--these vary directly with the volume of output of goods or services Average costs--the total of units of output divided by the total costs of output Marginal costs--the costs of producing one additional unit of output Sunk costs--these are costs that can be ignored as they have already been spent in the past Another type of economic criterion is benefits. Benefits are the opposite of costs. Benefits are ways in which the policy actors will be better off. Benefits can be measured in many of the same ways as costs, including; Direct benefits--directly attributable to the policy alternative Increases in net worth--increases in assets and/or liabilities Indirect benefits--additional benefits not included in the goals Interest earned--interest that will accrue or be paid Intangible benefits--benefits that cannot be counted or quantified Monetarizable benefits--can be expressed in dollars One-time benefits--one-time reduction in the problem Ongoing benefits--continuing decreases in the problem Tangible benefits--can be counted and quantified Benefits are often more difficult to quantify than costs. One alternative is to use "shadow prices," or the value of the benefits in a perfectly competitive market, for example, free recreation facilities, wilderness areas, parks, etc.

7.5.4. Equity Criteria Efficiency and effectiveness are technical and economic questions, but equity is a public question. Equity asks about the social allocation of burdens and benefits. Equity asks the questions of "who pays?" and "who benefits?" A proposed policy alternative may impact equity if it will change the distribution of burdens and benefits in society. There is no universally approved optimal or right answer for how benefits and burdens should be distributed in society. That is, a continuing area of contention and essentially a political decision. However, there are guidelines for equity, such non-discrimination, and the same treatment for those equally situated and different treatment for those unequally situated. Horizontal equity asks whether burdens and benefits are being shifted among groups in society which are relatively equal. Vertical equity asks whether burdens and benefits are being shifted among groups in society which are relatively unequal. Inter-generational equity asks whether burdens or benefits are being shifted from one time period to another, whether younger generations will have to pay more and receive less than older ones, or vice versa. Groups are often identified on the basis of: Residence Income Citizenship Race or Ethnicity Sex Age Family Status Home Ownership Educational Status Health

Problems in assessing equity include: How should the population be sub-divided? How should groups be defined? Should historical criteria, the status quo, or desired nations be used? What is a burden? What is a benefit? What is a degree of need? What is an ability to pay? 7.5.5. Technical Criteria Effectiveness is often used as a criterion by which to judge policy proposals. Effectiveness is the extent to which the proposed policy will attain the goals set forth in the problem statement. For example, if the goal is to decrease the current teenage driver accident rate, how much will each policy alternative decrease the rate below current levels? Another technical criterion is technical feasibility. This asks whether the technology exists or is readily available to implement a proposed alternative. For example, one proposed policy alternative may be to install in all cars a breath analyzing device that would not let a car start if the driver has been drinking. However, this technology is not widely or cheaply available. Other technical criteria may question whether the measurement of criteria can be conducted at the desired level of reliability and validity. For example, are there tests that can adequately measure whether students in bilingual education programs have the same level of literacy as students in non-bilingual education programs? 7.5.6. Political Criteria Many times the client for the policy analysis will hold a political office. In that case, the policy analyst must often include political criteria in the assessment of proposed policy alternatives. Political viability asks whether or to what extent a proposed policy alternative will be acceptable to relevant powerful groups, decision makers, legislators, administrators, citizens, neighborhoods, unions, or others. Other ways of assessing political viability include:

Acceptability--is the proposed alternative acceptable to policy makers, policy targets, the general public, voters, etc.? Appropriateness--is the proposed alternative appropriate to the values of the community, society, the legislature, etc.? Legal--is the proposed alternative legal under current law, or will statutes have to be amended or enacted? Responsive--will the proposed alternative meet the real or perceived needs of the target group, the public, etc.? 7.5.7. Administrative / Institutional Criteria Many public policies are implemented by public agencies. Therefore, administrative operability or administrative ease is often used as criteria for judging proposed public policies. Questions that may be addressed include: Authority--does the agency have the authority to implement the proposed policy? Commitment--does the proposed policy have the commitment of top managers, field staff, and support staff? Capacity--does the agency have the resources to implement the proposed policy, in terms of staff, skills, money, training, expertise, etc.? Support--are the facilities, equipment, and other support available for the proposed policy? 7.6. Identifying Alternatives

7.6.1. Generating Alternatives Before alternatives can be generated, 1) The problem must be correctly identified, and 2) Relevant criteria for judging alternatives must be specified At first, the policy analyst can generate a large number of alternatives, but later reduce them to a manageable size (between four and seven). Consider alternatives like the status quo, but also radically different. Consider what may be possible under different circumstances. Some criteria that are often used in judging the suitability of alternatives include: 1) Cost--Can We Afford It; Will It Be Cost-Effective? 2) Reliability--Does It Have Proven Success, Or Is It Subject To Failures? 3) Stability--Will It Still Work If Conditions Change?
10

4) Invulnerability--Will It Work If One Of Its Component Parts Fails? 5) Flexibility--Can It Accomplish More Than One Thing? 6) Riskiness--Is There A High Chance Of All Or Nothing? 7) Communicability--Is It Easy To Understand? 8) Merit--Does It Address The Problem? 9) Simplicity--Is It Easy To Implement? 10) Compatibility--Is It Congruent With Existing Norms And Procedures? 11) Reversibility--Can We Return To Our Prior Nation If It Fails? 12) Robustness--Can It Succeed In Different Future Nations? 7.6.2. Sources of Alternatives 1) The status quo or no action alternative This means that current efforts will continue at the same level. It is important to consider how effective any different alternative will be at changing the status quo. A baseline analysis: identifies clear trade-offs with the present; clarifies project objectives; underlines whether there is a need for action or not; provides linkages to existing efforts; identifies problems likely to emerge; and confirms that no optimum solution exists. 2) Experiences of others with similar problems, from reported research findings, experts, laws, public opinion polls, new technology, etc. 3) Re-define the problem from others' points of view, including opponents of any change 4) Consider the ideal, then apply political, economic, and other constraints 5) Start from generic, to modified, to custom-made alternatives 6) Quick Surveys by telephone, fax, or e-mail, of peers, old MPA classmates, people in the policy issue network, public meetings or hearings, content analysis of editorials, letters to the editor, etc. 7) Literature review of professional and academic journals, government reports, collected proceedings from conferences, on-line services (lexis-nexus, first search, article first etc.).

11

8) Case studies of real world experiences: why was the alternative adopted, what were the circumstances, what other alternatives were considered and discarded, how did it eventually work out, what modifications were made after implementation. 9) Passive collection and classification: keep a folder for collecting interesting policy solutions on a regular basis, even if no problem exists at the moment, from clients, superiors, advocates, media, interest groups, etc. Then refer to the folder in emergencies. 10) Develop Typologies: identify all the types of persons likely to be affected by any policy alternative, and what the probable reaction of each group would be to each type of alternative suggested; then develop alternatives that can overcome the objections of most of the groups. 11) Use analogies: 'new' problems are really just like other 'old' problems. Personal Analogy: pretend to be someone affected by this problem, identify with the problem to see what types of policy alternatives suggest themselves; Direct Analogy--look at solutions to other problems to see if they can be applied to this one; Symbolic Analogy--imagine the most aesthetically satisfying solutions rather than merely technologically sound ones; Fantasy Analogy--image the ideal solution, and try to preserve as much of it as possible when working backwards through real world constraints. 12) Brainstorming--can be oral, written, or electronic. Brainstorming has two phases, first a pure idea-generation phase, where no judgments are made about any ideas; and second, an evaluation and ranking phase, to help arrive at concrete solutions. 13) Feasible Manipulation--takes existing policy activities and develops alternatives based on limited, moderate, or wide manipulation of the range of possible activities. 14) Modify existing solutions: Magnify--do more, more often, larger, longer, exaggerate, add new components, new resources Minify--do less, less often, smaller, shorter, omit, remove, split apart, under use, fewer resources Substitute--switch components, apply in different order, use different materials, try a different location or different sponsor Combine--blend approaches, combine units, combine purposes, combine sponsors
12

Re-arrange--reverse, invert, change sequence, speed up, slow down, randomize Location--use single or multiple locations, node versus scattered, temporary versus permanent Timing--accelerate, lag, stagger, run concurrently, shorter span, longer span, time sharing Finance--provide, purchase, tax, user fee, subsidy, co-pay, deductible, voucher, contract out Organization--centralized versus decentralized, mandated versus voluntary, regulated, prohibited, enforced, inform, implore Decision Sites--individual, unit, organization, elected, appointed, advisory, binding Influence Points--users, providers, intermediaries, beneficiaries, payers Risk Management--guarantees, insurance, remedial correction 7.6.3. 1) 2) 3) 4) 5) 6) 7) Pitfalls Too much reliance on past experience Failure to capture ideas and insights (listen, write them down, record them) Too early closure on problem definition Sets a policy preference too soon before all the alternatives are known Criticizing new ideas as they are offered Some alternatives are ruled out too early on Failure to re-consider discarded alternatives if conditions change

13

DEPARTMENT OF ECONOMICS
UNIVERSITY OF DAR ER SALAAM

Lecture Eight
Policy Making Decision Processes and Analysis
By Semboja Haji Hatibu Haji

Unedited Training Notes To be presented at the EC664 Policy Analysis MA Course Date Tuesday, November 01 2011

8.1.

Assessing Policy Alternatives

Which policy alternative should be adopted? In this step in the policy analysis process, we noted that the policy analyst takes each of the proposed policy alternatives and, one by one, applies each of the decision criteria to each alternative. For example, say we have specified that we will be using the criteria of efficiency, cost, political acceptability, and equity to make our decision. We have defined what we mean by each of these and how they will be measured. We must then look at each proposed policy alternative, one at a time, and ask, what would be the efficiency of this alternative? What would be the cost of this alternative? What would be the political acceptability of this alternative? And how will this alternative affect equity? We then repeat this process for every alternative, including the no-action alternative. How do we know what the efficiency of each alternative will be? That involves forecasting. 8.1.1. Forecasting The criteria that will be important in assessing proposed policy alternatives determine what needs to be forecast. For example, if the goal of a proposed policy alternative is to lower the teenage driving fatality rate, then what needs to be forecast is the teen driving fatality rate, first under the assumption that no action is taken, and the under the assumption that the policy alternative being considered is implemented. There are a variety of methods used to make forecasts. Forecasting methods range from simple stereotyping to complex statistical formulas. Intuition may use techniques such as Delphi, scenario writing, or feasibility assessment. However, it requires that the participants be quite knowledgeable, and it needs to be checked for logical consistency. Theoretical economic models identify important variables and specify the nature of the linkages among them. Then the model is used to predict outcomes when one or more of the variables are changed. Models are built from information, experience, expert advice, etc.
2

Constructing a model helps to get to the key elements of the situation, and focus on the most important concerns. It identifies the key factors and the relationships among them which will likely be impacted by any proposed policy alternative. It demonstrates the likely consequences of either the no action alternative, or any other rival alternative. Models may be expressed in words, in physical dimensions (e.g., architectural models), or in numerical form. Extrapolation uses the past to predict the future, assuming there are stable patterns. For example, if the population of Tanzania has been growing at 25% every ten years, then a graph showing past growth can be extended into coming years to predict future growth. Extrapolation is useful for conducting a baseline analysis, showing what is expected if the status quo or no action alternative is adopted. It is relatively simple and cheap and can be accurate in many circumstances. Data can be either raw numbers or a computed rate of change. Extrapolation requires precise definitions of criteria and measures, and accurate measurement. It is most often used when there are linear patterns in the data. Extrapolation is less useful in the case of new problems, new issues, or new policy areas, where there is little or no past data. The most commonly used form of regression is linear regression, and the most common type of linear regression is called ordinary least squares regression. Linear regression uses the values from an existing data set consisting of measurements of the values of two variables, X and Y, to develop a model that is useful for predicting the value of the dependent variable, Y for given values of X. If the data are not linear, that is, if on a graph the line that best shows the relationship between the two variables is not a straight line, then simple linear regression cannot be used to extrapolate into the future. Instead, the data must be converted, for example, to logarithms, or a different sort of regression must be used. 8.1.2. Economic Analysis One of the most widely used economic analysis tools is to look at the long term costs and the long term benefits of a proposed policy alternative. From there, the policy analyst can calculate the Net Present Value (NPV), the Cost-Benefit Ratio, or the Internal Rate of Return (IRR) of each alternative.
3

To calculate the long term costs and long term benefits of a proposed policy alternative, the policy analyst must assemble estimates of the initial or implementation year costs and benefits of the alternative, and the subsequent costs and values for each additional year the project will be in effect. Discounting The next step is for the policy analyst to decide on a discount rate. The discount rate assumes that money spent in the future will not cost as much as money spent today. Similarly, money gained in the future will not be worth as much as money gained today. This is based on the human preference for wanting to put off costs (or payments) as long as possible, and wanting to receive benefits (or pay) as soon as possible. The discount rate is usually obtained from economists, from agency policy, or from the nature of the project being considered (i.e., whether a large infrastructure project, a revenue-bond based project, or a general obligation bond based project). Another source is the discount rate charged by the Bank of Tanzania, or the interest rate paid on government bonds. At times, the choice of which discount rate to use has been highly politicized. Because many government projects have high initial costs but a long stream of benefits, a low discount rate will make a project look more favorable, and a high discount rate will make a project look less favorable. The same discount rate is generally applied to both the project costs and the project benefits. If inflation is going to be factored in, it should be applied to both the costs and benefits separately, before the discount factor is applied. To calculate the discounted costs, multiply each year's costs by that year's discount factor (the discount rate factor be obtained from a table of discount rates): Net Present Value The Net Present Value is the value of the project if all the costs were paid today and all the benefits were gained today. To find NPV, subtract discounted costs from discounted benefits: Discounted Benefits $17,807 - Discounted Costs $16,087 = $1,720

The Net Present Value of each policy alternative must be calculated separately, and then it can be compared to the NPV of each other policy alternative, to find the one with the highest NPV. Cost-Benefit Ratios The costs and the benefits of any policy alternative can be compared in a number of ways. Costbenefit ratios are obtained by dividing discounted benefits by discounted costs: Discounted benefits =$17,807 Discounted costs =$16,087 Benefit/Cost ratio =1.1 Note that the highest benefit-cost ratio may not have the highest NPV. These are two different types of analysis. The most efficient projects have the highest benefits-to-costs ratio, but many policy analysts prefer to maximize NPV. In any case, NPV should be a positive number, and the benefit-cost ratio should be greater than 1.0 Internal Rate of Return The internal rate of return is an expression of the discount rate at which discounted benefits would equal discounted costs. For the example above, at an 8% discount rate, discounted benefits would equal $15,971 and discounted costs would also equal $15,971. If the calculated IRR is greater than the discount rate being used for the project, then that is an indication that the project should be carried out. Generally, IRR is not comparable to either NPV or the benefits-to-costs ratio. The IRR from one project, however, can be directly compared to the IRR from an alternative project. Sensitivity Analysis Often there is no clearly superior potential policy alternative, but several that seem equally acceptable. One alternative may be better on the criterion of efficiency, while another is better on costs, and a third on political acceptability. A policy analyst will usually try to see how sensitive the analysis is to changes in assumptions. Things that the policy analyst will test include: 1) The length of the project (how long will benefits continue)
5

2) The discount rate 3) The value placed on various quantities (costs, benefits, probabilities, etc.) For example, a city wants to replace old garbage trucks with newer models, and it assumes the new trucks will last 20 years. What if the benefits only last 10 years? Or if the annual maintenance costs are 50% higher than what was budgeted? Or does a project still have a positive NPV if the discount rate is raised from 4% to 6%? Is the IRR still greater than the discount rate? Is the benefit-to-cost ratio still greater than 1.0 ? In another example, the city assumes that building a new parking garage will raise an additional $2,000 per parking space per year in sales taxes, as well as the revenues from parking. What if only $1,000 is raised? What are the probabilities of the different outcomes? What if the probabilities for the favored outcome decrease? Another type of sensitivity analysis is to identify the break-even point. This can vary according to: The length of the project (how many years are needed to break even?) The discount rate, (how low before benefits equal costs?) The value of other quantities (e.g., amount of extra parking permits sold?) Contingency analysis Contingency analysis identifies what will happen if one of the basic assumptions about the project is altered. For example, what if there are large cost over-runs? What if people do not behave as predicted (e.g., buy more parking permits?) A fortiori analysis A fortiori analysis examines the likelihood that any one factor will take on a value that makes the project infeasible. For example, what if the project takes two years to complete instead of one? What if interest rates rise dramatically? What if new regulations are adopted that make the project technically impossible?
6

To perform sensitivity analysis, 1) List all relevant considerations; 2) Establish the range of values that each variable can take, from low to high; 3) Holding all other values constant, vary the value of one variable at a time; 4) Test sensitive values to find the break-even, contingency, and a fortiori points. 8.1.3. Risk Analysis Some decision-makers are risk averse. They want to minimize any possible losses, rather than to pursue the (riskier) maximum possible gains. They will want to go for the sure thing (the alternative with the highest probability--in this case, do nothing--especially if limits their possible losses (for this alternative, the worst case scenario is to break even at 0). Another way to begin the appreciate the different possible outcomes of different policy alternatives is to use quick decision analysis. This is a way to visually represent a small number of alternatives and their consequences. Quick decision analysis identifies key issues, and helps the policy analyst to decide what information is necessary to assess each possible alternative. It helps to structure thinking about the probability or likelihood that certain outcomes will occur. It also helps the policy analysts or decision-makers to reveal their attitudes about risk and uncertainty. And it alerts the policy analyst to the possible political ramifications of predicted outcomes. The steps in constructing a quick decision analysis are: (1) Identify the dimensions of the analysis (problem, alternatives and outcomes) (2) Construct a diagram (3) Forecast the likely outcome for each alternative (4) Assess how likely each outcome is in terms of probability (5) Calculate the expected value of each alternative For example, say a city wants to know if it should offer tax abatement to encourage economic development. The two alternatives are, simply, to do nothing (not offer the abasement), and to do something (offer the abatement). Each possible policy alternative has two possible outcomes: new economic development occurs, or new economic development does not occur.

Likely Outcomes

Do Nothing Development Occurs No new development

Offer Abatement Development Occurs +$900 m No development 0 new

Change in Revenues

Property

Tax

+$100 m

Cost of offering the abatement Cost of additional city services Net Probability of this outcome Expected alternative Value of this

0 -$25 m +$75 m p=0.3 0.3 x $75 m = $22.5 m +$22.5 m

0 0 0 p=0.7 0.7 x $0 m $0 m =

-$600 m -$100 m +$200 m p=0.6 0.6 x $200 m = $120 m +$40 m

-$200 m 0 -$200 m p=0.4 0.4 x-$200 -$80 m m =

However, it is important to question quick decision analysis. -What studies were used to estimate outcomes and probabilities? -Were discount rate applied? -What time frame was considered? -What were the opportunity costs (how could the money be spent elsewhere?) -How sensitive are these figures to changes in the economy? -At what probability would the expected value of the two alternatives be equal? If there is a great deal of uncertainty about the analysis, there are a number of strategies: 1) Delay until more is known 2) Map out all uncertainties and the information that is needed 3) Collect more data to reduce uncertainty 4) Estimate a wide range of possible values for those which are uncertain 5) develop alternatives under a wide range of possible conditions 6) build in more flexibility 7) build in more backup 8) compromise to an acceptable alternative, even if it is not the optimal one 9) choose a strategy that minimizes the maximum possible losses 10) conduct in-depth research to provide the information needed

8.1.4. Political Analysis Often one criterion for assessing proposed policy alternatives is political acceptability to the client. A political feasibility analysis can help the policy analyst identify the important elements to be considered for each proposed policy. 1) Actors--people, groups, and organizations 2) Beliefs and motivations--which are negotiable, and which are non-negotiable? 3) Resources--power, influence, money, staff, public opinion, etc. 4) Effectiveness--leadership, ability to use resources effectively 5) Sites--agendas, windows of opportunity, sequencing of decisions, etc. A political feasibility analysis takes each proposed policy alternative and examines how well it will hold up in the current political reality. Which actors will favor or oppose it, and why (beliefs and motivations)? What resources do they have, and how effective will they be at supporting or opposing the policy? Where is the debate on the policy to occur, and which actors or groups will be most powerful there? Does any group have veto power? 8.2. Implementation Analysis

Even after a policy is adopted, there still may be resistance to its implementation. In conducting an implementation analysis, the policy analyst looks at factors that will make the alternative easier or more difficult to implement, such as: 1) are there few or many actors required to implement this alternative? 2) will there be one or multiple implementation settings? 3) will there be a single or multiple sets of instructions? 4) what is the degree of consensus around this alternative? 5) what magnitude of change will be required? 6) how much of the political conflict from the adoption stage will be displaced into the implementation stage? 7) can game theory be used to model the possible outcomes? 8) are the necessary resources present, such as administrative will, competence, budget, skills, authority, personnel, etc. 8.2. Decision Rules and Displaying Alternatives

8.2.1. Decision Rules Policy assessment techniques do not determine which policy should be adopted. Policy analysis presents the benefits and drawbacks of each alternative, but in addition one or more decision rules are needed in order to determine which policy is the "best." There are many problems in trying to determine which policy to adopt. 1) Many problems in the public sector have multiple facets. Policies are designed with multiple goals or objectives. There may be no dominant objective, or several objectives may be in conflict. 2) there are multiple criteria to take into account--technical, economic, political, and administrative--but who decides which is the most important? 3) not all important considerations can be converted into comparable units, such as dollar values. 4) which is the proper criterion to use, greatest net present value? greatest internal rate of return? largest benefit-cost ratio? 5) there is often a lack of agreement beforehand on decision rules, or which rules to apply 6) even if each decision criterion is optimized separately, there may still be a sub-optimal choice at the end (a camel is a horse designed by a committee). The policy analyst is often faced with trying to present multiple policy alternatives which have been assessed in terms of multiple decision criteria. There are various methods which can be used to display this information in a way that facilitates decision-making. 8.2.2. Paired Comparisons If there are 5 different ways of collecting the city's garbage, then the analyst can compare method 1 with method 2 and determine which is superior. The better of the two is then compared with method 3, and again one of them is determined to be superior. The winner of each contest is then compared with another of the remaining alternatives until all have been evaluated and the winner of the last contest is the overall winner. This method presents a simple, step-by-step comparison that is relatively easy to follow, if somewhat tedious. The problem with this method is that the outcome may be influenced by the order in which the alternatives were considered. 8.2.3. Satisfying
10

The analyst presents all the alternatives that meet the minimum threshold levels on all criteria. The minimum threshold is then increased on each criterion, and those alternatives which do not meet the new levels are dropped. This process continues until only one alternative is left. For example, say there are 6 alternatives to solve the parking problems on campus and three criteria: net revenues, number of permits sold, and student satisfaction. The minimum levels are $50,000 in revenues, 10% increase in permits sold, and at least 50% students satisfaction. Two alternatives are dropped because they do not meet one or more of these minimum levels. The levels are then raised to $75,000 in revenues, 20% increase in parking, and 65% student satisfaction. Another two alternatives drop out. Finally, raising the minimums to $100,000 in revenues, 25% increase in parking, and 75% student satisfaction eliminates one alternative and the only remaining alternative that meets all these minimums is the winner. This method assures that the minimum "needs" for the policy will be met, and, in addition, offers the prospect of meeting higher than minimum needs ("desires"). The problem is that it changes the definition of acceptable after the analysis has been completed. 8.2.4. Grading Method The consequences of each alternative on each criterion are considered. A grade of "Pass" or "Fail" is assigned to each alternative on each criterion. Only those alternatives which "Pass" on all criteria are retained; those which have any "Fails" are rejected. The retained criteria are then compared further. This is comparable to the satisficing method discussed above.

8.2.5. Lexicographic Ordering The analyst lists all those alternatives that ranked most highly on the one most important criterion. These alternatives are all considered to be roughly equal. The alternatives are then compared on the second most important criterion. Those alternatives which rank most highly are retained, and they are then compared on the third most important criterion. This process is repeated until the alternative that is most highly ranked on all the criteria is found.

11

For example, say there are 5 alternatives for economic development for the downtown area, and there are three criteria: increased revenues, increased jobs, and citizen satisfaction. Three alternatives rank highly on the most important criterion of increased jobs. These three are then compared on the second criterion, citizen satisfaction. Only two are highly ranked. These last two are compared on the third criterion of increased revenues, and the most highly ranked is the winner. This is a rather straightforward process of comparison. However, it assumes there is agreement on which is the first most important criterion, the second most important, and so on. For situations with multiple objectives (criteria) or multiple decision makers, this may be difficult. 8.2.6. Non-Dominated Alternatives All alternatives are measured on all criteria, and their rank order on each criterion is displayed. Every alternative that is ranked the most highly on any criterion is retained; any alternative that is not ranked #1 on at least one criterion is discarded. The result is only "non-dominated" alternatives, that is, alternatives that are clearly superior on at least one criterion. These alternatives can then be compared further by another method.

Criterion 1 Alternative A Alternative B Alternative C Alternative D Alternative E Alternative F Rank #4 Rank #2 Rank #3 Rank #1 Rank #6 Rank #5

Criterion 2 Rank #5 Rank #1 Rank #4 Rank #3 Rank #6 Rank #2

Criterion 3 Rank #6 Rank #3 Rank #1 Rank #2 Rank #5 Rank #4

In this example, only Alternatives B, C, and D were ranked #1 in at least one category. Alternative B is not dominated by any other alternative on Criterion 2; Alternative C is not dominated by any other alternative on Criterion 3; and Alternative D is not dominated by any other alternative on Criterion 1. Alternatives B, C, and D must now be considered further.

12

Say there are five designs for a new community building, and the designs are ranked in terms of their suitability for athletics, as well as their suitability for arts and crafts. Only one design will be ranked #1 in each category. These two designs are the only non-dominated alternatives. Since they are each ranked #1 on one category, and they are each ranked #2 in the other category, they are considered equal. A third criterion may be added as a "tie-breaker." For example, the two alternatives might be ranked in terms of their suitability for meetings. The higher ranking of the two will be the winner. This method is straightforward and relatively easy to follow. However, it brings in additional criteria (tie-breakers) after the analysis has been completed and some alternatives have been eliminated. 8.2.7. Equivalent Alternatives When at least one of the criteria can be measured in quantitative units, for example, dollars, this method can be used to compare two alternatives. It involves converting other units of measurement to dollars as well and then comparing the two alternatives again. For example, you have been offered two possible jobs. You assess these jobs in terms of five criteria: salary (measured in dollars), climate (measured in days of sunshine per year), commute time (measured in minutes), nature of job (interesting or uninteresting), and potential for advancement (measured as good or poor).

Salary Job A Job B $36,000 $42,000

Climate 240 200

Commute 20 30

Nature I U

Advance G P

Since the two jobs are both measured on at least one criterion--salary--in a quantitative form (dollars), the next step is to convert the value of the other criteria to dollars as well.

13

For example, how much of the $42,000 salary would you be willing to give up to have more days of sunshine per year? Say that the extra 40 days of sunshine per year are worth $1,600 (you would be willing to take Job B at $1,600 less in pay if it had 40 more days of sunshine). Show these calculations in a revised chart.

Salary Job A Job B $36,000 $40,400

Climate 240 240

Commute 30 20

Nature I U

Advance G P

Now, how much of the remaining salary of Job B would you be willing to give up to have a shorter commute? Say that cutting commute time by 10 minutes per day is worth $1,000 (you would be willing to take Job B at $1,000 less in pay if it had 10 minutes less of commuting). Show these calculations in a revised chart.

Salary Job A Job B $36,000 $39,400

Climate 240 240

Commute 20 20

Nature I U

Advance G P

Now, how much of the remaining salary of Job B would you be willing to give up to have a more interesting job? Say that it is worth $1,400 (you would be willing to take Job B at $1,400 less in pay if it was more interesting). Show these calculations in a revised chart.

Salary Job A Job B $36,000 $38,000

Climate 240 240

Commute 20 20

Nature I I

Advance G P

Now, how much of the remaining salary of Job B would you be willing to give up to have greater potential for advancement? Say that it is worth $2,500 (you would be willing to take Job B at
14

$2,500 less if there was greater advancement potential). Show these calculations in a revised chart. Salary Job A Job B $36,000 $35,500 Climate 240 240 Commute 20 20 Nature I I Advance G G

Now the two jobs are "equalized" on all criteria except the quantitative on (salary). Since the two jobs are equal except for salary, then the job with the higher salary (Job A) is the winner. This method is rather complex and has many steps. It is also very subjective and best suited to situations where there are only individual decision makers rather than groups. It does help the decision maker to clarify their personal preferences, however, and may provide useful insight into the most important facets of the problem. 8.2.8. Weighted Decision Criteria When there are multiple decision criteria, a ranking or weighting system can be developed to reflect the relative importance of each criterion in the decision making process. These are sometimes referred to as "importance weights." Say that the state wants to adopt a plan to give grants to the elderly to defray their utility expenses. The decision criteria are number of elderly reached, speed at delivering the grants, and controls on fraud. Each alternative is measured on each criterion and a raw score is assigned. The decision criteria have been weighted by the decision makers, so that the number of elderly reached is worth 50% of the decision, the speed at delivering grants is worth 30%, and controls on fraud is worth 20%. The raw score for each alternative on each criterion is then multiplied by the importance weight for each criterion. The result is a weighted score. The weighted scores for each alternative on all the criteria are then added for the total weighted score. WEIGHTED SCORES Elderly Reached Speed Delivery of Fraud Curbs Total Score

15

(50%) Alternative A Alternative B Alternative C Alternative D 5 x .5 = 2.5 4 x .5 = 2.0 4 x .5 = 2.0 2 x .5 = 1.0

(30%) 4 x .3 = 1.2 4 x .3 = 1.2 3 x .3 = 0.9 3 x .3 = 0.9

(20%) 3 x .2 = 0.6 4 x .2 = 0.8 3 x .2 = 0.6 5 x .2 = 1.0 4.3 4.0 3.5 2.9

The alternative which scores the highest on the number of elderly reached (Alternative A) is the alternative with the highest total score. An alternative which has very good controls on fraud, but does not do as well in the areas of reaching the elderly or speed, has the lowest total score. The advantages of this method are that arriving at the superior alternative is straightforward and relatively easy. Rather than considering alternatives one at a time, or considering criteria one at a time, this method considers all alternatives on all criteria simultaneously. The disadvantages are that many criteria are not measurable in quantitative form and there may be disagreement over the importance weights of the criteria. 8.2.9. Groller Scorecard The matrix (or "scorecard") is a way of displaying the impacts of each alternative in terms of each criterion in "natural" units of measure, such as reduction in fatality rate, political acceptability, administrative ease, effectiveness, impact on need for additional landfills, etc. The scorecard indicates the extent to which each alternative attains the objectives specified by each criterion. This approach the viewer(s) to grasp a complex analysis by summarizing it in a chart. It can help a group to come to a decision without the need to impose quantitative measurement or assign importance weights to criteria.

REDUCE PERMIT PRICE COST TO UNIVERSITY THE More students buy permits; no net loss or gain

STRONGER PARKING ENFORCEMENT Higher costs enforcement in

EDUCATIONAL CAMPAIGN

Moderate costs for materials

16

SOLVES PARKING PROBLEM ACCEPTABILITY TO STUDENTS ACCEPTABILITY TO COMMUNITY

Cuts illegal parking by 25% Highly acceptable

Cuts illegal parking by 40% Highly unacceptable

Cuts illegal parking by 10%

Moderately acceptable

Moderately acceptable

Highly acceptable

Unacceptable

Best option

Worst option

8.3.

Implementation, Monitoring and Evaluation

8.3.1. Implementation Analysis The full policy process is often described by the following steps: 1) problem definition 2) alternative generation 3) analysis of alternatives 4) policy adoption 5) policy implementation 6) policy evaluation
17

While this course has focused on the first three steps, the last three steps are equally important. A thorough policy analysis will include some consideration of policy implementation, monitoring, and evaluation. The policy analyst can sketch out an implementation plan for the most highly ranked alternative(s) that considers: 1) relevant actors and their interests 2) required resources and who might provide them 3) facilitators and barriers likely to be encountered 4) reasonable time frame Implementation analysis might involve writing a "best-case" scenario and a "worst-case" scenario for each policy alternative, as well as the "most likely" outcome. The idea is to think systematically through the implementation process, identify potential problems, and develop actions that can be taken to either avert catastrophes or reduce losses. 8.3.2. Policy Monitoring Policy maintenance refers to keeping the policy or program going after it is adopted. Policy monitoring refers to the process of detecting how the policy is doing. To monitor a policy, some data about the policy must be obtained. A good implementation plan will suggest some ways in which ongoing data about the policy can be generated in the regular course of policy maintenance, for example, from records, documents, feedback from program clients, diary entries of staff, ratings by peers, tests, observation, and physical evidence. 8.3.3. Policy Evaluation Policy evaluation is the last step in the policy process. It may ask deep and wide-ranging questions, such as: 1) was the problem correctly identified, or was the correct problem identified? 2) were any important aspects overlooked? 3) were any important data left out of the analysis? did this influence the analysis? 4) were recommendations properly implemented? 5) is the policy having the desired effect? 6) are there any needs for modification, change, or re-design? what should be done differently next time?

18

When policies fail to have the intended effect, it is usually due to one of two types of failure: theory failure, or program failure. A theory failure occurs when the policy was implemented as intended, but failed to have the desired effect. This may occur when, for example, a school adopts school uniforms to curb violence in the school, but the violence remains at the same level. The policy was implemented (uniforms were adopted) but the expected change did not occur. The theory that violence occurs due to style of dress is wrong. There must be some other cause of school violence, which would require a different policy to address. An implementation failure occurs when the policy is not implemented as intended. For example, the school may adopt a uniform policy, but the majority of the students ignore it. The level of violence in the school does not change. We still do not know whether adopting school uniforms would lower the level of violence in the schools; we only know that uniforms were not adopted. 8.3.4. Formative Evaluation If adequate monitoring processes are in effect, it should be fairly easy to detect whether a policy has been implemented as intended. This type of policy monitoring has been referred to as formative evaluation. Formative evaluation documents and analyzes how a policy is implemented, with the objective of making improvements as the implementation process unfolds. 8.3.5. Summative Evaluation Summative evaluation is conducted after a program has been fully implemented. It looks at whether the program is meeting its objectives, and why or why not. Evaluations may be unpopular for many reasons: 1) the program is controversial; 2) there are strong political interests in seeing it succeed or fail; 3) there are difficulties in measuring program accomplishments; 4) those involved may be uncooperative; 5) program effects may be influenced by outside developments. To decide whether an evaluation will be helpful, the answer to the following questions should be "yes":
19

1) Will the evaluation be accepted by politicians, administrators, and/or participants? 2) Has an evaluator been involved from the beginning? 3) Are there measurable objectives? 4) Are data available? 5) Are multiple evaluation methods plausible? 6) Has the program remained stable over time? 7) Can program staff become involved in the evaluation? 8) Will the findings be made widely available? 8.3.6. Evaluation Design Policy evaluation applies accepted social science research methods to public programs. The same research designs used in laboratory experiments are not always practicable in the field, but the same principles can guide the planning and execution of policy evaluation. Before-and-After Evaluation: a policy is evaluated for the changes it has produced since its implementation; the situation is controlled to exclude other possible influences on the outcome. With-and-Without Evaluation: a policy is evaluated for producing changes in the target population, compared to another population without the policy. After-Only Evaluation: the extent to which the policy goals were achieved, compared to the state of affairs before the policy was implemented; but the situation is not controlled to exclude other possible influences on the outcome. Time-Series Evaluation: the changes produced by the policy, tracked over a long time period.

20

DEPARTMENT OF ECONOMICS
UNIVERSITY OF DAR ER SALAAM

Lecture Note Nine

Monitoring and Evaluation System
By Semboja Haji Hatibu Haji
Unedited Training Notes To be presented at the EC664 Policy Analysis Date Monday, November-07-11

9.1. General Objectives of the Monitoring and Evaluation (M&E) System This lecture note sets out the arrangements for monitoring and evaluation (M&E) of the national development policy implementation when policies are increasingly recognized as indispensable management functions. We noted in the previous lectures that some of the main constraints and problems that hampered in development policies include: weak interest and commitment to the evaluation function by partners and civil society organizations; weak culture of carrying out, sharing, discussing and using the results of evaluation activities among stakeholders; a relative shortage of professional evaluation experts (in comparison with researchers, trainers, etc.), insufficient technical resources, limited monitory allocation to M&E work, limited training opportunities in evaluation, shortage of trained staff, etc. The last few years have witnessed an increased interest in strengthening policy M&E by different stakeholders in number of Sub Saharan countries including Tanzania. More government, public, private, nonprofit and civil society organizations are interested in strengthening their M&E capacities. This lecture note reviews the nature of policy M&E, presents basic concepts, principles, tools and methods of M&E, reviews the process of planning and implementing effective M&E processes for policies, and suggests ways for using M&E results. There are many reasons why policy analyst, staff and managers should know about M&E. First, knowledge about M&E helps policy staff to improve their ability to effectively monitor and evaluate their policies, and therefore, strengthen the performance of their policies. We should remember that policy staff need not be evaluation experts in order to monitor their policies; with basic orientation and training, policy staff can implement appropriate techniques to carry out a useful evaluation. Second, policy processes and policy evaluations, carried out by inexperienced persons, might be time-consuming, costly and could generate impractical or irrelevant information. Third, if central and local government authorities or and development organizations are to recruit an external evaluation expert they should be smart clients aware of standards, and know what to look for and require in this service. 9.2. The Need for Monitoring and Evaluation There are many reasons for carrying out policy M&E. All stakeholders need to know the extent to which their policies are meeting their objectives and leading to their desired effects. M&E build greater transparency and accountability in terms of use of policy resources. Information generated through M&E provides policy staff with a clearer basis for policy analysis and decision-making. Future policy planning and development is improved when guided by lessons learned from policy experience.

9.3. Policy Monitoring Monitoring represents an on-going activity to track policy progress against planned tasks. It aims at providing regular oversight of the implementation of an activity in terms of input delivery, work schedules, targeted outputs, etc. Through such routine data gathering, analysis and reporting, policy monitoring aims at: Providing all stakeholders with information on whether progress is being made towards achieving policy objectives. In this regard, monitoring represents a continuous assessment of policy implementation in relation to policy plans, resources, infrastructure, and use of services by policy beneficiaries. Providing regular feedback to enhance the ongoing learning experience and to improve the planning process and effectiveness of interventions. Increasing policy accountability with all stakeholders. Enabling managers and staff to identify and reinforce initial positive policy results, strengths and successes. As well, monitoring alerts managers to actual and potential policy weaknesses, problems and shortcomings before it is too late. This would provide managers with the opportunity to make timely adjustments and corrective actions to improve the policy/policy design, work plan and implementation strategies. Checking on conditions or situations of a target group, and changes brought about by policy activities. In this regard, monitoring assists policy management to check whether the policy continues to be relevant to the target group and/or geographical area, and whether policy assumptions are still valid. Monitoring actions must be undertaken throughout the lifetime of the policy. Ad hoc evaluation research might be needed when unexpected problems arise for which planned monitoring activities cannot generate sufficient information, or when socio economic or environmental conditions change drastically in the target area. Effective monitoring needs adequate planning, baseline data, indicators of performance, and results and practical implementation mechanisms that include actions such as field visits, stakeholder meetings, documentation of policy activities, regular reporting, etc. Policy monitoring is normally carried out by policy management, staff and other stakeholders.

9.4. Policy Evaluation Policy evaluation represents a systematic and objective assessment of ongoing or completed policies terms of their design, implementation and results. In addition, evaluations usually deal with strategic issues such as policy relevance, effectiveness, efficiency (expected and unexpected), in the light of specified objectives, as well as policy impact and sustainability. Those terms are described in detail in the following sections. Periodic evaluations of ongoing policies are conducted to review implementation progress, predict policy's likely effects and highlight necessary adjustments in policy design. Terminal evaluations (or final evaluations) are evaluations carried out at the end of a policy to provide an overall assessment of policy performance and effects/impact, as well as to assess the extent to which the policy has succeeded in meeting their objectives and their potential sustainability. Development policy evaluation is a management tool. It is a time-bound exercise that attempts to assess systematically and objectively the relevance, performance and success of ongoing and completed policies and projects. Evaluation is undertaken selectively to answer specific questions to guide decision-makers and/or policy managers, and to provide information on whether underlying theories and assumptions used in policy development were valid, what worked and what did not work and why. Evaluation commonly aims to determine the relevance, efficiency, effectiveness, impact and sustainability of a policy or project1. The main objectives of policy evaluation are: To inform decisions on operations, policy, or strategy related to ongoing or future policy interventions; To demonstrate accountability2 to decision-makers (donors and policy countries). It is expected that improved decision-making and accountability will lead to better results and more efficient use of resources. Other objectives of policy evaluation include: To enable corporate learning and contribute to the body of knowledge on what works and what does not work and why; To verify/improve policy quality and management; To identify successful strategies for extension/expansion/replication;
1
2

Accountability is the responsibility to justify expenditures, decisions or the results of the discharge of authority and official duties, including duties delegated to a subordinate unit or individual. Policy Managers are responsible for providing evidence to stakeholders and sponsors that a policy is effective and in conformity with its coverage, service, legal and fiscal requirements.

To modify unsuccessful strategies; To measure effects/benefits of policy and project interventions; To give stakeholders the opportunity to have a say in policy output and quality; To justify/validate policies to central government ministries, development partners and other constituencies.

There are many reasons for conducting an evaluation, including: Providing managers with information regarding policy performance. Policy plans might change during the implementation process. Evaluations can verify if the policy is really running as originally planned. In addition, they provide signs of policy strengths and weaknesses, and therefore, enable managers to improve future planning, delivery of services and decision-making. Assisting policy managers, staff and other stakeholders to determine in a systematic and objective manner the relevance, effectiveness, and efficiency of activities (expected and unexpected) in light of specified objectives. Mid-term evaluations may serve as a means of validating the results of initial assessments obtained from policy monitoring activities. If conducted after the termination of a policy/policy, an evaluation determines the extent to which the interventions are successful in terms of their impact and sustainability of results. Assisting managers to carry out a thorough review and re-thinking about their policies in terms of their goals and objectives, and means to achieve them. Generating detailed information about policy implementation process and results. Such information can be used for public relations, fundraising, promotion of services in the community, as well as identifying possibilities for policy replication. Improving the learning process. Evaluations often document and explain the causes as to why activities succeeded or failed. Such documentation can help in making future activities more relevant and effective. As in monitoring, evaluation activities must be planned at the policy/ policy level. Baseline data and appropriate indicators of performance and results must be established. Evaluation goals and objectives should be determined by policy management and staff. Many organizations do not have the resources to carry out the ideal evaluation. Therefore, it is preferred

that they recruit an external evaluation consultant to lead the evaluation process. This would increase the objectivity of the evaluation. Policy strengths and weaknesses might not be interpreted fairly when data and results are analyzed by policy staff members that are responsible for ensuring that the policy is successful. In case the organization does not have the technical expertise to carry out the evaluation and can not afford outside help, or prefers to carry out the evaluation using its own resources, it is recommended to engage an experienced evaluation expert to advise on developing the evaluation plan, selecting evaluation methods, and analyzing and reporting results. 9.5. Relationship between Monitoring and Evaluation Monitoring and evaluation are two different management tools that are closely related, interactive and mutually supportive. Through routine tracking of policy progress, monitoring can provide quantitative and qualitative data useful for designing and implementing policy evaluation exercises. On the other hand, evaluations support policy monitoring. Through the results of periodic evaluations, monitoring tools and strategies can be refined and further developed. Some might argue that good monitoring substitutes policy evaluations. This might be true in small-scale or short-term policies, or when the main objective on M&E is to obtain information to improve the process on implementation of an ongoing policy. However, when a final judgment regarding policy results, impact, sustainability, and future development are needed, an evaluation must be conducted. Monitoring continuously tracks performance against what was planned by collecting and analyzing data on the indicators established for monitoring and evaluation purposes. It provides continuous information on whether progress is being made toward achieving results (outputs, outcomes, and goals) through record keeping and regular reporting systems. Monitoring looks at both policy processes3 and changes in conditions of target groups and institutions brought about by policy activities. It also identifies strengths and weaknesses in a policy. The performance information generated from monitoring enhances learning from experience and improves decision-making. Management and policy implementers typically conduct monitoring. Evaluation is a periodic, in-depth analysis of policy performance. It relies on data generated through monitoring activities as well as information obtained from other sources (e.g., studies, research, in-depth interviews, focus group discussions, surveys etc.). Evaluations are often (but not always) conducted with the assistance of external evaluators. Policy evaluations are less frequent than monitoring activities, considering their costs and time needed.

Transformation of inputs into outputs through activities. 6

The following table provides a comparison between monitoring and evaluation: Table 9.1. Item Frequency Main action Basic purpose Focus Information sources Undertaken by Comparison between monitoring and evaluation Monitoring Periodic, regular Keeping track/oversight Improving efficiency Adjusting work plan Inputs/outputs, process outcomes, work plans Routine systems, field observations, progress reports, rapid assessments Policy managers Community workers Community (beneficiaries) Supervisors Funders Evaluation Episodic Assessment Improve effectiveness, impact, future policy making Effectiveness, relevance, impact, cost-effectiveness Same plus surveys/studies Policy managers Supervisors Funders External evaluators Community (beneficiaries)

The object of process evaluation It is important to monitor and evaluate the outcome of the national policy and implementation processes. The object of process evaluation is to examine the formation and implementation of processes and to elicit the systematic relationships that exist between national social economic policies and their effects. Variations in the implementation processes are assumed to be an important determinant for the success or failure of policy reforms. The ultimate goal is to identify the optimal design of implementation systems and procedures of the national policy implementation and reforms. Where there is little chance of changing actual processes, then process evaluation can at least provide information as to how specific plans, policy and activities should be adjusted to make them function more efficiently. This involves taking stock of the relative success and failure of the reforms pursued in terms of achieving the aim for which they were designed. For either outcome, it is useful to analyze on one hand the extent to which the success /failure of the reform is attributed to limitations in the reform itself, reflecting some weakness in the process above, and on the other hand the extent to which the implementation of the reform itself has contributed to the outcome.

9.5.1.

Failures in policy reform implementation

We noted that failures in policy reforms and implementation may arise from several angles: the reform itself may be the wrong premise, assumptions about the nature of the primary and secondary problems and instrument to addressing these problems; the reforms may have been appropriate for a previous problems under previous conditions which may be different from new conditions; the implementation of the reform objectives and strategies may have been given rise to further problems which had not been anticipated; or the supervision and preparation at the implementation stage may be inadequate. Disagreements may arise because of the failure to trace the full consequences of a particular policy reform. There may be indirect or general equilibrium effects. Alternatively, they may work in the opposite direction and undermine the intended consequences. The national policy reform evaluation or take-up shows to what extent policy and measures are appropriate to the motivations, interests and capacities of targeted stakeholders, people or groups. At this stage, the direct outcome performance of implementation can be measured, such as number of participants, structural composition of participants, quality indicators of measures and compliance with the rules. 9.5.2. Lessons from the monitoring and evaluation

Lessons from the monitoring and evaluation should be used to make the necessary modifications and improvements in the processing of policy analysis and economic management. In occasions of successes, concerted efforts should be directed at sustaining the situation and duplicating these efforts in other areas where it may be relevant. As for the event of failure, an evaluation of the limitations which may have occurred in any of the above mentioned areas and processes are needed, strategies need to be reviewed and where necessary, the policies should be revisited. 9.6. Specific Objectives and Strategies of the Monitoring and Evaluation (M&E) System For the national policy document to be alive and dynamic, its implementation strategies and plans will be subjected to regular and continuous Monitoring and Evaluation, (M&E) by all implementing agencies at different given times and levels. The Monitoring and Evaluation (M&E) system will be established, with the following general policy objectives.

9.6.1.

Facilitate review of the performance

Firstly, to facilitate review of the performance of the national policy implementation and performance, both at the input and output/impact levels, using quantitative and qualitative indicators. This includes routine internal government institution reviews done by all departments, agents and units. The latter will also include process indicators. 9.6.2. Provide feedback that will enable updating

Secondly, to ensure transparency and provide feedback that will enable updating of the national policy management and implementation. This provides a basis for corrective actions to improve the reform performance. The national policy document has to continue as a living document that reflects what is happening on the ground and consistency with respect to other national development goals. The monitoring shall provide key inputs for continuous adjustments and flexibility in the policy implementation. 9.6.3. Monitoring must provide reports that have necessary and sufficient data and information

Third, the monitoring must provide reports that have necessary and sufficient data and information for national policy decision making processes as needed at different levels by different implementation departments, agencies and units. This suggests the need for harmonized monitoring requirements and data. The general national policy strategy for monitoring ad evaluation consists of comprehensive multi-pronged approach of the reform institutional arrangements, processes and outcomes. It will involve implementation of above MIS strategies and ensure efficient target data collection, analysis storage, dissemination and communication and strategic linkages with other national monitoring systems. Above suggests that effective monitoring and evaluation is vital to the success of the national policy implementation; The specific objectives of monitoring and evaluation of the national policy are to Measure progress towards the goal, purpose and outputs of the National policy; Link with the on-going monitoring of the National Strategy for Economic Growth and Reduction of Poverty, (NSGRP); Evaluate progress against specific time bound targets; provide timely, accurate and useful information to stakeholders on the status of implementation;

 Provide a basis for making informed decisions on the future direction of the national policy and in the development of public security and safety policy; Provide a consistent framework within which progress on all key national policy initiatives can be assessed, compared and coordinated; Provide an entry point for civil society involvement in monitoring and therefore in prioritization and resource allocation; Assess the impact of specific National policy interventions, and provide data for the design of new interventions; and Monitor key indicators in other policies which are not primarily focused on the justice administration but which are critical to the success of the National Policy . 9.7. Measurable Indicators for M&E The M&E system requires that the targets are set, measurable indicators are determined, the data for tracking down changes are available, the institutional framework for M&E is established and MIS capacity for implementing M&E is developed and strengthened. The choice of an agreed set of National policy implementation indicator requires involvement of a broad range of stakeholders. For the purpose of the M&E system, indicators for the National policy implementation have to possess two qualities. Firstly they must be quantifiable and measurable. Many of the reform targets specified provide measurable indicators. This is an important consideration in the final selection of indicators. Secondly consistent and reliable data must be available to allow comparison between implementing periods to be made. More specifically, a baseline data must be constructed at the beginning of the policy implementation that must be compared with results during implementation time. Therefore, proxy national policy indicators will be developed for such targets. In addition to measurable indicators, qualitative and process indicators will be developed and assessed. A comprehensive structure, format and content of the monitoring reports shall be designed and developed in tandem with the implementation plans, strategies and other national M&E systems, such as the National Strategy for Growth and Reduction of Poverty, (NSGRP), Education Sector Reforms, Development Vision 2025 and Millennium Development Goals. 9.8. Institutional Framework for the M&E The institutional framework for monitoring and evaluation consists of a comprehensive institutional organizational set-up and an institutional environment. The former covers the reporting, supporting, and coordination systems for monitoring and evaluation. The latter

10

provides the incentive systems for the departments, agencies, units and the various stakeholders to implement planned M&E activities. There is a need to establish a comprehensive M&E institutional arrangement composing of the [1] internal and [2] external management committees. The internal management will constitute refined national policy management committee. 9.8.1. An External M & E Committee

It is important to establish an External M & E Committee. The External M & E Committee will provide strategic and policy level monitoring of the reform, bringing together all relevant ministries at the highest level to assess progress against key National policy indicators every specified time intervals (.e.g., quarter). The Committee will work to enhance the openness and transparency of its proceedings, to foster greater public accountability for progress towards National policy objectives. This external committee will provide a link between national policy reforms and other national development initiatives, reforms and activities. It is important for transparency and an integral part of democratization processes in Tanzania. The external committees may be formed to include members from the central and local government ministries, public institutions, academic and policy research institutions. 9.8.2. Internal and technical committees and working groups

There may be internal and specific technical committees and working groups. The Minister in collaboration with the PS are the overall coordinator of national sector policy reform and M & E system. Under this ministry, the Directorate of Policy and Planning, (DPP) are involved in coordinating implementation and M&E system of the national policy implementation DPP will work in collaboration all ministries, departments and agencies in the country. In addition, all the relevant institutions and Monitoring System, (MS) networks need to be linked, consulted and involved in the M&E of the national policy implementation through external M & E Committee, both horizontally and vertically. Specific M&E committees and technical working groups shall be established to manage development and assessment of M&E reports and provide technical or professional opinions and guidance to other collaborating departments, agencies and units. Institutional set-up for monitoring will extend to the lower levels zones and regions to ensure timely delivery services to all, in particular to the rural areas. This is important because the reform policy relevance of indicators may differ by levels and locations. In addition, national

11

levels need to link up with lower levels and vice versa for the generation of accurate and relevant data and information. Establishing appropriate institutional environment is essential for ensuring smooth implementation of the national policy M & E system. All implementing agencies and actors in the country respond to the incentive system in place. The latter may include eligibility for funding, training and capacity building. A consensus among the various agencies will determine the level and structure of the incentive system. 9.8.3. The Technical Committee/Secretariat

There shall be a Technical Committee/Secretariat. This will work in close collaboration with the Implementation Units and shall be responsible for M&E on a day to day basis. The Technical Secretariat will be responsible for working with the change management teams to coordinate all M&E processes for the Strategy, including Developing of monitoring indicators and identification of suitable monitoring instruments Commissioning baseline and follow up studies; Commissioning impact assessments of specific interventions; Ensuring engagement by key stakeholders including all justice sector institutions and their users in the national policy M & E process; Preparing and disseminating M&E reports; and Providing M&E inputs for all public security and safety aspects of the TDV-2025, NSGRP 9.9. Evaluation National policy implementation should begin by evaluating the state of and needs for sustainable social, economic and political development in the country. This initial assessment should be followed by periodic monitoring and evaluation visits during implementation and for several years following the government policy to assess reform progress, determine further needs and conduct final evaluations. The specific mix of specific reforms should be tailored to a countrys capacity to take over policies and to begin paying for services and equipment from its own resources At each particular implementation period internal and external evaluations will be undertaken to review performance of the national policy implementation. The internal evaluation will assess systematically and objectively the relevancy, processes and performance of the national policy implementation. The general objective of evaluation is to determine the relevance, effectiveness and impact of the national policy implementation on the socio, political and economic development of the country. Both qualitative and quantitative (including process) indicators will be reviewed.

12

The specific objective of process evaluation is to examine the implementation of the national policy implementation and to elicit the systematic relationships that exist between the national development policy performances and their effects. The ultimate goal is to identify the optimal design of short and medium term implementation strategies, processes and outcomes. That is, the evaluation will serve two important specific objectives . The first is to assess national policy performances during specific time bound period and, and the second is to provide lessons and determine adjustments that may be needed to make the consequent periods. The evaluation of the national policy implementation shall be carried out to correspond to the evaluation of specific short-term and medium term strategies. This will allow assessing the implementation of the general and specific policy strategies and specific policies. The results of the evaluation will contribute to an effective assessment of the implementation of the national policy implementation and national growth and poverty reduction strategies. Lessons from the monitoring and evaluation should be used to make the necessary modifications and improvements. In occasions of success, concerted efforts should be directed at sustaining the situation and duplicating these efforts in other legal sector areas where it may be relevant. As for the event of failure, an evaluation of the limitations, which may have occurred in any of the above, mentioned areas and processes are needed, strategies need to be reviewed and where necessary, the National policy implementation strategies and action lines should be revisited. 9.10. Reward Systems

National policy implementations are important processes intended to enhance stability, sustainability and efficiency in social, economic and political systems. It is important that the government create a necessary linkage between on one hand the monitoring and evaluation system and on the other hand the reward system. The reward system is the complex set of formal and informal incentives that connect individual motivation, behavior, performance, and ultimately results to the various forms of pay or compensation received in exchange. It includes not only how individuals in the government institution are paid but also how the underlying philosophy and principles about officers and their contributions and the goals of the government institution are created and communicated, how each individual's contribution is aligned with and tied to organization results, and how performance is managed and appraised. It is required that the; rewards do influence motivation and behavior reward systems must focus on what is valued in the organization there must be a clear connection between the valued behavior/result and the reward

13

 if there is a discrepancy between what is espoused as valued in behavior and/or outcomes and what is rewarded, that which is rewarded will be the stronger influencer of behavioral choices reward systems must be comprised of thoughtfully and strategically integrated components in order for them to be effective There is a clear need of changing reward systems as part of reforms. Both desired reform and reward system changes must clearly be communicated and understood by all stakeholders. It is crucial that reward systems be consistent across the government institution. Both individual and collective performances have to be encouraged. It is necessary to include Carrot (positive incentives) and Stick Principles (negative incentives) in the rewarding system. The contribution required of government officers to bring about the national policy goals is dependent upon effective management, leadership and needs to reflect improved community focus, vigorous defense of profession, and a culture of continuous improvement, officers involvement, effectiveness and efficiency. As part of a broader staff management strategy aimed at harnessing the contribution of officers in the medium- and short-term, the reform approach to reward and recognition must play a key strategic role, taking into account prevailing officers relations arrangements, differing needs of the government institution and existing reward and recognition initiatives. The specific components of the traditional reward systems have served the operation well: looking forward however, it is important that the future reward and recognition strategy adapts and aligns all these components as part of an integrated and sustainable approach which closely supports the changing needs of the reforms 9.10.1. The Approach In order for the national policy to deliver its objectives it needs to have in place a coherent and robust reward and recognition strategy. The key features of the desired reward and recognition strategy are: A statement of the objectives or philosophy informing the reward and recognition strategy The key strategies and principles governing choices within the reward and recognition strategy

14

9.10.2. Objectives of the reward and recognition The reform reward and recognition approach will support the achievement of national policy performance. It will do this through: Supporting the development of a performance culture by rewarding and recognizing government officer contributions. In broad terms, this means aligning rewards to encourage the achievement of reform outcomes, and using recognition to value efforts and quality of contributions. Aligning officer behavior and focus more closely with national needs Being flexible enough to respond to changing national needs Moving towards greater ownership of pay decisions by line officers; 9.10.3. Strategies of reward and recognition The reward and recognition strategy is underpinned by the following strategies which will ensure the organization in making decisions about its reward and recognition practices. These strategies are to: Promote a clearer link between performance and incentives (e.g., pay). Where appropriate this will be at the level of the individual but will also include linkages at team and organizational level Ensure that the salary structure remains competitive in order to recruit, retain and motivate government officers; Provide rewards that are valued by government officers; Provide the facility to give timely recognition for individual and collective achievement; Be simple to understand and operate; Be clearly communicated to all government officers; Be fairly and consistently designed and applied; Be implemented at a pace that is compatible with the needs of the government institution; A key to the success of these strategies and principles is that the reward and recognition mechanisms and processes which they underpin should be sufficiently flexible in the light of embarked government institution reform and needs. 9.10.4. Collective and Collaborative Performances The government institution reforms will also rely on collaboration, involvement, initiative, and synergy in order to achieve it's objectives and outcome and output. Under this case the reward system must include, value, and mirror these requirements. Specifically, it will need to: comprehend group/team performance as well as individual contribution to the team's results,

15

 show a clear connection between collaborative behavior and the rewards received, avoid creating a dynamic whereby people who need to collaborate end up competing over scarce resources, including the rewards themselves, and reward change and speed, for without these, innovation of products and evolution of the organization won't occur 9.10.5. Effective reward systems There is a need to establish an effective reward system as any process within the government institution that encourages, or compensates officers for taking a particular set of actions. It may be formal or informal, cash or non-cash, immediate or delayed. The government institution should develop and implement a behavioral framework for rewards. This involves rethinking the traditional reward systems that currently exist. The process entails viewing reward systems as supporters, if not drivers, of reforms, and modifying the concept that pay policies are just an infrastructure to the government organization. It goes beyond making sure that government officers are properly-paid, and includes understanding the messages that National policy sends and the behaviors it rein institutions. This approach also involves establishing a strategy for building and integrating a set of positive and negative incentive systems, policies, and practices those institutions the behaviors necessary for the implementation of the National policy goals. Effective reward systems are: Specific - Performance measures and feedback systems need to define what government officers should do to contribute to the organization's success. There needs to be a clear line of sight between the results desired under reforms and the behaviors required to achieve them. Meaningful - Rewards need to make government officers feel valued for their achievements from their own point of view. Achievable - The desired actions or results need to be within the participants' control or influence, and attainable through reasonable effort. Reliable - The reward system needs to be designed and operated in a fashion consistent with the reforms and its purpose. Not only should rewards be contingent on the achievement of desired reform results, the whole process must be managed in a cost-effective manner. Timely - Feedback, institution, and rewards need to be provided as soon after the achievement and/or behaviors as possible. Most annual incentive plans indicate that employees make a concerted effort to achieve goals toward the end of a performance period.

16

The Glossary (A) Accountability: Responsibility and answerability for the use of resources, decisions and/or the results of the discharge of authority and official duties, including duties delegated to a subordinate unit or individual. In regard to programme managers, the responsibility to provide evidence to stakeholders that a programme is effective and in conformity with planned results, legal and fiscal requirements. In organizations that promote learning, accountability may also be measured by the extent to which managers use monitoring and evaluation findings. Achievement: A manifested performance determined by some type of assessment. Activities: Actions taken or work performed through which inputs such as funds, technical assistance and other types of resources are mobilized to produce specific outputs. Analysis: The process of systematically applying statistical techniques and logic to interpret, compare, categorize, and summarize data collected in order to draw conclusions. Appraisal: An assessment, prior to commitment of support, of the relevance, value, feasibility, and potential acceptability of a programme in accordance with established criteria. Applied Research: A type of research conducted on the basis of the assumption that human and societal problems can be solved with knowledge. Insights gained through the study of gender relations for example, can be used to develop effective strategies with which to overcome, socio-cultural barriers to gender equality and equity. Incorporating the findings of applied research into programme design therefore can strengthen interventions to bring about the desired change. Assumptions: Hypotheses about conditions that are necessary to ensure that: (1) planned activities will produce expected results; (2) the cause effect relationship between the different levels of programme results will occur as expected. Achieving results depends on whether or not the assumptions made prove to be true. Incorrect assumptions at any stage of the results chain can become an obstacle to achieving the expected results. Attribution: Causal link of one event with another. The extent to which observed effects can be ascribed to a specific intervention. Auditing: An independent, objective, systematic process that assesses the adequacy of the internal controls of an organization, the effectiveness of its risk management and governance processes, in order to improve its efficiency and overall performance. It

17

verifies compliance with established rules, regulations, policies and procedures and validates the accuracy of financial reports. Authority: The power to decide, certify or approve. (B) Baseline: Facts about the condition or performance of subjects prior to treatment or intervention. Baseline Study: An analysis describing the situation prior to a development intervention, against which progress can be assessed or comparisons made. Benchmark: Reference point or standard against which progress or achievements can be assessed. A benchmark refers to the performance that has been achieved in the recent past by other comparable organizations, or what can be reasonably inferred to have been achieved in similar circumstances. Beneficiaries: Individuals, groups or entities whose situation is supposed to improve (the target group), and others whose situation may improve as a result of the development intervention. Bias: Refers to statistical bias. Inaccurate representation that produces systematic error in a research finding. Bias may result in overestimating or underestimating certain characteristics of the population. It may result from incomplete information or invalid data collection methods and may be intentional or unintentional. (C) Capacity: The knowledge, organization and resources needed to perform a function. Capacity Development: A process that encompasses the building of technical abilities, behaviours, relationships and values that enable individuals, groups, organizations and societies to enhance their performance and to achieve their development objectives over time. It progresses through several different stages of development so that the types of interventions required to develop capacity at different stages vary. It includes strengthening the processes, systems and rules that shape collective and individual behaviours and performance in all development endeavours as well as people's ability and willingness to play new developmental roles and to adapt to new demands and situations. Capacity development is also referred to as capacity building or strengthening. Causality Analysis: A type of analysis used in programme formulation to identify the root causes of development challenges. Development problems often derive from the same root causes (s). The analysis organizes the main data, trends and findings into relationships of cause and effect. It identifies root causes and their linkages as well as the

18

differentiated impact of the selected development challenges. Generally, for reproductive health and population problems, a range of causes can be identified that are interrelated. A causality framework or causality tree analysis (sometimes referred to as problem tree) can be used as a tool to cluster contributing causes and examine the linkages among them and their various determinants. Chain of Results: The causal sequence in the planning of a development intervention that stipulates the possible pathways for achieving desired results beginning with the activities through which inputs are mobilized to produce specific outputs, and culminating in outcomes, impacts and feedback. The chain of results articulates a particular programme theory. Conclusion: A reasoned judgment based on a synthesis of empirical findings or factual statements corresponding to a specific circumstance. Cost-Benefit Analysis: A type of analysis that compares the costs and benefits of programmes. Benefits are translated into monetary terms. In the case of an HIV infection averted, for instance, one would add up all the costs that could be avoided such as medical treatment costs, lost income, funeral costs, etc. The cost-benefit ratio of a programme is then calculated by dividing those total benefits (in monetary terms) by the total programme cost (in monetary terms). If the benefits as expressed in monetary terms are greater than the money spent on the programme, then the programme is considered to be of absolute benefit. Cost-benefit analysis can be used to compare interventions that have different outcomes (family planning and malaria control programmes, for example). Comparisons are also possible across sectors. It is, for instance, possible to compare the cost-benefit ratio of an HIV prevention programme with that of a programme investing in girls education. However, the valuation of health and social benefits in monetary terms can sometimes be problematic (assigning a value to human life, for example). Cost-Effectiveness Analysis: A type of analysis that compares effectiveness of different interventions by comparing their costs and outcomes measured in physical units (number of children immunized or the number of deaths averted, for example) rather than in monetary units. Cost-effectiveness is calculated by dividing the total programme cost by the units of outcome achieved by the programme (number of deaths averted or number of HIV infections prevented) and is expressed as cost per death averted or per HIV infection prevented, for example. This type of analysis can only be used for programmes that have the same objectives or outcomes. One might compare, for instance, different strategies to reduce maternal mortality. The programme that costs less per unit of outcome is considered the more cost-effective. Unlike cost-benefit analysis, cost-effectiveness analysis does not measure absolute benefit of a programme. Implicitly, the assumption is that the outcome of an intervention is worth achieving and that the issue is to determine the most cost-effective way to achieve it. Coverage: The extent to which a programme reaches its intended target population, institution or geographic area.

19

(D) Data: Specific quantitative and qualitative information or facts. Database: An accumulation of information that has been systematically organized for easy access and analysis. Databases are usually computerized. (E) Effectiveness: A measure of the extent to which a programme achieves its planned results (outputs, outcomes and goals). Effective Practices: Practices that have proven successful in particular circumstances. Knowledge about effective practices is used to demonstrate what works and what does not and to accumulate and apply knowledge about how and why they work in different situations and contexts. Efficiency: A measure of how economically or optimally inputs (financial, human, technical and material resources) are used to produce outputs. Evaluability: The extent to which an activity or a programme can be evaluated in a reliable and credible fashion. Evaluation: A time-bound exercise that attempts to assess systematically and objectively the relevance, performance and success, or the lack thereof, of ongoing and completed programmes. Evaluation is undertaken selectively to answer specific questions to guide decision-makers and/or programme managers, and to provide information on whether underlying theories and assumptions used in programme development were valid, what worked and what did not work and why. Evaluation commonly aims to determine the relevance, validity of design, efficiency, effectiveness, impact and sustainability of a programme. Evaluative Activities: Activities such as situational analysis, baseline surveys, applied research and diagnostic studies. Evaluative activities are quite distinct from evaluation; nevertheless, the findings of such activities can be used to improve, modify or adapt programme design and implementation. Evaluation Questions: A set of questions developed by the evaluator, sponsor, and/or other stakeholders, which define the issues the evaluation will investigate and are stated in such terms that they can be answered in a way useful to stakeholders. Evaluation Standards: A set of criteria against which the completeness and quality of evaluation work can be assessed. The standards measure the utility, feasibility, propriety and accuracy of the evaluation. Evaluation standards must be established in consultation with stakeholders prior to the evaluation.

20

Execution: The management of a specific programme which includes accountability for the effective use of resources. Ex-ante Evaluation: An evaluation that is performed before implementation of a development intervention. Related term: appraisal. Ex-post Evaluation: A type of summative evaluation of an intervention usually conducted after it has been completed. Its purpose is to understand the factors of success or failure, to assess the outcome, impact and sustainability of results, and to draw conclusions that may inform similar interventions in the future. External Evaluation: An evaluation conducted by individuals or entities free of control by those responsible for the design and implementation of the development intervention to be evaluated (synonym: independent evaluation). (F) Feasibility: The coherence and quality of a programme strategy that makes successful implementation likely. Feedback: The transmission of findings of monitoring and evaluation activities organized and presented in an appropriate form for dissemination to users in order to improve programme management, decision-making and organizational learning. Feedback is generated through monitoring, evaluation and evaluative activities and may include findings, conclusions, recommendations and lessons learned from experience. Finding: A factual statement on a programme based on empirical evidence gathered through monitoring and evaluation activities. Focus Group: A group of usually 7-10 people selected to engage in discussions designed for the purpose of sharing insights and observations, obtaining perceptions or opinions, suggesting ideas, or recommending actions on a topic of concern. A focus group discussion is a method of collecting data for monitoring and evaluation purposes. Formative Evaluation: A type of process evaluation undertaken during programme implementation to furnish information that will guide programme improvement. A formative evaluation focuses on collecting data on programme operations so that needed changes or modifications can be made to the programme in its early stages. Formative evaluations are used to provide feedback to programme managers and other personnel about the programme that are working and those that need to be changed. (G) Goal: The higher order objective to which a development intervention is intended to contribute.

21

(I) Impact: Positive and negative long term effects on identifiable population groups produced by a development intervention, directly or indirectly, intended or unintended. These effects can be economic, socio-cultural, institutional, environmental, technological or of other types. Impact Evaluation: A type of outcome evaluation that focuses on the broad, longer-term impact or results of a programme. For example, an impact evaluation could show that a decrease in a communitys overall maternal mortality rate was the direct result of a programme designed to improve referral services and provide high quality pre- and post-natal care and deliveries assisted by skilled health care professionals. Indicator: A quantitative or qualitative measure of programme performance that is used to demonstrate change and which details the extent to which programme results are being or have been achieved. In order for indicators to be useful for monitoring and evaluating programme results, it is important to identify indicators that are direct, objective, practical and adequate and to regularly update them. Inputs: The financial, human, material, technological and information resource provided by stakeholders (i.e. donors, programme implementers and beneficiaries) that are used to implement a development intervention. Inspection: A special, on-the-spot investigation of an activity that seeks to resolve particular problems. Internal Evaluation: Evaluation of a development intervention conducted by a unit and /or individual/s reporting to the donor, partner, or implementing organization for the intervention. (J) Joint Evaluation: An evaluation conducted with other UN partners, bilateral donors or international development banks.

(L) Lessons Learned: Learning from experience that is applicable to a generic situation rather than to a specific circumstance. The identification of lessons learned relies on three key factors: i) the accumulation of past experiences and insights; ii) good data collection instruments; and iii) a context analysis. Logical Framework Approach: A specific strategic planning methodology that is used to prepare a programme or development intervention. The methodology entails a

22

participatory process to clarify outcomes, outputs, activities and inputs, their causal relationships, the indicators with which to gauge/measure progress towards results, and the assumptions and risks that may influence success and failure of the intervention. It offers a structured logical approach to setting priorities and building consensus around intended results and activities of a programme together with stakeholders. Logical Framework (log frame): A dynamic planning and management tool that summarizes the results of the logical framework approach process and communicates the key features of a programme design in a single matrix. It can provide the basis for monitoring progress achieved and evaluating programme results. The matrix should be revisited and refined regularly as new information becomes available. (M) Management Information System: A system, usually consisting of people, procedures, processes and a data bank (often computerized) that routinely gathers quantitative and qualitative information on pre-determined indicators to measure programme progress and impact. It also informs decision-making for effective programme implementation. Means of Verification (MOV): The specific sources from which the status of each of the results indicators in the Results and Resources Framework can be ascertained. Meta-evaluation: A type of evaluation that aggregates findings from a series of evaluations. Also an evaluation of an evaluation to judge its quality and/or assess the performance of the evaluators. Methodology: A description of how something will be done. A set of analytical methods, procedures and techniques used to collect and analyse information appropriate for evaluation of the particular programme, component or activity. Monitoring: A continuous management function that aims primarily at providing programme managers and key stakeholders with regular feedback and early indications of progress or lack thereof in the achievement of intended results. Monitoring tracks the actual performance against what was planned or expected according to pre-determined standards. It generally involves collecting and analysing data on programme processes and results and recommending corrective measures. Multi-Year Planning, Management and Funding Framework (MYFF): A four-year framework that is composed of three interlinking components: (1) a results framework, which identifies the major results that UNFPA aims to achieve, its key programme strategies, and the indicators that will be used to measure progress; (2) an integrated resources framework that indicates the level of resources required to achieve the stated results; and (3) a managing for results component that defines the priorities for improving the Fund's organizational effectiveness. (O)

23

Objective: A generic term usually used to express an outcome or goal representing the desired result that a programme seeks to achieve. Objectively Verifiable Indicator (OVI) (in Results and Resources Framework): Indicator. See

Operations Research: The application of disciplined investigation to problem-solving. Operations research analyses a problem, identifies and then tests solutions. Outcome: The intended or achieved short and medium-term effects of an interventions outputs, usually requiring the collective effort of partners. Outcomes represent changes in development conditions which occur between the completion of outputs and the achievement of impact. Outcome Evaluation: An in-depth examination of a related set of programmes, components and strategies intended to achieve a specific outcome. An outcome evaluation gauges the extent of success in achieving the outcome; assesses the underlying reasons for achievement or non achievement; validates the contributions of a specific organization to the outcome; and identifies key lessons learned and recommendations to improve performance. Outputs: The products and services which result from the completion of activities within a development intervention. (P) Participatory Approach: A broad term for the involvement of primary and other stakeholders in an undertaking (e.g. programme planning, design, implementation, monitoring and evaluation). Performance: The degree to which a development intervention or a development partner operates according to specific criteria/standards/guidelines or achieves results in accordance with stated plans. Performance Measurement: A system for assessing the performance of development interventions, partnerships or policy reforms relative to what was planned in terms of the achievement of outputs and outcomes. Performance measurement relies upon the collection, analysis, interpretation and reporting of data for performance indicators. Performance Indicator: A quantitative or qualitative variable that allows the verification of changes produced by a development intervention relative to what was planned. Performance Monitoring: A continuous process of collecting and analysing data for performance indicators, to compare how well development interventions, partnerships or policy reforms are being implemented against expected results. Process Evaluation: A type of evaluation that examines the extent to which a programme is operating as intended by assessing ongoing programme operations. A

24

process evaluation helps programme managers identify what changes are needed in design, strategies and operations to improve performance. Programme: A time-bound intervention similar to a project but which cuts across sectors, themes or geographic areas, uses a multi-disciplinary approach, involves multiple institutions, and may be supported by several different funding sources. Programme Approach: A process which allows governments, donors and other stakeholders to articulate priorities for development assistance through a coherent framework within which components are interlinked and aimed towards achieving the same goals. It permits all donors, under government leadership, to effectively contribute to the realization of national development objectives. Programme Theory: An approach for planning and evaluating development interventions. It entails systematic and cumulative study of the links between activities, outputs, outcomes, impact and contexts of interventions. It specifies upfront how activities will lead to outputs, outcomes and longer-term impact and identifies the contextual conditions that may affect the achievement of results. Project: A time-bound intervention that consists of a set of planned, interrelated activities aimed at achieving defined programme outputs. Proxy Measure or Indicator: A variable used to stand in for one that is difficult to measure directly. (Q) Qualitative Evaluation: A type of evaluation that is primarily descriptive and interpretative, and may or may not lend itself to quantification. Quantitative Evaluation: A type of evaluation involving the use of numerical measurement and data analysis based on statistical methods. (R) Reach: the coverage (e.g., the range or number of individuals, groups, institutions, geographic areas; etc.) that will be affected by a programme. Recommendation: Proposal for action to be taken in a specific circumstance, including the parties responsible for that action. Relevance: The degree to which the outputs, outcomes or goals of a programme remain valid and pertinent as originally planned or as subsequently modified owing to changing circumstances within the immediate context and external environment of that programme.

25

Reliability: Consistency and dependability of data collected through repeated use of a scientific instrument or data collection procedure under the same conditions. Absolute reliability of evaluation data is hard to obtain. However, checklists and training of evaluators can improve both data reliability and validity. Research: The general field of disciplined investigation. Result: The output, outcome or impact (intended or unintended, positive and /or negative) derived from a cause and effect relationship set in motion by a development intervention. Results Based Management (RBM): A management strategy by which an organization ensures that its processes, products and services contribute to the achievement of desired results (outputs, outcomes & impacts). RBM rests on stakeholder participation and on clearly defined accountability for results. It also requires monitoring of progress towards results and reporting on performance/feedback which is carefully reviewed and used to further improve the design or implementation of the programme. Results Framework: The logic that explains how results are to be achieved, including causal relationships and underlying assumptions. The results framework is the application of the logical framework approach at a strategic level, across an entire organization, for a country programme, a programme component within a country programme, or even a project. Risks: Factors that may adversely affect delivery of inputs, completion of activities and achievement of results. Many risk factors are outside the control of the parties responsible for managing and implementing a programme. Risk Analysis: An analysis or assessment of factors that affect or are likely to affect the achievement of results. Risk analysis provides information that can be used to mitigate the impact of identified risks. Some external factors may be beyond the control of programme managers and implementers, but other factors can be addressed with some slight adjustments in the programme strategy. It is recommended that stakeholders take part in the risk analysis as they offer different perspectives and may have pertinent and useful information about the programme context to mitigate the risks. (S) Stakeholders: People, groups or entities that have a role and interest in the aims and implementation of a programme. They include the community whose situation the programme seeks to change; field staff who implement activities; and programme managers who oversee implementation; donors and other decision-makers who influence or decide the course of action related to the programme; and supporters, critics and other persons who influence the programme environment (see target group and beneficiaries).

26

Strategies: Approaches and modalities to deploy human, material and financial resources and implement activities to achieve results. Success: A favourable programme result that is assessed in terms of effectiveness, impact, sustainability and contribution to capacity development. Summative Evaluation: A type of outcome and impact evaluation that assesses the overall effectiveness of a programme. Survey: Systematic collection of information from a defined population, usually by means of interviews or questionnaires administered to a sample of units in the population (e.g. person, youth, adults etc.). Baseline surveys are carried out at the beginning of the programme to describe the situation prior to a development intervention in order to assess progress; Mid line surveys are conducted at the mid point of the cycle to provide management and decision makers with the information necessary to assess and, if necessary, adjust, implementation, procedures, strategies and institutional arrangements, for the attainment of results. In addition, the results of midline surveys can also be used to inform and guide the formulation of a new country programme. End line surveys are conducted towards the end of the cycle to provide decision makers and planners with information with which to review the achievements of the programme and generate lessons to guide the formulation and/or implementation of a new programme/ projects. Sustainability: Durability of programme results after the termination of the technical cooperation channelled through the programme. Static sustainability the continuous flow of the same benefits, set in motion by the completed programme, to the same target groups; dynamic sustainability the use or adaptation of programme results to a different context or changing environment by the original target groups and/or other groups. (T) Target Group: The main stakeholders of a programme that are expected to gain from the results of that programme. Sectors of the population that a programme aims to reach in order to address their needs. Time-Series Analysis: Quasi-experimental designs that rely on relatively long series of repeated measurements of the outcome/output variable taken before, during and after intervention in order to reach conclusions about the effect of the intervention. Thematic Evaluation: Evaluation of selected aspects or cross-cutting issues in different types of interventions. Transparency: Carefully describing and sharing information, rationale, assumptions, and procedures as the basis for value judgments and decisions. (U)

27

Utility: The value of something to someone or to an institution. The extent to which evaluations are guided by the information needs of their users. (V) Validity: The extent to which methodologies and instruments measure what they are supposed to measure. A data collection method is reliable and valid to the extent that it produces the same results repeatedly. Valid evaluations are ones that take into account all relevant factors, given the whole context of the evaluation, and weigh them appropriately in the process of formulating conclusions and recommendations. (W) Work Plans: Quarterly, annual, or multiyear schedules of expected outputs, tasks, timeframes and responsibilities.

28

DEPARTMENT OF ECONOMICS
UNIVERSITY OF DAR ER SALAAM

Lecture Note Ten

Logical Framework Approach
By Semboja Haji Hatibu Haji
Unedited Lecture Notes To be presented at the EC664 Policy Analysis, Date Thursday, December-09-10

10.1. Introduction 10.1.1. Origins of LFA

The Logical Framework Approach (LFA) is a policy management tool mainly used in the design, monitoring and evaluation of development projects, reform programmes and national development strategic plans. It is also known as Goal Oriented Project Planning (GOPP) or Objectives Oriented Project Planning (OOPP).
The Logical Framework Approach (LFA) was first developed by Practical Concepts Inc. in 1969 for the U.S. Agency for International Development (USAID). It has since been widely adopted and adapted by many international development partners, government and public institutions in many developing economies and is used for participatory project planning, as an analytic tool for project approval, or as a monitoring and evaluation framework. The diverse purpose to which the LFA has been put to use over the years is a testimony to its enduring strengths as an economic management approach1. The LFA has been used in Tanzania as part of economic planning, reforms, programs and management activities by some government authorities, pubic and private institutions. The logical framework has always been an integral part of the project design and approval documentation, thus capitalizing on its potential to communicate complex national projects clearly and understandably on one or two pages. It has also been relied on extensively as a starting point for mid-term and final project evaluations, conducted either internally or externally. 10.1.2. Purpose and coverage of the Lecture Note

With the advent of Results-Based Management (RBM), there was an expressed need to modify the logical framework so as to render it more "results-oriented" and less inputoriented. The purpose of this lecture note is to provide guidance in the preparation of a results-oriented logical framework as part of policy analysis and management. It is useful to distinguish between the two terms: the Logical Framework Approach (LFA) and Logical Framework (LF or Logframe). They are sometimes confused. The Logical Framework Approach is a project design methodology, the Logframe is a document. This lecture note uses the words policy, reform programme and project interchangeable.

Here we refer specifically to the matrix or chart which is the product of using the Logical Framework Analysis and often referred to as the Logical Framework Analysis, logical framework, logframe or LFA.

10.2. Concept of Logical Form

Logic is the formal systematic study of the principles of valid inference and correct reasoning. Logic is used in most intellectual activities, but is studied primarily in the disciplines of philosophy, mathematics, semantics, and computer science. It examines general forms which arguments may take, which forms are valid, and which are fallacies. In philosophy, the study of logic is applied in most major areas: ontology, epistemology, ethics, and metaphysics. In mathematics, it is the study of valid inferences within some formal language Logic is also studied in argumentation theory Logic is generally accepted to be formal, in that it aims to analyze and represent the form (or logical form of any valid argument type. The form of an argument is displayed by representing its sentences in the formal grammar and symbolism of a logical language to make its content usable in formal inference. If one considers the notion of form to be too philosophically loaded, one could say that formalizing is nothing else than translating English sentences into the language of logic. This is known as showing the logical form of the argument. It is necessary because indicative sentences of ordinary language show a considerable variety of form and complexity that makes their use in inference impractical. It requires, first, ignoring those grammatical features which are irrelevant to logic (such as gender and declension if the argument is in Latin), replacing conjunctions which are not relevant to logic (such as 'but') with logical conjunctions like 'and' and replacing ambiguous or alternative logical expressions ('any', 'every', etc.) with expressions of a standard type (such as 'all', or the universal quantifier ).

Second, certain parts of the sentence must be replaced with schematic letters. Thus, for example, the expression 'all As are Bs' shows the logical form which is common to the sentences 'all men are mortals', 'all cats are carnivores', 'all Greeks are philosophers' and so on.
10.3. The Logical Framework Approach Process A results-oriented Logical Framework Approach (LFA or Logframe) can be used most effectively in conceptualizing projects by asking some fundamental questions of the key stakeholders i.e., project delivery partners, beneficiaries, and general publics. Why are we doing this policy/project/reform? What results do we expect to achieve for the resources being invested? Who will the project reform reach out to in terms of beneficiaries? What are the differentiated needs and priorities of women and men from the target group? How will progress toward the achievement of results be measured? The effectiveness of this approach depends on the extent to which it reflects the full range of stakeholder views and the intended outcomes of the project when responding to these questions. Stakeholder participation is an essential ingredient when using the LFA methodology for project

design and planning because it helps build the necessary level of understanding and, whenever possible, consensus. The LFA is best used to assist stakeholders:

Set strategic objectives; Define a chain of expected results; Identify underlying assumptions and risks Select appropriate sensitive performance indicators, (e.g., gender and age) to measure progress towards the expected results.

Like many other aspects of development, the quality of the process is sometimes as important as the completed logframe it produces. Developing a sense of ownership among all stakeholders and a commitment to continuous performance self-assessment from the very beginning will pay dividends in terms of improved implementation later in the project cycle. The LFA can help establish a common ground for discussion and shared understanding, thus forming the basis for partnership and shared responsibility for achieving results. Although producing a logical framework understandable and agreeable to all major stakeholders is the initial objective, the logframe should not remain static throughout the life of the project. In the context of results-based management, there is a regular flow of information collected from performance indicators that informs the management decision-making process. This performance information is formally appraised, at least once a year, by the project stakeholders and used to make adjustments in the design or implementation of the project. In the context of results-oriented management, changes to the original project logframe are inevitable and should reflect an improved stakeholder understanding of the causal relationships between the different levels of expected results and the underlying assumptions made about them.

10.4. The Logical Framework Structure The first form LFA involves the preparation of a three row by four column 12-cell-matrixes called the "logical framework" or "logframe." The result-oriented logframe describes the logical relationships between a policy/plan/project's strategic components, expected results, performance indicators, assumptions and risks at the conceptual level. The logical framework should not be used to illustrate how the policy/plan/project/reform would be implemented. The Project Management Strategy, (PMS), the Project Implementation Plan, (PMI) and the Performance Measurement Frameworks, (PMF), are better tools suited to that purpose. A description of a results-oriented logframe is provided as Figure 10.1 below and an explanation of its vertical logic and horizontal logic follows.

Figure 10.1 - The Results-Oriented Logical Framework

Narrative Summary Expected Results Performance Measurement Assumptions/Risk Indicators

Project Goal (Program Impact Objective) A long-term The program objective developmental result at from the C/RPF to which the societal level that is this project is intended to the logical consequence make a contribution of achieving a specified combination of outcomes.

Risk Performance Indicators Assumptions Indicators Performance indicators that will provide evidence Assumptions that the project has made The necessary conditions a contribution to the that must exist for the achievement of the stated cause-effect relationships developmental impact. between outcomes and impact to behave as expected. Risk Indicators Risk indicators that will measure the status of the assumptions identified above.

Project

Purpose Outcomes Medium-term development results benefiting an identified target population that are achievable within the timeframe of the project and are the logical consequence of achieving a specified combination of outputs.

The project objective which addresses the priority development needs of the identified beneficiaries and is achievable within the scope of project activities.

Risk Performance Indicators Assumptions Indicators Performance indicators that will provide evidence Assumptions that the project has The necessary conditions achieved the stated that must exist for the developmental outcomes. cause-effect relationships between outputs and outcomes to behave as expected. Risk Indicators Risk indicators that will measure the status fo the assumptions identified above. Risk Performance Indicators Assumptions Indicators Performance indicators that will provide evidence Assumptions that the project has The necessary conditions achieved the stated that must exist for the developmental outputs. cause-effect relationships between inputs and outputs to behave as

Resource Listing by categories of resources (inputs and/or activities) required to achieve the project purpose, planned budget for each type of resource and total project budget.

Output Short-term developmental results produced by or for the benefit of project delivery partners that are the immediate consequences of project activities and

inputs.

expected. Risk Indicators Risk indicators that will measure the status of the assumptions identified above.

10.5. The Vertical Logic The results-oriented logframe has three rows representing different levels of analysis in a project and three columns which describe the vertical logic of the projects: strategic elements (Narrative Summary); the chain of results (Expected Results); and the uncertainties related to their realization (Assumptions/Risk) The third column is the Performance Measurement. While indicators are recorded within a column, their logic is horizontal to the appropriate expected result. 10.5.1. Narrative Summary Column The Narrative Summary contains the following three strategic planning elements: Resources, Purpose and Goal. The first two levels - Resources and Purpose - are specific to the project itself. The logic that links them can be illustrated with the following question. What Resources (inputs and/or activities, usually with the $/Tshs. amount) will have to be invested in the project in order for the women and men from targeted population group(s) to benefit from the achievement of the project Purpose? It is important that we note only design projects to achieve meaningful results, but we must also ask ourselves, "For whose benefit and at what cost?" The Purpose statement must identify the intended beneficiaries. The first two levels of the Narrative Summary are essential to the strategic planning process and must be taken into consideration in a resultsoriented logical framework. Although the Purpose is the reason or basic motive why the project is to be undertaken, it should be defined in the context of a broader strategic objective - the Goal. This third level of the Narrative Summary makes the project - program link that is so critical to strategic planning. Projects must not be designed, selected or approved in isolation, nor in disregard of the applicable Programming Framework (PF). The implementation of RBM depends on a coherent and consistent approach to strategic planning based on national mandate, its development finance priorities and policies through to the program and project levels. The Programming Frameworks play a critical role in ensuring strategic coherence from policy to program planning to project selection. A Goal statement should, in effect, be the same as one of

the program objectives from the PF to which this project and other related projects would contribute. A results-oriented Logical Framework thus serves program level management purposes by ensuring that projects are identified, selected, designed and approved within the context of a strategic planning framework at the country/regional desk level. 10.5.2. Expected Results Column The internal logic of the Expected Results column is based on the principle of causality running from program and project management through to the different levels of Developmental Results. Developmental Results are defined as "the outputs, outcomes and impacts that are the logical consequences of a public investment in the country. Developmental results should reflect the actual changes that are attributable to program and project activities. For example, in a human resources development component in a given project, the results chain could involve: a training workshop, individual learning, organizational change/reform, client benefits and socio-economic development. When defining expected results, all the key project stakeholders should be involved. (Whenever possible, expected results relating to improvements in gender equity should be indicated at all three levels of results.) Agreeing on the different levels of results can be a difficult task. However, a good rule of thumb is to articulate outcomes so that they are realistically achievable within the timeframe and resources of the project. In addition, outcomes should clearly identify the intended beneficiaries, both women and men. In this way, if the outcomes are achieved, then the project will have achieved its stated purpose. As illustrated in Figure 10.2 below, expected results are linked in cause effect relationships, in which a level of result is related to the next higher one by being a means of achievement. It may be helpful to think about the results chain as a means-ends continuum. The cause and effect linkages can be expressed with "If...Then" phrases, representing the internal logic of the project. For example: "if" the outputs are achieved as expected, "then" the project should achieve its outcomes, and; "if" the outcomes are achieved as expected, "then" the project should contribute to the stated impact. However, underlying the results chain are some important assumptions and risks that must be made explicit.

Figure 10.2 - Internal Logic

10.5.3. Assumptions and Risk Indicators Column Since projects/reforms are not implemented in a controlled environment, external factors can often be the cause of their failure. Accordingly, care should be taken to make explicit the important assumptions upon which the project design is based. Assumptions describe the necessary conditions that must exist if the cause-effect relationships between levels of results are to behave as expected. Identifying these assumptions, and the level of risk associated with them not holding true, is critical for appropriate project design and risk management. Whether these assumptions hold true or not, could affect a project's progress or success. Figure 10.3 below illustrates how the integrity of the results chain is dependent on the validity of the underlying assumptions about conditions external to the project.

Figure 10.3 - External Logic

The conditional logic of project design begins with the initial assumptions about the necessary preconditions for project start-up, i.e., available funding, government support, etc. "If" these initial assumptions hold true, "then" the expected program and project activities can be implemented. "If" the activities are achieved, "and" provided that the assumptions about the factors affecting the activities-outputs relationships hold true, "then" the outputs should be achievable. "If" the outputs are achieved, "and" provided that the assumptions about the factors affecting the outputs-outcomes relationships hold true, "then" the outcomes should be achievable. "If" the outcomes are achieved, "and" provided that the assumptions about the factors affecting the outcomes-impact relationships hold true, "then" the contribution to the impact should eventually manifest itself. A risk analysis should be conducted during project design to determine the probability that the underlying assumptions will not hold true and the potential effect this would have on project sustainability. When this risk assessment is completed, each assumption can be rated in terms of its potential risk e.g., high, medium or low. Measures can then be considered and resources allocated if it is feasible and cost-effective to bring the necessary external factors under the manageable control of the project delivery partners (in which case they are no longer external risks, but are within the manageable interests of the project). However, this is not generally possible when financial resources are limited. In these cases, the best alternative is to monitor the status of those risks and assumptions giving greatest attention to those with the highest risk rating and taking corrective action when required using the project Risk Allowance, if there is one.

All assumptions should, therefore, be carefully monitored during project implementation. As time passes, the necessary conditions underlying the causal relationships may change, thus jeopardizing the integrity of the project's internal logic. For some projects, the use of specific risk indicators to monitor the status of assumptions would be recommended. Very simply, such a technique would involve a regular scanning of the environment in which the project is operating to determine whether the necessary conditions for project success remain present. In cases to the contrary, immediate corrective action would have to be taken to ensure project sustainability. The use of risk indicators should be reserved for either very large, complex or risky projects where the potential benefits of monitoring assumptions/risks would outweigh the additional cost of data collection and analysis. 10.6. The typical M&E Logical Framework

It must be noted that the typical M&E Logical Framework takes the form of a four x four matrixes. The four rows are used to describe four different types of events that take place as a project is implemented: the project Activities, Outputs, Purpose and Goal (from bottom to top on the left hand side The four columns provide different types of information about the events in each row. The first column is used to provide a Narrative description of the event. The second column lists one or more Objectively Verifiable Indicators (OVIs) of these events taking place. The third column describes the Means of Verification (MoV) where information will be available on the OVIs, and the fourth column lists the Assumptions. Assumptions are external factors that it is believed could influence (positively or negatively) the events described in the narrative column. The list of assumptions should include those factors that potentially impact on the success of the project, but which cannot be directly controlled by the project or program managers. In some cases these may include what could be killer assumptions, which if proved wrong will have major negative consequences for the project. A good strategic plan, reform program or project design should be able to substantiate its assumptions, especially those with a high potential to have a negative impact.

10.7. The Horizontal Logic The logic of the M&E traditional 16 cell logical framework also consisted of two middle columns: Objectively Verifiable Indicators (OVI); and the Means of Verification (MOV). The four cells in each of these columns were meant to assist in project evaluation at each level of the vertical logic. In Results-Based Management, however, there is an emphasis on continuous performance monitoring (including self-assessment by project managers and stakeholders)

10

requiring new methods, techniques and tools for tracking results. These can not be captured in the limited space provided in a logframe. Consequently, the results-oriented logical framework has only one Performance Measurement column in which performance indicators are identified for all three levels of results. Dropping the MOV column keeps the results-oriented logical framework at the conceptual level of project design and also avoids the dilemma of not having enough space to adequately describe how performance self-assessment will be carried out. Another RBM tool, referred to as the Performance Measurement Framework fulfills the requirement to describe the planning, collection, analysis, use and dissemination of performance information formerly addressed by the MOV column. 10.8. Performance Measurement Developing a Performance Measurement System, (PMS), begins with the identification of performance indicators. It is important that project stakeholders agree in the initial stages on the indicators that will be used to measure project performance. Performance indicators are qualitative or quantitative measures used to monitor progress made toward the achievement of expected results, i.e., outputs, outcomes and impact. RBM emphasizes measuring the achievement of developmental results, more than the management of process activities. At the outcomes level, for example, the information collected on performance indicators would be analyzed and used in management decision-making to keep the project on track. They could also constitute evidence regarding project success or failure. Figure 10.4 below illustrates how performance indicators are identified at all levels of expected results. Figure 10.4 - Performance Measurement

11

There are six criteria that should be used when selecting performance indicators. Each one is presented below along with an illustrative question in guise of an explanation: I. Validity - Does it measure the result? II. Reliability - Is it a consistent measure over time and, if supplied externally, will it continue to be available? III. Sensitivity - When a change occurs will it be sensitive to those changes? IV. Simplicity - Will it be easy to collect and analyze the information? V. Utility - Will the information be useful for decision-making and learning? VI. Affordable - Can the project afford to collect the information?

Project teams, in consultation with other project stakeholders, should begin the process of identifying and selecting performance indicators by preparing a comprehensive list. (Performance indicators at the output level may be very simple.) The next step is to decide how many are needed and apply the above six selection criteria to the list. (The number of indicators per output and outcome should be limited with 3 indicators being the maximum number chosen.) Those that do not meet these criteria should be discarded. The best performance indicators from those remaining should be used and the rest kept in a reserve pool.

12

Developing a performance measurement system is a trial and error experience that can be improved after several cycles of data collection, analysis and appraisal. Some performance indicators may, after some use, prove not to meet the above criteria and must then be replaced from the reserve pool. The RBM principle of "learning by doing" clearly applies to performance measurement. 10.9. Preparing a Draft Logical Framework The logical framework of a project can not be finalized after one consultation or meeting of the project team or other project stakeholders. It will require several drafts interspersed with research and consultations with several partners, stakeholders and beneficiaries (both women and men), use of technical experts (both foreign specialists and local experts), and more discussion among stakeholders and the project team before a working logframe is ready for use during the project approval process. Who participates in this process and how it unfolds will vary depending on the unique circumstances of each project. However, there is a recommended sequence of overlapping steps that should be followed when preparing the first draft of a logical framework. Step One: The Narrative Summary should be prepared first, since it represents the more strategic elements of the project. This might occur at the Project Selection or Concept Paper stages in the project cycle, subsequent to a fact finding mission and stakeholder analysis. A participatory process during the project's initial stages should follow as the focus shifts to defining the Expected Results. Step Two: Next in the process will be to achieve consensus on Expected Results and the internal logic of the project's results chain. This will take time during the planning stage, but how much time will depend on the diversity of opinion represented by the key stakeholders involved. Programming experience, lessons-learned and research can be most helpful in substantiating the internal logic of a project and Expected Results before identifying the underlying assumptions and risks. Step Three: The identification of the Assumptions and Risks will depend on a sound understanding of the socio-cultural, political and economic environment in which the project will be implemented. The contribution of developing country partners and beneficiaries is essential during the planning phase if a realistic identification of the Assumptions and Risks is sought. This can be accomplished by reading the logframe from the bottom up, using the "If -- And -- Then" external logic illustrated in Figure 7.3 above. Again, programming experience, lessons-learned and research are assets when completing this step of the logical framework. Step Four: The final step in completing the first draft of the logical framework for a project is to identify the Performance Indicators that will be used to monitor progress made toward the achievement of each expected result. If time is limited, then the most productive approach is to

13

focus on selecting performance indicators for output and outcome level results. Quantitative and qualitative performance indicators should be gender-sensitive, wherever possible. Again, participation by major stakeholders in this process is critical for several reasons:

to ensure that a full range of diverse information needs are identified; to benefit from local knowledge of existing performance information; and, to build ownership of and commitment to the performance measurement process.

Following these four steps when preparing a draft logframe may not result in a finished product, but it will provide well thought out draft LFA for future development during the Project Design phase and also brings with it the benefits of consensus building amongst the major stakeholders. 10.10. Updating the LFA As indicated above, circumstances change on almost all projects, and, on iterative projects, change is built into the project. With RBM, many planners use continuous monitoring to detect these changes and respond to them. An important part of this change management involves keeping the LFA up-to-date so that the logic of the project, the expected results, the main performance indicators and the key assumptions reflect the current reality of the project. The logframe should be modified, as required, and any such changes should be discussed amongst the key project stakeholders and approved or ratified at Project Steering Committee meetings. It should be noted that while changes to Performance Indicators and Outputs may be expected and agreed to by stakeholders, changes to the Project Purpose or Outcomes (change in scope) or significant increases to the resources/funding required (cost Increase) will be governed by Section 10.6 of the Roadmap. LFAs should indicate the version number and date and should be kept in the key documents file/binder in chronological order. The Project Closing Report will require a copy of all versions of the LFA throughout the life of the project.

10.11. Conclusion It should be remembered that although a logical framework should be as complete as possible, it should not be too detailed. The logframe should remain a means to facilitate communication and a common understanding of the project among the stakeholders. It should not be a comprehensive explanation comprising all technical details. These should be given in separate documents (e.g., Project Implementation Plan), which will be cross referenced to the corresponding aspects of the

14

logical framework. For the logical framework to remain useful during the life of the project, it should remain a valid summary description of the overall project and, therefore, should be revised as stakeholders agree to changes in the project design.

15

AusGuideline
Activity design

3.3 The Logical Framework Approach

Associated guidance on Activity design

Part 3A Identification & assessment of initiatives Part 3B Selecting forms of aid Part 3C Appraisal and approval

AusGuideline 3.1 Principles of activity design AusGuideline 3.2 Selecting forms of aid AusGuideline 3.4 Undertaking a prefeasibility study AusGuideline 3.5 Undertaking a feasibility and design study AusGuideline 3.6 Preparing draft scope of services and basis of payment AusGuideline 3.7 Preparing activity schedules AusGuideline 3.8 Designing and using Flexible Funding Accounts

October 2005

Commonwealth of Australia 2005

AusGuideline

3.3 The Logical Framework Approach

Last updated 27 October 2005

Contents
1 Introduction 1

1.1 Overview of the Logical Framework Approach (LFA) 1.2 Use in activity design 1.3 The Logical Framework Matrix (LFM)
2 Analysing the situation

1 2 3
4

2.1 Problem analysis and the problem tree 2.1.1 Overview 2.1.2 Preparatory steps 2.1.3 Conduct the analysis 2.2 Stakeholder analysis 2.3 Analysis of objectives 2.4 Analysis of alternative strategies 2.5 Link to the Logframe matrix
3 The Logframe matrix

5 5 7 8 8 10 11 12
14

3.1 Format 3.2 Vertical Logic 3.2.1 If-then causality 3.2.2 Activity components 3.2.3 Management influence 3.3 Assumptions and risks 3.4 Horizontal logic 3.4.1 Indicators 3.4.2 Means of verification
4 The LFA and different forms of aid 5 Implementation, resource and cost schedules A Steps in conducting problem tree analysis B Stakeholder analysis tools C Reference numbers, flow charts & contractible outputs D Logical Framework Approach Terminology E Indicators and the link to M&E

14 16 16 16 17 17 20 20 22
23 25 26 28 32 34 36

ii

AusAID Australian Agency for International Development

AusGuideline

3.3 The Logical Framework Approach Last updated 27 October 2005

Introduction

1.1 Overview of the Logical Framework Approach (LFA)

The Logical Framework Approach (LFA) is a long established activity design methodology used by a range of major multilateral and bilateral donors, including Australia. It is based on a systematic analysis of the development situation, particularly key development problems, and of the options for addressing those problems. It can be applied in a range of circumstances and to a range of types of aid activity. Although mainly used in the past for the well-established forms of AusAID activity, it can also be used for new forms of activity such as program support and macro-policy support. The LFA is an analytical, presentational and management tool which can help planners and managers analyse the existing situation during activity preparation establish a logical hierarchy of means by which objectives will be reached identify the potential risks to achieving the objectives, and to sustainable outcomes establish how outputs and outcomes might best be monitored and evaluated if desired, present a summary of the activity in a standard format, and monitor and review Activities during implementation.

LFA can be used throughout AusAID's management of aid activities in identifying and assessing activity options preparing the activity design in a systematic and logical way appraising activity designs implementing approved Activities, and monitoring, reviewing and evaluating activity progress and performance.

LFA is best started early in activity design. (It is more difficult to use the LFA to review and/or restructure ongoing activities which were not designed using LFA principles and practices). As LFA is an aid to thinking, it has widespread and flexible application. Activity planning and management should always be approached as a team task. This means that adequate opportunity should be given to colleagues and key stakeholders to provide input to the process and product of LFA. This can be supported by

AusAID Australian Agency for International Development 1

AusGuideline

3.3 The Logical Framework Approach

Last updated 27 October 2005

taking time to explain the principles of LFA and clarifying the terminology used integrating effective team work and adult learning methods into meetings with stakeholder groups, and

ensuring that stakeholder groups are involved in situation and/or problem analysis, particularly in early design.

However, LFA is not a tool that all participants should necessarily be expected to understand or use. While logical in concept, its effective application poses many challenges, even to the experienced user.

1.2 Use in activity design

During activity design (including identification, preparation and appraisal and approval) the purpose of the LFA is to produce and soundly document an activity design for a proposed new development activity which includes both an activity description, which clearly specifies what the proposed activity is to do and how, and a systematic and soundly based activity rationale, which clearly states the case for implementing the proposed activity from the perspective of both the Australian Government and other development partners who would participate in implementation. The activity description typically specifies the activity components, and what is to be done in each component roles and responsibilities of all the main participants in implementation, and the proposed management and administrative arrangements for the activity, particularly including the part to be played by each of the partners to implementation. The activity rationale outlines the nature of the development situation, particularly the causes and effects of the key development problems which the activity is designed to improve outlines the cause/effect logic of the proposed activity design, and the expected results of implementing the activity, and justifies the use of Australian and partner resources in terms of the expected benefits of activity implementation (that is, those expected results of implementation which are benefits relative to the policies and priorities of both Australia and the development partners with whom we work, particularly other partner governments). In this way the activity design makes explicit the means by which the desired ends of the activity are to be attained. That is, it outlines the means-end relationship between what the

AusAID Australian Agency for International Development

AusGuideline

3.3 The Logical Framework Approach Last updated 27 October 2005

activity actually does and the attainment of its objectives, and between the attainment of the lower level objectives of the activity and its higher level (or ultimate) objectives. (For example, as explained later, the relationship between its immediate Purpose, and its ultimate Goal).

1.3 The Logical Framework Matrix (LFM)

One standard analytical product of the LFA is the Logical Framework Matrix (LFM). It consists of a matrix with four columns and a number of rows, which summarise selected aspect of an activity design, namely what the activity will do, and what it will produce (Activity Description) the activitys hierarchy of objectives and planned results (also Activity Description) the key assumptions that are being made (Assumptions), and how the activitys achievements will be measured, monitored and evaluated (Indicators and Means of Verification). The general structure of a Logframe Matrix is shown in Figure 1 below.
Figure 1: General structure and content of a Logframe Matrix Activity Description Goal or Impact The long term development impact (policy goal) that the activity contributes at a national or sectoral level Indicators How the achievement will be measured including appropriate targets (quantity, quality and time) How the achievement of the Purpose will be measured including appropriate targets (quantity, quality and time) How the achievement of the Component Objectives will be measured including appropriate targets (quantity, quality and time) How the achievement of the Outputs will be measured including appropriate targets (quantity, quality and time) Means of Verification Sources of information on the Goal indicator(s) including who will collect it and how often Sources of information on the Purpose indicator(s) including who will collect it and how often Sources of information on the Component Objectives indicator(s) including who will collect it and how often Sources of information on the Output indicator(s) including who will collect it and how often Assumptions concerning the Purpose to Goal linkage Assumptions

Purpose or Outcome The medium term result(s) that the activity aims to achieve in terms of benefits to target groups

Component Objectives or Intermediate Results This level in the objectives or results hierarchy can be used to provide a clear link between outputs and outcomes (particularly for larger multicomponent activities) Outputs The tangible products or services that the activity will deliver

Assumptions concerning the Component Objective to Output linkage

Assumptions concerning the Output to Component Objective linkage

Work program (not usually included in the matrix itself)

AusAID Australian Agency for International Development 3

AusGuideline

3.3 The Logical Framework Approach

Last updated 27 October 2005

In order to help avoid common problems associated with the use of the LFM, AusAID managers should ensure their colleagues and partners have a common understanding of the key analytical principles and terminology used emphasise the importance of the LFA process at least as much as the matrix product ensure it is used as a tool to promote stakeholder participation, dialogue and agreement on activity scope, rather to impose external concepts and priorities avoid using the matrix as a blueprint through which to exert external control over the activity treat the matrix as a presentational summary (keep it clear and concise), and refine and revise the matrix as new information comes to light.

Analysing the situation

Prior to beginning work on activity design and the construction of a Logframe matrix it is important to undertake a structured analysis of the existing situation. LFA incorporates four main analytical elements to help guide this process problem analysis stakeholder analysis objectives analysis, and selection of a preferred implementation strategy.

Each element is described further below. Remember that effective development planning should be approached as an iterative process, not as a linear set of prescribed steps. For example, while stakeholder analysis is presented in these Guidelines as coming after problem analysis, in practice, stakeholder analysis is ongoing throughout the design process, and does not neatly fit in to any one step. These Guidelines should not be seen as prescribing a formulaic approach to activity design. The process of applying the analytical tools of LFA in a participatory manner is as important as its products. This is particularly so in the context of development activities, where ownership of the idea by implementing partners is often critical to the success of implementation and to the sustainability of benefits. Effective coordination and cooperation (including teamwork) is critical.

AusAID Australian Agency for International Development

AusGuideline

3.3 The Logical Framework Approach Last updated 27 October 2005

Ideally, the main analytical tools should be applied in a workshop setting with key stakeholders, so that the initial LFA analysis, and the initial findings are developed truly jointly. However, it needs to be recognised that there will be a range of design studies where consultations with counterparts may be extensive, but do not extend to joint design analysis in a workshop setting. In these circumstances, the design team may need to itself apply the main principles and practices of the LFA to information and input provided by counterparts and stakeholders. In these cases, the emerging conclusions of the team's analysis need to be iteratively checked against the knowledge and understanding of our partners through successive consultations.

2.1 Problem analysis and the problem tree

2.1.1 Overview

Development Activities are usually proposed as a response to addressing development situations, and overcoming identified development problems in those situations. Problem analysis involves identifying what the main problems are and establishing the cause and effect relationships which result in, and flow from, these problems. The key purpose of this analysis is to try and ensure that root causes are identified and subsequently addressed in the activity design, not just the symptoms of the problem(s). A clear and comprehensive problem analysis provides a sound foundation on which to develop a set of relevant and focused activity objectives. One main tool used in problem analysis is the problem tree, a simplified example of which is shown in Figure 2. This example presents the causal structure of problems impacting on poor budget execution by the national Government of a developing country, and therefore the inadequate delivery of key public services.

AusAID Australian Agency for International Development 5

AusGuideline

3.3 The Logical Framework Approach

Last updated 27 October 2005

Figure 2 Example problem tree structure (national budget execution)

Adequate and timely resources not available to deliver critical public services Effect Low levels of budget execution Financial decision making/approval is not timely Expenditure management systems and processes are inefficient

Centralised decision making authority

No performance incentives

Complex cash payment voucher approval process

Planning & finance staff not clear about responsibilities

Line agencies unclear of processes

Limited budgeting & accounting capacity in line departments

No clear service standards or benchmarks for finance & procurement functions

Financial regulations labyrinthine and restrictive

No clear guidelines on workflows & responsibilities

Limited communication & teamwork

Cause

Underlying constraints

Weak national audit authority

Nascent public service ethic attitudinal and behavioural constraints

Top down management systems and culture

Limited HR capacity knowledge and skills

AusAID Australian Agency for International Development

AusGuideline

3.3 The Logical Framework Approach Last updated 27 October 2005

Important points to note about using the problem tree tool are There are two main approaches that can be used to help give focus to the problem analysis, namely: (i) the focal problem method, whereby development problems (or constraints) are brainstormed by the group, a core or focal problem is identified, and the cause and effect analysis then pivots around the focal problem; or (ii) the objectives oriented method, whereby a broad/high level development objective is specified at the start of the analysis, and constraints to achieving this objective are then brainstormed, analysed and sorted in to a cause and effect logic. Both approaches are equally valid, and which to use is largely up to individual preference and circumstances. Ideally, problem analysis should be undertaken as a group learning activity involving stakeholders who can contribute relevant technical and local knowledge. A workshop environment (involving groups of up to 25 carefully selected participants) is an appropriate forum for developing problem trees, analysing the results, and then proposing solutions. As noted, however, some design teams will need to apply the LFA - and its tools, including problem analysis - outside a workshop setting, based on information and feedback provided by counterparts and stakeholders in some other way. It may be appropriate to undertake a number of separate problem analysis exercises with different stakeholder groups, to help determine different perspectives and how priorities vary. The process is as important as the product. Where a workshop is possible, the exercise should be presented as a learning experience for all those involved, and as an opportunity for different views and interests to be presented and discussed. However, one should not necessarily expect full consensus among stakeholders on what the priority problems are or what the causality of these problems is. It is important to recognise that - however produced - the product (the problem tree diagram) should provide a simplified but nevertheless robust version of reality. If it is too complicated, it is likely to be less useful in providing direction to subsequent steps in the analysis.
2.1.2 Preparatory steps

Before starting work on preparing a problem tree Clarify the scope of the investigation or analysis. If you are participating in an activity preparation mission, others (perhaps including other donors) will have already identified (at least to some extent) the main development situation they are concerned with, or opportunities they have seen. Understanding this will help you focus and structure the direction of the analysis. You will not want, or be able, to deal with a limitless range of

AusAID Australian Agency for International Development 7

AusGuideline

3.3 The Logical Framework Approach

Last updated 27 October 2005

problems. This information should thus help you to identify either an appropriate objective, or focal problem, to help give focus to the problem tree analysis. Inform yourself further. Collect and review existing background information on the main issue(s) of concern and/or on the geographic area(s) you will be working in. Are you clear what the main issues are, or are likely to be? Identify the relevant stakeholder group(s). Who needs to be involved to ensure the workshop group (and/or design team) is well informed and can help to analyse and discuss the main issues that the analysis will focus on? For example, if you are looking at a health and sanitation problem which may require a water supply as part of the solution, make sure that you have available to join you a water supply engineer and an environmental health officer (among others). Also, be sure to involve community representatives that you believe would be willing and able to contribute to this kind of exercise. A representative and technically competent reference group is required to help effectively identify, analyse and organise ideas. Participants need to be informed to be useful and productive. They should know why they are doing the analysis, what the process involves and what information they are expected to contribute.
2.1.3 Conduct the analysis

A description of the main steps to follow in conducting a problem tree analysis using the focal problem method is provided at Annex A to these Guidelines. For a workshop situation, cards, marker pens, wall space for display and some means of sticking and moving cards on the display area are essential to undertaking this exercise successfully. Once a workshop group is generally happy with the main elements of the problem tree, move on to investigating and documenting possible solutions through using stakeholder analysis, the objective tree, alternatives analysis and finally the LFM itself. Remember that planning is an iterative process and that elements of both problem analysis and stakeholder analysis will need to be revisited on an ongoing basis as new information and ideas come to light.

2.2 Stakeholder analysis

Having identified the main problems and the cause and effect relationship between them, it is then important to give further consideration to who these problems actually impact on most, and what the roles and interests of different stakeholders might be in addressing the problems and reaching solutions. On some occasions it may be advisable to undertake the stakeholder analysis (or an initial stakeholder analysis) before embarking on the problem analysis. For example, if it is likely

AusAID Australian Agency for International Development

AusGuideline

3.3 The Logical Framework Approach Last updated 27 October 2005

that there are strong competing interests within or between stakeholder groups that may influence their input into the analysis of the development problem, then this should be known beforehand so that the problem analysis can ensure such divergent views and interests are appropriately captured and factored into the analysis. The main purposes of stakeholder analysis are to understand the interests of different groups, and their capacities to address identified problems, and design activities that appropriately address institutional capacity, distributional and social issues. Stakeholder analysis is about asking the questions: Whose problem and, if an activity is then designed: Who will benefit? Stakeholder analysis is thus an essential element of both poverty and gender analysis. Stakeholder analysis also helps to determine who needs to change the way they operate/work in order to address problems and thus achieve desired objectives. The main steps in stakeholder analysis include identifying the principal stakeholders (these can be at various levels, eg local, regional, national) investigating their roles, interests, relative power and capacity to participate identifying the extent of cooperation or conflict in the relationship between stakeholders, and interpreting the findings of the analysis and defining how this should be incorporated into activity design. When looking at who the stakeholders are, it is useful to distinguish between the target group and the final beneficiaries. A summary of the terminology used in these Guidelines is provided below.
Stakeholders: Individuals or institutions that may directly or indirectly, positively or negatively be affected by or affect an Activity. Beneficiaries: Are those who benefit in whatever way from the implementation of the Activity. Distinction may be made between: Target group(s): The group/entity who will be directly positively affected by the Activity at the Activity Outcome level. This may include the staff from partner organisations; Final beneficiaries: Those who benefit from the Activity in the long term at the level of the society or sector at large, e.g. children due to increased spending on health and education, consumers due to improved agricultural production and marketing. Partners: Those who implement the Activity in-country (who are also stakeholders, and may be a target group).
AusAID Australian Agency for International Development 9

AusGuideline

3.3 The Logical Framework Approach

Last updated 27 October 2005

It is important to see stakeholder analysis as part of the iterative process of activity planning. As both problems and potential activity objectives are analysed in more detail, the stakeholder analysis should be reviewed and updated to account for the new information which comes to light. Annex B provides information on some specific analytical tools that can be used to support stakeholder analysis.

2.3 Analysis of objectives

Objective trees should be prepared after the problem tree has been completed and an initial stakeholder analysis has been undertaken. In its simplest form, the objective tree uses exactly the same structure as the problem tree, but with the problem statements (negatives) turned into objective statements (positives). However, the results of the stakeholder analysis may have helped to give better focus to priority problems and not all of the original problem statements may therefore need to be translated into objective statements. While the problem tree shows the cause and effect relationship between problems, the objective tree shows the means - end relationship between objectives (i.e. the means by which desired ends or results will be achieved). This leads directly into developing the activitys narrative description in the LFM. Once the negative statements from the problem tree have been re-worded to positive statements, you should then check are the statements clear and unambiguous? are the links between each statement logical and reasonable? (Will the achievement of one help support the attainment of another that is above it in the hierarchy?) is there a need to add any other positive actions and/or statements? More detail may be required. are the positive actions at one level sufficient to lead to the result above? do the risks to achieving the objectives and also having sustainable outcomes appear to be manageable? is the overall structure simple and clear? Simplify if possible or necessary.

Once these main points have been checked, the proposed objective tree structure can be circulated for further comment and feedback.

10

AusAID Australian Agency for International Development

AusGuideline

3.3 The Logical Framework Approach Last updated 27 October 2005

2.4 Analysis of alternative strategies

During the process of analysing the problems, stakeholder issues and developing a draft objective tree, views on the potential merits or difficulties and risks associated with different possible interventions should have been developed and discussed. These options then need to be further scrutinised to help firm up the likely scope of the activity before more detailed design takes place. The type of questions that might need to be asked (and answered) could include should all of the identified problems and/or objectives be tackled, or a selected few? what is the combination of interventions that are most likely to bring about the desired results and promote sustainability of benefits? what are the likely capital and recurrent cost implications of different possible interventions, and what can be realistically afforded? which strategy will best support participation by both women and men? which strategy will most effectively support institutional strengthening objectives? and how can negative environmental impacts be best mitigated?

To assess alternative interventions in a workshop setting, it is useful to identify and agree on a number of assessment criteria against which alternative interventions can be ranked or scored. Criteria that may be used to help make a broad assessment of different intervention options could include the expected benefits to target groups level of benefits, equity and participation sustainability of the benefits ability to repair and maintain assets post-activity total cost and recurrent cost implications financial and economic viability technical feasibility contribution to institutional strengthening and management capacity building environmental impact, and compatibility of activity with sector or program priorities.

An activity design should demonstrate that the main alternative options have been assessed and considered. There is always more than one way to solve a development problem. The aim is to find the best way. However, it is important to emphasise again that activity planning is not a linear process. One does not move mechanistically from one step to the next, always in a forward direction, and

AusAID Australian Agency for International Development 11

AusGuideline

3.3 The Logical Framework Approach

Last updated 27 October 2005

arrive automatically at the best solution. Planning is an iterative and creative process, and selecting a design option often involves significant leaps in thinking which cannot be neatly slotted into a stage in the planning process.

2.5 Link to the Logframe matrix

Figure 3 shows how the objective tree can be used to start framing the objectives hierarchy in the first column of the Logframe matrix. Objectives at the top of the tree should help frame goal and purpose statements, while further down the tree component objective and output statements can be identified. However, it should not be expected that the objective tree can be transposed directly, without further adjustment, into the hierarchy of the activity description in the matrix. Further adjustment and refinement of statements is usually required and checking of the means-ends logic should be ongoing as the matrix is developed. A Fiji Police Training Project is used as an example.

12

AusAID Australian Agency for International Development

AusGuideline

3.3 The Logical Framework Approach Last updated 27 October 2005

Figure 3 Objective Tree link to Logframe objective hierarchy

To improve the level of police performance and increase community satisfaction with the service provided by the Fiji Police Force (FPF) To upgrade professional skills throughout the FPF

Logframe Vertical Logic Goal/Impact

Ends

Purpose/Outcom

To increase the quantity and quality of training delivered to force members

To establish an effective institutional capacity to support the training function within the FPF

To establish a sustainable capacity to develop and manage the provision of quality training

Component objectives/intermediate results

Targeted advanced training delivered. Program of detective training established. A series of special courses delivered

Training strategy developed. FPF academy restructured. Trainee selection procedures established.

TNA carried out. New courses designed. Annual training calendar produced. Quality control systems established

Outputs

Means

AusAID Australian Agency for International Development 13

AusGuideline

3.3 The Logical Framework Approach

Last updated 27 October 2005

The Logframe matrix

3.1 Format
The results of the logical framework analysis can be presented, and further analysed, through the development of a Logframe matrix. The matrix should provide a summary of the activity design and, when detailed down to output level, should generally be no more than three or four pages long. Tasks which are part of the activity work program may be listed in the logframe matrix itself. However, it may often be better to describe indicative sets of tasks (required to produce each output) in the main narrative of the activity documentation. The implementation and resource schedules should be used to further detail when key elements of the work program are expected to be undertaken, as well as the division of work responsibilities between the various partners to implementation. The Logframe matrix has four columns and usually four or five rows, depending on the number of levels of objectives used to explain the means-ends relationship of the activity. The vertical logic (reading up and down columns 1 and 4 of the matrix) clarifies the causal relationships between the different levels of objectives (column 1), and specifies the important assumptions and uncertainties beyond the activity manager's control (column 4). The horizontal logic (reading across the rows of the matrix) defines how the activity objectives specified in column 1 of the Logframe (e.g. Goal, Purpose, Outputs) will be measured (column 2) and the means by which the measurement will be verified (column 3). This provides a framework for activity monitoring and evaluation. Figure 4 shows the structure of the matrix. The Activity Description is completed first, then the assumptions, indicators, and finally the means of verification. However, completing the matrix must be approached as an iterative process. As one part of the matrix is completed, there is a need to look back at what has been said in previous parts to review and test whether or not the logic still holds. This process will often require the modification of previous descriptions.

14

AusAID Australian Agency for International Development

AusGuideline

3.3 The Logical Framework Approach Last updated 27 October 2005

Figure 4 Logframe matrix structure Activity Description Goal/Impact Purpose/Outcome Component Objectives/Intermediate Results Outputs Work program (optional) Indicators Indicators Indicators Indicators Means of Verification (MOVs) MOVs MOVs MOVs Assumptions Assumptions Assumptions

Indicators

MOVs

Assumptions

The option of whether or not to include both an overall activity outcome and intermediate results/component objectives should be left open to the activity designers, depending on the scope and complexity of the activity. For example, in some cases it may be sufficient to have a goal, outcome and outputs, and to leave out intermediate results/component objectives. It is recommended that in most cases the matrix itself should not include a listing of the work program of tasks required to produce outputs. The main reason for this is to keep the matrix as a concise summary of what the activity aims to do, rather than specifying in too much detail how it will do it. The work program required to deliver outputs (if this detail is needed) can instead be separately detailed in an implementation schedule format, using reference numbers to link each group of tasks to a specific output. It can also be presented as narrative description in the main body of the design documentation. Where different elements of the envisaged work program are allocated to different implementation partners, this is also presented in the resource schedules. (The detailed use of implementation and cost schedules is described separately in AusGuideline 3.7 Preparing activity schedules). It is important to keep firmly in mind that the Logframe matrix produced during design is essentially a draft. It provides a snapshot in time. The activity design summarised in the matrix will need to be reassessed, refined and updated on an ongoing basis once activity implementation starts. There is a careful balance to achieve. On the one hand it is important to provide enough detail in the design matrix to provide a clear and logical plan of action (which can be appropriately costed and, if required, contracted). On the other hand it is important to avoid being too prescriptive and establishing too rigid a structure that is more likely to constrain than facilitate activity implementation.

AusAID Australian Agency for International Development 15

AusGuideline

3.3 The Logical Framework Approach

Last updated 27 October 2005

3.2 Vertical Logic

3.2.1 If-then causality

Constructing the Activity Description in the matrix involves a detailed breakdown of the chain of causality in the activity design (and the associated means-ends relationships). This can be expressed in terms of if inputs are provided, then the work program can be undertaken if the work program is undertaken, then outputs will be produced if outputs are produced, then component objectives will be achieved if component objectives are achieved, then the purpose will be supported, and if the activity purpose is supported, this should then contribute to the overall goal.

Each level thus provides the rationale for the next level down: the goal helps justify the purpose, the purpose the component objectives, and so on down the hierarchy.
3.2.2 Activity components

Constructing the Activity Description may also involve disaggregating the work to be undertaken into a number of Activity Components. An activity component consists of a subset of inputs, activities and outputs that serve a single component objective/intermediate result. Components may be identified on the basis of a number of possible variables, including technical features (i.e. a health activity may have components focusing on malaria control, diarrhoeal disease, and acute respiratory infections) geographic locations (i.e. a census support activity focusing its capacity building activities on different provinces or regions and at the national level) beneficiaries (i.e. an HIV aids activity focusing on raising awareness among schoolchildren, sex-workers, injecting drug users and health workers) management/organisational structures (i.e. an agriculture activity divided into extension, training, research and credit components to reflect the local structure of the Department of Agriculture), and phasing of key activities (i.e. a rural electrification activity which requires a feasibility study, pilot testing, implementation and maintenance stages. Identifying appropriate component headings or foci will thus depend on a number of context specific factors. Agreement on what the components should be is best determined through a consultative process with key stakeholders.

16

AusAID Australian Agency for International Development

AusGuideline

3.3 The Logical Framework Approach Last updated 27 October 2005

3.2.3 Management influence

The Logframe helps to indicate the degree of control the partners to activity implementation might have over the various levels of the activity. In a project context, the partners should have considerable direct control over inputs, activities and outputs, but can only be expected to exert influence over the achievement of the activitys component objectives and outcome through the way in which outputs are managed. Activity implementers usually have no direct influence over achieving the goal, and can only be expected to monitor the broader policy and program environment to help ensure the activity continues to be contextually relevant and the benefits likely to remain sustainable. The necessary and sufficient conditions within the vertical logic indicate that achieving the purpose is necessary but not sufficient to attain the goal. This is because an aid activity (particularly a stand-alone activity) is but one of a number of initiatives that contribute to the goal; producing the activity outputs is necessary but may not be sufficient to achieve the component objectives. Other factors beyond the activitys control are again likely to have an influence on achievement of the intermediate results; and carrying out the program of work/tasks within the activity plan should be necessary and sufficient to produce the required outputs (although some risks will always remain). In defining activity outputs it is also necessary to remember that there is often no single agency or manager who has complete control over their delivery. In the case of AusAID funded activities, many outputs will be the result of the endeavours of both a local implementing agency(s) and a contractor. In terms of contracting an activity, a distinction then needs to be made between an activity output and a contractible output (outputs that AusAID can contract a consultancy firm to deliver). This issue is further discussed in Annex C and AusGuideline 3.6 Preparing draft scopes of service and basis of payment. However, in the design of a Policy or Program support activity, where the activity manager is in effect the partner government (or at least its responsible agencies), then the scope of management influence needs to be considered much more broadly. Unlike stand-alone project support, where there is usually limited influence over the broader program and policy context, the program and policy based activity is primarily about influencing that context working from within.

3.3 Assumptions and risks

Any activity is subject to influence by factors that are difficult to predict and over which noone has direct control. Like life in general!

AusAID Australian Agency for International Development 17

AusGuideline

3.3 The Logical Framework Approach

Last updated 27 October 2005

The fourth column of the matrix is used to highlight assumptions about the external conditions that need to be fulfilled if the vertical logic of the activity description is to hold true. It is also used to highlight key assumptions about the relationships between, and respective inputs of, the partners to activity implementation. The relationship between assumptions and the activity description is shown in Figure 5.
Figure 5 Relationship between assumptions and objectives

Only if these assumptions are met will the next level of objectives be achieved. Assumptions are thus part of the vertical logic

Goal

Purpose

Assumptions

Outputs

Assumptions

Tasks

Assumptions

Understanding and assessing the nature of these assumptions is an essential part of good design. Failure to realistically identify and address assumptions is a common source of activity failure. Some Logframe users prefer to talk about risks in this fourth column - the primary distinction being that risks are negative statements about what might go wrong, whereas assumptions are positive statements about the conditions that need to be met if the activity is to stay on track. Whether assumptions or risks are used, the purpose is the same, namely to assess and address external impacts on the activity and improve where possible, the robustness of the design. The primary difference between the assessment of risks for a policy or program support activity and for project support or once-off TA relates to the issue of manageable interest (or who is in control). Because a policy or program activity works primarily through or within partner government institutions and systems, the partner government has greater control over the activity environment than might be the case for a stand-alone activity.

18

AusAID Australian Agency for International Development

AusGuideline

3.3 The Logical Framework Approach Last updated 27 October 2005

Thus, some risks that a project support activity might face can be more explicitly brought within the planned scope of the policy or program based activity, if they are (reasonably) within the control of partner government institutions. Conversely, projects may be chosen as a preferred form of aid specifically because it is considered too high risk to work through or within government systems. Assessment of the operating environment on a case by case basis is therefore required. A decision tree to help analyse the importance of potential risks, and decide what should be done about them, is shown in Figure 6 Assumptions Decision Tree.
Figure 6 Assumptions Decision Tree

Is the assumption important?

Yes

No

Will it be realised?

Almost certainly

Do not include in the Logframe

Likely

Include as an assumption

Unlikely

Is it possible to redesign the Activity and influence the external factor?

Yes

No

Re-design the Activity, eg add activities or outputs or reformulate purpose statements

High risk activity which should probably not be funded by GoA

AusAID Australian Agency for International Development 19

AusGuideline

3.3 The Logical Framework Approach

Last updated 27 October 2005

The difference between the assumptions documented in the Logframe matrix, and the risks analysed in the Risk Management Matrix, are thus that while the Logframe highlights those events/issues that remain outside the activity managers control, the Risk Matrix provides further analysis of how the design has been informed/modified to mitigate identified risks during the design process. The Logframe provides a starting point for further risk assessment, stakeholder consultations on risk, and the preparation of a risk management plan (refer to AusAID Risk Management Policy, AusAID Circular No. 29 of 8 November 1999). For further information refer to AusGuideline 6.3 Managing Risk, and AusGuideline 6.4 Promoting practical sustainability.

3.4 Horizontal logic

3.4.1 Indicators

Indicators specify how the achievement of activity objectives will be measured and verified. They provide the basis for monitoring activity progress (completion of work program tasks, delivery of outputs and progress towards outcomes). Indicators are established in response to the question: How do I know whether or not what has been planned is actually happening or has happened? We look for indications or signs to help us. For example: How do we know that more teachers have been trained this year? What would tell us that the training had had an impact on classroom performance? How do we measure progress towards the objective of strengthening community management capacity? How do we know if these benefits are likely to be sustainable? There are no absolute principles about what makes a good indicator of physical achievement, however the SMART characteristics listed below (Specific, Measurable, Attainable, Relevant, Timely) are useful. Specific Key indicators need to be specific and to relate to the conditions the activity seeks to change. Cement delivered to a site is not a good indicator of the number of houses constructed. Likewise seedlings distributed from a nursery may not be a valid indicator of plants established. The horizontal logic of the Logframe matrix helps to test these criteria. Measurable Quantifiable indicators are preferred because they are precise, can be aggregated and allow further statistical analysis of the data. However, development process indicators may be difficult to quantify, and qualitative indicators should also be used. Attainable The indicator (or information) must be attainable at reasonable cost using an appropriate collection method. Accurate and reliable information on such things as household

20

AusAID Australian Agency for International Development

AusGuideline

3.3 The Logical Framework Approach Last updated 27 October 2005

incomes and crop production from small-scale dryland farming are, for example, notoriously difficult and expensive to actually collect. Relevant Indicators should be relevant to the management information needs of the people who will use the data. Indicators must also be selected to meet the management and informational needs of all partners to implementation. Field staff may also need particular indicators that are of no relevance to senior managers, and vice-versa. Information must be sorted, screened, aggregated and summarised in different ways to meet different managers needs. (However, the Logframe matrix itself should not attempt to contain this detail. Rather the detail should be incorporated in the monitoring and evaluation framework, which is a key element of the final activity design.) Timely Information on an indicator needs to be collected and reported at the right time to influence many management decisions. Information about agricultural based activities, for example, must often come within specific time periods if it is to be used to influence events in the whole cropping and processing cycle. There is also no point choosing indicators that can only tell you at the end of an activity whether you succeeded or failed in meeting certain objectives. They may be lessons learned but the information comes too late for personnel to act on. Where possible, indicators should incorporate elements of quantity, quality and time. This is about setting targets for implementers to work towards and against which progress can then be measured. As the saying goes, what gets measured gets managed. Caution should nevertheless be exercised when specifying quantified targets in the Logframe (rather than just the indicator or unit of measurement), particularly for Activities which focus on process/capacity development outcomes. Two issues are important here the Logframe should provide a summary of the activity and not contain more detail than is necessary. Details of the proposed management information system should be documented separately, using the Logframe as a guiding framework, and targets may be indicated during design, but the detailed assessment of what is really feasible needs to be undertaken and agreed upon by the implementing agencies once the activity starts. Setting targets is an important part of good planning, but the quality and usefulness of such targets depends very much on when and by whom they are set. Design teams may not have adequate information to confidently propose specific targets, particularly for process-oriented Activities implemented in partnership with local agencies. Two particular limitations associated with specifying indicators using the Logframe structure also need to be recognised

AusAID Australian Agency for International Development 21

AusGuideline

3.3 The Logical Framework Approach

Last updated 27 October 2005

the indicators selected may be relevant to some, but not all, stakeholders. It cannot necessarily be assumed that all stakeholders have common interests and information needs, and

even within one agency, information needs will vary between levels of the institutional hierarchy. As the level of management changes, so do the level of detail required and the nature of indicators.

The indicators selected for inclusion in the Logframe are usually focused on meeting the information needs of selected stakeholders and at specific management level, eg policy makers, program managers, AusAID. The point of view reflected in the hierarchy of objectives summarised in the Logframe may therefore need to be broken down into sub-sets of objectives, indicators and targets for each level of management once activity implementation starts.
3.4.2 Means of verification

The different means (and costs) of collecting information must also be considered when choosing appropriate indicators. Some indicators may give the information you would ideally like to have, but when the means of getting this is carefully considered it might become impractical, eg too complex or expensive. The Logframe matrix is a useful analytical and presentational structure for systematically identifying and assessing appropriate means of verification for each indicator that is chosen. Once it is clear what information managers might require (the key indicators) it is then necessary to consider how this might be obtained. The following questions should be asked and answered how should the information be collected, eg sample surveys, administrative records, national statistics (as in the census), workshops or focus groups, observation, PRA or rapid rural appraisal techniques? what source is most appropriate? eg Who should be interviewed? Does the Bureau of Statistics already collect the required information? Is the source reliable? who should do it? eg extension staff, supervisors, an independent team? when and how often should the information be collected, analysed and reported? eg monthly, annually, according to seasonal cropping cycles? what formats are required to record the data being collected?

When developing answers to these questions, one of the main issues to keep in mind is the resource and capacity constraints that will be faced by those responsible for collecting the information. There is no point designing procedures which are too complex or costly as this

22

AusAID Australian Agency for International Development

AusGuideline

3.3 The Logical Framework Approach Last updated 27 October 2005

will merely lead to frustration and disappointment in the outcomes. A balance must therefore be struck between what would be desirable in an ideal world and what is feasible in practice. Staff working on an activity may need to collect some primary information specific to their work, but should aim to use existing sources where these are available. Where local systems are failing or inadequate, rather than build parallel systems, it may be more effective in the long-run to support the development and use of local systems. The main point is to build on existing systems and sources (where possible and appropriate) before establishing new ones. Check whats already there before assuming it isnt. A further note on the link between indicators and means of verification and Monitoring and Evaluation (M&E) is provided at Annex E.

The LFA and different forms of aid

While the LFA has traditionally been used to support project planning, the analytical approach and basic tools (e.g. problem analysis, stakeholder analysis, objective setting, risk analysis and establishing a monitoring framework) can also be applied to different forms of aid, such as program and macro-policy support activities. Using different forms of aid is more about how donors can effectively contribute to development outcomes (particularly the management and financing arrangements used), not so much what those outcomes should be. The main difference between the traditional project and these other forms of aid relates primarily to the nature of the partnership strategy that donors wish to pursue with the partner government, and the type and level of detail that is included in a design. Policy and program approaches are often more explicitly focused on capacity building given that they work primarily within or through partner institutions and systems rather than outside and usually focus more on broader policy and programmatic issues that the partner government wishes to address. A Logframe Matrix for a policy or program support activity is therefore likely to focus on desired impacts, outcomes and indicative outputs (to be delivered by government) while the matrix for a more traditional project would focus more on the expected outcome, outputs and indicative activities (to be delivered by the project). Figure 7 summarises the main differences in analytical focus between policy or program support Activities and the more traditional project/TA approach.

AusAID Australian Agency for International Development 23

AusGuideline

3.3 The Logical Framework Approach

Last updated 27 October 2005

Figure 7 Differences in analytical focus between

LFA Element
Problem and Stakeholder Analysis

Macro-Policy and Program Support

Focus more on: Macro-economic framework, status of the aid market, national development/poverty reduction strategies, sector program strategies, public finance management systems, institutional framework, organisational capacity, donor coordination, etc Focus more on: Partner Government priorities, higher level policy and program level objectives, development outcomes/results, strategies for achieving results

Projects and Stand Alone TA

Focus more on: Overview of institutional and organisational context, then with greater attention paid to specific technical constraints or problems within the focus area of intervention

Objectives Analysis

Focus more on: Project-based objectives, technical outputs, activities and input requirements

Strategy Options

Focus more on: Analysis of options for working through or within PG systems, coordination arrangements with other development partners, aid effectiveness considerations, etc

Focus more on: Choosing between technical alternatives, considering appropriate parallel management and financing arrangements, considering Australian comparative advantage Focus more on: Project specific indicators, output focus, contract milestones, reporting to GoA, attribution of benefit to Australian contribution, accountability to Australian tax payers/authorities Focus more on: Assumptions from the perspective of the project managers and the donor(s) - as well as on those from the perspective of the partner government and their program managers

Performance Indicators and MOVs

Focus more on: Higher level indicators of impact and outcome (results), use of MDGs or similar, using (or building on) existing PG systems, harmonisation with other donors, accountability to beneficiaries Focus more on: Assumptions from the perspective of the partner government and their program managers

Assumptions/Risks

More extensive information on the analytic framework for designing Australian Government aid initiatives across a full range of forms of aid is provided in AusGuideline 3.2 Selecting forms of aid.

24

AusAID Australian Agency for International Development

AusGuideline

3.3 The Logical Framework Approach Last updated 27 October 2005

Implementation, resource and cost schedules

Once the Logframe matrix is considered sound, the structure can then be used as a framework for preparing implementation, resource and cost schedules. These schedules should be clearly and logically linked to Logframe components and outputs through the use of appropriate reference numbers. Activities leading to outputs can (as appropriate) be specified in more detail and scheduled on a Gantt chart format (implementation schedule). The inputs required for each set of activities and/or outputs can then be specified and also scheduled over time. Finally, the cost of inputs can be determined and an activity budget estimate and cash flow calculated. Guidelines on preparing these schedules are available in AusGuideline 3.7 Preparing activity schedules.

AusAID Australian Agency for International Development 25

AusGuideline

3.3 The Logical Framework Approach

Last updated 27 October 2005

A
A.1

Steps in conducting problem tree analysis

Identifying and listing the main problems

Explain the purpose of the exercise and the context within which it is taking place, eg preparation of a primary health care activity. Explain the problem tree method and the input expected from the participants. Provide some examples of the cause and effect relationship before starting, emphasising the importance of identifying root causes.

Using contributions from the group, list all the negative statements about the situation you are analysing. This can be undertaken as a brainstorming session.

Print each problem statement in clear language on a card and display this on some suitable wall space.

A.2

Identifying core problems

Through discussions, identify a consensus core problem - the one(s) which appear to be linked to most negative statements.

Print a precise definition of the core problem on a card (if the existing statement requires further clarification).

Display the card on a wall (or on the floor) so that the whole group can clearly see it.
Identifying cause and effect Begin to distribute the negative statement cards according to whether they are causes, i.e.

A.3

leading to the core problem, or effects, ie resulting from the core problem. Do this until all causes are below the core problem and all effects are above the core problem. At any stage in the exercise, those statements that are considered to be unclear should either be more clearly specified or discarded. Problems that are clear but very general in nature and which affect not only this issue but would apply to almost any development problem can be treated as overall constraints and moved to the side of the main problem tree. This helps keep the core problem tree focused and manageable. You can be guided in this by considering whether or not the problem is likely to be one which can be addressed by an activity based solution. If not, it is a constraint. Then the guiding questioning for further structuring the statements into a problem tree becomes What leads to that? Choose any negative statement printed as a problem on the cards and ask: What leads to that? Then select from the cards the most likely cause of the problem, and place it below the chosen statement. If there are two or more causes combining to produce an effect, place them side by side below the resulting effect.

26

AusAID Australian Agency for International Development

AusGuideline

3.3 The Logical Framework Approach Last updated 27 October 2005

After you have placed the card or cards for each relationship, pause to review. Then ask the group if there are more causes leading to that problem.

Similarly you must ask if there are any more effects resulting from that problem. If there are multiple effects resulting from a cause, place them side by side and above the cause(s).

A.4

Checking the logic

At each stage you should invite participants to move the cards, i.e. to suggest or hypothesise other relationships.

When you have placed all cards, review the structure to ensure that related streams of cause and effect are close to each other on the problem diagram.

Choose one of the cards at the top line of your Problem Tree, then work back through the diagram according to the guiding question: What leads to, or causes, that? in order to check the logic or completeness of your cause-effect structure.

A.5

Drafting the problem tree diagram Then draw in vertical links to show cause-effect relationships, and horizontal links to show

joint causes and combined effects; and Copy your diagram onto a sheet of paper and distribute it for further comment and variations within an appropriate time period.
A.6 Dealing with overall constraints

Overarching development problems that are identified during the analysis, but which cannot be addressed directly by an activity based intervention, should be taken out of the main problem tree diagram and considered as overall constraints. Examples might include: institutional corruption, lack of government revenue, high population pressure. These overall constraints should then be considered as part of the risk and sustainability analyses undertaken later in the preparation process.

AusAID Australian Agency for International Development 27

AusGuideline

3.3 The Logical Framework Approach

Last updated 27 October 2005

Stakeholder analysis tools

There are a variety of tools that can be used to support stakeholder analysis. Some suggested options are described below, namely 1. stakeholder analysis matrix 2. SWOT analysis 3. Venn diagrams, and 4. spider diagrams In using any of these tools, the quality of information obtained will be significantly influenced by the process of information collection. In this regard, the effective use of participatory planning methods and group facilitation tools can help ensure that the views and perspectives of different stakeholder groups are adequately represented and understood.
B.1 Stakeholder analysis matrix

Both of the matrix formats shown (Figures B1 and B2) can be adapted to include different or additional information about the main stakeholder groups depending on the scope and focus of the issues being addressed.
Figure B1 Stakeholder analysis matrix 1 problems Stakeholder How affected by the problem(s)? Capacity/motivation to participate in addressing the problem(s) Relationship with other Stakeholders (eg partnership or conflict)

Figure B2 Stakeholder analysis matrix 2 impacts Stakeholder Stakeholders main objectives Positive impacts/benefits Negative impacts/costs Net impact

The type of information collected, analysed and presented in the columns of such a matrix can be adapted to meet the needs of different circumstances. For example, additional columns could be added to specifically deal with the different interests of women and men. Also, when analysing potential activity objectives in more detail (at a later stage in activity

28

AusAID Australian Agency for International Development

AusGuideline

3.3 The Logical Framework Approach Last updated 27 October 2005

planning), greater focus should be given to analysing the potential benefits and costs of a proposed intervention to different stakeholder groups.
B.2 SWOT analysis

SWOT analysis (strengths, weaknesses, opportunities and threats) is used to analyse the internal strengths and weaknesses of an organization and the external opportunities and threats that it faces. It can be used either as a tool for general analysis, or to look at how an organization might address a specific problem or challenge. The quality of information derived from using this tool depends (as ever) on who is involved and how the process is managed it basically just provides a structure and focus for discussion. SWOT is undertaken in three main stages, namely 1. ideas are generated about the internal strengths and weaknesses of a group or organization, and the external opportunities and threats 2. the situation is analysed by looking for ways in which the group/organisations strengths can be built on to overcome identified weaknesses, and opportunities can be taken to minimize threats, and 3. a strategy for making improvements is formulated (and then subsequently developed using a number of additional analytical planning tools). An example of a SWOT matrix, (analysing the capacity of an organisation to deliver effective staff training) is shown in Figure B3 below:
Figure B3 SWOT matrix

Strengths
Senior management commitment to HRD Suitable infrastructure available Reasonable budget allocation for training Cadre of trained trainers and training managers available in-house

Weaknesses
No comprehensive training strategy in place Lack of appropriate written policy and criteria for selection of trainees Budget allocation processes not linked to analysis of priorities/needs No defined and structured process for training needs analysis and training course design

Opportunities
Increasing pressure from public and from politicians to address police service training needs Public Service Training Institute starting to offer broader range of generic management skills training Regional interest in joint/collaborative security issues resulting in increased sharing of resources for training

Threats
National fiscal outlook not promising threat of budget cuts Risk of growing institutional corruption Country commitment to regional and international peacekeeping are stretching overall resources

AusAID Australian Agency for International Development 29

AusGuideline

3.3 The Logical Framework Approach

Last updated 27 October 2005

B.3

Venn diagrams

Venn Diagrams are created to analyse and illustrate the nature of relationships between key stakeholder groups. The size of the circle used can help indicate the relative power/influence of each group/organization, while the spatial separation is used to indicate the relative strength or weakness of the working relationship/interaction between different groups/organizations. Venn diagrams are commonly used as a participatory planning tool with target groups, to help them profile their concept of such relationships. An example of a Venn Diagram is shown in Figure B4.
Figure B4 Venn Diagram Venn diagram of stakeholder relationships in the justice sector from a community perspective

Public Prosecutor

Ombudsman

POLICE

Judiciary Community

Preliminary analysis indicates that: Community consider themselves close to Village Elders and to village courts, but distant from official justice organisations. Police are viewed as distant but powerful, and closely linked to the judiciary and public prosecutor. The ombudsman is particularly distant and seen to be aligned with other official interests.

Traditional Elders

Village Courts

Venn diagrams can also be used to analyse and highlight potential conflicts between different stakeholder groups.
B.4 Spider diagrams

Spider diagrams can be used to help analyse and provide a visual summary of institutional capacity. The collection of relevant information can be undertaken using a variety of tools, including inspection of administrative record and management reports, interviews with staff and clients, and observation of operations/activities on the ground.

30

AusAID Australian Agency for International Development

AusGuideline

3.3 The Logical Framework Approach Last updated 27 October 2005

An example of a spider diagram is shown in Figure B5 below. This indicates that the agency has relatively strong technical management skills/capacity, and that its policy and planning systems are also fairly robust, but the agency has some critical shortcomings in terms of transparency and accountability, its relationship with its clients and learning and evaluation mechanisms. This suggests that the critical constraints to the capacity of this agency are therefore related more to organizational culture and management priorities than to either technical skills or basic management competencies. A key requirement in undertaking this type of analysis is to include all the relevant characteristics of the organisation(s) being studied as a segment of the spider diagram.
Figure B5 Spider Diagram

Technical Skills

Financial Management

Good governance transparency and accountability 1 0

3 2 Personnel Management, training & staff motivation

Client Focus Learning and evaluation mechanisms

Key: 0 = Undesirable: dramatic improvement needed. 1 = Poor situation: significant room for improvement.

Links with other relevant organisations

2 = Satisfactory: some scope for improvement.

Policy and Planning Systems

3 = Highly effective.

AusAID Australian Agency for International Development 31

AusGuideline

3.3 The Logical Framework Approach

Last updated 27 October 2005

Reference numbers, flow charts & contractible outputs

Reference numbers and flow charts

C.1

Using reference numbers is a useful device to help the Logframe user negotiate around the logic of the matrix, particularly when the matrix is presented on more than one page. This helps the reader understand which activities, outputs and outcomes are linked and also provides a clear reference point when preparing more detailed implementation plans using implementation, resource and cost schedules linked to the Logframe matrix. Use of a flow chart format to present a summary of outputs, component objectives, outcome and the goal is also a useful device. Such a structure is shown below in Figure C1.
Figure C1 Activity components flow chart

Goal

Purpose

Component 1 Objective

Component 2 Objective

Output 1.1

Output 1.2

Output 2.1

Output 2.2

Tasks 1.1.1 1.1.2 1.1.3

Tasks 1.2.1 1.2.2 1.2.3

Tasks 2.1.1 2.1.2 2.1.3

32

AusAID Australian Agency for International Development

AusGuideline

3.3 The Logical Framework Approach Last updated 27 October 2005

C.2

Activity outputs and contractible outputs

In preparing the Logframe matrix, the focus should be on defining the outputs that the activity aims to produce. However, these outputs may not be the same as the outputs that a contractor may be directly contracted to deliver. This is because the activity outputs usually require that actions be taken by other stakeholders that the contractor has no direct control over, eg partner government implementing agencies. Where necessary/appropriate, the distinction between activity outputs and contractible outputs should be defined and reflected in the scope of services and the memorandum of understanding, rather than being detailed in the Logframe matrix itself. The main reasons for recommending this approach are the Logframe matrix should remain a summary of the development logic and rationale, rather than include detail of different stakeholder responsibilities or contractual issues the activity design and the Logframe matrix should represent what the partner government, AusAID and other development partners have jointly committed to the scope of services (what AusAID contracts a provider to deliver) and the memorandum of understanding (what the partner government agrees to contribute) indicate the respective responsibilities for contributing to the delivery of activity outputs, and the exact specification of contractible outputs needs (to some extent) to be negotiated between AusAID and the firm selected to implement. AusGuideline 3.5 Undertaking a feasibility & design study provides further guidance on documenting the respective responsibilities of key stakeholders in delivering activity outputs.

AusAID Australian Agency for International Development 33

AusGuideline

3.3 The Logical Framework Approach

Last updated 27 October 2005

Logical Framework Approach Terminology

A brief description of key LFA terms is given below. Activity description provides a narrative summary of what the activity intends to achieve and how. It describes the means by which desired ends are to be achieved (the vertical logic). That is, it describes what the activity will actually do in order to produce the planned outputs and outcomes. Activity component: Constructing the activity description may involve disaggregating the work to be undertaken into a number of activity components. An activity component consists of a sub-set of inputs, work program tasks and outputs that form a natural whole, and can be considered as a separate part of the overall activity. Components may be identified on the basis of a number of possible variables, including technical features (e.g. a health activity may have components focusing on malaria control, diarrhoeal disease, and acute respiratory infections) geographic locations (e.g. a census support activity focusing its capacity building activities on different provinces or regions and at the national level) beneficiaries (e.g. an HIV aids activity focusing on raising awareness among schoolchildren, sex-workers, injecting drug users and health workers) management/organisational structures (e.g. an agriculture activity divided into extension, training, research and credit components to reflect the local structure of the Department of Agriculture) phasing of key tasks (e.g. a rural electrification activity which requires a feasibility study, pilot testing, implementation and maintenance stages. Identifying appropriate component headings will thus depend on a number of contextspecific factors. Agreement on what the components should be is best determined through a consultative process with key stakeholders. Goal/Impact refers to the sectoral or national objectives which the activity is designed to contribute to, eg increased incomes, improved nutritional status, reduced crime. The goal helps set the macro-level context within which the activity fits, and describes the long-term impact that the activity is expected to contribute towards (but not by itself achieve). Purpose/Outcome refers to what the activity itself is expected to achieve in terms of sustainable development results, if the relevant assumptions of the activity design are correct. It is the positive developmental change which the activity would produce if it were completely successful (and the assumptions were fully accurate). Examples might include

34

AusAID Australian Agency for International Development

AusGuideline

3.3 The Logical Framework Approach Last updated 27 October 2005

increased agricultural production, higher immunisation coverage, cleaner water, or improved legal services. Component Objectives/Intermediate Results: Where the activity is relatively large and has a number of components (output/work program areas) it can be useful to give each component an objective statement. These statements should help provide a logical link between the outputs of that component and the overall purpose/outcome. Outputs refer to the tangible products (goods and services) produced by undertaking a series of tasks as part of the planned work of the activity. Examples might include: irrigation systems or water supplies constructed, areas planted/developed, children immunised, buildings or other infrastructure built, policy guidelines produced, and staff effectively trained. The delivery of outputs should be largely under activity managements control. Work program refers to the specific tasks to be undertaken as part of the planned delivery of the activity to achieve the required outputs. Examples for a new community water supply might include: establishing water users committee and maintenance procedures, site preparation, collection of local materials, tank construction and pipe laying, digging soak pits, and commissioning. However, the Logframe matrix should not include too much detail on work program otherwise it becomes too lengthy and potentially prescriptive. If detailed specification is required, this should be presented separately in a work schedule/Gantt chart format and not in the matrix itself. Inputs refer to the resources required to undertake the work program and produce the outputs, eg as personnel, equipment, and materials. However, inputs should not be included in the matrix format. Assumptions: Assumptions refer to assumptions made about conditions which could affect the progress or success of the activity, but over which activity managers may have no direct control, eg price changes, rainfall, land reform policies, non-enforcement of supporting legislation. An assumption is a positive statement of a condition that must be met in order for objectives to be achieved. A risk is a negative statement of what might prevent objectives being achieved. Indicators: Indicators are measure of progress or lack of progress used to assess progress towards meeting stated objectives. An indicator should provide, where possible, a clearly defined unit of measurement and a target detailing the quantity, quality and timing of expected results. Means of verification: Means of verification should clearly specify the expected source of the information we need to collect. We need to consider how the information will be collected (method), who will be responsible, and the frequency with which the information should be provided.

AusAID Australian Agency for International Development 35

AusGuideline

3.3 The Logical Framework Approach

Last updated 27 October 2005

Indicators and the link to M&E

The horizontal logic of the matrix helps establish the basis for monitoring and evaluating the activity. The link between the Logframe and monitoring, review and evaluation is illustrated in Figure E1.
Figure E1 The Logframe and monitoring and evaluation Logframe/results hierarchy Impact Outcome Intermediate Results/Component Objectives Outputs Work program, Inputs Type of monitoring and evaluation Ex-post evaluation Evaluation at completion Ongoing review Monitoring and review Monitoring

This is of course a simplified framework, and needs to be applied and interpreted in a suitably flexible manner. For example, ex-post evaluation will include some element of assessing whether or not the purpose, component objectives and outputs have been achieved, and review will also assess performance in output delivery.
E.1 Testing the activity description

Once the activity description and assumptions have been drafted (columns 1 and 4 of the matrix), the next task is to identify the indicators that might be used to measure and report on the achievement of objectives (column 2), and the source of that information (column 4). Because one reads across the matrix when analysing indicators and means of verification, this is referred to as the horizontal logic. In considering how the achievement of objectives might be measured/verified, one is required to reflect on the clarity of objective statements, how feasible they will be to achieve, and how they might be more specifically defined. This is part of the iterative nature of the analysis. Each part of the framework may need to be revisited as new tests of logic are applied.
E.2 The level of detail

In most cases, the specification of indicators and means of verification should focus on the output, intermediate result and outcome levels of the hierarchy. It is usually not appropriate to specify indicators for every element of the work program (if these are included in the logframe), as this tends to clutter the matrix with too much detail. Activity and input monitoring systems are often better defined and established during implementation by the management team. If the goal is a broad statement of development intention at the national/policy level, and the activity itself is providing only a modest contribution, it may not be necessary (or useful) to include indicators and means of verification for the goal.

36

AusAID Australian Agency for International Development

AusGuideline

3.3 The Logical Framework Approach Last updated 27 October 2005

At the design stage, the level of detail that can be realistically expected in both the indicators and MOV columns will depend on (among other things) the type of activity the information available at the time of design whether or not the design work has had the input of individuals with monitoring and evaluation design skills, and how much time the design team has to do the work.

For example, a three person design team which is in the field for three weeks to help prepare a complex institutional strengthening activity, should not necessarily be expected to prescribe the activity monitoring and evaluation arrangements in great detail. Rather, the horizontal logic of the matrix should be used as a means by which to test the clarity of objective statements indicate the type of information required and how it could be collected provide a framework within which activity implementers can design the detailed elements of the monitoring and evaluation system once implementation commences, and help determine the scope and scale of resources that will be required to establish and maintain an effective monitoring and evaluation function, and then include these resources in the activity design and budget.

AusAID Australian Agency for International Development 37