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Toward Country-led Development: The Missing Link

Toward Country-led Development: The Missing Link

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This book examines the influence of local public services on the economics of cities. The relationship between economic development and urbanization is indisputable; less clear, however, are the ways in which cities directly contribute to economic growth and employment creation. Current economic thinking holds that the ability of cities to create wealth depends on “agglomeration economies;” that is, the geographic concentration of industries and people which enables economic actors to come together, interact, and become productive. However, this ability to promote productive interaction depends on several factors, one of which is the provision of local public services. The book argues that the quality of local services significantly influences the productivity of a city, and of its business firms. Inferior local services increase the cost of interaction, erode the effects of agglomeration, and diminish wealth-creation potential. This study attempts to assess the costs of inferior local public services to firms. Based on surveys conducted in five cities—Belo Horizonte (Brazil), Montreal (Canada), Puebla (Mexico), San José (Costa Rica), and San Salvador (El Salvador)—it examines the complex issues surrounding local service provision, and illustrates how inferior local services affect firms and, in turn, the ability of firms to contribute to wealth.
This book examines the influence of local public services on the economics of cities. The relationship between economic development and urbanization is indisputable; less clear, however, are the ways in which cities directly contribute to economic growth and employment creation. Current economic thinking holds that the ability of cities to create wealth depends on “agglomeration economies;” that is, the geographic concentration of industries and people which enables economic actors to come together, interact, and become productive. However, this ability to promote productive interaction depends on several factors, one of which is the provision of local public services. The book argues that the quality of local services significantly influences the productivity of a city, and of its business firms. Inferior local services increase the cost of interaction, erode the effects of agglomeration, and diminish wealth-creation potential. This study attempts to assess the costs of inferior local public services to firms. Based on surveys conducted in five cities—Belo Horizonte (Brazil), Montreal (Canada), Puebla (Mexico), San José (Costa Rica), and San Salvador (El Salvador)—it examines the complex issues surrounding local service provision, and illustrates how inferior local services affect firms and, in turn, the ability of firms to contribute to wealth.

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Publish date: Sep 15, 2003
Added to Scribd: May 23, 2009
Copyright:AttributionISBN:9780821356432

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9780821356432

A building project in Bolivia shows the high
cost of current donor practices. Three major
donors in the health sector agreed to cofi-
nance construction of a building. The ministry
put up the land, but each donor had its own
procedures, which made it difficult to find a
common approach to construction. The three
donors could not pool their contribution in a
common fund, because the rules of the agen-
cies prohibited channeling money to another
agency. One donor did not require competitive
bidding, but the other two did. None of the
agencies could accept the procedures of any
of the others, and two of the agencies were
unwilling to adopt Bolivian rules.

A “thematic” approach was considered. One
donor would finance the design, another
the construction works, and the third could
contribute the equipment. As an alternative,
to avoid one agency blaming another if
something went wrong, it was proposed that
each donor would finance particular floors,
procuring the materials and hiring builders
according to its own standards and proce-
dures. This would have greatly prolonged
the construction period.

After long debates, one of the donors with-
drew from the project, and the other two
signed an agreement of their intentions of
constructing the building. Thanks to revisions
of the regulations and numerous coordination
meetings, the donor contributing the smaller
amount has accepted the rules of the
other donor.

After two years, the foundation stone has yet
to be laid.

Source: Bolivia country case study.

p. xxiv-39 for PDF 9/5/03 10:23 AM Page 36

donor respondents in Ghana, Romania,
Uganda, and Vietnam report that they have not
adopted common donor procurement rules. In
Ghana, for instance, only two donors—the
Netherlands and the U.K.—have adopted the
procurement rules of other donors: both use
those of the World Bank. Similar situations are
noted in the other countries, where only one or
two donors have adopted the procurement rules
of other donors. In Vietnam, the Asian
Development Bank (ADB) and the World Bank
are harmonizing their procedures. For the most
part, however, stringent donor headquarters
policies and complex and intertwined political
and business interests in donor countries have
made it difficult for donors to harmonize among
themselves. As noted in the Bolivia case study,
it appears particularly costly and irrational for
member countries of the European Union,
which have nine representations in Bolivia,
including the EC, not to have coordinated or
harmonized their procedures among members
more extensively. Box 2.8 graphically illustrates
the costs that multiple donor procurement and
related procedures can impose.

Monitoring and Evaluating
Country-led Partnership
Performance: Breaking with
the Past

To break with the past and make real advances
on the country-led partnership principle
requires serious monitoring. This includes rat-
ings and rankings of both the recipients and
donors on major elements of the country-led
partnership principle so that all partners have
the information to continuously refine and
improve their practices and policies. All parties
must be evaluated, in joint performance reviews
co-designed and co-evaluated by both sides of
the partnership. A first step would be to harmo-
nize existing criteria among aid agencies and
agree on a set of “international best practice”

indicators of effective partnerships. The second
step would be to design institutional arrange-
ments or governance structures to mainstream
these indicators.

Independent evaluation at the country level,
together with possible oversight of donor behav-
ior by national legislatures, might be a powerful
means of ensuring donor-recipient transparency
and accountability. Currently, Tanzania is
experimenting with a form of independent eval-
uation of aid relationships (box 2.9). These
and other worthy experiments deserve further
exploration. Respondents in several case study
countries suggested the Consultative Group
mechanism or SWAp meetings as possible
forums for reviewing donor performance (issu-
ing an annual “donor report card,” for example).
A wide range of potential indicators of country-
led partnerships could be quantified and com-
bined in a composite index of effective
development partnerships. The impact of the
index on outcome variables, such as MDGs,
would need further examination.

Conclusions on
Country-led Partnership

Is country-led partnership working in practice?
The answer is a qualified yes. There is evidence
that donor-recipient coordination activities
have increased in number and frequency over
the past five years. Progress has been highly
uneven across donors, across countries, across
the various elements or instruments of the coun-
try-led partnership principle, and across sectors
within countries. Donor headquarters policies,
regulations, and incentive structures set bound-
aries on how much donor field offices can
change their behavior. True, there are more
joint appraisal missions, more joint reporting
formats, and more joint monitoring. But these
operations tend to be limited to a few (popular)
sectors, particularly the social sectors. Har-

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p. xxiv-39 for PDF 9/5/03 10:23 AM Page 37

monizing rules and procedures, particularly for
procurement, remains a major problem. Donors
still work through separate implementation
units in or outside line ministries and provide
supply-driven technical assistance.

In addition to conscious efforts by donors and
recipients to address the plethora of bureaucratic
constraints, more fundamental reforms have to
focus on building the infrastructure to institu-
tionalize and sustain aid coordination oriented
toward country leadership. Three major ele-
ments of this infrastructure include the accelera-
tion of mechanisms that promote common pool
funding, demand-driven capacity building, and
effective monitoring and evaluation that puts
peer pressure on nonconforming partners. Two
additional interrelated elements that apply to
both sets of partners are transparency and mutual

trust. These considerations surface most explic-
itly in the Vietnamese case study, where inter-
locutors said that trust and personal working
relationships were key factors in building effec-
tive country-led partnership. For donors, this
included staff competence, long-term use of
“true experts,” communication, and dissemina-
tion of information (in Vietnamese). For the
government, this included staff compensation,
information sharing, long-term staff, language,
and other skills. A related priority among
Vietnam stakeholders is transparency. One inter-
locutor suggested that the World Bank should
add transparency as a fifth CDF principle, and
argued that the most effective way to enhance
ODA effectiveness and reduce corruption is
to facilitate the involvement of independent
local experts. The Bolivia case study concluded
that trust matters not only in the relations

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