Presentation on theme: "Political Economy at Work Brussels, January 2011 Bryan Fornari"— Presentation transcript:
1 Trade Facilitation in the Philippines: Testing the EC governance framework Political Economy at WorkBrussels, January 2011Bryan FornariUnit E2, EuropeAid, European CommissionThis standard presentation needs to be adapted to fit the audience and purpose.It should be used with the support of the document: EuropeAid Tools and Methods series, Reference Document No 4 “Analysing and Addressing Governance in Sector Operations”, which is the main source of information of this power point.AIDCO/Unit E4 would be grateful to receive any suggestions, comments or new examples that could enrich the presentation to the unit's functional mailbox or to the HoU Dominique Dellicour
2 How did we get to the Philippines case study General framework defined in the Reference Document “Analysing and Addressing Governance in Sector Operations”Methodology being applied to Trade Facilitation as a pilot sectorOngoing TF programme in Philippines tackling governance issues, but need to go beyond technicalitiesDesk + field work to apply methodology to the Philippines contextInvolved in the exercise: Delegation, DEVCO E4+E2, ECDPM consultants
3 The governance analysis framework Political system/governmentRule making and executive actors at different levelsContextChecks and balances organisationsSupervise sector organisations or handle complaints (auditors, judiciary, ombudsmen,…)Non-state actorsCitizens, voters, consumers, user groups economic agents, elites, media…Core public agenciesSector ministries, agencies with regulatory or supporting roles, …Frontline service providersPublic and private providers delivering servicesDonors, international organisationsInfluence on sector governance and accountability relationsMAKING THE GOVERNANCE ICEBERG VISIBLEThe methodology is intended to be a practical tool to provide EC staff with some guidance and an analytical framework to increase their understanding of governance issues at sector level in order to better support partner countries' efforts in this field.Step 1: Assessing the context of sector governancepolitical attention of sector; broader public sector reform context; strong judiciary; decentralisation; international context; etc.Step 2: Mapping the actors: interests, power, incentivessix clusters of actors: focus on key interests and relationshipsStep 3: Assessing accountability relationswho accounts to whom; who depends on whom, who can pressure whom; who is voiceless; who are agents of changeStep 4: Summing up: analysing reform readinessstrengths, opportunities, weaknesses, threatsGovernanceAccountability33
4 The TRTA 2 project in the Philippines € 6.5 million,Project purpose: Support selected agencies and non-state actors to implement deeper integration into the international trading systemsSome expected results:- Integrate 35 agencies into a National Single Window- Risk Management System enhanced- Custom Transit System at ports improved- Strengthened Bureau of Customs(including perception of its standards of integrity)Component 1: Trade Policy and Export DevelopmentComponent 2: Standards Harmonisation and SPS ConformityComponent 3: Trade FacilitationComponent 4:Rapid Response FacilityFocus on automation and effectiveness of customs operations (faster, cheaper, more transparent)44
5 The case study in practice – the process Longstanding involvement of the Delegation in the sectorProgramme already addressing governance issuesDesk and field work – one week of meetings with key stakeholders (lead by Delegation + one consultant)Mix of “Internal” (EC) and “external” work/discussions55
6 STEP 1 – Key features of the context LevelFeaturesIndicators/SourcesSectorIn customs emphasis on revenue generationTF with strategic plan but slow progress (resistance); greater automationBoC mistrusted within government, probs of principal-agent mechanisms, appointments by executive/legislative powersNational and Export Development Plans‘Doing Business’ IndicatorsStrategic Action Plan of the Bureau of CustomsNationalEconomy heavily regulated; High corruptionPublic sector reform is slow, low salariesNew Administration (fighting corruption)Congress with short mandatesEC country assistance reviews, governance assessments, TI indexRegional / Int’nationalPressure from globalisation for competitiveness, International and ASEAN commitmentsASEAN TF Programme; WTO Trade Policy ReviewASEAN laggard, consumption driven economy, heavy reliance on remittances (>10% of GDP), significant drop in applied tariffs from over 40% to 8%, trade to GDP ratio 62%, strong reliance on one export sector (electronics), Business Process Operations (outsourcing) on the rise, managed crisis relatively wellMarket governance: weak governance, high corruption levels and constitutional investment restrictions hamper FDI. Legislation usually in place but enforcement weak and political intervention high.World Bank ‘Doing Business’: weak rankings across the board (above 100) with “trading across boarders” relatively better at rank 68. Philippines ranks 139 in TI CPI index behind Nigeria, Pakistan etc.Political attention of sector: Customs reform has high priority (e2m, NSW) and is well funded but progress is very slow. International (RKC) and ASEAN obligations help trigger reformSector: trade important but focus in customs on revenue generation more than TFRegeional commitments important but not systematiaclly enforced66
7 STEP 2: Mapping the actors Stakeholders: blurred boundariesPolitical system/governmentCongressExecutive bodyContextChecks and balances organisationsJudiciaryCongressCommission on AuditNon-state actorsMediaImporters/ExportersShipping CompaniesProducersCore public agenciesCustoms Authority,Trade MinistryFrontline service providersCustoms officialsDonors, international organisationsEC, JICA, US Aid, ASEAN, WCO, WTO77
8 STEP 2: Mapping the actors Cluster of ActorsKey ActorsPower / InterestsDriver of changeCore Public AgenciesBureau of Customs (Department of Finance) – senior officialsHolds key TF powersInterests: greater efficiency in TF, subject to budget and capacity constraints, need to improve imagePotentially, with varying degrees depending on who in the top managementDepartment of Trade and IndustryInterest in improving TF, but little power to influence policy or performance; also prefers to concentrate on trade negotiationsLimited (but potenital) driver of changeFrontline Service ProvidersCustoms officialsInterest: interst to keep status quo for rent seeking, but image problemOverall resitance to changeNon-State Actors: Private Sector OperatorsExportersInterest: improved TF (while maintaining cosy status quo relationship with government)Weak driver of changeMediaQuite independent, focuses on negative corruption storiesPotentially can mobilise public opinion8
9 STEP 2: Mapping the actors Cluster of ActorsKey ActorsPower / InterestsDriver of change?Non-state actorsFarmers/ ProducersLittle power to affect policy: lack of organisation, information on TF and capacity to build positions and lobbyDriver of changeChecks and Balance OrganisationsJudiciaryInterest in persuing customs transgressorsDriver of change but prob of capacityCommission on Audit, CongressPolitical System / GovernmentCongress, SenateDifficulty to pass TF legislation due to vested interest groupsLimited driver of changeInternational OrganisationsASEAN, WCO, WTOInterest in TF harmonisation but little power at nat’l levelPotentially, if mandate strengthenedDonorsEC, JICA, US AidImproved TF, leading ulitmately to increased trade and developmentNon-state actors: private sector operators are important, including buyers, exporters, producers/farmers and the full range of ‘middlemen’ including transporters, logistical support services, etc.Core public agencies: BoC, DTI, DA (with various agencies), Presidential Anti Smuggling GroupBoC still very much focused on revenue generation (contributing over 23% to treasury), TF plays a secondary role. HR management in BoC highly politicised. Change resistant in BoC high given attractive rent-seeking opportunities. Currently IT driven change ongoing with potentially strong governance impactsWhile only at the level of a Bureau customs is a very strong player within the government systemEthnical devide between Malay dominated government sector and Sino dominated business sector.Negative Public Opinion vis-à-vis BoC, TF not very high on Business Chambers agenda but corruption/governance in general isDonors: US Aid reduced engagement, MCC finally pulled out, EC and JICA main TA providers, Worldbank and Eximbank interested to support NSW
10 Step 3: Analysing governance relationships Customs – Political system:Annual targets based on revenue collectionSystem of appointments at all levelsMembers of parliament formerly BoC CommissionersLow salaries of customs staff would require major reformPrivate Sector operators – CustomsLimited involvement in reform issuesFocus on short term profit – privileged relationshipsGovernment – donorsFocus on technical issues to address governanceLimited leverage by donors, focus on supply-side
11 Step 4: Summing up Cluster of Actors Key Features Key Strengths OpportunitiesWeaknesses ThreatsMajor TrendsBroader ContextGlobalisation and competition. New technology. New political leadership. Weak national accountability institutions.External pressure exists on Philippines to reform.External pressures (e.g. falling revenue) may end up making reform more difficult.Context is increasingly favourable. ‘Jury is out’ on new administration’s anti-corruption pushActors, interests and incentivesStrong political interests limit incentives for deep reforms.New president committed to fighting corruption, including in BoCReformers may lack power against vested interests.Donor-driven technical reforms have had success, but future progress may require tackling governance issues.Governance RelationsCliental relations between BoC and politicians. Revenue targets for BoC.Accountability gaps in BoC’s relations.Wide range of knowledgeable reform demandeurs, albeit currently unorganised and disparate.Lack of clear driver for deep governance reform in sector. Public apathy on prospects for real reform.Despite dynamic context and technical reforms, little change in underlying governance roles between key actors.It takes time, plan ahead: analysis, dialogue and awareness, mapping and understanding the political economyAdded value of regional integration in supporting governance:- Learning from trading partners by adapting (or imitating) successful institutions and regulations- International competition forces to reform institutional and regulatory setting to improve domestic business environmentRent seeking and corruption might be harder in more open economiesComment on the Table: not telling much, does this help?
12 Towards some conclusions / considerations The dichotomy between “technical solutions” and institutional changeLook beyond TF at some key features (political influence, salaries, accountability)Encouraging private sector to be more engaged in reform, increasing accountability of BoC to stakeholdersBuilding capacity of stakeholders (congressmen, academia, media) could also strengthen the demand side of governanceAddress overall corruption issues, not only within CustomsNeed to go beyond technical approach – automation has its limits in addressing corruption
13 More general questions about the tool Added value of the Governance Analysis Framework? It helps?Supports analysis / dialogue?How to improve it?Additional steps after the analysis?Need for further reflection on how to engage with stakeholders on the use of the toolemerging issues and/or lessons - the points you make (including importance of preparation, usefulness of formalising the analysis or making the methodology and the assumptions explicit etc..) - but also the political sensitivities (once you start to unpack these aspects, etc.) - and such sensitivities are also present when one tries to answer the question about o with whom to undertake the analysis o who the analysis is meant to serve – o or with whom to share the analysis (you may find comfort that this issue was the subject of some work we did two years ago on behalf of DAC – this resulted in guiding principles that you may find interesting or relevant – see annex)2. emerging questions of relevance (also to a non-TF audience): - What has been the added value of the Governance Analysis Framework? Did it really help you ‘unpack’ the political and political economy factors? - What does such approach help you do better? Did or will it contribute to better dialogue with other development partners? With developing partners? Does it help in better targeting stakeholders and engagement strategies? - How can this approach/methodology be sharpened or taken forward? What may be additional questions to seek answers to? (this may be useful in getting feedback from experienced PE practitioners in terms of improvement of the GAF tool) - What may be additional next steps after such exercise?
14 Some considerationsClarity of objectives: For who is the analysis? Donors, stakeholders, internal EC? Need for further reflection on how to engage with stakeholders on the use of the toolTiming: context specific (in case study, EC programme + new political developments)Format of study:Good mix of EC officials / external support. Delegation key roleApproach in interviews: long preparation, ask right questions (in case study, good open dialogue with stakeholders)Methodology: difficulty in placing actors in specific categoriesDifficult balance for donors in supporting without being perceived as taking sides: from analysis to action is not easy…Need for further reflection on how to engage with stakeholders on the use of the toolemerging issues and/or lessons - the points you make (including importance of preparation, usefulness of formalising the analysis or making the methodology and the assumptions explicit etc..) - but also the political sensitivities (once you start to unpack these aspects, etc.) - and such sensitivities are also present when one tries to answer the question about o with whom to undertake the analysis o who the analysis is meant to serve – o or with whom to share the analysis (you may find comfort that this issue was the subject of some work we did two years ago on behalf of DAC – this resulted in guiding principles that you may find interesting or relevant – see annex)2. emerging questions of relevance (also to a non-TF audience): - What has been the added value of the Governance Analysis Framework? Did it really help you ‘unpack’ the political and political economy factors? - What does such approach help you do better? Did or will it contribute to better dialogue with other development partners? With developing partners? Does it help in better targeting stakeholders and engagement strategies? - How can this approach/methodology be sharpened or taken forward? What may be additional questions to seek answers to? (this may be useful in getting feedback from experienced PE practitioners in terms of improvement of the GAF tool) - What may be additional next steps after such exercise?