1. GIZ Professional Forum on ‘The Political Economy of Health and Social Protection’ 2011
Making development co-operation work better by using political economy analysis: what has been done and what have we learned?

2. What is political economy?
“The interaction of political and economic processes in a society: the distribution of power and wealth between different groups and individuals, and the processes that create, sustain and transform these relationships over time”

3. Why does it matter?
Theory and practice of development agencies ignored politics --- challenge seen as technical and financial – and as capacity.
But too much did not work well, especially in poorest countries; needed to change
Rationale for PE analysis therefore is development effectiveness and aid effectiveness; and (post 9/11) fragile states, conflict, state-building

4. What has been done?
From 2002: DFID, NL, SIDA, World Bank, US (democratic governance)
Various approaches and ‘brands’ (Drivers of Change, Power and Change Analysis, Power Analysis, Problem-Driven Governance and PE)
Methods of analysis diverse (but shared core)
Three levels --- sequenced
Country-level / macro (links to international)
Sectoral / thematic (e.g. growth)
Problem-focussed (includes aid modalities)

5. Five core issues recur (illustrated by Bangladesh, Nigeria)
History of state formation, and state-society relations (aid is a small player)
Political competition and the distribution of power
Formal and informal institutions, incentives and relationships
Sources of revenue and accountability
The causes and effects of violent conflict

6. Where can PE add value? (1)
Thinking: not just the what, but the why?
In the two countries, some progress in PEA becoming a routine tool; analytical and programming documents: country strategies (context analysis); Country Governance Assessments (PE asks Why?)
PEA extended to some programme contractors (Nigeria State-Level) and other development agencies (joint analysis in Bangladesh)
Agencies reflect how to achieve influence in context of low aid dependence where donors’ leverage is limited.
Broader thinking about how to support progressive change (more than just ‘demand-side’ and ‘supply-side’) -- longer term, structural
More realism about the difficulty of bringing about transformative change
Engagement with a wider range of organisations across and outside government

7. Where can PE add value? (2)
Strategy: looking for ways to promote change that shift incentives in a pro-developmental direction
Focus on accountability and ‘voice’, alongside capacity development (Nigeria State programmes; shift also in Bangladesh, although still largely focussed on capacity)
Broadening types of intervention: new actors (more on national and state Assemblies, parties) and civil society, media (more on advocacy and not just service delivery)
Issue-based approach; promoting coalitions for change
Link development to diplomacy (elections in both countries), law enforcement / sanctions for corruption
More on violent conflict (incentives of participants)
Shifting incentives in natural resources , using markets (EITI, FLEGT)
Time-scales

8. Where can PE add value? (3)
Operations: from supply-driven (financial and technical) assistance to how can aid contribute to feasible change?
Progress is halting, but there is some:
Nigeria new programmes influenced by Drivers of Change: capacity paralleled by accountability (private sector; ‘Making Markets Work’; state level sector programmes seen as governance)
Bangladesh, more on demand-side governance programmes (e.g. multi-donor Paribartan: Driving Change programme; Manusher Jonno challenge fund for governance and rights of poor people; 20-year public expenditure programme shifts
Supporting long-term structural socio-economic change (women’s education, middle-class...)
Agencies may be working more closely together:
Designing and implementing interventions (fewer larger, less purely technical)
shared donor understanding (joint analysis); but trade-offs
Co-operation among the agencies is mixed (internal incentives!)
joint country strategies; but also risk of blandness.

9. Overall impact of PE analysis?
Overall, possible to discern effects at each level, but uptake not complete, and areas where greater progress needed
Even if design and implementation are more soundly based, what about impact on poor people, development/aid effectiveness?
We don’t know; evidence not (yet) collected

10. Conclusion
It’s a process; progress is being made (DFID was a ‘project machine’)
No going back to ‘ignoring’ politics
Incentives are problematic
Staff are scarce
How to reconcile with demand for measurable results?