1. Political Economy Analysis in Governance Related Projects
Experience from the Demand for Good Governance Project in Cambodia
BBL Series on Political Economy of Reform
Sladjana Cosic, February 17, 2009

2. Presentation Outline
What is the DFGG Project in Cambodia attempting to achieve?
What were the challenges during project preparation?
How did the political economy analysis help?
What were the crucial findings of the analysis?
What are the lessons learned?

3. What is the DFGG Project about?
PDO: To strengthen the demand for good governance in certain priority reform areas in Cambodia by supporting promising state and non state institutions, encouraging partnerships, and sharing lessons
Three components:
1. Support to State Institutions
2. Support to Non-State Institutions
3. Coordination and Learning
Total project envelope $20 million (IDA Grant)

4. Support to State Institutions Support to Non-State Institutions
Coordination and Learning
Component-1
Component-2
Component-3
1A. AC
1D. RNK
1C. OWSO-DO
1B. MONASRI
2B. Thematic
Grants
2A. Partnership
Decentralization and Citizens’ Partnerships for Better Governance
Natural Resource Management
Private Sector Development
Public Financial Management
For work with 4 State Institutions
3A. Coordinating Project Implementation
3B. Learning
2C. Capacity Building & Learning
Ripple Effect
For work on 4 priority reform areas or themes
Priority Reform Areas
(from CAS Governance Pillar)
PECSA

5. Country Context Democracy after decades of conflict and autarky
Economic growth impressive – 7.1% avg from ; 10.2% in 2007
Poverty Reduction – 47% in `94 to 35% in 2004
Yet suffering from weak governance:
Corruption Perception Index ranking 162/179
CPIA rating 2.5
TI (2006): Most institutions in the national governance and integrity system are still weak if not dysfunctional

6. Challenges
Contending with the poor record of cooperation between state institutions and civil society
Introducing the concept of DFGG and of downward accountability culture within state institutions
Surmounting weak capacity of state institutions - with regard to human resources, administrative tools, and experiences
Overcoming a deteriorated relationship between the Government and the World Bank

7. Political economy analysis
… is a process of identifying the power relations and sociopolitical constraints to the project’s objectives and considering how these constraints can be mitigated
The main objective is to map and maximize the overlapping space between politically feasible and technically desirable actions in order to help ensure the best possible project design and implementation
In the DFGG Project, it was done by a local political economy adviser  outside-in vs. inside-out

8. The process of political economy analysis and the role of the adviser
Anticipation  Analysis  Action
Using informal approaches
Mapping stakeholders and identifying winners & losers
Undertaking extensive multistakeholder consultations
Understanding ‘rules of the game’
Building ‘bridges’ between key stakeholders
Interpreting Bank’s policies for local counterparts

9. Crucial findings of the analysis
DFGG is feasible in Cambodia
The Government’s buy-in would come through champions of reform
Main constraints and how to mitigate them
The DFGG Project should target existing, promising institutions
Modular design helps to diversify risk
Support to state institutions is crucial for project feasibility and sustainability

10. Lessons learned Listen, listen, listen,… and adapt to local context
Focus on the ‘good’ rather than the ‘bad’
View everything through a political lens
Support both state and non-state sectors
Promote constructive engagement between state and non-state actors
If you decide to appoint a local political economy adviser, make sure you make the right choice
When preparing a governance-related project, conduct a comprehensive political economy analysis!

11. THANK YOU!