Can we move from a risk framework to an opportunities framework in international development?
Wednesday, October 01, 2008 2:44 PM by Simon MaxwellI’m trying to work something out and would appreciate some help.
In thinking about the future of international development, under the rubric of our ‘What’s Next?’ theme, I’ve found it very useful to make use of risk management frameworks, like the global risks analysis pioneered by the World Economic Forum. An example of what they do is pasted in below, taken from the Global Risks 2008 Report. This charts 26 core global risks by likelihood and by severity of economic loss. An asset price collapse is in the top right-hand corner, seen as reasonably likely and very expensive. Extreme inland flooding is in the bottom left hand corner, seen as rather unlikely and somewhat less expensive. The Report was published in January 2008. I don’t know whether the WEF tracks the accuracy of its analysis, but this year has been marked by both an asset price collapse and severe inland flooding, both very expensive in money terms and in human misery. It is worth looking at some of the other risks in the table: pandemics, nanotechnology, transnational crime, war. Not all bad things have happened at the same time. Yet.
The 26 Core Global Risks: Likelihood with Severity by Economic Loss
However, a risk analysis is only half the story. We are missing the opportunities. A sensible guide to making decisions and spending money should take account of risks, but also of opportunities. Where is the opportunity analysis?
I had hoped that this was a question no-one had quite thought of, but of course that is not the case. The Millennium Development Goals provide a kind of opportunity framework, though without the rigour of cost-benefit analysis. The MDGs and their key indicators are listed below.
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Goal 1 |
Target 1.A Target 1.B Target 1.C |
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Goal 2 |
Target 2.A |
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Goal 3 |
Target 3.A |
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Goal 4 |
Target 4.A |
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Goal 5 |
Target 5.A Target 5.B |
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Goal 6 |
Target 6.A Target 6.B Target 6.C |
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Goal 7 |
Target 7.A Target 7.B Target 7.C |
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Goal 8 |
Target 8.A Target 8.B Target 8.C Target 8.D |
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*Target added at the 2005 UN World Summit Sources: The Millennium Development Goals Report 2007, United Nations; World Bank website, February 2008. | |
Another possible source of ideas is the work of Jean Francois Rischard, who published a book called ‘High Noon. Twenty Global Problems and Twenty Years to Solve Them’. His list is below, taken from a paper for the Helsinki Process on Globalisation and Democracy. Rischard distinguishes between issues involving the global commons, those addressing key human needs and those requiring regulation at global level.
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20 years, 20 issues Sharing our Planet: Issues involving the global commons
Sharing our humanity: Issues whose size and urgency requires a global commitment
Sharing our rulebook: Issues needing a global regulatory approach
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Another approach is Jeff Sach’s list of ‘quick wins’, predicated on the idea that there are practical and cost-effective opportunities available in development. His list is below, taken from the Millennium Report. There are some very practical ideas here, including free school meals, the abolition of user fees for health services, and the free distribution of bednets.
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Eliminating school and uniform fees to ensure that all children, especially girls, are not out of school because of their families' poverty. Lost revenues should be replaced with more equitable and efficient sources of finance, including donor assistance. |
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Providing impoverished farmers in sub-Saharan Africa with affordable replenishments of soil nitrogen and other soil nutrients. |
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Providing free school meals for all children using locally produced foods with take-home rations. |
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Designing community nutrition programs for pregnant and lactating women and children under five that support breastfeeding, provide access to locally produced complementary foods and, where needed, provide micronutrient (especially zinc and vitamin A) supplementation. |
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Providing regular annual deworming to all schoolchildren in affected areas to improve health and educational outcomes. |
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Training large numbers of village workers in health, farming, and infrastructure (in one-year programmes) to ensure basic expertise and services in rural communities. |
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Distributing free, long-lasting, insecticide-treated bed-nets to all children in malaria-endemic zones to cut decisively the burden of malaria. |
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Eliminating user fees for basic health services in all developing countries, financed by increased domestic and donor resources for health. |
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Expanding access to sexual and reproductive health information and services, including family planning and contraceptive information and services, and closing existing funding gaps for supplies and logistics. |
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Expanding the use of proven effective drug combinations for AIDS, tuberculosis, and malaria. For AIDS, this includes successfully completing the 3 by 5 initiative to bring anti-retrovirals to 3 million people by 2005. |
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Setting up funding to finance community-based slum upgrading and earmark idle public land for low-cost housing. |
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Providing access to electricity, water, sanitation, and the Internet for all hospitals, schools, and other social service institutions using off-grid diesel generators, solar panels, or other appropriate technologies. |
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Reforming and enforcing legislation guaranteeing women property and inheritance rights. |
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Launching national campaigns to reduce violence against women. |
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Establishing, in each country, an office of science advisor to the president or prime minister to consolidate the role of science in national policymaking. |
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Empowering women to play a central role in formulating and monitoring MDG-based poverty reduction strategies and other critical policy reform processes, particularly at the level of local governments. |
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Providing community-level support to plant trees to provide soil nutrients, fuelwood, shade, fodder, watershed protection, windbreak, and timber. |
Finally, this approach has been systematised by Bjorn Lomberg, through his work on the Copenhagen Consensus, specifically in the context of ‘prioritising global opportuntities’. This was born out of Lomberg’s scepticism about the cost-effectiveness of action on global warming, itself highly controversial, of course, but has developed into a systematic effort to rank issues of global importance. In brief, expert panels are presented with a list of ten global challenges and possible solutions. They then rank the cost-effectiveness of the solutions. The latest exercise was completed in May 2008. The ten global challenges were: air pollution; conflicts; diseases; education; global warming; malnutrition and hunger; sanitation and water; subsidies and trade barriers; terrorism; and women and development. The final, ranked list of 30 interventions is given below, within a notional budget constraint of $US 75bn over four years. Apart from a trade deal, nutrition and interventions aimed at women dominate the top ten.
|
Solution |
Challenge |
Yearly cost in million USD | |
|
1 |
Micronutrient supplements for children (vitamin A and zinc) |
Malnutrition |
60 |
|
2 |
The Doha development agenda |
Trade |
0 |
|
3 |
Micronutrient fortification (iron and salt iodization) |
Malnutrition |
286 |
|
4 |
Expanded immunization coverage for children |
Diseases |
1000 |
|
5 |
Biofortification |
Malnutrition |
60 |
|
6 |
Deworming and other nutrition programs at school |
Malnutrition & Education |
27 |
|
7 |
Lowering the price of schooling |
Education |
5400 |
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8 |
Increase andimprove girls’ schooling |
Women |
6000 |
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9 |
Community-based nutrition promotion |
Malnutrition |
798 |
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10 |
Provide support for women’s reproductive role |
Women |
4000 |
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11 |
Heart attack acute management |
Diseases |
200 |
|
12 |
Malaria prevention and treatment |
Diseases |
500 |
|
13 |
Tuberculosis case finding and treatment |
Diseases |
419 |
|
14 |
R&D in low-carbon energy technologies |
Global Warming |
|
|
15 |
Bio-sand filters for household water treatment |
Water |
|
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16 |
Rural water supply |
Water |
|
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17 |
Conditional cash transfers |
Education |
|
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18 |
Peace-keepingin post ‐ conflict situations |
Conflicts |
|
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19 |
HIV combination prevention |
Diseases |
|
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20 |
Total sanitation campaign |
Water |
|
|
21 |
Improving surgical capacity at district hospital level |
Diseases |
|
|
22 |
Microfinance |
Women |
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|
23 |
Improved stove intervention |
Air Pollution |
|
|
24 |
Large, multipurpose dam in Africa |
Water |
|
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25 |
Inspection and maintenance of diesel vehicles |
Air Pollution |
|
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26 |
Low sulfur diesel for urban road vehicles |
Air Pollution |
|
|
27 |
Diesel vehicle particulate control technology |
Air Pollution |
|
|
28 |
Tobacco tax |
Diseases |
|
|
29 |
R&D and mitigation |
Global Warming |
|
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30 |
Mitigation only |
Global Warming |
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TOTAL |
18,750 |
In terms of financial allocation, the results for the top 13 are listed above. Again, nutrition and gender dominate the list.
Not surprisingly, perhaps, climate change mitigation and adaptation receive short shrift in this analysis. Nick Stern would certainly have something to say about that, from his report on the economics of climate change. As we’ve seen in the period since that was published, a key issue is about the appropriate discount rate. Stern himself has written about that in his recent proposals on a climate change deal.
The use of a budget of $US 75 bn reminds me that this was the sum that the Africa Commission used as the estimate of what it would cost to implement its recommendations in 2010. Here is the table from Annex 5 of the Report, showing the allocation of money by sub-sector. Health and education are large items, with HIV/AIDS as an additional item, but it is notable that growth features prominently, with infrastructure taking up more than one quarter of the funds available.
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Costings of the Commission’s Recommendations – Taking No Account of Constraints of Absorptive Capacity* | |
|
|
Resource Estimates for |
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Governance (Chapter 4) |
2.6 |
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- APRM trust fund |
0.01 |
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- AU Institutional Transformation Program |
0.02 |
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- Programme costs for AU (excl. Peace & Security) |
0.02 |
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- Improve statistical systems |
0.06 |
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- Higher education |
0.50 |
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- Science & technology (Centres of Excellence) |
2.00 |
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Peace and Security (Chapter 5)** |
1.7 |
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- Arms control |
0.04 |
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- UN peacebuilding fund |
0.25 |
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- Expand World Bank Post-Conflict Reconstruction Trust Fund |
0.06 |
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- Clearing arrears for post-conflict countries |
1.00 |
|
- AU Peace Fund |
0.30 |
|
HIV and AIDS (Chapter 6) |
10.0 |
|
Education (Chapter 6) |
7.5 |
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- Primary education (incl. through FTI) |
3.75 |
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- Secondary education |
3.75 |
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- Extra for curriculum development |
0.04 |
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Health (Chapter 6) |
19.6 |
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- WHO/NEPAD health systems strengthening |
1.50 |
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- Human resources |
5.00 |
|
- GAVI |
0.50 |
|
- Polio eradication |
0.00 |
|
- Malaria and HIV and AIDS vaccine development |
1.00 |
|
- Sexual and reproductive health services |
0.29 |
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- Programmes against parasitic and infectious debilitating and blinding diseases and micronutrients |
0.30 |
|
- ‘Tuberculosis and HIV and AIDS linkages’ program |
0.25 |
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- Commission for Macroeconomics and Health basic health package |
10.58 |
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- Protection against vitamin and mineral deficiency |
0.14 |
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Social Inclusion (Chapter 6) |
4.0 |
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Growth (Chapter 7) |
20.1 |
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- Infrastructure (incl. irrigation, water, sanitation, slum upgrading, transport, power) |
20.00 |
|
- Investment Climate Facility |
0.08 |
|
- MIGA |
0.02 |
|
- Africa Enterprise Challenge Fund |
0.01 |
|
- Youth Employment Network |
0.01 |
|
- Growing Sustainable Business Initiative |
0.004 |
|
Environment (Chapter 7) |
0.01 |
|
Trade (Chapter 8) |
0.1 |
|
- Meeting sanitary and phytosanitary standards |
0.07 |
|
- Improve productive capacity |
0.02 |
|
- Trade facilitation (inc. customs reform) |
0.004 |
|
Mitigation of Shocks (Chapter 9) |
3.8 |
|
Contingency Funding |
5.6 |
|
TOTAL |
75.0 |
What is interesting about all this is what gets onto the agenda and what doesn’t. For example, I don’t think there is much discussion of infrastructure in the Copenhagen work. Nevertheless, the fundamental approach taken by Lomberg is consistent with the risk approach taken by the WEF: identify opportunities and rank them by impact and cost-effectiveness. There are enough Nobel prize-winning economists involved in the Copenhagen Consensus to underwrite the logic of the method.
Indeed, a similar cost-benefit approach is often advocated in budget planning. Adrian Fozzard wrote an ODI Working Paper on this in 2001, though qualifying his conclusions with the observation that all planning was in the end political.
The question for us is whether we can do better. Is there a way of linking Sachs and the MDG project to Lomberg and the Africa Commission? Do we have anything to say about method? Of course we know that cost-benefit analysis is never quite as objective as it appears. Discount rates, I’ve mentioned. What about income distribution weights or poverty weights? How are environmental externalities to be costed and weighted?
It would also be interesting to link this work to scenario planning. There are lots of sources on that, but one I have found useful recently is by the Humanitarian Futures Project, who have carried our work on drivers of humanitarian futures.
Some people may think that an ‘opportunities analysis’ does not take us very far. I’m not sure I agree. With the development ‘project’ likely to be threatened by the recession, careful priority-setting will be essential. That’s why I would appreciate some help.
# re: Can we move from a risk framework to an opportunities framework in international development? @ Wednesday, October 01, 2008 5:41 PM
Interesting questions. My worry, methodologically, would be that for opportunities as well as for risks, sensible policy needs an assessment of system-wide costs and benefits -- general equilibrium results, or a rough approximation to those. Partial equlibrium analysis and, even more, project appraisals, may be easier and may give more appearance of precision, but at the cost of being highly misleading. The Lomberg cost-effectiveness ideas seem on the face of it to have the same flaws as the Sachs quick wins: they don't include any assessment of the opportunity cost of the local resources used; or any consideration of the political economy impacts of a massive injection of earmarked donor money into 'weak' country and sector management systems. Nothing wrong with an opportunities approach, but the way you are formulating it, as a global thinking exercise, seems to contradict the accumulated wisdom of recent years about the need for country-rooted prioritisations centred on country budgets. No?David Booth
# re: Can we move from a risk framework to an opportunities framework in international development? @ Tuesday, October 07, 2008 10:44 AM
I agree on the need for an opportunities framework and the need to focus on local needs and opportunities. Especially in combination with quick wins a local focus could make a differnce and strengthen implemantion. Because as I notice in for example Kenya, even if positive priorities are agreed upon, the lack of implementing power prevents governments and citizens to achieve results. For me, here comes in the sceanrio approach and the use of 'gaming'. At local level, based on the already existing knowledge we can focus on scenario's for the near future to trace the best possible positive change agents and build a quick gaming instrument to let people on the ground find out where the most useful and achievable results can be created. On 'gaming'a whole body of knowledge exist st the University of Tilburg and MIT.Anne-Marie Brinkman
# re: Can we move from a risk framework to an opportunities framework in international development? @ Tuesday, October 07, 2008 10:52 AM
Opportunities for who?Simon is right in this; public policy should be about converting challenges or risks into opportunities. As a framework for thinking about this conversion opportunity costs and benefits would seem to be a way forward, but as his piece illustrates, various authors bring quite different understandings of what these cost/benefits are in relation to the effectiveness of the relevant technical solutions. But the bigger problem is - am I correct - that what the approaches share is an assumption that the agent of change is a public authority, national or international, the costs that matter are those to this authority and that development is a matter of ‘delivery’. If this is the case than I have a problem with it: two instances. I have just returned from a conflict zone: N.E. Sri Lanka. Donors, as public agents there, know that their resources are of limited effectiveness and will decline as attention shifts elsewhere. What matters is that ‘beneficiaries’ - more or less paralysed by displacement, etc.- are enabled to become active agents on their own behalf again. No-body seems to be modelling the potential of these multiple agencies in achieving change. Groups of women have been assisted to organise, find voice, save and invest. The return to this public investment is difficult to asses but the benefit to the women and to their local economy is whatever they make of it. Second instance; banks worldwide are in turmoil; public authorities are making available vast sums of money to enable them to continue to operate, but the real solution lies in their rebuilding mutual operating rules and relationships. Most development or environmental transformations require multiple agencies; no doubt in interaction with public agencies. Am I alone in thinking that current ways of understanding this interaction are inadequate?
Donald Curtis
donald.curtis@btinternet.com
Donald Curtis