Most aid to Myanmar has been grants from rich countries – what about when Myanmar accepts loans from the World Bank, how is that different?
An interview with Nikolas Myint - senior social development specialist with the World Bank.
Forum: Myanmar has received a $400 million loan from the World Bank for the National Community Driven Development project. Is the accountability relationship with donors different between a loan and a grant?
Nik: It depends on what we are talking about.
You obviously have lots of grants from bilateral partners, as well as from UN agencies or NGOs. This is great because it gives the people of Myanmar access to resources that do tremendously important things to support development – and it’s money that doesn’t have to be paid back. On accountability though, one potential issue is that some of these grants are not recorded in the government budget (for example because they are executed by non-government entities), which makes the accountability relationship a bit harder, including because donors tend to focus their reporting on their constituents, be they taxpayers for bilaterals, or granting institutions for UN agencies and NGOs.
One of the things I think is good about Bank financing is that when we provide financing it is in the government budget, which is now public (and where we, along with other partners, have a whole bunch of work ongoing with the Ministry of Planning and Finance to make the budget more accessible and understandable for average citizens).
So people can in theory go and see how much money [the government] are spending on energy generation, or increasing access to basic services in the countryside, or relaying the highway between Yangon and Mandalay.
And they can say, well do we agree with this or not? Having this aid within the government budget is an important first step.
And with loans, you are voting on it in Parliament. The MPS are voting yes or no about this loan.
And (as a Myanmar citizen) you can call your MP about it. And people do call their MPs all the time about this stuff. That in turn generates discussions between parliament and government agencies about what the loan will be used for, how sites are being selected, how funds will be used. And in turn, everybody can read about these discussions in the media, where there has been lots of coverage on international loans, be they from the Bank or elsewhere.
So it is different, but doesn’t have to be. Grants can be recorded in the government budget, and moving to more fully capture the aid flows into Myanmar would be a great step towards promoting a fuller understanding of how money comes in, for what purposes it is used, and what results it achieves.
Forum: National Community Driven Development Program is one of the biggest aid interventions Myanmar has ever seen. What do you think about the cost effectiveness of the project?
Cost effectiveness is an important question in every sector we are working in.
The first thing to know is that when we provide IDA (e.g. what we call concessional, or low-cost financing) to Myanmar, the full amount goes to the government for program implementation. Our own overheads, including staff time, travel, office costs etc) are covered out of the Bank’s administrative budget, financed by income from our operations in middle-income countries. In fact, one of the key advantages for government in taking IDA financing is that the technical expertise provided by Bank staff comes for free, and this is expertise provided throughout the design and implementation of projects.
The second thing that is important is that there are at least two main models of aid operating in Myanmar, with some donor funding going to UN agencies or NGOs, and other financing going to government. On the first model, the cost is usually pretty explicit. The government and donors are aware of them, and there is a good ongoing discussion about whether these costs are reasonable. In the second model, when money flows to government for implementation of projects, costs are often lower, because you don’t need to set up new offices. Instead, you are drawing on existing systems and the capacity of the civil service.
That is great, and helps to ensure that the bulk of the money goes to the people it is supposed to support. That is especially true when projects grow bigger and you have economies of scale – for example the share of funds going directly to communities under the national CDD project increased significantly when the financing grew from $80 million to $550 million because some one-off costs (like the project’s management information system which collects monitoring and evaluation data) can serve a much larger project.
But we also have to be clear that the costs of implementation are not just financial, but also that there is an opportunity cost, which can be significant. For example, when you have limited time in a stretched civil service, should the staff working on that aid funded project be doing something else?And this goes back also to the question of grants (which tend to be smaller) and loans – implementing a relatively small grant can have a significant opportunity cost.
From this perspective, it might be ideal to have a situation where we have a range of well-performing, rigorously monitored programs led by government that can accept both grants and loans, and around which donors and government can pool their support. This is what we are trying to do with the NCDDP, where we have grant and loan resources from different donors, as well as government financing. For example, donors to the NCDDP have agreed to a common reporting format and frequency, to reduce the transaction costs for government.
In reality, we won’t fully get there and smaller projects have a role to play, especially in a country as diverse as Myanmar. But I think it’s important when we think about cost effectiveness to think about these different aspects.
Right now in Myanmar, government and development partners are implementing (at last count) over a thousand different programs inside and outside of government. But there is no agreed overall evaluation strategy or unit, so it is basically left to donors and implementing agencies and government departments to evaluate themselves and report on this And big surprise everyone comes out and says we are doing great (ourselves included!).
I have not seen a report yet that actually says this project is not performing very well and it should be closed early, or that in this project we tried this, but it didn’t work. So we lose opportunities to learn, and money may not be spent in the best way possible.Common sense tells you that there must be programs that are performing better than others and if you don’t have the means to find out what those programs are you really don’t have the means to move money into programs that work and to people that need it.
That is where I really worry.
When we have a program that performs well it makes sense to pool resources around that, but how will we know?In my view, this would be a great place for government to start when looking at aid effectiveness issues. Bring in some smart people who have worked on this lots, and get them to help set up a monitoring and evaluation centre to evaluate all this stuff.
Bring in the (Harvard) Kennedy School or the MIT poverty lab and bring in some people who have done this and just crunch the numbers, set up systems, and allow transparency and evidence to drive the discussion.
Then you can make decisions. You can find that in organisations, including on the government side, there are lots of small programs that are legacy programs from 15 years ago. Someone had an idea back then.Can you find a way of weeding out programs that don’t work but in a way that is not highly personalised. You are not suggesting that you don’t like this person from 15 years ago.
Rather that you think this program just ought to be effective.
See a bio of Nik here http://www.worldbank.org/en/about/people/n/nikolas-myint