ANNUAL CONFERENCE 2005
In association with Development Policy and Practice
and the International Development Centre at the Open University
Milton Keynes, UK
7th-9th September 2005
Connecting people
and places: challenges and opportunities for development
ECONOMICS FINANCE AND DEVELOPMENT PARALLEL SESSIONS
ABSTRACTS
There are five sessions, three on Economics and
Development and two on Finance and Development:
A: September 7th, 14.00-15.30
B: September 7th, 16.00-17.30
C: September 8th, 9.00-10.30
D: September 8th, 13.30-15.00
E: September 8th, 15.30-16.45
Click on the abstract title to download the paper (not all abstracts
have papers yet)
PAPERS
FOR SESSIONS ON ECONOMICS AND DEVELOPMENT
DARFUR CONFLICT AND SUDAN’S EXPORT PERFORMANCE
Y. Ali and A. Bannaga, University of Khartoum
Darfur conflict resulted in a civil war in 2003 when two rebel groups
attacked government forces and installations. However, entrenched conflict
existed in the region for more than two decades for political, economic
and ethnic reasons.
In this paper we investigate the impact of Darfur conflict on the Sudanese
non-oil exports. We discuss the contribution of Darfur region on Sudan’s
export mainly livestock (25% of Sudan’s exports), groundnut (50%
of Sudan exports) and sesame (2% of Sudan exports). We compare Darfur
export performance with other regions in Sudan.
We employed regression analysis and descriptive statistics (mean, median
and variance) to investigate whether export shocks are country specific
or region specific.
Examining Darfur’s export, we found them to be more volatile and
less diversified than other regions. Also, export earnings are considerably
volatile. The variability of export earnings (especially of livestock
which is used as consumption smoothing tool in Darfur) has increased vulnerability
to further income shocks.
Sources of export variability are the nature of the exported products
and the lack of diversification, conflict and civil strife, drought and
other natural disasters, international price changes
At the end of the paper we provide the policy implications and suggestions
for improvement of export performance.
This paper addresses issues relevant to a critical problem in economic
development: how to get rapid pro-poor economic growth in poor rural areas
in Africa and South Asia where most of the world's dollar a day poor live.
It examines constraints to the development of coordinated exchange systems
in poor rural areas, focusing on the core problem of thin markets and
low density of economic activity in these areas. Kydd and Dorward's (2004)
conceptual framework describing supply chain coordination failure in poor
rural economies is extended to include rent seeking, allowing integration
of governance and New Institutional Economics considerations into a formal
neoclassical production economics framework. This framework then allows
us to describe the existence of low level equilibrium traps in transactions
and supply chains and to glean important insights for development policy.
This paper critically reviews issues associated with the management of
public expenditure (and, by implication, of public policy) in circumstances
where there has been increasing pressure (particularly from the international
aid community) to ensure that these directly contribute to poverty reduction
in developing countries. It consists of five main sections basic propositions;
the definition of poverty in form that can be addressed by government
action; the fundamental means of achieving poverty reduction; the range
of public interventions and their contributions to poverty reduction;
the concept of a ‘public policy hierarchy’; and a summary
of the main conclusions.
There is a growing literature focussed on the proposition that while
public expenditure is good for poverty reduction its has been insufficiently
focussed, and it is believed that changes can make public expenditure
more poverty focussed. The paper gives particular attention to possible
changes in the overall composition of public expenditure (sectoral priorities),
adjustment to the nature, design and characteristics of public expenditure,
and the potential shift of some activities out of the public sector altogether.
It is argued that if public expenditure is to be more poverty-focussed
then ‘poverty’ has to be defined and understood clearly, with
a view of how public policy and public expenditure can reduce poverty.
Policy objectives and policy instruments are reviewed within this context.
The paper then discusses public expenditure pathways or mechanisms in
order to assess their impacts on poverty. The intention is to enhance
understanding of the distinction between public expenditures which are
fundamentally essential, those which contribute directly to poverty reduction,
and those which contribute only indirectly to poverty reduction. Exploration
of which of these areas of public policy or public expenditure might be
reduced or eliminated, which expanded, and which changed in design and
characteristics follows. The poverty reducing role of public services
such as the police, armed forces, and telecommunications management and
regulation will be explored in this context. The likely impact of moving
public sector activities into the private sector (including civil society,
commercial, ‘not for profit’ and voluntary forms) will also
be explored.
The paper will suggest the adoption of a Public Policy Hierarchy –
with Strategy at the top, followed respectively by Policy, Programmes,
Projects and Activities – as a means for attaining greater coherence
in public policy and public expenditure management. Within this context
the ‘sector wide approach’ will be examined, with an emphasis
on the roles of individual socio-economic sectors and of cross-cutting
issues. Attention will be given to a number of conceptual and practical
problems in application, which have not been adequately explored in the
literature. Finally, findings from each section are summarised with the
overall conclusion that the poverty reducing contribution of public policy
and expenditure can be significantly enhanced through more effective critical
design and management of policies, programmes and projects.
THE IMPACT OF INTERNATIONAL MOBILITY OF TEACHERS: A FOUR
COUNTRY STUDY
Simon Appleton, John Morgan and Amanda Sives, University of Nottingham
The international recruitment of educators has been a rising issue of
concern for some developing countries, leading to the adoption of a protocol
on teacher recruitment by the Commonwealth in September 2004. Although
partly an instance of more general worries over a possible “brain
drain” of skilled workers, the case of educators raises some further
issues. In partly, there is the possibility that the loss of educators
will impede the acquisition of skills by future generations.
This paper looks at the impacts of international recruitment of educators
based on fieldwork in four countries conducted in 2004/05. Two, South
Africa and Jamaica, are developing countries which have been net senders
of educators. Two, Botswana and the UK, have been net receivers of educators.
The fieldwork involved surveyed schools in both sending and receiving
countries, as well as various categories of teachers – migrant teachers
overseas, returned migrant teachers and non-migrant teachers.
A key issue is the impact of teacher migration on schools, both in terms
of quantitative shortages of educators and in terms of altering the average
quality of educators employed. The paper investigates whether international
migration contributes to adverse outcomes in these respects in the two
sending countries. It will also investigate the mirror effects on the
two receiving countries. Attention will be given to disaggregating these
effects by type of school – urban-rural, public-private, primary-secondary
etc. For example, in South Africa, the impact of migration appears to
vary dramatically according to the historical racial classification of
schools in the apartheid regime.
The paper will also provide evidence on some of monetary impacts of international
migration on sending countries - in terms of income gains to migrants,
teacher training costs paid by the state, and remittances and savings
repatriated.
Policy options will be discussed in the light of the findings of the
study.
A CRITICAL POLITICAL ECONOMY OF THE SMALL ISLAND DEVELOPING
STATES CONCEPT: SOUTH-SOUTH COOPERATION FOR ISLAND PEOPLES?
Liam Campling, PhD Candidate, Department of Development Studies, School
of Oriental and African Studies
The 1994 Declaration of Barbados and the Barbados Programme
of Action (BPOA) was a watershed in the scale and scope of international
cooperation between small island developing states (SIDS). It was also
the beginning of a heightened international concern with the particularities
of SIDS developmental trajectories, constraints and opportunities. However,
while the Declaration opens with the affirmation that ‘sustainable
development programmes must seek to enhance the quality of life of peoples,
including their health, well-being and safety’, it does not affirm
the centrality of island peoples as key agents in this development. This
paper argues that for the genuine ‘sustainable development’
of SIDS a popular democratic base of island peoples must exist within
island societies that in turn cooperate and coordinate – including
material, political-social and operational linkages – across the
spatially disparate regions of the global oceans. It is suggested that
only through the heightened consciousness of island peoples of linkages
across oceanic regions and their explicit incorporation as social agents
to compliment and, if required, counter international – read inter-state
– negotiations and strategies can contemporary forms of inter-island
cooperation in the global South be sustained.
The paper starts with a short outline of my conceptual framework: I utilise
critical theory within the discipline of international political economy.
Second, true to the critical approach, I demonstrate the historical development
of SIDS discourse and show that it has been influenced (and consequently
reformulated) by a multiplicity of international political-economic forces.
This emphasis on change should help us to draw out why particular aspects
of being a SIDS are emphasised at particular times. Due to its contemporary
hegemony in SIDS discourse I provide a more detailed sketch of the main
conceptual grounding of SIDS as presently conceived, this will incorporate
the key claims made by academics and policy makers for the economic and
environmental specificities of SIDS and their concomitant ‘vulnerabilities’.
In the third section I critically evaluate contemporary claims for the
particularity of SIDS. This sub-section will draw attention to the many
problems with the SIDS concept, such as policy-relevance, levels of acceptance
by development agencies, the in-built pessimism of the pro-SIDS literature
and intra-SIDS conflict over definitions. I then argue that there are
at least two highly significant distinctions that differentiate SIDS from
other small developing economies (SDEs), namely the permanent nature of
their geographical constraints and their associated extreme economic vulnerability.
The fourth section offers a critical assessment of a historical case study
in South-South cooperation – the New International Economic Order
– before moving to an interrogation of three contemporary conceptualisations
of South-South cooperation. I argue that in order for the SIDS concept
to be sustainable and, in turn, a mechanism for genuine cooperation, civil
society actors must be integrated as key players, despite the associated
difficulties and contradictions. Importantly, such a reformulation may
also improve the significance of the SIDS concept for those small island
peoples in the Third World who do not live in independent states but in
overseas territories, dependencies, etc. Despite the fact that social
issues beyond the economistic notion of ‘social capital’ have
now been largely disposed of in the contemporary conceptualisation of
SIDS ‘vulnerabilities’, in order for it to be a practical
strategic and tactical tool in international negotiations social forces
must be considered and incorporated (at least within the SIDS grouping).
Only then can SIDS provide a genuine and sustainable common-front in the
international system; an example of South-South cooperation that harnesses
the support of citizens as well as governments.
FOREIGN ASSISTANCE AND FISCAL GOVERNANCE IN AID DEPENDENT
FRAGILE STATES
Simon Feeny, Royal Melbourne Institute of Technology, Australia
Recent research suggests that foreign aid is effective at spurring economic
growth in recipient countries but that its effectiveness is likely to
depend upon a number of factors. Arguably, the most important factor determining
aid effectiveness is how recipient governments use and respond to foreign
aid inflows. This paper investigates this issue for the Melanesian recipients
of Fiji, Papua New Guinea, the Solomon Islands and Vanuatu. Specifically
the paper examines the impact of foreign aid on various expenditure and
revenue categories in these countries during the 1990s. Melanesian countries
are of particular interest. They receive some of the highest levels of
per capita aid and are perceived to be ‘fragile states’ by
the international development community. This has led to unique interventions
in these countries by the Australian Agency for International Development.
(AusAID).
Adapted fiscal response models are applied to the Melanesian countries
which differ from the existing literature in two important ways. Firstly,
the models incorporate the asymmetric preferences of fiscal decision makers.
Secondly, actual budgetary appropriations and revenue estimates are employed
using data from the recipients’ budget papers. With no need to estimate
target variables, the paper avoids the most serious problem associated
with previous studies. Further foreign aid is disaggregated to investigate
whether public sectors differentiate between different forms of foreign
assistance.
Results suggest that foreign aid has led to increases in developmental
expenditures and to falls in tax revenue and borrowing. Further, Melanesian
public sectors respond differently to the provision of grants and loans.
The finding that recipients have lowered their tax revenues in response
to aid inflows might be an area for concern. Reducing tax rates will assist
the private sector and economic growth. Conversely, weakening tax compliance
will provide poor incentives. Donors should devise methods to ensure that
tax compliance is not weakened in response to their aid although this
is not an easy task. It is also recommended that all aid flows through
the budget since this will provide recipient governments (and donors)
with a far better idea of the future recurrent costs associated with aid
projects.
USING AGENCY THEORY TO ANALYSE RELATIONSHIPS BETWEEN
RECIPIENT GOVERNMENTS AND DEVELOPMENT PARTNERS: A CASE STUDY OF UGANDA
Valeria Oliveira Cruz and Barbara McPake, London School of Hygiene and
Tropical Medicine
Previous studies of relationships between recipient governments (RGs)
and international development partners (IDPs) in the health sector have
tended to apply political economy frameworks to understand the key interchanges
between these two sets of actors. Recently, agency theory has been used
to further this analysis, but its use has not been applied to the health
sector specifically. This study aims to contribute to a better understanding
of the types of principal-agent relationships between RGs and IDPs and
how these are affected by different aid modalities in the health sector
in Uganda. Lack of accountability and transparency in practices and mechanisms
of both sides have been persistent complaints in RG-IDP relationships.
Hence, we analyse the circumstances under which IDPs act as principals
and RGs as agents, and, in contrast to previous studies, when RGs act
as principals and IDPs as agents. New ways of structuring aid modalities
offer approaches to managing the relationships differently by altering
the incentive and monitoring environment. In the Ugandan health sector,
responsibility for meeting development targets is reviewed at a Joint
Review Mission attended by all relevant state actors and IDPs. This new
monitoring mechanism is argued to focus on results/outcomes rather than
inputs to a greater extent than project modes of assistance, and can,
therefore, change the nature of the relationship between RGs and IDPs.
We have used qualitative methods (interviews, participant observation
and documentary analysis) to understand the effects of this restructuring,
specifically analysing alternative aid modalities in terms of incentive
compatibility, rewards and penalties.
A HISTORICAL AND CONTEXTUAL ANALYSIS OF JAPAN’S
BILATERAL INTERNATIONAL COOPERATION
Soyeun Kim, PhD student, Department of Geography, King’s College
London
This paper explores Japan’s bilateral international cooperation
(kokusai-kyoryoku) within the broad historical context of Japan’s
external relationship of ‘aid’ and economic cooperation. This
is an important area of historical and contextual analysis because Japan’s
international cooperation is an ambiguous process, given that the Japanese
government has never provided a definitive statement on its role and nature.
The official starting point of Japan’s international cooperation
was in 1954, coincidentally the same year that its post-war reparation
agreement began agreed with Burma. Starting with reparations, these activities
were, then, termed economic cooperation, ‘aid’ or even ‘investment’
by the Japanese government. The unique tradition of economic cooperation
that combined private sector activities (such as export-import credits,
etc.) with public sector operations like Official Development Assistance
(ODA), are still strongly present in Japan’s international cooperation,
a relationship that is significantly different from other Northern donors’
practices. This is more clearly demonstrated in the birth of the Japan
Bank for International Cooperation (JBIC) in 1999 that merged an export
credit agency (Export-Import Bank of Japan) and an ODA implementing agency
(Overseas Economic Cooperation Fund). JBIC, under the label of international
cooperation, thus carries the characteristic of Japanese ‘aid’
and mixes two different types of development finance, ODA and Other Official
Flows (OOF).
By revisiting Japan’s reparation and economic cooperation in the
post-World War II era, this paper aims to examine the historical roots
and the development of Japanese international cooperation. It enables
us to see how Japan has been (re)conceptualising its ‘aid’
relations and (re)shaping its ‘aid’ strategy in the post-WWII
international (and domestic) political economy. As post-WWII external
economic cooperation undeniably contributed to Japan’s economic
‘miracle’, it is a critical to appreciate how ‘aid’
was carefully coordinated to achieve Japan’s economic self-interest
(kokueki).
Furthermore, the complex structure of Japan’s ‘aid’
in both domestic decision-making and external delivery is examined to
explicate how different ‘aid’ players in Japan influence the
national ‘aid’ strategy in order to serve distinct politico-economic
interests. Finally, the analysis will demonstrate the importance and influence
of the private sector in terms of the delivery (particularly in project
formation) of Japan’s international cooperation.
PAPERS FOR
SESSIONS ON FINANCE AND DEVELOPMENT
SOCIAL PERFORMANCE OF FINANCIAL INSTITUTIONS: FROM MICROFINANCE
TO A GLOBAL FINANCIAL SYSTEMS PERSPECTIVE.
James Copestake, University of Bath
Financial institutions (FI) face daily management trade-offs which together
amount to major strategic options over the balance between growth and
quality of services now and in the future. If breadth, depth and quality
of outreach (=net worth to customers) are collapsed into a single indicator
of current social performance and financial performance is taken as a
proxy indicator of future social performance capacity then strategic dilemmas
can be depicted graphically: (a) utility is represented by indifference
curves between current social performance and future social performance
capacity; (b) performance possibilities can be represented as a locus
of possible combinations that the FI might aim for, and (c) the main strategic
choice is between different pathways of growth in capacity over time,
subject to minimum quality standards.
This model is elaborated with reference to data collected from thirty
organisations in four continents during the five year Ford Foundation
funded Imp-Act programme (“Improving the impact of microfinance
on poverty: an action research programme”) . A key goal of this
programme was to confront the practical problem of how specialist microfinance
institutions could systematically and cost-effectively measure their performance
over time relative to an explicit social mission. The paper concludes
that this is achievable through a combination of: (a) precise, if changing,
definition of social goals (=mission); (b) continuous monitoring of who
its customers are (particularly in relation to multiple indicators of
relative poverty); (c) periodic qualitative and quantitative sample surveys
of their satisfaction; (d) systematic review of how this information is
used, and how performance assessment systems can be strengthened. This
is largely a task for financial institutions themselves rather than external
investors in them, although the latter can support organisations in developing
such systems, particularly by contributing to (d). If microfinance institutions
generally erred towards current social performance in the 1980s, the dynamic
balance switched firmly in the other direction during the 1990s. This
phenomenon is often referred to as mission drift, but this metaphor needs
careful deconstruction in order to explore how much it was planned and
how much the result of inadequate performance measurement systems.
Performance thinking along these lines is already moving rapidly beyond
“the ghetto” of specialist microfinance institutions, partially
through the growing involvement of private social investors. Their experience
poses a challenge to large scale financial institutions, including international
banks, to achieve similar standards of corporate social performance management,
albeit with often with a weaker explicit social mission. There also remains
huge scope to develop mechanisms (being pioneered particularly in South
Africa) for financial sector wide monitoring of performance along the
same lines. Such work is needed to monitor the dynamic trade-offs that
arise from liberalisation/regulation policy choices. For example, it remains
an open question how far the potential pay off from the loss of access
to financial services in many countries arising from financial liberalisation,
particularly privatisation and branch closures (a sacrifice of current
social performance) has been offset by an increase in future social performance
capacity, and what prospects there are for this being realised. Increased
customer pressure on banks (including global mobilisation of shareholders
of international banks) is one influence on this. Hence this paper is
ultimately a call to action for everyone with a bank account – to
draw the financial sector more firmly into what Polanyi might have called
the second ‘great transformation’ of capitalism.
FINANCIAL DEVELOPMENT AND PROPERTY VALUATION
M. Shahid Ebrahim and Sikandar Hussain, University of Nottingham
This paper studies the impact of financial development on the valuation
of property. We use a rational expectations framework to model the agency
theoretic perspective of risk averse investors (property owners) and financiers
(banks/ capital markets). We demonstrate that property financing is undertaken
in a pecking order of increasing pareto-efficiency (with reduction in
its overall costs and a subsequent increase in the value of the underlying
collateral) in a three staged process as financial architecture advances
from a partially liberalized bank to the developed stage of capital markets.
Our results yield implications for financial system development. Our analysis
predicts that an optimal financial system will configure itself skewed
towards capital markets irrespective of the source of its origination
(from specialized banking system or universal banking system). We also
rationalize the coexistence of banks and financial markets in a well-developed
financial system.
MONEY DEMAND INSTABILITY AND MONETARY MANAGEMENT IN SUDAN
Dr Ahmed Badawi, Assistant Professor, Department of Economics, University
of Khartoum
The paper attempts to test the hypothesis that effective monetary policy
in Sudan requires a stable money demand function. Then it will suggest
the ‘right’ monetary aggregate to use as an intermediate policy
target for monetary management. The theme of money demand function instability
has important policy implications. With reference to Sudan such instability
may explain inefficacy of monetary management to curtail inflation over
the 1970s, 1980s, and most of the 1990s.
The paper will employ cointegration and vector autoregressive (VAR) analysis
to test whether money demand is cointegrated with its determinants in
the long-run. The paper will employ different monetary aggregates (M1,
M2, etc.). Cointegration of money demand with its determinants implies
that monetary aggregates are useful tools for longrun intermediate targeting
of monetary policy. If cointegration is not present then targeting monetary
aggregates will be of no use. Monetary policy pursuit in Sudan goes with
the assumption that demand for money is stable, and most of the studies
carried out to estimate money demand functions paid no (or little) attention
to money demand stability in the long run.
Section 1of the study is introductory. In section 2 we review monetary
policy management in Sudan and various monetary tools characterising the
monetary system. In section 3 we will test for stationarity in data used
and we will employ different specifications for VAR model to test presence
of cointegration. Section 4 will conclude by highlighting important consequences
and policy implications.
FINANCIAL LIBERALIZATION AND HOUSEHOLD CONSUMPTION BEHAVIOUR
IN INDIA
Peter Lawrence, Keele University and Gauthier Lanot, Queens University,
Belfast
Changes in financial policy are expected to result in the greater availability
of credit as financial controls are relaxed and banking competition is
increased. This ‘financial deepening’ should show up in a
higher consumption expenditure in areas where credit is often required,
such as durable consumption, education and health. We use the household
consumption data collected by India’s National Sample Survey Organisation
for 11 rounds which straddle the period before and during financial liberalisation
(i.e. 1987-2000). We generate measures of the within-households shifts
in distribution of consumption and see how far these are correlated with
financial development variables. We find that at the macro level, financial
depth did not increase from the beginning to the end of the period under
study. However we did find some association between some of the financial
development variables and expenditure on durables goods, although the
changes in behaviour are very small.
Page last updated:
28 September, 2005
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