15/12/2011

Regional public goods (RPGs) can be summarised as goods or resources that can be shared by people across countries in a more or less non-rival, non-excludable way. RPGs can support developing countries to achieve higher economies of scale in market size and thereby contribute to the development of a region, but also to regional peace and stability. Yet, due to political issues and market failures, such as the dilemmas that RPGs create due to presence of positive or negative externalities[1], the provision of RPGs tends to be sub-optimal.

The Collaborative Africa Budget Reform Initiative (CABRI) has an interest in RPGs because of their impact on the public finances of countries in Africa. 

This is why CABRI (with the support of the African Development Bank) has conducted research on a number of RPGs in Africa in order to examine the benefits and challenges which result in their provision from a financing perspective. At CABRI’s 3^rd Africa Policy Seminar in Cape Town senior officials from 14 African countries and representatives from various international organisations met to examine Regional Public Goods in the African context, the incentives to enter into such projects, the institutional arrangements thatenable their provisioning as well as the available financing frameworks.                                                             

Collaboration on RPGs is not an easy task. An example of the challenges is a railway line between Malawi and Mozambique which needs maintenance work in a swamp area on the Mozambique side. This railway connects Malawi to a Port and is therefore of more importance to Malawi than to Mozambique. Yet, due to the lower importance of this railway link to Mozambique, the repair work on the railway line is not undertaken and Malawi struggles with the resulting negative externalities.   

Key lessons

Regarding the implementation of Regional Public Goods Projects, the key points raised during the discussions on project design include the following:

(1)   Commitment: A shared purpose as well as a long term commitment of participating countries are the basis for any regional public cooperation;

(2)   Institutional foundation: In order to have a sustainable collaboration, the necessary institutional arrangements need to be created in a robust and flexible manner. It is also important to reassess the circumstances in the course of the project in order to explore whether contributions need to be weighted differently, or partnerships possibly redefined;

(3)   Capacity: Sound project design includes ensuring that financial mechanisms are carefully scrutinised beforehand in terms of the capacities of the involved parties in order to ensure regulation and also enforce the implementation of regional projects.

(4)   Coordination of projects: While the different nature of infrastructure needs to be taken into account, the coordination of projects can result in higher cost efficiency (e.g. jointly coordinating the construction of a cross-boundary road and an underground cable running next to it).

(5)   Strong leadership: Most times RPGs are not of equal importance to all countries involved. It can, however, still be useful for a strong country or institution to take a leading role and support a weaker country (even if this country can draw a greater benefit from the provision of a public good), as the entire regional collaboration on an RPG might otherwise be undermined.

Partnership solutions for regional projects

The question that remains is how to begin operationalising collaboration on regional public goods and how to tip the scale from national solutions to more regional ones? Some countries have the mindset of “1 dollar buying more domestically” and remain reluctant to enter into collaborations on RPGs. This is why institutions like CABRI are considered important for sensitising decision-makers towards seeing the benefits and potential of RPGs in the broader context. Some of the following financing options were discussed:

Public Private Partnerships (PPPs): When public and private sector aims are aligned, the benefits of collaborating become obvious: strong private sector participation can improve the execution of regional public projects. The Maputo Development Corridor that links South Africa and Mozambique is a good example for this. The private sector can also be instrumental in providing risk capital, as project financing from debt alone does not provide equity and is not sustainable. What is important to bear in mind is that while the vision of providing a public good in the public sector mostly represents a long-term goal, the private sector interest may be limited in time and provisions need to be made for an eventual end of such a partnership. PPPs can, indeed, go well, but the enforcement of agreements on the international level needs to be carefully thought through.

One suggestion is to introduce a database of bankable projects which are freely accessible in order to stimulate more involvement from the private sector (and other donors).

Regional Banks: In order for regional initiatives to take off, regional banks need to be brought to the floor as main actors for the financing of RPGs. Regional banks are especially important when it comes to the initial project phases (feasibility studies etc.), when return on investments might be unclear and therefore still unattractive for private sector investors. This also means that the capacity of regional banks needs to be strengthened, both in terms of financial means to support regional initiatives and capacitating staff through training regarding questions such as: what kind of financing structures to develop, which of the partner in the RPG project will receive the funds etc.

 Creative regional solutions

One example for creative financing options that can be learned from is the Africa Risk Capacity (ARC), a new mechanism that has been created from collaboration between the African Union and the World Food Programme. The ARC is not a pure regional public good, but it is an example of a club good aiming towards reducing the risk of negative externalities that arise from natural disasters. It is a risk financing facility that provides the possibility for member gouvernments to access contingency funds as a potential disaster response with the objective to avoid gouvernments‘redirecting resources originally planned for other activities.

Though co-operation on Regional Public Goods is a challenging endeavour, cross border-collaboration has clear success stories. One of these is the river blindness control work in sub-Saharan Africa: the African Programme for Onchocerciasis Control (APOC). The APOC is generally considered as a good practice example, where, despite internal and cross-border political conflicts, the programme continued to work and has substantially contributed towards combating Onchocerciasis in Africa.

The publication Regional Public Goods. Incentives, Financial Frameworks and Institutional Arrangements and the CABRI Briefing Paper on Regional Public Goods served as the basis for discussions at CABRI’s 3^rd Africa Policy Seminar

Anke Braumann ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it )

[1] Externalities can occur whenever an action of an individual (or a group of individuals) or a natural event  positively or negatively influence the well-being of any other another individual(s).

10/11/2011

CABRI partnered with the South African National Treasury and the IMF to host the first Africa Fiscal Forum, which was attended by 14 of the participating members of CABRI. The forum took place on the 9th and 10th of November 2011 in Cape Town and followed the publication in October of the IMF’s Regional Economic Outlook for Sub-Saharan Africa, entitled “Sustaining the Expansion”.  Given the forum was such a success, we hope it will be the first of many.

The forum provided an opportunity for country delegates, the IMF and representatives from other international organisations to share views on Africa’s current and future fiscal policy challenges. The discussions focused strongly on how Africa can prepare itself to face the next economic shock. Experiences were shared by senior budget officials, from West Africa (Mali, Guinea, Sierra Leone, Liberia, Ghana, Benin); East Africa (Ethiopia, Malawi); Central Africa (Gabon); and Southern Africa (Mauritius, Seychelles, Zimbabwe, Mozambique, South Africa). This, combined with panel discussions and presentations from the OECD, the African Development Bank, the University of Oxford and the IMF, resulted in a lively platform for discussions.

9/12/2010

The International Budget Partnership (IBP) released the 2010 Open Budget Survey results at the end of October 2010. The survey considers the public availability and/or accessibility of eight key budget documents, in addition to asking a series of questions on the breadth and depth of information in these documents and the openness of key budget processes. The Open Budget Index (OBI) comprises selected questions from the survey for which a composite score is calculated for each country, with 100 being the highest score possible.

18/11/2010

Over the last decade, Africa achieved demonstrable progress towards improved political and economic governance and consistent economic growth. Deep challenges, however, remain for the continent to grow out of aid and bring about progressive and sustainable improvements in its citizens’ quality of life. Unless Africa focuses on strengthening the good governance foundations of its progress, in the context of globalisation, the balance between progress and the remaining challenges could tilt in the wrong direction.

Moreover, the 2008 financial crisis again brought the world’s attention to the cost of weak governance arrangements for nations’ development, prosperity and growth. It is against this backdrop that the Collaborative Africa Budget Reform Initiative (CABRI) and its sister networks, the African Tax Administration Forum (ATAF) and the African Organisation of Supreme Audit Institutions (AFROSAI) perceived in 2009 that the time was right to raise an African voice on sound public finance management principles, auditing practices and credible tax systems that are appropriate for the African context.

Effective states, economic growth and sustainable development is associated with states’ ability to raise taxes, borrow prudently and manage other revenue flows effectively; to plan and manage the spending of public money effectively and efficiently; and to account for the use of funds and the results achieved. The management of public funds in states that achieve these outcomes commonly are characterised by elements of transparency, participation, responsiveness, oversight, accountability and predictability and by the rule of law. Together these features are constituent elements of good financial governance, the subject of a key work stream for CABRI in 2010/11.

Programme budgeting is always a topical issue within the CABRI fora. Many countries are currently grappling with how to design and implement programme-based budgets. The Ministry of Finance and Economic Empowerment in Mauritius (MoFEE) has taken important steps, by learning from their neighbours in order to navigate through the complex terrain of programme budgeting. CABRI has seized the opportunity to gain an understanding of Mauritius’ successes, challenges and lessons learned by conducting a Joint Country Case Study.

A CABRI expert group consisting of senior budget officials from Ethiopia (Mr Melaku), Kenya (Mr Kiiru), Rwanda (Mr Baingana and Mr Karakye) and South Africa (Dr Brown) spent a week in February 2010 reviewing the implementation of programme-based budgeting in Mauritius. The review involved an intense schedule of meetings, interviews with Mauritian officials and late night discussions amongst the team. The team was supported by the CABRI secretariat and a short-term consultant.

This is an excerpt of the press release.

"Africa's Infrastructure: A Time for Transformation", a study recently conducted in 24 African countries, shows that the poor state of infrastructure in Sub Saharan Africa – its electricity, water, roads, and information and communications technology (ICT) – cuts national economic growth by 2 percentage points every year and reduces business productivity by as much as 40 percent. This study argues that well functioning infrastructure is essential to Africa’s economic performance and that improving inefficiencies and reducing waste could result in major improvements in African’s lives.

The 2008 Open Budget Index (OBI) has been released by the International Budget Partnership on 1 February 2008. The OBI has been constructed in 2006 and “evaluates the quantity and type of information available to the public in a country’s budget documents” according to generally accepted good practice criteria for public sector management.

The 2008 Index was constructed by averaging countries’ answers to a 91-question Questionnaire (the Open Budget Survey) that covered the information contained in a country’s national budget documents that should be publicly available in countries. 85 countries were surveyed, compared to 59 in 2006. The questionnaire comprises three sections: (i) the dissemination of budget information, (ii) the executive’s annual budget proposal to the legislature and the availability of other information that would contribute to analysis of budget policies and practices and (iii) the four phases of the budget process.