The new BRICS bank

The BRICS (Brabricszil, Russia, India, China and South Africa) have announced that they will set up a “New Development Bank” (NDB) to fund economic development in their countries. The aim is to start with US$50bn of equal contributions in an infrastructure loan fund, to grow that over time, and to establish a US$100bn contingency reserves arrangement for financial/payments crises. The NDB stems i) partly from a frustration with the lack of reform at the World Bank/IMF in recognition of all the comparative and absolute economic change of the last few decades and ii) partly from a positive desire to develop new streams for the growing networks of economic interaction between and across the South. The stated intention is that other ’emerging’ economies could contribute and benefit from the NDB over time.

The NDB might well be an inherent ‘good’ for these countries and their partners. Anything that potentially supports sound, value adding, infrastructure development in these countries could be very welcome. There are, however, five main issues that will determine its success or otherwise.

1. Politics – how will the institution affect geopolitics? It could be highly divisive, adding to the worrying strains that already exist between North and South? Also, are these five contributors politically stable and aligned enough to be able to pursue their goals efficiently, effectively and honestly or are they going to fall out over the real world application of their aspiration?  Rule of law and a ‘free trade’ approach are vital ingredients to successful, long-term, economic development on this scale. Sadly, some BRICS do not always display these characteristics very well.

2. Economics – the countries vary so much in the scale and scope of their investment processes and they are competitors as well as partners – can they manage the stresses these differences imply?

3. Financial – why is the pooling of this money better than the spending of it individually? Will the infrastructure that is produced be better or worse (economically as well as physically) as a result? How will they handle the letting of contracts? There is a danger of circularity here: India donates funds to the NDB which is spent with Indian companies on Indian projects – why set up an institution in Shanghai to act as a middleman in this? Why not do it yourself? In essence, why would the sum of these parts make for better outcomes than the individual pots? They can do, but how is the NDB going make sure they do?

4. Practical – who is going to do the appraisal and evaluation of investment proposals and outcomes? There is a need for robust monitoring and surveillance of the projects and the funds. Why would this NDB be be better at that than any other parallel format? All the problems of an expensive bureaucracy, with the potential for corruption, could emerge.

5.  Relationships – is the NDB set up in competition or partnership with the IMF/WB and other bodies? Will it lead to separate funding streams that are vying for the same projects? Competition may be good but it can also be divisive and inefficient. Is China going to act as guarantor as, effectively, the USA has done for the Bretton Woods institutions for nearly 70 years? Will existing institutions now decline, disappear or become more of a ‘developed’ world club?

At this point, we can not answer these issues. Good intentions now need to be backed up with practical implementation. We will need to watch closely as the NDB is born, grows and matures.

Can contractual agreements deliver change in complex systems?

For me, the most exciting message coming out of the debates around complexity is that development agencies should focus less on planning and delivering pre-determined outputs, and more on understanding the system that they work in and the part that they could play in changing it. They should throw away detailed implementation plans, embrace iterative management, and merrily accept that they are just one of many factors contributing to change. This blog suggests that this way of working is inconsistent with the use of contractual agreements to deliver aid.

Most large donors are heavily reliant on contractors to implement their projects. These contractors typically commit to conducting activities and producing an agreed number of outputs, in exchange for money. This agreement is formalised in logical frameworks, contract agreements, or just scrawled on the back of an envelope. The donor monitors and manages these programmes against these activities and outputs. For example, DFID conducts annual reviews of each project and scores each output from A+ to C. (With B, inexplicably, being a fail.) This blog refers to any type of organisation managed through this relationship – whether NGO, government, or private sector.

This management style requires outputs to be clearly defined and fully attributable to the programme. It encourages implementers to focus on meeting these quantitative targets rather than broader development outcomes. It is difficult to change the targets and outputs, since the donor will inevitably suspect the contractor of trying to get out of what they promised.

This can work well when the project is to deliver pre-specified services. However, it is generally incompatible with any programme that seeks to influence complex systems. Quantitative results may not be easily specifiable – and any quantitative targets could set perverse incentives. For example, a requirement to reduce the incidence of malaria by 20% can incentivise a health provider to distribute bednets, rather than strengthening health systems. Activities and outputs are likely to change as the programme learns more about the system it works in and experiments with new approaches, making it very difficult to set targets up-front. Information asymmetries between the implementer and the donor make it very difficult for the donor to effectively manage this relationship. How do you know if the implementer is revising targets based on a greater understanding of their potential to leverage systemic agents of change, or if they’re just making excuses for bad performance?

Could we deal with this by improving our monitoring and evaluation systems? This is what I spend my life doing, so I’d love to say that the answer was yes. For example, we might hold contractors accountable to outcomes rather than outputs. In some cases (such as payment by results pilots) this seems to work – but I think will remain the exception rather than the rule. Outcomes typically are only partially attributable to programme activities, if at all. The donor will never really know if missed targets reflect poor implementation or other factors, and so will be unable to hold contractors accountable for them. Perhaps more significantly, a good monitoring system is fundamentally dependent on organisational culture. Staff must want the data they collect to be a fair reflection of their performance, and to have incentives to report on failures as well as successes. They must want to know when things are not going well, and how it can be improved. In a contractor-client relationship, where present and future jobs are at stake, that’s simply not going to happen.

So what can be done? There are some simple steps which could be taken; donor staff could (and should) spend more time managing projects, and staff should have a deeper understanding of the context, which would allow them to better make judgement calls regarding the responsibility of the implementer for success or failure. Perhaps more significantly, they could take evaluation findings to reflect on the implementer – not (as is currently the case) the project design.

However, I don’t think that’s enough. Ultimately, working in complex environments isn’t susceptible to a simple contractual agreement. Transforming social and economic systems isn’t the same as contracting out dustbin collection, or even direct delivery of healthcare services. Instead of managing contractors through activity or output-based contracts, donors need to select partners who share their values, and offer longer-term support to help them achieve their goals. This can be NGOs, governments, civil society, or direct delivery. It could even be the private sector – though it is unlikely to include profit-driven aid contractors. By paying more attention to the organisational culture and motives of implementing agencies, donors might move a step closer to some of their loftier ambitions.

P.S. Regular AidLeap readers (hi Mum!) might notice that this blog is a a mish-mash of two previous blogs– the Risks of Complexity and Why the Private Sector Shouldn’t Deliver Aid. Both sparked fascinating discussions which informed this post, so please continue that in the comments.

The Logframe of Love

For millennia, lovers have been struggling to cope with the complexity and challenges of relationships, without any evidence-based project cycle management tools to guide their way. Unaware of their killer assumptions and completely unable to monitor their progress, no wonder that the history of romance has been one long litany of failure.

With that in mind, we present our major contribution to humanity: the Aid Leap Logframe of Love.

Level Indicators Assumptions
IMPACT:A stable, happy, productive society.
  • Levels of violent crime
  • Consumption of anti-depressants
  • Suicide rates
  • Change in GDP
OUTCOME:More love in the world.
  • Rate of divorce
  • Number of Valentine’s Day cards sold
  • Amount of jewellery and roses purchased
  • People in a loving relationship have less reason to revert to crime.
  • No war, natural disasters, or recession.
  • Political stability.
OUTPUT 1: Couples successfully meet and date each other.
  • % of couples who make it to the fifth date (indicator of sustainability)
  • % of dates that end in a kiss
  • % of text messages that include xXx
  • Romantic films and music available.
  • Roses available in local markets.
  • Alcoholic beverages remain affordable.
OUTPUT 2: Couples have consensual sex.
  • Number of condoms sold
  • Frequency of bedsheets being washed
  • Sales of waxing strips (proxy indicator)
  • Sex will be enjoyable.
  • Pornography has not isolated sex from love.
  • Endorphins released during sex.
OUTPUT 3:Couples have babies.
  • Number of new-borns
  • % of baby nappies changed by women. (Gender-sensitive indicator)
  • % of public toilets that contain a baby changing facility
  • Babies do not produce too much bodily fluids.
  • Couples share responsibility for care.
  • Sufficient funds available for couples to cover baby’s needs.

Any major donors interested in funding this project should contact us on 0800-AID-LOVE.