Poverty and Social Impact Analysis

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Poverty and Social Impact Analysis
Distributional Issues in Policy Reform

• Renate Kirsch
• Nairobi, Dec 2006

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This presentation

• Where does it come from
• What is it and what does it try to achieve
• How it has been applied in Africa
• How is relates to the PRSP
• How it is used at the World Bank
• What are the challenges we face

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The Context

• PRSPs have given greater impetus to the
  understanding of impacts of policy reforms on the
  poor to underpin development strategies
• PSIA emerged in the context of reforms likely to
  be supported by PRSC and PRGF operations
• Includes macroeconomic, structural and sectoral
  reforms
• Although the Bank has comparative advantage in
  poverty analysis, PSIA involves shared
  responsibility between Bank, IMF and other
  partners
• Poverty analysis is not new, recognition that
  prior ESW was less focused on impacts of specific
  reforms systematic application
• Call for providing policy options to reforms

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What is PSIA?

• PSIA is the analysis of intended and unintended
  consequences of policy interventions (ex-ante,
  during implementation, and ex-post) on the
  well-being of different social groups, with a
  particular focus on the poor and vulnerable.
• PSIA focuses on
• distributional impacts on different stakeholders
• positive and negative impacts, intended and
  unintended impacts
• income and non-income dimensions.

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PSIA helps

• To inform the design of reforms
• To understand the impact of policy reforms and
  public actions on different social groups and
  poverty
• To analyze tradeoffs between social costs and
  benefits of reform by assessing opportunities,
  constraints and social risks
• To design appropriate mitigating measures and
  risk management strategies for the reform
  program, when adverse impacts and risks are
  unavoidable
• To inform the policy dialog
• To underpin policy reforms with empirical
  evidence
• To keep a pro-poor focus in policy reform
• To open space for policy dialogue and enhance
  transparency and accountability in reform process
• To build country ownership of policies by
  informing a public debate on the trade-offs
  between policy choices

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PSIA in a policy process
Policy Dialogue
Selection of reform for PSIA
Analysis
Monitoring
Recommendation
Policy design
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The dual function of PSIA

• Approach to support due diligence for donor
  operations
• Developed by WB with support from several
  bilateral agencies
• Institutional Anchor Operational Policy for
  Development Policy Lending
• Approach to inform national policy making and
  foster ownership for reform implementation
• Analytical results can help to change public
  perceptions and create political space
• Aims at developing options and scenarios
• Informs the design of reforms and the
  implementation process
• ?Risk of becoming a box ticking exercise if not
  owned and demanded by national stakeholders

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PSIAs in Africa - a wide range of reforms

• Agriculture, Rural Development, NRM Reforms
• Cotton (Mali, Chad, Benin)
• Tobacco Marketing (Malawi)
• Maize prices (Kenya)
• Tea sector privatization (Rwanda)
• Groundnut sector liberalization (Senegal)
• Crop boards (Tanzania)
• Land reform (Zambia)
• Fertilizer subsidy reform (Zambia)
• Livestock sector reform (Botswana)
• Agriculture market closures (Malawi)
• Agriculture services (Madagascar)
• Cocoa/coffee taxation (Cote dIvoire)
• Forestry sector (DRC)
• Coffee liberalization (Burundi)

• Decentralization, Public Expenditure, Service
  Delivery Reforms
• Health service delivery (Madagascar), and user
  fees (Kenya)
• Education public expenditure distribution
  (Malawi)
• Primary schools fees (Mozambique)
• Rural roads (Zambia)
• Service delivery (Madagascar)
• Road construction (Ethiopia)
• Public expenditure prioritization (Cote dIvoire)
• Public sector reform (DRC)

• Utility Reform/ Privatization
• Energy/electricity sector privatization/reforms
  (Ghana, Malawi, Lesotho, Eritrea)
• Water sector (Mauritania)
• Mining services (Mauritania, DRC)
• Rural electrification (Lesotho)

• Macro Reforms
• PAMS modeling (Benin, Mauritania, Rwanda,
  Guinea))
• Growth and poverty linkages (Cameroon, Burkina
  Faso)

• Tax Reforms
• Local government taxation (Tanzania)
• VAT and utility sector (Cape Verde)

• Labour Markets Social Protection
• Pension reforms (Kenya)

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Ghana Electricity Pricing

• Reform Context
• New GOG electricity pricing policy with
  automatic increases lifeline protection for the
  poor request from GOG to evaluate the poverty
  impact of reform.
• Focus of PSIA
• (1) Inform PRSC2 on whether lifeline tariff
  policy an effective mechanism to protect poor
  consumers (2) assess if subsidies an effective
  means of reaching the poor
• Tools and methods
• (1) Consumer and social impact assessments of
  tariff changes (small-scale household surveys)
  (2) analysis of nationally representative study
  on consumer response (3) stakeholder analysis
  (4) social risk analysis /w key informant
  interviews focus groups.
• Process
• Multi-stakeholder steering committee with
  diverse interests to guide process.
• Impact
• (1) Confirmation of PRSC12 reliance on a
  lifeline to protect poor consumers (2)
  discredited assumptions of the reform (3)
  lending approved to include off-grid and
  renewable energy options appropriate for poorer
  Northern regions.

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DRC Mining Sector Reform

• Reform Context
• Retrenchment of 50 of employees of bankrupt
  state mining company, potential for future
  privatization to grant foreign investors access
  to mineral resources revitalize sector.
• Focus of PSIA
• (1) Analysis of direct/indirect social costs of
  reform and monitoring framework (2) initial
  focus on impact of retrenchment but subsequently
  highlighted broader set of issues (e.g.
  differential impact for remote areas, impacts on
  those highly dependent on mine services).
• Tools and Methods
• (1) Stakeholder analysis (2) social impact
  analysis using existing baseline data (3)
  participatory focus groups in each town (4)
  supplementary module on vulnerability/social
  capital integrated into exit survey for
  retrenchees.
• Process
• (1) Collaboration with local university, incl.
  TOT (2) local multi-stakeholder consultative
  groups (3) substantial dialogue (4) design of
  mitigation mechanisms for most severe impacts.
• Impact
• (1) Assistance to keep 50,000 students in school
  in order to keep teachers from striking (2)
  ongoing dialogue with sectors on mgt options for
  schools and clinics (3) creation of local-level
  information centers (4) proposal for ring-fenced
  social services in mine policy paper (5) local
  level consultative committee formed to bring in
  broad set of stakeholders (6) raised awareness
  with other active partners (UNICEF) and other
  stakeholders on severe impacts of reform

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PSIA relation to PRSP

• ?PSIA an important analytical underpinning of PRS
• PRSP and MDGs put poverty reduction at the center
  
• Increased demand for prior understanding of
  impacts of policy reforms on different groups
• PSIA should be part of PRSP process
• Good institutional home for PSIA is the PRS
  secretariat
• Caveat PSIA can address most individual reforms
  but cannot address programs such as the PRS

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PSIA in the PRS-Cycle
Ex ante
monitoring
Poverty Diagnostic Strategy design
Monitoring
during implementation
Implementation of reforms
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Evolution of PSIA in the WB

• Development of approach 2001 with great support
  from bilateral development agencies
• Pilot phase 2002 (6 PSIA by WB and 6 by DfID)
• Founding of PSIA donor network in 2003 (process,
  participation)
• Scaling up 2003 -2006, supported by 4.5 Mio
  extra funds (154 PSIA in 72, of which 50 are PRSP
  countries, in 15 sectors)
• Institutional anchor via new OP on Development
  Policy Lending
• Production of a wide range of knowledge sharing
  and learning instruments to build capacity
• 2006 shift in focus towards country led PSIA and
  launch of capacity building initiative

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Where does PSIA fit in the WB?
Lending andPolicy Dialogue
ESW

• Upstream
• Analysis
• CEM, PA, CSA

CAS (PRSP)
Country Level
PSIA
Development Policy Lending
Program andPolicy Level
Investmentprojects
Economic SocialAppraisal
Project Level
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Regional distribution of funded PSIAs
Number of PSIAs
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Sectoral distribution of funded PSIAs
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PSIA Features

• Average cost 140,000
• but considerable variation (40,000 - 200,000)
• Around 60 PSIA complete analytical work in less
  than one year dissemination and policy dialog
  often continues in second year

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Challenges

• Influencing policy
• Translating analytical findings into relevant
  policy recommendations to inform reform design
• Alignment and link to PRSP process to be more
  effective
• Embedding the approach into national policy
  cycles PSIA needs an institutional home to
  incorporate results into the policy process in
  most PRSP countries this has been the PRSP
  secretariat
• Building on existing systems to contribute to
  development of national poverty monitoring
  system, Integrating results into national ME

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Challenges II

• Awareness how PSIA assist in policy reform
• Capacity to identify when it is needed
• Capacity to commission and supervise such work
• Capacity to conduct rigorous analysis

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A 10 Step approach to PSIA

• 1. Selecting the Reform
• 2. Identifying stakeholders
• 3. Understanding transmission channels
• 4. Assessing institutions
• 5. Gathering data and information
• 6. Analyzing impacts
• 7. Enhancing design and compensatory schemes
• 8. Assessing risks
• 9. Establishing monitoring and evaluation systems
• 10. Fostering policy debate and feedback into
  policy choice

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1. Selecting the reform and mapping out research
questions

• Criteria for selection of reform
• Expected size and direction of impacts
• Prominence of issue in the governments policy
  agenda
• Timing and urgency of policy or reform
• Level of national debate surrounding the reform
• Formulating the key questions
• Identify key problems/constraints that policy
  will address
• Make development objectives explicit
• Formulate causal hypotheses linking objectives to
  actions to likely short-term and long-term
  impacts
• Define the alternative (other option, status quo)

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Upstream or Downstream

• Upstream Assessing the reform issues in a sector
  to start a discussion over reform options
• Downstream Assessing winners and losers of a
  very specific reform proposal Risk narrows
  space for national debate, mere mitigation of
  previous policy decision

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Operational lesson 1 identify reforms

• Need for PSIA should emerge from PRS
• Identifying reforms for PSIA should be part of
  national PRS process (no duplication)
• In practice, work in progress. Selection should
  strengthen broader process, not
  undermine/duplicate it
• Selectivity/prioritization essential
• Costly and time consuming
• PSIA most meaningful and effective when applied
  to specific reforms