MDG COST ESTIMATES: THE LIMITS OF EXPERT KNOWLEDGE Rathin Roy and Antoine Heuty UNDP Public Resource Management Training, New Delhi, March 30 th - April.

MDG COST MDG COST ESTIMATES: ESTIMATES:

THE LIMITS OFTHE LIMITS OFEXPERT EXPERT

KNOWLEDGEKNOWLEDGERathin Roy and Antoine HeutyRathin Roy and Antoine Heuty

UNDP Public Resource UNDP Public Resource Management Training, New Delhi, Management Training, New Delhi,

March 30March 30thth- April 3- April 3rdrd

COURSE OUTLINECOURSE OUTLINE SESSION 1: GLOBAL & SECTORAL SESSION 1: GLOBAL & SECTORAL

ESTIMATESESTIMATES

SESSION 2: COUNTRY LEVEL MDG SESSION 2: COUNTRY LEVEL MDG COSTINGCOSTING

SESSION 3: AN ALTERNATIVE SESSION 3: AN ALTERNATIVE APPROACH TO MDG COSTINGAPPROACH TO MDG COSTING

Course ObjectivesCourse Objectives Warning: This Course does NOT aim to Warning: This Course does NOT aim to

provide a one-size fits all recipe for MDG provide a one-size fits all recipe for MDG costing.costing.

MDG Cost estimates are important but MDG Cost estimates are important but existing methodologies are highly unreliable.existing methodologies are highly unreliable.

Unreliable cost estimates will make it more Unreliable cost estimates will make it more difficult to achieve the MDGs. difficult to achieve the MDGs.

An alternative approach, recognizing the An alternative approach, recognizing the limits of expert knowledge, exists: an limits of expert knowledge, exists: an Institutionalized Financing and Learning Institutionalized Financing and Learning Mechanism (IFLM).Mechanism (IFLM).

Introduction Introduction Definition: The Millennium Development Goals Definition: The Millennium Development Goals

(MDGs) are a set of eight specific (in many (MDGs) are a set of eight specific (in many instances, quantitative) objectives for the instances, quantitative) objectives for the betterment of the human condition.betterment of the human condition.

The MDGs aim to:The MDGs aim to:

‘‘Eradicate’ Extreme Poverty And HungerEradicate’ Extreme Poverty And Hunger Achieve Universal Primary EducationAchieve Universal Primary Education Promote Gender Equality And Empower WomenPromote Gender Equality And Empower Women Reduce Child MortalityReduce Child Mortality Improve Maternal HealthImprove Maternal Health Combat HIV/ AIDS, Malaria And Other DiseasesCombat HIV/ AIDS, Malaria And Other Diseases Ensure Environmental SustainabilityEnsure Environmental Sustainability Develop a Global Partnership For DevelopmentDevelop a Global Partnership For Development

MDGs: History MDGs: History ORIGINSORIGINS

UN social development conferences and global summit UN social development conferences and global summit meetings of the 1990s;meetings of the 1990s;

Millennium Declaration (2000). Millennium Declaration (2000).

2001: UN General Assembly approves the MDGs 2001: UN General Assembly approves the MDGs as part of the UN Secretary General’s report A as part of the UN Secretary General’s report A Road Map Towards the Implementation of the Road Map Towards the Implementation of the United Nations Millennium Declaration.United Nations Millennium Declaration.

2002: Monterrey Conference on Financing for 2002: Monterrey Conference on Financing for DevelopmentDevelopment

I/ GLOBAL MDG COST I/ GLOBAL MDG COST ESTIMATESESTIMATES

Why are Cost estimates useful?Why are Cost estimates useful? Choice of objective (normative rationale)Choice of objective (normative rationale) Planning (operational reason)Planning (operational reason)

Existing Global Cost EstimatesExisting Global Cost Estimates The divergence of global estimatesThe divergence of global estimates Case Study: methodological issues with goal 1Case Study: methodological issues with goal 1

Main Methodological limitsMain Methodological limits Unjustified assumptionsUnjustified assumptions Data weaknessesData weaknesses Unpredictable future shocksUnpredictable future shocks

Rationale for estimating Rationale for estimating the cost of achieving the the cost of achieving the

MDGsMDGs Why is it necessary to estimate the Why is it necessary to estimate the

cost of achieving the MDGs?cost of achieving the MDGs?

A normative question: A normative question: Should an end be pursued ? Should an end be pursued ?

An operational question:An operational question: How should an end best be pursued? How should an end best be pursued?

Aggregate cost estimates Aggregate cost estimates and choice between and choice between

objectivesobjectives The feasibility of achieving the MDGs, given a The feasibility of achieving the MDGs, given a

sufficient application of resources in the context sufficient application of resources in the context of adequate policy and institutional reform , is of adequate policy and institutional reform , is not generally in doubt.not generally in doubt.

However , the discussion implicitly supposes However , the discussion implicitly supposes that the commitment to achieving the MDGs is that the commitment to achieving the MDGs is not total. not total.

An implicit rationale: Convincing developing An implicit rationale: Convincing developing countries and donors that the MDGs can be countries and donors that the MDGs can be achieved without undue sacrifice of other achieved without undue sacrifice of other objectives. objectives.

Aggregate cost estimates Aggregate cost estimates and planningand planning

How best to achieve the MDGs? How best to achieve the MDGs?

Budget PlanningBudget Planning Resource gap identification;Resource gap identification; Budgeting process “stickiness” (irreversibilities, Budgeting process “stickiness” (irreversibilities,

cost of planning).cost of planning).

This ‘budgeting’ rationale for producing This ‘budgeting’ rationale for producing realistic aggregate cost estimates may be realistic aggregate cost estimates may be relevant at both the global and the national relevant at both the global and the national level. level.

Disaggregated cost Disaggregated cost estimates and planningestimates and planning

What is the most cost efficient approach to What is the most cost efficient approach to achieving the goals?achieving the goals?

Global cost estimates are of no inherent Global cost estimates are of no inherent

interest from this standpoint. interest from this standpoint.

The MDGs have been widely interpreted as The MDGs have been widely interpreted as to be achieved on a country-by-country basis. to be achieved on a country-by-country basis.

Within-country cost information is Within-country cost information is indispensable to developing an effective indispensable to developing an effective country-specific plan for achieving the country-specific plan for achieving the MDGs. MDGs.

Global cost estimate 1 – Global cost estimate 1 – Zedillo ReportZedillo Report

Zedillo Report: “The cost of achieving the Zedillo Report: “The cost of achieving the 2015 goals would probably be on the order 2015 goals would probably be on the order of an extra $50 billion a year”. of an extra $50 billion a year”.

Calculations derive from adding the costs of Calculations derive from adding the costs of achieving individual goals that were achieving individual goals that were identified in secondary sources and identified in secondary sources and ad hocad hoc estimates of its own. estimates of its own.

An “order of magnitude” of the additional An “order of magnitude” of the additional funds required to achieve the MDGs.funds required to achieve the MDGs.

Global cost estimate 2 – Global cost estimate 2 – The World BankThe World Bank

Goal 1: US $ 54 - 62 billion a year. Goal 1: US $ 54 - 62 billion a year. Ad hoc assumptions: ‘poverty reduction Ad hoc assumptions: ‘poverty reduction

elasticities of growth’, capital-output ratios, elasticities of growth’, capital-output ratios, national savings rates, and ‘absorption national savings rates, and ‘absorption constraints’. constraints’.

Other MDGs: US $ 35 - $ 76 billion per year. Other MDGs: US $ 35 - $ 76 billion per year.

These two sets of figures should not be These two sets of figures should not be aggregated, in order to avoid ‘double-aggregated, in order to avoid ‘double-counting’. counting’.

Global Cost Estimate 3 – Global Cost Estimate 3 – Background Paper for HDR Background Paper for HDR

20032003 Pettifor and Greenhill draw on similar Pettifor and Greenhill draw on similar

sector estimates to those used in the Zedillo sector estimates to those used in the Zedillo Report Report

Goal 1: The approach centers on the Goal 1: The approach centers on the investments required to generate poverty-investments required to generate poverty-reducing increases in output in developing reducing increases in output in developing countries. countries.

The total estimate of the cost (to donors) is The total estimate of the cost (to donors) is US$ 76 billion per year, significantly higher US$ 76 billion per year, significantly higher than the Zedillo report and in the upper than the Zedillo report and in the upper range of the World Bank’s estimates.range of the World Bank’s estimates.

Goal One – unreliability and Goal One – unreliability and meaninglessness of the meaninglessness of the

datadata Data on Goal 1 lacks in credibility and is such Data on Goal 1 lacks in credibility and is such

that monitoring it over time is greatly difficult.that monitoring it over time is greatly difficult.

Large fluctuations in poverty estimates arise due to Large fluctuations in poverty estimates arise due to irrelevant factors.irrelevant factors.

PPP conversion factors are both inappropriate and PPP conversion factors are both inappropriate and often based on an inadequate evidence base.often based on an inadequate evidence base.

Estimates of “$1 per day” poverty do not provide a Estimates of “$1 per day” poverty do not provide a basis for meaningful comparisons of absolute poverty basis for meaningful comparisons of absolute poverty across time or space. across time or space.

The “$1 per day” criterion fails meaningfully to The “$1 per day” criterion fails meaningfully to capture extreme poverty. In a majority of poor capture extreme poverty. In a majority of poor countries, national poverty lines are substantially countries, national poverty lines are substantially above the “$1 per day” line. above the “$1 per day” line.

Poverty Reduction Poverty Reduction estimates in China estimates in China

11% 12%9%

7% 6%

28%

32%29%

17%17%

1987 1990 1993 1996 1999

$1/day poverty line National poverty line

Goal One – Lack of credible Goal One – Lack of credible estimates of ‘poverty estimates of ‘poverty reduction elasticities’reduction elasticities’

The “poverty reduction elasticities of The “poverty reduction elasticities of growth” used in exiting methodologies growth” used in exiting methodologies are based on existing ‘$1 per day’ are based on existing ‘$1 per day’ estimates and are lacking in credibility. estimates and are lacking in credibility.

““Poverty reduction elasticities of Poverty reduction elasticities of growth” differ substantially from growth” differ substantially from country to country and change over country to country and change over time in any given country. time in any given country.

Main methodological Main methodological problems - Choice of problems - Choice of

AssumptionsAssumptions Existing national and global cost estimates Existing national and global cost estimates

are not robust to the choice of assumptions. are not robust to the choice of assumptions.

Examples:Examples: Constant unit costs; Constant unit costs; ““Absorptive capacity“; Absorptive capacity“; Aid ineffectiveness and "good policies" ;Aid ineffectiveness and "good policies" ; Complementarities between the distinct MDGs, Complementarities between the distinct MDGs,

Studies vary widely in their (ad hoc and perhaps Studies vary widely in their (ad hoc and perhaps overly optimistic assumptions);overly optimistic assumptions);

Assumptions concerning future growth rates, Assumptions concerning future growth rates, future tax/GDP ratios, and the balance of public future tax/GDP ratios, and the balance of public and private financing of expenditure that may and private financing of expenditure that may reasonably be expected.reasonably be expected.

Main methodological Main methodological problems - Data problems - Data

WeaknessesWeaknesses Data for baseline scenario of the MDGs and Data for baseline scenario of the MDGs and

monitoring are severely deficient.monitoring are severely deficient.

As a result, it is often not possible meaningfully to As a result, it is often not possible meaningfully to judge either the extent of progress required or the judge either the extent of progress required or the costs of achieving progress. costs of achieving progress.

Data on unit costs are rare, and where available Data on unit costs are rare, and where available are produced using methodologies that are most are produced using methodologies that are most often both inadequately specified and often both inadequately specified and idiosyncratic. idiosyncratic. Confusion average / marginal costsConfusion average / marginal costs Absence of clear distinction between capital costs and Absence of clear distinction between capital costs and

recurrent costs.recurrent costs. Unclear cost conceptUnclear cost concept

Main methodological Main methodological problems - Unpredictable problems - Unpredictable

Future ShocksFuture Shocks Unpredictable future shocks are sure eventually Unpredictable future shocks are sure eventually

to undermine the accuracy of MDG cost to undermine the accuracy of MDG cost estimates. estimates.

Examples: Examples: Diseases (such as HIV/AIDS);Diseases (such as HIV/AIDS); Climatic events (such as El Niño and global warming);Climatic events (such as El Niño and global warming); Civil and regional wars (e.g. that in the Great Lakes Civil and regional wars (e.g. that in the Great Lakes

region). region).

Shocks to terms of trade and global demand may Shocks to terms of trade and global demand may influence the share of overall MDG costs that will influence the share of overall MDG costs that will have to be borne by developed countries.have to be borne by developed countries.

II/ COUNTRY LEVEL MDG II/ COUNTRY LEVEL MDG COST ESTIMATESCOST ESTIMATES

UNDP Country StudiesUNDP Country Studies Overview of methodologyOverview of methodology Limits for policy decision making and resource mobilizationLimits for policy decision making and resource mobilization

World Bank InitiativeWorld Bank Initiative Results SummaryResults Summary Critique of the “absorptive constraint” approachCritique of the “absorptive constraint” approach Good vs. Bad PoliciesGood vs. Bad Policies

The Millennium ProjectThe Millennium Project Presentation of the methodologyPresentation of the methodology Methodological limits of the MP modelMethodological limits of the MP model Economies of scale and scopeEconomies of scale and scope The limits of expert knowledgeThe limits of expert knowledge

Introduction: A Benchmark Introduction: A Benchmark for MDG cost estimatesfor MDG cost estimates

What does an accurate estimate require?What does an accurate estimate require?

Accurate identification of the baseline Accurate identification of the baseline scenario.scenario.

Accurate identification of the cost function:Accurate identification of the cost function: Cost function specification.Cost function specification. Identification of the appropriate cost Identification of the appropriate cost

concept. concept.

UNDP Country StudiesUNDP Country Studies In preparation for the Monterrey Conference, a In preparation for the Monterrey Conference, a

pilot project to estimate the cost of attaining the pilot project to estimate the cost of attaining the MDGs in six countries (MDGs in six countries (Cameroon, Egypt, Cameroon, Egypt, Malawi, Uganda, Tanzania and the Philippines).Malawi, Uganda, Tanzania and the Philippines).

The reports focused on 6 MDG targets: income The reports focused on 6 MDG targets: income poverty, primary education, child mortality, poverty, primary education, child mortality, maternal health, HIV/AIDS and water.maternal health, HIV/AIDS and water.

Limitations are very similar to global cost Limitations are very similar to global cost estimates (data weaknesses, complementarities, estimates (data weaknesses, complementarities, uncertainty, choice of assumptions).uncertainty, choice of assumptions).

Recent MDG costing reports (Nepal, for Recent MDG costing reports (Nepal, for instance) mitigate but do not overcome most instance) mitigate but do not overcome most methodological issues.methodological issues.

Development Committee Development Committee Results, based on the World Results, based on the World

Bank estimatesBank estimates The World Bank approach gives priority to The World Bank approach gives priority to

the Poverty Reduction Strategy (PRS) the Poverty Reduction Strategy (PRS) previously defined by each country, and previously defined by each country, and asks how, giving priority to the objectives asks how, giving priority to the objectives and strategy of the PRS, the MDGs can and strategy of the PRS, the MDGs can best be achieved. best be achieved.

PRSPs prominently feature PRSPs prominently feature macroeconomic policy objectives that are macroeconomic policy objectives that are not directly referred to among the MDGs. not directly referred to among the MDGs.

Critique of the ‘absorptive Critique of the ‘absorptive capacity’ approachcapacity’ approach

World Bank estimates rely heavily on the notion World Bank estimates rely heavily on the notion that there exist “absorption constraints” that that there exist “absorption constraints” that limit countries’ capacity to use resources limit countries’ capacity to use resources effectively. effectively.

Beyond a “saturation point”, additional Beyond a “saturation point”, additional resources have zero impact. Moreover, this resources have zero impact. Moreover, this “saturation point” is said to vary with the “saturation point” is said to vary with the quality and nature of a country’s policies and quality and nature of a country’s policies and institutions. institutions.

The notion of an “absorption constraint” is ill-The notion of an “absorption constraint” is ill-defined. It is unclear what would in practice defined. It is unclear what would in practice constitute an absorption constraint of this kind, constitute an absorption constraint of this kind, however. however.

Results of the World Bank Results of the World Bank InitiativeInitiative

Source: Supporting sound policies with adequate and appropriate financing, Development Committee, page 10

““Good” vs. “Bad” PoliciesGood” vs. “Bad” Policies A Popular view: Policy revisions can by itself A Popular view: Policy revisions can by itself

substantially contribute to the achievement of the first substantially contribute to the achievement of the first MDGMDG

A country is identified as having “good” policies if it A country is identified as having “good” policies if it receives a high score on the World Bank Country receives a high score on the World Bank Country Policy and Institutional Assessment Policy and Institutional Assessment (CPIA) through (CPIA) through subjective assessments by Bank “country experts”. subjective assessments by Bank “country experts”. Example of CPIA criteria: presence of a “Competitive Example of CPIA criteria: presence of a “Competitive

Environment for the Private Sector” and “Property Rights and Environment for the Private Sector” and “Property Rights and Rule-based Governance”. Rule-based Governance”.

However, tHowever, there is no universal agreement either on here is no universal agreement either on how to classify policies as “good” and “bad” nor on the how to classify policies as “good” and “bad” nor on the impact that the policies classified as “good” have on impact that the policies classified as “good” have on growth, or indeed on any other desired outcome. growth, or indeed on any other desired outcome.

The Millennium Project The Millennium Project (MP)(MP)

The Millennium Project focuses on the The Millennium Project focuses on the totaltotal costs of achieving costs of achieving allall ofof the the Millennium Development Goals at the Millennium Development Goals at the country level.country level.

Good governance is necessary but not Good governance is necessary but not sufficient to achieve the MDGs. sufficient to achieve the MDGs.

A massive and long term public finance A massive and long term public finance investment program is paramount to the investment program is paramount to the achievement of the MDGs. achievement of the MDGs.

Millennium Project Millennium Project MethodologyMethodology

Inflexible and Unrealistic Inflexible and Unrealistic AssumptionsAssumptions

Important methodological issues Important methodological issues undermine the MP approach to MDG undermine the MP approach to MDG costing.costing.

Choice of assumptions: Choice of assumptions: Poverty reduction elasticities of growthPoverty reduction elasticities of growth Growth projectionsGrowth projections Resource mobilizationResource mobilization

Policy vs. Intervention Policy vs. Intervention CostingCosting

The MP methodology establishes a The MP methodology establishes a comprehensive list of interventions required to comprehensive list of interventions required to meet each of the goals.meet each of the goals.

Policy and institutional framework is not Policy and institutional framework is not modeled nor discussed.modeled nor discussed.

The technocratic bias: a list of interventions The technocratic bias: a list of interventions cannot provide an adequately sound cannot provide an adequately sound framework for determining the best strategies framework for determining the best strategies to achieve the MDGs.to achieve the MDGs.

Unit cost: inaccuracy and Unit cost: inaccuracy and discrepanciesdiscrepancies

Generalization of unit cost lead to unreliable Generalization of unit cost lead to unreliable estimates.estimates.

Recent country studies from different sources have Recent country studies from different sources have made unit cost estimates for the extension of made unit cost estimates for the extension of particular services that vary widely. particular services that vary widely. Table: Unit costs of Extending Primary Education in Uganda Table: Unit costs of Extending Primary Education in Uganda

StudyStudy Estimated annual Estimated annual cost per pupilcost per pupil

UNICEF UNICEF $13 (1998 USD) $13 (1998 USD)

EPRC 2001 EPRC 2001 $46 (2001 USD)$46 (2001 USD)

World Bank World Bank $27.5 (2000 USD)$27.5 (2000 USD)

Millennium Project Millennium Project $63 (2000 USD)$63 (2000 USD)

(Dis)Economies of scale (Dis)Economies of scale and scopeand scope

Economies of scale: Economies of scale: Diseconomies of scale: beneficiaries of relevant services Diseconomies of scale: beneficiaries of relevant services

may be those who are most difficult to reach, for may be those who are most difficult to reach, for geographical or social reasons. geographical or social reasons.

Economies of scale: higher levels of service provision enable Economies of scale: higher levels of service provision enable the cost of delivery infrastructure to be spread over more the cost of delivery infrastructure to be spread over more persons, increased achievements enhance individual persons, increased achievements enhance individual knowledge and bring about transformations in social norms. knowledge and bring about transformations in social norms.

Economies of scope (complementarities between Economies of scope (complementarities between distinct MDGs): distinct MDGs): Diseconomies of Scope: reductions in infant mortality will Diseconomies of Scope: reductions in infant mortality will

make it costlier to achieve a specified percentage increase make it costlier to achieve a specified percentage increase in primary enrolments.in primary enrolments.

Economies of Scope: greater access to safe drinking water Economies of Scope: greater access to safe drinking water and to literacy both improve healthand to literacy both improve health

(Dis)Economies of scale (Dis)Economies of scale and scopeand scope

Table: Total (tuberculosis treatment and malaria Table: Total (tuberculosis treatment and malaria diagnosis) health costs in billions of (2002) dollars diagnosis) health costs in billions of (2002) dollars under different assumptions concerning economies under different assumptions concerning economies of scale and scope.of scale and scope.

NoneNone EconomiesEconomies DiseconomiesDiseconomies

4.3 4.3

ScaleScale ScopeScope ScaleScale

& &

ScopeScope

ScaleScale ScopeScope ScaleScale

&&

ScopeScope

1.442 1.442 2.213 2.213 0.737 0.737 17.215 17.215 6.387 6.387 25.516 25.516

The limits of expert The limits of expert knowledgeknowledge

EXPERT DRIVEN EXPERT DRIVEN

APPROACHAPPROACH

RIGID FRAMEWORKRIGID FRAMEWORK

ABSTRACT INTERVENTION ABSTRACT INTERVENTION

COSTINGCOSTING

ASYMMETRYASYMMETRY

INCORRECT

MDG COST

ESTIMATES

LONG TERM DAMAGE FOR MDG COUNTRY STRATEGY

III/ AN ALTERNATIVE III/ AN ALTERNATIVE APPROACH TO MDG COST APPROACH TO MDG COST

ESTIMATIONESTIMATION Rationale for a MDG Institutionalized Financing Rationale for a MDG Institutionalized Financing

and Learning Mechanism (IFLM)and Learning Mechanism (IFLM) The importance of learning and flexibilityThe importance of learning and flexibility A “needs & capacities” based systemA “needs & capacities” based system

A Peer & Partner Review Mechanism to estimate A Peer & Partner Review Mechanism to estimate the MDGsthe MDGs Concept and use of peer review mechanismConcept and use of peer review mechanism Actors, functions and proceduresActors, functions and procedures Criteria and principles of evaluationCriteria and principles of evaluation

Localizing and operating the MDGs through the Localizing and operating the MDGs through the IFLMIFLM Making IFLM work for the poorMaking IFLM work for the poor From technocratic to democratic MDG costingFrom technocratic to democratic MDG costing

Rationale for an MDG Rationale for an MDG Institutionalized Financing Institutionalized Financing and Learning Mechanism and Learning Mechanism

(IFLM)(IFLM) What is the most sensible way to determine What is the most sensible way to determine

countries’ needs and allocate resources? countries’ needs and allocate resources?

Cost estimates are necessary but insufficient and Cost estimates are necessary but insufficient and imperfect.imperfect.

A flexible and comprehensive approach: A flexible and comprehensive approach: MDG MDG Institutionalized Financing and Learning Institutionalized Financing and Learning Mechanism (IFLM)Mechanism (IFLM). .

Purpose of the IFLM: a realistic, effective, and Purpose of the IFLM: a realistic, effective, and flexible approach to planning and financing at both flexible approach to planning and financing at both the country and global level. the country and global level.

Empirical ideas underlying Empirical ideas underlying the MDG IFLMthe MDG IFLM

The IFLM is motivated by two core empirical The IFLM is motivated by two core empirical ideas:ideas:

The importance of learning: The importance of learning: It cannot be known It cannot be known in advance how the MDGs can be best achieved. in advance how the MDGs can be best achieved. As a result, it is necessary to foster individual and As a result, it is necessary to foster individual and collective learning and lesson-sharing. collective learning and lesson-sharing.

The importance of flexibilityThe importance of flexibility: It cannot be : It cannot be known in advance what it will cost to achieve the known in advance what it will cost to achieve the MDGs. As a result, it is necessary periodically to MDGs. As a result, it is necessary periodically to reassess these costs (and associated resource reassess these costs (and associated resource gaps) on the basis of new information. gaps) on the basis of new information.

Normative ideals Normative ideals underlying the MDG IFLMunderlying the MDG IFLM

The IFLM approach is further The IFLM approach is further underpinned by two core normative underpinned by two core normative principles directly reflected in the principles directly reflected in the “Monterrey Consensus”“Monterrey Consensus”::

A need principle:A need principle: Countries ought to have Countries ought to have access to the resources they need to meet the access to the resources they need to meet the MDGs.MDGs.

A capacity principle:A capacity principle: Countries ought to Countries ought to provide the resources required to meet the provide the resources required to meet the MDGs to the extent of their capacities. MDGs to the extent of their capacities.

Overview of the IFLM Overview of the IFLM ProposalProposal

A Peer Review MechanismA Peer Review Mechanism, through which each , through which each country’s efforts toward the MDGs will be assessed country’s efforts toward the MDGs will be assessed by a committee containing representatives from by a committee containing representatives from North and South, from within a region and from North and South, from within a region and from beyond it, and from civil society as well as statesbeyond it, and from civil society as well as states. .

A flexible instrument to identify: A flexible instrument to identify: Resource requirements to achieve the MDGs in each Resource requirements to achieve the MDGs in each

country; country; Resource availability to achieve the MDGs in each country Resource availability to achieve the MDGs in each country

(domestic resource generation and policy reorientation).(domestic resource generation and policy reorientation).

Periodic assessmentsPeriodic assessments on a on a voluntary voluntary basis to basis to identify identify bona fidebona fide resource gaps. resource gaps.

A global inventory of resource gaps will be A global inventory of resource gaps will be assembled by the central secretariat of the IFLM. assembled by the central secretariat of the IFLM.

A Peer Review Mechanism A Peer Review Mechanism for the MDGs: Definitionfor the MDGs: Definition

A peer review mechanism involves “the systematic A peer review mechanism involves “the systematic examination and assessment of the performance of a examination and assessment of the performance of a State by other States, with the ultimate goal of helping State by other States, with the ultimate goal of helping the reviewed State improve its policy making, adopt the reviewed State improve its policy making, adopt best practices, and comply with established standards best practices, and comply with established standards and principles” (OECD)and principles” (OECD)

Objective of a MDG peer review system: Objective of a MDG peer review system:

Assess rich and poor countries governments’ current efforts Assess rich and poor countries governments’ current efforts toward the goals; toward the goals;

Identify Identify bona fidebona fide resource gaps and opportunities for new resource gaps and opportunities for new resource generation, reallocation of effort, and policy resource generation, reallocation of effort, and policy reorientation.reorientation.

Motivations of an MDG peer review mechanism: Motivations of an MDG peer review mechanism: Identify relevant facts in a transparent manner, and to foster Identify relevant facts in a transparent manner, and to foster

exchange of information and rapid collective learning exchange of information and rapid collective learning concerning effective policies and actions; concerning effective policies and actions;

Provide a system for identifying Provide a system for identifying bona fidebona fide resource gaps and resource gaps and for filling them. for filling them.

History and practice of peer History and practice of peer review mechanismsreview mechanisms

Peer review mechanism is closely associated with Peer review mechanism is closely associated with the OECD. the OECD.

UN bodies and specialized agencies also use peer UN bodies and specialized agencies also use peer review to evaluate national policies in various review to evaluate national policies in various sectors.sectors.

The peer review systems recently developed by the The peer review systems recently developed by the Development Assistance Committee of the OECD for Development Assistance Committee of the OECD for evaluating development cooperation efforts and the evaluating development cooperation efforts and the African Peer Review Mechanism within the NEPAD African Peer Review Mechanism within the NEPAD are sources of inspiration for the proposed IFLM, are sources of inspiration for the proposed IFLM, and may be integrated in to it.and may be integrated in to it.

Actors & Functions of the Actors & Functions of the MDG peer review MDG peer review

mechanism mechanism The frequency of the reviews would depend on The frequency of the reviews would depend on

practical judgments concerning the most practical judgments concerning the most effective planning horizon and the capacities of effective planning horizon and the capacities of participants. participants.

The IFLM SecretariatThe IFLM Secretariat organizes and drives organizes and drives the peer review process. Its missions are to: the peer review process. Its missions are to: Assist the review process;Assist the review process; Organize missions and meetings;Organize missions and meetings; Maintain the quality and the continuity of the Maintain the quality and the continuity of the

process;process; Disseminate the results of the reviews to the public.Disseminate the results of the reviews to the public.

The membersThe members: Any country wishing to : Any country wishing to undergo an MDG-related peer review process undergo an MDG-related peer review process may do so.may do so.

Procedures of the MDG Procedures of the MDG peer review mechanismpeer review mechanism

Finally the MDG peer review process shall follow certain Finally the MDG peer review process shall follow certain proceduresprocedures to ensure the transparency, credibility and to ensure the transparency, credibility and focus of its work:focus of its work:

Preparatory phasePreparatory phase: Background analysis and some form of : Background analysis and some form of self-evaluation by the country under review. self-evaluation by the country under review.

ConsultationConsultation: The peer review committee and the Secretariat : The peer review committee and the Secretariat conduct their evaluation. conduct their evaluation.

AssessmentAssessment: Final report of the peer review committee , which : Final report of the peer review committee , which shall seek consensus consensus but leave an opportunity for shall seek consensus consensus but leave an opportunity for members of the committee to file dissenting comments on the members of the committee to file dissenting comments on the majority report for the public record. majority report for the public record.

Communication:Communication: The final report shall be followed by a press The final report shall be followed by a press release supervised by the Secretariat with a summary of the release supervised by the Secretariat with a summary of the main issues addressed and findings. main issues addressed and findings.

IncorporationIncorporation into resource generation mechanisms. into resource generation mechanisms.

Size, Scope and CoverageSize, Scope and Coverage

Developing countries will have an incentive to Developing countries will have an incentive to participate in the peer review process so as to participate in the peer review process so as to attract additional resources, improve their attract additional resources, improve their capacities, and highlight their commitment to capacities, and highlight their commitment to the MDGs.the MDGs.

Developed countries will be invited to submit Developed countries will be invited to submit evidence concerning their commitment to the evidence concerning their commitment to the MDGs to peer review. MDGs to peer review.

In all instances, participation will be voluntary.In all instances, participation will be voluntary.

Principles and criteria of Principles and criteria of MDG peer reviewsMDG peer reviews

A set of common criteria and indicators for a fair, A set of common criteria and indicators for a fair, credible and internationally comparable review credible and internationally comparable review process.process.

Criteria , identified by the IFLM secretariat should be Criteria , identified by the IFLM secretariat should be based on the following principles:based on the following principles: Incorporation of MDG costing estimations with due Incorporation of MDG costing estimations with due

emphasis on their respective limitations. emphasis on their respective limitations. Estimate additional resources with which to build institutional Estimate additional resources with which to build institutional

capacities and relax “absorptive capacity” constraints.capacities and relax “absorptive capacity” constraints. National MDG efforts (measured for instance by the pattern National MDG efforts (measured for instance by the pattern

and level of public expenditures and the transparency of the and level of public expenditures and the transparency of the administration) and assessed on the basis of national MDG administration) and assessed on the basis of national MDG reports. reports.

All considerations shall be weighed against a country’s All considerations shall be weighed against a country’s economic, political and social conditions.economic, political and social conditions.

Making the IFLM work for Making the IFLM work for the Poorthe Poor

The IFLM is potentially compatible with PRSP:The IFLM is potentially compatible with PRSP: MDGs and PRSP objectives are differentMDGs and PRSP objectives are different PRSP shall recognize the MDGs as legitimate long-term PRSP shall recognize the MDGs as legitimate long-term

objectives. objectives. PRSP conditionality is at odds with the IFLMPRSP conditionality is at odds with the IFLM

For the rich countries, the peer review mechanism will For the rich countries, the peer review mechanism will provide a basis for assessing their commitment to the MDGs provide a basis for assessing their commitment to the MDGs both in terms of aid and policy practices.both in terms of aid and policy practices.

In the developing world, the peer review process will: In the developing world, the peer review process will: identify the identify the bona fidebona fide resource requirements to achieve the resource requirements to achieve the

MDGs;MDGs; evaluate their commitment and capacities to reach the goals;evaluate their commitment and capacities to reach the goals; suggest relevant policy reorientations. suggest relevant policy reorientations.

A global report drawing attention to the balance between A global report drawing attention to the balance between global needs and global resources shall be prepared global needs and global resources shall be prepared periodically by the central secretariat of the IFLM.periodically by the central secretariat of the IFLM.

FROM TECHNOCRATIC TO DEMOCRATIC MDG FROM TECHNOCRATIC TO DEMOCRATIC MDG

COSTINGCOSTING EXISTING MDG COSTINGEXISTING MDG COSTING

EXPERT DRIVEN EXPERT DRIVEN APPROACHAPPROACH

RIGID FRAMEWORKRIGID FRAMEWORK

ABSTRACT ABSTRACT INTERVENTION INTERVENTION COSTING COSTING

ASYMMETRYASYMMETRY

PROPOSED MECHANISMPROPOSED MECHANISM

COUNTRY DRIVENCOUNTRY DRIVEN

FLEXIBLE PROCESSFLEXIBLE PROCESS

EVIDENCE BASED EVIDENCE BASED POLICY MAKINGPOLICY MAKING

EQUITYEQUITY

ANNEXESANNEXES

(Dis)Economies of Scale(Dis)Economies of Scale

We define a cost function for improvements in achievement. It is We define a cost function for improvements in achievement. It is assumed that the unit cost of assumed that the unit cost of cc is correct for the last (observed) is correct for the last (observed) unit (1%) of coverage attained. For the next unit (1%) of coverage unit (1%) of coverage attained. For the next unit (1%) of coverage produced, we have: produced, we have:

A positive value of beta implies rising marginal costs, and a A positive value of beta implies rising marginal costs, and a negative value of beta implies falling marginal costs. negative value of beta implies falling marginal costs.

(Dis)Economies of Scope(Dis)Economies of Scope

Note thatNote that

1 21 11 2

11 max 2

More generally, let the joint cost function be T ( , y), where and denote

the improvements in intervention coverage to be attained (by 2007 or 2015).

TC( , ) (1 ) (11 1

C x x y

c x c yyx y

y

2

max

max max

max max

), where , -1, [-1,1].

The parameters will generate economies/diseconomies of scope. and

are defined as follows: 100 , and similary 100

(the maximubaseline baseline

x

x

Y X

y y x x

m coverage extension).

0 means that there are no economies of scope.

>0 yields economies of scope.

<0 yields diseconomies of scope.

EXISTING MDG COSTINGEXISTING MDG COSTING PROPOSED MECHANISMPROPOSED MECHANISM

EXPERT DRIVEN APPROACHEXPERT DRIVEN APPROACH COUNTRY DRIVEN APPROACHCOUNTRY DRIVEN APPROACH

Built on theoretical models and driven by external actors, often within an Built on theoretical models and driven by external actors, often within an ODA-logic.ODA-logic.Framework reserved to technical experts, based on judgments that are Framework reserved to technical experts, based on judgments that are often arbitrary and subjective.often arbitrary and subjective.Opaque framework that does not explicitly recognise its technical Opaque framework that does not explicitly recognise its technical limitations and the impact of the range of assumptions.limitations and the impact of the range of assumptions.

Greater sense of national ownership.Greater sense of national ownership.Inclusive process involving political accountabilityInclusive process involving political accountabilityPublic interest awakened, ambition stirred and expectation aroused.Public interest awakened, ambition stirred and expectation aroused.Transparent process involving all segments of society and external partners Transparent process involving all segments of society and external partners and widely publicised within the countryand widely publicised within the country

RIGID FRAMEWORKRIGID FRAMEWORK FLEXIBLE PROCESSFLEXIBLE PROCESS

Costing models of a normative nature can only partially be tailored to the Costing models of a normative nature can only partially be tailored to the specific needs and priorities of the country.specific needs and priorities of the country.Needs assessments and arguments about absorptive capacity seldom take Needs assessments and arguments about absorptive capacity seldom take account of dynamic and non-tangible factors.account of dynamic and non-tangible factors.The medium term (PRSPs) and long term (MDGs) expenditure frameworks The medium term (PRSPs) and long term (MDGs) expenditure frameworks are not necessarily compatibleare not necessarily compatible

The enhanced mechanism allows thorough consultation with partners and The enhanced mechanism allows thorough consultation with partners and full consideration of national priorities and specifics.full consideration of national priorities and specifics.Dynamic process that incorporates information on a continuous and Dynamic process that incorporates information on a continuous and evolving basis.evolving basis.The enhanced mechanism offers an opportunity to MDG-ise the PRSP The enhanced mechanism offers an opportunity to MDG-ise the PRSP framework.framework.

ABSTRACT INTERVENTION COSTINGABSTRACT INTERVENTION COSTING EVIDENCE-BASED POLICY MAKINGEVIDENCE-BASED POLICY MAKING

Costing models based on ‘scaling up’ of key interventions cannot address Costing models based on ‘scaling up’ of key interventions cannot address inherent uncertainty; it is also undermined by unreliable or old data.inherent uncertainty; it is also undermined by unreliable or old data.Costing work is often biased toward ODA flows; it seldom addresses the Costing work is often biased toward ODA flows; it seldom addresses the impact of policy reforms, including domestic taxesimpact of policy reforms, including domestic taxes

Generate policy dialogue based on country’s experience Generate policy dialogue based on country’s experience Foster learning and exchange of ideas and experiences of capacity building.Foster learning and exchange of ideas and experiences of capacity building.Policy focus integrates systemic parameters and specific context beyond Policy focus integrates systemic parameters and specific context beyond ODA (taxes, trade and financial system).ODA (taxes, trade and financial system).

ASYMMETRYASYMMETRY EQUITYEQUITY

Only the needs of low-income countries are assessed for achieving the Only the needs of low-income countries are assessed for achieving the MDGs.MDGs.Perception is widespread that MDG costing is a soft imposition of long-Perception is widespread that MDG costing is a soft imposition of long-term conditionality on developing countriesterm conditionality on developing countries

Enhanced mechanism applies equally to middle-income countries, as well Enhanced mechanism applies equally to middle-income countries, as well as to North and South – on a voluntary basis.as to North and South – on a voluntary basis.For developing countries, the incentive to participate is to gain stronger For developing countries, the incentive to participate is to gain stronger support for home-grown strategies, together with accessto extra resources. support for home-grown strategies, together with accessto extra resources. For donor countries, the incentive is stronger national ownership and better For donor countries, the incentive is stronger national ownership and better development outcomesdevelopment outcomes

Advantages of the IFLMAdvantages of the IFLM

Capacity building Capacity building & learning& learning

VoluntarismVoluntarism

SymmetrySymmetry

EquityEquity

FlexibilityFlexibility

Incentive Incentive compatibilitycompatibility

Policy DialoguePolicy Dialogue

TransparencyTransparency

MP Growth AssumptionsMP Growth AssumptionsCountry Country Average GDP per capita growth Average GDP per capita growth

1990-2000 (%) 1990-2000 (%)

BangladeshBangladesh 3.023.02

CambodiaCambodia 2.042.04

EthiopiaEthiopia 1.311.31

GhanaGhana 1.611.61

KenyaKenya -0.67-0.67

SenegalSenegal 0.790.79

UgandaUganda 0.440.44

TanzaniaTanzania 3.293.29

YemenYemen 1.551.55

East Asia Average with ChinaEast Asia Average with China 1.871.87

East Asia Average without ChinaEast Asia Average without China 1.531.53

Sub Saharan AfricaSub Saharan Africa -0.53 -0.53

MP Resource Mobilization MP Resource Mobilization for healthfor health

COUNTRYCOUNTRY Implicit % Increase Implicit % Increase of total health of total health

expenditureexpenditure

Implicit % increase of Implicit % increase of public health public health

expenditureexpenditure BangladeshBangladesh 53%53% 145%145%

BoliviaBolivia 30%30% 41%41%

CambodiaCambodia 25%25% 101%101%

Dominican RepublicDominican Republic 32%32% 113%113%

EthiopiaEthiopia 43%43% 110%110%

GhanaGhana 48%48% 89%89%

KenyaKenya 24%24% 109%109%

SenegalSenegal 43%43% 77%77%

TanzaniaTanzania 34%34% 72%72%

UgandaUganda 51%51% 135%135%

MDG and PRSP health MDG and PRSP health targetstargets