POLICY REFORM LESSONS LEARNED - Public …

1 POLICY REFORM LESSONS LEARNED :A REVIEW OF ECONOMIC GROWTH RELATED POLICY REFORM ACTIVITIES IN DEVELOPING COUNTRIESJUNE 2007 This publication was produced by EPIQ II, United States Agency for International Development. EPIQ II Prime Contractors: Chemonics International,International Resources Group, PA Consulting Group (2003 2009) 7/17/2007 1:30 PM Page aIPOLICY REFORM LESSONS LEARNED :A REVIEW OF ECONOMIC GROWTH RELATED POLICY REFORM ACTIVITIES IN DEVELOPING COUNTRIESJune 7/17/2007 1:30 PM Page cIIPOLICY REFORM LESSONS 7/17/2007 1:30 PM Page dPOLICY REFORM LESSONS LEARNEDCONTENTSIIITABLE OF CONTENTSINTRODUCTION.

2 1 ..SECTION I: MANAGING THE POLICY PROCESSINVOLVE THE PLAYERS ..9 lesson 1: Find a POLICY champion ..9 lesson 2: Involve key stakeholders throughoutthe POLICY process .. 11 lesson 3: Coordinate with other donors ..12 CONDUCT OPEN AND FLEXIBLE POLICY DIALOGUE ..13 lesson 4: POLICY dialogue must adapt to specific political,economic, and cultural contexts ..13 .. lesson 5: Promote a flexible approach to POLICY dialogue ..15 GET THE TIMING RIGHT ..17 .. lesson 6: Approach POLICY change as a continuing process ..17 lesson 7:Time POLICY : work strategically ..18 COMMUNICATE EFFECTIVELY ..19 lesson 8: Know the context in managing and communicating information.

3 19 lesson 9: Communication legitimizes the POLICY process and reinforces change .21 SECTION II:WORKING WITH THE POLICY PROCESSDIAGNOSE THE PROBLEM ..25 lesson 10: Be sure analyses are solid and credible ..25 DESIGN THE POLICY ..27 lesson 11: Help donor partners to support POLICY efforts ..27 .. lesson 12:Account for a variety of factors when helping design POLICY ..28 .. lesson 13: Analyze the incentive structures of POLICY instruments ..29 .. lesson 14: Anticipate barriers to POLICY implementation ..31 ..IMPLEMENT THE POLICY ..32 lesson 15: Be alert to POLICY implementation realities ..32 lesson 16: Develop an implementation strategy.

4 33 lesson 17: Identify financing sources for short- and long-term implementation .33 lesson 18:Plan to help build the capacity of stakeholders ..34 lesson 19: Delegate implementation responsibility to local authorities ..35 ..EVALUATE THE POLICY ..37 lesson 20: Evaluate POLICY performance .. 37.. lesson 21:Tell a story process and results ..38 lesson 22: Learn to track what is important .. 39..LIST OF CASES .. 41.. 7/17/2007 1:30 PM Page eIVPOLICY REFORM LESSONS 7/17/2007 1:30 PM Page fPOLICY REFORM LESSONS LEARNEDINTRODUCTION1 INTRODUCTIONFor many years, development assistance to fostersustainable economic growth and social infrastructurein developing nations, focused mainly on fieldprojects, demonstrations, infrastructure investments, andcapacity-building programs for various civic organizations(NGOs) and government ministries.

5 However, over the lastseveral decades, development practitioners havedemonstrated an increasing appreciation for POLICY REFORM asa means to obtain far greater, and more enduring results andbenefits. This report reviews experience gained from creating andexecuting programs focused on designing, implementing,and assessing economic development-related POLICY reformsand strengthening the organizations engaged in POLICY is intended as a practical guide for developmentprofessionals with operational responsibilities for policyreform, including their donor partners in governmentministries, local as well as international NGOs, variousaffected parties.

6 And donors and donor-funded is also designed as a quick reference guide that includes abrief introduction to POLICY REFORM fundamentals in thecontext of economic development. It contains presentationsof twenty-two LESSONS LEARNED and a selected list of casestudies that appear in the full report (included in the CD-ROM provided in the pocket on the inside back cover ofthis report). POLICY FUNDAMENTALS The challenge in assisting POLICY REFORM and developmentpartners is to learn how POLICY REFORM might bring aboutactions that will then lead to improved and sustainabledevelopment outcomes. POLICY REFORM , as we see it,encompasses two main thrusts: a) changes in laws, decrees,regulations, the enabling framework, and b) improvingthe institutional capacity of development partners toimplement the enabling framework Public policies can impact the developmentperformance of a country.

7 Two types of policies typicallyhave economic ramifications:Targeted Sectoral/Industrial Instruments. Designedexpressly to address specific development issues by setting (orchanging) POLICY the "rules of the game" that guide thebehavior of businesses and households related to, ,production, consumption, use of Public resources, costrecovery of Public services, and full cost policies. Designed to meet economicdevelopment or stabilization objectives, these policies canhave positive or negative economic impacts. Examplesinclude policies to restructure the energy sector which reduceboth fuel use and air pollution; fiscal reforms that reduceofficial debt, lower interest rates, and increase incentives forprivate or Public sector investment; and trade policies andagreements that may provide inducements for better orworse corporate performance.

8 Coherent and effective programs to improve developmentoutcomes will require careful attention to all developmentassistance activities, not just those directly focused ondevelopment POLICY . A necessary starting point is to agree ona common development COMMON DEVELOPMENTFRAMEWORK:THE POLICY PROCESSP olicy effectiveness is enhanced to the extent that there is aconcerted and coordinated sequence of stages that start withan assessment of the POLICY opportunities this is oftenthought of as diagnosis, or as problem definition. Another wayto consider this task is that it concerns the quest for policyreform opportunities.

9 The second stage is concerned 7/17/2007 1:30 PM Page 12 INTRODUCTIONPOLICY REFORM LESSONS LEARNED design of a POLICY solution entailing how to change the"rules" and their associated implementing mechanisms by:(1) analyzing opportunities to improve economic outcomes;(2) improving institutional capacity; (3) assessing theprobable impediments to POLICY REFORM ; and (4) formulatingfeasible POLICY innovations. The third stage is implementationof those innovations developed in the design phase of theprogram. Finally, there is the essential work of monitoringandevaluationof the outcomes of the REFORM process.

10 Thesestages can be portrayed as a wheel (see Figure 1).Notice in Figure 1 that this on-going process is coordinatedand facilitated "managed" by stakeholders from a varietyof settings and circumstances who nonetheless agree tomaintain a continual and constructive dialogue about theprocess. It isimportant thatthese stakeholdersbe sensitive to theimportance oftiming andtimeliness, andthat they make acommitment toopen, on-goingand arrows inFigure 1 capturecritical flows and lasting POLICY REFORM will be enhanced tothe extent that the general spirit of Figure 1 is central to thepolicy process. While the stages illustrated in the rim of the " POLICY wheel"move forward logically from diagnosis through to evaluationin an apparently linear fashion, it is important to note thefunction of the arrows moving from the stages to the are bi-directional because POLICY champions not onlymanage the inputs and outputs of each stage but they alsoreact to feedback from various stakeholders that occurs ateach stage; feedback which is used to adjust design, analysis,timing, dialogue and information flows throughout thepolicy process.