Wrestling with PHN Graduation by USAID

Wrestling with PHN Graduation by USAID

Presented by Alonzo WindOffice of Human InvestmentsUSAID/Nicaragua - March 2001

Grateful Acknowledgement to the 1999 CDIE Frank Martin - Stephanie McNulty Report

Significant Bibliographic Support from Brook Larimer, CDIE/RRS

March 12, 2001 Wrestling with Graduation 3

What is graduation in USAID? PPC and M bureaus have argued: “Building on the tremendous progress that has already been made through U.S. support for development and relief programs, a clear measure of ultimate success for USAID's programs will be the number of countries that no longer require assistance, and can be considered "graduates" of the need for external assistance. At that point, these countries will have the capacity and institutions necessary for autonomous development and crisis management.”


Graduation Expectations USAID reported to Congress in FY98 that assuming a

relatively constant level of resources over the next five years, USAID expected to graduate up to ten countries (primarily in Eastern Europe and the former Soviet Union, but also in other regions). Over that same period, USAID suggested it would fulfill objectives and be able to terminate funding in specific sectors in seven additional countries. Several other countries were supposed to reach the point where the in-country presence of direct-hire USAID personnel would be no longer necessary, and where “targeted assistance [would be] provided through strategic partnerships with U.S. NGOs, including private voluntary organizations (PVOs), and for-profit organizations.”


Graduation Projections

By FY2007, USAID expects to graduate more than thirty countries from assistance, including eight countries which are recipients of development assistance as well as most of the countries in Eastern Europe and the Newly Independent States.


How do you determine readiness?

An assisted country’s overall level of development is described by PPC as a combination of its economical and social sector achievements in several different areas, including real income per capita, degree of technological dissemination and incorporation, educational levels in the general population, general health levels and nature of health problems, institutional capacity of public and private sector organizations, etc.


What can we really measure?

The level of development becomes a subjective measure depending on the degree of emphasis given to economic or social sector indicators; as a result USAID generally avoids broad categorization of countries as developed or developing.


There’s always politics...

The threshold for development assistance becomes more complex, with the identification of which countries that should be “graduated” on the one hand due to level of high performance, and the identification of which countries that should be dropped due to perennial poor performance as a development partner or other political externalities.


OE and Staffing Pressures

There is a further threshold for determining which countries can effectively host “full-service” fully staffed USAID Missions, generally seen as 8 or more USDH positions. Shrinking USAID resources have reduced the number of possible full service Missions.


So what happens?The pressure on development assistance and OE funding has meant in practical terms that USAID graduates countries with relatively modest levels of income and development; this graduation is generally viewed as “premature” for many countries that might still offer strong opportunities for promoting significant progress. These are countries that may have a per capita annual income of approximately $750, or close to the bottom of the World Bank’s lower middle

income category of nations.


In theory...

… where other political externalities do not otherwise intervene, the decision to graduate or not would fall from a determination of the institutional capacity of a country to manage its development without further foreign assistance, extrapolated from the achievements of countries in terms of levels of per capital income, levels of education, growth supporting economic policies, etc.


But in practice...

the professional and managerial judgement and discretion of USAID staff intervenes, playing an important role in the decisions. Some countries are viewed as having greater capabilities to continue than objective indicators would otherwise suggest. These justifications are more often than not driven by harsh resource limitations, leading to decisions made in 1994 that USAID would close Missions

in Thailand, Costa Rica and Tunisia by the end of FY96.


The “Transitional” argumentThe collapse of Communist regimes in the former Soviet Union and Eastern Europe led to political decisions driven by USG foreign policy interests to provide short term transitional programs to support conversions to market economies and democratic institutions. These transitional programs, while for countries well above the general income level for graduated countries, were intended to be of short duration and have been phased out progressively since 1998, with the last programs intended to end by 2002.


Executive Branch concerns

Clinton Administration concerns about global issues such as environmental degradation, global warming and population growth have provided a justification for continuing focused support in some upper middle income countries such as Brazil (which was “graduated in the early 1970s) and Mexico. What will the concerns of the Bush Administration be?


Bilateral vs. Global Concerns

USAID’s institutional culture consists of a binary country-based approach: “on or off.” However, global issues are rising to countervail this force. Issues such as HIV/AIDS, the environment, and population are global in nature, affect the United States, and demand a global response.


Global Bureau POVG Bureau looks at issues functionally, not geographically. USAID does not have a traditional presence in many countries that are big global actors (Mexico, Brazil, China, and India). One manner to redefine the USAID relationship is to go from a traditional bilateral relationship to one that deals with global issues. G argues that graduation could be replaced by ranking country- based and field-based programs, then have flexible missions and staff. The Agency can use objective criteria but still avoid the “bean counter” approach to closeout.


G Bureau Role?

Could G Bureau set targets and objectives, meet them and then re-allocate resources? This could be done on an Agency-wide basis. In theory, USAID should be able to say the country is progressing, and our work is done. This is hard, for two reasons.


Problems with G Setting Targets

First, foreign policy issues always override these decisions.

Then, we tend to use traditional indicators, like per capita income and economic growth indicators, that don’t measure sustainability. These indicators can change overnight. The Agency needs to look at better indicators, look for long-term trends and institutional sustainability.


What are the qualifications?

Possibly... existence of competitive and performing markets existence of an active civil society and

democratic institutions and practices capacity to provide basic education for both girls

and boys effectively capacity to provide basic health services to the

population (including family planning), such that mortality and fertility trends continue to decline to manageable levels.

capacity to manage the environment for long term sustainability.


Should it be by sector or country?

Looking at criterion that justifies continued development assistance would be useful. Then the Agency could decide when countries and donors could take over programs. A graduation policy would help the Bureau set up a rational decision making process when allocating resources.


Practice makes Perfect

Is out, out? In Mexico and Brazil USAID went back in. The AA decided, the Bureau made recommendations, then they went back and forth. Some decisions were personalistic and political. For example, LAC made an argument to leave Jamaica based on indicators, then stayed because of the Ambassador’s contacts.


Is LAC comparable to E&E?

No, E&E is a short-term program with different goals. Arguably, LAC has no explicit graduation policy, although the Trends Analysis is a wannabe. There may be a de facto strategy (if one looks at Costa Rica, Chile, Uruguay, and Belize). But, “backsliding” should be monitored and fully understood.


Backsliding or Embracing Error

LAC tries to graduate sectors sometimes (for example, DR graduated child survival, and now is back again). The Bureau saw very little movement and thought that the Dominicans could take over, then realized otherwise.With Ecuador we were out, then back in, then back out. Are we sure we should stay out?El Salvador seemed to be heading for a sector phase-out, but how will earthquake reconstruction affect those plans?


Backsliding or Embracing Error

Chuck Costello ex G/A-DAA helped plan USAID/Ecuador’s last family planning project in 1992 that proposed a financial analysis of the sustainability of providers. They endowed two NGOs (one in the mountains and one on coast) and planned to graduate the sector. The plans were cancelled and USAID went back in for five years. Now scheduled to end in FY2001.


LAC Considerations

Partially drawn from interviews in LAC Bureau, October 24, 1997Attendees: Janice Weber, LAC/CA, Vince Cusumano, LAC/SPM, Karen Anderson, LAC/ SPM, John Eriksson, and Stephanie McNulty CDIEDiscussions with Bob Meehan, John Coury


LAC Considerations

Mexico is an interesting case; USAID is there for primarily foreign policy reasons. USAID left Belize because programs were low impact (small population) and social indicators were OK.Presumably graduation occurs when targets have been met. In some countries dates have been set. There are different reasons in each country that led to sector graduations.


LAC Choices in the Past

El Salvador: Transition to peacePanama: Closed Justice SOChile: Closed Pop before close-outColombia: Pop closedGuatemala: Bilateral Trade SO closedJamaica: D/G SO closed


LAC Future Considerations

Decisions are made during R4 and strategy process. (Mainly population, child survival.) Sector graduation is a combination of meeting targets, graduating missions and budget cuts. The Bob Meehan Hit List: Mexico: Pop, 2000 Brazil: Pop, 2000; DR: Child Survival; Ecuador: Child Survival, 2000. Will we or won’t we? Should we?


LAC Perspective on Policy in the Past

“The LAC Bureau is fully phasing out some of its programs and considerably down-sizing others. Over the past several years, the Bureau phased out five country programs, reducing the overall number from 21 to 16. Of the five, only Costa Rica is considered to be a legitimate “graduate” country, i.e. all of the Bureau’s goals and objectives in sustainable development program covering more than two decades were achieved…

The Bureau was instructed to cut back to cut back to seven “sustainable development programs” …The Bureaus’ phase-out and down-sizing have been mainly based on U.S. foreign policy interests and OE constraints.”


For PHN - thinking strategically

Perhaps there is Added Value in Linking Graduation or Phase-out to a Sustainability Plan at the OutsetThe lessons suggest that the health and family planning projects most likely to be sustained include a sustainability plan at the outset, as well as a plan to phase out donor assistance and phase in local support. The literature suggests that sustainability does not just happen: it has to be planned for.


Link to best practices

Brazil’s IPPF program is a “best practice.” The Colombia PROFAMILIA is another good endowment. It was one of USAID’s first endowments and was said to not be a good example from bureaucratic side. However it functions well today. Bolivia’s PROCOSI endowment is a “best practice” for NGO sustainability, although not a graduation experience (yet).


But...

Endowments can be quick fixes that do not always work and are hard to sustain.


In leaving a country, LAC can use a number of filters

Per capita income. A tension arises if a country has a high per capita income (over $1500-2000) and the Bureau argues for funds. These expenditures will need to be justified. For example, in Costa Rica per capita income filters were used inadvertently.

Global issues. For example, the Agency said out is out in Costa Rica, but LAC knew there would be a continued global interest there. Now there is a bio-diversity program that targets CR but is run from a regional environment program in Guatemala. LAC used a regional activity legalism

to get around restrictions.



Sector targets. The Agency may lean to a sector graduation policy (somewhat related to the R4 process). LAC’s strategy revolved around the sector earmark process (Environment, Child health, and AIDS). The idea is to pick some “key countries,” do a lot well, then get out.

LAC adopted a strategy to take the money and go “full hog.” This became 40-50% of the development assistance budget. This was a strategic decision. Other regions fought earmarks. LAC has better indicators, so they could use the short-term money and get out (for example in the DR).



The Agency set standards for “key countries.” For example, to receive child survival money the country had to have more than 75 deaths per 1000 births. PHN programs go to countries with less than 65% contraception prevalence.

The R4 strategy process is the ideal forum for these decisions. However, the R4 process goes at a leisurely pace while typically “graduation” decisions need to be made rapidly, due to budget cuts.



Country-specific issues. One country may have a specific constituency or interest that keeps the Agency in. For example, in Guyana, Jimmy Carter wants to work with race relations.

And money is the continuing driving force: if the Bush Administration increases funding for LAC, will that undermine arguments for close-out, phase-out and graduation?


National vs. sub-national focalized realities

In Mexico and Brazil arguments were made that the indicators did not reflect the reality in many regions of the country. Bob Meehan calls these “possessive arguments” made by dedicated professionals who felt they have not yet completed their job. LAC decided in these two cases to differentiate between public sector and private sector assistance in PHN. “But they also have to realize that USAID can’t do everything. There is a point at which their job is to decide when the

country (or other donors) can take over.”


Some Key Country GleaningsMorocco: Success makes the portfolio an immediate candidate for graduation, and social sectors tend to go first. This is ironic because social sectors have better data, can see positive effects and backsliding better.

The experience would have been improved if there had been a high level (USAID and host country) expression of commitment to graduation from the beginning. USAID prepared to close; however their partners were in denial because they never heard

the decision confirmed at the top.


Some Key Country Gleanings

The rules of the game in Indonesia are unclear and transparency is limited. USAID could work towards privatizing the family planning services and encourage transparency, all of which fit into Agency goals. This could be the crowning moment for USAID (would take four to six years for government to make and implement policy and community to take ownership—therefore, sustainable. The biggest problem in Indonesia is the failure to take into

account external shocks.


Some Key Country GleaningsMexico is similar to Indonesia in that there is strong institutional support (governmental). The Mexicans want a continued USAID presence, even if the presence is symbolic. They fear USAID’s exit will precipitate other donors’ exits. Conventional wisdom states that if a donor leaves, other donors will pick-up projects. This is not the case; donors don’t like to pick up other donors’ projects. Sustainability indicators look good. However, the program has focused

on service delivery, not national advocacy.


Some Key Country Gleanings

Chile is an interesting example. USAID left Chile 20 years ago then went back in with limited objectives (NAFTA, D/G). Chile is now a great regional partner.


Some Key Country GleaningsAnother case is Tunisia. The Tunisia PHN portfolio was phased out first. G treated Tunisia as a case in what to do technically in order to have a smooth transfer. PHN was phased-out from 1988 to 1990. In 1992 the Mission closed. What has changed? Has Tunisia continued to perform? In 1992, Tunisia asked for additional support. USAID may have over-estimated the institutional capacity of the government to sustain programs. USAID also assumed that the private sector would step up and get involved, which didn’t happen.


Some Key Country GleaningsIn Russia, the State coordinator promised Congress that USAID would be out in 5 years. At that point relations would be “normal” (in terms of diplomacy, the economy and civil society). However, when and what is normal? Idea of “equality” as an aspect of normalcy crept in. USAID said Russia needed stronger institutions in order to have normal relations. However, State wanted USAID out (State associated USAID with bad management and bureaucracy). USAID’s presence sent signals that Russia is part of the “third world.” USAID didn’t fit into the “normal” relationship.


Threats Remain...

The lack of understanding about where USAID is and what they are doing is a vulnerable point for the Agency. Funds are hard to track. Congressional staffers seem unamused by the “roll-up” in Budget Presentations and the loss of detail in reporting and funding requests


Threats Remain…which could short-circuit graduation

USAID is not a foundation. The Agency is public sector in nature, especially in terms of accountability. USG agencies work well with USAID. In terms of trade, USAID works well as the “honest broker,” something PVOs can’t do. USAID fills a niche that few recognize. Some Bureaus in State, PVOs, Faith-Based Organizations and some USG Agencies want to replace. Helms remarks to Powell...


Threats Remain...Arguably, USAID’s goals need to be carefully examined. The question should not be “should a country graduate,” but should the Agency and DOS in a MPP begin to view the bilateral relationship in different ways. USAID should get out if things are going well and stay when needed. Relationships may be bilateral or regional. USAID and DOS need to agree on the results that they want, the resources they need to get those results, then allocate as necessary. USAID needs to change the paradigm from the outset--get out of the boxes, be

more flexible.


What’s required?

Develop Specific Graduation and Phase-out Strategic Plans for Each Recipient Country - But Not on Artificial Timescales: Programs should describe a long term process which in some cases which may require 5, 10 or 20 years of assistance. R4s should gauge the progress on these plans and make it an explicit part of the Management Contract of Mission Senior Management Teams, evaluated with a baseline at beginning and then at end of tours.


What’s required?

Promote Indicators and Milestones That Gauge Fundamental Changes: Traditional PHN indicators showing incremental change akin to the R4 tables are probably not the best measure for phase-out and graduation; they won’t capture the institutional change and increased potential for sustained host country commitment that we really want to induce.


What’s required?

Apply an Integrated Approach to Supporting National Poverty Reduction Strategies and HIPC: Backsliding is always going to be a risk for PHN sector phase-outs if true poverty reduction and national government re-alignment of resources is not relentlessly pursued.


What’s required?

Re-start Strategic Partnering: USAID held a number of public meetings in the mid 1990s discussing a strategic partnering plan for graduating countries. ACVFA formulated a strategy to gather a body of experience and mechanisms to use to continue presence after graduation. The process was transparent and deliberative. The Agency then decided to “look inward” and talk to its own staff, but has done nothing since. Missions have never been consulted (nor have southern NGOs) and the PVO community became disappointed and anxious.


What’s required?

True Donor Leveraging and Coordination Starts in the Field: Major energies are devoted in Washington to this, but success in this area is still not amply rewarded by the Agency. It remains a back burner issue not aggressively pursued (viz. Common Agenda with Japan?)


What’s required?

Piecemeal Distribution of Resources from Major New Initiatives (viz. LIFE) is Probably Counter-productive: Addressing AIDS as a “Marshall Plan” level priority can never be achieved in an environment where Sub Saharan Africa receives an average of 3-5 condoms per year per sexually active male


What’s required?

Close Down LPA and Let Congress Learn the Real Story from the FSNs and FSOs in the Field: Staffers and Members despise USAID to a great extent due to the regular diet of regurgitated and non-responsive news they receive. They need to see the real work of USAID.

Wrestling with PHN Graduation by USAID

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