Those negatives include the possibility that consumers will continue to keep a tight hold on their purse strings, so reducing demand in the economy. The reasons for that vary: some people may be paying off debts while others may put off spending because of unemployment, or the fear of losing their job, and concerns over continued weakness in house prices. On the plus side, the OECD says corporate profits are “robust” and that levels of private investment are so low they can probably now only go in one direction – up. (A decline would take even more steam from the economy.)

The OECD also believes that the worst of the turmoil on financial markets may now be over, although risks remain, and notes that emerging economies like China and India are doing well, which should benefit the wider global economy. As for the hard numbers, the OECD sees the pace of economic growth slowing over the course of this year in the G7 countries. It cites GDP growth of 3.2% in the first three months of 2010 and 2.5% in the second quarter, and forecasts falls to 1.4% in the third quarter and just 1% in the fourth.

Useful links OECD work on economics

Insights: From Crisis to Recovery

According to the QS listing, when you exclude British universities, only one European institution features in the world top 20 and only three – two in France and one in Switzerland – in the top 50.

Of course, any such ranking reflects the methodology used to create it, as Daniel de Vise  and The Chronicle of Higher Education explain . Different criteria would produce different results. On the other hand, other rankings, such as the widely cited league table  from Shanghai Jiao Tong University, also suggest that Europe’s universities are not keeping up with the world leaders. Also worrying, a report  from the Lisbon Council suggests that, more broadly, university systems in a number of European countries are failing “to make their education systems more open, democratic and readily accessible to a broader range of people”.

By the way, the OECD is hosting a conference on higher education next week under the title “Higher Education in a World Changed Utterly: Doing More with Less” . You can find out more about the event on the OECD’s educationtoday  blog, and follow the discussions via a live webcast starting Monday morning.

Useful links

 OECD work on higher education

 OECD Insights: Human Capital

 “Europe’s university challenge”   – from the OECD Observer

1. Generally in OECD countries, which age group is more likely to have a university-level qualification?

a. 25-34 year-olds  b. 55-64 year-olds

2. Around the world, 3.3 million tertiary students study abroad. In which of these OECD countries do foreign and international students make up the biggest slice of the student population?

a. Australia b. Switzerland c. The United States

3. Between primary and tertiary education, how much do OECD countries spend per student each year (in U.S. dollars)?

a. $1,688 b. $5, 644 c. $9,195

All these questions are based on data in OECD Education at a Glance, a compendium of data and statistics on education released every September by the OECD. It covers an enormous amount of ground, including how far young people and adults have studied, the economic benefits of education, who pays for it and conditions in schools and universities, such as teaching hours and student numbers. The point of collecting the data is to give OECD countries a basis on which to make comparisons about their education systems. This is important as there can be big variations in how well students perform in individual countries, even with similar levels of investment. As OECD Secretary-General Angel Gurría said at the launch of Education at a Glance in Paris this morning, “In a global economy, it is no longer improvement by national standards alone. The best performing education systems internationally provide the benchmark for success.”

And the answers to those questions …

1 a: 25-34 year-olds ;  younger people are much more likely to have been through tertiary education in OECD countries, a reflection of the expansion of university-level education in recent decades.

2 a: Australia ; more foreign students go to the United States in absolute terms, but they account for a bigger share of the tertiary student population in Australia, more than one in five.

3 c: $9,195 ; most of the money goes on salaries for teachers and other staff.

Useful Links :  

Education at a Glance 2010

The weather's interesting and the Statlinks are lovely

 What’s a StatLink? It’s a file with all the numbers (and sometimes more) that lie behind each OECD chart and table. Useful for researchers, and popular too – more than half a million files downloaded so far this year, and counting …

Click on the logo to find out more:

Still, they do produce some startling revelations. Speaking to the US Financial Crisis Inquiry Commission yesterday, Dick Fuld, head of Lehman Brothers when it collapsed, said: “Deregulation of the financial industry and lack of government control helped us to make substantial profits in the years leading up to the crisis, so naturally we only have ourselves to blame for the mistakes and mismanagement that led to our bankruptcy”.

Ha ha, only kidding. In fact, he blamed poor decision-making by, wait for it: the Fed. Here’s what he actually said according to the New York Times: “Lehman was forced into bankruptcy not because it neglected to act responsibly or seek solutions to the crisis, but because of a decision, based on flawed information, not to provide Lehman with the support given to each of its competitors and other nonfinancial firms in the ensuing days”.

So, nothing to do with overleveraging, bad bets or Repo 105, an accounting trick that classifies a loan as a sale, thereby reducing Lehman’s liabilities by $50 bn (but only on the balance sheet).

Governments, as we all know, had to step in to clean up the mess, and not just in the US. From October 2008 to May 2010, more than 1400 bonds backed by government guarantees were issued by around 200 banks from 17 countries, for an amount equivalent to more than a trillion dollars.

Aviram Levy of the Banca d’Italia and Sebastian Schich of the OECD’s Financial Affairs Division look at the consequences in an article for the OECD Journal. They show that the guarantees have been effective in resuming overall long-term funding for banks and reducing their default risk, but at least two major issues now have to be addressed.

First, relatively weak banks with strong governments backing them (“sovereign guarantors”) have been able to borrow more cheaply than strong banks with weak sovereign guarantors.

Second, extending the scheme into 2010 allows non-viable banks to take advantage of the continued availability of guarantees and postpone addressing their own weaknesses or, even worse, adopt excessive risks in a “gamble-for-redemption”.

You can’t legislate against the toxic combination of ignorance and arrogance that brought the financial system crashing down. But governments and taxpayers shouldn’t be seen as blood donors permanently on call to stop banks dying from self-inflicted wounds.

Useful links

OECD work on financial markets

OECD Insights: From Crisis to Recovery

Water is emerging as one of the most serious and controversial resource and environmental issues of the twenty first century. Fundamental water shortage, chronic environmental despoliation of water systems and irreversible debilitation of associated land and marine systems looms, while public expenditures on increasing and improving the water supply are increasingly unaffordable.

A great many of the world’s water “markets” are distorted as a consequence of inappropriate incentive–disincentive systems. The observations of Professor R.H Whitebeck, commenting in the Geographical Journal on early irrigation development in California in 1919, that irrigation development “… was occurring at too rapid a rate and at too high a price”, remain as poignant now as they were insightful nearly a hundred years ago. From the experience of the irrigation colonies of the Chaffey Brothers in Northern Victoria to the Central Arizona Project and, the failures of irrigation in the Central Asian republics, the lack of financial viability of irrigation in the absence of substantial public subsidy is a general rule – even in the paragon of efficient trickle irrigation and high cost irrigation water, Israel.

In many cases the drivers of water development have been political expediency and a desire to end food shortages in many poor countries, with little attention to the costs, the benefits and the prices of water.  The inevitable result of the irrigation-led revolution in water development and regulation, seen throughout much of the twentieth century, is that a huge amount of water is being wasted…

Relative to the consideration of cost recovery, the net returns to irrigation farmers are barely able to cover a small fraction of the annual operating, maintenance and the administrative costs of water management, while the prospect of contributing a meaningful financial return on the capital invested in the irrigation projects (the largest component of water cost) remains but a dream in just about every country on the planet. Societies and whole nations are expending considerably more on diverting and managing water than they are reaping in productive returns. And in many cases, given the lack of profitability, the high environmental costs of the market distortion are beyond the scope of consideration.

Water shortages are looming in both developed and developing countries, as river and groundwater systems become perilously despoiled. New urban and industrial users are pleading for more water, while the established irrigation – agricultural users who control most of the water in many countries, are adamant that they still need much more water to keep their systems going. Ironically, despite the near collapse of many irrigation – agriculture systems, the very low water prices levied on this sector will always stimulate more and more demand for water. On the face of it this water scenario appears headed for collapse.

However, with several leaps of reasoning and a bit of courage, there could be some light at the end of the tunnel.

First, there needs to be recognition that in many cases the apparent water shortage results from problems with the institutionalised process of supply and price/rate setting, rather than extraneous hydrological conditions. A good deal of existing water management at national levels appears to have difficulty realising and dealing with this.

Secondly, it is necessary to dispel the starvation – food shortage myth. It is quite clear that the real terms of trade for food products has been falling steadily for most of the past hundred or so years, indicating an obvious trend in food availability. Additionally, where food “disruptions” have occurred, the root causes can be hammered back to political “games” gone wrong mostly in poor countries, or the distortion of significant world food markets as a consequence of gross subsidization of agriculture in rich countries. High priority water for food is not as serious an issue as has often been made out.

Thirdly, there is a lack of will to move water away from agriculture as a consequence of a conception that it could decimate a whole sector which is often characterized as containing some of the poorer members of the community. The fact is that many of those poorer segments of this sector are suffering already and will suffer very much more unless reasonable readjustment programs are instigated in the near future to give them something else to do besides farming a failing irrigation agriculture.

Ironically, the actual amounts of water which need to be moved from the very low value end of irrigation, to urban, industrial and high end agriculture are not that great, and the pending benefits are enormous.

In many parts of the world, where three quarters of a country’s regulated water supply can be expended on irrigation and agriculture, the need might be to move as little as 10 to 15 percent of the water used in low value agriculture to the higher valued uses over the next twenty years. Another 10 percent could remedy much of the environmental despoliation. And the “nice” twist is that the higher valued users could also pay considerably more for their new supplies, so that a more reasonable balance of marginal returns to marginal cost could be achieved, thus reducing the subsidy burden borne by the long suffering taxpayers.

Being proactive in this way, means that some surplus could be extracted from the apparently stressed water resources, which should enable a reasoned “reassignment” and retraining of the low value irrigators, who are often poor. As well it should enable some remediation of the environmental condition together with refurbishment and appropriate augmentation of the existing stressed systems.

The blind focus on water problems and management as simply being that of hydrological scarcity, needs to be broadened to consider the institutional and economic setting within which water is developed and used. The real needs are to appraise the demands and supply of water in an economic way which accounts costs explicitly and enables prices to be applied to achieve a better outcome for many. (In a positive way the OECD focuses its efforts on the policy and institutional responses on pricing, financing infrastructure and sustainable management of water resources). Ironically, the “fear” of prices for water (poor people can’t pay), inevitably means that poor farmers will be committed to a life of servitude as their livelihood disintegrates underneath them, while at the same time other, often poor, taxpayers carry the burden of the very substantive subsidies and environmental cost which are funnelled into irrigation agriculture.

Water management in many national settings has been delinquent in identifying the institutional and economic underpinnings of wide scale water shortages and water despoliation, and it is timely to consider this failing and establish a pathway to reform as a matter of some urgency. Current issues and reform of world water management will be considered in two special issues of the International Journal of Water.

Useful links

OECD work on water

Click on the photo to see why they like berries

Vietnamese farm-workers recently locked up their bosses to protest against low pay and hard working conditions. Their action might well have gone unnoticed except for one thing: It happened in Lapland.

But in recent years, this tradition has become commercialised, with thousands of foreign workers flying in to reap the wild harvest. In the past, many were rice farmers from Thailand. They planted their rice in June, travelled to Sweden for the summer berry season, and then returned home to harvest their own rice crop in the autumn. As Bertil Lintner writes, the work was hard but lucrative, with workers bringing home between $2,850 and $5,700 – “much more than a doctor or other well-paid professional back in Thailand”.

Lately, however, the annual trek has become less rewarding. Travelling to Sweden has become more expensive and the berries are harder to find. One picker told the Bangkok Post that he used to be able to find wild berries within 20 kilometres of a town centre. But these days he has to drive 100 to 400 kilometres. In part that’s just because some years are good for berries and some are not. But it also reflects growing competition.    

Problems came to a head this summer with the arrival of workers from China and Vietnam. Not only did they hit a bad summer for berries but, according to locals, many were spooked by the mosquito-ridden northern forests and had little farming experience.

 The workers also complained of impossible targets. One of them, Le Thi Hong, said the recruiting agency had promised workers they would be able to pick between 60 and 120 kilograms of berries a day, Västerbottens Folkblad reported. In reality, he said, they were lucky if they could manage 10 to 30 kg. Workers had mortgaged their homes to travel to Sweden, he added, and risked losing them if they didn’t meet their targets. Discontent led the Chinese and Vietnamese pickers to stage a series of protests over the summer, including locking up their bosses and going on a 15-kilometre night march.

The story is unusual but, unfortunately, not all that rare. Fruit-picking can provide useful, short-term labour, but it’s also often rife with scams. Many pickers are hired by contractors and may have to pay relatively high up-front fees, which they can only earn back by meeting quotas. Many also are seasonal workers, and so may have limited protection under labour laws. (And, while there’s no suggestion of forced labour in Sweden, in the worst cases farm-workers – both locals and migrants – may effectively be slave labour, as this ILO report discusses.)

Sweden has tried to protect the pickers by issuing warnings about scams through its embassies and imposing a minimum wage. Local unions, however, say more needs to be done. But in reality there’s probably only so much the government can do: So long as hiring agencies in the pickers’ home countries create unrealistic expectations, would-be fruit pickers are going to be open to exploitation. Back in Sweden, there have been calls for a boycott of commercially picked berries to show support for pickers who have been unfairly treated. But, as Isabel Conway comments, the idea of giving up their beloved berries “may be a sacrifice too hard for many Swedes to swallow”.

 Useful links

OECD Insights: International Migration

 OECD work on international migration

Social issues (including migration) at the OECD iLibrary

The International Labour Organisation

Migration and asylum policy in Sweden (government website)

Click on the image to go to the Acción Social site (in Spanish)

This contribution to the debate on aid ownership comes from Sandra Alzate, Director of International Cooperation, Presidential Agency for Social Action and International Cooperation – Acción Social, Colombia. You can see French and Spanish translations by clicking on the “more” tag.

I would like to express our rejection of the conclusion of Joel Brinkley in his article: “Don’t let Haitians help themselves“, according to which “if the World wants to help Haiti, aid officials should put aside the Paris Agreement on Aid Effectiveness. The donors should decide what to do with their money. The Haitian “government” can have no more than an advisory role, or nothing will ever change”.

There are several points to mention.

As expressed in the article, there have indeed been decades of unproductive work; unproductive work that gave rise to the reflections and actions for more effective aid strategies, both in countries dependent and not dependent on aid.

The Paris Declaration (PD) and the Accra Agenda for Action (AAA) have become a commitment of the international community with the most vulnerable populations of the world. Colombia shares the principles of the PD because it locates the responsibility for development with the so-called partner countries, and because it understands international cooperation as complementary to national efforts.

In particular, the principle of “ownership” is seen by Colombia as the origin of the aid effectiveness chain, and necessary in order to strengthen leadership, coordination, dialogue and interaction between all the development actors, thus enriching their cooperation policies and practices.

It is in this scenario that Colombia has played an active role in the international debate. This has generated new spaces of dialogue and has promoted the incorporation of the effectiveness agenda, and of subjects like broadening and the  democratization of the term ownership, the promotion of using national systems and mutual evaluation mechanisms, the recognition of the role of NGOs, the reference to south-south and triangular cooperation policies, and aid information transparency.

As anticipated in the PD and AAA, donors have the responsibility to develop capacities and leadership in Southern countries so as to support the sustainable construction of their own development. Nevertheless, traditional cooperation models in Haiti have reflected a lack of work from donors related to this responsibility (lack of capacity-building, creation of dependence, fragmentation of initiatives, high transaction costs, weakness of accountability, and lack of transparency).

Considering these factors, ownership becomes the common denominator that must govern in a vulnerable and, for decades, criticized context like the one in which Haiti has been living. This principle allows the exercise of an effective authority of development policies and strategies where donors respect the leadership and they contribute to local capacities development and strength.

To imagine a scenario like the one raised in the conclusion by Brinkley, where the Haitian reality reflects the presence of multiple international actors working to develop the country, without guaranteeing a firm leadership and an active participation of the Haitian government, only generates a lack of organization of the numerous cooperation actions, and a negative impact for the future generations of Haitian society.

Colombia, as a Middle Income Country, positioned as a donor of financial and technical cooperation in Haiti, has felt deep solidarity with the Haitian Government since the earthquake of January 12, 2010. As a result, Colombia participates as an observer in the Interim Recovery Haiti Commission (IHRC) and is using the Haiti Reconstruction Fund – created by the Government of Haiti and managed by the World Bank – to realize, as a request of the Government, a donation of $4 million for budget support to the agricultural and land reconstruction sectors.

Colombia has also seen in South-South Cooperation an opportunity to promote in Haiti a new philosophy that encourages an integrated and new approach to development, based on a coordination scheme between all the actors involved, connecting the emergency and recovery stage, and guaranteeing the active participation of local communities in decision-making.

What the author proposes in his article is not new, but is a scenario that has caused a continued chaotic situation in Haiti. It is for that reason that we would like to invite the author to reframe his ideas and to better ask donors what they have done, or what they are doing, to develop Haiti’s capacity for leadership.

 Je voudrais manifester notre rejet à la conclusion de l’auteur Joel Brinkley dans son article « Don’t let Haitians help themselves », selon lequel il déclare que « si le Monde veut aider Haïti, les fonctionnaires de l’aide doivent mettre de côté cet Accord de Paris sur l’Efficacité de l’Aide. Les bailleurs doivent décider que faire avec leur argent. Le « gouvernement » haïtien ne peut pas avoir qu’un rôle consultatif, ou jamais rien ne changera »[1].

 Plusieurs commentaires à évoquer à ce sujet :

 Comme le dit l’auteur dans son article, ce sont des décennies de travail improductif ; travail improductif qui a donné naissance à des réflexions et à des actions, pour rendre l’aide plus efficace dans des pays autant dépendants comme non dépendants de l’aide.

 La Déclaration de Paris (DP) et l’AAA sont devenues un compromis de la communauté internationale avec la population la plus vulnérable. La Colombie partage les principes de la DP dans la mesure où celle-ci place la responsabilité du développement dans les pays dits partenaires, et elle comprend la coopération comme un complément des efforts nationaux. En particulier, le principe d’appropriation est vu par la Colombie comme l’origine de la chaîne de l’efficacité de l’aide pour fortifier le leadership, la coordination, le dialogue et l’interaction avec tous les acteurs du développement, enrichissant ainsi les politiques et pratiques de coopération.

C’est dans ce scénario que la Colombie a jouée un rôle actif dans le débat international, ce qui a permis de forger de nouveaux espaces de dialogue et de promouvoir l’incorporation dans l’agenda d’efficacité, des sujets comme l’élargissement et la démocratisation du terme appropriation, l’élan à l’utilisation des systèmes nationaux et des mécanismes d’évaluation conjoints, la reconnaissance du rôle des ONG, la mention des particularités de la coopération sud-sud et triangulaire, ainsi que la transparence de l’information de l’aide.

 Comme le prévoit la DP et l’AAA, les donneurs ont la responsabilité de développer des capacités et du leadership dans les pays du sud pour la construction soutenable de leur propre développement. Cependant, les modèles traditionnels de coopération en Haïti ont reflété un manque de travail des bailleurs conforme à cette responsabilité (manque de développement des capacités, dépendance et atomisation d’initiatives, coûts élevés de transaction, faiblesse dans la reddition de comptes et manque de transparence).

En tenant compte de ceci, le principe d’appropriation devient le dénominateur commun qui doit régir dans un contexte vulnérable et, par des décennies, critiqué comme celui qui vit aujourd’hui Haïti. Ce principe permet l’exercice d’une autorité effective face aux politiques et stratégies de développement où les donneurs respectent le leadership et contribuent au développement et renforcement des capacités locales.

Imaginer une scène comme celle qui expose l’auteur Brinkley dans sa conclusion, où la réalité haïtienne reflète la présence d’un grand nombre d’acteurs internationaux qui travaillent pour le développement du pays, sans qui y ait une garantie de leadership ferme et une participation active du gouvernement, ne peut que produire un désordre des nombreuses actions de coopération et un impact négatif pour le futur des générations de la société haïtienne.

La Colombie, en tant que Pays à Revenus Moyen, placé comme donneur de coopération financière et technique en Haïti, s’été submergée dans la solidarité avec le Gouvernement haïtien après le séisme du 12 janvier 2010. En parcourant ce chemin, la Colombie participe en tant qu’observateur dans la Commission Intérimaire pour la Reconstruction d’Haïti (CIRH) et a utilisé le Fond pour la Reconstruction d’Haïti – créé par le Gouvernement d’Haïti et géré par la Banque Mondiale – pour effectuer, à la demande du Gouvernement, une donation de $4 millions de dollars pour l’appui budgétaire des secteurs agricole et de restructuration territoriale. De même, la Colombie a vu dans la coopération sud-sud une opportunité pour encourager une nouvelle philosophie en Haïti qui promeut le développement intégral, nouveau et basé sur un schéma de coordination de tous les acteurs locaux impliqués, en reliant l’étape d’urgence avec celle de reconstruction, et en garantissant la participation active des communautés locales dans l’orientation des décisions.

Ce que propose l’auteur dans son article n’est pas nouveau, mais est un scénario qui a rendu propice que la situation en Haïti soit également chaotique. Ce pourquoi, j’invite  l’auteur à remettre en question ses exposés et à demander aux donneurs ce qu’ils ont fait, ou font, pour développer la capacité de leadership d’Haïti.

Quisiera manifestar nuestro rechazo a la conclusión del autor Joel Brinkley en su artículo “Don’t let Haitians help themselves“, según la cual “si el Mundo quiere ayudar a Haití, los funcionarios de la ayuda deben poner a un lado  ese Acuerdo de Paris sobre la Eficacia de la Ayuda. Los donantes deben decidir qué hacer con su dinero. El “gobierno” haitiano no puede tener más que un papel consultivo, o nunca nada cambiará”[2].

 Varios puntos a mencionar al respecto:

 Como bien lo menciona el autor en su artículo, fueron décadas de trabajo improductivo; trabajo improductivo que dio origen a las reflexiones y acciones para hacer la ayuda más eficaz en países tanto dependientes como no dependientes de la misma.

 La Declaración de Paris y la AAA se han convertido en un compromiso de la comunidad internacional con la población más vulnerable. Colombia comparte los principios de la Declaración de Paris en la medida en que ubica la responsabilidad del desarrollo en los países llamados socios y entiende la cooperación como un complemento de los esfuerzos nacionales. En particular, el principio de apropiación es visto por Colombia como el origen de la cadena de la eficacia de la ayuda por fortalecer el liderazgo, la coordinación, el diálogo y la interacción con todos los actores del desarrollo, enriqueciendo así las políticas y prácticas de cooperación.

Es en este escenario que Colombia ha jugado un rol activo en el debate internacional, lo cual ha permitido generar nuevos espacios de diálogo y promover la incorporación en la agenda de eficacia, de temas como la ampliación y democratización del término apropiación, el impulso al uso de los sistemas nacionales y mecanismos de evaluación conjuntos, el reconocimiento del papel de las ONGs, la mención de las particularidades de la cooperación sur-sur y triangular, y la transparencia de la información de la ayuda.

 Tal como lo prevé la DP y la AAA, los donantes tienen la responsabilidad de desarrollar capacidades y liderazgo en los países del sur para la construcción sostenible de su propio desarrollo. Sin embargo, los modelos tradicionales de cooperación en Haití han reflejado una falta de trabajo de los donantes acorde a esta responsabilidad (falta de desarrollo de capacidades, dependencia y atomización de iniciativas, elevados costos de transacción, debilidad en la rendición de cuentas y falta de transparencia).

 Teniendo en cuenta lo anterior, el principio de apropiación se convierte en el común denominador  que debe regir en un contexto vulnerable y, por décadas, criticado como el que hoy vive Haití. Este principio es el que permite el ejercicio de una autoridad efectiva frente a las políticas y estrategias de desarrollo donde los donantes respetan el liderazgo y contribuyen al desarrollo y fortalecimiento de las capacidades locales.

 Imaginar un escenario como el que plantea el autor Brinkley en su conclusión, donde la realidad haitiana refleja la presencia de un sin número de actores internacionales trabajando por el desarrollo del país, sin la garantía de un liderazgo firme y una participación activa del gobierno, solo genera desorganización de las numerosas acciones de cooperación y un impacto negativo para el futuro de las generaciones de la sociedad haitiana.

Colombia, en su calidad de País de Renta Media, posicionado como donante de cooperación financiera y técnica en Haití, se ha sumergido en la solidaridad con el Gobierno Haitiano tras el terremoto del pasado 12 de enero. Al caminar por esta senda, Colombia participa como observador en la Comisión Interina para la Reconstrucción de Haití y utilizó el Fondo Multiactores – creado por el Gobierno de Haití y administrado por el Banco Mundial – para realizar, por solicitud del Gobierno de Haití, una donación de 4 millones de USD que apoye al sector agrícola y de reestructuración territorial. Así mismo, Colombia ha visto en la cooperación sur-sur una oportunidad para promover en Haití una nueva filosofía que promueva el desarrollo integral, novedoso y basado en un esquema de coordinación de todos los actores locales implicados, conectando la etapa de emergencia con la de reconstrucción, y garantizando la activa participación de las comunidades locales en la orientación de las decisiones.

Lo que propone el autor en su artículo no es novedoso, sino que es un escenario que ha propiciado que la situación siga igualmente caótica en Haití. Es por ello que invito al autor a replantear sus planteamientos y a preguntarles a los donantes ¿qué han hecho o están haciendo para desarrollar la capacidad de liderazgo de Haití?

[2] Tomado del artículo cuya  versión en ingles es: “if the World wants to help Haiti, aid officials should put aside that Paris Agreement on Aid Effectiveness. The donors should decide what to do with their money. The Haitian “government” can have no more than an advisory role, or nothing will ever change”.

Haircuts can be dangerous

OK, wurfing (surfing the web at work) didn’t make it into the new edition of the Oxford Dictionary of English published today, but toxic debt and quantitative easing did.

Speaking of which, haircut was already there. Eh? Haircut, you know: “US informal: a reduction in the stated value of an asset”.

That’s one of the terms you need to understand to follow the argument in a new OECD Working Paper on the stress tests 84 European banks passed so brilliantly in July.

Adrian Blundell-Wignall, Special Adviser to the OECD Secretary-General on financial markets, and his colleague Patrick Slovik point out that the tests only considered “trading book” exposures to sovereign debt, while over 80% of exposure is on the “banking book”.

The trading book consists of the securities a bank buys and sells regularly, even daily, while the banking book contains the products the bank would normally hold on to until they matured, including the bonds used to finance sovereign debt.

For the trading book, the haircut is around €26 bn in the stress tests. No haircut was applied to the banking book, on the grounds a default would be virtually impossible over the two-year period considered. The tests also assumed there would be no bank failures.

Blundell-Wignall and Slovik argue that these two assumptions help to explain why despite the encouraging test results (only 7 banks failed) equity markets are still performing poorly, bond spreads remain high, and banks are still reluctant to lend.

If a bank fails, it cannot hold on to the longer-term assets on its banking book, which would have to be sold for whatever they are worth on the day, even at a loss, and in fact there would be no difference between the trading and banking books. In other words, shifts in the market value of sovereign debt do matter, unless you assume that the stress-tested banks never fail. 

That’s a brave, or foolish, assumption in light of what we’ve seen since the crisis broke, but the assumption of no sovereign default over the next two years seems reasonable, given the €720 bn European Financial Stability Facility (EFSF) agreed earlier this year.

The EFSF could more than cover all the funding needs of the most exposed countries, even in the highly unlikely case that no securities could be sold on the open market.

So why are ratings agencies like Moody’s worried about the sovereign debt of even the US, Germany, France and the UK, countries they consider “well-positioned at AAA” in their latest figures?

They’re not worried about the next couple of years, but many analysts foresee problems in reforming labour and pension markets to ensure sustainable growth before the stimulus packages run out. In the medium-term, budget restraints will make these reforms more difficult.

In the longer term, Moody’s is afraid of a situation where states delay pension reform for political reasons, leading to a downward spiral as they try to borrow more to finance deficits, while at the same time, conflict between younger and older generations destroys the social cohesion needed to stabilise debt.

Countries in this situation would lose their triple-A rating.  

Useful links

OECD Insights: From Crisis to Recovery

OECD work on financial markets

This OECD paper warns that retirement income may become a “lottery” unless default strategies are carefully designed

Click on the image for links to government and state institutions

Following the previous post on aid to Haiti, Jerzy POMIANOWSKI, Director of the OECD’s Partnership for Democratic Governance Advisory Unit and Bathylle MISSIKA, Technical Advisor for the OECD-PDG sent us this contribution to the debate. You can find information on PDG work on Haiti’s reconstruction and development here.

Brinkley is absolutely right when he underlines some of the shortcomings of donor involvement in Haiti. The “by the book” application of some of the pivotal Paris Declaration principles  of ownership or use of country systems (“alignment”) has not delivered according to plan. But should we expect the same pace of improvement from “good performers” like Tanzania or Ghana in countries like Haiti, which are emerging from decades of political and social instability and rampant poverty?

As outlined in the DAC Principles for Good International Engagement in Fragile States, donors need to adapt their strategies to fragile contexts. In other words, discarding the ownership principle altogether is not the answer and certainly sounds schizophrenic after the political and financial commitments made by aid donors in March at the international conference in New York when more than USD 5 billion was pledged to help Haiti “build back better”.

Clearly, this money cannot be given in the form of a blank check. Brinkley is also right to warn against the misuse of funds and the risks of seeing monies disappear in the wrong pockets. This does not mean that donors should “decide what to do with their money”. A countless number of evaluations have showed that “ring fencing” funds by creating isolated projects run by donors using their own procedures and staff, and accountable only to themselves only leads to greater alienation of the government, a lack of efficiency and unsustainable results. Haitian stewardship is not incompatible with safeguarding mechanisms.

The Reconstruction Commission mentioned by Brinkley, which approves all new development and reconstruction projects, has been established with a built-in, independent “Performance and Anti-corruption Office” with a compliance unit and investigative powers so as to limit the risks of embezzlement in reconstruction projects.

Moreover, Brinkley is wrong in asserting that Haitian leadership has led nowhere in the past. It is precisely the past practice of aid donors avoiding the state that needs to be let go. Since former dictator Jean-Claude Duvalier fled the island in 1986, donors have unfortunately often bypassed the government. But Haitian ownership has manifested itself in many ways. It now needs the right stepping stone to take off.

The most recent example cited by Brinkley of displaced people on the Champ de Mars is a good example. Whatever the Government (or in this case, President Préval) puts forth as its own agenda, some international critics raise eyebrows because things should be done by the (their?) book. Should tents have been left in front of the destroyed Presidential Palace, fingers would have been pointed at the Haitian government for its inertia.

The biggest risk now is not to avoid having “Haitians help themselves” but, rather, a return to the sub-optimal pre-earthquake model, in which donors, NGOs and other non-state providers bypassed the state, with 85% of essential services such as health, education or water primarily administered and delivered through NGOs, private companies and other non-state actors such as charities, associations and faith-based groups, with little accountability to the government or the beneficiaries of these services.

As discussed during a workshop organised from 8-9 July 2010 by the Haitian government in collaboration with the OECD’s Partnership for Democratic Governance, the Govern­ment of Haiti, donors and service providers have laid the ground for a new approach to the delivery of basic social services. “We need to redefine the model that prevailed before the earthquake, in particular to allow Haitians to have access to the essential services [they] can rightfully expect from the State,” Prime Minister Bellerive said as he opened discussions at the July workshop.

This new paradigm for service delivery, in which all stakeholders accept the Haitian state’s primary stewardship role and, at a minimum, its core policy-making, standard-setting and monitoring roles, can mark a turning point in what has so far been an uncoordinated tango between donors, NGOs and the government.

This uneven relationship of mistrust and low mutual accountability probably stems from Haiti’s complicated history as the first black republic, which freed itself from slavery and declared independence in 1804, while reinstating a culture of dependency through dictatorships, the oppression of the elite and a reliance on foreign aid.

Now is actually the time to allow Haitians to help themselves. Finger-pointing has not led anywhere and it is high time for donors and the Haitians to “walk the talk”. The new rules of engagement discussed in July are premised on the Government setting its policy orientations, being informed of the activities of all donors and non-state providers, and applying its norms and regulations, while being able to decide what services should be delivered and where. This is the least that citizens can expect from their sovereign state and the first step towards greater accountability.

This approach of enhanced transparency was behind the creation of the IHRC, which is not co-chaired by President Préval as incorrectly stated by Brinkley, but by Prime Minister Bellerive. The Commission has become an easy scapegoat, while it is simply the tip of the iceberg of a bigger problem: Donors tend to supply technical responses to political problems and apply old recipes, such as hiring big management consulting firms to set up multi-donor funds and expecting donors to fall in line behind their approach.

Brinkley rightly notes that the Commission has “met only once” and implies it is far from being operational, but this situation has more to do with all the weaknesses of international recruitment systems and the superimposition of donors’ own red tape and pre-defined organigrams than anything else.

The Commission is about to meet a second time on 17 August and is certainly behind schedule. But before resuming the never-ending ‘blame game’ it should be given the space and time to operate. If donors do not support Haitians to help themselves according to a set of mutually agreed new rules of engagement and through the mechanisms that they themselves have helped to create, it would be, as a popular Creole proverb goes, like “lave men siye a tè” (washing your hands then rubbing them in the dirt). 

Useful links (the previous post on this topic also has many links)

Atelier sur le renforcement des capacités du Gouvernement haïtien : Provision et coordination des services sociaux de base (8-9 juillet 2010)

Plateforme pour la refondation d’Haïti

BetterAid unites over 700 development organisations from civil society working on development effectiveness and “is leading many of the civil society activities” in the lead up to the Fourth High Level Forum on Aid Effectiveness (HLF-4) in Busan, Korea in 2011

Inter-American Development Bank on Haiti