Regional Public Goods in International AssistanceBy Lisa D. Cook, Research Associate, and Jeffrey Sachs, Director, Sorely deficient in the existing frameworks for developing country assistance is the provision of regional public goods -- which can range from research on tropical disease and agriculture to environmental protection, public health, and law enforcement, say authors Lisa D. Cook and Jeffrey Sachs with the Center for International Development. The multilateral development banks can help, they say, but much needs to be done to build the structures to provide regional public goods. Sachs is also a professor of international trade at Harvard. One of the basic lessons of modern economic development is that the public sector should focus its scarce resources on those activities that will not be provided adequately by private markets. International development assistance should have a similar focus, supporting desirable activities -- the so-called public goods -- that will not be provided adequately either by private markets or by the aid recipient governments. During the 1980s and 1990s, aid programs increasingly became a kind of surrogate national government, with outside agencies (usually led by the Bretton Woods institutions) attempting to foster the provision of public goods at the local and national levels. The basic motivation, sometimes explicit but more often implicit, was that national governments could not be trusted to provide public goods within their own territories. In this vision, the International Monetary Fund (IMF) and the World Bank would lead reform on behalf of the national polity because the aid recipient government was too weak, too corrupt, too prone to backsliding, or too incompetent to do the job on its own. Aid was closely tied to policy conditions to ensure that the recipient government implemented appropriate policies and provided appropriate public goods. In principle, if the conditions were not met, the aid would be cut off. A large number of studies and case histories have shown that this model is deeply flawed. First, money is fungible. Even if foreign aid agencies succeed in ensuring that particular funds are directed toward particular purposes, they cannot be sure that the aid funds are truly incremental in support of those purposes. An outside agency may desire to boost spending on education, only to find that the aid dollars directed toward education are offset by a reduction in the government's own budgetary outlays on education. To ensure that aid really delivers public goods that otherwise will not be provided, donors need to rethink their strategies. Without a doubt, there is one hugely neglected area of public goods: goods that can only be provided effectively at the regional level (defined here as a grouping of neighboring governments) or on a global scale. This is an area where the multilateral development banks should play a part. THE CASE FOR REGIONAL PUBLIC GOODS It is easy to offer examples of public goods that must be delivered on the regional level with a number of national governments acting in concert. A non-exhaustive list includes:
One extremely pertinent general category of regional public goods is basic scientific research on regionally focused problems, such as health, agriculture, and environmental management. Recent research has shown that most developing countries, and particularly those in the tropics, face profound problems in public health, agriculture, and environment that require new scientific and technological approaches that cannot simply be "borrowed" or taken from advanced economies. Advanced country scientific research pays relatively scant attention to tropical problems such as malaria, schistosomiasis, helminthes, and tropical agriculture. Moreover, health and agricultural technologies developed in advanced economies are not directly applicable in the tropics. Scientific funding for tropical health, agriculture, and environmental research is a pittance compared with the funds mobilized for temperate zone problems. THE DELIVERY OF REGIONAL PUBLIC GOODS Regional public goods are generally underprovided -- and often completely neglected. While transactions costs for public goods at the national level are already very high, at the regional level they are often insurmountable. Why?
MODEST EVIDENCE ON THE PROVISION OF REGIONAL PUBLIC GOODS While data are scarce, the information that is available indicates that there is precious little funding for regional public goods though there are some notable cases and success stories. Data from the Organization for Economic Cooperation and Development (OECD) Development Assistance Committee (DAC) reporting system, the most comprehensive source on bilateral assistance, show that net development assistance -- from countries and multilateral institutions -- for regional aid programs amounts to a very small portion of total assistance. In the case of Africa, in 1996 it was just 7.4 percent. While the World Bank's charter requires that it lend to member countries, some Bank projects in recent years have taken on a regional public goods character. This has been accomplished through the coordination of country-level programs, jointly implemented, with identical financing arrangements, and bundled and approved by the Bank's Executive Board as a single venture. Examples include agricultural research by the Consultative Group on International Agricultural Research (CGIAR); water projects such as the Aral Sea Basin Program for Water and Environmental Management, which coordinated activities among the former Soviet central Asian states; disease control efforts such as the Onchocerciasis Control Program, which operates among several smaller West African countries, and infrastructure projects such as the rehabilitation of the Abidjan-Ouagadougou-Kaya railway. While this kind of lending appears to be small, there have been notable successes -- such as the Onchocerciasis Control Program. While regional development banks, such as the Inter-American Development Bank (IDB) and the African Development Bank (AfDB), would seem to be ideally suited to help finance the provision of regional public goods, this generally seems not to be the case. These banks have increasingly modeled their lending to match the country-level projects of the World Bank. The reported AfDB allocation of African Development Fund loans and grants during 1974-97 appears to show that 98.1 percent went to country programs and just 1.9 percent for multinational projects. This is especially ironic for a region rife with regional problems including infectious disease, cross-border conflict, the need for transport links, and so on. The IDB seems to have a growing portfolio of regional projects, though it is still modest relative to overall lending. As of 1997 the IDB had made 58 regional loans totaling $2,770 million, with cumulative disbursements of $1,710 million. As total IDB disbursements were $61,400 million, regional projects amounted to 4.5 percent of the total. In 1997 the IDB made 18 regional loans totaling $833 million in commitments, compared with $6,020 million in overall loans. Thus, regional loans accounted for 13.8 percent of the total, suggesting an increase in region-based lending. Regional projects in 1997 included:
The United Nations was established in large part to solve problems of international coordination and to enhance regional and international cooperation. The 81 U.N. organizations are core providers of regional and international public goods. Outstanding examples include the World Health Organization; the U.N. High Commissioner for Refugees; the United Nations Educational, Scientific and Cultural Organization; the United Nations Development Program (UNDP); and other efforts for dispute resolution, peacekeeping, and so forth. Yet even with the United Nations it is not possible -- on the basis of published data -- to ascertain the actual flow of funds to national-level programs and those that are truly regional or international. OPERATIONAL STEPS FOR THE NEAR TERM This article is a very preliminary look at this issue, meant to spur further analysis and action. We recommend the following five operational steps in the near term:
Skeptics of regional public goods provision repeatedly point to the current weakness of regional bodies in fulfilling the mandate of public goods provision. But regional bodies will inherently be weak until they are given both the mandate and the financing to do more. The European Union found its origins in decisions by the United States to channel postwar reconstruction aid through a regional body (the Organization for European Economic Cooperation) in the context of the Marshall Plan. The Marshall Plan, together with a group of European visionaries, created European regional cooperation and public goods provision by pressing the war-torn continent to work together as a condition for receiving U.S. assistance. Our common longer-term goal should be to work toward a reassessment and redesign of the international aid strategy in general, to make sure that international assistance serves the most important needs of the developing world by focusing on activities that cannot be addressed by national and local governments or private actors. (Note: The opinions expressed in this article do not necessarily reflect the views or policies of the U.S. government.) (This article is an abridgement of "Regional Public Goods in International Assistance" by Lisa D. Cook and Jeffrey Sachs, from Global Public Goods: International Cooperation in the 21st Century, edited by Inge Kaul, et. al., © 1999 by the United Nations Development Programme. Used by permission of Oxford University Press, Inc.)
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