Speaker: Takashi Yoshida and Shohei Kawase, University of Tokyo

Moderator: Wilson Tan (SIPA/LKYSPP) – Rapporteur: Kayo Matsushita (Tokyo University)

Problem

Even though large amount of money has been used for aid, the issues of poverty and development have not been resolved.

Analysis

Core reason of ineffectiveness in aid is the wrong allocation of aid. One way of allocating aid is through an indirect method of assessment. This way should be employed because direct assessment is not measurable due to

• Individual contribution of donors which is not tangible,
• the contribution of aid to the GDP growth rate in the direct assessment is not quantifiable.

Aid is given based on humanitarian consideration, political interests, etc. Allocation is made on the basis of:

• Economic policies
• Amount of aid recieved
• Social capital
• Institutional quality and capacity

Japan provides support to the developing countries in the form of Loans, Grants, Technical Assistance. Controlling for other factors (population, income, population, region), if the Japanese government gives aid with good policy, the result is positive.

There is certainly room for improvement in the decision making process.

Questions and Answers

What are the kinds of social capital that should be considered?

A chart should be formulated according to extent those factors that affect the budget of loan next year both negatively and positively.

What happens if a country receives no aid?

No data available.

Speaker: Vinay Nair, LSE

Moderator: Wilson Tan (SIPA/LKYSPP) – Rapporteur: Kayo Matsushita (Tokyo University)

Problem

Kleptocracy in Africa

G20 has pointed out the following in Africa;

• To ensure promised funding made available for sustainable development,
• Tackling tax havens ‘grey listed’ by the OECD.

However the cost of achieving this is high and with the financial crisis things became more difficult. Africa needs an additional funding of 27 billion dollars per annum by 2015.

Definition of Kleptorcacy

To strengthen personal power, using state funds; even pretending as honest service.

It’s a phenomenon which is hard to measure though efforts have been made. A study was carried out by UK All Party Parliamentary Group.

Analysis

TIEAs (Tax Information Exchange Agreements)

Three TIEAs have been signed so far with France and UK but African leaders were not included in the negotiations. As to why this happened, following hypothesis has been formulated;

Hypothesis

• Obviation may suit many African leaders.
• Role for African Union – joint liable model, 1 meta- agreement, all 52 nations are not mutually accountable .

Kleptocracy is at the very roots, corruption itself has to be tackled.

Given obviation risk from both African and swiss leaders, what role other countries leaders, particular G20 leaders should play:

• Financial crisis aftermath should be accepted as a reality
• Alternative funding sources should be found
• The ‘root cause’ of the problem should be tackled

Possible Solutions

Giving the means to the African leaders, backed by the will of the international community.

• This is an important policy window and we risk it closing – 12 bilateral TIEAs with OECD countries but no African nations have been included
• Enforcing adoption of 13^th TIEA gives an opportunity to tackle kleptocracy
• gain a new source of income to close funding gaps
• Must be on the Agenda for next G20 summit in Huntsville, Canada, June 2010
• Precedent must be established for other ‘grey listed’ countries and other kleptocratic regions of the world

Question and Answers

How to motivate the G20 leaders?

• Leaders who really want to tackle the issue should be engaged
• Stronger regulations, institutions are required
• Additional/Alternative source of funding is essential

Speaker: Sawako Inada, The University of Tokyo

Moderator: Wilson Tan (SIPA/LKYSPP) – Rapporteur: Kayo Matsushita (Tokyo University)

Problem

While Chinese aid has become more influential today, it is problematic because characteristics of Chinese aid are quite different from other donors. Sometimes Chinese aid is criticized due to lack of humanitarian consideration, lack of good governance and so on.

Question

How we can cooperate with China?

Analysis

Characteristics of Chinese Aid

No conditionality

Mutual approach

• Variety and irrelevance of aid giving actors and styles (various ministries are concerned in aid)

It is difficult for China to join in the Development Assistance Committee because;

• Its loan is basically tied aid,
• There’s a lack of information sharing environment

Why Zambia?

China and Zambia go way back and now since Zambia is found to be rich in natural resources, Chinese interest is quite evident.

History of Chinese aid to Zambia

From the 2007 onwards, Chinese aid has increased significantly. However the nature of aid is now changing;

Difference in 1997 and 2007 projects

• Tazara railway(1970s): china delivered assistance w/o gaining any resources

Downsides: The aid was considered low quality as it was without any conditionalities; there was no cooperation with other donors, thus undermining the other aid in Zambia

• Special Economic Zones, 2006 made China’s Economic interests quite obvious. On one hand it helped in job creation and increased exports. On the other hand, lack of transparency, low quality of management, ill treatment of labors,  showed that there was no proper evaluation system.

Solution

China: to continue to make efforts to improve the quality of the aid

Other donors : to support China and Zambia

Zambia: to improve “Governance”; especially policy management with all donors involved in the development of Zambia, and accountability

China doesn’t want to join the donor groups, but it can enhance Zambian participation by giving options to recipient.

Question and Answers

Does China provide opportunity for the other donors to cooperate? Is there any chance to support china?

China is a developing country. Though indirect cooperation has been taking place already, no official framework or data exists to support the statement.

Speaker: Aminata Ndiaye, Sciences Po.

Moderator: Wilson Tan (SIPA/LKYSPP) – Rapporteur: Kayo Matsushita (Tokyo University)

Problem

How to design channels of effective aid in Africa that promote good governance and economic growth?

Analysis

What AfDB provides is aid as a tool for good governance. This can make the whole process more transparent and efficient. This can improve the use of their resources. AfDB can be quite effective by creating a fund instead of creating a binding bilateral agreement. In this session the main focus is non-project operations; budget support and technical assistance.

A few areas of work within OSGE

• Tax Systems
  African tax systems are generally characterised by low tax/GDP ratios. The support reform of tax policies and tax administration depend on aid which is not sustainable.
• Transparent and Comprehensive Budgeting Procedures
  National budgets ought to reflect a government’s political priorities. The Collaborative Africa Budget Reform Initiative (CABRI) should be supported.
• Accountability, Transparency and Enhancing Budgetary Control
  Credibility and reliability of governments depend upon regular auditing to ensure both the legality and efficiency of public expenditure. For this African Supreme Audit Institutions (AFROSAI) should be supported.
• Revenues from Extractive Industries
• Capacity building for Governance in Fragile States

Restore basic functions of government in order to provide basic services and security for the population.

Governance

• Governance action plan (2008-2012); good financial governance and sound public financial management in RMC
• Anti- corruption measures are implemented selectivity
• So many factors and actors in the aid disbursing process are not effective.
• Ownership and harmonization among donors are critical; Joint association framework?

Governance is about participation, and ownership, what policy you want to do; shouldn’t be other way round. Under same objectives, it can work effectively.

Procumbent

There should be an international procumbent.

Accountability

• African Peer Review Mechanism; clear framework to asses it

Voluntary – yearly assessment of particular country and giving recommendation to avoid the governments become a team.

Solutions

Civil society can promote good governance, not the leaders.

• Promotion of good governance at multiple levels
  • Increased donor harmonization
  • Increased support to regional networks/NGOs
  • Enhanced support to civil society through seminars/workshops
• Improved design of aid programs: effective conditionality to strengthen country systems
• Increased accountability and transparency of donors

“The ultimate objective of Good Financial Governance in Africa should remain the reduction of poverty by creating capable states that implement country-owned and country-led development strategies.”

Questions and Answers

When they deliver loans, do they deliver it to NGOs, civil society, or through the governments?

95 % aid to the government. In the budget (PBL) Support for NGOs specifically for promotion of governance should be through the governments.

Presentation: The Social Economy – A New Paradigm for Financial Sustainability

Speaker: Vasudev Daggupaty, Sciences Po, Paris, France

Moderator: Aneliya Nazirova (LKYSPP) – Rapporteur: Naomi Jacob (LKYSPP)

Abstract

The current Financial Crisis presents an opportunity to restructure financial instruments to enable social innovation, in a Schumpetarian manner (model of “creative destruction”).

Problem

How can one use the opportunities presented by the current financial crisis to transform the presence of social innovation in the economy?

Analysis

Currently Social entrepreneurs have to depend on three types of Income financing- grants from Governments, Charity from Private Benefactors and Revenue Funding. As the first two sources are not sustainable for operations with a long-term view, since the amounts to obtained from them will keep fluctuating, the presentation concentrates on how social enterprises can be sustainable in the long run using revenue funding. The framework used was to look at two axes-a vertical axis ranging from high involvement to low involvement and a horizontal axis ranging from charitable donations to commercial funding from banks etc. The intersection of the axes divides the space into four quadrants-

• Venture philanthropy – charitable high involvement funding
• Venture capital- commercial high involvement funding
• Grant making- charitable low involvement funding
• Bank Lendiing- commercial low involvement funding

Solutions and Strategies

Social enterprises can also be encouraged by legal and tax structure changes:

A Community Interest company is a new type of company introduced by the United Kingdom designed for social enterprises that want to use their profits and assets for the public good. Regular limited liability companies that do not have charitable status find it difficult to ensure that their assets are dedicated to public benefit. There is no simple, clear way of locking assets of such a company to a public benefit purpose other than applying for charitable status. The community interest company is intended to meet this need.

The L3C is a low-profit limited liability company (LLC),that functions via a business modality that is a hybrid legal structure combining the financial advantages of the limited liability company, an LLC, with the social advantages of a non-profit entity. An L3C runs like a regular business and is profitable. However, unlike a for-profit business, the primary focus of the L3C is not to make money, but to achieve socially beneficial aims, with profit making as a secondary goal. The L3C thus occupies a niche between the for-profit and charitable sectors.

The role of public policy in this regard is to be a bridge between protecting the interest of lenders as well as giving incentives to citizen-sector entrepreneurs.

Questions and Answers

What are specific examples of social enterprises?

In the US, prisoners’ rehabilitation program to prepare them for jobs: sweet potato pie bakery set up by a guy to give jobs to ex-cons. The profits were used to run educational programmes for prisoners. Aside from his initial start-up, he used loans as capital for his company.

Do we need to create new institutions to support the social economy? Won’t these be parallel structures? Can we use existing systems?

Yes, the idea is to reform existing institutions to accommodate and foster the social economy. But the context is different in particular countries. In countries where existing institutions do not have the capacity, there may be a need to create new institutions.

Do banks’ lending criteria need to evolve?

The method of evaluating projects should ideally also have to change as the nature of the projects is also different from typical business ventures.

Presentation: IMF Responses to the Two Crises – Asia ‘97 and Global ’08

Speakers: Ina Kunikawa and Vandy Leng, Tokyo University, Japan

Moderator: Aneliya Nazirova (LKYSPP) – Rapporteur: Naomi Jacob (LKYSPP)

Problem

Appropriateness of IMF policies in addressing the two crises (IMF recommendations for 1997 were not relevant to the cause of the crisis, while recommended actions for 2008 were apt); compare IMF-supported program for non-euro European countries (e.g. Iceland, Hungary) under the current global crisis. The cases examined were those of Korea, Indonesia, Iceland and Hungary.

Analysis

The presentation examined certain indicators of IMF Policy such as Structural Conditionality, Fiscal Policy, Monetary Policy and Capital Control and compared the use of these tools in the Asian Currency Crisis and in the non-Euro countries of Iceland and Hungary.

The findings can be summarized as follows:

Structural Conditionalities

• Higher during the Asian currency crisis than in the global financial crisis (ex. Indonesia -141 conditionalities while Hungary – 20 conditionalities
• Asian Crisis 1997: The conditionality was not quite related to the major cause of crisis (ex. a request to close the banks in Indonesia in 1997 crisis)
• Financial Crisis 2008: The conditionality was more relevant to the cause of the crisis: banking sector restructuring and fiscal sustainability framework and capital injection to the main three banks in Iceland, for example.

Fiscal Policy

• The IMF requirement for fiscal policy during Asian crisis was too tight, even though Asian countries had better macro environments than Eastern Europe countries. Asian countries had less external debt and central government debt than Eastern Europe. The Asian countries and Hungary had less than 10% current account, but Iceland had larger CA balance
• IMF required 3% fiscal adjustment for Thailand, 1% for Korea and 2% for Indonesia. Iceland was allowed to conduct a fiscal relaxation and Hungary was required 2.4% fiscal adjustment.
  • Fiscal tightening was severer in Asian countries than in Eastern Europe countries

Monetary Policy

• Asian countries took higher interest rate policy under the IMF-supported program, compared to Iceland and Hungary. For example, in Indonesia, the interest rate skyrocketed to its highest level of 80%
  • For Iceland and Hungary, the IMF did not require the interest rate to be that high.
  • In both cases, depreciation seems to have stopped although the authority did not raise interest rate so high.

Capital Controls

• Capital Controls were also not supported during the Asian Crisis as in the case of Malaysia. On September 1998, Malaysia became the first Asian countries affected by the Asian crisis to announce temporary capital controls without IMF-supported Program. Successful in controlling capital outflows, reducing further depreciation of Ringgit.
• Capital Controls have been implemented since the beginning of IMF-supported program( end of October, 2008). In line with high policy interest rate, capital controls in Iceland help to prevent a further sharp decline in the krona.

Solutions and Strategies

Structural Conditionality

• Facilitate the process of providing funds to the recipient countries
• Ensure that conditionality imposed be relevant to critical issues of crisis

Fiscal Policy

• The extent of fiscal deficit could accelerate the crisis: need to have a close watch on fiscal sustainability

Monetary Policy

• When economy recovers, high interest rate policy should be withdrawn as soon as possible.

Capital Controls

• Though capital controls seem to have worked in both Malaysia and Iceland, further adoption should be strictly considered.

Questions and Answers

On the solutions for Monetary Policy, what are the indicators to evaluate whether an economy has already “recovered”? Prolonged maintenance of low interest rates were criticized in the US, thus isn’t it a good thing that interest rates were high here?

Macro-economic indicators such as GDP growth, inflation

Is IMF really the lender of the last resort? How can it improve its efficiency?

IMF: does not have the capacity to be lender of last resort; does not have enough funding; could not address the need for increased liquidity of borrowing countries during the crises
To improve efficiency: increase funding for IMF so that it can be an effective lender of last resort

What are incentives to the IMF to reform its processes and procedures (i.e. irrelevant economic prescriptions which worsened instead of improved economic growth in some countries – Latin America)?

Competition is a form of incentive. There are other funding sources for countries – non-traditional donors like China and India.
Current IMF reforms involve assigning more technical staff to partner countries so that they can better understand local context in designing packages/conditionalities.

Speakers: Takushi Sasada and Yumeto Ito, Tokyo University, Japan

Moderator: Aneliya Nazirova (LKYSPP) – Naomi Jacob (LKYSPP)

Problem

Can the East Asia Community be a means for improving cooperation and integration in the region? How will this improve Japan’s foreign policy? Will this regionalism improve relations between the East and West or cause further tension?

This topic had a more geo-political theme than an economic reform theme.

Analysis

• The speakers looked at economic and security reasons for Japan to pursue East Asian Community integration.
• The region contains 49% of the world population, saw 8.8% of economic growth
• The summiteers do more than 57% of total trade with each other
• 150 billion US$ of military expenditure

Solutions and Strategies

• Status Quo: Japan-US relations as the Grand Strategy
• But there is a need for a new strategy, given the increased relations and fast pace of development of the East Asia region
• Pursue BOTH: Japan-US Alliance and East Asian Community
  • Fostering market economy mechanisms through trade liberalization   (a region-wide FTA)
  • Maintaining an effective means of policing nuclear non-proliferation
  • Bilateral efforts in the region to restore credibility of global institutions such as G8 summit or the UN Security Council

Questions and Answers

Does Japan’s position on the FTAP in the APEC Summit go against or contradict its new stance towards East Asian Community?

Not really. Japan has a new administration, which plans to actively promote the East Asian Community regionalism. Previous policies may change based on this new foreign relations strategy.

What will be the impact of regional free-trade agreement (East Asia Community) on Japan-US trade relations?

Japan EAC doesn’t hamper Japan-USA economic relations, thus it the two-pronged strategy is possible and practical.

What is Japan’s attitude towards the rise of China?

Japan seeks to greater collaboration with China. They see the rise of China as beneficial for the region over-all. However, it is true that there is a tension between Japan and China due to historical context. These are being managed through soft diplomacy.

Is the East Asia Community strategy related or different from Japan’s greater East Asia Co-Prosperity Sphere in the 1940s?

It is different. What happened in the 1940s is used as a propaganda by the military regime. The East Asia Community regionalism has a different goal and spirit.

What is the ordinary American’s view on the rise of China or tension between Japan and China?

On one hand, Americans are apathetic or have no opinion on this issue. Basically, this is because the issue is “too far” from their everyday reality. However, there are some who view the “rise of China or rise of India” as a threat. Some students say that “the rise of” concept tends to be a caricaturish or overly simplified. For example, despite the supposed rise of India, there is high incidence of poverty in the country. The “fear” of the “rise of Asia” is unnecessary. The concept of the “rise of Asia” needs to be understood in a nuanced way.

Speaker: Dr. Surin Pitsuwan, Secretary General of ASEAN

Problem

The need to build a coherent global governance structure that reconciles hegemony of nation states with global constitutions (regulation and coordination) based upon resilient states and effective global organizations such as the World Bank. This equilibrium includes promoting a balanced relationship between states and international multinational corporations (MNCs).

1. An inadequate public power constellation at the international level – lack of a strong institutional setup that can balance the interest of the hegemony and that of global constitutions.
2. A lack of social contract with the role of the state at the nucleus [illustrated with Haiti as example – issues of human rights, lack of focus on women’s development (more than 50% of population), repeated UN peacekeeping missions, etc]. Fragile state is related to the low institutional capacity of the government whereas the failed state has no institutional capacity at all to deliver public goods.
3. Lack of relevance, legitimacy & effectiveness of the World Bank as an important international actor. There is a current aid fragmentation internationally with too many actors involved.
4. Lack of clarity in roles/relationship between state and large MNCs (e.g. ExxonMobil) for sustainable development – issues of equity, self-interest, power dynamics, etc.

Analysis

Tension within the current structure

• Inter-, intra- and international levels: hegemony (within a scale from coercion, i.e. “imperialism” to consensus, i.e. “leadership”) and constitutionalism
• The right of a global constitution to override the power of a national state and its national sovereignty BUT there is also the possibility of mutual interdependent and counter-influencing effects between hegemony and constitutionalism – potential convengence for the future (hegelian dynamics)
• Political actor (who is the hegemon?) and the global norms. The powerful decides the norms. How do we find the delicate balance between hegemony and constitutionalism?
• Political actors, potential for political manipulation and increasing demand for services
• Provision of basic public services (institutional capacity of government), political actors (interests & strategies) and impact on households (demographics & socioeconomic conditions)
• Decreasing world aid from various sources (public and private) with increasing need for aid (both arising from the global economic crisis)
• State and large MNCs’ viewpoints: State (as owner of resource) and large MNCs (as service providers) VS large MNCs as owners of assets

Growing need to reform World Bank to increase accountability and flexibility (institutional weaknesses). The World Bank can be a valuable instrument to mitigate the impact of decreasing aid from various sources (“affordable” means to channel aid) and future crises on the developing world while ensuring the sustainability and predictability of aid flows. However, G20 is the key to reforms. They need to have the necessary motivation to carry out the necessary reforms of the World Bank. And in failing to do so, the World Bank runs the risk of becoming irrelevant in the post-crisis.

Solutions and Strategies

To create an institutional framework that reconciliate hegemony of nations with global constitution with the following core features:

• A global community structured around an agglomeration of power (beyond mere national state level) repsenting the bearer of universal values such as solidarity, dynamic development, equality and pluralism.
• A global legal order to further integration and interaction with institutions conceived on regional principle.
• Balance can only be implemented on a case by case basis because different hegemonies has different power dynamices with the global constituions.

To implement the framework for the social contract with the following core features:

• Coordinate aid among the donors so as to lessen the burden on the state.
• The state should be the main provider of basic services with its state legitimacy established through regulations.
• Reforms to overcome fragile states have to be wider than security; it needs to include improvement of socio-economic conditions, distribution of political power and stronger institutional capacity of the government.

To reform the World Bank with the following core features:

• First critical thing is to change the structure of G20; the countries involved will change the dynamics in order to deliver better aid effectiveness.
• A reinforced and refined poverty-alleviation mandate, including a clarity on global public goods
• A broad and deep reform of the Bank’s governance structure, including the board size, function, accountability and voice, and human resources matters to include greater diversity, accountability and breadth of knowledge/competency of staff
• An improvement in the World Bank’s traditional business model to respond to the current crisis and the changing needs of its shareholders

To understand the dynamics of power between state and large MNCs

• Prisoners’ dilemma illustrates the payoff and the relationship, in this case, profits = power. Hence, there is a need to balance out the power between the state and the MNCs as owners of resources into a mutually dependent and beneficial relationship through an external mechanism of enforcement. They need to be “taught” to choose the cooperative option.

Please click here to see & download the revised schedule for the 2009 GPPN Student Conference.

Introduction:

The world is facing a multitude of crises today. From the worst financial and economic crisis in recent decades to the climate change and global warming that endangers ecosystems, natural and human habitats, and probably the biggest challenge yet would be the population crisis. An estimate of 8 and 10 billion people by 2050 places further stress on energy resources, food and water supply, and raises questions about poverty, education, and health issues.

Can we turn this crisis into an opportunity for sustainability?

Developing long-term sustainable policies is a challenge. It is difficult to oversee the extent and the depth of each crisis in the political, environmental, economic, and social context.

The 4^th GPPN Student Conference titled “Crisis as Opportunity – What Policies Do We Need for Sustainable Development Today?” from 11-13 November 2009 in Lee Kuan Yew School of Public Policy, Singapore invites participants to have a closer look at today’s crises. It aims to understand the root causes for today’s challenges, what policies are needed both for short-term recovery and long-term sustainability, and the role of various stakeholders is in the process. Finally, the concept of sustainability itself will be challenged, debated and applied to cases and situations.

Participants:

Over 100 students and academics of public policy from the Global Public Policy Network are expected to attend from

• Lee Kuan Yew School of Public Policy (Singapore),
• London School of Economics (United Kingdom),
• Columbia University (United States)
• Sciences Po (France)

Partner universities such as University of Tokyo (Japan), Tsinghua University (China), University of St. Gallen (Switzerland) and the Hertie School of Governance (Germany) are sending their delegates as well. A number of prominent public policy figures and leaders from Asia and the world will also be invited to address and debate the issues.

Expected Output:

• Conference Report
• Blog or Website
• AJPA Special Edition on conference proceedings

Objectives and Impact:

• Contribute toward global policy dialogue by creating a platform for students of public policy to exchange ideas and interact with current public policy makers and leaders.
• Provide meaningful opportunities for networking and future collaborations between conference participants, in formal as well as informal alleys.
• Increase the visibility of the GPPN network among relevant public policy stakeholders.
• Become a concrete reference point for future GPPN Student Conferences.

There will be three plenary sessions on the following dimensions of sustainable development:

• Good Governance as Institutional Sustainability: Understanding local, state and supranational policy arrangements and their challenges will be undertaken as follows:

Break-Out Session #1: Global Regimes and Institutional Arrangements
Break-Out Session #2: Corruption
Break-Out Session #3: Aid Governance

• Economic and Environmental Sustainability: Exploring the possibilities of reconciling rapid economic growth and rising energy needs with the preservation of biodiversity and functioning ecosystems. Break-out sessions are:

Break-Out Session #4: Sustainable Economics and Energies
Break-Out Session #5: Biodiversity/Ecosystems
Break-Out Session #6: Agriculture

• Sustainable Human and Social Development: Covering topics such as the Millenium Development Goals and the effective delivery of social services, such as water and sanitation, health, and education will be discussed as follows:

Break-Out Session #7: Millennium Development Goals
Break-Out Session #8: Sustainable Cities
Break-Out Session #9: Social Entrepreneurs

All policy recommendations will be presented in the final plenary session.