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Transcript of an Economic Forum
Capacity Building: Lessons for Africa

International Monetary Fund
IMF Auditorium
Tuesday, September 12, 2002
Washington, D.C.

View this conference using Windows Media Player

MR. STARRELS: I'm John Starrels of the External Relations Department, and welcome to the International Monetary Fund, and to the first Economic Forum in this series on "Capacity Building: Lessons for Africa?" We have a distinguished panel here, and before I turn the floor over to the very capable Mr. Bio Tchane, who will be chairing today's event, some housekeeping notes.

Number one, we have some superb contributions that are made available by some of our authors, including a very important speech by the Managing Director at a recent visit to Africa. I would hope that you will avail yourselves of those materials.

Secondly, we not only value, we almost, I'd say, require participation by the audience. We want to hear from you. And in that spirit, you'll notice, as you turn to your right, there is a microphone. When we reach the question-and-answer/discussion period, what we ask you to do is to speak into the microphone, identify yourself, and provide us your affiliation. We want to know who you are and where you're from.

Mr. Bio Tchane, the floor is now yours.

MR. BIO TCHANE: Thank you very much. Thank you, indeed. I'm really glad to chair this seminar.

Ladies and gentlemen, I'd like to welcome you on behalf of the Fund and on behalf of the African Department. I would like also thank EXR for organizing this event on a topic that we consider to be a critical component of economic development not only in Africa but in many developing countries.

You have here the members of the panel. I'm just chairing this panel, and as a moderator I would just give the floor to these people, and I'll introduce them in a few minutes. I'm sure that they will give us very productive speeches, but looking also to the audience, I see many faces: Mr. Calamitsis, Mohsin Khan, Anupam Basu and others who certainly will contribute. And I'm sure that the debate will be really fruitful.

We all know that capacity and institution building is essential for economic development. It is of critical importance for African countries in order to strengthen not only economic policy choices, but also ownership and the consistent implementation of policies.

Experience has shown that even the best designed and realistic set of reform measures, for example, can be poorly implemented or monitored for lack of capacity. The private sector development, governance, the rule of law can all be shifted for lack of adequate capacity and well-functioning institutions.

Some countries have made encouraging strides in this area. Some are still lagging behind. Also, progress has been more marked in other regions in the world where lessons can be drawn for Africa. I'm sure that we'll explore from the panel and from the presentations all these aspects this afternoon. So let me introduce the members of this panel.

First, we have John Audley. He is our guest panelist from the Carnegie Endowment. Mr. Audley is a well-known authority on capacity-building and technical assistance issues. A major focus of his work has been trade negotiations, an area of particular interest to the Fund today and the African continent. In addition, he has published on technical assistance issues in specific sectors such as environment.

As second panelist, we have Oleh Havrylyshyn, Deputy Director of European II Department. He has extensively published on the importance of institution building in transition economies and its nexus to growth. He himself has had very personal experiences in meeting the challenges of institution building not only as an IMF senior official in charge of that region but also as former Deputy Minister of Finance in a major transition country, which is the Ukraine.

Then we have my good friend here on my left,

Mr. Saleh Nsouli, Deputy Director of the IMF Institute. Mr. Nsouli has also published in the field of institution building, including on the type of institutions that matter, and the Fund's contribution to institution building around the world. Through his career he has had also extensive experience with capacity-building challenges in Africa when he worked in the African Department, and also in the Middle Eastern Department.

Then we have Mrs. Claire Liuksila, who is on my left here, who the Director of the Office of Technical Assistance Management, OTM. Mrs. Liuksila is in charge of coordinating and overseeing the Fund's TA in all regions, and she has been instrumental in setting up as a new model the Regional Technical Assistance Center in the Caribbean Region, the CARTAC.

Finally, we have Ms. Piroska Nagy, here on my right. She's an advisor in the African Department. In addition to being in charge of the Fund's Africa Capacity Building Initiative from the outset, as a practicing mission chief in several African countries she has also had direct experience with capacity-building challenges in Africa.

I propose to structure the forum in the following way: First, I will invite the panelists to share with us their thoughts and experience in capacity building. Their comments should be limited to about seven minutes, and I have a clock here. Then I will open the floor for discussion, which I will moderate, and at the end I will summarize the key points of our discussion here in the afternoon.

So let us start with Mrs. Claire Liuksila. Mrs. Liuksila, you have the floor.

MS. LIUKSILA: Thank you very much.

As you know, the focus of today's forum is "Capacity Building: Lessons for Africa?" But from the vantage point of the Office of Technical Assistance Management, which I represent, I would like to present a somewhat broader view of technical assistance, and I would like to discuss what we mean when we talk about capacity building and what is required for its success, what IMF TA is and how it contributes to capacity building, and then I would like to provide an example of an IMF-sponsored regional capacity-building initiative, the one in the Caribbean that Mr. Bio Tchane mentioned. And then I would like finally to try to distill what we have learned from the IMF's regional centers as instruments for assisting capacity building.

I think it's important to first answer the question: What is capacity building and what is required for its success? Capacity building is an important subject, and a great deal has been written about it over the past decade. Most recently, fostering capacity building has been recognized as central to reducing poverty and attaining the Millennium Development Goals.

The concept of capacity building gained importance during the 1990s with the growing realization that poverty could not be addressed through technical solutions alone. Thus, capacity building as a development concept can be seen as part of a wider change in the philosophy of official development assistance, as a result of which more attention is now being given to issues of ownership, accountability, and effective governing institutions.

Although no doubt we feel we understand the term "capacity building" when we hear it, in fact, different groups and organizations have different views on what it actually means. Some groups equate capacity building with fostering strong institutions while others place the emphasis on training and acquiring skills. Still others take a systems approach and emphasize the interrelationships between different groups in the capacity-building process. Others give priority to participatory processes. The variations can go on and on, making it important to clarify what capacity building actually means.

For me, one of the best definitions of capacity building is provided by the Canadian International Development Agency, CIDA, which says that capacity building is a process by which individuals, groups, institutions, organizations, and societies enhance their abilities to identify and meet development challenges in a sustainable manner.

A close runner-up, in my view, would be the definition provided by Deborah Eade in her book "Capacity Development: An Approach to People-Centered Development," where she changes the focus somewhat. She says, "Capacity building is an approach to development, not something separate from it. It is a response to the multidimensional processes of change, not a set of discrete or prepackaged technical interventions intended to bring about a pre-defined outcome."

Both of these definitions emphasize the view of capacity building as a holistic, dynamic, participatory process that emphasizes ownership and accountability for all those involved--governments, civil society, bilateral aid agencies, and international institutions such as the IMF.

There are abundant academic studies and many practical examples that reveal that capacity building has worked well in some countries and sectors, but in others, the effort has fallen short. The yardstick to measure success in most cases has been results--that is, were the technical skills transferred and were the institutions built or strengthened? And, most importantly, was the change lasting and did it contribute to better policy outcomes?

So all of this experience suggests that technical assistance can play a successful role in supporting capacity building when the following conditions are met: The identification of capacity needs has to be a supply-driven process, guided by country officials and country conditions. There has to be a recognition that capacity building is a long-term process, requiring a commitment to change. Ownership is central to capacity building, requiring broad stakeholder participation and commitment. The point of departure must be to work with and through the existing capacity base. And capacity building explicitly brings into the equation local or regional knowledge.

In the past, we have seen that many donor agencies operated under the assumption that knowledge resides mainly in the donor countries and needs to be transferred, effectively bypassing the experience gained by developing countries and regional institutions with a strong capacity-building record.

So, after presenting this general background, I would like to provide you some facts on what the IMF does in the technical assistance area.

The objective of IMF technical assistance is to help countries strengthen their human and institutional capacities as a means to improving the quality of policymaking and policy implementation. The IMF does this by providing technical advice and training, mostly to low- and lower-middle-income countries and mainly on a grant basis. The volume of direct IMF technical assistance, excluding overheads, is about $75 million, which is quite small compared with the technical assistance provided by other international financial institutions or bilateral development agencies.

Operationally, four main departments and the IMF Institute deliver technical assistance and training in the core areas of the IMF's expertise, which parallel essentially the core mandate of the institution.

The countries in Sub-Saharan Africa and the Asia-Pacific Region are the largest beneficiaries of IMF technical assistance. Nearly a third of the IMF's technical assistance goes to countries in Sub-Saharan Africa. And I could provide you with many, many more details, but I think it might be better if you take a look at the IMF website. On the public website, there is a section that describes IMF technical assistance and also provides access by the public to various technical assistance papers.

I would like to move on now to how the IMF contributes to capacity building and provide an example from our experience in the Caribbean.

The IMF's Executive Board and its management has identified technical assistance for capacity building as a main priority of the institution. There has been a conscious effort to integrate technical assistance more closely with the IMF's surveillance and program work, and as Mr. Bio Tchane has pointed out, it has long been recognized that policy reforms are not likely to be very effective if the institutions and skills needed to underpin them are not in place.

As other speakers will cover different aspects of the IMF's technical assistance for capacity building, I would like to focus my presentation on regional arrangements.

In recent years, regional arrangements to deliver the Fund's technical assistance have taken on greater prominence, in particular, for delivering training, for facilitating countries' participation in the general data dissemination system, for delivering technical assistance to countries facing similar issues, and in cooperation with established regional organizations.

The IMF is using regional centers to improve the effectiveness of its technical assistance, and the work of these centers is focused squarely on capacity building. The Fund's first involvement with a Regional Technical Assistance Center was in 1993 with the establishment of the Pacific Island Financial Technical Assistance Center, which we call PFTAC for short. It's located in Fiji, and its mission is to implement a fiscal and monetary management reform and statistical improvement project in about 15 Pacific Island countries.

I should note that PFTAC was jointly established by the IMF and the United Nations Development Program, UNDP, with financial support from Australia, New Zealand, and the Asian Development Bank. The center has been in operation for nearly a decade, and the countries receiving assistance have expressed satisfaction with its work.

Modeled on PFTAC, a second Regional Technical Assistance Center was established in November of 2001, just last year, to serve 20 Caribbean countries, and its acronym is CARTAC. It is organized as a UNDP regional program with the IMF as the executing agency. Canada provides over 50 percent of the funding for CARTAC. A number of other countries are also involved in the funding: the United States, the United Kingdom, Ireland, and a few others. Two additional Regional Technical Assistance Centers, as you will hear, are about to be established in Africa.

So if I can tell you a little bit more about CARTAC, you'll have a sense of how these regional centers try to match up the ingredients for successful capacity building.

CARTAC takes as its hallmark country ownership and close cooperation with the countries concerned, with other TA providers and with regional organizations. Its governance structure is a steering committee, which, again, tries to foster ownership and feed into the types of goals that I mentioned earlier.

There is very open communication among the members of CARTAC, among the steering committee, and among all of the others involved--the donors and the IMF.

The approach taken with CARTAC attempts to go back to the optimal conditions for capacity building that we saw earlier. CARTAC's work is supply-driven program. The program of technical assistance carried out by CVARTAC is generated by the countries themselves. There is strong political commitment to change and to implement the technical assistance. There is strong ownership by all stakeholders. And there is a conscious attempt to work through the existing capacity base and not provide the technical assistance in a vacuum. CARTAC takes advantage of the knowledge from local and regional institutions, and the cooperation, for example, with CARICOM, with the ECCB, the East Caribbean Central Bank, and others in the region is very close.

So, in conclusion, I think, first of all, if we're to do technical assistance properly for capacity building, we have to understand what capacity building is. Once we understand what it is, then we can try to tailor our interventions to meet the criteria that will give this technical assistance a chance for success.

Thank you.

[Applause.]

MR. BIO TCHANE: Thank you very much.

Mr. Nsouli will have the floor now.

MR. NSOULI: Thank you very much, Mr. Chairman. I'll try to adhere to the seven-minute limit. I would like to discuss with you today three issues and pose them as three questions.

First, we talk a lot about capacity building. Why is capacity building important? What is the evidence that points to the importance of capacity building?

Two, what is the role of the IMF in this area? And I would like to go a little bit beyond the view presented by Ms. Liuksila, looking in a more global manner at the role of the IMF.

And, three, what is the role of the IMF Institute in capacity building in Africa, in particular?

So let's start with the issue of the importance of capacity building. There is an emerging consensus in the economic literature--and this is relatively recent--that institutions do matter for economic growth. In the past, there was the idea that capital formation was the most important element. I will not go through all the references, but I will tell you, for instance, Dani Rodrick has done a very interesting study showing how institutions affected economic growth in East Asia.

There is another study by Easterly and Levine that also points out to the importance of institutional factors in Africa's development. And Holtz and Johns have looked at 133 countries and shown that differences in social infrastructure account to a very large extent for differences in output per worker.

Now, these studies do underscore what I was referring to, and that is the complementarity between good and effective institutions and capital accumulation for long-lasting economic growth.

What, then, is the evidence on the quality of institutions in Africa? One of the most interesting studies was conducted by Sievers of Harvard University, which had a survey of 23 African countries and looked at a number of institutional indicators. She concluded that the qualify of African institutions is better than conventional wisdom assumes but lower than needed for sustained high growth--therefore, the need for capacity building.

Now let me turn to the role of the IMF in capacity building. I would say that the IMF has many facets of interaction with countries, and these facets constitute a distinctive model in capacity building. Let me focus on four of these factors.

First, economic training offered by the IMF Institute and by other IMF departments is a direct way of improving capacity, and I will come back to this.

Second, technical assistance, to which Ms. Liuksila referred, is another direct way of building capacity.

Third, the interactions during Article IV consultations between the Fund staff and the authorities. This is a less explicit but an equally important channel for capacity building, as the interactions that take place help the authorities understand much more the kinds of macroeconomic relations or models that are used for analysis and programming.

Fourth, this is the same for the dialogue that surrounds the design of Fund-supported programs and for the follow-up monitoring of Fund-supported programs. It does help strengthen core domestic units of economic management.

Now, the third question. What is the role of the IMF Institute in capacity building in Africa? The Managing Director, Horst Köhler, has put considerable emphasis on ownership of homegrown economic and financial programs. Khan and Sharma in a very recent paper have argued that program ownership raises the probability of success of programs--hence, the rationale for ownership. There is, therefore, a need to ensure that countries have the requisite institutional policymaking capacity to design and implement their own programs.

The IMF Institute is, in fact, the department of the Fund that helps enhance and improve economic policymaking capacity of member countries by providing relevant, high-quality training on the formulation and implementation of macroeconomic and financial policies to member country officials.

During the 1990s, the average number of participants from Africa in IMF Institute courses in Washington and overseas tripled relative to the 1980s. The results of a survey that was conducted of African authorities indicates that the IMF Institute training has improved the analytical skills and expertise of agencies in a wide range of areas in member countries.

In view of the increasing demand for training in Africa, the IMF Institute has over the last few years taken a number of initiatives. It initiated a series of high-level seminars particularly relevant to Africa. It established the Joint Africa Institute in Abidjan in collaboration with the African Development Bank and the World Bank. In 2001 alone, the JAI trained about 500 participants.

It set up regional workshops which focus on more technical issues. It intensified its collaboration with several training centers and institutes in Africa, and it introduced in 2000 distance learning into its program of activities, thus reaching out to a wider group of technical government officials in Africa.

Conclusion: We now know that not only capital accumulation but also that effective institutions are indispensable for sustained growth under conditions of financial stability. And the recent work that is being done in the field has shown that that has been critical.

The IMF, I think as Ms. Liuksila indicated, and my colleagues will also indicate, is building on this premise in its support for capacity building.

Thank you, Mr. Chairman.

[Applause.]

MR. BIO TCHANE: Well, thank you very much, Mr. Nsouli.

The result of one of the surveys he didn't mention is that the most popular department in the Fund is the IMF Institute.

[Laughter.]

MR. BIO TCHANE: And we know why.

The third speaker is Mr. Havrylyshyn, so you have the floor.

MR. HAVRYLYSHYN: I won't be using power point, but elbow power. Europe II still needs a little more technical assistance on these sophisticated new activities.

[Laughter.]

MR. HAVRYLYSHYN: I have been asked to give a short overview of how technical assistance and capacity building has taken place in the transition countries of Europe II, that is, the 15 countries that previously were the USSR. In order to keep within the time limit, but also give something that may really be lessons for Africa, I'd like to concentrate on three dimensions.

First of all, for Europe II countries, there was a huge volume of TA. That occasioned two types of problems or issues that I will elaborate on: absorptive capacity and an eventual transition fatigue on the part of donors.

Secondly, I want to talk about what were the efforts of and first priorities of the IMF, which is to say the evolution of macro policy institutions: establishing a central bank, forming the Ministry of Finance, establishing a treasury. Here we have a very critical question of what the proper sequence is between these sorts of institutions and the broader rule-of-law institutions.

Then, third, I'd just like to say a few things about the fact that we have an initial condition of socialist economies which had highly developed government institutions and a large bureaucracy, but one that needed significant redirection towards market-based policymaking. That, of course, raises the interesting question: To what extent is it easier to build from scratch as opposed to trying to change or reorient things?

On the first broad question, the large volume of TA in the very short period, the enthusiasm of the early years of transition led both to a very high demand on the part of the countries as well as a very large and eager supply from outside, from all sorts of providers: all IFIs, many bilaterals, not to speak of a lot of academics and private individuals. I don't know of too many colleague economists in the Western academic community who didn't suddenly become interested in transition economics for at least a year and a half!

From the IMF alone we see the huge magnitudes of TA because you had orders of magnitude of a cumulative, 50 to 100, depending on the country: TA missions, usually one or two resident advisors, especially in larger countries. Of course, this has slowed in recent years.

Finally, it's important to note that, if you go beyond the IMF and consider all providers of TA, the range of areas in which technical assistance and capacity building was being done was enormous, from setting up central banks, doing commercial legislation and related judicial procedures, port management reforms, land ownership regulation, land registration, and even establishment of various types of NGOs such as environmental ones.

Given this very large volume, there were some very special issues. With the pre-existing institutions and the well-educated bureaucracy that we have in place, on the one hand, you have a potential for good absorption. But this did depend on whether the overall pace of reforms was faster, the ownership was in place. And there was a high correlation between the two, which was by no means perfect. I'd like to point out that sometimes technical assistance even in slow-reforming countries can be extremely effective. I give the one example of developing monetary policy capacities in Belarus. Our Monetary Affairs Department tells us that they're delighted by how this has been done.

The third kind of problem is one we now face, though I'm not sure it's a serious problem, but, in any event, the euphoric way in which things started should have already predicted to us that they wouldn't last. There is now a donor fatigue, while the nature of the needs continues in many different ways. So we have a bit of an issue of that sort to worry about in the transition countries.

Let me turn to the second general point I wanted to focus on, the priorities of the Fund. The first and most important thing, and perhaps one of the most successful areas, was simply establishing virtually non-existent central bank operations. In Central European countries, one had something more like central banks; in the USSR, essentially no.

Secondly, the Ministry of Finance as such did not exist or was part of the Ministry of Economy, which was really an arm of the central planning mechanism. So trying to worry about a specific budget and revenues and tax policy and macroeconomic projections that lay behind revenue projections, this was simply not an issue. All of this had to be put in place anew.

And then, of course, financial control of expenditures in an institution such as a treasury also did not exist. It had to be put in place, again, from the beginning because of the nature of the Soviet central planning approach, and the difference from a market economy.

Let me say a word about rule-of-law institutions, economic commercial legislation, regulation and so on. Despite recent criticisms, which I'll come to a bit later, it's not as if it wasn't understood at the beginning that these were needed. I can cite any number of early-mid-'90s publications by people who would consider themselves to be part of the Washington consensus that talk about these matters. It was more a question of whether you could do anything about it immediately, you should wait or you should not wait.

For the Fund, of course, it was, in a sense, a different issue. The Fund simply never had the expertise or capacity or mandate to do much more than the policymaking institution development.

The main problem was that the Fund's focus on macro institutions has led to is to raise the question--and, of course, open the institution to the criticisms that all of us know about--that many of the problems we saw, abuses by the so-called new capitalist class, were attributable to the inadequacy of rule-of-law institutions. Let's for short call this the Stiglitz critique, although, of course, we know that he was by no means the only or even the first person to make this argument. That critique basically says that privatization and liberalization should not have come before the rule-of-law institutions were sufficiently in place.

Now, one part of this critique in the experience that we see in Europe II countries is fully acceptable, namely, that good rule-of-law institutions not only minimize abuse by large private ownership interests and strong political persona, it helps achieve more quickly the expected improvements in productivity and efficiency.

However, there are parts of the critique which I think need to be countered. It's still debatable, first of all, whether things could have or even should have been done in a different sequence. Historically, we have to remember that rule of law was not built in one day in the history of market economies and certainly could not have been in socialist ones. And, in addition to that, they really had no time to spare to deal with the financial instability of the early '90s. In a word, inaction was not an option in those countries.

Furthermore, there's a lot of debate still going on among economic and legal experts about whether it's possible to sequence these things so neatly, rule of law first and liberalization second; or whether, indeed, these are synergistic processes.

In contrast, it's certainly clear that the macro policymaking institutions could be put in place quickly, unlike the rule-of-law ones, which take an awfully long time, and that at a minimum they help deal with some of the immediate problems such as inflation and financial instability.

Finally, the Fund itself has, frankly, very little to apologize for in the fact that it concentrated on the areas in which it happened to have expertise, the macro policy institutions.

Let me turn to the third dimension that I wanted to address, the fact that we started in these countries with a highly developed institutional base.

On the one hand, positively there was a substantial set of administration, governmental institutions and agencies, well functioning in the Soviet system. The problem, however, was that their role was to provide directives in a command economy, which was not at all appropriate to a market economy; another problem was that the bureaucracy was, in fact, far too large.

A related issue is that while there was a relatively high level of education and skills, the other side of that coin was that the knowledge of market operations by these bureaucracies was virtually non-existent. This was, by the way, less true in some of Central Europe.

The dilemma or issue that is raised by this pre-existing availability of a lot of institutions in government is that the existing administration on the one hand can be potentially good ground for developing TA, but you have to worry that the inertia of old thinking, of old procedures can be a major impediment to the absorption of the technical assistance and to the changes in approach.

Indeed, in the early '90s, observers or commentators on transition issues would very commonly suggest that the large bureaucracy of central planning was going to be a major impediment to the transition process itself. In point of fact, I think it has turned out not to be so.

To conclude, let me try to summarize by a few comments, looking back and looking forward.

What are the achievements? We believe the most important achievement is that the TA itself, the setting up of these institutions, helped considerably to contribute to the success of financial stabilization that we now see in this region of the world. Explicitly, and more focused on the TA results themselves, what we do see is that in all of these countries, we now have these basic macroeconomic agencies in place--the central bank, Ministry of Finance and Treasury less fully perhaps than the central bank. However a lot of refinement, administrative rejiggering is still needed.

Surprisingly--and this is one of the interesting lessons, I think--this success has created an unexpected lobby for market reform. Central bank Governors and Ministers of Finance and their supporting bureaucracies tend to be today vocal proponents of fiscal and monetary discipline and market orientation.

The other side of the coin of how things have turned out, if you look at the issue of opposition to reform, is that the strongest opponents are not where we expected them to be when we thought in the early '90s. The strongest opponents are the new capitalists who were expected to be pro-market but turned out to be the strongest opponents of truly open competitive markets. This, of course, is not new. Adam Smith wrote about it 200 years ago.

The remaining challenge that we now have is, first of all, to finish the job of building these key macroeconomic institutions. In particular, there are three areas which I'd like to point out, all of them related to Ministry of Finance activities. Tax reform still has a long way to go. Ministry of Finance budgetary projections and processes are still very awkward and crude. Treasury procedures are still far from adequate.

Another area which did not get much attention early on, only increasingly so in the '90s, and today is a big area which needs technical assistance and reform in general, is banking sector, particularly in the CIS countries.

On the rule-of-law institutions, there's absolutely no doubt in the mind of any analysts that have looked back on ten years of transition that they are the key need in the future, whatever the debates about how they should or should not have been done in the past.

Thank you kindly.

[Applause.]

MR. BIO TCHANE: Thank you very much.

The next speaker is Mr. Audley.

MR. AUDLEY: I don't have a PowerPoint presentation, so I don't know if you mind if I sit here. Is that okay? Thanks. Better over there?

If you'll indulge me for a moment, I'll take an extra minute to try and explain why I'm here. I asked myself that when I was invited to come because I don't consider myself an expert on the IMF and I'm certainly not an expert on Africa -- [tape ends].

-- trade, equity, and development project, a project that does its best to wrestle with what I oftentimes call the "trade and" issues: trade and environment, trade and labor, trade and development. This is an 18-month-old project with a variety of emphasis on the World Trade Organization, on the Free Trade Area of the Americas, and a recently launched effort to better understand the implications for the three North American members of the North American Free Trade Agreement.

I was pleased to hear that economists have discovered that institutions matter. My Ph.D. is in political science. That's the sort of question that I may have been asked when I took my exams, and, of course, political scientists have always known that institutions matter. That notion of whether or not institutions matter and good governance will phrase or shape the three specific comments I think I'll share with you today in regards to this particular subject.

First is in regards to flexibility. I wonder whether or not the approach to providing technical assistance and capacity building is indeed flexible enough to achieve the objectives that were so eloquently described early on by CIDA from Canada and others in terms of what technical assistance and capacity building really is or should be. Balancing fiscal policies versus an attempt to maintain some emphasis on homegrown efforts is quite a challenge, and I don't envy you that responsibility.

Perhaps the true test of whether or not you've got it right is whether or not countries indeed attract the foreign investment that so often they desperately need and that the policies win the public support of folks affected by just those policies. I myself was informed by an article recently published in Foreign Policy Magazine, which is affiliated with Carnegie Endowment, by William Easterly when he argued for more open competition for technical assistance and capacity building as countries propose particular projects and draw from a pool of resources as opposed to depending upon a more narrow slice of the international financial institutions or other intergovernmental organizations.

A second that is related has to do with ownership and, say, quality control. When I look at the proposal that we'll hear about in just a moment, you see that the IMF is deeply involved in providing technical assistance and capacity and serving in oversight and in providing a fairly substantial contribution to the money required to actually make these projects happen.

To what extent will this approach actually free the IMF from the critics that say that you exert too much influence on the kind of policies under consideration by governments and, in essence, address what I understand to be a lot of specific concerns related to the success or effectiveness of the poverty reduction strategy plans?

The third point I'd like to talk about is coordination. With the increased coordination that we just heard about or coordination or competition, if you will, among the IFIs that, in fact, could be healthy as financial institutions compete, if you will, for providing support for economic reform, you have a need for, especially in a world of scarce resources, coordinating or at least watching the competition pick the winners from the losers in terms of that support.

But going back to the definition of technical assistance and capacity building, it is so complex, and in today's society and as my own project I hope demonstrates how complex it is, how complex these subjects are, how well will these efforts to coordinate be accomplished. I'm pleased to see the level of involvement of the IMF and other IFIs in regards to work or the program areas of, say, the United Nations Development Program or UNCTAD. This is a demonstration of the importance of reaching out to institutions who have different technical--areas of technical competence, and I think that's important.

I think that there are still other areas that have not yet been worked into the puzzle. To pick an intergovernmental organization, the United Nations Environment Program is seeking its place as a technical assistance provider, if you will. And when I look at what each of those institutions provides, it's that kind of combination that begins to speak to the very complex definition of what technical assistance and capacity building could be or should be.

What I'm noticing in my world, the world of trade policy, is that you have an increasing amount of competition for who's going to be the coordinator of technical assistance and capacity building. The recently retired Mike Moore wanted to be the coordinator of technical assistance and capacity building as it related to the WTO's trade agenda, but that trade agenda obviously has implications for what you all do in very narrow ways, but also in the broader relationships that you have with the WTO and with the World Bank.

I'll close my comments with what I hear from my colleagues who work around the world and work with developing countries when they look at technical assistance and capacity building within the context of the World Trade Organization and trade globalization. They largely break technical assistance and capacity building into three categories:

One, assistance to help them address those obligations they've already undertaken in the context of, say, the Uruguay Round obligations. Many countries haven't met those obligations. They're still trying to figure them out. They understand they need to, they need assistance to meet those obligations.

The second category comprises those issues they've agreed to negotiate for the liberalization of agriculture, for example.

The third category, though, is issues that are under consideration but they have not yet decided whether or not they want to negotiate, what is oftentimes referred to as the Singapore issues. These are subjects that required an awful lot of attention to technical assistance and capacity building to achieve an agreement in Doha last year to launch a new round of negotiations. And from many developing countries' perspective, their goal is to understand these issues so that they can decide whether or not they want to negotiate them.

From the donor countries' perspective--and I'll speak narrowly from the United States perspective--I don't get the sense that's what the United States has in mind when it contributed to the $12.5 million that the WTO is now responsible for administering and providing technical assistance. It is a U.S. assumption, if you will, that once we arrive in Cancun next year for the next round of negotiations, we will engage in a negotiation of all of the subjects. That speaks to the flexibility issue. I think it speaks to the good governance issue when you talk about the broader coordination. And it speaks to the challenge that you face as you consider some of your options that we'll hear about next.

Again, thank you all for inviting me. It was an honor to visit with you today.

[Applause.]

MR. BIO TCHANE: Thank you, Mr. Audley.

Let's listen to the last panelist, Ms. Nagy.

MS. NAGY: Thank you, Mr. Chairman. I'll try to be very brief.

Since he's my boss, I know that we have a very tough moderator, so I'll try not to exceed my allotted time.

We have heard very interesting presentations here, very persuasive about why capacity building is very important, why it's key for economic growth, that not only economic policies but also institutions matter, how much the Fund has been doing it, how much IFIs have been doing it in all the various areas. Mr. Nsouli and Ms. Liuksila have presented very compelling arguments.

We also heard about a true success story in transition economies over a period of a decade or so. From virtually nothing or something that was very mismanaged and misdeveloped, a new set of institutions sprang up, creating also the proper vested interest for further reforms.

So we heard all this, and we know that this can give some basis for optimism. But if you look at one continent--and working in Africa, I consider it as my mother base now--we know that something is missing. We know that despite all this knowledge, all this importance, and despite all the tremendous amount of assistance that the Fund has provided to this region, and all that has been provided by other bilateral donors, the World Bank and others, the desired results are really not fully there, to be politically cautious.

So what is missing? We know it's needed. We know it's important. We put the resources of the global community. But, still, we see that this is not what we really want to see and what will be really needed for durable economic growth and poverty reduction.

What I will try to summarize here is something that many of you practitioners in Africa are very well aware of, sort of just putting it together.

So what are the factors, key factors? Well the literature has very clearly identified as a key reason political instability. You can define it in various measures. You can define it as eruption of wars, ethnic division which does not conform to the established national borders. But whatever the reason, there's political instability which, given that capacity building by definition is a very long-term process, really disrupts a durable consolidation of institutions.

I'd like to highlight here that in this respect, I see a startling difference vis-a-vis the transition economies because, well, apart perhaps from the still not fully settled southern region, in this region there was a very, very clear over-arching objective of linking up to the European system. For many, the membership in the EU [European Union]from the beginning was a clear possibility, and that over-arching objective across the political spectrum really geared countries toward a desire to conform with a set of EU standards. Whatever opposition parties you would talk to in Central Europe, there was not too much of an argument about the need to link up and conform with the EU standards.

In this sense, I think the external environment provided a fantastic incentive system. I think that in Africa, this conducive external of environment, if you wish, is not always there. Number one, all right, we can't have exactly the setting that Western Europe has been able to offer to the transition economies. But not only that there was no very positive incentive system, sometimes we see that there is some discouragement. If the countries see that reforms don't really pay off, reforms that politically can be quite painful, then they maybe are more reluctant or less inclined to start going on that path and institute very painful reforms.

What I have in mind--I don't want to go into details, but I think everybody knows, agricultural and trade subsidization is one point in any case. I think it's really critical to recognize that the external environment can provide either positive encouragement or a discouragement system for our countries.

Then, of course, a lot of discussion has been devoted to the problems of the TA delivery itself. One key element of the critique is that there has been insufficient focus on the capacity-building aspect. International institutions go there, give supposedly sound advice, then they leave and little is really left behind. It's kind of a gap-filling thing. Maybe the Fund has been less criticized in that respect, but I think we also can improve in that respect, by discussing our follow-up, monitoring and providing hands-on advice.

Another factor that has been identified is the distance from the field and the time lag with which the needed assistance is delivered. Assistance is provided from Washington or Brussels or elsewhere, and by the time literally the countries would be needing assistance, it's just not delivered there in a timely manner.

Now, of course, a lot has been said about the incentive system of the recipient countries,and that is clearly a key as well. There is the case when there is not sufficient ownership. It's the case when there is really no constituency for institutional reform. This is an internal problem. The Fund does not have have too much expertise in this, and we don't have too much influence and special support reforming groups. But now we use the new framework, the PRSP process, to build an internal support and constituency for reforms and, thus, ownership for institution building.

There has been also a very strong critique toward the Fund as well that the system is not sufficient because the TA advice is usually not internalized. It's perceived as externally imposed. Again, the Western advisor comes, gives the advice, and then just leaves. There is really no full connect, no training, and, therefore, it's ultimately not internalized.

Another factor, very important, is insufficient accountability of recipients and providers. Here I think there has to be a balance, and we need to have accountability not only from countries receiving assistance,

but then would not really show the results, but also the accountability of the providers must be strengthened. This is something that we have also accepted.

I would like to be a little bit provocative concerning the next factor. I also believe that given that there has been a huge amount of technical assistance, there has been a lack of discipline, if you wish, on behalf of the providers to really follow up on what type of assistance, what type of advisors they put in, what type of assistance is really needed. There has been what some call the development of a "development industry," with advisors coming in, going out again, leaving the gap behind, regenerating the continuation of demand for their services. This is a somewhat of a perverse vested interest.

And, finally, a point that has been mentioned here already, the coordination among providers. Indeed, a little bit just like in Eastern Europe, there has been a significant amount of assistance, perhaps not so short a period of time like there, but the volume has been large--with very little coordination amongst providers.

So how to address these problems? There have been two opposite solutions--one extreme solution and one which I think is closer to what we can embrace.

I don't know how many of you have been following this debate, but there has been a very radical solution proposed--and some developed countries have in part implemented it. It's just to withdraw Western assistance. They say that you have to nurture the local market, the local capacity, and, therefore, just withdraw and let the local market develop the local expertise to develop so as to avoid crowding out and nurture these local efforts.

There was a very extreme case when one country actually withdrew its doctors from African countries so that local doctors can step in and do the job.

I think that probably it is a little bit over-radical. I think--and this is something that the Fund is trying to do and in the context of the new Africa Initiative that has been launched this year. We are endeavoring to maintain the system where know-how is transferred--the transfer of knowledge and best practices-while addressing the problem of local incentives as well as other TA delivery shortcomings.

So to my mind withdrawing all the doctors and not transferring know may be too drastic a solution. The comparative advantage of the IMF is that it can survey all the practices in the world and pull together best practices. This should remain a key in our assistance.

But we do need to involve much more strongly the recipient countries in the decisionmaking process of the TA provision.

This is something that formally has been done with our traditional TA but I think--

MR. BIO TCHANE: Ms. Nagy, you will need to conclude.

MS. NAGY: Yes. Okay. We need to strengthen the accountability of recipients, particularly through peer review. I think that's a critical instrument. That is what NEPAD actually has embraced, and I think that this actually might make a difference in terms of accountability.

I do believe, following also the presentation of Ms. Liuksila, that decentralized delivery has a tremendous amount of advantages, brings assistance close to need, reduces the time lag within which we can react to needs. Improve the accountability of the provider, obviously, is very important, and so is better donor coordination. There the PRSP context could give us a very useful and efficient framework.

And, finally, just one sentence, Mr. Chairman, if you will allow me to do some publicity here with the Fund's African Capacity Building Initiative, which is what we are trying to address. In the context of the capacity-building initiative, we are setting up technical assistance centers and with a governance structure geared toward the increasing role, actually the leading role of recipients.

Thank you.

[Applause.]

MR. BIO TCHANE: Well, thank you very much.

We have heard now the five panelists. We have now at least for half an hour the opportunity to comment, ask questions, some statements. So you have the floor, ladies and gentlemen.

MR. : Thank you, Mr. Bio Tchane. I have a quick question regarding the demand-driven nature for the technical assistance that some of the speakers mentioned. My experience is in many countries in Africa that this the senior authorities know when something isn't being done, and they recognize when they want to improve the quality of their administration. But they don't have a clear understanding of what needs to be done in order to achieve that.

In the past, there have been two ways of approaching that: officials come to Washington or Abidjan or someplace to get a short training course; or else there's some sort of technical assistance, either long term or short term, that goes to the country to try and address specifically identified issues.

But in the sense of having an appreciation about how an efficient institution like the Federal Reserve System or the U.K. Treasury or a really well-functioning system that's proven itself to be sustainable and shown itself to be efficient, it seems to me that it's very difficult for senior officials to get an appreciation of what their system might look like and what they should be doing in order to put such a system into place.

I'm just wondering if one of the panelists might address that.

MR. BIO TCHANE: Thank you.

Mr. Basu?

MR. BASU: Thank you, Mr. Chairman. My question is to Mr. Havrylyshyn. I was tempted very much by your presentation to compare with Africa, especially post-conflict countries and countries in political turmoil in Africa. One of the points you mentioned is the rule of law and institutions in that area, their development was rather delayed or came after other priorities. In Africa, we seem to have the priority there in many cases, political systems, the rule of law, good governance, donors seem to put that first on the agenda now before we proceed with the other reforms.

I was just wondering to what extent in your countries you had political systems that actually favored the processes of reforms, that actually counted governance issues and in what form and in what ways they did so and whether those practices could hold lessons for us.

MS. : I just have two--maybe just a comment about the disappointment I have about the presentations--

MR. BIO TCHANE: Introduce yourself, please.

MS. : I'm (?) . I'm an academic. The two issues which (?) presenters focused more on: number one is that you tend to use a lot of Western concepts in analyzing African countries and development, rule of law, accountability, transparency, and institution building and all that. And that's my major concern whether all those Western concepts are legitimate and appropriate for understanding many of the problems that Africans are facing in Africa right now.

Number two, I would like you to say something more about some of the variations in Africa as a continent. You talk about Africa as if Africa is homogeneous. It's a huge continent, a huge variation, different institutions make up tribal set-ups and all that. If you want to propose some solutions for Africa, I would like you to pay attention to the variations and see what you propose that might work in some countries may not be for some other countries.

Those are my two major concerns. Thank you very much.

MR. BIO TCHANE: Thank you very much.

Yes, sir?

MR. : My name is (?) . I'm from the World Bank. Training is one of the important elements of capacity building, both overseas and local. Is there any study made on the system loss of training, what's happening after training in the African countries?

MR. : Yes, my name is Mark Bochet (ph). I work for the U.S. State Department. One quick question.

To what extent has conditionality been employed when you provide TA? In other words, to what extent do you go into a country and say we will provide TA providing you make certain adjustments that will make the TA more effective?

Thank you.

MR. BIO TCHANE: Yes, sir?

MR. : Yes, my name is Ben (?) from the Operations Group of the World Bank, Africa Region. I just wanted to posit my idea. I've been involved in capacity building in various--in several ways over the past decade, and I've always felt that, as far as Africa was concerned, probably we're putting a wrong emphasis here. Unlike the transition economies where I think there was a need to start from scratch, I feel over the past 30 or 40 years now a considerable body of capacity has been developed in Africa. But, unfortunately, it has been seriously underutilized. And I've always posited that probably we need to talk more about capacity enhancement as opposed to capacity building, and probably when you mention what is missing, could it be not only this focus but also how do you tie capacity enhancement to longer-term sustainable development if you--given the fact that you're operating in a disabling environment, which I think you did mention. So I just wanted to put that out there for discussion.

MR. BIO TCHANE: hank you.

Yes, sir?

MR. MORRISSEY: I'm David Morrissey with the National Louis University. In Sub-Saharan Africa, there are many regional associations. Would you judge that the capacity building within those regional associations has been more proficient than outside? And is the regional association an effect of already existing improved capacity building or does it generate an improvement in capacity building?

MR. BIO TCHANE: When you refer to the regional association, are you talking about ECOWAS and--

[Inaudible comment off microphone].

MR. BIO TCHANE: Okay. Thank you.

Any other comments? Yes, (?) .

MR. : Thank you, Mr. Chairman. Just two quick questions.

The first one relates to what Ms. Nagy said about the fact that, despite the massive technical assistance, the desired results were not achieved. And she mentioned something about the governance aspect of the technical assistance. I was just wondering whether maybe Claire or Mr. Havrylyshyn who have experience in other countries could tell us a little bit what are the governance aspects that you can put in place, first of all, to ensure the quality of the technical assistance that is provided and, second, to ensure that the countries will really do their utmost to make sure that this technical assistance is used efficiently.

The second point is on the civil society. I think it's not clear really whether the civil society would be included in all of this capacity building. From the Fund perspective, we're working to making the civil society a part of the whole process of development. How do we integrate the civil society in our capacity building?

Thank you.

MR. BIO TCHANE: Thank you very much.

Mr. Barro Chambrier?

MR. BARRO CHAMBRIER: Thank you, Mr. Chairman. I would like to commend you for organizing this panel. I think this is very timely, and as you know, we are a strong supporter of AFRITAC and other involvement in the region to improve the technical assistance.

I wonder whether the panelists maybe should insist on the importance to link the technical assistance with the reform of the civil service in Africa, because it seems to me, as one commentator said earlier, that the key question is really first to use the capacity that exists already and try to broaden that.

The second aspect, of course, is related to the ownership, and here I think it has to come from the country to have--from the recipient country to have a counterpart when we provide the TA to ensure that after a certain period the counterpart is able to take the lead and to get the autonomy. I think this is part of the accountability, and I would like very much in light of the experience of the transition countries to know more on that.

Thank you.

MR. BIO TCHANE: Thank you.

Do we have any other comments?

[No response.]

MR. BIO TCHANE: Okay. Maybe I'll ask the panelists to comment, but before asking them to comment, I'll one question to Ms. Nagy.

Can we just state, as you said, that Africa has received in the past massive technical assistance and that it has been wasted?

MS. NAGY: It is the first question to answer, Mr. Chairman?

MR. BIO TCHANE: Well, you are not supposed to answer it first, but--

[Laughter.]

MS. NAGY: Give me some time to reflect.

MR. BIO TCHANE: Okay. Mr. Havrylyshyn, do you want to start?

MR. HAVRYLYSHYN: Thank you, Mr. Chairman. There are several points that have been raised, some of them questions directly to me, some of them perhaps indirectly. I will try to make a few brief comments that may not fully answer each, but bring them together.

The lessons for Africa on how the political establishment may or may not have had commitment and how this affects the forward progress, technical assistance absorption and so on, is a mixed story in the transition countries, of course, and even in the group of the Europe II countries.

Certainly one clear conclusion is that in Central Europe and the Baltics the anchor or magnet of European--EU accession has led to a very, very strong commitment by parties across the spectrum in the political establishment and, therefore, by different leaderships; as governments changed, the economic policy didn't. The political scientists doing correlation about political stability and economic reform will be stymied by the fact that Estonia and Latvia have had more governments than Russia or Ukraine, probably.

In the CIS countries, even there it was a mixed story, of course, across countries over time. There tended to be a stronger commitment early on by political leadership, and that tended to in some cases deteriorate a little bit. The reason for the deterioration was that there wasn't a fast enough movement of all of the institutions, including rule of law in particular, to catch up with the great opportunities for new vested interests to capture the process. That I think is a great danger in any environment. It's certainly a very old story in the political economy of trade liberalization, and we saw it played out quite fully.

Fortunately, I think we see that now being brought back to a bit of an equilibrium in a lot of our countries, and while the vested interests are now strongly entrenched, there are beginning to be a lot of impediments put in the way of their fully exercising their strength. A major impediment, by the way, is that the greatest opportunities for vested interests to milk from the milk cow--namely, the transfer of state assets to private hands--that's about played out. There isn't much more left to do.

But, in addition to that--and that addresses a question that also came on what you can do in terms of governance. Well, there's no silver bullet, clearly. It's a very, very difficult task. It takes a long time. However, if there's a single word that should guide us in trying to set up barriers to poor governance, it is transparency. On everything you do, every condition that you impose, every new institution, every new process, insist at a minimum on transparency.

Let me give you an example and reveal perhaps a little bit of internal secrets to the outsiders. On Azerbaijan, where an oil fund was set up to pool together the money from oil revenues, we have a lot and continue to have a lot of internal debate as to whether that is an economically optimal mechanism. It probably isn't. However, to make sure there is a transparency as to how that money comes in, for what purposes it is used, to insist on quarterly reporting to the public of the accounts of this oil fund, we thought was far more important than achieving the first best on the production possibility curve. That's, I think, the one single thing that I would say is most important and has been in our countries.

MR. BIO TCHANE: Okay. Thank you.

Mr. Audley, do you want to address some of the concerns?

MR. AUDLEY: I'll do my best.

The emphasis of my presentation is drawn from my experiences with the WTO, which is oftentimes criticized because it cannot provide assistance, if you will, beyond its own mandate or its understanding of the way the world works. It's responsible for administering trade rules and resolving disputes among its members.

To the same extent, the IMF has a certain discipline, and its job is to share that understanding of fiscal responsibility, economic policy with countries on a demand basis.

I worry about the overemphasis on that as a component of technical assistance and capacity building in the absence of other aspects of good governance, if you will, that I think taken together create the kind of policy that wins public support and ensures that greater economic activity or a larger part of a global economy serves a broader slice of the citizenry.

A couple of specific things. We're working on a dialogue with the Government of India through some civil society groups, and one of the things that has been highlighted by our counterparts in India is the reluctance among civil servants in India to trade liberalization, in part because they worry that their own livelihoods are in jeopardy.

Now, the folks who are our counterparts think it's a good idea. They're not civil servants. Their jobs aren't at risk per se. But that is certainly--I learned from that and understand the importance of reform in that area.

Finally, it's an interesting and perhaps useful exercise to, if you will, put transportation above a first best, whatever that might be, endeavor--in part to instill that notion of transparency as a common practice. I'm not a believer in first or second best. I think we do our best and out of that, after it, comes a variety of options. Placing transparency at the top of the heap, if you will, or making it a guiding force I think is a useful exercise because it does lead to the kind of governance that I think we are all talking about.

Thanks.

MR. BIO TCHANE: Thank you, Mr. Audley.

Ms. Nagy?

MS. NAGY: First, on the quantity of TA, I don't have numbers under my fingertips, Mr. Chairman, but I do believe that there have been substantial TA provided. I wouldn't characterize it that it has failed, but it has not produced the results I think that we are really looking for in terms of what is needed for economic development.

Now, several questions that maybe I can pick up. The role of civil society, it's a very pertinent question. I wasn't able to elaborate on that, but indeed, in the context of the PRSP process, they are involved in broad aspects of policy discussion and economic policy decisionmaking, including the capacity-building needs.

On the importance of reform of civil service, Mr. Barro Chambrier, I couldn't agree with you more. Unfortunately, it's a little bit outside our control, but I agree it's absolutely key. If that doesn't happen, no matter how much investment you make, even in capacity building, the capacity will not be there to supplement good policies.

Your suggestion also on TA ownership to be ensured, via appointing local counterparts, I fully agree. In fact, in our initiative--again, I didn't have time to elaborate, but in our initiative, we would like to have that. In some TA provisions, it's already a practice, but it's not a common practice. We will identify key local counterparts who are responsible also; for the projects, so that the element of accountability is also introduced here.

I don't know, Mr. Chairman, if you want to handle the question on to what extent conditionality enters into the TA process, or should I try to tackle that?

MR. BIO TCHANE: Please. You can go ahead.

MS. NAGY: I'll give my view on that. TA is not directly linked to Fund conditionality, but amongst us, of course, if we have a country with which we're having an economic program and weak capacity has been pinpointed, identified, and we're providing assistance, it's sometimes natural to bring that into the conditionality. You can argue that this is "imposed," but sometimes I see that on the other side it is also used a little bit, because those who are in favor of the given institutional reform actually find it quite useful to have this in-built into Fund conditionality.

But as a last sentence, Mr. Chairman, I don't think that's the main mechanism with which we would like to have accountability. Accountability really should come through peer review among countries in the regional context and also through pressure from the civil society, from all the domestic stakeholders who have interest in economic reforms.

Thank you.

MR. BIO TCHANE: Thank you very much.

Mr. Nsouli, do you want to...

MR. NSOULI: Thank you, Mr. Chairman. I think I would like to address directly the question that was raised on training, and let me just say as a preamble to that that the issue of the effectiveness of technical assistance is very, very difficult to assess. Many times when technical assistance is provided, it has some specific objectives, but these are not extremely well defined. And to be able to say at the end did it succeed, did it not succeed, is extremely difficult. It depends on a number of factors.

And, in fact, this was the question that about five years ago when I first joined the IMF Institute and Mohsin Khan, my Director, were posing ourselves. What has the IMF Institute achieved? And, therefore, this was a retrospective study against objectives that had not been preset originally. And we hired a firm to undertake a detailed study of how the authorities of member countries in Africa and other regions of the world saw the training provided by the IMF Institute.

In general, the conclusions were as follows:

One, the IMF Institute training has improved the analytical skills of agencies' staff and their expertise in a wide range of areas.

Two, it has enhanced the participants' understanding of the IMF and its operations.

And, three, these participants--and we're very proud of these, particularly at the Annual Meetings when all the Governors and the Ministers come here, many of them have gone on to higher positions in their respective agencies in their home countries.

The conclusion of this study was that the training provided by the IMF Institute has had a dynamic impact on policymakers. Policymakers get better advice as a result of the training provided by the IMF Institute and are themselves, when they becomes Governors or Ministers, better trained than their predecessors.

So, yes, indeed, we have followed up to see what happens after training.

Thank you, Mr. Chairman.

MR. BIO TCHANE: Thank you.

Ms. Liuksila?

MS. LIUKSILA: Thank you. I have a feeling my colleagues are sending me a message. I'm at the end of the platform -- [tape ends].

-- about with respect to conditionality and technical assistance. I understood the question in a different way, which is, if the technical assistance that is provided subject to conditions, and there in the sense of do certain steps need to be taken before it can be put in place. And I think in that sense, like any intervention, you have to look at it as a whole, and if a series of steps are needed for a particular technical assistance intervention, well, you need to take those prior steps.

We have seen that in the case of the countries of the former Soviet Union. The sequencing of reform is very, very important.

Looking at the flip side of that, one needs to have fairly good markers or indicators along the way when you are doing a technical assistance project to make sure that it's going well. And in that sense, there are conditions attached to technical assistance interventions because you don't want the resources to be wasted.

I wanted to take up a second question. One of you had mentioned that in our interventions we were looking at Sub-Saharan Africa or Eastern Europe in a sort of monolithic way, and that, of course, is because we have been restricted to seven minutes to get our message across.

I think it's important for you to realize that in technical assistance, the activities of the IMF in general and in particular for these Africa Regional Technical Assistance Centers, countries are treated individually, and not only are they treated individually, but we have made a particular effort through many, many different meetings to discuss with them their needs in the technical assistance area to work out solutions that are country-specific.

And so I wouldn't want to give the impression that we are doing a one-size-fits-all approach. It's certainly not the case.

Thank you.

MR. BIO TCHANE: Okay. Ms. Nagy, can you take the last two questions?

MS. NAGY: Yes, Mr. Chairman. Basically, there was a question whether indeed Western concepts make sense in the African context. I'm sure that we can have very different views on that. However, I can tell you the following. I'm Hungarian. I'm coming from the transition economies, if you want. I remember fierce debates at the beginning of the transition process on why Hungary was different and why there had to be a third way, et. cetera.

Well, this was not very relevant in the end, and it was clear that concepts of transparency and good governance and the like were very useful in a world which considered itself very different. And I would think that in the African context that also could be the case in most places.

Our World Bank colleague was also asking about the concept of capacity enhancement, making the point that there is capacity in place already. And I think there's a lot to it. It is true. But it's not to say that there is no room for really strongly enhancing it and give it a boost through a concerted effort and through better donor coordination.

There was a question if regional associations are providing better technical assistance, but I am not in a position to answer that. I don't know whether Claire Liuksila would like to address that.

MR. BIO TCHANE: Thank you very much.

Unless anybody wants to raise a final question, I'll just conclude the session.

[No response.]

MR. BIO TCHANE: Okay. Nobody. So thank you very much for coming to this very good seminar, and I would like to thank on your behalf all the panelists, and especially Mr. John Audley for participating in this panel.

I think clearly our debate today could not provide solution to all the issues and problems raised, but I believe that we have learned a number of interesting ideas and views. Let me just summarize a few points without coming back to the issues raised by the panelists.

In the coming days we'll see with EXR how we could put together a document summarizing the presentations, but from the questions raised by the audience, I noted some questions for the future. Some of them are already taken care of in the framework of our AFRITAC Initiative, some of them by the Institute, and I'm really serious when I say that the Institute is the most popular department of the Fund.

These issues include, for instance, the ownership of the reforms in the TA in the countries, the question of accountability and conditionality, the role of the regional organizations--and, by the way, it's true that some of them can call on the central banks, the two regional central banks, the ECOWAS, the West African Monetary Institute, who all participate in TA and training in the areas; the question of the Western concept just addressed by Mrs. Nagy to Africa. I think an important question is also how we treat the countries. It's true that the TA coming from an individual analysis of what's happening in the countries, in the framework of the program or in the framework of the Article IV consultations, and I think we treat each country separately and specifically. So I think all these questions are very focused and relevant questions, and we are taking them back with us.

I wish also to underline that within the framework of NEPAD, under our new Africa Capacity Building Initiative, we are attempting to address many of the problems discussed by the panelists and raised by some of you in the audience. Setting up our new capacity-building centers, the AFRITACS, will bring about, we hope, several benefits:

First, an increase in volume of capacity-building assistance to the African continent, with a clear focus on capacity building.

Second, our targeted assistance will help African governments to address their capacity-building needs in the context of the PRSP process. This will at the same time improve the process of donor coordination.

Third, the introduction of an instrument that locates assistance in the vicinity of needs will provide for a flexible and rapidly deployable tool for capacity-building assistance. Resident experts of the centers will be in a unique position to provide hands-on assistance in a rapidly deployable fashion and to allow for a more effectiveness monitoring of ongoing technical assistance projects. They will also have the complex task of donor coordination in the field.

Fourth, as some of you noted, the question of the governance in TA, the governance structure of the centers is designed to foster ownership and accountability of both the recipient and TA providers. Recipient countries will play a major role in the decisionmaking as well as monitoring process of the activities of the center, including via peer review, an aspect widely stressed by the NEPAD; accountability will also be extended to us, the assistance providers.

Fifth, in conjunction with the setting up of the centers, the Fund, in the area of its own mandate, is also intensifying its collaboration with ongoing capacity-building efforts in the African region. Most notably, the Fund had joined the World Bank's Partnership of Capacity Building in Africa, the PACT, and it has become a member of it executive agency, the Africa-led Africa Capacity Building Foundation, ACBF. In fact, Mr. Aninat, the Deputy Managing Director in charge of technical assistance, will be signing the Fund's MOU with the representative of the ACBF during the forthcoming Annual Meetings.

Finally, I want to tell you that of the five AFRITACs, we will start this year with the first two--the first one in Dar es Salaam in October, and the second one in December in Abidjan.

Finally, I wish to extend on behalf of the African Department our thanks to EXR staff, the panelists, and all of you who have taken your time to come here this afternoon.

Thank you very much.

[Applause.]

[Whereupon, the Economic Forum was concluded.]




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