Aid Ownership & Relationship – The Botswana Example. (The North South Institute Conference – Does Aid Work?). Gervase S. Maipose University of Botswana. Purpose.
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Aid Ownership & Relationship – The Botswana Example.(The North South Institute Conference – Does Aid Work?)
Gervase S. Maipose
University of Botswana
NB: Botswana is often cited as an exceptional development success story that has used its aid resources effectively; and has sustained one of the world’s highest economic growth rates; and is no longer aid dependent. Why?
(3) To illuminate Leadership Aspect and developmental role of the Botswana state in explaining Aid ownership
(4) To examine what can be done by aid dependent countries to establish or regain ownership in policy and institutional context; and
(5) To explore how to adopt countercyclical instruments as an asset; and how to manage transition from aid dependence .
NB It is, to a large extent, the story of exceptional state management of “good fortune”- initially aid from the international community and subsequently natural resources – while avoiding aid dependency and fortifying ownership against donor onslaught.
How were the main issues Addressed?Taking Policy regime orientation of Aid & Growth Management into three phases: 1960 – 1975; 1975 -1989; 1990-2005.
1. The First phase: 1960 - 1975 – Initial base creating, a transitional phase.
By the end of the second phase, viable traditional and modern institutions of economic, political and legal restraint had been in place and relatively well consolidated.
Development Planning and its integration with Budgeting system ensured that development projects were initiated locally, and donors funded projects that addresed government priorities
NB: Growth slackened and picked up again; and aid became insignificant in macroeconomic variables. What constitutes Private sector-led development Vs the Role of the State.
The institutional context and how interest of the key players were reconciled were crucial in explaining the forces behind some crucial development outcome, including how Botswana managed aid and coordinated donors .
The country’s development path has largely avoided both the Dutch disease and resource curse –signifying importance of prudent management – making it possible for a natural resource dependent country to enter into virtuous cycle . Thus success is due to effective state management under institutions of restraint. What is the evidence?
NB: It is a story of export-led growth combined with economic & political stability with no predatory leaders & rampant corruption
Major macro-economic puzzle relates to the fact that a growth rate of that magnitude, sustained for a long period, has had limited impact on structural economic diversification (especially for manufacturing) and the levels of unemployment and inequality in income have not been sufficiently reduced.
The country’s political economy has had fundamental bearing on policy choices & Accountability:
The role of the state in Botswana is, in many respects, similar with the development success story of the “East Asian miracle" where the state has been strategically interventionist rather than crisis-driven under a capitalist market economic development formula/strategy.
But the institutional context of rapid growth in Botswana – that is a multi-party democratic system of government – offers a sharp and refreshing contrast to authoritative and undemocratic regimes elsewhere ( including China and East Asian miracle economies) which do not have a history of democratic institutions until quite recently if at all.
In this case study, Botswana –illustrates the positive role the leadership can play in sustaining economic growth and development
The essence of State-led development - depicted as an “indigenous developmental state”. It is basically a story of forty years natural resource export-led growth process in which:
Botswana Case offers the following Lessons:
Lessons for Ownership and Managing a transition are clear:
1.While Botswana’s historical and cultural context may be unique and may not be applicable elsewhere, it is imperative for aid dependent and resource based economies to strive with good effect to use Planning instrument to fortify ownership against donor onslaught; and also to minimize adverse consequences of “Dutch disease and resource curse to which many economies tend to be prone. The lesson applies to all.
2. Botswana’s super-prudent macro-economic policy of treating diamond price increases as temporary and declines as permanent – leading to reserve accumulation during boom periods and rapid responses – is internationally relevant, especially for resource based economies.
3. The importance of encouraging and attracting private investment applies to all.
Botswana’s success story is not due to good fortune or good luck factors, but largely a result of effective/good management effort, pursued by a relatively strong and competent state that provides visionary and management role ( operating) under viable traditional and developed modern institutions of economic, political and legal restraint.
Conducive policy environment, including institutional context of restraint, broad-based development planning, pragmatism, etc are necessary for growth and Managing a Transition from Aid Dependence to Independence.
The above explanations seem to be consistent with political economic models in which policy makers who need to satisfy larger constituencies, who face checks and balances within the decision making process, who are subject to electoral reviews and who function in stable institutional environments are more likely to produce good policies for growth (Humphreys and Bates,2002; 2004).
A more encompassing regime would choose to expand future productive capacity rather than maximize transfers to the narrow elite, while the political stability and well established democratic process of regime change or conflict management ( as is the case in Botswana) also helps to reduce the perception of higher investment risks or capital flights typically associated with violent regime change.
NB. Botswana Case Illustrated by Global Fund Assistance to the HIV/AIDS Sector.