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Session Overview
6-HP039 - 2/2: Between Financial Dependence and Policy Autonomy: Navigating the External Financing of Development - 2/2
Wednesday, 07/July/2021:
12:30pm - 1:45pm

Session Chair: Dr. Andrew Martin Fischer, Institute of Social Studies (The Hague), Netherlands, The
Session Chair: Dr. Miguel Rivera-Quinones, University of Puerto Rico, Puerto Rico (U.S.)

Session Abstract

This panel invites papers that examine the precise mechanisms by which external finance is mobilised and utilised by developing countries governments for development purposes, whether these are focused on industrial policy or other productive activities, infrastructural financing, or else domestic social expenditures. The aim is to explore the underlying tensions between bilateral and multilateral donors on one hand, and developing country governments on the other, regarding policy autonomy versus donor attempts to influence national policy agendas, with the aim to deepen our analysis of the challenges of international redistribution as a crucial element of global solidarity. Exploration of the role of commercial sources of financing to both public and private actors is also welcome.

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The Politics Of Sino-Ethiopian Relations: From Political Agency To Collective Action

Valeria Lauria

International Institute of Social Studies (ISS), Italy

A significant knowledge gap in the literature about China in Africa appears to be related to the inclusion of the African perspective. Africa’s relations with China have been regularly assumed to be characterised by asymmetry due especially to China’s economic and political strength. In particular, a widespread perception of African-China encounters is that Chinese actors play in context where local actors are passively suffering from the adverse effects of the Chinese presence, incapable of any reaction. Moreover, mainstream narratives often bear out a simplistic picture of agency, where agency is equalized with state actors. As Lampert and Mohan put it (2015: 109), ‘the dominant assumption in much literature on the Chinese presence in Africa is that the monolithic entity China is able to set the terms of engagement with African states and to unilaterally determine events. This is problematic for two linked reasons. First, it privileges unitary states as the key players in these relationships. Second, it underplays the role that African actors”. Following this argument, this paper shows that, despite stories of Chinese agency and African passivity, a careful examination of Sino-Ethiopian relations suggests a reassessment of this asymmetry and a rethink of the agents playing in the context of Ethiopian infrastructure industry.

Thanks to a thorough study of domestic conditions, local actors and their strategies, formal and informal constructions of power relations inside and outside state-led negotiations, I argue that, albeit in different ways and with different degree of success, a diverse range of Ethiopian actors do exert agency in their everyday encounters with their Chinese counterpart. Indeed, power asymmetries between Chinese and Ethiopian agents remain. Yet, fieldwork evidence shows that Ethiopian agents have been able to shape and influence their relationship with the Chinese actors. Specifically, I recognize two kinds of agency in Ethiopian-China relations, high-level agency and on-the-ground agency. On the one hand, state actors exert high-level agency with China in the context of infrastructure contract negotiations. On the other hand, a variegated network of actors, who participate and influence the debate at different levels, extend on-the-ground agency in their day-to-day interaction with Chinese agents. In this context, the reaction of Chinese agents is multifaceted and subject to difficult battlefield where negotiations, bargaining, diplomacy and compromise are always on the agenda.

To scrutinise the anatomy of Ethiopian decision-making and the “balance of power” between different stakeholders involved in the context of Chinese financing in the Ethiopian’s infrastructure sector, the paper proceeds in three steps. It first provides the context to unpack the distinctive features and agents of the Ethiopian developmental state providing inspiration in relation to historical insights and into structural conditions driving the rise of the Ethiopian developmental state and the arrival of the Chinese actors in the country. The section will then present an empirical analysis of the modalities of Ethiopian negotiation with China in the context of the country’s infrastructure sector, evaluating the tactics in which different Ethiopian actors engage, negotiate and contain Chinese engagement through the different stages of infrastructure development. In addition to exploring macro inter government connection, I scrutinise the implementation mechanisms and the micropolitics of everyday activities with the aim to assess how the decision taken at the top are leveraged at a lower level of bureaucracy and how the conditions of Sino-Ethiopian partnership are shaped and adjusted during project implementation. The paper ends with some reflections on the significance of these findings for the broader China-Africa literature.

World Bank’s Method of Development Finance: A Case Study from Indian State of Karnataka

Amitabha Sarkar

Centre of Social Medicine and Community Health, Jawaharlal Nehru University, India

Context: The development finance after 1990 took a distinct turn by incrementally getting involved with the policy-based lending. The paper attempts to analyse the trajectory of development finance in health intervention from 1990s to till date. The World Bank’s intervention in organising health system of the Indian state of Karnataka is used as a case study to analyse the trajectory. Karnataka intervention (from 1996 to 2017) is so far the world’s longest period of the Bank’s investment of financing development through health. That investment in health had also been aided with two consecutive World Bank financed structural adjustment loans in order to reform the Karnataka economy in early 2000s.

Objective and Methodology: The paper aims to locate the theory as well as track the practice of development finance by analysing the economic and governance structures of the state in relation to the ‘development model’ propounded by the World Bank. The study is a mix of field-based and desk research. The documents and data (both primary and secondary) have been collected from the Ministry of Finance and the Ministry of Health and Family Welfare Offices in Karnataka, and also from the World Bank Delhi data base. Both qualitative and quantitative methods are employed to inculcate data and conduct the analysis.

Findings: 1991’s economic liberalisation in principle had widened the scope to adopt new model of development for Indian states to plan fiscal space management and improve on the service delivery. Karnataka was also not an exception. Both the policy choice and fiscal pressure convinced the Karnataka as one of the first Indian states to seek refuge at external finance for continuing the government’s commitment on social expenditure. 1996 World Bank’s loan on the Karnataka Health System Development Project (KHSDP) - the first in kind in India – was an outcome of that borrowing. World Bank theorised model of development came at this context where development finance provides an alternate model of development in general, and subsequently institutionalise a new system of governing health policy and operations. In this process, the World Bank had incrementally begun depending on the skilful management of state’s administrative and political leadership to mute the ‘view points’ of government and even civil society.

Discussion: The World Bank model of development has created an architect of strategic reform. They are four types; physical (fiscal and public expenditure), technical (administrative), tactical (private sector development), and theoretical (poverty and human development monitoring). It is found that all these four types of reform have been bought in to reorient not only the economy but also the governance structures. The World Bank’s investment in health system development was primarily made in line with the theoretical reform under the notion of poverty and human development monitoring. However, the investment made in health system, in practice, has always been linked to the overall architect of the World Bank’s ‘reformed model of development’ where all four types of strategic reform are in mutual coordination to slowly but steadily overhaul political and economic governances.

The model worked as reform instruments (strategies, techniques and tactics) in restructuring the state economy and reorienting the governance system. The model eventually became the conservatory of the Karnataka’s own evolutionary development model (typified by growth with equity theory) in order to govern the policy making spaces. Thus it is to point out that the Paris Declaration (2005) and followed by the Accra Agenda (2008) have not made any impact on the function of development finance yet, except the addition of non-state actors in the league.

What Happens to Aid Fungibility when a Recipient Government Takes Control? Effects of Aid Ownership in Rwanda

Zunera Rana1,2

1Hochschule Rhein Waal, Germany; 2Radboud University, Nijmegen

Aid fungibility and aid ownership have largely been discussed separately in the development literature. This is unfortunate, especially as donors have often aimed to reduce the former, while increasing the latter, without fully understanding the relationship between them. In this paper we analyse the impact on aid fungibility when the recipient government takes ownership of its development process by examining the case of Rwanda. We use a mixed method approach for our analysis; we start off with an econometric model to determine if aid fungibility is present in Rwanda. We find that there is fungibility, albeit in a U-shaped relationship between development aid and public development expenditure. Using the principle-agent framework as a theoretical background, we investigate our quantitative results further by conducting expert interviews in Rwanda and conclude that the government took over its development process through i) stimulating the donor to align their spending to its priorities and ii) urging the donors to switch from project aid to budget support. While government taking executive ownership of its development process should reduce worries about fungibility, it could also contribute to marginalization of certain sectors or themes if this ownership is not inclusive.

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