What Can Be Done to Improve the Use of Country Governance Systems?

TheGovernanceBrief ISSUE51•2023 WhatCanBeDonetoImprovetheUseofCountryGovernanceSystems? byJoseLuisSyquia Introduction:Useofcountrysystems—whathashappenedtoit? Recognizingtheimportanceofstronggovernanceinstitutionsandsystemsinpublicservicedelivery,thisbriefreviewstheprogressofdevelopmentpartnersinfulfillingtheircommitmenttousecountrygovernancesystemstoensuretheeffectivenessofdevelopmentaid.Thisbriefwillfirstlookbackathowdevelopmentpartners havefaredintheircommitmentstousecountrysystemsintheirrespectiveprogramsandidentifythespecificchallengestheyfacedinfulfillingsuchcommitments.Havingidentifiedandanalyzedtherootcausesofthesechallenges,thisbriefwillthenproposestepsthatdevelopmentpartnersandtheirgovernmentcounterpartscantaketoaddresstheunderlyingissuesandprogressintheirrespectivecommitmentstousecountrygovernancesystems. Theuseofnationalsystemscanprovideincentivesandmomentumtostrengthenthecapacityandperformanceofdevelopingcountries,enhancedomesticaccountabilitymechanisms,andimprovetheeffectivenessofpublicexpenditure, regardlessofthesourceoffinancing(i.e.,whetherfromthenationalbudgetorfromdevelopmentassistance).1Althoughthereisvariedunderstandingofwhattheterm“countrysystems”covers,theParisDeclarationonAidEffectivenessgivesthefollowingbroadperspective:“Countrysystemsandprocedurestypicallyinclude,butarenotrestrictedto,nationalarrangementsandproceduresforpublicfinancialmanagement(PFM),accounting,auditing,procurement,resultsframeworksandmonitoring.”2 Forinquiries,comments,andsuggestions,pleasecontacttheauthorofthisgovernancebrief,JoseLuisSyquia,PrincipalPublicManagementSpecialist,Public SectorManagementandGovernanceSectorOffice, atjsyquia@adb.orgor+63286325453. PreviousissuesofTheGovernanceBriefcanbeaccessedathttp://www.adb.org/publications/series/governance-briefs. TheaideffectivenesscommitmentsagreeduponinRome,Paris,andAccracallforanincreaseintheuseofpartnercountrysystems,particularlywithrespecttoPFMsystems(footnote1). TheAddisAbabaActionAgendaonFinancingforDevelopment(2015)callsformoreandbetterofficialdevelopmentassistance(ODA)thatis alignedwithnationaldevelopmentgoalsandtargets,andisinaccordancewithnationalbudgetallocationprocesses.3TheOperationalPlanonStrengtheningGovernanceandInstitutionalCapacityofthe AsianDevelopmentBank(ADB),underitsStrategy2030(OperationalPlanforPriority6),expressesADB’scommitmenttoincreasethe 1OECDDAC.WhatAretheBenefitsofUsingCountrySystems?PolicyBriefs.No.1. 2OECD.2012.ParisDeclarationonAidEffectiveness.Paris.p.4.CitedinWorldBank.2021.FollowingtheGovernmentPlaybook?ChannelingDevelopmentAssistanceforHealthThroughCountrySystems.Washington,DC.p.8. para.53. 3UnitedNations.2015.AddisAbabaActionAgendaoftheThirdInternationalConferenceonFinancingforDevelopment.NewYork. useofcountrysystems(UCS)indeliveringpublicsectoroperations.ItalsoacknowledgesthatUCScouldreducedelaysinprojectimplementation,cuttransactioncosts,improvecountryownership,andstrengtheninstitutionsandsystemsforservicedelivery.4InFebruary2015,ADBpublishedthepaper,PromotingtheUseofCountrySystemsinADB’sOperations:ASystematicApproach,where itdeclareditscommitmenttostrengthenand promoteUCSinitsoperations.ThepaperhighlightsthebenefitsofUCS,whicharealsomentionedinStrategy2030OperationalPlanforPriority6,and itnotesthatthestrengtheningofinstitutionsandsystemsofADB’sdevelopingmembercountries(DMCs)canleadtoimprovedservicedeliveryandsustainabledevelopment.5Italsoidentifiedthethreeareasofcountrysystemsthatareconsideredcentraltoachievingsustainabledevelopmentimpact:PFM,procurement,andenvironmentalandsocialsafeguards(involuntaryresettlementandindigenouspeoples)(footnote5).ThisissimilartotheWorldBank’sdefinitionof“useofcountrysystems,”whichreferstoitsrelianceon theborrowingcountry’ssystemsforthesafeguardandfiduciaryaspectsofoperationsitsupports—thatis,thefinancialmanagement,procurement,environmental,andsocialaspectsofprojectimplementation.6ThisbrieffocusesonthefirsttwoareasofcountrysystemsidentifiedinADB’s2015paper(footnote5):PFMandprocurement. DespitethewideacknowledgmentoftheimportanceofUCSindeliveringaidandthesignificantamountofattentionithashadoverthepast2decades,developingcountries’relianceonPFMandprocurementsystemshasnotprogressedmeaningfully,especiallywhenoneexcludessovereignbudgetsupport.The2019reportoftheGlobalPartnershipforEffectiveDevelopment Co-operation(GPEDC),whichtracksprogresstowardtheeffectivenessprinciplesunderthe2030AgendaforSustainableDevelopment,showsthatprogressindevelopmentpartners’useofcountryPFMsystems(includingprocurement)hasbeenslowoverthepastfewyears(Figure1).7 Alldevelopmentpartnersregardtheassessmentofacountry’sfinancialmanagementfunctionsas Figure1:DevelopmentPartnerUseofCountryPFMSystemsasaProportionofDisbursementstothePublicSectorbySystemComponent(%) 495053 5353 56 55 50 52 55 49 53 55 49 53 UseofcountryBudgetexecutionsystems(average) Financialreporting Auditing Procurement 201120162018 PFM=publicfinancialmanagement. Source:GlobalPartnershipforEffectiveDevelopmentCo-operation.2019.MakingDevelopmentPartnerCo-opera