A PFMConnect Study Report by David Fellows & John Leonardo

1. Introduction

In this study we look across a series of governance and outcome evaluation systems to assess the evidence for consistency within and between the two.

The main intention is to understand the extent to which progress in one field mirrors progress in others and consider what this may suggest about the drivers of the relationships observed, identifying any areas requiring further research.

Our work is based on the World Bank Governance Indicators (WBGIs) and a set of key Socio-economic Outcome Indicators (SEOIs) derived from the World Health Organisation (WHO) & United Nations Development Programme (UNDP) data sets. Data for 2004 (2005 for Health) and 2021 was derived from the 176 countries for which all necessary data was available. This is intended to provide a reasonable timespan and data sample for such an exercise. The one exception to this approach is in Table 5 (examining the relationship between female & male Expected Years of Schooling and GNIpc) where data from only 163 of the 176 counties is available.

Technical Note

Regression analysis is used throughout this study to determine the closeness of fit between the data being compared. For this we use Pearson coefficients (shown in the tables below) and r² values. Given that we are interrogating data based on social behaviour we take a ‘satisfactory’ r² value as being of between 0.4 and 0.5. This range is equivalent to Pearson coefficients of approximately 0.64 and 0.72. We therefore regard Pearson coefficients above 0.72 as ‘good’ and below 0.64 as ‘unsatisfactory’. All the correlations in this study exhibit P values < 5%. The results are coloured in the tables below, as follows: good; satisfactory; borderline unsatisfactory; and unsatisfactory.

2. World Bank Governance Indicators (WBGIs)

The WBGIs have 6 aspects: Voice and Accountability; Political Stability and absence of violence/terrorism; Government Effectiveness; Regulatory Quality; Rule of Law; and Control of Corruption (abbreviated in the tables below). In Tables 1 & 2 we examine the internal consistency of these data sets for the two chosen points in time (2004 and 2021). 

All elements of the WBGIs correlate well internally across the data sets for both periods. For 2004 data (Table1) Political Stability achieved the lowest performance with ‘satisfactory’ correlations across three variables (Voice and Accountability, Government Effectiveness; Regulatory Quality). For 2021 (Table 2) Political Stability had just one ‘satisfactory’ result (Regulatory Quality) with another ‘satisfactory’ result being obtained between Voice and Accountability and Government Effectiveness. All other results for both periods were ‘good’.

3. WHO and UNDP Socio-Economic Outcome Indicators (SEOIs)

The five key SEOIs chosen for this exercise cover a wide spectrum of personal and community development activities: Health; Human Development[1]; Life Expectancy; Expected Years of Schooling; and Gross National Income per capita. The Health indicator is compiled by the World Health Organisation and the others by the United Nations Development Programme. In Tables 3 & 4 we examine the internal consistency of these data sets for the two chosen points in time (2004 and 2021).

Each of the SEOIs correlate well internally across the two data sets for both periods. For 2004/5 (Table 3) GNIpc was rated ‘unsatisfactory’ against Expected Years of Schooling and ‘satisfactory’ against Health and Life Expectancy although in 2021 (Table 4) this  performance improved to ‘satisfactory’ for Expected Years of Schooling and ‘good’ for Health and Life Expectancy. All other results for both periods were ‘good’.

4. Focus on female and male years of schooling

There is much work that we could do at both a broad and granular level with respect to both WBGI and SEOIs but for the moment we have chosen to examine the relationship between Expected Years of Schooling for females and males  (EYS(f)/EYS(m)) and Gross National Income per capita for females and males (GNIpc(f)/GNIpc(m)) for 2004 and 2021 (Table 5). In doing this we use the same UNDP data source as for the material in section 3 above.

A recent IMF Blog stresses the importance of female participation in the labour market to improve the economic output of emerging and developing economies. Table 5 demonstrates that female schooling correlates well with female income generation. The lower correlation values for males could indicate that there are more diverse routes for males into economic activity making education a slightly more important route for the earning power of women although the male correlation improved from unsatisfactory to satisfactory between the two study periods, seemingly indicating an increased relevance of education to male earning capacity.

5. Examining the relationship between WBGIs and Outcomes

We next examined the relationships between WBGIs and SEOIs by correlating the WBGIs from section 2 and the SEOIs from section 3.

The analysis in Tables 6 & 7 demonstrates that four of the WBGIs (Government Effectiveness, Regulatory Quality, Rule of Law, Control of Corruption – termed here the ‘key’ WBGIs) correlate well with all the SEOIs included in this study for both the 2004/5 and 2021 data sets. For 2004/5 fourteen of these ‘key WBGI’ correlations are ‘good’ and six are ‘satisfactory’. For 2021 fifteen of these correlations are ‘good’ and five are ‘satisfactory’. Government Effectiveness is ‘good’ across all five SEOIs for both years. Political Stability appears at first sight to be the most consistently problematic across the two sets of correlations although all its correlations for the 2021 data set show improved Pearson coefficients for 2021 and one is borderline unsatisfactory. Voice and Accountability declines from three satisfactory and two unsatisfactory results for 2004/5 to five unsatisfactory results in 2021

6. The World Justice Programme – an approach to analysing performance standards

The World Justice Project, Rule of Law Index provides an accessible level of analysis of key governance characteristics (eg: absence of judicial corruption; accessibility and affordability of civil redress; effective criminal investigations) that assists consideration of their potential contribution to service improvement. The Rule of Law Index is not unique but it is impressive exemplar for the presentation of governance data.

The addition of organisational efficiency indicators within this framework could prove useful.

7. Discussion

Evidence from the internal analysis of World Bank Governance Indicators (Tables 1 & 2) and SEOIs (Tables 3 & 4) suggests that when one indicator from either of these data sets is executed well then the whole data set tends to be executed well and vice versa. The exception to this is the relationship between Expected Years of Schooling and GNI per capita in the 2004 data set (Table 3), although the 2021 result proves ‘satisfactory’ (Table 4).

‘Key WBGIs’ are mostly concerned with administrative and policy development tasks usually requiring broadly similar skill sets. Experiences in this field can be shared through regular contact in business meetings and client department project work.

Socio-economic activities are highly diverse in comparison to the tasks represented by the WBGIs. These activities are often highly customer-facing and require input from staff having many different backgrounds who do not often collaborate or even meet one another across service boundaries. The possibility of common levels of good or poor performance between socio-economic activities seems remote unless good standards of service performance are compared and developed across Government. The prevalence of satisfactory and good correlations amongst this data set seems particularly worthy of further consideration

The results of cross correlations between the ‘key WBGIs’ and the ‘SEOIs’ suggest that the ‘key WBGIs’ represent those activities that seem the most likely contributors to good socio-economic performance. In comparison, the WBGI ‘outliers’ (Voice & Accountability and Political Stability), although clearly preferable characteristics in their own right when realised to a high standard, do not seem to offer a consistent influence on good socio-economic public service delivery.

It could be argued that rather than the WBGIs driving the SEOIs, these data sets are driven by common factors such as national wealth, strength of democracy, uniformity of income distribution within the population or the quality of leadership at administrative or political level. So far we have established no such links and direct national leadership impact on a multitude of service delivery points seems improbable. 

We note that the World Justice Project, Rule of Law Index offers an analytical format that could be applied to both governance and service performance. It could help equip individuals, community groups and governments to improve service outcomes at various levels.

Finally, female secondary education has many advantages but the particular advantage this study seems to suggest is that the education of females improves the wealth they generate. This result offers clear support for the economic arguments in favour of female education.

8. Conclusions

The outcomes from this study suggest that:

• WBGIs and SEOIs each have strong internal consistency of performance. From this it could be inferred that well organised administrations  are likely to be well organised at a general level rather than as a series of independent activities. The issue is more remarkable in terms of SEOIs given that WBGIs could be regarded as mainly dependent on similar skill sets whereas this seems less likely in the case of SEOIs.

• The degree of compatibility between the four ‘key’ WBGIs and the SEOIs used in this study suggest that the ‘key’ governance indicators tend to influence the quality of service outcomes. Good governance, therefore, would seem to improve the quality of services, poor governance having an opposite effect.

• Our findings suggest that national leaders should consider the improvement of governance as a contribution to the improvement of service outcomes. The World Justice Project, Rule of Law Index provides an analytical format that could help in this process.

• The correspondence between female Expected Years of Schooling and female GNIpc provides powerful support for female education on economic grounds alone, confirming opinions already expressed by others.

PFMConnect is a public financial management consultancy with a particular interest in the use of digital communication to support learning and sharing expertise amongst the international development community.

David Fellows began his career in UK local government where he became President of the Society of Municipal Treasurers and a pioneer of digital government. He has held appointments in the UK Cabinet Office and the National Treasury of South Africa (david.fellows@pfmconnect.com).

John Leonardo is a PFM expert with extensive worldwide experience. He has undertaken PFM assignments in Africa, Asia, the Caribbean and the Pacific where he undertook PEFA assessments. Both authors are directors of PFMConnect, a public financial management consultancy (john.leonardo@pfmconnect.com).         

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[1] The Human Development (HDI) subset used in this study is a composite index developed by the UNDP that consists of: Life Expectancy, Expected Years of Schooling, GNIpc (all show separately here) plus Estimated Mean Years of Schooling.

 

 

IMF Article IV reports

The International Monetary Fund (IMF)’s regular Article IV consultations are usually conducted annually with those small island developing states (SIDS) who are members of the IMF and result in the preparation of Article IV reports by the IMF. These provide country analyses of recent economic and public financial management trends, forward SIDS’ economic outlook forecasts and document the respective economic management challenges that they face.

Availability of IMF Article IV reports for SIDS

Article IV reports are available for the following SIDS:

• Antigua and Barbuda
• Aruba
• Bahamas
• Barbados
• Belize
• Cabo Verde
• Comoros
• Curaçao
• Dominica
• Dominican Republic
• Fiji
• Grenada
• Guinea-Bissau
• Guyana
• Haiti
• Jamaica
• Kiribati
• Maldives
• Marshall Islands
• Mauritius
• Micronesia
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• St Kitts and Nevis
• St Lucia
• St. Vincent and Grenadines
• Solomon Islands
• Tonga
• Trinidad and Tobago
• Tuvalu
• Vanuatu

N.B. Reports for Aruba, Curacao and Sint Maarten are also provided although they are not formal IMF members but participate as part of the Kingdom of the Netherlands.

Access SIDS Article IV reports

The most recently published International Monetary Fund (IMF) Article IV reports as at 4 January 2024 for SIDS can be accessed by clicking on to the country groups below:

• Article IV reports for SIDS countries A-C
• Article IV reports for SIDS countries D-H
• Article IV reports for SIDS countries J-P
• Article IV reports for SIDS countries S
• Article IV reports for SIDS countries T-V

N.B. Reports for Aruba, Curacao and Sint Maarten are also provided although they are not formal IMF members but participate as part of the Kingdom of the Netherlands. [The latest Article IV reports for Kiribati (2021) and Maldives (2021) are currently unavailable.]

Interested in other SIDS’ issues?

Interested in other issues affecting SIDS? Go to PFMConnect’s small island developing states Pinterest Board to access articles on a wide range of issues associated with SIDS.

By David Fellows

In this open letter the author proposes an election agenda dominated by levelling-up, NHS and Zero-Carbon met from a programme of public spending reductions. He sees a need for this to be explained by an honest evaluation of the challenges facing Government.

Dear Rishi,

It seems to me that the coming general election must be regarded as the start of a new era: post financial crisis, post Brexit, post Covid, post supply chain disruption, post outbreak of the Ukraine war, post inflation explosion, post Corbyn & Johnson. This clearly requires a courageous agenda as we approach a somewhat more stable (excluding Ukraine) yet challenging domestic and international landscape.

Your new Government must be ambitious, rigorous and transparent in constructing the way forward. We require a Government pro innovation, productivity and regional opportunity; pro personal responsibility and smaller state; pro advice above regulation; and more communicative about problems and possibilities. This challenging requirement plays to your technocratic strengths – embrace it, speak up and move quickly.

So far as the middle-class millenarian campaigners are concerned, the more level-headed majority want a government that can stand up to them where it counts.

Internationally the way forward must include increased national resilience and partnership development where this is mutually beneficial. Sooner or later, this will include improved relations with the EU and US, accepting that marginal improvements may be all there are available right now without offering unreasonable concessions. In this respect the decision to rejoin Horizon is a mystery to me, it has not been properly explained and the terms are bewildering. You must do better.

We need a narrative that embraces all this and gives us confidence for the future. 

Levelling-up encapsulates the lack of tangible concern by the political class over past decades. There is a yawning deficit in economic opportunity in the regions compared to that in the Greater South East. People in the regions need feasible solutions that address this through a substantial programme of investment and collaboration involving development tax incentives, training, innovative technologies and infrastructure. The current political mindset is far too London-centric as my analysis of then Levelling Up White Paper demonstrated. This cannot continue. If you do not understand the insistent need for leveling-up, a phrase invented by BJ but a concept long embedded in the regional DNA, then frankly you are adrift.

If the levelling-up ambition is ever to succeed in practice then staunch and continuous Government leadership is essential. Local government and other local institutions will never have the heft to lead a real revolution although they are clearly vital ingredients. Collaboration between major public sector organisations is limited by the determination of all parties to retain discretion over important matters for which they are held responsible. Metropolitan authorities have limited powers leaving their leadership role hanging by a thread.

Constant cries from industry to allow local politicians to take charge are immediately followed by demands for action on issues for which Government holds the key. Any intention of real change requires continuously active ministerial involvement to build the regional offering and demands true collaboration between players, including greater cooperation and shared learning within the business sector together with more rigorous thinking about the shortcomings of public and private sector relationships hitherto.

The Government’s failure to give due support to regional development over decades has almost by default put enormous emphasis on London and the quality of life of ordinary Londoners has suffered. Housing provision has been disastrous. Inner London, with some exceptions, has been demonstrably failed by the public sector. Levelling up is the first step in redressing this unhelpful London bias allowing the quality of life throughout the country to be improved step by step.

Looking at other issues, the NHS is simply too monolithic while internal communication and coordination can be appalling. It now requires the challenge of an alternative model based on universal healthcare principles. I suggest a dual system of state and private provision with the latter largely funded through an insurance system, as I have previously advocated. The state would then be one option within a diverse provider model that would develop through operational experience and user demand.  Basic personal coverage within the system would be mandatory and personal taxation would reflect the choices made.

Zero carbon timescales are unrealistic and becoming detrimental to everyday decision-taking. The cost of electric vehicles, shortage of charging points, deficiencies of national grid infrastructure and power generation now require firm deadlines to be translated into softer and longer timescales. Further technological breakthroughs and comprehensive cost analysis will determine the nature of the initial net-zero platform. At this stage options for power generation and end-user technology need further work if abortive costs, perhaps crippling burdens, are to be avoided at state and personal level. Locally-determined ULEZ charging zones are part of an emerging left wing economic disruption narrative and should be prohibited. Only Government-enacted regulatory and penalty systems should be permitted.

The limited extent of house building is an injustice to younger people of child-bearing age, a threat to the country’s economy and destructive to local communities that do so much heavy lifting that otherwise falls on an overburdened state. With this in mind, local authority discretion to refuse planning permission for housing must be reduced, the scope for building on greenbelt land must be increased and the land bank practices of major developers must be scrutinised and reformed as necessary. It is no good observing the preferences of the traditional voting base if the result is national destruction. Some hard truths need to be told. This may lose the support of some but gain respect and possibly support elsewhere.

Whether political leaders are gregarious, eloquent or rich (none could be said to be of limited means), I suggest that in the coming election it matters less to the electorate than their integrity, their willingness to engage openly with the electorate on key issues, the quality of their team and, crucially, what they seem able and willing to deliver for the individual voter and the country at large. Not every voter will forensically examine these issues but many will and their conclusions will filter through.

With this in mind, why not bring the levelling-up agenda back into the Cabinet Office with you accepting personal responsibility for vision, oversight and cohesion. It would be a major commitment but as the election approaches it would signal that you put fairness of opportunity and a shared national prosperity at the heart of your mission. Having made my case for the levelling-up perhaps I can go one step further and suggest that where there is deemed to be an overwhelming case for technological research and development based in the Greater South East then this should be linked with institutions and businesses in the regions.

Also commit to social imperatives that are not on substantial fiscal support, particularly private sector house-building and the inclusion of the private health sector as a full partner in the NHS family.

On the international stage, trade and security must be clearly at the forefront. Perhaps international development, outside the bounds of humanitarian aid, could be targeted mainly at existing and potential trading partners in the developing world with support centred around in-country governance arrangements and partnership development involving UK businesses and technological institutions (even catapults). I am not suggesting that some of this does not happen already but that it could be a much more prominent focus of the development offer.

Any substantial programme of public investment in economic growth must be financed in the short term by increased public service efficiency and the elimination of ineffective service provision leading subsequently to self-funding through increased tax revenues. Hard choices are clearly required for both initial service reductions and investment priorities.

The next election will find many issues vying for attention. A selective offer delivered with straightforward honesty is now required that demonstrates your vision and for our future prosperity. Clarity about key roles in developing the future vision could be helpful too.

Regards, DF

PS: I’m always creating to-do lists and perhaps I could offer a few thoughts in this vein

Levelling-up and self-reliance:

• Demand substantial contributions from regional universities, technology institutes and catapults – of a scale and ambition to make a significant difference
• Devolve Govt departments much more extensively
• Support development of new technology to facilitate greater productivity for domestic industries eg: agriculture; product design, testing and development; digital technology
• Employ tax incentives to encourage investment in regional development hubs for new product development and productivity improvements
• Commit ministerial support to facilitate institutional cohesion at regional level

Public spending:

• Set 3 year targets for departmental cost reductions
• Reduce  services that lack value; improve administrative efficiency; and reduce regulations, making it harder for ministers to create them (none of this is ever done well)
• Seek advice from the NAO. Hold departments responsible.

National health services:

• Announce the intention to develop a twin track (public/private sector) universal National Health Service with the private component being largely insurance-based including the option of providing both private medical schools and university hospitals
• Allow cross-contracting for service delivery between public and private sectors
• Allow private sector to adopt a variety of configurations for primary and secondary care.
• Call for outline proposals from public and prospective private sector partners
• Design a supportive tax allowance package for those wishing to take the private health option
• Learn from others

Carbon reduction:

• Scrap all net zero deadlines and replace with more realistic targets for key proposals
• Monitor and evaluate the emergence of innovations worldwide, encourage domestic innovation, stimulate the creation of viable net zero industries and support them

David Fellows worked extensively in UK local government, was a leader in the use of digital communication in UK public service and became President of the Society of Municipal Treasurers. He was subsequently an advisor on local government reform in the UK Cabinet Office and an international advisor to the South African National Treasury. He is a director of PFMConnect, a public financial management consultancy, and a regular commentator on public financial management issues at home and abroad.

The U.S. State Department annually publishes assessments of the quality of fiscal transparency in countries that are eligible to receive U.S. foreign assistance. We outline in this video the overall state of Central Africa fiscal transparency in the 2022 calendar year drawing on the results of the 2023 fiscal transparency assessments for nine Central African countries.

These assessments, published on 27 June 2023, found that while all nine countries did not meet the U.S. State Department’s minimum fiscal transparency requirements, six countries demonstrated significant progress was evident in 2022.

The U.S. State Department’s recommendations for improving fiscal transparency in the nine countries not meeting minimum fiscal transparency requirements are presented in the video and cover government budget, audit, natural resource extraction and sovereign wealth fund activities.

The most numerous deficiencies identified in fiscal transparency in Central African countries in 2022 were in the following government budget processes:

• Publishing executive budget proposals within a reasonable period
• Producing end-of-year reports within a reasonable period
• Eliminating off-budget accounts or subjecting them to adequate oversight and audit

We also examine the relationship between identified fiscal transparency deficiencies and 2022 Corruption Perceptions Index scores. In addition, we suggest sources of technical assistance that governments might access to assist their efforts to improve fiscal transparency and indicate how fiscal transparency improvement activities could be monitored.

You can access the individual country reports here:

• Burundi

• Cameroon

• Central African Republic

• Chad

• Democratic Republic of the Congo

• Republic of the Congo

• Equatorial Guinea

• Gabon

• Sao Tome and Principe