We have just finished work on the funding recommendation for ABIF's second competitive round. The great news is that we eventually received a total of 22 fundable project proposals! Together these proposals envisage projects with total investment of some US$23m, incentivised by grant requests totalling just under US$7m. If we then combine this with the first round results, the potential investment incentive achievement from ABIF can be summarised as US$36m of private sector investment, incentivised by some US$9m of public funds.
Back to the specifics of round 2, based on the final grant requests submitted by the remaining applicants the other day, we have now finished ranking these projects according to the development return on the grant request. This ranking determines which are included in the funding recommendation that goes via the Investment Panel to DFID for review and approval.
The good (or the not-so-good, depending on how you look at things) outcome of the second round is that we have more potentially fundable projects than we have grant funds remaining. This means that of the 22 projects that made it through to the final stage of the competition, only the top 17 are included in the funding recommendation. This means that the anticipated (rather than potential) figures for investment and incentive will be slightly less than the potential mentioned above, but impressive nonetheless - we will only have the final calculation when the second round grant agreements are signed.
In the course of two rounds, after just 18 months of operations, we can reasonably conclude that the ABIF "pilot" is producing real evidence that relatively small grants can be effective incentives, more than justifying the investment that DFID has put into the project and the innovative approach we took to determining grant amounts.
But this of course, is only the intermediate step towards market change and improving the lives of our target beneficiaries, those results will come with time as projects are implemented and innovative products and services enter the market. In due course, we also hope to be able to talk about the positive impact of the capacity building we have done with local business development service providers.
That credible demand for grants has far out-stripped supply is a major achievement in itself, that there are any number of other potential applicants out there, is hugely encouraging both for the future of Afghanistan's economic development in general and for ABIF in particular.
Meanwhile, round 1 project implementation continues (more on that subject in a later post) and the first tangible development results are emerging. These are happy and professionally satisfying days for the whole ABIF team!
Herat mosque
Herat mosque
30 June 2013
29 June 2013
On funnels
I wanted to share a thought about funnels that has been developing in my mind for some time now, and which I am beginning to think may have something to it that is worth developing...
The thought started with the feeling based on observation that the way that we try to effect pro-private sector change in a place like Afghanistan is often under-productive (occasionally even counter-productive) and frustrating for all concerned. Our intentions were good, the models were there and the process was reasonably well understood, but somehow, things didn't work out in the way that we wanted.
I first noticed this when I was working in the Ministry of Commerce, way back in 2004-07. These were the good old days, when donors were full of energy and enthusiasm, and money was no object. The size of the budget was matched by the grandeur of the vision and the certainty of the Doing Business indicators. There were any number of exciting ideas as to what reforms the ministry should execute, there were league tables to measure progress and there was an embarrassment of technical assistance to help make it happen.
We wrote strategies, we prepared options papers, we drafted proposals, we held workshops... all driven by an ambitious notion of what could be, if only the government did what it should do.
And this, I now think, is where we went wrong. In setting out the grand vision, in identifying and describing ambitious reform targets, rather than enthuse our counter-part, we frightened them off.
Many civil servants (as anyone who has seen the parody of the UK comedy Yes Minister will appreciate) are past masters at superficially going along with things while delaying/resisting all the way... the end result is that change is incredibly difficult to achieve. For some reason, we (donors and implementers) collectively thought that it would all be so different in Afghanistan. Maybe we were seduced by the fact that it was our vision, our prescription that we were trying to push, maybe it was because there was so little by way of formal government structure to constrain our behaviour, that we forgot about the informal constraints, and ignored the need to convince not by preaching but by listening. Oh, and add into the mix the fact that there were any number of people (both international and Afghan) who had the perfect commercial incentive to sell a line, pretend that anything was possible.
Well, a few years later, we just have to look at what has changed and (just as importantly) what hasn't changed to realise that we made a mistake somewhere. Yes, the Ministry of Commerce is much better than it was, without a shadow of doubt. But has the wide and deep reform we proposed happened as we were convinced it should? Has the change in culture really taken root in the organisation? I would say probably not to both questions. And DFID (which paid for our work back then) acknowledges that this is the case in the business plan for another 3 years of technical assistance and capacity building to the ministry (currently being contracted for 2013-16). And this is a familiar story across the whole of government; depending on the inclination of individual ministers, more or less may have been achieved at the top of the respective ministries, but nowhere (that I know about) has there been real and self-sustaining transformation in the way that organisations work.
So back to the "funnel theory" (as I rather grandly call it). This is not about forgetting the end objective of achieving (in my case) pro-private sector reform, but it is about changing the way in which we try to achieve that reform. Rather than setting some incredibly ambitious goal of where you want to be, start with where you are.
For example, the funnel theory approach would advocate forgetting about re-designing registration processes or re-writing laws or making new regulations as the first and explicit priority, instead look at what processes, laws and regulations already exist and work within these constraints. Don't spread fear and confusion with bold ideas of ripping everything up, instead adopt what is there and start to bring shape and certainty.
Take business registration as a specific issue. The Doing Business indicators (which I now have to say that I reject as a useful tool for governance reform) encourage a race to the fastest possible time and the least number of steps. In this focus it ignores the individual starting point by setting a universal league table and goal. For Afghanistan, even in 2004 there was a registration process, and the main problem faced by businesses was absolutely not the time it took or the steps involved, or even the small bribes that had to be paid along the way (all annoying, but not the real issue). The main problem was that nobody either within the institutions responsible for registration or the businesses applying for registration, really knew what the process was. The result of this was that decision making could not be delegated and was slow, and bottlenecks were everywhere. But this lack of knowledge, in the impatience to reform, was confused for lack of system, and so after spending millions, we ended up with a parallel system (because nobody focused on the existing system, or it was too complicated, or we couldn't be bothered) and even more confusion, as well as creating resistance along the way.
The funnel system approach would be to look at what's there already and probably not try to change anything at the start. A simple process of working with the ministry to map what they had already and making this information available internally and externally is all that is necessary. OK, it won't move Afghanistan up the league tables, but it will make life hugely easier for everyone concerned with business registration. In fact, while others were cracking on with their reforms, this is pretty much what we did. Thanks to a colleague who had worked on what was known as an "Investor's Roadmap", we set about identifying and mapping around 50-60 business registration and licensing processes dotted around government. We covered everything we could find, from pharmacies to mines. We then had each institution sign and stamp their own process to say that the map was accurate. This document (now sadly out of print) was a "best-seller" while stocks lasted!
Why "funnel"? I use the term because the idea is to lead the counter-party towards an objective by gradually narrowing the scope for discretion and resistance. Each step is proportionate and non-threatening and pace is determined by the people entering the funnel. The determination is not to achieve radical, overnight change, but to slowly lead from one conclusion to the next. Circumstances may change and the end goal be refined over time, but that isn't an issue, because we are not saying that we must do X by such and such a date, we are saying that as things stand, we think that our end goal may be X, but let's take it one step at a time and be ready to change as opportunities arise or increasing understanding suggests alternatives. The funnel is still there, the width of uncertainty is gradually reduced, but the process is a gradual one.
This is kind of where I have reached with my thinking so far and probably plenty enough (if not too much) for a blog post! I need to learn about behaviour and refine the thinking, and of course it is perfectly possible that people much smarter than I am have already come up with this kind of idea years ago... but I haven't ever heard such a notion being discussed in the context of development or reform. If you have, please let me know!
The thought started with the feeling based on observation that the way that we try to effect pro-private sector change in a place like Afghanistan is often under-productive (occasionally even counter-productive) and frustrating for all concerned. Our intentions were good, the models were there and the process was reasonably well understood, but somehow, things didn't work out in the way that we wanted.
I first noticed this when I was working in the Ministry of Commerce, way back in 2004-07. These were the good old days, when donors were full of energy and enthusiasm, and money was no object. The size of the budget was matched by the grandeur of the vision and the certainty of the Doing Business indicators. There were any number of exciting ideas as to what reforms the ministry should execute, there were league tables to measure progress and there was an embarrassment of technical assistance to help make it happen.
We wrote strategies, we prepared options papers, we drafted proposals, we held workshops... all driven by an ambitious notion of what could be, if only the government did what it should do.
And this, I now think, is where we went wrong. In setting out the grand vision, in identifying and describing ambitious reform targets, rather than enthuse our counter-part, we frightened them off.
Many civil servants (as anyone who has seen the parody of the UK comedy Yes Minister will appreciate) are past masters at superficially going along with things while delaying/resisting all the way... the end result is that change is incredibly difficult to achieve. For some reason, we (donors and implementers) collectively thought that it would all be so different in Afghanistan. Maybe we were seduced by the fact that it was our vision, our prescription that we were trying to push, maybe it was because there was so little by way of formal government structure to constrain our behaviour, that we forgot about the informal constraints, and ignored the need to convince not by preaching but by listening. Oh, and add into the mix the fact that there were any number of people (both international and Afghan) who had the perfect commercial incentive to sell a line, pretend that anything was possible.
Well, a few years later, we just have to look at what has changed and (just as importantly) what hasn't changed to realise that we made a mistake somewhere. Yes, the Ministry of Commerce is much better than it was, without a shadow of doubt. But has the wide and deep reform we proposed happened as we were convinced it should? Has the change in culture really taken root in the organisation? I would say probably not to both questions. And DFID (which paid for our work back then) acknowledges that this is the case in the business plan for another 3 years of technical assistance and capacity building to the ministry (currently being contracted for 2013-16). And this is a familiar story across the whole of government; depending on the inclination of individual ministers, more or less may have been achieved at the top of the respective ministries, but nowhere (that I know about) has there been real and self-sustaining transformation in the way that organisations work.
So back to the "funnel theory" (as I rather grandly call it). This is not about forgetting the end objective of achieving (in my case) pro-private sector reform, but it is about changing the way in which we try to achieve that reform. Rather than setting some incredibly ambitious goal of where you want to be, start with where you are.
For example, the funnel theory approach would advocate forgetting about re-designing registration processes or re-writing laws or making new regulations as the first and explicit priority, instead look at what processes, laws and regulations already exist and work within these constraints. Don't spread fear and confusion with bold ideas of ripping everything up, instead adopt what is there and start to bring shape and certainty.
Take business registration as a specific issue. The Doing Business indicators (which I now have to say that I reject as a useful tool for governance reform) encourage a race to the fastest possible time and the least number of steps. In this focus it ignores the individual starting point by setting a universal league table and goal. For Afghanistan, even in 2004 there was a registration process, and the main problem faced by businesses was absolutely not the time it took or the steps involved, or even the small bribes that had to be paid along the way (all annoying, but not the real issue). The main problem was that nobody either within the institutions responsible for registration or the businesses applying for registration, really knew what the process was. The result of this was that decision making could not be delegated and was slow, and bottlenecks were everywhere. But this lack of knowledge, in the impatience to reform, was confused for lack of system, and so after spending millions, we ended up with a parallel system (because nobody focused on the existing system, or it was too complicated, or we couldn't be bothered) and even more confusion, as well as creating resistance along the way.
The funnel system approach would be to look at what's there already and probably not try to change anything at the start. A simple process of working with the ministry to map what they had already and making this information available internally and externally is all that is necessary. OK, it won't move Afghanistan up the league tables, but it will make life hugely easier for everyone concerned with business registration. In fact, while others were cracking on with their reforms, this is pretty much what we did. Thanks to a colleague who had worked on what was known as an "Investor's Roadmap", we set about identifying and mapping around 50-60 business registration and licensing processes dotted around government. We covered everything we could find, from pharmacies to mines. We then had each institution sign and stamp their own process to say that the map was accurate. This document (now sadly out of print) was a "best-seller" while stocks lasted!
Why "funnel"? I use the term because the idea is to lead the counter-party towards an objective by gradually narrowing the scope for discretion and resistance. Each step is proportionate and non-threatening and pace is determined by the people entering the funnel. The determination is not to achieve radical, overnight change, but to slowly lead from one conclusion to the next. Circumstances may change and the end goal be refined over time, but that isn't an issue, because we are not saying that we must do X by such and such a date, we are saying that as things stand, we think that our end goal may be X, but let's take it one step at a time and be ready to change as opportunities arise or increasing understanding suggests alternatives. The funnel is still there, the width of uncertainty is gradually reduced, but the process is a gradual one.
This is kind of where I have reached with my thinking so far and probably plenty enough (if not too much) for a blog post! I need to learn about behaviour and refine the thinking, and of course it is perfectly possible that people much smarter than I am have already come up with this kind of idea years ago... but I haven't ever heard such a notion being discussed in the context of development or reform. If you have, please let me know!
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