Natural Resource Management and Institutional Change

Diana Carney, John Farrington

• Publisher: Routledge
• Year: 2005
• Print ISBN: 9780415186049
• eBook ISBN: 9781134664894
• Edition: 1
• Topic: Physical Sciences
• Subtopic: Geography
• Index: Geography

Using new evidence from a three year programme of research in developing countries in Asia, Latin America and Africa, the authors describe how government organizations have been privatised, decentralised or restructured while private sector organizations - both non-profit and commercial - have taken on increasingly important roles in resource management and service supply.
This book provides an important and easily accessible point of reference for decision-makers and students alike, offering unique view in its breadth of coverage across the natural resources sector and a range of different institutional types and approaches to resource management.

1

INTRODUCTION

The past decade has seen a fundamental change in beliefs about the appropriate role of the state in developing countries. Rather than being the executor of a state-led process of development, the state must become the facilitator for a far more heterogeneous process in which a coalition of different actors and institutions is involved. This view has been reached through various changes in thinking. Between about 1950 and 1980 the primacy of the state was relatively unchallenged. During the 1980s there was a liberal backlash, with the ‘New Political Economy’ view that the state and those who worked within it were innately incapable of doing the job that they should have been doing. This view was based on the notion that public servants are motivated only by self-interest (summary presented in Toye, 1991) and given depth by more moderate thinkers who took the view that ‘imperfect markets’ are better than ‘imperfect states’ (arguments reviewed in Colclough, 1991).

Evidence to support this view was drawn from changes in developed countries. At the same time that socialist states were collapsing, and taking their economic paradigms down with them, many western countries were putting into place sophisticated and far-reaching privatisation programmes. The apparent (though not yet fully confirmed) success of these programmes strengthened the case for market-oriented reform in developing countries. An initial review of the evidence certainly seems to suggest that, over the past forty years or so, markets have done a fairly good job and developing country governments a fairly poor job. Compelling examples of this are provided by the 7 per cent per annum increase in agricultural production in some areas of China when private trade was legalised, and the wide range of goods available in the parallel market in countries where official trade is heavily regulated.

However, the problems associated with radical paring back of the state— especially in terms of equity, threats to the environment and the development of an excluded underclass—together with the fact that economic growth has been most pronounced in those countries of east Asia in which the state has not drawn back, have led in the 1990s to a growing consensus

that the state does have an important role to play in the development process. What is now proposed is the ‘partnership’ or ‘pluralistic approach’, which seeks to find ways in which the state can work together with NGOs, the private sector and people’s organisations so that the ‘comparative advantage’ of each party can be exploited. The validity, indeed the necessity, of state involvement in the marketplace is once more recognised and efforts are being made to seek meaningful guidelines for the way in which all sides should operate (World Bank, 1997).

While the need for change can, arguably, be justified on theoretical grounds, it is more convincingly defended on empirical grounds.¹ Growth rates in developing countries have been unsatisfactory. Despite (and some would argue because of) significant inflows of aid and loans, standards of living remain unacceptably low for the majority of the population, especially in rural areas. Numerous instances of absurd waste and corruption and huge untapped potential have been identified by both outsiders and domesticallybased critics. Even those in power have been forced to accept the desirability of change, as their coffers have run dry.

This book provides a synthesis of research conducted by ODI during the period 1993–6. The focus of the research was on the changing relationship between the state and the individual in the management of natural resources. It therefore examined both the processes of reform within government and the activities of civil society in taking over some of the functions previously performed by the state. In so doing it gathered early (but not comprehensive) evidence about reform in the various natural resource sub-sectors with which it was concerned (agricultural service provision, forestry, water resources and pastoralism). The overall goal of the research was to derive policy-relevant conclusions to inform the design of future changes.

This raises three important points. The first concerns the nature or scope of reform. The second concerns the goals of reform, and the third concerns the nature of the policy advice which can be drawn.

What types of reform?

Deregulation, decentralisation and privatisation—the processes lying at the heart of the changes examined in this book—have all been defined in somewhat different ways. Our definitions for the purposes of this book are given in Box 1. The common element of each process is that the central government is shedding some of its responsibilities both for actual management of natural resources and for the supply of the services (such as agricultural research and extension) which enable people to make more productive use of those resources.

BOX 1
DEFINITIONS OF THE CONCEPTS UNDERLYING REFORM

PRIVATISZATION

Privatisation can be broadly defined as the process of change which involves the private sector taking responsibility for activities which were formerly controlled exclusively by the public sector. This may include the transfer of ownership of productive assets from the public to the private sector or may simply imply that ‘space’ is created in which the private sector can operate. ‘Contracting out’ of activities to the private sector would therefore be considered to be ‘privatisation’, but the development within the public sector of ‘internal markets’, ‘cost recovery’, or other modes of operation usually associated with the public sector would not.

DECENTRALISATION

Decentralisation is a process, a shift in the locus of power from the centre towards the periphery. Beyond this there is little consensus as to the meaning of the word. Some authors use it to refer to almost any move away from central government control, including privatisation. Here we take a narrower view. We focus on restructuring and changes in power relations within government. Decentralisation does not, however, imply that all power resides at the periphery. The centre still sets broad policy guidelines and goals and is responsible for coordination between decentralised units in addition to supplying certain key goods and services; getting the balance between the centre and the periphery right is one of the major challenges of decentralisation.

• Decentralisation within the law-making, legislative branch is referred to as devolution. This involves the creation or revitalisation of elected bodies at a lower level. It is unlikely to be successful unless some control over resources is ceded from the centre to these elected bodies.
• Decentralisation within the appointed bureaucracy, or executive branch, is known as deconcentration. This involves a shift in operational power away from the central ministry to sub-units outside the capital. It may coincide with a redefinition of the scope of a ministry but such a change is not, in itself, an example of deconcentration.
  
  

DEREGULATION

Deregulation and liberalisation are both rather general terms implying a loosening of government control and usually some form of privatisation coupled with increased competition. Paradoxically, deregulation, like privatisation, can actually imply a need for greater formal or explicit regulation of newly competitive markets. That is, while new players may be welcomed in, their activities, pricing strategies and general relations with their customers might be subject to significant outside (usually governmental or quasi-governmental) intervention.

(Carney, 1995b; Kirkpatrick, 1996)

What is sought here is not a reduction in public spending due to bankruptcy or indiscriminate cuts, but planned withdrawal from certain areas of activity. These areas of activity are either those which the state has shown itself to be very poor at managing or, more clinically, those which classical welfare economics tells us are better performed by the private sector (although advocates of reform would prefer these to be identical, it is clear that this is not always the case). The result which is sought is improved fulfilment of the ex-state responsibilities by new suppliers and, at the same time, improved performance by the state in its residual areas of activity. This is a persuasive argument: if resources are focused on a narrower range of activities then, other things being equal, it seems safe to assume that performance should at least not deteriorate. In the core argument, well-planned and wellexecuted withdrawal reduces costs, improves government performance and—some would argue—stimulates growth in that it provides the right incentives for further private sector activity. A knock-on effect of this, according to some, is that jobs and income created by the private sector lead to a more equitable diffusion of the benefits of growth to more people (OECD/DAC, 1995). However, poorly planned withdrawal clearly does not bring such advantages. It may deter the private sector from engaging in new economic activity (because of residual state interventionism, inconstant state behaviour, or inappropriate supporting regulations and infrastructure) and may pose major threats particularly to the livelihoods of the poorest and to the environment.

What goals for reform?

The concepts which now dominate the debate surrounding the role of the state in rural development are effectiveness, efficiency and accountability; all three are related, as will be outlined below. It is important at the outset to clarify the way in which each is used in this book. Effectiveness refers to the ability to meet goals, objectives or needs—in this context, primarily those of the rural population. Efficiency refers to the way in which goals are met, and implies that this is done at as low a cost as is possible without compromising effectiveness. Accountability is institutionalised responsiveness to those who are affected by one’s actions. Since the responsiveness is formalised, measures must exist to enforce it (these are usually electoral or financial).

Thus, effectiveness is a precondition for efficiency and accountability can enhance both. In achieving efficiency individuals or organisations should be identifying critical tasks in conjunction with users, then striving to find the most cost effective way of performing these tasks and cutting out superfluous tasks. This implies a culture of continuous learning. Institutionalising such a culture represents a formidable challenge.

It is important at the outset to clarify one theoretical issue. Efficiency, as defined above, does not always coincide exactly with economic efficiency as traditionally understood. In general, economic or Pareto efficiency is achieved when nobody can be made better off without somebody else being made worse off. In the absence of market failure, markets are considered to be the best allocative mechanism for achieving this. However, if governments wish to service the needs of those sections of the population with inadequate purchasing power which are not served by markets, they will need to intervene in pure market allocations. This does not imply that they entirely sweep aside such allocations but, rather, that they supplement them in particular areas (for example, providing funds to which poorer users can apply under certain conditions in order to purchase goods or services available in the market place). According to the definition above, they can do so and still be efficient (so long as they adopt the least cost method of doing so), which would not necessarily be true given a narrowly economic definition of efficiency. Such ‘social efficiency’ can, therefore, be congruent with a strategy of poverty reduction, an objective which now takes centre stage in many donors’ hierarchies of goals (including those of the UK Department for International Development (DFID)). Such efficiency might thus be thought of as ‘social efficiency’. This is not, however, an easy concept with which to work since it has no natural boundaries. To the extent that it involves meeting people’s needs, there must always be an additional decision taken about how far the public sector should go, given scarce resources and inevitable tradeoffs between provision in different natural resource subsectors and even different sectors (for example, tradeoffs between spending on education, health, industry and so on). Furthermore, if the public sector goes too far down this route it will be in danger of regaining ground from which reform had intended to displace it.

It is also important to note that increases in efficiency and effectiveness will have to be pursued in the context of underlying national objectives. Issues of intergenerational equity and concern about preserving the overall resource base are particularly pertinent;² these may conflict with demands made by current users of natural resources. States must recognise inherent conflicts such as these and take measures to adjudicate in a rational manner.

What types of policy advice should we expect?

While it is intuitively appealing, the concept of ‘social efficiency’ is relatively difficult to handle because of the degree of flexibility that it entails. The underlying language of reform is one of responsiveness to local needs, facilitation of local initiatives and respect or support for existing management practices (where these function). This in turn raises a plethora of new issues relating to information management and the nature of the policy guidance that can be provided. The purpose of policy advice is to provide the foundation for concrete actions, yet the type of policy advice that flows from the new quest for effectiveness is seldom definitive. It consists instead of ‘best practices’ which have been identified but will probably need to be adapted to a given situation. While this type of advice is more realistic than are sweeping prescriptions, it has its own complications. Solutions are viewed as situation-specific, which implies that government staff, donors and other decision-takers must be able to interpret the environments in which they work and to make plans accordingly. This entails levels of skill and analytical availability which many current staff may not have or, certainly, may be unused to exercising. Hence, there is a need to stress human resource development as an integral part of the reform process.

Nevertheless, given limited time and resources for exploring the full details of every situation, we must look for general guidelines and focus on putting in place structures and decision-support systems which will facilitate effective management of resources with limited on-going external input. This explains the level of generality which is sometimes necessary when drawing conclusions and making policy guidelines.

The structure of the book

This introduction outlines the scope and complexity of reform in the management of natural resources and supporting services. Chapter 2 elaborates on a variety of situations which demonstrate the need for reform in the various natural resource sub-sectors with which we are concerned (agricultural service provision, forestry, water resources and pastoralism). Our focus overall is on meeting the ‘productivity enhancing’ needs of the rural poor. We do not go into all the many justifications for doing so. Let it suffice to say that, given the continuing prevalence of poverty in rural areas, as well as the intimate relationship between agricultural production and food security, this is an objective which should be at the top of most political agendas in democratically controlled developing countries (Garcia, 1994). Only if it can be achieved will the massive projected increases in demand for food over the forthcoming decades represent an opportunity rather than a threat to poor, rural people.

Chapter 3 goes into detail about the process of reform within government, looking at both the problems this entails and some of the successes which have been achieved. As with all reform, there are many problems which are not revealed until the process is underway. What we produce here is, therefore, an early attempt to bring together some lessons from reform so as to facilitate the learning process for reforms of the future. Once again, one of the critical pieces of advice is ‘know your environment’, including both the overt and the covert institutions which influence change. An ‘actorcentred’ approach is useful if the underlying reasons for the ...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Illustrations
• Preface
• Acronyms
• Acknowledgements
• 1. Introduction
• 2. The Nature of the Problems
• 3. Reforming the State
• 4. Non-State Approaches
• 5. The Interface
• 6. Summary
• 7. Conclusions
• Notes
• Bibliography