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Breaking Out of the Middle-Income Trap: Open Government Approaches

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This blog is adapted from Sanjay Pradhan’s remarks at the Asian Development Bank Annual Meetings in Yokohoma, Japan on May 5.

The last mile to break out of the middle-income trap to reach high-income has proven daunting and ultimately elusive for many countries.  To traverse this uphill journey, middle income countries (MICs) face three major imperatives: first, accelerate private investment and growth, second, ensure better service delivery to make growth inclusive and equitable, and third, ensure environmental sustainability.  The role of government is critical in this, but governments alone cannot tackle the enormous scale of these challenges.  Governments that are open and collaborative with the private sector, civil society, and citizens can tackle these challenges through complementary actions.  The 75-country Open Government Partnership (OGP) – as a platform where reformers from  government and civil society co-create commitments and implement actions – provides some valuable examples of how open government can help countries traverse their last mile.  

First, more open governments can attract higher private sector investment and growth. In 2014, South Korea’s National Investment and Credit Evaluation, Inc. upgraded the Philippines to investment grade, citing enhanced government transparency, which improved the country’s risk profile.  The Philippines also used the OGP platform – wherein government co-creates commitments with civil society and the private sector – to commit to improving the ease of doing business in specific areas identified by the private sector, dramatically improving its ranking in the World Bank’s index from 138 in 2013 to 95 in 2015.  This helped enhance investor confidence, resulting in a 10% increase in investment and a 66% jump in foreign direct investment (FDI) from 2010 to 2014.

Across countries, there is compelling evidence that countries with greater fiscal transparency have lower deficits, better credit ratings, and lower borrowing costs.  A number of OGP countries have made transformative commitments in this area. The Brazil Transparency Portal provides real-time information on government spending, revenues, and credit card charges of elected officials. This prompted an immediate 25 percent reduction in credit card expenses, and the portal now attracts 900,000 unique visitors per month. This spurred a civil society website visualizing “where did the money go,” and has empowered citizens to monitor the use of public money.   

Second, transparency and citizen participation can improve service delivery to make growth inclusive..

Citizen participation and oversight of budgets has resulted in better resource allocation and service delivery. Under Brazil’s Participatory Budgeting program, citizens allocated public service budgets, leading to higher levels of pro-poor spending – including in education and health – and lower levels of infant mortality. Ukraine faced major scandals of corrupt and extravagant contracts (in one particularly egregious case, awarding US$3.75 million per kilometer of road construction). Civil society leaders and government reformers launched an open contracting platform, ProZorro, which mandated that all public contracting had to be done electronically and published online using open data standards, making them searchable by the public.  In two years this resulted in US$687 million of savings, reducing costs and enhancing resources for service delivery.  This has been life-saving: it has allowed cancer clinics to save one-third of procurement costs for chemotherapy drugs, allowing them to administer chemo free-of-charge to patients for an additional month. ProZorro’s success earned it first place in the 2016 Open Government Awards.  In Honduras, following a scandal where millions of dollars of medicines were siphoned off from a state-controlled medical warehouse, the government, as part of an OGP commitment, has tasked civil society to monitor supplies; similarly, Sri Lanka has committed to appoint an advisory board with civil society representation to monitor drug availability.

Another important area where open government approaches can help is infrastructure. Even though capable infrastructure is key to the last-mile journey of MICs, it is frequently underfunded – or the funding is lost in leakages. In the Philippines, it was estimated by the Construction Sector Transparency Initiative (CoST) that 30-50 percent of the infrastructure budget gets lost in leakages. To tackle this, the Philippines government launched the Open Roads initiative, disseminating information on all public spending on roads, often geo-coded at the local level.  The Commission of Audit mobilized participatory social audits by civil society and citizens to determine the existence and condition of roads, which mandated government response, saving up to $300,000 per “ghost road.”  In Mexico, the Budget Transparency Portal (another 2016 Open Government Award recipient) disclosed information on infrastructure projects involving public-private partnerships (PPPs), and the Ministry of Finance and civil society partnered on the “Taking Data to the Streets” initiative, where participants visit projects listed on the portal, report discrepancies using social media, and track remedial action and progress online.

Another excellent example, from a high-income country which is easily replicable by MICs given the increasing rates of mobile phone penetration in these countries, is from the London’s Transport Authority (TfL), which released 62 data sets of transport services, including real-time feeds such as departure and arrival times. The release generated 362 innovative apps, which reached 4 million people, and saved passengers between £15m and £58m in 2012.

Third, open government approaches can foster environmental sustainability. Indonesia’s One Map initiative, an OGP commitment, aims to open up land use, land tenure, and other spatial data to address issues of land management and illegal logging of forests – a huge contributor to forest fires with severe environmental consequences for Indonesia and its neighboring countries. The initiative aims to go beyond making the data publicly available to engaging local communities in participatory mapping efforts, in order to influence spatial planning and make it environmentally sustainable while protecting customary land rights. In Macedonia, the release of data on air pollution, spurred the mobile app Moj Vozduh (My Air) and got citizens to organize, reaching 30% of smartphone users and 62% of adults under the age of 55, prompting the government to act to improve ambient air quality.  

More broadly, international evidence shows a positive correlation between better governance and higher per-capita incomes; with income growth, citizens demand better governance. These stories illustrate that open and collaborative approaches can help MICs accelerate their last mile journey and respond to citizens expectations.

The role of development partners becomes crucial here. Through financial and technical assistance, and knowledge sharing MICs’ development partners need to support open and collaborative approaches between government, private sector, civil society and citizens who need to together tackle key MIC challenges that governments alone cannot. There is a need to embed within traditional development projects open government approaches of transparency, citizen participation and feedback with government responsiveness to achieve stronger development results.  After 30 years in the development, I have come to a firm realization that the frontier of accelerating development progress lies not just in provision of finance or knowledge, but in facilitating and supporting coalitions of reformers from government, private sector and civil society who can together push through the last mile.  

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