Revised Draft Ver.1a

Opening the Black Box of Capacity Development for Development Effectiveness

Akio Hosono,Shunichiro Honda, Mine Sato and Mai Ono(JICA-RI)[1]

1. Introduction

1-1 Background

Capacity development (CD)[2] has emerged as a central issue in recent development discussions, especially in the context of the Paris process which serves as the principal framework for aid reform in support of the MDGs completion. In the Paris Declaration, adopted in 2005 at the 2nd High Level Forum on Aid Effectiveness (HLF), CD was highlighted as one of the key cross-cutting themes for aid effectiveness. Subsequently, CD was featured even more strongly in the Accra Agenda for Action (AAA) adopted in 2008 at the 3rd HLF. Why is CD attracting growing attention now, when the broad concept was coined almost a decade ago?

One factor may be the stronger orientation of the Paris process with its emphasis on development results.[3]A large part of AAA is given over to detailed action on management for results. Behind this emphasis are the mixed records on progress toward meeting the MDGsbytheir final year, 2015. Low income countries, many of which are in sub-Saharan Africa, are unlikely to reach some or most of the goals by 2015,although a number of Asian countries including Chinaare well on track.[4] The challenge of attaining and sustaining development outcomes for the off-track countries, particularly those in fragile situations, are formidable. The difficulty of their path ahead is compounded by emerging global challenges such as climate change and the increasingly volatile economic environment exemplified by the recent global financial crisis. It is particularly for these low-income, highly aid dependent countries that the Paris process advocates for more effective aid.

Since the early 1990s, so called Program-Based Approaches (PBAs),[5] including Sector-Wide Approaches (SWAps) and PRSPs (Poverty Reduction Strategy Papers), have been introduced in these countries. These approachesare coupled with sector basket funds as well as general budget support to facilitate alignment and multi-donor harmonization in support of country-owned concerted development programs. There were high expectations that aid approaches using PBAs under strong ownership of partner countries would spur an enhancement of aid effectiveness inmeeting the MDGs. Under these circumstances of persistent MDGs challenges despite ongoing aid reforms, capacity seems to have been rediscovered as the potential missing link,that if found might strengthen the linkage between aid reform andtangible development results.

1-2 Objective and outline

Since CD will likelyremain at the center of the Parisagenda and related processes, the test of that agenda and those processes will largely be the extent to which the CD concept is translated meaningfully into practice. Our objective in the present paper is to contribute to the operationalizing of the CD concept by reviewing CD studies and selected case studies and to exploring the direction that CD discussion should take in terms of development effectivenessat the next HLF in Pusan in 2011 and beyond.

With thisas the objective, we first take a quick look at CD in the Paris process, especially discussion at the HLF 3 in Accra (Section 2-1). This is followed by a review of key CD studies(Section 2-2). Next we present comparative analysis of selected case studies applying key common CD themes drawn from the review(Section 3). Based on this material, our final section provides implications and discusses the way forward (Section 4).

2.The CD perspective towards development effectiveness: A review

2-1 CD on the aid effectiveness agenda

A quick comparative review of CD discussions in mid-2005 on the Paris Declaration document itself, and more recent ones that included AAA, reveals notable changes, especially in scope and focus. It is evident that in the earlier discussions the focus tended to be on capacity aspects of country policy processes and country systems, most notably public finance management which is closely related to PBAs and concomitant budgetary aid modalities. PBAs can essentially be considered an improved approach for providing concerted and harmonized aid support for the promotion of reforms in developing countries under the country ownership principle.These were the preferred aid approaches of the Paris process. As PBAs and budgetary aid essentially rely on country ownership and capacity over policy process and adequately functioning country systems, the lack of capacityhere is particularly compelling.

On the other hand, the scope of CD discussion in the more recent HLF 3 and AAA isbroader and becoming more concrete. AAA gives more detail on CD action, stating that “developing countries will systematically identify areas where there is a need to strengthen the capacity to perform and deliver services at all levels – national, sub-national, sectoral, and thematic – and design strategies to address them” (AAA 2008). It also highlights the importance of increasing the capacity of all development actors, including local governments, civil society organizations (CSOs), media and the private sector, to take an active part in dialogueon policy and the role of aid(ibid).

Underlying these discussions is a growing recognition among donor organizations as well as the governments of partner countries that lack of capacity has been and will likely remain the major bottleneck in translating policy into development results. This was noted in the synthesis report of the evaluation of the Paris Declaration that was undertaken prior to HLF 3. The synthesis report pointed out that “…even the countries with the most experience face difficulties in translating these national strategies into sector strategies and operational and decentralized programs....”, despite the fact that “all the partner country evaluations indicate a strengthening of national development policies and strategies since 2005” (Wood et.al 2008). The report further states that “[t]he evaluations reveal both real and perceived limits on the capacities of all partner countries to exercise leadership, in setting and implementing operational strategies, in working at sub-national levels, and in coordinating Development Partner contributions”(ibid).

However, as several studies pointed out, complementary actions are necessary if these policy reforms areto be operationalized into improved practices; this is especially so at the sub-national level because it is at this level that policies are translated into the actions that produce real outcomes. It is at this level, also, that stakeholders, including local governments, are in desperate need of enhanced capacity to proactively address the real development issues they faceinthe global trend to decentralization.

CD has now been mainstreamed into global and country discussions. The next crucial question is how developing countries, donors and other actors can best pursue CD.

2-2 CD study findings and lessons learned: Where are we now?

2-2-1 On CD studies

As is typical of global policy documents, the Paris Declaration stops somewhat short of concrete, practical action. In order to draw practical lessons, we review in this section key discussionsand consensusrelated toearly andrecent CD studies.[6] This body of workwas started in the mid-1990s by researchers, consultants and practitioners aimingto revisit aid approaches, including technical assistance. (UNDP 1995, 1998, Qualman and Bolger 1996, Lusthaus 1999) Most of itwasundertaken as commissioned studies supported financially by donors with differing degrees of linkagetothe Paris and related processes.[7]Due to the strong practicality of this orientation, a distinctive CD academic field has not yet formed. Nevertheless, the early and recent studies have produced analytical insights and lessons that extend beyond what the Paris process alone offers.

We first confirm the general consensus on a basic CD conceptual framework, with remarks on variations in CD focus within the framework. We then take a quick look at the systems thinking which has been incorporated increasingly into studies as an analytical perspective complementing the general framework. A broad and holistic view of the development process might be considered CD added value; however, such a comprehensive viewmight also denotea lack of strategic focus. Recognizing this paradox, many of the recent studies have stressed the importance of the question “capacity for what?” which we touch on briefly below.[8]After reviewingthe general framework, we move on to look at the factors for a sustained CD process. Among the factors being discussed, learning and knowledge increasingly occupies the central place, and the final part of this review section focuses on this key CD factor and on the importance of “time and space” for learning and knowledge co-creation to take place.

2-2-2 CD framework: discussions and consensus

(1)General consensus and discussions

The key CD studies all agree that capacity development is a long-term endogenous process (UNDP 2002,[9] CIDA,[10] GTZ 2003, WBI,[11] GOVNET/DAC 2005, JICA 2006).It is defined as a continuing local process of change involving multiple stakeholders. This implies by extension that donor as external actors can only provide indirect assistanceto the enhancement ofthese local processes. Another key consensus is that CD should be viewed as a holistic process, encompassing interlinked multiple layers of capacities of various sorts. The most widely cited definition,from DAC, sets three layers: population, organization and society.

Within the broad and commonly accepted framework, however, there are variations in emphasis regarding the different levels. One strand of studies, including the World Bank’s CD Strategy Document for Sub-Saharan Africa, putsgreater focus on the macro perspective of state building. The World Bank document sets out a strategy for Africa with the “dual objectives of building effective states and forging engaged societies (WB 2005:2).” “Capacity, Change and Performance,” a study by the European Centre for Development Policy Management (ECDPM), focuses on CD at the level of the individual organization (ECDPM 2008).

(2)Systems thinking at the core of the CD analytical framework

Several CD studies, including the one from ECDPM, employ “complex adaptive systems,” or systemic perspective, to present a more analytic framework. This is especially so for CD at the level of the organization where lessons can be drawn from organization theory in management science literature, such as that by Senge[12]. The wider acceptance of systems thinking in CD seems to come from theexpectation that it will help to incorporate the complex natures of human and organizational transformative processes[13] in relation to constantly changing external (development) environments. Insights from systems thinking suggest also that intervention is likely to fail when it is too rigidly fixed in advance, whereas incremental or emergent intervention models seem more promising for dealing with usually ill-defined development issues becausethey allow more room for anendogenous process of learning by doing.

(3)CD context and “capacity for what?”

Major CD studies have unanimously highlighted the importance of the social, economic and political contextsin which the CD process takes place（OECD-DAC 2006, Baser and Morgan 2008, Clarke and Oswald 2010）, . A favorablecontext, such as political commitment to a particular policy action, would likely be conducive to an enhanced CD process. Afavorable context can be an enabling environment,althougha change of contextitself can also be a driving force for the CD process.

While a holistic understanding of dynamic change process is certainly the added value of the CD concept, it poses a challenge of how to translate such a comprehensive view into concrete practice. In overcoming the inherently abstract nature of a broad CD perspective in the context of development effectiveness, it is essential to begin by asking “capacity for what?” This will help to set clearly defined goals for intervention (DAC 2006).

In answering “capacity for what?” however, the simple reductionist approach of identifyingthe necessary ingredients ofa sound CD strategy is unlikely to make sense (Brinkerhoff and Morgan 2010). CD involves much more than manipulating key capacity factors (typically understood as transfer of technical and scientific skills, management systems, and resources). Thus, it is critical to begin by identifying real development needs and hence the “what” of our question, along with a strategic CD entry point to meet those needs. Concrete CD actions based on exploratory exercises– such as “capacity for what”– could then lead to the nurturing of intangible yet critical capacity elements – such as learning – which will be touched on in the following section.

2-2-3 Factors for a dynamic capacity development process

(1)CD factors/ triggers

Most CD studies list favorable conditions under which CD appears to succeed. The list includes both tangible and intangible factors, some of which are drawn from management theory. Frequently cited factors include leadership, organizational culture, management systems with incentive mechanisms, operating space,and knowledge and learning.[14] Most studies point also to the importance of context or enabling environment, such as the commitment of political leaders to the CD process. This context could provide momentum for change and open up windows of opportunity for enhanced CD processes. The factors are not mutually exclusive; rather, in many cases they are reciprocally reinforcing and interdependent (Baser and Morgan 2008).

Among the key factors, knowledge and learning has increasingly been the focus. Clarke and Oswald (2010) argue that mutual learning might even be identified as CD itself (ibid). In other words, values, leadership and an enabling environment could be seen to underpin and sustain CD as a mutual learning process.

(2) Knowledge and learning: the heart of CD?

CD as a mutual learning process inevitably demands a shift in our perception of how knowledge can be generated from the traditional transfer of knowledge model towards a “co-creation of knowledge” model.

In discourses on transferring knowledge, knowledge is treated as material that can be passed from one who teaches to one who learns through planning and programs.[15]What iscalled for in such a model[16]is first to identify a deficiency (a need) and then to fill the gap by introducing knowledge from outside. UNDP questionsthis simplistic understanding of knowledge generation (UNDP 2002).

An emerging alternative view sees knowledge as a product of continuous human interaction. According to this view, knowledge is co-created through a mutual learning process and acquired through practical experience.[17] Such a process of mutual learningfor co-creation of knowledge centered on practice can also be understood as a process of “situated learning.” This has increasingly been mainstreamed into various academic disciplines, including adult education,[18] and management science, such as that on learning organization[19] and among others (Pettit, Woodhill, Fisher 2010).[20]

(3)Time and space – “Ba” – for mutual learningco-creation of knowledge

From the above discussions, it is more than clear that mutual learning is crucial for co-creating knowledge including solutions among various stakeholders. However, Ozwald and Clark caution that the process of learning in most cases does not occur automatically. In an organization, for instance, individuals and groups are usually under pressure from their routine work (Ozwald and Clark 2008). This being the case, time and space for learning must be consciously created and maintained.

Nonaka denotes such time and space for learning with the Japanese word “Ba.” He defines “Ba” conceptually as the creation ofan essential enabling context for deep business relationships and the co-creation of knowledge and value. “Ba” can be crucial for mutual learning and trust when its timing is optimal. “Ba” is important both within and between organizations, and can be created by both local and external actors, including donors (Nonaka, Toyama and Hirota 2008).

3. The CD process on the ground

3-1 Setting the framework and key themes for comparative case studies

3-1-1 General CD understanding

As mentioned above, past and recent studies coincide with a bottom-line understanding of CD as follows:

  • First: CD is and should be a continuous, non-linear and endogenous process, different from the one shot “gap filling” approach which was common in technical cooperation in the past.
  • Second: CD is a holistic, broad and multi-layered process in which multiple stake-holders are involved and inter-linked.
  • Third:With regard to the definition of CD, we understandcapacity to be a legitimate end and not simply a means to an end and that it includes both cross-cutting capacity (often known as functional, core or generic capacity) and specific capacity linked to certain issues(ECDPM 2008, JICA 2006, JICA 2008).
  • Fourth:Donors, as external, but active players, can provide CD assistance only, not CD itself.

These aspects constitute the basis of our comparative analysis of case studies. However, within this conceptual framework, CD appears to be a black box, as it has been in most previous studies. It is essential to open the black box in order to operationalize the CD perspective/concept into workable practices in the field.

3-1-2 Common analytical key themes

Through the above discussions, we have identified six key themes as fundamental for opening analytically the black box of CD.

First, sincethe CD process is continuous, non-linear and endogenous, one key for a sustained process is a strong awareness by stakeholders of their own issues, as well as a desire on their parts to act on their own. This is the strong, basic driver for a sustained CD process.

Second, as CD is a holistic process encompassing multiple layers of capacities, a practical and realistic approach in most cases is to identify some stakeholders and methodologies for assessing current situations such as CD mapping as a “strategic entry point.”

Third, another aspect related to the endogenous process is mutual learning and mutual trust, both essential for the co-creation of innovative solutions for effectively addressing the needs of beneficiaries and other stakeholders. It is this approach that makes the CD process authentically endogenous.

Fourth, CD enabling environment or context is crucial as CD is a continuous and non-linear process which often faces a series of bottlenecks, constraints and difficulties.

Fifth, specific triggers which will often times be effective are often observed in order to produce a breakthrough in CD process.

Finally, scaling-up of good practices is critical for attaining and sustaining the CD process at sub-national and national levels. Through scaling-up, the process is extended from local or regional pioneering programs to nation-wide CDcoveragewith the objective of achieving aid and development effectiveness. This is the sixth of our six key themes.