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Capacity Building @ DFM

What is Capacity Building?

Poor governance is generally considered to be the root of many developing countries problems. Increased interest in capacity building in recent years is a response to shortcomings in the developing assistance over the last 50 years with the failure to see the importance of good governance. The lack of attention to long term capacity issues also meant that the effect of many development projects have not been sustainable.

Capacity Building, or capacity development as it also is called, is generally understood to be the process by which individuals, organisations, institutions and societies build abilities to perform functions, solve problems and achieve objectives. Some consider capacity building as a means to reduce poverty, while others see increased local capacity it as an objective itself. Many definitions fall somewhere between these two ideas.

Capacity building is not necessarily about building new capacity. Many times it's about strengthening, or making better use of already existing capacity, or eliminating old, inappropriate capacity, or just providing space or creative use for local actors' own capacities.

(This text is based on: Capacity Development (1997) Technical Advisory Paper 2, Management Development and Governance Division, UNDP; and Capacity Development, Occasional Series vol. 1, no. 1 May 2000. Canadian International Development Agency)

The Different Levels of Capacity Building

Capacity is sometimes divided into four levels - individual, organizational, network/sectoral and the enabling environment, of which each represents its own level of analysis:

Individual level: This refers to the capacity building for individuals, like planners, accountants, engineers, and their abilities to contribute to the realization of development objectives. Capacity building on an individual level should be contemplated as part of a broader framework. If not, experience shows that the result of this type of capacity building may be limited.

Organizational level: Building capacity on this level focuses on organizational structures, processes and management issues. To make full use of capacity building on individual level, attention should also be put on the organisational level. Typical capacity building on this level includes technical assistance, budgetary or infrastructure support.

Network/sectoral level: This refers to sector or sub-sector programs, for instance, developing sector policies and strategies, as well as effective coordination between and within sectors. More focus has been put on this level over recent years as independent programmes hava been replaced by programs as part of country strategies.

Enabling environment level: This level represents the environment in which the development process is taking place. The environment may be both enabling and constraining. For example, high levels of corruption, lack of legitimacy or poorly conceived polices, can all have negative effects on development initiatives. On the other hand, sound policies, high level of commitments and effective coordination can increase the prospects for success.

(This text is based on: Capacity Development (1997) Technical Advisory Paper 2, Management Development and Governance Division, UNDP; and Capacity Development, Occasional Series vol. 1, no. 1 May 2000. Canadian International Development Agency)

Designing Capacity Building

Capacity for what:
Before any capacity building programme is started it is critical to identify "what should be developed?" What are the goals, and what priorities do we have? There must be consensus among the parties involved in the project of its vision and goals. There are many ways in which one can identify what should the training be to best achive goals and priorities: Studies, workshops, political or planning processes, are some methods.

Capacity for whom: Once it has been decided "what", the next step is to decide whose capacity should be developed. Government officials, the private sector, or community-based organizations? It has to be identified where the capacity building will benefit the most, keeping goals and priorities in mind. Before, governments were often seen as the main source for development. The latest trend however is to give greater credibility and importance to private sector and civil society.

How? The question "how" is just as important as the "what" and "whom" questions. There are however few general rules on how a capacity building program should be designed and implemented in order to give sustainable results. Every programme has to be designed specifically for the needs of the individuals or groups that are being targeted and adopted to the society and context in which a programme is run. However a few things often stressed are transparency -the program should be built on a free flow on information, and that all men and women involved should have a vote in the decision making throughout the process.

(This text is based on: Capacity Development (1997) Technical Advisory Paper 2, Management Development and Governance Division, UNDP; and Capacity Development, Occasional Series vol. 1, no. 1 May 2000. Canadian International Development Agency)

UNITAR's Capacity Building Efforts

Context and Scope
This text aims to provide specific input, in summary form, on the efforts, initiatives and results in regards capacity building (since 1998) relating to UNITAR's training programme in the legal aspects of debt and financial management for Sub-Saharan Africa.

Steps taken and results achieved by UNITAR's Debt Programme towards Capacity Building

1. Coupling training with capacity building at the initiation and launch of UNITAR's training programme in the legal aspects of debt and financial management for Sub-Saharan Africa.

2. Reflecting the importance of capacity building in our 'Strategy Document'.

3. Preparing a Guidance Document entitled 'National Profile to Assess the National Legal Infrastructure in relation to Sound Financial Management for Sub-Saharan Africa - Guidance Document' with view to taking a stakeholder approach to reviewing and improving the national legal infrastructure (including constitution, laws, by laws, decrees, circulars) which has a bearing on sound financial management for a country.

4. Launching the National Profile Project by using the Guidance Document to prepare Country Profiles in East, West and Southern African nations with a view to undertaking a stocktaking exercise of the prevalent legal infrastructure in relation to financial management in the selected countries. This is currently being done in conjunction with partners in Africa.

5. Working in tandem with African Partner Training Institutes through partnerships and cost sharing. Currently, UNITAR works with (a) Eastern and Southern African Management Institute; (b) International Law Institute; (c) Macroeconomic and Financial Management Institute of Eastern and Southern Africa; (d) Pôle-Dette for French-speaking Central and West Africa; (d) West African Institute of Financial and Economic Management for English-speaking West African nations.

6. Identifying and involving African experts as trainers in UNITAR seminars and workshops and posting their resumés and areas on specialization on our website (see www.unitar.org/dfm).

7. Developing a website to act as a conduit of information and query service for African government officials (see www.unitar.org/dfm).

8. Making available all programme documentation free of charge on our website, including distance learning training packages, glossaries, document series (published and unpublished), best practices and reports emanating from UNITAR's seminars and workshops.

9. Utilizing New Information Technologies by starting an innovative project to develop and conduct online training courses for our target audience.

The Impact through UNITAR's Training

I. Overview

The debt crisis of the 1980s gave a devastating blow to development in the Third World. The consequences are still felt in a number of countries. Some continue to devote greater resources to debt payments than to education and health and many are still unable to fulfill their payment obligations. It is encouraging to note that the Bretton Woods institutions have now accepted to take steps to ease the burden of multilateral debt for heavily indebted poor countries (HIPCs). There is hope that their initiative will start to have an impact in the coming years.

Realizing the seriousness of the debt crisis, UNITAR and UNCTAD called a high-level expert meeting in Geneva in April 1987 to discuss a framework for addressing the crisis through training of government officials in Africa. The meeting noted that weaknesses in external debt management exacerbated the debt problems of African countries. Further, the management of external debt had become an important aspect of a country's financial management and many countries lacked the necessary tools to cope with a dramatic increase in the volume of foreign debt and its service. It was additionally noted that better debt management could give the data necessary both for the negotiation of debt rescheduling and relief and for the formulation of a country's strategy for external borrowing. UNITAR was also to take the lead in training in the legal aspects of debt and financial management, since it was noted that developing country supervisors underestimated the importance of the legal aspects in the borrowing process and that there was a critical need to sensitize them to the central role of lawyers in the borrowing process[1].

In addition to UNITAR's initiative, UNDP commissioned in 1988 a report on debt management and established on its basis a joint programme for debt management with UNCTAD and the World Bank. Similarly, the Commonwealth Secretariat embarked upon training its member countries in debt recording and monitoring.

Thus, in a nutshell, the various efforts in training and capacity building since 1987 have aimed broadly at reducing the financial vulnerability of African countries through provision of training in priority areas of debt and financial management to senior and middle-level government officials.

II. The Early Stages: A Dire Need for Training and Capacity Building at All Levels

During the early 1980s, in African countries as well as other developing countries, the dire need for training and improved debt management capacity cannot be overemphasized. UNITAR's early surveys and needs assessments conducted in the region pointed to a lack of trained staff from the (a) Executive, (b) Management and Supervision, and (c) Operational levels.

Executive Level: On a general level, very few senior officials understood the context of multilateral and bilateral lending as well as its challenges and pitfalls. As far as policy formulation at the top was concerned, very little existed in as far as objectives, guidelines for representation or capacity building plans. Additionally, an effective legal and administrative framework was missing as were clear institutional and departmental responsibilities. Much was left to be desired in as far as effective co-ordination mechanisms and effective information flows within departments. In fact, there was beginning to be a general debate on how to set up a debt management unit and where it should be located. To compound the issue, senior officials lacked sufficient qualified staff, staff that was well motivated and properly compensated, who had clear job descriptions and tools (hardware and software) to fulfill their duties. As far as debt re-negotiation at the Paris Club was concerned, senior government officials felt humiliated at these meetings and found themselves completely at the mercy of industrialized countries and the 'non-porous' International Financial Institutions (IFIs). Similarly, negotiating contracts with the World Bank seemed to be a 'one-way affair' in which the lender came with a pre-prepared text of a loan agreement (with 'boilerplate'/non-negotiable clauses) which could not be negotiated or touched by the borrower.

Management and Supervision Level: This relates to senior officials involved in planning, organizing and monitoring work in relation to debt and financial management as well as development and putting in place of systems and procedures. At the early stages (i.e. during the early '80s) none of the above tasks was focused and there was critical need for improving the planning, organizing and monitoring process within the relevant government departments. Similarly there was need to develop manuals (e.g. on negotiations; work procedures in relation to specific debt management functions; etc.). Additionally, staff with specific competence or training were wrongly placed in departments with the result that benefits were not accruing due to staff training, which was normally conducted overseas and was expensive.

Operational Level: This involves tasks such as debt recording, analysis, portfolio review, strategy, negotiations, disbursements as well as debt servicing. By way of general comment, and during the early stages, very little was in place since government officials from Sub-Saharan Africa belonged to young nations who had so far worked in already elaborated systems and legislation and had thus inherited systems which were external to them. At this stage came the debt crisis and a realization that tools and mechanisms needed to be developed to record and monitor all transactions which lead to an increase or decrease in a nation's debt portfolio as well as learn from the experiences of other nations in properly managing debt units. Government officials at this stage still did not realize the negative repercussions of badly negotiated loan agreements which would later on compound the debt burden and eventually the negotiating power of their respective nations. Thus, very little was in place in as far as the nuts and bolts of debt management within government departments are concerned. Capacity building at the departmental level was of the essence here.

III. Debt Strategy Implementation at the National Level

The following is by way of specific example to show what has been the progress over the years in as far as good debt management at national level is concerned. Obviously a lot may be written on the achievements and impact of various initiatives in debt management since late 1980s, including those of UNITAR. However, we feel that a specific case - which follows - will lend itself better in explaining some of these developments.

The table below (see Table 1 overleaf) is derived from input provided by one of UNITAR's partners in the Sub-Saharan African region and following a UNITAR regional workshop conducted to gather information on issues for capacity building (at the national level) in the area of debt management (August 2000). Column 1 relates to the Function and Criteria in terms of Debt Management; Column 2 shows the ranking as it stands now (high; medium or low); and Column 3 shows the trend.

[1] A lawyer who is well versed in financial law and who has a good understanding of financial transactions can play a constructive role at each stage of the loan transaction. Borrowers who allow lawyers to function as fully fledged members of their negotiating teams will find that the value the lawyer can add to the debt team will exceed the cost, both in money terms and in terms of the difficult issues that the lawyer might raise in the course of the structuring and negotiating of the transaction. Any borrower who doubts this should take note of the fact that its creditors almost always come to the negotiating table with their own lawyers. If there is no lawyer on the borrower's side, the borrower will be forced to defer to the lender's lawyer on all legal issues that may arise in the course of the negotiating and drafting of their loan agreement.

Table 1: Debt Strategy Implementation at the National Level:
Issues for Capacity Building - Year 2000

- Clear Objectives MEDIUM STATIC
- Representation LOW STATIC
- Approved Capacity Building Plans MEDIUM IMPROVING
- Effective Legal and Admin. Framework LOW STATIC
- Clear Institutional/Deptt. Responsibilities HIGH IMPROVING
- Effective Coordination Mechanisms MEDIUM IMPROVING
- Effective Information Flows MEDIUM IMPROVING
- Sufficient Qualified Staff HIGH IMPROVING
- Staff Well Motivated, Well Compensated MEDIUM STATIC
- Clear Job Descriptions MEDIUM STATIC
- Computer Hardware/Software MEDIUM IMPROVING
- Office Space/Facilities/Consumables LOW IMPROVING
- Planning, Organizing and Monitoring MEDIUM IMPROVING
- Systems and Procedures MEDIUM IMPROVING
- Skilled Resources LOW IMPROVING
- Completeness/Accuracy/Consistency MEDIUM IMPROVING
- Report Preparation and Circulation HIGH IMPROVING
- Routine Economic Reporting MEDIUM IMPROVING
- Quality and Timeliness MEDIUM IMPROVING
- Presentation HIGH IMPROVING
- Presentation HIGH IMPROVING
- Frequency LOW STATIC
- Analysis of Prospective New Loans MEDIUM IMPROVING
- Consistency (with Debt Strategy) -- --
- Negotiation Procedures LOW STATIC
- Latest Information Used HIGH IMPROVING
- Preparedness (Skills; Level; Representation) MEDIUM IMPROVING
- Documentation Quality and Timeliness LOW STATIC
- Follow-up on Non-Disbursing Loans LOW IMPROVING
- Compliance with Pre-Conditions MEDIUM IMPROVING
- Application for Disbursements MEDIUM IMPROVING
- Identification of Non-Disbursing Loans MEDIUM IMPROVING
- Circulation of Information LOW IMPROVING
- Confirmation of Disbursements MEDIUM IMPROVING
- Accuracy and Timeliness MEDIUM IMPROVING
- Tracing through Payment Cycle MEDIUM IMPROVING
- Budget Provision MEDIUM IMPROVING
- Monitoring of Arrears and Penalty HIGH IMPROVING
- Debt Reduction Accounted For MEDIUM IMPROVING

IV. Deepening Impact through Partnership with African Regional Training Institutes

Since January 1998, UNITAR has partnered with four African Regional Training Institutes in the design and delivery of its training and capacity building activities in the Legal Aspects of Debt and Financial Management for Sub-Saharan Africa. The four African Regional Partner Institutes are:

  • Eastern and Southern African Management Institute (ESAMI, Arusha);
  • International Law Institute - Legal Centre of Excellence (ILI-Uganda, Kampala);
  • Macroeconomic and Financial Management Institute (MEFMI, Harare); and
  • West African Institute for Financial and Economic Management (WAIFEM, Lagos).

Through its collaboration with the afore cited institues, UNITAR has been able to deepen its impact by offering training programmes which are not only complementary with the work of these institutes but also based on specific needs assessment and feedback received by these partner institutes. Thus complementarity and cost-sharing has been of the essence in this partnership. Further, UNITAR has invovled officials from these institutes with a view to conducting future training programmes and acting as co-speakers in legal aspects of financial management and negotiation.

V. Direct Impact of UNITAR's Programme in African Institutions

By way of illustration, following are the collated responses of beneficiary government departments and officials on the direct impact of UNITAR's Training Programme since 1990. By 'impact' we mean the extent to which the general objectives set for the training programme have translated into general development/better financial management in partner countries. The following responses were collated as part of a joint UNITAR/Donor Evaluation of the programme for the African region:

a. Bank of Ghana (Legal Department) - views of a team
At the Legal Department of the Bank of Ghana, thanks to UNITAR's workshops, lawyers have improved their skills to such a point that they can now give advice to line ministries relating to loan negotiation and management. Even the Governor has appreciated the impact of UNITAR's Training Programme in the legal aspects of debt and financial management and has commended the Legal Department as most active, efficient, and not delaying matters. UNITAR's training has also led the Bank of Ghana to modify its work manuals. These manuals practically serve the purpose of initiating new comers to the Bank to better understand and upgrade their knowledge of basic issues relating to their day-to-day work. These workshops have had the added advantage of showing the practical relevance of balanced teams in negotiations involving both lawyers and non-lawyers. Furthermore, presence of various delegations at UNITAR workshops had the added advantage that national ministries started talking and discussing issues which were paradoxically not discussed or touched on in the past.

b. Electricity Corporation of Ghana - views of a lawyer
Thanks to UNITAR workshops, the Electricity Corporation of Ghana has on a general level created awareness particularly for engineers of the importance of taking recourse to lawyers and of keeping lawyers involved and abreast of on-going loan negotiations. It is now that lawyers are also represented on our negotiation teams and are sent the respective original versions of agreements which have been negotiated, which did not use to be the case earlier. On a practical level, these workshops have been an eye opener for senior and middle-level officials and now allow us to look 'realistically' at loan agreements. As far as training materials emanating from these workshops are concerned, one of the modules of the training package (on loan agreements) was particularly appreciated by workshop participants who prepared a check list of the important points therein and distributed it to their Directors.

c. University of Ghana (Faculty of Law) - views of law professors
Faculty professors and lecturers have been invited on several occasions to attend UNITAR workshops. More recently, a Training of Trainers workshop offered by UNITAR helped in better understanding the importance of a multidisciplinary approach to training in debt and financial management issues. The comprehensive training package provided by UNITAR has been integrated into the University curriculum for training at the University. This is considered important because no such formal training is offered in Ghana, despite the fact that it addresses important practical considerations in loan negotiation and management for government officials.

d. Ministry of Finance (Zimbabwe) - views of an accountant
The Ministry of Finance is handling loan agreements almost on a daily basis. UNITAR's highly experienced resource persons have helped in understanding the context of multilateral and bilateral lending as well as its challenges and pitfalls. These workshops have also helped young officials at the ministry to attend donor meetings, discuss implications confidently, as well as administer donor funds subsequent to the conclusion of negotiations. A major benefit of the workshop has been the training materials, which have been distributed, photocopied and read by colleagues who did not attend these workshops.

e. Ministry of Justice (Zimbabwe) - views of a lawyer
The subject of legal aspects of debt and financial management has never been offered at the university level in Zimbabwe. It is firstly in this respect that UNITAR' multidisciplinary approach (though the involvement of accountants, economists, and lawyers) to training has helped. Secondly, networks of lawyers created through informal contact at UNITAR workshops has also helped in keeping in touch with them and in better understanding their experiences and learning from their mistakes. Since short-term practically oriented training is very rare in the field of International Loan Agreements, UNITAR courses are highly sought after at the Ministry.

f. Ministry of Industry and Commerce (Zimbabwe) - views of an economist
The negotiation skills training imparted by UNITAR has helped a lot in negotiating deals and arrangements with donors. More practically, we are in the process of drafting a document on Foreign Trade Policy. UNITAR's awareness workshops have helped directly in this by sensitizing us to discuss this document before finalization with the Ministry of Finance, Department of Customs and Excise, the Reserve Bank of Zimbabwe, and the Ministry of Justice. We have even worked as partners on this with the Department of Economics at the University of Zimbabwe. On another note, UNITAR workshops have helped by bringing African experts from other regions with a view to exposing how solutions to specific problems are found by other neighbouring countries.

Capacity Bulding Bibliography

  • Bolger, Joe. Capacity Development: What, Why and How? (2001) Capacity Development Occasional Series, Vol. 1 No. 1. CIDA Policy Branch.

  • Capacity Development (1997) Technical Advisory Paper 2, Management Development and Governance Division. UNDP

  • Capacity for Development -New Solutions to Old Problems (2002) Edited by Fukunda-Parr. Lopes, Carlos. Malik, Khalid. UNDP/Earthscan.

  • Partnership for Capacity Building in Africa -Strategy and Program of Action (1996) Report of the African Governors of the World Bank, World Bank Group.

Links to Capacity Building Organizations Working With Development Issues

  • African Capacity Building Foundation
    ACBF is an independent, capacity-building institution based in Harare, Zimbabwe. It was established through the collaborative efforts of three multilateral institutions, the African Development Bank, the World Bank, and the UNDP to strengthen capacity in African government and private sector.

  • African Economic Research Consortium
    The principal objective of AERC is to strengthen local capacity for conducting independent, rigorous inquiry into problems pertinent to the management of economies in sub-Saharan Africa.

  • Capacity.org
    Capacity.org is an initiative of the European Centre for Development Policy Management with the aim to look at policy and practice of capacity development within international development cooperation.

  • Commonwealth Association for Public Administration and Management http://www.capam.comnet.mt/
    CAPAM's aim is to strengthen public management and consolidating democracy and good governance throughout the Commonwealth.

  • The Commonwealth Fund for Technical Co-operation
    The CFTC is the principal means by which the Commonwealth promotes economic and social development and the alleviation of poverty in member countries. It is largely demand-driven and responds to requests from governments for such technical assistance as the provision of experts to fill specific development needs.

  • Council for Development of Social Science Research in Africa
    African NGO with a primary focus on social sciences, broadly defined.

  • Crown Agents
    Consultant firm offering capacity building and institutional development services for the public sector.

  • Evaluation Capacity Building in Research and Development Organizations
    Site promoting the use of evaluation as a tool to advance the development of organizational capacity and performance.

  • Fahamu
    English non profit organisation supporting social change in the South by offering electronic information on subjects in many different areas.

  • Global Programme for Globalization, Liberalization and Sustainable Human Development, UNDP, UNCTAD
    A joint UNCTAD - UNDP project aims to offer capacity building mainly within the areas of human and economic development, and trade.

  • Institutional and Capacity Development Network
    A capacity building network established by OECD, UNDP and the World Bank. Its resources are available for members, mainly bilateral and multilateral aid agencies.

  • International Public Management Network
    International capacity building resource available for members. The mission of IPMN is to provide a forum for sharing ideas, concepts and results of research and practice in the field of public management.

  • Impact Alliance
    Global capacity building network that offers the "know-how" of hundreds of organizations from all sectors of development.

  • Kabissa
    Washington based non-profit organisation whose aim is to use electronic resources to strengthen the capacities of NGOs working in Africa.

  • Operations Evaluations Department at the World Bank http://www.worldbank.org/oed/ecd/
    A World Bank Project encompassing a number of types of action to build and strengthen monitoring and evaluation (M&E) systems in borrowing countries.

  • Organization for Social Science Research in Eastern and Southern Africa http://www.ossrea.net/
    Membership based and donor supported research network that aims to encourage and promote the study and research in the Social Sciences in Eastern and Southern Africa.

  • Pact
    Pact's aim is to strengthen the capacity of local organizations and leaders to meet community needs in dozens of countries in Asia, Africa and Latin America.

  • Public Sector Reform
    PSR is concerned with improving the capacity of public institutions in Africa.

    Uses information communication technology tools to strengthen capacities for local actors in Africa in the areas of development and social justice.

  • Storkey & Co Limited
    The website provides information on public debt management, including a
    reference library and documents, a list of finance and treasury systems, and
    tools and information to assist sovereign debt managers. There are also
    useful links to sovereign debt offices, international agencies and other
    relevant debt management sites.

  • Third World Academy
    TWA's principal aim is to promote scientific capacity and excellence for sustainable development in the South.

  • UNDP, Management and Governance Network

  • UNCTAD Debt Management and Financial Analysis System Programme (DMFAS)
    UNCTAD's DMFAS programme offers software for debt management reporting and analysis, as well as advisory service and training on technical, and other aspects of public debt management.

  • United Nations Division for Sustainable Development
    UN division with the purpose of strengthening capacities on sustainable development.

  • Universalia
    Canadian management consultancy working with many NGOs and development projects.

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