From Mitigating Impacts to Improving Outcomes: the PSIA story

1. From Mitigating Impacts to Improving Outcomes: the PSIA story Dr. Anis A. Dani Lead Social Scientist The World Bank EDIAS Conference Manchester, November 24-25, 2003

2. Two world views • Policy statements at the World Bank reveal a striking contrast between the role of economic analysis (forward looking), and environmental assessment (do-no-harm) • SIA followed in the footsteps of EA and, after a few controversial projects (Narmada), adopted a similar defensive role • The limitations of EA/EIA and SIA were reinforced by the label “safeguard policies”, and the focus of EA/SIA on investment projects

3. IAIA Community of Practice • SIA has been systematically adopted in North America and Australasia • In those countries, SIA piggy-backs on EA which is triggered by biophysical impacts • Lament among IAIA members about SIA as the “orphan of impact assessment” (Burdge 2002) • Focus of SIA practitioners remains on adverse impacts of micro-projects • Latest formulation in “Guidelines and Principles” by IAIA and US Interorganizational Committee indicate desire to expand scope of SIA work

4. Rhetoric-reality gap at MDBs • Policies focused on safeguards (involuntary resettlement, indigenous peoples, cultural property) • Rhetoric suggests intent to go beyond safeguards • ADB – Initial Social Assessment • IADB – Socio-cultural Analysis • CDB – Social Impact Assessment • WB – Social Assessment • WB initiatives to reinvent and realign social analysis: • Social Analysis Sourcebook • Poverty and Social Impact Analysis

5. What is PSIA? An approach to the analysis of distributional impacts of policy reforms on the well-being of different groups, especially the poor intended and unintended impacts positive and negative impacts income and non-income dimensions PSIA is not new PRSP impetus for more systematic analysis of poverty and social impacts of associated reforms Gradually extending to IBRD countries as well PSIA: responsibility of Borrowing countries Bank and others assist LICs in undertaking PSIA for reforms we support What do we mean by PSIA?

6. Scaling up PSIA work • PSIA work expanding rapidly • TF pilots: 6 in FY02, 5 more in FY03 • Incremental BB-funds: 15 mini-PSIA in FY03, and 37 PSIA in FY04 • PSIA increasingly integrated as an approach in poverty assessments and other core ESW • Total 71 identifiable PSIA activities ongoing, of which 62 are in PRSP countries • PSIA ongoing in 43 countries, of which 38 are PRSP countries • But much more needs to be done to mainstream PSIA in borrowing countries

7. Table 3: Reforms analyzed by pilot PSIA

8. PSIA applied to individual reforms • It is methodologically more realistic to undertake PSIA for individual reforms, where impacts can be attributed more accurately, than for the entire macroeconomic and structural reform program • Criteria for selection of reform • Expected size and direction of impacts • Prominence of issue in the govt’s policy agenda • Timing and urgency of policy or reform • Level of national debate surrounding the reform

9. Fig. 1: Sectoral distribution of PSIA

10. Tools Utilities Public Sector Agriculture Land Macro Social Enterprise Restructuring Stakeholder analysis X X X X X SIA X X X X Beneficiary Assessment X X PPA X Poverty Mapping X Institutional Analysis X X X X X Contingent Valuation X Benefit Incidence Analysis X X Marginal Incidence Analysis X X Tax Incidence Analysis X X Household Models X X X X Partial Equilibrium Analysis/Multi-market models X X PAMS X CGE X X Public Expenditure Tracking Survey X X X Scenario Analysis X X Social Risk Analysis X X X X Table 4: Use of PSIA tools

11. Conceptual contribution of SIA • Growth alone is not enough; distribution of benefits and impacts matters • Reforms do not effect everyone equally; regional conditions and social diversity matter • People do not respond to policy opportunities equally; resource and asset endowments, and capabilities matter • The degree of influence exercised by different stakeholders varies; political economy matters • Institutions are not neutral; structures, functional capabilities, and organizational interests matter • Impacts are transmitted through multiple channels; employment, assets, access to goods and services, and transfers matter just as much as prices and wages • Reform outcomes are not perfectly predictable and carry risks

12. Lessons from sectoral PSIA • Utility tariff reforms • Tariff reforms to recover cost-of-service can have adverse impacts on poor and increase risk of non-payment • Issues: pace, quality and sustainability of reform • Agricultural reforms • Restructuring of state monopolies needs to be balanced against food security concerns • Issues: weak institutions, poor agri. Infrastructure, subsidies in industrialized countries • Enterprise restructuring • Design of mitigation measures for laid off workers needs to be balanced by impact on regional economy, especially in mono-industrial areas

13. Lessons from Bank experience • PSIA more feasible for individual reforms than for entire reform program • Reforms identified by PRSP and included in PRSC • Ownership through consultation on reform priorities, e.g. Cambodia • Flexibility needed: tools and methods based on context but multi-disciplinarity helps • Dilemma: Short-term results easier to analyze, many positive impacts have longer time horizon • Forward-looking elements (M&E, policy dialogue) help to overcome limits of ex-ante PSIA • Shift from safeguard approach to analyze positive and negative impacts upstream: feasible to influence reform design and improve outcomes

14. Conclusions • SIA has suffered from alliance with EA/EIA • SIA often triggered only for biophysical impacts • Excessive focus on adverse impact, safeguard compliance, and mitigation • Realignment has allowed combination of economic and social analysis through PSIA • Refocus on development outcomes, micro-macro linkages, policy and program design • Applied to wide range of policy reforms • Limits of ex-ante analysis: • avoid prescriptive safeguards; participate in policy dialogue; influence reform design; strong M&E during implementation