Asian Development Bank - Kiribatis Political Economy and Capacity Development

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Pacific Studies Series

Kiribatis Political Economy
and Capacity Development

Asian Development Bank

2009 Asian Development Bank

All rights reserved. Published 2009.

Printed in the Philippines.

ISBN 978-971-561-776-5

Publication Stock No. BBK229208

Cataloging-In-Publication Data

Asian Development Bank.

Kiribatis political economy and capacity development

Mandaluyong City, Phil.: Asian Development Bank, 2008.

1. Economics.2. Capacity development.3. Kiribati.I. Asian Development Bank.

The views expressed in this book are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent.

ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use.

Use of the term country does not imply any judgment by the authors or ADB as to the legal or other status of any territorial entity.

ADB encourages printing or copying information exclusively for personal and noncommercial use with proper acknowledgment of ADB. Users are restricted from reselling, redistributing, or creating derivative works for commercial purposes without the express, written consent of ADB.

6 ADB Avenue, Mandaluyong City

1550 Metro Manila, Philippines

Tel +63 2 632 4444

Fax +63 2 636 2444

www.adb.org

For orders, please contact:

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Contents

Acknowledgments

Acronyms

Foreword

Introduction

The Institutional Analysis and Development Framework

Application of the IAD Framework to Economic Reforms

Context

Actors, Action Arenas, and Incentives

Analysis

Reform-Supporting Measures for Development Partners

Investment Legislation

Better Community Understanding of Economic Reforms

Capacity Building

Companion Reforms

Appendix

A Framework for Consideration of Support for Capacity Development in Kiribati

References

Acknowledgments

The kind cooperation of all those interviewed during the preparation of this paper is gratefully acknowledged.

Acronyms

ADB	Asian Development Bank
AusAID	Australian Agency for International Development
FIC	Foreign Investment Commission
IAD	institutional analysis and development
IFC	International Finance Corporation
KIT	Kiribati Institute of Technology
MFED	Ministry of Finance and Economic Development
PSO	Public Service Office
US	United States
USP	University of the South Pacific

Note

In this report, $ refers to Australian dollars unless otherwise specified.

Foreword

Development partners have increasingly recognized the important role of political economy in a countrys growth and development. The political economys impact is even more pronounced in fragile states and in the small communities of the Pacific islands.

At the request of the Government of Kiribati, the Asian Development Bank (ADB) funded a study of the political economy of the countrys state-owned enterprise (SOE) reform. After reviewing approaches and methodologies to examine the political economy, one approach was selected and tried in the Kiribati case study. This study reveals how the prioritization, sequencing, and nature of SOE reform is greatly influenced by the political economy. Technical and professional advice and assistance in support of SOE reform are commonly insufficient in the Pacific islands. Greater account has to be taken for social, cultural, and political influences. A reform program built on the realities of the prevailing political economy will likely differ greatly from a program based on professional considerations alone. The lack of assessments of political economy could well be one major reason why earlier reform efforts have not succeeded.

The Kiribati SOE reform case study stands as a good-practice example for SOE- and other reform programs in the Pacific. The study was undertaken by Professor Ron Duncan under the guidance of ADBs South Pacific Regional Office in Suva, Fiji.

Introduction

This paper reports the results of an investigation into the social, economic, political, and institutional factors that encourage or impede inclusive economic development in Kiribati and hamper the capacity development needed to overcome obstacles to that development. Much of the information on which this report is based was collected in discussions in South Tarawa in January and April 2007.

The institutional analysis and development (IAD) framework of Ostrom et al (2001) served as the analytical framework for the investigation. This framework, which was developed by researchers from the Workshop in Political Theory and Policy Analysis at Indiana University in the United States, is an effective way to explain group behavior that influences a countrys economic development.

The investigation centers on the reasons for the difficulties the Government faces when it tries to privatize public enterprises and develop the private sector. Reforms in these areas have concerned various development partners of Kiribati for many years. They have also been, and still are, primary objectives of the Government, as stated in national development plans and related documents and speeches. However, little or no progress has been made in achieving these objectives.

The next section gives an overview of the IAD framework, which is used in the following section to examine the social, economic, political, and institutional factors that have stymied privatization and private sector development in Kiribati. The section after that looks into various measures that could encourage capacity building and economic reforms. The final section sums up the outlook for reform in Kiribati and recommends ways to improve the outcomes of development partner projects and programs in the country.

In the appendix, the IAD methodology is used to develop a capacity-building framework for technical assistance to improve the availability of accurate and up-to-date financial information for a multiyear budgeting framework for Kiribati.

The Institutional Analysis and Development Framework

The institutional analysis and development (IAD) framework is based on the assumption that most problems in development arise because people cannot take the necessary collective action. The delivery of public goods and the effective management of common-pool resources in a society require collective action by that society. However, societal incentives or rules of behavior may provide weak or perverse incentives to individuals and groups to act collectively for their common good, thereby adversely affecting the delivery of public goods and the management of common-pool resources.

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