Editors’ Note: Organized crime actors have increasingly adopted advanced technologies, with law enforcement agencies adapting accordingly. However, the use of ever fancier-technology is only a part of the story. The future lies as much behind as ahead, writes Vanda Felbab-Brown, with criminal groups now using primitive technologies and methods to counter the advanced technologies used by law enforcement. This post was originally published by the Remote Control Project, a project hosted by the Oxford Research Group.

The history of drug trafficking and crime more broadly is a history of adaptation on the part of criminal groups in response to advances in methods and technology on the part of law enforcement agencies, and vice versa. Sometimes, technology trumps crime: The spread of anti-theft devices in cars radically reduced car theft. The adoption of citadels (essentially saferooms) aboard ships, combined with intense naval patrolling, radically reduced the incidence of piracy off Somalia. Often, however, certainly in the case of many transactional crimes such as drug trafficking, law enforcement efforts have tended to weed out the least competent traffickers, and to leave behind the toughest, meanest, leanest, and most adaptable organized crime groups. Increasingly, organized crime actors have adopted advanced technologies, such as semi-submersible and fully-submersible vehicles to carry drugs and other contraband, and cybercrime and virtual currencies for money-laundering. Adaptations in the technology of smuggling by criminal groups in turn lead to further evolution and improvement of methods by law enforcement agencies. However, the use of ever fancier-technology is only a part of the story. The future lies as much behind as ahead (to paraphrase J.P. Wodehouse), with the asymmetric use of primitive technologies and methods by criminal groups to counter the advanced technologies used by law enforcement.

The seduction of SIGINT and HVT

The improvements in signal intelligence (SIGINT) and big-data mining over the past two decades have dramatically increased tactical intelligence flows to law enforcement agencies and military actors, creating a more transparent anti-crime, anti-terrorism, and counterinsurgency battlefield than before. The bonanza of communications intercepts of targeted criminals and militants that SIGINT has come to provide over the past decades in Colombia, Mexico, Iraq, Pakistan, Afghanistan, and other parts of the world has also strongly privileged high-value targeting (HVT) and decapitation policies-i.e., principally targeting the presumed leaders of criminal and militant organizations.

The proliferation of SIGINT and advances in big-data trawling, combined with some highly visible successes of HVT, has come with significant downsides. First, high-value targeting has proven effective only under certain circumstances. In many contexts, such as in Mexico, HVT has been counterproductive, fragmenting criminal groups without reducing their proclivity to violence; in fact, exacerbating violence in the market. Other interdiction patterns and postures, such as middle-level targeting and focused-deterrence, would be more effective policy choices. 

A large part of the problem is that the seductive bonanza of signal intelligence has lead to counterproductive discounting of the need to:

1. develop a strategic understanding of criminal groups’ decisionmaking—knowledge crucial for anticipating the responses of targeted non-state actors to law enforcement actions; Mexico provides a disturbing example;
2. cultivate intelligence human intelligence assets, sorely lacking in Somalia, for example;
3. obtain a broad and comprehensive understanding of the motivations and interests of local populations that interact with criminal and insurgent groups, notably deficient in Iraq, Afghanistan, and Pakistan; and 
4. establish good relationships with local populations to advance anti-crime and counterinsurgency policies, such as in Colombia where drug eradication policy antagonized local populations from national government and strengthened the bonds between them and rebel groups. 

In other words, the tactical tool, technology—in the form of signal intelligence and big-data mining—has trumped strategic analysis. The correction needed is to bring back strategic intelligence analysis to drive interdiction targeting patterns, instead of letting the seduction of signal data drive intelligence analysis and targeting action. The political effects, anticipated responses by criminal and militant groups, and other outcomes of targeting patterns need be incorporated into the strategic analysis. Questions to be assessed need to include: Can interdiction hope to incapacitate—arrest and kill—all of the enemy or should it seek to shape the enemy? What kind of criminals and militants, such as how fractured or unified, how radicalized or restrained in their ambitions, and how closely aligned with local populations against the state, does interdiction want to produce? 

Dogs fights or drone fights: Remote lethal action by criminals

Criminal groups have used technology not merely to foil law enforcement actions, but also to fight each other and dominate the criminal markets and control local populations. In response to the so-called Pacification (UPP) policy in Rio de Janeiro through which the Rio government has sought to wrestle control over slums from violent criminal gangs, the Comando Vermelho (one of such gangs), for example, claimed to deploy remote-sensor cameras in the Complexo do Alemão slum to identify police collaborators, defined as those who went into newly-established police stations. Whether this specific threat was credible or not, the UPP police units have struggled to establish a good working relationship with the locals in Alemão.

The new radical remote-warfare development on the horizon is for criminal groups to start using drones and other remote platforms not merely to smuggle and distribute contraband, as they are starting to do already, but to deliver lethal action against their enemies—whether government officials, law enforcement forces, or rival crime groups. Eventually, both law enforcement and rival groups will develop defenses against such remote lethal action, perhaps also employing remote platforms: drones to attack the drones. Even so, the proliferation of lethal remote warfare capabilities among criminal groups will undermine deterrence, including deterrence among criminal groups themselves over the division of the criminal market and its turfs. Remotely delivered hits will complicate the attribution problem— i.e., who authorized the lethal action—and hence the certainty of sufficiently painful retaliation against the source and thus a stable equilibrium. More than before, criminal groups will be tempted to instigate wars over the criminal market with the hope that they will emerge as the most powerful criminal actors and able to exercise even greater power over the criminal market—the way the Sinaloa Cartel has attempted to do in Mexico even without the use of fancy technology. Stabilizing a highly violent and contested—dysfunctional—criminal market will become all the more difficult the more remote lethal platforms have proliferated among criminal groups.

Back to the past: The Ewoks of crime and anti-crime

In addition to adopting ever-advancing technologies, criminal and militant groups also adapt to the technological superiority of law enforcement-military actors by the very opposite tactic—resorting asymmetrically to highly primitive deception and smuggling measures. Thus, both militant and criminal groups have adapted to signal intelligence not just by using better encryption, but also by not using cell phones and electronic communications at all, relying on personal couriers, for example, or by flooding the e-waves with a lot of white noise. Similarly, in addition to loading drugs on drones, airplanes, and submersibles, drug trafficking groups are going back to very old-methods such as smuggling by boats, including through the Gulf of Mexico, by human couriers, or through tunnels. 

Conversely, society sometimes adapts to the presence of criminal groups and intense, particularly highly violent, criminality by adopting its own back-to-the-past response—i.e., by standing up militias (which in a developed state should have been supplanted by state law enforcement forces). The rise of anti-crime militias in Mexico, in places such as Michoacán and Guerrero, provides a vivid and rich example of such populist responses and the profound collapse of official law enforcement. The inability of law enforcement there to stop violent criminality—and in fact, the inadvertent exacerbation of violence by criminal groups as a result of HVT—and the distrust of citizens toward highly corrupt law enforcement agencies and state administrations led to the emergence of citizens’ anti-crime militias. The militias originally sought to fight extortion, robberies, theft, kidnapping, and homicides by criminal groups and provide public safety to communities. Rapidly, however, most of the militias resorted to the very same criminal behavior they purported to fight—including extortion, kidnapping, robberies, and homicides. The militias were also appropriated by criminal groups themselves: the criminal groups stood up their own militias claiming to fight crime, where in fact, they were merely fighting the rival criminals. Just as when external or internal military forces resort to using extralegal militias, citizens’ militias fundamentally weaken the rule of law and the authority and legitimacy of the state. They may be the ewoks’ response to the crime empire, but they represent a dangerous and slippery slope to greater breakdown of order.

In short, technology, including remote warfare, and innovations in smuggling and enforcement methods are malleable and can be appropriated by both criminal and militant groups as well as law enforcement actors. Often, however, such adoption and adaptation produces outcomes that neither criminal groups nor law enforcement actors have anticipated and can fully control. The criminal landscape and military battlefields will resemble the Star Wars moon of Endor: drone and remote platforms battling it out with sticks, stones, and ropes.

On Tuesday, May 24, Nigerian Central Bank Governor Godwin Emefiele announced that the country will adopt a more flexible foreign exchange rate system in the near future. This move signals a major policy shift by Emefiele and President Muhammadu Buhari, who had until this point opposed calls to let the naira weaken. Many international oil-related currencies have depreciated against the dollar as oil prices began their decline in 2014. Nigeria, however, has held the naira at a peg of 197-199 per U.S. dollar since March 2015, depleting foreign reserves and deterring investors, who remain concerned about the repercussions of a potential naira devaluation. Following the announcement, Nigerian stocks jumped to a five-month high and bond prices rose in anticipation that a new flexible exchange rate regime would increase the supply of dollars and help attract foreign investors.

For now it remains unclear exactly what a more flexible system will entail for Nigeria, however, some experts suggest that the Central Bank may introduce a dual-rate system, which allows select importers in strategic industries to access foreign currency at the current fixed rate, while more generally foreign currency will be available at a weaker, market-related level. This new regime raises a number of questions, including how it will be governed and who will have access to foreign currency (and at what rate). On Wednesday, Nigeria’s parliament requested a briefing soon from Emefiele and Finance Minister Kemi Adeosun to provide additional clarity on the new system, although the date for such a meeting has not yet been set.

Earlier this month, Kenya announced plans to close the Dadaab refugee camp, located in northeast Kenya, amid security concerns. The move to close the camp has been widely criticized by international actors. United States State Department Press Relations Director Elizabeth Trudeau urged Kenya to “uphold its international obligations and not forcibly repatriate refugees.” The United Nations High Commissioner for Refugees stated that the closure of the refugee camp would have “devastating consequences.” Despite these concerns, this week, at the World Humanitarian Summit, Kenya stated that it will not go back on its decision and confirmed the closure of the refugee camps within a six-month period.

The camp houses 330,000 refugees, a majority of whom fled from conflict in their home country of Somalia. Kenya insists that the camp poses a threat to its national security, as it believes the camp is used to host and train extremists from Somalia’s Islamist group al-Shabab. Kenya also argued that the developed world, notably the United Kingdom, should host its fair share of African refugees. This is not the first time Kenya has threatened to close the refugee camp. After the Garissa University attacks last April, Kenya voiced its decision to close the refugee camps, although it did not follow through with the plan.

From May 23-27, Lusaka, Zambia hosted 5,000 delegates and participants for the 2016 Annual Meetings of the African Development Bank (AfDB), with the theme, “Energy and Climate Change.” Held in the wake of December’s COP21 climate agreement and in line with Sustainable Development Goals 7 (ensure access to affordable, reliable, sustainable and modern energy for all) and 13 (take urgent action to combat climate change and its impacts), the theme was timely and, as many speakers emphasized, urgent. Around 645 million people in Africa have no access to electricity, and only 16 percent are connected to an energy source. To that end, AfDB President Akinwumi Adesina outlined the bank’s ambitious aim: “Our goal is clear: universal access to energy for Africa within 10 years; Expand grid power by 160 gigawatts; Connect 130 million persons to grid power; Connect 75 million persons to off grid systems; And provide access to 150 million households to clean cooking energy."

As part of a push to transform Africa’s energy needs and uses, Rwandan President Paul Kagame joined Kenyan President Uhuru Kenyatta on a panel to support the AfDB’s “New Deal on Energy” that aims to deliver electricity to all Africans by 2025. Kenyatta specifically touted the potential of geothermal energy sources. Now, 40 percent of Kenya's power needs come from geothermal energy sources, he said, but there is still room for improvement—private businesses, which make up 30 percent of Kenya’s on-grid energy needs, have not made the switch yet.

As part of the meetings, the AfDB, the Organization for Economic Cooperation and Development (OECD), and United Nations Development Program (UNDP) also launched their annual African Economic Outlook, with the theme “Sustainable Cities and Structural Transformation.” In general, the report’s authors predict that the continent will maintain an average growth of 3.7 percent in 2016 before increasing to 4.5 percent in 2017, assuming commodity prices recover and the global economy improves.  However, the focus was on this year’s theme: urbanization. The authors provide an overview of urbanization trends and highlight that successful urban planning can discourage pollution and waste, slow climate change, support better social safety nets, enhance service delivery, and attract investment, among other benefits.

For more on urbanization in sub-Saharan Africa, see Chapter 4 of Foresight Africa 2016: Capitalizing on Urbanization: The Importance of Planning, Infrastructure, and Finance for Africa’s Growing Cities.

Event Information

The Brookings Doha Center (BDC) hosted a panel discussion on May 30, 2016, about the security of energy exports and energy transit from the Middle East and North Africa (MENA). The panelists were Robin Mills, nonresident fellow at the Brookings Doha Center; and Colonel Giuseppe Morabito, director of the Middle East Faculty at the NATO Defense College. Sultan Barakat, senior foreign policy fellow and director of research at the BDC, moderated the event, which was attended by members of Qatar’s diplomatic, academic, and media community.

Barakat introduced the session by stating that the current unsettled environment in the Middle East raises concerns over energy security, both within the region and amongst energy consumers in Europe, the United States, India, China, and elsewhere. Threats to energy infrastructure exist at all scales, from individual acts of crime, sabotage, and terrorism to major regional wars and conflicts. We have seen large swaths of land fall under the control of non-state actors while states struggle to protect their territories. The Middle East houses some of the most important chokepoints in the energy transit, but also happens to be one of the most unstable regions in the world. 

Mills started his remarks by highlighting paradoxes in the oil and gas markets today, where low global oil and gas prices are juxtaposed with high levels of global disruptions to energy transits. Concern over energy security is lacking as markets appear to pay less attention to risks, even though energy security faces some unprecedented challenges. Such indifference, he noted, may be appropriate for now given the oversupply and abundance of energy in the market. But even in the current market, some possible threats may have very severe effects on global energy supplies, threatening the economies of consumers, producers, and the global market alike.

Mills proceeded to list different risk scenarios. At the local level, he highlighted the threat of sabotage, where communities demanding a greater share of natural resources may block a pipeline or attack an export terminal; piracy, which, he argued, could emerge in regions beyond the coast of Somalia; and attacks by extremist groups, who are eager to get a hold on new sources of income. On a state level, there is the threat of major interstate wars between major exporters, which thankfully haven’t erupted yet.  Past interstate wars, however, have had very significant impacts on energy security. The 1973 war between Israel and Egypt lead to an embargo that triggered the first oil crisis. The 1980s Iran-Iraq war resulted in severe damage to the oil production facilities of both countries and involved a tanker war which destroyed tankers passing through the Strait of Hormuz, resulting in an intervention by both the United States and the Soviet Union to protect shipping.

Hormuz, Mills continued, is one of numerous chokepoints—narrow channels along widely-used global sea routes that are crucial to the energy business. Given their narrowness, they tend to be obvious disruption targets. Hormuz carries about 17 million barrels per day (more than 20%) of oil exports. It is also the sole route for LNG export from Qatar, a crucial source of gas for East Asia and Europe. Other important chokepoints in the region are the Suez Canal, the southern entrance to the Red Sea, and the Bosporus Straits in Turkey. Any interruption of transit along those key areas would be highly detrimental.

Mills argued that, beyond attacks and wars, there is a broader and more diffuse threat to energy security, which has to do with investment. While it is true that investors can handle some level of risk in countries with moderate levels of insecurity like Nigeria, not all levels of insecurity can be worked with. At some point, insecurity can become too severe, deterring investment or even preventing it entirely. In the long term, this deters the development of promising new sources of oil and gas.

In response to a question from Barakat about NATO’s perspective on energy security in the Middle East, Morabito argued that NATO is particularly concerned about its gas supplies from the region, as most NATO countries rely on the region for gas. He argued that NATO’s policies, however, are primarily reactive, driven by events. No major events have interrupted energy supplies in recent times, so energy security is hardly on the agenda of NATO policymakers. There are more pressing issues these days, such as the threat of the Islamic State group (IS) and that of Russia’s Vladimir Putin.

In fact, Morabito continued, it is difficult to focus NATO’s attention on the issue because there doesn’t seem to be one. In the past, oil prices went up simply due to a war in Lebanon, which isn’t even an energy exporter. Today, however, we have a war that involves Saudi Arabia, the largest oil producer, but prices have been declining. The markets are very different today, mainly due to the development of shale technologies.

Nevertheless, Morabito noted that he thinks NATO, or some NATO nations, have intervened to secure their energy interests by training interstate groups such as the Kurds in Iraq or paying tribesmen in Algeria to protect pipelines that flow towards Europe. He noted that protecting pipelines is a costly business. A pipeline of 1,000 kilometers requires the presence of at least two soldiers every 50 meters; those two would have to work in shifts which necessitates hiring yet another two. Even then, an attack by only 50 militants would likely see the pipeline destroyed. This high cost makes it crucial to cooperate with local groups if proper security is to be insured.

Mills noted that European countries have become far less vulnerable to interruptions in supply, which were historically mainly caused by conflicts with Russia. He attributed that to interventions by the European Union to mitigate those vulnerabilities. He noted that in addition to institutional interventions, infrastructural development and market forces are also key in mitigating risks to the energy transit. When it comes to infrastructure, pipelines can be developed to bypass chokepoints, strategic storage can be built to provide countries with an emergency stock of oil and gas, and in some rare cases spare capacity can be employed to fill gaps in supply. Additionally, too often, government action to impose price controls, rationing, and export bans has proven to be counterproductive. It is important to allow the market to correct itself freely, although market mechanisms could be aided by better data.

After a Q&A session that asked about whether there truly are any real threats to Hormuz, the role that multi-national corporations can play in securing energy security, and threats to energy transit stemming from outside the MENA region.  Barakat concluded by thanking the guests and stating that energy security is yet another reason why the region should work to resolve its differences and put an end to regional wars and rivalries.

Video

• Risky routes: Energy transit in the Middle East

Event Materials

• EnergyTransitTranscript0516doc

On Friday, June 3, S&P Global Ratings announced that it would not downgrade South Africa’s credit rating to junk, letting South Africa breathe a sigh of relief. The outlook, however, remained negative. While some experts were confident that the rating would not be cut, most continued to warn that future economic or political turmoil could spark a downgrade later this year. The South African Treasury agreed, but remained positive releasing a statement saying:

Government is aware that the next six months are critical and there is a need to step up the implementation [of measures to boost the economy] … The benefit of this decision is that South Africa is given more time to demonstrate further concrete implementation of reforms that are underway.

South Africa, whose current rating stands at BBB- (one level above junk), has been facing weak economic growth—at 1 percent—over past months. The International Monetary Fund has given a 2016 growth forecast of 0.6 percent. Many feared that a downgrade could have pushed the country into a recession. Borrowing by the government would have also become more expensive, especially as it tackles a 3.2 percent of GDP budget deficit for the 2016-2017 fiscal year.

Other credit ratings agencies also are concerned with South Africa’s economic performance. Last month, Moody’s Investors Service ranked the country two levels above junk but on review for a potential downgrade, while Fitch Ratings is reviewing its current stable outlook and BBB- rating.

For South African Finance Minister Pravin Gordhan’s thoughts on the South African economy, see the April 14 Africa Growth Initiative event, “Building social cohesion and an inclusive economy: A conversation with South African Finance Minister Pravin Gordhan.”

This week, the Extraordinary African Chambers—located in Dakar and established in collaboration with the African Union—sentenced former Chadian President Hissène Habré to life in prison. Habré seized power in 1982, overthrowing then President Goukouni Oueddei. He fled to Senegal in 1990 after being ousted by current Chadian President Idriss Deby. After he fled to Senegal, the African Union called on Senegal to prosecute Habré. In 2013, the Extraordinary African Chamber was created with the sole aim to prosecute Habré. The Habré trial is the first trial of a former African head of state in another African country.

Habré faced a long list of charges including crimes against humanity, rape, sexual slavery, and ordering killings while in power. According to Chad’s Truth Commission,  Habré’s government murdered 40,000 people during his eight-year reign. At the trial, 102 witnesses, victims, and experts testified to the horrifying nature of Habré’s rule. His reign of terror was largely enabled by Western countries, notably France and the United States. In fact, on Sunday, U.S. Secretary of State John Kerry admitted to his country’s involvement in enabling of Habré’s crimes. He was provided with weapons and money in order to assist in the fight against former Libyan leader Moammar Gadhafi. Said resources were then used against Chadian citizens.

Also this week, Simone Gbagbo, former Ivorian first lady, is being tried in Côte d’Ivoire’s highest court— la Cour d’Assises—for crimes against humanity. She also faces similar charges at the International Criminal Court though the Ivoirian authorities have not reacted to the arrest warrant issued in 2012. In March 2015, Simone Gbabgo was sentenced to 20 years in jail for undermining state security as she was found guilty of distributing arms to pro-Laurent Gbagbo militia during the 2010 post-electoral violence that left 3000 dead. Her husband is currently on trial in The Hague for the atrocities committed in the 2010 post-election period.

On Monday, May 30, South African chemical and energy company Sasol Ltd announced that Mozambique’s ongoing debt crisis and continuing low global gas prices would not slow down its Mozambican gas project. The company expressed confidence in a $1.4 billion processing facility upgrade stating that the costs will be made up through future gas revenues. In explaining Sasol’s decision to increase the capacity of its facility by 8 percent, John Sichinga, senior vice president of Sasol’s exploration and production unit, stated, “There is no shortage of demand … There’s a power pool and all the countries of the region are short of power.” In addition, last week, Sasol began drilling the first of 12 new planned wells in the country.

On the other hand, on Monday The Wall Street Journal published an article examining how these low gas prices are stagnating much-hoped-for growth in East African countries like Tanzania and Mozambique as low prices prevent oil companies from truly getting started. Now, firms that flocked to promising areas of growth around these industries are downsizing or moving out, rents are dropping, and layoffs are frequent. Sasol’s Sichinga remains positive, though, emphasizing, "We are in Mozambique for the long haul. We will ride the waves, the downturns, and the upturns."

Despite widespread agreement that the federal budget is on an unsustainable path, there is also widespread disagreement about what should be done. The Hamilton Project asked leading experts from a variety of backgrounds—the policy world, academia, and the private sector, and from both sides of the political aisle—to develop and share their ideas for addressing the deficit. The proposals will be released at two events scheduled for February 22 and February 26. In a dialogue previewing those events, Hamilton Project Director Michael Greenstone and Policy Director Adam Looney discuss some of the key ideas offered by the experts.

Greenstone stresses that the goal of the papers is to move beyond the fights and disagreements between President Obama and Congress and to provide some of the poetry, or some of the details, on how government might run better. The papers will also be featured in a book, 15 Ways to Rethink the Federal Budget, and will take on a wide-ranging set of topics, including immigration, transportation, health care, defense spending, and tax expenditures.

Video

• Michael Greenstone and Adam Looney: These Authors Have Drafted Policies That Help the Budget and Provide Economic Benefits

A key objective of the United Nations Development Programme (UNDP) is to assist its member countries in meeting the Millennium Development Goals (MDGs). UNDP pursues this objective in various ways, including through analysis and advice to governments on the progress towards the MDGs (such as support for the preparation and monitoring Poverty Reduction Strategies, or PRSs, in poor countries), assistance for capacity building, and financial and technical support for the preparation and implementation of development programs.

The challenge of achieving the MDGs remains daunting in many countries, including Tajikistan. To do so will require that all development partners, i.e., the government, civil society, private business and donors, make every effort to scale up successful development interventions. Scaling up refers to “expanding, adapting and sustaining successful policies, programs and projects on different places and over time to reach a greater number of people.” Interventions that are successful as pilots but are not scaled up will create localized benefits for a small number of beneficiaries, but they will fail to contribute significantly to close the MDG gap.

This paper aims to assess whether and how well UNDP is supporting scaling up in its development programs in Tajikistan. While the principal purpose of this assessment was to assist the UNDP country program director and his team in Tajikistan in their scaling up efforts, it also contributes to the overall growing body of evidence on the scaling up of development interventions worldwide.

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Editor's Note: The World Bank’s Independent Evaluation Group (IEG) recently published a self-evaluation of its activities. Besides representing current thinking among evaluation experts at the World Bank, it also more broadly reflects some of the strengths and gaps in the approaches that evaluators use to assess and learn from the performance of the international institutions with which they work. The old question “Quis custodet ipsos custodes?” – loosely translated as “Who evaluates the evaluators?” – remains as relevant as ever. Johannes Linn served as an external peer reviewer of the self-evaluation and provides a bird’s-eye view on the lessons learned.

An Overview of the World Bank’s IEG Self-Evaluation Report

In 2011 the World Bank’s Independent Evaluation Group (IEG) carried out and published a self-evaluation of its activities. The self-evaluation team was led by an internal manager, but involved a respected external evaluation expert as the principal author and also an external peer reviewer.

The IEG self-evaluation follows best professional practices as codified by the Evaluation Cooperation Group (ECG). This group brings together the evaluation offices of seven major multilateral financial institutions in joint efforts designed to enhance evaluation performance and cooperation among their evaluators. One can therefore infer that the approach and focus of the IEG self-evaluation is representative of a broader set of practices that are currently used by the evaluation community of international financial organizations.

At the outset the IEG report states that “IEG is the largest evaluation department among Evaluation Capacity Group (ECG) members and is held in high regard by the international evaluation community. Independent assessments of IEG’s role as an independent evaluation function for the Bank and IFC rated it above the evaluation functions in most other ECG members, international nongovernmental organizations, and transnational corporations and found that IEG follows good practice evaluation principles.”

The self-evaluation report generally confirms this positive assessment. For four out of six areas of its mandate IEG gives itself the second highest rating (“good”) out of six possible rating categories. This includes (a) the professional quality of its evaluations, (b) its reports on how the World Bank’s management follows up on IEG recommendations, (c) cooperation with other evaluation offices, and (d) assistance to borrowing countries in improving their own evaluation capacity. In the area of appraising the World Bank’s self-evaluation and risk management practices, the report offers the third highest rating (“satisfactory”), while it gives the third lowest rating (“modest”) for IEG’s impact on the Bank’s policies, strategies and operations. In addition the self-evaluation concludes that overall the performance of IEG has been “good” and that it operates independently, effectively and efficiently.

The report makes a number of recommendations for improvement, which are likely to be helpful, but have limited impact on its activities. They cover measures to further enhance the independence of IEG and the consistency of evaluation practices as applied across the World Bank Group’s branches – the World Bank, the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA) –; to improve the design of evaluations and the engagement with Bank management upstream for greater impact; and monitoring the impact of recent organizational changes in IEG in terms of results achieved. The report also recommends that more be done to evaluate the Bank’s analytical work and that evaluations draw on comparative evidence.

Assessment

In terms of the parameters of self-evaluation set by the prevailing practice among the evaluators on international financial agencies, the IEG self-evaluation is accurate and helpful. From my own experience as an operational manager in the Bank whose activities were evaluated by IEG in years past, and as a user of IEG evaluations (and of evaluations of other international aid organizations) for my research on aid effectiveness, I concur that IEG is independent and effective in meeting its mandate as defined. Moreover, the self-evaluation produces useful quantitative evidence (including survey results, budget analysis, etc.) to corroborate qualitative judgments.

However, the self-evaluation suffers from a number of limitations in approach and gaps in focus, which are broadly representative of the practices prevalent among many of the evaluation offices of international aid agencies.

Approach of the IEG self-evaluation

The core of the self-evaluation report is about the evaluation process followed by IEG, with very little said about the substance of IEG’s evaluations. The following questions could have usefully been raised, but were not: do evaluations cover the right issues with the right intensity, such as growth and poverty; environmental, governance, and gender impacts; regional dimensions versus exclusive country or project focus; effectiveness in addressing the problems of fragile and conflict states; effectiveness in dealing with global public goods; sustainability and scaling up; etc. Therefore the report does not deal with the question of whether IEG effectively responds in its evaluations to the many important strategic debates and issues with which the development community is grappling.

Related to this limitation is the fact that the report assessed the quality of IEG’s mostly in terms of (a) whether its approach and processes meet certain standards established by the Evaluation Cooperation Group; and (b) how it is judged by stakeholders in response to a survey commissioned for this evaluation. Both these approaches are useful, but they do not have any basis in professional assessments of the quality of individual products. This is equivalent to IEG evaluating the World Bank’s projects on the quality of its processes (e.g., appraisal and supervision processes) and on the basis of stakeholder surveys, without evaluating individual products and their impacts.

Gaps in the Self-Evaluation and in Evaluation Practice

Careful reading of the report reveals six important gaps in the IEG self-evaluation, in the prevailing evaluation practice in the World Bank, and more generally in the way international financial organizations evaluate their own performance. The first three gaps relate to aspects of the evaluation approach used and the second three gaps relate to lack of focus in the self-evaluation on key internal organizational issues:

1. Impact Evaluations: The report notes that IEG carries out two to three impact evaluations per year, but it sidesteps the debate in the current evaluation literature and practice as to what extent the “gold standard” of randomized impact evaluation should occupy a much more central role. Given the importance of this debate and divergence of views, it would have been appropriate for the self-evaluation to assess IEG’s current practice of very limited use of randomized evaluations.

2. Evaluation of Scaling Up: The report does not address the question of to what extent current IEG practice not only assesses the performance of individual projects in terms of their outcomes and sustainability, but also in terms of whether the Bank has systematically built on its experience in specific projects to help scale up their impact through support for expansion or replication in follow-up operations or through effective hand-off to the government or other partners. In fact, currently IEG does not explicitly and systematically consider scaling up in its project and program evaluations. For example, in a recent IEG evaluation of World Bank funded municipal development projects (MDPs) , IEG found that the Bank has supported multiple MDPs in many countries over the years, but the evaluation did not address the obvious question whether the Bank systematically planned for the project sequence or built on its experience from prior projects in subsequent operations. While most other evaluation offices like IEG do not consider scaling up, some (in particular those of the International Fund for Agricultural Development and the United Nations Development Program) have started doing so in recent years.

3. Drawing on the Experience of and Benchmarking Against Other Institutions: The self-evaluation report does a good job in benchmarking IEG performance in a number of respects against that of other multilateral institutions. In the main text of the report it states that “IEG plans to develop guidelines for approach papers to ensure greater quality, in particular in drawing on comparative information from other sources and benchmarking against other institutions.” This is a welcome intention, but it is inadequately motivated in the rest of the report and not reflected in the Executive Summary. The reality is that IEG, like most multilateral evaluation offices, so far has not systematically drawn on the evaluations and relevant experience of other aid agencies in its evaluations of World Bank performance. This has severely limited the learning impact of the evaluations.

4. Bank Internal Policies, Management Processes and Incentives: IEG evaluations traditionally do not focus on how the Bank’s internal policies, management and incentives affect the quality of Bank engagement in countries. Therefore evaluations cannot offer any insights into whether and how Bank-internal operating modalities contribute to results. Two recent exceptions are notable exceptions. First, the IEG evaluation of the Bank’s approach to harmonization with other donors and alignment with country priorities assesses the incentives for staff to support harmonization and alignment. The evaluation concludes that there are insufficient incentives, a finding disputed by management. Second, is the evaluation of the Bank’s internal matrix management arrangements, which is currently under way. The self-evaluation notes that Bank management tried to quash the matrix evaluation on the grounds that it did not fall under the mandate of IEG. This is an unfortunate argument, since an assessment of the institutional reasons for the Bank’s performance is an essential component of any meaningful evaluation of Bank-supported programs. While making a good case for the specific instance of the matrix evaluation, the self-evaluation report shies away from a more general statement in support of engaging IEG on issues of Bank-internal policies, management processes and incentives. It is notable that IFAD’s Independent Office of Evaluation appears to be more aggressive in this regard: It currently is carrying out a full evaluation of IFAD’s internal efficiency and previous evaluations (e.g., an evaluation of innovation and scaling up) did not shy away from assessing internal institutional dimensions.

5. World Bank Governance: The IEG self-evaluation is even more restrictive in how it interprets its mandate regarding the evaluation of the World Bank’s governance structures and processes (including its approach to members’ voice and vote, the functioning of its board of directors, the selection of its senior management, etc.). It considers these topics beyond IEG’s mandate. This is unfortunate, since the way the Bank’s governance evolves will substantially affect its long-term legitimacy, effectiveness and viability as an international financial institution. Since IEG reports to the Bank’s board of directors, and many of the governance issues involve questions of the board’s composition, role and functioning, there is a valid question of how effectively IEG could carry out such an evaluation. However, it is notable that the IMF’s Independent Evaluation Office, which similarly reports to the IMF board of directors, published a full evaluation of the IMF’s governance in 2008, which effectively addressed many of the right questions.

6. Synergies between World Bank, IFC and MIGA: The self-evaluation report points out that the recent internal reorganization of IEG aimed to assure more effective and consistent evaluations across the three member branches of the World Bank Group. This is welcome, but the report does not assess how past evaluations addressed the question of whether the World Bank, IFC and MIGA effectively capitalized on the potential synergies among the three organizations. The recent evaluation of the World Bank Group’s response to the global economic crisis of 2008/9 provided parallel assessments of each agency’s performance, but did not address whether they work together effectively in maximizing their synergies. The reality is that the three organizations have deeply engrained institutional cultures and generally go their own ways rather than closely coordinating their activities on the ground. Future evaluations should explicitly consider whether the three effectively cooperate or not. While the World Bank is unique in the way it has organizationally separated its private sector and guarantee operations, other aid organizations also have problems of a lack of cooperation, coordination and synergy among different units within the agency. Therefore, the same comment also applies to their evaluation approaches.

Conclusions

Self-evaluations are valuable tools for performance assessment and IEG is to be congratulated for carrying out and publishing such an evaluation of its own activities. As for all self-evaluations, it should be seen as an input to an independent external evaluation, a decision that, for now, has apparently been postponed by the Bank’s board of directors.

IEG’s self-evaluation has many strengths and provides an overall positive assessment of IEG’s work. However, it does reflect some important limitations of analysis and of certain gaps in approach and coverage, which an independent external review should consider explicitly, and which IEG’s management should address. Since many of these issues also likely apply to most of the other evaluation approaches by other evaluation offices, the lessons have relevance beyond IEG and the World Bank.

Key lessons include:

• An evaluation of evaluations should focus not only on process, but also on the substantive issues that the institution is grappling with.
• An evaluation of the effectiveness of evaluations should include a professional assessment of the quality of evaluation products.
• An evaluation of evaluations should assess:
  o How effectively impact evaluations are used;
  o How scaling up of successful interventions is treated;
  o How the experience of other comparable institutions is utilized;
  o Whether and how the internal policies, management practices and incentives of the institution are effectively assessed;
  o Whether and how the governance of the institution is evaluated; and
  o Whether and how internal coordination, cooperation and synergy among units within the organizations are assessed.

Evaluations play an essential role in the accountability and learning of international aid organizations. Hence it is critical that evaluations address the right issues and use appropriate techniques. If the lessons above were reflected in the evaluation practices of the aid institutions, this would represent a significant step forward in the quality, relevance and likely impact of evaluations.

Introduction

During 2006, the United States saw a considerable upswing in the number of new mortgage defaults and foreclosure filings. By 2007, that upswing had become a tidal wave. Today, national homeownership rates are falling, while more than a million American families have already lost their homes to foreclosure. Across the country, boarded houses are appearing on once stable blocks. Some of the hardest hit communities are in older industrial cities, particularly Midwestern cities such as Cleveland, Detroit, and Indianapolis.

Although most media attention has focused on the role of the federal government in stemming this crisis, states have the legal powers, financial resources, and political will to mitigate its impact. Some state governments have taken action, negotiating compacts with mortgage lenders, enacting state laws regulating mortgage lending, and creating so-called “rescue funds.” Governors such as Schwarzenegger in California, Strickland in Ohio, and Patrick in Massachusetts have taken the lead on this issue. State action so far, however, has just begun to address a still unfolding, multidimensional crisis. If the issue is to be addressed successfully and at least some of its damage mitigated, better designed, comprehensive strategies are needed.

This paper describes how state government can tackle both the immediate problems caused by the wave of mortgage foreclosures and prevent the same thing from happening again. After a short overview of the crisis and its effect on America’s towns and cities, the paper outlines options available to state government, and offers ten specific action steps, representing the most appropriate and potentially effective strategies available for coping with the varying dimensions of the problem.

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Introduction

Ohio has already taken important steps to address the state’s ongoing foreclosure crisis, yet the crisis continues, causing distress for thousands of families and individuals, and destabilizing cities, towns and neighborhoods across the state. Therefore, the state, its local governments and private stakeholders need to do still more to deal more effectively with the crisis and its impacts on the state’s housing stock, cities and neighborhoods.

What is often termed the “foreclosure crisis” is actually a multi-dimensional crisis, in which the collapse of the housing bubble, the devastation caused by the lax and often irresponsible credit practices that accompanied and perpetuated that bubble, the resulting freeze on commercial and consumer credit, and the worldwide recession are interwoven, and can only with great difficulty be untangled. In Ohio, those forces are further exacerbated by profound changes to the state’s historical economic underpinnings. Ohio cannot solve the crisis by itself, but it can significantly mitigate its impact on people, neighborhoods, and towns and cities. These mitigating efforts will also help preserve the value of homes and neighborhoods in the state, and place Ohio in a stronger position to benefit from the future economic recovery.

The paper begins with a short summary of current conditions and the actions the state has already taken to address the wave of foreclosures, followed by a discussion of areas for future action. This discussion will address mitigating both the individual and community impacts of foreclosure, but will give particular emphasis to the critical issue of softening the blow of foreclosure on communities, which up to now has been less of a focus for state action.

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In an era of fluid geopolitics and geoeconomics, challenges to the global order abound: from ever-changing terrorism, to massive refugee flows, a stubbornly sluggish world economy, and the specter of global pandemics. Against this backdrop, the question of whether leader summitry—either the G-7 or G-20 incarnations—can supply needed international governance is all the more relevant. This question is particularly significant for East Asia this year as Japan and China, two economic giants that are sometimes perceived as political rivals, respectively host the G-7 and G-20 summits. 

On April 18, the Center for East Asia Policy Studies and the Project on International Order and Strategy co-hosted a discussion on the continued relevancy and efficacy of the leader summit framework, Japan’s and China’s priorities as summit hosts, and whether these East Asian neighbors will hold parallel but completely separate summits or utilize these summits as an opportunity to cooperate on issues of mutual, and global, interest.

Join the conversation on Twitter using #G7G20Asia

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• Japan’s G-7 and China’s G-20 chairmanships: Bridges or stovepipes in leader summitry?

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Stock buybacks are an important explanation for both the concentration of income among the richest households and the disappearance of middle-class employment opportunities in the United States over the past three decades. Over this period, corporate resource-allocation at many, if not most, major U.S. business corporations has transitioned from “retain-and-reinvest” to “downsize-and-distribute,” says William Lazonick in a new paper.

Under retain-and-reinvest, the corporation retains earnings and reinvests them in the productive capabilities embodied in its labor force. Under downsize-and-distribute, the corporation lays off experienced, and often more expensive, workers, and distributes corporate cash to shareholders. Lazonick’s research suggests that, with its downsize-and-distribute resource-allocation regime, the “buyback corporation” is in large part responsible for a national economy characterized by income inequity, employment instability, and diminished innovative capability.

Lazonick also challenges many of the notions associated with maximizing shareholder value, an ideology that has come to dominate corporate America. Lazonick calls for a decrease, or even a ban, in stock buybacks so companies will be able to use these funds to finance capital expenditures but more importantly to attract, train, retain, and motivate its career employees. And some of the funds made available by a buyback ban can even flow to the government, he argues, as tax revenues for investments in infrastructure and human knowledge that can underpin the next generation of innovation.  

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In a new paper, William Galston and Elaine Kamarck argue that the laws and rules that shape corporate and investor behavior today must be changed. They argue that Wall Street today is trapped in an incentive system that results in delivering quarterly profits and earnings at the expense of long-term investment.

As Galston and Kamarck see it, there’s nothing wrong with paying investors handsome returns, and a vibrant stock market is something to strive for. But when the very few can move stock prices in the short term and simultaneously reap handsome rewards for themselves, not their companies, and when this cycle becomes standard operating procedure, crowding out investments that boost productivity and wage increases that boost consumption, the long-term consequences for the economy are debilitating.

Galston and Kamarck argue that a set of incentives has evolved that favors short-term gains over long-term growth. These damaging incentives include:

• The proliferation of stock buybacks and dividends
• The increase in non-cash compensation
• The fixation on quarterly earnings
• The rise of activist Investors

These micro-incentives are so powerful that once they became pervasive in the private sector, they have broad effects, Galston and Kamarck write. Taken together, they have contributed significantly to economy-wide problems such as: (1) Rising inequality, (2) A shrinking middle class, (3) An increasing wedge between productivity & compensation, (4) Less business investment, and (5) Excessive financialization of the U.S. economy.

So what should be done? Galston and Kamarck propose reining in both share repurchases and the use of stock awards and options to compensate managers as well as refocusing corporate reporting on the long term. To this end, these scholars recommend the following policy steps:

• Repeal SEC Rule 10-B-18 and the 25% exemption
• Improve corporate disclosure practices
• Strengthen sustainability standards in 10-K reporting
• Toughen executive compensation rules
• Reform the taxation of executive compensation

Galston and Kamarck state that the American economy would work better if public corporations behaved more like private and family-held firms—if they made long-term investments, retained and trained their workers, grew organically, and offered reasonable but not excessive compensation to their top managers, based on long-term performance rather than quarterly earnings. To make these significant changes happen, the incentives that shape the decisions of CEOs and board of directors must be restructured. Reining in stock buybacks, reducing short-term equity gains from compensation packages, and shifting managers’ focus toward long-term objectives, Galston and Kamarck argue, will help address the most significant challenges facing America’s workers and corporations.  

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Over the past several years, thousands of foreign fighters have traveled to Syria and Iraq on a scale unprecedented in modern history. While most foreign fighters remain engaged in combat, some have begun to return, posing a real, if sometimes exaggerated, security threat to home countries. In such situations, how should governments aim to respond? Are there policies that can defuse the security threats posed by returning fighters without alienating individuals and communities key to countering violent extremism?

Read "Returning foreign fighters: Criminalization or reintegration?"

Drawing on case studies from countries such as France, Denmark, and the United Kingdom, this Policy Briefing by Charles Lister points to the necessity of counter-terrorism measures, yet cautions against allowing these policies to translate into blanket criminalization of individuals or communities. On a basic level, policymakers will have to navigate between “hard” policies of criminal investigation and prosecution and more “liberal” policies that that aim to rehabilitate fighters and better reintegrate them into their home communities.

Lister concludes that countries should adopt a nuanced approach toward returning foreign fighters, relying on closer coordination between local authorities and community leaders, improved information sharing on the foreign-fighter phenomenon, and a better understanding of the dynamics of recruitment and radicalization.

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