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Change in challenging contexts: How does it happen?

How does genuine institutional change take place and how can it be supported? This paper tries to understand how reform takes place in practice in challenging environments, the different roles actors play in the reform process, and the role external actors can play in the change process. In fragile states and other challenging situations, the establishment of core functions relating to public financial management (PFM) and service delivery is seen as a critical part of state building and resilience, and is central to most development partnerships.

This is primarily a lesson-learning piece. It draws from the experience of the ODI Budget Strengthening  Initiative’s (BSI’s) work in South Sudan, Liberia, the Democratic Republic of the Congo and Uganda and with the g7+ group of fragile states. BSI was set up in 2010 as an innovative and experimental programme to support fragile and conflict-affected states to build more effective, transparent and accountable budget systems. This paper sits alongside a series of insider accounts of change written with our partners in government, which are intended to promote lesson learning in how institutional change can take place. They draw from experience of BSI advisers and their counterparts working within ministries of finance and sector ministries.

Is good practice problem-driven?
Reformers in developing countries and external actors have, for decades, tried to strengthen institutions, their capacity, systems and processes. However, progress has been slow and uneven (Pritchett et al., 2010). Projectbased aid, institutional support and conditionality associated with structural adjustment in the 1990s was seen as ineffective in levering change. In response, aid shifted towards the use of government systems in the 2000s. Approaches to technical assistance and capacity development evolved in a way which emphasised two aspects: first, a programmatic approach, a logical sequencing of reforms drawing from good practice and coordinated support; and second, greater awareness of the context and a resultant emphasis on the importance of establishing ownership, identifying drivers of change and tailoring reforms to a country’s situation (PEFA Steering Committee, 2004; Brooke, 2003; European Commission, 2010). This represented a genuine effort to improve the appropriateness, coherence and uptake of reform. In the early 2010s, some observers noted that while the ‘form’ of institutions has changed significantly in recent times, often as a result of external support delivered in line with the principles which emerged in 2000s, the underlying ‘function’ of those institutions has not (Pritchett et al., 2010). In other words, while institutional capacity, systems and processes have been developed, commensurate progress in the behaviour of individuals and institutions, and improvements in public-sector outcomes, have often not followed. These observers, drawing from thinking from the 1950s (Lindblom, 1959), advocate an iterative, ‘problem-based’ approach to institutional change that is ‘politically smart’, escapes ‘capability traps’ and addresses ‘collective action problems’ which underlie the lack of real progress (Andrews et al., 2012; Booth and Unsworth, 2014). Furthermore, Booth (2013) points to the potential of ‘arm’s-length organisations’ as a means of supporting such change processes.

This paper tries to understand where and why the divergence between form and function might arise, and the nature of change processes which have real impact.