systems approaches to policy for poverty alleviation
TRANSCRIPT
© Strategy Dynamics Ltd. 2014. All rights reserved www.strategydynamics.com
Systems Approaches to Policy for Poverty Alleviation: Example of System Dynamics Modeling in Aid for Trade
ESPA Complexity Workshop: London, July 2014
Kim Warren
OUTLINE
Project background and purpose
System dynamics’ contribution to challenging issues
The export-trade “system”
Generic structure of a trade border (+ working models)
Issues, challenges and limitations
Background: A DFID-funded research project on complex systems tools
Seek new ways to understand the problems and issues DFID works on
Clarify the limitations of existing tools
Exploring the potential of new tools suited to complex, dynamic realities (focusing on wealth creation)
Examining implications for DFID’s current business models
… led by Ben Ramalingam, ODI and author of Aid on the edge of Chaos, http://aidontheedge.info/ )
The 4 pilot projects on complex systems tools …
System dynamics of Aid for Trade (AfT) in Nigeria … for the analysis, design, planning, managing, monitoring and evaluation of AfT initiatives (specifically for smaller-scale export activity of direct benefit to those in poverty)
Network analysis techniques with the Girl Hub project in N. Nigeria … for informing stakeholder-based theories of change and strategies for the empowerment of girls
‘Complexity-informed theory of change’ for private sector development (PSD) in the Democratic Republic of Congo (subsequently, a system dynamics analysis has been performed for PSD in 4 large sectors of the Nepal economy)
Systems thinking and mapping of DFID’s End-to-End Programme Management
Conclusions from the pilot complex-systems projects …
Legitimise the trial of new approaches to understand the complex Aid problems
Establish a rich picture of problems from the start … a view of the systems, the network, the behaviours and the dynamics around a given issue
Recognise the whole ‘aid chain’ and ensure that ex-ante design and analysis joins up with downstream implementation and evaluation
Network with others – scientists, private sector and the wider public sector where the necessary capabilities are established
Encourage ‘experiment and adapt’ in addition to ‘plan and control’
The “logical framework” for evaluation and monitoring*
Inputs
Financial, human and material
resources
Activities
Task undertaken to transform inputs into
outputs
Outputs
Products/services produced or
delivered
Outcomes
Behavioural changes: intended + unintended
positive + negative
Impacts
Long-term, widespread
improvement in society
* DFID Working Paper 26, Feb-2011, “Sharing the Benefits of Trade: DFID’s Aid for Trade Portfolio - Monitoring and Evaluation Framework”, SAANA Consulting
Problems: Cause-effect relationships are unclear
… due to the system-nature of export trading
Outcomes reflect how the system responds to the Outputs arising from Inputs + Activities
The Trade system Inputs Activities Outputs
Access to border [starting to trade
is easier]
Build roads
Outcomes
more people trade
Impacts
less poverty
Feedback within the trade system and from Outcomes
people trade
delays at borders
people start trading and
others stop
Impacts Outcomes The Trade system Inputs Activities Outputs
people trade
visible trade opportunities
people start trading
For example:
Critical factors accumulate over very long periods … big delays from action to results, and consequences continue for many years
There is interdependence in the system … multiple choices need to be right, on multiple issues
Many feedback mechanisms exist … changes accelerate (good + bad changes) – or improvements stall or back-fire
Numerous thresholds exist … good changes seem to do nothing until a tipping point is reached – or we get bad surprises!
Problematic “system” features and consequences
System dynamics* deals explicitly and quantitatively with all these mechanisms (also agent-based and discrete-event modelling, suited to certain problem-types)
* This style of system dynamics modelling is highly evidence-based and quantitative, not to be confused with other styles of system dynamics work, such as qualitative feedback mapping.
Inter-related features of real-world cases …
Careful not to “over-complexify” the challenges
we face – simple systems explain observed behaviour
System dynamics contribution
SD trades off detailed insight for simplicity, speed and scope
visible benefits to traders
System dynamics (1) “causal-loop diagramming” of feedback
time
now
Trade volume
number of people trading R
“Reinforcing” feedback drives self-sustaining growth … (or decline)
B
“Balancing” feedback stifles growth … (or slows decline)
border delays
Capacity of border crossing
Km. of roads to the border
This style of work offers insight and shared understanding, but not adequate for designing and managing situations
Outcomes
years
volume of trade now
‘000
tons
/day
Outputs
years
delays at ports and borders now
hour
s
Impacts
years
mill
ions
numbers in poverty
now
bad
bad bad good
good good
There is a history … the situation could get worse
… and will take time to fix
The start-point: time-charts of system performance
These are our overall aims, but trade occurs through each individual border crossing and port.
Other factors affect impacts, so isolating this system’s contribution is tough
Over-land trade Sea-borne trade Air-borne trade Total trade = sum of all trade through each mode
Disaggregating the trade system
The trade system Inputs Activities Outputs Outcomes Impacts
… and total trade through each mode = sum of trade
through all crossings
Large land borders Large land
borders Small land borders
Small ports
Large land borders
Large ports Large airports
Large land borders
Large ports Large airports
Each land border
Each port Each airport
System dynamics (2) … building a working model of reality. Example: Export trading through a land-border
years
now bad
good
trading volume
A desired Outcome
traders using the crossing
years
A Resource causing the Outcome
trading frequency
Another factor causing the Outcome “If we know A and B
we can estimate C”
The behaviour of Resources (“accumulating stocks”)
$50 250
people starting to trade per month
“Flow-rates” drive the resources … and therefore how performance changes over time
… so flow-rates are the items we need to control
A “flow-rate” – how fast the stock is
increasing or being lost
traders using the crossing
3,000 last month
3,100 this month
trading volume and value
$50 150
people ceasing trading per month
A “resource” or “stock”
“If we know A (traders) we can work out B (trade volume)”
$50 250
people starting to trade per month
1. new people must start trading faster …
Accumulation (and depletion) continue over time
traders using the crossing
years
now
bad
good
To grow the number of people engaged in trade
faster …
$50 150
people stop trading per month
… and/or 2. people must cease trading more slowly.
If both flows change slowly, little progress results. (If both flows change slowly, little progress is made).
Growing trade participation
$50
net increase in traders per month
… so this must be higher
years
now bad
good
traders using the crossing trading volume
trading frequency
years
If this is to grow
… then this must grow
… so why do people make this choice?
… and why do people make this choice?
This is the critical item – another desired Outcome (and is the net of gains minus losses)
What causes traders to start or stop?
$50
net increase in traders per month
years
now bad
good
traders using the crossing trading volume
trading frequency
years
income per trader
“I start trading if I see others make money”
border delays: hours
“I stop trading if I can’t cross the border”
corruption tariffs
dela
y
“I trade less if tariffs and corruption take my money,
or delays cut my income”
attempted crossings per day
maximum crossings per day
Border delays happen if more people want to cross
than can be handled
$50
road capacity and reach
More roads enable more traders to reach
the crossing
Interdependence on other existing resources
$50
net increase in traders per month
years
now bad
good
traders using the crossing trading volume
trading frequency
years
income per trader
border delays: hours
corruption tariffs
dela
y
attempted crossings per day
maximum crossings per day
$50
permitted products
More permitted products make opportunities for
more traders
Interdependence causes feedback
$50
net increase in traders per month
years
now bad
good
traders using the crossing trading volume
trading frequency
years
income per trader
border delays: hours
corruption tariffs
dela
y
attempted crossings per day
maximum crossings per day
$50
permitted products
$50
road capacity and reach
“Reinforcing” feedback drives self-sustaining growth ... more people trading
more start trading … (or decline)
R
B
“Balancing” feedback stifles growth ... more people trading more
delays people stop trading
Supply-side resources grow capacity
$50
net increase in traders per month
years
now bad
good
traders using the crossing trading volume
trading frequency
years
income per trader
attempted crossings per day
maximum crossings per day
border delays: hours
$50
permitted products
corruption tariffs
$50
road capacity and reach
dela
y
process efficiency
staff skills
$50
$50
capacity also needs more intangible resources
$50
$50
border buildings & equipment
border staff
capacity needs more physical and human resources
Supply-side resources grow capacity
$50
net increase in traders per month
years
now bad
good
traders using the crossing trading volume
trading frequency
years
income per trader
attempted crossings per day
maximum crossings per day
border delays: hours
$50
permitted products
corruption tariffs
$50
road capacity and reach
dela
y
process efficiency
staff skills
$50
$50
$50
$50
border buildings & equipment
border staff
A generic theory of how export trading actually works
The same in London, Shanghai or anywhere else … an “engineering” theory of the system (incorporating economics)
Action options to grow the system and Outcomes
build roads
process efficiency
years
now bad
good trading volume
trading frequency
years
income per trader
attempted crossings per day
maximum crossings per day
border delays: hours
$50
permitted products
corruption tariffs
$50
net increase in traders per month
traders using the crossing
dela
y
staff skills
$50
$50
$50
$50
border buildings & equipment
border staff
$50
road capacity and reach km./month of
new roads
permit more products
add and develop crossings
hire officials
train officials
streamline documents & processes
officials’ pay and discipline
set best tariff rates
educate traders
BUT which, when, how much … ?
Part of a working model on attracting traders …
More permitted products make opportunities for more traders
More roads enable more traders to reach
the crossing
The working model is at www.sdl.re/DFIDtradeM1 (latest-version browser required)
How to use dynamic mapping/modeling? … 3 options:
1. Manual model only ‘sketch’ estimated scale and time-path of Inputs, Outputs and Outcomes implicitly estimating the interdependencies plot actual results against Plan manually each period adjust projects and spend+effort in light of progress
2. Manual model, in software enter numerical estimates for Inputs, Outputs and Outcomes include simple calculations to save effort enter actual results to compare with Plan adjust projects and spend+effort in light of progress
3. Functioning software model enter numerical estimates for Inputs, Outputs and Outcomes … and compute expected relationships enter actual results to compare with Plan adjust the model to evaluate changes to projects and spend+effort
Issues, challenges, and limitations
Lack of data: start with well-informed estimates - use experienced people - design simple data-collection and adjust the model as we learn
How to specify relationships in the models: most are arithmetical - involve experienced parties - check performance against reality
External factors: trading also reflects market conditions, enterprise-development and producer-trader relationships
Where to stop (model boundaries)? … when enough confidence has been gained (recognising the additional factors above)
Other relevant system dynamics work …
Water resources and usage
Spread and containment of disease
Risk and resilience of infrastructure
Private sector development
…
Example from another domain: the animalhuman infection system (“zoonosis”)
… a working model of this system is at http://sdl.re/OneHealthDiseaseModel
Susceptible people '000s
weeks
newly infected by people '000s/week
Infected/uninfected between humans
contacts/week
1. The disease is initially unknown among humans
Infected people '000s
weeks
recovery rate '000s/week
Resistant people '000s
time
5. One mutation makes the disease infectious to humans
6. Increasing humananimal contact leads the disease to jump to humans
7. The disease can now circulate among humans
2. So contact with animals initially causes no infection
Animalhuman contacts/week
people newly infected by animals'000s/week
Susceptible animals '000s
weeks
newly infected '000s/week
Infected/uninfected between animals
contacts/week
Infected animals '000s
weeks
recovery rate '000s/week
Resistant animals '000s
time
3. … but the disease spreads among animals
Mutations of the disease among animals
4. … and at some time the disease mutates
7. Further mutations make animals and humans repeatedly Susceptible to new variants
Critical … building shared understanding
Engaging games Joint planning
Training Just do it!
See www.simudyne.com/nigeria
Learn the value of the approach
Questions? Comments to [email protected]
What is the best trade value you can build, when you can only focus on limited initiatives
What is the best trade value you can build, when you can only focus on limited initiatives
The bigger challenge: many projects: many agencies (Nigeria change projects only, policy studies + institutional support are additional)
Government Implement systems for “single widow” facility Bill to update existing Customs Management Act Implement 48-hour clearance policy Implement 24/7 operation at the port Strengthen NCS manpower to achieve items above Reduce agencies at the port from 16 to 6 Increase professionalism of NCS Increase focus on enabling trade v. collecting revenue
US AID Customs modernisation Agricultural growth along Lagos-Kano-Jibiya corridor Cut hold time at Lagos ports and Seme Border post Implement the ECOWAS Common External Tariff Business service provision to exporting enterprises
European Union Joint Nigeria : Benin border post (Seme-Krake)
DFID Okerete joint border post trial – bridge, roads, market Advice on professionalising Customs (Crown Agents)
GIZ Increase NCS training capacity Joint cross-border controls with neighbour countries Training for Ministry of Trade & Investment
Regional Facilitation initiatives Transport facilitation (joint crossings, corridors, single windows, border procedures …) Trade facilitation initiatives (various) Abidjan-Lagos Trade and Transport facilitation project Authorised economic operator program ECOWAS Regional Transit System Borderless Initiative
Source: Nigeria Trade Facilitation Review, SAANA Consulting.
How to understand the interactions and consequences of all these? How to coordinate for best overall impact?
Initiatives’ impact, by mode, by location (illustrative)
All land borders
Crossing 1
Crossing 2
Crossing 3
Crossing … N All ports Port 1 Port 2 Port 3 Port
… N All airports Airport 1
Airport … N
Enablers Add crossings/ports X X X X X X X X
X no impact : some impact : big impact
Create a crossing or port at specific locations Create a crossing or port at specific locations
All land borders
Crossing 1
Crossing 2
Crossing 3
Crossing … N All ports Port 1 Port 2 Port 3 Port
… N All airports Airport 1
Airport … N
Enablers Add crossings/ports X X X X X X X X
Initiatives’ impact, by mode, by location (illustrative)
All land borders
Crossing 1
Crossing 2
Crossing 3
Crossing … N All ports Port 1 Port 2 Port 3 Port
… N All airports Airport 1
Airport … N
Enablers Add crossings/ports X X X X X X X X
Build roads X X X X
Train staff
Create markets X X X X X X X X
Grow access to finance
Train staff for all locations Train staff for all locations
Initiatives’ impact, by mode, by location (illustrative)
All land borders
Crossing 1
Crossing 2
Crossing 3
Crossing … N All ports Port 1 Port 2 Port 3 Port
… N All airports Airport 1
Airport … N
Enablers Add crossings/ports X X X X X X X X
Build roads X X X X
Train staff
Create markets X X X X X X X X
Grow access to finance
Disablers Cut banned products X X X X X
Cut check-points X X X X X X
Reduce agencies X X
Fewer documents
Cut corruption X X
All land borders
Crossing 1
Crossing 2
Crossing 3
Crossing … N All ports Port 1 Port 2 Port 3 Port
… N All airports Airport 1
Airport … N
Enablers Add crossings/ports X X X X X X X X
Build roads X X X X
Train staff
Create markets X X X X X X X X
Grow access to finance
Same approach for trade Disablers
Some initiatives have broad impact
All land borders
Crossing 1
Crossing 2
Crossing 3
Crossing … All ports Port 1 Port 2 Port 3 Port … All airports Airport
1 Airport
…
Enablers Add crossings/ports X X X X X X X X
Build roads X X X X
Train staff
Create markets X X X X X X X X
Grow access to finance
Disablers Cut banned products X X X X X
Cut check-points X X X X X X
Reduce agencies X X
Fewer documents
Cut corruption X X
Some initiatives have broad impact
Some initiatives have differential local impact
All land borders
Crossing 1
Crossing 2
Crossing 3
Crossing … All ports Port 1 Port 2 Port 3 Port … All airports Airport
1 Airport
…
Enablers Add crossings/ports X X X X X X X X
Build roads X X X X
Train staff
Create markets X X X X X X X X
Grow access to finance
Disablers Cut banned products X X X X X
Cut check-points X X X X X X
Reduce agencies X X
Fewer documents
Cut corruption X X
Some initiatives have different local impacts
Some project are local, and need multiple initiatives
All land borders
Crossing 1
Crossing 2
Crossing 3
Crossing … All ports Port 1 Port 2 Port 3 Port … All airports Airport
1 Airport
…
Enablers Add crossings/ports X X X X X X X X
Build roads X X X X
Train staff
Create markets X X X X X X X X
Grow access to finance
Disablers Cut banned products X X X X X
Cut check-points X X X X X X
Reduce agencies X X
Fewer documents
Cut corruption X X
Some projects are location-specific (e.g. Okarete)