Monday, May 31, 2010

Sustainability ... an inadequate idea!

Dear Colleagues

What is sustainability ... is it really something that should be a top talking point, or is there something better that would help clarify what is important in socio-economic performance.

Clearly there are some aspects of society that are not "sustainable" especially in the long run ... but as Keynes is reported to have said "In the long run, we are dead!" People are just not going to get serious about things that are only going to become critical in the long run, when this generation of decision makers are long dead.

I argue that the discussion about "sustainable" should be replaced by or at least supplemented with something that talks more about value analysis ... vanalysis ... associated with the item or the process ... and the value efficiency ... vefficiency!

When only money profit is driving decision making to the exclusion of all else, the decisions are unlikely to be those that are favorable to society as a whole ... for this it is critical that there is value analysis ... vanalysis, as well. There should be accountability not only for decision makers to achieve profit, but for decision makers to show value adding from vanalysis reporting.

Value analysis ... vanalysis ... includes some of the ideas of sustainability ... but it is value efficiency ... vefficiency ... more than sustainability that is likely to facilitate the behavior changes that are needed.

Are soft drink companies "green" and sustainable or not ... where do these big global companies that manufacture and market soft drinks rank in sustainability and in vefficiency. How do these companies compare to municipal water supply organizations? It is impressive how profit has motivated the soft drink manufacturers to get distribution into even the most remote rural areas ... and conversely how many places still do not have good potable municipal water supplies. By comparing the results of vanalysis for soft drinks and for potable municipal water it is clear that allocation of resources needs to change.

There needs to be a comprehensive system of value metrics so that people ... civil society ... are able to differentiate between the what matters and what does not ... and be able to tell the difference between policy options. With market economics we have chosen soft drinks over improved potable water supply systems and sanitation because soft drinks make profit and these other initiatives have not been organized to be profitable ... and I would argue this is the right decision. But the fact of these organizations being in the not for profit sector does not mean that they are not valuable ... and it is clear that the metrics of value should be being reported and taken into consideration when decisions are being made about the allocation of resources.

In the distant past the health of the population of London was at risk from cholera ... and when the reason for cholera was identified, the policy decision was made to build a storm sewer system that would ensure that no sewage ever flowed into the River Thames. This initiative solved the cholera problem in London ... and has worked for more than 150 years. A better solution arguably than shipping in bottled water from a soft drinks company ... not profitable but very valuable. I consider this to be a great example of value based decision making ... but this sort of analysis is not being done in the modern capital markets because the key value metrics are not in play.

Sustainable concrete ... not a particularly clear idea! But there is concrete that is vefficient and concrete that is less vefficient. Vefficiency is about using less resources to produce the concrete ... and for the concrete to last longer ... but any concrete uses resources, and anything that uses resources is, at the limit, not sustainable.

Comments are welcome

Peter Burgess

Is Development Aid Nonsense? ... a debate!

Dear Colleagues

I wish I was invited to speak on this subject ... and with this group. It promises to be interesting. What a great subject for a debate: "Is Development Aid Nonsense?"

The debate is going to take place in Amsterdam, Netherlands on June 4th, and has a Dutch centric starting point but this resonates:
Opinions amongst political parties vary depending on their political orientation but no one seems to be asking the countries in the South about their needs.
Very little that has been done in the name of development over the past 40 years has had any meaningful input from the theoretical beneficiaries ... and it is quite amazing that even today the structure of the industry is so little changed from 30 years ago.

My position is that development aid can be either very valuable or a complete waste of money ... it depends on the people involved and the decisions made. There is no single answer to this question. With good people and good decisions, there is, in my view, a huge return from development aid. But almost all the time the people who make decisions serve themselves and make their decision with this in mind, and development aid ends up a waste of money.

Haiti is a good example. It had to happen. The media ... as in the New York Times ... is now reporting that the situation in Haiti is not good. The article is titled "Rubble of a Broken City Strains Haitians’ Patience" written by Damien Cave

Nothing in this article comes as a surprise ... but what is infuriating is that most everything talked about should have been handled. There have been hundreds of efforts to do many of the things that are needed ... but the "system" put in place has served to make it very difficult for good ideas to get incorporated into the relief and rebuilding process. This is the way a dysfunctional system always operates!

Development aid does not work in large part because the prevailing system of government does not work. It is appalling how many people on the planet are living under governments that are dysfunctional ... and very little that can be done about it using the established norms of international relations. Big institutions like the United Nations exist ... but it is not entirely clear how effective the UN is at making much of a difference. Something more effective is needed ... and I would argue that something effective is likely to be based on data more than being based on structure.

In the NYT article about Haiti there is reference to the cost and time required to establish a business in Haiti ... this is no accident but the "rule of law" being used to make it very difficult for new business to be established. This is a very practical little example ... but government is one of the big constraints on success ... and development aid has been largely responsible for a lot of bad government staying funded.

This is the Memorial Day weekend in the United States ... a time to remember the people who have fought for Freedom and Liberty. It saddens me that so much of the world's population does not have benefit from their sacrifice!

Peter Burgess
4 June: Is Development Aid Nonsense? (Amsterdam)
Andrea Sturkenboom
Mon, May 31, 2010 at 2:27 PM
Is Development Aid Nonsense?
Organised by the Transnational Institute (TNI)
DATE: Friday, 4 June 2010
TIME: 20:00 – 22:00hrs
VENUE: Salon, de Balie, Kleine-Gartmanplantsoen 10, 1017 RR Amsterdam
Prof Jan Nederveen Pieterse (Chair), contributor to WRR reports and studies on the future of Dutch development cooperation; Professor of global studies and sociology at the University of California, Santa Barbara
Maarten Brouwer (NL), Ambassador for development cooperation, Ministry of Foreign Affairs, Netherlands
Dot Keet (South Africa), Alternative Information & Development Centre, Cape Town; key co-ordinator of the continent-wide Africa Trade Network (ATN)
Praful Bidwai (India), Indian climate specialist, former senior editor of the Times of India, author of “From What Now to What Next: Reflections on three decades of international politics and development” (Dag Hammarskjöld Foundation)
Marcos Arruda (Brazil), Director of Políticas Alternativas Para o Cone Sul (PACS), active member of the Brazilian Network for the Integration of the Peoples working on issues related to NAFTA, Mercosur and the World Trade Organisation.

Debate about the future of Dutch development cooperation is again picking up pace ahead of the general elections in June. Opinions amongst political parties vary depending on their political orientation but no one seems to be asking the countries in the South about their needs.

The Transnational Institute is bringing Southern voices into the debate. A panel from some of the rising countries of the South will discuss how Dutch aid could usefully contribute to more sustainable development, in particular building civil society in the south as the means of addressing structural poverty.

The session will be chaired by Professor Jan Nederveen Pieterse, contributor to WRR reports and studies on the future of Dutch development cooperation. He is author of 15 books and specialist in development studies and cultural studies and globalisation.

The panelists will be available for interviews on 4 June. To arrange an interview or for more
information, please contact or +31 65 491 8960

The Transnational Institute (TNI) is an international network of activist-scholars committed to critical analyses of the global problems such as militarism and conflict, poverty and marginalisation, social injustice and environmental degradation.

Transnational Institute
P.O. Box 14656
1001 LD Amsterdam
The Netherlands
tel +31 20 662 6608
fax +31 20 675 7176

Gotcha ... a big part of modern business strategy

Dear Colleagues

The idea of "buyer beware" was one of the first things I remember from my childhood ... and I remember all sorts of little stories about how the business seller tricked the consumer. One memory is about the upcoming annual post Christmas "sale". My mother saw something we needed but decided that she would wait until the "sale". When she got to the "sale" she found the same item now on "sale" at a price that was higher than it had been in the regular course of business. The "reduced from" part of the tag was pure fiction.

I have watched with interest over the years the way similar looking packages contain less and less actual product. It is a long time since a "One pound" package of coffee actually contained one pound or 16 ounces ... now it is likely to contain something more like 10.5 ounces! It is a long time since a half pound bar of chocolate was 8 ounces ... now something that looks somewhat similar contains 6 ounces if you are lucky and maybe just 5.5 ounces. One big baking company changed the size of its loaf of bread from 24 ounces to 16 ounces announcing new price new size ... but price per unit of weight went up in the process.

The "gotcha" idea is everywhere. I am a member of AAA (the American Automobile Association) which provides its members with free service when there is some sort of breakdown. The basic service is excellent, up to a point ... but the "gotcha" element is in full play. Their roadside service is provided by garages ... automobile service centers ... that know every trick in the book to convert the roadside service into a high revenue business lead. I have recently been subjected to this abuse and what should have been a "free" jump start to get me mobile again turned into a chain of misinformation that nearly landed me with a towing and repair bill approaching $1,000. The assumption that the customer is a total dummy works most of the time ... and it is a very profitable business model. The fiasco cost me a lot of time and aggravation, which in itself is a consumption of value!

The sub-prime mortgage industry and the boom in housing construction was a "gotcha" business. There were many parts of the value chain that were able to make good profits as long as the "reality" of the business was hidden from view. A lot of people including Main Street bankers, real estate agents, appraisers, attorneys, builders, sub-contractors all made money profit ... but in due course the music stopped and the mess had to be cleaned up. The cleaner of last resort is the "government" which is shorthand for the general public and taxpayers who end up with the bill! A host of people made a lot of money out of the sub-prime fiasco ... and all those that tried to "whistle blow" were themselves blown away!

There is a "gotcha" element in all sorts of pricing programs. The printer ink industry is a great gotcha game. Buy a printer for almost no money ... and regret it as long as you use the printer and have to buy exorbitantly expensive ink.

The mobile phone pricing has a lot of "gotcha" ... the contract terms are driven not only by what you think you have agreed to, but also all the small print that is carried along with the highlighted good part of the deal. The demographics of modern mobile phone users is perfect for "gotcha" billing, since many of the users get their bills paid by parents who are intimidated by their children and corporate contracts and legalese!

The medical sector is also into the "gotcha" business model. Maybe it is the most egregious of all the "gotcha" business models. A loved one is sick ... and relatives take the sick person to the hospital. The question is posed "What to you want us to do?" and the only possible answer is "Everything". This is "gotcha" at its best! The relatives are answering in the right way ... but they are usually neither lawyers nor health professionals. By doing what is right ... the relatives are likely to be on the hook for a whole lot of costs that may or may not be justified ... but who is to ever know! I went through this a long time ago at a hospital in Trenton, New Jersey with my visiting Father-in-Law. It was a wake up call ... just one in a series of "gotcha" events throughout my career!

There is "gotcha" in the charity sector. Sad stories about poverty and children are used to mobilize donations ... but sadly the money donated never seems to be linked to much progress out of poverty and much reduction in the number of children suffering. There are good stories about success ... but not all the money donated is going to do much of substance. As things now stand with lack of accounting and accountability, nobody will ever really know how much of these donated funds is merely "gotcha" at its worst.

There is "gotcha" all over the relief and development industry. Because there is so little rigor in the accounting and no accountability it is easy to call something one thing, and have it actually behave in a totally different way. At one time agricultural cooperatives were a fashionable modality within agricultural projects funded by the World Bank ... but looking at the accounting in these cooperatives it was able to see how they actually functioned as vehicles to divert funds to powerful people and their business interests. It was "gotcha" at its best ... because while the accounting showed the reality very clearly, all the decision makers associated with the project wanted success, and having the cooperatives exposed as a fraud would be detrimental to all these people's reputation and career. Not surprisingly, the accounting was ignored ... the responsible World Bank staff moved on with their career track record unblemished! Government official in charge of the project funds continued with their rip-off as if nothing had happened. My consulting team never got paid ... the Government would not sign off on the work we had done ... the World Bank would not pay because the Government had not signed off! (See note below)

The "gotcha" economy is unhealthy ... even though there are profits being made, the slow build-up of anger about how business is behaving is going to produce backlash, and it could be vicious. People will put up with a lot ... but at some point people snap. The fact of several decades of bigger profits and bigger fortunes while there is also a bigger pool of people who are struggling to make ends meet ... or just simply now failing to make ends meet. I have never liked the "gotcha" business model ... but it is only recently that I realized how pervasive it is, and how damaging to society.

Peter Burgess

[Note ... In some ways I had the last laugh. Two years after this experience the World Bank realized that they had been duped on almost all their projects in this country. This country became one of only two countries in the World where the World Bank withdrew its relationship.]

Sunday, May 30, 2010

Haiti ... American Red Cross ... and how to show how well they are doing ... or not!

Dear Colleagues

In a few days I will be having a meeting with the American Red Cross (ARC) in Washington DC. The purpose of the meeting is for me to share the basic concepts of Community Analytics (CA) with some of the ARC staff ... and for me to learn from them what issues they are faced with in connection with their work in Haiti.

Clearly the news stories about relief and development progress in Haiti are becoming more and more negative ... but this may not be the whole story. Certainly there is plenty of evidence that the situation is not perfect ... but whether or not the work done has been not half good or not half bad (like "Is the glass half full or the glass half empty?") is a question which is difficult to answer. The following from the Miami Herald at the end of April is an example of negative questioning:
Scrutiny of Red Cross Effort Grows
Wednesday, 28 April 2010 15:28

Frances Robles reports on the American Red Cross in Haiti for the Miami Herald, noting the aid organization is coming under increasing pressure to explain how they are spending the $400 million in donations for Haiti. Robles writes:
But after consuming $106 million in the first 60 days, the Red Cross in the past month has tapped just $5 million more and has come under fire for what critics call anemic spending.
Other aid groups, members of Congress, bloggers and even a former board member are among the growing chorus asking what the Red Cross is doing with such a massive amount of money raised in such a short time.

The American Red Cross plans on spending about half of their donations this year, and the rest over a 3-5 year period, reports Robles. The former board member, Victoria Cummock, had some particularly harsh words for the organization, saying, "That's not disaster relief, that's long-term recovery, and that's not the Red Cross' mission and not the donor intent either."

Robles reports that Cummock, after asking about the Red Cross' relief efforts in Haiti, gave $25,000 to Project Medishare and UNICEF instead.

The three-month report released by the American Red Cross earlier this month raises more questions. According to their own numbers, the Red Cross network had built just 200 latrines in the previous month. Since along with shelter, sanitation provision is a top priority, this seems like a low number. USAID in their most recent update notes that out of a total of 15,300 latrines, just 8,727 have been built. Previous plans had been to build 11,000 by April 15.

The American Red Cross' three-month report also states the organization has distributed relief items to the same number of people (400,000 people) as in the two-month report. Does this mean that in one whole month, the Red Cross did not supply relief items to anyone new?

The bigger question underscored by the Herald article, however, is this, also from the three-month report: "Of the more than $400 million raised to date, the American Red Cross expects to spend approximately $200 million to meet the survivors’ immediate needs — mostly in the first 12 months following the earthquake. The remainder of the funds raised, now a bit more than $200 million to date, will be allocated for long-term recovery."

Why doesn't the Red Cross ramp up spending now to do what is necessary to avert disaster, with the current rainy season and the coming hurricane season?

Robles also notes that the Red Cross had been criticized by Congresswoman Debbie Wasserman-Schultz. In response to the representative's comments, the American Red Cross released a statement, which read, in part:
The results of our efforts are evident in many areas around Haiti. For example, the American Red Cross has provided 111,000 tarps, 4,400 tents, 29,000 shelter kits and 248,000 blankets.
It is unclear, however, if this is an accurate representation of the organization's efforts. The statement was given on April 8, however at the time the Shelter Cluster was reporting that the International Federation of the Red Cross network had only distributed 72,654 tarps.

Now, more than 100 days after the earthquake, relief efforts may have improved, however for many the situation has not. Deborah Sontag of the New York Times reported today on the conditions on Avenue Poupelard, writing:
Avenue Poupelard provides a less encouraging picture of the reach of aid, services and information than that found in official situation reports. Tucked into encampments too small to have attracted the nongovernmental groups operating in the big tent cities, many on Avenue Poupelard increasingly feel that they are on their own.
Asked if her situation had improved since immediately after the earthquake, Ms. Joseph paused and said,
“I guess it smells better with the bodies gone.” She and others on the street are still looking for sturdy tarpaulins or tents and wondering how to secure a foothold in the new temporary relocation sites, like the one north of this city in Corail Cesse Lesse, to which thousands from the camp at the Pétionville country club were recently moved.

“I’d love one of those places with latrines,” Ms. Joseph said. “The hole we dug for our toilet here is filthy and sick, and now we go inside broken-down houses to relieve ourselves.”
Reports such as this one are hard to reconcile with the Shelter Cluster's report from April 26, which says that 99.6 percent of those in need have received shelter materials. One problem may be with the shelter material itself though. The most recent report from OCHA states that:
constant rain over the past few days has revealed that some tents are not waterproof, requiring additional plastic sheeting.
In addition, rope has only reached 37 percent of those in need and took kits only 11 percent. These inputs are key to ensuring a sturdy and waterproof shelter. OCHA noted on April 16 that the lack of rope and fixings, "remains a vital gap in the response", and that "Most constructed emergency shelters will therefore require strengthening prior to the rainy season."
My impression of the Haiti emergency response is that the rescue and relief up to now has been quite well done considering a lot of the constraints that had to be overcome ... but within the overall program an awful lot has fallen through the cracks, and the more time passes, the more it seems that the cracks are taking over.

The are some reasons for this ... but the data to understand the performance of the overall program either do not exist or are being kept secret and away from public scrutiny.

The UN Office for the Coordination of Humanitarian Assistance (OCHA) has introduced a "cluster" system to coordinate day to day activities in Haiti ... and this seems to be better than the system used in years past where a UN agency would act as the lead agency for each sector. In the old system many key activities like for example logistics were replicated over and over again. In the cluster system ... all logistics come together under the logistics cluster. It is not perfect but it is better than before.

A lot of people ... a lot of organizations ... feel left out. This was inevitable as long as the program was to all extent and purposes centralized at the National Level and mainly in Port-au-Prince. Increasingly it appears that progress has slowed down ... but this is difficult to ascertain because the metrics are voluminous but not particularly easy to use in an analytical mode.

In this context it is possible to say almost anything you want about the performance of the American Red Cross ... and then get data to back up whatever you have chosen to say. For its part the American Red Cross can probably justify what it has done ... with data to support what they are saying. This is not a particularly satisfactory way of "keeping score" about performance in a relief and development setting. Something way better is needed ... and this is what Community Analytics (CA) sets out to do.

The following are some of the elements of CA that are relevant:
  • The CA approach is community centric more than it is sector or "cluster" centric;
  • The CA approach is people centric ... enabling people to do more for themselves;
  • What are the needs for the people in the community?
  • What are the available resources in the community already? 
  • What incremental resources are needed?
  • What organizations are available?
  • What incremental organizations are needed?
In the CA community model there are needs that may in part be satisfied by activities carried out by people in the community leaving a net need. What is it that has to be done so that the net need is reduced?

Progress is measured by how fast the net need in the community is eliminated. Progress is also measured by how the "state" of the community improves over time.

Performance is measured by how much resource is needed to reduce net need. This is sometimes referred to as cost effectiveness.

Both progress and performance are measured relative to a community ... with activities being carried out by organizations that are active in the community ... with resources that in some part come from the community and in some part come from external sources.

Constraints impact progress and performance. What are these constraints in the community.

While there are more data available about Haiti and sectors / clusters ... the data are not easy to use in a specific location context. The CA data organization puts data that are needed to plan and manage progress in the community into a form that provides for easy community focus access.

Organizations are responsible for activities. Activities should produce progress in the community that can be measured both as to cost and as to impact. While most organizations do not do this type of analysis for reporting  to the public the underlying data to do this is likely available in most organizations. Organizations have payroll records ... have daily plans ... have expense reports ... have purchase reports ... have inventory records ... etc. ... not to mention all sorts of pictures and stories that have been collected to impress donors and post to websites and give to the press.

There are activities that cost a lot and do very little. This is something that an organization does not want in any publicly accessible accounting for accountability. Nobody knows at the moment how much of these high cost low value activity is going on in Haiti ... but negative reporting suggests that it is substantial.

In the CA approach impact is about value ... and value is subjective ... and value is not easy to quantify. For the purpose of impact quantification the value of different outcomes in the community is quantified using a concept of "standard value" ... something not unlike the standard cost used in cost accounting. Good CA style value reporting might show that there are many good activities that have low costs and very high values.

CA is not static ... it is dynamic with variables respected. CA also has a value chain analysis dimension that aims to address the unintended consequences of different activities. Value chain analysis, for example, helps to explain why costs and prices are what they are, and where there are profits, value adding and value destruction. Sustainable progress is only possible when there are both local profits and local value adding without the need for continuing inflow of financial or material subsidy.

It is only when there are data that there can be analysis and management ... good planning, organization and good activities. The challenge is to do this within the existing framework of dataflows.

Peter Burgess

Atmospheric pollution ... not just CO2

Dear Colleagues

I was directed to this article by friends involved with the problem of carbon emissions and the pollution of the atmosphere.

I wrote a short comment as follows:
Dear Colleagues

This is a very useful post ... thank you.

My position on almost everything is that we will make a lot of progress if 6 billion people start doing things a little bit more thoughtfully ... doing more things that make sense.

This is easier than one might think ... getting better metrics for decision makers can make a big difference. The profit metric is good for corporate managers and owners ... but it is a value metric that is needed for society ... and these include issues like CO2 and particulates.

Peter Burgess
The web posting refers to a USAID report with the title "Black Carbon Emissions in Asia" ... and points out that the role of various forms of particulate emission are a big part of the air pollution problem.

I recall the air pollution associated with "industry" prior to the 1960s ... and especially soot in the atmosphere in the UK associated with burning coal for everything including the "home fires". A killer smog in 1955 was the impetus for hard hitting legislation to clean up the air in the UK ... and the results were quite rapid and very impressive. Clean air in the USA is now generally accepted ... with California having an ongoing problem because of the automobile. Many parts of the developing world have great need for control over the emissions from vehicles of all sorts. Some of the low tech practices in agriculture and daily living in poor countries are also important sources of emissions ... slash and burn agriculture ... wood and kerosene for cooking.

What I had to say about metrics is my normal issue ... there must be a value dimension as well as just the profit metrics.

Peter Burgess

Haiti ... World Bank IDA debt cancelled! What impact on accountability

Dear Colleagues

A Relief Web posting reports that some World Bank IDA debt is being cancelled. The article is at this URL and the text copied at the end of this posting.

This debt cancellation raises big questions ... not least is how come so much debt in a country with so much poverty. There are clearly substantial issues that need some accounting and accountability.

Accountability is a difficult problem to handle ... especially when the rewards associated with no accountability are huge. My first work with the World Bank was in 1978 ... if you don't count some cost accounting that I did in connection with the Kariba Dam early in the 1960s! I have been interested in debt and development for a very long time ... and have worked on trying to understand the state of sovereign liabilities in a number of developing countries. It is am amazing mess ... the accounting is a mess and, not surprisingly, accountability is impossible.

We now learn that the World Bank is cancelling all the Haiti IDA debt ... some $37 million, which is not very much, but it comes after Haiti won a $1.2 billion in debt relief from the World Bank, International Monetary Fund and other creditors in July 2009. I do not know yet what debt this leaves to be repaid in the future.

The World Bank and the other institutions associated with official relief and development assistance (ORDA) are a central problem in the achievement of any depth of accountability. Cancelling debt may be a good thing to do ... but there should be an accounting that explains how come such a debt restructuring was needed. The World Bank does a huge amount of research and prints more material than most publishing houses ... but when it comes to basic accounting and accountability there is a void ... a silence ... an empty space!

There are around 10 million Haitians. $1.2 billion of debt is equivalent to about $120 per person ... or with 5 people per family say $600 per family. With the general population of Haiti so poor ... exactly what was all the money used for that eventually became a liability of the country. Who did the lending and why? Who did the borrowing and why?

I have done enough practical business ... physical construction ... and know something of the problems that arise. In the companies where I have been involved we made provisions for problems and at the end we had nice credits as we had less problem than we planned and budgeted for. There has to be a reason why this does not happen with ORDA projects ... and part of the reason has a lot to do with the lack of adequate accounting and absent accountability ... and another part of the reason is that a lot of decisions have been made by senior people to serve special interests rather than the public good and needy beneficiaries. Nobody knows much about this, and never will until there is a paradigm shift towards accountability.

My guess is that much of the debt was used to import goods that became needed as a result of the total economic collapse of the country over a good number of years ... but why did the economic collapse take place, and to what degree did imported goods in competition with locally produced goods cause collapse. Was this vicious cycle in play? If not, what other explanation is there? Maybe it is that the Government of Haiti was loaned money to do health and education ... while not having any economic underpinning that would allow for either user fees or taxation to pay for repayment. These are questions for which there should be solid answers ... and a lot of accountability from both borrowing entities and the lenders.

Maybe this information exists ... but where? I would be delighted if someone could show me the data and the relevant analysis!

Peter Burgess
World Bank Announces Total Cancellation of Haiti's Debt
Source: The World Bank Group
Date: 28 May 2010
Press Release No:2010/439/LCR/CFP

WASHINGTON, May 28, 2010 -- The World Bank today announced that the remaining US$36 million of debt owed by Haiti to the International Development Association (IDA), the Bank's fund for the poorest countries, has been cancelled. Haiti now has no further amounts payable to the World Bank.

"Relieving Haiti's remaining debt is part of our effort to pursue every avenue to help Haiti's reconstruction efforts," said World Bank Group President Robert B. Zoellick. "We will continue to work in close cooperation with the Haitian government and our international partners to support the country's recovery and longer-term development."

This cancellation by the World Bank of Haiti's debt to IDA was made possible by contributions from Belgium, Canada, Finland, France, Germany, Ireland, Italy, Japan, The Netherlands, Norway, Spain, Sweden, and Switzerland.

Since the earthquake that struck Haiti in January this year, the World Bank has made available US$479 million in grants to support Haiti's recovery and development through June 2011. It is also the trustee as well as a partner working to support Haiti's reconstruction and development through the multi-donor Haiti Reconstruction Fund, to which Brazil became the first country to contribute earlier this month.

In July 2009, Haiti won $1.2 billion in debt relief from the World Bank, International Monetary Fund and other creditors.
For more information on the World Bank's work in Haiti, please visit:

World Bank in Washington:
Sergio Jellinek (202) 458-2841
Angela Furtado (202) 473-1909

Risk is changing its fundamental character ... society needs to understand what this means!

Dear Colleagues

The BP oil spill in the Gulf of Mexico may be described as an environmental disaster of historic proportion ... but the fact that this has occurred was totally predictable ... and this is the matter that needs to be understood and the matter that should have been planned for.

Mark Tulay has written an interesting article about BP and the Gulf cleanup. I am sure there are going to be a lot of articles along these lines. The article can be found at this URL and the text is copied at the end of the message below:

But in my view the problem is a lot deeper than this article embraces. Essentially the risk that is being taken by corporate industrial organizations has the same systemic potential for disaster that we have already observed in the global financial sector.

In most industrial disasters the limits of the impact are quite modest compared to the scale of society and its environment ... but the BP situation is different ... the activities of the oil industry are different ... the scale of the potential impact are large in relation to the scale of the society and the environment.

In most industrial situations the government ... the authorities ... the emergency response agencies ... have more access to technology and to support organizations that have competence in emergency situations. They can mobilize these resources more effectively than any corporate or industrial organization. In addition, the military usually have logistics technology that is way better than is available in private organizations.

But in the BP Mexican Gulf oil disaster the scale of the disaster is bigger than the scale of the company causing the disaster not any of the authorities that the public would normally expect to respond. Risk is bigger than the entities creating the risk ... a highly dangerous situation. The oil industry has the only technology that can work on the problem ... and in the past five weeks none of this technology has been good enough to fix the problem. The companies are working at the limits of their technology to "produce" and there is zero backup technology that is substantially better than the technology deployed in production. This is to be expected ... it is the way everything on the planet is being run under the watchful eye of scorekeeping stakeholders who are interested in profits and not very much else.

I have already argued that the value of BP, the corporate organization has always been less than the value of the socio-economic activity of the US Gulf Coast and the environment ... though there is no set of statistics that routinely make it easy to make such a comparison.

Society got close to having this discussion with the risk analysis associated with the nuclear industry ... the nuclear weapons industry and the nuclear power industry and other peaceful applications of nuclear technology. The rules and regulations imposed on the industry did not eliminate the risk ... but reduced the risk through layer after layer of safety. Nothing similar has ever been done in the global oil industry though the risks are big ... and maybe a lot bigger than we ever contemplated.

I have worked on assignments in various parts of the world where the oil industry operates with little regulation. The pollution is impressive ... it reminds one of the late 19th century when industry operated with an "anything goes" attitude towards safety and the environment because rules and regulations either did not/do not exist or did not/do not get enforced. The industry at the highest levels is not well known for letting ethical considerations get in the way of profit performance and growth.

The damage being done to society and the environment has a monetary value that is probably in excess of the pre-disaster market capitalization/valuation of BP ... which would normally mean that the existing BP stockholders get wiped out and the business value of BP becomes a source of pay-out for society as a whole, and especially those impacted along the US Gulf coast.

In the future there should be a "fund" ready to go to pay for the damage to society. This is, of course, what insurance is meant to do ... but rule of law has the perverse effect of making it more difficult rather than less difficult for value to be transferred from an organization like BP to an aggrieved party in the broader society. There should be, of course, ways to ensure that fraudulent claims do not get paid ... but this is no excuse for good claims to get thrown out as well ... the typical modus operandi of the legal system when society is up against large corporate interests!

There is a growing portfolio of very large scale risks ... economies of super scale are good for profits as long as the risks of superscale are ignored and not provided for in any way in the accounting and reporting for profit.

Once again we find that the accountancy profession is not understanding enough of what the accounting is trying to say ... and what reporting is needed. Why am I not surprised?

The text of the Tulay message is set out below

Peter Burgess
Opinion: Commitment to Gulf Cleanup Will Be True Measure of BP
May 28, 2010 by Mark Tulay

It’s official: the oil spill that began in the Gulf of Mexico on April 20th is now the largest in American history, surpassing the Exxon Valdez spill in 1989. Sen. Lisa Murkowski (R-Alaska) observed that "the recovery from the Exxon Valdez oil spill was long and sad, and it took 20 years for litigation over punitive damages to be resolved....That in and of itself was a tragedy we can't let happen again."

When news of the Exxon Valdez oil spill broke in March of 1989, the slow and inadequate corporate and government response to the disaster ushered in a new wave of leaders in the environmental movement. One of these new visionary leaders was the late Joan Bavaria, the driving force behind the Boston-based CERES, which was founded in 1989 to advance what was then viewed as a sweeping 10-point code of environmental conduct that became known as the CERES Principles.

In ancient Rome Ceres is the goddess of agriculture, charged with guarding humankind's survival. In the wake of the Exxon Valdez disaster, Joan Bavaria and the CERES team began to build a movement to do just that by creating a new way to hold companies to higher environmental performance and disclosure standards and to provide market based incentives to spur innovation and environmental leadership. Joan worked tirelessly to build a first-of-its-kind multi-stakeholder coalition comprising environmental organizations, corporations, faith-based institutions and institutional investors all working to find new collaborative solutions.

It was not an easy task in the early 1990's to bring corporate CEOs and leaders in the environmental movement together. At the time of the Exxon Valdez spill, a spokesman for Exxon said that the CERES Principles "do not recognize the need to balance environmental protection with the importance of adequate energy resources and a stable, healthy economy."

Five years later another oil company, Sun Oil, had an entirely different view on this when it broke ranks with the Fortune 500 and surprised everyone to become the first large company to join with CERES. The CEO of Sunoco, Robert Campbell, said at the time that his company and members of CERES developed trust for each other and realized that their goals were similar. "Their goal and our goal did not seem so far apart," Campbell said. "The Sun Company decided that by signing the CERES principles they would be placing themselves at the forefront of business' role in protecting the environment." Bob Campbell displayed true leadership and willingness to ignore pressure from his CEO counterparts, who at the time were angry at him for joining with environmentalists.

CERES continues to play an important role and is focusing on steering investor assets toward companies demonstrating a commitment to sustainability and improved environmental performance and away from more risky laggards. The original reporting framework CERES designed in the early 1990's evolved into the Global Reporting Initiative, the de facto standard for corporate disclosure of sustainability information used by 1,500 companies worldwide.

New initiatives are emerging today to tackle the new paradigm and the hard choices associated with our addiction to oil. Earthster, for example, allows companies to quickly assess the environmental impacts of thousands of household products. And consumers now have a new resource in Good Guide that rates over 75,000 products on environmental performance. These innovations and others all mark the beginning of a new era of radical transparency where the power is shifting from producer to consumer, as new information and resources become available to separate companies that are truly green from those that greenwash.

The Future for BP

BP's CEO Tony Hayward has pledged "to clean up every drop of oil" off the oil-soaked shore and to put the "Gulf coast right as fast as we can." Since April 20th, BP has spent over $800 million responding to the spill. BP's stock price has dropped over 25% during this period, eroding nearly $25 billion in market value.

More trouble lies ahead for BP as it may face the specter of EPA fines of $1,100 per gallon or up to $4,300 if gross negligence was found to cause the spill. The total costs for BP could exceed by some estimates over $25 billion, far eclipsing the $3.8 billion costs for the Exxon Valdez spill.

How BP handles these costs will be a true measure of the company. BP has come under fire for its early handling of the financial settlements from individuals. Alabama's Attorney General Troy King has said he told BP to stop encouraging settlement agreements among coastal residents that he said stripped people of their right to sue in exchange for a $5,000 settlement. Furthermore, CEO Hayward recently was quoted in The Times of London repeating his commitment to pay all verifiable individual claims but qualified his statement further by saying that because "this is America" many of the claims will likely be "illegitimate." Instead of hedging and dodging, BP would be well served to take the high road on settlement issues and learn from the lessons of Exxon

On the wall of Bavaria's cluttered Boston office was a sign that read: “Life is a test. It is only a test. If this were your real life, you would have been given better instructions.” She was put to the test in 1990 as she visited Prince William Sound on the first anniversary of the Valdez spill and wrote: ''The extent of the damage is still disputed and probably will be forever. But one thing was crystal clear: such disasters need not happen, they must not happen, and we must not let time heal this wound so well that we forget the tears, the tragedy, and bet again on luck to pull us through.'' This message rings as true today as it did in 1989. While the tragedy of the Gulf oil spill itself cannot be undone, let’s hope that Mr. Hayward is prepared to follow through on his original commitments and follow Joan's advice of 21 years ago as he deals with the aftermath of clean-up and compensation.
Mark Tulay worked for Joan Bavaria at Boston-based CERES as the organization's first full-time employee beginning in the 1990's. He has worked in the environmental movement for over 15 years and is the Founder and CEO of Sustainability Risk Advisors, a consulting firm that advises non-profit organizations and institutional investors on sustainability related issues.

Saturday, May 29, 2010

Persistent poverty ... needed to justify the perpetuation of the donor and development assistance industry!

Dear Colleagues

Why has international relief and development assistance become little more than a huge "welfare" system with a huge proportion of the world's population ... maybe half ... and indeed countries ... being funded by the other half.

This is a fatally flawed model for development success ... and it is no surprise that over a very long time ... something like 60 years, the progress of relief and development has been glacial no matter how much money has been mobilized.

The sad reality is that a lot of people have been well remunerated in administering this welfare arrangement ... and will continue in this mode ad infinitum unless there is a substantial paradigm shift.

A recent report issued by Medecins sans Frontiere (MSF) ... in English, Doctors without Borders ... is complaining that global health funding needs to be sustained at very high levels to ensure that access to AIDS treatment can be maintained at an adequate level. And while the issue of access to treatment is well taken ... the question of where the money for this should be coming from needs to be looked at from a better perspective. The MSF essay is to be found at: The text is copied at the end of this posting.

The key question that needs to be answered is why is it that so few people are able to afford the cost of adequate health care! Why are so many people poor, hungry, badly educated and unhealthy? Why are decision makers so ineffective when looked at from the perspective of society? What on earth is so wrong?

The prevailing enterprise system that is a mix of capital market, free enterprise and oligarchy ... and the prevailing systems of subsidy, official development assistance, and international finance make it possible for decision makers to design programs where there is personal and organizational profit without societal progress. It is a dysfunctional system when looked at from the perspective of the people of the planet, but almost perfect for those that are in control.

There is something fundamentally wrong when, in order for people to have access to health services there has to be external funding from "donors". An economic system that is working effectively should be able to deliver service that are able to be paid for by beneficiaries ... and the service should be affordable ... which in turn means that the beneficiaries should be in a society where remuneration is reasonable.

With more than 4 billion people poor and hungry ... there is a huge challenge to be addressed. This argues for development investment that changes the "business model" being used for global socio-economic development and the approach to development assistance. People must have opportunity to be remunerated, and important needs have got to be available at affordable profitable prices. Society must have productive value adding activities that make it possible for people to be remunerated and able to pay for what they need.

This is a big change from what has been the norm for the last several decades ... and big change is needed. This is going to be done in due course with the help of better socio-economic metrics ... more cost efficiency, more value efficiency (vefficiency) so that economic activity creates more improvement in people's quality of life!

While not-for-profit organizations do good work ... whether or not they have cost efficiency and value efficiency is never part of the analysis. This needs to change. Getting more money from donors is essential for organizational survival, but ultimate socio-economic progress is when donors and implementing organizations are not needed and the local economic activity allows what is needed to be purchased with locally earned income.

Change is not easy! There are a lot of people who are well remunerated throughout the global economy that benefit as long as poverty persists. With persistent poverty, there is a need for donors and government programs and the associated intermediaries and organizations ... and all the incentive in this value chain is to maintain the failed status quo! Not a good situation!

Peter Burgess

Backtracking by international donors in funding HIV/AIDS risks undermining years of positive achievements and will cause many more unnecessary deaths, warns humanitarian aid group Médecins Sans Frontières (MSF) in a new report.

Titled 'No time to quit: HIV & AIDS treatment gap widening in Africa', the report (download here) builds on analyses made in eight sub-Saharan countries to illustrate how major international funding institutions such as PEPFAR, the World Bank, UNITAID, and donors to the Global Fund have decided to cap, reduce or withdraw their spending on HIV treatment and antiretroviral drugs (ARVs) over the past year and a half.

'How can we give up the fight halfway and pretend that the crisis is over?' said Dr. Mit Philips, Health Policy Analyst for MSF and one of the authors of the report. 'Nine million people worldwide in need of urgent treatment still lack access to this lifesaving care - two thirds of them in sub-Saharan Africa alone. There is a real risk that many of them will
die within the next few years if necessary steps are not taken now. Also, the current donor retreat will prevent more people from accessing treatment and will threaten to undermine all the progress made since the introduction of ARVs.' The US President's Emergency Plan for AIDS relief, PEPFAR, reduced its budget for the purchase of ARVs in 2009 and 2010, and also introduced a freeze on its overall HIV/AIDS budget. Other donors, such as UNITAID and the World Bank, have announced reductions over the coming years in the funding for antiretroviral drugs in Malawi, Zimbabwe, Mozambique, Uganda and the Democratic Republic of Congo (DRC).

The Global Fund, the largest funding institution in the fight against HIV & AIDS, faces a major funding shortfall. The US, the Netherlands and Ireland have already announced that they will be providing lower contributions to the Global Fund. In 2009-2010, contributions to already approved country grants were reduced by 8 to 12 percent.

Overall funding cuts have translated into a reduction in the number of people able to start their ARV treatment, as seen in South Africa and Uganda, and in DRC - where the number of new patients able to start ARV treatment has been cut six-fold. Already fragile health systems will
become increasingly strained by an increasing patient load requiring more intensive care.

Drug stock-outs and disruptions in drug supply are already a reality, and will become more frequent if sufficient funding is not made available. MSF has recently been requested by the government and other actors to assist with emergency drug supplies in Malawi, Zimbabwe, DRC, Kenya and Uganda.

'If there is reduced funding, then it will mean more people will die, and we will have more orphans,' said Catherine Mango, an HIV patient from Kenya. 'The ones that are positive often need to assist others, like their children. People will lose hope and die. It will be the end. If there are no drugs there is no future.'

ARV treatment is lifesaving but also lifelong. This means that the number of patients under treatment increases cumulatively each year, thus requiring incrementally growing and sustainable funding.

'The HIV & AIDS crisis remains a massive emergency that still requires an exceptional response. MSF calls for a sustained and renewed commitment by donors and national governments in the fight against HIV & AIDS, so that this disastrous public health crisis can be addressed appropriately,' concluded Dr. Philips.
Seco Gerard
Analysis and Advocacy Unit, Gen. Dir.
Medecins Sans Frontieres
Operational Centre Brussels (OCB)
+32 2 475 36 34

Wednesday, May 26, 2010

Book ... Why Doesn't Microfinance Work?

Dear Colleagues

Milford Bateman, a friend has just circulated the following PR material about his new book.
Just released this week by Zed Books is my book on microfinance, titled 'Why Doesn't Microfinance Work? The Destructive Rise of Local Neoliberalism'. Clearly, it's a critical take on microfinance.

Quoting from the blurb on the back cover now, Zed have this to say:

"Over the last thirty years or so, microfinance has risen to become one of the most high-profile policies to address poverty and under-development in developing and transition countries. It is beloved of rock stars, royalty, movie stars, high-profile politicians and trouble-shooting economists. Its most famous pioneer, Muhammad Yunus, was awarded the Nobel Peace Prize in 2006.

In this provocative and controversial analysis, Milford Bateman reveals that microfinance doesn't actually work. That, in fact, the case for it has largely been built on a desire to advance a particular free market ideology, on hype and egregious half-truths, and -- latterly -- on the Wall Street-style greed, deception and individual self-interest of those promoting and working in microfinance. Using a multitude of case studies from across the globe -- from India to Cambodia, Bolivia to Uganda, Serbia to Mexico amongst many others -- he exposes why many of its most fundamental building blocks are largely myths. In doing so, he demonstrates that microfinance actually constitutes a major barrier to sustainable economic and social development, and thus also to sustainable poverty reduction.

As developing and transition countries attempt to repair the devastation wrought by the global financial crisis, Bateman argues forcefully that the role of microfinance in development policy needs to be urgently and fundamentally reconsidered."
I am looking forward to a careful read of this book ... some of the issues that are being raised confirm my experience, but some do not. This does not surprise me because, in my view, the good and the bad of "externalities" are way bigger than the best or the worst of microfinance.

One of the things that bothers me is that none of the many analysts and writers about microfinance seem to be spending much effort on these externalities and how they impact on microfinance performance.

Another thing is the issue of metrics which rarely make it possible to put the performance of a microfinance institution into any sort of area context. Places are different ... and the externalities are different.

I am looking forward to reading the book ... but not expecting that my mind will be changed very much. I expect that Milford Bateman will have made a good case based on the specifics that he knows about. I would argue ... I expect ... that it is dangerous to generalize from the examples to the whole industry. I know of many examples where the results of microfinance were very helpful ... but my expectations have never been that microfinance was going to be the single silver bullet that would make "development" successful. Bottom line ... there are hundreds of things in addition to the financial constraint that have to be addressed. I have heard Muhammad Yunus say on multiple occasions that there is systemic dysfunction in the economic system that causes poverty ... and accordingly there needs to be a systemic solution. Microfinance is only one little bit of this systemic solution.

I have also observed in more than one occasion over the past several decades that the main reason why microfinance became so popular was that all the other initiatives of the official relief and development assistance community were such terrible failures. In this context microfinance was a successful silver bullet!

Peter Burgess

Health ... big study well funded but what management action will result?

Dear Colleagues

IRIN has circulated an article about health written from Johannesburg titled GLOBAL: PMTCT could be key to cutting child mortality. The text of the article is copied below and the URL for the article is

The highlighted conclusion from this article is
Globally, the trend is clear - child mortality rates are going down faster than anyone anticipated. Studies like this may point way forward
The study referred to is "Neonatal, postneonatal, childhood, and under-5 mortality for 187 countries, 1970—2010: a systematic analysis of progress towards Millennium Development Goal 4" written by the following researchers: Julie Knoll Rajaratnam PhD a, Jake R Marcus BA a, Abraham D Flaxman PhD a, Haidong Wang PhD a, Alison Levin-Rector BSPH a, Laura Dwyer BA a, Megan Costa BA a, Prof Alan D Lopez PhD b, Prof Christopher JL Murray MD a associated with (a) the Institute for Health Metrics and Evaluation, University of Washington, Seattle, WA, USA and (b) the School of Population Health, University of Queensland, Brisbane, QLD, Australia. The study is funded by the Bill and Melinda Gates Foundation.

The article in the Lancet is around 21 pages long and the annex to this article 219 pages ... a substantial amount of data and analysis. From an academic perspective this work is probably considered to be very good ... from a management perspective I cannot pretend to be impressed. There has been heavy use of statistical method, which is not easy to follow unless one has advanced degrees in these matters ... but little of it ends up giving clear management guidance.

Bottom line ... the question of whether or not the global health situation is being managed well or not is not addressed, even though this may be the biggest question in the modern health sector when there is so much disease and illness and a chronic shortage of resources.

Somewhere, somehow, there needs to be some good work done on how best to use scarce resources to achieve the best possible results in the healthcare sector. My sense is that the health sector is scared stiff that this will be done and it will show that the medical profession and the corporate health sector together with the funding organizations are running a high cost low performance industry ... that in spite of this, is highly profitable. This is fundamentally wrong. The scientific capacity of the modern health sector is amazing ... and no reason for the terrible amount of suffering caused by disease, poor health and dysfunction in the healthcare industry.

The question is what health outcomes should there be given the amount of fund flow that is going into global health ... and how could these outcomes being substantially improved through better organization and changing the way things are done.

Community Analytics (CA) has some preliminary conclusions including the very basic one that science and technology has progressed very impressively over the past 50 years, but value flowing into society quite modest and money profits substantial. The idea that money profits have done so well and value adding for society so limited suggests that there is some serious structural dysfunctionality in the way things are working ... notably the focus on money metrics with almost no value metrics being used anywhere.

This is not the first time I have written something like this ... and likely it will not be the last.

This IRIN article touches on an important issue ... and the Lancet study goes into great detail about some of the statistics about performance. However, moving from a big study to a big change in performance is not happening and, as far as I can see, nobody has it on their agenda.

The text of the IRIN article is below.


Peter Burgess

JOHANNESBURG, 25 May 2010 (PlusNews) - Sub-Saharan Africa is struggling to meet the Millennium Development Goal (MDG) of reducing child mortality but with greater access to prevention of mother-to-child HIV transmission (PMTCT) services, some countries are slowly catching up.

A new study by the Institute for Health Metrics and Evaluation (IHME) at the University of Washington in Seattle, US, published on 24 May in the online edition of British medical journal The Lancet, compared mortality in children younger than five from 1970 to 2010 in 187 countries to chart progress towards reaching the goal.

Worldwide child mortality had declined by 52 percent since 1970, but only 31 developing countries were on track to meet the MDG target of reducing under-five mortality by two-thirds by 2015; African countries hit hard by HIV were conspicuously absent from the list.

Sub-Saharan Africa accounted for about half the global figure for child mortality under the age of five, and the region also had the slowest rates of decline in child deaths, which might be partly due to high HIV prevalence levels.

"We can see the effects of HIV in sub-Saharan Africa in the way that the declines in child mortality throughout the [19]70s and '80s stop, and start to reverse in the 1990s. This coincides with the rise of the HIV epidemic there," Dr Christopher Murray, director of the IHME, told IRIN/PlusNews.

According to UNAIDS, sub-Saharan Africa still has most of the world's HIV infections, while a regional prevalence of about 5 percent accounted for almost 70 percent of all new HIV infections in 2008.

The good news

Yet there was compelling evidence that some African countries were making significant strides in reducing child mortality, and the report's authors suggested that this could be explained by improved access to antiretroviral (ARV) drugs and PMTCT [preventing mother-to-child transmission] services.

"There has been a tremendous scale-up in ARV programmes over the past decade, and an increased emphasis on preventing mother-to-child transmission. We think both of these efforts are starting to show an effect on child mortality, and are helping to drive the child mortality rate lower," Murray noted.

"Since 2005, though, we are starting to see declines [in child mortality] again, including in countries that have been hit very hard by HIV, such as Swaziland, Botswana, and Lesotho."

The study also pointed out that southern African countries with relatively strong ARV and PMTCT programmes had notably lower under-five mortality rates than those in other regions of Africa.

Malawi, which has made substantial gains in ARV and PMTCT services, has been charting yearly declines in child mortality of more than three percent. Today, 45 percent of pregnant, HIV-positive women access PMTCT, up from just three percent five years ago, according to a recent report by the International Treatment Preparedness Coalition, a support group for people living with HIV and AIDS.

Dr Ashraf Coovadia, chair of the South African National AIDS Council's treatment and care support task team, and head of paediatric HIV services at the Rahima Moosa Mother and Child Hospital in Johannesburg, told IRIN/PlusNews that the results of improved PMTCT regimens and access were becoming evident.

"We are seeing less [HIV]-infected infants, and those that are infected we are seeing at an earlier stage," said Coovadia. Infants brought to the hospital in later stages of HIV infection tended to come from areas outside Johannesburg, where access to PMTCT services was often still problematic.

The study's authors suggested that comprehensive and accurate studies, such as this one, should be conducted more often because decreased funding levels would make the data they provided crucial to guiding aid and national health priorities.

"We need to spend more time looking in depth at what is working and what isn't working in countries where we have seen substantial progress ... What are the lessons to be learned from these countries?" Murray said.

"Globally, the trend is clear - child mortality rates are going down faster than anyone anticipated," he said. "Now, for governments and non-governmental organizations, the real work begins of identifying the best policies to build on that momentum."

Coovadia agreed, noting that further studies were needed, not only to lobby governments and funders for extended services, but also to understand why not all countries with PMTCT programmes had charted gains, like Malawi.

"We need to know where we're getting bang for our buck, especially when funding is dwindling; we need to take an evidenced-based approach to prioritising [health] interventions," he told IRIN/PlusNews.

"We also need to look at the challenges of why, in places where programmes are in place, we may not be getting the same benefits ... in many cases this is related to [weak] health systems and issues of access."

Haiti ... What role for accountants in rescue, relief and rebuilding?

Dear Colleagues

Some time back ... not long after the start of the Haiti earthquake emergency I posted the following question to a LonkedIn group discussion "Accountants for Haiti" a subgroup of Haitian Development Professional Group.
What role for accountants in rescue, relief and rebuilding?

It is reasonable that there is little specific accountability in the rescue phase. The goal is simple ... to save lives. The strategy is to everything possible with whatever resources can be obtained ... and do it now. Rescue lasts a few days at most.

The relief phase starts immediately with the emergency ... all the basics are needed today, and in a few days everyone needed relief should have access to the basics of relief. In these initial few days there should be a strong accounting framework available and in use. Accounting should be in place as a vital tool in the management of resources and the accountability of everyone concerned.

Relief changes into rebuilding ... and if done well, the resources are used not only for immediate relief but to achieve a step forward in the process of rebuilding. The accountant needs to be fully involved with this, so that there can be good control accountancy, but also good analytical accountancy.

As things stand at the moment the huge value of donated professional time appears nowhere in the accounting ... while many institutions think that when they no longer have the money, something good has been done with it. This is plain ridiculous ... and accountants have to stand up and start to make a noise. I will do it, I hope others will join me.
As time has passed, it has become glaringly apparent that the issues raised in this message are not on the agenda of the main users of resources in the Haiti emergency program beyond making sure that the PR is in place. The subject of accounting and accountability is not a mainstream issue in the official relief and development assistance community, and, not surprisingly I have not been overwhelmed with responses.

But there is some progress. The following is interesting from James P. Andersen, Jr., Principal and Founder, Foundation Management Associates
I started a business 5 years ago, Foundation Management Associates, that provides outsourced accounting services to small non profits; those who are large enough to need the help of a controller or CFO, but typically can only afford a bookkeeper. One of my clients is a U.S Foundation that operates a 125 employee, 65 bed hospital in Fond des Blancs, Haiti, about 65 miles southwest of Port au Prince. This organization outsourced their financial management to my company, and we effectively serve as their internal accounting department.

I have decided to focus more of my attention on providing these services to other U.S. non profits operating in Haiti, because I feel there is a real need for them. We can assist these NGOs by helping them manage their foreign financial management needs, documentation flow, as well as management of of a major headache, the annual A-133 audit process.

We can also help our Haiti clients through our rather unique, virtually paperless, electronic accounting and financial reporting model that works particularly well for NGOs operating in developing countries. These services include assisting the NGO with establishing and managing effective internal control systems, utilizing processes that are simple to use by foreign accounting staff, and leveraging readily available technology that enables the U.S. client to maintain its foreign financial information and documentation in the U.S. in real time.

FMA provides a full range of accounting services, from bookkeeping to CFO-level services for just the amount of time needed each month. This model has proven very cost effective for our clients as our services are packaged at a price that is often no more than the cost of a good bookkeeper.

If anyone has any interest in pursuing this further, please feel free to contact me by email at
My take on this is simple. I like it ... I have responded publicly as follows:
Dear Colleagues

The Foundation Management Associates (FMA) initiative is a very sensible idea ... I like it.

I visited a small accounting firm in New York this week and found that they were doing a lot of work as the "accountant/CFO" for small business, and had a good business and doing something that was very useful. FMA in Haiti with focus on the not for profit NGO is a very good idea. I know of another organization in Haiti that is "doing payroll" for a number of organizations that have staff in Haiti doing emergency work but no formal corporate or organizational structure.

We are not quite ready ... but accounting for the NGO is not quite the same as accountability for the NGO. I want to see something happening where the NGO community ... and the organizations of the Official Relief and Development Community (ORDA) ... and providing meaningful accountability feedback to the interested public and stakeholders.

Community Analytics (CA) is developing as a way for some of the rigor of money accounting to flow into value analysis. I see accountability as the conversion of money and material resources into something of value for the beneficiaries ... value being either socio-economic progress, or improvement in the quality of life, or similar things. In CA value items are quantified using standards rather like cost accountants might use standard costs. Accountability takes into account the efficiency of the spend ... how much did something cost versus how much should it have cost.

As this develops I would like to collaborate in a mutually beneficial way.


Peter Burgess
While making the accounting better is a step towards better performance in the not for profit NGO world, it is necessary also to have the accountability better. This can be built around the accounting ... but is not just more and more detail in the money accounting systems, but a rather fundamental mind shift to value.

As Community Analytics (CA) has developed and evolved it has become clear that there is a need for organization and structure to enable efficient deployment. The work that FMA is doing is a natural complement to the work that CA should be doing.

Peter Burgess

Tuesday, May 25, 2010

ROI ... a ubiquitous but wrong metric of performance

Dear Colleagues

I was amused in the post Sarbannes-Oxley era of corporate financial reporting that ROI not only stood for Return on Investment, but also Risk of Incarceration.

But I have been less amused over the years at how ROI ... Return on Investment ... has been used to create the illusion of economic performance when in fact the reality was very different.

I trained as an engineer ... and only later on trained as an accountant. I like to think I know the difference between real engineering and financial engineering. I appreciate the importance and value of real engineering, and despise financial engineering.

When I was heavily involved in corporate management and management information systems, I was an advocate for the use of Return on Capital Employed as a core metric of performance. Using this metric helped to sort out the difference between the profit contribution that was arising in the conduct of the real business, and what was being contributed by creative financing. In my view, getting a healthy contribution from the real business was the key to sustainable performance. Any work that I was able to do with creative financing that helped the profit reporting depended in the end on the underlying real business. Any executive or manager that forgets this reality is doomed ... sooner of later.

Capital employed is what a business needs to operate ... cash, receivable, inventory, land and buildings, equipment, intellectual property. How all of these real things are financed is a separate question. Productivity is the relationship between the assets needed to operate and the profit contribution these assets are able to generate.

It is interesting to note how many of the well respected CEOs have made a name for themselves not by improving their Return on Capital Employed but merely by leveraging their balance sheet so that the same business seemed to be operating with less investment. The ability to do "off-balance-sheet" financing made a nonsense of most financial analysis in many capital intensive businesses, like for example airlines ... and, I would argue, the industry has paid a price for this financial engineering.

Community Analytics (CA) embraces the idea that performance is about the value adding that arises from real assets ... in other words productivity is not just about return on investment but about return on the assets employed. Clear understanding of these matters helps to clarify how expenditures can be used most effectively to improve performance.

While it is dangerous to generalize, it can be observed that in poor societies there is usually very little value adding on top of considerable resources, especially human resources. A small expenditure to remove a constraint on performance makes it possible for a big amount of resource to function more effectively. This is real leverage ... something of great value ... unlike financial leverage that has all sorts of downside while making it look like performance has improved.

Hopefully more and more the money accounting world will embrace Return on Capital Employed as a better metric of performance than Return on Investment which hides the financial engineering implicit in the concept!

What am I missing? Please let me know!

Peter Burgess

Sunday, May 23, 2010

Without full value analysis CSR is only working at the margin.

Dear Colleagues

Corporate Social Responsibility (CSR) is in the news more than it used to be ... but CSR still does not have very much traction. I wrote the following in response to a posting about the publication of a CSR report by a unit in the global Coca Cola organization or network.
CSR has a lot of potential ... but it is a long way from realizing this potential. What CSR does is to reduce the bad impact of a company's mainstream business ... which is a step in the right direction. But CSR avoids the big question about the social impact of the mainstream business ... and no company is ever going to address this matter objectively on their own. This is why Community Analytics (CA) does this from outside the enterprise and from the perspective of society. Tobacco companies are not going report objectively about the health impact of their products ... somewhat the same with soft drink manufacturers ... and fast food operators! These businesses have made good profits, but what has been the social impact of their business? It is not part of any reporting.

Peter Burgess
I think these observations are correct. Coca-Cola has been very profitable for many years, and it is possible to buy their products practically everywhere on the planet ... it is an amazing organization. But has Coca-Cola been a good use of resources ... and has the impact of a mass marketed sugary beverage been positive for society or not. Imagine if all the financial resources and management capacity allocated to Coca-Cola had instead been invested in global initiatives to deliver fortified (with micronutrients) potable water to everyone on the planet. Against this the CSR performance of Coca-Cola is rather pedestrian.

Of course people will say that Coca-Cola's business is to make profit ... and in the present market economy with the present metrics, the outcome is predictably that profits are optimized. Imagine on the other hand that the metrics were to include the value dimension, at which point the role of water might well be more important than the role of Coco-Cola.

I believe that metrics matter ... and until the metrics include the social impact dimension, the market driven allocation of resources is going to "get it wrong"!

This is the text of the press release about the Coca-Cola Hellenic 2009 CSR Report.
Release of 2009 CSR Report - Coca-Cola Hellenic Maintains Sustainability Commitments

Coca-Cola Hellenic, one of Europe's leading bottlers of non-alcoholic beverages, continued extending its Corporate Social Responsibility (CSR) commitments during the 2009 global economic downturn, according to the Company’s latest report, "Towards Sustainability".

The seventh annual report details initiatives, progress and future sustainability goals in the Company's 28 countries of operation and covers activities in all key focus areas both in its own operations, and through strong stakeholder partnerships aimed at benefiting the communities it serves.

Among major highlights was the construction of three Combined Heat and Power (CHP) plants during the year. They represent the first wave of 15 plants being constructed in 12 countries, and will contribute to cutting CO2 emissions by an average of 20% in the group's manufacturing operations.

The Company has worked with suppliers to develop a range of 14 new-generation cooler units that eliminate hydrofluorocarbons (HFCs) and provide up to two-thirds greater energy efficiency. The introduction of 10,000 units in 2009 brought the total in the marketplace to 18,000 - a figure that will be trebled by the end of 2010, helping to reduce the company's Scope 3 carbon emissions.

Through all of its actions in 2009, relative scope 1 and 2 emissions were reduced by 4%, bringing the total amount lowered since 2002 to 31%.

In further supporting the climate strategy of Coca-Cola Hellenic, the lightweighting of packaging improved efficiency by avoiding more than 4,500 tonnes of materials, 9% more than the previous year. Across operations, through Company-wide recovery programmes, the equivalent of 66% of bottles and cans was recycled.

Special attention was given to the protection and preservation of water resources. In addition to continuing the construction of water treatment facilities at bottling plants, partnerships with governments, NGOs and communities were established and further developed to conserve waterways, including those involving the Danube and Tisza river systems.

Another focus in 2009 was the strengthening of measures to protect employees. A structured three-year Health & Safety plan was begun aimed at substantially cutting accidents in the workplace. During the year a further five plants achieved the international occupational health certification, OHSAS 18001, and the Company recorded a drop in serious accidents of 26% compared to 2008.

Coca-Cola Hellenic maintained its support of the United Nations Global Compact (UNGC) throughout the year, and actively participated in the CEO Water Mandate and Caring for Climate, contributing to activities in local networks in 13 countries.

The Company was recognised as one of 44 leaders selected from a short list of 130 to qualify for 'Notable' status in the UNGC Communications on Progress listing. This makes it the only beverage company and the only Greece-based company to achieve this leadership status

Recognition of the Company's CSR commitments and achievements was demonstrated through its listing on the Dow Jones Sustainability World, and European STOXX, indexes for the second consecutive year, placing it among the top 10% of most sustainable companies worldwide, and the top five sustainable beverages companies.

The full CSR report, which follows the Sustainability Reporting Guidelines of the Global Reporting Initiative (GRI), can be viewed at

About Coca-Cola Hellenic Coca-Cola Hellenic is one of the world's largest bottlers of products of The Coca-Cola Company with sales of more than 2 billion unit cases. It has broad geographic reach with operations in 28 countries serving a population of approximately 560 million people. Coca-Cola Hellenic offers a diverse range of ready-to-drink non-alcoholic beverages in the sparkling, juice, water, sport, energy, tea and coffee categories. Coca-Cola Hellenic is committed to promoting sustainable development in order to create value for its business and for society. This includes providing products that meet the beverage needs of consumers, fostering an open and inclusive work environment, conducting our business in ways that protect and preserve the environment and contribute to the socio-economic development of our local communities.

Coca-Cola Hellenic's shares are listed on the Athens Exchange (ATHEX: EEEK), with a secondary listing on the London Stock Exchange (LSE: CCB). Coca-Cola Hellenic's American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE: CCH). Coca-Cola Hellenic is included in the Dow Jones Sustainability and FTSE4Good Indexes. For more information, please visit

Funding development ... better use of funds is critical

Dear Colleagues

As most readers will probably know, I am an outspoken critic of the performance of the global relief and development industry. This is one of the reasons why Community Analytics (CA) has been developed. There is a need for metrics that are more appropriate for a complex environment that is not only about money and profit.

I am constantly surprised how few people are as demanding as I am to see progress and performance. I posted the following a few days ago. Peter O is an African friend who had made important remarks to the group about community initiatives!
Dear Colleagues

Please pay attention to what Peter O has to say ... he is a long time friend, and knows something about the issues faced by rural agricultural communities in his part of Africa.

As many of you know I am en engineer turned economist turned accountant. I am interested in money getting used efficiently and effectively ... and, as Dambisa Moyo (author of Dead Aid) has observed when talking about aid into Africa ... 60 years and a trillion dollars and little to show for it ... there has to be a better way. With this sort of performance it seems that it is time to criticize and in a very noisy way in order to get attention.

Money is needed ... but it should be used so that there are valuable outcomes. The case of malaria is interesting ... there has been a big increase in funding to combat malaria in the last five years ... from around $100 million a year to more than $2 billion a year. How is this money being spent? Most of the money is being spent on a range of popular interventions (bednets and ACTs) and academic research which are not moving us forward to a sustainable solution. Performance data are conspicuously absent though there is no lack of PR!

Money spent well in the relief and development sector has a huge value ... but not much is spent well ... and accountability is near zero!

Peter Burgess
I was surprised to get this pushback! In the following message I am one of the Peters, the other is my African friend in Kenya.
Peters. The only subsaharan country receving as "much" as 0.18 US D per day per inhabitant is Mozambique which have one of the fastest growth rates in the world. The effect of treated mosquito nets is well documented at scales where analysis and experiments are possible. Blasting aid in general as so many others do, is not getting easier to get funding for even better solutions (like low-cost multipurpose in-situ water conservation to prevent formation of mosquito breeding-pits, see my climate article at my profile page). DEVELOPMENT-aid is clearly associated with increased growth the subsequent time period. More recent data show it now (unlike earlier) particularly works in Africa. By Torsten Mandal Independent agroforestry and soil fertility specialist
My response to this follows. Maybe I am being a little harsh ... but the causality of better performance is not more disbursement on its own, it is more disbursement into a system that works rather than one that is dysfunctional. There are differences!
Dear Colleagues

Thank you Torsten for challenging my criticism of the global relief and development industry ... but I stand by my criticism today, just as I have for the best part of the last thirty years. With a trillion dollars disbursed over the past 60 years, one would hope that the key institutions would have a few good stories ... but the bleak reality is that for every good story they have, there are perhaps 10 ... or 100 that are abysmal failures.

My career as a consultant to the World Bank and the UN had promise ... but eventually was not a great success, because the reason for so many of the failures were obvious to any decent honest analyst. Sadly that was not what the "client" wanted to hear!

Accountants "follow the money" and the combination of sloppy disbursement and questionable government systems ended up with a large leakage that was never accounted for. In recent years and in some countries, things are getting better ... but not very fast, and not completely by a long shot. There is both PR progress and real progress ... and sometimes these are quite far apart!

As you point out, good projects can make a huge difference ... but the money must be used for things that are effective and have impact.

I cannot agree with your observation that the effectiveness of insecticide treated bednets is well documented. There is great PR material about bednet performance ... but considering that billions of dollars have been spent on bednets, the data about effectiveness are minuscule. Bearing in mind that effectiveness is about both cost and impact ... and malaria comes back just as fast as it disappears unless you there is an appropriate complete portfolio of interventions in place to get sustainable results ... what is going on at the moment is more about benefit for the industry participants than benefit for people affected by endemic malaria. My work on malaria is not "popular" but with so much money being disbursed it would be nice if the results were to be documented and sustainable!

Your reference to Mozambique is interesting ... some parts of Mozambique are doing well, and as you observe they have some metrics that suggest causality between amount being spent and progress. What I know of Mozambique is that there are a host of other "externalities" that are helping, not least their proximity to South Africa and the low starting point following their wars of independence and the subsequent internal conflict.

Like you, I want more money to flow into the relief and development sector ... but I want more benefit to be coming out of the sector as a result of more money. And for this, as you know, I advocate for metrics that are able to measure progress and performance at the community level where real people live!

Better results in Africa are more associated with improved government management of resources than simply more disbursements ... and only a very few places are improving significantly.

These are big issues ... not easily dismissed.

Peter Burgess

Friday, May 21, 2010

Value ... What is it? Why does it matter?

Dear Colleagues

Value is subjective. Value is difficult to quantify. But does that mean that value should be ignored and the only ubiquitous metrics in play those that only relate to corporate profits, stockmarket prices, GDP growth and public debt!

Value is subjective and complex ... and no single number enough to quantify value from every perspective. But something useful can be done.

Community Analytics (CA) uses the concept of standard value ... an idea similar to the idea of standard cost in corporate cost accounting. A standard cost is a theoretical cost based on analysis of the engineering and production process. An item gets a standard cost from this analysis ... and this standard can be used in a variety of ways. When compared to actual cost, there is a measure of performance. With good understanding of the make-up of a standard cost there can be planning and engineering for cost improvement ... and so on.

A standard value is a theoretical computation based on analysis of a variety of elements of value ... those that are important for the people concerned. Big questions have to be addressed, and some of these are related to money, some to future perspectives, some are emotional.

A good starting point is to consider the difference between the following two situations: (1) a 25 year old in the USA with a good education and in good health with all sorts of possibilities; and, (2) a 25 year old in a developing country without education and in poor health and with nothing much in terms of possibilities.

Situation 1 can reasonably be valued at (say) 1,010,000 where you can think of the numbers as US dollars, but in reality they are merely a quantification. Situation 2 can be valued at perhaps 10,000. In the first case the potential and the money earning power of the individual is enormous ... but in the second case the money earning power of the individual is essentially nothing. Arguably there is an emotional value to be attached to both people ... and it is reasonable to consider the quantification of this should be the same in a rich country as in a poor country. Accordingly just 10000 units in both cases.

Another example may also serve to explain value in the context of CA. When an oil company costs its production for the purposes of calculating its profit and preparing financial reports it includes all the cost disbursements made from the time it gets access to an area to explore and drill ... and the costs associated with drilling and pumping and transporting, etc. It does not have any number for the cost of actually using the oil that exists in the ground. This is considered as zero ... even though the cost of replacing this energy resource would be way bigger than the costs being incurred to bring this free material through a production process and to market. The value consumed that is part of the assets of the planet is not being accounted for in normal money accounting, but it needs to be in CA's full value accounting methodology.

Putting the standard value methodology in place is going to be accelerated by applying the ideas at the community level and within organizations rather than at the national level. There are various initiatives to do something different from money data at the national level ... and that is certainly a step in the right direction but it does not have much potential to be used to change the way major operational and investment decisions are made.

One example is the action of leadership in Bhutan to use a metric they have called Gross National Happiness rather than Gross National Product. This reflects the value idea quite well. It is reported that as many as 40 countries are now using some version of this measure ... but it is not mainstream by a long way. Also, some years back ... almost 20 years now, the United Nations Development Programme (UNDP) started publishing an annual Human Development Report to incorporate some human measures of society into the global reporting and to balance somewhat the money economics reporting of the World Bank in their Annual Development Report. While the UNDP initiative had merit, it had a terrible flaw in that the cost of achieving progress was ignored. As a result there is now a lot of data about what is and how it has trended ... but little or nothing about the cost of doing it. Community Analytics (CA), of course, has an interest in both the status, the progress and the performance ... all of which should be optimized in order for society to be successful and sustainable.

There is a lot more to say about value ... this is just a start. More to come. In haste!

Peter Burgess