This note draws on lessons learned to provide an introduction to political economy (PE) assessment for World Bank sector- and project-based operational teams. The last decade of experience has demonstrated that PE assessments can improve project design, lessen risk, explain why reform champions may fail to deliver, and can promote more thoughtful engagement with client governments.
PE analysis can be carried out at country, sector or project level – wherever it is most effective in helping the task team to address the challenge identified. Country-level analysis provides a detailed view of the national political economy drivers. Sector or project level assessments focus on detail around specific components, such as the location of a new road or the scope of a primary education initiative. These supplement country-level analysis by identifying drivers relevant to the specific intervention and undertaking in-depth analysis.
A PE assessment typically involves four steps: 1) clearly identify the problem or opportunity that it aims to address; 2) map out the institutional and governance arrangements and capacities; 3) examine the political economy drivers; and 4) propose recommendations on the way forward. These steps involve asking:
- What are the challenges? What evidence is there of poor outcomes to which PE issues appear to contribute?
- What are the institutional arrangements? Are they capable, effective and efficient? Consider institutions, laws and regulations, policy processes (formal and de facto rules of the game), and corruption.
- Why are things this way? Why are policies or institutional arrangements not being improved? Analyse stakeholders’ incentives, rents and rent distribution, historical legacies and earlier reform experiences, and social trends and forces.
- What can be done? Is the project going to work within the existing reform space and/or seek to expand it? Recommend actions – these might cover, for example, tailoring and sequencing project or sector work, and communication strategies.
PE assessments need to be grounded in a focused problem, to have their findings checked by sector and country teams, and to produce operationally relevant recommendations. In addition:
- PE assessments should be commissioned early so that findings can be incorporated into project design: undertaking a small study prior to budget agreement is better than doing a more in-depth study later on.
- To help ensure that the assessment provides an appropriate balance of focus and breadth, the task team needs a shared understanding of the following: (a) the focus of the work; (b) the type of output (informal or published); (c) whether the assessment will be used internally only, or as part of a participatory approach with other stakeholders; and (d) how the analysis will inform operational design and implementation.
- Project-level PE analysis needs to be viewed in the context of country-level and sector-level analysis to be meaningful. Existing country- or sector-level analyses by the Bank or other donors could be used as a starting point.
- Assessments need to be appropriate to time and financial constraints in output.
- While PE assessments increase staff workload and require tactful conversations with clients and project partners, their potential benefits outweigh their costs.
