CHAPTER I: Future Direction

NEX was introduced as the "norm" during the Fifth Programming Cycle (1992-1996). Not surprisingly, its adoption was strongly supported by participating governments. After several years of experience with NEX, most personnel of UNDP country offices, programmes, and governments are now committed to the process and policy. But the broad implementation of National Execution is a complex and difficult endeavor that is not yet complete. Guidelines and definitions are still evolving and country offices are improvising as they cope with the challenges of practical implementation.

One consequence of the recent evolution from Agency Execution to National Execution is that it has blurred the conceptual and operational clarity that had once characterized the traditional tripartite (Government-UNDP-UN Agency) system. For many people, the term "tripartite" has become a codeword meaning simply Agency

Execution, rather than referring more broadly to the roles of the three parties to a programme. The lack of clarity stems partly from the "Government Execution" model whereby the government replaced the agency, leaving only two parties to the programme agreement.

NEX is a modality that has a number of positive attributes each of which has its limitations. It greatly improves and expands the sense of ownership of programmes. Ownership, however, is not costless, and its price is often the delay of implementation due to the participatory nature of formulation.

The modality significantly increases the level of self-reliance. Yet this characteristic, is not riskless either, for in some cases the international character of the UN technical cooperation may be lost.

NEX contributes to capacity building, especially to the development of human resources, and in some environments to organizational capacity building. But it has not been able to address directly the overall problem of weak public sector institutions, despite the fact that it puts UNDP's programmes largely into the hands of flawed public bureaucracies. The flawed environment necessitates short-term compromises on the part of UNDP-assisted programmes (support units, parallel salary scales, and others) that jeopardize somewhat the long-term objective of institutional capacity building.

The greater integration of UNDP-assisted programmes into normal governmental operations, the wider participation of national persons and institutions, the stronger sense of ownership, all should enhance project sustainability, right from the beginning of the programme. Under NEX, sustainability has the potential of becoming not a simple continuation of project benefits following the termination of the assistance, but an on-going evolution of a general planning and management capability.

Another characteristic of the modality is its cost effectiveness. NEX substitutes national for international personnel; hence it uses less expensive resources. If done selectively, this improves cost effectiveness and capacity building simultaneously. But the process has many hidden costs; some are recurrent and others are of an investment nature, such as the mere process of introducing NEX as the main modality. These two cost components taken together may make NEX less cost effective than is maintained.

Although many feared that the wholesale push for National Execution would compromise UNDP's overall financial accountability, to date there is sufficient evidence that this is not a problem. Much of the funding is handled directly by UNDP country offices and is fully accounted for with no added risk. (Although it does involve a significant increase in UNDP country office workload.) The remaining funds which are advanced to national project management on a quarterly basis are also adequately accounted for before the country office approves the subsequent advance. However, although adequate, audit compliance suffers from the weak capacity of many governments to carry out the procedure.

Another fear was that National Execution would compromise the technical quality of UNDP programmes. Here, too, there is no evidence that

the technical quality of NEX programmes is in general inferior to that of agency execution. Nor do NEX programmes tend to be simpler than agency-executed programmes. NEX projects also have a higher rate of compliance with mandated mid-term and final evaluations than do agency-executed projects. UN specialized agencies still contribute significant technical inputs to most programmes, and still participate in programme formulations and evaluations.

When resolving in 1992 that the NEX modality should become the norm in UNDP programming, the (former) Governing Council intended to reduce the management role of the UN specialized agencies and allow them to focus on providing technical resources, especially to upstream activities, including formulation, technical monitoring and quality control, and on participating in evaluations. This participation has not been optimal, since the new system of agency support costs has not worked well. The agencies themselves have not yet fully adapted to their new roles and to the changing requirements of NEX and the Programme Approach. Governments

and UNDP country offices often did not encourage an optimal participation of the agencies, and the climate of misunderstanding between agencies, governments, and UNDP was not conducive to cooperation.

Despite the start-up difficulties emanating from its rapid implementation and evolution, the National Execution Modality has enhanced UNDP's comparative advantage as a development agency contributing to sustainable human development. NEX appears to be making sig-

nificant progress in accomplishing its stated purposes of enhancing ownership, self-reliance, capacity building, sustainability, and cost effectiveness. It is providing technical assistance and training; representing the interests of the recipient UN member country; providing and strengthening long-term institutional linkages with international scientific institutions; and providing a certain neutrality in its aid programmes.

Because the terminology ("executing", "implementing", "tripartite") from previous UNDP modalities carry contradictory layers of meanings it is recommended that the institutional roles be rethought from first principles. Borrowing from the conceptual framework of modern institutional economics, the following is put forth.

Government and UNDP are partners in the development programmes of a country. They are the "owners" of a programme and should share its specific objectives. The two partners select a "management team" that is solely responsible to them. This management team is in most instances a government ministry or other national entity, but could also be a UN specialized agency if the partners determined that this is optimal. The management, in turn, can subcontract agents to provide specialized technical inputs under its direction. These "subcontractors" may include other government departments, international specialized agencies, NGOs and private firms. There may be just one such entity, or many depending on the size and complexity of the programme. These subcontractors report to the management. In short, two parties - government and UNDP - come together to formulate a programme and then invite a third party to manage it.

Management will report regularly to the partners on the progress of the programme and on the use of the programme funds, as specified in the

programme document and in accordance with UNDP and government regulations. Management will also be subject to external evaluation and auditing according to UNDP and government regulations, and as specified in the programme document.

In order to operationalize this new model of institutional roles, the following specific actions would be required:

• The 1992 guidelines should be reviewed and the confusing distinction between "execution" and "implementation" should be abandoned in favor of the conceptually clear and accepted terminology of "owners" and "manager." Guidelines should be focused on governance aspects of NEX first, management guidelines should be developed thereafter.

• External monitoring agreements should be developed, with adequate provision in the programme budget, to become an integral part of all programme agreements, to ensure that external substantive and financial monitoring, including evaluations and audits, are included in the governance framework for NEX programmes.

• The programme agreement should be formatted to accommodate the three legal contracts for programme management, external technical and financial monitoring with a view to providing the proper contractual basis for NEX. UNDP and Government as well as programme management must sign the programme agreement before it becomes effective. The designated monitoring agents should also be signatories of the document. The Standard Basic Agreements and PPM should be revised to reflect the changed contractual reality of NEX. The legal foundations to transfer management responsibilities from the central coordinating ministry to other government entities need to be reviewed.

• The feasibility should be explored and arrangements developed for involving NGOs and private sector entities as managers of programmes jointly owned by the government and UNDP. This may require changes in UNDP as well as country legislation.

• UNDP Resident Representatives should be relied upon in determining the government procedural requirements that will minimize the administrative workload of programmes while preserving proper accountability.

• UNDP Resident Representatives should be encouraged to continue their efforts to reduce the involvement of the Country Office as contractor/sub-contractor of programme management, emphasizing, rather, its main function as donor and partner.

Recommendation 2: UNDP and the UN Specialized Agencies Should Improve the Mechanisms for Engaging UN Technical Expertise

The Governing Council and the General Assembly clearly intended that UN Agencies should continue to provide important technical guidance and resources to UNDP-assisted programmes, but that they should cede the overall management role to national entities in most instances. This technical cooperation can be smoother and more effective, if:

• The Resident Representatives seek to involve the UN agencies as fully as possible in the planning of the Sixth Cycle programme. In

this regard the General Assembly Resolution (47/199) calling for the formulation of Country Strategy Notes, providing a macro-planning framework with full participation of UN organizations is to be noted.

• The participation of the UN agencies in programme formulation is enhanced. This is key to improving the agencies' participation in implementation, monitoring, and evaluation. Because programme formulation under NEX is a longer, more participatory, and more locally specific activity, the traditional short-term agency formulation mission does not contribute adequately to the process. The enhancing of agency participation in formulation, will produce benefits of more effective technical participation in later implementation, monitoring, and evaluation.

• Care is taken to make the agency support cost system function appropriately, so that the UN system as a whole stays effective in technical cooperation, making optimum use of its institutional resources.

• Agencies continue to improve their reputations with their client governments regarding their responsiveness and the quality of their technical inputs.

The task of establishing National Execution as the main modality for UNDP-funded programming is far from complete. UNDP Headquarters should continue to monitor the progress and consequences of key attributes of NEX. One issue is to monitor the extent to which UNDP-funded programmes continue to reflect overriding UNDP mandates and themes such as poverty alleviation, grassroots participation, environmental preservation, women's participation, and so forth. Active steps will have to be taken wherever and whenever the NEX modality can be used as leverage for these priority themes.

Although it is too early to assess the longer-term and more dynamic aspects of sustainability, this should be examined at regular intervals as programmes mature. Moreover, although NEX alone is unlikely to solve the problems emanating from the absence of an enabling environment, the capacity building component of NEX should be assessed more closely to assure that it is indeed contributing to capacity building. Future reviews of the experiences of the Fifth Programming Cycle in these respects should clarify the misconception that national execution means simply execution/implementation by nationals. Similarly the issue of whether or not NEX is cost effective will require a full and specifically focused evaluation at some point in the near future. The introduction of the NEX modality entails non-trivial indirect transaction costs that preclude definitive statement at this time as to NEX's real long-term cost effectiveness.

Much is at stake, as the United Nations system continues to modify its policies in its endeavor to make a unique and effective contribution in a changing international environment. It does not overstate the case to say that the future of UNDP now depends upon its ability, in cooperation with the recipient countries and UN specialized agencies, to make National Execution a successful instrument of development assistance.