Sustainable Public Financial Management

New portal ensures better expenditure management, increases accountability and transparency in government procurement  

Ottawa, Canada (August 26, 2011) – FreeBalance, a Government Resource Planning (GRP) software For Profit Social Enterprise (FOPSE), today announced that the Government of the Democratic Republic of Timor-Leste (RDTL) has launched the web-based eProcurement Portal.

The eProcurement Portal in Timor-Leste was officially launched at the Extractive Industries Transparency Initiative (EITI) regional conference “Beyond EITI: Timor-Leste Transparency Model” by His Excellency, Prime Minister Kay Rala Xanana Gusmão with the Minister of Finance, Emilia Pires. The announcement follows the recently launched Transparency Portal by the RDTL. 

The eProcurement Portal in Timor-Leste enables web users to interactively access and review open government tenders. These tenders are grouped business types to assist businesses. Web users can also access and review all awarded tenders. The eProcurement portal is accessible to members of the public, Non-Governmental Organizations, businesses and development partners. Public access to tenders allows all citizens and vendors to download tenders ensuring equal opportunity and improving value for money. The eProcurement Portal ensures that all tenders by public entities are posted onto a single internet site. Bidders are able to download legal bidding documents. All procurement awards are published.  All procurement procedures, changes and instructions are published and are transparent.

“With the launch of the eProcurement Portal, the Government of Timor-Leste continues to demonstrate leadership in transparency, trust and accountability,” said Manuel Pietra, President & CEO of FreeBalance. “The eProcurement Portal improves transparency of the procurement process by publishing the procurement selection criteria and creating an accurate audit trail. Confidence levels from citizens, NGOs, and donor confidence levels in the government will improve when everyone can see who is buying, what was purchased, who was awarded the contract, and what price the Government paid.”

The eProcurement portal integrates with back-office automated procurement and commitment management functionality from the FreeBalance Accountability Suite. This enables rapid deployment of tender opportunities, improves efficiency and reduces errors. This integration will assist the Government of Timor-Leste to implement critical infrastructure projects more quickly and more efficiently. 

FreeBalance has been working with the RDTL since 2000. FreeBalance has provided GRP software and PFM services supporting improved governance, accountability, and transparency. The Government of the Democratic Republic of Timor-Leste uses FreeBalance Financials, Purchasing, Assets, Human Capital Accountability, Treasury, and Performance Budgeting modules. FreeBalance Procurement, Minister’s Dashboard, Data Mart, OLAP Analytics, and Document Management modules were implemented in late 2010 and went into production in early 2011. On March 15, 2011, the RDTL officially launched the Transparency Portal.

FreeBalance customers span the globe and the user community includes public financial management professionals in 19 countries. FreeBalance operates in 15 customer time zones. FreeBalance software manages a global civil service workforce of 1,500,000, and also manages a quarter trillion ($US) annual budgets worldwide. FreeBalance is active in 19 countries, including Antigua & Barbuda, Afghanistan, Canada, Iraq, Kosovo, Kyrgyz Republic, Liberia, Mongolia, Namibia, Pakistan, Sierra Leone, Southern Sudan, Timor-Leste, and Uganda among others. 

About the Democratic Republic of Timor-Leste
Internationally recognized as an independent state in 2002, Timor-Leste is located in south western Asia. The former Portuguese colony has witnessed rapid development growth in recent years. Tetum and Portuguese are the official languages.

About FreeBalance
FreeBalance helps governments around the world leverage robust Government Resource Planning (GRP) technology to accelerate country growth. FreeBalance software solutions for public financial and human resource management support reform and modernization to improve governance, transparency and accountability. Good governance is required to improve development results. For more information, visit www.freebalance.com. 

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Doug Hadden, VP Products

The Government of Timor-Leste has taken another step towards leading-edge government transparency with the launch of an eProcurement portal. The Timor-Leste transparency portal was first launched in March of this year with budget transparency. The World Bank has commended the government commitment of revenue transparency as the first country in Asia/Pacific to fully support and be certified for the Extractive Industries Transparency Initiative (EITI).

What does this mean for Corporate Social Responsibility (CSR)? How does it align with being a social enterprise?

Real Social Responsibility

There is a debate about CSR. Critics suggest that CSR is fake, just feel-good marketing. Others see CSR as a cost with few benefits. My sense is that what we understand as CSR is maturing to something else. There is a significant difference between how social enterprises like FreeBalance approaches the world compared to companies who sell similar software.

For example, there is a well-known software company sponsoring a yacht in a famous yacht race. (FreeBalance sponsored a 5K run to raise money for cancer research). Another well-known company uses some social responsibility to purchase modern art. (FreeBalance collects art from children as SOS Children’s Villages). Why the difference? Social responsibility is at the core of what we do: helping country growth through improving governance.

Making a Difference as an Innovation Motivation

Umair Haque has made a strong case of meaningful and sustainable capitalism. Followers of his blog entries and twitter feeds often disagree with this notion. Yet, I see it almost every day at FreeBalance.

A colleague at a company I worked for previously confided in me: “what am I going to tell my grandchildren, that I helped insurance companies become more profitable?” Don’t get me wrong, my time with that company was rewarding. I learned a lot and made some lifelong friends. However, the motivation to innovate was intellectual. We didn’t internalize the angst of insurance company executives. Working long hours, as we often did, was not a cause of celebration. I rarely woke up at 3 in the morning with eureka moments. (Mostly nightmares.)

Yet at FreeBalance, we’re actually doing something meaningful. Our teams in Canada, Portugal and Timor-Leste worked around the clock. They did so because they believe that this contribution will have a cumulative effect in making the lives of the Timorese better. And, consequently, the world a better place.

Yes, but what about the Business?

Our transformation from a traditional software vendor to a For Profit Social Enterprise (FOPSE) has resulted in more profit and rapid growth relative to the industry. It seems to be superior to the traditional notion of “the business of business is business.”

And, it’s not because people are motivated to work harder – rather to work smarter.

What happened to that company I worked for? After a series of acquisitions, they are part of that software company that sponsors the yacht.

Doug Hadden, VP Products

Media guru Marshall McLuhan observed that newspapers report on bad news in order to sell the good news- advertising. This seems to be the overwhelming approach to journalists covering Afghanistan. Including from such prestigious publications as the Wall Street Journal, Daily Telegraph and Reuters (as I’ve pointed out before). It’s as if there is a contest among the press to come up with the most sensational headline or negative visceral presentation about Afghanistan.

That prize might belong to the Daily Mail in the UK for the story £70m of British aid ‘paid to the Taliban’: Cash wasted on bribes and protection money, say campaigners written by Kristy Walker. The premise of the story is that corruption is causing aid money in Afghanistan to be directed to the Taliban. The added flavour here is the inclusion of three large photos of Taliban desperadoes ensconced with weapons. This gives the impression that the British government is knowingly presenting rocket launchers like bonbons to the insurgents. The cornerstone of the story is that up to 10% of British aid is being redirected to the Taliban. This is extrapolated to the “aid doesn’t work” narrative prevalent in the Western press.

Meanwhile, Scott Gilmore of the Peace Dividend Trust describes how US Govenment Success Touted as Failure in Afghanistan. He points out that the press is “reporting that a jaw dropping $360m of US govt money was lost to insurgents in Afghanistan through graft, theft, and intimidation.” Yet, this is only 1.1% of aid money lost to insurgents. One wonders whether the US government achieves 98.9% corruption-free spending within the United States.

As we have pointed out, there has been significant progress in public financial management in Afghanistan. The government has automated almost 100% of budget execution and closes 90% of revenue transactions within 24 hours. It meets international standards and the money is traceable. What Ms. Walker of the Daily Mail seems to ignore is that the reported graft occurs outside of the government financial management system because many donors are concerned about the political public relations consequences of doing so. In other words, many donors prefer methods that guarantee the fungibility of aid rather than use the proven government system. Why? Because the narrative suggests that the entire government is corrupt, facts be damned!

As you can imagine, I pointed this out in a comment on the Daily Mail site which was not accepted. And none of the other comments are visible. Which is a nice touch to maintain the narrative.

Carlos Lipari, FreeBalance Washington

This is a blog series discussing factors that impact development in developing countries. As a For Profit Social Enterprise (FOPSE), improving country growth through good governance is the core company mandate at FreeBalance. As such, FreeBalance participates in governance, development, foreign aid, ICT for development and transparency discussions globally.

“Poor governance is among the most important causes of state failure and underdevelopment. Hence innovations and reforms in the governmental and bureaucratic apparatus are an important prerequisite for development. E-government policy initiatives have gained international validity by the donor community as a catalyst for such reforms. To be sure, the characteristics of the state model implicit in e-government applications and the economics of transition from a backward state organization to e-government are equally relevant for the success of the initiative.” (Claudio Ciborra , Diego D. Navarra)

When politicians declare that they are striving to improve governance, they are often using a diplomatic way of saying that reducing corruption is a priority.

Increased Visibility of Governance and the Costs of Corruption

Over the last couple of decades, a greater importance has been given to both governance and the corruption that arises due to bad governance. Institutions such as the IMF, and World Bank have become increasingly interested in finding ways to access the quality of the governance of a given country and on how to improve it. (FreeBalance has had here an important role, providing countries with IT solutions that have rapidly improved their public financial management). Processes like the Public Expenditure and Financial Accountability (PEFA) framework is helping to focus governments on improving governance factors.

The perception of costs and benefits of corruption has changed over the years. Such change has contributed to turn governance into the very hot topic that it is today.

For a long period of time, economic literature had presented a “romantic” view of corruption. It had argued that corruption could relax government-imposed rigidities, increase commerce and even allocate investment in a more efficient way (by giving priority to more profitable investments). This perception has changed. The general belief today is that corruption benefits mostly “rent seekers”, that “it is subject to increasing returns that perpetuate it” and creates an environment “that, in time, can lead to the collapse of political regimes” (Vito Tanzi & Hamid Reza, IMF Edition 2000-2182)

In addition to this, corruption can be perceived as an extra tax on the economy that further distorts its activity and introduces uncertainty (Shang-Jin Wei, Nov. 1997). Like almost any tax, this limits economic activity to a suboptimal level and tends to slow down economic growth.

What history has demonstrated is that corruption leads to higher transactions costs and does not necessarily provide preference to agents that deliver the highest social surplus. Because investors are risk-averse, the uncertainty related to corruption (and bad governance in general) is incompatible with low risk premiums, which affects investment opportunities, making them less attractive.

Corruption and Poverty

One of the reasons why corruption also depresses the country’s development has to do with the fact that the capital raised by means of corruption, being illegal, tends to be kept outside the country, instead of invested in the local economy. This topic is particularly sensitive in countries with more corruption concentrated at a high level because as it dries out the economy from resources that should finance private demand and investment.

When it comes to the impact of corruption on poverty, even though there is some evidence that reducing corruption actually reduces income inequity (Sanjeev Gupta et all, Economics of Governance, 3^rd Edition 2002), I would agree that it is very important to understand and try to quantify the potential impact that certain anti-corruption measures will have on inequity and the social costs related to the adjustment process that is always necessary. Certain types of small corruption, when paid by the wealthiest of a given country or its foreigners, can ultimately provide a better life for many of its citizens, allowing some of these low income families to finance their children’s education and open small businesses. Changing the income structure of these families can have high social costs and this should not be ignored. Even so, one can easily agree that corruption must be reduced and that it tends to strongly limit a country’s ability to grow.

The fact that developed countries providing development assistance, along with international organizations such as the IMF or the World Bank are becoming more sensitive to this issue is just another reason why better governance is becoming crucial for the success of developing nations. Finally, this also allows us to better understand why a company such as FreeBalance has such an important role leveraging economic growth.

According to the United Nations, the middle class has a crucial role when it comes to improve local governance. In order to achieve this, though, it has to be well informed, interested, organized, and empowered, actively pursuing it.

(UNESCAP)

Doug Hadden, VP Products

John Moore of the Caribbean Regional Technical Assistance Centre (CARTAC)  has published a paper recommending the use of Content Management Software (CMS) such as Alfresco or Microsoft Sharepoint to manage the budget formulation process and support collaboration. The paper was described on the International Monetary Fund (IMF) blog. It generated some very lengthy discussion – particularly from me.

My contention is that CMS software does not satisfy the core requirements of budget formulation. And, the majority of benefits ascribed to the use of a CMS can be achieved through the use of Commercial Off-the-Shelf (COTS) budget management software such as FreeBalance Performance Budgeting. A CMS, in my view, is an ideal repository for managing document content and documenting processes and should be considered as part of a comprehensive budget management system.

Mr. Moore suggests that “Budget formulation is an example of a complex document development process that can benefit from the innovative use of a CMS.” Yet, Budget management is fundamentally financial in nature.

CMS Benefits

Mr. Moore provides a compelling list of benefits for using a CMS for budget formulation including:

• IT: avoid the need for IT involvement for rolling out, managing and adapting the system
• Flexibility: ability to adapt to meet the government workflow and processes
• Rapid implementation: ability to install quickly and gain benefits from the system rapidly
• Progressive activation: ability to update functions and processes as capacity improves and governments change
• Extensibility: ability to use the CMS for additional functions other than budget formulation
• Familiarity: ability to use standard office software tools in use by the government
• Cost: lower cost by leveraging open source tools or tools currently in use by the government

First Principles in Budget Formulation

It’s important to map out budget formulation functions. The table below represents a logical view of these functions.

Inputs

Inputs in the budget formulation process includes:

• Financial transactions from previous years (and the active fiscal year) and multi-year commitments that roll-over to subsequent years
• Previous budgets that had been passed and the changes that occurred to the budget during operation such as budget transfers
• The year 2 and 3 budget estimate from the Medium Term Expenditure Framework (MTEF) that provides the baseline for the working budget
• Macroeconomic data that predicts government revenue, identifies risks, and creates baseline budget assumptions such as currency exchange rates
• Documents like budget justification, policy information and reports.

Outputs

Outputs in the budget formulation process includes:

• Budget controls are integrated with the Integrated Financial Management Information System (IFMIS) for commitment accounting. This can also include warrants, supplemental budgets, continuing resolutions and other budget control methods
• Scenario plans that enables the government to quickly adjust budgets should risk factors come to fruition during the fiscal year
• Documents such as the budget book is created

What is the Purpose of Budget Management?

The budget is the legal embodiment of government policy. The budget is the financial bottom line in governments. It’s very much the critical factor in good public financial management. It’s no surprise that the Public Expenditure and Financial Accountability (PEFA) Performance Measurement Framework highlights the importance of budgets: (underlines are mine).

1. Credibility of the budget – The budget is realistic and is implemented as intended
2. Comprehensiveness and transparency – The budget and the fiscal risk oversight are comprehensive, and fiscal and budget information is accessible to the public.
3. Policy-based budgeting – The budget is prepared with due regard to government policy.
4. Predictability and control in budget execution – The budget is implemented in an orderly and predictable manner and there  are arrangements for the exercise of control and stewardship in the use of public funds.
5. Accounting, recording and reporting –  Adequate records and information are produced, maintained and disseminated  to meet decision-making control, management and reporting purposes.
6. External scrutiny and audit –  Arrangements for scrutiny of public finances and follow up by executive are operating.

My observation is that examining budget formulation is too narrow a topic. The budget management system should operate during the fiscal year to enable budget transfers, adding documents and reports, and running new scenarios.

Logical Budget Formulation Functions

A CMS supports some of the functions needed in budget formulation. Some elements are missing.

• Financial: Budget management software can support all of the financial functions required. These functions include ability to develop budgets in any combined top-down/bottom-up process. These systems can take previous data and adjust by formula (such as reduce by 5% all revenue categories or increase the cost of oil by 10%). It enables linking budget justification directly with the budget classifications. The budget passed by the legislature, often called the “organic budget law” or “the vote” is automatically integrated with the budget execution/accounting system to ensure proper budget controls. CMS software assumes that the financial calculations have occurred outside the system. Budget controls are managed outside the CMS, introducing the opportunity for errors. CMS software does not support the financial iterative nature of budget management.
• Performance: Budget management software can link to policy, program and performance classifications in order to show decision-makers how the budget is expected to impact outcomes. This enables effective performance monitoring and evaluation. CMS software can link to performance documents but cannot link to the budget classification. Decision-makers are not able to gain a holistic view of the government performance expectations.
• Content. Both budget formulation and CMS software can import or link to documents. Budget formulation software can import spreadsheet data directly to the financial budget plan. And, budget formulation software can merge documents with financial information to automatically render documents such as the budget book. Most CMS software does not support document automation. (Web CMS software like Drupal enables the creation of “books” but is somewhat limited in the ability to use all of the formatting from source office documents.)
• Workflow: Both budget formulation and CMS software can support flexible workflow processes. Budget formulation software supports the budget calendar through approval cycles where budget figures are approved by line ministries, budget office, Ministry of Finance etc. The estimated budget, based on input by users, can be calculated at any time. CMS software is not able to render the budget numbers at any time.
• Versioning: Both budget formulation and CMS software can support multiple versions and revision control.
• System and User Management: budget information is highly confidential. (I fundamentally disagree with Mr. Moore’s assertion: “budget systems that enforce data consistency among budget and accounting data are not popular because they lack flexibility” because data consistency and integrity is a prerequisite for budget formulation.) User permissions in the budget formulation system are tied directly to the chart of accounts. For example, a user in a line ministry may only have access to data from that line ministry and specific programs. The CMS software supports user security based on documents. In other words, a user with access to a broader range of financial information could publish a document in the CMS to users who are not supposed to see that information.
• Database: The database management system is the core to budget formulation and CMS software. Financial information is stored in structured data. Workflow is managed via the database as a “state machine”. Documents are stored in the database as large objects.

Revisiting the CMS Benefits

• IT: the assertion that CMS software requires less IT intervention than budget formulation systems is not well supported in the paper. CMS software needs to be installed, as do databases, virus protection, firewalls etc. Databases and users need to be managed.
• Flexibility: budget formulation systems can be just as flexible in managing workflow and processes as CMS software.
• Rapid implementation: budget formulation software may take more time to implement than CMS because of the need to link with financial transactions
• Progressive activation: budget formulation software can be progressively activated to support new functions, policies and financial management
• Extensibility: budget formulation software can extend into comprehensive budget management but cannot, like CMS software, be used for a broad range of needs
• Familiarity: budget formulation software can support office tools and can operate like office tools such as providing a spreadsheet look and feel
• Cost: the cost factors providing in Annex A of the paper require more analysis. The point that “the direct cost for annual software license fees associated with a country’s FMIS and tax systems can be $500,000 E.C. or more” is comparing the cost of many financial applications with much more value to a government than a CMS.

Conclusions

1. Content management is part of budget formulation and does not provide the benefits of government-specific flexible budget management software. That’s why FreeBalance has integrated with Drupal and Sharepoint for budget management.
2. Financial information is core to budget formulation. That’s why any effective budget formulation system must integrate with budget classifications and the budget execution/accounting system.

Liza Benkovitch, FreeBalance Washington

With the current state of tech innovation spreading in Europe, Asia & North America, it is not surprising to see the rise in tech communities in Africa. Technological revolution fosters new growth of local businesses and provides a better infrastructure for sustainable development within the continent. This trend is often termed ICT4D or Information and Communications Technologies for Development.

Africa: The Continent of Opportunity

According to Gallup Survey, entrepreneurship in Africa is becoming a popular notion, with 1 out of 5 African young adults are planning to start a business in the next year. This will help overcome the negative stereotypes and rebrand Africa as a continent of opportunity, sustainability and a land of capacity building initiatives.

Given the current IT infrastructure limits in Africa, the high growth rate of African start-ups is impressive.  In sub-Saharan Africa alone, over 90% of business operations are conducted through SMEs and they contribute around 50% of GDP. Hence, more people have started their own small businesses and internet ventures. Obinna Ekezie, for example, is a Founder of a Nigerian start-up, www.wakanow.com. Wakanow is an online travel booking company that provides customers with convenience and flexibility to make online travel arrangements within Africa. E-services range from online tickets, corporate travel, hotel booking and even airport pickups.  And to add to the convenience factor – the Wakanow mobile app was just launched.

Funding African Startups

The nature of start-ups in Africa is evolving. Start-ups been funded primarily by venture capitalists and philanthropic investment firms, with the support of intermediary organizations. Active SMEs investors in Africa include Soros Economic Development Fund, Omidyar Network, and Google. Omidyar is known to fund companies and organizations that promote capacity building, government transparency and accountability projects. In Africa, the Omidyar Network is a financial backer of many organizations, including iHub, a Nairobi based incubator, known as the “nerve center for technology.” iHub is particularly interesting because it supports sustainability initiatives in Kenya by hiring local people to run the center and encouraging entrepreneurs to invest in their country by establishing small business enterprises (SMEs).  The brainchild behind this innovative project is Erik Hersman, a technology influencer and startup guru. iHub, and other incubators such as ActivSpaces (Cameroon), Bantalabs (Senegal, Paris, London), MEST Incubator (Ghana), all serve as an essential nexus for technology, financial capital and skills.

Government Transparency and Accountability Trends in Africa

Part of Omidyar Network’s investment strategy thus far has been to invest in the government transparency initiatives.  Most recently, the Omidyar Network and a Dutch NGO, Hivos, launched a multimillion dollar Nairobi fund, the Africa Technology and Transparency Initiative (ATTI). The purpose of ATTI is to invest in technological platforms that help citizens track government activities & expenditures throughout the country.

African countries are also committed to the International Aid Transparency Initiative (IATI) and Extractive Industries Transparency Initiative (EITI).

As many African countries are becoming hotbeds of tech activity, government transparency and accountability has become more critical in Africa. Good governance is considered critical to improving development outcomes and to improving the business climate.

In mid-June, the Government of Liberia launched the Integrated Financial Management Information System (IFMIS) at the Ministry of Finance. The IFMIS is the FreeBalance Accountability Suite software that enhances “government’s credibility with its citizens and development partners, and demonstrate its continuous commitment to transparency and accountability,” said Minister of Finance, Augustine Ngafuan.

The Government of Kenya launched an Open Data Initiative, a data web portal that enables official government information to become accessible to the general public.  The World Bank, along with Google and iHub assisted with the publication of the data and the Government of Kenya has contributed to the launch. The data sets are readily available through an online portal, where users can view the information on a local, national and constituent level.

Closing the Digital Divide: Africa Success Stories

The rise of small business enterprises and tech communities has influenced the political and economic landscape of many countries. Governments are now held accountable by financial institutions for all the loans, grants and credits. Now governments are accountable to citizens.

ICT4D has  become an indispensible tool for achieving development goals in Africa. It has created a window of opportunity for ‘out of the box’ tech entrepreneurs to leverage resources and improve their socio economic conditions at home.  African leaders have caught-on to the importance of investing in ICT and have made it a priority to provide communication technology services to citizens. Rwanda is a great example of a country that is committed to its ICT goals, especially when President Paul Kagame won the 2006 ICT Award for the second time in a row in Accra, Ghana. President Kagame was selected as the best head of state in Africa in support of ICT policy, surpassing South Africa, Ghana and Tanzania.  The success of the policy is attributed to Rwanda’s commitment to its ICT visions and “we in Rwanda have no intent to stand still as the rest of the globe moves forward at an ever increasing pace,” stated President Paul Kagame.

Speaking of moving forward, the technology boom in Egypt is also one not to be missed. International Finance Corporation reported that in 2011, out of 183 economies, Egypt’s “Starting a Business” ranking rose to 18 from 23 in 2010. Those who relied on social media to ignite the uprising in Tahrir Square are now creating businesses to jumpstart the economy.

Sustainability is a major theme in Africa entrepreneurship

Also exciting are the “made in Africa” solutions. These solutions tend to be more environmentally sustainable and operate better in the African context than products and services designed in “the West”.  The South African government has recently commissioned the first large scale solar panel facility in the country, while Nokia Siemens network has launched an energy solutions program to help reduce  network operating costs and power consumption through the use of renewable energy. Leading telecom operators in Africa, MTN and Vodacom, are also looking into renewable energy to power the stations in Sub-Sahara Africa.

South African green media company, Eco-Bin, transforms the use of advertising to promote eco sustainability. The ads on the back panel of the bins are used for educational purposes, while the E-lite material offers brand exposure all day, without using any extra power. Eco-Bin is a one stop shop for earth-friendly and sustainable products for South African communities.

The digital divide is closing in Africa through emerging tech- savvy nations and entreprenuers.

Carlos Lipari, FreeBalance Washington

This is a blog series discussing factors that impact development in developing countries. As a For Profit Social Enterprise (FOPSE), improving country growth through good governance is the core company mandate at FreeBalance. As such, FreeBalance participates in governance, development, foreign aid, ICT for development and transparency discussions globally.

Foreign aid has been accused of not promoting economic growth and development in developing countries.  In fact, many studies have criticized foreign aid, stating that it does not promote what it should, such as investment and less poverty, but what it should not, such as more government (Peter Boone, 1996). Some even argue that it is not promoting democracy because evidence was found that corrupt governments tend to receive more aid than less corrupt governments (Alberto Alesina & Weder, 1999).

Lack of Foreign Aid

But when it comes down to numbers, the OECD countries do not really spend a significant portion of their income helping other countries. The overall impact that this help could have among developing countries is, therefore, very limited. In fact the US, the largest contributor in nominal terms, was spending, back in 2009, 4.7% of its GDP with the military but just 0.2% of its GDP with official development assistance (foreign aid). The health care system in America, costing 17% of the national GDP, represents, alone, almost 100 times the amount of money spent on development assistance.  (World Bank and OECD)

The way assistance (help) is delivered is another essential variable to understand how will it help developing nations. This aspect has to be taken into account when analyzing how effective assistance is. Too often, “expensive”/inefficient ONGs with well-paid foreign workers together with other Western institutions and private companies end up absorbing a very large amount of the budget made available for assistance (William Easterly, 2002). As a result of this, little help ends up getting into the ground and, not surprisingly, research finds that economic development has not occurred.

Still regarding the figures of development assistance, OECD countries have contributed to this cause in 2010 with roughly 129 billion dollars, approximately the same value that was been provided in 2008 (121 billion dollars) at the start of the last world economic crises. Development Assistance is at the same level as it was in 2008, in percentage of the GDP, but only represents about 0.5% of the OECD GDP. Assistance has been relatively small over the last decades and attempts to increase it are most of the times unsuccessful as some countries (such as Italy over the last 6 years) do not resist cutting back on this item to finance domestic expenditures.  (OECD and Bill & Melinda Gates Foundation)

Doug Hadden, VP Products

Internet marketing guru Seth Godin warns us that social media is not television 2.0. It was looking at the web as TV 2.0 that ensured the dot com bubble/Internet “dark ages”, according to Godin in a Yahoo interview.

The interview is focused more on the marketing discipline. Yet, there are some lessons here about how social is a business model, not just a marketing channel.

Humans are still Humans

Godin suggests that the era of Mad Men where marketers spend money to sell average things to average folks is at an end. It’s the end of the ‘industrial’ era in marketing. Humans remain humans, so the impersonal approach is not likely to succeed. Some of the characteristics of this fundamental way to do business, according to Godin, includes:

• Transparency: people will find out the truth on the web, so organizations that persist in being open will be more successful that those who do not.
• Authenticity: social media will not be successful if it doesn’t match what the company is all about
• Communications: those in charge of communications (Godin says marketers) should be responsible for making products and supporting customers. (in other words, marketing becomes customer service that becomes marketing and products)
• Publicity: the product is the marketing, not the other way around

Extending these Ideas

My observations align with Godin. There are a few additional trends:

• Customer-centricity: industrial-style command and control structures have become ineffective in the social media network, so Godin’s idea of communications can be extended to all company processes
• Social: transparency and authenticity extends because social is becoming a new business model
• Sustainable: Corporate Social Responsibility (CSR) is maturing from a corporate sideline or marketing effort to new business models

2011 FreeBalance International Steering Committee

By Asylbek Bolotbaev, Deputy Director of the State Personnel Service of Kyrgyzstan (SPS) and Chairman of the Supervisory Support Fund for Public Servants

The implementation of an advanced information technology system for the Government of Kyrgyzstan was an important topic of discussion at the International Steering Committee meeting hosted by FreeBalance on January 16-19, 2011 in Portugal. FreeBalance, a Canadian company, is one of the largest software vendors specializing in finance and human resource management in Government.

The International Steering Committee Meeting was well attended by government officials from Kyrgyzstan, Canada, Portugal, Kosovo, Guatemala, Liberia, Mongolia, Sierra Leone, Timor Leste, Uganda, Antigua and Barbados. Good practices in human resource management, public financial management reform sequencing and government transparency were discussed.

I later summed up the direction and development of government information systems discussed at the meeting with my closing remarks to the Steering Committee. In particular, I provided insight into the direction of public financial and human resource management in government. Some of my observations are located below.

Towards Government 2.0

An important topic of discussion was the transition to a new model of information technology, known as “e-Government 2.0.” The objective of “e-Government 2.0” is to increase the convenience and accessibility of government services and information to citizens and to ensure transparency and accountability within the government agencies. While most modern government websites serve a purely functional purpose, new government websites will incorporate web 2.0 technologies to create user-friendly interactive web portals.  In this case, state owned websites will make official government data accessible to the public through an array of charts, graphs, databases and users can contribute with their thoughts and opinions through online discussions and commentaries.

“e-Government 2.0” is currently in its implementation phase in Kyrgyzstan. The World Bank Group, through its intermediary body, the GTAC, is leading the implementation processes of this project.  Therefore, the SPS of Kyrgyzstan will implement the Human Resource Management Information System (HRMIS), and the Ministry of Finance will implement the Treasury Management Information System (TMIS). These information tools, adapted to meet the needs and legal requirements of the Government of Kyrgyzstan, will improve transparency.

Human Resources Automation

The HRMIS will provide many benefits:

• Improved efficiency  of civil servant management through modern technology
• Increased quality of decision-making  through reports and up-to-date information
• Improvement in organizational structures and automated processes
• Facilitated training of personnel for executive positions through talent management
• Improved performance through the  evaluation and certification of staff member
• Improved efficiency by  maintaining detailed  records of employees’ expenses
• Improved compliance to regulations with taxes and assets declared by employees
• Accelerated professional development through automating training and learning
• Improved transparency by providing the general public with access to official information from state agencies.

Treasury Management

The TMIS will oversee the control and execution of budgets, while speeding up the payment system and reducing the use of paper documents between the Central Treasury and its regional offices. The TMIS system will ensure the transparency of the financial processes.

Next Steps

FreeBalance, along with World Bank, has already started the development of the HRMIS and TMIS systems in the country. Currently, the FreeBalance software supports the new “e-government 2.0” platform.

It must be noted that the World Bank will consider extending this project, provided that the results are positive. The launch of the HRMIS and TMIS is planned for January 2012.

Doug Hadden, VP Products

I’ve been trying to enjoy The Net Delusion – the Dark Side of Internet Freedom by Evgeny Morozov. Don’t get me wrong, there is a lot to enjoy: littered with sparkling disdain for cyberutopia and biting turns of phrase. Morozov, (@evgenymorozov) whose tweets and magazine articles are crisp and insightful, has managed to squeeze a magazine article into a full length book.  With a hodgepodge of evidence (aka confirmation bias). And no data visualization, so the proof points appear weak.

That’s not to say that he doesn’t have anything important to say. Morozov’s view that technological determinism is a vapid explanation for change deserves thought. After all, who wants to believe that they are a gadget? (Not Jason Lanier for one.)

The Horseless Carriages of Technological Determinism

The Cold War figures heavily in the historical context of The Net Delusion. Morozov questions whether radio broadcasts or fax machines really had any effect on the end of the Soviet empire. He also suggests that because Twitter did not change the regime in Iran, therefore, it doesn’t work. (And so on.) This is an example of where holes in the net denialism seem to form.

1. Technology speeds up communications, so the introduction of any technology does not create social change unless there are the economic or political pre-requisites to do so. The new medium alone does not create change.
2. Technology has macro effects. So, the micro situation (i.e. Tunisia compared to Iran) is not easily resolved even when there is evidence that people or the government did or did not use social media in any fundamental way. The effects of social media is in a network, so it doesn’t behave like broadcast or propaganda.
3. Different technology has different effects. Morozov points out that Marshall McLuhan suggested that radio led to extreme nationalism and seems to imply that other media has the same effect.  Radio is a hot medium. One-way. Social media is multidirectional. Anyone can be a content provider.
4. Social media is in the early days. So, the trivial can dominate the echo chamber. And, the previous medium (i.e. reality television) forms the content of the new. So, it’s a bit early to pass judgement on social media. And, we are in the “horseless carriage” days where we are looking at social media as an extension of old media (i.e. social media journalism).
5. Technological determinism and the “medium is the message” are two different things. The first supposes a specific outcome (i.e. democracy) while the other suggests changes in society (i.e. the relationship between citizens and government, but not necessarily “democracy”). So, the fact that twitter did not lead to democracy in Iran does not mean that social media is not fundamentally changing something.

Morozov crafts stirring invectives at social media proponents. He’s the Captain Haddock of social media criticism. (Although not so far as to characterize cyberenthusiasts as amoeba or protozoa – explicitly. It’s just that they haven’t thought things out. So, just a slightly lower form of homo sapien.)

Get a Horse?

Are we tied to values of the past? My sense is that Morozov sees more value in journalism than social media. More value in books than e-books. Ever since Socrates, who believed that writing destroys memory, every new medium has been criticized as lacking value. Or, like rock and roll, destroying values.

It’s not unusual for someone whose livelihood is predicated on previous media to find fault with the next.  We could suggest that Morozov could join the luddites and get off twitter and back to the typewriter. And off the grid. That would be a mistake. The Net Delusion opinionated noise can get in the way of more important questions:

1. Despite state interventions, is technology power shifting from governments to people as an overall trend? If so, what does this mean for governments?
2. Is democracy, as we define it today, a vestige of the past? Is the narrative that Russia is not a democracy rather fuzzy logic? Will the relationship between the state and citizens change in the era of social media and transnationalism?
3. Are private sector actors like Google an extension of national policy? Or, do these organizations operate within unique value systems?