Helping Finance Self-Reliance

DAI advises national economic authorities to implement a holistic approach to financing their development priorities, including helping them boost domestically generated tax revenue, maximize the efficiency and transparency of public spending, and partner with the private sector to stimulate investment and inclusive growth.

National governments are the largest single consumer of goods, and the largest single employer in most of the developing world—and thus have tremendous influence over local economies that increases in importance in times of crisis. As official development assistance declines in relative importance to domestic revenue and private capital flows, countries are embracing a more integrated approach to finance their pursuit of the Sustainable Development Goals. Modernizing public finance systems can unlock domestic revenue for essential infrastructure and basic services—laying foundations for poverty reduction and inclusive growth.

Domestic Revenue Mobilization

DAI helps national and sub-national governments across the full range of domestic revenue generation levers—from policy analysis and enhancements, to administrative improvements in tax collections, data analytics, property registration, digital cadasters, collection of user fees for services, public private partnerships, and more.

In El Salvador, DAI helped the government increase net tax revenue from 13.3 percent at the outset of assistance in 2005 to 18.2 percent of the gross domestic product (GDP) in 2018, without increasing tax rates or substantial changes to the tax code. The project helped the Internal Revenue Directorate build a cloud-based data warehouse with detailed taxpayer profiles, returns history, and third-party data sources to conduct data mining that identifies taxpayers at high-risk of non-compliance.

In Liberia, the Revenue Generation for Governance and Growth (RG3) project launched a mobile platform for payments for tax liability and non-tax fees for five agencies. RG3’s mobile platform reduced the cost of compliance and expenses for thousands of Liberians: Since the inception of the platform in April 2018, more than 40,000 payments have been made, totaling more than $5 million in revenue.

Public Financial Management

DAI helps governments spend public resources more efficiently through sophisticated medium-term planning and budgeting, performance budget reforms, improved treasury operations, more transparent and accountable public procurements, and modernized governing IT infrastructure.

Under the Philippines Facilitating Public Investment (FPI) project, DAI assisted the Department of Budget Management (DBM) to modernize the Government’s procurement and accounting practices to lay the foundations for performance-informed budgeting. FPI helped develop and implement a strategy that built the capacity of the DBM to prepare the 2015 budget with a results-oriented perspective—starting with functional reviews of transport, agriculture, and health to improve planning, budgeting, and performance evaluation of these agencies.

In El Salvador, DAI helped the Ministry of Finance develop a state-of-the-art Integrated Financial Management Information System. The system will integrate and centralize financial management functions for the whole of government. The impact on efficiency, transparency, and accountability in the use of public funds will be dramatic by automating paper-based processes and creating a consolidated, virtual audit trail. This reform also supports and automates our support to the national adoption of International Public-Sector Accounting Standards.

Fiscal Transparency and Accountability

DAI supports government authorities to engage more transparently with their populations on fiscal issues. We support national Open Government Plans, accession to the Organisation for Economic Co-operation and Development, access to public information, improved country scores on the Open Budget Index, and codifying Open Contracting Standards for procurement.

Under the Macro-Economic Stabilization and Reform (MESR) project in Egypt, DAI helped the Fiscal Transparency and Citizen Engagement Unit to address transparency gaps identified in the 2017 Open Budget Survey. The latest report published in April 2020 placed Egypt second in the Middle East after improvements attributed to increased access to budget figures via the Government of Egypt’s publication of the citizen’s budget and pre-budget statements that MESR supported.

The Kosovo Transparent, Effective, and Accountable Municipalities (TEAM) project has significantly contributed to increased transparency of the public procurement process nationwide. DAI used Open Contracting Data Standards in the procurement process to standardize procurement data and make it more accessible to civil society, the media, and the broader private sector (not just industry insiders), developed the Open Procurement Transparency Portal, and is supporting interoperability between the e-Procurement System and the Kosovo Finance Management Information System to enable end-to-end tracing of public funds. The Kosova Democratic Institute declared that the greatest achievement of 2019 was the publication of contracts on the e-Procurement platform, with budget transparency increased by 16 percent compared to the previous year over €1.2 billion worth of procurements processed through the platform.

Enabling Environment for Investment

Healthy enabling environments for investment are marked by a high level of confidence in the rule of law, fair and equitable competition policy, transparency and access to information, and strong property ownership protections. DAI helps countries shape their investment and entrepreneurship ecosystem through a comprehensive set of technical advisory services to governments, private sector associations, and individual companies.

The DaNa Facility in Myanmar works to reduce poverty and increase incomes by fostering a business environment conducive to job creation and expanding economic opportunities for small and medium enterprises. DaNa works across multiple levels, including with government policy makers, private sector leaders, and entrepreneurs, to address key constraints to inclusive growth. DAI has supported initiatives that reduced the number of days it takes to register a business from 36 in 2016 to 13 in 2017 and helped $3.4 billion worth of imported goods becoming licence-free in 2017. DaNa exceeded its target to support the reduction in the cost of starting a business in the country, which fell from $1,232 in 2016 to $446 in 2017.

The East Africa Trade and Investment Hub employed a transaction facilitation approach that was the beginning of a “pay for results” type model. The approach resulted in $176.6 million of private investment deals facilitated. The project accomplished the following systemic changes:

• Successfully advocated for a Common External Tariff stay of application with the Governments of Kenya and Ethiopia to allow the importation of maize duty-free during the Kenya food crisis in 2017.
• Supported Ethiopian grain exporters to meet regional market standards and requirements.* Worked with partners in Zambia to remove a maize export ban and 10 percent export tax in 2017 to allow maize trade between Zambia and Kenya.
• Enabled Zambian traders to export to the East African Community by supporting the Government of Zambia to resolve trans-shipment challenges with the Government of Tanzania.

Functioning Financial Markets

DAI supports national governments, financial institutions, regulators, and credit reporting agencies to develop and deepen more functional and transparent financial markets to help allocate capital to underserved businesses and sectors.

DAI worked in Kenya, under the Financial Inclusion for Rural Microenterprise (FIRM) project, to develop and deliver products and services at the county level to those who have been historically excluded from the financial system by combining mobile solutions, private sector capital, and innovative partnerships to expand credit access for micro, small, and medium-sized enterprises throughout Kenya. Between 2011 and 2016, FIRM facilitated more than $1 billion in financing of agricultural and rural loans that benefited more than 2.5 million mostly farm-based households and more than 1.7 million members of producer organizations and other Feed the Future beneficiaries, as well as promoted county-level and energy investments tied to Power Africa.

In Ukraine, the Financial Sector Transformation (FST) project secured the passage of four economic governance laws including two that combat corruption: The Base Erosion and Profit Shifting Law and Anti-Money Laundering (AML) Law. The AML law fundamentally transforms Ukraine’s legal framework for preventing and combatting money laundering, which cost the nation an estimated $12.3 billion in 2018. Moreover, the new law brings Ukraine’s AML framework into compliance with international standards. FST provided legal and technical advice at every step of the process, from conceptualization to passage of this transformative legislation.