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On MDG costing

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					Understanding the MDGs
Jan Vandemoortele1

The note attempts to correct some of the misunderstandings and misconceptions that have arisen about the millennium development goals (MDGs). It clarifies their origin and meaning and addresses some of the frequently asked questions. The note reviews global MDG progress and identifies growing disparities within countries as a major reason why the global targets are unlikely to be met by 2015. It suggests four practical steps for formulating an MDG-based national development strategy. It concludes by highlighting the need for a new partnership to accelerate progress in the remaining period before 2015.

June 2007

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UN Resident Coordinator and UNDP Resident Representative in Pakistan. In 2001, he co-chaired the UN inter-agency group that put together the MDGs. The views expressed are not necessarily those of the United Nations.

1. Four basic questions Some five years after the MDGs came into being, several misunderstandings have arisen about their genesis and meaning. The questions and answers below are meant to correct these. They may challenge received wisdom, but as the late economist John Kenneth Galbraith said, “The conventional view only serves to protect us from the painful job of thinking.” Are global targets new? Contrary to common belief, global target setting is an established practice. Back in 1961, governments agreed at the United Nations to aim for an average rate of economic growth of 5 per cent per year during the so-called „First Development Decade‟; a target that was actually surpassed. In 1966, the objective was set to eliminate smallpox, which was achieved in 1977. Not all targets have been achieved2; and after several false dawns and missed opportunities, one might be tempted to dismiss the MDGs as targets that are „easily set but never met‟. That would be a mistake. Global targets have made a difference, mostly by mobilising actors and resources – both global and local. Why do the MDGs cover the period 1990-2015? It can be safely assumed that a 25-year period was chosen because it is normally associated with the time span of one generation. World leaders made a promise that the current generation will “spare no effort to free our fellow men, women and children from the abject and dehumanising conditions of extreme poverty”.3 The starting year was 1990 when two major world summits took place – on education and on children – that resulted in a series of global targets. Why are some aspects not included in the MDGs? The MDGs were not developed from scratch. They resulted from an incremental process of generating a political consensus through world summits and international conferences in the 1990s. In 2000, the Millennium Summit summarised the key commitments made at these various gatherings. A year later, an UN inter-agency group extracted the key targets with a view to keeping them in the spotlight beyond the normal shelf-life of a declaration issued after a world summit. They became known as the MDGs. The targets were selected on the basis of two criteria: (i) whether internationally agreed indicators existed for measuring progress and (ii) whether reasonably good data were available to document global trends. Since there is no consensus on how to measure „good governance‟, for instance, that aspect of the Millennium Declaration was not included among the MDGs. While most of the missing aspects were due to nonmeasurability, some were absent by commission – not omission. The original MDGs
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2005 saw the deadline pass for three global targets. The first was to have gender parity in primary school enrolment. Although it was not achieved, the progress from 87% in 1990 to 94% in 2005 cannot be categorised as failure. The second target was to eradicate polio where considerable progress was made. The number of reported polio cases worldwide was cut from nearly 250,000 in 1990 to about 2,000 in 2005. The third target was to have three million HIV-infected people with access to life-saving drugs by the end of 2005. This „3 by 5‟ initiative of the World Health Organisation delivered for only about 1 million people, mostly due to severe restrictions imposed by the global trading system in medicines covered by intellectual property rights. 3 United Nations, 2000, Millennium Declaration. New York.

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did not cover reproductive health, for example, because there was no intergovernmental consensus in 2000 on this particular dimension of human development. Why are the targets not uniform? The MDG targets aim to reduce hunger by one-half, infant and child mortality by twothirds, and maternal mortality by three-quarters. Why are the quantitative targets not uniform? Why not reduce everything by three-quarters? The simple reason is that most global targets were set on the premise that global trends of the past 25 years would continue for the next 25 years. Were progress for child survival, for instance, to continue as in the 1970s and 1980s, the global under-five mortality rate (U5MR) in 2015 would be two-thirds lower than in 1990. Were the global net enrolment ratio (NER) to continue its increase of the 1970s and 1980s, universal primary education could be achieved by 2015. Diagram 1 illustrates that these targets are essentially based on an extrapolation of global trends of the 1970s and 1980s and projected forward till 2015.
Diagram 1

Global targets = extrapolated global trends 223
U5MR 166
132 103
100

NER
48 1960 59 1970

70

78

34

1980

1990

2000

2015

Source: UN staff estimates

Therefore, the question whether progress is on track can only be asked at one level, namely the global level. It cannot be asked for any specific region or country because the quantitative targets were set in line with global trends, not on the basis of actual trends for any particular regional or country. It is unfair and dis-empowering, for instance, to lament that sub-Saharan Africa will not meet the MDGs; simply because these targets were not set specifically for that region. The MDG targets are not meant as uniform yardsticks for measuring performance in each country and every region. The contents of the MDGs apply universally because they reflect fundamental social and economic rights. But their quantitative dimensions do not apply to all countries or regions. World leaders agreed to set global targets on the understanding that aggregate trends in the recent past made them feasible for the near future at the global level, not necessarily in each and every country. The spirit of the Millennium Declaration was not to impose a one-size-fits-all yardstick for measuring national performance, regardless of the historical background, natural endowments and particular challenges faced by each and every country.

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2. Two frequently asked questions The two most frequently asked questions about the MDGs are (i) Is the world on track? and (ii) How much will they cost? Journalists and politicians expect short and precise answers. However, neat and concise answers on complex matters are seldom correct. Is the world on track? The answer depends, to a large extent, on the choice of the indicator.4 All indicators are imperfect but some are more imperfect than others. Indicators have two basic ingredients: observation and transformation; but they use them in different proportions. The reliability of an indicator tends to decline as more transformation is involved. For instance, it is easier to observe whether a child is malnourished than to determine whether she lives on less than $1 a day. The latter cannot be readily observed; it needs a large set of information and complex calculations and transformations – creating many occasions for omissions and errors to occur.5 It is easier to observe whether a child is enrolled in school than to estimate whether she will complete primary education – which requires assumptions about repetition, dropout, reentry and ultimate dropout. Hence, the indicator „completion rate‟ is less reliable than the „enrolment ratio‟ – albeit that the former is more relevant for measuring progress. Among the agreed indicators for monitoring global MDG progress, the five that are preferable for their reliability and coverage are: (i) under-five mortality rate, (ii) underweight among children, (iii) net enrolment ratio in primary education, (iv) ratio of girls to boys in primary school, and (v) the proportion of births attended by skilled health personnel. Diagram 2 indicates global progress between 1990 and 2004 – covering nearly 60 per cent of the period 1990-2015. The three health-related indicators show that 30 per cent of the road was covered. Progress towards primary education was slightly better. Progress vis-à-vis gender equality in primary school was nearly on track. The one-sentence summary of the global databases is that progress since 1990 should have been twice as fast for the world to be on track. Based on these five indicators, the global MDG story can be summarised in three points: (a) progress continued since 1990, (b) but at a slower pace than in the 1970s and 1980s, and (c) much of it by-passed the countries and the people most in need of progress. The global databases indicate that the world was not on track for 2015.6

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Hence the oft-quoted remark attributed to Benjamin Disraeli, British Prime Minister in 1868 and 187480, that “there are three kinds of lies: lies, damned lies, and statistics”. 5 It is ironic that the most frequently used MDG indicator is among the most problematic ones. Recent data on China, for instance, show that the number of China‟s poor remained unchanged between 1996 and 2001; suggesting that the stunningly rapid rate of growth failed to make any difference for the estimated 212 million people who struggled to survive on less than $1 per day. Indeed, it is difficult to take the $1/day statistics at face value. See, amongst other, Reddy S. and T. Pogge, 2003, How Not to Count the Poor. Columbia University: New York. 6 For a statistical update on global and regional progress, see: United Nations, 2006, The Millennium Development Goals Report 2006. New York: Department of Economic and Social Affairs or visit the global database at http://mdgs.un.org/unsd/mdg/Host.aspx?Content=Data/Trends.htm

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Diagram 2

Global progress 1990-2004
Child mortality Child malnutrition

Maternal health

Primary education

Gender equality

1990
Achieved

2004
To be achieved

2015

Source: UN staff estimates

It is not entirely clear why the „roaring‟ 1990s did not produce faster progress. The world witnessed rapid globalisation, driven by booming trade and soaring capital flows; yet it did not translate in faster social progress. Several factors explain this apparent paradox, including the slow progress towards universal primary education, persistent gender discrimination, decline in foreign aid, crippling debt burdens, weak commodity prices, growing number of countries in conflict, not-so-good governance, and the HIV pandemic. The latter makes the global MDG agenda quite ambitious because the targets are basically extrapolated from the 1970s and 1980s – a period without HIV and Aids. A major factor that explains the global slow-down is the growing disparity within countries. Widening gaps are evident in many areas of human development. Measuring income poverty and income distribution is shrouded in data imperfections and methodological uncertainty. Fortunately, data for social indicators are more reliable. Surveys not only indicate that a child born in a poor family is more likely to suffer from malnutrition, be out-of-school, or face premature death than her counterpart born in a rich family in the same country; they also confirm that such gaps have been widening in recent years. The disparity in under-five mortality, for instance, increased in all six countries shown in diagram 3. During the 1990s, the ratio in U5MR for the bottom quintile vis-à-vis that for the top quintile rose from about two-to-one to over three-to-one.7 After a careful statistical analysis of 25 countries with relevant data, two UNICEF colleagues concluded that the reduction in the under-five mortality rate for the poor was “modest, and in most cases not statistically significant.”8 Inequality is becoming the ugly underbelly of prosperity. Disaggregated data on various sectors and from different countries indicate that social progress failed to benefit the poor and the most disadvantaged. This explains why global MDG progress slowed down in the 1990s. Unlike income, social indicators have upper limits – e.g. life
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The quintile distribution is not based on income, which is notoriously difficult to measure. Instead, it is based on wealth, using household assets that can be directly observed such as a bicycle, radio, size of the dwelling and type of construction materials. 8 Minujin A. and E. Delamonica, 2003, “Mind the Gap! Widening Child Mortality Disparities” Journal of Human Development. Vol. 4, No. 3 pp. 396-418.

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expectancy cannot increase indefinitely. Investing in people whose social indicators already approach the natural bounds will gradually yield less result, thereby slowing down „average‟ progress.
Diagram 3: Progress was not pro-poor (Gap in U5MR between bottom & top quintiles)
Zimbabwe Indonesia Colombia Philippines Dom. Rep. Ghana
1 2 3 4

Late 1980s
Source: Minujin & Delamonica, 2003

Late 1990s

How much will the MDGs cost? This seemingly straightforward question has no easy answer either. MDG costing is indispensable for linking global targets to the national budget, but none of the attempts has yielded robust results.9 Uganda illustrates the complexities and uncertainties involved. Four organisations – UNICEF, UNDP, World Bank and the UN Millennium Project – recently estimated the cost of achieving universal primary education in that country. They followed different approaches and made different assumptions about pupil-teacher ratios, budget allocations for teaching materials and teachers‟ salaries, implications of HIV/Aids, et cetera. None of the assumptions made appears exaggerated or implausible. Yet, they yield very different results. The unit cost of one year of primary education in Uganda ranges by a staggering factor of five-to-one. Thus, the quest for a reliable cost estimate of the education target is elusive; questioning how reliable that for other targets can be whose price tag is often more difficult to quantify. It cannot be over-emphasised that the price tag of the MDGs will depend on key policy choices. Different policies and delivery mechanisms exist for reaching the MDGs; each of them with a different unit cost and a different cost function. Generic drugs, for instance, are less expensive than brand-name medicines. Home-based care is less costly than institution-based care. Day schools are less pricey than boarding schools. Community-driven initiatives and grass-roots involvement lower the cost of delivering education, health care and water supply. Some interventions combine high impact with low cost – such as hand-washing.
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All estimates are biased by implicit assumptions, methodological choices and data weaknesses. Global cost estimates are particularly unreliable – ranging from an extra $30 billion per year to more than $100 billion per annum. Vandemoortele J. and R. Roy, 2005, Making sense of MDG costing. Helsinki Process Publication Series 3/2005, pp. 62-72. Helsinki: Foreign Ministry.

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The issue is not whether to attempt MDG costing or not; the question is how best to do it. The price tag can only be ascertained meaningfully within a country‟s own development strategy and the macro-economic and sectoral policy framework. Each and every country must fashion costing to its unique context – by learning from existing methods as well as from learning-by-doing. There cannot be a one-size-fits-all costing exercise. The recent focus of the MDG debate on foreign aid might have given the impression that achieving the targets ultimately depends on financial transfers from abroad; creating the illusion that the global targets are attainable in each and every country provided the donors deliver the money. Such a misunderstanding about the role of foreign aid, combined with a misplaced faith in the accuracy of MDG needs assessments, has led to the belief that a doubling or tripling of aid is necessary and sufficient for achieving the MDGs.10 Foreign aid is important but it cannot deliver the MDGs. It would be foolish to deny that the MDG agenda requires more – and better – aid, but it would be equally unwise to argue that the agenda calls for an aid-led development strategy. 3. Four practical steps The MDGs are meant to help determine the strategic priorities for national development. This is not yet the case. A survey of 118 countries indicates that only one-third of the national strategies have been amended to reflect the MDGs; only onefifth of the countries have adjusted the national budget in line with the targets; and in only 22 per cent of the cases did parliamentarians formally discuss the MDGs.11 The same holds for the PRSPs, for which independent evaluations concluded that their “actual achievements thus far fall considerably short of potential”12. In particular, they highlighted the weak linkages between the poverty reduction strategy and the national budget. Aligning the country‟s strategy for reducing poverty with the MDG agenda involves four practical steps. The first two are essentially political in nature; steps 3 and 4 are more technical.

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The aid target of 0.7% is unrelated to the MDGs. It came about in the late 1960s during the preparation of the „Second Development Decade‟. The Chairman of the UN Committee for Development Planning, the late Prof. Jan Tinbergen, used a simple Harrod-Domar model to estimate that for developing countries to achieve an average target growth rate of 6% per annum in the 1970s, their domestic savings needed to be supplemented by international transfers equivalent to 1% of the then combined national income of the developed countries. Prof. Tinbergen assumed that, at the time, private capital flows accounted for about 30% of total North-South flows. The remaining 70%, he argued, should come from official sources – hence the ODA target of 0.7% of gross national income. 11 UN Development Group, 2005, Making the MDGs matter: the country response. New York. 12 IMF, 2004, Report on the Evaluation of Poverty Reduction Strategy Papers (PRSPs) and the Poverty Reduction and Growth Facility (PRGF). Independent Evaluation Office, Washington D.C. A similar evaluation by the World Bank concluded that the PRSP has “not yet fulfilled its full potential”. World Bank, 2004, The Poverty Reduction Strategy Initiative. An Independent Evaluation of the World Bank‟s Support Through 2003. Operations Evaluation Department. Washington D.C.

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Step 1: Tailor the global targets to make them context-sensitive Global targets are meant to encourage all countries to strive for accelerated progress but, ultimately, the applicability of the MDG targets can only be tested and judged against what is realistically achievable under country-specific circumstances. To be meaningful, national target setting requires adaptation, not mindless adoption of global targets. No stigma should be associated with setting national targets that are less ambitious than global targets because a judicious balance between ambition and realism is essential for national ownership.13 Targets that are over-ambitious will not trigger action; targets that lack any sense of urgency will not motivate people or mobilise resources. Step 2: Set intermediate targets for political accountability The MDGs must be linked to the political agenda of today‟s government. Targets for 2015 are unlikely to shape the government‟s policy reforms and action plan because the deadline will not occur on the watch of the current political leaders. Hence, intermediate targets are needed to sustain and solidify a genuine political commitment to a quantifiable and time-bound agenda for human development. Step 3: Translate them into specific programmes and policies Once intermediate targets are set, actionable propositions and pro-poor policy reforms can be identified for the next 2-3 years so as to make the necessary progress towards the agreed benchmarks. Actions will range from immunising children to iodising salt, training teachers and building schools, drilling boreholes and planting trees, treating Aids patients and distributing bed nets, enforcing laws against gender discrimination and child labour, abolishing user fees for basic social services, enlarging revenue through progressive taxation, restructuring budgetary spending in favour of the poor, and sequencing home-grown economic, financial and trade policies. Step 4: Cost these programmes and policies Such specific actions and pro-poor reforms can then be costed for the next 2-3 years with a certain degree of accuracy to inform the national budget and aid negotiations. The fourth step will ensure that the national budget is linked with the targets agreed under step 1. Given the methodological and data weaknesses, it would be ill-advised to estimate the costs over an extended period of time. The longer the time horizon the less reliable they become, with each additional year lessening their accuracy. A 10-year costing exercise is likely to generate a large price tag with little or no practical meaning for policy makers. 4. Conclusion Despite slow progress in the first half, the global targets remain achievable; they are not „mission impossible‟. Realising them will take more than scaling up investment. It will require a quantum leap in imagination to make progress pro-poor. This will need a radical overhaul of the partnership between rich and poor countries and between rich and poor people.

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Several countries have set targets above the global bar. These so-called „MDG-plus‟ countries include Thailand, Viet Nam and Chile. Others have set targets below the global level, including Bangladesh, Cambodia and Mozambique.

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Currently, the dimension of „money changing hands‟ dominates that partnership. Recent increases in global official development assistance and steeper debt relief are welcome. However, a partnership that is primarily based on money will remain inherently unequal and thus unstable. Human development is more than a process of „money changing hands‟. To be effective and sustainable, the partnership must start with „ideas changing minds‟ before addressing the money dimension. This will require a readiness to listen and an ability to unlearn and relearn. As long as key partners are unable or unwilling to change their theories, perceptions or preconceived notions, the global targets will remain elusive. Repeating standard recipes and defending entrenched positions will only prolong this generation‟s legacy of broken promises. Unfortunately, trade negotiations and trade-related intellectual property rights (TRIPS) are showing little evidence of that happening. Experience shows that they do not guarantee outcomes that are pro-poor, pro-jobs and pro-growth. The global trading and TRIPS regimes have become quite intrusive vis-à-vis a country‟s food security, public health and labour markets. Developing countries often see the current systems as insensitive to their stage of development and unhelpful in their efforts to reduce human poverty. Instead of enforcing one-size-fits-all systems – which seems an elusive quest given the stalled Doha round – it would be more productive to focus on ways to ensure that different trading and TRIPS regimes – that are inherently shaped by national or special interests – co-exist peacefully while they gradually evolve towards openness and harmony.

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