eth z issue.pdfthe african peer review mechanism (aprm) is generally described as the most...

The African Peer Review Mechanism(APRM) is generally described as the mostinnovative aspect of the New Partnership forAfrica’s Development (NEPAD). Recentlythere has been much controversy aroundboth NEPAD and the APRM. Days ahead ofthe 5th NEPAD Heads of StateImplementation Committee (HSIC) meetingin Abuja, South African Deputy ForeignMinister Aziz Pahad revealed a compromiseposition that would be discussed in Nigeria.The African Union (AU), through variousstructures dealing with democratisation,good governance and human rights, wouldbe responsible for the political reviewcomponent of the APRM. This wasconfirmed in the subsequent communiquéfrom Abuja.

The compromise, long in the offing,caused a storm in the media and the donorcommunity, as it appeared to water downthe expectation of an independent, stringenttest of African commitment to betterpolitical governance. Indeed, thecompetence and credibility of the AfricanCommission on Human and Peoples’ Rightsis questionable, while other AU institutionswhich could be tasked with this politicalreview, such as the Economic, Social andCultural Council (ECOSOCC) and the Pan-African Parliament do not yet exist.

From the start NEPAD had beenpromising a process of self-monitoring andwhat is now being called ‘peer learning’. Theexperience within the Organisation forEconomic Co-operation and Development

(OECD) from which NEPAD is taking itscue indicates that peer review must be non-adversarial and collegial, relying on mutualtrust and understanding between countriesbeing reviewed. It is unrealistic to expectAfrica, where democracy is less entrenchedand patronage politics is the order of theday, to adopt much more punitive practices.The Abuja decision therefore came as a‘reality check’ for many of the NEPADpartners and the donor community, the G8in particular. It could certainly have beenexplained and sold to them in a less alarmingway, however.

The Abuja HSIC meeting also settledlong-simmering tensions between the AUCommission and the NEPAD Secretariat.The communiqué clearly subordinates theNEPAD Secretariat and insists on its closerco-operation with the AU, until such time asit is merged into the new AU structure. Thisis in line with the original adoption ofNEPAD as an official programme of theOrganisation of African Unity (OAU)/AU, byHeads of State and Government in Lusaka,Zambia in July 2001.

Much of the rivalry between the AU andNEPAD relates to an earlier, Nigerian-driven initiative within the OAU. TheConference on Security, Stability,Development and Co-operation in Africa(CSSDCA) predates NEPAD by several yearsand had slowly but steadily been buildingconsensus around a series of benchmarks,standards and timetables towards acontinental African peer review process. At

E D I T O R I A L

THE NEPAD AFRICAN PEER REVIEW MECHANISMProspects and challenges

the Durban Summit in July, African leadersadopted a memorandum of understandingthat set out a framework and process of peerreview including a set of core values andcommitments and some 50 specific keyperformance indicators regardingdemocracy, human rights, security,economic issues and development.

While there are important differencesbetween the AU peer review processembodied within the CSSDCA and that ofNEPAD, there are also obvious areas ofoverlap, most glaring of which is theproposed creation of a parallel panel ofeminent African persons. The mostimportant difference between the two is thatthe CSSDCA process is inclusive of all AUmember states, while NEPAD is voluntary.While the CSSDCA benchmarks are veryspecific and ambitious, those of NEPADconstitute a series of best practices culledfrom international institutions.

In October 2001, the first meeting of theNEPAD HSIC met in Abuja, Nigeria, anddecided that, at its next meeting, it wouldconsider and adopt an appropriate peerreview mechanism and a code of conduct. Asa result the next HSIC meeting of March2002 adopted the APRM, although thedocument was only publicly available somemonths later.

The third HSIC meeting in Rome, in June2002, approved a Declaration onDemocracy, Political, Economic andCorporate Governance. The committeeapproved the establishment of a Panel ofEminent Persons and recommended that theproposed Secretariat of the APRM belocated in the UN Economic Commissionfor Africa (UNECA) based in Addis Ababa.

When eventually available for publicscrutiny several months later, the APRMdocument did not provide for the location ofthe APRM Secretariat in the UNECA, butwithin the Commission of the AU. Despitethe clear decision to locate the APRM withinthe UNECA as reflected in the Romecommuniqué of the 3rd NEPAD HSICmeeting, Nigerian President Obasanjoreversed his position thereafter. NowObasanjo was arguing that the UNECA was

non-African and inappropriate since itrepresented the interests of the Washingtonconsensus. The fact that he was reallydefending the legitimacy and role of theNigerian-driven CSSDCA initiative wasapparent to all.

Ever since the early discussions in Tripoliwhere the UNECA presented its muchacclaimed Compact for African Recoverybecame the substantive part of what wasthen known as the Millennium AfricaRecovery Programme (MAP), South Africanenthusiasm for the role of the UN EconomicCommission for Africa (UNECA) has beenkey to understanding the debates around theAPRM. The original South African intentionwas simply to use the UNECA GovernanceProject as a basis for the entire APRM. Intime, this idea became hostage to anynumber of other agenda’s.

In October 2002, the NEPAD Secretariatorganised a two-day workshop in CapeTown. The purpose of the meeting was tooperationalise the APRM by developingindicators and benchmarks, and to provide adetailed framework and content for thereview process. While the UNECA did, to adegree, defuse the barrage of criticism aboutits methodologies and processes during theCape Town meeting, it had no defence whenit came to its lack of expertise on humanrights and standards of democracy. In fact,by the end of the meeting, the complexity ofthe challenge of peer review becameapparent. Four of the most relevant papersfrom this workshop are reproduced in thisissue of African Security Review, with thepermission of the NEPAD Secretariat. Theseinclude perspectives on peer review from theUNECA, the OECD, the AU and a privatesector view from the CommonwealthBusiness Council.

Having toyed with the idea ofcomprehensive review, one could sense thedesire of the Secretariat to return to theiroriginal idea to use the existing UNECAGovernance Project as the basis for theAPRM. Eventually the UNECA argued infavour of a two-track approach with onetrack focusing on democracy and politicalgovernance which the UNECA

African Security Review 11(4) • 20022

recommended should be undertaken bypersons or institutions appointed by thePanel of Eminent Persons.

The second track would cover economicand corporate governance issues. Of thesethe UNECA would deal with economicgovernance issues while the AfricanDevelopment Bank focused on banking andfinancial standards.

This pragmatic consideration, togetherwith the need to present a practicalcompromise acceptable to Nigeria and theCommission of the AU were theconsiderations that saw the compromiseposition first floated by Deputy Foreign

Minister Aziz Pahad a few days before theAbuja meeting.

Despite recent difficulties, theachievements of NEPAD are significant evenin the face of the trade-offs and concessionsmade in the process. Never before has Africabeen the focus of so much engagement andsupport. Had it not been for Mbeki andNEPAD, Africa would have suffered severemarginalisation after the events of 11September 2001. Instead it was the focus ofdiscussions at the G8 in Canada and willagain be that in Italy in 2003. Finally,NEPAD has invigorated and spurred muchaction at the continental level.

Editorial 3

Concept and international experience

Peer review refers to the systematicexamination and assessment of theperformance of a state by other states(peers), by designated institutions, or by acombination of states and designatedinstitutions. The ultimate goal is to help thereviewed state improve its policy making;adopt best practices; and comply withestablished standards, principles, codes andother agreed commitments. Peer reviewexaminations and assessments are conductedin a non-adversarial manner, and they relyheavily on the mutual trust and

understanding between the state beingreviewed and the reviewers, as well as theirshared confidence in the process.

Peer reviews can be conducted based onsubject areas or themes. For example, anindividual country peer review could relateto economics, governance, education,health, the environment or other policiesand practices. Within one or more of thesesubject areas, a state may be examinedagainst a wide range of codes and standardsfor compliance, for example. Similarly,several countries can be examined at thesame time with respect to a particular theme.However, whether based on subject areas or

FEATURE

THE AFRICAN PEER REVIEW MECHANISMProcess and procedures

UNITED NATIONS ECONOMIC COMMISSION FOR AFRICA

The African Peer Review Mechanism (APRM) is perhaps the most innovative aspect of theNew Partnership for Africa’s Development (NEPAD). For the APRM to serve its fullpotential, it is important that the application of the peer review process meet the criteria ofcredibility, integrity and professionalism. This paper sets out clarifications by the UnitedNations Economic Commission for Africa (UNECA) on the nature and content of the APRMprocess. However, we first offer a brief summary of the concept and international experiencerelated to peer reviews as best practice for the APRM.

The UNECA in Addis Ababa, Ethiopia prepared this paper for the NEPAD Workshop held in Cape Town in October 2002.This paper was presented by Kempe Ronald Hope, Senior Chief Policy Advisor in the Cabinet Office of the ExecutiveSecretary. The views in this paper do not necessarily represent those of the NEPAD Secretariat.

themes, individual country peer reviews aretypically undertaken on a regular basis witheach review exercise resulting in a reportthat assesses accomplishments, indicatesshortcomings and makes recommendations.They never imply a punitive decision,sanctions, or any form of legally binding actsor enforcement mechanisms.

Nonetheless, related to the concept ofpeer review is the concept of peer pressure.Indeed, the effectiveness of peer reviewrelies on the influence of peer pressure—thatis, the persuasion exercised by the peers. Thepeer review process can give rise to peerpressure through, for example: a mix offormal recommendations and informaldialogue by the peer countries; publicscrutiny, comparisons and ranking amongcountries; and the impact of the foregoingon domestic public opinion, policy makers,and other stakeholders. Lessons from peerreviews done elsewhere suggest that thegreatest impact is derived when theoutcomes of peer reviews are made availableto the public. When the media is providedwith information on peer reviews, the storycan then be mass distributed to the public. Itis that public scrutiny that is most likely tocoerce change and corrective actions.

While several international organisationsincluding UN bodies and the InternationalMonetary Fund (IMF) conduct peer reviews,the most notable experience with peerreviews can be found at the Organisation forEconomic Co-operation and Development(OECD). The OECD has used this methodof assessment since its creation four decadesago. Within that organisation, peer reviewsare undertaken in several substantive areasand the performance of the reviewed statecan be assessed against principles, criteriaand standards. They may include:• Policy recommendations and guidelines.

The assessment of the performance of acountry in its implementation of policyrecommendations and guidelines. This isthe most common form of peer reviewand can also include an examination ofthe consistency and coherence withrespect to the country’s own policies. It isundertaken in such areas as economic

policy, education, environment, energyand development assistance.

• Specific indicators and benchmarks.Indicators and benchmarks providespecific and numerical targets to achieve.They are used in, for example,environmental performance reviews anddevelopment assistance reviews.

• Legally binding principles. Peer reviewcan also be a mechanism for monitoringcompliance with international norms suchas the OECD Convention on CombatingBribery of Foreign Public Officials inInternational Business Transactions.

Although each peer review in the OECD hasits own procedure, it is possible to identify acommon pattern among them. Thiscomprises three stages:• The preparatory stage. The first stage of

the review consists of background analysisand of some form of self-evaluation bythe country under review. During thisstage a questionnaire is sent to thecountry for responses by the competentauthorities or as an agenda for dialogue inthe next stage.

• The consultation stage. The examinersand the OECD Secretariat conduct theconsultation with a division ofresponsibility which depends on usualpractice and the topic under review. Thisstage entails a visit to the country underreview for consultations with thecompetent authorities. The examinersand Secretariat staff are also free toconsult with interest groups, civil society,and academics. At the end of this phase,the OECD Secretariat prepares a draftreport. The Secretariat may share thereport in draft with the examiners andwith the reviewed country and makeadjustments it considers justified beforethe draft is submitted to the members ofthe body responsible for the review.

• The assessment stage. In this final stage,the draft report is discussed in the plenarymeeting of the body responsible for thereview. The examiners lead thediscussion, but the entire body isencouraged to participate. Followingdiscussions among members of the body,


including the reviewed state, the finalreport is adopted by the whole body. Insome cases non-governmental organisa-tions (NGOs) may be given anopportunity to influence the discussion bysubmitting papers and documents. Often,the final report is followed by a pressrelease, which summarises the main issuesfor the media. Other press events andbriefings may also be held to publicise thefindings of the report.

Based on the experience of the OECD andother international organisations, we canconclude that the effectiveness of peerreviews depends upon a combination of anumber of factors:• Value sharing. There must be convergence

among the participating countries on thestandards or criteria against which toevaluate performance. Specificity isrequired to prevent uncertainty orbacktracking during the process.

• Adequate level of commitment. Peerreview can function properly only if thereis an adequate level of commitment by theparticipating countries in terms of bothhuman and financial resources.

• Mutual trust. Given the co-operative andnon-adversarial nature of the peer reviewprocess, mutual trust is an important basisfor its success. This will facilitate, amongother things, the disclosure of data,information and documentation that areessential to the process.

• Credibility. The credibility of the peerreview process is essential for itseffectiveness. To ensure credibility, thereviewer organisation must guaranteeindependence, transparency and qualityof work. Credibility can be undermined ifthe process is flawed by such factors asunqualified examiners, bias stemmingfrom national interests, inadequatestandards or criteria against which toundertake the review, or attempts by thereviewed state to unduly influence thefinal outcome.

Following on the international experiencewith peer reviews—and taking intoconsideration the African landscape ofdiversity of countries and the significance of

African ownership in the New Partnershipfor Africa’s Development (NEPAD)framework—we outline below the processand procedures for the African Peer ReviewMechanism (APRM). In that context, wehave also developed a set of core indicatorsfor tracking progress through the APRM andthese are set out in the United NationsEconomic Commission for Africa (UNECA)paper entitled ‘The African Peer ReviewMechanism: Core indicators for trackingprogress’.

Purpose, principles and participationin the APRMThe mandate of the APRM is to ensure thatthe policies and practices of participatingstates conform to the agreed political,economic and corporate governance codesand standards contained in the Declarationon democracy, political, economic andcorporate governance that was approved bythe African Union (AU) Summit in July2002. The APRM is a mutually agreedinstrument for self-monitoring by theparticipating member governments.

The primary purpose of the APRM is tofoster the adoption of policies, standardsand practices that lead to political stability,high economic growth, sustainabledevelopment and accelerated integrationthrough the sharing of experiences and thereinforcement of successful and bestpractice, including identifying deficienciesand assessing the needs for capacitybuilding.

Every peer review exercise carried outunder the authority of the mechanism mustbe technically competent and free ofpolitical manipulation. It must also complywith the mandate of the APRM referred toabove. These stipulations together constitutethe core guiding principles of themechanism.

Participation in the APRM process will beopen to all member states of the AU.Countries wishing to participate in theAPRM will notify the chairperson of theHeads of State and GovernmentImplementation Committee (HSGIC). This

United Nations Economic Commission for Africa 9

will automatically entail an undertaking tosubmit to periodic peer reviews, as well as tofacilitate such reviews with logistical andother support, and to be guided by agreedparameters for good political governanceand good economic and corporategovernance.

An Independent Panel of Eminent Persons(IPEP) will be established. It shall comprisefive to seven members. There shall be at leastone member from each of the AU sub-regions. All members shall be appointed bythe HSGIC including the chairperson andvice chairperson who shall be selected fromamong the members. The presence of fivemembers shall constitute a quorum, and thevice chairperson will act as the chairpersonin the absence of the latter. The compositionand functions of the IPEP are set out later inthis paper.

The NEPAD Secretariat will be the Co-ordinating Secretariat for the peer reviewprocess. As such, it shall be responsible for,among other things, providing secretarialand technical support to the IPEP and theImplementation Committee.

Given the context outlined above,UNECA sees its role in the APRM process ascomprising the following key elements:• The UNECA will lead the further

development of the APRM process,including the provision of technicalbackstopping for the peer reviews.

• The UNECA will conduct the economicmanagement and governance peerreviews.

• In addition to UNECA experts,representatives from two Africancountries will also be members of the peerreview teams. The African DevelopmentBank (AfDB) will also be invited to coverbanking and financial standards.

• Prior to the actual peer review, UNECAexperts will visit the country to be peerreviewed for consultations withgovernment representatives on the scopeand content of the peer review.

• In order to test the approach and kick-start the process, UNECA will conductpilot consultations in two or threecountries over the next few months.

• On the basis of these consultations,UNECA will prepare the InitiatingMemorandum (see Annex I) on a countryby country basis.

• The UNECA will be responsible forpreparing the findings andrecommendations of the peer review.

Stages of the APRM process

There shall be five stages to the APRMprocess. Stage One will entail a carefulanalysis of the governance and developmentenvironment in the country being reviewed.This analysis will draw heavily on theUNECA Governance Project, which wouldhave covered 20 to 25 countries byDecember 2002. That project aims atdefining and measuring governance on theAfrican continent through a number ofcountry studies, each of which will providemore than 80 indicators on the nature andquality of governance. These indicators willprovide background on the key governanceand development issues in the followingareas:• Political representativeness and rights. To

cover issues of political systems andelectoral processes, representation andparticipation of various stakeholders indecision making.

• Institutional effectiveness. Includingissues related to the nature and workingsof the legislature, judiciary and executivebranches of government, as well as thestate of the non-governmental sector.

• Economic management and governance.Addressing issues of macroeconomicmanagement, public financialaccountability, monetary and financialtransparency, accounting and auditingsystems, and regulatory oversight bodies,as well as issues of capacity, effectiveness,and accountability of the economicdecision making and service deliverysystems and processes.

A critical element of the UNECAGovernance Project, and one which will beused to inform the APRM process, is thecountry consultation. Those consultationsentail the seeking of advice through national


steering committees and the dissemination offindings through workshops. They providefor wide-ranging interaction and buy-in by alarge number of stakeholders including civilsociety organisations. Together with thefindings of the Governance Project, theconsultations will identify those key issues inpolitical governance (peace and security,human rights, electoral participation, etc.)that should be examined in the peer reviewprocess.

Stage Two will constitute the countryvisits by peer review mission teams. Thisstage will be informed by the analysisprepared in Stage One and the work of themissions will be conditioned by the contentsof the respective Initiating Memoranda, asset out in Annex I.

There shall be two tracks to Stage Two.One track will be concerned with thepolitical governance issues identifiedthrough the country consultations andcountry governance reports as described inStage One. The IPEP will select and appointappropriate institutions or individuals toconduct the political governance peerreviews based on those identified issues.

The second track will cover the economicand corporate governance issues. These peerreviews will be conducted by the UNECA inconjunction with the AfDB. The former willbe responsible for all of the standard set ofissues pertaining to economic managementand governance, while the latter will haveresponsibility for matters on banking andfinancial standards. The mission will be ledby UNECA experts and will also includerepresentatives from two African countries.

Mission teams will consult andextensively interview relevant governmentofficials, parliamentarians, opposition partymembers not in parliament, private sectorrepresentatives, representatives of civilsociety groups (including the media,academia, trade unions, NGOs) and officialsof resident missions of regional andinternational organisations.

Stage Three involves the preparation ofmission findings of the peer review. A draftof each report will be discussed with thegovernment concerned, prior to submission

to the IPEP. Those discussions will bedesigned to ensure the accuracy of theinformation and to provide the governmentan opportunity to react to a mission’sfindings and to provide its own views onhow the identified shortcomings may beaddressed. These responses of thegovernment will be appended to the finaldraft of the report. However, each missionreport will remain independent and itsfindings will not be altered or vetted by thegovernment concerned.

Stage Four entails discussion andadoption of the peer review reports by theNEPAD structures. Each report will besubmitted through the NEPAD/APRMSecretariat for consideration and adoptionby the IPEP and, ultimately, by the HSGIC.It is also recommended that the reports beconsidered by a technical committeecomprising the IPEP and senior officials ofcountries that have agreed to be peerreviewed so as to reinforce the mutuallearning and adoption of best practicesaspects of the APRM process.

Stage Five will entail the formal andpublic tabling of the APRM reports in keyregional and sub-regional structures and, inparticular, the AU structures.

Composition and functions of theIndependent Panel of Eminent Persons Composition of the panelThe IPEP shall comprise Africans who havedistinguished themselves in careers andservice that are considered relevant to theAPRM process. Members should be selectedwith a view to ensuring their independence,a sufficiently diverse background and genderbalance, and a wide spectrum of appropriateexperience.

Once appointed, members of the IPEP shallserve in their individual capacities and not ascountry or sub-regional representatives, nor asrepresentatives of any organisation. They shallnot seek or receive instructions from anygovernment or be influenced by any otherauthority external to the NEPAD/APRMSecretariat with regard to peer review mattersunder their consideration.


Functions of the panelThe IPEP shall be tasked:• to exercise oversight with respect to the

APRM process with a view to ensuringthe independence, professionalism andcredibility of that process;

• to select and appoint appropriateinstitutions or individuals to conductpolitical governance peer reviews;

• to meet periodically to review and makeobjective assessments of peer reviewreports submitted to it by the NEPAD/APRM Secretariat;

• to consider and approve recommen-dations contained in the peer reviewreports submitted to it by the NEPAD/APRM Secretariat; and

• through the NEPAD/APRM Secretariat,to transmit to the HSGIC all peer reviewreports considered and adopted and therecommendations agreed to.

Frequency of peer reviews

Peer reviews will be conducted within thetimeframes as approved by the 2002 AUSummit. Specifically, there will be four typesof reviews:• The first country review being the base

review to be undertaken within 18months of a country becoming a memberof the APRM.

• Then there is a periodic review that takesplace every two years.

• In addition to these, a member countrycan, for its own reasons, ask for a reviewthat is not part of the periodicallymandated reviews.

• Early signs of impending political andeconomic crises in a member countrywould also be sufficient cause forinstituting a review.

We recommend, however, that someflexibility is needed to accommodate specialcircumstances, for instance, where thetiming of a peer review would createdifficulties given the electoral cycle in thecountry concerned, but also to allow forearly reviews in the case of serious emergingpolitical and/or economic problems in amember country.

Furthermore, to maintain an efficientscheduling of peer reviews, the authorities ofa country to be peer reviewed should makeevery effort to provide written responses tothe questionnaires as well as other relevantbackground information to the reviewerinstitution prior to the start of the peerreview mission.

Role of the Implementation Committee

The HSGIC has ultimate responsibility foroversight of the APRM and for applying thepeer pressure required to make thisvoluntary peer review process effective,credible and acceptable by both Africans andthe international community. In addition toits current mandate and responsibilities, theHSGIC shall:• appoint members of the IPEP and its

chairperson;• consider, adopt and take ownership of

peer review reports submitted by theIPEP;

• exercise peer pressure to effect changes incountry practice where recommended;

• influence development partners tosupport the recommendations containedin peer review reports by providingsuggested technical and other assistance;

• transmit peer review reports to theappropriate AU structures in a timelymanner; and

• make public, through the NEPAD/APRMSecretariat, peer review reports and pressreleases pertaining thereto.

Conclusion

This paper has provided some clarity on thenature and content of the APRM processand the procedures involved for itsimplementation. As stated at the beginning,the APRM is perhaps the most innovativeaspect of NEPAD. It is an idea whose timehas come. Participation in the APRM isvoluntary and it is conducted in a non-adversarial manner. It is not an unwanted orunwarranted intrusion in how countries aremanaged. Rather, it is an important tool aspart of domestic efforts to improve


governance and track progress in thatregard.

ANNEX IInitiating MemorandumPrior to the conduct of a peer review of anycountry, UNECA experts will visit thecountry for consultations on the scope of,and the process that will guide the peerreview. The results of these consultationswill be reflected in an InitiatingMemorandum.

Discussions will be held with seniorgovernment officials as well as otherstakeholders. The visiting team will help toprepare the Memorandum. However, theMemorandum will be owned by the countryto be reviewed.

The Memorandum shall be brief andsuccinct and focused on relevant issues. Thefollowing is an illustration of the contents ofan Initiating Memorandum:

Background• Country background information; and• Objective of the peer review.

Scope• Areas to be reviewed;• Specific issues deserving attention; and• Methodology.

Process• Role and identity of country authorities

and other in-country stakeholders;• Role and identity of collaborating

partners; and• Planned contributions by country

authorities and other in-countrystakeholders.

Timetable and reporting arrangements• Proposed timetable for conducting the

peer review; and• The arrangements for submission and

consideration of the reports.

Team composition• The leaders and members of the peer

review team and their biographical data.

Budget• The anticipated costs of completing the

entire peer review exercise.


Introduction

While there are other documents availablethat list the peer reviews of the Organisationfor Economic Co-operation andDevelopment (OECD),1 this paper willprovide an analysis of the practice of peerreviews.2

The concept of peer review

The term ‘peer review’ in the presentcontext has not been rigorously defined.

However, over the years, the expression hasassumed a specific meaning in the practice ofinternational organisations. Peer review canbe described as the systematic examinationand assessment of the performance of a stateby other states,3 with the ultimate goal ofhelping the reviewed state improve its policymaking, adopt best practices and complywith established standards and principles.The examination is conducted on a non-adversarial basis, and it relies heavily onmutual trust among the states involved inthe review, as well as on their shared

FEATURE

PEER REVIEW AS A TOOL FOR CO-OPERATION AND CHANGE

An analysis of an OECD working method

FABRICIO PAGANI

Peer review can be described as the systematic examination and assessment of theperformance of a state by other states, with the ultimate goal of helping the reviewed stateimprove its policy making, adopt best practices and comply with established standards andprinciples. This paper examines the practice of peer review and the related effect of peerpressure in the context of international organisations, particularly the Organisation forEconomic Co-operation and Development (OECD). It outlines the main features of thesetwo concepts and attempts to establish a model based on the different peer reviewmechanisms used at the OECD.

This study was prepared by FABRICIO PAGANI with the assistance of colleagues of the Directorate for Legal Affairs. Itbenefited from the contributions of several services and directorates, and particularly of the Centre for Co-operation withNon-Members, the Economics Department, the Development Co-operation Directorate, the Environment Directorate, andthe Public Affairs and Communications Directorate. A longer version of this paper (which includes several annexures) waspresented at the NEPAD APRM conference in Cape Town. This paper does not necessarily reflect the views of NEPAD.

confidence in the process. When peer reviewis undertaken in the framework of aninternational organisation—as is usually thecase—the Secretariat of the organisation alsoplays an important role in supporting andstimulating the process. With these elementsin place, peer review tends to create,through this reciprocal evaluation process, asystem of mutual accountability.

An individual country peer review couldrelate to economics, governance, education,health, environment, energy or otherpolicies and practices. Within one or moreof those subject areas, a state may beexamined against a wide range of standardsand criteria, such as conformity with policyguidelines, or implementation of legallybinding principles. Peer review can also becarried out thematically,4 where severalcountries are examined at the same timewith respect to a particular theme. Peerreview with regard to an individual state orthemes, typically is carried out on a regularbasis, with each review exercise resulting ina report that assesses accomplishments,spells out shortfalls and makesrecommendations.

Other mechanisms for monitoring andensuring compliance with internationallyagreed policies and norms5 may bedistinguished from peer review, as follows: • Judicial proceedings. Unlike judicial

proceedings, the final outcome of a peerreview is not a binding act or a legaljudgement by a superior body. In practice,peer review may play some of the role ofa dispute settlement mechanism, byencouraging dialogue among states thathelps to clarify their positions andinterests. However, it is not intended toserve as a procedure for resolvingdifferences and peer review never impliesa punitive decision or sanctions.

• Fact-finding missions. Independentbodies, such as commissions of expertsfrom international organisations, carryout on-site fact-finding missionsexclusively to investigate specific eventsor to establish facts. Peer review, on theother hand, is not always conducted on-site, and it generally goes beyond fact-

finding to include an assessment of theperformance of the state. Fact-finding canbe a part of the peer-review process.

• Reporting and data collection. There areseveral systems in place for periodicreporting by states to independent bodies,who then analyse the submitted reports.6

By contrast, peer review is characterisedby dialogue and interactive investigation,which can comprise the recourse toquestionnaires, and it usually involves noformal reporting by the examined state.

A related concept: Peer pressure

The effectiveness of peer review relies on theinfluence and persuasion exercised by thepeers during the process. This effect isknown as ‘peer pressure’.7 The peer reviewprocess can give rise to peer pressurethrough, for example: a mix of formalrecommendations and informal dialogue bythe peer countries; public scrutiny,comparisons and, in some cases, evenranking among countries; and the impact ofall the above on domestic public opinion,national administrations and policy makers.The impact will be greatest when theoutcome of the peer review is made availableto the public, as is usually the case at theOECD. When the press is actively engagedwith the story, peer pressure is mosteffective. Public scrutiny often arises frommedia involvement.

Peer pressure does not take the form oflegally binding acts, as sanctions or otherenforcement mechanisms. Instead, it is ameans of soft persuasion which can becomean important driving force to stimulate thestate to change, achieve goals and meetstandards.

Peer pressure is particularly effectivewhen it is possible to provide bothqualitative and quantitative assessments ofperformance. The quantitative assessmentmight take the form of a ranking ofcountries according to their performance,and the drawing of real scoreboardsreflecting such rankings. An example is theOECD Jobs Strategy—a programme whichsets out principles and benchmarks, carries


out quantitative analysis and ranks countriesaccording to their performances in reducingunemployment.8 Another example, outsidethe OECD, of a very effective scoreboard isthe Internal Market Scoreboard, maintainedby the European Commission, which ranksthe EU members states according to theirperformance in the completion of theinternal market.9 A variation of this systemis the ‘naming and shaming’ technique,which singles out poor performers.However, these methods are appropriateand produce positive results only when the‘rules of the game’ are clear and thecountries accept them. In other cases, thistype of approach could risk shifting theexercise from an open debate to adiplomatic quarrel to gain position on thescoreboard.

Peer review in internationalorganisationsWhile peer review as a working method ismost closely associated with the OECD,several other intergovernmental organisationsand international programmes make use ofthis technique as well.

Within UN bodies and specialisedagencies, states use peer review to monitorand assess national policies in varioussectors, from environment10 toinvestment.11 The IMF Country Surveillancemechanism also has some aspects incommon with peer review.12

Peer review has also been developedwithin the World Trade Organisation(WTO) under the Trade Policy ReviewMechanism.13 The WTO system monitorstrade policy and practice in the memberstates. A designated WTO body then meetsto review the policy statements presented bythe member under review and a reportprepared by the Secretariat. Thisexamination is led by two reviewingcountries. The procedure concludes with theFinal Remarks of the Chair, which arepublished together with the policy statementof the country under review, the report ofthe Secretariat and the minutes of themeeting.

In the European Union framework, peerreview is used in several areas. For example,the DG Employment and Social Affairs ofthe European Commission has developedpeer review for national labour marketpolicies to identify good practices and toassess their transferability.

Peer review within the OECD

There is no other international organisationin which the practice of peer review has beenso extensively developed as the OECD,where it has been facilitated by thehomogeneous membership and the highdegree of trust shared among the membercountries. The OECD has used this methodsince its creation and peer review has, overthe years, characterised the work of theOrganisation in most of its policy areas.14

Within the Organisation, peer review iscarried out in several substantive areas andthere is no standardised peer reviewmechanism. However, all peer reviewscontain the following structural elements,which will be described further below:15

• A basis for proceeding. • An agreed set of principles, standards and

criteria against which the countryperformance is to be reviewed.

• Designated actors to carry out the peerreview.

• A set of procedures leading to the finalresult of the peer review.

The basisPeer review within the OECD may proceedon the following bases:• Decision by or request to an OECD

subsidiary body. Subsidiary bodies of theOrganisation can decide to undertakepeer reviews which are within their scopeof activities. Subsidiary bodies may alsocarry out one-time peer review exercisesat the request of the country to bereviewed.

• Council/Ministerial Council. For far-reaching programmes of review, adecision at council level is sometimesnecessary and, in certain cases, thedecision follows directly from the

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Ministerial Council meeting. Thecompetent subsidiary bodies thenimplement the programmes. The reviewon regulatory reform, for instance, whichis based on a 1997 ministerial request16

and successive council decisions, is carriedout by a number of subsidiary bodiesincluding the Ad Hoc MultidisciplinaryGroup on Regulatory Reform, the PublicManagement Committee and itsRegulatory Management and ReformWorking Party.

• International norms. Provisions in treatiesor in other legally binding instrumentscan be the basis for peer review mandates.One of the first systems of mutual reviewwas established by the OECD Codes ofLiberalisation of Capital Movement andCurrent Invisible Operations, which havea binding status on all OECD members.17

Another example is the OECDConvention on Combating Bribery ofForeign Public Officials in InternationalBusiness Transactions, which provides, inits Article 12, that “Parties shall co-operate in carrying out a programme ofsystematic follow-up to monitor andpromote the full implementation of thisConvention”. This provision has been thebasis for the establishment of a rigorousprocess of multilateral surveillance,including peer review, to foster theeffectiveness of the Convention and itsrelated instruments.

Council retains control over thedevelopment of peer review programmesthrough its annual examination of theproposed Programme of Work and Budgetof the Organisation.

The principles, criteria and standards The performance of the reviewed state canbe assessed against principles, criteria andstandards which differ widely in characterand scope. These may include:• Policy recommendations and guidelines.

The assessment of the performance of acountry in its implementation of policyrecommendations and guidelines is themost common form of peer review. Thispeer review can also include an

examination of the consistency andcoherence with respect to the country’sown policies. It is carried out in many ofthe Organisation’s activity areas,including economic policy, education,environment, energy, regulatory reformand development assistance. For example,in the peer reviews, or surveys, carriedout by the Economic and DevelopmentReview Committee, country performanceis assessed in relation to broad economicpolicy principles and best practices thathave been developed over the years, thepolicy orientations of the OECD GrowthProject, as well as specific guidelines suchas those contained in the OECD JobsStrategy. Similarly, peer reviews carriedout in connection with the regulatoryreform process draw on a number ofpolicy recommendations agreed at theministerial level. The EducationCommittee also undertakes peermonitoring and assessment of countrieson general policy guidelines. The DACPeer Reviews take into account principlesagreed in development co-operation, suchas guidelines (e.g., poverty reduction,conflict prevention) or emerging themes(e.g., policy coherence, harmonisation ofdonor procedures), in order to assess theperformance of the donor under review.

• Specific indicators and benchmarks.Indicators and benchmarks providespecific and often numerical targets toachieve, and they are more susceptiblethan policy guidelines to being assessedaccording to quantitative measures.Indicators and benchmarks are used, forinstance, in the environmentalperformance review, and in theregulatory reform and developmentassistance reviews.18

• Legally binding principles. Peer reviewcan also be a mechanism to monitorcompliance with international norms. Forexample, the OECD Committee onCapital Movements and InvisibleTransaction assesses, through a peerreview mechanism, the performance ofeach member in the application of theCodes of Liberalisation and examines its


reservations or derogation, in order toprogressively limit their scope.19 In theframework of the OECD Convention onCombating Bribery of Foreign PublicOfficials in International BusinessTransactions, the Working Group onBribery assesses the integration of theprinciples of the Convention into thenational legislation of the states, party,and it also evaluates their implementationand enforcement.20 This review creates asophisticated mechanism for monitoringcompliance with the Convention, and it iswidely regarded as an interesting modelfor monitoring and improvingcompliance with other international legalobligations. Finally, peer review can alsobe conducted to assess a country’scompliance with rules contained in itsown national legislation or in non-OECDinternational instruments to which thecountry has adhered.21

Within the same peer review, the assessmentcan be conducted against all these differentmeasures. For instance, in the WorkingParty on Environmental Performance, theenvironmental performance of the countriesis reviewed against objectives set out inpolicy guidelines—such as the OECDEnvironmental Strategy for the First Decadeof the 21st Century—and it is also reviewedagainst benchmarks and national andinternational legislation and regulations.

When a peer review programme reaches asecond round of reviews, it is quite commonto refer to the conclusions adopted in theprevious review of the country. Therecommendations and the outstanding issuesnoted in the earlier report become a veryimportant part of the measures againstwhich to assess the progress of the country,and to highlight trends and fluctuations.This process also allows for the creation of ashared knowledge base beneficial to allcountries via the identification of bestpractices or policies that work.

The actorsPeer review is the combination of theactivity of several actors: the collective bodywithin which the review is undertaken; the

reviewed country; the examiner countries;and the Organisation Secretariat: • The collective body. Peer reviews are

undertaken in the framework of theactivities of a subsidiary body of theOrganisation, such as a Committee or aWorking Party. The frequency of thereviews depends on the programme ofwork of the body, and it can range fromthe 6–7-year cycle for the EnvironmentalPerformance Reviews to the 12–18-month cycle of the Economic andDevelopment Review Committee.

• The reviewed country. Usually allcountries which are members of the bodyare subject to the peer review. Certainpeer reviews are considered an obligationof membership. Moreover, in some cases,officials of the country may have aninterest in peer review, as a means ofstimulating reform in their nationalpolicies and practices. Participationimplies the duty to co-operate with theexaminers and the Secretariat by, amongother things, making documents and dataavailable, responding to questions andrequests for self-assessment, facilitatingcontacts and hosting on-site visits. Theindividuals responsible for participatingon behalf of the reviewed country couldinclude civil servants from ministries andagencies and at different levels ofgovernment. On several occasions, theOECD has also reviewed theperformances of non-member countries,at their request or with their agreement.22

On occasion, the reviewed countrycontributes to the financing of the review.

• The examiner countries. Peer reviewimplies by definition that officials in therelevant policy field from other countries(peers) will be involved in the evaluationprocess. Generally, the choice ofexaminers is based on a system of rotationamong the member states, although theparticular knowledge of a countryrelevant to the review may be taken intoaccount. The role of the examiners is torepresent the collective body in the earlystages of the process and to provideguidance in the collective debate itself.

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Hence their task includes the examinationof documentation, participation indiscussions with the reviewed country andthe Secretariat, and a lead speaker role inthe debate in the collective body. In somecases, the examiners also participate inmissions to the country. While individualexaminers generally carry out the reviewsin their official capacity as representativesof their state, certain reviews require theparticipation of examiners in theirpersonal capacity. In either case,however, examiners have the duty to beobjective and fair, and free from anyinfluence of national interest that wouldundermine the credibility of the peerreview mechanism.

• The Secretariat. The OrganisationSecretariat has the role of supporting thewhole review process by producingdocumentation and analysis, organisingmeetings and missions, stimulatingdiscussion, upholding quality standards,and maintaining continuity as the keeperof the historical memory of the process.The independence, transparency,accuracy and the analytic quality of workof the Secretariat are essential to theeffectiveness of the peer review process.The intensity of the interaction betweenthe examiners and the Secretariat and thedegree of involvement of the examinersvary widely. In certain cases, theSecretariat works very closely with theexaminers, and the division of labourbetween them is not always well defined.However, normally the most labour-intensive part of the work is carried outby the Secretariat, which may also havethe most expertise in the substantive areaof the review.

The proceduresThe procedures of each peer review areoutlined in documents adopted by theresponsible subsidiary body. The level ofprocedural detail provided can vary widely,with certain reviews relying more on well-established practice than on formallyadopted rules of procedure.

Although each peer review has its own

procedure, it is possible to identify acommon pattern, consisting of three phases:• The preparatory phase. The first phase of

the review often consists of backgroundanalysis and of some form of self-evaluation by the country under review.This phase includes work ondocumentation and data as well as aquestionnaire prepared by the Secretariat.The questionnaire, which can be asophisticated instrument, is sent to thecountry for responses by the competentauthorities or as an agenda for a dialoguein the next phase.

• The consultation phase. The examinersand the Secretariat conduct theconsultation with a division ofresponsibility which depends very muchon the practice of the body and the topicunder review. During this phase, theSecretariat and the examiners maintainclose contact with the competentauthorities of the reviewed country, andin some cases, they carry out on-site visits.The examiners and the Secretariat arealso free to consult with interest groups,civil society and academics. At the end ofthis phase, the Secretariat prepares a draftof the final report, which usually followsa standardised model comprising ananalytical section, where the countryperformance is examined in detail andindividual concerns are expressed, and anevaluation or summary section settingforth the conclusions andrecommendations. The Secretariat—inmost peer review processes, but notalways—shares the report in draft withthe examiners and with the reviewedcountry and may make adjustments itconsiders justified before the draft issubmitted to the members of the bodyresponsible for the review.

• The assessment phase. The draft report isdiscussed in the plenary meeting of thebody responsible for the review. Theexaminers lead the discussion, but thewhole body is encouraged to participateextensively. Following discussions, and insome cases negotiations, among themembers of the body, including the


reviewed state, the final report is adopted,or just noted, by the whole body.Generally, approval of the final report isby consensus, unless the procedures of theparticular peer review specify otherwise.In some cases, the procedures may call forthe final report to state the differencesamong the participants. In some cases,NGOs also have the opportunity toinfluence the discussion by submittingpapers and documents. As alreadymentioned, the final report andparticularly its recommendations form animportant basis for follow-up monitoringof the performance of the state and,ultimately, for a subsequent peer review.Often, the final report is followed by apress release, which summarises the mainissues for the media, and press events ordissemination seminars are organised topublicise the findings of the review.

The functions of peer review

Peer review can be used in a broad range ofareas, including those not covered by OECDpeer review exercises—for example, humanrights and democratic governance. In eachof these fields, peer review, directly orindirectly, can serve the following purposes:• Policy dialogue. During the peer review

process, countries systematicallyexchange information, attitudes andviews on policy decisions and theirapplication. This dialogue can be the basisfor further co-operation, through, forexample, the adoption of new policyguidelines, recommendations or even thenegotiation of legal undertakings.23

• Transparency. The reviewed country hasthe chance, in the course of a peer review,to present and clarify national rules,practices and procedures and explaintheir rationale. As a result, the Secretariatis usually able to develop documentationand, in certain cases, a database whichremains at the disposal of the membercountries, and which often is also madeavailable to the public and published onthe Organisation web site. In the case ofthe Anti-Bribery Convention, for

example, all the country implementationreports adopted at the end of the peerreview process are published on theOECD web site.24 The combination ofthese two levels of enhancedtransparency—toward peer countries andtoward public opinion—contributes tothe effectiveness of the peer review andthe related peer pressure.

• Capacity building. Peer review is a mutuallearning process in which best practicesare exchanged. The process can thereforeserve as an important capacity buildinginstrument—not only for the countryunder review, but also for countriesparticipating in the process as examiners,or simply as members of the responsiblecollective body. For example, certainmethodologies commonly used in peerreview—such as benchmarking orrecourse to quantitative indicators inassessing compliance with policies—areunfamiliar to some officials and even tosome public administrations before theyparticipate in the peer review, and theexercise therefore represents animportant learning opportunity.

• Compliance. An important function ofpeer review is to monitor and enhancecompliance by countries withinternationally agreed policies, standards,and principles. However, unlike atraditional legal enforcement mechanism,peer review works as a sort of ‘softenforcement’ system,25 resulting in non-coercive final reports andrecommendations rather than bindingcoercive acts, such as sanctions. In manycontexts, the soft law nature of peerreview can prove better suited toencouraging and enhancing compliancethan a traditional enforcementmechanism. For example, unlike a legalenforcement body, examiners in a peerreview have the flexibility to take intoaccount a country’s policy objectives, andto look at its performance in a historicaland political context. Peer review cantherefore assess and encourage trendstoward compliance even among relativelypoorly performing countries, while

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noting negative trends in countries thatmay presently have a higher performancerecord. Peer review can also tend toenhance compliance by helping to clarifydifferences in policy positions amongcountries, thereby leading to theresolution of those differences.

Conclusion: When can peer reviewand peer pressure be effective?The effectiveness of peer review dependsupon the combination of a number offactors, which may be summarised asfollows:• Value sharing. One precondition for an

effective peer review is convergenceamong the participating countries on thestandards or criteria against which toevaluate performance. A strong commonunderstanding on these will preventuncertainty or backtracking during theprocess.

• Adequate level of commitment. Peerreview can function properly only if thereis an adequate level of commitment by theparticipating countries in terms of bothhuman and financial resources. Thus, theparticipating countries must not onlyplace adequate financial means at thedisposal of the Secretariat; they must alsobe fully engaged in the process at differenttimes as examiners, as active members ofthe collective body, and as subject of theexamination.

• Mutual trust. Since peer review is, by itsnature, a co-operative, non-adversarialprocess, mutual trust is an important basisfor its success. While the peer reviewprocess itself can contribute to confidencebuilding, a large degree of trust and valuesharing among the participants should bepresent from the beginning to facilitate,among other things, the disclosure ofdata, information and documentationwhich are essential to the process.26

• Credibility. The credibility of the peerreview process is essential to itseffectiveness, and to its added value incomparison with governmental reports orconsultants’ certifications. There is a

strong linkage between the credibility ofthe process and its capacity of influence.To assure this credibility, the approachthat the examiners—with the help of theSecretariat—take in the review must beobjective, fair and consistent. In the sameway, the Secretariat must guaranteeindependence, transparency and qualityof work. Credibility can be undermined ifthe process is flawed by such factors asunqualified examiners, bias stemmingfrom national interests, or inadequatestandards or criteria against which toundertake the review. However, the mainthreat to the credibility of the process isthe possibility of attempts by the reviewedstate to unduly influence the finaloutcome. The involvement of thereviewed state in the process and itsownership of the outcome of the peerreview is the best guarantee that it willultimately endorse the final report andimplement its recommendations. Thestate’s involvement should, however, notgo so far as to endanger the fairness andthe objectivity of the review. Forexample, the state under review shouldnot be permitted to veto the adoption ofall or part of the final report.

With each of these factors in place, peerreview can serve as a stimulus to incrementalchange and improvement. Through theaccompanying effect of peer pressure—including both persuasion by other countriesand the stimulus of domestic publicopinion—peer review can create a catalystfor performance enhancement which can befar-reaching and open-ended.

Notes1 For a general list of the peer review mechanisms

within the OECD, see Executive Committee inspecial session, monitoring and surveillanceactivities at the OECD and co-operation withother international organisations (Note by theSecretary-General), 27 April 1999, (ECSS(99)3).On peer review and peer pressure, especially inthe area of economic policy, see also Peerpressure as part of surveillance by internationalinstitutions, discussion led by Niels Thygesen,chairman, Economic and Development ReviewCommittee, 4 June 2002

org/pdf/M00031000/M00031293.pdf>. For ananalytical paper on the use of peer review in asubject area, see Joint Group on Trade andCompetition, Peer review: Merits and approachesin a trade and competition context, 6 June 2002, COM/TD/DAFFE/COMP(2002)4/FINAL.

2 Literature on peer review is scarce. Peer reviewis sometimes addressed, but always marginally,in the context of the debate on ‘compliance’,and particularly within the scholarly dispute‘enforcement vs. co-operation’, which opposesthe managerial school of international relationsto the institutionalists. See, for example, G WDowns, D M Rocke and P N Barsoom, Is thegood news about compliance good news aboutco-operation?, International Organisation 50(3),Summer 1996, pp 379 ff, or G W Downs,Enforcement and the evolution of co-operation,Michigan Journal of International Law 19(2),1988, pp 319 ff. For a general introduction tothe mechanisms of follow up and compliance ininternational organisations, see N Blokker & SMuller (eds.), Towards more effectivesupervision by international organisations.Essays in honour of Henry G. Schermers I,Dordrecht/Boston/London, 1994, and morerecently, H R Fabri, L-A Sicilianos, J M Sorel(eds.), L'effectivité des OrganisationsInternationales: Mécanismes de suivi et decontrôle, Athènes/Paris, 2000.

3 In some contexts, entities other than statesparticipate in peer review processes. An OECDexample is certain reviews of the EuropeanCommunity in the economic, trade anddevelopment assistance policies.

4 See, for instance, the thematic reviews in thesector of education. One example is the thematicreview on adult learning, see EducationCommittee, Thematic review on adult learning:Proposed terms of reference, 19 July 1999,DEEELSA/ED/WD(99)9/REV1.

5 On this subject, with a particular emphasis onlegal obligations, see A Chayes, A H Chayes, Thenew sovereignty. Compliance with internationalregulatory agreements, Cambridge Mass., 1995.

6 See, for instance, the International LabourOrganisation review and assessment process. Fora general review of these mechanism see Chayes,op cit, pp 154 ff.

7 The term peer pressure was used by the socialsciences, and particularly in pedagogy andbehavioural studies.

8 See The OECD Jobs Strategy: Progress report onimplementation of country-specificrecommendations, OECD EconomicsDepartment Working Paper 196.

9 See, for instance, Internal Market Scoreboard,May 2002, n 10.

10 See, for example, the EnvironmentalPerformance Reviews Programme carried out bythe UN Economic Commission for Europe,initiated as a joint undertaking with the OECD

Environment Directorate. Several activitieswithin UNEP follow peer review mechanisms.

11 Within UNCTAD, there are programmes whichsubmit the investment policies of developingcountries to peer review.

12 For a brief description of the IMF CountrySurveillance mechanism, see IMF Annual Report2001.

13 A more extensive description and evaluation ofthe Trade Policy Review Mechanism iscontained in Joint Group on Trade andCompetition, Peer review: Merits and approachesin a trade and competition context, 6 June 2002,COM/TD/DAFFE/COMP(2002)4/FINAL. Seealso S Laird, The WTO’s trade policy reviewmechanism—from through the looking glass,The World Economy 22, n 6, August 1999, pp741 ff.

14 Officials involved in peer review can be fromany level of government—central, regional,local.

15 Executive Committee in Special Session,Monitoring and surveillance activities at theOECD and co-operation with other internationalorganisations (Note by the Secretary-General),27 April 1999, (ECSS(99)3).

16 See Meeting of the Council at Ministerial Level,Communiqué, Paris, 26–27 May 1997,SG/COM/NEWS(97)45.

17 See OECD, Introduction to the OECD codes ofliberalisation of capital movements and currentinvisible operations, Paris, 1995.

18 In development assistance, see the MillenniumDevelopment Goals .

19 For a detailed description of the mechanism, seeOECD, Introduction to the OECD codes ofliberalisation of capital movements and currentinvisible operations, Paris, 1995.

20 See Working Group on Bribery in InternationalBusiness Transactions, A procedure of self- andmutual evaluation of implementation of theconvention and the revised recommendation,DAFFE/IME/BR(98)8/REV1.

21 As is the case of the Environment PerformanceReview.

22 See Executive Committee in Special Session,Monitoring and surveillance activities at theOECD and co-operation with other internationalorganisations (Note by the Secretary-General),27 April 1999, (ECSS(99)3). An interesting caseof peer review specifically designed for non-members is the mechanism for their adherenceto the OECD Declaration on the InternationalInvestment and Multinational Enterprises. Thesereviews are divided into three parts. The firstconsists in a general assessment of the country’sactual performance in attracting foreign directinvestment (FDI). The second involves a reviewof the country’s regulatory framework for FDIand domestic business operations. The last partconsists of an examination of the country’sproposed exceptions to the principle of national

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treatment as well as of the steps envisaged topromote the OECD Guidelines forMultinational Enterprises. This process may leadto the formulation of specific recommendationsto the country on how to further promote theobjectives of the Declaration.

23 On peer review as a tool for convergence andconvergence vs. negotiations, see Joint Groupon Trade and Competition, Peer review: Meritsand approaches in a trade and competition

context, 6 June 2002, COM/TD/DAFFE/COMP(2002)4/FINAL.

24 See

25 On the notion of soft law see the relevant entryin J Salmon (ed.), Dictionnaire de droitinternational public, Bruxelles, 2001.

26 In this regard, peer review is an instrument thatappears difficult to apply in the context ofsecurity and defence.


Introduction

Corporate governance is now established asan important component of theinternational financial architecture, butbarely half a decade ago it was little knownbeyond specialists in a few countries such asthe US, the UK, Australia, Canada and SouthAfrica. In 1999, there were an estimated 274conferences in 39 countries on corporategovernance, but most were in developingcountries, and almost none in Africa.

That is changing. In addition to the KingReport, which was authored in SouthAfrica—which in the view of many is the

global benchmark—there has been a rapidgrowth in the development of Africanthinking on corporate governance. In manyAfrican countries this interest in corporategovernance has its origins less in the contextof private sector financial systems, and morein the need to improve the performance of,and then to privatise, state enterprises.

In general, it is easy to see why corporategovernance has grown in status. The Asianfinancial crisis, which caused so muchdamage to the global economy, wastriggered by poor corporate governancepractices; just as the recent Enron scandal inthe US has shown poor practice undermines

FEATURE

BENCHMARKS AND INDICATORS FOR CORPORATE GOVERNANCE

A private sector perspective

STEVE GODFREY

In addition to the South African King Report, there has been a rapid growth in thedevelopment of African thinking on corporate governance. In a period in which the privatesector is accepted as the motor for growth, good corporate governance is an essential leverfor development and social justice. As the New Partnership for Africa’s Development(NEPAD) recognises, the link with economic and political governance criteria is critical.New thinking is to attack on the supply side of corruption (company bribes) bycomplementary anti-corruption measures by the state. The recent initiative of the AfricanUnion (AU) to develop an AU Convention on Combating Corruption addresses theimportance of declaring public officials’ assets, and also breaks ground by targeting unfairand unethical practices in the private sector.

This paper was presented by STEVE GODFREY of the Commonwealth Business Council (CBC) at the NEPAD Workshopheld in Cape Town in October 2002, on behalf of the NEPAD Business Group.The views in this presentation are the CBC’sand not necessarily those of the contributing institutions/individuals.

investor confidence and hits overall marketstability. Institutional investors rely on thequality of corporate governance regimes inmaking decisions, and place a financialpremium (a cost) where systems are weak.An effective regime to promote corporategovernance contributes positively to thedevelopment of both national capitalmarkets and to the promotion of foreigndirect investment. Thus the significance ofcorporate governance is now widelyrecognised both for national development,and as part of the international financialarchitecture. In the words of the President ofthe World Bank: “The proper governance ofcompanies will become as crucial to theworld economy as the proper governance ofcountries.”

The fundamental purpose of corporategovernance is healthy national development.In a period in which the private sector isaccepted as the motor for growth, goodcorporate governance is an essential leverfor development and social justice. Thequestion addressed by this workshop is notwhy or whether, but how the state and theprivate sector work together to promotethis, and what are realistic measures whichcan be agreed to set goals and measureperformance.

Corporate governance in context

The critical areas to be addressed bycorporate governance can be easilydescribed: the efficient, responsible,transparent and honest governance ofeconomic entities, whether they be privateor state owned, large, medium or small. Theprinciples set out by the CommonwealthAssociation for Corporate Governance(CACG) are a well-recognised benchmarkwithin the Commonwealth; but similarcodes and principles, for example theCadbury and King Reports, are available inother jurisdictions.1

The pillars of corporate governance areaccountability, fairness, responsibility andtransparency. These pillars must besupported by an adequate legal andregulatory structure that has credibility and

is enforced.The CACG Guidelines were agreed by the

Commonwealth Business Council (CBC) in1999 and presented to CommonwealthHeads of Government at their 1999Summit, which endorsed them. Theguidelines have been designed withparticular focus on the emerging andtransitional economies, making up a largepart of the Commonwealth, but also meetthe needs of international investors andmultilateral international agencies. TheCACG Guidelines also explore some of thecomplex issues relating to public and stateenterprises, business ethics and corruption,and the role of international professionsoperating in emerging and transitionaleconomies.

Already, there are many examples of theuse of these guidelines in Africa, includingthe Private Sector Corporate GovernanceTrust in Kenya, and examples in Ghanathrough the efforts of the African CapitalMarkets Forum.

Private sector perspective

From a private sector perspective twogeneral comments are important at theoutset.

First, corporate governance should not beseen in isolation from the wider concept ofcorporate citizenship. Any successfulmodern company has to take responsibility,in co-operation with government, indeveloping sustainable business andcommercial activities that servecommunities. Shareholder value and profitsare not sustainable in isolation from thisbroader business strategy which demandsquality services, the good will ofcommunities, and a belief in the ethicalstandards of companies.

Exceptions to these standards ofbehaviour serve to underline the penaltieswhich companies pay when they forfeitpublic trust. The NEPAD Business Group(NBG) and its member companies supportthe development of improved standards ofcorporate governance as core businessdrivers.


Second, the link with economic andpolitical governance criteria is critical. AsNEPAD recognises, corporate governance ispart of a wider economic and socialregeneration programme. CommonwealthHeads of Government approved at theirMarch 2002 meeting a set of 16 investmentprinciples proposed by the CBC, setting outactions by governments, by business andjoint actions to promote investment. Ofthese one relates to corporate governance,and the other 15 to wider measures foreconomic and social action, including keyissues such as the rule of law andenforceability of contracts, as well asliberalisation of markets to promotecompetition. Exposure to the rigours of themarket helps to promote good corporategovernance standards. But without faircompetition and rule of law, the bestcompanies will stay away.

Corporate governance and NEPAD

The proposal by various African structuresto develop and agree a pan-African set ofprinciples is an essential step—the firstbenchmark for NEPAD—to advancecorporate governance. For most of Africa,the practices of corporate governancedeveloped internationally will have limitedimpact if the following conditions are notrecognised, and targets, indicators andbenchmarks adapted accordingly:• The predominance of state-owned or

state-controlled enterprises in all sectorsof the economy. While general principlesof corporate governance apply, theseentities require special rules, especiallyregarding appointments of seniorpersonnel, and on the relationshipsbetween the executive, parliament andthe managers of the business.

• Capital markets are not well developedand the market capitalisation of listedcompanies is low. The financial sector hasa critical role to play, since equity marketsare small and many companies rely moreon debt finance from their banks. Thereare therefore fewer institutional investors

to encourage corporate governance thanin the Organisation for Economic Co-operation and Development (OECD)countries, but this role can be fulfilled tosome extent by banks and lenders.

• Central banks have a particularimportance, as they can exert influenceover these commercial banks and setrequirements for all licensed commercialbanks in accordance with the standardsset by the Bank of InternationalSettlements. The commercial banks can inturn recommend good corporategovernance practices for their customers,which include small and mediumenterprises, and family- and community-owned companies that are unlisted.2

• Other forms of business enterprises, e.g.co-operatives and community-basedsmall- and medium-sized businessorganisations, are important parts in theeconomy. One way to reach them isthrough the supply chain of the largercompanies and parastatals, suggesting thatthe latter have a special role to play inadvancing corporate governance inAfrican economies. Large public andprivate national, and international,companies can strengthen good corporategovernance practice in this way. Theirlevel of involvement in this process is akey indicator of likely progress. Theimportance of business-to-businessstandards in advancing good corporategovernance cannot be overemphasised,and national strategies should take thisinto account—and require large entitiesto meet their responsibilities.

• Good corporate governance requiresculture change, and cannot be createdonly by regulation from above. Thismeans that the benchmarks for progressshould include adoption of codes bynational business associations andgroupings—both formal and informal—aswell as including a measure of the roll outof these standards.

• While basic principles are not difficult toagree, making codes effective is notalways easy, and the regulations shouldnot be too general. The Enron and other

Godfrey 27

recent accounting scandals show thatthere always needs to be effective drillingdown of principles, and a system toevolve rules.

• Africa’s challenges of corporategovernance are compounded byinadequate administrative systems, weakhuman resource institutions,infrastructure and financial resources.This requires careful targeting of effortsto build up skills within the civil serviceand to use existing professional andbusiness associations.

• Development of reporting andenforcement is critical. Without measuresand penalties for non-compliance, it canbe hard to move from paper to practice.There is therefore a need to agree systemsof penalties for infringement, such asdelisting, debarring and disqualificationfrom the relevant market or professionalbody, and to be seen to apply these.

• New thinking emphasises that it is vital toattack on the supply side of corruption(company bribes) by complementary anti-corruption measures by the state. Thisincludes improved transparency on theassets and interests of public servants andpoliticians, and in simplifying theinteractions with the private sectorthrough streamlined administrativearrangements. The recent initiative of theAU to develop an AU Convention onCombating Corruption addresses theimportance of declaring public officials’assets, and also breaks ground bytargeting unfair and unethical practices inthe private sector.

In an evolving system, leadership isimportant, especially from parliament andfrom business and government leaders. It isimportant to identify the critical alliances topromote corporate governance as a nationalpolicy:• Government agencies and parliament can

pass legislation and set up the monitoringof agreed instruments for good practice incorporate governance. As noted above,parliament should, if its leadership is to becredible, set its own standards ofcorporate governance dealing with the

declaration of members’ interests.Parliament has to take a lead.

• The stock exchange or capital marketsauthority, which can influence theapplication of good corporate governancepractices among listed companies and canalso recommend standards for the contentof company reports.

• The central bank, which should make clearrequirements for all licensed commercialbanks in accordance with the standards setby the Bank of International Settlements.

• Professional institutes, in particular theinstitutes of directors, of charteredcompany secretaries and administrators,accountants and lawyers and managementtraining centres must be involved, so thatdirectors of companies can be trained intheir duties and responsibilities.

Benchmarks and standards

The above points lead to the followingobservations on appropriate targets,benchmarks and indicators:• The first priority is to agree a national

framework for corporate governancesuited to national conditions andpriorities, treating the subject in its fulldimensions of conformance andperformance, and as a lever for change,not just regulation.

• The second priority is for a nationalmonitoring and reporting system led bygovernment and parliament to beestablished. To succeed this must involvethe private sector and professional bodies.

• These steps would be assisted by NEPADagreeing an African policy framework forcorporate governance, drawing oninternational best practice and based onthe work done over the past 18 months todevelop an Africa standard.

• Some of the most important indicatorsare not the establishment of a legal orregulatory framework, but areoperational:

– Is there a working structure betweennational business associations and thegovernment to monitor a programmeof education and outreach?


– How far is the corporate sector itselfengaged in training, and developingand rolling out corporate governancepolicies?– Are professional organisationsengaged in setting and monitoringstandards? – Is there a national institution capableof training and development?– Has parliament, in conjunction withrepresentatives from businessassociations and the professions, set upa monitoring or compliancemechanism?– What resources are provided to thecompany registrar and departmentsand governments?

A reporting grid including these factorscould be developed with the participation ofthe stakeholders, and a report could becompiled on an annual basis.

Conclusion

The CBC and NBG believe that a co-

operative programme between governmentand the private sector, with legal teeth andenforcement, is the correct route. Progressdepends on creating an effective partnershipled by government. We would be happy tocontinue to work with NEPAD andgovernments to advance the principles ofbest practice and to co-operate with thestructures set up under NEPAD to advancethis issue.

Notes1 See also for example the OECD Principles of

Corporate Governance, 1999; the CorporateGovernance Reform Principles, 1998, Japan;and The Boards of Directors of ListedCompanies in France (Vienot Report), France1995.

2 For example, Commonwealth Finance MinistersMeeting in Malta in September 2000 endorsedproposals developed by Commonwealth CentralBank governors to set up a CommonwealthWorking Group, which has produced a draftpolicy paper, elaborating on the guidelinesissued by the Bank for International Settlements.

Godfrey 29

GOAL

Improvedcorporategovernance

INDICATIVE TARGET

Agreement of African Code

Regulatory framework

National legislation to entrench provisions

Financial regulatory regime

Provision on Declaration of Interests andAssets for Office Bearers

National roll out programme

Monitoring

Development of National TrainingProgramme

INDICATORS OR BENCHMARKS

Approval by AU

National legislation

Listing requirements by Stock Exchange

Central Bank Licensing (BIS standards)

Adoption by Parliament/Assembly

Establishment of Stakeholder Committee

Private Sector Strategy (actions bycompanies, professional bodies)

Reporting Grid (Annual) on training,penalties, application

Introduction

Even though the United Nations (UN)Security Council’s approach toward Africahas changed dramatically in recent years, thenumber of Blue Helmets made available forpeacekeeping duties on that continent willcontinue to be far below what is required.Since 1999, the UN Security Council hassubstantially re-engaged Africa, launchingsignificant peace operations in Sierra Leone,the Democratic Republic of Congo (DRC),as well as along the border in Ethiopia andEritrea. Today, of the some 44,000 UNpeacekeepers serving around the world,roughly three in five are deployed in Africa.

This responsibility is being undertaken by asizeable number of countries. Seventy-five ofthe 90 UN member states contributinguniformed personnel are providing BlueHelmets in Africa—more than two thirds ofwhich are from outside the continent. Andyet, this much larger commitment is still farbelow the level of engagement from someten years ago.2 Moreover, the number of UNpeacekeepers in Africa is likely notpolitically sustainable. It is more likely thatthere will be a reduction of Blue Helmetsrather than a further increase.

African countries’ willingness toparticipate in peace operations hasdramatically increased in recent years. Prior

AFRICAN REGIONAL ORGANISATIONS’ PEACE OPERATIONS

Developments and challenges1

ERIC G BERMAN

This paper reviews recent developments among African regional organisations inundertaking peacekeeping operations, as well as in preparing for future missions. It focuseson those that have been the most active: the Organisation of African Unity/African Union,the Economic Community of West African States and the Southern African DevelopmentCommunity. The paper goes on to briefly describe and analyse the activities of the French,UK, and US capacity-building programmes designed to develop African peacekeepingcapacities. The author then identifies some specific concerns and recommends actions tohelp meet today’s challenges. The paper concludes with a short analysis of Africanorganisations’ capacities and proclivities to provide a peacekeeping force for Sudan.

ERIC G BERMAN is a visiting scholar at the Thomas J. Watson Jr Institute for International Studies, Brown University,Providence, Rhode Island, United States.

AFRICA WATCH

to 1988, just 12 had contributed personnelto a UN peacekeeping operation, most onlyto a single mission. Since 1999, 29 have hadcontributed to a UN peacekeepingoperation, most to more than one. Thisincreased willingness is not limited to UNpeacekeeping operations. Since 1990, atleast one African country has participated in8 of the 10 UN-authorised multinationalforces (MNFs)3—all but the Italian-led MNFin Albania and the initially UK-led4 MNF inAfghanistan. All told, 41 African countrieshave contributed troops, observers or policeto an internationally recognisedpeacekeeping operation.5

African regional organisations have alsobecome more active. Of the 27 African-ledpeace operations that have beenundertaken,6 21 have involved regionalorganisations. All but three of the missionsinvolving African regional organisationshave been undertaken since 1990. Fiveorganisations have undertaken one or moresuch missions, but many more have creatednew conflict resolution mechanisms,strengthened their secretariats, undertakentraining, and sought new funding streams tobetter prevent, manage or resolve conflictamong their members.

Aware that African countries and regionalorganisations were experiencing growingpains as they assumed these newresponsibilities, Western countries, led byFrance, the UK and the US—the self-proclaimed ‘P-3’—undertook variousprogrammes to develop Africanpeacekeeping capacities.7 The centrepiece ofthe French policy is the Reinforcement ofAfrican Peacekeeping Capacities programme(RECAMP for Renforcement des capacitésAfricaines de maintien de la paix). The initialUK policy, the African PeacekeepingTraining Support Programme, has beensubsumed within a large programme knownas the Conflict Prevention Pool, whichcombines resources from the Ministry ofDefence, the Foreign and CommonwealthOffice, and the Department forInternational Development. The central USpolicy in this regard, the African CrisisResponse Initiative (ACRI),8 has been

replaced by the African ContingencyOperations Training and Assistance(ACOTA) programme.9 Washington alsoestablished Operation Focus Relief (OFR),which provided peacekeeping training andequipment to African countries during 2000and 2001.10 OFR is viewed as a one-offinitiative.

This article addresses two basic questions.First, what have African regionalorganisations done in the realm ofpeacekeeping, and what can they do better?Second, what have Western capacity-building programmes done and what canthey do better? The first section provides anoverview of African regional organisations,with a focus on those that have fielded peaceoperations. The second provides anoverview of Western capacity-buildingprogrammes, with a focus on those ofFrance, the UK and the US. The third sectionraises specific concerns and recommendsactions to help meet today’s challenges. Thepaper concludes with a short analysis ofAfrican organisations’ capacities andproclivities to provide a peacekeeping forcefor Sudan in light of recent progress inending that country’s civil war.

African regional organisations inpeacekeepingSix African organisations have fielded peaceoperations. The first to have done so was theformer Organisation of African Unity(OAU). Since its initiatives in Chad in theearly 1980s, the OAU deployed a total of 11distinct operations.11 The Treaty on Non-Aggression, Assistance and Mutual Defence(ANAD) was the second organisation tohave deployed a peacekeeping operation.The ANAD framework agreement wassigned by Burkino Faso, Côte d’Ivoire, Mali,Mauritania, Niger, Senegal and Togo in1977. In 1986, a small group of ANADmilitary observers were instrumental inresolving a border dispute between BurkinaFaso and Mali. The larger EconomicCommunity of West African States(ECOWAS) became the third organisation toauthorise a mission. In 1990, troops from


the ECOWAS Cease-fire Monitoring Group(ECOMOG) were sent to Liberia. Thatorganisation has subsequently authorisedmissions in four additional conflicts.12 TheSouthern African Development Community(SADC) became the fourth Africanintergovernmental organisation toparticipate in peacekeeping. In 1998, SADCmember states sent troops to the DRC andlater to Lesotho. The Community ofSaharan and Sahelian States (CEN-SAD)became the fifth African organisation toundertake a peacekeeping operation, with asmall force in Central A

eth z issue.pdfthe african peer review mechanism (aprm) is generally described as the most...

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