Institutional Analysis for Capacity Building

Institutions are usually defined as the rules and enforcement mechanisms which together govern human interaction in a more or less predictable manner. In this respect, the challenge of development policy is ‘getting the institutions right’. Since the beginning of the 1990s, there has been a noticeable increase in development policy debates and activities with a focus on topics such as ‘institutional development’ (ID), ‘capacity building’ (CB), and ‘governance’. In this area, not only conferences, publications and the formulation of principles of development cooperation, but also financing schemes and new approaches to project work abound. In Section 2 this is linked to the changing view of the state as an agent of development; the extensive criticism of the effectiveness of technical cooperation (TC) in general, of which ID and CB are part is addressed in Section 3. The new focus on ID and CB which has recently triggered the development of new approaches to institutional analysis is discussed in Section 4; Section 5 argues that these are of particular relevance for TC in the domain of macroeconomic management; and Section 6 draws on some additional insights from institutional economics. It is argued in Section 7 that the joint forces of initiatives to improve ID/CB on the one hand, and of academic research on institutions on the other, could lead to more credibility and sustainability of comprehensive economic reform processes.