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Aid Effectiveness
Quantity of Aid
Quality of Aid
Harmonized Aid Procedures
Policy coherence for development
International Initiatives
Lessons Learnt
Aiding poor country governments directly
Sources of Information
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Unicef
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Aid Effectiveness
Aid effectiveness refers to the effectiveness of development aid in achieving economic development. Aid agencies are always looking for new ways to improve aid effectiveness, including conditionality, capacity building and support for improved governance.
There is a long history of debate and analysis on the role and effectiveness of international development assistance. There is also an increased recognition of the impact of the quantity and quality of aid and harmonizing aid procedures.
Quantity of Aid
The world has never before seen so much prosperity and donor countries have never been richer. Wealth per person more than doubled between 1961 and 2000, but aid given per person is actually less than it was four decades ago.
The good news is that, following a decade of decline, official development assistance (ODA), began to climb again in 2002. It was the year during which the Monterrey Conference on Financing for Development was held, where world leaders met to address the challenges of providing financing for development around the world. Nevertheless, in 2004, OECD donor countries as a whole still only provided 0.25% of their gross national income (GNI) in ODA. 0.25% is well below the international target for ODA of 0.7% of GNI that was made over 30 years ago.
In April 2005, the European Union announced a plan to collectively provide 0.7% of GNI in ODA by 2015, and to achieve an intermediate target of 0.51% by 2010. Some of these countries have drawn up implementation schedules for meeting these commitments, in most cases intending to reach the target a little ahead of the 2015 EU-15 deadline.
Quality of Aid
Delivering more effective aid is as important as increasing aid volumes. Too much bilateral aid is driven by geo-political objectives, often going to countries that do not need external concessional assistance to reach the MDGs. Further, aid is frequently provided in ways that benefit exporters in rich countries, or provide donors visibility, more than it helps in reducing poverty in poor countries. A recent paper on MDGs, Taxpayers and Aid Effectiveness by the OECD discusses the opportunity for donors to explain what they do before growing skepticism erodes taxpayer support for aid.
Rich countries need to ensure good donor coordination, preferably under the leadership of developing country governments. The process of donor coordination includes harmonizing aid procedures across and within countries and gradually aligning procedures to those of the developing countries. Finally, donors need to untie aid and put a stop to the process by which recipients of aid are forced to use the aid to purchase goods and services from the donor country providing the aid.
In April 2006 The E.U. moved to urge all its Member Countries to "untie" their aid programmes to make them more efficient. Minister Lenihan welcomes EU efforts to monitor and harmonise aid funding in Africa.
"Today’s declaration in Luxembourg by Europe’s 25 Development Ministers will hopefully spell the beginning of the end for tied aid amongst member countries", said Minister of State Mr Conor Lenihan.
Harmonized Aid Procedures
Development aid is flowing through several different channels, each with its own processes and conditionalities. Donors fund more than 60,000 aid projects around the world and demands on recipient countries that have limited institutional capacity are overwhelming. Some recipient countries receive as many as 800 new projects each year, host more than 1,000 donor missions and present 2,400 quarterly reports on progress.
Prior to the major donor reform in Tanzania, the Minister of Finance there supplied 10,000 reports to donors every year and received 2,000 delegations, all of whom expected to meet top officials. In Zambia, the Finance Minister handled 1,200 different donor accounts. In Uganda, only about 30 percent of all stand-alone donor projects in the health sector have been aligned with the country’s own health priorities. The EC Donor Atlas shows that even in Mozambique and Tanzania, where donors are most ’advanced’ in harmonizing procedures and supporting recipient budgets and priorities, still nearly 1,000 different donor activities are underway, with each activity valued at less than $2 million. (Source: Millennium Campaign)
"These are the complaints we hear-inflexible procedures, cumbersome decision-making fragmentation, competition, overlap and duplication. We the donors, with our short-sighted funding and flag-waving, are part of the problem-the ’donor circus’. Too much focus on flags and visibility and too little concern for the end results. This is why we as donors decided to reform the way we work and agreed to a set of principles in Rome."
Hilde F. Johnson, Minister of International Cooperation, Norway
Oxfam undertook a survey of donor practices in 2004 based on interviews with recipient-government officials carried out anonymously in 11 countries across Africa, Asia and the Middle East and Eastern Europe. The survey found that in 52% of reported cases, governments spend ’too much’ or ’excessive’ time reporting to donors; and in 50% of reported cases, none or only some donor activities fitted with the government’s financial planning.
Excerpts from Oxfam’s 2004 survey of donor practice:
What are some government officials saying about aid delivery?
"The complexity of procedure may extend the length of the programme by one or two years."
--government official in West Africa
"Due to the time dedicated to meetings and missions, central and regional directors are often absent from their posts, and this disrupts the flow of activities."
--government official in West Africa
According to the OCED-DAC 2004 Development Cooperation Report:
"Good practice has not yet become general practice. When measured against the commitment to make significant changes to the ways donors manage and deliver aid in out partner countries, the progress made does not yet have sufficient momentum in applying good practice deeply and systematically...."There is scant evidence of steps by donors to harmonize easily harmonizable activities, e.g. undertaking joint analytical/diagnostic work, rationalizing missions, minimizing transaction costs for partner countries through delegated co-operation, and aligning their planning with countries’ own budget cycles. With few exceptions, there is a large gap between international commitments made by headquarters and how these are being translated into action at the country level.”
Policy coherence for development
A further aspect of aid effectiveness is development policy coherence. Donor governments and the EU have recognised that policies in other areas such as trade, finance and agriculture can negatively affect the objectives of development cooperation.
Irish Aid, in its 2006 White Paper, announced that the Government would establish a new Inter-Departmental Committee on Development (p. 96) to strengthen coherence in its approach to development.
Finland, a member of the ‘Like-Minded Group’ of which Irish Aid is a member, has gone further and published a legally-binding development policy which has led to a government-wide restructuring in an effort to improve coherence in all its external relations (p. 11). A 2006 report on the Nordic donor group by the Chr. Michelsen Institute assesses Nordic donors’ progress towards policy coherence for development. The report notes that the Nordic donors have gone further than other donors in promoting policy coherence, which provides valuable information for other donors in their own efforts and at EU-level, however it is still early to gauge real progress (p. 33).
At EU-level, a Development Policy Statement was agreed in 2005 in which member states committed to strengthening policy coherence across EU directorates general (DG). This 2006 paper by the Centre for European Policy Studies analyses whether EU structures (particularly the Council of Ministers and Commission) provide sufficient scope for bringing about greater coherence across its 12 key policy areas.
International Initiatives
The Rome Declaration on Harmonization adopted in February 2003 by bilateral donors, heads of multilateral institutions and partner countries aims to harmonize procedures with each other and with those of partner country systems to improve the effectiveness of development assistance.
The DAC Working Party on Aid Effectiveness was set up in May 2003 in the context of the international consensus reached at Monterrey on the actions needed to promote a global partnership for development and accelerate progress towards the Millennium Development Goals. In order to effectively cover its broad mandate the Working Party has established the following five themes to examine particular areas of interest: monitoring the Paris Declaration, public financial management, managing for development results, procurement and aid untying. The Paris Declaration on aid effectiveness, endorsed on 2 March 2005, is an international agreement to which over one hundred Ministers, Heads of Agencies and other Senior Officials adhered and committed their countries and organisations to increase efforts to harmonise, align and manage aid for so that effectiveness count be measure against a list of desired results with a set of actions which could be monitored and clear indicators of success.
The importance of the Paris Declaration in increasing the impact of aid is discussed in Chapter 3 of the OECD Development Cooperation Report 2005: Aid Effectiveness :Three Good Reasons Why the Paris Declaration Will Make a Difference
At the Spring 2004 Development Committee, Ministers promised "to translate these agreements into clear and specific commitments and timetables and call for the development of indicators and benchmarks to monitor the participation of all partners in this effort at the country level."
Harmonization, Alignment, Results: Progress Report on Aid Effectiveness: This report takes stock of progress made to align donor support with developing country poverty reduction strategies, harmonise donor policies and practices to reduce transaction costs, and manage aid resources with a focus on development results.
Overview of the Results of the Survey on Harmonisation and Alignment Based on the indicators framework developed by the DAC Task Team on Harmonisation and Alignment, an OECD-DAC Survey on Progress in Harmonisation and Alignment has been carried out in 14 partner countries. The findings of the survey were used to report progress to the Second High-Level Forum on Harmonisation and Alignment of Aid Effectiveness (early 2005).
Lessons Learnt
Joint Evaluations: Recent experiences, lessons learned and options for the future: a study on joint evaluations by the OECD DAC Network on Development Evaluation which focused on recent experiences, new and evolving issues and the partner countries perspectives.
The World Bank’s Contributions to Poverty Reduction The Annual Review of Development Effectiveness (ARDE) assesses the extent to which Bank interventions have contributed to growth and poverty reduction and the effectiveness of different types of interventions.
Learning from experience: A review of recipient government efforts to manage donor relations and improve the quality of aid. Alina Rocha Menocal and Sarah Mulley, (ODI Working Paper) May 2006.
Aiding poor country governments directly
Should OECD Donors Deliver Aid Through Poor Country Government Budgets? OECD donor countries now channel about USD 5 billion – some 5 per cent of their aid – directly to the budgets of developing country governments. A new independent evaluation shows that this system of delivering aid can be an effective way to strengthen the management of public financial systems in developing countries, and has helped to improve access to services like healthcare and education.
Miracle, Crisis and Beyond. A Synthesis of Policy Coherence Towards East Asia This report looks at the impact of OECD country policies on the region in a variety of areas, including trade, investment, environment, agriculture, finance and aid. It examines the coherence lessons of these OECD country policies in the light of future challenges in East Asia and other developing regions. Lastly, it contributes answers to the world-wide quest for ways to reduce poverty and promote growth with equity.
DAC’s recommendations as Ireland prepares for a USD 1 billion development co-operation programme In a major review of Ireland’s development co-operation programme, the OECD’s Development Assistance Committee (DAC) noted that Ireland’s official development assistance (ODA) rose dramatically over the past decade, to USD 398 million or 0.40% of its gross national income (GNI) in 2002 compared to USD 70 million or 0.16% of GNI in 1992.
OECD asks donor countries to honour aid promises and spend smarter Aid to the world’s poorest countries is expected to reach about USD 130 billion by 2010, an increase of USD 50 billion from 2004 and twice the amount spent in 2000.
The Centre for Aid and Public Expenditure at the Overseas Development Institute (ODI) has played a leading role in the debates around aid modalities and their linkages to national governance. The recent paper on aid effectiveness and good donorship focuses on identifying the appropriate aid modalities for different situations and exploring their impact on national public expenditure systems.
The effectiveness of aid: does it cause more problems than it solves? A paper from the IMF looks at the impact of aid on economic growth: What Undermines Aid’s Impact on Growth? This working paper asks why it is so hard to find a robust effect of aid on the long-term growth of poor countries, even those with good policies. It points out that corruption and mismanagement cannot be the only reasons why aid does not boost growth; and that although some types of aid may work in the short-term, they fail to have sustainable long-term effects.
A recent newsletter by the International NGO training and research (INTRAC) centre highlights the challenges for civil society in the present focus on aid harmonization.
Sources of Information
OECD Development Assistance Committee (DAC) is the principal body through which the OECD deals with issues related to co-operation with developing countries. The website is a source of information, statistics, research and evaluations of donor practice, public finance, taxation, aid, management, governance, etc.
The Governance and Social Development Resource Centre provides access to the best thinking on governance, conflict and social development. Funded by the UK Department for International Development (DFID), the GSDRC aims to help reduce poverty by better informing policymaking and enhancing professional knowledge and competencies. Services include rapid-response research on demand, consultancy project management, an online research library and directories of organisations, conferences and training opportunities.
The Centre for Aid & Public Expenditure at the ODI undertakes professional advisory and evaluation work on public financial management systems and on new aid approaches that aim to strengthen country systems (e.g. Sector Wide Approaches and General Budget Support).
Some ODI briefing papers:
UK Department for International Development Public Financial Management & Accountability (PFMA) stakeholder network
The United Nations Online Network in Public Administration and Finance (UNPAN) promotes the sharing of knowledge, experiences and best practices throughout the world in sound public policies, effective public administration and efficient civil services, through capacity-building and cooperation among the United Nations Member States, with emphasis on south-south cooperation.
Global Development Network (GDNet) is a research network whose aim is to bridge gaps between development research. It has information and links to a number of research and capacity building organisations in developing countries.
ECDPM hosts Capacity.org a web magazine-cum-portal intended for practitioners and policy makers who work in or on capacity development in international cooperation in the South.
European Network on Debt and Development (EURODAD) is a network of 48 development non-governmental organisations from 15 European countries working for national economic and international financing policies that achieve poverty eradication and the empowerment of the poor.
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