Aid effectiveness
Encyclopedia
Aid effectiveness is the effectiveness of development aid
in achieving economic
or human development
(or development targets). Aid agencies
are always looking for new ways to improve aid effectiveness, including conditionality
, capacity building
and support for improved governance
.
The aid effectiveness movement picked up steam in 2002 at the International Conference on Financing for Development in Monterrey, Mexico, which established the Monterrey Consensus
. There, the international community agreed to increase its funding for development—but acknowledged that more money alone was not enough. Donors and developing countries alike wanted to know that aid would be used as effectively as possible. They wanted it to play its optimum role in helping poor countries achieve the Millennium Development Goals, the set of targets agreed by 192 countries in 2000 which aimed to halve world poverty by 2015. A new paradigm of aid as a partnership, rather than a one-way relationship between donor and recipient, was evolving.
In 2003, aid officials and representatives of donor and recipient countries gathered in Rome for the High Level Forum on Harmonization. At this meeting, convened by the Organization for Economic Co-operation and Development (OECD), donor agencies committed to work with developing countries to better coordinate and streamline their activities at country level. They agreed to take stock of concrete progress before meeting again in Paris in early 2005. In Paris, countries from around the world endorsed the Paris Declaration on Aid Effectiveness, a more comprehensive attempt to change the way donor and developing countries do business together, based on principles of partnership. Three years on, in 2008, the Third High Level Forum in Accra, Ghana took stock of progress and built on the Paris Declaration to accelerate the pace of change. The principles agreed upon in the declarations are however still not always practiced by donors and multilateral bodies. In the case of Cambodia, two experts have assessed donor misbehaviour.
Critiques of the impact of aid have become more vociferous as the global campaigns to increase aid have gained momentum, particularly since 2000. There are those who argue that aid is never effective. Most aid practitioners agree that aid has not always worked to its maximum potential, but that it has achieved significant impact when it has been properly directed and managed, particularly in areas such as health and basic education. There is broad agreement that aid is only one factor in the complex process needed for poor countries to develop, and that economic growth and good governance are prerequisites. The OECD has explored—through peer reviews and other work by the Development Assistance Committee (DAC)—the reasons why aid has and has not worked in the past. This has resulted in a body of best practices and principles that can be applied globally to make aid work better. The ultimate aim of aid effectiveness efforts today is to help developing countries build well functioning local structures and systems so that they are able to manage their own development and reduce their dependency on aid.
Aid flows have significantly increased over the last decade, but at the same time aid has become increasingly fragmented. There has been an explosion in the number of donors, and while the number of projects has multiplied, their average size has dropped. Small projects being often limited in size, scope and duration, they result in little lasting benefit beyond the immediate impact. With more players, aid has become less predictable, less transparent and more volatile. Information, at the donors' as well at the recipients' level, is often poor, incomplete and difficult to compare with other data, and beneficiaries' feedback and formal project evaluations are rare. Aid is predictable when partner countries can be confident about the amount and the timing of aid disbursement. Not being predictable has a cost: the deadweight loss
associated with volatility has ranged on average from 10 to 20% of a developing country programmable aid from the European Union in recent years.
In the past decade, the aid environment has dramatically changed. Emerging economies (China, India, Saudi Arabia, Korea, Turkey, Brazil, Venezuela, etc.), which are still receiving aid from Western countries, have become donors themselves. Multinational corporations, philanthropists, international NGOs and civil society have matured into major players as well. Even though the rise of new development partners had the positive effect of bringing an increased variety of financing, know-how and skills to the development community, at the same time it has shaken up the existing aid system. This is particularly true in the case of emerging economies, as they do not feel compelled to conform to traditional donors’ norms. Generally demanding conditionality
in return for assistance, which means tying aid to the procurement of goods and services, they are challenging traditional development aid standards.
The governance of aid presents itself as complex, bureaucratized and fragmented, with evident diseconomies of numbers and coordination, which have meant an increase in transaction costs. This is true for recipient countries, forced to neglect their domestic obligations to cope with requests and meetings with donors (given the lack of capacity at the country level and the precedence given to responding to donor demands), but also for donors, and ultimately, for beneficiaries. In fact, each project has fixed costs of design, negotiation and implementation, which reduce dollars available for final beneficiaries.
Despite the fact that the international community addressed the effectiveness issue through the Paris Declaration
and the subsequent Accra Agenda for Action
, the implementation of this agenda has been difficult. Governments and aid agencies have made commitments at the leadership level, but for the moment have done little more than pursuing top-down, aggregate targets. Decades of development have shown that if countries are to become less dependent on aid, they must follow a bottom-up approach, where they determine their own priorities and rely on their own systems to deliver that aid. There is broad consensus that aid could be managed more effectively, answering a call for program quality and accountability. With more than $2.3 trillion spent in foreign aid over the last half-century and no equivalent impact in reducing poverty and conflict, and new crisis such as the recent famine in the horn of Africa, this call becomes particularly desperate.
The publication on September 21st, 2011 of the OECD-Development Assistance Committee
's“Aid Effectiveness 2005-2010: Progress in Implementing the Paris Declaration” Report, clearly demonstrates that only one out of the 13 targets established for 2010 has been met.
The 4th High Level Forum (HLF) on Aid Effectiveness held in Busan
, Korea, from November 29th to December 1st, 2011, arrives at a crossroads in the context of international development cooperation. HLF-4 is expected to make recommendations on a future aid quality framework, at least for the period up to the MDG date of 2015.
The major findings by Paul Mosley and others conclude that it is impossible to establish any significant correlation between aid and growth rate of GNP in developing countries. One reason for this is the fungibility and the leakage of the aid into unproductive expenditure in the public sector.
However, at a micro level, all donor agencies regularly report the success of most of their projects and programs. This contrast is known as the micro-macro paradox.
Mosley’s result was further confirmed by Peter Boone who argued that aid is ineffective because it tends to finance consumption rather than investments. Boone also affirmed the micro-macro paradox.
One challenge for assessing the effectiveness of aid is that not all aid is intended to generate economic growth. Some aid is intended for humanitarian purposes; and some may simply improve the standard of living of people in developing countries.
The micro-macro paradox has also been attributed to inadequate assessment practices. For example, conventional assessment techniques often over-emphasize inputs and outputs without taking sufficient account of societal impacts. The shortcomings of prevalent assessment practices have led to a gradual international trend towards more rigorous methods of impact assessment.
Research by Burnside and Dollar (2000)
Burnside and Dollar provide empirical evidence that the impact of aid on GDP growth is positive and significant in developing countries with "sound" institutions and economic policies (i.e. open trade, fiscal and monetary discipline); but aid has less or no significant impact in countries with "poor" institutions and policies. As economists at the World Bank, Burnside and Dollar advocated selectivity in aid allocation. They argue that aid should be systematically allocated to countries conditional on "good" policy.
Burnside and Dollar’s findings have been placed under heavy scrutiny since their publication. Easterly and others re-estimated the Burnside and Dollar estimate with an updated and extended dataset, but could not find any significant aid-policy interaction term. New evidence seems to suggest that Burnside and Dollar’s results are not statistically robust.
Studies and Literature on Aid Effectiveness
One problem of the studies on aid is that there is a lack of differentiation between the different types of aid. Some type of aids such as short-term aid do not have an impact on economic growth while other aids used for infrastructure and investments will result in a positive economic growth.
The emerging stories from aid-growth literature are that aid is effective under a wide variety of circumstances and that nonlinearities in the impact of aid reduce the significance of the aid-growth relationship. However, returns to aid show diminishing returns possibly because of absorption capacity and other constraints. Also, geographically-challenged countries would display lower effectiveness with respect to aid and that should be taken into account in allocation.
Therefore, the challenge to aid allocation is to identify and eliminate the overriding institutional and policy constraints that will reduce the impact of aid on growth. The real challenge is thus to develop a framework of ‘growth and development’ diagnostics to help identify the constraints. Stefan Schmitz believes that reporting duties, results-orientated action and ongoing performance assessments are essential for the sake of aid effectiveness, but political will must be already there for this to happen. Comprehensive thinking
Aid has quadrupled in the last 25 years, with the majority of aid still coming from official donors, and emerging giants such as China
and India. In addition, money is being spent in different ways, for example on global programmes to combat specific issues, such as the control of malaria or measles. Overseas Development Institute
work on argues for a redress of the way in which aid is provided through:
Research on the Accra Agenda for Action and Paris Declaration
Research by the Overseas Development Institute based on in-person interviews with senior politicians and government officials in Ethiopia, Sierra Leone and Zambia suggests that the Accra Agenda for Action (AAA) and Paris Declaration on Aid Effectiveness's indicators are too narrowly defined and lack depth. The principles of "predictability" and "transparency" are highlighted as lacking depth and important sub-dimensions not given enough emphasis, for instance on adaptation to local contexts. The interviews revealed recipient governments felt "predictability" meant donors should provide funding within the quarters scheduled, the Paris Declaration work on an annual basis and makes no distinction between the first and fourth quarter. Also mentioned, were the differences between pledges and actual commitments, the need to speed up the approval process and the need to make explicit and achievable conditions on the aid, to prevent withholding of funds when minor conditions are not fully achieved. Transparency in the reasons for donors' decisions was also seen as very important, the need to be 'frank' about why less funding was disbursed than committed, why feedback from the recipient government was not taken on board, and why a given percentage of funds was earmarked for certain activities such as technical assistance (TA). The resulting conclusion from these interviews and other studies is that repeatedly, the three most important issues for donor recipients are:
Those donor agencies highlighted by aid recipients as particularly attentive to these issues are the African Development Bank
(AfDB) and the World Bank
, followed by the United Nations Development Programme
(UNDP) and the Asian Development Bank
(AsDB).
Beyond Aid
There are also an increasing number of studies and literature that argue aid alone is not enough to lift developing countries out of poverty. Whether or not aid actually has a significant impact on growth, it does not operate in a vacuum. An increasing number of donor country policies can either complement or hinder development, such as trade, investment, or migration. The Commitment to Development Index
published annually by the Center for Global Development
is one such attempt to look at donor country policies toward the developing world and move beyond simple comparisons of aid given. It accounts for not only the quantity but the quality of aid, penalizing nations that given large amounts of tied aid.
is defined as project aid contracted by source to private firms in the donor country. It refers to aid tied to goods and services supplied exclusively by donor country businesses or agencies Tying aid to goods and services supplied exclusively by donor country businesses or agencies severely reduces its impact on development. Tied aid increases the cost of assistance and has the tendency of making donors to focus more on the commercial advancement of their countries than what developing countries need. There are many ways in which aid can be designed to pursue the commercial objectives of donors. One of such pervasive means is by insisting on donor country products.
Others have argued that tying aid to donor-country products is common sense; it is a strategic use of aid to promote donor country’s business or exports. It is further argued that tied aid if well designed and effectively managed, would not necessarily compromise the quality as well as the effectiveness of aid (Aryeetey, 1995; Sowa 1997). However, this argument would hold particularly for programme aid, where aid is tied to a specific projects or policies and where there is little or no commercial interest. It must be emphasized however, that commercial interest and aid effectiveness are two different things and it would be difficult to pursue commercial interest without compromising aid effectiveness. Thus, the idea of maximizing development should be separated from the notion of pursuing commercial interest. Tied aid improves donors export performance, creates business for local companies and jobs. It also helps to expose firms, which have not had any international experience on the global market to do so.
Transparency offers a valuable answer to insecurity, making aid "predictable" and "reliable". Transparency has been shown to improve service delivery and to reduce opportunities for diversion and therefore corruption.
Transparency can be defined as a basic expression of mutual accountability. Mutual accountability can only work if there is a global culture of transparency that demands provision of information through a set of rules and behavioral norms, which are difficult to enforce in the case of official development cooperation. In particular for emerging economy donors and private development assistance, these norms are only at a nascent stage. Kharas suggest to adopt the "regulation through information" approach, which as been developed and has proven its effectiveness in the case of the European integration. In fact, at the international level, when the enforcement of mandatory rules is difficult, the solution could be to provide and make available transparent, relevant, accurate and reliable information, which can be used to reward or sanction individual aid agencies according to their performances. This means establishing a strong culture of accountability within aid, which rewards aid successes but penalize failures.
In order to achieve this, literature on the topic suggest that donors should agree on adopting a standardized format for providing information on volume, allocation and results, such as the International Aid Transparency Initiative
(IATI), or other similar standards, and commit to improve recipient countries' databases with technical, financial and informational support. The format should be easily downloadable and with sufficient disaggregation to enable comparison with other data. Making aid data public and comparable among donors, would be likely to encourage a process of positive emulation towards a better usage of public funds. After all, official development assistance
(ODA) is a voluntary transfer that depends on the support of donor country taxpayers. Donors should therefore consider improving the transparency and traceability of aid funds also as a way of increasing engagement and support towards aid inside their own country. Moreover, a generalized adoption of IATI would ensure the publication of aid information in a timely way, the compatibility with developing countries' budgets and the reliability of future projections, which would have a strong and positive impact on the predictability of aid.
Finally, to improve accountability while building evaluation capabilities in aid recipient countries and systematically collecting beneficiaries’ feedback, different mechanisms to evaluate and monitor transparency should be considered, such as independent third-party reviews, peer reviews or mutual reviews.
While some progress had been made in harmonising the work of the different international aid donors in developing countries, it was acknowledged that much more needed to be done. The aid process was still too strongly led by donor priorities and administered through donor channels, making it hard for developing countries to take the lead. Aid was still too uncoordinated, unpredictable and un-transparent. Deeper reform was felt to be essential if aid was to demonstrate its true potential in the effort to overcome poverty.
At the Paris meeting, more than 100 signatories—from donor and developing-country governments, multilateral donor agencies, regional development banks and international agencies—endorsed the Paris Declaration on Aid Effectiveness. The Paris Declaration went much further than previous agreements; it represented a broader consensus among the international community about how to make aid more effective. At its heart was the commitment to help developing-country governments formulate and implement their own national development plans, according to their own national priorities, using, wherever possible, their own planning and implementation systems.
The Paris Declaration contains 56 partnership commitments aimed at improving the effectiveness of aid. It lays out 12 indicators to provide a measurable and evidence-based way to track progress, and sets targets for 11 of the indicators to be met by 2010. Some country-level aid information management systems, such as the Development Assistance Database
, are tracking indicators based on the principles of the Paris Declaration for tracking aid effectiveness and measuring donor performance.
The Declaration is focused on five mutually reinforcing principles:
A first round of monitoring of the 12 Paris Declaration indicators was conducted in 2006 based on activities undertaken in 2005 in 34 countries. A second survey was organised in early 2008 in which 54 developing countries examined progress against the targets at country level. This 2008 Survey covers more than half all the official development assistance delivered in 2007—nearly USD 45 billion. The evidence so far suggests that progress has been made. For example, more than one third of developing countries surveyed had improved their systems for managing public funds; almost 90% of donor countries had untied their aid; and technical cooperation is more in line with developing countries’ own development programmes. Despite these improvements, however, the results of the Survey show that the pace of progress remains too slow to reach the targets set in 2010. In particular, although many countries have made significant efforts to strengthen their national systems (for instance by improving how they manage their public funds), in many cases donors are still reluctant to use them. The predictability of aid flows also remains low (with just over a third of aid disbursed on schedule), thereby making it hard—or impossible—for governments to plan ahead. In summary, whilst some progress has been made there are still many areas where the pace of change must be accelerated if the targets set for 2010 are to be reached. In addition to the data from the monitoring survey a useful way of understanding donor and recipient country performance is to examine donor and recipient country self-assessments, donor evaluations and Development Assistance Committee
Peer Reviews.
In some quarters, the Paris Declaration is almost synonymous with aid effectiveness; it is expected that aid will be effective and achieve development outcomes when the principles are observed for government sector aid. However, there continue to be criticisms and alternative views, particularly from non-government aid organisations. Implementation of the Paris Declaration still needs to be significantly stepped up, according to the results of the 2008 Monitoring Survey. Concrete targets set for 2010 (such as an increased proportion of aid to be untied; establishment of "mutual accountability" mechanisms in aid recipient countries; and for two-thirds of aid to be delivered in the context of so-called programme approaches rather than projects) may be difficult to meet. Independent NGOs, such as Eurodad, also release their own evaluations, showing that the Declaration is not being implemented as planned. The Overseas Development Institute
has specified that better monitoring of the relationship between the Paris Principles and development results at sector level is necessary.
The Forum was attended by senior ministers from more than 100 countries, as well as representatives of multilateral aid institutions such as the European Commission
(EuropeAid), the World Bank, the United Nations (UN), private foundations and civil society organisations. It was the first of three major international aid conferences in 2008, all aimed at speeding up progress toward the Millennium Development Goals. It was followed by the United Nations High Level Event on the MDGs in New York on 25 September and the Follow-up International Conference on Financing for Development in Doha, Qatar, 29 November-2 December.
The Accra Forum took place against a rapidly changing international aid landscape. Donor countries such as China and India are becoming increasingly important and there are more global programmes and funds that channel aid to tackle specific problems, such as the Global Fund to fight AIDS, Tuberculosis and Malaria. Private funding sources such as the Bill and Melinda Gates Foundation are becoming major players, and civil society groups are increasingly active. The new players bring substantial new resources and expertise to the aid process, but also increase the complexity developing countries face in managing aid. The HLF-3 aims to encourage the formation of broad aid partnerships, based on the principles of the Paris Declaration, that will encompass all players.
The Accra meeting was different from its predecessors in that developing countries played a more active role in the preparations and the agenda. Some 80 developing countries took part in the regional preparatory events. Fifty-four developing countries participated in the OECD’s 2008 Survey of progress against the Paris Declaration targets. Civil society is also increasingly involved in discussions of aid effectiveness; globally, more than 300 civil society groups, including grass roots groups, were involved in consultations in the lead-up to the Accra meeting.
There is broad acknowledgement that new global challenges, such as rising food and fuel prices and climate change, bring added urgency to efforts to make aid as effective as possible.
On the first two days of the HLF-3, there was a series of nine Roundtables covering the key issues in aid effectiveness, from country ownership to managing aid in situations of conflict and fragility. On the third day of the Forum, ministers endorsed the Accra Agenda for Action (AAA). This ministerial statement has been developed with support from a multi-national consensus group working under the auspices of the OECD’s Working Party on Aid Effectiveness. Attention is being focused on stepping up progress towards the commitments outlined in the Paris Declaration by committing signatories to accelerating the pace of change by focusing on key areas that should enable them to meet the 2010 targets agreed in Paris. Drawing on evidence from the latest evaluations, the 2006 and 2008 Surveys on Monitoring the Paris Declaration and on in-depth contributions from developing countries, the AAA identifies three main areas where progress towards reform is still too slow.
1. Country ownership. The Accra Agenda for Action says developing-country governments still need to take stronger leadership of their own development policies and engage further with their parliaments and citizens in shaping them. Donors must commit to supporting them by respecting countries’ priorities, investing in their human resources and institutions, making greater use of their systems to deliver aid, and further increasing the predictability of aid flows.
2. Building more effective and inclusive partnerships. The Accra Agenda for Action aims to incorporate the contributions of all development players—middle-income countries, global funds, the private sector, civil society organisations—into more inclusive partnerships. The aim is for all the providers of aid to use the same principles and procedures, so that all their efforts are coherent and have greater impact on reducing poverty.
3. Achieving development results—and openly accounting for them. The Accra Agenda for Action says the demonstration of impact must be placed more squarely at the heart of efforts to make aid more effective. There is a strong focus on helping developing countries to produce stronger national statistical and information systems to help them better monitor and evaluate impact. More than ever, citizens and taxpayers of all countries expect to see the tangible results of development efforts. In the AAA, developing countries commit to making their revenues, expenditures, budgets, procurements and audits public. Donors commit to disclosing regular and timely information on their aid flows.
The Accra Agenda for Action sets out a list of commitments for its signatories, building on those already agreed in the Paris Declaration. It asks the OECD’s Working Party on Aid Effectiveness to continue monitoring progress on implementing the Paris Declaration and the Accra Agenda for Action and to report back to the Fourth High Level Forum on Aid Effectiveness in December 2011.
Many donor and recipient governments will have to make serious changes if the AAA’s aims are to be fulfilled. The fact that ministers have signed up to these changes in Accra makes the AAA a political document—rather than a technocratic prescription— to move from business as usual to a new way of working together.
The Forum sought to assess progress in improving the quality of aid against the agreed commitments and share global experiences in delivering the best results; and agreed upon a document to further the effectiveness of aid and development efforts and pursuit of the Millennium Development Goals (MDGs).
South Korea held a large stake in the forum. It is a shining example of a country that has transformed from a net aid recipient to a net aid donor. The holding of the Forum in Busan allowed South Korea to share its own development experience, which has attracted a considerable amount of research in the country since 2008.
is the main coordinating body for the international community’s efforts to make aid more effective. The OECD’s work on aid effectiveness is undertaken by its Development Assistance Committee
, known as the DAC. Hosted by the DAC, the Working Party on Aid Effectiveness (WP-EFF) is the major international forum where developing countries join with multilateral and bilateral donors to work on improving the effectiveness of aid. It was set up in May 2003 to promote the global partnership for development agreed at the 2002 Financing for Development Conference in Monterrey and to accelerate progress towards the Millennium Development Goals. It is the body responsible for organising the Third High-Level Forum on Aid Effectiveness in Accra in September 2008.
The Working Party on Aid Effectiveness’ primary function is to measure and encourage progress in implementing the commitments of the 2005 Paris Declaration and provide guidance on policy and good practice. The Working Party comprises senior policy advisers from the 23 DAC members, 23 developing countries and 11 multilateral organisations. It has a unique “tripartite” chairing arrangement, including representatives of a bilateral donor organisation, a multilateral organization and a developing-country partner. This reflects the partnership commitments embodied in the Paris Declaration. The WP-EFF also engages actively with civil society organisations. In order to effectively cover its broad mandate, it has established a number of Joint Ventures to examine particular areas of interest, including monitoring the Paris Declaration, public financial management, procurement, and managing for development results.
In addition to the work of the WP-EFF, the DAC tackles aid effectiveness issues through its other working parties and regular activities.
The DAC maintains and makes available unique and definitive statistics on the global aid effort. Its Working Party on Statistics tracks official development assistance over time, providing a firm basis for analytical work on aid trends and for assessments of aid effectiveness. Beyond the traditional OECD aid donors, its data collection also includes other official and private flows to developing countries.
One of the DAC’s important tasks is to conduct regular peer reviews of its members’ development policies, strategies and activities. Each year, the DAC conducts regular peer reviews of four or five of its members. These reviews look at how members are putting into practice the policy work carried out by the DAC, and how they are responding to international commitments and to their own national goals. These reviews are designed to encourage positive change, support mutual learning and raise the overall effectiveness of aid throughout the donor community.
Other aid effectiveness work is carried out by the DAC’s networks—global foray that bring together experts in various fields.
The Network on Development Evaluation supports robust, informed and independent evaluation of aid activities. This Network promotes joint reviews of the effectiveness of aid, such as the Evaluation of the Implementation of the Paris Declaration. It also works to improve the standards and norms used in evaluations. The 30 Evaluation Network members include heads of evaluation from all DAC member countries and from the African Development Bank (AfDB), Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD) and the World Bank.
The DAC’s Network on Gender Equality, GENDERNET, produces practical tools to help integrate gender equality and women’s empowerment into all aspects of development co-operation. It is currently focusing on the implementation of the Paris Declaration, designing a set of guiding principles to show how women’s empowerment can be clearly integrated into aid effectiveness efforts to increase their impact.
The Network on Environment and Development Co-operation, ENVIRONET, promotes and facilitates the integration of environment and climate change into all aspects of development co-operation, as called for by the Paris Declaration and the Accra Agenda for Action. Building on lessons learned and best practices, the Network works towards enhancing policy co-ordination and coherence to achieve more rapid progress towards the Millennium Development Goals and creating a successful shift towards “green growth”.
The DAC’s Network on Poverty Reduction, POVNET, promotes economic growth for poverty reduction, stressing the importance of both the rate and the pattern of growth, and works to ensure that growth is broad-based and inclusive. Subjects of workshops held by this network have included applying Paris Declaration principles in agriculture and infrastructure.
The Network on Governance and Capacity Development, GOVNET, helps donors to be more effective in supporting democratic governance. It offers a forum to exchange experiences and lessons, identify and disseminate good practice, and develop policy and analytical tools. It has produced important publications on themes such as fighting corruption, building institutions and ensuring human rights are placed at the centre of aid effectiveness efforts.
The Network on Situations of Conflict and Fragility brings together experts on governance and conflict prevention from bilateral and multilateral development co-operation agencies, including the EC, the UN system, the IMF, the World Bank and regional banks. It helps to improve development co-operation and coherent international action in situations where the Millennium Development Goals are undermined by threats of violent conflict, human insecurity, fragility, weak governance and instability.
The DAC also works on emerging issues in aid effectiveness. In 2008, it published the first in a new series of yearly surveys to tackle two major information gaps that hinder increased aid effectiveness: future spending intentions of donors, and the proliferation of aid donors. The results of these surveys will help donors make more informed decisions about where they should focus their aid, and to improve aid predictability at the country level. New analyses of historical information are also showing where there is donor fragmentation within a country, prompting donors to seek a better division of labour amongst themselves.
The DAC is working to build recognition among the development community that trade is an important tool for development. Its aim is to increase support for “aid for trade” activities—aid that helps build poor countries’ capacity to trade successfully. Experts from the DAC and the OECD Trade Committee are disseminating evidence of trade’s impact on development and creating an analytical toolbox for improving the design and implementation of aid-for-trade programmes. This includes strengthening the application of the Paris Declaration principles to trade-related aid activities.
Development aid
Development aid or development cooperation is aid given by governments and other agencies to support the economic, environmental, social and political development of developing countries.It is distinguished...
in achieving economic
Economic development
Economic development generally refers to the sustained, concerted actions of policymakers and communities that promote the standard of living and economic health of a specific area...
or human development
Human development (humanity)
Human development in the scope of humanity, specifically international development, is an international and economic development paradigm that is about much more than the rise or fall of national incomes. People are the real wealth of nations...
(or development targets). Aid agencies
Aid agency
An aid agency is an organisation dedicated to distributing aid. Many professional aid organisations exist, both within government , between governments as multilateral donors and as private voluntary organizations...
are always looking for new ways to improve aid effectiveness, including conditionality
Conditionality
Conditionality is a concept in international development, political economy and international relations and describes the use of conditions attached to a loan, debt relief, bilateral aid or membership of international organizations, typically by the international financial institutions, regional...
, capacity building
Capacity building
Capacity building also referred to as capacity development is a conceptual approach to development that focuses on understanding the obstacles that inhibit people, governments, international organizations and non-governmental organizations from realizing their developmental goals while enhancing...
and support for improved governance
Governance
Governance is the act of governing. It relates to decisions that define expectations, grant power, or verify performance. It consists of either a separate process or part of management or leadership processes...
.
Historical background
The international aid system was born out of the ruins of the Second World War, when the United States used their aid funds to help rebuild Europe. The system came of age during the Cold War era from the 1960s to the 1980s. During this time, foreign aid was often used to support client states in the developing world. Even though funds were generally better utilized in countries that were well governed, they were instead directed toward allies. After the end of the Cold War, the declared focus of official aid began to move further towards the alleviation of poverty and the promotion of development. The countries that were in the most need and poverty became more of a priority now. It is against this background that the international aid effectiveness movement began taking shape in the late 1990s. Donor governments and aid agencies began to realize that their many different approaches and requirements were imposing huge costs on developing countries and making aid less effective. They began working with each other, and with developing countries, to harmonize their work in order to improve its impact.The aid effectiveness movement picked up steam in 2002 at the International Conference on Financing for Development in Monterrey, Mexico, which established the Monterrey Consensus
Monterrey Consensus
The Monterrey Consensus was the outcome of the 2002 Monterrey Conference, the United Nations International Conference on Financing for Development. in Monterrey, Mexico. It was adopted by Heads of State and Government on 22 March 2002. Over fifty Heads of State and two hundred Ministers of Finance,...
. There, the international community agreed to increase its funding for development—but acknowledged that more money alone was not enough. Donors and developing countries alike wanted to know that aid would be used as effectively as possible. They wanted it to play its optimum role in helping poor countries achieve the Millennium Development Goals, the set of targets agreed by 192 countries in 2000 which aimed to halve world poverty by 2015. A new paradigm of aid as a partnership, rather than a one-way relationship between donor and recipient, was evolving.
In 2003, aid officials and representatives of donor and recipient countries gathered in Rome for the High Level Forum on Harmonization. At this meeting, convened by the Organization for Economic Co-operation and Development (OECD), donor agencies committed to work with developing countries to better coordinate and streamline their activities at country level. They agreed to take stock of concrete progress before meeting again in Paris in early 2005. In Paris, countries from around the world endorsed the Paris Declaration on Aid Effectiveness, a more comprehensive attempt to change the way donor and developing countries do business together, based on principles of partnership. Three years on, in 2008, the Third High Level Forum in Accra, Ghana took stock of progress and built on the Paris Declaration to accelerate the pace of change. The principles agreed upon in the declarations are however still not always practiced by donors and multilateral bodies. In the case of Cambodia, two experts have assessed donor misbehaviour.
Critiques of the impact of aid have become more vociferous as the global campaigns to increase aid have gained momentum, particularly since 2000. There are those who argue that aid is never effective. Most aid practitioners agree that aid has not always worked to its maximum potential, but that it has achieved significant impact when it has been properly directed and managed, particularly in areas such as health and basic education. There is broad agreement that aid is only one factor in the complex process needed for poor countries to develop, and that economic growth and good governance are prerequisites. The OECD has explored—through peer reviews and other work by the Development Assistance Committee (DAC)—the reasons why aid has and has not worked in the past. This has resulted in a body of best practices and principles that can be applied globally to make aid work better. The ultimate aim of aid effectiveness efforts today is to help developing countries build well functioning local structures and systems so that they are able to manage their own development and reduce their dependency on aid.
Why effectiveness matters
As recognized by the OECD's Working Party on Aid Effectiveness, at the beginning of the 21st century it became apparent that promoting widespread and sustainable development was not only about amounts of aid given, but also about how aid was given.Aid flows have significantly increased over the last decade, but at the same time aid has become increasingly fragmented. There has been an explosion in the number of donors, and while the number of projects has multiplied, their average size has dropped. Small projects being often limited in size, scope and duration, they result in little lasting benefit beyond the immediate impact. With more players, aid has become less predictable, less transparent and more volatile. Information, at the donors' as well at the recipients' level, is often poor, incomplete and difficult to compare with other data, and beneficiaries' feedback and formal project evaluations are rare. Aid is predictable when partner countries can be confident about the amount and the timing of aid disbursement. Not being predictable has a cost: the deadweight loss
Deadweight loss
In economics, a deadweight loss is a loss of economic efficiency that can occur when equilibrium for a good or service is not Pareto optimal...
associated with volatility has ranged on average from 10 to 20% of a developing country programmable aid from the European Union in recent years.
In the past decade, the aid environment has dramatically changed. Emerging economies (China, India, Saudi Arabia, Korea, Turkey, Brazil, Venezuela, etc.), which are still receiving aid from Western countries, have become donors themselves. Multinational corporations, philanthropists, international NGOs and civil society have matured into major players as well. Even though the rise of new development partners had the positive effect of bringing an increased variety of financing, know-how and skills to the development community, at the same time it has shaken up the existing aid system. This is particularly true in the case of emerging economies, as they do not feel compelled to conform to traditional donors’ norms. Generally demanding conditionality
Conditionality
Conditionality is a concept in international development, political economy and international relations and describes the use of conditions attached to a loan, debt relief, bilateral aid or membership of international organizations, typically by the international financial institutions, regional...
in return for assistance, which means tying aid to the procurement of goods and services, they are challenging traditional development aid standards.
The governance of aid presents itself as complex, bureaucratized and fragmented, with evident diseconomies of numbers and coordination, which have meant an increase in transaction costs. This is true for recipient countries, forced to neglect their domestic obligations to cope with requests and meetings with donors (given the lack of capacity at the country level and the precedence given to responding to donor demands), but also for donors, and ultimately, for beneficiaries. In fact, each project has fixed costs of design, negotiation and implementation, which reduce dollars available for final beneficiaries.
Despite the fact that the international community addressed the effectiveness issue through the Paris Declaration
Aid effectiveness
Aid effectiveness is the effectiveness of development aid in achieving economic or human development . Aid agencies are always looking for new ways to improve aid effectiveness, including conditionality, capacity building and support for improved governance.-Historical background:The international...
and the subsequent Accra Agenda for Action
Aid effectiveness
Aid effectiveness is the effectiveness of development aid in achieving economic or human development . Aid agencies are always looking for new ways to improve aid effectiveness, including conditionality, capacity building and support for improved governance.-Historical background:The international...
, the implementation of this agenda has been difficult. Governments and aid agencies have made commitments at the leadership level, but for the moment have done little more than pursuing top-down, aggregate targets. Decades of development have shown that if countries are to become less dependent on aid, they must follow a bottom-up approach, where they determine their own priorities and rely on their own systems to deliver that aid. There is broad consensus that aid could be managed more effectively, answering a call for program quality and accountability. With more than $2.3 trillion spent in foreign aid over the last half-century and no equivalent impact in reducing poverty and conflict, and new crisis such as the recent famine in the horn of Africa, this call becomes particularly desperate.
The publication on September 21st, 2011 of the OECD-Development Assistance Committee
Development Assistance Committee
The Organisation for Economic Co-operation and Development's Development Assistance Committee is a forum for selected OECD member states to discuss issues surrounding aid, development and poverty reduction in developing countries...
's“Aid Effectiveness 2005-2010: Progress in Implementing the Paris Declaration” Report, clearly demonstrates that only one out of the 13 targets established for 2010 has been met.
The 4th High Level Forum (HLF) on Aid Effectiveness held in Busan
Busan
Busan , formerly spelled Pusan is South Korea's second largest metropolis after Seoul, with a population of around 3.6 million. The Metropolitan area population is 4,399,515 as of 2010. It is the largest port city in South Korea and the fifth largest port in the world...
, Korea, from November 29th to December 1st, 2011, arrives at a crossroads in the context of international development cooperation. HLF-4 is expected to make recommendations on a future aid quality framework, at least for the period up to the MDG date of 2015.
Related research on aid effectiveness
Micro-Macro ParadoxThe major findings by Paul Mosley and others conclude that it is impossible to establish any significant correlation between aid and growth rate of GNP in developing countries. One reason for this is the fungibility and the leakage of the aid into unproductive expenditure in the public sector.
However, at a micro level, all donor agencies regularly report the success of most of their projects and programs. This contrast is known as the micro-macro paradox.
Mosley’s result was further confirmed by Peter Boone who argued that aid is ineffective because it tends to finance consumption rather than investments. Boone also affirmed the micro-macro paradox.
One challenge for assessing the effectiveness of aid is that not all aid is intended to generate economic growth. Some aid is intended for humanitarian purposes; and some may simply improve the standard of living of people in developing countries.
The micro-macro paradox has also been attributed to inadequate assessment practices. For example, conventional assessment techniques often over-emphasize inputs and outputs without taking sufficient account of societal impacts. The shortcomings of prevalent assessment practices have led to a gradual international trend towards more rigorous methods of impact assessment.
Research by Burnside and Dollar (2000)
Burnside and Dollar provide empirical evidence that the impact of aid on GDP growth is positive and significant in developing countries with "sound" institutions and economic policies (i.e. open trade, fiscal and monetary discipline); but aid has less or no significant impact in countries with "poor" institutions and policies. As economists at the World Bank, Burnside and Dollar advocated selectivity in aid allocation. They argue that aid should be systematically allocated to countries conditional on "good" policy.
Burnside and Dollar’s findings have been placed under heavy scrutiny since their publication. Easterly and others re-estimated the Burnside and Dollar estimate with an updated and extended dataset, but could not find any significant aid-policy interaction term. New evidence seems to suggest that Burnside and Dollar’s results are not statistically robust.
Studies and Literature on Aid Effectiveness
One problem of the studies on aid is that there is a lack of differentiation between the different types of aid. Some type of aids such as short-term aid do not have an impact on economic growth while other aids used for infrastructure and investments will result in a positive economic growth.
The emerging stories from aid-growth literature are that aid is effective under a wide variety of circumstances and that nonlinearities in the impact of aid reduce the significance of the aid-growth relationship. However, returns to aid show diminishing returns possibly because of absorption capacity and other constraints. Also, geographically-challenged countries would display lower effectiveness with respect to aid and that should be taken into account in allocation.
Therefore, the challenge to aid allocation is to identify and eliminate the overriding institutional and policy constraints that will reduce the impact of aid on growth. The real challenge is thus to develop a framework of ‘growth and development’ diagnostics to help identify the constraints. Stefan Schmitz believes that reporting duties, results-orientated action and ongoing performance assessments are essential for the sake of aid effectiveness, but political will must be already there for this to happen. Comprehensive thinking
Aid has quadrupled in the last 25 years, with the majority of aid still coming from official donors, and emerging giants such as China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
and India. In addition, money is being spent in different ways, for example on global programmes to combat specific issues, such as the control of malaria or measles. Overseas Development Institute
Overseas Development Institute
The Overseas Development Institute is one of the leading independent think tanks on international development and humanitarian issues. Based in London, its mission is "to inspire and inform policy and practice which lead to the reduction of poverty, the alleviation of suffering and the achievement...
work on argues for a redress of the way in which aid is provided through:
- Redesigning aid architecture and improving aid effectiveness
- Reforming public finance management
- Strengthening resource allocation and use at sector and local levels
- Improving national policy and planning processes
Research on the Accra Agenda for Action and Paris Declaration
Research by the Overseas Development Institute based on in-person interviews with senior politicians and government officials in Ethiopia, Sierra Leone and Zambia suggests that the Accra Agenda for Action (AAA) and Paris Declaration on Aid Effectiveness's indicators are too narrowly defined and lack depth. The principles of "predictability" and "transparency" are highlighted as lacking depth and important sub-dimensions not given enough emphasis, for instance on adaptation to local contexts. The interviews revealed recipient governments felt "predictability" meant donors should provide funding within the quarters scheduled, the Paris Declaration work on an annual basis and makes no distinction between the first and fourth quarter. Also mentioned, were the differences between pledges and actual commitments, the need to speed up the approval process and the need to make explicit and achievable conditions on the aid, to prevent withholding of funds when minor conditions are not fully achieved. Transparency in the reasons for donors' decisions was also seen as very important, the need to be 'frank' about why less funding was disbursed than committed, why feedback from the recipient government was not taken on board, and why a given percentage of funds was earmarked for certain activities such as technical assistance (TA). The resulting conclusion from these interviews and other studies is that repeatedly, the three most important issues for donor recipients are:
- depth of commitment to development
- responsiveness to country circumstances, and
- support for recipient-driven policy
Those donor agencies highlighted by aid recipients as particularly attentive to these issues are the African Development Bank
African Development Bank
The African Development Bank Group is a development bank established in 1964 with the intention of promoting economic and social development in Africa...
(AfDB) and the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
, followed by the United Nations Development Programme
United Nations Development Programme
The United Nations Development Programme is the United Nations' global development network. It advocates for change and connects countries to knowledge, experience and resources to help people build a better life. UNDP operates in 177 countries, working with nations on their own solutions to...
(UNDP) and the Asian Development Bank
Asian Development Bank
The Asian Development Bank is a regional development bank established on 22 August 1966 to facilitate economic development of countries in Asia...
(AsDB).
Beyond Aid
There are also an increasing number of studies and literature that argue aid alone is not enough to lift developing countries out of poverty. Whether or not aid actually has a significant impact on growth, it does not operate in a vacuum. An increasing number of donor country policies can either complement or hinder development, such as trade, investment, or migration. The Commitment to Development Index
Commitment to Development Index
The Commitment to Development Index , published annually by the Center for Global Development, ranks the world’s richest countries on their dedication to policies that benefit the five billion people living in poorer nations. Rich and poor countries are linked in many ways; thus the Index looks...
published annually by the Center for Global Development
Center for Global Development
The Center for Global Development is a non-profit think tank based in Washington, D.C. that focuses on international development. It was founded in November 2001 by former senior U.S. official Edward W. Scott, director of the Peterson Institute for International Economics, C. Fred Bergsten, and...
is one such attempt to look at donor country policies toward the developing world and move beyond simple comparisons of aid given. It accounts for not only the quantity but the quality of aid, penalizing nations that given large amounts of tied aid.
Tied Aid
Tied aidTied aid
Tied aid is foreign aid that must be spent in the country providing the aid or in a group of selected countries. A developed country will provide a bilateral loan or grant to a developing country, but mandate that the money be spent on goods or services produced in the selected country...
is defined as project aid contracted by source to private firms in the donor country. It refers to aid tied to goods and services supplied exclusively by donor country businesses or agencies Tying aid to goods and services supplied exclusively by donor country businesses or agencies severely reduces its impact on development. Tied aid increases the cost of assistance and has the tendency of making donors to focus more on the commercial advancement of their countries than what developing countries need. There are many ways in which aid can be designed to pursue the commercial objectives of donors. One of such pervasive means is by insisting on donor country products.
Others have argued that tying aid to donor-country products is common sense; it is a strategic use of aid to promote donor country’s business or exports. It is further argued that tied aid if well designed and effectively managed, would not necessarily compromise the quality as well as the effectiveness of aid (Aryeetey, 1995; Sowa 1997). However, this argument would hold particularly for programme aid, where aid is tied to a specific projects or policies and where there is little or no commercial interest. It must be emphasized however, that commercial interest and aid effectiveness are two different things and it would be difficult to pursue commercial interest without compromising aid effectiveness. Thus, the idea of maximizing development should be separated from the notion of pursuing commercial interest. Tied aid improves donors export performance, creates business for local companies and jobs. It also helps to expose firms, which have not had any international experience on the global market to do so.
Ways to improve Aid effectiveness
The Paris Declaration embodied a new, broad consensus on what needs to be done to produce better development results. Its principles lay open the possible ways to undertake, which can be interpreted also as the major objectives of good aid: fostering recipient countries' ownership of development policies and strategies, maximizing donors' coordination and harmonization, improving aid transparency and mutual accountability of donors and recipients, just to name a few.Improving aid transparency and mutual accountability of donors and recipients
The Accra Agenda for Action states that transparency and accountability are essential elements for development results, as well as drivers of progress. Mutual accountability and transparency is one of the five partnership commitments of the Paris Declaration Through transparency, donors and recipients can be held accountable for what they spend and aid can be made more effective by knowing : Who gives money to which recipient, What project is being funded and for what purpose, and Where (the 3 Ws of transparency)Transparency offers a valuable answer to insecurity, making aid "predictable" and "reliable". Transparency has been shown to improve service delivery and to reduce opportunities for diversion and therefore corruption.
Transparency can be defined as a basic expression of mutual accountability. Mutual accountability can only work if there is a global culture of transparency that demands provision of information through a set of rules and behavioral norms, which are difficult to enforce in the case of official development cooperation. In particular for emerging economy donors and private development assistance, these norms are only at a nascent stage. Kharas suggest to adopt the "regulation through information" approach, which as been developed and has proven its effectiveness in the case of the European integration. In fact, at the international level, when the enforcement of mandatory rules is difficult, the solution could be to provide and make available transparent, relevant, accurate and reliable information, which can be used to reward or sanction individual aid agencies according to their performances. This means establishing a strong culture of accountability within aid, which rewards aid successes but penalize failures.
In order to achieve this, literature on the topic suggest that donors should agree on adopting a standardized format for providing information on volume, allocation and results, such as the International Aid Transparency Initiative
International Aid Transparency Initiative
The International Aid Transparency Initiative is a global campaign to create transparency in the records of how aid money is spent. The initiative hopes to thereby ensure that aid money reaches its intended recipients...
(IATI), or other similar standards, and commit to improve recipient countries' databases with technical, financial and informational support. The format should be easily downloadable and with sufficient disaggregation to enable comparison with other data. Making aid data public and comparable among donors, would be likely to encourage a process of positive emulation towards a better usage of public funds. After all, official development assistance
Official development assistance
Official development assistance is a term compiled by the Development Assistance Committee of the Organisation for Economic Co-operation and Development to measure aid. The DAC first compiled the term in 1969. It is widely used by academics and journalists as a convenient indicator of...
(ODA) is a voluntary transfer that depends on the support of donor country taxpayers. Donors should therefore consider improving the transparency and traceability of aid funds also as a way of increasing engagement and support towards aid inside their own country. Moreover, a generalized adoption of IATI would ensure the publication of aid information in a timely way, the compatibility with developing countries' budgets and the reliability of future projections, which would have a strong and positive impact on the predictability of aid.
Finally, to improve accountability while building evaluation capabilities in aid recipient countries and systematically collecting beneficiaries’ feedback, different mechanisms to evaluate and monitor transparency should be considered, such as independent third-party reviews, peer reviews or mutual reviews.
Paris Declaration on Aid Effectiveness, February 2005
In February 2005, international community came together at the Paris High Level Forum on Aid Effectiveness, hosted by the French government and organised by the OECD. The role of aid in promoting development was attracting increasing public scrutiny in the run-up to the G8 Summit in Gleneagles, Scotland, and the global campaigns such as Make Poverty History.While some progress had been made in harmonising the work of the different international aid donors in developing countries, it was acknowledged that much more needed to be done. The aid process was still too strongly led by donor priorities and administered through donor channels, making it hard for developing countries to take the lead. Aid was still too uncoordinated, unpredictable and un-transparent. Deeper reform was felt to be essential if aid was to demonstrate its true potential in the effort to overcome poverty.
At the Paris meeting, more than 100 signatories—from donor and developing-country governments, multilateral donor agencies, regional development banks and international agencies—endorsed the Paris Declaration on Aid Effectiveness. The Paris Declaration went much further than previous agreements; it represented a broader consensus among the international community about how to make aid more effective. At its heart was the commitment to help developing-country governments formulate and implement their own national development plans, according to their own national priorities, using, wherever possible, their own planning and implementation systems.
The Paris Declaration contains 56 partnership commitments aimed at improving the effectiveness of aid. It lays out 12 indicators to provide a measurable and evidence-based way to track progress, and sets targets for 11 of the indicators to be met by 2010. Some country-level aid information management systems, such as the Development Assistance Database
Development Assistance Database
The Development Assistance Database is a widely used Aid Information Management System developed by for Aid Management, Public Investment and National Budgeting...
, are tracking indicators based on the principles of the Paris Declaration for tracking aid effectiveness and measuring donor performance.
The Declaration is focused on five mutually reinforcing principles:
- Ownership: Developing countries must lead their own development policies and strategies, and manage their own development work on the ground. This is essential if aid is to contribute to truly sustainable development. Donors must support developing countries in building up their capacity to exercise this kind of leadership by strengthening local expertise, institutions and management systems. The target set by the Paris Declaration is for three-quarters of developing countries to have their own national development strategies by 2010.
- Alignment: Donors must line up their aid firmly behind the priorities outlined in developing countries’ national development strategies. Wherever possible, they must use local institutions and procedures for managing aid in order to build sustainable structures. In Paris, donors committed to make more use of developing countries’ procedures for public financial management, accounting, auditing, procurement and monitoring. Where these systems are not strong enough to manage aid effectively, donors promised to help strengthen them. They also promised to improve the predictability of aid, to halve the amount of aid that is not disbursed in the year for which it is scheduled, and to continue to “untie” their aid from any obligation that it be spent on donor-country goods and services.
- Harmonisation: Donors must coordinate their development work better amongst themselves to avoid duplication and high transaction costs for poor countries. In the Paris Declaration, they committed to coordinate better at the country level to ease the strain on recipient governments, for example by reducing the large numbers of duplicative field missions. They agreed on a target of providing two-thirds of all their aid via so-called “programme-based approaches” by 2010. This means aid is pooled in support of a particular strategy led by a recipient country—a national health plan for example—rather than fragmented into multiple individual projects.
- Managing for results: All parties in the aid relationship must place more focus on the result of aid, the tangible difference it makes in poor people’s lives. They must develop better tools and systems to measure this impact. The target set by the Paris Declaration is for a one-third reduction by 2010 in the proportion of developing countries without solid performance assessment frameworks to measure the impact of aid.
- Mutual accountability: Donors and developing countries must account more transparently to each other for their use of aid funds, and to their citizens and parliaments for the impact of their aid. The Paris Declaration says all countries must have procedures in place by 2010 to report back openly on their development results.
A first round of monitoring of the 12 Paris Declaration indicators was conducted in 2006 based on activities undertaken in 2005 in 34 countries. A second survey was organised in early 2008 in which 54 developing countries examined progress against the targets at country level. This 2008 Survey covers more than half all the official development assistance delivered in 2007—nearly USD 45 billion. The evidence so far suggests that progress has been made. For example, more than one third of developing countries surveyed had improved their systems for managing public funds; almost 90% of donor countries had untied their aid; and technical cooperation is more in line with developing countries’ own development programmes. Despite these improvements, however, the results of the Survey show that the pace of progress remains too slow to reach the targets set in 2010. In particular, although many countries have made significant efforts to strengthen their national systems (for instance by improving how they manage their public funds), in many cases donors are still reluctant to use them. The predictability of aid flows also remains low (with just over a third of aid disbursed on schedule), thereby making it hard—or impossible—for governments to plan ahead. In summary, whilst some progress has been made there are still many areas where the pace of change must be accelerated if the targets set for 2010 are to be reached. In addition to the data from the monitoring survey a useful way of understanding donor and recipient country performance is to examine donor and recipient country self-assessments, donor evaluations and Development Assistance Committee
Development Assistance Committee
The Organisation for Economic Co-operation and Development's Development Assistance Committee is a forum for selected OECD member states to discuss issues surrounding aid, development and poverty reduction in developing countries...
Peer Reviews.
In some quarters, the Paris Declaration is almost synonymous with aid effectiveness; it is expected that aid will be effective and achieve development outcomes when the principles are observed for government sector aid. However, there continue to be criticisms and alternative views, particularly from non-government aid organisations. Implementation of the Paris Declaration still needs to be significantly stepped up, according to the results of the 2008 Monitoring Survey. Concrete targets set for 2010 (such as an increased proportion of aid to be untied; establishment of "mutual accountability" mechanisms in aid recipient countries; and for two-thirds of aid to be delivered in the context of so-called programme approaches rather than projects) may be difficult to meet. Independent NGOs, such as Eurodad, also release their own evaluations, showing that the Declaration is not being implemented as planned. The Overseas Development Institute
Overseas Development Institute
The Overseas Development Institute is one of the leading independent think tanks on international development and humanitarian issues. Based in London, its mission is "to inspire and inform policy and practice which lead to the reduction of poverty, the alleviation of suffering and the achievement...
has specified that better monitoring of the relationship between the Paris Principles and development results at sector level is necessary.
Third High Level Forum on Aid Effectiveness, Accra, September 2008
The Third High Level Forum on Aid Effectiveness (HLF-3) was held in Accra, Ghana from September 2–4, 2008. Its aim was to build on the work of the two previous meetings, in Rome and Paris, to take stock of progress so far, and to accelerate the momentum of change.The Forum was attended by senior ministers from more than 100 countries, as well as representatives of multilateral aid institutions such as the European Commission
European Commission
The European Commission is the executive body of the European Union. The body is responsible for proposing legislation, implementing decisions, upholding the Union's treaties and the general day-to-day running of the Union....
(EuropeAid), the World Bank, the United Nations (UN), private foundations and civil society organisations. It was the first of three major international aid conferences in 2008, all aimed at speeding up progress toward the Millennium Development Goals. It was followed by the United Nations High Level Event on the MDGs in New York on 25 September and the Follow-up International Conference on Financing for Development in Doha, Qatar, 29 November-2 December.
The Accra Forum took place against a rapidly changing international aid landscape. Donor countries such as China and India are becoming increasingly important and there are more global programmes and funds that channel aid to tackle specific problems, such as the Global Fund to fight AIDS, Tuberculosis and Malaria. Private funding sources such as the Bill and Melinda Gates Foundation are becoming major players, and civil society groups are increasingly active. The new players bring substantial new resources and expertise to the aid process, but also increase the complexity developing countries face in managing aid. The HLF-3 aims to encourage the formation of broad aid partnerships, based on the principles of the Paris Declaration, that will encompass all players.
The Accra meeting was different from its predecessors in that developing countries played a more active role in the preparations and the agenda. Some 80 developing countries took part in the regional preparatory events. Fifty-four developing countries participated in the OECD’s 2008 Survey of progress against the Paris Declaration targets. Civil society is also increasingly involved in discussions of aid effectiveness; globally, more than 300 civil society groups, including grass roots groups, were involved in consultations in the lead-up to the Accra meeting.
There is broad acknowledgement that new global challenges, such as rising food and fuel prices and climate change, bring added urgency to efforts to make aid as effective as possible.
On the first two days of the HLF-3, there was a series of nine Roundtables covering the key issues in aid effectiveness, from country ownership to managing aid in situations of conflict and fragility. On the third day of the Forum, ministers endorsed the Accra Agenda for Action (AAA). This ministerial statement has been developed with support from a multi-national consensus group working under the auspices of the OECD’s Working Party on Aid Effectiveness. Attention is being focused on stepping up progress towards the commitments outlined in the Paris Declaration by committing signatories to accelerating the pace of change by focusing on key areas that should enable them to meet the 2010 targets agreed in Paris. Drawing on evidence from the latest evaluations, the 2006 and 2008 Surveys on Monitoring the Paris Declaration and on in-depth contributions from developing countries, the AAA identifies three main areas where progress towards reform is still too slow.
1. Country ownership. The Accra Agenda for Action says developing-country governments still need to take stronger leadership of their own development policies and engage further with their parliaments and citizens in shaping them. Donors must commit to supporting them by respecting countries’ priorities, investing in their human resources and institutions, making greater use of their systems to deliver aid, and further increasing the predictability of aid flows.
2. Building more effective and inclusive partnerships. The Accra Agenda for Action aims to incorporate the contributions of all development players—middle-income countries, global funds, the private sector, civil society organisations—into more inclusive partnerships. The aim is for all the providers of aid to use the same principles and procedures, so that all their efforts are coherent and have greater impact on reducing poverty.
3. Achieving development results—and openly accounting for them. The Accra Agenda for Action says the demonstration of impact must be placed more squarely at the heart of efforts to make aid more effective. There is a strong focus on helping developing countries to produce stronger national statistical and information systems to help them better monitor and evaluate impact. More than ever, citizens and taxpayers of all countries expect to see the tangible results of development efforts. In the AAA, developing countries commit to making their revenues, expenditures, budgets, procurements and audits public. Donors commit to disclosing regular and timely information on their aid flows.
The Accra Agenda for Action sets out a list of commitments for its signatories, building on those already agreed in the Paris Declaration. It asks the OECD’s Working Party on Aid Effectiveness to continue monitoring progress on implementing the Paris Declaration and the Accra Agenda for Action and to report back to the Fourth High Level Forum on Aid Effectiveness in December 2011.
Many donor and recipient governments will have to make serious changes if the AAA’s aims are to be fulfilled. The fact that ministers have signed up to these changes in Accra makes the AAA a political document—rather than a technocratic prescription— to move from business as usual to a new way of working together.
Fourth High Level Forum on Aid Effectiveness, Busan, South Korea, November 2011
The Fourth High Level Forum on Aid Effectiveness was held in Busan, South Korea from 29 November 2011 to 1 December 2011. The Forum brought together political leaders, government representatives, parliamentarians, civil society organisations and private sector representatives from both developing and donor countries.The Forum sought to assess progress in improving the quality of aid against the agreed commitments and share global experiences in delivering the best results; and agreed upon a document to further the effectiveness of aid and development efforts and pursuit of the Millennium Development Goals (MDGs).
South Korea held a large stake in the forum. It is a shining example of a country that has transformed from a net aid recipient to a net aid donor. The holding of the Forum in Busan allowed South Korea to share its own development experience, which has attracted a considerable amount of research in the country since 2008.
The OECD's work on aid effectiveness
The Organisation for Economic Co-operation and DevelopmentOrganisation for Economic Co-operation and Development
The Organisation for Economic Co-operation and Development is an international economic organisation of 34 countries founded in 1961 to stimulate economic progress and world trade...
is the main coordinating body for the international community’s efforts to make aid more effective. The OECD’s work on aid effectiveness is undertaken by its Development Assistance Committee
Development Assistance Committee
The Organisation for Economic Co-operation and Development's Development Assistance Committee is a forum for selected OECD member states to discuss issues surrounding aid, development and poverty reduction in developing countries...
, known as the DAC. Hosted by the DAC, the Working Party on Aid Effectiveness (WP-EFF) is the major international forum where developing countries join with multilateral and bilateral donors to work on improving the effectiveness of aid. It was set up in May 2003 to promote the global partnership for development agreed at the 2002 Financing for Development Conference in Monterrey and to accelerate progress towards the Millennium Development Goals. It is the body responsible for organising the Third High-Level Forum on Aid Effectiveness in Accra in September 2008.
The Working Party on Aid Effectiveness’ primary function is to measure and encourage progress in implementing the commitments of the 2005 Paris Declaration and provide guidance on policy and good practice. The Working Party comprises senior policy advisers from the 23 DAC members, 23 developing countries and 11 multilateral organisations. It has a unique “tripartite” chairing arrangement, including representatives of a bilateral donor organisation, a multilateral organization and a developing-country partner. This reflects the partnership commitments embodied in the Paris Declaration. The WP-EFF also engages actively with civil society organisations. In order to effectively cover its broad mandate, it has established a number of Joint Ventures to examine particular areas of interest, including monitoring the Paris Declaration, public financial management, procurement, and managing for development results.
In addition to the work of the WP-EFF, the DAC tackles aid effectiveness issues through its other working parties and regular activities.
The DAC maintains and makes available unique and definitive statistics on the global aid effort. Its Working Party on Statistics tracks official development assistance over time, providing a firm basis for analytical work on aid trends and for assessments of aid effectiveness. Beyond the traditional OECD aid donors, its data collection also includes other official and private flows to developing countries.
One of the DAC’s important tasks is to conduct regular peer reviews of its members’ development policies, strategies and activities. Each year, the DAC conducts regular peer reviews of four or five of its members. These reviews look at how members are putting into practice the policy work carried out by the DAC, and how they are responding to international commitments and to their own national goals. These reviews are designed to encourage positive change, support mutual learning and raise the overall effectiveness of aid throughout the donor community.
Other aid effectiveness work is carried out by the DAC’s networks—global foray that bring together experts in various fields.
The Network on Development Evaluation supports robust, informed and independent evaluation of aid activities. This Network promotes joint reviews of the effectiveness of aid, such as the Evaluation of the Implementation of the Paris Declaration. It also works to improve the standards and norms used in evaluations. The 30 Evaluation Network members include heads of evaluation from all DAC member countries and from the African Development Bank (AfDB), Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD) and the World Bank.
The DAC’s Network on Gender Equality, GENDERNET, produces practical tools to help integrate gender equality and women’s empowerment into all aspects of development co-operation. It is currently focusing on the implementation of the Paris Declaration, designing a set of guiding principles to show how women’s empowerment can be clearly integrated into aid effectiveness efforts to increase their impact.
The Network on Environment and Development Co-operation, ENVIRONET, promotes and facilitates the integration of environment and climate change into all aspects of development co-operation, as called for by the Paris Declaration and the Accra Agenda for Action. Building on lessons learned and best practices, the Network works towards enhancing policy co-ordination and coherence to achieve more rapid progress towards the Millennium Development Goals and creating a successful shift towards “green growth”.
The DAC’s Network on Poverty Reduction, POVNET, promotes economic growth for poverty reduction, stressing the importance of both the rate and the pattern of growth, and works to ensure that growth is broad-based and inclusive. Subjects of workshops held by this network have included applying Paris Declaration principles in agriculture and infrastructure.
The Network on Governance and Capacity Development, GOVNET, helps donors to be more effective in supporting democratic governance. It offers a forum to exchange experiences and lessons, identify and disseminate good practice, and develop policy and analytical tools. It has produced important publications on themes such as fighting corruption, building institutions and ensuring human rights are placed at the centre of aid effectiveness efforts.
The Network on Situations of Conflict and Fragility brings together experts on governance and conflict prevention from bilateral and multilateral development co-operation agencies, including the EC, the UN system, the IMF, the World Bank and regional banks. It helps to improve development co-operation and coherent international action in situations where the Millennium Development Goals are undermined by threats of violent conflict, human insecurity, fragility, weak governance and instability.
The DAC also works on emerging issues in aid effectiveness. In 2008, it published the first in a new series of yearly surveys to tackle two major information gaps that hinder increased aid effectiveness: future spending intentions of donors, and the proliferation of aid donors. The results of these surveys will help donors make more informed decisions about where they should focus their aid, and to improve aid predictability at the country level. New analyses of historical information are also showing where there is donor fragmentation within a country, prompting donors to seek a better division of labour amongst themselves.
The DAC is working to build recognition among the development community that trade is an important tool for development. Its aim is to increase support for “aid for trade” activities—aid that helps build poor countries’ capacity to trade successfully. Experts from the DAC and the OECD Trade Committee are disseminating evidence of trade’s impact on development and creating an analytical toolbox for improving the design and implementation of aid-for-trade programmes. This includes strengthening the application of the Paris Declaration principles to trade-related aid activities.
See also
- Development Assistance CommitteeDevelopment Assistance CommitteeThe Organisation for Economic Co-operation and Development's Development Assistance Committee is a forum for selected OECD member states to discuss issues surrounding aid, development and poverty reduction in developing countries...
- Monterrey ConsensusMonterrey ConsensusThe Monterrey Consensus was the outcome of the 2002 Monterrey Conference, the United Nations International Conference on Financing for Development. in Monterrey, Mexico. It was adopted by Heads of State and Government on 22 March 2002. Over fifty Heads of State and two hundred Ministers of Finance,...
- EurodadEurodadEurodad is a network of 58 non-governmental organisations from 19 European countries. Eurodad and its members make up a network, this network researches and works on issues that are related to debt, development finance and poverty reduction.Recently this network has focussed on issues such as...
- International Aid Transparency InitiativeInternational Aid Transparency InitiativeThe International Aid Transparency Initiative is a global campaign to create transparency in the records of how aid money is spent. The initiative hopes to thereby ensure that aid money reaches its intended recipients...
- Development Assistance DatabaseDevelopment Assistance DatabaseThe Development Assistance Database is a widely used Aid Information Management System developed by for Aid Management, Public Investment and National Budgeting...
External links
- Eurodad: The European Network on Debt and Development
- Special Report on Aid Harmonization
- "Addicted to Aid"-documentary by Sorious Samura
- Center for Global Development: Aid Effectiveness
- Millions Saved A compilation of case studies of effective foreign assistance by the Center for Global Development.
- Aidharmonisation.org
- Aideffectiveness.org
- PubHealth.org - Ugandan effort to develop tools for harmonization
- Reading list on the future of development assistance
- PSD Blog: aid effectiveness
- Boston Review Forum: Making Aid Work Initial article arguing for funding of projects confirmed as effective in randomized trials, followed by replies.
- CGAP's (Consultative Group to Assist the Poor) Aid Effectiveness Work. Microfinance as a test case.
- The Crisis in African Agriculture: A more effective use for EC aid? A Practical Action and Pelum 'African Voices' Report
- European Network on Debt and Development reports, news and links on aid effectiveness
- Euforic pages on aid evaluation and effectiveness
- FRIDE From Paris to Accra: building the global governance of aid
- Zunia Aid Effectiveness Page - articles, reports, blogs, and jobs related to aid effectiveness
- Three-Cs.net Six joint-evaluations to explore and assess the role played by the Maastricht Treaty precepts of coordination, complementarity and coherence (3Cs) in the EU's development co-operation policies and operations
- The OECD DAC's site on the Paris Declaration on Aid Effectiveness
- Governance and Social Development Resource Centre's Topic Guide: Aid instruments and aid effectiveness
- Milestones in Aid Effectiveness
- ODI Briefing Paper: Aid effectiveness after Accra
- EADI Online Dossier on Aid Effectiveness
- Masterclass on Aid Effectiveness
- Open Forum for CSO Development Effectiveness