Guest contribution - issue 25 - April 2005
By: Niloy Banerjee
Prologue
The world of development cooperation has been grappling with issues of aid coordination and delivery in the past decade, and the momentum has accelerated in the latter half of the decade. There is now an emerging consensus that the impact of developmental resources can be increased by reducing transactional inefficiencies and curtailing their use as instruments for rent-seeking and patronage-disbursement.
After a period spent questioning the effectiveness of developmental resources, the global community is now pro-actively seeking to make development more effective. In fact, a virtuous cycle may well be arising, with strong leadership on the part of developing countries generating greater confidence among donors to shore up their resource allocations. In the past two years, official development assistance (ODA) 1 flows have crept up marginally from their decade-long stagnation at around USD 50 billion per annum to USD 68 billion more recently. At the same time, the global community – developed and developing countries alike – is increasingly keen to measure how developing countries have been doing, as is indicated by the burgeoning interest in the five-year Review of the Millennium Development Goals (MDGs, see www.unmillenniumproject.org) slated for later this year. In fact, a declaration issued at the recent High-Level Forum (HLF) in Paris opens with a commitment by ministers and agency heads to continue ‘far-reaching and monitorable actions to reform the ways [we] deliver and manage aid as [we] look ahead to the five-year review of the Millennium Declaration and the MDGs.’ 2
Amid all this excitement, it is important to understand that the consensus on the delivery of developmental resources is basically a matter of principle, i.e. the relatively straightforward aspect. The challenge, as always - as this volume describing experiences in Asia demonstrates - is in working out the nuts and bolts of greater coordination, alignment and harmonisation. This should, however, in no way diminish the significance of what has been achieved by developed and developing countries in better understanding the efficient use of ODA resources. The central tenet of this new consciousness is that national ownership is key to the effective utilisation of resources. This in turn cascades into a host of agreements such as on the need to align donor systems behind government systems, the need to harmonise donor procedures, the need for mutual accountability, the following of local priorities and procedures, the use of local institutions, moving from project assistance to programme assistance and budgetary support, aligning procurement systems, etc. 3 In some cases, these agreements have managed to go beyond principles and break through into very specific areas of substantive harmonisation.
Photo: R. Chalasani / UNDP
The Asian experience
These developments have been echoed in Asia, where countries and their donor partners, irrespective of their historical origins, institutional mandates, governance structures and authorising environments, are simplifying and harmonising their requirements. The aim is to reduce costs and at the same time to improve fiduciary oversight and public accountability, and sharpen the focus on specific development outcomes. Vietnam is a good example of a country that has now joined the international policy dialogue on aid coordination and is, in many ways, emerging as a trendsetter in the field. The key findings of the Asian case studies reflect certain trends and areas of broad commonality, as well as a number of concerns.
First, it is clear that countries in Asia are energetically following the global debate on aid coordination and are effectively participating in it. Viewed from another angle, it is fair to say that the past decade of global activism in streamlining aid delivery has had a very positive impact on the recipient countries. Key events such as the Monterrey meeting, the Rome HLF, and most recently the Paris HLF 2, where developing countries’ participation was encouraged and their feedback actively sought, have served to energise the discussion and move it beyond platitudes. Clearly, the OECD-DAC 4, multilateral agencies and bilateral donors have managed to seed an unprecedented level of interest and participation. The OECD’s working parties on Aid Effectiveness and Simplification and Harmonisation have both produced influential reports on which many countries have based their future courses of action. Overall, this is a positive development in that an effective global debate has encouraged developing countries to assume greater charge of their aid coordination affairs.
Second, and following from the above, many countries in the region have prepared or are in the midst of preparing harmonisation action plans - phased, time-bound road maps that lay down key achievables and challenges for both donors and national governments. This includes the designation of nodal agencies and ministries to take charge of coordination and harmonisation. Key individuals from within these organisations have emerged as champions of this agenda and have lent voice and credibility to these countries’ efforts at international forums.
Third, there is a welcome trend in the region towards pegging all developmental resources to unified, single national frameworks like the Vietnamese government’s Five-Year Socio-Economic Development Plan. These are twinned with rolling Mid-Term Expenditure Frameworks to ensure that both donors and national planners are able to get a strategic overview of resource allocations and donors, for their part, provide predictability to ODA flows.
Fourth, as has already been mentioned, national governments and donors are raising and discussing more specific concerns, such as limiting the use of project implementation units, multiple procurement modalities and practices like topping-up civil service salaries.
The Monterrey, Rome and Paris Meetings
The International Conference on Financing for Development was held in March 2002 in Monterrey, Mexico. The ‘Monterrey Consensus’ introduced a new partnership based on a framework of mutual accountability between developed and developing countries, which was supposed to create measurable improvements in growth and poverty reduction. Developing countries acknowledged their responsibilities for good governance and sound policies. The international community, in turn, committed itself to scaling-up and intensifying its efforts to help developing countries by:
- making sure that aid resources match the commitment to progress on policy reforms;
- tearing down trade barriers that harm the poorest countries and constraints that prevent them from deriving the full benefits from trade and investment flows;
- implementing the HIPC Initiative as an enduring solution to the debt burden of low-income countries;
- renewing calls for a new partnership on capacity-building, using the power of the knowledge economy.
http://www.un.org/esa/ffd/
In February 2003, senior officials from over 40 multilateral and bilateral development organisations and 28 aid recipient countries met in Rome for a High-Level Forum on Aid Harmonisation. The aim of the Forum was to discuss the possibilities for making aid more effective by working together more closely. In the resulting Rome Declaration on Harmonisation, delegates committed themselves to a range of activities aimed at improving harmonisation. These included:
- adapting harmonisation efforts to the country context;
- reviewing individual institutions’ and countries’ practices in order to facilitate harmonisation;
- simplifying and harmonising documentation;
- disseminating good practices to staff at headquarters and in country offices and to other in-country development partners;
- creating incentives that foster management and staff recognition of the benefits of harmonisation;,
- streamlining donor procedures and practices;
- promoting the use of harmonised approaches in global and regional programmes.
http://www.oecd.org/dataoecd/54/50/31451637.pdf
In March 2005, the participants at the Paris Second High-Level Forum on Aid Harmonisation issued the ‘Paris Declaration on Aid Effectiveness,’ committing their institutions and countries to stepping up efforts in relation to harmonisation, alignment, and managing for results. The Declaration also listed a set of monitorable actions and indicators to accelerate progress in these areas. Many of the actions listed were intended to reaffirm the commitments originally made in Rome. However, additional measures were also announced to combat:
- weaknesses in partner countries’ institutional capacities for development;
- failures to provide more predictable and multi-year commitments on aid flows to committed partner countries;
- failures to delegate sufficient authority to donors’ field staff;
- the inadequate integration of global programmes and initiatives into partner countries’ broader development;
- corruption and lack of transparency, both of which impede effective resource mobilisation and allocation.
http://www.aidharmonization.org/ |
Capacity development
The logical corollary of donors aligning their procedures behind national systems, institutions and procedures is that capacity development has become central to the debate on aid coordination and management. Donors are keen to see that the systems and institutions behind which they are aligning their resources are sufficiently capacitated and robust and are accompanied by fiduciary oversight mechanisms. This has come through clearly in the recent Paris declaration.
This re-visitation of the capacity question is welcome and must be seen in a positive light. Critics have, however, begun to wonder whether the capacity issue is in danger of becoming the new conditionality, as donors question whether national governments are capable of handling increases in aid through their national systems. It is therefore instructive to follow the debate on the issue of ‘absorptive capacity’, for example, that arose in the wake of the Millennium Project recommendation to up ODA resources (currently USD 68 billion) to more than three times the current global volume in order to achieve the MDGs.
While the notion of capacity development is completely antithetical to conditionality, it would be helpful to bear in mind that, to prevent capacity development assuming any form of conditionality whatsoever, caution will need to be exercised on the issue of ‘who leads’ the aid coordination initiative. Here, a cautionary note must be sounded on the donor-led debate on aid coordination, alignment and harmonisation, which, despite having had very positive outcomes so far, is susceptible to remaining donor-led in perpetuity.
One clear mitigating initiative would be seed forums for dialogue and information-sharing for the countries of the South. These forums could be designed to be a mirror image of the OECD-DAC, which in recent times has led many a high-quality development dialogue by facilitating the free flow of information and opinions between donor peers. While the DAC has increasingly benefited from Southern participation, its agenda is set largely by donors. The same can be said of the Rome and Paris forums and Monterrey. The time has come to think of a ‘DAC South’ that would give developing countries an opportunity to do more than simply participate in donor forums and actually set the agenda of the global debate. Such a ‘DAC South’ would also doubtless serve to enrich future DAC work and that of future HLFs.
A long way to go
Apart from the question of ‘who leads’, other serious challenges remain to be addressed. In the generic realm, there is the problem of what the Cambodian government in its ministerial presentation to the HLF 2 in Paris called the ‘divide’. While developing countries attending DAC sessions, HLFs and such other forums are encouraged to see a progressive, forward-looking agenda emerging out of donor capitals, it has been disappointing to see that the field managers of these same agencies are far from inclined or equipped to deliver on what their colleagues at headquarters are passionately espousing. This is not hard to understand, given that any head of mission of say, a European donor has to meet national delivery criteria and reporting standards. Tailoring these also to the standards of the national government would involve a large amount of work and the seeking of multiple political clearances. Apart from the fact that there are no incentives to do so, managers in donors’ country offices are – unfortunately – neither keen nor equipped to deliver on the well-intentioned rhetoric of their HQ counterparts.
As is evident from the Cambodian case study presented here, much of the rhetoric on aid coordination and management has yet to be translated into concrete action on the ground. It will require a concerted effort on the part of the donors to address some of the anomalies – such as the fact that 90% of Cambodian ODA bypasses national systems – and act in the spirit of Monterrey, Rome and Paris.
The issue of donor missions is a case in point. Vietnam and Cambodia have arguably received the most donor missions in recent times. The two governments have raised this issue with some force in recent meetings with donors. "In many ways, the simple finding that several partner countries received far more aid teams from abroad than there were days in the year, and had to produce hundreds or even thousands of quarterly reports primarily for donors’ benefit, was the badge of shame that triggered the whole harmonisation movement. Reducing this burden remains a litmus test of progress". A 14-country survey by the OECD-DAC shows that the travel burden is still very heavy, averaging above 200 visits a year in the countries surveyed. Only a small fraction of visits are conducted jointly (see table below). The large number of missions is a clear symptom of weak progress towards alignment and harmonisation. Donors can reduce the burden placed on partner countries by more effectively decentralising authority, as well as staff, to country offices. Partner countries can help by making the ground rules more systematic and enforcing them consistently. For example, Tanzania and various other countries have found it useful to declare blackout or quiet periods, linked to peaks in their budget cycles, when they prefer not to receive visitors.
Number of Donor Missions
Source: DAC Working Party on Aid Effectiveness (2004)
The UN system has a crucial role to play, starting with the effective implementation of intra-UN harmonisation of procedures and delivery. Although the use of Common Country Assessments and a common programming framework (UNDAF) has been a useful first step on the road towards harmonisation, UNDAF programming continues to be work in progress. It will be important for the UN to effect credible internal harmonisation if it is to advocate alignment and coordination together with other donors.
Moving ahead
Ultimately, for both donors and partner countries, it is the progress made on the ground in programmes and projects that will measure the success of their efforts. While donors would do well to ensure that development assistance is delivered in accordance with partner country priorities and that harmonisation efforts are adapted to the country context, they must also review and identify ways to amend individual institutions’ and countries’ policies, procedures, and practices to facilitate harmonisation.
A progressive form of implementation, by building on experiences and messages from regional workshops, and disseminating good practices to managers and staff at headquarters and in country offices and to other in-country development partners, is an effective way of moving forward. Donors must work more towards delegated cooperation at country level and make it easier for country-based staff to manage country programmes and projects more effectively and efficiently. Incentive systems within donor agencies must be tweaked to foster management and staff recognition of the benefits of harmonisation in the interests of increased aid effectiveness.
A good first step would be to start small by lending support to country-led efforts (whether in particular sectors, thematic areas or individual projects) to streamline donor procedures and practices, including enhancing demand-driven technical cooperation. More analytical work needs to be undertaken on each country, so that policy contributions emerging from them are relevant and owned. Similarly, providing budget, sector, or balance of payments support, once appropriate policy and fiduciary arrangements are in place following national budget cycles and national poverty reduction strategy reviews, is also a desirable goal to pursue.
To sum up…
National governments in Asia have taken the lead in aid coordination and delivery, by dialoguing with donors and stating their desired terms of engagement. Key focal institutions have been designated to lead and manage the process of aid coordination. But, as is evident from the case studies in the following pages, much needs to happen before intentions match reality. While capacity development and enhanced governance are the key challenges for developing countries, the challenges for donors are to ‘walk the talk’ and make their own institutions adaptable to national systems. Concerted action on both sides may yet result in great progress in coordinating aid in the coming years.
Author:
Niloy Banerjee, Capacity Development Advisor / Regional Coordinator Capacity 2015, UNDP Regional Centre in Bangkok serving Asia and the Pacific (niloy.banerjee@undp.org).
1) Official Development Assistance (ODA) are the grants or loans to developing countries and multilateral institutions provided by official agencies, including state and local governments, or by their executive agencies to promote the economic development and welfare of developing countries as its main objective.
2) The full text of the declaration may be found at www.oecd.org/dac.
3) For an overview of these issues, see, for instance, UNDP’s series under Reforming Technical Cooperation for Capacity Development at www.undp.org/capacity.
4) The Development Assistance Committee (DAC) is the principal body through which the Organisation for Economic Cooperation and Development (OECD) deals with issues related to co-operation with developing countries (see: www.oecd.org/dac).
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