Giving aid teeth

“Local ownership” is a much stressed term in recent development discourse – but day to day politics still hardly reflect this principle. Donors and recipients should move beyond the rhetoric of consensus and agree on bindingcommitments. The EU’s regional policy provides an example of how advanced and less advantaged nations can cooperate successfully.

[ By Louka T. Katseli ]

During the next twelve months, participants in a series of international summits will be asking how we can raise sufficient funds to meet the Millennium Development Goals (MDGs) and how we can improve the effectiveness of aid. While most will agree that recent reforms within development agencies and introduction of innovative financing initiatives demonstrate renewed commitment, others are calling for an overhaul of the whole system, claiming that it is incoherent and ineffective. 2005 is clearly shaping up to be a year of transition for international development assistance.

The present consensus model of development cooperation unites donors and recipients around the shared goals of poverty reduction and the fulfilment of the MDGs by 2015. It also assigns tasks to promote their achievement. Donors have pledged to increase aid volumes, harmonise their procedures and make aid more predictable. Recipient governments, for their part, have agreed to mobilise domestic resources, involve their citizens more widely in the formulation and implementation of poverty reduction strategies, integrate these strategies into their national agendas, as well as improve their governance systems.
As we approach the first comprehensive review of progress towards achieving the MDGs, evidence suggests that the new consensus model is not working as well as one would have hoped. The MDGs remain seriously underfinanced and both donor and recipient governments have proved to be hesitant in backing their ambitious promises with concrete action. The calls for more resources, developing country ownership, partnership, stakeholder participation, policy coherence and results-based management are perceived by some as empty rhetoric; this despite assurances to the contrary and the implementation of some worthwhile initiatives.

Donors remain in the driver’s seat. They continue to set the development agenda in accordance with their own preferences and modes of operation, as well as dictate the procedures that aid recipients must follow in order to become eligible for financing. The Poverty Reduction Strategy initiative, introduced by the World Bank and IMF in 1999 to underpin the HIPC initiative, is a case in point.

Agency reforms have often been accompanied by the blurring of responsibilities amongst the various UN bodies and international financial institutions. New financial instruments have been set up with diverging objectives: some, notably the US Millennium Challenge Account, are linked to performance criteria; others as the Global Environmental Facility or the Global Fund to Fight Aids, Tuberculosis and Malaria only address specific policy challenges, at a time in which many donors, meeting under the auspices of the OECD’s Development Assistance Committee, are advocating the increased provision of direct budget support (Sagasti et al., 2004). Finally, development policy in most donor countries continues to be formulated without adequate consideration for policies pursued in other areas such as trade or migration.

This has left recipient countries with the impossible task of coordinating and managing a multitude of objectives, initiatives, donors and instruments, as they seek to develop and integrate their growth strategies with social policy agendas, promote structural reform, cope with shocks and imbalances, and improve their governance systems. Hilde Johnson (2004), the Norwegian Minister of International Development, has referred to this phenomenon as the “donor circus”. The concepts of ownership and partnership clearly do not reflect the realities of today’s aid system.


Less bark, more bite

So, how can we build a system reflecting ownership and partnership? First, we must recognise that forging a shared vision and commitment for development requires more than the signing of agreements. A partnership will only be credible when institutional safeguards foster trust and mutual accountability – partners must be assured that agreed tasks will be performed today and followed up tomorrow. In recipient countries, this requires the creation and consolidation of a participatory process that engages local communities, social partners and the private sector.

The process must underpin development policy making by identifying bottlenecks, prioritising policy actions, resolving differences, coordinating stakeholder initiatives, improving governance and monitoring effectively the implementation of coherent development strategies. In donor countries, true partnership requires that information on past results and future needs be shared and that the public be educated. This would help to generate the necessary political support, thereby increasing engagement, augmenting financial flows, enhancing aid predictability and improving policy coherence.

Recipient countries should have the driver’s seat. They should be in charge of formulating coherent strategies for development, built around a set of integrated policy priorities and investment proposals that span the local, regional and sectoral levels. These strategies, which would differ across countries, could cover a time span of up to seven years. They could include subsets of development programmes that respond to diverse needs on the ground, such as basic infrastructural services, health and education initiatives, SME and entrepreneurial cluster development, trade or institutional capacity building, as well as improvements in local and national governance systems.

Following an assessment of financial needs, conducted by the recipient country in collaboration with the international financial institutions and regional banks, the donor community could then be requested to align its pledges with the proposed initiatives, with financial commitments also being secured from domestic governments and the private sector. After negotiation with all relevant stakeholders, the process could culminate in flexible, but binding, contractual agreements, spelling out mutual obligations and specifying the timetable associated with implementation and financing.

The disbursement of funds could be coordinated by budget authorities at the country level through decentralised special accounts. Financial allocations and replenishments could be tied to regular evaluations conducted by an independent monitoring committee. Monitoring and evaluation ought to go both ways, ensuring accountability between donors and recipients.

Can we find similar examples of such a comprehensive partnership approach? The answer may lie closer to home than expected: the EU’s Community Support Frameworks, initiated in 1988 as part of the Community’s regional policy, provide a useful model for rethinking the present aid architecture. They have rallied a multitude of actors around a set of comprehensive and coherent policies, ensured greater predictability of financial assistance, and promoted transparency and results-based management in recipient regions and countries. Most importantly, they have been instrumental in raising standards of living in the Community’s poorer regions. They thus constitute a concrete model around which future donor-recipient partnerships – Development Support Frameworks – could be structured.

As we move into 2005, we should take a fresh look at the prevailing model and explore innovative ways to approach development cooperation. If we are convinced that country ownership, trust and mutual accountability should lie at the heart of a donor-recipient relationship, then we should be open to rethinking this relationship and embedding it in a system which provides incentives for all partners to take action in pursuit of their shared goal of sustainable development combined with poverty reduction. The framework model outlined above could be a useful starting point.

References
Johnson, H., (2004): Introduction at UN Chief Executives Board Retreat,
Greentree, 29-30 October.
Sagasti, F., Bezanson, K., and Prada, F., (2004): “The Future of Development Financing: Challenges and Strategic Choices”, Global Development Studies, No. 1, Pre-publication Copy, EGDI Secretariat, Ministry of Foreign Affairs, Sweden.