Donor harmonisation to increase efficiency

”Well meant, but not always well and efficiently done.” Such judgments are common, not least among practitioners in developing countries. This gives food for thought after 40 years of joint development cooperation. Some of the problems arise because of the great number of actors involved in recipient and donor countries and because of the many planning and coordination tasks. The situation is made even more complex by the manifold (and certainly valuable) involvement of other, non-governmental actors.

According to studies by the UNDP and other organisations, more than 60 000 donor-financed bilateral and multilateral projects are currently underway in developing countries. For example, no fewer than 49 aid agencies are working in Mozambique. The government is dealing with about 840 new projects per year. Officials in developing countries have to cope with thousands of annual reports and more than 1000 missions concerning appraisal, monitoring and evaluation. All this is an enormous task for a poor country’s administration.

Problems of planning, coordination and capacity occur regularly when several donor nations and organisations want to support a specific country. Sometimes there are also conflicts of objectives. Consequently, donors and recipients put the subject of “Donor Harmonisation” on the international agenda in the wake of the Millennium summit and the Monterrey Conference on Financing for Development. “Donor harmonisation” stands for keeping administrative time and effort as low as possible, not overloading the recipient countries with various procedures, and ensuring a sensible distribution of funds among regions and economic sectors. The main objective is to achieve a more efficient development policy and to reduce transaction costs on all sides.

The German Development Ministry (BMZ) supports this agenda. Along with other members of the OECD’s Development Assistance Committee (DAC), Germany promoted the idea of searching for solutions in a specific working group. In appointing the Task Force on Donor Practices, the DAC Ministerial Council took an innovative path. For the first time, a forum was set up in which multilateral donors and developing countries worked together with the OECD members on equal terms. Besides the donors, 16 recipient countries, including, for example, Cambodia, Senegal and Bolivia, and the South Pacific Forum, an organisation of small island states, took part.

After two years of intensive work the DAC Task Force presented its recommendations on donor harmonisation. These were approved by the DAC Ministerial Council and adopted by the bilateral and multilateral donors at the High-Level Forum in Rome in February 2003. A consensus on a broad international basis was achieved. This is appropriate for increasing efficiency and effectiveness as well as cutting transaction costs. All participants are now called on to develop action plans to implement the harmonisation agenda.

The aim is not to standardise procedures around the world. Rather, pragmatic solutions should be tailored for individual recipient countries. Tried and tested concepts are not to be dropped. Rather, they should be enhanced and linked to new strategies. The DAC Task Force has provided “good practices” papers that should help achieve this goal. They cover tasks such as country analyses, project and programme preparation, public finance management, submitting and auditing accounts, and reporting and monitoring.

A main objective is to use the capabilities the recipient countries already have and to strengthen them. Where ever reliable national statistics or audit offices are in place, for instance, donors should draw upon them rather than start their own surveys. Similarly, transactions should be made according to the fiscal years of the partner countries. In general, the goal is to use and enhance local systems that are already operational.

Some partners, however, have considerable problems concerning capacity and resources. Local systems are not always sound. In these cases, German development policy relies on capacity-building. Due to specific experiences in technical cooperation, Germany can come up with valuable support to enhance local capacities.

During the ongoing implementation phase, Germany will continue to work towards partner-oriented and efficiency-boosting harmonisation. Ownership in the sense of the partner countries’ will to implement measures is a fundamental principle. Immediately after the Rome Declaration on Harmonisation, the BMZ – supported by German Technical Cooperation (GTZ) and the national development bank KfW – submitted an action plan, which Development Minister Heidemarie Wieczorek-Zeul presented to the DAC ministerial Council as early as April 2003. The development of common country and sector analyses, common appraisals of projects, programmes and priorities, common monitoring and report formats, as well as common evaluations will be given priority. Moreover, expansion of German development presence and competence in the recipient countries will further facilitate country-specific harmonisation. In order to strengthen structures, initial steps have been taken. For instance, the Ministry and its German implementing agencies are forming country groups that will coordinate their actions more closely than before.

However, the harmonisation of donor procedures is an urgent task for all developmental sectors. This understanding must yet be incorporated more strongly in the advanced training of German development staff. The same applies to the professional incentive structures. Therefore, the action plan also serves as a benchmark for scrutiny within the DAC Peer Review context. All German organisations involved will examine which rules and processes can be simplified, adjusted and made more flexible in order to meet the objectives.

In addition, the subject matter must also inform the dialogue with NGOs. They, too, should think about measures in good time. The international NGO fora should discuss what common inputs they can make to reduce the burdens that arise in the cooperation with the partner countries and target groups.

In general, however, the German side is well prepared for harmonisation. The modernisation of its instruments in recent years has also contributed to this goal. In their cooperation with other bilateral donors – not only with the World Bank – German institutions took the path of “delegated cooperation” early on. For instance, the KfW works very closely with the French Agence française de développement (AfD). According to specific know-how, either of the two institutions assumes project responsibility. Of course, the GTZ is also inclueded as a partner in these delegated cooperation efforts.

Moreover, the BMZ has already contributed to cutting transaction costs and to increasing efficiency by the introduction of multiple-year pledges of assistance, which reduce the frequency of intergovernmental negotiations. It has also simplified procedures for cooperation agreements on projects and programmes. The Ministry's focus on fewer partner countries and the establishment of priority areas also form a good basis for further, flexible harmonisation with various partners. All this gives reason to hope that future judgments on developmental measures will be different than the presently known one, namely: “Well meant, well harmonised and efficiently implemented.”

Further reading

OECD (2003): DAC Guidelines and Reference Series – Harmonising Donor Practices for Effective Aid Delivery
Internet: http://www.oecd.org/dataoecd/0/48/20896122.pdf

BMZ Spezial Nr. 73, Harmonisierung von Geberpraktiken
in der deutschen Entwicklungszusammenarbeit – Aktionsplan, April 2003
Internet: http://www.bmz.de/infothek/ fachinformationen/spezial/spezial073/spezial073_90.pdf