Republished courtesy of IDN-InDepth NewsSpecial – Part 2
PARIS (IDN) – The ‘aid effectiveness agenda’ provides a framework for 'donors' and developing countries to work together in the most effective way possible. There are essentially two dimensions to do so.
First, the donor-recipient dimension. How can partnership be designed to support an enabling environment for development through a capable, accountable state that is committed to development and responsive to the needs of development stakeholders?
Underlying it is the basic understanding that donors cannot ‘do’ or ‘deliver’ development, but that this process has to be owned and achieved by the people and countries themselves. Hence the central importance of ownership and alignment as well as mutual trust and commitment expressed by the principle of mutual accountability.
Second, the donor universe dimension. There are many donor stakeholders in development. Clearly, the wealth of experience and resources that these diverse actors bring and make available for development is very welcome, as all have valuable contributions to make.
However, we need to be conscious of the fact that providing development assistance in and to other countries has externalities. These may be small for any individual actor. But together, this has also led to the creation of a complex international system of institutions and organizations.
Different institutional approaches and the self-interest that are innate to all organizations, have resulted in ever-increasing transaction costs, fragmentation, duplication and inefficiencies of development co-operation efforts to an extent that they have become a real burden for many poor countries.
The aid effectiveness agenda is sometimes referred to as a governance framework for development co-operation. We can indeed look at it in this way. This can then lead to the question whether there should be such a thing as a governance framework.
My answer is: yes. Because without such a governance framework, markets fail. We saw the clear and devastating effect of this in the financial market crisis.
The failure in the ‘development co-operation’ business is not that inefficient organisations or approaches disappear. Rather, it is that development outcomes suffer. This is because the provision of development co-operation is not subject to normal market discipline. Supply is not automatically defined by demand.
Rather, the nature of aid is such that it is largely defined by the supply-side, in the form of political support and processes on the donor side. This does not mean that there is not much demand, or need – it is clear that aid resources are very scarce if seen against the development challenges in this world.
Yet, there is nobody who claims the current international aid architecture is not fragmented and inefficient: This is the outcome of non-regulation. There are currently some 249 bilateral assistance programmes and 263 multilateral programmes.
While it is important to acknowledge that the transfer of resources may not be the primary mandate of most of these institutions, many of which provide technical assistance or serve a norms-setting purpose, nobody any longer has a grasp of the entire system.
Moreover, while there is broad agreement on the need for less fragmentation, the opposite has happened, as number of the interventions has tended to increase more sharply than overall ODA, so that the value of aid transactions – projects or programmes – has actually fallen.
This is the result of non-regulation and of competition gone wrong, because it was too much competition of development institutions for their own business model or interest area, rather than for their supposed clients. This system stopped long ago corresponding to country needs and realities.
Again, the aid effectiveness work has a crucial role in re-calibrating the way the system works. But much remains to be done, and development institutions stand to generate enormous value added by simplifying and reforming organizational structures, instruments and procedures; greater synergy and coherence among bilateral and multilateral assistance; and a more effective division of labour among institutions.
DEVELOPMENT IS ABOUT MORE THAN AID
At the same time, it is clear that development, and the impact of OECD countries and other major economies on the development prospects of partner countries, is about more than aid. Developed country policies in areas seemingly not related to development, such as food safety and banking regulation, can actually have a profound impact on the production and finance systems of developing countries. In some cases, this impact be more significant than aid itself.
Sometimes, this is turned into an argument against aid:
Because the impact of development co-operation can often be outweighed by the negative impact of other rich-country policies on development, what is the use of development co-operation?
Why bother about it and invest so much money?
In a strange blurring of lines, incoherent policies of donor countries are thus implicitly turned into a criticism of development co-operation.
The problem with this reasoning is that it takes the existence of bad policies as an argument against doing something about them. It is like saying that there is no point in environmental protection, because pollution is linked to our economic activity and lifestyles, and protection would impose a cost on them.
Rather than questioning what we do on the basis of bad practice or habits in other areas, we need to expose the true cost and deal with their negative externalities on our policy objectives and instruments.
It is essential that decision makers are well informed so as to assess relevant policy options before taking decisions that may, directly or indirectly, affect developing countries. This makes policy coherence an essential part of effective governance – in all administrations.
What we need to recognize is that development co-operation has a key political role in identifying and dealing with other policy areas that are incoherent with our development efforts, and offset the value of aid.
If we take, as we should, development results as the yardstick for the success, donors will have to deal much more with factors beyond their direct operational remit, and often beyond their control.
The development community must become involved in a wider array of policies and activities that have a bearing on poverty and the effectiveness of their co-operation, moving beyond the sphere of traditional development partnerships to work on these broader issues together with other government departments and policy portfolios. This will be a crucial factor for achieving development results in poor countries.
This is not anything but an easy task. It is far from clear that fully coherent policies in all circumstances are actually feasible. What is clear, however, is that incoherent policies are bad policies. They are, by definition, inefficient and ineffective, and a waste of taxpayers’ money, no matter which policy objective takes priority.
LOOKING AHEAD
A better general understanding of development co-operation in our domestic political systems – and in the public – is fundamental. Poverty is the ultimate systemic risk. It is the breeding ground for the proliferation of terrorism, armed conflict, environmental degradation, cross-border diseases and organised crime.
Development commitments need to be centered squarely in this global context. In a volatile world facing the threats of environmental disasters, increasing competition for scarce resources and increasing global interdependence of economies and markets, failure to deliver the benefits of globalization, especially in developing countries, risks undermining global stability.
Development is a challenge cannot be overcome with the tools of aid alone. But development co-operation is central to the solution to this global challenge.
- This is the second of two IDN-InDepth NewsSpecials by Eckhard Deutscher. -
See Part One Aid: Beyond Prejudice and Pride
* The writer has been the Chair of the OECD Development Assistance Committee (DAC) since January 2008. The DAC is a unique international forum where donor governments and multilateral organisations – such as the World Bank and the United Nations – come together to help partner countries reduce poverty and achieve the Millennium Development Goals.
See also Sydney Irresistible and Mike Hitchen Unleashed
Putting principles before profits
Putting principles before profits
