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“Rethinking Development Aid Governance in Times of
Crisis
(A reflection on the Accra Agenda for Action on aid
effectiveness)”
Ramon Marimon
European University Institute &
Universitat Pompeu Fabra
European Report on Development
Conference
Accra, May 23 2009
Aid effectiveness is a recurrent goal…
“ODA is a soft target in such situations; during past banking crises, it has dipped anywhere between 20% to 40%.”
“Fresh new thinking is often the only way out of desperate situations such as this.”
(UNCTAD ‘Keeping ODA afloat’, N° 7, March 2009)
even more relevant
in times of crisis
in times of dire straits
The rationale for the Paris declaration:
‘why is aid under-performing?’
1. Lack of national ownership (donor driven)
2. Absence of country leadership in setting development strategies & country priorities (irrelevant projects)
3. Aid bypasses national budget & parallel systems of donors undermine national system
4. Little coordination & too many projects
5. Aid comes with high transaction costs to governments with limited administrative capacity
6. Inadequate ‘monitoring, evaluation & learning’
Source: official presentation
(V. Sivagnanasothy, Sri Lanka, Oct. 2007)
The rationale for the Paris declaration:
‘why is aid under-performing?’
1. Lack of national ownership (donor driven)
2. Absence of country leadership in setting development strategies & country priorities (irrelevant projects)
3. Aid bypasses national budget & parallel systems of donors undermine national system
4. Little coordination & too many projects
5. Aid comes with high transaction costs to governments with limited administrative capacity
6. Inadequate ‘monitoring, evaluation & learning’
Source: official presentation
Colour emphasis: mine
The Five Core Principles
of the Paris Declaration
1. Ownership- Developing countries set their own strategies for poverty reduction, improve their institutions and tackle corruption.
2. Alignment - Donor countries align behind these objectives and use local systems.
3. Harmonisation- Donor countries coordinate, simplify procedures, and share information to avoid duplication.
4. Results - Developing countries and donors shift focus to development results and results get measured.
5. Mutual Accountability - Donors and partners are accountable for development results.
An ambitious exercise in
‘global peer pressure’
Does it work?
Will it work?
Will it work in times of crisis?
Fresh new thinking?
Wishful thinking?
“The findings are clear: progress is being made, but not fast enough.
Unless they seriously gear up their efforts, partner countries and their
external partners will not meet their international commitments and
targets for effective aid by 2010. Action is needed now.”
Accra Agenda for Actionthree major challenges to accelerate progress on
aid effectiveness
1. Country ownership is key.
2. Building more effective and inclusive partnerships.
3. Achieving development results –and openly
accounting for them– must be at the heart of all we
do.
Another ambitious exercise in
‘global peer pressure’?
Does it work?
Will it work?
Will it work in times of crisis?
Fresh new thinking?
Wishful thinking?
Donors
Recipients
Agencies
ODA Governance (after Paris Declaration)
Developing
Governments
Country ownership is key!
A step back. What is aid about?
• Allocating resources to people
• Internalizing externalities (empowerment; not just
altruism)
• Confronting uncertainty
• Creating opportunities
• Overtaking resistance
• Sidestepping corruption to get aid to their intended
recipients
A step forward. What is needed?
• Credible Policies (long-term commitments, not discretion)
• Priorities. Who should define them? How?
• Competitive allocation of resources?
• Integration, even of the ‘aid orphans’?
• Proper evaluation and accountability of:
projects,
programmes, and
aid agencies!
Donors
Agencies
A non-credible governance structure:
• Aid Agencies, non autonomous from donors, are subject to:
– Time inconsistent discretionary budget allocations
– Politically distorted (myopic) objectives
– Limited capacity for ‘monitoring, evaluation & learning’
Another non-credible governance
structure:
• Agencies (& donors) are often subject to a ‘hold up’ problem from ‘developing countries’
• Politically distorted (local) objectives
• Limited capacity for ‘monitoring, evaluation & learning’
Developing
Governments
Agencies
Priorities… The false debate
• If donors do not have broad objectives they will cease to be donors; for example, ODA will not be accountable.
• However, specific objectives require local knowledge; recipients know best.
• But developing governments’ objectives may still be ‘top down’ with respect to aid recipients. If so, they should only play a role in determining broad objectives.
From the Accra Agenda for Action:
“Developing countries determine and implement their
development policies to achieve their own
economic, social and environmental goals.”
“We will engage in open and inclusive dialogue on
development policies”
“We acknowledge the critical role and responsibility of
parliaments in ensuring country ownership of
development processes.”
Remark:
In the European Union
–with the Subsidiarity Principle in place–
the assignment of Structural Funds does not give
such a preponderant role to national or regional
parliaments!
Possible confusions #1
• Between broad, long-term, objectives
and specific –possibly, short-term– objectives
• Between ownership of policy objectives
and ownership of the implementation process
• Between aid as policy
and aid as service
Credibility and delegation
• Donors (and governments from developing
countries) should commit to long-term
development policies.
• For aid programmes, such commitment can be
better maintained by delegating the
implementation of these programmes to service
aid agencies
(& transferring funds to them)
Delegation and accountability
“We will be judged by the impact that our collective efforts
have on the lives of poor people. We recognize that greater
transparency and accountability for the use of development
resources –domestic as well as external– are powerful
drivers of progress” (Accra Agenda for Action)
A service Aid Agency can easily be made accountable
and transparent: don’t use this agency if it is not
transparent & efficient!
How can you do that with Sovereign Countries?
Basic principle of ‘governance & trust’
in aid funding:
• “engage in open and inclusive dialogue on development policies” [donors and governments of developing countries] to determine broad long-term objectives, basic principles and mechanisms that development policy should follow, etc.
• delegate the aid programmes to service Aid Agencies
• require these agencies to be transparent and make them accountable
for the broad performance of the aid programmes
(not for every single aid project)
Principles of ‘governance & trust’ in aid
funding: 1. independence between political authorities (from
donors & developing countries) and ‘aid agencies.’
2. independence between ‘aid agencies’ and ‘recipients.’
3. professional, stable and properly funded & accountable aid agencies (service aid agencies).
4. in selecting from among aid programmes: clear, and well known, rules for competition, evaluation criteria, selection procedures, and follow-up evaluation.
5. simple and timely implementation of aid programmes.
6. Implementing developing countries’ objectives should not mean implementation by local agencies.
Principles of ‘governance & trust’
specially apt for ‘fragile countries’
A (my) definition of ‘fragility’:
‘A situation where negative shocks always materialize (& persist) while positive opportunities seldom realize (as to persist)’
Countries in situations of conflict, weak state capacity, etc. satisfy the above definition
Development aid is a necessary opportunity in this context, but if in order to ‘build state capacity’ aid is delegated to the ‘weak state’, the opportunity may vanish…
Possible confusions #2
• Between too many donors and projects
and too many agencies and programmes
(the former is good, the latter is not)
• Between countries’ capacities
and service aid agencies’ capacities
(the latter is a requirement, the former is not)
• Between assigning aid base on need
and assigning aid base on absorbing capacity
(the former should not overrun the latter)
The fragmentation issue
“we calculate that the probability that two randomly
selected dollars in the international aid effort will
be from the same donor to the same country for the
same sector is 1 in 2658” (W. Easterly and T. Pfutze, “Where
Does the Money Go? Best and Worst Practices in Foreign Aid”, Journal
of Economic Perspectives, 2008)
[They study 31 bilateral agencies and 17 multilateral agencies]
The fragmentation issue
• For ‘monitoring, evaluation & learning’& ‘reducing transaction costs’ the problem is not the multiple sources of funds or of recipients with specific needs, but
the fragmentation of monopolistic agencies.
• Donors (& developing countries) seldom delegate their policies to the agency offering the best service, but rather to their official agency.
• Agencies seldom compete in order to implement an aid programme, but serve their official donors.
The fragmentation issue
• Without an Open International and Competitive Aid
Service Sector, efficiency in terms of agency size and
services can hardly be achieved.
• Yet, not surprisingly, according to Easterly & Pfutze
“development banks tend to be closest to best
practices for aid” [The African Development Bank ranks 3rd!]
• Will a more competitive Aid Service Sector produce
‘aid orphans’?
Basic microeconomics shows that supply is higher
in a less monopolistic market!
Aid to Africa…another false debate?
The ‘transformational’ approach.
‘Big Push to Save Africa’,
integrating development, trade, &
security policies
Paul Collier
William Easterly
The ‘marginalist’
approach. Helping Africa
by taking reliable steps
one at a time …
Or possible confusions #3?
• Between the range of policies that can affect growth
and development aid policies
• Between the need to coordinate objectives and policies
and the need for independence in implementing aid
• Between structural reforms helping aid policy
and the scope of development aid policy
Possible confusion #4
• Between development aid
and humanitarian aid
(the former requires aid based on
performance and expectations, the latter only on
current need)
Aid Governance (Trust & Delegation)
approach
• Vindicates ‘transformational’ aspects…
• To facilitate many reliable steps to help Africa!
• Avoiding ‘confusions’
Aid Governance (Trust & Delegation)
approach
To implement, in particular,
optimal long-term development aid programs
as long-term principal-agent contracts
incremental, based on past performance
require commitment (aid may need to be curtailed)
consistent with helping the most needed and ‘giving
more where the return can be higher’
require experience (need to implement similar contracts)
The rationale for the Paris declaration:
‘why is aid under-performing?’
1. Lack of national ownership (donor driven)
2. Absence of country leadership in setting development strategies & country priorities (irrelevant projects)
3. Aid bypasses national budget & parallel systems of donors undermine national system
4. Little coordination & too many projects
5. Aid comes with high transaction costs to governments with limited administrative capacity
6. Inadequate ‘monitoring, evaluation & learning’
Source: official presentation
Colour emphasis: mine
SEPTEMBER 2-4, 2008 ACCRA GHANA
“We agree that, by 2010, each of us should meet
the commitments we made on aid effectiveness in
Paris and today in Accra”
“We agree to reflect and draw upon the many
valuable ideas and initiatives that have been
presented at this High Level Forum.”
The European Union Lisbon (2000) & Barcelona
(2002) Agenda
“Making Europe the most competitive and dynamic
knowledge-based economy in the world (…) with a
3% expenditure on R&D over GDP by 2010”
An ambitious exercise in
‘global peer pressure’
Does it work?
Will it work?
Will it work in times of crisis?
Fresh new thinking?
Wishful thinking?
A short balance• ‘progress is being made, but not fast enough’
• Yet peer pressure has resulted in Lisbon and 3% country plans…
• Remarkable R&D growth in some countries…
• A very important governance innovation:
Creation of the European Research Council
• Could become a proper Service R&D Funding Agency, which will help to develop
• An Open, Integrated, and Competitive European Research Area
Does it work in times of crisis?
• In this time of crisis, countries’ Lisbon Agenda seems to have been forgotten… (e.g. Spain cuts to R&D –and International Aid– funding)
• Yet, the EC Budget for R&D funding (FP7) has been pre-committed up to 2012!
• The ERC is creating a new source of competition and mobility for researchers across the European Research Area
• Some ‘far-sighted’ countries are starting to rely on the ERC as their ‘evaluating agency’
Conclusions
• The 2005 Paris Declaration and the subsequent 2008
Accra Agenda for Action is a far-reaching attempt to
enhance aid effectiveness worldwide. Any progress
would be most welcome.
• One must go beyond the ‘peer pressure’ process.
• Modify the current structure of Development Aid
Governance
• A model of delegation to independent and competing
Service Aid Agencies may be more effective in
addressing some of the objectives of the Paris
Declaration and the Accra Agenda for Action.
Conclusions
• This model takes into account:
– the limited scope of Development Aid Policies, and
– the need to implement them with independence from
other development & security policies
• This model limits the Paris-Accra principle of
‘Developing Country Ownership’ to the
formulation of broad and coordinated
development policies and objectives.
• The European Union experience with the Lisbon
Agenda and the creation of the ERC provides a
lesson in favour of such a model.
Providing answers to:
Victor Davies “Is Aid good for African countries? For
many countries it is a cheap [distorting] option”
Giorgio Barba Navaretti “It is better to provide aid to
the most needed countries or the ones, at the
margin, for which the expected return on an euro of
aid is higher?”
Joe Masawe “African countries should not depend on
Aid completely, but we should not abolish it, we
have to tackle the problem of Aid Governance and
its Effectiveness.”
The End
Coming for the first time to Accra for the
European Report on Development Conference
I thought
I should
‘reflect and
draw upon the many valuable ideas and initiatives’
of the 2008 Accra Agenda for Action.
This has been my reflection…
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