Ramon Marimon European University Institute ...erd.eui.eu/media/presentation-marimon.pdf · Ramon Marimon European University Institute & UniversitatPompeuFabra ... (V. Sivagnanasothy,

“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

Inherited thinking…

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)










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.”

SEPTEMBER 2-4, 2008 ACCRA GHANA

AAA development aid!

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?


Fresh new thinking?

Wishful thinking?

Donors

Recipients

Agencies

ODA Governance (before Paris Declaration)

Developing

Governements

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,

18

“the bottom-up”

“top-down”

“dichotomy”!

Priorities… The false debate,

19

“Donor driven”

“National ownership”

“dichotomy”?

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)

Donors

Recipients

Agencies

Aid Governance (Trust & Delegation)

Developing

Governments

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]


• 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.


• 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)


approach

• Vindicates ‘transformational’ aspects…

• To facilitate many reliable steps to help Africa!

• Avoiding ‘confusions’


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)

back to…










Colour emphasis: mine

back to…

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.”

Learning from a different experience…

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?


Fresh new thinking?

Wishful thinking?

‘progress is being made, but not fast enough’

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

Remarkable R&D growth in some countries…

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…

Thanks!

Ramon Marimon European University Institute ...erd.eui.eu/media/presentation-marimon.pdf · Ramon Marimon European University Institute & UniversitatPompeuFabra ... (V. Sivagnanasothy,

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