Lecture 8: Aid Effectiveness Flashcards
Aid effectiveness debate
• development cooperation often criticized for not creating economic growth of the recipient countries • most of the available evaluation reports positively assess aid effectiveness at the project level
→ “micro-macro paradox” (Mosley)
o satisfactory results of development project at the micro level
o no clear correlation between aid flows and increases in growth of recipient countries
changes in the “aid industry” after the end of the Cold War donors starting to be more concerned about the effectiveness of the aid they provide -quality of aid
initiatives to increase the effectiveness
reports on how aid could become more effective => set of best practices and principles adopted by donors and applied (to some extent)
Sceptics→Realists→Optimists
SCEPTICS
development aid ineffective and/or harming poor countries, creating aid dependencies & strengthening corruption
REALISTS
development aid effective under certain conditions, relating to recipients (esp. quality of domestic institutions) and donors (quality of aid programs)
OPTIMISTS
development aid is effective, but financial volumes are too small
higher volumes of aid and complex aid interventions (e.g. New Marshall Plan - „big push“)
Key Issues
development aid achieves good results in certain context
recipients countries: quality of institutions and policies & absorptive capacity
donor countries:
o tied aid
o proliferation and fragmentation of aid
o missing feedback
absorptive capacity
extent to which the receiving country is capable of utilizing the aid provided by donors
at certain point aid stops being effectively used:
o ODA around 15-20% of recipient‘s GDP
o differs between countries
why do receiving countries have problems using aid effectively?
o capacities of receiving government are overloaded, not enough capacities to make an effective use of all the aid received
• aid demands human resources, infrastructure…
3 ways of tying aid:
o untied aid: grants and loans that can be spent on goods and services from any country
o partly tied: aid to procure goods and services from limited number of countries, may include the donor country
o tied
Aid tied de iure x de facto
o de iure: the US food aid
o de facto: preferring national companies/organizations in tenders, issuing calls for proposals in national language etc. – e.g. Czech development assistance
Tied aid causes
reducing the effectiveness of aid directly (increasing the price of supplies) and indirectly (administrative costs, ownership, cooperation of donors..)
motivations for tying aid:
o economic goals: supporting export (protectionism)
o political interests: geopolitical interests, historical and cultural ties, etc.
proliferation:
raising number of donors providing aid
fragmentation:
aid being disbursed through too many relatively small projects
o donors providing aid in too many countries
o recipients receiving too little aid from too many donors
o fragmentation at the sector level: especially high in the health sector
Proliferation and fragmentation -why is it a problem:
o increased transaction costs
o administrative burden for receiving and donor country
o increased number of donor visits, consultations, monitoring and reporting requirements, evaluation missions etc.
o each donor having different priorities, administration processes, financial years…
o “poaching” of local qualified staff → undermining capacities of recipient’s institutions
o unrealistic demands on the budget (for sustainability etc.)
o lack of coordination among projects and donors, duplication
o lack of transparency
o lack of accountability of results and impact of dev. assistance
Proliferation and fragmentation -how could it be tackled:
o coordination of donors: coordination groups, donor meetings, single country strategies
o specialization of donors: focusing assistance on limited number of countries or sectors
o harmonizing the reporting, monitoring and other requirements
o make use of sector approaches and budget support
problem of donors competing for visibility
Missing feedback
• donors and implementers lack evaluation
o uncovering failure or shortcomings might reduce future funding
o rigorous impact evaluations are costly
o represents additional unnecessary burden for staff
o attribution problem
lack of valuable feedback that would contribute to increased effectiveness of new projects/programs
in most donor countries, independent evaluation departments have been established
Paris declaration: priorities
o ownership
o alignment
o harmonization
o managing for results
o mutual accountability
Accra Agenda for Action:
three main areas:
1. Country ownership: developing country governments must take stronger leadership, donors increasing predictability of their aid and respect national priorities more
2. Building more effective and inclusive partnerships:
incorporate contribution of different stakeholders (traditional donors, new donors, civil society, private sector etc.) into more inclusive partnerships
3. Achieving development results and openly accounting for them: putting more emphasis on demonstrating the results and impact of aid, strengthening national statistical systems, improve M&E
Busan Partnership
Ownership of development priorities by developing counties: countries defining the development model they want to implement
Focus on results: sustainable impact being the driving force behind investments and development policies
Partnerships for development: participation of all actors with their diverse and complementary functions crucial for development
Transparency and shared responsibility: development cooperation transparent and accountable to all citizens
concrete action points agreed in Busan:
o use results frameworks, use country-led coordination
arrangements
o untie aid to max. extent possible
o use country public financial management systems for development financing
o strengthen transparency, approve common standard for electronic publication of data on dev. cooperation
o prevent proliferation of multilateral org., tackle issue of aid orphans
o donors providing recipient countries with indicative 3-5 year forward expenditure plans
o support parliaments, local governments, civil society org.
