Improving the effectiveness of aid

• Author: Eckhard Deutscher/Sara Fyson
• Position: Chairman of the Development Assistance Committee/Policy Advisor in the Aid Effectiveness Division of the Organization for Economic Cooperation and Development
• Pages: 15-19

Page 15

Levels of aid have begun to recover and seem likely to continue to increase following a protracted decline in the 1990s. yet both donors and recipient countries generally agree that aid is still underperforming in terms of development effectiveness. It has become clear that what matters in reaching development goals is not just the amount of aid but also the quality of that aid.

Decades of development assistance have shown, for instance, that if countries are to become less dependent on aid, they must be able to determine their own priorities and rely on their own systems to deliver that aid. Donor-driven aid does not lead to sustainable results. Moreover, asymmetries in the aid relationship, whereby donors respond to their own constituencies rather than to citizens' needs in developing countries, have distorted the accountability of domestic institutions in recipient countries.

Experience has also shown that if donors do not channel funds through recipient country institutions, these countries will not strengthen (or in some cases even develop) the governance structures and capacities to pull themselves out of poverty. In addition, disparate actors and interests have led to the uncoordinated delivery of aid-again putting severe strain on local government systems.

In the face of these hurdles, donors and partner countries have committed to transform the way aid is delivered. The goal is to improve the quality of aid and achieve greater development impact. Over one hundred donors (bilaterals and multilaterals) and developing countries endorsed the Paris Declaration on Aid Effectiveness at the High-Level Forum in Paris on March 2, 2005. In doing so, they agreed for the first time to measure their success, or failure, at making aid more effective through a set of 56 commitments. Following the endorsement of the Paris Declaration, the way in which aid is delivered was set to undergo wide-ranging reform. Expectations were high: aid would be better coordinated, increasingly aligned with country priorities, and delivered in a harmonized way; donors would commit to support national ownership; development results would be measured; and donors and countries would be mutually accountable.

A proliferation of donors and projects has made the governance of aid more problematic

Now, at the halfway point between the endorsement of the principles and commitments in the Paris Declaration and the date set for their implementation (2010), the question is, has aid effectiveness improved? Addressing continued inefficiencies in the governance systems at both the international and country levels has become a high priority, and a series of high-level meetings in 2008 make this yearPage 16 critical for evaluating such efforts and building consensus to move forward and strengthen aid effectiveness.

This year's meetings include the Accra High-Level Forum on Aid Effectiveness and the United Nations Summit on the Millennium Development Goals (MDGs) in New york in September, and the Financing for Development follow-up meeting in Doha in November. Commitments undertaken and promises made in previous forums (notably in Monterrey in 2002; and in Paris and in Gleneagles in 2005) will be reviewed and new impetus will be given to reforming the way aid is delivered.

This article highlights the challenges created by ineffective aid and how transforming governance mechanisms are a way to address these challenges. It outlines a set of recommendations to strengthen aid effectiveness while recognizing that there are no easy solutions or one-size-fits-all approaches and that national conditions vary in the delivery of aid. Improving the effectiveness of aid entails addressing complex policy challenges at both the international and country levels-not least because development cooperation is an inherently political process.

Asessing the problems

The institutional complexity of the global governance of aid presents real difficulties, given that more than 280 bilateral donor agencies, 242 multilateral programs, 24 development banks, and about 40 United Nations agencies are working in the development business. The increasing number of private foundations and the existence of so many nongovernmental organizations (NGOs) add to the complexity. The proliferation of donor activities-including an estimated 340,000 development projects around the world-leads us to question current ways of managing the aid business.

Indeed, a slew of factors combine to make aid effectiveness less than optimal. They include lack of aid predictability, issues of coordination among the large numbers of donors, and aid fragmentation-all of which have real implications at the country level.

Lack of predictability. According to preliminary data, a recent Survey on the Implementation of the Paris Declaration (OECD-DAC, 2008a) showed that in any average country only 45 percent of aid arrives on time, as scheduled by donors. This lack of predictability means that government authorities in developing countries will have difficulty planning or responding to citizens' needs if...