The Role of the EU and OECD as
coordinating institutions
European Union
43. Collectively, the European Union is the largest
donor in the world. The Minister gave us DFID's perspective on
this:
"The EU is critical: 57% of global aid is what
the EU represents, that is about £37 billion and £7
billion approximately of that is through the European Commission.
The EU obviously has a very important role to play in terms of
the coordination amongst EU states."[60]
While the volume of EU aid is unchallenged, some
of the evidence we received in this inquiry challenged the effectiveness
of the EU as a coordinating body. Howard White of 3ie said:
"This is patently not the case. No one thinks
the EU is coordinating the aid of the various EU donors on the
ground in recipient countries. The multilateral agencies, by and
large, are not playing that role either."[61]
44. The European Commission plays a central role
in managing parts of the global EU aid budget. The 2006 Survey
on Monitoring of the Paris Declaration showed that the Commission
had performed significantly less well in this role against the
Paris Declaration targets than some of the better performing donors,
such as the UK.[62] Beyond
the management of European Community aid, the European Commission
also claims a coordinating role across all European development
actors. The Commission told us that it viewed itself as a "federator
of Member States" and that the EU Code of Conduct on the
Division of Labour was "an instrument" for the Commission
in pursuing that role.[63]
We were interested, therefore, to examine the role and impact
of this "instrument" in the course of this inquiry.
The European Union Code of Conduct on the Division
of Labour
45. In 2007, the EU agreed a voluntary Code of
Conduct with the aim of enhancing "complementarity and division
of labour amongst EU donors".[64]
The ODI summarised the Code as follows:
"The Code is voluntary […]. Two central
guiding principles are, firstly, that donors restrict themselves
to a maximum of three sectors per country and either redeploy
out of other sectors or work as a silent partner, allowing another
EU donor to take the lead. Secondly, that no more than 3-5 donors
should be present per sector (the Code of Conduct does not say
whether this means all donors or only EU donors)."[65]
The Commission explained how the Code was being implemented
in practice:
"The Code of Conduct was adopted only in May
of 2007. We have to prepare the ground by engaging our delegations,
and we are now in the process of reflecting on what part of the
work on the ground we can delegate to Member States […].
We could address situations of donor congestion in different countries.
We should build on comparative advantages. We are globally present
but in some countries Member States are better represented and
rooted and they can build on their comparative advantage. We can
then delegate to them and they can run the programmes on behalf
of the EU."[66]
46. ODI evidence said that, despite the Code
of Conduct, "EU bilateral aid and EC aid remains fundamentally
fragmented" and that "the challenges of making the Code
of Conduct a reality are formidable".[67]
It also challenged the robustness of the Code given that some
terms and targets are not well-defined.[68]
World Vision
discussed in its evidence the limitations of the Code, and recommended
that rather than a "voluntary and self-policing" Code,
it should be "promoted and monitored".[69]
In response to such concerns about problems implementing the Code,
the Minister said:
"It is true to say that the Code of Conduct
is of a voluntary nature but we still see it as a significant
milestone in moving forward. There are some barriers to the implementation
of division of labour and sometimes that is suspicion and mistrust
by partner countries when division of labour is donor-led […].
They sometimes feel powerless when faced by a coordinated group
of donors."[70]
47. We asked the Minister for examples where
the Code of Conduct has had a significant impact. He cited Zambia
as a country where division of labour has led to significant savings
for the Zambian authorities.[71]
ODI evidence, however, highlighted the difficulties of attempts
to implement the Code in Zambia where "the number of donors
per sector barely reduced, and […] the willingness of donors
to withdraw from sectors in which they are engaged is limited."[72]
48. The European Union has particular
responsibilities as the world's largest donor in leading efforts
to ensure complementary and coordinated donor activity. The Code
of Conduct on the Division of Labour is a useful starting point
for this task. We endorse this attempt to draw together good practice
principles and guidance into a agreement around which EU governments
and the Commission can focus their work. We accept that the Code
is in its early days of implementation. But if it is to be credible
as a practical agreement, the EU must soon be able to show that
it is having an impact on the ground. We recommend that DFID work
with the Commission to identify countries in which there is the
potential for the Code to have a positive impact and where the
recipient government is supportive of the Code, and to prioritise
efforts in these countries.
49. We record our disappointment
that the Commission is not able to lead by example on questions
of aid effectiveness by putting in a stronger performance against
the Paris Declaration indicator targets. We challenge the Development
Commissioner to take a more pro-active role in promoting practical
coordination both among member states and between member states
and the Commission. We understand that the percentage of EU aid
which falls under the direct control of the Commission will diminish
as national budgets increase. But the Commission's coordination
role needs to be strengthened irrespective of its share of the
EU's total development budget.
OECD Development Assistance Committee
50. The OECD Development Assistance Committee
(DAC) provides the leading forum for donors to co-ordinate their
aid efforts and to agree best practice in development. The Committee
has 23 members—all the major bilateral western donors and
the European Commission. The DAC's key functions include promoting
best practice, defining and publishing statistical analysis of
Official Development Assistance (ODA) and peer reviewing members'
development assistance policies.
51. The OECD DAC was instrumental in drawing
up and facilitating agreement on the Paris Declaration in 2005.
It was agreed that monitoring of the international standards and
targets set out in the Declaration would fall to the OECD. The
OECD has published the 2006 Survey on Monitoring the Declaration
and a second Survey is being conducted in advance of the Accra
High Level Forum. Data were collected up to March 2008 and are
now being analysed. The OECD shared with us headline results from
the 2008 Survey in advance of the Forum.[73]
In a separate work stream, Denmark and Sri Lanka are co-chairing
an Evaluation of the Paris Declaration, which will run to 2010
and beyond and will use the data from the periodic Surveys "to
assess the relevance and effectiveness of the Paris Declaration
and its contribution to development aid".[74]
52. Some of the evidence we received from NGOs
raised concerns about the extent of OECD influence over the Paris
Declaration process. ActionAid said that "The Paris process
has suffered from being based in a donor institution [OECD] and
being donor driven". ActionAid's evidence goes on to suggest
that,
"The 2006 OECD DAC survey of implementation
of the Paris Declaration was fatally undermined by donors insisting
on 'negotiating' on the figures, so that the figures in the final
document were in many cases significantly different from earlier
drafts."[75]
DFID said that this confusion was related to the
absence of a set of agreed definitions for some forms of assistance
in the 2006 Survey but that this had been resolved in advance
of the 2008 Survey.[76]
Working with non-DAC donors
53. Some of the evidence we received drew attention
to the changing nature of the donor 'club'. Donors are no longer
simply confined to the OECD DAC membership and it is clear that
these new donors are far from marginal to global aid figures.
For example in 2006, China committed $12.7 billion for investment
in infrastructure in Africa, more than all OECD countries combined.[77]
China is, however, a signatory to the Paris Declaration as an
aid recipient rather than a donor. We are looking at China's role
as a donor in more detail in our inquiry into DFID and China.
54. We have observed a separation between DAC
and non-DAC donors during our visits to developing countries.
In Ghana, we were told by a donor group that China did not consider
itself as a donor in Ghana but rather as a commercial partner.
China, India and Brazil did not participate in the groups set
up in Ghana to harmonise donor action by sector. Professor Mick
Moore of the University of Sussex says in his evidence:
"The new aid donors (China and other fast-growing
middle income countries that were 'traditionally' aid recipients;
the big private foundations) have made the [donor] field much
more diverse. The system is now out of control. The Western donors'
club—OECD DAC—can no longer coordinate it."[78]
55. A recent World Bank report on trends in ODA
flows welcomes the contribution of 'non-DAC' donors to international
development efforts. But the report raises concerns about the
degree to which non-DAC donors comply with the best practice guidance
and standards established by the DAC:
"New donors bring with them more resources to
help developing countries reach their MDGs. At the same time,
new challenges for harmonisation and alignment are created. Non-DAC
donors are a heterogeneous group: the degree to which DAC approaches
and norms as regards the provision of aid finance are applied
by non-DAC donors varies from country-to-country."[79]
56. We asked the OECD how it planned to draw
new donors into compliance with DAC best practice guidance and
standards. Brenda Killen of the OECD Development Co-operation
Directorate told us that some developing countries had set out
their own role in this process at a recent preparatory meeting
for the Accra High level Summit:
"On the question of new donors, what emerged
was that the onus was now on African countries themselves to manage
the complexities; they should reach a common position and use
the Paris Declaration to deal with new partners and say that they
want the aid but set out the basis on which they want it."[80]
57. The proliferation of donors
in recent decades brings welcome new resources to the international
development effort but also brings new challenges for recipients
in managing a range of donor relationships. The principles contained
in the Paris Declaration are as applicable to new donors, such
as China, India and Brazil, as to the OECD Development Assistance
Committee member countries. We recommend that DFID seek opportunities
to share with new donors its own experience of working towards
more effective aid but also to support efforts by developing countries
to draw new donors into a recipient-led dialogue on aid effectiveness.
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