Memorandum submitted by the Department
for International Development on behalf of the UK Government
CO-ORDINATION FOR AID EFFECTIVENESS INQUIRY
EXECUTIVE SUMMARY
Aid effectiveness is about achieving the most
poverty reduction possible for each pound or dollar of aid spent.
The UK Government aims to maximise the impact of UK aid on the
world's poor. DFID helps lift at least three million people permanently
out of poverty every year.[1]
The International Development Act puts poverty reduction at the
heart of the UK's aid programme. DFID has performed above average
compared to other donors on aid effectiveness, having either met
or being on track to meet all the 2010 targets in the Paris Declaration
on Aid Effectiveness.
However, as the UK provides only 12% of global
aid, improving our own aid effectiveness will not, on its own,
be enough to ensure sustained poverty reduction and economic growth
and deliver long-term results for poor people. We are therefore
using our funds and influence to encourage reform of the broader
international aid system.
Aid can play a vital role in helping countries
to reduce poverty and increase economic growth. For example, in
Tanzania aid helped get nearly four million more children into
school and in Nigeria DFID has helped the government expand childhood
vaccination from 38% to 72% since 2005. The UK government believes
that for aid to have the maximum impact on poverty, it must do
four things. First, aid should be allocated efficiently and effectively,
with resources channelled to the countries and regions where it
can have the greatest impact. Second, aid must be spent in ways
that will save lives and reduce poverty. Third, donors and partners
need to measure results achieved and be held accountable for using
resources effectively. Finally, aid should be used to help build
a future where poor countries don't have to rely on money from
donors, but are increasingly self-reliant and able to manage their
own affairs. This means aid must help to support the development
of effective, accountable states that can produce sustained improvements
in people's lives. In 2000, the international community made major
progress in these areas by agreeing the results we seek to achieve—the
Millennium Development Goals (MDGs).
Better co-ordination of donors could make aid
much more effective in meeting the MDGs. There has been a huge
proliferation of donors and projects. Over the past 50 years,
donor bodies have been continuously created, yet no single agency
has been abolished.[2]
As a result, the average partner country must now deal with more
than 30 donors, up from only 12 in the 1960s. This proliferation
makes aid less effective than it could be. It also makes it harder
to tackle the new global challenges, such as climate change and
water scarcity, that require coordinated global action. Co-ordination
is difficult because some donors have competing objectives for
their aid programmes and face pressures domestically to achieve
fast, visible results. The UK is leading efforts to improve aid
coordination, for example, the UK pioneered the International
Health Partnership to improve the effectiveness of international
aid in achieving the health MDGs.
The Paris Declaration on Aid Effectiveness,
signed in 2005, is a major step forwards in addressing these problems.
The Declaration outlines a set of five inter-related principles:
ownership; alignment; harmonisation; results; and accountability;
and commits donors and partners to making changes in each area.
A set of quantified targets, monitored bi-annually, is used to
assess progress and hold signatories accountable for achieving
results. These commitments are already helping to improve donor
co-ordination and to make aid more effective. DFID played a key
role in agreeing the Paris Declaration and we continue to push
for faster and deeper progress in implementation. In our own aid
programme, we have already met or are on track to meet the Paris
Declaration targets at corporate level.
Implementing the Paris Declaration, while vital,
will not be enough. Further reforms at both national and international
levels are needed. The first of these is a more coherent global
allocation of aid, to ensure that aid is channelled to the countries
and sectors which need it most. The UK uses our shareholding and
influence to drive reforms within multilateral institutions, and
bringing non-traditional donors into the dialogue on aid effectiveness.
We are promoting an enhanced focus on results, and pushing for
new mechanisms to hold donors and partners accountable for achieving
results.
1. AID WORKS—IT
IS VITAL
FOR SUSTAINED
GROWTH AND
POVERTY REDUCTION
1. Aid helps reduce poverty by increasing
economic growth, improving governance and increasing access to
public services. Economic studies show a strong positive correlation
between aid and growth.[3]
Aid raises health and education indicators. In Tanzania, aid has
helped the government build 3,000 new primary schools, employ
50,000 more teachers, and put almost four million more children
into school.[4]
Poor countries receiving higher levels of aid on average have
higher expenditure on health, education and sanitation; lower
infant mortality and better human development outcomes for their
people. For example, DFID has helped the Nigerian government expand
childhood vaccination from 38% to 72% since 2005.
2. Aid effectiveness is about achieving
the most poverty reduction possible for each pound or dollar of
aid spent. The UK government aims to maximise the impact of UK
aid on development outcomes to achieve the Millennium Development
Goals (MDGs). DFID helps lift at least three million people permanently
out of poverty every year.[5]
However, DFID's aid represents only 12% of global aid, so improving
our own aid effectiveness will not, on its own, be enough to meet
the MDGs. In addition, we need to drive reform of the whole international
aid system so that all aid achieves as much poverty reduction
as possible.
3. The UK Government believes that maximising
the impact of aid on poverty requires four things:
(a) Aid needs to be allocated efficiently
and effectively, with resources channelled to the countries and
regions where it has the most impact on the poor.
(b) Aid should be spent on the things that
will save lives and reduce poverty. This means spending it on
the sectors and interventions that will have most impact on poverty,
and spending it in the ways that achieve the best outcomes for
the poor.
(c) Donors and partner countries need to
measure results achieved and hold each other accountable for using
aid effectively. They must monitor whether aid is delivering poverty
reduction, and learn about what changes are needed to make aid
more effective.
(d) Aid should be used to promote long term
changes that enable poor countries to reduce their reliance on
money from donors, so they are increasingly self-reliant and able
to manage their own affairs. It needs to enable partner countries
to become more effective at reducing poverty with their own resources,
policies and actions. Aid alone can never be the solution to global
poverty—the lives of citizens are affected more by the actions
of their state than by external aid.
4. The international community has made
major progress towards these goals in recent years. In 2000, leaders
from every country agreed on a vision for the future—the
Millennium Development Goals (MDGs). This was a huge step forward
because, for the first time, donors and partner countries agreed
the international development results they want to achieve—a
world with less poverty, hunger and disease, greater survival
prospects for mothers and their infants, better educated children,
equal opportunities for women, a healthier environment, and a
world in which developed and developing countries work in partnership
for the betterment of all. The Millennium Development Goals provide
agreed objectives for donors and partner countries to work towards,
together with time-bound measurable targets to measure progress.
5. In 2005, donors and partner countries
agreed a new approach to delivering aid in order to achieve the
MDGs—the Paris Declaration on Aid Effectiveness. For the
first time, more than 100 donors and partner countries signed
up to 56 commitments and 12 quantified targets to improve aid
effectiveness. These targets are measured every two years to assess
progress. The Paris Declaration commitments and targets reflect
the lessons donors and partner countries have learnt from experience
about how to make aid more effective in reducing poverty. Section
2 below sets out this evidence and learning. It demonstrates why
the Paris Declaration principles are so crucial for achieving
the MDGs.
6. DFID has been at the forefront of leading
these international changes. The Development Assistance Committee
of the OECD commended DFID for its strong leadership in driving
forward international efforts to improve the effectiveness of
aid, saying "DFID has inspired and endorsed . . . the Paris
Declaration".[6]
The UK Aid Network, a network of the major UK development NGOs
including Oxfam, Action Aid and Christian Aid said "The UK
provided unprecedented leadership in 2005 on international development
and has shown significant commitment to increasing the volume
and quality of its aid".[7]
The strong political leadership by the UK Government coupled with
the groundswell of support from UK organisations and citizens
for international development, was critical in achieving international
agreements in 2005 to increase the amount of aid and deliver it
more effectively.
2. DFID IS COMMITTED
TO IMPLEMENTING
THE PARIS
DECLARATION ON
AID EFFECTIVENESS
AND TO
IMPROVING DELIVERY
OF GLOBAL
AID
7. Despite the progress made in recent years,
aid could be even more effective if donors organised themselves
better. Two factors make some aid less effective in reducing poverty
than it could be. Firstly, some donors have multiple objectives
in providing aid, not all of which are directly related to poverty
reduction. This means that donors sometimes allocate and spend
aid according to objectives other than just poverty reduction.
It also leads to donor proliferation, an upward trend. Secondly,
the nature of the poverty reduction challenge has changed. New
global challenges, including climate change, water scarcity, conflict
and health pandemics, require a coordinated international response.
The current aid system, with a multiplicity of donors, funding
channels and projects, is poorly designed to address these challenges.
8. In an important attempt to address these
problems, the Paris Declaration aims to help ensure that donors
and partner countries spend aid on the right things, measure results
and achieve long-term poverty reduction that developing countries
sustain for themselves.
9. The Paris Declaration identifies five,
inter-related tenets that are essential for effective aid: ownership,
alignment, harmonisation, results, and accountability. All five
are important if aid is to make the most impact. The over-arching
principle behind Paris is the recognition that partner governments
have much more influence over their county's development than
donors. Partner countries commit to lead and take responsibility
for their countries' development, with support from donors. They
are responsible for achieving results and using their own plans
and systems. The Declaration reflects a move away from traditional
aid supported projects, which often had high administration costs
but did not give sustainable solutions to long-term development
needs. A project may have built roads and bridges but if the partner
government did not have sufficient resources to maintain the infrastructure
then the benefits were lost.
Partner country ownership
10. In the Paris Declaration, partner countries
commit to lead their development policies and strategies and to
co-ordinate development assistance. Without such ownership, aid
will not achieve lasting poverty reduction. Paris recognises the
political reality that donors cannot "buy" reform from
unwilling governments.
Why is this important?
11. Partner country ownership is important
because, while aid can contribute to poverty reduction, it will
never alone be the solution to global poverty. However good individual
aid programmes may be, the prosperity of citizens will be affected
more by the actions of their own governments and the effectiveness
of the state in which they live. Some things that are critical
for poverty reduction can only be done by governments, including
creating an environment that encourages the economy to grow, ensuring
peace and security for citizens, and providing basic services
for all. Growth accounts for approximately 80% of the poverty
reduction that has, over the last 15 years, lifted 500 million
people around the world above the poverty line.
What is DFID doing?
12. DFID is helping strengthen partner country
ownership through a variety of means. For example, to help partner
governments plan future spending, we continue to establish ten-year
Development Partnership Arrangements with partner countries. In
the last two years, DFID has agreed five new long-term partnership
arrangements with Yemen, Zambia, Uganda, Pakistan and Vietnam,
plus ten-year arrangements to deliver support to the education
sectors in Ghana and Mozambique. In Yemen, the UK is significantly
scaling up development assistance to support the Government of
Yemen (GoY) deliver its poverty and reform ambitions. We plan
to increase funding from £10 million in 2006-07 to £50
million per year by 2010-11, a four-fold increase. The monitoring
benchmarks of the DPA between the two governments focus on the
commitments that the Yemeni Government has already made, to give
greater momentum to their existing priorities and avoid increasing
the reporting burden on GoY. These priorities include reducing
rural poverty, improving basic and girls' education, strengthen
human rights, and improving financial management. In turn the
UK has committed to improving the alignment of our aid with GoY
priorities and making our aid more predictable.
Alignment with partner countries' strategies and
systems
13. The second tenet of the Paris Declaration
is alignment. Donors must base their overall support on partner
countries' national development strategies, institutions and procedures.
Why is this important?
14. This recognises that aid will be more
effective both in immediately reducing poverty and in building
up effective and accountable states if it works with government
policies and systems rather than bypassing them. An effective
state is needed to sustain improvements in poverty reduction.
For example, in Rwanda, the majority of donor aid to the health
sector is spent via NGOs, local government or separate donor projects,
rather than through Central Government. As a result, some of the
most prevalent diseases receive only a small share of aid. The
government has a strategy to scale up health services, based on
evidence of what would work for the poor, but does not have enough
"on budget" financing to implement its strategy.[8]
15. Many donors bypass government policy
and financial systems, rather than working with the government,
often due to concerns about corruption or weak systems. Some aid
is channelled through parallel, donor run "project implementation
units" or through NGOs. In 2005, an OECD survey of 34 low
income countries found an average of 62 such units in each country,
with some having as many as 131.[9]
These units are often staffed by the most talented government
staff, who leave government because donors pay higher wages.
16. In the long run, this can create a vicious
cycle of weak institutions and weak aid effectiveness. As scarce
government capacity is drawn increasingly to managing separate
donor projects rather than running the government's own services,
the state's legitimacy in the eyes of citizens is eroded. State
planning and budget processes become increasingly irrelevant as
line ministries turn to donors rather than the government budget
for resources. Different donors, NGOs and project units design
interventions independently with little coherence or consideration
of sustainability. Donors and citizens lose even more faith in
state systems, and make even greater use of parallel systems,
creating a vicious circle.[10]
17. Research has shown that the role of
institutions is the most important factor in creating policy conditions
under which aid can trigger growth and positive development outcomes.
The better national institutions are, the better policies will
be and the greater the probability that policies will be implemented
effectively, improving the impact of both nationally raised resources
and aid. Aid should be helping to support effective institutions.
[11]
What is DFID doing?
18. DFID's experience is that in the right
circumstances, the best way to strengthen government systems is
by using them. DFID uses three "partnership commitments"
to determine whether to use our aid to support partner government
policies and strategies: commitment to poverty reduction; respect
for human rights; and commitment to strengthening public financial
management, good governance and fighting corruption. In countries
where the partner government meets these commitments, DFID aligns
with government priorities and uses country systems to manage
our money, for example by providing budget support or other programme
based approaches.
19. DFID is aligning behind country priorities
by:
(a) Providing poverty reduction budget
support, both general and sector, in countries where we assess
that the partner government is committed to poverty reduction,
upholding human rights and international obligations, improving
public financial management, promoting good governance and transparency
and fighting corruption; and where we assess that provision of
budget support will produce significant benefits relative to other
forms of aid delivery. In 2006-07, DFID provided budget support
to 14 countries. This was 18% of DFID's total bilateral programme.
The recent evaluation of budget support[12]
found it to have:
(i) Strengthened public financial management
systems
(ii) Improved the efficiency of public expenditure
(iii) Increased pro-poor expenditure by partner
governments
(iv) Increased the services provided by partner
governments, particularly in health and education
(v) Improved some aspects of accountability
(vi) Improved the coherence of policies for
poverty reduction.
In Mozambique, delivering aid through budget support
meant the national budget grew by over a third between 2000 and
2004, giving the government greater say over how external resources
are used, and a bigger budget to implement their poverty reduction
plans. Poverty reduced from 69% in 1997 to 54% in 2003, meaning
three million fewer Mozambicans living in absolute poverty. The
Mozambique Government plans to reduce it to 44% by 2009, just
1 percentage point short of the 2015 MDG target. The number of
children in school increased from three million in 2002 to four
million in 2006.[13]
In Sierra Leone, where budget support is one third of DFID's country
programme, primary school enrolment doubled between 2001-02 and
2004-05. In Zambia budget support (around two-thirds of DFID's
programme) helped remove health user fees in April 2006. Use of
health services increased by over 30%.
(b) Sector wide approaches. Sector
wide approaches (SWaPs) align donor support behind government
led strategies in particular sectors. In Malawi, for example,
the government worked out how much it would cost to deliver an
Essential Health Package to tackle the major causes of illness
and death that affect the poor. DFID, the World Bank and Norway/
SIDA are pooling their funds with those of the Ministry of Health
to deliver this essential health package through a costed six-year
programme of work. This enables the government to prioritise the
use of its own and donor funds so they make the most impact in
reducing illness and premature deaths among the poor. The number
of women giving birth in some hospitals increased by 200% in 2006.[14]
20. The Paris Declaration acknowledges that
it is not possible to align behind country strategies in all countries.
Targets for using country systems are set only for those countries
assessed to have sufficiently strong systems to be able to ensure
some accountability in the use of resources. In fragile states,
where the government cannot or will not deliver core functions
which help poor people, a different approach may be needed. Other
work is on-going in the OECD's Development Assistance Committee
(DAC) to address aid effectiveness in these countries.
Harmonisation
21. Paris aims to reduce transaction costs
for partner governments and provide greater transparency about
resources being invested and results achieved by committing donors
to harmonise their actions and adopt simple and transparent common
procedures. In particular, donors commit to improve their use
of "programme based approaches,"[15]
and to share their country visits and analysis.
Why is this important?
22. Uncoordinated aid can divert government
staff and Ministers away from essential functions and divert them
into managing individual donor projects and agendas. Donors sent
10,453 "missions" to 34 countries in 2005, or an average
of more than one per country each working day. Vietnam alone received
791 missions that year, more than three per working day. Even
on the most conservative assumptions about the government staff
time involved in each mission, this represents a serious diversion
of staff resources.
23. The average number of donors per country
has grown from about 12 in the 1960s to more than 30 in 2001-05.
Over the past 50 years, donor bodies have been continuously created,
yet no single agency has been abolished.[16]
Proliferation has accelerated in recent years with the emergence
of new donors, such as China, India and Saudi Arabia, private
foundations, and global funds. In 2006, China committed $12.7
billion for investment in infrastructure in Africa, more than
all OECD countries combined. The following illustration of the
health sector in one African country clearly demonstrates the
challenges of fragmentation at country level.
What is DFID doing?
24. DFID is working with other donors to
harmonise aid in a number of ways, including:
(a) Delegated co-operation, or "silent
partnership" agreements, which enable donors to channel
their aid through other donors, thus reducing the burden on recipient
administrations. DFID already has delegated cooperation agreements
in place in a number of countries and sectors, including education
in Malawi, and health in Uganda. In Yemen, DFID agreed in January
2008 to contribute £3.5 million to the Netherlands Government
over five years for a health programme. This will fund increased
midwifery, obstetric and family planning services for poor and
marginalised women. The Netherlands Embassy has assumed the full
responsibility for implementation, monitoring and reporting of
DFID funds.
(b) Joint Assistance Strategies, developed
by partner countries together with donors, enable partner countries
to articulate how they wish donors to provide development assistance,
so donors provide assistance in a coherent way. In Ghana, DFID's
country strategy draws on a Joint Assistance Strategy agreed by
16 of Ghana's development partners. In Tanzania, a Joint Assistance
Strategy commits donors to identify lead and delegating donors
in each sector. This process has helped to increase the share
of aid using national budget systems, and the recording of aid
on budget. The use of budget support has also increased: 14 donors
provided budget support in 2007-08, accounting for 42% of Tanzania's
aid. This has enabled spending on priority areas to grow to more
than half the budget by 2006-07. The result has been increased
investment in education, with 3000 new primary schools, 50,000
more teachers—a 45% increase since 2000—and almost
four million more children in school.
(c) Implementing the European Union (EU)
Code of Conduct on Division of Labour, and extending the principles
to non EU donors. All EU donors have signed the code of conduct
which is a voluntary code that seeks to guide member states in
reducing the number of donors working in each sector.
(d) Multi Donor Trust Funds. In countries
where country systems are weak, donors can co-ordinate through
the establishment of multi-donor trust funds. These funds pool
donor funding into one basket, which can then be used to fund
recurrent expenditure and/or priority programmes. DFID is taking
this approach alongside other donors in fragile states such as
Afghanistan and Sudan. In Afghanistan, the World Bank manages
a pooled trust fund—the Afghanistan Reconstruction Trust
Fund (ARTF)—which provides coordinated funding for recurrent
expenditure, as well as for the Government's national priority
programmes. Since its inception in March 2002, the ARTF has mobilised
$1.7 billion to assist delivery of essential services to ordinary
Afghans. DFID is currently putting £55 million ($110 million)
through the ARTF recurrent window and plans to put £60 million
($120 million) in 2008-09. 18 donors have participated, including
Saudi Arabia.
(e) Joint donor offices. In Southern
Sudan six donors, including the UK, have established a Joint Donor
Office (JDO). Since May 2006 the JDO has implemented an agreed
work plan on behalf of the six donors in support of the Comprehensive
Peace Agreement. Establishing a pioneering joint donor operation
in a fragile state has been particularly challenging and the JDO
model has required some adjustment in light of lessons learned.
A joint-review of the JDO's impact will be conducted in 2008.
In Cambodia, the UK, Denmark and now New Zealand have a joint
office for rural livelihoods.
(f) Strengthening international aid to
the health sector. The UK government has pioneered the International
Health Partnership (IHP) to improve the effectiveness of aid in
achieving the health MDGs. Aid for health has doubled since 2000
because many countries remain off-track on the health MDGs. There
have been some impressive results, for example on immunisation
and AIDS treatment. But progress in other areas has been slower,
especially in reducing child and maternal mortality. Poor underlying
health systems are the constraining factor. Building the basic
health system is difficult if aid is fragmented, does not support
national priorities and does not appear in the national budget.
The 26 donors, foundations and partner countries who have signed
up to the IHP recognise that, to accelerate progress on the health
MDGs, we need to build basic health systems in developing countries.
Donors in the IHP commit to support partner country plans to strengthen
the health system, coordinate better and, where possible, provide
long-term predictable aid so that partner countries can rely on
it to pay health workers, maintain health facilities and buy equipment.
Managing for development results
25. Fourth, donors and partner countries
commit to focus on development results. This principle recognises
that we all need to continue to learn more about what aid is achieving
on the ground. This can help partners and donors to design better
aid programmes. It also makes it easier to hold those involved
accountable. In order to minimise the considerable burden on partner
countries of having separate donor reporting systems, this must
be done by investing in countries' own statistical and monitoring
and evaluation systems.
Why is this important?
26. Better data on the impact of aid and
partner country spending on poor people will enable partners and
donors to make more informed, evidence based decisions about how
and where to provide aid. With a plethora of donors and projects,
partner country governments, Parliaments and civil society organisations
sometimes cannot find out the total amount of money, whether aid
or government spending, being invested in a sector or country
and the results from that investment.
27. For example, in Malawi, the World Bank
found, in 2003, that training health workers accounted for $4.5
million or 10 per cent of donor spending on health care a year.
The World Bank calculated that if the sponsoring agencies had
put this money in a pot to supplement salaries through the budget,
it would have given every health care worker in Malawi an average
50% salary increase.[17]
This would have helped recruit and retain more health workers
in a country which has one of the most severe shortages of health
care workers in the world.
What is DFID doing?
28. DFID puts considerable effort into ensuring
that aid is used to produce the intended outputs and meet the
MDGs. To further improve our results focus, DFID has published
a Results Action Plan. This outlines priority actions to ensure
that we and our partners use evidence effectively to improve development
outcomes.
29. DFID has established the Independent
Advisory Committee on Development Impact (IACDI) to help evaluate
the impact of UK aid. DFID is also working with other donors to
build up the evidence of what works and what doesn't by developing
joint approaches to impact evaluation through the OECD-DAC's Evaluation
Network, the network of networks on impact evaluation (NONIE),
and the development of the new International Initiative on Impact
Evaluation (3IE).
30. DFID is working with other donors to
enhance our understanding of the effectiveness of the various
multilateral donors, and has compiled Multilateral Development
Effectiveness Summaries for our key multilateral partners, published
in December 2007. These summaries distil information about how
well individual multilateral organisations manage their resources,
contribute to results on the ground, are building for the future
and working with others.
31. DFID also works with other donors through
the Multilateral Organisations Performance Assessment Network
(MOPAN) Group to build a common understanding and evidence base
of the effectiveness of the various multilateral donors, and to
carry out monitoring of multilateral effectiveness. The evidence
will be used to feed into ongoing reform processes and to inform
resourcing decisions. MOPAN has also encouraged multilaterals
to look at ways to improve their own self reporting.
Mutual accountability
32. The fifth and final principle of the
Paris Declaration is that donors and partner countries are accountable
for development results. Donors and partners commit themselves
to hold mutual assessments of progress in implementing agreed
commitments in aid effectiveness.
Why is this important?
33. In development aid, donors and recipients
have an asymmetric partnership. Whereas recipients are required
to explain their performance to donors in return for funds, there
are few systems requiring donors to explain their own performance
to developing countries. Yet studies have shown that that aid
is more effective when recipients play a leading role in coordinating
donor interventions and monitoring donor performance.[18]
Effective mechanisms for donors and partner countries to hold
each other accountable for their behaviour and its impact on development
results can create incentives for change in donor and partner
behaviour. They can also increase the opportunities for Parliaments
and civil society to put pressure on donors and governments to
deliver results.
What is DFID doing?
34. The Paris Declaration target only commits
donors and partners to developing country level mutual accountability
mechanisms. The UK believes that better mechanisms for donors
and partners to hold each other accountable are also needed at
the international level. We are supporting work through the DAC
to assess current mechanisms at both country and international
levels, to explore gaps and consider how these can be addressed.
We would like to see progress in addressing these issues at the
Accra High Level Forum in September 2008.
3. SUMMARY OF
DFID, PARTNER COUNTRY
AND OVERALL
DONOR PERFORMANCE
IN IMPLEMENTING
THE PARIS
DECLARATION
DFID performance
35. The baseline Paris Declaration monitoring
survey, carried out in 2006, shows DFID has either met or is on
track to meet all the 2010 Paris Declaration targets. DFID performs
above average compared to other donors. Going forward, DFID is
committed to making faster progress in three areas: reporting
aid on budget; aid predictability; and the use of programme based
approaches. DFID is taking steps to ensure that the Paris Declaration
principles are fully incorporated into our policies, procedures
and strategies:
(a) Departmental Strategic Objectives (DSOs)
now entrench aid effectiveness as a corporate priority at global,
corporate and country levels.
(b) All Country Assistance Plans (CAPs) are
expected to include an assessment of aid effectiveness.
(c) A new Results Action Plan was published
in January 2008, setting out how we will embed results into our
own and our partners' culture and systems.
(d) Progress against Paris Declaration targets
is included in our Institutional Strategy Papers for key multilateral
organisations.
Overall donor and partner country performance
36. The baseline Paris Declaration monitoring
survey found that the Declaration had stimulated an important
dialogue at country level on how to improve aid, and that there
has been at least some implementation activity in over 60 countries.
However, the survey showed that both donors and partner countries
need to accelerate progress if the Paris Declaration targets are
to be met by 2010. Priorities for donors include better alignment
with country priorities, reducing transactions costs, better use
of performance assessment frameworks to promote managing for results,
and mutual accountability.[19]
37. The baseline survey showed that partners
need to do better in developing national development strategies.
According to the World Bank assessment used for the survey, no
participating partner country has a strategy which "substantially
achieves" good practice as defined by the Comprehensive Development
Framework (CDF), and only 17% of countries had largely achieved
good practice.
38. Some partner countries are showing greater
leadership over the aid co-ordination process, however. In Cambodia,
the government has produced its own Aid Effectiveness Report—a
high quality analysis of the state of development assistance in
Cambodia. Fully Cambodian-owned, the report provides compelling
evidence-based analysis of development assistance, and highlights
particular problems around Technical Cooperation, Project Implementation
Units, and use of government systems.[20]
Alignment
39. The 2006 monitoring survey showed that
across all donors, there is considerable variation in the degree
of donor alignment behind country priorities and systems, much
more so than can be explained by the quality of partner country
strategies and systems. Overall, the survey suggested that donors
need to make better use of partner's national budgets to align
behind country priorities.
Harmonising donor systems and procedures
40. The survey provides clear evidence that
the cost of managing aid is high for partner countries. Donors
need to work aggressively to reduce the transaction cost of delivering
and managing aid.
Managing for Results
41. Donors and partners commit to develop
transparent and monitorable performance assessment frameworks
to assess progress against national development strategies and
sector programmes. The 2006 Paris monitoring survey found that
major investments have been made in recent years to improve poverty
monitoring, but that there are still major deficits in the monitoring
of national development plans. Only two countries were found to
have established good practice in this area.
Mutual accountability
42. Donors and partners in all countries
commit to undertake mutual assessments of progress on aid effectiveness
commitments by 2010. However, to date less than half of countries
have undertaken such assessments.
43. The survey results show that although
progress is being made, aid could be even more effective if donors
coordinated better. Some donors find it difficult to align and
harmonise because they have their own agendas, set by domestic
politics in their own country. Donors are influenced by the level
of domestic political support for development, the priorities
and ideological views of their government and legislative bodies,
and the type of external scrutiny they face. Scrutiny can be both
formal, for example through national audit offices or Parliamentary
committees, and informal, through NGOs. Donors often feel they
must justify aid spending by generating immediate, visible results
which can be clearly attributed to them, in order to maintain
domestic political support for development. These domestic pressures
can create incentives for donors to behave competitively, leading
to aid proliferation.
44. The impact of greater alignment and
coordination on donor counties is that they will need to focus
on poverty reduction as the over-riding objective of their aid,
rather than other political objectives. The UK Parliament has
passed the International Development Act, which puts poverty reduction
at the heart of the UK's aid programme. The International Development
(Transparency and Reporting) Act (2006) requires DFID to report
to Parliament each year on the UK government's combined efforts
to achieve policy coherence for development. Few other countries
have such legislation. In the absence of similar constraints,
some donor agencies face pressures to allocate and spend aid in
ways which meet commercial or political objectives, not poverty
reduction. To achieve maximum poverty reduction from their aid,
donors need to be prepared to support partner country priorities,
rather than promoting their own interests and visibility. The
UK has already set an example in this area by being one of the
few donor countries to have fully untied aid.
4. FURTHER PROGRESS
IN IMPROVING
AID EFFECTIVENESS,
BEYOND PARIS,
IS NEEDED
Implementation and strengthening of the Paris
Declaration
45. The Third High Level Forum on Aid Effectiveness
(HLF3) will take place in September 2008 in Accra, Ghana. The
HLF3 will review progress towards the 2010 Paris Declaration targets
and will identify areas for faster and deeper reforms.
46. Partner country priorities for Accra
include reducing conditionality; ensuring greater in-year and
medium term predictability; further reductions in the use of tied
aid; a better division of labour between donors; strengthened
incentives for aid effectiveness in donor agencies; and improving
capacity development. In line with these stated priorities, DFID
is particularly seeking to secure agreement to further progress
on incentives, division of labour, predictability and greater
accountability between donor and partner countries.
47. The Paris Declaration is an important
agreement which will do much to improve the effectiveness of aid.
But the Declaration alone will not address all the problems in
the current aid system. Progress is needed in other areas:
A more effective and coherent global aid allocation
48. Globally, aid would be most effective
if it was allocated to the countries and sectors in which the
needs are greatest and the resources could be most effectively
used. Improved aid allocation has had an impact on poverty reduction
in recent years. DFID's internal calculations on our own aid programme
estimate that an additional 500,000 people will be pulled out
of poverty over the next three years due to better aid allocations.
Yet more needs to be done. According to OECD estimates, less than
half of all aid goes to low income countries.[21]
Some countries get too little aid, and others too much. There
has been a small increase in the share of aid going to Low Income
Countries in recent years, from 45% in 2004 to 49% in 2006—though
with a dip in 2005 to 41%.
49. DFID's own aid allocations are guided
by a Resource Allocation Model (RAM). Country allocations under
the RAM are based on population, poverty levels, and the likely
effectiveness of aid in reducing poverty. We use several lenses
to identify cases in which we may need to diverge from the model.
For example, in countries at high risk of conflict, we may provide
increased aid over time in ways appropriate to country circumstances.
50. Aid would also be more effective if
donors allocated their aid according to their comparative advantage.
This would require each donor to assess how much aid they need
to reduce poverty in each sector, relative to the other sectors
in which they work. This will be influenced by their size, specialism,
whether they are bilateral or multilateral, and so on. Donors
would all compile such information. For a given level of aid,
the most effective allocation will be where donors focus on the
sectors in which they are relatively most effective, compared
to other donors.
51. Determining comparative advantage relies
on being able to measure and compare the relative impact of all
development channels and institutions. Lack of data means that
it is currently very difficult to make such assessments.
52. Preliminary internal analytical work
to inform DFID's allocation decisions has identified that donors
tend to have the following attributes:
(a) Multilateral organisations: greater
economies of scale; outreach to parts of the world that DFID cannot
reach; more stable and predictable funding, in some cases; ability
to leverage resources from other bilateral and other multilateral
sources; and broader and deeper capacity for research, advice
and development innovation. Multilaterals are also particularly
equipped to tackle emerging global challenges, such as climate
change, water scarcity and health pandemics, which require trans-boundary
solutions.
(b) Global Funds share the main attributes
of multilaterals to varying degrees. They also offer several distinct
advantages: their strong outcome focus, high political visibility
and simplicity; ability to apply lighter conditionality; and transparency
and new governance formulas. However, Global Funds do represent
additional players at the table, potentially leading to an overall
increase in transactions costs. And where funding is project based
or off budget it can distort country priorities and lead to volatility
in country-level spending.
(c) Bilateral programmes have a number
of generic attributes, including knowledge of and engagement with
politics of change in country; closer links between aid and major
non-aid policies; flexibility, speed of reaction and alliance
building; and better engagement with domestic civil society organisations
which can help bring private and non-profit know-how and finance
to bear, in a way not available to multilateral organisations.
53. DFID believes that there is need for
a balance in allocations between bilateral and multilateral donors,
based on the attributes of each. Bilaterals can draw on their
long relationship with states, and their potential to be more
flexible in some circumstances. Multilaterals tend to be better
equipped to deal with large projects and to address problems that
are global in nature. We also believe that some healthy competition
between donors can create energy and innovation about ways to
make aid more effective. But this must take place within a well
co-ordinated framework for aid, which focuses on results and accountability.
54. Globally there appears to be little
political interest in coordinating aid allocation. However, through
the DAC, DFID and other donors have agreed to make progress by
publishing planned aid allocations, drawing on information from
the DAC's annual scaling up survey.
More effective multilateral organisations
55. DFID believes that multilateral donors
can have some advantages over bilaterals, including their ability
to reduce transactions costs for partner governments by combining
aid into one single pot. However, multilaterals also need to be
made to work more effectively. DFID is using its role as a shareholder
of key multilaterals to push for reforms. DFID's priorities for
reforming multilateral institutions are:
(a) UN agencies need to focus more
strictly on their mandate and comparative advantage, particularly
doing more to prevent conflict, broker peace and help conflict-affected
countries recover after crises. DFID is developing a new results
framework for UK investments in UN bodies, and will use our core
financing decisions from 2008 onwards to reward those UN agencies
which are performing better. DFID supports the One UN initiative,
where UN country teams plan and deliver as one UN behind countries'
own national plans. Where a unified "One UN" programme
is in place at country level, we are increasingly providing consolidated
funds to support it.
(b) In the African Development Bank,
momentum on the reform agenda must continue to improve development
effectiveness, including increased decentralisation, ending tied
aid, and improved portfolio management and supervision. The Bank
will also be able to demonstrate its key role as a regional institution
by improving the effectiveness of its regional programmes and
by increasing its engagement in fragile states.
(c) At EU level, DFID will continue
to support the European Development Fund and aims to ensure that
the successor to EDF10 further strengthens its poverty focus.
We will work with EU donors to reduce transaction costs for our
partners, for example through implementation of the EU Code of
Conduct on division of Labour. We will support improvements in
the predictability of European Commission aid by supporting more
predictable budget support instruments, such as the MDG contract
approach.
(d) In the World Bank, the UK is now
the largest donor to IDA 15 and we will continue to use our influence
to drive reform. During the IDA 15 negotiations we secured significant
commitments from the Bank including on decentralisation of staff,
improving implementation of the Paris agenda and working better
with partners in country. We will continue to press the Bank for
wider reform. Priorities include decentralisation of staff, to
ensure that the Bank better responds to country needs, and giving
developing countries a greater say in how the Bank operates. There
is also need to ensure the Bank's overall financing and its organisational
and institutional structures are appropriate for effective engagement
in all types of fragile states.
Involvement of non-traditional donors
56. DFID is also working to ensure that
non traditional donors, including emerging official donors and
new private sector donors and foundations, better co-ordinate
their aid in line with the Paris Declaration principles. Emerging
donors such as China and India account for an increasingly large
share of global aid flows. UK activities towards this end include:
(a) The establishment of a regular high level
development dialogue with the Government of China, including ensuring
development cooperation was a major theme of the recent UK-China
summit.
(b) The recent signature of a new Partnership
to Achieve the MDGs globally with the Indian government.
(c) Increasing the UK's senior level interaction
with a number of key foundations, engaging them in discussion
about aid effectiveness and alignment with partner country plans.
Co-ordinating other donor policies that impact
on development
57. The non-aid policies of developed countries,
such as trade and climate change, can often have a far greater
economic and social impact on poor countries than aid. For example,
recent estimates suggest that developing countries lose about
$24 billion a year in agricultural income from protectionism and
subsidies in developed countries, even without including dynamic
and spill-over effects.[22]
It is important that both the UK government and other developed
country governments consider the impact of all policy decisions
on developing countries. DFID is required to report to parliament
each year on the UK government's combined efforts to achieve international
development.
58. The UK is ranked 9th overall out of
21 leading industrialised countries in the 2007 Commitment to
Development Index (CDI)[23]
with a score of 5.5, an improvement of three places from its 2006
ranking.[24]
This ranks OECD countries according to how well their non-aid
policies support development. The UK ranked top for investment
and scores well for environmental policy. It scores less well
on migration and technology. The UK is showing a committed response
on climate change and has re-organised so that the UK's aid and
trade policies are even more coherent, putting developing countries'
concerns squarely at the forefront of our trade polices. The UK's
priorities for further progress are trade and climate change.
Increased efforts are, however being made across a range of different
sectors and the UK also works to influence international approaches
through the OECD and the EU.
59. European Union policies have a major
impact on development, especially in those policy areas, such
as trade, agriculture and fisheries, for which the EU has a primary
responsibility. In 2007 the Commission published the first biennial
report on the application of policy coherence for development.
The preparation of the report in itself played an important role
in raising awareness, both at the national and EU levels of the
effects of EU policies on developing countries. The Council agreed
to take forward work that addresses the impact on development
of security, fragile states, climate change and migration agendas.
Economic Partnership Agreements (EPAs) are also being negotiated
with the objective that they can be good for development by making
it easier for countries to trade their way out of poverty.
5. DFID IS PLAYING
A KEY
ROLE IN
PROMOTING DONOR
CO-ORDINATION
60. DFID's priorities for facilitating greater
co-ordination and improving aid effectiveness are:
(a) Ensuring that DFID acts a model of
good practice and that the Paris Declaration targets are met
both corporately and at country level. As noted above, we are
taking steps to ensure that the Paris Declaration is mainstreamed
across all our corporate strategies, policies and procedures.
(b) Promoting stronger partner country
leadership in the Accra High Level Forum on Aid Effectiveness
in September 2008.
(c) Making multilateral donors more effective,
by using our funding and our role as a shareholder to push for
these donors to have a greater impact on poverty reduction.
(d) Working with partners to promote greater
accountability between donors and partner countries at country
and international levels, to create better incentives for
both donors and partner countries to reform.
(e) Talking with non traditional donors,
including the BRICS (Brazil, Russia, India, China and South Africa)
and the private sector, to encourage them to sign up to the Paris
principles.
(f) Promoting an enhanced focus on results.
We are investing in partner country statistics and monitoring
and evaluation systems so that we all know what results we are
achieving.
(g) Promoting coherence between development
and wider policies. This is a priority both within the UK
government, for example working on trade with the Department for
Business, Enterprise and Regulatory reform and on conflict with
the Foreign and Commonwealth Office, and internationally, notably
in the EU and through the DAC.
February 2008
1 Internal DFID calculations. Back
2
Donor behaviour and co-ordination: Making Aid Work (Better)2,
Overseas Development Institute (ODI), briefing note for the IDC. Back
3
Counting Chickens When They Hatch: The Short Term Effects of Aid
on Growth. Clemens, M., Radelet, S. and Bhavani, R: Centre for
Global Development Working Paper No 44 2004. Back
4
Basic Education Statistics in Tanzania 2003-2007, Ministry
of Education and Vocational Training, United Republic of Tanzania,
June 2007. Back
5
Internal DFID calculations. Back
6
United Kingdom DAC Peer Review: Main Findings and Recommendations,
OECD DAC, 2006. Back
7
More and Better Aid: Are the G8 Promises being delivered?
UK Aid Network (UKAN) briefing note, June 2006. Back
8
Scaling up to achieve the health MDGs in Rwanda, Rwanda
Ministry of Finance and Economic Planning and Rwanda Ministry
of Health in conjunction with World Bank, 2006, Case study for
High-Level Forum on the Health Millennium Development Goals (MDGs). Back
9
2006 Survey on Monitoring the Paris Declaration: Overview of
the Results. OECD DAC, 2006. Back
10
"Donor behaviour and co-ordination: Making Aid Work (Better.)
ODI Briefing for IDC. Back
11
Burnside and Dollar, 2004: "Aid, Policies and Growth: Revisiting
the Evidence" Policy research Working Paper 3251, World Bank,
Washington DC and Rodrik, Dani (ed.), 2003 "In Search of
Prosperity: Analytical Narratives on Economic Growth", Princeton
University Press, New Jersey. Both cited in Donor Behaviour
and Coordination: Making Aid Work (Better), ODI Briefing for
the IDC. Back
12
Joint Evaluation of General Budget Support 1994-2004, University
of Birmingham, May 2006 Back
13
República De Moçambique, Ministério Da Educação
E Cultura: Plano Estratégico De Educação
E Cultura; Comité Paritário de Acompanhamento-Relatório
Final do COPA de 2006, (15 de Dezembro de 2006). Back
14
DFID Departmental Report 2007. Back
15
Programme based approaches involve leadership by the partner country
or organisation, one single comprehensive programme and budget
framework, a formalised process for donor coordination, and efforts
to increase the use of country systems. Back
16
Donor behaviour and co-ordination: Making Aid Work (Better.)
Overseas Development Institute (ODI) briefing note for the IDC. Back
17
World Development Report 2004, Making Services work for Poor
People, World Bank 2003. Back
18
"Does a Country-Led Approach Deliver Results? "
Cox, M., Thornton, N., Cameron, C. Agulhas, April 2006. Back
19
2006 Survey on Monitoring the Paris Declaration: Overview of
the Results. OECD DAC. Back
20
Cambodia Aid Effectiveness Report. Royal Government of
Cambodia, 2007. Back
21
DAC Database on Aid from DAC Members, available online at
http://www.oecd.org/document/33/0,2340,en_2649_34447_36661793_1_1_1_1,00.html Back
22
Human Development Report 2005, United Nations Development
Programme (UNDP), New York. Back
23
Commitment to Development Index 2007, Centre for Global
Development. Back
24
2006 ranking based on the 2006 methodology. Back
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