Memorandum submitted by Christian Aid
COORDINATION FOR AID EFFECTIVENESS
INTRODUCTION
1. Christian Aid works in nearly 50 countries
worldwide, supporting local organisations to deliver urgently
needed services directly to poor communities, and to scrutinise
and hold their own governments and the international community
to account. We also strive to influence the UK, Ireland and the
European Union on policies that affect the countries where we
work. One of Christian Aid's central concerns is the way those
actors give aid.
2. Christian Aid welcomed the Paris Declaration
on Aid Effectiveness (PD) agreed between donors in 2005 and particularly
the active role the UK government took to secure it. The PD represents
a significant change in aid relations in that it confers obligations
on donors to meet certain standards. Prior to the PD, only recipients
were required to make and meet specific commitments, through aid
conditions. We strongly endorse the existing principles and believe
that in emerging areas such as the Aid-for-Trade initiative[81],
the principles should also apply.
3. However, we must guard against overstating
the importance of the PD. There are real limitations in the indicators,
the methods to monitor compliance and, most importantly, the ability
to hold donors to account for poor performance. September's High
Level Forum on Aid Effectiveness in Accra provides an opportunity
to address some of these weaknesses. Christian Aid would like
to see donors take on board the recommendations of the international
civil society network, particularly to ensure donors commit to
use aid only for poverty reduction, target it at the poorest people
and allocate it equitably.[82]
4. This International Development Committee
(IDC) inquiry comes at an opportune moment to both scrutinise
and influence the agenda of the UK government in the run-up to
Accra. To assist that inquiry Christian Aid has written this brief
submission. It does not aim to provide an exhaustive critique
of the PD: instead it will focus on two specific issues, namely
the indicators around country ownership and alignment with country
procurement systems.
OWNERSHIP
5. The current development consensus is
that countries are more likely to implement a policy if they "own"
it. This may seem obvious, but it is a significant change in principles
to the traditional donor practice of imposing the reforms they
believe to be priorities upon recipients. This approach is inappropriate,
ineffective and undemocratic:
— Inappropriate because externally
imposed reforms have so often failed to bring benefit to the country
concerned. Indeed policies such as liberalisation and privatisation
that are premised on their ability to bring growth have on the
contrary frequently impoverished poor people further
— Ineffective because of the
risk that aid recipients will not fully implement, or could even
reverse, reforms
— Undemocratic in that externally
imposed reforms undermine democratic decision-making in poor countries,
because governments are forced to adopt specific policies to secure
development finance—even if they are unpopular with their
citizens. Agreements are made behind closed doors with little
input from parliaments and citizens.
6. Christian Aid considers "ownership"
to mean the degree to which a recipient country government selected
a policy. We find it alarming that some donors such as the World
Bank and International Monetary Fund (IMF) define ownership as
the degree to which a country is likely to implement a reform,
ie its implementation is proof that the policy is wanted. Such
an approach fails to reflect the power of donor money, aid conditions
and technical assistance to push a government on to a different
course of action.
The operational PRSP
7. While we welcome a Paris indicator on
ownership, it is the measure that reveals its weakness. Currently
the existence of an operational Poverty Reduction Strategy Paper
(PRSP) is seen by donors as proof of ownership. Christian Aid
welcomed the PRSP and many of our partner organisations feel governance
has improved as state and citizens engage in PRSP development.
Yet it is perverse to use this as a measure of ownership, given
its genesis in each country is driven by donor conditionality
(countries need to have a PRSP to get aid) and pre-existing donor
conditionality—most notably the IMF's Poverty Reduction
and Growth Facility (PRGF)—define the limits within which
the PRSP is developed. It is the World Bank (whose policies inform
the PRSP) who decides if a PRSP is "operational".
Conditionality
8. The clear aid effectiveness indicator
omitted a commitment to curtail aid conditionality. The failure
to do this means donors can continue to have lots of conditions
that differ from other donors. This can increase risks of aid
volatility, unpredictability and other issues that kick-started
the entire drive to improved quality of aid targets in the first
place. The evidence shows that budget support programmes are more
likely to go off track due to aid conditionality[83],
highlighting the importance of rationalising across and coordinating
between donors in this area. This becomes more important while
donor conditions are informing the content of PRSPs and undermining
the actual ownership indicator.
Parallel governance structures
9. Christian Aid is concerned that the pursuit
of the "low-hanging fruit" of donor coordination must
be accompanied by vigorous activity to achieve the goals of ownership
and alignment. Failure to do so may perversely risk further squeezing
citizens and their organisations out of major policy decisions.
Indeed, we could be witnessing the development of parallel governance
systems.
10. Civil society organisations are involved
in PRSP formulation, the parliamentary PRSP approval and monitoring
processes as well as other consultations with individual government
ministries. Donors engage with government through the Multi-donor
Budget Support performance assessment framework (which is drawn
from but effectively prioritises PRSP commitments) and at the
donor-government working groups that guide the work of each ministry.[84]
Because donors have the leverage where citizens and their organisations
do not, there is a risk that this parallel process could undermine
those formal, albeit fledgling, democratic dialogue processes
through which states and citizens communicate.
Conclusion
11. True ownership in the broader sense
denotes the ownership not just of government but of other domestic
stakeholders. Donors need to focus on restricting conditionality
to those conditions focused on fiduciary accountability to ensure
PRSPs are not just operational but more broadly owned. Furthermore,
donors need to ensure that fora where they engage with recipient
governments are fully transparent and do not distort dialogue
processes between states and citizens.
ALIGNMENT: USE
OF COUNTRY
PROCUREMENT SYSTEMS
12. Christian Aid has focused specifically
on the commitment for donors to use country procurement systems.
Again, this is a welcome commitment because of the heavy transaction
costs for recipients in complying with the purchasing rules of
all their different donors. The goal is ambitious, for at least
90% of donors to be using country procurement systems by 2010.
Best practice procurement systems
13. The goal only applies to countries which
have procurement systems which "adhere to broadly accepted
best practice or have a reform programme in place to achieve these".[85]
At first glance this seems fair enough; no donor will want to
put their funds through processes that are weak and likely to
be at risk of corruption.
14. Christian Aid decided to investigate
what "broadly accepted best practice" means on the ground.
We did this because procurement is the most controversial of all
the aid conditions around good governance, seem by critics as
a "can-opener" for further liberalisation.[86]
We found that the criteria focus on basic accountability and transparency
of the procurement process, but step beyond this to consider how
far recipients can use procurement as an interventionist economic
policy tool.
A bias to liberalisation
15. An Organisation for Economic Cooperation
and Development (OECD)-World Bank round-table on procurement has
devised indicators to measure how far countries are meeting with
"broadly accepted best practice". These reward non-discriminatory
procurement systems with higher scores. The sub-indicator on participation
rules argues that "as a general principle, firms, including
qualified firms, should not be excluded from participating in
a tendering process for reasons other than lack of qualifications"
as these exclusions "may arbitrarily limit competition and
may result in inefficient procurement and higher prices".[87]
16. Furthermore, the indicators reward policies
that do not require foreign firms to associate with local firms
or establish subsidiaries. An annexed document entitled "good
practice for national competitive bidding" claims that it
is good practice if "any firm, national or foreign, can participate
in the tendering process except if the firms are excluded by legal
provisions" including convictions or UN sanctions.[88]
17. Christian Aid research into procurement
reform found that Ghana was pressurised by the World Bank to ensure
national competitive bidding allowed foreign firms to participate.
The impacts of this shift are being felt by local firms, many
of whom argue that the mitigation measures allowed by the "broadly
accepted best practice" models are not sufficient to counter
the inequities of taxation, access to credit and other factors
which allow foreign firms to bid lower.[89]
Procurement and policy space
18. Furthermore, governments are restricted
in their ability to use procurement as an important economic policy
despite evidence that many countries have done so in the past.
One of the best examples is the US Buy American Act 1933, which
mandates preference for the purchase of domestically produced
goods over foreign goods in U.S. government procurement and is
still in place today.
19. In response to major riots between indigenous
Malays (the Bumiputera), Chinese Malays and other "market
dominant minorities"[90]
in the late 1960s, the government of Malaysia used public procurement
preferences for both Bumiputera businesses and other domestic
providers. There has been some evidence of political corruption
by Malaysian officials in the awarding of contracts. However Janis
van der Westhuizen, an expert in the southeast Asia region, argues
that without this policy "Malaysia's adaptation to the competition
state model would have been even more difficult, complex and unstable".[91]
Aid untying, procurement and market access
20. Procurement reform needs to be set against
other trade goals. Procurement is a key issue in numerous trade
agreements where western countries are encouraging procurement
liberalisation with a view to secure greater market access. At
the same time the donors are completely dragging their feet on
lifting conditions attached to aid. The rather flimsy PD commitment
was to make "continued progress" up to 2010.
21. As part of this drive the World Bank
has begun considering how to use country procurement systems in
countries where it works; however they have come up against the
US corporate lobby who believe that developing country procurement
systems are high risk and inferior to those of donor countries.
Implicit in this is a concern that if this becomes World Bank
common practice, it will restrict US corporations' competitive
access to bidding.[92]
To quash these concerns the proposed bar for selection of pilot
countries is set so high very few countries will quality. The
World Bank is likely to continue to use it own systems for the
foreseeable future.
Conclusion
22. The desire to minimise risk of corruption
and maximise value for money have led donors to strongly emphasis
open competition in procurement by as many players as possible,
preferably including foreign participants too. But in doing so
the scope for developing country governments to use procurement
to pursue broader goals has been curtailed. It seems inappropriate
that commitments to use national procurement systems should be
requiring developing country governments to give-up their flexibility
to pursue a path similar to that of Malaysia and indeed the US.
23. Christian Aid believes this issue substantially
undermines the legitimacy of the Paris process. It is unacceptable
to link commitments to use a country's procurement system to how
far it has liberalised, particularly when most donors continue
to want to ensure that their own firms benefit from aid contracts
(there is still a disproportional number of UK firms securing
UK aid contracts, despite aid from the UK being untied). We would
like to see the UK government prioritising this issue in the run-up
to Accra and pushing for a revision that ensures recipient governments
must only improve the accountability and transparency of their
procurement systems.
CONCLUSIONS AND
RECOMMENDATIONS
24. The run-up to Accra presents a good
opportunity to not only strengthen the existing PD, but to deepen
our understanding of what makes aid effective. The UK government
has played a very important role in kick-starting this process,
both at a country level and internationally. However, we believe
this inquiry by the IDC is well-timed and useful to challenge
the Department for International Development on the goals guiding
their engagement in this process. We support all the recommendations
made by the international civil society network, but in particular
would ask that the IDC focuses on the following in their inquiry:
1. The need to change how ownership is measured.
This should not be based on a World Bank assessment of how operational
a PRSP is. Instead donors should measure how far a country leads
in the selection, design and sequencing of their development agenda.
2. The importance of donor commitment to
stop using aid conditions, bar those focused on fiduciary accountability.
The continued use of conditionality undermines the goal of country
ownership. A complementary goal on conditionality is required.
3. In implementing the PD, donors should
avoid setting up decision-making structures with recipients which
parallel those between states and citizens. Donor-government fora
should be transparent and open to local civil society organisations.
4. Donors should look only to the accountability
and transparency of recipient procurement systems when assessing
their robustness and whether to use them. Any consideration of
the degree of openness should be removed.
February 2008
81 Launched at the World Bank-IMF annual meetings in
2005. See Christian Aid The Opportunities and Risks of Aid
for Trade December 2007 Back
82
International CSO Steering Group (ISG), From Paris 2005 to Accra
2008: Will aid become more accountable and effective?, A critical
approach to the aid effectiveness agenda, date? Back
83
Benn Eifert and Alan Gelb, Coping with aid volatility,
Finance and Development, International Monetary Fund Sepember
2005 Vol 42, Number 3. Back
84
This has been seen in Sierra Leone, for example Lucy Hayes, Old
habits die hard: aid and accountability in Sierra Leone, Eurodad,
February 2008. Back
85
Paris Declaration on Aid Effectiveness pg 9 available at
http://www.oecd.org/dataoecd/11/41/34428351.pdf Back
86
Author? Reality of Aid, An Independent Review of Poverty and
Development Assistance: Focus on Governance and Human Rights in
International Cooperation[s?], Zed Books and IBON, 2004. Back
87
Organisation for Economic Cooperation and Development Methodology
for assessment of national procurement systems version 4,
17 July 2006. Back
88
Ibid. Back
89
Christian Aid research into procurement reform in Ghana. Forthcoming.
[more info?] Back
90
Christopher McCrudden, Buying Social Justice: Equality,
Government Procurement and Legal Change, Oxford University Press,
September 2007. Back
91
Ibid. Back
92
For more information about the US corporate lobby and concerns
re changes in World Bank procurement changes, see
http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/EXTPROGRAMS/EXTTRADERESEARCH/0,,contentMDK:20529033~menuPK:215762~pagePK:210083~piPK:152538~theSitePK:544849,00.html
and
http://www.nftc.org/default/trade/export%20finance/May%2025%202005%20Letter%20to%20World%20Bank%20President-Elect%20Wolfowitz.pdf Back
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