Speaker:

Matthew Martin - Director, Debt Relief International
Nick Roseveare - Chief Executive, BOND

Rachel Turner - Director, International Finance and Development Effectiveness Division, DfID

Chair:

Alison Evans - Director, ODI

How serious are donors about aid effectiveness? – The challenges to 2010 and beyond

Jasmine Burnley (Coordinator, AidWatch):

·         AidWatch and CONCORD recently launched an assessment of EU members aid performance, ‘Lightening the load – In a time of crisis, European aid has never been more important’.

·         European donors have made significant progress on aid effectiveness but without further progress, many of their commitments are in jeopardy.

·         Two key issues are the quantity and quality of aid:

1.    Quantity: Small rise overall from European donors, but many are a long way off-track from commitments. Another important issue is inflated aid: AidWatch/CONCORD advocate removing debt cancellation, student and refugee costs from calculations of aid levels. Aid is also declining overall due to shrinking economies, as a result of the global financial crisis.

2.    Quality: The EU showed strong leadership at Accra in advancing the aid effectiveness agenda. Since then, however, little progress has been made. Key issues still to be addressed include national ownership, conditionality, tied aid and technical assistance. This week’s EU Development Ministers’ meeting in Brussels put forward new commitments, but it will be difficult to hold donors to account for them. Overall there remains a lack of accountability for aid, and an absence of parliamentary and public scrutiny. There remains a trend of politically motivated spending by donors, for example linked to concerns of security, immigration or tackling climate change.

·         To 2010, there are two key issues which European NGOs will follow closely:

1.    Many European donors are focusing on ‘division of labour’ between donors. While this may be important, there is a danger that attention to this issue leads to neglect of issues which are of more central concern to developing countries.

2.    During discussions in Brussels this week, some Development Ministers put forward a ‘whole of Union’ approach, focusing on all possible sources of development support (not just aid) such as export credits, peace and security, migration. If this broader approach is adopted, then also need to broaden aid effectiveness concepts to incorporate a ‘whole of Union’ approach.

Nick Roseveare (Chief Executive, BOND):

·         Commended AidWatch/CONCORD report as an important monitoring tool for NGOs and others.

·         There are many areas of concern regarding aid effectiveness, including the implications of the ‘whole of Union’ approach and a focus on timetabling commitments rather than concerted efforts to meet them.

·         The global financial crisisis above all a crisis for the poor. This has been made worse by the collapse of other forms of development assistance (such as remittances, foreign direct investment and private capital flows). Aid is now potentially more important than ever. This means that where European governments are cutting back their aid, this will have an even more damaging impact.

·         The UK Government should therefore be credited for leading by example, both in terms of aid quantity (through its recent budget commitments) and quality, through leadership at Accra, and the establishment of the International Aid Transparency Initiative.

·         But the UK Government could do more. For example, it still needs to make progress in improving predictability. While the Government is committed to decreasing economic conditionalities, the UK could better use its leverage within the World Bank and the IMF to encourage changes in their approach too. Similarly, the UK Government is promoting transparency, but could do more to improve its own transparency for aid.

Rachel Turner (Director, International Finance and Development Effectiveness Division, DfID):

·         The UK Government is still on track to meet its aid targets and commitments.

·         The global financial crisis has led to a sharpened focus on the importance of aid and aid effectiveness. In addition to the standard indicators of aid effectiveness (e.g. from Paris and Accra) there is growing emphasis on issues of flexibility and the need to speed-up disbursals. These are not included in the main indicators but are increasingly significant.

·         It is important to be open about the challenges for aid quality. Within DFID, there is increased focus on those areas where the UK could do better. Indicators are being monitored at country levels, within performance reporting mechanisms and right up to the Treasury on a range of issues, including whether aid flows are aligned to national policies; levels of predictability; and how to avoid parallel implementation structures.

·         The lack of progress on mutual accountability remains of ongoing concern and it is one of the most challenging areas of aid effectiveness. Experience in Mozambique revealed that mutual accountability can have a significant impact and it needs to be strengthened at the country level.

·         There is a focus on both the quality of UK aid and the quality of the aid of the institutions which the UK is a shareholder in, including the World Bank.

·         The Global Fund provides a useful example, as it has embedded its commitments under the Paris Principles within its corporate performance system.

Matthew Martin (Director, Debt Relief International):

·         The big question in current debates, particularly for developing countries, is how to adjust to aid cuts? But it is important to remember that overall, aid will continue to increase. There is a risk that a focus on quality and flows from other actors (e.g. NGOs, private donors) overlooks important progress on quantity.

·         But many are asking whether the aid effectiveness agenda is the right one, for example by questioning the focus on budget support. While aid experts may be convinced, a wider group of stakeholders need to be persuaded that this approach is the right one (including parliamentarians, civil society, general public). A change of government in the UK might also present risks; an incoming government may have a different definition of ‘aid effectiveness’, making it important to embed this concept within wider society.

·         There are a number of priorities from a developing country perspective: These include: developing countries need greater opportunities to feedback to donors; most policymakers within developing countries have a less positive view of ‘progress’ especially regarding mutual accountability; The focus on ‘division of labour’ has not always been helpful because, for a significant number of developing countries, there may be a lack of donors in some sectors, rather than a proliferation.

·         Regarding the international aid architecture, attempts to make it more participatory have not gone far enough. Southern donors, private actors (e.g. NGOs) and Global ‘vertical funds’ and foundations have been left out of debates, despite the fact that they comprise some 25% of global aid. Lessons might be learned from these donors: e.g. Southern donors are often quicker at disbursing aid.

·         It is important to consider the potential role of the UN in these debates. The OECD excels at technical discussions and monitoring for aid effectiveness but the UN may be better equipped to engage a wider range of stakeholders, bring in Southern donors, and to take a more balanced view of mutual accountability.

·         Beyond 2010, Matthew would like to see more fundamental changes in the indicators of aid effectiveness and a leadership role for the UN.

Key areas of comment and questions included:

·         The implications of the global financial crisis were discussed: What are the implications of aid cuts? What proposals are there to meet funding gaps in light of the global financial crisis? Jasmine Burnley stated that there are a number of proposals, including plans to quickly disburse funds. But it should be remembered that these are not ‘new money’ and in fact ‘borrow’ from future commitments.

·         The implications of the ‘whole of Union’ approach were discussed. It was raised that this has the potential to achieve greater coherence in the EU. At the same time, those countries advocating this approach were those cutting their aid budgets. There was concern that a ‘whole of Union’ approach could mask this. Finally, it was raised that it could be hard to measure the total contribution of EU countries to developing countries (for example – what about illicit transfers e.g. tax havens?)

·         The potential downsides of the increased urgency to disburse funds was raised. Is there a danger of irresponsible spending? Rachel Turner pointed out that because the crisis is still unfolding, and the long-term impacts are unclear, decisions about whether to frontload aid are very difficult ones. At the same time, just as developed countries are using fiscal stimulus to respond to the crisis, this should not be denied to developing countries.

·         There were a number of questions on mutual accountability. Some focused on what was really behind the lack of mutual accountability in practice; others on the lack of linkages between domestic and mutual accountability. One proposal put forward was that donors could make annual reports to recipient parliaments, in order to build the link between domestic and mutual accountability. Matthew Martin emphasised the need for strong accountability structures at local and national levels; in fact, accountability could be more important than aid in terms of its development impacts. He advocated donors investing in both mutual and domestic accountability.

·         The definition of aid effectiveness was problematised. Is the language used too technocratic? Is it difficult for practitioners and those ‘on the ground’ to engage in these debates? Rachel Turner responded that it is essential to remember that this debate is all about development results and the need for streamlined, transparent processes so that citizens can see these results and monitor progress.

·         National ownership was flagged as an area where it is important to make greater progress. Rachel Turner advocated more streamlined procedures at the country-level, which were demand driven rather than donor led.

·         The impacts on public support for aid, in light of the global financial crisis and challenges of aid effectiveness, were questioned. Nick Roseveare responded that there was a growing risk of negative impacts for public opinion and that NGOs themselves would need to do more to communicate effectively with the public on aid and progress on aid.

·         Matthew Martin highlighted that there is a danger of aid effectiveness fatigue. Southern commentators like Dambisa Moyo are calling for an end to aid; these voices are likely to get louder unless real progress is made on aid effectiveness.