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Untying Aid: Is it working? An Evaluation of the Implementation of the Paris Declaration and of the 2001 DAC Recommendation of Untying ODA to the LDCs

Research reports

Written by Ed Clay

The OECD DAC, in making its Recommendation in 2001 for untying of aid to least developed countries, envisaged a comprehensive evaluation of its implementation and impact by 2009. The Paris Declaration (PD) reaffirmed the Recommendation firstly by stating that untying aid generally increases aid effectiveness by reducing transaction costs for partner countries and improving country ownership and alignment, and consequently by making further steps towards aid untying Indicator 8 of progress towards increasing aid effectiveness. Accordingly OECD commissioned this study as part of the PD evaluation.

This study, undertaken during 2008-09, has included a re- examination of efforts towards untying as reported statistically by DAC donors to the OECD, complemented by a review of donor policies and practices through a purposive survey of five donors who had either largely untied their aid, or were actively committed to untying after 2001 (Australia, Canada, Denmark, Norway and Switzerland). The widespread perception that untying increases aid efficiency and effectiveness has been re-examined through a literature review on the econom- ics of tying and untying practices, followed by an investigation into untying practices in six partner countries (South Africa, Zambia, Burkina Faso, Ghana, Vietnam and Lao PDR). Twenty- one development projects in these countries, supported individually or jointly by thirteen DAC members as well as the EU and the World Bank (IDA), and reported to the OECD as fully untied or with untied components, were examined in detail. EC administered aid is included to ensure coverage of partial untying and IDA aid is included as a base for comparison with fully untied funding. Most projects are in the Water and Sanita- tion Sector (W&SS), which combines both infrastructure and social development objectives.

Edward Clay, Matthew Geddes, Luisa Natali