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Is development aid producing effective results?

A Note by the Director (Ditchley 2009/07)

11-13 June 2009


At Ditchley’s last conference of the 2008/2009 season we examined the effectiveness of development aid policy. Issues of definition were, as always, important, but participants agreed that aid was part of the larger process of development and could not be analysed without recognising the importance of trade, foreign policy and overall economic growth.  Discussion therefore covered the full range of development assistance activities.  When discussing donors, participants accepted that they were mostly referring to OECD DAC members.  Emerging donors, such as China, were mentioned but most conclusions reached in the conference would not necessarily apply to them.

The company gathered at the table represented a variety of countries and backgrounds within ministries, agencies, NGOs, business and academia.  While reluctant to settle on a single measure of ‘effectiveness’, they agreed that aid needed to be flexible and adaptable.  Diversification in line with a recipient country’s specific needs and challenges was crucial.  There was a huge difference between development aid to functioning, emerging states and assistance, often more in the short term, to fragile states.  The importance of partnership between donors and recipients was underlined, something that was inevitably difficult to achieve when there was no functioning state to deal with.  Nevertheless, donors had to try to make humanitarian assistance available for all countries, including those in which longer-term development strategies would be more difficult to implement.

When discussing the more stable developing states, conference participants kept coming back to the imperative for local ownership and empowerment.  Aid projects were ineffective in their use of funds when those running them failed to take account of local realities or to analyse gaps.  Local economies had too often been skewed by an inappropriate introduction of funds; and donor-dependency too easily resulted.  If projects were locally controlled and managed, funds would be used more effectively and coherently.  Regional input, for instance from regional banks, was also seen as preferable to outside or multilateral control.  Lessons learnt could be passed on within regions. Capacity building within governments and states was crucial as a basis for effective local ownership.  This included good governance, development of relevant skills and education.  There was wide agreement within the conference that technical assistance was ineffective in contributing towards capacity building or achieving successful aid outcomes:  some even felt that it should be eliminated completely.  Supporting the development of local expertise was vital in ensuring that a capacity to manage incoming aid was adequately developed and maintained.

Views differed on how aid funds should be disbursed. Some thought that vertical funds were an effective way of addressing specific challenges and reducing poverty and related social and health problems in developing countries.  However, the majority of participants believed that vertical funds undermined domestic systems and that improving local capacity and placing a long-term emphasis on development and growth would be far more effective.  Direct budget support was the best way of achieving this.  The difficulties associated with a multiplicity of donors – states, multilateral agencies, international institutions, private foundations, NGOs – all giving funds to separate projects and in different ways could be overcome by creating a single funnel through which aid entered a recipient country, e.g. the Finance Ministry.  In other words, aid recipient countries themselves should coordinate donors, rather than donors assuming the coordination responsibility themselves.

Nevertheless, coordination among donors remained important, especially between the United States and the EU and its member states, who together gave 80% of all international development aid. Strategies for achieving coordination had already been set in the Paris Declaration and the Accra Accord. What was needed now was implementation of these existing agreements.  There were a number of participants who criticised the tendency of government practitioners to prioritise governmental and intergovernmental meetings and processes, which they saw as producing heavy transaction costs without tangible benefits.  Equally important, therefore, was coordination within a capital among aid agencies and other government actors, for instance foreign ministries and the military. Inefficiencies stemmed from duplication, administrative waste and leakage of funds, almost always accompanied by a lack of understanding of the political and cultural complexities in specific situations.   By coordinating within a donor country before money was disbursed and then, by common international agreement, funnelling this money through one place at the recipient end, a lot of wastage could be eliminated.

We were concerned that corruption remained a significant problem.  At least vertical funds had the advantage of cutting out opportunities for high incidences of corruption.  Some participants felt that an initial level of corruption was inevitable if eventual local ownership and management was to be achieved.  Nevertheless, accountability was crucial in ensuring that budget support worked well.  Perhaps things were starting to change in this respect, as citizens even in developing countries gained access to better information and collaborated more effectively.  Now was the time to empower them further and educate them  to hold their own governments to account, something that was becoming increasingly relevant as private sectors developed and information spread.  True accountability did not come from ticking boxes as part of often perfunctory monitoring and evaluation exercises.  It had to be based on politicians being held to account by those their decisions affected. Good evaluation should be a part of this.  Aid projects that worked were increasingly community-driven, long-term, sustainable and differentiated.

At the other end of the spectrum, the importance of citizen support in the donor countries was emphasised.  Tax-payers would not support the funding of wasteful or inefficient policies.  Politicians in donor countries needed to convince their own voters of the significance of development aid.  Demonstrating efficiency was central to this.  However, participants did point out that this often led to short-term initiatives being supported where long-term development strategies would ultimately be more effective.  A reaffirmation of the Millennium Development goals would be a good step to take to underline the importance of existing strategies and goals.  In light of the discussion about aid forming part of a larger development strategy, goals one and eight on eradicating poverty and hunger and developing a global partnership were seen as particularly relevant, since they reflected the global complexities within which aid operated.  In general, while many participants had doubts about the value of the MDGs, and certainly about their deliverability, the conference regarded them in a positive light.  If recipient country governments were to take greater responsibility for coordination, then they should also be the primary owners of the MDGs.

We kept on coming back to politics.  The donor community needed to be honest about the subjective factors in policy-making. Historical ties, security considerations and trade interests all played a part.  Politicians in donor countries wanted to show imagination and value for money in this whole field and were constantly pushing new initiatives.  But these were rarely what recipient countries actually benefitted from.  Our discussion suggested that donors should concentrate on fewer recipients, reflecting their interests, and thereby manage their development aid funds more efficiently across a narrower range.

It was interesting to note that, when asked how aid money should best be disbursed, very few participants mentioned multilateral organisations.  Organisations such as the World Bank and the United Nations Development Programme in particular were seen as institutions which were failing to adapt to the circumstances of globalisation and power redistribution.  They had made the mistake of undermining their earlier coherence by taking on more and more projects themselves.  Reform of these institutions was crucial if they were to remain relevant to the wider debate.  Many participants thought that money would better be spent through bilateral agencies, NGOs, corporations and the private sector.  Public-private partnerships to encourage a growth in jobs, for instance, were seen as vital in any successful development strategy.  The big foundations were also mentioned as often exemplary donors with patience, long time-lines and a focus on developing policy capacity as well as more technical capabilities in the developing world.

In summary, the principal points to take away from this vigorous debate were as follows:

·        Aid was one element of the larger process of development.  It needed to be managed in parallel with others, such as trade and foreign investment;

·        Sustainable economic growth was a key criterion;

·        Local capacity-building and ownership were crucial;

·        Budget support was the most effective way of disbursing large-scale aid, while keeping in mind and controlling the potential for corruption;

·        Recipient countries held responsibility for coordinating donors and developing themselves;

·        Donor countries should coordinate their aid policies with other domestic political priorities and with other donors before disbursing their funds.

The main proposals to emerge from our concluding session were to:

·        Reaffirm the Millennium Development Goals at both the donor and the recipient ends. Even though they had limitations, their appeal was an important political motivation;

·        Encourage competition among donors, as well as coordination, to raise standards;

·        Focus on adequately demonstrating successes to donor country tax-payers to ensure future support;

·        Support the growth of mechanisms whereby recipient country citizens could hold their own governments to account;

·        Eradicate the “aid business”, in which too large a percentage of available funds went to foreign staff, overheads and marketing in donor organisations, which was wasteful and undermined local ownership;

·        Take a long, hard look at the performance and role of multilateral agencies.

Donors should:  

·        Take care, first of all, to do no harm in the particular local context;

·        Implement strategies that had already been agreed, for instance the Accra Accord;

·        Recognise the differences between countries and avoid inflexible models;

·        Be prepared, at least some of the time, to take risks to achieve better results.

Hanging over our whole discussion was the growing debate about ‘Dead Aid’.  There was no doubt in this company that development policies and practice needed a thorough re-examination.  But we agreed that aid to many developing countries remained vital and could not be phased out.  There were different ways of making it more effective, but the most important first step was to hand responsibility and ownership more clearly over to the recipient.

We were fortunate in being guided through the labyrinth of our discussions by an efficient and thoughtful Chairman, who ensured that we remained on track and challenged the company to come up with concrete solutions. In the end, we had to bow to a recognition of the incredible complexity of the international development aid system and of the uniqueness of each individual situation.  External assistance was, in short, never going to be as significant a factor as the capacity of each country, perhaps each community, to drive itself forward.

This Note reflects the Director’s personal impressions of the conference.  No participant is in any way committed to its content or expression.

PARTICIPANTS

Chair  :   Dr David Malone
President, International Development Research Centre (2008-).  Formerly:  High Commissioner of Canada to India and Ambassador to Bhutan and Nepal (2006-08);  Assistant Deputy Minister, Global Issues, Department of Foreign Affairs, Ottawa (2005-06);  Assistant Deputy Minister, Africa and Middle East (2004-05);  President, International Peace Academy, New York (1998-2004);  Director-General, International Organisations and Global Issues Bureaux of the Canadian Foreign and Trade Ministry (1994-98);   Ambassador and Deputy Permanent Representative to the UN (1992-94).  Author.

CANADA
Dr Roy Culpeper
The North-South Institute, Ottawa (1986-):  President and CEO (1995-);  Vice President and Coordinator of Research (1991-95).  Formerly:  Adviser, World Bank, Washington DC (1983-86).
Mr Charles Sirois
Founding Partner, Chairman, President and CEO, Enablis Entrepreneurial Network, Montreal, Canada;  Founding and Controlling Shareholder, Telesystem Ltd;  Chairman, Canadian Imperial Bank of Commerce.

EUROPEAN UNION/IRELAND
Mr Paul Culley

Director for International Trade and Development, Secretariat of the EU Council of Ministers, Brussels.

GHANA
Dr K Y Amoako
Founder and President, African Center for Economic Transformation, Accra;  Chair, Developing Country Contact Group of the Working Party on Aid Effectiveness.  Formerly:  Head, UN Economic Commission for Africa (1995-2005).

INDIA
Mr George Varughese

President, Development Alternatives, India.

JAPAN
Mrs Sadako Ogata

President, Japan International Cooperation Agency (2003-);  Chair, The Advisory Board on Human Security (2003-).  Formerly:  Co-Chair, Commission on Human Security (2001-03);  United Nations High Commissioner for Refugees (1991-2000).

KENYA/GAMBIA
Mr Ousainou Ngum

Executive Director, Agency for Cooperation and Research in Development.

NETHERLAND/SWEDEN
Mr Pär Granstedt

Secretary General (2006-) and Founding Member, AWEPA – European Parliamentarians for Africa, Amsterdam.  Formerly:  Director and Political Advisor, Federation of Swedish Farmers (1999-2005);  Vice President, World Federation of UN Associations (1995-2000).

NEPAL
Mr Sujeev Shakya

CEO, Beed Management, Nepal;  Contributor, Nepali Times;  Chair, Nepal Economic Forum.  Formerly:  Recipient, Hubert Humphrey Fellowship (2002-03).  Author.

NETHERLANDS/UNITED KINGDOM 
Dr James Mackie

Programme Coordinator, Development Policy and International Relations, European Centre for Development Policy Management, Maastricht (2002-);  Visiting Professor, Department of International Relations and Diplomacy, College of Europe, Bruges (2006-).

NORWAY
Mr Asbjørn Eidhammer

Director of Evaluation, Norwegian Agency for Development Cooperation (NORAD).  Formerly:  Ambassador of Norway to Malawi;  Deputy Director General and Head of UN Division, Ministry of Foreign Affairs.

OECD
Mr Richard Carey

Development Cooperation Directorate, OECD (1980-);  Director (2007-).  Formerly:  Deputy Permanent Representative, New Zealand Delegation to the OECD (1977-80).

SOUTH AFRICA
Dr Greg Mills

Director, The Brenthurst Foundation (2005-).  Formerly:  National Director (1996-2005), Director of Studies (1994-96), South African Institute Of International Affairs.

SWEDEN
Ambassador Lars Håkan Åkesson

Deputy Director-General and Head, Department for Management and Methods in Development Cooperation, Ministry for Foreign Affairs, Stockholm.  Formerly:  Ambassador of Sweden to Ethiopia (2002-05).

SWITZERLAND/UNITED KINGDOM
Mr Mark Knight

Consultant on Conflict and Post-Conflict Interventions.  Formerly:  Program Manager, Post-Conflict Reintegration, Aceh Indonesia, International Organisation for Migration, Switzerland (2006).

UNDP/NETHERLANDS
Ms Eva Leonie Herfkens

Special Advisor to UNDP Administrator (2007-).  Formerly:  UN Secretary-General’s Executive Coordinator of the UN Millennium Campaign (2002-07);  Minister for Development Cooperation, The Netherlands (1998-2002).

UNITED KINGDOM
Mr Tony Baldry MP

Member of Parliament (Conservative), Banbury (1983-);  Vice-Chair, All-Party Overseas Development Group (1999-).  Formerly:  Member, Parliamentary Select Committee on International Development (2001-05).
Dr Simon Dorris
Founder Partner, Lansdowne Consulting (2001-).  Formerly:  Founder and VP Business Development, Wit Soundview Europe Investment Bank (1999-2001);  Associate Consultant, A T Kearney (1997-99).
Mr Alex Evans
Non-Resident Fellow, Center on International Cooperation, New York University.  Formerly:  Special Adviser to the Secretary of State, Department for International Development (2003-06).
Professor Valpy FitzGerald
Professor of International Development and Director, Department of International Development, University of Oxford.  Formerly:  Recipient, Gabarrón Foundational International Prize in Economics (2007).
Ms Bela Kapur
Conflict Adviser, UK Stabilisation Unit (tri-departmental Unit of the Department for International Development, Foreign and Commonwealth Office and Ministry of Defence) (2009-).
Mr Adam Leach
Chief Executive, The International Business Leaders Forum.  Formerly:  Regional Director, Middle East, Eastern Europe, Commonwealth of Independent States, Oxfam.
Ms Kate Nustedt
UK Executive Director, Women for Women International (2009-).  Formerly:  International Communications Director, ActionAid International, Johannesburg and London (2004-08).
Ms Elizabeth Padmore
International Advisor, Board Member and Independent Consultant (2006-);  Associate Fellow in Futures, Oxford Institute for Science, Innovation and Society, Said Business School, University of Oxford;  Trustee, Women for Women International.  A Governor and Member of the Council of Management, The Ditchley Foundation.
Mr David Peretz
Chair, Independent Advisory Committee on Development Impact, Department for International Development;  Independent Consultant and Senior Adviser to:  IMF Independent Evaluation Office, World Bank, Commonwealth Secretariat.
Mrs Emma Shercliff
Board Member, World Computer Exchange (2008-),  Turquoise Mountain Foundation USA (2008-).  Formerly:  Managing Director, Macmillan English Campus (2006-08);  British Council Tehran (2002 03), Macmillan Publishers Ltd (1997-2002).
Mr Simon Shercliff
HM Diplomatic Service (1998-);  Foreign Security Policy Group, British Embassy, Washington DC (2006-).  Formerly:  Chief Press Officer, Foreign and Commonwealth Office (2004-06).
Ms Rachel Turner
Director, International Finance and Development Effectiveness Division, Department for International Development (DFID).  Formerly:  Head, DFID, Mozambique;  Director, International Division Advisory Team, DFID.
Mr Phil Vernon
Director of Programmes, Africa and Peacebuilding Issues, International Alert.  Formerly:  CARE International (1992-2004);  Country Director Uganda, CARE International (2000-04).
Dr Ngaire Woods
Professor, International Political Economy, University College, Oxford;  Director, Global Economic Governance Programme, University of Oxford.  A Governor, The Ditchley Foundation.
Mr Roger Yates
Humanitarian Director, Plan International.  Formerly:  ActionAid;  Oxfam;  UN Inter-Agency Working Group on Disaster Risk Reduction.

UNITED KINGDOM/UNITED STATES OF AMERICA
Dr Albert Park

Reader in the Economy of China, Department of Economics and School for Interdisciplinary Studies, University of Oxford (2007-);  Faculty Associate, Institute for Chinese Studies and Contemporary China Program, University of Oxford.
Ms Ginger Turner
Rhodes Scholar, Economics, St John’s College, University of Oxford.  Formerly:  Junior Professional Associate, Office of the Chief Economist, World Bank.

UNITED STATES OF AMERICA
Ms Carol Bellamy

President and CEO, World Learning (2005-).  Formerly:  Executive Director, UNICEF (1995-2005);  Director, United States Peace Corps (1993-95);  Managing Director, Public Finance Department, Bear Stearns & Co (1990-93).   
Mrs Wendy Luers
Founder and President:  The Foundation for a Civil Society (1990-);  Co-Founder and Co-Chair, Project on Justice in Times of Transition, Tufts University.  Member, The Advisory Council, The American Ditchley Foundation.

UNITED STATES OF AMERICA/UNITED KINGDOM/PAKISTAN
Mr Homi Kharas

Senior Fellow, Wolfensohn Center for Development, Global Economy and Development, Brookings Institution.  Formerly:  World Bank:  Chief Economist, East Asia and Pacific Region.