• 02 September 2014

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    Category : Opinion

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    Is development aid effective?

    In this article, Cecilia Castillo, the FIIAPP representative in Brussels reflects on development aid, the different phases this has passed through and its challenges for the future.

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    Maximizing the impact of actions oriented towards development and the fight against poverty, as well as aid management based on results and effectiveness, should be habitual practises in international cooperation. However, since the 1990s, multilateral bodies, foreign aid donors and recipients have shared a common concern. Now in the 21st century, the poor effectiveness of aid due to the phenomenon of stakeholder proliferation and fragmentation of activities, with the resulting increase in transaction costs, is clear. These demands for effectiveness become more relevant in contexts of economic crisis, when society demands that aid fulfil the assigned objectives and governments cut Official Development Assistance (ODA) to address budget deficits.

    For decades the international debate about development mainly revolved around the amount of aid. The International Conference on Financing for Development, held in Monterrey in 2002, broadened the terms of the debate by including quality of aid as one of the key elements for evaluating progress. In subsequent years, the Organisation for Economic Co-operation and Development (OECD) organized four high-level fora on aid effectiveness: Rome (2003), Paris (2005), Accra (2008) and Busan (2011). Each of these represented a step forward. In Rome, for the first time the importance of the principles of aid effectiveness was highlighted, and a declaration stating the need for convergence between aid and the priorities of the partner countries was signed. In Paris, the principles of effectiveness were defined, and the member governments were included in the debate on how to improve aid. And in Accra, two key stakeholders for development were included: civil society and private sector organizations.

    It was in the Paris Declaration on Aid Effectiveness that global commitments were established by donor and recipient countries to improve the delivery and management of aid with the aim of making it more effective and transparent. The agreement was signed in 2005 by over 100 donor and recipient countries, international agencies and multilateral organizations. The Paris Declaration proposes five key principles:

    Ownership: Developing countries, with the participation of all the development stakeholders (central and local governments, parliaments, the private sector and civil society) must be the ones to determine and implement their own development policies.
    Alignment: International cooperation will focus its efforts on supporting the national development policy, which means channelling the funds through national financial management systems. For their part, the recipient countries will improve the quality and transparency of their public financial management system.
    Harmonization: International cooperation will be conducted in a coordinated and transparent manner. Donors will unify and simplify their procedures to reduce the bureaucratic burden for the countries they collaborate with.
    Results: This means managing and implementing cooperation to focus on the results desired.
    Mutual accountability: Developing countries and donors will increase transparency and accountability in the use of development resources.

    Despite this ambitious agenda, the results obtained were not tangible. It turned out to be more complicated to establish the results of the donors than those of the partners. The latest OECD monitoring reportshows that the recipient countries have kept their promises. The donors have not. Of the 13 objectives agreed to, significant progress has been made in only one: the donors now coordinate better among themselves. The main deficiencies of cooperation are:

    •       A significant percentage of technical cooperation continues to be governed by supply, with a low level of ownership and involvement by the partner countries and little accountability.
    •       Many partner countries lack sufficient capacity to guarantee active ownership and manage the overloaded Paris Agenda, which includes the objective of ensuring coordination and ownership.
    •       Dependency on suppliers in the North leads to high costs. The cost and the effectiveness of technical assistance personnel are a source of concern.

    Lastly, at the Fourth High Level Forum on Aid Effectiveness in Busan in 2011, the progress made in improving the impact and effectiveness of development aid was examined, and new commitments were made to guarantee that aid contributes to reducing poverty and supports progress towards fulfilment of the Millennium Development Goals (now rechristened Sustainable Development Objectives—SDOs). There was a shift from a focus on aid effectiveness to a focus on development effectiveness. The forum placed aid effectiveness into a broader context: investments/private sector, transparency, financing to combat climate change and the fight against corruption. Likewise the principles most strengthened in Busan were those of transparency of aid flows and alignment, with agreement on the need to maintain consistency between all the public policies for promoting development.

    In line with the commitments reached in Busan, the EU launched the Programme for Change in 2011, with which it aimed to increase the impact of aid by concentrating on fewer sectors and on the countries with the greatest need. This policy change was aimed at concentrating the resources of the 48 least developed countries in terms of governance, social protection, agriculture and sustainable energy, with the goal of making EU aid more strategic and results-oriented.

    In terms of the results of the effectiveness agenda, despite world economic instability and budgetary pressure in the countries, the commitment to the principles of development cooperation has remained solid. The commitments in the area of aid effectiveness, especially those concerning ownership and harmonization, have given rise to promising changes. The partner governments are increasingly participating in a more active way in the dialogue on issues related to cooperation, and the efforts of the donor community to coordinate its actions have managed to reduce aid fragmentation. But despite these positive changes, there is still much left to be done to make cooperation more effective in terms of sustainable results. It is necessary to focus efforts in order to continue progressing and reach the goals set for achieving more effective, inclusive and sustainable development.

    The views and opinions expressed in this blog are the sole responsibility of its author.