Asia Pacific Aid Effectiveness Portal

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You can also access the up-to-date Asia-Pacific Aid Effectiveness Portal at: AidEffectiveness.org
This site contains up to date information on preperations for Accra, outcomes from the regional consultations on Accra and the Asia-Pacific Aid Effectiveness Community Newsletters

Getting to Accra:

Information Portalon Aid Effectiveness for the Asia-Pacific Region

February 2008

Marcus Cox
Kristina Hemon
Prepared by Agulhas

Applied Knowledge for UNDP
with support from the Department for International Development (UK)

Contents 1 INTRODUCTION 2 ROUNDTABLE TOPICS FOR ACCRA 2.1 Country ownership 2.1.1 National development strategies/PRSPs 2.1.2 Participation 2.1.3 Conditionality 2.2 Alignment 2.2.1 Programmatic assistance 2.2.2 Use of country systems 2.2.3 Capacity building 2.2.4 Predictability of aid 2.2.5 Untying aid 2.3 Harmonisation 2.4 Managing for results and development impact 2.5 Mutual accountability 2.6 Civil society and aid effectiveness 2.7 Fragile states 2.8 Health as a ‘tracer sector’ 2.9 The international aid architecture 2.9.1 Global Funds 2.9.2 Emerging donors 2.9.3 IFI governance 2.9.4 UN reform 2.10 Cross-cutting issues 3 RESOURCES ON AID EFFECTIVENESS 3.1 International resources 3.2 Regional resources 3.3 Country level resources 3.3.1 Afghanistan 3.3.2 Bangladesh 3.3.3 Cambodia 3.3.4 Indonesia 3.3.5 Kyrgyz Republic 3.3.6 Lao PDR 3.3.7 Mongolia 3.3.8 Nepal 3.3.9 Pakistan 3.3.10 The Philippines 3.3.11 Sri Lanka 3.3.12 Tajikistan 3.3.13 Thailand 3.3.14 Timor-Leste 3.3.15 Tonga 3.3.16 Vietnam 3.3.17 Yemen

INTRODUCTION

The 2005 Paris Declaration on Aid Effectiveness sets out to accomplish a major shift in the way development assistance is provided. Its core principles – ownership, alignment, harmonisation, managing for results and mutual accountability – are easy to state, but add up to a radical change for both donors and partner countries.

The 3rd High-Level Forum in Accra in September 2008 is an opportunity to take stock of how far the reality of aid has changed in response to these principles. In preparation, a great amount of research and analysis is underway to assess the extent of behaviour change, to identify obstacles and to set the implementation priorities for the coming period.

This information portal is designed to help governments in the Asia and the Pacific region to prepare for and contribute to the Accra debates. From our review of the literature, it would seem that many of the countries in Asia and the Pacific have not been always very active in international debates on aid effectiveness. It may be that some take the view that the region is simply too diverse for a single aid paradigm; others may consider that the Paris Declaration reflects the experience of European donors in Africa, and is less relevant to Asia and the Pacific.

In fact, all recipients of ODA have a great deal to gain from the aid-effectiveness agenda. The Paris Declaration is a tool that all governments can use to maximise the value of their ODA. However, they need to engage with the agenda to maximise the benefits.

This information portal offers:

• an introduction to the issues likely to be debated at Accra;
• brief descriptions of the current evidence and available literature which informs those debates, highlighting literature on Asia-Pacific countries;
• information about on-going workstreams in preparation for Accra;
• information and links on where to go for further information.
• Provocative questions and challenges for developing more analysis and evidence
  
  

The first part of the portal is organised according to the nine roundtable topics provisionally on the agenda for Accra, together with cross-cutting themes:

• Country ownership
  
• Alignment
  
• Harmonisation
  
• Managing for results
  
• Mutual accountability
  
• Civil society and aid effectiveness
  
• Aid effectiveness in fragile states
  
• Health as a ‘tracer sector’
  
• The international aid architecture.
  
  

The second part provides a guide to where to go for further information on aid effectiveness, at the global, regional and country levels. There is of course no standard definition of the Asia-Pacific region. Here, we have focused on the following 21 countries that are signatory to the Paris Declaration:

Afghanistan	Lao PDR	Sri Lanka
Bangladesh	Mongolia	Tajikistan
Cambodia	Nepal	Thailand
Cook Islands	Pakistan	Timor-Leste
Fiji	Papua New Guinea	Tonga
Indonesia	Philippines	Vietnam
Kyrgyz Republic	Solomon Islands	Yemen

ROUNDTABLE TOPICS FOR ACCRA

Country ownership

Ownership is the foundation stone of the Paris Declaration. It signals a departure from the old ‘social engineering’ school of development assistance, where donors believed that development was something that could be done to developing countries, rather than by them. The principle of ownership means tailoring external assignment towards helping partners countries achieve their own development objectives. It recognises that policies and institutions for development will be effective only so far as they emerge out of genuinely country-led processes.

The Paris Declaration commitments on country ownership include:

• Partner countries exercise leadership in developing and implementing their national development strategies through broad consultative processes, and translate them into prioritised, results-oriented operational programmes.
• Donors respect partner country leadership and help strengthen their capacity to exercise it.
  
  

There are likely to be three main issues for debate in this Roundtable:

• National development strategies/PRSPs: How effective are national development strategies? Are partner countries able to produce realistic, prioritised strategies, and implement them systematically?
• Participation: How broad is country ownership of national development strategies? Does it extend across government, horizontally and vertically? Does it include parliaments, civil society and citizens?
• Conditionality: Have donors changed their practices on conditionality to respect country ownership?

National development strategies/PRSPs

The PRSP initiative was launched in September 1999 as a condition for debt relief and concessional lending from the World Bank and IMF. It was based on the Bank’s four CDF principles: (i) long-term, holistic vision; (ii) country ownership; (iii) country-led partnership; (iv) results focus. Countries were given detailed guidelines for preparing PRSPs in the World Bank’s PRSP Sourcebook.

From the outset, many observers pointed out the contradiction of using external conditionality to compel the production of a country-owned strategy. Many questioned whether the first generation of PRSPs were genuinely country owned. Furthermore, producing a comprehensive PRSP, based on realistic priorities and linked to the budget process, was an extremely ambitious undertaking for most developing countries. Some feared that PRSPs would become nothing more than wish lists of development projects.

Now that many countries have produced a second- or even third-generation PRSP, however, the nature of the debate has changed. In countries like Vietnam, the principles of the PRSP have been incorporated into the regular planning process. Donors have become less directive as to the form and content of national development strategies, to encourage greater country ownership. However, there are still questions as to how effective the approach has been in many countries.

The first three documents present the views of the PRSP initiative’s original sponsor, the World Bank.

World Bank, “Results-Based National Development Strategies”, draft, October 2007
In 2006, the World Bank conducted 62 country-level Aid Effectiveness Reviews, which were used to set the baseline for the first Paris Declaration indicator: “Partners have operational development strategies”. The individual country reports can be found here. They are desk reviews based on existing literature, but provide a useful overview of aid-effectiveness initiatives in each country.
This draft report is a summary of the reviews. The assessment as to whether a country has an operational development strategy is based on 3 criteria: a unified strategic framework; prioritisation within that framework, and a strategic link to the budget. While all 62 countries were found to have made some progress, only 8 satisfied all three criteria, suggesting that Paris Declaration 2010 target (75 percent of partner countries with largely developed operational development strategies) is some way off being achieved. Establishing a link between the strategy and the budget remains difficult for most countries, leading in turn to poorly prioritised strategies. Many countries still have multiple, parallel development strategies.
The report notes that holistic development strategies should address cross-cutting issues like gender, HIV-AIDS and the environment.

IMF and World Bank, “2005 Review of the Poverty Reduction Strategy Approach – Balancing Accountabilities and Scaling Up Results”, August 2005
This is an internal review of the PRSP approach carried out jointly by WB and IMF staff. It is a broadly positive assessment, suggesting that PRSPs have brought about a “fundamental change” in the relationship between low-income countries and donors. It found that while most PRSPs contained good qualitative and quantitative analysis of poverty, it was often hard to link that analysis to the policies selected. Few countries had linked their PRSPs to the budgets through an MTEF. The process had created space for broader participation in the policy process, but there had been little public discussion of macroeconomic policy choices. Staff suggested a number of priorities for strengthening the PRSP approach, including strengthening the medium-term perspective, participation and budget linkages.

World Bank Operation’s Evaluation Department, “The Poverty Reduction Strategy Initiative: An Independent Evaluation of the World Bank’s Support through 2003”, 2004
Although somewhat dated, this independent evaluation of the World Bank’s support to the PRSP initiative is the most comprehensive available. It provides a more cautious assessment, finding considerable variation in the value of the initiative across different countries. It concluded: “The [PRSP] Initiative has added the most value in countries where government leadership and aid management processes were already strong. It has had less effect in countries with weak public sector capacity or with donor-dominated aid relationships… Where the government-donor dialogue was previously weak or donors continued to drive the agenda, PRSPs by themselves have not noticeably promoted donor coordination or increased government management of external assistance.” It found that ownership of the PRSP was strong among government agencies directly involved in its preparation, but faded across line ministries and sub-national government. Importantly, it found that some countries had included policies they thought donors expected to see, including an overall emphasis on the social over the productive sectors. The evaluation called for strengthening analytical underpinnings, growth policies and results focus. It found that, while the Bank had generally aligned its support to PRSPs, this had not involved much change in the content of its Country Assistance Strategies.

Independent assessments of the PRSP initiative during the early years tended to be quite critical, suggesting that the approach was structural adjustment in a new guise, and that countries were preparing PRSPs merely to satisfy donor conditions. More recent literature, however, acknowledges that the initiative is beginning to make significant changes to national planning processes, although many practical challenges remain.

Driscoll, Ruth with Alison Evans, “Second-generation Poverty Reduction Strategies: new opportunities and emerging issues”, Development Policy Review, Issue 23(1), 2005
This review by the United Kingdom’s official development think tank, the Overseas Development Institute (ODI), concluded that the PRSP has begun to escape from its origins in HIPC and IFI conditionality, and become genuinely country owned. It found that second-generation strategies were more comprehensive and multi-sectoral, and have triggered a genuine shift in expenditure towards poverty reduction in health, education and transport. They had opened up the policy process and enabled civil society to engage in policy debates “on an unprecedented scale”. However, it also noted the tendency of PRSP units to act as “enclaves” within government, and for ownership to be limited to core central ministries. The lack of budget links had resulted in poor costing and prioritisation, while weaknesses in public-financial management systems made the strategies difficult to implement. While donors were making genuine efforts to align with PRSPs, it found that this was often a pro forma process of reformulating existing policies in PRSP language. It found that too much assistance was still provided off the budget, and was fragmented across too many sectors, programmes and projects.

Oxfam International, “From ‘donorship’ to ownership? Moving towards PRSP Round Two”, Oxfam Briefing Paper, January 2004
Oxfam found that the PRSP initiatives had been disappointing in both process and content. It found that donors still wield too much control over policy content, through “backstage conditionality”. It found that macroeconomic policies are still dictated by the IFIs, and are “antipathetic to the interests of poor people”. It found that PRSP content was limited to social-sector spending projects, with little discussion of key policy areas such as trade. It found that few PRSPs came anywhere near to mainstreaming gender. While some “female problems” were addressed, such as girls’ schooling and domestic violence, there was no systematic analysis of the causes of gender inequality.

Rosa Alonso, Lindsay Judge & Jeni Klugman, “PRSPs & budgets: a synthesis of five case studies”, January 2005
This study, based on five case studies including Cambodia and Vietnam, is the most detailed and technical assessment of the challenges involved in linking PRSPs to the budget. It analyses problems such as weak budget classification, which prevents agencies from matching their spending to PRS priorities, poor reporting on budget execution, and the difficulties of monitoring the impact of expenditure on poverty reduction. It notes that, where government lacks the capacity to execute budgets as planned, there is little chance of holding them to account for development results. Overall, however, it found that there has been a significant absolute increase in pro-poor spending as a result of the PRSP initiative, especially in education, rural development and transport. It concludes that the findings are “highly encouraging, as the PRSP process in a short period of time has succeeded in difficult areas where traditional public sector reform initiatives had failed. In particular, we find evidence that it has increased the transparency, openness and pro-poor character of budgeting processes.”

Further information

World Bank PovertyNet
This site contains the PRSP Sourcebook, which is regularly updated and remains the only comprehensive guide to preparing a PRSP. It also links to toolkits and advice on a range of topics, from measuring poverty to designing participatory processes to sectoral policy issues.

IMF on PRSPs
The IMF site contains the full text of all national PRSPs (although not entirely up to date) and WB/IMF assessments of them.

Governance and Social Development Resource Centre
This is a DFID-funded resource centre, developed for both staff and external use. It contains topics guides and links to the most important literature on a wide range of governance and social development topics, and is an extremely useful source for practitioners. It has an extensive section on Aid Effectiveness, including Poverty Reduction Strategy Papers.

Centre for Aid and Public Expenditure (CAPE)
The Centre for Aid and Public Expenditure at the UK’s Overseas Development Institute (ODI) is a research centre dedicated to improving the quality of international development assistance and enhancing the effectiveness of developing countries’ public resource management. It specialises in the development policy making and resource allocation, and has an extensive range of quality Working Papers on these topics.

PRSP Monitoring and Synthesis Project
ODI was commissioned by DFID for a PRSP monitoring and synthesis project, to enhance DFID’s ability to engage with policy debates remain informed on developments. The initiative ran from 2001 to 2004, and was then discontinued, but the website is still in existing, containing useful and practical briefing notes on issues such as PRSP costings, monitoring, Poverty and Social Impact Analysis and Annual Progress Reports.

PRSP Watch
German website providing information on the preparation and implementation of PRSPs. Includes country case studies (somewhat dated) and lengthy bibliographies on Cambodia and Vietnam.

Participation

The concept of ‘ownership’ under the Paris Declaration means more than just the preferences of the government of the day. Ownership should be as broadly based as possible, with citizens participating in the formulation, implementation and monitoring of national development strategies through democratic processes and civil society.

Participation, however, is a difficult quality to measure. Most PRSP countries have gone to some trouble to organise consultation across social groups and parts of the country. In many cases, however, this was an ad hoc process that fell away as soon as the PRSP had been adopted. To what extent has the PRSP initiative increased the openness of government as a whole?

There is no consensus in the literature on this point. Early reviews of the PRSP initiative tended to conclude that participation in PRSP formulation had been artificial and unsustainable. Some influential international NGOs continue to take that view. However, many Southern NGOs have acknowledged that the PRSP initiative has opened up new opportunities for them to participate in the setting of development policy. Academic commentators have criticised donors for their ‘apolitical’ and even ‘naïve’ understanding of participation.

David Booth, “Missing links in the politics of development: learning from the PRSP experiment”, ODI Working Paper 256, October 2005
ODI’s David Booth is one of the leading academic commentators on the politics of development. He points out the dilemma for donors: effective participation is a function of healthy, democratic political processes, which by their nature cannot be ‘engineered’ by external actors. He concludes that the theory that more participatory policy processes will be more effective has proved to be “naïve”. His studies of the political economy of LICs suggest that real decisions on resource allocation are taken behind the scenes by small groups of politicians, and that formal policy processes are largely “window dressing”. However, there is greater potential in MICs, where there is informed public opinion, a degree of effective parliamentary scrutiny and an active media.

Booth, David, Arturo Grigsby & Carlos Toranza, “Politics and Poverty Reduction Strategies: Lessons from Latin American HIPCs”, ODI Working Paper 262, December 2005
Elsewhere, based on a review of Latin American PRSPs, Booth reached three conclusions about participatory processes: (i) it is much easier to have effective consultations around discrete issues, than to generate the kind of broad agreements needed for a comprehensive PRSP; (ii) participatory processes generate short-term demands on government to fix problems, but don’t produce solutions to complex problems involving conflicting interests and trade-offs; (iii) the key factor for successful participation is whether government is willing to be influenced by the process. His overall conclusion is very pessimistic: “PRS processes as currently conceived do not help to create the political interest in formulating and carrying out pro-poor public policies.”

Driscoll, Ruth with Alison Evans, “Second-generation Poverty Reduction Strategies: new opportunities and emerging issues”, Development Policy Review, Issue 23(1), 2005
Driscoll notes that that the PRSP initiative has brought about an “unprecedented level of civil society engagement” in the policy process, but that it could go much deeper. Formal democratic and accountability institutions – parliaments, audit offices, public-sector watchdogs, the media – are often bypassed. Participation has mostly been limited to urban NGOs, rather than grass-roots organisations, and demand-side accountability to poor people has not increased. She criticises the World Bank and other donors for their “unwarranted faith in a technocratic, depoliticised mode of governance”.

Agulhas, “Does the country-led approach deliver results? A synthesis of emerging evidence”, Paper commissioned by DFID, April 2006
This document reviews the literature on participation, and finds a number of common concerns, including: a bias towards urban NGOs; lack of participation by the private sector and trade unions; artificial deadlines preventing participants from absorbing materials and preparing responses; language constraints (including use of technical language); poor organisation of participatory sessions; and a tendency to steer away from macroeconomics and other controversial policy areas. It argues that participation should not be ‘projectised’ as an ad hoc series of consultations during PRSP formulation, but should be institutionalised in the regular policy-making and budget processes.

ActionAid, “Rethinking participation: questions for civil society about the limits of participation in PRSPs”, April 2004
ActionAid charges that participation has been limited to narrowly defined ‘poverty reduction’ issues, namely spending priorities in health and education. Civil society has been excluded from discussion of controversial subjects such as industrial policy, trade, fiscal policy, price supports, regulation of foreign investment and interest rates, which are ultimately more important for poverty reduction. It argues that the IFIs continue to narrow the space for domestic policy by imposing restrictive macroeconomic policies.

Practical guidance for strengthening participation can be found in these documents.

Masud Mozammel and Sina Odugbemi, “With the support of multitudes: using strategic communication to fight poverty through PRSPs”, World Bank, 2005
This World Bank publication makes a strong case for the importance of strategic communications to support the development process. Strategic communications are planned, deliberate and long-term, not ad hoc and reactive. They involve opening up the development policy process, ensuring free flow of information to opinion makers in society, using the mass media for foster debate, and using communications to boost awareness of national development strategies. The book contains useful examples of good communications practices from around the world, including from the Kyrgyz Republic, Cambodia and Pakistan. A follow-up book is to be released in 2008.

Scott Hubli and Alicia Mandaville, “Parliaments and the PRSP process”, World Bank Institute Working Paper, 2004
This is one of many reports concluding that parliamentary involvement in the PRPS process has been weak, and that this limits prospects for effective implementation. The document goes through the PRSP preparation, implementation and monitoring cycle, suggesting numerous points at which parliament could be better engaged.

Conditionality

The principle of ownership means that donors should no longer try to dictate development policy through conditionality. Under the Paris Declaration, they commit to drawing their conditions, where possible, from a partner’s own national development strategy, and imposing additional conditions only where clearly justified. In addition, donors should as far as possible use the partner country’s own performance assessment framework to assess progress against the national development plan.

Donor practice on conditionality is not covered by the Paris Declaration monitoring process, and there are at present no overall assessments of donor performance. However, individual donor practices are addressed in the DAC Peer Reviews. In preparation for Accra, a report is being prepared drawing together lessons from the 14 DAC Peer Reviews completed since adoption of the Paris Declaration.

Conditionality is also one of the themes for the OECD’s Global Forum on Development, a body which encourages dialogue between DAC and non-OECD governments and civil society. The following is a report of a seminar in September 2007 attended by 30 developing country experts, containing a useful summary of current thinking on conditionality.

Felix Zimmerman, Draft report on the Informal Expert’s Workshop “Ownership in Practice”, September 2007
The seminar revealed concerns that “ownership” might become a euphemism for the adoption by partner countries of externally conceived policies. The workshop drew a distinction between policy-based, process-based and performance-based conditionality. Policy-based conditionality was heavily criticised as a discredited approach from the 1980s and 90s. While there is some support for conditionality based on human rights and democratisation, there was strong consensus that developing countries should be free to choose their own economic policies. Process-based conditions (e.g., on participation) are considered more legitimate, but there is considerable doubt about their effectiveness. Some argue that they lead to a box-ticking approach to participation. There is more consensus on performance-based conditionality, where the level of disbursement is linked to achievement against an agreed set of indicators drawn from the country’s national development strategy, although allowance must be made for the effect of external shocks. The DAC website contains background papers produced for this event, including reports from Vietnam, Indonesia and Bangladesh.

A number of donors have introduced new conditionality policies to reflect the Paris Declaration, including the World Bank.

World Bank, “Review of World Bank conditionality”, September 2005
This report documents the World Bank’s changing approach to conditionality in recent years, from an emphasis on policies for structural adjustment and growth, to a set of benchmarks designed to assess its borrowers’ commitment to their own development programmes. On principle, the Bank no longer uses conditionality to prescribe policies. The flip side is that the Bank should be more selective in its operations, engaging only where it sees clear evidence of prior commitment from the partner. In that way, the Bank sees its conditionality policy as contributing to, rather than detracting from, country ownership. It sets out five good practice principles for conditionality: ownership; harmonisation; criticality; transparency; and predictability.

Other commentators contest this interpretation of the World Bank’s practice. Some of the civil society articles cited above suggest that the Bank and the IMF still impose structural adjustment measures through their lending activities. Others suggest that the Bank has other ways of dictating country policy.

ActionAid, “What progress? A shadow review of World Bank conditionality”, 2006
This report reviews the World Bank against its 2005 conditionality review and good practice principles. It claims that the Bank has no implementation plan in place to ensure compliance with its policies, and that staff incentives still encourage the use of intrusive conditionality. It has a superficial approach towards country ownership, and still uses loan conditions to push controversial economic reforms. Harmonisation in practice means that other donors link their conditions to the Bank’s PRSC, rather than all donors linking to the national development plan.

Wilks, Alex & Fabien Lefrancois, “Blinding with science or encouraging debate? How World Bank analysis determines PRSP policies”, 2002
This article argues that the World Bank no longer has to rely on policy conditionality, because it is winning the policy debates upstream through its “near monopoly on development analysis”. It argues that the Bank and the IMF “often give the impression that there is consensus on the development agenda, and that only details remain to be worked out.” “The Bank constantly talks about capacity-building and listening, but seems reluctant to cede control of policy formulation processes or to recognise contributions or perspectives that diverge markedly from core Washington thinking… Indeed, the Bank often appears to imply that there is a vacuum out there that it needs to fill: that few others are doing serious policy analysis.” Despite its commitment on principle to move away from one-size-fits-all development policies, in practice the Bank still acts as if there is a single, right answer to development challenges, making it averse to experimentation and debate.

Graham Bird and Thomas Willett, “IMF conditionality, implementation and the new political economy of ownership”, Comparative Economic Studies, Vol. 46(3), 2004
Along similar lines, Bird and Willett argue that the IMF has a perverse understanding of country ownership. IMF asserts that it uses conditionality to reinforce, rather than substitute for, national ownership, by acting as a “commitment device”, helping to strengthen the hand of reformers and sustain support during implementation. However, if national ownership is solid, then conditionality is not needed, and if it is not solid, then conditionality is unlikely to succeed. In effect, the IMF is using conditionality to try to generate country ownership of the IMG’s own policy agenda.

The European Union is acknowledged as leading on performance-based conditionality.

The European Union’s Cotonou Agreement
Under the Cotonou Agreement, the European Union is committed to providing finance in accordance with development outcomes. Its budget support agreements typically make provision for variable tranches: that is, disbursements where the amount is determined by outcome indicators negotiated with government and typically taken from the national development strategy. The greater the progress, the larger the disbursement. According to the EU, the use of outcome indicators (rather than prior policy actions) as conditions gives the country greater choice in the mix of policies and measures it takes towards achieving the MDGs, and therefore advances country ownership. However, it has caused some concern among partner governments who fear they may lose support as a result of factors beyond their control.

For an Asian example of best practice in benchmarking rather than policy conditionality, see:

Agulhas, “Vietnam’s Poverty Reduction Support Credit”, September 2006
The benchmarks for Vietnam’s multi-donor general budget support are derived from annual negotiations between government and donors as to the policy actions required to achieve the government’s stated development goals. In place of conditionality, the instrument provides a soft financial incentive, in that disbursements are linked to performance against the previous year’s commitments. The process is welcomed by line ministries, who see it as a chance to signal their priorities.

Further information

European Network on Debt and Development (Eurodad)
Eurodad is a network of 54 European development NGOs. It provides a platform for information sharing, research and advocacy on debt, development finance and poverty reduction. Its site contains a selection of articles on conditionality. Its November 2007 report, “Untying the knots: how the World Bank is failing to deliver real change on conditionality”, argues that, while there has been an overall reduction in the volume of World Bank conditions, it is still imposing policy conditions in sensitive areas like privatisation and trade liberalisation. It also offers a matrix analysing the conditionality in IMF PRGF programmes, as of 2003.

Work underway for Accra

• The DAC GOVNET is preparing various contributions and case studies on governance assessments and political economy analysis.

Issues for the Asia-Pacific region

The Asia-Pacific region is heavily under-represented in the literature on Poverty Reduction Strategies and national development planning. Only two Asian countries – Cambodia and Vietnam – have been studied in any detail, and those studies are already largely out of date. Given the great diversity of development challenges across the Asia-Pacific region – from microstates to world’s most populous countries, from low income to rapidly industrialising countries, from conflict-torn states to one-party systems – there is a real need for more textured analysis on national development planning.

• How has the PRSP initiative been adapted across the Asia-Pacific? Has it demonstrated its relevance as a tool for donor alignment? Are donors providing sufficient space for different planning traditions and capacities?
• What does participation mean in the Asia-Pacific context? Are there specifically Asian models of grass-roots democracy and stakeholder engagement that can help inform global debates on country ownership?
• How do Asian countries organise policy dialogue in a post-conditionality world?

The region would also benefit from more detailed case studies of country experience with national development strategies, along the lines of these first-class examples:

• Alta Folscher, “The design, process and achievements of Zambia’s Poverty Reduction Strategy Paper”, report for DFID Zambia, June 2004
• Jeni Klugman and Rob Talierco, “Cambodia: PRSP and budget linkages”, October 2003
• Gould, Jeremy & Julia Ojanen, “’Merging in the circle’: the politics of Tanzania’s Poverty Reduction Strategy”, Institute of Development Studies, University of Helsinki Policy Paper 2/2003

Alignment

The principle of alignment emerged as a corrective to two aspects of past aid practice that came under sustained criticism during the 1990s: the tendency of donors to try to dictate policies to developing countries; and the use of project modalities to bypass weak country systems.

The failure of structural adjustment programmes in the 1990s proved that, where policy initiatives were developed by foreigners and signed off on by governments solely to access finance, they were rarely implemented effectively or sustained over time. Under the Paris Declaration, donors commit to basing their support on the partner’s own development strategies.

Traditionally, when confronted with weak capacity in a beneficiary administration, donors have created Project Implementation Units under their own direct control, to create an acceptable fiduciary environment for their assistance. However, capacity built up in PIUs is rarely transferred back into government. The short-term efficiency gains of bypassing government systems comes at the cost of a missed opportunity to build up the institutions and capacity required to replicate the project results over the longer term. Under the Paris Declaration, donors are now committed to phasing out PIUs and using government systems as far as possible to deliver their assistance

At Accra, this Roundtable is likely to focus on a number of issues:

i) Programme-based approaches: The experience in using programmatic assistance, including budget support, SWAps and similar arrangements, to increase alignment with country policies and systems;
ii) Use of country systems: The experience of donors in using of country systems for aid delivery;
iii) Capacity building: Progress on capacity building on country systems, and the effectiveness of technical assistance;
iv) Predictability: The predictability of ODA, and reflecting ODA on the budget;
v) Untying of aid.

Programmatic assistance

Most donors now routinely relate their country assistance plans to their partners’ national development strategies. In most cases, however, this does not involved much change to the content of donor programmes. National development strategies tend to be broad enough to encompass most donor preferences.

The more challenging side of alignment is the move towards programmatic forms of assistance. Traditionally, aid has been fragmented across too many small projects, which are difficult for partners to coordinate and end up becoming donor driven. To try to make development assistance more strategic, the Paris Declaration sets a target of 66% of aid flows to be provided in the context of programme-based approaches (PBAs).

The official definition of PBA is contained in the following DAC publication. However, the definition is notoriously difficult to apply, and there are doubts as to the accuracy of the DAC baseline figure set in 2006.

OECD DAC, “Harmonising donor practices for effective aid delivery: Vol. 2 – Budget support, sector-wide approaches and capacity development in public financial management”, 2006
This is one of a series of good practice papers produced by the DAC to guide donors. It defines PBAs as having the following features: (a) leadership by the partner country; (b) a single comprehensive programme and budget framework; (c) a formalised process for donor co-ordination and harmonisation of donor procedures for reporting, budgeting, financial management and procurement; (d) efforts to increase the use of local systems for programme design and implementation, financial management, monitoring and evaluation. As well as increasing country ownership, PBAs are designed to increase the coherence between sectoral policy, spending and results, strengthen national capacity and reduce transaction costs, by anchoring assistance in an agreed, overall programme of action. It stresses that a PBA are not a particular aid modality, but an approach that can encompass projects, technical assistance or budget support.

OECD DAC, “2006 Survey on monitoring the Paris Declaration: Overview of the results”, 2007
The survey revealed that PBA was one of the most problematic indicators to apply. The DAC itself understands the term as “fairly restrictive”, covering budget support, SWAps and “other arrangements in which there are equivalent efforts towards joint planning and harmonisation of procedures”. However, for the 2006 survey, many donors insisted on a looser definition. The survey revealed a baseline of 43%, but the real figure is likely to be substantially lower. On the whole, however, it found a strong trend towards the adoption of both budget support and SWAp-type arrangements, especially in the social sectors.

Marcus Cox, Samuel Wangwe, Hisaaki Mitsui and Tran Thi Hanh, “Independent Monitoring Report on implementation of the Hanoi Core Statement”, Hanoi, November 2007
This recent independent monitoring of aid effectiveness in Vietnam argues that moving towards PBAs is a key strategic priority, not just for increasing donor harmonisation, but also for overcoming Vietnam’s legacy of scattered project aid and ensuring that donor assistance is as strategic as possible. PBAs provide a framework through which government and donors can agree on key priorities, and programme both national and ODA resources coherently to achieve them. However, effective PBAs need to evolve over time. Ministries need to develop the capacity to articulate clear priorities and preferred approaches, and to lead on aid management and capacity development. Effective alignment of donor assistance involves in parallel with greater sectoral capacity.
The report also contains a discussion of the dilemmas that the PBA target can cause. Vietnam has set its own target of 75% PBAs. However, the government has also expressed a preference for more than half of its ODA to be provided for large infrastructure projects, which are traditionally delivered in project form. Donors and government are unclear as to whether they should broaden the definition of PBAs to cover well-aligned project aid, or to adjust the target downwards.

Agulhas, “How have programme-based approaches helped countries establish effective leadership over development assistance?”, Paper for the 2006 Asian Regional Forum on Aid Effectiveness, September 2006
This paper is based on three case-studies of PBAs in Asia: Vietnam’s general budget support instrument (PRSC); an education SWAp in India and a sectoral budget support programme in social service delivery in Pakistan. It concludes that PBAs are potentially a very effective platform for increasing country leadership and policy alignment, by encouraging the partner country to lead on developing policies and frameworks to coordinate external assistance. It concludes that PBAs can be effective even in sectors where country leadership capacity is beginning from a low base, but may require a lengthy period of intense engagement to demonstrate results. Systems alignment within PBAs remains a difficult challenge, with many donors still imposing additional rules and procedures. The report notes that PBAs vary considerably in the extent to which they embody the Paris Declaration commitments, and that donors must use PBAs as a platform to continue to pursue greater aid effectiveness.

General budget support is still a relatively new tool in donor practices, and its ultimate impact is still uncertain. Some donors, such as DFID, are committed to providing two-thirds of their assistance as budget support; others are more sceptical. The multi-donor evaluation (below) was the first systematic attempt to assess the effects of general budget support.

OECD DAC, “Harmonising donor practices for effective aid delivery: Vol. 2 – Budget support, sector-wide approaches and capacity development in public financial management”, 2006
The DAC Guidelines contain a chapter on general and sectoral budget support. As well as facilitating macroeconomic stabilisation and providing resources for the implementation of national development strategies, it notes that budget support can reduce transaction costs, facilitate donor coordination and enhance the predictability of ODA flows. It can help partner countries improve the allocation of their development resources, while reinforcing accountability by underscoring the importance of the budget as a tool of government policy. However, there are also potential disadvantages for partners, including increased volatility in aid flows and (on occasion) excessive conditionality. It advises donors to refrain from any earmarking of budget support, and to draw their conditionality as far as possible from the partner’s own development strategies.

IDA and Associates, “Evaluation of General Budget Support: Synthesis Report”, May 2006
This evaluation was commissioned by a consortium of donors and partner countries, and involved 7 studies including Vietnam. It notes that budget support was intended to bring about a step-change in the nature of dialogue and conditionality, centred on the implementation of a national development strategy. However, this change has happened only gradually, and has been more significant in the eyes of donors than partner countries. It has contributed to the alignment of assistance with partner budget cycles, as well as (by definition) the use of country systems for aid delivery. It has also contributed to donor harmonisation, although budget support arrangements themselves are not always fully harmonised. The high-level dialogue and review mechanisms around budget support have proved to be a useful complement to sectoral processes. One of its most important effects has been to increase the level of discretionary funding available to partners, which in turn increases the importance of the planning and budgeting process. It has also provided an important boost to improving public financial management. It found that there had been an overall increase in spending in the social sectors as a result of budget support, but that it was too early to identify long-term development impacts.

For more information, refer to:

Programme-Based Approaches Learning Network (LENPA)
This is a site run by the Canadian International Development Agency as a way of exchanging information on Program-based Approaches. See also CIDA’s primer on PBAs: CIDA, “Primer on Program-Based Approaches”, August 2003

OECD-DAC, “Gender equality in sector-wide approaches: a reference guide”, June 2002
This guide provides advice on conducting gender analysis, designing consultation processes that are gender inclusive, creating organisational structures for mainstreaming gender, integrating gender into policies and budget, and undertaking gender-sensitive monitoring and evaluation.

Use of country systems

Under the Paris Declaration, donors commit to providing as much of their aid as possible through country systems for public-financial management (PFM), procurement, monitoring and environmental and social safeguards. For their part, partner countries agree to intensify reforms and capacity building to bring those systems up to international standards.

OECD DAC, “2006 Survey on monitoring the Paris Declaration: Overview of the results”, 2007
The baseline survey found that, on average, 40% of aid flows use country systems for PFM and 39% for procurement. Targets have been set on a sliding scale, based on the assessed quality of country systems under DAC methodology. Importantly, however, the survey results showed now clear relationship between the quality of country systems and the extent to which they were being used by donors, suggesting that donors rules and procedures remain the primary determining factor.

Marcus Cox, Samuel Wangwe, Hisaaki Mitsui and Tran Thi Hanh, “Independent Monitoring Report on implementation of the Hanoi Core Statement”, Hanoi, November 2007
The independent monitoring study in Vietnam found that what progress there has been on use of country system was almost entirely limited to budget support and other PBAs. There has been little change in the delivery of traditional investment projects. It found there were three distinct groups of donors in their approach to use of country systems: (i) the development banks take a limited reading of the Paris commitment, recognising an obligation to use country system only as and when they reach international standards; until then they are bound by strict rules preventing them compromising on fiduciary standards; (ii) a group of bilateral donors with more permissive rules, enabling them to balance the greater development impact and sustainability of using country systems against the fiduciary risks; and (iii) a significant number of donors (around half of the total) still bound by very restrictive rules, enabling them to use country systems only in very limited conditions. However, the report also found that donors were receiving relatively little encouragement from their government counterparts to use country systems, and that traditional aid practices created vested interests that were difficult to overcome.

The OECD has been developing a series of tools to help donors and partner countries reach a common assessment of the state of country systems and the reform priorities. Good practices suggest that these assessments should be done jointly by donors and partner countries, and shared among donors. The following document and sites provide guidelines for how these assessments are to be done.

Public financial management

Public Expenditure and Financial Accountability (PEFA)
PEFA is the product of a joint initiative of a number of donors to strengthen assessment of PFM, procurement and financial accountability systems. Its Performance Measurement Framework is designed to provide a harmonised, country-led tool for measuring improvements in PFM systems over time. Guidance on applying it can be found on the website.

World Bank, “Public Expenditure Management Handbook”, 1998
The World Bank produced this handbook in 1998, providing guidelines on how to strengthen budget processes, how to link and budgeting through an MTEF, and how to development effective public financial management information systems. It provides checklists of good practices in areas such as public audit and aid management.

World Bank PFM Reform Database
This database contains a wide selection of current reference material on PFM reform, covering budget preparation, budget execution, accounting and financial reporting, external oversight and cross-cutting issues. Examples are drawn from both OECD and developing countries. It also contains the newsletter FM Notes, which documents recent experience with PFM reform programmes.

ODI Briefing Paper, “Linking policies and budgets: implementing medium term expenditure frameworks in a PRSP context”, June 2005
This paper summarises the results of an ODI research project on the experiences of developing countries in linking PRSPs to the budget through MTEFs. It found that introducing MTEFs had been a good catalyst for PFM reforms, even from a low base. A key successor factor was the setting of a clear budget timetable, integrating the various phases of the budget cycle with other planning processes. However, it also points to the need to manage expectations about how much time it takes to provide effective linkages between the PRSP process and resource allocation. The individual case studies can be found on the ODI Aid and Public Expenditure website.

Procurement

OECD DAC Joint Venture for Procurement
In December 2004, Joint Venture members approved the Johannesburg Declaration, which recognised the importance of strengthening procurement to increase the effectiveness of development spending. The signatories undertook to develop new capacity building techniques and approaches, based on country ownership, to develop a common set of diagnostic tools and to focus on achieving measurable improvements in procurement systems. Since then, the Joint Venture has developed a set of good practice guidelines: Strengthening Procurement Capacities in Developing Countries, 2005. It represents a departure from previous approaches through its emphasis on the process of change, as much as the substantive content of procurement reforms. The Joint has also developed a New Common Benchmarking and Assessment Methodology for Public Procurement Systems, which has been applied in 22 pilot countries. The Joint Venture will be producing guidelines on using this methodology for Accra, as well as a good practices guide on procurement reform.

World Bank on Public Procurement
The World Bank has its own diagnostic tool for country procurement systems: the Country Procurement Assessment Report (CPAR) and guideline for its use. CPAR’s already carried out on borrower countries can be found here.

World Trade Organization on Public Procurement
This contains extensive information on public procurement, including the Agreement on Government Procurement signed by many WTO member states and on-going work on transparency.

Capacity building

Under the Paris Declaration, partner countries agree to integrate capacity building into their national development strategies, and to lead on capacity development. Donors agree to align their technical assistance behind country-led capacity development strategies.
At present, there is considerable doubt among the donor community about the quality of technical assistance (TA) for capacity building. No other aid modality is as fragmented, poorly aligned and supply-driven, focusing on technical standards and imported models rather than workable reform processes. According to the World Bank, there were 20,000 separate TA activities in 2004 – equivalent to one per day per developing country. Officials from partner countries often admit to doubts about the value of foreign technical advisers. And yet experience with partner coordinated, procured and managed TA has not been very positive.

The question of how to improve country leadership of capacity development will be an important one at Accra. Japan has commissioned a major study of technical cooperation, from which results will become available over the coming months here.

ActionAid, “Real Aid: Making Technical Assistance Work”, 2005
In a stringing criticism of donor practices, ActionAid finds that TA, making up at least a quarter of all ODA, is overpriced and ineffective, and in the worst cases destroys rather than builds the capacity of the poorest countries. Most TA is designed and managed by donors, implemented by firms from the donor’s own country, poorly coordinated and based on false assumptions about expatriate knowledge and recipient ignorance. It is under-evaluated, and stubbornly resistant to change. ActionAid suggests four principles for improving TA: putting recipient countries in the lead; giving them more space to choose their own development path; greater mutual accountable; and more specificity of assistance to country conditions. It advises Southern governments to draw up clear capacity-building plans, and to reject all offers of TA falling outside this framework.

OECD DAC, “2006 Survey on monitoring the Paris Declaration: Overview of the results”, 2007
For the baseline survey, respondents were asked to identify TA meeting all four of the following criteria: (i) the TA supports the national development strategy; (ii) partner countries exercise effective leadership, including clearly communicated objectives from senior officials; (iii) donors integrate their support within county-led programmes; (iv) there are arrangements for coordinating donor contributions, especially pooled funding. What resulted was marked difference in perception between donor and partner country respondents. Partner countries often took the view that no TA at all met all four criteria. Donors tended to score their own programmes more generously. The official baseline was set at 48%, but the DAC notes that this is not a robust figure.

Agulhas, “What is required to deliver external assistance through country systems?”, Thematic Study No. 2, Asian Regional Forum on Aid Effectiveness, Manila, October 2006
This report is based on case studies of procurement reforms in the Philippines and PFM reforms in Bangladesh. The case studies illustrate the importance of long-term, incremental reforms, in which process elements rather than technical sophistication are the main determinants of success. They point to a number of key success factors, including reform processes that are owned and driven by country stakeholders, painstaking consensus building and political management to build and sustain country ownership, a long-term vision for reform supported by considerable short-term tactical flexibility, leadership by the partner country over the form of TA, and TA providers with political and diplomatic, as well as technical, skills.

OECD DAC, “Harmonising donor practices for effective aid delivery: Vol. 2 – Budget support, sector-wide approaches and capacity development in public financial management”, 2006
These DAC guidelines on capacity development in PFM reflect contemporary thinking on good practice in TA. It stresses four key principles: (i) country leadership and ownership; (ii) the design and sequencing of reforms should fit country circumstances, rather than standard or imported solutions; (iii) capacity development must cover the institutional, organisational and individual levels, including both managerial and technical aspects; (iv) donor support should be provided in a coherent, coordinated and programmatic manner.

There is a great deal of technical information and support available on capacity building, drawing lessons from both developing and OECD countries.

Country Analytic Work
This is a directory of country-level analytical work contributed by some 50 different donor organisations. Its extensive document library can be searched by country, agency or theme.

SIGMA
Sigma is a joint initiative of the European Union (EU) and the Organisation for Economic Co-operation and Development (OECD), principally financed by the EU, which supports potential EU members on strengthening country systems. Sigma papers include technical studies on issues such as procurement, developing central policy capacity, PFM, Supreme Audit Institutions, PAR and many other areas.

Capacity.org
Capacity.org is a web magazine-cum-portal intended for practitioners and policy makers who work in or on capacity development in international cooperation in the South. It contains short articles on experiences in capacity development in many different countries.

United Nations Online Network in Public Administration and Finance (UNPAN)
UNPAN promotes the sharing of knowledge, experiences and best practices throughout the world in sound public policies, effective public administration and efficient civil services, through capacity-building and cooperation among the United Nations Member States, with emphasis on south-south cooperation. The site contains analytical reports and best practice guidance on civil service reform.

Predictability of aid

In the Paris Declaration, donors undertook to provide reliable, indicative pledges of aid over a multi-year span, and to disburse aid in a timely and predictable fashion according to agreed schedules. Predictable aid enables partner countries to manage their public finances and plan their development expenditure. Donors also commit to ensuring that at least 85% of their assistance is reported on the budget.

This is an area where donors have been performing rather poorly. In its Global Monitoring Report 2005, the World Bank found that aid tends to be more volatile than domestic revenues, and that aid volatility has increased over the last decade. The 2006 OECD Survey set an apparently high baseline of 88% of aid reported on budget, and 70% of aid disbursed according to annual schedules. However, there are reasons to be cautious of these figures, as over- and under-reporting and disbursement cancel each other out, resulting in an artificially high baseline. For the majority of countries and most donors, performance is considerably below this level.

Mokoro Ltd, “Putting aid on budget: draft literature review”, November 2007
This literature review of good practice guidance and donor policies notes that the term ‘putting aid on budget’ is ambiguous, and can mean inclusion of aid in budget plans, parliamentary appropriations, treasury systems, accounting processes or financial reporting. Developing standard definitions and indicators has been problematic. The contemporary approach to management budgets stresses that they should be comprehensive – that is, include all revenue and expenditure in a single, central fund. This increases allocative efficiency, while improving external transparency and accountability. Placing aid on the budget results both in improved aid management and a stronger budget processes, ensuring that donor and recipients share common priorities. The report notes that this is a mutual commitment, and that reasons for poor aid capture can include poor supply of information by donors, weak demand for information by partner countries, and lack of realism in information provided by donors (usually in the form of over-estimates of the speed of project implementation). The treatment of non-cash aid in the budget emerges as particularly problematic, with some partner countries lacking budget categories for recording technical assistance and other in-kind support.

OECD-DAC, “Donor practices on forward planning of aid expenditures”, 11 December 2007
This paper presents the results of a survey of DAC donors carried in 2007. Most DAC donors have annual aid budgets, supported by 3-4 years indicative budget planning. There are one-page descriptions of the budget procedures for each of the DAC bilateral donors.

Untying aid

The Paris Declaration reaffirms the 2001 DAC Recommendation on Untying Official Development Assistance to Least Developed Countries. The Recommendation covered most categories of aid, but exempted TA and food aid. It sets out monitoring and review procedures that enable DAC to keep statistics on the tying status of aid (here). Overall, 82% of aid is currently untied.

OECD Policy Brief, “Untying aid to the least developed countries”, July 2001
It is estimated that the tying of aid diminishes its real value by between 15 and 30%. It creates additional administrative burdens for partner countries, while causing a bias towards capital-intensive imports and donor-based technical expertise which may compromise country leadership. In short, tied aid is a costly way of subsidising jobs in donor countries – a form of protectionism that runs counter to the overall OECD commitment to open markets.

ActionAid, “Real Aid: Making Technical Assistance Work”, 2005
ActionAid estimates that some $2.5 billion, or 3% of total ODA, is lost through tying practices. It states that the US, Italy, Canada, Greece, Spain and Austria are the worst culprits on tying of aid, while Ireland, the UK and Norway have fully untied their aid. It notes that, even where aid is not officially tied, procurement practices (how and where tenders are published; the bundling of contracts into large lots) often mean that donor country firms win the majority of the contracts.

Preparations for Accra

• The DAC Joint Venture on Public Financial Management is planning to produce a report on progress on use of country PFM systems, with recommendations for key actions by donors and partner countries.
• The DAC Joint Venture for Procurement will be producing guidelines on using the new benchmarking methodology, as well as a good practices guide on procurement reform.
• The DAC is preparing a feasibility study on options for promoting regional and local procurement, as part of its Recommendations on untying aid.
• The Strategic Partnership for Africa and the Collaborative African Budget Reform Initiative are preparing a study on ‘Putting Aid on the Budget’. Based on 10 country case studies, it will produce a synthesis report and good practice note.
• The Strategic Partnership for Africa is also producing a study on capacity for aid management, including 9 country studies, synthesis report and good practice note.
• The Multilateral Financial Institutions-Working Group on Environment is planning to organising three complementary workshops at Accra: (a) Opportunities in and Challenges to the Use of Country Systems for Environmental and Social Safeguard Policies; (b) Strengthening the Capacity of Public and Private Sector Institutions to Address Environmental and Social Dimensions of Development Plans, Programs and Projects; and (c) Experience with the Use of Strategic Environmental Assessments.
• JICA is coordinating a multi-country study on technical cooperation for capacity development, to generate empirical evidence on how to make TC more effective. It will include 11 country case studies, including Cambodia, Lao PDR, Malaysia, Thailand, Pakistan and Vietnam. Outputs will include a synthesis report and a booklet containing good practices and recommendations.

Issues for the Asia-Pacific region

The Asia-Pacific region, with its strong states, established planning traditions and relatively effective government systems, should be the global leader in country-led capacity development and use of country systems for aid delivery. However, it is not clear from literature whether this is in fact the case.

The debates at Accra would benefit from further research on:

• Which Asia-Pacific countries have expressed clear preferences to donors on aid modalities? Do regional preferences on external assistance (e.g., the high priority given to large infrastructure development) influence choice of aid modality?
• Are there distinctively Asian approaches to capacity building? What makes for a successful reform path? What kinds of capacity-building assistance work best in Asia?
• How predictable is aid to Asia-Pacific? Have donors changed their practices since the Asian financial crisis to ensure that aid flows are counter-cyclical?

The debate at Accra would benefit from more case studies of reform processes, focusing not just on the technical aspects, but on the process of change in all its political complexity. Only a good understanding of the political economy of institutional change in the region will enable donors to lift the quality of their capacity-building assistance. Examples of good case studies can be found here:

• PFM reform in Bangladesh;
• the education sector in India;
• procurement reform in the Philippines.

Harmonisation

Harmonisation refers to cooperation between donors to improve the effectiveness and efficiency of their aid delivery. It includes programme-based approaches, joint projects (pooled funding) and other common arrangements, such as joint country plans or shared offices.

Since the 2003 Rome Declaration, donors have been concerned that the proliferation of donors and the fragmentation of aid across too many activities is straining partner country capacity. Under the Paris Declaration, they commit to developing common arrangements for planning, funding, monitoring, evaluating and reporting on aid flows, and to reducing the number of duplicative field missions and diagnostic reviews.

Harmonisation has come to consume a large share of donor time. Joint activities often come with additional transaction costs for donors, even if they are time-saving for partner governments. Joint programmes with too many donors quickly encounter diminishing returns. There are concerns that donors are now spending too much time talking to each other – in effect, doing the same old things in more complicated ways.

The solution would appear to be in a better division of labour among donors. Donors should be achieving greater complementarity by becoming more selective in their choice of sectors, and by using of silent partnerships and other lead donor arrangements. Under the Paris Declaration, donors commit to greater delegation of authority to lead donors, while partner countries agree to provide clear views on donors’ comparative advantage.

However, so far there has been very little progress on complementarity at a practical level. In African countries, such as Tanzania, formalising the division of labour through Joint Assistance Strategies (JASs) has come to represent the state of the art in harmonisation. JASs are now preparation in some 15 African countries, but have not yet been tried in the Asia-Pacific region, although there have been some more modest attempts at joint country planning in Bangladesh and Cambodia.

Agulhas, “Are donor harmonisation initiatives a good investment in improved aid effectiveness?”, thematic study for the Asian Regional Forum on Aid Effectiveness, Manila, 2006
This report is based on case studies of joint country planning initiatives in Bangladesh and Cambodia. Groups of four donors came together to conduct joint analytical work and risk analysis, and produce a common set of high-level objectives to guide their country strategies. Though each donor then developed its individual country strategy, these joint planning initiatives helped to improve strategic coordination and generate complementarities in programming. In Bangladesh, the partners developed a common outcomes matrix, nominating a lead donor for each outcome and sub-area for strategic planning and policy dialogue.

COWI, “Joint Assistance Strategies in Tanzania, Zambia and Uganda: Final Report”, commissioned by Danida and the European Commission, 2005
This report summarises the content and process of Joint Assistance Strategies (JAS) in three African countries. The JASs provide a joint donor response to the financing requirements of the PRSP, setting out a common set of priorities, a common assessment framework for financing decisions, and a common set of indicators for measuring impact. In Tanzania, there is strong country leadership of the JAS, and government finds it’s a valuable tool for managing its donor relations. It sets out the government’s preference on aid modality, including a target of 70% general budget support. It contains a chapter on complementarity, with a complicated process of capacity assessments, stakeholder consultations and adjustment of donor programming. However, this does not appear to have been implemented. In Zambia, by contrast, the JAS process was largely donor driven, but donors have made some progress in agreeing their own division of labour. In Uganda, division of labour has made little progress in the face of limited government interest. The study finds that the JASs are very sensitive to the design of the negotiation process, given the many different interests and predispositions among (and within) donor agencies, and that 2-3 years was required to achieve agreement.

European Commission, “EU Code of Conduct on division of labour in development policy”, 2007
In February 2007, the EU member states agreed on a voluntary code of conduct on division of labour. In a series of flexible guiding principles, it encourages EU donors to select two focal sectors per country based on their comparative advantage (plus budget support and support to civil society). For other sectors, they should either exit or work through a silent partnership. In each strategic sector, there should be at least one EU donor active, but no more than three. Note that it is not at all clear how these principles will be made operational. With the expansion of the EU to 27 members, many new, small donors are coming on line, each with their own visibility requirements. The maximum of 3 donors per sector cannot apply equally to the European Commission and a small donor from Eastern Europe.

OECD-DAC, “Towards better division of labour: concentration and fragmentation of aid”, Global Forum on Development, December 2007
This report presents the results of a DAC survey on aid fragmentation. It contains useful data, including the number of countries in which each DAC donor is active (e.g, 140 for the European Commission) and the number of donors per country (there are 37 countries with 24 or more donors). It points out the problem of the long ‘tail’ of small donors. There are 24 countries where more than 15 donors jointly contribute less than 10% of total ODA. The health sector in particular is characterised by a large number of small donors. In 2005, Cambodia had 27 donors, of which 16 provided less than 10% of ODA. 22 of them were active in the health sector, with 17 providing less than 10% of health ODA.

Preparations for Accra

• The OECD-DAC Joint Venture on Managing for Development Results is preparing a set of good-practice guidelines and a self-assessment tool for donors on improving incentives for harmonisation and alignment.
• The DAC is planning to produce draft principles on complementarity and rationalised aid delivery, to become part of the Accra Action Agenda.
• The World Bank’s Legal Vice Presidency is launching a Legal Harmonization Initiative aimed at harmonising operational policies, practices and documentation between IFIs and bilateral donors. It will address issues such as guidelines for joint financing MoUs, legal structures for SWAps, information disclosure policies, use of country systems, and standardising terms and conditions for legal agreements. A progress report will be presented at Accra.

Issues for the Asia-Pacific

Donor fragmentation is as much a problem in Asia (although less so in the Pacific), as in Africa. India has addressed the issue through ‘minimum stake’ rules for donors. Most Asian countries, however, do not appear from the literature to have taken up the complementarity agenda.

So what are the Asian interests around harmonisation? The debate at Accra would benefit from clear signals on a number of points:

• How do donors decide on the division of labour in the Asia-Pacific? What mechanisms have evolved, and how successful are have they been?
• Is there an optimal number of donors per sector? Are Asian countries expressing preferences to donors on how to coordinate their efforts?
• Do the countries of the region place greater weight by the efficiency or the effectiveness of aid? To what degree are transaction costs seen as a problem? Which donor practices would Asian countries most like to change?

Managing for results and development impact

The Paris Declaration commits both donors and partner countries to managing their resources so as to maximise development results. This means having systems in place to monitor the impact of development initiatives, and using the information to improve decision making and programme performance. Specifically, donors and partner countries agree to establishing common reporting and assessment frameworks for more effective results monitoring, and donors agree to invest in capacity development and rely on country monitoring systems.

Most countries have gone to considerable lengths to produce performance assessment frameworks with elaborate lists of indicators, in support of their national development strategies. Many have also tried to rationalise the multiple monitoring mechanisms for development assistance into a single, national monitoring system.

However, experience suggests that this managing for results is one of the hardest principles of implement. The quality of administrative and financial data tends to be very poor. Fragmented government administrations are reluctant to share information. Many PRSPs are intrinsically difficult to monitor because of their “missing middle” – the lack of an explicit theory on how the programmes are supposed to affect poverty outcomes. Most difficult of all, information on development outcomes is rarely used by policy makers to improve their policies.

There is now a considerable volume of guidance and information available to assist countries with managing for results. This Working Table is likely to focus on practical lesson learning and overcoming obstacles.

World Bank, “Results-based National Development Strategies: Assessment and Challenges Ahead”, October 2007
Three criteria: (i) quality of development information; (ii) stakeholder access to development information; and (iii) co-ordinated country-level monitoring and evaluation. The quality of survey-based data on poverty and human development has been increasing in most countries, but administrative data remains a weakness. Data sharing and dissemination have somewhat improved, but feedback loops into policy and planning remain a major challenge. On the whole, only 3 countries from the sample of 62 had “largely developed” performance assessment frameworks, although more than half had taken some action towards establishing them.

David Booth and Henry Lucas, “Good practice in the development of PRSP indicators and monitoring systems”, ODI Working Paper 172, July 2002
This study finds that the PRSP initiative has led to an upsurge the measurement of final poverty outcomes, through household surveys and participatory poverty assessments. However, there is less interest in measuring intermediate process and achievements, which in the short term is more important for both learning and accountability. This contributes to the famous problem of the “missing middle”: PRSPs tend not to identify the causal process by which their proposed actions will impact on poverty outcomes. This makes it difficult to select indicators which will verify whether or not these causal effects are actually taking place. It stresses that what matters is not technically advanced monitoring systems, but mechanisms to ensure that the available information is used to inform policy making. It calls for a new “political economy of information” to understand why this is not happening.

Lucas, Henry, David Evans & Kath Pasteur (IDS), “Research on the current state of PRS monitoring systems”, DFID, July 2004
This detailed study commission by DFID explores institutional frameworks for poverty monitoring, capacity constraints, decentralisation, participation, data sources, analysis, dissemination and policy feedback. It notes a tendency for monitoring reports to be produced to meet donor requirements, rather than support national policy-making, and for the tendency of donors to undermine the creation of a national system by insisting on stand-alone monitoring arrangements.

Tara Bedi, Aline Coudouel, Marcus Cox, Markus Goldstein and Nigel Thornton, Beyond the Numbers: Understanding the Institutions for Monitoring Poverty Reduction Strategies (World Bank: Washington, 2006)
This World Bank book is a study of the institutional arrangements for poverty monitoring systems, based on 12 country case studies. It finds that the record on establishing monitoring systems is very modest. Few countries have made much progress in rationalising ad hoc monitoring arrangements into a coherent system. Lack of coordination, lack of demand for information from decision makers, unclear mandates and responsibilities, lack of relevant and timely data and limited accessibility are all identified as key constraints to a culture of results-based decision making. It finds that, beyond weaknesses in data collection, few countries are making effective use of the data they have. There is a lack of data analysis, poor dissemination of data, and no institutionalised processes for feeding results information back into the policy and budget processes. Given the scale of the challenges, the book concludes that development an effective national monitoring system needs to be a gradual process, beginning with what is already there and introducing a flexible system that can be adapted over time. The book also contains diagnostic and guidance tools designed to help practitioners develop monitoring systems.

It is widely accepted that civil society organisations have a comparative advantage in certain types of monitoring, particularly participatory poverty assessments and budget monitoring. Their involvement not only generates useful information for policy makers, it also helps with the public dissemination of results information and helps to boost accountability. There are many resources around to help civil society in this process, including:

The International Budget Project
The IBP was formed within the Center on Budget and Policy Priorities in 1997 to build civil society capacity to analyze and influence government budget processes, institutions and outcomes. The IBP works with organisations that focus on the impact of the budget on poor and low-income people in developing countries or new democracies, with a view to making budget systems more responsive to the needs of society and more transparent and accountable to the public. It supports individual CSOs engaged in capacity building on budget monitoring, encourages civil society networks, and seeks to raise the profile of budget work in the international community. It commissioned a briefing paper from ODI on how civil society can have policy influence through budget monitoring (posted here).

Budget Information Service (BIS)
BIS was created by the Institute for Democracy in South Africa (IDASA) in 1995 to monitor inclusion and democracy in post-apartheid government policies. It has established a strong reputation in budget analysis, and provides support to civil society organisations throughout Africa. Its site contains many useful resource and toolkits, particularly on fiscal decentralisation and gender auditing.

Additional information and guidance for partner countries on monitoring and evaluation can be found on the following sites.

DAC Network on Development Evaluation
This sites includes the official DAC criteria for evaluating development assistance, guidance on joint evaluations, and various publications from the Evaluation and Aid Effectiveness Series. It links to the DAC Evaluation Resource Centre: a one-stop-shop for use by partners, development agencies, civil society, researchers, students and the interested public to quickly and easily find, access and learn from a wide array of key evaluation publications. It contains over 1500 evaluation reports, and is updated regularly.

DAC Joint Venture on Managing for Results
The Joint Venture was formed to promote international lesson-learning and communities of practice on managing for results. It conducts periodic Roundtables for exchanging international experience, most recently in Hanoi in February 2007. It has also published a Sourcebook on Emerging Good Practice in Managing for Results.

World Bank PovertyNet
Poverty monitoring involves tracking progress over time in achieving results in reducing poverty, including setting indicators and targets, building statistical system and setting in place poverty monitoring systems. The World Bank PovertyNet site offers a variety of resources, including country reports, data sources, training materials, key readings and links.

Partnership in Statistics for Development in the 21st Century (Paris 21)
Paris21 is a partnership of policymakers, analysts and statisticians from around the world, established following the UN Conference on Development in 1999. It promotes the production of high-quality statistics and statistical systems, and encourages the development of a culture of evidence-based policy making. The site contains documentation on measuring progress against MDGs, managing and developing statistical systems, and designing and implementing national statistics development plans. It has produced a “Guide to designing a National Strategy for the Development of Statistics (NSDS)”, November 2004 – a manual designed to assist developing countries and their international advisers to design statistical systems and promote better use of statistical data.

Managing for Results at the Asian Development Bank
The ADB sites contains an MfDR Resource Center, with ADB policy documents, best-practice guidance and other relevant documents on managing for results. It contains a wealth of case study material from Asia.

Preparations for Accra

• The OECD-DAC Joint Venture on Managing for Development Results is planning to produce a revised methodology for applying PD Indicator 11 (performance assessment frameworks), a MfDR country capacity assessment tool and a new edition of the Sourcebook on Emerging Good Practice on MfDR.

Issues for Asia-Pacific countries

A number of Asian countries, including Vietnam and Japan, have been very active at promoting regional networks to support managing for results. Technical expertise on poverty monitoring and choice of indicators appears to be relatively strong. It is the institutional side that presents the greatest challenge.

There are a number of key questions that would benefit from greater evidence:

• How have Asian countries organised monitoring systems across decentralised administrations? Have they succeeded in creating incentives to improve the quality of administrative data at the local level?
• Which Asian countries have opened up their budget processes to external monitoring? Are there successful examples of strengthening accountability and grass-roots democracy through greater participation in the budget?
• Under what circumstances does the political leadership make use of evidence on results when setting development policy?

Mutual accountability

A key innovation of the Paris Declaration is that the commitments are reciprocal in nature, applying both to donors and partner countries. This creates for the first time the possibility for mutual accountability.

However, mutual accountability is a difficult principle to institutionalise. A few countries (Tanzania; Vietnam) have introduced independent monitoring of aid effectiveness. Under the 2006 Baseline Survey, 41% of countries reported having some kind of mutual review mechanism, although the quality of these reviews varies significantly. Some commentators are sceptical that devices such as these can overcome the imbalance of power between donor and recipient.

The Paris Declaration itself provides little assistance. It refers both to accountability between donors and recipients on aid effectiveness, and to strengthening the domestic accountability of partner governments for their use of development resources in general. The relationship between these different forms of accountability is unclear.

It is fair to say that at present there is little consensus on mutual accountability. In preparation for Accra, the Joint Venture on Managing for Development Results is conducting two studies on mutual accountability: at country level (conceptual and good practice paper, recommendations); and at international level (study on existing mechanisms, synthesis report). It is hoped that these studies will produce a clearer vision of how to move forward.

International mechanisms

Paolo de Renzio, “Promoting mutual accountability in aid relationships: synthesis note”, ODI, January 2006
This paper describes a number of mechanisms for mutual accountability at the international level, including the EU’s Cotonou Agreement, the DAC Peer Review process, the WB and IMF Global Monitoring Reports and the Africa Partnership Forum. It finds they are generally quite weak, with loose targets, unclear monitoring mechanisms, limited recipient voice and lack of enforceability. It calls for more dissemination of information on aid flows and performance, more independent monitoring of donor behaviour, stronger fora for high-level dialogue and measures to promote a common voice among Southern countries. At the country level, the paper argues that mutual accountability requires four conditions: confidence, credibility, coherence and capacity.

ActionAid, “Making aid accountable and effective: an ActionAid Ten Point Plan for real aid reform”, 2007
ActionAid argues that closed-door discussions between donors and partner governments can never be enough to secure mutual accountability. It argues for donors to adopt binding, monitorable agreements setting out the quantum and terms of external assistance. Donors should be held to account in international fora for their performance against their commitments. This should be done in a more representative institution than the OECD. It argues for the creation of a UN Commissioner on Aid, who would review donor conduct and act as an ombudsman to resolve disputes.

Country-level mechanisms

Agulhas, “What new structures are emerging at country level to support a more effective and accountable development partnership?”, Thematic Study No. 5, 2006 Asian Regional Forum on Aid Effectiveness, Manila, October 2006
Based on studies of the development partnership in Vietnam and Cambodia, this paper describes a number of processes that are contributing to greater mutual accountability: (i) the negotiation of detailed aid-effectiveness commitments at country level; (ii) more intensive dialogue around aid practices; and (iii) the establishment of baselines and review processes to increase the transparency of aid practices. However, it also identified a number of factors working against mutual accountability, including lack of delegation of authority by donors to their country offices, poor information flows between donors and government and in some cases a lack of commitment on both sides.

Marcus Cox, Samuel Wangwe, Hisaaki Mitsui and Tran Thi Hanh, “Independent Monitoring Report on implementation of the Hanoi Core Statement”, Hanoi, November 2007
The Independent Monitoring of the Hanoi Core Statement (HCS) concluded that, while the basic elements for mutual accountability were in place in Vietnam, including clear, country-level, aid-effectiveness principles and commitments, well developed dialogue structures and an independent review mechanism, mutual accountability was still not very effective. The Report found that the HCS implementation process had become bogged down in detailed reforms, and the mutual accountability would be strengthened by separating political oversight from technical management. It also suggested an annual action plan on aid effectiveness, focusing on a few strategic priorities, to increase the focus.

See also the work of the Independent Monitoring Group in Tanzania, whose reports can be found here.

Debt Relief International, “Aid effectiveness: better indicators needed: non-OECD aid often highly effective”, Strategies for Financing for Development, Newsletter of HIPC CPB, Issue 32, 2007
The organisation Debt Relief International has developed a methodology to assist HIPC countries to assess the quality of their aid providers, based on their policies and procedures. The methodology uses the Paris Declaration indicators, plus additional indicators on concessionality, conditionality, predictability, flexibility in response to exogenous shocks, coverage of key PRSP sectors and so on. The idea is that donor league tables of this kind will increas