Multilateral politics

At a crossroads

The final declaration of the High Level Forum on Aid Effectiveness (HLF-4) in Busan marked a historic turning point in late 2011. For the first time, all participants – including the leading emerging powers – agreed to a common framework for action. Next, decisions need to be taken on how to fill the global agreement with life.

By Thomas Fues

The international system for development affairs is in a turbulent transition. The old system was dominated by established donors, who are members of the Development Assistance Committee (DAC) of the OECD (Organisation for Economic Cooperation and Development), but it is crumbling. At present, there is no clear roadmap for defining new, globally accepted rules. The reason is that emerging powers – especially China, India and Brazil – are increasingly active in other ­developing countries, but they are not ­prepared to accept DAC standards. Their reluctance is partly due to the half-hearted­ness of DAC members’ efforts to implement the DAC-inspired reform agenda for improving aid effectiveness.

Mixed results

The old system of western-dominated development policymaking is eroding. One reason are the mixed achievements of the DAC. At its instigation, a multilateral High-Level Forum endorsed the Paris Declaration on Aid Effectiveness in 2005. The document’s basic principles are:
– policy ownership of developing countries,
– donors’ alignment to developing countries’ procedures and institutions,
– management for results,
– mutual accountability and
– donor harmonisation.
The idea was to make aid more effective.

Vast independent evaluations were done on behalf of the OECD, however, and they show that established donors made only little progress in key areas such as fragmentation, transaction costs, alignment and mutual accountability. Overall, recip­ient countries have done more than donors to make the Paris principles become reality.

The OECD is often considered a “club of industrial countries”, and it did not manage to involve emerging southern powers in the aid effectiveness agenda. An initially substantial dialogue with China did not overcome the country’s rejection of the OECD. Brazil and India also keep a distance from the OECD, which they perceive to be western-dominated. The governments of all these countries made a point of not signing the Paris Declaration in their capacity as donors. They only signed as recipients of official development assistance (ODA). In their opinion, the Paris principles do not apply to south-south cooperation.

Nonetheless, some progress was made in Busan. The final declaration of the HLF states that a Global Partnership for Effective Development Cooperation will be established in the first half of 2012. The governments of leading emerging markets signed up as donors for the first time.

The configuration of the Global Partnership is very important. The talks are set to conclude at the end of June, after this issue of D+C/E+Z goes to press. The big question is whether international development policymaking will move towards an efficient multilateral regime or whether an increasingly fragmented system will continue to exist even though it is fraught with rivalry and duplication.

It is encouraging that the DAC has managed to involve many developing countries in its aid-effectiveness agenda. Those that signed up include not only traditional partner countries (recipients), but also middle-income countries that are recipients and donors at once. For example, Colombia, Egypt and Thailand keep a distance from the BRICS group (Brazil, Russia, India, China, South Africa) and seek proximity to the DAC. Emerging market countries like Mexico, South Korea and Chile, who have joined the OECD, also do not have issues with the DAC.

Against this backdrop, the outcome of the Busan HLF was satisfactory. Host country South Korea applied diplomatic pressure and managed to persuade reluctant emerging powers to endorse the final document. But there was a price: these powers did not commit to applying the Paris principles in their capacity as donors. They only consider these rules voluntary guidelines.

We are now heading for a new era of development affairs. Within the Global Partnership, the DAC will be only one of many players. It will no longer be in a ­position to impose ideas on others. The Global Partnership, of course, must not turn out to be toothless.

Opportunities and risks after Busan

The mandate of the DAC Working Party on Aid Effectiveness expires at the end of June 2012. The Post Busan Interim Group, the body preparing the switch to the Global Partnership, favours a new institutional structure. It anticipates
– a secretariat jointly operated by the DAC and the UNDP (UN Development Programme),
– the appointment of three co-chairs, one from each of the three country groups “recipients”, “donors” and “recipients/donors”,
– minister-level summits every 18 to 24 months and
– a representative 12 to 14-member steering committee for monitoring all on­going activities.

This design would be a reasonable mini­mal solution. It would offer an unambitious platform for dialogue and sharing experience. Whereas the Paris Declaration relied on major bureaucratic efforts at the international level, such requirements would be minor in the future. Implementation and monitoring are meant to take place primarily at the level of individual countries. The negotiation buzzwords are “global light” and “country heavy”. In nine working groups (“building blocks”), interested actors can link up to form innovative alliances to tackle issues such as private enterprise, climate finance, transparency as well as outcomes and accountability.

Nonetheless, this design has a downside. It would establish yet another institution, another platform for “club governance” outside existing structures. It would thus further fragment the landscape of international development. This would be especially true if the major emerging powers did not come aboard or signed up only for the sake of appearances.

Another open question is who will fund the new bodies and formats. If only a few industrial countries foot the bills, the post-Busan process will be perceived as a continuation of the DAC agenda and enjoy little legitimacy.

Instead of operating as a free-floating club, the Global Partnership should be constituted in the context of the UN Development Cooperation Forum (DCF). A fairly low-key institution so far, the DCF was mandated by the 2005 UN reform summit and is convened every two years. It will meet in July 2012, just in time to pick up the ball.

Future outlook

It matters how most developing countries position themselves. If those, who so far received, but did not grant ODA, support a global framework that binds all parties, the big rising powers will be under pressure to cooperate. However, the developing countries’ interests are not obvious. It is possible that key players in their camp might even prefer to see no harmonisation of donors’ activities.

At present, for example, Chinese development professionals say they are open to triangular cooperation with western donors, but they say at the same time that their partners in Africa are not interested in such arrangements. Apparently, some governments see advantages in playing one donor against another, as was done in the Cold War.

Rising powers like China, India and Brazil need to draft policies for their increasing international involvement. They need to decide whether
– they want to act on their own, or whether
– they prefer to engage in a pragmatic exchange of experience and coordinate their efforts with industrial countries.

The BRICS group have announced they want to set up their own development bank, which looks like a strategic move away from western-dominated institutions. At the same time, the governments concerned seem ready to boost their financial contributions to the World Bank and International Monetary Fund, provided they get more say in these institutions to reflect their growing global economic significance.

The industrial nations, for their part, must decide how much importance they attach to eye-level cooperation with developing countries and emerging powers. The latter approach will involve the negotiation of new principles for international development policy and keeping old promises. At the same time, development policies need to leave their mark on every field of external relations (“policy coherence for development”) and comply with the demand for transparent mutual accountability.

Trust is crucial for success in international affairs. Mutual distrust presently inhibits both the emerging powers and the industrial countries. Dialogue, shared knowledge and pragmatic policy coordination in developmental affairs would obviously make sense. For example, emerging market governments could get support for establishing development agencies of their own.

Cooperation in multi-actor constellations on regional and global challenges also helps to build confidence. In this context, the advanced countries could take a pro­active stance and initiate experience-sharing programmes that focus on shortcomings and mistakes, including their own.

Without joint strategic action programmes and coordinated policy in development cooperation, it will be impossible to rise to global challenges. Global public goods such as environmental protection, crisis prevention and eradication of poverty can clearly be guaranteed only if ­policy becomes synchronised. The Global Partnership can make a major contribution to achieving that.

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