New paradigms in a new millennium

A document of crucial relevance was the Paris Declaration on Aid Effectiveness. It was passed by the High Level Forum on Aid Effectiveness in the French capital in 2005. Governments of donor and recipient nations agreed on five principles.
– Ownership: Developing countries are responsible for their own future. They must draft policies accordingly, and donors should respect and support them.
– Aid Alignment: Donors should use developing countries’ own systems, relying on those countries’ institutions and procedures. Donors should not set up implementing systems of their own in developing countries.
– Harmonisation: Donors must coordinate policies and efforts, so developing countries do not become overburdened with a multitude of bilateral missions.
– Managing for Results: Attention should not focus on how much money is spent for development purposes, but rather on what is achieved.
– Mutual Accountability: Since aid needs to be transparent, donors and recipients must be held responsible.

The Paris Declaration was a child of its time, reflecting several trends in international affairs. Enduring poverty – in Africa especially, but not only there – showed that earlier developmental efforts had not been effective. It was obvious, moreover, that the strict structural adjustment programmes the World Bank and the International Monetary Fund had imposed on developing countries in the hope of integrating them into the world market had failed. Free-market reform programmes of this sort had all too often led to over-indebtedness and fragile statehood. Even where they succeeded in triggering growth, social disparities and poverty were exacerbated. By the end of the 1990s, it was generally accepted that there is no blueprint for development, and that each country must find its own path to prosperity.

The G8 summit in Cologne in 1999 agreed on debt relief for highly indebted poor countries. To qualify for such relief, the governments of the countries concerned had to draft poverty reduction strategies. This approach later became enshrined in the Paris Declaration’s ownership principle.

Millennium Development Goals

In 2000, the members of the United Nations passed the Millennium Declaration. They pledged joint action to tackle some of the great global challenges. They defined eight Millennium Development Goals (MDGs) and committed to achieving them by 2015.

The MDGs are about reducing hunger, maternal and child mortality, illiteracy and other causes of poverty.

Economic growth, in itself, is not an MDG. The guiding idea was to focus policymakers’ minds on tangible issues such as cutting absolute poverty in half from its 1990 level by 2015. The MDGs promote sector-wide thinking and discourage piecemeal projects. In 2002, the UN organised the Financing for Development summit in Monterrey, Mexico. Donors made funding commitments. Nonetheless, the UN’s MDG report of 2011 made it clear that the MDGs will not be achieved by 2015 unless efforts are stepped up fast.

The High Level Forums

Against the backdrop of the MDGs and the Monterrey summit, the Organisation for Economic Cooperation and Development (OECD) established the Working Party on Aid Effectiveness which, in turn, organised multilateral High Level Forums (HLFs) to elaborate goals, action plans and operation modalities. The first HLF was held in Rome in 2003, the fourth was held in Busan, South Korea late last year. In Rome, the HLF agreed that donors must harmonise their action and align to the institutions, policies and procedures of developing countries.

It is often argued that budget support is the perfect way to implement the Paris Declaration because it is in line with all five of its principles. Budget support means that donor agencies directly fund developing countries’ national budgets. Typically, budget support is based on policy dialogue, focuses on a specific sector and goes along with technical assistance. It is, by definition, aligned to national policies. And when several donors jointly fund a developing country’s budget, they obviously act in harmony.

Nonetheless, experts do not consider budget support a panacea. A serious downside is that, all too often, national parliaments budgetary powers are undermined when governments rely on donor rather than tax money for implementing policies. Moreover, corruption and abuse of funds are likely – unless countries have strong audit offices or other means for controlling their government.

The Accra Agenda for Action resulted from the HLF in the Ghanaian capital in 2008. Among other things, it dealt with fragile statehood and post-conflict countries – places where it is difficult to live up to the prin­ciples of ownership and alignment. The Accra Agenda states that donors should contribute to state building in such cases. Civil society organisations, moreover, were pleased that the Accra Agenda explicitly recognised their role in development.

The HLF in South Korea last year resulted in the Busan Partnership for Effective Development Co­operation. An important feature is that it addresses emerging market nations as donors and appreciates south-south cooperation. Emerging market governments did not commit to the principles of the Paris Declaration, but accepted them as points of reference. Moreover, the Busan Partnership takes into account the role of non-state actors from civil society, the private sector and philanthropy. It also considers the role of municipal and sub-national authorities favourably. Compared with previous HLF agreements, the Busan Partnership is less focussed on central governments.

The HLF in Busan was the last one that was organised by the OECD Working Party. The Working Party is to be replaced by a Global Partnership for Effective Development Cooperation later this year. How the Global Partnership will be organised and how it will operate has not been defined yet. One of its tasks will be to monitor the implementation of earlier agreements. The debate on aid effectiveness is certain to go on.

Vera Dicke