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Donor harmonisation

Southern discomfort

by Yash Tandon

In depth

Who measures performance? And what are the criteria? Participants in the Accra Milo Marathon of summer 2006

Who measures performance? And what are the criteria? Participants in the Accra Milo Marathon of summer 2006

While the governments of rich nations want to streamline their global-development efforts in the OECD context, those of many developing countries are less enthusiastic. Some experts even view the Paris Declaration on Aid Effectiveness as a document of new colonialist aspirations, and doubt the OECD High Level Forum in Accra in September will achieve much good. [ By Yash Tandon ]

At first glance, the Paris Declaration (PD) looks benign. It recognises faults of the present system, and sets out sensible principles. Why, then, are the developing countries not all that excited? Many have signed on to the PD, but apparently without fully analysing the implications of its proposals. Meantime, awareness is growing among both civil-society and government actors in the developing world that not all that glitters about the PD is gold, and that underlying the PD could be another agenda not readily transparent at first reading.

The issue of aid effectiveness was put on the global agenda primarily for three reasons.
– One was the need to simplify and rationalise the complex system of aid admini­s­tration and to reduce transaction costs.
– Second, citizens of donor countries are asking why their governments are giving “so much money” to, for example, Africa in spite of rampant corruption, human-rights violations and very little progress in terms of fighting poverty.
– Third, the present aid architecture is dominated by the rich countries of the OECD and thus suffers from a serious democratic and legitimacy deficit.

The OECD took the lead to reform the aid architecture. In March 2005, an intergovernmental High Level Forum convened by the Development Cooperation Directorate (DAC) of the OECD adopted the PD, which aims at taking “far-reaching and monitorable actions to reform the ways we deliver and manage aid”. In late 2007, the OECD website listed 115 countries as endorsing the PD.

The PD recognises that, at present, accountability requirements are often “harder on developing countries than donors” and that “aid is more effective when partner countries exercise strong and effective leadership over their development policies and strategies”. According to the DAC website, there are three reasons why the PD would make a significant difference.
– It goes beyond previous joint statements on general intentions, laying down a “practical, action-orientated roadmap to improve the quality of aid and its impact on development.” 56 commitments are organised around the five key principles of ownership, alignment, harmonisation, managing for results and mutual accountability.
– The PD sets out 12 indicators to monitor progress. Targets for the year 2010 have been set for 11 of the indicators.
– The PD promotes a “model of partnership” meant to improve transparency and accountability at different levels. At the international level, the PD provides a mechanism by which donors and recipients of aid are held “mutually accountable”, and publicly monitored. At the country level, it encourages donors and partners to jointly assess mutual progress in implementing agreed commitments.

Reasons for doubt

Nonetheless, the PD is not a benign document. Roberto Bissio (2007) of “Social Watch” wrote the most critical assessment so far; and he did so on assignment from the UN Human Rights Council’s High-Level Task Force on the Implementation of the Right to Development. He acknowledged some minor gains in terms of efficiency and lower transaction costs thanks to the PD, but argues that these are overridden by the asymmetrical conditions under which negotiations take place between donors and “recipients”. In his view, the PD “creates a new level of supranational economic governance above the World Bank and the regional development banks”.

It is important to understand both the overall context and the text of the PD to fully appreciate its implications. Lack of adequate UN involvement is only one serious problem (see box below). Others include dubious criteria for measuring performance, governance and related issues.

The PD’s performance conditionalities are defined by the donors in conjunction with the World Bank. In the case of Tanzania, for example, there is a 12 pages matrix, plus 49 pages on accounting on good progress. It is important to understand that this was prepared without participation by the “recipient” country, the supposed “owner” of policymaking. In other words, there is no real mutual accountability.

If “recipient” countries do not perform, they are subject to penalties. If “donor” countries do not perform, there is no penalty. In normal business transactions, both sides of a deal run risks. The subprime mortgage crisis in the USA and Europe is an example in case: banks and borrowers are paying the price. But in the aid architecture proposed by the DAC, only the “recipient” ever bears risks.

In a similar vein, “compliance tests” are administered by the Word Bank without regard for the economic and social policies of the “owner” countries. Such tests – on public procurement, for example – are imposed from outside. That is also true of the “rating system”, which is supposed to measure the “effectiveness” of aid in relation to public-finance management and procurement systems. This system is based on methodology provided by the DAC and the World Bank. It is to be used wherever donors are not satisfied with “recipient” countries’ own systems of reporting.

Let us be clear: this is not about bureaucratic detail, but power. Should donors be uncomfortable with a “recipient” country’s public procurement system, for instance, they would want to enforce an open-tender system for international procurement. That, however, is something the developing countries have already rejected in the context of the WTO.

It will come as no surprise that, on issues of governance, it is once again the donors’ procedures that determine the methods of harmonisation, with neither input from developing countries, nor even an understanding of their reality. Although the PD talks about “ownership”, its thrust goes in the opposite direction. For example, donors want to decide whether a particular procurement item is to be tendered internationally, nationally or locally; and whether it is open to the private sector or to the state sector or both. Should donors disagree among themselves, with one favouring the private sector and another preferring the state procurement, for instance, the matter will be “sorted out” by the donors, and their decision imposed on the supposed “owner” country in the name of aid efficiency.

Conditional budget support

Another disturbing issue is the PD’s shift from project lending to programme based lending. There are three inter-related issues here:
– the pooling of donor resources,
– the injection of such funds into the national budget of a “recipient” country (“direct budget support”) along lines defined by the donors in a Joint Assistance Strategy (JAS) for each individual country, and
– the scaling-up activities and funding, according to the donors’ collective assessment of good or bad policies.
Of course, assessments will depend on whether the “recipient” countries engage in policies acceptable to the donors, for example, regarding health matters, the Millennium Development Goals, et cetera. Should the developing countries not meet externally defined targets, budget support would be reduced or discontinued, a form of collective sanctions.

The World Bank undertakes AERs (Aid Effectiveness Reviews). Recent data shows that according to the Bank only a few Poverty Reduction Strategies passed by developing countries “provide the level of operational detail that specifies how objectives are to be achieved through policy actions”. Growth performance is apparently much lower than the donors had expected. Donor countries are likely to demand “better performance” from “recipient” countries or discontinue aid unless “performance” improves.

These are only some of troubling implications of the “aid effectiveness” project. The conclusion is unavoidable: under the pretext of making aid more effective the Paris Declaration project is a form of collective colonialism by Northern “donors” of those countries in the South that (because of their weakness and vulnerability and psychology of “dependency”) may allow themselves to be subjected to it at the Accra September Conference.