Aid effectiveness

September 2014

Key takeaways

• Good enough is good enough, if the citizenry is satisfied; out-performance can be left to privateconcerns who depend on it to compete, or who can deliver in partnership

• M&E is needed but only donors want to spend significantly on it because data is dear to themand performance criteria ties up further spending; M&E should be carried out by third-partieswho have unrestricted access and are truly independent with significant automation being mostobjective

• Most projects are already monetarily efficient, as they are embedded in low resource settings thatdonors do not relate with, quality and performance are problems.

• Donors have a lot of experience that they do not easily share, perhaps for self-preservation as theyare relatively expensive resources

• There is too much redundancy of effort, technology can help

• At scale, performance and quality suffer, so incentives and execution context have to be reassessed.Small-scale wonders are a dime a dozen

• No donor can match well-governed Government-backed pockets of excellence

• There is no development project that can be replicated blindly, the context changes and is temporal.Identifying performers suffers from selection bias

• People make projects happen and they age and move on. The rolling new team may not be asdedicated, committed and efficient. Reversion to the mean ensues.

• External agency involvement helps. The agencies need to come across as more sensitive to thefact that they are better resourced, not better field performers.

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Consensus on high-quality aid

• Maximising efficiency

– allocation to poor and well-governed and country programmable

– low administrative cost

– focused/specialised and supporting select global public good facilities

– untied aid

• Fostering institutions

– aid to receipients top development priorities and percentage of recipient budgets and partneroperational strategies

– no project implementation unit and coordination of technical cooperation and forward spend-ing/aid predictability

• Reducing burden

• Transparency and learning

Monterrey Consensus

The Monterrey Consensus has become the major reference point for international development cooper-ation. The document embraces six areas of Financing for Development:

1. Mobilizing domestic financial resources for development. [If this were possible on a large scale,then external financing would become redundant. This is also what Governments do, in the large.Governance is important.]

2. Mobilizing international resources for development: foreign direct investment (FDI) and otherprivate flows. [Performance has to be demonstrated in the long term of development bonds andother named ideas.]

3. International Trade as an engine for development. [This is how the Asian Tigers leapfrogged butthis model is not the only credible development model, particularly in countries with substantialinternal markets and an expanding middle-class.]

4. Increasing international financial and technical cooperation for development. [The detail is everimportant.]

5. External Debt. [Credible, where available.]

6. Addressing systemic issues: enhancing the coherence and consistency of the international mone-tary, financial and trading systems in support of development.

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Paris Declaration on Aid Effectiveness, February 2005

[To a large extent, in South and South East Asia, this is already the case.]

1. Ownership: Developing countries must lead their own development policies and strategies, andmanage their own development work on the ground. This is essential if aid is to contribute to trulysustainable development. Donors must support developing countries in building up their capacityto exercise this kind of leadership by strengthening local expertise, institutions and managementsystems. The target set by the Paris Declaration is for three-quarters of developing countries tohave their own national development strategies by 2010.

2. Alignment: Donors must line up their aid firmly behind the priorities outlined in developing coun-tries national development strategies. Wherever possible, they must use local institutions and pro-cedures for managing aid in order to build sustainable structures. In Paris, donors committed tomake more use of developing countries procedures for public financial management, accounting,auditing, procurement and monitoring. Where these systems are not strong enough to manageaid effectively, donors promised to help strengthen them. They also promised to improve thepredictability of aid, to halve the amount of aid that is not disbursed in the year for which it isscheduled, and to continue to untie their aid from any obligation that it be spent on donor-countrygoods and services.

3. Harmonisation: Donors must coordinate their development work better amongst themselves toavoid duplication and high transaction costs for poor countries. In the Paris Declaration, theycommitted to coordinate better at the country level to ease the strain on recipient governments,for example by reducing the large numbers of duplicate field missions. They agreed on a target ofproviding two-thirds of all their aid via so-called “programme-based approaches” by 2010. Thismeans aid is pooled in support of a particular strategy led by a recipient countrya national healthplan for examplerather than fragmented into multiple individual projects.

4. Managing for results: All parties in the aid relationship must place more focus on the result of aid,the tangible difference it makes in poor people’s lives. They must develop better tools and systemsto measure this impact. The target set by the Paris Declaration is for a one-third reduction by 2010in the proportion of developing countries without solid performance assessment frameworks tomeasure the impact of aid.

5. Mutual accountability: Donors and developing countries must account more transparently to eachother for their use of aid funds, and to their citizens and parliaments for the impact of their aid.The Paris Declaration says all countries must have procedures in place by 2010 to report backopenly on their development results.

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