What can we learn from experiences in donor harmonization with investment in ARD?

1
What can we learn from experiences in donor
harmonization with investment in ARD?

• Gerd Fleischer
• GTZ, Eschborn (Germany)
• ADB / IFPRI Policy Forum
• Agricultural and Rural Development for Reducing
  Poverty andHunger in Asia In Pursuit of
  Inclusive and Sustainable Growth
• Manila, August 9 10, 2007

2
Overview

• ODA trends
• Transaction costs in aid delivery
• Responses from donors Paris Declaration on Aid
  Effectiveness
• Experiences with harmonized approaches in
  agriculture and rural development
• Outlook

3
ODA

• Delivery side
• Protracted decline during the 1990s
• Resumption of ODA from US 58 billion in 1997 to
  US 105 billion in 2005 (constant 2004 prices)
• Much of the growth has been due to debt relief,
  and to a lesser extent to emergency assistance
• Until most recently, pronounced shift from
  productive sectors to social sectors (health,
  education)
• Core development ODA exceeded only in 2005 again
  its 1992 levels, but expected to increase
  significantly
• Recipient side
• Increased donor funding is required to finance
  the agriculture-for-development agenda
• Aid dependency is already high in a large number
  of agriculture-based economies
• Average of 28 of total agricultural spending in
  24 Sub-Saharan African countries
• In countries such as Mozambique, Niger, Uganda
  and Rwanda, ODA contributes gt 80 of
  agricultural spending

4
Aid delivery has grown into a complex system

• Proliferation of aid channels
• Average number of donors per country grew from 12
  in the 1960s to 33 in the 2001-2005 period
• The number of international organizations, funds
  and programs is now higher than the number of
  dev. Countries they were created to assist
• Progressive earmarking of funding, both in bi-
  and multilateral aid
• Widespread use of uncoordinated technical
  assistance
• Not to forget the role of international NGOs In
  2004, they employed 140,000 staff and generated
  revenues of US 13 billion
• meets .
• increasingly fragemented aid
• Total number of interventions/activites increased
  from 20,000 in 1997 to almost 60,000 in 2004
• Average size of donor funded activities decreased
  from US 2.5 million in 1997 to US 1.5 million
  in 2004 (2004 constant prices)
• Fragmentation is the higher the lower is the
  institutional capacity of recipient countries

5
Transaction costs in aid delivery

• Equivalent to a tax, reducing the amount of
  aid resources available to the recipient
  countries
• Administrative costs on the donor side have been
  increasing
• Recipient countries
• Direct costs
• Diversion of scarce resources of decision-makers
• Example Average number of donor mission per
  country is 307 per year
• Indirect costs
• Aid is increasingly unpredictable, thus fostering
  weak fiduciary controls and lack of transparency
  in the resource allocation process
• Distortive impact on incentive systems in
  government administration
• Example Brain drain from line ministries to
  project implementation units
• But
• So far, costs have not yet been systematically
  quantified.

6
The Paris Declaration (2005) as a response to ODA
being increasingly under scrutiny

• Objective
• Increased aid effectiveness
• Key principles
• Ownership Partner countries exercise effective
  leadership over their development policies and
  strategies, and co-ordinate development actions.
  
• Alignment Donors base their overall support on
  partner countries national development
  strategies, institutions and procedures.
• Harmonization Donors actions are more
  harmonized, transparent and collectively
  effective.
• Managing for results Managing results and
  improving decision-making for results.
• Mutual Accountability Donors and partners are
  accountable for development results.
• Common monitoring framework

7
Experiences in ARD

• About 15 programs ongoing worldwide, some date
  back to 1996
• ODI review of seven programs Ghana, Tanzania,
  Mozambique, Uganda, Nicaragua, Cambodia, Vietnam
  (Evans 2007)
• Harmonization still ongoing
• Progress on alignment most advanced
• Number of parallel project implementation units
  has not decreased significantly
• Line ministries generally positive about the
  approach
• Ghana case Since 2006, second try on a
  sector-wide approach for agriculture, stimulated
  by a national joint assistance strategy and donor
  agreement on budget support targets

8
Lessons learned and challenges

• Initially, increased transaction costs for
  coordination.
• Too much focus on national government
  administration led to re-centralization.
• Often, donors have been undisciplined, induced by
  policy changes in their headquarters.
• ARD generally more difficult than health and
  education
• Role of public sector is more limited
• Rural development is multi-sectoral, cutting
  across ministries
• Donors hold different views on strategies for ARD
  
• Weak government control of the process
• Diverging expectations on the donor and the
  recipient side

9
Outlook

• Donor harmonization will get stronger attention
  as the international aid architecture has to
  deliver more results. ARD will not escape that
  pressure to remain on the agenda for ODA support.
• Capacity development of the recipient side to
  steer donor support is needed
• Donors will likely specialise in service delivery
  to remain visible to their home constituencies.