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Aid
effectiveness: Solution or a mirage
Yosh Tandon, Pambazuka News
June 10, 2008
http://www.pambazuka.org/en/category/features/48634
The Third High
Level Forum on Aid Effectiveness will be held this September in
Accra. But is aid effectiveness a mirage? Yash Tandon dissects the
Paris Declaration in relation to aid effectiveness and reaches the
conclusion that "under the pretext of making aid more effective,
the aid effectiveness project is a form of collective colonialism
by Northern donors of those Southern countries that, through weakness,
vulnerability or psychological dependency, allow themselves to be
subjected to it at the Accra conference in September." But
all is not lost and he also offers a way out.
A historical
and contextual note
The Paris
Declaration and the debate on aid effectiveness must first be placed
in its proper conceptual and historical context. The origins of
the debate lie in the concept of 'failed states- that
in the 1990s became a common explanation for 'crisis-
in large parts of the South. Theorists, largely in the US and Europe,
argued that failed states were at the root of global instability
and terrorism. They had lost their legitimacy and credibility, giving
the North the right to intervene in order to reshape them as democratic
states that would no longer pose a threat to the rest of the civilised
world.
Robert Cooper,
for example, described a zone of the 'pre-modern world, the
pre-state-, which was in a condition of 'post-imperial
chaos-: 'The existence of such a zone of chaos is nothing
new, but previously such areas, precisely because of their chaos,
were isolated from the rest of the world. Not so today . . . If
they become too dangerous for the established states to tolerate,
it is possible to imagine a defensive imperialism. If non-state
actors, notably drug, crime or terrorist syndicates take to using
non-state (that is pre-modern) bases for attacks on the more orderly
parts of the world, then the organised states may eventually have
to respond'.
Cooper, an English
version of the American neo-Conservatives, might have been ignored
had not some of his ideas been given a boost a year later by Martin
Wolf, a respected columnist for the Financial Times. In an article
entitled 'The need for a new imperialism-, Wolf argued
that Afghanistan was but an extreme example of a 'failed state-.
There were others, which not only posed a threat to the rest of
the world but reduced the lives of their own people. 'If a
failed state is to be rescued,- Wolf wrote, 'the essential
parts of honest government - above all the coercive apparatus
- must be provided from outside . . . . To tackle the challenge
of the failed state, what is needed is not pious aspirations but
an honest and organised coercive force.- In his view this
entailed 'a transformation in our approach to national sovereignty
- the building block of today-s world.- The legal
doctrine of sovereignty must not impede the reordering of the South,
by force of arms if necessary, even pre-emptively.
In essence,
underpinning Bush and Blair-s intervention in Afghanistan
and Iraq was the concept of failed states and the right (indeed
obligation) of the North to intervene. This was 'hard power-
at work. Complementary expressions of 'soft power- included
Blair-s Commission for Africa and Bush-s Millennium
Challenge Account. At the World Economic Forum in January 2005 Blair
called for 'a big, big push forward- to end poverty.
The G8 meeting in July that year decided to double annual foreign
aid to Africa and forgive African debt. In September the United
Nations took up the theme: Jeffrey Sachs toured the world spreading
the message that Africa could be saved through increased aid. The
year ended with Bono being named Time magazine's person of the year
for his efforts to save Africa. Aid, along with other instruments
of intervention such as human rights, had become a means to democratise
the South and make it safe for the rest of the world.
Many in the
South condemned the idea of failed states as a Northern pretext
for intervention. In the North, too, some were alarmed at this new-found
justification for imperial or neo-imperial intervention in their
name. Others were skeptical about Bush and Blair-s grandiose
plans to 'save Africa-. As a rejoinder to the idea that
accelerated aid would (or could) make Africa-s poverty history,
William Easterly, formerly of the World Bank, argued that top-down,
donor-driven aid does not work, and that aid can only play a supportive
role to essentially domestic efforts. Stephen Browne emphasized
aid-s inadequate market signals and the way in which donor
domination distorts supply and demand. Roger Riddell showed how
short-term political interests distort aid, and argued that the
aid industry must change radically to become the effective force
for good that it is often claimed to be.
To summarize,
then, we need to recognize that we are on very controversial and
politically sensitive terrain when we talk about aid. Perhaps Bono
and Sachs are honest advocates of aid, believing that the rich have
a responsibility to help the poor. They do not ask if the rich had
anything to do with creating poverty in the first place, but their
good faith is best not questioned; they are artists and academics,
not politicians, spreading the good word about humanity and humanitarianism.
Bush and Blair, however, are in another camp altogether. They are
in the category of people that Roger Riddell argues distort the
purpose of aid because they have a political agenda, whether hidden
or explicit. Their political track record suggests that they share
Robert Cooper and Martin Wolf-s belief in defensive imperialism.
Like their 19th century ancestors Bush and Blair are driven by a
kind of missionary zeal to civilise the South and reorder it, to
make it safe for democracy and 'more like us-. Both
soft and hard power are needed. Aid, from this perspective, becomes
another weapon in their arsenal to discipline chaotic parts of the
world. It follows that it would be irresponsible to give aid without
conditions.
More recent reasons for the OECD-s aid effectiveness
initiative
More
recently, aid effectiveness has been driven by three additional
factors. First, the need to simplify and rationalise the complex
system of aid administration and reduce transaction costs. Second,
demands from citizens of donor countries for greater discipline
and accountability in the administration of aid by their governments.
And third, a sudden awareness of the serious democratic and legitimacy
deficit in the present aid architecture, dominated as it is by donor
countries of the Organisation for Economic Co-operation and Development
(OECD), the World Bank and regional development banks.
The OECD took
the lead to reform the aid architecture. In 2003, at an intergovernmental
High Level Forum (HLF) in Rome convened by the OECD-s Development
Cooperation Directorate, Northern donors discussed how to make aid
more effective. In March 2005, at the second High Level Forum, the
OECD adopted the so-called Paris Declaration, which aims to take
'far-reaching and monitorable actions to reform the ways we
deliver and manage aid-. By mid-December 2007, 115 countries
had endorsed it. At the third HLF in Accra in September 2008 the
OECD and other signatories will agree a text on the methods and
modalities of making aid more effective. Meanwhile OECD countries
are already implementing the Paris Declaration in conjunction with,
ironically, the World Bank.
On its website
the OECD-s Development Assistance Committee (DAC) gives three
reasons why the Paris Declaration will improve aid effectiveness.
First, it goes beyond a statement of general principles; it lays
down a 'practical, action-orientated roadmap to improve the
quality of aid and its impact on development-. Second, it
sets out 12 indicators for monitoring and 'encouraging progress-
against partnership commitments. Third, it promotes a model of partnership
that will improve transparency and accountability in the use of
development resources. At international level it provides a mechanism
for donors and recipients of aid to hold each other mutually accountable
and publicly monitor compliance. At country level it encourages
joint assessment of progress by donors and partners using local
instruments.
The Paris Declaration
accepts that current accountability requirements are often 'harder
on developing countries than donors-. It also recognises that
'aid is more effective when partner countries exercise strong
and effective leadership over their development policies and strategies-.
This is why ownership - i.e. developing countries exercising
strong and effective leadership over their development policies
and strategies - is, so the Paris Declaration says, its 'fundamental
tenet-.
The
South's concerns about the Paris Declaration and its aid effectiveness
model
On
the face of it, then, the Paris Declaration looks a benign document.
It recognises the faults of the present system, sets out reasonably
sensible principles on aid and, significantly, emphasises principles
of ownership by developing countries and mutual accountability between
donors and recipients. Why, then, are developing countries not very
excited about it? Many of them have signed on to it, but appear
to have done so without fully analysing its implications. There
is now growing awareness among both civil society and some government
actors in developing countries that all that glitters about the
Paris Declaration is not gold and that another agenda, not readily
transparent on first reading, may underlie it.
The most critical
analysis of the Paris Declaration has come from a study by Roberto
Bissio of Social Watch for the UN Human Rights Council's High-Level
Task Force on the Implementation of the Right to Development. Bissio
argues that relatively minor gains in efficiency and the reduction
of some transaction costs are overridden by the asymmetrical conditions
under which negotiations between donors and recipients take place.
He adds that the Paris Declaration 'creates a new level of
supranational economic governance above the World Bank and the regional
development banks-.
In light of
this and similar critiques, it is important to understand the overall
purpose and methodology of the Paris Declaration to appreciate fully
its implications for the aid industry. Here are some of the South-s
major concerns:
- The UN was
initially excluded from the system and then, belatedly, brought
in to give the Paris Declaration a semblance of credibility. The
UN lacks any leverage to promote its priorities within the Paris
Declaration because it was not involved from the start. For example,
the ILO`s internationally recognised concept of 'decent
work- does not appear as one of the objectives in aid evaluation
- nor do many of the MDG-related objectives, especially
MDG 8 that deals with North-South relations.
More
worryingly, the OECD has now sought to bring the UN into the Paris
Declaration process. Why should this be a matter for concern?
The UN`s early involvement could have been a positive step in
reforming the global aid architecture, but the OECD apparently
preferred to place its trust in the Bretton Woods Institutions.
It now seems that the OECD-s directorate has belatedly become
aware of the World Bank and IMF-s democratic deficit, and
of the need to involve the UN to provide a veneer of legitimacy.
It has
done this in two ways. First, the OECD-DAC has embraced the UN-s
Development Cooperation Forum (DCF) initiative. The DCF was created
by the General Assembly in October 2005 as a follow-up to the
2005 World Summit. It is mandated to review 'trends in international
development cooperation, including strategies, policies and financing-,
to promote 'greater coherence among the development activities
of different development partners-, and to strengthen 'the
normative and operational link in the work of the United Nations-.
Its overall purpose is to help strengthen the Economic and Social
Council (ECOSOC) and make it more effective. In January 2007 the
General Assembly further provided for the DCF to meet biennially
in a forum 'within the framework of the ECOSOC High Level
Segment-.
It is
reasonable to suggest that once the OECD-DAC became aware of the
democratic and legitimacy deficit of the IMF-World Bank architecture,
it embraced the DCF to provide that missing dimension. The intention
behind this move may not be as conspiratorial as it appears; it
may be a genuine desire to render credibility to the Paris Declaration
process. However, the OECD-DAC did not allow the UN to influence
the process or the outcome (for example on ILO and MDG objectives).
Furthermore, the World Bank continues to play a dominant role.
All that the Paris Declaration has done is remove the more offensive
vocabulary of the Bretton Woods institutions (such as 'conditionalities-)
and co-opt a new terminology (such as 'mutual accountability-
and 'coherence- with development objectives).
The
OECD-DAC-s second strategy has been to bring the Paris Declaration
into the negotiating methodology of the UN system through the
back door. This appears to be the objective of the Accra meeting
in September 2008 at which the text of the so-called Accra Action
Agenda (AAA) will be negotiated for adoption. What its legal implications
might be nobody knows. Normally, the UN methodology of a negotiated
text begins very early with experts and other stakeholders from
the negotiating countries working on drafts. These early texts
outline areas of convergence and divergence. The final proposed
text is then negotiated by member countries, paragraph by paragraph,
until a text is agreed that then has legal validity. The AAA text,
on the other hand, appears to have been drafted by a working party
outside the UN process, and it is this text that will be negotiated
in Accra.
The
intentions of those shepherding the Paris Declaration process
are not clear. However, the process leading to Accra and the meeting
itself do not seem calculated to build credibility for the AAA,
especially given the other serious shortcomings of the Paris Declaration,
as discussed briefly below.
- Donors prepare
performance conditionalities in conjunction with the World Bank.
In the case of Tanzania, for example, there is a 12-page matrix
and 49 pages on accounting. The matrix is prepared with no participation
by the recipient country. There is no real mutual accountability,
contrary to the Paris Declaration`s stated objective. If recipient
countries do not perform, they are subject to penalties, but if
donor countries do not perform they are not penalised. In normal
business transactions, banks that lend money take risks as well
as borrowers; if borrowers fail to repay, the banks pay a price.
But in the aid architecture proposed by the OECD, the risks are
taken by recipient countries alone.
- The compliance
tests administered by the Word Bank do not use the economic and
social policies of recipient countries. With regard to procurement,
for example, the tests are externally imposed based on a World
Bank-devised procurement assessment methodology. There is no recipient
country ownership of these tests. The rating system uses a methodology
provided by the OECD-DAC and the World Bank to test the effectiveness
of aid in relation to systems of both public finance management
and procurement. There are twelve criteria or indicators by which
to measure the performance and progress of recipient countries,
graded on a scale from A to E. If recipient country systems meet
agreed donor criteria they will be used to make the evaluation;
if not, tests provided by the OECD-DAC and the World Bank will
be used. For example, if the national procurement system is not
good enough, an open tender system will be used to undertake international
procurement, something that developing countries have already
rejected in the context of WTO negotiations. In other words, the
Paris Declaration brings through the back door what developing
countries have already turned down.
- On governance,
it is once again donor procedures that determine the method of
harmonisation. Although the Paris Declaration talks about ownership,
the opposite is in reality the case. Harmonisation processes are
externally set. Donors decide whether a particular procurement
item is to be tendered internationally or nationally (or locally
in a local government context), and whether it is open to the
private sector or the state sector or both. Donors may disagree
(for example, the US favours the private sector and the Scandinavians
prefer state procurement). These disagreements are first sorted
out between donors, and then become inflexible instruments of
enforcement on recipient countries in the name of aid efficiency.
- There is
a shift from project lending to programme-based lending, which
involves the pooling of donor resources and the injection of these
funds into the national budget through direct budget support.
Donor countries develop a single Joint Assistance Strategy for
each country. Recipient countries must discuss their strategies
with donors and the World Bank. The provision of assistance and
funding is based on a collective donor assessment of recipient
countries- policies and the extent to which these policies
are acceptable to donors. There is a danger that if the performance
of recipients falls short of the indicators, direct budget support
may become the instrument for stopping the flow of aid. Recent
World Bank documents show that in Poverty Reduction Strategy assessments
undertaken by the World Bank, 'few of them provide the level
of operational detail that specifies how objectives are to be
achieved through policy actions-. Growth is apparently much
lower than expected by the donor community. If this is still the
case in 2010, the implication is that donors will demand better
performance from recipient countries or they might stop aid.
Conclusion
The
conclusion is unavoidable. Under the pretext of making aid more
effective, the aid effectiveness project is a form of collective
colonialism by Northern donors of those Southern countries that,
through weakness, vulnerability or psychological dependency, allow
themselves to be subjected to it at the Accra conference in September.
Is there a way
out? Can the Paris Declaration be salvaged? Yes, it can. In order
to give it legitimacy and credibility, the following steps are necessary.
- The Paris
Declaration must be properly embedded in the UN system. The UN
(ECOSOC, for example) must thoroughly analyse it and bring into
it the UN`s evaluative criteria on aid effectiveness, such as
those related to internationally agreed development goals, the
MDGs, and the ILO`s concept of 'decent work-.
- Meanwhile,
there must be a moratorium on the Accra process and the proposed
Accra Action Agenda.
- The Paris
Declaration must distance itself from the Bretton Woods institutions
or it will suffer the same credibility and legitimacy gap.
- The principle
of mutual accountability must be properly structured and monitored
by a UN body. The Development Cooperation Forum of the UN can
play this role. Although it is a new institution created as a
forum, without power of implementation or enforcement, it could
undertake or commission a proper study of the Paris Declaration
and recommend how a two-way process of accountability could be
put in place.
- Finally,
aid is not the route to development. It creates dependency and
erodes self-reliance. The UN should encourage a study on how developing
countries can exit from aid dependency over the next 10 or 15
years. The South Centre is already engaged on such an exercise.
*Yash Tandon
is the Executive Director of South Centre based in Geneva.
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