On 15 November Eurodad, CNCD-11.11.11 and Oxfam International organised the public seminar “The future of aid and development effectiveness.” The seminar brought together civil society groups, experts, EU decision-makers, parliamentarians and private sector representatives to debate the role of the private sector in the post-Busan agenda. The event was also an opportunity to publicly launch the latest Eurodad report: “Hitting the Target? Evaluating the Effectiveness of Results-based Approaches to Aid.” After a fruitful discussion, participants called on relevant stakeholders to be accountable for previous commitments on the aid effectiveness agenda.
The Fourth High-Level Forum on Aid Effectiveness held in Busan in late 2011 reaffirmed the commitments made in Paris and Accra, and resulted in the new Global Partnership for Effective Development Cooperation, which includes new actors such as emerging donors and the private sector. As participants stated during the seminar, Busan did not result in agreement on a clear framework to monitor aid effectiveness commitments and progress so far has been very slow, particularly regarding the work of the building block on public-private cooperation for development.
Donors are increasingly using ODA to leverage private finance for investments. This trend partly responds to the needs of Micro, Small and Medium sized Enterprises (MSMEs) in developing countries. However, there are serious concerns that the focus on the private sector is also being driven by the need to fill the financing gaps created by shrinking aid budgets. In any case, the new emphasis on the private sector as a “development partner and actor” poses some key questions that should be addressed. During the seminar, participants discussed some of them, such as the type of private sector actors donors should work with, the impacts and modalities that work best for development and the type of engagement with the private sector in the context of the aid effectiveness agenda.
The challenges of development cooperation
MEP Charles Goerens (ALDE), rapporteur on the Agenda for Change, framed the discussion by introducing the Parliament’s position on the issue. The European Parliament has recently challenged the focus of the European Commission (EC) Agenda for Change on the private sector in a specific resolution that calls on the Commission to put the emphasis on “poverty reduction and the fight against inequality”. According to the Parliament, “exclusive attention to economic growth and excessive confidence in the effects of automatic redistribution of development in the private sector could lead to unbalanced, non-inclusive growth without having a real impact on poverty reduction”.
As the European Union remains the world’s largest aid donor, Goerens stressed the need for increasing aid quality and its real development impact. Despite recent changes, participants also highlighted the catalytic role that ODA can (and should) play in promoting sustainable development and increasing domestic resource mobilisation, particularly in low-income countries where ODA can account for as much as 10 per cent of GDP.
Another challenge addressed during the seminar was how to reach the private sector actors that have a greater development impact and which are the right tools to do this. Regarding the former, developing countries’ domestic enterprises are a key target in order to ensure that development finance is used effectively. SMEs and in particular young SMEs play an essential role in development, as job creators and social stabilisers, as well as sources of innovation. Regarding the latter, Eurodad highlighted the important role that smart public procurement can play in creating business opportunities for the private sector. Eurodad research shows that public procurement accounts for about 18 per cent of global GDP and in some developing countries can account for 70 per cent of public expenditures. As it was mentioned in seminar, “procurement is where the money is and determines where the money ends up,” thus, if well targeted procurement is an effective development policy tool.
However, donors and recipient countries’ ineffective practices continue to constrain the full potential of aid to deliver development outcomes. Participants agreed that it is essential to monitor progress towards commitments on a rolling basis. In June this year at the meeting of the Working Party on Aid Effectiveness (WP-EFF) a relevant set of indicators was endorsed and the use of recipient countries’ procurement systems is now seen as a crucial indicator. Despite progress having been made, the list has yet to be completed and there is concern about what the exact content of some key indicators will be, such as the indicator on the engagement and contribution of the private sector to development.
Aid effectiveness and results-based approaches
More public and political pressure on budget allocations, coupled with the genuine need to improve aid effectiveness to fill the development gap, have combined to provide the impetus for a renewed focus on results. However, results-based approaches are the subject of much debate among development practitioners. For some, it is a way to ensure that aid is effective; others regard it as quick win and a donor driven agenda for times of crisis that could reverse all the progress made towards programmatic aid modalities.
During the seminar Eurodad launched its latest report in a round-table discussion with civil society groups, Oxfam Germany and Action Aid, and representatives from the European Commission (EC). Based on the main findings of the report, participants discussed some encouraging signs, but also some grey areas such as design, sustainability, funding predictability and long term development impact compared to other aid modalities.
Although the EC is one of the donors that according to Eurodad perform better on the implementation of results-based approaches, the EC representatives agreed on the point that they should be cautious when using results-based approaches. The increasing pressure on aid budgets and the calls for greater accountability in the use of aid funds should not be translated into modalities that undermine the aid effectiveness principles. In order to prevent this from happening, the aid effectiveness agenda should serve as a reference framework to ensure that new aid modalities are an improvement over existing ones.
The AidWatch Special Report assesses the process of the Busan Partnership Agreement and the quality of EU aid.
Key Messages and Findings of the Report:
- Key flaws of EU aid: The report identifies three key flaws of EU development cooperation: the EU aid architecture remains fragmented and poorly coordinated, the share of aid that is an actual and sustainable North-South financial transfer is limited due to formal and informal aid tying, too little aid focuses on poverty eradication because aid allocation remains distorted by non-developmental objectives.
- Aid Effectiveness targets missed: The report assesses to what extent EU donors have implemented the aid effectiveness commitments made in the Paris Declaration (2005) and the Accra Agenda for Action (2008). It finds that provider countries as a whole met only one in 13 targets that were due in 2010. Progress was very uneven across EU providers, with some making more progress than others: Denmark scored best and met 7 targets, while Belgium and Luxemburg met only one target each. It finds also that recipient countries made more progress and effort in implementation than providers, and that donors progress has slowed down, in some areas has even been reversed, since 2007.
- Mixed blessing at Busan: Busan lead to mixed results concerning the main aims of addressing the unfinished business of the aid effectiveness agenda, and responding to the new development landscape in which new providers from the south and the private sector play an increasingly important role. Busan failed in particular to agree on effective implementation and accountability mechanisms. The EU governments have demonstrated much less effort to push for a strong, binding and far-reaching agreement in Busan than at previous HLFs in Paris and Accra, and played a particular harmful role in opposing a strong monitoring and accountability framework for actual implementation.
- Transparency and Joint Programming: The report also deals in detailed thematic chapters with two selected issues of the wide aid and development effectiveness agenda: aid transparency and joint programming. These are the issues currently prioritized by EU governments and the European Commission. While there was some progress on aid transparency and the EU has passed a ‘Transparency Guarantee’, the EU member states are still lagging behind the non-EU donors. Slightly more than 70% of EU member states have ’poor’ or ‘very poor’ aid transparency.
- Uneven but overall unsatisfactory post-Busan action: EU providers’ efforts to implement Busan commitments are once again uneven across EU countries, but overall limited and unsatisfactory. One year after Busan, the necessary and effective institutions to drive implementation are still not in place.
Eurodad partner ODA Watch Korea published a parallel report for the An OECD DAC Peer Review team will visited Korea in June 2012.
This OECD DAC Peer Review was the first time that Korea undergoes this formal process since it became a member of DAC in 2010. The Korean government submitted a memorandum to DAC on the 7th of May after forming a Task Force team in charge of coordinating preparations between ministries and implementing organizations responsible for bilateral ODA through loans and grants, under the authority of the Prime Minister’s Office (which the Korean Committee for International Development Cooperation is part of). The memorandum focused on how much Korean ODA had improved since recommendations made by DAC in 2008.
ODA Watch Korea published this report in order to conduct a review on the country’s international development cooperation with the belief that the review should be conducted on the basis of ample information, broad perspectives and multiple viewpoints so that it may subsequently lead to a qualitative improvement of Korean ODA. This report is composed of 6 major chapters in line with DAC content guide.
As the report points out, during the last years there have been legal and policy improvements, Korean aid activities still suffer from a lack of cooperation and consistency. One reason for this lies in the absence of a coordinating function. As a result, foreign aid is being fragmented during the implementation stage, which more stakeholders now participate to, in an absence of coherent policy and strategy.
ODA Watch Korea propose the following:
- Establish an independent agency or ministry in charge of international development cooperation.
- Set a deadline to combine loans and grants.
- Strengthen communication channels between lead ministries in charge of loans and grants, and establish a joint basic and implementation plan for each theme.
- Formulate a joint, unified philosophy and strategy for Korean aid.
- Clearly identify guidelines for combining aid within the foreign aid strategy guidelines.
- Prevent foreign aid from being overly donor-oriented in the establishment and implementation of a ´Korean ODA Model’, in accordance with the Strategic Plan.
- Reflect internationally accepted norms and values in Korea’s aid philosophy.
- Identify core values and principles pertaining to its foreign aid and implement them at all stages.
Read the full report:ODA Watch Parallel Report on Korea´s International Development Cooperation
By Carlos Villota,
Eurodad visited Seoul last week under the framework of the “Civil society dialogues on sustainable finance Europe- Republic of Korea” project, that aims to open an important new channel of knowledge, intelligence and experience exchange, through which joint advocacy towards Korean and EU targets with the aim of making global finance sustainable will be coordinated.
PSPD and Eurodad jointly evaluated the outcomes of the IMF and World Bank Annual meetings that took place in Tokyo the week before. PSPD and Eurodad assess the outcomes on issues that were subject of their joint advocacy work such as on Doing business rankings and on tax justice.
Moreover, Eurodad and PSPD efforts to mutually engage with civil society in Korea and in Europe, are not only focusing on NGOs but also on other sectors of civil society such as academics and students. The Eurodad delegation gave a lecture on “European development finance from NGO Perspective” at the Ewha Women University in Seoul, followed by a discussion on European civil society influences and advocates their positions at official processes.
Aid Effectiveness issues are key for this project and a meeting that gathered five different Korean NGOs working on aid was organised. In addition to Eurodad presention on its new report on Results-based approaches to aid, a further analysis on current global aid dynamics was made. Eurodad and the Korean NGOs identified several areas of common interest and agreed on joint actions.
Eurodad also met the European Union Delegation in Korea to discuss the impact of the Free Trade Agreement between Europe and South Korea. Korean performance on aid from an Aid Effectiveness perspective was also adressed.
Eurodad member Erlassjahr has released a new paper on how a Fair and Transparent Debt Workout mechanism could work in the case of Zimbabwe.
For the last decade the Zimbabwean government has been in default on most of its debt, currently estimated to be around 7 to 9 billion US Dollar. It is not the first and will not be the last country in the world to default on external debt. Europe today shows that northern industrial countries can also become unable to meet all their debt service payments. Other more recent examples may include Cote d’Ivoire in February 2010 or Jamaica in 2010. Sovereign debt defaults have been normal phenomena for millennia.
However, there is no established law that enables the state to demand the cancellation of debt obligations. In case it would declare insolvency it will be seen as “unwilling” to pay, not as “unable”. In the context of developing countries, one can find the HIPC and MDRI initiatives, the Debt Sustainability Framework of the IMF and negotiation fora such as the Paris Club. But those instruments do not address state insolvency as recurring phenomena of national economies. Moreover, not having a good way of dealing with sovereign debt and a sovereign debt crisis, make sovereign debt crises likely to recur.
The report is the result of a project on “simulating” an alternative debt workout for a country case, in order to demonstrate that alternatives to traditional creditor-dominated procedures are actually possible. Zimbabwe as a currently over-indebted country has been chosen as an example to show an alternative debt workout process as an alternative to HIPC. The paper illustrates a flexible arbitration process that encompasses a sufficient debt reduction through a fair sharing of losses among all parties aligning the country’s total debts to its real capacity to pay. Such an arbitration process would be driven by the aim to restore Zimbabwe’s debt sustainability.
The illustration of how a flexible process as an alternative to the traditional debt relief processes could look like in Zimbabwe is based on the step-by-step guide developed by Jürgen Kaiser, Erlassjahr coordinator, “Resolving Sovereign Debt Crises: Towards a Fair and Transparent International Insolvency Framework”. The result is a concrete step-by-step simulation on how an impartial and fair process could look like or work in the concrete case of Zimbabwe.
By Carlos Villota,
Last week the European network of IFI (International Financial Institution) watchers – the EuroIFInet – met in Amsterdam for its 20th Annual Meeting to strategically review its last 10 years of activism. In addition the network coordinated NGO actions for the Annual Meetings of the World Bank and the IMF, which this time are taking place in Tokyo from 9 to 14 of October.
This year, BothENDS together with Eurodad hosted the meeting for this informal but active network of European NGOs. Non-European allies such us PSPD (Korea), Forest Peoples, Afrodad and World Resource Institute also attended the meeting and were key assets during the different sessions.
The role of non-traditional donors, emerging economies and the diminishing power of European countries were discussed. In addition, issues such as the World Bank Program for Results financing instrument the ongoing Safeguards review, Investment Lending Reform, IMF gold sales, IMF quota reform, Energy policies and the World Bank Doing Business Report were also addressed.
Through exchanging ideas and advocacy strategies, the participants stressed the need of reinforcing alliances with emerging countries in order to achieve more effective common advocacy towards IFIs. The increasing role of private finance and the growing linkages between private sector actors and the IFIs, was highlighted as a key crosscutting issue in order to get engaged in new emerging world dynamics and advocate to fight poverty and inequality.
The issues addressed will be amongst the topics discussed both in the official meetings and the civil society events organised in Tokyo in mid October.