The Effectiveness of Aid One Year after the Declaration of Paris

National, European and Multilateral Issues and the Role of the Network of Cooperation

The March 3, 2005, Declaration of Paris on the effectiveness of aid for development is said to be, a posteriori, one of the most outstanding outcomes of 2005. The consequences of this Declaration take up a large part of the international aid agenda. The present Note du Jeudi (Thursday Note) reviews certain issues that it entails for French aid. It will be helpful to refer to Notes du Jeudi nº24 to nº27, written at the same time last year on this subject.

After a brief summary of the content of the Declaration of Paris and the ideas that underpin it, three levels will be successively dealt with below: the international scene, the European area, and the purely French level, as well as the network of cooperation.

1. The Declaration of Paris: Summary of the Content and the Dialectic that Runs Through It

Following nearly 10 years of reflection and mobilization begun by the international community under the aegis of the DAC of the OECD, the High Level Forum, bringing together bilateral donors, multilateral donors and forty beneficiary countries, adopted the Declaration of Paris (DP) in 2005. This Declaration put together 56 reciprocal commitments between donors and partner countries to improve the quality of aid and its impact on development. These commitments were conveyed through fifteen indicators, finalized at the end of 2005, which should make it possible to measure the attainment of the precise objectives by 2010.

The DP is based on five major principles: (1) ownership of aid by developing countries, (ii) alignment of aid policies with national development strategies, (iii) harmonization of policies by donors and the establishment of common intervention measures, (iv) management of aid focused on results (v) mutual responsibility for results attained.

The debate that led to the Declaration of Paris mainly concerned the national level of the beneficiary countries. It only dealt secondarily with questions of the structure of international aid, division of labor between institutions, etc.

For a long time this debate on effectiveness at the beneficiary country level has been at the heart of a dialectic between two quite different poles:

• One emphasizes the harmonization of procedures, ownership of aid by the governments of the beneficiary countries and alignment of the donors with national programs for reducing poverty validated by the Bretton Woods institutions. The favored tools of financing are sectoral aid (common pot, targeted budgetary aid) or comprehensive (or non-allocated) budgetary aid. This approach is dependent on the quality of the governmental institutions of the beneficiary country, particularly those in charge of the management of public finances, on which aid often concentrates to support the strengthening of competences. In numerous cases, it stumbles over the lack of “political will” of local authorities, weakness of financial governance and the maladjustment of sectoral policies.

• The other pole of the dialectic is based on a detailed understanding of the socio-political context of beneficiary countries, analysis of this lack of political will and the resulting effects of aid on the evolution of the internal balance of power. It proves to be more circumspect about conditions of local appropriation and the use of instruments for rapid disbursement of aid. It tends to diversify the strengthening of competences over a wide range of social actors in order to make possible a balanced institutional construction and the emergence of public policies that are the result of local processes of internal negotiations. It uses the medium of the aid project more, possibly coupled with a gradual rise in budgetary aid.

Today the first pole quite clearly occupies the world scene. The whole Declaration of Paris is concerned with it. Undoubtedly, considerable effort and progress have been achieved in this area these past few years. The expected growth in flows of ODA (Official Development Assistance) and the pressure for rapid disbursements are factors that are favorable to this evolution.

As a consequence, the complementarity of the two approaches is hardly recognizable because of the antagonisms they create in certain situations (massive disbursements vs. cautious disbursements).

A policy for French aid could be, at each of the four levels of analysis and action presented below, to advance as much as possible along the path of the first approach, and benefit from its modernization potential, while keeping in the background the concepts of the second approach, essential in the long term. Undoubtedly, the complementarity of the two approaches plays the greatest role in considerations concerning the strengthening of capabilities.

2. The Multilateral Level

The Forum of the DAC-OECD, whose work led to the adoption of the DP, now has the principal objective of disseminating information on this Declaration and establishing a baseline that will then permit the measurement of the progress achieved.

This baseline will be established on the basis of a survey undertaken from May to September 2006. The consolidated results from this survey will be presented to the members of the DAC in December 2006. The questionnaire for this survey, developed in 2005, must first be tested in April 2006 in several countries, with the support of some fund donors (among which is France in support of Senegal).

The DAC Working Group on the effectiveness of aid is also pursuing its work, under the chairmanship of Michel Reveyrand. This group has become the principal world forum on aid. It is, from now on, open to partner countries. A vice-chairmanship has been confided to Ghana, which will host the next High Level Forum in 2008.

The World Bank played an important role in setting up the DP. It remains very active and provides a portion of the data for the follow-up to the Declaration. The UNDP (United Nations Development Program), encouraged by several bilateral donors, including France, is also increasingly active in this work.

The African Development Bank (ADB) is also involved in this work by organizing regional workshops for distribution and exchange of information on the theme of effectiveness. The first workshop was held in East Africa in November 2005. The second will take place March 25-27, 2006 at Bamako for West, Central and North Africa. It will provide precise details on the adaptation of national measures to the target objectives of the DP and to monitoring the indicators.

France has renewed its technical and financial support to the working group. French commitments concern the follow-up to the recommendations adopted in March 2005 and the strengthening of the participation of partner countries in this process:

(i) support for the organization of the Bamako regional workshop by the ADB (French financing by the DGTPE (Treasury and Economic Policy General Directorate) via the ADB)

(ii) mobilization of the network on French support for the response to the questionnaire and to the ownership process by our principal partners (cf. point 5).

Beyond the Declaration of Paris, the DAC and the World Bank are attempting to extend and direct the current process towards “changing the scale” of aid (“scaling up”), i.e., essentially improving the long-term predictability of aid and a more pronounced orientation towards financing national PRSPs (Poverty Reduction Strategy Papers).

The political economy approach, second pole outlined above, is only marginally present in the work of the DAC group on effectiveness. The latter tends rather to overlook the question of the State, by limiting itself to emphasizing the importance of strengthening its capabilities. It is only in the DAC network on governance, called “Govnet”, that there is any real reflection on this subject, particularly in the work of a sub-group called “Drivers of Change”, whose work remains discreet.

3. The European and European Community Framework

The ODA (Official Development Assistance) of the European Commission already displays positive points in relation to those parts of the Declaration of Paris concerning harmonization:

 Long-term planning by allocating sums of money every 5 or 6 years (9th EDF [European Development Fund] soon 10th EDF, etc.) is an element of aid predictability.

 The objective of the Country Strategy Papers (CSP) and National Indicators Program (NIP) linked to these funds is to be aligned with the poverty reduction strategies drawn up by the aid beneficiary countries.

 The decentralization of Community aid since 2001 is spectacular and allows for better local coordination.

 The delinking of Community aid (regulation of November 2005: complete delinking for the least advanced countries as well as for emergency food aid) goes beyond the 2001 Recommendation of the OECD.

 In a general way, the Commission has shown itself to be active in the progress of the Declaration of Paris.

The Commission has also played an important role as facilitator among the Member States (MS) on these questions:

 Following a request from the General Affairs and External Relations Council (GAERC) of November 23, 2004, the European Commission elaborated in cooperation with Member States a joint framework for long-term planning. Even if no obligation to unify the planning of the 25 MS is not envisaged at this stage, this format, which will be used for planning the 10th EDF (2008-2013) is proposed to the MS, particularly to those that do not yet have such a framework (new MS in particular). It ought to, above all, make possible the gradual adoption of joint diagnoses and then the working out of joint strategies.

 This same council had also requested the Commission to draw up a plan of action and coordination in partner countries, in particular when no other forum of coordination exists. “Roadmaps” were thus established in about 50 countries.

But it is undoubtedly in the area of progress in complementarity (within countries and above all between countries) and division of labor that the European framework seems to represent an opportunity.

 On the one hand, Europe, which is home to most of the bilateral donors, is well placed to deal in a unified fashion with the question of the international structure of aid and particularly with the division between bilateral and multilateral donors as well as between different multilateral donors.

 On the other hand, it provides room to implement, on a pilot, basis the division of labor between bilateral agencies and between the latter and the EC. It is within this process that the EC is preparing a second version of the atlas of donors, an excellent tool to visualize this possible complementarity.

The Commission just made public a plan of action in the area of coordination, harmonization and alignment of aid that takes up these various orientations.

As for the political economic aspects, the EC often carries out analyses of local actors. But for operational purposes, it still, above all, counts on high-level dialogue and general political conditionalities to cause local situations to change. It has no influence on the gap between general policy and the local emergence of institutional operations that are propitious for economic and social development. And even less so is it one of the donors with sizeable disbursement requirements.

4. Efforts to Improve the Effectiveness of French Aid

The Declaration of Paris set in motion a dynamic process, leading numerous donors to establish internal plans of action to meet commitments. France has done the same. The summary of the conclusions from the CICID (Inter-Ministerial Committee for International Cooperation and Development) of May 2005 anticipates that “the next CICID will examine a plan of action to implement the Declaration of Paris of March 2005 on strengthening the effectiveness of aid. This plan will concern all of the participants in and means of French cooperation.”

A working group on effectiveness (GTE), including representatives of the GAERC, DGCID (Directorate-General for International Cooperation and Development) and the AFD (French Development Agency) was set up at the end of 2005. The mandate of this group concerns three areas:

 Subjects linked to the Declaration properly speaking, and notably to its expression in terms of indicators that directly concern modes of action for French aid (including our aid to the national budgets of beneficiary States, larger use of local management processes for public finances, coordination of donor missions, etc.).

 Underlying factors that condition or extend the Declaration of Paris: long-term predictability of aid, division of labor between donors, strengthening of local authorities (decentralization of our system and improvement of human resources).

 Reviving French participation in world debates: operational methods of aid, governance, strengthening of capabilities, etc.

The subject of predictability takes on particular importance because of commitments made through the partnership frameworks (document cadre de parteneriat - DCP) in the Zone de Solidarité Prioritaire (zone of primary solidarity). Likewise, the subject of strengthening of capabilities occupies a place of growing importance and makes it possible to widen the debate (see below). For these two subjects, as for the others, the members of the GTE have to formulate clear and directly applicable proposals for strengthening the effectiveness of French aid. In particular, they have to establish a summary sheet that systematically adopts the following set-up: definition of a diagnosis of the situation of French aid (strengths and weaknesses); formulation of operational proposals; bringing to light possible risks or obstacles to the implementation of these proposals.

This plan of action will be available for the CICID in Spring 2006.

The institutional economics approach finds its place in these considerations, particularly in reference to strengthening of capabilities. Work undertaken on this subject by different donors (particularly the British) show that this approach can produce very invaluable elements that allow for improving diagnoses, sharing them among donors, expanding the area for strengthening competences beyond just the State apparatus, and orienting it towards public policy negotiations among local actors.

5. The Challenge of Ownership by the Beneficiary Countries - The Role of the Network of Cooperation

The results of efforts for better effectiveness will be proportional to the quality of the governmental institutions of the beneficiary countries and their “political will” truly to implement the Declaration that they adopted.

This requirement begins with the anticipated survey phase in 2006: some of the indicators are based on the definition of certain information and benchmarks by the beneficiary countries.

The members of the DAC and the multilateral agencies agree: the question of coaching beneficiary countries that request it must be dealt with (some countries, such as Vietnam, Nicaragua or South Africa are, on the other hand, already fully involved in the process).

Different kinds of support are envisaged, particularly by the multilateral agencies (World Bank and UNDP) The UNDP is developing a concept of an “aid management platform” that could bring together several ways to strengthen capabilities by integrating different kinds of support into the PRSPs, MDGs (Millennium Development Goals) and the agenda of effectiveness. This support would be coordinated by the regional poles, including the Dakar pole. Several member countries of the DAC consider it desirable that bilateral agencies also be mobilized in this area.

The DGCID is exploring the support possibilities that it would be likely to provide to regional programs such as the UNDP Dakar pole. A strong mobilization of the SCAC (Cooperation and Cultural Action Section) is also indispensable. The means to mobilize could come from different sources: ex Title IV (mission-invitations), projects underway concerning statistical, economic or financial governance. Setting up specific projects (particularly mobilizing ones) is conceivable, but in the longer term.

The network was already mobilized in 2005: it responded, at very short notice, to an internal inquiry undertaken in the Coopération française (French Cooperation) in the month of May, providing an important service for the completion of the DAC indicators and the drawing up of the French plan of action. In numerous countries, French aid was the pioneer and still facilitates sectoral or overall coordination. It supports the implementation initiatives of the Declaration of Paris in countries that desire to do something on the subject. It identifies key actors, within administrations as well as outside of them. Generally, in the ZSP (zone of primary solidarity), mobilization of the French network is an important condition of success for the harmonization of aid.

In the complex and changing world of international aid, the Declaration of Paris should gradually permit a real rationalization of aid at the level of beneficiary countries. This Declaration underlines the challenge of ownership by the beneficiary countries of the, in principle growing, means from which they should benefit in the years to come. In turn, this ownership goes back to numerous questions internal to the beneficiary countries the importance of which must not be underestimated.