Challenges to Aid Effectiveness: Donor Fragmentation International Development Cooperation: Theory & Practice SNU GSIS Challenges to Aid Effectiveness: Donor Fragmentation

Complexity in Aid Architecture Proliferation of donor agencies 56 bilateral donors, over 230 international organizations, funds and programmes, plus private organizations (World Bank 2008) <New aid architecture (Kharas 2007)>

Complexity in Aid Architecture According to 2011 OECD Reports on Division of Labour: addressing cross-country fragmentation of aid An average donor present in 71 out of 152 countries In average, 21 donors (11 bilateral, 10 multilateral) present in recipient country (only DAC members and major MOs considered)

Complexity in Aid Architecture There are more than 3,000 pairs of donor/country aid relations Fragmentation ratio not much improved Fragmentation ratio

Complexity in Aid Architecture Aid fragmentation partly due to lack of concerted and co-ordinated aid allocation practices more transactions costs for both Donors: fixed costs maintaining minimum in-country presence and managing programmes/projects Recipients: burden on administrative capacity, difficulty in coherent policy making In Accra Agenda for Action (2008) international community committed to reduce the fragmentation of aid by improving the complementarity of donors’ efforts and the division of labour among countries and the division of labour among donors, including through improved allocation of resources […] across countries.”

Proliferation and Fragmentation (Acharya et al 2006) Extent to which an aid donor disperses its aid budget among a portfolio of potential recipients independent of the relative size of aid budgets Fragmentation Extent of dispersion in the sources of aid received by a recipient independent from relative sizes of aid receipts How to improve? coordination: to maximize cooperation and synergy and minimize competition and overlap sector-wide approaches (SWAps) budget support sector specialisation

Proliferation and Fragmentation (Acharya et al 2006) Index of donor proliferation

Proliferation and Fragmentation (Acharya et al 2006) obstacles and ideas coordination: to maximize cooperation and synergy and minimize competition and overlap sector-wide approaches (SWAps) budget support sector specialisation Are there ‘optimal’ concentration or fragmentation levels per donor or recipient?

Donor Practices (Easterly and Pfutze 2008) Many levels of fragmentation by donor for countries by donor for sectors by donor for each aid recipient International consensus: transparency is good too many donors in a single country and sector, too many difference projects for a single donor should be avoided. excessively high overhead costs relative to the amount of aid dispersed should be avoided 'tied' aid, food aid and technical assistance are thought to be less effective Five indicators for best practice of aid agency Transparency Specialization Selectivity Ineffective aid channels Overhead costs

Donor Practices: Transparency

Donor Practices: Specialization

Donor Practices: Selectivity

Donor Practices: Ineffective aid channels

Donor Practices: Overhead costs

Aid Management System of Donors International Development Cooperation: Theory & Practice SNU GSIS Aid Management System of Donors

Aid Management System Agenda for international development cooperation at international level More aid Better aid Aid coordination Aid Management at national level How they promote coherent development policies How they organize operations at HQs and in partner countries How they manage human resources How they allocate aid between channels, countries, sectors and themes How they monitor and evaluate aid programs legal framework and government structure

<Peer Review Reference Guide> DAC Peer Reviews Objectives To improve the quality and effectiveness of development cooperation policies and systems To promote good development partnerships for better impact on poverty reduction and sustainable development To promote individual and collective behavior change of DAC members to ensure their development cooperation policy framework and systems are fit for purpose <Peer Review Reference Guide> holding DAC members accountable for the commitments they have made, and reviewing their performance against key dimensions of development co-operation and other domestic policies with an impact on developing countries learning and sharing good practice.

Peer Review Reference Guide

Twelve lessons from DAC Peer Reviews (from OECD Development Cooperation Report 2007) Strategy Finding the appropriate legal and political foundation Managing competing national interests Achieving greater policy coherence for development Public awareness Organizational management Identifying a leadership structure that works Dealing with institutional dispersion Managing contributions to multilateral institutions Decentralizing management to the field. Management of delivery Managing the scaling-up of development aid Maintaining a focused approach towards countries and sectors Performance-based management, evaluation and quality control Human resource management priorities

Lessons from Peer Reviews: Strategy Find the appropriate legal and political foundation Have a clear, top-level statement of the purpose of development co-operation, whether in legislation or another form, that has wide ownership and can remain relevant for a sufficient period Manage competing national interests Avoid letting short-term pressures jeopardize the long-term common interest in effective development Achieve greater policy coherence for development Set a clear mandate and establish mechanisms to ensure that policies are assessed for their impact on poor countries Public awareness Invest in delivering, measuring and transmitting results of aid-financed activity Comprehensive development legislation (DfID & UK’s Int’l Development Act 2002) or policy statement National priority concerns such as trade, political relationships or security (importance of political vision in US aid: 1961 Foreign Assistance Act) National decisions have international Impact: national policies may either promote or work against the needs of poor countries (in fields such as trade, migration or environment…) Strong public support is the best guarantee of political and legislative support… requires pro-active and targeted forms of public education and awareness building

Lessons from Peer Reviews: Organization Identify a leadership structure that works Task a sufficiently senior and publicly accountable figure with clear responsibility at the political level for the delivery of effective development co-operation Deal with institutional dispersion Rationalize bilateral aid structures to facilitate coherent action at country level Manage contributions to multilateral institutions Promote greater coherence between those responsible for different aspects of multilateral aid Decentralize management to the field The decentralization of responsibility to the field level can be beneficial, but it needs high-quality, lean supporting systems 5. Leadership structure… minister or deputy minister with a strong government position 6. Different structures for the management of bilateral aid: policy – delivery, actors (national, regional or municipal level) => clarity of responsibility and accountability, professionalism, effective coordination 7. MOFA & agencies: Bilateral and UN – MOF: major multilateral and debt relief (or loans) 8. Role of field offices?

Lessons from Peer Reviews: Delivery Managing the scaling-up of development aid Radical reforms in aid delivery will be vital as donors are forced to deliver more aid per head of agency staff, while increasing the effectiveness of this aid Maintaining a focused approach towards countries and sectors Most DAC members should focus their assistance on fewer countries, fewer sectors and, in particular, fewer activities Performance-based management, evaluation and quality control Develop a stronger culture of managing for results and align incentives accordingly, but in ways that promote, not weaken, local structures of accountability Human resource management priorities Securing and developing well-qualified, well-motivated local and expatriate staff is essential for any agency to function effectively. The good news is that quality agencies attract quality staff Organizational capacity is needed to scale up aid programs: more with less (more aid with downsizing the staff)? Staff numbers is important to cope with the increasing workload that comes with scaling up. Aid to too many countries with too many activities Accountability for both aid agencies and local organizations. Lack of understanding of the local context and its reluctances and/or inability to consult with and work through local communities, groups and organizations. Important of evaluation system capacity, lesson feedbacks, information sharing… Challenges: downsizing of gov’t personnel, inadequate staffing levels, changing skill needs, rapid turnover in staff... Local staffs? Commitment and expertise

Aid Management: Organizational Structure Many actors Ministries, aid agencies, policy makers National, regional and municipal level Universities, NGOs Who is responsible for what? Policy-making Main ministry with overall responsibility for aid policy Several ministries and inter-ministerial coordination body Implementation By ministry(ies) responsible for policy By separate agency(ies) Operation Degree of decentralization: HQs and delegations

Who has lead responsibility for bilateral aid

Who has lead responsibility for multilateral aid

Staff distribution between HQs and field offices

Proportion of staff in HQs and field offices

Organizational Structure for Managing Aid Categorizing organizational structure for managing aid Is there an independent ministry with overall responsibility for aid policy and implementation? Is aid policy decided by a main ministry or through coordination of several ministries involved? Is there a separate executing agency responsible for implementation? (1) Independent Ministry (2) Decision making (3) Separate agency category No By main ministry [Model 1] Yes [Model 2] Inter-ministerial [Model 3] [Model 4]

Model 1: integrated within responsible ministry [1] by each department [2] by development department Responsible Ministry(ies) Africa Department Asia Department Latin America Department Foreign Policy Trade Development Co-operation Responsible Ministry(ies) Trade Foreign Affairs Development Directorate Development Co-operation Denmark, Norway, etc. Greece, Italy, etc.

Model 2: policy ministry with separate agency A ministry of overall responsibility for policy with a separate executing agency responsible for implementation Main Ministry Others Ministry 2 Ministry 3 …. Main Agency Agency 2 US, Japan, Sweden US: while a number of ministries/agencies manage aid funds, State Department has overall responsibility and USAID is the largest institution administering about 40% of bilateral ODA. Japan: Since 2008, MOFA take the responsibility for policy and JICA is the main implementing agency. ….

Model 3: coordination among ministries Several main ministries with inter-ministerial coordination body Inter-ministerial co-ordination committee Ministry 1 Ministry 2 Ministry 3 Others …. France: Many ministries (M. of Foreign and European Affairs, M. of Economy, Industry & Employment, M. of Immigration and Development, etc.) are involved in ODA process with AFD as the principal executing agency. CICID decides policy direction and sector/regional priorities. Development Agency

Model 4: integrated independent ministry/agency An independent ministry or agency has the overall responsibility for ODA management. Ministry/Agency for Development Cooperation (Minister for Development Cooperation) UK: DFID Other Ministries …. Policy Planning Imple-ment Canada: M. of International Cooperation and Canadian International Development Agency. Agency 1 Agency 2 Agency 3 Germany: Federal M. for Economic Cooperation and Development (BMZ), with several implementing agencies such as GTZ, KfW and DED.

Korea’s Organizational Structure for ODA Committee for International Development Cooperation (CIDC) MEST MOSF MOFAT MAF Local governments Committee for International Development Cooperation (CIDC), a coordinating body chaired by the Korean Prime Minister which decides on key policies and plans of Korea's development assistance EDCF (in EXIM Bank) KOICA ….

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