Improving Aid Effectiveness Presentation by Ms. Pauline Hayes Head, Europe and Central Asia Department, DFID Done on behalf of wider donor community Aid Effectiveness is about: making sure donor support collectively supports national efforts to develop and to reduce poverty. We measure impact of aid effectiveness in terms of the impact of national efforts and programmes and how effective they are. We do not measure impact in terms of the effectiveness of individual donor projects. This is because successful donor projects, although important, may be successful individually but have no overall impact on development in the country.

Paris Declaration on Aid Effectiveness What? Basic commitments for better use of aid When? March 2005: 91 countries, 26 international organisations Why? To help countries achieve Millennium Development Goals, increase growth and improve governance Kyrgyz Republic: pilot country for reporting on progress against 12 aid effectiveness indicators What is aid effectiveness about? Paris Declaration sets the international context and outlines the basic commitments and responsibilities of the donors and governments – in order to make aid more effective. Elaborated in 2005 and builds on the earlier 2003 Rome Declaration. Full copies in English and Russian are in your packs for you to refer to. We have all signed up to it - endorsed by the Kyrgyz Republic and most countries and international organisations sitting in the room today. Overall aim is to ensure aid is used more effectively to help partner countries achieve poverty reduction. The Kyrgyz Republic, with the Ministry of Finance in the lead, reports annually against the 12 aid effectiveness indicators

Key Principles OWNERSHIP – putting national partners in the driving seat ALIGNMENT – donors align with partners development strategies (JCSS) HARMONISATION – donor actions more transparent and collectively effective MUTUAL ACCOUNTABILITY – government and donors jointly review progress, take action Main highlights in KR…. See packs for Kyrgyz returns in 2004 and 2005 on progress towards achieving aid effectiveness indicators. On ownership, the Kyrgyz Republic has a national strategy (the recently approved Country Development Strategy) and several sector strategies On alignment – some strategic alignment already, particularly with the Joint Country Support Strategy taken forward by the donor community. BUT on alignment - in terms of using national systems – the Kyrgyz Republic does not score well. Only limited proportion of donor funds go through the government budget. Why? Governance – fiduciary risk concerns….. On harmonisation – active national led donor co-ordination in some sectors (health, education, agriculture). Donors also well co-ordinated through the Donor Coordination Council, providing joint messages to government on key issues. However, could still do a lot more. On Mutual Accountability and results – all aware of an annual return to OECD-DAC on the indicators. Also a National Action Plan, although this has been largely redundant over the last two years. BUT….little attention paid to the results of the annual reviews and follow-on actions limited.

How Can We Improve in the Kyrgyz Republic? Country Development Strategy and Sector Strategies should be linked to budget, implemented well and monitored Strengthen national systems e.g. public financial management at national and regional levels Donors should support via technical assistance where requested On government side there are a number of areas where it would be in your interest to make progress. a) Vital that Country Development Strategy and sector strategies are better costed, linked to the national budget, and have robust monitoring and evaluation framework. b) Government can then implement, with donor support, and measure and report on impact against sector outcomes, and overall economic growth and development indicators. Work is in progress on this agenda and we will support the government fully on the next steps c) PFM systems need strengthening if donors are to put funds through national systems. For example continuing with on-going budget reforms and implementing the National Public Financial Management action plan. Donors will provide support as needed in a co-ordinated manner.

How Can Donors Improve? Support national leadership Use national systems where feasible Reduce number of Project Implementation Units Reduce bilateral missions (over 300 annually) Increase Joint Analysis and Joint Reviews Strengthen Donor Coordination Council - and involve the Government On the donor side there are a number of actions we can take in line with our Paris commitments. support national leadership – and use national systems to deliver our aid where possible. But this requires government action as well. Until then we can provide support off-budget, eg. very successful Village Investment Programme supported by ARIS. This creates greater impact and uses national staff, building up national capacity. c) reduce the number of parallel Project Implementation Units - we know that Government is keen for us to do this. d) reduce the huge numbers of bilateral missions taking place that continue to take up much valuable time of Government staff, when you should be attending to core business e) build on successful joint analysis of the Joint Country Support Strategy that helped in the Country Development Strategy elaboration. f) take forward more joint reviews as exemplified by the recent Joint Portfolio Performance Review from the IFIs g) strengthen the, otherwise excellent Donor Coordination Council, providing joint messages to Government when requested, and involving Government more in our discussions. Ideally government should be in driving seat – key Paris principle.

Success Story: Kyrgyz Health Sector National Strategy, strong national leadership Implementation supported by donors, (5 do so on-budget – $15M pa, plus technical assistance) No PIU - all financial management functions done in-house Improved MOH / MOF relations – better budgeting, auditing and procurement management Joint monitoring of Manas Taalimi – third Health Summit last week Many people ask whether this all really works and whether applying aid effectiveness principles, really works and makes a difference to ordinary people on the ground – does it help improve their lives? In KR we already have one example where this does happen ie. implementation of Nationally-designed and Nationally-owned Manas Taalimi Health Sector Strategy. In the health sector aid effectiveness principles fully applied. Implementation is supported by the donors. All donors active in the sector have signed an MoU with Government. 5 donors provide on-budget financing to the tune of ~$15M per year. All technical assistance is fully co-ordinated by the Ministry. There is no PIU to manage these funds, with management of national and donor resources fully taken forward by civil servants Better joint work between the Ministries of Health and Finance, with capacity-building support from the donors has led to overall improvements in budgeting, auditing and procurement. Joint monitoring of Manas Taalimi implementation and the first 2007 bi-annual Health Summit was successfully completed last week

Impact on Health Sector Performance Improved financial management capacity within Ministry of Health Health budget increased in 2006 after 5 years of decline, 100% execution, donor funds additional Better health outcomes: reduced child and maternal mortality, reduced TB incidence More people using health services Poor people paying less This radically new way of working has been difficult as with any change process. Ministry staff have had to take on new responsibilities (without increase pay of special incentives), cross-Government working has had to improve and donors have had to break down barriers to work together under national leadership. Has it all been worth it? – Well undoubtedly so. Health Sector staff now have new skills and are often motivated simply by being in the driving seat of the reforms The health budget increased in 2006 after 5 years of decline and budget execution was 100%. Budget allocation figures have increased again in 2007 and will continue to do so until acceptable levels are reached. All donor funds are additional. Most importantly there are signs, that applying aid effectiveness principles is really making a difference to sector outcomes. Data taken from a recent Ministry of Health presentation shows that: Infant and Maternal Mortality Rates and TB incidence falling The number of people using health services has increased Poor people are paying less money to use services The donor community would like to thank the Government for its high-level support for health sector reforms and the Ministry staff for making the reforms work in a challenging environment.

Next steps Continuously improve ways of working JCSS – opportunity to put alignment in action Continue to support Manas Taalimi implementation applying Paris principles Roll out this approach to other sectors and issues Evaluate and communicate impact, success stories Encourage emerging donors to consider these approaches The final slide suggests some actions for further discussion. recommend continued support to the health sector, an excellent national example of aid effectiveness, in order to witness even greater impact in terms of better health of Kyrgyz citizens Aim for joint annual review – JAR - of CDS – jointly with the donors, GoKR in lead b) Use health sector experience to inform government reforms in other sectors e.g. line ministries, such as Education, and in cross ministry issues such as Public Financial Management reform c) impact of this new way of working should be evaluated and positively communicated to the public, who are largely unaware of the potential benefits of this new approach to delivering aid d) international architecture of aid is changing rapidly - additional donors are emerging - some represented here today. We recommend that new donors consider the aid effectiveness principles as they develop new programmes. Happy to discus further this agenda THANKS!

Thank you for attention! Presentation by Ms. Pauline Hayes Head, Europe and Central Asia Department, DFID I am here, on behalf of the wider donor community, to talk to you about Aid Effectiveness. It is important to make clear at the beginning that Aid Effectiveness is about making sure that donor support collectively supports national efforts to sustainably develop and to reduce poverty. We measure the impact of aid effectiveness in terms of the impact of national efforts and programmes and how effective they are. We do not measure impact in terms of the effectiveness of individual donor projects. This is because successful donor projects, although important, may be successful individually but have no overall impact on improved development and poverty reduction in the country.