Development Officer’s Workshop: “New Trends in Development Cooperation” Berlin, 28 August 2006 by Richard Manning Chair Development Assistance Committee OECD/DAC’s Vision for the Future of Development Aid

Aid in Context Millennium Development Goals are a good framework for measuring results. But must not be interpreted narrowly. No substitute for local effort, better governance etc, or for creating conditions for private sector to flourish. No substitute either for more development-friendly policies by OECD countries and by “anchor countries” more widely. But aid can – up to a point – accelerate progress, help address bottlenecks, and ease the costs of rapid change. Will cover Scaling up; the Paris Declaration; and Capacity Development, refering to last year’s Peer Review of Germany where relevant.

Aid Volume: What’s the Real Story? (1) DAC Members’ net ODA and DAC Secretariat simulation of net ODA to 2010

Aid Volume: What’s the Real Story? (2) Focus on what the average well-performing poor country is seeing. Significant debt write off for some (but DAC treatment of Paris Club settlements overstate real resource transfer). Humanitarian aid increases focused on a few major disasters/emergencies. Perhaps an average 5% a year increase in “core ODA” to average poor country in past four years commitments imply much more rapid increase, particularly for Africa (doubling from 2004 to 2010).

Aid Volume: What’s the Real Story? (3) DAC/IBRD Scaling –up Exercise 16 replies on allocations to 2008 Represents about a quarter of DAC ODA Showed average increase of 7.5% a year ; only 4% for sub-Saharan Africa What of the big players? US? Japan? Germany? German position absolutely critical, but very demanding ($8 billion increase , the largest absolute increase of any DAC member) Crucial importance that DAC members deliver on their commitments

Aid Volume: What’s the Real Story? (4) Non-DAC donors: how important? A bit of history (separate slide) Non-DAC OECD donors: a growing force Middle Eastern Donors: more scope, but self-imposed constraints The “BRICS”: main impact likely to be in trade, investment and non-concessional flows?

US$ billion CMEA (1) Arab Countries DAC Countries Net ODA by major donor group (Constant USD, five-year averages)

From donorship to ownership Development Results Results & Mutual accountability 4 Ownership (Partner countries) Partners set the agenda 1 Aligning with partners’ agenda Using partners’ systems Alignment (Donors - Partner) 2 Harmonisation (Donors - Donors) Establishing common arrangements Simplifying procedures Sharing information 3

A key principle: Mutual accountability To track change and change behaviour 56 monitorable commitments: –Monitored at country level (CGs, RTs etc.) and… –Tracked internationally. 12 Indicators of Progress: –Capture progress against the 56 commitments. –Measures progress for donors AND partners. –To be adapted at country level and tracked internationally. Targets to be set against 11 Indicators Reviews of mutual progress at country level.

12 Indicators of Progress (1/1) OWNERSHIP 1Partners have operational development strategies ALIGNMENT 2Reliable country systems 3Aid flows are aligned on national priorities 4Strengthen capacity by co-ordinated support 5Use of country systems 6 Strengthen capacity by avoiding parallel implementation structures 7Aid is more predictable 8Aid is untied

12 Indicators of Progress (2/2) HARMONISATION 9Use of common arrangements or procedures 10Encourage shared analysis MANAGING FOR RESULTS 11Results-oriented frameworks MUTUAL ACCOUNTABILITY 12Mutual accountability

11 targets have been agreed Selected examples Indicator 10a: At least 40% of donor country missions in poorer countries should be jointly organised to cut costs. Indicator 10b: Two-thirds of all country analytical work should be joint, drastically cutting the number of duplicative pieces of consultancy.

Top-level political and managerial commitment Adequate delegation to field level Willingness to adapt rule-books (may require discussion with Finance Ministry, Auditors, Parliament) Incentives Increased division of labour and delegated cooperation with other donors A degree of pressure from the recipient country Peer Review findings support case for institutional change in German aid delivery, in the direction of a more integrated field-based approach. Effective implementation likely to require:

Capacity Development (1) Growing consensus on aid effectiveness and capacity The 2005 Paris Declaration on Aid Effectiveness Calls for capacity development to be an explicit objective of national development & poverty reduction strategies The 2005 Paris Declaration on Aid Effectiveness Calls for capacity development to be an explicit objective of national development & poverty reduction strategies The UN Millennium Project and the Commission for Africa Challenges the world to treat capacity development with greater urgency The UN Millennium Project and the Commission for Africa Challenges the world to treat capacity development with greater urgency The New Partnership for Africa’s Development (NEPAD) Identified capacity constraints as a major obstacle to sustainable development The New Partnership for Africa’s Development (NEPAD) Identified capacity constraints as a major obstacle to sustainable development Capacity Development: One of the most important elements of aid effectiveness Capacity Development: One of the most important elements of aid effectiveness Without sufficient capacity, development efforts will not succeed

Capacity Development (2) Building capable institutions, including effective states, is in many ways THE key to sustainable development Important successes in Central and Eastern Europe show what can be done--provided the incentive framework is in place and an enabling environment conducive to change. Can we replicate these in poorer and more fragile areas? Need to look at both supply and demand sides of capacity Need to look beyond aid to OECD government policies impacting upon brain drain; return migration, and the role of the diaspora. Relevance of Paris Declaration principles (not just the indicator for TC) Relevance of Peer Review finding on need to move from an instrument-driven approach

Capacity Development (3) Scope & limits of Capacity Development Promotion of good governance Building an effective state Institutional Development Capacity Development

Capacity Development (4) Many evaluations – going back to 1960s – highly critical of donors’ approach to building institutional capacity (NB capacity development, an outcome, does not equate to technical cooperation, an input) Well known problems of supply-led technical cooperation – though some TC outstandingly effective DAC Policy paper emphasises the need to understand and take action at the organisational and broader institutional context Supply side: must give more weight to ability of experts to operate effectively in developing country situation. Technical competence essential but not sufficient. Local and regional expertise may be more relevant as well as far less costly Demand side: partner in the lead; build systems of accountability: tax, audit, statistics, Parliamentary scrutiny, community groups, civil society, media, evaluation.

The role of partner countries and donors in capacity development Growing tension in Fragile States between medium term concerns with institutional sustainability and the short term imperative of ‘getting the job done’? Partner Countries Lead the process Set specific objectives in national development plans Implementation through country-led strategies Partner Countries Lead the process Set specific objectives in national development plans Implementation through country-led strategies Donor Countries Mobilize financial & analytical support around partner country’s objectives, plans & strategies Make full use of existing capacities Harmonize support for capacity development Donor Countries Mobilize financial & analytical support around partner country’s objectives, plans & strategies Make full use of existing capacities Harmonize support for capacity development

Vielen Dank!