1 Competing Visions of Development Cooperation Louka T. Katseli Director, OECD Development Centre ( University of Bern 17 October 2005

2 Overview The bumpy road to the 2005 UN World Summit Shifting paradigms of development co- operation The present “consensus” model Competing practices A smoother road ahead?

3 The bumpy road to the 2005 UN World Summit Development is back on the agenda Major commitments on aid volumes and delivery: total ODA up by $50b in real terms by 2010 (over 70% of this from EU donors) Paris Declaration on Aid Effectiveness (March 2005) A fragile consensus on policy coherence for development (Monterrey, 2002)

4 The bumpy road to the 2005 UN World Summit But diversity in both visions and practice reflects competing approaches to global governance Incoherent practices mean development impacts are harder to achieve The development co-operation system needs to cope with and reconcile differences

5 The Golden Age: Investment & Infrastructure (1950 – 1973) Critical bottlenecksPolicy priorities Capital availability Inadequate financing Unequal exchange Market failures Infrastructure projects Resource transfers: 0.7% ODA/GNI target Price stabilisation schemes Shifting Paradigms of Development Co-operation

6 From basic needs to the Washington Consensus (1973 – 1992) Shifting Paradigms of Development Co-operation Critical bottlenecksPolicy priorities Rural poverty Financial sustainability Macroeconomic management Government failures Development programmes for rural poor Basic needs agenda Structural adjustment lending (1979) Washington Consensus (1989)

7 Poverty Reduction and the MDGs (1992 – … 2005?) The Present “Consensus” Model: Critical bottlenecks Policy priorities Local capacity for poverty reduction Governance and Corruption Financial and debt crises Global financial instability Inclusion in global system Debt alleviation: HIPC Initiative (1996, 1999) PRSPs (1999) Poverty reduction and the MDGs (2000) Higher volumes of development finance: Monterrey (2002), Gleneagles (2005) Policy coherence for Development: Doha (2001) EU Communication (2005)

8 The Paris Aid Effectiveness Agenda (2005) Enhancing aid effectiveness by: Strengthening country ownership Aligning donor country strategies with recipient systems through sector- based approaches and increased budget support Harmonising donor practices through common arrangements at country level Managing for results: aligning with partner country performance assessment and results-oriented reporting Monitoring progress through 12 performance-based indicators Mutual accountability through transparent financial management (Source: DCD/DAC/EFF(2005)20)

9 The “consensus” model in practice 1. Priority setting 2. Implementation & allocation procedures 3. Monitoring and evaluation options 4. The development finance architecture

10 1. Priority Setting in Practice Actors A multiple donor-driven process (bi- and multilaterals) BWI dominance in policy selection Weakened and uncoordinated UN agencies Private institutions and multinational companies Policy process Normative one-size-fits-all approaches Insufficient harmonisation of bilateral donors Mismatch with local conditions and needs Diverse minimum eligibility criteria Selectivity Lack of policy coherence across relevant policy domains Effects Lack of voice and ownership Limited participation of local stakeholders Aid-dependency syndrome Diffused political responsibility Weakened credibility of domestic institutions Aid darlings and aid orphans

11 2. Implementation in Practice Actors A multitude of operating actors Policy process Improved but limited donor harmonisation Short-term disbursements Differentiated conditionality Plethora of donor-driven projects, policies and practices Multitude of funding mechanisms and instruments Parallel processes Effects Volatile and unpredictable financing High transaction and coordination costs on the ground Inefficient use of resources

12 3. Monitoring and Evaluation in Practice Actors Donor-side experts Evaluation units within donor institutions DAC monitoring Policy process Monitoring of inputs Limited use of objectives outcome indicators Limited peer reviews Effects Limited monitoring capacity Low accountability (on donor and recipient sides) Lack of transparent operations No arbitration mechanisms No internal learning by doing Limited international sharing of best practices

13 4. Development Finance Architecture Actors Competition among US / EU / Japan New actors UN under reform IFIs in transition Leading recipient countries Failed states DAC’s balancing act Policy process Disconnected global, regional, national and local processes & programmes Scale-up of aid (Gleneagles communiqué) Dispersed innovative sources of financing (e.g. IFF, airline tax proposal) Differentiated partnerships Effects No focal governance points New patterns of dependency Erosion of legitimacy

UN World Summit Outcome Summit “Outcome Document” (para. 22) “…We resolve: (a)To adopt, by 2006, and implement comprehensive national development strategies to achieve the internationally agreed development goals and objectives, including the Millennium Development Goals…”

15 A smoother road ahead? 1.Face reality: diverse preferences of donors and capacities of recipients 2.Enable those who can to lead: capable recipient governments and local accountable institutions 3.Provide incentives for participative and reform processes

16 A smoother road ahead? 4.Harmonise through alignment around achievable, short-term, sectoral and regional programmes 5.Finance programmes through appropriate pooling of diverse resources (e.g. ODA, public and private funds) via budget

17 A smoother road ahead? 6.Promote contractual relationships where possible 7.Develop mutual transparency and accountability through independent monitoring and evaluation mechanisms 8.Reward positive outcomes through performance-based conditionality

18 A smoother road ahead? 9.Develop differentiated engagement strategies for failed states 10.Mobilise stakeholders for a more coherent and accountable development finance architecture

19 Merci! Thank you! Grazie! Dankeschön! In dealing with the multiple and complex problems of development, we have learnt that we must be deaf, like Ulysses, to the seductive chant of the unique paradigm. Albert Hirschman (1995)