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What’s the future role and structure of aid and aid donors? Some options

April 9, 2014
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If I told you, I'd have to shoot you

If I told you, I’d have to shoot you

Yesterday saw the announcement that foreign aid has defied economic and political gravity and reached a record high of $135bn in 2013. The news came as I headed off for a fascinating discussion on reforming the aid system at the ODI. Under Chatham House rules alas, so no names or institutions (ODI gave me a pass on crediting them as hosts), but they included aid types from across Europe, researchers, and a sprinkling of NGOs and retired diplomats.

The underlying dilemma was, I think, how to respond to a world where the big challenges are less and less about shipping cash from ‘North’ to ‘South’, whether because the distinction is no longer useful (rise of the middle income countries, ever-more variable geometry of international alliances and partnerships), or because the issue is a global collective action problem (climate change, arms trade), or because money (or lack of it) is not the main problem/solution (fragile states).

Among the traditional donors (this discussion wasn’t about the new arrivals on the aid scene), the current institutional options seem to be:

  • Integrating aid with the broader foreign affairs function, and foreign affairs takes the lead (Norway, Denmark);
  • A development agency within the ministry of foreign affairs leads on policy and implementation (Australia, Canada, Ireland, Netherlands)
  • A ministry does policy and a separate executing agency, including development banks, spends the money (France, Germany, Japan, US)
  • A single separate ministry runs both policy and implementation (UK)

 

But which, if any, of these are best suited to the new world order? Some of the points that arose in the discussion included:

  • Reforms and new approaches typically emerge when events/’something new’ combine with a ‘felt urgency’ and political leadership – eg 9/11 or the 1970s oil shock. That generates a period of innovation and cross-departmental cooperation for 3-5 years, before institutional siloes reassert themselves and the system reverts to the status quo.
  • A single ‘ministry of everything’ has downsides – specialist ministries (defence, diplomacy, development) accumulate ‘siloes of expertise’ that are actually very important (don’t ask a social development adviser to run a war or build a bridge).
  • Governments with big aid budgets need a separate department, or else the money will distort the incentives and operations of the host ministry (‘the tail wagging the dog’).
  • Keeping aid under the ministry of foreign affairs makes sense when foreign policy is primarily driven by altruism (the Nordics), but not when the country has an active foreign policy based on national interest (US, UK). (‘development is normative; foreign affairs is functional’; ‘there is a risk of instrumentalization’).
  • Whatever structure we propose has to be highly flexible – we have no idea what will be the medium term outcome of today’s big geopolitical questions (China v Japan; Russia v Europe; the disintegration of the 20th Century settlement in the Middle East).
  • One of the side effects of the UK’s extraordinary (and very welcome) commitment to reaching 0.7 is a marked reluctance to shake things up in any way – the risks of doing so are all downside (rocking boats, babies and bathwater etc). Understandable, but at some point, the UK will have to rethink its aid arrangements, if this discussion is anything to go by.

UK aid poster

My conclusion was that we do need a new way of thinking about the challenge of international development that goes beyond obsolete divisions of North-South, or ever-more complicated subsets of them (LDCs, LICs, MICs, fragile and conflict states, Small Island Developing States, all of which are contested and overlapping). One way to rethink would be to start with three different kinds of problem and think through the institutional arrangements best suited to each:

  1. National problems to which the answer is primarily money (some aspects of health and education, social protection, humanitarian emergencies) need a traditional aid spending ministry
  2. National problems to which the answer is something else (e.g. thinking and working politically, convening and brokering solutions, testing new approaches) need a new kind of approach that offers more expertise and less pressure to sign big cheques
  3. Collective action problems between governments (tax havens, climate change) and issues of policy coherence within governments (eg trade policy, migration) need a network approach across government departments, led from the top, rather than a separate ministry (‘global public goods are currently not represented in any line ministry’)

A further layer of complexity, and potential division of labour, is between national donors and the multilateral system. What aspects of this ever-wider spectrum of activity should DFID and its bilateral friends leave to the World Bank or UN?

If this post is a bit chaotic, that probably reflects the meeting. There was a lack of clarity/agreement on what (if anything) is broken in the current system, let alone how to fix it. But the conversation was definitely interesting enough to warrant a post.

13 comments

  1. I agree with your call for more innovative solutions or alternatives to the future role and structure of aid, Duncan. So far, these all all feel like the kind of options that the industry itself would put forward… Alternatives in which it has a future.

    I have been surprised at the good reception that my unmediated aid idea has had since I presented it in Australia last year: http://onthinktanks.org/2013/12/01/what-is-the-point-of-the-development-sector-unmediated-support-is-the-future/

    I am not an expert in these issues (maybe this is something to look into in the future) but it’s been possible to see how this model is already working and picking up pace. Only yesterday I met a group of Brazilian thinktankers in London here to meet their peers in uk think tanks. Last month a delegation from the Peruvian science and technology research funding body visited its counterparts across Europe to learn from them. In these cases there has been no Aid agency to mediate. The connections were done directly or via personal or professional networks. Or via the FCO – which is the natural contact point for businesses interested in trading with the uk… So why not for the government or for NGOs?
    The challenge, I think, is for people and organisations IN the industry to think about a future where such industry may not exist… Or to allow OUTSIDERS to join the debate.

    1. Thanks Enrique, the same thought occurred to me yesterday – the people in the room were almost entirely European/North America and white

      1. and men? (hopefully not, but that is the usual equation!) your sentence in parentheses “don’t ask a social development adviser to run a war or build a bridge” prompted the thought that a social development adviser may actually have found other solutions to the problem – i.e. a political dialogue instead of a war, or a job-creating ferry system instead of a bridge…

  2. Keeping aid under the ministry of foreign affairs makes sense when foreign policy is primarily driven by altruism (the Nordics), but not when the country has an active foreign policy based on national interest–but would that mean it’s easy and plausible to transit DFID back into the FCO?

  3. Dear Duncan,

    I find your report very clear, and not chaotic at all. It is very much in line with my thinking, including your classification.
    Integrating development policy into the ministry of foreign affairs is even in “altruistic” countries problematic. Development should indeed be very much based on nuanced knowledge of what works in what situation. However, foreign affairs tends to deal with broad strokes and great principles. Especially in altruistic countries. From there the push for big solutions, silver bullets that detract from searching solutions on the ground: Coordination as the one and all, the paris Agenda, with the country “government” ownership agenda, etc.

    Your classification is very important.
    I find the role of development actors in middle income countries concerning rule of law, transparency, climate change very important. It concerns internationally agreed standards on human rights, anti corruption and name it. For these aspects it is possible to get support, but the case is only rarely made. With the new donordrive to leave MICs, we notice a devastating abandonment of this work where it has the most impact.
    I would add a category: countries where the population has no acces to basic services as defined e.g. in the Sphere standards. I would consider this kind of countries a priori in humanitarian crisis, with a right to aid.
    Strengthening the institutions if possible, but not primarily. We should not let them die for the greater good.

  4. Having listened to the Easterly Barder debate last night, and having read a very interesting paper (not sure it’s in public circulation) by Lavell and Maskrey on the Future of Disaster Risk Management – I am thinking that we need a new imaginary.. If for instance we change our nomenclature (as Lavell and Maskrey suggest) from “developed” and “developing” countries, to “sustainable and adaptable”, or “unsustainable and non-adaptable countries”, or “countries whose sustainability depends on others” – would not the relationships of aid change dramatically?

  5. Problems for which money is the answer are probably far less common then we assume. Those which at first appear to be money problems are almost invariably rooted in something else, i.e. problems which limit domestic tax revenue that aid recipients need to pay for money problems themselves.

    So much expertise in delivery of better public services is held in those public service institutions themselves – not in consulting firms who get the contracts to provide such TA.

    Taking the UK as an example, what about an aid insitution, or part of one, whose purpose is organising for NHS doctors and nurses to spend time working in hospitals overseas, for good teachers to provide training, for IT staff to work with IT departments in corresponding departments and ministries, for agronomists and research scientists to share their skills and knowledge.

    *Just realised you suggested something similar in your article on unmediated aid! Though here I am suggesting a little mediation is needed to help make links between real experts. Your unmediated aid article also reflects my belief that south-south cooperation is important but overhyped and at risk of making all north-south cooperation (meaning cooperation between people who are the recognised world leaders in a technical field and people who are not) seem neo-colonialist.

    1. I agree, Leon. A bit of mediation is needed but limited. Once the connection is made it should not be necessary to stay around. Also, mediation does not require a degree in international development.

  6. In response to a question that was asked to Duncan via a tweet “did ODI really have no-one from LIC/MIC govts or organisations at their future of aid mtg?”, I wanted to clarify that the roundtable was for academics, former diplomats, and for those who have been thinking about future institutional and operational structures for development agencies. It was not a meeting of donors; in fact, there were no donors around the table. We’re planning to engage with a broader set of actors in the next stages of our work.

  7. Raphaëlle,

    Unfortunately, the round-table demographic will change very little as Priyanthi observes. Unlike aid critics who lament a tragedy regarding how aid does not work, I wish to lament a tragedy of ideas about ‘the science of development’. Little has changed since the idea of aiding development started in the 1950s. Same dominant demographic, same ideas and same results. You just need to look at the think tanks. Yes, wonderful, well-meaning and thoughtful people but it is inconceivable that they know how to fix all problems. I think it is time to get out of the tank (or just mix it up)!

    I too watched the debate between Owen and Bill. It turns out, to borrow from Bill Easterly’s book (on the debate that never happened between Friedrich Hayek and Gunnar Myrdal), this is a debate that never happened between the two discussants. Bill scaled back to leave us with a much to do about nothing feeling and Owen did what technocrats are good at doing, justifying their good deeds.

    In terms of how development structures are configured, we are seeing an unprecedented consolidation of the top-down ethos in policy and learning (3ie for example). So Enrique, it is ‘Mediated Development 10.0’!

    1. At the same event where I presented the idea of unmediated aid, Uma Kothari talked about different ideas of development. She argued that the aid sector accepts one future -that developing countries will be like developed countries in the future. It suggests that developing countries are in the past and developed in the future.
      Besides being a brilliant presentation (I had to correct my previous statement not to study development studies -unless it is with her) I found that she provided an excellent explanation to the way in which development technocrats and advocates go about telling everyone what they should be doing. It is not that the ‘know’ how to develop, they think they know because they assume they are developed already.
      Uma argues for different futures. I like that. Messy, but interesting.

  8. Dear Duncan,

    I think it was expected to see ODA rise…but what constitute ODA is another question. The same day you wrote this piece, I was looking at an article here in Colombia where USAID is now in the mortgage business with poor population!! And this is the new ODA. In the 50+ years of ODA, what is included in ODA keeps on evolving to the point where any increases are meaningless – from volunteer programs to refugee cost and unsubsidised loans…

    Now for the unsubsidised loans! In recent years the development banks of France, Germany and the EU can raise funds at ~2%, though this may be about to change, if recent trends on the bond market continue. They have then re-lent the money to developing countries at 3-5%.

    With a long maturity, these loans can meet the ODA “grant element” test (25% grant element when measured against a loan at 10% interest)
    But does meeting that numerical formula mean that are the loans “concessional in character”, as also required by the ODA definition?

    So much to say that lots needs to be done but as ODA becomes more irrelevant in numbers…maybe what we are trading ODA for..might be short lived and the debates will come long after.

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