Busan conference offers chance to tackle aid effectiveness
The time is right for a bold attempt to draw all countries together behind clear principles on aid, which could mean giving the OECD and UN a dual role in enforcing them
The fourth High Level Forum (HLF4) on Aid Effectiveness looks set to be a huge conference, with 2,000 delegates expected from all ends of the earth. It needs to have a huge impact to be worth the effort and money invested. After many months of uncertainty a consensus is beginning to emerge about what that impact might be: a “twin-track” approach.
On the one hand, the principles agreed in Paris six years ago to cover aid from OECD countries (known as overseas development assistance, or ODA) need to be re-emphasised. Progress has been slow, especially among donor countries, but there has been progress nonetheless. The principles are not perfect, but they are better than nothing.
The existence of a monitoring bureaucracy, however flawed the indicators being monitored, has led to improvements in aid efficiency in many countries and, crucially, a new tone to the relationships between donor and recipient. Recipient countries are demanding more, and donors are under pressure to comply. In return, recipient countries are improving aid and budget management.
But there is a second area of work that needs to be tackled head-on if it is to be relevant at the forum in Busan, South Korea, in November. The rise of the emerging powers, such as China and the other BRIC countries (Brazil, Russia and India), has challenged traditional concepts of “aid”. As recently as 2005, when the Paris Declaration was signed, the magnitude of the shift occurring in the sources and types of development finance (public, private and blended) was not fully appreciated. Today, it is impossible to fail to factor it in. In some poor countries China is now the major source of development finance.
The overriding weakness of the Paris Declaration is that it does not cover non-OECD official assistance providers and other development finance sources. The Paris Principles are not, as is sometimes thought, a blueprint for an ideal aid relationship. They were useful correctives to the specific aid activities of most development assistance committee (DAC) members, and continue to be so.
But they are not appropriate for other sources of funding. China, for example, has little interest in untying aid, with 40% of its aid delivered as a finished product (for example, a fully built road). The resurgence of interest in south-south co-operation gives us clues as to how aid will look in the coming era, with mutual interest replacing apparent charity as the prime motive.
The coming era of development will not be defined by traditional aid. By seeking principles that can govern all finance flows, even eventually private ones, the world moves beyond esoteric debates about whether flows, such as climate finance, non-ODA (pdf) official flows and complex blends of private-public flows, should be treated as aid or not.
That is why Andrew Rogerson and I have published a short opinion piece for the Overseas Development Institute, arguing that global reach is the most important prize at Busan. The Busan meeting’s main objective should be to reach global agreement on a few basic principles to govern all major forms of development finance. These principles should primarily be signed by all countries, international finance institutions and philanthropic organisations (including NGOs). Private sector umbrella bodies should also be encouraged to sign.
The risk of expanding the mandate to all flows is that traditional donors take their eyes off the ball with regard specifically to aid effectiveness. Conversely, Paris failed to link aid effectiveness principles to concrete development outcomes, and to capture the key political changes in a fast-changing world.
A focus on basic principles of development finance is a happy medium, broad enough to bring on board new players in a new global partnership, but specific enough to be meaningful.
Voluntary principles are not exactly the most exciting weapons in the international development armoury. Observed as much in their circumvention as in their fulfilment, they are painfully ineffective at creating the kind of rapid improvements most of us want to see. But they are often the best we can do, given the reluctance of powerful entities to submit to binding approaches. And they often set the tone of an era. We recognise the limits of what voluntary principles can achieve, but believe they will help nudge development financers towards better practices.
These principles should be applicable to all cross-border flows (as long as there is an entity that can sign up to them), unambiguously positive for development (ie it is inconceivable that development outcomes could be improved through reduced adherence), and measurable, preferably quantitatively.
Once principles have been broadly agreed, further work can be done, by institutions that have a broad-based mandate, to make them technically applicable. Other principles (covering traditional ODA, climate finance, responsible investment, extractive industries and many more types of finance) will remain intact, as subsets of these overarching principles.
The time is right for a bold attempt to draw all countries together behind clear principles that matter for development finance. Increasingly those responsible for the organisation of Busan are agreeing that this “twin-track” approach is the best way forward. The OECD DAC would remain the enforcer of the Paris principles covering DAC aid. But the UN would increasingly take on the role of encouraging the take up of the broader principles by all countries.
If Busan flunks it and fails to grapple with this broader agenda it will still be playing out the endgame of a previous era, rather than defining the new one.
Source: The Guardian