Aligning Investment with Development Goals in Central America

siecaJavier A Gutiérrez, Executive Director, Secretariat for Central American Economic Integration (SIECA)

Central America has an important opportunity over the next few years to build inclusive and sustainable development through deepening regional economic integration, both to further the development of its internal market at sufficient scale, and to present the region as more attractive for investment. At the Secretariat for Central American Economic Integration (SIECA), we view coordinated regional integration as crucial to the implementation of the 2030 Agenda for Sustainable Development and its Sustainable Development Goals (SDGs). Key priorities are facilitating trade, promoting sustainable, resilient infrastructure and ensuring the integration of small-scale enterprises into value chains and markets (SDG 9), as well as promoting gender equality through women’s economic empowerment (SDG 5).

Regional action to support trade

Central America has made considerable progress in fostering trade openness and economic integration. The majority of trade within the region is now conducted under a free trade regime – tariffs apply to only 1.8 percent of originating products. Because of this progress, intraregional trade went from accounting for 16 percent of total exports in 1960 to 32 percent in 2015.

However, the World Bank estimates that around 12 percent of the value of consumer goods in Central American countries is still associated with the burdensome procedures and out-dated infrastructure in borders. It also takes an average of 13 days to export and 14 days to import products, and freight moves at an average speed of only 17 km per hour. Costs associated with road transportation are particularly high in the region. In advanced economies, freight transport prices are as low as 2-5 US cents per ton-kilometre, but they average 17 US cents per ton-kilometre on main Central American routes; prices stand out even against other developing economies. This is why trade facilitation has become one of the region’s priorities.

In addition to taking part in the implementation of the World Trade Organization (WTO)’s Trade Facilitation Agreement (TFA) – El Salvador, Honduras, Nicaragua and Panama have already notified the WTO of its ratification, and the rest of countries are in the process of doing so –, Central America adopted its Strategy for Trade Facilitation and Competitiveness (STFC) in October 2015. The Strategy will involve the implementation of five short-term measures to streamline border management procedures, and a medium and long term plan to consolidate a Coordinated Border Management (CBM) system in Central America, following the guidelines and best practices from the World Customs Organization (WCO). Successful implementation of the Strategy could enable an increase of between 1.4 and 3 percent in the region’s GNP and a surge in exports between 4.2 and 11.9 percent, according to the UN Economic Commission for Latin America and the Caribbean (ECLAC). The STFC, moreover, is conceived only as a step towards deeper economic integration. A roadmap to be implemented from now to 2024 has also been approved with the aim of establishing a Central American Customs Union (CACU).

Investment priorities

Besides trade and integration, Central America is seeking to improve its infrastructure. Panama is the most ambitious; having recently invested US$5.58 billion in the expansion of the Panama Canal; they’re also creating a second metro line, and have already announced a third one valued in US$2300 million. Meanwhile, Honduras has focused in infrastructure supportive of trade facilitation, and Guatemala and El Salvador have devoted resources to energy-related projects.

Despite this the region still faces a sizeable investment gap. According to ECLAC estimates, Latin America needs to spend some 6.2 percent of GDP per year on average to fund infrastructure investment needs in transport, energy, telecommunications, and drinking water and sanitation, but spending is currently below 3 percent of GDP in Central America. The region also needs to revamp its existing infrastructure, building resilience to the effects of climate change, and improving adaptive capacity to face climate-related hazards and natural disasters, reflecting the targets under SDG 13 on climate change.

Just as crucial is investment in boosting micro, small and medium enterprises (MSMEs). Around 96 percent of Central America’s companies are MSMEs, which support 54 percent of employment and contribute to 34 percent of the region’s GDP. It is thus crucial to harness the potential of the regional market – which is large, with similar cultural background and a shared language – to offer small firms the opportunity to engage in international trade. SIECA has intervened to bolster MSME participation in value chains for key export products, including bovine meat, natural honey, foliage, cardamom, tilapia and shrimp, through the Regional Programme for Quality Support of Sanitary and Phytosanitary Measures in Central America (PRACAMS), which operates with funds from the European Union.

Moving forward, the region is looking to support MSMEs in other sectors of industry, creating a path for entrepreneurs to join the formal economy, create better jobs, and – because 46 percent of micro enterprises are owned by women – boost women’s participation in regional and global value chains and their economic empowerment.  A recent SIECA study shows that the sectors with the most potential for participation in value chains include food preparations, vegetables, cardamom, coffee, and cattle.

Addressing financing gaps

All these efforts require a substantial amount of support. Overall, SIECA managed US$9.3 million in cooperation funds in 2014 and US$11.7 million in 2015, including for the work on MSMEs and GVCs above. As the sustainable development agenda moves forward, however, regional efforts will also require improved monitoring and evaluation mechanisms to ensure effective allocation of funds and an overarching strategy that ensures resources are aligned with the region’s own development goals.

Preventing overlaps or contradictions between each countries’ fund allocation will be crucial. To achieve this, the Council of Ministers of Economic Integration is expected to soon approve the Central American Aid for Trade Programme (AfTP), and later submit it to the Summit of Presidents for its adoption, a systematic investment plan to address regional trade-related investment needs in a coordinated way.

In SIECA’s experience, aid is more effective when there is a close collaboration between countries and donors. Clear communication and feedback mechanisms have helped us enhance the effectiveness of our collective actions. We’ve also learned the importance of coordinating the execution of projects at the regional level, to avoid redundancies and ensure regional efforts are coherent. Instruments to assist leaders in identifying financing gaps and seek investment and funds to cover them are also crucial.  Applying these lessons will be crucial for success as Central America moves ahead with the implementation of the 2030 Agenda.

Useful links

The OECD and Latin America and the Caribbean

OECD Latin America Economic Outlook 2016: Towards a New Partnership with China

Aid for Trade: From Hong Kong to Nairobi, and beyond

AFT 10Frans Lammersen, OECD Development Co-operation Directorate

The Tenth WTO Ministerial Conference, taking place this week in Kenya, offers an excellent opportunity to take stock of the achievements of the Aid for Trade Initiative and reflect on how to continue its relevance in the changing trade and development landscape.

Ten years ago when opening the Sixth WTO Ministerial Conference in Hong Kong, Pascal Lamy lamented the absence of a magic wand to conclude the Doha Development Agenda. What proved to be magic in Hong Kong was the agreement on a mandate to operationalise aid for trade. A WTO Task Force recommended using existing mechanisms for identifying and prioritising trade-related capacity constraints in developing countries around which donors should align their support.

So 10 years on, did Aid for Trade deliver on its promise?

The Initiative created strong partnerships between developed and developing countries, between the trade and development communities, between the traditional and non-traditional donors and between the public and the private sector. These partnerships are based on a common agenda with clear objectives and reciprocal commitments.

Successive Global Reviews and Aid for Trade at a Glance reports have shown that the Initiative has raised awareness among developing countries and donors about the positive role that trade can play in promoting economic growth and development. Moreover, developing countries, notably the least developed, are getting better at articulating, mainstreaming and communicating their trade-related objectives and strategies.

As a result, cumulative aid-for-trade disbursements reached USD 245 billion and an additional USD 190 billion in other official flows, since the Initiative started in 2006. Commitments stood at USD 55 billion in 2013, an additional USD 30 billion compared to the 2002-05 baseline average. This has raised the share of aid-for-trade in sector-allocatable aid to 38% in 2013 from an average 32% during the baseline period.

But are these substantive aid-for-trade programmes also effective?

According a broad range of trade and development literature they are indeed; both at the micro and macro level. More specifically, OECD research found that one dollar extra invested in aid-for-trade generates around eight additional dollars of exports from all developing countries – and twenty dollars for the poorest countries. Results, however, may vary considerably depending on the type of aid-for-trade intervention, the sector at which the support is directed, the income level, and the georgraphic location of the recipient country.

These empirical findings are buttressed by the aid-for-trade case stories. The sheer quantity of activities described in these stories suggests that aid for trade is now central to development strategies and has taken root across a wide spectrum of countries and activities. Although it is not always easy to attribute cause and effect, the stories show tangible evidence of how aid-for-trade is helping countries build the human, institutional and infrastructural capacities for turning trade opportunities into trade flow and helping men and women make a decent living.

Despite these significant achievements, the effectiveness of the Initiative could be further enhanced through regional programmes. Deepening economic integration via regional co-operation is a key priority in the reform strategies of most developing economies. It is also actively promoted by donors. The support for and results of these programmes can be strengthened by involving Regional Economic Commissions and Regional Development Commissions to act as honest brokers to help developing countries find common ground, to offer financial incentives, to build human and institutional capacities, and to harmonise regulations.

However, what is now most important is how aid-for-trade can best support the Sustainable Development Goals. The SDGs highlight that “(…) increasing aid‑for‑trade support for developing countries, in particular the least developed (…)” would help to “(…) promote inclusive and sustainable economic growth, full and productive employment and decent work for all.”           Operationalising these objectives could be achieved through focusing the Initiative on improving connectivity, expanding the scope to services and promoting green growth.

A focus on reducing trade costswhich are highest for LDCs, SMEs and agricultural goodsprovides an operational focal point for an action-oriented aid-for-trade agenda among a broad collation of stakeholders, including the providers of South-South cooperation and the private sector. The advantages of such as a focus is also that it is neutral in the sense of benefiting not just exporters, but also importers and households, and trade in goods and services.

Service trade is important for developing countries. Services are not only an important economic sector in their own right, such as for instance tourism, which for 11 LDCs is the biggest source of foreign currencies, but also increasingly as an important input to merchandise trade and linking to global value chains. The emphasis should be on those areas that are central to promoting sustainable development, such as agriculture, energy and transport.

After the successful conclusion of COP21, aid-for-trade should support developing countries in moving to sustainable agriculture, building climate-resilient infrastructure, strengthening the supply chain of low-carbon technologies and environmental goods and services, and more generally helping developing countries with achieving green growth.

In short, to remain relevant after 10 years aid for trade should focus on the fundamental changes that are occurring in the trade and development landscape. The first WTO Ministerial Conference taking place on the African continent should provide the impetus to ensure that the Aid for Trade Initiative becomes an integral part of delivering the Sustainable Development Goals by 2030.

Useful links

OECD work on Aid-for-Trade

Aid-for-trade on the Insights blog

Profligate spending?

Global partnership“There are few more confused policies than this Government’s on foreign aid, which has seen the budget soar by a staggering 28 per cent in the past year, to £10.6 billion. This figure, revealed by the OECD, represents probably the biggest percentage increase in a single year ever enjoyed by any department in British peacetime history. And it has happened for no obvious reason. […] The fact that the overseas aid budget is one of the few to be ringfenced often feels more like a public relations exercise than an act of good governance. Rather than boasting of their compassion, ministers should provide more concrete evidence of what our spending has achieved.” That’s the UK Daily Telegraph’s reaction to what it calls “Profligate spending on foreign aid” after seeing the latest figures published by the OECD Development Assistance Committee (DAC).

Today and tomorrow, over 1500 “development leaders” will join Enrique Peña Nieto, President of Mexico, UN Secretary-General Ban Ki-moon and OECD Secretary-General Angel Gurría in Mexico City to discuss the kind of evidence The Telegraph is asking for. The first High-Level Meeting of the Global Partnership for Effective Development Co-operation will review global progress in making development co-operation more effective; agree on actions to boost progress; and “anchor effective development co-operation in the post-2015 global development agenda” – the set of goals and policies that will take over from the UN’s Millennium Development Goals after their 2015 target date.

The UN and OECD will be presenting Making development co-operation more effective: 2014 progress report. The OECD DAC’s data show that aid rose by 6.1% in real terms in 2013 to reach the highest level ever recorded, despite continued pressure on budgets in OECD countries since the global economic crisis. Donors provided a total of $134.8 billion in net official development assistance (ODA), marking a rebound after two years of falling volumes. In all, 17 of the DAC’s 28 member countries increased their ODA in 2013, while 11 reported a decrease. Net ODA from DAC countries stood at 0.3% of gross national income (GNI.) Five countries, including the UK, met a longstanding UN target for an ODA/GNI ratio of 0.7%. At the same time, the fall in the share of aid going to the neediest sub-Saharan African countries looks likely to continue in the years to come.

The 2014 progress report looks at whether this money was well spent, based on data provided by 46 countries that receive aid, or “development co-operation” as the book sometimes calls it. This isn’t the only piece of jargon you’ll need to know to be able to understand the report. The assessment starts by looking at “country ownership”. The case of Korea, where the Global Partnership was created in 2011 at a conference in Busan, illustrates what this refers to. It means that countries receiving aid take charge of the process. Korea wanted non-military aid rather than the guns, tanks and planes it was being offered, and it insisted on focusing on large enterprises rather than the small and medium-sized businesses foreign development experts told it were the key to success. History shows that the Koreans knew better than anybody else what they needed.

Like many aspects of international cooperation, this sounds like common sense, but people involved in actual projects can often tell of money wasted because the experts didn’t know enough about local conditions – building industrial plants without bothering about where the energy to power them would come from for instance. Country ownership appears to be strengthening, but it’s too early to say whether this is translating into increased use of developing countries’ own ways of assessing results to guide cooperation.

Country ownership should reduce the number of useless projects, especially when it is combined with another Busan indicator – untying aid. Many projects that failed in their stated objectives, or contributed little to helping most people in a country improve their lives, were financed to help businesses in the donor country. The money was given on condition that it was spent in a certain way, on certain suppliers, even if the same goods or services could have been obtained more cheaply elsewhere or the funds spent on something more useful. In 2012, 79% of ODA was untied, compared with only 50% at the start of the millennium.

A common criticism of aid is that it ends up in the offshore bank accounts of kleptocrats. And the critics aren’t just in donor countries complaining that income from taxes should be spent at home. Writing in The Nigerian Voice, Gambian journalist Matthew K. Jallow argues that “… a major debilitating by-product of foreign aid to Africa is the culture of corruption that has taken root at every level of every government. Today, corruption has become the way of life in every country in Sub-Saharan Africa”. Jallow’s strategy for fighting this is transparency, accountability, and good governance. Making development co-operation more effective takes a similar view, stating that the “drive for transparency is starting to show results”, although the report also warns that there’s still a lot to be done by donors and recipients alike. “Inclusiveness” is one way to boost transparency. In other words, include non-state actors in national systems and accountability processes. Unfortunately, a government-centred, North-South perspective is still common.

Overall, the report concludes that there are some encouraging signs that “longstanding efforts to change the way development co-operation is delivered are paying off”, and that the quality of this co-operation is improving, but we still haven’t met the targets that the Global Partnership set for 2015, and we won’t meet them without more effort.

Useful links

OECD work on aid effectiveness

Getting smart with aid

Climate change threatens the most vulnerable
Climate change threatens the most vulnerable

Today’s post is from Jon Lomøy, Director of the OECD Development Co-operation Directorate (DCD-DAC). It is also being published by Development Progress.

It’s fashionable these days to talk down official development assistance – ‘aid’, for want of a better word. Certainly, there’s little doubt that its relative importance has dwindled as more developing countries gather the economic momentum they need to finance their own progress and as aid becomes just one of many sources of finance for development.

All of this is welcome and helps us imagine a day when aid is just a distant memory. But that day is not today. Aid still matters, as even a quick glance at the websites of DAC members’ development agencies shows. Here we can see countless examples of how donor countries work with developing countries to get ahead of the curve in meeting social and other objectives.

So, aid still has a role to play, but that role is changing and sometimes at such a pace that it can be hard to keep up. That’s why I want to set down, first, some of the characteristics of the changing world in which aid now operates and, second, how aid can best meet the needs of developing countries in this ever-changing landscape.

The world in which aid operates has shifted profoundly. Take poverty. The poorest people once lived in ‘poor’ countries but, as Andy Sumner has shown, today around three-quarters of them now live in middle-income countries. On one level, this shift simply reflects what some have called a statistical ‘artefact’ – the poor didn’t move countries, but their countries moved classifications from low to middle income.

On another level, however, it underlines how the fight against poverty is evolving. As Owen Barder has argued, ‘The figures suggest that the biggest causes of poverty are not lack of development in the country as a whole, but political, economic and social marginalisation of particular groups in countries that are otherwise doing quite well.’

At the very least, this shift underlines the reality that developing countries are increasingly diverse, spanning a spectrum from middle-income emerging economies like China to low-income fragile states like South Sudan. Their needs vary greatly, as does their capacity to drive – and fund – their own progress. To be effective, aid must respond to this diversity.

A second key change is the increasing importance of non-aid financing, such as foreign investment and tax revenues, for developing countries, as well as development co-operation provided by countries beyond the DAC. At the OECD, we calculate that aid provided by the ‘traditional’ DAC donor countries now accounts for just one-quarter of total financing for development (official development assistance as captured in DAC statistics divided by total developing countries’ resource receipts, 2012 data).

Aid must also respond to the changing international development agenda. While the final shape of the post-2015 development goals has yet to emerge, they seem likely to include at least two priorities. First, building on the MDGs, world leaders will probably commit to the eradication of absolute poverty over a relatively short timeframe. Second, we’re likely to see a gradual merging of the development and sustainability agendas. This makes sense: it’s already clear that climate change threatens the hard-won progress made by many developing countries in recent years while undermining the foundations of future growth in both developing and developed countries – carbon emissions know no borders.

So, how should aid respond? In many areas, it already is. In recent years, for example, a growing slice of the aid pie has been spent on climate change mitigation. And the pie needs to get bigger: by 2020, an estimated $100 billion a year will be needed from public and private sources to tackle climate change. In other areas, however, aid is dragging its feet, with some countries getting far less than their fair share: using a recently developed analytical tool, the OECD calculates that 8 countries – from Madagascar to Togo – are ‘under-aided’.

All of this only emphasises the challenges that aid must address. If it’s to succeed, it must become ‘smart’ – increasingly targeted towards the poorest countries and those that face the greatest difficulties in raising alternative finance for development. It must also become increasingly strategic in creating effective development partnerships and in mobilising non-aid sources of financing for development. These ideas might sound abstract, but they have real-world applications. A few examples:

Untie aid to improve transparency: ‘tied’ aid obliges developing countries to use goods or suppliers based in donor countries. Untying aid creates greater transparency to build more effective partnerships, and cuts the cost of goods and services by at least 15%.

More value for money with predictable aid: uncertainties about future resources complicate countries’ decision-making and can stand in their way when it comes to the strategic planning of their own development priorities. More predictable aid allows countries to better implement their own development plans and reduces the deadweight loss associated with aid volatility, which has been estimated to amount to 15%-20% of the total value of aid.

Use aid to mobilise domestic funding: in Colombia, a $15,000 investment in capacity building for tax administrators was followed by a 76% increase in tax revenues – a rate of return of about $170 for every dollar spent.

Use aid to mobilise additional resources: guarantees for development have been attracting attention among both the development community and the private sector as an effective tool to leverage private finance for development. According to a survey recently conducted by the OECD, guarantees issued by development finance institutions, both multilateral and bilateral, mobilised $15.3 billion from the private sector for investments in developing countries.

A last point: ‘smart’ should also mean taking our knowledge of what works in aid and putting it to good use. But, as a recent OECD paper pointed out, only 0.07% of aid allocated to fragile states is currently being used to bolster tax revenues in developing countries. Smart move? I’m afraid not.

Useful links

Should aid money go to peacekeeping?

Peacekeeping Mission
Pay them from aid money?

Today’s post is from Brenda Killen, Head of OECD’s Global Partnerships and Policy Division and Donata Garrassi from the International Dialogue on Peacebuilding and Statebuilding

Is peacekeeping a cost-effective way of spending aid money, as UK Prime Minister David Cameron implied last week in remarks quoted by the BBC?

In 2010, some forty countries in situations of fragility received around $50 billion in Official Development Assistance (ODA), as aid is formally known. This represents 38% of total ODA according to OECD figures. Global peacekeeping has cost an estimated $8 billion a year over the past few years.

These are significant sums, especially when governments are seeking ways to reduce their deficits. But compare them with the costs of military operations. Between 2009 and 2010, for example, US Department of Defense spending alone for Afghanistan grew from $4.4 billion to $6.7 billion a month. According to US government data, the cumulative total for the War on Terror and the Iraq and Afghanistan wars since 9/11 is $1.283 trillion, of which about $1.2 trillion went to the Department of Defense with only $67 billion, or 5%, going to State/USAID.

ODA covers a broad range of activities from humanitarian interventions to stabilization, peacebuilding and statebuilding. (although peacekeeping is funded by a blend of ODA and non-ODA funds). Why is it better to use ODA as opposed to defence budgets for these initiatives? Because with ODA, taxpayers have a clearer idea of where and how their money is being spent. ODA is an accountable and transparent way to deliver development assistance, even if it is not the only one. ODA funding to fragile states is reported regularly by donors, providing taxpayers in these countries and governments and people in recipient countries with as clear as possible a picture of how much money comes in, from where, what it is used for, and how effectively it is provided. Military aid, on the contrary, and enforcement aspects of peacekeeping, are not reportable as ODA. It is difficult to know how much is spent, how, and on whom, let alone to assess the impact on national governments and populations.

The main issue is about the best way to support countries during the difficult transition out of conflict and fragility. It’s also about preventing conflict flaring up again, by addressing the  root causes of conflict, and promoting the growth and development that make conflict less likely in the future.

These are huge tasks. The human development record in fragile states is not good. Not one conflict-affected fragile state has achieved any of the Millennium Development Goals., and the share of world poor living in fragile states is expected to exceed 50% by 2015. What do these trends suggest? Tackling fragility and instability requires a long-term development strategy. A military solution (even one that drags on for years) will not solve the underlying problems. An army may manage to provide stability, but it is not designed to address the inequalities, sense of injustice and frustrations that lead to conflict in the first place.

Lasting peace needs more than peacekeepers. It needs economic development to  provide jobs, education, health care and other services. It needs the political involvement of the whole population, especially those with grievances, to promote social justice and to seek solutions other than violence. It needs well-functioning government and institutions. Building a lasting peace may take decades, so it needs long-term commitment from national and international actors to develop the local capacities and potential that will eventually make aid irrelevant.

This is not a military strategy or timescale. Un-glamorous development departments and personnel have the skills needed to implement cross-governmental approaches, use pooled funds wisely, and work in the multidisciplinary teams best suited to conflict-affected and fragile states. But vital as their contribution may be, it is secondary. Ultimately, transitioning out of conflict and ensuring long-lasting peace depend on the country itself, not foreign aid, whether civilian or military. So maybe we should start by asking conflict-affected and fragile countries for which we are designing strategies, re-allocating funds, and planning operations, what would work best.

Useful links

OECD work on conflict and fragility

Evaluating Peacebuilding Activities in Settings of Conflict and Fragility

International Network on Conflict and Fragility

Child mortality: aid works

Click to download the Unicef report on child mortality

The number of children dying before age 5 dropped from nearly 12 million in 1990 to around 6.9 million in 2011, according to new figures from UNICEF and the United Nations Inter-agency Group for Child Mortality Estimation. To put it another way, 14,000 fewer children under 5 die each day than was the case 21 years ago, chiefly because of progress in tackling polio, measles and malaria. The decline in under-five mortality has accelerated in the last decade — from 1.8% a year during the 1990s to 3.2% a year between 2000 and 2011. But 19,000 children under 5 still die every day from preventable diseases, notably pneumonia (18% of the deaths) and diarrhoea (11%).

We asked aid specialist Brenda Killen from the OECD Development Co-operation Directorate for her thoughts on what the UN report reveals.

Brenda Killen: It’s great news that child mortality has fallen, but every baby’s death is a tragedy and we have to reduce mortality even more by learning the lessons from this success, identifying the key success factors, then replicating them elsewhere – on a larger scale if possible. One lesson for me is that your chances of success are greatest when the goal is simple, clear, and widely shared.  Everyone wants to reduce child mortality – from global leaders to the poorest people in the least developed parts of the world.  So we can mobilize our efforts around it in a true partnership of governments, donors, NGOs, people. And we can raise funds around it so it has sustained and secure finance. Being able to plan your budget is important, especially for long-term efforts such as those targeting child mortality. Our research shows that the value of aid is reduced by 15% to 20% when it’s unpredictable and volatile.

We hear a lot of criticism about aid being a waste of money. How important was aid in reducing child mortality?

BK: Aid didn’t achieve the result on its own, but it was a vital factor. Experience from the field shows again and again that aid programmes work. For example, aid saves over 1 million children from death each year in six Commonwealth countries according to Oxfam Campaigns Director Ben Phillips. At the OECD, we’ve been studying what makes aid effective. Last year in Busan, Korea, donors from OECD and non-OECD countries, along with civil society, set out a number of principles to guide all development actors in making their cooperation work better. I mentioned the fact that the mortality goal was widely shared. In the Busan Partnership, this is described as “ownership”: countries receiving finance take charge of the process and so too do the various people and organisations involved at every level.

But what if the country can’t cope?

BK: Ownership doesn’t mean the country has to achieve everything on its own. The Busan principles emphasize that partnerships are important too, and we’re starting to see results from a number of innovative initiatives where we’ve used aid well. Aid can do things that other types of assistance can’t. A good example is the GAVI Alliance, the organisation that used to be called the “Global Alliance for Vaccines and Immunisation”. Aid was used to guarantee markets for life-saving vaccines so that the pharmaceutical companies would provide the products needed to tackle the leading killers of infants at an affordable price.  This would not have happened without aid.  The development of new partnerships such as the Global Fund to Fight Aids, TB and Malaria or the Partnership for Maternal, Newborn and Child Health are other examples.  They show that innovative thinking backed by aid can be a game-changer.  And that is the Busan principle on results.

Why do you need a “principle on results”? Shouldn’t it be obvious that policy makers need to produce evidence of results?

BK: Yes, but actually collecting reliable data, analysing it and drawing conclusions as to what works and doesn’t isn’t simple. Child mortality has always has been relatively well-reported when compared with other issues and efforts to tackle child mortality have gone hand-in-hand with improvements in data and knowledge.  Even so,  in 2009 the births of 50 million children went unrecorded and the deaths of 40 million people went un-noted except by family or friends, according to the World Bank. And there’s a long list of other areas where better information is needed, both to support the design of policies and programmes and to improve accountability. For instance, only 17 sub-Saharan African countries have collected data to measure changes in poverty over the past decade and 47% have not carried out household income or expenditure surveys in more than five years. Only one in four African countries report basic crop production data. Without reliable data, you can’t target your efforts, or demonstrate impact, or learn lessons as quickly and accurately as you should.  The Busan Action Plan for Statistics supports three principal objectives: fully integrating statistics in decision making; promoting open access to statistics; and increasing resources for statistical systems.

Finally, what would you say to people who argue that the government shouldn’t be giving taxpayers’ money to foreigners when times are tough at home?

BK: We’ve just been talking about statistics, so it’s worth recalling the actual data. In 2011, countries that are members of the Development Assistance Committee (DAC) of the OECD provided $133.5 billion of net official development assistance (ODA), representing 0.31% of their combined gross national income (GNI).  This was a 2.7 % drop in real terms compared to 2010, the first drop in 15 years. There are a number of reasons OECD countries should help others. Apart from the moral aspect, it’s in their own interest, for both positive and negative reasons. The big problems affecting the world with regard to the economy, security and conflict, the environment, or health don’t respect national boundaries. It’s cheaper to help a poor country tackle problems while they’re still local before they spill over to affect the wider global community. Let’s not forget that the public is fully committed to helping the less fortunate. A recent survey in crisis-hit Ireland found that 80% of those interviewed support the 0.7% target for aid. The public is also supporting important private giving. For example, Save the Children has over two million supporters worldwide and raised 1.6 billion dollars last year. What is often questioned is how aid money is spent – and that’s what the Busan commitments are all about. And as Korea and others have shown, aid plays a part in helping countries develop to become valuable partners in a number of different fields.

Useful links

OECD work on aid effectiveness

Against the Odds : Talking Your Way Out of Conflict and Fragility?

Today’s post from Erwin van Veen of the OECD-DAC International Network on Conflict and Fragility is the first of several we’ll publishing in connection with the Fourth High-level Forum on Aid Effectiveness in Busan on 29 November- 1 December

Violent conflict wastes lives and sets development into reverse. Past investment is reduced to rubble and institutions are destroyed that took decades to build. Violence also casts a long shadow over the future. Helping countries to consolidate peace and build effective and legitimate states is essential to reduce these devastating effects and to achieving the Millennium Development Goals (MDGs). Sadly, current ways of working in situations of conflict and fragility are ineffective and, despite significant investment, the Paris Declaration and the Accra Agenda for Action, results are limited.  Why is that?

Three main problems prevent progress. First, in their engagement, neither international nor national actors focus rigorously on key peace- and statebuilding goals. Second, national actors are often not given a full role and responsibility to lead their own transitions out of fragility. Finally, domestic and foreign resources are frequently mobilized in ways that do not effectively strengthen trust and increase capacities, which are critical to building peaceful states.

The International Dialogue on Peacebuilding and Statebuilding (ID) is a high-level conversation between the major donors, international development organizations (like the United Nations and World Bank) and around 15 states in situations of conflict and fragility (dubbed the “g7+”). Its aim is to identify, agree on and deliver three changes that respond to these problems:

  • Agree and use five Peacebuilding and Statebuilding Goals (PSGs) to guide work in fragile states. These goals represent the key enablers for managing conflict and transiting out of fragility. They are, first of all, to foster inclusive political settlements. Second, to establish security for people. Third, to address injustices as possible and to increase people’s access to justice. Fourth, to generate employment and improve livelihoods. Fifth, to manage revenue and build capacity for accountable and fair service delivery.
  • Ensure that transitions out of fragility are led by national authorities through country compacts, country-led fragility assessments, national plans and inclusive political dialogue.
  • Provide aid and use domestic resources more effectively by increasing transparency, predictability of funding, tolerance to risks and use of country systems.

Effectively delivering these three changes requires overcoming major challenges. To start with, the PSGs will have to be endorsed by the United Nations General Assembly if they are to guide political focus, action and resources globally. Yet, the 2010 MDG review summit demonstrated that resistance in the UN against recognizing violence and insecurity as critical barriers to development is alive and well. Apart from almost dismissing the daily needs and struggles of millions of people for basic safety and justice, this also means that a strong political effort is required to realize the prize of UN engagement.

Country-led transitions out of fragility will work well where national authorities are legitimate, effective and functional. Unfortunately, they often aren’t. So, it will matter how these transitions are led and how priorities are established. The challenge for the g7+ is to convince their people and, through the International Dialogue international partners, that they can lead in a reasonably inclusive and increasingly legitimate manner. Trust can be built by establishing clear processes for setting priorities, agreeing early on confidence-building measures that are hard to reverse, enabling engagement and monitoring by civil society and peer review by fellow g7+ countries.

Providing aid and using domestic resources more effectively faces a double challenge. Donors and international organizations need to start by meeting their unfulfilled commitments to reduce aid volatility and improve the quality of their engagement. Failure to deliver this risks a serious loss of credibility. National authorities need to focus domestic resources more in line with PSG priorities and be willing to take innovative, exceptional and temporary measures to quickly raise the quality of their administration and their fiduciary capabilities to manage money.

The International Dialogue will agree an agenda for change at the High Level Forum on Aid Effectiveness in Busan. Its true test will lie in continuing the dialogue to deliver its “new deal”.

Useful links

OECD work on peacebuilding, statebuilding and security