"Leveraging Effective Development Cooperation (EDC) to mobilize existing resources for development and enhance private finance for sustainable development."

Added 30 Mar 2015
Eurodad recently made a submission to a discussion hosted by the Global Partnership for Effective Development Cooperation (GPEDC) on "Leveraging Effective Development Cooperation (EDC) to mobilize existing resources for development and enhance private finance for sustainable development."

The guiding questions for submissions were:
  1. How can the Financing for Development Conference and related negotiations advance country efforts to manage the wide range of development finance modalities and partners entailed in implementing the post-2015 agenda, ensuring country-level ownership?
  2. How can countries best leverage existing effectiveness commitments to manage ODA, DRM, and co-operation with other actors? Do any particular commitments require revitalised political attention?
  3. How can the Global Partnership for Effective Development Co-operation, through its multi-stakeholder nature, best support developing countries in the above areas?
Submission below: 

Country level ownership is critical for effective management of international and domestic development finance and is central to the Busan partnership agreement. As stated in the document “partnerships for development can only succeed if they are led by developing countries, implementing approaches that are tailored to country-specific situations and needs[i].” In terms of commitments to development effectiveness relevant to this discussion two that stand out are those related to country systems and tied aid. Both of these commitments are crucial to ensuring country level democratic ownership of development finance and both require revitalised political attention. A third area that is glaringly omitted from the effectiveness agenda is that of economic policy conditionality. If not dealt with these issues bind the hands of partner countries and challenge their ability to use development finance to its greatest ability and efficiency.

Progress on untying aid has slowed in recent years despite wide acknowledgement that tied aid increases costs by 15 to 30% and undermines country ownership as spending decisions are made by donor countries[ii]. Even where aid is untied in principle (de jure) it remains tied in practice (de facto). On average over 60% of contracts for development projects funded by member states of the European Union go to European businesses and consultants[iii]. This boomerang effect limits the ability of aid to build capacities and create decent jobs for people in partner countries that is needed to reduce aid dependency. In order to enable effective management of development finance the first step is to remove the constraints that limit the ability to do so.

Commitments to using partner country systems has also stalled in recent years yet is a central component for partner countries to utilise international and domestic sources of finance to the greatest effect[iv]. To ensure ownership partner countries need to be in the driving seat in order to align these flows to their national development strategies. Using these systems also increases their effectiveness and serves to identify potential gaps and weaknesses. For partner countries to manage domestic and international financial resources they require strong public institutions with clear lines of accountability and oversight. Through utilising parallel systems donors undermine the ability of partner country governments to develop these institutions. It is unrealistic to assume that sustainable development can be achieved through bypassing the institutions that are responsible for achieving it.

The issue of conditionality, while not an existing development effectiveness commitment, is a further element that undermines national ownership. In many cases partner country governments must adhere to donor conditions to receive development finance. While fiduciary conditions are necessary to ensure transparency and accountability, donors also impose economic policy conditions which go as far as determining fiscal and monetary choices, push for the privatisation of essential services, and haphazard trade liberalisation. These conditions undermine democratic ownership and deprive poor nations and people of choosing their own development path. All too often they end up having a harmful impact on the poor. Despite an encouraging decrease in the number of conditions attached to aid, indirect conditions such as aid allocation systems based on performance against policy reforms, informal influence of IFIs in negotiations prior to financing agreements behind closed doors, non-legally binding benchmarks and donor-driven technical assistance are still common place. This practice of “conditionality through the back door” reduces transparency and constrains partner country policy space in conducting inclusive national debates on the policy choices that respond to their people’s needs and aspirations. They also have the perverse effect of making partner country governments accountable to donors rather than their citizens.

Two of these issues represent the unfinished business of existing commitments and the third is indicative of the challenges in ensuring democratic ownership of both international and domestic development finance. Addressing these challenges will require more than lip service. What the Financing for Development conference can achieve is to go beyond acknowledging voluntary commitments to untying aid and promoting partner country policy space, make them time bound and binding, and put in place a mechanism to monitor progress and to assess challenges to their implementation. The conference should also commit to convening a commission of experts for the purpose of producing a report which assesses why aid that is untied in principle remains tied in practice. Through its experience and broad constituency the GPEDC has a supporting role to play in implementing this mechanism through its monitoring framework and its consensus building and knowledge sharing activities.

[i] The Busan Partnership for Effective Development Cooperation

[ii] Clay, E. J. et al (2008) Thematic Study, The Developmental Effectiveness of Untied Aid: Evaluation of the Implementation of the Paris Declaration and of the 2001 DAC Recommendation on Untying ODA To The LDCs, Phase I Report. Copenhagen, December 2008

[iii] Clay, Edward J., Matthew Geddes and Luisa Natali (2009) Untying Aid: Is it working? An Evaluation of the Implementation of the Paris Declaration and of the 2001 DAC Recommendation of Untying ODA to the LDCs. Copenhagen, December 2009.

[iv] See the 2014 Global Partnership Monitoring Report, “Making Development Co-operation More Effective,” which show no increase in use of country systems between 2010 and 2013.