The Telegraph
Since 1st March, 1999
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Increasing aid will not be enough. As a recent World Bank study finds, at different times and in different places aid has been “highly effective, totally ineffective, and everything in between”. Aid contributed to many of the spectacular development successes of recent decades — Indonesia and the Republic of Korea in the Seventies, Bolivia and Ghana in the Eighties, Uganda and Vietnam in the Nineties. International programmes drove the green revolution, efforts to control river blindness and expanded immunizations against childhood diseases. But too much aid has gone to countries with rampant corruption and misguided policies — conditions where aid can only be squandered.

What should be done to ensure that aid is more effective, especially in accelerating progress towards the goals' Three issues that have dominated recent analyses — stronger governance, increased ownership and better aid practices — are central to the principles of stronger partnership that emerged from the Monterrey and Johannesburg conferences...

Governance — the policies and institutions that regulate interactions among individuals and groups in society is seen as part of the foundation for sustained growth and human development. Thus many donors have predicated their support on efforts to strengthen governance — and provided support to strengthen it, primarily through technical cooperation. Fighting corruption, adopting sound macroeconomic policies and implementing efficient, accountable systems for the use of public resources are key to ensuring that external resources are not wasted. The rule of law, sound contract enforcement and strong public regulatory institutions are important for making a market economy function. These are important elements of good economic governance...

The second issue, ownership, is about countries being in charge. A lesson of the Nineties is that policy reforms are not implemented if they are not deeply embedded in a national commitment involving all of a country’s stakeholders. This reinforces the findings of governance studies that participation matters. How decisions are made — the process — matters. But ownership is difficult to achieve when capacity and power are uneven. Most poor countries lack not only financial resources but also the institutional and human capacity to manage and drive development.

Aid agencies often complain of institutional weaknesses in recipient countries that “force” them to take charge of designing aid interventions. But this asymmetry has undesirable consequences for ownership. Finding aid delivery mechanisms that minimize the burden on recipient countries is an important challenge in making aid more effective.

The final issue has long been part of the debate about making aid more effective: tied aid and donor coordination. Tied aid is costly for recipient countries because it limits choices in making the most economical use of resources...

Achieving the goals will require much more ambitious aid programmes that tackle resource, policy and institutional constraints. As emphasized in the Millennium Development Compact, aid must focus on the poorest countries...But massive injections of resources — financial and technical — can create distortions, overwhelm weak national programmes and create resource dependency.

To avoid such outcomes, external resources must be embedded in nationally-owned programmes and processes. That requires integrating the goals and their targets with national budgeting, programming and planning processes — at the local, sectoral and national levels-that identify external financing resources. To be assessed is the gap between current external resources and domestic policies and the external resources and policy reforms required to achieve the goals.

Most top priority and high priority countries are already using poverty reduction strategy papers as frameworks for agreements with external partners. As proposed in the compact, these papers should assess what is needed to reach the goals. As things stand, the papers set targets based on what can realistically be achieved given available resources and prevailing institutions and policies. Instead, gaps between the funds required to reach the goals and the funds now available must be identified, as well as the capacity and governance weaknesses that need to be overcome through policy and institutional reforms.

Determining how to fill these gaps, and integrating the results with the framework of the poverty-reduction strategy papers, will need to be negotiated country by country. Local coordination and dialogue can also strengthen consensus on priorities between donors and developing country governments...

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